______________________________________________________________________________
______________________________________________________________________________
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, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-11337 WPS RESOURCES CORPORATION 39-1775292
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
414-433-1466
1-3016 WISCONSIN PUBLIC SERVICE CORPORATION 39-0715160
(A Wisconsin Corporation)
700 North Adams Street
P. O. Box 19001
Green Bay, WI 54307-9001
414-433-1466
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
WPS Resources Corporation Yes [x] No [ ]
Wisconsin Public Service Corporation Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuers' classes of
common stock, as of the latest practicable date:
WPS RESOURCES CORPORATION Common stock, $1 par value,
23,896,962 shares outstanding at
April 28, 1997
WISCONSIN PUBLIC SERVICE CORPORATION Common stock, $4 par value,
23,896,962 shares outstanding at
April 28, 1997
______________________________________________________________________________
______________________________________________________________________________
<PAGE>
WPS RESOURCES CORPORATION
AND
WISCONSIN PUBLIC SERVICE CORPORATION
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
CONTENTS
Page
INTRODUCTION 4
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
Consolidated Statements of Income and
Retained Earnings 5
Consolidated Balance Sheets 6
Consolidated Statements of Capitalization 7
Consolidated Statements of Cash Flows 8
WISCONSIN PUBLIC SERVICE CORPORATION
Consolidated Statements of Income 9
Consolidated Balance Sheets 10
Consolidated Statements of Capitalization 11
Consolidated Statements of Cash Flows 12
Consolidated Statements of Retained Earnings 13
CONDENSED NOTES TO FINANCIAL STATEMENTS OF
WPS Resources Corporation and
Wisconsin Public Service Corporation 14
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations for
WPS Resources Corporation and
Wisconsin Public Service Corporation 15 - 19
PART II. OTHER INFORMATION
Item 5. Other Information 20 - 21
Item 6. Exhibits and Reports on Form 8-K 22
Signatures 23 - 24
-2-
<PAGE>
EXHIBIT INDEX 25
Exhibit 11 Statement Regarding Computation of Per Share
Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
Exhibit 99.1 Financial and Statistical Forecast
WPS Resources Corporation
-3-
<PAGE>
<PAGE>
INTRODUCTION
The unaudited interim financial statements presented herein include
the consolidated statements of WPS Resources Corporation and
Subsidiaries ("Company") as well as separate consolidated financial
statements for Wisconsin Public Service Corporation ("WPSC"). The
unaudited statements have been prepared by the Company and WPSC,
respectively, pursuant to the rules and regulations of the Securities
and Exchange Commission. Certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. The Company and WPSC
believe, however, that the disclosures are adequate to make the
information presented not misleading. The Company's and WPSC's
consolidated financial statements should be read in conjunction with
the financial statements and notes thereto incorporated by reference
in the respective Annual Reports on Form 10-K of WPS Resources
Corporation and Wisconsin Public Service Corporation for the year
ended December 31, 1996.
In the opinion of the Company and WPSC, their respective interim
financial statements filed as part of this Form 10-Q reflect all
adjustments necessary to present fairly the results for the respective
periods. Due to the influence of weather and other factors which are
characteristics of WPSC's utility operations, financial results for
the periods ended March 31, 1997 and 1996 are not necessarily
indicative of trends for any 12-month period.
-4-
<PAGE>
<PAGE>
<TABLE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
WPS RESOURCES CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF INCOME AND RETAINED EARNINGS Three Months Ended
(Thousands, except per share amounts) March 31
1997 1996
=============================================================================================
<S> <C> <C>
Operating revenues
Electric utility $122,964 $122,564
Gas utility 84,580 78,373
Non-regulated energy and other 55,469 50,400
- ---------------------------------------------------------------------------------------------
Total operating revenues 263,013 251,337
=============================================================================================
Operating expenses
Electric production fuels 27,145 26,549
Purchased power 14,156 7,099
Gas purchased for resale 61,513 53,741
Non-regulated energy cost of sales 54,360 50,400
Other operating expenses 38,235 39,947
Maintenance 9,468 9,248
Depreciation and decommissioning 17,927 16,508
Taxes other than income 6,939 6,846
- ---------------------------------------------------------------------------------------------
Total operating expenses 229,743 210,338
=============================================================================================
Operating income 33,270 40,999
- ---------------------------------------------------------------------------------------------
Other income
Allowance for equity funds used during construction 35 37
Other, net 1,148 1,318
- ---------------------------------------------------------------------------------------------
Total other income 1,183 1,355
=============================================================================================
Income before interest expense 34,453 42,354
- ---------------------------------------------------------------------------------------------
Interest on long-term debt 5,524 5,409
Other interest 1,028 708
Allowance for borrowed funds used during construction (34) (32)
- ---------------------------------------------------------------------------------------------
Total interest expense 6,518 6,085
=============================================================================================
Income before income taxes 27,935 36,269
Income taxes 9,203 11,971
Minority interest (281) -
Preferred stock dividends of subsidiary 778 778
- ---------------------------------------------------------------------------------------------
Net income 18,235 23,520
=============================================================================================
Retained earnings at beginning of period 311,794 308,965
Cash dividends on common stock 11,351 11,112
- ---------------------------------------------------------------------------------------------
Retained earnings at end of period $318,678 $321,373
=============================================================================================
Average shares of common stock 23,880 23,896
Earnings per average share of common stock $0.76 $0.98
Dividend per share of common stock $0.475 $0.465
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-5-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=======================================================================================================
CONSOLIDATED BALANCE SHEETS March 31 December 31
(Thousands) 1997 1996
=======================================================================================================
<S> <C> <C>
ASSETS
- -------------------------------------------------------------------------------------------------------
Utility plant
Electric $1,480,514 $1,474,104
Gas 241,963 240,791
