-----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, C5SDRJbSVOXdgFcB6LZytF5wllBBNKAs2KekbPvXO9E/GF2CfI9DU353ZR6WrvoN sLzNoFn/j4dO+OVSgaiLKQ== 0000072909-96-000006.txt : 19960517 0000072909-96-000006.hdr.sgml : 19960517 ACCESSION NUMBER: 0000072909-96-000006 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960331 FILED AS OF DATE: 19960515 SROS: AMEX FILER: COMPANY DATA: COMPANY CONFORMED NAME: NORTHERN STATES POWER CO /WI/ CENTRAL INDEX KEY: 0000072909 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC SERVICES [4911] IRS NUMBER: 390508315 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03140 FILM NUMBER: 96567263 BUSINESS ADDRESS: STREET 1: 100 N BARSTOW ST CITY: EAU CLAIRE STATE: WI ZIP: 54702 BUSINESS PHONE: 7158392621 MAIL ADDRESS: STREET 1: P O BOX 8 CITY: EAU CLAIRE STATE: WI ZIP: 54702-008 10-Q 1 United States SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark one) X Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 For Quarter Ended MARCH 31, 1996 Commission File Number 10-3140 NORTHERN STATES POWER COMPANY, A WISCONSIN CORPORATION, MEETS THE CONDITIONS SET FORTH IN GENERAL INSTRUCTION H (1) AND (2) OF FORM 10-Q AND IS THEREFORE FILING THIS FORM WITH THE REDUCED DISCLOSURE FORMAT. Northern States Power Company (Exact name of registrant as specified in its charter) Wisconsin 39-0508315 (State or other jurisdiction of (I.R.S.Employer Identification No.) incorporation or organization) 100 North Barstow Street, Eau Claire, Wisconsin 54703 (Address of principal executive officers) (Zip Code) Registrant's telephone number, including area code (715) 839-2592 NONE Former name, former address and former fiscal year, if changed since last report 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 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. Class Outstanding at May 15, 1996 Common Stock, $100 par value 862,000 Shares All outstanding common stock is owned beneficially and of record by Northern States Power Company, a Minnesota corporation. Northern States Power Company (Wisconsin) NOTES TO FINANCIAL STATEMENTS The Company is a wholly owned subsidiary of Northern States Power Company, a Minnesota corporation (NSPM). In the opinion of management, the accompanying unaudited financial statements contain all adjustments necessary to present fairly the financial position of Northern States Power Company, a Wisconsin corporation, (Company) as of March 31, 1996 and December 31, 1995, the results of its operations for the three months ended March 31, 1996 and 1995 and its cash flows for the three months ended March 31, 1996 and 1995. Due to the seasonality of the Company's electric and gas sales, operating results on a quarterly and year- to-date basis are not necessarily an appropriate base from which to project annual results. The accounting policies followed by the Company are set forth in Note 1 to the Company's financial statements in its Annual Report on Form 10-K for the year ended December 31, 1995 (Form 10-K). The following notes should be read in conjunction with such policies and other disclosures in the Form 10-K. 1. Accounting Change - Gas Costs While fixed costs (demand charges) from gas suppliers are incurred fairly evenly throughout the year, such costs are recovered in customer rates on a per unit basis (using average annual costs per unit), primarily in the winter heating season when sales volumes are highest. Also, the energy price of gas purchased (excluding demand charges) can vary from estimated levels included in customer rates. As a result, gas costs for both demand and energy charges are incurred throughout the year at a different time than when such costs are recovered from customers. The purchased gas adjustment (PGA) clause allows customer rates to be adjusted periodically to ensure full recovery of all gas costs incurred. Effective January 1, 1996, the Company changed its method of accounting for the regulatory effects of costs recovered through the PGA rate adjustment clause. Previously, the Company expensed gas costs as incurred. Beginning in 1996, the cost of gas expensed is adjusted to equal the level of cost recovery in customer rates, with such adjustments being reflected as regulatory deferrals on the balance sheet. This accounting change results in a better matching of revenues and expenses, and conforms to the cost recognition method used by NSPM. This change affects the timing of expense recognition within the year but will not change total annual gas expense for 1996 or any prior years. The effect of the change on first quarter 1996 results was an increase in gas costs recognized and a decrease in pre-tax operating income of approximately $6.5 million, and a decrease in net income of $3.9 million. Consistent with accounting requirements, prior year quarterly results have not been restated for this change. Had the change been implemented as of January 1, 1995, the effect of the change on first quarter 1995 results would have been an increase in gas costs and a decrease in pre-tax operating income of $3.7 million, and a decrease in net income of $2.2 million. 