<PAGE> 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 September 30, 1994
OR
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 1-1245
WISCONSIN ELECTRIC POWER COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0476280
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
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.
Class Outstanding at November 1, 1994
-------------------------- -------------------------------
$10 Par Value Common Stock 33,289,327 Shares
<PAGE> 2
<TABLE>
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ELECTRIC POWER COMPANY
CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 1994 1993
------ ------ ------ ------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues
Electric $361,735 $354,126 $1,056,249 $1,008,742
Steam 1,214 1,310 10,640 9,761
-------- -------- --------- --------
Total Operating Revenues 362,949 355,436 1,066,889 1,018,503
Operating Expenses
Fuel 73,061 66,799 217,022 195,340
Purchased power 11,722 12,557 33,356 43,431
Other operation expenses 85,249 87,916 262,993 257,419
Maintenance 28,049 32,334 88,681 107,949
Revitalization - - 63,500 -
Depreciation 40,680 38,795 119,740 112,596
Taxes other than income taxes 17,000 17,307 54,081 52,269
Federal income tax 25,911 24,237 62,194 53,087
State income tax 6,014 5,478 14,623 12,632
Deferred income taxes - net 1,928 2,515 (12,566) 7,443
Investment tax credit - net (1,021) (991) (3,061) (2,972)
-------- -------- -------- --------
Total Operating Expenses 288,593 286,947 900,563 839,194
Operating Income 74,356 68,489 166,326 179,309
Other Income and Deductions
Interest income 3,117 3,552 8,645 10,892
Allowance for other funds used
during construction 1,358 1,946 4,119 6,120
Miscellaneous - net 2,254 2,394 6,275 6,946
Income taxes (531) (772) (1,255) (2,671)
-------- -------- -------- --------
Total Other Income and Deductions 6,198 7,120 17,784 21,287
Income Before Interest Charges 80,554 75,609 184,110 200,596
Interest Charges
Interest expense 25,210 23,907 75,623 73,678
Allowance for borrowed funds used
during construction (767) (1,099) (2,327) (3,417)
-------- -------- -------- --------
Total Interest Charges 24,443 22,808 73,296 70,261
-------- -------- -------- --------
Net Income 56,111 52,801 110,814 130,335
Preferred Stock Dividend Requirement 301 1,094 1,050 3,987
-------- -------- -------- --------
Earnings Available for Common Stockholder $ 55,810 $ 51,707 $109,764 $126,348
======== ======== ======== ========
Note - Earnings and dividends per share of common stock are not applicable because
all of the company's common stock is owned by Wisconsin Energy Corporation.
See accompanying notes to financial statements.
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</TABLE>
<PAGE> 3
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY FORM 10-Q
CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
September 30, 1994 December 31, 1993
------------------ -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Electric $4,260,835 $4,079,794
Steam 40,148 39,113
Accumulated provision for depreciation (1,892,806) (1,784,110)
---------- ----------
2,408,177 2,334,797
Construction work in progress 190,837 208,834
Nuclear fuel - net 52,869 52,665
---------- ----------
Net Utility Plant 2,651,883 2,596,296
Other Property and Investments 392,954 375,457
Current Assets
Cash and cash equivalents 26,274 13,421
Accounts receivable 85,767 91,849
Accrued utility revenues 88,687 89,306
Materials, supplies and fossil fuel 125,674 127,312
Prepayments and other assets 51,519 53,812
---------- ----------
Total Current Assets 377,921 375,700
---------- ----------
Deferred Charges and Other Assets
Accumulated deferred income taxes 117,092 97,788
Other 238,981 248,315
---------- ----------
Total Deferred Charges and Other Assets 356,073 346,103
---------- ----------
Total Assets $3,778,831 $3,693,556
========== ==========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 502,566 $ 472,566
Retained earnings 931,742 927,120
---------- ----------
Total Common Stock Equity 1,434,308 1,399,686
Preferred stock - redemption not required 30,451 30,451
Preferred stock - redemption required - 5,250
Long-term debt 1,186,448 1,188,744
---------- ----------
Total Capitalization 2,651,207 2,624,131
Current Liabilities
Long-term debt due currently 17,974 19,254
Short-term debt 143,226 117,903
Accounts payable 66,523 81,630
Accrued liabilities 55,459 61,775
Other 21,222 13,238
---------- ----------
Total Current Liabilities 304,404 293,800
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 443,041 444,717
Other 380,179 330,908
---------- ----------
Total Deferred Credits and Other Liabilities 823,220 775,625
---------- ----------
Total Capitalization and Liabilities $3,778,831 $3,693,556
========== ==========
<FN>
See accompanying notes to financial statements.
