______________________________________________________________________________
______________________________________________________________________________
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 June 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
July 26, 1995
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
July 26, 1995
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 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
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation and
Wisconsin Public Service Corporation 14 - 20
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 21
Item 5. Other Information 21 - 22
Item 6. Exhibits and Reports on Form 8-K 23
Signatures 24 - 25
EXHIBIT INDEX 26
Exhibit 3(ii) By-Laws
WPS Resources Corporation
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 June 30, 1995 and 1994 are not necessarily
indicative of trends for any 12-month period.
-3-
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
<CAPTION>
==============================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three Months Ended Six Months Ended
(Thousands, except share amounts) June 30 June 30
1995 1994 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $117,418 $115,893 $238,518 $239,502
Gas 44,735 31,676 111,346 108,797
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 162,153 147,569 349,864 348,299
==============================================================================================================================
Operating expenses
Electric production fuels 26,388 28,128 50,507 56,302
Purchased power 10,396 8,459 22,477 19,752
Gas purchased for resale 33,962 20,962 78,873 74,328
Other operating expenses 39,784 37,536 75,779 73,641
Maintenance 15,262 14,316 28,538 25,812
Depreciation and decommissioning 15,837 13,874 32,412 28,066
Taxes other than income 6,366 6,451 12,848 12,987
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 147,995 129,726 301,434 290,888
==============================================================================================================================
Operating income 14,158 17,843 48,430 57,411
- ------------------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 48 23 74 43
Other, net 1,887 1,126 5,914 2,336
- ------------------------------------------------------------------------------------------------------------------------------
Total other income 1,935 1,149 5,988 2,379
==============================================================================================================================
Income before interest expense 16,093 18,992 54,418 59,790
- ------------------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 5,796 5,887 11,589 11,842
Other interest 606 393 1,254 887
Allowance for borrowed funds used during construction (48) (27) (81) (62)
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 6,354 6,253 12,762 12,667
==============================================================================================================================
Income before income taxes 9,739 12,739 41,656 47,123
Income taxes 3,095 4,551 13,996 16,560
Preferred stock dividends of subsidiary 778 778 1,556 1,556
- ------------------------------------------------------------------------------------------------------------------------------
Net income 5,866 7,410 26,104 29,007
==============================================================================================================================
Retained earnings at beginning of period 306,957 298,878 297,592 287,915
Cash dividends on common stock 10,873 10,634 21,746 21,268
- ------------------------------------------------------------------------------------------------------------------------------
Retained earnings at end of period $301,950 $295,654 $301,950 $295,654
==============================================================================================================================
Average shares of common stock outstanding 23,897 23,897 23,897 23,897
Earnings per average share of common stock $0.24 $0.31 $1.09 $1.21
Dividend per share of common stock $0.455 $0.445 $0.910 $0.890
==============================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-4-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
====================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1995 1994
====================================================================================================
<S> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------
Utility plant
Electric $1,435,978 $1,412,666
Gas 209,621 202,903
- ----------------------------------------------------------------------------------------------------
Total 1,645,599 1,615,569
Accumulated depreciation and decommissioning (884,489) (846,505)
- ----------------------------------------------------------------------------------------------------
Total 761,110 769,064
Nuclear decommissioning trusts 73,432 64,147
Construction in progress 14,351 11,131
Nuclear fuel, less accumulated amortization 16,966 19,417
- ----------------------------------------------------------------------------------------------------
Net utility plant 865,859 863,759
====================================================================================================
Current assets
Cash and equivalents 25,408 13,167
Customer and other receivables, net of reserves 54,779 60,029
Accrued utility revenues 18,106 28,820
Fossil fuel, at average cost 11,501 10,505
Gas in storage, at average cost 8,241 15,787
Materials and supplies, at average cost 22,316 20,585
Prepayments and other 18,677 21,122
- ----------------------------------------------------------------------------------------------------
Total current assets 159,028 170,015
====================================================================================================
Regulatory assets 103,287 109,135
Investments and other assets 82,402 74,366