2. Proposed Business Combination On April 28, 1995, NSPM and Wisconsin Energy Corporation (WEC) entered into an Agreement and Plan of Merger (Merger Agreement), which provides for a strategic business combination involving NSPM, WEC and the Company to form a registered utility holding company, which will be known as Primergy Corporation (Primergy) and will be the parent of NSPM and the current operating subsidiaries of NSPM and WEC. It is anticipated that, following the merger, except for certain gas distribution properties transferred to NSPM, the Company will be merged into WEC's current principal utility subsidiary, Wisconsin Electric Power Company, which will be renamed "Wisconsin Energy Company," and that some of the Company's other subsidiaries will be divested to Primergy or another of its subsidiaries. The business combination is intended to be tax-free for income tax purposes, and to be accounted for as a pooling of interests. The Merger, which was approved by the shareholders of the constituent companies at meetings held on September 13, 1995, is expected to close shortly after all of the conditions of the Merger Agreement, including obtaining applicable regulatory approvals, are met or waived. Although the goal of NSPM and WEC is to receive approvals from the regulatory authorities by the end of 1996, some regulatory authorities have not established a timetable for their decision. Therefore, it is possible that the approvals necessary to consummate the merger may not be obtainable until after 1996. Item 5 of Part II of this report provides additional information regarding the proposed business combination. 3. Rate Matters There were no changes in any of the Company's jurisdictionss rates since the Form 10-K was filed. The technical hearings for the electric and gas stand alone rate cases, based on a 1997 pre-merger test year, are scheduled before the Public Service Commission of Wisconsin on July 8, 1996. Item 2. Management's Discussion and Analysis of Results of Operations Discussion of financial condition and liquidity is omitted per conditions set forth in general instructions H (1) and (2) of Form 10-Q for wholly-owned subsidiaries (reduced disclosure format). On April 28, 1995, NSPM and WEC entered into an Agreement and Plan of Merger which provides for a strategic business combination involving the two companies in a "merger-of-equals" transaction. See Note 2 to the Financial Statements and Part II of this report. The Company's net income for the three months ended March 31, 1996 was $12.9 million. Net income decreased $2.2 million for the comparable period from a year ago. FIRST QUARTER 1996 AS COMPARED WITH FIRST QUARTER 1995 Electric revenues for the first quarter of 1996 increased $3.9 million (4.1 percent) from the electric revenues for the first quarter of 1995. Electric sales increased 4.5% in 1996 from 1995, with the majority of the increase due to the comparably colder temperatures in 1996 and the remainder due to customer and load growth. Gas revenues increased $6.8 million (21.6 percent) in the first quarter of 1996 compared to the first quarter of 1995. Gas sales for the first quarter of 1996 were 12.9% higher than those in the comparable quarter of 1995. Also contributing to the increase were the gas rate increase effective January 1, 1996, as discussed in the Rate Matters Jurisdiction section of the 1995 Form 10-K. Fuel for electric generation expenses increased $0.6 million primarily due to increased generation to meet sales requirements. Purchased and interchange power increased $4.5 million as a result of higher purchased power expenses in 1996 due to higher cost of purchases, reflecting market conditions and higher purchases due to less plant availability. Gas purchased for resale increased $8.2 million with $1.7 million of the increase as a result of increased sales and the remaining $6.5 million as a result of the change in accounting for gas costs as discussed in Note 1 of the Notes to Financial Statements in this report. Other operation costs increased $1.0 million primarily as a result of increased spending in the electric equipment maintenance area. Maintenance expense increased $0.7 million due to increased spending in the diesel operations, and electric transmission and distribution areas. Administrative and general costs decreased $0.4 million due primarily to decreases in employee benefit expenses. Depreciation increased $0.4 million in the first quarter of 1996 over the same quarter of 1995 due to increases in the Company's plant in service. Property and general taxes increased $0.1 million primarily due to taxes on increased plant in service in the State of Wisconsin. Income tax expense of the first quarter of 1996 is down $2.2 million as compared to the first quarter of 1995. This reflects a lower level of pre-tax income in the first quarter of 1996, and is also partially due to adjustments made increasing current tax expense in the first quarter of 1995 as a result of updating the status of estimated income tax liabilities expected to be incurred as a result of unaudited tax years. Other income and deductions increased $0.1 million primarily as a result of an increase in allowance for funds used during construction-equity (AFUDC) due to more equity used to fund construction and an increase in construction work in progress. Interest expense was about the same in both periods. PART II. OTHER INFORMATION