______________________________________________________________________________
______________________________________________________________________________
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, 1998
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
920-433-1466
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
920-433-1466
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
August 12, 1998
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
August 12, 1998
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1998
CONTENTS
Page
FORWARD-LOOKING STATEMENTS 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 - 16
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation and
Wisconsin Public Service Corporation 17 - 26
PART II. OTHER INFORMATION
Item 1. Legal Proceedings 27
Item 4. Submission of Matters to a Vote of Security Holders 27
Item 5. Other Information 27 - 31
Item 6. Exhibits and Reports on Form 8-K 32
Signatures 33 - 34
-2-
<PAGE>
EXHIBIT INDEX 35
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>
FORWARD-LOOKING STATEMENTS
This report includes forward-looking statements within the meaning of
Section 21E of the Securities Exchange Act of 1934, as amended. The
statements speak of plans, goals, beliefs, or expectations of WPS Resources
Corporation ("WPSR") and Wisconsin Public Service Corporation ("WPSC"), refer
to estimates, or use similar terms. Although WPSR and WPSC believe that their
expectations are based on reasonable assumptions, actual results may differ
materially from those in the forward-looking statements included in this
report for reasons that include: the speed and degree to which competition
enters the electric and natural gas industries; state and federal legislative
and regulatory initiatives that increase competition, affect cost and
investment recovery, and have an impact on rate structures; the economic
climate and industrial, commercial, and residential growth in areas served by
WPSC and WPS Energy Services, Inc. ("ESI") (WPSR's wholly-owned nonregulated
energy marketing subsidiary); the weather and other natural phenomena; the
timing and extent of changes in commodity prices and interest rates;
conditions in the capital markets; and growth in opportunities for ESI and
WPS Power Development, Inc. (WPSR's wholly-owned nonregulated electric power
development and energy service subsidiary).
A forward-looking statement speaks only as of the date on which such
statement is made, and neither WPSR nor WPSC undertakes to update any
forward-looking statement to reflect events or circumstances after the date on
which such statement is made or to reflect the occurrence of unanticipated
events which affect such forward-looking statements. New factors emerge from
time to time, and it is not possible for WPSR or WPSC to predict all such
factors, nor can it assess the impact of each such factor or the extent to
which any factor, or combination of factors, may cause results to differ
materially from those contained in any forward-looking statement.
-4-
<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
1998 1997 1998 1997
======================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric utility $125,058 $118,263 $237,864 $241,227
Gas utility 24,388 39,326 89,872 123,906
Nonregulated energy and other 70,174 33,771 168,693 89,240
- ----------------------------------------------------------------------------------------------------------------------
Total operating revenues 219,620 191,360 496,429 454,373
======================================================================================================================
Operating expenses
Electric production fuels 26,771 24,506 52,389 51,651
Purchased power 11,991 14,901 20,156 29,057
Gas purchased for resale 12,989 25,980 55,999 87,493
Nonregulated energy cost of sales 68,207 32,251 164,695 86,611
Other operating expenses 37,949 38,057 73,677 76,292
Maintenance 15,596 13,409 25,534 22,877
Depreciation and decommissioning 19,818 19,716 39,933 37,643
Taxes other than income 6,769 6,920 13,581 13,859
- ----------------------------------------------------------------------------------------------------------------------
Total operating expenses 200,090 175,740 445,964 405,483
======================================================================================================================
Operating income 19,530 15,620 50,465 48,890
- ----------------------------------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 39 33 68 68
Other, net 1,599 5,564 3,903 6,712
- ----------------------------------------------------------------------------------------------------------------------
Total other income 1,638 5,597 3,971 6,780
======================================================================================================================
Income before interest expense 21,168 21,217 54,436 55,670
- ----------------------------------------------------------------------------------------------------------------------
Interest on long-term debt 5,359 5,655 10,757 11,179
Other interest 774 562 1,503 1,590
Allowance for borrowed funds used during construction (27) (30) (38) (64)
- ----------------------------------------------------------------------------------------------------------------------
Total interest expense 6,106 6,187 12,222 12,705
======================================================================================================================
Income before income taxes 15,062 15,030 42,214 42,965
Income taxes 4,408 4,866 13,893 14,069
Minority interest (3) (185) (215) (466)
Preferred stock dividends of subsidiary 778 778 1,556 1,556
- ----------------------------------------------------------------------------------------------------------------------
Net income 9,879 9,571 26,980 27,806
- ----------------------------------------------------------------------------------------------------------------------
Other comprehensive income - - - -
- ----------------------------------------------------------------------------------------------------------------------
Comprehensive income 9,879 9,571 26,980 27,806
======================================================================================================================
Retained earnings at beginning of period 325,165 318,678 319,654 311,794
Cash dividends on common stock 11,590 11,351 23,180 22,702
- ----------------------------------------------------------------------------------------------------------------------
Retained earnings at end of period $323,454 $316,898 $323,454 $316,898
======================================================================================================================
Average shares of common stock 23,858 23,875 23,860 23,878
Basic and diluted earnings per average share of common stock $0.41 $0.40 $1.13 $1.16
Dividend per share of common stock $0.485 $0.475 $0.970 $0.950
======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
======================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1998 1997
======================================================================================================
<S> <C> <C>
ASSETS
- ------------------------------------------------------------------------------------------------------
Utility plant
Electric $1,520,020 $1,506,470
Gas 255,426 251,603
- ------------------------------------------------------------------------------------------------------
Total 1,775,446 1,758,073
Less - Accumulated depreciation and decommissioning 1,077,989 1,032,149
- ------------------------------------------------------------------------------------------------------
Total 697,457 725,924
Nuclear decommissioning trusts 153,151 134,108
Construction in progress 14,430 7,266
Nuclear fuel, less accumulated amortization 16,334 19,062
- ------------------------------------------------------------------------------------------------------
Net utility plant 881,372 886,360
======================================================================================================
Current assets
Cash and equivalents 56,929 6,424
Customer and other receivables, net of reserves 84,969 87,709
Accrued utility revenues 18,821 30,750
Fossil fuel, at average cost 12,978 10,336
Gas in storage, at average cost 12,690 22,080
Materials and supplies, at average cost 19,573 18,793
Prepayments and other 23,595 20,499
- ------------------------------------------------------------------------------------------------------
Total current assets 229,555 196,591
======================================================================================================
Regulatory assets 72,387 78,544
Net nonutility and nonregulated plant 28,581 19,194
Investments and other assets 127,554 118,913
======================================================================================================
Total $1,339,449 $1,299,602
======================================================================================================
CAPITALIZATION AND LIABILITIES
- ------------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 483,487 $ 477,823
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 251,989 304,008
- ------------------------------------------------------------------------------------------------------
Total capitalization 786,676 833,031
======================================================================================================
Current liabilities
Notes payable and current maturities of long-term debt 60,511 10,000
Commercial paper 55,668 20,706
Accounts payable 74,924 85,651
Accrued taxes 1,347 3,514
Accrued interest 7,801 7,801
Other 18,726 9,536
- ------------------------------------------------------------------------------------------------------
Total current liabilities 218,977 137,208
======================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 123,899 125,804
Accumulated deferred investment credits 26,030 26,901
Regulatory liabilities 53,454 50,279
Environmental remediation liabilities 39,359 40,215
Other long-term liabilities 91,054 86,164
- ------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 333,796 329,363
======================================================================================================
Minority interest
======================================================================================================
Total $1,339,449 $1,299,602
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
======================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 December 31
(Thousands, except share amounts) 1998 1997
======================================================================================================
<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 323,454 319,654
Shares in deferred compensation trust, 40,970 and 33,430 shares
at average cost of $29.67 and $28.44 per share at
June 30, 1998 and December 31, 1997, respectively (1,216) (951)
ESOP loan guarantees (7,669) (9,798)
- ------------------------------------------------------------------------------------------------------
Total common stock equity 483,487 477,823
======================================================================================================
