SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
------
For the quarterly period ended September 30, 1996
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
------ THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ____________ to ____________
Commission file number 1-9894
WPL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1380265
(State or other jurisdiction (I.R.S. Employer Identification Number)
of incorporation or organization)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 608-252-3311
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES X NO
-------- --------
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Common Stock Outstanding at September 30, 1996: 30,795,260 shares
<PAGE>
CONTENTS
PAGE
PART I. Financial Information:
Consolidated Financial Statements of WPL
Holdings, Inc.
Consolidated Balance Sheets as of
September 30, 1996 and 1995 and December 31, 2,3
1995 . . . . . . . . . . . . . . . . . . .
Consolidated Statement of Income for the
Three and Twelve Months Ended September 30, 4
1996 and 1995 . . . . . . . . . . . . . . .
Consolidated Statements of Cash Flows for
the Three and Twelve Months Ended 5
September 30, 1996 and 1995 . . . . . . . .
Notes to Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of 7
Operations . . . . . . . . . . . . . . . .
PART II. Other Information . . . . . . . . . . . . . 20
Signature . . . . . . . . . . . . . . . . . 22
Exhibit Index . . . . . . . . . . . . . . . 23
<PAGE>
<TABLE>
WPL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
<CAPTION>
September 30, September 30, December 31,
1996 1995 1995
(Thousands of Dollars)
<S> <C> <C> <C>
ASSETS
UTILITY PLANT:
Plant in service--
Electric................................................ $1,700,226 $1,648,378 $1,666,134
Gas..................................................... 223,889 212,475 217,678
Water................................................... 23,818 22,192 22,518
Common.................................................. 144,567 130,954 136,943
--------- --------- ---------
2,092,500 2,013,999 2,043,273
Less: Accumulated provision for depreciation.............. 951,086 869,343 887,562
--------- --------- ---------
1,141,414 1,144,656 1,155,711
Construction work in progress............................. 71,360 34,758 36,996
Nuclear fuel, net......................................... 18,191 15,209 18,867
--------- --------- ---------
Total utility plant..................................... 1,230,965 1,194,623 1,211,574
--------- --------- ---------
OTHER PROPERTY AND EQUIPMENT:
Other property and equipment............................. 138,364 163,371 171,211
Less: Accumulated provision for
depreciation.......................................... 24,065 26,504 26,442
--------- --------- ---------
114,299 136,867 144,769
--------- --------- ---------
INVESTMENTS:
Nuclear decommissioning trust funds..................... 85,473 66,559 73,357
Other investments....................................... 13,766 12,098 12,105
--------- --------- ---------
99,239 78,657 85,462
--------- --------- ---------
CURRENT ASSETS:
Cash and equivalents...................................... 6,519 5,409 11,386
Accounts receivable less allowance for
doubtful accounts of $1,207, $2,037 and
and $1,735, respectively................................ 76,467 71,581 94,648
Fossil fuel, at average cost.............................. 18,337 17,106 14,625
Materials and supplies, at average cost................... 21,202 20,819 20,723
Gas in storage, at average cost........................... 11,075 8,244 6,319
Prepayments and other..................................... 26,414 26,982 27,987
--------- --------- ---------
Total current assets.................................... 160,014 150,141 175,688
--------- --------- ---------
Restricted cash............................................. 7,314 6,498 3,266
--------- --------- ---------
OTHER ASSETS:
Regulatory assets...................................... 164,781 159,319 171,699
Deferred charges and other............................. 74,389 98,865 79,956
--------- --------- ---------
Total other assets................................ 239,170 258,184 251,655
TOTAL ASSETS................................................ $1,851,001 $1,824,970 $1,872,414
========= ========= =========
CAPITALIZATION AND LIABILITIES
Common stock, $.01 par value, authorized--
100,000,000 shares; issued and
outstanding-- 30,795,260, 30,773,588 and
30,773,588 shares, respectively......................... $ 308 $ 308 $ 308
Premium on capital stock & capital surplus................ 305,891 307,349 305,223
Reinvested earnings....................................... 307,207 293,794 291,939
--------- --------- ---------
Total common equity.................................. 613,406 601,451 597,470
PREFERRED STOCK NOT MANDATORILY REDEEMABLE:
Cumulative, without par value, authorized
3,750,000 shares maximum aggregate
stated value $150,000,000;
Cumulative, without par value, $100
stated value; 449,765 shares
outstanding......................................... 44,977 44,977 44,977
Cumulative, without par value, $25
stated value; 559,630 shares
outstanding......................................... 14,986 14,986 14,986
--------- --------- ---------
Total preferred stock.................................... 59,963 59,963 59,963
LONG TERM DEBT, NET......................................... 421,270 427,108 430,362
--------- --------- ---------
Total capitalization.................................... 1,094,639 1,088,522 1,087,795
--------- --------- ---------
CURRENT LIABILITIES:
Current maturities of long-term debt...................... 2,336 5,766 3,397
Variable rate demand bonds................................ 56,975 56,975 56,975
Short-term debt........................................... 68,295 89,885 109,525
Accounts payable.......................................... 86,054 74,130 94,898
Accrued payroll and vacation.............................. 15,588 15,709 14,299
Accrued taxes............................................. 14,385 7,605 6,483
Accrued interest.......................................... 6,155 6,409 9,214
Other..................................................... 46,032 24,927 26,783
--------- --------- ---------
Total current liabilities............................... 295,820 281,406 321,574
--------- --------- ---------
OTHER LIABILITIES AND CREDITS:
Accumulated deferred income taxes......................... 241,518 230,267 241,150
Accumulated deferred investment tax credits............... 37,409 39,321 38,842
Accrued environmental remediation costs................... 76,046 78,454 76,852
Other..................................................... 105,569 107,000 106,201
--------- --------- ---------
Total other liabilities and credits..................... 460,542 455,042 463,045
--------- --------- ---------
TOTAL CAPITALIZATION AND LIABILITIES........................ $1,851,001 $1,824,970 $1,872,414
========= ========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
<CAPTION>
Three Months Ended Twelve Months Ended
September 30, September 30,
1996 1995 1996 1995
(In Thousands of Dollars Except for Per Share Data)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric.................................................... $ 153,587 $ 150,708 $ 577,545 $ 539,358
Gas......................................................... 10,827 13,601 158,476 130,855
Fees, rents, non-utility energy
sales and other........................................... 47,849 31,822 164,672 120,515
-------- -------- -------- --------
212,263 196,131 900,693 790,728
-------- -------- -------- --------
OPERATING EXPENSES:
Electric production fuels................................... 30,419 30,660 114,585 117,423
Purchased power............................................. 22,201 14,936 67,698 39,664
