______________________________________________________________________________
______________________________________________________________________________
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 March 31, 1996
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
414-433-1466
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
414-433-1466
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.
WPS Resources Corporation Yes [x] No [ ]
Wisconsin Public Service Corporation 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
April 26, 1996
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
April 26, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1996
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 - 18
PART II. OTHER INFORMATION
Item 5. Other Information 19 - 20
Item 6. Exhibits and Reports on Form 8-K 21
Signatures 22 - 23
EXHIBIT INDEX 24
Exhibit 11 Statement Regarding Computation of Per Share
Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
Exhibit 99-1 Financial and Statistical Forecast dated
May 1, 1996
Wisconsin Public Service Corporation
-2-
PAGE
<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, 1995.
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 March 31, 1996 and 1995 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 EARNINGS Three Months Ended
(Thousands, except per share amounts) March 31
1996 1995
===========================================================================================
<S> <C> <C>
Operating revenues
Electric $122,564 $121,100
Gas 128,289 66,611
Other 484 -
- -------------------------------------------------------------------------------------------
Total operating revenues 251,337 187,711
===========================================================================================
Operating expenses
Electric production fuels 26,549 24,119
Purchased power 7,099 12,081
Gas purchased for resale 104,141 44,911
Other operating expenses 39,947 35,995
Maintenance 9,248 13,276
Depreciation and decommissioning 16,508 16,575
Taxes other than income 6,846 6,482
- -------------------------------------------------------------------------------------------
Total operating expenses 210,338 153,439
===========================================================================================
Operating income 40,999 34,272
- -------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 37 25
Other, net 1,318 4,027
- -------------------------------------------------------------------------------------------
Total other income 1,355 4,052
===========================================================================================
Income before interest expense 42,354 38,324
- -------------------------------------------------------------------------------------------
Interest on long-term debt 5,409 5,931
Other interest 708 510
Allowance for borrowed funds used during construction (32) (33)
- -------------------------------------------------------------------------------------------
Total interest expense 6,085 6,408
===========================================================================================
Income before income taxes 36,269 31,916
Income taxes 11,971 10,900
Preferred stock dividends of subsidiary 778 778
- -------------------------------------------------------------------------------------------
Net income 23,520 20,238
===========================================================================================
Retained earnings at beginning of period 308,965 297,592
Cash dividends on common stock 11,112 10,873
- -------------------------------------------------------------------------------------------
Retained earnings at end of period $321,373 $306,957
===========================================================================================
Average shares of common stock outstanding 23,896 23,897
Earnings per average share of common stock $0.98 $0.85
Dividend per share of common stock $0.465 $0.455
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-4-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=======================================================================================================
CONSOLIDATED BALANCE SHEETS March 31 December 31
(Thousands) 1996 1995
=======================================================================================================
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------
Utility plant
Electric $1,445,256 $1,441,126
Gas 231,627 229,604
- -------------------------------------------------------------------------------------------------------
Total 1,676,883 1,670,730
Less - Accumulated depreciation and decommissioning 924,922 905,519
- -------------------------------------------------------------------------------------------------------
Total 751,961 765,211
Nuclear decommissioning trusts 86,536 82,109
Construction in progress 12,407 8,463
Nuclear fuel, less accumulated amortization 13,201 14,275
- -------------------------------------------------------------------------------------------------------
Net utility plant 864,105 870,058
=======================================================================================================
Current assets
Cash and equivalents 35,139 6,533
Customer and other receivables, net of reserves 92,786 79,301
Accrued utility revenues 31,137 37,586
Fossil fuel, at average cost 8,565 8,701
Gas in storage, at average cost 1,838 10,076
Materials and supplies, at average cost 20,887 20,312
Prepayments and other 16,696 23,576
- -------------------------------------------------------------------------------------------------------
Total current assets 207,048 186,085
=======================================================================================================
Regulatory assets 109,288 111,101
Investments and other assets 102,135 99,499
=======================================================================================================
Total $1,282,576 $1,266,743
=======================================================================================================
CAPITALIZATION AND LIABILITIES
- -------------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $473,496 $463,441
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 306,974 306,590