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
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 53,100
7-1/8% 2023 50,000 50,000
- ------------------------------------------------------------------------------------------------------
Total 234,175 284,175
Unamortized discount and premium on bonds, net (846) (890)
- ------------------------------------------------------------------------------------------------------
Total first mortgage bonds 233,329 283,285
- ------------------------------------------------------------------------------------------------------
ESOP loan guarantees 7,669 9,798
Notes payable to bank, secured by nonregulated plant 10,802 10,710
Other long-term debt 189 215
- ------------------------------------------------------------------------------------------------------
Total long-term debt 251,989 304,008
======================================================================================================
Total capitalization $786,676 $833,031
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1998 1997
============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $ 26,980 $ 27,806
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 39,933 37,643
Amortization of nuclear fuel and other 8,482 4,432
Deferred income taxes (3,787) (3,038)
Investment tax credit restored (871) (884)
Allowance for equity funds used during construction (68) (68)
Pension income (4,597) (6,182)
Postretirement funding 1,997 2,494
Deferred demand-side management expenditures - (5)
Other, net (2,175) 5,927
Changes in
Customer and other receivables 2,740 26,115
Accrued utility revenues 11,929 16,986
Fossil fuel inventory (2,642) (3,452)
Gas in storage 9,390 8,296
Accounts payable (10,727) (26,918)
Miscellaneous current and accrued liabilities 8,231 6,226
Accrued taxes (2,167) (537)
Gas refunds 959 17
- --------------------------------------------------------------------------------------------
Net cash from operating activities 83,607 94,858
============================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (29,393) (29,480)
Purchase of other property and equipment (10,216) (301)
Decommissioning funding (7,883) (7,439)
Purchase of investments and acquisitions - 617
Other 1,785 (497)
- --------------------------------------------------------------------------------------------
Net cash used for investing activities (45,707) (37,100)
============================================================================================
Cash flows from (used for) financing activities
Issuance of notes payable 52,711 48,160
Redemptions of notes payable (52,200) (61,860)
Issuance of other long-term debt 651 1,173
Redemptions of other long-term debt (74) -
Issuance of commercial paper 733,488 380,851
Redemptions of commercial paper (698,526) (404,601)
Cash dividends on common stock (23,180) (22,702)
Purchase of deferred compensation stock (265) (288)
- --------------------------------------------------------------------------------------------
Net cash from (used for) financing activities 12,605 (59,267)
============================================================================================
Net increase (decrease) in cash and equivalents 50,505 (1,509)
Cash and equivalents at beginning of period 6,424 5,978
============================================================================================
Cash and equivalents at end of period $ 56,929 $ 4,469
============================================================================================
Cash paid during period for
Interest, less amount capitalized $ 11,225 $ 11,385
Income taxes 15,046 19,820
Preferred stock dividends of subsidiary 1,556 1,556
============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-8-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=======================================================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Six Months Ended
(Thousands) June 30 June 30
1998 1997 1998 1997
=======================================================================================================================
<S> <C> <C> <C> <C>
Operating revenues
Electric $125,058 $118,263 $237,864 $241,227
Gas 24,388 39,326 89,872 123,906
- -----------------------------------------------------------------------------------------------------------------------
Total operating revenues 149,446 157,589 327,736 365,133
=======================================================================================================================
Operating expenses
Electric production fuels 26,771 24,506 52,389 51,651
Purchased power 11,991 14,901 20,156 29,057
Gas purchased for resale 12,940 25,896 55,334 87,409
Other operating expenses 34,708 34,300 67,223 68,303
Maintenance 15,596 13,409 25,534 22,877
Depreciation and decommissioning 19,316 19,287 38,958 36,815
Federal income taxes 4,425 3,534 12,721 12,204
Investment tax credit restored (435) (442) (871) (884)
State income taxes 1,560 1,143 3,817 3,913
Gross receipts tax and other 6,737 6,894 13,523 13,825
- -----------------------------------------------------------------------------------------------------------------------
Total operating expenses 133,609 143,428 288,784 325,170
=======================================================================================================================
Operating income 15,837 14,161 38,952 39,963
- -----------------------------------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds used during construction 39 33 68 68
Other, net 2,426 5,378 4,246 6,784
Income taxes (153) (1,483) (434) (1,515)
- -----------------------------------------------------------------------------------------------------------------------
Total other income and (deductions) 2,312 3,928 3,880 5,337
=======================================================================================================================
Income before interest expense 18,149 18,089 42,832 45,300
- -----------------------------------------------------------------------------------------------------------------------
Interest expense
Interest on long-term debt 5,430 5,634 10,910 11,268
Other interest 545 493 1,090 1,347
Allowance for borrowed funds used during construction (27) (30) (38) (64)
- -----------------------------------------------------------------------------------------------------------------------
Total interest expense 5,948 6,097 11,962 12,551
=======================================================================================================================
Net income 12,201 11,992 30,870 32,749
Preferred stock dividend requirements 778 778 1,556 1,556
- -----------------------------------------------------------------------------------------------------------------------
Earnings on common stock 11,423 11,214 29,314 31,193
- -----------------------------------------------------------------------------------------------------------------------
Other comprehensive income - - - -
- -----------------------------------------------------------------------------------------------------------------------
Comprehensive income $ 11,423 $ 11,214 $ 29,314 $ 31,193
=======================================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-9-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
==================================================================================================
CONSOLIDATED BALANCE SHEETS June 30 December 31
(Thousands) 1998 1997
==================================================================================================
<S> <C> <C>
ASSETS
- --------------------------------------------------------------------------------------------------
Utility plant
Electric $1,520,020 $1,506,470
Gas 255,426 251,603
- --------------------------------------------------------------------------------------------------
Total 1,775,446 1,758,073
Less - Accumulated depreciation and decommissioning 1,077,989 1,032,149
- --------------------------------------------------------------------------------------------------
Total 697,457 725,924
Nuclear decommissioning trusts 153,151 134,108
Construction in progress 14,430 7,266
Nuclear fuel, less accumulated amortization 16,334 19,062
- --------------------------------------------------------------------------------------------------
Net utility plant 881,372 886,360
==================================================================================================
Current assets
Cash and equivalents 55,312 3,921
Customer and other receivables, net of reserves 53,368 55,893
Accrued utility revenues 18,821 30,750
Fossil fuel, at average cost 12,827 9,964
Gas in storage, at average cost 10,650 17,194
Materials and supplies, at average cost 19,573 18,793
Prepayments and other 23,176 20,155
- --------------------------------------------------------------------------------------------------
Total current assets 193,727 156,670
==================================================================================================
Regulatory assets 72,387 78,544
Net nonutility plant 2,946 2,972
Investments and other assets 118,232 109,408
==================================================================================================
Total $1,268,664 $1,233,954
==================================================================================================
CAPITALIZATION AND LIABILITIES
- --------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 499,384 $ 457,121
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 14,194 14,321
Long-term debt 241,187 293,298
- --------------------------------------------------------------------------------------------------
Total capitalization 805,965 815,940
==================================================================================================
Current liabilities
Note payable and current maturities of long-term debt 60,000 10,000
Commercial paper - 15,500
Accounts payable 47,068 46,453
Accrued taxes 1,347 3,514
Accrued interest 7,801 7,801
Other 16,715 10,049
- --------------------------------------------------------------------------------------------------
Total current liabilities 132,931 93,317
==================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 126,603 127,512
Accumulated deferred investment tax credits 26,030 26,901
Regulatory liabilities 53,454 50,279
Environmental remediation liabilities 39,359 40,215
Other long-term liabilities 84,322 79,790
- --------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 329,768 324,697
==================================================================================================
Total $1,268,664 $1,233,954
==================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-10-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
========================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION June 30 December 31
(Thousands, except share amounts) 1998 1997
========================================================================================================
<S> <C> <C>
Common stock equity
Common stock $ 95,588 $ 95,588
Premium on capital stock 107,842 73,842
Retained earnings 303,623 297,489
ESOP loan guarantees (7,669) (9,798)
