SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
(Mark One)
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
- - ---- EXCHANGE ACT OF 1934
For the quarterly period ended JUNE 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 1-3016
_________________________
Wisconsin Public Service Corporation
____________________________________________________________________________
(Exact name of Registrant as specified in its charter)
Wisconsin 39-0715160
____________________________________________________________________________
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
700 North Adams St., P. O. Box 19001, Green Bay, Wisconsin 54307
____________________________________________________________________________
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (414) 433-1445
_________________________
_____________________________________________________________________________
Former name, former address and former fiscal year if changed since last
report
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the Registrant was required to file such reports), and (2) has been subject
to such filing requirements for the past 90 days.
Yes x No
______ ______
Number of shares outstanding of each class of common stock, as of
the close of the period covered by this report.
________________________________________________________________
Common Stock, $4 par value 23,896,962 shares
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WISCONSIN PUBLIC SERVICE CORPORATION
BALANCE SHEETS
ASSETS
<CAPTION>
June 30 December 31
1994 1993
------- -----------
(Thousdands)
<S> <C> <C>
ASSETS
Utility Plant:
In-service -
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,397,908 $ 1,374,662
Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 187,642 183,798
----------- ------------
1,585,550 1,558,460
Less - Accumulated provision for depreciation. . . . . . . . 829,171 801,056
----------- ------------
756,379 757,404
Nuclear decommissioning trusts . . . . . . . . . . . . . . . 59,553 56,699
Construction in progress . . . . . . . . . . . . . . . . . . 10,458 11,781
Nuclear fuel, less accumulated provisions for amortization .
of $132,529, and $130,011, respectively . . . . . . . . . 15,912 17,981
----------- ------------
Net utility plant. . . . . . . . . . . . . . . . . . . . . 842,302 843,865
----------- ------------
Current Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . 32,593 5,391
Customer and other receivables, net of reserves. . . . . . . . 62,764 66,511
Accrued utility revenues . . . . . . . . . . . . . . . . . . . 17,862 37,314
Fossil fuel, at average cost . . . . . . . . . . . . . . . . . 10,146 10,208
Gas in storage, at average cost . . . . . . . . . . . . . . . 11,352 19,885
Materials and supplies, at average cost. . . . . . . . . . . . 20,365 19,411
Prepayments and other. . . . . . . . . . . . . . . . . . . . . 19,941 21,420
----------- ------------
Total current assets . . . . . . . . . . . . . . . . . 175,023 180,140
----------- ------------
Deferred Charges . . . . . . . . . . . . . . . . . . . . . . . . 114,724 118,128
Investments and Other Assets . . . . . . . . . . . . . . . . . . 64,609 56,708
----------- ------------
$ 1,196,658 $ 1,198,841
=========== ============
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity. . . . . . . . . . . . . . . . . . . . . . $ 442,505 $ 434,503
Preferred stock with no mandatory redemption . . . . . . . . . 51,200 51,200
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 312,283 314,225
----------- ------------
Total capitalization . . . . . . . . . . . . . . . . . 805,988 799,928
----------- ------------
Current Liabilities:
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . -- 11,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 44,694 64,113
Accrued taxes. . . . . . . . . . . . . . . . . . . . . . . . . 3,973 3,266
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . 8,053 7,695
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27,197 9,956
----------- ------------
Total current liabilities. . . . . . . . . . . . . . . 93,917 106,030
----------- ------------
Other Long-Term Liabilities and Deferred Credits:
Accumulated deferred income taxes. . . . . . . . . . . . . . . 136,691 138,952
Accumulated deferred investment credits. . . . . . . . . . . . 33,305 34,210
Regulatory liabilities . . . . . . . . . . . . . . . . . . . . 62,928 61,434
Other long-term liabilities. . . . . . . . . . . . . . . . . . 63,829 58,287
----------- ------------
296,753 292,883
----------- ------------
Commitments and Contingencies ----------- ------------
$ 1,196,658 $ 1,198,841
=========== ============
<FN>
The accompanying notes to financial statements are an integral part of these statements.
