SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF
X THE SECURITIES EXCHANGE ACT OF 1934
------
For the quarterly period ended June 30, 1995
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 1-9894
WPL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1380265
(State or other jurisdiction (I.R.S. Employer Identification
of incorporation or organization) No.)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 608-252-3311
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.
Common Stock Outstanding at June 30, 1995: 30,773,588 shares
CONTENTS
PAGE
PART I. Financial Information:
Consolidated Financial Statements of WPL Holdings, Inc.
Consolidated Balance Sheets as of June 30, 1995
and 1994 and December 31, 1994 . . . . . . . . . . . . 2
Consolidated Statements of Income for the Three and Six
Months Ended June 30, 1995 and 1994 . . . . . . . . . . 4
Consolidated Statements of Cash Flows - Six
Months Ended June 30, 1995 and 1994 . . . . . . . . . . 5
Notes to Consolidated Financial Statements . . . . . . . 6
Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . . 7
PART II. Other Information . . . . . . . . . . . . . . . . . . . . . . 15
Signatures . . . . . . . . . . . . . . . . . . . . . . . 16
Exhibit Index . . . . . . . . . . . . . . . . . . . . . 17
WPL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, June 30, December 31,
1995 1994 1994
(Thousands of dollars)
ASSETS
UTILITY PLANT:
Plant in service --
Electric . . . . . . $1,651,351 $1,531,411 $1,611,351
Gas . . . . . . . . 211,062 195,233 204,514
Water . . . . . . . 22,006 20,945 22,070
Common . . . . . . . 128,897 110,565 123,254
---------- ---------- ------------
2,013,316 1,858,154 1,961,189
Dedicated
decommissioning funds
64,342 50,970 51,791
---------- ----------- ------------
2,077,658 1,909,124 2,012,980
Less: Accumulated
provision for
depreciation . . . . 853,853 780,514 808,853
----------- ------------ ------------
1,223,805 1,128,610 1,204,127
Construction work in
progress . . . . . . 33,486 76,540 42,732
Nuclear fuel, net . . . 16,949 15,558 19,396
---------- ----------- -----------
Total utility plant . . 1,274,240 1,220,708 1,266,255
---------- ----------- -----------
OTHER PROPERTY AND
EQUIPMENT:
Other property and
equipment . . . . 153,191 136,794 96,536
Less: Accumulated
provision for
depreciation . . . 25,237 19,510 26,693
--------- ---------- ----------
127,954 117,284 123,229
--------- ---------- ----------
INVESTMENTS . . . . . . 12,085 12,607 12,320
---------- ----------- ----------
CURRENT ASSETS:
Cash and equivalents 11,071 9,198 7,273
Net accounts
receivable and
unbilled revenue,
less allowance for
doubtful accounts
of $1,890, $1,313
and $1,964,
respectively . . . 61,484 61,476 71,465
Fossil fuel, at
average cost . . . 12,689 12,772 15,824
Materials and
supplies, at
average cost . . . 21,421 23,124 21,618
Gas in storage, at
average cost . . . 5,178 4,610 7,975
Prepayments and other 30,993 29,379 30,279
---------- ---------- ----------
Total current
assets . . . . 142,836 140,559 154,434
---------- ---------- ----------
Restricted cash . . . . 7,218 3,234 3,217
---------- ---------- ----------
DEFERRED CHARGES:
Regulatory assets . 144,988 131,535 144,476
Other . . . . . . . 100,371 113,097 101,970
---------- ----------- -----------
Total deferred
charges . . . . 245,359 244,632 246,446
TOTAL ASSETS . . . . . $1,809,692 $1,739,024 $1,805,901
========== ========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
WPL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
June 30, June 30, December 31,
1995 1994 1994
(Thousands of dollars)
CAPITALIZATION AND
LIABILITIES
COMMON SHAREOWNER'S
INVESTMENT:
Common stock, $.01 par
value, authorized --
100,000,000 shares;
issued and outstanding
-- 30,773,588,
30,735,596 and
30,773,588 shares,
respectively . . . . . $ 308 $ 306 $ 308
Premium on capital stock
& capital surplus . . 307,659 303,441 304,442
Reinvested earnings . . 288,021 294,274 293,048
-------- -------- ---------
