-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, O1C2HB+xO0qsdcRojmTOGWeH6izjtEUgTotJl92JaPNXQ4/LawPNqzwUsx2cj7ku I50dIVcaSlJaHTB1rBdOgQ== 0000916863-96-000003.txt : 19960501 0000916863-96-000003.hdr.sgml : 19960501 ACCESSION NUMBER: 0000916863-96-000003 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960429 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WPS RESOURCES CORP CENTRAL INDEX KEY: 0000916863 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-11337 FILM NUMBER: 96553191 BUSINESS ADDRESS: STREET 1: 700 N ADAMS ST STREET 2: PO BOX 19001 CITY: GREEN BAY STATE: WI ZIP: 54307-9001 BUSINESS PHONE: 4144331466 MAIL ADDRESS: STREET 1: 700 NORTH ADAMS STREET STREET 2: PO BOX 19001 CITY: GREEN BAY STATE: WI ZIP: 54307-9001 10-Q 1 ______________________________________________________________________________ ______________________________________________________________________________ SECURITIES AND EXCHANGE COMMISSION Washington, D. C. 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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission Registrant; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification No. - ----------- ----------------------------------- ------------------ 1-11337 WPS RESOURCES CORPORATION 39-1775292 (A Wisconsin Corporation) 700 North Adams Street P. O. Box 19001 Green Bay, WI 54307-9001 414-433-1466 1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160 (A Wisconsin Corporation) 700 North Adams Street P. O. Box 19001 Green Bay, WI 54307-9001 414-433-1466 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. WPS Resources Corporation Yes [x] No [ ] Wisconsin Public Service Corporation Yes [x] No [ ] Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: WPS RESOURCES CORPORATION Common stock, $1 par value, 23,896,962 shares outstanding at April 26, 1996 WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value, 23,896,962 shares outstanding at April 26, 1996 ______________________________________________________________________________ ______________________________________________________________________________ WPS RESOURCES CORPORATION AND WISCONSIN PUBLIC SERVICE CORPORATION FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 CONTENTS Page INTRODUCTION 3 PART I. FINANCIAL INFORMATION Item 1. Financial Statements WPS RESOURCES CORPORATION Consolidated Statements of Income and Retained Earnings 4 Consolidated Balance Sheets 5 Consolidated Statements of Capitalization 6 Consolidated Statements of Cash Flows 7 WISCONSIN PUBLIC SERVICE CORPORATION Consolidated Statements of Income 8 Consolidated Balance Sheets 9 Consolidated Statements of Capitalization 10 Consolidated Statements of Cash Flows 11 Consolidated Statements of Retained Earnings 12 CONDENSED NOTES TO FINANCIAL STATEMENTS OF WPS Resources Corporation and Wisconsin Public Service Corporation 13 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for WPS Resources Corporation and Wisconsin Public Service Corporation 14 - 18 PART II. OTHER INFORMATION Item 5. Other Information 19 - 20 Item 6. Exhibits and Reports on Form 8-K 21 Signatures 22 - 23 EXHIBIT INDEX 24 Exhibit 11 Statement Regarding Computation of Per Share Earnings WPS Resources Corporation Exhibit 27 Financial Data Schedule WPS Resources Corporation Wisconsin Public Service Corporation Exhibit 99-1 Financial and Statistical Forecast dated May 1, 1996 Wisconsin Public Service Corporation -2- PAGE INTRODUCTION The unaudited interim financial statements presented herein include the consolidated statements of WPS Resources Corporation and Subsidiaries ("Company") as well as separate consolidated financial statements for Wisconsin Public Service Corporation ("WPSC"). The unaudited statements have been prepared by the Company and WPSC, respectively, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations. The Company and WPSC believe, however, that the disclosures are adequate to make the information presented not misleading. The Company's and WPSC's consolidated financial statements should be read in conjunction with the financial statements and notes thereto incorporated by reference in the respective Annual Reports on Form 10-K of WPS Resources Corporation and Wisconsin Public Service Corporation for the year ended December 31, 1995. In the opinion of the Company and WPSC, their respective interim financial statements filed as part of this Form 10-Q reflect all adjustments necessary to present fairly the results for the respective periods. Due to the influence of weather and other factors which are characteristics of WPSC's utility operations, financial results for the periods ended March 31, 1996 and 1995 are not necessarily indicative of trends for any 12-month period. -3- PAGE Part I. FINANCIAL INFORMATION Item 1. Financial Statements WPS RESOURCES CORPORATION
=========================================================================================== CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three Months Ended (Thousands, except per share amounts) March 31 1996 1995 =========================================================================================== Operating revenues Electric $122,564 $121,100 Gas 128,289 66,611 Other 484 - - ------------------------------------------------------------------------------------------- Total operating revenues 251,337 187,711 =========================================================================================== Operating expenses Electric production fuels 26,549 24,119 Purchased power 7,099 12,081 Gas purchased for resale 104,141 44,911 Other operating expenses 39,947 35,995 Maintenance 9,248 13,276 Depreciation and decommissioning 16,508 16,575 Taxes other than income 6,846 6,482 - ------------------------------------------------------------------------------------------- Total operating expenses 210,338 153,439 =========================================================================================== Operating income 40,999 34,272 - ------------------------------------------------------------------------------------------- Other income Allowance for equity funds used during construction 37 25 Other, net 1,318 4,027 - ------------------------------------------------------------------------------------------- Total other income 1,355 4,052 =========================================================================================== Income before interest expense 42,354 38,324 - ------------------------------------------------------------------------------------------- Interest on long-term debt 5,409 5,931 Other interest 708 510 Allowance for borrowed