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 September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission File No. 0-692
NORTHWESTERN PUBLIC SERVICE COMPANY
A Delaware Corporation
IRS Employer Identification No. 46-0172280
33 Third Street SE
Huron, South Dakota 57350-1318
Telephone - 605-352-8411
Indicate by check mark whether the registrant (1) has filed all reports req
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. [ X ] Yes [ ] No
Common Stock, Par Value $3.50
7,677,232 shares outstanding at November 7, 1994
INDEX
Page
Part I. Financial Information
Consolidated Balance Sheet -
September 30, 1994 and December 31, 1993 1
Consolidated Statement of Income -
Three months and nine months ended
September 30, 1994 and 1993 2
Consolidated Statement of Cash Flows
Three months and nine months ended
September 30, 1994 and 1993 3
Notes to Consolidated Financial Statements 4
Management's Discussion of Financial Condition
and Results of Operations 5
Part II. Other Information 8
Signatures 9
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED BALANCE SHEET
September 30, December 31,
1994 1993
ASSETS (unaudited)
-------------- --------------
UTILITY PLANT, at original cost:
Electric $ 296,292,831 $ 292,508,996
Gas 57,068,778 53,414,571
Common 15,996,775 15,788,899
-------------- --------------
Utility plant in service 369,358,384 361,712,466
Less-Accumulated depreciation 136,142,269 130,610,474
-------------- --------------
233,216,115 231,101,992
Construction work in progress 11,431,086 7,393,129
-------------- --------------
244,647,201 238,495,121
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 1,750,304 3,099,093
Accounts receivable, net 7,755,888 11,197,920
Fuel, at average cost 4,069,406 4,040,170
Inventories, materials and supplies 10,567,635 9,150,841
Deferred gas costs 805,223 4,121,591
Other 3,353,795 2,343,183
-------------- --------------
28,302,251 33,952,798
-------------- --------------
OTHER ASSETS:
Investments 48,367,938 44,851,734
Deferred charges and other 28,554,411 26,274,440
-------------- --------------
76,922,349 71,126,174
-------------- --------------
$ 349,871,801 $ 343,574,093
============== ==============
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock equity-
Common stock $ 26,870,312 $ 26,870,312
Additional paid-in capital 29,922,847 29,922,847
Retained earnings 54,816,206 52,873,772
Unrealized gain on investments, net 3,861,233 -
-------------- --------------
115,470,598 109,666,931
Cumulative preferred stock-
Nonredeemable 2,600,000 2,600,000
Redeemable 40,000 70,000
Long-term debt 126,322,500 126,600,000
-------------- --------------
244,433,098 238,936,931
-------------- --------------
CURRENT LIABILITIES:
Commercial paper 4,500,000 -
Long-term debt due within one year 600,000 600,000
Accounts payable 8,275,907 10,440,263
Accrued taxes 5,907,117 8,227,610
Accrued interest 1,674,035 2,946,075
Other 5,336,427 5,617,740
-------------- --------------
26,293,486 27,831,688
-------------- --------------
DEFERRED CREDITS:
Accumulated deferred income taxes 39,971,630 35,683,509
Unamortized investment tax credits 10,723,031 11,149,631
Other 28,450,556 29,972,334
-------------- --------------
79,145,217 76,805,474
-------------- --------------
$ 349,871,801 $ 343,574,093
============== ==============
The accompanying notes to consolidated financial statements are
an integral part of this balance sheet.