595,988 598,021 597,798
PREFERRED STOCK NOT
MANDATORILY REDEEMABLE:
Cumulative, without par
value, authorized
3,750,000 shares
maximum aggregate
stated value
$150,000,000;
Cumulative, without par
value, $100 stated
value; 449,765 shares
outstanding . . . . 44,977 44,977 44,977
Cumulative, without par
value, $25 stated
value; 599,630 shares
outstanding . . . . 14,986 14,986 14,986
LONG TERM DEBT, NET . . . . 431,027 423,590 448,110
--------- --------- -----------
Total capitalization 1,086,978 1,081,574 1,105,871
--------- --------- ----------
CURRENT LIABILITIES:
Current maturities of
long-term debt . . . . 2,871 1,528 2,832
Variable rate demand
bonds . . . . . . . . 56,975 56,975 56,975
Short-term debt . . . . 93,364 64,541 64,501
Accounts payable . . . . 59,540 53,192 71,949
Accrued payroll and
vacation . . . . . . . 16,527 15,515 17,357
Accrued taxes . . . . . 6,197 3,698 6,395
Accrued interest . . . . 8,992 8,995 9,138
Other . . . . . . . . . 24,030 30,602 21,925
--------- --------- ---------
Total current
liabilities . . . . 268,496 235,046 251,072
--------- --------- ---------
OTHER CREDITS:
Accumulated deferred
income taxes . . . . . 226,688 222,565 224,049
Accumulated deferred
investment tax credits 39,800 41,721 40,758
Accrued environmental
remediation costs . . 79,044 80,244 79,280
Other . . . . . . . . . 108,686 77,874 104,871
--------- --------- ---------
Total other credits . 454,218 422,404 448,958
--------- --------- ---------
TOTAL CAPITALIZATION AND
LIABILITIES . . . . . . $1,809,692 $1,739,024 $1,805,901
========== ========== ==========
The accompanying notes are an integral part of the consolidated
financial statements.
WPL HOLDINGS, INC. AND SUBSIDIARIES
Consolidated Statements of Income
Three Months Ended Six Months Ended
June 30, June 30,
1995 1994 1995 1994
(In Thousands Except for Per Share Data)
OPERATING REVENUES:
Electric . . . . . . $ 126,093 $ 125,271 $ 257,244 $ 262,468
Gas . . . . . . . . 23,509 24,629 79,718 89,704
Fees, rents and other 33,551 33,884 71,075 67,730
--------- ---------- --------- ----------
183,153 183,784 408,037 419,902
OPERATING EXPENSES:
Electric production
fuels . . . . . . 27,962 32,646 57,675 64,932
Purchased power . . 10,234 8,440 17,382 17,927
Purchased gas . . . 13,283 15,360 48,157 59,045
Other operation . . 67,278 65,815 135,640 129,409
Maintenance . . . . 13,216 12,387 23,048 21,759
Depreciation and
amortization . . . 21,901 19,569 43,505 41,034
Taxes other than
income . . . . . . 9,348 8,703 18,671 17,687
-------- --------- --------- --------
163,222 162,920 344,078 351,793
-------- --------- --------- --------
NET OPERATING INCOME . 19,931 20,864 63,959 68,109
-------- --------- -------- --------
OTHER INCOME AND
(DEDUCTIONS):
Allowance for equity
funds used during
construction . . . 451 681 722 1,130
Other, net . . . . . (141) 4,247 (106) 9,069
--------- -------- ------- ---------
310 4,928 616 10,199
INCOME BEFORE INTEREST
EXPENSE . . . . . . 20,241 25,792 64,575 78,308
------- -------- --------- --------
INTEREST EXPENSE:
Interest on debt . . 10,211 9,219 20,458 18,694
Allowance for
borrowed funds
used during
construction
(credit) . . . . . (151) (245) (241) (434)
------- -------- --------- --------
10,060 8,974 20,217 18,260
------ --------- -------- --------
INCOME BEFORE INCOME
TAXES . . . . . . . 10,181 16,818 44,358 60,048
INCOME TAXES . . . . . 2,415 5,688 16,111 21,721
PREFERRED STOCK
DIVIDENDS OF
SUBSIDIARY . . . . . 827 827 1,655 1,655
------- ------- -------- --------
NET INCOME . . . . . . $ 6,939 $ 10,303 $ 26,592 $ 36,672
======== ======== ========= ========
EARNINGS PER SHARE OF
COMMON STOCK . . . . $ 0.22 $ 0.33 $ 0.86 $ 1.20
======= ======= ======= =======
CASH DIVIDENDS PER SHARE
OF COMMON STOCK . . 0.485 0.480 0.970 0.960
======= ======= ======== =======
WEIGHTED AVERAGE COMMON
SHARES OUTSTANDING . 30,774 30,649 30,774 30,575
====== ======= ======= =======
The accompanying notes are an integral part of the consolidated
financial statements.
