<PAGE>
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 March 31, 1995
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-3548
MINNESOTA POWER & LIGHT COMPANY
A Minnesota Corporation
IRS Employer Identification No. 41-0418150
30 West Superior Street
Duluth, Minnesota 55802
Telephone - (218) 722-2641
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
----- -----
Common Stock, no par value,
31,282,063 shares outstanding
as of April 30, 1995
<PAGE>
Minnesota Power & Light Company
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1995 and December 31, 1994 1
Consolidated Statement of Income -
Quarter ended March 31, 1995 and 1994 2
Consolidated Statement of Cash Flows -
Quarter ended March 31, 1995 and 1994 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations 7
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 9
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 13
Signatures 14
<PAGE>
Definitions
The following abbreviations or acronyms are used in the text.
Abbreviation
or Acronym Term
- -------------- ----------------------------------------------------------
1994 Form 10-K Minnesota Power's Annual Report on Form 10-K for the Year
Ended December 31, 1994
ADESA ADESA Corporation
Capital Re Capital Re Corporation
Company Minnesota Power & Light Company and its Subsidiaries
CPI Consolidated Papers, Inc.
DRIP Automatic Dividend Reinvestment and Stock Purchase Plan
ESOP Employee Stock Ownership Plan
FERC Federal Energy Regulatory Commission
FPSC Florida Public Service Commission
Lehigh Lehigh Acquisition Corporation
LSPI Lake Superior Paper Industries
Minnesota Power Minnesota Power & Light Company and its Subsidiaries
MPUC Minnesota Public Utilities Commission
MW Megawatt(s)
MWh Megawatt-hour(s)
National National Steel Pellet Co.
Reach All Reach All Partnership
Square Butte Square Butte Electric Cooperative
SRFI Superior Recycled Fiber Industries Joint Venture
SSU Southern States Utilities, Inc.
<PAGE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
Minnesota Power
Consolidated Balance Sheet
In Thousands
<CAPTION>
March 31, December 31,
1995 1994
Unaudited Audited
- --------------------------------------------------------------------------
<S> <C> <C>
Assets
Plant and Other Assets
Electric utility operations $ 785,758 $ 784,931
Water utility operations 297,936 295,451
Investments and corporate services 357,922 362,006
---------- ----------
Total plant and other assets 1,441,616 1,442,388
---------- ----------
Current Assets
Cash and cash equivalents 21,351 27,001
Trading securities 71,709 74,046
Trade accounts receivable (less
reserve of $954 and $1,041) 47,118 51,105
Notes and other accounts receivable 56,878 61,654
Fuel, material and supplies 28,018 26,405
Prepayments and other 19,254 25,927
---------- ----------
Total current assets 244,328 266,138
---------- ----------
Deferred Charges
Regulatory 74,576 74,919
Other 26,106 24,353
---------- ----------
Total deferred charges 100,682 99,272
---------- ----------
Total Assets $1,786,626 $1,807,798
- --------------------------------------------------------------------------
Capitalization and Liabilities
Capitalization
Common stock without par value,
65,000,000 shares authorized
31,282,063 and 31,246,557 shares
outstanding $ 371,974 $ 371,178
Unearned ESOP shares (75,713) (76,727)
Net unrealized gain (loss) on
securities investments (2,035) (5,410)
Retained earnings 282,384 272,646
---------- ----------
Total common stock equity 576,610 561,687
Cumulative preferred stock 28,547 28,547
Redeemable serial preferred stock 20,000 20,000
Long-term debt 600,629 601,317
---------- ----------
Total capitalization 1,225,786 1,211,551
---------- ----------
Current Liabilities
Accounts payable 29,740 36,792
Accrued taxes 48,764 41,133
Accrued interest and dividends 9,535 14,157
Notes payable 30,167 54,098
Long-term debt due within one year 12,818 12,814
Other 30,220 23,799
---------- ----------
Total current liabilities 161,244 182,793
---------- ----------
Deferred Credits
Accumulated deferred income taxes 176,164 192,441
Contributions in aid of construction 86,686 87,036
Regulatory 55,120 55,996
Other 81,626 77,981
---------- ----------
Total deferred credits 399,596 413,454
---------- ----------
Total Capitalization and Liabilities $1,786,626 $1,807,798
</TABLE>
- --------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
- 1 -
<PAGE>
<TABLE>
Minnesota Power
Consolidated Statement of Income
In Thousands Except Per Share Amounts - Unaudited
<CAPTION>
Quarter Ended
March 31,
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Operating Revenue and Income
Electric utility operations $119,450 $117,681
Water utility operations 16,279 17,848
Investments and corporate services 32,997 15,039
-------- --------
Total operating revenue and income 168,726 150,568
-------- --------
Operating Expenses
Fuel and purchased power 40,310 43,011
Operations 81,511 66,821
Administrative and general 18,585 19,668
Interest expense 12,618 12,192
-------- --------
Total operating expenses 153,024 141,692
-------- --------
Income (Loss) from Equity Investments (4,450) 1,969
-------- --------
Operating Income 11,252 10,845
Income Tax Expense (Benefit) (14,205) 1,477
-------- --------
Net Income 25,457 9,368
Dividends on Preferred Stock 800 800
-------- --------
Earnings Available for Common Stock $ 24,657 $ 8,568
======== ========
Average Shares of Common Stock 28,368 28,172
Earnings Per Share of Common Stock $ .87 $ .30
Dividends Per Share of Common Stock $ .51 $ .505
</TABLE>
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
- 2 -
<PAGE>
<TABLE>
Minnesota Power
Consolidated Statement of Cash Flows
In Thousands - Unaudited
<CAPTION>
Quarter Ended
March 31,
1995 1994
- ---------------------------------------------------------------------------
<S> <C> <C>
Operating Activities
Net income $ 25,457 $ 9,368
Depreciation 13,766 11,311
Amortization of coal contract
termination costs - 3,920
Deferred income taxes (17,415) 1,435
Deferred investment tax credits (620) (441)
Changes in operating assets and liabilities
Notes and accounts receivable 8,763 (732)
Fuel, material and supplies (1,613) 487
Accounts payable (7,052) (11,264)
Other current assets and liabilities 18,440 19,479
Other - net 3,698 3,209
-------- --------
Cash from operating activities 43,424 36,772
-------- --------
Investing Activities
Proceeds from sale of investments
in securities 43,577 10,227
Additions to investments (37,153) (12,989)
Additions to plant (17,027) (9,512)
Changes to other assets - net 1,035 (7,457)
-------- --------
Cash for investing activities (9,568) (19,731)
-------- --------
Financing Activities
Issuance of common stock 829 337
Issuance of long-term debt 305 300
Changes in notes payable (23,931) (10,780)
Reductions of long-term debt (989) (716)
Dividends on preferred and common stock (15,720) (15,458)
-------- --------
Cash for financing activities (39,506) (26,317)
-------- --------
Change in Cash and Cash Equivalents (5,650) (9,276)
Cash and Cash Equivalents at Beginning of Period 27,001 31,674
-------- --------
Cash and Cash Equivalents at End of Period $ 21,351 $ 22,398
======== ========
Supplemental Cash Flow Information
Cash paid during the period for
Interest (net of capitalized) $ 16,616 $ 16,109
Income taxes $ 982 $ 1,843
</TABLE>
- ---------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
- 3 -
<PAGE>
Notes to Consolidating Financial Statements
The accompanying unaudited consolidated financial statements and notes should
be read in conjunction with the Company's 1994 Form 10-K. In the opinion of the
Company, all adjustments necessary for a fair statement of the results for the
interim periods have been included. The results of operations for an interim
period may not give a true indication of results for the year.