- -------------------------------------------------------------------------------------------------------
Total 1,722,477 1,714,895
Less - Accumulated depreciation and decommissioning 970,521 952,296
- -------------------------------------------------------------------------------------------------------
Total 751,956 762,599
Nuclear decommissioning trusts 105,173 100,570
Construction in progress 11,096 10,301
Nuclear fuel, less accumulated amortization 21,070 19,381
- -------------------------------------------------------------------------------------------------------
Net utility plant 889,295 892,851
=======================================================================================================
Current assets
Cash and equivalents 4,220 5,978
Customer and other receivables, net of reserves 96,543 106,967
Accrued utility revenues 27,295 35,386
Fossil fuel, at average cost 8,524 8,224
Gas in storage, at average cost 2,877 19,987
Materials and supplies, at average cost 19,576 19,944
Prepayments and other 16,783 22,658
- -------------------------------------------------------------------------------------------------------
Total current assets 175,818 219,144
=======================================================================================================
Regulatory assets 87,192 96,920
Net non-utility and non-regulated plant 20,212 19,738
Investments and other assets 105,305 102,011
=======================================================================================================
Total $1,277,822 $1,330,664
=======================================================================================================
CAPITALIZATION AND LIABILITIES
- -------------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 473,958 $ 467,524
Preferred stock of subsidiary
with no mandatory redemption 51,200 51,200
Long-term debt 306,286 305,788
- -------------------------------------------------------------------------------------------------------
Total capitalization 831,444 824,512
=======================================================================================================
Current liabilities
Notes payable 17,600 26,600
Commercial paper 5,000 31,350
Accounts payable 60,701 96,531
Accrued taxes 11,295 1,350
Accrued interest 5,239 8,134
Other 21,775 12,771
- -------------------------------------------------------------------------------------------------------
Total current liabilities 121,610 176,736
=======================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 127,811 130,208
Accumulated deferred investment credits 28,227 28,669
Regulatory liabilities 48,545 48,870
Environmental remediation liabilities 40,099 41,697
Other long-term liabilities 80,529 80,173
- -------------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 325,211 329,617
=======================================================================================================
Minority interest (443) (201)
=======================================================================================================
Total $1,277,822 $1,330,664
=======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-6-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
======================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31
(Thousands, except share amounts) 1997 1996
======================================================================================================
<S> <C> <C>
Common stock equity
Common stock, $1 par value, 100,000,000 shares authorized;
and 23,896,962 shares outstanding $ 23,897 $ 23,897
Premium on capital stock 145,021 145,021
Retained earnings 318,678 311,794
Shares in deferred compensation trust, 19,725 and 14,223 shares
at average cost of $30.17 and $31.16 per share at
March 31, 1997 and December 31, 1996, respectively. (596) (443)
ESOP loan guarantees (13,042) (12,745)
- ------------------------------------------------------------------------------------------------------
Total common stock equity 473,958 467,524
======================================================================================================
Preferred stock - Wisconsin Public Service Corporation
Cumulative, $100 par value, 1,000,000 shares authorized;
with no mandatory redemption
Series Shares Outstanding
------ ------------------
5.00% 132,000 13,200 13,200
5.04% 30,000 3,000 3,000
5.08% 50,000 5,000 5,000
6.76% 150,000 15,000 15,000
6.88% 150,000 15,000 15,000
- ------------------------------------------------------------------------------------------------------
Total preferred stock 51,200 51,200
======================================================================================================
Long-term debt
First mortgage bonds - Wisconsin Public Service Corporation
Series Year Due
------ --------
5-1/4% 1998 50,000 50,000
7.30% 2002 50,000 50,000
6.80% 2003 50,000 50,000
6-1/8% 2005 9,075 9,075
6.90% 2013 22,000 22,000
8.80% 2021 53,100 53,100
7-1/8% 2023 50,000 50,000
- ------------------------------------------------------------------------------------------------------
Total 284,175 284,175
Unamortized discount and premium on bonds, net (956) (978)
- ------------------------------------------------------------------------------------------------------
Total first mortgage bonds 283,219 283,197
- ------------------------------------------------------------------------------------------------------
ESOP loan guarantees 13,042 12,745
Notes payable to bank, secured by non-regulated plant 9,760 9,581
Other long-term debt 265 265
- ------------------------------------------------------------------------------------------------------
Total long-term debt 306,286 305,788
======================================================================================================
Total capitalization $831,444 $824,512
======================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-7-
PAGE
<PAGE>
<TABLE>
WPS RESOURCES CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
(Thousands) March 31
1997 1996
=============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $18,235 $23,520
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 17,927 16,508
Amortization of nuclear fuel and other 1,554 7,898
Deferred income taxes (2,313) (1,919)
Investment tax credit restored (442) (444)
Allowance for equity funds used during construction (35) (37)
Pension income (3,092) (3,118)
Post-retirement funding 1,788 1,985
Deferred demand-side management expenditures (7) (2,444)
Other, net 9,021 6,865
Changes in
Customer and other receivables 10,424 (13,485)
Accrued utility revenues 8,091 6,449
Fossil fuel inventory (300) 136
Gas in storage 17,110 8,238
Accounts payable (35,830) 10,018
Miscellaneous current and accrued liabilities 8,995 6,978
Accrued taxes 9,945 9,774
Gas refunds 9 (5,528)
- ---------------------------------------------------------------------------------------------
Net cash from operating activities 61,080 71,394
=============================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (11,540) (11,557)
Purchase of other property and equipment (996) (386)
Decommissioning funding (3,130) (2,244)
Purchase of investments and acquisitions 738 -
Other (1,293) (902)
- ---------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (16,221) (15,089)
=============================================================================================
Cash flows from (used for) financing activities
Change in notes payable (9,000) (5,000)
Change in other long-term debt 237 -