Purchased gas............................................... 6,398 8,108 97,104 81,111
Other operation............................................. 83,135 60,359 303,330 253,401
Maintenance................................................. 10,746 9,793 39,439 42,903
Depreciation and amortization............................... 22,162 22,165 89,308 84,510
Taxes other than income..................................... 8,335 8,187 33,720 34,796
-------- -------- -------- --------
183,396 154,208 745,184 653,808
-------- -------- -------- --------
OPERATING INCOME.............................................. 28,867 41,923 155,509 136,920
-------- -------- -------- --------
INTEREST EXPENSE AND OTHER:
Interest on debt............................................ 8,945 9,749 41,277 38,855
Allowance for funds used during
construction (credit)..................................... (741) (606) (2,621) (3,097)
Other (income) and deductions, net.......................... (1,322) (1,515) (13,092) 1,373
-------- -------- -------- --------
6,882 7,628 25,564 37,131
INCOME FROM CONTINUING OPERATIONS
BEFORE INCOME TAXES........................................ 21,985 34,295 129,945 99,789
-------- -------- -------- --------
INCOME TAXES:
Current..................................................... 5,777 8,817 40,075 25,757
Deferred.................................................... 1,965 3,910 3,862 9,936
Amortization of investment tax credits...................... (478) (479) (1,913) (1,918)
-------- -------- -------- --------
7,264 12,248 42,024 33,775
PREFERRED STOCK DIVIDENDS OF SUBSIDIARY....................... 828 827 3,311 3,310
-------- -------- -------- --------
INCOME FROM CONTINUING OPERATIONS............................. 13,893 21,220 84,610 62,704
-------- -------- -------- --------
DISCONTINUED OPERATIONS:
Loss from operations of discontinued
subsidiary, net of applicable tax benefits
of $0, $335, $257, and $1,363,
respectively............................................. - 510 393 2,134
Loss on disposal of subsidiary, net
of applicable tax benefit of $575 and
tax expense of $0, $3,271, and $0,
respectively............................................. 1,297 - 12,271 -
-------- -------- -------- --------
1,297 510 12,664 2,134
-------- -------- -------- --------
NET INCOME.................................................... $ 12,596 $ 20,710 $ 71,946 $ 60,570
======== ======== ======== ========
EARNINGS PER SHARE:
Income from continuing operations.......................... $0.45 $0.69 $2.75 $2.04
Discontinued operations.................................... (0.04) (0.02) (0.41) (0.07)
-------- -------- -------- --------
Net income................................................. $0.41 $0.67 $2.34 $1.97
======== ======== ======== ========
CASH DIVIDENDS PER SHARE OF COMMON STOCK...................... $ 0.4925 $ 0.485 $ 1.948 $ 1.925
======== ======== ======== ========
WEIGHTED AVERAGE COMMON SHARES OUTSTANDING.................... 30,795 30,744 30,784 30,774
======== ======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
<CAPTION>
Three Months Ended Twelve Months Ended
September 30, September 30,
1996 1995 1996 1995
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Cash flows from (used for) operating activities:
Net income .......................................... $ 12,596 $ 20,710 $ 71,946 $ 60,570
Adjustments to reconcile net income to
net cash from operating activities:
Depreciation and amortization...................... 22,162 22,165 89,308 84,510
Deferred income taxes and investment
tax credits...................................... 1,487 3,431 1,950 8,017
Amortization of nuclear fuel....................... 1,727 2,165 8,274 7,538
Allowance for equity funds used during
construction..................................... (494) (454) (1,650) (2,394)
(Gain) loss on sale of subsidiaries................ - - 9,415 -
(Gain) loss on sale of other property
and equipment.................................... - - (5,676) -
Changes in assets and liabilities:
Restricted cash.................................... (1,373) 720 (816) (3,265)
Accounts receivable and unbilled
revenues......................................... 4,786 (10,097) (4,886) 2,285
Production fuels, materials, and
supplies......................................... (3,687) (3,815) (1,614) (668)
Gas in storage..................................... (6,460) (3,066) (2,831) 2,165
Prepayments and other.............................. 8,011 4,011 568 471
Accounts payable and accruals...................... 14,159 11,189 11,549 18,046
Accrued taxes...................................... (3,295) 1,408 6,780 470
Other, net......................................... (602) 20,234 6,995 38,291
------- ------- ------- -------
Net cash from (used for) operating
activities................................... 49,017 68,601 189,312 216,036
------- ------- ------- -------
Cash flows from (used for) financing
activities:
Long-term debt maturities, redemptions
and sinking fund requirements...................... (3,563) (1,040) (9,329) 5,993
Net change in short term debt........................ 10,761 (3,479) (21,590) 27,784
Retirement of first mortgage bonds................... - - (5,011) (17,990)
Common stock cash dividends, less
dividends reinvested............................... (15,167) (14,925) (60,416) (61,847)
Other, net........................................... 362 (322) 5,436 4,349
------- ------- ------- -------
Net cash from (used for) financing
activities...................................... (7,607) (19,766) (90,910) (41,711)
------- ------- ------- -------
Cash flows from (used for) investing
activities:
Proceeds from sale of other property and
equipment.......................................... - - 36,264 -
Additions to utility plant, excluding
AFUDC.............................................. (34,202) (21,247) (125,158) (127,205)
Allowance for borrowed funds used during
construction....................................... (247) (152) (971) (703)
Dedicated decommissioning funding.................... (726) (2,217) (18,914) (14,656)
Proceeds from sale of subsidiaries................... 2,800 - 23,024 -
Purchase of other property and
equipment.......................................... (1,940) (10,390) (5,065) (14,898)
Other, net........................................... (10,211) (20,491) (6,472) (18,849)
------- ------- ------- -------
Net cash from (used for) investing
activities....................................... (44,526) (54,497) (97,292) (176,311)
------- ------- ------- -------
Net increase (decrease) in cash and
equivalents......................................... (3,116) (5,662) 1,110 (1,986)
Cash and equivalents at beginning of
period.............................................. 9,635 11,071 5,409 7,395
------- ------- ------- -------
Cash and equivalents at end of period.................. $ 6,519 $ 5,409 $ 6,519 $ 5,409
======== ======== ======== ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest on debt................................... $ 10,697 $ 9,897 $ 38,210 $ 35,891
Preferred stock dividends of
subsidiary....................................... $ 828 $ 828 $ 3,310 $ 3,310
Income taxes....................................... $ 11,301 $ 5,524 $ 40,454 $ 25,476
Noncash financing activities:
Dividends reinvested................................ $ - $ - $ - $ 216
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by WPL Holdings, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. The consolidated financial statements include the Company
and its wholly owned consolidated subsidiaries including Wisconsin
Power and Light Company (WP&L). These financial statements should be
read in conjunction with the financial statements and the notes
thereto included in the Company's latest Annual Report on Form 10-K.