- -------------------------------------------------------------------------------------------------------
Total capitalization 831,670 821,231
=======================================================================================================
Current liabilities
Notes payable 10,000 15,000
Commercial paper - 11,500
Accounts payable 77,501 67,483
Accrued taxes 11,518 1,744
Accrued interest 5,288 8,378
Gas refunds 1,351 6,879
Other 26,808 14,668
- -------------------------------------------------------------------------------------------------------
Total current liabilities 132,466 125,652
=======================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 134,735 135,958
Accumulated deferred investment credits 30,003 30,447
Regulatory liabilities 48,904 49,924
Environmental remediation liabilities 41,697 41,697
Long-term liabilities 63,101 61,834
- -------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 318,440 319,860
=======================================================================================================
Total $1,282,576 $1,266,743
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
============================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31
(Thousands, except share amounts) 1996 1995
============================================================================================================
<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 321,373 308,965
Shares in deferred compensation trust, 2,628 shares at average
cost of $33.26 per share (87) -
ESOP loan guarantees (16,708) (16,346)
Net unrealized security gains(net of taxes) - 1,904
- ------------------------------------------------------------------------------------------------------------
Total common stock equity 473,496 463,441
============================================================================================================
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 (1,044) (1,066)
- ------------------------------------------------------------------------------------------------------------
Total first mortgage bonds 290,031 290,009
- ------------------------------------------------------------------------------------------------------------
ESOP loan guarantees 16,708 16,346
Other long-term debt 235 235
- ------------------------------------------------------------------------------------------------------------
Total long-term debt 306,974 306,590
============================================================================================================
Total capitalization $831,670 $821,231
============================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPITON>
===========================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
(Thousands) March 31
1996 1995
===========================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $23,520 $20,238
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 16,508 16,575
Amortization of nuclear fuel and other 7,898 7,691
Deferred income taxes (1,919) (3,053)
Investment tax credit restored (444) (449)
AFUDC equity (37) (25)
Pension income (3,118) (3,231)
Postretirement funding 1,985 1,666
Deferred demand-side management expenditures (2,444) (3,174)
Other, net 6,865 (1,161)
Changes in
Customer and other receivables (13,485) (5,558)
Accrued utility revenues 6,449 2,768
Fossil fuel inventory 136 (1,445)
Gas in storage 8,238 12,911
Accounts payable 10,018 (15,690)
Miscellaneous current and accrued liabilities 6,978 20,366
Accrued taxes 9,774 11,078
Gas refunds (5,528) 6,576
- -------------------------------------------------------------------------------------------
Net cash from operating activities 71,394 66,083
===========================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (11,525) (13,467)
Allowance for borrowed funds used during construction (32) (33)
Decommissioning funding (2,244) (3,537)
Purchase of investments - (4,000)
Other (1,288) (799)
- -------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (15,089) (21,836)
===========================================================================================
Cash flows from (used for) financing activities
Change in notes payable (5,000) -
Change in commercial paper (11,500) (12,500)
Cash dividends on common stock (11,112) (10,873)
Purchase of treasury stock (87) -
- -------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (27,699) (23,373)
===========================================================================================
Net increase (decrease) in cash and equivalents 28,606 20,874
Cash and equivalents at beginning of period 6,533 13,167
===========================================================================================
Cash and equivalents at end of period $35,139 $34,041
===========================================================================================
Cash paid during period for
Interest, less amount capitalized $8,444 $8,330
Income taxes 1,709 2,211
Preferred stock dividends of subsidiary 778 778
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===========================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended
(Thousands) March 31
1996 1995
===========================================================================================
<S> <C> <C>
Operating revenues
Electric $122,564 $121,100
Gas 78,373 59,360
- -------------------------------------------------------------------------------------------
Total operating revenues 200,937 180,460
===========================================================================================
Operating expenses
Electric production fuels 26,549 24,119
Purchased power 7,099 12,081
Gas purchased for resale 53,741 37,883
Other operating expenses 38,500 35,640
Maintenance 9,248 13,276
Depreciation and decommissioning 16,269 16,575
Federal income taxes 9,984 8,193
Investment tax credit restored (444) (449)
State income taxes 3,184 2,440
Gross receipts and other taxes 6,846 6,481
- -------------------------------------------------------------------------------------------
Total operating expenses 170,976 156,239
===========================================================================================
Operating income 29,961 24,221
- -------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 37 25
Other, net 1,265 4,015
