FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1997
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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 0-17736
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ESELCO, INC.
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(Exact name of registrant as specified in its charter)
MICHIGAN 38-2785176
---------------------- ----------------------
State of Incorporation (I.R.S. Employer
Identification Number)
725 East Portage Avenue
Sault Ste. Marie, Michigan 49783
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(Address of principal executive offices)
(Zip Code)
(906) 632-2221
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(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
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1,593,180 shares of Common Stock, par value $.01 per share,
outstanding as of September 30, 1997
ESELCO, INC.
NOTES TO FINANCIAL STATEMENTS
(1) These consolidated financial statements include the accounts of
ESELCO, Inc. (ESELCO) and its wholly owned subsidiaries, Edison Sault
Electric Company (Edison Sault), ESEG, Inc. and Northern Tree Service,
Inc. All significant intercompany balances and transactions have been
eliminated in consolidation. The consolidated financial statements as
of September 30, 1997 and 1996 included herein, which are unaudited,
reflect, in the opinion of management, all adjustments (which include
only normal recurring adjustments) necessary to present fairly the
results of operations for the periods presented. Sales of electricity
by Edison Sault, ESELCO's major subsidiary, are affected to some degree
by variations in weather conditions, and results of operations for
interim periods are not necessarily indicative of results to be
expected for the entire year.
Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to rules
and regulations of the Securities and Exchange Commission, although
ESELCO believes that the disclosures which are made are adequate to
make the information presented not misleading. It is suggested that
these condensed consolidated financial statements be read in
conjunction with the financial statements and the notes thereto
included in ESELCO, Inc. 1996 Annual Report on Form 10K, which
incorporates by reference the financial statements in the 1996 Annual
Report to Shareholders.
(2) On October 6, 1997, the Board of Directors of ESELCO declared a
quarterly dividend on the common stock of 28 cents per share, payable
November 14, 1997 to stockholders of record at the close of business
November 3, 1997. The accompanying financial statements for the
period ending September 30, 1997 do not reflect this declared
dividend.
(3) On August 22, 1995, Edison Sault filed an application with the
Michigan Public Service Commission (MPSC) for authority to implement
price cap regulation. In the application Edison Sault proposed that
its base rates be capped at present levels, that its existing power
supply cost recovery (PSCR) factor be rolled into base rates, and that
its existing PSCR Clause be suspended. Edison Sault published the
required notice of opportunity to comment or request a hearing. No
comments were received and on September 21, 1995, the MPSC approved
Edison Sault's application subject to the modification that Edison
Sault give 30 days notice rather than 2 weeks notice for rate decreases
and that Edison Sault file an application by October 1, 2000, to
address its experience under the price cap mechanism. With the latter
modification the price cap authorization represents an experimental
regulatory mechanism. The order also allows Edison Sault to file an
application seeking an increase in rates only under extraordinary
circumstances.
On October 23, 1995, the Attorney General for the State of Michigan
filed an intervention and petition for rehearing in Edison Sault's
price cap order. The Attorney General's intervention was based on the
grounds that the MPSC did not have authority to approve price cap
regulation. On December 21, 1995, the MPSC rejected the Attorney
General's petition for rehearing. On January 19, 1996, the Attorney
General filed an appeal with the Michigan
Court of Appeals.
Legal counsel for Edison Sault believes that the Attorney General's
appeal is without merit and that Edison Sault will prevail. A decision
in this case is not expected until early to mid 1998. Edison Sault
implemented the price cap order on January 1, 1996.
(4) In 1993, Edison Sault received notification from the U.S.
Environmental Protection Agency (U.S. EPA) that it was being named a
"Potentially Responsible Party" at the Manistique River/Harbor Area of
Concern (AOC) in Manistique, Michigan. There were a number of other
potentially responsible parties, some of whom have been notified by the
U.S. EPA.
