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 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 1-3016
_________________________
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>
March 31 December 31
1994 1993
----------- ------------
(Thousands)
<S> <C> <C>
ASSETS
Utility Plant:
In-service -
Electric . . . . . . . . . . . . . . . . . . . . . . . . . . $ 1,387,514 $ 1,374,662
Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 185,068 183,798
----------- ------------
1,572,582 1,558,460
Less - Accumulated provision for depreciation. . . . . . . . 815,438 801,056
----------- ------------
757,144 757,404
Nuclear decommissioning trusts . . . . . . . . . . . . . . . 58,702 56,699
Construction in progress . . . . . . . . . . . . . . . . . . 7,894 11,781
Nuclear fuel, less accumulated provisions for amortization .
of $131,444, and $130,011, respectively . . . . . . . . . 16,658 17,981
----------- ------------
Net utility plant. . . . . . . . . . . . . . . . . . . . . 840,398 843,865
----------- ------------
Current Assets:
Cash and equivalents . . . . . . . . . . . . . . . . . . . . . 34,214 5,391
Customer and other receivables, net of reserves. . . . . . . . 79,240 66,511
Accrued utility revenues . . . . . . . . . . . . . . . . . . . 28,350 37,314
Fossil fuel, at average cost . . . . . . . . . . . . . . . . . 10,040 10,208
Gas in storage, at average cost . . . . . . . . . . . . . . . 5,267 19,885
Materials and supplies, at average cost. . . . . . . . . . . . 20,712 19,411
Prepayments and other. . . . . . . . . . . . . . . . . . . . . 16,519 21,420
----------- ------------
Total current assets . . . . . . . . . . . . . . . . . 194,342 180,140
----------- ------------
Deferred Charges . . . . . . . . . . . . . . . . . . . . . . . . 118,980 118,128
Investments and Other Assets . . . . . . . . . . . . . . . . . . 62,347 56,708
----------- ------------
$ 1,216,067 $ 1,198,841
----------- ------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity. . . . . . . . . . . . . . . . . . . . . . $ 444,213 $ 434,503
Preferred stock with no mandatory redemption . . . . . . . . . 51,200 51,200
Long-term debt . . . . . . . . . . . . . . . . . . . . . . . . 313,781 314,225
----------- ------------
Total capitalization . . . . . . . . . . . . . . . . . 809,194 799,928
----------- ------------
Current Liabilities:
Note payable . . . . . . . . . . . . . . . . . . . . . . . . . 10,000 10,000
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . -- 11,000
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . 54,716 64,113
Accrued taxes. . . . . . . . . . . . . . . . . . . . . . . . . 11,916 3,266
Accrued interest . . . . . . . . . . . . . . . . . . . . . . . 5,002 7,695
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . 31,749 9,956
----------- ------------
Total current liabilities. . . . . . . . . . . . . . . 113,383 106,030
----------- ------------
Other Long-Term Liabilities and Deferred Credits:
Accumulated deferred income taxes. . . . . . . . . . . . . . . 140,201 138,952
Accumulated deferred investment credits. . . . . . . . . . . . 33,757 34,210
Regulatory liabilities . . . . . . . . . . . . . . . . . . . . 59,318 61,434
Other long-term liabilities. . . . . . . . . . . . . . . . . . 60,214 58,287
----------- ------------
293,490 292,883
----------- ------------
Commitments and Contingencies
----------- ------------
$ 1,216,067 $ 1,198,841
----------- ------------
<FN>
The accompanying notes to financial statements are an integral part of these statements.
- 2 -
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<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
STATEMENTS OF CAPITALIZATION
<CAPTION>
March 31 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. . . . . . . . . . . . . . . . . . . . . . 298,878 288,693
ESOP loan guarantee. . . . . . . . . . . . . . . . . . . . . (23,858) (23,383)
--------- ---------
Total common stock equity. . . . . . . . . . . . . . 444,213 434,503
--------- ---------
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 . . . . . . . (1,219) (1,257)
--------- ---------
Total first mortgage bonds . . . . . . . . . . . . . . . . 289,856 290,818
ESOP loan guarantee. . . . . . . . . . . . . . . . . . . . 23,858 23,383
Other long-term debt . . . . . . . . . . . . . . . . . . . 67 24
--------- ---------
Total long-term debt . . . . . . . . . . . . . . . . 313,781 314,225
--------- ---------
Total capitalization . . . . . . . . . . . . . . . . . . . . . $ 809,194 $ 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 THREE MONTHS ENDED
<CAPTION>
March 31
1994 1993
--------- ---------
(Thousands)
<S> <C> <C>
Cash Flows From Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . . . . . . . . . $ 22,375 $ 20,980
Adjustments to reconcile net income to net cash from
operating activities -
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . 14,192 15,386
Amortization of nuclear fuel and other . . . . . . . . . . . . . 7,370 6,823
Deferred income taxes. . . . . . . . . . . . . . . . . . . . . . 350 (544)
Investment credit restored . . . . . . . . . . . . . . . . . . . (453) (496)
AFUDC equity . . . . . . . . . . . . . . . . . . . . . . . . . . (20) (98)
Pension (income) . . . . . . . . . . . . . . . . . . . . . . . . (2,753) (2,409)
Post retirement liability. . . . . . . . . . . . . . . . . . . . 1,607 1,516
Deferred demand-side management expenditures . . . . . . . . . . (3,682) (7,940)
Other, net . . . . . . . . . . . . . . . . . . . . . . . . . . . (2,003) 5,065
Changes in -
Customer and other receivables. . . . . . . . . . . . . . . . . (12,729) (9,911)
Accrued utility revenues. . . . . . . . . . . . . . . . . . . . 8,964 5,052
Fossil fuel . . . . . . . . . . . . . . . . . . . . . . . . . . 168 2,653
Gas in storage. . . . . . . . . . . . . . . . . . . . . . . . . 14,618 11,616
Accounts payable. . . . . . . . . . . . . . . . . . . . . . . . (9,676) (3,839)
Miscellaneous current and accrued liabilities . . . . . . . . . 17,451 7,331
Accrued taxes . . . . . . . . . . . . . . . . . . . . . . . . . 8,650 12,049
--------- ---------
Net Cash From Operating Activities. . . . . . . . . . . . . . . 64,429 63,234
--------- ---------
Cash Flows From (Used For) Investing Activities:
Construction and nuclear fuel expenditures, including AFUDC debt (10,883) (12,994)
Decommissioning funding. . . . . . . . . . . . . . . . . . . . . (2,003) (2,264)
Other. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 692 (3,198)
--------- ---------
Net cash from (used for) investing activities . . . . . . . . . (12,194) (18,456)
--------- ---------
Cash Flows From (Used For) Financing Activities:
Proceeds from issuance of common stock . . . . . . . . . . . . . -- 1,693
Sale of first mortgage bonds . . . . . . . . . . . . . . . . . . -- 50,000
Redemption and maturity of first mortgage bonds. . . . . . . . . (1,000) (50,000)
Change in commercial paper . . . . . . . . . . . . . . . . . . . (11,000) (10,000)
Preferred stock dividends. . . . . . . . . . . . . . . . . . . . (778) (809)
Common stock dividends . . . . . . . . . . . . . . . . . . . . . (10,634) (10,381)
--------- ---------
Net cash from (used for) financing activities . . . . . . . . (23,412) (19,497)
--------- ---------
Net Increase in Cash and Equivalents . . . . . . . . . . . . . . . 28,823 25,281
Cash and Equivalents at Beginning of Period. . . . . . . . . . . . 5,391 178
--------- ---------
