______________________________________________________________________________
______________________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-11337 WPS RESOURCES CORPORATION 39-1775292
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
414-433-1445
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
414-433-1445
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date:
WPS RESOURCES CORPORATION Common stock, $1 par value,
23,896,962 shares outstanding at
October 30, 1995
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
October 30, 1995
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1995
CONTENTS
Page
INTRODUCTION 3
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
Consolidated Statements of Income and
Retained Earnings 4
Consolidated Balance Sheets 5
Consolidated Statements of Capitalization 6
Consolidated Statements of Cash Flows 7
WISCONSIN PUBLIC SERVICE CORPORATION
Consolidated Statements of Income 8
Consolidated Balance Sheets 9
Consolidated Statements of Capitalization 10
Consolidated Statements of Cash Flows 11
Consolidated Statements of Retained Earnings 12
CONDENSED NOTES TO FINANCIAL STATEMENTS OF
WPS Resources Corporation and
Wisconsin Public Service Corporation 13 - 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation and
Wisconsin Public Service Corporation 15 - 20
PART II. OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22 - 23
EXHIBIT INDEX 24
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-2-
<PAGE>
INTRODUCTION
The unaudited interim financial statements presented herein include
the consolidated statements of WPS Resources Corporation and
Subsidiaries ("Company") as well as separate consolidated financial
statements for Wisconsin Public Service Corporation ("WPSC"). The
unaudited statements have been prepared by the Company and WPSC,
respectively, pursuant to the rules and regulations of the Securities
and Exchange Commission. 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 rules and regulations. The Company and WPSC
believe, however, that the disclosures are adequate to make the
information presented not misleading. The Company's and WPSC's
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference
in the respective Annual Reports on Form 10-K of WPS Resources
Corporation and Wisconsin Public Service Corporation for the year
ended December 31, 1994.
In the opinion of the Company and WPSC, their respective interim
financial statements filed as part of this Form 10-Q reflect all
adjustments necessary to present fairly the results for the respective
periods. Due to the influence of weather and other factors which are
characteristics of WPSC's utility operations, financial results for
the periods ended September 30, 1995 and 1994 are not necessarily
indicative of trends for any 12-month period.
-3-
PAGE
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
<CAPTION>
======================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNING THREE MONTHS ENDED NINE MONTHS ENDED
(Thousands, except per share amounts) SEPTEMBER 30 SEPTEMBER 30
1995 1994 1995 1994
======================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $130,800 $124,340 $369,318 $363,842
Gas 35,948 27,917 147,294 140,421
- ----------------------------------------------------------------------------------------------------------------------
Total operating revenues 166,748 152,257 516,612 504,263
======================================================================================================================
Operating expenses
Electric production fuels 28,654 29,177 79,161 85,479
Purchased power 9,890 8,995 32,367 28,747
Gas purchased for resale 27,694 21,489 106,567 99,416
Other operating expenses 34,383 36,878 110,162 110,756
Maintenance 10,288 9,877 38,826 35,689
Depreciation and decommissioning 16,579 14,042 48,991 42,108
Taxes other than income 6,567 6,544 19,415 19,531
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 134,055 127,002 435,489 421,726
======================================================================================================================
Operating income 32,693 25,255 81,123 82,537
======================================================================================================================
Other income (expense)
Allowance for equity funds used during construction 54 40 127 82
Other, net (934) 1,459 4,981 3,793
- ----------------------------------------------------------------------------------------------------------------------
Total other income (expense) (880) 1,499 5,108 3,875
======================================================================================================================
Income before interest expense 31,813 26,754 86,231 86,412
======================================================================================================================
Interest on long-term debt 5,654 5,770 17,243 17,612
Other interest 620 477 1,874 1,364
Allowance for borrowed funds used during construction 32 (38) (49) (100)
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 6,306 6,209 19,068 18,876
======================================================================================================================
Income before income taxes 25,507 20,545 67,163 67,536
Income taxes 8,997 6,817 22,994 23,325
Preferred stock dividends of subsidiary 778 778 2,333 2,333
- ----------------------------------------------------------------------------------------------------------------------
Net income 15,732 12,950 41,836 41,878