1
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF INCOME
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------------- ------------- ------------- -------------
OPERATING REVENUES:
Electric $ 19,387,455 $ 18,641,348 $ 55,484,438 $ 53,203,636
Gas 5,376,641 5,794,429 47,013,129 47,353,546
Other 5,430,697 5,339,000 16,918,202 14,137,900
------------- ------------- ------------- -------------
30,194,793 29,774,777 119,415,769 114,695,082
------------- ------------- ------------- -------------
OPERATING EXPENSES:
Fuel for electric generation 3,283,838 3,334,309 10,141,499 9,774,967
Purchased power 550,108 435,274 1,034,707 954,094
Purchased gas sold 6,332,986 4,875,305 35,762,490 35,208,270
Other operating expenses 5,189,623 5,209,898 15,972,568 15,833,929
Manufacturing costs 4,840,356 4,914,280 15,180,305 12,956,555
Maintenance 1,594,886 1,558,781 4,802,707 4,771,141
Depreciation 3,036,942 2,893,879 9,056,728 8,652,235
Income taxes 478,853 1,007,440 5,583,093 5,491,204
Property and other taxes 1,613,855 825,599 4,825,202 3,905,219
------------- ------------- ------------- -------------
26,921,447 25,054,765 102,359,299 97,547,614
------------- ------------- ------------- -------------
OPERATING INCOME 3,273,346 4,720,012 17,056,470 17,147,468
ALLOWANCE FOR EQUITY FUNDS
USED DURING CONSTRUCTION 4,621 13,044 10,395 22,704
INVESTMENT INCOME AND OTHER,
net of taxes 514,691 449,440 1,817,595 1,397,082
------------- ------------- ------------- -------------
INCOME BEFORE INTEREST CHARGES 3,792,658 5,182,496 18,884,460 18,567,254
INTEREST EXPENSE (2,473,288) (2,735,314) (7,318,017) (7,217,051)
ALLOWANCE FOR BORROWED FUNDS
USED DURING CONSTRUCTION 10,783 20,402 24,255 35,511
------------- ------------- ------------- -------------
NET INCOME 1,330,153 2,467,584 11,590,698 11,385,714
DIVIDENDS ON CUMULATIVE
PREFERRED STOCK (29,775) (30,168) (90,111) (91,293)
------------- ------------- ------------- -------------
NET INCOME AVAILABLE FOR
COMMON STOCK $ 1,300,378 $ 2,437,416 $ 11,500,587 $ 11,294,421
============= ============= ============= =============
EARNINGS PER AVERAGE COMMON SHARE
based on 7,677,232 shares $ 0.17 $ 0.32 $ 1.50 $ 1.47
============= ============= ============= =============
DIVIDENDS PER SHARE OF COMMON STOCK $ 0.415 $ 0.405 $ 1.245 $ 1.215
============= ============= ============= =============
The accompanying notes to consolidated financial statements are
an integral part of this statement.
2
NORTHWESTERN PUBLIC SERVICE COMPANY
CONSOLIDATED STATEMENT OF CASH FLOWS
(unaudited)
Three Months Ended Nine Months Ended
September 30 September 30
1994 1993 1994 1993
------------- ------------- ------------- -------------
OPERATING ACTIVITIES:
Net income $ 1,330,153 $ 2,467,584 $ 11,590,698 $ 11,385,714
Items not requiring cash:
Depreciation 3,036,942 2,893,879 9,056,728 8,652,235
Deferred income taxes, net 1,311,134 (504,908) 1,450,269 (558,768)
Investment tax credit (142,200) (141,000) (426,600) (423,000)
Changes in current assets and liabilities:
Accounts receivable 2,276,078 463,117 3,442,032 1,062,268
Inventories (663,857) (128,313) (1,446,030) (400,368)
Other current assets (122,255) (1,462,509) 2,305,756 1,696,634
Accounts payable (372,668) 1,215,235 (2,164,356) (3,722,158)
Accrued taxes (3,458,610) (1,757,166) (2,320,493) (147,800)
Accrued interest (1,227,514) (570,595) (1,272,040) (1,040,381)
Other current liabilities (195,138) (696,466) (281,313) 125,592
Other, net (2,753,612) (189,331) (4,438,561) (850,941)
------------- ------------- ------------- -------------
Cash flows from (for) operating activities (981,547) 1,589,527 15,496,090 15,779,027
------------- ------------- ------------- -------------
INVESTMENT ACTIVITIES:
Additions to utility plant (6,127,126) (4,765,030) (13,813,268) (13,842,938)
Sale (purchase) of noncurrent investments, net 5,537,956 (281,485) 2,424,156 (6,798,523)
------------- ------------- ------------- -------------
Cash flows for investment activities (589,170) (5,046,515) (11,389,112) (20,641,461)
------------- ------------- ------------- -------------
FINANCING ACTIVITIES:
Common and preferred stock dividends paid (3,215,827) (3,139,449) (9,648,267) (9,419,132)
Issuance of long-term debt - 53,050,743 400,000 73,715,307
Repayment of long-term debt (242,500) (36,500,000) (677,500) (58,900,200)
Retirement of preferred stock (30,000) (30,000) (30,000) (30,000)
Commercial paper borrowings 4,500,000 (10,000,000) 4,500,000 -
------------- ------------- ------------- -------------
Cash flows from (for) financing activities 1,011,673 3,381,294 (5,455,767) 5,365,975
------------- ------------- ------------- -------------
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (559,044) (75,694) (1,348,789) 503,541
Cash and Cash Equivalents, beginning of period 2,309,348 4,274,798 3,099,093 3,695,563
------------- ------------- ------------- -------------
CASH AND CASH EQUIVALENTS, end of period $ 1,750,304 $ 4,199,104 $ 1,750,304 $ 4,199,104
============= ============= ============= =============
SUPPLEMENTAL CASH FLOW INFORMATION:
Cash paid during the year for:
Income taxes $ 1,676,516 $ 1,571,163 $ 5,953,219 $ 5,059,163
Interest 3,468,706 3,180,189 7,920,422 7,889,768
The accompanying notes to consolidated financial statements are
an integral part of this statement.
