_________________________________________________________________
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] 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 0-1125
MADISON GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
WISCONSIN 39-0444025
(State or other jurisdiction of (IRS Employer Identification No.)
incorporation or organization)
133 South Blair Street
Post Office Box 1231
Madison, Wisconsin 53701-1231
(Address of principal executive offices)
(ZIP Code)
(608) 252-7923
(Registrant's telephone number, including area code)
Common Stock outstanding at August 11, 1994: 10,719,812 shares
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,
and (2) has been subject to such filing requirements for the past
90 days. Yes [X] No [ ]
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PART 1. FINANCIAL INFORMATION
Item 1. Financial Statements
MADISON GAS AND ELECTRIC COMPANY AND SUBSIDIARIES
Consolidated Statements of Income and Retained Income
(Thousands of Dollars, Except Per-Share Amounts)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
STATEMENTS OF INCOME
Operating Revenues (Note 4):
Electric . . . . . . . . . . . . . . $36,434 $35,106 $ 71,696 $ 69,877
Gas . . . . . . . . . . . . . . . . 13,938 15,199 60,809 53,379
Total Operating Revenues . . . . . 50,372 50,305 132,505 123,256
Operating Expenses:
Fuel for electric generation . . . . 7,561 5,452 14,239 11,750
Purchased power . . . . . . . . . . 2,130 2,875 3,796 4,893
Natural gas purchased . . . . . . . 8,372 9,418 39,550 33,978
Other operations . . . . . . . . . . 14,628 13,493 29,140 27,669
Maintenance . . . . . . . . . . . . 3,727 3,465 6,462 6,801
Depreciation and amortization . . . 5,606 5,446 11,208 10,753
Other general taxes . . . . . . . . 2,104 2,002 4,419 4,128
Income tax items . . . . . . . . . . 1,376 1,816 7,169 6,225
Total Operating Expenses . . . . . 45,504 43,967 115,983 106,197
Net Operating Income . . . . . . . . 4,868 6,338 16,522 17,059
AFUDC - equity funds . . . . . . . . 21 14 55 27
Other income, net . . . . . . . . . . 545 508 1,096 1,020
Income before interest expense . . . 5,434 6,860 17,673 18,106
Interest Expense:
Interest on long-term debt . . . . . 2,632 2,847 5,252 5,832
Other interest . . . . . . . . . . . 32 40 145 141
AFUDC - borrowed funds . . . . . . . (12) (10) (31) (18)
Net Interest Expense . . . . . . . 2,652 2,877 5,366 5,955
Net Income . . . . . . . . . . . . . 2,782 3,983 12,307 12,151
Preferred stock dividends . . . . . . 120 124 239 248
Earnings on common stock . . . . . . $ 2,662 $ 3,859 $ 12,068 $ 11,903
Earnings per share of common
stock (Note 3) . . . . . . . . . . . $0.25 $0.36 $1.13 $1.11
STATEMENTS OF RETAINED INCOME
Balance at beginning of period . . . $77,285 $71,556 $72,865 $68,380
Earnings on common stock . . . . . . 2,662 3,859 12,068 11,903
Cash dividends on common stock
(Note 3) . . . . . . . . . . . . . . (4,983) (4,867) (9,969) (9,735)
Balance at end of period . . . . . . $74,964 $70,548 $74,964 $70,548
<FN>
The accompanying notes are an integral part of the above statements.