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
Six Months Ended
June 30,
1995 1994
(In Thousands)
Cash flows from (used for)
operating activities:
Net income . . . . . . $ 26,592 $ 36,672
Adjustments to
reconcile net income
to net cash from
operating activities:
Depreciation and
amortization . . 43,505 41,034
Deferred income taxes 4,567 6,429
Amortization of
nuclear fuel . . 3,404 2,749
Allowance for equity
funds used during
construction . . (722) (1,130)
Investment tax credit
restored . . . . (958) (963)
Changes in assets and
liabilities:
Net accounts
receivable and
unbilled revenues 9,981 7,294
Coal . . . . . . . . 3,135 521
Materials and
supplies . . . . 197 (1,446)
Gas in storage . . . 2,797 4,144
Prepayments and other (714) (6,129)
Accounts payable and
accruals . . . . (11,280) (22,554)
Accrued taxes . . . (198) 4,144
Other, net . . . . . (3,949) 379
--------- ---------
Net cash from
operating
activities . . 76,357 71,144
--------- ---------
Cash flows from (used for)
financing activities:
Long-term debt
maturities,
redemptions and
sinking fund
requirements . . . . 925 (1,582)
Net change in short
term debt . . . . . 28,863 (20,844)
Retirement of first
mortgage bonds . . . (17,999) -
Common stock cash
dividends, less
dividends reinvested (29,850) (21,774)
Preferred stock
issuance expense . . - (648)
Other, net . . . . . . 1,448 868
--------- --------
Net cash (used for)
financing activities (16,613) (43,980)
--------- --------
Cash flows from (used for)
investing activities:
Additions to utility
plant, excluding
AFUDC . . . . . . . (39,879) (37,809)
Allowance for borrowed
funds used during
construction . . . . (241) (434)
Dedicated
decommissioning
funding . . . . . . (12,551) (1,167)
Purchase of other
property and
equipment . . . . . (4,724) (1,590)
Restricted bond
proceeds . . . . . . - 3,234
Other, net . . . . . . 1,449 332
---------- ----------
Net cash (used for)
investing
activities . . . (55,946) (37,434)
---------- -----------
Net increase (decrease) in
cash and equivalents . 3,798 (10,270)
Cash and equivalents at
beginning of period . 7,273 19,468
---------- -----------
Cash and equivalents at
end of period . . . . $ 11,071 $ 9,198
========== ===========
Supplemental disclosures
of cash flow
information:
Cash paid during the
period for:
Interest on debt . . $ 16,267 $ 9,461
Preferred stock
dividends of
subsidiary . . . 1,655 1,655
Income taxes . . . . $ 7,535 $ 12,561
Noncash financing
activities:
Dividends reinvested $ - $ 8,462
The accompanying notes are an integral part of the
consolidated financial statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. The consolidated financial statements included herein have been
prepared by WPL Holdings, Inc. (the "Company"), without audit,
pursuant to the rules and regulations of the Securities and Exchange
Commission. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with
generally accepted accounting principles have been condensed or
omitted. The consolidated financial statements include the Company
and its wholly-owned consolidated subsidiaries including Wisconsin
Power and Light Company ("WPL"). These financial statements should be
read in conjunction with the financial statements and the notes
thereto included in the Company's latest annual report on Form 10-K.
In the opinion of the Company, the consolidated interim financial
statements reflect all adjustments necessary to fairly state the
results of operations for the interim periods presented. However,
because of the seasonal nature of the Company's operations, the
results shown for portions of a year are not indicative of annual
results.
