NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota
NOTICE OF
ANNUAL MEETING
AND PROXY STATEMENT
Annual Meeting
of Stockholders
May 7, 1997
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1318
March 15, 1997
Dear Stockholder:
You are invited to attend the Annual Meeting of Stockholders of
Northwestern Public Service Company, which will be held at the Company's
Operations Center, 600 Market Street West, Huron, South Dakota, on May 7,
1997, at 11:00 a.m., local time. Enclosed is a formal Notice of Annual
Meeting and Proxy Statement, together with a proxy and return envelope for
use of stockholders who are unable to be present in person at the meeting.
The formal Notice and Proxy Statement describe the matters scheduled
to be acted upon at the meeting. In addition to the election of Directors
in Class III, the holders of the Common Stock of the Company will be
entitled to vote on two very important amendments to the Company's Restated
Certificate of Incorporation. The Board of Directors has indicated its
intention to declare a two-for-one stock split in the form of a stock
dividend if stockholders approve the first proposed amendment to increase
the authorized shares of Common Stock from 20 million shares to 50 million
shares and to reduce the par value of the Common Stock from $3.50 per share
to $1.75 per share. The second proposed amendment would remove a provision
in the Restated Certificate of Incorporation which states that Directors
need not be stockholders of the Company.
Regardless of the size of your holdings, please make certain that your
shares are represented at the meeting, whether or not you are personally
able to attend. We will sincerely appreciate your signing, dating, and
returning the enclosed proxy card at this time. A postage-paid envelope is
enclosed for your convenience.
If, after returning your proxy, you find that you are able to attend
the meeting in person and wish to personally vote your shares, you may
revoke your proxy at that time and personally vote your shares at the
meeting. In either event, it is important that your shares are voted at
this Annual Meeting.
Very truly yours,
/s/ Merle D. Lewis
Merle D. Lewis
President and Chief Executive Officer
VOTING YOUR PROXY IS IMPORTANT
TO INSURE THAT YOUR SHARES ARE REPRESENTED AT THIS MEETING,
HOWEVER SMALL YOUR HOLDINGS, IT IS ESSENTIAL THAT YOU SIGN, DATE,
AND RETURN THE ENCLOSED PROXY CARD PROMPTLY.
A self-addressed envelope, which requires no postage if mailed in the
United States, is enclosed for your convenience.
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1318
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
TO THE HOLDERS OF COMMON STOCK OF NORTHWESTERN PUBLIC SERVICE COMPANY:
The Annual Meeting of Stockholders of Northwestern Public Service
Company (the "Company") will be held at the Company's Operations Center,
600 Market Street West, Huron, South Dakota, on Wednesday, May 7, 1997, at
11:00 a.m., local time, for the following purposes:
(1) To elect three members of Class III of the Board of Directors of
the Company to hold office until the Annual Meeting of Stockholders in
2000, and until their successors are duly elected and have qualified.
(2) To consider and act upon a proposal to amend the Company"s
Restated Certificate of Incorporation to increase the authorized shares of
Common Stock to 50,000,000 shares and to reduce the par value of the Common
Stock to $1.75 per share;
(3) To consider and act upon a proposal to amend the Company's
Restated Certificate of Incorporation to eliminate a provision (in Article
Seventh) which states that Directors need not be stockholders of the
Company; and
(4) To transact such other business as may properly come before the
meeting.
The Board of Directors of the Company has fixed the close of business
on March 10, 1997, as the record date for determining the holders of Common
Stock entitled to notice of and to vote at the meeting or any adjournment
thereof. The stock transfer books of the Company will not be closed. A
list of stockholders entitled to vote at the meeting will be maintained at
the offices of the Company, 600 Market Street West, Huron, South Dakota,
and such list will be open to examination by stockholders for a period of
ten days prior to the meeting.
You are encouraged to sign, date and return your proxy in the enclosed
self-addressed postage-paid envelope. If you are able to attend the Annual
Meeting and wish to vote in person, you may do so whether or not you have
returned your proxy.
BY ORDER OF THE BOARD OF DIRECTORS
ALAN D. DIETRICH
Vice President-Administration
and Corporate Secretary
March 15, 1997
NORTHWESTERN PUBLIC SERVICE COMPANY
Corporate Office
33 Third St. SE
Huron, South Dakota 57350-1318
Proxy Statement for Annual Meeting of Stockholders
To be held May 7, 1997
This statement is expected to be mailed to stockholders on March 15,
1997, and is furnished in connection with the solicitation by the Board of
Directors of the Company of proxies to be voted at the Annual Meeting of
Stockholders to be held on May 7, 1997. The Company will bear all costs of
the solicitation. In addition to solicitation by mail, officers and
employees of the Company may solicit proxies by telephone or in person.
Kissel-Blake Inc. has been retained by the Company to assist in the
solicitation of proxies at an anticipated cost to the Company of $5,000,
plus out-of-pocket expenses. Also, the Company will, upon request,
reimburse brokers or other persons holding stock in their names or in the
names of their nominees for reasonable expenses in forwarding proxies and
proxy material to the beneficial owners of stock.
Holders of Common Stock of record at the close of business on March
10, 1997, will be entitled to one vote for each share of Common Stock held
by them on all matters to be voted upon at the meeting. As of March 10,
1997, there were outstanding 8,922,632 shares of Common Stock. The only
person known to the Company to own beneficially (as defined by the
Securities and Exchange Commission for proxy statement purposes) more than
5% of the outstanding Common Stock of the Company is the Northwestern
Public Service Company Employee Stock Ownership Plan and Trust (ESOP),
whose Trustees are a committee of employees of the Company, 600 Market
Street West, Huron, SD 57350. The ESOP is beneficial owner of 612,308
shares (6.86%) of the outstanding Common Stock of the Company. The Common
Shares owned by the ESOP are held in trust for the benefit of participants
in the ESOP, and the Trustees have sole investment power over the Common
Shares held in trust. Employee participants are entitled to instruct the
Trustees on how to vote all Company Common Shares allocated to their
accounts (presently 444,435) and will receive a separate Proxy for voting
such shares. All shares allocated to the participants for which no voting
instructions are received and all unallocated shares held by the ESOP will
be voted by the Trustees.
Stockholders who execute proxies may revoke them at any time prior to
the exercise thereof by giving written notice of such revocation to the
Corporate Secretary of the Company or by filing another proxy with him.
The number of shares of Common Stock represented at the Annual Meeting
by the holders in person or by their proxies will be tabulated by the
election inspectors appointed for the meeting which will determine whether
or not a quorum is present. The election inspectors will also tabulate the
votes cast at the Annual Meeting for each matter voted upon. The election
inspectors will treat shares of stock represented by proxies who have been
instructed to abstain from voting on a particular matter as being present
for quorum purposes but as unvoted for purposes of determining approval of
the particular matter. If a broker holding shares of record indicates on
its proxy card that it does not have discretionary authority to vote on a
particular matter, those shares will not be considered as present and
entitled to vote with respect to that matter.
ELECTION OF DIRECTORS
In accordance with the Company's Restated Certificate of Incorporation
and By-laws, the Company's directors are elected to staggered terms on a
classified Board of Directors. At this Annual Meeting of Stockholders,
three directors will be elected to Class III of the Board of Directors, to
hold office for a term of three years, until the Annual Meeting of
Stockholders in 2000, and until their respective successors are duly
elected and have qualified. The election of each director is to be by a
plurality of the votes cast in each case by holders of Common Stock.