- --------------------------------------------------------------------------------------------------------
Total common stock equity 499,384 457,121
========================================================================================================
Preferred stock
Cumulative, $100 par value, 1,000,000 shares authorized;
with no mandatory redemption
Series Shares Outstanding
------ ------------------
5.00% 132,000 13,200 13,200
5.04% 30,000 3,000 3,000
5.08% 50,000 5,000 5,000
6.76% 150,000 15,000 15,000
6.88% 150,000 15,000 15,000
- --------------------------------------------------------------------------------------------------------
Total preferred stock 51,200 51,200
========================================================================================================
Long-term debt to parent
Series Year Due
------ --------
8.76% 2015 5,863 5,914
7.35% 2016 8,331 8,407
- --------------------------------------------------------------------------------------------------------
Total long-term debt to parent 14,194 14,321
========================================================================================================
Long-term debt
First mortgage bonds
Series Year Due
------ --------
5-1/4% 1998 - 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 53,100
7-1/8% 2023 50,000 50,000
- --------------------------------------------------------------------------------------------------------
Total 234,175 284,175
Unamortized discount and premium on bonds, net (846) (890)
- --------------------------------------------------------------------------------------------------------
Total first mortgage bonds 233,329 283,285
- --------------------------------------------------------------------------------------------------------
ESOP loan guarantees 7,669 9,798
Other long-term debt 189 215
- --------------------------------------------------------------------------------------------------------
Total long-term debt 241,187 293,298
========================================================================================================
Total capitalization $805,965 $815,940
========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-11-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Six Months Ended
(Thousands) June 30
1998 1997
============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $ 30,870 $ 32,749
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 38,958 36,815
Amortization of nuclear fuel and other 8,478 4,432
Deferred income taxes (2,791) (2,766)
Investment tax credit restored (871) (884)
Allowance for equity funds used during construction (68) (68)
Pension income (4,597) (6,182)
Postretirement funding 1,997 2,494
Deferred demand-side management expenditures - (5)
Other, net 898 5,721
Changes in
Customer and other receivables 2,525 2,713
Accrued utility revenues 11,929 16,926
Fossil fuel inventory (2,863) (3,178)
Gas in storage 6,544 5,983
Accounts payable 615 (9,423)
Miscellaneous current and accrued liabilities 2,755 6,297
Accrued taxes (2,167) (537)
Gas refunds 959 17
- --------------------------------------------------------------------------------------------
Net cash from operating activities 93,171 91,104
============================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (29,393) (29,480)
Decommissioning funding (7,883) (7,439)
Purchase of other property and equipment - (94)
Other 1,732 770
- --------------------------------------------------------------------------------------------
Net cash used for investing activities (35,544) (36,243)
============================================================================================
Cash flows from (used for) financing activities
Proceeds from issuance of commercial paper 47,000 116,600
Redemptions of commercial paper (62,500) (138,000)
Equity infusion from parent 34,000 -
Preferred stock dividends (1,556) (1,556)
Common stock dividends (23,180) (32,703)
- --------------------------------------------------------------------------------------------
Net cash used for financing activities (6,236) (55,659)
============================================================================================
Net increase (decrease) in cash and equivalents 51,391 (798)
Cash and equivalents at beginning of period 3,921 4,165
============================================================================================
Cash and equivalents at end of period $ 55,312 $ 3,367
============================================================================================
Cash paid during period for
Interest, less amount capitalized $ 10,684 $ 11,135
Income taxes 15,937 23,561
============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-12-
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
============================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Six Months Ended
(Thousands) June 30
1998 1997
============================================================================================
<S> <C> <C>
Balance at beginning of period $297,489 $291,740
Add Net income 30,870 32,749
- --------------------------------------------------------------------------------------------
328,359 324,489
- --------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 1,556 1,556
Dividends declared on common stock 23,180 32,703
- --------------------------------------------------------------------------------------------
24,736 34,259
- --------------------------------------------------------------------------------------------
Balance at end of period $303,623 $290,230
============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
JUNE 30, 1998
NOTE 1. FINANCIAL INFORMATION
______________________________
The foregoing consolidated financial statements have been prepared by
WPS Resources Corporation ("WPSR") 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. WPSR and
WPSC believe that the disclosures made are adequate to make the information
presented not misleading. These financial statements should be read in
conjunction with the financial statements and notes thereto included in WPSR's
and WPSC's latest annual report on Form 10-K.
Because of the seasonal nature of WPSC's operations, interim results are not
necessarily indicative of annual results.
NOTE 2. SEGMENT DISCLOSURES
____________________________
In June 1997, the Financial Accounting Standards Board ("FASB") issued
Statement of Financial Accounting Standards ("SFAS") No. 131, "Disclosures
about Segments of an Enterprise and Related Information." This statement
establishes standards for reporting information about operating segments and
is effective for periods beginning after December 15, 1997. WPSR will be
adopting the requirements of this statement at year-end 1998, has not yet
determined the segments which will be disclosed, and has not yet determined
the impact of adopting this statement.
NOTE 3. DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
______________________________________________________
In June 1998, the FASB issued SFAS No. 133, "Accounting for Derivative
Instruments and Hedging Activities." This statement requires all derivatives
to be measured at fair value and recognized as either assets or liabilities in
the statement of financial position. The accounting for changes in the fair
value of a derivative is dependent upon the use of the derivative and its
resulting designation. Unless specific hedge accounting criteria are met,
changes in the derivative's fair value must be recognized currently in
earnings. This statement is effective for fiscal periods beginning after
June 15, 1999. WPSR will be adopting the requirements of this statement on
January 1, 2000, and has not yet determined the method of adoption or its
impact. However, the requirements of this statement could increase volatility
in earnings and other comprehensive income.
-14-
<PAGE>
NOTE 4. INTERNALLY-DEVELOPED SOFTWARE
______________________________________
In March 1998, the American Institute of Certified Public Accountants
("AICPA") issued Statement of Position 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This statement
requires the capitalization of certain costs related to software developed or
obtained for internal use. The statement is effective for periods beginning
after December 15, 1998. WPSR will be adopting the requirements of this
statement in 1999. While the total impact of WPSR's adoption of this
statement has not been determined, WPSC's adoption of this statement is
expected to result in a reduction in operating expenses which will be
considered in the ratemaking process.
NOTE 5. COSTS OF START-UP ACTIVITIES
_____________________________________
In April 1998, the AICPA issued Statement of Position 98-5, "Reporting on the
Costs of Start-up Activities." This statement provides guidance on the
financial reporting of start-up costs and organization costs. Costs of
start-up activities and organization costs are required to be expensed as
incurred. The statement is effective for periods beginning after December 15,
1998. WPSR will be adopting the requirements of this statement in 1999 and
does not anticipate any material impact to its financial statements.
NOTE 6. AGREEMENT TO MERGE WITH UPPER PENINSULA ENERGY CORPORATION
___________________________________________________________________
On July 10, 1997, WPSR announced an agreement to merge with Upper Peninsula
Energy Corporation ("UPEN"). The S-4 Registration Statement was declared
effective by the SEC on December 5, 1997. The shareholders of UPEN approved
the merger on January 29, 1998. The merger was approved by the Federal Energy
Regulatory Commission ("FERC") on May 27, 1998. On July 9, 1998, the Federal
Trade Commission granted early termination of the waiting period applicable to
the merger under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.
The merger remains subject to (1) approval by the SEC under the Public Utility
Holding Company Act of 1935; (2) receipt by the parties of an opinion of
counsel that the exchange of stock qualifies as a tax-free transaction;
(3) receipt by the parties of appropriate assurances that the transaction will
be accounted for as a pooling of interests; and (4) the satisfaction of
various other conditions. The merger is expected to be completed in the
second half of 1998. UPEN will merge with and into WPSR, and Upper Peninsula
Power Company ("UPPCO"), UPEN's utility subsidiary, will become a wholly-owned
subsidiary of WPSR.
The summary below contains selected unaudited pro forma financial data for the
three months and six months ended June 30, 1998. The financial data should be
read in conjunction with the historical WPSR and UPEN consolidated financial
statements and related notes. The pro forma combined earnings per share
reflect the issuance of shares associated with the merger agreement and the
related dilutive effect. The pro forma combined data accounts for the merger
as a pooling of interests.
Under the terms of the merger agreement, each of the 2,950,001 outstanding
shares of UPEN common stock (no par value) will be converted into 0.90 shares
-15-
<PAGE>
of WPSR common stock ($1.00 par value), subject to adjustment for fractional
shares.
