Company Quick10K Filing
Quick10K
DPL
10-Q 2019-03-31 Quarter: 2019-03-31
10-K 2018-12-31 Annual: 2018-12-31
10-Q 2018-09-30 Quarter: 2018-09-30
10-Q 2018-06-30 Quarter: 2018-06-30
10-Q 2018-03-31 Quarter: 2018-03-31
10-K 2017-12-31 Annual: 2017-12-31
10-Q 2017-09-30 Quarter: 2017-09-30
10-Q 2017-06-30 Quarter: 2017-06-30
10-Q 2017-03-31 Quarter: 2017-03-31
10-K 2016-12-31 Annual: 2016-12-31
10-Q 2016-09-30 Quarter: 2016-09-30
10-Q 2016-06-30 Quarter: 2016-06-30
10-Q 2016-03-31 Quarter: 2016-03-31
10-K 2015-12-31 Annual: 2015-12-31
10-Q 2015-09-30 Quarter: 2015-09-30
10-Q 2015-06-30 Quarter: 2015-06-30
10-Q 2015-03-31 Quarter: 2015-03-31
10-K 2014-12-31 Annual: 2014-12-31
10-Q 2014-09-30 Quarter: 2014-09-30
10-Q 2014-06-30 Quarter: 2014-06-30
10-Q 2014-03-31 Quarter: 2014-03-31
10-K 2013-12-31 Annual: 2013-12-31
8-K 2019-05-16 Other Events, Exhibits
8-K 2019-04-17 Enter Agreement, Off-BS Arrangement, Exhibits
8-K 2019-02-15 Other Events
8-K 2019-01-23 Regulation FD, Exhibits
8-K 2018-12-06 Other Events
8-K 2018-09-26 Regulation FD
8-K 2018-06-18 Regulation FD
8-K 2018-05-31 Regulation FD, Exhibits
8-K 2018-03-27 M&A, Exhibits
8-K 2018-02-05 Other Events
8-K 2018-01-03 Enter Agreement, Exhibits
SNP China Petroleum & Chemical 88,870
CTSH Cognizant 33,640
TECH Tech Central 7,650
MANU Manchester United 3,100
FORM Formfactor 1,250
BCRX Biocryst Pharmaceuticals 862
NINE Nine Energy Service 678
SVM Servicemaster Co 365
GALT Galectin Therapeutics 204
CHTA Wari 0
DPL 2019-03-31
Part I - Financial Information
Item 1 - Financial Statements
Note 1 - Overview and Summary of Significant Accounting Policies
Note 2 - Supplemental Financial Information
Note 3 - Regulatory Matters
Note 4 - Fair Value
Note 5 - Derivative Instruments and Hedging Activities
Note 6 - Long-Term Debt
Note 7 - Income Taxes
Note 8 - Benefit Plans
Note 9 - Shareholder's Equity
Note 10 - Contractual Obligations, Commercial Commitments and Contingencies
Note 11 - Business Segments
Note 12 - Revenue
Note 13 - Dispositions
Note 1 - Overview and Summary of Significant Accounting Policies
Note 2 - Supplemental Financial Information
Note 3 - Regulatory Matters
Note 4 - Fair Value
Note 5 - Derivative Instruments and Hedging Activities
Note 6 - Long-Term Debt
Note 7 - Income Taxes
Note 8 - Benefit Plans
Note 9 - Contractual Obligations, Commercial Commitments and Contingencies
Note 10 - Revenue
Note 11 - Dispositions
Item 2 - Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3 - Quantitative and Qualitative Disclosures About Market Risk
Item 4 - Controls and Procedures
Part II - Other Information
Item 1 - Legal Proceedings
Item 1A - Risk Factors
Item 2 - Unregistered Sale of Equity Securities and Use of Proceeds
Item 3 - Defaults Upon Senior Securities
Item 4 - Mine Safety Disclosures
Item 5 - Other Information
Item 6 - Exhibits
EX-31.A dpl20190331ex31a.htm
EX-31.B dpl20190331ex31b.htm
EX-31.C dpl20190331ex31c.htm
EX-31.D dpl20190331ex31d.htm
EX-32.A dpl20190331ex32a.htm
EX-32.B dpl20190331ex32b.htm
EX-32.C dpl20190331ex32c.htm
EX-32.D dpl20190331ex32d.htm

DPL Earnings 2019-03-31

DPL 10Q Quarterly Report

Balance SheetIncome StatementCash Flow

10-Q 1 dpl10q20190331q1.htm 10-Q Document
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q

(x) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended March 31, 2019

OR

( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934

dplinclogoa07.jpg
 
dpandllogoa10.jpg
DPL INC.
(an Ohio corporation)
 
THE DAYTON POWER AND LIGHT COMPANY
(an Ohio corporation)
Commission file number 1-9052
 
Commission file number 1-2385
1065 Woodman Drive
Dayton, Ohio 45432
 
1065 Woodman Drive
Dayton, Ohio 45432
937-259-7215
 
937-259-7215
I.R.S. Employer Identification No. 31-1163136
 
I.R.S. Employer Identification No. 31-0258470

Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
N/A
N/A
N/A

Indicate by check mark whether each registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.
DPL Inc.
Yes o
No x
The Dayton Power and Light Company
Yes o
No x

Each of DPL Inc. and The Dayton Power and Light Company is a voluntary filer that has filed all applicable reports under Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months.

Indicate by check mark whether each registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).
DPL Inc.
Yes x
No o
The Dayton Power and Light Company
Yes x
No o



1


Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer”, “smaller reporting company” and "emerging growth company" in Rule 12b-2 of the Exchange Act.
 
Large
accelerated
filer
Accelerated
filer
Non-
accelerated
filer
(Do not check if a smaller reporting company)
Smaller
reporting
company
Emerging growth company
DPL Inc.
o
o
x
o
o
The Dayton Power and Light Company
o
o
x
o
o

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.
DPL Inc.
o
The Dayton Power and Light Company
o

Indicate by check mark whether each registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).
DPL Inc.
Yes o
No x
The Dayton Power and Light Company
Yes o
No x

All of the outstanding common stock of DPL Inc. is indirectly owned by The AES Corporation. All of the outstanding common stock of The Dayton Power and Light Company is owned by DPL Inc.

As of May 6, 2019, each registrant had the following shares of common stock outstanding:
Registrant
 
Description
 
Shares Outstanding
 
 
 
 
 
DPL Inc.
 
Common Stock, no par value
 
1
 
 
 
 
 
The Dayton Power and Light Company
 
Common Stock, $0.01 par value
 
41,172,173

This combined Form 10-Q is separately filed by DPL Inc. and The Dayton Power and Light Company. Information contained herein relating to any individual registrant is filed by such registrant on its own behalf. Each registrant makes no representation as to information relating to a registrant other than itself.



2


DPL Inc. and The Dayton Power and Light Company
Quarter Ended March 31, 2019
 
Table of Contents
Page No.
Glossary of Terms
Forward-Looking Statements
Part I Financial Information
 
Item 1
Financial Statements – DPL Inc. and The Dayton Power and Light Company (Unaudited)
 
 
DPL Inc.
 
 
Condensed Consolidated Statements of Operations
 
Condensed Consolidated Statements of Comprehensive Income
 
Condensed Consolidated Balance Sheets
 
Condensed Consolidated Statements of Cash Flows
 
Condensed Consolidated Statements of Shareholder's Equity
 
Notes to Condensed Consolidated Financial Statements
 
Note 1 – Overview and Summary of Significant Accounting Policies
 
Note 2 – Supplemental Financial Information
 
Note 3 – Regulatory Matters
 
Note 4 – Fair Value
 
Note 5 – Derivative Instruments and Hedging Activities
 
Note 6 – Long-term Debt
 
Note 7 – Income Taxes
 
Note 8 – Benefit Plans
 
Note 9 – Shareholder's Equity
 
Note 10 – Contractual Obligations, Commercial Commitments and Contingencies
 
Note 11 – Business Segments
 
Note 12 – Revenue
 
Note 13 – Dispositions
 
Note 14 – Discontinued Operations
 
 
 
 
The Dayton Power and Light Company
 
 
Condensed Statements of Operations
 
Condensed Statements of Comprehensive Income
 
Condensed Balance Sheets
 
Condensed Statements of Cash Flows
 
Condensed Statements of Shareholder's Equity
 
Notes to Condensed Financial Statements
 
Note 1 – Overview and Summary of Significant Accounting Policies
 
Note 2 – Supplemental Financial Information
 
Note 3 – Regulatory Matters
 
Note 4 – Fair Value
 
Note 5 – Derivative Instruments and Hedging Activities
 
Note 6 – Long-term Debt
 
Note 7 – Income Taxes
 
Note 8 – Benefit Plans
 
Note 9 – Contractual Obligations, Commercial Commitments and Contingencies
 
Note 10 – Revenue
 
Note 11 – Dispositions
 
 
 
Item 2
Management's Discussion and Analysis of Financial Condition and Results of Operations
Item 3
Quantitative and Qualitative Disclosures about Market Risk
Item 4
Controls and Procedures
 
 
 
Part II Other Information
 
Item 1
Legal Proceedings
Item 1A
Risk Factors
Item 2
Unregistered Sales of Equity Securities and Use of Proceeds
Item 3
Defaults Upon Senior Securities 
Item 4
Mine Safety Disclosures
Item 5
Other Information
Item 6
Exhibits
 
