SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended: MARCH 31, 1998
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from: __________ to _________
Commission 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 (IRS Employer
of incorporation or Identification No.)
organization)
133 South Blair Street, Madison, Wisconsin 53703
(Address of principal executive offices and ZIP code)
(608) 252-7000
(Registrant s telephone number including area code)
Common Stock Outstanding at May 14, 1998: 16,079,718 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 [ ]
<PAGE>
<TABLE>
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED INCOME
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
------------------------
1998 1997
------- -------
<S> <C> <C>
STATEMENTS OF INCOME
Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . $38,393 $37,431
Gas . . . . . . . . . . . . . . . . . . . . . 36,722 47,482
------- -------
Total Operating Revenues . . . . . . . . . 75,115 84,913
------- -------
Operating Expenses:
Fuel for electric generation . . . . . . . . 6,846 7,509
Purchased power . . . . . . . . . . . . . . . 1,702 4,314
Natural gas purchased . . . . . . . . . . . . 22,781 33,176
Other operations . . . . . . . . . . . . . . 15,845 15,358
Maintenance . . . . . . . . . . . . . . . . . 2,527 2,540
Depreciation and amortization . . . . . . . . 8,258 6,364
Other general taxes . . . . . . . . . . . . . 2,330 2,214
Income taxes . . . . . . . . . . . . . . . . 4,592 4,085
------- -------
Total Operating Expenses . . . . . . . . . 64,881 75,560
------- -------
Net Operating Income . . . . . . . . . . . . . 10,234 9,353
Allowance for funds used during construction -
equity funds . . . . . . . . . . . . . . . . 24 12
Other income, net . . . . . . . . . . . . . . . 691 531
Non-utility operating income/(loss), net . . . 133 786
------- -------
Income before interest expense . . . . . . . . 11,082 10,682
------- -------
Interest expense:
Interest on long-term debt . . . . . . . . . 2,423 2,404
Other interest . . . . . . . . . . . . . . . 257 248
Allowance for funds used during construction -
borrowed funds . . . . . . . . . . . . . . (13) (6)
------- -------
Net Interest Expense . . . . . . . . . . . 2,667 2,646
------- -------
Net Income . . . . . . . . . . . . . . . . . . $ 8,415 $ 8,036
======= =======
Earnings per share of common stock (basic and
diluted) (Note 3) . . . . . . . . . . . . . . . $0.52 $0.50
======= =======
STATEMENTS OF RETAINED INCOME
Balance - beginning of period . . . . . . . . . $52,285 $50,451
Earnings on common stock . . . . . . . . . . . 8,415 8,036
Cash dividends on common stock (Note 3) . . . . (5,199) (5,146)
------- -------
Balance - end of period . . . . . . . . . . . . $55,501 $53,341
======= =======
<FN>
The accompanying notes are an integral part of the above statements.
</TABLE>
<PAGE>
<TABLE>
Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Three Months Ended
March 31,
-----------------------
1998 1997
------- -------
<S> <C> <C>
Operating Activities:
Net income . . . . . . . . . . . . . . . . . . . $ 8,415 $ 8,036
Items not affecting working capital:
Depreciation and amortization . . . . . . . . . 8,258 6,364
Deferred income taxes . . . . . . . . . . . . . (1,438) 16
Amortization of nuclear fuel . . . . . . . . . 618 -
Amortization of investment tax credits . . . . (186) (191)
Allowance for funds used during construction -
equity funds . . . . . . . . . . . . . . . . . (24) (12)
Other . . . . . . . . . . . . . . . . . . . . . (44) 181
------- -------
Net funds provided from operations . . . . . 15,599 14,394
Changes in working capital, excluding cash
equivalents, sinking funds,
maturities, and interim loans:
Decrease in current assets . . . . . . . . . . 14,843 22,801
Increase/(decrease) in current liabilities . . 3,883 (13,812)
Other noncurrent items, net . . . . . . . . . . . 6,542 7,096
------- -------
Cash provided by Operating Activities . . . . . 40,867 30,479
Financing Activities:
Cash dividends on common stock . . . . . . . . . (5,199) (5,146)
Other decreases in First Mortgage Bonds . . . . . 10 9
Decrease in interim loans . . . . . . . . . . . . (24,750) (21,250)
------- -------
Cash used for Financing Activities . . . . . . (29,939) (26,387)
------- -------
Investing Activities:
Additions to utility plant and nuclear fuel . . . (5,176) (3,317)
Allowance for funds used during construction -
borrowed funds . . . . . . . . . . . . . . . . . (13) (6)
Increase in nuclear decommissioning fund . . . . (2,517) (1,141)
------- -------
Cash used for Investing Activities . . . . . . (7,706) (4,464)
------- -------
Change in Cash and Cash Equivalents (Note 5) . . . 3,222 (372)
Cash and cash equivalents at beginning of period . 2,108 5,288
------- -------
Cash and cash equivalents at end of period . . $ 5,330 $ 4,916
======= =======
<FN>
The accompanying notes are an integral part of the above statements.