====================================================================================================
Total $1,210,576 $1,217,275
====================================================================================================
CAPITALIZATION AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $451,934 $446,540
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 308,946 309,945
- ----------------------------------------------------------------------------------------------------
Total capitalization 812,080 807,685
====================================================================================================
Current liabilities
Note payable 10,000 10,000
Commercial paper - 12,500
Accounts payable 48,071 66,643
Accrued taxes 3,541 1,152
Accrued interest 8,338 8,068
Gas refunds 12,343 -
Other 13,684 7,494
- ----------------------------------------------------------------------------------------------------
Total current liabilities 95,977 105,857
====================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 129,747 126,639
Accumulated deferred investment tax credits 31,274 32,172
Regulatory liabilities 57,880 65,995
Long-term liabilities 83,618 78,927
- ----------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 302,519 303,733
====================================================================================================
Total $1,210,576 $1,217,275
====================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-5-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
===============================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 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 301,950 297,592
ESOP loan guarantees (18,934) (19,970)
- -----------------------------------------------------------------------------------------------
Total common stock equity 451,934 446,540
===============================================================================================
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 (1,110) (1,154)
- -----------------------------------------------------------------------------------------------
Total first mortgage bonds 289,965 289,921
- -----------------------------------------------------------------------------------------------
ESOP loan guarantees 18,934 19,970
Other long-term debt 47 54
- -----------------------------------------------------------------------------------------------
Total long-term debt 308,946 309,945
===============================================================================================
Total capitalization $812,080 $807,685
===============================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-6-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
===============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1995 1994
===============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $26,104 $29,007
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 32,412 28,066
Amortization of nuclear fuel and other 14,334 14,130
Deferred income taxes (4,430) 598
Investment tax credit restored (898) (905)
AFUDC equity (74) (43)
Pension funding (6,142) (5,454)
Postretirement funding 3,458 3,518
Deferred demand-side management expenditures (4,793) (5,154)
Other, net 6,645 (3,365)
Changes in
Customer and other receivables 5,250 3,747
Accrued utility revenues 10,714 19,452
Fossil fuel inventory (996) 62
Gas in storage 7,546 8,533
Accounts payable (18,572) (19,419)
Miscellaneous current and accruals 20,583 17,068
Accrued taxes 2,389 707
- -----------------------------------------------------------------------------------------------
Net cash from operating activities 93,530 90,548
===============================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (33,497) (27,910)
Allowance for borrowed funds used during construction (81) (62)
Decommissioning funding (9,285) (2,854)
Purchase of investments (4,000) -
Other (180) 748
- -----------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (47,043) (30,078)
===============================================================================================
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 (21,746) (21,268)
- -----------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (34,246) (33,268)
===============================================================================================
Net increase (decrease) in cash and equivalents 12,241 27,202
Cash and equivalents at beginning of period 13,167 5,391
===============================================================================================
Cash and equivalents at end of period $25,408 $32,593
===============================================================================================
Cash paid during period for
Interest, less amount capitalized $10,586 $10,157
Income taxes 15,264 14,453
Preferred stock dividends of subsidiary 1,556 1,556
===============================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-7-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==============================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended
(Thousands, except share amounts) June 30 June 30
1995 1994 1995 1994
==============================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $117,418 $115,893 $238,518 $239,502
Gas 33,513 31,676 92,873 108,797
- ------------------------------------------------------------------------------------------------------------------------------
Total operating revenues 150,931 147,569 331,391 348,299
==============================================================================================================================
Operating expenses
Electric production fuels 26,388 28,128 50,507 56,302
Purchased power 10,396 8,459 22,477 19,752
Gas purchased for resale 22,859 20,962 60,742 74,328
Other operating expenses 39,258 37,536 74,898 73,641
Maintenance 15,262 14,316 28,538 25,812
Depreciation and decommissioning 15,837 13,874 32,412 28,066
Federal income taxes 2,640 3,895 10,833 13,601
