<PAGE>
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 June 30, 1996
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 June 30,
1996 was 63,640,861.
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended June 30
1996 1995
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $257,317 $261,592
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 89,605 87,415
Fuel 8,231 6,846
Other 38,913 42,082
Maintenance 11,799 13,743
Depreciation and amortization 27,443 26,983
Taxes other than federal income taxes 26,889 26,094
Federal income taxes 14,538 15,491
------- --------
Total operating expenses 217,418 218,654
------- -------
OPERATING INCOME 39,899 42,938
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion -- 94
Miscellaneous - net of taxes 860 2,493
------- -------
Total other income 860 2,587
------- -------
INCOME BEFORE INTEREST CHARGES 40,759 45,525
------- -------
INTEREST CHARGES
Interest and amortization on long-term debt 18,277 21,115
Allowance for funds used during
construction - debt portion (1,141) (1,185)
Other 1,991 2,732
------- -------
Total interest charges 19,127 22,662
------- -------
NET INCOME 21,632 22,863
------- -------
DEDUCT:
Preferred stock dividend accrual 3,763 3,908
------- -------
INCOME FOR COMMON STOCK $ 17,869 $ 18,955
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,640,861
EARNINGS PER COMMON SHARE (Note a) $0.28 $0.30
DIVIDENDS PAID PER COMMON SHARE $0.46 $0.46
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF INCOME
Six Months Ended June 30
1996 1995
------- -------
(Unaudited)
(Thousands except shares
and per share amounts)
OPERATING REVENUES $588,326 $599,937
------- -------
OPERATING EXPENSES:
Operation:
Purchased and interchanged power 205,231 199,262
Fuel 16,272 13,235
Other 78,552 88,308
Maintenance 24,475 27,037
Depreciation and amortization 54,921 54,006
Taxes other than federal income taxes 58,717 56,785
Federal income taxes 45,571 48,006
------- -------
Total operating expenses 483,739 486,639
------- -------
OPERATING INCOME 104,587 113,298
------- -------
OTHER INCOME:
Allowance for funds used during construction -
equity portion -- 94
Miscellaneous - net of taxes 1,979 4,175
------- -------
Total other income 1,979 4,269
------- -------
INCOME BEFORE INTEREST CHARGES 106,566 117,567
------- -------
INTEREST CHARGES:
Interest and amortization on long-term debt 36,692 42,193
Allowance for funds used during
construction - debt portion (2,444) (2,345)
Other 4,267 6,109
------- -------
Total interest charges 38,515 45,957
------- -------
NET INCOME 68,051 71,610
------- -------
DEDUCT:
Preferred stock dividend accrual 7,505 7,871
------- -------
INCOME FOR COMMON STOCK $ 60,546 $ 63,739
======= =======
COMMON SHARES OUTSTANDING -
WEIGHTED AVERAGE 63,640,861 63,640,861
EARNINGS PER COMMON SHARE (Note a) $0.95 $1.00
DIVIDENDS PAID PER COMMON SHARE $0.92 $0.92
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
ASSETS
June 30 December 31
1996 1995
--------- ---------
(Unaudited)
(Thousands of Dollars)
UTILITY PLANT:
Electric Plant, at original cost
(including construction work in
progress of $98,536,000 and
$105,617,000, respectively) $3,442,786 $3,400,723
Less: Accumulated depreciation 1,149,763 1,118,678
--------- ---------
Net utility plant 2,293,023 2,282,045
--------- ---------
OTHER PROPERTY AND INVESTMENTS:
Investment in Bonneville Exchange Power
Contract 90,558 94,241
Investments in and advances to subsidiaries 96,937 95,459
Energy conservation loans to customers 620 783
Other investments, at cost 12,529 11,328
--------- ---------
Total other property and investments 200,644 201,811
--------- ---------
CURRENT ASSETS:
Cash 2,036 12,498
Accounts receivable 117,014 124,086
Estimated unbilled revenue 48,235 80,363
PRAM accrued revenues 34,567 59,123
Materials and supplies, at average cost 40,209 46,407
Prepayments and Other 3,769 4,352
--------- ---------
Total current assets 245,830 326,829
--------- ---------
LONG-TERM ASSETS:
Regulatory asset for deferred income taxes 242,472 249,731
PRAM accrued revenues (net of current portion) 43,664 55,673
Unamortized debt expense 9,658 10,264
Unamortized energy conservation charges (Note b) 39,803 37,889
Other 116,237 104,753
--------- ---------
Total long-term assets 451,834 458,310
--------- ---------
TOTAL ASSETS $3,191,331 $3,268,995
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
June 30 December 31
1996 1995
--------- ---------
(Unaudited)
(Thousands of Dollars)
CAPITALIZATION:
Common shareholders' investment:
Common stock, $10 stated value,
80,000,000 shares authorized,
63,640,861 shares outstanding $ 636,409 $ 636,409
Additional paid-in capital 328,963 328,963
Earnings reinvested in the business 212,521 210,532
--------- ---------
Total common equity 1,177,893 1,175,904
Preferred stock not subject to
mandatory redemption 125,000 125,000
Preferred stock subject to
mandatory redemption 87,840 89,039
Long-term debt 920,512 920,439
--------- ---------
Total capitalization 2,311,245 2,310,382
--------- ---------
CURRENT LIABILITIES
Accounts payable 43,786 50,269
Short-term debt 144,851 167,049
Current maturities of long-term debt 8,000 43,000
Accrued expenses:
Taxes 44,132 36,321
Salaries and wages 20,923 22,011
Interest 21,928 22,921
Other 19,929 27,356
--------- ---------
Total current liabilities 303,549 368,927
--------- ---------
DEFERRED INCOME TAXES:
Deferred income taxes 517,055 528,400
Investment tax credits 103 311
--------- ---------
Total deferred income taxes 517,158 528,711
--------- ---------
OTHER DEFERRED CREDITS:
Customer advances for construction 20,319 19,972
Other 39,060 41,003
--------- ---------
Total other deferred credits 59,379 60,975
--------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $3,191,331 $3,268,995
========= =========
The accompanying notes are an integral part of the financial statements.
