-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, TU1eSEN5yf0RA7pTINgR2S4QgZ+YjQqlvFVhS9MLUFq4+OeN8NmX2DMIOAB14qQ2 u7xpU27cHy5iYnzxG1svXg== 0000897069-95-000098.txt : 19950814 0000897069-95-000098.hdr.sgml : 19950814 ACCESSION NUMBER: 0000897069-95-000098 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950811 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN POWER & LIGHT CO CENTRAL INDEX KEY: 0000107832 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390714890 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00337 FILM NUMBER: 95561613 BUSINESS ADDRESS: STREET 1: 222 W WASHINGTON AVE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523311 10-Q 1 WISCONSIN POWER & LIGHT COMPANY FORM 10-Q SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF X THE SECURITIES EXCHANGE ACT OF 1934 ------ For the quarterly period ended June 30, 1995 TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF ------ THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ____________ to ____________ Commission file number 0-337 Wisconsin Power and Light Company (Exact name of registrant as specified in its charter) Wisconsin 39-0714890 (State or other jurisdiction (I.R.S. Employer Identification of incorporation or organization) No.) 222 West Washington Avenue, Madison, Wisconsin 53703 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 608-252-3311 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. YES X NO -------- -------- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Common Stock Outstanding at June 30, 1995: 13,236,601 shares CONTENTS PAGE PART I. Financial Information: Consolidated Financial Statements of Wisconsin Power and Light Co. Consolidated Balance Sheets as of June 30, 1995 and 1994 and December 31, 1994 . . . . . . . . . . . . . . . . . 2 Consolidated Statements of Income for the Three and Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . 4 Consolidated Statements of Cash Flows - Six Months Ended June 30, 1995 and 1994 . . . . . . . . . . . . . . 5 Notes to Consolidated Financial Statements . . . . . . . . . . . 6 Management's Discussion and Analysis of Financial Condition and Results of Operations . . . . . . . . . . . . . . 7 PART II. Other Information . . . . . . . . . . . . . . . . . . . . . . 13 Signatures . . . . . . . . . . . . . . . . . . . . . . . . . . . 14 Exhibit Index . . . . . . . . . . . . . . . . . . . . . . . . . . 15 WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Balance Sheets June 30, June 30, December 31, 1995 1994 1994 (Thousands of dollars) ASSETS UTILITY PLANT: Plant in service -- Electric . . . . . . $1,651,351 $1,531,411 $1,611,351 Gas . . . . . . . . 211,062 195,233 204,514 Water . . . . . . . 22,006 20,945 22,070 Common . . . . . . . 128,897 110,565 123,255 ---------- ---------- ------------ 2,013,316 1,858,154 1,961,190 Dedicated decommissioning funds 64,342 50,970 51,791 ---------- ----------- ------------ 2,077,658 1,909,124 2,012,981 Less: Accumulated provision for depreciation . . . . 853,853 780,514 808,853 ----------- ------------ ------------ 1,223,805 1,128,610 1,204,128 Construction work in progress . . . . . . 33,486 76,540 42,731 Nuclear fuel, net . . . 16,949 15,558 19,396 ---------- ----------- ----------- Total utility plant . . 1,274,240 1,220,708 1,266,255 ---------- ----------- ----------- OTHER PROPERTY AND EQUIPMENT, net . . . 13,955 646 9,133 ---------- ----------- ---------- INVESTMENTS . . . . . . 12,303 12,514 12,228 ---------- ----------- ---------- CURRENT ASSETS: Cash and equivalents . 3,937 3,504 2,234 Net accounts receivable and unbilled revenue, less allowance for doubtful accounts of $209, $159, and $209, respectively . . . . 12,773 18,943 21,689 Coal, at average cost . 12,689 12,772 15,824 Materials and supplies, at average cost . . 21,041 22,310 20,835 Gas in storage, at average cost . . . . 5,178 4,610 7,975 Prepayments and other . 27,155 20,448 22,310 ---------- ---------- ---------- Total current assets . 82,773 82,587 90,867 ---------- ---------- ---------- DEFERRED CHARGES: Regulatory assets . . . 144,988 131,535 144,476 Other . . . . . . . . . 