-----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, QzJa22PrUFatTUMart6pPmXSWw8htcF3Ax4MAhMwnJ3dZXxvnpzCrrePSPKwkv1b AlUJNBW3QH8Q0Gtn0LA3cA== 0000055387-94-000054.txt : 19941111 0000055387-94-000054.hdr.sgml : 19941111 ACCESSION NUMBER: 0000055387-94-000054 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941110 SROS: PHLX 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: 94558836 BUSINESS ADDRESS: STREET 1: ONE QUALITY ST CITY: LEXINGTON STATE: KY ZIP: 40507 BUSINESS PHONE: 6062552100 10-Q 1 KENTUCKY UTILITIES CO. 3RD 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 September 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 November 9, 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 September 30, 1994 1993 Operating Revenues (See Note 3) $156,512 $160,615 Operating Expenses: Fuel, principally coal, used in generation (See Note 3) 33,972 44,860 Electric power purchased 15,603 10,689 Other operating expenses 27,939 27,120 Maintenance 15,209 12,755 Depreciation 16,308 15,191 Federal and state income taxes 14,208 15,943 Other taxes 3,536 3,417 Total Operating Expenses 126,775 129,975 Net Operating Income 29,737 30,640 Other Income and Deductions: Interest and dividend income 771 827 Other income and deductions - net 1,719 1,312 Total Other Income and Deductions 2,490 2,139 Income Before Interest Charges 32,227 32,779 Interest Charges 8,585 7,989 Net Income 23,642 24,790 Preferred Stock Dividend Requirements 564 629 Net Income Applicable to Common Stock $ 23,078 $ 24,161 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 Nine Months Ended September 30, 1994 1993 Operating Revenues (See Note 3) $477,066 $454,760 Operating Expenses: Fuel, principally coal, used in generation (See Note 3) 121,203 132,385 Electric power purchased 47,842 26,128 Other operating expenses 82,271 77,688 Maintenance 48,640 39,216 Depreciation 48,646 45,606 Federal and state income taxes 36,872 39,091 Other taxes 11,241 10,642 Total Operating Expenses 396,715 370,756 Net Operating Income 80,351 84,004 Other Income and Deductions: Interest and dividend income 3,273 2,359 Other income and deductions - net 4,767 4,513 Total Other Income and Deductions 8,040 6,872 Income Before Interest Charges 88,391 90,876 Interest Charges 24,932 25,116 Net Income 63,459 65,760 Preferred Stock Dividend Requirements 1,820 1,888 Net Income Applicable to Common Stock $ 61,639 $ 63,872 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 Nine Months Ended September 30, 1994 1993 Cash Flows from Operating Activities: Net Income $ 63,459 $ 65,761 Items not requiring (providing) cash currently: Depreciation 48,646 45,606 Deferred income taxes and investment tax credit (4,768) 1,939 Change in fuel inventory (2,968) 3,853 Change in accounts receivable (1,651) (10,192) Change in accounts payable 623 4,722 Change in accrued taxes 3,648 5,869 Change in accrued utility revenues 4,964 3,037 Change in liability to ratepayers (28,704) 34,889 Change in escrow funds 29,582 (38,001) Other--net 3,665 10,067 Net Cash Provided by Operating Activities 116,496 127,550 Cash Flows from Investing Activities: Construction expenditures - utility (130,035) (104,932) Nonutility property (237) (4,955) Other 337 124 Cash Used by Investing Activities (129,935) (109,763) Cash Flows from Financing Activities: Short-term borrowings - net 59,100 - Issuance of long-term debt - 123,500 Funds deposited with trustee - net 18,393 - Retirement of long-term debt, including premiums (21) (180,677) Retirement of preferred stock, including premium (20,302) - Payment of dividends (48,114) (47,270) Net Cash Provided (Used) by Financing Activities 9,056 (104,447) Net Decrease in Cash and Cash Equivalents (4,383) (86,660) Cash and Cash Equivalents Beginning of Period 8,832 94,299 Cash and Cash Equivalents End of Period $ 4,449 $ 7,639 Supplemental Disclosures Cash paid for: Interest on long-term debt $ 20,063 $ 24,767 Federal and state income taxes $ 38,414 $ 33,148 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 Sept. 30, Dec. 31, 1994 1993 ASSETS Utility Plant: Plant in service, at cost $2,079,701 $2,004,688 Less: Accumulated depreciation 925,102 879,960 1,154,599 1,124,728 Construction work in progress 209,325 158,829 1,363,924 1,283,557 Current Assets: Cash and cash equivalents 4,449 8,832 Escrow funds - coal contract litigation 8,170 37,752 Construction funds held by trustee 2 18,268 Accounts receivable 43,108 41,457 Accrued utility revenues 20,611 25,575 Fuel, principally coal, at average cost 34,041 31,073 Materials and supplies, at average cost 18,649 17,261 Other 7,584 7,804 136,614 188,022 Investments, Deferred Charges and Other Assets: Accumulated deferred income taxes 42,162 35,778 Unamortized loss on reacquired debt 12,578 13,295 Other 36,387 38,400 91,127 87,473 Total Assets $1,591,665 $1,559,052 CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity $ 567,123 $ 552,106 Preferred stock 40,000 40,000 Long-term debt 442,015 442,045 1,049,138 1,034,151 Current Liabilities: Preferred stock and long-term debt due within one year 21 20,021 Short-term borrowings 59,100 - Accounts payable 44,629 44,006 Accrued interest 9,993 7,302 Accrued taxes 8,308 4,660 Customers' deposits 6,284 10,803 Accrued payroll and vacations 10,075 7,709 Liab. to ratepayers - coal contract litigation 8,163 36,867 Other 7,148 6,434 153,721 137,802 Deferred Credits and Other Liabilities: Accumulated deferred income taxes 254,593 248,103 Accumulated deferred investment tax credits 39,302 42,385 Regulatory liabilities 65,946 69,689 Other 28,965 26,922 388,806 387,099 Total Capitalization and Liabilities $1,591,665 $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 Utili-ties 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 NOTES TO FINANCIAL STATEMENTS (Unaudited) 3. OPERATING REVENUES AND FUEL COSTS Pursuant to regulatory orders, Kentucky Utilities has been refunding fuel cost savings related to the resolution of a coal contract dispute. Refunds to Kentucky retail customers commenced in July 1994. Refunds were made to Virginia retail customers during the period August 1993 through June 1994. Refunds were made to wholesale customers under the jurisdiction of the Federal Energy Regulatory Commission in lump sum payments in September 1993. Operating revenues and fuel expense for the respective periods were reduced by the following amounts resulting from the above- mentioned refunds: Three Months Ended Nine Months Ended Sept. 30, Sept. 30, 1994 1993 1994 1993 (in thousands of dollars) Reductions in: Operating Revenues $17,540 $4,312 $18,442 $4,312 Fuel, principally coal, used in generation $18,614 $5,098 $21,980 $5,098 The difference between the reduction in Operating Revenues and the reduction in Fuel Expense is attributed to incurred litigation costs, fuel costs savings related to off-system sales and costs incurred to administer the refund plan. These amounts were allowed to be retained by Kentucky Utilities pursuant to -7- KENTUCKY UTILITIES COMPANY NOTES TO FINANCIAL STATEMENTS (Unaudited) regulatory orders. LIQUIDITY & RESOURCES Kentucky Utilities' construction expenditures increased approximately $26 million for the nine-month period ended September 30, 1994 compared to the same period of 1993. The increase is primarily attributable to expenditures for compliance with the 1990 Clean Air Act Amendments. Kentucky Utilities plans to issue $54 million of tax-exempt debt during the 4th quarter of 1994 to fund certain solid waste disposal facilities' expenditures. RESULTS OF OPERATIONS Quarter ended September 30, 1994, compared to the Quarter ended September 30, 1993 Increase (Decrease) From Prior Year Three Months Ended Sept. 30, 1994 kWh Revenues (%) (000's) Residential (9) $ (3,017) Commercial (1) 489 Industrial 9 3,114 Mine Power & Public Authorities 6 1,718 Total Retail Sales - 2,304 Other Electric Utilities 59 7,403 Miscellaneous Revenues & Other - (582) Total Before Refund 9 9,125 Provision for Refund - Litigation Settlement - (13,228) Total 9 $ (4,103) -8- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating revenues were impacted by refunds to customers of fuel cost savings associated with the resolution of a coal contract dispute. Refer