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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, 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) 221-2590
(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 May 2, 1994
-------------------------- --------------------------
$10 Par Value Common Stock 33,289,327 Shares
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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 March 31
---------------------------
1994 1993
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues
Electric $355,239 $333,908
Steam 6,863 5,743
-------- --------
Total Operating Revenues 362,102 339,651
Operating Expenses
Fuel 72,476 68,187
Purchased power 11,594 13,938
Other operation expenses 91,103 80,834
Maintenance 31,999 35,978
Revitalization 63,500 -
Depreciation 39,893 36,208
Taxes other than income taxes 19,140 17,634
Federal income tax 16,752 17,882
State income tax 4,016 4,376
Deferred income taxes - net (16,536) 2,517
Investment tax credit - net (1,020) (990)
-------- --------
Total Operating Expenses 332,917 276,564
Operating Income 29,185 63,087
Other Income and Deductions
Interest income 3,614 3,514
Allowance for other funds used
during construction 1,253 2,006
Miscellaneous - net 1,798 3,330
Income taxes (609) (1,083)
-------- --------
Total Other Income and Deductions 6,056 7,767
Income Before Interest Charges 35,241 70,854
Interest Charges
Interest expense 25,082 25,694
Allowance for borrowed funds used
during construction (708) (1,093)
-------- --------
Total Interest Charges 24,374 24,601
-------- --------
Net Income 10,867 46,253
Preferred Stock Dividend Requirement 389 1,447
-------- --------
Earnings Available for Common Stockholder $ 10,478 $ 44,806
======== ========
<FN>
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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WISCONSIN ELECTRIC POWER COMPANY FORM 10-Q
CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
March 31, 1994 December 31, 1993
-------------- -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Electric $4,111,747 $4,079,794
Steam 39,902 39,113
Accumulated provision for depreciation (1,825,593) (1,784,110)
---------- ----------
2,326,056 2,334,797
Construction work in progress 223,612 208,834
Nuclear fuel - net 51,501 52,665
---------- ----------
Net Utility Plant 2,601,169 2,596,296
Other Property and Investments 383,783 375,457
Current Assets
Cash and cash equivalents 27,131 13,421
Accounts receivable 91,793 91,849
Accrued utility revenues 83,653 89,306
Materials, supplies and fossil fuel 111,204 127,312
Prepayments and other assets 57,328 53,812
---------- ----------
Total Current Assets 371,109 375,700
---------- ----------
Deferred Charges and Other Assets
Accumulated deferred income taxes 116,200 97,788
Other 246,514 248,315
---------- ----------
Total Deferred Charges and Other Assets 362,714 346,103
---------- ----------
Total Assets $3,718,775 $3,693,556
========== ==========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 487,566 $ 472,566
Retained earnings 903,653 927,120
---------- ----------
Total Common Stock Equity 1,391,219 1,399,686
Preferred stock - redemption not required 30,451 30,451
Preferred stock - redemption required 5,250 5,250
Long-term debt 1,185,195 1,188,744
---------- ----------
Total Capitalization 2,612,115 2,624,131
Current Liabilities
Long-term debt due currently 18,247 19,254
Short-term debt 104,939 117,903
Accounts payable 59,590 81,630
Accrued liabilities 73,204 61,775
Other 19,325 13,238
---------- ----------
Total Current Liabilities 275,305 293,800
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 449,565 444,717
Other 381,790 330,908
---------- ----------
Total Deferred Credits and Other Liabilities 831,355 775,625
---------- ----------
Total Capitalization and Liabilities $3,718,775 $3,693,556
========== ==========
<FN>
See accompanying notes to financial statements
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31
---------------------------
1994 1993
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $ 10,867 $ 46,253
Reconciliation to cash:
Depreciation 39,893 36,208
Nuclear fuel expense - amortization 5,816 5,890
Conservation expense - amortization 6,152 3,342
Debt premium, discount & expense - amortization 3,657 2,306
Revitalization - net 50,807 -
Deferred income taxes - net (16,536) 2,517
Investment tax credit - net (1,020) (990)
Allowance for other funds used during construction (1,253) (2,006)
Change in: Accounts receivable 56 (5,602)
Inventories 16,108 20,589
Accounts payable (22,040) (16,630)
Other current assets 2,137 2,153
Other current liabilities 17,516 21,002
Other 1,410 (4,792)
-------- --------
Cash Provided by Operating Activities 113,570 110,240
Investing Activities:
Construction expenditures (48,737) (52,471)
Allowance for borrowed funds used during construction (708) (1,093)
Nuclear fuel (4,806) (2,916)
Nuclear decommissioning trust (3,113) (2,451)
Conservation investments - net (4,355) (5,842)
Other (1,212) 234
-------- --------
Cash Used in Investing Activities (62,931) (64,539)
Financing Activities:
Sale of long-term debt - 223,765
Retirement of long-term debt (4,876) (243,480)
Change in short-term debt (12,964) (29,798)
Stockholder contribution 15,000 -
Dividends on stock - common (33,700) (16,250)
- preferred (389) (1,447)
-------- --------
Cash Used in Financing Activities (36,929) (67,210)
-------- --------
Change in Cash and Cash Equivalents $ 13,710 $(21,509)
======== ========
Supplemental Information Disclosures:
Cash Paid for -
Interest (net of amount capitalized) $ 22,842 $ 20,336
Income taxes 7,501 11,500
<FN>
See accompanying notes to financial statements.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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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 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 ended March 31, 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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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 $114 million during the three months ended
March 31, 1994. This compares to $110 million provided during the same period
in 1993.
