SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-10944
KU Energy Corporation
(Exact name of registrant as specified in its charter)
Kentucky 61-1141273
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
One Quality Street, Lexington, Kentucky 40507
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 606-255-2100
Not Applicable
Former name, former address and former fiscal year, if changed since
last report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such
shorter period that the Registrant was required to file such reports)
and (2) has been subject to such filing requirements for the past 90
days.
Yes X No .
Number of shares of Common Stock outstanding at May 5, 1994:
37,817,878 shares.
-1-
<PAGE>
PART I. FINANCIAL INFORMATION
KU ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
(in thousands except for per share amounts)
For the Three
Months Ended
March 31,
1994 1993
Operating Revenues $166,523 $154,273
Operating Expenses:
Fuel, principally coal, used in generation 43,859 43,658
Electric power purchased 15,883 9,968
Other operating expenses 27,104 25,418
Maintenance 14,539 11,325
Depreciation 16,188 15,232
Federal and state income taxes 14,558 13,937
Other taxes 4,068 3,710
Total Operating Expenses 136,199 123,248
Net Operating Income 30,324 31,025
Other Income and Deductions:
Interest and dividend income 2,155 1,375
Other income and deductions - net 1,377 1,250
Total Other Income and Deductions 3,532 2,625
Income Before Interest and Other Charges 33,856 33,650
Interest and Other Charges 8,837 9,801
Net Income $ 25,019 $ 23,849
Average Common Shares Outstanding 37,818 37,818
Earnings Per Common Share $ .66 $ .63
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-2-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(in thousands of dollars)
For the Three Months
Ended March 31,
1994 1993
Cash Flows from Operating Activities:
Net Income $ 25,019 $ 23,849
Items not requiring (providing) cash currently:
Depreciation 16,188 15,232
Deferred income taxes and investment tax credit (1,782) 1,766
Change in fuel inventory 4,644 (1,709)
Change in accounts receivable 1,404 (6,780)
Change in accounts payable (10,223) (2,114)
Change in accrued taxes 17,882 12,560
Change in accrued utility revenues 4,788 2,567
Change in liability to ratepayers (519) 38,332
Change in escrow funds 507 (44,240)
Other--net 787 6,684
Net Cash Provided by Operating Activities 58,695 46,147
Cash Flows from Investing Activities:
Construction expenditures - utility (40,496) (17,928)
Nonutility property - (5)
Purchase of long-term investments (238) 328
Proceeds from leveraged lease investments 162 -
Other 103 108
Net Cash Used by Investing Activities (40,469) (17,497)
Cash Flows from Financing Activities:
Short-term borrowings - net 3,500 -
Funds deposited with trustee - net 9,000 -
Retirement of long-term debt (21) (30,021)
Retirement of preferred stock, incl. premium (20,302) -
Payment of common stock dividends (15,505) (15,127)
Net Cash Used by Financing Activities (23,328) (45,148)
Net Decrease in Cash and Cash Equivalents (5,102) (16,498)
Cash and Cash Equivalents Beginning of Period 32,500 122,802
Cash and Cash Equivalents End of Period $ 27,398 $106,304
Supplemental Disclosures
Cash paid for:
Interest on long-term debt $ 4,772 $ 9,612
Federal and state income taxes $ - $ -
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-3-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
(Unaudited)
(in thousands of dollars)
As of As of
Mar. 31, Dec. 31,
ASSETS 1994 1993
Utility Plant:
Plant in service, at cost $2,012,198 $2,004,688
Less: Accumulated depreciation 896,527 879,960
1,115,671 1,124,728
Construction work in progress 191,530 158,829
1,307,201 1,283,557
Current Assets:
Cash and cash equivalents 27,398 32,500
Escrow funds - coal contract litigation 37,245 37,752
Construction funds held by trustee 9,372 18,268
Accounts receivable 39,990 41,394
Accrued utility revenues 20,787 25,575
Fuel, principally coal, at average cost 26,429 31,073
Materials and supplies, at average cost 18,441 17,261
Other 8,912 7,808
188,574 211,631
Investments, Deferred Charges and Other Assets:
Investment in marketable securities 16,352 16,397
Investment in leveraged leases 10,591 10,320
Accumulated deferred income taxes 39,293 36,418
Unamortized loss on reacquired debt 13,084 13,295
Other 38,344 37,994
117,664 114,424
Total Assets $1,613,439 $1,609,612
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity $ 611,378 $ 602,503
