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
For the quarterly period ended March 31, 1996
or
/ / Transition Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934
Commission File No. 1-3548
Minnesota Power & Light Company
A Minnesota Corporation
IRS Employer Identification No. 41-0418150
30 West Superior Street
Duluth, Minnesota 55802
Telephone - (218) 722-2641
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,
31,673,778 shares outstanding
as of April 30, 1996
Minnesota Power & Light Company
Index
Page
Part I. Financial Information
Item 1. Financial Statements
Consolidated Balance Sheet -
March 31, 1996 and December 31, 1995 1
Consolidated Statement of Income -
Quarter ended March 31, 1996 and 1995 2
Consolidated Statement of Cash Flows -
Quarter ended March 31, 1996 and 1995 3
Notes to Consolidated Financial Statements 4
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations 8
Part II. Other Information
Item 5. Other Information 10
Item 6. Exhibits and Reports on Form 8-K 11
Signatures 12
Definitions
The following abbreviations or acronyms are used in the text.
Abbreviation
or Acronym Term
- -------------------- ------------------------------------------------------
1995 Form 10-K Minnesota Power's Annual Report on Form 10-K for
the Year Ended December 31, 1995
ADESA ADESA Corporation
Capital Re Capital Re Corporation
Company Minnesota Power & Light Company and its Subsidiaries
CPI Consolidated Papers, Inc.
DRIP Automatic Dividend Reinvestment and Stock Purchase Plan
ESOP Employee Stock Ownership Plan
FERC Federal Energy Regulatory Commission
Heater Heater Utilities, Inc.
Lehigh Lehigh Acquisition Corporation
Minnesota Power Minnesota Power & Light Company and its Subsidiaries
MW Megawatt(s)
NOPR Notice of Proposed Rulemaking
QUIPS Quarterly Income Preferred Securities
Seabrook Heater of Seabrook, Inc.
Square Butte Square Butte Electric Cooperative
SSU Southern States Utilities, Inc.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Minnesota Power
Consolidated Balance Sheet
In Thousands
March 31, December 31,
1996 1995
Unaudited Audited
- --------------------------------------------------------------------------------
Assets
Plant and Other Assets
Electric operations $ 802,417 $ 800,477
Water operations 316,807 323,182
Automobile auctions 134,043 123,632
Investments 196,279 201,360
----------- -----------
Total plant and other assets 1,449,546 1,448,651
----------- -----------
Current Assets
Cash and cash equivalents 60,270 31,577
Trading securities 45,955 40,007
Trade accounts receivable (less reserve
of $3,716 and $3,325) 173,207 128,072
Notes and other accounts receivable 18,172 12,220
Fuel, material and supplies 22,799 26,383
Prepayments and other 14,213 13,706
----------- -----------
Total current assets 334,616 251,965
----------- -----------
Deferred Charges
Regulatory 82,946 88,631
Other 26,438 25,037
----------- -----------
Total deferred charges 109,384 113,668
----------- -----------
Intangible Assets
Goodwill 121,124 120,245
Other 13,038 13,096
----------- -----------
Total intangible assets 134,162 133,341
----------- -----------
Total Assets $ 2,027,708 $ 1,947,625
- --------------------------------------------------------------------------------
Capitalization and Liabilities
Capitalization
Common stock without par value,
65,000,000 shares authorized
31,647,679 and 31,467,650
shares outstanding $ 379,925 $ 377,684
Unearned ESOP shares (71,964) (72,882)
Net unrealized gain on securities
investments 819 3,206
Cumulative translation adjustment (191) (177)
Retained earnings 278,665 276,241
----------- -----------
Total common stock equity 587,254 584,072
Cumulative preferred stock 28,547 28,547
Redeemable serial preferred stock 20,000 20,000
Company obligated mandatorily
redeemable preferred securities
of MP&L Capital I 75,000 -
Long-term debt 576,362 639,548
----------- -----------
Total capitalization 1,287,163 1,272,167
----------- -----------
Current Liabilities
Accounts payable 101,615 68,083
Accrued taxes 62,334 40,999
Accrued interest and dividends 9,744 14,471
Notes payable 45,096 96,218
