SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
/X/ Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
For the quarterly period ended MARCH 31, 2002
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-3548
ALLETE, Inc.
A Minnesota Corporation
IRS Employer Identification No. 41-0418150
30 West Superior Street
Duluth, Minnesota 55802-2093
Telephone - (218) 279-5000
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
----- -----
Common Stock, no par value,
84,827,051 shares outstanding
as of April 30, 2002
INDEX
Page
Definitions 2
Safe Harbor Statement 3
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 2002 and December 31, 2001 4
Consolidated Statement of Income -
Quarter Ended March 31, 2002 and 2001 5
Consolidated Statement of Cash Flows -
Quarter Ended March 31, 2002 and 2001 6
Notes to Consolidated Financial Statements 7
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 11
Item 3. Quantitative and Qualitative Disclosures
about Market Risk 16
Part II. Other Information
Item 4. Submission of Matters to a Vote of Security Holders 17
Item 5. Other Information 18
Item 6. Exhibits and Reports on Form 8-K 19
Signatures 20
1 ALLETE First Quarter 2002 Form 10-Q
DEFINITIONS
The following abbreviations or acronyms are used in the text. References in this
report to "we," "us" and "our" are to ALLETE, Inc. and its subsidiaries,
collectively.
ABBREVIATION OR ACRONYM TERM
- --------------------------------------------------------------------------------
2001 Form 10-K ALLETE's Annual Report on Form 10-K for the Year
Ended December 31, 2001
ADESA ADESA Corporation
AFC Automotive Finance Corporation
ALLETE ALLETE, Inc.
ALLETE Water Services ALLETE Water Services, Inc.
Company ALLETE, Inc. and its subsidiaries
EBITDAL Earnings Before Interest, Taxes, Depreciation,
Amortization and Lease Expense
Electric Odyssey Electric Outlet, Inc.
Enventis Telecom Enventis Telecom, Inc.
ESOP Employee Stock Ownership Plan
FERC Federal Energy Regulatory Commission
Florida Water Florida Water Services Corporation
FPSC Florida Public Service Commission
Great Rigs Great Rigs Incorporated
Minnesota Power An operating division of ALLETE, Inc.
MPUC Minnesota Public Utilities Commission
MW Megawatt(s)
NCUC North Carolina Utilities Commission
NRG Energy NRG Energy, Inc.
PSCW Public Service Commission of Wisconsin
SEC Securities and Exchange Commission
SFAS Statement of Financial Accounting Standards No.
Split Rock Energy Split Rock Energy LLC
Square Butte Square Butte Electric Cooperative
ALLETE First Quarter 2002 Form 10-Q 2
SAFE HARBOR STATEMENT
UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995, we are hereby filing cautionary statements
identifying important factors that could cause our actual results to differ
materially from those projected in forward-looking statements (as such term is
defined in the Private Securities Litigation Reform Act of 1995) made by or on
behalf of ALLETE in this Quarterly Report on Form 10-Q, in presentations, in
response to questions or otherwise. Any statements that express, or involve
discussions as to, expectations, beliefs, plans, objectives, assumptions or
future events or performance (often, but not always, through the use of words or
phrases such as "anticipates," "believes," "estimates," "expects," "intends,"
"plans," "projects," "will likely result," "will continue" or similar
expressions) are not statements of historical facts and may be forward-looking.
Forward-looking statements involve estimates, assumptions, risks and
uncertainties and are qualified in their entirety by reference to, and are
accompanied by, the following important factors, which are difficult to predict,
contain uncertainties, are beyond the control of ALLETE and may cause actual
results or outcomes to differ materially from those contained in forward-looking
statements:
- war and acts of terrorism;
- prevailing governmental policies and regulatory actions, including those of
the United States Congress, state legislatures, the FERC, the MPUC, the
FPSC, the NCUC, the PSCW and various county regulators, about allowed rates
of return, financings, industry and rate structure, acquisition and
disposal of assets and facilities, operation and construction of plant
facilities, recovery of purchased power and capital investments, and
present or prospective wholesale and retail competition (including but not
limited to transmission costs) as well as general vehicle-related laws,
including vehicle brokerage and auction laws;
- unanticipated impacts of restructuring initiatives in the electric
industry;
- economic and geographic factors, including political and economic risks;
- changes in and compliance with environmental and safety laws and policies;
- weather conditions;
- population growth rates and demographic patterns;
- the effects of competition, including the competition for retail and
wholesale customers, as well as suppliers and purchasers of vehicles;
- pricing and transportation of commodities;
- market demand, including structural market changes;
- changes in tax rates or policies or in rates of inflation;
- unanticipated project delays or changes in project costs;
- unanticipated changes in operating expenses and capital expenditures;
- capital market conditions;
- competition for economic expansion or development opportunities;
- our ability to manage expansion and integrate recent acquisitions; and
- legal and administrative proceedings (whether civil or criminal) and
settlements that affect the business and profitability of ALLETE.
Any forward-looking statement speaks only as of the date on which such statement
is made, and ALLETE undertakes no obligation to update any forward-looking
statement to reflect events or circumstances after the date on which that
statement is made or to reflect the occurrence of unanticipated events. New
factors emerge from time to time and it is not possible for management to
predict all of these factors, nor can it assess the impact of each of these
factors on the businesses of ALLETE or the extent to which any factor, or
combination of factors, may cause actual results to differ materially from those
contained in any forward-looking statement.