Investment tax credit restored (449) (453) (898) (906)
State income taxes 891 1,166 3,331 3,827
Gross receipts and other taxes 6,366 6,451 12,847 12,987
- ------------------------------------------------------------------------------------------------------------------------------
Total operating expenses 139,448 134,334 295,687 307,410
==============================================================================================================================
Operating income 11,483 13,235 35,704 40,889
- ------------------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 48 23 73 43
Other, net 1,874 1,124 5,889 2,334
Income taxes (116) 59 (826) (36)
- ------------------------------------------------------------------------------------------------------------------------------
Total other income 1,806 1,206 5,136 2,341
==============================================================================================================================
Income before interest expense 13,289 14,441 40,840 43,230
- ------------------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 5,931 5,887 11,862 11,842
Other interest 606 393 1,252 887
Allowance for borrowed funds used during construction (48) (27) (81) (62)
- ------------------------------------------------------------------------------------------------------------------------------
Total interest expense 6,489 6,253 13,033 12,667
==============================================================================================================================
Net income 6,800 8,188 27,807 30,563
Preferred stock dividend requirements 778 778 1,556 1,556
- ------------------------------------------------------------------------------------------------------------------------------
Earnings on common stock $6,022 $7,410 $26,251 $29,007
==============================================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-8-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
====================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1995 1994
====================================================================================================
<S> <C> <C>
ASSETS
- ----------------------------------------------------------------------------------------------------
Utility plant
Electric $1,435,978 $1,412,666
Gas 209,600 202,897
- ----------------------------------------------------------------------------------------------------
Total 1,645,578 1,615,563
Accumulated depreciation and decommissioning (884,488) (846,505)
- ----------------------------------------------------------------------------------------------------
Total 761,090 769,058
Nuclear decommissioning trusts 73,432 64,147
Construction in progress 14,351 11,131
Nuclear fuel, less accumulated amortization 16,966 19,417
- ----------------------------------------------------------------------------------------------------
Net utility plant 865,839 863,753
====================================================================================================
Current assets
Cash and equivalents 20,167 3,449
Customer and other receivables, net of reserves 51,421 58,036
Accrued utility revenues 18,106 28,820
Fossil fuel, at average cost 11,501 10,505
Gas in storage, at average cost 8,186 15,783
Materials and supplies, at average cost 22,316 20,585
Prepayments and other 18,652 21,091
- ----------------------------------------------------------------------------------------------------
Total current assets 150,349 158,269
====================================================================================================
Regulatory assets 103,287 109,135
Investments and other assets 75,831 74,069
====================================================================================================
Total $1,195,306 $1,205,226
====================================================================================================
CAPITALIZATION AND LIABILITIES
- ----------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $432,994 $429,953
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 6,143 6,176
Long-term debt 308,946 309,945
- ----------------------------------------------------------------------------------------------------
Total capitalization 799,283 797,274
====================================================================================================
Current liabilities
Note payable 10,000 10,002
Commercial paper - 12,500
Accounts payable 45,853 65,336
Accrued taxes 3,616 1,199
Accrued interest 8,338 8,068
Gas refunds 12,343 -
Other 12,953 6,627
- ----------------------------------------------------------------------------------------------------
Total current liabilities 93,103 103,732
====================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 130,197 127,126
Accumulated deferred investment tax credits 31,274 32,172
Regulatory liabilities 57,880 65,995
Long-term liabilities 83,569 78,927
- ----------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 302,920 304,220
====================================================================================================
Total $1,195,306 $1,205,226
====================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-9-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 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 282,735 280,730
ESOP loan guarantees (18,934) (19,970)
- ------------------------------------------------------------------------------------------------
Total common stock equity 432,994 429,953
================================================================================================
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 6,143 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 (1,110) (1,153)
- ------------------------------------------------------------------------------------------------
Total first mortgage bonds 289,965 289,922
ESOP loan guarantees 18,934 19,970
Other long-term debt 47 53
