SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
-----
For the quarterly period ended September 30, 1994
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
----- THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-337
WISCONSIN POWER AND LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0714890
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) No.)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 608-252-3311
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.
Common Stock outstanding at September 30, 1994: 13,236,601 shares
<PAGE>
CONTENTS
PAGE
PART I. Financial Information:
Consolidated Financial Statements of Wisconsin Power
and Light Company:
Consolidated Balance Sheets as of September 30, 1994
and 1993 and December 31, 1993 . . . . . . . . . . . . . . . 2
Consolidated Statements of Income for the Three and
Nine Months Ended September 30, 1994 and 1993 . . . . . . . 4
Consolidated Statements of Cash Flows - Nine
Months Ended September 30, 1994 and 1993 . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . . . 7
PART II. Other Information . . . . . . . . . . . . . . . . . . . . . . 13
Signatures . . . . . . . . . . . . . . . . . . . . . . . . . 14
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
September 30, September 30, December 31,
1994 1993 1993
(Thousands of dollars)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT:
Plant in service--
Electric................................ $ 1,583,959 $ 1,491,602 $ 1,518,701
Gas..................................... 200,241 190,404 194,283
Water................................... 21,397 20,069 20,437
Common.................................. 112,541 102,022 106,803
--------- --------- ---------
1,918,138 1,804,097 1,840,224
Dedicated decommissioning funds........... 51,903 42,037 49,803
--------- --------- ---------
1,970,041 1,846,134 1,890,027
Less: Accumulated provision for
depreciation............................ 808,046 753,852 763,027
--------- --------- ---------
1,161,995 1,092,282 1,127,000
Construction work in progress............. 40,216 67,712 75,732
Nuclear fuel, net......................... 13,912 17,674 18,000
--------- --------- ---------
Total utility plant..................... 1,216,123 1,177,668 1,220,732
--------- --------- ---------
OTHER PROPERTY AND EQUIPMENT, net........... 4,620 648 652
--------- --------- ---------
INVESTMENTS, at cost........................ 12,076 13,534 12,537
--------- --------- ---------
CURRENT ASSETS:
Cash and equivalents...................... 4,298 640 5,930
Net accounts receivable and unbilled
revenue, less allowance for doubtful
accounts of $359, $261, and $259,
respectively............................ 13,333 17,031 30,572
Accounts receivable from parent for
income taxes............................ - - 2,117
Coal, at average cost..................... 14,819 15,340 16,042
Materials and supplies, at average cost... 21,695 22,776 21,679
Gas in storage, at average cost........... 10,409 15,837 8,754
Prepayments and other..................... 20,415 18,608 21,677
--------- --------- ---------
Total current assets.................... 84,969 90,232 106,771
--------- --------- ---------
ENVIRONMENTAL REMEDIATION COSTS............. 82,230 82,354 82,380
--------- --------- ---------
DEFFERRED CHARGES AND OTHER................. 119,087 115,983 127,585
--------- --------- ---------
TOTAL ASSETS................................ $ 1,519,105 $ 1,480,419 $ 1,550,657
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
September 30, September 30, December 31,
1994 1993 1993
(Thousands of dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
COMMON SHAREOWNER'S INVESTMENT:
Common stock, $5 par value, authorized--
18,000,000 shares; issued and
outstanding--13,236,601 shares............ $ 66,183 $ 66,183 $ 66,183
Premium on capital stock and capital
surplus.................................... 198,987 177,950 189,520
Reinvested earnings......................... 279,762 260,764 267,000
--------- --------- ---------
544,932 504,897 522,703
PREFERRED STOCK WITHOUT MANDATORY
REDEMPTION:
Cumulative, without par value, authorized
3,750,000 shares maximum aggregate stated
value $150,000,000
Cumulative, without par value,
$100 stated value; 449,765, 599,630,
and 449,765 shares, respectively,
outstanding............................ 44,977 59,963 44,977
Cumulative, without par value, $25 stated
value, 599,460, 0, and 599,460 shares,
respectively, outstanding.............. 14,986 - 14,986
--------- --------- ---------
Total preferred stock..................... 59,963 59,963 59,963
FIRST MORTGAGE BONDS, NET..................... 336,523 336,463 336,477
--------- --------- ---------
Total capitalization...................... 941,418 901,323 919,143
CURRENT LIABILITIES:
Variable rate demand bonds.................. 56,975 57,075 56,975
Short-term debt............................. 32,000 44,000 59,000