- 2 -
</TABLE>
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
STATEMENTS OF CAPITALIZATION
<CAPTION>
June 30 December 31
1994 1993
------- -----------
(Thousands)
<S> <C> <C>
COMMON STOCK EQUITY:
Common stock, $4 par value, 32,000,000 shares authorized;
23,896,962 shares outstanding . . . . . . . . . . . . . . . $ 95,588 $ 95,588
Premium on capital stock . . . . . . . . . . . . . . . . . . 73,605 73,605
Retained earnings. . . . . . . . . . . . . . . . . . . . . . 295,654 288,693
ESOP loan guarantee. . . . . . . . . . . . . . . . . . . . . (22,342) (23,383)
--------- ----------
Total common stock equity. . . . . . . . . . . . . . 442,505 434,503
--------- ----------
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 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
10-1/8% 2014 . . . . . . . . . -- 1,000
8.80% 2021 . . . . . . . . . . 60,000 60,000
7-1/8% 2023 . . . . . . . . . . 50,000 50,000
--------- ----------
291,075 292,075
Unamortized discount and premium on bonds, net . . . . . . . (1,198) (1,257)
--------- ----------
Total first mortgage bonds . . . . . . . . . . . . . . . . 289,877 290,818
ESOP loan guarantee. . . . . . . . . . . . . . . . . . . . . 22,342 23,383
Other long-term debt . . . . . . . . . . . . . . . . . . . . 64 24
--------- ----------
Total long-term debt . . . . . . . . . . . . . . . . 312,283 314,225
--------- ----------
Total capitalization . . . . . . . . . . . . . . . . . . . . . $ 805,988 $ 799,928
========= ==========
<FN>
The accompanying notes to financial statements are an integral part of these statements.
- 3 -
</TABLE>
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
STATEMENTS OF CASH FLOWS
FOR THE SIX MONTHS ENDED
<CAPTION>
June 30
1994 1993
--------- ---------
(Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 30,563 $ 32,712
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 28,066 30,411
Amortization of nuclear fuel and other . . . . . . . . . . . . . 14,130 12,992
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 598 (966)
Investment credit restored . . . . . . . . . . . . . . . . . . . (906) (991)
AFUDC equity . . . . . . . . . . . . . . . . . . . . . . . . . . (43) (253)
Pension (income) . . . . . . . . . . . . . . . . . . . . . . . . (5,454) (4,915)
Post retirement liability. . . . . . . . . . . . . . . . . . . . 3,518 2,957
Deferred DSM Expenditures. . . . . . . . . . . . . . . . . . . . (5,154) (12,256)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (3,364) 831
Changes in -
Customer and other receivables. . . . . . . . . . . . . . . . . 3,747 1,545
Accrued utility revenues. . . . . . . . . . . . . . . . . . . . 19,452 14,933
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 62 487
Gas in storage. . . . . . . . . . . . . . . . . . . . . . . . . 8,533 777
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . (19,419) (10,888)
Miscellaneous current and accrued liabilities . . . . . . . . . 17,068 8,676
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . 707 6,828
--------- ---------
Net Cash From Operating Activities. . . . . . . . . . . . . . 92,104 82,880
--------- ---------
Cash Flows From (Used For) Investing Activities:
Construction and nuclear fuel expenditures, including AFUDC debt (27,972) (27,203)
Decommissioning funding. . . . . . . . . . . . . . . . . . . . . (2,854) (3,420)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 748 (349)
--------- ---------
Net cash from (used for) investing activities . . . . . . . . (30,078) (30,972)
--------- ---------
Cash Flows From (Used For) Financing Activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . - 1,693
Proceeds from issuance of preferred stock. . . . . . . . . . . . - 15,000
Sale of first mortgage bonds . . . . . . . . . . . . . . . . . . - 50,000
Redemption and maturity of first mortgage bonds. . . . . . . . . (1,000) (71,211)
Change in commercial paper . . . . . . . . . . . . . . . . . . . (11,000) (10,000)
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . (1,556) (1,618)
Common stock dividends . . . . . . . . . . . . . . . . . . . . . (21,268) (20,777)
--------- ---------
Net cash from (used for) financing activities . . . . . . . . (34,824) (36,913)
--------- ---------
Net Increase in Cash and Equivalents . . . . . . . . . . . . . . . 27,202 14,995
Cash and Equivalents at Beginning of Period. . . . . . . . . . . . 5,391 178
--------- ---------
Cash and Equivalents at End of Period. . . . . . . . . . . . . . . $ 32,593 $ 15,173
========= =========
Cash Paid During Period For:
Interest, less amount capitalized. . . . . . . . . . . . . . . . $ 10,157 $ 9,950
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 14,453 $ 12,764
<FN>
The accompanying notes to financial statements are an integral part of these statements.
