-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, HhMoak/TtDNVcCyhYp/AoufRj3qnoB3d70id7i1Sk1PndpuHDlrGJdvnla39mySm yWtMzqIM+jV5mj43aR57eg== 0000061339-96-000010.txt : 19961118 0000061339-96-000010.hdr.sgml : 19961118 ACCESSION NUMBER: 0000061339-96-000010 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: MADISON GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000061339 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390444025 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01125 FILM NUMBER: 96663778 BUSINESS ADDRESS: STREET 1: 133 S BLAIR ST STREET 2: PO BOX 1231 CITY: MADISON STATE: WI ZIP: 53701 BUSINESS PHONE: 6082527923 MAIL ADDRESS: STREET 1: POST OFFICE BOX 1231 CITY: MADISON STATE: WI ZIP: 53701-1231 10-Q 1 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: SEPTEMBER 30, 1996 or [ ] 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 0-1125 MADISON GAS AND ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Wisconsin 39-0444025 (State or other jurisdiction (IRS Employer of incorporation or organization) Identification No.) 133 South Blair Street, Madison, Wisconsin 53703 (Address of principal executive offices and ZIP code) (608) 252-7000 (Registrant's telephone number including area code) Common Stock Outstanding at November 13, 1996: 16,079,718 shares 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, and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] PART I. FINANCIAL INFORMATION Item 1. Financial Statements Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF INCOME AND RETAINED INCOME (Thousands of Dollars, Except Per-Share Amounts) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 STATEMENTS OF INCOME Operating Revenues: Electric . . . . . . . . . . . . . $44,547 $47,316 $116,621 $117,908 Gas . . . . . . . . . . . . . . . 8,345 7,407 66,700 59,787 Total Operating Revenues . . . . 52,892 54,723 183,321 177,695 Operating Expenses: Fuel for electric generation . . . 7,246 8,509 20,047 21,549 Purchased power . . . . . . . . . 3,203 2,526 7,601 6,169 Natural gas purchased . . . . . . 3,823 3,220 41,158 35,716 Other operations . . . . . . . . . 13,902 14,764 41,934 44,725 Maintenance . . . . . . . . . . . 2,898 2,402 7,793 8,919 Depreciation and amortization . . 6,514 6,206 19,039 18,656 Other general taxes . . . . . . . 2,148 2,149 6,596 6,495 Income tax items . . . . . . . . . 4,117 4,933 12,051 10,554 Total Operating Expenses . . . . 43,851 44,709 156,219 152,783 Net Operating Income . . . . . . . . 9,041 10,014 27,102 24,912 AFUDC - equity funds . . . . . . . . 3 10 29 46 Gas marketing subsidiaries (loss)/income . . . . . . . . . . . . (1,382) (5) (4,321) 1,277 Other income, net . . . . . . . . . . 419 302 938 1,246 Income before interest expense . . . 8,081 10,321 23,748 27,481 Interest expense: Interest on long-term debt . . . . 2,411 2,593 7,407 7,774 Other interest . . . . . . . . . . 190 208 465 797 AFUDC - borrowed funds . . . . . . (2) (5) (15) (24) Net Interest Expense . . . . . . 2,599 2,796 7,857 8,547 Net Income . . . . . . . . . . . . . 5,482 7,525 15,891 18,934 Preferred stock dividends . . . . . . - - - 64 Earnings on common stock . . . . . . $5,482 $7,525 $15,891 $18,870 Earnings per share of common stock (Note 3) . . . . . . . . . . . . . . $0.34 $0.47 $0.99 $1.17 STATEMENTS OF RETAINED INCOME Balance - beginning of period . . . . $64,722 $62,121 $64,499 $60,851 Earnings on common stock . . . . . . 5,482 7,525 15,891 18,870 Cash dividends on common stock (Note 3) . . . . . . . . . . . . . . (5,144) (5,093) (15,330) (15,168) Balance - end of period . . . . . . . $65,060 $64,553 $65,060 $64,553 The accompanying notes are an integral part of the above statements. /TABLE Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOW (Thousands of Dollars) (Unaudited)
Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 Operating Activities: Net income . . . . . . . . . . . . . . . . . . . . $ 5,482 $ 7,525 $15,891 $18,934 Items not affecting cash: Depreciation and amortization . . . . . . . . . 6,514 6,206 19,039 18,656 Deferred income taxes . . . . . . . . . . . . . . 22 (323) (1,677) (563) Amortization of nuclear fuel . . . . . . . . . . 620 797 2,098 1,927 Amortization of investment tax credits . . . . . (200) (192) (592) (581) AFUDC - equity funds . . . . . . . . . . . . . . (3) (10) (29) (46) Other . . . . . . . . . . . . . . . . . . . . . 168 157 (2,625) 1,061 Net funds provided from Operations . . . . . . . 12,603 14,160 32,105 39,388 Changes in working capital, excluding cash equivalents, sinking funds, maturities, and interim loans: Decrease/(increase) in current assets . . . . . . (626) (4,667) 13,240 9,985 (Decrease)/increase in current liabilities . . . (3,176) 1,428 (7,734) (1,610) Other noncurrent items, net . . . . . . . . . . . . (1,372) (2,092) 8,447 (2,073) Cash provided by Operating Activities . . . . . . 7,429 8,829 46,058 45,690 Financing Activities: Cash dividends on common and preferred stock . . . (5,144) (5,093) (15,330) (15,232) Maturities/redemptions of First Mortgage Bonds . . - - (7,840) - Other increase/(decrease) in First Mortgage Bonds . 9 9 29 (233) Decrease in preferred stock . . . . . . . . . . . . - - - (5,300) Decrease in bond construction funds, net . . . . . - 1,976 - 5,469 (Decrease)/increase in interim loans . . . . . . 9,000 (1,250) 2,500 (17,350) Cash provided by/(used for) Financing Activities. 3,865 (4,358) (20,641) (32,646) Investing Activities: Acquisition of nonregulated subsidiary . . . . . . - - - (8,036) Sale of Superior Lamp, Inc. . . . . . . . . . . . . - - 201 - Additions to utility plant and nuclear fuel . . . . (7,037) (4,997) (18,380) (13,083) AFUDC - borrowed funds . . . . . . . . . . . . . . (2) (5) (15) (24) Increase in nuclear decommissioning fund . . . . . (1,264) (1,135) (3,516) (3,117) Cash used for Investing Activities . . . . . . (8,303) (6,137) (21,710) (24,260) Change in Cash and Cash Equivalents (Note 5) . . . . 2,991 (1,666) 3,707 (11,216) Cash and cash equivalents at beginning of period. . 3,560 1,984 2,844 11,534 Cash and cash equivalents at end of period. . . . . $6,551 $318 $6,551 $318 The accompanying notes are an integral part of the above statements. /TABLE Madison Gas and Electric Company and Subsidiaries CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
Sept. 30, Dec. 31, 1996 1995 ASSETS Utility Plant, at original cost, in service: Electric . . . . . . . . . . . . . . . . . . . . . $497,777 $489,399 Gas . . . . . . . . . . . . . . . . . . . . . . . 177,213 173,890 Gross plant in service . . . . . . . . . . . . . 674,990 663,289 Less accumulated provision for depreciation . . . . (366,986) (348,254) Net plant in service . . . . . . . . . . . . . . 308,004 315,035 Construction work in progress . . . . . . . . . . 8,585 9,061 Nuclear decommissioning fund (Note 2) . . . . . . 41,707 36,965 Nuclear fuel, net . . . . . . . . . . . . . . . . 8,378 6,172 Total Utility Plant . . . . . . . . . . . . . . . 366,674 367,233 Other property and investments . . . . . . . . . . . 