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 June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-692
NORTHWESTERN PUBLIC SERVICE COMPANY
A Delaware Corporation
IRS Employer Identification No. 46-0172280
33 Third Street SE
Huron, South Dakota 57350-1318
Telephone - 605-352-8411
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. [ X ] Yes [ ] No
Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of the latest practicable date:
Common Stock, Par Value $3.50
7,677,232 shares outstanding at August 9, 1994
<PAGE>
INDEX
Page
Part I. Financial Information
Consolidated Balance Sheet -
June 30, 1994 and December 31, 1993 1
Consolidated Statement of Income -
Three months and six months 2
ended June 30, 1994 and 1993
Consolidated Statement of Cash Flows
Three months and six months 3
ended June 30, 1994 and 1993
Notes to Consolidated Financial Statements 4
Management's Discussion of Financial Condition
and Results of Operations 5
Part II. Other Information 8
Signatures 9
<PAGE>
<TABLE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED BALANCE SHEET
<CAPTION>
June 30, December 31,
1994 1993
ASSETS (unaudited)
-------------- --------------
<S> <C> <C>
UTILITY PLANT, at original cost:
Electric $ 295,132,526 $ 292,508,996
Gas 56,236,669 53,414,571
Common 15,935,420 15,788,899
-------------- --------------
Utility plant in service 367,304,615 361,712,466
Less-Accumulated depreciation 134,692,328 130,610,474
-------------- --------------
232,612,287 231,101,992
Construction work in progress 7,929,347 7,393,129
-------------- --------------
240,541,634 238,495,121
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 2,309,348 3,099,093
Accounts receivable, net 10,031,966 11,197,920
Fuel, at average cost 3,074,656 4,040,170
Inventories, materials and supplies 10,898,528 9,150,841
Deferred gas costs 1,841,021 4,121,591
Other 2,195,742 2,343,183
-------------- --------------
30,351,261 33,952,798
-------------- --------------
OTHER ASSETS:
Investments 55,444,508 44,851,734
Deferred charges and other 27,073,183 26,274,440
-------------- --------------
82,517,691 71,126,174
-------------- --------------
$ 353,410,586 $ 343,574,093
============== ==============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock equity-
Common stock $ 26,870,312 $ 26,870,312
Additional paid-in capital 29,922,846 29,922,847
Retained earnings 56,701,878 52,873,772
Unrealized gain in investments, net 4,861,332 -
-------------- --------------
118,356,368 109,666,931
Cumulative preferred stock-
Nonredeemable 2,600,000 2,600,000
Redeemable 70,000 70,000
Long-term debt 126,565,000 126,600,000
-------------- --------------
247,591,368 238,936,931
-------------- --------------
CURRENT LIABILITIES:
Long-term debt due within one year 600,000 600,000
Accounts payable 8,648,575 10,440,263
Accrued taxes 9,365,727 8,227,610
Accrued interest 2,901,549 2,946,075
Other 5,531,565 5,617,740
-------------- --------------
27,047,416 27,831,688
-------------- --------------
DEFERRED CREDITS:
Accumulated deferred income taxes 39,057,116 35,683,509
Unamortized investment tax credits 10,865,231 11,149,631
Other 28,849,455 29,972,334
-------------- --------------
78,771,802 76,805,474
-------------- --------------
$ 353,410,586 $ 343,574,093
============== ==============
The accompanying notes to consolidated financial statements are
an integral part of this balance sheet.