In the opinion of management, all adjustments, consisting only of
normal recurring adjustments, necessary for a fair presentation of (a)
the consolidated results of operations for the three and twelve month
periods ended September 30, 1996 and 1995, (b) the consolidated
financial position at September 30, 1996 and 1995 and December 31,
1995, and (c) the consolidated statement of cash flows for the three
and twelve month periods ended September 30, 1996 and 1995 have been
made.
2. During the first quarter of 1996, the Financial Accounting
Standards Board issued an Exposure Draft on Accounting for Liabilities
Related to Closure and Removal of Long-Lived Assets which deals with,
among other issues, the accounting for decommissioning costs. If
current electric utility industry accounting practices for such
decommissioning are changed: (1) annual provisions for
decommissioning could increase, (2) the estimated cost for
decommissioning could be recorded as a liability rather than as
accumulated depreciation, with recognition of an increase in the
recorded amount of nuclear plant, and (3) trust fund income from the
external decommissioning trusts could be reported as investment income
rather than as a reduction to decommissioning expense. Given the
preliminary nature of the process, the Company cannot currently
determine what impact, if any, this process may have on the Company's
financial condition or results of operations.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995:
Overview
The Company reported consolidated third quarter net income from
continuing operations of $13.9 million or 45 cents per share compared to
$21.2 million or 69 cents per share for the same period in 1995. The
decrease in earnings primarily reflects the operation of the Company's
utility subsidiary, WP&L. The impact of cooler summer weather on higher-
margin residential electric sales combined with an increase in operations
and maintenance expense resulted in lower earnings compared with the same
quarter in 1995.
Heartland Development Corporation ("HDC"), parent company of the
Company's non-regulated operations, reported a loss from continuing
operations of $1.4 million for the third quarter of 1996 compared with a
income from continuing operations of $0.3 million for the same period in
1995. The third quarter performance was due to losses at the Company's
energy services and environmental consulting businesses. Also during the
third quarter of 1996, a loss of $1.3 million resulted from additional
fees and expenses related to the discontinued operation of A&C Enercom
Consultants, Inc. which is discussed in the "Discontinued Operations"
section of the MD&A.
<TABLE>
Electric Operations
<CAPTION>
Revenues
and Costs % kWhs Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $50,863 $55,870 (9)% 758,394 843,617 (10)% 336,221 330,229 2%
Industrial 36,789 36,497 1% 1,025,866 1,001,149 2% 816 791 3%
Commercial 28,150 28,704 (2)% 493,528 502,534 (2)% 45,558 44,575 2%
Wholesale and
Class A 36,134 29,374 23% 1,371,639 831,530 65% 93 81 15%
Other 1,651 263 528% 13,193 12,065 9% 1,741 1,503 16%
------- ------- --------- --------- ------- -------
Total 153,587 150,708 2% 3,662,620 3,190,895 15% 384,429 377,179 2%
------- ------- ========= ========= ======= =======
Electric
Production
Fuels 30,419 30,660 (6%)
Purchased Power 22,201 14,936 49%
-------- -------
Margin $100,967 $105,112 (4)%
========= =========
</TABLE>
Electric revenues increased $2.9 million, or 2 percent, as compared
to the third quarter of 1995. The increase was the result of a 15 percent
increase in kWh sales primarily due to increased bulk power sales and
continued customer growth during the third quarter of 1996.
Electric margin decreased $4.1 million, or 4 percent, during the
third quarter of 1996 compared to the third quarter of 1995 primarily due
to a change in the mix of sales from higher margin residential customers
to lower margin bulk power sales. The decline in residential sales
reflects a much cooler summer in 1996 as compared to the extreme heat
experienced in the summer of 1995. The decrease in residential and
commercial revenues was offset somewhat by opportunities for WP&L to
increase its sale of power to other utilities. The 49 percent increase in
purchased power expense reflects both increased sales and the availability
of competitively priced off-system power.
<TABLE>
Gas Operations
<CAPTION>
Revenues
and Costs % Therms Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $5,576 $5,177 8% 7,564 7,761 (3)% 132,084 127,428 4%
Firm 3,625 3,474 4% 6,659 7,433 (10)% 16,169 15,698 3%
Interruptible 377 357 6% 987 1,134 (13)% 247 226 9%
Transport. and
Other 1,249 4,593 (73)% 38,044 36,319 5% 254 255 (0)%
------ ------ ------ ------ ------- -------
Total 10,827 13,601 (20)% 53,254 52,647 1% 148,754 143,607 4%
------ ------ ====== ====== ======= =======
Purchased Gas 6,398 8,108 (21)%
------ ------
Margin 4,429 5,493 (19)%
====== ======
</TABLE>
Gas revenues decreased $2.8 million, or 20 percent, in the third
quarter of 1996 as compared to 1995. A somewhat milder third quarter of
1996 resulted in a 3 percent decease in high margin residential sales. In
addition, a change in the sales mix, on a therms sold basis, resulted in a
10 and 13 percent decrease in firm and interruptible sales, respectively,
with a 5 percent increase in transportation sales. The gas incentive
program authorized by the Public Service Commission of Wisconsin (PSCW)
resulted in additional earnings of $0.2 million pre-tax during the third
quarter of 1996 compared with a slight loss for the same period in 1995.
Growth in the economic service territory resulted in a 4 percent increase
in customers.
The review of the gas incentive program for 1995 by the PSCW was
completed and will result in a November 1996 refund to residential
natural gas customers of $3.3 million. The full amount of the refund will
be reflected in the financial results in the fourth quarter 1996, which is
expected to have no material impact on earnings.
Fees, Rents, Non Utility Energy Sales and Other Revenues
Fees, rents, non utility energy sales and other revenues primarily
reflect sales and revenues of the Company's non-regulated subsidiaries,
consolidated under HDC, as adjusted for discontinued operations. The $16.0
million increase in fees, rents, non utility energy sales and other
revenues is the result of higher energy marketing revenues due to an
increase in power marketing activity at the energy marketing company.