Proxies which the Company receives will be voted or the vote withheld as
directed on the proxy, and if no direction is given, proxies will be voted
for the election of the three nominees in Class III named below as
directors.
In the event of the inability or unwillingness of one or more of these
nominees to serve as a director at the time of said meeting, or of any
adjournment thereof, the shares represented by the proxies may (in the
discretion of the holders of said proxies) be voted for other nominees not
named herein, in lieu of those unable or unwilling to serve. Each of the
nominees has consented to be named and to serve if elected. Management is
not aware that any of the nominees will be unable to serve.
All of the nominees as directors in Class III are presently serving as
directors. Current Class III Director R. A. Wilkens has indicated his
intention to retire from the Board of Directors, effective May 1, 1997.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
each director whose term of office will continue after this Annual Meeting
and to the following nominees to Class III of the Board of Directors:
Period Age on
Principal Occupation Served as March 1,
Nominee or Employment Director 1997
- ------------------ ------------------------- ----------- --------
Aelred J. Kurtenbach President and Chief May 1994 63
Executive Officer of to date
Daktronics, Inc.,
manufacturer of large
computer programmable
displays, Brookings,
South Dakota.
M. D. Lewis President and Chief February 1993 49
Executive Officer of the to date
Company since February 1994;
Chairman and Chief Executive
Officer of Northwestern
Growth Corporation since
September 1994; formerly
held the following offices of
the Company: Executive Vice
President from May 1993 to
February 1994, Executive Vice
President-Corporate
Services from November
1992 to May 1993, Assistant
Secretary from May 1982 to
May 1993, Vice President-
Corporate Services from
1987 to 1992.
Gary Olson President and Chief February 1997 56
Executive Officer of Norwest to date
Bank South Dakota, Regional
President of Norwest Cor-
poration, and Chairman of
Norwest Ag Credit Company
since 1988, Sioux Falls,
South Dakota.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class I whose terms expire in 1998:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1997
- ------------------ ------------------------- ----------- --------
Herman Lerdal Banking and Business April 1975 68
Consultant; formerly to date
Banker and College
Development Officer,
Sioux Falls, South Dakota.
Raymond M. Schutz Attorney and partner in October 1990 67
the law firm of Siegel, to date
Barnett & Schutz since
1963, Aberdeen, South
Dakota.
Bruce I. Smith Attorney and partner in May 1989 55
the law firm of Luebs, to date
Leininger, Smith, Busick
& Johnson since 1978,
Grand Island, Nebraska.
The following information, including principal occupation or
employment for the past five or more years, is furnished with respect to
directors in Class II whose terms expire in 1999:
Period Age on
Principal Occupation Served as March 1,
Director or Employment Director 1997
- ------------------ ------------------------- ----------- --------
Larry F. Ness President and Chief August 1991 51
Executive Officer of to date
First Dakota Financial
Corp., a bank holding
company, and Vice Chairman
and Chief Executive Officer
of First Dakota National
Bank, Yankton, South Dakota.
Jerry W. Johnson Dean of the School of May 1994 56
Business, University of to date
South Dakota, since 1990,
Vermillion, South Dakota.
R. R. Hylland Executive Vice President- November 1995 36
of the Company since to date
May 1996; President
and Chief Operating Officer
of Northwestern Growth
Corporation since September
1994; formerly held the
following offices with the
Company: Executive Vice
President-Strategic Develop-
ment from November, 1995
to May 1996, Vice President
Strategic Development from
August 1995 to November
1995, Vice President-Corporate
Development from May 1993 to
August 1995, Vice President-
Finance from April 1991 to
August 1995, Treasurer from
December 1990 to November 1994,
Sioux Falls, South Dakota.
INFORMATION CONCERNING BOARD OF DIRECTORS
There is no family relationship among any of the directors, nominees
or executive officers of the Company.
The preceding information relative to the principal occupation or
employment of each of the nominees, as well as the information hereinafter
set forth as to beneficial ownership of securities of the Company by
directors, nominees and officers of the Company, is based on information
furnished to the Company by such persons.
Meetings of the Board of Directors
The Board of Directors held four regular meetings and three special
meetings during 1996. Each director attended more than 75 percent of the
aggregate of the meetings of the Board of Directors and of each committee
on which he served.
Audit Committee
The Board of Directors has a standing Audit Committee composed of not
less than three directors who are not employees of the Company. The
present members of the Audit Committee are Jerry W. Johnson, Larry F. Ness,
Gary Olson, and Raymond M. Schutz. The Audit Committee held two meetings
during 1996. The principal functions of the Audit Committee are to
recommend to the Board of Directors the appointment of independent public
accountants to conduct the annual audit of the Company's financial
statements, to review the scope of the annual audit, to approve services
performed by the independent public accountants, considering the possible
effect thereof on their independence, to review the report of the
independent public accountants relating to the annual audit, and to review
the Company's internal financial and accounting controls.
Nominating and Compensation Committee
The Board of Directors also has a standing Nominating and Compensation
Committee composed of not less than three directors who are not employees
of the Company. The present members of the Nominating and Compensation
Committee are Aelred J. Kurtenbach, Herman Lerdal, and Bruce I. Smith. The
Nominating and Compensation Committee held three meetings during 1996. The
function of the Nominating and Compensation Committee is to recommend to
the Board of Directors the nominees to be presented by the Board of Direc
tors to the stockholders for election to the Company's Board of Directors,
to recommend to the Board of Directors the persons to be elected as
officers of the Company, and to recommend compensation of directors and
officers of the Company. The Nominating and Compensation Committee will
consider nominees for directors recommended by stockholders. Such
recommendations may be addressed to the Committee, in care of the Corporate
Secretary of the Company.
Corporate Governance Committee
The Board of Directors, during 1996, created a Corporate Governance
Committee composed of not less than three directors who are not employees
of the Company and the President and Chief Executive Officer. The present
members of the Corporate Governance Committee are Jerry W. Johnson, Aelred
J. Kurtenbach, Bruce I. Smith, and M. D. Lewis. The Corporate Governance
Committee held four meetings in 1996. The function of the Corporate
Governance Committee is to make recommendations to the Board of Directors
concerning Board policies, a chief executive officer performance appraisal
procedure, director qualifications and Board evaluation, counsel, and
oversight.
SECURITIES OWNERSHIP BY MANAGEMENT
The following table sets forth information, as of February 1, 1997,
with respect to shares of the Common Stock owned by the directors, nominees
for director, certain executive officers of the Company and by all
directors and executive officers of the Company as a group:
Amount & Nature
of Beneficial Ownership (1)
---------------------------
Name of Percent of
Beneficial Owner Individual (2) Joint (3) Common Stock
- ---------------------- -------------- --------- ------------
R. R. Hylland (4) 1,470 (5) *
Jerry W. Johnson 941 *
Aelred J. Kurtenbach 933 *
Herman Lerdal 2,205 (6) *
M. D. Lewis (4) 9,776 2,309 *
Larry F. Ness 856 *
Gary Olson 2,000 *
Raymond M. Schutz 1,583 *
Bruce I. Smith 1,843 *
R. A. Wilkens 12,869 (7) *
A. R. Donnell 5,356 (8) 3,789 *
R. F. Leyendecker 6,372 11 *
D. K. Newell (4) 316 79 *
All directors &
executive officers 56,515 17,835 *
*Less than 1%.
