-----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, TL8dcI8kA/jmlS+eNEO8RIx6OQmjOn1YguB4jhpaydwHhpHh2VlEXf3EqW1ia/Hj 8pHqADPHsunmhvaspjORhA== 0000061339-98-000005.txt : 19980515 0000061339-98-000005.hdr.sgml : 19980515 ACCESSION NUMBER: 0000061339-98-000005 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980514 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: SEC FILE NUMBER: 000-01125 FILM NUMBER: 98620418 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: MARCH 31, 1998 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 Identification No.) organization) 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 May 14, 1998: 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) (Unaudited)
Three Months Ended March 31, ------------------------ 1998 1997 ------- ------- STATEMENTS OF INCOME Operating Revenues: Electric . . . . . . . . . . . . . . . . . . $38,393 $37,431 Gas . . . . . . . . . . . . . . . . . . . . . 36,722 47,482 ------- ------- Total Operating Revenues . . . . . . . . . 75,115 84,913 ------- ------- Operating Expenses: Fuel for electric generation . . . . . . . . 6,846 7,509 Purchased power . . . . . . . . . . . . . . . 1,702 4,314 Natural gas purchased . . . . . . . . . . . . 22,781 33,176 Other operations . . . . . . . . . . . . . . 15,845 15,358 Maintenance . . . . . . . . . . . . . . . . . 2,527 2,540 Depreciation and amortization . . . . . . . . 8,258 6,364 Other general taxes . . . . . . . . . . . . . 2,330 2,214 Income taxes . . . . . . . . . . . . . . . . 4,592 4,085 ------- ------- Total Operating Expenses . . . . . . . . . 64,881 75,560 ------- ------- Net Operating Income . . . . . . . . . . . . . 10,234 9,353 Allowance for funds used during construction - equity funds . . . . . . . . . . . . . . . . 24 12 Other income, net . . . . . . . . . . . . . . . 691 531 Non-utility operating income/(loss), net . . . 133 786 ------- ------- Income before interest expense . . . . . . . . 11,082 10,682 ------- ------- Interest expense: Interest on long-term debt . . . . . . . . . 2,423 2,404 Other interest . . . . . . . . . . . . . . . 257 248 Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . (13) (6) ------- ------- Net Interest Expense . . . . . . . . . . . 2,667 2,646 ------- ------- Net Income . . . . . . . . . . . . . . . . . . $ 8,415 $ 8,036 ======= ======= Earnings per share of common stock (basic and diluted) (Note 3) . . . . . . . . . . . . . . . $0.52 $0.50 ======= ======= STATEMENTS OF RETAINED INCOME Balance - beginning of period . . . . . . . . . $52,285 $50,451 Earnings on common stock . . . . . . . . . . . 8,415 8,036 Cash dividends on common stock (Note 3) . . . . (5,199) (5,146) ------- ------- Balance - end of period . . . . . . . . . . . . $55,501 $53,341 ======= ======= The accompanying notes are an integral part of the above statements.
Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS (Thousands of Dollars) (Unaudited)
Three Months Ended March 31, ----------------------- 1998 1997 ------- ------- Operating Activities: Net income . . . . . . . . . . . . . . . . . . . $ 8,415 $ 8,036 Items not affecting working capital: Depreciation and amortization . . . . . . . . . 8,258 6,364 Deferred income taxes . . . . . . . . . . . . . (1,438) 16 Amortization of nuclear fuel . . . . . . . . . 618 - Amortization of investment tax credits . . . . (186) (191) Allowance for funds used during construction - equity funds . . . . . . . . . . . . . . . . . (24) (12) Other . . . . . . . . . . . . . . . . . . . . . (44) 181 ------- ------- Net funds provided from operations . . . . . 15,599 14,394 Changes in working capital, excluding cash equivalents, sinking funds, maturities, and interim loans: Decrease in current assets . . . . . . . . . . 14,843 22,801 Increase/(decrease) in current liabilities . . 3,883 (13,812) Other noncurrent items, net . . . . . . . . . . . 6,542 7,096 ------- ------- Cash provided by Operating Activities . . . . . 40,867 30,479 Financing Activities: Cash dividends on common stock . . . . . . . . . (5,199) (5,146) Other decreases in First Mortgage Bonds . . . . . 10 9 Decrease in interim loans . . . . . . . . . . . . (24,750) (21,250) ------- ------- Cash used for Financing Activities . . . . . . (29,939) (26,387) ------- ------- Investing Activities: Additions to utility plant and nuclear fuel . . . (5,176) (3,317) Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . . . . (13) (6) Increase in nuclear decommissioning fund . . . . (2,517) (1,141) ------- ------- Cash used for Investing Activities . . . . . . (7,706) (4,464) ------- ------- Change in Cash and Cash Equivalents (Note 5) . . . 3,222 (372) Cash and cash equivalents at beginning of period . 2,108 5,288 ------- ------- Cash and cash equivalents at end of period . . $ 5,330 $ 4,916 ======= ======= The accompanying notes are an integral part of the above statements.
Madison Gas and Electric Company and Subsidiaries CONSOLIDATED BALANCE SHEETS (Thousands of Dollars) (Unaudited)
Mar. 31, Dec. 31, 1998 1997 -------- -------- ASSETS Utility Plant, at original cost, in service: Electric . . . . . . . . . . . . . . . . . . . . $512,536 $510,405 Gas . . . . . . . . . . . . . . . . . . . . . . . 182,553 181,861 -------- -------- Gross plant in service . . . . . . . . . . . . 695,089 692,266 Less accumulated provision for depreciation . . . (419,811) (407,602) -------- -------- Net plant in service . . . . . . . . . . . . . 275,278 284,664 Construction work in progress . . . . . . . . . . 12,625 10,995 Nuclear decommissioning fund . . . . . . . . . . 66,099 59,179 Nuclear fuel, net . . . . . . . . . . . . . . . . 7,637 8,255 -------- -------- Total Utility Plant . . . . . . . . . . . . . . 361,639 363,093 -------- -------- Other property and investments . . . . . . . . . . 8,004 8,252 -------- -------- Current Assets: Cash and cash equivalents . . . . . . . . . . . . 5,330 2,108 Accounts receivable, less reserves of $1,156 and $1,235, respectively . . . . . . . . . . . . 29,450 28,395 Unbilled revenue . . . . . . . . . . . . . . . . 8,928 13,580 Materials and supplies, at average cost . . . . . 5,794 5,557 Fossil fuel, at average cost . . . . . . . . . . 3,304 3,605 Stored natural gas, at average cost . . . . . . . 1,696 9,851 Prepaid taxes . . . . . . . . . . . . . . . . . . 4,692 7,190 Other prepayments . . . . . . . . . . . . . . . . 1,552 2,081 -------- -------- Total Current Assets . . . . . . . . . . . . . 60,746 72,367 -------- -------- Deferred charges . . . . . . . . . . . . . . . . . 21,801 28,078 -------- -------- Total Assets . . . . . . . . . . . . . . . . $452,190 $471,790 ======== ======== CAPITALIZATION AND LIABILITIES Capitalization (see statement) . . . . . . . . . . $314,072 $310,846 -------- -------- Current Liabilities: Long-term debt sinking fund requirements . . . . 200 200 Interim loans - commercial paper outstanding . . 8,750 33,500 Accounts payable . . . . . . . . . . . . . . . . 11,269 14,528 Accrued taxes . . . . . . . . . . . . . . . . . . 7,113 79 Accrued interest . . . . . . . . . . . . . . . . 3,550 2,206 Accrued nonregulated items . . . . . . . . . . . 4,753 4,837 Other . . . . . . . . . . . . . . . . . . . . . . 4,095 5,247 -------- -------- Total Current Liabilities . . . . . . . . . . . 39,730 60,597 -------- -------- Other Credits: Deferred income taxes . . . . . . . . . . . . . . 44,134 45,572 Regulatory liability - SFAS 109 . . . . . . . . . 24,645 24,875 Investment tax credit - deferred . . . . . . . . 10,499 10,685 Other regulatory liabilities . . . . . . . . . . 19,110 19,215 -------- -------- Total Other Credits . . . . . . . . . . . . . . 98,388 100,347 -------- -------- Commitments . . . . . . . . . . . . . . . . . . . . - - -------- -------- Total Capitalization and Liabilities . . . . $452,190 $471,790 ======== ======== The accompanying notes are an integral part of the balance sheets.