<TABLE>
Note 1. Business Segments
Thousands
<CAPTION>
Electric Water Utility
Consolidated Utility Operations Operations
------------ ------------------ ----------
Electric Coal
-------- ----
<S> <C> <C> <C> <C>
Quarter Ended Mar. 31, 1995
- ---------------------------
Revenue and income $ 168,726 $112,597 $ 6,853 $ 16,279
Operation and other expense 126,640 81,525 5,381 11,670
Depreciation expense 13,766 9,552 341 2,611
Interest expense 12,618 5,135 254 2,517
Income (loss) from
equity investments (4,450) - - -
---------- -------- ------- --------
Operating income (loss) 11,252 16,385 877 (519)
Income tax expense (benefit) (14,205) 7,177 216 (388)
---------- -------- ------- --------
Net income (loss) $ 25,457 $ 9,208 $ 661 $ (131)
========== ======== ======= ========
Total assets $1,786,626 $934,727 $27,970 $328,568
Accumulated depreciation $ 598,644 $479,408 $18,021 $ 95,348
Construction work in progress $ 37,155 $ 30,432 $ - $ 6,723
Quarter Ended Mar. 31, 1994
- ---------------------------
Revenue and income $ 150,568 $111,101 $ 6,580 $ 17,848
Operation and other expense 117,063 83,765 5,171 11,177
Depreciation expense 12,437 8,657 329 2,359
Interest expense 12,192 5,050 243 2,807
Income from equity investments 1,969 - - -
---------- -------- ------- --------
Operating income (loss) 10,845 13,629 837 1,505
Income tax expense (benefit) 1,477 5,817 258 553
---------- -------- ------- --------
Net income (loss) $ 9,368 $ 7,812 $ 579 $ 952
========== ======== ======= ========
Total assets $1,750,189 $903,313 $27,777 $331,180
Accumulated depreciation $ 559,919 $451,487 $16,541 $ 90,135
Construction work in progress $ 37,846 $ 21,843 $ - $ 16,003
<CAPTION>
Investments and Corporate Services
----------------------------------
Portfolio,
Reinsurance Paper &
& Other Real Estate Pulp
----------- ----------- -------
<S> <C> <C> <C>
Quarter Ended Mar. 31, 1995
- ---------------------------
Revenue and income $ 7,657 $ 4,265 $ 21,075
Operation and other expense 2,436 7,134 <F2> 18,494
Depreciation expense 34 60 1,168
Interest expense 3,903 2 807
Income (loss) from
equity investments (6,271)<F1> - 1,821
-------- -------- --------
Operating income (loss) (4,987) (2,931) 2,427
Income tax expense (benefit) (4,253) (18,015)<F3> 1,058
-------- -------- --------
Net income (loss) $ (734) $ 15,084 $ 1,369
======== ======== ========
Total assets $288,766 $ 32,631 $173,964
Accumulated depreciation $ 102 $ - $ 5,765
Construction work in progress $ - $ - $ -
Quarter Ended Mar. 31, 1994
- ---------------------------
Revenue and income $ (4,623)<F4> $ 9,431 $ 10,231
Operation and other expense 2,905 4,801 9,244
Depreciation expense 1 49 1,042
Interest expense 3,242 3 847
Income from equity investments 1,465 - 504
-------- -------- --------
Operating income (loss) (9,306) 4,578 (398)
Income tax expense (benefit) (5,095) 85 (141)
-------- -------- --------
Net income (loss) $ (4,211) $ 4,493 <F5> $ (257)
======== ======== ========
Total assets $289,688 $ 34,576 $163,655
Accumulated depreciation $ 3 $ - $ 1,753
Construction work in progress $ - $ - $ -
<FN>
<F1> Includes an $8.5 million pre-tax provision for exiting the equipment
manufacturing business.
<F2> Includes $3.7 million of minority interest relating to the recognition of
tax benefits. (See note 5.)
<F3> Includes $18.4 million of tax benefits. (See note 5.)
<F4> Includes a $10.1 million pre-tax loss from the write-off of an investment.
<F5> Includes $3.6 million of net income related to escrow funds.