-4-
</TABLE>
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
STATEMENTS OF RETAINED EARNINGS
FOR THE SIX MONTHS ENDED
<CAPTION>
June 30
1994 1993
--------- ----------
(Thousands)
<S> <C> <C>
Balance at Beginning of Period . . . . . . . . . . . . . . . . . . . . . . $ 288,693 $ 272,019
Add - Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 30,563 32,712
--------- ----------
319,256 304,731
--------- ----------
Deduct -
Cash dividends declared on preferred stock . . . . . . . . . . . . . . . 2,334 2,554
Cash dividends declared on common stock. . . . . . . . . . . . . . . . . 21,268 20,777
--------- ----------
23,602 23,331
--------- ----------
Balance at End of Period . . . . . . . . . . . . . . . . . . . . . . . . . $ 295,654 $ 281,400
========= ==========
<FN>
The accompanying notes to financial statements are an integral
part of these statements.
-5-
</TABLE>
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
STATEMENTS OF INCOME
AS OF JUNE 30
<CAPTION>
Three Months Ended Six Months End
1994 1993 1994 1993
-------- -------- -------- --------
(Thousands) (Thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . . . . . . . $ 115,893 $ 119,700 $ 239,502 $ 243,140
Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 31,676 37,992 108,797 103,556
-------- -------- -------- --------
147,569 157,692 348,299 346,696
-------- -------- -------- --------
Operating Expenses:
Operation -
Electric production fuels. . . . . . . . . . . . . . . 28,128 27,914 56,302 58,835
Cost of gas sold . . . . . . . . . . . . . . . . . . . 20,962 28,099 74,328 72,762
Purchased power. . . . . . . . . . . . . . . . . . . . 8,459 8,136 19,752 16,263
Other. . . . . . . . . . . . . . . . . . . . . . . . . 37,536 36,653 73,641 73,241
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 14,316 12,865 25,812 24,567
Depreciation . . . . . . . . . . . . . . . . . . . . . . 13,874 15,025 28,066 30,411
Taxes -
Federal income . . . . . . . . . . . . . . . . . . . . 3,895 4,862 13,601 12,969
Investment credit restored . . . . . . . . . . . . . . (453) (496) (906) (991)
State income . . . . . . . . . . . . . . . . . . . . . 1,166 1,386 3,827 3,620
Gross receipts and other . . . . . . . . . . . . . . . 6,451 6,302 12,987 12,530
-------- -------- -------- --------
134,334 140,746 307,410 304,207
-------- -------- -------- --------
Operating Income . . . . . . . . . . . . . . . . . . . . . 13,235 16,946 40,889 42,489
-------- -------- -------- --------
Other Income and (Deductions):
Allowance for equity funds used during construction. . . 23 155 43 253
Other, net . . . . . . . . . . . . . . . . . . . . . . . 1,124 1,394 2,334 3,043
Income taxes . . . . . . . . . . . . . . . . . . . . . . 59 (295) (36) 16
-------- -------- -------- --------
1,206 1,254 2,341 3,312
-------- -------- -------- --------
Income Before Interest Expense . . . . . . . . . . . . . . 14,441 18,200 43,230 45,801
-------- -------- -------- --------
Interest Expense:
Interest on long-term debt . . . . . . . . . . . . . . . 5,887 6,233 11,842 12,599
Allowance for borrowed funds used during construction. . (27) (124) (62) (258)
Other interest . . . . . . . . . . . . . . . . . . . . . 393 360 887 748
-------- -------- -------- --------
6,253 6,469 12,667 13,089
-------- -------- -------- --------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 8,188 11,731 30,563 32,712
Preferred Stock Dividend Requirements. . . . . . . . . . . 778 848 1,556 1,658
-------- -------- -------- --------
Earnings on Common Stock . . . . . . . . . . . . . . . . . $ 7,410 $ 10,883 $ 29,007 $ 31,054