(1) Shares shown represent both record and beneficial ownership. None of
such shares is subject only to a right to acquire beneficial
ownership.
(2) Shares held individually by employees include shares held in that
employee's account with the Trustees of the Company's Employee Stock
Ownership Plan and in the employee savings plan.
(3) Shares held jointly owned with spouse or other family member(s).
(4) Messrs. Hylland, Lewis, and Newell own, respectively, 14,286, 20,048,
and 9,524 common units representing limited partner interests in
Cornerstone Propane Partners, L.P., an affiliate of the Company, for a
total of 43,858 common units held by directors and executive officers
of the Company. None of the foregoing amounts exceeds 1% of the
outstanding common units.
(5) Included are 332 shares that Mr. Hylland holds as custodian for his
children and 567 shares held by his wife.
(6) All shares are held in a Trust.
(7) Included are 6,540 shares held in a Trust.
(8) Included are 612 shares that Mr. Donnell holds as custodian for his
grandchildren.
With the exception of Thomas A. Gulbranson, Vice President-Energy
Services of the Company, and Herman Lerdal, a director, none of the
directors, nominees or executive officers of the Company beneficially owns
any of the Company's Cumulative Preferred Stock ($100 par value) or any of
the Company's Trust Preferred Capital Debentures. Mr. Gulbranson, together
with other family members, jointly owns 13 shares (0.0005%) of the
Company's 4 1/2% Cumulative Preferred Stock, and Mr. Lerdal owns, in a
trust of which he and his wife are joint trustees, 200 shares (0.0002%) of
NWPS Capital Financing 8 1/8% Trust Preferred Capital Securities.
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
Executive Management Compensation
The Nominating and Compensation Committee of the Board of Directors
consists of three directors who are not officers or employees of the
Company, has overall responsibility to nominate persons to serve as
executive officers of the Company and to review and to recommend
compensation for the members of the Board of Directors and for the
executive officers. The Committee also reviews and recommends to the full
Board of Directors any benefit plans for officers and employees and any
awards made under the Company's Phantom Stock Unit Plan and approves any
executive officer awards made under the Company's NorthSTAR Plan.
The Nominating and Compensation Committee and the management of the
Company are committed to the principle that compensation should be
commensurate with performance. Base salary compensation is determined by
the potential impact the individual has on the Company, the skills and
experiences required by the job, and the performance and potential of the
incumbent in the job.
In determining Mr. Lewis's salary for 1996 as President and Chief
Executive Officer, the Committee considered his individual performance as
leader of the Company and his contributions to the long-term success of the
organization. In particular, the Committee cites the many initiatives that
have been undertaken successfully by the Company, the significant growth of
the Company through service expansions and non-utility acquisitions, and
the increases in earnings during the year. The Committee also compared his
salary to that of the other ten midwestern utility companies used in the
NorthSTAR Plan. At the present time his salary is in the lower range of
such companies. Similar factors are used to determine the compensation of
the other executive officers. In 1996 the Board of Directors adopted a
formal chief executive officer evaluation process which will be utilized in
1997 and succeeding years.
The philosophy for incentive compensation is to provide rewards when
financial objectives are achieved, and provide reduced or no benefits when
the objectives are not achieved. These objectives are designed to further
Company goals and to increase shareholder value. In February, 1989, the
Board of Directors adopted a Performance Incentive Plan (now known as the
NorthSTAR Plan), an incentive compensation plan which, with later
amendments, has been broadened to involve all employees of the Company.
The purpose of the plan is to motivate and reward outstanding performance
by the employees of the Company in meeting short-term goals which support
long-term objectives important to the Company's success. Awards under the
plan are based upon three factors measuring annual performance: (1) a
ranking of the Company's performance in relation to a pre-selected
comparison group of ten midwestern utilities based on change in average
rates and change in total operating expenses per unit of energy furnished
to customers, (2) the Company's achievement of its budgeted earnings per
share, as proposed by the Board of Directors, and (3) an individual
employee's achievement of management-established individual or department
goals. At the end of the year, a percentage is computed and totaled for
each eligible employee for each of the factors, with the first factor
carrying 50% of the weight, and the other factors each carrying 25%. If
the eligible employee's composite level is 25% or greater, a cash incentive
award varying from two to thirty-five percent of annual salary will be paid
to the employee, unless employment with the Company has been terminated for
any reason other than death, disability or retirement. Awards to executive
officers under the NorthSTAR Plan are made by the Nominating and
Compensation Committee of the Board of Directors annually.
In August 1994, the Board of Directors adopted an Incentive
Compensation Plan for the officers and directors of Northwestern Growth
Corporation ("NGC"), the Company's wholly owned subsidiary which manages
its nonutility investments. Under the plan, the NGC officers and directors
may receive incentive compensation awards based upon improvements in the
after-tax investment returns above the returns previously achieved in such
investments. NGC officers, directors, or employees shall have any awards
under the Company's NorthSTAR Plan reduced by up to 50% for awards made
under this plan. Awards made in 1996 were consistent with this philosophy
and were based on NGC's investment performance.
As a complement to the Company's NorthSTAR Plan, the Board of
Directors in 1989 also adopted a long-term incentive compensation plan
which is intended to create incentives for participants relating to the
long-term performance of the Company's Common Stock, to encourage continued
employment with the Company or service on the Board of Directors, and to
promote awareness of the performance of the Company's Common Stock. All
executive officers and directors of the Company are eligible to participate
in the long-term incentive plan. The Board of Directors determines the
recipients, if any, and the amount of the awards, upon the recommendation
of the Nominating and Compensation Committee. Under the long-term
incentive compensation plan, an annual award of performance units is made
to all directors and may be made to any or all officers. A performance
unit is equal in value to the fair market value of one share of the
Company's Common Stock. Because the value of the performance units at any
point in time is established by reference to the fair market value of the
Company's Common Stock, the performance units are sometimes referred to as
"phantom stock units." The annual award of the performance units is held
in an account for the participant for a period of five years, during which
time units equal in value to the dividends paid on the Company's Common
Stock are added to the account. At the end of each five-year rolling
period, the value of the matured account for one year is paid in cash to
the recipient if he or she at that time is an officer or director of the
Company. If the recipient is not an officer or director of the Company at
the end of the five-year period, the performance unit award is forfeited
unless there has been a termination due to death, disability or retirement
of the recipient. The value of the award at maturity is determined by
multiplying the accumulated performance units which have matured by the
average of the closing prices of the Company's Common Stock for the ten
days preceding such event. Individual annual awards are set at 200
performance units for directors and for executive officers are considered
by the Board of Directors during their annual meeting in May each year.
Incentive compensation awards made in 1996 were based upon the performance
of the Company's Common Stock in the market and upon the contributions of
the individual executive officer to the long-term success of the Company,
as measured by the Board of Directors.
