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, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Commission Registrant, State of Incorporation, IRS Employer
File Number Address, and Telephone Number Identification No.
1-10568 LG&E Energy Corp. 61-1174555
(A Kentucky Corporation)
220 West Main Street
P.O. Box 32030
Louisville, Ky. 40232
(502) 627-2000
2-26720 Louisville Gas and Electric Company 61-0264150
(A Kentucky Corporation)
220 West Main Street
P.O. Box 32010
Louisville, Ky. 40232
(502) 627-2000
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:
LG&E Energy Corp.
129,682,889 shares, without par value, as of May 5, 1998.
Louisville Gas and Electric Company
21,294,223 shares, without par value, as of April 30, 1998,
all held by LG&E Energy Corp.
This combined Form 10-Q is separately filed by LG&E Energy Corp. and
Louisville Gas and Electric Company. Information contained herein related
to LG&E Energy Corp. or any of its direct or indirect subsidiaries other
than Louisville Gas and Electric Company is provided solely by LG&E Energy
Corp. and not Louisville Gas and Electric Company and shall be deemed not
included in the Form 10-Q of Louisville Gas and Electric Company.
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TABLE OF CONTENTS
PART I
Item 1 Financial Statements
LG&E Energy Corp. and Subsidiaries
Statements of Income 1
Balance Sheets 2
Statements of Cash Flows 4
Statements of Retained Earnings 6
Statements of Comprehensive Income 7
Louisville Gas and Electric Company
Statements of Income 8
Balance Sheets 9
Statements of Cash Flows 11
Statements of Retained Earnings 12
Statements of Comprehensive Income 13
Notes to Financial Statements 14
Item 2 Management's Discussion and Analysis of Results of
Operations and Financial Condition 17
PART II
Item 1 Legal Proceedings 21
Item 5 Other Information
Unaudited Supplemental Pro Forma Financial
Information 22
Unaudited Supplemental Pro Forma Combined
Condensed Balance Sheet as of March 31, 1998 23
Unaudited Supplemental Pro Forma Combined
Condensed Statements of Income:
Three Months Ended March 31, 1998 25
Three Months Ended March 31, 1997 26
Notes to Unaudited Supplemental Pro Forma
Combined Condensed Financial Statements 27
Item 6 Exhibits and Reports on Form 8-K 28
Signatures 29
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Part I. Financial Information - Item 1. Financial Statements
LG&E Energy Corp. and Subsidiaries
Statements of Income
(Unaudited - Thousands of $ Except Per Share Data)
Three Months
Ended
March 31,
1998 1997
REVENUES:
Energy marketing and trading $ 940,714 $1,059,078
Electric utility 140,585 128,827
Gas utility 92,759 96,738
Argentine gas distribution and other 34,170 18,600
Total revenues 1,208,228 1,303,243
COST OF REVENUES:
Energy marketing and trading 932,479 1,046,396
Fuel and power purchased 45,640 35,019
Gas supply expenses 64,076 67,825
Argentine gas distribution and other 19,427 11,394
Total cost of revenues 1,061,622 1,160,634
Gross profit 146,606 142,609
OPERATING EXPENSES:
Operation and maintenance:
Energy marketing and trading 10,506 11,970
Utility 55,590 53,431
Argentine gas distribution and other 12,781 7,802
Depreciation and amortization 31,750 27,887
Total operating expenses 110,627 101,090
Equity in earnings
of joint ventures 5,119 3,384
OPERATING INCOME 41,098 44,903
Other income and (deductions) 1,531 3,367
Interest charges and preferred dividends 16,627 14,422
Minority interest 1,343 568
Income before income taxes 24,659 33,280
Income taxes 6,896 12,041
NET INCOME $ 17,763 $ 21,239
Average common shares
outstanding 66,528 66,383
Earnings per share - basic and diluted $ .27 $ .32
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Balance Sheets
(Thousands of $)
ASSETS
(Unaudited)
March 31, Dec. 31,
1998 1997
CURRENT ASSETS:
Cash and temporary cash investments $ 134,984 $ 104,366
Marketable securities 25,048 22,300
Accounts receivable - less reserve 465,114 521,166
Materials and supplies - primarily at average cost:
Fuel (predominantly coal) 21,501 17,651
Gas stored underground 13,365 49,396
Other 31,985 31,866
Price risk management assets 182,262 120,341
Prepayments and other 4,340 10,599
Total current assets 878,599 877,685
UTILITY PLANT:
At original cost 2,789,600 2,779,234
Less: reserve for depreciation 1,087,647 1,072,842
Net utility plant 1,701,953 1,706,392
OTHER PROPERTY AND INVESTMENTS - LESS RESERVES:
Investment in affiliates 153,042 168,276
Non-utility property and plant, net 420,918 421,486
Price risk management assets 57,025 44,240
Other 29,228 24,743
Total other property and investments 660,213 658,745
DEFERRED DEBITS AND OTHER ASSETS 120,837 123,569
Total assets $3,361,602 $3,366,391
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Balance Sheets (cont.)
(Thousands of $)
LIABILITIES AND CAPITAL
(Unaudited)
March 31, Dec. 31,
1998 1997
CURRENT LIABILITIES:
Long-term debt due within one year $ 20,000 $ 20,000
Notes payable 205,515 360,184
Accounts payable 393,748 449,230
Trimble County settlement 11,542 13,248
Price risk management liabilities 177,238 131,107
Other 78,388 84,966
Total current liabilities 886,431 1,058,735
Long-term debt 814,371 664,339
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 319,633 327,343
Investment tax credit, in
process of amortization 74,722 75,800
Regulatory liability 71,287 65,502
Price risk management liabilities 53,848 23,803
Other 111,064 111,459
Total deferred credits and other liabilities 630,554 603,907
Minority interests 99,173 105,985
Cumulative preferred stock 98,353 98,353
COMMON EQUITY:
Common stock, without par value -
66,527,636 shares outstanding 470,136 470,136
Other (1,391) (1,068)
Retained earnings 363,975 366,004
Total common equity 832,720 835,072
Total liabilities and capital $3,361,602 $3,366,391
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months
Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 17,763 $ 21,239
Items not requiring cash currently:
Depreciation and amortization 31,750 27,887
Deferred income taxes - net (1,131) 6,529
Change in net price risk management assets 1,470 (22,313)
Other (2,361) 2,352
Change in net current assets 30,607 17,290
Other (13,730) (2,457)
Net cash flows from operating activities 64,368 50,527
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (3,584) (11,846)
Proceeds from sales of securities 961 2,033
Construction expenditures (22,954) (21,366)
Proceeds from sale of investment
in affiliate 16,000 -
Investments in affiliates - (985)
Acquisition of interests in
Argentine natural gas distribution
companies, net of cash and temporary
cash investments acquired - (126,499)
Net cash flows from investing activities (9,577) (158,663)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of medium-term notes 150,000 -
Repayment of short-term borrowings (995,724) (61,000)
Short-term borrowings 841,343 201,000
Issuance of common stock - 2,594
Payment of common dividends (19,792) (19,073)
Net cash flows from financing activities $ (24,173) $ 123,521
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LG&E Energy Corp. and Subsidiaries
Statements of Cash Flows (cont.)
(Unaudited - Thousands of $)
Three Months
Ended
March 31,
1998 1997
CHANGE IN CASH AND TEMPORARY
CASH INVESTMENTS $ 30,618 $ 15,385
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD 104,366 114,669
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 134,984 $ 130,054
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid (received) during the period for:
Income taxes $ 2,160 $ (62)
Interest on borrowed money 16,073 13,175
For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Statements of Retained Earnings
(Unaudited)
(Thousands of $)
Three Months
Ended
March 31,
1998 1997
Balance at beginning
of period $366,004 $345,994
Net income 17,763 21,239
Cash dividends declared on
common stock ($.2975 and
$.2875 per share) 19,792 19,112
Balance at end of period $363,975 $348,121
The accompanying notes are an integral part of these financial statements.