to Note 3 of the Notes to Financial Statements for further discussion. Operating revenues, before the impact of the refunds to customers, increased $9.1 million (6%) primarily as a result of a 9% increase in kilowatt-hour sales. The increase in kilowatt-hour sales is primarily attributable to increases in industrial and off-system sales partially offset by a decrease in residential sales. The increase in industrial sales reflects the continued improvement of the manufacturing segment of the service area. About 40% 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 at neighboring utilities. The decrease in residential sales resulted from the mild weather experienced during the third quarter of 1994. Fuel expense was also impacted by the previously mentioned refunds to customers. Refer to Note 3 of the Notes to Financial Statements for further discussion. Fuel expense, excluding the effect of the refunds to customers, increased $2.6 million (5%). This increase reflects a 4% increase in tons of coal consumed and a 1% increase in the average price per ton of coal consumed. Purchased power expense increased by $4.9 million (46%) due to -9- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS higher demand costs ($3.6 million) and greater kilowatt-hour purchases ($1.3 million). The increase in demand costs is primarily due to the permanent increase in capacity entitlement, effective January 1994, from Electric Energy, Inc. (EEI). The increased kilowatt-hour purchases were primarily from EEI. A contract between Kentucky Utilities and EEI allows Kentucky Utilities to purchase, on an economic basis, 20% of the available capacity from a 1,000-megawatt generating station owned by EEI. Maintenance expenses increased $2.5 million (19%), primarily due to the timing of scheduled maintenance at Kentucky Utilities' generating stations. Nine Months ended September 30, 1994, compared to the Nine Months ended September 30, 1993 Increase (Decrease) From Prior Year Nine Months Ended Sept. 30, 1994 kWh Revenues (%) (000's) Residential 2 $ 4,790 Commercial 3 3,698 Industrial 8 6,591 Mine Power & Public Authorities 5 3,170 Total Retail Sales 4 18,249 Other Electric Utilities 52 17,890 Miscellaneous Revenues & Other - 297 Total Before Refund 11 36,436 Provision for Refund - Litigation Settlement - (14,130) Total 11 $ 22,306 -10- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Operating revenues were impacted by refunds to customers of fuel cost savings associated with the resolution of a coal contract dispute. Refer to Note 3 of the Notes to Financial Statements for further discussion. Operating revenues, before the impact of the refunds to customers, increased $36.4 million (8%) primarily as a result of an 11% 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 increase in industrial sales reflects the continued improvement of the manufacturing segment of the service area. About 40% of the increase in industrial sales is attributable to greater sales to TMM due its to recent plant expansion. The increase in off-system sales is attributable to an increase in demand for power due to maintenance programs at neighboring utilities and to warm weather during the second quarter of 1994. Fuel expense was also impacted by the previously mentioned refunds to customers. Refer to Note 3 of the Notes to Financial Statements for further discussion. Fuel expense, excluding the effect of the refunds to customers, increased $5.7 million (4%). This increase reflects a 3% increase in the average price per ton of coal consumed and a 1% increase in the tons of coal consumed. Purchased power expense increased $21.7 million (83%) due to higher demand costs ($10 million) and to greater kilowatt-hour purchases ($11.7 million). The increase in demand costs is -11- KENTUCKY UTILITIES COMPANY MANAGEMENTS' DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS primarily due to the permanent increase in capacity entitlement, effective January 1994, from EEI. The increased kilowatt-hour purchases were primarily from EEI. Maintenance expenses increased $9.4 million (24%). 