Cash and Equivalents at End of Period. . . . . . . . . . . . . . . $ 34,214 $ 25,459
--------- ---------
Cash Paid During Period For:
Interest, less amount capitalized. . . . . . . . . . . . . . . . $ 7,957 $ 5,712
Income taxes . . . . . . . . . . . . . . . . . . . . . . . . . . $ 3,279 $ 1,237
Construction and nuclear fuel expenditures, including accruals,
AFUDC and customer contributions . . . . . . . . . . . . . . . . $ 12,107 $ 14,315
<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 THREE MONTHS ENDED
<CAPTION>
March 31
1994 1993
--------- ---------
(Thousands)
<S> <C> <C>
Balance at Beginning of Period . . . . . . . . . . . . . . . $ 288,693 $ 272,019
Add - Net income . . . . . . . . . . . . . . . . . . . . . . 22,375 20,980
--------- ---------
311,068 292,999
--------- ---------
Deduct -
Cash dividends declared on preferred stock . . . . . . . . 1,556 1,618
Cash dividends declared on common stock. . . . . . . . . . 10,634 10,382
--------- ---------
12,190 12,000
--------- ---------
Balance at End of Period . . . . . . . . . . . . . . . . . . $ 298,878 $ 280,999
--------- ---------
<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 MARCH 31
<CAPTION>
Three Months Ended
1994 1993
--------- ---------
(Thousands)
<S> <C> <C>
Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . . . . . . . $ 123,609 $ 123,440
Gas. . . . . . . . . . . . . . . . . . . . . . . . . . . 77,121 65,563
--------- ---------
200,730 189,003
--------- ---------
Operating Expenses:
Operation -
Electric production fuels. . . . . . . . . . . . . . . 28,174 30,921
Cost of gas sold . . . . . . . . . . . . . . . . . . . 53,366 44,663
Purchased power. . . . . . . . . . . . . . . . . . . . 11,293 8,127
Other. . . . . . . . . . . . . . . . . . . . . . . . . 36,105 36,588
Maintenance. . . . . . . . . . . . . . . . . . . . . . . 11,496 11,702
Depreciation . . . . . . . . . . . . . . . . . . . . . . 14,192 15,386
Taxes -
Federal income . . . . . . . . . . . . . . . . . . . . 9,706 8,107
Investment credit restored . . . . . . . . . . . . . . (453) (496)
State income . . . . . . . . . . . . . . . . . . . . . 2,661 2,234
Gross receipts and other . . . . . . . . . . . . . . . 6,536 6,228
--------- ---------
173,076 163,460
--------- ---------
Operating Income . . . . . . . . . . . . . . . . . . . . . 27,654 25,543
--------- ---------
Other Income and (Deductions):
Allowance for equity funds used during construction. . . 20 98
Other, net . . . . . . . . . . . . . . . . . . . . . . . 1,210 1,648
Income taxes . . . . . . . . . . . . . . . . . . . . . . (95) 311
--------- ---------
1,135 2,057
--------- ---------
Income Before Interest Expense . . . . . . . . . . . . . . 28,789 27,600
--------- ---------
Interest Expense:
Interest on long-term debt . . . . . . . . . . . . . . . 5,955 6,366
Allowance for borrowed funds used during construction. . (35) (135)
Other interest . . . . . . . . . . . . . . . . . . . . . 494 389
--------- ---------
6,414 6,620
--------- ---------
Net Income . . . . . . . . . . . . . . . . . . . . . . . . 22,375 20,980
Preferred Stock Dividend Requirements. . . . . . . . . . . 778 809
--------- ---------
Earnings on Common Stock . . . . . . . . . . . . . . . . . $ 21,597 $ 20,171
--------- ---------
Earnings Per Average Share of Common Stock . . . . . . . . $0.90 $0.85
--------- ---------
<FN>
The accompanying notes to financial statements are an integral part of these statements
- 6 -
</TABLE>
<PAGE>
WISCONSIN PUBLIC SERVICE CORPORATION
NOTES TO FINANCIAL STATEMENTS
(1) Financial Information: The accompanying 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
presented. 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.
Because of the seasonal nature of the Company's operations, interim
results are not necessarily indicative of annual results.
(2) Nuclear Decommissioning: Nuclear decommissioning costs are accrued over
the estimated service life of Kewaunee nuclear plant (Kewaunee), which
is through the year 2013. These costs are currently recovered from
customers in rates, and are deposited in external trusts. For 1994
decommissioning costs recovered in rates are to be $4.0 million. These
decommissioning trusts are shown on the balance sheet as a component of
net utility plant, and as of March 31, 1994, these trusts totalled $58.7
million ($60.5 million market value).
Decommissioning costs are recovered through depreciation expense,
exclusive of earnings on the trusts. Net earnings on the trusts are
included in other income.
The Company's share of Kewaunee decommissioning costs is estimated to be
$151 million in current dollars based on a site specific study,
performed in 1992, using immediate dismantlement as the method of
decommissioning. As of March 31, 1994, the accumulated provision for
depreciation included accumulated provisions for decommissioning
totalling $58.7 million. Decommissioning costs are assumed to inflate
at a rate of 5.5%. The long-term after-tax earnings on these trusts is
assumed to be 6.4%. 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 undiscounted amount of decommissioning costs estimated
to be expended between the years 2014 - 2050 is $736.7 million.
(3) Joint Plant Litigation: The Columbia Energy Center (Columbia) is owned
31.8% by the Company, 46.2% by Wisconsin Power and Light Company (WP&L),
and 22.0% by Madison Gas and Electric Company (MG&E). WP&L operates
Columbia. In 1989, the Public Service Commission of Wisconsin (PSCW)
concluded that WP&L did not properly administer a coal contract for
Columbia and ordered WP&L to refund $9 million to the ratepayers of
WPSC, WP&L and MG&E proportionately according to the ownership shares of
each utility in Columbia. WP&L appealed the PSCW decision, and such
decision was found to represent unlawful retroactive ratemaking by both
the Dane County Circuit Court and the Wisconsin Court of Appeals. The
case was appealed by the PSCW to the Wisconsin Supreme Court, and in
February 1994, the court affirmed the decision of the Court of Appeals
and found in favor of WP&L. This decision should eliminate any
potential negative impact to the Company as a result of the 1989 PSCW
order.
(4) Rate Reduction: 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
are to become effective May 10, 1994, or shortly thereafter.
(5) 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 months upon receipt of all required
regulatory approvals.
Item 2. Management's Discussion and Analysis of Financial Condition and
---------------------------------------------------------------
Results of Operations
---------------------
RESULTS OF OPERATIONS
- - ---------------------
First Quarter of 1994 Compared to the First Quarter of 1993
- - -----------------------------------------------------------
Revenues -
Electric operating revenues increased $.2 million, or .1%, during the first
quarter of 1994 compared to the first quarter of 1993. Electric revenues were
higher during this period as a result of overall 5.5% increase in kilowatt-
hour (Kwh) sales. This increase in Kwh sales was offset by a 4.0% decrease in
retail Wisconsin rates that took effect January 1, 1994. Residential Kwh
sales increased 6.7% due to the colder winter with heating degree days
increasing by 12.0% from 1993. Commercial and industrial Kwh sales rose 7.0%,
reflecting the colder weather and customer growth. Wholesale sales were
relatively constant in 1994 compared to 1993.