15,234 17,176 Current Assets: Cash and cash equivalents . . . . . . . . . . . . 6,551 2,844 Accounts receivable, less reserves of $1,136 and $1,379, respectively . . . . . . . . . . . . . . . 29,303 36,817 Unbilled revenue . . . . . . . . . . . . . . . . . 6,211 13,529 Materials and supplies, at average cost . . . . . . 5,637 5,987 Fossil fuel, at average cost . . . . . . . . . . . 2,991 2,986 Stored natural gas, at average cost . . . . . . . 10,032 6,203 Prepaid taxes . . . . . . . . . . . . . . . . . . 4,387 5,846 Other prepayments . . . . . . . . . . . . . . . . . 1,174 1,608 Total Current Assets . . . . . . . . . . . . . . 66,286 75,820 Deferred charges . . . . . . . . . . . . . . . . . . 31,931 33,647 Total Assets . . . . . . . . . . . . . . . . . $480,125 $493,876 CAPITALIZATION AND LIABILITIES Capitalization (see statement) . . . . . . . . . . . $322,774 $322,185 Current Liabilities: Long-term debt sinking fund requirements . . . . . 200 200 Maturity of 5.45%, 1996 series . . . . . . . . . . - 7,840 Interim loans - commercial paper outstanding . . . 23,000 20,500 Accounts payable . . . . . . . . . . . . . . . . . 21,094 25,928 Accrued taxes . . . . . . . . . . . . . . . . . . 255 1,500 Accrued interest . . . . . . . . . . . . . . . . . 3,604 2,359 Other . . . . . . . . . . . . . . . . . . . . . . . 5,003 7,903 Total Current Liabilities . . . . . . . . . . . . 53,156 66,230 Other Credits: Accumulated deferred income taxes . . . . . . . . 53,544 54,153 Regulatory liability . . . . . . . . . . . . . . . 24,109 25,177 Investment tax credit - deferred . . . . . . . . . 11,639 12,231 Other . . . . . . . . . . . . . . . . . . . . . . 14,903 13,900 Total Other Credits . . . . . . . . . . . . . . . 104,195 105,461 Commitments . . . . . . . . . . . . . . . . . . . . . - - Total Capitalization and Liabilities . . . . . $480,125 $493,876 The accompanying notes are an integral part of the above balance sheets. /TABLE Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CAPITALIZATION (Thousands of Dollars) (Unaudited)
Sept. 30, Dec. 31, 1996 1995 Common Shareholders' Equity: Common stock - par value $1 per share: Authorized 50,000,000 shares Outstanding 16,079,718 shares . . . . . . . . . . $ 16,080 $ 16,080 Amount received in excess of par value . . . . . . 112,558 112,558 Retained income . . . . . . . . . . . . . . . . . 65,060 64,499 Total Common Shareholders' Equity . . . . . . . . 193,698 193,137 Redeemable Preferred Stock cumulative, $25 par value, authorized 1,175,000 shares, 0 shares outstanding. . - - First Mortgage Bonds: 5.45%, 1996 series . . . . . . . . . . . . . . . . - 7,840 6 1/2%, 2006 series: Pollution Control Revenue Bonds . . . . . . . . . 7,075 7,075 8.50%, 2022 series . . . . . . . . . . . . . . . . 40,000 40,000 6.75%, 2027A series: Industrial Development Revenue Bonds . . . . . . 28,000 28,000 6.70%, 2027B series: Industrial Development Revenue Bonds . . . . . . 19,300 19,300 7.70%, 2028 series . . . . . . . . . . . . . . . . 25,000 25,000 First Mortgage Bonds Outstanding . . . . . . . . 119,375 127,215 Unamortized discount and premium on bonds, net . . (1,099) (1,127) Long-term debt sinking fund requirements . . . . . (200) (200) Maturity of 5.45%, 1996 series . . . . . . . . . . - (7,840) Total First Mortgage Bonds . . . . . . . . . . . 118,076 118,048 Other Long-Term Debt: 6.01%, interest rate SWAP agreement . . . . . . . 11,000 11,000 Total Capitalization . . . . . . . . . . . . . $322,774 $322,185 The accompanying notes are an integral part of the above statements.