Long-term debt due within one year 68,821 9,743
Other 35,470 27,292
----------- -----------
Total current liabilities 323,080 256,806
----------- -----------
Deferred Credits
Accumulated deferred income taxes 162,532 164,737
Contributions in aid of construction 96,467 98,167
Regulatory 57,221 57,950
Other 101,245 97,798
----------- -----------
Total deferred credits 417,465 418,652
----------- -----------
Total Capitalization and Liabilities $ 2,027,708 $ 1,947,625
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
-1-
Minnesota Power
Consolidated Statement of Income
In Thousands Except Per Share Amounts - Unaudited
Quarter Ended
March 31,
1996 1995
- --------------------------------------------------------------------------------
Operating Revenue and Income
Electric operations $ 131,501 $ 120,754
Water operations 19,227 15,600
Automobile auctions 39,693 -
Investments 12,255 10,332
----------- -----------
Total operating revenue and income 202,676 146,686
----------- -----------
Operating Expenses
Fuel and purchased power 43,643 40,310
Operations 86,030 62,142
Administrative and general 33,792 18,459
Interest expense 14,160 11,100
----------- -----------
Total operating expenses 177,625 132,011
----------- -----------
Income (Loss) from Equity Investments 3,777 (6,271)
----------- -----------
Operating Income from Continuing Operations 28,828 8,404
Income Tax Expense (Benefit) 10,324 (15,401)
----------- -----------
Income from Continuing Operations 18,504 23,805
Income from Discontinued Operations - 1,652
----------- -----------
Net Income 18,504 25,457
Dividends on Preferred Stock 800 800
Distributions on Company Obligated
Mandatorily Redeemable Preferred
Securities of MP&L Capital I 201 -
----------- -----------
Earnings Available for Common Stock $ 17,503 $ 24,657
=========== ===========
Average Shares of Common Stock 28,786 28,368
Earnings Per Share of Common Stock
Continuing operations $ .61 $ .81
Discontinued operations - .06
----- -----
Total $ .61 $ .87
===== =====
Dividends Per Share of Common Stock $ .51 $ .51
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
-2-
Minnesota Power
Consolidated Statement of Cash Flows
In Thousands - Unaudited
Quarter Ended
March 31,
1996 1995
- --------------------------------------------------------------------------------
Operating Activities
Net income $ 18,504 $ 25,457
Depreciation and amortization 16,216 13,766
Deferred income taxes (742) (17,415)
Deferred investment tax credits (623) (620)
Pre-tax gain on sale of plant (1,073) -
Changes in operating assets and liabilities
Trading securities (5,948) 2,336
Notes and accounts receivable (45,776) 8,763
Fuel, material and supplies 3,584 (1,613)
Accounts payable 33,532 (7,052)
Other current assets and liabilities 24,078 16,104
Other - net 5,342 3,698
--------- --------
Cash from operating activities 47,094 43,424
--------- --------
Investing Activities
Proceeds from sale of investments in
securities 7,849 26,466
Additions to investments (4,449) (20,042)
Additions to plant (25,427) (17,027)
Changes to other assets - net 250 1,035
--------- --------
Cash for investing activities (21,777) (9,568)
--------- --------
Financing Activities
Issuance of common stock 4,546 829
Issuance of long-term debt 77,108 305
Issuance of Company obligated mandatorily
redeemable preferred securities of
MP&L Capital I - net 72,638 -
Changes in notes payable (53,821) (23,931)
Reductions of long-term debt (81,217) (989)
Dividends on preferred and common stock (15,878) (15,720)
--------- --------
Cash from (for) financing activities 3,376 (39,506)
--------- --------
Change in Cash and Cash Equivalents 28,693 (5,650)
Cash and Cash Equivalents at Beginning of Period 31,577 27,001
--------- --------
Cash and Cash Equivalents at End of Period $ 60,270 $ 21,351
========= ========
Supplemental Cash Flow Information
Cash paid during the period for
Interest (net of capitalized) $ 17,781 $ 16,616
Income taxes $ 2,844 $ 982
- --------------------------------------------------------------------------------
The accompanying notes are an integral part of this statement.