funds used during construction (32) (33) - ------------------------------------------------------------------------------------------- Total interest expense 6,085 6,408 =========================================================================================== Income before income taxes 36,269 31,916 Income taxes 11,971 10,900 Preferred stock dividends of subsidiary 778 778 - ------------------------------------------------------------------------------------------- Net income 23,520 20,238 =========================================================================================== Retained earnings at beginning of period 308,965 297,592 Cash dividends on common stock 11,112 10,873 - ------------------------------------------------------------------------------------------- Retained earnings at end of period $321,373 $306,957 =========================================================================================== Average shares of common stock outstanding 23,896 23,897 Earnings per average share of common stock $0.98 $0.85 Dividend per share of common stock $0.465 $0.455 ===========================================================================================
The accompanying notes are an integral part of these statements. -4- PAGE WPS RESOURCES CORPORATION
======================================================================================================= CONSOLIDATED BALANCE SHEETS March 31 December 31 (Thousands) 1996 1995 ======================================================================================================= ASSETS - ------------------------------------------------------------------------------------------------------- Utility plant Electric $1,445,256 $1,441,126 Gas 231,627 229,604 - ------------------------------------------------------------------------------------------------------- Total 1,676,883 1,670,730 Less - Accumulated depreciation and decommissioning 924,922 905,519 - ------------------------------------------------------------------------------------------------------- Total 751,961 765,211 Nuclear decommissioning trusts 86,536 82,109 Construction in progress 12,407 8,463 Nuclear fuel, less accumulated amortization 13,201 14,275 - ------------------------------------------------------------------------------------------------------- Net utility plant 864,105 870,058 ======================================================================================================= Current assets Cash and equivalents 35,139 6,533 Customer and other receivables, net of reserves 92,786 79,301 Accrued utility revenues 31,137 37,586 Fossil fuel, at average cost 8,565 8,701 Gas in storage, at average cost 1,838 10,076 Materials and supplies, at average cost 20,887 20,312 Prepayments and other 16,696 23,576 - ------------------------------------------------------------------------------------------------------- Total current assets 207,048 186,085 ======================================================================================================= Regulatory assets 109,288 111,101 Investments and other assets 102,135 99,499 ======================================================================================================= Total $1,282,576 $1,266,743 ======================================================================================================= CAPITALIZATION AND LIABILITIES - ------------------------------------------------------------------------------------------------------- Capitalization Common stock equity $473,496 $463,441 Preferred stock of subsidiary with no mandatory redemption 51,200 51,200 Long-term debt 306,974 306,590 - ------------------------------------------------------------------------------------------------------- Total capitalization 831,670 821,231 ======================================================================================================= Current liabilities Notes payable 10,000 15,000 Commercial paper - 11,500 Accounts payable 77,501 67,483 Accrued taxes 11,518 1,744 Accrued interest 5,288 8,378 Gas refunds 1,351 6,879 Other 26,808 14,668 - ------------------------------------------------------------------------------------------------------- Total current liabilities 132,466 125,652 ======================================================================================================= Long-term liabilities and deferred credits Accumulated deferred income taxes 134,735 135,958 Accumulated deferred investment credits 30,003 30,447 Regulatory liabilities 48,904 49,924 Environmental remediation liabilities 41,697 41,697 Long-term liabilities 63,101 61,834 - ------------------------------------------------------------------------------------------------------- Total long-term liabilities and deferred credits 318,440 319,860 ======================================================================================================= Total $1,282,576 $1,266,743 =======================================================================================================
The accompanying notes are an integral part of these statements. -5- PAGE WPS RESOURCES CORPORATION
============================================================================================================ CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31 (Thousands, except share amounts) 1996 1995 ============================================================================================================ Common stock equity Common stock, $1 par value, 100,000,000 shares authorized; and 23,896,962 shares outstanding $23,897 $23,897 Premium on capital stock 145,021 145,021 Retained earnings 321,373 308,965 Shares in deferred compensation trust, 2,628 shares at average cost of $33.26 per share (87) - ESOP loan guarantees (16,708) (16,346) Net unrealized security gains(net of taxes) - 1,904 - ------------------------------------------------------------------------------------------------------------ Total common stock equity 473,496 463,441 ============================================================================================================ Preferred stock - Wisconsin Public Service Corporation Cumulative, $100 par value, 1,000,000 shares authorized; with no mandatory redemption Series Shares Outstanding ------ ------------------ 5.00% 132,000 13,200 13,200 5.04% 30,000 3,000 3,000 5.08% 50,000 5,000 5,000 6.76% 150,000 15,000 15,000 6.88% 150,000 15,000 15,000 - ------------------------------------------------------------------------------------------------------------ Total preferred stock 51,200 51,200 ============================================================================================================ Long-term debt First mortgage bonds - Wisconsin Public Service Corporation Series Year Due ------ -------- 5-1/4% 1998 50,000 50,000 7.30% 2002 50,000 50,000 6.80% 2003 50,000 50,000 6-1/8% 2005 9,075 9,075 6.90% 2013 22,000 22,000 8.80% 2021 60,000 60,000 7-1/8% 2023 50,000 50,000 - ------------------------------------------------------------------------------------------------------------ Total 291,075 291,075 Unamortized discount and premium on bonds, net (1,044) (1,066) - ------------------------------------------------------------------------------------------------------------ Total first mortgage bonds 290,031 290,009 - ------------------------------------------------------------------------------------------------------------ ESOP loan guarantees 16,708 16,346 Other long-term debt 235 235 - ------------------------------------------------------------------------------------------------------------ Total long-term debt 306,974 306,590 ============================================================================================================ Total capitalization $831,670 $821,231 ============================================================================================================
The accompanying notes are an integral part of these statements. -6- PAGE WPS RESOURCES CORPORATION =========================================================================================== CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended (Thousands) March 31 1996 1995 =========================================================================================== Cash flows from operating activities Net income $23,520 $20,238 Adjustments to reconcile net income to net cash from operating activities Depreciation and decommissioning 16,508 16,575 Amortization of nuclear fuel and other 7,898 7,691 Deferred income taxes (1,919) (3,053) Investment tax credit restored (444) (449) AFUDC equity (37) (25) Pension income (3,118) (3,231) Postretirement funding 1,985 1,666 Deferred demand-side management expenditures (2,444) (3,174) Other, net 6,865 (1,161) Changes in Customer and other receivables (13,485) (5,558) Accrued utility revenues 6,449 2,768 Fossil fuel inventory 136 (1,445) Gas in storage 8,238 12,911 Accounts payable 10,018 (15,690) Miscellaneous current and accrued liabilities 6,978 20,366 Accrued taxes 9,774 11,078 Gas refunds (5,528) 6,576 - ------------------------------------------------------------------------------------------- Net cash from operating activities 71,394 66,083 =========================================================================================== Cash flows from (used for) investing activities Construction and nuclear fuel expenditures (11,525) (13,467) Allowance for borrowed funds used during construction (32) (33) Decommissioning funding (2,244) (3,537) Purchase of investments - (4,000) Other (1,288) (799) - ------------------------------------------------------------------------------------------- Net cash from (used for) investing activities (15,089) (21,836) =========================================================================================== Cash flows from (used for) financing activities Change in notes payable (5,000) - Change in commercial paper (11,500) (12,500) Cash dividends on common stock (11,112) (10,873) Purchase of treasury stock (87) - - ------------------------------------------------------------------------------------------- Net cash from (used for) financing activities (27,699) (23,373) =========================================================================================== Net increase (decrease) in cash and equivalents 28,606 20,874 Cash and equivalents at beginning of period 6,533 13,167 =========================================================================================== Cash and equivalents at end of period $35,139 $34,041 =========================================================================================== Cash paid during period for Interest, less amount capitalized $8,444 $8,330 Income taxes 1,709 2,211 Preferred stock dividends of subsidiary 778 778 ===========================================================================================
The accompanying notes are an integral part of these statements. -7- PAGE WISCONSIN PUBLIC SERVICE CORPORATION
=========================================================================================== CONSOLIDATED STATEMENTS OF INCOME Three Months Ended (Thousands) March 31 1996 1995 =========================================================================================== Operating revenues Electric $122,564 $121,100 Gas 78,373 59,360 - ------------------------------------------------------------------------------------------- Total operating revenues 200,937 180,460 =========================================================================================== Operating expenses Electric production fuels 26,549 24,119 Purchased power 7,099 12,081 Gas purchased for resale 53,741 37,883 Other operating expenses 38,500 35,640 Maintenance 9,248 13,276 Depreciation and decommissioning 16,269 16,575 Federal income taxes 9,984 8,193 Investment tax credit restored (444) (449) State income taxes 3,184 2,440 Gross receipts and other taxes 6,846 6,481 - ------------------------------------------------------------------------------------------- Total operating expenses 170,976 156,239 =========================================================================================== Operating income 29,961 24,221 - ------------------------------------------------------------------------------------------- Other income Allowance for equity funds used during construction 37 25 Other, net 1,265 4,015 Income taxes (100) (710) - ------------------------------------------------------------------------------------------- Total other income 1,202 3,330 =========================================================================================== Income before interest expense 31,163 27,551 - ------------------------------------------------------------------------------------------- Interest on long-term debt 5,543 5,931 Other interest 692 646 Allowance for borrowed funds used during construction (32) (33) - ------------------------------------------------------------------------------------------- Total interest expense 6,203 6,544 =========================================================================================== Net income 24,960 21,007 Preferred stock dividend requirements 778 778 - ------------------------------------------------------------------------------------------- Earnings on common stock $24,182 $20,229 ===========================================================================================