Change in commercial paper (26,350) (11,500)
Cash dividends on common stock (11,351) (11,112)
Purchase of deferred compensation stock (153) (87)
- ---------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (46,617) (27,699)
=============================================================================================
Net increase (decrease) in cash and equivalents (1,758) 28,606
Cash and equivalents at beginning of period 5,978 6,533
=============================================================================================
Cash and equivalents at end of period $ 4,220 $35,139
=============================================================================================
Cash paid during period for
Interest, less amount capitalized $ 8,672 $ 8,444
Income taxes 2,215 1,709
Preferred stock dividends of subsidiary 778 778
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-8-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF INCOME Three Months Ended
(Thousands) March 31
1997 1996
=============================================================================================
<S> <C> <C>
Operating revenues
Electric $122,964 $122,564
Gas 84,580 78,373
- ---------------------------------------------------------------------------------------------
Total operating revenues 207,544 200,937
=============================================================================================
Operating expenses
Electric production fuels 27,145 26,549
Purchased power 14,156 7,099
Gas purchased for resale 61,513 53,741
Other operating expenses 34,003 38,500
Maintenance 9,468 9,248
Depreciation and decommissioning 17,528 16,269
Taxes
Federal income 8,670 9,984
Investment tax credit restored (442) (444)
State income 2,770 3,184
Gross receipts and other 6,931 6,846
- ---------------------------------------------------------------------------------------------
Total operating expenses 181,742 170,976
=============================================================================================
Operating income 25,802 29,961
- ---------------------------------------------------------------------------------------------
Other income and (deductions)
Allowance for equity funds used during construction 35 37
Other, net 1,406 1,265
Income taxes (32) (100)
- ---------------------------------------------------------------------------------------------
Total other income and (deductions) 1,409 1,202
=============================================================================================
Income before interest expense 27,211 31,163
- ---------------------------------------------------------------------------------------------
Interest expense
Interest on long-term debt 5,634 5,543
Other interest 854 692
Allowance for borrowed funds used during construction (34) (32)
- ---------------------------------------------------------------------------------------------
Total interest expense 6,454 6,203
=============================================================================================
Net income 20,757 24,960
Preferred stock dividend requirements 778 778
- ---------------------------------------------------------------------------------------------
Earnings on common stock $ 19,979 $ 24,182
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-9-
<PAGE>
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
===================================================================================================
CONSOLIDATED BALANCE SHEETS March 31 December 31
(Thousands) 1997 1996
===================================================================================================
<S> <C> <C>
ASSETS
- ---------------------------------------------------------------------------------------------------
Utility plant
Electric $1,480,514 $1,474,104
Gas 241,963 240,791
- ---------------------------------------------------------------------------------------------------
Total 1,722,477 1,714,895
Less - Accumulated depreciation and decommissioning 970,521 952,296
- ---------------------------------------------------------------------------------------------------
Total 751,956 762,599
Nuclear decommissioning trusts 105,173 100,570
Construction in progress 11,096 10,301
Nuclear fuel, less accumulated amortization 21,070 19,381
- ---------------------------------------------------------------------------------------------------
Net utility plant 889,295 892,851
===================================================================================================
Current assets
Cash and equivalents 2,067 4,165
Customer and other receivables, net of reserves 74,850 66,234
Accrued utility revenues 27,295 35,326
Fossil fuel, at average cost 8,424 8,224
Gas in storage, at average cost 2,407 16,440
Materials and supplies, at average cost 19,576 19,796
Prepayments and other 16,573 22,189
- ---------------------------------------------------------------------------------------------------
Total current assets 151,192 172,374
===================================================================================================
Regulatory assets 87,192 96,920
Net non-utility plant 4,498 4,191
Investments and other assets 96,145 92,612
===================================================================================================
Total $1,228,322 $1,258,948
===================================================================================================
CAPITALIZATION AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
Capitalization
Common stock equity $ 446,756 $ 448,425
Preferred stock with no mandatory redemption 51,200 51,200
Long-term debt to parent 14,553 14,612
Long-term debt 296,526 296,207
- ---------------------------------------------------------------------------------------------------
Total capitalization 809,035 810,444
===================================================================================================
Current liabilities
Note payable 10,000 10,000
Commercial paper 5,000 29,000
Accounts payable 45,341 62,500
Accrued taxes 11,297 1,350
Accrued interest 5,239 8,134
Other 21,826 12,324
- ---------------------------------------------------------------------------------------------------
Total current liabilities 98,703 123,308
===================================================================================================
Long-term liabilities and deferred credits
Accumulated deferred income taxes 129,151 131,549
Accumulated deferred investment tax credits 28,227 28,669
Regulatory liabilities 48,545 48,870
Environmental remediation liabilities 40,099 41,697
Other long-term liabilities 74,562 74,411
- ---------------------------------------------------------------------------------------------------
Total long-term liabilities and deferred credits 320,584 325,196
===================================================================================================
Total $1,228,322 $1,258,948
===================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-10-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=========================================================================================================
CONSOLIDATED STATEMENTS OF CAPITALIZATION March 31 December 31
(Thousands, except share amounts) 1997 1996
=========================================================================================================
<S> <C> <C>
Common stock equity
Common stock $ 95,588 $ 95,588
Premium on capital stock 73,842 73,842