Income taxes (100) (710)
- -------------------------------------------------------------------------------------------
Total other income 1,202 3,330
===========================================================================================
Income before interest expense 31,163 27,551
- -------------------------------------------------------------------------------------------
Interest on long-term debt 5,543 5,931
Other interest 692 646
Allowance for borrowed funds used during construction (32) (33)
- -------------------------------------------------------------------------------------------
Total interest expense 6,203 6,544
===========================================================================================
Net income 24,960 21,007
Preferred stock dividend requirements 778 778
- -------------------------------------------------------------------------------------------
Earnings on common stock $24,182 $20,229
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-8-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPITON>
=================================================================================================
CONSOLIDATED BALANCE SHEETS March 31 December 31
(Thousands) 1996 1995
=================================================================================================
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------
Utility plant
Electric $1,445,217 $1,441,126
Gas 230,252 228,346
- -------------------------------------------------------------------------------------------------
Total 1,675,469 1,669,472
Less - Accumulated depreciation and decommissioning 924,798 905,427
- -------------------------------------------------------------------------------------------------
Total 750,671 764,045
Nuclear decommissioning trusts 86,536 82,109
Construction in progress 12,407 8,463
Nuclear fuel, less accumulated amortization 13,201 14,275
- -------------------------------------------------------------------------------------------------
Net utility plant 862,815 868,892
=================================================================================================
Current assets
Cash and equivalents 21,979 4,471
Customer and other receivables, net of reserves 70,462 62,156
Accrued utility revenues 31,137 37,586
Fossil fuel, at average cost 8,565 8,701
Gas in storage, at average cost 1,411 9,903
Materials and supplies, at average cost 20,887 20,312
Prepayments and other 16,601 23,526
- -------------------------------------------------------------------------------------------------
Total current assets 171,042 166,655
=================================================================================================
Regulatory assets 109,288 111,101
Investments and other assets 89,239 86,763
=================================================================================================
Total $1,232,384 $1,233,411
=================================================================================================
CAPITALIZATION AND LIABILITIES
- -------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $445,179 $445,375
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 6,079 6,101
Long-term debt 306,974 306,590
- -------------------------------------------------------------------------------------------------
Total capitalization 809,432 809,266
=================================================================================================
Current liabilities
Note payable 10,000 10,000
Commercial paper - 11,500
Accounts payable 49,339 52,881
Accrued taxes 11,518 1,744
Accrued interest 5,288 8,378
Gas refunds 1,351 6,879
Other 26,663 12,635
- -------------------------------------------------------------------------------------------------
Total current liabilities 104,159 104,017
=================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 135,102 136,226
Accumulated deferred investment tax credits 30,003 30,447
Regulatory liabilities 48,904 49,924
Environmental remediation liabilities 41,697 41,697
Long-term liabilities 63,087 61,834
- -------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 318,793 320,128
=================================================================================================
Total $1,232,384 $1,233,411
=================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-9-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===============================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31
(Thousands, except share amounts) 1996 1995
===============================================================================================
<S> <C> <C>
Common stock equity
Common stock $ 95,588 $ 95,588
Premium on capital stock 73,842 73,842
Retained earnings 292,457 290,387
ESOP loan guarantees (16,708) (16,346)
Net unrealized security gains (net of taxes) - 1,904
- -----------------------------------------------------------------------------------------------
Total common stock equity 445,179 445,375
===============================================================================================
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 6,079 6,101
===============================================================================================
6,079 6,101
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 (1,044) (1,066)
- -----------------------------------------------------------------------------------------------
Total first mortgage bonds 290,031 290,009
- -----------------------------------------------------------------------------------------------
ESOP loan guarantees 16,708 16,346
Other long-term debt 235 235
- -----------------------------------------------------------------------------------------------
Total long-term debt 306,974 306,590
===============================================================================================
Total capitalization $809,432 $809,266
===============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-10-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===========================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
(Thousands) March 31
1996 1995
===========================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $24,960 $21,007
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 16,269 16,575
