<PAGE> 1
Filed pursuant to Rule 424(b)(2)
Registration No. 33-52963
PROSPECTUS SUPPLEMENT
(To Prospectus Dated April 19, 1994)
4,500,000 SHARES
LONG ISLAND LIGHTING COMPANY
COMMON STOCK
($5 PAR VALUE)
---------------------------
The outstanding shares of Common Stock of Long Island Lighting Company (the
"Company") are listed on the New York and Pacific Stock Exchanges and the shares
of Common Stock offered hereby are expected to be listed on such Exchanges
subject to notice of issuance. The last reported sale price of the Common Stock
on the New York Stock Exchange on June 6, 1994 was $20.00 per share.
---------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES
AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR
HAS THE SECURITIES AND EXCHANGE COMMISSION OR ANY STATE
SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY
OF THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS.
ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
Price to Underwriting Proceeds to
Public Discounts Company(2)
and Commissions(1)
- ----------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share.......................... $20.000 $.625 $19.375
- ----------------------------------------------------------------------------------------------------
Total(3)........................... $90,000,000 $2,812,500 $87,187,500
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
</TABLE>
(1) The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, as
amended. See "Underwriting."
(2) Before deducting expenses payable by the Company estimated at $470,000.
(3) The Company has granted the Underwriters a 30-day option to purchase up to
an additional 675,000 shares of Common Stock on the same terms as set forth
above to cover over-allotments, if any. If such option is exercised in full,
the total Price to the Public, Underwriting Discounts and Commissions and
Proceeds to the Company will be $103,500,000, $3,234,375, and $100,265,625,
respectively. See "Underwriting."
---------------------------
The shares of Common Stock offered by this Prospectus Supplement are
offered by the Underwriters subject to prior sale, withdrawal, cancellation or
modification of the offer without notice, to delivery to and acceptance by the
Underwriters and to certain further conditions. It is expected that delivery of
the Common Stock will be made at the offices of Lehman Brothers Inc., New York,
New York, on or about June 13, 1994.
---------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
June 6, 1994
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK
OFFERED HEREBY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK AND PACIFIC STOCK
EXCHANGES, IN THE OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF
COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
-------------------
SERVICE TERRITORY MAP
S-2
<PAGE> 3
PROSPECTUS SUPPLEMENT SUMMARY
This summary is qualified in its entirety by, and should be read in
conjunction with, the information appearing elsewhere in this Prospectus
Supplement and the accompanying Prospectus and in documents, financial
statements and other information incorporated herein and therein by reference.
Except as otherwise indicated herein, all share and per share data in this
Prospectus Supplement assume the Underwriters' over-allotment option is not
exercised.
THE OFFERING
Company.......................... Long Island Lighting Company
Common Stock Offered............. 4,500,000 shares of Common Stock ($5 par
value)
Approximate Number of
Shares Outstanding After the
Offering....................... 117,050,193 shares
Listing.......................... New York and Pacific Stock Exchanges
Symbol: "LIL"
Common Stock Price Range: January
1, 1993 through June 6, 1994..... High: $29 5/8 Low: $18 3/4
Current Indicated Annual Dividend
Rate............................. $1.78 ($0.445 quarterly, declared on May
25, 1994, payable July 1, 1994 to holders
of record as of June 17, 1994)
Use of Proceeds.................. To repay a portion of the Company's
maturing debt obligations
THE COMPANY
Business......................... Electric and gas utility
Customers (as of April 30,
1994)............................ Electric 1,014,260; Gas 447,715
Service Area..................... Approximately 1,230 square miles, including
Nassau and Suffolk Counties and the
Rockaway Peninsula in Queens County, all on
Long Island, New York, with a population of
approximately 2.7 million persons
Sources of 1993 Revenue.......... Electric 82%; Gas 18%
Sources of 1993 Operating Income
(before taxes)................. Electric 89%; Gas 11%
Energy Sources -- Electric....... 41% purchased power; 33% oil; 19% gas and
7% nuclear
Electric Load Mix................ 45% Residential; 45% Commercial; 7%
Industrial and 3% other sales
S-3
<PAGE> 4
FINANCIAL INFORMATION
(IN THOUSANDS OF DOLLARS, EXCEPT FOR PER SHARE AMOUNTS AND OTHER DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS
FOR THE YEAR ENDED DECEMBER 31, ENDED MARCH 31,
-------------------------------------- ------------------------