2. On June 23, 1995, WPL filed an application with the Public Service
Commission of Wisconsin (PSCW) for the sale of $60 million of first
mortgage bonds to occur sometime in 1995. WPL intends to use the net
proceeds from the sale of these bonds first to repay short-term debt
which was incurred in June of 1995 to repurchase in private
transactions $18 million aggregate principal amount of WPL's first
mortgage bonds, Series V, due December 1, 2025, interest rate of
9.30%. The remainder of the net proceeds will be used to repay other
short-term debt incurred by WPL to finance utility construction
expenditures and for general corporate purposes.
3. In March 1995, the Financial Accounting Standards Board ("FASB")
issued Statement of Financial Accounting Standards ("SFAS") No. 121,
"Accounting for the Impairment of Long-Lived Assets and Long-Lived
Assets to be Disposed Of." This statement imposes stricter criteria
for regulatory assets by requiring that such assets be probable of the
future recovery at each balance sheet date. The Company anticipates
adopting this standard on January 1, 1996 and does not expect that
adoption will have a material impact on the financial position or
results of operations of the Company based on the current regulatory
structure in which the Company operates. This conclusion may change
in the future as competitive factors influence wholesale and retail
pricing in this industry.
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
THREE MONTHS ENDED JUNE 30, 1995 VS. JUNE 30, 1994:
OVERVIEW
The Company reported consolidated second quarter net income of $6.9
million compared to $10.3 million for the same period in 1994. This
represents a decrease in earnings per share from $.33 in the second
quarter of 1994 to $.22 in the second quarter of 1995. The decrease in
earnings primarily reflects a decrease in earnings from the Company's
utility subsidiary, Wisconsin Power and Light Company ("WPL"). Second
quarter 1995 net income was $2.0 million lower due to approval to
recollect in the second quarter of 1994 a previously refunded penalty
assessed by the PSCW relating to WPL's administration of a coal contract.
Also, operating and maintenance expense increased $1.4 million after-tax
primarily due to Kewaunee Nuclear Power Plant ("Kewaunee" or "Plant")
refueling and maintenance overhaul costs. Depreciation expense increased
$1.4 million after-tax due to increased investment in property, plant and
equipment.
Heartland Development Corp. (HDC), a parent company of WPL Holdings'
nonregulated business operations, incurred a loss for the quarter which
negatively impacted the Company's results by 4 cents per share. While the
environmental and affordable housing areas have met expectations, the
energy conservation consulting market continues to soften. The Company is
currently exploring options to exit the energy conservation consulting
business.
Offsetting these decreases is a $2.2 million after-tax increase in
electric margin primarily from lower electric production fuel costs per
kWh and decreased cost per kWh of purchased power.
Electric Operations Revenues and
Revenues and Costs
kWhs Sold, Generated Per kWh Sold
Revenues and Costs % and Purchased % Generated and Customers at End
(In Thousands) Change (In Thousands) Change Purchased of Quarter
1995 1994 1995 1994 1995 1994 1995 1994
Residential
and Farm $43,247 $42,801 1% 622,251 602,761 3% $.070 $.071 327,319 322,202
Industrial 36,080 35,777 1% 991,595 955,781 4% .036 .037 778 755
Commercial 24,168 24,055 0% 412,304 393,496 5% .059 .061 44,227 43,437
Wholesale and
Class A 20,319 20,877 -3% 628,782 606,255 4% .032 .034 83 40
Other 2,279 1,761 29% 14,856 12,203 22% .153 .144 1,497 1,471
------- ------- ---- ------- ------ ----- ---- ---- ----- ------
Total $126,093 $125,271 1% 2,669,788 2,570,496 4% $.047 $.049 373,904 367,905
======== ======== === ========= ========= ==== ===== ===== ======= =======
Electric
production
fuels $27,962 $32,646 -14% 2,261,305 2,344,507 -4% $.012 $.014
========= ========= === ===== =====
Purchased
Power $10,234 $8,440 21% 516,992 325,804 59% $.020 $.026
------- ------ ----- ======= ======= ==== ====== ======
Margin $87,897 $84,185 4%
======= ======= ===
Electric margin increased in the second quarter of 1995 compared to the
second quarter of 1994 primarily from slightly increased revenues coupled
with reductions in electric production fuels per kWh and the cost of
purchased power per kWh. Revenues increased from growth among all
customer classes due to favorable economic conditions in WPL's service
territory. These revenue increases were somewhat offset by an overall
2.8% decrease in retail electric rates effective January 1, 1995.
