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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM U-3A2
Statement by Holding Company Claiming Exemption Under Rule U-3a-2 from the
provisions of the Public Utility Holding Company Act of 1935
To be filed Annually Prior to March 1
ALASKA POWER & TELEPHONE COMPANY
- --------------------------------------------------------------------------------
(Name of Company)
hereby files with the Securities Exchange Commission, pursuant to Rule 2, its
statement claiming exemption as a holding company from the provisions of the
Public Utility Holding Company Act of 1935, and submits the following
information:
1. Name, State of organization, location and nature of business of claimant
and every subsidiary thereof, other than any exempt wholesale generator
(EWG) or foreign utility company in which claimant directly or indirectly
holds an interest.
2. A brief description of the properties of claimant and each of its
subsidiary public utility companies used for the generation,
transmission, and distribution of electric energy for sale, or for the
production, transmission and distribution of natural or manufactured gas,
indicating the location of principal generating plants, transmission
lines, producing fields, gas manufacturing plants, and electric and gas
distribution facilities, including all such properties which are outside
the State in which claimant and its subsidiaries are organized and all
transmission or pipelines which deliver or receive electric energy or gas
at the borders of such State.
3. The following information for the last calendar year with respect to
claimant and each of its subsidiary public utility companies:
(a) Number of kwh. Of electric energy sold (at retail or wholesale) and
Mcf. Of natural or manufactured gas distributed at retail.
(b) Number of kwh. of electric energy and Mfc. Of natural or
manufactured gas distributed at retail outside the State in which
each company is organized.
(c) Number of kwh. Of electric energy and MCF. OF NATURAL OR
MANUFACTURED AS SOLD AT WHOLESALE OUTSIDE THE State in which each
such company is organized, or at the State line.
(d) Number of kwh. Of electric energy and Mcf. Of natural or
manufactured gas purchased outside the State in which each such
company is organized or at the State line.
4. The following information for the reporting period with respect to
claimant and each interest it holds directly or indirectly in an EWG or a
foreign utility company, stating monetary amounts in United States
dollars:
(a) Name, location, business address and description of the facilities
used by the EWG or foreign utility company for the generation,
transmission and distribution of electric energy for sale or for
the distribution at retail of natural or manufactured gas.
(b) Name of each system company that holds an interest in such EWG or
foreign utility company; and description of the interest held.
(c) Type and amount of capital invested, directly or indirectly, by the
holding company claiming exemption; any direct or indirect
guarantee of the security of the EWG or foreign utility company by
the holding company claiming exemption; and any debt or other
financial obligation for which there is recourse, directly or
indirectly, to the holding company claiming exemption or another
system company, other than the EWG or foreign utility company.
Potential persons who are to respond to the collection of information contained
in this form are not required to respond unless the form displays a currently
valid OMB control number. SEC 1834 (2-97)
<PAGE>
(d) Capitalization and earnings of the EWG or foreign utility company
during the reporting period.
(e) Identify any service, sales or construction contract(s) between the
EWG or foreign utility company and a system company, and describe
the services to be rendered or goods sold and fees or revenues under
such agreement(s).
EXHIBIT A
A consolidating statement of income and surplus of the claimant and its
subsidiary companies for the last calendar year, together with a consolidating
balance sheet of claimant and its subsidiary companies as of the close of such
calendar year.
The above-named claimant has caused this statement to be duly executed on its
behalf by its authorized officer on this 14th day of April, 1999.
ALASKA POWER & TELEPHONE COMPANY
- --------------------------------------------------------------------------------
Name of claimant
by /s/ ARNE SATHER
------------------
(title) CONTROLLER
------------
CORPORATE SEAL
Attest: /s/ HOWARD GARNER , EXECUTIVE VICE PRESIDENT
------------------------------------------------
Name, title, and address of officer to whom notices and correspondence
concerning this statement should be addressed:
ALASKA POWER & TELEPHONE COMPANY ARNE SATHER, CONTROLLER
- -------------------------------- -----------------------
(Name) (Title)
P.O. BOX 3222, PORT TOWNSEND, WASHINGTON 98368
EXHIBIT B Financial Data Schedule
If, at the time a report on this form is filed, the registrant is required to
submit this report and any amendments thereto electronically via EDGAR, the
registrant shall furnish a Financial Data Schedule. The Schedule shall set forth
the financial and other data specified below that are applicable to the
registrant on a consolidated basis.
Item No. Caption Heading
1 Total Assets
2 Total Operating Revenues
3 Net Income
EXHIBIT C
An organizational chart showing the relationship of each EWG or foreign utility
company to associate companies in the holding-company system.