Madison Gas and Electric Company and Subsidiaries CONSOLIDATED STATEMENTS OF CAPITALIZATION (Thousands of Dollars) (Unaudited)
Mar. 31, Dec. 31, 1998 1997 -------- -------- 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 . . . . . . . . . . . . . . . 55,501 52,285 -------- -------- Total Common Shareholders' Equity . . . . . 184,139 180,923 -------- -------- First Mortgage Bonds: 6 1/2%, 2006 series: Pollution Control Revenue Bonds . . . . . . 6,675 6,675 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 . . . . . . . . . . . . . 21,200 21,200 -------- -------- First Mortgage Bonds Outstanding . . . . . 115,175 115,175 Unamortized discount and premium on bonds, net . . . . . . . . . . . . . . . . (1,042) (1,052) Long-term debt sinking fund requirements . . (200) (200) -------- -------- Total First Mortgage Bonds . . . . . . . . 113,933 113,923 Other Long-Term Debt: 6.01%, due 2000 . . . . . . . . . . . . . . . 11,000 11,000 6.91%, due 2004 . . . . . . . . . . . . . . . 5,000 5,000 -------- -------- Total Capitalization . . . . . . . . . . . $314,072 $310,846 ======== ======== The accompanying notes are an integral part of the above statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) March 31, 1998 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 18 through 27 of the Company's 1997 Annual Report to Shareholders and in the Company's 1997 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 1997 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: First Mortgage Bonds and other long-term debt; preferred stock; and notes payable to banks, commercial paper, and lines of credit k. Gas marketing subsidiaries l. Commitments m. Segments of business n. Regulatory assets and liabilities 2. Nuclear Decommissioning Nuclear decommissioning costs are currently being accrued to an end-of-service life of 2002 for Kewaunee Nuclear Power Plant (Kewaunee). These costs are currently recovered from customers in rates and are deposited in external trusts. The Company is presently funding decommissioning costs at the $8.1 million annual level. These trusts are shown on the balance sheet in the utility plant section, and as of March 31, 1998, these trusts totaled $66.1 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 5.6 percent. The Company s share of Kewaunee decommissioning costs is estimated to be $79.9 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 6.0 percent. Physical decommissioning is expected to occur during the period 2014 through 2021, with additional expenditures being incurred during the period 2022 through 2039 related to the storage of spent nuclear fuel at the site. 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 ended March 31, 1998 and 1997, there were 16,079,718 shares. Dividends declared and paid per share of common stock for the three months ended March 31, 1998 and 1997, were $0.323 and $0.320, respectively. 4. Rate Matters The Company received approval from the Public Service Commission of Wisconsin (PSCW) on March 19, 1998, to recover approximately $1.8 million (excluding carrying costs) of deferred expenses related to the 1997 repairs to the Kewaunee steam generator tubes. The deferred expenses are being recovered through a four-month customer surcharge effective April through July of 1998. On April 15, 1998, the Company announced its intention to increase electric rates for the test year beginning January 1, 1999, by $14.6 million, or 8.9 percent annually, and increase natural gas rates by $4.6 million, or 4.5 percent annually, for the same time period. The proposed changes are based on a requested return on common stock equity of 12.5 percent and would remain in effect through the year 2000. The rising cost of fuel coupled with increased transmission and generation costs to improve electric reliability are the primary reasons for the requested increase in electric rates. The proposed gas rate increase will cover pipeline expansion, which will help bring the lowest-cost gas possible to all of the Company's customers. Also, both rate requests include costs to implement technology to ensure computer system compatibility with the year 2000. 