Electric production fuels and purchased power per kWh were reduced
through lower coal costs and from successful procurement strategies,
respectively.
Gas Operations
Therms Sold and Revenues and Costs
Revenues and Costs % Purchased % per Therms Sold and Customers at End of
(In Thousands) Change (In Thousands) Change Purchased Quarter
1995 1994 1995 1994 1995 1994 1995 1994
Residential $10,697 $10,337 3% 18,843 18,154 4% $.568 $.569 126,581 122,476
Firm 5,839 5,930 -2% 13,419 13,022 3% .435 .455 15,733 15,298
Interruptible 606 1,463 -59% 1,942 4,768 -59% .312 .307 236 233
Transport 3,858 3,384 14% 29,590 17,870 66% .130 .189 164 87
Other 2,509 3,515 -29% 22,890 20,473 12% .110 .172 79 93
------ ------- ---- ------ ------ ---- ----- ----- ------ ------
Total $23,509 $24,629 -5% 86,684 74,287 17% $.271 $.332 142,793 138,187
======= ======= ==== ======= ======= ===== ===== ===== ======= =======
Purchased gas $13,283 $15,360 -14% 59,023 50,499 17% $.225 $.304
------- ------- ====== ======= ===== ===== =====
Margin $10,226 $ 9,269 10%
======= ======= =====
Gas margin increased in the second quarter of 1995 compared to the
second quarter of 1994 from some change in the mix of sales from lower
margin to higher margin customer classes and from favorable gas
procurement strategies. Customer growth continued from the solid economic
conditions in WPL's service territory.
Fees, Rents and Other Operating Revenues ("Other Revenues")
Environmental services revenues increased as a result of higher demand
for environmental consulting services, however, margins as a percentage of
revenue decreased in response to greater competition. Energy consulting
service revenues declined as a result of softness in the energy
conservation consulting market. (Also see: Liquidity and Capital
Resources, page 14, "Heartland Development Corporation").
Other Operation Expense
The increase in other operation expense is somewhat related to continued
increased program start-up costs associated with the expansion of the
Company's affordable housing business.
Additionally, there has been severance costs incurred in management's
changes related to the energy consulting service business activities.
Other operation expense also increased due to WPL's increase in accounts
receivable factoring costs related to a rise in the short-term market
interest rates and increased conservation expenditures recently approved
in WPL's latest rate order, effective January 1, 1995.
Maintenance Expense
Maintenance expense increased due to a more extensive refueling and
maintenance overhaul at Kewaunee. (Also see: Liquidity and Capital
Resources, page 14, "Other.")
Depreciation and Amortization
Depreciation and amortization expense increased primarily reflecting
increased property additions.
Other Income and Deductions - Other, Net
Other, net decreased for the second quarter of 1995 compared with the
same period in 1994, primarily due to the approval to recollect, in 1994,
$2.0 million after-tax from ratepayers from a assessment by the PSCW
relating to the administration of a coal contract.
Interest Expense
The increase in interest expense between the second quarters is
primarily from the issuance of $24 million of debt by the Company in
December 1994.
Income Taxes
Income taxes decreased between second quarters primarily due to lower
taxable income.
SIX MONTHS ENDED JUNE 30, 1995 VS. JUNE 30, 1994:
OVERVIEW
The Company reported consolidated net income for the six months ended
June 30, 1995 of $26.6 million compared to $36.7 million for the six
months ended June 30, 1995. This represents a decrease in earnings per
share from $1.20 in the first six months of 1994 to $.86 in the first six
months of 1995. The decrease in earnings primarily reflects a decrease in
earnings from the Company's utility subsidiary, Wisconsin Power and Light
Company ("WPL"). The operating factors include an increase in operating
expenses of $1.6 million, after-tax, principally related to Kewaunee
refueling and maintenance overhaul costs. Also, depreciation expense
increased $1.5 million after-tax from increased investment in property,
plant and equipment.