1993 1992 1991 1994 1993
---------- ---------- ---------- ---------- ----------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
SUMMARY OF OPERATIONS:
Electric Revenues................ $2,352,109 $2,194,632 $2,196,568 $ 587,266 $ 536,342
Gas Revenues..................... 528,886 427,207 351,161 284,877 224,109
---------- ---------- ---------- ---------- ----------
Total Revenues................... 2,880,995 2,621,839 2,547,729 872,143 760,451
Operating Income................. 755,551 741,105 785,280 183,865 192,391
Net Income....................... 296,563 301,974 305,538 69,620 67,861
Earnings for Common Stock........ 240,455 238,020 239,144 56,348 53,286
Earnings per Common Share........ $2.15 $2.14 $2.15 $.50 $.48
Dividends declared per Common
Share......................... $1.76 $1.72 $1.60 $.445 $.435
Average Common Shares Outstanding
(in thousands)................ 112,057 111,439 111,348 112,536 111,779
Book Value per Common Share (at
end of period):............... $19.88 $19.58 $19.13 $19.94 $19.65
Utility Plant, net (at end of
period)....................... $3,347,557 $3,161,148 $3,002,733 $3,327,964 $3,183,530
OTHER DATA (UNAUDITED):
Electric System Sales
(millions of kWh)............. 15,824 15,440 15,814 4,092 3,938
Firm Gas Sales
(thousands of dth)............ 59,183 56,292 48,689 30,324 28,068
</TABLE>
<TABLE>
<CAPTION>
AT MARCH 31, 1994
-----------------------------------------------
(UNAUDITED)
ACTUAL (AS ADJUSTED)(3)
------------------- ------------------------
<S> <C> <C> <C> <C>
BALANCE SHEET DATA:
Net Utility Plant................................. $ 3,327,964 $ 3,327,964
Regulatory Assets................................. 7,586,947 7,586,947
Other Assets...................................... 2,470,188 2,381,906
----------- ----------------
Total Assets................................. $13,385,099 $ 13,296,817
========== ============
Long-term Debt and Unamortized Premium
and Discount(1)................................ $ 5,470,642 65 % $ 5,295,642 63 %
Preferred Stock--Redemption Required(2)........... 653,950 8 653,950 8
Preferred Stock--No Redemption Required........... 64,005 1 64,005 1
Total Common Shareowners' Equity.................. 2,244,559 26 2,331,277 28
----------- ---- ---------------- ----
Total Capitalization......................... $ 8,433,156 100 % $ 8,344,874 100 %
========== ==== ============ ====
</TABLE>
- ---------------
(1) Includes current maturities of long-term debt.
(2) Includes current redemption requirements of Preferred Stock.
(3) Adjusted to reflect (i) the issuance of Common Stock offered hereby
(assuming the receipt of net proceeds of approximately $86.7 million and
that the Underwriters' over-allotment option is not exercised); (ii) the
proposed issuance of $250 million aggregate principal amount of long-term
debt; (iii) the repayment at maturity of $25 million aggregate principal
amount of First Mortgage Bonds, 4 5/8% Series N Due June 1, 1994; and (iv)
the application of the net proceeds from the issuance of the Common Stock
and long-term debt as described herein under "Use of Proceeds".
S-4
<PAGE> 5
THE COMPANY
GENERAL
The Company supplies electric and gas service in Nassau and Suffolk
Counties and to the Rockaway Peninsula in Queens County, all on Long Island, New
York. The principal executive offices of the Company are located at 175 East Old
Country Road, Hicksville, New York 11801 and the general telephone number is
(516) 755-6650.
The Company's service territory covers an area of approximately 1,230
square miles. The population of the service area, according to the Company's
1993 estimate, is approximately 2.7 million persons, including approximately
98,000 persons who reside in Queens County within the City of New York. The 1993
population estimate reflects a .14% increase since the 1990 census. This is a
larger population than in each of 20 of the 50 states. The area served is
predominantly residential, but the Company receives approximately one-half of
its electric revenues from commercial and industrial customers. Although
electronics and aerospace are the largest manufacturing industries in the area,
about 88% of total employment is non-manufacturing. Industrialization is
gradually increasing in Suffolk County which, with three times the land area,
has only one-third the population density of Nassau County.
SIGNIFICANT INFORMATION RESPECTING THE COMPANY
The following is a summary of certain information regarding the Company and
is therefore subject to and should be read in conjunction with the detailed
information concerning the Company appearing in the documents incorporated by
reference in this Prospectus Supplement and the accompanying Prospectus.
RESULTS OF RECENT OPERATIONS
Earnings for common stock for the quarter ended March 31, 1994 were $56.3
million or 50 cents per common share, compared to $53.3 million or 48 cents per
common share for the same period last year. Quarterly earnings are not
necessarily indicative of earnings in other quarters.
