______________________________________________________________________________
______________________________________________________________________________
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, 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
July 26, 1996
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
July 26, 1996
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996
CONTENTS
Page
INTRODUCTION 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
Consolidated Statements of Income and
Retained Earnings 5
Consolidated Balance Sheets 6
Consolidated Statements of Capitalization 7
Consolidated Statements of Cash Flows 8
WISCONSIN PUBLIC SERVICE CORPORATION
Consolidated Statements of Income 9
Consolidated Balance Sheets 10
Consolidated Statements of Capitalization 11
Consolidated Statements of Cash Flows 12
Consolidated Statements of Retained Earnings 13
CONDENSED NOTES TO FINANCIAL STATEMENTS OF
WPS Resources Corporation and
Wisconsin Public Service Corporation 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation and
Wisconsin Public Service Corporation 15 - 23
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders 24
Item 5. Other Information 24 - 25
Item 6. Exhibits and Reports on Form 8-K 26
Signatures 27 - 28
-2-
<PAGE>
EXHIBIT INDEX 29
Exhibit 11 Statement Regarding Computation of Per Share
Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
-3-
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 the Company and WPSC
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 June 30, 1996 and 1995 are not necessarily
indicative of trends for any 12-month period.
-4-
<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 Six Months Ended
(Thousands, except per share amounts) June 30 June 30
1996 1995 1996 1995
============================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $116,928 $117,418 $239,492 $238,518
Gas 64,993 44,735 193,282 111,346
Other (293) - 191 -
- ----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 181,628 162,153 432,965 349,864
============================================================================================================================
Operating expenses
Electric production fuels 24,269 26,388 50,818 50,507
Purchased power 9,233 10,396 16,332 22,477
Gas purchased for resale 52,335 33,962 156,476 78,873
Other operating expenses 40,078 39,784 80,025 75,779
Maintenance 12,525 15,262 21,773 28,538
Depreciation and decommissioning 16,032 15,837 32,540 32,412
Taxes other than income 6,550 6,366 13,396 12,848
- ----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 161,022 147,995 371,360 301,434
============================================================================================================================
Operating income 20,606 14,158 61,605 48,430
- ----------------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 33 48 70 74
Other, net 1,813 1,887 3,131 5,914
- ----------------------------------------------------------------------------------------------------------------------------
Total other income 1,846 1,935 3,201 5,988
============================================================================================================================
Income before interest expense 22,452 16,093 64,806 54,418
- ----------------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 5,432 5,796 10,841 11,589
Other interest 566 606 1,274 1,254
Allowance for borrowed funds used during construction (32) (48) (64) (81)
- ----------------------------------------------------------------------------------------------------------------------------
Total interest expense 5,966 6,354 12,051 12,762
============================================================================================================================
Income before income taxes 16,486 9,739 52,755 41,656
Income taxes 5,588 3,095 17,559 13,996
Preferred stock dividends of subsidiary 778 778 1,556 1,556
- ----------------------------------------------------------------------------------------------------------------------------
Net income 10,120 5,866 33,640 26,104
============================================================================================================================
Retained earnings at beginning of period 321,373 306,957 308,965 297,592
Cash dividends on common stock 11,112 10,873 22,224 21,746
- ----------------------------------------------------------------------------------------------------------------------------
Retained earnings at end of period $320,381 $301,950 $320,381 $301,950
============================================================================================================================
Average shares of common stock outstanding 23,893 23,897 23,894 23,897
Earnings per average share of common stock $0.42 $0.24 $1.41 $1.09
Dividend per share of common stock $0.465 $0.455 $0.930 $0.910
============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-5-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
===================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1996 1995
===================================================================================================
ASSETS
- ---------------------------------------------------------------------------------------------------
<S> <C> <C>
Utility plant
Electric $1,454,618 $1,441,126
Gas 231,384 229,604
- ---------------------------------------------------------------------------------------------------
Total 1,686,002 1,670,730
Less - Accumulated depreciation and decommissioning 923,971 905,519
- ---------------------------------------------------------------------------------------------------
Total 762,031 765,211
Nuclear decommissioning trusts 90,311 82,109
Construction in progress 10,319 8,463
Nuclear fuel, less accumulated amortization 17,252 14,275
- ---------------------------------------------------------------------------------------------------
Net utility plant 879,913 870,058
===================================================================================================
Current assets