</FN>
</TABLE>
- 4 -
<PAGE>
<TABLE>
Note 2. Securities Investments
<CAPTION>
March 31, 1995 December 31, 1994
------------------------------------- ------------------------------------
Gross Unrealized Fair Gross Unrealized Fair
---------------- ----------------
Summary of Securities Cost Gain (Loss) Value Cost Gain (Loss) Value
- ----------------------------------------------------------------------------------------------------
In Thousands
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Trading $ 71,709 $ 74,046
Available-for-sale
Common stock $ 10,601 $ 128 $(1,522) 9,207 $ 10,636 $ 86 $(1,748) 8,974
Preferred stock 103,633 1,995 (1,740) 103,888 117,860 2,747 (3,893) 116,714
-------- ------ ------- -------- -------- ------ ------- --------
$114,234 $2,123 $(3,262) 113,095 $128,496 $2,833 $(5,641) 125,688
Held-to-maturity
Leveraged
preferred stock $ 2,219 2,219 $ 2,013 2,013
-------- --------
Total securities investments $187,023 $201,747
======== ========
</TABLE>
The net unrealized gain (loss) on securities investments on the balance sheet
includes $1.4 and $3.8 million from the Company's share of Capital Re's
unrealized holding losses at March 31, 1995, and December 31, 1994,
respectively.
<TABLE>
<CAPTION>
Quarter Ended March 31,
----------------------------------
1995 1994
- -------------------------------------------------------------------------------------------
<S> <C> <C>
Trading securities
Change in net unrealized holding gain (loss)
included in earnings $ (101) $ 837
Available-for-sale securities
Proceeds from sales $26,466 $10,227
Gross realized gains $ 274 $ 127
Gross realized (losses) $ (419) $ (290)
</TABLE>
Note 3. Square Butte Purchased Power Contract
The Company has a contract to purchase power and energy from Square Butte.
Under the terms of the contract which extends through 2007, the Company is
purchasing 71 percent of the output from a generating plant which is capable of
generating up to 455 MW. Reductions to about 49 percent of the output are
provided for in the contract and, at the option of Square Butte, could begin
after a five-year advance notice to the Company.
The cost of the power and energy is a proportionate share of Square Butte's
fixed obligations and variable operating costs, based on the percentage of the
total output purchased by the Company. The annual fixed obligations of the
Company to Square Butte are $19.4 million from 1995 through 1999. The variable
operating costs are not incurred unless production takes place. The Company is
responsible for paying all costs and expenses of Square Butte if not paid by
Square Butte when due. These obligations and responsibilities of the Company
are absolute and unconditional whether or not any power is actually delivered
to the Company.
- 5 -
<PAGE>
Note 4. Lake Superior Paper Industries
The Company is an equal participant with Pentair Duluth Corp., a wholly owned
subsidiary of Pentair, Inc., in LSPI, a joint venture which produces
supercalendered paper in Duluth, Minnesota. The Company is committed to a
maximum guaranty of $95 million to ensure a portion of LSPI's $33.4 million
annual lease obligation for equipment under an operating lease extending to
2012. As of March 31, 1995, the Company also had a $30.2 million short-term
note receivable from LSPI. The obligations of the Company are several and not
joint with Pentair Duluth Corp. and Pentair, Inc. (See note 6.)
<TABLE>
Note 5. Income Tax Expense
<CAPTION>
Quarter Ended March 31,
---------------------------------
Schedule of Income Tax Expense (Benefit) 1995 1994
- --------------------------------------------------------------------------
In Thousands
<S> <C> <C>
Current tax
Federal $ 5,296 $ 261
State (1,466) 222
-------- ------
3,830 483
-------- ------
Deferred tax
Federal (14,879) 1,347
State (2,536) 88
-------- ------
(17,415) 1,435
-------- ------
Deferred tax credits (620) (441)
-------- ------
Total income tax expense (benefit) $(14,205) $1,477
======== ======
</TABLE>
In March 1995 based on the results of a project which analyzed the economic
feasibility of realizing future tax benefits available to the Company, the
board of directors of Lehigh directed the management of Lehigh to dispose of
Lehigh's assets in a manner that would maximize utilization of tax benefits.
With this new directive in place, Lehigh recognized $18.4 million of income in
the first quarter of 1995 by reducing a portion of the valuation reserve that
offsets the deferred tax assets. The Company's portion of that income is $14.7
million, or 52 cents per share.
Note 6. Subsequent Event
On May 8, 1995, the Company and Pentair, Inc. signed definitive agreements with
Consolidated Papers, Inc. to sell their interests in LSPI and SRFI for
approximately $183 million in cash, plus CPI's assumption of debt and lease
obligations. CPI will also indemnify the Company and Pentair, Inc. for any
future liability under LSPI's lease payment guarantees discussed in note 4. The
Company's portion of the proceeds is approximately $112 million. The sale price
is subject to adjustment for changes in net book value from December 31, 1994,
to closing. The transaction is expected to close in late June 1995, and is
conditioned on regulatory clearance, satisfactory completion of further
environmental due diligence, closing of the sale by Pentair, Inc. of its
Niagara of Wisconsin Paper Corporation to CPI, and other customary conditions.
The exit from the paper and pulp business is expected to have an immaterial
impact on 1995 financial results for the Company.
- 6 -
<PAGE>
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Minnesota Power has operations in three business areas: (1) electric utility
operations, which include electric, gas and coal mining operations; (2) water
utility operations, which include water, wastewater and sanitation operations;
and (3) investments and corporate services, which include investments in
securities, a financial guaranty reinsurance company, a real estate company in
Florida, paper and pulp production, and manufacturing of truck-mounted lifting
equipment. The pending $167 million acquisition of ADESA is expected to be
completed in mid 1995 and, when completed, the auto redistribution business
will be part of investments and corporate services.
On April 17, 1995, a Minnesota businessman agreed to purchase Reach All, the
truck-mounted lifting equipment manufacturing partnership owned 82.5 percent by
UtilEquip Incorporated, a subsidiary of the Company. The transaction is
expected to be completed in the second quarter of 1995, and is conditioned on
the purchaser's completion of due diligence and finalization of financing
arrangements.
On May 8, 1995, the Company and Pentair, Inc. signed definitive agreements with
Consolidated Papers, Inc. to sell their interests in LSPI and SRFI for
approximately $183 million in cash, plus CPI's assumption of debt and lease
obligations. CPI will also indemnify the Company and Pentair, Inc. for any
future liability under LSPI's lease payment guarantees discussed in note 4. The
Company's portion of the proceeds is approximately $112 million. The sale price
is subject to adjustment for changes in net book value from December 31, 1994,
to closing. The transaction is expected to close in late June 1995, and is
conditioned on regulatory clearance, satisfactory completion of further
environmental due diligence, closing of the sale by Pentair, Inc. of its
Niagara of Wisconsin Paper Corporation to CPI, and other customary conditions.