<PAGE>
Puget Sound Power & Light Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended June 30
1996 1995
------- -------
(Unaudited)
(Thousands of Dollars)
OPERATING ACTIVITIES:
- --------------------
Net income $ 68,051 $ 71,610
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 54,921 54,006
Deferred income taxes and tax credits - net (4,294) 10,874
AFUDC - equity portion -- (94)
PRAM accrued revenues - net 36,565 (6,634)
Other (2,769) 6,283
Change in certain current assets
and liabilities (Note c) 37,801 14,141
- ---------------------------------------------------------------------------
Net Cash Provided by Operating Activities 190,275 150,186
- ---------------------------------------------------------------------------
INVESTING ACTIVITIES:
- --------------------
Construction expenditures - excluding equity AFUDC (65,150) (55,321)
Additions to energy conservation program (3,323) (7,061)
Decrease in energy conservation loans 163 372
Cash received from sale of conservation assets - net -- 199,802
Other (including advances to subsidiaries) (7,949) (1,626)
- ---------------------------------------------------------------------------
Net Cash Provided (Used) by
Investing Activities (76,259) 136,166
- ---------------------------------------------------------------------------
FINANCING ACTIVITIES:
- --------------------
Decrease in short-term debt (22,198) (218,669)
Dividends paid (66,062) (66,479)
Redemption of bonds and notes (35,001) (2)
Redemption of preferred stock (1,199) (1,993)
Issue costs of bonds and stock (18) (10)
- ---------------------------------------------------------------------------
Net Cash Used by Financing Activities (124,478) (287,153)
- ---------------------------------------------------------------------------
Decrease in Cash (10,462) (801)
Cash at Beginning of Period 12,498 5,284
- ---------------------------------------------------------------------------
Cash at End of Period $ 2,036 $ 4,483
===========================================================================
The accompanying notes are an integral part of the financial statements.
<PAGE>
NOTES TO FINANCIAL STATEMENTS
(a) Earnings Per Common Share
Earnings per common share for the three and six months ended June 30, 1996
and 1995 have been computed by dividing income for common stock by the
weighted average number of common shares outstanding.
(b) Unamortized Energy Conservation Costs
The Company's energy conservation expenditures are accumulated, included in
rate base and amortized over a ten-year period at the direction of the
Washington Utilities and Transportation Commission (the "Washington
Commission"). In June 1995, the Company sold approximately $202.5 million
of its investment in customer-owned energy conservation measures to a
grantor trust which, in turn, issued securities backed by a Washington state
statute enacted in 1994. The securities were issued by the trust in June
1995, and carry a coupon rate of 6.45 percent. The Company recognized no
gain or loss on the sale. The Company's total remaining unamortized
conservation balance at June 30, 1996 was $39.8 million.
(c) Consolidated Statements of Cash Flows
The following provides additional information concerning cash flow
activities:
Six Months Ended June 30
1996 1995
- ---------------------------------------------------------------------------
(Thousands)
Changes in current assets and current liabilities:
Accounts receivable $ 7,072 $ 2,601
Unbilled revenues 32,128 41,424
Materials and supplies 6,198 (969)
Prepayments and Other 583 331
Accounts payable (6,483) (21,188)
Accrued expenses and Other (1,697) (8,058)
- ---------------------------------------------------------------------------
Net change in current assets and current liabilities $37,801 $14,141
===========================================================================
Cash payments:
Interest (net of capitalized interest): $40,085 $46,246
Income taxes $41,000 $34,200
- ---------------------------------------------------------------------------
(d) Other
On September 22, 1995, the Washington Commission issued a rate order
relating to the Company's fifth annual rate adjustment under the PRAM. The
Company had requested a $62.8 million revenue increase and the Commission
allowed $58.8 million. The disallowance included $3.3 million related to
resource cost projections that are subject to true-up during the PRAM period
and a flow-through to customers of $0.7 million related to tax benefits on
the Company's conservation expenditures. In addition to approval of the
rate adjustment, the Commission also agreed, pursuant to a negotiated
settlement, to discontinue the PRAM on September 30, 1996, the end of the
current PRAM period. Under the terms of the settlement agreement, PRAM
accrued revenues outstanding at that time will be recovered in rates over a
period not to exceed two years. With the discontinuance of the PRAM, the
annual regulatory adjustments for variations in weather and hydro conditions
provided for in the PRAM will also be discontinued.