The U.S. EPA, in conjunction with the Michigan Department of Natural
Resources, identified the Manistique River and Harbor as an "Area of
Concern" (AOC) due to PCBs which have been found in that area. An
Environmental Engineering/Cost Analysis (EECA) was submitted to the
U.S. EPA which provided an analysis of various methods of remediation
for the harbor. The EECA presented six alternatives of remediation
action and ultimately recommended a remediation method of in-place
capping. Management believed this to be the most prudent course of
action. Although the total ultimate cost of specific remedial action
and Edison Sault's potential liability were not known at that time,
management had estimated Edison Sault's minimum cost of this remedy to
be $2.9 million. That figure represented an increase of $1.9 million
from the amount recorded during 1994. Certain other expenditures for
investigation of any necessary remedial action were incurred and are
reflected in the accompanying financial statements.
During 1995 and 1996, the U.S. EPA agreed to allow the PRPs to
remediate the harbor through in-place capping at a total cost of $6.4
million, with the Edison Sault portion costing $3.2 million. Through
further negotiations, the U.S. EPA and the PRPs agreed to a cash-out
settlement whereby the PRPs would pay to the U.S. EPA the $6.4 million
cost of capping for the right to be absolved from any future legal
actions concerning PCB pollution. To effect this settlement, an
Administrative Order on Consent was executed by all parties in
December, 1996 with payments made to the U.S. EPA prior to year-end
1996.
To date, Edison Sault has incurred a total cost of $3.6 million on this
project. Edison Sault filed an action on February 4, 1997 in the
Circuit Court for the County of Schoolcraft, Michigan against certain
insurance carriers to recover unreimbursed defense costs and expenses
associated with defending this matter of approximately $350,000 and
indemnification for its costs of approximately $3.2 million in settling
the matter with the U.S. EPA and obtaining a release of the property
damage claims asserted by the U.S. EPA. The certainty and magnitude of
any insurance recovery is unknown at this time. On April 28, 1997,
Michigan Mutual Insurance Company filed a counterclaim for
approximately $1.7 million for previously paid defense costs. Legal
counsel for Edison Sault believes, based on the information currently
available, that the counterclaim lacks merit.
In November 1993, the MPSC issued an order authorizing Edison Sault to
defer and amortize, over a period not to exceed ten years,
environmental assessment and remediation costs associated with the
Manistique River AOC. Therefore, Edison Sault has recorded a regulatory
asset in the amount of $3.2 million, plus unreimbursed costs of
$350,000, for a total of $3.55 million, which it began amortizing in
1997.
(5) On May 14, 1997 ESELCO, Inc. and Wisconsin Energy Corporation
(Wisconsin Energy) announced that they had entered into a definitive
agreement regarding the acquisition of ESELCO by Wisconsin Energy. The
terms of the definitive agreement were approved by both companies'
boards. On October 7, 1997, at a special meeting of shareholders of
ESELCO, ESELCO's shareholders approved the definitive agreement and
related transactions.
Upon completion of the transaction, all outstanding shares of ESELCO
common stock would be converted into shares of Wisconsin Energy common
stock based on a value of $44.50 for each share of ESELCO common stock
in a transaction proposed to be structured as a tax-free
reorganization. The total purchase price would be approximately $71.0
million. The exact number of shares of Wisconsin Energy common stock
to be issued in the transaction would be determined by dividing $44.50
by the average closing price of Wisconsin Energy common stock for the
ten trading days immediately preceding the closing date. Pursuant to
the definitive agreement, Wisconsin Energy will be paid a fee of $2.0
million if ESELCO consummates or enters into an agreement with respect
to, a business combination with a party unrelated to Wisconsin Energy
or ESELCO terminates the definitive agreement to pursue a business
combination with a party unrelated to Wisconsin Energy prior to the end
of the period specified in the agreement.
The transaction is contingent upon several conditions, including
receipt of all regulatory approvals. There can be no assurance that
the conditions will be satisfied or that the transaction will be
consummated.
ESELCO, INC.
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
THREE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating revenues for the third quarter of 1997 were 3% higher than the
corresponding period in 1996, while total kilowatthour sales increased 2%.
Commercial sales are up about 5% while industrial sales were up 6% based on
increased sales to all of our industrial customers. Residential sales were
the same as last year. Sales for resale were 5% lower than last year.
Purchased power expense increased 1% because of increased requirements
partially offset by a lower average cost.
