-----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, L56ptAUUeBu5LVdaMVngDzALrmXRY1rQBuxqkfQKFebo76m0rDr/SJ95KhjKRiEs JhVp2BoRk10n4I7hhItp7g== 0000060549-97-000011.txt : 19970815 0000060549-97-000011.hdr.sgml : 19970815 ACCESSION NUMBER: 0000060549-97-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19970630 FILED AS OF DATE: 19970814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: LOUISVILLE GAS & ELECTRIC CO /KY/ CENTRAL INDEX KEY: 0000060549 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 610264150 STATE OF INCORPORATION: KY FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-02893 FILM NUMBER: 97661860 BUSINESS ADDRESS: STREET 1: 220 W MAIN ST STREET 2: P O BOX 32010 CITY: LOUISVILLE STATE: KY ZIP: 40232 BUSINESS PHONE: 5026272000 MAIL ADDRESS: STREET 1: 220 WEST MAIN ST CITY: LUUISVILLE STATE: KY ZIP: 40232 10-Q 1 LG&E'S JUNE 1997 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 20549 FORM 10-Q (Mark One) [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1997 or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 2 - 26720 LOUISVILLE GAS AND ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Kentucky 61 - 0264150 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 220 West Main Street 40232 P.O. Box 32010 (Zip Code) Louisville, KY (Address of principal executive offices) (502) 627-2000 (Registrant's telephone number) 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 Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. 21,294,223 shares, without par value, as of July 31, 1997, all of which were held by LG&E Energy Corp. 2 Part I. Financial Information - Item 1. Financial Statements Louisville Gas and Electric Company Statements of Income (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 REVENUES: Electric (Note 2) $146,085 $151,745 $274,746 $287,433 Gas 34,191 29,362 130,929 120,418 Total operating revenues 180,276 181,107 405,675 407,851 OPERATING EXPENSES: Fuel for electric generation 35,438 36,692 66,450 72,606 Power purchased 2,969 5,171 6,976 8,273 Gas supply expenses 21,144 18,652 88,969 76,884 Other operations expenses 37,094 31,530 73,962 71,257 Maintenance 14,621 15,988 26,343 30,156 Depreciation and amortization 22,952 22,251 45,904 44,501 Federal and state income taxes 11,386 13,832 24,663 28,409 Property and other taxes 4,250 4,255 9,091 9,079 Total operating expenses 149,854 148,371 342,358 341,165 NET OPERATING INCOME 30,422 32,736 63,317 66,686 Other income and (deductions) 958 590 1,844 712 Interest charges 9,893 10,418 19,707 20,938 NET INCOME 21,487 22,908 45,454 46,460 Preferred Stock Dividends 1,161 1,136 2,288 2,292 NET INCOME AVAILABLE FOR COMMON STOCK $ 20,326 $ 21,772 $ 43,166 $ 44,168 3 Louisville Gas and Electric Company Balance Sheets (Thousands of $) ASSETS June 30, Dec. 31, 1997 1996 UTILITY PLANT: At original cost $2,721,261 $2,685,209 Less: reserve for depreciation 1,037,437 999,987 Net utility plant 1,683,824 1,685,222 OTHER PROPERTY AND INVESTMENTS - less reserve: 1,181 1,028 CURRENT ASSETS: Cash and temporary cash investments 84,882 56,792 Marketable securities 8,412 3,595 Accounts receivable - less reserve 104,682 115,144 Materials and supplies - at average cost: Fuel (predominantly coal) 15,651 14,576 Gas stored underground 13,361 35,510 Other 31,802 32,426 Prepayments 1,268 2,480 Total current assets 260,058 260,523 DEFERRED DEBITS AND OTHER ASSETS: Unamortized debt expense 6,900 6,933 Regulatory assets 25,777 27,729 Other 29,443 25,277 Total deferred debits and other assets 62,120 59,939 Total assets $2,007,183 $2,006,712 4 Louisville Gas and Electric Company Balance Sheets (cont.) (Thousands of $) CAPITAL AND LIABILITIES June 30, Dec. 31, 1997 1996 CAPITALIZATION: Common stock, without par value - Outstanding 21,294,223 shares $ 425,170 $ 425,170 Retained earnings 233,388 209,222 Other (924) (635) Total common equity 657,634 633,757 Cumulative preferred stock 95,328 95,328 Long-term debt 626,800 646,835 Total capitalization 1,379,762 1,375,920 CURRENT LIABILITIES: Long-term debt due within one year 20,000 - Accounts payable 63,614 97,478 Trimble County Settlement 15,072 17,511 Dividends declared 20,161 20,131 Accrued taxes 16,608 11,982 Accrued interest 10,174 9,994 Other 14,836 13,128 Total current liabilities 160,465 170,224 DEFERRED CREDITS AND OTHER LIABILITIES: Accumulated deferred income taxes 241,939 241,681 Investment tax credit, in process of amortization 77,869 80,040 Accumulated provision for pensions and related benefits 42,520 42,554 Regulatory liability 75,600 77,287 Other 29,028 19,006 Total deferred credits and other liabilities 466,956 460,568 Total capital and liabilities $2,007,183 $2,006,712 5 Louisville Gas and Electric Company Statements of Cash Flows (Thousands of $) Six Months Ended June 30, 1997 1996 CASH FLOWS FROM OPERATING ACTIVITIES: Net income $ 45,454 $ 46,460 Items not requiring cash currently: Depreciation and amortization 