<PAGE>
Exhibit A
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
<TABLE>
<CAPTION>
CONSOLIDATING BALANCE SHEETS - ASSETS
December 31, 1998
AP&T ALD APC ATC ATW BBL BTT
<S> <C> <C> <C> <C> <C> <C> <C>
Assets
Utility Plant:
Electric 1,898,962 34,281,296 10,308,588
Telephone 9,529,674 1,922,895 713,323
Non-Utility Plant 324,636
------------ ------- ------------- ----------- ----------- ------------ ---------
2,223,598 0 34,281,296 9,529,674 1,922,895 10,308,588 713,323
Less accumulated depreciation 1,240,807 11,862,713 3,193,199 264,650 709,930 305,508
------------ ------- ------------- ----------- ----------- ------------ ---------
982,791 0 22,418,583 6,336,475 1,658,245 9,598,658 407,815
Utility plant under construction 27,315 805,352 161,626 42,295 14,138 406
------------ ------- ------------- ----------- ----------- ------------ ---------
Total utility plant 1,010,106 0 23,223,935 6,498,101 1,700,540 9,612,796 408,221
Other assets:
Investment in Subsidiaries 33,750,599
Preliminary survey and investigation costs 423,451 (151)
Investment in CoBank 697,785
Notes Receivable 198,946
Special Funds Restricted
Other 2,050,800 9,425 15,218 152,866
------------ ------- ------------- ----------- ----------- ------------ ---------
Total other assets 36,698,130 9,425 423,451 (151) 15,218 152,866 0
Current assets:
Cash 708,909 47,305 22,620 890 76
Trade accounts receivable 917,080 604,453 165,260 36,406
Other receivables 437,532 1,271
Fuel, supplies, and other inventory 526,790 97,125 349,415 1,227
Income Taxes Recoverable 8,599
Prepaid expenses and other 87,649
Costs in Exces of Billing 321,022
------------ ------- ------------- ----------- ----------- ------------ ---------
Total current assets 1,563,711 0 1,491,175 724,198 516,836 0 37,709
------------ ------- ------------- ----------- ----------- ------------ ---------
39,271,947 9,425 25,138,561 7,222,148 2,232,594 9,765,662 445,930
============ ======= ============= =========== =========== ============ =========
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS - ASSETS - continued
December 31, 1998
<TABLE>
<CAPTION>
GLH NCT Combined Elimination Consoldiated
<S> <C> <C> <C> <C> <C>
Assets
Utility Plant:
Electric 17,002,891 63,491,737 63,491,737
Telephone 280,515 12,446,407 12,446,407
Non-Utility Plant 324,636 324,636
------------ ---------- ------------- -------------- --------------
17,002,891 280,515 76,262,780 0 76,262,780
Less accumulated depreciation 82,993 17,659,800 17,659,800
------------ ---------- ------------- -------------- --------------
17,002,891 197,522 58,602,980 58,602,980
Utility plant under construction 4,656 1,055,788 1,055,788
------------ ---------- ------------- -------------- --------------
Total utility plant 17,002,891 202,178 59,658,768 0 59,658,768
Other assets:
Investment in Subsidiaries 33,750,599 (33,750,599) 0
Preliminary survey and investigation costs 172,008 595,308 595,308
Investment in CoBank 697,785 697,785
Notes Receivable 198,946 198,946
Special Funds Restricted 6,753,104 6,753,104 6,753,104
Other 544,597 2,772,906 2,772,906
------------ ---------- ------------- -------------- --------------
Total other assets 7,469,709 0 44,768,648 (33,750,599) 11,018,049
Current assets:
Cash 111 779,911 779,911
Trade accounts receivable 29,481 1,752,680 1,752,680
Other receivables 443,150 881,953 881,953
Fuel, supplies, and other inventory 2,026 976,583 976,583
Income Taxes Recoverable 8,599 8,599
Prepaid expenses and other 87,649 87,649
Costs in Exces of Billing 321,022 321,022
------------ ---------- ------------- -------------- --------------
Total current assets 443,150 31,618 4,808,397 0 4,808,397
------------ ---------- ------------- -------------- --------------
24,915,750 233,796 109,235,813 (33,750,599) 75,485,214
============ ========== ============= ============== ==============
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS - LIABILITIES AND EQUITY
December 31, 1998
<TABLE>
<CAPTION>
AP&T ALD APC ATC ATW BBL BTT
<S> <C> <C> <C> <C> <C> <C> <C>
Liabilities and stockholders' equity
Stockholders' equity:
Common stock, $1 par value:
Authorized shares, - 2,000,000
Issued and outstanding shares - 937,016 1,177,534
Additional paid-in capital 5,705,804
Retained earnings 12,688,063
------------ ------- ------------- ----------- ----------- ------------ ---------
Total stockholders' equity 19,571,401 0 0 0 0 0
Parent Company Equity 9,425 22,893,770 6,052,882 2,061,047 557,520 373,027
------------ ------- ------------- ----------- ----------- ------------ ---------
Long-term debt, less current portion 17,327,294 100,000 7,751,425
------------ ------- ------------- ----------- ----------- ------------ ---------
Other liabilities:
Deferred investment tax credits 25,611
Deferred income taxes 74,685 1,661,558 976,703 65,635 1,286,098 62,464
Customer advances for construction 146,862
------------ ------- ------------- ----------- ----------- ------------ ---------
Total other liabilities 100,296 0 1,808,420 976,703 65,635 1,286,098 62,464
Current liabilities:
Trade accounts payable 981,472 233,075 43,464 11,077 6,956
Accrued taxes and expenses 574,037 37,728 22,498 5,912 51,734 173
Deferred income taxes (14,137) 109,204 23,992 (1,253) 61
Customer deposits and advance billings 56,364 102,609 3,249
Current portion of long-term debt 731,584 109,061
------------ ------- ------------- ----------- ----------- ------------ ---------
Total current liabilities 2,272,956 0 436,371 192,563 5,912 170,619 10,439
------------ ------- ------------- ----------- ----------- ------------ ---------