NOMINATING AND COMPENSATION COMMITTEE
Aelred J Kurtenbach, Chairman
Herman Lerdal
Bruce I. Smith
The following table sets forth the compensation paid by the Company
during the fiscal years indicated for services in all capacities to the
chief executive officer and to the four most highly compensated of the
other executive officers:
Summary Compensation Table
Long- All
Annual Compensation(1) Term Other
---------------------- Compen- Compen-
Name and Salary Bonus(2) sation sation(5)
Position Year ($) ($) Payout(4) ($)
- --------------- ---- --------- ----------- --------- ----------
M. D. Lewis 1996 207,388 (3) 17,765 15,358
President & 1995 187,758 97,255 18,507 14,349
Chief Execu- 1994 157,000 65,231 11,171 14,312
tive Officer
R. R. Hylland 1996 137,906 (3) 17,765 7,359
Executive 1995 115,077 125,260 18,507 6,029
Vice President- 1994 95,242 52,505 0 5,516
A. R. Donnell 1996 117,440 (3) 26,647 8,329
Vice President- 1995 109,416 26,642 27,761 11,475
Energy 1994 99,829 19,631 16,757 13,380
Operations
R. F. Leyendecker1996 114,208 (3) 17,765 11,453
Vice President- 1995 104,375 46,784 18,507 13,343
Market 1994 90,708 25,195 11,171 12,664
Development
D. K. Newell 1996 106,500 (3) 0 3,415
Vice President- 1995 41,667 52,776 0 0
Finance & 1994 - - - -
Chief Financial
Officer
(1) Certain employee benefits are not reported as compensation in this
table when, by reason of their nature or amount, they are not required
to be set forth herein under applicable rules of the Securities and
Exchange Commission.
(2) The amounts in the bonus column for 1994 are cash awards pursuant to
the Company's NorthSTAR Plan and the Northwestern Growth Corporation
Incentive Compensation Plan, which are described under Executive
Management Compensation. For 1995 the amounts include awards pursuant
to such plans, and special discretionary awards made to Mr. Hylland
($25,000) and Mr. Newell ($25,000) for their efforts related to the
successful completion of certain acquisition transactions and for Mr.
Leyendecker ($5,000) for his efforts related to certain regulatory
matters.
(3) The award earned by the executives in 1996, if any is to be paid under
the NorthSTAR Plan and/or the NGC Incentive Compensation Plan, will be
determined in the spring of 1997.
(4) The amounts in this column represent the cash payouts from the
Company's Long-Term Incentive Compensation Plan at the end of the five-
year periods since the awards were made.
(5) The amounts in this column include the Company's contributions to the
Employee Savings Plan (described below) for the executives and to the
Employee Stock Ownership Plan (described below) as well as the amounts
paid by the Company with respect to term life insurance for the
benefit of the executives. For the executives named in this table,
for 1996 such amounts under the Employee Savings Plan, ESOP, and life
insurance respectively, were as follows: Mr. Lewis: $4,750, $6,257.
and $4,351; Mr. Hylland: $4,137, $2,078, and $1,144; Mr. Donnell:
$3,110, $3,319, and $1,900; Mr. Leyendecker: $3,426, $5,639, and
$2,388; and Mr. Newell: $1,540, $0, and $1,875.
Long-Term Incentive Plan
Performance or Other
Period Until
Name Number of Units* Maturation or Payout
- ----------------- --------------- --------------------
M. D. Lewis 2,315.73 5 years
R. R. Hylland 1,502.22 5 years
A. R. Donnell 562.24 5 years
R. F. Leyendecker 562.24 5 years
D. K. Newell 488.89 5 years
*The amounts in this column represent the phantom stock awards made
during 1996 pursuant to the Company's Long-Term Incentive Compensation
Plan, which is described under Executive Management Compensation.
Director Compensation
Directors who are not officers of the Company annually receive 300
shares of Common Stock of the Company and are paid $1,100 each quarter for
serving on the Board of Directors and an attendance fee of $1,000 for
attendance at each regular or special meeting of the Board of Directors.
Directors are also paid $700 for each meeting of a committee on which such
director serves and $300 for each quarter during which they serve as
chairman of a committee of the Board of Directors. Directors receive one-
half of the meeting fee for telephonic conference board or committee
meetings. Directors may elect to defer receipt of their compensation as
directors until they cease to be directors. The deferred compensation may
be invested in an account which earns interest at the same rate as accounts
in the employee savings plan or in a deferred compensation unit account in
which the deferred compensation is converted into deferred compensation
units on the basis that each unit is at the time of investment equal in
value to the fair market value of one share of the Company's Common Stock,
sometimes referred to as "phantom stock units." Additional units based on
the dividends paid on the Company's Common Stock are added to the
directors' deferred compensation unit account. Following the director's
retirement, the value of the deferred compensation units is paid in cash in
an amount determined by multiplying the accumulated deferred compensation
units by the average of the closing prices of the Company's Common Stock
for the ten days preceding such event. Directors who are also officers are
not separately compensated for services as a director. Mr. R. A. Wilkens,
as Chairman of the Board, has been paid an annual fee of $54,000, payable
monthly, in lieu of the normal directors' fees.
In 1987, the Board of Directors approved a retirement plan for non-
employee directors who have served for at least five years. Upon retiring
as a director, the retired director or that director's surviving spouse is
entitled to receive retirement benefits approximately equal to the fees,
other than meeting fees then paid to active outside directors of the
Company, for the same number of months as served as a director. If the
outside director retires before reaching age sixty-five, the retirement
benefit to be paid upon retirement is reduced by five per cent for each
year of age less than age sixty-five at the time of retirement. In no
event is any retirement benefit paid to any retired director prior to age
sixty-five.
Employee Savings Plan
In 1984, the Company adopted and implemented an employee savings plan
which permits all employees to defer receipt of compensation as provided in
Section 401(k) of the Internal Revenue Code. Directors who are not
employees are not eligible to participate in this plan. Under the
provisions of this savings plan, any employee may elect to direct that up
to twelve percent (12%) of his or her gross compensation be paid to the
plan administrator for the employee's account. Any amount so deferred by
the employee, up to a present maximum of $9,500, is exempt from current
federal income tax. Amounts in excess of $9,500 may be deferred by, up to
the 12% limits in a 401(k) wraparound plan, effective January 1, 1997. To
encourage participation in this employee savings plan, the Company
contributes to the account of participating employees 50 cents for each one
dollar contributed by the employee, up to a maximum Company contribution of
three percent (3%) of the employee's gross compensation. Upon retirement
from the Company, employees may receive distributions from their savings
accounts held by the plan administrator.
Employee Stock Ownership Plan
In 1976, the Board of Directors adopted the Company's Employee Stock
Ownership Plan ("ESOP") pursuant to the provisions of the Tax Reduction Act
of 1975 and the Tax Reform Act of 1976. All full-time employees who are at
least 21 years old and have one year of service with the Company are
eligible to participate in the ESOP, but directors who are not also full-
time employees of the Company do not qualify to participate. The ESOP is
funded with federal income tax savings which result from tax laws
applicable to such employee benefit plans. Shares of Common Stock of the
Company acquired by the ESOP are allocated to participants' accounts in
proportion to the compensation of employees during the particular year for
which allocation is made. Under the provisions of the ESOP, shares held
for a participant's account may be distributed to the participant or sold
on behalf of the participant upon retirement from employment with the
Company. Prior to distribution, dividends paid on shares in the
participant's account are reinvested in additional shares.
Pension Plan
The Company has a Pension Plan in which all employees 21 years of age
and over are eligible to participate after one year of service. Directors
who are not employees are not eligible to participate in the Pension Plan.