On March 20, 1996, shareholders of the Company and Washington Energy Company
("WECo"), voting as separate groups, gave their approval to an Agreement and
Plan of Merger between the two companies. The merger, which would merge
WECo and Washington Natural Gas Company ("WNG"), a wholly-owned subsidiary
of WECo, with and into the Company, had been unanimously approved by the
Company's Board of Directors as well as the Boards of Directors of WECo and
WNG in October 1995. The name of the merged company, Puget Sound Energy,
was also announced at the March 20 meetings. Before the merger becomes
final, however, it must also be approved by the Washington Commission, which
regulates the utility operations of each entity. The regulatory approval
process is expected to be completed at the end of 1996.
The Agreement calls for each share of WECo common stock to be exchanged for
0.86 share of the Company's common stock. Based on the capitalization of
the Company and WECo on June 30, 1996, holders of the Company's and WECo's
common stock would have held approximately 75% and 25% respectively, of the
aggregate number of outstanding shares of the merged company's common stock
had the merger been consummated at that date. In addition, the Agreement
calls for the preferred stock of WNG to be converted into preferred shares
of the merged company. The merger is structured as a tax-free exchange of
shares, and is expected to be accounted for as a pooling of interests.
The Hart-Scott-Rodino Antitrust Improvement Act of 1978("HSR Act") and the
rules and regulations thereunder provide that the merger may not be
consummated until certain information has been submitted to the Antitrust
Division of the United States Department of Justice and the Federal Trade
Commission and specified HSR Act waiting period requirements have been
satisfied.
In connection with its application for approval of the merger with WECo, the
Company filed with the Washington Commission, in February 1996, a proposed
rate stability plan which, if adopted, would among other things, increase
general electric rates by 1% annually from 1997 through 2000.
Also in connection with the merger, the Company, on December 11, 1995,
offered a voluntary early separation plan to approximately 890 employees.
The plan, which offers a severance package based on years of service, was
accepted by 204 employees on January 31, 1996. Under the terms of the plan,
the Company has the right to retain the employees for up to 60 days after
the merger is completed. If, for any reason, the merger plans are
discontinued prior to the employee's separation date, the employee's
participation in the plan will thereupon be considered terminated and no
severance benefits will be paid. Total additional costs of this voluntary
separation plan are currently estimated to be $7 million. Through June 30,
1996, costs of $3.1 million, for employees released under the severance
package, have been deferred pending the outcome of the regulatory approval
process.
As of June 30, 1996, the Company has accumulated and deferred costs
associated with the merger of approximately $7.7 million.
On May 24, 1996, the Company filed a proposal with the Washington Commission
that would create an Optional Large Power Sales Rate for its largest
customers. Under the Company's proposal, customers who elect the Optional
Large Power Sales Rate would no longer be considered "core" customers.
Instead, they would form a new class of "non-core" customers, and the
Company would no longer have an obligation to plan for resources to serve
their needs. The non-core customers will receive access to electric energy
that is priced at current market cost and will pay a charge for energy
delivery (including a charge for conservation programs) and a transition
charge (representing the difference between the Company's present cost and
the current market cost of electric energy and capacity). The transition
charge will be phased out before the end of the year 2000. Non-core
customers also would take on the risk that market costs could become
volatile and that electricity could be unavailable on the open market.
On July 12, 1996, the Company and six other Northwest electric companies
signed a memorandum of understanding to create an independent transmission
grid operator called "IndeGO" to insure non-discriminatory, open access to
electricity transmission facilities in compliance with recent Federal Energy
Regulatory Commission ("FERC") rulings. IndeGO members include Idaho Power
Company, Montana Power Company, PacifiCorp, Portland General Electric,
Sierra Pacific Power Company, Washington Water Power Company, and the
Company. However, participation in IndeGO will be open to other
transmission owners in the Northwest. The members plan to file the IndeGO
proposal with FERC by the end of the year, and anticipate operation would
commence by July 1997.
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 June 30, 1996, was $21.6 million on
operating revenues of $257.3 million, compared with net income of $22.9
million on operating revenues of $261.6 million for the same period in 1995.
Income for common stock was $17.9 million for the second quarter of 1996 and
$19.0 million for the second quarter of 1995. Earnings per common share were
$0.28 for the second quarter of 1996 compared to $0.30 for the second quarter
of 1995 based on 63.6 million weighted average common shares outstanding for
both periods.
For the first six months of 1996, net income was $68.1 million on operating
revenues of $588.3 million, compared with net income of $71.6 million on
operating revenues of $599.9 million for the corresponding period in 1995.
Income for common stock was $60.5 million for the first half of 1996 and
$63.7 million for the same period in 1995. Earnings per common share were
$0.95 for the six months ended June 30, 1996 and $1.00 for the same period in
1995 based on 63.6 million weighted average common shares outstanding for
both periods.