In addition to the revenues of the non-regulated businesses, fees,
rents, non utility energy sales and other revenues also include revenue
from the water utility operations of WP&L. These revenues represent $1.1
million for both the three months ended September 30, 1996 and 1995.
Other Operation and Maintenance
The increase in other operation and maintenance expense of $23.7
million is primarily due to the increased activity in the energy marketing
business, merger related expenses, employee welfare plan expense, and the
timing of Kewaunee expenses. Refueling costs at Kewaunee which occurred in
the second quarter of 1995 did not begin until late in the third quarter
of 1996.
Income Taxes
Income taxes decreased between third quarters consistent with lower
taxable income.
TWELVE MONTHS ENDED SEPTEMBER 30, 1996 VS. SEPTEMBER 30, 1995:
Overview
The Company reported consolidated net income from continuing
operations of $84.6 million or $2.75 per share for the twelve months
ended September 30, 1996, as compared to $62.7 million or $2.04 per share
for the same period in 1995. Earnings per share for the twelve-month
periods ended September 30, 1996 and September 30, 1995, were $2.34 and
$1.97, respectively, reflecting the impact of the discontinued operation
of A&C Enercom Consultants, Inc. The increase in earnings primarily
reflects the operations of WP&L. Weather-driven sales growth along with
continued customer growth in the service territory contributed to
increased electric and gas margins as compared with the twelve months
ended September 30, 1995. In addition, a $3.4 million after-tax gain on
the sale of a combustion turbine was recognized during the twelve months
ended September 30, 1996.
Other operation and maintenance expenses at WP&L decreased primarily
due to higher early retirement and severance expenses during the twelve
month period ended September 30, 1995, and a shift in the refueling cycle
at the Kewaunee Nuclear Power Plant from the second quarter of 1995 to the
end of the third quarter of 1996.
HDC reported a loss from continuing operations of $4.2 million for
the twelve months ended September 30, 1996, compared with a loss from
continuing operations of $0.1 million for the same period in 1995. The
losses in both periods are largely attributable to the operations of the
energy services business which includes losses on commodity transactions.
Offsetting these losses was a gain of $4.2 million in the twelve months
ended September 30, 1996, related to the sale of the Company's investment
in assisted living properties.
During the twelve months ended September 30 , 1996, a $0.4 million
loss on discontinued operations resulted from A&C Enercom Consultants,
Inc. and a $12.3 million loss on disposal of A&C Enercom Consultants,
Inc. was recognized which is discussed in the "Discontinued Operations"
section of the MD&A.
<TABLE>
Electric Operations
<CAPTION>
Revenues
and Costs % kWh Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $199,134 $199,344 - 2,928,103 2,918,306 9% 336,221 330,229 2%
Industrial 143,780 140,867 2% 3,957,926 3,868,308 2% 816 791 3%
Commercial 104,037 101,852 2% 1,800,120 1,744,523 3% 45,558 44,575 2%
Wholesale and
Class A 124,330 89,937 38% 4,818,134 2,747,997 75% 93 81 15%
Other 6,264 7,358 (15)% 57,338 53,459 7% 1,741 1,503 16%
------- ------- ---------- ---------- ------- -------
Total 577,545 539,358 7% 13,561,621 11,332,593 20% 384,429 377,179 2%
------- ------- ========== ========== ======= =======
Electric
production
fuels 114,585 117,423 (2)%
Purchased Power 67,698 39,664 71%
------- -------
Margin $395,262 $382,271 3%
======= =======
</TABLE>
Electric revenues increased $38.2 million, or 7 percent, as compared
to the twelve months ended September 30, 1995. The increase was the result
of a 20 percent increase in kWh sales primarily due to higher sales to
other utilities, colder winter weather in 1996, and customer growth.
Electric margin increased $13.0 million, during the twelve months
ended September 30, 1996, compared to the same period in 1995. Higher
sales to commercial and industrial customers as well as other utilities
combined with reduced costs per kWh for electric production fuels and
purchased power resulted in a 3 percent increase in electric margin.
Although total fuel and purchased power costs declined on a per kWh basis,
purchased power expense increased by 71 percent. This increase is due to
the Company's higher level of sales to other utilities as well as the
opportunity to purchase low cost energy. Partially offsetting increased
purchased power costs are slightly lower delivered coal and nuclear fuel
costs per kWh.
<TABLE>
Gas Operations
<CAPTION>
Revenues
and Costs % Therms Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $85,354 $64,562 32% 142,024 115,591 23% 132,084 127,428 4%
Firm 47,632 36,031 32% 98,997 82,706 20% 16,169 15,698 3%
Interruptible 3,626 4,730 (23)% 10,526 14,990 (30)% 247 226 9%
Transport. and
Other 21,864 25,532 (14)% 176,450 160,382 10% 254 255 (0)%
------- ------- ------- ------- ------- -------
Total 158,476 130,855 21% 427,997 373,669 15% 148,754 143,607 4%
======= ======= ======= ======= ======= =======
Purchased Gas 97,104 81,111 20%
------- -------
Margin $61,372 $49,744 23%
======= =======
</TABLE>
Gas revenues increased $27.6 million, or 21 percent, during the
twelve months ended September 30, 1996, as compared to the twelve months
ended September 30, 1995. The higher revenues were the result of a 15
percent rise in therm sales primarily due to colder winter weather and
residential and firm customer growth. The higher sales volumes as well as
favorable management of gas supply costs resulted in a $11.6 million, or
23 percent, increase in gas margin.
With the elimination of the purchased gas adjustment clause effective
January 1, 1995, the fluctuations in the commodity cost of gas above or
below a prescribed commodity price index will increase or decrease WP&L's
margin on gas sales. Both benefits and exposures are subject to customer
sharing provisions. WP&L's share is capped at $1.1 million, pre-tax. For
the twelve months ended September 30, 1996, the gas incentive program
resulted in additional earnings of $1.0 million pre-tax compared with
additional earnings of $0.6 million pre-tax for the same period in 1995.
Fees, Rents, Non Utility Energy Sales and Other Revenues
Fees, rents, non utility energy sales and other revenues primarily
reflect sales and revenues of the Company's non-regulated subsidiaries,
consolidated under HDC, as adjusted for discontinued operations.
The increase of $44.2 million is primarily due to increased power
marketing activity at the energy services subsidiary. The increase was
partially offset by lower revenues in the environmental business due to a
softening market as well as lower revenues in the affordable housing
business due to a decrease in syndication revenues.