======================================================================================================================
Retained earnings at beginning of period 301,950 295,654 297,592 287,915
Cash dividends on common stock 11,112 10,873 32,858 32,141
Other - 79 - -
- ----------------------------------------------------------------------------------------------------------------------
Retained earnings at end of period $306,570 $297,652 $306,570 $297,652
======================================================================================================================
Average shares of common stock outstanding 23,897 23,897 23,897 23,897
Earnings per average share of common stock $0.66 $0.54 $1.75 $1.75
Dividend per share of common stock $0.465 $0.455 $1.375 $1.345
======================================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-4-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=======================================================================================================
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30 December 31
(Thousands) 1995 1994
=======================================================================================================
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------
Utility plant
Electric $1,443,929 $1,412,666
Gas 222,261 202,903
- -------------------------------------------------------------------------------------------------------
Total 1,666,190 1,615,569
Accumulated depreciation and decommissioning (899,642) (846,505)
- -------------------------------------------------------------------------------------------------------
Total 766,548 769,064
Nuclear decommissioning trusts 79,249 64,147
Construction in progress 5,900 11,131
Nuclear fuel, less accumulated amortization 15,216 19,417
- -------------------------------------------------------------------------------------------------------
Net utility plant 866,913 863,759
=======================================================================================================
Current assets
Cash and equivalents 15,272 13,167
Customer and other receivables, net of reserves 53,243 60,029
Accrued utility revenues 17,988 28,820
Fossil fuel, at average cost 8,272 10,505
Gas in storage, at average cost 15,612 15,787
Materials and supplies, at average cost 21,393 20,585
Prepayments and other 15,069 21,122
- -------------------------------------------------------------------------------------------------------
Total current assets 146,849 170,015
=======================================================================================================
Regulatory assets 98,869 109,135
Investments and other assets 88,332 74,366
=======================================================================================================
Total $1,200,963 $1,217,275
=======================================================================================================
CAPITALIZATION AND LIABILITIES
- -------------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $456,831 $446,540
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 308,691 309,945
- -------------------------------------------------------------------------------------------------------
Total capitalization 816,722 807,685
=======================================================================================================
Current liabilities
Note payable 10,000 10,000
Commercial paper - 12,500
Accounts payable 46,502 66,643
Accrued taxes 3,418 1,152
Accrued interest 7,890 8,068
Other 15,092 7,494
- -------------------------------------------------------------------------------------------------------
Total current liabilities 82,902 105,857
=======================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 129,879 126,639
Accumulated deferred investment tax credits 30,887 32,172
Regulatory liabilities 53,996 65,995
Long-term liabilities 86,577 78,927
- -------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 301,339 303,733
=======================================================================================================
Total $1,200,963 $1,217,275
=======================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
========================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION SEPTEMBER 30 DECEMBER 31
(Thousands, except share amounts) 1995 1994
========================================================================================================
<S> <C> <C>
Common stock equity
Common stock, $1 par value, 100,000,000 shares authorized;
and 23,896,962 shares outstanding $23,897 $23,897
Premium on capital stock 145,021 145,021
Retained earnings 306,570 297,592
ESOP loan guarantees (18,657) (19,970)
- --------------------------------------------------------------------------------------------------------
Total common stock equity 456,831 446,540
========================================================================================================
Preferred stock - Wisconsin Public Service Corporation
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 - Wisconsin Public Service Corporation
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
8.80% 2021 60,000 60,000
7-1/8% 2023 50,000 50,000
- --------------------------------------------------------------------------------------------------------
Total 291,075 291,075
Unamortized discount and premium on bonds, net (1,088) (1,154)
- --------------------------------------------------------------------------------------------------------