Notes to Consolidated Financial Statements (Unaudited) September 30, 1996 The consolidated financial statements included herein have been prepared by the Company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). 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, although the Company believes that the disclosures made are adequate to make the information presented not misleading. In the opinion of Company management, all adjustments (consisting of only normal recurring adjustments) necessary to fairly present results have been made. It is suggested that these consolidated financial statements be read in conjunction with the financial statements and the notes thereto set forth on pages 20 through 25 of the Company's 1995 Annual Report to Shareholders and in the Company's 1995 Annual Report on Form 10-K. 1. Summary of Significant Accounting Policies The accounting and financial policies relative to the following items have been described in the "Notes to Consolidated Financial Statements" in the Company's 1995 Annual Report to Shareholders and have been omitted herein because they have not changed materially through the date of this report. a. General b. Utility plant c. Nuclear fuel d. Joint plant ownership e. Depreciation f. Income taxes g. Pension plans h. Postretirement benefits other than pensions i. Fair value of financial instruments j. Capitalization matters: common stock - stock split, redeemable preferred stock, other long-term debt, notes payable to banks, commercial paper, and lines of credit k. Commitments l. Segments of business m. Regulatory assets and liabilities 2. Nuclear Decommissioning Nuclear decommissioning costs relative to the Kewaunee Nuclear Power Plant (Kewaunee) are currently accrued over the plant's license term, which expires in the year 2013. These costs are currently recovered from customers in rates and are deposited in external trusts. For 1996, the decommissioning costs recovered in rates will be $3.1 million. These trusts are shown on the balance sheet in the Utility Plant section, and as of September 30, 1996, these trusts totaled $41.7 million (fair market value). Decommissioning costs are recovered through depreciation expense, exclusive of earnings on the trusts. Net earnings on the trusts are included in other income. The long-term, after-tax earnings assumption on these trusts is 6.2 percent. As of September 30, 1996, the accumulated provision for depreciation included accumulated provisions for decommissioning totaling $41.7 million. The Company has applied to the Public Service Commission of Wisconsin (PSCW) for acceleration of decommissioning collections relative to Kewaunee such that by mid-year 2003 there would be funding adequate to fully fund currently forecasted decommissioning expenditures. The request for this acceleration reflects the condition of the present steam generators (see Part II, Item 5 for additional information). The Company's share of Kewaunee decommissioning costs is estimated to be $70 million in current dollars based on a site-specific study performed in 1992 using immediate dismantlement as the method of decommissioning. Decommissioning costs are assumed to inflate at an average rate of 6.1 percent. 3. Per-Share Amounts Earnings per share of common stock are computed on the basis of the weighted average of the daily number of shares outstanding. For the three months and for the nine months ended September 30, 1996 and 1995, there were 16,079,718 shares. Dividends declared and paid per share of common stock for the periods ended September 30, 1996 and 1995, were, respectively, for the three months $0.32 and $0.317; for the nine months $0.953 and $0.943. Both the shares outstanding and the dividends per-share amounts reflect the Company's 3-for-2 stock split which was effective in the first quarter of 1996. 4. Capitalization Matters a. First Mortgage Bonds. The annual sinking fund requirements of the outstanding First Mortgage Bonds are $200,000 in 1996. As of September 30, 1996, $200,000 is still needed to satisfy the 1996 requirements. The 5.45%, 1996 series, First Mortgage Bonds matured on June 1, 1996, requiring funding of $7.8 million in short-term debt to retire this bond series. 5. Supplemental Cash Flow Information For purposes of the Consolidated Statements of Cash Flow, the Company considers cash equivalents to be those investments that are highly liquid with maturity dates of less than three months. Cash payments for interest, net of amounts capitalized, and income taxes were as follows: Three Months Nine Months Ended Ended September 30, September 30, (Thousands of dollars) 1996 1995 1996 1995 Interest, net of amounts capitalized $1,420 $1,601 $6,642 $7,481 Income taxes paid $3,702 $4,515 $13,274 $13,495 6. Sale of Nonregulated Subsidiary In May 1996 the Company sold its 50 percent share in Superior Lamp Recycling, Inc., a jointly owned subsidiary of the Company and Superior Services, Inc., purchased during 1993. Superior Lamp recycles fluorescent lamps that are banned from landfills. The sale resulted in a modest gain on the Company's investment. 