Signatures



3


GLOSSARY OF TERMS 

The following terms are used in this Form 10-Q:
Term
Definition
2017 ESP
DP&L's ESP, approved October 20, 2017, effective November 1, 2017
AES
The AES Corporation, a global power company and the ultimate parent company of DPL
AES Ohio Generation
AES Ohio Generation, LLC, a wholly-owned subsidiary of DPL that owns an interest in a coal-fired EGU and previously operated EGUs from which it makes wholesale sales
AOCI
Accumulated Other Comprehensive Income
ARO
Asset Retirement Obligation
ASU
Accounting Standards Update
CAA
U.S. Clean Air Act
Conesville
AES Ohio Generation's interest in Unit 4 at the Conesville EGU
CPP
The Clean Power Plan, the USEPA's final carbon dioxide emission rules for existing power plants under Clean Air Act Section 111(d)
CSAPR
Cross-State Air Pollution Rule
DIR
Distribution Investment Rider as authorized in the DRO
DMP
Distribution Modernization Plan
DMR
Distribution Modernization Rider
DPL
DPL Inc.
DP&L
The Dayton Power and Light Company, the principal subsidiary of DPL and a public utility that delivers electricity to residential, commercial, industrial and governmental customers in a 6,000-square mile area of West Central Ohio
DRO
Distribution Rate Order, the order issued by the PUCO on September 26, 2018 establishing new base distribution rates for DP&L, which became effective October 1, 2018
EBITDA
Earnings before interest, taxes, depreciation and amortization. EBITDA also excludes the Fixed-asset impairment
EGU
Electric Generating Unit
ELG
Steam Electric Power Effluent Limitations Guidelines
ERISA
The Employee Retirement Income Security Act of 1974
ESP
The Electric Security Plan is a plan that a utility must file with the PUCO to establish SSO rates pursuant to Ohio law
FASB
Financial Accounting Standards Board
FASC
FASB Accounting Standards Codification
Form 10-K
DPL’s and DP&L’s combined Annual Report on Form 10-K for the fiscal year ended December 31, 2018, which was filed on February 26, 2019
First and Refunding Mortgage
DP&L’s First and Refunding Mortgage, dated October 1, 1935, as amended, with the Bank of New York Mellon as Trustee
GAAP
Generally Accepted Accounting Principles in the United States of America
Generation Separation
The transfer on October 1, 2017 to AES Ohio Generation of the DP&L-owned generating facilities and related liabilities pursuant to an asset contribution agreement with a subsidiary that was then merged into AES Ohio Generation
kV
Kilovolt, 1,000 volts
kWh
Kilowatt-hours
LIBOR
London Inter-Bank Offering Rate
Master Trust
DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans
MATS
Mercury and Air Toxics Standards
Merger
The merger of DPL and Dolphin Sub, Inc., a wholly-owned subsidiary of AES. On November 28, 2011, DPL became a wholly-owned subsidiary of AES.
Miami Valley Lighting
Miami Valley Lighting, LLC is a wholly-owned subsidiary of DPL established in 1985 to provide street and outdoor lighting services to customers in the Dayton region. Miami Valley Lighting serves businesses, communities and neighborhoods in West Central Ohio with over 70,000 lighting solutions for more than 190 businesses and 180 local governments.
MVIC
Miami Valley Insurance Company, a wholly-owned insurance subsidiary of DPL that provides insurance services to DPL and its subsidiaries and, in some cases, insurance services to partner companies related to the jointly-owned facility operated by AES Ohio Generation
MW
Megawatt
NAAQS
National Ambient Air Quality Standards
NERC
North American Electric Reliability Corporation
Ohio EPA
Ohio Environmental Protection Agency
OVEC
Ohio Valley Electric Corporation, an electric generating company in which DP&L holds a 4.9% equity interest
Peaker assets
The generation and related assets for the 586.0 MW Tait combustion turbine and diesel generation facility, the 236.0 MW Montpelier combustion turbine generation facility, the 101.5 MW Yankee combustion turbine generation and solar facility, the 25.0 MW Hutchings combustion turbine generation facility, the 12.0 MW Monument diesel generation facility, and the 12.0 MW Sidney diesel generation facility that were sold on March 27, 2018
PJM
PJM Interconnection, LLC, an RTO
PUCO
Public Utilities Commission of Ohio
RTO
Regional Transmission Organization
SEC
Securities and Exchange Commission


4


GLOSSARY OF TERMS (cont.)
 
 
Term
Definition
SERP
Supplemental Executive Retirement Plan
Service Company
AES US Services, LLC, the shared services affiliate providing accounting, finance, and other support services to AES’ U.S. SBU businesses
SSO
Standard Service Offer represents the regulated rates, authorized by the PUCO, charged to DP&L retail customers that take retail generation service from DP&L within DP&L’s service territory
TCJA
The Tax Cuts and Jobs Act of 2017, signed on December 22, 2017
TCRR
Transmission Cost Recovery Rider
U.S.
United States of America
USEPA
U.S. Environmental Protection Agency
USF
The Universal Service Fund is a statewide program which provides qualified low-income customers in Ohio with income-based bills and energy efficiency education programs
U.S. SBU
U.S. and Utilities Strategic Business Unit, AES’ reporting unit covering the businesses in the United States, including DPL
Utility segment
DPL's Utility segment is made up of DP&L’s electric transmission and distribution businesses, which distribute electricity to residential, commercial, industrial and governmental customers

FORWARD-LOOKING STATEMENTS

Certain statements contained in this report are “forward-looking statements” within the meaning of the Private Securities Litigation Reform Act of 1995. Matters discussed in this report that relate to events or developments that are expected to occur in the future, including management’s expectations, strategic objectives, business prospects, anticipated economic performance and financial condition and other similar matters constitute forward-looking statements. Forward-looking statements are based on management’s beliefs, assumptions and expectations of future economic performance, considering the information currently available to management. These statements are not statements of historical fact and are typically identified by terms and phrases such as “anticipate,” “believe,” “intend,” “estimate,” “expect,” “continue,” “should,” “could,” “may,” “plan,” “project,” “predict,” “will” and similar expressions. Such forward-looking statements are subject to risks and uncertainties and investors are cautioned that outcomes and results may vary materially from those projected due to various factors beyond our control, including but not limited to:

growth in our service territory and changes in demand and demographic patterns;
weather-related damage to our electrical system;
performance of our suppliers;
transmission and distribution system reliability and capacity;
regulatory actions and outcomes, including, but not limited to, the review and approval of our rates and charges by the PUCO;
federal and state legislation and regulations;
changes in our credit ratings or the credit ratings of AES;
fluctuations in the value of pension plan assets, fluctuations in pension plan expenses and our ability to fund defined benefit pension plans;
changes in financial or regulatory accounting policies;
environmental matters, including costs of compliance with, and liabilities related to, current and future environmental laws and requirements;
interest rates and the use of interest rate hedges, inflation rates and other costs of capital;
the availability of capital;
the ability of subsidiaries to pay dividends or distributions to DPL;
level of creditworthiness of counterparties to contracts and transactions;
labor strikes or other workforce factors, including the ability to attract and retain key personnel;
facility or equipment maintenance, repairs and capital expenditures;
significant delays or unanticipated cost increases associated with construction projects;
the availability and cost of funds to finance working capital and capital needs, particularly during periods when the time lag between incurring costs and recovery is long and the costs are material;
local economic conditions;
costs and effects of legal and administrative proceedings, audits, settlements, investigations and claims and the ultimate disposition of litigation;
industry restructuring, deregulation and competition;


5


issues related to our participation in PJM, including the cost associated with membership, allocation of costs, costs associated with transmission expansion, the recovery of costs incurred and the risk of default of other PJM participants;
changes in tax laws and the effects of our tax strategies;
product development, technology changes and changes in prices of products and technologies;
cyberattacks and information security breaches;
the use of derivative contracts;
catastrophic events such as fires, explosions, terrorist acts, acts of war, pandemic events, or natural disasters such as floods, earthquakes, tornadoes, severe winds, ice or snow storms, droughts or other similar occurrences; and
the risks and other factors discussed in this report and other DPL and DP&L filings with the SEC.

Forward-looking statements speak only as of the date of the document in which they are made. We disclaim any obligation or undertaking to provide any updates or revisions to any forward-looking statement to reflect any change in our expectations or any change in events, conditions or circumstances on which the forward-looking statement is based. If we do update one or more forward-looking statements, no inference should be made that we will make additional updates with respect to those or other forward-looking statements.

All such factors are difficult to predict, contain uncertainties that may materially affect actual results, and many are beyond our control. See Item 1A - Risk Factors in our Annual Report on Form 10-K for the fiscal year ended December 31, 2018 and the “Management’s Discussion and Analysis of Financial Condition and Results of Operations” section in such report and this Quarterly Report on Form 10-Q for a more detailed discussion of the foregoing and certain other factors that could cause actual results to differ materially from those reflected in such forward-looking statements and that should be considered in evaluating our outlook.

Our SEC filings are available to the public from the SEC’s website at www.sec.gov.

COMPANY WEBSITES

DPL’s public internet site is www.dplinc.com. DP&L’s public internet site is www.dpandl.com. The information on these websites is not incorporated by reference into this report.

Part I – Financial Information
This report includes the combined filing of DPL and DP&L. Throughout this report, the terms “we,” “us,” “our” and “ours” are used to refer to both DPL and DP&L, respectively and altogether, unless the context indicates otherwise. Discussions or areas of this report that apply only to DPL or DP&L will be clearly noted in the applicable section.

Item 1 – Financial Statements


6














FINANCIAL STATEMENTS

DPL INC.