The Pension Plan is a non-contributory funded plan providing an annual
pension benefit upon normal retirement at age 62 or early retirement to
those employees meeting the eligibility requirements under the Pension
Plan. The amount of the annual pension is based upon average annual
earnings for the five consecutive highest paid calendar years during the 10
years immediately preceding retirement. Upon retirement on the normal
retirement date, the annual pension to which an eligible employee becomes
entitled under the present Pension Plan amounts to 1.34% of average annual
earnings up to the Covered Compensation base plus 1.75% of such earnings in
excess of the Covered Compensation base, multiplied by all years of
credited service. Covered Compensation is determined for each employee as
the average of the taxable wage bases for Social Security tax purposes in
each of the calendar years during the period beginning with the later of
the year in which the employee reached 30 or 1961 and ending with the
calendar year in which the employee reaches age 64. The annual pension
benefit is not subject to any deduction for Social Security benefits or
other offset amounts.
Based upon average annual compensation and years of credited service
as illustrated in the table below, the annual pension commencing at normal
retirement for retirements processed in 1997 based on the provisions of the
Pension Plan as it existed on December 31, 1996, would be:
Average Years of Service
Annual ----------------------------------------------------------
Earnings 15 20 25 30 35 40
- -------- ------- ------- ------- -------- -------- --------
$ 25,000... $4,760 $6,347 $7,934 $9,521 $11,107 $12,694
50,000... 11,323 15,097 18,871 22,646 26,420 30,194
75,000... 17,885 23,847 29,809 35,771 41,732 47,694
100,000... 24,448 32,597 40,746 48,896 57,045 65,194
125,000... 31,010 41,347 51,684 62,021 72,357 82,694
150,000... 37,573 50,097 62,621 75,146 87,670 100,194
175,000... 44,135 58,847 73,559 88,271 102,982 117,694
200,000... 50,698 67,597 84,496 101,396 118,295 135,194
225,000... 57,260 76,347 95,434 114,521 133,607 152,694
250,000... 63,823 85,097 106,371 127,646 148,920 170,194
275,000... 70,385 93,847 117,309 140,771 164,232 187,694
The years of credited service under the Pension Plan for the executive
officers shown in the preceding summary compensation table are as follows:
M. D. Lewis, 21 years; R. R. Hylland, 7 years; A. R. Donnell, 26 years; R.
F. Leyendecker, 22 years; D. K. Newell, 1 year.
The Employee Retirement Income Security Act of 1974 ("ERISA"), as
amended, places limitations on the amount of the annual pension which can
be paid from a tax-qualified pension plan. Under certain circumstances,
the pension benefit to which an employee of the Company is entitled under
the Company's Pension Plan may exceed the limitations under ERISA. In
1987, the Board of Directors adopted a Pension Equalization Plan, as
permitted by ERISA, which provides for payment to retired employees of the
amount by which the normal pension benefit determined in accordance with
the formula provided in the Pension Plan exceeds the ERISA limitations. In
this manner, all employees are treated equally in accordance with the terms
of the Pension Plan.
Salary Continuation Plan
In 1983, the Company implemented a non-qualified salary continuation
plan for directors and selected management employees. In 1996 a total of
45 directors and eligible employees participated in this plan. The plan
provides for certain amounts of salary continuation in the event of death
before or after retirement, or in the alternative, certain supplemental
retirement benefits in lieu of any death benefits after age 65. Generally,
death benefits will vary from 45% to 75% of salary for up to 15 years, and
supplemental retirement benefits from 25% to 40% of current salary. Life
insurance is carried on each plan participant in favor of the Company to
indirectly fund future benefit payments. Part of the cost of the life
insurance carried by the Company is allocated to participants in the plan.
The program is designed so that if assumptions made as to mortality
experience, policy dividends or credits, and other actuarial factors are
realized, the Company will more than recover its cost of this program.
Consequently, the cost of any one individual participant cannot be properly
allocated or determined because of the overall actuarial plan assumptions
and the cost recovery feature of the plan. Therefore, no amount
attributable to this plan has been included in the summary compensation
table above.
Termination Benefit Agreements
The Company has agreements with Messrs. Lewis, Hylland, Donnell,
Leyendecker, Newell, and five other officers which provide termination
benefits if their employment by the Company terminates for any reason
(other than death, disability, retirement at age 65 or such earlier age
that the Board of Directors approves, or discharge for gross misconduct in
the performance of employment duties that materially injures the Company)
within thirty-six months after a "change in control" or "major transaction"
event. A change in control event occurs if a person acquires 20% or more
of the voting power of the Company's securities. A major transaction event
occurs if the stockholders of the Company approve a merger or consolidation
in which less that two-thirds of the Board of Directors of the Company
continue to serve, the stockholders of the Company approve a plan of
liquidation of the Company, or the stockholders of the Company approve a
sale or disposition of all or substantially all of the Company's assets.
As part of the termination benefits, the Company must pay the executive
officer a lump sum payment equal to three times the person's base salary
and average NorthSTAR Plan or NGC Incentive Compensation Plan payment. The
Company must also provide the officer with health, disability and life
insurance coverages in amounts substantially equal to those he or she was
receiving at the time of the termination. Also, on the officer's normal
retirement date, the Company must pay the officer, or his or her estate in
the event of death, a lump sum amount equal to the actuarial equivalent of
the additional retirement benefits that would have been due under the
Company's pension plans, if employment had continued for the period for
which the benefits referred to in the preceding sentence are payable. To
the extent that such benefits are subject to the excise tax imposed by
Section 4999 of the Internal Revenue Code of 1954, as amended, with respect
to excess "parachute payments" under Section 180G of such Code, the Company
will be responsible for such tax. The termination benefits under each of
the agreements are to be provided regardless of whether the officer is able
to obtain other employment. Each agreement is in effect for a term of
three years, provided that another year is automatically added to the term
on each anniversary date unless either party has given the other notice
that it does not wish to extend the term.
PERFORMANCE GRAPH
The following Stock Price Performance Graph compares the cumulative
total return* on the Company's Common Stock, the S&P Stock Index and an
Edison Electric Institute peer group index of 41 combination gas and
electric utility companies** for a five year period:
(GRAPH)
NWPS S&P 500 EEI Peer
---- ------- --------
Base 12/30/91 $100 $100 $100
1992 115.28 108 110.24
1993 124.81 118 123.10
1994 123.29 120 107.25
1995 137.56 165 136.60
1996 178.34 203 135.74
*Cumulative total return assumes quarterly reinvestment of dividends.
**Baltimore Gas & Electric Co.; Central Hudson Gas & Elec. Corp.; CILCORP
Inc.; CINERGY Corp.; CIPSCO, Inc.; CMS Energy Corp.; Commonwealth Energy
System; Consolidated Edison Co. of N.Y.; Delmarva Power & Light Co.;
DPL, Inc.; Enova Corp.; IES Industries, Inc.; Illinova Corp.; Interstate
Power Co.; LG&E Energy Corp.; Long Island Lighting Co.; Madison Gas &
Electric Co.; MidAmerican Energy; Montana Power Co.; New York State
Elec. & Gas Corp.; Niagara Mohawk Power Corp.; NIPSCO Industries, Inc.;
Northern States Power Co.; Northwestern Public Service Co.; Orange &
Rockland Utilities, Inc.; Pacific Gas & Electric Co.; PECO Energy;
Public Service Co. of Colo.; Public Service Co. of New Mexico; Public
Service Enterprise Group; Rochester Gas & Electric Corp.; Scana Corp.;
Sierra Pacific Resources; SIGECORP; St. Joseph Light & Power Co.;
Utilicorp United, Inc.; Washington Water Power Co.; Western Resources,
Inc.; Wisconsin Energy Corp.; WPS Resources; and WPL Holdings, Inc.
