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, 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 May 5, 1994:
37,817,878 shares (owned by the parent-KU Energy Corporation).
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PART I. FINANCIAL INFORMATION
KENTUCKY UTILITIES COMPANY
STATEMENTS OF INCOME
(Unaudited)
(in thousands of dollars)
For the Three
Months Ended
March 31,
1994 1993
Operating Revenues $166,528 $154,236
Operating Expenses:
Fuel, principally coal, used in generation 43,859 43,658
Electric power purchased 15,883 9,968
Other operating expenses 26,687 25,171
Maintenance 14,538 11,321
Depreciation 16,187 15,223
Federal and state income taxes 14,731 14,037
Other taxes 4,063 3,703
Total Operating Expenses 135,948 123,081
Net Operating Income 30,580 31,155
Other Income and Deductions:
Interest and dividend income 1,736 883
Other income and deductions - net 1,173 1,682
Total Other Income and Deductions 2,909 2,565
Income Before Interest Charges 33,489 33,720
Interest Charges 8,145 9,172
Net Income 25,344 24,548
Preferred Stock Dividend Requirements 692 629
Net Income Applicable to Common Stock $ 24,652 $ 23,919
The accompanying Notes to Financial Statements are an integral
part of these statements.
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KENTUCKY UTILITIES COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
For the Three Months
Ended March 31,
1994 1993
Cash Flows from Operating Activities:
Net Income $ 25,344 $ 24,548
Items not requiring (providing) cash currently:
Depreciation 16,187 15,223
Deferred income taxes and investment tax credit (1,819) 1,748
Change in fuel inventory 4,644 (1,709)
Change in accounts receivable 1,418 (6,814)
Change in accounts payable (10,332) (2,115)
Change in accrued taxes 17,858 12,861
Change in accrued utility revenues 4,788 2,567
Change in liability to ratepayers (519) 38,332
Change in escrow funds 507 (44,240)
Other--net 1,166 6,659
Net Cash Provided by Operating Activities 59,242 47,060
Cash Flows from Investing Activities:
Construction expenditures - utility (40,496) (17,928)
Nonutility property - (4,956)
Other 163 108
Cash Used by Investing Activities (40,333) (22,776)
Cash Flows from Financing Activities:
Short-term borrowings - net 3,500 -
Funds deposited with trustee - net 9,000 -
Retirement of long-term debt (21) (30,021)
Retirement of preferred stock, including premium (20,302) -
Payment of dividends (16,258) (15,757)
Net Cash Used by Financing Activities (24,081) (45,778)
Net Decrease in Cash and Cash Equivalents (5,172) (21,494)
Cash and Cash Equivalents Beginning of Period 8,832 94,299
Cash and Cash Equivalents End of Period $ 3,660 $ 72,805
Supplemental Disclosures
Cash paid for:
Interest on long-term debt $ 4,772 $ 9,612
Federal and state income taxes $ - $ -
The accompanying Notes to Financial Statements are an integral
part of these statements.
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KENTUCKY UTILITIES COMPANY
BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
As of As of
Mar. 31, Dec. 31,
1994 1993
ASSETS
Utility Plant:
Plant in service, at cost $2,012,198 $2,004,688
Less: Accumulated depreciation 896,527 879,960
1,115,671 1,124,728
Construction work in progress 191,530 158,829
1,307,201 1,283,557
Current Assets:
Cash and cash equivalents 3,660 8,832
Escrow funds - coal contract litigation 37,245 37,752
Construction funds held by trustee 9,372 18,268
Accounts receivable 40,039 41,457
Accrued utility revenues 20,787 25,575
Fuel, principally coal, at average cost 26,429 31,073
Materials and supplies, at average cost 18,441 17,261
Other 8,910 7,804
164,883 188,022
Investments, Deferred Charges and Other Assets:
Accumulated deferred income taxes 38,508 35,778
Unamortized loss on reacquired debt 13,084 13,295
Other 38,690 38,400
90,282 87,473
Total Assets $1,562,366 $1,559,052
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity $ 560,897 $ 552,106
Preferred stock 40,000 40,000
Long-term debt 442,021 442,045
1,042,918 1,034,151
Current Liabilities:
Preferred stock and long-term debt
due within one year 21 20,021
Short-term borrowings 3,500 -
Accounts payable 33,674 44,006
Accrued interest 9,796 7,302
Accrued taxes 22,518 4,660
Customers' deposits 8,835 10,803
Accrued payroll and vacations 10,061 7,709
Liab. to ratepayers - coal contract litigation 36,348 36,867
Other 6,236 6,434
130,989 137,802
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 250,359 248,103
Accumulated deferred investment tax credits 41,358 42,385
Regulatory liabilities 68,818 69,689
Other 27,924 26,922
388,459 387,099
Total Capitalization and Liabilities $1,562,366 $1,559,052
The accompanying Notes to Financial Statements are an integral
part of these statements.