Total first mortgage bonds 289,987 289,921
- --------------------------------------------------------------------------------------------------------
ESOP loan guarantees 18,657 19,970
Other long-term debt 47 54
- --------------------------------------------------------------------------------------------------------
Total long-term debt 308,691 309,945
========================================================================================================
Total capitalization $816,722 $807,685
========================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=======================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended
(Thousands) September 30
1995 1994
=======================================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $41,836 $41,878
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 48,991 42,108
Amortization of nuclear fuel and other 21,700 21,474
Deferred income taxes (3,791) (1,244)
Investment tax credit restored (1,285) (1,403)
AFUDC equity (127) (82)
Pension income (9,919) (8,131)
Postretirement funding 5,188 5,277
Deferred demand-side management expenditures (6,447) (7,338)
Other, net (216) 1,176
Changes in
Customer and other receivables 6,786 16,909
Accrued utility revenues 10,832 19,022
Fossil fuel inventory 2,233 109
Gas in storage 175 240
Accounts payable (22,291) (20,083)
Miscellaneous current and accrued liabilities 11,350 2,819
Accrued taxes 2,266 (1,458)
- -------------------------------------------------------------------------------------------------------
Net cash from operating activities 107,281 111,273
=======================================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (47,628) (45,925)
Allowance for borrowed funds used during construction (50) (100)
Decommissioning funding (9,131) (3,649)
Purchase of investments (4,000) -
Other 991 1,872
- -------------------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (59,818) (47,802)
=======================================================================================================
Cash flows from (used for) financing activities
Redemption and maturities of first mortgage bonds - (1,000)
Change in commercial paper (12,500) (11,000)
Cash dividends on common stock (32,858) (32,141)
- -------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (45,358) (44,141)
=======================================================================================================
Net increase (decrease) in cash and equivalents 2,105 19,330
Cash and equivalents at beginning of period 13,167 5,393
=======================================================================================================
Cash and equivalents at end of period $15,272 $24,723
=======================================================================================================
Cash paid during period for
Interest, less amount capitalized $16,289 $18,463
Income taxes 19,500 24,832
Preferred stock dividends of subsidiary 2,333 2,333
=======================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
======================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended
(Thousands) September 30 September 30
1995 1994 1995 1994
======================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $130,800 $124,340 $369,318 $363,842
Gas 25,743 25,290 118,616 134,087
- ----------------------------------------------------------------------------------------------------------------------
Total operating revenues 156,543 149,630 487,934 497,929
======================================================================================================================
Operating expenses
Electric production fuels 28,654 29,177 79,161 85,479
Purchased power 9,890 8,995 32,367 28,747
Gas purchased for resale 17,698 18,946 78,440 93,274
Other operating expenses 33,871 36,745 108,769 110,384
Maintenance 10,288 9,877 38,826 35,689
Depreciation and decommissioning 16,579 14,042 48,991 42,108
Federal income taxes 7,980 5,307 18,813 18,909
Investment tax credit restored (387) (498) (1,285) (1,403)
State income taxes 2,319 2,036 5,650 5,863
Gross receipts and other taxes 6,567 6,544 19,414 19,531
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 133,459 131,171 429,146 438,581
======================================================================================================================
Operating income 23,084 18,459 58,788 59,348
======================================================================================================================
Other income
Allowance for equity funds used during construction 54 40 127 82
Other, net (741) 1,381 5,148 3,715
Income taxes 718 13 (109) (23)
- ----------------------------------------------------------------------------------------------------------------------
Total other income 31 1,434 5,166 3,774
======================================================================================================================
Income before interest expense 23,115 19,893 63,954 63,122
======================================================================================================================
Interest on long-term debt 5,795 5,770 17,657 17,612
Other interest 612 477 1,864 1,364
Allowance for borrowed funds used during construction 32 (38) (49) (100)
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 6,439 6,209 19,472 18,876
======================================================================================================================
Net income 16,676 13,684 44,482 44,246