<TABLE>
<CAPTION>
===============================================================================================
Pro Forma
WPSR UPEN Combined
(In thousands, except per share data) (as reported) (as reported) (unaudited)
- -----------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three months ended June 30, 1998
Operating revenues $ 219,620 $ 13,889 $ 233,509
Net income $ 9,879 $ 586 $ 10,465
Basic and diluted earnings per share $0.41 $0.20 $0.39
Six months ended June 30, 1998
Operating revenues $ 496,429 $ 29,462 $ 525,891
Net income $ 26,980 $ 1,437 $ 28,417
Basic and diluted earnings per share $1.13 $0.49 $1.07
At June 30, 1998
Assets $1,339,449 $134,662 $1,473,871
Long-term obligations $ 251,989 $ 42,806 $ 294,795
===============================================================================================
</TABLE>
-16-
<PAGE>
<PAGE>
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
WPSR is a holding company. Approximately 95% of WPSR's assets at
June 30, 1998 and approximately 66% of its revenues and all of its net income
for the first six months of 1998 were derived from WPSC, an electric and gas
utility. WPSR's wholly-owned subsidiaries include a regulated utility, WPSC,
and two nonregulated subsidiaries, WPS Energy Services, Inc. ("ESI") and
WPS Power Development, Inc. ("PDI").
SECOND QUARTER 1998 COMPARED WITH SECOND QUARTER 1997
WPS RESOURCES CORPORATION OVERVIEW
WPSR total operating revenues increased from $191.4 million in the second
quarter of 1997 to $219.6 million in the second quarter of 1998, or 14.7%.
Net income increased 3.1%, from $9.6 million in 1997 to $9.9 million in 1998.
Basic and diluted earnings per share increased 2.5%, from $.40 in 1997 to $.41
in 1998. The primary reasons for the increase in earnings were increased
electric utility margins as a result of increased prices during a period of
abnormally warm weather in the latter part of the second quarter of 1998 and
an increase in the nonregulated gas and electric margins. Partially
offsetting this increase in earnings were a decrease in other income due to
gains on sales of nonutility property which had occurred in the second quarter
of 1997, an increase in nuclear plant maintenance expenses, and a decrease in
utility gas margins.
Earnings on common stock of WPSC were $11.4 million in the second quarter of
1998 and $11.2 million in the same period of 1997. Nonregulated losses were
$1.5 million in 1998 and $1.6 million in 1997.
WISCONSIN PUBLIC SERVICE CORPORATION OVERVIEW
Revenues at WPSC were $149.4 million in 1998 compared with $157.6 million in
1997, a decrease of 5.2%. Earnings on common stock increased 1.8% from
$11.2 million in 1997 to $11.4 million in 1998. The primary reason for the
increase in earnings on common stock at WPSC was an increase in electric
margins as described above. Partially offsetting this increase in electric
margins was a decrease in other income, an increase in nuclear plant
maintenance expenses, and a decrease in gas margins.
ELECTRIC UTILITY OPERATIONS
Electric margins increased $7.4 million, or 9.4%, as the result of increased
revenues from wholesale customers during a period of abnormally warm weather
in the second quarter of 1998.
-17-
<PAGE>
Second Quarter
------------------------------
Electric Margins (000's) 1998 1997
- ------------------------ ---- ----
Revenues $125,058 $118,263
Fuel and purchased power 38,762 39,407
------- -------
Margin $ 86,296 $ 78,856
======= =======
Sales in kilowatt-hours (000) 2,796,853 2,719,481
Electric revenues increased $6.8 million, or 5.7%, due largely to increased
revenues of $5.3 million from wholesale customers and $2.3 million from
commercial and industrial customers as a result of increased prices to
wholesale and interruptible buy-through customers during the second quarter of
1998 when cooling degree days increased 137.1%, from 70 cooling degree days in
1997 to 166 cooling degree days in 1998. Included in 1998 second quarter
electric revenues are $3.8 million of surcharge revenues related to recovery
of the deferred costs of the 1997 steam generator repairs at WPSC's
Kewaunee Nuclear Power Plant ("Kewaunee"). WPSC is the operator and 41.2%
owner of Kewaunee. Partially offsetting the increase in revenues from
wholesale customers was a $1.0 million refund of transmission revenues as the
result of a FERC settlement related to open access transmission tariff rates.
Electric production fuel expense increased $2.3 million, or 9.2%, as a result
of increased nuclear fuel expense of $1.7 million and increased steam fuel
expense of $0.4 million reflecting higher energy demands in the second quarter
of 1998 due to warmer weather. Higher nuclear fuel expense in the second
quarter of 1998 also resulted because Kewaunee was out of service in the
second quarter of 1997 due to an extended outage to repair steam generators.
Purchased power expense decreased $2.9 million, or 19.5%, due to decreased
purchase requirements in the second quarter of 1998. Purchase requirements in
the second quarter of 1997 were high due to lack of production at Kewaunee as
a result of an extended outage.
GAS UTILITY OPERATIONS
Gas margins decreased $1.9 million in the second quarter of 1998, or 14.6%,
due primarily to lower therm sales of 15.1%.
-18-
<PAGE>
Second Quarter
-----------------------------
Gas Margins (000's) 1998 1997
- ------------------- ---- ----
Revenues $24,388 $39,326
Purchase costs 12,989 25,980
------ ------
Margin $11,399 $13,346
====== ======
Volume in therms (000) 113,925 134,194
Gas operating revenues decreased $14.9 million, or 38.0%. This decrease was
due to lower therm sales as a result of unusually mild spring weather in the
first half of the second quarter of 1998. Also contributing to the decrease
in gas operating revenues in the second quarter of 1998 was a reduction in
revenues of $7.5 million for refunds from ANR Pipeline Company which WPSC
passed on to its gas customers.
Gas purchase costs decreased $13.0 million, or 50.0%. This decrease was due
to reduced customer demand as a result of mild weather during the second
quarter of 1998. Also contributing to the decrease in gas costs was a
$7.5 million refund from ANR Pipeline Company which was credited to gas
expense. Under current regulatory practice, the Public Service Commission of
Wisconsin ("PSCW") allows WPSC to pass changes in the cost of gas on to
customers through a purchased gas adjustment clause ("PGAC").
OTHER UTILITY EXPENSES/INCOME
Other operating expenses at WPSC increased $0.4 million, or 1.2%, due
primarily to increased benefit costs.
Maintenance expense increased $2.2 million, or 16.3%, as a result of increased
expenses at Kewaunee. This increase was due to the recognition of 1997
deferred expenses for Kewaunee steam generator repairs in the second quarter
of 1998. The PSCW approved deferral of the repairs in 1997, the cost of which
has been collected in the second quarter of 1998 through a $3.8 million
electric revenue surcharge.
Other income decreased $3.0 million, or 54.9%, due primarily to gains on sales
of nonutility property which occurred in the second quarter of 1997. These
gains represented an increase in 1997 second quarter earnings of approximately
$0.07 per share.
OVERVIEW OF NONREGULATED OPERATIONS
Nonregulated operations primarily consist of the gas and electric sales of
ESI, an energy marketing subsidiary. Nonregulated operations also include
those of PDI which participates in the development of electric generation
projects, invests in generating projects, and provides services to the
electric power generation industry. Nonregulated operations experienced a
loss of $1.5 million in the second quarter of 1998 compared with a loss of
$1.6 million in the second quarter of 1997. Although nonregulated margins
-19-
<PAGE>
continue to be positive, losses are being experienced due to gas trading
losses and expenses associated with the expansion of customer base.
NONREGULATED MARGINS
Gas margins at ESI increased $0.5 million from $0.4 million in the second
quarter of 1997 to $0.9 million in the second quarter of 1998. Electric
margins at ESI increased $0.2 million from $0.4 million in 1997 to
$0.6 million in 1998.
Nonregulated energy and other operating revenues increased $36.4 million, or
107.7%, from $33.8 million in 1997 to $70.2 million in 1998. The increase in
nonregulated energy revenues consisted largely of increased gas revenues at
ESI of $35.6 million, or 119.4%, as a result of sales volume growth and
expansion to additional geographical areas. Electric revenues at ESI
increased $1.0 million, or 30.8%, also as a result of sales volume growth.