Cash and equivalents 6,099 6,533
Customer and other receivables, net of reserves 75,577 79,301
Accrued utility revenues 18,662 37,586
Fossil fuel, at average cost 10,131 8,701
Gas in storage, at average cost 10,852 10,076
Materials and supplies, at average cost 21,316 20,312
Prepayments and other 20,091 23,576
- ---------------------------------------------------------------------------------------------------
Total current assets 162,728 186,085
===================================================================================================
Regulatory assets 107,144 111,101
Investments and other assets 105,747 99,499
===================================================================================================
Total $1,255,532 $1,266,743
===================================================================================================
CAPITALIZATION AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $474,973 $463,441
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 297,572 306,590
- ---------------------------------------------------------------------------------------------------
Total capitalization 823,745 821,231
===================================================================================================
Current liabilities
Notes payable 14,600 15,000
Commercial paper - 11,500
Accounts payable 61,482 67,483
Accrued taxes 5,445 1,744
Accrued interest 8,130 8,378
Gas refunds 1,211 6,879
Other 20,606 14,668
- ---------------------------------------------------------------------------------------------------
Total current liabilities 111,474 125,652
===================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 130,913 135,958
Accumulated deferred investment credits 29,558 30,447
Regulatory liabilities 52,254 49,924
Environmental remediation liabilities 41,697 41,697
Long-term liabilities 65,891 61,834
- ---------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 320,313 319,860
===================================================================================================
Total $1,255,532 $1,266,743
===================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-6-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
===============================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 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 320,381 308,965
Shares in deferred compensation trust, 6,078 shares at average
cost of $32.23 per share (195) -
ESOP loan guarantees (14,131) (16,346)
Net unrealized security gains (net of taxes) - 1,904
- -----------------------------------------------------------------------------------------------
Total common stock equity 474,973 463,441
===============================================================================================
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 53,100 60,000
7-1/8% 2023 50,000 50,000
- -----------------------------------------------------------------------------------------------
Total 284,175 291,075
Unamortized discount and premium on bonds, net (1,022) (1,066)
- -----------------------------------------------------------------------------------------------
Total first mortgage bonds 283,153 290,009
- -----------------------------------------------------------------------------------------------
ESOP loan guarantees 14,131 16,346
Other long-term debt 288 235
- -----------------------------------------------------------------------------------------------
Total long-term debt 297,572 306,590
===============================================================================================
Total capitalization $823,745 $821,231
===============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-7-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1996 1995
=============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $33,640 $26,104
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 32,540 32,412
Amortization of nuclear fuel and other 15,198 14,334
Deferred income taxes (3,750) (4,430)
Investment tax credit restored (889) (898)
AFUDC equity (70) (74)
Pension income (6,229) (6,142)
Postretirement funding 3,575 3,458
Deferred demand-side management expenditures (3,893) (4,793)
Other, net (1,908) 6,645
Changes in
Customer and other receivables 3,724 5,250
Accrued utility revenues 18,924 10,714
Fossil fuel inventory (1,430) (996)
Gas in storage (776) 7,546
Accounts payable (6,001) (18,572)
Miscellaneous current and accrued liabilities 5,938 15,766
Accrued taxes 3,701 2,389
Gas refunds (5,668) 4,817
- ---------------------------------------------------------------------------------------------
Net cash from operating activities 86,626 93,530
=============================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (40,840) (33,497)
Allowance for borrowed funds used during construction (64) (81)
Decommissioning funding (4,489) (9,285)
Purchase of investments 0 (4,000)
Other (448) (180)
- ---------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (45,841) (47,043)
=============================================================================================
Cash flows from (used for) financing activities
Redemption of first mortgage bonds (6,900) -
Change in notes payable (400) -
Change in commercial paper (11,500) (12,500)
Cash dividends on common stock (22,224) (21,746)
Purchase of deferred compensation stock (195) -
- ---------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (41,219) (34,246)
=============================================================================================
Net increase (decrease) in cash and equivalents (434) 12,241
Cash and equivalents at beginning of period 6,533 13,167
=============================================================================================
Cash and equivalents at end of period $6,099 $25,408
=============================================================================================
Cash paid during period for
Interest, less amount capitalized $10,668 $10,586
Income taxes 17,330 15,264
Preferred stock dividends of subsidiary 1,556 1,556