45,904 44,501 Deferred income taxes - net (1,319) 7,033 Investment tax credit - net (2,171) (2,203) Other 1,940 2,056 (Increases) decreases in net current assets: Accounts receivable 10,462 (622) Materials and supplies 21,698 28,560 Trimble County Settlement (2,439) (8,222) Accounts payable (33,864) (16,298) Accrued taxes 4,626 6,449 Accrued interest 180 121 Prepayments and other 2,920 2,000 Other 4,475 (16,686) Net cash provided by operating activities 97,866 93,149 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of securities (6,467) (6,550) Proceeds from sales of securities 1,247 21,036 Construction expenditures (43,298) (47,949) Net cash used for investing activities (48,518) (33,463) CASH FLOWS FROM FINANCING ACTIVITIES: Retirement of first mortgage bonds - (16,000) Payment of dividends (21,258) (39,327) Net cash used for financing activities $ (21,258) $ (55,327) 6 Louisville Gas and Electric Company Statements of Cash Flows (cont.) (Thousands of $) Six Months Ended June 30, 1997 1996 NET INCREASE IN CASH AND TEMPORARY CASH INVESTMENTS $ 28,090 $ 4,359 CASH AND TEMPORARY CASH INVESTMENTS AT BEGINNING OF PERIOD 56,792 58,131 CASH AND TEMPORARY CASH INVESTMENTS AT END OF PERIOD $ 84,882 $ 62,490 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Income taxes $ 25,936 $ 21,334 Interest on borrowed money 18,710 20,048 For the purposes of this statement, all temporary cash investments purchased with a maturity of three months or less are considered cash equivalents. 7 Louisville Gas and Electric Company Statements of Retained Earnings (Thousands of $) Three Months Six Months Ended Ended June 30, June 30, 1997 1996 1997 1996 Balance at beginning of period $232,062 $184,945 $209,222 $181,049 Net income 21,487 22,908 45,454 46,460 Subtotal 253,549 207,853 254,676 227,509 Cash dividends declared on stock - 5% cumulative preferred 269 269 538 538 Auction rate cumulative pref. 525 500 1,016 1,020 $5.875 cumulative preferred 367 367 734 734 Common 19,000 18,500 19,000 37,000 Total dividends declared 20,161 19,636 21,288 39,292 Balance at end of period $233,388 $188,217 $233,388 $188,217 8 Louisville Gas and Electric Company Notes to Financial Statements (Unaudited) 1. The unaudited financial statements included herein have been prepared by Louisville Gas and Electric Company (the "Company" or "LG&E"), pursuant to the rules and regulations of the Securities and Exchange Commission. In the opinion of management, all adjustments have been made to present fairly the consolidated financial position, results of operations and cash flows for the periods indicated. The adjustments consist of those of a normal and recurring nature. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's Annual Report on Form 10-K for the year 1996. 2. In April 1995, in response to an application filed by the Company, the Commission approved, with modifications, an environmental cost recovery surcharge that increased electric revenues by $3.2 million in 1995, $2.4 million in 1996 and is expected to increase 1997 revenues an additional $.5 million. An appeal of the Commission's April 1995 order by various intervenors in the proceeding is currently pending in the Franklin Circuit Court of Kentucky. The Company is contesting the legal challenges to the surcharge, but cannot predict the outcome of the appeal. The amount of refunds that may be ordered, if any, are not expected to have a material adverse effect on the Company's financial position or results of operations. 3. New Accounting Pronouncements. Effective January 1, 1997, the Company adopted Statement of Financial Accounting Standards No. 125, Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities (SFAS No. 125). This new standard is effective for all transfers and servicing of financial assets and extinguishments of liabilities occurring after December 31, 1996. Adopting SFAS No. 125 had no impact on the Company's financial position or results of operations. 9 The Company adopted the provisions of Statement of Position (SOP) 96-1, Environmental Remediation Liabilities, January 1, 1997. This statement provides authoritative guidance for recognition, measurement, and disclosure of environmental remediation liabilities in financial statements. Due to the Company's previous recognition of this type of liability, adoption did not have a material impact on the Company's financial position or results of operation. In February 1997, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 128, Earnings per Share, effective for annual periods ending after December 15, 1997. This statement, which establishes standards for computing and presenting earnings per share, will not have an effect on the Company because the common stock is held by the parent, LG&E Energy Corp. 4. The Company is exploring steps that it can take to maintain or even improve its position as a low-cost producer of electricity and evaluating other actions, including an analysis associated with the future recovery of certain regulatory assets, that will enable the Company to continue to offer favorable electric rates to its customers. 