Item 5. Other Information Merger Agreement with Wisconsin Energy Corporation As previously reported in The Company's Current Report on Form 8-K, dated May 8, 1995, and filed on May 8, 1995, and the 1995 Form 10-K, NSPM and WEC have entered into a merger agreement which provides for a strategic business combination involving NSPM and WEC in a "merger-of-equals" transaction (Transaction). In connection with the Transaction, the Company will be merged into WEC's principal utility subsidiary, Wisconsin Electric Power Company (WE), which will be renamed Wisconsin Energy Company. Prior to the merger of the Company into Wisconsin Energy Company, a new successor company to NSPM, Northern Power Wisconsin Corp. (New NSP), will acquire from the Company certain gas utility properties and operations in La Crosse and Hudson, Wisconsin with a net historical cost at March 31, 1996 of approximately $18.2 million. The Merger Agreement is subject to various conditions, including the approval of various regulatory agencies. On April 10, 1996, the Michigan Public Service Commission approved the merger application through a settlement agreement containing terms consistent with the merger application. This is the first of four states to act where approval of the merger is required. On April 5, 1996, WEC and NSPM submitted the initial filing to the Securities and Exchange Commission to facilitate registration of a new parent company, Primergy Corporation (Primergy) under the Public Utility Holding Company Act of 1935, as amended. In 1996, WEC and NSPM will also file required notifications with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended. Subject to obtaining all requisite approvals, WEC and NSP anticipate completing the Transaction by January 1, 1997. Detailed information with respect to the Merger Agreement and the proposed Transaction is contained in the 1995 Annual Reports on Form 10-K of NSPM and the Company and in the Joint Proxy Statement/Prospectus dated August 7, 1995 relating to the meetings of the stockholders of WEC and NSPM to vote on the Merger Agreement and related matters. SUMMARIZED PRO FORMA FINANCIAL INFORMATION (UNAUDITED) The following summarized unaudited pro forma financial information combines historical balance sheet and income statement information of WEC and NSPM, and of WE and the Company, to give effect to the Transaction to form Primergy and Wisconsin Energy Company, respectively. The unaudited pro forma balance sheet information gives effect to the Transaction as if it had occurred at March 31, 1996. The unaudited pro forma income statement information gives effect to the Transaction as if it had occurred at January 1, 1996. This pro forma information was prepared from the historical financial statements of NSPM, WEC, WE and the Company on the basis of accounting for the Transaction as a pooling of interest and should be read in conjunction with each historical financial statements and related notes thereto. The allocation between Wisconsin Energy Company and New NSP and their customers of the estimated cost savings resulting from the Transaction, net of costs incurred to achieve such estimated cost savings, will be subject to regulatory review and approval. None of the estimated cost savings, the costs to achieve such savings, nor transaction costs are reflected in the unaudited pro forma financial information. With the exception of certain non-current deferred tax balance sheet reclassifications described below, all other financial statement presentation and accounting policy differences are immaterial and have not been adjusted in the unaudited pro forma financial information. The following information is not necessarily indicative of the financial position or operating results that would have occurred had the Transaction been consummated on the date or at the beginning of the period for which the Transaction is being given effect nor is it necessarily indicative of future operating results or financial position. Primergy Information The following summarized Primergy unaudited pro forma financial information reflects the combination of the historical financial statements of WEC and NSPM after giving effect to the Transaction to form Primergy. A $143 million pro forma adjustment has been made to conform the presentation of noncurrent deferred income taxes in the summarized unaudited pro forma combined balance sheet information as a net liability. The unaudited pro forma combined earnings per common share reflect pro forma adjustments to average NSPM common shares outstanding in accordance with the provisions of the Merger Agreement, whereby each outstanding share of NSPM common stock will be converted into 1.626 shares of Primergy common stock. In the Transaction, each outstanding share of WEC common stock will remain outstanding as a share of Primergy common stock. Primergy Corporation: Unaudited WEC NSPM Pro Forma (As Reported) (As Reported) Combined (Millions, except per share amounts) As of March 31, 1996: Utility plant-net $2 907 $4 321 $7 228 Current assets 502 838 1 340 Other assets * 1 129 1 222 2 208 Total Assets $4 538 $6 381 $10 776 Common stockholders' equity $1 893 $2 066 $3 959 Preferred stockholders' equity 30 241 271 Long-term debt 1 356 1 668 