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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
_____________________________
Commission File Number 1-4393
_____________________________
PUGET SOUND POWER & LIGHT COMPANY
(Exact name of registrant as specified in its charter)
Washington 91-0374630
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
411 - 108th Avenue N.E., Bellevue, Washington 98004-5515
(Address of principal executive offices)
(206) 454-6363
(Registrant's telephone number, including area code)
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 for such reports), and (2) has been
subject to such filing requirements for the past 90 days.
Yes /X/ No / /
The number of shares of registrant's common stock outstanding at March 31,
1994 was 63,629,416.
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<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended March 31
1994 1993
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $329,222 $323,974
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 99,730 80,554
Fuel 12,293 22,068
Other 52,278 45,395
Maintenance 11,358 10,892
Depreciation and amortization 29,875 30,839
Taxes other than federal income taxes 29,533 29,398
Federal income taxes 30,263 31,906
------- -------
Total operating expenses 265,330 251,052
------- -------
OPERATING INCOME 63,892 72,922
------- -------
OTHER INCOME:
Miscellaneous - net of taxes 3,881 3,718
------- -------
Total other income 3,881 3,718
------- -------
INCOME BEFORE INTEREST CHARGES 67,773 76,640
------- -------
INTEREST CHARGES
Interest and amortization on long-term debt 20,856 21,939
Allowance for funds used during
construction - debt portion (722) (690)
Other 1,112 709
------- -------
Total interest charges 21,246 21,958
------- -------
NET INCOME 46,527 54,682
------- -------
DEDUCT:
Preferred stock dividend accrual 3,827 4,339
------- -------
INCOME FOR COMMON STOCK $ 42,700 $ 50,343
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,629,416 58,766,352
EARNINGS PER COMMON SHARE (Note a) $0.67 $0.86
DIVIDENDS PAID PER COMMON SHARE $0.46 $0.45
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
ASSETS
March 31 December 31
1994 1993
--------- ---------
(Unaudited)
(Thousands of Dollars)
UTILITY PLANT:
Electric Plant, at original cost
(including construction work in
progress of $100,202,000 and
$97,932,000 respectively) $3,162,091 $3,134,747
Less: Accumulated depreciation 1,000,857 981,535
--------- ---------
Net utility plant 2,161,234 2,153,212
--------- ---------
OTHER PROPERTY AND INVESTMENTS:
Investment in Bonneville Exchange Power
Contract (Note b) 106,363 108,002
Investment in terminated generating projects 8,470 12,612
Investments in and advances to subsidiaries 65,092 90,423
Energy conservation loans to customers 1,918 2,284
Other investments, at cost 15,786 15,960
--------- ---------
Total other property and investments 197,629 229,281
--------- ---------
CURRENT ASSETS:
Cash 6,283 3,445
Accounts receivable 109,057 90,863
Estimated unbilled revenue 65,300 89,266
PRAM accrued revenues 39,765 37,212
Materials and supplies, at average cost 52,261 52,383
Prepayments and Other 8,279 5,185
--------- ---------
Total current assets 280,945 278,354
--------- ---------
LONG TERM ASSETS:
Regulatory asset - SFAS No. 109 276,060 280,639
Unamortized energy conservation charges (Note c) 236,799 231,331
PRAM accrued revenues (net of current portion) 50,144 47,795
Unamortized debt expense 8,453 8,550
Other 123,364 111,968
--------- ---------
Total long-term assets 694,820 680,283
--------- ---------
TOTAL ASSETS $3,334,628 $3,341,130
========= =========
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
March 31 December 31
1994 1993
--------- ---------
(Unaudited)
(Thousands of Dollars)
CAPITALIZATION:
Shareholders' investment:
Common stock, $10 stated value,
80,000,000 shares authorized,
63,629,416 shares outstanding $ 636,294 $ 636,294
Additional paid-in capital 328,611 329,922
Earnings reinvested in the business 233,535 220,259
--------- ---------
Total common equity 1,198,440 1,186,475
Preferred stock not subject to
mandatory redemption 125,000 115,000
Preferred stock subject to
mandatory redemption 91,972 93,176
Long-term debt 1,041,201 1,036,079
--------- ---------