Accounts payable............................ 50,415 54,591 72,430
Accrued payroll and vacation................ 12,199 11,600 12,092
Accrued taxes............................... 6,106 4,026 804
Accrued interest............................ 5,760 5,993 7,695
Other....................................... 21,559 22,783 16,431
--------- --------- ---------
Total current liabilities................. 185,014 200,068 225,427
--------- --------- ---------
OTHER CREDITS:
Accumulated deferred income taxes .......... 207,100 223,592 210,762
Accumulated deferred investment tax credits. 41,239 43,176 42,684
Accrued environmental remediation costs..... 79,311 81,303 80,973
Other....................................... 65,023 30,957 71,668
--------- --------- ---------
Total other credits....................... 392,673 379,028 406,087
--------- --------- ---------
TOTAL CAPITALIZATION AND LIABILITIES.......... $ 1,519,105 $ 1,480,419 $ 1,550,657
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES
Consolidated Statements of Income
<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............................ $ 137,873 $ 131,424 $ 400,341 $ 373,852
Gas................................. 17,492 12,004 102,757 90,784
Water............................... 1,118 1,012 3,119 2,876
---------- ---------- ---------- ----------
156,483 144,440 506,217 467,512
---------- ---------- ---------- ----------
OPERATING EXPENSES:
Electric production fuels........... 29,385 31,642 94,317 91,431
Purchased power..................... 12,793 8,345 30,720 22,091
Purchased gas....................... 9,997 7,634 64,603 60,648
Other operation..................... 33,990 33,700 103,430 106,265
Maintenance......................... 9,406 10,936 31,165 33,554
Depreciation........................ 18,482 14,714 55,497 45,720
Taxes --
Current federal income............ 6,401 6,678 21,742 17,344
Deferred income taxes............. 4,278 1,838 8,841 3,293
Investment tax credit (restored).. (482) (492) (1,445) (1,476)
Current state income.............. 1,127 1,485 4,662 4,477
Property, payroll & other......... 6,636 6,915 20,692 19,780
---------- ---------- ---------- ----------
132,013 123,395 434,224 403,127
---------- ---------- ---------- ----------
NET OPERATING INCOME.................. 24,470 21,045 71,993 64,385
---------- ---------- ---------- ----------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used
during construction............... 661 1,103 1,791 1,749
Other, net.......................... 610 266 10,025 1,275
Current income tax.................. (274) (229) (2,065) 31
Deferred income tax................. (23) (369) (1,889) (1,667)
---------- ---------- ---------- ----------
974 771 7,862 1,388
---------- ---------- ---------- ----------
INCOME BEFORE INTEREST EXPENSE........ 25,444 21,816 79,855 65,773
---------- ---------- ---------- ----------
INTEREST EXPENSE:
Interest on bonds................... 7,323 7,264 21,639 21,546
Allowance for borrowed funds used
during construction (credit)....... (285) (267) (719) (676)
Other............................... 651 770 1,660 2,973
---------- ---------- ---------- ----------
7,689 7,767 22,580 23,843
---------- ---------- ---------- ----------
NET INCOME............................ 17,755 14,049 57,275 41,930
PREFERRED STOCK DIVIDENDS............. 828 953 2,483 2,858
---------- ---------- ---------- ----------
NET INCOME AFTER PREFERRED STOCK
DIVIDENDS............................ $ 16,927 $ 13,096 $ 54,792 $ 39,072
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1994 1993
(Thousands of Dollars)
<S> <C> <C>
Cash flows from (used for) operating activities:
Net income................................................... $ 57,274 $ 41,932
Adjustments to reconcile net income to net cash
from operating activities:
Depreciation............................................... 55,650 45,720
Amortization of nuclear fuel............................... 4,738 4,991
Investment tax credit restored............................. (1,445) (1,475)
Allowance for equity funds used during construction........ (1,791) (1,749)
Deferred income taxes...................................... (8,841) (3,292)
Changes in assets and liabilities:
Net accounts receivable and unbilled revenues.............. 24,690 20,223
Coal....................................................... 1,223 3,645
Materials and supplies..................................... (16) (5,694)
Gas in storage............................................. (1,655) (11,049)
Prepayments and other...................................... 1,262 2,686
Accounts payable and accruals.............................. (22,014) (12,305)
Accrued taxes.............................................. 5,301 2,684
Other...................................................... 7,750 14,431
-------- --------
Net cash generated from (used for) operating activities.. 122,126 100,748
-------- --------