3
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Reference is made to Notes to Financial Statements
included in the Company's Annual Report)
(1) Management's Statement -
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. In the opinion of the Company, all
adjustments necessary for a fair presentation of the results of operations
for the interim periods have been included. It is suggested that these
financial statements be read in conjunction with the financial statements
and the notes thereto included in the Company's latest annual report to
stockholders.
(2) Subsidiaries and Principles of Consolidation -
The consolidated financial statements include the accounts of all
wholly owned subsidiaries. All significant intercompany transactions have
been eliminated.
(3) Adoption of SFAS 115 -
On January 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 (SFAS 115), "Accounting for Certain
Investments in Debt and Equity Securities." Adoption of SFAS 115 resulted
in no cumulative or current period effect on the Company's operating
results.
(4) Environmental Matters -
The Company is subject to environmental regulations from numerous
entities. The Clean Air Act Amendments of 1990 (the Act) stipulate
limitations on sulfur dioxide and nitrogen oxide emissions from coal-fired
power plants. The Company believes it can economically meet the Act's
sulfur dioxide emission requirements at its generating plants by the
required compliance dates and that it is in compliance with all presently
applicable environmental protection requirements and regulations. In
addition to the Clean Air Act, the Company is also subject to other
environmental regulations including matters related to utility processing
sites. The Company conducted an investigation of a former gas
manufacturing site and is taking remedial action to dispose of waste
material found at such site. Recovery of any remediation costs incurred
will be sought from insurance carriers and through the regulatory process
although there is no assurance that such costs will be recovered. No
administrative or judicial proceedings involving the Company are now
pending or known by the Company to be contemplated under present
environmental protection requirements.
(5) Reclassifications -
Certain 1993 amounts have been reclassified to conform to the 1994
presentation. Such reclassifications had no impact on net income and
common stock equity as previously reported.
4
MANAGEMENT'S DISCUSSION OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
FINANCIAL CONDITION:
Liquidity and Capital Resources -
The Company has a high degree of long-term liquidity through the
generation of significant cash flows, the availability of substantial
marketable securities, and a sound capital structure. In addition, the
Company has adequate capacity for additional financing.
The Company has generated significant operating cash flows while
continuing to maintain substantial cash reserves in the form of marketable
securities. Cash flows from operating activities during the nine months
ended September 30, 1994 and 1993 were $15.5 million and $15.8 million,
respectively. Cash equivalents and investment securities totaled $39.4
million and $27.2 million at September 30, 1994 and 1993, respectively.
Financial resources are also provided by unused lines of credit, which
are generally used to support commercial paper borrowings, a primary source
of short-term financing. At September 30, 1994, unused short-term lines of
credit totaled $12 million.
Capital Requirements -
The Company's primary capital requirements include the funding of its
utility construction and expansion programs, the funding of debt and
preferred stock retirements and sinking fund requirements, and the funding
of its investment activities.
The emphasis of the Company's construction activities is to undertake
those projects that most efficiently serve the expanding needs of its
customer base, enhance energy delivery and reliability capabilities through
system replacement, expand its current customer base, and provide for the
reliability of energy supply. Expenditures for construction activities
during the three months and for the nine months ended September 30, 1994
and 1993 were $6.1 million and $4.8 million, and $13.8 million and $13.8
million, respectively. The Company estimates construction expenditures
will be approximately $20 million in 1994 with a large portion of
expenditures to be spent on enhancements of the electric distribution
system. The Company also projects spending modest amounts on the Company's
continuing gas expansion program. Construction expenditures for the years
1994 through 1998 are estimated to be $75 million.
5
Capital requirements for the mandatory retirement of long-term debt
and mandatory preferred stock sinking fund redemptions totaled $480,000
during the year ended September 30, 1994, and it is expected that such
mandatory retirements will be $630,000 in 1994 and 1995, $610,000 in 1996,
$600,000 in 1997, and $20.6 million in 1998.