3 ALLETE First Quarter 2002 Form 10-Q
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
ALLETE
CONSOLIDATED BALANCE SHEET
Millions
MARCH 31, DECEMBER 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------
ASSETS
Current Assets
Cash and Cash Equivalents $ 219.9 $ 220.2
Trading Securities 165.9 155.6
Accounts Receivable (Less Allowance of $14.7 and $11.7) 370.8 328.2
Inventories 31.3 32.0
Prepayments and Other 144.5 131.7
Discontinued Operations 38.4 42.2
- -------------------------------------------------------------------------------------------------------------------
Total Current Assets 970.8 909.9
Property, Plant and Equipment 1,343.0 1,323.3
Investments 136.0 141.0
Goodwill 495.2 494.4
Other Intangible Assets 39.8 34.8
Other Assets 69.4 68.8
Discontinued Operations 323.3 310.3
- -------------------------------------------------------------------------------------------------------------------
TOTAL ASSETS $3,377.5 $ 3,282.5
- -------------------------------------------------------------------------------------------------------------------
LIABILITIES AND SHAREHOLDERS' EQUITY
LIABILITIES
Current Liabilities
Accounts Payable $ 375.6 $ 239.8
Accrued Taxes, Interest and Dividends 53.8 38.1
Notes Payable 224.5 267.4
Long-Term Debt Due Within One Year 8.6 6.9
Other 77.6 106.4
Discontinued Operations 34.2 45.9
- -------------------------------------------------------------------------------------------------------------------
Total Current Liabilities 774.3 704.5
Long-Term Debt 931.7 933.8
Accumulated Deferred Income Taxes 118.0 107.0
Other Liabilities 148.4 163.5
Discontinued Operations 155.9 154.9
- -------------------------------------------------------------------------------------------------------------------
Total Liabilities 2,128.3 2,063.7
- -------------------------------------------------------------------------------------------------------------------
Company Obligated Mandatorily Redeemable
Preferred Securities of Subsidiary ALLETE Capital I
Which Holds Solely Company Junior Subordinated Debentures 75.0 75.0
- -------------------------------------------------------------------------------------------------------------------
SHAREHOLDERS' EQUITY
Common Stock Without Par Value, 130.0 Shares Authorized
84.7 and 83.9 Shares Outstanding 787.5 770.3
Unearned ESOP Shares (51.8) (52.7)
Accumulated Other Comprehensive Loss (16.5) (14.5)
Retained Earnings 455.0 440.7
- -------------------------------------------------------------------------------------------------------------------
Total Shareholders' Equity 1,174.2 1,143.8
- -------------------------------------------------------------------------------------------------------------------
TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $3,377.5 $ 3,282.5
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
ALLETE First Quarter 2002 Form 10-Q 4
ALLETE
CONSOLIDATED STATEMENT OF INCOME
Millions Except Per Share Amounts - Unaudited
QUARTER ENDED
MARCH 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------
OPERATING REVENUE
Energy Services $ 142.9 $ 159.0
Automotive Services 213.5 204.9
Investments 16.6 13.0
- -------------------------------------------------------------------------------------------------------------------
Total Operating Revenue 373.0 376.9
- -------------------------------------------------------------------------------------------------------------------
OPERATING EXPENSES
Fuel and Purchased Power 49.4 62.4
Operations 251.3 242.8
Interest 15.9 19.3
- -------------------------------------------------------------------------------------------------------------------
Total Operating Expenses 316.6 324.5
- -------------------------------------------------------------------------------------------------------------------
OPERATING INCOME FROM CONTINUING OPERATIONS 56.4 52.4
DISTRIBUTIONS ON REDEEMABLE
PREFERRED SECURITIES OF ALLETE CAPITAL I 1.5 1.5
INCOME TAX EXPENSE 21.5 20.2
- -------------------------------------------------------------------------------------------------------------------
INCOME FROM CONTINUING OPERATIONS 33.4 30.7
INCOME FROM DISCONTINUED OPERATIONS 1.8 2.2
- -------------------------------------------------------------------------------------------------------------------
NET INCOME $ 35.2 $ 32.9
- -------------------------------------------------------------------------------------------------------------------
AVERAGE SHARES OF COMMON STOCK
Basic 80.4 71.5
Diluted 81.0 72.1
- -------------------------------------------------------------------------------------------------------------------
EARNINGS PER SHARE OF COMMON STOCK
BASIC AND DILUTED
Continuing Operations $0.42 $0.43
Discontinued Operations 0.02 0.03
- -------------------------------------------------------------------------------------------------------------------
$0.44 $0.46
- -------------------------------------------------------------------------------------------------------------------
DIVIDENDS PER SHARE OF COMMON STOCK $0.275 $0.2675
- -------------------------------------------------------------------------------------------------------------------
The accompanying notes are an integral part of these statements.
5 ALLETE First Quarter 2002 Form 10-Q
ALLETE
CONSOLIDATED STATEMENT OF CASH FLOWS
Millions - Unaudited
QUARTER ENDED
MARCH 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------
OPERATING ACTIVITIES
Net Income $ 35.2 $ 32.9
Depreciation and Amortization 19.9 25.4
Deferred Income Taxes 3.8 (1.4)
Changes In Operating Assets and Liabilities
Trading Securities (10.3) (3.6)
Accounts Receivable (40.7) (124.3)
Inventories 1.3 (3.5)
Accounts Payable 134.0 108.4
Other Current Assets and Liabilities (35.9) (23.7)
Other - Net 3.2 6.4
- -------------------------------------------------------------------------------------------------------------------
Cash from Operating Activities 110.5 16.6
- -------------------------------------------------------------------------------------------------------------------
INVESTING ACTIVITIES
Proceeds from Sale of Investments 1.9 -
Additions to Investments (1.8) (1.9)
Additions to Property, Plant and Equipment (46.9) (24.6)
Acquisitions - Net of Cash Acquired (16.7) (47.2)
Other - Net (0.5) 8.8
- -------------------------------------------------------------------------------------------------------------------
Cash for Investing Activities (64.0) (64.9)
- -------------------------------------------------------------------------------------------------------------------
FINANCING ACTIVITIES
Issuance of Common Stock 17.2 6.9
Issuance of Long-Term Debt 1.3 125.8
Changes in Notes Payable - Net (42.9) (56.0)
Reductions of Long-Term Debt (2.8) (10.3)
Dividends on Common Stock (21.0) (19.0)
- -------------------------------------------------------------------------------------------------------------------
Cash from (for) Financing Activities (48.2) 47.4
- -------------------------------------------------------------------------------------------------------------------
EFFECT OF EXCHANGE RATE CHANGES ON CASH (0.5) (8.9)
- -------------------------------------------------------------------------------------------------------------------
CHANGE IN CASH AND CASH EQUIVALENTS (2.2) (9.8)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD <F1> 234.2 219.3
- -------------------------------------------------------------------------------------------------------------------
CASH AND CASH EQUIVALENTS AT END OF PERIOD <F1> $ 232.0 $ 209.5
- -------------------------------------------------------------------------------------------------------------------
SUPPLEMENTAL CASH FLOW INFORMATION
Cash Paid During the Period For
Interest - Net of Capitalized $22.8 $23.7
Income Taxes $3.2 $1.7
- -------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Included cash from discontinued operations.