- ------------------------------------------------------------------------------------------------
Total long-term debt 308,946 309,945
================================================================================================
Total capitalization $799,283 $797,274
================================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-10-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1995 1994
==============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $27,807 $30,563
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 32,412 28,066
Amortization of nuclear fuel and other 14,334 14,130
Deferred income taxes (4,467) 598
Investment tax credit restored (898) (905)
AFUDC equity (74) (43)
Pension funding (6,142) (5,454)
Postretirement funding 3,458 3,518
Deferred demand-side management expenditures (4,793) (5,154)
Other, net 6,343 (3,365)
Changes in
Customer and other receivables 6,615 3,747
Accrued utility revenues 10,714 19,452
Fossil fuel (996) 62
Gas in storage 7,597 8,533
Accounts payable (19,483) (19,419)
Miscellaneous current and accruals 20,719 17,068
Accrued taxes 2,417 707
- ----------------------------------------------------------------------------------------------
Net cash from operating activities 95,563 92,104
==============================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (33,578) (27,972)
Decommissioning funding (9,285) (2,854)
Other (180) 748
- ----------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (43,043) (30,078)
==============================================================================================
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 (1,556) (1,556)
Cash dividends on common stock (21,746) (21,268)
- ----------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (35,802) (34,824)
==============================================================================================
Net increase (decrease) in cash and equivalents 16,718 27,202
Cash and equivalents at beginning of period 3,449 5,391
==============================================================================================
Cash and equivalents at end of period $20,167 $32,593
==============================================================================================
Cash paid during period for
Interest, less amount capitalized $10,586 $10,157
Income taxes 15,249 14,453
==============================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-11-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==============================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Six Months Ended
(Thousands) June 30
1995 1994
==============================================================================================
<S> <C> <C>
Balance at beginning of period $280,730 $288,693
Add Net income 27,807 30,563
- ----------------------------------------------------------------------------------------------
308,537 319,256
- ----------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 1,556 2,334
Dividends declared on common stock 24,246 21,268
- ----------------------------------------------------------------------------------------------
25,802 23,602
- ----------------------------------------------------------------------------------------------
Balance at end of period $282,735 $295,654
==============================================================================================
<FN>
The accompanying notes are an integral part of these statements.
</TABLE>
-12-
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 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 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.
-13-
<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 99% of the Company's assets and revenues are derived
from Wisconsin Public Service Corporation ("WPSC"), an electric and
gas utility.
Overview of Second Quarter of 1995 Compared to Second Quarter of 1994
Earnings per share declined from $.31 in 1994 to $.24 in 1995, or
22.6%. The most significant reason was an increase in operating
expenses, that was partially offset by improved margins.
Electric margins increased by $1.3 million, or 1.7%, due primarily to
lower fuel costs.
Second Quarter
___________________________
Electric Margins (000's) 1995 1994
____ ____
Revenues $117,418 $115,893
Fuel and purchases 36,784 36,587
_______ _______
Margin $ 80,634 $ 79,306
======= =======
Sales in kilowatt-hours (000) 2,676,896 2,542,827
Electric revenues increased $1.5 million, or 1.3%, during the second
quarter of 1995 compared to the second quarter of 1994. Electric
revenues were higher due to a 5.3% 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 4.4% due to warmer weather. Commercial and industrial
kWh sales rose 4.2% reflecting customer growth and warmer weather.
Wholesale kWh sales grew 9.3% due primarily to increased demand by
WPSC s largest wholesale customer.
Electric fuels and purchases increased $.2 million, or .1%, in the
second quarter of 1995 compared to the same period in 1994. Even
though there was an increase in coal-fired generation of 5.4%, or $1.3
million, coal related costs decreased 10.0%, or $2.8 million, due to
burning less expensive low sulphur coal. There was an increase in kWh
purchases of 22.9%, or $1.9 million due to increased plant outages
resulting from maintenance and warmer weather.
-14-
<PAGE>
Gas margins were relatively flat.
Second Quarter
_________________________
Gas Margins (000's) 1995 1994
____ ____
Revenues $44,735 $31,676
Purchase costs 33,962 20,962
_______ _______
Margin $10,773 $10,714
======= =======
Volume in Therms (000) 168,244 108,724
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 $13.1 million, or 41.2%, during the
second quarter of 1995 compared to the second quarter of 1994. Of the
increase, $11.3 million is attributable to sales by WPS Energy
Services, Inc. ("WPSE"), an energy marketing subsidiary which began
operations in 1994. The balance of the increase is attributable to
higher sales volume at WPSC due to weather.