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LG&E Energy Corp. and Subsidiaries
Statements of Comprehensive Income
(Unaudited - Thousands of $)
Three Months
Ended
March 31,
1998 1997
Net income $17,763 $21,239
Unrealized holding losses on
available-for-sale securities
arising during the period (14) (405)
Reclassification adjustment for realized
gains and losses on available-for-sale
securities included in net income 111 (18)
Other comprehensive income (loss), before tax 97 (423)
Income tax expense related to items
of other comprehensive income 37 (169)
Comprehensive income $17,823 $20,985
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Income
(Unaudited)
(Thousands of $)
Three Months
Ended
March 31,
1998 1997
REVENUES:
Electric $140,585 $128,661
Gas 92,759 96,738
Total operating revenues 233,344 225,399
OPERATING EXPENSES:
Fuel for electric generation 36,041 31,012
Power purchased 9,600 4,007
Gas supply expenses 64,076 67,825
Other operation expenses 40,368 36,868
Maintenance 10,266 11,722
Depreciation and amortization 23,294 22,952
Federal and state
income taxes 12,417 13,277
Property and other taxes 4,956 4,841
Total operating expenses 201,018 192,504
NET OPERATING INCOME 32,326 32,895
Other income and (deductions) 311 886
Interest charges 9,238 9,814
NET INCOME 23,399 23,967
Preferred stock dividends 1,123 1,127
NET INCOME AVAILABLE
FOR COMMON STOCK $ 22,276 $ 22,840
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Balance Sheets
(Thousands of $)
ASSETS
(Unaudited)
March 31, Dec. 31,
1998 1997
UTILITY PLANT:
At original cost $2,789,600 $2,779,234
Less: reserve for depreciation 1,087,647 1,072,842
Net utility plant 1,701,953 1,706,392
OTHER PROPERTY AND INVESTMENTS -
LESS RESERVES 1,267 1,365
CURRENT ASSETS:
Cash and temporary cash investments 89,015 50,472
Marketable securities 22,001 19,311
Accounts receivable - less reserve 102,670 124,872
Materials and supplies - at average cost:
Fuel (predominantly coal) 21,501 17,651
Gas stored underground 15,352 41,487
Other 31,966 31,866
Prepayments 2,060 2,627
Total current assets 284,565 288,286
DEFERRED DEBITS AND OTHER ASSETS:
Unamortized debt expense 6,147 6,074
Regulatory assets 26,545 24,899
Other 25,773 28,625
Total deferred debits and other assets 58,465 59,598
Total assets $2,046,250 $2,055,641
The accompanying notes are an integral part of these financial statements.
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<PAGE>
Louisville Gas and Electric Company
Balance Sheets (cont.)
(Thousands of $)
CAPITAL AND LIABILITIES
(Unaudited)
March 31, Dec. 31,
1998 1997
CAPITALIZATION:
Common stock, without par value -
Outstanding 21,294,223 shares $ 425,170 $ 425,170
Retained earnings 261,386 258,910
Other (731) (754)
Total common equity 685,825 683,326
Cumulative preferred stock 95,328 95,328
Long-term debt 626,800 626,800
Total capitalization 1,407,953 1,405,454
CURRENT LIABILITIES:
Long-term debt due within one year 20,000 20,000
Accounts payable 72,347 98,894
Trimble County settlement 11,542 13,248
Dividends declared 20,923 21,152
Accrued taxes 27,903 18,723
Accrued interest 8,130 8,016
Other 16,152 14,608
Total current liabilities 176,997 194,641
DEFERRED CREDITS AND OTHER LIABILITIES:
Accumulated deferred income
taxes 246,625 249,851
Investment tax credit, in
process of amortization 74,722 75,800
Accumulated provision for pensions
and related benefits 40,608 40,608
Regulatory liability 71,287 65,502
Other 28,058 23,785
Total deferred credits and other liabilities 461,300 455,546
Total capital and liabilities $2,046,250 $2,055,641
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Cash Flows
(Unaudited - Thousands of $)
Three Months
Ended
March 31,
1998 1997
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 23,399 $ 23,967
Items not requiring cash currently:
Depreciation and amortization 23,294 22,952
Deferred income taxes - net 2,547 253
Investment tax credit - net (1,078) (1,086)
Other 1,000 931
Changes in net current assets:
Accounts receivable 22,202 5,086
Materials and supplies 22,185 27,834
Trimble County settlement (1,706) (1,712)
Accounts payable (26,547) (39,977)
Accrued taxes 9,180 13,703
Accrued interest 114 (1,501)
Prepayments and other 2,111 2,110
Other 4,710 2,274
Net cash flows from operating activities 81,411 54,834
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of securities (3,096) (10,238)
Proceeds from sales of securities 444 740
Construction expenditures (19,064) (19,284)
Net cash flows from investing activities (21,716) (28,782)
CASH FLOWS FROM FINANCING ACTIVITIES:
Payment of dividends (21,152) (20,131)
Net cash flows from financing activities (21,152) (20,131)
CHANGE IN CASH AND TEMPORARY
CASH INVESTMENTS 38,543 5,921
CASH AND TEMPORARY CASH INVESTMENTS AT
BEGINNING OF PERIOD 50,472 56,792
CASH AND TEMPORARY CASH INVESTMENTS AT
END OF PERIOD $ 89,015 $ 62,713
SUPPLEMENTAL DISCLOSURES OF CASH FLOW
INFORMATION:
Cash paid (refunded) during the period for:
Income taxes $ 4,276 $ (52)
Interest on borrowed money 8,705 10,929
For the purposes of these statements, all temporary cash investments
purchased with a maturity of three months or less are considered cash
equivalents.
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Retained Earnings
(Unaudited)
(Thousands of $)
Three Months
Ended
March 31,
1998 1997
Balance at beginning
of period $258,910 $209,222
Net income 23,399 23,967
Subtotal 282,309 233,189
Cash dividends declared on stock:
5% cumulative preferred 269 269
Auction rate cumulative
preferred 487 491
$5.875 cumulative preferred 367 367
Common 19,800 -
Subtotal 20,923 1,127
Balance at end of period $261,386 $232,062
The accompanying notes are an integral part of these financial statements.
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Louisville Gas and Electric Company
Statements of Comprehensive Income
(Unaudited - Thousands of $)
Three Months
Ended
March 31,
1998 1997
Net income $22,276 $22,840
Unrealized holding gains on available-
for-sale securities arising during
the period (27) (417)
Reclassification adjustment for realized
gains on available-for-sale securities
included in net income 66 10
Other comprehensive income (loss), before tax 39 (407)
Income tax expense related to items
of other comprehensive income 16 (107)
Comprehensive income $22,299 $22,540
The accompanying notes are an integral part of these financial statements.
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<PAGE>
LG&E Energy Corp. and Subsidiaries
Louisville Gas and Electric Company
Notes to Financial Statements
(Unaudited)
1. This report includes unaudited consolidated financial statements for
LG&E Energy Corp. and its wholly owned subsidiaries - Louisville Gas
and Electric Company (LG&E) and LG&E Capital Corp. (Capital Corp.),
collectively referred to as the "Company." This report also includes
financial statements for LG&E. The unaudited consolidated financial
statements of LG&E Energy as of and for the three months ended March
31, 1998 and 1997 included herein do not include or reflect the
financial results of either KU Energy Corporation or Kentucky Utilities
Company. As described below, subsequent to March 31, 1998, KU Energy
Corporation was merged into LG&E Energy Corp. Unaudited supplemental
pro forma financial information for the periods ended March 31, 1998
and 1997 giving effect to the merger is presented, however, in Part II
- Item 5, Unaudited Supplemental Pro Forma Financial Information.
In the opinion of management, all adjustments, including those of a
normal recurring nature, have been made to present fairly the
consolidated financial position, results of operations and cash flows
for the periods indicated. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to SEC rules and regulations, although
the Company believes that the disclosures are adequate to make the
information presented not misleading.
Certain reclassifications have been made to the Company's income
statement for the three months ended March 31, 1997, to conform to the
presentation for the three months ended March 31, 1998, with no impact
on previously reported net income.
These financial statements should be read with the financial statements
and notes thereto included in the Company's and LG&E's Annual Reports
on Form 10-K for 1997.
2. On April 3, 1998, LG&E entered into a forward-starting interest-rate
swap with a notional amount of $83.3 million. The swap will hedge
anticipated variable-rate borrowing commitments. It will start in
August 2000 and mature in November 2020. LG&E will pay a fixed rate of
5.21% and receive a variable rate based on the Bond Market Association
Municipal Swap Index. Under certain conditions, the counterparty to
the agreement may terminate the swap at no cost after August 2010.
3. On May 4, 1998, the Company and KU Energy Corporation merged, with the
Company as the surviving corporation. The Company will account for the
merger as a pooling of interests. Through March 31, 1998, the
Company's costs associated with the merger amounted to $8.6 million.
In accordance with regulatory filings approved by the Kentucky Public
Service Commission, one half of the Company's costs to achieve the
merger synergies, up to a total of $77.2 million, are permitted to be
deferred as a regulatory asset and amortized ratably over five years to
reduce the amount of merger related savings being refunded to customers
through a surcredit over five years. Amortization will begin in July
1998, when LG&E initiates the surcredit on customers' bills for 50% of
the projected net non-fuel savings to be realized in each of the five
years subsequent to consummation of the merger. The remaining one half
of the recorded costs to achieve the merger will be expensed during the
second quarter of 1998. The costs to achieve the merger, including
separation costs, transaction costs and other merger-related
expenditures, are currently estimated to total approximately $47
million for LG&E and $47 million for Kentucky Utilities. These amounts
are higher than earlier estimates, primarily as a result of higher than
originally estimated separation costs. Amounts in excess of $77.2
million will be expensed consis
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tent with the approved regulatory plan as part of the second quarter
one-time charge. The accompanying financial statements do not reflect
the effects of the merger.
For more information, see Item 1, Business, and Unaudited Supplemental
Pro Forma Combined Condensed Financial Information in this report under
Part II, Item 5, Other Information, Note 2 of the Company's Notes to
Financial Statements in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997, and the Company's Current Report on
Form 8-K dated May 4, 1998.
