-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, KVWv8+uXMwoqOuHQQ2JEoc8OR/G8Gr1thgcY27aXcoK1nGcifillnbeTPn0w2IJt NT2gSQ+iq+6tgk5S8JO8dw== 0000055387-94-000045.txt : 19940819 0000055387-94-000045.hdr.sgml : 19940819 ACCESSION NUMBER: 0000055387-94-000045 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940630 FILED AS OF DATE: 19940812 FILER: COMPANY DATA: COMPANY CONFORMED NAME: KENTUCKY UTILITIES CO CENTRAL INDEX KEY: 0000055387 STANDARD INDUSTRIAL CLASSIFICATION: 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: 94543764 BUSINESS ADDRESS: STREET 1: ONE QUALITY ST CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 6062552100 10-Q 1 KENTUCKY UTILITIES CO. 2ND QTR 1994 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 June 30, 1994 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 August 11, 1994: 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 June 30, 1994 1993 Operating Revenues $154,026 $139,909 Operating Expenses: Fuel, principally coal, used in generation 43,372 43,867 Electric power purchased 16,356 5,471 Other operating expenses 27,645 25,397 Maintenance 18,893 15,140 Depreciation 16,151 15,192 Federal and state income taxes 7,933 9,111 Other taxes 3,642 3,522 Total Operating Expenses 133,992 117,700 Net Operating Income 20,034 22,209 Other Income and Deductions: Interest and dividend income 766 649 Other income and deductions - net 1,875 1,519 Total Other Income and Deductions 2,641 2,168 Income Before Interest Charges 22,675 24,377 Interest Charges 8,202 7,955 Net Income 14,473 16,422 Preferred Stock Dividend Requirements 564 630 Net Income Applicable to Common Stock $ 13,909 $ 15,792 The accompanying Notes to Financial Statements are an integral part of these statements. -2- KENTUCKY UTILITIES COMPANY STATEMENTS OF INCOME (Unaudited) (in thousands of dollars) For the Six Months Ended June 30, 1994 1993 Operating Revenues $320,554 $294,145 Operating Expenses: Fuel, principally coal, used in generation 87,231 87,525 Electric power purchased 32,239 15,439 Other operating expenses 54,332 50,568 Maintenance 33,431 26,461 Depreciation 32,338 30,415 Federal and state income taxes 22,664 23,148 Other taxes 7,705 7,225 Total Operating Expenses 269,940 240,781 Net Operating Income 50,614 53,364 Other Income and Deductions: Interest and dividend income 2,502 1,532 Other income and deductions - net 3,048 3,201 Total Other Income and Deductions 5,550 4,733 Income Before Interest Charges 56,164 58,097 Interest Charges 16,347 17,127 Net Income 39,817 40,970 Preferred Stock Dividend Requirements 1,256 1,259 Net Income Applicable to Common Stock $ 38,561 $ 39,711 The accompanying Notes to Financial Statements are an integral part of these statements. -3- KENTUCKY UTILITIES COMPANY STATEMENTS OF CASH FLOWS (Unaudited) (in thousands of dollars) For the Six Months Ended June 30, 1994 1993 Cash Flows from Operating Activities: Net Income $ 39,817 $ 40,970 Items not requiring (providing) cash currently: Depreciation 32,338 30,415 Deferred income taxes and investment tax credit (3,342) 3,032 Change in fuel inventory 179 (1,552) Change in accounts receivable 2,059 (3,402) Change in accounts payable (3,195) (444) Change in accrued taxes 2,998 620 Change in accrued utility revenues 1,865 827 Change in liability to ratepayers (791) 38,979 Change in escrow funds 1,577 (44,886) Other--net (3,179) 12,123 Net Cash Provided by Operating Activities 70,326 76,682 Cash Flows from Investing Activities: Construction expenditures - utility (89,468) (47,299) Nonutility property - (4,956) Other 170 108 Cash Used by Investing Activities (89,298) (52,147) Cash Flows from Financing Activities: Short-term borrowings - net 47,900 - Issuance of long-term debt - 123,500 Funds deposited with trustee - net 18,393 (123,795) Retirement of long-term debt, including premiums (21) (57,334) Retirement of preferred stock, including premium (20,302) - Payment of dividends (32,139) (31,513) Net Cash Provided (Used) by Financing Activities 13,831 (89,142) Net Decrease in Cash and Cash Equivalents (5,141) (64,607) Cash and Cash Equivalents Beginning of Period 