The Company experienced an increase in earnings for the electric business,
partially offset by lower earnings for the gas business for the three months
ended March 31, 1994 compared to the same period in 1993. The increase in
electric earnings reflects lower operations and maintenance expenses resulting
from the Company's continuing efforts to control costs. Gas revenues continued
to increase as a result of the Company's aggressive gas expansion program.
However, gas earnings declined primarily due to the recognition of previously
deferred storm costs affecting gas operations and a lower allowed rate of return
on common equity as determined by the Public Service Commission of the State of
New York ("PSC").
Although earnings cannot be predicted with certainty, the Company currently
anticipates that its earnings for the first six months of 1994 will be
significantly less than earnings for the same period in 1993. While the Company
can give no assurances, it is expecting that the items described below,
affecting the comparability of earnings between the six-month period ended June
30, 1994 and June 30, 1993, should be offset during the balance of the year by
certain positive factors. These factors include a continuation of reductions in
operations and maintenance expenses and the impact of improved cash flow from
operations.
Comparative earnings for the six-month period are expected to be affected
by certain factors including: (1) the recognition in 1993 of the benefits
associated with certain tax credits that the Company does not anticipate in
1994; (2) the recognition of previously deferred storm costs, mentioned above;
(3) a provision in the Company's gas rate structure that was not in effect prior
to December 1, 1993 that requires earnings in excess of a 10.6% rate of return
on common equity to be shared equally between the Company's firm gas customers
and its shareowners; (4) a lower allowed rate of return on common equity for the
Company's gas business; and (5) lower gas revenues for the three months ended
June 30, 1994, resulting from a refinement in the Company's procedures used to
estimate revenues not yet billed, which will in turn increase gas revenues in
the second six-month period of 1994.
S-5
<PAGE> 6
RATE MATTERS
Electric Rates
Overview: Nearly five years have passed since the Company and the State of
New York (by its Governor) entered into an agreement, the 1989 Settlement, which
was designed to eliminate the controversy surrounding the Shoreham Nuclear Power
Station ("Shoreham"). Over this period of time, the Company has attempted to
manage costs and improve operating efficiencies. The Company's efforts, coupled
with six electric rate increases, lower than anticipated fuel and financing
costs and significantly lower production expenses, have helped to improve the
Company's financial health. Since the 1989 Settlement became effective, the
Company has refinanced approximately $4.6 billion of its high-cost debt and
preferred stock, resulting in annual cash savings of approximately $88 million.
The Company's focus on managing costs and improving operating efficiencies has
also enabled the Company to file with the PSC a three-year electric rate plan,
described in greater detail below, that requests a freeze of base rates for the
two-year period beginning December 1, 1994.
The Company's proposal to freeze base rates is designed to moderate the
rate increases that were originally contemplated in the 1989 Settlement. The
base rate freeze for the initial two years of the plan, if approved, will help
better position the Company to respond to competitive challenges and to assist
in Long Island's economic recovery.
Electric Rate Case: In December 1993, the Company filed a three-year
electric rate plan with the PSC for the period beginning December 1, 1994 (the
"Rate Proposal"). The Rate Proposal, which may be approved, modified or rejected
by the PSC, requests an allowed rate of return on common equity of 11.0% and
provides for zero percent base rate increases in years one and two of the plan
and an overall rate increase of 4.3% in the third year. Although base electric
rates would be frozen during the first two years of the Rate Proposal, annual
rate increases of approximately 1% to 2% are expected to result in these years
from the operation of a fuel cost adjustment ("FCA") mechanism. The FCA
captures, among other amounts, any increases in the cost of fuel above the level
recovered in base rates, and any amounts to be recovered or refunded to
ratepayers in excess of $15 million which result from the reconciliation of
revenue, certain expenses and earned performance incentive components.
The Rate Proposal reflects four underlying objectives: (i) to limit the
balance of the Rate Moderation Component ("RMC"), discussed in greater detail
under the heading "Ratio of Earnings" in the accompanying Prospectus, during the
three-year period to no more than its 1992 peak balance of $652 million; (ii) to
recover the RMC within no more than 13 years of its 1989 inception; (iii) to
minimize, beginning in the third year of the Rate Proposal, the final three rate
increases contemplated in the 1989 Settlement that follow the two-year rate
freeze period; and (iv) to continue the Company's gradual return to financial
health.
On May 19, 1994, the staff of the PSC ("Staff") and other intervening
parties filed testimony in response to the Rate Proposal. Staff concurs with the
Company's proposal for an 11.0% return on common equity in each of the three
years. However, Staff has recommended an overall zero percent rate increase for
the first two years, contrasted with the Company's proposal for a zero percent
base rate increase and FCA adjustments of 1% to 2% in each of these years as
described above. Staff has not yet made a firm recommendation for the level of
rate relief in the third year, but has reaffirmed its commitment to the
principles of the Rate Moderation Agreement ("RMA"), including the full recovery
of the RMC.