======== ======== ======== ========
Earnings Per Average Share of Common Stock . . . . . . . . $0.31 $0.45 $1.21 $1.30
======== ======== ======== ========
<FN>
The accompanying notes to financial statements are an integral part of these statements.
- 6 -
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(1) Financial Information: The following financial statements have been
prepared by Wisconsin Public Service Corporation (the "Company"),
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 latest annual report on Form 10-K and with the Company's March
31, 1994 Form 10-Q.
Because of the seasonal nature of the Company's operations, interim
results are not necessarily indicative of annual results.
(2) Nuclear Decommissioning: In July 1994, the Public Service Commission of
Wisconsin (PSCW) issued a generic order covering all utilities in the
state that have nuclear generation. This order standardizes the
escalation assumptions to be used in determining nuclear decommissioning
liabilities. Based upon this new methodology and considering other
assumption changes, the Company's share of Kewaunee nuclear plant
(Kewaunee) decommissioning costs have changed. Decommissioning costs
for Kewaunee are now estimated to be $147 million in current dollars.
The undiscounted amount of decommissioning costs estimated to be
expended between the years 2014 - 2050 is $785 million, as compared to
the previous estimate of $736.7 million. Annual retail funding is
expected to change from approximately $3.5 million to approximately $8.4
million as a result of this new order. In conjunction with this, the
long-term after-tax earnings are assumed to be 5.5%.
(3) Environmental Liabilities: An eighth manufactured gas plant site has
been identified by the Company. The Company is in the early stages of
investigation, and at this time is investigating the amount or level of
contamination at this site. The extent, if any, to which the Company
could be liable is not known.
In June the Supreme Court of Wisconsin (Court) issued a decision
regarding recoveries from insurance companies for environmental
remediation costs. The Court, held that insurance coverage was not
available for environmental cleanup costs to the extent the cleanup is
done to prevent or mitigate future injury. In addition, the Court held
that a notification letter from a government agency about an
environmental situation did not constitute a suit, triggering the
insurers' duty to defend. A motion for reconsideration is pending. In
addition, the Company is exploring alternative approaches of pursuing
claims against its carriers in light of the decision.
Based on discussion with regulatory authorities and effective with a
recent rate order cleanup costs will be recoverable in future rates,
except for carrying costs.
-------------
-7-
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
- - ---------------------
Second Quarter of 1994 Compared to the Second Quarter of 1993
- - -------------------------------------------------------------
Revenues -
Electric operating revenues decreased $3.8 million, or 3.2%, during the second
quarter of 1994 compared to the second quarter of 1993. Electric revenues
were lower due to a 4.0% decrease in retail Wisconsin rates that took effect
January 1, 1994. This rate decrease was partially offset by 4.7% increase in
kilowatt-hour (Kwh) sales. Residential Kwh sales increased 5.9% due to the
warmer weather. Commercial and industrial Kwh sales rose 6.4%, reflecting the
warm weather and customer growth. Wholesale Kwh sales experienced a decrease
of 3.3%.
