United States
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
Transition report pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
For Quarter Ended MARCH 31, 1995 Commission File Number 10-3140
NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS
THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) AND (2) OF
FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED
DISCLOSURE FORMAT.
Northern States Power Company
(Exact name of registrant as specified in its charter)
Wisconsin 39-0508315
(State or other jurisdiction of
(I.R.S.Employer Identification No.)
incorporation or organization)
100 North Barstow Street, Eau Claire, Wisconsin
54702
(Address of principal executive officers) (Zip Code)
Registrant's telephone number, including area code
(715) 839-2621
None
Former name, former address and former fiscal year, if changed
since last report
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 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
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at April 30, 1995
Common Stock, $100 par value 862,000 Shares
All outstanding common stock is owned beneficially and of
record by Northern States Power Company, a Minnesota
corporation.
<PAGE>
Northern States Power Company (Wisconsin)
NOTES TO FINANCIAL STATEMENTS
In the opinion of management, the accompanying unaudited
financial statements contain all adjustments necessary to
present fairly the Northern States Power Company Wisconsin's
(The Company's) financial position as of March 31, 1995, and
December 31, 1994 and the results of its operations and cash
flows for the three months ended March 31, 1995 and March 31,
1994.
The accounting policies followed by the Company are set forth in
Note 1 to the Company's financial statements in its Annual
Report on Form 10-K for the year ended December 31, 1994,(The
Form 10-K). The following notes should be read in conjunction
with such policies and other disclosures in the Form 10-K.
1. Subsequent Event - Proposed Business Combination
The Company is a wholly owned subsidiary of Northern States
Power Company, a Minnesota corporation (NSPM). On April
28, 1995, NSPM and Wisconsin Energy Corporation (WEC)
entered into an Agreement and Plan of Merger (Agreement).
As a result, a registered utility holding company, which
will be known as Primergy Corporation (Primergy), will be
the parent of NSPM and the current operating subsidiaries
of NSPM and WEC. Each outstanding share of common stock of
NSPM will be converted into 1.626 shares of common stock of
Primergy and each outstanding share of common stock of WEC
will remain outstanding as one share of common stock of
Primergy. The business combination is intended to be tax-
free for income tax purposes, and to be accounted for as a
"pooling of interests". The Agreement is subject to
various conditions, including approval of the stockholders
of NSPM and WEC, and the approval of various regulatory
agencies. The Company anticipates that the completion of
the regulatory review and approval process will take
approximately 12-18 months and, accordingly, the
completion of this business combination is not anticipated
until late 1996. Item 5 of Part II of this report provides
additional information regarding the proposed transaction.
2. Rate Matters
There were no changes in any of the Company's
jurisdictions' rates since the Form 10-K was filed.
The Company will be filing a rate case June 1, 1995, for a
change in gas retail rates. No electric change will be
proposed.
3. Contingent Liabilities
On March 2, 1995, the Wisconsin Department of Natural
Resources notified the Company that it is a PRP on a
creosote/coal tar contamination site in Ashland, WI. An
estimate of site remediation costs, and the extent of the
Company's responsibility, if any, for sharing such costs,
is not known at this time. The Company intends to seek
rate recovery of significant costs it incurs associated
with the clean-up of the Ashland Site.
The Company is contingently liable to several financial
institutions for debt incurred by companies under the
Company's Economic Development Guaranty Program. At March
31, 1995, the Company was contingently liable for
approximately $1.4 million under the agreements. No losses
were sustained under these agreements during 1992, 1993,
1994, nor during the first quarter of 1995; the Company
anticipates no future material losses will result from
these agreements.
<PAGE>
Item 2. Management's Discussion and Analysis of Results of
Operations
Discussion of financial condition and liquidity is omitted per
conditions set forth in general instructions H (1) and (2) of
Form 10-Q for wholly-owned subsidiaries. (Reduced disclosure
format.)
On April 28, 1995, NSPM and WEC entered into an Agreement and
Plan of Merger which provides for a strategic business
combination involving the two companies in a "merger-of-equals"
transaction. See Part II of this report.