In addition, Staff supports both the Company's proposed continuation of its
current FCA mechanism and the continuation of the Long Island Lighting Company
Ratemaking and Performance Plan ("LRPP") mechanisms and proposes to continue the
performance incentives, with some modifications. Staff is also recommending
demand side management ("DSM") expenditures that exceed those proposed by the
Company. The Company is reviewing the proposals submitted by Staff and the
intervenors, discussed below, in preparation for hearings expected to commence
in mid-June.
The Consumer Protection Board and Long Island Power Authority ("CPB/LIPA")
jointly filed testimony in which they proposed that total electric bills be cut
by 2.6% for the first rate year, 1.2% for the second rate year, and 1.2% for the
third rate year. CPB/LIPA also proposed higher sales forecasts, reductions
S-6
<PAGE> 7
in forecasted expenses, and a reduction in return on common equity from the
Company's proposed 11.0% to 10.6%. Other intervenors proposed various
adjustments to the Rate Proposal, including increasing DSM expenditures and
reducing the authorized return on common equity. The CPB/LIPA response to the
Company's Rate Proposal is unrelated to a CPB/LIPA petition filed in December
1993 also seeking to reduce the Company's electric rates. The Commission has not
acted upon this prior CPB/LIPA petition.
The Commission is expected to issue a final order in the Company's rate
proceeding in November 1994. The Company is unable to predict the ultimate
outcome of this rate proceeding.
The RMA and the LRPP: The RMA, one of the constituent documents of the
1989 Settlement, contemplated that the Company would apply to the PSC for
targeted annual electric rate increases of 4.5% to 5.0% for an eight-year period
beginning December 1, 1991. For additional information about the RMA and
definitions of the terms used herein, see "Ratios of Earnings" in the
accompanying Prospectus.
In response to the Company's electric rate filing in December 1990, which
requested a three-year rate increase with annual increases consistent with the
RMA, the PSC approved, and the Company accepted, the LRPP. The LRPP provides
that the Company receive, for each of the three years beginning December 1,
1991, annual electric rate increases of 4.15%, 4.1% and 4.0%, respectively, with
an allowed return on common equity from electric operations of 11.6%.
The LRPP contains three major components--revenue reconciliation, expense
attrition and reconciliation, and performance incentives. Revenue reconciliation
is provided through a mechanism that reduces the impact of experiencing electric
sales that are above or below the annual net margin level (defined as sales
revenues, net of fuel and gross receipts taxes) that the Company is forecasted
to receive in each of the three rate years under the LRPP. The expense attrition
and reconciliation component permits the Company to make adjustments for certain
expenses recognizing that certain cost increases are unavoidable due to
inflation and changes in the business. The LRPP includes the annual
reconciliation of certain expenses for wage rates, property taxes, interest
charges and DSM costs, the deferral and amortization of certain costs for
enhanced reliability, production operations and maintenance expenses, and the
application of an inflation index to other expenses for the rate years beginning
December 1, 1992 and 1993.
Under the performance incentive component of the LRPP, the Company is
allowed to earn up to 60 additional basis points, or forfeit up to 38 basis
points, of the allowed return on common equity as a result of its performance
within certain incentive and/or penalty programs. These programs consist of a
customer service performance plan, a DSM program, a time-of-use program, a
partial pass through fuel cost incentive plan and, effective December 1, 1993,
an electric transmission and distribution reliability plan. The LRPP also
contains a mechanism whereby earnings in excess of the allowed rate of return on
common equity, excluding the impacts of the various incentive and/or penalty
programs, will be shared equally between ratepayers and shareowners.
In the past, the PSC has taken actions which have been consistent with the
establishment and recovery from ratepayers of the 1989 Settlement-deferred
charges provided by the RMA. In addition, the PSC has granted the Company six of
the 11 electric rate increases contemplated by the RMA (including the three rate
increases provided by the LRPP) and has publicly confirmed its commitment to the
effectuation of the 1989 Settlement. Therefore, the Company has no reason to
believe that the PSC will not honor its commitments, contained in the RMA,
respecting the recovery of the FRA and other 1989 Settlement-deferred charges.
Gas Rates
In December 1993, the PSC approved a three-year gas rate settlement between
the Company and Staff. The gas rate settlement provides that the Company
receive, for each of the rate years beginning December 1, 1993, 1994 and 1995,
annual gas rate increases of 4.7%, 3.8% and 2.8%, respectively. In the
determination of the revenue requirements for the first year of the gas rate
settlement an allowed rate of return on equity of 10.1% was used. The gas rate
decision also provides that earnings in excess of a 10.6% return on equity in
any of the three rate years covered by the settlement be shared equally between
the Company's firm gas customers
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<PAGE> 8
and its shareowners. The allowed rate of return on equity for the rate year that
began December 1, 1992 was 11.0%.