Amortization of nuclear fuel and other 7,612 7,691
Deferred income taxes (1,820) (3,123)
Investment tax credit restored (444) (449)
AFUDC equity (37) (25)
Pension income (3,118) (3,231)
Postretirement funding 1,985 1,666
Deferred demand-side management expenditures (2,444) (3,174)
Other, net 5,286 (1,532)
Changes in
Customer and other receivables (8,306) (5,512)
Accrued utility revenues 6,449 2,768
Fossil fuel 136 (1,445)
Gas in storage 8,492 13,343
Accounts payable (3,542) (16,864)
Miscellaneous current and accrued liabilities 10,938 20,579
Accrued taxes 9,774 11,106
Gas refunds (5,528) 6,576
- -------------------------------------------------------------------------------------------
Net cash from operating activities 66,662 65,956
===========================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (11,557) (13,500)
Decommissioning funding (2,244) (3,537)
Other (963) (799)
- -------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (14,764) (17,836)
===========================================================================================
Cash flows from (used for) financing activities
Change in commercial paper (11,500) (12,500)
Preferred stock dividends (778) (778)
Cash dividends on common stock (22,112) (10,873)
- -------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (34,390) (24,151)
===========================================================================================
Net increase (decrease) in cash and equivalents 17,508 23,969
Cash and equivalents at beginning of period 4,471 3,449
===========================================================================================
Cash and equivalents at end of period $21,979 $27,418
===========================================================================================
Cash paid during period for
Interest, less amount capitalized $8,429 $8,330
Income taxes 1,700 2,198
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-11-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===========================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Three Months Ended
(Thousands) March 31
1996 1995
===========================================================================================
<S> <C> <C>
Balance at beginning of period $290,387 $280,730
Add Net income 24,960 21,007
- -------------------------------------------------------------------------------------------
315,347 301,737
- -------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 778 778
Dividends declared on common stock 22,112 13,373
- -------------------------------------------------------------------------------------------
22,890 14,151
- -------------------------------------------------------------------------------------------
Balance at end of period $292,457 $287,586
===========================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-12-
PAGE
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1996
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.
-13-
<PAGE>
<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% and 80% of the Company's assets and revenues,
respectively, are derived from Wisconsin Public Service Corporation
("WPSC"), an electric and gas utility.
OVERVIEW OF FIRST QUARTER OF 1996 COMPARED TO FIRST QUARTER OF 1995
Earnings per share increased from $.85 in 1995 to $.98 in 1996, or
15.3%. The most significant reason was colder than normal weather
which resulted in a 17.9% increase in heating degree days. This
increased residential electric and gas consumption 7.4% and 15.8%,
respectively.
ELECTRIC OPERATIONS
Electric margins increased by $4.0 million, or 4.7%, due to lower fuel
costs and increased consumption due to the weather in the residential,
and commercial and industrial sectors, which are higher margin sales.
First Quarter
---------------------------
Electric Margins (000's) 1996 1995
- ------------------------ ---- ----
Revenues $122,564 $121,100
Fuel and purchases 33,648 36,200
------- -------
Margin $ 88,916 $ 84,900
======= =======
Sales in kilowatt-hours (000) 2,737,830 2,760,398
Electric generating revenues increased $1.5 million, or 1.2%, during
the first quarter of 1996 as compared to the first quarter of 1995.
Residential Kwh sales increased 7.4% due to colder weather.
Commercial and industrial Kwh sales rose 1.5% reflecting the colder
weather and customer growth. Wholesale Kwh sales decreased 17.6% due
to reduced demand from WPSC's largest wholesale customer.
Electric fuels and purchases decreased $2.6 million, or 7.0%, in the
first quarter of 1996 as compared to the same period in 1995. This
decrease was the result of lower purchased power of $5.0 million, or
41.2%, reflecting 42.7% lower Kwh purchases. Purchased power
requirements were reduced due to increased production at WPSC's
coal-fired plants. Certain units were down for maintenance in the
first quarter of 1995. This decrease was offset somewhat by an
increase in coal-fired production of 17.0%, or $3.5 million, and was
-14-
<PAGE>
partially offset by a 4.8%, or $1.2 million, reduction in coal costs
from burning less expensive low sulphur coal.
GAS OPERATIONS
Gas margins increased $2.4 million, or 11.3%, due to the colder than
normal weather.
First Quarter
--------------------------
Gas Margins (000's) 1996 1995
- ------------------- ---- ----
Revenues $128,289 $66,611
Purchase costs 104,141 44,911
------- ------
Margin $ 24,148 $21,700
======= ======
Volume in therms (000) 392,528 261,321
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 $61.7 million, or 92.6%, during the
first quarter of 1996 compared to the first quarter of 1995. The
$61.7 million increase is comprised of colder than normal weather,
customer growth, and higher gas costs as a result of the weather. At
WPSC, revenues increased $19.0 million or 32.0%. This reflects
increased gas sales volumes of 16.6% resulting from the colder weather
and the higher cost of gas. In addition, sales at WPS Energy
Services, Inc. ("ESI"), an energy marketing subsidiary, increased by
$42.7 million or 588.4%. This reflects a number of factors--the
acquisition of a gas marketing company in the fourth quarter of 1995,
higher sales volumes due to customer growth, colder weather, and
higher unit prices due to gas commodity market conditions.