The accompanying notes are an integral part of these statements. -8- PAGE WISCONSIN PUBLIC SERVICE CORPORATION ================================================================================================= CONSOLIDATED BALANCE SHEETS March 31 December 31 (Thousands) 1996 1995 ================================================================================================= ASSETS - ------------------------------------------------------------------------------------------------- Utility plant Electric $1,445,217 $1,441,126 Gas 230,252 228,346 - ------------------------------------------------------------------------------------------------- Total 1,675,469 1,669,472 Less - Accumulated depreciation and decommissioning 924,798 905,427 - ------------------------------------------------------------------------------------------------- Total 750,671 764,045 Nuclear decommissioning trusts 86,536 82,109 Construction in progress 12,407 8,463 Nuclear fuel, less accumulated amortization 13,201 14,275 - ------------------------------------------------------------------------------------------------- Net utility plant 862,815 868,892 ================================================================================================= Current assets Cash and equivalents 21,979 4,471 Customer and other receivables, net of reserves 70,462 62,156 Accrued utility revenues 31,137 37,586 Fossil fuel, at average cost 8,565 8,701 Gas in storage, at average cost 1,411 9,903 Materials and supplies, at average cost 20,887 20,312 Prepayments and other 16,601 23,526 - ------------------------------------------------------------------------------------------------- Total current assets 171,042 166,655 ================================================================================================= Regulatory assets 109,288 111,101 Investments and other assets 89,239 86,763 ================================================================================================= Total $1,232,384 $1,233,411 ================================================================================================= CAPITALIZATION AND LIABILITIES - ------------------------------------------------------------------------------------------------- Capitalization Common stock equity $445,179 $445,375 Preferred stock with no mandatory redemption 51,200 51,200 Long-term debt to parent 6,079 6,101 Long-term debt 306,974 306,590 - ------------------------------------------------------------------------------------------------- Total capitalization 809,432 809,266 ================================================================================================= Current liabilities Note payable 10,000 10,000 Commercial paper - 11,500 Accounts payable 49,339 52,881 Accrued taxes 11,518 1,744 Accrued interest 5,288 8,378 Gas refunds 1,351 6,879 Other 26,663 12,635 - ------------------------------------------------------------------------------------------------- Total current liabilities 104,159 104,017 ================================================================================================= Long-term liabilities and deferred credits Accumulated deferred income taxes 135,102 136,226 Accumulated deferred investment tax credits 30,003 30,447 Regulatory liabilities 48,904 49,924 Environmental remediation liabilities 41,697 41,697 Long-term liabilities 63,087 61,834 - ------------------------------------------------------------------------------------------------- Total long-term liabilities and deferred credits 318,793 320,128 ================================================================================================= Total $1,232,384 $1,233,411 =================================================================================================
The accompanying notes are an integral part of these statements. -9- PAGE WISCONSIN PUBLIC SERVICE CORPORATION
=============================================================================================== CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31 (Thousands, except share amounts) 1996 1995 =============================================================================================== Common stock equity Common stock $ 95,588 $ 95,588 Premium on capital stock 73,842 73,842 Retained earnings 292,457 290,387 ESOP loan guarantees (16,708) (16,346) Net unrealized security gains (net of taxes) - 1,904 - ----------------------------------------------------------------------------------------------- Total common stock equity 445,179 445,375 =============================================================================================== Preferred stock Cumulative, $100 par value, 1,000,000 shares authorized; with no mandatory redemption Series Shares Outstanding ------ ------------------ 5.00% 132,000 13,200 13,200 5.04% 30,000 3,000 3,000 5.08% 50,000 5,000 5,000 6.76% 150,000 15,000 15,000 6.88% 150,000 15,000 15,000 - ----------------------------------------------------------------------------------------------- Total preferred stock 51,200 51,200 =============================================================================================== Long-term note to parent Series Year Due ------ -------- 8.76% 2014 6,079 6,101 =============================================================================================== 6,079 6,101 Long-term debt First mortgage bonds Series Year Due ------ -------- 5-1/4% 1998 50,000 50,000 7.30% 2002 50,000 50,000 6.80% 2003 50,000 50,000 6-1/8% 2005 9,075 9,075 6.90% 2013 22,000 22,000 8.80% 2021 60,000 60,000 7-1/8% 2023 50,000 50,000 - ----------------------------------------------------------------------------------------------- Total 291,075 291,075 Unamortized discount and premium on bonds, net (1,044) (1,066) - ----------------------------------------------------------------------------------------------- Total first mortgage bonds 290,031 290,009 - ----------------------------------------------------------------------------------------------- ESOP loan guarantees 16,708 16,346 Other long-term debt 235 235 - ----------------------------------------------------------------------------------------------- Total long-term debt 306,974 306,590 =============================================================================================== Total capitalization $809,432 $809,266 ===============================================================================================