5. Supplemental Cash Flow Information For purposes of the Consolidated Statements of Cash Flows, 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 cash receipts from income tax refunds, net, were as follows: Three Months Ended March 31, ------------------- (Thousands of dollars) 1998 1997 ---- ---- Interest, net of amounts capitalized . . . $993 $1,302 Income taxes received, net of payments . . . . . $894 $ 256 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 during the three months ended March 31, 1998 and 1997. It is anticipated that 1998 construction and nuclear fuel expenditures will be approximately $46.4 million. Cash provided by operating activities increased $10.4 million, or 34 percent, from the same three-month period a year ago due to a decrease in current assets. Cash used for financing activities increased $3.6 million, or 13.5 percent, compared to the same period a year ago. This was mainly attributable to a decrease in the Company's short-term debt. Bank lines of credit available to the Company as of March 31, 1998, were $45 million. The Company's capitalization ratios were as follows: Mar. 31, Dec. 31, 1998 1997 -------- -------- Common shareholders' equity . . 57.0% 52.5% Long-term debt* . . . . . . . . 40.3 37.8 Short-term debt . . . . . . . . 2.7 9.7 *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 and Regulatory Environment In February 1996, the PSCW submitted a report to the State Legislature on electric utility restructuring in Wisconsin. Included in the report was a 32-step work plan and time line summarizing expected restructuring activities. During the summer of 1997, Wisconsin and Illinois experienced electric supply shortages due to outages of a number of nuclear plants in Illinois and Wisconsin, including Kewaunee. The electric reliability crisis caused the PSCW to revise its previous plans for restructuring the electric industry. In October 1997, the PSCW stated that retail competition cannot occur until all the safeguards are in place to protect consumers. Also, prior to any significant restructuring, reliability concerns must be addressed. This conclusion was consistent with plans proposed by the Company and a broad coalition of customers. The new plan focuses on the construction of a generation and transmission infrastructure by all Wisconsin utilities to increase the amount of power in the state and the state s ability to obtain electricity from other regions. The PSCW plans to remove any barriers to open access to the transmission system that currently exist and to move forward in its efforts to develop a strong state and regional Independent System Operator (ISO). This would assure that the transmission system is operated safely, reliably, and with open and nondiscriminatory access. Also in its revised plan, the PSCW plans to explore new ways to promote the development of renewable energy sources. The Company is in the process of building a $14 million wind generation project which will allow its customers to purchase blocks of energy produced with renewable resources. The PSCW has not set a date for retail competition and has concluded that any decision to go to retail competition in the electric industry remains to be made in the future. The Company cannot predict what impact future PSCW actions may have on its future financial condition, cash flows, or results of operations. However, the Company believes it is well-positioned to compete in a deregulated market. The restructuring of the electric industry could affect the eligibility of the Company to continue applying Statement of Financial Accounting Standard (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." Under this situation, continued deferral of certain regulatory asset and liability amounts on the Company's books may no longer be appropriate as allowed under SFAS No. 71. The Company is unable to predict whether any adjustments to regulatory assets and liabilities will occur in the future. The PSCW's restructuring plan specifically recognizes the need to allow recovery for commitments made under prior regulatory regimes. The Company's recent rate order authorized a gas cost recovery mechanism that allows recovery of pipeline capacity, Federal Energy Regulatory Commission (FERC)-approved/mandated charges, and supply demand costs. Under the new mechanism, gas commodity costs will be compared to a monthly benchmark equal to the first- of-the-month index plus adders reflecting the effects on pricing for reliability, flexibility, weather, and variable transportation costs. If actual costs are below the benchmark, full recovery is allowed. Gas commodity costs above the benchmark will be reviewed by the PSCW. A target will also be determined for capacity release. Capacity release above the target will