39,271,947 9,425 25,138,561 7,222,148 2,232,594 9,765,662 445,930
============ ======= ============= =========== =========== ============ =========
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long-Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
CONSOLIDATING BALANCE SHEETS - LIABILITIES AND EQUITY - continued
December 31, 1998
<TABLE>
<CAPTION>
GLH NCT Combined Elimination Consolidated
<S> <C> <C> <C> <C> <C>
Liabilities and stockholders' equity
Stockholders' equity:
Common stock, $1 par value:
Authorized shares, - 2,000,000
Issued and outstanding shares - 937,016 1,177,534 1,177,534
Additional paid-in capital 5,705,804 5,705,804
Retained earnings 12,688,063 12,688,063
------------ ---------- ------------- -------------- --------------
Total stockholders' equity 0 0 19,571,401 19,571,401
Parent Company Equity 1,622,553 180,375 33,750,599 (33,750,599) 0
------------ ---------- ------------- -------------- --------------
Long-term debt, less current portion 22,678,769 47,857,488 47,857,488
------------ ---------- ------------- -------------- --------------
Other liabilities:
Deferred investment tax credits 25,611 25,611
Deferred income taxes 602,115 46,075 4,775,333 4,775,333
Customer advances for construction 146,862 146,862
------------ ---------- ------------- -------------- --------------
Total other liabilities 602,115 46,075 4,947,806 0 4,947,806
Current liabilities:
Trade accounts payable 4,275 1,280,319 1,280,319
Accrued taxes and expenses 28,900 119 721,101 721,101
Deferred income taxes 117,867 117,867
Customer deposits and advance billings 2,952 165,174 165,174
Current portion of long-term debt (16,587) 824,058 824,058
------------ ---------- ------------- -------------- --------------
Total current liabilities 12,313 7,346 3,108,519 3,108,519
------------ ---------- ------------- -------------- --------------
24,915,750 233,796 109,235,813 (33,750,599) 75,485,214
============ ========== ============= ============== ==============
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long-Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF INCOME
For the year ended December 31, 1998
<TABLE>
<CAPTION>
AP&T ALD APC ATC ATW BBL BTT
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues:
Electric 10,562,706 1,339,301
Telephone 111,750 4,560,727 1,070,811 284,294
------------ -------- ------------ ----------- ----------- ------------ ---------
Total revenues 0 111,750 10,562,706 4,560,727 1,070,811 1,339,301 284,294
Expenses:
Electric (256,805) 8,273,906 533,339
Telephone 182,092 3,230,198 1,255,419 277,644
------------ -------- ------------ ----------- ----------- ------------ ---------
Total expenses (256,805) 182,092 8,273,906 3,230,198 1,255,419 533,339 277,644
------------ -------- ------------ ----------- ----------- ------------ ---------
Operating income 256,805 (70,342) 2,288,800 1,330,529 (184,608) 805,962 6,650
Other (income) expense:
Interest income (30,561)
Allowance for funds used during construction (19,600)
Interest expense 1,037,104 587,167
Gross profit on contract revenues (82,264)
Gain on sale on non-utility plant (381,375)
Miscellaneous (12,527) 7,007 3,844 (2,351) (9,500)
------------ -------- ------------ ----------- ----------- ------------ ---------
510,777 0 7,007 3,844 (2,351) 577,667 0
------------ -------- ------------ ----------- ----------- ------------ ---------
Income before income taxes (253,972) (70,342) 2,281,793 1,326,685 (182,257) 228,295 6,650
Provision for income taxes (22,867) 728,956 431,277 (59,247) 74,214 2,162
------------ -------- ------------ ----------- ----------- ------------ ---------
Net income (253,972) (47,475) 1,552,837 895,408 (123,010) 154,081 4,488
============ ======== ============ =========== =========== ============ =========
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long-Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
ALASKA POWER & TELEPHONE COMPANY AND SUBSIDIARIES
CONSOLIDATING STATEMENTS OF INCOME - continued
For the year ended December 31, 1998
<TABLE>
<CAPTION>
GLH NCT Combined Elimination Consolidated
<S> <C> <C> <C> <C> <C>
Revenues:
Electric 11,902,007 (1,339,301) 10,562,706
Telephone 231,840 6,259,422 6,259,422
------------ ---------- ------------- -------------- --------------
Total revenues 0 231,840 18,161,429 (1,339,301) 16,822,128
Expenses:
Electric 8,550,440 (1,339,301) 7,211,139
Telephone 184,202 5,129,555 5,129,555
------------ ---------- ------------- -------------- --------------
Total expenses 0 184,202 13,679,995 (1,339,301) 12,340,694
------------ ---------- ------------- -------------- --------------
Operating income 0 47,638 4,481,434 4,481,434
Other (income) expense:
Interest income (30,561) (30,561)
Allowance for funds used during construction (19,600) (19,600)
Interest expense 1,624,271 1,624,271
Gross profit on contract revenues (82,264) (82,264)
Gain on sale on non-utility plant (381,375) (381,375)
Miscellaneous (13,527) (13,527)
------------ ---------- ------------- -------------- --------------
0 0 1,096,944 0 1,096,944
------------ ---------- ------------- -------------- --------------
Income before income taxes 0 47,638 3,384,490 3,384,490
Provision for income taxes 15,486 1,169,981 1,169,981
------------ ---------- ------------- -------------- --------------
Net income 0 32,152 2,214,509 0 2,214,509
============ ========== ============= ============== ==============
</TABLE>
AP&T Alaska Power & Telephone Company
ALD AP&T Long-Distance
APC Alaska Power Company
ATC Alaska Telephone Company
ATW AP&T Wireless, Inc.