Gas purchased for resale showed a net increase of $59.2 million, or
131.9%, in the first quarter of 1996 as compared to the same period in
1995. WPSC gas purchases increased $15.9 million due to higher demand
as a result of the weather and higher gas costs, which on average
increased 19.3% per dekatherm. ESI gas purchases increased $43.3
million as the result of the acquisition discussed above, customer
growth, the weather, and higher gas costs. As a result of unusually
high purchased gas costs during an extremely cold period in February
1996, ESI incurred losses on certain sales resulting in an overall
negative gas margin for the first quarter of 1996 of $.6 million.
OTHER
Other operating expenses increased $3.9 million, or 10.1%. There was
an increase in gas operating expenses of $1.2 million as a result of
-15-
<PAGE>
the colder weather, and a $1.5 million increase in customer accounts
expense. This primarily relates to the expansion of WPSC's customer
call center.
Maintenance decreased by $4.0 million, or 30.3%, in the first quarter
of 1996 as compared to 1995 due to lower maintenance activity at
WPSC's coal-fired plants.
Other income decreased by $2.7 million, or 66.6%, in the first quarter
of 1996 compared to the same period in 1995. This decrease was the
result of two factors that occurred in 1995 which had a significant
impact on other income. The first factor was a $1.6 million pretax
gain on the decommissioning portfolio due to 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 company
executive.
Income taxes increased $1.1 million, or 9.8%, in the first quarter of
1996 compared to the same period in 1995, due primarily to higher
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 three months of 1996, along with short-term
investments. No funding difficulties are anticipated in the future.
Pretax interest coverage was 4.5 times for the 12 months ended
March 31, 1996 for WPSC.
WPSC's bond ratings are AA+ (Standard & Poor's and Duff & Phelps) and
Aa2 (Moody's).
WPSC made application to the PSCW on March 15, 1996 for authority to
procure and install replacement steam generators at the Kewaunee
Nuclear Power Plant ("Kewaunee"). Replacement is projected for 1999
at a total capital cost estimated to be approximately $100 million.
In WPSC's opinion, replacement of the steam generators is the least
cost and lowest risk option to restore Kewaunee to full rated capacity
and allow continued operation until expiration of the operating
license in the year 2013. Kewaunee is operated by WPSC and owned
jointly with two other utilities. WPSC's current ownership interest
in Kewaunee is 41.2%.
The steam generator tubes at Kewaunee are susceptible to the corrosion
and cracking phenomena seen throughout the nuclear industry. Kewaunee
is not operating at full rated capacity due to the plugging of tubes
in both steam generators. Steam Generator A is currently 24.94%
effectively plugged and Steam Generator B is 17.69% effectively
plugged for an average of 21.32%. The current Kewaunee safety
analysis report allows an effective tube plugging limit of up to 25%
-16-
<PAGE>
average for both steam generators, not to exceed 25% in either steam
generator. Analyses are currently being performed which WPSC believes
will increase the effective plugging limit to 30%. Without
replacement of the steam generators, existing and projected plugging
could make the continued operation of Kewaunee uneconomic sometime
during the 2002 to 2006 time frame.
Currently the owners of Kewaunee have differing views on the
desirability of proceeding with the steam generator replacement
project. WPSC is negotiating with the other Kewaunee owners to
resolve this and other ownership issues. As described in the
application filed with the PSCW, WPSC is willing to consider acquiring
full ownership of Kewaunee upon satisfactory resolution of issues
relating to decommissioning liability and funding of decommissioning
costs as well as price and other issues. The Kewaunee owners have not
reached agreement on these matters, but negotiations are ongoing. If
the steam generator replacement project receives PSCW approval, the
issues relating to the future ownership would still need to be
resolved before the steam generator replacement could proceed.