Preferred stock dividend requirements 778 778 2,333 2,333
- ----------------------------------------------------------------------------------------------------------------------
Earnings on common stock $15,898 $12,906 $42,149 $41,913
======================================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==================================================================================================
CONSOLIDATED BALANCE SHEETS SEPTEMBER 30 DECEMBER 31
(Thousands) 1995 1994
==================================================================================================
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------
Utility plant
Electric $1,443,929 $1,412,666
Gas 222,234 202,897
- --------------------------------------------------------------------------------------------------
Total 1,666,163 1,615,563
Accumulated depreciation and decommissioning (899,640) (846,505)
- --------------------------------------------------------------------------------------------------
Total 766,523 769,058
Nuclear decommissioning trusts 79,249 64,147
Construction in progress 5,900 11,131
Nuclear fuel, less accumulated amortization 15,216 19,417
- --------------------------------------------------------------------------------------------------
Net utility plant 866,888 863,753
==================================================================================================
Current assets
Cash and equivalents 8,290 3,449
Customer and other receivables, net of reserves 48,876 58,036
Accrued utility revenues 17,988 28,820
Fossil fuel, at average cost 8,272 10,505
Gas in storage, at average cost 14,680 15,783
Materials and supplies, at average cost 21,393 20,585
Prepayments and other 15,046 21,091
- --------------------------------------------------------------------------------------------------
Total current assets 134,545 158,269
==================================================================================================
Regulatory assets 98,869 109,135
Investments and other assets 81,501 74,069
==================================================================================================
Total $1,181,803 $1,205,226
==================================================================================================
CAPITALIZATION AND LIABILITIES
- --------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $438,057 $429,953
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 6,122 6,176
Long-term debt 308,691 309,945
- --------------------------------------------------------------------------------------------------
Total capitalization 804,070 797,274
==================================================================================================
Current liabilities
Note payable 10,000 10,002
Commercial paper - 12,500
Accounts payable 40,478 65,336
Accrued taxes 3,418 1,199
Accrued interest 7,890 8,068
Other 14,136 6,627
- --------------------------------------------------------------------------------------------------
Total current liabilities 75,922 103,732
==================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 130,349 127,126
Accumulated deferred investment tax credits 30,887 32,172
Regulatory liabilities 53,996 65,995
Long-term liabilities 86,579 78,927
- --------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 301,811 304,220
==================================================================================================
Total $1,181,803 $1,205,226
==================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-9-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=====================================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION SEPTEMBER 30 DECEMBER 31
(Thousands, except share amounts) 1995 1994
=====================================================================================================================
<S> <C> <C>
Common stock equity
Common stock $95,588 $95,588
Premium on capital stock 73,605 73,605
Retained earnings 287,521 280,730
ESOP loan guarantees (18,657) (19,970)
- ---------------------------------------------------------------------------------------------------------------------
Total common stock equity 438,057 429,953
=====================================================================================================================
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 note to parent
Series Year Due
------ --------
8.76% 2014 6,122 6,176
=====================================================================================================================
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
8.80% 2021 60,000 60,000
7-1/8% 2023 50,000 50,000
- ---------------------------------------------------------------------------------------------------------------------
Total 291,075 291,075
Unamortized discount and premium on bonds, net (1,088) (1,153)
- ---------------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 289,987 289,922
- ---------------------------------------------------------------------------------------------------------------------
ESOP loan guarantees 18,657 19,970
Other long-term debt 47 53
- ---------------------------------------------------------------------------------------------------------------------
Total long-term debt 308,691 309,945
=====================================================================================================================
Total capitalization $804,070 $797,274