</TABLE>
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MADISON GAS AND ELECTRIC COMPANY AND SUBSIDIARIES
Consolidated Balance Sheets
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1994 1993
<S> <C> <C>
ASSETS
Utility plant, at original cost:
In service - Electric . . . . . . . . . . . . . . $472,948 $466,984
- Gas . . . . . . . . . . . . . . . . . 161,911 158,458
Gross plant in service . . . . . . . . . . . . . . 634,859 625,442
Less accumulated provision for depreciation . . . (313,571) (302,904)
Net plant in service . . . . . . . . . . . . . . 321,288 322,538
Construction work in progress . . . . . . . . . . 10,189 12,251
Nuclear decommissioning fund (Note 2) . . . . . . 26,756 25,499
Nuclear fuel, net . . . . . . . . . . . . . . . . 6,863 8,305
Total Utility Plant . . . . . . . . . . . . . . 365,096 368,593
Other property and investments . . . . . . . . . . 8,368 9,822
Current Assets
Cash . . . . . . . . . . . . . . . . . . . . . . . 2,823 1,391
Deposits for jointly owned electric power
production facilities . . . . . . . . . . . . . . 2,554 2,787
Accounts receivable, less reserves of $1,072
and $973, respectively (Note 9) . . . . . . . . . 21,490 10,593
Unbilled revenue . . . . . . . . . . . . . . . . . 6,237 11,458
Materials and supplies, at average cost . . . . . . 6,823 7,254
Fossil fuel, at average cost . . . . . . . . . . . 3,303 3,333
Stored natural gas, at average cost . . . . . . . . 4,769 10,562
Prepaid taxes . . . . . . . . . . . . . . . . . . . 5,653 5,693
Other prepayments . . . . . . . . . . . . . . . . . 963 1,126
Total Current Assets . . . . . . . . . . . . . . 54,615 54,197
Deferred charges . . . . . . . . . . . . . . . . . 32,897 32,752
Total Assets . . . . . . . . . . . . . . . . . . $460,976 $465,364
CAPITALIZATION AND LIABILITIES
Capitalization (see statement) . . . . . . . . . . 317,618 310,791
Current Liabilities
Preferred stock sinking fund requirements . . . . . 100 100
Interim loans - commercial paper
outstanding (Note 9) . . . . . . . . . . . . . . 14,000 23,500
Accounts payable . . . . . . . . . . . . . . . . . 14,775 17,890
Accrued taxes . . . . . . . . . . . . . . . . . . . 2,178 2,056
Accrued interest . . . . . . . . . . . . . . . . . 2,807 2,810
Other . . . . . . . . . . . . . . . . . . . . . . . 6,044 5,998
Total Current Liabilities . . . . . . . . . . . 39,904 52,354
Other Credits
Accumulated deferred income taxes . . . . . . . . . 55,235 54,167
Regulatory liability (Note 7) . . . . . . . . . . . 25,107 25,264
Investment tax credit - deferred . . . . . . . . . 13,394 13,781
Other . . . . . . . . . . . . . . . . . . . . . . . 9,718 9,007
Total Other Credits . . . . . . . . . . . . . . 103,454 102,219
Commitments and Contingencies (Note 5) . . . . . . - -
Total Capitalization and Liabilities . . . . . . $460,976 $465,364
<FN>
The accompanying notes are an integral part of the above balance sheets.
/TABLE
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MADISON GAS AND ELECTRIC COMPANY AND SUBSIDIARIES
Consolidated Statements of Capitalization
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
June 30, Dec. 31,
1994 1993
<S> <C> <C>
Common Shareholders' Equity
Common stock - par value $8 per share:
Authorized 28,000,000 shares
Outstanding 10,719,812 shares . . . . . . . . . . $ 85,758 $ 85,758
Amount received in excess of par value . . . . . . 26,372 26,372
Retained income . . . . . . . . . . . . . . . . . . 74,964 72,865
Total Common Shareholders' Equity . . . . . . . 187,094 184,995
Redeemable Preferred Stock (cumulative,
$25 par value, authorized 1,199,000 shares)
Series E, 8.70%, 220,000 shares outstanding, less
current sinking fund requirements of $100 . . . . . 5,400 5,400
First Mortgage Bonds
5.45% - 1996 series . . . . . . . . . . . . . . . 7,920 8,000
7 3/4% - 2001 series . . . . . . . . . . . . . . . 11,478 11,482
6 1/2% - 2006 series (Pollution Control Revenue
Bonds, principal amount $8,780, less construction
fund of $1,583 and $1,556, respectively) . . . . 7,197 7,224
8.50% - 2022 series . . . . . . . . . . . . . . . 40,000 40,000
6.75% - 2027A series (Industrial Development
Revenue Bonds, principal amount $28,000, less
construction fund of $12,600 and $17,426,
respectively) . . . . . . . . . . . . . . . . . . 15,400 10,574
6.70% - 2027B series (Industrial Development
Revenue Bonds) . . . . . . . . . . . . . . . . . 19,300 19,300
7.70% - 2028 series . . . . . . . . . . . . . . . 25,000 25,000
First Mortgage Bonds Outstanding . . . . . . . . 126,295 121,580
Unamortized discount and premium on bonds (net) . . (1,171) (1,184)
Total First Mortgage Bonds . . . . . . . . . . . 125,124 120,396
Total Capitalization . . . . . . . . . . . . . . $317,618 $310,791
<FN>
The accompanying notes are an integral part of the above statements.
