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, 1996
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
8,920,122 shares outstanding at May 10, 1996
Company-Obligated Mandatorily Redeemable Preferred Securities
of Subsidiary Trust, Liquidation Amount $25.00
1,300,000 shares outstanding at May 10, 1996
<PAGE>
INDEX
Page
Part I. Financial Information
Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995
Consolidated Statement of Income -
Three months ended March 31, 1996 and 1995
Consolidated Statement of Cash Flows
Three months ended March 31, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion of Financial Condition
and Results of Operations
Part II. Other Information
Signatures
<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED BALANCE SHEET
March 31 December 31,
1996 1995
ASSETS (unaudited)
-------------- --------------
[S] [C] [C]
PROPERTY:
Electric $ 340,876,481 $ 336,961,117
Gas 75,539,381 73,546,150
Propane 76,202,103 74,815,533
Manufacturing 2,071,266 2,048,725
-------------- --------------
494,689,231 487,371,525
Less-Accumulated depreciation (154,673,396) (150,469,310)
-------------- --------------
340,015,835 336,902,215
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 5,122,783 4,551,913
Trade accounts receivable, net 32,025,489 28,190,389
Receivables related to acquisition 41,666,250 23,357,538
Inventories
Coal and fuel oil 2,386,605 3,600,474
Materials and supplies 4,400,762 4,097,484
Manufacturing 5,303,149 5,660,357
Propane 7,054,788 8,287,443
Deferred gas costs 3,825,756 2,925,865
Other 5,612,730 9,948,238
-------------- --------------
107,398,312 90,619,701
-------------- --------------
OTHER ASSETS:
Investments 54,332,436 51,907,141
Deferred charges and other 30,133,356 30,240,083
Goodwill and other intangibles, net 50,747,180 49,052,343
-------------- --------------
135,212,972 131,199,567
-------------- --------------
$ 582,627,119 $ 558,721,483
============== ==============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock equity $ 162,847,135 $ 152,678,191
Nonredeemable cumulative preferred stock 2,600,000 2,600,000
Redeemable cumulative preferred stock 3,660,000 3,660,000
Company obligated mandatorily redeemable
security of trust holding solely
parent debentures 32,500,000 32,500,000
Long-term debt
Utility 183,850,000 183,850,000
Nonrecourse debt of subsidiaries 28,020,977 28,990,224
-------------- --------------
413,478,112 404,278,415
-------------- --------------
CURRENT LIABILITIES:
Commercial paper - 3,500,000
Long-term debt due within one year 570,000 570,000
Accounts payable 13,933,884 15,564,985
Accrued taxes 16,309,356 7,689,592
Accrued interest 2,451,978 4,738,243
Accrued liabilities related to acquisition 28,104,316 12,750,424
Other 15,111,591 13,947,990
-------------- --------------
76,481,125 58,761,234
-------------- --------------
DEFERRED CREDITS:
Accumulated deferred income taxes 41,513,700 43,666,229
Unamortized investment tax credits 9,880,669 10,021,519
Other 41,273,513 41,994,086
-------------- --------------
92,667,882 95,681,834
-------------- --------------
$ 582,627,119 $ 558,721,483
============== ==============
The accompanying notes to consolidated financial statements are
an integral part of these balance sheets.