Gas operating revenues increased $11.6 million, or 17.6%, in the first quarter
of 1994 compared to the first quarter of 1993. Gas revenues were higher
during 1994 due to increased volume sales caused by the colder weather
discussed earlier, a .6% increase in retail Wisconsin rates that took effect
January 1, 1994, and a 6.0% increase in the cost of gas. Residential sales
accounted for 12.7 million of the increase, as customer volumes increased by
12.6%.
-8-
<PAGE>
Expenses -
Electric production fuels decreased $2.7 million, or 8.9%, in the first
quarter of 1994 over 1993. This was primarily the result of less expensive
coal which has been purchased on the spot market, which decreased fuel cost
per Kwh by 6.3%. Electric generation was up less than .1%, even though Kwh
sales increased 5.5%, because the company utilized increased purchased power
to meet this demand.
Cost of gas sold increased $8.7 million, or 19.5%, in the first quarter of
1994 over 1993 due to higher gas volumes of 11.9%, caused by the colder than
normal winter and a 6.0% increase in the cost of gas.
Purchased power increased by $3.2 million, or 39.0%, in the first quarter of
1994 over 1993. This was the result of higher Kwh purchases of 29.7%, and a
7.2% increase in the average cost of energy purchased. Both of these factors
were a result of the cold winter which raised the overall demand for
electricity.
Depreciation decreased $1.2 million, or 7.8%, in the first 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 increased $2.0 million, or 19.6%, in the first
quarter of 1994 over 1993, due to higher taxable earnings, and the effect of
an increase in the federal income tax rate from 34% to 35% as provided in the
Revenue Reconciliation Act of 1993. This rate increase took effect in the
third quarter of 1993.
Other income decreased by $.9 million, in the first quarter of 1994 over 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.
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 quarter. No external funding difficulties are anticipated
in the future. Pretax interest coverage was 4.6 times for the 12 months ended
March 31, 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 $642 million by
about $190 million. These expenditures are comprised of $463 million for
electric construction, which includes new generation, $29 million for nuclear
fuel, $43 million for gas construction, and $34 million for other construction
expenditures, $73 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
-9-
<PAGE>
net bond additions of $124 million, common stock sales of $21 million,
preferred stock sales of $25 million, and short-term debt of $20 million.
However, no permanent security 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 $151 million and the
undiscounted amount is $737.7 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 March 31, 1994, the company has recorded $17.3 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 are to become effective May 10,
1994, or shortly thereafter.
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 described in Item 5 below.
Part II. OTHER INFORMATION
Item 5. Other Information
-----------------
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 months upon receipt of all required
regulatory approvals.
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 are to become effective May 10,
1994, or shortly thereafter. The Company and the PSCW have agreed to reduce
the Company's 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 described below. The reduced rates would remain in effect
-10-
<PAGE>
until 1997. The Company also expects not to increase natural gas rates in
1995 and 1996. However, the Company will continue to pass on to customers
monthly adjustments in gas costs reflected in supplier billings. The
Company's rate proposal, which continues to be considered by the PSCW,
includes a plan to accelerate the amortization of capitalized demand-side
management program costs by up to an additional $8 million in both 1995 and
1996. A hearing is to be held in August, 1994, for the purpose of receiving
testimony with respect to capital structure, return on equity, accelerated
amortization of capitalized demand-side expenditures and revised nuclear
plant decommissioning accruals. The PSCW is expected to issue a rate order
in October which will be effective January 1, 1995.
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,
the Company has identified a need for additional generating capacity late in
this decade. Therefore, late in 1993, the Company requested proposals for
additional generating capacity. The Company has received thirteen proposals
including electricity generated using coal, natural gas and wind facilities.
The proposals also included the sale of electricity from plants located in
other states. The Rhinelander Energy Center, a joint project proposed by the
Company and the Rhinelander Paper Company, is part of this bidding process.
In total, companies responding to the request for bids have offered over 1,800
megawatts of capacity. Destec Energy, Inc., an independent power producer
which was seeking to develop a 260 megawatt electric and steam cogeneration
facility in the Company's service territory, did not submit a bid. The
Company is evaluating the bids and will be proposing a solution to its
capacity and energy needs to the PSCW in May, 1994. The PSCW must approve
generating plant additions. Over the summer, the PSCW will hold formal
hearings on the recommended plan. A final determination is expected by the
fall of 1994.
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,
in 1989, the PSCW concluded that WP&L did not properly administer a coal
contract for the Columbia Energy Center, which is owned 31.8% by the Company,
46.2% by WP&L, and 22.0% by MG&E, and ordered WP&L to refund $9 million to the
ratepayers of the Company, WP&L and MG&E proportionately according to the
ownership shares of each utility in Columbia. WP&L appealed the PSCW
decision, and that PSCW action was found to represent unlawful retroactive
ratemaking by both the Dane County Circuit Court and the Wisconsin Court of
Appeals. On February 8, 1994, the Wisconsin Supreme Court upheld the decision
of the Wisconsin Court of Appeals.
As reported in Part I, Item 1, Business - Environmental Matters, in the
Company's Annual Report on Form 10-K for the year ended December 31, 1993,
in November of 1986, the Company was notified by the DNR that it was one of
several PRPs involved in the Holtz & Krause Landfill located in Wausau,
Wisconsin. The Company disposed of 12,516 cubic yards of non-hazardous office
waste and construction debris at the site. This represents 1.02% of the total
amount of waste at the site. The landfill is currently only being addressed
by the DNR, and the current work is not being conducted as part of EPA's
Superfund program. The DNR has selected a remedy which is estimated to cost a
total of $11 million to $12 million. The DNR has proposed to contribute
approximately $4.5 million toward the remedy if the remaining amount is raised
by the parties that contributed waste to the landfill. Also, the county in
-11-
<PAGE>
which the landfill is located has adopted a surcharge on the waste disposal
fee charged at the county's landfill to raise funds to assist in the
remediation. Clean Sites, Inc., a neutral cost allocation expert, was
retained by the Holtz & Krause PRP Group to develop an allocation. The amount
to be allocated to the Company, $37,163, was paid to the cleanup fund in
October of 1993. The DNR has indicated that it will pursue a cost-recovery
action against entities that do not settle with the Holtz & Krause PRP Group.
The Company has entered into the Consent Decree that is being finalized
acknowledging the payment of the settlement amount. The Company anticipates
approval of the Consent Decree within the next two months.