7. Rate Matters On September 3, 1996, the Company announced its intention to increase electric rates for the test period beginning July 1, 1997, by approximately $7.7 million, or 5.1 percent, and increase natural gas rates by $3.7 million, or 3.8 percent, for the same time period. The proposed changes are based on a requested return on common equity of 12.0 percent and would remain in effect through 1998. The proposed early recovery of the Kewaunee investment and accelerated decommissioning collections are the primary reasons for the increase in electric rates. Also, the Company continues its efforts to lower costs but is experiencing increases in operating costs and construction costs due primarily to inflation. Hearings will take place on the Company's recent rate filing in the first quarter of 1997. A decision is expected sometime in the second quarter of 1997. Rates for electric service have not been increased since 1990 and were reduced in 1993 and 1994. Gas rates have not been increased since 1989 and were reduced in 1990, 1992, and 1993. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations Liquidity and Capital Resources The Company's internally generated funds were greater than the funds used for construction and nuclear fuel expenditures for the nine-month period ended September 30, 1996. The Company experienced increased additions to utility plant and nuclear fuel expenditures during the first nine months of 1996 compared to 1995. It is anticipated that 1996 construction and nuclear fuel expenditures will be approximately $25 million. Cash provided by operating activities increased $0.4 million during the first nine months of 1996 compared to 1995 due to an increase in working capital somewhat offset by a decrease in net income. Cash provided by operating activities during the third quarter of 1996 decreased $1.4 million, or 15.9 percent, compared to last year's third quarter. This is mainly attributable to the decrease in current assets, liabilities, and net income. Cash used for financing activities decreased $12 million, or 36.8 percent, for the nine months ended September 30, 1996, primarily due to an increase in interim loans caused by the maturity of the 5.45%, 1996 series, First Mortgage Bonds, higher levels of construction, and advances by the parent company to its subsidiaries. The third quarter 1996 cash provided for financing activities increased $8.2 million also due to the increase in interim loans. Bank lines of credit available to the Company as of September 30, 1996, were $45 million, which includes $10 million for Great Lakes Energy Corp. (GLENCO), a wholly owned subsidiary of the Company, and American Energy Management Inc., a subsidiary of GLENCO. The Company's capitalization ratios were as follows: Sept. 30, 1996 Dec. 31, 1995 Common shareholders' equity 56.0% 55.1% Long-term debt* 37.4 39.1 Short-term debt 6.6 5.8 *Includes current maturities and current sinking fund requirements. The Company's bonds are currently rated Aa2 by Moody's Investors Service, Inc., and AA by Standard & Poor's Corporation. The Company's dealer-issued commercial paper carries the highest ratings assigned by Moody's and Standard & Poor's. Business Environment On May 1, 1995, Northern States Power Company and Wisconsin Energy Corporation announced a proposed merger. If approved, the two companies would form a holding company called Primergy Corporation, creating the tenth largest utility company in the United States. The merger has been approved by the shareholders of both companies. Various regulatory agency approval is required including the SEC, the Nuclear Regulatory Commission (NRC), the Federal Energy Regulatory Commission (FERC), and state regulatory agencies. The Company is opposing approval of the merger on the grounds that the merger would violate antitrust laws and principles by increasing the exercise of anticompetitive market power by Primergy. Hearings on the proposed merger have been concluded before the FERC. Hearings on the proposed merger are currently scheduled before the Wisconsin and Minnesota Public Service Commissions. The Company believes the proposed merger would have a detrimental impact on the Wisconsin economy. Regulatory Environment The PSCW voted in December 1995 to carefully pursue the restructuring of the electric utility industry in Wisconsin. This approach is largely consistent with a plan developed and supported by the Company. The process included a report by the Commissioners to the legislature, a draft work plan, and a series of dockets and proceedings over the next three to seven years to implement the whole plan. It is unknown at this time what impact (if any) this plan will have on the Company. An order is expected some time this year regarding a docket that was opened to examine what changes are needed in the cost recovery mechanism for purchasing gas costs. Hearings have been concluded on this matter. No material changes are expected at this time. Results of Operations Electric Sales and Revenues The cooler weather experienced this summer contributed to the decreased electric sales for the three and nine months ended September 30, 1996, compared to the same periods last year (see table below). Electric retail sales decreased 5.1 percent for the three months ended September 30, 1996, compared to the same period in 1995. Cooling degree days (measured by the number of degrees the mean daily temperature is above 65 degrees Fahrenheit) for the third quarter of 1996 decreased approximately 64 percent from last year's third quarter and were 40 percent below normal. Electric Sales in Megawatt-Hours