Gas purchased for resale showed a net increase of $13.0 million, or
62.0%, in the second quarter of 1995 as compared to the same period in
1994. Gas purchases for WPSE of $11.1 million were the primary reason
for this increase.
Other operating expenses increased $2.2 million, or 6.0%, during the
second quarter of 1995 compared to the second quarter of 1994. The
primary reason for this was increased amortization and write-offs of
coal and associated rail transportation contracts of $1.0 million.
Maintenance increased by $.9 million, or 6.6%, in the second quarter
of 1995 compared to the second quarter of 1994 due to increased
maintenance activity at the Kewaunee nuclear plant.
Depreciation and decommissioning increased $2.0 million, or 14.1%, in
the second quarter of 1995 compared to the same period in 1994. This
was due 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.
Other income increased by $.8 million, or 68.4%, in the second quarter
of 1995 compared to the same period in 1994. The primary factor was a
$.5 million increase in decommissioning trust earnings.
Income taxes decreased $1.4 million, or 32.0%, in the second quarter
of 1995 compared to the same period in 1994, due primarily to lower
earnings.
-15-
<PAGE>
Overview of Six Months of 1995 Compared to Six Months of 1994
Earnings per share declined from $1.21 in 1994 to $1.09 in 1995, or
9.9%. The most significant reason was an increase in operating and
maintenance expenses.
Electric margins increased by $2.1 million, or 1.3%, due primarily to
lower fuel costs.
Six Months
___________________________
Electric Margins (000's) 1995 1994
____ ____
Revenues $238,518 $239,502
Fuel and purchases 72,984 76,054
_______ _______
Margin $165,534 $163,448
======= =======
Sales in kilowatt-hours (000) 5,444,097 5,210,352
Electric revenues decreased $1.0 million, or .4%, during the first six
months of 1995 compared to the first six months of 1994. Electric
revenues were lower due to a 2.6% decrease in Wisconsin retail rates
that took effect January 1, 1995. This rate decrease was partially
offset by a 4.5% increase in kWh sales. Residential kWh sales
increased .3% due to weather. Commercial and industrial kWh sales
rose 4.6% reflecting customer growth. Wholesale kWh sales grew by
9.2%, due primarily to increased demand by WPSC s largest wholesale
customer.
Electric fuels and purchases decreased $3.1 million, or 4.0%, in the
first six months of 1995 compared to the same period in 1994. Even
though there was an increase in coal-fired generation of 1.3%, coal
related costs decreased $5.3 million due to burning less expensive low
sulphur coal. These decreases were somewhat offset by a 13.8%, or
$2.7 million increase in kWh purchases due to increased plant outages
resulting from maintenance at some plants and warmer weather.
-16-
<PAGE>
Gas margins decreased $2.0 million, or 5.8%, due to the warmer than
normal weather.
Six Months
_________________________
Gas Margins (000's) 1995 1994
____ ____
Revenues $111,346 $108,797
Purchase costs 78,873 74,328
_______ _______
Margin $ 32,473 $ 34,469
======= =======
Volume in Therms (000) 429,565 348,964
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 $2.5 million, or 2.3%, during the
first six months of 1995 compared to the first six months of 1994.
The $2.5 million increase is comprised of an $18.4 million increase in
revenues, attributable to sales by WPSE, an energy marketing
subsidiary which began operation in 1994. Offsetting the increase
were decreases of $13.6 million due to warmer than normal weather and
lower gas cost, 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 $4.5 million, or
6.1%, in the first six months of 1995 compared to the same period in
1994. Gas purchases increased $18.1 million due to WPSE sales and
were offset by the $4.7 million refund discussed earlier.
Other operating expenses increased $2.1 million, or 2.9%, in the first
six months of 1995 compared to 1994 due primarily to increased
amortization and write-offs of coal and associated rail transportation
contracts of $1.5 million.
