1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTER ENDED SEPTEMBER 30, 1996 REGISTRANTS; STATE OF COMMISSION INCORPORATION; ADDRESS; AND I.R.S. EMPLOYER FILE NUMBER TELEPHONE NUMBER IDENTIFICATION NO. - ----------- ---------------------------- ------------------ 1-11607 DTE Energy Company 38-3217752 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-4000 1-2198 The Detroit Edison Company 38-0478650 (a Michigan corporation) 2000 2nd Avenue Detroit, Michigan 48226-1279 313-235-8000 Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. YES X NO --- --- At October 31, 1996, 145,119,875 shares of DTE Energy's Common Stock, substantially all held by non-affiliates, were outstanding.
2 DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996 This document contains the Quarterly Reports on Form 10-Q for the quarter ended September 30, 1996 for each of DTE Energy Company and The Detroit Edison Company. Information contained herein relating to an individual registrant is filed by such registrant on its own behalf. Accordingly, except for its subsidiaries, The Detroit Edison Company makes no representation as to information relating to any other companies affiliated with DTE Energy Company. TABLE OF CONTENTS <TABLE> <CAPTION> Page ---- <S> <C> Definitions ......................................................................... 3 Quarterly Report on Form 10-Q for DTE Energy Company: Part I- Financial Information ........................................... 4 Item 1 - Financial Statements (Unaudited) ........................ 4 Notes to Consolidated Financial Statements (Unaudited) .. 14 Independent Accountants' Report ......................... 16 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 17 Part II-Other Information ................................................ 29 Item 1 - Legal Proceedings ....................................... 29 Item 5 - Other Information ....................................... 29 Quarterly Report on Form 10-Q for The Detroit Edison Company: Part I-Financial Information ............................................. 31 Item 1 - Financial Statements (Unaudited) ........................ 31 Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations ..................... 31 Part II-Other Information ................................................ 31 Item 1 - Legal Proceedings ....................................... 31 Item 5 - Other Information ....................................... 31 Quarterly Reports on Form 10-Q for DTE Energy Company and The Detroit Edison Company: Item 6 - Exhibits and Reports on Form 8-K ....................... 32 Signature Page to DTE Energy Company Quarterly Report on Form 10-Q .................. 39 Signature Page to The Detroit Edison Company Quarterly Report on Form 10-Q .......... 40 </TABLE> 2
3 DEFINITIONS Annual Report ........... 1995 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company or The Detroit Edison Company, as the case may be Annual Report Notes ..... Notes to Consolidated Financial Statements appearing on pages 46 through 57 of the 1995 Annual Report to the Securities and Exchange Commission on Form 10-K for DTE Energy Company and The Detroit Edison Company Company ................. DTE Energy Company and Subsidiary Companies Detroit Edison .......... The Detroit Edison Company (a wholly owned subsidiary of DTE Energy Company) and Subsidiary Companies EPA ..................... United States Environmental Protection Agency FERC .................... Federal Energy Regulatory Commission kWh ..................... Kilowatthour MDEQ .................... Michigan Department of Environmental Quality Mortgage Bonds .......... Detroit Edison's General and Refunding Mortgage Bonds MPSC .................... Michigan Public Service Commission MW ...................... Megawatts NOPR .................... Notice of Proposed Rulemaking Note(s) ................. Note(s) to Consolidated Financial Statements (Unaudited) appearing herein PSCR .................... Power Supply Cost Recovery Quarterly Report ........ Quarterly Report to the Securities and Exchange Commission on Form 10-Q for quarters ended March 31, 1996 and June 30, 1996 for DTE Energy Company or The Detroit Edison Company, as the case may be Quarterly Report Notes .. Notes to Consolidated Financial Statements (Unaudited) appearing in the Quarterly Report to the Securities and Exchange Commission on Form 10-Q for quarters ended March 31, 1996 and June 30, 1996 for DTE Energy Company or The Detroit Edison Company, as the case may be QUIDS ................... Quarterly Income Debt Securities Registrant .............. Company or Detroit Edison, as the case may be Renaissance ............. Renaissance Energy Company (an unaffiliated company) 3
4 QUARTERLY REPORT ON FORM 10-Q FOR DTE ENERGY COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED): DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 --------------------------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 --------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> OPERATING REVENUES Electric - System $958,439 $1,008,450 $2,703,835 $2,710,411 $3,553,894 $3,500,793 Electric - Interconnection 14,346 20,591 33,578 40,230 44,327 45,490 Steam and other 4,549 3,248 20,821 17,877 27,039 24,909 - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Revenues $977,334 $1,032,289 $2,758,234 $2,768,518 $3,625,260 $3,571,192 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation Fuel $184,766 $ 193,675 $ 527,120 $ 538,867 $ 704,220 $ 707,835 Purchased power 41,800 51,311 102,925 119,170 117,312 90,715 Other operation 157,582 195,323 466,831 481,694 620,434 648,325 Maintenance 65,218 66,406 217,518 178,780 278,853 253,207 Steam heating special charges 149,231 - 149,231 - 191,260 - Depreciation and amortization 131,959 125,383 394,563 375,057 520,117 492,730 Deferred Fermi 2 amortization (1,119) (1,493) (3,359) (4,479) (4,852) (6,345) Amortization of deferred Fermi 2 depreciation and return 25,485 23,248 76,453 69,742 99,701 90,949 Taxes other than income 65,919 64,353 195,674 188,457 259,158 244,454 Income taxes 37,853 88,969 171,628 236,238 225,077 296,384 - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses $858,694 $ 807,175 $2,298,584 $2,183,526 $3,011,280 $2,818,254 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $118,640 $ 225,114 $ 459,650 $ 584,992 $ 613,980 $ 752,938 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) Allowance for other funds used during construction $ 456 $ 369 $ 1,430 $ 952 $ 1,886 $ 1,061 Other income and (deductions) - net (925) (7,637) (7,550) (25,913) (11,883) (37,906) Income taxes 733 1,550 2,924 7,720 4,993 12,274 Accretion income 1,967 2,677 6,444 8,536 8,949 11,712 Income taxes - disallowed plant costs and accretion income (560) (811) (1,870) (2,608) (2,617) (3,588) - ----------------------------------------------------------------------------------------------------------------------------------- Net Other Income and (Deductions) $ 1,671 $ (3,852) $ 1,378 $ (11,313) $ 1,328 $ (16,447) - ----------------------------------------------------------------------------------------------------------------------------------- INTEREST CHARGES Long-term debt $ 68,916 $ 69,353 $ 206,537 $ 205,873 $ 276,263 $ 273,679 Amortization of debt discount, premium and expense 2,959 2,849 8,881 8,427 11,766 11,178 Other 1,421 1,698 3,464 7,912 5,218 5,498 Allowance for borrowed funds used during construction (credit) (826) (594) (2,588) (1,535) (3,322) (2,241) - ----------------------------------------------------------------------------------------------------------------------------------- Net Interest Charges $ 72,470 $ 73,306 $ 216,294 $ 220,677 $ 289,925 $ 288,114 - ----------------------------------------------------------------------------------------------------------------------------------- PREFERRED STOCK DIVIDENDS OF SUBSIDIARY 2,908 6,544 13,108 21,355 19,490 28,763 - ----------------------------------------------------------------------------------------------------------------------------------- NET INCOME $ 44,933 $ 141,412 $ 231,626 $ 331,647 $ 305,893 $ 419,614 =================================================================================================================================== COMMON SHARES OUTSTANDING - - AVERAGE 145,119,875 144,905,909 145,119,875 144,882,040 144,727,881 144,876,686 EARNINGS PER COMMON SHARE $ 0.31 $ 0.98 $ 1.60 $ 2.29 $ 2.11 $ 2.90 DIVIDENDS DECLARED PER SHARE OF COMMON STOCK $ 0.515 $ 0.515 $ 1.545 $ 1.545 $ 2.06 $ 2.06 </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 4
5 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 ----------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 ----------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> OPERATING ACTIVITIES Net Income $ 44,933 $ 141,412 $ 231,626 $ 331,647 $ 305,893 $ 419,614 Adjustments to reconcile net income to net cash from operating activities: Accretion income (1,967) (2,677) (6,444) (8,536) (8,949) (11,712) Depreciation and amortization 131,959 125,383 394,563 375,057 520,117 492,730 Deferred Fermi 2 amortization and return - net 24,366 21,755 73,094 65,263 94,849 84,604 Deferred income taxes and investment tax credit - net (46,885) 9,328 (18,273) 49,411 (5,161) 88,622 Fermi 2 refueling outage - net (3,062) 3,058 3,454 9,813 6,716 11,080 Steam heating special charges 149,231 - 149,231 - 191,260 - Other 23,074 8,615 13,618 7,837 11,756 (35,929) Changes in current assets and liabilities: Customer accounts receivable and unbilled revenues (7,527) (33,935) (25,253) (226,414) (17,418) (232,394) Other accounts receivable (8,029) (4,159) (12,768) (7,633) (8,587) (22,135) Inventories 27,594 16,117 39,815 (11,547) 32,525 (17,216) Accounts payable (21,608) 12,495 (23,865) 7,352 (13,168) 22,219 Taxes payable 22,308 20,777 10,904 34,031 (25,776) 16,077 Interest payable (14,705) 20,273 (10,086) 19,159 (27,331) 19,624 Other 18,187 13,880 (37,799) (10,049) 3,505 8,289 - ----------------------------------------------------------------------------------------------------------------------------- Net cash from operating activities $ 337,869 $ 352,322 $ 781,817 $ 635,391 $1,060,231 $ 843,473 - ----------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures $(145,951) $(113,148) $(397,931) $(293,126) $ (558,649) $(400,480) Nuclear decommissioning trust funds (11,978) (5,901) (34,772) (29,193) (48,930) (36,692) Non-utility investments (260) 1,173 (6,545) 1,993 (6,673) (9,563) Other changes in current assets and liabilities 1,753 9,413 906 5,825 855 9,596 Other (2,210) (24,668) (16,464) (30,632) (18,677) (39,306) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for investing activities $(158,646) $(133,131) $(454,806) $(345,133) $ (632,074) $(476,445) - ------------------------------------------------------------------------------------------------------------------------------ FINANCING ACTIVITIES Issuance of long-term