BBL Black Bear Lake Hydro
BTT Bettles Telephone Inc.
GLH Goat Lake Hydro
NCT North Country Telephone Inc.
<PAGE>
Exhibit B
Alaska Power & Telephone Company
and Subsidiaries
Consolidated Financial Statements
Years Ended December 31, 1998 and 1997
with Report of Independent Auditors
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Financial Statements
Years Ended December 31, 1998 and 1997
Contents
Report of Independent Auditors............................................ 1
Audited Consolidated Financial Statements
Consolidated Balance Sheets.......................................... 2
Consolidated Statements of Income.................................... 4
Consolidated Statements of Stockholders' Equity...................... 5
Consolidated Statements of Cash Flows................................ 6
Notes to Consolidated Financial Statements........................... 7
<PAGE>
Report of Independent Auditors
The Board of Directors
Alaska Power & Telephone Company
We have audited the accompanying consolidated balance sheets of Alaska Power &
Telephone Company and subsidiaries as of December 31, 1998 and 1997, and the
related consolidated statements of income, stockholders' equity, and cash flows
for the years then ended. These financial statements are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the consolidated financial position of Alaska Power &
Telephone Company and subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for the years then
ended, in conformity with generally accepted accounting principles.
February 19, 1999
Ernst & Young LLP
1
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Balance Sheets
December 31
1998 1997
------------------------------
ASSETS
Utility plant
Electric and non-utility $ 63,816,373 $ 42,829,536
Telecommunications 12,446,407 10,890,665
------------- -------------
76,262,780 53,720,201
Less accumulated depreciation 17,659,799 15,514,261
------------- -------------
58,602,981 38,205,940
Hydroelectric plant under construction 0 13,968,869
Other plant under construction 1,055,788 1,566,872
------------- -------------
Total utility plant, net 59,658,769 53,741,681
Other assets
Preliminary survey and investigation costs 595,308 412,617
Investments and other assets 2,653,961 2,000,983
Goodwill - net of accumulated amortization of
$80,023 and $44,114, respectively 816,731 852,640
Special Funds - Restricted 6,753,104 9,499,656
------------- -------------
Total other assets 10,819,104 12,765,896
Current assets
Cash 779,910 216,264
Accounts receivable, less allowance for
doubtful accounts of $16,684 and
$16,685, respectively 2,833,580 2,397,547
Fuel, supplies, and other inventory 976,583 1,050,788
Income taxes recoverable 8,599 367,066
Prepaid expenses 87,649 125,623
Costs and estimated earnings in excess of
billings on uncompleted contracts 321,022 0
------------- -------------
Total current assets 5,007,343 4,157,288
------------- -------------
$ 75,485,216 $ 70,664,865
============= =============
See accompanying notes. 2
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Balance Sheets
December 31
1998 1997
------------------------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Stockholders' equity
Common stock, $1 par value:
Authorized shares - 2,000,000
Issued and outstanding shares - 1,177,534 and
1,143,871, respectively $ 1,177,534 $ 1,143,871
Additional paid-in capital 5,705,804 5,086,137
Retained earnings 12,688,063 11,516,593
------------- -------------
Total stockholders' equity 19,571,401 17,746,601
Long-term debt
Goat Lake Hydro, Inc. notes payable 22,662,182 22,662,182
Other notes payable, less current portion 25,195,306 22,409,971
------------- -------------
Total long-term debt 47,857,488 45,072,153
Other liabilities
Deferred income taxes 4,800,944 4,378,360
Customer advances for construction 146,862 162,608
------------- -------------
Total other 4,947,806 4,540,968
liabilities
Current liabilities
Accounts payable 1,280,320 968,255
Accrued taxes and expenses 721,101 1,193,504
Deferred income taxes 117,867 145,322
Customer deposits and advance billings 165,175 162,973
Current portion of long-term debt 824,058 835,089
------------- -------------
Total current liabilities 3,108,521 3,305,143
------------- -------------
$ 75,485,216 $ 70,664,865
============= =============
See accompanying notes. 3
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Statements of Income
Year Ended December 31
1998 1997
------------------------------
Revenues
Electric $10,562,706 $10,532,481
Telecommunications 6,259,424 5,980,072
------------- -------------
16,822,130 16,512,553
Total revenues
Expenses
Electric 7,211,139 7,786,138
Telecommunications 5,129,555 4,453,368
------------- -------------
Operating expenses 12,340,694 12,239,506
Interest (expense) income
Interest expense (1,603,929) (1,872,559)
Allowance for funds used during construction -
debt portion 10,219 238,797
------------- -------------
Net interest expense (1,593,710) (1,633,762)
------------- -------------
Operating income 2,887,726 2,639,285