Total capitalization 2,456,613 2,430,730
--------- ---------
CURRENT LIABILITIES
Accounts payable 46,250 53,449
Short-term debt 106,206 149,306
Current maturities of long-term debt 8,000 23,000
Accrued expenses:
Taxes 64,238 39,124
Salaries and wages 24,960 26,289
Interest 24,301 23,832
Other 26,169 22,216
--------- ---------
Total current liabilities 300,124 337,216
--------- ---------
DEFERRED TAXES:
Deferred income taxes 532,153 528,665
Deferred investment tax credits 1,037 1,142
--------- ---------
Total deferred taxes 533,190 529,807
--------- ---------
OTHER DEFERRED CREDITS:
Customer advances for construction 19,333 19,131
Other 25,368 24,246
--------- ---------
Total other deferred credits 44,701 43,377
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $3,334,628 $3,341,130
========= =========
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31
1994 1993
------- -------
(Unaudited)
(Thousands of Dollars)
OPERATING ACTIVITIES:
- - --------------------
Net income $46,527 $ 54,682
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 29,875 30,839
Deferred income taxes and tax credits - net 7,963 16,978
AFUDC - equity portion (41) (430)
PRAM accrued revenues - net (4,902) (27,339)
Other 1,375 (19,140)
Change in certain current assets
and liabilities (Note d) 23,807 43,756
- - ---------------------------------------------------------------------------
Net Cash Provided by Operating Activities 104,604 99,346
- - ---------------------------------------------------------------------------
INVESTING ACTIVITIES:
- - --------------------
Construction expenditures - excluding equity AFUDC (35,497) (30,631)
Additions to energy conservation program (12,168) (14,387)
Decrease in energy conservation loans 367 487
Cash received from subsidiary 30,136 --
Other (including subsidiary advances) (5,362) (1,440)
- - ---------------------------------------------------------------------------
Net Cash Used by Investing Activities (22,524) (45,971)
- - ---------------------------------------------------------------------------
FINANCING ACTIVITIES:
- - --------------------
Decrease in short-term debt (43,101) (46,945)
Dividends paid (net of newly issued shares
totaling $6,184,000 in 1993) (33,252) (24,597)
Issuance of preferred stock and common stock 50,000 4,063
Issuance of bonds 55,000 70,000
Redemption of bonds and notes (65,003) (164,002)
Redemption of preferred stock (41,204) (600)
Issue costs of bonds and stock (1,682) (458)
- - ---------------------------------------------------------------------------
Net Cash Used by Financing Activities (79,242) (162,539)
- - ---------------------------------------------------------------------------
Increase (Decrease) in Cash 2,838 (109,164)
Cash at Beginning of Period 3,445 121,106
- - ---------------------------------------------------------------------------
Cash at End of Period $ 6,283 $11,942
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<PAGE>
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(a) Earnings Per Common Share
Earnings per common share for the three months ended March 31, 1994 and 1993
have been computed by dividing income for common stock by the weighted
average number of common shares outstanding.
(b) Investment in Bonneville Exchange Power Contract
The Company has a five percent interest, as a tenant in common with three
other investor-owned utilities and Washington Public Power Supply System
("WPPSS"), in the WPPSS Unit 3 project. Unit 3 is a partially constructed
1,240,000 kilowatt nuclear generating plant at Satsop, Washington, which is
in a state of extended construction delay instituted by the Bonneville Power
Administration ("BPA") and WPPSS in 1983. Under the terms of a settlement
agreement (the "Settlement Agreement"), which includes a Settlement Exchange
Agreement ("Bonneville Exchange Power Contract") between the Company and BPA
dated September 17, 1985, the Company is receiving electric power (the
"Bonneville Exchange Power") from the federal power system resources
marketed by the BPA for a period of approximately 30.5 years which commenced
January 1, 1987. The Settlement Agreement settled the claims of the Company
against WPPSS and BPA relating to the construction delay of the WPPSS Unit 3
project.