The exit from the paper and pulp business is expected to have an immaterial
impact on 1995 financial results for the Company.
Earnings per share of common stock for the quarter ended March 31, 1995, were
87 cents compared to 30 cents for the quarter ended March 31, 1994. The most
significant factor contributing to the higher earnings in 1995 was the
recognition of tax benefits associated with Lehigh which contributed 52 cents
to earnings per share. Earnings in 1995 also reflect the improved performance
of the Company's securities portfolio, higher paper and pulp prices, and
increased electric sales to industrial customers offset in part by lower water
consumption levels at SSU and an 18 cent per share provision associated with
exiting the truck-mounted lifting equipment business. Earnings in 1994 include
13 cents per share from the recognition of escrow funds associated with Lehigh
and a 21 cent per share write off of an investment.
<TABLE>
<CAPTION>
Quarter Ended March 31,
Earnings Per Share 1995 1994
- --------------------------------------------------------------------------
<S> <C> <C>
Electric Utility Operations
Electric $ .31 $ .26
Coal .02 .02
----- -----
.33 .28
----- -----
Water Utility Operations .00 .03
----- -----
Investments and Corporate Services
Portfolio and reinsurance .16 (.13)
Real estate .53 .16
Paper and pulp .05 (.01)
Other operations (.20) (.03)
----- -----
.54 (.01)
----- -----
Total Earnings Per Share $ .87 $ .30
===== =====
</TABLE>
- 7 -
<PAGE>
Results of Operations
Comparison of the Quarter Ended March 31, 1995 and 1994.
Electric utility operations. Income from the electric utility operations was
higher in 1995 compared to 1994 due to interim rates in effect since March 1,
1994, and an overall increase in electric sales of 2 percent. Kilowatt-hour
sales to industrial customers increased 10 percent due to National resuming
operations in August 1994. Coal operations contributed income of $661,000 in
1995 and $579,000 in 1994 to electric utility operations.
Revenue from electric sales to taconite customers accounted for 37 percent of
revenue and income from electric operations in 1995 compared to 32 percent in
1994. Revenue from electric sales to paper and other wood-products companies
accounted for 13 percent of revenue and income from electric operations in 1995
and in 1994.
Water utility operations. Income from water utility operations was down in
1995 due in part to reduced irrigation demand and the December 1994 sale of
SSU's Venice Gardens assets. It is expected that the loss of customers as a
result of the Venice Gardens transaction will be offset when the purchase of
Orange Osceola Utilities, Inc. is completed in the third quarter of 1995.
Investments and corporate services. Earnings from investments and corporate
services were higher in 1995 primarily due to the recognition of $18.4 million
of tax benefits by Lehigh, the Company's real estate business. In March 1995
based on the results of a project which analyzed the economic feasibility of
realizing future tax benefits available to the Company, the board of directors
of Lehigh directed the management of Lehigh to dispose of Lehigh's assets in a
manner that would maximize utilization of tax benefits. The Company's portion
of the tax benefits reflected as income is $14.7 million, or 52 cents per
share. Earnings in 1994 include 13 cents per share from the recognition of
escrow funds associated with Lehigh.
Higher paper and pulp prices also increased earnings in 1995. Pretax income
from LSPI was $1,594,000 in 1995 compared to $452,000 in 1994. Pulp production
contributed $779,000 to net income in 1995 compared to a $322,000 loss in 1994.
The performance of the Company's securities portfolio improved significantly
over 1994 due to improved market conditions. In the first quarter of 1994 the
Company wrote off a $10.1 million investment. In March 1995, the Company
recorded a $5 million provision, lowering earnings per share by 18 cents in
anticipation of exiting Reach All. On April 17, 1995, the Company entered into
an agreement for the sale of this business to a Minnesota businessman. The
transaction is expected to be completed in the second quarter of 1995.
Liquidity and Financial Position
Reference is made to the Consolidated Statement of Cash Flows for the three
months ended March 31, 1995 and 1994, for purposes of the following discussion.
Cash flow activities. Cash from operating activities was affected by a number
of factors representative of normal operations. Cash used for investing
activities decreased $10.2 million because a portion of the securities
portfolio was liquidated in anticipation of the ADESA acquisition. Cash used
for financing activities increased $13.2 million due to the payment of notes
payable outstanding at December 31, 1994.
Working capital, if and when needed, generally is provided by the sale of
commercial paper. In addition, securities investments can be liquidated to
provide funds for reinvestment in existing
- 8 -
<PAGE>
businesses or acquisition of new businesses, and approximately 900,000
original issue shares of common stock are available for issuance through the
DRIP.
Proceeds from the pending sale of the paper and pulp businesses, combined with
funds from the sale of a portion of the securities investment portfolio, are
expected to fund the ADESA purchase in mid 1995.
Capital requirements. Consolidated capital expenditures for the three months
ended March 31, 1995, totaled $13.7 million. These expenditures include $9.7
million for electric utility operations, of which $500,000 was for coal
operations, $3.8 million for water utility operations and $200,000 for the pulp
production plant. Internally generated funds were the primary source for
funding these expenditures.
PART II. OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
(a) The Company held its Annual Meeting of Shareholders on May 9, 1995.