ENERGY SUPPLY
The Company's current electric load forecasts indicate that, with
implementation of its conservation and load management programs and with the
availability of electricity provided by the Company's existing generating
facilities, by its portion of nuclear energy generated at Nine Mile Point
Nuclear Power Station, Unit 2 and by power purchased from other electric systems
and from certain non-Company owned facilities, located within the Company's
service territory, Long Island has adequate generating sources to meet its
energy demands for the next ten years.
COMPETITIVE ENVIRONMENT
The Company believes that competitive forces are a factor in the electric
utility industry. Some of the factors affecting competition, applicable to the
Company, are discussed below.
Current Competitive Factors: The development of the non-utility generator
("NUG") industry has been encouraged by federal and state legislation. There are
two ways that NUGs can negatively impact the Company: first, NUGs may locate on
a customer's site, providing part or all of that customer's electric energy
requirements. The Company estimates that in 1993, it lost sales to on-site NUGs
generating a total of 234 gigawatt-hours ("GWh") representing approximately $20
million in revenues, net of fuel, or approximately 1.0% of the Company's 1993
net revenues. Second, in accordance with the Public Utility Regulatory Policies
Act of 1978 ("PURPA"), the Company is required to purchase all the power offered
by NUGs that are Qualified Facilities ("QF"). QFs have the choice of pricing
these sales at either (i) PSC published estimates of the Company's long run
avoided costs ("LRAC") or (ii) the Company's tariff rates which reflect the
Company's actual avoided cost. Additionally, until repealed in 1992, New York
State law set a minimum price of six cents per kilowatt-hour ("kWh") for certain
categories of QFs, considerably above the Company's avoided cost. The six-cent
minimum now only applies to contracts entered into before June 1992. The Company
believes that the repeal of the six-cent law, coupled with the PSC's updates
which resulted in lower LRAC estimates, has significantly reduced the economic
benefits to QF's seeking to sell power to the Company.
As of December 31, 1993, 39 QFs were on line and selling approximately 200
megawatts ("MW") of power to the Company. The Company estimates that in 1993,
purchases from QFs required by federal and state law cost the Company $47
million more than it would have cost had the Company generated this power
itself. However, with the exception of approximately 40 MW of power to be
produced annually at the Stony Brook Campus of the State University of New York
("Stony Brook") beginning in early 1995, the Company does not expect any
significant new NUGs to be built on Long Island in the foreseeable future.
The Company had been ordered by the PSC to enter into a contract with
Mayflower Energy Partners, L.P. ("Mayflower"), to purchase, on an energy-only
basis, power for 15 years from a 300 MW facility originally scheduled to begin
commercial operation in 1995. However, a New York State appellate court upheld a
lower court's decision to annul the PSC order and also affirmed the lower
court's finding that the PSC had violated PURPA and the New York Public Service
Law and that it acted arbitrarily when it ordered the Company to execute the
agreement. On April 28, 1994, the New York State Court of Appeals denied
Mayflower's motion for leave to appeal the appellate court's decision. In
addition, on May 4, 1994, the Company notified Mayflower that it was exercising
its right to terminate the agreement as a result of Mayflower's failure to meet
certain construction commencement milestone dates.
After the anticipated loss of the Stony Brook load, the Company expects
that load losses to cogeneration will stabilize. The Company believes that a
number of factors will mitigate load loss, including customer load
characteristics, such as a lack of a significant industrial base and
accompanying large thermal load, which would make cogeneration economically
attractive. Also, the Company's geographic location and the limited electrical
interconnections to Long Island limit the accessibility of its transmission grid
to potential competitors.
S-8
<PAGE> 9
For over a decade, the Company has voluntarily provided wheeling of New
York Power Authority ("NYPA") power for economic development. As a result, NYPA
power has displaced approximately 400 GWh of energy sales. The net revenue loss
associated with this amount of sales is approximately $27 million or 1.3% of the
Company's 1993 net revenues. Currently, the potential loss of additional load is
limited by conditions in the Company's transmission agreements with NYPA.
Competition for customer loads also comes from other electric utilities
(including those in Connecticut, New York, and New Jersey) which seek to attract
commercial and industrial customers to relocate within their service territories
by offering reduced rates and other incentives. In order to retain existing and
attract new commercial and industrial customers, the Company offers an Economic
Development Rate which provides rate abatement to new or existing customers that
qualify under the program approved by the PSC.
