______________________________________________________________________________
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SECURITIES AND EXCHANGE COMMISSION
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 September 30, 2003
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
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Commission |
Registrants; State of Incorporation; |
IRS Employer |
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1-11337 |
WPS RESOURCES CORPORATION |
39-1775292 |
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1-3016 |
WISCONSIN PUBLIC SERVICE CORPORATION |
39-0715160 |
Indicate by check mark whether the registrants (1) have 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) have been subject to such filing requirements for the past 90 days.
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WPS Resources Corporation |
Yes [x] No [ ] |
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Wisconsin Public Service Corporation |
Yes [x] No [ ] |
Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Act).
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WPS Resources Corporation |
Yes [x] No [ ] |
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Wisconsin Public Service Corporation |
Yes [ ] No [x ] |
Indicate the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date:
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WPS RESOURCES CORPORATION |
Common stock, $1 par value, |
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WISCONSIN PUBLIC SERVICE CORPORATION |
Common stock, $4 par value, |
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WPS RESOURCES CORPORATION CONTENTS |
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4 |
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FINANCIAL INFORMATION |
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Item 1. |
FINANCIAL STATEMENTS |
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WPS RESOURCES CORPORATION |
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5 |
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6 |
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7 |
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WISCONSIN PUBLIC SERVICE CORPORATION |
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8 |
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9 |
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10 |
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11 |
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WPS Resources Corporation and Subsidiaries |
12-27 |
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Management's Discussion and Analysis of Financial Condition and Results of Operations for |
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28-51 |
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52-60 |
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Quantitative and Qualitative Disclosures About Market Risk |
61 |
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Controls and Procedures |
61 |
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OTHER INFORMATION |
62 |
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Legal Proceedings |
62-63 |
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Other Information |
64-65 |
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Exhibits and Reports on Form 8-K |
66-67 |
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68-69 |
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EXHIBIT INDEX |
70 |
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12.1 |
WPS Resources Corporation Ratio of Earnings to Fixed Charges |
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12.2 |
Wisconsin Public Service Corporation Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Fixed Charges and Preferred Dividends |
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31.1 |
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934 for WPS Resources Corporation |
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31.2 |
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934 for WPS Resources Corporation |
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31.3 |
Certification of Chief Executive Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934 for Wisconsin Public Service Corporation |
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31.4 |
Certification of Chief Financial Officer Pursuant to Section 302 of the
Sarbanes-Oxley Act and Rule 13a-14(a) or 15d-14(a) under the Securities
Exchange Act of 1934 for Wisconsin Public Service Corporation |
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32.1 |
Written Statement of the Chief Executive Officer and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for WPS Resources
Corporation |
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32.2 |
Written Statement of the Chief Executive Officer and Chief Financial Officer Pursuant to 18 U.S.C. Section 1350 for Wisconsin Public Service Corporation |
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Except for historical data and statements of current fact, the information contained or incorporated by reference in this document constitutes forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934. Any references to plans, goals, beliefs or expectations in respect to future events and conditions or to estimates are forward-looking statements. Although we believe that statements of our expectations are based on reasonable assumptions, forward-looking statements are inherently uncertain and subject to risks and should be viewed with caution. Actual results or experience could differ materially from the forward-looking statements as a result of many factors. Forward-looking statements included or incorporated in this document include, but are not limited to statements regarding:
- expectations regarding future revenues or expenses,
- estimated future capital expenditures,
- expected costs of purchased power in the future,
- costs of decommissioning generation plants,
- recovery of deferred costs,
- future cleanup costs associated with manufactured gas plant sites, and
- statements regarding trends or estimates in Management's Discussion and Analysis of Financial Condition and Results of Operations.