Retained earnings 290,368 291,740
ESOP loan guarantees (13,042) (12,745)
- ---------------------------------------------------------------------------------------------------------
Total common stock equity 446,756 448,425
=========================================================================================================
Preferred stock
Cumulative, $100 par value, 1,000,000 shares authorized;
with no mandatory redemption
Series Shares Outstanding
------ ------------------
5.00% 132,000 13,200 13,200
5.04% 30,000 3,000 3,000
5.08% 50,000 5,000 5,000
6.76% 150,000 15,000 15,000
6.88% 150,000 15,000 15,000
- ---------------------------------------------------------------------------------------------------------
Total preferred stock 51,200 51,200
=========================================================================================================
Long-term debt to parent
Series Year Due
------ --------
8.76% 2015 5,987 6,012
7.35% 2016 8,566 8,600
- ---------------------------------------------------------------------------------------------------------
Total long-term debt to parent 14,553 14,612
=========================================================================================================
Long-term debt
First mortgage bonds
Series Year Due
------ --------
5-1/4% 1998 50,000 50,000
7.30% 2002 50,000 50,000
6.80% 2003 50,000 50,000
6-1/8% 2005 9,075 9,075
6.90% 2013 22,000 22,000
8.80% 2021 53,100 53,100
7-1/8% 2023 50,000 50,000
- ---------------------------------------------------------------------------------------------------------
Total 284,175 284,175
Unamortized discount and premium on bonds, net (956) (978)
- ---------------------------------------------------------------------------------------------------------
Total first mortgage bonds 283,219 283,197
- ---------------------------------------------------------------------------------------------------------
ESOP loan guarantees 13,042 12,745
Other long-term debt 265 265
- ---------------------------------------------------------------------------------------------------------
Total long-term debt 296,526 296,207
=========================================================================================================
Total capitalization $809,035 $810,444
=========================================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-11-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF CASH FLOWS Three Months Ended
(Thousands) March 31
1997 1996
=============================================================================================
<S> <C> <C>
Cash flows from operating activities
Net income $20,757 $24,960
Adjustments to reconcile net income to net cash from
operating activities
Depreciation and decommissioning 17,528 16,269
Amortization of nuclear fuel and other 1,550 7,612
Deferred income taxes (2,314) (1,820)
Investment tax credit restored (442) (444)
Allowance for equity funds used during construction (35) (37)
Pension income (3,092) (3,118)
Post-retirement funding 1,788 1,985
Deferred demand-side management expenditures (7) (2,444)
Other, net 8,371 5,286
Changes in
Customer and other receivables (8,616) (8,306)
Accrued utility revenues 8,031 6,449
Fossil fuel inventory (200) 136
Gas in storage 14,033 8,492
Accounts payable (17,159) (3,542)
Miscellaneous current and accrued liabilities 10,206 10,938
Accrued taxes 9,947 9,774
Gas refunds 9 (5,528)
- ---------------------------------------------------------------------------------------------
Net cash from operating activities 60,355 66,662
=============================================================================================
Cash flows from (used for) investing activities
Construction of utility plant and nuclear fuel expenditures (11,540) (11,557)
Decommissioning funding (3,130) (2,244)
Purchase of other property and equipment (307) (254)
Other (1,347) (709)
- ---------------------------------------------------------------------------------------------
Net cash from (used for) investing activities (16,324) (14,764)
=============================================================================================
Cash flows from (used for) financing activities
Change in commercial paper (24,000) (11,500)
Preferred stock dividends (778) (778)
Common stock dividends (21,351) (22,112)
- ---------------------------------------------------------------------------------------------
Net cash from (used for) financing activities (46,129) (34,390)
=============================================================================================
Net increase (decrease) in cash and equivalents (2,098) 17,508
Cash and equivalents at beginning of period 4,165 4,471
=============================================================================================
Cash and equivalents at end of period $ 2,067 $21,979
=============================================================================================
Cash paid during period for
Interest, less amount capitalized $ 8,512 $ 8,429
Income taxes 2,205 1,700
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-12-
PAGE
<PAGE>
<TABLE>
WISCONSIN PUBLIC SERVICE CORPORATION
<CAPTION>
=============================================================================================
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Three Months Ended
(Thousands) March 31
1997 1996
=============================================================================================
<S> <C> <C>
Balance at beginning of period $291,740 $290,387
Add Net income 20,757 24,960
- ---------------------------------------------------------------------------------------------
312,497 315,347
- ---------------------------------------------------------------------------------------------
Deduct
Cash dividends declared on preferred stock 778 778
Dividends declared on common stock 21,351 22,112
- ---------------------------------------------------------------------------------------------
22,129 22,890
- ---------------------------------------------------------------------------------------------
Balance at end of period $290,368 $292,457
=============================================================================================
</TABLE>
The accompanying notes are an integral part of these statements.
-13-
PAGE
<PAGE>
WPS RESOURCES CORPORATION AND SUBSIDIARIES
WISCONSIN PUBLIC SERVICE CORPORATION
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
NOTE 1. FINANCIAL INFORMATION
______________________________
The following consolidated financial statements have been prepared by
WPS Resources Corporation ("Company") and Wisconsin Public Service
Corporation ("WPSC"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission ("SEC") and, in
the opinion of Management, include all adjustments (consisting only of
normal recurring adjustments) necessary for a fair statement of
results for each period shown. Certain information and footnote
disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such SEC rules and regulations. The
Company believes that the disclosures made are adequate to make the
information presented not misleading. It is recommended that these
financial statements be read in conjunction with the financial
statements and notes thereto included in the Company's and WPSC's
latest annual reports on Form 10-K.
Because of the seasonal nature of the Company's operations, interim
results are not necessarily indicative of annual results.