4. In the first quarter of 1998, the Company and LG&E adopted Statement of
Accounting Standards No. 130, Reporting Comprehensive Income. The
Company and LG&E have presented the information required by the
Statement in their respective Statements of Comprehensive Income.
Accumulated other comprehensive income included in the Company's equity
totaled $277,000 and $217,000 at March 31, 1998, and December 31, 1997,
respectively. Accumulated other comprehensive income included in
LG&E's equity totaled $82,000 and $105,000 at March 31, 1998, and
December 31, 1997, respectively. The Company's and LG&E's accumulated
other comprehensive income at March 31, 1998, and December 31, 1997,
consisted of unrealized holding gains and losses on available-for-sale
securities.
On April 3, 1998, the American Institute of Certified Public
Accountants issued Statement of Position No. 98-5, Reporting on the
Costs of Start-Up Activities. The statement requires companies to
expense the costs of start-up activities as incurred. The statement
also requires certain previously capitalized costs to be charged to
expense at the time of adoption and reported as the cumulative effect
of a change in accounting principle. The Company is currently
analyzing the provisions of the statement and cannot predict the impact
this statement will have on its consolidated operations and financial
position.
5. Effective January 1, 1996, the Company adopted the mark-to-market
method of accounting for its energy marketing and trading activities.
The fair values of the Company's price risk management assets and
liabilities as of March 31, 1998, and the averages for the three months
then ended follow (in thousands of $):
March 31, 1998 Average
Fair Value Fair Value
Liabil- Liabil-
Counterparty Assets ities Assets ities
Electricity $157,121 $145,437 $113,735 $101,224
Natural gas 82,397 84,096 88,158 93,526
Other (231) - 11 -
Totals 239,287 229,533 $201,904 $194,750
Reserves - 1,553
Net values $239,287 $231,086
As of March 31, 1998, the Company estimated that a $1 change in
electricity prices and a 10-cent change in natural gas prices across
all geographic areas and time periods could have changed the value of
the Company's net price risk management assets by approximately $1.2
million. In addition to price risk, the value of the Company's entire
energy portfolio is subject to operational and event risks including,
among others, regulatory changes, increases in load demand, and forced
outages at units providing supply for the Company.
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For more information, see Notes 1 and 5 of the Company's Notes to
Financial Statements in the Company's Annual Report on Form 10-K for
the year ended December 31, 1997.
6. Reference is made to Part II herein - Item 1, Legal Proceedings, and
Note 16 of the Notes to Financial Statements of the Company's Annual
Report on Form 10-K for the year ended December 31, 1997.
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<PAGE>
Item 2. Management's Discussion and Analysis of Results of Operations and
Financial Condition.
On May 4, 1998, the Company and KU Energy Corporation ("KU Energy") merged.
KU Energy is the parent company of Kentucky Utilities Company ("Kentucky
Utilities"). Further information concerning the merger and supplemental
pro forma financial information relating thereto is included in Note 3 and
Part II of this Form 10-Q. Except as otherwise indicated, the following
discussion and analysis is based on the financial condition and operations
of the Company and does not reflect the effects of the combination between
the Company and KU Energy. Reference is made to the Form 10-Q of KU Energy
for the quarter ended March 31, 1998, for a discussion of its results of
operations and other matters (File No. 1-10944).
Without regard to the above-mentioned merger, one of the Company's
principal subsidiaries is LG&E, an electric and gas utility. Accordingly,
LG&E's results of operations and liquidity and capital resources are
primary factors affecting the Company's consolidated results of operations
and capital resources and liquidity.
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. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but
are not limited to: general economic conditions; business and competitive
conditions in the energy industry; unusual weather; regulatory decisions,
including decisions resulting from the combination of the Company and KU
Energy; the factors described in Exhibit 99.01 of this Report on Form 10-Q,
and other factors described from time to time in the Company's reports to
the Securities and Exchange Commission.
Results of Operations
LG&E's and the Argentine gas distribution companies' results of operations
are significantly affected by seasonal fluctuations in temperature and
other weather-related factors. To a lesser degree, the results of the
Company's Energy Marketing and Trading Division are also affected by
seasonal fluctuations in temperature and other weather-related factors.
Because of these and other factors, the results of one interim period are
not necessarily indicative of results or trends to be expected for the full
year.
Three Months Ended March 31, 1998, Compared to
Three Months Ended March 31, 1997
Earnings per share decreased 16% to $.27 in 1998 from $.32 in 1997 mainly
due to a loss on the previously announced sale of the Company's San Miguel
generating facilities in Argentina and lower energy marketing and trading
gross margins. The decrease in energy marketing and trading margins
reflects the impact of increasing summer electricity pricing being
recognized through mark-to-market accounting. Lower energy marketing and
trading operation and maintenance expenses partially offset these
decreases.
LG&E (Utility) Operating Results:
LG&E's net income decreased $.6 million (2%) for the quarter ended March
31, 1998, as compared to the quarter ended March 31, 1997, primarily due to
a decrease in electric and gas retail sales caused by the unseasonably mild
weather and higher operation expenses. Heating degree days were 12% below
1997.
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A comparison of LG&E's revenues for the quarter ended March 31, 1998, with
the quarter ended March 31, 1997, reflects increases and decreases which
have been segregated by the following principal causes:
Increase or
(Decrease)
(Thousands of $)
Electric Gas
Cause Revenues Revenues
Sales to ultimate consumers:
Fuel and gas supply adjustments $ (1,463) $ 3,821
Demand side management/revenue
decoupling (1) 1,383
Environmental cost recovery surcharge (238) -
Variation in sales volume, etc. 482 (13,954)
Total (1,220) (8,750)
Sales for resale 13,390 4,508
Gas transportation - net - 484
Other (246) (221)
Total $ 11,924 $ (3,979)
Electric sales for resale increased due to larger amounts of power
available for off-system sales.
Gas wholesale sales increased to $4.5 million in 1998 from zero in 1997 due
to the implementation of LG&E's performance-based ratemaking mechanism.
Fuel for electric generation and gas supply expenses comprise a large
segment of LG&E's total operating expenses. LG&E'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 retail rates, subject to the approval of the Public Service
Commission of Kentucky. Fuel for electric generation increased $5 million
(16%) for the quarter because of an increase in generation ($3.9 million)
and a higher cost of coal burned ($1.1 million). Gas supply expenses
decreased $3.7 million (6%) due to a decrease in the volume of gas
delivered to the distribution system ($10.1 million) partially offset by an
increase in net gas supply cost ($6.4 million).
Power purchased increased $5.6 million because of the availability of
economically priced power and an increase in unplanned outages at the
electric generating plants.
Other operation expenses increased $3.5 million (9%) over 1997 because of
increased administrative costs ($2.5 million) and increased costs to
operate the electric generating plants ($1 million).
Maintenance expenses decreased $1.5 million (12%) mainly because of a
decrease in repairs at the electric generating plants ($1.1 million) and
fewer storm damage expenses ($.5 million).
Variations in income tax expense are largely attributable to changes in pre-
tax income.
- 18 -
<PAGE>
Capital Corp. (Non-Utility) Operating Results:
Capital Corp., a wholly-owned subsidiary of the Company, serves as the
holding company for the Company's non-utility operations. Capital Corp.,
through its subsidiaries, is engaged in energy marketing and trading, the
gas distribution business in Argentina, and various independent power
projects, which businesses are included in the accompanying income
statement under the headings "Energy Marketing and Trading," "Argentina Gas
Distribution and Other" and "Equity in Earnings of Joint Ventures."
Energy marketing and trading revenues and cost of revenues decreased $118.4
million (11%) and $113.9 million (11%), respectively, due to lower prices
in the energy markets, partially offset by increased volumes. The decrease
in gross margins reflects the impact of increasing summer electricity
pricing recognized through mark-to-market accounting.
Energy marketing and trading operation and maintenance expense decreased
$1.5 million (12%). The decrease primarily reflects savings resulting from
relocating gas trading operations from Dallas to Louisville during the
second quarter of 1997.
Argentine gas distribution and other revenues and cost of revenues
increased $15.6 million (84%) and $8.0 million (71%) due to acquiring
Distribuidora de Gas del Centro (Centro) in February 1997. Argentine gas
distribution and other operating expenses increased $5.0 million (64%) due
to the Centro acquisition and to higher corporate expenses.
Consolidated depreciation and amortization expense increased $3.9 million
(14%) due to acquiring Centro and to writing off certain costs related to
the San Miguel facility. The Company sold its interest in the San Miguel
project in February 1998. See Note 7 of Notes to Financial Statements
under Item 8 in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
Equity in earnings of joint ventures increased $1.7 million (51%) due
mainly to a reduction in forced-outage days at the Roanoke Valley I
project.
Non-utility interest charges increased $2.8 million (80%) due to an
increase in average debt outstanding.
The consolidated effective income tax rate decreased to 28.0% in 1998 from
36.2% in 1997 primarily due to the favorable resolution of income tax
audits in 1998.