</TABLE>
<PAGE>1
<TABLE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 16,832,875 $ 16,294,951 $ 36,096,983 $ 34,562,288
Gas 11,325,668 12,552,109 41,636,488 41,559,117
Other 5,598,734 4,935,800 11,487,505 8,798,900
------------- ------------- ------------- -------------
33,757,277 33,782,860 89,220,976 84,920,305
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Fuel for electric generation 2,958,766 2,984,139 6,857,661 6,440,658
Purchased power 138,932 113,827 484,599 518,820
Purchased gas sold 9,344,035 9,445,551 29,429,504 30,332,965
Other operating expenses 5,034,727 5,277,435 10,782,945 10,624,031
Manufacturing costs 5,054,720 4,393,020 10,339,949 8,042,275
Maintenance 1,802,530 1,758,442 3,207,821 3,212,360
Depreciation 3,028,458 2,889,517 6,019,786 5,758,356
Income taxes 858,995 1,200,245 5,104,240 4,483,764
Property and other taxes 1,611,350 1,504,684 3,211,347 3,079,620
------------- ------------- ------------- -------------
29,832,513 29,566,860 75,437,852 72,492,849
------------- ------------- ------------- -------------
OPERATING INCOME 3,924,764 4,216,000 13,783,124 12,427,456
ALLOWANCE FOR EQUITY FUNDS
USED DURING CONSTRUCTION 3,396 6,982 5,774 9,660
INVESTMENT INCOME AND OTHER,
net of taxes 756,844 391,045 1,302,904 947,642
------------- ------------- ------------- -------------
INCOME BEFORE INTEREST CHARGES 4,685,004 4,614,027 15,091,802 13,384,758
INTEREST EXPENSE (2,449,371) (2,280,676) (4,844,729) (4,481,737)
ALLOWANCE FOR BORROWED FUNDS
USED DURING CONSTRUCTION 7,922 10,921 13,472 15,109
------------- ------------- ------------- -------------
NET INCOME 2,243,555 2,344,272 10,260,545 8,918,130
DIVIDENDS ON CUMULATIVE
PREFERRED STOCK (30,168) (30,561) (60,336) (61,125)
------------- ------------- ------------- -------------
NET INCOME AVAILABLE FOR
COMMON STOCK $ 2,213,387 $ 2,313,711 $ 10,200,209 $ 8,857,005
============= ============= ============= =============
EARNINGS PER AVERAGE COMMON SHARE
based on 7,677,232 shares $ 0.29 $ 0.30 $ 1.33 $ 1.15
============= ============= ============= =============
DIVIDENDS PER SHARE OF COMMON STOCK $ 0.415 $ 0.405 $ 0.830 $ 0.810
============= ============= ============= =============
The accompanying notes to consolidated financial statements are
an integral part of this statement.
</TABLE>
<PAGE>2
<TABLE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1994 1993 1994 1993
------------- ------------- ------------- -------------
<S> <C> <C> <C> <C>
OPERATING ACTIVITIES:
Net income $ 2,243,555 $ 2,344,272 $ 10,260,545 $ 8,918,130
Items not requiring cash:
Depreciation 3,028,458 2,889,517 6,019,786 5,758,356
Deferred income taxes, net 64,573 (26,371) 139,135 (53,860)
Investment tax credit (142,200) (141,000) (284,400) (282,000)
Changes in current assets and liabilities:
Accounts receivable 3,863,393 2,583,069 1,165,954 599,151
Inventories (1,395,458) (461,372) (782,173) (272,055)
Other current assets 862,433 1,501,660 2,428,011 3,159,143
Accounts payable (1,764,373) (3,236,938) (1,791,688) (4,937,393)
Accrued taxes (3,730,107) (3,028,096) 1,138,117 1,609,366
Accrued interest 1,246,971 488,943 (44,526) (469,786)
Other current liabilities (185,098) 389,822 (86,175) 822,058
Other, net (716,568) (516,125) (1,684,949) (1,447,046)
------------- ------------- ------------- -------------
Cash flows from operating activities 3,375,579 2,787,381 16,477,637 13,404,064
------------- ------------- ------------- -------------
INVESTMENT ACTIVITIES:
Additions to utility plant (4,505,358) (6,988,637) (7,686,142) (9,077,908)
Purchase of noncurrent investments, net (813,104) (438,346) (3,113,800) (6,517,038)
------------- ------------- ------------- -------------
Cash flows for investment activities (5,318,462) (7,426,983) (10,799,942) (15,594,946)
------------- ------------- ------------- -------------
FINANCING ACTIVITIES:
Common and preferred stock dividends paid (3,216,221) (3,139,840) (6,432,440) (6,279,683)
Issuance of long-term debt - 21,350,000 400,000 21,450,000
Repayment of long-term debt (435,000) (22,250,200) (435,000) (22,400,200)
Commercial paper borrowings - 7,000,000 - 10,000,000
------------- ------------- ------------- -------------
Cash flows from (for) financing activities (3,651,221) 2,959,960 (6,467,440) 2,770,117
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (5,594,104) (1,679,642) (789,745) 579,235
Cash and Cash Equivalents, beginning of period 7,903,452 5,954,440 3,099,093 3,695,563
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 2,309,348 $ 4,274,798 $ 2,309,348 $ 4,274,798
============= ============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 3,960,703 $ 3,477,500 $ 4,276,703 $ 3,488,000
Interest 978,727 1,681,162 4,451,716 4,709,579
The accompanying notes to consolidated financial statements are
an integral part of this statement.