Other operating and maintenance expenses increased 6% during the third
quarter of 1997 due to an increase in payroll and associated employee
benefits costs as well as the ten year write-off of costs associated with the
Manistique Harbor EPA Project.
Depreciation and amortization expenses increased 8% due to the Edison Sault's
ongoing construction program.
Interest expense increased 2%, primarily due to an increase in borrowing
which included a term loan to cover the payment to the U.S. EPA in
connection with the Manistique Harbor EPA Project.
Based on the above changes, net income available for common stock increased
2% from last year.
NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating revenues for 1997 were 3% higher than last year, while total
kilowatthour sales increased 1%. Residential and commercial sales are up only
slightly from last year reflecting warmer weather in 1997. Industrial sales
were up 4% based on increased sales to three of our four industrial
customers. Resale sales are down slightly, however, revenue is higher due to
the pass through of cost from the new Consumers Energy purchased power
contract.
Purchased power expense decreased 3% due to a lower average purchased power
cost realized through the new power sales agreement with Consumers Energy.
Included in purchased power expenses is an accrued net credit of $520,000
which reflects anticipated reductions in transmission costs resulting from
negotiations with Consumers Energy. A final settlement of this issue is
expected before year end.
Other operating and maintenance expenses increased 8% during 1997 due to an
increase in payroll and associated employee benefits costs as well as the ten
year write-off of costs associated with the Manistique Harbor EPA Project.
Income taxes increased $159,900 due to the increase in taxable income.
Interest expense increased 10%, primarily due to an increase in borrowing
which included a term loan to cover the payment to the U.S. EPA in
connection with the Manistique Harbor EPA Project.
Based on the above changes, net income available for common stock increased
20% from last year.
TWELVE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
Operating revenues during the current twelve month period were 3% higher than
a year ago. Total electric sales increased 1% during the current twelve month
period. Residential sales were down during the period while commercial and
industrial sales increased 1% and 4% respectively. Resale sales were down
slightly for the period.
Purchased power expense decreased 2% due to higher cost energy purchases
being replaced with lower cost energy from American Electric Power Company
and lower average cost energy from Consumers Energy including a credit for
anticipated reductions in transmission costs.
Other operating and maintenance expenses were up 9% during the current twelve
month period, due to increased payroll and associated employee benefit costs
and higher water costs reflecting higher rates and additional water available
for generation at Edison Sault's hydro plant. In addition, the current period
includes the write off of costs associated with the Manistique Harbor EPA
Project.
Depreciation and amortization expenses increased 7% due to Edison Sault's
ongoing construction program.
Based on an increase in taxable income, income taxes increased 12% during the
period.
Based on the above changes, net income available for common stock increased
17% from the prior twelve month period.
LIQUIDITY AND CAPITAL COMMITMENTS
INVESTING ACTIVITIES ESELCO invested $3,350,000 in property, plant, and
equipment in the nine month period ending September 30, 1997. For the same
period in 1996, ESELCO invested approximately $3,314,000 in property, plant
and equipment.
Investment expenditures during both periods included costs associated with
the planned construction of a new 138 KV interconnection with Wisconsin
Electric Power Company. This project has a planned completion date of 1999.
Edison Sault's projected share of the cost of this project is $9.3 to $13.0
million. Most of these expenditures are expected to be made in late 1997 and
1998.
In December, 1996 ESEG, Inc. (ESEG) signed a purchase agreement with
Consumers Power Company for the purchase of a 138 KV submarine circuit across
the Straits of Mackinac. Since 1990, Edison Sault has leased these cables at
an annual net lease cost of approximately $466,000. ESEG, a wholly-owned
subsidiary of ESELCO, has been an inactive subsidiary of ESELCO. ESEG will
lease the cables to Edison Sault under an operating lease arrangement. The
purchase and lease have been approved by the Federal Energy Regulatory
Commission (FERC). The cost of the purchase, which is expected to be
consummated in 1997, will be approximately $3.8 million.
CASH PROVIDED BY OPERATING AND FINANCE ACTIVITIES Cash provided by
operating activities for the nine month periods ending September 30, 1997,
and September 30, 1996, totalled $4,226,000 and $3,531,000, respectively.