In its general rate order issued on January 17, 1990, the Washington
Utilities and Transportation Commission (the "Washington Commission") found
that all WPPSS Unit 3/Bonneville Exchange Power costs had been prudently
incurred. Under terms of the order, approximately two-thirds or $97 million
of the investment in Bonneville Exchange Power is included in rate base and
amortized on a straight-line basis over the remaining life of the Bonneville
Exchange Power Contract (amortization is included in "Purchased and
interchanged power"). The remainder of the Company's investment is being
recovered in rates over ten years, without a return during the recovery
period. Beginning in 1990, the related amortization is included in
"Depreciation and amortization," pursuant to a FERC accounting directive.
Statement of Financial Accounting Standards No. 90 ("Statement No. 90")
requires that amounts recoverable through rates be adjusted to their present
value using a discount rate as specified in Statement No. 90. In the fourth
quarter of 1989, the Company adjusted its investment account downward by
$21.2 million. The impact of the adjustment on net income, net of the $7.2
million deferred tax benefit, was approximately $14 million. The adjustment
to present value in 1989 results in reduced net amortization expense over
the ten-year recovery period, the effect of which is included in other
income.
Several issues in the litigation relating to WPPSS Unit 3, including claims
on behalf of WPPSS Unit 5 against the Company and the other Unit 3 owners
seeking recovery of certain common costs, have not been settled by the
Settlement Agreement. The claims with respect to WPPSS Unit 3 and Unit 5
common costs, made in the United States District Court for the Western
District of Washington, arise out of the fact that Unit 3 and Unit 5 were
being constructed adjacent to each other and were planned to share certain
costs. Unit 3 is in a state of extended construction delay, and Unit 5 was
terminated prior to completion. In 1989, the Company and other parties
submitted arguments and affidavits to the United States District Court, in
response to an order of the court, on the proper basis or bases upon which
costs should have been allocated between Unit 3 and Unit 5 under the WPPSS
Unit 4 and 5 Bond Resolution. On October 5, 1990, the District Court ruled
that certain cost allocations between Unit 3 and Unit 5 (and between WPPSS
Unit 1 and Unit 4) were improper. The District Court determined that
principles of incremental cost sharing were not applied and, as a result,
Units 4 and Unit 5 apparently bore more than their fair and equitable share
of construction costs. The District Court granted the motion by the trustee
for WPPSS Unit 4 and Unit 5 bondholders for an accounting of all uses of
WPPSS Unit 4 and Unit 5 bond proceeds to determine, among other things, the
extent of improper allocation of such costs. In January 1991, the United
States Court of Appeals for the Ninth Circuit granted the Company and others
permission to appeal on an interlocutory basis from the District Court's
orders. In February 1992, the Court of Appeals ruled on the District
Court's October 5, 1990 order and held that principles of incremental cost
sharing were not required and remanded the matter to the District Court for
further proceedings. The ultimate resolution of these issues is not
expected to have a material adverse impact on the financial condition or
operations of the Company.
(c) Unamortized Conservation Costs
The Company's conservation expenditures are accumulated, included in rate
base and amortized over a ten-year period at the direction of the Washington
Commission. The Company's total unamortized conservation balance at March
31, 1994 was $237 million. The amount included in rate base by the
Washington Commission in its September 1993 order, based on expenditures
through April 30, 1993, was $201 million. Conservation investments made
since April 30, 1993 are expected to be included in rates beginning October
1, 1994. In its April 1991 rate order, the Washington Commission authorized
the Company to accrue, as non-cash income, the carrying costs on
conservation investments (Allowance for Funds Used to Conserve Energy, or
AFUCE) until such investments are included in rates.
(d) Consolidated Statements of Cash Flows
For purposes of the Consolidated Statements of Cash Flows, the Company
considers all temporary investments to be cash equivalents. These temporary
cash investments are securities held for cash management purposes, having
maturities of three months or less at time of purchase. The net change in
current assets and current liabilities for purposes of the Statement of Cash
Flows excludes short-term debt, current maturities of long-term debt, and
the current portion of Periodic Rate Adjustment Mechanism ("PRAM") accrued
revenues.