Total kilowatt-hour sales were 5.4 billion, including 0.8 billion in sales to
other utilities, for the second quarter of 1996, compared to 4.9 billion,
including 0.5 billion in sales to other utilities, for the second quarter of
1995. For the six month periods ended June 30, 1996 and 1995, total kilowatt-
hour sales were 12.1 billion, including 1.8 billion in sales to other
utilities, and 11.2 billion, including 1.4 billion in sales to other
utilities, respectively.
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 have not been significantly influenced,
up or down, by sales of surplus electricity to other utilities or by weather
or hydro conditions. The PRAM, however, will end effective September 30,
1996 under a stipulated negotiated settlement approved by the Washington
Commission. Under terms of the settlement, PRAM accrued revenues at that
time would be recovered in rates over a period not to exceed two years.
Preferred stock dividends decreased $0.1 million and $0.4 million for the
three and six month periods ended June 30, 1996, respectively, compared to
the same periods in 1995. The decreases were due to lower dividend rates on
the Adjustable Rate Cumulative Preferred Stock ("ARPS"), Series B ($100 par
value).
<PAGE>
Comparative Periods Ending
June 30, 1996 vs. June 30, 1995
Increase (Decrease)
Three Six
Month Month
Period Period
-------------------
(In Millions)
Operating revenue changes
PRAM surcharge billed $ 13.5 $ 31.1
Accrual of revenue under the PRAM - Net (19.6) (43.2)
BPA Residential Purchase & Sale Agreement (3.6) (9.6)
Sales to other utilities 1.9 (1.6)
Revenue sold to Conservation Trust (9.8) (20.0)
Load and other changes 13.3 31.7
----- -----
Total operating revenue change (4.3) (11.6)
Operating expense changes
Purchased & interchanged power 2.2 6.0
Fuel 1.4 3.0
Other operation expenses (3.2) (9.7)
Maintenance (1.9) (2.6)
Depreciation and amortization 0.5 0.9
Taxes other than federal income taxes 0.8 1.9
Federal income taxes (1.0) (2.4)
----- -----
Total operating expense change (1.2) (2.9)
Allowance for funds used during
construction (AFUDC) (0.1) 0.0
Other income (1.6) (2.2)
Interest charges excluding AFUDC (3.6) (7.3)
----- -----
NET INCOME CHANGE $ (1.2) $ (3.6)
===== =====
The following is additional information pertaining to the changes outlined
in the above table.
Operating revenues
Revenues since October 1, 1995 increased as a result of rates authorized
by the Washington Commission in its fifth PRAM order issued on September
22, 1995. (See discussion of the Periodic Rate Adjustment Mechanism in
"Other.")
Revenues in 1996 and 1995 were reduced because of the credit the Company
received through the Residential Purchase and Sale Agreement with the
Bonneville Power Administration ("BPA"). 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 in 1996 were reduced by $9.8 million and $20.0 million during the
three and six month periods ended June 30, 1996, respectively, as a result
of the Company's sale of revenues, in June 1995, associated with $202.5
million of its investment in conservation assets to a grantor trust. The
revenue decrease represents the portion of rate revenues that were sold
and forwarded to the trust. The impact of these revenue decreases,
however, were offset by related reductions in other operation and interest
expenses.
Revenues from kilowatt-hour sales, excluding PRAM, were higher in the
second quarter and first half of 1996 as compared to the same periods in
1995 due to colder weather and continued growth in the number of
customers.
Operating expenses
Purchased and interchanged power expenses increased $2.2 million for the
second quarter of 1996 and $6.0 million for the first half of 1996
compared to the same periods in 1995. Higher levels of purchased power,
which contributed increases of $5.1 million and $15.6 million,
respectively, were due to increased power purchases from both firm and
secondary sources. These higher costs were partially offset by increased
credits of $3.5 million and $9.3 million, respectively, associated with
the Residential Purchase and Sale Agreement with the BPA. (See discussion
of Residential Purchase and Sale Agreement in "Operating revenues.")
Fuel expense increased $1.4 million for the three month comparative period
and $3.0 million for the six month comparative period. In the second
quarter of 1996, the Company recorded a one-time charge of $1.8 million
related to a loss on the sale of oil stocks at a combustion turbine site.
Additionally, an Arbitration Panels' decision of a dispute involving the
coal supply agreement at the Company's fifty percent-owned Colstrip 1 and
2 plants resulted in a $4.6 million decrease to fuel expense in the first
quarter of 1995.
Other operation expenses decreased $3.2 million and $9.7 million for the
three and six month comparative periods, respectively. The decreases were
due primarily to reductions of $4.8 and $12.2, respectively, in
amortization expense associated with the Company's conservation program.
In June 1995 the Company sold, to a grantor trust, approximately $202.5
million of its investment in customer-owned energy conservation measures.
This decrease was partially offset by increases of $1.4 million and $2.3
million in transmission and distribution expenses for the three and six
month comparative periods, respectively.