</FN>
The accompanying notes are an integral part of these statements.
ALLETE First Quarter 2002 Form 10-Q 6
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying unaudited consolidated financial statements and notes should be
read in conjunction with our 2001 Form 10-K. In our opinion all adjustments
necessary for a fair statement of the results for the interim periods have been
included. The results of operations for an interim period may not give a true
indication of results for the year. The financial information for prior periods
has been reclassified to reflect the discontinuance of our Water Services
businesses, our auto transport business-Great Rigs, and our retail
business-Electric Odyssey.
NOTE 1. BUSINESS SEGMENTS
Millions
INVESTMENTS
ENERGY AUTOMOTIVE AND CORPORATE
CONSOLIDATED SERVICES SERVICES CHARGES
- -------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED MARCH 31, 2002
Operating Revenue $373.0 $ 142.9 $213.5<F2> $ 16.6
Operation and Other Expense 273.8 109.6 152.8 11.4
Depreciation and Amortization Expense 19.7 11.9 7.8 -
Lease Expense 7.2 1.1 6.1 -
Interest Expense 15.9 4.7 5.7 5.5
- -------------------------------------------------------------------------------------------------------------------
Operating Income (Loss) from Continuing Operations 56.4 15.6 41.1 (0.3)
Distributions on Redeemable
Preferred Securities of Subsidiary 1.5 0.6 - 0.9
Income Tax Expense (Benefit) 21.5 5.9 16.4 (0.8)
- -------------------------------------------------------------------------------------------------------------------
Income (Loss) from Continuing Operations 33.4 $ 9.1 $ 24.7 $ (0.4)
-------------------------------------------------
Income from Discontinued Operations 1.8
- ------------------------------------------------------------
Net Income $ 35.2
- ------------------------------------------------------------
EBITDAL from Continuing Operations $99.2 $33.3 $60.7 $5.2
Total Assets $3,377.5<F1> $1,003.2 $1,638.2<F3> $374.4
Property, Plant and Equipment $1,343.0 $881.5 $457.3 $4.2
Accumulated Depreciation and Amortization $834.9 $704.1 $128.6 $2.2
Capital Expenditures $46.9<F1> $20.6 $10.6 -
- -------------------------------------------------------------------------------------------------------------------
FOR THE QUARTER ENDED MARCH 31, 2001
Operating Revenue $376.9 $ 159.0 $204.9<F2> $ 13.0
Operation and Other Expense 277.0 120.8 147.4 8.8
Depreciation and Amortization Expense 21.7 11.6 10.0 0.1
Lease Expense 6.5 0.6 5.9 -
Interest Expense 19.3 4.9 10.6 3.8
- -------------------------------------------------------------------------------------------------------------------
Operating Income from Continuing Operations 52.4 21.1 31.0 0.3
Distributions on Redeemable
Preferred Securities of Subsidiary 1.5 0.6 - 0.9
Income Tax Expense (Benefit) 20.2 8.1 12.9 (0.8)
- -------------------------------------------------------------------------------------------------------------------
Income from Continuing Operations 30.7 $ 12.4 $ 18.1 $ 0.2
-------------------------------------------------
Income from Discontinued Operations 2.2
- ------------------------------------------------------------
Net Income $ 32.9
- ------------------------------------------------------------
EBITDAL from Continuing Operations $99.9 $38.2 $57.5 $4.2
Total Assets $3,097.5<F1> $906.6 $1,586.9<F3> $260.1
Property, Plant and Equipment $1,214.6 $785.3 $425.0 $4.3
Accumulated Depreciation and Amortization $776.9 $672.0 $102.7 $2.2
Capital Expenditures $24.6<F1> $8.0 $9.7 -
- -------------------------------------------------------------------------------------------------------------------
<FN>
<F1> Discontinued Operations represented $361.7 million of total assets in 2002
($343.9 million in 2001); and $15.7 million of capital expenditures in 2002
($6.9 million in 2001).
<F2> Included $34.3 million of Canadian operating revenue in 2002 ($34.8 million in 2001).
<F3> Included $222.4 million of Canadian assets in 2002 ($227.2 million in 2001).
</FN>
7 ALLETE First Quarter 2002 Form 10-Q
NOTE 2. DISCONTINUED OPERATIONS
In September 2001 we began a process of systematically evaluating our businesses
to determine the strategic value of our assets and explore ways to unlock that
value. As a result, our management and Board of Directors have committed to a
plan to sell our Water Services businesses and our auto transport business.
Water Services includes water and wastewater services operated by several wholly
owned subsidiaries in Florida, North Carolina and Georgia. We anticipate selling
our Water Services businesses before the end of 2002. During the first quarter
of 2002 we exited our nonregulated water subsidiaries. We expect to exit the
auto transport business during the second quarter 2002. We will continue to
incur operating losses until we sell those assets. We have also completely
exited the Electric Odyssey, our retail business. The financial results for all
of these businesses have been accounted for as discontinued operations. In
accordance with SFAS 144, we ceased depreciation of assets related to these
businesses in the fourth quarter of 2001.