-12-
<PAGE>
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
(28-1) Statistical Analysis and Comments for the Years
1988 - 1993 dated April 1, 1994
(28-2) Financial and Statistical Forecast dated May 1,
1994
-13-
<PAGE>
EXHIBIT INDEX
--------------
Exhibit
- - -------
11 Statement Regarding: Computation of Per Share
Earnings
28-1 Statistical Analysis and Comments for the Years 1988 - 1993 dated April
1, 1994
28-2 Financial and Statistical Forecast dated May 1, 1994
<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 May 9, 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
March 31
-------------------------
(Thousands)
1994 1993
---- ----
<S> <C> <C>
SHARES OF COMMON STOCK OUTSTANDING AT
BEGINNING OF PERIOD 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
====== ======
COMPUTATION OF DAILY WEIGHTED AVERAGE
SHARES OUTSTANDING:
Shares of common stock outstanding at
beginning of period -
Number Number
of of
Days Shares
---- ------
March 31, 1994 90 23,896,962 2,150,727
March 31, 1993 26 23,846,144 620,000
SHARES OF COMMON STOCK OUTSTANDING
AFTER SHARES ISSUED DURING THE PERIOD -
Number Number
of of
Days Shares
---- ------
March 31, 1993 30 23,856,485 715,695
March 31, 1993 22 23,865,919 525,050
March 31, 1993 4 23,888,061 95,552
March 31, 1993 8 23,896,962 191,176
--------- ---------
Total days shares outstanding 2,150,727 2,147,473
========= =========
AVERAGE NUMBER OF SHARES OF COMMON
STOCK OUTSTANDING BASED ON DAILY
WEIGHTED AVERAGE COMPUTATIONS 23,897 23,861
========= =========
EARNINGS ON COMMON STOCK, as set forth
in statements of income $21,598 $20,171
========= =========
EARNINGS PER SHARE OF COMMON STOCK
BASED ON WEIGHTED AVERAGE SHARES
OUTSTANDING $0.90 $0.85
========= =========
<FN>
The accompanying notes to financial statements are an integral part of these statements.
</TABLE>
STATISTICAL ANALYSIS AND COMMENTS
YEARS 1988-1993
For Analysts and Professional Investors
TABLE OF CONTENTS
-----------------
Section Page
- - ------- ----
Electric Sales 1
Electric Revenues 1
KWH Sales Growth 2
Revenue Per KWH 2
Electric Customers - Residential Use 2
Electric Heating Customers - Residential Use 3
Degree Days 3
Gas Sales 3
Gas Revenues 4
Therm Sales Growth 4
Revenue Per Therm 4
Gas Customers - Residential Use 5
Generating Capability - Peak Load 5
Generation Mix 6
Fuel Cost 6
Construction - Internal Generation 6
Rate of Return Analysis 7
Rate Filings 7
Financing 8
Capitalization Ratios 8
Common Price Range 8
Earnings Analysis 9
Quarterly Earnings Analysis 9
Dividend Analysis 9
Quality Factors 10
Operating Ratios 10
Daniel P. Bittner
(414) 433-1463
Ralph G. Baeten
(414) 433-1449
April 1, 1994
<PAGE>
<TABLE>
ELECTRIC SALES
<CAPTION>
1993 1992 1991 1990 1989 1988
---------- ---------- --------- --------- ---------- ---------
KWH KWH KWH KWH KWH KWH
(MM) % (MM) % (MM) % (MM) % (MM) % (MM) %
----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential 2 349 23 2 269 23 2 320 24 2 184 24 2 136 24 2 155 24
Com'l & Ind
(Excl Paper) 4 039 40 3 767 39 3 644 38 3 514 38 3 376 38 3 284 37
Paper 1 702 17 1 633 17 1 599 17 1 588 17 1 534 17 1 511 17
Miscellaneous 33 - 33 - 35 - 38 - 41 - 45 1
Sales for Resale
Requirements 1 397 14 1 462 15 1 493 16 1 768 19 1 789 20 1 728 20
Opportunity 631 6 583 6 477 5 196 2 81 1 117 1
------ --- ----- --- ----- --- ----- --- ------ --- ----- ---
Total 10 151 100 9 747 100 9 568 100 9 288 100 8 957 100 8 840 100
</TABLE>
<PAGE>
<TABLE>
ELECTRIC REVENUES
<CAPTION>
1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ----------
$ MM % $ MM % $ MM % $ MM % $ MM % $ MM %
----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential 165.6 34 156.7 33 158.0 34 145.1 32 146.5 33 145.1 33
Com'l & Ind
(Excl Paper) 205.8 42 194.3 41 188.2 40 177.5 40 173.6 39 168.2 39
Paper 58.8 12 57.0 12 57.2 12 56.7 13 55.3 13 54.0 12
Miscellaneous 5.8 1 7.8 2 5.4 1 5.5 1 4.6 1 4.9 1
Sales for Resale
Requirements 45.0 9 49.8 10 51.3 11 58.5 13 61.0 14 60.8 14
Opportunity 12.3 2 12.0 2 11.2 2 5.6 1 1.9 - 3.0 1
----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
Total 493.3 100 477.6 100 471.3 100 448.9 100 442.9 100 436.0 100
</TABLE>
-1-
<PAGE>
<TABLE>
KWH SALES GROWTH
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residential (%) 3.5 (2.2) 6.2 2.2 (.1) 6.1
Com'l & Ind
(Excl Paper) 7.2 3.4 3.7 4.1 2.8 7.4
Paper 4.2 2.1 .7 3.5 1.5 (.3)
Miscellaneous - (5.7) (7.9) (7.3) (8.9) (4.3)
Sales for Resale
Requirements (4.4) (2.1) (15.6) (1.2) 3.5 7.1
Opportunity 8.2 22.2 143.4 142.0 (30.8) 34.5
Total (%) 4.1 1.9 3.0 3.7 1.3 5.9
</TABLE>
<PAGE>
<TABLE>
REVENUE PER KWH
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residential (cents) 7.05 6.91 6.81 6.64 6.86 6.73
Com'l & Ind
(Excl Paper) 5.10 5.16 5.16 5.05 5.14 5.12
Paper 3.45 3.49 3.58 3.57 3.60 3.57
Miscellaneous 17.58 23.64 15.43 14.47 11.22 10.89
Sales for Resale
Requirements 3.22 3.41 3.44 3.31 3.41 3.52
Opportunity 1.95 2.06 2.35 2.86 2.35 2.56
Total (cents) 4.86 4.90 4.93 4.83 4.94 4.93
</TABLE>
<PAGE>
<TABLE>
ELECTRIC CUSTOMERS - RESIDENTIAL USE
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Elec Cus 346 950 340 141 333 208 328 159 322 582 317 695
% Chg 2.0 2.1 1.5 1.7 1.5 1.5
Av Res Use (KWH) 7 649 7 538 7 845 7 495 7 450 7 616
% Chg 1.5 (3.9) 4.7 .6 (2.2) 4.4
Av Res Bill ($) 539.10 520.51 534.32 498.08 510.95 512.80
% Chg 3.6 (2.6) 7.3 (2.5) (.4) 2.0
</TABLE>
-2-
<PAGE>
<TABLE>
ELECTRIC HEATING CUSTOMERS - RESIDENTIAL USE
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Elec Htg Cust 26 647 26 509 26 219 25 930 25 459 25 085
% Chg .5 1.1 1.1 1.9 1.5 3.0
Av Res Htg Use (KWH) 11 323 11 088 11 413 10 680 11 215 11 294
% Chg 2.1 (2.8) 6.9 (4.8) (.7) 9.1
Av Res Htg Bill ($) 758.17 734.94 750.42 692.08 758.36 753.13
% Chg 3.2 (2.1) 8.4 (8.7) .7 6.3
</TABLE>
<PAGE>
<TABLE>
DEGREE DAYS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Heating Degree
Days 7 916 7 670 7 544 7 171 8 358 8 043
Normal Heating
Degree Days* 7 901 7 970 7 972 8 139 8 139 8 182
Cooling Degree
Days 432 213 686 452 429 788
Normal Cooling
Degree Days** 501 492 501 505 377 377
<FN>
* 1991 and subsequent years computed using 20-year period. Prior years computed using 30-year
period.