Offsetting the above decreases is a $1.6 million after-tax increase in
electric margin primarily from lower electric fuel cost per kWh and
purchased power cost per kWh.
HDC's nonregulated business operations incurred a loss for the six
months ended June 30, 1995 which negatively impacted the Company's results
by 7 cents per share. ended June 30, 1995. While the environmental and
affordable housing areas have met expectations, the energy conservation
consulting market continues to soften. The Company is currently exploring
options to exit the energy conservation consulting business.
An additional factor impacting other income and deductions is the
reversal of a $4.9 million after-tax reserve in the first six months of
1994 which represented a penalty assessment by the PSCW relating to the
administration of a coal contract.
Electric Operations
Revenues and Costs
kWhs Sold, Generated Per kWh Sold
Revenues and Costs % and Purchased % Generated and Customers at End
(In Thousands) Change (In Thousands) Change Purchased of Quarter
1995 1994 1995 1994 1995 1994 1995 1994
Residential
and Farm $95,137 $97,356 -2% 1,391,862 1,389,627 0% $.068 $.070 326,397 322,202
Industrial 67,636 67,989 -1% 1,874,769 1,822,824 3% .036 .037 776 755
Commercial 48,457 49,605 -2% 833,344 821,480 1% .058 .060 44,126 43,437
Wholesale
and Class A 42,058 43,239 -3% 1,313,920 1,312,372 0% .032 .033 81 40
Other 3,956 4,279 -8% 28,104 28,986 -3% .141 .148 1,494 1,471
------- ------- ---- ------- ------- ---- ----- ----- ------- -------
Total $257,244 262,468 -2% 5,441,999 5,375,289 1% $.047 $.049 372,874 367,905
======== ======= ==== ========= ========= === ===== ===== ======= =======
Electric
production
fuels $57,675 $64,932 -11% 4,770,259 4,790,116 0% $.012 $.014
========= ========= === ===== =====
Purchased
Power $17,382 $17,927 -3% 897,941 767,945 17% $.019 $.023
------- ------- ----- ======= ======= === ===== ======
Margin $182,187 $179,609 1%
======== ======== ===
Electric margin increased slightly for the six months ended June 30,
1995 compared to the same period in 1994. Revenues decreased slightly due
to a 2.8% decrease in retail electric rates effective January 1, 1995 and
less favorable weather conditions, offset by increased kWh sales from
growth among customer classes.
However, lower electric production fuel and purchased power costs per
kWh resulting from successful procurement strategies increased overall
margin.
Gas Operations
Therms Sold and Revenues and Costs
Revenues and Costs % Purchased % per Therms Sold and Customers at End of
(In Thousands) Change (In Thousands) Change Purchased Quarter
1995 1994 1995 1994 1995 1994 1995 1994
Residential $39,564 $45,090 -12% 73,793 78,399 -6% $.536 $.575 126,155 122,476
Firm 21,617 26,060 -17% 51,899 57,089 -9% .417 .456 15,694 15,298
Interruptible 1,777 4,308 -59% 6,102 11,762 -48% .291 .366 239 233
Transport 8,410 8,345 1% 54,257 42,934 26% .155 .194 160 87
Other 8,350 5,901 42% 52,893 33,911 56% .158 .174 81 93
------- ------- ------ ------- ------- ---- ----- ------ ------ -------
Total $79,718 $89,704 -11% 238,944 224,095 7% $.334 $.400 142,329 138,187
======= ======= ===== ======= ======= ==== ===== ===== ======= =======
Purchased gas $48,157 $59,045 -18% 208,352 191,517 9% $.231 $.308
------- ------- ---- ======= ======= ==== ===== =====
Margin $31,561 $30,659 3%
====== ====== ====
Gas margin for the six month period ended June 30, 1995 increased when
compared to the same period in 1994. Revenues decreased due to less
favorable weather conditions but were somewhat offset by increased therm
sales as a result of customer growth from the solid economic conditions in
WPL's service territory.
Favorable gas procurement strategies significantly reduced purchased gas
expense which resulted in the overall increase in margin.