61,939 73,922 62,165 ---------- ----------- ----------- Total deferred charges 206,927 205,457 206,641 ---------- ----------- ----------- TOTAL ASSETS . . . . . $1,590,198 $1,521,912 $1,585,124 ========== ========== ========== The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Balance Sheets June 30, June 30, December 31, 1995 1994 1994 (Thousands of dollars) CAPITALIZATION AND LIABILITIES COMMON SHAREOWNER'S INVESTMENT: Common stock, $5 par value, authorized -- 18,000,000 shares; issued and outstanding -- 13,236,601 shares . $ 66,183 $ 66,183 $ 66,183 Premium on capital stock and capital surplus . . 199,169 197,982 199,170 Reinvested earnings . . 280,417 276,817 279,153 -------- -------- --------- 545,769 540,982 544,506 PREFERRED STOCK WITHOUT MANDATORY REDEMPTION: Cumulative, without par value, authorized 3,750,000 shares maximum aggregate stated value $150,000,000; Cumulative, without par value, $100 stated value, 449,765 shares outstanding . . . . . 44,977 44,977 44,977 Cumulative, without par value, $25 stated value, 599,460 shares outstanding . . . . . 14,986 14,986 14,986 --------- --------- ----------- Total preferred stock . 59,963 59,963 59,963 FIRST MORTGAGE BONDS, NET . 318,569 336,507 336,538 --------- ---------- ---------- Total capitalization . . 924,301 937,452 941,007 --------- ---------- ---------- CURRENT LIABILITIES: Variable rate demand bonds . . . . . . . . . 56,975 56,975 56,975 Short-term debt . . . . 68,000 24,500 50,500 Accounts payable . . . . 59,270 50,330 67,518 Accrued payroll and vacation . . . . . . . 12,715 12,185 12,624 Accrued taxes . . . . . 8,777 4,791 7,299 Accrued interest . . . . 7,583 7,618 7,669 Other . . . . . . . . . 16,998 23,416 12,456 --------- --------- --------- Total current liabilities . . . . . 230,318 179,815 215,041 --------- --------- --------- OTHER CREDITS: Accumulated deferred income taxes . . . . . 226,415 216,612 222,373 Accumulated deferred investment tax credits 39,800 41,721 40,758 Accrued environmental remediation costs . . . 79,044 80,244 79,280 Other . . . . . . . . . 90,320 66,068 86,665 --------- --------- --------- Total other credits . . 435,579 404,645 429,076 --------- --------- --------- TOTAL CAPITALIZATION AND LIABILITIES . . . . . . $1,590,198 $1,521,912 $1,585,124 ========== ========== ========== The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY AND SUBSIDIARIES Consolidated Statements of Income Three Months Ended Six Months Ended June 30, June 30, 1995 1994 1995 1994 (Thousands of Dollars) OPERATING REVENUES: Electric . . . . $ 126,093 $ 125,271 $ 257,244 $ 262,468 Gas . . . . . . 22,450 24,629 77,657 89,704 Water . . . . . 1,014 1,024 1,998 2,001 --------- ---------- --------- ---------- 149,557 150,924 336,899 354,173 OPERATING EXPENSES: Electric production fuels . . . . . 27,898 32,646 57,611 64,932 Purchased power 10,234 8,440 17,382 17,927 Purchased gas . 12,359 15,360 46,241 59,045 Other operation 35,821 34,830 70,801 69,440 Maintenance . . 13,216 12,387 23,048 21,759 Depreciation . . 19,913 17,519 39,408 37,015 Taxes -- Current federal income . . . . 3,053 3,814 14,499 15,341 Deferred income taxes . . . . 2,825 2,782 4,546 4,563 Investment tax credit (restored) . . (479) (481) (958) (963) Current state income . . . . 759 748 3,324 3,535 Property, payroll & other . . . . 7,144 7,041 14,304 14,056 ------- --------- -------- -------- 132,743 135,086 290,206 306,650 ------- --------- -------- -------- NET OPERATING INCOME . . . . . 16,814 15,838 46,693 47,523 -------- --------- -------- -------- OTHER INCOME AND (DEDUCTIONS): Allowance for equity funds used during construction . 451 681 722 1,130 Other, net . . . 400 4,140 463 9,415 Current income tax . . . . . . (120) 693 (88) (1,791) Deferred income tax . . . . . . 17 (1,968) 21 (1,866) ------- ------- -------- -------- 748 3,546 1,118 6,888 ------- -------- -------- -------- INCOME BEFORE INTEREST EXPENSE 17,562 19,384 47,811 54,411 ------- -------- --------- -------- INTEREST EXPENSE: Interest on bonds . . . . . 7,256 7,142 15,065 14,316 Allowance for borrowed funds used during construction (credit) . . . (151) (245) (241) (434) Other . . . . . 784 429 1,587 1,009 ------- -------- --------- -------- 7,889 7,326 16,411 14,891 ------ --------- -------- -------- NET INCOME . . . . 9,673 12,058 31,400 39,520 PREFERRED STOCK DIVIDENDS . . . 