debt $ 34,880 $ - $ 219,880 $ - $ 219,880 $ - Funds received from Trustees: Installment sales contracts and loan agreements - 22,175 - 22,175 179,350 62,260 Decrease in short-term borrowings (94,988) (138,877) (36,990) (36,489) (3,000) (74,472) Redemption of long-term debt (6,500) (22,175) (75,714) (41,389) (255,064) (51,539) Redemption of preferred stock - - (185,000) - (185,955) - Premiums on reacquired long-term debt - (565) - (565) (5,381) (857) Dividends on common stock (74,737) (75,474) (224,212) (224,689) (298,887) (299,292) Other (11) (4,636) (9,986) (5,099) (11,487) (6,041) - ------------------------------------------------------------------------------------------------------------------------------ Net cash used for financing activities $(141,356) $(219,552) $(312,022) $(286,056) $ (360,544) $(369,941) - ------------------------------------------------------------------------------------------------------------------------------ NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ 37,867 $ (361) $ 14,989 $ 4,202 $ 67,613 $ (2,913) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD 42,070 12,685 64,948 8,122 12,324 15,237 - ------------------------------------------------------------------------------------------------------------------------------ CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 79,937 $ 12,324 $ 79,937 $ 12,324 $ 79,937 $ 12,324 ============================================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 83,770 $ 49,199 $ 216,944 $ 188,898 $ 302,459 $ 255,496 Income taxes paid 51,248 60,757 165,194 137,237 258,494 183,920 New capital lease obligations 21,700 6,564 33,882 4,455 56,277 6,093 Exchange of preferred stock of subsidiary for long-term debt - 49,878 - 49,878 - 49,878 ============================================================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 5
6 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS (Dollars in Thousands) <TABLE> <CAPTION> September 30 December 31 1996 1995 ----------- ----------- <S> <C> <C> UTILITY PROPERTIES Plant in service $13,670,679 $13,303,992 Less: Accumulated depreciation and amortization (5,315,708) (4,928,316) - -------------------------------------------------------------------------------------------------- $ 8,354,971 $ 8,375,676 Construction work in progress 137,935 142,726 - -------------------------------------------------------------------------------------------------- Net utility properties $ 8,492,906 $ 8,518,402 - -------------------------------------------------------------------------------------------------- Property under capital leases (less accumulated amortization of $106,032 and $99,633, respectively) $ 130,081 $ 137,206 Nuclear fuel under capital lease (less accumulated amortization of $473,644 and $427,831, respectively) 133,532 145,463 - -------------------------------------------------------------------------------------------------- Net property under capital leases $ 263,613 $ 282,669 - -------------------------------------------------------------------------------------------------- Total owned and leased properties $ 8,756,519 $ 8,801,071 - -------------------------------------------------------------------------------------------------- OTHER PROPERTY AND INVESTMENTS Non-utility property $ 63,233 $ 21,576 Investments and special funds 45,111 29,058 Nuclear decommissioning trust funds 154,615 119,843 - -------------------------------------------------------------------------------------------------- $ 262,959 $ 170,477 - -------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and temporary cash investments $ 79,937 $ 64,948 Customer accounts receivable and unbilled revenues (less allowance for uncollectible accounts of $20,000 and $22,000, respectively) 439,656 414,403 Other accounts receivable 50,432 37,664 Inventories (at average cost) Fuel 122,580 162,796 Materials and supplies 143,310 142,782 Prepayments 45,436 12,910 - -------------------------------------------------------------------------------------------------- $ 881,351 $ 835,503 - -------------------------------------------------------------------------------------------------- DEFERRED DEBITS Regulatory assets $ 1,018,210 $ 1,155,482 Prepaid pensions 93,151 81,865 Unamortized debt expense 45,233 40,936 Other 41,583 45,257 - -------------------------------------------------------------------------------------------------- $ 1,198,177 $ 1,323,540 - -------------------------------------------------------------------------------------------------- TOTAL $11,099,006 $11,130,591 ================================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 6
7 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) LIABILITIES (Dollars in Thousands) <TABLE> <CAPTION> September 30 December 31 1996 1995 ------------ ----------- <S> <C> <C> CAPITALIZATION Common stock - without par value, 400,000,000 shares authorized; 145,119,875 shares outstanding $ 1,951,437 $ 1,951,437 Retained earnings used in the business 1,489,484 1,484,871 - ------------------------------------------------------------------------------------------ Total common shareholders' equity $ 3,440,921 $ 3,436,308 Cumulative preferred stock of subsidiary 144,405 326,604 Long-term debt 3,775,301 3,756,094 - ------------------------------------------------------------------------------------------ Total Capitalization $ 7,360,627 $ 7,519,006 - ------------------------------------------------------------------------------------------ OTHER NON-CURRENT LIABILITIES Obligations under capital leases $ 119,823 $ 128,362 Other postretirement benefits 14,256 24,381 Other 72,934 58,424 - ------------------------------------------------------------------------------------------ $ 207,013 $ 211,167 - ------------------------------------------------------------------------------------------ CURRENT LIABILITIES Short-term borrowings $ - $ 36,990 Amounts due within one year Long-term debt 244,214 119,214 Obligations under capital leases 143,790 154,307 Accounts payable 139,874 165,148 Property and general taxes 18,050 34,416 Income taxes 26,785 - Accumulated deferred income taxes 52,917 51,697 Interest payable 52,042 62,128 Dividends payable 77,644 81,102 Payrolls 88,019 72,164 Fermi 2 refueling outage 17,796 14,342 Other 112,489 130,689 - ------------------------------------------------------------------------------------------ $ 973,620 $ 922,197 - ------------------------------------------------------------------------------------------ DEFERRED CREDITS Accumulated deferred income taxes $ 2,004,851 $ 2,052,875 Accumulated deferred investment tax credits 318,794 330,085 Other 234,101 95,261 - ------------------------------------------------------------------------------------------ $ 2,557,746 $ 2,478,221 - ------------------------------------------------------------------------------------------ COMMITMENTS AND CONTINGENCIES (NOTE 2) - ------------------------------------------------------------------------------------------ TOTAL $11,099,006 $11,130,591 ========================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 7
8 DTE ENERGY COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Retained Total Common Stock Earnings Common ------------------- Used in the Shareholders' Shares Amount Business Equity - ----------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> BALANCE AT DECEMBER 31, 1995 145,119,875 $ 1,951,437 $ 1,484,871 $ 3,436,308 Expense associated with subsidiary preferred stock redeemed (2,801) (2,801) Net income 231,626 231,626 Cash dividends declared on Common stock - $1.545 per share (224,212) (224,212) - ----------------------------------------------------------------------------------------------- BALANCE AT SEPTEMBER 30, 1996 145,119,875 $ 1,951,437 $ 1,489,484 $ 3,440,921 =============================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 8
9 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF INCOME (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 ---------------------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 ---------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> OPERATING REVENUES Electric - System $ 958,439 $ 1,008,450 $ 2,703,835 $ 2,710,411 $ 3,553,894 $ 3,500,793 Electric - Interconnection 14,346 20,591 33,578 40,230 44,327 45,490 Steam 3,447 3,248 18,687 17,877 24,905 24,909 - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Revenues $ 976,232 $ 1,032,289 $ 2,756,100 $ 2,768,518 $ 3,623,126 $ 3,571,192 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING EXPENSES Operation Fuel $ 184,766 $ 193,675 $ 527,120 $ 538,867 $ 704,220 $ 707,835 Purchased power 41,800 51,311 102,925 119,170 117,312 90,715 Other operation 155,251 195,323 461,217 481,694 614,820 648,325 Maintenance 65,218 66,406 217,518 178,780 278,853 253,207 Steam heating special charges 149,231 - 149,231 - 191,260 - Depreciation and amortization 131,849 125,383 394,242 375,057 519,796 492,730 Deferred Fermi 2 amortization (1,119) (1,493) (3,359) (4,479) (4,852) (6,345) Amortization of deferred Fermi 2 depreciation and return 25,485 23,248 76,453 69,742 99,701 90,949 Taxes other than income 65,916 64,353 195,566 188,457 259,050 244,454 Income taxes 38,554 88,969 173,424 236,238 226,873 296,384 - ----------------------------------------------------------------------------------------------------------------------------------- Total Operating Expenses $ 856,951 $ 807,175 $ 2,294,337 $ 2,183,526 $ 3,007,033 $ 2,818,254 - ----------------------------------------------------------------------------------------------------------------------------------- OPERATING INCOME $ 119,281 $ 225,114 $ 461,763 $ 584,992 $ 616,093 $ 752,938 - ----------------------------------------------------------------------------------------------------------------------------------- OTHER INCOME AND (DEDUCTIONS) Allowance for other funds used during construction $ 456 $ 369 $ 1,430 $ 952 $ 1,886 $ 1,061 Other income and (deductions) - net (1,492) (7,637) (9,678) (25,913) (14,011) (37,906) Income taxes 733 1,550 2,924 7,720 4,993 12,274 Accretion income 1,967 2,677 6,444 8,536 8,949 11,712 Income taxes - disallowed plant costs and accretion income (560) (811) (1,870) (2,608) (2,617) (3,588) - ----------------------------------------------------------------------------------------------------------------------------------- Net Other Income and (Deductions) $ 1,104 $ (3,852) $ (750) $ (11,313) $ (800) $ (16,447) - ------------------------------------------------------------------------------------------------------------------------------------ INTEREST CHARGES Long-term debt $ 68,916 $ 69,353 $ 206,537 $ 205,873 $ 276,263 $ 273,679 Amortization of debt discount, premium and expense 2,947 2,849 8,855 8,427 11,740 11,178 Other 1,327 1,698 3,268 7,912 5,022 5,498 Allowance for borrowed funds used during construction (credit) (826) (594) (2,588) (1,535) (3,322) (2,241) - ------------------------------------------------------------------------------------------------------------------------------------ Net Interest Charges $ 72,364 $ 73,306 $ 216,072 $ 220,677 $ 289,703 $ 288,114 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME $ 48,021 $ 147,956 $ 244,941 $ 353,002 $ 325,590 $ 448,377 PREFERRED STOCK DIVIDENDS 2,908 6,544 13,108 21,355 19,490 28,763 - ------------------------------------------------------------------------------------------------------------------------------------ NET INCOME AVAILABLE FOR COMMON STOCK $ 45,113 $ 141,412 $ 231,833 $ 331,647 $ 306,100 $ 419,614 ==================================================================================================================================== </TABLE> Note: Detroit Edison's financial statements are presented here for ease of reference and are not considered to be part of Item 1 of the Company's report. See accompanying Notes to Consolidated Financial Statements (Unaudited). 9
