1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 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 number 1-1245
WISCONSIN ELECTRIC POWER COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0476280
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2590
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such 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. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at August 1, 1994
-------------------------- -----------------------------
$10 Par Value Common Stock 33,289,327 Shares
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ELECTRIC POWER COMPANY
CONDENSED INCOME STATEMENT
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1994 1993 1994 1993
------ ------ ------ ------
(Thousands of Dollars)
Operating Revenues
Electric $339,275 $320,708 $694,514 $654,616
Steam 2,563 2,708 9,426 8,451
-------- -------- -------- --------
Total Operating Revenues 341,838 323,416 703,940 663,067
Operating Expenses
Fuel 71,485 60,354 143,961 128,541
Purchased power 10,040 16,936 21,634 30,874
Other operation expenses 86,641 88,669 177,744 169,503
Maintenance 28,633 39,637 60,632 75,615
Revitalization - - 63,500 -
Depreciation 39,167 37,593 79,060 73,801
Taxes other than income taxes 17,941 17,328 37,081 34,962
Federal income tax 19,531 10,968 36,283 28,850
State income tax 4,593 2,778 8,609 7,154
Deferred income taxes - net 2,042 2,411 (14,494) 4,928
Investment tax credit - net (1,020) (991) (2,040) (1,981)
-------- -------- -------- --------
Total Operating Expenses 279,053 275,683 611,970 552,247
Operating Income 62,785 47,733 91,970 110,820
Other Income and Deductions
Interest income 1,914 3,826 5,528 7,340
Allowance for other funds used
during construction 1,508 2,168 2,761 4,174
Miscellaneous - net 2,223 1,222 4,021 4,552
Income taxes (115) (816) (724) (1,899)
-------- -------- -------- --------
Total Other Income and Deductions 5,530 6,400 11,586 14,167
Income Before Interest Charges 68,315 54,133 103,556 124,987
Interest Charges
Interest expense 25,331 24,077 50,413 49,771
Allowance for borrowed funds used
during construction (852) (1,225) (1,560) (2,318)
-------- -------- -------- --------
Total Interest Charges 24,479 22,852 48,853 47,453
-------- -------- -------- --------
Net Income 43,836 31,281 54,703 77,534
Preferred Stock Dividend Requirement 360 1,446 749 2,893
-------- -------- -------- --------
Earnings Available for Common Stockholder $ 43,476 $ 29,835 $ 53,954 $ 74,641
======== ======== ======== ========
<FN>
Note - Earnings and dividends per share of common stock are not applicable because
all of the company's common stock is owned by Wisconsin Energy Corporation.
See accompanying notes to financial statements.
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WISCONSIN ELECTRIC POWER COMPANY FORM 10-Q
CONDENSED BALANCE SHEET
(Unaudited)
June 30, 1994 December 31, 1993
--------------- -----------------
(Thousands of Dollars)
Assets
------
Utility Plant
Electric $4,192,026 $4,079,794
Steam 39,940 39,113
Accumulated provision for depreciation (1,862,743) (1,784,110)
---------- ----------
2,369,223 2,334,797
Construction work in progress 192,192 208,834
Nuclear fuel - net 56,673 52,665
---------- ----------
Net Utility Plant 2,618,088 2,596,296
Other Property and Investments 391,328 375,457
Current Assets
Cash and cash equivalents 15,306 13,421
Accounts receivable 88,421 91,849
Accrued utility revenues 91,808 89,306
Materials, supplies and fossil fuel 115,739 127,312
Prepayments and other assets 71,017 53,812
---------- ----------
Total Current Assets 382,291 375,700
---------- ----------
Deferred Charges and Other Assets
Accumulated deferred income taxes 116,904 97,788
Other 244,744 248,315
---------- ----------
Total Deferred Charges and Other Assets 361,648 346,103
---------- ----------
Total Assets $3,753,355 $3,693,556
========== ==========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 502,566 $ 472,566
Retained earnings 911,515 927,120
---------- ----------
Total Common Stock Equity 1,414,081 1,399,686
Preferred stock - redemption not required 30,451 30,451
Preferred stock - redemption required - 5,250
Long-term debt 1,190,102 1,188,744
---------- ----------
Total Capitalization 2,634,634 2,624,131
Current Liabilities
Long-term debt due currently 18,915 19,254
Short-term debt 137,300 117,903
Accounts payable 57,604 81,630
Accrued liabilities 61,972 61,775
Other 20,019 13,238
---------- ----------
Total Current Liabilities 295,810 293,800
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 437,667 444,717
Other 385,244 330,908
---------- ----------
Total Deferred Credits and Other Liabilities 822,911 775,625
---------- ----------
Total Capitalization and Liabilities $3,753,355 $3,693,556
========== ==========
<FN>
See accompanying notes to financial statements.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30
---------------------------
1994 1993
---- ----
(Thousands of Dollars)
Operating Activities:
Net income $ 54,703 $ 77,534
Reconciliation to cash:
Depreciation 79,060 73,801
Nuclear fuel expense - amortization 10,706 10,672
Conservation expense - amortization 11,942 7,378
Debt premium, discount & expense - amortization 7,100 5,620
Revitalization - net 49,347 -
Deferred income taxes - net (14,494) 4,928
Investment tax credit - net (2,040) (1,981)
Allowance for other funds used during construction (2,761) (4,174)
Change in: Accounts receivable 3,428 (4,499)
Inventories 11,573 2,410
Accounts payable (24,026) 1,537
Other current assets (19,707) 2,795
Other current liabilities 6,978 13,561
Other (8,829) (1,092)
-------- --------
Cash Provided by Operating Activities 162,980 188,490
Investing Activities:
Construction expenditures (96,552) (109,440)
Allowance for borrowed funds used during construction (1,560) (2,318)
Nuclear fuel (16,426) (9,463)
Nuclear decommissioning trust (5,080) (5,910)
Conservation investments - net (7,459) (12,861)
Other (8,482) (310)
-------- --------
Cash Used in Investing Activities (135,559) (140,302)
Financing Activities:
Sale of long-term debt 11,079 233,744
Retirement of long-term debt (10,699) (249,400)
Change in short-term debt 19,397 (27,754)
Stockholder contribution 30,000 -
Retirement of preferred stock (5,250) -
Dividends on stock - common (69,284) (32,500)
- preferred (779) (2,893)
-------- --------
Cash Used in Financing Activities (25,536) (78,803)
-------- --------
Change in Cash and Cash Equivalents $ 1,885 $(30,615)
======== ========
Supplemental Information Disclosures:
Cash Paid for:
Interest (net of amount capitalized) $ 42,087 $ 38,719
Income taxes 71,979 49,670
<FN>
See accompanying notes to financial statements.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited financial statements should be read in
conjunction with the company's 1993 Annual Report on Form 10-K. In the
opinion of management, all adjustments necessary to a fair statement of
the results of operations and financial position of the company have been
included in the accompanying income statement and balance sheet. The
results of operations for the three months and six months ended June 30,
1994 are not, however, necessarily indicative of the results which may
be expected for the year 1994 because of seasonal and other factors.
2. In the first quarter of 1994, Wisconsin Electric Power Company recorded
a $63.5 million charge related to its revitalization program. The charge
reflects primarily the costs of voluntary severance and early retirement
packages which are being used to reduce employee staffing levels.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by Wisconsin Electric Power Company's ("Wisconsin Electric")
operating activities totaled $163 million during the six months ended June 30,
1994. This compares to $188 million provided during the same period in 1993.
Wisconsin Electric's investing activities totaled $136 million for the six
months ended June 30, 1994 compared to $140 million during the same period in
1993. Investments during the first half of 1994 include $97 million for the
construction of new or improved facilities, $16 million for acquisition of
nuclear fuel, $7 million for net capitalized conservation expenditures and $5
million for payments to an external trust for the eventual decommissioning of
Wisconsin Electric's Point Beach Nuclear Plant.
Capital requirements for the remainder of 1994 are expected to be principally
for construction expenditures, capitalized conservation programs and payments
to the external trust for the eventual decommissioning of the Point Beach
Nuclear Plant. Exclusive of possible debt refundings, Wisconsin Electric
tentatively plans to issue approximately $100 million of long-term debt in a
public offering later in 1994. The specific form, amount and timing of debt
securities to be issued have not yet been determined and will depend, to a
large extent, on market conditions.
RESULTS OF OPERATIONS
Second Quarter Results:
Earnings increased $14 million during the second quarter of 1994 compared to
the same period during 1993 largely reflecting a 7.4% increase in kilowatt-
hour sales and reduced expenses. Maintenance expenses decreased 27.8% during
the period largely because of reduced expenditures made in connection with the
Port Washington Power Plant, as three years of renovation work at this
facility neared completion. For additional information regarding the
completion of the Port Washington renovation project, refer to ITEM 5. OTHER
INFORMATION - "PORT WASHINGTON RENOVATION COMPLETED" in PART II hereof. Other
operation expenses during the second quarter of 1994 decreased 2.3% on a
comparative basis reflecting, among other things, savings attributable to the
"Revitalization" program undertaken at Wisconsin Electric. The Revitalization
efforts being implemented are designed to increase efficiencies, reduce costs
and improve customer service in order to position the company for success in
the emerging competitive utility environment.