Cash flows generated from (used for) financing activities:
Common stock cash dividends.................................. (41,910) (40,541)
Preferred stock dividends.................................... (2,483) (2,859)
Net change in short term debt................................ (27,000) (7,000)
Equity contribution from parent.............................. 9,467 49,829
-------- --------
Net cash generated from (used for)
financing activities................................... (61,926) (571)
-------- --------
Cash flows from (used for) investing activities:
Additions to utility plant, excluding AFUDC.................. (54,699) (96,184)
Allowance for borrowed funds used during construction........ (719) (675)
Dedicated decommissioning funds.............................. (2,100) (1,660)
Other........................................................ (740) (1,399)
-------- --------
Net cash (used for) investing activities................... (58,258) (99,918)
-------- --------
Net increase (decrease) in cash and equivalents................ 1,942 259
Cash and equivalents at beginning of period.................... 5,930 381
-------- --------
Cash and equivalents at end of period.......................... $ 7,872 $ 640
======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest - debt............................................ $ 23,452 $ 26,189
Income taxes............................................... $ 25,969 $ 15,763
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have
been prepared by Wisconsin Power and Light Company ("WPL" or the
"Company"), without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Accordingly, certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted. The consolidated financial statements include the
Company and its consolidated subsidiaries. The Company is a wholly-owned
subsidiary of WPL Holdings, Inc. These financial statements should be
read in conjunction with the financial statements and the notes thereto
included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the consolidated interim
financial statements reflect all adjustments necessary to fairly state the
results of operations for the interim periods presented. However, because
of the seasonal nature of the Company's operations, the results shown for
portions of a year are not indicative of annual results.
2. In November 1989, the Public Service Commission of Wisconsin
("PSCW") concluded that the Company did not properly administer a coal
contract, resulting in an assessment to compensate ratepayers for excess
fuel costs having been incurred. As a result, the Company recorded a
reserve in 1989 which had an after-tax affect of reducing 1989 net income
by $4.9 million. This reserve included a portion payable to the Company's
ratepayers and portions payable to Wisconsin Public Service Corporation
and Madison Gas and Electric Company for their joint ownership in the
generating station served by the contract. In 1990, the Company refunded
$2.0 million of the reserve, after tax, to its own ratepayers.
The PSCW decision was found to represent unlawful retroactive
ratemaking by both the Dane County Circuit Court and the Wisconsin Court
of Appeals. The case was then appealed to the Wisconsin Supreme Court.
In February 1994, the Wisconsin Supreme Court affirmed the decisions of
the Dane County Circuit Court and Wisconsin Court of Appeals. In
management's judgement, all avenues for appeal regarding this case have
been exercised.
As a result, in March 1994, the Company reversed the unrefunded
portion of the assessment of amounts due to Wisconsin Public Service
Corporation and Madison Gas and Electric Company. This action increased
its net income by $2.9 million in the first quarter of 1994. For the
portion of the assessment which was refunded to the Company's ratepayers,
a proposed plan for recollection was submitted to the PSCW on February 15,
1994 and was approved on May 11, 1994. With this approval, the Company
recorded an additional after-tax increase to net income to account for the
remaining $2.0 million and began recollection in June, 1994. By September
30, 1994, the amount of the assessment remaining uncollected from WPL's
ratepayers was not material.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1994 VS. SEPTEMBER 30, 1993:
OVERVIEW
The Company reported consolidated third-quarter net income of $17.8
million compared to $14.1 million for the same period in 1993. The
principal factors leading to increased earnings include a 3.6% retail
electric rate increase effective October 1, 1993 and economy driven strong
electric industrial and commercial customer growth which increased
electric margins by $2.6 million, after tax. Gas margins also contributed
$1.9 million (after tax) to net income. An additional $1.0 million was
added to income as a result of efficiencies realized in the maintenance of
the Kewaunee Nuclear Power Plant ("Kewaunee").