10 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) ASSETS (Dollars in Thousands) <TABLE> <CAPTION> September 30 December 31 1996 1995 ------------ ----------- <S> <C> <C> UTILITY PROPERTIES Plant in service $ 13,670,679 $13,303,992 Less: Accumulated depreciation and amortization (5,315,708) (4,928,316) - ----------------------------------------------------------------------------------------------------- $ 8,354,971 $ 8,375,676 Construction work in progress 137,935 142,726 - ----------------------------------------------------------------------------------------------------- Net utility properties $ 8,492,906 $ 8,518,402 - ----------------------------------------------------------------------------------------------------- Property under capital leases (less accumulated amortization of $106,032 and $99,633, respectively) $ 130,081 $ 137,206 Nuclear fuel under capital lease (less accumulated amortization of $473,644 and $427,831, respectively) 133,532 145,463 - ----------------------------------------------------------------------------------------------------- Net property under capital leases $ 263,613 $ 282,669 - ----------------------------------------------------------------------------------------------------- Total owned and leased properties $ 8,756,519 $ 8,801,071 - ----------------------------------------------------------------------------------------------------- OTHER PROPERTY AND INVESTMENTS Non-utility property $ 7,731 $ 21,576 Investments and special funds 26,489 29,058 Nuclear decommissioning trust funds 154,615 119,843 - ----------------------------------------------------------------------------------------------------- $ 188,835 $ 170,477 - ----------------------------------------------------------------------------------------------------- CURRENT ASSETS Cash and temporary cash investments $ 27,697 $ 64,948 Customer accounts receivable and unbilled revenues (less allowance for uncollectible accounts of $20,000 and $22,000, respectively) 439,656 414,403 Other accounts receivable 47,791 37,664 Inventories (at average cost) Fuel 122,580 162,796 Materials and supplies 143,310 142,782 Prepayments 45,160 12,910 - ----------------------------------------------------------------------------------------------------- $ 826,194 $ 835,503 - ----------------------------------------------------------------------------------------------------- DEFERRED DEBITS Regulatory assets $ 1,018,210 $ 1,155,482 Prepaid pensions 93,151 81,865 Unamortized debt expense 45,233 40,936 Other 37,061 45,257 - ---------------------------------------------------------------------------------------------------- $ 1,193,655 $ 1,323,540 - ---------------------------------------------------------------------------------------------------- TOTAL $ 10,965,203 $11,130,591 ==================================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 10
11 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED BALANCE SHEET (UNAUDITED) LIABILITIES (Dollars in Thousands) <TABLE> <CAPTION> September 30 December 31 1996 1995 ------------ ------------ <S> <C> <C> CAPITALIZATION Common stock - $10 par value, 400,000,000 shares authorized; 145,119,875 shares outstanding $ 1,451,199 $ 1,451,199 Premium on common stock 547,799 547,799 Common stock expense (47,561) (47,561) Retained earnings used in the business 1,391,229 1,484,871 - -------------------------------------------------------------------------------------------- Total common shareholders' equity $ 3,342,666 $ 3,436,308 Cumulative preferred stock 144,405 326,604 Long-term debt 3,740,421 3,756,094 - -------------------------------------------------------------------------------------------- Total Capitalization $ 7,227,492 $ 7,519,006 - -------------------------------------------------------------------------------------------- OTHER NON-CURRENT LIABILITIES Obligations under capital leases $ 119,823 $ 128,362 Other postretirement benefits 14,256 24,381 Other 72,934 58,424 - -------------------------------------------------------------------------------------------- $ 207,013 $ 211,167 - -------------------------------------------------------------------------------------------- CURRENT LIABILITIES Short-term borrowings $ - $ 36,990 Amounts due within one year Long-term debt 244,214 119,214 Obligations under capital leases 143,790 154,307 Accounts payable 136,328 165,148 Property and general taxes 18,048 34,416 Income taxes 26,881 - Accumulated deferred income taxes 52,918 51,697 Interest payable 52,041 62,128 Dividends payable 82,723 81,102 Payrolls 87,858 72,164 Fermi 2 refueling outage 17,796 14,342 Other 111,073 130,689 - ------------------------------------------------------------------------------------------- $ 973,670 $ 922,197 - ------------------------------------------------------------------------------------------- DEFERRED CREDITS Accumulated deferred income taxes $ 2,004,133 $ 2,052,875 Accumulated deferred investment tax credits 318,794 330,085 Other 234,101 95,261 - ------------------------------------------------------------------------------------------- $ 2,557,028 $ 2,478,221 - ------------------------------------------------------------------------------------------- COMMITMENTS AND CONTINGENCIES (NOTE 2) - ------------------------------------------------------------------------------------------- TOTAL $10,965,203 $11,130,591 =========================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 11
12 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Three Months Ended Nine Months Ended Twelve Months Ended September 30 September 30 September 30 ------------------------------------------------------------------------- 1996 1995 1996 1995 1996 1995 ------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> OPERATING ACTIVITIES Net Income $ 48,021 $ 147,956 $ 244,941 $ 353,002 $ 325,590 $ 448,377 Adjustments to reconcile net income to net cash from operating activities: Accretion income (1,967) (2,677) (6,444) (8,536) (8,949) (11,712) Depreciation and amortization 131,849 125,383 394,242 375,057 519,796 492,730 Deferred Fermi 2 amortization and return - net 24,366 21,755 73,094 65,263 94,849 84,604 Deferred income taxes and investment tax credit - net (46,921) 9,328 (18,361) 49,411 (5,249) 88,622 Fermi 2 refueling outage - net (3,062) 3,058 3,454 9,813 6,716 11,080 Steam heating special charges 149,231 - 149,231 - 191,260 - Other 10,968 8,615 4,687 7,837 2,851 (35,929) Changes in current assets and liabilities: Customer accounts receivable and unbilled revenues (7,527) (33,935) (25,253) (226,414) (17,418) (232,394) Other accounts receivable (9,185) (4,159) (10,127) (7,633) (5,946) (22,135) Inventories 27,594 16,117 39,815 (11,547) 32,525 (17,216) Accounts payable (14,972) 12,495 (27,411) 7,352 (16,714) 22,219 Taxes payable 24,083 20,777 10,998 34,031 (25,682) 16,077 Interest payable (14,630) 20,273 (10,087) 19,159 (27,332) 19,624 Other 30,627 13,880 (39,100) (10,049) 2,204 8,289 - ---------------------------------------------------------------------------------------------------------------------------------- Net cash from operating activities $ 348,475 $ 358,866 $ 783,679 $ 656,746 $1,068,501 $ 872,236 - ---------------------------------------------------------------------------------------------------------------------------------- INVESTING ACTIVITIES Plant and equipment expenditures $ (130,084) $(113,148) $(355,461) $(293,126) $ (516,179) $ (400,480) Nuclear decommissioning trust funds (11,978) (5,901) (34,772) (29,193) (48,930) (36,692) Non-utility investments - 1,173 - 1,993 (128) (9,563) Other changes in current assets and liabilities 1,753 9,413 906 5,825 856 9,596 Other (2,591) (24,668) (4,936) (30,632) (7,150) (39,306) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used for investing activities $ (142,900) $(133,131) $(394,263) $(345,133) $ (571,531) $ (476,445) - ---------------------------------------------------------------------------------------------------------------------------------- FINANCING ACTIVITIES Issuance of long-term debt $ - $ - $ 185,000 $ - $ 185,000 $ - Funds received from Trustees: Installment sales contracts and loan agreements - 22,175 - 22,175 179,350 62,260 Decrease in short-term borrowings (94,988) (138,877) (36,990) (36,489) (3,000) (74,472) Redemption of long-term debt (6,500) (22,175) (75,714) (41,389) (255,064) (51,539) Redemption of preferred stock - - (185,000) - (185,955) - Premiums on reacquired long-term debt and preferred stock - (565) (1,850) (565) (7,231) (857) Dividends on common and preferred stock (82,724) (82,018) (249,086) (246,044) (330,169) (328,055) Cash portion of restructuring dividend to parent - - (56,510) - (56,510) - Other - (4,636) (6,517) (5,099) (8,018) (6,041) - ---------------------------------------------------------------------------------------------------------------------------------- Net cash used for financing activities $ (184,212) $(226,096) $(426,667) $(307,411) $ (481,597) $ (398,704) - ---------------------------------------------------------------------------------------------------------------------------------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY CASH INVESTMENTS $ 21,363 $ (361) $ (37,251) $ 4,202 $ 15,373 $ (2,913) CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF THE PERIOD 6,334 12,685 64,948 8,122 12,324 15,237 - ---------------------------------------------------------------------------------------------------------------------------------- CASH AND TEMPORARY CASH INVESTMENTS AT END OF THE PERIOD $ 27,697 $ 12,324 $ 27,697 $ 12,324 $ 27,697 $ 12,324 ================================================================================================================================== SUPPLEMENTARY CASH FLOW INFORMATION Interest paid (excluding interest capitalized) $ 83,613 $ 49,199 $ 216,765 $ 188,898 $ 302,280 $ 255,496 Income taxes paid 51,922 60,757 167,088 137,237 260,388 183,930 New capital lease obligations 21,700 6,564 33,882 4,455 56,277 6,093 Exchange of preferred stock for long-term debt - 49,878 - 49,878 - 49,878 Non-cash portion of restructuring dividend to parent - - 26,716 - 26,716 - ================================================================================================================================== </TABLE> See accompanying Notes to Consolidated Financial Statements (Unaudited). 12