<PAGE>
The following provides additional information concerning cash flow
activities:
Three Months Ended March 31 1994 1993
- - ---------------------------------------------------------------------------
(Thousands)
Changes in current assets and current liabilities:
Accounts receivable $(18,194) $(21,572)
Unbilled revenues 23,966 21,814
Materials and supplies 122 (617)
Prepayments and Other (3,095) 4,788
Accounts payable (7,199) 4,001
Accrued expenses and Other 28,207 35,342
- - ---------------------------------------------------------------------------
Net change in current assets and current liabilities $23,807 $43,756
===========================================================================
Cash payments
Interest (net of capitalized interest) $20,386 $ 14,638
Income taxes $ 6,000 $ --
- - ---------------------------------------------------------------------------
(e) Other
On September 21, 1993, the Washington Commission issued two rate orders, one
regarding the Company's request for an increase in general rates, the other
relating to an annual rate adjustment under the Company's Periodic Rate
Adjustment Mechanism ("PRAM"). In its revised general rate request, the
Company had requested a $97 million increase and in its PRAM request it had
requested a first year recovery of between $27.6 and $38.1 million of
previously deferred costs under the PRAM.
The Washington Commission authorized a general rate increase of $21.9
million, reflecting increased costs of service, and collection of $35.7
million in the first year to recover previously deferred costs under the
PRAM. The Washington Commission authorized full recovery of the Company's
PRAM request within two years from the end of the year in which the costs
were deferred. The total increase in rates of $57.6 million was effective
October 1, 1993. The Washington Commission also authorized the Company to
increase rates by an additional $3.9 million effective October 1, 1993 to
recognize, prospectively, the effect of the increase in the Federal
corporate income tax rate from 34 to 35 percent.
The Washington Commission authorized a 10.5 percent return on common equity
and a common equity component of 45 percent, compared to the Company's
request for a 12.25 percent return on common equity and a 45 percent common
equity component.
The general rate order also required the Company to file a case by November
1, 1993, demonstrating the prudency of its eight new power purchase
contracts acquired since its last general rate case. Pending the resolution
of the prudency review case, the Washington Commission ordered that the
Company's new rates, effective October 1, 1993, would be collected subject
to refund to the extent this proceeding demonstrates any of those contracts
to be imprudent. The Washington Commission calculated the annual revenue
requirement at risk to be up to $86.1 million. This amount is the
difference between the Company's power costs under the new power purchase
contracts and the Washington Commission's estimated cost of purchasing
equivalent power on the secondary market. Revenues reported for the three
months ending March 31 1994, which are at risk under the prudency review
case, are approximately $26.5 million. Revenues reported since the
Commission's order was effective October 1, 1993, which are at risk, are
approximately $45.5 million.
On May 4, 1994, Commission Staff, the Public Counsel section of the State
Attorney General's Office, and a group of industrial customers filed
testimony in the Company's prudence review addressing the eight contracts
initially subject to review plus an additional contract for a resource that
went into operation on April 8, 1994. The testimony filed by the industrial
customer group does not recommend any rate reduction or refund.
Commission Staff's testimony recommends that beginning October 1, 1994, the
Company's rates be reduced by $22.6 million, and that the Company be directed
to refund $12.8 million (which is the estimated amount expected to be
collected in rates through September 30, 1994) associated with three
purchased power contracts. Public Counsel's testimony recommends a $43.2
million rate reduction effective October 1, 1994, and that the Company be
directed to refund $35.4 million. The disallowances proposed by Commission
Staff and Public Counsel would continue throughout the term of the respective
power contracts which have remaining terms of 14 to 20 years.
Based on the nature and terms of the contracts and existing regulatory
precedents, management believes that these power purchase contracts were
prudent, and that on those grounds the recommendations of Commission Staff
and Public Counsel are not supportable. The contracts were acquired pursuant
to the Company's integrated resource plan and all of the generating projects
whose output is being purchased are completed, operational, and performing in
accordance with the contracts. The ultimate resolution of this prudence
review is subject to the determination of the Commission.
Cross-examination of the opposing testimony is scheduled to commence June 6,
1994. Filing of the Company's rebuttal case is due July 1, 1994. The
Commission is expected to issue its decision in September, to be effective as
of October 1, 1994.