8,832 94,299 Cash and Cash Equivalents End of Period $ 3,691 $ 29,692 Supplemental Disclosures Cash paid for: Interest on long-term debt $ 15,302 $ 17,018 Federal and state income taxes $ 25,378 $ 20,690 The accompanying Notes to Financial Statements are an integral part of these statements. -4- KENTUCKY UTILITIES COMPANY BALANCE SHEETS (Unaudited) (in thousands of dollars) As of As of June 30, Dec. 31, 1994 1993 ASSETS Utility Plant: Plant in service, at cost $2,020,277 $2,004,688 Less: Accumulated depreciation 910,853 879,960 1,109,424 1,124,728 Construction work in progress 231,087 158,829 1,340,511 1,283,557 Current Assets: Cash and cash equivalents 3,691 8,832 Escrow funds - coal contract litigation 36,175 37,752 Construction funds held by trustee 2 18,268 Accounts receivable 39,398 41,457 Accrued utility revenues 23,710 25,575 Fuel, principally coal, at average cost 30,894 31,073 Materials and supplies, at average cost 18,271 17,261 Other 8,396 7,804 160,537 188,022 Investments, Deferred Charges and Other Assets: Accumulated deferred income taxes 40,359 35,778 Unamortized loss on reacquired debt 12,831 13,295 Other 37,572 38,400 90,762 87,473 Total Assets $1,591,810 $1,559,052 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity $ 559,473 $ 552,106 Preferred stock 40,000 40,000 Long-term debt 442,018 442,045 1,041,491 1,034,151 Current Liabilities: Preferred stock and long-term debt due within one year 21 20,021 Short-term borrowings 47,900 - Accounts payable 40,811 44,006 Accrued interest 7,029 7,302 Accrued taxes 7,658 4,660 Customers' deposits 6,278 10,803 Accrued payroll and vacations 8,146 7,709 Liab. to ratepayers - coal contract litigation 36,076 36,867 Other 8,367 6,434 162,286 137,802 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 252,448 248,103 Accumulated deferred investment tax credits 40,330 42,385 Regulatory liabilities 67,780 69,689 Other 27,475 26,922 388,033 387,099 Total Capitalization and Liabilities $1,591,810 $1,559,052 The accompanying Notes to Financial Statements are an integral part of these statements. -5- 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 (Kentucky Utilities) Annual Report on Form 10-K for the year ended December 31, 1993. In the opinion of management, the information furnished herein reflects all adjustments 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 mislead- ing. Results of interim periods are not necessarily indicative of results for any twelve-month period due to the seasonal nature of Kentucky Utilities' business. 2. PREFERRED STOCK Kentucky Utilities issued $20 million of 6.53% preferred stock in December 1993. On February 1, 1994, Kentucky Utilities used the proceeds from this issue, together with other available funds, to redeem its 7.84% Preferred Stock at a total cost of $20.3 million (including a redemption premium of $.3 million). Kentucky Utilities announced its intention to redeem this preferred stock on December 22, 1993. -6- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS LIQUIDITY & RESOURCES Kentucky Utilities' construction expenditures increased approximately $20 million and $42 million for the three-month and six-month periods ended June 30, 1994, respectively, when compared to the corresponding periods of 1993. The increases are attributable primarily to expenditures for combustion turbine peaking units and for compliance with the 1990 Clean Air Act Amendments. Kentucky Utilities expects to fund approximately 50% of its remaining 1994 construction expenditures from the issuance of short-term and long-term debt with the balance primarily from internal sources. RESULTS OF OPERATIONS Quarter ended June 30, 1994, compared to the Quarter ended June 30, 1993 Increase (Decrease) From Prior Year Three Months Ended June 30, 1994 kWh Revenues (%) (000's) Residential 6 $ 2,395 Commercial 4 1,529 Industrial 8 2,186 Mine Power & Public Authorities 4 883 Total Retail Sales 6 6,993 Other Electric Utilities 58 7,037 Provision for Refund - Litigation Settlement - (365) Miscellaneous Revenues & Other - 452 Total 14 $ 14,117 Operating revenues increased $14.1 million (10%) primarily -7- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS as a result of a 14% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily attributable to increases in residential, commercial, industrial and off-system sales. The increases in residential and commercial sales reflect unusually warm weather during the month of June 1994. The increase in industrial sales reflects continued economic growth in the service area. Approximately one third of the increase in industrial sales is due to greater sales to Toyota Motor Manufacturing U.S.A., Inc. (TMM), Kentucky Utilities' largest customer. TMM completed an $800 million assembly plant expansion in March 1994. The increase in off-system sales is attributable to an increase in demand for power due to unusually warm weather and maintenance programs at neighbor-ing utilities. Revenues were reduced by approximately $.4 million resulting from refunds to customers of amounts recovered from a litigation settlement with a former coal supplier. Fuel and purchased power expense increased $10.4 million (21%). Fuel expense decreased $.5 million (1%). This decrease reflects a 5% decline in net kilowatt-hour generation offset by a 4% increase in the average price per ton of coal consumed. Fuel expense also reflects a $.4 million reduction associated with the refunding to customers of fuel cost savings related to the resolution of a coal contract dispute. Purchased power expense increased by $10.9 million due to greater kilowatt-hour purchases ($7.2 million) and higher demand costs ($3.7 million). The increase in kilowatt-hour purchases during the second quarter of 1994 is the result of the previously discussed sales increases as -8- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS well as the decline in net kilowatt-hour generation. The increased kilowatt-hour purchases reflect a permanent increase in capacity entitlement, effective January 1994, under an existing purchased power contract with Electric Energy, Inc. (EEI) and greater kilowatt-hour purchases from Owensboro Municipal Utilities (OMU). Scheduled maintenance of OMU's generating units in the second quarter of 1993 resulted in a reduction of availability during that period. The increase in demand costs is primarily due to the permanent increase in capacity entitlement from EEI. Maintenance expenses increased $3.8 million (25%), primarily due to the timing of scheduled maintenance at Kentucky Utilities' generating stations. Six Months ended June 30, 1994, compared to the Six Months ended June 30, 1993 Increase (Decrease) From Prior Year Six Months Ended June 30, 1994 kWh Revenues (%) (000's) Residential 9 $ 7,807 Commercial 5 3,209 Industrial 8 3,477 Mine Power & Public Authorities 4 1,452 Total Retail Sales 7 15,945 Other Electric Utilities 48 10,487 Provision for Refund - Litigation Settlement - (902) Miscellaneous Revenues & Other - 879 Total 12 $ 26,409 Operating revenues increased $26.4 million (9%) primarily as -9- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS a result of a 12% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily attributable to increases in residential, commercial, industrial and off-system sales. The increases in residential and commercial sales reflect colder weather during the first quarter of 1994 and unusually warm weather during the month of June 1994. The increase in industrial sales reflects continued economic growth in the service area. Approximately one third of the increase in industrial sales is due to greater sales to TMM due to its recent plant expansion. The increase in off-system sales is attributable to an increase in demand for power due to extreme weather conditions and maintenance programs at neighboring utilities. Revenues were reduced by approximately $.9 million resulting from refunds to customers of amounts recovered from a litigation settlement with a former coal supplier. The $.9 million, which was charged against revenue, represents $3.3 million of fuel savings less $2.4 million for incurred litigation costs and off-system sales which Kentucky Utilities was allowed to retain