13 THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY (UNAUDITED) (Dollars in Thousands) <TABLE> <CAPTION> Common Stock Premium Retained Total ---------------------- on Common Earnings Common $10 Par Common Stock Used in the Shareholders' Shares Value Stock Expense Business Equity - ---------------------------------------------------------------------------------------------------------------------- <S> <C> <C> <C> <C> <C> <C> BALANCE AT DECEMBER 31, 1995 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $ 1,484,871 $ 3,436,308 Expense associated with preferred stock redeemed (2,801) (2,801) Net income 244,941 244,941 Cash dividends declared Common stock - $1.65 per share (239,448) (239,448) Cumulative preferred stock* (13,108) (13,108) Restructuring dividend to parent (83,226) (83,226) - ---------------------------------------------------------------------------------------------------------------------- BALANCE AT SEPTEMBER 30, 1996 145,119,875 $ 1,451,199 $ 547,799 $ (47,561) $ 1,391,229 $ 3,342,666 ====================================================================================================================== </TABLE> *At established rate for each series See accompanying Notes to Consolidated Financial Statements (Unaudited). 13
14 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES NOTE 1 - GENERAL These consolidated financial statements should be read in conjunction with the Quarterly Report Notes and the Annual Report Notes. The Notes contained herein update and supplement matters discussed in the Quarterly Report Notes and the Annual Report Notes. The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. The preceding consolidated financial statements are unaudited, but, in the opinion of the Company and Detroit Edison, include all adjustments necessary for a fair statement of the results for the interim periods. Financial results for this interim period are not necessarily indicative of results that may be expected for any other interim period or for the fiscal year. NOTE 2 - FERMI 2 Fermi 2, a nuclear generating unit, was shut down on September 27, 1996 to replace one-third of its nuclear fuel and install three new low-pressure turbines. With the installation of these new turbines the unit is expected to initially operate at 1085 MW, up from 878 MW prior to this shut down. The expected cost of replacing the turbines is between $45-50 million. The cost will be capitalized and is expected to be recovered in rates. The plant is scheduled to restart in November 1996. NOTE 3 - STEAM HEATING SPECIAL CHARGES As discussed in Note 14 of the Annual Report Notes and Note 2 of the Quarterly Report Notes for the quarter ended June 30, 1996, the Company adopted Statement of Financial Accounting Standards ("SFAS") No. 121 in the fourth quarter of 1995. As the result of continuing losses in the operation of its steam heating business, upon adoption of SFAS No. 121, Detroit Edison wrote off the remaining net book value of its steam heating plant assets of $42 million ($32 million after-tax) or $0.22 per share. During the third quarter of 1996, following the completion of a review of its steam heating operations, Detroit Edison recorded a special charge to net income of $149.2 million ($97 million after-tax) or $0.67 per share. The special charge included a reserve for steam purchase commitments during the period from 1997 through 2008 under the agreement with the Greater Detroit Resource Recovery Facility, the retirement and 14
15 closure of a portion of the steam heating system in 1997, and the investment of $18 million to improve service to remaining customers. ---------------------------- This Quarterly Report on Form 10-Q, including the report of Deloitte & Touche LLP (on page 16) will automatically be incorporated by reference in the Prospectuses constituting part of the Registration Statements on Form S-3 (Registration Nos. 33-53207 and 33-64296) of The Detroit Edison Company and Form S-8 (Registration No. 333-00023) and Form S-3 (Registration No. 33-57545) of DTE Energy Company, filed under the Securities Act of 1933. Such report of Deloitte & Touche LLP, however, is not a "report" or "part of the Registration Statement" within the meaning of Sections 7 and 11 of the Securities Act of 1933 and the liability provisions of Section 11(a) of such Act do not apply. 15
16 INDEPENDENT ACCOUNTANTS' REPORT To the Board of Directors and Shareholders of DTE Energy Company and The Detroit Edison Company We have reviewed the accompanying condensed consolidated balance sheets of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies as of September 30, 1996, and the related condensed consolidated statements of income and of cash flows for the three-month, nine-month, and twelve-month periods ended September 30, 1996 and 1995, and the condensed consolidated statements of common shareholders' equity for the nine-month period ended September 30, 1996. These financial statements are the responsibility of DTE Energy Company's management and of The Detroit Edison Company's management. We conducted our reviews in accordance with standards established by the American Institute of Certified Public Accountants. A review of interim financial information consists principally of applying analytical procedures to financial data and of making inquiries of persons responsible for financial and accounting matters. It is substantially less in scope than an audit conducted in accordance with generally accepted auditing standards, the objective of which is the expression of an opinion regarding the financial statements taken as a whole. Accordingly, we do not express such an opinion. Based on our reviews, we are not aware of any material modifications that should be made to such condensed consolidated financial statements for them to be in conformity with generally accepted accounting principles. We have previously audited, in accordance with generally accepted auditing standards, the consolidated balance sheets of DTE Energy Company and subsidiary companies and of The Detroit Edison Company and subsidiary companies as of December 31, 1995, and the related consolidated statements of income, common shareholders' equity, and cash flows for the year then ended (not presented herein); and in our report dated January 22, 1996 we expressed an unqualified opinion on those consolidated financial statements. In our opinion, the information set forth in the accompanying condensed consolidated balance sheets as of December 31, 1995 is fairly stated, in all material respects, in relation to the consolidated balance sheets from which it has been derived. DELOITTE & TOUCHE LLP Detroit, Michigan November 7, 1996 16
17 ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. DTE ENERGY COMPANY, THE DETROIT EDISON COMPANY AND SUBSIDIARY COMPANIES This analysis for the three, nine and twelve months ended September 30, 1996, as compared to the same periods in 1995, should be read in conjunction with the consolidated financial statements (unaudited), the accompanying Notes, the Quarterly Report Notes and the Annual Report Notes. Detroit Edison is the principal subsidiary of the Company and, as such, this discussion explains material changes in results of operations of both the Company and Detroit Edison and identifies recent trends and events affecting both the Company and Detroit Edison. For the periods presented, the Company's operations and those of Detroit Edison are not materially different. RESULTS OF OPERATIONS For the three months ended September 30, 1996, the Company's net income was $44.9 million, or $0.31 per share, down 68 percent from the $141.4 million, or $0.98 per share earned in the three months ended September 30, 1995. The decrease in net income was due to a $149.2 million ($97 million after-tax), or $0.67 per share, special charge to net income following completion of Detroit Edison's review of its steam heating operations. Without the special charge, third quarter earnings would have equaled the $0.98 per share reported for the same period in 1995. For the nine months ended September 30, 1996, the Company's net income was $231.6 million, or $1.60 per share, down 30 percent from the $331.6 million, or $2.29 per share earned in the nine months ended September 30, 1995. The nine-month period this year included the steam heating special charge. For the twelve months ended September 30, 1996, the Company's net income was $305.9 million, or $2.11 per share, down 27 percent from the $419.6 million, or $2.90 per share earned in the twelve months ended September 30, 1995. The twelve-month period this year included the special charge of $149.2 million ($97 million after-tax), or $0.67 per share and the write off of the remaining net book value of steam heating plant assets of $42 million ($32 million after-tax), or $0.22 per share. At September 30, 1996, the book value of the Company's common stock was $23.68 per share, an increase of $0.06 per share or 0.25 percent since December 31, 1995. Return on average total common shareholders' equity was 8.8% and 12.4% for the twelve months ended September 30, 1996 and 1995, respectively. Detroit Edison's ratio of earnings to fixed charges was 2.68 and 3.31 for the twelve months ended September 30, 1996 and 1995, respectively. Detroit Edison's ratio of 17
18 earnings to fixed charges and preferred stock dividends for the 1996 and 1995 twelve-month periods was 2.44 and 2.89, respectively. OPERATING REVENUES Total operating revenues of the Company increased (decreased) due to the following factors: <TABLE> <CAPTION> Three Nine Twelve Months Months Months ------ ---------- ------ (Millions) <S> <C> <C> <C> Rate Changes Special Manufacturing Contracts $ (3) $ (14) $ (24) PSCR Clause (3) (27) 8 ------ ----- ----- (6) (41) (16) System sales volume and mix (45) 14 50 Interconnection sales (6) (7) (1) Fermi 2 capacity factor performance standard reserve - 16 12 Other - net 2 8 9 ----- ----- ----- Total $ (55) $ (10) $ 54 ===== ===== ===== </TABLE> SPECIAL MANUFACTURING CONTRACTS In March 1995, the MPSC issued an order approving Detroit Edison's 10-year special manufacturing contracts with Chrysler Corporation, Ford Motor Company and General Motors Corporation. In return for their long-term commitments, these companies receive a reduction in the price paid for electricity. For additional information, see Management's Discussion and Analysis of Financial Condition and Results of Operations in the Annual Report. PSCR CLAUSE The decreases in PSCR Clause revenues for the three-month and nine-month periods resulted from lower average unit costs of fuel and purchased power. The increase in PSCR Clause revenue for the twelve-month period resulted from higher fuel and purchased power expense. 18