-3-
</TABLE>
<PAGE> 4
<TABLE>
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended September 30
------------------------------
1994 1993
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $110,814 $130,335
Reconciliation to cash:
Depreciation 119,740 112,596
Nuclear fuel expense - amortization 16,775 16,534
Conservation expense - amortization 17,705 11,358
Debt premium, discount & expense - amortization 10,477 9,143
Revitalization - net 46,890 -
Deferred income taxes - net (12,566) 7,443
Investment tax credit - net (3,061) (2,972)
Allowance for other funds used during construction (4,119) (6,120)
Change in: Accounts receivable 6,082 (8,364)
Inventories 1,638 948
Accounts payable (15,107) (7,144)
Other current assets 2,912 23,345
Other current liabilities 1,668 11,775
Other (5,663) (363)
-------- --------
Cash Provided by Operating Activities 294,185 298,514
Investing Activities:
Construction expenditures (172,316) (199,662)
Allowance for borrowed funds used during construction (2,327) (3,417)
Nuclear fuel (18,809) (12,706)
Nuclear decommissioning trust (7,732) (9,018)
Conservation investments - net (11,333) (22,214)
Other (8,407) (537)
-------- --------
Cash Used in Investing Activities (220,924) (247,554)
Financing Activities:
Sale of long-term debt 11,079 350,999
Retirement of long-term debt (15,614) (316,945)
Change in short-term debt 25,323 (2,790)
Stockholder contribution 30,000 -
Retirement of preferred stock (5,250) (65,504)
Dividends on stock - common (104,867) (48,750)
- preferred (1,079) (4,340)
-------- --------
Cash Used in Financing Activities (60,408) (87,330)
-------- --------
Change in Cash and Cash Equivalents $ 12,853 $(36,370)
======== ========
Supplemental Information Disclosures:
Cash Paid for:
Interest (net of amount capitalized) $ 65,385 $ 59,129
Income taxes 102,750 71,788
<FN>
See accompanying notes to financial statements.
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</TABLE>
<PAGE> 5
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited financial statements should be read in
conjunction with the company's 1993 Annual Report on Form 10-K. In the
opinion of management, all adjustments, normal and recurring in nature,
necessary to a fair statement of the results of operations and financial
position of the company have been included in the accompanying income
statement and balance sheet. The results of operations for the three
months and nine months ended September 30, 1994 are not, however,
necessarily indicative of the results which may be expected for the year
1994 because of seasonal and other factors.
2. In the first quarter of 1994, Wisconsin Electric Power Company recorded
a $63.5 million charge related to its revitalization program. The charge
reflects primarily the costs of voluntary severance and early retirement
packages which are being used to reduce employee staffing levels.
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<PAGE> 6
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by Wisconsin Electric Power Company's ("Wisconsin Electric")
operating activities totaled $294 million during the nine months ended
September 30, 1994. This compares to $299 million provided during the same
period in 1993.
Wisconsin Electric's investing activities totaled $221 million for the nine
months ended September 30, 1994 compared to $248 million during the same
period in 1993. Investments during the first three quarters of 1994 include
$172 million for the construction of new or improved facilities, $19 million
for acquisition of nuclear fuel, $11 million for net capitalized conservation
expenditures and $8 million for payments to an external trust for the eventual
decommissioning of Wisconsin Electric's Point Beach Nuclear Plant.
Capital requirements for the remainder of 1994 are expected to be principally
for construction expenditures, capitalized conservation programs and payments
to the external trust for the eventual decommissioning of the Point Beach
Nuclear Plant. A $100 million long-term debt issue, originally planned for
1994, has been deferred until 1995. The specific form, amount and timing of
debt securities to be issued have not yet been determined and will depend, to
a large extent, on market conditions.
RESULTS OF OPERATIONS
Third Quarter Results:
Earnings increased $4.1 million during the third quarter of 1994 compared to
the same period in 1993, largely the result of an increase of 4.6% in
kilowatt-hour sales and a decrease in non-fuel operation and maintenance
expenses. Revenues rose 2.1% in the quarter compared to 1993. Revenues from
sales to the Empire and Tilden iron ore mines, the company's two largest
customers, increased by $5.7 million or 41% from the year earlier period.
Revenues from the mines were below normal in 1993 due to a five week employee
strike at the mines while revenues are above normal in 1994 due to strong
demand for iron ore. Maintenance expenses decreased 13.3% during the period
largely because of reduced expenditures made in connection with the Port
Washington Power Plant, as three years of renovation work at this facility
were completed. Other operation expenses during the second quarter of 1994
decreased 3.0% on a comparative basis reflecting, among other things, savings
attributable to the "Revitalization" program undertaken at Wisconsin Electric.