The accompanying notes are an integral part of these statements. -10- PAGE WISCONSIN PUBLIC SERVICE CORPORATION
=========================================================================================== CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended (Thousands) March 31 1996 1995 =========================================================================================== Cash flows from operating activities Net income $24,960 $21,007 Adjustments to reconcile net income to net cash from operating activities Depreciation and decommissioning 16,269 16,575 Amortization of nuclear fuel and other 7,612 7,691 Deferred income taxes (1,820) (3,123) Investment tax credit restored (444) (449) AFUDC equity (37) (25) Pension income (3,118) (3,231) Postretirement funding 1,985 1,666 Deferred demand-side management expenditures (2,444) (3,174) Other, net 5,286 (1,532) Changes in Customer and other receivables (8,306) (5,512) Accrued utility revenues 6,449 2,768 Fossil fuel 136 (1,445) Gas in storage 8,492 13,343 Accounts payable (3,542) (16,864) Miscellaneous current and accrued liabilities 10,938 20,579 Accrued taxes 9,774 11,106 Gas refunds (5,528) 6,576 - ------------------------------------------------------------------------------------------- Net cash from operating activities 66,662 65,956 =========================================================================================== Cash flows from (used for) investing activities Construction and nuclear fuel expenditures (11,557) (13,500) Decommissioning funding (2,244) (3,537) Other (963) (799) - ------------------------------------------------------------------------------------------- Net cash from (used for) investing activities (14,764) (17,836) =========================================================================================== Cash flows from (used for) financing activities Change in commercial paper (11,500) (12,500) Preferred stock dividends (778) (778) Cash dividends on common stock (22,112) (10,873) - ------------------------------------------------------------------------------------------- Net cash from (used for) financing activities (34,390) (24,151) =========================================================================================== Net increase (decrease) in cash and equivalents 17,508 23,969 Cash and equivalents at beginning of period 4,471 3,449 =========================================================================================== Cash and equivalents at end of period $21,979 $27,418 =========================================================================================== Cash paid during period for Interest, less amount capitalized $8,429 $8,330 Income taxes 1,700 2,198 ===========================================================================================
The accompanying notes are an integral part of these statements. -11- PAGE WISCONSIN PUBLIC SERVICE CORPORATION
=========================================================================================== CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Three Months Ended (Thousands) March 31 1996 1995 =========================================================================================== Balance at beginning of period $290,387 $280,730 Add Net income 24,960 21,007 - ------------------------------------------------------------------------------------------- 315,347 301,737 - ------------------------------------------------------------------------------------------- Deduct Cash dividends declared on preferred stock 778 778 Dividends declared on common stock 22,112 13,373 - ------------------------------------------------------------------------------------------- 22,890 14,151 - ------------------------------------------------------------------------------------------- Balance at end of period $292,457 $287,586 ===========================================================================================
The accompanying notes are an integral part of these statements. -12- PAGE WPS RESOURCES CORPORATION AND SUBSIDIARIES WISCONSIN PUBLIC SERVICE CORPORATION CONDENSED NOTES TO FINANCIAL STATEMENTS MARCH 31, 1996 NOTE 1. FINANCIAL INFORMATION ______________________________ The following consolidated financial statements have been prepared by WPS Resources Corporation ("Company") and Wisconsin Public Service Corporation ("WPSC"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission ("SEC") and, in the opinion of Management, include all adjustments (consisting only of normal recurring adjustments) necessary for a fair statement of results for each period shown. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such SEC rules and regulations. The Company believes that the disclosures made are adequate to make the information presented not misleading. It is recommended that these financial statements be read in conjunction with the financial statements and notes thereto included in the Company's and WPSC's latest annual reports on Form 10-K. Because of the seasonal nature of the Company's operations, interim results are not necessarily indicative of annual results. -13- ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS WPS Resources Corporation ("Company") is a holding company. Approximately 96% and 80% of the Company's assets and revenues, respectively, are derived from Wisconsin Public Service Corporation ("WPSC"), an electric and gas utility. OVERVIEW OF FIRST QUARTER OF 1996 COMPARED TO FIRST QUARTER OF 1995 Earnings per share increased from $.85 in 1995 to $.98 in 1996, or 15.3%. The most significant reason was colder than normal weather which resulted in a 17.9% increase in heating degree days. This increased residential electric and gas consumption 7.4% and 15.8%, respectively. ELECTRIC OPERATIONS Electric margins increased by $4.0 million, or 4.7%, due to lower fuel costs and increased consumption due to the weather in the residential, and commercial and industrial sectors, which are higher margin sales. First Quarter --------------------------- Electric Margins (000's) 1996 1995 - ------------------------ ---- ---- Revenues $122,564 $121,100 Fuel and purchases 33,648 36,200 ------- ------- Margin $ 88,916 $ 84,900 ======= ======= Sales in kilowatt-hours (000) 2,737,830 2,760,398 Electric generating revenues increased $1.5 million, or 1.2%, during the first quarter of 1996 as compared to the first quarter of 1995. Residential Kwh sales increased 7.4% due to colder weather. Commercial and industrial Kwh sales rose 1.5% reflecting the colder weather and customer growth. Wholesale Kwh sales decreased 17.6% due to reduced demand from WPSC's largest wholesale customer. Electric