3 024 Total Capitalization 3 279 3 975 7 254 Current liabilities 400 998 1 398 Other liabilities * 859 1 408 2 124 Total Equity & Liabilities $4 538 $6 381 $10 776 For the Three Months Ended March 31, 1996: Utility Operating Revenues $ 495 $ 719 $ 1 214 Utility Operating Income 85 89 174 Net Income, after Preferred Dividend Requirements 63 64 127 Earnings per Common Share: As Reported 0.57 0.94 - NSP Equivalent Shares - - 1.87 Primergy Shares - - 0.57 * Includes a $143 million pro forma adjustment to conform the presentation of noncurrent deferred taxes as a net liability. Wisconsin Energy Company Information The following summarized Wisconsin Energy Company unaudited pro forma financial information combines historical balance sheet and income statement information of WE and the Company to give effect to the Transaction, including the transfer of certain gas utility properties from the Company to New NSP. The unaudited pro forma income statement information does not reflect adjustments to eliminate 1996 first quarter revenues of $14.5 million and related expenses associated with the transfer of certain gas utility properties and operations from the Company to New NSP. A $139 million pro forma adjustment has been made to conform the presentation of noncurrent deferred income taxes in the summarized unaudited pro forma combined balance sheet information as a net liability. Wisconsin Energy Company: ** Unaudited The Pro Forma WE Company Combined (As Reported) (As Reported) *** (Millions of Dollars) As of March 31, 1996: Utility plant-net $2 907 $ 655 $3 542 Current assets 485 73 574 Other assets * 896 60 816 Total Assets $4 288 $ 788 $4 932 Common stockholders' equity $1 718 $ 325 $2 043 Preferred stock and premium 30 - 30 Long-term debt 1 314 213 1 527 Total Capitalization 3 062 538 3 600 Current liabilities 380 88 468 Other liabilities * 846 162 864 Total Equity & Liabilities $4 288 $ 788 $4 932 For the Three Months Ended March 31, 1996: Utility Operating Revenues $ 495 $ 139 $ 634 Utility Operating Income 85 17 102 Net Income, after Preferred Dividend Requirements 62 13 75 * Includes a $143 million pro forma adjustment to conform the presentation of noncurrent deferred taxes as a net liability. ** In connection with the Merger Agreement, WE will be renamed Wisconsin Energy Company. *** Includes a pro forma adjustment for the transfer of certain gas properties from the Company to New NSP and a $139 million pro forma adjustment to conform the presentation of noncurrent deferred taxes as a net liability. Note: Earnings per share of common stock are not applicable because all of the Wisconsin Energy Company common stock will be owned by Primergy. Item 6. Exhibits and Reports on Form 8-K (a) Exhibits The following Exhibit is filed with this report: 27.01 Financial Data Schedule for the three months ended March 31, 1996. The following Exhibits are incorporated herein by reference: None (b) Reports on Form 8-K None 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. NORTHERN STATES POWER COMPANY (Registrant) Date: May 15, 1996 /s/ David E. Ripka Controller (Principal Accounting Officer) Date: May 15, 1996 /s/ Neal Siikarla Treasurer (Principal Financial Officer) NORTHERN STATES POWER COMPANY (WISCONSIN) STATEMENTS OF INCOME
For the Three Months Ended March 31 (Thousands of Dollars) 1996(*) 1995(*) Operating revenues Electric................................ 100,360 96,436 Gas..................................... 38,370 31,558 Total................................. 138,730 127,994 Operating expenses Fuel for electric generation............ 1,781 1,158 Purchased and interchange power......... 48,080 43,584 Gas purchased for resale................ 26,261 18,021 Other operation......................... 14,235 13,219 Maintenance............................. 4,614 3,893 Administrative and general.............. 6,187 6,571 Depreciation and amortization........... 8,529 8,124 Taxes: Property and general............. 3,648 3,521 Current income tax expense....... 7,901 9,511 Net Provision for Deferred Income 380 977 Net Investment tax credit adjustment...................... (227) (234) Total................................. 121,389 108,345 Operating income......................... 17,341 19,649 Other income Other income and deductions - net....... 126 156 Allowance for funds used during construction - Equity................ 136 59 Total Other income..................... 262 215 Income before interest charges........... 17,603 19,864 Interest charges Interest on long-term debt.............. 3,980 4,011 Other interest and amortization......... 799 838 Allowance for funds used during construction - Debt.................. (95) (145) Total................................. 4,684 4,704 Net Income............................... 12,919 15,160 Pro forma Net Income - adjusted to apply the change in accounting for gas costs retroactively to January 1, 1995 (see Note 1) 12,919 12,934 Statements of Retained Earnings Balance at beginning of period........... 221,638 218,833 Net income for period.................... 12,919 15,160 Net Additions.......................... 12,919 15,160 Dividends paid........................... 6,396 6,603 Balance at end of period................. 228,161 227,390 (*) Unaudited The Notes to Financial Statements are an integral part of the Statements of Income and Retained Earnings 2