The decrease in allowed return on equity from 12.8 percent in the last
general rate case to 10.5 percent approved in the present rate case has put
downward pressure on earnings since the order became effective on October 1,
1993. In addition, it will be difficult for the Company to earn its full
allowed rate of return because of changes made by the rate orders in the
recovery methods of certain costs. Therefore, the Company continues to
place strong emphasis on its ongoing improvement efforts designed to
increase operating efficiencies.
As a regulated electric utility, the Company's financial condition is
largely dependent on continued cost-recovery regulation by the Washington
Commission. Adverse action by the Washington Commission in regulatory
matters involving the Company, including the pending prudency review case,
could adversely impact the Company's financial condition and threaten its
ability to maintain the dividend on its common stock at current levels.
The Company will file its fourth annual rate request under the PRAM by June
1, 1994. A decision from the Washington Commission is expected by late
September of this year.
In 1994, the Company offered to 650 manager-level and eligible professional
staff the opportunity to voluntarily leave or, if eligible, to retire from
the Company. The offer was accepted by 98 employees in March 1994. A
charge of $6.9 million ($4.5 million or 7 cents a share after-tax) was taken
in the first quarter to reflect costs associated with this program and is
included in other operating expenses.
The financial statements contained in this Form 10-Q are unaudited; however,
in the opinion of the Company, they include all adjustments (consisting only
of normal recurring adjustments) necessary for a fair statement of the
results of operations for the periods shown.
<PAGE>
ITEM 2 - MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
Net income for the three months ended March 31, 1994, was $46.5 million on
operating revenues of $329.2 million, compared with net income of $54.7
million on operating revenues of $324.0 million for the same period in 1993.
Income for common stock was $42.7 million for the first quarter of 1994
compared to $50.3 million for the first quarter of 1993. Earnings per common
share were $0.67 for the first quarter of 1994 based on 63.6 million weighted
average common shares, compared to $0.86 for the first quarter of 1993 based
on 58.8 million weighted average common shares outstanding.
Total kilowatt-hour sales were 5.7 billion, including 0.4 billion in sales to
other utilities, for the first quarter of 1994, compared to 5.5 billion,
including 49 million in sales to other utilities, for the first quarter of
1993.
The Company's operating revenues and associated expenses are not generated
evenly during the year. Variations in energy usage by consumers do occur
from season to season and from month to month within a season, primarily as a
result of weather conditions. The Company normally experiences its highest
energy sales in the first and fourth quarters of the year. Sales to other
utilities also vary by quarter and year depending principally upon water
conditions for the generation of hydroelectric power, customer usage and the
energy requirements of other utilities. With the implementation of the PRAM
in October 1991, earnings are no longer significantly influenced, up or down,
by sales of surplus electricity to other utilities or by weather or hydro
conditions.
Preferred stock dividends decreased $0.5 million for the three month period
ending March 31, 1994 compared to the same period in 1993. Decreases due to
the redemptions of the $50 million, Flexible Dutch Auction Rate Transferable
Securities (FLEX DARTS) $100 Par Value Preferred Stock, Series B in July 1993
and the $40 million, Adjustable Rate Cumulative Preferred Stock, Series A
($100 par value) in February 1994 were partially offset by the issuance in
February 1994 of the $50 million, Adjustable Rate Cumulative Preferred Stock,
Series B ($25 par value).
<PAGE>
Comparative Periods Ending March 31, 1994 vs. March 31, 1993
Increase (Decrease)
Three Month Periods
-------------------
(In Millions)
Operating revenue changes
General Rate Increase $17.4
PRAM surcharge billed 4.5
Accrual of Revenue under the PRAM - Net (22.4)
BPA Residential Purchase & Sale Agreement 4.1
Sales to other utilities 6.0
Load and other changes (4.4)
----
Total operating revenue changes 5.2
Operating expense changes
Purchased & interchanged power 19.2
Fuel (9.8)
Other operation expenses 6.9
Maintenance 0.5
Depreciation and amortization (1.0)
Taxes other than federal income taxes 0.1
Federal income taxes (1.6)
----
Total operating expense changes 14.3
Allowance for funds used during construction (AFUDC) (0.4)
Other income 0.6
Interest charges excluding AFUDC (0.7)
----
NET INCOME CHANGES ($8.2)
===
The following is additional information pertaining to the changes outlined in
the above table.