5. On May 20, 1997, LG&E Energy Corp. (LG&E Energy), the parent company of LG&E, entered into an Agreement and Plan of Merger with KU Energy Corporation ("KU"), which is the parent of Kentucky Utilities Company ("Kentucky Utilities"). As a result of the Merger, LG&E Energy will become the parent company of KU's principal operating subsidiary, Kentucky Utilities. The operating utility subsidiaries (LG&E and Kentucky Utilities) will maintain their separate corporate identities and will continue to serve customers in Kentucky and Virginia under their present names. LG&E Energy and KU expect more than $760 million in gross non-fuel savings over a ten-year period following the Merger. Costs to achieve these synergies are estimated to be $77 million. The preferred stock and debt securities of the operating utility subsidiaries will not be affected by the Merger. Further information regarding this proposed transaction is included in Part II of this Form 10-Q. 6. Reference is made to Part II herein - Item 1, Legal Proceedings, and Note 13 of the Notes to Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 1996. 10 Item 2. Management's Discussion and Analysis of Results of Operations and Financial Condition. On May 20, 1997, LG&E Energy Corp. ("LG&E Energy"), the parent company of LG&E, entered into an Agreement and Plan of Merger with KU Energy Corporation ("KU"), which is the parent company of Kentucky Utilities Company ("Kentucky Utilities"). Further information regarding this proposed transaction is included in Part II of this Form 10-Q. The following discussion and analysis is based on the financial conditions and operations of LG&E and does not reflect the potential effects of the combination between LG&E Energy and KU. Some of the matters discussed in Part I or Part II of this Form 10-Q may contain forward looking statements that are subject to certain risks, uncertainties and assumptions. Such forward looking statements are intended to be identified in this document by the words "anticipate," "estimate," "objective," "possible," "potential" and similar expressions. Actual results may vary materially. Factors that could cause actual results to differ materially include: general economic conditions; business and competitive conditions in the energy industry; change in federal or state legislation; unusual weather; actions by state or federal regulatory agencies affecting rates; regulatory decisions regarding the proposed Merger of LG&E Energy Corp. and KU Energy Corporation; and the other factors described in Exhibit 99.01 to this Form 10-Q. Results of Operations Because of seasonal fluctuations in temperature and other factors the results of one interim period are not necessarily indicative of results to be expected for the year. Quarter Ended June 30, 1997, Compared with Quarter Ended June 30, 1996 Net income decreased $1.4 million (6%) for the quarter ended June 30, 1997, as compared to the quarter ended June 30, 1996, primarily due to a decrease in electric sales caused by the unseasonably mild weather. Cooling degree days were 45% below 1996. In addition, lower net income this quarter resulted from a one-time reduction of certain employee fringe benefits recorded in operation expenses in the second quarter of 1996. 11 A comparison of operating revenues for the quarter ended June 30, 1997, with the quarter ended June 30, 1996, reflects increases and decreases which have been segregated by the following principal causes: Increase or (Decrease) (Thousands of $) Electric Gas Cause Revenues Revenues Sales to ultimate consumers: Fuel and gas supply adjustments $ (876) $ 5,224 Demand side management/revenue decoupling 5,147 2,238 Environmental cost recovery surcharge 113 - Variation in sales volume, etc. (10,086) (2,698) Total (5,702) 4,764 Sales for resale (1,353) - Gas transportation - net - 126 Other 1,395 (61) Total $ (5,660) $ 4,829 Fuel for electric generation and gas supply expenses comprise a large segment of the Company's total operating expenses. The Company's electric and gas rates contain a fuel adjustment clause and a gas supply clause, respectively, whereby increases or decreases in the cost of fuel and gas supply may be reflected in the Company's retail rates, subject to the approval of the Public Service Commission of Kentucky. Fuel for electric generation decreased $1.3 million (3%) for the quarter because of a decrease in generation ($1.6 million) partially offset by a higher cost of coal burned ($.3 million). Gas supply expenses increased $2.5 million (13%) due to an increase in net gas supply cost ($2.9 million), partially offset by a decrease in the volume of gas delivered to the distribution system ($.4 million). Power purchased decreased $2.2 million (43%) because of fewer outages at the electric generating plants as compared to the same period in 1996. Other operation expenses increased $5.6 million (18%) over 1996 mainly because the Company recorded a credit to expense in the second quarter of 1996 for a one-time reduction of certain employee fringe benefits in connection with a change in the collective bargaining agreement ($3.6 million) and a portion of the settlement proceeds related to a commercial dispute ($1 million). Also contributing to the increase were higher costs to operate the Company's electric power plants and distribution systems ($1.3 million). Maintenance expenses decreased $1.4 million (9%) because of a decrease in storm damage expenses. 