Revenues at PDI decreased $0.1 million due to lower project revenues.
Nonregulated energy cost of sales increased from $32.3 million in 1997 to
$68.2 million in 1998, an increase of $35.9 million, or 111.1%. This increase
was due primarily to increased gas purchases and purchased power of
$35.1 million and $0.7 million, respectively, at ESI as a result of customer
growth.
OTHER NONREGULATED EXPENSES/INCOME
Other nonregulated operating expenses decreased $0.5 million, or 13.8%. Other
operating expenses at ESI increased $0.1 million, or 6.9%, due to expansion of
the business. Other operating expenses at PDI decreased $0.4 million, or
35.1%, due to lower project expenses. Operating expenses decreased
$0.2 million at WPSR.
Other income (losses) at the nonregulated subsidiaries included gas trading
losses at ESI of $1.2 million in the second quarter of 1998 compared with gas
trading gains of $0.1 million in the second quarter of 1997.
SIX MONTHS 1998 COMPARED WITH SIX MONTHS 1997
WPS RESOURCES CORPORATION OVERVIEW
Revenues at WPSR increased from $454.4 million in the first six months of 1997
to $496.4 million in the first six months of 1998, or 9.2%. Net income for
the period decreased 2.9%, from $27.8 million in 1997 to $27.0 million in
1998. Basic and diluted earnings per share decreased 2.6%, from $1.16 in 1997
to $1.13 in 1998. The primary reasons for the decrease in earnings at WPSR
were a decrease in other income due to gains on sales of nonutility property
which had occurred in the second quarter of 1997, an increase in nuclear
maintenance expenses, and a decrease in utility gas margins. Partially
offsetting these decreases in earnings were increased electric utility margins
as a result of increased prices during a period of abnormally warm weather in
the latter part of the second quarter of 1998, a decrease in other operating
expenses, and an increase in the nonregulated gas and electric margins.
Earnings on common stock of WPSC were $29.3 million for the first six months
of 1998 and $31.2 million for the same period of 1997. Nonregulated losses
-20-
<PAGE>
were $2.3 million in 1998 and $3.4 million in 1997. The decrease in
nonregulated losses was due primarily to a $2.0 million dividend on a venture
capital investment received by WPSR in the first quarter of 1998.
WISCONSIN PUBLIC SERVICE CORPORATION OVERVIEW
Revenues at WPSC were $327.7 million for the first six months of 1998 compared
with $365.1 million for the same period in 1997, a decrease of 10.2%.
Earnings on common stock decreased 6.1% from $31.2 million in 1997 to
$29.3 million in 1998. The primary reasons for the decrease in earnings on
common stock at WPSC were a decrease in other income, an increase in
maintenance expense, an increase in depreciation and decommissioning expenses,
and a decrease in gas margins. Partially offsetting these decreases were an
increase in electric margins and a decrease in other operating expenses.
ELECTRIC UTILITY OPERATIONS
Electric margins for the first six months of 1998 increased $4.8 million, or
3.0%, primarily as the result of increased revenues from wholesale customers
during a period of abnormally warm weather in the second quarter of 1998.
Partially offsetting the increase in revenues in the second quarter of 1998
was the impact of a PSCW rate order which was effective for the entire first
six months of 1998 but was only effective in 1997 for the period after
February 21, 1997. This order authorized an 8.1% electric revenue reduction.
Six Months
------------------------------
Electric Margins (000's) 1998 1997
- ------------------------ ---- ----
Revenues $237,864 $241,227
Fuel and purchased power 72,545 80,708
------- -------
Margin $165,319 $160,519
======= =======
Sales in kilowatt-hours (000) 5,570,604 5,478,241
Electric revenues decreased $3.4 million, or 1.4%, due primarily to the
electric rate reduction and a $1.0 million refund of transmission revenues as
the result of a FERC settlement related to open access transmission tariff
rates. The electric rate reduction and refund impacts were partially offset
by a 3.8% increase in kilowatt-hour sales to wholesale customers during the
first six months of 1998 resulting in an 8.9% increase in revenues from
wholesale customers during this period. Included in electric revenues for the
first six months of 1998 are surcharge revenues of $3.8 million related to
recovery of the deferred costs of the 1997 Kewaunee steam generator repairs.
Electric production fuel expense increased $0.7 million, or 1.4%, as a result
of increased nuclear fuel expense of $3.5 million partially offset by
decreased steam and combustion turbine fuel expenses of $2.1 million and
$0.7 million, respectively. Kewaunee was out of service in the first six
months of 1997 as the result of an extended outage to repair steam generators,
-21-
<PAGE>
thus, the higher nuclear fuel expense and lower steam and combustion turbine
fuel expenses in the first six months of 1998.
Purchased power expense decreased $8.9 million, or 30.6%, due to decreased
purchase requirements in the first six months of 1998. Purchase requirements
in the first six months of 1997 were high due to lack of production at
Kewaunee as a result of an extended outage.
GAS UTILITY OPERATIONS
Gas margins decreased $2.5 million in the six months of 1998, or 7.0%, due
primarily to a 20.7% reduction in heating degree days.
Six Months
-----------------------------
Gas Margins (000's) 1998 1997
- ------------------- ---- ----
Revenues $89,872 $123,906
Purchase costs 55,999 87,493
------ -------
Margin $33,873 $ 36,413
====== =======
Volume in therms (000) 337,729 385,366
Gas operating revenues decreased $34.0 million, or 27.5%. This decrease was
due to unusually mild winter and spring weather in the first six months of
1998 resulting in lower gas therm sales of 12.4%. Also contributing to the
decrease in gas operating revenues in the first six months of 1998 was a
reduction in revenues of $7.5 million for refunds from ANR Pipeline Company
which WPSC passed on to its gas customers in the second quarter of 1998.
Gas purchase costs decreased $31.5 million, or 36.0%. This decrease was due
to reduced customer demand as a result of the mild weather during the first
six months of 1998. Also contributing to the decrease in gas costs during the
first six months of 1998 was a $7.5 million refund from ANR Pipeline Company
which was credited to gas expense. Under current regulatory practice, the
PSCW allows WPSC to pass changes in the cost of gas on to customers through a
PGAC.
OTHER UTILITY EXPENSES/INCOME
Other operating expenses at WPSC decreased $1.1 million, or 1.6%, due
primarily to fewer uncollectible accounts in the first six months of 1998.
Maintenance expense increased $2.7 million, or 11.6%, as a result of increased
expenses at Kewaunee during the first six months of 1998. This increase was
due to the recognition of 1997 deferred expenses for Kewaunee steam generator
repairs in the second quarter of 1998. The PSCW approved deferral of the
repairs in 1997, the cost of which has been collected in the second quarter of
1998 through a $3.8 million electric revenue surcharge.
-22-
<PAGE>
Depreciation and decommissioning expenses increased $2.1 million, or 5.8%, due
to the accelerated recovery of investment in Kewaunee and accelerated funding
of Kewaunee decommissioning costs. Accelerated recovery of investment and
funding began on February 21, 1997 and, therefore, was effective for the
entire first six months of 1998 but only a portion of the first six months of
1997.
Other income decreased $2.5 million, or 37.4%, due primarily to gains on sales
of nonutility property which occurred in the second quarter of 1997. These
gains represented an increase in the earnings for the first six months of 1997
of approximately $0.07 per share.
OVERVIEW OF NONREGULATED OPERATIONS
Nonregulated operations experienced a loss of $2.3 million in the first six
months of 1998 compared with a loss of $3.4 million in the first six months of
1997. The decrease in nonregulated losses was due primarily to a $2.0 million
dividend on a venture capital investment received by WPSR in the first quarter
of 1998. Although nonregulated margins continue to grow, losses are being
experienced due to gas trading losses and expenses associated with the
expansion of customer base.
NONREGULATED MARGINS
Gas margins at ESI increased $2.2 million from $0.5 million in the first six
months of 1997 to $2.7 million in the first six months of 1998. Electric
margins at ESI increased $0.1 million from $0.5 million in 1997 to
$0.6 million in 1998.