pursuant to a regulatory order. Fuel and purchased power expense increased $16.5 million (16%). Fuel expense reflects a $3.3 million reduction associated with the refunding to customers of fuel cost savings related to the resolution of a coal contract dispute. This reduction in fuel expense was substantially offset by a 3.5% increase in the average price of coal consumed. Net kilowatt-hour generation remained fairly constant in comparison to the corresponding six- -10- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS month period in 1993. Purchased power expense increased $16.8 million due to greater kilowatt-hour purchases ($10.4 million) and higher demand costs ($6.4 million). The increase in kilowatt-hour purchases is the result of the previously discussed sales increases. The increased kilowatt-hour purchases reflect a permanent increase in capacity entitlement, effective January 1994, under an existing purchased power contract with EEI. The increase in demand costs is primarily due to the permanent increase in capacity entitlement from EEI. Maintenance expenses increased $7.0 million (26%). The increase is the result of distribution utility line maintenance costs incurred as a result of extensive ice storm damage during the first quarter of 1994, as well as the timing of scheduled maintenance at Kentucky Utilities' generating stations. ENVIRONMENTAL SURCHARGE On July 19, 1994, the Kentucky Public Service Commission (PSC) approved Kentucky Utilities' environmental surcharge application. The surcharge is designed to recover certain ongoing operating and capital costs of complying with federal, state or local environmental requirements associated with the production of energy from coal, including the 1990 Clean Air Act Amendments. The environmental surcharge was implemented in August 1994. Kentucky Utilities estimates that it will recover approximately $15 million in environmental costs during the first twelve months and about $23 million during the second twelve -11- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS months. Amounts collected will be subject to PSC review every two years. Two intervenors have filed petitions with the PSC seeking a rehearing of the PSC's surcharge order. The PSC has not ruled on either petition. Any party to the proceeding may appeal the final PSC order to the Franklin County (KY) Circuit Court. -12- PART II. OTHER INFORMATION KENTUCKY UTILITIES COMPANY ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS At the April 26, 1994 Annual Meeting of Shareholders, the following proposal was acted upon and approved. (1) To elect three Directors to the Board of Directors of Kentucky Utilities Company. Votes Votes for Withheld Milton W. Hudson 37,817,878 0 John T. Newton 37,817,878 0 William L. Rouse, Jr. 37,817,878 0 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibit is filed as part of this report: Exhibit Number Description 12 Computation of Ratio of Earnings to Fixed Charges. (b) Reports on Form 8-K. None. -13- 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 August 11, 1994 /s/ John T. Newton John T. Newton Chairman and President Date August 11, 1994 /s/ Michael D. Robinson Michael D. Robinson Controller -14- EX-12 2 KENTUCKY UTILITIES CO. EXHIBIT 12 EXHIBIT 12 KENTUCKY UTILITIES COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 12 Months Ended June 30, 1994 (in thousands, except ratio) Earnings Net Income $ 80,133 Adjustments Fixed charges 32,290 Income taxes Current Federal 38,893 Current State 10,058 Deferred Federal-Net (440) Deferred State-Net (720) Deferred investment tax credit-Net (97) Income taxes included in Other Income and Deductions Current Federal and State 529 Deferred Federal and State 502 Amortization of investment tax credit (4,024) Undistributed income of Electric Energy, Inc. 13 Total Earnings $157,137 Fixed Charges Interest on long-term debt $ 31,052 Other interest charges 1,238 Total Fixed Charges $ 32,290 Ratio of Earnings to Fixed Charges 4.87 Note--Rentals are not material and have not been included in fixed charges. -15- -----END PRIVACY-ENHANCED MESSAGE-----