</TABLE>
<PAGE>3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements
included in the Company's Annual Report)
(1) Management's Statement -
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. It is suggested that these
financial statements be read in conjunction with the financial statements
and the notes thereto included in the Company's latest annual report to
stockholders.
(2) Subsidiaries and Principles of Consolidation -
The consolidated financial statements include the accounts of all
wholly owned subsidiaries. All significant intercompany transactions have
been eliminated.
(3) Adoption of SFAS 115 -
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." Adoption of SFAS 115 resulted
in no cumulative or current period effect on the Company's operating
results.
(4) Environmental Matters -
The Company is subject to environmental regulations from numerous
entities. The Clean Air Act Amendments of 1990 (the Act) stipulate
limitations on sulfur dioxide and nitrogen oxide emissions from coal-fired
power plants. The Company believes it can economically meet the Act's
sulfur dioxide emission requirements at its generating plants by the
required compliance dates and that it is in compliance with all presently
applicable environmental protection requirements and regulations. In
addition to the Clean Air Act, the Company is also subject to other
environmental regulations including matters related to utility processing
sites. The Company conducted an investigation of a former gas
manufacturing site and is taking remedial action to dispose of waste
material found at such site. Recovery of any remediation costs incurred
will be sought from insurance carriers and through the regulatory process
although there is no assurance that such costs will be recovered. No
administrative or judicial proceedings involving the Company are now
pending or known by the Company to be contemplated under present
environmental protection requirements.
(5) Reclassifications -
Certain 1993 amounts have been reclassified to conform to the 1994
presentation. Such reclassifications had no impact on net income and
common stock equity as previously reported.
<PAGE>4
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION:
Liquidity and Capital Resources -
The Company has a high degree of long-term liquidity through the
generation of significant cash flows, the availability of substantial
marketable securities, and a sound capital structure. In addition, the
Company has adequate capacity for additional financing.
The Company has generated significant operating cash flows while
continuing to maintain substantial cash reserves in the form of marketable
securities. Cash flows from operating activities during the three months
and six months ended June 30, 1994 and 1993 were $3.4 million and
$2.8 million, and $16.5 and $13.4 million, respectively. Cash equivalents
and investment securities totaled $39.8 million and $26.9 million at
June 30, 1994 and 1993, respectively.
Financial resources are also provided by unused lines of credit, which
are generally used to support commercial paper borrowings, a primary source
of short-term financing. At June 30, 1994, unused short-term lines of
credit totaled $12 million.
Capital Requirements -
The Company's primary capital requirements include the funding of its
utility construction and expansion programs, the funding of debt and
preferred stock retirements and sinking fund requirements, and the funding
of its investment activities.
The emphasis of the Company's construction activities is to undertake
those projects that most efficiently serve the expanding needs of its
customer base, enhance energy delivery and reliability capabilities through
system replacement, expand its current customer base, and provide for the
reliability of energy supply. Expenditures for construction activities
during the three months and for the six months ended June 30, 1994 and 1993
were $4.5 million and $7.0 million, and $7.7 million and $9.1 million,
respectively. The Company estimates construction expenditures will be
approximately $17.9 million in 1994 with a large portion of expenditures to
be spent on enhancements of the electric distribution system. The Company
also projects spending modest amounts on the Company's continuing gas
expansion program. Construction expenditures for the years 1994 through
1998 are estimated to be $72 million.
<PAGE>5
Capital requirements for the mandatory retirement of long-term debt
and mandatory preferred stock sinking fund redemptions totaled $330,000
during the year ended June 30, 1994, and it is expected that such mandatory
retirements will be $630,000 in 1994 and 1995, $610,000 in 1996, $600,000
in 1997, and $20.6 million in 1998.
The Company anticipates that future capital requirements will be met
by both internally generated cash flows and available external financing.