Potential Competitive Factors: In the pending rate proceeding discussed
above, Staff expressed concern over the competitive position of New York State
utilities and their ability to meet competition. In order to address competitive
opportunities generally available to electric and gas customers, the PSC has
instituted a generic proceeding in which they will consider allowing New York
State utilities to negotiate flexible rates with individual customers in order
to avoid additional loss of sales. The Company generally supports this objective
although the Company opposes Staff's proposal to share the difference in
revenues between the flexible rate and the higher conventional rate between
ratepayers and shareholders. Commission action is expected in June. The PSC is
also considering whether to expand this proceeding in order to address retail
competition in the State of New York. Until the scope of any such proposal
relating to retail wheeling is known, the Company is unable to predict what
impact it may have on the Company.
Recently, the Long Island Power Authority ("LIPA") indicated that it would
hold public hearings to discuss proposals to build a 400-450 MW natural
gas-powered generating plant at Shoreham scheduled for operation as early as
1996, which reportedly would result in ratepayer savings of between $283 million
and $458 million over 20 years. However, based on previous LIPA and Company
studies analyzing the feasibility of building a gas-powered plant at Shoreham,
the Company continues to believe that such a facility would not result in
ratepayer savings. This view is supported by the February 1994 draft State
Energy Plan issued by the New York State Energy Planning Board which states that
bringing a gas-powered facility at Shoreham on line before the turn of the
century would raise the Company's rates. The Company is unable, however, to
predict the likelihood of a generating unit operating at the Shoreham site. The
impact, if any, on the Company of the operation of such a plant would depend on
the nature of the project, the price at which it would propose to sell power and
other factors.
In addition, on May 12, 1994, a petition was filed with the PSC by the
Education/Electric Buying Group asking the PSC to require the Company to
transport power purchased from other electricity producers to member school
districts on Long Island. The Company believes that the proposed request is in
conflict with existing federal and state policy and will oppose this petition.
The Company is currently unable to predict the action, if any, that the PSC may
take regarding this petition, or the impact on the Company if this proposal were
ultimately approved.
FINANCING PLANS
This offering of Common Stock is part of a larger program to strengthen the
Company's capital structure over the next four to five years. The Company is
committed to improving its debt-to-equity ratio through growth in retained
earnings, debt reduction through improved cash flow, and the issuance of common
equity. The nature, timing and amount of the Company's future financings will be
determined in light of various factors, including, among others, market
conditions, the adequacy of rate relief experienced by the Company and the
Company's financial condition. The Company has a total of approximately $1.1
billion of debt securities maturing during the three-year period beginning
January 1, 1994, with a total of $600 million maturing in June and November of
1994. Subject to market conditions, the Company currently intends to fund these
requirements with the proceeds from the sale of equity and debt securities in
addition to the use of cash.
S-9
<PAGE> 10
RATINGS OF THE COMPANY'S SECURITIES
As part of its review of the Company's proposed sale of long-term debt,
Moody's Investors Service, Inc. ("Moody's") has downgraded the long-term credit
ratings of the Company's securities. In addition to Moody's, the Company's
securities are also rated by Standard & Poor's Corporation ("S&P"), Fitch
Investors Service, Inc. ("Fitch") and Duff and Phelps, Inc. ("D&P"). The current
ratings of the Company's securities are as follows:
<TABLE>
<CAPTION>
MOODY'S S&P FITCH D&P
------- ---- ----- -----
<S> <C> <C> <C> <C>
First Mortgage Bonds..................................... Baa3 BBB- BBB BBB
General and Refunding Bonds.............................. Baa3 BBB- BBB BBB
1985 Pollution Control Revenue Bonds* ("PCRBs").......... Aaa NR NR NR
1993 Electric Facilities Revenue Bonds* ("EFRBs")........ Aa2 NR NR NR
Other PCRBs and EFRBs (unsecured)........................ Ba1 BB+ NR NR
Debentures (unsecured)................................... Ba1 BB+ BBB- BB+
Preferred Stock.......................................... "ba1" BB+ BBB- BB
MINIMUM INVESTMENT GRADE................................. Baa3 BBB- BBB- BBB-
</TABLE>
- ---------------
<TABLE>
<S> <C>
* -- Secured by Letters of Credit.
NR -- Not rated.
</TABLE>
USE OF PROCEEDS
The net proceeds to the Company from the offering of the Common Stock will
be approximately $86.7 million (assuming that the Underwriters' over-allotment
option is not exercised). The Company plans to apply the net proceeds from the
sale of the shares of Common Stock toward the repayment, at maturity, of $400
million aggregate principal amount of Debentures, 10.25% Series Due June 15,
1994. The Company expects that the balance of the funds needed to repay these
maturing series of securities will be provided from cash on hand and from
proceeds from the sale of up to $250 million of debt securities. The sale of the
Common Stock offered hereby is not conditioned upon the sale of debt securities.