Fees, Rents and Other Operating Revenues ("Other Revenues")
Environmental services revenues increased as a result of higher demand
for environmental consulting services, however, margins as a percentage of
revenue decreased in response to greater competition. Energy consulting
service revenues declined as a result of softness in the energy
conservation consulting market. (Also see: Liquidity and Capital
Resources, page 14, "Heartland Development Corporation").
Other Operation Expense
The increase in other operation expense is somewhat related to continued
increased program start-up costs associated with the expansion of the
Company's affordable housing business. Additionally, there have been
severance costs incurred in management's changes related to the energy
consulting service business activities.
Other operation expense also increased due to WPL's increase in accounts
receivable factoring cost related to a rise in the short-term market
interest rates and increased conservation expenditures recently approved
in WPL's latest rate order, effective January 1, 1995.
Maintenance Expense
Maintenance expense increased due to refueling and maintenance overhaul
costs at Kewaunee. (Also See: "Liquidity and Capital Resources, page 14,
"Other".)
Depreciation and Amortization
Depreciation and amortization expense increased primarily reflecting
increased property additions.
Other Income and Deductions - Other, Net
Other, net decreased for the six months ended June 30, 1995 compared
with the same period in 1994, primarily due to the reversal of a $2.9
million after-tax reserve which represented a penalty assessment by the
PSCW, and also the $2.0 million after-tax approval to recollect from
ratepayers, both relating to the administration of a coal contract.
Interest Expense
The increase in interest expense between the second quarters is
primarily from the issuance of $24 million of debt by the Company in
December 1994.
Income Taxes
Income taxes decreased for the six month period ended June 30, 1995
primarily due to lower taxable income.
LIQUIDITY AND CAPITAL RESOURCES
Financing and Capital Structure
The level of short-term borrowing fluctuates based primarily on seasonal
corporate needs, the timing of long-term financing and capital market
conditions. To maintain flexibility in its capital structure and to take
advantage of favorable short-term rates, the Company also uses proceeds
from the sales of WPL's accounts receivable and unbilled revenues to
finance a portion of its long-term cash needs.
The Company's capitalization at June 30, 1995, including the current
maturities of long-term debt, variable rate demand bonds and short-term
debt, consisted of 48 percent common equity, 5 percent preferred stock and
47 percent long-term debt.
Capital Expenditures
The Company's liquidity is primarily determined by the level of cash
generated from operations and the funding requirements of WPL's ongoing
construction and maintenance programs and Heartland Development
Corporation's ("HDC") capital requirements for future acquisitions and
development of affordable housing. Cash flows from operating activities,
after dividends paid, provided approximately $71 million and $59 million
for the three months ended June 30, 1995 and 1994, respectively, and $47
million and $49 million for the six months ended June 30, 1995 and 1994,
respectively. The Company finances its construction expenditures through
internally generated funds supplemented, when required, by outside
financing. The estimated construction expenditures for the remainder of
1995 are $73 million. The Company currently anticipates that it will
finance approximately 94 percent of these expenditures through internally
generated funds (also see: Note 2 in the "Notes to Financial Statements,"
page 6).
The expenditures for the decommissioning of Kewaunee are estimated to
begin in 2014. It is anticipated that expenditures related to the actual
decommissioning of the plant will occur between 2014 and 2021 of which
WPL's share in terms of future dollars, approximates $581 million. An
additional $435 million related to the storage of spent nuclear fuel on
site and other maintenance of the site will likely occur from 2022 to
2050. WPL currently expects to have the cost collected through electric
rates and funded in an external trust by 2013. Therefore, such
expenditures are not expected to have a direct impact on the liquidity or
the availability of capital resources.
Industry Outlook
The PSCW has recently opened a formal docket initiating an inquiry into
the goals of Wisconsin utility regulation and identification of
alternative forms of regulation. WPL has submitted its views which, in
summary form, call for open access to transmission and distribution
systems and a competitive power generation marketplace. It is not
possible at this time to predict the outcome of these proceedings.
The Federal Energy Regulatory Commission (FERC) is developing regulation
which will begin to provide open access to utility's transmission
facilities for wholesale customers subject to certain approved FERC
tariffs. WPL believes its existing open access tariffs position it well
to compete under such market conditions.