827 827 1,655 1,655 ------- ------- -------- -------- NET INCOME AFTER PREFERRED STOCK DIVIDENDS . . . $ 8,846 $ 11,231 $ 29,745 $ 37,865 ======== ======== ========= ======== The accompanying notes are an integral part of the consolidated financial statements. WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS Six Months Ended June 30, 1995 1994 (Thousands of Dollars) Cash flows from (used for) operating activities: Net income . . . . . . . . $ 31,400 $ 39,520 Adjustments to reconcile net income to net cash from operating activities: Depreciation . . . . . . 39,408 37,015 Amortization of nuclear fuel . . . . . . . . . . 3,404 2,749 Deferred income tax . . . 4,567 6,429 Investment tax credit restored . . . . . . . . (958) (963) Allowance for equity funds used during construction (722) (1,130) Changes in assets and liabilities: Net accounts receivable and unbilled revenues . 8,916 13,746 Coal . . . . . . . . . . 3,135 521 Materials and supplies . (206) (631) Gas in storage . . . . . 2,797 4,144 Prepayments and other . . (4,844) 1,229 Accounts payable and accruals . . . . . . . . (3,704) (22,007) Accrued taxes . . . . . . 1,478 3,987 Other, net . . . . . . . 530 6,894 --------- --------- Net cash generated from operating activities 85,201 91,503 --------- --------- Cash flows from (used for) financing activities: Common stock cash dividends (28,482) (28,696) Preferred stock dividends (1,655) (1,655) Preferred stock issuance expense . . . . . . . . . - 648 Net change in short term debt . . . . . . . . . . 17,500 (34,500) Retirement of first mortgage bonds . . . . . (17,999) - Equity contribution from parent . . . . . . . . . - 8,462 --------- -------- Net cash (used for) financing activities . . (30,636) (55,741) Cash flows from (used for) investing activities: Additions to utility plant, excluding AFUDC . . . . . (36,698) (36,616) Allowance for borrowed funds used during construction . . . . . . (241) (434) Dedicated decommissioning funds . . . . . . . . . . (12,551) (1,167) Other, net . . . . . . . . (3,372) 29 ---------- ---------- Net cash (used for) investing activities . . (52,862) (38,188) ---------- ----------- Net increase in cash and equivalents . . . . . . . 1,703 (2,426) Cash and equivalents at beginning of period . . . 2,234 5,930 ---------- ----------- Cash and equivalents at end of period . . . . . . . . . . $ 3,937 $ 3,504 ========== =========== Supplemental disclosures of cash flow information: Cash paid during the period for: Interest - debt . . . . . $ 14,840 $ 8,427 Income taxes . . . . . . $ 10,175 $ 14,971 The accompanying notes are an integral part of the consolidated financial statements. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. The consolidated financial statements included herein have been prepared by Wisconsin Power and Light Company (the "Company" or "WPL"), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted. The consolidated financial statements include the Company and its wholly-owned consolidated subsidiaries. The Company is a wholly-owned subsidiary of WPL Holdings, Inc. These financial statements should be read in conjunction with the financial statements and the notes thereto included in the Company's latest annual report on Form 10-K. In the opinion of the Company, the consolidated interim financial statements reflect all adjustments necessary to fairly state the results of operations for the interim periods presented. However, because of the seasonal nature of the Company's operations, the results shown for portions of a year are not indicative of annual results. 2. On June 23, 1995, the Company filed an application with the Public Service Commission of Wisconsin (PSCW) for the sale of $60 million of first mortgage bonds to occur sometime in 1995. The Company intends to use the net proceeds from the sale of these bonds first to repay short-term debt which was incurred in June of 1995 to repurchase in private transactions $18 million aggregate principal amount of the Company's first mortgage bonds, Series V, due December 1, 2025, interest rate of 9.30%. The remainder of the net proceeds will be used to repay other short-term debt incurred by the Company to finance utility construction expenditures and for general corporate purposes. 3. In March 1995, the Financial Accounting Standards Board ("FASB") issued Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996 and does not expect that adoption will have a material impact on the financial position or results of operations of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as competitive factors influence wholesale and retail pricing in this industry. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS THREE MONTHS ENDED JUNE 30, 1995 VS. JUNE 30, 1994: OVERVIEW The Company reported consolidated second quarter net income of $9.7 million down from $12.1 million for the same period in 1994. Second quarter 1995 net income was $2.0 million lower due to approval to recollect in the second quarter of 1994 a previously refunded penalty assessed by the PSCW relating to WPL's administration of a coal contract. Also, operating and maintenance expense increased $1.1 million after-tax primarily due to Kewaunee Nuclear Power Plant ("Kewaunee" or "Plant") refueling and maintenance overhaul costs. Depreciation expense increased $1.4 million after-tax due to increased investment in property, plant and equipment. Offsetting these decreases is a $2.3 million after-tax increase in electric margin primarily from lower electric production fuel costs per kWh and decreased cost per kWh of purchased power. Electric Operations
Revenues and Costs KWhs Sold, Generated Per kWh Sold Revenues and Costs and Purchased Generated and Customers at End of (In Thousands) % Change (In Thousands) % Change Purchased Quarter 1995 1994 1995 1994 1995 1994 1995 1994 Residential and Farm $43,247 $42,801 1% 622,251 602,761 3% $.070 $.071 327,319 322,202 Industrial 36,080 35,777 1% 991,595 955,781 4% .036 .037 778 755 Commercial 24,168 24,055 0% 412,304 393,496 5% .059 .061 44,227 43,437 Wholesale and Class A 20,319 20,877 -3% 628,782 606,255 4% .032 .034 83 40 Other 2,279 1,761 29% 14,856 12,203 22% .153 .144 1,497 1,471 ------ ------ ----- ------- ------- ----- ------ ------- ------ ------ Total $126,093 $125,271 1% 2,669,788 2,570,496 4% $.047 $.049 373,904 367,905 ====== ====== ====== ========= ========= ===== ===== ===== ======= ======= Electric production fuels $27,898 $32,646 -15% 2,261,305 2,344,507 -4% $.012 $.014 ========= ========= === ==== ===== Purchased Power $10,234 $8,440 21% 516,992 325,804 59% $.020 $.026 ------ -------- ----- ======= ======== === === ===== Margin $87,961 $84,185 4% ======= ======= ===
Electric margin increased in the second quarter of 1995 compared to the second quarter of 1994 primarily from slightly increased revenues coupled with reductions in electric production fuels per kWh and the cost of purchased power per kWh. Revenues increased from growth among all customer classes due to favorable economic conditions in WPL's service territory. These revenue increases were somewhat offset by an overall 2.8% decrease in retail electric rates effective January 1, 1995. Electric production fuels and purchased power per kWh were reduced through lower coal costs and from successful procurement strategies, respectively. Gas Operations
Terms Sold and Revenues and Costs Revenues and Costs Purchased per Therms Sold and Customers at End of (In Thousands) % Change (In Thousands) % Change Purchased Quarter 1995 1994 1995 1994 1995 1994 1995 1994 Residential $10,697 $10,337 3% 18,843 18,154 4% $.568 $.569 126,581 122,476 Firm 5,839 5,930 -2% 13,419 13,022 3% .435 .455 15,733 15,298 Interruptible 606 1,463 -59% 1,942 4,768 -59% .312 .307 236 233 Transport 3,858 3,384 14% 29,590 17,870 66% .130 .189 164 87 Other 1,450 3,515 -0.59 10,598 20,473 -0.48 .137 .172 79 93 ------ ----- ---- ------- ------ ------- ------- ----- ------ ------- Total $22,450 $24,629 -9% 74,392 74,287 0% $.302 $.332 142,793 138,187 ======= ======= ====== ====== ====== ====== ====== ===== ======= ======= Purchased gas $12,359 $15,360 -20% 58,546 50,499 16% $.211 $.304 ------- ------ ----- ======= ======= ======= ===== ====== Margin $10,091 $ 9,269 9% ====== ====== =====
Gas margin increased in the second quarter of 1995 compared to the second quarter of 1994 from favorable gas procurement strategies and some change in the mix of sales from lower margin to higher margin customer classes. Customer growth continued from the solid economic conditions in WPL's service territory. Other Operation Expense Other operation expense increased due to an increase in accounts receivable factoring costs related to a rise in the short-term market interest rates and increased conservation expenditures recently approved in WPL's latest rate order, effective January 1, 1995. Maintenance Expense Maintenance expense increased due to a more extensive refueling and maintenance overhaul at Kewaunee. (also, see: Liquidity and Capital Resources, page 12, "Other") Depreciation and Amortization Depreciation and amortization expense increased primarily reflecting increased property additions. Income Taxes Income taxes decreased between second quarters primarily due to lower taxable income. Other Income and Deductions - Other, Net Other, net decreased for the second quarter of 1995 compared with the same period in 1994, primarily due to the approval to recollect, in 1994, $2.0 million after-tax from ratepayers from an assessment by the PSCW relating to the administration of a coal contract. SIX MONTHS ENDED JUNE 30, 1995 VS. JUNE 30, 1994: OVERVIEW The Company reported consolidated net income of $31.4 million for the six months ended June 30, 1995 compared to $39.5 million for the same period in 1994. The operating factors include an increase in operating and maintenance expenses of $1.6 million after-tax principally related to Kewaunee refueling and maintenance overhaul costs. Also, depreciation expense increased $1.4 million after-tax from increased investment in property, plant and equipment. Offsetting the above decreases is a $1.6 million after-tax increase in electric margin primarily from lower electric fuel cost per kWh and purchased power cost per kWh. An additional factor impacting other income and deductions is the reversal of a $4.9 million after-tax reserve in the first six months of 1994 which represented a penalty assessment by the PSCW relating to the administration of a coal contract. Electric Operations
kWhs Sold, Revenues and Costs Generated and Per kWh Sold Revenues and Costs Purchased % Generated and Customers at End of (In Thousands) % Change (In Thousands) Change Purchased Quarter 1995 1994 1995 1994 1995 1994 1995 1994 Residential and Farm $95,137 $97,356 -2% 1,391,862 1,389,627 0% $.068 $.070 326,397 322,202 Industrial 67,636 67,989 -1% 1,874,769 1,822,824 3% .036 .037 776 755 Commercial 48,457 49,605 -2% 833,344 821,480 1% .058 .060 44,126 43,437 Wholesale and Class A 42,058 43,239 -3% 1,313,920 1,312,372 0% .032 .033 81 40 Other 3,956 4,279 -8% 28,104 28,986 -3% .141 .148 1,494 1,471 -------- ------- ----- -------- -------- ---- ------ ----- ------- ------- Total $257,244 $262,468 -2% 5,441,999 5,375,289 1% $.047 $.049 372,874 367,905 ======= ======= ===== ========= ========= ==== ====== ===== ======= ======= Electric production fuels $57,611 $64,932 -11% 4,770,259 4,790,116 0% $.012 $.014 ========= ========= ==== ===== ===== Purchased Power $17,382 $17,927 -3% 897,941 767,945 17% $.019 $.023 ------- ------- ---- ======== ======= ===== ======= ====== Margin $182,251 $179,609 1% ======= ======= ===
Electric margin increased slightly for the six months ended June 30, 1995 compared to the same period in 1994. Revenues decreased slightly due to a 2.8% decrease in retail electric rates effective January 1, 1995 and less favorable weather conditions, offset by increased kWh sales from growth among customer classes. However, lower electric production fuel and purchased power costs per kWh resulting from successful procurement strategies increased overall margin. Gas Operations
Terms Sold and Revenues and Costs Revenues and Costs Purchased per Therms Sold Customers at End of (In Thousands) % Change (In Thousands) % Change and Purchased Quarter 1995 1994 1995 1994 1995 1994 1995 1994 Residential $39,564 $45,090 -12% 73,793 78,399 -6% $.536 $.575 126,155 122,476 Firm 21,617 26,060 -17% 51,899 57,089 -9% .417 .456 15,694 15,298 Interruptible 1,777 4,308 -59% 6,102 11,762 -48% .291 .366 239 233 Transport 8,351 8,345 -11% 54,257 42,934 26% .155 .194 160 87 Other 6,348 5,901 8% 39,895 33,911 18% .158 .174 81 93 ------- -------- ----- ------- ------- ----- ------ ------ ------- ------- Total $77,657 $89,704 -0% 225,946 224,095 1% $.344 $.400 142,329 138,187 ======= ======= ==== ======= ======= ===== ====== ===== ======= ======= Purchased gas $46,241 $59,045 -22% 207,352 191,517 8% $.223 $.308 ------- ------- ---- ======== ======== ==== ===== ===== Margin $31,416 $30,659 2% ======= ======= ====