Maintenance expense decreased $1.9 million and $2.6 million for the second
quarter and first half of 1996 from levels experienced during the same
periods in 1995. These decreases were primarily the result of lower
maintenance expense at the Company's Colstrip and Centralia coal-fired
generation projects.
Depreciation and amortization expense increased $0.5 million and $0.9
million for the three and six month comparative periods, respectively.
The increases resulted from the effects of new plant placed into service
during the past year.
Taxes other than federal income taxes increased $0.8 million and $1.9
million for three and six month comparative periods, due primarily to
higher municipal and state excise tax payments.
Federal income taxes on operations decreased $1.0 million and $2.4 million
for the three and six month comparative periods, respectively. The
decreases were due primarily to lower pre-tax operating income in the
respective periods.
AFUDC
AFUDC, which does not represent current cash income, is included partially
in other income and partially as an offset to interest expense.
Other income
Total other income decreased $1.6 million and $2.2 million for the three
and six month periods ended June 30, 1996, over the same periods a year
ago. The three and six month comparative period decreases were due in
part to reduced earnings of subsidiaries of $1.1 million and $1.4 million,
respectively, and increases in certain non-utility expenses of $0.4
million for both of the comparative periods.
Interest charges
Interest charges, which consist of interest and amortization on long-term
debt and other interest, decreased $3.6 million and $7.3 million for the
three and six month periods ended June 30, 1996, respectively, compared to
the same periods in 1995.
Interest and amortization on long-term debt alone decreased $2.8 million
for the three month comparative period and $5.5 million for the six month
comparative period. These decreases included reduced interest from the
retirement of four issues of First Mortgage Bonds totaling $143 million.
Other interest expense decreased $0.7 million and $1.8 million for the
three and six month comparative periods, respectively, due to lower
amounts of outstanding short-term debt and lower interest rates compared
to the same periods in 1995.
Construction expenditures (excluding AFUDC and AFUCE) for the second quarter
of 1996 were $36.6 million, including $1.2 million of conservation
expenditures, compared to $31.4 million, including $3.2 million of
conservation expenditures, for the second quarter of 1995. Year-to-date
construction expenditures (excluding AFUDC and AFUCE) totaled $65.5 million,
including $2.7 million of conservation expenditures, compared to $58.8
million, including $5.9 million of conservation expenditures, for the same
period in 1995. Construction expenditures (excluding AFUDC and AFUCE) for
1996 and 1997 are expected to be $133.5 million and $143.8 million,
respectively.
Cash provided by operations (net of dividends, AFUDC and AFUCE) as a
percentage of construction expenditures (excluding AFUDC and AFUCE) was 80%
and 15% for the second quarters of 1996 and 1995, respectively. Cash
provided by operations (net of dividends, AFUDC and AFUCE) as a percentage of
construction expenditures (excluding AFUDC and AFUCE) was 185% and 137% for
the six month periods ended June 30, 1996 and 1995, respectively. The
Company expects cash from operations (net of dividends, AFUDC and AFUCE) in
1996 and 1997 will, on average, be approximately 114% of average estimated
construction expenditures (excluding AFUDC and AFUCE) during the same period.
Construction expenditure estimates are subject to periodic review and
adjustment.
On June 30, 1996, the Company had available $176.5 million in lines of credit
with various banks, which provide credit support for outstanding commercial
paper of $90.3 million, effectively reducing the unused available borrowing
capacity under these lines of credit to $86.2 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.
<PAGE>
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Contingencies arising out of the normal course of the Company's business,
exist at June 30, 1996. The ultimate resolution of these issues is not
expected to have a material adverse impact on the financial condition,
results of operations or liquidity of the Company.
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 (1991 through 1995 and twelve months ending
June 30, 1996).
12-b Statement setting forth computation of ratios of earnings to
combined fixed charges and preferred stock dividends (1991
through 1995 and twelve months ending June 30, 1996).
27 Financial Data Schedule
99 Pro Forma Statements of Puget Sound Energy
(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
s/s James W. Eldredge
---------------------------------
James W. Eldredge
Corporate Secretary and Controller
Date: August 9, 1996 Chief accounting officer and
officer duly authorized to sign this
report on behalf of the registrant.