In addition to the revenues of the non-regulated businesses, fees,
rents, non utility energy sales and other revenues also include revenue
from the water utility operations of WP&L. These revenues represent $4.2
million for both the twelve months ended September 30, 1996 and 1995,
respectively.
Other Operation and Maintenance
The increase in other operation and maintenance expense of $46.5
million is primarily due to the increased costs associated with gas and
electric marketing transactions in the energy services subsidiary. The
higher expenses at HDC were offset by a $16.7 million reduction in expense
at WP&L. The decrease in the utility operations was a result of higher
early retirement and severance expenses during the twelve months ended
September 30, 1995, related to the Company's reengineering efforts. In
addition, nuclear plant refueling costs which occurred during the twelve-
month period ended September 30, 1995, did not begin until late in the
third quarter of 1996.
Depreciation and Amortization
Depreciation and amortization expense increased $4.8 million as a
result of property additions, and greater amortization of contributions in
aid of construction ( a reduction of expense) during the twelve months
ended September 30, 1995.
Interest Expense and Other
Interest expense and other increased primarily as a result two
significant gains recognized during the twelve months ended September 30,
1996. The sale of a combustion turbine by WP&L resulted in a gain of $5.7
million. In addition , HDC recognized a $4.2 million gain on a sale of its
investment in assisted living properties.
Income Taxes
Income taxes increased for the twelve-month period ended September
30, 1996, as a result of higher taxable income.
TWELVE MONTHS ENDED SEPTEMBER 30, 1996 VS. TWELVE MONTHS ENDED
DECEMBER 31, 1995:
OVERVIEW
The Company reported consolidated net income from continuing
operations of $84.6 million or $2.75 per share for the twelve months
ended September 30, 1996 as compared to $71.6 million or $2.33 per share
for the twelve months ended December 31, 1995. The increase in earnings
primarily reflects the operations of WP&L. Weather-driven sales growth
contributed to increased electric and gas margins. In addition, a $3.4
million after-tax gain on the sale of a combustion turbine was recognized
during the twelve months ended September 30, 1996.
HDC reported a loss from continuing operations of $4.2 million for
the twelve months ended September 30, 1996 compared with a loss from
continuing operations of $1.5 million for the twelve months ended December
31, 1995. The losses in both periods are largely attributable to the
operations of the energy services business. Offsetting these losses was a
gain of $4.2 million in the twelve months ended September 30, 1996,
related to the sale of the Company's investment in assisted living
properties.
During the twelve months ended September 30 , 1996, a $0.4 million
loss on discontinued operations resulted from the sale of A&C Enercom
Consultants, Inc. and a $12.3 million loss on disposal of A&C Enercom
Consultants, Inc. was recognized which is discussed in the "Discontinued
Operations" section of the MD&A. Earnings per share for the twelve-month
periods ended September 30, 1996 and December 31, 1995 were $2.34 and
$1.90, respectively, reflecting the impact of the discontinued operation
of A&C Enercom Consultants, Inc.
<TABLE>
Electric Operations
<CAPTION>
Revenues
and Costs % kWh Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $199,134 $199,850 - 2,928,103 2,937,825 - 336,221 329,643 2%
Industrial 143,780 140,562 2% 3,957,926 3,872,520 2% 816 795 3%
Commercial 104,037 102,129 2% 1,800,120 1,773,406 2% 45,558 44,730 2%
Wholesale and
Class A 124,330 97,350 28% 4,818,134 3,109,385 55% 93 48 94%
Other 6,264 6,433 (3)% 57,338 54,042 6% 1,741 1,294 35%
------- ------- ---------- ---------- ------- -------
Total 577,545 546,324 6% 13,561,621 11,747,178 15% 384,429 376,510 2%
------- ------- ========== ========== ======= =======
Electric
production
fuels 114,585 116,488 (2)%
Purchased Power 67,698 44,940 51%
------- -------
Margin $395,262 $384,896 3%
======= =======
</TABLE>
Electric revenues increased $31.2 million, or 6 percent, as compared
to the twelve months ended December 31, 1995. The increase was the result
of an 55 percent increase in kWh sales to other utilities, and higher
commercial and industrial sales.
Electric margin increased $10.4 million, or 3 percent, during the
twelve months ended September 30, 1996, compared to the twelve months
ended December 31, 1995, primarily due to higher sales (as discussed
above). Aggregate costs of production fuels and purchased power increased
as a result of an 15 percent increase in kWh sales. Because of this
increase in sales and the availability of competitively priced off-system
power, purchased power increased 51 percent.
<TABLE>
Gas Operations
<CAPTION>
Revenues
and Costs % Therms Sold % Customers at %
(In Thousands) Change (In Thousands) Change End of Quarter Change
1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and
Farm $85,354 $70,382 21% 142,024 126,903 12% 132,084 129,576 2%
Firm 47,632 39,456 21% 98,997 91,316 8% 16,169 15,976 1%
Interruptible 3,626 3,708 (2)% 10,526 12,148 (13)% 247 257 (4)%
Transport. and
Other 21,864 25,619 (15)% 176,450 169,121 4% 254 284 (11)%
------- ------- ------- ------- ------- -------
Total 158,476 139,165 14% 427,997 399,488 7% 148,754 146,093 2%
======= ======= ======= ======= ======= =======
Purchased Gas 97,104 84,002 16%
------- -------
Margin $61,372 $55,163 11%
======= =======
</TABLE>
Gas revenues increased $19.3 million, or 14 percent, during the
twelve months ended September 30, 1996, as compared to the twelve months
ended December 31, 1995. The higher revenues were the result of a 7
percent rise in therm sales primarily due to colder winter weather in the
first quarter of 1996.
Gas margin increased $6.2 million or 11 percent during the twelve
months ended September 30, 1996, compared with the period ended December
31, 1995, primarily due to a change in the mix of customer sales. The
sales mix indicates a decline of 13 percent in interruptible sales with a
corresponding increase of 12 percent and 8 percent in higher margin
residential and firm sales, respectively.
Fees, Rents, Non Utility Energy Sales and Other Revenues
Fees, rents, non utility energy sales and other revenues primarily
reflect sales and revenues of the Company's non-regulated subsidiaries,
consolidated under HDC, as adjusted for discontinued operations. The
increase in fees, rents, non utility energy sales and other revenues of
$43 million is primarily due to increased power marketing activity at the
energy services subsidiary. The increase was partially offset by lower
revenues in the environmental business due to a softening market and in
the affordable housing business due to a decrease in syndication revenues.