Gas margin for the six month period ended June 30, 1995 increased when compared to the same period in 1994. Revenues decreased due to less favorable weather conditions but were somewhat offset by increased therm sales as a result of customer growth from the solid economic conditions in WPL's service territory. Favorable gas procurement strategies significantly reduced purchased gas expense which resulted in the overall increase in margin. Other Operation Expense Other operation expense increased due to an increase in accounts receivable factoring costs related to a rise in the short-term market interest rates and increased conservation expenditures recently approved in WPL's latest rate order, effective January 1, 1995. Maintenance Expense Maintenance expense increased due to refueling and maintenance overhaul costs at Kewaunee. (Also see: Liquidity and Capital Resources, page 11, "Other.") Depreciation and Amortization Depreciation and amortization expense increased primarily reflecting increased property additions. Income Taxes Income taxes decreased for the six month period ended June 30, 1995 primarily due to lower taxable income. Other Income and Deductions - Other, Net Other, net decreased for the six months ended June 30, 1995 compared with the same period in 1994, primarily due to the reversal of a $2.9 million after-tax reserve which represented a penalty assessment by the PSCW, and also the $2.0 million after-tax approval to recollect from ratepayers, both relating to the administration of a coal contract. LIQUIDITY AND CAPITAL RESOURCES Financing and Capital Structure The level of short-term borrowing fluctuates based primarily on seasonal corporate needs, the timing of long-term financing and capital market conditions. To maintain flexibility in its capital structure and to take advantage of favorable short-term rates, the Company also uses proceeds from the sales of accounts receivable and unbilled revenues to finance a portion of its long-term cash needs. The Company's capitalization at June 30, 1995, including the current maturities of long-term debt, variable rate demand bonds and short-term debt, consisted of 52 percent common equity, 6 percent preferred stock and 42 percent long-term debt. Capital Expenditures The Company's liquidity is primarily determined by the level of cash generated from operations and the funding requirements of WPL's ongoing construction and maintenance programs. Cash flows from operating activities, after dividends paid, provided approximately $66 million and $67 million for the three months ended June 30, 1995 and 1994, respectively and $57 million and $63 million for the six months ended June 30, 1995 and 1994, respectively. The Company finances its construction expenditures through internally generated funds supplemented, when required, by outside financing. The estimated construction expenditures for the remainder of 1995 are $73 million. The Company currently anticipates that it will finance approximately 94 percent of these expenditures through internally generated funds. (Also see: Note 2 in the "Notes to Financial Statements," page 6.) The expenditures for the decommissioning of Kewaunee are estimated to begin in 2014. It is anticipated that expenditures related to the actual decommissioning of the plant will occur between 2014 and 2021 of which WPL's share in terms of future dollars, approximates $581 million. An additional $435 million related to the storage of spent nuclear fuel on site and other maintenance of the site will likely occur from 2022 to 2050. WPL currently expects to have the cost collected through electric rates and funded in an external trust by 2013. Therefore, such expenditures are not expected to have a direct impact on the liquidity or the availability of capital resources. Industry Outlook The PSCW has recently opened a formal docket initiating an inquiry into the goals of Wisconsin utility regulation and identification of alternative forms of regulation. WPL has submitted its views which, in summary form, call for open access to transmission and distribution systems and a competitive power generation market place. It is not possible at this time to predict the outcome of these proceedings. The Federal Energy Regulatory Commission (FERC) is developing regulation which will begin to provide open access to utility's transmission facilities for wholesale customers subject to certain approved FERC tariffs. WPL believes its existing open access tariffs position it well to compete under such market conditions. Other The Company's Form 10-Q for the quarter ended March 31, 1995, at Part I, "Other", Page 10, reported the shutdown