=====================================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-10-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
======================================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS NINE MONTHS ENDED
(Thousands) SEPTEMBER 30
1995 1994
======================================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $44,482 $44,246
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 48,991 42,108
Amortization of nuclear fuel and other 21,700 21,474
Deferred income taxes (3,808) (1,346)
Investment tax credit restored (1,285) (1,403)
AFUDC equity (127) (82)
Pension income (9,919) (8,131)
Postretirement funding 5,188 5,277
Deferred demand-side management expenditures (6,447) (7,338)
Other, net (225) 79
Changes in
Customer and other receivables 9,160 17,626
Accrued utility revenues 10,832 19,022
Fossil fuel 2,233 109
Gas in storage 1,103 252
Accounts payable (27,008) (20,416)
Miscellaneous current and accrued liabilities 11,261 2,181
Accrued taxes 2,219 (1,503)
- ------------------------------------------------------------------------------------------------------
Net cash from operating activities 108,350 112,155
======================================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (47,678) (46,025)
Decommissioning funding (9,131) (3,649)
Other 991 1,872
- ------------------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (55,818) (47,802)
======================================================================================================
Cash flows from (used for) financing activities
Redemption and maturities of first mortgage bonds - (1,000)
Change in commercial paper (12,500) (11,000)
Preferred stock dividends (2,333) (2,333)
Cash dividends on common stock (32,858) (32,142)
- ------------------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (47,691) (46,475)
======================================================================================================
Net increase (decrease) in cash and equivalents 4,841 17,878
Cash and equivalents at beginning of period 3,449 5,391
======================================================================================================
Cash and equivalents at end of period $8,290 $23,269
======================================================================================================
Cash paid during period for
Interest, less amount capitalized $16,289 $18,463
Income taxes 19,479 24,830
======================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-11-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=========================================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Nine Months Ended
(Thousands) September 30
1995 1994
=========================================================================================================
<S> <C> <C>
Balance at beginning of period $280,730 $288,693
Add Net income 44,482 44,246
- ---------------------------------------------------------------------------------------------------------
325,212 332,939
- ---------------------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 2,333 3,111
Cash dividends declared on common stock 32,858 32,142
Dividend to parent 2,500 3,901
- ---------------------------------------------------------------------------------------------------------
37,691 39,154
- ---------------------------------------------------------------------------------------------------------
Balance at end of period $287,521 $293,785
=========================================================================================================
</TABLE>
[FN]
The accompanying notes are an integral part of these statements.
-12-
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
SEPTEMBER 30, 1995
NOTE 1. FINANCIAL INFORMATION
______________________________
The following consolidated financial statements have been prepared by
WPS Resources Corporation ("Company") and Wisconsin Public Service
Corporation ("WPSC"), 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 and WPSC's
latest annual reports on Form 10-K.
Because of the seasonal nature of the Company's operations, interim
results are not necessarily indicative of annual results.
NOTE 2. REGULATORY ASSETS
__________________________
In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121,
Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to be Disposed of. This Statement imposes stricter criteria
for regulatory assets by requiring that such assets be probable of
future recovery at each balance sheet date. WPSC anticipates adopting
this standard on January 1, 1996 and does not expect that adoption
will have a material impact on the financial position or results of
operations of WPSC based on the current regulatory structure in which
WPSC operates. This conclusion may change in the future as
competitive factors influence wholesale and retail pricing in this
industry.
NOTE 3. RHINELANDER ENERGY CENTER
__________________________________
On July 21, 1995, WPSC and Rhinelander Paper Company ("Rhinelander")
announced the cancellation of their plans to construct the Rhinelander
Energy Center ("REC"). The REC would have been a 123 megawatt
cogeneration power plant which would have provided steam to
-13-
<PAGE>
Rhinelander's facility in Rhinelander, Wisconsin and electricity to
WPSC's customers. As a result of this cancellation, WPSC wrote off in
the third quarter of 1995 its entire investment in this project. The
charge, which totaled $2.7 million ($1.6 million after tax), was
recorded as other expense, reducing net income by $.07 per share.