** 1990 and subsequent years computed using 20-year period. Prior years computed using 30-year
period.
COMMENT: Determined on calendar period basis.
</TABLE>
<PAGE>
<TABLE>
GAS SALES
<CAPTION>
1993 1992 1991 1990 1989 1988
--------- --------- --------- ------- --------- --------
Therms Therms Therms Therms Therms Therms
(MM) % (MM) % (MM) % (MM) % (MM) % (MM) %
---- --- ---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential 192 55 183 59 184 58 169 58 192 58 178 57
Com'l & Ind 133 38 119 38 119 38 111 38 128 39 125 40
Interruptible 17 5 7 2 6 2 5 2 4 1 5 1
Miscellaneous 6 2 4 1 5 2 6 2 8 2 6 2
--- --- --- --- --- --- --- --- --- --- --- ---
Total Sales
Volumes 348 100 313 100 314 100 291 100 332 100 314 100
Volumes of Gas
Transportation 221 232 229 215 210 187
--- --- --- --- --- ---
Total 569 545 543 506 542 501
</TABLE>
-3-
<PAGE>
<TABLE>
GAS REVENUES
<CAPTION>
1993 1992 1991 1990 1989 1988
---------- --------- --------- --------- --------- ---------
$ MM % $ MM % $ MM % $ MM % $ MM % $ MM %
----- --- ---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential 110.5 59 93.2 59 94.3 62 84.0 60 98.2 69 97.2 58
Com'l & Ind 61.5 33 46.9 30 47.7 31 43.6 31 53.2 37 56.1 33
Interruptible 5.9 3 2.6 2 2.2 1 2.0 2 1.8 1 2.2 1
Miscellaneous 3.0 2 5.5 3 (.4) - 1.9 1 (20.1)*(14) 2.8 2
Gas
Transportation 6.5 3 9.0 6 8.4 6 8.5 6 9.8 7 10.1 6
----- --- ----- --- ----- --- ----- --- ----- --- ----- ---
Total 187.4 100 157.2 100 152.2 100 140.0 100 142.9 100 168.4 100
<FN>
* Reflects $21.1 million refund from company's major natural gas supplier.
</TABLE>
<PAGE>
<TABLE>
THERM SALES GROWTH
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residential (%) 4.9 (.5) 8.9 (12.0) 7.9 17.1
Com'l & Ind 11.8 - 7.2 (13.3) 2.4 9.6
Interruptible 2.4 16.7 20.0 25.0 (20.0) 25.0
Total (%) 11.2 (.3) 7.9 (12.3) 5.7 15.0
Volume of Gas
Transportation (4.7) 1.3 6.5 2.4 12.3 10.8
</TABLE>
<PAGE>
<TABLE>
REVENUE PER THERM
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Residential (cents) 57.6 50.9 51.3 49.7 51.1 54.6
Com'l & Ind 46.2 39.4 40.1 39.3 41.6 44.9
Interruptible 34.7 37.1 36.7 40.0 45.0 44.0
Total (cents) 53.9 50.2 48.5 48.1 43.0* 53.6
<FN>
* Reflects $21.1 million refund from company's major natural gas supplier.
</TABLE>
-4-
<PAGE>
<TABLE>
GAS CUSTOMERS - RESIDENTIAL USE
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Total Gas Cust 189 982 184 776 180 388 176 429 172 519 169 369
% Chg 2.8 2.4 2.2 2.3 1.9 1.9
Av Res Use (Therms) 1 128 1 099 1 133 1 065 1 230 1 159
% Chg 2.6 (3.0) 6.4 (13.4) 6.1 14.3
Av Res Bill ($) 649.46 561.35 580.39 528.36 630.04 634.86
% Chg 15.7 (3.3) 9.8 (16.1) (.1) 12.7
<FN>
COMMENT: Does not reflect $21.1 million refund from company's major natural gas supplier
received in 1989 applicable to the years 1986 through 1989.
</TABLE>
<PAGE>
<TABLE>
GENERATING CAPABILITY - PEAK LOAD
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Summer Gen Cap (MW) 1 819 1 766 1 748 1 734 1 719 1 708
% Chg 3.0 1.0 .1 .1 .6 (.6)
MWH Generation (MM) 9.0 8.8 8.7 8.6 8.0 8.2
% Steam 77.5 76.8 77.5 77.3 77.6 77.1
% Nuclear 17.4 18.3 17.4 18.7 19.4 19.7
% Hydro 4.7 4.6 4.6 3.7 2.9 3.0
% Other 0.4 .3 .5 .3 .1 .2
Summer Peak (MW) 1 548 1 494 1 592 1 516 1 504 1 510
Month Aug Aug Aug Aug Aug Aug
% Chg 3.6 (6.2) 5.0 .8 (.4) 9.3
Winter Peak (MW) 1 463 1 413 1 425 1 405 1 472 1 354
Month Dec Dec Dec Jan Dec Dec
% Chg 3.5 (.8) 1.4 (4.5) 8.7 7.6
Reserve at Peak (MW)* 292.4 319.0 174.2 252.5 187.1 194.8
% Peak 18.8 22.0 10.9 17.0 12.2 12.9
Load Factor (%) 74.3 74.0 68.9 72.6 72.2 70.2
<FN>
* Includes effect of contracted capacity sales and purchases with Wisconsin
Power Pool and other utilities.
COMMENT: Major Units Fuel Operational Size WPSC Share
----------- ---- ----------- ---- ----------
Weston 3 Coal 1981 337.3 MW 337.3 MW
Kewaunee Nuclear 1974 522.0 MW 215.1 MW
Columbia 1 Coal 1975 512.0 MW 162.8 MW
Columbia 2 Coal 1978 510.5 MW 162.3 MW
Pulliam 8 Coal 1964 134.8 MW 134.8 MW
Edgewater 4 Coal 1969 318.8 MW 101.4 MW
Weston 2 Coal 1960 91.5 MW 91.5 MW
Pulliam 7 Coal 1958 88.5 MW 88.5 MW
Weston 1 Coal 1954 67.5 MW 67.5 MW
</TABLE>
-5-
<PAGE>
<TABLE>
GENERATION MIX
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Coal (%) 65 65 66 67 64 66
Nuclear 15 16 15 17 16 17
Hydro 3 4 4 3 3 3
Nat Gas * * * * * *
Oil * * * * * *
Purchases 17 15 15 13 17 14
--- --- --- --- --- ---
Total (%) 100 100 100 100 100 100
<FN>
* Less than 1%.
</TABLE>
<PAGE>
<TABLE>
FUEL COST
<CAPTION>
1993 1992 1991 1990 1989 1988
---------- ---------- --------- --------- ---------- ----------
c/MM c/ c/MM c/ c/MM c/ c/MM c/ c/MM c/ c/MM c/
BTU KWH BTU KWH BTU KWH BTU KWH BTU KWH BTU KWH
---- --- ---- --- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal 138 1.50 159 1.70 168 1.80 169 1.81 189 2.04 184 1.98
Nuclear 45 0.48 41 .44 52 .56 50 .54 45 .48 44 .47
Nat Gas 341 4.55 337 4.65 318 4.29 295 4.05 310 3.83 347 4.48
Oil 396 5.72 566 6.54 504 5.85 489 5.70 420 4.79 348 4.13
Total 122 1.33 137 1.47 148 1.59 146 1.57 162 1.74 157 1.69
<FN>
COMMENT: Nuclear fuel costs include an amount for disposal.