7


DPL INC.
Condensed Consolidated Statements of Operations
(Unaudited)
 
 
Three months ended
 
 
March 31,
$ in millions
 
2019
 
2018
Revenues
 
$
209.0

 
$
207.4

 
 
 
 
 
Cost of revenues:
 
 
 
 
Net fuel cost
 
3.5

 
4.5

Net purchased power cost
 
74.2

 
86.0

Total cost of revenues
 
77.7

 
90.5

 
 
 
 
 
Gross margin
 
131.3

 
116.9

 
 
 
 
 
Operating expenses:
 
 
 
 
Operation and maintenance
 
51.0

 
36.0

Depreciation and amortization
 
18.4

 
18.8

General taxes
 
19.5

 
19.4

Loss on asset disposal
 
0.9

 
0.1

Loss on disposal of business (Note 13)
 

 
11.7

Total operating expenses
 
89.8

 
86.0

 
 
 
 
 
Operating income
 
41.5

 
30.9

 
 
 
 
 
Other income / (expense), net:
 
 
 
 
Interest expense
 
(23.7
)
 
(27.8
)
Charge for early redemption of debt
 

 
(0.7
)
Other income
 
1.4

 
0.1

Total other expense, net
 
(22.3
)
 
(28.4
)
 
 
 
 
 
Income from continuing operations before income tax
 
19.2

 
2.5

 
 
 
 
 
Income tax expense from continuing operations
 
2.7

 
0.2

 
 
 
 
 
Net income from continuing operations
 
16.5

 
2.3

 
 
 
 
 
Discontinued operations (Note 14):
 
 
 
 
Income from discontinued operations before income tax
 
29.8

 
20.0

Gain / (loss) from disposal of discontinued operations
 
0.1

 
(1.9
)
Income tax expense from discontinued operations
 
4.3

 
3.5

Net income from discontinued operations
 
25.6

 
14.6

 
 
 
 
 
Net income
 
$
42.1

 
$
16.9

See Notes to Condensed Consolidated Financial Statements.


8


DPL INC.
Condensed Consolidated Statements of Comprehensive Income
(Unaudited)
 
 
Three months ended March 31,
$ in millions
 
2019
 
2018
Net income
 
$
42.1

 
$
16.9

Derivative activity:
 
 
 
 
Change in derivative fair value, net of income tax (expense) / benefit of $0.1 and $(0.1) for each respective period
 
(0.3
)
 
0.9

Reclassification to earnings, net of income tax expense of $0.1 and $0.6 for each respective period
 
(0.2
)
 
(0.4
)
Reclassification of earnings related to discontinued operations, net of income tax benefit of $0.0 and $(1.4) for each respective period
 

 
2.7

Total change in fair value of derivatives
 
(0.5
)
 
3.2

Pension and postretirement activity:
 
 
 
 
Reclassification to earnings, net of income tax benefit of $0.0 and $(0.1) for each respective period
 
0.1

 
0.1

Total change in unfunded pension and postretirement obligations
 
0.1

 
0.1

 
 
 
 
 
Other comprehensive income / (loss)
 
(0.4
)
 
3.3

 
 
 
 
 
Net comprehensive income
 
$
41.7

 
$
20.2

See Notes to Condensed Consolidated Financial Statements.



9


DPL INC.
Condensed Consolidated Balance Sheets
(Unaudited)
$ in millions
 
March 31, 2019
 
December 31, 2018
ASSETS
 
 
 
 
Current assets:
 
 
 
 
Cash and cash equivalents
 
$
70.8

 
$
90.5

Restricted cash
 
42.0

 
21.2

Accounts receivable, net (Note 2)
 
87.7

 
90.5

Inventories (Note 2)
 
11.9

 
10.7

Taxes applicable to subsequent years
 
54.5

 
72.6

Regulatory assets, current
 
34.8

 
41.1

Other prepayments and current assets
 
12.9

 
12.9

Current assets of discontinued operations and held-for-sale businesses
 
6.5

 
8.7

Total current assets
 
321.1

 
348.2

 
 
 
 
 
Property, plant & equipment:
 
 
 
 
Property, plant & equipment
 
1,637.9

 
1,615.6

Less: Accumulated depreciation and amortization
 
(324.3
)
 
(310.8
)
 
 
1,313.6

 
1,304.8

Construction work in process
 
35.3

 
32.2

Total net property, plant & equipment
 
1,348.9

 
1,337.0

 
 
 
 
 
Other non-current assets:
 
 
 
 
Regulatory assets, non-current
 
151.2

 
152.6

Intangible assets, net of amortization
 
18.2

 
18.4

Other deferred assets
 
21.0

 
21.6

Non-current assets of discontinued operations and held-for-sale businesses
 
5.3

 
5.3

Total other non-current assets
 
195.7

 
197.9

 
 
 
 
 
Total assets
 
$
1,865.7

 
$
1,883.1

 
 
 
 
 
LIABILITIES AND SHAREHOLDER'S DEFICIT
 
 
 
 
Current liabilities:
 
 
 
 
Current portion of long-term debt (Note 6)
 
$
103.6

 
$
103.6

Accounts payable
 
39.5

 
58.1

Accrued taxes
 
78.1

 
76.7

Accrued interest
 
30.0

 
14.3

Customer security deposits
 
29.0

 
21.3

Regulatory liabilities, current
 
39.0

 
34.9

Other current liabilities
 
17.9

 
22.0

Current liabilities of discontinued operations and held-for-sale businesses
 
9.0

 
12.2

Total current liabilities
 
346.1

 
343.1

 
 
 
 
 
Non-current liabilities:
 
 
 
 
Long-term debt (Note 6)
 
1,372.1

 
1,372.3

Deferred taxes
 
113.0

 
116.1

Taxes payable
 
39.9

 
76.1

Regulatory liabilities, non-current
 
279.0

 
278.3

Pension, retiree and other benefits
 
74.2

 
82.3

Asset retirement obligations
 
9.4

 
9.4

Other deferred credits
 
7.9

 
8.0

Non-current liabilities of discontinued operations and held-for-sale businesses
 
52.5

 
69.2

Total non-current liabilities
 
1,948.0

 
2,011.7

 
 
 
 
 
Commitments and contingencies (Note 10)
 

 

 
 
 
 
 
Common shareholder's deficit
 
 
 
 
Common stock:
 
 
 
 
1,500 shares authorized; 1 share issued and outstanding at March 31, 2019 and December 31, 2018
 

 

Other paid-in capital
 
2,372.1

 
2,370.5

Accumulated other comprehensive income
 
1.8

 
2.2

Accumulated deficit
 
(2,802.3
)
 
(2,844.4
)
Total common shareholder's deficit
 
(428.4
)
 
(471.7
)
 
 
 
 
 
Total liabilities and shareholder's deficit
 
$
1,865.7

 
$
1,883.1

See Notes to Condensed Consolidated Financial Statements.


10


DPL INC.
Condensed Consolidated Statements of Cash Flows
(Unaudited)
 
 
Three months ended March 31,
$ in millions
 
2019
 
2018
Cash flows from operating activities:
 
 
 
 
Net income
 
$
42.1

 
$
16.9

Adjustments to reconcile net income to net cash from operating activities:
 
 
 
 
Depreciation and amortization
 
(3.1
)
 
20.1

Charge for early redemption of debt
 

 
0.7

Deferred income taxes
 
5.2

 
(41.7
)
Loss / (gain) on disposal and sale of business, net
 
(0.1
)
 
13.6

Loss on asset disposal, net
 
0.9

 
0.6

Changes in certain assets and liabilities:
 
 
 
 
Accounts receivable, net
 
4.1

 
5.9

Inventories
 
(1.2
)
 
3.2

Taxes applicable to subsequent years
 
18.7

 
19.7

Deferred regulatory costs, net
 
7.7

 
(2.1
)
Accounts payable
 
(14.0
)
 
(0.9
)
Accrued taxes
 
(35.2
)
 
8.2

Accrued interest
 
15.6

 
17.6

Customer security deposits
 
7.7

 
0.6

Pension, retiree and other benefits
 
(6.9
)
 
(5.9
)
Other
 
(4.9
)
 
(5.9
)
Net cash provided by operating activities
 
36.6

 
50.6

Cash flows from investing activities:
 
 
 
 
Capital expenditures
 
(34.3
)
 
(27.3
)
Proceeds from disposal and sale of business
 

 
234.9

Payments on disposal and sale of business
 

 
(14.5
)
Other investing activities, net
 

 
2.3

Net cash provided by / (used in) investing activities
 
(34.3
)
 
195.4

Cash flows from financing activities:
 
 
 
 
Repayment of long-term debt
 
(1.1
)
 
(131.1
)
Borrowings from revolving credit facilities
 

 
25.0

Repayment of borrowings from revolving credit facilities
 

 
(15.0
)
Other financing activities, net
 
(0.1
)
 

Net cash used in financing activities
 
(1.2
)
 
(121.1
)
Decrease in cash and restricted cash of discontinued operations and held-for-sale businesses
 

 
(1.3
)
Cash, cash equivalents, and restricted cash:
 
 
 
 
Net change
 
1.1

 
123.6

Balance at beginning of period
 
111.7

 
24.9

Cash, cash equivalents, and restricted cash at end of period
 
$
112.8

 
$
148.5

Supplemental cash flow information:
 
 
 
 
Interest paid, net of amounts capitalized
 
$
6.7

 
$
7.0

Non-cash financing and investing activities:
 
 
 
 
Accruals for capital expenditures
 
$
4.4

 
$
8.9

Non-cash proceeds from sale of business
 
$

 
$
4.1

Non-cash capital contribution (Note 9)
 
$
1.5

 
$
44.6

See Notes to Condensed Consolidated Financial Statements.