In addition to the revenues of the non-regulated businesses, fees,
rents, non utility energy sales and other revenues also include revenue
from the water utility operations of WP&L. These revenues represent $4.2
million for both the twelve months ended September 30, 1996 and December
31, 1995.
Other Operation and Maintenance
The increase in other operation and maintenance expense of $49.9
million is primarily due to the increased activity in the energy services
business. The increase in expenses at HDC was offset by a $5.6 million
reduction in expense at WP&L. The decrease in the utility operations is
primarily due to the timing of nuclear plant refueling costs which
occurred during the twelve-month period ended December 31, 1995, and did
not begin until late in the third quarter of 1996.
Depreciation and Amortization
Depreciation and amortization expense increased $3.0 million as a
result of property additions, and greater amortization of contributions in
aid of construction (a reduction of expense) during the twelve months
ended December 31, 1995.
Income Taxes
Income taxes increased for the twelve month period ended September
30, 1996, as a result of higher taxable income.
Other (Income) and Deductions, Net
Other (income) and deductions increased primarily as a result two
significant gains recognized during the twelve months ended September 30,
1996. The sale of a combustion turbine resulted in a pre-tax gain of $5.7
million and a $4.2 million gain resulted from the sale of an HDC
investment in assisted living properties.
Discontinued Operations
During the fourth quarter of 1995, the Company recognized an $11.0
million estimated loss related to the discontinued operations of A&C
Enercom Consultants, Inc. ("A&C"), its utility energy and marketing
consulting business. During the three months ended September 30, 1996, the
Company recognized an additional $1.3 million of fees and expenses related
to the disposition. The impact of the disposition of this business segment
was as follows in each of the time periods presented:
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
9/30/96 9/30/95 9/30/96 9/30/95 12/31/95
($Millions) ($Millions) ($Millions) ($Millions) ($Millions)
<S> <C> <C> <C> <C> <C>
Loss from operations of
discontinued subsidiary --- .5 0.4 2.1 2.2
Loss on disposal of
subsidiary 1.3 --- 12.3 --- 11.0
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
The Company's liquidity is primarily determined by the level of cash
generated from its utility operations and the funding requirements of
WP&L's ongoing construction and maintenance programs. WP&L finances its
construction expenditures through internally generated funds supplemented,
when required, by outside financing.
During the three and twelve months ended September 30, 1996, and
September 30, 1995, the Company generated sufficient cash flows from
operations, the sale of other property and equipment and short-term
borrowings to cover operating expenses, cash dividends and investing
activities. Cash flows from operations decreased to $49.0 million for the
three months ended September 30, 1996, compared to $68.6 million for the
same period last year. For the twelve-month period ended September 30,
1996, cash flows from operations decreased to $189.3 million from $216.0
million during the same period in 1995. During the twelve months ended
September 30, 1996, the Company received $59.3 million from sales of a
combustion turbine and several non-regulated investments. For the twelve
month period ended September 30, 1996, cash flows from operations
increased to $189.3 million from $185.7 million for the twelve months
ended December 31, 1995.
Financing and Capital Structure
The level of short-term borrowing fluctuates based primarily on
seasonal corporate needs, the timing of long-term financing and capital
market conditions. WP&L generally borrows on a short-term basis to
provide interim financing of construction and capital expenditures in
excess of available internally-generated funds. To maintain flexibility in
its capital structure and to take advantage of favorable short-term rates,
the Company also uses proceeds from the sales of accounts receivable and
unbilled revenues to finance a portion of its long-term cash needs. Bank
lines of credit of $120 million at September 30, 1996, are available to
support these borrowings.
The Company's capitalization at September 30,1996, including the
current maturities of long-term debt, variable rate demand bonds and
short-term debt, consisted of 53 percent common equity, 5 percent
preferred stock and 42 percent total debt.
Capital Expenditures
The Company's largest subsidiary, WP&L, is a capital-intensive
business and requires large investments in long-lived assets. Therefore,
the Company's most significant capital requirements relate to utility
construction expenditures. Construction expenditures for the three months
ended September 30, 1996, were $37.3 million. The estimated construction
expenditures for the remainder of 1996 are $34.1 million.
The Company has a 41.0 percent ownership interest in Kewaunee Nuclear
Power Plant (Kewaunee). The operating partner of this plant is Wisconsin
Public Service Corporation (WPSC).
Kewaunee was taken out of service on September 21, 1996, for a
scheduled refueling and maintenance outage which was originally projected
to be of five weeks duration (i.e., Kewaunee was scheduled to return to
service on October 25, 1996). During the outage, however, electronic
inspection of previously sleeved steam generator tubes disclosed continued
degradation of steam generator tube sleeve joints. There were 907 new
indications of corrosion in Steam Generator A and 587 new indications in
Steam Generator B which would require plugging, except for the impact of
two technical specification changes described below. Plugging of these
tubes would result in the aggregate number of effectively plugged Steam
Generator A tubes of approximately 49% of total tubes and the aggregate
number of effectively plugged Steam Generator B tubes of approximately 34%
of total tubes (each steam generator has a total of 3,388 tubes). In each
instance, this would exceed the currently effective 25% average plugging
limit for each of the two steam generators established by the current
Kewaunee safety analysis report and would prevent further operation of
Kewaunee unless and until the tubes are repaired or the two steam
generators are replaced. WPSC has successfully performed the safety
analyses necessary to increase the steam generator effective plugging
margin from 25% to 30%.
Paragraphs which included forward information are preceded by an
asterisk("*")
*As anticipated in the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1996, the owners of Kewaunee have submitted
requests with the Nuclear Regulatory Commission (NRC) for two technical
specification changes: (1) The first technical specification change,
which was approved in September 1996, relocates the sleeve pressure
boundary and allows leaving in service or unplugging 74 tubes in Steam
Generator A and 52 tubes in Steam Generator B; (2) The second technical
specification change, approval of which is still pending, would
allow the laser weld repair of the remaining sleeve joints thereby
allowing the steam generator tubes with the new indications to remain in
service. Although the Company cannot predict the exact nature and timing
of the NRC's response to the request for the second technical
specification change, the Company currently expects the request to be
approved by the NRC in mid-November of 1996. It is estimated that the
repair of the steam generators will extend the outage six to nine weeks
beyond the original five week period. Based on current estimates, Kewaunee
is expected to be returned to service prior to year end. It is estimated
that the total cost of repairing corroded sleeved tubes utilizing laser
welding repair technology would be $3,000,000 to $5,000,000, WP&L's share
being $1,230,000 to $2,050,000. The current estimated cost to WP&L of
purchasing replacement power is in the range of $430,000 per week more
than the cost of Kewaunee generated power. For 1997, WP&L is pursuing
regulatory approval of one of several alternative cost recovery mechanisms
which would reduce the financial exposure of either an extended Kewaunee
outage or a mid-operating cycle outage.