(b) The election of directors, appointment of independent accountants and
approval of the Minnesota Power Director Stock Plan were voted on at the
Annual Meeting of Shareholders. The results were as follows:
Votes
Withheld or Broker
Directors Votes For Against Abstentions Nonvotes
- --------- --------- ------- ----------- --------
Merrill K. Cragun 27,132,221 499,284 - -
Dennis E. Evans 27,016,172 615,333 - -
Sr. Kathleen Hofer 27,094,394 537,111 - -
Peter J. Johnson 27,171,459 460,046 - -
Paula F. McQueen 27,132,900 498,605 - -
Robert S. Nickoloff 27,110,974 520,531 - -
Jack I. Rajala 27,156,666 474,839 - -
Charles A. Russell 27,143,921 487,584 - -
Arend J. Sandbulte 27,115,690 515,815 - -
Nick Smith 27,050,055 581,450 - -
Bruce W. Stender 27,066,918 564,587 - -
Donald C. Wegmiller 27,123,323 508,182 - -
Independent Accountants
- -----------------------
Price Waterhouse LLP 26,981,957 222,367 427,181 -
Minnesota Power
Director Stock Plan
- -------------------
23,280,465 2,870,316 1,480,724 -
- 9 -
<PAGE>
Item 5. Other Information
Reference is made to the Company's 1994 Form 10-K for background information on
the following updates. Unless otherwise indicated, cited references are to the
Company's 1994 Form 10-K.
Ref. Pages 3 and 4. - Table - Contract Status of Minnesota Power Firm Large
Power Customers
Eveleth Mines is owned 41.7 percent by Rouge Steel Co., 14.4 percent by Oglebay
Norton Co., 33.3 percent by AK Steel and 10.6 percent by Steel Co. of Canada.
(5) Minntac has incremental demand of 52.6 MW through October 1995.
(6) On April 13, 1995, the MPUC approved the Company's contract amendment with
National which incorporated incremental production service over 85 MW and
updated the interruptible service provision.
On April 28, 1995, the Company and Lakehead Pipe Line signed a six-year
electric service agreement for 16.5 MW. This agreement, which is subject to
MPUC approval, will be effective retroactive to May 1, 1995, and continue
through April 30, 2001. Upon MPUC approval of this agreement, Lakehead Pipe
Line, who is currently a customer of the Company, will become a Firm Large
Power Customer.
Ref. Page 4. - Table - Contract Status of Minnesota Power Purchased Power
Contracts
Add the following information to the table entitled "Contract Status of
Minnesota Power Purchased Power Contracts":
Firm Power Purchases (3)
Hibbing Public Utilities Commission 5 May 1, 1995 through October 31,
1995
Virginia Public Utilities Commission 5 May 1, 1995 through October 31,
1995
Manitoba Hydro 120 May 1, 1995 through October 31,
1995
(3) Firm power purchase contracts require the Company to pay demand charges for
MW under contract and an energy charge for each MWh purchased. The entity is
obligated to provide energy as scheduled by the Company.
Ref. Page 4. - Insert New Paragraph after Table "Contract Status of Minnesota
Power Purchased Power Contracts"
On April 17, 1995, the Company and LTV Steel Mining Company (LTV) signed a
capacity purchase agreement and an amendment to their Electric Service and
Interconnection Agreement providing for a new five year shared reserves
arrangement. The capacity purchase agreement and the amendment will enable the
Company to add to its capacity 210 MW generated from three of LTV's generating
units with the understanding that the Company will provide LTV's entire 130 MW
load on a stand-by basis. Of the remaining 80 MW, 60 MW will be used to meet
the Company's needs and 20 MW will be kept in reserve as required by the Mid-
Continent Area Power Pool. The Company will also receive about $500,000 per
year for providing related control area services. The amendment, which is
expected to be effective retroactive to May 1, 1995, and continue through April
30, 2000, is subject to MPUC approval. LTV will file the capacity agreement
addressing the Company's purchase of LTV's 210 MW of generating capacity with
the FERC for its approval.
- 10 -
<PAGE>
Ref. Page 8. - First Paragraph and Ref. Page 12. - Fifth Paragraph
The original St. Louis River Project license expired December 31, 1993, and the
Company is currently operating the project under an annual license until the
FERC issues a new license. As a precursor to the issuance of the new license,
the final environmental impact statement (FEIS) for this project was released
by the FERC in February 1995. In a filing with the FERC on April 17, 1995, the
Company identified deficiencies in the FEIS pertaining to the incremental
economic impact that the FEIS recommendations would have upon the project
economics. A final license is expected to be issued during 1995. Depending on
the terms of the final license, the Company, and any other interested party,
may pursue reconsideration of the license under procedures established pursuant
to federal regulations.
Ref. Page 8. - Insert after First Paragraph
On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking (NOPR) on
Open Access Non-Discriminatory Transmission Services by Public Utilities and
Transmitting Utilities (FERC Docket No. RM95-8-000) and a supplemental NOPR on
Recovery of Stranded Costs (FERC Docket No. RM94-7-001).
The rules proposed in the NOPR are intended to facilitate competition among
generators for sales to the bulk power supply market. If adopted, the NOPR on
open access transmission would require public utilities under the Federal Power
Act to provide open access to their transmission systems and would establish
guidelines for their doing so. Previously, the FERC had not imposed on
utilities a general obligation to provide access to their transmission systems.
This open access regime would require utilities to file tariffs that provide
for point-to-point and network transmission services, including ancillary
services. All public utilities would provide such services pursuant to a
generic set of transmission tariff terms and conditions established in the
rulemaking proceeding. Thus, a final rule would define the terms under which
independent power producers, neighboring utilities, and others could gain
access to a utility's transmission grid to deliver power to wholesale
customers, such as municipal distribution systems, rural electric cooperatives,
or other utilities. Under the NOPR, each public utility would also be required
to establish separate rates for its transmission and generation services for
new wholesale services, and to take transmission services (including ancillary
services) under the same tariffs that would be applicable to third-party users
for all of its new wholesale sales and purchases of energy.
The supplemental NOPR on stranded costs provided a basis for recovery by
regulated public utilities of legitimate and verifiable stranded costs
associated with existing wholesale requirements customers and retail customers
who become unbundled wholesale transmission customers of the utility. The FERC
would provide public utilities a mechanism for recovery of stranded costs that
result from municipalization, former retail customers becoming wholesale
customers, or the loss of a wholesale customer. The FERC will consider allowing
recovery of stranded investment costs associated with retail wheeling only if a
state regulatory commission lacks the authority to consider that issue.