19 kWh SALES kWh sales increased (decreased) as follows: <TABLE> <CAPTION> Three Nine Twelve Months Months Months ----------- ----------- ---------- <S> <C> <C> <C> Residential (12.6)% (1.9)% (0.2)% Commercial (1.1) 1.3 2.0 Industrial 5.4 3.2 3.5 Other (includes primarily sales for resale) (1.2) 2.7 2.3 Total System (3.0) 1.0 1.8 Interconnection (44.1) (28.1) (8.9) Total (6.3) (0.8) 1.2 </TABLE> The decreases in residential sales reflect cooler summer weather in 1996 as compared with 1995. The commercial sales decrease for the three-month period reflects cooler summer weather, while increases in the nine-month and twelve-month periods were due to improved economic conditions. The increases in industrial sales reflect strong demand in the automotive and construction sectors. The increased sales to other customers for the nine-month and twelve-month periods reflect increased load requirements of wholesale for resale customers. The decreased sales to other customers for the three-month period reflect lower weather-related demand from the wholesale for resale customers. Interconnection sales decreases reflect a decreased demand for energy for all periods. FERMI 2 CAPACITY FACTOR PERFORMANCE STANDARD RESERVE Because of a turbine-generator failure in December 1993, Fermi 2, a nuclear generating unit, was out of service in 1994 and early 1995, and operated at reduced capacity during the remainder of 1995 and the first three quarters of 1996. As a result, under the MPSC capacity factor performance standard, a disallowance of net incremental replacement power cost will be imposed in each of the years 1994-1998 for the amount by which the Fermi 2 three-year rolling average capacity factor is less than the greater of either the average of the top 50% of U. S. boiling water reactors or 50%. Detroit Edison recorded a reserve for such disallowances of $31 million in 1994 and $32 million in 1995, which amounts were charged to operating revenues. For additional information, see Notes 2 and 3 in the Annual Report. 19
20 Operating revenues have increased due to the absence of Fermi 2 reserve charges in the 1996 nine-month period, and due to a decrease in Fermi 2 reserve charges in the 1996 twelve-month period. OPERATING EXPENSES FUEL AND PURCHASED POWER Fuel and purchased power expenses increased (decreased) due to the following factors: <TABLE> <CAPTION> Three Nine Twelve Months Months Months ------ ------ ------ (Millions) <S> <C> <C> <C> Net system output $ (14) $ (5) $ 9 Average unit cost (5) (32) (48) Fermi 2 business interruption insurance - 6 59 Other 1 3 3 ----- ----- ---- Total $ (18) $ (28) $ 23 ===== ===== ==== </TABLE> Net system output and average fuel and purchased power unit costs were as follows: <TABLE> <CAPTION> Three Months Nine Months Twelve Months ---------------------------- ------------------------- -------------------------- 1996 1995 1996 1995 1996 1995 ------------- ------------- ------------ ------------ ------------ ------------ (Thousands of Megawatthours, "MWh") <S> <C> <C> <C> <C> <C> <C> Power plant generation Fossil 11,052 10,830 31,208 31,517 41,328 41,961 Nuclear 1,628 1,917 4,778 3,240 6,629 3,207 Purchased power 1,190 2,018 3,177 4,724 3,876 6,077 ------- ------- ------- ------- ------- ------- Net system output 13,870 14,765 39,163 39,481 51,833 51,245 ======= ======= ======= ======= ======= ======= Average unit cost ($/MWh) $ 15.16 $ 15.54 $ 14.73 $ 15.54 $ 14.68 $ 15.62 ======= ======= ======= ======= ======= ======= </TABLE> Fuel and purchased power expense decreased in the three-month period due to lower net system output, and lower average unit costs resulting from increased usage of lower-cost western low-sulfur coal and a decrease in Fermi 2 fuel expense. For the nine-month period, fuel and purchased power expense decreased due to lower average unit costs resulting from increased usage of lower-cost western low-sulfur coal and lower cost nuclear generation, and lower net system output. For the twelve-month period, fuel and purchased power expense increased due to the prior-period receipt of Fermi 2 business interruption insurance and higher net system output, partially offset by lower average unit costs resulting from increased 20
21 usage of lower cost nuclear generation and lower-cost western low-sulfur coal. Fermi 2 was out of service in 1994 and early 1995 as a result of a turbine-generator failure in December 1993. OTHER OPERATION Three Months Other operation expense decreased due primarily to expenses recorded in the year-earlier period for the write-off of obsolete and excess stock material ($15 million), the Ludington Pumped Storage Plant fish mortality case ($8.4 million) and Electric Power Research Institute dues ($4.8 million), lower major storm expenses ($9 million) and lower incentive award expenses related to a shareholder value improvement plan ($3.7 million), partially offset by higher sales expenses ($2.7 million). Nine Months Other operation expense decreased due primarily to expenses recorded in the year-earlier period for the write-off of obsolete and excess stock material ($15 million), the Ludington Pumped Storage Plant fish mortality case ($8.4 million) and Electric Power Research Institute dues ($4.8 million), lower incentive award expenses related to a shareholder value improvement plan ($9.1 million) and lower major storm ($4 million) and injuries and damages ($3.5 million) expenses. These decreases were partially offset by higher nuclear plant expenses ($9.1 million), lump sum payments to union employees ($4.3 million) and higher sales ($4.4 million), demand side management ($3 million), employee retirement plan ($2.6 million) and other expenses. Twelve Months Other operation expense decreased due primarily to expenses recorded in the year-earlier period for the write-off of obsolete and excess stock material ($21 million), the Ludington Pumped Storage Plant fish mortality case ($8.4 million), and Electric Power Research Institute dues ($4.8 million), lower uncollectible expense ($6.3 million), and lower injuries and damages expense ($4.1 million). These decreases were partially offset by higher demand side management expenses ($6 million), lump sum payments to union employees ($4.3 million) and higher sales expenses ($3.7 million). MAINTENANCE Three Months Maintenance expense decreased due to lower major storm ($8.3 million), fossil plant ($2.4 million) and nuclear plant ($1.1 million) expenses. These decreases were partially offset by higher overhead and underground lines support ($7.1 million), station maintenance ($1.8 million) and general property ($1.5 million) expenses. 21
22 Nine Months Maintenance expense increased due to higher overhead and underground lines support ($22.1 million), general property ($7.7 million), station equipment ($6.7 million) and nuclear plant ($4 million) expenses, partially offset by lower major storm expense ($2.9 million). Twelve Months Maintenance expense increased due to higher overhead and underground lines support ($23.1 million), general property ($7.7 million) and station equipment ($9 million) expenses. These increases were partially offset by lower nuclear plant ($6.7 million) and fossil plant ($5.7 million) expenses. STEAM HEATING SPECIAL CHARGES As the result of continuing losses in the operation of its steam heating business, upon adoption of Statement of Financial Accounting Standards No. 121 in the fourth quarter of 1995, Detroit Edison wrote off the remaining net book value of its steam heating plant assets of $42 million. During the third quarter of 1996, following the completion of a review of its steam heating operations, Detroit Edison recorded a special charge to net income of $149.2 million ($97 million after-tax). The special charge included a reserve for steam purchase commitments during the period from 1997 through 2008 under an agreement with the Greater Detroit Resource Recovery Facility, the retirement and closure of a portion of the steam heating system in 1997, and an investment of $18 million to improve service to remaining customers. DEPRECIATION AND AMORTIZATION Depreciation and amortization expense increased due primarily to increases in plant in service, including internally developed software costs. DEFERRED FERMI 2 AMORTIZATION Deferred Fermi 2 amortization, a non-cash item of income, was recorded beginning with Detroit Edison's purchase of the Wolverine Power Supply Cooperative, Inc.'s ownership interest in Fermi 2 in February 1990. The annual amount deferred decreases each year through 1999. AMORTIZATION OF DEFERRED FERMI 2 DEPRECIATION AND RETURN Deferred Fermi 2 depreciation and return, non-cash items of income, were recorded beginning with the implementation of the Fermi 2 rate phase-in plan in January 1988. The annual amounts of deferred depreciation and return decreased each year through 22
23 1992. Beginning in 1993 and continuing through 1998, these deferred amounts will be amortized to operating expense as the cash recovery is realized through revenues. TAXES OTHER THAN INCOME TAXES Taxes other than income taxes increased due to higher payroll and property taxes. INCOME TAXES Income taxes decreased due to lower pretax operating income. OTHER INCOME AND DEDUCTIONS OTHER INCOME AND (DEDUCTIONS) - NET Three Months Other deductions decreased due primarily to an increase in income from merchandising, jobbing and contract work ($2.8 million), a decrease in corporate contributions ($2.7 million), and a decrease in the write-off of unamortized expenses related to the open market purchases of Mortgage Bonds ($1.2 million), partially offset by higher promotional practices expense ($1.6 million). Nine Months Other deductions decreased due primarily to lower promotional practices expense ($6.2 million), expenses recorded in the year-earlier period for the sale of accounts receivables and unbilled revenues ($3.1 million) and the formation of a holding company ($2.6 million), a decrease in corporate contributions ($2.7 million) and lower expenses related to merchandising, jobbing and contract work ($1.3 million), partially offset by an increase in the write-off of unamortized expenses related to the open market purchases of Mortgage Bonds ($1.5 million). Twelve Months Other deductions decreased due primarily to expenses recorded in the year-earlier period for the sale of accounts receivable and unbilled revenues ($5.9 million), lower promotional practices expense ($5.9 million), lower corporate contributions ($4.8 million), a decrease in the write-off of unamortized expenses related to the open market purchases of Mortgage Bonds ($3.7 million) and lower expenses incurred in the formation of a holding company ($2.1 million). 23