-14-
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
WPS Resources Corporation ("Company") is a holding company.
Approximately 96% of the Company's assets and revenues are derived
from Wisconsin Public Service Corporation ("WPSC"), an electric and
gas utility.
OVERVIEW OF THIRD QUARTER OF 1995 COMPARED TO THIRD QUARTER OF 1994
The Company's earnings per share increased from $.54 in 1994 to $.66
in 1995, or 22.2%. The most significant reason was an increase in
margins, due to increased revenues and lower fuel costs. These were
partially offset by higher operating expenses, and a write-off of the
investment in the canceled Rhinelander Energy Center ("REC") of $2.7
million ($1.6 million after tax), or $.07 a share.
ELECTRIC OPERATIONS
Electric margins increased by $6.1 million, or 7.1%, due to lower fuel
costs and higher sales volumes.
Third Quarter
___________________________
Electric Margins (000's) 1995 1994
____ ____
Revenues $130,800 $124,340
Fuel and purchases 38,544 38,172
_______ _______
Margin $ 92,256 $ 86,168
======= =======
Sales in kilowatt-hours (000) 2,859,730 2,722,774
Electric revenues increased $6.5 million, or 5.2% during the third
quarter of 1995 compared to the third quarter of 1994. Electric
revenues were higher due to a 5.0% increase in kilowatt-hour ("kWh")
sales. This was offset partially by a 2.6% decrease in retail
Wisconsin rates that took effect January 1, 1995. Residential kWh
sales increased 14.4% due to warmer weather. Commercial and
industrial kWh sales rose 4.2% reflecting customer growth and warmer
weather. Wholesale kWh sales decreased 3.3% due primarily to lower
demand by WPSC's largest wholesale customer.
Electric fuels and purchases increased $0.4 million, or 1.0%, in the
third quarter of 1995 compared to the same period in 1994. Even
though there was an increase in coal-fired generation of 8.3%, or $1.9
million, coal related costs decreased 13.7%, or $1.7 million, due to
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burning less expensive low sulphur coal. There was an increase in kWh
purchases of 10.0%, or $.9 million due to the warmer weather.
GAS OPERATIONS
Gas margins increased $1.8 million in the third quarter of 1995
compared to the third quarter of 1994, due to weather related volume
increases and improvements in margins at WPS Energy Services, Inc.
("WPSE").
Third Quarter
_________________________
Gas Margins (000's) 1995 1994
____ ____
Revenues $35,948 $27,917
Purchase costs 27,694 21,489
_______ _______
Margin $ 8,254 $ 6,428
======= =======
Volume in Therms (000) 154,089 105,169
The Public Service Commission of Wisconsin ("PSCW") allows WPSC to
pass on to its customers, through a purchased gas adjustment clause,
changes in the cost of gas.
Gas operating revenues increased $8.0 million, or 28.8%, during the
third quarter of 1995 compared to the third quarter of 1994. Of the
increase, $7.6 million is attributable to increased sales by WPSE, an
energy marketing subsidiary which began operations in 1994. Higher
weather related sales volume at WPSC was largely offset by lower per
unit gas costs passed on to customers.
Gas purchased for resale showed a net increase of $6.2 million, or
28.9%, in the third quarter of 1995 as compared to the same period in
1994. Increased gas purchases for WPSE of $7.0 million were the
primary reason for this increase.
OTHER
Other operating expenses decreased $2.5 million, or 6.8%, during the
third quarter of 1995 compared to the third quarter of 1994. The
primary reason for this was lower employee benefit costs.
Depreciation and decommissioning increased $2.5 million, or 18.1%, in
the third quarter of 1995 compared to the same period in 1994. This
was due primarily to an increase in decommissioning funding of
$1.3 million that has been reflected in the rates that became
effective January 1, 1995, and increased earnings on the
decommissioning trusts that were offset by the increase discussed
below.