WPSC has applied to the PSCW for acceleration of the depreciation and
decommissioning collections relative to Kewaunee such that by the end
of the year 2002 there would be full recovery of all plant investment
exclusive of that related to the new steam generators, and there would
be funding adequate to fully fund currently forecasted decommissioning
expenditures. With respect to depreciation, WPSC has requested a
special depreciation accrual (over and above the amount presently
being accrued) in the amount of $5.5 million for each of the six years
1997 to 2002. With respect to decommissioning, WPSC has requested an
increase in the annual retail nonqualified fund contribution of
$8.8 million, from $1.3 million to $10.1 million. No change has been
requested in the retail qualified fund contribution currently set at
$7.1 million. The request for these accelerations reflects the
condition of the present steam generators and the evolution of the
electric generation marketplace toward a more competitive model.
In addition to the proposed replacement of the steam generators, the
following actions are or will be taken:
(1) The Nuclear Regulatory Commission ("NRC") has been
requested to redefine the pressure boundary point of the
repaired steam generator tubes, which have been removed
from service by plugging, in order to allow the return of
many of the tubes to service; thus, permitting Kewaunee
to return to full licensed power.
(2) The NRC will be requested to increase the steam generator
effective plugging limit from 25% to 30%.
(3) A request will be submitted to the NRC to allow the owners
to pursue welded repair technologies to repair existing
sleeved tubes in an effort to return plugged tubes to
service.
-17-
<PAGE>
Even if these courses of action are approved, there will still be a
need to replace the steam generators. These actions will prolong the
life of the existing steam generator tubes, but they will not stop the
ultimate corrosion.
For the three-year period 1996 to 1998, internally generated funds are
expected to lag construction expenditures and other investments
totaling $248 million by about $33 million. These expenditures are
comprised of $140 million for electric construction, $20 million for
nuclear fuel, $35 million for gas construction, $21 million for other
construction expenditures, and $32 million for nuclear decommissioning
and other investments. The company currently expects to finance this
shortfall in internally generated funds through short-term debt. This
excludes any expenditures for the replacement of the steam generator
units at the Kewaunee Nuclear Plant.
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. The
adoption of this new standard did not materially impact first quarter
1996 results 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.
-18-
PAGE
<PAGE>
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION
KEWAUNEE NUCLEAR POWER PLANT
Wisconsin Public Service Corporation ("WPSC") made application to the
Public Service Commission of Wisconsin ("PSCW") on March 15, 1996 for
authority to procure and install replacement steam generators at the
Kewaunee Nuclear Power Plant ("Kewaunee"). Replacement is projected
for 1999 at a total capital cost estimated to be approximately $100
million. In WPSC's opinion, replacement of the steam generators is
the least cost and lowest risk option to restore Kewaunee to full
rated capacity and allow continued operation until expiration of the
operating license in the year 2013. Kewaunee is operated by WPSC and
owned jointly with two other utilities. WPSC's current ownership
interest in Kewaunee is 41.2%.
The steam generator tubes at Kewaunee are susceptible to the corrosion
and cracking phenomena seen throughout the nuclear industry. Kewaunee
is not operating at full rated capacity due to the plugging of tubes
in both steam generators. Steam Generator A is currently 24.94%
effectively plugged and Steam Generator B is 17.69% effectively
plugged for an average of 21.32%. The current Kewaunee safety
analysis report allows an effective tube plugging limit of up to 25%
average for both steam generators, not to exceed 25% in either steam
generator. Analyses are currently being performed which WPSC believes
will increase the effective plugging limit to 30%. Without
replacement of the steam generators, existing and projected plugging
could make the continued operation of Kewaunee uneconomic sometime
during the 2002 to 2006 time frame.
Currently the owners of Kewaunee have differing views on the
desirability of proceeding with the steam generator replacement
project. WPSC is negotiating with the other Kewaunee owners to
resolve this and other ownership issues. As described in the
application filed with the PSCW, WPSC is willing to consider acquiring
full ownership of Kewaunee upon satisfactory resolution of issues
relating to decommissioning liability and funding of decommissioning
costs as well as price and other issues. The Kewaunee owners have not
reached agreement on these matters, but negotiations are ongoing. If
the steam generator replacement project receives PSCW approval, the
issues relating to the future ownership would still need to be
resolved before the steam generator replacement could proceed.