<PAGE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Three Months Ended
March 31
1996 1995
------------- -------------
[S] [C] [C]
OPERATING REVENUES:
Electric $ 19,203,918 $ 18,583,549
Gas 30,190,334 26,464,219
Propane 41,798,835 -
Manufacturing 6,026,306 5,706,647
------------- -------------
97,219,393 50,754,415
------------- -------------
OPERATING EXPENSES:
Fuel and purchased power 3,755,953 3,799,340
Purchased gas sold 17,658,775 17,222,018
Other operating expenses 6,626,209 5,502,060
Propane costs 31,962,525 -
Manufacturing costs 5,637,289 5,163,010
Maintenance 1,537,200 1,302,560
Depreciation and amortization 4,593,590 3,209,529
Property and other taxes 1,634,593 1,673,642
------------- -------------
73,406,134 37,872,159
------------- -------------
OPERATING INCOME:
Electric 6,457,814 6,675,533
Gas 8,470,637 5,744,698
Propane 8,641,019 -
Manufacturing 243,789 462,025
------------- -------------
23,813,259 12,882,256
INVESTMENT INCOME AND OTHER 637,340 564,912
INTEREST EXPENSE, net (3,951,994) (2,590,280)
------------- -------------
INCOME BEFORE INCOME TAXES 20,498,605 10,856,888
INCOME TAXES (7,189,758) (3,754,254)
------------- -------------
NET INCOME 13,308,847 7,102,634
MINORITY INTEREST ON PREFERRED
SECURITIES OF SUBSIDIARY TRUST (660,156) -
DIVIDENDS ON CUMULATIVE PREFERRED STOCK (140,297) (29,775)
------------- -------------
EARNINGS ON COMMON STOCK $ 12,508,394 $ 7,072,859
============= =============
WEIGHTED AVERAGE SHARES 8,920,122 7,677,232
EARNINGS PER AVERAGE COMMON SHARE $ 1.40 $ 0.92
============= =============
DIVIDENDS PER AVERAGE COMMON SHARE $ 0.440 $ 0.425
============= =============
The accompanying notes to consolidated financial statements are
an integral part of these statements.
<PAGE>
<TABLE>
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
<CAPTION>
Three Months Ended
March 31
1996 1995
--------------- -------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net income $ 13,308,847 $ 7,102,634
Items not affecting cash:
Depreciation and amortization 4,593,590 3,209,529
Deferred income taxes (664,166) 67,430
Investment tax credits (140,850) (141,300)
Changes in current assets and liabilities, net:
Accounts receivable (3,835,100) (1,634,339)
Inventories 1,600,564 1,306,299
Other current assets 4,335,508 959,940
Accounts payable (1,825,679) (3,027,472)
Accrued taxes 8,619,764 4,745,593
Accrued interest (2,286,265) (1,248,761)
Other current liabilities 1,358,179 395,749
Other, net (2,666,918) 1,160,896
--------------- -------------
Cash flows from operating activities 22,397,474 12,896,198
--------------- -------------
INVESTMENT ACTIVITIES:
Property additions (7,251,935) (4,977,045)
Purchase of noncurrent investments, net (2,425,295) (2,305,992)
Purchase of working capital, net (2,954,820) -
--------------- -------------
Cash flows for investment activities (12,632,050) (7,283,037)
--------------- -------------
FINANCING ACTIVITIES:
Dividends on common and preferred stock (4,065,151) (3,292,599)
Minority interest on preferred securities of
subsidiary trust (660,156) -
Issuance of long-term debt and nonrecourse
subsidiary debt 962,803 2,265,000
Repayment of long-term debt (1,932,050) -
Commercial paper repayments (3,500,000) (3,800,000)
--------------- -------------
Cash flows for financing activities (9,194,554) (4,827,599)
--------------- -------------
INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS 570,870 785,562
Cash and Cash Equivalents, beginning of period 4,551,913 2,552,612
--------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 5,122,783 $ 3,338,174
=============== =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the period for:
Income taxes $ - $ 300
Interest 5,533,533 3,394,827
The accompanying notes to consolidated financial statements are
an integral part of these statements.
</TABLE>
<PAGE>
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
Northwestern Public Service Company (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 and majority owned subsidiaries. All significant intercompany
transactions have been eliminated.
(3) Allowance for Funds Used During Construction -
The allowance for funds used during construction includes the costs of
equity and borrowed funds used to finance construction which are
capitalized in accordance with rules prescribed by the FERC. For the
quarters ended March 31, 1996 and 1995, allowance for equity funds was
$35,510 and $20,256. Allowance for borrowed funds was $30,264 and $54,767
for the quarters ended March 31, 1996 and 1995.