The Revitalization efforts being implemented are designed to increase
efficiencies, reduce costs and improve customer service in order to position
the company for success in the emerging competitive utility environment.
An annualized $16,179,000 or 1.3%, Wisconsin retail electric fuel adjustment
rate decrease became effective on August 4, 1994.
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<PAGE> 7
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
ELECTRIC SALES
Three Months Ended September 30
-------------------------------
Electric Sales - Megawatt Hours 1994 1993 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,699,442 1,719,932 (1.2)
Small Commercial and Industrial 1,721,476 1,693,492 1.7
Large Commercial and Industrial 2,803,350 2,457,109 14.1
Other 382,146 420,227 (9.1)
---------- ----------
Total Retail and Municipal 6,606,414 6,290,760 5.0
Resale-Utilities 368,341 378,055 (2.6)
---------- ----------
Total Sales 6,974,755 6,668,815 4.6
- -------------------------------
Total electric kilowatt-hour sales increased in the quarter primarily the
result of sales to the Empire and Tilden mines. Sales to the mines increased
76% in the quarter compared to the third quarter of 1993 due to the five week
mine employee strike in 1993 and strong demand for iron ore in 1994 as
described above. Excluding the mines, total sales increased less than 1% and
sales to all other large commercial and industrial customers increased 3.8% in
the quarter compared to the same period in 1993.
Year-to-Date Results:
Earnings decreased $17 million during the nine months ended September 30, 1994
compared to the same period during 1993 primarily reflecting a non-recurring
restructuring charge of approximately $39 million (net of tax) incurred during
the first quarter of 1994 as part of the "Revitalization" program undertaken
at Wisconsin Electric. This charge includes the cost of voluntary severance
and early retirement packages used to reduce employee staffing levels by up to
1,000 employees. It is anticipated that this charge will be offset by the end
of 1995 through savings in operation and maintenance costs. The ultimate
timing of the cash flows for this item will depend in part upon the funding
limitations of the Wisconsin Electric pension plans, $16.5 million have been
paid through September 30, 1994. Excluding the non-recurring charge, earnings
would have increased approximately $22 million during the nine month period
ended September 30, 1994 compared to the same period during 1993.
Contributing positively to earnings during the first three quarters of 1994
were increased kilowatt-hour sales and an 18% reduction in maintenance
expenses.
Operating revenues increased 4.8% during the nine months ended September 30,
1994 compared to the same period during 1993, reflecting the increase in
electricity sales.
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<PAGE> 8
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
ELECTRIC SALES
Nine Months Ended
September 30
---------------------------
Electric Sales - Megawatt Hours 1994 1993 % Change
- ------------------------------- ---------- ---------- --------
Residential 4,967,637 4,880,951 1.8
Small Commercial and Industrial 5,040,837 4,779,170 5.5
Large Commercial and Industrial 7,877,608 7,327,270 7.5
Other 1,218,405 1,349,643 (9.7)
---------- ----------
Total Retail and Municipal 19,104,487 18,337,034 4.2
Resale-Utilities 1,168,490 814,822 43.4
---------- ----------
Total Sales 20,272,977 19,151,856 5.9
- -------------------------------
Total electric kilowatt-hour sales during the first nine months of 1994 were
positively impacted by, among other things, substantially warmer weather
conditions during the second quarter of 1994 and colder weather conditions
during the first quarter of 1994 and increased sales to the Empire and Tilden
mines as previously described. As measured by cooling degree days, the first
three quarters of 1994 was 39% warmer than normal and 34% warmer than 1993.
As measured by heating degree days, the first quarter of 1994 was 9% colder
compared to the same period during 1993.
Electric energy sales to the Empire and Tilden iron ore mines increased 20.2%
during the nine months ended September 30, 1994 compared to the same period
during 1993 due to the mine employee strike in 1993 and strong demand for iron
ore in 1994 as described above. Excluding the mines, total electric sales
increased 4.7% and sales to all other large commercial and industrial
customers increased 4.4% during the nine months ended September 30, 1994
compared to the same period during 1993.
For certain other information which may impact Wisconsin Electric's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
POINT BEACH NUCLEAR POWER PLANT
Public hearings before the PSCW concluded on October 28, 1994, on WE's
application for dry storage of spent nuclear fuel and steam generator
replacement at Point Beach Nuclear plant. WE's application requests
additional spent fuel storage by 1995. The estimated cost of the proposed dry
storage facility is about $10 million. WE is also seeking approval for new
steam generators to improve the capacity of Unit 2. The cost of this project
is estimated to be about $120 million. A decision is expected from the PSCW
by early 1995.