Liquidity and Capital Resources
The Company's need for capital funds is primarily related to the
construction of plant and equipment necessary to meet LG&E's electric and
gas customers' needs and protection of the environment. Capital funds are
also needed for partnership equity contributions in connection with
independent power production projects, efforts to expand and improve gas
gathering and processing facilities, information system enhancements, and
other business development opportunities. Construction expenditures for
the three months ended March 31, 1998, of $23.0 million were financed with
internally generated funds.
The Company's combined cash and marketable securities balance increased
$33.4 million during the three months ended March 31, 1998. The increase
reflects cash flows from operations and proceeds received from the sale of
the Company's interest in the San Miguel project, partially offset by
construction expenditures and dividends paid.
Variations in accounts receivable, accounts payable and materials and
supplies are generally not significant indicators of the Company's
liquidity. Such variations are primarily attributable to fluctuations in
weather, which have a direct effect on sales of electricity and natural
gas. The significant decreases in accounts receivable and accounts pay
- 19 -
<PAGE>
able resulted from seasonal fluctuations in the energy marketing and
trading division's and LG&E's businesses. Gas stored underground decreased
due to seasonal fluctuations in LG&E's business.
The decrease in notes payable and the offsetting increase in long-term debt
reflect issuing $150 million of medium-term notes in February 1998 and
using the proceeds to repay a portion of the outstanding commercial paper
balance. The Company also uses commercial paper which had maturity dates
ranging between one and 270 days. Because of the rollover of these
maturity dates, total short-term borrowings during the first quarter of
1998 were $1.0 billion and total repayments of short-term borrowings during
the quarter were $.8 billion. See Note 14 of Notes to Financial Statements
under Item 8 in the Company's Annual Report on Form 10-K for the year ended
December 31, 1997.
At March 31, 1998, unused capacity under the Company's lines of credit
totaled $659.6 million after considering commercial paper support and
approximately $34.9 million in letters of credit securing on- and off-
balance sheet commitments. At December 31, 1997, unused capacity under the
lines of credit totaled $481.7 million. The increase in unused capacity
resulted from repaying a portion of the outstanding commercial paper
balance.
As explained in more detail under Item 1 of Part II of this report, the
Company continues to progress in its proposed lease of the generating
assets of Big Rivers Electric Corporation. Upon closing the transaction
and receiving the necessary regulatory approvals, the Company will need
funds to meet various working capital requirements. The Company expects to
issue debt to finance these requirements.
The Company's capitalization ratios at March 31, 1998, and December 31,
1997, follow:
March 31, Dec. 31,
1998 1997
Long-term debt (including current portion) 42.4% 34.7%
Notes payable 10.4 18.2
Preferred stock 5.0 4.8
Common equity 42.2 42.3
Total 100.0% 100.0%
LG&E's capitalization ratios at March 31, 1998, and December 31, 1997,
follow:
March 31, Dec. 31,
1998 1997
Long-term debt (including current portion) 45.3% 45.4%
Preferred stock 6.7 6.7
Common equity 48.0 47.9
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.
- 20 -
<PAGE>
Part II. Other Information
Item 1. Legal Proceedings.
For a description of the significant legal proceedings involving the
Company and LG&E, reference is made to the information under the following
items and captions of the Company's and LG&E's combined Annual Report on
Form 10-K for the year ended December 31, 1997: Item 1, Business; Item 3,
Legal Proceedings; Item 7, Management's Discussion and Analysis of Results
of Operations and Financial Condition; Notes 4 and 16 of the Company's
Notes to Financial Statements under Item 8; and Notes 3 and 12 of LG&E's
Notes to Financial Statements under Item 8. Except as described herein, to
date, the proceedings reported in the Company's and LG&E's combined 1997
Annual Report on Form 10-K have not changed materially.
Environmental.
Note 16 of the Company's, and Note 12 of LG&E's, Financial Statements for
the year ended December 31, 1997, respectively, in the Company's and LG&E's
Annual Report on Form 10-K for such year, discuss certain pending
settlements for an aggregate of $150,000 relating to LG&E's status as a
potentially responsible party under the Comprehensive Environmental
Response Compensation and Liability Act for certain disposal facilities.
These certain settlements are now final and have been entered by the court.
Big Rivers Transaction.
On April 30, 1998, the Kentucky Public Service Commission (the "Kentucky
Commission") issued an order approving, in principle, the proposed 25-year
lease by certain subsidiaries of the Company of the generating assets of
Big Rivers Electric Corporation ("Big Rivers") as generally set forth in a
New Participation Agreement dated April 6, 1998 among the parties. The New
Participation Agreement supersedes an earlier Participation Agreement dated
June 9, 1997 and is effective in lieu of an Amended and Restated
Participation Agreement dated March 18, 1998. The Kentucky Commission's
order contained or required certain modifications or further filings in
connection with the transaction and the Company, Big Rivers, its member
cooperatives and certain of Big Rivers' industrial customers are in
discussions to attempt to resolve the issues raised by the Kentucky
Commission's order. In connection with an earlier November 1997 order of
the Kentucky Commission, the New Participation Agreement also contains an
agreement by affiliates of the Company to assume, effective with the
overall proposed transaction, responsibility for certain unforeseen future
environmental, legislative and regulatory costs associated with the Big
Rivers generating facilities and the loads of certain industrial customers.
Consummation of the lease transaction, including consideration of
modifications contained in the recent Kentucky Commission order, is subject
to further regulatory and other approvals, including the U.S. Bankruptcy
Court and the Federal Energy Regulatory Commission ("FERC"). See Item 1,
Business, of Part I of the Company's Annual Report on Form 10-K for the
year ended December 31, 1997.
Southampton
Note 16 of the Company's Financial Statements for the year ended December
31, 1997 discusses the status of certain proceedings before the FERC
regarding the status of the Southampton cogeneration facility
("Southamption") as a qualifying facility ("QF") under the Public Utility
Regulatory Policies Act for the year 1992, including a request for
clarification as to any FERC-ordered rate refunds payable from Southampton
to Virginia Electric and Power Company ("VEPCO") for the 1992 period. On
May 13, 1998, the FERC approved an order, which has not been issued in
final form, addressing certain issues in this matter. The order reaffirmed
certain exemptions granted Southampton as a QF for the 1992 period.
Regarding the rate refund amount, the FERC order requires VEPCO to compen
- 21 -
<PAGE>
sate Southampton for every hour in 1992 that the unit was available for
dispatch, whether or not actually dispatched, at VEPCO's hourly economy
energy cost, thus reducing Southampton's exposure to refund. FERC also
denied Southampton's request for approval of a $500,000 refund and directed
the parties to enter into further FERC-supervised settlement negotiations
regarding calculation of the refund amount in accordance with the
clarifications in the FERC order. Pending the commencement and outcome of
such negotiations, as well as any further potential actions, currently
unknown, to be taken by Southamption or VEPCO, including possible appeal of
any final FERC order, the Company cannot predict the ultimate amount of the
refund. The Company's share of the revenues received by Southampton in
1992 is approximately $9.5 million and any refund is subject to interest
charges.
Item 5. Other Information.
Unaudited Supplemental Pro Forma Financial Information.
On May 4, 1998, the Company and KU Energy Corporation, a Kentucky
corporation ("KU"), merged. Pursuant to the Merger Agreement, among other
things, KU was merged with and into LG&E Energy, with LG&E Energy as the
surviving corporation (the "Merger"). See Note 3 of Notes to Financial
Statements under Part I, Item 1, for more information.
The following unaudited supplemental pro forma financial information
combines the balance sheets and statements of income of LG&E Energy and KU
Energy, including their respective subsidiaries, after giving effect to the
Merger. The unaudited supplemental pro forma combined condensed balance
sheet at March 31, 1998, gives effect to the Merger as if it had occurred
on that date. The unaudited supplemental pro forma combined condensed
statements of income for all periods give effect to the Merger as if it had
occurred at the beginning of the periods presented. These statements are
prepared on the basis of accounting for the Merger as a pooling of
interests and are based on the assumptions set forth in the notes thereto.
In addition, the supplemental pro forma financial information does not give
effect to the expected synergies of the transaction.
The following supplemental pro forma financial information has been
prepared from, and should be read in conjunction with, the financial
statements and related notes thereto reported by the Company and KU Energy,
incorporated herein by reference. The following information is not
necessarily indicative of the financial position or operating results that
would have occurred had the Merger been consummated on the date as of
which, or at the beginning of the periods for which, the Merger is being
given effect nor is it necessarily indicative of future operating results
or financial position. In addition, due to the effect of seasonal
fluctuations in temperature and other weather-related factors on the
operations of the Company and KU Energy, financial results for the three
months ended March 31, 1998, and March 31, 1997, are not necessarily
indicative of trends for any twelve-month period.
- 22 -
<PAGE>
LG&E Energy Corp.