24 ACCRETION INCOME Accretion income, a non-cash item of income, was recorded beginning in January 1988 to restore to income, over the period 1988-1998, losses recorded due to discounting indirect disallowances of plant costs. The annual amount of accretion income recorded decreases each year through 1998. INTEREST CHARGES LONG-TERM DEBT Three Months Long-term debt interest charges were lower due to the early redemption of Mortgage Bonds, partially offset by the issuance of QUIDS. Nine Months and Twelve Months Long-term debt interest charges were higher due to the issuance of QUIDS, partially offset by the early redemption of Mortgage Bonds. OTHER Other interest charges were lower due primarily to lower levels of short-term borrowings. PREFERRED STOCK DIVIDENDS OF DETROIT EDISON Preferred stock dividends of Detroit Edison decreased due to the redemption of all of the outstanding Cumulative Preferred Stock, 7.68% Series, 7.45% Series and 7.36% Series and the exchange of a portion of the 7.75% Series for QUIDS and the redemption and/or conversion of all shares of the convertible 5.50% Series. LIQUIDITY AND CAPITAL RESOURCES PRIVATE SECURITIES LITIGATION REFORM ACT - FORWARD-LOOKING STATEMENTS Certain information presented in this Quarterly Report on Form 10-Q is based upon the expectations of the Company and Detroit Edison and, as such, is forward-looking. The Private Securities Litigation Reform Act of 1995 encourages reporting companies to provide analyses and estimates of future prospects and also permits reporting companies to point out that actual results may differ from those anticipated. 24
25 Actual results for the Company and Detroit Edison may differ from those expected due to a number of variables including, but not limited to, the impact of newly-required FERC tariffs, actual sales, the effects of competition, pending regulatory proceedings, pending and proposed statutory changes, the recovery of stranded costs, environmental and nuclear requirements and the success of non-utility projects. While the Company and Detroit Edison believe that estimates given accurately measure the expected outcome, actual results could vary materially due to the variables mentioned as well as others. COMPETITION THE DETROIT EDISON COMPANY FERC. On April 24, 1996, the FERC issued Orders 888 and 889. Order 888 requires public utilities to file open access transmission tariffs for wholesale transmission services in accordance with non-discriminatory terms and conditions established by the FERC. On July 9, 1996, Detroit Edison filed its Pro-Forma Open Access Transmission Tariff in compliance with FERC Order 888. The tariff sets forth the terms and conditions under which Detroit Edison will supply wholesale Firm and Non-Firm Point-to-Point Transmission Service as well as Network Integration Transmission Service (a service which allows the network customer to integrate, economically dispatch and regulate its network resources to serve its network load in a manner comparable to that in which the transmission provider utilizes its transmission system to serve its native load customers). Detroit Edison's filing also included the development and cost support for the rates to be charged for transmission service and the various ancillary services that are required to be offered. Order 888 permits the recovery of stranded costs on a case by case basis. The FERC has initiated proceedings to review Detroit Edison's tariff filing. Effective with the filing, Detroit Edison must take transmission service (including ancillary services) under the open access tariff for any new wholesale sales or purchases. Existing economy energy coordination agreements must be unbundled to take service under the transmission tariff after December 31, 1996. Effective October 1996, all bills submitted to wholesale requirements customers must include unbundled informational rates as a line item in order to allow customers to compare rates and evaluate alternative contracts. By December 31, 1996, Detroit Edison, as a member of a pool, must file a joint pool-wide pro forma tariff and must begin to take service under that tariff for all pool transactions. Power pool agreements must be reformed to establish open, non-discriminatory provisions and to modify any provisions that are unduly discriminatory or preferential. By January 3, 1997, public utilities are required by Order 889 to obtain transmission information for wholesale transactions through a system on the Internet. Public utilities 25
26 must separate transmission operations and reliability functions from wholesale marketing functions. FERC has also issued a NOPR on Capacity Reservation Transmission Tariffs ("CRT"). The NOPR requested comment by October 21, 1996 on whether there are certain disadvantages inherent in offering transmission service on both a network and point-to-point basis and whether comparability can be better accomplished using a single different methodology. The proposed CRT approach suggests that no later than December 31, 1997, all pro forma point-to-point and network service be replaced with a single point-to-point tariff that provides for reservation-based transmission service for all jurisdictional (wholesale sales and wholesale and retail transmission) service. Detroit Edison is currently unable to estimate the revenue impact, if any, of these newly required tariffs and procedures. MPSC. On April 12, 1996, the MPSC issued a "Scheduling Order" which required Detroit Edison and Consumers Power Company to file "applications" by May 15, 1996 containing proposals addressing the recommendation of Michigan Governor Engler and the Michigan Jobs Commission ("MJC") to "allow new industrial/commercial electrical load to be negotiated directly from the generator and wheeled over 'common' transmission" by January 1, 1997. Detroit Edison filed its application on May 15, 1996, stating that the MJC's report set out a framework for a transition to a competitive environment that included six specific recommendations associated with a near term deadline of January 1, 1997. However, the MPSC's scheduling order only sought proposals regarding the first recommendation. Detroit Edison indicated it does not support piecemeal implementation of the MJC's framework. Detroit Edison also stated that, although the MPSC has no legal authority to compel Michigan utilities to offer retail wheeling services, it would voluntarily develop a retail wheeling program as part of a comprehensive implementation of the MJC's recommendations, including the development of a mechanism to recover stranded costs. Detroit Edison also indicated that it will take some time to develop a tariff that, among other things, identifies and separates the transmission and distribution facilities as required by FERC Order 888. In the interim, Detroit Edison requested ex parte authority to immediately offer an Economic Growth Service Rider to be used as a tool to attract new business. The proposed rider, which is still before the MPSC, contains significant price discounts for new commercial and industrial customers. The MPSC conducted a series of five public hearings during the months of July and August, 1996, to provide an opportunity for the public to address the issues surrounding the restructuring of the electric utility industry, including, but not limited to issues raised by the recommendations of the MJC. 26
27 Detroit Edison is continuing to address its competitive status and the needs of its customers by entering into long-term (as long as 10 years) service contracts with large commercial and industrial customers. A number of such contracts, which must be approved by the MPSC prior to implementation, are pending before the MPSC. CASH GENERATION AND CASH REQUIREMENTS CONSOLIDATED STATEMENT OF CASH FLOWS (UNAUDITED) Net cash from operating activities decreased for the three-month period due primarily to changes in current assets and liabilities. Net cash from operating activities increased in the nine-month and twelve-month periods due primarily to changes in current assets and liabilities, primarily as a result of the 1995 repurchase of customer accounts receivable and unbilled revenues. Net cash used for investing activities was higher due to increased plant and equipment expenditures. Net cash used for financing activities was lower in the three-month and twelve-month periods due primarily to a decrease in funds used to reduce short-term borrowings. Net cash used for financing activities for the nine-month period was higher due to higher redemptions of long-term debt. Net cash used for financing activities for Detroit Edison was higher in the nine-month and twelve-month periods due to the cash portion of a restructuring dividend to the Company. ADDITIONAL INFORMATION During the period May through September 1996, Detroit Edison purchased a total of $56.5 million of Mortgage Bonds on the open market, consisting of $29.5 million of 7.74% 1993 Series J, $26.0 million of 8.24% 1993 Series C and $1 million of 8.25% 1993 Series C. These bonds have been canceled. Detroit Edison's 1996 cash requirements for its capital expenditure program are estimated at $482 million, of which $351 million had been expended as of September 30, 1996. Detroit Edison's internal cash generation is expected to be sufficient to meet cash requirements for capital expenditures as well as scheduled long-term debt redemptions. Detroit Edison had short-term credit arrangements of approximately $450 million at September 30, 1996, under which no borrowings were outstanding. 27
28 NON-REGULATED INVESTMENTS Expenditures for 1996 non-regulated investments are estimated at $80 million, of which $49 million had been expended at September 30, 1996. A project financing arrangement is in place for affiliate borrowings of up to $50 million, of which $32.3 million was outstanding at September 30, 1996. This arrangement is supported by specific project assets. At September 30, 1996, DTE Capital Corporation had a $200 million Revolving Credit Agreement, backed by a Support Agreement from the Company, under which no borrowings were outstanding. CAPITALIZATION The Company's capital structure as of September 30, 1996 was 46.7% common shareholders' equity, 2.0% cumulative preferred stock of subsidiary and 51.3% long-term debt as compared to 45.7%, 4.3% and 50.0%, respectively, at December 31, 1995. 28
