SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 11-K
X ANNUAL REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 For the fiscal year ended December 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 15(d) OF THE SECURITIES EXCHANGE ACT
OF 1934
Commission file number: 1-3034
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
NORTHERN STATES POWER COMPANY (the "Company")
414 NICOLLET MALL
MINNEAPOLIS, MINNESOTA 55401
<PAGE>
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
December 30, 1997 December 30, 1996
------------------ -----------------
<C> <C> <C>
ASSETS:
Total noninterest-bearing cash $ 2 $ 1
Receivables:
Participant contributions 2,361 2,539
Dividends and interest 3,961,510 4,051,136
---------- ----------
Total 3,963,873 4,053,676
General investments:
Interest-bearing cash
(including money market funds) 7,730 1,758
Employer-related investments:
Investment in Northern States
Power Company common stock 327,286,014 270,459,824
------------ -----------
TOTAL ASSETS 331,257,617 274,515,258
LIABILITIES:
Loans and interest payable to
Northern States Power Company 10,660,759 17,765,580
----------- ----------
TOTAL LIABILITIES 10,660,759 17,765,580
NET ASSETS AVAILABLE FOR
PLAN BENEFITS $320,596,858 $256,749,678
============ =============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
Year Ended
December 30, 1997
<S> <C>
INCOME:
Contributions:
Employers $4,546,503
Participants 31,311
----------
Total contributions 4,577,814
Earnings on investments:
Interest-bearing cash
(including money market funds) 7,605
Dividends:
Northern States Power Company
common stock 15,923,150
Net gain on sale of assets:
Aggregate proceeds 26,811,389
Aggregate carrying amount 16,903,984
-----------
Total net gain on sale of assets 9,907,405
Unrealized appreciation of assets 60,689,596
----------
TOTAL INCOME 91,105,570
EXPENSES:
Benefit payments made directly to
participants or beneficiaries 26,426,550
Interest expense 815,994
Administrative and other 15,846
----------
TOTAL EXPENSES 27,258,390
NET INCREASE IN PLAN ASSETS 63,847,180
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 256,749,678
------------
End of year $320,596,858
============
</TABLE>
See accompanying notes to financial statements.
<PAGE>
Page 3
NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
(EIN: 41-0448030 PN: 002)
NOTES TO FINANCIAL STATEMENTS
1. Summary of Significant Accounting Policies
Investments - Substantially all investments of the Northern States Power
Company Employee Stock Ownership Plan (the "Plan") consist of common stock
of Northern States Power Company (Minnesota) (the "Company") and are carried
at market. The Plan recognizes unrealized appreciation or depreciation in
the market value of Company shares, which is determined using the year-end
closing market price. Realized appreciation or depreciation is recognized
by the Plan upon distribution of individual account balances to participants
or beneficiaries. The cost of stock distributed is determined on the
average cost basis.
Use of Estimates - In recording transactions and balances resulting from
Plan activity, the Plan uses estimates based on the best information
available. Estimates are used for such items as interest and dividends
receivable. As better information becomes available (or actual amounts are
determinable), the recorded estimates are revised. Consequently, Plan
operating results can be affected by revisions to prior estimates.
Other - The Plan follows the accrual basis of accounting. Most
administrative expenses of the Plan are paid by the Company or its
subsidiaries, except that terminating participants who at their election
desire an early and additional distribution of their accounts are charged a
fee by the Company to partially offset the added administrative cost for two
distributions.
2. Plan Description
The following brief description of the Plan is provided for general
informational purposes only. Participants should refer to the Plan document
for more complete information.
General - Adopted in 1975, the Plan is a defined contribution employee
benefit plan which provides eligible employees of the Company and its
participating subsidiaries (collectively the "Companies") with the
opportunity to acquire ownership of common stock of the Company, without
reduction in pay or other benefits. Eligible participants may purchase
additional Company common stock under the Plan by making after-tax
contributions. The Plan covers substantially all of the employees of the
Companies.
Funding - Assets of the Plan are maintained in a trust. The Companies can
make contributions to the Plan at their discretion. Generally, the Company
makes contributions (on behalf of the Companies) to the extent that tax
savings are realized by the Companies as a result of the use of the
dividends received by the Plan to repay loans, as discussed below. Shares
purchased with contributions made by the Company are allocated to the
eligible active participants' accounts in the proportion that the
participants' covered compensation bears to the covered compensation of all
eligible participants, excluding compensation in excess of $160,000, as
limited under the Internal Revenue Code 401(a)(17). Since 1977, the Plan
has also provided for voluntary savings contributions to be made by eligible
employees through payroll deductions which are not matched by the Companies
under current Plan provisions.