QUARTER ENDED
MARCH 31,
INCOME STATEMENT 2002 2001
- --------------------------------------------------------------------------------
Millions
Operating Revenue $32.7 $36.1
- --------------------------------------------------------------------------------
Pre-Tax Income $3.1 $3.6
Income Tax Expense 1.3 1.4
- --------------------------------------------------------------------------------
Income from Discontinued Operations $1.8 $2.2
- --------------------------------------------------------------------------------
MARCH 31, DECEMBER 31,
BALANCE SHEET INFORMATION 2002 2001
- --------------------------------------------------------------------------------
Millions
Assets of Discontinued Operations
Cash and Cash Equivalents $ 12.1 $ 14.0
Other Current Assets 26.3 28.2
Property, Plant and Equipment 293.9 280.8
Other Assets 29.4 29.5
- --------------------------------------------------------------------------------
$ 361.7 $ 352.5
- --------------------------------------------------------------------------------
Liabilities of Discontinued Operations
Current Liabilities $ 34.2 $ 45.9
Long-Term Debt 127.5 128.7
Other Liabilities 28.4 26.2
- --------------------------------------------------------------------------------
$ 190.1 $ 200.8
- --------------------------------------------------------------------------------
ALLETE First Quarter 2002 Form 10-Q 8
NOTE 3. INCOME TAX EXPENSE
QUARTER ENDED
MARCH 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------
Millions
Current Tax
Federal $ 14.7 $ 18.7
Foreign 2.8 0.8
State 1.7 2.1
- -------------------------------------------------------------------------------------------------------------------
19.2 21.6
- -------------------------------------------------------------------------------------------------------------------
Deferred Tax
Federal 1.9 (1.2)
Foreign 0.2 (0.2)
State 0.5 0.4
- -------------------------------------------------------------------------------------------------------------------
2.6 (1.0)
- -------------------------------------------------------------------------------------------------------------------
Deferred Tax Credits (0.3) (0.4)
- -------------------------------------------------------------------------------------------------------------------
Income Taxes on Continuing Operations 21.5 20.2
Income Taxes on Discontinued Operations 1.3 1.4
- -------------------------------------------------------------------------------------------------------------------
Total Income Tax Expense $ 22.8 $ 21.6
- -------------------------------------------------------------------------------------------------------------------
NOTE 4. TOTAL COMPREHENSIVE INCOME
For the quarter ended March 31, 2002 total comprehensive income was $33.2
million ($26.4 million for the quarter ended March 31, 2001). Total
comprehensive income includes net income, unrealized gains and losses on
securities classified as available-for-sale, changes in the fair value of an
interest rate swap and foreign currency translation adjustments.
NOTE 5. GOODWILL AND OTHER INTANGIBLE ASSETS
We adopted SFAS 142, "Goodwill and Other Intangible Assets," in January 2002 and
accordingly no longer amortize goodwill. We completed the required goodwill
impairment testing in the first quarter of 2002 and no goodwill is impaired at
this time. SFAS 142 requires disclosure of what reported net income and earnings
per share would have been in all periods presented exclusive of amortization
expense recognized in those periods related to goodwill or other intangible
assets that are no longer being amortized. All goodwill amortization related to
continuing operations.
QUARTER ENDED
MARCH 31,
2002 2001
- --------------------------------------------------------------------------------
Millions Except Per Share Amounts
NET INCOME
Reported $35.2 $32.9
Goodwill Amortization - 2.8
- --------------------------------------------------------------------------------
Adjusted $ 35.2 $ 35.7
- --------------------------------------------------------------------------------
BASIC AND DILUTED EARNINGS PER SHARE
Reported $0.44 $0.46
Goodwill Amortization - 0.04
- --------------------------------------------------------------------------------
Adjusted $0.44 $0.50
- --------------------------------------------------------------------------------
9 ALLETE First Quarter 2002 Form 10-Q
NOTE 6. NEW ACCOUNTING STANDARDS
SFAS 143, "Accounting for Asset Retirement Obligations," requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the carrying
amount of the related long-lived asset is correspondingly increased. Over time,
the liability is accreted to its present value and the related capitalized
charge is depreciated over the useful life of the asset. SFAS 143 is effective
for fiscal years beginning after June 15, 2002. Currently, decommissioning
amounts collected in Minnesota Power's rates are reported in accumulated
depreciation. We are reviewing what additional assets, if any, may have
associated retirement costs as defined by SFAS 143.
NOTE 7. SQUARE BUTTE POWER PURCHASED CONTRACT
Minnesota Power has a power purchase agreement with Square Butte that extends
through 2026 (Agreement). It provides a long-term supply of low-cost energy to
customers in our electric service territory and enables Minnesota Power to meet
power pool reserve requirements. Square Butte, a North Dakota cooperative
corporation, owns a 455-MW coal-fired generating unit (Unit) near Center, North
Dakota. The Unit is adjacent to a generating unit owned by Minnkota Power
Cooperative, Inc. (Minnkota), a North Dakota cooperative corporation whose Class
A members are also members of Square Butte. Minnkota serves as the operator of
the Unit and also purchases power from Square Butte.
Minnesota Power is entitled to approximately 71 percent of the Unit's output
under the Agreement. After 2005 and upon compliance with a two-year advance
notice requirement, Minnkota has the option to reduce Minnesota Power's
entitlement by 5 percent annually, to a minimum of 50 percent. Minnesota Power
is obligated to pay its pro rata share of Square Butte's costs based on
Minnesota Power's entitlement to Unit output. Minnesota Power's payment
obligation is suspended if Square Butte fails to deliver any power, whether
produced or purchased, for a period of one year. Square Butte's fixed costs
consist primarily of debt service. At March 31, 2002 Square Butte had total debt
outstanding of $299.1 million. Total annual debt service for Square Butte is
expected to be approximately $36 million in each of the years 2002 and 2003, and
$23 million in each of the years 2004 through 2006. Variable operating costs
include the price of coal purchased from BNI Coal, Ltd., our subsidiary, under a
long-term contract. Minnesota Power's payments to Square Butte are approved as
purchased power expense for ratemaking purposes by both the MPUC and FERC.
ALLETE First Quarter 2002 Form 10-Q 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
ALLETE has core operations that are focused on two business segments. ENERGY
SERVICES includes electric and gas services, coal mining and telecommunications.
AUTOMOTIVE SERVICES includes a network of wholesale and total loss vehicle
auctions, a finance company, a vehicle remarketing company, a company that
provides vehicle inspection services to the automotive industry and its lenders,
and a company that provides Internet-based automotive parts location and
insurance claim audit services nationwide. INVESTMENTS AND CORPORATE CHARGES
provide corporate liquidity and include our real estate operations, investments
in emerging technologies related to the electric utility industry, our
securities portfolio and corporate charges. Corporate charges represent general
corporate expenses, including interest, not specifically related to any one
business segment. DISCONTINUED OPERATIONS includes our Water Services
businesses, our auto transport business-Great Rigs, and our retail
business-Electric Odyssey.
CONSOLIDATED OVERVIEW
For the quarter ended March 31, 2002, net income was up 7 percent and earnings
per share were down 4 percent over the same period of 2001. Excluding $2.3
million, or $0.02 per share, of charges related to our exit from non-strategic
businesses, earnings per share for the quarter ended March 31, 2002 would have
been $0.46. Earnings for 2001 included $2.8 million, or $0.04 per share, of
goodwill amortization expense. The issuance of 6.6 million shares of our common
stock in the second quarter of 2001 also impacted earnings per share for 2002.