NOTE 2. EARNINGS PER SHARE
___________________________
In February 1997, the Financial Accounting Standards Board issued
Statement of Financial Accounting Standards No. 128, Earnings Per
Share. This statement establishes standards for computing and
presenting earnings per share. The Company will be adopting this
standard at December 31, 1997 and does not expect that adoption will
have an impact on its presentation of earnings per share.
-14-
<PAGE>
<PAGE>
Item 2. Management's Discussion and Analysis of Financial Condition
and Results of Operations
RESULTS OF OPERATIONS
WPS Resources Corporation ("Company") is a holding company.
Approximately 96% and 79% of the Company's assets and revenues,
respectively, are derived from Wisconsin Public Service Corporation
("WPSC"), an electric and gas utility.
Overview of First Quarter of 1997 Compared to First Quarter of 1996
Earnings per share decreased 22.4% from $.98 in 1996 to $.76 in 1997.
The primary reason for the decrease in earnings was a decrease in the
electric utility margins at WPSC. During the period January 1, 1997,
through February 20, 1997, lower electric margins were due primarily
to higher replacement power costs as a result of an extended outage at
WPSC's Kewaunee Nuclear Power Plant ("Kewaunee"). WPSC is the
operator and 41.2% owner of Kewaunee. Lower electric margins during
the period February 21, 1997 through March 31, 1997, were the result
of implementation of a Public Service Commission of Wisconsin ("PSCW")
rate order which authorized an 8.1% electric revenue reduction.
During this same period, the PSCW authorized a $2.0 million per month
surcharge effectively offsetting additional replacement power costs
due to Kewaunee's extended outage. This surcharge is authorized until
Kewaunee returns to service.
Electric Utility Operations
Electric margins decreased by $7.3 million, or 8.2%, due to increased
replacement power costs as a result of the extended outage at
Kewaunee and implementation of the PSCW rate order which reduced
electric rates. A surcharge authorized by the PSCW offset increases
to replacement power costs in the latter part of the quarter.
-15-
<PAGE>
First Quarter
---------------------------
Electric Margins (000's) 1997 1996
- ------------------------ ---- ----
Revenues $122,964 $122,564
Fuel and purchases 41,301 33,648
------- -------
Margin $ 81,663 $ 88,916
======= =======
Sales in kilowatt-hours (000) 2,758,760 2,737,830
Electric revenues remained relatively stable overall during the first
quarter of 1997 as compared to the first quarter of 1996.
Electric fuels and purchases increased $7.7 million, or 22.7%, in the
first quarter of 1997 as compared to the same period in 1996. This
increase was the result of increased purchased power costs of
$7.1 million, or 99%, reflecting a 68.8% increase in Kwh purchases.
Purchased power requirements were increased due to decreased
production at Kewaunee as a result of an extended outage.
Gas Utility Operations
Gas margins decreased $1.6 million, or 6.4%, due primarily to a 6.8%
decrease in heating degree days.
First Quarter
--------------------------
Gas Margins (000's) 1997 1996
- ------------------- ---- ----
Revenues $84,580 $78,373
Purchase costs 61,513 53,741
------- ------
Margin $ 23,067 $24,632
======= ======
Volume in therms (000) 251,172 255,093
-16-
<PAGE>
The PSCW allows WPSC to pass changes in the cost of gas on to
customers through a purchased gas adjustment clause.
Gas operating revenues increased $6.2 million, or 7.9%, during the
first quarter of 1997 compared to the first quarter of 1996. This
increase was due primarily to higher gas costs. Gas operating
revenues in the first quarter of 1997 reflect a one-time reduction of
$0.9 million based on a PSCW directive related to a change in the
accounting treatment for previous line extensions for customers.
Gas purchased for resale showed a net increase of $7.8 million, or
14.5%, in the first quarter of 1997 as compared to the same period in
1996. This increase was due primarily to higher gas costs.
Gas operating revenues also reflect the implementation of a PSCW rate
order on February 21, 1997, which authorized a 2.7% increase in gas
revenues.
Non-Regulated Operations
Non-regulated energy and other operating revenues increased
$5.1 million, or 10.1%. Non-regulated energy revenues primarily
represent the electric and gas sales of WPS Energy Services, Inc.
("ESI"), the Company's energy marketing subsidiary. The increase in
non-regulated energy revenues consisted largely of increased gas sales
at ESI of $3.6 million, or 7.2%, as a result of customer growth and
higher gas costs. In addition, ESI had increased sales of
$1.0 million related to electric sales. ESI received power "marketer"
status from the Federal Energy Regulatory Commission in April of 1996
which provided increased flexibility for the sale of electric energy
and capacity at market rates.
Other operating revenues increased $.4 million due to increased
consulting and construction activities at WPS Power Development, Inc.
("PDI"), a company organized to participate in the development of
electric generation projects and to provide services to the
non-regulated electric power generation industry.
Non-regulated energy cost of sales increased $4.0 million, or 7.9%,
due primarily to increased gas purchases and purchased power of
$3.0 million and $0.9 million, respectively, at ESI. Margins
increased at ESI in the first quarter of 1997 compared to the first
quarter of 1996.
-17-
<PAGE>
Other Expenses
Other operating expenses decreased $1.7 million, or 4.3%. Other
operating expenses at WPSC decreased $4.5 million, or 11.7%. This
decrease was due to lower customer service expenses of $1.1 million,
lower administrative expenses of $1.5 million due primarily to reduced
post-retirement medical and dental expenses, and lower generation
operating expenses of $2.1 million resulting from finalization in 1996
of the retail portion of the amortization of a deferred coal and rail
contract settlement. Partially offsetting these decreases were
increases to electric transmission and distribution operating
expenses.