Other income
Allowance for funds used during construction -
equity portion 19,600 452,893
Gross profit on contract revenues 82,264 0
Gain on sale of non-utility plant 381,375 0
Miscellaneous 13,525 32,900
------------- -------------
Total other income 496,764 485,793
------------- -------------
Income before income taxes 3,384,490 3,125,078
Income taxes 1,169,981 1,029,770
------------- -------------
Net income $ 2,214,509 $ 2,095,308
============= =============
Basic earnings per share $ 1.91 $ 1.87
============= =============
Diluted earnings per share $ 1.87 $ 1.86
============= =============
See accompanying notes. 4
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Statements of Stockholders' Equity
<TABLE>
<CAPTION>
Additional
Common Paid-In Retained
Stock Capital Earnings Total
---------- ---------- ----------- -----------
<S> <C> <C> <C> <C>
Balance at January 1, 1997 $1,097,881 $4,279,314 $10,405,640 $15,782,835
Net income - - 2,095,308 2,095,308
Cash dividends - - (984,355) (984,355)
Sale of common stock to ESOP 29,402 599,878 - 629,280
Sale of other common stock 5,588 113,995 - 119,583
Common stock options exercised 11,000 92,950 - 103,950
---------- ---------- ----------- -----------
Balance at December 31, 1997 1,143,871 5,086,137 11,516,593 17,746,601
Net income - - 2,214,509 2,214,509
Cash dividends - - (1,043,039) (1,043,039)
Sale of common stock to ESOP 28,316 610,188 - 638,504
Sale of other common stock 4,490 96,760 - 101,250
Repurchase of common stock (8,143) (174,056) - (182,199)
Common stock options exercised 9,000 86,775 - 95,775
---------- ---------- ----------- -----------
Balance at December 31, 1998 $1,177,534 $5,705,804 $12,688,063 $19,571,401
========== ========== =========== ===========
</TABLE>
See accompanying notes. 5
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Consolidated Statements of Cash Flows
<TABLE>
<CAPTION>
Year Ended December 31
1998 1997
-----------------------------
<S> <C> <C>
OPERATING ACTIVITIES
Net income $ 2,214,509 $ 2,095,308
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 2,511,096 2,388,261
Gain on sale of land (381,375)
0
Deferred income tax provision 456,795 658,229
Changes in operating activities:
Change in accounts receivable 7,117 (150,310)
Change in other; assets, liabilities, and receivables (634,470) (129,218)
Change in inventories 74,205 (54,036)
Change in income taxes 296,801 (95,459)
Change in accounts payable and accrued liabilities (160,338) 396,776
Other 2,201 ( 6,110)
------------ ------------
Net cash provided by operating activities 4,386,541 5,103,441
INVESTING ACTIVITIES
Acquisitions of utility plant (5,371,822) (19,042,385)
Investment in Special Funds - Restricted 0 (9,499,656)
Other Investments (652,977) (336,158)
Preliminary survey and investigation costs (182,691) (176,575)
------------ ------------
Net cash used in investing activities (6,207,490) (29,054,774)
FINANCING ACTIVITIES
Proceeds from long-term debt 6,535,976 49,397,499
Payments on long-term debt (3,761,672) (25,212,305)
Payment of bond issue costs 0 (326,558)
Payment of cash dividends (1,043,039) (779,286)
Proceeds from sale of common stock 835,529 852,813
Repurchase of common stock (182,199) 0
------------ ------------
Net cash provided by financing activities 2,384,595 23,932,163
------------ ------------
Net increase (decrease) in cash 563,646 ( 19,170)
CASH AT BEGINNING OF YEAR 216,264 235,434
------------ ------------
CASH AT END OF YEAR $ 779,910 $ 216,264
============ ============
</TABLE>
See accompanying notes. 6
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. The Company and Summary of Significant Accounting Policies
Alaska Power & Telephone Company and subsidiaries (AP&T) supplies electric and
telephone service to several communities in the state of Alaska and acts as the
general contractor on certain power projects. AP&T is subject to regulation by
the Alaska Public Utilities Commission, the Federal Communications Commission,
and the Federal Energy Regulatory Commission (the Commissions) with respect to
rates for service and maintenance of its accounting records. AP&T's accounting
policies conform to generally accepted accounting principles as applied to
regulated public utilities and are in accordance with the accounting
requirements and rate-making practices of the Commissions.
Consolidation
The accompanying consolidated financial statements include the accounts of AP&T
and its wholly owned subsidiaries, after elimination of significant intercompany
transactions and balances.
Revenue and Cost Recognition
The Company recognizes revenues from fixed-price and modified fixed-price
construction contracts on the percentage-of-completion method, measured by the
percentage of cost incurred to date to estimated total cost for each contract.
This method is used because management considers total cost to be the best
available measure of progress on these contracts. Because of inherent
uncertainties in estimating costs and percentage of completion, actual results
could differ from those estimates.