We cannot predict the course of future events or anticipate the interaction of multiple factors beyond our control and their effect on revenues, project timing, and costs. Some risk factors that could cause results different from any forward-looking statement include those described in the Risk Factors Section of our Annual Report on Form 10-K for the year ended December 31, 2002 and the following:
- General economic, business, and regulatory conditions
- Legislative and regulatory initiatives regarding deregulation and restructuring of the utility industry which could affect costs and investment recovery
- State and federal rate regulation, including the inability to obtain necessary regulatory approvals
- Changes in generally accepted accounting principles
- Growth and competition and the extent and timing of new business development in the markets of subsidiary companies
- The performance of projects undertaken or acquired by subsidiary companies
- Business combinations among our competitors and customers
- Energy supply and demand
- Financial market conditions, including availability, terms, and use of capital
- Nuclear and environmental issues
- Weather and other natural phenomena
- Commodity price and interest rate risk
- Counter-party credit risk
- Federal and state tax policies
- Acts of terrorism or war
We make no commitment to disclose any revisions to the forward-looking statements as a result of facts, events, or circumstances after the date of this report.
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Item 1. Financial Statements |
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WPS RESOURCES CORPORATION |
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CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
Three Months Ended |
Nine Months Ended |
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September 30, |
September 30, |
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(Millions, except share amounts) |
2003 |
2002 |
2003 |
2002 |
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Nonregulated revenue |
$ 742.8 |
$ 129.4 |
$2,385.2 |
$ 350.4 |
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Utility revenue |
269.5 |
247.7 |
892.2 |
758.3 |
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Total revenues |
1,012.3 |
377.1 |
3,277.4 |
1,108.7 |
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Nonregulated cost of fuel, natural gas, and purchased power |
707.0 |
102.6 |
2,286.3 |
277.0 |
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Utility cost of fuel, natural gas, and purchased power |
98.4 |
87.2 |
403.2 |
291.3 |
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Operating and maintenance expense |
110.3 |
103.9 |
360.7 |
321.3 |
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Depreciation and decommissioning expense |
29.5 |
23.8 |
82.4 |
72.5 |
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Taxes other than income |
11.0 |
10.0 |
32.7 |
29.9 |
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Operating income |
56.1 |
49.6 |
112.1 |
116.7 |
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Miscellaneous income |
8.8 |
11.0 |
17.7 |
34.2 |
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Interest expense and distributions from preferred securities of subsidiary trust |
(15.4) |
(15.2) |
(46.6) |
(44.9) |
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Minority interest |
2.0 |
- |
4.3 |
(0.1) |
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Other expense |
(4.6) |
(4.2) |
(24.6) |
(10.8) |
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Income before taxes |
51.5 |
45.4 |
87.5 |
105.9 |
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Income tax provision (benefit) |
16.7 |
14.1 |
18.6 |
23.4 |
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Net income before preferred dividends |
34.8 |
31.3 |
68.9 |
82.5 |
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Preferred stock dividends of subsidiary |
0.7 |
0.8 |
2.3 |
2.3 |
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Net income before cumulative effect of changes in |
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accounting principles |
34.1 |
30.5 |
66.6 |
80.2 |
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Cumulative effect of changes in accounting principles, net of tax |
- |
- |
3.2 |
- |
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Income available for common shareholders |
$ 34.1 |
$ 30.5 |
$ 69.8 |
$ 80.2 |
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Average shares of common stock |
32.6 |
31.9 |
32.5 |
31.7 |
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Earnings per share before cumulative effect of |
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changes in accounting principles |
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Basic |
$1.05 |
$0.96 |
$2.05 |
$2.53 |
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Diluted |
$1.04 |
$0.95 |
$2.04 |
$2.52 |
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Impact per share of cumulative effect of changes in |
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accounting principles |
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Basic |
- |
- |
$0.10 |
- |
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Diluted |
- |
- |
$0.10 |
- |
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Earnings per common share |
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Basic |
$1.05 |
$0.96 |
$2.15 |
$2.53 |
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Diluted |
$1.04 |
$0.95 |
$2.14 |
$2.52 |
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Dividends per common share declared |
$1.090 |
$0.535 |
$2.160 |
$1.585 |
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The accompanying condensed notes are an integral part of these statements. |
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WPS RESOURCES CORPORATION |
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CONSOLIDATED BALANCE SHEETS (Unaudited) |
September 30, |
December 31, |
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(Millions) |
2003 |
2002 |
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Assets |
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Cash and cash equivalents |
$ 40.7 |
$ 43.3 |
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Restricted funds |
0.5 |
4.2 |
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Accounts receivable - net of reserves of $6.9 and $7.0, respectively |