Other operating expenses at ESI increased $1.4 million, or 153%, due
to expansion of the business.
Other operating expenses at PDI increased $1.0 million, or 203.0%, as
a result of expansion of the business and initial operation of the
Stoneman Power Plant. Other operating expenses also increased at the
Company.
Depreciation and decommissioning expenses increased $1.4 million, or
8.6%, largely due to the accelerated recovery of investment in
Kewaunee and accelerated funding of Kewaunee decommissioning costs.
Income tax expense decreased $2.8 million due primarily to lower
earnings.
FINANCIAL CONDITION
WPSC requires large investments in capital assets used to deliver
electric and gas services. As a result, most of the Company's capital
expenditures relate to WPSC's construction expenditures. WPSC
maintains good liquidity levels and a financial condition considered
to be strong by utility analysts. Internally generated funds exceeded
WPSC's cash requirements resulting in the reduction of short-term
borrowings during the first three months of 1997. No funding
difficulties are anticipated in the future. Pretax interest coverage
was 4.12 times for the 12 months ended March 31, 1997 for WPSC.
WPSC's bond ratings are AA+ (Standard & Poor's and Duff & Phelps) and
Aa2 (Moody's).
For the three-year period 1997 to 1999, internally generated funds are
expected to lag WPSC's construction expenditures and other investments
totaling $450 million by about $97 million. These expenditures are
-18-
<PAGE>
comprised of $175 million for electric construction, $29 million for
nuclear fuel, $125 million for gas construction, $57 million for other
construction expenditures, and $64 million for nuclear
decommissioning. WPSC currently expects to finance this shortfall in
internally generated funds through short-term debt, long-term debt,
and common equity from the Company. This includes expenditures for
the potential replacement of the steam generator units at Kewaunee and
construction of gas transmission pipeline laterals.
Anticipated investment expenditures for non-regulated subsidiaries
could be as high as $112.0 million for the three-year period 1997 to
1999 if projects develop as forecasted.
Although the Company has no plans for permanent financings in 1997, up
to $150.0 million of bonds or debentures, and $100.0 million of common
stock sales may be necessary in 1998 and 1999 to cover WPSC
expenditures, maturing bonds, and currently forecasted non-regulated
projects. Debt related to non-regulated projects is expected to be
non-recourse.
On February 20, 1997, WPSC received a rate order from the PSCW
authorizing a $35.5 million, or 8.1%, decrease in Wisconsin electric
retail revenues and a $5.7 million, or 2.7%, increase in Wisconsin gas
retail revenues. These rates are effective for 1997 and 1998. The
order provides for deferral of revenues to cover the costs associated
with the 1997 Kewaunee mid-cycle shutdown and the 1998 Kewaunee
refueling. It also grants WPSC a $2.0 million per month surcharge on
customer bills to cover additional costs incurred for acquiring power
from other sources while Kewaunee remains out of service. The order
reaffirms the decision to allow accelerated recovery of investment in
Kewaunee and accelerated funding of Kewaunee decommissioning.
Effective March 20, 1997, WPSC received authorization from the PSCW to
begin deferring all costs associated with the repair of the Kewaunee
steam generators. The joint owners of Kewaunee will be requesting
rate recovery of these deferred costs in a future proceeding. Repairs
are progressing and it is anticipated that Kewaunee will return to
operation in June 1997.
In the first quarter of 1997, WPSC received a portion of the
$12.0 million manufactured gas plant remediation insurance settlements
that it anticipates to receive in 1997. Insurance recoveries are
being deferred and will offset future remediation costs as the PSCW
prescribes in future rate proceedings.
-19-
<PAGE>
<PAGE>
Part II. OTHER INFORMATION
Item 5. Other Information
Kewaunee Nuclear Power Plant
Kewaunee remains out of service for the repair of the steam
generators. As announced previously, it is anticipated that Kewaunee
will return to service no earlier than mid to late June 1997.
Kewaunee is operated by WPSC and is owned jointly by WPSC (41.2%),
Wisconsin Power and Light Company (41%), and Madison Gas and Electric
Company (17.8%).
The owners of Kewaunee are incurring steam generator tube repair costs
which will total approximately $7.5 million of which WPSC's share is
approximately $3.1 million. The PSCW has authorized deferral of such
costs incurred as of March 20, 1997. The owners will request future
rate recovery of these deferred costs. The PSCW authorization to
defer repair costs does not constitute assurance of future recovery in
customer rates or a finding that such costs have been prudently
incurred.
WPSC is also incurring costs associated with the acquisition of
replacement power while Kewaunee remains out of service. Effective
February 21, 1997, WPSC was authorized to include a surcharge on
customer bills to recover the additional costs for replacement power
which are expected to average $67,000 per day and amount to
approximately $2.0 million per month. The surcharge of $0.00228 per
Kwh will continue until Kewaunee is returned to service.
The PSCW has directed the owners of Kewaunee to develop depreciation
and decommissioning cost levels based on an expected plant end-of-life
of 2002 versus a license end-of-life of 2013. This was prompted by
the substantial uncertainty regarding the expected useful life of the
plant without steam generator replacement. At December 31, 1996, the
net carrying amount of WPSC's investment in Kewaunee was approximately
$49.5 million. The current cost of WPSC's share of the estimated
costs to decommission Kewaunee, assuming early retirement, exceeds the
trust assets at December 31, 1996 by $63.4 million. WPSC's customers
in the Wisconsin jurisdiction are responsible for approximately 88% of
WPSC's share of Kewaunee costs.