After payment of dividends, internal sources of funds exceeded the capital
requirements of ESELCO for the nine months ending September 30, 1997. Profoma
dividends for the nine months ending September 30, 1997, totalled $1,325,000
which represented a 56% payout ratio. For the same period in 1996, dividends
totalled $1,218,000 which represented a 61% dividend payout ratio.
During 1996, Edison Sault borrowed $3.2 million under a bank term loan
agreement. The proceeds from this loan were used for payment to the U.S. EPA
in settlement of the Manistique Harbor Project. In addition, ESEG has
arranged bank term loan financing for its planned acquisition of the 138 KV
submarine cables described above.
Edison Sault has authority to issue up to $10 million in short-term
obligations. Included in this authority is a line of credit in the amount of
$4 million at the prime rate. In addition, Edison Sault has authority to
issue short-term thrift notes to Michigan residents. The Company's short-term
financing requirements relate primarily to financing customer accounts
receivable, unbilled revenue resulting from cycle billing, and capital
expenditures until permanently financed.
At September 30, 1997, the Company had approximately $6.4 million of unused
bank line of credit and additional energy thrift notes. These two sources of
short-term financing should be sufficient to meet the Company's short-term
capital requirements.
ESELCO's shareholders reinvested approximately $207,000 through the dividend
reinvestment plan (DRP) in 1997. For the nine month period ending September
30, 1996, the DRP provided $569,000 of capital.
Effective March 24, 1997 the Board of Directors of ESELCO, Inc. declared the
suspension of the DRP. The DRP has been suspended pending the potential
acquisition of ESELCO, Inc. by Wisconsin Energy Corporation.
At September 30, 1997, the long-term portion of first mortgage bonds totalled
$6,170,000 which is a decrease of $1,825,000 from the December 31, 1996
amount. First mortgage bonds are secured by the utility plant of Edison
Sault. At December 31, 1996, there was approximately $10.4 million of
unutilized bond financing capability resulting from plant additions and bond
retirements.
Edison Sault also has authority to issue up to $10 million in long-term
energy thrift notes to Michigan residents. At September 30, 1997, the
long-term portion of energy thrift notes outstanding was $5,549,000 which is
an increase of $194,000 over the December 31, 1996 amount.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 of the Notes to Financial Statements in Item 1 Part I herein.
Edison Sault filed an action on February 4, 1997 in the Circuit Court for the
County of Schoolcraft, Michigan against certain insurance carriers to recover
unreimbursed defense costs and expenses associated with defending this matter
of approximately $350,000 and indemnification for its costs of approximately
$3.2 million in settling the matter with the U.S. EPA and obtaining a release
of the property damage claims asserted by the U.S. EPA. The certainty and
magnitude of any insurance recovery is unknown at this time. On April 28,
1997, Michigan Mutual Insurance Company filed a counterclaim for
approximately $1.7 million for previously paid defense costs. Legal counsel
for Edison Sault believes, based on the information currently available, that
the counterclaim lacks merit.
Item 4. Submission of Matters to a Vote of Security Holders.
On October 7, 1997, ESELCO Inc. held a special meeting of shareholders for
the purpose of asking shareholders to approve an Amended and Restated
Agreement and Plan of Reorganization dated as of May 13, 1997, as amended and
restated as of July 11, 1997, including the related Plan of Merger (together,
the "Reorganization Agreement"), which provides for the merger (the "Merger")
of ESL Acquisition Inc. ( Acquisition), a wholly owned subsidiary of
Wisconsin Energy Corporation ("Wisconsin Energy"), with and into ESELCO.
This plan was approved by the Shareholders by a vote of 1,220,687 shares FOR
and 14,755 shares AGAINST such approval. There were 1,658 abstentions and no
broker non-votes with respect to such matter.
Of the 1,593,180 shares of common stock outstanding and entitled to vote on
the record date of August 27, 1997, 78% of the shares were represented at the
meeting.
Item 6. Exhibits and Reports on Form 8-K
(a) List of Exhibits.