</TABLE>
<PAGE>
<TABLE>
Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Mar. 31, Dec. 31,
1998 1997
-------- --------
<S> <C> <C>
ASSETS
Utility Plant, at original cost, in service:
Electric . . . . . . . . . . . . . . . . . . . . $512,536 $510,405
Gas . . . . . . . . . . . . . . . . . . . . . . . 182,553 181,861
-------- --------
Gross plant in service . . . . . . . . . . . . 695,089 692,266
Less accumulated provision for depreciation . . . (419,811) (407,602)
-------- --------
Net plant in service . . . . . . . . . . . . . 275,278 284,664
Construction work in progress . . . . . . . . . . 12,625 10,995
Nuclear decommissioning fund . . . . . . . . . . 66,099 59,179
Nuclear fuel, net . . . . . . . . . . . . . . . . 7,637 8,255
-------- --------
Total Utility Plant . . . . . . . . . . . . . . 361,639 363,093
-------- --------
Other property and investments . . . . . . . . . . 8,004 8,252
-------- --------
Current Assets:
Cash and cash equivalents . . . . . . . . . . . . 5,330 2,108
Accounts receivable, less reserves of $1,156 and
$1,235, respectively . . . . . . . . . . . . 29,450 28,395
Unbilled revenue . . . . . . . . . . . . . . . . 8,928 13,580
Materials and supplies, at average cost . . . . . 5,794 5,557
Fossil fuel, at average cost . . . . . . . . . . 3,304 3,605
Stored natural gas, at average cost . . . . . . . 1,696 9,851
Prepaid taxes . . . . . . . . . . . . . . . . . . 4,692 7,190
Other prepayments . . . . . . . . . . . . . . . . 1,552 2,081
-------- --------
Total Current Assets . . . . . . . . . . . . . 60,746 72,367
-------- --------
Deferred charges . . . . . . . . . . . . . . . . . 21,801 28,078
-------- --------
Total Assets . . . . . . . . . . . . . . . . $452,190 $471,790
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization (see statement) . . . . . . . . . . $314,072 $310,846
-------- --------
Current Liabilities:
Long-term debt sinking fund requirements . . . . 200 200
Interim loans - commercial paper outstanding . . 8,750 33,500
Accounts payable . . . . . . . . . . . . . . . . 11,269 14,528
Accrued taxes . . . . . . . . . . . . . . . . . . 7,113 79
Accrued interest . . . . . . . . . . . . . . . . 3,550 2,206
Accrued nonregulated items . . . . . . . . . . . 4,753 4,837
Other . . . . . . . . . . . . . . . . . . . . . . 4,095 5,247
-------- --------
Total Current Liabilities . . . . . . . . . . . 39,730 60,597
-------- --------
Other Credits:
Deferred income taxes . . . . . . . . . . . . . . 44,134 45,572
Regulatory liability - SFAS 109 . . . . . . . . . 24,645 24,875
Investment tax credit - deferred . . . . . . . . 10,499 10,685
Other regulatory liabilities . . . . . . . . . . 19,110 19,215
-------- --------
Total Other Credits . . . . . . . . . . . . . . 98,388 100,347
-------- --------
Commitments . . . . . . . . . . . . . . . . . . . . - -
-------- --------
Total Capitalization and Liabilities . . . . $452,190 $471,790
======== ========
<FN>
The accompanying notes are an integral part of the balance sheets.