S-10
<PAGE> 11
COMMON STOCK DIVIDENDS AND PRICE RANGE
Cash dividends on the Company's Common Stock have been paid each year since
1989. On April 1, 1994, a quarterly cash dividend of $.445 per share was paid to
shareholders of record as of March 11, 1994. The Company's Board of Directors
has recently declared a quarterly cash dividend of $.445, payable on July 1,
1994 to holders of record on June 17, 1994.
The Board of Directors' current policy is to pay cash dividends on the
Common Stock on a quarterly basis. Future cash dividends will be dependent upon
the policies of the Company's Board of Directors and the Company's earnings,
financial condition and other factors.
The Company's Common Stock is listed on the New York and Pacific Stock
Exchanges and is traded under the symbol "LIL". The reported price range of the
Common Stock on the composite tape and dividends paid are shown in the following
table for the periods indicated.
<TABLE>
<CAPTION>
SALES PRICE
QUARTERLY CASH ------------
DIVIDENDS HIGH LOW
-------------- ---- ---
<S> <C> <C> <C>
1991:
First Quarter........................................ $0.375 23 1/4 19
Second Quarter....................................... 0.375 23 5/8 21 1/2
Third Quarter........................................ 0.375 24 1/2 22 1/8
Fourth Quarter....................................... 0.425 25 23 1/8
1992:
First Quarter........................................ 0.425 24 5/8 22 1/8
Second Quarter....................................... 0.425 24 1/4 22 3/8
Third Quarter........................................ 0.425 25 5/8 23 3/8
Fourth Quarter....................................... 0.435 25 7/8 23 5/8
1993:
First Quarter........................................ 0.435 28 3/4 24 7/8
Second Quarter....................................... 0.435 28 1/4 24 3/4
Third Quarter........................................ 0.435 29 5/8 27
Fourth Quarter....................................... 0.445 27 3/4 23 1/4
1994:
First Quarter........................................ 0.445 24 1/4 21 1/2
Second Quarter (to date)............................. 0.445 22 7/8 18 3/4
</TABLE>
For a recent closing sale price of the Common Stock, as reported on the New
York Stock Exchange, see the cover page hereof.
On May 18, 1994, the Company had 95,477 registered holders of record of
Common Stock. At March 31, 1994, the book value per share of Common Stock was
$19.94.
The Company has established an Employee Stock Purchase Plan ("ESPP")
whereby eligible employees may purchase shares of Common Stock directly from the
Company on regular intervals below market price without any fee, commission, or
other charge payable by the employee. The PSC has authorized the issuance of
shares of Common Stock pursuant to the ESPP through August 31, 1997.
The Company has also established an Automatic Dividend Reinvestment Plan
("ADRP") pursuant to which holders of Common Stock and Preferred Stock may
automatically reinvest their dividends to purchase newly issued shares of Common
Stock at a price equal to fair market value without payment of brokerage
commissions or service charges. A prospectus describing the ADRP and an
authorization card for enrolling in the ADRP may be obtained from The Bank of
New York, Shareholder Relations Department, Church Street Station, P.O. Box
11258, New York, New York 10286-1258.