*Prior to the current refueling outage, Kewaunee was operating at 98%
of full rated capacity due to the plugging of tubes. After the
anticipated repairs to be made during this outage, Kewaunee could be
operating at approximately the same 98% level.
*The duration of the current Kewaunee outage will depend upon a
number of steam generator repair related factors, including: (1) whether
or not the NRC will permit the use of the laser welding repair technology,
(2) the length of time it takes the NRC to respond to Kewaunee's request
for use of the laser welding repair technology, (3) the availability of
the necessary welding equipment and trained personnel to operate the
equipment, (4) the number of tubes to be repaired, (5) the level of
satisfaction the NRC has that the tubes that remain unplugged will perform
safely during the next operating cycle, and (6) the tube repair success
rate. If for any reason the steam generators cannot be repaired, the
ability of the Kewaunee owners to reach consensus on steam generator
replacement and to secure the approval of the PSCW for such replacement
would become critical factors affecting the duration of the current outage
because in that case replacement of steam generators is essential for the
continued operations of Kewaunee.
*If the repairs are made using laser welding technology, such repairs
would only be temporary because corrosion will continue at a rate which
cannot be forecasted accurately. Although WPSC believes that the repairs
could extend the useful life of the steam generators for a period of three
or more years, there has been minimal field experience with this repair
technology, and there can be no assurance that such repairs will be
effective or, once effective, remain effective for any given period of
time. If it should become necessary to retire Kewaunee permanently, WP&L
would replace the Kewaunee generation through a combination of power
purchases, increased generation at existing WP&L generating units and new
generating unit additions if necessary.
Currently, the owners of Kewaunee have different views of the future
market value of energy which impact on the desirability of replacing the
steam generators. During the first quarter of 1996 WPSC filed an
application with the PSCW seeking approval to replace the steam generators
in 1999. WP&L believes that analysis and final action on this application
will take approximately two years to complete. The joint owners continue
to analyze and discuss various options related to the future of Kewaunee,
including various ownership transfer alternatives. The net book value of
WP&L's share of Kewaunee as of September 30, 1996, was $56.2 million.
WP&L has applied to the PSCW for accelerated depreciation of the
remaining book value of Kewaunee such that by the end of the year 2002
there would be full recovery of all plant investment. The request for this
acceleration reflects the condition of the present steam generators and
the evolution of the electric generation marketplace towards a more
competitive model.
Certain matters as identified above are "forward-looking statements"
intended to qualify for the safe harbor from liability established by the
Private Securities Litigation Reform Act of 1995. Such forward-looking
statements are subject to certain risks and uncertainties which could
cause actual results and outcomes to differ materially from those
currently anticipated. In addition to the matters specifically described
in the forward-looking statements, factors that could affect actual
results or outcomes include the timing and nature of regulatory responses
and approvals, technological developments and advancements regarding
repair of the steam generator tubes, the time needed to complete necessary
repairs, the useful life of any repairs effected, and the cost of
purchased electric power or additional generating facilities to replace
the power generated by Kewaunee. Shareholders, potential investors and
other readers are urged to consider these factors in evaluating the
forward-looking statements and are cautioned not to place undue reliance
on such forward-looking statements. The forward-looking statements
included herein are only made as of the date of this Quarterly Report on
Form 10-Q and the Company undertakes no obligation to update publicly such
forward-looking statements to reflect subsequent events or circumstances.
Rates and Regulatory Matters
In the PSCW rate order UR-109, effective January 1, 1995, the PSCW
approved certain incentive programs. In 1995, WP&L collected $2.0 million
pre-tax in revenues for SO2 emissions and service reliability incentive
clauses. Based on the 1995 performance of the SO2 emissions and service
reliability incentive programs a $2.5 million refund was approved by the
PSCW to retail electric customers and was made during the third quarter of
1996.
The gas incentive program for 1995 resulted in a additional earnings
of $1.0 million and a refund to residential natural gas customers of $3.3
million. The refund is expected to occur in November 1996.
WP&L made its required biennial rate case filing with the PSCW on
April 1, 1996. Technical hearings will are anticipated to take place from
November 18, 1996, through November 27, 1996. A final order is expected in
early 1997.
INDUSTRY OUTLOOK
The PSCW's inquiries into the future structure of the natural gas and
electric utility industries are ongoing. The stated goal of the PSCW in
the natural gas docket is to move all gas supply activities out of the
existing regulated distribution utilities and allow independent units to
compete for the business. The goal of the electric restructuring process
is to create open access transmission and distribution services for all
customers with competitive generation and customer service markets.
Additional proceedings as well as consultation with the legislature are
planned prior to a target implementation date after the year 2000.
On April 24, 1996, the Federal Energy Regulatory Commission (FERC)
issued two rules (No. 888 and 889) that will promote competition by
opening access to the nation's wholesale power market. The new rules
require public utilities that own, control or operate transmission
systems to provide other companies with the same transmission
access/service that they provide to themselves. The Company presently has
on file with the FERC a pro forma open access transmission tariff, filed
on July 8, 1996, in compliance with FERC order no. 888. On September 20,
1996, the FERC extended the deadline for compliance with order no. 889 to
January 3, 1997. WP&L will fulfill its requirements through participation
in a regional Open Access Same-time Information System administered by the
Mid-America Interconnected Network, Inc.
On September 26, 1996, the PSCW issued an order which establishes the
minimum Standards for a Wisconsin Independent System Operator (Standards).
The Standards will be applied by the PSCW in Advance Plan proceedings,
merger review cases, transmission construction cases, and other
proceedings as appropriate. The order provides that the Standards will be
reviewed and revised as necessary in light of ongoing regional and
national events such as FERC requirements or policy, regional
institutions, or relevant actions of neighboring states.
INFLATION
The impacts of inflation on WP&L are currently mitigated through
current rate making methodologies. Although rates will be held flat
until at least 1997, management expects that any impact of inflation will
be mitigated by customer growth and productivity improvements.
OTHER
Proposed Merger
The Company, IES Industries Inc. ("IES"), and Interstate Power Co.