As a result of accelerating the recovery of WPSC's share of Kewaunee
related costs, depreciation expense and decommissioning funding will
increase approximately $3.3 million and $8.3 million, respectively, on
-20-
<PAGE>
an annualized basis. Customer rates, which became effective in the
Wisconsin jurisdiction on February 21, 1997, are designed to recover
the accelerated Kewaunee depreciation and decommissioning costs.
For additional information, see: Annual Report on Form 10-K for the
year ended December 31, 1996, Part I, Item 1. Business, B. Electric
Matters, at page 6, and Current Report on Form 8-K dated
March 10, 1997, Item 5. Other Events.
-21-
<PAGE>
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
The following documents are filed herewith:
Exhibit 11 Statement Regarding Computation of Per
Share Earnings
WPS Resources Corporation
Exhibit 27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
Exhibit 99.1 Financial and Statistical Forecast
WPS Resources Corporation
(b) Report on Form 8-K
A current report on Form 8-K dated March 10, 1997
reporting on the status of Kewaunee Nuclear Power Plant
steam generator repairs.
WPS Resources Corporation
Wisconsin Public Service Corporation
-22-
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, WPS Resources Corporation, has duly caused this report
to be signed on its behalf by the undersigned thereunto duly
authorized.
WPS Resources Corporation
Date: April 28, 1997 /s/ D. L. Ford
____________________________________
D. L. Ford
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
-23-
<PAGE>
<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant, Wisconsin Public Service Corporation, has duly caused
this report to be signed on its behalf by the undersigned thereunto
duly authorized.
Wisconsin Public Service Corporation
Date: April 28, 1997 /s/ D. L. Ford
____________________________________
D. L. Ford
Controller
(Duly Authorized Officer and
Chief Accounting Officer)
-24-
<PAGE>
<PAGE>
WPS RESOURCES CORPORATION AND
WISCONSIN PUBLIC SERVICE CORPORATION
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
Exhibit No. Description
___________ ___________
11 Statement Regarding Computation of Per Share Earnings
WPS Resources Corporation
27 Financial Data Schedule
WPS Resources Corporation
Wisconsin Public Service Corporation
99.1 Financial and Statistical Forecast
WPS Resources Corporation
-25-
<PAGE>
<TABLE>
EXHIBIT 11
WPS RESOURCES CORPORATION
<CAPTION>
============================================================================
INFORMATION WITH RESPECT TO THE COMPUTATION
OF EARNINGS PER SHARE OF COMMON STOCK Three Months Ended
(Thousands) March 31
1997 1996
============================================================================
<S> <C> <C>
Shares of common stock at beginning of period 23,883 23,897
Shares of common stock purchased for deferred
compensation trust -
Date of Deferred Number
Compensation Trust Purchase of Shares
- --------------------------- ---------
January 20, 1997 2,190 2
February 20, 1997 1,384 1
March 20, 1997 1,930 2
January 22, 1996 469 1
February 20, 1996 1,027 1
March 21, 1996 1,132 1
- ----------------------------------------------------------------------------
Shares of common stock at end of period 23,878 23,894
============================================================================
Computation of daily weighted average
shares:
Shares of common stock at
beginning of period -
Number Number
of of
Days Shares
------ ------
March 31, 1997 19 23,882,741 453,772 -
March 31, 1996 21 23,896,962 - 501,836
Shares of common stock after
purchase for deferred compensation trust -
Number Number
of of
Days Shares
------ ------
March 31, 1997 31 23,880,551 740,297 -
March 31, 1997 28 23,879,167 668,617 -
March 31, 1997 12 23,877,237 286,527 -
March 31, 1996 29 23,896,493 - 692,998
March 31, 1996 10 23,895,466 - 238,955
March 31, 1996 20 23,895,467 - 477,909
March 31, 1996 11 23,894,334 - 262,838
- ----------------------------------------------------------------------------
Total days - weighted 2,149,213 2,174,536
============================================================================
Average number of shares of common
stock based on daily
weighted average computations 23,880 23,896
============================================================================
Earnings on common stock, as set forth
in statements of income $18,235 $23,520
============================================================================
Earnings per share of common stock based on
weighted average shares $0.76 $0.98
============================================================================
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT EXHIBIT 27
<CIK> 0000916863
<NAME> WPS RESOURCES CORPORATION
<SUBSIDIARY>
<NUMBER> 1
<NAME> WISCONSIN PUBLIC SERVICE CORPORATION
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 889,295
<OTHER-PROPERTY-AND-INVEST> 105,305
<TOTAL-CURRENT-ASSETS> 175,818
<TOTAL-DEFERRED-CHARGES> 87,192
<OTHER-ASSETS> 20,212
<TOTAL-ASSETS> 1,277,822
<COMMON> 23,897
<CAPITAL-SURPLUS-PAID-IN> 145,021
<RETAINED-EARNINGS> 305,040
<TOTAL-COMMON-STOCKHOLDERS-EQ> 473,958
0
51,200
<LONG-TERM-DEBT-NET> 306,286
<SHORT-TERM-NOTES> 17,600
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 5,000
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 0
<TOT-CAPITALIZATION-AND-LIAB> 854,044
<GROSS-OPERATING-REVENUE> 263,013
<INCOME-TAX-EXPENSE> 9,203
<OTHER-OPERATING-EXPENSES> 229,743
<TOTAL-OPERATING-EXPENSES> 229,743<F1>
<OPERATING-INCOME-LOSS> 33,270<F2>
<OTHER-INCOME-NET> 1,183
<INCOME-BEFORE-INTEREST-EXPEN> 34,453<F3>
<TOTAL-INTEREST-EXPENSE> 6,518
<NET-INCOME> 19,013<F4>
778
<EARNINGS-AVAILABLE-FOR-COMM> 18,235
<COMMON-STOCK-DIVIDENDS> 11,351
<TOTAL-INTEREST-ON-BONDS> 8,672
<CASH-FLOW-OPERATIONS> 61,080
<EPS-PRIMARY> .76
<EPS-DILUTED> .76
<FN>
<F1>Operating expenses exclude income taxes of $9,203.