29 DTE ENERGY COMPANY PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. On May 28, 1996 an order was issued by the Circuit Court for Wayne County, Michigan certifying a plaintiff class (Gilford, et al v Detroit Edison) in a lawsuit claiming that Detroit Edison had engaged in age and racial discrimination. Detroit Edison has requested leave to appeal the class certification to the Michigan Court of Appeals and has, also, filed a motion for summary disposition of the lawsuit with the Circuit Court for Wayne County. In October, 1996, the Michigan Court of Appeals issued an order staying proceedings in the Circuit Court and directing that immediate consideration be given to the issue of whether to grant Detroit Edison's application for leave to appeal. Thereafter, the Court of Appeals dissolved the stay and denied leave for appeal. Detroit Edison has requested reconsideration of these rulings. Detroit Edison is of the opinion that the allegations of discrimination are without merit. ITEM 5 - OTHER INFORMATION. As discussed in Part I, Items 1 and 2 - Business and Properties, "Regulation and Rates - Michigan Public Service Commission" of the Annual Report, Detroit Edison is subject to the regulatory jurisdiction, including rates, of the MPSC. On September 30, 1996, Detroit Edison filed its PSCR plan recommending a fuel adjustment for bills rendered in 1997. Fuel and purchased power costs are expected to decrease 10.6 percent, on average, in 1997 over the corresponding forecast for 1996. A pre-hearing conference in this matter is scheduled for November 1996. As discussed in Part I, Items 1 and 2 - Business and Properties, "Regulation and Rates - Michigan Public Service Commission - Conservation and Demand-Side Management Programs" of the Annual Report, on April 11, 1994, the MPSC issued an order authorizing Detroit Edison to collect a surcharge to install energy conservation measures in low-income customer households. The MPSC, at Detroit Edison's request, approved the elimination of the surcharge in an order dated August 22, 1996. As discussed in part I, Items 1 and 2 - Business and Properties, "Regulation and Rates - Michigan Public Service Commission - Conservation and Demand-Side Management Programs" of the Annual Report, the MPSC in June 1988 ordered each Michigan gas and electric utility to file a biennial energy conservation report including a three-year plan. On August 5, 1996, Detroit Edison filed its fourth biennial plan for 1997 and beyond. In the plan, Detroit Edison requests that it be allowed to spend in 1997 (and 1998, if necessary) the remaining funds collected for its 1994-1996 energy conservation programs. An MPSC order is expected by the end of 1996. As discussed in Part I, Items 1 and 2 - Business and Properties, "Regulation and Rates - Michigan Public Service Commission - Retail Wheeling" of the Annual Report and in Item 5 - Other Information of the Quarterly Report for the quarter ended June 30, 29
30 1996, MascoTech Forming Technologies, Inc., a Detroit Edison industrial customer currently purchasing approximately 25 MW of electricity annually (with the potential for an additional 6 MW annually) petitioned the MPSC to establish a "cost based fair and pro-competitive transportation rate" for its new and existing electric load. On August 5, 1996, in resolution of this petition Detroit Edison and MascoTech Forming Technologies, Inc. entered into a long-term Large Customer Contract. The MPSC issued an order on September 12, 1996 approving the contract and an order was issued on October 7, 1996, dismissing the MascoTech direct access case. As discussed in Part 1 - Items 1 and 2 - Business and Properties, "Environmental Matters - Water" of the Annual Report and Item 5 - Other Information of the Quarterly Report for the quarter ended June 30, 1996, National Pollution Discharge Elimination System ("NPDES") permits for Detroit Edison's power plants are issued by the MDEQ pursuant to delegation by the EPA under the federal Clean Water Act. The NPDES permit for the Fermi 2 Power Plant was issued on May 31, 1996. On July 24, an anti-nuclear power group filed a petition for a contested case hearing challenging the issuance of the permit. In September, 1996, the MDEQ filed a briefing memo recommending approval of the hearing request. An October 7, 1996 letter from the Administrative Law Judge announced the matter will now be moved to hearing. While it is unknown what the outcome of the hearing will be, the Fermi 2 permit remains in effect. Permit renewal applications for six other plants have been submitted (in 1994 and earlier); those existing expired permits remain effective until new permits are issued or denied. As discussed in Part 1 - Items 1 and 2 - Business and Properties, "Environmental Matters - Wastes and Toxic Substances" of the Annual Report and Item 5 - Other Information of the Quarterly Report for the quarter ended March 31, 1996, in April, 1996, the MDEQ conducted an Integrated Assessment on Detroit Edison owned property, formerly known as the Monroe City Landfill, located next to the Monroe Power Plant. The site was on the State of Michigan's list of contaminated sites and the Comprehensive Environmental Response, Compensation and Liability Act list. In October, 1996, the company received a copy of the report and a letter from the MDEQ indicating that it was recommending that the site be designated "No Further Remedial Action Planned." An all time peak demand of 10,337 MW was experienced for Detroit Edison's system on August 7, 1996. The new peak, which included certain loads on the Company's interruptible rates, was served using a combination of installed generation, long-term purchases, and seasonal capacity purchases without any loss of power for firm customers. The previous peak was 10,049 MW set in August 1995. 30
31 QUARTERLY REPORT ON FORM 10-Q FOR THE DETROIT EDISON COMPANY PART I - FINANCIAL INFORMATION ITEM 1 - FINANCIAL STATEMENTS (UNAUDITED). See pages 9 through 15. ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. See the Company's and Detroit Edison's "Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations," which is incorporated herein by this reference. PART II - OTHER INFORMATION ITEM 1 - LEGAL PROCEEDINGS. See the Company's "Item 1 - Legal Proceedings," which is incorporated herein by this reference. ITEM 5 - OTHER INFORMATION. By letter dated October 9, 1996, the Nuclear Regulatory Commission requested all reactor licensees, including Detroit Edison, to submit information concerning the adequacy and availability of nuclear power plant design basis information. This information is due March 1997. Detroit Edison will make its report submission on a timely basis. See the Company's "Item 5 - Other Information," which is incorporated herein by this reference. 31
32 QUARTERLY REPORTS ON FORM 10-Q FOR DTE ENERGY COMPANY AND THE DETROIT EDISON COMPANY ITEM 6 - EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits (i) Exhibits filed herewith. Exhibit Number 4-177 - First Amendment, dated as of August 15, 1996, to Second Supplemental Note Indenture. 11-5 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock. 15-3 - Awareness Letter of Deloitte & Touche LLP regarding their report dated November 7, 1996. 27-7 - Financial Data Schedule for the period ended September 30, 1996 for the Company. 27-8 - Financial Data Schedule for the period ended September 30, 1996 for Detroit Edison. 99-13 - Fourth Amendment, dated as of August 29, 1996, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99-14 - Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-Year) Credit Agreement, dated as of September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. (ii) Exhibits incorporated herein by reference. 3(a) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-117 to Form 10-Q for quarter ended March 31, 1993). 32
33 Exhibit Number 3(b) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-134 to Form 10-Q for quarter ended March 31, 1993). 3(c) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau (Exhibit 4-140 to Form 10-Q for quarter ended March 31, 1993). 3(d) - Amended and Restated Articles of Incorporation of the Company, dated December 13, 1995 (Exhibit 3A (3.1) to the Company's Form 8-B filed January 2, 1996, File No. 1-11607). 3(e) - Agreement and Plan of Exchange (Exhibit 1(2) to the Company's Form 8-B filed January 2, 1996, File No. 1-11607). 3(f) - Amended and Restated By-Laws, dated as of February 26, 1996, of the Company (Exhibit 3-3 to Form 10-K for year ended December 31, 1995). 3(g) - Amended and Restated By-Laws, dated as of February 26, 1996, of Detroit Edison (Exhibit 3-4 to Form 10-K for year ended December 31, 1995). 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison (File No. 1-2198) and Bankers Trust Company as Trustee (Exhibit B-1 to Registration No. 2-1630) and indentures supplemental thereto, dated as of dates indicated below, and filed as exhibits to the filings as set forth below: September 1, 1947 Exhibit B-20 to Registration No. 2-7136 October 1, 1968 Exhibit 2-B-33 to Registration No. 2-30096 November 15, 1971 Exhibit 2-B-38 to Registration No. 2-42160 January 15, 1973 Exhibit 2-B-39 to Registration No. 2-46595 June 1, 1978 Exhibit 2-B-51 to Registration No. 2-61643 June 30, 1982 Exhibit 4-30 to Registration No. 2-78941 August 15, 1982 Exhibit 4-32 to Registration No. 2-79674 October 15, 1985 Exhibit 4-170 to Form 10-K for year ended December 31, 1994 33
34 Exhibit Number November 30, 1987 Exhibit 4-139 to Form 10-K for year ended December 31, 1992 July 15, 1989 Exhibit 4-171 to Form 10-K for year ended December 31, 1994 December 1, 1989 Exhibit 4-172 to Form 10-K for year ended December 31, 1994 February 15, 1990 Exhibit 4-173 to Form 10-K for year ended December 31, 1994 November 1, 1990 Exhibit 4-110 to Form 10-K for year ended December 31, 1990 April 1, 1991 Exhibit 4-15 to Form 10-K for year ended December 31, 1995 May 1, 1991 Exhibit 4-112 to Form 10-Q for quarter ended June 30, 1991 May 15, 1991 Exhibit 4-113 to Form 10-Q for quarter ended June 30, 1991 September 1, 1991 Exhibit 4-116 to Form 10-Q for quarter ended September 30, 1991 November 1, 1991 Exhibit 4-119 to Form 10-K for year ended December 31, 1991 January 15, 1992 Exhibit 4-120 to Form 10-K for year ended December 31, 1991 February 29, 1992 Exhibit 4-121 to Form 10-Q for quarter ended March 31, 1992 April 15, 1992 Exhibit 4-122 to Form 10-Q for quarter ended June 30, 1992 July 15, 1992 Exhibit 4-123 to Form 10-Q for quarter ended September 30, 1992 July 31, 1992 Exhibit 4-124 to Form 10-Q for quarter ended September 30, 1992 November 30, 1992 Exhibit 4-130 to Registration No. 33-56496 January 1, 1993 Exhibit 4-131 to Registration No. 33-56496 March 1, 1993 Exhibit 4-141 to Form 10-Q for quarter ended March 31, 1993 March 15, 1993 Exhibit 4-142 to Form 10-Q for quarter ended March 31, 1993 April 1, 1993 Exhibit 4-143 to Form 10-Q for quarter ended March 31, 1993 April 26, 1993 Exhibit 4-144 to Form 10-Q for quarter ended March 31, 1993 May 31, 1993 Exhibit 4-148 to Registration No. 33-64296 June 30, 1993 Exhibit 4-149 to Form 10-Q for quarter ended June 30, 1993 (1993 Series AP) 34