AMENDMENTS TO AUTHORIZE ADDITIONAL STOCK
AND TO ELIMINATE PROVISION THAT
DIRECTORS NEED NOT BE STOCKHOLDERS
Your Board of Directors has proposed and recommends the adoption of
two amendments to the Company's Restated Certificate of Incorporation.
These amendments will (1) increase from 20,000,000 to 50,000,000 the number
of authorized shares of the Company's Common Stock and reduce the par value
of the Common Stock from $3.50 per share to $1.75 per share; and (2)
eliminate a provision which states that Directors need not be stockholders
of the Company. The text of each of these amendments appears below.
Proposed Amendment to Increase Authorized Shares
of Common Stock and Reduce Par Value
During its meeting February 5, 1997, the Board of Directors declared
its intention to authorize a two-for-one split of the Common Stock of the
Company, $3.50 par value, if an amendment to the Company's Restated
Certificate of Incorporation, which the Board of Directors considers
necessary to implement the stock split, is approved by holders of Common
Stock. Authority for the proposed stock split from the Federal Energy
Regulatory Commission, which has regulatory jurisdiction over the issuance
of securities by the Company, will be sought by the Company in advance of
the Annual Meeting.
The Directors voted unanimously to approve, present, and recommend for
adoption by holders of Common Stock a resolution to amend Article FOURTH of
the Restated Certificate of Incorporation to increase the authorized shares
of Common Stock from 20 million shares to 50 million shares and to reduce
the par value of the Common Stock from $3.50 per share to $1.75 per share.
The text of the proposed resolution and amendment to the Company's Restated
Certificate of Incorporation (hereinafter referred to as the "First
Proposed Amendment"), with proposed changes indicated by underlining, is as
follows:
RESOLVED that the first paragraph of Article FOURTH of the
Restated Certificate of Incorporation of Northwestern Public Service
Company (the "Company"), as heretofore amended, is hereby amended to
read as follows:
"FOURTH: The total authorized capital stock of the Company is
(i) 1,000,000 shares of Cumulative Preferred Stock, of the par
value of $100 per share (hereinafter called the "New Preferred
Stock"), (ii) 1,000,000 shares of Preference Stock, of the par
value of $50 per share, and (iii) 50,000,000 shares of Common
Stock, of the par value of $1.75 per share."
The Board of Directors believes that the proposed two-for-one split is
advisable in order to place the price of the Common Stock at a more
attractive level for the individual investor, broaden ownership of the
Common Stock, and improve the marketability of the shares. The stock split
could result in higher brokerage commissions for transactions of equivalent
dollar amounts.
If the First Proposed Amendment is approved by the holders of a
majority of the shares of Common Stock, the Board of Directors presently
intends to authorize a two-for-one split of the Common Stock, to be
effected in the form of a 100% stock dividend, during its meeting on May 7,
1997, immediately following the annual meeting of stockholders.
Notwithstanding such approval, however, the Board of Directors reserves the
right to elect not to declare the stock split if the market price of the
Common Stock has substantially decreased from its present level. If the
stock split is declared by the Board of Directors, each holder will receive
one additional share of Common Stock, par value $1.75 per share, for each
share held on the record date for the stock split, which is presently
expected to be May 19, 1997. The stock certificate for the additional
shares will be sent to each holder as soon as practicable after the record
date. After the effective date of the amendment to the Restated
Certificate of Incorporation, the outstanding Common Stock certificates
will be considered to represent the same number of shares, but with a par
value of $1.75 per share. Following the split, holders of Common Stock
will then hold of record two shares of Common Stock, par value $1.75, for
each share of Common Stock, par value $3.50 held on the record date. As a
result of this procedure, it is NOT necessary to send the presently
outstanding Common Stock certificates to the Company.
Although the number of shares of Common Stock outstanding after the
stock split will be two times the amount outstanding prior to the stock
split, the resulting increased number of shares held by a stockholder will
represent the same percentage interest in the Company as before the stock
split. Because the par value of the Common Stock will be proportionately
reduced by one-half, the stock split will not change the stated capital of
the Company. Each share of Common Stock after the split will have one vote
and will be fully paid and non-assessable. The two-for-one stock split
will result in corresponding adjustments in outstanding warrants to
purchase Common Stock and in phantom stock units denominated in shares of
Common Stock.
Because the number of shares of Common Stock outstanding after the
split will be increased from 8,922,632 to 17,845,264 shares, the Board of
Directors considers it advisable to increase the authorized shares of
Common Stock from 20 million shares to 50 million shares, as provided in
the First Proposed Amendment. The number of shares in excess of the number
of shares necessary to effect the stock split will be available for
issuance from time to time in connection with the business needs of the
Company, by authorization of the Board of Directors and without further
action by stockholders.
In the opinion of counsel for the Company, holders of the Common Stock
will not realize any gain or loss for federal income tax purposes as a
result of the split. Shares held following the split will have a new basis
for computing gain or loss equal to one-half of the basis of the shares
held prior to the split.
Adoption of this Proposed Amendment requires the favorable vote of the
holders of a majority of the outstanding Common Stock. Proxies of the
holders of such stock will be voted on the Proposed Amendment as specified
thereon, and in the absence of such specification, the proxies will be
voted in favor of the Proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THIS PROPOSED AMENDMENT.
UNLESS OTHERWISE INDICATED ON THE PROXY,
THE SHARES OF COMMON STOCK WILL BE VOTED
FOR THIS AMENDMENT.
Proposed Amendment to Eliminate Provision
that Directors Need Not be Stockholders
The other proposed amendment to the Restated Certificate of
Incorporation would remove a provision which states that Directors need not
be stockholders of the Company. During its meeting August 7, 1996, the
Board of Directors voted unanimously to approve, present, and recommend for
adoption by holders of Common Stock a resolution to amend Article Seventh
of the Restated Certificate of Incorporation to remove this provision. The
text of the proposed resolution and amendment to the Company's Restated
Certificate of Incorporation, with the proposed language to be eliminated
underlined, is as follows:
RESOLVED that the Restated Certificate of
Incorporation of Northwestern Public Service Company,
as heretofore, amended, is hereby amended by deleting
therefrom the following underlined language in Article
Seventh:
None of the directors need be a stockholder of the
corporation or a resident of the State of Delaware.
The Board of Directors believes that it is important that they, as
Directors, have an investment in the Company, and while all of the
Directors have been stockholders, they wanted to remove language in the
Restated Certificate of Incorporation that was contrary to that intent.
Adoption of this Proposed Amendment requires the favorable vote of the
holders of a majority of the outstanding Common Stock. Proxies of the
holders of such stock will be voted on the Proposed Amendment as specified
thereon, and in the absence of such specification, the proxies will be
voted in favor of the Proposed Amendment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE
FOR APPROVAL OF THIS PROPOSED AMENDMENT.
UNLESS OTHERWISE INDICATED ON THE PROXY,
THE SHARES OF COMMON STOCK WILL BE VOTED
FOR THIS AMENDMENT.
ANNUAL REPORT
A copy of the Company's Annual Report for the year ended December 31,
1996, is being sent to all stockholders of record as of March 10, 1997, the
record date for the determination of stockholders entitled to vote at the
Annual Meeting of Stockholders. Attention is directed to the financial
statements and Management's Discussion and Analysis in such Annual Report
which are incorporated herein by reference.