WPSC has applied to the PSCW for acceleration of the depreciation and
decommissioning collections relative to Kewaunee such that by the end
of the year 2002 there would be full recovery of all plant investment
exclusive of that related to the new steam generators, and there would
be funding adequate to fully fund currently forecasted decommissioning
expenditures. With respect to depreciation, WPSC has requested a
special depreciation accrual (over and above the amount presently
being accrued) in the amount of $5.5 million for each of the six years
1997 to 2002. With respect to decommissioning, WPSC has requested an
-19-
<PAGE>
increase in the annual retail nonqualified fund contribution of
$8.8 million, from $1.3 million to $10.1 million. No change has been
requested in the retail qualified fund contribution currently set at
$7.1 million. The request for these accelerations reflects the
condition of the present steam generators and the evolution of the
electric generation marketplace toward a more competitive model.
In addition to the proposed replacement of the steam generators, the
following actions are or will be taken:
(1) The Nuclear Regulatory Commission ("NRC") has been
requested to redefine the pressure boundary point of the
repaired steam generator tubes, which have been removed
from service by plugging, in order to allow the return of
many of the tubes to service; thus, permitting Kewaunee
to return to full licensed power.
(2) The NRC will be requested to increase the steam generator
effective plugging limit from 25% to 30%.
(3) A request will be submitted to the NRC to allow the owners
to pursue welded repair technologies to repair existing
sleeved tubes in an effort to return plugged tubes to
service.
Even if these courses of action are approved, there will still be a
need to replace the steam generators. These actions will prolong the
life of the existing steam generator tubes, but they will not stop the
ultimate corrosion.
See the Annual Report on Form 10-K for the year ended December 31,
1995, Part I, Item 1. Business, Section B. Electric Matters - Kewaunee
Nuclear Power Plant, at page 4, for additional information.
CUSTOMER RATE MATTERS
On April 1, 1996, WPSC made application to the PSCW to decrease retail
electric rates 1.1%, or $5.0 million annually, and to increase gas
rates 3.7%, or $7.3 million annually. New rates, when approved by the
PSCW, will become effective January 1, 1997 and will remain in effect
for the years 1997 and 1998. The final rates will be based upon
revised projections and PSCW findings after staff review. No
assurance can be given that rate changes in the range of those
requested will result.
The application for new electric rates included the acceleration of
the depreciation and decommissioning collections relative to Kewaunee
such that by the end of 2001 there would be full recovery of all plant
investment exclusive of that related to the new steam generators, and
there would be funding adequate to fully fund currently forecasted
decommissioning expenditures. The filing will be amended to reflect
accelerated collections over the period 1997 through 2002. This
change will decrease annual electric revenue requirements by
$7.0 million.
-20-
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed herewith:
Exhibit 11 Statement Regarding Computation of Per
Share Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
Exhibit 99-1 Financial and Statistical Forecast dated
May 1, 1996
Wisconsin Public Service Corporation
-21-
<PAGE>
<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: April 26, 1996 /s/ D. L. Ford
________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
-22-
PAGE
<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: April 26, 1996 /s/ D. L. Ford
____________________________________
D. L. Ford
Controller
(Chief Accounting Officer)
-23-
<PAGE>
<PAGE>
WPSC RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1996
Exhibit No. Description
___________ ___________
11 Statement Regarding Computation of Per Share Earnings
WPS Resources Corporation
27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
99-1 Financial and Statistical Forecast dated May 1, 1996
Wisconsin Public Service Corporation
-24-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<CIK> 0000107833
<NAME> WISCONSIN PUBLIC SERVICE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 862,815
<OTHER-PROPERTY-AND-INVEST> 89,239
<TOTAL-CURRENT-ASSETS> 171,042
<TOTAL-DEFERRED-CHARGES> 109,288
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,232,384
<COMMON> 95,588
<CAPITAL-SURPLUS-PAID-IN> 73,842
<RETAINED-EARNINGS> 275,749
<TOTAL-COMMON-STOCKHOLDERS-EQ> 445,179
0
51,200
<LONG-TERM-DEBT-NET> 306,974
<SHORT-TERM-NOTES> 10,000
<LONG-TERM-NOTES-PAYABLE> 6,079
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 819,432
<GROSS-OPERATING-REVENUE> 200,937
<INCOME-TAX-EXPENSE> 12,724
<OTHER-OPERATING-EXPENSES> 158,252
<TOTAL-OPERATING-EXPENSES> 170,976
<OPERATING-INCOME-LOSS> 29,961
<OTHER-INCOME-NET> 1,202
<INCOME-BEFORE-INTEREST-EXPEN> 31,163
<TOTAL-INTEREST-EXPENSE> 6,203
<NET-INCOME> 24,960
778
<EARNINGS-AVAILABLE-FOR-COMM> 24,182
<COMMON-STOCK-DIVIDENDS> 22,112
<TOTAL-INTEREST-ON-BONDS> 8,429
<CASH-FLOW-OPERATIONS> 66,662
<EPS-PRIMARY> 1.01
<EPS-DILUTED> 1.01
</TABLE>
EXHIBIT 99-1
<TABLE>
(WPSC LETTERHEAD)
May 1, 1996
TO ALL MEMBERS OF THE FINANCIAL COMMUNITY:
The company formed a holding company in 1994, WPS Resources Corporation. The
primary business will continue to be operation of the utility business of Wisconsin
Public Service Corporation. This is our summary of projected utility operating and
financial data for the five-year period 1996-2000. Construction and other
requirements for this period are about $30 million lower than the five years in our
publication of last May.