Operating Revenues
Revenues since October 1, 1993 increased as a result of rates authorized
by the Washington Commission in its general rate and PRAM orders issued on
September 21, 1993. See discussion of the general rate order and Periodic
Rate Adjustment Mechanism in "Other.").
Revenues in 1994 and 1993 were reduced because of the credit that the
Company received through the Residential Purchase and Sale Agreement with
the BPA. This credit, in the first quarter of 1994, was smaller by $4.1
million compared to the same period in 1993. The agreement enables the
Company's residential and small farm customers to receive the benefits of
lower-cost federal power. A corresponding reduction is included in
purchased and interchanged power expenses.
Revenues from kilowatt-hour sales, excluding PRAM, were slightly lower in
the first quarter of 1994 as compared to the same period in 1993 due to
warmer than normal temperatures in the first three months of 1994.
Operating Expenses
Purchased and interchanged power expenses increased $19.2 million for the
first quarter of 1994 compared to the same period in 1993. Higher levels
of purchased power, which contributed an increase of $15.4 million, were
influenced by new firm cogeneration power purchase contracts from PURPA
(Public Utility Regulatory Policies Act) qualifying facilities. Also
contributing to the increase was a $3.8 million reduction in credits
associated with the Residential Purchase and Sale Agreement with BPA.
(See discussion of Residential Purchase and Sale Agreement in "Operating
revenues.")
Fuel expense decreased $9.8 million for the three month comparative period
as the Company purchased additional power from cogeneration facilities
rather than run Company-owned gas turbines to generate electricity.
Other operating expenses increased $6.9 million for the three month
comparative period. This increase was primarily due to a $6.9 million
charge to reflect costs associated with the Company's recently concluded
voluntary early separation program. Additional increases of $1.1 million
in amortization expense associated with the Company's conservation program
and $1.1 million in transmission expenses were offset by a $2.4 million
decrease in steam power generation expenses.
Depreciation and amortization expense decreased $1.0 million for the first
quarter of 1994 from the same period in 1993 as a result of a change in
depreciation rates approved by the Washington Commission in the second
quarter of 1993. This adjustment decreased depreciation expense by $2.6
million during the first quarter of 1994. This decrease was partially
offset by the effects of new plant placed into service during the past
year.
Taxes other than federal income taxes increased $0.1 million for the three
month comparative period due to an increase in municipal taxes of $0.5
million that was partially offset by a decrease of $0.4 in other federal
and state taxes.
Federal income taxes on operations decreased $1.6 million for the first
quarter of 1994 from the same period in 1993 due to lower pre-tax
operating income.
AFUDC
AFUDC, which does not represent current cash income, is normally included
partially in other income and partially as an offset to interest expense.
Other Income
Other income increased $0.6 million in the first quarter of 1994 over the
same period in 1993. An increase in subsidiary earnings of $1.1 million
was partially offset by a $0.3 million decline in interest on advances to
a subsidiary. Included in subsidiary earnings for the first quarter of
1994 is an after-tax gain of $1.9 million resulting from the sale of a
project by the Company's hydro development subsidiary. Cash received from
the sale, which totaled $30.1 million, has been paid to the Company and is
recorded on the Statement of Cash Flows as "Cash received from
subsidiary."
Interest Charges
Interest charges, which consist of interest and amortization on long-term
debt and other interest, decreased $0.7 million for the first quarter of
1994 compared to the same period in 1993.
Interest and amortization on long-term debt decreased $1.1 million for the
first quarter of 1994. This decrease reflects First Mortgage Bond and
Medium-Term Note retirements or reacquisitions totaling $297 million,
which decreased interest expense by $2.5 million for the first quarter of
1994. Partially offsetting this decrease was additional interest of $1.5
million on eight recent issues of Secured Medium-Term Notes totaling $139
million. These Notes were issued during 1993 and the first quarter of
1994.