The asset "Costs and estimated earnings in excess of billings on uncompleted
contracts" represents revenues recognized in excess of amounts billed.
Utility Plant and Depreciation
The cost of additions to and replacements of utility plant are capitalized. Cost
includes direct material, labor, and similar items and charges for such indirect
costs as engineering, supervision, payroll taxes, and pension benefits. AP&T
capitalizes, as an additional cost of electric utility plant, an allowance for
funds used during construction (AFUDC), which represents the allowed cost of
capital used to finance a portion of construction work in progress for projects
of more than one year in duration. AFUDC consists of debt and equity components
that, when capitalized, are credited as noncash
7
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. The Company and Summary of Significant Accounting Policies (continued)
items to other income and interest charges. The cost of current repairs and
maintenance is charged to expense, while the cost of betterment is capitalized.
The original cost of utility plant together with removal cost, less salvage is
charged to accumulated depreciation at such times as assets are retired and
removed from service.
In relation to one specific construction project, Goat Lake Hydro, the Company
used Power Revenue Bond financing to fund construction. As a result interest
cost incurred in 1998 of $1 million related to construction in progress were
capitalized. In addition operating cost of $0.3 million, offset by power sales
of $0.7 million were capitalized during the construction period in 1998. Goat
Lake Hydro became operational on January 1, 1999.
For financial statement purposes, depreciation is computed on the straight-line
method using rates based on average service lives. For income tax purposes, AP&T
computes depreciation using accelerated methods where permitted.
Goodwill
Goodwill is amortized on a straight-line basis over 15 to 40 years.
Preliminary Survey and Investigation Costs
AP&T defers costs incurred for the preliminary survey and investigation of
proposed construction projects in accordance with the rules of the Commissions.
These deferred costs are capitalized into utility plant when the preliminary
survey and investigation projects are completed or are charged to expense in the
period that a proposed project is abandoned.
Fuel, Supplies, and Other Inventory
Fuel, supplies, and other inventory are valued at the lower of cost or market on
a first-in, first-out basis. The supplies and other inventory are primarily held
for use in construction projects.
8
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. The Company and Summary of Significant Accounting Policies (continued)
Income Taxes
Deferred income taxes result from temporary differences in the recognition of
income and expense for tax and financial reporting purposes. The differences are
primarily due to preliminary survey and investigation costs and depreciation
expense.
Customer Advances for Construction
Customer advances for construction of additions to the electric distribution
systems are recorded as a liability and are amortized through discounted service
billings to the customer over a 60-month period. At the end of the amortization
period, any remaining balance is recorded as a reduction of the respective
utility plant accounts.
Stock-Based Compensation
The Company has adopted the disclosure only provisions of FASB Statement No.
123, and applies Accounting Principles Board Opinion No. 25 and related
interpretation in accounting for its stock option plans. Accordingly, the
Company's stock-based compensation expense is recognized based on the intrinsic
value of the option on the date of grant. Disclosure in accordance with
Statement 123 is provided in Note 8.
Earnings per Share
The Company has calculated its basic earnings per share data according to the
method prescribed in FASB Statement No. 128 "Earnings per Share." Under this
Statement, basic earnings per share are based on the weighted average number of
shares of common stock outstanding, excluding any potential dilution that could
occur if any outstanding options were exercised or any other contracts to issue
common stock were converted. Diluted earnings per share reflects the impact of
the dilution caused by outstanding stock options. FASB Statement No. 128
requires the duel presentation of basic and diluted earnings per share.
Reclassifications
Certain prior year amounts have been reclassified to conform to the current year
presentation.
9
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
1. The Company and Summary of Significant Accounting Policies (continued)
Use of Estimates
The preparation of financial statements in conformity with generally accepted
accounting principles requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and disclosure of
contingent assets and liabilities at the date of the financial statements and
the reported amounts of revenues and expenses during the reporting period.
Actual results could differ from those estimates.
2. Utility Plant
Annual
Depreciation
1998 1997 Rate
-----------------------------------------------
Electric plant:
Hydroelectric $ 19,254,755 $ 9,695,267 2%
Other generation 13,153,194 10,764,506 5%
Transmission and distribution 22,327,121 14,090,071 2.5% to 5%
Other 8,365,382 7,482,811 5% to 20%
Land 715,921 796,881 -
------------ -----------
Electric 63,816,373 42,829,536
------------ -----------
Telecommunications plant:
General support assets 1,360,146 1,158,175 5% to 20%
Central office assets 5,152,424 4,895,892 6%
Cable and wire facilities 3,564,312 3,245,805 5% to 6%
Nonregulated investment 2,285,970 1,490,671 7% to 20%
Land 83,555 100,122 -
------------ -----------
Telecommunications 12,446,407 10,890,665
------------ -----------
Total utility plant $76,262,780 $53,720,201
============ ===========
10
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
3. Investments and Other Assets
During 1998, the Company entered into an agreement with Cape Fox Corporation to
form Ketchikan Electric Company LLC (KEC). KEC is a limited liability company
organized under the Alaska Limited Liability Company Act. The principal purpose
and business of KEC is to construct, own, operate and manage a hydroelectric
power system in the Ketchikan Gateway Borough. The Company owns a 50% share of
KEC, with a total investment of $908,000 as of December 31, 1998.