Three Months Ended September 30, Nine Months Ended September 30, 1996 1995 % Change 1996 1995 % Change Residential 194,608 227,414 (14.43)% 544,853 561,923 (3.04)% Large commercial and industrial 259,585 258,855 0.28 716,855 712,285 0.64 Small commercial and industrial 196,611 192,348 2.22 540,584 528,405 2.30 Other 81,943 93,779 (12.62) 237,900 245,047 (2.92) Total retail 732,746 772,396 (5.13) 2,040,192 2,047,660 (0.36) Sales for resale 8,393 2,859 193.56 23,256 16,768 38.69 Total sales 741,139 775,255 (4.40) 2,063,448 2,064,428 (0.05)
The decrease in electric sales for both the three- and nine-month periods contributed to the decrease in electric operating revenues of $2.8 million, or 5.9 percent, for this year's third quarter and $1.3 million, or 1.1 percent, for the nine months ended September 30, 1996, as compared to the same periods the previous year. Gas Sales and Revenues For the three months ended September 30, 1996, gas revenues increased $0.9 million, or 12.7 percent, compared to last year, despite a 7.3 percent decrease in gas deliveries for the same time period. This was the result of higher unit gas costs. Higher gas costs are passed on to customers in the form of higher rates through the purchased gas adjustment (PGA) clause, thus increasing natural gas revenues on a one-for-one basis. For the nine months ended September 30, 1996, gas operating revenues increased $6.9 million, or 11.6 percent, compared to the same period in 1995. This increase in revenues is due to colder weather experienced in the first half of the year and higher gas costs collected from customers through the PGA clause. The following table illustrates gas deliveries as compared to the previous year: Gas Deliveries in Thousands of Therms
Three Months Ended September 30, Nine Months Ended September 30, 1996 1995 % Change 1996 1995 % Change Residential 5,702 5,702 0.00% 64,705 56,419 14.69% Commercial and Industrial 9,117 10,099 (9.72) 61,593 61,437 0.25 Total retail 14,819 15,801 (6.21) 126,298 117,856 7.16 Transport 9,142 10,036 (8.91) 28,578 26,677 7.13 Total deliveries 23,961 25,837 (7.26) 154,876 144,533 7.16
Electric Fuel and Natural Gas Costs Fuel for electric generation decreased $1.3 million, or 14.8 percent, for the third quarter of 1996 compared to last year's third quarter. This was mainly attributable to decreased power demands due to the mild weather experienced during this time. Purchased power increased $0.7 million, or 26.8 percent, for the three months ended September 30, 1996, compared to the same period last year. This is primarily due to an increase in the cost of capacity purchases. Fuel for electric generation decreased $1.5 million, or 7.0 percent, for the nine-month period ended September 30, 1996, when compared to the same period last year. This was mainly attributable to decreased power demands due to the cool summer. Purchased power increased $1.4 million, or 23.2 percent, for the nine months ended September 30, 1996, compared to the same period last year. This is mainly due to an increase in the cost of capacity purchases. Natural gas costs for the nine-month period ended September 30, 1996, increased $5.4 million, or 15.2 percent, compared to the same period a year ago. This is mainly due to the increase in gas deliveries during the first half of 1996 because of the cold weather. An increase in the cost per therm of $.04, or 14.5 percent, also contributed to increased natural gas costs. Natural gas costs for the three months ended September 30, 1996, versus the comparative period in 1995 increased $0.6 million, or 18.7 percent. This is due mainly to a cost per therm increase of $.29. Other Operating Expenses Income taxes for the nine-month period ended September 30, 1996, increased $1.5 million, or 14.2 percent, compared to last year. The increase is due to the increase in pretax operating income. Operations and maintenance costs decreased $0.4 million, or 2.1 percent, for the third quarter of 1996 and decreased $3.9 million, or 7.3 percent, for the nine months of the year compared to the same periods a year ago. The primary reasons for the decrease are continued cost-control efforts throughout the Company and the conversion from a 12-month to an 18-month fuel cycle at Kewaunee. During 1995, Kewaunee was on a 12-month fuel cycle with the outage occurring in the second quarter, increasing operations and maintenance expenses. Due to the conversion, these operations and maintenance expenses will shift from the second quarter to the fourth quarter of this year. This will reduce the 1996 fourth-quarter earnings compared to the fourth quarter of 1995. Other Items Interest expense decreased in both the three- and nine-month periods ended September 30, 1996, when compared to the same periods a year ago. This is due to lower interest rates during the 1996 periods compared to 1995. The Company's unregulated gas marketing subsidiaries continued to incur losses through the third quarter of this year due to pressure on natural gas profit margins. Losses of $4.3 million for the nine-month period ended September 30, 1996, were realized on the Company's unregulated gas marketing subsidiaries. In