35 Exhibit Number June 30, 1993 Exhibit 4-150 to Form 10-Q for quarter ended June 30, 1993 (1993 Series H) September 15, 1993 Exhibit 4-158 to Form 10-Q for quarter ended September 30, 1993 March 1, 1994 Exhibit 4-163 to Registration No. 33-53207 June 15, 1994 Exhibit 4-166 to Form 10-Q for quarter ended June 30, 1994 August 15, 1994 Exhibit 4-168 to Form 10-Q for quarter ended September 30, 1994 December 1, 1994 Exhibit 4-169 to Form 10-K for year ended December 31, 1994 August 1, 1995 Exhibit 4-174 to Form 10-Q for quarter ended September 30, 1995. 4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993 (Exhibit 4-152 to Registration No. 33-50325). 4(c) - First Supplemental Note Indenture, dated as of June 30, 1993 (Exhibit 4-153 to Registration No. 33-50325). 4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993 (Exhibit 4-159 to Form 10-Q for quarter ended September 30, 1993). 4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-169 to Form 10-Q for quarter ended September 30, 1994). 4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994 (Exhibit 4-12 to Registration No. 333-00023). 4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995 (Exhibit 4-175 to Form 10-Q for quarter ended September 30, 1995). 4(h) - Fifth Supplemental Note Indenture, dated as of February 1, 1996 (Exhibit 4-14 to Form 10-K for year ended December 31, 1995). 4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents (Exhibit 99-18 to Form 10-Q for quarter ended September 30, 1994). 35
36 Exhibit Number 4(j) - Support Agreement, dated as of March 8, 1996, between the Company and Detroit Edison (Exhibit 4-176 to Form 10-Q for quarter ended March 31, 1996). 99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-5 to Registration No. 2-81501). 99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982 (Exhibit 28-6 to Registration No. 2-81501). 99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-6 to Registration No. 33-50325). 99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-7 to Registration No. 33-50325). 99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-8 to Registration No. 33-50325). 99(f) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-12 to Registration No. 33-50325). 99(g) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-19 to Form 10-Q for quarter ended September 30, 1994). 99(h) - Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-11 to Form 10-Q for quarter ended March 31, 1996). 36
37 Exhibit Number 99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent (Exhibit 99-13 to Registration No. 33-50325). 99(j) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-20 to Form 10-Q for quarter ended September 30, 1994). 99(k) - Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent (Exhibit 99-12 to Form 10-Q for quarter ended March 31, 1996). 99(l) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-9 to Registration No. 33-50325). 99(m) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance (Exhibit 99-10 to Registration No. 33-50325). 99(n) - Second Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract dated as of September 1, 1993, between Detroit Edison and Renaissance (Exhibit 99-11 to Registration No. 33-50325). 99(o) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-21 to Form 10-Q for quarter ended September 30, 1994). 99(p) - Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance (Exhibit 99-10 to Form 10-Q for quarter ended March 31, 1996). 99(q) - Credit Agreement, dated as of March 1, 1996 among DTE Capital Corporation, the Initial Lenders named therein, and Citibank, N.A., as Agent (Exhibit 99-9 to Form 10-Q for quarter ended March 31, 1996). 37
38 (b) Reports on Form 8-K The Registrants each filed a Current Report on Form 8-K, dated September 9, 1996, during the third quarter of 1996 in which it was disclosed that Detroit Edison was recording an additional non-cash charge to net income based upon a review of steam heating operations. 38
39 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. DTE ENERGY COMPANY -------------------------------------- (Registrant) Date November 7, 1996 /s/ SUSAN M. BEALE --------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date November 7, 1996 /s/ RONALD W. GRESENS ---------------------------------------- Ronald W. Gresens Vice President and Controller 39
40 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. THE DETROIT EDISON COMPANY --------------------------------------- (Registrant) Date November 7, 1996 /s/ SUSAN M. BEALE --------------------------------------- Susan M. Beale Vice President and Corporate Secretary Date November 7, 1996 /s/ RONALD W. GRESENS ---------------------------------------- Ronald W. Gresens Vice President and Controller 40
41 QUARTERLY REPORTS ON FORM 10-Q FOR DTE ENERGY COMPANY (FILE NO. 1-11607) AND THE DETROIT EDISON COMPANY (FILE NO. 1-2198) EXHIBIT INDEX (i) Exhibits filed herewith. Exhibit Page No. Number -------- 4-177 - First Amendment, dated as of August 15, 1996, to Second Supplemental Note Indenture. 11-5 - DTE Energy Company and Subsidiary Companies Primary and Fully Diluted Earnings Per Share of Common Stock. 15-3 - Awareness Letter of Deloitte & Touche LLP regarding their report dated November 7, 1996. 27-7 - Financial Data Schedule for the period ended September 30, 1996 for the Company. 27-8 - Financial Data Schedule for the period ended September 30, 1996 for Detroit Edison. 99-13 - Fourth Amendment, dated as of August 29, 1996, to $200,000,000 364-Day Credit Agreement, dated as of September 1, 1990, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99-14 - Fourth Amendment, dated as of September 1, 1996, to $200,000,000 Multi-Year (formerly Three-Year) Credit Agreement, dated as of September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. (ii) Exhibits incorporated by reference. See Pages _____ through ____ for location of Exhibits Incorporated by Reference 3(a) - Restated Articles of Incorporation of Detroit Edison, as filed December 10, 1991 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau.
42 Exhibit Number - ------- 3(b) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.75% Series as filed February 22, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau. 3(c) - Certificate containing resolution of the Detroit Edison Board of Directors establishing the Cumulative Preferred Stock, 7.74% Series, as filed April 21, 1993 with the State of Michigan, Department of Commerce - Corporation and Securities Bureau. 3(d) - Amended and Restated Articles of Incorporation of the Company, dated December 13, 1995. 3(e) - Agreement and Plan of Exchange. 3(f) - Amended and Restated By-Laws, dated as of February 26, 1996, of the Company. 3(g) - Amended and Restated By-Laws, dated as of February 26, 1996, of Detroit Edison. 4(a) - Mortgage and Deed of Trust, dated as of October 1, 1924, between Detroit Edison and Bankers Trust Company as Trustee and indentures supplemental thereto, dated as of dates indicated below: September 1, 1947 October 1, 1968 November 15, 1971 January 15, 1973 June 1, 1978 June 30, 1982 August 15, 1982 October 15, 1985
43 Exhibit Number - ------- November 30, 1987 July 15, 1989 December 1, 1989 February 15, 1990 November 1, 1990 April 1, 1991 May 1, 1991 May 15, 1991 September 1, 1991 November 1, 1991 January 15, 1992 February 29, 1992 April 15, 1992 July 15, 1992 July 31, 1992 November 30, 1992 January 1, 1993 March 1, 1993 March 15, 1993 April 1, 1993 April 26, 1993 May 31, 1993 June 30, 1993 (1993 Series AP) June 30, 1993 (1993 Series H) September 15, 1993 March 1, 1994 June 15, 1994 August 15, 1994 December 1, 1994 August 1, 1995 4(b) - Collateral Trust Indenture (notes), dated as of June 30, 1993. 4(c) - First Supplemental Note Indenture, dated as of June 30, 1993. 4(d) - Second Supplemental Note Indenture, dated as of September 15, 1993. 4(e) - Third Supplemental Note Indenture, dated as of August 15, 1994. 4(f) - First Amendment, dated as of December 12, 1995, to Third Supplemental Note Indenture, dated as of August 15, 1994.
44 Exhibit Number - ------- 4(g) - Fourth Supplemental Note Indenture, dated as of August 15, 1995. 4(h) - Fifth Supplemental Note Indenture, dated as of February 1, 1996. 4(i) - Standby Note Purchase Credit Facility, dated as of August 17, 1994, among The Detroit Edison Company, Barclays Bank PLC, as Bank and Administrative Agent, Bank of America, The Bank of New York, The Fuji Bank Limited, The Long-Term Credit Bank of Japan, LTD, Union Bank and Citicorp Securities, Inc. and First Chicago Capital Markets, Inc. as Remarketing Agents. 4(j) - Support Agreement, dated as of March 8, 1996, between the Company and Detroit Edison. 99(a) - Belle River Participation Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982. 99(b) - Belle River Transmission Ownership and Operating Agreement between Detroit Edison and Michigan Public Power Agency, dated as of December 1, 1982. 99(c) - 1988 Amended and Restated Loan Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance. 99(d) - First Amendment to 1988 Amended and Restated Loan Agreement, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(e) - Second Amendment to 1988 Amended and Restated Loan Agreement, dated as of September 1, 1993, between Detroit Edison and Renaissance. 99(f) - $200,000,000 364-Day Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent. 99(g) - First Amendment, dated as of August 31, 1994, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent.
45 Exhibit Number - ------- 99(h) - Third Amendment, dated as of March 8, 1996, to $200,000,000 364-Day Credit Agreement, dated September 1, 1993, as amended, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(i) - $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, among Detroit Edison, Renaissance and Barclays Bank PLC, New York Branch, as Agent. 99(j) - First Amendment, dated as of September 1, 1994, to $200,000,000 Three-Year Credit Agreement, dated as of September 1, 1993, among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(k) - Third Amendment, dated as of March 8, 1996, to $200,000,000 Three-Year Credit Agreement, dated September 1, 1993, as amended among Detroit Edison, Renaissance, the Banks party thereto and Barclays Bank, PLC, New York Branch, as Agent. 99(l) - 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(m) - First Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated as of February 1, 1990, between Detroit Edison and Renaissance. 99(n) - Second Amendment to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract dated as of September 1, 1993, between Detroit Edison and Renaissance. 99(o) - Third Amendment, dated as of August 31, 1994, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract, dated October 4, 1988, between Detroit Edison and Renaissance. 99(p) - Fourth Amendment, dated as of March 8, 1996, to 1988 Amended and Restated Nuclear Fuel Heat Purchase Contract Agreement, dated as of October 4, 1988, between Detroit Edison and Renaissance. 99(q) - Credit Agreement, dated as of March 1, 1996 among DTE Capital Corporation, the Initial Lenders named therein, and Citibank, N.A., as Agent.