QUARTER ENDED
MARCH 31,
2002 2001
- -------------------------------------------------------------------------------------------------------------------
Millions Except Per Share Amounts
Operating Revenue
Energy Services $142.9 $ 159.0
Automotive Services 213.5 204.9
Investments 16.6 13.0
- -------------------------------------------------------------------------------------------------------------------
$373.0 $ 376.9
- -------------------------------------------------------------------------------------------------------------------
Operating Expenses
Energy Services $127.3 $ 137.9
Automotive Services 172.4 173.9
Investments and Corporate Charges 16.9 12.7
- -------------------------------------------------------------------------------------------------------------------
$316.6 $ 324.5
- -------------------------------------------------------------------------------------------------------------------
Net Income
Energy Services $ 9.1 $ 12.4
Automotive Services 24.7 18.1
Investments and Corporate Charges (0.4) 0.2
- -------------------------------------------------------------------------------------------------------------------
33.4 30.7
Discontinued Operations 1.8 2.2
- -------------------------------------------------------------------------------------------------------------------
$ 35.2 $ 32.9
- -------------------------------------------------------------------------------------------------------------------
Diluted Average Shares of Common Stock - Millions 81.0 72.1
- -------------------------------------------------------------------------------------------------------------------
Diluted Earnings Per Share of Common Stock
Continuing Operations $0.42 $0.43
Discontinued Operations 0.02 0.03
- -------------------------------------------------------------------------------------------------------------------
$0.44 $0.46
- -------------------------------------------------------------------------------------------------------------------
11 ALLETE First Quarter 2002 Form 10-Q
NET INCOME
ENERGY SERVICES' net income in 2002 decreased $3.3 million, or 27 percent,
primarily due to weaker wholesale market conditions. Last year's stronger
economy and colder winter weather resulted in higher wholesale prices. Total
retail megawatthour sales were similar to last year.
AUTOMOTIVE SERVICES reported a $6.6 million, or 36 percent, increase in net
income and a 6 percent increase in EBITDAL over 2001. The continued growth in
net income was primarily due to higher conversion rates, improved cost
efficiencies, a mandated accounting change related to goodwill amortization and
lower interest rates. The conversion rate (the percentage of vehicles sold from
those that were offered at auction) related to wholesale vehicles sold was 66
percent for the quarter ended March 31, 2002 (64 percent for the same period in
2001). In 2002 vehicles sold at our wholesale auction facilities were similar to
last year. Fleet downsizing by rental car companies after September 11, 2001
resulted in increased sales of factory vehicles at our auction facilities during
the fourth quarter of 2001 to the detriment of the first quarter of 2002.
Vehicle sales in other higher margin categories had strong conversion rates in
2002 and helped mitigate the reduction in sales of factory vehicles. Vehicles
sold at our total loss vehicle auction facilities were up 37 percent from 2001.
AFC contributed 30 percent of the net income for Automotive Services in 2002 (36
percent in 2001) and reported a 7 percent increase in the number of vehicles
financed.
INVESTMENTS AND CORPORATE CHARGES reported lower net income in 2002 due in part
to lower returns on our securities portfolio. Our securities portfolio earned an
after-tax annualized return of 3.08 percent in 2002 (10.32 percent in 2001).
This decrease was partially offset by larger real estate sales and more income
from our emerging technology investments.
DISCONTINUED OPERATIONS was down $0.4 million reflecting $2.3 million of exit
charges associated with Great Rigs and the Electric Odyssey. This decrease was
partially offset by a $1.8 million increase in net income from our Water
Services businesses primarily due to the suspension of depreciation.
COMPARISON OF THE QUARTERS ENDED MARCH 31, 2002 AND 2001
ENERGY SERVICES
OPERATING REVENUE was down $16.1 million, or 10 percent, in 2002. Revenue from
wholesale power marketing and trading activities decreased $11.3 million
primarily due to weak wholesale market conditions as a result of warmer winter
weather in 2002. Revenue from retail electric and gas sales was down $10.9
million in 2002 reflecting warmer winter weather, lower fuel clause recoveries
and lower industrial revenue. Total retail megawatthour sales were similar to
last year. These 2002 decreases were partially offset by $4.6 million more
revenue from Enventis Telecom reflecting the July 2001 acquisition of Enventis,
Inc.
Revenue from electric sales to taconite customers accounted for 10 percent of
consolidated operating revenue in both 2002 and 2001. Electric sales to paper
and pulp mills accounted for 4 percent of consolidated operating revenue in both
2002 and 2001. Sales to other power suppliers accounted for 4 percent of
consolidated operating revenue in 2002 (7 percent in 2001).
OPERATING EXPENSES were down $10.6 million, or 8 percent, in 2002. Purchased
power expense was down $14.4 million in 2002 because Company generation was up
10 percent and 7 percent fewer megawatthours were sold. Purchased gas expense
was lower in 2002 because in 2001 prices paid were at record highs. These
decreases were partially offset by the inclusion of Enventis, Inc. operations.
ALLETE First Quarter 2002 Form 10-Q 12
AUTOMOTIVE SERVICES
OPERATING REVENUE was up $8.6 million, or 4 percent, in 2002 reflecting strong
conversion rates at wholesale auction facilities. At ADESA, 461,000 wholesale
vehicles were sold in 2002 (465,000 in 2001). Vehicles sold were impacted by a
reduction in factory vehicles brought to auction. Stronger sales in other
vehicle categories helped mitigate the reduction in factory vehicles. In
addition, at our total loss vehicle auctions 48,000 vehicles were sold in 2002
(35,000 in 2001), an increase of 37 percent.
Operating revenue from AFC was higher in 2002 reflecting a 7 percent increase in
vehicles financed through its loan production offices. AFC financed
approximately 237,000 vehicles in 2002 (221,000 in 2001) and managed total
receivables of $500 million at March 31, 2002 ($497 million at March 31, 2001).
OPERATING EXPENSES were down $1.5 million, or 1 percent, in 2002 primarily due
to the discontinuance of goodwill amortization ($3.3 million), reduced interest
expense ($4.9 million) as a result of lower interest rates and improved cost
efficiencies. These decreases were partially offset by an increase in operating
expenses incurred to standardize operations at all our total loss auction
facilities and expenditures for information technology initiatives. Also,
operating expenses in 2001 reflected additional expenses for utility and labor
costs incurred as a result of inclement weather conditions.