The Company's net income for the first quarter ended March 31,
1995 was $15.2 million, down approximately $3.1 million from the
net income recorded for the comparable period a year ago. The
decrease in net income was primarily due to a reduction in
revenues resulting from a decrease in weather related energy
sales.
ELECTRIC SALES AND REVENUES
Electric revenues for the first quarter of 1995 decreased $4.2
million (4.2 percent) from the electric revenues for the first
quarter of 1994. Electric sales decreased 1.7 percent in the
first quarter of 1995 as compared with the first quarter of 1994
mainly due to the comparably cooler temperatures in 1994. This
sales decrease resulted in $2.3 million of the decrease from the
first quarter of 1994. The remaining $1.9 million is a result
of decreased Interchange Agreement billings to the Minnesota
Company due to a decrease in transmission operating and
maintenance and fuel generation in Wisconsin.
GAS SALES AND REVENUES
Gas revenues decreased $1.9 million (5.7 percent) compared to
the first quarter, 1994. This is partly due to an 8.7 percent
decrease in firm gas sales due to comparably cooler temperatures
in 1994. Interruptible sales increases and 4% customer growth
offset the weather decreases in part yielding a 2.1% sales
decrease. Lower spot market gas costs resulted in approximately
$1.7 million of purchased gas adjustment clause revenue
decreases.
OPERATING EXPENSES
Operating expenses decreased $3.4 million in the first quarter
of 1995 as compared to the first quarter of 1994. Gas
purchased for resale decreases made up $1.9 million of this
decrease and were the result of decreased commodity costs on the
spot market combined with decreased purchased volumes to supply
the decreased sales. The Company's decreased electric sales
during the first quarter of 1995 from the first quarter of 1994
resulted in the Company's fuel for electric generation and its
purchased power and fuel as purchased under its interchange
agreement with its parent to decrease by approximately $1.1
million. Included in this decrease is an increase due to a one-
time payment schedule change in the annual Department of Energy
enrichment facility decommissioning and decontamination
assessment.
<PAGE>
OTHER INCOME
There were no material changes to other income and deductions in
the first quarter of 1995 as compared with the first quarter of
1994.
INTEREST CHARGES
Interest on short-term borrowings from the parent company has
increased by $0.3 million as a result of increases in both the
debt level and the interest rate between 1994's first three
months and those of 1995.
PART II. OTHER INFORMATION
Item 5. Other Information
MERGER AGREEMENT WITH WISCONSIN ENERGY CORPORATION
Northern States Power Company, a Wisconsin corporation, (NSP-W),
is a wholly owned subsidiary of Northern States Power Company,
a Minnesota corporation (NSP). As previously reported in NSP-
W's Current Report on Form 8-K dated April 28, 1995 (The NSP-W
Form 8-K Report), NSP, Wisconsin Energy Corporation, a Wisconsin
corporation (WEC), Northern Power Wisconsin Corp., a Wisconsin
corporation and wholly-owned subsidiary of NSP (new NSP) and WEC
Sub Corp., a Wisconsin corporation and wholly-owned subsidiary
of WEC (WEC Sub), have entered into an Agreement and Plan of
Merger, dated as of April 28, 1995 (the Merger Agreement), which
provides for a strategic business combination involving NSP and
WEC in a "merger-of-equals" transaction (the Transaction). The
Transaction, which was unanimously approved by the Boards of
Directors of the constituent companies, is expected to close
shortly after all of the conditions to the consummation of the
Transaction, including obtaining applicable regulatory
approvals, are met or waived. The regulatory approval process
is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined
enterprise will be registered under the Public Utility Holding
Company Act of 1935, as amended. The holding company will be
named Primergy Corporation (Primergy) and will be the parent
company of both NSP (which, for regulatory reasons, will
reincorporate in Wisconsin) and of WEC's present principal
utility subsidiary, Wisconsin Electric Power Company (WEPCO),
which will be renamed "Wisconsin Energy Company." Wisconsin
Energy Company will include the operations of WEC's other
present utility subsidiary, Wisconsin Natural Gas Company, which
is anticipated to be merged into WEPCO by year-end 1995, pending
regulatory approval, as previously planned. It is anticipated
that, following the Transaction, NSP-W will be merged into
Wisconsin Energy Company. In the event NSP-W is merged into
Wisconsin Energy Company, it is expected that NSP-W's first
mortgage bonds will remain outstanding and Wisconsin Energy
Company will assume all obligations related to such bonds in
accordance with the NSP-W first mortgage bond indenture.