fuels and purchases decreased $2.6 million, or 7.0%, in the first quarter of 1996 as compared to the same period in 1995. This decrease was the result of lower purchased power of $5.0 million, or 41.2%, reflecting 42.7% lower Kwh purchases. Purchased power requirements were reduced due to increased production at WPSC's coal-fired plants. Certain units were down for maintenance in the first quarter of 1995. This decrease was offset somewhat by an increase in coal-fired production of 17.0%, or $3.5 million, and was -14- partially offset by a 4.8%, or $1.2 million, reduction in coal costs from burning less expensive low sulphur coal. GAS OPERATIONS Gas margins increased $2.4 million, or 11.3%, due to the colder than normal weather. First Quarter -------------------------- Gas Margins (000's) 1996 1995 - ------------------- ---- ---- Revenues $128,289 $66,611 Purchase costs 104,141 44,911 ------- ------ Margin $ 24,148 $21,700 ======= ====== Volume in therms (000) 392,528 261,321 The Public Service Commission of Wisconsin ("PSCW") allows WPSC to pass on to its customers, through a purchased gas adjustment clause, changes in the cost of gas. Gas operating revenues increased $61.7 million, or 92.6%, during the first quarter of 1996 compared to the first quarter of 1995. The $61.7 million increase is comprised of colder than normal weather, customer growth, and higher gas costs as a result of the weather. At WPSC, revenues increased $19.0 million or 32.0%. This reflects increased gas sales volumes of 16.6% resulting from the colder weather and the higher cost of gas. In addition, sales at WPS Energy Services, Inc. ("ESI"), an energy marketing subsidiary, increased by $42.7 million or 588.4%. This reflects a number of factors--the acquisition of a gas marketing company in the fourth quarter of 1995, higher sales volumes due to customer growth, colder weather, and higher unit prices due to gas commodity market conditions. Gas purchased for resale showed a net increase of $59.2 million, or 131.9%, in the first quarter of 1996 as compared to the same period in 1995. WPSC gas purchases increased $15.9 million due to higher demand as a result of the weather and higher gas costs, which on average increased 19.3% per dekatherm. ESI gas purchases increased $43.3 million as the result of the acquisition discussed above, customer growth, the weather, and higher gas costs. As a result of unusually high purchased gas costs during an extremely cold period in February 1996, ESI incurred losses on certain sales resulting in an overall negative gas margin for the first quarter of 1996 of $.6 million. OTHER Other operating expenses increased $3.9 million, or 10.1%. There was an increase in gas operating expenses of $1.2 million as a result of -15- the colder weather, and a $1.5 million increase in customer accounts expense. This primarily relates to the expansion of WPSC's customer call center. Maintenance decreased by $4.0 million, or 30.3%, in the first quarter of 1996 as compared to 1995 due to lower maintenance activity at WPSC's coal-fired plants. Other income decreased by $2.7 million, or 66.6%, in the first quarter of 1996 compared to the same period in 1995. This decrease was the result of two factors that occurred in 1995 which had a significant impact on other income. The first factor was a $1.6 million pretax gain on the decommissioning portfolio due to the sale of certain investments. The second factor was receipt of $1.2 million in insurance proceeds as the result of the death of a retired company executive. Income taxes increased $1.1 million, or 9.8%, in the first quarter of 1996 compared to the same period in 1995, due primarily to higher earnings. FINANCIAL CONDITION WPSC requires large investments in capital assets used to deliver electric and gas services. Most of the Company's capital expenditures relate to WPSC's construction expenditures. WPSC maintains good liquidity levels and a financial condition considered to be strong by utility analysts. Internally generated funds exceeded the Company's cash requirements resulting in the reduction of short-term borrowings during the first three months of 1996, along with short-term investments. No funding difficulties are anticipated in the future. Pretax interest coverage was 4.5 times for the 12 months ended March 31, 1996 for WPSC. WPSC's bond ratings are AA+ (Standard & Poor's and Duff & Phelps) and Aa2 (Moody's). WPSC made application to the PSCW on March 15, 1996 for authority to procure and install replacement steam generators at the Kewaunee Nuclear Power Plant ("Kewaunee"). Replacement is projected for 1999 at a total capital cost estimated to be approximately $100 million. In WPSC's opinion, replacement of the steam generators is the least cost and lowest risk option to restore Kewaunee to full rated capacity and allow continued operation until expiration of the operating license in the year 2013. Kewaunee is operated by WPSC and owned jointly with two other utilities. WPSC's current ownership interest in Kewaunee is 41.2%. The steam generator tubes at Kewaunee are susceptible to the corrosion and cracking phenomena seen throughout the nuclear industry. Kewaunee is not operating at full rated capacity due to the plugging of tubes in both steam generators. Steam Generator A is currently 24.94% effectively plugged and Steam Generator B is 17.69% effectively plugged for an average of 21.32%. The current Kewaunee safety analysis report allows an effective tube plugging limit of up to 25% -16- average for both steam generators, not to exceed 25% in either steam generator. Analyses are currently being performed which WPSC believes will increase the effective plugging limit to 30%. Without replacement of the steam generators, existing and projected plugging could make the continued operation of Kewaunee uneconomic sometime during the 2002 to 2006 time frame. Currently the owners of Kewaunee have differing views on the desirability of proceeding with the steam generator replacement project. WPSC is negotiating with the other Kewaunee owners to resolve this and other ownership issues. As described in the application filed with the PSCW, WPSC is willing to consider acquiring full ownership of Kewaunee upon satisfactory resolution of issues relating to decommissioning liability and funding of decommissioning costs as well as price and other issues. The Kewaunee owners have not reached agreement on these matters, but negotiations are ongoing. If the steam generator replacement project receives PSCW approval, the issues relating to the future ownership would