The Company is currently evaluating the NOPR to determine its impact on the
Company and its customers. However, the impact is not expected to be material
since the Company has generally adopted the open access policies proposed in
the NOPR. Comments on the open-access NOPR are due August 7, 1995. It is
anticipated that a final rule could take effect in early 1996. The Company
cannot predict the outcome of this matter.
- 11 -
<PAGE>
Ref. Page 9. - Fourth Paragraph
On April 13, 1995, the MPUC issued an order denying approval of the economic
development rate. The MPUC is allowing the Company to refile this request after
making several modifications to address the MPUC's concerns relating primarily
to potential discriminatory impact, cost recovery and future ratemaking
treatment. The Company is currently considering the MPUC's concerns and has not
decided whether it will refile this request with the MPUC.
Ref. Page 11. - Insert after First Paragraph
Early Retirement Plan
In April 1995 the Company offered an early retirement plan to 124 electric
utility employees age 55 or older with 10 or more years of service. The offer
is open until June 15, 1995, and those employees who accept it must retire by
June 30. The Company estimates that the plan will cost from $6 to $8 million,
which will be deferred and expensed over the next 2 to 3 years.
Ref. Page 12. - Insert after Sixth Paragraph
In response to EPA Region V's request for utilities to participate in their
Great Lakes Initiative by voluntarily removing remaining polychlorinated
biphenyl (PCB) inventories, the Company is scheduling replacement of PCB-
contaminated oil from substation equipment by 1998 and removal of PCB
capacitors by 2004. The total cost is expected to be between $1.5 and $2
million.
Ref. Page 14. - Insert after First Paragraph
In January 1995 the FPSC approved the transfer to SSU of water and wastewater
facilities serving the communities of Lakeside and Spring Gardens in Citrus
County, Florida, and Valencia Terrace in Lake County, Florida. The transfers
were finalized in March 1995 adding 1,270 customers to SSU's existing customer
base for a combined purchase price of approximately $500,000.
Ref. Page 15. - Insert after Second Full Paragraph
On April 6, 1995, Florida's First District Court of Appeals issued a decision
reversing a 1993 FPSC order which approved uniform rates for 127 of the
approximate 150 water and wastewater treatment facilities owned by SSU. The
decision resulted from appeals filed with Florida's First District Court of
Appeals by Citrus County and a homeowners' group in SSU's Sugarmill Woods
service area. In addition, Florida's Office of Public Counsel had appealed the
FPSC's decision to permit SSU's shareholders to retain the gain realized from
the condemnation of SSU's St. Augustine Shores facilities in St. Johns County,
Florida. The Court of Appeals affirmed the FPSC's decision to permit SSU's
shareholders to retain the gain realized from the condemnation.
On April 21, 1995, SSU filed a motion for rehearing of the reversal of the
uniform rate structure as well as a motion for certification of the uniform
rate issue to the Supreme Court of Florida. The FPSC also filed a motion for
rehearing of the rate structure issue. The FPSC has not provided any guidance
regarding the impact of the reversal of the uniform rate structure. SSU
believes that it will not be subject to refund liability if the FPSC's rate
structure is not ultimately affirmed on appeal because, among other reasons,
the rate structure issue is a revenue neutral issue.
- 12 -
<PAGE>
Ref. Page 19. - First Full Paragraph and Last Partial Paragraph
On April 17, 1995, a Minnesota businessman agreed to purchase Reach All, the
truck-mounted lifting equipment manufacturing partnership owned 82.5 percent by
UtilEquip Incorporated, a subsidiary of the Company. The transaction is
expected to be completed in the second quarter of 1995, and is conditioned on
the purchaser's completion of due diligence and finalization of financing
arrangements. In anticipation of exiting this business, the Company recorded a
$5 million provision, lowering earnings per share of common stock by 18 cents
in March 1995.
Ref. Page 19. - Fifth Paragraph
On May 8, 1995, the Company and Pentair, Inc. signed definitive agreements with
Consolidated Papers, Inc. to sell their interests in LSPI and SRFI for
approximately $183 million in cash, plus CPI's assumption of debt and lease
obligations. CPI will also indemnify the Company and Pentair, Inc. for any
future liability under LSPI's lease payment guarantees discussed in note 4. The
Company's portion of the proceeds is approximately $112 million. The sale price
is subject to adjustment for changes in net book value from December 31, 1994,
to closing. The transaction is expected to close in late June 1995, and is
conditioned on regulatory clearance, satisfactory completion of further
environmental due diligence, closing of the sale by Pentair, Inc. of its
Niagara of Wisconsin Paper Corporation to CPI, and other customary conditions.
The exit from the paper and pulp business is expected to have an immaterial
impact on 1995 financial results for the Company.
Ref. Page 21. - Executive Officers of the Registrant
At its May 9, 1995 meeting, the Board of Directors elected Mr. Edwin L. Russell
as President of the Company. The election was effected in anticipation of the
upcoming retirement of Mr. Sandbulte and pursuant to a May 8, 1995 agreement
with Mr. Russell. Mr. Sandbulte, who was the Chairman, President and Chief
Executive Officer of the Company prior to Mr. Russell's election, is expected
to remain as Chief Executive Officer until early 1996 and as Chairman until
May 1996. In addition, the Board of Directors, in accordance with the
authority vested in it by the Articles of Incorporation and the Bylaws of the
Company and pursuant to, and in light of the timing of, the May 8 agreement,
appointed Mr. Russell as a director after authorizing an increase in the
size of the Board of Directors from twelve to thirteen members. Mr. Russell
is a former group vice president of J.M. Huber Corp., a $1.5 billion
family-owned diversified manufacturing and natural resources company based
in Edison, New Jersey.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
10 Minnesota Power Director Stock Plan
27 Financial Data Schedule
(b) Reports on Form 8-K - None.
- 13 -
<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.
Minnesota Power & Light Company
-----------------------------------
(Registrant)
May 12, 1995 D. G. Gartzke
-----------------------------------
D. G. Gartzke
Senior Vice President - Finance
and Chief Financial Officer
May 12, 1995 Mark A. Schober
-----------------------------------
Mark A. Schober
Corporate Controller
- 14 -
Exhibit 10
MINNESOTA POWER
Director Stock Plan
I. Purpose
The purpose of the Minnesota Power Director Stock Plan is to provide
ownership of the Company's stock to members of the Board of Directors in
order to improve the Company's ability to attract and retain highly qualified
individuals to serve as directors of the Company and to strengthen the
commonality of interest between directors and shareholders.