11


DPL INC.
Condensed Consolidated Statements of Shareholder's Equity
(Unaudited)
 
 
Common Stock (a)
 
 
 
 
 
 
 
 
$ in millions
 
Outstanding Shares
 
Amount
 
Other
Paid-in
Capital
 
Accumulated Other Comprehensive Income / (Loss)
 
Retained earnings / (accumulated deficit)
 
Total
Balance, January 1, 2018
 
1

 
$

 
$
2,330.4

 
$
0.8

 
$
(2,915.5
)
 
$
(584.3
)
Net comprehensive income
 
 
 
 
 
 
 
3.3

 
16.9

 
20.2

Capital contributions (b)
 
 
 
 
 
44.6

 
 
 
 
 
44.6

Other (c)
 
 
 
 
 


 
(1.0
)
 
1.0

 

Balance, March 31, 2018
 
1

 
$

 
$
2,375.0

 
$
3.1

 
$
(2,897.6
)
 
$
(519.5
)

(a)
1,500 shares authorized.
(b)
Represents the conversion of a tax sharing payable to AES to contributed capital, as DP&L's 2017 ESP restricts tax sharing payments to AES during the term of the ESP. See Note 9 – Shareholder's Equity.
(c)
ASU 2016-01 “Recognition and Measurement of Financial Assets and Financial Liabilities” was effective as of January 1, 2018. This ASU requires the change in the fair value of equity instruments to be recorded in income rather than in Other Comprehensive Income. Equity Instruments were defined to include all mutual funds, regardless of the underlying investments. Therefore, as of January 1, 2018, AOCI of $1.6 million ($1.0 million net of tax) was reversed to Accumulated deficit.

 
 
Common Stock (a)
 
 
 
 
 
 
 
 
$ in millions
 
Outstanding Shares
 
Amount
 
Other
Paid-in
Capital
 
Accumulated Other Comprehensive Income / (Loss)
 
Retained earnings / (accumulated deficit)
 
Total
Balance, January 1, 2019
 
1

 
$

 
$
2,370.5

 
$
2.2

 
$
(2,844.4
)
 
$
(471.7
)
Net comprehensive income
 
 
 
 
 
 
 
(0.4
)
 
42.1

 
41.7

Capital contributions (b)
 
 
 
 
 
1.5

 
 
 
 
 
1.5

Other
 
 
 
 
 
0.1

 
 
 
 
 
0.1

Balance, March 31, 2019
 
1

 
$

 
$
2,372.1

 
$
1.8

 
$
(2,802.3
)
 
$
(428.4
)

(a)
1,500 shares authorized.
(b)
Represents the conversion of a tax sharing payable to AES to contributed capital, as DP&L's 2017 ESP restricts tax sharing payments to AES during the term of the ESP. See Note 9 – Shareholder's Equity.

See Notes to Condensed Consolidated Financial Statements.



12


DPL Inc.
Notes to Condensed Consolidated Financial Statements (Unaudited)

Note 1Overview and Summary of Significant Accounting Policies

Description of Business
DPL is a diversified regional energy company organized in 1985 under the laws of Ohio. DPL has one reportable segment: the Utility segment. See Note 11 – Business Segments for more information relating to this reportable segment. The terms “we,” “us,” “our” and “ours” are used to refer to DPL and its subsidiaries.

DPL is an indirectly wholly-owned subsidiary of AES.

DP&L, a wholly-owned subsidiary of DPL, is a public utility incorporated in 1911 under the laws of Ohio. Beginning in 2001, Ohio law gave Ohio consumers the right to choose the electric generation supplier from whom they purchase retail generation service; however, retail transmission and distribution services are still regulated. DP&L has the exclusive right to provide such transmission and distribution services to approximately 526,000 customers located in West Central Ohio. Additionally, DP&L provides retail SSO electric service to residential, commercial, industrial and governmental customers in a 6,000-square mile area of West Central Ohio. Principal industries located in DP&L’s service territory include automotive, food processing, paper, plastic, health care, data management, manufacturing and defense. Following the issuance of the DRO in September 2018 and the resulting changes to the decoupling rider effective January 1, 2019, DP&L's distribution sales will primarily be impacted by customer growth within our service territory. DP&L sells its proportional share of energy and capacity from its investment in OVEC into the wholesale market.

DPL’s other primary subsidiaries include MVIC and AES Ohio Generation. MVIC is our captive insurance company that provides insurance services to DPL and our other subsidiaries. AES Ohio Generation's only operating asset is an undivided interest in Conesville. AES Ohio Generation sells all of its energy and capacity into the wholesale market. DPL's subsidiaries are all wholly-owned.

DPL also has a wholly-owned business trust, DPL Capital Trust II, formed for the purpose of issuing trust capital securities to investors.

DP&L’s electric transmission and distribution businesses are subject to rate regulation by federal and state regulators. Accordingly, DP&L applies the accounting standards for regulated operations to its electric transmission and distribution businesses and records regulatory assets when incurred costs are expected to be recovered in future customer rates, and regulatory liabilities when current cost recoveries in customer rates relate to expected future costs.

DPL and its subsidiaries employed 629 people as of March 31, 2019, of which 617 were employed by DP&L. Approximately 58% of all DPL employees are under a collective bargaining agreement, which expires October 31, 2020.

Financial Statement Presentation
DPL’s Condensed Consolidated Financial Statements include the accounts of DPL and its wholly-owned subsidiaries except for DPL Capital Trust II, which is not consolidated, consistent with the provisions of GAAP. As of March 31, 2019, AES Ohio Generation has an undivided ownership interest in one coal-fired generating facility, which is included in the financial statements at a carrying value of zero as it has been fully impaired. Operating revenues and expenses of this facility are included on a pro rata basis in the corresponding lines in the Condensed Consolidated Statements of Operations.

Certain immaterial amounts from prior periods have been reclassified to conform to the current period presentation.

All material intercompany accounts and transactions are eliminated in consolidation. We have evaluated subsequent events through the date this report is issued.

These financial statements have been prepared in accordance with GAAP for interim financial statements, the instructions of Form 10-Q and Regulation S-X. Accordingly, certain information and footnote disclosures normally included in the annual financial statements prepared in accordance with GAAP have been omitted from this interim


13


report. Therefore, our interim financial statements in this report should be read along with the annual financial statements included in our Form 10-K for the fiscal year ended December 31, 2018.

In the opinion of our management, the Condensed Consolidated Financial Statements presented in this report contain all adjustments necessary to fairly state our financial position as of March 31, 2019; our results of operations for the three months ended March 31, 2019 and 2018, our cash flows for the three months ended March 31, 2019 and 2018 and the changes in our equity for the three months ended March 31, 2019 and 2018. Unless otherwise noted, all adjustments are normal and recurring in nature. Due to various factors, interim results for the three months ended March 31, 2019 may not be indicative of our results that will be realized for the full year ending December 31, 2019.

The preparation of financial statements in conformity with GAAP requires us to make estimates and judgments that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the revenues and expenses of the periods reported. Actual results could differ from these estimates. Significant items subject to such estimates and judgments include: recognition of revenue including unbilled revenues, the carrying value of property, plant and equipment; the valuation of derivative instruments; the valuation of insurance and claims liabilities; the valuation of allowances for receivables and deferred income taxes; regulatory assets and liabilities; liabilities recorded for income tax exposures; litigation; contingencies; the valuation of AROs; and assets and liabilities related to employee benefits.

Cash, Cash Equivalents, and Restricted Cash
The following table provides a summary of cash, cash equivalents, and restricted cash amounts reported on the Condensed Consolidated Balance Sheet that reconcile to the total of such amounts as shown on the Condensed Consolidated Statements of Cash Flows:
$ in millions
 
March 31, 2019
 
December 31, 2018
Cash and cash equivalents
 
$
70.8

 
$
90.5

Restricted cash
 
42.0

 
21.2

Cash, Cash Equivalents, and Restricted Cash, End of Period
 
$
112.8

 
$
111.7


Accounting for Taxes Collected from Customers and Remitted to Governmental Authorities
DP&L collects certain excise taxes levied by state or local governments from its customers. These taxes are accounted for on a net basis and not included in revenue. The amounts of such taxes collected for the three months ended March 31, 2019 and 2018 were $13.9 million and $13.1 million, respectively.

New accounting pronouncements adopted in 2019The following table provides a brief description of recently adopted accounting pronouncements that had an impact on our consolidated financial statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or did not have a material impact on our consolidated financial statements.
ASU Number and Name
Description
Date of Adoption
Effect on the financial statements upon adoption
2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities
The standard updates the hedge accounting model to expand the ability to hedge nonfinancial and financial risk components, reduce complexity, and ease certain documentation and assessment requirements. When facts and circumstances are the same as at the previous quantitative test, a subsequent quantitative effectiveness test is not required. The standard also eliminates the requirement to separately measure and report hedge ineffectiveness. For cash flow hedges, this means that the entire change in the fair value of a hedging instrument will be recorded in other comprehensive income and amounts deferred will be reclassified to earnings in the same income statement line as the hedged item.
Transition method: modified retrospective with the cumulative effect adjustment recorded to the opening balance of retained earnings as of the initial application date. Prospective for presentation and disclosures.
January 1, 2019.
The adoption of this standard had no material impact on our condensed consolidated financial statements.
2016-02, 2018-01, 2018-10, 2018-11 Leases (Topic 842)
See "Adoption of FASC Topic 842, Leases" below.
January 1, 2019.
See impact upon adoption of the standard below.