The 5.7% increase in operating revenues reflects higher kilowatt-hour sales
and rate increases at Wisconsin Electric.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
The projected annualized revenue impact of rate changes authorized by
regulatory commissions which impact 1993 and 1994 operating revenues are as
follows:
Revenue Percent
Increase Change in Effective
Company/Service (Decrease) Rates Date
------------------------ ------------ --------- -----------
Wisconsin Electric
* Retail electric, WI 2,448,000 0.2% 02/17/93
Steam heating 505,000 3.5 02/17/93
Wholesale electric 6,000,000 10.6 06/09/93
Retail electric, MI 1,366,000 4.3 07/09/93
------------------------
* The $2.4 million annualized rate increase effective February 17,
1993 represents the net rate increase after the elimination of
a fuel adjustment rate reduction in effect since May 1992.
ELECTRIC SALES
Three Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1994 1993 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,472,750 1,458,835 1.0
Small Commercial and Industrial 1,661,575 1,514,319 9.7
Large Commercial and Industrial 2,611,826 2,492,295 4.8
Other 396,838 430,660 (7.9)
---------- ----------
Total Retail and Municipal 6,142,989 5,896,109 4.2
Resale-Utilities 408,691 203,060 101.3
---------- ----------
Total Sales 6,551,680 6,099,169 7.4
- -------------------------------
Total electric kilowatt-hour sales during the second quarter of 1994 were
positively impacted by, among other things, substantially warmer weather
conditions. As measured by cooling degree days, the second quarter of 1994
was 84.2% warmer than normal.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, increased 2.2% during the quarter ended
June 30, 1994 compared to the same period during 1993. Excluding the mines,
total electric sales increased 8.0% and sales to all other large commercial
and industrial customers increased 5.6% during the second quarter of 1994
compared to the same period during 1993.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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PART I - FINANCIAL INFORMATION (Cont'd)
Year-to-Date Results:
Earnings decreased $21 million during the six months ended June 30, 1994
compared to the same period during 1993 primarily reflecting a non-recurring
restructuring charge of approximately $39 million (net of tax) incurred during
the first quarter of 1994 as part of the "Revitalization" program undertaken
at Wisconsin Electric. This charge includes the cost of voluntary severance
and early retirement packages used to reduce employee staffing levels. It is
anticipated that this charge will be offset by the end of 1995 through savings
in operation and maintenance costs. Excluding the non-recurring charge,
earnings would have increased approximately $18 million during the 6 month
period ended June 30, 1994 compared to the same period during 1993.
Contributing positively to earnings during the first half of 1994 were
increased kilowatt-hour sales and the previously described reduction in
expenses.
Operating revenues increased 6.2% during the six months ended June 30, 1994
compared to the same period during 1993, reflecting the increase in
electricity sales and the rate increases in effect during this period.
ELECTRIC SALES
Six Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1994 1993 % Change
- ------------------------------- ---------- ---------- --------
Residential 3,268,195 3,161,019 3.4
Small Commercial and Industrial 3,319,361 3,085,678 7.6
Large Commercial and Industrial 5,074,258 4,870,161 4.2
Other 836,259 929,416 (10.0)
---------- ----------
Total Retail and Municipal 12,498,073 12,046,274 3.8
Resale-Utilities 800,149 436,767 83.2
---------- ----------
Total Sales 13,298,222 12,483,041 6.5
- -------------------------------
Total electric kilowatt-hour sales during the first six months of 1994 were
positively impacted by, among other things, substantially warmer weather
conditions during the second quarter of 1994 and colder weather conditions
during the first quarter of 1994. As measured by cooling degree days, the
second quarter of 1994 was 84.2% warmer than normal, while, as measured by
heating degree days, the first quarter of 1994 was 9.4% colder compared to the
same period during 1993.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, increased 2.4% during the six months ended
June 30, 1994 compared to the same period during 1993. Excluding the mines,
total electric sales increased 6.9% and sales to all other large commercial
and industrial customers increased 4.7% during the six months ended June 30,
1994 compared to the same period during 1993.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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PART I - FINANCIAL INFORMATION (Cont'd)
ELECTRIC SALES - Cont'd
For certain other information which may impact Wisconsin Electric's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with ITEM 3. LEGAL
PROCEEDINGS in PART I of Wisconsin Electric's Annual Report on Form 10-K for
the year ended December 31, 1993.