</TABLE>
<PAGE>
<TABLE>
Madison Gas and Electric Company and Subsidiaries
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands of Dollars)
(Unaudited)
<CAPTION>
Mar. 31, Dec. 31,
1998 1997
-------- --------
<S> <C> <C>
Common Shareholders' Equity:
Common stock - par value $1 per share:
Authorized 50,000,000 shares
Outstanding 16,079,718 shares . . . . . . . $ 16,080 $ 16,080
Amount received in excess of par value . . . 112,558 112,558
Retained income . . . . . . . . . . . . . . . 55,501 52,285
-------- --------
Total Common Shareholders' Equity . . . . . 184,139 180,923
-------- --------
First Mortgage Bonds:
6 1/2%, 2006 series:
Pollution Control Revenue Bonds . . . . . . 6,675 6,675
8.50%, 2022 series . . . . . . . . . . . . . 40,000 40,000
6.75%, 2027A series:
Industrial Development Revenue Bonds . . . 28,000 28,000
6.70%, 2027B series:
Industrial Development Revenue Bonds . . . 19,300 19,300
7.70%, 2028 series . . . . . . . . . . . . . 21,200 21,200
-------- --------
First Mortgage Bonds Outstanding . . . . . 115,175 115,175
Unamortized discount and premium on
bonds, net . . . . . . . . . . . . . . . . (1,042) (1,052)
Long-term debt sinking fund requirements . . (200) (200)
-------- --------
Total First Mortgage Bonds . . . . . . . . 113,933 113,923
Other Long-Term Debt:
6.01%, due 2000 . . . . . . . . . . . . . . . 11,000 11,000
6.91%, due 2004 . . . . . . . . . . . . . . . 5,000 5,000
-------- --------
Total Capitalization . . . . . . . . . . . $314,072 $310,846
======== ========
<FN>
The accompanying notes are an integral part of the above statements.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1998
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 (SEC).
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 18 through 27 of the Company's 1997
Annual Report to Shareholders and in the Company's 1997 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 1997
Annual Report to Shareholders and have been omitted herein
because they have not changed materially through the date of
this report.
a. General
b. Utility plant
c. Nuclear fuel
d. Joint plant ownership
e. Depreciation
f. Income taxes
g. Pension plans
h. Postretirement benefits other than pensions
i. Fair value of financial instruments
j. Capitalization matters: First Mortgage Bonds and other
long-term debt; preferred stock; and notes payable to
banks, commercial paper, and lines of credit
k. Gas marketing subsidiaries
l. Commitments
m. Segments of business
n. Regulatory assets and liabilities
<PAGE>
2. Nuclear Decommissioning
Nuclear decommissioning costs are currently being accrued to
an end-of-service life of 2002 for Kewaunee Nuclear Power
Plant (Kewaunee). These costs are currently recovered from
customers in rates and are deposited in external trusts. The
Company is presently funding decommissioning costs at the $8.1
million annual level. These trusts are shown on the balance
sheet in the utility plant section, and as of March 31, 1998,
these trusts totaled $66.1 million (fair market value).
Decommissioning costs are recovered through depreciation
expense, exclusive of earnings on the trusts. Net earnings on
the trusts are included in other income. The long-term, after-
tax earnings assumption on these trusts is 5.6 percent.
The Company s share of Kewaunee decommissioning costs is
estimated to be $79.9 million in current dollars based on a
site-specific study performed in 1992 using immediate
dismantlement as the method of decommissioning.
Decommissioning costs are assumed to inflate at an average
rate of 6.0 percent. Physical decommissioning is expected to
occur during the period 2014 through 2021, with additional
expenditures being incurred during the period 2022 through
2039 related to the storage of spent nuclear fuel at the site.
3. Per-Share Amounts
Earnings per share of common stock are computed on the basis
of the weighted average of the daily number of shares
outstanding. For the three months ended March 31, 1998 and
1997, there were 16,079,718 shares.
Dividends declared and paid per share of common stock for the
three months ended March 31, 1998 and 1997, were $0.323 and
$0.320, respectively.
4. Rate Matters
The Company received approval from the Public Service
Commission of Wisconsin (PSCW) on March 19, 1998, to recover
approximately $1.8 million (excluding carrying costs) of
deferred expenses related to the 1997 repairs to the Kewaunee
steam generator tubes. The deferred expenses are being
recovered through a four-month customer surcharge effective
April through July of 1998.
<PAGE>
On April 15, 1998, the Company announced its intention to
increase electric rates for the test year beginning January 1,
1999, by $14.6 million, or 8.9 percent annually, and increase
natural gas rates by $4.6 million, or 4.5 percent annually,
for the same time period. The proposed changes are based on a
requested return on common stock equity of 12.5 percent and
would remain in effect through the year 2000. The rising cost
of fuel coupled with increased transmission and generation
costs to improve electric reliability are the primary reasons
for the requested increase in electric rates. The proposed gas
rate increase will cover pipeline expansion, which will help
bring the lowest-cost gas possible to all of the Company's
customers. Also, both rate requests include costs to implement
technology to ensure computer system compatibility with the
year 2000.