INDEPENDENT PUBLIC ACCOUNTANTS
Arthur Andersen LLP has served as the Company's independent public
accountants continuously since 1932. Upon the recommendation of the Audit
Committee, the Board of Directors have selected Arthur Andersen LLP to
serve as the Company's independent public accountants during the current
year. Representatives of Arthur Andersen LLP will attend the Annual
Meeting of Stockholders and will have the opportunity to make a statement
if they desire to do so and to respond to appropriate questions.
During 1996, the Company also engaged Arthur Andersen LLP to render
certain non-audit professional services. The Audit Committee of the Board
of Directors approved the audit and non-audit services and considered the
possible effect of the non-audit services on the independence of the
accountants prior to the time the services were rendered.
SUBMISSION OF STOCKHOLDER PROPOSALS
Stockholders who wish to present proposals for consideration at the
1998 Annual Meeting of Stockholders should submit their proposals, together
with any supporting statements, to the Company on or before November 15,
1997. No proposal will be considered unless it is received at least ninety
days before the meeting. Proposals should be sent to the Corporate
Secretary of the Company.
OTHER MATTERS
The management does not know of any matter to be brought before the
meeting, other than the matters described in the Notice of Annual Meeting
accompanying this Proxy Statement. The persons named in the form of proxy
solicited by the Board of Directors will vote all proxies which have been
properly executed, and if any matters not set forth in the Notice of Annual
Meeting are properly brought before the meeting, such persons will vote
thereon in accordance with their best judgment.
By order of the Board of Directors
ALAN D. DIETRICH
Vice President-Administration
and Corporate Secretary
Northwestern Public Service Company
March 15, 1997
PLEASE COMPLETE, SIGN, AND RETURN PROMPTLY THE ENCLOSED PROXY SO THAT
YOUR STOCK MAY BE REPRESENTED AND VOTED AT THE ANNUAL MEETING.
MANAGEMENT HEREBY UNDERTAKES TO PROVIDE TO EACH STOCKHOLDER WHOSE
PROXY IS SOLICITED FOR THE 1997 ANNUAL MEETING, UPON WRITTEN REQUEST AND
WITHOUT CHARGE, A COPY OF THE COMPANY'S 1996 ANNUAL REPORT (FORM 10-K) TO
THE SECURITIES AND EXCHANGE COMMISSION. REQUESTS SHOULD BE DIRECTED TO
ALAN D. DIETRICH, VICE PRESIDENT-ADMINISTRATION AND CORPORATE SECRETARY,
NORTHWESTERN PUBLIC SERVICE COMPANY, 600 MARKET STREET WEST, HURON, SOUTH
DAKOTA 57350-1500.
IMPORTANT:
PLEASE SIGN AND
RETURN THE ENCLOSED
PROXY PROMPTLY.
(PROXY CARD)
NORTHWESTERN PUBLIC SERVICE COMPANY
Huron, South Dakota 57350
PROXY FOR 1997 ANNUAL MEETING OF STOCKHOLDERS
Solicited on behalf of the Board of Directors
The undersigned hereby appoints M. D. Lewis and R. R. Hylland, or
either of them, proxies of the undersigned, each with the power of
substitution, to represent and vote all shares of Common Stock of
Northwestern Public Service Company held of record by the undersigned on
March 10, 1997, at the Annual Meeting of the Stockholders of the Company to
be held on May 7 1997, and at any adjournments thereof, in accordance with
the Notice and Proxy Statement received, as follows:
1. ELECTION OF CLASS I DIRECTORS
(Mark only one box) ( ) FOR all nominees listed below
(except as marked to the contrary)
( ) WITHHOLD AUTHORITY
to vote for all nominees listed below
Nominees: Aelred J. Kurtenbach
M. D. Lewis
Gary Olson
(Instruction: To withhold authority to vote for any individual
nominee, print that nominee's name on the line provided below.)
---------------------------------------------------------
2. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to increase to
50,000,000 the number of authorized shares of the Company's Common
Stock, and to reduce the par value to $1.75.
3. Vote For ( ) Against ( ) Abstain ( ) on the proposal to amend
the Company's Restated Certificate of Incorporation to eliminate the
provision that Directors need not be stockholders of the Company.
4. Upon such other matters as may come before said meeting or any
adjournments thereof.
THIS PROXY, WHEN PROPERLY EXECUTED, WILL BE VOTED IN THE MANNER DIRECTED
HEREIN BY THE UNDERSIGNED STOCKHOLDER. IF NO DIRECTION IS MADE, THIS PROXY
WILL BE VOTED FOR ALL NOMINEES NAMED IN ITEM 1 AND FOR THE PROPOSALS
REFERRED TO IN ITEMS 2 AND 3.
Dated , 1997
- ------------------------------ -----------------------------
(Signature) (Signature)
Please sign above exactly as your name appears on this card. Joint owners
should each sign personally. Corporation proxies should be signed by
authorized officer. Executors, administrators, trustees, etc., should so
indicate when signing.
PLEASE MARK, SIGN, DATE AND RETURN THIS PROXY CARD PROMPTLY, USING THE
ENCLOSED ENVELOPE. NO POSTAGE IS REQUIRED.
"FURNISHED for use of SEC only"
CONSOLIDATED STATEMENT OF CASH FLOWS
Years Ended December 31
1996 1995 1994
------------- ------------- -------------
Operating Activities:
Net income $ 26,053,800 $ 19,305,569 $ 15,440,208
Items not affecting cash:
Depreciation and amortization 19,414,065 14,633,154 12,438,501
Deferred income taxes 5,830,313 2,540,385 1,509,619
Investment tax credit (561,278) (563,311) (564,801)
Changes in current assets and
liabilities net of
effects from acquisitions:
Trade accounts receivable (332,902) (3,897,932) (1,057,563)
Inventories (4,374,494) (327,160) (1,447,191)
Other current assets (4,308,027) (2,641,018) (259,826)
Accounts payable 15,712,431 (1,718,666) 2,699,294
Accrued taxes 4,621,014 937,553 (1,487,575)
Accrued interest 23,477 1,741,160 (30,991)
Other current liabilities (143,168) 3,328,632 421,690
Other, net (1,032,214) 2,028,594 (1,392,444)
------------- ------------ ------------
Cash flows from operating
activities 60,903,017 35,366,960 26,268,921
------------- ------------ ------------
Investment Activities:
Property additions (37,651,026) (29,636,745) (22,680,856)
Purchase of noncurrent
investments, net (107,425,554) (5,669,229) (1,386,178)
Purchase of net assets, net
of cash acquired (22,000,000) (109,528,168) -
Purchase of working capital, net 0 (10,607,114) -
Acquisition related costs 0 (5,405,328) -
------------- ------------ ------------
Cash flows for investment
activities (167,076,580) (160,846,584) (24,067,034)
------------- ------------ ------------
Financing Activities:
Dividends on common and
preferred stock (16,346,762) (14,463,389) (12,940,868)
Minority interest on preferred
securities of subsidiary trust (2,722,232) (1,056,250) -
Issuance of long-term debt 19,613,811 86,599,820 1,100,000
Repayment of long-term debt (339,958) (3,156,699) (677,500)
Issuance of preferred securities
of subsidiary trust 0 31,213,261 -
Issuance of preferred stock 0 3,650,000 -
Retirement of preferred stock (10,000) (30,000) (30,000)
Issuance of common stock 0 31,022,182 -