Adoption of FASC Topic 842, "Leases"
On January 1, 2019, we adopted ASU 2016-02 Leases and its subsequent corresponding updates (“FASC 842”). Under this standard, lessees are required to recognize assets and liabilities for most leases, and recognize


14


expenses in a manner similar to the current accounting method. For lessors, the guidance modifies the lease classification criteria and the accounting for sales-type and direct financing leases. The guidance eliminates current real estate-specific provisions.

Under FASC 842, it is expected that fewer contracts will contain a lease. However, due to the elimination of the real estate-specific guidance and changes to certain lessor classification criteria, more leases will qualify as sales-type leases and direct financing leases. Under these two models, a lessor will derecognize the asset and will recognize a net investment in a lease. According to FASC 842, the net investment in the lease includes the fair value of the plant after the contract period, but does not include variable payments such as margin on the sale of energy. Therefore, the net investment in the lease could be significantly different than the carrying amount of the underlying asset at lease commencement. In such circumstances, the difference between the initially recognized net investment in the lease and the carrying amount of the underlying asset is recognized as a gain/loss at lease commencement.

During the course of adopting FASC 842, we applied various practical expedients including:

The package of practical expedients (applied to all leases) that allowed lessees and lessors not to reassess:
a.
whether any expired or existing contracts are or contain leases,
b.
lease classification for any expired or existing leases, and
c.
whether initial direct costs for any expired or existing leases qualify for capitalization under FASC 842.

The transition practical expedient related to land easements, allowing us to carry forward our accounting treatment for land easements on existing agreements, and

The transition practical expedient for lessees that allowed businesses to not separate lease and non-lease components. We applied the practical expedient to all classes of underlying assets when valuing right-of-use assets and lease liabilities. Contracts where we are the lessor were separated between the lease and non-lease components.

We applied the modified retrospective method of adoption and elected to continue to apply the guidance in FASC 840 Leases to the comparative periods presented in the year of adoption. Under this transition method, we applied the transition provisions starting at the date of adoption.

The adoption of FASC 842 did not have a material impact on our condensed consolidated financial statements.

New Accounting Pronouncements Issued But Not Yet EffectiveThe following table provides a brief description of recent accounting pronouncements that could have a material impact on our consolidated financial statements. Accounting pronouncements not listed below were assessed and determined to be either not applicable or are expected to have no material impact on our consolidated financial statements.
ASU Number and Name
Description
Date of Adoption
Effect on the financial statements upon adoption
2016-13, Financial Instruments — Credit Losses (Topic 326): Measurement of Credit Losses on Financial Instruments
The standard updates the impairment model for financial assets measured at amortized cost. For trade and other receivables, held-to-maturity debt securities, loans and other instruments, entities will be required to use a new forward-looking "expected loss" model that generally will result in the earlier recognition of allowance for losses. For available-for-sale debt securities with unrealized losses, entities will measure credit losses as it is done today, except that the losses will be recognized as an allowance rather than a reduction in the amortized cost of the securities.
Transition method: various.
January 1, 2020.
Early adoption is permitted only as of January 1, 2019.
We are currently evaluating the impact of adopting the standard on our condensed consolidated financial statements.



15


Note 2Supplemental Financial Information

Accounts receivable and Inventories are as follows at March 31, 2019 and December 31, 2018:
 
 
March 31,
 
December 31,
$ in millions
 
2019
 
2018
Accounts receivable, net:
 
 
 
 
Customer receivables
 
$
60.5

 
$
55.8

Unbilled revenue
 
15.7

 
16.8

Amounts due from affiliates
 
0.7

 

Due from PJM transmission enhancement settlement
 
9.8

 
16.5

Other
 
1.6

 
2.3

Provision for uncollectible accounts
 
(0.6
)
 
(0.9
)
Total accounts receivable, net
 
$
87.7

 
$
90.5

 
 
 
 
 
Inventories, at average cost:
 
 
 
 
Fuel and limestone
 
$
3.5

 
$
1.9

Materials and supplies
 
8.4

 
8.3

Other
 

 
0.5

Total inventories, at average cost
 
$
11.9

 
$
10.7


Accumulated Other Comprehensive Income / (Loss)
The amounts reclassified out of Accumulated Other Comprehensive Income / (Loss) by component during the three months ended March 31, 2019 and 2018 are as follows:
Details about Accumulated Other Comprehensive Income / (Loss) components
 
Affected line item in the Condensed Consolidated Statements of Operations
 
Three months ended March 31,
$ in millions
 
 
 
2019
 
2018
Gains and losses on cash flow hedges (Note 5):
 
 
 
 
 
 
Interest expense
 
$
(0.3
)
 
$
(1.0
)
 
 
Income tax expense
 
0.1

 
0.6

 
 
Net of income taxes
 
(0.2
)
 
(0.4
)
 
 
 
 
 
 
 
 
 
Loss from discontinued operations
 

 
4.1

 
 
Income tax benefit from discontinued operations
 

 
(1.4
)
 
 
Net of income taxes
 

 
2.7

 
 
 
 
 
 
 
Amortization of defined benefit pension items (Note 8):
 
 
 
 
 
 
Other expense
 
0.1

 
0.2

 
 
Income tax benefit
 

 
(0.1
)
 
 
Net of income taxes
 
0.1

 
0.1

 
 
 
 
 
 
 
Total reclassifications for the period, net of income taxes
 
$
(0.1
)
 
$
2.4


The changes in the components of Accumulated Other Comprehensive Income / (Loss) during the three months ended March 31, 2019 are as follows:
$ in millions
 
Gains / (losses) on cash flow hedges
 
Change in unfunded pension and postretirement benefit obligation
 
Total
Balance at January 1, 2019
 
$
17.0

 
$
(14.8
)
 
$
2.2

 
 
 
 
 
 
 
Other comprehensive loss before reclassifications
 
(0.3
)
 

 
(0.3
)
Amounts reclassified from AOCI to earnings
 
(0.2
)
 
0.1

 
(0.1
)
Net current period other comprehensive income / (loss)
 
(0.5
)
 
0.1

 
(0.4
)
 
 
 
 
 
 
 
Balance at March 31, 2019
 
$
16.5

 
$
(14.7
)
 
$
1.8


Note 3Regulatory Matters

On January 22, 2019, DP&L filed a request with the PUCO for a two-year extension of its DMR through October 2022, in the proposed amount of $199.0 million for each of the two additional years. The request was made pursuant to the PUCO’s October 20, 2017 ESP order, which approved the DMR and had the option for DP&L to file for a two-year extension. The extension request was set at a level expected to reduce debt obligations at both


16


DP&L and DPL and to position DP&L to make capital expenditures to maintain and modernize its electric grid. To that end, DP&L’s DMP investments are contingent upon the PUCO approving the two-year extension of its DMR.

Impact of tax reform
On January 10, 2018, the PUCO initiated a proceeding to consider the impacts of the TCJA to determine the appropriate course of action to pass benefits resulting from the legislation on to ratepayers. The PUCO also directed Ohio utilities to record deferred liabilities for the estimated reduction in federal income tax resulting from the TCJA beginning January 1, 2018. Beginning October 1, 2018, the new distribution rates approved in the DRO include the impacts of the decrease in current federal income taxes as a result of the TCJA. Under the terms of the stipulation approved in the DRO, DP&L agreed to file an application at the PUCO to refund eligible excess accumulated deferred income taxes ("ADIT") and any related regulatory liability over a 10-year period. DP&L made such a filing on March 1, 2019 and proposed to return a total of $65.1 million to customers. The timing and final amount to be returned to customers is unknown at this time. Excess ADIT related to depreciation life and method differences will be returned to customers in accordance with federal tax law and related regulations.

Note 4Fair Value

The fair value of current financial assets and liabilities, debt service reserves and other deposits approximate their reported carrying amounts. The estimated fair values of our assets and liabilities have been determined using available market information. By virtue of these amounts being estimates and based on hypothetical transactions to sell assets or transfer liabilities, the use of different market assumptions and/or estimation methodologies may have a material effect on the estimated fair value amounts. For further information on our valuation techniques and policies, see Note 5—Fair Value in Item 8.—Financial Statements and Supplementary Data of our Form 10-K.

The following table presents the fair value, carrying value and cost of our non-derivative instruments at March 31, 2019 and December 31, 2018. Information about the fair value of our derivative instruments can be found in Note 5 – Derivative Instruments and Hedging Activities.
 
 
March 31, 2019
 
December 31, 2018
$ in millions
 
Cost
 
Fair Value
 
Cost
 
Fair Value
Assets
 
 
 
 
 
 
 
 
Money market funds
 
$
0.1

 
$
0.1

 
$
0.4

 
$
0.4

Equity securities
 
2.3

 
3.9

 
2.4

 
3.5

Debt securities
 
4.1

 
4.1

 
4.1

 
4.0

Hedge funds
 
0.1

 
0.1

 
0.1

 
0.1

Tangible assets
 
0.1

 
0.1

 
0.1

 
0.1

Total Assets
 
$
6.7

 
$
8.3

 
$
7.1

 
$
8.1

 
 
 
 
 
 
 
 
 
 
 
Carrying Value
 
Fair Value
 
Carrying Value
 
Fair Value
Liabilities
 
 
 
 
 
 
 
 
Long-term debt
 
$
1,475.7

 
$
1,544.9

 
$
1,475.9

 
$
1,519.6


These financial instruments are not subject to master netting agreements or collateral requirements and as such are presented in the Condensed Consolidated Balance Sheet at their gross fair value, except for Long-term debt, which is presented at amortized carrying value.