Gas operating revenues decreased $6.4 million, or 16.6%, during the second
quarter of 1994 compared to the second quarter of 1993. Gas revenues were
lower due to an 18.4% decrease in the cost of gas. This decrease was
partially offset by a 1.1% increase in therm sales and a .6% increase in
retail Wisconsin rates that took effect January 1, 1994. Residential sales
accounted for $5.1 million of the decrease, as customer volumes were lower by
11.3%, as a result of heating degree days decreasing 16.2%.
Expenses -
Electric production fuels increased $.2 million, or .8%, in the second quarter
of 1994 over 1993, even though coal and nuclear electric generation was up
8.1% due to the warm weather discussed earlier. This nominal increase in the
cost of fuel was the result of less expensive coal which has been purchased on
the spot market, which decreased fuel cost per Kwh by 12.0%.
Gas purchased for resale decreased $7.2 million, or 25.4%, in the second
quarter of 1994 over 1993. This decrease was due to the lower cost of gas
discussed earlier.
Maintenance expense increased $1.5 million, or 11.3%, in the second quarter of
1994 over 1993. The primary reason for this increase was higher maintenance
activities at the Company's coal-fired generating plants.
Depreciation decreased $1.2 million, or 7.7%, in the second quarter of 1994
over 1993. The primary factor for this was a depreciation rate order from the
PSCW that took effect January 1, 1994, which reduced the annual depreciation
provision by an estimated $5.8 million.
Federal and state income taxes decreased $1.2 million, or 19.0%, in the second
quarter of 1994 over 1993, due to lower earnings.
-8-
<PAGE>
First Six Months of 1994 Compared to the First Six Months of 1993
- - -----------------------------------------------------------------
Revenues -
Electric operating revenues decreased $3.6 million, or 1.5% for the first six
months of 1994 as compared to 1993. This decrease was due to a 4.0% reduction
in retail Wisconsin rates that took effect January 1, 1994. This decrease was
partially offset by an overall 4.5% increase in Kwh sales. Residential Kwh
sales increased 4.7% due primarily to weather. Commercial and industrial Kwh
sales rose 6.7%, reflecting the weather and customer growth. Wholesale Kwh
sales were lower by 1.8%.
Gas operating revenues increased $5.2 million, or 5.1% during the first six
months of 1994 as compared to 1993. Gas revenues were higher due to a 8.3%
increase in volume sales and a .6% increase in Wisconsin retail rates that
took effect January 1, 1994. These increases were partially offset by a 4.3%
reduction in the cost of gas. Residential sales accounted for $7.6 million of
the increase, as customer volumes increased 6.1%.
Expenses -
Electric production fuels decreased $2.5 million, or 4.3%, during the first
six months of 1994 compared to the same period in 1993, even though coal and
nuclear generation was up 3.8%. This decrease in the cost of fuel was
primarily the result of less expensive coal which has been purchased on the
spot market, which decreased fuel cost per Kwh by 9.3%.
Gas purchased for resale increased $1.6 million, or 2.2%, during the first six
months of 1994 compared to the same period in 1993 due to higher gas volumes
of 8.3%, caused by the colder than normal winter, and was partially offset by
a 4.3% decrease in the cost of gas.
Purchased power increased $3.5 million, or 21.5%, during the first six months
of 1994 compared to the same period in 1993. This was the result of higher
Kwh purchases of 21.5%, which was caused by the cold winter which raised
overall demand for electricity.
Maintenance increased $1.2 million, or 5.1%, during the first six months of
1994 over the same period in 1993. This was due primarily to increased
maintenance activities at the Company's coal fired generating plants.