be shared 60 percent with the ratepayers and 40 percent with the shareholders. Any shortfalls in capacity release will be shared 40 percent with the ratepayers and 60 percent with the shareholders. Electric Reliability Act On April 28, 1998, Governor Tommy Thompson signed into law 1997 Wisconsin Act 204 (the Act) - the Electric Reliability Plan. The Act seeks to guarantee the reliable provision of electricity in Wisconsin for future generations. It received widespread support from consumer groups, legislators, and utilities. Among the many provisions included in the Act are those streamlining the regulatory process. For instance, the Act requires the PSCW to prepare a strategic energy assessment, and calls for expediting the PSCW and the Department of Natural Resources deadlines to grant certificates of public convenience and necessity needed to construct electric generating facilities and transmission lines. The Act also calls for utilities to voluntarily hand over control of their transmission facilities to an Independent System Operator (ISO) approved by the Federal Regulatory Commission by the year 2000. The Act also includes the following: - - Allowing the construction of "merchant" power plants that would sell their power to utilities. A merchant plant is built without prior commitments to buy the power it will produce. - - Requires a total of 50 megawatts of new generation to come from renewable power sources, such as wind or solar. - - Directs the PSCW to conduct a study of constraints in the intrastate and interstate transmission system that hurt the reliability of electric service in Wisconsin. The PSCW must report the results to the state legislature by September 1, 1998. RESULTS OF OPERATIONS Electric Sales and Revenues Electric retail sales decreased slightly during the three-month period ending March 31, 1998, over the comparable period last year (see table below). Three Months Ended March 31, ---------------------------- Electric Sales (megawatt-hours) 1998 1997 % Change ------- ------- -------- Residential . . . . . . . . 185,793 188,905 (1.6)% Large commercial and industrial . . . . . . . . . 245,297 230,809 6.3 Small commercial and industrial . . . . . . . . . 169,971 172,841 (1.7) Other . . . . . . . . . . . 75,053 87,070 (13.8) ------- ------- Total Retail . . . . . . . 676,114 679,625 (0.5) Resale . . . . . . . . . . . 26,969 5,584 * ------- ------- Total Sales . . . . . . . 703,083 685,209 2.6 ======= ======= *Over 100 percent The decrease in retail sales was due, in part, to the mild winter experienced during this year's first quarter compared to last year's first quarter. Electric operating revenues for the same period increased approximately $1.0 million, or 2.6 percent. The increase in electric operating revenues was primarily the result of a 3.1 percent electric rate increase which became effective in August 1997. Gas Sales and Revenues The decrease in gas delivered was due to the extremely warm weather experienced in the first quarter of this year (see table below). The average temperature for the three months ended March 31, 1998, was 30.6 degrees Fahrenheit as compared to 24.9 degrees Fahrenheit for the same three months ended last year, or 22.9 percent warmer than last year s first quarter. Three Months Ended March 31, ---------------------------- Gas Deliveries 1998 1997 %Change (thousands of therms) ------ ----- ------- Residential . . . . . . . . 35,506 40,961 (13.3)% Commercial and industrial . 29,296 36,399 (19.5) ------ ------ Total Retail . . . . . . . 64,802 77,360 (16.2) Transport . . . . . . . . . 11,277 9,342 20.7 ------ ------ Total Gas Deliveries . . . 76,079 86,702 (12.3) ====== ====== For the three months ended March 31, 1998, gas revenues decreased $10.8 million, or 22.7 percent, compared to last year. This is mainly attributable to the decrease in gas deliveries for the same time period. Retail gas deliveries decreased 16.2 percent for the three months ended March 31, 1998, compared to the same period last year because of the extremely mild weather. Electric Fuel and Natural Gas Costs Fuel cost for electric generation and purchased power costs decreased $3.3 million, or 27.7 percent, for the first three months of 1998 when compared to the same period last year. The Company's electric margin (revenues less fuel and purchased power costs) increased $4.2 million, or 16.6 percent, for the first quarter of 1998 compared to last year's first quarter. The