NORTHERN STATES POWER COMPANY (WISCONSIN) BALANCE SHEETS
March 31 December 31 1996 (*) 1995 (Thousands of dollars) ASSETS UTILITY PLANT Electric.................................... 871,170 864,514 Gas......................................... 95,040 94,425 Common...................................... 67,330 63,758 Total................................... 1,033,540 1,022,697 Accumulated provision for depreciation.... (378,290) (370,634) Net utility plant....................... 655,250 652,063 OTHER PROPERTY AND INVESTMENTS................ 9,484 9,218 CURRENT ASSETS Cash and cash equivalents................... 840 247 Accounts receivable - net................... 35,249 43,134 Materials and supplies - at average cost Fuel...................................... 2,182 6,689 Other..................................... 5,304 5,561 Unbilled utility revenues................... 20,871 18,665 Prepayments and other....................... 8,366 11,295 Total current assets.................... 72,812 85,591 DEFERRED DEBITS Unamortized debt expense.................... 2,746 2,780 Regulatory assets........................... 34,233 34,704 Federal Income tax receivable............... 3,307 3,307 Other....................................... 10,405 3,235 Total deferred debits..................... 50,691 44,026 TOTAL.............................. 788,237 790,898 LIABILITIES CAPITALIZATION Common Stock - authorized 870,000 shares of $100 par value, issued shares: 1996 and 1995, 862,000............ 86,200 86,200 Premium on common stock..................... 10,461 10,461 Retained Earnings........................... 228,161 221,638 Total common stock equity............... 324,822 318,299 LONG-TERM DEBT 213,235 213,235 Total capitalization.................... 538,057 531,534 CURRENT LIABILITIES Notes payable - parent company.............. 37,000 50,900 Accounts payable............................ 10,888 14,884 Salaries, wages, and vacation pay accrued... 4,757 6,343 Payable to affiliate companies (principally 16,923 13,457 Federal taxes accrued....................... 5,518 4,111 Other taxes accrued......................... 2,154 1,537 Interest accrued............................ 5,299 5,300 Deferred tax liability...................... 2,015 1,963 Other....................................... 10,431 4,177 Total current liabilities............... 94,985 102,672 DEFERRED CREDITS Accumulated deferred income taxes........... 100,441 100,227 Accumulated deferred investment tax credits. 20,906 21,205 Regulatory liabilities...................... 17,840 18,020 Customer advances........................... 6,771 6,458 Benefit obligations and other............... 9,237 10,782 Total deferred credits.................. 155,195 156,692 TOTAL............................... 788,237 790,898 (*) Unaudited The Notes to Financial Statements are an integral part of the Balance Sheet. 3
Northern States Power Company (Wisconsin) Statements of Cash Flows
Three Months Ended March 31 (Thousands of dollars) 1996(*) 1995(*) Cash Flows from Operating Activities: Net Income.......................................... 12,919 15,160 Adjustments to reconcile net income to cash from operating activities: Depreciation and amortization..................... 8,744 8,529 Deferred income taxes............................. 267 1,454 Investment tax credit adjustments................. (227) (234) Allowance for funds used during construction - equity....................................... (136) (59) Insurance receivable.............................. 0 1,533 Cash provided from (used by) changes in working capital......................................... 20,146 17,139 Cash provided from (used by) changes in other assets and liabilities....................... (5,768) (2,275) Net cash provided from operating activities 35,945 41,247 Cash Flows from Financing Activities: Issuance (repayment) of short-term debt............. (13,900) (25,000) Redemption of long-term debt(Including Reacquisition Premium) 0 (2,910) Dividends paid...................................... (6,396) (6,603) Net cash used for financing activities (20,296) (34,513) Cash Flows from Investing Activities: Capital expenditures................................ (11,840) (4,980) Increase (decrease) in construction related accounts payable.................................. (615) (942) Allowance for funds used during construction - equity.......................................... 136 59 Other............................................... (2,737) (847) Net cash used for investing activities (15,056) (6,710) Net increase (decrease) in cash and cash equivalents... 593 24 Cash and cash equivalents beginning of period.......... 247 61 Cash and cash equivalents end of period................ 840 85 (*) Unaudited The Notes to Financial Statements are an integral part of the Statements of Cash Flows.
EX-27 2
UT 1000 3-MOS DEC-31-1996 MAR-31-1996 PER-BOOK 655,250 9,484 72,812 50,691 0 788,237 86,200 10,461 228,161 324,822 0 0 213,235 37,000 0 0 0 0 0 0 213,180 788,237 138,730 8,054 113,335 121,389 17,341 262 17,603 4,684 12,919 0 12,919 6,396 3,980 35,945 14.99 14.99
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