4. Long-Term Debt
Long-term debt consists of the following:
1998 1997
-------------------------
Goat Lake Hydro, Inc., note payable to secure Power
Revenue Bonds series 1997. Face amount of
$23,000,000 less the original issue discount of
$337,818 secured by the Power Sales Agreement, a
Construction Funding Agreement, and all assets of
Goat Lake Hydro Inc. Interest rate average of 6% per
year, principal due in annual installments from 2000
through 2032 $22,662,182 $22,662,182
Other notes payable:
Notes payable to National Bank for Cooperatives (CoBank):
Note payable, secured by BBL Hydro Inc., assets and
revenues, through 2022, at 7.17% fixed interest rate
through 2002 7,860,486 7,947,228
Note payable, secured by telephone assets, due in
quarterly installments through 2008, at 7.24% fixed
interest rate 4,552,420 4,861,329
Note payable, secured by electric assets, due in
quarterly installments through 2012, at 7.28% fixed
interest rate 3,788,540 3,932,477
Note payable, secured by electric assets, due in
quarterly installments through 2010, at 7.33% fixed
interest rate 3,598,289 3,755,618
11
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
4. Long-Term Debt (continued)
1998 1997
--------------------------
Note payable, secured by electric assets, due in
quarterly installments through 2014, variable
interest rate (6.63%) at December 31, 1998 $4,000,000 $1,000,000
Note payable to commercial bank, unsecured line of
credit, due December 2000, variable interest rate
(7.96%) at December 31, 1998 1,500,000 1,000,000
Other debt, unsecured, with interest rates ranging
from 2% to 11%, maturing at various dates 719,629 748,408
----------- -----------
26,019,364 23,245,060
Less current portion 824,058 835,089
----------- -----------
Total other notes payable 25,195,306 22,409,971
----------- -----------
Total long-term debt $47,857,488 $45,072,153
============ ============
Annual maturities for the five years beginning January 1, 1999 are $824,058,
$2,763,981, $1,463,481, $1,470,379, and $1,675,389, respectively, and
$40,484,257, thereafter.
Note payable of Goat Lake Hydro, Inc. (GLH), a wholly owned subsidiary of AP&T,
to secure the Power Revenue Bonds series 1997 is the result of the issuance on
December 31, 1997, of a series of tax-exempt bonds by the Alaska Industrial
Development and Export Authority (AIDEA). The proceeds are restricted in use,
with the purpose of financing the acquisition, purchase, construction,
improvement, and equipment of the project known as the Upper Lynn Canal Regional
Power Supply System. Of these restricted funds, $2 million is required to remain
in reserve for the term of the bonds. To secure payment of bond principal and
interest, AIDEA has assigned to U.S. Bank Trust National Association all rights
and interests in the note. The note is secured by all assets and revenues of GLH
and a Power Sales Agreement (PSA) between GLH and Alaska Power Co. (APC), both
fully owned subsidiaries of AP&T. The Alaska Public Utilities Commission has
approved the PSA for the life of the GLH note. This approval allows APC to
charge its customers the entire annual costs as defined in the PSA, i.e.,
principal and interest due on the bonds, all operating costs (excluding
depreciation), general and administrative costs, and the return on equity
permitted by the
12
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
4. Long-Term Debt (continued)
commission. The PSA requires all GLH's production and sales of electricity be
sold to and purchased by APC for the life of the agreement.
CoBank is organized similar to a cooperative and is owned by the customers it
serves. As such, a portion of CoBank's earnings is returned to its customers.
AP&T's loan agreements with CoBank require that a portion of CoBank's earnings
returned to AP&T be invested in additional stock of CoBank based on a five-year
average of the outstanding borrowings. The electric and telephone assets of the
Company's two principal operating subsidiaries, Alaska Power Company and Alaska
Telephone Company, secure these loan agreements. As part of these agreements,
the Company is required to meet certain covenants. The Company is in compliance
with all covenants.
As of December 31, 1998, the Company has unsecured lines of credit of $4,000,000
from CoBank and $7,500,000 from other commercial banks. This total of
$11,500,000, less the outstanding amount of $1,500,000, is available for general
and other corporate needs.
Interest paid on debt was $1,897,446 and $1,808,521 in 1998 and 1997,
respectively.
5. Operating Lease Agreements
AP&T leases its administrative office and a portion of its utility plant under
noncancellable leases expiring through 2011. Total rent expense was $338,018 and
$270,013 for 1998 and 1997, respectively. Certain of the leases include renewal
provisions at AP&T's option. Minimum rental commitments under noncancellable
operating leases, excluding hydroelectric operations, are $489,388. Minimum
annual rental commitments are $54,515 in each of the next five years. Additional
lease agreements have been secured for the use of the land for hydroelectric
operations. The term of the agreements extend for the life of the hydroelectric
license, 50 years. Total rent expense for hydroelectric operations was $126,570
and $124,395 for 1998 and 1997, respectively.