Short term borrowings
(repayments) 35,500,000 (6,300,000) 9,800,000
------------- ------------ ------------
Cash flows from (for)
financing activities 35,694,859 127,478,925 (2,748,368)
------------- ------------ ------------
Cornerstone Propane Partners
Formation Transactions:
Acquisition of CGI Holdings,
net of $2,568,000 of cash
acquired (68,962,482) 0 0
Issuance of Cornerstone Propane
Partners Common Units 191,804,130 0 0
Issuance of long-term debt 220,000,000 0 0
Repayment of long-term debt
and short-term borrowings (229,570,969) 0 0
Other fees and expenses (10,553,650) 0 0
------------- ------------ ------------
Cash flows from Cornerstone
Partners Formation 102,717,029 0 0
Transactions
------------- ------------ ------------
Increase (Decrease) in Cash and
Cash Equivalents 32,238,325 1,999,301 (546,481)
Cash and Cash Equivalents,
beginning of year 4,551,913 2,552,612 3,099,093
------------- ------------ ------------
Cash and Cash equivalents,
end of year $ 36,790,238 $ 4,551,913 $ 2,552,612
============= ============ ============
Supplemental Cash Flow Information:
Cash paid during the year for:
Income taxes $ 6,271,000 $ 5,972,200 $ 7,382,119
Interest 18,644,802 8,381,217 8,887,901
Noncash transactions during the year for:
Assumption of debt as part of
acquisition $ 149,516,144 $ 2,344,603 $ -
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS
Years Ended December 31
1996 1995 1994
------------- ------------- -------------
Operating Revenues:
Propane $ 175,102,363 $ 38,883,031 $ -
Electric 73,416,994 74,857,501 73,077,431
Natural Gas 72,269,047 64,482,943 62,141,382
Manufacturing 23,220,737 26,746,847 22,047,241
------------- ------------- -------------
344,009,141 204,970,322 157,266,054
------------- ------------- -------------
Operating Expenses:
Propane gas sold 101,359,989 18,527,061 -
Fuel and purchased power 13,347,461 14,304,791 14,552,637
Purchased natural gas sold 51,170,517 46,430,023 46,351,422
Manufacturing costs of goods sold 14,547,866 17,162,626 13,996,217
Other operating expenses 80,555,962 43,190,237 27,117,519
Maintenance 5,919,354 6,019,601 6,169,895
Depreciation and amortization 19,414,065 14,633,154 12,438,501
Property and other taxes 7,275,925 6,605,660 6,103,903
------------- ------------- -------------
293,591,139 166,873,153 126,730,094
------------- ------------- -------------
Operating Income:
Propane 18,947,261 5,604,307 -
Electric 24,474,634 26,003,006 25,661,632
Natural Gas 5,683,585 3,861,608 2,540,091
Manufacturing 1,312,522 2,628,248 2,334,237
------------- ------------- -------------
50,418,002 38,097,169 30,535,960
Interest Expense, net (18,668,279) (11,694,483) (9,669,829)
Investment Income and Other 9,719,236 3,029,376 2,443,420
------------- ------------- -------------
Income Before Income Taxes 41,468,959 29,432,062 23,309,551
Income Taxes (15,415,159) (10,126,493) (7,869,343)
------------- ------------- -------------
Net Income 26,053,800 19,305,569 15,440,208
Minority Interest on Preferred
Securities of Subsidiary Trust (2,722,232) (1,056,250) -
Dividends on Cumulative Preferred
Stock (468,945) (258,939) (119,888)
------------- ------------- -------------
Earnings on Common Stock 22,862,623 17,990,380 15,320,320
Retained Earnings, beginning of year 59,159,042 55,373,112 52,873,772
Dividends on Common Stock (15,877,817) (14,204,450) (12,820,980)
------------- ------------- -------------
Retained Earnings, end of year $ 66,143,848 $ 59,159,042 $ 55,373,112
============= ============= =============
Average Shares Outstanding 8,920,122 8,130,581 7,677,232
Earnings Per Average Common Share $ 2.56 $ 2.21 $ 2.00
============= ============= =============
Dividends Declared Per Average
Common Share $ 1.780 $ 1.746 $ 1.670
============= ============= =============
See Notes to Consolidated Financial Statements
<PAGE>
CONSOLIDATED BALANCE SHEETS
December 31
1996 1995
--------------- ----------------
ASSETS
Property:
Electric $ 350,419,398 $ 336,961,117
Natural Gas 80,905,454 73,546,150
Propane 248,555,861 74,815,533
Manufacturing 2,141,553 2,048,725
--------------- ----------------
682,022,266 487,371,525
Less-Accumulated depreciation (162,908,836) (150,469,310)
--------------- ----------------
519,113,430 336,902,215
Current Assets:
Cash and cash equivalents 36,790,238 4,551,913
Trade accounts receivable, net 89,258,503 28,190,389
Inventories 43,826,307 21,645,758
Deferred gas costs 7,006,445 2,925,865
Other 20,806,825 33,305,776
--------------- ----------------
197,688,318 90,619,701
--------------- ----------------
Other Assets:
Investments 159,332,695 51,907,141
Deferred charges and other 40,260,445 30,240,083
Goodwill and other intangibles, net 197,320,839 49,052,343
--------------- ----------------
396,913,979 131,199,567
--------------- ----------------
$ 1,113,715,727 $ 558,721,483
=============== ================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity $ 163,805,137 $ 152,678,191
Nonredeemable cumulative preferred stock 2,600,000 2,600,000
Redeemable cumulative preferred stock 1,150,000 1,160,000
Company obligated mandatorily redeemable
security of trust holding solely
parent debentures 32,500,000 32,500,000
Long-term debt 183,850,000 183,850,000
--------------- ----------------
383,905,137 372,788,191
Preferred Stock of Subsidiary 2,500,000 2,500,000
Minority Interest in Subsidiaries 186,713,663 0
Long-term debt of Subsidiaries 240,562,549 28,990,224
--------------- ----------------
813,681,349 404,278,415
--------------- ----------------
Commitments and Contingencies
Current Liabilities:
Commercial Paper 0 3,500,000
Long-term debt due within one year 1,244,220 570,000
Accounts payable 99,393,912 15,564,985
Accrued taxes 11,834,153 7,689,592
Accrued interest 4,761,720 4,738,243
Other 35,532,721 26,698,414
--------------- ----------------
152,766,726 58,761,234
--------------- ----------------
Deferred Credits:
Accumulated deferred income taxes 70,893,910 43,666,229
Unamortized investment tax credits 9,460,241 10,021,519
Other 66,913,501 41,994,086
--------------- ----------------
147,267,652 95,681,834
--------------- ----------------
$ 1,113,715,727 $ 558,721,483
See Notes to Consolidated Financial =============== ================
<PAGE>
QUARTERLY FINANCIAL DATA (UNAUDITED)
First Second Third Fourth
------- ------- ------- -------
(thousands except per share amounts)
1996: Operating revenues $97,219 $56,681 $49,705 $140,404
Operating income 23,813 6,436 4,652 15,517
Net income 13,309 3,353 1,301 8,091
Average shares 8,920 8,920 8,920 8,920
Earnings per average
common share $1.40 $0.29 $0.06 $0.81
1995: Operating revenues $50,754 $40,107 $45,548 $68,561
Operating income 12,929 6,679 6,908 11,581
Net income 7,103 3,049 3,140 6,014
Average shares 7,677 7,677 8,277 8,889
Earnings per average
common share $0.92 $0.39 $0.32 $0.59