Offsetting the above was an increase in depreciation expense
attributable to increased investment in plant and increased
decommissioning costs which reduced net income by $2.2 million.
<TABLE>
Electric Operations
<CAPTION>
Revenues and
kWhs Sold, Costs Per kWh
Revenues and % Generated and % Sold Generated Customers at End
Costs Change Purchased Change and Purchased of Quarter
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
and Farm $48,548 $46,607 4% 704,441 714,912 -1% .069 .065 323,499 317,233
Industrial 35,764 34,735 3% 949,739 919,091 3% .038 .038 765 714
Commercial 27,086 25,863 5% 458,223 447,910 2% .059 .058 43,570 42,657
Wholesale and
Class A 24,656 22,335 10% 659,203 663,420 -1% .037 .034 81 77
Other 1,819 1,884 -3% 12,242 11,394 7% .149 .165 1,468 1,442
------- ----- --- ------ ------ -- ---- ---- ----- -----
Total $137,873 $131,424 5% 2,783,848 2,756,727 1% .050 .048 369,383 362,123
======= ======= == ========= ========= == ==== ==== ======= =======
Elec production
fuels $29,385 $31,642 -7% 2,282,831 2,439,839 -6% .013 .013
Purchased Power $12,793 $ 8,345 53% 636,345 398,990 59% .020 .021
------- ----- ---
Margin $95,695 $91,437 5%
======= ======
</TABLE>
WPL's electric margin increased in the third quarter of 1994 compared
to the third quarter of 1993. The primary factor was a 3.6% retail rate
increase effective October 1, 1993. Strong economic conditions in the
Industrial and Commercial customer classes contributed higher sales and
customer growth. Finally, a very warm mid-September offset relatively
mild summer conditions in July and August.
<TABLE>
Gas Operations
<CAPTION>
Revenues and Therms Sold and Revenues and Costs
Costs % Purchased % per Therms Sold Customers at End of
(In Thousands) Change (In Thousands) Change and Purchased Quarter
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $6,644 $4,620 44% 7,127 7,802 -9% $.932 $.592 123,075 118,586
Firm 4,916 3,042 62% 7,024 7,904 -11% .700 .385 15,313 14,775
Interruptible 1,873 1,519 23% 5,292 4,528 17% .354 .335 262 240
Transport. 2,947 2,521 17% 17,767 14,815 20% .166 .170 109 97
Other 1,112 302 268% 2,145 1,562 37% .518 .193 90 73
----- --- ---- ----- ----- --- ---- ---- -- --
Total $17,492 $12,004 46% 39,355 36,611 7% .444 .328 138,849 133,771
====== ====== === ====== ====== == ==== ==== ======= =======
Purchased
gas $9,781 $7,599 29% 39,187 36,314 8% .250 .209
----- -----
Margin $7,711 $4,405 17%
===== =====
</TABLE>
Gas margin increased during the third quarter of 1994 compared to
the third quarter of 1993 due in part to a 1.4% retail rate increase
effective October 1, 1993. Additionally, customer growth among all
classes remained strong from the solid economic conditions in the
Company's service territory. Finally, adjustments resulting from the
conclusion of WPL's annual gas supply contracts on August 1, 1994
favorably impacted gas margins.
A factor which impacted both gas revenues and purchased gas costs
was an increased cost of gas which was passed on to customers through the
automatic purchased gas adjustment clause.
Other Operation Expense
Other operation expense remained flat as a result of the Company's
ongoing cost management efforts.
Depreciation
Depreciation expense increased, principally reflecting increased
property additions, and increased decommissioning costs.
Income Taxes
Income taxes increased between third quarters, primarily due to
higher taxable income.