INVESTMENTS AND CORPORATE CHARGES
OPERATING REVENUE was up $3.6 million, or 28 percent, in 2002 due to the timing
of sales related to our real estate operations and our emerging technology
investments. Two large real estate sales in 2002 contributed $4.9 million to
revenue, while in 2001 two large real estate sales contributed $2.6 million to
revenue. Operating revenue included $3.3 million of gains on the sale of certain
emerging technology investments in 2002. These increases were partially offset
by less income from the securities portfolio due to lower returns in 2002.
OPERATING EXPENSES were up $4.2 million, or 33 percent, in 2002 primarily due to
larger real estate sales and additional interest expense.
CRITICAL ACCOUNTING POLICIES
Certain accounting measurements under applicable generally accepted accounting
principles involve management's judgment about subjective factors and estimates,
the effects of which are inherently uncertain. The following summarizes those
accounting measurements we believe are most critical to our reported results of
operations and financial condition.
ACCOUNTING JUDGMENTS/UNCERTAINTIES SEE ADDITIONAL
POLICY AFFECTING APPLICATION DISCUSSION AT
- ------------------------------------------------------------------------------------------------------------------
Uncollectible Receivables - Economic conditions affecting Liquidity and Capital Resources -
and Allowance for Doubtful customers, suppliers and market prices Working Capital on page 14
Accounts - Outcome of negotiations,
litigation and bankruptcy proceedings
- Current sales, payment and
write-off histories
Goodwill Impairment - Economic conditions affecting Note 6. Goodwill and Intangible
market valuations Assets on page 9
- Changes in business strategy
- Forecast of future operating cash
flows and earnings
- ------------------------------------------------------------------------------------------------------------------
13 ALLETE First Quarter 2002 Form 10-Q
OUTLOOK
We continue to expect earnings per share will be in the range of $2.13 to $2.17
for 2002, excluding any gain from the expected sale of our Water Services
assets. This 14 percent to 16 percent increase in earnings per share for 2002
incorporates the goodwill accounting change. The cash generated from our
operating results and the expected sale of our Water Services assets will fuel
our future growth. We will focus on our two core competencies-Energy Services
and Automotive Services, and work toward positioning each of them to continue
our earnings growth track record.
ENERGY SERVICES. Our new merchant generation facilities at Taconite Harbor
Energy Center in northern Minnesota, and Kendall County near Chicago, Illinois,
are expected to be fully operational by the second quarter of 2002.
AUTOMOTIVE SERVICES. We expect to see continued EBITDAL and revenue improvement
from our auctions acquired since January 2000. In addition, we anticipate
continued growth in the number of vehicles sold and financed at auction. As
previously disclosed, we expect 30 percent earnings growth over 2001 for
Automotive Services-including the goodwill accounting change. We also expect a 5
percent increase in total vehicles sold and a 13 percent increase in vehicles
financed over 2001. This quarter we acquired a large total loss vehicle auction
facility and have made progress on integrating total loss vehicle auctions into
some of our wholesale auction facilities.
INVESTMENTS AND CORPORATE CHARGES. We continue to anticipate net income from
Investments and Corporate Charges to remain stable in 2002. An expected lower
contribution from our real estate operations should be offset by better returns
from our emerging technology investments and securities portfolio, and lower
corporate charges.
DISCONTINUED OPERATIONS. Negotiations for the sale of our auto transport
business are still in progress and we expect to completely exit that business
during the second quarter of 2002. We will continue to incur operating losses
until we sell the assets.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW ACTIVITIES
During the first quarter of 2002 cash flow from operations reflected strong
operating results and continued focus on working capital management. Cash flow
from operations was higher in 2002 due to the timing of the collection of
certain finance receivables outstanding at December 31, 2001. Cash flow from
operations was also affected by a number of factors representative of normal
operations.
WORKING CAPITAL. Additional working capital, if and when needed, generally is
provided by the sale of commercial paper. Our securities investments can be
liquidated to provide funds for reinvestment in existing businesses or
acquisition of new businesses. Approximately 5.1 million original issue shares
of our common stock are available for issuance through INVEST DIRECT, our direct
stock purchase and dividend reinvestment plan.
A substantial amount of ADESA's working capital is generated internally from
payments for services provided. However, ADESA has arrangements to use proceeds
from the sale of commercial paper issued by ALLETE to meet short-term working
capital requirements arising from the timing of payment obligations to vehicle
sellers and the availability of funds from vehicle purchasers. During the sales
process, ADESA does not typically take title to vehicles.
AFC offers short-term on-site financing for dealers to purchase vehicles at
auctions in exchange for a security interest in those vehicles. The financing is
provided through the earlier of the date the dealer sells the vehicle or a
general borrowing term of 30 to 45 days. AFC has arrangements to use proceeds
from the sale of commercial paper issued by ALLETE to meet its operational
requirements.
ALLETE First Quarter 2002 Form 10-Q 14
At March 31, 2002 approximately 91 percent of AFC's finance receivables were
securitized (81 percent at December 31, 2001). AFC sells certain finance
receivables on a revolving basis to a wholly owned, unconsolidated, qualified
special purpose subsidiary. This subsidiary in turn sells, on a revolving basis,
an undivided interest in eligible finance receivables, up to a maximum at any
one time outstanding of $325 million, to third party purchasers under an
agreement that expires at the end of 2002. At March 31, 2002 AFC had sold $437.8
million of finance receivables to the special purpose subsidiary ($381.2 million
at December 31, 2001). Third party purchasers had purchased an undivided
interest in finance receivables of $307.0 million from this subsidiary at March
31, 2002 ($267.0 million at December 31, 2001). Unsold finance receivables held
by the special purpose subsidiary are recorded by AFC as residual interest at
fair value. Fair value is based upon estimates of future cash flows, using
assumptions that market participants would use to value such instruments,
including estimates of anticipated credit losses over the life of the
receivables sold without application of a discount rate due to the short-term
nature of the receivables sold. The fair value of AFC's residual interest was
$118.3 million at March 31, 2002 ($103.0 million at December 31, 2001). Proceeds
from the sale of the receivables were used to repay borrowings from ALLETE and
fund vehicle inventory purchases for AFC's customers. AFC must maintain certain
financial covenants such as minimum tangible net worth to comply with the terms
of the securitization agreement.