Nonregulated energy and other operating revenues increased $79.5 million, or
89.1%, from $89.2 million in 1997 to $168.7 million in 1998. The increase in
nonregulated energy revenues consisted largely of increased gas revenues at
ESI of $75.9 million, or 91.1%, as a result of sales volume growth and
expansion to additional geographical areas. Electric revenues at ESI
increased $4.3 million, or 105.9%, also as a result of sales volume growth.
Revenues at PDI decreased $0.6 million due to lower project revenues.
Nonregulated energy cost of sales increased from $86.6 million in 1997 to
$164.7 million in 1998, an increase of $78.1 million, or 90.2%. This increase
was due primarily to increased gas purchases and purchased power of
$73.7 million and $4.3 million, respectively, at ESI as a result of customer
growth.
OTHER NONREGULATED EXPENSES/INCOME
Other nonregulated operating expenses decreased $1.5 million, or 19.2%. Other
operating expenses at ESI decreased $0.3 million, or 6.4%, due to fewer
uncollectible customer accounts. Other operating expenses at PDI decreased
$1.3 million, or 45.0%, due to lower project expenses.
Other income at WPSR included a dividend on a venture capital investment of
$2.0 million in the first quarter of 1998 and $0.2 million in the first
quarter of 1997. Other income (losses) at the nonregulated subsidiaries
included gas trading losses at ESI of $2.3 million and $0.1 million in the
first six months of 1998 and 1997, respectively.
-23-
<PAGE>
FINANCIAL CONDITION
WPSR returned $34.0 million in special dividends through an equity infusion to
WPSC and reclassified $50.0 million of first-mortgage bonds due July 1, 1998
to short-term debt. Although WPSR generated cash during the first six months
of 1998, short-term borrowings increased $35.0 million as a result of
obtaining funds for the July 1 retirement of first-mortgage bonds. Pretax
interest coverage was 4.49 times for the 12 months ended June 30, 1998 for
WPSC. WPSC's bond ratings are AA+ (Standard & Poor's and Duff & Phelps) and
Aa2 (Moody's).
WPSC makes large investments in capital assets. Construction expenditures for
WPSC are expected to continue in the $75.0 million to $90.0 million range
annually during the 1998 through 2000 period. This does not include
expenditures for the replacement of Kewaunee steam generators. WPSC's share
of steam generator replacement, at a 59.0% ownership level, will be
approximately $53.5 million in year of occurrence dollars.
In addition, other capital requirements for WPSC during the three-year period
include Kewaunee decommissioning trust fund contributions of approximately
$30.0 million.
On July 30, 1998, WPSR entered into financing arrangements involving the
issuance, on its behalf, of $50.0 million of trust preferred securities.
During the next three years, WPSR may expand its leveraged employee stock
ownership plan and may issue long-term debt to reduce short-term debt. The
specific forms of financing, amounts, and timing will depend on the
availability of projects, market conditions, and other factors.
WPSC received PSCW approval on March 19, 1998, to recover approximately
$3.8 million of deferred expenses related to the 1997 repairs to the Kewaunee
steam generator tubes. The deferred expenses were recovered through a
two-month customer surcharge effective in April and May of 1998.
On July 2, 1998, WPSC received approval from the PSCW to defer the future
costs associated with the repair of Kewaunee steam generator tubes. Recovery
of the deferred costs will then be requested in a future rate proceeding.
On April 7, 1998, the PSCW approved replacement of the Kewaunee steam
generators at a total cost of approximately $90.7 million. On July 2, 1998,
the PSCW approved an 8.5 year recovery period for the cost of the investment
in Kewaunee utilizing sum-of-the-years digits accelerated depreciation. WPSC
and Madison Gas and Electric Company ("MG&E") have entered into a letter of
intent and anticipate executing a definitive settlement agreement in
August 1998 which provides for WPSC to assume the 17.8% Kewaunee ownership
share currently held by MG&E prior to work beginning on the replacement of
steam generators. The letter of intent contemplates that MG&E will transfer
its ownership interest in exchange for an interest in a WPSC combustion
turbine generating facility or other WPSC assets having an aggregate book
value at time of transfer approximately equal to the book value of MG&E's
interest in Kewaunee (estimated at approximately $10.0 million) with any
difference settled in cash. MG&E will also transfer to WPSC's qualified
decommissioning trust the net assets in MG&E's qualified decommissioning trust
which will be fully funded as of the date of ownership transfer and will
transfer funds to the MG&E nonqualified decommissioning trust which, together
-24-
<PAGE>
with amounts then held in such trust and in the qualified decommissioning
trust, are deemed to be sufficient, pursuant to a funding plan approved by the
PSCW, to fund fully MG&E's estimated share of the costs of decommissioning
Kewaunee. MG&E will irrevocably devote the MG&E nonqualified decommissioning
trust to satisfy Kewaunee decommissioning obligations. When the ownership
change takes place, WPSC will continue to operate Kewaunee and will own 59.0%
of Kewaunee. Alliant Utilities-Wisconsin Power and Light Company ("WP&L")
will continue to own 41% of Kewaunee. At a 59.0% ownership level, WPSC's
share of the cost of steam generator replacement is approximately
$53.5 million. In addition, WPSC and WP&L will amend the joint power supply
agreement relating to Kewaunee, such that, under certain circumstances, either
party will have the right to cause the shutdown and decommissioning of
Kewaunee or to require the purchase of its interest in Kewaunee by the other
party.
Cleanup of WPSC's Stevens Point manufactured gas plant site began on
March 27, 1998. The project is substantially completed with monitoring
continuing. Costs of the Stevens Point clean-up were within the range
expected for this site. A liability for the cleanup of eight gas plant sites
has been established and the costs related to cleanup are being recovered in
part through insurance settlements with the balance recovered through customer
rates.
WPSC's contract agreement with the International Union of Operating
Engineers - Local 310 was ratified on April 24, 1998 and is effective for the
period from November 2, 1997 through October 28, 2000.
On July 7, 1998, PDI announced an agreement to purchase generating facilities
with 92 megawatts of aggregate capacity from Maine Public Service Company and
its subsidiary, New Brunswick Electric Power Company. The transaction is
contingent upon receipt of required regulatory approvals. PDI intends to
finance the majority of the purchase through non-recourse project financing.
On July 9, 1998, PDI announced a joint venture with an affiliate of EarthCo to
turn residue from coal mining at an Alabama Land and Mineral site into usable
energy briquettes. The project began operations in late June 1998 and is
eligible to receive federal tax credits because of the briquette's status as a
synthetic fuel. PDI has invested less than $10.0 million for a two-thirds
interest in the project.
WPSR and its subsidiary companies are committed to eliminating or minimizing
adverse effects of the Year 2000 computer compliance issue on their business
operations, including the products and services provided to customers, and to
maintaining its reputation as an efficient and reliable supplier of energy.
WPSR, however, is unable to guarantee that there will be no adverse affects as
a result of the Year 2000 computer compliance issue because many aspects of
compliance are beyond WPSR's direct control.
WPSR has undertaken a program to assess Year 2000 compliance and to bring
computer systems into compliance by the year 2000. WPSR has defined an
external review process to monitor the progress of its Year 2000 activities
which includes a status check on its ability to comply. All systems,
including energy production and delivery systems, other embedded systems, and
third party systems of suppliers are being evaluated to identify and resolve
potential problems. Modifications of major in-house supported systems to
-25-
<PAGE>
correct Year 2000 problems have been underway since 1996. The current status
of this effort by system follows:
- The facility management and customer information systems are
completed.
- The finance and human resource systems are completed with the
exception of government reporting requirements.
- The materials management system is scheduled to be completed in
the fourth quarter of 1998.
A contingency plan is required for all applications which are identified as
having a major impact on business operations.
The estimated costs for the Year 2000 project are considered reasonable and
have been approved for rate recovery by the PSCW. Total Year 2000 estimated
project costs are $13.4 million. This estimate includes internal labor costs
of $5.4 million and out-of-pocket costs of $8.0 million which includes
contract labor and software replacement costs for non-compliant products.