<PAGE>
NINE MONTHS ENDED SEPTEMBER 30, 1994 VS. SEPTEMBER 30, 1993:
OVERVIEW
The Company reported consolidated net income of $57.3 million for the
nine months ended September 30, 1994 compared to $41.9 million for the
same period in 1993. A principal factor which resulted in increased
earnings was the favorable weather conditions in the first nine months of
1994 which yielded higher electric and gas margins ($11.3 million). Also,
net income for the nine months ended September 30, 1994 increased $4.9
million due to the reversal of a PSCW penalty relating to the Company's
administration of a coal contract. See Note 2 of Notes to Consolidated
Financial Statements. A reduction in other operation expense contributed
$1.7 million resulting from cost management efforts. Finally, decreased
maintenance expense primarily from efficiencies realized in the
maintenance of Kewaunee added $1.4 million to net income.
Offsetting the above was an increase in depreciation expense which
was attributable to increased investment in plant and increased
decommissioning costs which reduced net income by $5.8 million.
<TABLE>
Electric Operations
<CAPTION>
Revenues and
Costs Per kWh
% kWhs sold, Generated % Sold Generated Customers at End
Revenues and Costs Change and Purchased Change and Purchased of Quarter
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $145,905 $135,418 8% 2,094,068 2,060,137 2% .070 .066 323,499 317,233
Industrial 103,753 98,609 5% 2,772,563 2,619,965 6% .037 .038 765 714
Commercial 76,691 71,926 7% 1,279,703 1,231,821 4% .060 .058 43,570 42,657
Wholesale and
Class A 67,895 59,995 13% 1,971,574 1,773,386 11% .034 .034 81 77
Other 6,097 7,903 -23% 41,228 38,731 6% .148 .204 1,468 1,442
------- ----- ---- ------ ------ -- ---- ---- ----- -----
Total 400,341 373,852 7% 8,159,136 7,724,040 6% .049 .048 369,383 362,123
======= ======= == ========= ========= == ==== ==== ======= =======
Elec production
fuels $ 94,317 $ 91,431 3% 7,072,947 6,747,368 5% .013 .014
Purchased Power $ 30,720 $ 22,091 39% 1,404,289 1,200,303 17% .022 .018
------- ------
Margin $275,304 $260,328 6%
======= =======
</TABLE>
For the nine months ended September 30, 1994 compared to the nine months
ended September 30, 1993, WPL's electric sales benefitted from very cold
conditions in the early part of 1994 and hot weather in late June and mid-
September. These favorable periods were somewhat offset by a mild April
and May and otherwise normal summer conditions. Additionally, the Company
experienced additional growth in the Commercial and Industrial customer
classes from strong economic conditions. Finally, a 3.6% retail rate
increase effective October 1, 1993 also had a positive impact on 1994
results.
<TABLE>
Gas Operations
<CAPTION>
Therms Sold and Revenues and Costs
Revenues and Costs % Purchased (In % per Therms Sold Customers at
(In Thousands) Change Thousands) Change and Purchased End of Quarter
1994 1993 1994 1993 1994 1993 1994 1993
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 51,733 $ 47,262 9% 85,526 81,236 7% .605 .582 123,075 118,586
Firm 30,977 27,077 14% 64,113 59,936 7% .483 .452 15,313 14,775
Interruptible 6,181 7,891 -22% 17,054 19,147 -11% .362 .412 262 240
Transport. 11,292 8,543 32% 60,701 57,792 5% .186 .148 109 97
Other 2,574 11 - 7,043 2,283 208% .365 .005 90 73
----- -- ----- ----- ----- ---- ---- ---- -- --
Total $102,757 $ 90,784 13% 234,437 220,394 6% .438 .412 138,849 133,771
======= ====== === ======= ======= == ==== ==== ======= =======
Purchased
gas $ 64,387 $ 60,532 6% 235,604 198,205 19% .273 .305
------ ------
Margin $ 38,370 $ 30,252 7%
</TABLE>
Gas margin increased for the nine months ended September 30, 1994
compared to the same period in 1993 due primarily to favorable winter
weather conditions in the early part of 1994. Also contributing to the
margin increase was a change in the mix of sales from lower margin to
higher margin customer classes. Additionally, growth among all customer
classes remained strong due to favorable economic conditions in the
Company's service territory.
