<PAGE>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 March 31, 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 April 30, 1997, all of which were held by LG&E
Energy Corp.
<PAGE>2
Part I. Financial Information - Item 1. Financial Statements
Louisville Gas and Electric Company
Statements of Income
(Thousands of $)
The following statements of income include all normal recurring
adjustments and accruals which are, in the opinion of the Company,
necessary to present a fair statement of the results for the periods
shown.
Quarter Ended
March 31,
1997 1996
OPERATING REVENUES:
Electric (Note 2) $128,661 $135,688
Gas 96,738 91,056
Total operating revenues 225,399 226,744
OPERATING EXPENSES:
Fuel for electric generation 31,012 35,914
Power purchased 4,007 3,102
Gas supply expenses 67,825 58,232
Other operation expenses 36,868 39,728
Maintenance 11,722 14,167
Depreciation and amortization 22,952 22,250
Federal and state income
taxes 13,277 14,577
Property and other taxes 4,841 4,824
Total operating expenses 192,504 192,794
NET OPERATING INCOME 32,895 33,950
Other income and
(deductions) (Note 3) 886 122
Interest charges 9,814 10,520
NET INCOME 23,967 23,552
Preferred Stock Dividends 1,127 1,156
NET INCOME AVAILABLE FOR
COMMON STOCK $ 22,840 $ 22,396
<PAGE>3
Louisville Gas and Electric Company
Balance Sheets
(Thousands of $)
ASSETS
Mar. 31, Dec. 31,
1997 1996
UTILITY PLANT:
At original cost $2,699,988 $2,685,209
Less: reserve for depreciation 1,019,075 999,987
Net utility plant 1,680,913 1,685,222
OTHER PROPERTY AND INVESTMENTS -
less reserve 1,635 1,028
CURRENT ASSETS:
Cash and temporary cash investments 62,713 56,792
Marketable securities 12,682 3,595
Accounts receivable - less reserve 110,058 115,144
Materials and supplies - at average cost:
Fuel (predominantly coal) 9,274 14,576
Gas stored underground 13,314 35,510
Other 32,090 32,426
Prepayments 1,833 2,480
Total current assets 241,964 260,523
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense 6,984 6,933
Regulatory assets 26,725 27,729
Other 29,535 25,277
Total deferred debits and other assets 63,244 59,939
Total assets $1,987,756 $2,006,712
<PAGE>4
Louisville Gas and Electric Company
Balance Sheets (cont.)
(Thousands of $)
CAPITAL AND LIABILITIES
Mar. 31, Dec. 31,
1997 1996
CAPITALIZATION:
Common stock, without par value -
Outstanding 21,294,223 shares $ 425,170 $ 425,170
Retained earnings 232,062 209,222
Other (935) (635)
Total common equity 656,297 633,757
Cumulative preferred stock 95,328 95,328
Long-term debt 646,800 646,835
Total capitalization 1,398,425 1,375,920
CURRENT LIABILITIES:
Accounts payable 57,501 97,478
Trimble County Settlement 15,799 17,511
Dividends declared 1,127 20,131
Accrued taxes 25,685 11,982
Accrued interest 8,493 9,994
Other 14,591 13,128
Total current liabilities 123,196 170,224
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 242,670 241,681
Investment tax credit, in
process of amortization 78,954 80,040
Accumulated provision for pensions
and related benefits 42,530 42,554
Regulatory liability 76,444 77,287
Other 25,537 19,006
Total deferred credits and
other liabilities 466,135 460,568
Total capital and liabilities $1,987,756 $2,006,712
<PAGE>5
Louisville Gas and Electric Company
Statements of Cash Flows
(Thousands of $)
Quarter Ended
March 31,
1997 1996
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,967 $ 23,552
Items not requiring cash currently:
Depreciation and amortization 22,952 22,250
Deferred income taxes - net 253 815
Investment tax credit - net (1,086) (1,101)
Other 931 1,030
(Increases) decreases in net current assets:
Accounts receivable 5,086 (1,507)
Materials and supplies 27,834 29,211
Trimble County Settlement (1,712) (7,436)
Accounts payable (39,977) (12,267)
Accrued taxes 13,703 14,690
Accrued interest (1,501) (217)
Prepayments and other 2,110 1,673
Other 2,274 (19,160)
Net cash provided by operating activities 54,834 51,533
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (10,238) (5,430)
Proceeds from sales of securities 740 19,279
Construction expenditures (19,284) (19,145)
Net cash used for
investing activities (28,782) (5,296)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (20,131) (19,672)
Net cash used for financing activities $(20,131) $ (19,672)
<PAGE>6
Louisville Gas and Electric Company
Statements of Cash Flows (cont.)