Filed
Exhibit ------------------------
No. Description of Exhibit Herewith By Reference
- ------- ------------------------------------------------------------- -------- ------------
(2) Amended and Restated Agreement and Plan of Reorganization
by and among Wisconsin Energy Corporation and ESELCO,
Inc. and ESL Acquisition, Inc., dated as of May 13, 1997,
as amended and restated as of July 11, 1997. (6) *
(3) (a) Articles of Incorporation as filed on January 6, 1989. (6) *
(b) Amendment to Articles of Incorporation as filed on
August 7, 1997. (6) *
(c) Bylaws. (6) *
(4) Instruments defining the rights of security holders,
including indentures:
(a) Mortgage and Deed of Trust as of March 1, 1952. (1) *
(b) Supplemental Indenture dated as of February 1, 1957. (1) *
(c) Second Supplemental Indenture dated as of
January 1, 1964. (1) *
(d) Third Supplemental Indenture dated as of
February 1, 1968. (1) *
(e) Fourth Supplemental Indenture dated as of
September 15, 1975. (1) *
(f) Fifth Supplemental Indenture dated as of
October 1, 1986. (2) *
(g) Sixth Supplemental Indenture dated as of
April 1, 1989. (4) *
(h) Seventh Supplemental Indenture dated as of
February 15, 1992. (5) *
(i) Debenture Indenture dated as of August 1, 1973. (1) *
(j) Form of Long-Term Energy Thrift Note. (3) *
(10) (a) Form of Executive Severance Agreement. (6) *
(b) 1996 ESELCO, Inc. Restricted Stock Bonus Plan. (6) *
(c) ESELCO, Inc. Director's Retirement Plan, as amended
January 1, 1995. (6) *
(d) Edison Sault Electric Company Director's Fee Deferral Plan,
October 1, 1989. (6) *
(e) Edison Sault Electric Company ESELCO Director's Fee
Deferral Plan, January 1, 1986. (6) *
(f) Supplemental Executive Retirement Plan of Edison Sault
Electric Company, as amended as of August 17, 1995. (6) *
(27) Financial Data Schedule *
Key to Exhibits Incorporated by Reference:
(1) Filed with the Company's Registration Statement, Form S-16,
No. 2-67191, filed April 2, 1980.
(2) Filed with the Company's Form 10-K for 1986, dated March 30, 1987,
File No. 0-1158.
(3) Filed with the Company's Registration Statement, Amendment No. 2 to
Form S-3, No. 2-67191, filed February 16, 1988.
(4) Filed with the Company's Form 10-Q for June 30, 1989, dated
August 11, 1989, File No. 0-17736.
(5) Filed with the Company's Form 10-Q for March 31, 1992, dated
May 13, 1992, File No. 0-17736.
(6) Filed with the Company's Form 10-Q for June 30, 1997, dated
August 11, 1997, File No. 0-17736.
Item 6. (b) Reports on Form 8-K
The following reports on Form 8-K were filed during the three months
ended September 30, 1997.
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.
ESELCO, INC.
(Registrant)
Date November 12, 1997 /s/ William R. Gregory
WILLIAM R. GREGORY
Its President
Date November 12, 1997 /s/ David R. Hubbard
DAVID R. HUBBARD
Its Vice President-Finance
PART I. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
E S E L C O, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
September 30, December 31,
1 9 9 7 1 9 9 6
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ASSETS:
ELECTRIC PLANT, at original cost $74,890,260 $71,802,321
Less - Accumulated depreciation 31,629,436 29,671,038
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$43,260,824 $42,131,283
Asset acquired under capital lease 2,795,821 2,851,622
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$46,056,645 $44,982,905
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CURRENT ASSETS:
Cash $ 118,055 $ 293,883
Accounts receivable, less reserve of $26,203
and $32,000 respectively 3,709,612 2,999,783
Unbilled revenue 1,576,226 1,693,826
Materials and supplies, at average cost 1,158,311 1,148,046
Prepayments 1,160,498 1,966,932
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$ 7,722,702 $ 8,102,470
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OTHER ASSETS:
Debt expense, being amortized $ 23,572 $ 28,972
Regulatory asset 3,246,481 3,510,181
Other 1,255,269 531,193
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$ 4,525,322 $ 4,070,346
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$58,304,669 $57,155,721
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STOCKHOLDERS' INVESTMENT AND LIABILITIES:
CAPITALIZATION (See Statement):
Common equity $22,343,982 $20,234,722
Preferred stock 0 0
Long-term debt (less current portion) 14,817,450 16,898,187
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$37,161,432 $37,132,909
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OTHER NONCURRENT LIABILITIES:
Obligation under capital lease $ 2,711,874 $ 2,775,905
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CURRENT LIABILITIES:
Notes payable $ 2,179,000 $ 1,119,000
Current portion of long-term debt 3,157,516 2,877,323
Current portion of lease obligation 83,947 75,717
Accounts payable 3,012,184 2,143,082
Dividends declared 0 415,960
Accrued taxes 880,283 1,754,101
Current deferred income taxes 59,555 66,755
Accrued interest 395,665 166,215
Other 145,862 270,116
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$ 9,914,012 $ 8,888,269
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DEFERRED CREDITS:
Deferred income taxes $ 4,247,356 $ 4,454,626
Net regulatory liability 1,202,526 1,193,526
Unamortized investment tax credit 822,781 873,181
Other 2,244,688 1,837,305
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$ 8,517,351 $ 8,358,638
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$58,304,669 $57,155,721
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E S E L C O, INC.