Preferred stock of Subsidiary 40,000 40,000
Long-term debt of Subsidiary 442,021 442,045
1,093,399 1,084,548
Current Liabilities:
Preferred stock and long-term debt
due within one year 21 20,021
Short-term borrowings 3,500 -
Accounts payable 33,671 43,894
Accrued interest 9,796 7,302
Accrued taxes 22,338 4,456
Customers' deposits 8,835 10,803
Accrued payroll and vacations 10,084 7,719
Liab. to ratepayers - coal contract litigation 36,348 36,867
Other 6,277 6,444
130,870 137,506
Deferred Credits and Other Liabilities:
Accumulated deferred income taxes 250,807 248,369
Accumulated deferred investment tax credits 41,358 42,385
Regulatory liabilities 68,818 69,689
Other 28,187 27,115
389,170 387,558
Total Capitalization and Liabilities $1,613,439 $1,609,612
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
-4-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. PRESENTATION OF CONDENSED INFORMATION
Pursuant to the rules and regulations of the Securities and
Exchange Commission, certain information has been condensed and
certain footnote disclosures have been omitted, which are
normally included in financial statements prepared in accordance
with generally accepted accounting principles.
These financial statements should be read in conjunction
with the financial statements and notes thereto in the KU Energy
Corporation (KU Energy or the Company) Annual Report on Form 10-K
for the year ended December 31, 1993 (1993 10-K).
In the opinion of management, the information furnished
herein reflects all adjustments which are necessary to present
fairly the results of the periods shown and the disclosures which
have been made are adequate to make the information not
misleading. Results of interim periods are not necessarily
indicative of results for any twelve-month period due to the
seasonal nature of the business of the Company's principal
subsidiary, Kentucky Utilities Company (Kentucky Utilities).
2. FINANCIAL INSTRUMENTS
Effective January 1, 1994, the Company adopted Statement of
Financial Accounting Standards No. 115, "Accounting for Certain
Investments in Debt and Equity Securities" (SFAS 115). This
statement contains accounting and disclosure requirements
associated with investments in equity securities that have
readily determinable fair values and all investments in debt
securities.
-5-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
This statement requires, among other things, classification
of securities into one of three categories: held-to-maturity,
available-for-sale or trading. Currently, the Company has no
trading securities. The Company's temporary cash investments are
classified as available-for-sale or held-to-maturity and are
reported under the caption "Cash and cash equivalents" on the
Consolidated Balance Sheet. The Company has investments in
marketable securities which are classified as available-for-sale
and are included in the caption "Investment in marketable
securities" on the Consolidated Balance Sheet.
The adoption of SFAS 115 did not have a material impact on
financial condition or results of operations. Reference is made
to the 1993 10-K for market value disclosures on these
securities.
3. PREFERRED STOCK
Kentucky Utilities issued $20 million of 6.53% preferred
stock in December 1993. On February 1, 1994, Kentucky Utilities
used the proceeds from this issue, together with other available
funds, to redeem its 7.84% Preferred Stock at a total cost of
$20.3 million (including a redemption premium of $.3 million).
Kentucky Utilities announced its intention to redeem this
preferred stock on December 22, 1993.
-6-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
KU Energy Corporation is a holding company organized under
the laws of Kentucky. KU Energy has two wholly owned
subsidiaries, Kentucky Utilities Company, an electric utility,
and KU Capital Corporation (KU Capital), a nonutility subsidiary.
Kentucky Utilities is KU Energy's principal subsidiary. Material
changes in the consolidated financial condition and operating
results of KU Energy are based primarily upon the operations of
Kentucky Utilities.
LIQUIDITY & RESOURCES
Kentucky Utilities' construction expenditures increased
approximately $23 million during the three-month period ended
March 31, 1994, when compared to the first quarter of 1993. The
increase can be attributed primarily to expenditures for
combustion turbine peaking units and for compliance with the 1990
Clean Air Act Amendments.