5. Supplemental Cash Flow Information
For purposes of the Consolidated Statements of Cash Flows, the
Company considers cash equivalents to be those investments
that are highly liquid with maturity dates of less than three
months.
Cash payments for interest, net of amounts capitalized, and
cash receipts from income tax refunds, net, were as follows:
Three Months Ended
March 31,
-------------------
(Thousands of dollars) 1998 1997
---- ----
Interest, net of
amounts capitalized . . . $993 $1,302
Income taxes received,
net of payments . . . . . $894 $ 256
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
the three months ended March 31, 1998 and 1997. It is anticipated
that 1998 construction and nuclear fuel expenditures will be
approximately $46.4 million.
<PAGE>
Cash provided by operating activities increased $10.4 million, or
34 percent, from the same three-month period a year ago due to a
decrease in current assets.
Cash used for financing activities increased $3.6 million, or
13.5 percent, compared to the same period a year ago. This was
mainly attributable to a decrease in the Company's short-term
debt.
Bank lines of credit available to the Company as of March 31,
1998, were $45 million.
The Company's capitalization ratios were as follows:
Mar. 31, Dec. 31,
1998 1997
-------- --------
Common shareholders' equity . . 57.0% 52.5%
Long-term debt* . . . . . . . . 40.3 37.8
Short-term debt . . . . . . . . 2.7 9.7
*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.
Business and Regulatory Environment
In February 1996, the PSCW submitted a report to the State
Legislature on electric utility restructuring in Wisconsin.
Included in the report was a 32-step work plan and time line
summarizing expected restructuring activities. During the summer
of 1997, Wisconsin and Illinois experienced electric supply
shortages due to outages of a number of nuclear plants in
Illinois and Wisconsin, including Kewaunee. The electric
reliability crisis caused the PSCW to revise its previous plans
for restructuring the electric industry. In October 1997, the
PSCW stated that retail competition cannot occur until all the
safeguards are in place to protect consumers. Also, prior to any
significant restructuring, reliability concerns must be
addressed. This conclusion was consistent with plans proposed by
the Company and a broad coalition of customers.
<PAGE>
The new plan focuses on the construction of a generation and
transmission infrastructure by all Wisconsin utilities to
increase the amount of power in the state and the state s ability
to obtain electricity from other regions. The PSCW plans to
remove any barriers to open access to the transmission system
that currently exist and to move forward in its efforts to
develop a strong state and regional Independent System Operator
(ISO). This would assure that the transmission system is operated
safely, reliably, and with open and nondiscriminatory access.
Also in its revised plan, the PSCW plans to explore new ways to
promote the development of renewable energy sources. The Company
is in the process of building a $14 million wind generation
project which will allow its customers to purchase blocks of
energy produced with renewable resources. The PSCW has not set a
date for retail competition and has concluded that any decision
to go to retail competition in the electric industry remains to
be made in the future. The Company cannot predict what impact
future PSCW actions may have on its future financial condition,
cash flows, or results of operations. However, the Company
believes it is well-positioned to compete in a deregulated
market.
The restructuring of the electric industry could affect the
eligibility of the Company to continue applying Statement of
Financial Accounting Standard (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation." Under this situation,
continued deferral of certain regulatory asset and liability
amounts on the Company's books may no longer be appropriate as
allowed under SFAS No. 71. The Company is unable to predict
whether any adjustments to regulatory assets and liabilities will
occur in the future. The PSCW's restructuring plan specifically
recognizes the need to allow recovery for commitments made under
prior regulatory regimes.
The Company's recent rate order authorized a gas cost recovery
mechanism that allows recovery of pipeline capacity, Federal
Energy Regulatory Commission (FERC)-approved/mandated charges,
and supply demand costs. Under the new mechanism, gas commodity
costs will be compared to a monthly benchmark equal to the first-
of-the-month index plus adders reflecting the effects on pricing
for reliability, flexibility, weather, and variable
transportation costs. If actual costs are below the benchmark,
full recovery is allowed. Gas commodity costs above the benchmark
will be reviewed by the PSCW. A target will also be determined
for capacity release. Capacity release above the target will be
shared 60 percent with the ratepayers and 40 percent with the
shareholders. Any shortfalls in capacity release will be shared
40 percent with the ratepayers and 60 percent with the
shareholders.