<CAPTION>
SOURCES AND USES OF FUNDS (millions)
- ------------------------------------
Actual 5 Yr.
1995 1996 1997 1998 1999 2000 Total
------ ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Construction & Other Investments $75.7 $76.2 $74.9 $96.6 $109.3 $112.1 $469.1
Internal Funds After Dividends -76.7 -48.9 -84.5 -80.9 -119.5 - 98.4 -432.2
Financing Required $-1.0 $27.3 $-9.6 $15.7 $-10.2 $ 13.7 $ 36.9
</TABLE>
AFUDC is included in construction and internal funds. Internal funds assume 12%
return on average common equity with modest dividend increases. Special
dividends from the utility to the holding company are forecast to maintain
the equity ratio approved by the Public Service Commission of Wisconsin.
The only permanent financing anticipated is the refinancing of $50 million of
bonds in 1998.
<TABLE>
<CAPTION>
Filing Amount
RATE CASES Date Requested Increase Effective
- ---------- ------ --------- -------- ---------
<S> <C> <C> <C> <C>
Wisconsin
Electric 4/96 $(5.0)MM (1.1)% Expected 1/97
Gas 4/96 $ 7.3 MM 3.7 % Expected 1/97
</TABLE>
Wisconsin currently has authorized 11.5% return on equity. An 11.75% return was
requested with the new filing. The company files biannually for rate changes.
<PAGE>
SALES & LOAD DATA
ELECTRIC - In the next 5 and 10 years, kwh sales are expected to grow at average
annual rates of 1.2% and 0.9%, respectively. Firm peak loads, however, are
expected to decline in the short-term. The decline is projected to be at an
average annual rate of 2.7% over the next 5 years due to anticipated competition
in the large customer markets and the expectation that many large retail
customers will take greater advantage of interruptible rates. After the
year 2002, load growth is expected to resume a normal growth pattern. The
ten-year average annual growth rate for peak demand is -1.3%. The effects of
load management, time of use billing, interruptible rates, and other
demand-side programs are included in the sales and load projections.
GAS - Sales of natural gas are projected to grow at an average annual rate
of 1.8% and 1.5% during the next 5- and 10-year periods, respectively.
For the same time periods, transportation volumes are expected to grow
at average annual rates of 2.9% and 1.9%, respectively. The effect of
demand-side programs are included in the sales projections.
SUPPLY DATA
System capacity reserves are expected in the range of 15% to 23% over the next
10 years. No long term capacity additions are necessary due to the expected
decline in firm peak demand (as reported in the Sales & Load Data section). The
1995 summer generating capability was 1833MW. Short-term capacity additions may
be necessary to cover new wholesale loads that are not reflected in the current
load forecast. The actual system generation mix for 1995 was 63.7% coal, 13.5%
nuclear, 2.6% hydro, 0.9% natural gas, 0% oil and 19.3% purchased power, very
similar to 1994. The system generation mix is expected to remain predominately
coal, followed by nuclear and purchased power to meet over 95% of the system
requirements over the next 10 years. The balance of the system requirements is
expected to be met by hydro, natural gas and oil.
FURTHER INFORMATION
If you would like additional information concerning this data or other matters
pertaining to the company, please call me. My telephone number is
(414) 433-1449.
Sincerely,
Ralph G. Baeten
Vice President-Treasurer