CONSOLIDATED STATEMENT OF CAPITALIZATION
September 30, December 31,
1 9 9 7 1 9 9 6
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AMOUNT % AMOUNT %
---------- --- ---------- ---
COMMON EQUITY:
COMMON STOCK, par value $.01 per share
1997 1996
--------- ---------
Authorized shares 9,840,000 3,000,000
--------- ---------
--------- ---------
Outstanding shares 1,593,180 1,540,592 $ 15,932 $ 15,406
--------- ---------
--------- ---------
Capital surplus 19,256,710 17,331,579
Retained earnings 3,971,719 4,204,585
Unearned compensation - ESOP and
Restricted Stock Bonus Plan (900,379) (1,316,848)
----------- -----------
$22,343,982 60% $20,234,722 54%
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PREFERRED STOCK, value $.01 per share,
authorized 160,000 shares $ 0 0% $ 0 0%
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LONG-TERM DEBT of Subsidiaries (less current portion)
First Mortgage Bonds:
Series D, 7.00%, due 1998 $ 0 $ 855,000
Series F, 10.31%, due 2001 900,000 1,200,000
Series G, 10.25%, due 2009 4,070,000 4,440,000
Series H, 7.90%, due 2002 1,200,000 1,500,000
Energy Thrift Notes, 5.8%-10%, due 1998-2007 5,549,000 5,355,000
Equipment Loan, Floating Rate, due 1998 104,797 147,786
ESOP Loans of the Corporation,
floating rate, due 2000-2001 179,998 421,110
Term Loan, floating rate, due 1999 2,813,655 2,979,291
----------- -----------
$14,817,450 40% $16,898,187 46%
----------- --- ----------- ---
TOTAL CAPITALIZATION $37,161,432 100% $37,132,909 100%
----------- --- ----------- ---
----------- --- ----------- ---
E S E L C O, INC.