/TABLE
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MADISON GAS AND ELECTRIC COMPANY AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(Thousands of Dollars)
(Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
1994 1993 1994 1993
<S> <C> <C> <C> <C>
Operating Activities
Net income . . . . . . . . . . . . . $ 2,782 $ 3,983 $12,307 $12,151
Items not affecting working capital:
Depreciation and amortization . . . 5,606 5,446 11,208 10,753
Deferred income taxes . . . . . . . 360 645 911 1,741
Amortization of nuclear fuel . . . . 467 506 1,095 1,080
Amortization of investment tax
credits . . . . . . . . . . . . . . (196) (200) (387) (400)
AFUDC - equity funds . . . . . . . . (21) (14) (55) (27)
Other . . . . . . . . . . . . . . . 250 (358) 237 (227)
Net Funds Provided from Operations . 9,248 10,008 25,316 25,071
Changes in working capital, excluding
cash, sinking funds, maturities, and
interim loans:
(Increase)/decrease in current assets (3,310) 2,298 1,014 10,036
Decrease in current liabilities . . (6,935) (9,347) (2,950) (5,196)
Other noncurrent items (net) . . . . (2,565) (3,726) 2,816 (3,755)
Cash (Used) for/Provided by
Operating Activities . . . . . . . (3,562) (767) 26,196 26,156
Financing Activities
Cash dividends on common and
preferred stock . . . . . . . . . . (5,103) (4,991) (10,208) (9,983)
Sale of First Mortgage Bonds . . . . - - - 25,000
Maturities/redemptions of
First Mortgage Bonds . . . . . . . . - - - (25,000)
Other increases/(decreases) in
First Mortgage Bonds . . . . . . . . (74) 2 (71) (146)
Decrease in bond - construction funds 1,365 2,109 4,799 2,848
Increase (decrease) in interim loans 14,000 5,500 (9,500) (9,500)
Cash Provided by/(Used) for
Financing Activities . . . . . . . 10,188 2,620 (14,980) (16,781)
Investing Activities
Additions to utility plant and
nuclear fuel . . . . . . . . . . . . (4,822) (4,104) (8,496) (8,554)
AFUDC - borrowed funds . . . . . . . (12) (10) (31) (18)
Increase in decommissioning fund . . (731) (752) (1,257) (1,431)
Cash Used for Investing Activities . (5,565) (4,866) (9,784) (10,003)
Changes in Cash (Note 6) . . . . . . 1,061 (3,013) 1,432 (628)
Cash at beginning of period . . . . . 1,762 4,415 1,391 2,030
Cash at end of period . . . . . . . . $2,823 $1,402 $2,823 $1,402
<FN>
The accompanying notes are an integral part of the above statements.
</TABLE>
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MADISON GAS AND ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1994
The consolidated financial statements included herein have been prepared by
the Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures made are adequate to make the information presented not
misleading. In the opinion of Company management, all adjustments (consisting
of only normal recurring adjustments) necessary to fairly present results have
been made. It is suggested that these consolidated financial statements be
read in conjunction with the financial statements and the notes thereto set
forth on pages 17 through 26 of the Company's 1993 Annual Report to
Shareholders as incorporated in the Company's 1993 Annual Report on Form 10-K.
1. Summary of Significant Accounting Policies
The accounting and financial policies relative to the following items
have been described in the "Notes to Consolidated Financial Statements"
in the Company's 1993 Annual Report to Shareholders and have been omitted
herein because they have not changed materially through the date of this
report.
a. Basis of consolidation
b. Revenue recognition
c. Utility plant
d. Nuclear fuel
e. Joint plant ownership
f. Depreciation
g. Income taxes
h. Pension plans
i. Postretirement benefits other than pensions
j. Postemployment benefits other than pensions and health care
k. Fair value of financial investments
l. Capitalization matters: common stock; redeemable preferred stock;
First Mortgage Bonds, notes payable to banks, commercial paper, and
lines of credit
m. Segments of business
2. Nuclear Decommissioning
In July 1994, the Public Service Commission of Wisconsin (PSCW) issued a
generic order covering all utilities in the state that have nuclear
generation. This order standardizes certain assumptions to be used in
determining nuclear decommissioning liabilities. The order mandates that
specific inflation assumptions be determined for the labor, burial,
energy, and other components of a site-specific study.
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
The Company's share of decommissioning costs for Kewaunee are estimated
to be $65 million in current dollars based upon a site-specific study
performed in 1992 using immediate dismantlement as the method of
decommissioning. As of June 30, 1994, the accumulated provision for
depreciation included accumulated provisions for decommissioning totalling
$27 million. Physical decommissioning is expected to occur during the
period 2014 to 2021, with additional expenditures being incurred during
the period 2022 to 2050 related to the storage of spent nuclear fuel at
the site. The Company's share of future year costs of decommissioning
are estimated to be expended between the years 2014 to 2050 is
$339.2 million.
The Company is currently addressing the changes in future decommissioning
costs as a part of its current rate filing.