Other
The Company's Form 10-Q for the quarter period ended March 31, 1995, at
Part I, "Other", Page 10, reported the shutdown of Kewaunee on April l,
1995 for scheduled maintenance, refueling and related steam generator
matters. Wisconsin Public Service Corporation is the operator and 41.2%
owner of Kewaunee which is owned jointly with WPL and Madison Gas and
Electric Company which own 41% and 17.8%, respectively.
During the shutdown, inspection of the steam generators revealed higher
levels of tube degradation than was anticipated. Continued use of
degraded tubes raises concerns regarding primary-to-secondary leakage of
reactor coolant. Thus, the degraded tubes were removed from service by
plugging. Tube plugging and the build-up of deposits on the tubes affect
the heat-transfer capability of the steam generators to the point where
eventually full-power operation is affected. Prior to the recent
shutdown, the equivalent of approximately 12% of the tubes in the steam
generators were plugged with no loss of capacity. When the Plant was
returned to service on May 18, 21% of the tubes were plugged, resulting
in a capacity reduction of 3.8% during the Plant's current operating cycle
which extends into the fall of 1996. Thus, net Plant output has been
reduced from 525 megawatts to approximately 510 megawatts. Although
preliminary estimates indicated slightly increased maintenance and
purchased power expense as reported in the Company's Form 10-Q for the
quarter ended March 31, 1995, revised estimates indicate that during 1995
additional expenses related to recent steam generator plugging likely will
be offset by reduced nuclear expenses in other areas and, therefore,
should not affect earnings significantly. WPL with its joint partners
continue the study of tube repair alternatives.
See Part I, Item 1. Business - Electric Operations - Kewaunee Nuclear
Power Plant in the WPLH Form 10-K for the year ended December 31, 1994 for
additional background on this matter.
Heartland Development Corporation
In addition to its investment in affordable housing, Heartland
Properties Incorporated, a subsidiary of HDC, continues to market its
affordable housing expertise by expanding its business to provide
assistance to other corporate/public investors in their development,
operation and financing of affordable housing projects. HDC continues to
examine options associated with the sale of part or all of its energy
conservation consulting business.
PART II--OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders
At the Company's annual meeting of shareowners held on May 17, 1995, L.
David Carley, Donald R. Haldeman, Arnold M. Nemirow and Judith D. Pyle
were elected directors of the Company for terms expiring in 1998. The
following table sets forth certain information with respect to the
election of directors at the annual meeting.
Shares Withholding
Name of Nominee Shares Voted For Authority
L. David Carley 23,417,216 941,601
Donald R. Haldeman 23,623,047 735,770
Arnold M. Nemirow 23,613,037 745,780
Judity D. Pyle 22,992,480 1,366,337
The following table sets forth the other directors of the Company whose
terms of office continued after the 1994 annual meeting.
Name of Director Year in which Term Expires
Katherine C. Lyall 1996
Henry F. Scheig 1996
Rockne G. Flowers 1996
Henry C. Prange 1996
Erroll B. Davis, Jr. 1997
Milton E. Neshek 1997
Carol T. Toussaint 1997
In addition, at the annual meeting, shareowners approved the appointment
of Arthur Andersen LLP as the Company's independent auditors for the 1995
calendar year. With respect to such matter, the number of shares voted
for and against were 23,517,148 and 577,993, respectively. The number of
shares abstaining and the number of shares subject to broker non-votes
were 263,676 and 0, respectively.
Item 6. Exhibits and Reports on Form 8-K
1. Exhibits:
27 Financial Data Schedule
2. Reports on Form 8-K: None
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WPL Holdings, Inc.
August 9, 1995 /s/ Edward M. Gleason
Edward M. Gleason, Vice President, Treasurer,
and Corporate Secretary (principal financial
officer)
August 9, 1995 /s/ Daniel A. Doyle
Daniel A. Doyle, Controller and Treasurer,
Wisconsin Power and Light Company (principal
accounting officer and officer authorized to
sign on behalf of the registrant.)
EXHIBIT INDEX
Exhibit
No. Description
27 Financial Data Schedule