Both NSP and WEC recognize that the divestiture of their
existing gas operations and certain non-utility operations is a
possibility under the new registered holding company structure,
but will seek approval from the SEC to maintain such businesses.
If divestiture is ultimately required, the SEC has historically
allowed companies sufficient time to accomplish divestitures in
a manner that protects shareholder value.
The foregoing description of the Transaction does not purport to
be complete and is qualified in its entirety by reference to the
following documents (including the exhibits thereto) filed with
the Securities and Exchange Commission (SEC): (ii) NSP-W Form
8-K Report, (ii) Current Report on Form 8-K, dated April 28,
1995, of NSP (SEC File No. 1-3034) and (iii) Quarterly Report on
Form 10-Q of NSP for the quarter ended March 31, 1995 (SEC File
No. 1-3034) (NSP Form 10-Q). The NSP Form 10-Q contains certain
pro-forma financial information regarding the transaction and is
incorporated herein by this reference.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following Exhibit is filed with this report:
27.01 Financial Data Schedule for the three months ended March
31, 1995.
The following Exhibits are incorporated herein by reference:
2.01 Agreement and Plan of Merger, dated as of April 28, 1995,
by and among Northern States Power Company, Wisconsin
Energy Corporation, Northern States Power Company Wisconsin
Corp. and WEC Sub Corp. (Exhibit (2)-1 to Northern States
Power Company, a Minnesota Corporation, Current Report on
Form 8-K dated as of April 28, 1995, File No. 1-3034).
99.01 Quarterly Report on Form 10-Q of Northern States Power
Company, a Minnesota Corporation for the quarter ended
March 31, 1995, (File No. 1-3034):
99.02 Press Release, dated May 1, 1995, of Northern States
Power Company. (Exhibit (99)-1 of NSP's 4/28/95 Form
8-K.
(b) Reports on Form 8-K
The following report on Form 8-K was filed between March
31, 1995 and the date of this report:
April 28, 1995 (Filed May 8, 1995) - Item 5. Other Events.
Disclosure of an agreement and plan of merger between
Northern States Power Company (a Minnesota Corporation) and
Wisconsin Energy Corporation, subject to approval by
stockholders and regulatory agencies.
<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.
NORTHERN STATES POWER COMPANY
(Registrant)
Date: May 15, 1995 /s/
Kenneth J Zagzebski
Controller
(Principal Accounting Officer)
Date: May 15, 1995 Neal Siikarla
Treasurer
(Principal Financial Officer)
NORTHERN STATES POWER COMPANY (WISCONSIN)
STATEMENTS OF INCOME
Three Months Ended
March 31
(Thousands of dollars)
1995(*) 1994(*)
Operating revenues
Electric 96355 100548
Gas 31558 33456
Total 127913 134004
Operating expenses
Fuel for electric generation 1158 1747
Purchased and interchange power 43584 43462
Gas purchased for resale 18021 19912
Administrative and general 6571 7018
Other operation 13219 12791
Maintenance 3893 4144
Depreciation and amortization 8115 7524
Taxes: Property and general 3521 3514
Current income tax exense 9511 10769
Net Provision for deferred income taxes 977 1091
Net investment tax credit adjustments -234 -236
Total 108336 111736
Operating Income 19577 22268
Other income
Other income and deductions - net 228 52
Allowance for funds used during const-Equity 59 152
Total Other Income 287 204
Income before interest charges 19864 22472
Interest charges
Interest on long-term debt 4011 3974
Other interest and amortization 838 288
Allowance for funds used during const-Debt -145 -96
Total 4704 4166
Net Income 15160 18306
STATEMENTS OF RETAINED EARNINGS
Balance at beginning of period 218833 205114
Net income for period 15160 18306