3. Per-Share Amounts
Earnings per share of common stock computed on the basis of the weighted
average of the daily number of shares outstanding for the three-months
and for the six-months ended June 30, 1994, were 10,719,812; and for the
three-months and six-months ended June 30, 1993, were 10,697,218 shares,
respectively.
Dividends declared and paid per share of common stock for the periods
ended June 30, 1994 and 1993, were, respectively: for the three months,
$0.465 and $0.455; for the six months, $0.93 and $0.91.
4. Rate Matters
In April 1994, the Company announced its intention to reduce electric
rates for the test period beginning January 1, 1995, by approximately
$5.8 million and freeze natural gas rates for the same time period. The
proposed changes would remain in effect through December 31, 1996.
Hearings will take place on the Company's recent rate filing in September
of this year. A decision is expected sometime in late December.
5. Commitments and Contingencies
ANR Pipeline Company (ANR) and Northern Natural Gas Company (NNG) have
both entered into settlements with their gas suppliers concerning take-
or-pay provisions of gas supply contracts that are being canceled.
Remaining charges applicable to the Company for take-or-pay to ANR are
$75,000 including interest. This is being paid to ANR as a fixed charge
through July 1, 1995. Also, a volumetric surcharge is being paid to both
ANR and NNG. ANR's surcharge is applied through April 1998; NNG's is
effective through May 1996. The PSCW has approved procedures whereby the
Company is allowed to recover both fixed and volumetric take-or-pay
charges in rates.
<PAGE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) (continued)
6. Supplemental Cash Flow Information
Cash payments for interest (net of amounts capitalized) and income taxes
for the periods ended June 30 were as follows (in thousands of dollars):
Three Six
Months Ended Months Ended
1994 1993 1994 1993
Interest (net of
amounts capitalized) $3,781 $3,887 $5,332 $5,679
Income taxes paid $5,376 $5,426 $6,001 $6,253
7. Regulatory Liability
Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standard (SFAS) No. 109, "Accounting for Income Taxes." The
cumulative effect of implementation on net earnings for the six months
ended June 30, 1993, was insignificant.
As a result of applying the provisions of SFAS No. 109, the Company has
recorded, at June 30, 1994, a regulatory liability of $25,107,000, which
represents the probable future cash flow associated with deferred taxes
previously collected from ratepayers.
8. Accounting Policies
Effective January 1, 1994, the Company adopted SFAS No. 115, "Accounting
for Certain Investments in Debt and Equity Securities," which addresses
the accounting and reporting for investments in equity securities that
have readily determinable fair values and for all investments in debt
securities. The adoption of SFAS No. 115 did not have a material effect
on the financial position of the Company.
9. Accounts Receivable
On June 30, 1994, the Company bought back $15 million of its accounts
receivable from a wholly owned subsidiary of The First National Bank of
Chicago. The Company sold $15 million of its accounts receivable in
December 1990. The Company issued short-term debt for the buyback of
its receivables.
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Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
LIQUIDITY AND CAPITAL RESOURCES
The Company's internally generated funds were greater than the funds used for
construction and nuclear fuel expenditures during all of the periods ended
June 30, 1994. It is anticipated that 1994 construction and nuclear fuel
expenditures will be $20 million. The Company also expects to expend and
capitalize about $3 million on conservation programs. The Company expects to
meet these requirements with internally generated funds and construction fund
draw-downs.
Bank lines of credit available to the Company are currently $22 million.
The Company's capitalization ratios were as follows:
June 30, 1994 December 31, 1993
Common Shareholders' Equity . . . . 56.4% 55.3%
Redeemable Preferred Stock* . . . 1.7 1.7
Long-term Debt . . . . . . . . . . 37.7 36.0
Short-term Debt . . . . . . . . . . 4.2 7.0
*Includes current maturities and current sinking fund requirements.
The Company's bonds are currently rated Aa2 by Moody's Investors Service,
Inc., and AA by Standard & Poor's Corporation. The Company's dealer-issued
commercial paper carries the highest ratings assigned by Moody's and
Standard & Poor's.
RESULTS OF OPERATIONS
Electric Revenues
The warmer-than-normal weather experienced in this year's second quarter, when
compared against the cooler-than-normal weather experienced during last year's
second quarter, contributed to increased electric sales, as shown in the table
below. As a result, electric revenues for this year's second quarter, when
compared to the second quarter of 1993, increased approximately 4 percent.
Electric revenues increased approximately 3 percent for the first half of 1994
when compared to the same time period a year ago.