=============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-8-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
=============================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended
(Thousands) June 30 June 30
1996 1995 1996 1995
=============================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $116,928 $117,418 $239,492 $238,518
Gas 40,271 33,513 118,644 92,873
- -----------------------------------------------------------------------------------------------------------------------------
Total operating revenues 157,199 150,931 358,136 331,391
=============================================================================================================================
Operating expenses
Electric production fuels 24,269 26,388 50,818 50,507
Purchased power 9,233 10,396 16,332 22,477
Gas purchased for resale 28,219 22,859 81,960 60,742
Other operating expenses 38,642 39,258 77,142 74,898
Maintenance 12,525 15,262 21,773 28,538
Depreciation and decommissioning 15,743 15,837 32,012 32,412
Federal income taxes 4,918 2,640 14,902 10,833
Investment tax credit restored (445) (449) (889) (898)
State income taxes 1,492 891 4,676 3,331
Gross receipts and other taxes 6,550 6,366 13,396 12,847
- -----------------------------------------------------------------------------------------------------------------------------
Total operating expenses 141,146 139,448 312,122 295,687
=============================================================================================================================
Operating income 16,053 11,483 46,014 35,704
- -----------------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 33 48 70 73
Other, net 1,761 1,874 3,026 5,889
Income taxes (184) (116) (284) (826)
- -----------------------------------------------------------------------------------------------------------------------------
Total other income 1,610 1,806 2,812 5,136
=============================================================================================================================
Income before interest expense 17,663 13,289 48,826 40,840
- -----------------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 5,696 5,931 11,239 11,862
Other interest 524 606 1,216 1,252
Allowance for borrowed funds used during construction (32) (48) (64) (81)
- -----------------------------------------------------------------------------------------------------------------------------
Total interest expense 6,188 6,489 12,391 13,033
=============================================================================================================================
Net income 11,475 6,800 36,435 27,807
Preferred stock dividend requirements 778 778 1,556 1,556
- -----------------------------------------------------------------------------------------------------------------------------
Earnings on common stock $10,697 $6,022 $34,879 $26,251
=============================================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-9-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1996 1995
===================================================================================================
<S> <C> <C>
ASSETS
- ---------------------------------------------------------------------------------------------------
Utility plant
Electric $1,454,618 $1,441,126
Gas 229,852 228,346
- ---------------------------------------------------------------------------------------------------
Total 1,684,470 1,669,472
Less - Accumulated depreciation and decommissioning 923,812 905,427
- ---------------------------------------------------------------------------------------------------
Total 760,658 764,045
Nuclear decommissioning trusts 90,311 82,109
Construction in progress 10,319 8,463
Nuclear fuel, less accumulated amortization 17,252 14,275
- ---------------------------------------------------------------------------------------------------
Net utility plant 878,540 868,892
===================================================================================================
Current assets
Cash and equivalents 3,473 4,471
Customer and other receivables, net of reserves 60,933 62,156
Accrued utility revenues 18,662 37,586
Fossil fuel, at average cost 10,131 8,701
Gas in storage, at average cost 10,750 9,903
Materials and supplies, at average cost 21,316 20,312
Prepayments and other 19,955 23,526
- ---------------------------------------------------------------------------------------------------
Total current assets 145,220 166,655
===================================================================================================
Regulatory assets 107,144 111,101
Investments and other assets 93,796 86,763
===================================================================================================
Total $1,224,700 $1,233,411
===================================================================================================
CAPITALIZATION AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $447,341 $445,375
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 14,675 6,101
Long-term debt 297,572 306,590
- ---------------------------------------------------------------------------------------------------
Total capitalization 810,788 809,266
===================================================================================================
Current liabilities
Note payable 10,000 10,000
Commercial paper - 11,500
Accounts payable 49,323 52,881
Accrued taxes 3,635 1,744
Accrued interest 8,130 8,378
Gas refunds 1,211 6,879
Other 20,859 12,635
- ---------------------------------------------------------------------------------------------------
Total current liabilities 93,158 104,017
===================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 131,382 136,226
Accumulated deferred investment tax credits 29,558 30,447
Regulatory liabilities 52,254 49,924
Environmental remediation liabilities 41,697 41,697
Long-term liabilities 65,863 61,834
- ---------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 320,754 320,128
===================================================================================================