346.4 |
293.3 |
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Accrued unbilled revenues |
54.2 |
105.9 |
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Inventories |
176.7 |
118.1 |
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Current portion of assets from risk management activities |
466.2 |
406.6 |
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Other current assets |
84.1 |
72.3 |
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Current assets |
1,168.8 |
1,043.7 |
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Property, plant, and equipment - net of reserves of $1,671.8 and $1,832.4, respectively |
2,018.4 |
1,610.2 |
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Regulatory assets |
109.0 |
110.9 |
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Long-term assets from risk management activities |
135.0 |
135.3 |
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Other |
347.9 |
307.8 |
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Total assets |
$3,779.1 |
$3,207.9 |
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Liabilities and Shareholders' Equity |
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Short-term debt |
$ 160.9 |
$ 29.8 |
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Current portion of long-term debt |
6.6 |
71.1 |
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Accounts payable |
462.2 |
452.0 |
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Current portion of liabilities from risk management activities |
458.3 |
443.8 |
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Other current liabilities |
84.2 |
53.7 |
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Current liabilities |
1,172.2 |
1,050.4 |
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Long-term debt |
813.0 |
824.4 |
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Deferred income taxes |
95.6 |
73.7 |
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Deferred investment tax credits |
18.1 |
19.3 |
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Regulatory liabilities |
108.2 |
49.7 |
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Environmental remediation liabilities |
37.0 |
40.2 |
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Benefit obligations |
49.9 |
51.8 |
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Long-term liabilities from risk management activities |
127.0 |
109.7 |
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Asset retirement obligations |
341.2 |
- |
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Other |
105.3 |
104.8 |
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Long-term liabilities |
1,695.3 |
1,273.6 |
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Company-obligated mandatorily redeemable trust preferred |
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securities of subsidiary trust holding solely |
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WPS Resources 7.00% subordinated debentures |
50.0 |
50.0 |
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Preferred stock of subsidiary with no mandatory redemption |
51.1 |
51.1 |
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Common stock equity |
810.5 |
782.8 |
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Total liabilities and shareholders' equity |
$3,779.1 |
$3,207.9 |
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The accompanying condensed notes are an integral part of these statements. |
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WPS RESOURCES CORPORATION |
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CONSOLIDATED STATEMENTS OF CASH FLOWS (Unaudited) |
Nine Months Ended |
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September 30, |
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(Millions) |
2003 |
2002 |
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Operating Activities |
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Net income before preferred dividends |
$ 68.9 |
$ 82.5 |
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Adjustments to reconcile net income to net cash provided by operating activities |
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Depreciation and decommissioning |
82.4 |
72.5 |
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Amortization |
32.8 |
40.0 |
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Unrealized gains on investments |
(5.5) |
(1.0) |
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Unrealized losses on nonregulated energy contracts |
8.7 |
9.1 |
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Deferred income taxes and investment tax credit |
13.2 |
15.0 |
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Other |
2.5 |
(18.2) |
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Changes in working capital |
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Receivables |
(3.8) |
40.0 |
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Inventories |
(79.9) |
6.7 |
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Other current assets |
(17.3) |
(14.8) |
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Accounts payable |
9.8 |
(25.2) |
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Other current liabilities |
0.2 |
(9.2) |
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Net cash operating activities |
112.0 |
197.4 |
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Investing Activities |
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Capital expenditures |
(118.6) |
(145.3) |
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Sale of property, plant and equipment |
20.1 |
0.3 |
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Business acquisitions and purchases of equity investments |
(50.1) |
(69.9) |
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Dividends received from equity method investment |
5.6 |
5.4 |
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Decommissioning funding |
(2.2) |
(2.0) |
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Other |
(2.1) |
(6.9) |
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Net cash investing activities |
(147.3) |
(218.4) |
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Financing Activities |
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Short-term debt - net |
134.7 |
46.1 |
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Repayment of long-term debt and capital lease |
(77.0) |
(4.4) |