Maintenance increased by $2.7 million, or 10.6%, in the first six
months of 1995 compared to 1994 due to increased maintenance activity
at WPSC's coal-fired and nuclear plants.
Depreciation and decommissioning increased $4.3 million, or 15.5%, in
the first six 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 $2.6 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. This maintains
-17-
<PAGE>
the balance between the depreciation reserve and the decommissioning
trusts.
Other income increased by $3.6 million, or 151.7%, in the first six
months of 1995 compared to the same period in 1994. This increase was
the result of two 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.
Income taxes decreased by $2.6 million, or 15.5%, in the first six
months of 1995 compared to the same period in 1994, due primarily to
lower earnings.
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 six months of 1995, along with short-term
investments. No funding difficulties are anticipated in the future.
Pretax interest coverage was 3.9 times for the 12 months ended June
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%.
-18-
<PAGE>
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 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 this new standard is adopted based on prior and current rate
treatment of such costs.
However, the Public Service Commission of Wisconsin ("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
impact of any change in the current regulatory compact is not known at
this time.
TRENDS
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
Rhinelander's facility in Rhinelander, Wisconsin and electricity to
WPSC's customers. Plans for REC were originally announced on
August 27, 1992. On August 3, 1993, the parties entered into a steam
and electrical sales agreement. The parties had attempted to reach
agreement with respect to an amendment to the original agreement as a
result of certain reopener provisions in that agreement. Following an
in-depth financial analysis and a lengthy negotiation process,
Rhinelander decided it was not feasible to continue and decided to
terminate negotiations. WPSC and Rhinelander had been negotiating
since November of 1994 when the Public Service Commission of Wisconsin
("PSCW") selected the REC as the best project from 13 proposals to
meet WPSC's future electrical needs.
The Kewaunee Nuclear Power Plant ("Kewaunee" or "Plant") was shutdown
on April 1, 1995 for scheduled maintenance and refueling. During the
shutdown, inspection of the steam generators revealed higher levels of
tube degradation than was anticipated. Continued use of degraded
tubes raises concerns regarding primary-to-secondary leakage of
reactor coolant. Thus, the degraded tubes were removed from service
by plugging. Tube plugging and the build-up of deposits on the tubes
affect the heat-transfer capability of the steam generators to the
point where eventually full power operation is affected. Prior to the
recent shutdown, the equivalent of approximately 12% of the tubes in
the steam generators were plugged with no loss of capacity. When the
Plant was returned to service on May 18, 21% of the tubes were
plugged, resulting in a capacity reduction of 3.8% during the Plant s
current operating cycle which extends into the fall of 1996. Thus,
net Plant output has been reduced from 525 megawatts to approximately
510 megawatts. Although preliminary estimates indicated a minor
reduction in earnings as reported in the WPS Resources
-19-
<PAGE>
Corporation/Wisconsin Public Service Corporation Form 10-Q for the
quarter ended March 31, 1995, revised estimates indicate that during
1995 additional expenses related to recent steam generator plugging
likely will be offset by reduced nuclear expenses in other areas. The
small reduction in capacity resulting from the plugging of steam
generator tubes should not affect earnings significantly because of
the availability of reserve capacity in the WPSC system. The study of
tube repair alternatives continues.
Wisconsin Public Service Corporation is the operator and 41.2% owner
of Kewaunee which is owned jointly with Wisconsin Power and Light
Company and Madison Gas and Electric Company who own 41% and 17.8%,
respectively.