Unaudited Supplemental Pro Forma Combined Condensed Balance Sheet
As of March 31, 1998
(Thousands of $)
ASSETS
As Reported Pro
Pro For-
LG&E KU Forma ma Com-
Energy Energy Adj. bined
CURRENT ASSETS:
Cash and temporary cash
investments $ 134,984 $ 32,386 $ - $ 167,370
Marketable securities 25,048 - - 25,048
Accounts receivable -
less reserve 465,114 70,163 (320) 534,957
Materials and supplies - pri-
marily at average cost:
Fuel (predominantly coal) 21,501 22,892 - 44,393
Gas stored underground 13,365 - - 13,365
Other 31,985 24,147 - 56,132
Price risk management
assets 182,262 - - 182,262
Prepayments and other 4,340 6,360 - 10,700
Total current assets 878,599 155,948 (320) 1,034,227
UTILITY PLANT:
At original cost 2,789,600 2,625,228 - 5,414,828
Less: reserve for
depreciation 1,087,647 1,149,284 - 2,236,931
Net utility plant 1,701,953 1,475,944 - 3,177,897
OTHER PROPERTY AND INVESTMENTS -
LESS RESERVES:
Investment in affiliates 153,042 2,081 - 155,123
Non-utility property and
plant, net 420,918 2,642 - 423,560
Price risk management
assets 57,025 - - 57,025
Other 29,228 43,349 - 72,577
Total other property and
investments 660,213 48,072 - 708,285
DEFERRED DEBITS AND OTHER
ASSETS 120,837 56,253 (2,798) 174,292
Total assets $3,361,602 $1,736,217 $ (3,118)$5,094,701
See accompanying notes to Unaudited Supplemental Pro Forma Combined
Financial Statements.
- 23 -
<PAGE>
LG&E Energy Corp.
Unaudited Supplemental Pro Forma Combined Condensed Balance Sheet (cont.)
As of March 31, 1998
(Thousands of $)
LIABILITIES AND CAPITAL
As Reported Pro
Pro For-
LG&E KU Forma ma Com-
Energy Energy Adj. bined
CURRENT LIABILITIES:
Long-term debt due within
one year $ 20,000 $ 21 $ - $ 20,021
Notes payable 205,515 - - 205,515
Accounts payable 393,748 28,052 7,573 429,373
Trimble County settlement 11,542 - - 11,542
Price risk management
liabilities 177,238 - - 177,238
Other 78,388 63,468 (4,314) 137,542
Total current liabilities 886,431 91,541 3,259 981,231
Long-term debt 814,371 546,330 - 1,360,701
DEFERRED CREDITS AND OTHER
LIABILITIES:
Accumulated deferred income
taxes 319,633 255,037 - 574,670
Investment tax credit, in
process of amortization 74,722 25,163 - 99,885
Regulatory liability 71,287 50,263 - 121,550
Price risk management
liabilities 53,848 - - 53,848
Other 111,064 55,374 - 166,438
Total deferred credits and
other liabilities 630,554 385,837 - 1,016,391
Minority interests 99,173 - - 99,173
Cumulative preferred stock 98,353 40,000 - 138,353
Common equity 832,720 672,509 (6,377) 1,498,852
Total capital and liabilities $3,361,602 $1,736,217 $ (3,118)$5,094,701
See accompanying notes to Unaudited Pro Supplemental Forma Combined
Financial Statements.
- 24 -
<PAGE>
LG&E Energy Corp.
Unaudited Supplemental Pro Forma Combined Condensed Statements of Income
Three Months Ended March 31, 1998
(Thousands of $ Except Per Share Data)
As Reported Pro
Pro For-
LG&E KU Forma ma Com-
Energy Energy Adj. Bined
REVENUES:
Energy marketing and trading $ 940,714 $ - $ - $ 940,714
Electric utility 140,585 183,210 (24) 323,771
Gas utility 92,759 - - 92,759
Argentine gas distribution
and other 34,170 1,912 - 36,082
Total revenues 1,208,228 185,122 (24) 1,393,326
COST OF REVENUES:
Energy marketing and trading 932,479 - - 932,479
Fuel and power purchased 45,640 66,336 (24) 111,952
Gas supply expenses 64,076 - - 64,076
Argentine gas distribution
and other 19,427 - - 19,427
Total cost of revenues 1,061,622 66,336 (24) 1,127,934
Gross profit 146,606 118,786 - 265,392
OPERATING EXPENSES:
Operation and maintenance:
Energy marketing and trading 10,506 - - 10,506
Utility 55,590 47,393 - 102,983
Argentine gas distribution
and other 12,781 540 - 13,321
Depreciation and amortization 31,750 21,533 - 53,283
Total operating expenses 110,627 69,466 - 180,093
Equity in earnings
of joint ventures 5,119 - - 5,119
OPERATING INCOME 41,098 49,320 - 90,418
Other income and (deductions) 1,531 953 - 2,484
Interest charges and pre-
ferred dividends 16,627 10,270 - 26,897
Minority interest 1,343 - - 1,343
Income before income taxes 24,659 40,003 - 64,662
Income taxes 6,896 14,598 - 21,494
NET INCOME $ 17,763 $ 25,405 $ - $ 43,168
Average shares outstanding 66,528 37,818 25,338 129,684
Earnings per share $ .27 $ .67 $ - $ .33
See accompanying notes to Unaudited Supplemental Pro Forma Combined
Financial Statements.
- 25 -
<PAGE>
LG&E Energy Corp.
Unaudited Supplemental Pro Forma Combined Condensed Statements of Income
Three Months Ended March 31, 1997
(Thousands of $ Except Per Share Data)
As Reported Pro
Pro For-
LG&E KU Forma ma Com-
Energy Energy Adj. Bined
REVENUES:
Energy marketing and trading $1,059,078 $ - $ (4)$1,059,074
Electric utility 128,827 178,908 (204) 307,531
Gas utility 96,738 - - 96,738
Argentine gas distribution
and other 18,600 1,177 - 19,777
Total revenues 1,303,243 180,085 (208) 1,483,120
COST OF REVENUES:
Energy marketing and trading 1,046,396 - (14) 1,046,382
Fuel and power purchased 35,019 62,316 (194) 97,141
Gas supply expenses 67,825 - - 67,825
Argentine gas distribution
and other 11,394 - - 11,394
Total cost of revenues 1,160,634 62,316 (208) 1,222,742
Gross profit 142,609 117,769 - 260,378
OPERATING EXPENSES:
Operation and maintenance:
Energy marketing and trading 11,970 - - 11,970
Utility 53,431 46,812 - 100,243
Argentine gas distribution
and other 7,802 619 - 8,421
Depreciation and amortization 27,887 20,882 - 48,769
Total operating expenses 101,090 68,313 - 169,403
Equity in earnings
of joint ventures 3,384 - - 3,384
OPERATING INCOME 44,903 49,456 - 94,359
Other income and (deductions) 3,367 527 - 3,894
Interest charges and pre-
ferred dividends 14,422 10,440 - 24,862
Minority interest 568 - - 568
Income before income taxes 33,280 39,543 - 72,823
Income taxes 12,041 14,680 - 26,721
NET INCOME $ 21,239 $ 24,863 $ - $ 46,102
Average shares outstanding 66,383 37,818 25,338 129,539
Earnings per share $ .32 $ .66 $ - $ .36
See accompanying notes to Unaudited Supplemental Pro Forma Combined
Financial Statements.
- 26 -
<PAGE>
LG&E Energy Corp.
Notes to Unaudited Supplemental Pro Forma Combined Condensed Financial
Statements.
1. Reclassifications have been made to certain "as-reported" account
balances reflected in KU Energy's financial statements to conform to
this reporting presentation. All other financial statement
presentation and accounting policy differences are immaterial and have
not been adjusted in the supplemental pro forma combined condensed
financial statements.
2. Intercompany transactions (power purchased and power sales
transactions) between LG&E Energy and KU Energy during the periods
presented were eliminated through pro forma adjustments.
3. Merger-related transaction costs are currently estimated to be
approximately $21.4 million (including fees for financial advisors,
attorneys, accountants, consultants, filings and printing). LG&E
Energy and KU Energy have incurred transaction costs of $13.5 million
through March 31, 1998, which are included in deferred debits and other
assets in the supplemental pro forma combined condensed balance sheet.
None of the estimated cost savings resulting from the Merger or costs
to achieve such savings have been reflected in the supplemental pro
forma combined condensed statements of income. A charge of $6.4
million ($10.7 million, net of income taxes of $4.3 million) as a pro
forma adjustment to retained earnings and a credit of $2.8 million
($10.7 million less $13.5 million actual charges incurred through March
31, 1998) as a pro forma adjustment to deferred debits and other assets
have been made in the supplemental pro forma combined condensed balance
sheet to recognize such estimated transaction costs and the proposed
treatment following the consummation of the Merger.
4. The supplemental pro forma combined condensed financial statements
reflect the conversion of each share of KU Energy Common Stock (no par
value) outstanding into 1.67 shares of LG&E Energy Common Stock (no par
value) as provided in the Merger Agreement. The supplemental pro forma
combined condensed financial statements are presented as if the
companies were combined during all periods included therein.
- 27 -
<PAGE>
Item 6(a). Exhibits.
Exhibit
Number Description
27 Financial Data Schedules for LG&E Energy Corp. and
Louisville Gas and Electric Company.
99.01 Cautionary Statement for Purposes of the "Safe Harbor"
provisions of the Private Securities Litigation Reform
Act of 1995.