-3-
Notes to Consolidated Financial Statements
The accompanying unaudited consolidated financial statements and notes should be
read in conjunction with the Company's 1995 Form 10-K. In the opinion of the
Company, 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 income
statement information for prior periods has been reclassified to reflect the
discontinuance of the paper and pulp business. Financial statement information
may not be comparable between periods due to the purchase of ADESA on July 1,
1995.
Note 1. Business Segments
In Thousands
Investments
---------------------- Corporate
Electric Water Automobile Portfolio & Real Charges
Consolidated Operations Operations Auctions <F1> Reinsurance Estate & Other
------------ ----------- ---------- ------------ ----------- ------ ----------
Quarter Ended March 31, 1996
- ----------------------------
Operating revenue and income $ 202,676 $ 131,501 $ 19,227 $ 39,693 $ 3,869 $ 8,676 $ (290)
Operation and other expense 147,249 95,307 11,518 34,202 523 3,213 2,486
Depreciation and amortization
expense 16,216 10,499 3,137 2,550 - 30 -
Interest expense 14,160 5,674 3,190 1,291 1 2 4,002
Income from equity investments 3,777 - - - 3,777 - -
---------- ---------- ---------- ---------- ---------- ---------- ---------
Operating income
from continuing operations 28,828 20,021 1,382 1,650 7,122 5,431 (6,778)
Income tax expense (benefit) 10,324 7,742 449 662 2,322 2,363 (3,214)
---------- ---------- ---------- ---------- ---------- ---------- ---------
Net income $ 18,504 $ 12,279 $ 933 $ 988 $ 4,800 $ 3,068 $ (3,564)
========== ========== ========== ========== ========== ========== =========
Total assets $2,027,708 $ 990,018 $ 340,312 $ 429,604 $ 210,973 $ 55,225 $ 1,576
Accumulated depreciation $ 631,694 $ 518,311 $ 110,536 $ 2,847 - - -
Accumulated amortization $ 4,195 - - $ 3,398 - $ 797 -
Construction work in progress $ 55,491 $ 27,715 - $ 27,776 - - -
Quarter Ended March 31, 1995
- ----------------------------
Operating revenue and income $ 146,686 $ 120,754 $ 15,600 - $ 6,739 $ 4,265 $ (672)
Operation and other expense 108,310 87,037 11,055 - 935 7,134<F3> 2,149
Depreciation and amortization
expense 12,601 10,021 2,520 - - 60 -
Interest expense 11,100 5,497 2,463 - 2 2 3,136
Income (loss) from
equity investments (6,271) - - - 2,257 - (8,528)<F2>
---------- ---------- ---------- ---------- ---------- ---------- ---------
Operating income (loss)
from continuing operations 8,404 18,199 (438) - 8,059 (2,931) (14,485)
Income tax expense (benefit) (15,401) 7,782 (395) - 1,775 (18,015)<F4> (6,548)
---------- ---------- ---------- ---------- ---------- ---------- ---------
Income (loss) from
continuing operations 23,805 $ 10,417 $ (43) - $ 6,284 $ 15,084 $ (7,937)
========== ========== ========== ========== ========== =========
Income from
discontinued operations 1,652
----------
Net income $ 25,457
==========
Total assets $1,786,626<F5> $ 992,699 $ 310,776 - $ 274,383 $ 34,443 $ 362
Accumulated depreciation $ 598,644<F6> $ 501,545 $ 91,334 - - - -
Accumulated amortization $ 507 - - - - $ 507 -
Construction work in progress $ 37,155 $ 30,432 $ 6,723 - - - -
- --------------------------------
<FN>
<F1> Purchased July 1, 1995.
<F2> Includes an $8.5 million pre-tax provision for exiting the equipment manufacturing business.
<F3> Includes $3.7 million of minority interest relating to the recognition of tax benefits. (See Note 4.)
<F4> Includes $18.4 million of tax benefits. (See Note 4.)
<F5> Includes $174 million related to operations discontinued in 1995.
<F6> Includes $5.8 million related to operations discontinued in 1995.