-26-
<PAGE>
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
WPSC is an intervenor defendant in Madison Gas and Electric Co. v. Public
--------------------------------------
Service Commission of Wisconsin, Dane County Circuit Court. The case involves
- -------------------------------
MG&E's appeal of the PSCW's order granting WPSC authority to replace the steam
generators at Kewaunee. WPSC, MG&E, and WP&L jointly own Kewaunee. WPSC is
the operating owner. MG&E opposes the steam generator replacement project.
WPSC and MG&E have entered into a letter of intent to consummate certain
transactions which would result in the settlement of MG&E's opposition to the
steam generator replacement project and the dismissal of MG&E's appeal. WPSC
and MG&E anticipate executing a definitive settlement agreement in August
1998.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Proxy voting results for the election of three directors to WPSR's Board at
the May 7, 1998 Annual Shareholders' Meeting are as follows:
For Abstentions Non-Votes Total
---------- ----------- --------- ----------
Richard A. Bemis 21,102,879 414,666 2,379,417 23,896,962
Daniel A. Bollom 21,079,109 438,436 2,379,417 23,896,962
Robert C. Gallagher 21,104,899 412,646 2,379,417 23,896,962
The following directors also continued in office after the Annual
Shareholders' Meeting:
A. Dean Arganbright
Michael S. Ariens
M. Lois Bush
Kathryn M. Hasselblad-Pascale
James L. Kemerling
Larry L. Weyers
ITEM 5. OTHER INFORMATION
KEWAUNEE NUCLEAR POWER PLANT
Kewaunee has achieved the nuclear industry's top rating for the seventh time
from the Institute of Nuclear Power Operations ("INPO"). Evaluations were
conducted over 24 months and included a 2-week on-site evaluation in May 1998
by a team made up of INPO staff and industry experts. The team looked at all
aspects of Kewaunee operations including training, engineering, operations,
and management. INPO also monitored a set of performance measurements over
the entire evaluation period.
-27-
<PAGE>
UNION NEGOTIATIONS
On April 24, 1998, the International Union of Operating Engineers - Local 310
("Union") ratified a three-year contract with WPSC which will expire on
October 28, 2000. The Union had been working without a contract since
October 29, 1997. Approximately 1,200 of WPSC's 2,400 employees are members
of the Union.
WPSR/UPEN MERGER
WPSR and UPEN announced an agreement to merge on July 10, 1997. The
shareholders of UPEN approved the merger on January 29, 1998. FERC approved
the merger of WPSR and UPEN on May 27, 1998. The Hart-Scott-Rodino Antitrust
waiting period was terminated on July 9, 1998. When the merger is completed,
UPEN will merge with and into WPSR, and UPPCO, UPEN's subsidiary, will become
a wholly-owned subsidiary of WPSR.
Approval of the SEC under the Public Utility Holding Company Act of 1935 and
the satisfaction of various other conditions are pending. Completion of the
merger is still expected in the second half of 1998.
SPENT NUCLEAR FUEL DISPOSAL
On January 31, 1998, the United States Department of Energy ("DOE") failed to
comply with its obligation to begin removing spent nuclear fuel as required by
the Nuclear Waste Policy Act of 1982. WPSC joined other utilities in a motion
to enforce the July 1996 mandate of the United States Court of Appeals for the
District of Columbia that the DOE had an unconditional obligation to begin
accepting, transporting, and disposing of spent nuclear fuel by January 31,
1998.
On May 5, 1998, the United States Court of Appeals for the District of
Columbia issued a decision denying the motion to enforce the Court's 1996
mandate. The denial centered on the question of whether the DOE could
properly use the Nuclear Waste Fund as a source to pay damages the utilities
have incurred as a result of the DOE's breach of its obligation and the fact
that the question is not ready for review. The Court also indicated that
certain items fall outside the scope of the Court's mandate including
(1) compelling the DOE to submit a detailed program for disposing of spent
fuel from utilities and (2) declaring that the utilities are relieved of their
obligation to pay fees to the Nuclear Waste Fund for a permanent spent fuel
repository and are authorized to place such fees into escrow until the DOE
commences with disposing of spent fuel pursuant to its obligation. The scope
of the Court's mandate was limited to defining the nature of the DOE's
statutory obligations and did not extend to requiring the DOE to perform under
its contracts with the utilities. WPSC is currently evaluating the decision
to determine how to proceed with contract remedies.
FUNDING DECONTAMINATION AND DECOMMISSIONING OF FEDERAL FACILITIES
The United States Supreme Court, on June 26, 1998, declined to review a May
1997 United States Court of Appeals for the Federal Circuit decision which was
adverse to Yankee Atomic Electric Company ("Yankee"), thereby letting stand
the decision that held that nuclear power companies must pay a retroactive
surcharge on enrichment services purchased from the DOE. Yankee had argued
-28-
<PAGE>
that the government should not have the power to impose retroactive financial
liability, stating it was a breach of the fixed-price enrichment contracts
Yankee signed prior to enactment of the Energy Policy Act of 1992 ("Act").
The surcharge was imposed by the Act which requires nuclear power companies to
fund the decontamination and decommissioning of certain DOE facilities.
Pursuant to the provisions of the Act, WPSC is required to pay a surcharge on
uranium enrichment services purchased from the federal government prior to
October 23, 1992. WPSC's obligation amounts to approximately $600,000 per
year (adjusted for inflation) through the year 2007.
WPSC and a number of other nuclear power companies sued the DOE in the
United States Court of Federal Claims seeking a refund of the previously paid
decontamination and decommissioning surcharge payments. The suits had been
stayed pending the outcome of the petition for review filed with the
United States Supreme Court by Yankee. Yankee had filed a suit in the
United States Court of Federal Claims and received a favorable decision, only
to have it overturned by the Federal Circuit Court of Appeals, as indicated
above.
Subsequent to the United States Supreme Court action in the Yankee case, WPSC
has joined with a number of other nuclear power companies in challenging the
constitutionality of the Act in a Federal District Court in New York.
FERC RULING REGARDING TRANSMISSION INTERFACE
As reported in the December 31, 1997 Report on Form 10-K to the SEC, Wisconsin
Public Power Inc. ("WPPI") requested transmission service across the WPSC
portion of the constrained Minnesota to eastern Wisconsin interface
("Interface") to serve five of WPPI's municipal customers (Sturgeon Bay,
Algoma, Eagle River, New Holstein, and Washington Island) located in the WPSC
service territory. The Interface is owned by Wisconsin Electric Power
Company, (52%), WP&L (28%), and WPSC (20%). WPPI has a 1993 contract with
WP&L that provides transmission service for these loads through the WP&L
portion of the Interface.
WPSC filed a complaint with the FERC contending that WPPI and WP&L were
conspiring to use the WPSC portion of the interface capacity for a service
that should use the WP&L portion of the Interface. WPPI responded with a FERC
complaint against both WPSC and WP&L indicating that neither had provided the
necessary transmission services across the constrained Interface. WPSC and
WP&L both maintained that they have previous claims to the interface capacity
consistent with the FERC's first-come-first-served transmission scheduling
process.
On May 27, 1998, the FERC rejected WPSC's arguments supporting the denial of
transmission service requested by WPPI. WPSC had argued that WPPI's request
violates certain agreements between WPPI and WP&L and that there was
insufficient available transmission capacity to provide the requested service.
The FERC ruled that it is not within WPSC's authority as a provider of
transmission service to deny that service on the basis of interpretations of
contracts between other utilities. In addition, the FERC stated that it
considered WPSC's available transmission capacity calculation to be flawed
because it reserved 176 megawatts of service for itself by designating
unexercised option contracts as network resources.
-29-
<PAGE>
The FERC, therefore, directed WPSC to release 42 megawatts of transmission
capacity to WPPI and 40 megawatts of transmission capacity to MG&E. FERC did
not require WPSC to join an Independent System Operator ("ISO") noting
Wisconsin's legislative timetable requirements for ISO membership.
The FERC also required WPSC to enter into alternative dispute resolution
procedures with interested customers to establish protocols for dissemination
of transmission information, including calculation of the available
transmission capacity.