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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 (1993 10-K).
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. FINANCIAL INSTRUMENTS
Effective January 1, 1994, Kentucky Utilities adopted
Statement of Financial Accounting Standards No. 115, "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS
115). This statement contains accounting and disclosure
requirements associated with investments in equity securities
that have readily determinable fair values and all investments in
debt securities.
This statement requires, among other things, classification
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KENTUCKY UTILITIES COMPANY
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
of securities into one of three categories: held-to-maturity,
available-for-sale or trading. Currently, Kentucky Utilities has
no trading securities. Kentucky Utilities' temporary cash
investments are classified as available-for-sale or held-to-
maturity and are reported under the caption "Cash and cash
equivalents" on the Balance Sheet. Kentucky Utilities has
minimal investments in marketable securities which are classified
as available-for-sale and are included in the caption "Other" in
the noncurrent portion of the Balance Sheet.
The adoption of SFAS 115 did not have a material impact on
financial condition or results of operations. Reference is made
to the 1993 10-K for market value disclosures on these
securities.
3. 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.
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KENTUCKY UTILITIES COMPANY
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY & RESOURCES
Kentucky Utilities' construction expenditures increased
approximately $23 million during the three-month period ended
March 31, 1994, when compared to the first quarter of 1993. The
increase can be attributed primarily to expenditures for
combustion turbine peaking units and for compliance with the 1990
Clean Air Act Amendments.
Kentucky Utilities expects to fund the majority of its
remaining 1994 construction expenditures from the issuance of
long-term debt with the balance primarily from internal sources.
RESULTS OF OPERATIONS
Quarter ended March 31, 1994, compared
to the Quarter ended March 31, 1993
Increase (Decrease)
From Prior Year
Three Months
Ended Mar. 31, 1994
kWh Revenues
(%) (000's)
Residential 11 $ 5,412
Commercial 6 1,680
Industrial 7 1,291
Mine Power & Public Authorities 4 569
Total Retail Sales 8 8,952
Other Electric Utilities 36 3,450
Provision for Refund -
Litigation Settlement - (537)
Miscellaneous Revenues & Other - 427
Total 11 $ 12,292
Operating revenues increased $12.3 million (8%). The
increase can be attributed to 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 increases in residential and
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KENTUCKY UTILITIES COMPANY
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
commercial sales reflect colder weather during the first quarter
of 1994. Kentucky Utilities set a new record winter peak demand
of 3,092 megawatts on January 19, 1994. The increase in
industrial sales reflects the general strength of the service
area economy as well as an increase in the number of industrial
customers. 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 during the
first quarter of 1994. Revenues were reduced by approximately
$.5 million resulting from refunds to customers of amounts
recovered from a litigation settlement with a former coal
supplier. The $.5 million, which was charged against revenue,
represents $2.9 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 $6.1 million
(11%). Fuel expense for the first quarter of 1994 reflects a
$2.9 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 offset by a
$3.1 million increase resulting from a 4% increase in coal
consumption as well as a 3% increase in the average price per ton
of coal consumed. Purchased power expense increased by
$5.9 million due to greater kilowatt-hour purchases
($3.2 million) and higher demand costs ($2.7 million). The
increase is attributable to a permanent increase in capacity
entitlement, effective January 1994, under an existing purchased
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KENTUCKY UTILITIES COMPANY
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
power contract with Electric Energy, Inc. The increases in tons
of coal consumed and kilowatt-hour purchases are the result of
the previously discussed sales increases.
Maintenance expenses increased $3.2 million (28%), primarily
due to distribution utility line maintenance costs incurred as a
result of extensive ice storm damage during the first quarter of
1994.
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PART II. OTHER INFORMATION
KENTUCKY UTILITIES COMPANY
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.
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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 5, 1994 /s/ John T. Newton
John T. Newton
Chairman and President
Date May 5, 1994 /s/ Michael D. Robinson
Michael D. Robinson
Controller
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EXHIBIT 12
KENTUCKY UTILITIES COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
12 Months Ended
Mar. 31, 1994
(in thousands,
except ratios)
Earnings
Net Income $ 82,081
Adjustments
Fixed charges 31,952
Income taxes
Current Federal 38,298
Current State 9,938
Deferred Federal-Net 1,062
Deferred State-Net (324)
Deferred investment tax credit-Net (102)
Income taxes included in Other Income
and Deductions
Current Federal and State (409)
Deferred Federal and State 1,415
Amortization of investment tax credit (4,024)
Undistributed income of Electric
Energy, Inc. (24)
Total Earnings $159,863
Fixed Charges
Interest on long-term debt $ 30,765
Other interest charges 1,187
Total Fixed Charges $ 31,952
Ratio of Earnings to Fixed Charges 5.00
Note--Rentals are not material and have not been included in
fixed charges.
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