still need to be resolved before the steam generator replacement could proceed. WPSC has applied to the PSCW for acceleration of the depreciation and decommissioning collections relative to Kewaunee such that by the end of the year 2002 there would be full recovery of all plant investment exclusive of that related to the new steam generators, and there would be funding adequate to fully fund currently forecasted decommissioning expenditures. With respect to depreciation, WPSC has requested a special depreciation accrual (over and above the amount presently being accrued) in the amount of $5.5 million for each of the six years 1997 to 2002. With respect to decommissioning, WPSC has requested an increase in the annual retail nonqualified fund contribution of $8.8 million, from $1.3 million to $10.1 million. No change has been requested in the retail qualified fund contribution currently set at $7.1 million. The request for these accelerations reflects the condition of the present steam generators and the evolution of the electric generation marketplace toward a more competitive model. In addition to the proposed replacement of the steam generators, the following actions are or will be taken: (1) The Nuclear Regulatory Commission ("NRC") has been requested to redefine the pressure boundary point of the repaired steam generator tubes, which have been removed from service by plugging, in order to allow the return of many of the tubes to service; thus, permitting Kewaunee to return to full licensed power. (2) The NRC will be requested to increase the steam generator effective plugging limit from 25% to 30%. (3) A request will be submitted to the NRC to allow the owners to pursue welded repair technologies to repair existing sleeved tubes in an effort to return plugged tubes to service. -17- Even if these courses of action are approved, there will still be a need to replace the steam generators. These actions will prolong the life of the existing steam generator tubes, but they will not stop the ultimate corrosion. For the three-year period 1996 to 1998, internally generated funds are expected to lag construction expenditures and other investments totaling $248 million by about $33 million. These expenditures are comprised of $140 million for electric construction, $20 million for nuclear fuel, $35 million for gas construction, $21 million for other construction expenditures, and $32 million for nuclear decommissioning and other investments. The company currently expects to finance this shortfall in internally generated funds through short-term debt. This excludes any expenditures for the replacement of the steam generator units at the Kewaunee Nuclear Plant. In March 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of, effective January 1, 1996. This statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The adoption of this new standard did not materially impact first quarter 1996 results based on prior and current rate treatment of such costs. However, the PSCW has initiated proceedings to consider restructuring electric utility regulation in Wisconsin, and one of the issues on its agenda is stranded investment. Stranded investment is unrecovered investment in facilities that are no longer economical to operate. Therefore, the extent and impact of any change in the current regulatory compact is not known at this time. -18- PAGE PART II. OTHER INFORMATION ITEM 5. OTHER INFORMATION KEWAUNEE NUCLEAR POWER PLANT Wisconsin Public Service Corporation ("WPSC") made application to the Public Service Commission of Wisconsin ("PSCW") on March 15, 1996 for authority to procure and install replacement steam generators at the Kewaunee Nuclear Power Plant ("Kewaunee"). Replacement is projected for 1999 at a total capital cost estimated to be approximately $100 million. In WPSC's opinion, replacement of the steam generators is the least cost and lowest risk option to restore Kewaunee to full rated capacity and allow continued operation until expiration of the operating license in the year 2013. Kewaunee is operated by WPSC and owned jointly with two other utilities. WPSC's current ownership interest in Kewaunee is 41.2%. The steam generator tubes at Kewaunee are susceptible to the corrosion and cracking phenomena seen throughout the nuclear industry. Kewaunee is not operating at full rated capacity due to the plugging of tubes in both steam generators. Steam Generator A is currently 24.94% effectively plugged and Steam Generator B is 17.69% effectively plugged for an average of 21.32%. The current Kewaunee safety analysis report allows an effective tube plugging limit of up to 25% average for both steam generators, not to exceed 25% in either steam generator. Analyses are currently being performed which WPSC believes will increase the effective plugging limit to 30%. Without replacement of the steam generators, existing and projected plugging could make the continued operation of Kewaunee uneconomic sometime during the 2002 to 2006 time frame. Currently the owners of Kewaunee have differing views on the desirability of proceeding with the steam generator replacement project. WPSC is negotiating with the other Kewaunee owners to resolve this and other ownership issues. As described in the application filed with the PSCW, WPSC is willing to consider acquiring full ownership of Kewaunee upon satisfactory resolution of issues relating to decommissioning liability and funding of decommissioning costs as well as price and other issues. The Kewaunee owners have not reached agreement on these matters, but negotiations are ongoing. If the steam generator replacement project receives PSCW approval, the issues relating to the future ownership would still need to be resolved before the steam generator replacement could proceed. WPSC has applied to the PSCW for acceleration of the depreciation and decommissioning collections relative to Kewaunee such that by the end of the year 2002 there would be full recovery of all plant investment exclusive of that related to the new steam generators, and there would be funding adequate to fully fund currently forecasted decommissioning expenditures. With respect to depreciation, WPSC has requested a special depreciation accrual (over and above the amount presently being accrued) in the amount of $5.5 million for each of the six years 1997 to 2002. With respect to decommissioning, WPSC has requested an -19- increase in the annual retail nonqualified fund contribution of $8.8 million, from $1.3 million to $10.1 million. No change has been requested in the retail qualified fund