-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, OFC3zomZxvoQiJbhZntAjOMF9lVitl51kPtU3hD3ZcfawY9kHYWRwdYoqbnuvZY1 qlLbBZxil582xUgoIY3lsQ== 0000055387-96-000011.txt : 19960506 0000055387-96-000011.hdr.sgml : 19960506 ACCESSION NUMBER: 0000055387-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960503 SROS: PHLX FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENTUCKY UTILITIES CO CENTRAL INDEX KEY: 0000055387 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 610247570 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03464 FILM NUMBER: 96555751 BUSINESS ADDRESS: STREET 1: ONE QUALITY ST CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 6062552100 10-Q 1 KENTUCKY UTILITIES CO. 1ST QTR 1996 FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 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, 1996 TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission file number 1-3464 Kentucky Utilities Company (Exact name of registrant as specified in its charter) Kentucky and Virginia 61-0247570 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) One Quality Street, Lexington, Kentucky 40507 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 606-255-2100 Not Applicable Former name, former address and former fiscal year, if changed since last report Indicate by check mark whether the 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. Yes X No . Number of shares of Common Stock outstanding at May 2, 1996: 37,817,878 shares (owned by the parent-KU Energy Corporation). -1- PART I. FINANCIAL INFORMATION KENTUCKY UTILITIES COMPANY STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) For the Three Months Ended March 31, 1996 1995 Operating Revenues $190,996 $167,148 Operating Expenses: Fuel, principally coal, used in generation 54,025 45,706 Electric power purchased 17,504 15,777 Other operating expenses 29,688 30,598 Maintenance 14,202 14,856 Depreciation 20,018 18,701 Federal and state income taxes 16,336 10,634 Other taxes 4,235 4,314 Total Operating Expenses 156,008 140,586 Net Operating Income 34,988 26,562 Other Income and Deductions: Interest and dividend income 613 633 Other income and deductions - net 2,100 1,480 Total Other Income and Deductions 2,713 2,113 Income Before Interest Charges 37,701 28,675 Interest Charges 10,198 9,747 Net Income 27,503 18,928 Preferred Stock Dividend Requirements 564 564 Net Income Applicable to Common Stock $ 26,939 $ 18,364 The accompanying Notes to Financial Statements are an integral part of these statements. -2- KENTUCKY UTILITIES COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) For the Three Months Ended March 31, 1996 1995 Cash Flows from Operating Activities: Net Income $ 27,503 $ 18,928 Items not requiring (providing) cash currently: Depreciation 20,018 18,701 Deferred income taxes and investment tax credit (352) (630) Changes in current assets and liabilities: Change in fuel inventory 4,127 (254) Change in accounts receivable 1,508 5,623 Change in accounts payable (2,455) (18,239) Change in accrued taxes 15,300 10,725 Change in accrued utility revenues 2,704 2,493 Other--net 9,665 8,570 Net Cash Provided by Operating Activities 78,018 45,917 Cash Flows from Investing Activities: Construction expenditures - utility (21,105) (28,035) Other 201 10 Cash Used by Investing Activities (20,904) (28,025) Cash Flows from Financing Activities: Short-term borrowings - net (40,200) (7,100) Issuance of long-term debt 35,710 (146) Funds deposited with trustee - net 1,500 8,600 Retirement of long-term debt, incl. premiums (36,192) (21) Payment of dividends (16,826) (16,353) Net Cash Used by Financing Activities (56,008) (15,020) Net Increase in Cash and Cash Equivalents 1,106 2,872 Cash and Cash Equivalents Beginning of Period 5,697 3,111 Cash and Cash Equivalents End of Period $ 6,803 $ 5,983 Supplemental Disclosures Cash paid for: Interest on short- and long-term debt $ 6,294 $ 6,475 Federal and state income taxes $ 2,753 $ - The accompanying Notes to Financial Statements are an integral part of these statements. -3- KENTUCKY UTILITIES COMPANY BALANCE SHEETS (Unaudited) (in thousands of dollars) As of As of March 31, Dec. 31, 1996 1995 ASSETS Utility Plant: Plant in service, at cost $2,401,414 $2,394,018 Less: Accumulated depreciation 1,015,733 997,366 1,385,681 1,396,652 Construction work in progress 72,775 61,410 1,458,456 1,458,062 Current Assets: Cash and cash equivalents 6,803 5,697 Escrow funds - coal contract litigation 6,599 6,599 Construction funds held by trustee 2,270 3,743 Accounts receivable 47,963 49,471 Accrued utility revenues 25,196 27,900 Fuel, principally coal, at average cost 25,311 29,438 Materials and supplies, at average cost 23,547 23,064 Other 8,471 8,121 146,160 154,033 Investments, Deferred Charges and Other Assets: Unamortized loss on reacquired debt 11,640 11,304 Other 37,615 36,589 49,255 47,893 Total Assets $1,653,871 $1,659,988 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity $ 587,214 $ 576,537 Preferred stock 40,000 40,000 Long-term debt 546,373 545,980 1,173,587 1,162,517 Current Liabilities: Long-term debt due within one year 21 21 Short-term borrowings 15,400 55,600 Accounts payable 35,545 38,000 Accrued interest 10,695 7,556 Accrued taxes 20,501 5,201 Customers' deposits 7,245 6,876 