Kentucky Utilities expects to fund the majority of its
remaining 1994 construction expenditures from the issuance of
long-term debt with the balance primarily from internal sources.
In April 1994, KU Capital entered into agreements with
Tenaska, Inc., (a developer of gas-fired cogeneration and
independent power generation projects in the United States and
Canada) and affiliates to purchase limited partnership interests
in the ownership and development of certain independent power
generation projects. Under the agreements, which are subject to
the completion of formal legal documentation, KU Capital will
become a limited partner in two operating cogeneration projects
-7-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
and in two independent power projects being developed under the
leadership of Tenaska. KU Capital estimates that its investment
in the four Tenaska-sponsored projects will be about $12 million
over the 1994-1997 period. KU Capital has also agreed to
participate in funding the development of future Tenaska-
sponsored independent power projects in North America. KU
Capital will fund about $10 million of project development
expenditures over the 1994-1996 time frame. This funding
commitment will provide KU Capital with the opportunity to invest
in future development projects.
RESULTS OF OPERATIONS
Quarter ended March 31, 1994, compared
to the Quarter ended March 31, 1993
Increase (Decrease)
From Prior Year
Three Months
Ended Mar. 31, 1994
kWh Revenues
(%) (000's)
Residential 11 $ 5,412
Commercial 6 1,680
Industrial 7 1,291
Mine Power & Public Authorities 4 569
Total Retail Sales 8 8,952
Other Electric Utilities 36 3,450
Provision for Refund -
Litigation Settlement - (537)
Miscellaneous Revenues & Other - 385
Total 11 $12,250
Operating revenues increased $12.3 million (8%). The
increase can be attributed to an 11% increase in kilowatt-hour
sales. The increase in kilowatt-hour sales is primarily
attributable to increases in residential, commercial, industrial
-8-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
and off-system sales. The increases in residential and
commercial sales reflect colder weather during the first quarter
of 1994. Kentucky Utilities set a new record winter peak demand
of 3,092 megawatts on January 19, 1994. The increase in
industrial sales reflects the general strength of the service
area economy as well as an increase in the number of industrial
customers. The increase in off-system sales is attributable to
an increase in demand for power due to extreme weather conditions
and maintenance programs at neighboring utilities during the
first quarter of 1994. Revenues were reduced by approximately
$.5 million resulting from refunds to customers of amounts
recovered from a litigation settlement with a former coal
supplier. The $.5 million, which was charged against revenue,
represents $2.9 million of fuel savings less $2.4 million for
incurred litigation costs and off-system sales which Kentucky
Utilities was allowed to retain pursuant to a regulatory order.
Fuel and purchased power expense increased $6.1 million
(11%). Fuel expense for the first quarter of 1994 reflects a
$2.9 million reduction associated with the refunding to customers
of fuel cost savings related to the resolution of a coal contract
dispute. This reduction in fuel expense was offset by a
$3.1 million increase resulting from a 4% increase in coal
consumption as well as a 3% increase in the average price per ton
of coal consumed. Purchased power expense increased by
$5.9 million due to greater kilowatt-hour purchases
($3.2 million) and higher demand costs ($2.7 million). The
-9-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
MANAGEMENTS' DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
increase is attributable to a permanent increase in capacity
entitlement, effective January 1994, under an existing purchased
power contract with Electric Energy, Inc. The increases in tons
of coal consumed and kilowatt-hour purchases are the result of
the previously discussed sales increases.
Maintenance expenses increased $3.2 million (28%), primarily
due to distribution utility line maintenance costs incurred as a
result of extensive ice storm damage during the first quarter of
1994.
-10-
<PAGE>
PART II. OTHER INFORMATION
KU ENERGY CORPORATION AND SUBSIDIARIES
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K.
None.
-11-
<PAGE>
KU ENERGY CORPORATION AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
KU ENERGY CORPORATION
(Registrant)
Date May 5, 1994 /s/ John T. Newton
John T. Newton
Chairman and President
Date May 5, 1994 /s/ Michael D. Robinson
Michael D. Robinson
Controller
-12-