</FN>
-4-
Note 2. Securities Investments
March 31, 1996 December 31, 1995
------------------------------------- ----------------------------
Gross Unrealized Gross Unrealized
---------------- Fair ---------------- Fair
Summary of Securities Cost Gain (Loss) Value Cost Gain (Loss) Value
- -------------------------------------------------------------------------------------------------------------------
In Thousands
Trading $ 45,955 $ 40,007
======== =========
Available-for-sale
Common stock $ 2,599 $ - $ (519) $ 2,080 $ 2,599 $ - $ (451) $ 2,148
Preferred stock 59,758 1,617 (2,516) 58,859 64,506 1,969 (3,090) 63,385
------- ------ ------- -------- -------- ------ ------- ---------
$62,357 $1,617 $(3,035) $ 60,939 $ 67,105 $1,969 $(3,541) $ 65,533
======= ====== ======= ======== ======== ====== ======= =========
The net unrealized gain on securities investments on the balance sheet also
includes the Company's share of Capital Re's unrealized holding gains of $1.7
million at March 31, 1996 and $4.1 million at December 31, 1995.
Quarter Ended
March 31,
1996 1995
- -------------------------------------------------------------------------------
In Thousands
Trading securities
Change in net unrealized holding gain
included in earnings $ 856 $ 778
Available-for-sale securities
Proceeds from sales $ 7,849 $ 26,466
Gross realized gains $ 105 $ 274
Gross realized (losses) $ (367) $ (419)
Note 3. Square Butte Purchased Power Contract
The Company has a contract to purchase power and energy from Square Butte. Under
the terms of the contract which extends through 2007, the Company is purchasing
71 percent of the output from a generating plant which is capable of generating
up to 470 MW. Reductions to about 49 percent of the output are provided for in
the contract and, at the option of Square Butte, could begin after a five-year
advance notice to the Company.
The cost of the power and energy is a proportionate share of Square Butte's
fixed obligations and variable operating costs, based on the percentage of the
total output purchased by the Company. The annual fixed obligations of the
Company to Square Butte are $19.4 million from 1996 through 2000. The variable
operating costs are not incurred unless production takes place. The Company is
responsible for paying all costs and expenses of Square Butte if not paid by
Square Butte when due. These obligations and responsibilities of the Company are
absolute and unconditional whether or not any power is actually delivered to the
Company.
-5-
Note 4. Income Tax Expense
Quarter Ended
March 31,
Schedule of Income Tax Expense (Benefit) 1996 1995
- --------------------------------------------------------------------------------
In Thousands
Charged to continuing operations
Current tax
Federal $ 8,859 $ 5,402
Foreign (101) -
State 2,931 (1,449)
--------- ---------
11,689 3,953
--------- ---------
Deferred tax
Federal (12) (73)
State (730) (261)
--------- ---------
(742) (334)
--------- ---------
Change in valuation allowance - (18,400)
---------
Deferred tax credits (623) (620)
--------- ---------
Income tax - continuing operations 10,324 (15,401)
--------- ---------
Charged to discontinued operations
Current tax
Federal - (106)
State - (17)
--------- ---------
- (123)
--------- ---------
Deferred tax
Federal - 1,018
State - 301
--------- ---------
- 1,319
--------- ---------
Income tax - discontinued operations - 1,196
--------- ---------
Total income tax expense (benefit) $ 10,324 $ (14,205)
========= =========
In March 1995 based on the results of a project which analyzed the economic
feasibility of realizing future tax benefits available to the Company, the board
of directors of Lehigh directed the management of Lehigh to dispose of Lehigh's
assets in a manner that would maximize utilization of tax benefits. Based on
this directive, Lehigh recognized $18.4 million of income in the first quarter
of 1995 by reducing the valuation reserve which offsets deferred tax assets.
Additional unrealized net deferred tax assets resulting from the original
purchase of Lehigh of $8.2 million are included on the Company's balance sheet.
These assets are fully offset by the deferred tax asset valuation allowance
because under Statement of Financial Accounting Standards No. 109, "Accounting
for Income Taxes," it is currently "more likely than not" that the value of
these assets will not be realized. Management reviews the appropriateness of the
valuation allowance quarterly.
-6-
Note 5. Discontinued Operations
On June 30, 1995 Minnesota Power sold its interest in the paper and pulp
business. The financial results of the paper and pulp business, including the
loss on disposition, have been accounted for as discontinued operations.