We did not have any transfers of the fair values of our financial instruments between Level 1, Level 2 or Level 3 of the fair value hierarchy during the three months ended March 31, 2019 or 2018.

Master Trust Assets
DP&L established a Master Trust to hold assets that could be used for the benefit of employees participating in employee benefit plans and these assets are not used for general operating purposes. On January 1, 2018, AOCI of $1.6 million ($1.0 million net of tax) was reversed to Accumulated Deficit and all future changes to fair value on the Master Trust Assets will be included in income in the period that the changes occur. Changes to fair value were not material for the three months ended March 31, 2019 or 2018. These assets are primarily comprised of open-ended mutual funds, which are valued using the net asset value per unit. These investments are recorded at fair value within Other deferred assets on the condensed consolidated balance sheets and classified as available for sale.



17


Long-term debt
The fair value of debt is based on current public market prices for disclosure purposes only. Unrealized gains or losses are not recognized in the financial statements as long-term debt is presented at carrying value, net of unamortized premium or discount and unamortized deferred financing costs in the financial statements. The long-term debt amounts include the current portion payable in the next twelve months and have maturities that range from 2019 to 2061.

The fair value of assets and liabilities at March 31, 2019 and December 31, 2018 and the respective category within the fair value hierarchy for DPL is as follows:
$ in millions
 
Fair value at March 31, 2019 (a)
 
Fair value at December 31, 2018 (a)
 
 
Level 1
 
Level 2
 
Level 3
 
Total
 
Level 1
 
Level 2
 
Level 3
 
Total
Assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Master Trust assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Money market funds
 
$
0.1

 
$

 
$

 
$
0.1

 
$
0.4

 
$

 
$

 
$
0.4

Equity securities
 

 
3.9

 

 
3.9

 

 
3.5

 

 
3.5

Debt securities
 

 
4.1

 

 
4.1

 

 
4.0

 

 
4.0

Hedge funds
 

 
0.1

 

 
0.1

 

 
0.1

 

 
0.1

Tangible assets
 

 
0.1

 

 
0.1

 

 
0.1

 

 
0.1

Total Master Trust assets
 
0.1

 
8.2

 

 
8.3

 
0.4

 
7.7

 

 
8.1

Derivative assets
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Interest rate hedges
 

 
1.1

 

 
1.1

 

 
1.5

 

 
1.5

Total Derivative assets
 

 
1.1

 

 
1.1

 

 
1.5

 

 
1.5

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Total Assets
 
$
0.1

 
$
9.3

 
$

 
$
9.4

 
$
0.4

 
$
9.2

 
$

 
$
9.6

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Liabilities
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Long-term debt
 
$

 
$
1,527.3

 
$
17.6

 
$
1,544.9

 
$

 
$
1,501.9

 
$
17.7

 
$
1,519.6

 
 
 
 
 
 
 
 


 
 
 
 
 
 
 


Total Liabilities
 
$

 
$
1,527.3

 
$
17.6

 
$
1,544.9

 
$

 
$
1,501.9

 
$
17.7

 
$
1,519.6


(a)
Includes credit valuation adjustment

Note 5Derivative Instruments and Hedging Activities

In the normal course of business, DPL enters into interest rate hedges to manage the interest rate risk of our variable rate debt. All of our derivative instruments are used for risk management purposes and are designated as cash flow hedges if they qualify under FASC 815 for accounting purposes. In prior periods, we have used commodity derivatives principally to manage the risk of changes in market prices for commodities.

Cash Flow Hedges
As part of our risk management processes, we identify the relationships between hedging instruments and hedged items, as well as the risk management objective and strategy for undertaking various hedge transactions. The fair values of cash flow hedges determined by current public market prices will continue to fluctuate with changes in market prices up to contract expiration. With the adoption of ASU 2017-12, Derivatives and Hedging (Topic 815): Targeted improvements to Accounting for Hedging Activities effective January 1, 2019, we will no longer be required to calculate effectiveness and thus the entire change in the fair value of a hedging instrument will be recorded in other comprehensive income and amounts deferred will be reclassified to earnings in the same income statement line as the hedged item in the period in which it settles.

As of March 31, 2019, we have two interest rate swaps to hedge the variable interest on our $140.0 million variable interest rate tax-exempt First Mortgage Bonds. The interest rate swaps have a combined notional amount of $140.0 million and settle monthly based on a one-month LIBOR. On March 29, 2018, we settled $60.0 million of these interest rate swaps due to the partial repayment of the underlying debt and a gain of $0.8 million was recorded as a reduction to interest expense. Since the swap was partially settled, the remaining swaps were de-designated and then re-designated with a new hypothetical derivative. The AOCI associated with the remaining swaps will be amortized out of AOCI into interest expense over the remaining life of the underlying debt.

We had previously entered into interest rate derivative contracts to manage interest rate exposure related to anticipated borrowings of fixed-rate debt. These interest rate derivative contracts were settled in 2013 and we continue to amortize amounts out of AOCI into interest expense.



18


The following tables provide information concerning gains or losses recognized in AOCI for the cash flow hedges for the three months ended March 31, 2019 and 2018:
 
 
Three months ended
 
Three months ended
 
 
March 31, 2019
 
March 31, 2018
 
 
 
 
Interest
 
 
 
Interest
$ in millions (net of tax)
 
Power
 
Rate Hedge
 
Power
 
Rate Hedge
Beginning accumulated derivative gains / (losses) in AOCI
 
$
0.4

 
$
16.6

 
$
(2.8
)
 
$
17.5

Net gains / (losses) associated with current period hedging transactions
 

 
(0.3
)
 

 
0.9

Net gains / (losses) reclassified to earnings
 
 
 
 
 
 
 
 
Interest expense
 

 
(0.2
)
 

 
(0.4
)
Income / (loss) from discontinued operations
 

 

 
2.7

 

Ending accumulated derivative gains / (losses) in AOCI
 
$
0.4

 
$
16.1

 
$
(0.1
)
 
$
18.0

 
 
 
 
 
 
 
 
 
Portion expected to be reclassified to earnings in the next twelve months
 


 
$
(0.8
)
 
 
 
 
Maximum length of time that we are hedging our exposure to variability in future cash flows related to forecasted transactions (in months)
 


 
17

 
 
 
 

Net gains or losses associated with the ineffective portion of the hedging transactions were immaterial in the prior year period presented.

Financial Statement Effect
DPL has elected not to offset derivative assets and liabilities and not to offset net derivative positions against the right to reclaim cash collateral pledged (an asset) or the obligation to return cash collateral received (a liability) under derivative agreements. The fair value derivative position of DPL's interest rate swaps are as follows:
Fair Values of Derivative Instruments
at March 31, 2019
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Consolidated Balance Sheets (a)
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
Interest rate swap
 
Designated
 
$
0.8

 
$

 
$

 
$
0.8

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred assets)
Interest rate swap
 
Designated
 
0.3

 

 

 
0.3

Total assets
 
 
 
$
1.1

 
$

 
$

 
$
1.1


(a)
Includes credit valuation adjustment.
Fair Values of Derivative Instruments
at December 31, 2018
 
 
 
 
 
 
Gross Amounts Not Offset in the Condensed Consolidated Balance Sheets
 
 
$ in millions
 
Hedging Designation
 
Gross Fair Value as presented in the Condensed Consolidated Balance Sheets (a)
 
Financial Instruments with Same Counterparty in Offsetting Position
 
Cash Collateral
 
Net Fair Value
Assets
 
 
 
 
 
 
 
 
 
 
Short-term derivative positions (presented in Other prepayments and current assets)
Interest rate swaps
 
Designated
 
$
0.9

 
$

 
$

 
$
0.9

 
 
 
 
 
 
 
 
 
 
 
Long-term derivative positions (presented in Other deferred assets)
Interest rate swaps
 
Designated
 
0.6

 

 

 
0.6

Total assets
 
 
 
$
1.5

 
$

 
$

 
$
1.5


(a)
Includes credit valuation adjustment.


19



Any prior year ineffectiveness on the interest rate hedges and the monthly settlement of the interest rate hedges is recorded in interest expense within the Condensed Consolidated Statements of Operations.

Note 6Long-term Debt

The following table summarizes DPL's outstanding long-term debt.
 
 
Interest
 
 
 
March 31,
 
December 31,
$ in millions
 
Rate
 
Maturity
 
2019
 
2018
Term loan - rates from 4.50% - 4.53% (a) and 4.01% - 4.60% (b)
 
 
 
2022
 
$
435.0

 
$
436.1

Tax-exempt First Mortgage Bonds - rates from 3.05% - 3.07% (a) and 1.52% - 1.92% (b)
 
 
 
2020
 
140.0

 
140.0

U.S. Government note
 
4.2%
 
2061
 
17.6

 
17.7

Unamortized deferred financing costs
 
 
 
 
 
(5.8
)
 
(6.3
)
Unamortized debt discounts and premiums, net
 
 
 
 
 
(1.3
)
 
(1.4
)
Total long-term debt at consolidated subsidiary
 
 
 
 
 
585.5

 
586.1

 
 
 
 
 
 
 
 
 
Senior unsecured notes
 
6.75%
 
2019
 
99.0

 
99.0

Senior unsecured notes
 
7.25%
 
2021
 
780.0

 
780.0

Note to DPL Capital Trust II (c)
 
8.125%
 
2031
 
15.6

 
15.6

Unamortized deferred financing costs
 
 
 
 
 
(3.9
)
 
(4.3
)
Unamortized debt discounts and premiums, net
 
 
 
 
 
(0.5
)
 
(0.5
)
Total long-term debt
 
 
 
 
 
1,475.7

 
1,475.9

Less: current portion
 
 
 
 
 
(103.6
)
 
(103.6
)
Long-term debt, net of current portion
 
 
 
 
 
$
1,372.1

 
$
1,372.3


(a)
Range of interest rates for the three months ended March 31, 2019.
(b)
Range of interest rates for the year ended December 31, 2018.
(c)
Note payable to related party.