the first quarter of 1996, extremely cold weather caused natural gas supply prices to substantially rise. Because of this demand for natural gas, unregulated gas marketing companies were forced to pay premium prices to fill customer orders. The Company's gas supply capacity that was used by its unregulated gas subsidiaries from 1993 to 1995 generated approximately $2.5 million of revenue to be returned to the Company's customers. Whether this revenue was properly returned is currently under review. This may have a negative impact on fourth-quarter earnings in 1996. PART II. OTHER INFORMATION Item 5 Other Information Kewaunee is operated by Wisconsin Public Service Corporation. The Company has a 17.8 percent ownership interest in Kewaunee. Kewaunee is operating with a license that expires in 2013. The steam generator tubes at Kewaunee are susceptible to corrosion characteristics seen throughout the nuclear industry. During the scheduled refueling and maintenance outage, which began September 21, 1996, electronic inspection of previously sleeved steam generator tubes disclosed that the growth rate of corrosion in all tubes was much higher than expected. The owners of Kewaunee have submitted a request to the NRC, approval of which is still pending, for a technical specification change that would allow the laser weld repair of these sleeve joints, thereby allowing the steam generator tubes with the additional indications to remain in service. It is estimated that the total cost of repairing corroded sleeved tubes utilizing laser welding repair technology will be $3 million to $5 million, the Company's estimated share being $0.5 million to $0.9 million. It is estimated the repair of the steam generators could extend the outage several weeks beyond the original planned period. There will be an additional cost for replacement purchased power due to the extended outage. Based on current estimates, Kewaunee is expected to be returned to service before the end of the year. The owners of Kewaunee are continuing to evaluate various economic alternatives to deal with the potential future loss of capacity resulting from the continuing degradation of the steam generator tubes. These alternatives range from repairing/replacing the existing steam generators to early plant closure with replacement power options. Replacement of steam generators is estimated to cost $89 million (the Company's share would be 17.8 percent), excluding additional purchased power costs associated with an extended shutdown. The Company is seeking PSCW approval of accelerated depreciation rates and decommissioning funding for inclusion in future rate cases based on a possible Kewaunee closure date by the end of the year 2002, which is consistent with the current condition of steam generators and the laser welded repairs mentioned above. Steam generator replacement is necessary for cost-effective operation of Kewaunee beyond 2002. The Company is investigating ownership changes which may allow steam generators to be replaced without its participation. Item 6(a) Exhibits Exhibit 4 Indenture of Mortgage and Deed of Trust between the Company and Firstar Trust Company, as Trustee (and supplements). Reference was provided in the Company's 1995 Annual Report on Form 10-K (Commission File No. 0-1125). Exhibit 12 Ratio of Earnings to Fixed Charges Exhibit 27 Appendix E to Item 601(c) of Regulation S-K: Public Utility Companies Financial Data Schedule UT. Exhibit Page Exhibit 4 NA Exhibit 12 17 Exhibit 27 18 Item 6(b) Reports on Form 8-K No reports on 8-K were filed during the quarter for which this report is filed. 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. MADISON GAS AND ELECTRIC COMPANY (Registrant) Date: November 13, 1996 /s/ David C. Mebane David C. Mebane Chairman, President and Chief Executive Officer (Duly Authorized Officer) Date: November 13, 1996 /s/ Joseph T. Krzos Joseph T. Krzos Vice President - Finance (Chief Financial and Accounting Officer) EX-27 2
UT This schedule contains summary financial information extracted from SEC Form 10-Q. Items 1 through 22 are as of September 30, 1996. Items 23 through 38 are for the nine months ended September 30, 1996. 1,000 9-MOS DEC-31-1996 SEP-30-1996 PER-BOOK 366674 15234 66286 31931 0 480125 16080 112558 65060 193698 0 0 129076 23000 0 0 200 0 0 0 134151 480125 183321 12051 144168 156219 27102 (3354) 23748 7857 15891 0 15891 (15330) 0 46058 0.99 0
EX-12 3 Ratio of Earnings to Fixed Charges Exhibit 12 Nine Months Ended September 30, 1996 (000s) Earnings Income before interest expense . . . . . . . . . $23,748 Add: Income tax items . . . . . . . . . . . . . . . . 12,051 Income tax on other income . . . . . . . . . . . 407 Amortization of debt discount, premium expense . 216 AFUDC - borrowed funds . . . . . . . . . . . . . 15 Interest on rentals . . . . . . . . . . . . . . . 210 Total Earnings . . . . . . . . . . . . . . . . $36,647 Fixed Charges Interest on long-term debt . . . . . . . . . . . $ 7,407 Other interest . . . . . . . . . . . . . . . . . 465 Amortization of debt discount, premium expense . 216 Interest on rentals . . . . . . . . . . . . . . . 210 Total Fixed Charges . . . . . . . . . . . . . $ 8,298 Ratio of Earnings to Fixed Charges . . . . . . . 4.42x -----END PRIVACY-ENHANCED MESSAGE-----