<F2>Operating income is before income taxes of $9,203.
<F3>Income before interest expense is before income taxes of
$9,203.
<F4>Net income includes minority interest of ($281).
</FN>
</TABLE>
EXHIBIT 99.1
(WPS RESOURCES CORPORATION LETTERHEAD)
May 1, 1997
TO ALL MEMBERS OF THE FINANCIAL COMMUNITY:
The company formed a holding company in 1994, WPS Resources
Corporation. The primary business continues to be operation
of the electric and gas utility business of Wisconsin Public
Service Corporation. WPS Power Development, Inc. was formed to
participate in development of electric generation projects and
to provide services to the nonregulated electric power generation
industry. WPS Energy Services, Inc. was formed to offer electric
and gas marketing services, consulting and other energy services
in the nonregulated energy market.
Projected consolidated operating and financial data for the five-year
period 1997-2001 follow.
SOURCES AND USES OF FUNDS (millions)
- ------------------------------------
<TABLE>
<CAPTION>
Actual 5-Yr
1996 1997 1998 1999 2000 2001 Total
------ ---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C> <C>
Utility Construction & Other Inv $ 95.4 $115.0 $122.8 $211.9 $113.2 $ 95.2 $658.1
Nonregulated Investments 16.4 13.7 46.0 51.5 86.2 84.1 281.5
Internal Funds After Dividends - 72.0 -107.7 - 84.1 - 95.5 -112.7 -129.2 -529.2
------ ------ ------ ------ ------ ------ ------
Financing Required $ 39.8 $ 21.0 $ 84.7 $167.9 $ 86.7 $ 50.1 $410.4
</TABLE>
AFUDC is included in utility construction. Modest dividend increases
are projected. Permanent financing includes the refinancing of
$50 million of utility bonds maturing in 1998, plus the possibility of
an additional $100 million of bonds for Kewaunee Nuclear Plant steam
generators and gas transmission pipeline laterals. At the holding
company level, $150 million of common equity may be necessary to
finance utility and nonregulated projects if the projects develop as
forecast. For purposes of this presentation, it is assumed debt
financing for nonregulated projects is to be on a nonrecourse basis.
In February, the Public Service Commission of Wisconsin authorized
11.8% return on equity. An additional 45 basis points (declining over
the 5-year period to 25 basis points) is provided as a return on
deferred investment tax credits. The company files biannually for
rate changes. In a separate docket, the PSCW ordered the accelerated
recovery of decommissioning and depreciation expenses for the
Kewaunee Nuclear Power Plant over a six-year period ending in 2002.
ELECTRIC UTILITY SALES, LOAD AND SUPPLY
- ---------------------------------------
In the next 5 and 10 years, kwh sales are expected to grow at average
annual rates of 0.8% and 0.7%, respectively. Firm peak loads,
however, are expected to decline in the short term. The decline is
projected to be at an average annual rate of 1.3% over the next 5
years due to anticipated
<PAGE>
competition in the large customer markets and the expectation that
many large retail customers will take greater advantage of
interruptible rates. After the year 2002, load is expected to grow at
0.4% per year. The effects of load management, time of use billing,
interruptible rates, and other demand-side programs are included in
the sales and load projections.
System capacity reserves are expected to be in the range of 15% to 19%
over the next 10 years. No long-term capacity additions are necessary
due to the expected decline in firm peak demand. The 1996 summer
generating capability was 1805 MW. Short-term capacity purchases may
be necessary to cover new wholesale loads that are not reflected in
the current load forecast. The actual system generation mix for 1996
was 68% coal, 11% nuclear, 3% hydro, 1% natural gas, and 17% purchased
power. The system generation mix is expected to remain predominately
coal, followed by nuclear and purchased power to meet over 95% of the
system requirements over the next 10 years. The balance of the system
requirements is expected to be met by hydro, natural gas and oil.
GAS UTILITY SALES
- -----------------
System throughput of natural gas for the residential, the small
commercial and the small industrial sectors will grow modestly over
the next 10 years. System throughput for the large commercial and the
large industrial sectors over this same period is also projected to
increase. System throughput rather than commodity sales is a more
relevant measure since the utility does not earn on the commodity but
on the distribution margin to deliver the commodity. Total gas
volumes are expected to grow at annual rates of 1% over the next 10
years. The impact of demand-side programs are included in these sales
projections.
In terms of the number of new residential and small commercial
customers receiving gas service, the trend continues which was
initiated about four years ago with our Area Expansion Program (AEP).
The company will pursue additional customers through the AEP with the
current plan adding about 2000 customers annually in 1997 and 1998.
The recent announcement of the proposed Viking Voyageur gas
transmission pipeline brings the potential to significantly reduce the
cost of importing gas into Wisconsin in the year 2000 and beyond. The
utility may invest, construct and operate pipeline laterals to connect
our gas load centers (Green Bay, Oshkosh, Sheboygan and Stevens Point)
to this new line in the 1999-2000 time frame. All of our customers
will benefit, but this should especially bolster our future growth in
gas use for the commercial and industrial markets. The impact of this
new pipeline is not factored into our growth forecast discussed above.
FURTHER INFORMATION
- -------------------
If you would like additional information concerning this data or other
matters pertaining to the company, please call me. My telephone
number is (414) 433-1449.
Sincerely,
/s/ Ralph G. Baeten
Ralph G. Baeten
Treasurer