12 Depreciation and amortization increased because of additional depreciable plant in service. Variations in income tax expense are largely attributable to changes in pre-tax income. Other income increased $.4 million primarily because of increased interest income from investments. Interest charges decreased $.5 million (5%) primarily because of a decrease in outstanding debt. The Company's First Mortgage Bonds, 5.625% Series of $16 million were retired at maturity on June 1, 1996 and $50 million in other debt was refinanced at more favorable rates in 1996. Six Months Ended June 30, 1997 Compared with Six Months Ended June 30, 1996 Net income for the six months ended June 30, 1997 decreased $1 million (2%) as compared to the same period of 1996. This decrease is due primarily to a decrease in sales of electricity and natural gas caused by unseasonably mild weather conditions. A comparison of operating revenues for the six months ended June 30, 1997, with the six months ended June 30, 1996 reflects increases and decreases which have been segregated by the following principal causes: Increase or (Decrease) (Thousands of $) Electric Gas Cause Revenues Revenues Sales to ultimate consumers: Fuel and gas supply adjustments $ (1,668) $ 25,897 Demand side management/revenue decoupling 6,551 3,805 Environmental cost recovery surcharge 265 - Variation in sales volume, etc. (13,197) (19,858) Total (8,049) 9,844 Sales for resale (7,390) - Gas transportation - net - 575 Other 2,752 92 Total $(12,687) $ 10,511 Fuel for electric generation decreased $6.2 million (8%) for the six months ended June 30, 1997, primarily because of decreased generation ($6.6 million), partially offset by a higher cost of coal burned ($.4 million). Gas supply expenses increased $12.1 million (16%) primarily because of an increase in the cost of net gas supply ($25.5 million), partially offset by a decrease in gas delivered to the distribution system ($13.4 million). 13 Power purchased decreased $1.3 million (16%) due mainly to less power being purchased to meet native load and other power commitments and fewer outages at the electric generating plants. Other operation expenses increased $2.7 million (4%) over 1996 because of the recognition of credits to expense in 1996 for a one-time reduction of certain employee fringe benefits in connection with a change in the collective bargaining agreement ($3.6 million) and for settlement proceeds related to a commercial dispute ($1 million). In addition, expenses for the operation of electric power plants increased $2.4 million. Maintenance expenses decreased $3.8 million (13%) primarily due to a decrease in repairs at the electric generating plants ($2.6 million) and expenses related to storm damage ($1.2 million). Other income and deductions increased $1.1 million primarily because of interest income recorded as a result of a favorable tax settlement and higher income from investments. Interest charges decreased $1.2 million (6%) primarily because of a decrease in outstanding debt and favorable refinancing activities. Liquidity and Capital Resources The Company's capital structure and cash flow remained strong throughout the reported periods. This is evidenced primarily by the Company's ability to meet its capital needs through internal generation. The Company's need for capital funds is primarily related to the construction of plant and equipment necessary to meet electric and gas customers' needs and the protection of the environment. Construction expenditures for the six months ended June 30, 1997, of $43 million, were financed with internally generated funds. The Company's cash and temporary cash investments balance increased $28 million during the six months ended June 30, 1997. The increase reflects the Company's cash flow from operations less construction expenditures, dividends paid, and the purchase of securities. Variations in accounts receivable, accounts payable and materials and supplies are not generally significant indicators of the Company's liquidity, as such variations are primarily attributable to seasonal fluctuations in weather, which has a direct effect on sales of electricity and natural gas. At June 30, 1997, the Company had unused lines of credit of $200 million with banks for which it pays commitment fees. The lines are scheduled to expire in the year 2001. The Company expects to renegotiate such lines when they expire. 