Depreciation decreased $2.4 million, or 7.7%, during the first six months of
1994 over the same period in 1993. The primary factor for this was a
depreciation rate order from the PSCW that took effect January 1, 1994, which
reduced the annual depreciation provision by an estimated $5.8 million.
Federal and state income taxes decreased $.8 million, or 5.1%, during the
first six months of 1994 over the same period in 1993. This decrease was due
primarily to lower earnings.
Other income decreased by $1.0 million, or 29.3%, during the first six months
of 1994 over the same period in 1993. This decrease was primarily the result
of gains that were recognized in 1993 when a portion of the Company's nuclear
decommissioning trust portfolio was reinvested.
-9-
<PAGE>
FINANCIAL CONDITION
- - -------------------
The Company continues to maintain good liquidity levels and a financial
condition considered to be strong by utility analysts. Internally generated
funds exceeded the Company's cash requirements so short-term borrowings were
reduced during the first six months of 1994, and short term investments have
increased. No external funding difficulties are anticipated in the future.
Pretax interest coverage was 4.5 times for the 12 months ended June 30, 1994.
The Company's bond ratings are AA+ (Standard & Poor's) and Aa2 (Moody's).
For the five-year period 1994-1998, internally generated funds are expected to
lag construction expenditures and other investments totalling $533 million by
about $131 million. These expenditures are comprised of $361 million for
electric construction, which includes new generation, $34 million for nuclear
fuel, $49 million for gas construction, and $33 million for other construction
expenditures, $57 million for funding of nuclear plant decommissioning,
certain employee benefit plans, and non-utility investments. The Company
currently expects to finance this shortfall in internally generated funds by
net bond additions of $75 million, and short-term debt of $56 million.
However, no bond sales are anticipated until after 1996.
The Company's Kewaunee nuclear plant is currently licensed through the year
2013. Physical decommissioning of the plant is expected to occur during the
period 2014-2021 with additional expenditures being incurred during the period
2022-2050. Costs to decommission in current dollars is $147 million and the
undiscounted amount is $785 million. Management does not anticipate
decommissioning to have any negative impacts to the Company's liquidity or
capital resources, since these costs are being funded through external
decommissioning trusts.
As of June 30, 1994, the Company has recorded $14.0 million in other current
liabilities representing gas costs recovered from customers (through the
purchased gas adjustment clause) in excess of the cost of gas sold.
On May 3, 1994, the Company filed a request with the PSCW for permission to
reduce prospectively its 1994 electric rates by $1.8 million due to lower than
forecasted fuel expense. The lower rates became effective May 24, 1994.
The Company expects to reduce its Wisconsin retail electric rates by at least
2.5% on January 1, 1995. The exact amount of the rate decrease will be
determined by the PSCW after a hearing.
-10-
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
---------------------------------------------------
Proxy voting results at the May 5, 1994 Annual Shareholders' Meeting are as
follows:
For the election of directors:
For Abstentions Non-Votes Total
--- ----------- --------- -----
Michael S. Ariens 21,622,598 287,401 1,986,963 23,896,962
Kathryn M.
Hasselblad-Pascale 21,644,891 265,309 1,986,762 23,896,962
Linus M. Stoll 21,617,870 292,130 1,986,962 23,896,962
The following directors also continued in office after the Annual
Shareholders' Meeting:
A. Dean Arganbright
Richard A. Bemis
Daniel A. Bollom
M. Lois Bush
Robert C. Gallagher
James L. Kemerling
For the approval of a Plan and Agreement of Share Exchange pursuant to which
each outstanding share of common stock of Wisconsin Public Service Corporation
("Company") will be exchanged for one share of common stock of WPS Resources
Corporation ("Resources"), and the Company will become a subsidiary of
Resources:
For Against Abstentions Non-Votes Total
--- ------- ----------- --------- -----
18,474,079 455,449 476,454 4,490,980 23,896,962
Item 5. Other Information
-----------------
FORMATION OF HOLDING COMPANY. At the annual meeting of shareholders held on
May 5, 1994, the holders of the Company's common stock approved an Agreement
and Plan of Share Exchange which provides, subject to the receipt of various
regulatory approvals, for the Company to become a subsidiary of WPS Resources
Corporation ("Resources") with each outstanding share of Company common stock
being exchanged for one share of common stock of Resources. Resources is
currently a wholly-owned subsidiary of the Company. It is anticipated that
the share exchange will become effective within the next several weeks upon
receipt of all required regulatory approvals.