CONSOLIDATED STATEMENT OF INCOME
The Three Months The Nine Months The Twelve Months
Ended September 30, Ended September 30, Ended September 30,
------------------------- -------------------------- --------------------------
1997 1996 1997 1996 1997 1996
---------- ---------- ----------- ----------- ----------- -----------
OPERATING REVENUES $9,302,926 $9,045,070 $28,648,048 $27,770,257 $38,377,722 $37,149,373
---------- ---------- ----------- ----------- ----------- -----------
OPERATING EXPENSES:
Operation - Purchased power $4,384,322 $4,326,233 $13,629,019 $13,994,190 $18,485,864 $18,845,612
- Other 1,759,282 1,594,720 5,528,047 4,904,080 7,367,240 6,503,301
Maintenance 513,720 544,151 1,577,557 1,693,327 2,026,389 2,101,531
Depreciation and amortization 700,259 645,193 2,100,697 1,961,019 2,754,073 2,569,738
Property and other taxes 404,712 405,770 1,209,778 1,172,006 1,594,123 1,581,677
Income taxes 343,300 344,400 1,029,700 869,800 1,407,096 1,255,784
---------- ---------- ----------- ----------- ----------- -----------
Total operating expenses $8,105,595 $7,860,467 $25,074,798 $24,594,422 $33,634,785 $32,857,643
---------- ---------- ----------- ----------- ----------- -----------
Net operating income $1,197,331 $1,184,603 $ 3,573,250 $3,175,835 $4,742,937 $4,291,730
---------- ---------- ----------- ----------- ----------- -----------
OTHER INCOME (DEDUCTIONS), NET ($36,267) ($8,452) ($67,228) ($55,174) ($59,648) ($41,328)
---------- ---------- ----------- ----------- ----------- -----------
ALLOWANCE FOR FUNDS USED
DURING CONSTRUCTION $39,900 $0 $119,700 $0 $119,700 $0
---------- ---------- ----------- ----------- ----------- -----------
INTEREST CHARGES:
Interest on long-term debt $ 387,014 $ 347,092 $ 1,171,067 $ 1,012,290 $ 1,526,164 $ 1,347,949
Other interest 18,410 49,597 67,409 112,911 86,954 173,417
---------- ---------- ----------- ----------- ----------- -----------
Total interest charges $ 405,424 $ 396,689 $ 1,238,476 $ 1,125,201 $ 1,613,118 $ 1,521,366
---------- ---------- ----------- ----------- ----------- -----------
NET INCOME AVAILABLE FOR COMMON
STOCK $ 795,540 $ 779,462 $ 2,387,246 $ 1,995,460 $ 3,189,871 $ 2,729,036
---------- ---------- ----------- ----------- ----------- -----------
---------- ---------- ----------- ----------- ----------- -----------
EARNINGS PER AVERAGE SHARE OF
COMMON STOCK $0.50 $0.50 $1.50 $1.29 $2.01 $1.77
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
CASH DIVIDENDS DECLARED PER
SHARE OF COMMON STOCK $0.28 $0.26 $0.83 $0.78 $1.09 $1.02
----- ----- ----- ----- ----- -----
----- ----- ----- ----- ----- -----
AVERAGE COMMON SHARES OUTSTANDING 1,593,180 1,569,635 1,591,829 1,548,406 1,589,706 1,542,472
---------- ---------- ----------- ----------- ----------- -----------
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E S E L C O, INC.
CONSOLIDATED STATEMENT OF CASH FLOW
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1997 AND 1996
1997 1996
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NET CASH FLOWS FROM (USED BY):
OPERATING ACTIVITIES:
Net income $2,387,246 $1,995,460
Noncash expenses, revenue, losses and gains
included in income
Depreciation and amortization 2,149,812 2,031,084
Deferred taxes and charge equivalent to
investment tax credit, net of amortization (255,870) 741,582
Net decrease (increase) in receivables and
unbilled revenue (592,229) 253,681
Net decrease (increase) in materials and
supplies and prepayments 796,169 517,893
Net increase (decrease) in accounts payable,
accrued taxes, and other current liabilities (128,970) (2,154,662)
Increase (decrease) in interest accrued
but not paid 229,450 158,108
Other (359,505) (12,476)
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Net cash from operating activities $4,226,103 $3,530,670
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INVESTING ACTIVITIES:
Acquisition of property, plant and equipment ($3,349,799) ($3,314,233)
Proceeds from disposals of property, plant
and equipment 75,846 23,212
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Net cash used by investing activities ($3,273,953) ($3,291,021)
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FINANCING ACTIVITIES:
Proceeds of short-term debt $7,546,500 $9,131,500
Payments to settle short-term debt (6,486,500) (9,818,000)
Issuance of long-term debt (net) 910,000 2,123,000
Payments on long-term debt (2,425,475) (1,216,153)
Proceeds from sale of common stock 206,844 569,084
Dividends paid (879,347) (1,217,881)
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Net cash used by financing activities ($1,127,978) ($428,450)
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NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS ($175,828) ($188,801)
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF THE YEAR 293,883 302,845
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CASH AND CASH EQUIVALENTS AT THE END OF THE PERIOD $ 118,055 $ 114,044
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INTEREST PAID $1,111,513 $1,030,118
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INCOME TAXES PAID $ 730,000 $ 645,000
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