Other interest expense increased $0.4 million for the first quarter of
1994 compared to the same period last year due to higher levels of
outstanding short-term debt.
Construction expenditures (excluding AFUDC and AFUCE) for the first quarter
of 1994 were $45.7 million, including $11.0 million of energy conservation
expenditures, compared to $42.9 million, including $13.0 million of energy
conservation expenditures, for the first quarter of 1993. Construction
expenditures (excluding AFUDC and AFUCE) for the twelve months ending March
31, 1994 were $214.3 million, including $56.0 million of energy conservation
expenditures. Construction expenditures (excluding AFUDC and AFUCE) for the
twelve months ending March 31, 1993 were $229.6 million, including $53.7
million of energy conservation expenditures. Construction expenditures
(excluding AFUDC and AFUCE) for 1994 and 1995 are expected to be $260 million
and $207 million, respectively.
Cash provided by operations (net of dividends, AFUDC and AFUCE) as a
percentage of construction expenditures (excluding AFUDC and AFUCE) was
152.6% and 170.4% for the first quarter of 1994 and 1993, respectively. Cash
provided by operations (net of dividends, AFUDC and AFUCE) as a percentage of
construction expenditures (excluding AFUDC and AFUCE) was 56.8% and 39.5% for
the twelve months ending March 31, 1994 and 1993, respectively. The Company
expects to fund an average of 79% of its estimated construction expenditures
(excluding AFUDC and AFUCE) in 1994 through 1995 from cash provided by
operations (net of dividends, AFUDC and AFUCE) with the balance being funded
through the sales of securities, the nature, amount and timing of which will
be subject to market conditions and other relevant factors. The Company made
an initial payment of $8.0 million in 1993 for capacity rights to BPA's third
A.C. transmission line to the southwestern United States and expects to pay
the remaining cost of $72 million in 1994. Construction expenditure
estimates are subject to periodic review and adjustment.
On February 1, 1994, the Company issued $55 million principal amount of
Secured Medium-Term Notes Series B, due February 1, 2024, bearing interest at
7.35% per annum. Proceeds of this issue were used to extinguish $50 million
principal amount of the Company's First Mortgage Bonds, 9.625% Series due
1997. The Company redeemed $24.5 million through a tender offer completed
February 7, 1994. A portfolio of U.S. Government Treasury Securities was
purchased to defease the remaining $25.5 million of the bonds.
On February 3, 1994, the Company issued $50 million, Adjustable Rate
Cumulative Preferred Stock, Series B ($25 par value). The proceeds were used
to retire the $40 million principal amount of its Adjustable Rate Cumulative
Preferred Stock, Series A ($100 par value) and to pay down short-term debt.
On March 31, 1994, the Company had available $152 million in lines of credit
with various banks, which provide credit support for outstanding commercial
paper of $48.4 million, effectively reducing the available borrowing capacity
under these lines of credit to $103.6 million. In addition, the Company has
agreements with several banks to borrow on an uncommitted, as available,
basis at money-market rates quoted by the banks. There are no costs, other
than interest, for these arrangements.
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
For a description of legal proceedings relating to the Company's five
percent interest in WPPSS Unit No. 3, see Note (b) to the Financial
Statements.
Item 6. Exhibits and Reports on Form 8-K
(a) The following exhibits are filed herewith:
(12)-a Statement setting forth computation of ratios of earnings
to fixed charges (1989 through 1993 and twelve months ending
March 31, 1994).
(12)-b Statement setting forth computation of ratios of earnings
to combined fixed charges and preferred stock dividends
(1989 through 1993 and twelve months ending March 31, 1994).
(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.
PUGET SOUND POWER & LIGHT COMPANY
William S. Weaver
-------------------------------
William S. Weaver
Executive Vice President and
Chief Financial Officer
Date: May 13, 1994 Principal financial officer and
officer duly authorized to sign this
report on behalf of the registrant.