99.02 Description of Common Stock.
99.03 Unaudited Financial Statements of KU Energy Corporation
and Kentucky Utilities Company for the three months
ended March 31, 1998. [Filed as part of KU Energy
Corporation's, File No. 1-10944, and Kentucky Utilities
Company's, File No. 1-3464, Quarterly Report on Form 10-
Q for the three months ended March 31, 1998, and
incorporated herein by reference.]
Item 6(b). Reports on Form 8-K.
On January 8, 1998, LG&E Energy Corp. filed a report on Form 8-K stating
that:
(1)On December 19, 1997, LG&E Power Argentina I Inc. ("LG&E Argentina"), a
wholly owned indirect subsidiary of the Company, entered into a Put and
Call Agreement with Pluspetrol Resources Corporation ("Pluspetrol") and
ASTRA Compania Argentina de Petroleo S.A. ("Astra") pursuant to which
Pluspetrol and Astra have an option to purchase from LG&E Argentina,
and LG&E Argentina has an option to sell to Pluspetrol and Astra, LG&E
Argentina's one-third interest in the company which owns and operates
the San Miguel facility, at a purchase price which is established based
upon a variable pricing structure.
(2)On December 30, 1997, LG&E Energy Corp. announced that it elected R.
Foster Duncan, 43, to the position of Executive Vice President,
Planning and Development, effective January 12, 1998.
On April 9, 1998, the Company filed a report on Form 8-K announcing that
the LG&E Energy Corp. and KU Energy Corporation merger will close effective
May 4, 1998, subject to Securities and Exchange Commission final approval
and the satisfaction and confirmation of certain closing conditions set
forth in their merger agreement.
On May 6, 1998, the Company filed a report on Form 8-K stating that:
(1)On May 4, 1998, LG&E Energy Corp. and KU Energy Corporation completed
their merger with the Company as the surviving corporation.
(2)Effective May 1, 1998, the Company elected Frederick J. Newton, III, to
the position of Senior Vice President - Human Resources and
Administration.
- 28 -
<PAGE>
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.
LG&E ENERGY CORP.
Registrant
Date: May 15, 1998 /s/ Victor A. Staffieri
Victor A. Staffieri
Chief Financial Officer
(On behalf of the registrant)
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 15, 1998 /s/ Victor A. Staffieri
Victor A. Staffieri
Chief Financial Officer
(On behalf of the registrant)
- 29 -
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<F3>Includes equity in earnings of affiliates of
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<TABLE> <S> <C>
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<NAME> LOUISVILLE GAS AND ELECTRIC COMPANY
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<COMMON-STOCK-DIVIDENDS> 19,800
<TOTAL-INTEREST-ON-BONDS> 8,819
<CASH-FLOW-OPERATIONS> 81,411
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
Exhibit 99.01
LG&E Energy Corp. and Louisville Gas and Electric Company Cautionary
Factors
The Private Securities Litigation Reform Act of 1995 provides a "safe
harbor" for forward-looking statements to encourage such disclosures
without the threat of litigation providing those statements are identified
as forward-looking and are accompanied by meaningful, cautionary statements
identifying important factors that could cause the actual results to differ
materially from those projected in the statement. Forward-looking
statements have been and will be made in written documents and oral
presentations of LG&E Energy Corp. ("LG&E Energy") and Louisville Gas and
Electric Company ("LG&E") (collectively, the "Companies"). Such statements
are based on management's beliefs as well as assumptions made by and
information currently available to management. When used in the Companies'
documents or oral presentations, the words "anticipate," "estimate,"
"expect," "objective" and similar expressions are intended to identify
forward-looking statements. In addition to any assumptions and other
factors referred to specifically in connection with such forward-looking
statements, factors that could cause the Companies' actual results to
differ materially from those contemplated in any forward-looking statements
include, among others, the following:
* Increased competition in the utility, natural gas and electric power
marketing industries, including effects of: decreasing margins as a
result of competitive pressures; industry restructuring initiatives;
transmission system operation and/or administration initiatives; recovery
of investments made under traditional regulation; nature of competitors
entering the industry; retail wheeling; a new pricing structure; and
former customers entering the generation market;
* Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not
limited to, price, basis, credit, liquidity, volatility, capacity,
transmission, currency, interest rate and warranty risks;
* Risks associated with price risk management strategies intended to
mitigate exposure to adverse movement in the prices of electricity and
natural gas on both a global and regional basis;
* Legal, regulatory, economic and other factors which may result in
redetermination or cancellation of revenue payment streams under power
sales agreements resulting in reduced operating income and potential
asset impairment related to the Companies' investments in independent
power production ventures, as applicable;
* Economic conditions including inflation rates and monetary fluctuations;
* Trade, monetary, fiscal, taxation, and environmental policies of
governments, agencies and similar organizations in geographic areas where
the Companies have a financial interest;
* Customer business conditions including demand for their products or
services and supply of labor and materials used in creating their
products and services;
* Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission, state public
utility commissions, state entities which regulate natural gas
transmission, gathering and processing and similar entities with
regulatory oversight;
* Availability or cost of capital such as changes in: interest rates,
market perceptions of the utility and energy-related industries, the
Companies or any of their subsidiaries or security ratings;
* Factors affecting utility and non-utility operations such as unusual
weather conditions; catastrophic weather-related damage; unscheduled
generation outages, unusual maintenance or repairs; unanticipated changes
to fossil fuel, or gas supply costs or availability due to higher demand,
shortages, transportation problems or other developments; environmental
incidents; or electric transmission or gas pipeline system constraints;
* Employee workforce factors including changes in key executives,
collective bargaining agreements with union employees, or work stoppages;
* Rate-setting policies or procedures of regulatory entities, including
environmental externalities;
* Social attitudes regarding the utility, natural gas and power industries;
* Identification of suitable investment opportunities to enhance
shareholder returns and achieve long-term financial objectives through
business acquisitions;
* Some future project investments made by the Companies, respectively, as
applicable, could take the form of minority interests, which would limit
the Companies' ability to control the development or operation of the
project;
* Legal and regulatory delays and other unforeseeable obstacles associated
with mergers, acquisitions and investments in joint ventures;
* Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims and matters, including but not
limited to those described in Note 16 (for LG&E Energy) and Note 12 (for
LG&E) of the respective Notes to Financial Statements of the Companies'
Annual Reports on Form 10-K for the year ended December 31, 1997, under
the caption Commitments and Contingencies;
* Technological developments, changing markets and other factors that
result in competitive disadvantages and create the potential for
impairment of existing assets;
* Factors associated with non-regulated investments, including but not
limited to: continued viability of partners, foreign government actions,
foreign economic and currency risks, political instability in foreign
countries, partnership actions, competition, operating risks, dependence
on certain customers, third-party operators, suppliers and domestic and
foreign environmental and energy regulations;
* Other business or investment considerations that may be disclosed from
time to time in the Companies' Securities and Exchange Commission filings
or in other publicly disseminated written documents.
* Factors affecting the realization of anticipated cost savings associated
with the merger between LG&E Energy and KU Energy Corporation including
national and regional economic conditions, national and regional
competitive conditions, inflation rates, weather conditions, financial
market conditions, and synergies resulting from the business combination;
The Companies undertake no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
8
EXHIBIT 99.02
DESCRIPTION OF LG&E ENERGY COMMON STOCK
The information under this caption is a succinct summary of
certain provisions and is subject to the detailed provisions of
LG&E Energy Corp.'s (the "Company's") Restated Articles of
Incorporation, as amended, and of its By-Laws, which have been
filed (or incorporated by reference) as exhibits to the Company's
Current Report on Form 8-K dated May 4, 1998, and which are
incorporated herein by this reference.
Authorized Stock
Under the Company's Articles of Incorporation, the Company is
authorized to issue 300,000,000 shares of Common Stock, without
par value (the "Common Stock"), of which approximately
129,682,889 shares were outstanding on May 4, 1998.
The Company is also authorized to issue 5,000,000 shares of
preferred stock, without par value (the "Preferred Stock"). As
discussed below under the caption "Rights to Purchase Series A
Preferred Stock," the Company has created a series of Preferred
Stock designated as "Series A Preferred Stock," and the number of
shares constituting such series is 2,000,000. No shares of such
Series A Preferred Stock and no shares of any other Preferred
Stock are currently outstanding. Preferred Stock may be issued
in the future in such series as may be designated by the
Company's Board of Directors. In creating any such series, the
Company's Board of Directors has the authority to fix the rights
and preferences of each series with respect to, among other
things, the dividend rate, redemption provisions, liquidation
preferences, and sinking fund provisions.
Dividend Rights
Subject to the prior payment in full of all accrued and unpaid
dividends on the Series A Preferred Stock and possible prior
rights of holders of other Preferred Stock that may be issued in
the future, holders of the Company's Common Stock are entitled to
receive such dividends as may be declared from time to time by
the Board of Directors of the Company out of funds legally
available therefor.
The funds required by the Company to enable it to pay dividends
on its Common Stock are expected to be derived principally from
dividends paid by Louisville Gas and Electric Company, the
Company's principal subsidiary ("LG&E"), on LG&E's Common Stock.