14 The Company's capitalization ratios at June 30, 1997, and December 31, 1996 were: June 30, Dec. 31, 1997 1996 Long-term debt (including current portion) 46.2% 47.0% Preferred stock 6.8 6.9 Common equity 47.0 46.1 Total 100.0 100.0% For a description of significant contingencies that may affect the Company, reference is made to Part II herein - Item 1, Legal Proceedings. 15 Part II. Other Information Item 1. Legal Proceedings. For a description of the significant legal proceedings involving the Company, reference is made to: the information under the following items and captions of the Company's Annual Report on Form 10-K for the year ended December 31, 1996 Item 1, Business; Item 3, Legal Proceedings; Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition; and Notes 2 and 13 of the Notes to Financial Statements under Item 8. To date, the proceedings reported in the Company's 1996 Form 10-K have not changed materially. Item 4. Submission of Matters to a Vote of Security Holders a. The Company's Annual Meeting of Shareholders was held on May 8, 1997. b. Not applicable. c. The matters voted upon and the results of the voting at the Annual Meeting are set forth below: 1. The shareholders voted to elect the Company's nominees for election to the Board of Directors as follows: William C. Ballard, Jr. - 21,294,223 common and 603,781 preferred shares cast in favor of election and 1,544 preferred shares withheld. Ronald L. Bittner - 21,294,223 common shares and 603,090 preferred shares cast in favor of election and 2,235 preferred shares withheld. S. Gordon Dabney - 21,294,223 common shares and 600,504 preferred shares cast in favor of election and 4,821 preferred shares withheld. T. Ballard Morton, Jr. - 21,294,223 common shares and 600,760 preferred shares cast in favor of election and 4,565 preferred shares withheld. Holders of 325 preferred shares abstained from voting on this matter. 2. The shareholders voted 21,294,223 common shares and 597,924 preferred shares in favor of and 2,297 preferred shares against the approval of Arthur Andersen LLP as independent auditors for 1997. Holders of 6,142 preferred shares abstained from voting on this matter. d. Not applicable. 16 Item 5. Other Matters On May 20, 1997, LG&E Energy Corp., a Kentucky corporation ("LG&E Energy"), and KU Energy Corporation, a Kentucky corporation ("KU"), entered into an Agreement and Plan of Merger (the "Merger Agreement") providing for a merger of LG&E Energy and KU. Pursuant to the Merger Agreement, among other things, KU will be merged with and into LG&E Energy, with LG&E Energy as the surviving corporation (the "Merger"). The Merger, which was unanimously approved by the Boards of Directors of LG&E Energy and KU, is expected to close shortly after all of the conditions to consummation of the Merger, including the receipt of all applicable regulatory approvals, are met or waived. As a result of the Merger, LG&E Energy, which is the parent of LG&E, will become the parent company of KU's principal operating subsidiary, Kentucky Utilities Company ("Kentucky Utilities"). LG&E and Kentucky Utilities will maintain their separate corporate identities and will continue to serve customers in Kentucky and Virginia under their present names. LG&E Energy and KU expect more than $760 million in gross non-fuel savings over a ten-year period following the Merger. Costs to achieve these synergies are estimated to be $77 million. In regulatory filings associated with approval of the Merger, LG&E and Kentucky Utilities will commit not to seek increases in base rates and are proposing reductions in their retail customers' bills in amounts based on 50% of the currently estimated cost savings to be achieved as a result of the Merger, less 50% of the costs to achieve such savings, in each of the next five years following effectiveness of the Merger. The preferred stock and debt securities of LG&E and Kentucky Utilities will not be affected by the Merger. Under the terms of the Merger Agreement, each outstanding share of the common stock, without par value, of KU ("KU Common Stock") (other than shares with respect to which dissenters' rights are perfected under applicable state law), together with the associated KU stock purchase rights, will be converted into the right to receive 1.67 shares of common stock, without par value, of LG&E Energy ("LG&E Energy Common Stock"), together with the associated LG&E Energy stock purchase rights. A holder of KU Common Stock who would otherwise have been entitled to a fractional share of LG&E Energy Common Stock will be entitled to receive a cash payment in lieu of such fractional share. The outstanding shares of LG&E Energy Common Stock will remain unchanged and outstanding. As of May 16, 1997, there were 66,484,875 shares of LG&E Energy common stock outstanding, and 37,817,878 shares of KU common stock outstanding. Based on such capitalization, upon consummation of the Merger 51.3% of the outstanding LG&E Energy common stock will be owned by the shareholders of LG&E Energy prior to the Merger and 48.7% will be owned by former KU shareholders. 