<PAGE>
Northern States Power Company Page 4
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
Benefits - Each participant is fully vested (that is, has a right which
cannot be lost) in all of the common stock allocated to the participant's
account. Participant accounts can be distributed to participants in the
plan year following retirement or other termination of employment with the
Companies. Qualifying participants may accelerate or delay distribution
after termination of employment. The Plan also permits limited in-service
withdrawals of amounts attributable to employee contributions, but some
withdrawals are available only to satisfy qualifying hardships.
Loans - The Plan is designed so that loans may be taken out by the Plan and
the proceeds used to purchase shares of Company common stock. (See Note 6
for further discussion of Plan loans.) Dividends received for unallocated
shares and for certain shares allocated to active participants are used to
repay the loans. As the dividends for shares allocated to participant
accounts are applied to the loan, the shares purchased with the loan
proceeds are allocated to the individual accounts of the active participants
whose dividends were used, as though the dividends were used to purchase
stock on the open market, but at the price per share of the shares acquired
with the loan proceeds, if that price is lower than the market price.
Dividends are applied to loan repayments before any contributions by the
Companies are applied.
Plan Termination - There is no specified term for the Plan but the employer
may terminate the Plan at any time in accordance with the provisions of
ERISA.
3. Federal Income Tax
The Plan has been determined by the Internal Revenue Service (IRS) to be a
qualified plan under Section 401(a) of the Internal Revenue Code (the Code).
As a result, any income earned by the Plan is exempt from federal income
tax. The Company believes that the Plan is currently designed and being
operated in compliance with the applicable requirements of the Code to
maintain compliance with Section 401(a). In September 1995, the Company
received a favorable determination letter from the IRS reaffirming the
Plan's status as a qualified plan under section 401(a) of the Code.
As long as the Plan remains a qualified plan, participants are not subject
to income tax on amounts contributed by the Companies or any income received
by the Plan until a distribution is received from the Plan. Participants
may not claim a deduction on their Federal income tax return for any
employee contributions. Distributions in excess of the participant's
contributions will usually be taxed as ordinary income. However, if common
stock is distributed, the portion of the value representing unrealized
appreciation while held in the Plan, may not, under certain circumstances,
be subject to immediate tax. Participants of age 50 or older as of January
1, 1986 may elect 10-year averaging at pre-1987 income tax rates or 5-year
averaging at current rates. Through tax year 1999, other participants may
elect a one time only 5-year averaging option for lump sum distributions
received after the participant attains age 59 1/2.
<PAGE>
NORTHERN STATES POWER COMPANY Page 5
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
4. Changes In Unrealized Appreciation (Depreciation) Of Company Common Stock
Unrealized
Market Value* Cost Appreciation
------------- ------------ -----------
Balance, December 30, 1996 $270 459 824 $187 666 581 $82 793 243
Net Change - Increase (Decrease) 56 826 190 ( 3 863 406) 60 689 596
------------ ------------ -----------
Balance, December 30, 1997 $327 286 014 $183 803 175 $143 482 839
*The market value at December 30, 1997 and 1996 was $58 1/4 and $45 7/8
per share, respectively.
5. Allocation of Plan Investments
The Plan's cash investments are not allocated to participants. The Plan's
investments in Company common stock were allocated to participants' accounts
at December 30, 1997 and 1996 as follows:
1997 1996
---------------------- ----------------------
Allocated Unallocated Allocated Unallocated
Number of Shares 5 297 645 320 999 5 420 993 474 589
Market Value $308 587 821 $18 698 193 $248 688 054 $21 771 770
Cost $168 769 632 $15 033 543 $165 716 468 $21 950 113
6. Related Party Transactions
Transactions with the Company - Income from common stock dividends relate to
Company shares held by the Plan. Income receivables include dividends on
Company stock payable to the Plan of $3,961,510 and $4,051,129 at December
30, 1997 and 1996, respectively. Employer contributions for the 1997 plan
year were based on tax savings realized by the Company.
Loan Payable - In September 1996 and March 1995, the Plan entered into
respective $15,000,000 term loan agreements with the Company as permitted by
the Trust Agreement between the Trustee and the Company. The proceeds of
the loans were used to purchase the Company's common stock. In September
1996 and April 1995, the Company obtained $15,000,000 in unsecured bank
loans to finance the loans to the Plan on a long-term basis. The agreements
with the Company provide for the Plan's loans to be repaid coincidentally
with the Company's bank loans, in quarterly installments over approximately
seven years. Loan payments in the amount of $7,037,454 and $7,302,869 were
made during the years ended December 30, 1997 and 1996, respectively. The
loans bear interest at a variable rate which is adjusted quarterly, based on
changes in London Interbank Offered Rates (LIBOR). At December 30, 1997 the
interest rate was 6.0% on the loan dated September 1996 and 6.1% on the loan
dated April 1995.