("IPC") have entered into an Agreement and Plan of Merger ("Merger
Agreement"), dated November 10, 1995, as amended, providing for: a) IPC
becoming a wholly-owned subsidiary of the Company, and b) the merger of
IES with and into the Company, which merger will result in the combination
of IES and the Company as a single holding company. The holding company
will be renamed Interstate Energy Corporation. Under terms of the Merger
Agreement, the outstanding shares of the Company's common stock will
remain unchanged and outstanding as shares of Interstate Energy. Each
outstanding share of IES common stock will be converted to 1.14 shares of
Interstate Energy's common stock. Each share of IPC's common stock will be
converted to 1.11 shares of Interstate Energy's common stock.
The Company, IES and IPC held separate shareowner meetings on
September 5, 1996. At the annual meetings the shareowners of all three
companies approved the Merger Agreement. In addition to shareholder
approval, approvals must be secured from regulatory agencies at the
federal and state level. The merger partners expect the merger to be
completed during the first half of 1997.
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareowners held on September 5,
1996, Rockne G. Flowers, Katharine C. Lyall and Henry C. Prange were
elected as directors whose terms will expire in 1999. The following table
sets forth certain information with respect to the election of directors
at the annual meeting.
Shares Withholding
Name of Nominee Shares Voted For Authority
Rockne G. Flowers 26,004,985 916,276
Katharine C. Lyall 25,947,322 971,171
Henry C. Prange 25,849,176 1,026,285
The following table sets forth the other directors of the Company
whose terms of office continued after the 1996 annual meeting.
Name of Director Year In Which Terms Expires
Erroll B. Davis, Jr. 1997
Milton E. Neshek 1997
Carol T. Toussaint 1997
L. David Carley 1998
Donald R. Haldeman 1998
Arnold M. Nemirow 1998
Judith D. Pyle 1998
At the annual meeting, shareowners approved the appointment of Arthur
Andersen LLP as the Company's independent auditors for the 1996 calendar
year. With respect to such matter, the number of shares voted for and
against were 26,203,139 and 312,401, respectively. The number of shares
abstaining were 416,401 and the broker non-votes were O.
The following three non-routine items had 3,069,652 shares subject to
broker non-votes:
The Agreement and Plan of Merger, dated November 10, 1995, as
amended, among the Company, IES Industries Inc. and Interstate Power
Company, the related Plan of Merger to be entered into by and between the
Company and IES Industries Inc. and the transactions contemplated by the
Merger Agreement and the related Plan of Merger, including, among other
things, the issuance of common stock of the Company pursuant to the terms
of the Merger Agreement and the related Plan of Merger, was approved by
shareowners at the annual meeting. With respect to such matter, the
number of shares voted for and against were 22,148,912 and 1,078,883,
respectively. The number of shares abstaining were 696,627.
The proposal to change Article 1 of the Restated Articles of
Incorporation amending the name of the corporation to Interstate Energy
Corporation was approved with 21,585,265 votes for, 1,346,145 votes
against and 910,640 votes abstained.
The final item was the amendment to the Restated Articles of
Incorporation relating to increasing the authorized number of shares of
common stock to 200,000,000. This was approved by a vote of 21,246,865
for, 1,739,830 against and 1,234,419 abstained.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits
2A Amendment No. 2 to Agreement and Plan of Merger, dated as
of August 16, 1996, by and among WPL Holdings, Inc., IES
Industries Inc., Interstate Power Company, a Delaware
corporation, WPLH Acquisition Co. and Interstate Power
Company, a Wisconsin corporation [Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 15, 1996]
27 Financial Data Schedule
2. Reports on Form 8-K: The Company filed a Current Report on
Form 8-K, dated August 15, 1996, reporting under Item 5 that the Boards of
Directors of the Company, IES Industries Inc. and Interstate Power Company
authorized the execution and delivery of a second amendment to the
Agreement and Plan of Merger among the parties increasing the IES exchange
ratio from 1.01 to 1.14.
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WPL Holdings, Inc.
Date: November 14, 1996
/s/ Edward M. Gleason
Edward M. Gleason, Vice President -
Treasurer, and Corporate Secretary
(principal financial officer and
officer authorized to sign on behalf
of the registrant)
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
2A Amendment No. 2 to Agreement and Plan of Merger, dated as of
August 16, 1996, by and among WPL Holdings, Inc., IES
Industries Inc., Interstate Power Company, a Delaware
corporation, WPLH Acquisition Co. and Interstate Power
Company, a Wisconsin corporation [Incorporated by reference
to Exhibit 2.1 to the Company's Current Report on Form 8-K,
dated August 15, 1996]
27 Financial Data Schedule
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED FINANCIAL STATEMENTS OF WPL HOLDINGS, INC. AS OF AND
FOR THE TWELVE MONTHS ENDED SEPTEMBER 30, 1996 AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> OCT-01-1995
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1230965
<OTHER-PROPERTY-AND-INVEST> 213538
<TOTAL-CURRENT-ASSETS> 160014
<TOTAL-DEFERRED-CHARGES> 239170
<OTHER-ASSETS> 7314
<TOTAL-ASSETS> 1851001
<COMMON> 308
<CAPITAL-SURPLUS-PAID-IN> 305891
<RETAINED-EARNINGS> 307207
<TOTAL-COMMON-STOCKHOLDERS-EQ> 613406
0
59963
<LONG-TERM-DEBT-NET> 421270
<SHORT-TERM-NOTES> 31795
<LONG-TERM-NOTES-PAYABLE> 56975
<COMMERCIAL-PAPER-OBLIGATIONS> 36500
<LONG-TERM-DEBT-CURRENT-PORT> 2336
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 628756
<TOT-CAPITALIZATION-AND-LIAB> 1851001
<GROSS-OPERATING-REVENUE> 900693
<INCOME-TAX-EXPENSE> 42024
<OTHER-OPERATING-EXPENSES> 303330
<TOTAL-OPERATING-EXPENSES> 745184
<OPERATING-INCOME-LOSS> 155509
<OTHER-INCOME-NET> 13092
<INCOME-BEFORE-INTEREST-EXPEN> 168601
<TOTAL-INTEREST-EXPENSE> 38656
<NET-INCOME> 87921
3311
<EARNINGS-AVAILABLE-FOR-COMM> 84610
<COMMON-STOCK-DIVIDENDS> 60416
<TOTAL-INTEREST-ON-BONDS> 38210
<CASH-FLOW-OPERATIONS> 189312
<EPS-PRIMARY> 2.75
<EPS-DILUTED> 0<F1>
<FN>
<F1>Applicable accounting rules do not require WPL Holdings, Inc. to report
earnings per share on a fully diluted basis.
</FN>
</TABLE>