Total $1,224,700 $1,233,411
===================================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-10-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==============================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 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 292,042 290,387
ESOP loan guarantees (14,131) (16,346)
Net unrealized security gains (net of taxes) - 1,904
- ----------------------------------------------------------------------------------------------
Total common stock equity 447,341 445,375
==============================================================================================
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 6,057 6,101
7.35% 2016 8,618 -
==============================================================================================
14,675 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 53,100 60,000
7-1/8% 2023 50,000 50,000
- ----------------------------------------------------------------------------------------------
Total 284,175 291,075
Unamortized discount and premium on bonds, net (1,022) (1,066)
- ----------------------------------------------------------------------------------------------
Total first mortgage bonds 283,153 290,009
- ----------------------------------------------------------------------------------------------
ESOP loan guarantees 14,131 16,346
Other long-term debt 288 235
- ----------------------------------------------------------------------------------------------
Total long-term debt 297,572 306,590
==============================================================================================
Total capitalization $810,788 $809,266
==============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-11-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1996 1995
=============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $36,435 $27,807
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 32,012 32,412
Amortization of nuclear fuel and other 14,742 14,334
Deferred income taxes (3,549) (4,467)
Investment tax credit restored (889) (898)
AFUDC equity (70) (74)
Pension income (6,229) (6,142)
Postretirement funding 3,575 3,458
Deferred demand-side management expenditures (3,893) (4,793)
Other, net (1,565) 6,343
Changes in
Customer and other receivables 1,223 6,615
Accrued utility revenues 18,924 10,714
Fossil fuel (1,430) (996)
Gas in storage (847) 7,597
Accounts payable (3,558) (19,483)
Miscellaneous current and accrued liabilities 7,976 15,902
Accrued taxes 1,891 2,417
Gas refunds (5,668) 4,817
- ----------------------------------------------------------------------------------------------
Net cash from operating activities 89,080 95,563
==============================================================================================
Cash flows from (used for) investing activities
Construction and nuclear fuel expenditures (40,904) (33,578)
Decommissioning funding (4,489) (9,285)
Other (123) (180)
- ----------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (45,516) (43,043)
==============================================================================================
Cash flows from (used for) financing activities
Redemption of first mortgage bonds (6,900) -
Proceeds of long-term debt from parent 8,618 -
Change in commercial paper (11,500) (12,500)
Preferred stock dividends (1,556) (1,556)
Cash dividends on common stock (33,224) (21,746)
- ----------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (44,562) (35,802)
==============================================================================================
Net increase (decrease) in cash and equivalents (998) 16,718
Cash and equivalents at beginning of period 4,471 3,449
==============================================================================================
Cash and equivalents at end of period $3,473 $20,167
==============================================================================================
Cash paid during period for
Interest, less amount capitalized $10,668 $10,586
Income taxes 18,372 15,249
==============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-12-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Six Months Ended
(Thousands) June 30
1996 1995
=============================================================================================
<S> <C> <C>
Balance at beginning of period $290,387 $280,730
Add Net income 36,435 27,807
- ---------------------------------------------------------------------------------------------
326,822 308,537
- ---------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 1,556 1,556
Dividends declared on common stock 33,224 24,246
- ---------------------------------------------------------------------------------------------
34,780 25,802
- ---------------------------------------------------------------------------------------------
Balance at end of period $292,042 $282,735
=============================================================================================
The accompanying notes are an integral part of these statements.
</TABLE>
-13-
PAGE
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1996
NOTE 1. FINANCIAL INFORMATION
______________________________
The foregoing 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. LONG-TERM DEBT
_______________________
In June 1996, Wisconsin Public Service Corporation repurchased $6.9
million of the 8.80% bond series due in 2021. The repurchase was
funded through short-term borrowings. The repurchase premium and the
unamortized discount from the original issue have been deferred and
will be amortized over approximately a two-year period to correspond
with ratemaking treatment.
-14-
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 98% and 83% of the Company's assets and revenues,
respectively, are derived from Wisconsin Public Service Corporation
("WPSC"), an electric and gas utility.
OVERVIEW OF SECOND QUARTER OF 1996 COMPARED TO SECOND QUARTER OF 1995
Earnings per share increased 75.0% from $.24 in 1995 to $.42 in 1996.