RESULTS OF OPERATIONS:
Earnings Comparisons -
Earnings per share for the quarter ended June 30, 1994 were $.29
compared to $.30 for the quarter ended June 30, 1993. The decrease in
earnings was primarily due to less revenue from gas sales and increased
interest expense offset by an increase in electric revenues and higher
investment income, principally from nonregulated operations.
Earnings per share for the year to date ended June 30, 1994 were $1.33
compared to $1.15 for the six months ended June 30, 1993. The increase can
be attributed to more favorable weather patterns which increased electric
revenue and improved profitability from nonregulated operations.
Electric and Gas Revenues -
The following tables summarize the factors affecting the variations in
electric and gas revenues between years:
Variation from Variation from
Prior Year Prior Year
Three Months Six Months
Ended June 30 Ended June 30
------- ------- ------- -------
1994 1993 1994 1993
------- ------- ------- -------
(thousands of dollars)
Electric Revenue:
Variation in kwh sales $ 592 $ 1,285 $ 1,594 $ 3,220
Changes in rates, fuel cost
recovery, and other (54) (359) (59) (898)
------- ------- ------- -------
$ 538 $ 926 $ 1,535 $ 2,322
======= ======= ======= =======
<PAGE>6
Gas Revenue:
Variation in mcf sales $(1,371) $ 1,355 $ (971) $ 8,827
Changes in rates, gas cost
recovery, and other 145 902 1,048 2,268
------- ------- ------- -------
$(1,226) $ 2,257 $ 77 $11,095
======= ======= ======= =======
Operating Expenses -
For the quarter ended June 30, 1994, electric fuel-related costs were
comparable to electric revenues. Gas costs increased as a percentage of
gas revenues primarily due to cost fluctuations. Other operating expenses
decreased primarily due to lower employee benefits. Depreciation increases
can be attributed to an increase in utility plant, while interest expense
increased due to the issuance of additional mortgage bonds in August 1993.
For the six months ended June 30, 1994, the favorable weather patterns
resulted in comparable increases in electric fuel-related costs. Although
gas revenues increased in 1994, gas costs decreased slightly primarily due
to lower commodity costs. Other operating expenses increased primarily due
to the use of internal gas peaking production units to supplement the
purchase of natural gas supplies. Depreciation increases are attributable
to increased utility plant, while taxes increased as a result of higher
taxable income. The increase in interest charges is due to the issuance of
additional mortgage bonds in August 1993.
NONREGULATED OPERATIONS:
In addition to the Company's investment portfolio of preferred stock
investments, the Company holds interest in two nonregulated businesses. At
June 30, 1994, Northwestern Networks, Inc. (NNI), one of the Company's
wholly owned subsidiaries, held 1.1 million shares of LodgeNet
Entertainment Corporation (LEC) common stock (which trades on the NASDAQ
national market). NNI also has an additional investment in LEC in the form
of a $6,000,000 subordinated note, bearing interest at 7.6%.
Northwestern Systems, Inc. (NSI), one of the Company's wholly owned
subsidiaries, owns Lucht, Inc., a firm that develops, manufactures, and
markets multi-image photographic printers and other related equipment.
Manufacturing revenues increased $663,000 for the three months ended June
1994 and $2.7 million for the six months ended June 1994 as compared to the
same periods in 1993. Manufacturing costs increased comparably.
<PAGE>7
NORTHWESTERN PUBLIC SERVICE COMPANY
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any pending major litigation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The election of three Directors to Class III of the Board of Directors
was submitted to stockholders in the Company's proxy statement. At the
annual meeting of stockholders held on May 4, 1994, the three nominees were
elected, receiving the following votes: Aelred J. Kurtenbach, 6,465,315;
M. D. Lewis, 6,478,312; and R. A. Wilkens, 6,469,437.
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports on Form 8-K
None
<PAGE>8
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.
NORTHWESTERN PUBLIC SERVICE COMPANY
-----------------------------------
(Registrant)
Date: August 9, 1994 /s/ R. R. Hylland
------------------------------------
Vice President-Finance and Corporate
Development and Treasurer
Date: August 9, 1994 /s/ A. D. Dietrich
-----------------------------------
Vice President-Legal, Corporate
Secretary and Assistant Treasurer
<PAGE>9