Deferred financing costs are amortized over the remaining life of the debt using the effective interest method. Premiums or discounts on long-term debt are amortized over the remaining life of the debt using the effective interest method.

Line of credit
At March 31, 2019 and December 31, 2018, DPL had no outstanding borrowings on its line of credit. At March 31, 2019 and December 31, 2018, DP&L had no outstanding borrowings on its line of credit.

Significant transactions
On March 4, 2019, DPL issued a Notice of Partial Redemption to the Trustee (U.S. Bank) on the DPL 6.75% Senior Notes due 2019. DPL notified the trustee that it was calling the remaining $99.0 million outstanding principal amount of these notes. The redemption date was April 4, 2019. These bonds were redeemed at par plus accrued interest and a make-whole premium of $1.5 million with cash on hand.

On April 17, 2019, DPL closed a $400.0 million issuance of senior unsecured bonds. These new bonds were priced at 4.35% and mature on April 15, 2029. Proceeds from the issuance and cash on hand will be used to settle a partial redemption for $400.0 million of DPL's 7.25% senior unsecured notes maturing October 15, 2021, as discussed below. After the redemption, the DPL 7.25% senior notes due in 2021 will have an outstanding balance of $380.0 million.

On April 8, 2019, DPL issued a Notice of Partial Redemption to the Trustee (Wells Fargo Bank N.A.) on the DPL 7.25% Senior Notes due 2021. DPL notified the trustee that it was calling $400.0 million of the $780.0 million outstanding principal amount of these notes. The redemption date will be May 7, 2019. These bonds will be redeemed at par plus accrued interest and a make-whole premium.

On March 30, 2018, DPL issued a Notice of Partial Redemption to the Trustee (U.S. Bank) on the DPL 6.75% Senior Notes due 2019. DPL notified the trustee that it was calling $101.0 million of the $200.0 million outstanding principal amount of these notes. These bonds were redeemed at par plus accrued interest and a make-whole premium of $5.1 million on April 30, 2018 with cash on hand.



20


On March 30, 2018, DP&L commenced a redemption of $60.0 million of outstanding tax exempt First Mortgage Bonds due 2020 at par value (plus accrued and unpaid interest). These bonds were redeemed at par plus accrued interest on April 30, 2018 with cash on hand.

On March 27, 2018, DPL made a $70.0 million prepayment to eliminate the outstanding balance of its bank term loan in full. As of March 31, 2018, the term loan was fully paid off.

On January 3, 2018, DP&L and its lenders amended DP&L's Term Loan B credit agreement. The amendment (a) modified the definition of "applicable rate", from 2.25% per annum to 1.00% per annum - in the case of the Base Rate, and from 3.25% per annum to 2.00% per annum - in the case of the Eurodollar Rate, and (b) modified a "call protection" provision which as modified stated that in the event the loan was repriced or any portion of the loans were prepaid, repaid, refinanced, substituted, or replaced on or prior July 3, 2018, such prepayment, acceleration, repayment, refinancing, substitution or replacement would have been made at 101% of the principal amount so prepaid, repaid, refinanced, substituted or replaced. After July 3, 2018, any such transaction would occur at 100% of the principal amount of the then outstanding loans. There were no such transactions prior to July 3, 2018.

Long-term debt covenants and restrictions
DPL’s revolving credit agreement has two financial covenants. The first financial covenant, a Total Debt to EBITDA ratio, is calculated at the end of each fiscal quarter by dividing total debt at the end of the current quarter by consolidated EBITDA for the four prior fiscal quarters. The ratio in the agreement is not to exceed 7.25 to 1.00 for any fiscal quarter ending September 30, 2015 through December 31, 2018; it then steps down not to exceed 7.00 to 1.00 for any fiscal quarter ending January 1, 2019 through June 30, 2019; it then steps down not to exceed 6.75 to 1.00 for any fiscal quarter ending July 1, 2019 through December 31, 2019; and it then steps down not to exceed 6.50 to 1.00 for any fiscal quarter ending January 1, 2020 and afterward. As of March 31, 2019, this financial covenant was met with a ratio of 5.83 to 1.00.

The second financial covenant is an EBITDA to Interest Expense ratio that is calculated, at the end of each fiscal quarter, by dividing EBITDA for the four prior fiscal quarters by the consolidated interest charges for the same period. The ratio, per the agreement, is to be not less than 2.10 to 1.00 for any fiscal quarter ending September 30, 2015 through December 31, 2018; it then steps up to be not less than 2.25 to 1.00 for any fiscal quarter ending January 1, 2019 and afterward. As of March 31, 2019, this financial covenant was met with a ratio of 2.73 to 1.00.

DPL’s secured revolving credit agreement and senior unsecured notes due 2019 also restrict dividend payments from DPL to AES, such that DPL cannot make dividend payments unless at the time of, and/or as a result of the distribution, (i) DPL’s leverage ratio does not exceed 0.67 to 1.00 and DPL’s interest coverage ratio is not less than 2.50 to 1.00 or, if such ratios are not within the parameters, (ii) DPL’s senior long-term debt rating from two of the three major credit rating agencies is at least investment grade. As of March 31, 2019, DPL’s leverage ratio was at 1.40 to 1.00. As a result, as of March 31, 2019, DPL was prohibited under each of these agreements from making a distribution to its shareholder or making a loan to any of its affiliates (other than its subsidiaries). DPL is also restricted from making dividend and tax sharing payments from DPL to AES per its 2017 ESP. This order restricts dividend payments from DPL to AES during the term of the 2017 ESP and restricts tax sharing payments from DPL to AES during the term of the DMR.

DP&L’s unsecured revolving credit agreement and Bond Purchase and Covenants Agreement (financing document entered into in connection with the sale of $200.0 million of variable rate tax-exempt First Mortgage Bonds, dated as of August 1, 2015) have two financial covenants. The first measures Total Debt to Total Capitalization and is calculated, at the end of each fiscal quarter, by dividing total debt at the end of the quarter by total capitalization at the end of the quarter. DP&L’s Total Debt to Total Capitalization ratio shall not be greater than 0.65 to 1.00. Except that, after Generation Separation and the twelve-month period following (October 1, 2017 to September 30, 2018) the ratio shall be a) increased to 0.75 to 1.00 or b) suspended if DP&L’s long-term indebtedness is less than or equal to $750.0 million. Additionally, this covenant shall be suspended any time after separation during which DP&L maintains a rating of BBB- (or in the case of Moody’s Investors Service, Inc. Baa3) or higher with a stable outlook from at least one of Fitch Investors Service Inc., Standard & Poor’s Ratings Services or Moody’s Investors Service, Inc. The Total Debt to Capitalization covenant is calculated as the sum of DP&L’s current and long-term portion of debt, divided by the total of DP&L’s net worth and total debt. As of March 31, 2019, DP&L's ratings meet those requirements and this covenant is suspended for the quarter ended March 31, 2019.

The second financial covenant measures EBITDA to Interest Expense. The Total Consolidated EBITDA to Consolidated Interest Charges ratio is calculated, at the end of each fiscal quarter, by dividing consolidated EBITDA


21


for the four prior fiscal quarters by the consolidated interest charges for the same period. The ratio, per the agreement, is to be not less than 2.50 to 1.00. This financial covenant was met with a ratio of 8.99 to 1.00 as of March 31, 2019.

As of March 31, 2019, DPL and DP&L were in compliance with all debt covenants, including the financial covenants described above.

DP&L does not have any meaningful restrictions in its debt financing documents prohibiting dividends to its parent, DPL.

Substantially all property, plant & equipment of DP&L is subject to the lien of the mortgage securing DP&L’s First and Refunding Mortgage.

Note 7Income Taxes

The following table details the effective tax rates for the three months ended March 31, 2019 and 2018.
 
 
Three months ended
 
 
March 31,
 
 
2019
 
2018
DPL
 
14.1%
 
8.0%

Income tax expense for the three months ended March 31, 2019 and 2018 was calculated using the estimated annual effective income tax rates for 2019 and 2018 of 14.1% and 19.2%, respectively. Management estimates the annual effective tax rate based on its forecast of annual pre-tax income. To the extent that actual pre-tax results for the year differ from the forecasts applied to the most recent interim period, the estimated rates could be materially different from the actual effective tax rates. DPL’s effective combined state and federal income tax rate was 14.1% for the three months ended March 31, 2019. This is lower than the combined federal and state statutory rate of 21.6% primarily due to the flowthrough of the net tax benefit related to the reversal of excess deferred taxes of DP&L.

For the three months ended March 31, 2019, DPL’s current period effective tax rate was not materially different than the estimated annual effective rate.

Per the terms of DP&L's 2017 ESP, DPL will not make any tax-sharing payments to AES and AES will forgo collection of the payments during the term of the DMR. As such, during the three months ended March 31, 2019 and 2018, DPL converted $1.5 million and $44.6 million, respectively, of accrued tax sharing liabilities with AES to additional equity investment in DPL.