</TABLE>
<PAGE>
<TABLE>
CONSTRUCTION - INTERNAL GENERATION
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Const Exp ($MM) 72.7 102.3 64.5 66.0 71.6 68.8
Net Plant ($MM) 843.9 847.1 810.6 809.5 808.3 801.2
% Chg (.4) 4.5 .1 .1 .9 2.1
Int Gen ($MM)
Depr-St Line 60.6 58.6 55.7 55.4 53.1 50.5
Depr-Tax Savings - - - - 3.4 5.7
Nucl Fuel Amort 7.6 8.1 8.5 8.7 7.4 7.6
Ret Earn 16.8 14.6 12.5 8.2 8.8 16.6
Miscellaneous (2.8) (15.8) (34.9) (13.9) (6.2) (14.3)
Total 82.2 65.5 41.8 58.4 66.5 66.1
% Const Exp 113.1 64.0 64.8 88.5 92.9 96.1
<FN>
COMMENT: Construction includes AFUDC. In 1990, net plant was restated to reflect a change in
accounting that excludes deferred taxes from depreciation reserve. Tax savings are
no longer normalized through depreciation, also. Miscellaneous includes changes in
working capital and other operating and investing activities as defined by FASB.
</TABLE>
-6-
<PAGE>
<TABLE>
RATE OF RETURN ANALYSIS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Electric
- - --------
Av Net Plt ($MM) 605.2 589.2 585.5 584.6 591.0 575.8
% Chg 2.7 .6 .2 (1.1) 2.6 2.0
Av CWIP ($MM) 16.1 20.6 6.8 8.2 9.9 10.2
Elec Op Inc ($MM) 75.7 72.8 67.3 64.4 62.1 66.0
% Av Net Plt 12.5 12.4 11.5 11.0 10.5 11.5
Gas
- - ---
Av Net Plt ($MM) 76.2 72.0 69.8 67.4 70.5 68.7
% Chg 5.8 3.2 3.6 (4.4) 2.5 .1
Av CWIP ($MM) .9 .5 .4 .6 .3 .5
Gas Op Inc ($MM) 8.0 6.4 7.8 6.4 8.2 11.2
% Av Net Plt 10.5 8.9 11.2 9.5 11.6 16.3
% Ret Av Common Equity 13.10 13.18 13.10 12.07 12.10 14.36
- - ----------------------
<FN>
COMMENT: Net plant excludes CWIP.
</TABLE>
<PAGE>
<TABLE>
RATE FILINGS*
<CAPTION>
Net Authorized
Amount Amount Investment Equity Return on
Filing Date Requested Allowed Rate Base Ratio Equity
Jurisdiction Date Effective $MM % $MM $MM % %
- - ------------ ------ --------- ---- --- ------- ---------- ------ ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Wis Elec Apr 93 Jan 94 (1.3) (.3) (17.4) 582.0 55.6 11.3
Gas Apr 93 Jan 94 2.0 1.3 1.0 93.2 55.6 11.3
Wis Elec Mar 92 Jan 93 13.8 3.3 8.7 577.5 54.2 12.3
Gas Mar 92 Jan 93 2.6 1.6 3.8 79.2 54.2 12.3
Mich Elec Jan 92 .4 3.9 .4 16.9 52.2 13.5
Wis Elec Apr 91 Jan 92 10.2 2.5 5.7 571.0 53.0 12.8
Gas Apr 91 Jan 92 2.5 1.6 - 73.1 53.0 12.8
Mich Elec Oct 90 Jan 91 (.4) (3.9) (.4) 16.1 50.7 13.5
Wis Elec Mar 90 Jan 91 10.2 2.6 10.9 545.6 51.0 13.1
Gas Mar 90 Jan 91 2.6 1.7 2.0 68.9 51.0 13.1
Mich Elec Aug 89 Jan 90 (.1) (1.1) (.1) 16.4 53.6 13.5
Wis Elec Mar 89 Jan 90 2.4 .6 (7.3) 536.3 53.6 12.9
Gas Mar 89 Jan 90 4.4 2.7 .9 66.2 53.6 12.9
Mich Elec Jul 88 Jan 89 (.2) (1.7) (.2) 16.5 52.8 13.5
Wis Elec Apr 88 Jan 89 17.9 5.0 2.7 512.9 52.8 13.0
Gas Apr 88 Jan 89 (1.7) (1.0) (1.1) 66.5 52.8 13.0
<FN>
* Excludes fuel clause adjustments.
</TABLE>
-7-
<PAGE>
<TABLE>
FINANCING
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Common Fin ($MM) None 22.0 None None None None
Shares (MM) - .8
Month of Sale - June
Gross Price - 28.25
Bk Val (At Sale) - 16.22
Other ($MM) 1.7** 4.9** None None (7.5)* None
Bond Fin ($MM) 172 59.1*** 60.0 None None None
Month of Sale Various Various Sept
Rate (%) Various Various 8.8
Preferred Fin ($MM) 15.0*** None None None None None
Month of Sale June
Rate (%) 6.88
<FN>
* During 1989, the company repurchased 311,932 shares.
** Dividend Reinvestment and Stock Purchase Plan.
*** Refunding issues.
</TABLE>
<PAGE>
<TABLE>
CAPITALIZATION RATIOS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Common (%) 54.3 52.6 49.0 53.4 54.9 54.5
Preferred 6.4 6.5 6.8 7.4 7.6 7.8
Long-Term Debt 39.3 40.9 44.2 39.2 37.5 37.7
Total (%) 100.0 100.0 100.0 100.0 100.0 100.0
Short-Term (%) 2.6 2.5 1.7 5.0 5.3 3.2
<FN>
COMMENT: ESOP Loan Guarantee causes decrease in Common and increase in Long-Term Debt ratios.
For PSCW ratemaking, leveraged ESOP guarantees are not deducted from common equity as
prescribed by GAAP.
</TABLE>
<PAGE>
<TABLE>
COMMON PRICE RANGE
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Market High 36 1/2 32 1/4 28 1/4 24 5/8 24 7/8 23 3/8
Market Low 30 1/8 26 1/8 22 1/4 19 3/4 20 1/2 20
Year-End 33 5/8 31 3/4 28 1/4 23 5/8 23 3/4 21 5/8
<FN>
COMMENT: Not adjusted for 2 for 1 common stock split in June 1987.
</TABLE>
-8-
<PAGE>
<TABLE>
EARNINGS ANALYSIS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Av EPS ($) 2.47 2.35 2.23 2.00 1.98 2.28
% Chg 5.1 5.4 11.5 1.0 (13.2) 8.1
AFUDC/Share ($) .02 .04 .01 .03 .04 .04
Shares Out (MM)
Ending 23.9 23.8 22.9 22.9 22.9* 23.2
Average 23.9 23.4 22.9 22.9 23.1 23.2
Dilution (%)
Full .2 4.0 None None (1.4)* None
Average 2.3 2.0 None None (.5)* None
<FN>
* During 1989, the company repurchased 311,932 shares.