S-11
<PAGE> 12
UNDERWRITING
Subject to the terms and conditions set forth in the Underwriting
Agreement, the Company has agreed to sell to the underwriters named below (the
"Underwriters") and the Underwriters have severally agreed to purchase the
number of shares of Common Stock set forth opposite their names below:
<TABLE>
<CAPTION>
SHARES OF
UNDERWRITERS COMMON STOCK
--------------------------------------------------------------- ------------
<S> <C>
Lehman Brothers Inc. .......................................... 383,500
Bear, Stearns & Co. Inc. ...................................... 383,300
Dillon, Read & Co. Inc. ....................................... 383,300
Goldman, Sachs & Co. .......................................... 383,300
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...................................... 383,300
PaineWebber Incorporated....................................... 383,300
CS First Boston Corporation.................................... 105,000
Dean Witter Reynolds Inc....................................... 105,000
A.G. Edwards & Sons, Inc....................................... 105,000
Kemper Securities, Inc......................................... 105,000
Kidder, Peabody & Co. Incorporated............................. 105,000
Morgan Stanley & Co. Incorporated.............................. 105,000
Oppenheimer & Co., Inc......................................... 105,000
Prudential Securities Incorporated............................. 105,000
Salomon Brothers Inc........................................... 105,000
Smith Barney Inc............................................... 105,000
Wertheim Schroder & Co. Incorporated........................... 105,000
Advest, Inc.................................................... 55,000
Chatfield Dean & Co............................................ 55,000
Dain Bosworth Incorporated..................................... 55,000
Fahnestock & Co. Inc........................................... 55,000
First Albany Corporation....................................... 55,000
First of Michigan Corporation.................................. 55,000
Gruntal & Co., Incorporated.................................... 55,000
Janney Montgomery Scott Inc.................................... 55,000
Edward D. Jones & Co........................................... 55,000
Josephthal Lyon & Ross Incorporated............................ 55,000
Legg Mason Wood Walker, Incorporated........................... 55,000
McDonald & Company Securities, Inc............................. 55,000
Piper Jaffray Inc.............................................. 55,000
Principal Financial Securities, Inc............................ 55,000
Rauscher Pierce Refsnes, Inc................................... 55,000
Raymond James & Associates, Inc................................ 55,000
The Robinson-Humphrey Company, Inc............................. 55,000
Sutro & Co. Incorporated....................................... 55,000
Tucker Anthony Incorporated.................................... 55,000
Total Shares.............................................. 4,500,000
===========
</TABLE>
S-12
<PAGE> 13
The Company has been advised that the several Underwriters propose
initially to offer the Common Stock to the public at the public offering price
set forth on the cover page of this Prospectus Supplement, and to certain
dealers at such price less a concession of not in excess of $.40 per share of
the Common Stock. Underwriters may allow, and such dealers may re-allow, a
concession not in excess of $.10 per share of the Common Stock to certain other
dealers. After the initial public offering of the Common Stock, the public
offering price and concessions may be changed.
The Company has granted the Underwriters an option, exercisable within 30
days after the date of the Underwriting Agreement, to purchase up to 675,000
additional shares of Common Stock at the same price per share that the Company
will receive for shares being purchased by the Underwriters. The Underwriters
may purchase such shares only to cover over-allotments made in connection with
the sale of the 4,500,000 shares shown in the foregoing table. If the
Underwriters purchase any of the additional shares of Common Stock which are
subject to the over-allotment option, each Underwriter will be committed,
subject to certain conditions, to purchase approximately the same percentage
thereof which the number of shares to be purchased by such Underwriter as shown
in the foregoing table bears to 4,500,000.
The Underwriting Agreement provides that the Company will indemnify the
several Underwriters against certain civil liabilities, including liabilities
arising under the Securities Act of 1933, as amended.
S-13
<PAGE> 14
- ------------------------------------------------------
- ------------------------------------------------------
No dealer, salesman or other person has been authorized to give any
information or to make any representation not contained in this Prospectus
Supplement or the accompanying Prospectus and, if given or made, such
information or representation must not be relied upon as having been authorized
by the Company or any underwriter. This Prospectus Supplement and the
accompanying Prospectus do not constitute an offer to sell or a solicitation of
any offer to buy any of the securities offered hereby in any jurisdiction to any
person to whom it is unlawful to make such offer in such jurisdiction. Neither
the delivery of this Prospectus Supplement or the accompanying Prospectus nor
any sale made hereunder or thereunder shall, under any circumstances, create any
implication that there has been no change in the affairs of the Company since
the date hereof.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
<S> <C>
Prospectus Supplement Summary......... S-3
Financial Information................. S-4
The Company........................... S-5
Significant Information Respecting
the Company......................... S-5
Use of Proceeds....................... S-10
Common Stock Dividends
and Price Range..................... S-11
Underwriting.......................... S-12
PROSPECTUS
Available Information................. 1
Incorporation of Certain
Documents by Reference.............. 2
The Company........................... 3
Use of Proceeds....................... 3
Ratios of Earnings.................... 4
Description of the Securities......... 6
Experts............................... 19
Legality.............................. 19
Plan of Distribution.................. 19
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
4,500,000 SHARES
LONG ISLAND
LIGHTING COMPANY
COMMON STOCK
($5 PAR VALUE)
------------------------
PROSPECTUS SUPPLEMENT
June 6, 1994
------------------------
LEHMAN BROTHERS
BEAR, STEARNS & CO. INC.
DILLON, READ & CO. INC.
GOLDMAN, SACHS & CO.
MERRILL LYNCH & CO.
PAINEWEBBER INCORPORATED
- ------------------------------------------------------
- ------------------------------------------------------
<PAGE> 15
APPENDIX TO ELECTRONIC FORMAT DOCUMENT
A map outlining the Company's service territory is displayed on page S-2 of
this prospectus supplement. This map appears in the paper format version of the
document and not in this electronic filing.