<PAGE>
Electric Reliability Act
On April 28, 1998, Governor Tommy Thompson signed into law 1997
Wisconsin Act 204 (the Act) - the Electric Reliability Plan. The
Act seeks to guarantee the reliable provision of electricity in
Wisconsin for future generations. It received widespread support
from consumer groups, legislators, and utilities.
Among the many provisions included in the Act are those
streamlining the regulatory process. For instance, the Act
requires the PSCW to prepare a strategic energy assessment, and
calls for expediting the PSCW and the Department of Natural
Resources deadlines to grant certificates of public convenience
and necessity needed to construct electric generating facilities
and transmission lines. The Act also calls for utilities to
voluntarily hand over control of their transmission facilities to
an Independent System Operator (ISO) approved by the Federal
Regulatory Commission by the year 2000.
The Act also includes the following:
- - Allowing the construction of "merchant" power plants that
would sell their power to utilities. A merchant plant is built
without prior commitments to buy the power it will produce.
- - Requires a total of 50 megawatts of new generation to come
from renewable power sources, such as wind or solar.
- - Directs the PSCW to conduct a study of constraints in the
intrastate and interstate transmission system that hurt the
reliability of electric service in Wisconsin. The PSCW must
report the results to the state legislature by September 1,
1998.
<PAGE>
RESULTS OF OPERATIONS
Electric Sales and Revenues
Electric retail sales decreased slightly during the three-month
period ending March 31, 1998, over the comparable period last
year (see table below).
Three Months Ended March 31,
----------------------------
Electric Sales (megawatt-hours) 1998 1997 % Change
------- ------- --------
Residential . . . . . . . . 185,793 188,905 (1.6)%
Large commercial and
industrial . . . . . . . . . 245,297 230,809 6.3
Small commercial and
industrial . . . . . . . . . 169,971 172,841 (1.7)
Other . . . . . . . . . . . 75,053 87,070 (13.8)
------- -------
Total Retail . . . . . . . 676,114 679,625 (0.5)
Resale . . . . . . . . . . . 26,969 5,584 *
------- -------
Total Sales . . . . . . . 703,083 685,209 2.6
======= =======
*Over 100 percent
The decrease in retail sales was due, in part, to the mild winter
experienced during this year's first quarter compared to last
year's first quarter. Electric operating revenues for the same
period increased approximately $1.0 million, or 2.6 percent. The
increase in electric operating revenues was primarily the result
of a 3.1 percent electric rate increase which became effective in
August 1997.
<PAGE>
Gas Sales and Revenues
The decrease in gas delivered was due to the extremely warm
weather experienced in the first quarter of this year (see table
below). The average temperature for the three months ended
March 31, 1998, was 30.6 degrees Fahrenheit as compared to
24.9 degrees Fahrenheit for the same three months ended last
year, or 22.9 percent warmer than last year s first quarter.
Three Months Ended March 31,
----------------------------
Gas Deliveries 1998 1997 %Change
(thousands of therms) ------ ----- -------
Residential . . . . . . . . 35,506 40,961 (13.3)%
Commercial and industrial . 29,296 36,399 (19.5)
------ ------
Total Retail . . . . . . . 64,802 77,360 (16.2)
Transport . . . . . . . . . 11,277 9,342 20.7
------ ------
Total Gas Deliveries . . . 76,079 86,702 (12.3)
====== ======
For the three months ended March 31, 1998, gas revenues decreased
$10.8 million, or 22.7 percent, compared to last year. This is
mainly attributable to the decrease in gas deliveries for the
same time period. Retail gas deliveries decreased 16.2 percent
for the three months ended March 31, 1998, compared to the same
period last year because of the extremely mild weather.
Electric Fuel and Natural Gas Costs
Fuel cost for electric generation and purchased power costs
decreased $3.3 million, or 27.7 percent, for the first three
months of 1998 when compared to the same period last year. The
Company's electric margin (revenues less fuel and purchased power
costs) increased $4.2 million, or 16.6 percent, for the first
quarter of 1998 compared to last year's first quarter. The
primary factor for the increased electric margin is lower
purchased power costs. During the first quarter of 1997, the
Company had increased amounts of replacement power costs due to
the extended outage of Kewaunee. The Company was granted a customer
surcharge by the PSCW, in March 1997, to help offset these higher
costs.