primary factor for the increased electric margin is lower purchased power costs. During the first quarter of 1997, the Company had increased amounts of replacement power costs due to the extended outage of Kewaunee. The Company was granted a customer surcharge by the PSCW, in March 1997, to help offset these higher costs. Natural gas costs for the three months ended March 31, 1998, versus the 1997 comparative period decreased $10.4 million, or 31.3 percent. This is mainly due to the decrease in retail gas deliveries of 16.2 percent, as previously mentioned. Another contributing factor to the decrease in natural gas costs during the first quarter of 1998, compared to last year, was the decrease in the cost per therm of $0.08, or 18.0 percent. Other Operating Expenses Income taxes increased 12.4 percent for the first three months of 1998 when compared to the same time period in 1997. This was mainly attributable to an increase in pretax operating income. Depreciation and amortization expense increased $1.9 million, or 29.8 percent, for the three months ended March 31, 1998, compared to the same time period a year ago. This increase is due to the accelerated depreciation and decommission funding of Kewaunee. The PSCW approved accelerated depreciation and decommission funding for Kewaunee based on its service life ending at the end of 2002. PART II. OTHER INFORMATION ITEM 5 OTHER INFORMATION Kewaunee Nuclear Power Plant Kewaunee is operated by Wisconsin Public Service Corporation (WPSC). The Company has a 17.8 percent ownership interest in Kewaunee. Kewaunee is operating with a license that expires in 2013. On April 7, 1998, the PSCW approved WPSC's application for replacement of the two steam generators at Kewaunee. The total cost of replacing the steam generators would be approximately $90.7 million (the Company's share would be 17.8 percent or $16.1 million). The replacement work is tentatively planned for the spring of 2000 and will take approximately 60 days. However, issues related to the continued operation and future ownership of Kewaunee must be resolved before the steam generator replacement plan proceeds. The owners of Kewaunee have differing views on the desirability of proceeding with the steam generator replacement project. The Company has not favored replacement. The co-owners are continuing to discuss resolution of the issues. Kewaunee has been in operation since 1974 and is jointly owned by the Company, WPSC, and Wisconsin Power and Light Company. Background information regarding Kewaunee steam generator repair issues is set forth in the registrant's Annual Report on Form 10-K for the year ended December 31, 1997. 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 1997 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: May 14, 1998 David C. Mebane Chairman, President and Chief Executive Officer (Duly Authorized Officer) Date: May 14, 1998 Terry A. Hanson Vice President - Finance (Chief Financial and Accounting Officer) EX-12 2 Ratio of Earnings to Fixed Charges Exhibit 12 Three Months Ended (Thousands of dollars) March 31, 1998 -------------- Earnings Income before interest expense . . . . . . . . $11,082 Add: Income tax items . . . . . . . . . . . . . . . 4,592 Income tax on other income . . . . . . . . . . 620 Amortization of debt discount, premium expense. 56 Allowance for funds used during construction - borrowed funds . . . . . . . . . . . . . . 13 Interest on rentals . . . . . . . . . . . . . . 238 ------- Total Earnings . . . . . . . . . . . . . . $16,601 ======= Fixed Charges Interest on long-term debt . . . . . . . . . . $ 2,423 Other interest . . . . . . . . . . . . . . . . 257 Amortization of debt discount, premium expense 56 Interest on rentals . . . . . . . . . . . . . . 238 ------- Total Fixed Charges . . . . . . . . . . . . $ 2,974 ======= Ratio of Earnings to Fixed Charges . . . . . . 5.58 ======= EX-27 3 WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
UT This schedule contains summary financial information extracted from SEC Form 10-Q. Items 1 through 22 are as of March 31, 1998. Items 23 through 38 are for the three months ended March 31, 1998. 1,000 3-MOS DEC-31-1998 MAR-31-1998 PER-BOOK 361,639 8,004 60,746 21,801 0 452,190 16,080 112,558 55,501 184,139 0 0 129,933 8,750 0 0 200 0 0 0 129,168 452,190 75,115 4,592 60,289 64,881 10,234 848 11,082 2,667 8,415 0 8,415 (5,199) 8,649 40,867 0.52 0.52
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