(4) Adoption of SFAS 121 and 123 -
On January 1, 1996, the Company adopted Statement of Financial
Accounting Standards Nos. 121 (SFAS 121) and 123 (SFAS 123). SFAS 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of", establishes new accounting standards for the impairment
of long-lived assets. Adoption of SFAS 121 had no effect on the Company's
current period operating results. Similarly, adoption of SFAS 123,
"Accounting for Stock-Based Compensation", had no effect on the Company's
current period operating results.
(5) Reclassifications -
Certain 1995 amounts have been reclassified to conform to the 1996
presentation. Such reclassifications had no impact on net income and
common stock equity as previously reported.
<PAGE>
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Northwestern Public Service is an energy distribution company with
core operations engaged in the electric, natural gas, and propane
businesses. The Company generates and distributes electric energy to
55,000 customers in eastern South Dakota. It also purchases and
distributes natural gas to 77,000 customers in eastern South Dakota and
four communities in Nebraska.
In August 1995, the Company acquired Synergy Group, Inc., a retail
propane distributor in the eastern and south-central regions of the United
States. Late in 1995, two smaller propane companies were acquired. The
Company's propane operations serve more than 180,000 customers in 17
states.
Weather
Weather patterns have a material impact on the Company's operating
performance. Because natural gas and propane are heavily used for
residential and commercial heating, the demand for these products depends
upon weather patterns throughout the Company's service area. With a larger
proportion of its operations related to seasonal natural gas and propane
sales in 1996, the distribution of the Company's quarterly operating
performance will be different than in historical periods. A significantly
greater portion of the Company's future operating income is expected to be
recognized in the first and fourth quarters related to higher revenues from
the heating season. Operating income for the second and third quarters is
expected to be substantially less than historical periods.
RESULTS OF OPERATIONS:
Earnings Comparisons -
Earnings per share for the quarter ended March 31, 1996 were $1.40
compared to $.92 for the quarter ended March 31, 1995. The increase in
earnings was due to the acquisition of a major propane distributor in 1995,
improved returns from natural gas sales, and slightly colder weather. The
Company issued 1.2 million additional shares of common stock in 1995
related to propane acquisitions and earnings per share for the first
quarter of 1996 reflect a 16% increase in average shares outstanding.
Electric and Natural Gas:
Retail electric sales increased by 7% over 1995 while revenues
increased 3%. Gas throughput increased 12% in the first quarter as
compared to the first quarter of 1995 while gas revenue increased 14%. On
a weighted average basis, weather in the Company's electric and natural gas
service area was virtually normal for the first quarter, but 7% colder than
for the same period of 1995. Gas revenues and margins also increased due
to a 6.3% increase in Nebraska effective April 1, 1995.
The following tables summarize the factors affecting the variations in
electric and natural gas revenues between years:
Variation from
Prior Year
Three Months
Ended March 31
------- -------
1996 1995
------- -------
(thousands of dollars)
Electric:
Variation in kwh sales $ 842 $ (531)
Changes in rates, fuel cost
recovery, and other (222) (150)
------- --------
620 $ (681)
======= ========
Natural Gas:
Variation in mmbtu sales $3,298 $(3,221)
Changes in rates, gas cost
recovery, and other 428 (626)
------- -------
$3,726 $(3,847)
======= ========
The increase in other operating expenses reflects growth-related costs
in expanded energy services and marketing functions, higher employee
benefit expense, and higher costs related to the leasing of certain
computer equipment rather than making capital investments. Maintenance
expense increases are primarily related to higher expenditures at the base-
load generating plants and electric distribution line facilities.
Propane:
Operating revenue from propane sales for the first quarter of 1996 was
$41.8 million on sales of 40.7 million gallons. Weather on a weighted
average basis throughout the Company's propane service area was 2% colder
than normal during the first three months of 1996. The majority of propane
revenues and operating income occur in the first and fourth quarters when
propane is heavily sold for residential and commercial heating as compared
to the second and third quarters which traditionally are net loss periods
in the industry.