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<PAGE>
Other income decreased by $2.4 million, or 160.1%, in the third
quarter of 1995 compared to the same period in 1994. The primary
factor was a $2.7 million write-off of the investment in the canceled
REC project, and was partially offset by a $0.3 million increase in
decommissioning trust earnings.
Income taxes increased $2.2 million, or 32.0%, in the third quarter of
1995 compared to the same period in 1994, due primarily to higher
earnings.
OVERVIEW OF NINE MONTHS OF 1995 COMPARED TO NINE MONTHS OF 1994
Earnings per share were unchanged at $1.75 in 1995 as compared to
1994. Other expenses increased due primarily to the $2.7 million
write-off of deferred costs related to the canceled REC project that
reduced net income by $.07 per share. This charge was offset by
increased electric margins.
ELECTRIC OPERATIONS
Electric margins increased by $8.2 million, or 3.3%, due primarily to
lower fuel costs.
Nine Months
___________________________
Electric Margins (000's) 1995 1994
____ ____
Revenues $369,318 $363,842
Fuel and purchases 111,528 114,226
_______ _______
Margin $257,790 $249,616
======= =======
Sales in kilowatt-hours (000) 8,287,455 7,916,713
Electric revenues increased $5.5 million, or 1.5%, during the first
nine months of 1995 compared to the first nine months of 1994.
Electric revenues were higher due to a 4.7% increase in kWh sales, and
were offset in part by a 2.6% decrease in Wisconsin retail rates that
took effect January 1, 1995. Residential kWh sales increased 4.9% due
to weather. Commercial and industrial kWh sales rose 4.5% reflecting
customer growth and weather impact. Wholesale kWh sales grew by 4.8%,
due primarily to increased demand by WPSC's largest wholesale
customer.
Electric fuels and purchases decreased $2.7 million, or 2.4%, in the
first nine months of 1995 compared to the same period in 1994. Coal
related costs decreased $7.0 million due to burning less expensive low
sulphur coal. This decrease was partially offset by an increase in
coal-fired generation of 3.6%, and a 12.6% increase, or $3.6 million,
in kWh purchases due to increased plant outages resulting from
maintenance at some plants and to warmer than normal weather.
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<PAGE>
GAS OPERATIONS
Gas margins were relatively flat.
Nine Months
_________________________
Gas Margins (000's) 1995 1994
____ ____
Revenues $147,294 $140,421
Purchase costs 106,567 99,416
_______ _______
Margin $ 40,727 $ 41,005
======= =======
Volume in Therms (000) 583,654 454,133
The Public Service Commission of Wisconsin ("PSCW") allows WPSC to
pass on to its customers, through a purchased gas adjustment clause,
changes in the cost of gas.
Gas operating revenues increased $6.9 million, or 4.9%, during the
first nine months of 1995 compared to the first nine months of 1994.
The $6.9 million increase is comprised of a $22.3 million increase in
revenues attributable to sales by WPSE, an energy marketing subsidiary
which began operation in 1994, and offsetting decreases of
$15.5 million due to warmer than normal weather and lower gas costs,
and $4.7 million representing a refund from WPSC's primary gas
supplier. (There was a reciprocal reduction recorded in gas purchased
for resale as a result of this refund, thus there was no impact on net
income.)
Gas purchased for resale showed a net increase of $7.2 million, or
7.2%, in the first nine months of 1995 compared to the same period in
1994. Gas purchases increased $22.0 million due to WPSE sales and
were offset by lower sales volume at WPSC due to weather and the $4.7
million refund discussed earlier.
Maintenance increased by $3.1 million, or 8.8%, in the first nine
months of 1995 compared to 1994 due to increased maintenance activity
at WPSC's coal-fired and nuclear plants.
Depreciation and decommissioning increased $6.9 million, or 16.3%, in
the first nine months of 1995 compared to the same period in 1994.