The Company's ability to receive dividends on LG&E's Common Stock
is subject to the prior rights of the holders of LG&E's preferred
stock and the covenants of debt instruments limiting the ability
of LG&E to pay dividends.
The only existing covenant limiting LG&E's ability to pay
dividends is in LG&E's trust indenture, as supplemented, securing
LG&E's first mortgage bonds. It provides in substance that
retained income of LG&E equal to the amount by which the
aggregate of (a) provisions for retirement and depreciation and
(b) expenditures for maintenance, for the period from January 1,
1978, to the end of the last preceding month for which a balance
sheet of LG&E is available, is less than 2.25% of depreciable
property, including construction work in progress, as of the end
of that period, shall not be available for the payment of cash
dividends on the Common Stock of LG&E. No portion of retained
income of LG&E is presently restricted by this provision.
Voting Rights
Every holder of Common Stock and every holder of Series A
Preferred Stock that may be issued in the future is entitled to
one vote per share for the election of directors and upon all
other matters on which such holder is entitled to vote. At all
elections of directors, any eligible shareholder may vote
cumulatively. The Board of Directors of the Company has the
authority to fix conversion and voting rights for any new series
of Preferred Stock (including the right to elect directors upon a
failure to pay dividends), provided that no share of Preferred
Stock can have more than one vote per share.
Notwithstanding the foregoing, if any Series A Preferred Stock is
issued in the future and if and when dividends payable on such
Series A Preferred Stock that may be issued in the future shall
be in default for six full quarterly dividends and thereafter
until all defaults shall have been paid, the holders of the
Series A Preferred Stock, voting separately as one class, to the
exclusion of the holders of Common Stock, will be entitled to
elect two (2) directors of the Company.
The Company's Articles of Incorporation contain "fair price"
provisions, which require that mergers and certain other business
combinations or transactions involving the Company and any
substantial (10% or more) holder of the Company's Voting Stock
(as defined below) must be approved by the holders of at least
80% of the voting power of the Company's outstanding Voting Stock
and by the holders of at least 66-2/3% of the voting power of the
Company's Voting Stock not beneficially owned by the 10% owner
unless the transaction is either approved by a majority of the
members of the Board of Directors who are unaffiliated with the
substantial holder or certain minimum price and procedural
requirements are met. Any amendment to the foregoing provisions
must be approved by the holders of at least 80% of the voting
power of the Company's outstanding Voting Stock and by the
holders of at least 66-2/3% of the voting power of the Company's
Voting Stock not beneficially owned by any 10% owner. The
Company's Voting Stock consists of all outstanding shares of the
Company generally entitled to vote in the election of directors
and currently consists of the Company's Common Stock.
Subject to the rights of the Series A Preferred Stock (if any are
issued) to elect directors under certain circumstances described
above and any voting rights of the holders of the Company's
Preferred Stock that may be issued in the future, the Company's
Articles and By-Laws contain provisions stating that: (a) the
Board of Directors shall be divided into three classes, as nearly
equal in number as possible, each of which, after an interim
arrangement, will serve for three years, with one class being
elected each year, (b) directors may be removed only with the
approval of the holders of at least 80% of the voting power of
the shares of the Company generally entitled to vote, except that
so long as cumulative voting applies no director may be removed
if the votes cast against removal would be sufficient to elect
the director if cumulatively voted at an election of the class of
directors of which such director is a part, (c) any vacancy on
the Board of Directors shall be filled by the remaining directors
then in office, though less than a quorum, (d) advance notice of
introduction by shareholders of business at annual shareholders'
meetings and of shareholder nominations for the election of
directors shall be given and that certain information be provided
with respect to such matters, (e) shareholder action may be taken
only by unanimous written consent or at an annual meeting of
shareholders or a special meeting of shareholders called by the
President, the Board of Directors or, to the extent required by
Kentucky law, shareholders, and (f) the foregoing provisions may
be amended only by the approval of the holders of at least 80% of
the voting power of the shares of the Company generally entitled
to vote. These provisions along with the "fair price" provisions
and cumulative voting provisions discussed above and the Rights
described below, may deter attempts to change control of the
Company (by proxy contest, tender offer or otherwise) and will
make more difficult a change in control of the Company that is
opposed by the Company's Board of Directors.
Liquidation Rights
Subject to the prior rights of the holders of the Series A
Preferred Stock that may be issued in the future and the possible
prior rights of holders of other Preferred Stock that may be
issued in the future, in the event of liquidation, dissolution or
winding up of the Company, whether voluntary or involuntary, the
holders of the Common Stock are entitled to the remaining assets.
Other Provisions
No holder of Common Stock or any future holder of Preferred Stock
has the preemptive right to subscribe for and purchase any part
of any new or additional issue of stock or securities convertible
into stock. The Common Stock is not subject to redemption and
does not have any conversion or sinking fund provisions. The
issued and outstanding shares of Common Stock are fully paid and
nonassessable shares of Common Stock of the Company.
Under the Company's Articles of Incorporation, the Board of
Directors may issue additional shares of authorized but unissued
Common Stock for such consideration as it may from time to time
determine.
Rights to Purchase Series A Preferred Stock
On December 5, 1990, the Board of Directors of the Company:
(i) declared a dividend distribution of one Preferred Stock
purchase right (a "Right" or "Rights") for each outstanding share
of Common Stock to shareholders of record on December 19, 1990,
and issuable as of such Record Date and (ii) further authorized
the issuance of one Right with respect to each share of Common
Stock of the Company that becomes outstanding after such Record
Date and before the Distribution Date (as defined below).
The Company declared a three-for-two split of the Common Stock to
shareholders of record on April 30, 1992. As a result of the
stock split and in accordance with the terms of the Rights, the
number of Rights associated with a share of Common Stock was
reduced, effective May 15, 1992, from one Right per share to two-
thirds of a Right per share. The Company declared a two-for-one
split of the Common Stock to shareholders of record on April 1,
1996. As a result of the two-for-one split and in accordance
with the terms of the Rights, the number of Rights associated
with a share of Common Stock was reduced from two-thirds of a
Right per share to one-third of a Right per share, effective
April 15, 1996.
On June 7, 1995, the Board of Directors approved the First
Amendment to Rights Agreement, whereby the definition of
"Acquiring Person" (see below) was modified to provide that an
"Acquiring Person" shall be any person who has acquired, or
obtained the rights to acquire, beneficial ownership of 15% or
more of the outstanding Common Stock of the Company. The
previous ownership threshold was 20%.
In connection with the Merger with KU Energy Corporation, on May
20, 1997, the Board of Directors approved the Second Amendment to
Rights Agreement so that the execution, delivery and performance
of the Merger Agreement and the LG&E Energy Stock Option
Agreement (as defined in the Second Amendment to Rights
Agreement) will not cause any Rights to become exercisable, cause
KU Energy or any of its affiliates to become an "Acquiring
Person" or give rise to a "Distribution Date" or "Stock
Acquisition Date" (see below).
Each whole Right entitles the holder of record to purchase from
the Company one one-hundredth of a share of Series A Preferred
Stock, without par value, of the Company ("Series A Preferred
Stock") at a price of $110 per one one-hundredth of a share (the
"Purchase Price"). The description and terms of the Rights are
set forth in the Rights Agreement, as amended (the "Rights
Agreement").
Initially the Rights will not be exercisable, certificates will
not be sent to shareholders and the rights will automatically
trade with the Common Stock.
The Rights will be evidenced by the Common Stock certificates
until the close of business on the earlier to occur of the tenth
day following (i) a public announcement (or, if earlier, the date
a majority of the Board of Directors of the Company becomes
aware) that a person or group of affiliated or associated persons
has become an "Acquiring Person", which is defined as a person
who has acquired, or obtained the right to acquire, beneficial
ownership of 15% or more of the outstanding Common Stock of the
Company (the "Stock Acquisition Date"), or (ii) the commencement
of, or public announcement of an intention to commence, a tender
or exchange offer the consummation of which would result in the
ownership of 15% or more of the outstanding Common Stock (the
earlier of the dates in clause (i) or (ii) being called the
"Distribution Date"). Notwithstanding the foregoing, if the
Board of Directors of the Company determines in good faith that a
person who would otherwise be an "Acquiring Person," has become
such inadvertently and without any intention of changing or
influencing control of the Company, and such person, as promptly
as practicable after being advised of such determination, divests
himself or itself of beneficial ownership of a sufficient number
of shares of Common Stock so that such person would no longer be
an "Acquiring Person," then such person shall not be deemed to be
an "Acquiring Person" for any purposes of the Rights Agreement.
Until the Distribution Date, (i) the Rights will be evidenced by
the Common Stock certificates and will be transferred with and
only with such Common Stock certificates, (ii) new Common Stock
certificates will contain a notation incorporating the Rights
Agreement by reference and (iii) the surrender for transfer of
any certificates for Common Stock outstanding will also
constitute the transfer of the Rights associated with the Common
Stock represented by such certificate.