Manufacturing:
Manufacturing revenues are related to the Company's investment in
Lucht Inc., a firm that manufactures photographic processing and imaging
equipment used by high volume photo processing laboratories. For the first
quarter, manufacturing revenues increased 6% over the first quarter of
1995, while operating income declined. Operating expense increases that
contributed to operating income declines in the first quarter of 1996 were
related to higher operating overhead from acquisitions and international
selling expenses in Europe, Japan, and China.
Other Income Statement Items:
Other income, net, increased for the first quarter in 1996 over 1995
primarily due to higher investment income. The increase in depreciation
reflects primarily the addition of propane to depreciable plant. The
increase in interest expense is primarily related to the issuance of $60
million general mortgage bonds issued in August 1995 as a part of the
Synergy acquisition financing. Income taxes increased as a result of
higher taxable income. The increase in preferred dividends and the
addition of minority interest on preferred securities is related to the
issuance of preferred securities to finance the propane transactions.
Liquidity and Capital Resources -
The Company has a high degree of long-term liquidity through the
generation of operating cash flows, the availability of substantial
marketable securities, and a sound capital structure. In addition, the
Company has adequate capacity for additional financing and has maintained
its liquidity position through favorable bond ratings.
The Company has generated significant operating cash flows while
continuing to maintain substantial cash and investment balances in the form
of marketable securities. Cash flows from operating activities during the
three months ended March 31, 1996 and 1995 were $22.4 million and $12.9
million. The increase was primarily due to growth in the Company's
operating performance and propane acquisitions. Cash equivalents and
investment securities totaled $41.4 million at March 31, 1996 and 1995.
Working capital and other financial resources are also provided by
lines of credit, which are generally used to support commercial paper
borrowings, a primary source of short-term financing. At March 31, 1996,
unused short-term lines of credit totaled $24.0 million. In addition, the
Company's nonregulated businesses maintain nonrecourse credit agreements
with various banks for revolving and term loans.
Capital Requirements -
The Company's primary capital requirements include the funding of its
energy business construction and expansion programs, the funding of debt
and preferred stock retirements and sinking fund requirements, and the
funding of its corporate development and 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 capabilities, expand its current
customer base, and provide for the reliability of energy supply.
Expenditures for construction activities during the three months ended
March 31, 1996 and 1995 were $7.3 million and $5.0 million. Included in
such construction activities were nonregulated capital expenditures of $1.4
million and $.2 million during the three months ended March 31, 1996 and
1995. Capital expenditures for 1996, excluding propane, are estimated to
be $16.0 million with a large portion of expenditures to be spent on
enhancements of the electric and natural gas distribution systems.
Electric and natural gas related capital expenditures for the years 1996
through 2000 are estimated to be $70.4 million. Nonregulated capital
expenditures for 1996 are estimated to be $6.5 million. Estimated
nonregulated capital expenditures for the years 1996 through 2000 are
estimated to be $20.5 million.
Capital requirements for the mandatory retirement of long-term debt
and mandatory preferred stock sinking fund redemptions totaled $600,000
during the year ended March 31, 1996, and it is expected that such
mandatory retirements will be $570,000 in 1997, $20.6 million in 1998,
$12.8 million in 1999, and $5.0 million in 2000.
The Company anticipates that future capital requirements will be met
by both internally generated cash flows and available external financing.
<PAGE>
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 II of the Board of Directors
was submitted to stockholders in the Company's proxy statement. At the
annual meeting of common stockholders held on May 1, 1996 and completed
following an adjournment to May 8, 1996, the three nominees were elected,
receiving the following votes: R. R. Hylland 6,043,577, Jerry W. Johnson
6,051,148, Larry F. Ness 6,032,345. Also submitted to the common and
preferred stockholders were six proposals to amend the Company's Restated
Certificate of Incorporation. Proposals 1, 3, 4, 5, and 6 were approved,
but proposal 2 failed to receive a majority of the outstanding shares of
common stock. The results of the voting were as follows:
1. To increase to 1,000,000 the number of authorized shares of the
Company's Preference Stock, par value $50 per share.