<PAGE>
Exhibit 12a
<TABLE>
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 ---------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
---------------- ---------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
EARNINGS AVAILABLE FOR FIXED CHARGES
Pre-tax income:
Net income per statement of income $132,161 $135,720 $120,059 $138,327 $135,720 $132,777
Federal income taxes 82,111 84,545 80,259 83,970 72,449 56,180
Federal income taxes charged to
other income - net (1,737) (488) 1,556 (382) (2,106) (2,267)
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- -- (567) (16)
------- ---------------------------------------------------
Total $212,535 $219,777 $201,874 $221,915 $205,496 $186,674
Fixed charges:
Interest on long-term debt $ 75,614 $ 81,115 $ 84,144 $ 86,030 $ 89,509 $ 84,791
Other interest 8,219 10,049 6,249 3,542 10,477 6,384
Portion of rentals representative
of the interest factor 3,348 3,798 4,218 3,937 4,474 4,463
------- ---------------------------------------------------
Total $ 87,181 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Earnings available for
fixed charges $299,716 $314,739 $296,485 $315,424 $309,956 $282,312
======= ===================================================
RATIO OF EARNINGS TO FIXED CHARGES 3.44x 3.31x 3.13x 3.37x 2.97x 2.95x
</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 ----------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
---------------- ----------------------------------------------------
<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 $132,161 $135,720 $120,059 $138,327 $135,720 $132,777
Federal income taxes 82,111 84,545 80,259 83,970 72,449 56,180
Federal income taxes charged to
other income - net (1,737) (488) 1,556 (382) (2,106) (2,267)
------- ---------------------------------------------------
Subtotal $212,535 $219,777 $201,874 $221,915 $206,063 $186,690
Undistributed (earnings) or losses
of less-than-fifty-percent-owned
entities -- -- -- -- (567) (16)
------- ---------------------------------------------------
Total $212,535 $219,777 $201,874 $221,915 $205,496 $186,674
Fixed charges:
Interest on long-term debt $ 75,614 $ 81,115 $ 84,144 $ 86,030 $ 89,509 $ 84,791
Other interest 8,219 10,049 6,249 3,542 10,477 6,384
Portion of rentals representative
of the interest factor 3,348 3,798 4,218 3,937 4,474 4,463
------- ---------------------------------------------------
Total $ 87,181 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Earnings available for combined
fixed charges and preferred
dividend requirements $299,716 $314,739 $296,485 $315,424 $309,956 $282,312
======= ===================================================
</TABLE>
<PAGE>
Exhibit 12b
Page 2
<TABLE>
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 ----------------------------------------------------
June 30, 1996 1995 1994 1993 1992 1991
---------------- ----------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
DIVIDEND REQUIREMENT:
Fixed charges above $ 87,181 $ 94,962 $ 94,611 $ 93,509 $104,460 $ 95,638
Preferred dividend requirements 24,383 25,144 26,451 26,377 21,080 14,115
------- ---------------------------------------------------
Total $111,564 $120,106 $121,062 $119,886 $125,540 $109,753
======= ==================================================
RATIO OF EARNINGS TO COMBINED FIXED
CHARGES AND PREFERRED STOCK DIVIDENDS 2.69x 2.62x 2.45x 2.63x 2.47x 2.57x
COMPUTATION OF PREFERRED DIVIDEND
REQUIREMENTS:
(a) Pre-tax income $212,535 $219,777 $201,874 $221,915 $206,063 $186,690
(b) Net income $132,161 $135,720 $120,059 $138,327 $135,720 $132,777
(c) Ratio of (a) to (b) 1.6082 1.6193 1.6815 1.6043 1.5183 1.4060
(d) Preferred dividends $ 15,162 $ 15,527 $ 15,731 $ 16,442 $ 13,884 $ 10,039
Preferred dividend requirements
[(d) multiplied by (c)] $ 24,383 $ 25,144 $ 26,451 $ 26,377 $ 21,080 $ 14,115
======= ===================================================
</TABLE>
<PAGE>
EXHIBIT 99
UNAUDITED PRO FORMA CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of Puget
Sound Power and Light Company ("Puget") and Washington Energy Company
("WECo") after giving effect to the merger. The unaudited pro forma
condensed balance sheet gives effect to the merger as if it had occurred at
the balance sheet date. The unaudited pro forma condensed statements of
income for the six months and twelve months ended June 30, 1996, give effect
to the merger as if it had occurred on July 1, 1995. These statements are
prepared on the basis of accounting for the merger as a pooling-of-interests
and are based on the assumptions set forth in the notes thereto. The
following pro forma financial information has been prepared from, and should
be read in conjunction with, the historical consolidated financial statements
and related notes thereto of Puget, WECo and Washington Natural Gas Company
("WNG"), a wholly-owned subsidiary of WECo. The following information is not
necessarily indicative of the operating results or financial position that
would have occurred had the merger been consummated on the date, or at the
beginning of the periods, for which the merger is being given effect, nor is
it necessarily indicative of future operating results or financial position.