Accrued payroll and vacations 11,177 8,706 Liab. to ratepayers - coal contract litigation 6,599 6,599 Other 8,697 6,752 115,880 135,311 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 233,158 231,717 Accumulated deferred investment tax credits 33,177 34,180 Regulatory tax liability 56,806 57,726 Other 41,263 38,537 364,404 362,160 Total Capitalization and Liabilities $1,653,871 $1,659,988 The accompanying Notes to Financial Statements are an integral part of these statements. -4- KENTUCKY UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) 1. PRESENTATION OF CONDENSED INFORMATION Pursuant to the rules and regulations of the Securities and Exchange Commission, certain information has been condensed and certain footnote disclosures have been omitted, which are normal- ly included in financial statements prepared in accordance with generally accepted accounting principles. These financial statements should be read in conjunction with the financial statements and notes thereto in the Kentucky Utilities Company (KU) Annual Report on Form 10-K for the year ended December 31, 1995. In the opinion of management, the information furnished herein reflects all adjustments, all of which are normal and recurring, which are necessary to present fairly the results of the periods shown and the disclosures which have been made are adequate to make the information not misleading. Results of interim periods are not necessarily indicative of results for any twelve-month period due to the seasonal nature of KU's business. 2. ENVIRONMENTAL COST RECOVERY Since August 1994, KU has been collecting an environmental surcharge from its Kentucky retail customers under a Kentucky statute which authorizes electric utilities (including KU) to implement, beginning January 1, 1993, an environmental surcharge. The surcharge is designed to recover certain operating and capital costs of compliance with federal, state or local environmental requirements associated with the production of -5- KENTUCKY UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) energy from coal, including the Federal Clean Air Act as amended. KU's environmental surcharge was approved by the Kentucky Public Service Commission (PSC) in July 1994 and was implemented in August 1994. The constitutionality of the surcharge statute was challenged in the Franklin County (Kentucky) Circuit Court in an action brought against KU and the PSC by the Attorney General of Kentucky and joined by representatives of consumer groups. In July 1995, the Circuit Court entered a judgment upholding the constitutionality of the statute, but vacating that part of the PSC's July 1994 order which the judgment describes as allowing KU to recover, under the surcharge, environmental expenditures incurred before January 1, 1993, and ordering the case remanded to the PSC for determination in accordance with the Circuit Court judgment. The Attorney General and other consumer representatives appealed to the Kentucky Court of Appeals that part of the Circuit Court judgment upholding the constitutionality of the surcharge statute. The PSC and KU appealed that part of the judgment denying recovery of environmental expenditures incurred before January 1, 1993. On August 22, 1995, the PSC ordered all surcharge revenues collected by KU from that date subject to refund pending final determination of all appeals. In March 1996 in the semi-annual reconciliation review, the PSC ordered all surcharge revenues collected during the six-month period then under review (February 1, 1995 through July 31, 1995) subject to -6- KENTUCKY UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) refund pending final determination of all appeals. The total surcharge collections from February 1, 1995 through March 31, 1996 were approximately $22 million. KU believes the constitutionality of the surcharge statute will be upheld, but it cannot predict the outcome of that part of the Circuit Court judgment disallowing recovery of environmental expenditures incurred before January 1, 1993. If the Circuit Court judgment is ultimately upheld as entered, KU estimates that the amount it would be required to refund (which is based solely on costs associated with environmental expenditures incurred before January 1, 1993) for surcharge collections through March 31, 1996, from the implementation of the surcharge would be approximately $7 million, and from February 1, 1995 would be approximately $5 million. At this time, KU has not recorded any reserve for refund. 