-11-
<PAGE>
GAS PLANT CLEANUP. As reported in Part I, Item 1, Business - Environmental
Matters, and in Part 3, Legal Proceedings, in the Company's Annual Report on
Form 10-K for the year ended December 31, 1993, the Company has been
investigating the need for environmental cleanup of seven manufactured gas
plant sites previously operated by the Company. The Company recently became
aware of information indicating that a manufactured gas plant was in operation
in Menominee, Michigan until approximately 1923. The Company is investigating
the extent to which it could be held responsible for the potential cleanup
costs of this eighth site. The Company has no indication of the level of
contamination at the eighth site.
On June 16, 1994, the Wisconsin Supreme Court, in City of Edgerton v, General
Casualty Company, held that insurance coverage was not available for
environmental cleanup costs to the extent the cleanup is done to prevent or
mitigate future injury. In addition, the court held that a notification
letter from a government agency about an environmental situation (commonly
known as a "PRP letter") did not constitute a suit, triggering the insurer's
duty to defend. A motion for reconsideration is pending. In addition, the
Company is exploring alternative approaches of pursuing claims against its
carriers in light of the City of Edgerton decision.
NUCLEAR DECOMMISSIONING. As reported in Part I, Item 1. Business - Kewaunee
Nuclear Plant, in the Company's Annual Report on Form 10-K for the year ended
December 31, 1993, the Company is funding in external trusts the forecasted
nuclear decommissioning liability related to the jointly owned Kewaunee
Nuclear Power Plant ("Kewaunee"). Physical decommissioning is expected to
occur during the period 2014 - 2021 with additional expenditures being
incurred during the period 2022 - 2050 related to the storage of spent nuclear
fuel at the site. The cost of decommissioning Kewaunee was estimated to be
$342 million, in 1992 dollars, (and $361 million, in 1993 dollars, as reported
in Form 10-K) based on a 1992 site specific study using immediate
dismantlement as the method of decommissioning. Subsequently, the cost
estimate of decommissioning Kewaunee has been revised to $319 million, in 1992
dollars, and $357 million, in 1994 dollars. The Company's share of these
costs is $132 and $147 million, in 1992 and 1994 dollars, respectively.
In July of 1994, the PSCW issued a generic order setting forth the escalation
methodology to be used in forecasting nuclear decommissioning liabilities, as
well as additional changes in the funding methodology. Under the escalation
methodology, the cost estimate was segregated into four categories to be
separately escalated at the following rates: 4.21% for labor, 9.85% for
burial costs, 3.74% for energy related costs, and 8.00% for other costs.
Using the new escalation assumptions, the year of expenditure amount of
decommissioning costs is estimated to be $785 million. This compares with
$736.7 million using previous assumptions.
The Company has filed with the PSCW a revised decommissioning funding plan for
its retail jurisdiction reflecting the revised assumptions, and is awaiting
their approval. Under the proposed funding plan, the Company would make
annual decommissioning funding payments for the retail jurisdiction of
approximately $8.4 million compared to approximately $3.5 million annual
payments under the current plan.
As of June 30, 1994, the accumulated provision for depreciation included
accumulated provisions for decommissioning totalling $59.6 million. The long-
term after-tax earnings on these funds is assumed to be 5.5%.