Net additions 15160 18306
Dividends paid 6603 6206
Balance at end of period 227390 217214
(*) Unaudited
The Notes to Financial Statements are an integral part of the Statements of
Income and Retained Earnings
2
Northern States Power Company (Wisconsin)
Balance Sheets
March 31 December 31
1995 (*) 1994
ASSETS (Thousands of dollars)
UTILITY PLANT
Electric 839032 836665
Gas 88225 88350
Common 55943 54675
Total 983200 979690
Accumulated depreciation for plant -351750 -344675
Net utility plant 631450 635015
OTHER PROPERTY AND INVESTMENTS 6846 6691
CURRENT ASSETS
Cash and cash equivalents. 85 61
Accounts receivable - net... 40241 36946
Materials and supplies - at average cost
Fuel 2905 3413
Other 7054 12280
Accrued utility revenues 13448 16409
Prepayments and other 8100 11030
Deferred tax asset 1847 1415
Total current assets 73680 81554
DEFERRED DEBITS
Unamortized debt expense 2895 2928
Regulatory assets 33176 31376
Federal Income Tax Receivable 3307 3307
Insurance receivable 1558 3091
Other 4166 4338
Total deferred debits 45102 45040
TOTAL ASSETS 757078 768300
LIABILITIES
CAPITALIZATION
Common Stock - authorized 870,000 shares of $100 par value,
issued shares: 1995 and 1994, 862,000 86200 86200
Premium on common stock 10461 10461
Retained Earnings 227391 218833
Total common stock equity 324052 315494
LONG-TERM DEBT 213700 213700
Total capitalization 537752 529194
CURRENT LIABILITIES
Notes payable - parent company 16300 41300
Long-term debt due within one year 0 2910
Accounts payable 11126 14415
Salaries, wages, and vacation pay accrued 5151 6028
Payable to affiliate companies (principally parent) 12276 8982
Federal taxes accrued 7180 0
Other taxes accrued 1719 936
Interest accrued 5160 5485
Other 2564 1463
Total current liabilities 61476 81519
DEFERRED CREDITS
Accumulated deferred income taxes 101634 99748
Accumulated deferred investment tax credits 22121 22332
Regulatory liability 17499 17961
Customer advances 6052 5543
Other 10544 12003
Total deferred credits 157850 157587
TOTAL 757078 768300
(*) Unaudited
The Notes to Financial Statements are an integral part of the
Balance Sheet.
3
NORTHERN STATES POWER COMPANY (WISCONSIN)
STATEMENTS OF CASH FLOWS
Three Months Ended
March 31
(Thousands of dollars)
1995(*) 1994(*)
Cash Flows from Operating Activities:
Net Income 15160 18306
Adjustments to reconcile net income
to cash from operating activities:
Depreciation and amortization 8529 7934
Deferred income taxes 1454 1091
Investment tax credit adjustments -234 -236
Allowance for funds used during construction - equity -59 -152
Insurance receivable 1533 0
Cash provided from (used by) changes in working capital 17139 7738
Cash provided from (used by)
changes in other assets and liabilities -2275 -19
Net cash provided from operating activities 41247 34662
Cash Flows from Financing Activities:
Issuance of long-term debt 0 0
Issuance (repayment) of short-term debt -25000 -20600
Redemption of long-term debt(Including
Reacquisition Premium) -2910 0
Dividends paid -6603 -6206
Net cash used for financing activities -34513 -26806
Cash Flows from Investing Activities:
Capital expenditures -4980 -5619
Increase (decrease) in construction related
accounts payable -942 -1514
Allowance for funds used during construction - equity 59 152
Other -847 -1037
Net cash used for investing activities -6710 -8018
Net increase (decrease) in cash and cash equivalents. 24 -162
Cash and cash equivalents beginning of period.. 61 449
Cash and cash equivalents end of period 85 287
(*) Unaudited
The Notes to Financial Statements are an integral part of the
Statements of Cash Flows.
4
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