Quarter Ended
March 31,
Summary of Discontinued Operations 1996 1995
- --------------------------------------------------------------------------------
In Thousands
Operating revenue and income - $ 22,039
=========
Equity in earnings - $ 1,821
=========
Income from operations - $ 2,848
Income tax expense - 1,196
---------
Income from discontinued operations - $ 1,652
=========
The Company is still committed to a maximum guaranty of $95 million to ensure a
portion of a $33.4 million annual lease obligation for paper mill equipment
under an operating lease extending to 2012. The purchaser of the Company's paper
and pulp business, CPI, has agreed to indemnify the Company for any payments the
Company may make as a result of the Company's obligation relating to this
operating lease.
Note 6. Mandatorily Redeemable Preferred Securities of MP&L Capital I
MP&L Capital I (Trust) was established as a wholly owned business trust of the
Company for the purpose of issuing common and preferred securities (Trust
Securities). On March 20, 1996 the Trust publicly issued three million 8.05%
Cumulative Quarterly Income Preferred Securities (QUIPS), representing preferred
beneficial interests in the assets held by the Trust, indirectly resulting in
net proceeds to the Company of $72.6 million. Holders of the QUIPS are entitled
to receive quarterly distributions at an annual rate of 8.05 percent of the
liquidation preference value of $25 per security. The Company is the owner of
all the common trust securities, which constitute approximately 3 percent of the
aggregate liquidation amount of all the Trust Securities. The sole asset of the
Trust is $77.5 million of 8.05% Junior Subordinated Debentures, Series A,
Due 2015 (Subordinated Debentures) issued by the Company, interest on which is
deductible by the Company for income tax purposes. The Trust will use interest
payments received on the Subordinated Debentures it holds to make the
quarterly cash distributions on the QUIPS.
The QUIPS are subject to mandatory redemption upon repayment of the Subordinated
Debentures at maturity or upon redemption. The Company has the option at any
time on or after March 20, 2001, to redeem the Subordinated Debentures, in whole
or in part. The Company also has the option, upon the occurrence of certain
events, (i) to redeem at any time the Subordinated Debentures, in whole but not
in part, which would result in the redemption of all the Trust Securities, or
(ii) to terminate the Trust and cause the pro rata distribution of the
Subordinated Debentures to the holders of the Trust Securities.
In addition to the Company's obligations under the Subordinated Debentures, the
Company has guaranteed, on a subordinated basis, payment of distributions on the
Trust Securities, to the extent the Trust has funds available to pay such
distributions, and has agreed to pay all of the expenses of the Trust (such
additional obligations collectively, the Back-up Undertakings). Considered
together, the Back-up Undertakings constitute a full and unconditional guarantee
by the Company of the Trust's obligations under the QUIPS.
-7-
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
Minnesota Power has operations in four business segments: (1) electric
operations, which include electric and gas services, and coal mining; (2) water
operations, which include water and wastewater services; (3) automobile
auctions, which also include a finance company and an auto transport company;
and (4) investments, which include real estate operations in Florida, a 21
percent equity investment in a financial guaranty reinsurance company, and a
securities portfolio.
Earnings per share of common stock for the quarter ended March 31, 1996 were 61
cents compared to 87 cents for the quarter ended March 31, 1995. All four
business segments were profitable for the first quarter ended March 31, 1996.
Increased electric sales, a gain in water operations and improvement in real
estate operations, excluding the recognition of tax benefits in 1995, were
contributing factors to 1996 earnings.
Higher earnings in 1995 were attributed to the 52 cent per share recognition of
tax benefits associated with real estate operations. Earnings in 1995 also
reflect an 18 cent per share provision associated with exiting the truck-mounted
lifting equipment business.
Quarter Ended March 31,
Earnings Per Share 1996 1995
- --------------------------------------------------------------------------------
Continuing Operations
Electric Operations $ .41 $ .35
Water Operations .03 .00
Automobile Auctions .03 -
Investments
Portfolio and reinsurance .17 .22
Real estate .11 .53
----- -----
.28 .75
Corporate Charges and Other (.14) (.29)
----- -----
Total Continuing Operations .61 .81
Discontinued Operations - .06
----- -----
Total Earnings Per Share $ .61 $ .87
===== =====
Results of Operations
Comparison of the Quarter Ended March 31, 1996 and 1995.