of Kewaunee on April 1, 1995 for scheduled maintenance and refueling and related steam generator matters. Wisconsin Public Service Corporation is the operator and 41.2% owner of Kewaunee which is owned jointly with WPL and Madison Gas and Electric Company which own 41% and 17.8%, respectively. During the shutdown, inspection of the steam generators revealed higher levels of tube degradation than was anticipated. Continued use of degraded tubes raises concerns regarding primary-to-secondary leakage of reactor coolant. Thus, the degraded tubes were removed from service by plugging. Tube plugging and the build-up of deposits on the tubes affect the heat-transfer capability of the steam generators to the point where eventually full-power operation is affected. Prior to the recent shutdown, the equivalent of approximately 12% of the tubes in the steam generators were plugged with no loss of capacity. When the Plant was returned to service on May 18, 21% of the tubes were plugged, resulting in a capacity reduction of 3.8% during the Plant's current operating cycle which extends into the fall of 1996. Thus, net Plant output has been reduced from 525 megawatts to approximately 510 megawatts. Although preliminary estimates indicated slightly increased maintenance and purchased power expenses as reported in the Company's Form 10-Q for the quarter ended March 31, 1995, revised estimates indicate that during 1995 additional expenses related to recent steam generator plugging likely will be offset by reduced nuclear expenses in other areas and, therefore, should not affect earnings significantly. WPL with it's joint partners continue the study of tube repair alternatives. See Part I, Item 1. Business - Electric Operations - Kewaunee Nuclear Power Plant in the WPL Form 10-K for the year ended December 31, 1994 for additional background on this matter. PART II--OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders At the Company's annual meeting of shareowners held on May 17, 1995, L. David Carley, Donald R. Haldeman, Arnold M. Nemirow and Judith D. Pyle were elected directors of the Company for terms expiring in 1998. The following table sets forth certain information with respect to the election of directors at the annual meeting. Shares Withholding Name of Nominee Shares Voted For Authority L. David Carley 13,707,173 9,036 Donald R. Haldeman 13,712,756 3,453 Arnold M. Nemirow 13,712,710 3,499 Judity D. Pyle 13,711,881 4,328 The following table sets forth the other directors of the Company whose terms of office continued after the 1994 annual meeting. Year in which Name of Director Term Expires Katherine C. Lyall 1996 Henry F. Scheig 1996 Rockne G. Flowers 1996 Henry C. Prange 1996 Erroll B. Davis, Jr. 1997 Milton E. Neshek 1997 Carol T. Toussaint 1997 In addition, at the annual meeting, shareowners approved the appointment of Arthur Andersen LLP as the Company's independent auditors for the 1995 calendar year. With respect to such matter, the number of shares voted for and against were 13,711,631 and 1,320, respectively. The number of shares abstaining and the number of shares subject to broker non-votes were 3,258 and 0, respectively. Item 6. Exhibits and Reports on Form 8-K 1. Exhibits: 27 Financial Data Schedule 2. Reports on Form 8-K: None SIGNATURE 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. Wisconsin Power and Light Company August 9, 1995 /s/ Daniel A. Doyle Daniel A. Doyle, Vice President - Finance, Controller and Treasurer, Wisconsin Power and Light Company (principal accounting officer and officer authorized to sign on behalf of the registrant.) EXHIBIT INDEX Exhibit No. Description 27 Financial Data Schedule EX-27 2 EXHIBIT 27
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANICAL STATEMENTS CONTAINED IN THE FORM 10-Q FILED BY WISCONSIN POWER AND LIGHT COMPANY FOR THE QUARTER ENDED JUNE 30, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1 6-MOS DEC-30-1995 JAN-01-1995 JUN-30-1995 PER-BOOK 1,274,240 26,298 93,443 196,257 0 1,590,198 66,183 199,169 280,417 545,769 0 59,963 318,569 56,975 0 68,000 0 0 0 0 540,922 1,590,198 149,557 6,158 35,821 132,743 16,814 748 17,562 7,889 9,673 827 8,846 14,148 5,352 84,901 0 0 Earnings per share of common stock is not reflected because all of such shares are held by WPL Holdings, Inc.
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