The primary reason for this significant change in earnings is the
conversion of the Kewaunee Nuclear Power Plant ("Kewaunee") from a
12-month fuel cycle to an 18-month fuel cycle at its last refueling
(see purchased power and maintenance expense discussions). Refueling
which used to occur in the second quarter will take place in the
fourth quarter of 1996. These expenses will be incurred in the fourth
quarter of 1996 when Kewaunee is taken off line for refueling, and
will reduce earnings at that time. In 1995, Kewaunee refueling
related expenses were approximately $.11 per share. Another
contributing factor was colder weather with heating degree days and
residential gas consumption increasing 12.5% and 16.1%, respectively.
ELECTRIC OPERATIONS
Electric margins increased by $2.8 million, or 3.5%, due to lower fuel
costs and lower power purchases.
Second Quarter
---------------------------
Electric Margins (000's) 1996 1995
- ------------------------ ---- ----
Revenues $116,928 $117,418
Fuel and purchases 33,502 36,784
------- -------
Margin $ 83,426 $ 80,634
======= =======
Sales in kilowatt-hours (000) 2,673,817 2,683,698
-15-
<PAGE>
Electric revenues decreased $.5 million, or .4%, during the second
quarter of 1996 as compared to the second quarter of 1995.
Residential kilowatt-hour ("Kwh") sales increased 2.4% due to colder
weather. Commercial and industrial Kwh sales rose 1.3% reflecting the
colder weather and customer growth. Wholesale Kwh sales decreased
6.9% due to reduced demand from WPSC's largest wholesale customer.
Electric fuels and purchases decreased $3.3 million, or 8.9%, in the
second quarter of 1996 as compared to the same period in 1995. This
decrease was the result of lower purchased power of $1.2 million, or
11.2%, which relates to the change in the Kewaunee refueling cycle
discussed earlier. In addition to this, coal-fired generation was
down 11.1% due to lower air conditioning load as a result of the
cooler weather. This resulted in a $2.8 million decrease, which was
partially offset by higher nuclear generation of 135.2%, which
resulted in higher fuel expense of $.4 million.
GAS OPERATIONS
Gas margins increased $1.9 million, or 17.5%, due to the colder than
normal weather.
Second Quarter
--------------------------
Gas Margins (000's) 1996 1995
- ------------------- ---- ----
Revenues $64,993 $44,735
Purchase costs 52,335 33,962
------ ------
Margin $12,658 $10,773
====== ======
Volume in therms (000) 261,304 168,244
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 $20.3 million, or 45.3%, during the
second quarter of 1996 compared to the second quarter of 1995. The
$20.3 million increase is a result of colder than normal weather,
customer growth, and higher gas costs as a result of the weather. At
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<PAGE>
WPSC, revenues increased $6.8 million or 20.2%. This reflects
increased residential gas sales volumes of 16.1% resulting from the
colder weather and higher gas costs. In addition, sales at WPS Energy
Services, Inc. ("ESI"), an energy marketing subsidiary, increased by
$13.5 million or 120.3%. 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 $18.4 million, or
54.1%, in the second quarter of 1996 as compared to the same period in
1995. WPSC gas purchases increased $5.4 million due to higher demand
as a result of the weather and higher gas costs, which on average
increased 8.2% per dekatherm. ESI gas purchases increased
$13.0 million as the result of the acquisition discussed above,
customer growth, the weather, and higher gas costs.
OTHER
Maintenance decreased by $2.7 million, or 17.9%, in the second quarter
of 1996 as compared to 1995 due primarily to the shift of Kewaunee
refueling, which was discussed earlier.
Income taxes increased $2.5 million, or 80.5%, in the second quarter
of 1996 compared to the same period in 1995, due primarily to higher
earnings.
OVERVIEW OF SIX MONTHS OF 1996 COMPARED TO SIX MONTHS OF 1995
Earnings per share increased from $1.09 in 1995 to $1.41 in 1996, or
29.4%. The primary reason for this was the conversion of Kewaunee to
an 18-month fuel cycle from a 12-month fuel cycle. This will cause
the shift of maintenance and purchased power expenses to the fourth
quarter of 1996. These delayed expenses will impact earnings at that
time. In 1995, Kewaunee refueling related expenses were approximately
$.11 per share. The other significant factor was colder than normal
weather which resulted in a 16.7% increase in heating degree days.
This increased residential electric and gas consumption 5.3% and
15.9%, respectively.