II. Definitions
When used herein, the following terms shall have the respective meanings
set forth below:
"Annual Retainer" means the annual retainer payable by the Company to
Directors (exclusive of any per meeting fees or expense reimbursements).
"Board" or "Board of Directors" means the Board of Directors of the Company.
"Committee" means a committee whose members meet the requirements of Section
IV(A) hereof, and who are appointed from time to time by the Board to
administer the Plan.
"Common Stock" means the common stock, no par value, of the Company.
"Company" means Minnesota Power & Light Company, a Minnesota corporation, and
any successor corporation.
"Director" or "Participant" means any person who is elected or appointed to
the Board of Directors of the Company and who is not an Employee.
"Effective Date" means May 9, 1995, the date as of which the Plan is approved
by the shareholders of the Company.
"Employee" means any officer or other common law employee of the Company or
of any Subsidiary.
"Exchange Act" means the Securities Exchange Act of 1934, as amended.
<PAGE>
Minnesota Power
Director Stock Plan
Page 2
"Plan" means the Company's Director Stock Plan, adopted by the Board on
January 25, 1995, and approved by the shareholders on May 9, 1995, as it may
be amended from time to time.
"Plan Year" means the period commencing on the Effective Date of the Plan and
ending the next following December 31 and, thereafter, the calendar year.
"Stock Payment" means that portion of the Annual Retainer to be paid to
Directors in shares of Common Stock rather than cash for services rendered as
a Director of the Company, as provided in Section V hereof, including that
portion of the Stock Payment resulting from any election specified in Section
VI hereof.
"Subsidiary" means any corporation that is a "subsidiary corporation" of the
Company, as that term is defined in Section 424(f) of the Internal Revenue
Code of 1986, as amended.
III. Shares of Common Stock Subject to the Plan
Subject to Section VII below, the maximum aggregate number of
shares of Common Stock that may be delivered under the Plan is 250,000
shares. The Common Stock to be delivered under the Plan will be made
available from authorized but unissued shares of Common Stock, or shares of
Common Stock purchased on the open market and held by the Committee.
IV. Administration
A. The Plan will be administered by a Committee appointed by the
Board, consisting of three or more persons who are not eligible to
participate in the Plan. Members of the Committee need not be
members of the Board. The Company shall pay all costs of
administration of the Plan.
B. Subject to and not inconsistent with the express provisions of the
Plan, the Committee has and may exercise such powers and authority
of the Board as may be necessary or appropriate for the Committee to
carry out its functions under the Plan. Without limiting the
generality of the foregoing, the Committee shall have full power and
authority (i) to determine all questions of fact that may arise
under the Plan, (ii) to interpret the Plan and to make all other
determinations necessary or advisable for the administration of the
Plan, and (iii) to prescribe, amend and rescind rules and
regulations relating to the Plan, including, without limitation, any
rules which the Committee determines are necessary or appropriate to
ensure that the Company and the Plan will be able to comply with all
applicable provisions of any federal, state or local law. All
<PAGE>
Minnesota Power
Director Stock Plan
Page 3
interpretations, determinations and actions by the Committee will be
final and binding upon all persons, including the Company, and the
Participants.
V. Determination of Annual Retainer and Stock Payments
A. The Board shall determine the Annual Retainer payable to all
Directors of the Company.
B. Each Director shall receive on the first business day following the
Effective Date, and on each January 31 thereafter (or on the first
business day thereafter if January 31 is not a business day) a Stock
Payment of 500 shares of Common Stock as a portion of the Annual
Retainer payable to such Director for the Plan Year in which such
date occurs. The cash portion of the Annual Retainer for such Plan
Year shall be paid to Directors at such times and in such manner as
may be determined by the Board of Directors. Directors joining the
Board during the Plan Year after January 31 will receive their Stock
Payment of 500 shares of Common Stock on the first business day
following the effective date of their election or appointment to the
Board.
C. Any Director may decline a Stock Payment for any Plan Year;
provided, however, that no cash compensation shall be paid in lieu
thereof. Any Director who declines a Stock Payment must do so in
writing prior to the performance of any services as a Director for
the Plan Year to which such Stock Payment relates.
D. No Director shall be required to forfeit or otherwise return any
shares of Common Stock issued as a Stock Payment pursuant to the
Plan (including any shares of Common Stock received as a result of
an election under Section VI) notwithstanding any change in status
of such Director which renders him ineligible to continue as a
Participant in the Plan.
VI. Election to Increase Amount of Stock Payment
For any Plan Year, a Participant may make a written election to
reduce the cash portion of the Annual Retainer by a specified dollar amount
and have such amount applied to purchase additional shares of Common Stock of
the Company. The election shall be made on a form provided by the Committee
and must be returned to the Committee no later than six months prior to the
applicable Plan Year. The election form shall state the amount by which the
Participant desires to reduce the cash portion of the Annual Retainer, which
shall be applied toward the purchase of Common Stock to be delivered on the
same date that the Stock Payment is made; provided, however, that no
fractional shares may be purchased. Cash in lieu of any fractional share
shall be paid to the
<PAGE>
Minnesota Power
Director Stock Plan
Page 4
Participant. An election shall continue in effect until changed or revoked by
the Participant. No Participant shall be allowed to change or revoke any
election for the then current year.
VII. Adjustment for Changes in Capitalization
If the outstanding shares of Common Stock of the Company are
increased, decreased, or exchanged for a different number or kind of shares
or other securities, or if additional shares or new or different shares or
other securities are distributed with respect to such shares of Common Stock
or other securities, through merger, consolidation, sale of all or
substantially all of the property of the Company, reorganization or
recapitalization, reclassification, stock dividend, stock split, reverse
stock split, combinations of shares, rights offering, distribution of assets
or other distribution with respect to such shares of Common Stock or other
securities or other change in the corporate structure or shares of Common
Stock, the number of shares to be granted annually, the maximum number of
shares and/or the kind of shares that may be issued under the Plan shall be
appropriately adjusted by the Committee. Any determination by the Committee
as to any such adjustment will be final, binding, and conclusive. The maximum
number of shares issuable under the Plan as a result of any such adjustment
shall be rounded down to the nearest whole share.