<PAGE>
EXHIBIT 99
PAGE 2
<TABLE>
PUGET SOUND ENERGY
PRO FORMA CONDENSED BALANCE SHEET
AT JUNE 30, 1996
<CAPTION>
Thousands of dollars)
(unaudited)
Pro Forma
Puget(1) WECo(1) Combined
---------- ---------- ----------
<S> <C> <C> <C>
ASSETS
Property, Plant and Equipment:
Utility plant $3,442,786 $1,114,357 $4,557,143
Coal and other 15,675 15,675
Accumulated provisions for depreciation
and amortization 1,149,763 297,157 1,446,920
--------- --------- ---------
Net property, plant and equipment 2,293,023 832,875 3,125,898
--------- --------- ---------
Other Property and Investments:
Investment in Bonneville Exchange Power Contract 90,558 90,558
Investment in and advances to subsidiaries 96,937 96,937
Investment in unconsolidated affiliate 69,291 69,291
Other 13,149 13,149
--------- --------- ---------
Total other property and investments 200,644 69,291 269,935
--------- --------- ---------
Current Assets:
Cash 2,036 8,306 10,342
Accounts receivable 117,014 9,314 126,328
Estimated unbilled revenue 48,235 5,759 53,994
PRAM accrued revenues 34,567 34,567
Materials and supplies, at average cost 40,209 20,981 61,190
Prepayments and other 3,769 10,529 14,298
--------- --------- ---------
Total current assets 245,830 54,889 300,719
--------- --------- ---------
Long-Term Assets:
Regulatory asset for deferred income taxes 242,472 17,605 260,077
PRAM accrued revenues (net of current portion) 43,664 43,664
Unamortized energy conservation charges 39,803 39,803
Other 125,895 40,344 166,239
--------- --------- ---------
Total long-term assets 451,834 57,949 509,783
--------- --------- ---------
TOTAL ASSETS $3,191,331 $1,015,004 $4,206,335
========= ========= =========
See accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
</TABLE>
<PAGE>
EXHIBIT 99
PAGE 3
<TABLE>
PUGET SOUND ENERGY
PROFORMA CONDENSED BALANCE SHEET
AT JUNE 30, 1996
<CAPTION>
(Thousands of dollars)
(unaudited)
Pro Forma
Puget(1) WECo(1) Combined
---------- ---------- ----------
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital (4) $ 965,372 $ 325,851 $1,291,223
Earnings reinvested (Accumulated deficit) 212,521 (116,130) 96,391
Preferred stock not subject to mandatory redemption 125,000 90,000 215,000
Preferred stock subject to mandatory redemption 87,840 87,840
Long-term debt 920,512 344,920 1,265,432
--------- --------- ---------
Total capitalization 2,311,245 644,641 2,955,886
--------- --------- ---------
Current Liabilities:
Accounts payable 43,786 24,032 67,818
Short-term debt 144,851 132,325 277,176
Current maturities of long-term debt 8,000 140 8,140
Accrued taxes 44,132 11,825 55,957
Other 62,780 84,030 146,810
--------- --------- ---------
Total current liabilities 303,549 252,352 555,901
--------- --------- ---------
Deferred Taxes:
Deferred income taxes 517,055 72,626 589,681
Deferred investment credits 103 8,779 8,882
--------- --------- ---------
Total deferred taxes 517,158 81,405 598,563
--------- --------- ---------
Other Deferred Credits:
Customer advances for construction 20,319 15,701 36,020
Other 39,060 20,905 59,965
--------- --------- ---------
Total other deferred credits 59,379 36,606 95,985
--------- --------- ---------
TOTAL CAPITALIZATION AND LIABILITIES $3,191,331 $1,015,004 $4,206,335
========= ========= =========
See accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
</TABLE>
<PAGE>
EXHIBIT 99
PAGE 4
<TABLE>
PUGET SOUND ENERGY
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE SIX MONTHS ENDED JUNE 30, 1996
<CAPTION>
(Thousands, except per share amounts)
(unaudited)
Pro Forma
Puget(1) WECo(1) Combined(5)
---------- ---------- -----------
<S> <C> <C> <C>
OPERATING REVENUES $588,326 $239,800 $828,126
OPERATING EXPENSES:
Purchased and interchanged power and gas purchases 205,231 102,860 308,091
Other operating expenses and maintenance 119,299 43,972 163,271
Depreciation, and amortization 54,921 18,116 73,037
Taxes other than federal income taxes 58,717 21,713 80,430
Federal income taxes 45,571 11,339 56,910
------- ------- -------
Total operating expenses 483,739 198,000 681,739
------- ------- -------
OPERATING INCOME 104,587 41,800 146,387
------- ------- -------
OTHER INCOME (EXPENSE):
Preferred dividend requirement - WNG (6) -- (3,510) --
Other - net of taxes 1,979 289 2,268
------- ------- -------
Total other income (expense) 1,979 (3,221) 2,268
------- ------- -------
INCOME BEFORE INTEREST CHARGES 106,566 38,579 148,655
INTEREST CHARGES 38,515 20,472 58,987
------- ------- -------
INCOME FROM CONTINUING OPERATIONS BEFORE
PREFERRED DIVIDENDS 68,051 18,107 89,668
LESS: PREFERRED STOCK DIVIDEND ACCRUALS 7,505 -- 11,015
------- ------- -------
INCOME FOR COMMON STOCK (2) $ 60,546 $ 18,107 $ 78,653