<PAGE>
<TABLE>
Exhibit 12a
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS OF
EARNINGS TO FIXED CHARGES
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
12 Months Ending ---------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
---------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
Pre-tax income:
Net income per statement of income $130,172 $138,327 $135,720 $132,777 $132,343 $117,749
Federal income taxes 82,328 83,970 72,449 56,180 64,094 50,456
Federal income taxes charged to
other income - net 388 (382) (2,106) (2,267) 12 (28,743)
Undistbuted (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- (567) (16) (114) (45)
------- ---------------------------------------------------
Total $212,888 $221,915 $205,496 $186,674 $196,335 $139,417
Fixed charges:
Interest on long-term debt $ 84,948 $ 86,030 $ 89,509 $ 84,791 $ 81,766 $ 81,593
Other interest 3,931 3,542 10,477 6,384 8,368 7,096
Portion of rentals representative
of the interest factor 3,919 3,937 4,474 4,463 4,388 4,505
------- ---------------------------------------------------
Total $ 92,798 $ 93,509 $104,460 $ 95,638 $ 94,522 $ 93,194
Earnings available for
fixed charges $305,686 $315,424 $309,956 $282,312 $290,857 $232,611
==========================================================
RATIO OF EARNINGS TO FIXED CHARGES 3.29x 3.37x 2.97x 2.95x 3.08x 2.50x
</TABLE>
<PAGE>
<TABLE>
Exhibit 12b
Page 1
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF
RATIOS OF EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
12 Months Ending ----------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
---------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR COMBINED FIXED
CHARGES AND PREFERRED DIVIDEND REQUIREMENTS
Pretax Income:
Net Income per statement
of income $130,172 $138,327 $135,720 $132,777 $132,343 $117,749
Federal income taxes 82,328 83,970 72,449 56,180 64,094 50,456
Federal income taxes charged
other income - net 388 (382) (2,106) (2,267) 12 (28,743)
------- ---------------------------------------------------
Subtotal 212,888 221,915 206,063 186,690 196,449 139,462
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- (567) (16) (114) (45)
------- ---------------------------------------------------
Total $212,888 $221,915 $205,496 $186,674 $196,335 $139,417
Fixed charges:
Interest on long-term debt 84,948 $ 86,030 $ 89,509 $ 84,791 $ 81,766 $ 81,593
Other interest 3,931 3,542 10,477 6,384 8,368 7,096
Portion of rentals representative
of the interest factor 3,919 3,937 4,474 4,463 4,388 4,505
------- ---------------------------------------------------
Total $ 92,798 $ 93,509 $104,460 $ 95,638 $ 94,522 $ 93,194
Earnings available for combined
fixed charges and preferred
dividend requirements $305,686 $315,424 $309,956 $282,312 $290,857 $232,611
==========================================================
</TABLE>
<PAGE>
<TABLE>
Exhibit 12b
Page 2
PUGET SOUND POWER & LIGHT COMPANY
STATEMENT SETTING FORTH COMPUTATIONS OF RATIOS OF
EARNINGS TO COMBINED FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
(Dollars in Thousands)
<CAPTION>
Year Ended December 31
12 Months Ending ----------------------------------------------------
March 31, 1994 1993 1992 1991 1990 1989
-------------- -----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVIDEND REQUIREMENT:
Fixed charges above $ 92,798 $ 93,509 $104,460 $ 95,638 $ 94,522 $ 93,194
Preferred dividend requirements 26,052 26,378 21,080 14,115 18,399 15,850
------- ---------------------------------------------------
Total $118,850 $119,887 $125,540 $109,753 $112,921 $109,044
==========================================================
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 2.57 2.63 2.47 2.57 2.58 2.13
COMPUTATION OF PREFERRED DIVIDEND
REQUIREMENTS:
(a) Pre-tax income $212,888 $221,915 $206,063 $186,690 $196,449 $139,462
(b) Net income $130,172 $138,327 $135,720 $132,777 $132,343 $117,749
(c) Ratio of (a) to (b) 1.6354 1.6043 1.5183 1.4060 1.4844 1.1844
(d) Preferred dividends $ 15,930 $ 16,442 $ 13,884 $ 10,039 $ 12,395 $ 13,382
Preferred dividend requirements
[(d) multiplied by (c)] $ 26,052 $ 26,378 $ 21,080 $ 14,115 $ 18,399 $ 15,850
==========================================================
</TABLE>