The Company anticipates that future capital requirements will be met
by both internally generated cash flows and available external financing.
RESULTS OF OPERATIONS:
Earnings Comparisons -
Earnings per share for the quarter ended September 30, 1994 were $.17
compared to $.32 for the quarter ended September 30, 1993. The decrease in
earnings was primarily due to lower gas sales, increased gas costs related
to costs not yet recovered through the purchased gas adjustment clause, and
an increase in property taxes due to a nonrecurring adjustment in 1993.
These increased expenses were somewhat offset by decreased interest
expense.
Earnings per share for the year to date ended September 30, 1994 were
$1.50 compared to $1.47 for the nine months ended September 30, 1993. The
increase can be attributed to increased electric revenue due to more
favorable weather patterns and improved profitability from nonregulated
operations.
Electric and Gas Revenues -
The following tables summarize the factors affecting the variations in
electric and gas revenues between years:
Variation from Variation from
Prior Year Prior Year
Three Months Nine Months
Ended September 30 Ended September 30
------- ------- ------- -------
1994 1993 1994 1993
------- ------- ------- -------
(thousands of dollars)
Electric Revenue:
Variation in kwh sales $ 1,129 $ 2,186 $ 2,723 $ 5,406
Changes in rates, fuel cost
recovery, and other (383) (167) (442) (1,065)
------- ------- ------- -------
$ 746 $ 2,019 $ 2,281 $ 4,341
======= ======= ======= =======
6
Gas Revenue:
Variation in mcf sales $ (560) $ 412 $(1,530) $ 9,239
Changes in rates, gas cost
recovery, and other 142 (7) 1,190 2,261
------- ------- ------- -------
$ (418) $ 405 $ (340) $11,500
======= ======= ======= =======
Operating Expenses -
For the quarter ended September 30, 1994, electric fuel-related costs
were comparable to electric revenues. Gas costs increased as a percentage
of gas revenues primarily due to cost fluctuations. Other operating
expenses decreased primarily due to lower labor costs offset by higher
employee benefits and community development activities. Maintenance
expense increased due to higher costs at the Company's jointly owned steam
generating plants. Depreciation increases can be attributed to an increase
in utility plant, while interest expense decreased due to the refinancing
of mortgage bonds in 1993.
For the nine months ended September 30, 1994, the favorable weather
patterns resulted in comparable increases in electric fuel-related costs.
Although gas revenues decreased in 1994, gas costs increased modestly
primarily due to cost fluctuations. Other operating expenses increased
primarily due to the use of internal gas peaking production units to
supplement the purchase of natural gas supplies, increased gas distribution
expenses, offset by lower employee benefit costs. Depreciation increases
are attributable to increased utility plant, while taxes increased as a
result of higher taxable income. The increase in interest charges is due
to the increased long-term debt borrowing during the period.
NONREGULATED OPERATIONS:
In addition to the Company's investment portfolio of preferred stock
investments, the Company holds interest in two nonregulated businesses. At
September 30, 1994, Northwestern Networks, Inc. (NNI), one of the Company's
wholly owned subsidiaries, held 1.1 million shares of LodgeNet
Entertainment Corporation (LEC) common stock (which trades on the NASDAQ
national market).
Northwestern Systems, Inc. (NSI), one of the Company's wholly owned
subsidiaries, owns Lucht, Inc., a firm that develops, manufactures, and
markets multi-image photographic printers and other related equipment.
Manufacturing revenues increased $92,000 for the three months ended
September 1994 and $2.8 million for the nine months ended September 1994 as
compared to the same periods in 1993. Manufacturing costs increased
comparably.
7
NORTHWESTERN PUBLIC SERVICE COMPANY
PART II
ITEM 1. LEGAL PROCEEDINGS
The Company is not currently involved in any pending major litigation.
ITEM 2. CHANGES IN SECURITIES
None
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
None
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None
ITEM 5. OTHER INFORMATION
None
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
Exhibit 27 - Financial Data Schedule UT
(b) Reports on Form 8-K
None
8
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.
NORTHWESTERN PUBLIC SERVICE COMPANY
-----------------------------------
(Registrant)
Date: November 7, 1994 /s/ R. A. Thaden
------------------------------------
Treasurer
Date: November 7, 1994 /s/ A. D. Dietrich
-----------------------------------
Vice President-Corporate Services
and Secretary
9