As soon as practicable following the Distribution Date, separate
certificates evidencing the Rights ("Right Certificates") will be
mailed to holders of record of the Company's Common Stock as of
the close of business on the Distribution Date, and such separate
certificates alone will evidence the rights from and after the
Distribution Date.
Each of the following persons (an "Exempt Person") will not be
deemed to be an Acquiring Person, even if they have acquired, or
obtained the right to acquire, beneficial ownership of 15% or
more of the outstanding Common Stock of the Company: (i) the
Company, any subsidiary of the Company, any employee benefit plan
or employee stock plan of the Company or of any subsidiary of the
Company; and (ii) any person who becomes an Acquiring Person
solely by virtue of a reduction in the number of outstanding
shares of Common Stock, unless and until such person shall become
the beneficial owner of, or make a tender offer for, any
additional shares of Common Stock.
The Rights are not exercisable until the Distribution Date. The
Rights will expire at the close of business on December 19, 2000,
unless earlier redeemed or exchanged by the Company as described
below.
The Purchase Price payable, and the number of shares of Series A
Preferred Stock or other securities or property issuable, upon
exercise of the Rights are subject to adjustment from time to
time to prevent dilution (i) in the event of a stock dividend on,
or a subdivision, combination or reclassification of, the Series
A Preferred Stock, (ii) upon the grant to holders of the Series A
Preferred Stock of certain rights or warrants to subscribe for
Series A Preferred Stock or convertible securities at less than
the current market price of the Series A Preferred Stock or (iii)
upon the distribution to holders of the Series A Preferred Stock
of evidences of indebtedness or assets (excluding dividends
payable in Series A Preferred Stock) or of subscription rights or
warrants (other than those referred to above). The number of
Rights associated with a share of the Company's Common Stock is
subject to adjustment from time to time in the event of a stock
dividend on, or a subdivision or combination of, the Common
Stock.
In the event any Person (other than an Exempt Person) becomes the
beneficial owner of 15% or more of the then outstanding shares of
Common Stock (except pursuant to an offer for all outstanding
shares of Common Stock that the independent directors determine
to be fair to and otherwise in the best interest of the Company
and its shareholders) or any Exempt Person who is the beneficial
owner of 15% or more of the outstanding Common Stock fails to
continue to qualify as an Exempt Person, then each holder of
record of a whole Right, other than the Acquiring Person, will
thereafter have the right to receive, upon payment of the
Purchase Price, Common Stock (or, in certain circumstances, cash,
property or other securities of the Company) having a market
value at the time of the transaction equal to twice the Purchase
Price. However, Rights are not exercisable following such event
until such time as the Rights are no longer redeemable by the
Company as set forth below. Any Rights that are or were at any
time, on or after the Distribution Date, beneficially owned by an
Acquiring Person shall become null and void.
For example, at an exercise price of $110 per Right, each whole
Right not owned by an Acquiring Person (or by certain related
parties) following an event set forth in the preceding paragraph
would entitle its holder to purchase $220 worth of Common Stock
(or other consideration, as noted above) for $110. Assuming that
the Common Stock had a per share value of $22 at such time, the
holder of each valid Right would be entitled to purchase 10
shares of Common Stock for $110.
After the Rights have become exercisable, if the Company is
acquired in a merger or other business combination (in which any
shares of the Company's Common Stock are changed into or
exchanged for other securities or assets) or more than 50% of the
assets or earning power of the Company and its subsidiaries
(taken as a whole) are sold or transferred in one or a series of
related transactions, the Rights Agreement provides that proper
provision shall be made so that each holder of record of a whole
Right will have the right to receive, upon payment of the
Purchase Price, that number of shares of common stock of the
acquiring company having a market value at the time of such
transaction equal to two times the Purchase Price.
After any such event, to the extent that insufficient shares of
Common Stock are available for the exercise in full of the
Rights, holders of Rights will receive upon exercise shares of
Common Stock to the extent available and then other securities of
the Company, including units of shares of Series A Preferred
Stock with rights substantially comparable to those of the Common
Stock, property, or cash, in proportions determined by the
Company, so that the aggregate value received is equal to twice
the Purchase Price. The Company, however, shall not be required
to issue any cash, property or debt securities upon exercise of
the Rights to the extent their aggregate value would exceed the
amount of cash the Company would otherwise be entitled to receive
upon exercise in full of the then exercisable Rights.
No fractional shares of Series A Preferred Stock or Common Stock
will be required to be issued upon exercise of the Rights and, in
lieu thereof, a payment in cash may be made to the holder of such
Rights equal to the same fraction of the current market value of
a share of Series A Preferred Stock or, if applicable, Common
Stock.
At any time until ten days after the Stock Acquisition Date
(subject to extension by the Board of Directors), the Company may
redeem the Rights in whole, but not in part, at a price of $0.01
per Right (subject to certain anti-dilution adjustments) (the
"Redemption Price"). After such redemption period, the Company's
right of redemption may be reinstated, under certain
circumstances, if an Acquiring Person reduces his beneficial
ownership of Common Stock to below 10% and there is no other
Acquiring Person. Immediately upon the action of the Board of
Directors of the Company authorizing redemption of the Rights,
the right to exercise the rights will terminate, and the only
right of the holders of Rights will be to receive the Redemption
Price without any interest thereon.
The Board of Directors may, at its option, at any time after any
Person becomes an Acquiring Person, exchange all or part of the
outstanding Rights (other than Rights held by the Acquiring
Person and certain related parties) for shares of Common Stock at
an exchange ratio of three (3) shares of Common Stock per Right
(subject to certain anti-dilution adjustments). However, the
Board may not effect such an exchange at any time any Person or
group owns 50% or more of the shares of Common Stock then
outstanding. Immediately after the Board orders such an
exchange, the right to exercise the Rights shall terminate and
the holders of Rights shall thereafter only be entitled to
receive shares of Common Stock at the applicable exchange ratio.
The Board of Directors of the Company may amend the Rights
Agreement. After the Distribution Date, however, the provisions
of the Rights Agreement may be amended by the Board only to cure
any ambiguity, to make changes which do not adversely affect the
interests of holders of Rights (excluding the interests of any
Acquiring Person or an affiliate or associate of an Acquiring
Person), or to shorten or lengthen any time period under the
Rights Agreement; provided, however, that no amendment to adjust
the time period governing redemption shall be made at such time
as the Rights are not redeemable. In addition, no supplement or
amendment may be made which changes the Redemption Price, the
final expiration date, the Purchase Price or the number one one-
hundredths of a share of Series A Preferred Stock for which a
Right is exercisable, unless at the time of such supplement or
amendment there has been no occurrence of a Stock Acquisition
Date and such supplement or amendment does not adversely affect
the interests of the holders of Rights (other than an Acquiring
Person or an associate or affiliate of an Acquiring Person).
Until a Right is exercised, the holder, as such, will have no
rights as a shareholder of the Company, including, without
limitation, the right to vote or to receive dividends.
The issuance of the Rights is not taxable to the Company or to
shareholders under presently existing federal income tax law, and
will not change the way in which shareholders can presently trade
the Company's shares of Common Stock. If the Rights should
become exercisable, shareholders, depending on then existing
circumstances, may recognize taxable income.
The Rights may have certain anti-takeover effects. The Rights
will cause substantial dilution to a person or group that
attempts to acquire the Company on terms not approved by the
Board of Directors and, accordingly, will make more difficult a
change of control that is opposed by the Company's Board of
Directors. However, the Rights should not interfere with a
proposed change of control (including a merger or other business
combination) approved by a majority of the Board of Directors
since the Rights may be redeemed by the Company at the Redemption
Price at any time until ten days after the Stock Acquisition Date
(subject to extension by the Board of Directors). Thus, the
Rights are intended to encourage persons who may seek to acquire
control of the Company to initiate such an acquisition through
negotiations with the Board of Directors. Nevertheless, the
Rights also may discourage a third party from making a partial
tender offer or otherwise attempting to obtain a substantial
equity position in, or seeking to obtain control of, the Company.
To the extent any potential acquirors are deterred by the Rights,
the Rights may have the effect of preserving incumbent management
in office.
A copy of the Rights Agreement has been filed with the Securities
and Exchange Commission as an Exhibit to the Company's
Registration Statement on Form S-8, Registration No. 33-38557. A
copy of the First Amendment to Rights Agreement has been filed
with the SEC as an Exhibit to the Company's Registration
Statement on Form 8-A/A, Registration No. 1-10568, filed on June
20, 1995. A copy of the Second Amendment to Rights Agreement has
been filed with the SEC as an Exhibit to the Company's
Registration Statement on Form S-4, Registration No. 333-34219.
This summary description of the Rights does not purport to be
complete and is qualified in its entirety by reference to the
Rights Agreement, as amended, which is incorporated in this
summary description herein by reference.
Miscellaneous
The Company's outstanding Common Stock is listed on the New York
and Chicago Stock Exchanges.
Transfer Agents and Registrar
The Transfer Agents for the Common Stock are the Company and
Harris Trust and Savings Bank, Chicago, Illinois. Registrars for
the Common Stock are PNC Bank, Kentucky, Inc., Louisville,
Kentucky, and Harris Trust and Savings Bank, Chicago, Illinois.