Electric operations. Operating revenue and income from electric operations were
higher in 1996 compared to 1995 due to a 14 percent increase in total
kilowatt-hours sales. The increase in sales is attributed primarily to the
Company's ability to market energy to other power suppliers. Extreme winter
weather in 1996 compared to the milder winter in 1995 also increased sales.
Revenue from electric sales to taconite customers accounted for 31 percent of
electric operating revenue in 1996 compared to 36 percent in 1995. Electric
sales to paper and other wood-products companies accounted for 11 percent of
electric operating revenue in 1996 and 13 percent in 1995. Sales to other power
suppliers accounted for 5 percent of electric operating revenue in 1996 compared
to only 1 percent in 1995.
Water operations. Operating revenue and income from water operations were higher
in 1996 due to the $1.1 million pre-tax gain from the sale of Seabrook's assets
in South Carolina, the addition of 17,000 new water and wastewater customers as
a result of the December 1995 purchase of the assets of Orange Osceola Utilities
in Florida, and SSU's implementation of a $7.9 million interim rate increase
effective January 23, 1996.
-8-
Automobile Auctions. Automobile auction operations were profitable despite
severe winter weather on the east coast which limited auction sales in January
1996. New auctions began operations at Jacksonville, Florida and Newark, New
Jersey during the first quarter of 1996.
Consolidated operating expenses in 1996 are significantly higher due to the
inclusion of ADESA's operations following its purchase by the Company in July
1995.
Investments.
- Securities Portfolio and Reinsurance. The Company's securities portfolio
and reinsurance performed well in 1996. The portfolio produced less
earnings in 1996 because its balance was smaller as a result of the sale of
a portion of the portfolio to fund the purchase of ADESA.
- Real Estate Operations. Revenue in 1996 includes $3.7 million from the
sale of Lehigh's joint venture in a resort and golf course. In 1995 $18.4
million of tax benefits were recognized by Lehigh. The Company's portion of
the tax benefits reflected as net income was $14.7 million, or 52 cents per
share.
Corporate Charges and Other. In March 1995 the Company recorded a $5 million
provision, lowering earnings per share by 18 cents, in anticipation of exiting
the truck-mounted lifting equipment business.
Discontinued Operations. Income from discontinued operations in 1995 reflects
the operating results of the paper and pulp business which was sold in June
1995.
Liquidity and Financial Position
Reference is made to the Consolidated Statement of Cash Flows for the three
months ended March 31, 1996 and 1995, for purposes of the following discussion.
Automobile auction operations, which were acquired in July 1, 1995, are included
in the three months ended March 31, 1996.
Cash flow activities. Cash from operating activities was affected by a number of
factors representative of normal operations.
Working capital, if and when needed, generally is provided by the sale of
commercial paper. In addition, securities investments can be liquidated to
provide funds for reinvestment in existing businesses or acquisition of new
businesses, and approximately 500,000 original issue shares of common stock are
available for issuance through the DRIP.
MP&L Capital I (Trust) was established as a wholly owned business trust of the
Company for the purpose of issuing common and preferred securities.
On March 20, 1996 the Trust publicly issued three million 8.05%
Cumulative Quarterly Income Preferred Securities (QUIPS), representing preferred
beneficial interests in the assets held by the Trust, indirectly resulting in
net proceeds to the Company of $72.6 million. The net proceeds to the Company
were used to retire approximately $56 million of commercial paper and
approximately $17 million will be used to redeem all of the outstanding
shares of the Company's Serial Preferred Stock, $7.36 Series, on May 13, 1996.
Capital requirements. Consolidated capital expenditures for the three months
ended March 31, 1996 totaled $29.3 million. These expenditures include $11.2
million for electric operations, $3.6 million for water operations and $14.5
million for automobile auction operations. Internally generated funds were the
primary source for funding these expenditures.
-9-
PART II. OTHER INFORMATION
Item 5. Other Information
Reference is made to the Company's 1995 Form 10-K for background information on
the following updates. Unless otherwise indicated, cited references are to the
Company's 1995 Form 10-K.