ELECTRIC OPERATIONS
Electric margins increased by $6.8 million, or 4.1%, due to lower fuel
costs and increased consumption due to the weather in the residential
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<PAGE>
and the commercial and industrial sectors, which are higher margin
sales.
Six Months
--------------------------
Electric Margins (000's) 1996 1995
- ------------------------ ---- ----
Revenues $239,492 $238,518
Fuel and purchases 67,150 72,984
------- -------
Margin $172,342 $165,534
======= =======
Sales in kilowatt-hours (000) 5,411,647 5,444,096
Electric revenues increased $1.0 million, or .4%, during the first six
months of 1996 compared to the first six months of 1995. Residential
sales and commercial and industrial sales rose 5.3% and 1.4%,
respectively, due to colder weather and customer growth. Wholesale
Kwh sales decreased 12.1% due to reduced demand from WPSC's largest
wholesale customer.
Electric fuels and purchases decreased $5.8 million, or 8.0%, in the
first six months of 1996 compared to the first six months of 1995.
This decrease was the result of lower purchased power of $6.1 million,
or 27.3%, reflecting 29.3% lower Kwh purchases. Purchased power
requirements were reduced due to increased production at WPSC's
coal-fired plants. Certain fossil units were down for maintenance in
1995. In addition, purchased power needs were lower in the first six
months of 1996 with the conversion of Kewaunee to an 18-month fuel
cycle. This decrease was offset somewhat by an increase in coal-fired
and nuclear generation of $1.1 million.
GAS OPERATIONS
Gas margins increased $4.3 million, or 13.3% due to the colder than
normal weather.
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<PAGE>
Six Months
--------------------------
Gas Margins (000's) 1996 1995
- ------------------- ---- ----
Revenues $193,282 $111,346
Purchase costs 156,476 78,873
------- -------
Margin $ 36,806 $ 32,473
======= =======
Volume in therms (000) 653,832 429,565
The PSCW allows WPSC to pass on to its customers, through a purchase
gas adjustment clause, changes in the cost of gas.
Gas operating revenues increased $81.9 million, or 73.6%, during the
first six months of 1996 compared to the same period in 1995. The
$81.9 million increase is comprised of colder than normal weather,
customer growth, and higher gas costs as a result of the weather.
Sales at ESI increased by $56.1 million, or 304.0%. 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. In addition, sales at WPSC increased $25.8 million, or
27.7%. This reflects increased gas sales volumes of 11.9% resulting
from the colder weather and the higher cost of gas.
Gas purchased for resale showed a net increase of $77.6 million, or
98.4%, in the first six months of 1996 as compared to the same period
in 1995. WPSC gas purchases increased $21.2 million due to higher
demand as a result of the weather and higher gas costs, which on
average increased 15.1% per dekatherm. ESI gas purchases increased
$56.4 million as the result of the acquisition discussed above,
customer growth, the weather, and higher gas costs.
OTHER
Other operating expenses increased $4.2 million, or 5.6%. There was
an increase in gas operating expenses of $1.2 million as a result of
the colder weather, and an increase of $2.0 million in operating
expense related to the Company's non-utility subsidiaries, ESI and WPS
Power Development, Inc.
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<PAGE>
Maintenance expense decreased by $6.8 million, or 23.7%, in the first
six months of 1996 as compared to 1995 due to lower maintenance
activity at WPSC's coal-fired plants and the shift of Kewaunee
refueling, which was discussed earlier.
Other income decreased $2.8 million, or 46.5%, in the first six months
of 1996 as 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 $3.6 million, or 25.5%, in the first six months
of 1996 as 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 six months of 1996. Pretax interest coverage was 4.8
times for the 12 months ended June 30, 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 Kewaunee.
Replacement is projected for 1999 at a total capital cost estimated to
be approximately $93 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
-20-
<PAGE>
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
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
-21-
<PAGE>
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
recover some or all of its restricted capacity.
(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.
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. WPSC 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 Kewaunee.
In the second quarter of 1996, WPSC repurchased $6.9 million of the
8.80% bond series due in 2021. This repurchase was funded through
short-term borrowings.
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 the first six
months of 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
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<PAGE>
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 environment is not known at this time.
The Financial Accounting Standards Board issued Statement of Financial
Accounting Standards No. 125, Accounting for Transfers and Servicing
of Financial Assets and Extinguishments of Liabilities, in June 1996.