6. Construction Contract Commitments
The Company formed a joint venture with Whitewater Engineering Company to pursue
a specific construction project. The Company maintains a General Contracting
license issued by the State of Alaska. In December 1998, the joint venture was
awarded a construction contract to modify and improve an existing State-owned
electric
13
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
6. Construction Contract Commitments (continued)
transmission line in southeast Alaska. The total contract price is approximately
$12 million of which the Company's portion is approximately $4.5 million, while
the remaining amount of $7.5 million is to be performed by Whitewater
Engineering Company. The work is required to be completed before the end of
1999. The joint venture has secured financing of $2 million to facilitate the
completion of the contract while the remainder of the project costs will be
financed through progress payments by the State of Alaska.
The Company has signed a fixed price construction contract totaling $17.5
million with KEC (see Note 3) to build the Mahoney Lake Hydroelectric project.
License requirements and permitting will be performed during 1999. The primary
construction efforts will occur in the year 2000. A construction line of credit
from CoBank to KEC will supply the financing requirements for the project.
Obtaining funding of the construction line of credit is subject to the
completion of a Power Sales Agreement between KEC and Ketchikan Public Utility,
and will be secured by the assets of KEC.
7. Income Taxes
The components of the consolidated provision for income taxes are as follows:
1998 1997
------------------------------
Current:
Federal $ 564,667 $ 295,627
State 148,519 75,914
------------- -------------
713,186 371,541
Deferred 456,795 658,229
------------- -------------
Provision for income taxes $ 1,169,981 $ 1,029,770
============= =============
14
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
7. Income Taxes (continued)
Total tax expense differs from that computed at the statutory federal income tax
rate due to the following:
<TABLE>
<CAPTION>
1998 1997
-------------------------------
<S> <C> <C>
Income tax provision at federal rate of 34% $ 1,150,727 $ 1,062,527
State income taxes, net of federal benefit 188,458 171,058
Amortization of deferred investment tax credits (12,807) (9,495)
Benefit of cash dividends paid to ESOP members (149,077) (136,578)
Other (7,320) (57,742)
-------------- --------------
Provision for income taxes $ 1,169,981 $ 1,029,770
============== ==============
The components of the deferred tax assets and liabilities as of December 31,
1998 and 1997 are as follows:
1998 1997
-------------------------------
Current:
Deferred tax assets $ (94,038) $ (82,175)
Deferred tax liabilities 211,905 227,497
-------------- --------------
117,867 145,322
Long-term deferred tax liabilities 4,800,944 4,378,360
-------------- --------------
Total net deferred tax liability $ 4,918,811 $ 4,523,682
============== ==============
</TABLE>
Federal and state income taxes paid were $721,785 and $744,993 in 1998 and 1997,
respectively.
8. Employee Stock Ownership Plan
AP&T maintains an employee stock ownership plan. All employees who have
completed one year of full-time service (1,000 hours) and have attained the age
of 21 are eligible to participate in the plan. Participants may elect to
contribute from 1% to 13.5% of their wages to the plan, which can be invested in
the common stock of AP&T or into other investment accounts. Employer
contributions match the participant's contributions up to the first 3% of the
participant's wages. Employer matching contributions were $124,657 and $111,940
in 1998 and 1997, respectively. Additional employer contributions are made
annually at 5% of the eligible wages. These additional employer contributions
15
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
8. Employee Stock Ownership Plan (continued)
were $217,909 and $186,565 in 1998 and 1997, respectively. Employer
contributions are allocated to all plan participants as of December 31, the end
of the plan year. The plan provides that participants' interests in
employer-funded contributions become fully vested after five years of full-time
employment.
9. Stock Option Plan
In 1991, AP&T established a stock option plan. The plan provides for the grant
of incentive stock options. Stockholders have approved a total of 200,000 shares
to be reserved for the plan from the authorized and unissued common stock. These
options become exercisable five years after the date of grant and expire ten
years after the date of grant.
The effect on net income and earnings per share of the fair value approach under
FASB Statement No.123 is not materially different from those amounts recorded
under APB 25.
A summary of the activity related to the plan is as follows:
Average Exercise
Shares Price Per Share
Under
Option
-------------------------------
Balance at December 31, 1996, unexercised 118,000 $ 14.16
Granted 25,000 21.40
Canceled 13,000 12.82
Exercised 11,000 8.49
-----------
Balance at December 31, 1997, unexercised 119,000 14.58
Granted 38,500 22.55
Canceled 1,500 12.45
Exercised 9,000 9.64
-----------
Balance at December 31, 1998, unexercised 147,000 $ 18.29
===========
16
<PAGE>
Alaska Power & Telephone Company and Subsidiaries
Notes to Consolidated Financial Statements
December 31, 1998
10. Year 2000 Issue (Unaudited)
The Company has evaluated its computer systems and applications. Although there
can be no assurance, the Company believes it is now in compliance with Year 2000
requirements. Any year 2000 compliance problem encountered by the Company, its
suppliers, or its customers is not expected to have a material effect to the
Company's business, financial conditions, and results of operations.
17
<TABLE> <S> <C>
<ARTICLE> OPUR3
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-ASSETS> 75,485,216
<TOTAL-OPERATING-REVENUES> 16,822,130
<NET-INCOME> 2,214,509
</TABLE>