(Thousands of $)
Quarter Ended
March 31
1997 1996
NET INCREASE IN CASH AND
TEMPORARY CASH INVESTMENTS $ 5,921 $ 26,565
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD 56,792 58,131
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 62,713 $ 84,696
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid (refunded) during the period for:
Income taxes $ (52) $ 2,629
Interest on borrowed money 10,929 10,367
For the purposes of this statement, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
<PAGE>7
Louisville Gas and Electric Company
Statements of Retained Earnings
(Thousands of $)
Quarter Ended
March 31,
1997 1996
Balance at beginning of period $209,222 $181,049
Net income 23,967 23,552
Subtotal 233,189 204,601
Cash dividends declared
on stock -
5% cumulative preferred 269 269
Auction rate cumulative pref. 491 520
$5.875 cumulative preferred 367 367
Common - 18,500
Total dividends declared 1,127 19,656
Balance at end of period $232,062 $184,945
<PAGE>8
Louisville Gas and Electric Company
Notes to Financial Statements
(Unaudited)
1. The financial statements included herein have been prepared
by Louisville Gas and Electric Company (the "Company"), without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 such 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 $1 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. Other income and deductions consisted of the following for
the quarter ended March 31 (in thousands of $):
1997 1996
Interest and dividend income $1,841 $ 859
Gains (losses) on fixed
asset disposal 8 2
Donations (58) (38)
Income taxes and other (905) (701)
$ 886 $ 122
<PAGE>9
4. 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.
5. 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.
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.
<PAGE>10
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition.
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; and the other factors
described in Exhibit 99.01 to the Company's Annual Report on Form
10-K for the year ended December 31, 1996.
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 March 31, 1997, Compared with
Quarter Ended March 31, 1996
Net income increased $.4 million (2%) for the quarter ended
March 31, 1997, over the quarter ended March 31, 1996, primarily
due to a decrease in operation and maintenance expenses of 10%,
partially offset by lower electric and gas sales caused by the
warmer weather.
A comparison of operating revenues for the quarter ended March 31,
1997, with the quarter ended March 31, 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 $ (792) $ 20,672
Demand side management/revenue
decoupling 1,404 1,568
Environmental cost recovery
surcharge 152 -
Variation in sales volume, etc. (3,111) (17,160)
Total (2,347) 5,080
Sales for resale (6,037) -
Gas transportation - net - 448
Other 1,357 154
Total $(7,027) $ 5,682
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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. While the price of coal purchased
remained relatively stable, fuel for electric generation decreased
$4.9 million (14%) for the quarter because of a decrease in
generation. Gas supply expenses increased $9.6 million (16%) due
to an increase in net gas supply cost ($22.6 million), partially
offset by a decrease in the volume of gas delivered to the
distribution system ($13.0 million).
Power purchased increased $.9 million (29%) due to increased
purchases because of the availability of economically priced power
and increased unplanned outages at the electric generating plants.
Other operation expenses decreased $2.9 million (7%) mainly as a
result of improved cost containment efforts, particularly in
administrative areas ($4.7 million), partially offset by increased
costs to operate electric generating plants ($1.8 million).
Maintenance expenses decreased $2.4 million (17%) mainly because of
a decrease in repairs at the electric generating plants and fewer
repairs to the electric transmission and distribution system,
partially offset by the financial effects of the March flood in
the Company's service area.
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 $.7 million because of interest recorded as
a result of a favorable tax settlement.
Interest charges decreased 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.
Liquidity and Capital Resources
The Company's capital structure and cash flow remained strong
throughout the quarter. This is evidenced primarily by the
Company's ability to meet its capital needs through internal
generation.
<PAGE>12
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 quarter ended March 31, 1997, of
$19 million, were financed with internally generated funds.
The Company's cash and temporary cash investments balance increased
$6 million during the three months ended March 31, 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 March 31, 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.
The Company's capitalization ratios at March 31, 1997, and
December 31, 1996 were:
Mar. 31, Dec. 31,
1997 1996
Long-term debt 46.3% 47.0%
Preferred stock 6.8 6.9
Common equity 46.9 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.
<PAGE>13
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 6(a). Exhibits.
Exhibit No.
27. Financial Data Schedule
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: May 14, 1997 /s/ M. L. Fowler
______________________________
M. L. Fowler
Vice President and Controller
(On behalf of the registrant in his
capacity as Principal Accounting
Officer)
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