contribution currently set at $7.1 million. The request for these accelerations reflects the condition of the present steam generators and the evolution of the electric generation marketplace toward a more competitive model. In addition to the proposed replacement of the steam generators, the following actions are or will be taken: (1) The Nuclear Regulatory Commission ("NRC") has been requested to redefine the pressure boundary point of the repaired steam generator tubes, which have been removed from service by plugging, in order to allow the return of many of the tubes to service; thus, permitting Kewaunee to return to full licensed power. (2) The NRC will be requested to increase the steam generator effective plugging limit from 25% to 30%. (3) A request will be submitted to the NRC to allow the owners to pursue welded repair technologies to repair existing sleeved tubes in an effort to return plugged tubes to service. Even if these courses of action are approved, there will still be a need to replace the steam generators. These actions will prolong the life of the existing steam generator tubes, but they will not stop the ultimate corrosion. See the Annual Report on Form 10-K for the year ended December 31, 1995, Part I, Item 1. Business, Section B. Electric Matters - Kewaunee Nuclear Power Plant, at page 4, for additional information. CUSTOMER RATE MATTERS On April 1, 1996, WPSC made application to the PSCW to decrease retail electric rates 1.1%, or $5.0 million annually, and to increase gas rates 3.7%, or $7.3 million annually. New rates, when approved by the PSCW, will become effective January 1, 1997 and will remain in effect for the years 1997 and 1998. The final rates will be based upon revised projections and PSCW findings after staff review. No assurance can be given that rate changes in the range of those requested will result. The application for new electric rates included the acceleration of the depreciation and decommissioning collections relative to Kewaunee such that by the end of 2001 there would be full recovery of all plant investment exclusive of that related to the new steam generators, and there would be funding adequate to fully fund currently forecasted decommissioning expenditures. The filing will be amended to reflect accelerated collections over the period 1997 through 2002. This change will decrease annual electric revenue requirements by $7.0 million. -20- Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following documents are filed herewith: Exhibit 11 Statement Regarding Computation of Per Share Earnings WPS Resources Corporation Exhibit 27 Financial Data Schedule WPS Resources Corporation Wisconsin Public Service Corporation Exhibit 99-1 Financial and Statistical Forecast dated May 1, 1996 Wisconsin Public Service Corporation -21- SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, WPS Resources Corporation, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WPS Resources Corporation Date: April 26, 1996 /s/ D. L. Ford ________________________________ D. L. Ford Controller (Chief Accounting Officer) -22- PAGE SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Wisconsin Public Service Corporation, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Wisconsin Public Service Corporation Date: April 26, 1996 /s/ D. L. Ford ____________________________________ D. L. Ford Controller (Chief Accounting Officer) -23- WPSC RESOURCES CORPORATION AND WISCONSIN PUBLIC SERVICE CORPORATION EXHIBIT INDEX TO FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996 Exhibit No. Description ___________ ___________ 11 Statement Regarding Computation of Per Share Earnings WPS Resources Corporation 27 Financial Data Schedule WPS Resources Corporation Wisconsin Public Service Corporation 99-1 Financial and Statistical Forecast dated May 1, 1996 Wisconsin Public Service Corporation -24- EX-11 2 EXHIBIT 11 WPS RESOURCES CORPORATION
============================================================================== INFORMATION WITH RESPECT TO THE COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK Three Months Ended (Thousands) March 31 1996 1995 ============================================================================== Shares of common stock at beginning of period 23,897 23,897 Shares of common stock purchased for deferred compensation trust - Date of deferred Number compensation trust purchase of Shares - --------------------------- --------- January 22, 1996 469 1 February 20, 1996 1,027 1 March 21, 1996 1,132 1 - ------------------------------------------------------------------------------ Shares of common stock at end of period 23,894 23,897 ============================================================================== Computation of daily weighted average shares: Shares of common stock at beginning of period - Number Number of of Days Shares ------ ------ March 31, 1995 90 23,896,962 - 2,150,727 March 31, 1996 21 23,896,962 501,836 - Shares of common stock after purchase for deferred compensation trust - Number Number of of Days Shares ------ ------ March 31, 1996 29 23,896,493 692,998 - March 31, 1996 10 23,895,466 238,955 - March 31, 1996 20 23,895,467 477,909 - March 31, 1996 11 23,894,334 262,838 - - ------------------------------------------------------------------------------ Total days - weighted 2,174,536 2,150,727 ============================================================================== Average number of shares of common stock based on daily weighted average computations 23,896 23,897 ============================================================================== Earnings on common stock, as set forth in statements of income $23,520 $20,238 ============================================================================== Earnings per share of common stock based on weighted average shares $0.98 $0.85 ==============================================================================
The accompanying notes to financial statements are an integral part of these statements. EX-27 3
UT EXHIBIT 27 0000916863 WPS RESOURCES CORPORATION 1 WISCONSIN PUBLIC SERVICE CORPORATION 1,000 3-MOS DEC-31-1996 JAN-01-1996 MAR-31-1996 PER-BOOK 864,105 102,135 207,048 109,288 0 1,282,576 23,897 145,021 304,578 473,496 0 51,200 306,974 10,000 0 0 0 0 0 0 0 841,670 251,337 11,971 210,338 210,338 40,999 1,355 42,354 6,085 24,298 778 23,520 11,112 8,444 71,394 .98 .98 Operating expenses exclude income taxes of $11,971. Operating income is before income taxes of $11,971. Income before interest expense is before income taxes of $11,971.
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