17 The Merger is subject to customary closing conditions, including, without limitation, the approval of the holders of a majority of the outstanding shares of common stock of each of LG&E Energy and KU, the receipt of all necessary governmental approvals and the making of all necessary governmental filings, including approvals of various regulators in Kentucky and Virginia under state utility laws, the approval of the Federal Energy Regulatory Commission under the Federal Power Act, the approval of the Securities and Exchange Commission (the "Commission") under the Public Utility Holding Company Act of 1935, and the filing of requisite notifications with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the expiration of all applicable waiting periods thereunder. The Merger is also subject to the receipt of opinions of counsel that the Merger will qualify as a tax-free reorganization and assurances from the parties' independent accountants that the Merger will qualify as a pooling of interests for accounting purposes. In addition, the Merger is conditioned upon the effectiveness of a registration statement to be filed with the Commission with respect to the LG&E Energy common stock to be issued in the Merger and the approval for listing of such shares on the New York Stock Exchange. It is anticipated that LG&E Energy, as parent of LG&E and Kentucky Utilities, will continue to be an exempt holding company under the Public Utility Holding Company Act of 1935. Meetings of the shareholders of LG&E Energy and KU to vote upon approval of the merger will be convened on October 14, 1997. The foregoing description of the Merger does not purport to be complete and is qualified in its entirety by reference to the following documents (including the exhibits thereto) filed with the Securities and Exchange Commission ("SEC"): (i) current reports on Form 8-K, dated May 21, 1997 and May 30, 1997, of LG&E Energy (SEC File No. 1-10568), and (ii) Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 (SEC File No. 1- 10568) (the "LG&E Energy Form 10-Q"). The LG&E Energy Form 10-Q contains certain pro-forma financial information regarding the transaction and is incorporated herein by this reference. 18 Item 6(a). Exhibits. Exhibit No. 2.01 Agreement and Plan of Merger, dated as of May 20, 1997, by and between LG&E Energy and KU (filed as Exhibit 2.01 to the current report on Form 8-K, dated May 30, 1997 of LG&E Energy, SEC File No. 1-10568, and incorporated herein by this reference). 27. Financial Data Schedule 99.01 Cautionary Statement for purposes of the "Safe Harbor" provisions of the Private Securities Litigation Reform Act of 1995. 99.02 Quarterly Report on Form 10-Q for the quarter ended June 30, 1997 of LG&E Energy (SEC File No. 1-10568 and incorporated herein by this reference). Item 6(b) Reports on Form 8-K. None. SIGNATURES Pursuant to the requirements of the Securities and Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. LOUISVILLE GAS AND ELECTRIC COMPANY Registrant Date: August 14, 1997 Victor A. Staffieri __________________________________ Victor A. Staffieri Chief Financial Officer (On behalf of the registrant in his capacity as Principal Accounting Officer) EX-27 2
UT 1,000 6-MOS DEC-31-1997 JUN-30-1997 PER-BOOK 1,683,824 1,181 260,058 62,120 0 2,007,183 424,334 (88) 233,388 657,634 0 95,328 626,800 0 0 0 20,000 0 0 0 607,421 2,007,183 405,675 24,663 317,695 342,358 63,317 1,844 65,161 19,707 45,454 2,288 43,166 19,000 18,891 97,866 0 0
EX-99.01 3 2 1 Exhibit 99.01 Louisville Gas and Electric Company Cautionary Factors The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for forward-looking statements to encourage such disclosures without the threat of litigation providing those statements are identified as forward-looking and are accompanied by meaningful, cautionary statements identifying important factors that could cause the actual results to differ materially from those projected in the statement. Forward-looking statements have been and will be made in written documents and oral presentations of Louisville Gas and Electric Company (the "Company"). Such statements are based on management's beliefs as well as assumptions made by and information currently available to management. When used in the Company's documents or oral presentations, the words "anticipate", "estimate", "expect", "objective" and similar expressions are intended to identify forward-looking statements. In addition to any assumptions and other factors referred to specifically in connection with