3. FINANCING In January 1996, KU issued $36 million of Series S First Mortgage Bonds which will mature January 15, 2006 and bear interest at 5.99%. The proceeds were used to redeem $35.5 million of Series K First Mortgage Bonds. A redemption premium of approximately $.7 million was recorded on the balance sheet and will be amortized over the period to the scheduled maturity of the new bonds. -7- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY & RESOURCES At March 31, 1996, KU's short-term borrowings were $15.4 million compared to $55.6 million at December 31, 1995. The short-term borrowings have been used primarily to finance ongoing construction expenditures and general corporate requirements. The decrease is due primarily to planned reductions in construction expenditures and additional cash provided by operations during the first quarter of 1996. Refer to Note 3 of the Notes to Financial Statements for a discussion of KU's recent financing activities. RESULTS OF OPERATIONS Quarter ended March 31, 1996, compared to the Quarter ended March 31, 1995 Net income applicable to common stock for the three-month period ended March 31, 1996 was $26.9 million compared to $18.4 million for the corresponding period of 1995. The increase primarily reflects the positive effects of colder weather and increased opportunity sales during the first quarter of 1996 compared to 1995. The positive effects of these factors were somewhat offset by increases in fuel and purchased power expense as discussed below. -8- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Increase (Decrease) From Prior Year Three Months Ended March 31, 1996 kWh Revenues (%) (000's) Residential 13 $ 8,186 Commercial 5 2,018 Industrial 10 3,134 Mine Power & Public Authorities 3 907 Total Retail Sales 9 14,245 Wholesale 5 773 Opportunity 405 7,920 Total Other Electric Utilities 89 8,693 Miscellaneous Revenues & Other - 910 Total 19 $ 23,848 Operating revenues increased $23.8 million (14%). The increase reflects a 19% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily attributable to increases in residential, industrial and opportunity sales. The increase in opportunity sales (525,495 megawatt-hours versus 104,148 megawatt-hours) is primarily due to Non-Firm energy sales agreements with two neighboring utilities for the year 1996. The increase in industrial sales reflects continued economic growth in the manufacturing sector of KU's service area evidenced primarily by a 6% increase in the number of industrial customers over 1995. The increase in residential sales was primarily due to colder weather in the first quarter of 1996 compared to 1995. KU set an all-time peak demand for electricity on February 5, 1996 of 3,391 megawatts. Fuel expense increased $8.3 million (18%). The increase was primarily due to a 20% increase in the tons of coal consumed, -9- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS which was primarily caused by a 19% increase in generation. The increase in consumption resulted from the previously mentioned increase in kilowatt-hour sales. Purchased power expense increased $1.7 million (11%) due to an increase in energy charges ($2.0 million) offset slightly by a decrease in demand charges ($.3 million). The increase in energy costs reflects a 10% increase in kilowatt-hour purchases. Federal and state income taxes increased $5.7 million (54%). The increase was primarily due to increased pre-tax income. UTILITY ISSUES - COMPETITION Refer to Management's Discussion and Analysis in the 1995 Annual Report on Form 10-K under the heading "Utility Issues - Competition" for a discussion of the Federal Energy Regulatory Commission's (FERC) proposed rules addressing open access trans- mission service and the collection of charges for the recovery of stranded costs. In late April 1996, the FERC issued two final rules and a Notice of Proposed Rulemaking (NOPR). FERC Order No. 888 addresses both open access and stranded cost issues. FERC Order No. 889 requires utilities to establish electronic systems to share information about available transmission capacity. It also establishes standards of conduct. The NOPR proposes to establish a new system for utilities to use in reserving capacity on their own and other's transmission lines. KU is currently evaluating the impacts of the final rules and the NOPR. -10- PART II. OTHER INFORMATION KENTUCKY UTILITIES COMPANY ITEM 1. LEGAL PROCEEDINGS See Note 2 of the Notes to Financial Statements, Environmental Cost Recovery, for a discussion of the environmental surcharge. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibit is filed as part of this report: Exhibit Number Description 27 Financial Data Schedule (required for electronic filing only in accordance with Item 601(c)(1) of Regulation S-K.) (b) Reports on Form 8-K. (1) KU filed a Form 8-K dated January 18, 1996 to report certain financial information included in the Prospectus dated January 18, 1996 for its Series S First Mortgage Bonds. -11- KENTUCKY UTILITIES COMPANY 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. KENTUCKY UTILITIES COMPANY (Registrant) Date May 2, 1996 /s/ Michael R. Whitley Michael R. Whitley Chairman and President Date May 2, 1996 /s/ Michael D. Robinson Michael D. Robinson Controller -12- EX-27 2 ARTICLE UT FDS FOR 1ST QTR 1996 FORM 10-Q
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE BALANCE SHEET AS OF MARCH 31, 1996 AND THE STATEMENTS OF INCOME AND CASH FLOWS FOR THE PERIOD ENDED MARCH 31, 1996 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FORM 10-Q QUARTERLY REPORT. 1,000 3-MOS DEC-31-1996 MAR-31-1996 PER-BOOK 1,458,456 12,131 146,160 37,124 0 1,653,871 308,140 (594) 279,668 587,214 0 40,000 546,373 15,400 0 0 21 0 0 0 464,863 1,653,871 190,996 16,336 139,672 156,008 34,988 2,713 37,701 10,198 27,503 564 26,939 16,262 9,588 78,018 0 0 ALL OUTSTANDING COMMON STOCK OF KENTUCKY UTILITIES COMPANY IS HELD BY ITS PARENT COMPANY, KU ENERGY CORPORATION. THEREFORE, EARNINGS PER SHARE IS NOT APPLICABLE.
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