Significant changes in accounts receivable and accounts payable balances at
March 31, 2002 compared to December 31, 2001 were due to increased sales and
financing activity at Automotive Services. Typically auction volumes are down
during the winter months and in December because of the holidays. As a result,
ADESA had higher receivables and higher payables at March 31, 2002.
We provide up to $50 million in credit support to facilitate the power marketing
and trading activities of Split Rock Energy, and had $30.3 million in
outstanding support at March 31, 2002 ($36.0 million at December 31, 2001).
SECURITIES. In March 2001 ALLETE, ALLETE Capital II and ALLETE Capital III,
jointly filed a registration statement with the SEC pursuant to Rule 415 under
the Securities Act of 1933. The registration statement, which has been declared
effective by the SEC, relates to the possible issuance of an aggregate amount of
$500 million of securities which may include ALLETE common stock, first mortgage
bonds and other debt securities, and ALLETE Capital II and ALLETE Capital III
preferred trust securities, of which approximately $387 million remains
available to be issued. ALLETE also previously filed a registration statement,
which has been declared effective by the SEC, relating to the possible issuance
of $25 million of first mortgage bonds and other debt securities. We may sell
all or a portion of the remaining registered securities if warranted by market
conditions and our capital requirements. Any offer and sale of the above
mentioned securities will be made only by means of a prospectus meeting the
requirements of the Securities Act of 1933 and the rules and regulations
thereunder.
INVESTMENTS. As companies included in our emerging technology investments are
sold, we will recognize a gain or loss. Our investment in the companies that
have gone public had a cost basis of approximately $12 million at March 31, 2002
and December 31, 2001. The aggregate market value of our investment in these
companies at March 31, 2002 was $15 million ($24 million at December 31, 2001).
These investments provide us with access to developing technologies before their
commercial debut, as well as potential financial returns and diversification
opportunities. We view these investments as a source of capital for redeployment
in existing businesses.
15 ALLETE First Quarter 2002 Form 10-Q
CAPITAL REQUIREMENTS
Consolidated capital expenditures for the quarter ended March 31, 2002 totaled
$46.9 million ($24.6 million in 2001). Expenditures for 2002 included $20.6
million for Energy Services and $10.6 million for Automotive Services.
Expenditures for 2002 also included $15.7 million related to discontinued
operations ($11.8 million to maintain our Water Services businesses while they
are in the process of being sold; $3.9 million to buy previously leased auto
transportation trucks). Internally generated funds were the primary sources of
funding for these expenditures.
NEW ACCOUNTING STANDARDS
SFAS 143, "Accounting for Asset Retirement Obligations," requires the
recognition of a liability for an asset retirement obligation in the period in
which it is incurred. When the liability is initially recorded, the carrying
amount of the related long-lived asset is correspondingly increased. Over time,
the liability is accreted to its present value and the related capitalized
charge is depreciated over the useful life of the asset. SFAS 143 is effective
for fiscal years beginning after June 15, 2002. Currently, decommissioning
amounts collected in Minnesota Power's rates are reported in accumulated
depreciation. We are reviewing what additional assets, if any, may have
associated retirement costs as defined by SFAS 143.
--------------------------------
READERS ARE CAUTIONED THAT FORWARD-LOOKING STATEMENTS INCLUDING THOSE CONTAINED
ABOVE, SHOULD BE READ IN CONJUNCTION WITH OUR DISCLOSURES UNDER THE HEADING:
"SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF
1995" LOCATED ON PAGE 3 OF THIS FORM 10-Q.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
SECURITIES PORTFOLIO
Our securities portfolio has exposure to both price and interest rate risk.
Investments held principally for near-term sale are classified as trading
securities and recorded at fair value. Trading securities consist primarily of
the common stock of publicly traded companies. In strategies designed to hedge
overall market risks, we also sell common stock short. Investments held for an
indefinite period of time are classified as available-for-sale securities and
also recorded at fair value. At March 31, 2002 available-for-sale securities
consisted of the common stock of publicly traded companies and equity securities
in a grantor trust established to fund certain employee benefits.
MARCH 31, DECEMBER 31,
FAIR VALUE 2002 2001
--------------------------------------------------------------------------
Millions
Trading Securities Portfolio $165.9 $155.6
Available-For-Sale Securities Portfolio $28.4 $26.5
--------------------------------------------------------------------------
FOREIGN CURRENCY
Our foreign currency exposure is limited to the conversion of operating results
of our Canadian subsidiaries and, therefore, we have not entered into any
foreign exchange contracts to hedge the conversion of our Canadian operating
results into United States dollars.
ALLETE First Quarter 2002 Form 10-Q 16
POWER MARKETING AND TRADING
Minnesota Power purchases power for retail sales in our retail service territory
and occasionally sells excess generation in the wholesale market. The services
of Split Rock Energy are used to fulfill purchase requirements for retail load
and market excess generation.
By the second quarter of 2002 we expect to have up to 500 MW of merchant
generation (non-rate base generation sold at market-based rates pursuant to FERC
authority) available for sale to the wholesale market. This includes 225 MW of
generation at our Taconite Harbor Energy Center in northern Minnesota that was
acquired in October 2001. Also included are 275 MW of generation secured through
a 15-year tolling agreement, which commenced in May 2002, with NRG Energy at a
facility near Chicago, Illinois. Under the tolling agreement, the Company pays a
fixed capacity charge for the right, but not the obligation, to utilize one 275
MW generating unit. We are responsible for arranging the natural gas fuel supply
and are entitled to the electricity produced.
Our strategy is to sell the majority of merchant generation through long-term
contracts of various durations. The balance will be sold in the spot market,
through short-term agreements, or possibly utilized as a source of low-cost
supply for our regulated operations if the need exists. The services of Split
Rock Energy may be utilized to broker or market merchant generation. We
currently have two long-term forward capacity and energy contracts related to
generation secured by the NRG Energy tolling agreement. Each is for 50 MW, with
one having a 10-year term and the other a 15-year term.