======= ======= =======
COMMON SHARES OUTSTANDING WEIGHTED AVERAGE (3) 63,641 24,161 84,419
EARNINGS PER SHARE (2) $0.95 $0.75 $0.93
See accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
</TABLE>
<PAGE>
<TABLE>
EXHIBIT 99
PAGE 5
PUGET SOUND ENERGY
PRO FORMA CONDENSED STATEMENT OF INCOME
FOR THE TWELVE MONTHS ENDED JUNE 30, 1996
<CAPTION>
(Thousands, except per share amounts)
(unaudited)
Pro Forma
Puget(1) WECo(1) Combined(5)
---------- ---------- -----------
<S> <C> <C> <C>
OPERATING REVENUES $1,167,719 $418,276 $1,585,995
OPERATING EXPENSES:
Purchased and interchanged power and gas purchases 415,510 177,720 593,230
Other operating expenses and maintenance 244,259 93,520 337,779
Depreciation, depletion and amortization 108,497 34,659 143,156
Taxes other than federal income taxes 111,464 39,174 150,638
Federal income taxes 82,111 11,335 93,446
--------- --------- ---------
Total operating expenses 961,841 356,408 1,318,249
--------- --------- ---------
OPERATING INCOME 205,878 61,868 267,746
--------- --------- ---------
OTHER INCOME (EXPENSE):
Preferred dividend requirement - WNG (6) -- (7,020) --
Other - net of taxes 5,386 (44,579) (39,193)
--------- --------- ---------
Total other income (expense) 5,386 (51,599) (39,193)
--------- --------- ---------
INCOME BEFORE INTEREST CHARGES 211,264 10,269 228,553
INTEREST CHARGES 79,103 41,948 121,051
--------- --------- ---------
INCOME (LOSS) FROM CONTINUING OPERATIONS BEFORE
PREFERRED DIVIDENDS 132,161 (31,679) 107,502
LESS: PREFERRED STOCK DIVIDEND ACCRUALS 15,162 -- 22,182
--------- -------- --------
INCOME (LOSS) FOR COMMON STOCK (2) $ 116,999 $(31,679) $ 85,320
========= ======== ========
COMMON SHARES OUTSTANDING WEIGHTED AVERAGE (3) 63,641 24,107 84,373
EARNINGS (LOSS) PER SHARE (2) $1.84 $(1.31) $1.01
See accompanying Notes to Unaudited Pro Forma Condensed Financial Statements
</TABLE>
<PAGE>
EXHIBIT 99
PAGE 6
NOTES TO UNAUDITED PROFORMA CONDENSED FINANCIAL STATEMENTS
(1) Puget's fiscal year ends on December 31. WECo's fiscal year ends on
September 30. The pro forma financial data for the six months and
twelve months ended June 30, 1996 are the results of six months and
twelve months ended June 30, 1996 for Puget and WECo.
(2) Income (Loss) for Common Stock and Earnings per Share are based on
income from continuing operations after preferred dividend requirements.
(3) The Pro Forma Condensed Financial Statements reflect the conversion of
each share of WECo common stock outstanding into .860 share of Puget
Sound Energy common stock and the issuance of Puget Sound Energy
preferred stock for WNG preferred stock. The Pro Forma Condensed
Financial Statements are presented as if the merger had been consummated
prior to the periods presented.
(4) The number of shares of common stock outstanding, by company, were as
follows:
Puget WECo Pro Forma
---------- ---------- ----------
at December 31, 1995 63,641,000 24,128,000 84,391,000
at June 30, 1996 63,641,000 24,226,000 84,475,000
(5) The pro forma financial statements do not reflect the $370 million net
cost savings estimated to be achieved in the ten-year period following
consummation of the merger. The terms and conditions under which the
Washington Utilities and Transportation Commission may approve the
merger are unknown.
(6) Assumes WNG preferred stock has been exchanged for Puget Sound Energy
preferred stock. In the Pro Forma Condensed Statements of Income, these
dividend requirements are included in "Preferred Stock Dividend
Accruals."
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000081100
<NAME> PUGET SOUND POWER & LIGHT COMPANY, BELLEVUE, WA
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,293,023
<OTHER-PROPERTY-AND-INVEST> 200,644
<TOTAL-CURRENT-ASSETS> 245,830
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 451,834
<TOTAL-ASSETS> 3,191,331
<COMMON> 636,409
<CAPITAL-SURPLUS-PAID-IN> 328,963
<RETAINED-EARNINGS> 212,521
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,177,893
87,840
125,000
<LONG-TERM-DEBT-NET> 920,512
<SHORT-TERM-NOTES> 54,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 90,251
<LONG-TERM-DEBT-CURRENT-PORT> 8,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 727,235
<TOT-CAPITALIZATION-AND-LIAB> 3,191,331
<GROSS-OPERATING-REVENUE> 588,326
<INCOME-TAX-EXPENSE> 45,571
<OTHER-OPERATING-EXPENSES> 438,168
<TOTAL-OPERATING-EXPENSES> 483,739
<OPERATING-INCOME-LOSS> 104,587
<OTHER-INCOME-NET> 1,979
<INCOME-BEFORE-INTEREST-EXPEN> 106,566
<TOTAL-INTEREST-EXPENSE> 38,515
<NET-INCOME> 68,051
7,505
<EARNINGS-AVAILABLE-FOR-COMM> 60,546
<COMMON-STOCK-DIVIDENDS> 58,550
<TOTAL-INTEREST-ON-BONDS> 34,972
<CASH-FLOW-OPERATIONS> 190,275
<EPS-PRIMARY> 0.95
<EPS-DILUTED> 0.95
</TABLE>