<PAGE>
NORTHERN STATES POWER COMPANY Page 6
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
7. Reconciliation of Financial Statements to Form 5500
As required by the Department of Labor's rules and regulations for reporting
and disclosure under the Employee Retirement Income Security Act of 1974, on
the Plan's Form 5500 report the net asset amounts allocable to withdrawing
participants are recorded as a liability based on benefit claims that have
been processed and approved for payment prior to December 30 but have not
yet been paid as of that date. As required by generally accepted accounting
principles, on the accompanying financial statements such amounts are
recorded as paid. At December 30, 1997 and 1996 there were no benefits
payable to withdrawing participants.
8. Subsequent Event
On April 22, 1998, the Company's Board of Directors authorized a two-for-
one stock split effective June 1, 1998 for shareholders of record on
May 18, 1998. This stock split is not reflected in the accompanying
financial statements.
<PAGE>
NORTHERN STATES POWER COMPANY Page 7
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
Item 27a - Schedule of Assets held for Investment Purposes at December 30, 1997
IDENTITY OF ISSUE DESCRIPTION OFINVESTMENT COST CURRENT VALUE
- ----------------- ------------------------ -------- ---------------
*Northern States
Power Company Common Stock - Par $2.50 $183 803 175 $327 286 014
* Known to be a party-in-interest to the Plan.
<PAGE>
NORTHERN STATES POWER COMPANY Page 8
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
Item 27d - Schedule of Reportable Transactions
(a)Identity of (b)Description (c)Purchase (d)Selling (h)Current (i) Net Gain
Party Involved of Transaction Price Price Value or (loss)
Single Transactions
- -------------------
None.
Series of Transactions - Security of the Same Issue
- ---------------------------------------------------
None.
Series of Transactions - Same Person
- ------------------------------------
Northern States Northern States Power Co.
Power Company * Common Stock Dividends,
Employer Contribution, and
Purchase of Common Stock
from Northern States Power
Company $27,121,686
* Known to be a party in interest.
<PAGE>
Page 9
REPORT OF INDEPENDENT ACCOUNTANTS
To the Participants and Administrator
of the Northern States Power Company
Employee Stock Ownership Plan
In our opinion, the accompanying statement of net assets available for benefits
and the related statement of changes in net assets available for benefits
present fairly, in all material respects, the net assets available for benefits
of the Northern States Power Company Employee Stock Ownership Plan (the Plan) at
December 30, 1997 and 1996, and the changes in its net assets available for
benefits for the year ended December 30, 1997, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Plan's management; our responsibility is to express an
opinion on these financial statements based on our audits. We conducted our
audits of these statements in accordance with generally accepted auditing
standards which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audits provide a reasonable basis for the opinion expressed above.
Our audits were performed for the purpose of forming an opinion on the basic
financial statements taken as a whole. The additional information provided in
Items 27a and 27d is presented for the purpose of additional analysis and is not
a required part of the basic financial statements but is supplementary
information required by the Department of Labor's Rules and Regulations for
Reporting and Disclosure under the Employee Retirement Income Security Act of
1974. The supplemental items have been subjected to the auditing procedures
applied in the audits of the basic financial statements and, in our opinion, are
fairly stated in all material respects in relation to the basic financial
statements taken as a whole.
/S/
- --------------------
Price Waterhouse LLP
Minneapolis, Minnesota
June 25, 1998
<PAGE>
Signature
As permitted under Form 11-K rules, the Company's Employee Stock Ownership Plan
is filing plan financial statements and schedules prepared in accordance with
the financial reporting requirements of ERISA.
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Company's Plan Administrator has duly caused this annual report to be signed on
its behalf by the undersigned, thereunto duly authorized.
Northern States Power Company
Employee Stock Ownership Plan
(Registrant)
By /S/
--------------------------
E J McIntyre
Vice President and
Chief Financial Officer
June 25, 1998 Northern States Power Company
Exhibit Index
Method of filing Exhibit No. Description
- ---------------- ------------ ------------
DT 23.01 Consent of Independent Accountants
DT = Filed electronically with this direct transmission.
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We consent to the incorporation by reference in the Registration Statement
No. 2-61264 of Northern States Power Company on Form S-8 of our report dated
June 25, 1998 appearing on page 9 of the Northern States Power Company
Employee Stock Ownership Plan's Annual Report on Form 11-K for the year
ended December 30, 1997.
/s/
- ---------------------------
Price Waterhouse LLP
Minneapolis, Minnesota
June 25, 1998