</TABLE>
<PAGE>
<TABLE>
QUARTERLY EARNINGS ANALYSIS
<CAPTION>
1993 1992 1991 1990 1989 1988
---------- --------- ---------- --------- --------- ----------
EPS % EPS % EPS % EPS % EPS % EPS %
($) Chg ($) Chg ($) Chg ($) Chg ($) Chg ($) Chg
---- --- --- --- --- --- --- --- --- --- --- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
1st .85 10 .77 13 .68 15 .59 (26) .80 (5) .84 25
2nd .45 50 .30 15 .26 (16) .31 41 .22 (27) .30 (23)
3rd .66 32 .50 (24) .66 25 .53 33 .40 (26) .54 15
4th .51 (35) .78 24 .63 11 .57 2 .56 (7) .60 3
2.47 5 2.35 5 2.23 12 2.00 1 1.98 (13) 2.28 8
<FN>
COMMENT: On January 1, 1990, the Company changed its method of accounting for revenue related
to gas supplier demand costs. This change has the effect of reducing first and
fourth quarter revenues and earnings while increasing revenues and earnings during
the second and third quarters; however, the effect on annual earnings is minimal.
</TABLE>
<PAGE>
<TABLE>
DIVIDEND ANALYSIS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Div Paid ($) 1.76 1.72 1.68 1.64 1.60 1.56
% EPS 71.3 73.2 75.3 82.0 80.8 68.4
Book Value ($) 18.18* 17.33* 16.14* 16.26* 16.30* 16.00*
Ind Rate ($) 1.78 1.74 1.70 1.66 1.62 1.58
% Book Value 9.8 10.0 10.5 10.2 9.9 9.9
Cash Dividend Coverage3.27 3.16 3.21 2.74 2.88 3.11
<FN>
* Reflects subtraction of ESOP Loan Guarantee from common equity.
COMMENT: 1993 was the 35th consecutive year in which dividends paid per share were increased.
</TABLE>
-9-
<PAGE>
<TABLE>
QUALITY FACTORS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
Eff FIT Rate (%) 29.5 27.6 26.8 28.3 27.9 29.7
Depr Rate (%)
Electric 3.88 3.87 3.80 3.82 3.75 3.73
Gas 3.81 3.81 4.13 4.12 4.73 4.73
Coverage (Times)
Before Tax 4.49 3.99 4.00 3.74 3.85 4.49
After Tax 3.29 3.01 3.03 2.84 2.95 3.33
Int & Pref Div 2.93 2.71 2.70 2.53 2.60 2.90
Bond Ind* 5.80 4.76 4.28 5.05 4.41 4.91
AFUDC as a % of Earn
Avail for Common .8 1.9 .6 1.7 2.0 1.9
<FN>
* Indenture requires two times pro forma interest coverage. The 1993 Indenture pro forma
coverage was 4.94, assuming the sale of $50MM bonds at 7.25%.
</TABLE>
<PAGE>
<TABLE>
OPERATING RATIOS
<CAPTION>
1993 1992 1991 1990 1989 1988
---- ---- ---- ---- ---- ----
<S>
Electric <C> <C> <C> <C> <C> <C>
- - --------
Operating Rev (%) 100.0 100.0 100.0 100.0 100.0 100.0
Operating Exp
Prod Fuel 23.1 25.9 27.8 28.9 30.4 30.8
Purch Power 6.2 6.2 7.0 6.0 7.0 5.7
Other Prod 14.4 13.1 12.8 12.9 12.9 13.2
Trans & Distr 6.7 6.9 6.7 6.7 6.2 5.8
Admin, Cust & Sales 12.6 11.2 11.6 10.6 9.9 9.1
Depr 11.0 11.1 10.5 11.0 10.5 10.1
Tax-Other than Inc 4.5 4.6 4.3 4.6 4.4 4.5
----- ----- ----- ----- ----- -----
Total (%) 78.5 79.0 80.7 80.7 81.3 79.2
Gas
- - ---
Operating Rev (%) 100.0 100.0 100.0 100.0 100.0* 100.0
Operating Exp
Gas Purch 71.3 70.0 67.9 69.6 68.6* 71.7
Distr 6.1 6.8 6.8 7.0 6.5 5.3
Admin, Cust & Sales 12.0 12.9 12.7 11.2 10.7 7.9
Depr 3.3 3.7 3.9 4.3 4.7 3.8
Tax-Other than Inc 1.7 1.6 1.9 1.8 1.9 1.6
----- ----- ----- ----- ----- -----
Total (%) 94.4 95.0 93.2 93.9 92.4 90.3
<FN>
* Reflects $21.1 million refund from company's major natural gas supplier.
</TABLE>
-10-
(Wisconsin Public Service Corporation Logo)
May 1, 1994
TO ALL MEMBERS OF THE FINANCIAL COMMUNITY:
This is our summary of projected construction, operating, and financial data
for the five-year period 1994-1998. Construction requirements for this period
are about $71 million lower than the five years in our publication of last May
primarily due to reduced expenditures for electric generation.
While the company is still hoping to construct a cogeneration facility by
early 1998, these plans are subject to a favorable decision by the Public
Service Commission of Wisconsin (PSCW). The PSCW is currently evaluating the
company's prioritization of the competitive bids submitted to fulfill needs
for the company's next capacity addition. (See "Anticipated Plants" and
"Capital Requirements and Sources" discussions).
Most of the firm resale KWH sales declines are due to shifts to the non-firm
category by wholesale customers with self-generating capability. This
forecast now provides non-firm sales projections, also. Reduction in peak
load growth reflects the high level of 1993 actual results, demand-side
management, and anticipated loss of some municipal sales.
Total gas volumes remain about the same as the last forecast but reflect
transfers from the transportation to firm sales category.
The company is seeking approval to form a holding company. The primary
business will continue to be operation of the utility business of Wisconsin
Public Service Corporation.
The 1993 annual report and the company's statistical analysis and comments
dated April 1, 1994 also provide reference information. If you would like
additional information concerning this data or other matters pertaining to the
company, please call me. My telephone number is (414) 433-1449.