RATE MATTERS
WISCONSIN RETAIL ELECTRIC JURISDICTION
1994 Fuel Cost Adjustment: Effective August 4, 1994, the Public Service
Commission of Wisconsin ("PSCW") authorized Wisconsin Electric to reduce
Wisconsin retail electric rates to reflect lower fuel and purchased power
expenses. The adjustment will reduce Wisconsin retail electric rates by an
annualized $16.2 million, or 1.3%.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Wisconsin Electric's 1994 Annual Meeting of Stockholders held on May 10,
1994, for which Wisconsin Electric did not solicit proxies, the board of
directors as listed in Wisconsin Electric's Information Statement dated
April 15, 1994 (the "Information Statement") was re-elected in its entirety.
With respect to each nominee, 33,289,327 votes were cast for election and no
votes were withheld. There was no solicitation in opposition to the nominees
proposed in the Information Statement and there were no abstentions or broker
non-votes with respect to the election of directors.
Further information concerning this matter is contained in the Information
Statement.
ITEM 5. OTHER INFORMATION
CONCORD GENERATING STATION
In May 1994, two units, or approximately 150 megawatts of peaking capacity,
were placed in-service marking the completion of the new Concord Generating
Station. Previously, two units, or approximately 150 megawatts of peaking
capacity, were placed in-service at this facility during 1993. Capital
expenditures associated with the four units at this facility total
approximately $108 million. The 300 megawatt natural gas-fired combustion
turbine facility, located near Watertown, Wisconsin is expected to run
approximately 5% of the time during a year, helping meet electric peak demand
requirements.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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PART II - OTHER INFORMATION (Cont'd)
ITEM 5. OTHER INFORMATION - Cont'd
PORT WASHINGTON RENOVATION COMPLETED
In June 1994, Wisconsin Electric completed the renovation work at its Port
Washington Power Plant, which included upgrading the turbine generators and
boilers and the installation of additional emission control equipment. With
units 1 and 2 completed in 1993 and unit 3 completed in 1992, the project
concluded with the recent completion of the unit 4 work. The total cost of
this renovation project was approximately $112 million.
RECORD ELECTRIC PEAK DEMAND
On June 17, 1994, Wisconsin Electric reached a new all-time electric peak
demand of 4,950 megawatts, during a period of unusually hot and humid weather.
The previous record peak demand of 4,797 megawatts was set on August 27, 1991.
EFFECTIVE DATE OF PLANNED MERGER OF WN INTO WE DELAYED
In a current report on Form 8-K dated January 24, 1994 (File No. 1-1245), an
announcement was made regarding the intent to merge Wisconsin Natural Gas
Company, the wholly-owned natural gas utility subsidiary of Wisconsin Energy
Corporation, into Wisconsin Electric, the principal utility subsidiary of
Wisconsin Energy Corporation. At that time it was anticipated that such
merger would be effective by year-end 1994.
The completion of the planned merger, which is subject to a number of
conditions including requisite regulatory approvals, is currently anticipated
to occur by year-end 1995.
As part of the company's current "Revitalization" effort, the combination of
the electric and gas utilities is expected to reduce operating costs and
improve the competitive position of Wisconsin Energy Corporation's utility
operations.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibit is filed with this report:
(3)-1 Bylaws of Wisconsin Electric Power Company, as amended to
July 27, 1994 to provide that the annual meeting of
stockholders may be held on or before the 1st of July
of each year. (Section 1 of Bylaw I)
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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PART II - OTHER INFORMATION (Cont'd)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K - Cont'd
The following exhibit is incorporated herein by reference to the
Quarterly Report on Form 10-Q for the quarter ended June 30, 1994
of Wisconsin Energy Corporation (File No. 1-9057), with which
it is filed as an exhibit bearing the same exhibit number:
(10)-1 Executive Non-Qualified Trust by and between Wisconsin
Energy Corporation and Firstar Trust Company, dated
May 12, 1994, established to provide a source of funds
to assist in the meeting of the liabilities under various
nonqualified deferred compensation plans made between the
Registrant or its subsidiaries and various plan participants.
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed in the quarter ended June 30,
1994.
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FORM 10-Q
WISCONSIN ELECTRIC POWER COMPANY
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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.
WISCONSIN ELECTRIC POWER COMPANY
--------------------------------------
(Registrant)
/s/ J. W. Boston
--------------------------------------
Date: August 12, 1994 J. W. Boston, President and Chief
Operating Officer
/s/ A. K. Klisurich
--------------------------------------
Date: August 12, 1994 A. K. Klisurich, Controller
(Chief Accounting Officer)
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Wisconsin Electric Power Company
EXHIBIT INDEX
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Form 10-Q for Quarter ended 6/30/94
Exhibit
Number
- -------
(3)-1 Bylaws of Wisconsin Electric Power Company, as amended to
July 27, 1994 to provide that the annual meeting of stockholders
may be held on or before the 1st of July of each year.
(Section 1 of Bylaw I)
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