-20-
PAGE
<PAGE>
Part II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
Proxy voting results at the May 4, 1995 Annual Shareholders Meeting
are as follows:
For the election of directors:
For Abstentions Non-Votes Total
--- ----------- --------- -----
Richard A. Bemis 21,237,542 241,443 2,417,977 23,896,962
Daniel A. Bollom 21,243,794 235,191 2,417,977 23,896,962
Robert C. Gallagher 21,247,202 231,783 2,417,977 23,896,962
The following directors also continued in office after the Annual
Shareholders Meeting:
A. Dean Arganbright
Michael S. Ariens
M. Lois Bush
Kathryn M. Hasselblad-Pascale
James L. Kemerling
Linus M. Stoll
For the approval of the WPS Resources Corporation Deferred
Compensation Plan:
For Against Abstentions Non-Votes Total
--- ------- ----------- --------- -----
19,195,653 1,293,459 989,873 2,417,977 23,896,962
Item 5. Other Information
Kewaunee Nuclear Power Plant
The WPS Resources Corporation/Wisconsin Public Service Corporation
Form 10-Q for the quarterly period ended March 31, 1995, at Part II.,
Item 5, Other Information, pages 19 and 20, reported the shutdown of
the Kewaunee Nuclear Power Plant ("Kewaunee" or "Plant") for scheduled
maintenance and refueling and related steam generator matters
beginning on April 1, 1995.
During the shutdown, inspection of the steam generators revealed
higher levels of tube degradation than was anticipated. Continued use
of degraded tubes raises concerns regarding primary-to-secondary
leakage of reactor coolant. Thus, the degraded tubes were removed
from service by plugging. Tube plugging and the build-up of deposits
on the tubes affect the heat-transfer capability of the steam
-21-
<PAGE>
generators to the point where eventually full power operation is
affected. Prior to the recent shutdown, the equivalent of
approximately 12% of the tubes in the steam generators were plugged
with no loss of capacity. When the Plant was returned to service on
May 18, 21% of the tubes were plugged, resulting in a capacity
reduction of 3.8% during the Plant s current operating cycle which
extends into the fall of 1996. Thus, net Plant output has been
reduced from 525 megawatts to approximately 510 megawatts. Although
preliminary estimates indicated a minor reduction in earnings as
reported in the WPS Resources/Wisconsin Public Service Corporation
Form 10-Q for the quarter ended March 31, 1995, revised estimates
indicate that during 1995 additional expenses related to recent steam
generator plugging likely will be offset by reduced nuclear expenses
in other areas. The small reduction in capacity resulting from the
plugging of steam generator tubes should not affect earnings
significantly because of the availability of reserve capacity in the
WPSC system. The study of tube repair alternatives continues.
See Part I, Item 1. Business - Electric Operations - Kewaunee Nuclear
Power Plant in the WPS Resources Corporation and Wisconsin Public
Service Corporation Form 10-K reports for the year ended December 31,
1994 for additional background on this matter.
Wisconsin Public Service Corporation is the operator and 41.2% owner
of Kewaunee which is owned jointly with Wisconsin Power and Light
Company and Madison Gas and Electric Company who own 41% and 17.8%,
respectively.
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
Rhinelander's facility in Rhinelander, Wisconsin and electricity to
WPSC's customers. Plans for REC were originally announced on
August 27, 1992. On August 3, 1993, the parties entered into a steam
and electrical sales agreement. The parties had attempted to reach
agreement with respect to an amendment to the original agreement as a
result of certain reopener provisions in that agreement. Following an
in-depth financial analysis and a lengthy negotiation process,
Rhinelander decided it was not feasible to continue and decided to
terminate negotiations. WPSC and Rhinelander had been negotiating
since November of 1994 when the Public Service Commission of Wisconsin
("PSCW") selected the REC as the best project from 13 proposals to
meet WPSC's future electrical needs.
See Part I, Item 1. Business - Electric Operations - Rhinelander
Energy Center in the WPS Resources Corporation and Wisconsin Public
Service Corporation Form 10-K reports for the year ended December 31,
1994 for additional background on this matter.
-22-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed herewith:
Exhibit 3(ii) By-Laws
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-23-
<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: July 26, 1995 /s/ D. L. Ford
________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
-24-
<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: July 26, 1995 /s/ D. L. Ford
____________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
-25-
<PAGE>
WPSC RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 1995
Exhibit No. Description
___________ ___________
3(ii) By-Laws
WPS Resources Corporation
27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-26-
<PAGE>
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<OTHER-OPERATING-EXPENSES> 282,421
<TOTAL-OPERATING-EXPENSES> 295,687
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