-12-
<PAGE>
ADDITIONAL GENERATING CAPACITY. As reported in Part I, Item 1, Business -
Electric Operations, in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993, and in Part II, Item 5, Other Information, in the
Company's quarterly report on Form 10-Q for the quarterly period ended March
31, 1994, the Company has identified a need for additional generating capacity
late in this decade. The Company, in a filing with the PSCW, has identified
the Rhinelander Energy Center ("Energy Center") as its preferred alternative
for meeting its generating needs. The Energy Center was one of thirteen
alternative projects identified as the result of a request for bids which was
required by the PSCW to assure that the lowest-cost alternative is chosen to
meet Wisconsin's energy needs. Each proposal was evaluated on its long-term
economic effect on customers, environmental impact and reliability, among many
other factors. The PSCW must approve generating plant additions. PSCW
hearings on the Company's proposal commenced in July 18, 1994. A decision is
expected by the fall of 1994.
Item 6. Exhibits and Reports on Form 8-K.
---------------------------------
(a) Exhibits
--------
The following documents are filed herewith:
(11) Statement Regarding: Computation of Per Share Earnings
-13-
<PAGE>
EXHIBIT INDEX
Exhibit
11 Statement Regarding: Computation of Per Share
Earnings
-14-
<PAGE>
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 Public Service Corporation
____________________________________
(Registrant)
/s/R. G. Baeten
____________________________________
(Signature)
R. G. Baeten
Treasurer
Date July 29, 1994
_____________________
/s/Diane L. Ford
____________________________________
(Signature)
Diane L. Ford
Chief Accounting Officer
<TABLE>
Exhibit 11
WISCONSIN PUBLIC SERVICE CORPORATION
------------------------------------
INFORMATION WITH RESPECT TO THE COMPUTATION OF EARNINGS PER SHARE OF COMMON STOCK
---------------------------------------------------------------------------------
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
------------------------ ---------------------
(Thousands) (Thousands)
1994 1993 1994 1993
---- ---- ---- ----
<S> <C> <C> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING AT
BEGINNING OF PERIOD 23,897 23,897 23,897 23,846
Shares of common stock issued during
this period -
Number
Date of Issue of Shares
- - ------------- ---------
January 27, 1993 10,341 10
February 26, 1993 9,434 10
March 20, 1993 22,142 22
March 24, 1993 8,901 9
---------- ---------- ---------- ----------
SHARES OF COMMON STOCK OUTSTANDING AT
END OF PERIOD 23,897 23,897 23,897 23,897
========== ========== ========== ==========
COMPUTATION OF DAILY WEIGHTED AVERAGE
SHARES OUTSTANDING:
Shares of common stock outstanding at
beginning of period -
Number Number
of of
Days Shares
------ ------
June 30, 1993 91 23,896,962 2,174,624
June 30, 1993 26 23,846,144 620,000
June 30, 1994 91 23,896,962 2,174,624
June 30, 1994 181 23,896,962 4,325,350
Shares of common stock outstanding
after shares issued during the period -
Number Number
of of
Days Shares
----- ------
June 30, 1993 30 23,856,485 715,695
June 30, 1993 22 23,865,919 525,050
June 30, 1993 4 23,888,061 95,552
June 30, 1993 99 23,896,962 2,365,799
---------- ---------- ---------- ----------
Total days shares outstanding 2,174,624 2,174,624 4,325,350 4,322,096
========== ========== ========== ==========
AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING BASED ON DAILY
WEIGHTED AVERAGE COMPUTATIONS 23,897 23,897 23,897 23,879
========== ========== ========== ==========
EARNINGS ON COMMON STOCK, as set forth
in statements of income $7,410 $10,883 $29,007 $31,054
========== ========== ========== ==========
EARNINGS PER SHARE OF COMMON STOCK
BASED ON WEIGHTED AVERAGE SHARES
OUTSTANDING $0.31 $0.45 $1.21 $1.30
========== ========== ========== ==========
<FN>
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