There were two primary factors for this increase. The first factor was
an increase in decommissioning funding of $3.9 million reflected in
the rates that became effective January 1, 1995. The second factor
was additional depreciation of $1.1 million, recorded to offset the
gain on the decommissioning portfolio discussed below and $.6 million
in higher trust earnings. These maintain the balance between the
depreciation reserve and the decommissioning trusts.
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<PAGE>
Other income increased by $1.2 million, or 31.8%, in the first nine
months of 1995 compared to the same period in 1994. This increase was
the result of three factors. The first factor was a $1.6 million
pretax gain on the decommissioning portfolio from the sale of certain
investments. The second factor was receipt of $1.2 million in
insurance proceeds as the result of the death of a retired WPSC
executive. The third factor, which offset these gains, was a
$2.7 million write-off related to the canceled REC project.
FINANCIAL CONDITION
WPSC requires large investments in capital assets used to deliver
electric and gas services. Most of the Company's capital expenditures
relate to WPSC's construction expenditures. WPSC maintains good
liquidity levels and a financial condition considered to be strong by
utility analysts. Internally generated funds exceeded the Company's
cash requirements resulting in the reduction of short-term borrowings
during the first nine months of 1995, along with short-term
investments. No funding difficulties are anticipated in the future.
Pretax interest coverage was 4.1 times for the 12 months ended
September 30, 1995 for WPSC.
WPSC's bond ratings are AA+ (Standard & Poor's and Duff & Phelps) and
Aa2 (Moody's).
For the three-year period 1995 to 1997, internally generated funds are
expected to lag construction expenditures and other investments
totaling $280 million by about $42 million. These expenditures are
comprised of $139 million for electric construction, $20 million for
nuclear fuel, $51 million for gas construction, $19 million for other
construction expenditures, and $51 million for nuclear decommissioning
and other investments. The Company currently expects to finance this
shortfall in internally generated funds through short-term debt.
WPSC's Kewaunee nuclear plant is currently licensed through the year
2013. Physical decommissioning of the plant is expected to occur
during the period 2014 to 2021 with additional expenditures being
incurred during the period 2022 to 2050. The estimated
decommissioning cost in current dollars is $155 million and the
undiscounted year of expenditure amount is $785 million. Management
does not anticipate decommissioning to have negative impacts on the
Company's liquidity or capital resources since these costs are being
funded through external decommissioning trusts.
On January 1, 1995, WPSC reduced its Wisconsin retail electric rates
by 2.6%.
In March 1995, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed of, effective January 1, 1996. This statement imposes
stricter criteria for regulatory assets by requiring that such assets
be probable of future recovery at each balance sheet date. At this
time, WPSC's management does not anticipate any material impact when
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<PAGE>
this new standard is adopted based on prior and current rate treatment
of such costs.
However, the PSCW has initiated proceedings to consider restructuring
electric utility regulation in Wisconsin, and one of the issues on its
agenda is stranded investment. Stranded investment is unrecovered
investment in facilities that are no longer economical to operate.
Therefore, the extent and impact of any change in the current
regulatory compact is not known at this time.
TRENDS
The Company's non-regulated energy marketing subsidiary, WPS Energy
Services, Inc., made two investments in October, 1995. It acquired an
interest in a producing gas reserves operation and acquired a gas
marketing operation. While these are not large acquisitions, they are
initial efforts to enhance growth opportunities.
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<PAGE>
Part II. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following documents are filed herewith:
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, WPS Resources Corporation, has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
WPS Resources Corporation
Date: October 30, 1995 /s/ D. L. Ford
________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
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<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, Wisconsin Public Service Corporation, has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Wisconsin Public Service Corporation
Date: October 30, 1995 /s/ D. L. Ford
____________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
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<PAGE>
WPSC RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED SEPTEMBER 30, 1995
Exhibit No. Description
___________ ___________
27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-24-
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