Note 8Benefit Plans

DP&L sponsors a defined benefit pension plan for the majority of its employees.

We generally fund pension plan benefits as accrued in accordance with the minimum funding requirements of ERISA and, in addition, make voluntary contributions from time to time. There were $7.5 million in employer contributions during each of the three months ended March 31, 2019 and 2018.

The amounts presented in the following tables for pension include the collective bargaining plan formula, the traditional management plan formula, the cash balance plan formula and the SERP, in the aggregate. The pension costs below have not been adjusted for amounts billed to the Service Company for former DP&L employees who are now employed by the Service Company that are still participants in the DP&L plan.



22


The net periodic benefit cost of the pension benefit plans for the three months ended March 31, 2019 and 2018 was:
 
 
Three months ended
 
 
March 31,
$ in millions
 
2019
 
2018
Service cost
 
$
0.9

 
$
1.5

Interest cost
 
3.7

 
3.4

Expected return on plan assets
 
(5.0
)
 
(5.2
)
Amortization of unrecognized:
 
 
 
 
Prior service cost
 
0.3

 
0.2

Actuarial loss
 
1.1

 
1.6

Net periodic benefit cost
 
$
1.0

 
$
1.5


In addition, DP&L provides postretirement health care and life insurance benefits to certain retired employees, their spouses and eligible dependents. We have funded a portion of the union-eligible benefits using a Voluntary Employee Beneficiary Association Trust. These postretirement health care benefits and the related unfunded obligation of $9.0 million at March 31, 2019 and $9.2 million at December 31, 2018 were not material to the financial statements in the periods covered by this report.

Note 9Shareholder's Equity

Capital Contributions from AES
DP&L's approved six-year 2017 ESP restricts DPL from making dividend payments to its parent company, AES, during the term of the ESP, as well as from making tax-sharing payments to AES during the term of the DMR. The 2017 ESP also requires that existing tax payments owed by DPL to AES, and similar tax payments that accrue during the term of the DMR, be converted into equity investments in DPL.

For the three months ended March 31, 2019 and 2018, AES made capital contributions of $1.5 million and $44.6 million, respectively, by converting the amount owed to it by DPL related to tax-sharing payments for current tax liabilities.

Note 10Contractual Obligations, Commercial Commitments and Contingencies

Guarantees
In the normal course of business, DPL enters into various agreements with its wholly-owned subsidiary, AES Ohio Generation, providing financial or performance assurance to third parties. These agreements are entered into primarily to support or enhance the creditworthiness otherwise attributed to this subsidiary on a stand-alone basis, thereby facilitating the extension of sufficient credit to accomplish this subsidiary's intended commercial purposes.

At March 31, 2019, DPL had $21.6 million of guarantees on behalf of AES Ohio Generation to third parties for future financial or performance assurance under such agreements. The guarantee arrangements entered into by DPL with these third parties cover select present and future obligations of AES Ohio Generation to such beneficiaries and are terminable by DPL upon written notice to the beneficiaries within a certain time. At March 31, 2019 and December 31, 2018, we had no outstanding balance of obligations covered by these guarantees.

To date, DPL has not incurred any losses related to the guarantees of AES Ohio Generation’s obligations and we believe it is unlikely that DPL would be required to perform or incur any losses in the future associated with any of the above guarantees.

Equity Ownership Interest
DP&L has a 4.9% equity ownership interest in OVEC, which is recorded using the cost method of accounting under GAAP. DP&L, along with several non-affiliated energy companies party to an OVEC arrangement, receive and pay for OVEC capacity and energy and are responsible for OVEC debt obligations and other fixed costs in proportion to their power participation ratios under the arrangement which, for DP&L, is the same as its equity ownership interest. At March 31, 2019, DP&L could be responsible for the repayment of 4.9%, or $67.5 million, of $1,378.5 million OVEC debt obligations if they came due, comprised of both fixed and variable rate securities with maturities from 2019 to 2040. OVEC could also seek additional contributions from DP&L to avoid a default in the event that other OVEC members defaulted on their respective OVEC obligations. One of the other OVEC members, with a 4.85% interest in OVEC, filed for bankruptcy protection and the bankruptcy court approved that member's rejection


23


of the OVEC arrangement and its related obligations on July 31, 2018. We do not expect these events to have a material impact on our financial condition, results of operations or cash flows.

Contingencies
In the normal course of business, we are subject to various lawsuits, actions, proceedings, claims and other matters asserted under various laws and regulations. We believe the amounts provided in our Condensed Consolidated Financial Statements, as prescribed by GAAP, are adequate considering the probable and estimable contingencies. However, there can be no assurances that the actual amounts required to satisfy alleged liabilities from various legal proceedings, claims, tax examinations and other matters discussed below, and to comply with applicable laws and regulations, will not exceed the amounts reflected in our Condensed Consolidated Financial Statements. As such, costs, if any, that may be incurred in excess of those amounts provided as of March 31, 2019, cannot be reasonably determined.

Environmental Matters
DPL’s and DP&L’s facilities and operations are subject to a wide range of federal, state and local environmental regulations and laws. The environmental issues that may affect us include:

The federal CAA and state laws and regulations (including State Implementation Plans) which require compliance, obtaining permits and reporting as to air emissions;
Litigation with federal and certain state governments and certain special interest groups;
Rules and future rules issued by the USEPA, the Ohio EPA or other authorities associated with the federal Clean Water Act, which prohibits the discharge of pollutants into waters of the United States except pursuant to appropriate permits; and
Solid and hazardous waste laws and regulations, which govern the management and disposal of certain waste. The majority of solid waste created from the combustion of coal and fossil fuels consists of fly ash and other coal combustion by-products.

In addition to imposing continuing compliance obligations, these laws and regulations authorize the imposition of substantial penalties for noncompliance, including fines, injunctive relief and other sanctions. In the normal course of business, we have investigatory and remedial activities underway at our facilities to comply, or to determine compliance, with such regulations. We record liabilities for loss contingencies related to environmental matters when a loss is probable of occurring and can be reasonably estimated in accordance with the provisions of GAAP. Accordingly, we have immaterial accruals for loss contingencies for environmental matters. We also have several environmental matters for which we have not accrued loss contingencies because the risk of loss is not probable, or a loss cannot be reasonably estimated. We evaluate the potential liability related to environmental matters quarterly and may revise our estimates. Such revisions in the estimates of the potential liabilities could have a material adverse effect on our results of operations, financial condition and cash flows.

We have several pending environmental matters associated with our current and previously owned coal-fired generation units. Some of these matters could have a material adverse effect on our results of operations, financial condition and cash flows.

Note 11Business Segments

DPL has presented the results of operations of Miami Fort Station, Zimmer Station, the Peaker Assets, Stuart Station, and Killen Station as discontinued operations as a group of components for all periods presented. For more information, see Note 14 – Discontinued Operations of Notes to DPL's Condensed Consolidated Financial Statements. As such, AES Ohio Generation only has operating activity coming from its undivided ownership interest in Conesville, which does not meet the thresholds to be a separate reportable operating segment. DPL manages its business through one reportable operating segment, the Utility segment. The primary segment performance measure is income / (loss) from continuing operations before income tax as management has concluded that this measure best reflects the underlying business performance of DPL and is the most relevant measure considered in DPL’s internal evaluation of the financial performance of its segment. The Utility segment is discussed further below.



24


Utility Segment
The Utility segment is comprised of DP&L’s electric transmission and distribution businesses, which distribute electricity to residential, commercial, industrial and governmental customers. DP&L distributes electricity to more than 526,000 retail customers located in a 6,000-square mile area of West Central Ohio. DP&L’s electric transmission and distribution businesses are subject to rate regulation by federal and state regulators. Accordingly, DP&L applies the accounting standards for regulated operations to its electric transmission and distribution businesses recording regulatory assets when incurred costs are expected to be recovered in future customer rates and regulatory liabilities when current cost recoveries in customer rates relate to expected future costs. The Utility segment includes revenues and costs associated with our investment in OVEC and the historical results of DP&L’s Beckjord Facility, which was closed in 2014 and transferred to a third party in the first quarter of 2018, and Hutchings Coal generating facility, which was closed in 2013. These assets did not transfer to AES Ohio Generation as part of DP&L's Generation Separation on October 1, 2017. Thus, they are grouped within the Utility segment for segment reporting purposes. In addition, regulatory deferrals and collections, which include fuel deferrals in historical periods, are included in the Utility segment.

Included within the “Other” column are other businesses that do not meet the GAAP requirements for disclosure as reportable segments as well as certain corporate costs, which include interest expense on DPL’s long-term debt and adjustments related to purchase accounting from the Merger. DPL's undivided interest in Conesville is now included within the "Other" column as it no longer meets the requirement for disclosure as a reportable operating segment, since the results of operations of the other EGUs are now presented as discontinued operations. The accounting policies of the reportable segment are the same as those described in Note 1 – Overview and Summary of Significant Accounting Policies of our 10-K. Intersegment sales, costs of sales and expenses are eliminated in consolidation. Certain shared and corporate costs are allocated between "Other" and the Utility reporting segment.

The following tables present financial information for DPL’s Utility reportable business segment:
$ in millions
 
Utility
 
Other (a)
 
Adjustments and Eliminations
 
DPL Consolidated
Three months ended March 31, 2019
Revenues from external customers
 
$
201.1

 
$
7.9

 
$

 
$
209.0

Intersegment revenues
 
0.3

 
0.8

 
(1.1
)
 

Total revenues
 
$
201.4

 
$
8.7

 
$
(1.1
)
 
$
209.0