<PAGE>
Natural gas costs for the three months ended March 31, 1998,
versus the 1997 comparative period decreased $10.4 million, or
31.3 percent. This is mainly due to the decrease in retail gas
deliveries of 16.2 percent, as previously mentioned. Another
contributing factor to the decrease in natural gas costs during
the first quarter of 1998, compared to last year, was the
decrease in the cost per therm of $0.08, or 18.0 percent.
Other Operating Expenses
Income taxes increased 12.4 percent for the first three months of
1998 when compared to the same time period in 1997. This was
mainly attributable to an increase in pretax operating income.
Depreciation and amortization expense increased $1.9 million,
or 29.8 percent, for the three months ended March 31, 1998,
compared to the same time period a year ago. This increase is
due to the accelerated depreciation and decommission funding
of Kewaunee. The PSCW approved accelerated depreciation and
decommission funding for Kewaunee based on its service life
ending at the end of 2002.
<PAGE>
PART II. OTHER INFORMATION
ITEM 5 OTHER INFORMATION
Kewaunee Nuclear Power Plant
Kewaunee is operated by Wisconsin Public Service Corporation
(WPSC). The Company has a 17.8 percent ownership interest in
Kewaunee. Kewaunee is operating with a license that expires in
2013.
On April 7, 1998, the PSCW approved WPSC's application for
replacement of the two steam generators at Kewaunee. The total
cost of replacing the steam generators would be approximately
$90.7 million (the Company's share would be 17.8 percent or
$16.1 million). The replacement work is tentatively planned
for the spring of 2000 and will take approximately 60 days.
However, issues related to the continued operation and future
ownership of Kewaunee must be resolved before the steam
generator replacement plan proceeds. The owners of Kewaunee
have differing views on the desirability of proceeding with
the steam generator replacement project. The Company has not
favored replacement. The co-owners are continuing to discuss
resolution of the issues.
Kewaunee has been in operation since 1974 and is jointly owned
by the Company, WPSC, and Wisconsin Power and Light Company.
Background information regarding Kewaunee steam generator
repair issues is set forth in the registrant's Annual Report
on Form 10-K for the year ended December 31, 1997.
ITEM 6(a) EXHIBITS
Exhibit 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 1997 Annual Report on Form 10-K
(Commission File No. 0-1125).
Exhibit 12
Ratio of Earnings to Fixed Charges
Exhibit 27
Appendix E to Item 601(c) of Regulation S-K: Public Utility
Companies Financial Data Schedule UT.
Exhibit Page
---------- ----
Exhibit 4 NA
Exhibit 12 17
Exhibit 27 18
ITEM 6(b) REPORTS ON FORM 8-K
No reports on 8-K were filed during the quarter for which this
report is filed.
<PAGE>
SIGNATURES
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: May 14, 1998 David C. Mebane
Chairman, President and Chief
Executive Officer
(Duly Authorized Officer)
Date: May 14, 1998 Terry A. Hanson
Vice President - Finance
(Chief Financial and Accounting
Officer)
Ratio of Earnings to Fixed Charges Exhibit 12
Three Months
Ended
(Thousands of dollars) March 31, 1998
--------------
Earnings
Income before interest expense . . . . . . . . $11,082
Add:
Income tax items . . . . . . . . . . . . . . . 4,592
Income tax on other income . . . . . . . . . . 620
Amortization of debt discount, premium expense. 56
Allowance for funds used during construction -
borrowed funds . . . . . . . . . . . . . . 13
Interest on rentals . . . . . . . . . . . . . . 238
-------
Total Earnings . . . . . . . . . . . . . . $16,601
=======
Fixed Charges
Interest on long-term debt . . . . . . . . . . $ 2,423
Other interest . . . . . . . . . . . . . . . . 257
Amortization of debt discount, premium expense 56
Interest on rentals . . . . . . . . . . . . . . 238
-------
Total Fixed Charges . . . . . . . . . . . . $ 2,974
=======
Ratio of Earnings to Fixed Charges . . . . . . 5.58
=======
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from SEC Form
10-Q. Items 1 through 22 are as of March 31, 1998. Items 23 through 38 are for
the three months ended March 31, 1998.
</LEGEND>
<MULTIPLIER> 1,000
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