We own 50 percent of Split Rock Energy which was formed in 2000 with Great River
Energy to combine power supply assets and customer loads for power marketing and
trading, power-pool operations and generation outage protection. Split Rock
Energy operates in the wholesale energy markets, and engages in trading
activities by entering into forward and option contracts for the purchase and
sale of electricity. These contracts are generally short-term in nature with
maturities of less than one year. Although Split Rock Energy generally attempts
to balance its purchase and sale positions, commodity price risk sometimes
exists or is created. This risk is actively managed through a risk management
program that includes policies, procedures and limits established by the Split
Rock Energy Board of Governors. Split Rock Energy's open trading contracts were
not significant at March 31, 2002 and had a fair value of $49,000.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
On May 14, 2002 shareholders of ALLETE will vote on the election of 11
directors, and approval of the appointment of PricewaterhouseCoopers LLP as our
independent accountants for 2002 and the reservation of an additional three
million shares of ALLETE common stock for issuance under the Executive Long-Term
Incentive Compensation Plan. Voting results will be provided in our Form 10-Q
for the quarter ended June 30, 2002.
17 ALLETE First Quarter 2002 Form 10-Q
ITEM 5. OTHER INFORMATION
Reference is made to our 2001 Form 10-K for background information on the
following updates. Unless otherwise indicated, cited references are to our 2001
Form 10-K.
Ref. Page 11 - Seventh Full Paragraph
Ref. Page 30 - Third Paragraph
During the first quarter of 2002, ALLETE Water Services sold Vibration
Correction Services, Inc. and Instrumentation Services, Inc. which resulted in
an after-tax net loss of $0.1 million. ALLETE Water Services has completed its
exit from the non-regulated businesses.
Ref. Page 11 - Ninth Full Paragraph
Ref. Page 15 - Last Paragraph
On April 11, 2002 the MPUC approved Minnesota Power's request to acquire the
225-MW Taconite Harbor Energy Center from Rainy River Energy
Corporation-Taconite Harbor, a wholly owned subsidiary of the Company. The
merger into Minnesota Power is expected to be complete by the middle of May
2002.
Activities related to staffing and restarting of the three generating units at
Taconite Harbor were initiated during November 2001. On February 4, 2002 Unit 2
became operational. Unit 3 became operational on April 1, 2002. Unit 1 is
scheduled to begin operating in late May 2002.
Ref. Page 11 - Sixth Paragraph
Ref. Page 30 - Third Paragraph
Ref. Form 8-K dated and filed February 28, 2002 - Second Paragraph
Ref. Form 8-K dated and filed March 28, 2002
As required by statute, the Florida Governmental Utilities Authority (FGUA)
convened a public hearing on May 2, 2002 to obtain input on the FGUA's proposed
acquisition of the assets of Florida Water. Due to concerns raised by local
governmental units representing areas served by Florida Water, the FGUA will
reconvene the public hearing on May 16, 2002, and has advised Florida Water that
it will work with these local governments through June 2002 in an effort to
obtain their support. It is then the FGUA's intent to advise Florida Water which
utility systems it desires to purchase and seek to finalize definitive
agreements. Certain local governmental units have indicated an interest in
buying utility systems directly from Florida Water. Although the period for
exclusive dealing with the FGUA will lapse on May 14, 2002, Florida Water
expects to continue its cooperation with FGUA due diligence efforts.
Ref. Page 14 - Table - Contract Status for Minnesota Power Large Power Customers
On March 18, 2002 Potlatch Corporation (Potlatch) announced the sale of its
Cloquet pulp and paper mill to South Africa-based Sappi Ltd. (Sappi). The sale
is subject to customary closing conditions, including regulatory approvals, and
is expected to be completed in the second quarter of 2002. Minnesota Power will
continue to serve the Cloquet facility after the sale. Negotiations are underway
between Potlatch, Sappi and Minnesota Power to disaggregate the current Potlatch
Electric Service Agreement that provides Potlatch a combined bill for electric
usage at its Cloquet, Brainerd and Grand Rapids facilities.
In conjunction with the sale of the Cloquet mill, Potlatch will close its
Brainerd paper mill. Potlatch is looking for another operator for the Brainerd
plant, which can no longer be used to produce coated paper, which would compete
with the Cloquet mill. Potlatch's Grand Rapids strandboard plant will continue
to operate and be served by Minnesota Power.
ALLETE First Quarter 2002 Form 10-Q 18
National Steel Corporation (National) filed for Chapter 11 bankruptcy protection
on March 6, 2002 leaving Minnesota Power with approximately $800,000 of unpaid
pre-petition debt for electric service to the plant in Keewatin, Minnesota.
Minnesota Power reserved $800,000 in March 2002 for this account and has
arranged assurance of adequate protection for future payments due from National
during the bankruptcy period.
Ref. Page 15 - Third Full Paragraph
On April 8, 2002 Split Rock Energy announced that it had integrated the
operations of MPEX, formerly Minnesota Power's power marketing and trading
division. MPEX's 40-member staff is now employed by Split Rock Energy.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit
Number
-------
10 Fifth Amendment to Receivables Purchase Agreement, dated as
of February 28, 2002, among AFC Funding Corporation, as Seller;
Automotive Finance Corporation, as Servicer; Fairway Finance
Corporation, as Purchaser; and BMO Nesbitt Burns Corp., as Agent.
(b) Reports on Form 8-K.
Report on Form 8-K filed January 14, 2002 with respect to Item 5. Other
Information.
Report on Form 8-K filed January 24, 2002 with respect to Item 7. Financial
Statements and Exhibits.
Report on Form 8-K filed January 25, 2002 with respect to Item 5. Other
Information.
Report on Form 8-K filed February 28, 2002 with respect to Item 5. Other
Information.
Report on Form 8-K filed March 28, 2002 with respect to Item 5. Other
Information and Item 7. Financial Statements and Exhibits.
19 ALLETE First Quarter 2002 Form 10-Q
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.
ALLETE, Inc.
May 10, 2002 James K. Vizanko
--------------------------------------
James K. Vizanko
Vice President,
Chief Financial Officer and Treasurer
May 10, 2002 Mark A. Schober
--------------------------------------
Mark A. Schober
Vice President and Controller
ALLETE First Quarter 2002 Form 10-Q 20
EXHIBIT INDEX
EXHIBIT
NUMBER
- --------------------------------------------------------------------------------
10 Fifth Amendment to Receivables Purchase Agreement, dated as of
February 28, 2002, among AFC Funding Corporation, as Seller;
Automotive Finance Corporation, as Servicer; Fairway Finance
Corporation, as Purchaser; and BMO Nesbitt Burns Corp., as Agent.
ALLETE First Quarter 2002 Form 10-Q