Changes in electric retail sales (MWH), as compared to the same periods the
previous year, were as follows:
For the periods ended June 30 Retail Electric Sales
Three Months
Increase in MWH Sales . . . . . . . . . . . 37,422
Percentage Change . . . . . . . . . . . . . 7%
Six Months
Increase in MWH Sales . . . . . . . . . . . 53,219
Percentage Change . . . . . . . . . . . . . 5%
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MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS (continued)
Gas Revenues
For the six months ended June 30, 1994, gas revenues increased about
14 percent compared to the same 1993 period. The increase in gas revenues for
the six months ended June 30, 1994, can be mostly attributed to the extremely
cold first quarter. For the three-months ended June 30, 1994, gas revenues
decreased about 8 percent as compared to the same period last year. The
decrease in gas revenues for the three-months ended June 30, 1994, is due to a
warmer second quarter and recording more transport.
The following table illustrates heating degree days (as measured by the number
of degrees the mean daily temperature is below 65 degrees Fahrenheit) as
compared to normal and the same periods the previous year.
For the periods ended June 30 1994 Normal 1993
Three Months 781 875 903
Six Months 4,791 4,507 4,488
Electric Fuel and Natural Gas Costs
Fuel costs increased for the three-month and six-month periods ended June 30,
1994, versus the same periods in 1993, due mainly to increased demand. Fuel
used for electric generation increased approximately 39 percent and 21 percent
for the three- and six-month periods, respectively. However, purchased power
costs for the same time periods decreased significantly when compared to last
year. As a result of lower fuel costs, MGE used more of its generating units
to meet power demands. This resulted in a decrease of purchased energy.
The unseasonably warm June caused power demands to increase significantly.
During June, the Company set a record for peak demand on June 17 at
551 megawatts for one hour. The old record of 541 megawatts for one hour was
set in August of 1993.
Purchased gas costs decreased 11 percent for the three-month period ended
June 30, 1994, when compared to the same 1993 period. The decrease is
attributed to the 12 percent decrease in the volume of gas purchased.
Purchased gas costs are 16 percent higher for the first half of 1994 versus
1993 due mainly to higher volumes of purchased gas to meet increased demand.
Other Items
Interest on long-term debt decreased approximately 8 percent and 10 percent
for the three- and six-month periods ended June 30, 1994, as compared to the
same periods for 1993. This is attributable in part to the Company's
refinancing of several of its First Mortgage bond issues at lower interest
rates and the call for redemption of its 8 percent, 1999 Series, First
Mortgage bonds.
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PART I. OTHER INFORMATION
Item 4 Results of Votes of Security Holders
The Company's Annual Meeting of Shareholders was
held on May 9, 1994, in Middleton, Wisconsin.
Proxies for the meeting were solicited pursuant to
Regulation 14A of the Securities Exchange Act.
The election of nominees for directors of Class II
to hold office until 1997 were voted upon by
shareholders at the meeting. The table below
briefly describes the results of the shareholders'
votes.
Voter results of extending Class II Directors'
term until 1997:
Withhold
For Authority
Robert M. Bolz 8,988,514 106,775
Phillip C. Stark 9,000,426 94,863
H. Lee Swanson 9,007,421 87,868
Frank C. Vondrasek 9,001,551 93,738
Item 6 (a) Exhibits
Exh. No. Description of Document
4 Indenture of Mortgage and Deed of Trust between
the Company and Firstar Trust Company, as Trustee
(and supplements) reference was provided in the
Company's 1993 Annual Report on Form 10-K
(Commission File No. 0-1125).
Item 6 (b) Reports on Form 8-K
No reports on Form 8-K were filed during the
quarter for which this report is filed.
<PAGE>
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Item 12 Ratio of Earnings to Fixed Charges
Six Months
Ended
June 30, 1994
Earnings
Income before interest expense $17,673
Add:
Income tax items 7,169
Income tax on other income 260
Amortization of debt discount,
premium expense 87
Allowance for funds used
during construction -
borrowed funds 31
Interest on rentals 320
Total Earnings $25,540
Fixed Charges:
Interest on long-term debt $5,252
Other interest 145
Amortization of debt discount
premium expense 87
Interest on rentals 320
Total Fixed Charges $ 5,804
Ratio of Earnings to Fixed
Charges 4.40x
<PAGE>
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S I G N A T U R E S
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.
MADISON GAS AND ELECTRIC COMPANY
(Registrant)
Date: August 11, 1994 /s/ David C. Mebane
David C. Mebane
Chairman, President and
Chief Executive Officer
(Duly Authorized Officer)
Date: August 11, 1994 /s/ Joseph T. Krzos
Joseph T. Krzos
Vice President - Finance
(Chief Financial and Accounting
Officer)
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