VIII. Amendment and Termination of Plan
A. The Board will have the power, in its discretion, to amend, suspend
or terminate the Plan at any time; provided, however, that no
amendment which requires shareholder approval in order for the Plan
to continue to comply with Rule 16b-3 under the Exchange Act,
including any successor to such Rule, shall be effective unless such
amendment shall be approved by the requisite vote of the
shareholders of the Company entitled to vote thereon.
B. Notwithstanding the foregoing, any provision of the Plan that
either states the amount and price of securities to be issued under
the Plan and specifies the price and timing of such issuances, or
sets forth a formula that determines the amount, price, and timing
of such issuances, shall not be amended more than once every six
months, other than to comport with changes in the Internal Revenue
Code, the Employee Retirement Income Security Act, or the rules
thereunder.
IX. Effective Date and Duration of the Plan
The Plan will become effective upon the Effective Date, and shall
remain in effect, subject to the right of the Board of Directors to terminate
the Plan at any time pursuant to Section VIII, until all shares
<PAGE>
Minnesota Power
Director Stock Plan
Page 5
subject to the Plan have been purchased or acquired according to the Plan's
provisions.
X. Miscellaneous Provisions
A. Continuation of Directors in Same Status
Nothing in the Plan or any action taken pursuant to the Plan shall be
construed as creating or constituting evidence of any agreement or
understanding, express or implied, that the Company will retain a Director as
a director or in any other capacity for any period of time or at a particular
retainer or other rate of compensation, as conferring upon any Participant
any legal or other right to continue as a director or in any other capacity,
or as limiting, interfering with or otherwise affecting the right of the
Company to terminate a Participant in his capacity as a director or otherwise
at any time for any reason, with or without cause, and without regard to the
effect that such termination might have upon him as a Participant under the
Plan.
B. Compliance with Government Regulations
Neither the Plan nor the Company shall be obligated to issue any shares
of Common Stock pursuant to the Plan at any time unless and until all
applicable requirements imposed by any federal and state securities and other
laws, rules and regulations, by any regulatory agencies or by any stock
exchanges upon which the Common Stock may be listed have been fully met. As a
condition precedent to any issuance of shares of Common Stock and delivery of
certificates evidencing such shares pursuant to the Plan, the Board or the
Committee may require a Participant to take any such action and to make any
such covenants, agreements, and representations as the Board or the Committee,
as the case may be, in its discretion deems necessary or advisable to ensure
compliance with such requirements. The Company shall in no event be obligated
to register the shares of Common Stock deliverable under the Plan pursuant to
the Securities Act of 1933, as amended, or to qualify or register such shares
under any securities laws of any state upon their issuance under the Plan or at
any time thereafter, or to take any other action in order to cause the issuance
and delivery of such shares under the Plan or any subsequent offer, sale, or
other transfer of such shares to comply with any such law, regulation, or
requirement. Participants are responsible for complying with all applicable
federal and state securities and other laws, rules, and regulations in
connection with any offer, sale, or other transfer of the shares of Common
Stock issued under the Plan or any interest therein including, without
limitation, compliance with the registration requirements of the Securities
Act of 1933 as amended (unless an exception therefrom is available) or with
the provisions of Rule 144 promulgated thereunder, if applicable, or any
successor
<PAGE>
Minnesota Power
Director Stock Plan
Page 6
provisions. Certificates for shares of Common Stock may be legended
as the Committee shall deem appropriate.
C. Nontransferability of Rights
No Participant shall have the right to assign the right to receive any
Stock Payment or any other right or interest under the Plan, contingent or
otherwise, or to cause or permit any encumbrance, pledge, or charge of any
nature to be imposed on any such Stock Payment (prior to the issuance of stock
certificates evidencing such Stock Payment) or any such right or interest.
D. Severability
In the event that any provision of the Plan is held invalid, void, or
unenforceable, the same shall not affect, in any respect whatsoever, the
validity of any other provision of the Plan.
E. Governing Law
To the extent not preempted by federal law, the Plan shall be governed
by the laws of the state of Minnesota.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM MINNESOTA
POWER'S CONSOLIDATED BALANCE SHEET, STATEMENT OF INCOME, AND STATEMENT OF CASH
FLOW FOR THE PERIOD ENDED MARCH 31, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,083,694
<OTHER-PROPERTY-AND-INVEST> 357,922
<TOTAL-CURRENT-ASSETS> 244,328
<TOTAL-DEFERRED-CHARGES> 100,682
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,786,626
<COMMON> 371,974
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 282,384
<TOTAL-COMMON-STOCKHOLDERS-EQ> 576,610
0
48,547
<LONG-TERM-DEBT-NET> 600,629
<SHORT-TERM-NOTES> 30,167
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 12,818
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 440,107
<TOT-CAPITALIZATION-AND-LIAB> 1,786,626
<GROSS-OPERATING-REVENUE> 168,726
<INCOME-TAX-EXPENSE> (14,205)<F1>
<OTHER-OPERATING-EXPENSES> 140,406
<TOTAL-OPERATING-EXPENSES> 153,024
<OPERATING-INCOME-LOSS> 11,252
<OTHER-INCOME-NET> (4,450)
<INCOME-BEFORE-INTEREST-EXPEN> 38,075
<TOTAL-INTEREST-EXPENSE> 12,618
<NET-INCOME> 25,457
800
<EARNINGS-AVAILABLE-FOR-COMM> 24,657
<COMMON-STOCK-DIVIDENDS> 14,920
<TOTAL-INTEREST-ON-BONDS> 10,647
<CASH-FLOW-OPERATIONS> 43,424
<EPS-PRIMARY> .87
<EPS-DILUTED> .87
<FN>
<F1>Includes tax benefits related to Lehigh Acquisition Corporation, Minnesota
Power's real estate company.
</FN>
</TABLE>