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Payment of dividends |
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Preferred stock |
(2.3) |
(2.3) |
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Common stock |
(51.8) |
(50.1) |
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Issuance of common stock |
24.1 |
23.6 |
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Purchase of common stock |
(0.8) |
(1.2) |
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Other |
5.8 |
9.2 |
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Net cash financing activities |
32.7 |
20.9 |
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Change in cash and cash equivalents |
(2.6) |
(0.1) |
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Cash and cash equivalents at beginning of period |
43.3 |
43.9 |
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Cash and cash equivalents at end of period |
$ 40.7 |
$ 43.8 |
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The accompanying condensed notes are an integral part of these statements. |
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WISCONSIN PUBLIC SERVICE CORPORATION |
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CONSOLIDATED STATEMENTS OF INCOME (Unaudited) |
Three Months Ended |
Nine Months Ended |
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(Millions) |
2003 |
2002 |
2003 |
2002 |
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Operating revenues |
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Electric |
$205.0 |
$197.1 |
$555.7 |
$522.3 |
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Gas |
49.0 |
39.5 |
294.8 |
205.1 |
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Total operating revenues |
254.0 |
236.6 |
850.5 |
727.4 |
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Operating expenses |
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Electric production fuels |
38.1 |
36.8 |
105.2 |
92.9 |
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Purchased power |
25.2 |
26.9 |
73.1 |
69.8 |
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Gas purchased for resale |
32.2 |
22.6 |
213.3 |
126.5 |
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Other operating expenses |
64.2 |
60.0 |
207.2 |
184.1 |
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Maintenance |
14.4 |
15.1 |
57.2 |
53.9 |
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Depreciation and decommissioning |
24.6 |
19.4 |
68.1 |
60.9 |
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Federal income taxes |
12.2 |
10.1 |
24.9 |
26.0 |
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Investment tax credit restored |
(0.4) |
(0.4) |
(1.1) |
(1.2) |
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State income taxes |
3.9 |
3.6 |
7.3 |
7.3 |
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Gross receipts tax and other |
9.0 |
8.3 |
27.3 |
25.1 |
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Total operating expense |
223.4 |
202.4 |
782.5 |
645.3 |
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Operating income |
30.6 |
34.2 |
68.0 |
82.1 |
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Other income and (deductions) |
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Allowance for equity funds used during construction |
0.3 |
0.8 |
1.9 |
2.2 |
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Other, net |
6.5 |
4.2 |
16.8 |
11.4 |
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Income taxes |
(0.8) |
(1.5) |
(2.6) |
(3.7) |
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Total other income |
6.0 |
3.5 |
16.1 |
9.9 |
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Income before interest expense |
36.6 |
37.7 |
84.1 |
92.0 |
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Interest expense |
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Interest on long-term debt |
6.6 |
6.9 |
21.1 |
20.9 |
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Other interest |
1.6 |
2.0 |
3.7 |
5.8 |
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Allowance for borrowed funds used during construction |
(0.3) |
(0.3) |
(0.8) |
(0.9) |
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Total interest expense |
7.9 |
8.6 |
24.0 |
25.8 |
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Minority interest |
- |
(0.4) |
(1.6) |
(1.2) |
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Net income |
28.7 |
28.7 |
58.5 |
65.0 |
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Preferred stock dividend requirements |
0.7 |
0.8 |
2.3 |
2.3 |
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Earnings on common stock |
$ 28.0 |
$ 27.9 |
$ 56.2 |
$ 62.7 |
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The accompanying condensed notes are an integral part of these statements. |
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WISCONSIN PUBLIC SERVICE CORPORATION |
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CONSOLIDATED BALANCE SHEETS (Unaudited) |
September 30, |
December 31, |
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(Millions) |
2003 |
2002 |
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ASSETS |
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Utility plant |
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Electric |
$2,115.6 |
$1,891.7 |
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Gas |
442.5 |
427.3 |
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Total |
2,558.1 |
2,319.0 |
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Less - Accumulated depreciation |
1,283.0 |
1,461.3 |
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Total |
1,275.1 |
857.7 |
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Nuclear decommissioning trusts |
318.4 |
290.5 |
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Construction in progress |
64.7 |
98.4 |
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Nuclear fuel, less accumulated amortization |
20.8 |
24.6 |
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Net utility plant |
1,679.0 |
1,271.2 |
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Current assets |
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Cash and equivalents |
4.9 |
3.4 |
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Customer and other receivables, net of reserves of $3.8 and $3.7, respectively |
93.2 |
101.2 |
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Intercompany receivables |
5.8 |
7.7 |