This statement provides standards for asset and liability recognition
when transfers occur. This statement, effective January 1, 1997,
removes provisions for recognizing debt defeasements which may have a
material impact on future financial statements in periods where new
debt is issued to replace existing debt and the existing debt has not
yet been extinguished. At the present time, this new standard is not
expected to materially impact the financial statements.
-23-
PAGE
<PAGE>
Part II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxy voting results at the May 2, 1996 Annual Shareholders' Meeting
are as follows:
For Abstentions Non-Votes Total
---------- ----------- --------- ----------
A. Dean Arganbright 21,430,278 545,273 1,921,411 23,896,962
Sister M. Lois Bush, SSM 21,396,017 579,534 1,921,411 23,896,962
James L. Kemerling 21,424,479 551,072 1,921,411 23,896,962
The following directors also continued in office after the Annual
Shareholders' Meeting:
Michael S. Ariens
Richard A. Bemis
Daniel A. Bollom
Robert C. Gallagher
Kathryn M. Hasselblad-Pascale
Larry L. Weyers
ITEM 5. OTHER INFORMATION
FEDERAL REGULATORY MATTERS
In April, the Federal Energy Regulatory Commission ("FERC") issued two
final orders intended to create a more competitive wholesale electric
power market. The first order, Order 888, requires: (1) utilities,
like Wisconsin Public Service Corporation ("WPSC"), that own, control,
or operate transmission lines to file non-discriminatory open access
tariffs which offer others the same transmission service that the
owners of transmission systems provide to themselves, (2) owners of
transmission systems to buy and sell transmission services using their
own tariffs, (3) FERC jurisdiction over the rates, terms, and
conditions of unbundled retail transmission in interstate commerce,
and (4) using a FERC procedure for the full recovery of stranded
costs. Thus, utilities are given the opportunity to recover
legitimate and verifiable wholesale stranded costs that were prudently
-24-
<PAGE>
incurred to serve electric customers and that could go unrecovered if
wholesale customers use open access to move to other electric energy
suppliers. Recovery would occur by computing those costs on a
revenues lost basis and directly assigning them to departing
customers.
Additionally, although FERC did not mandate independent system
operators (ISOs) for transmission systems in the 888 Order, they are
encouraging the formation of "properly-structured ISOs" and have set
out principles that FERC will use in assessing ISO proposals that may
be considered by the Commission in the future.
WPSC advocates open access transmission. WPSC has been a leader in
the development of open-access tariffs and has had a FERC-approved
transmission access tariff since 1990.
The second order, Order 889, requires utilities to establish
electronic systems to share information about available transmission
capacity and establishes standards of conduct to ensure that
transmission owners and their affiliates do not have an unfair
competitive advantage in using their transmission systems to sell
power. The order also requires companies to separate their
transmission operations and reliability functions from their
marketing/merchant functions.
STATE REGULATORY MATTERS
In the Wisconsin jurisdiction, as part of a generic review of electric
industry restructuring, four ISO proposals have been submitted to the
Public Service Commission of Wisconsin ("PSCW") for their
consideration. In August, the PSCW is expected to decide whether to
condition the utility mergers in the state with an ISO provision or
divestiture of utility-owned transmission systems to mitigate market
power. WPSC generally supports and is an active participant in
restructuring plans. WPSC agrees that transmission should be
functionally separated from generation and has taken significant steps
to separate its personnel, processes, and systems between generation
and transmission. But, WPSC believes it is unnecessary to force
divestiture of transmission systems. WPSC is working with other state
and regional utilities on the development of ISO proposals for the
state and the region.
-25-
<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
-26-
<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: July 26, 1996 /s/ P. D. Schrickel
________________________________
P. D. Schrickel
Vice President
(Duly Authorized Officer and
Principal Financial Officer)
-27-
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: July 26, 1996 /s/ P. D. Schrickel
________________________________
P. D. Schrickel
Senior Vice President -
Finance and Corporate Services
(Duly Authorized Officer and
Principal Financial Officer)
-28-
PAGE
<PAGE>
WPS RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED JUNE 30, 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
-29-
<PAGE>
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<ARTICLE> UT EXHIBIT 27
<CIK> 0000107833
<NAME> WISCONSIN PUBLIC SERVICE CORPORATION
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<TOTAL-OPERATING-EXPENSES> 312,122
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<EARNINGS-AVAILABLE-FOR-COMM> 34,879
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