/s/ Ralph G. Baeten
Ralph G. Baeten
Treasurer
<PAGE>
<TABLE>
<CAPTION>
Actual Estimated Annual
--------------------------------- Growth
SALES AND LOAD DATA 1993 1994 1995 1996 1997 1998 93-98
- - ------------------- ---- ---- ---- ---- ---- ---- ------
<S> <C> <C> <C> <C> <C> <C> <C>
Electric Sales - KWH (millions)
Ultimate Consumers 8 123 8 369 8 624 8 878 8 729 8 860 1.8%
Resale - Firm 1 397 1 123 1 098 1 124 1 316 926 (7.9)
Non-firm 631 1 026 1 137 1 140 1 126 1 126 12.3
Electric Peak Load - MW
Summer 1 569 1 592 1 624 1 626 1 650 1 614 0.6%
Winter (Nov-Feb) 1 500 1 469 1 489 1 478 1 428 1 448 (0.7)
Load Factor - % 73.3 72 73 75 73 73
Generating Capability - MW
Summer 1 820 1 828 1 817 1 815 1 814 1 876
Winter 1 889 1 906 1 895 1 893 1 892 1 832
Generating Reserve
Adjusted - MW 251 261 243 254 239 287
At Peak - % 16.0 17 15 15 15 18
Firm Power Purchases (Sales) - MW - 25 50 50 75 25
Gas Sales - Therms (millions) 347 356 369 376 380 384 2.0%
Gas Transp - Therms (millions) 221 219 219 221 223 226 0.4
CAPITAL REQUIREMENTS (millions) Total
- - -------------------- 94-98
-----
Construction (Incl AFUDC)
Electric $47.6 $45.9 $48.4 $59.1 $107.2 $ 99.9 $360.5
Nuclear Fuel 6.7 9.9 .9 8.9 8.1 5.7 33.5
Gas 12.6 13.6 8.3 8.1 9.0 10.2 49.2
Other 5.8 4.9 5.4 11.5 5.4 5.9 33.1
---- ---- ---- ---- ----- ----- -----
Total Construction Expenditures 72.7 74.3 63.0 87.6 129.7 121.7 476.3
Other Investments (1.4) 9.5 8.3 10.5 13.6 14.6 56.5
---- ---- ---- ---- ----- ----- -----
Total Investments 71.3 83.8 71.3 98.1 143.3 136.3 532.8
---- ---- ---- ---- ----- ----- -----
SOURCES OF CAPITAL (millions)
- - ------------------
Internal Funds After Dividends $80.8 $71.3 $78.5 $74.7 $ 83.8 $ 93.8 $402.1
Financing Required (9.5) 12.5 (7.2) 23.4 59.5 42.5 130.7
---- ---- ---- ---- ----- ----- -----
Total Sources of Capital 71.3 83.8 71.3 98.1 143.3 136.3 532.8
---- ---- ---- ---- ----- ----- -----
Financing (Net)
Common $ 1.7 $ - $ - $ - $ - $ - $ -
Preferred - - - - - - -
Bonds (12.2) - - - 50.0 25.0 75.0
Temporary Funding 1.0 12.5 (7.2) 23.4 9.5 17.5 55.7
---- ---- ---- ---- ---- ---- -----
Total (9.5) 12.5 (7.2) 23.4 59.5 42.5 130.7
---- ---- ---- ---- ---- ---- -----
INT FUNDS/CONSTRUCTION (%) 111 96 125 85 65 77 84
- - ----------------------
SIGNIFICANT ITEMS (millions)
- - -----------------
Depreciation $60.6 $57.1 $58.7 $60.7 $65.6 $68.8
Nuclear Fuel Amortization 7.6 7.9 8.5 8.4 9.0 7.7
AFUDC .6 .3 .3 .8 2.4 2.9
Demand-Side Management (Net) 12.8 8.6 4.0 3.5 1.0 (.5)
Nuclear Decommissioning 5.7 6.9 7.2 7.6 10.3 11.1
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Actual Estimated
----------------------------------------
1993 1994 1995 1996 1997 1998
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
CAPITALIZATION (%)
- - --------------
Common 55.7 56 57 55 53 51
Preferred 6.2 6 6 6 5 5
Long-Term Debt 35.5 34 34 33 36 38
Short-Term Debt 2.6 4 3 6 6 6
(Capitalization excludes GAAP adjustments and ESOP loans.)
GENERATION MIX (%)
- - ---------------
Coal 64.7 71 71 72 72 72
Nuclear 14.6 15 15 15 15 16
Hydro 4.0 4 4 4 3 4
Oil - - - - - -
Natural Gas .4 1 1 1 1 1
Purchased Power 16.3 9 9 8 9 7
</TABLE>
ANTICIPATED PLANTS
- - ------------------
The PSCW has ordered a bidding process to fill company capacity needs in 1998.
Included is a company bid for 122 MW of cogeneration. A decision is expected
from the PSCW in late 1994.
SALES AND LOAD DATA
- - -------------------
Effects of load management, time-of-use billing, interruptible rates, and
other demand-side management programs are included in sales and load
projections. Peak load is forecast to grow at annual rates of 1.0% and 1.5%
for the next ten- and twenty-year periods, respectively. KWH sales are
forecast to grow at 1.1% and 1.4%, respectively, for the same periods.
Generating reserve includes the effect of contracted capacity sales and
purchases with other utilities.
CAPITAL REQUIREMENTS AND SOURCES
- - --------------------------------
Construction includes a 3.5% inflation rate for generation and transmission.
Due to the uncertain outcome of the large capacity power purchase bidding
process, the construction forecast includes costs for generic combustion
turbines for filling capacity needs.
Internal cash flow assumes 12% return on average common equity with dividend
payout at 75%. AFUDC is included in construction and internal funds.
Demand-side management expenditures are included in internal funds. Nuclear
decommissioning expenditures are included in other investments.
BONDING CAPACITY
- - ----------------
Under the most restrictive covenant of the Bond Indenture, the company would
have been entitled to issue approximately $500 million of First Mortgage Bonds
on December 31, 1993.
<PAGE>
ACCOUNTING PRACTICES
- - --------------------
The company has historically followed conservative accounting practices. The
PSCW has approved for ratemaking purposes full accrual of the amounts calculated
for post-retirement benefits under SFAS 106, for pension benefits under SFAS 87
and for post-employment benefits under SFAS 112.
For Wisconsin and Michigan jurisdictions, the company capitalizes AFUDC on 100%
of construction related to new generating units and on 50% of all
other construction work in progress at the company's adjusted cost of capital.
AFUDC for FERC jurisdiction is based on the formula prescribed in the FERC chart
of accounts.
Estimated depreciation is based on rates approved by the PSCW. Composite rates
are 3.38% for electric and 3.46% for gas.
<TABLE>
WISCONSIN COMMISSIONERS
- - -----------------------
<CAPTION>
Prior Commissioner
Occupation Since Term Expires
---------- ------------ ------------
<S> <C> <C> <C>
Cheryl Parrino - Chairman PSCW Accounting Admin. 2/91 3/97
John Coughlin Attorney/Sec. of DILHR 7/89 3/95
Scott Neitzel State & Fed. Govt. Official 1/92 3/99
</TABLE>
<TABLE>
1993 AVERAGE REVENUE PER KWH SOLD (cents)
- - -----------------------------------------
<CAPTION>
Res. Coml. Ind.
---- ----- ----
<S> <C> <C> <C>
WPSC 7.05 5.75 3.76
Investor-Owned Electrics 8.69 7.85 5.03
</TABLE>
<TABLE>
% COMPOUND GROWTH OF KWH SALES (FIRM)
- - -------------------------------------
<CAPTION>
U.S. WPSC U.S. WPSC
---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
1930-1940 4.7 5.1 1960-1970 7.4 7.9
1940-1950 9.0 9.8 1970-1980 4.3 6.0
1950-1960 9.3 8.6 1980-1990 2.3 3.4
</TABLE>
<TABLE>
RATE CASES
- - ----------
<CAPTION>
Filing Amount Amount
Date Requested Received Increase Effective
------ --------- -------- -------- ---------
<S> <C> <C> <C> <C> <C>
Wisconsin Elec 4/93 $ (1.3) MM $(17.4) MM (4.1)% 1/94
Gas 4/93 2.0 1.0 .7 1/94
Wisconsin Elec 4/94 $(10.8)MM (2.5)% Pending
Gas 4/94 - - Pending
</TABLE>