Common Stock
4,621,337 For 975,433 Against 285,038 Abstain
2. To eliminate the ability of stockholders or a vice president or the
secretary of the Company to call a special meeting of stockholders.
Common Stock
4,431,850 For 1,126,901 Against 307,608 Abstain
Cumulative Preferred Stock
27,454 For 893 Against 1,128 Abstain
3. To increase to 1,000,000 the number of authorized shares of the
Company's Cumulative Preferred Stock, par value $100 per share.
Common Stock
4,560,860 For 1,009,045 Against 313,854 Abstain
Cumulative Preferred Stock
27,454 For 893 Against 1,128 Abstain
4. To eliminate the income coverage requirement which must be satisfied to
issue additional Cumulative Preferred Stock without obtaining approval of
the holders of at least two-thirds of the outstanding Cumulative Preferred
Stock.
Common Stock
4,533,628 For 591,126 Against 398,980 Abstain
Cumulative Preferred Stock
26,839 For 1,137 Against 1,313 Abstain
5. To eliminate the requirement that the approval of the holders of a
majority of the outstanding Cumulative Preferred Stock be obtained for the
Company to issue or assume unsecured indebtedness securities in an
aggregate amount exceeding 25% of the Company's capitalization.
Common Stock
4,531,442 For 576,350 Against 417,090 Abstain
Cumulative Preferred Stock
27,027 For 673 Against 1,589 Abstain
6. To eliminate the restrictions which apply to dividends or other
distributions on, and to purchases or other acquisitions of, the Company's
Common Stock when the Company's Common Stock equity is less than prescribed
percentages of the Company's total capitalization, unless approval of at
least two-thirds of the outstanding shares of the Cumulative Preferred
Stock is obtained.
Common Stock
4,913,384 For 307,708 Against 302,101 Abstain
Cumulative Preferred Stock
27,103 For 822 Against 1,364 Abstain
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule UT (SEC only)
(b) Reports on Form 8-K
None
<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.
NORTHWESTERN PUBLIC SERVICE COMPANY
-----------------------------------
(Registrant)
Date: __________, 1996 /s/ R. A. Thaden
------------------------------------
Treasurer
Date: ___________, 1996 /s/ A. D. Dietrich
-----------------------------------
Vice President-Corporate Services
and Corporate Secretary
<TABLE> <S> <C>
<ARTICLE> UT
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> MAR-31-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 340,015,835
<OTHER-PROPERTY-AND-INVEST> 54,332,436
<TOTAL-CURRENT-ASSETS> 107,398,312
<TOTAL-DEFERRED-CHARGES> 30,133,356
<OTHER-ASSETS> 50,747,180
<TOTAL-ASSETS> 582,627,119
<COMMON> 31,220,427
<CAPITAL-SURPLUS-PAID-IN> 56,594,913
<RETAINED-EARNINGS> 75,031,795
<TOTAL-COMMON-STOCKHOLDERS-EQ> 162,847,135
32,500,000
6,260,000
<LONG-TERM-DEBT-NET> 211,870,977
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 570,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 168,579,007
<TOT-CAPITALIZATION-AND-LIAB> 582,627,119
<GROSS-OPERATING-REVENUE> 97,219,393
<INCOME-TAX-EXPENSE> 7,189,758
<OTHER-OPERATING-EXPENSES> 73,406,134
<TOTAL-OPERATING-EXPENSES> 80,595,892
<OPERATING-INCOME-LOSS> 16,623,501
<OTHER-INCOME-NET> 637,340
<INCOME-BEFORE-INTEREST-EXPEN> 17,260,841
<TOTAL-INTEREST-EXPENSE> 3,951,994
<NET-INCOME> 13,308,847
800,453
<EARNINGS-AVAILABLE-FOR-COMM> 12,508,394
<COMMON-STOCK-DIVIDENDS> 3,924,854
<TOTAL-INTEREST-ON-BONDS> 3,923,945
<CASH-FLOW-OPERATIONS> 22,397,474
<EPS-PRIMARY> 1.40
<EPS-DILUTED> 0
</TABLE>