such forward-looking statements, factors that could cause the Company's actual results to differ materially from those contemplated in any forward-looking statements include, among others, the following: * Increased competition in the utility industry, including effects of: decreasing margins as a result of competitive pressures; industry restructuring initiatives; transmission system operation and/or administration initiatives; recovery of investments made under traditional regulation; nature of competitors entering the industry; retail wheeling; a new pricing structure; and former customers entering the generation market; * Changing market conditions and a variety of other factors associated with physical energy and financial trading activities including, but not limited to, price, basis, credit, liquidity, volatility, capacity, transmission, currency, interest rate and warranty risks; * Risks associated with price risk management strategies intended to mitigate exposure to adverse movement in the prices of electricity and natural gas on both a global and regional basis; * Economic conditions including inflation rates and monetary fluctuations; * Customer business conditions including demand for their products or services and supply of labor and materials used in creating their products and services; * Financial or regulatory accounting principles or policies imposed by the Financial Accounting Standards Board, the Securities and Exchange Commission, the Federal Energy Regulatory Commission, state public utility commissions, state entities which regulate natural gas transmission, gathering and processing and similar entities with regulatory oversight; 2 * Availability or cost of capital such as changes in: interest rates, market perceptions of the utility and energy-related industries, the Company or security ratings; * Factors affecting utility operations such as unusual weather conditions; catastrophic weather-related damage; unscheduled generation outages, unusual maintenance or repairs; unanticipated changes to fossil fuel, or gas supply costs or availability due to higher demand, shortages, transportation problems or other developments; environmental incidents; or electric transmission or gas pipeline system constraints; * Employee workforce factors including changes in key executives, collective bargaining agreements with union employees, or work stoppages; * Rate-setting policies or procedures of regulatory entities, including environmental externalities; * Social attitudes regarding the utility, natural gas and power industries; * Costs and other effects of legal and administrative proceedings, settlements, investigations, claims and matters, including but not limited to those described in Note 13 of the Notes to Financial Statements of the Company's Annual Report on Form 10-K for the year ended December 31, 1996, under the caption Commitments and Contingencies and in Note 2 of the Notes to Financial Statements of the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997; * Technological developments, changing markets and other factors that result in competitive disadvantages and create the potential for impairment of existing assets; * Other business or investment considerations that may be disclosed from time to time in the Company's Securities and Exchange Commission filings or in other publicly disseminated written documents. In addition, numerous matters associated with the proposed combination of LG&E Energy Corp. ("LG&E Energy"), the parent of Louisville Gas and Electric Company, and KU Energy Corporation, including: * Regulatory authorities' decisions regarding business combination issues including the approval of the business combination as proposed, the rate structure of utility operating companies after the merger, transmission system operation and administration, or divestiture of portions of LG&E Energy's business; 3 * Qualification of the transaction as a pooling of interest; * Factors affecting the anticipated cost savings including national and regional economic conditions, national and regional competitive conditions, inflation rates, weather conditions, financial market conditions, and synergies resulting from the business combination; * Allocation of benefits of cost savings between shareholders and customers, which will depend, among other things, upon the results of regulatory proceedings in various jurisdictions; * Different or additional federal and state regulatory requirements or restrictions to which the Company may be subject as a result of the business combination (including conditions which may be imposed in connection with obtaining the regulatory approvals necessary to consummate the business combination); The Company undertakes no obligation to publicly update or revise any forward-looking statements, whether as a result of new information, future events or otherwise. -----END PRIVACY-ENHANCED MESSAGE-----