On June 11, 1998, WPSC filed a motion with the FERC for an emergency stay of
the requirement to release the 176 megawatts of available transmission
capacity pending rehearing of the FERC's May 27, 1998 order. On June 26,
1998, WPSC filed for rehearing of the FERC's May 27, 1998 order. WPPI and
MG&E filed objections to both the stay and rehearing requests. On July 29,
1998, the FERC issued its rehearing order which resolved stay and rehearing
requests by acknowledging that the WPSC contracts for network resources were
valid and in accordance with FERC Order 888 and the WPSC open access
transmission tariff. The FERC held that WPSC's contract with Manitoba Hydro
for 50 megawatts of capacity and energy had higher priority than the WPPI or
MG&E requests for transmission service. The FERC also held that WPSC's
contract with Northern States Power for 150 megawatts of capacity and energy
had a lower priority than the WPPI request but a higher priority than the MG&E
request. WPSC is waiting for WPPI to determine whether it will take the
42 megawatts of the interface capacity from WPSC or WP&L. FERC has
established that WPSC has rights to the remaining 134 megawatts based on its
network resource contracts.
The FERC also addressed WPSC's adjustment to available transmission capacity
to account for a capacity benefit margin. The capacity benefit margin
reserves transmission capability across the Interface to meet generation
reliability requirements. FERC did not direct WPSC to eliminate the capacity
benefit margin, but directed WPSC to file revised transmission tariff
provisions reflecting the capacity benefit margin concept and to perform an
economic evaluation of capacity benefit margin versus other uses of the
transmission system. On July 20, 1998, WPSC filed a revision to its open
access transmission tariff which describes its capacity benefit margin
methodology and testimony that explains the economic evaluation of capacity
benefit margin. The FERC noticed this filing on July 29, 1998 and stated that
comments were due by August 7, 1998. MG&E and WPPI filed a motion for a delay
in the due date for the comments. WPSC has supported this motion in order to
provide a complete record in this important matter. It is expected that the
FERC will issue an order on the capacity benefit margin issue by mid-fall of
1998. This ruling could have significant consequences for the reliability and
economics of generation reserves in the Midwest and the entire nation.
VIKING VOYAGEUR NATURAL GAS PIPELINE
In previous reports, WPSC contemplated the construction of natural gas
laterals to connect the WPSC gas distribution system to the proposed Viking
Voyageur gas pipeline. In May 1998, the Viking Voyageur pipeline was placed
on hold at FERC with the Viking Voyageur partners now contemplating replacing
the proposed gas pipeline from Canada with a pipeline from Chicago to
Wisconsin. At this time, it is not known whether WPSC will be connecting to
that pipeline or any pipeline from the Chicago area. WPSC, however, continues
-30-
<PAGE>
to study various options to bring a competitive gas pipeline into the WPSC gas
service territory.
SUMMER RELIABILITY
WPSC has planned electrical capacity reserves of 18% for the summer of 1998
(covering June through August) as the result of the PSCW order earlier this
year requiring that Wisconsin utilities increase their reserve margin to 18%
from 15%. The planned reserve margin is based on installed capacity and firm
purchases from neighboring utilities. Three issues could erode WPSC's actual
reserve margin including (1) extremely hot and humid weather throughout the
Midwest for an extended period of time, (2) an emergency outage of power
generation equipment, and (3) a loss of transmission line capability that
prevents power from getting to northeastern Wisconsin.
Wisconsin utilities are monitoring the summer reliability issues through the
Wisconsin Reliability Assessment Organization, which includes investor-owned
utilities, municipal utilities, electric cooperatives and the PSCW in order to
keep abreast of changing events that could require specific action by
individual companies.
Of primary concern to Wisconsin utilities are reserves throughout the
Mid-America Interconnected Network ("MAIN"), the regional reliability group
which consists of utilities in parts of Upper Michigan, Missouri, Wisconsin,
and the state of Illinois. MAIN expects to have reserves of 12.2% for the
summer of 1998 and transmission import capability which is described as
"marginally adequate."
WPSC's reserves for the 1999 summer electrical peak will increase with the
addition of the 175-megawatt De Pere Energy Center.
DEADLINE FOR SUBMISSION OF SHAREHOLDER PROPOSALS
The deadline for submission of shareholder proposals pursuant to Rule 14a-8
under the Securities Exchange Act of 1934, as amended ("Rule 14a-8"), for
inclusion in the WPSR proxy statement for its 1999 Annual Meeting of
Shareholders is November 23, 1998. After February 6, 1999, notice to WPSR of
a shareholder proposal submitted otherwise than pursuant to Rule 14a-8 will be
considered untimely, and the persons named in proxies solicited by the Board
of Directors of WPSR for its 1999 Annual Meeting of Shareholders may exercise
discretionary voting power with respect to any such proposal as to which WPSR
does not receive timely notice.
-31-
<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
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K filed by WPS Resources
Corporation and Wisconsin Public Service Corporation on
June 10, 1998. The report included under Item 5 a Wisconsin
Public Service Corporation Press Release announcing the
proposed change in ownership for the Kewaunee Nuclear Power
Plant.
A Current Report on Form 8-K dated July 2, 1998 filed by
WPS Resources Corporation and Wisconsin Public Service
Corporation on July 22, 1998. The report included under
Item 5 a press release announcing financial results for the
period ended June 30, 1998; details of the Kewaunee Nuclear
Power Plant steam generator replacement and related recovery
of costs; proposed changes in ownership of the Kewaunee
Nuclear Power Plant; a proposed amendment to the joint power
supply agreement relating to the Kewaunee Nuclear Power
Plant; WPS Power Development, Inc.'s agreement to purchase
generating facilities from Maine Public Service Company; and
WPS Power Development, Inc.'s joint venture with an
affiliate of EarthCo.
A Current Report on Form 8-K dated July 27, 1998 filed by
WPS Resources Corporation and WPSR Capital Trust I on
August 6, 1998. The report included under Item 5 an
Underwriting Agreement in connection with the offering of
the 7.00% Trust Preferred Securities and certain related
documents.
-32-
<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: August 12, 1998 /s/ Diane L. Ford
_________________________________
Diane L. Ford
Controller and Chief
Accounting Officer
(Duly Authorized Officer and
Chief Accounting Officer)
-33-
<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: August 12, 1998 /s/ Diane L. Ford
____________________________________
Diane L. Ford
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
-34-
<PAGE>
WPS RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED June 30, 1998
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
-35-
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<CIK> 0000107833
<NAME> WISCONSIN PUBLIC SERVICE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 881,372
<OTHER-PROPERTY-AND-INVEST> 2,946
<TOTAL-CURRENT-ASSETS> 193,727
<TOTAL-DEFERRED-CHARGES> 72,387
<OTHER-ASSETS> 118,232
<TOTAL-ASSETS> 1,268,664
<COMMON> 95,588
<CAPITAL-SURPLUS-PAID-IN> 107,842
<RETAINED-EARNINGS> 295,954
<TOTAL-COMMON-STOCKHOLDERS-EQ> 499,384
0
51,200
<LONG-TERM-DEBT-NET> 255,381
<SHORT-TERM-NOTES> 60,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 402,699
<TOT-CAPITALIZATION-AND-LIAB> 1,268,664
<GROSS-OPERATING-REVENUE> 327,736
<INCOME-TAX-EXPENSE> 15,667
<OTHER-OPERATING-EXPENSES> 273,117
<TOTAL-OPERATING-EXPENSES> 288,784
<OPERATING-INCOME-LOSS> 38,952
<OTHER-INCOME-NET> 3,880
<INCOME-BEFORE-INTEREST-EXPEN> 42,832
<TOTAL-INTEREST-EXPENSE> 11,962
<NET-INCOME> 30,870
1,556
<EARNINGS-AVAILABLE-FOR-COMM> 29,314
<COMMON-STOCK-DIVIDENDS> 23,180
<TOTAL-INTEREST-ON-BONDS> 10,684
<CASH-FLOW-OPERATIONS> 93,171
<EPS-PRIMARY> 1.23
<EPS-DILUTED> 1.23
</TABLE>