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<PAGE> 9
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
ELECTRIC SALES - Cont'd
PSCW TO INVESTIGATE CHANGES IN UTILITY REGULATION
On September 8, 1994, the Public Service Commission of Wisconsin ("PSCW")
issued a notice that it will conduct an investigation into the state of the
electric utility industry in Wisconsin, particularly its institutional
structure and regulatory regime, in order to evaluate what changes would be
beneficial for Wisconsin. The notice states that this investigation may
result in profound and fundamental changes to the nature and regulation of the
electric utility industry in Wisconsin. It is the PSCW's stated intention
that this proceeding will establish criteria and direction for utilities to
incorporate into any proposals involving structural or regulatory change they
may put forward. The PSCW also intends that the proceeding reflect input from
all those having a stake in Wisconsin's electric utility industry, including
large and small retail customers; wholesale customers; utility management;
utility securities holders; independent power producers; purveyors of demand-
side options and renewable resources; representatives of the environmental,
financial, academic, labor, small business and governmental communities; and
elected representatives. The PSCW has invited interested persons to submit
comments as to appropriate objectives for regulation of the electric utility
industry and the utility structures and regulatory approaches likely to
provide the best balance of such objectives. An initial question and answer
session on these submissions has been scheduled for November 28, 1994.
On November 1, 1994, Wisconsin Electric submitted its comments to the PSCW in
a twenty page paper describing a framework for a restructured industry.
Wisconsin Electric's view of industry restructuring would seek to achieve the
benefits of competition while maintaining reliability of electric service,
controlling costs during the transition to the envisioned end-state, and
protecting the environment with increasing vigor. Today's various electric
utility functions would be split into two major categories--natural monopolies
and competitive entities. The natural monopolies are functions where a single
entity can provide the lowest cost. The competitive entities would perform
functions where competition can provide the lowest cost. The natural
monopolies would be re-regulated so the appropriate incentives exist to
provide electricity at reasonable prices. The competitive entities would
eventually see an elimination of traditional regulation.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibit is filed with this report:
(27) Wisconsin Electric Power Company Financial Data Schedule
for the nine months ended September 30, 1994.
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed in the quarter ended
September 30, 1994.
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<PAGE> 10
FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
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.
WISCONSIN ELECTRIC POWER COMPANY
--------------------------------------
(Registrant)
s/ J. W. Boston
--------------------------------------
Date: November 14, 1994 J. W. Boston, President and Chief
Operating Officer
s/ A. K. Klisurich
--------------------------------------
Date: November 14, 1994 A. K. Klisurich, Controller
(Chief Accounting Officer)
- 10 -
<PAGE> 11
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1994
Exhibit
Number
- -------
(27) Wisconsin Electric Power Company Financial Data Schedule
for the nine months ended September 30, 1994.
- 11 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN ELECTRIC
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,651,883
<OTHER-PROPERTY-AND-INVEST> 392,954
<TOTAL-CURRENT-ASSETS> 377,921
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 356,073
<TOTAL-ASSETS> 3,778,831
<COMMON> 332,893
<CAPITAL-SURPLUS-PAID-IN> 169,673
<RETAINED-EARNINGS> 931,742
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,434,308
0
30,451
<LONG-TERM-DEBT-NET> 1,100,087
<SHORT-TERM-NOTES> 50,400
<LONG-TERM-NOTES-PAYABLE> 67,000
<COMMERCIAL-PAPER-OBLIGATIONS> 92,826
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 19,361
<LEASES-CURRENT> 17,974
<OTHER-ITEMS-CAPITAL-AND-LIAB> 966,424
<TOT-CAPITALIZATION-AND-LIAB> 3,778,831
<GROSS-OPERATING-REVENUE> 1,066,889
<INCOME-TAX-EXPENSE> 61,190
<OTHER-OPERATING-EXPENSES> 839,373
<TOTAL-OPERATING-EXPENSES> 900,563
<OPERATING-INCOME-LOSS> 166,326
<OTHER-INCOME-NET> 17,784
<INCOME-BEFORE-INTEREST-EXPEN> 184,110
<TOTAL-INTEREST-EXPENSE> 73,296
<NET-INCOME> 110,814
1,050
<EARNINGS-AVAILABLE-FOR-COMM> 109,764
<COMMON-STOCK-DIVIDENDS> 104,867
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 294,185
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
Earnings per share of common stock is not applicable because all of
the company's common stock is owned by Wisconsin Energy Corporation.
See financial statements and footnotes in accompanying 10-Q.