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. -12- PART II. OTHER INFORMATION KENTUCKY UTILITIES COMPANY ITEM 1. LEGAL PROCEEDINGS By order of July 19, 1994, the Kentucky Public Service Commission (PSC) approved Kentucky Utilities' plan for environmental surcharge adjustments to customer billings beginning in August 1994. The surcharge, authorized by a Kentucky statute enacted in 1992, is designed to recover certain ongoing operating and capital costs, not already included in existing rates, related to compliance with federal, state or local environmental requirements associated with the production of energy from coal, including the 1990 Clean Air Act Amendments. Surcharge billings are subject to periodic PSC review to confirm the level of environmental expenditures and to reconcile previous surcharge billings with actual costs. Two requests for rehearing were filed by interveners before the PSC. The PSC denied those requests for rehearings. On September 9, 1994, the Attorney General of the Commonwealth of Kentucky (Attorney General) filed an action in the Franklin County (KY) Circuit Court challenging the constitutionality of the Kentucky surcharge statute and seeking to vacate the PSC order of July 19, 1994 on the ground, among others, that the environmental surcharge approved by the PSC will deprive Kentucky Utilities' customers of their property without due process of law. Management believes that, based on its review of the circumstances, the surcharge statute is constitutional and it is -13- probable that the PSC order of July 19, 1994 approving the surcharge will be upheld. In the remote occurrence that the statute is declared unconstitutional, amounts collected pursuant to the PSC order may be subject to refund. By motion filed November 8, 1994, the Attorney General and two interveners are seeking to have surcharge collections deposited with the court pending the outcome of the litigation. Kentucky Utilities believes that the motion is without merit and should be denied. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following exhibits are filed as part of this report: Exhibit Number Description 12 Computation of Ratio of Earnings to Fixed Charges. 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. None. -14- 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 November 9, 1994 /s/ John T. Newton John T. Newton Chairman of the Board and Chief Executive Officer Date November 9, 1994 /s/ Michael D. Robinson Michael D. Robinson Controller -15- EX-12 2 KENTUCKY UTILITIES CO. EXHIBIT 12 EXHIBIT 12 KENTUCKY UTILITIES COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES 12 Months Ended Sept. 30, 1994 (in thousands, except ratio) Earnings Net Income $ 78,983 Adjustments Fixed charges 32,965 Income taxes Current Federal 36,728 Current State 9,660 Deferred Federal-Net 212 Deferred State-Net (548) Deferred investment tax credit-Net (92) Income taxes included in Other Income and Deductions Current Federal and State 1,829 Deferred Federal and State (661) Amortization of investment tax credit (4,024) Undistributed income of Electric Energy, Inc. (80) Total Earnings $154,972 Fixed Charges Interest on long-term debt $ 31,293 Other interest charges 1,672 Total Fixed Charges $ 32,965 Ratio of Earnings to Fixed Charges 4.70 Note--Rentals are not material and have not been included in fixed charges. -16- EX-27 3 ARTICLE UT FDS FOR 3RD QTR 1994 FORM 10-Q
UT This schedule contains summary financial information extracted from the Balance Sheet as of September 30, 1994 and the Income Statement for the period ended September 30, 1994 and is qualified in its entirety by reference to such Form 10-Q Quarterly Report. 1,000 9-MOS DEC-31-1994 SEP-30-1994 PER-BOOK 1,363,924 13,103 136,614 75,926 2,098 1,591,665 308,140 (594) 259,577 567,123 0 40,000 442,015 0 0 59,100 21 0 0 0 483,406 1,591,665 477,066 36,872 359,843 396,715 80,351 8,040 88,391 24,932 63,459 1,820 61,639 46,232 23,959 116,496 0 0 See Note 3 of the Notes to Financial Statements. 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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