A factor which impacted both gas revenues and purchased gas costs
was an increased cost of gas which was passed on to customers through
the automatic purchased gas adjustment clause.
Other Operation Expense
Other operation expense decreased as a result of the Company's
ongoing cost management efforts.
Depreciation
Depreciation expense increased, principally reflecting increased
property additions, and increased decommissioning costs.
Income Taxes
Income taxes increased between second quarters, primarily due to
higher taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Rates and Regulatory Matters
See Part II -- Other Information, Item 1. Legal Proceedings.
Financing and Capital Structure
The level of short-term borrowing fluctuates based primarily on
seasonal corporate needs, the timing of long-term financing and capital
market conditions. To maintain flexibility in its capital structure and
to take advantage of favorable short-term rates, the Company also uses
proceeds from the sales of accounts receivable and unbilled revenues to
finance a portion of its long-term cash needs.
The Company's capitalization at September 30, 1994, including the
current maturities of long-term debt, variable rate demand bonds and
short-term debt, consisted of 53 percent common equity, 6 percent
preferred stock and 41 percent debt. Common equity at September 30, 1994
increased from 50.5 percent at December 31, 1993 due to increased earnings
and the receipt of $9.7 million of capital contributions from WPL
Holdings, Inc. during the first three quarters of 1994.
Capital Expenditures
The Company's liquidity is primarily determined by the level of cash
generated from operations and the funding requirements of its ongoing
construction and maintenance programs. Cash flows from operating
activities, after dividends paid, provided approximately $67 million and
$60 million for the nine months ended September 30, 1994 and 1993,
respectively. The Company finances its construction expenditures through
internally generated funds supplemented, when required, by outside
financing including equity investments from the Company's parent, WPL
Holdings, Inc.
The estimated construction expenditures for the remainder of 1994
are $43 million. The Company forecasts to finance approximately 70
percent of these expenditures through internally generated funds.
The expenditures for the decommissioning of Kewaunee are estimated
to begin in 2014. It is anticipated that expenditures related to the
actual decommissioning of the plant will occur between 2014 and 2021 of
which the Company's share approximates $581 million. A remaining $435
million relates to the storage of spent nuclear fuel on site and other
maintenance of the site that will likely occur from 2022 to 2050. By
2013, the Company currently expects to have the cost collected through
electric rates and funded in an external trust. Therefore, such
expenditures are not expected to have a direct impact on liquidity or the
availability of capital resources.
Industry Outlook
The Public Service Commission of Wisconsin (PSCW) has recently
opened a formal docket initiating an inquiry into the goals of Wisconsin
utility regulation, and identification of alternative forms of regulation.
WPL has submitted its views which, in summary form, call for open access
to transmission and distribution systems and a competitive power
generation market place. It is not possible at this time to predict the
outcome of these proceedings.
In anticipation of the restructuring, WPL proposed a set of
performance based incentives in its recent rate case. For the two year
period January 1, 1995 to December 31, 1996 covered by these rate
proceedings, performance based incentives were proposed for the purchasing
of natural gas, the availability of electric distribution service, the
emission of SO2 from Company owned plants, and electric power procurement
costs. See Item 1, Legal Proceedings, Note 1. Rates and Regulatory
Matters.
Given the expectation of increasing competition, WPL has continued
to reengineer its processes to implement cost efficiencies in its
operations. In connection with these efforts, WPL has offered voluntary
early retirement programs and voluntary severance programs to affected
employees. These offerings will remain open until late in the fourth
quarter of 1994.
Other
One of WPL's major coal transporters experienced a labor strike
during the third quarter of 1994. During the term of the strike (55
days), WPL's ability to receive coal from its suppliers was impaired,
which required WPL to use some of its existing coal reserves and to
purchase additional power. On August 29, 1994 President Clinton, acting
under the Railway Labor Act, forced a temporary end (the "cooling off
period") to the strike by ordering the railroad union employees back to
work and establishing a three member Presidential Emergency Board to draft
a recommended settlement. Negotiations between the railroad management
and the United Transportation Union continue. As of September 30, 1994,
the existing and anticipated financial impact on WPL's operating results
was not material. As negotiations continue along a normal course, there
is the potential for another strike in the first quarter of 1995 when the
current cooling off period expires.