Ref. Page 9. - Second Full Paragraph and Page 13 - Fourth Full Paragraph
On May 1, 1996 the FERC issued an Order on Rehearing for the St. Louis River
Project (Project). The FERC directed the Company to negotiate with the Fond du
Lac Band of Lake Superior Chippewa a reasonable annual charge for the use of
tribal lands within the Project. With respect to the Company's arguments
regarding the generating capacity that will be lost as a result of certain
license terms and conditions mandated by the FERC to mitigate environment
consequences of the Project, the FERC determined that not enough evidence was
provided to alter the FERC's original analysis of the anticipated impact of such
mandates on the generating capacity. The FERC extended the license term from 30
to 40 years because of the anticipated impact of such mandates. The Company
estimates that the revenue from this Project will be reduced by approximately $1
million on an annual basis as a result of the license terms.
Ref. Page 9. - Last Paragraph
On March 29, 1996 the Public Service Commission of Wisconsin approved a
$451,000, or 1.1 percent, increase in rates, with an 11.6 percent return on
equity for the Company's wholly owned subsidiary Superior Water, Light and Power
Company. Final rates were effective March 30, 1996.
Ref. Page 10. - Fourth Paragraph
On April 24, 1996 the FERC issued two final rules and a NOPR. The first rule,
Order No. 888, addresses both open access to transmission lines for wholesale
transactions and stranded cost issues. The second rule, Order No. 889, requires
utilities to establish electronic systems to share information about available
transmission capacity and establishes standards of conduct. The NOPR, "Capacity
Reservation Open Access Transmission Tariffs," proposes to establish a new
system for utilities to use in reserving capacity on their own and others'
transmission lines. The new and proposed rules are designed to facilitate
competition in the electric industry, lower prices and provide more choices to
energy customers.
In anticipation of the new rules, the Company filed an open access transmission
tariff for wholesale service on April 16, 1996 with the FERC. This filing will
allow the Company to have a current cost-based tariff in place for any new open
access transmission customers requesting service on Minnesota Power's system.
The tariff is expected to be effective 60 days after the filing date with the
revenue subject to refund pending final approval of the rates.
-10-
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
4(a) Amended and Restated Trust Agreement, dated as of March 1, 1996,
relating to MP&L Capital I's 8.05% Cumulative Quarterly Income
Preferred Securities, between the Company, as Depositor, and The
Bank of New York, The Bank of New York (Delaware), Philip R.
Halverson, David G. Gartzke and James K. Vizanko, as Trustees.
4(b) Amendment No. 1, dated April 11, 1996, to Amended and Restated
Trust Agreement, dated as of March 1, 1996, relating to MP&L
Capital I's 8.05% Cumulative Quarterly Income Preferred
Securities.
4(c) Indenture, dated as of March 1, 1996, relating to the Company's
8.05% Junior Subordinated Debentures, Series A, Due 2015, between
the Company and The Bank of New York, as Trustee.
4(d) Guarantee Agreement, dated as of March 1, 1996, relating to MP&L
Capital I's 8.05% Cumulative Quarterly Income Preferred
Securities, between the Company, as Guarantor, and The Bank of New
York, as Trustee.
4(e) Agreement as to Expenses and Liabilities, dated as of March 20,
1996, relating to MP&L Capital I's 8.05% Cumulative Quarterly
Income Preferred Securities, between the Company and MP&L Capital
I.
27 Financial Data Schedule
* 99 The consolidated financial statements of ADESA Corporation for
the quarter ended March 31, 1995 (filed as exhibit 99(b) to Form
8-K dated July 12 ,1995, File No. 1-3548).
- ---------------------------
* Incorporated herein by reference as indicated.
(b) Reports on Form 8-K
Report on Form 8-K dated and filed April 9, 1996 with respect to Item 5.
Other Events.
-11-
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.
Minnesota Power & Light Company
-------------------------------
(Registrant)
May 10, 1996 D. G. Gartzke
-------------------------------
D. G. Gartzke
Senior Vice President - Finance
and Chief Financial Officer
May 10, 1996 Mark A. Schober
-------------------------------
Mark A. Schober
Corporate Controller