Wisconsin Electric's investing activities totaled $63 million for the three
months ended March 31, 1994 compared to $65 million during the same period in
1993. Investments during the first quarter of 1994 include $49 million for
the construction of new or improved facilities, $5 million for acquisition of
nuclear fuel, $4 million for net capitalized conservation expenditures and $3
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. Exclusive of possible debt refundings, Wisconsin Electric
tentatively plans to issue approximately $100 million of long-term debt in a
public offering later in 1994. 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
Earnings decreased $34 million during the first quarter of 1994 compared to
the same period during 1993, primarily reflecting a non-recurring
restructuring charge of approximately $39 million (net of tax). This charge
includes the cost of voluntary severance and early retirement packages which
are being used to reduce employee staffing levels at Wisconsin Electric. It
is anticipated that this charge will be offset by the end of 1995 through
savings in operation and maintenance costs. Contributing positively to
earnings during the first quarter of 1994 were increased kilowatt-hour sales.
Excluding the non-recurring charge, earnings would have increased
approximately $5 million during the first quarter of 1994 compared to the same
period during 1993.
The 6.6% increase in operating revenues reflects higher kilowatt-hour sales
and various rate increases at Wisconsin Electric.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
The projected annualized revenue impact of rate changes authorized by
regulatory commissions which impact 1993 and 1994 operating revenues are as
follows:
Revenue Percent
Increase Change in Effective
Company/Service (Decrease) Rates Date
------------------------ ------------ --------- -----------
Wisconsin Electric
* Retail electric, WI $2,448,000 0.2% 02/17/93
Steam heating 505,000 3.5 02/17/93
Wholesale electric 6,000,000 10.6 06/09/93
Retail electric, MI 1,366,000 4.3 07/09/93
------------------------
* The $2.4 million annualized rate increase effective February 17,
1993 represents the net rate increase after the elimination of
a fuel adjustment rate reduction in effect since May 1992.
ELECTRIC SALES
Three Months Ended March 31
---------------------------
Electric Sales - Megawatt Hours 1994 1993 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,795,445 1,702,184 5.5
Small Commercial and Industrial 1,657,786 1,571,359 5.5
Large Commercial and Industrial 2,462,432 2,377,866 3.6
Other 439,421 498,756 (11.9)
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Total Retail and Municipal 6,355,084 6,150,165 3.3
Resale-Utilities 391,458 233,707 67.5
---------- ----------
Total Sales 6,746,542 6,383,872 5.7
- -------------------------------
Total electric kilowatt-hour sales during the first quarter of 1994 were
positively impacted by, among other things, colder weather conditions. As
measured by heating degree days, the first quarter of 1994 was 9.4% colder
compared to the same period during 1993.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, increased 2.6% during the quarter ended
March 31, 1994 compared to the same period during 1993. Excluding the mines,
total electric sales increased 6.0% and sales to all other large commercial
and industrial customers increased 3.8% during the first quarter of 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 5. OTHER INFORMATION in
Part II.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART II - OTHER INFORMATION
ITEM 5. OTHER INFORMATION
KIMBERLY COGENERATION FACILITY
As previously reported, in November 1993, the Public Service Commission of
Wisconsin ("PSCW"), after conducting a competitive bidding process, issued an
order selecting a proposal submitted by an unaffiliated independent power
producer ("IPP") to construct a 220 megawatt generation facility to meet a
portion of Wisconsin Electric's anticipated increase in system supply needs.
Included among the competing bids was Wisconsin Electric's proposed Kimberly
Cogeneration Facility, a 220 megawatt cogeneration facility which was intended
to also provide process steam to Repap Wisconsin, Inc. ("Repap") starting in
mid-1995.
Prior to the PSCW selection, Wisconsin Electric had made commitments toward
its proposed facility amounting to approximately $70 million, of which
approximately $60 million had been expended prior to December 31, 1993. These
commitments were primarily associated with the procurement of combustion
turbines, the steam turbine and the heat recovery boiler in order to achieve
the in-service dates as agreed to in a steam service contract with Repap.
Wisconsin Electric is currently evaluating its options regarding its Kimberly
Cogeneration Facility investment if the project does not proceed. (Wisconsin
Electric's Kimberly project was given second preference by the PSCW should the
selected IPP proposal fail to proceed.) The material procured to date is a
technology of natural gas-fired combined cycle generation equipment that is
marketed worldwide. Wisconsin Electric believes that a market for the
equipment exists and is investigating opportunities to sell the equipment or
to use it in another power project. At this time, Wisconsin Electric does not
believe that the PSCW's selection of an IPP proposal will have a material
adverse effect on its financial condition.
For additional information regarding this matter, see ITEM 7. MANAGEMENT'S
DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS in
PART II of Wisconsin Electric's Annual Report on Form 10-K for the year ended
December 31, 1993 and ITEM 5. OTHER INFORMATION in PART II of Wisconsin
Electric's Quarterly Reports on Form 10-Q for the quarters ended June 30, 1993
and September 30, 1993.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
None.
(b) Reports on Form 8-K:
A report on Form 8-K dated January 24, 1994 was filed by Wisconsin
Electric reporting the announced plan to merge Wisconsin Energy's
wholly-owned natural gas utility subsidiary, Wisconsin Natural into
Wisconsin Electric, anticipated to be effective by year-end 1994.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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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/ R. A. Abdoo
--------------------------------------
Date: May 13, 1994 R. A. Abdoo, Chairman of the Board
and Chief Executive Officer
s/ A. K. Klisurich
--------------------------------------
Date: May 13, 1994 A. K. Klisurich, Controller - Chief
Accounting Officer
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