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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, 1998
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
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NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
---------
STATEMENTS OF NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
ASSETS: December 30, 1998 December 30, 1997
---------------------- ---------------------
<S> <C> <C>
Noninterest-bearing cash $1 $2
Receivables:
Participant contributions 2,437 2,361
Dividends and interest 4,094,137 3,961,510
General investments:
Interest-bearing cash 2,952 7,730
Employer-related investments:
Investment in Northern States Power Company
common stock 317,884,185 327,286,014
---------------------- ---------------------
TOTAL ASSETS 321,983,712 331,257,617
---------------------- ---------------------
LIABILITIES:
Loans and interest payable to Northern States Power
Company 18,705,184 10,660,759
---------------------- ---------------------
TOTAL LIABILITIES 18,705,184 10,660,759
====================== =====================
NET ASSETS AVAILABLE FOR PLAN BENEFITS $303,278,528 $320,596,858
====================== =====================
</TABLE>
See accompanying notes to financial statements.
1
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NORTHERN STATES POWER COMPANY
EMPLOYEE STOCK OWNERSHIP PLAN
---------
STATEMENT OF CHANGES IN NET ASSETS AVAILABLE FOR BENEFITS
<TABLE>
<CAPTION>
Year Ended
INCOME: December 30, 1998
---------------------
<S> <C>
Contributions:
Employers $4,322,457
Participants 27,086
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Total contributions 4,349,543
Earnings on investments:
Interest-bearing cash 8,169
Dividends:
Northern States Power Company common stock 16,355,809
Net gain on sale of assets:
Aggregate proceeds 20,644,952
Aggregate carrying amount 11,816,920
---------------------
Total net gain on sale of assets 8,828,032
Unrealized appreciation (depreciation) of assets (25,172,111)
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TOTAL INCOME 4,369,442
---------------------
EXPENSES:
Benefit payments made directly to participants
or beneficiaries 20,635,058
Interest expense 1,042,835
Administrative and other 9,879
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TOTAL EXPENSES 21,687,772
---------------------
NET DECREASE IN PLAN ASSETS (17,318,330)
NET ASSETS AVAILABLE FOR PLAN BENEFITS:
Beginning of year 320,596,858
---------------------
End of year $303,278,528
=====================
</TABLE>
See accompanying notes to financial statements.
2
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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 fair value. 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.
RISKS AND UNCERTAINTIES - Because the Plan's assets and income sources
are concentrated largely in Company common stock, changes in the values
of Company stock could occur in the near term and such changes could
materially affect participants' account balances and the amounts reported
in the Statement of Net Assets Available for Plan Benefits.
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
Page 3
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NORTHERN STATES POWER COMPANY
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
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 $200,000,
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.
BENEFITS - Each participant is fully vested 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 current 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, and the
Employer has not expressed any intent to terminate the Plan. However, 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. The
Plan has been amended since receiving the determination letter. However,
the Plan's Administrator believes that the Plan is currently designed and
being operated in compliance with the applicable requirements of the
Internal Revenue Code. Therefore, no provision for income taxes has been
included in the Plan's financial statements.
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.
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NORTHERN STATES POWER COMPANY
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
4. CHANGES IN UNREALIZED APPRECIATION (DEPRECIATION) OF COMPANY COMMON STOCK
<TABLE>
<CAPTION>
Unrealized
Fair Value Cost Appreciation
------------- ------------ -------------
<S> <C> <C> <C>
Balance, December 30, 1997 $327,286,014 $183,803,175 $143,482,839
Net Change - Increase (Decrease) (9,401,829) 15,770,282 (25,172,111)
------------- ------------ -------------
Balance, December 30, 1998 $317,884,185 $199,573,457 $118,310,728
============= ============ =============
</TABLE>
The fair value at December 30, 1998 and 1997 was $27 3/4 and $29 1/8
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, 1998 and 1997 as follows:
<TABLE>
<CAPTION>
1998 1997
------------------------------ -------------------------------
Allocated Unallocated Allocated Unallocated
------------ ----------- ------------ ------------
<S> <C> <C> <C> <C>
Number of Shares 10,593,058 862,228 10,595,290 641,998
Market Value $293,957,359 $23,926,826 $308,587,821 $18,698,193
Cost $176,577,641 $22,995,816 $168,769,632 $15,033,543
</TABLE>
6. RELATED PARTY TRANSACTIONS
TRANSACTIONS WITH THE COMPANY - Common stock dividends relate solely to
Company shares held by the Plan. Receivables include dividends on Company
stock payable to the Plan of $4,094,077 and $3,961,510 at December 30,
1998 and 1997, respectively. Employer contributions for the 1998 plan year
were based on tax savings realized by the Company.
LOAN PAYABLE - In April 1998, 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. The Company correspondingly 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 $7,030,313
and $7,037,454 were made during the years ended December 30, 1998 and
1997, 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, 1998 the interest rate was 5.4% on the loan dated
September 1996, 5.5% on the loan dated April 1995 and 5.4% on the loan
dated April 1998.
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NORTHERN STATES POWER COMPANY
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, 1998 and 1997 there
were no benefits payable to withdrawing participants.
8. COMMON STOCK SPLIT IN 1998
On April 22, 1998, the Company's Board of Directors authorized a
two-for-one stock spilt effective June 1, 1998 for shareholders of record on May
18, 1998. All per share amounts and number of common shares have been adjusted
to reflect the two-for-one stock split.
Page 6
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NORTHERN STATES POWER COMPANY
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
ITEM 27A - SCHEDULE OF ASSETS HELD FOR INVESTMENT PURPOSES AT DECEMBER 30, 1998
<TABLE>
<CAPTION>
IDENTITY OF ISSUE DESCRIPTION OF INVESTMENT COST CURRENT VALUE
<S> <C> <C> <C>
*Northern States Power Common Stock-Par $2.50 $199,573,457 $317,884,185
Company
*Party in interest to the Plan.
First Bank N.A. First American Institutional
Money Fund 2,952 2,952
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$199,576,409 $317,887,137
</TABLE>
Page 7
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NORTHERN STATES POWER COMPANY
Employee Stock Ownership Plan
(EIN: 41-0448030 PN: 002)
ITEM 27D - SCHEDULE OF REPORTABLE TRANSACTIONS
<TABLE>
<CAPTION>
(a) Identity of Party (b) Description (c) Purchase (d) Selling (h) Current (i) Net Gain
Involved of Transaction Price Price Value or (loss)
--------- --------------- ---------------- -------------- ----------- ----------------
<S> <C> <C> <C> <C> <C>
SERIES OF TRANSACTIONS - SECURITY OF THE SAME ISSUE
Northern States Purchases and sales of
Power Company Northern States Power
Common Stock Company Common Stock
by the Plan $27,587,201 $9,894 $3,820
First Bank N.A. Purchases and sales of
First American
Institutional Money Fund $11,520,430 $11,525,208
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 $48,255,567
</TABLE>
Page 8
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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, 1998 and 1997, and the changes in its net assets available for
benefits for the year ended December 30, 1998, 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.
PricewaterhouseCoopers LLP
Minneapolis, Minnesota
June 17, 1999
Page 9
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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 28, 1999 Northern States Power Company
<PAGE>
Exhibit 23.01
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statement on Form S-8 (No. 2-61264) of Northern States Power Company our report
dated June 17, 1999 relating to the financial statements, which appears in this
Form 11-K.
PRICEWATERHOUSECOOPERS LLP
Minneapolis, Minnesota
June 28, 1999