<PAGE>
PART II--OTHER INFORMATION
Item 1. Legal Proceedings
1. Rates and Regulatory Matters
On September 29, 1994, the PSCW met in open session and
indicated the following preliminary decisions in the WPL retail rate
application as filed on February 4, 1994.
With small modifications, the commissioners indicated support
for all of the aforementioned incentive proposals with the exception of
the electric procurement area. Instead, the commissioners accepted the
staff incentive proposal which eliminated the electric fuel adjustment
mechanism. If these incentive mechanisms are formally adopted, WPL would
be subject to a somewhat greater degree of earnings volatility than in the
past. This earnings volatility would come primarily from the following:
1. The elimination of the electric fuel adjustment mechanism
exposes shareowners to earnings impacts from charges in fuel prices in
addition to the usual weather and sales growth effects.
2. The elimination of the automatic purchased gas adjustment
clause exposes shareowners to fluctuations in the commodity cost of gas
above or below a prescribed commodity price index. For the fixed demand
cost of gas, shareowners are subject to weather volatility. Both
exposures are also subject to ratepayer sharing provisions which cap both
exposures at $1.1 million.
3. For the SO2 emmissions and service reliability clause, up to
$4.0 million of pre-tax revenues may be collected subject to refund
upon final determination of performance under these programs.
In other items of significance the commissioners indicated
their support of the following: Electric revenues will be decreased by
approximately $12.3 million (2.8 percent) annually. Natural gas revenues
will be increased by approximately $.7 million (.5 percent) annually.
Return on common equity will be 11.5 percent vs. the Company's current
allowed return on equity of 11.6 percent. The rates would be in effect
for a two-year period beginning January 1, 1995.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits:
27 Financial Data Schedule
2. Reports on Form 8-K: None
<PAGE>
SIGNATURE
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 Power and Light Company
Date: November 14, 1994 By: /s/ Daniel A. Doyle
------------------------------
Daniel A. Doyle, Controller and
Treasurer, Wisconsin Power and
Light (principal accounting
officer and officer authorized
to sign on behalf of the
registrant.)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS CONTAINED IN THE FORM 10-Q FILED BY WISCONSIN
POWER AND LIGHT COMPANY FOR THE QUARTER ENDED SEPTEMBER 30, 1994 AND
IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,216,123
<OTHER-PROPERTY-AND-INVEST> 16,696
<TOTAL-CURRENT-ASSETS> 84,969
<TOTAL-DEFERRED-CHARGES> 201,317
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,519,105
<COMMON> 66,183
<CAPITAL-SURPLUS-PAID-IN> 198,987
<RETAINED-EARNINGS> 279,762
<TOTAL-COMMON-STOCKHOLDERS-EQ> 544,932
0
59,963
<LONG-TERM-DEBT-NET> 336,523
<SHORT-TERM-NOTES> 56,975
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 32,000
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 488,712
<TOT-CAPITALIZATION-AND-LIAB> 1,519,105
<GROSS-OPERATING-REVENUE> 506,217
<INCOME-TAX-EXPENSE> 30,358
<OTHER-OPERATING-EXPENSES> 103,430
<TOTAL-OPERATING-EXPENSES> 434,224
<OPERATING-INCOME-LOSS> 71,993
<OTHER-INCOME-NET> 7,862
<INCOME-BEFORE-INTEREST-EXPEN> 79,855
<TOTAL-INTEREST-EXPENSE> 22,580
<NET-INCOME> 57,275
2,483
<EARNINGS-AVAILABLE-FOR-COMM> 54,792
<COMMON-STOCK-DIVIDENDS> 41,910
<TOTAL-INTEREST-ON-BONDS> 23,452
<CASH-FLOW-OPERATIONS> 122,126
<EPS-PRIMARY> 0<F1>
<EPS-DILUTED> 0<F1>
<FN>
<F1> Earnings per share of common stock is not reflected because all of such
shares are held by WPL Holdings, Inc.
</FN>
</TABLE>
