1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1994,
-------------------
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 1-3701
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THE WASHINGTON WATER POWER COMPANY
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(Exact name of registrant as specified in its charter)
Washington 91-0462470
--------------------------------------------- ----------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1411 East Mission Avenue, Spokane, Washington 99202-2600
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: 509-489-0500
------------
None
-------------------------------------------------------------------------
(Former name, former address and former fiscal year, if changed since last
report)
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 [ ]
At November 1, 1994, 54,064,386 shares of Registrant's Common Stock, no par
value (the only class of common stock), were outstanding.
2
THE WASHINGTON WATER POWER COMPANY
INDEX
PAGE NO.
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PART I. FINANCIAL INFORMATION:
ITEM 1. FINANCIAL STATEMENTS
CONSOLIDATED STATEMENTS OF INCOME - THREE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993 . . . . . . . . . . . . . . . . . . . . 3
CONSOLIDATED STATEMENTS OF INCOME - NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993 . . . . . . . . . . . . . . . . . . . . 4
CONSOLIDATED BALANCE SHEETS - SEPTEMBER 30, 1994
AND DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . 5
CONSOLIDATED STATEMENTS OF CAPITALIZATION - SEPTEMBER 30, 1994
AND DECEMBER 31, 1993 . . . . . . . . . . . . . . . . . . . . . . . 6
CONSOLIDATED STATEMENTS OF CASH FLOWS - NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993 . . . . . . . . . . . . . . . . . . . . 7
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS - THREE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993 . . . . . . . . . . . . . . . . . . . . 8
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS - NINE MONTHS ENDED
SEPTEMBER 30, 1994 AND 1993 . . . . . . . . . . . . . . . . . . . . 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS . . . . . . . . . . . . . . 10
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS . . . . . . . . . . . . . 14
PART II. OTHER INFORMATION:
ITEM 5. OTHER INFORMATION . . . . . . . . . . . . . . . . . . . . . . . . . 19
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K . . . . . . . . . . . . . . . . . 26
SIGNATURE . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27
2
3
CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
For the Three Months Ended September 30
Thousands of Dollars
1994 1993
-------- --------
OPERATING REVENUES . . . . . . . . . . . . . . $142,334 $123,507
-------- --------
OPERATING EXPENSES:
Operations and maintenance . . . . . . . . . 80,722 64,642
Administrative and general . . . . . . . . 12,661 13,752
Depreciation and amortization . . . . . . . 15,040 15,017
Taxes other than income taxes . . . . . . . 10,938 9,693
-------- --------
Total operating expenses . . . . . . . . 119,361 103,104
-------- --------
INCOME FROM OPERATIONS . . . . . . . . . . . . 22,973 20,403
-------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense . . . . . . . . . . . . . 13,751 12,719
Interest capitalized and AFUCE . . . . . . (435) (1,019)
Other (income) deductions-net . . . . . . . (3,100) (2,672)
-------- --------
Total interest expense and other
income-net . . . . . . . . . . . . . 10,216 9,028
-------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . 12,757 11,375
INCOME TAXES . . . . . . . . . . . . . . . . . 4,653 3,981
-------- --------
NET INCOME . . . . . . . . . . . . . . . . . . 8,104 7,394
DEDUCT-Preferred stock dividend requirements . 2,186 2,082
-------- --------
INCOME AVAILABLE FOR COMMON STOCK . . . . . . . $ 5,918 $ 5,312
======== ========
Average common shares outstanding
(thousands) . . . . . . . . . . . . . . . . 53,751 51,997
EARNINGS PER SHARE OF COMMON STOCK . . . . . . $0.11 $0.10
Dividends paid per common share . . . . . . . . $0.31 $0.31
The Accompanying Notes are an Integral Part of These Statements.
3
4
CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
For the Nine Months Ended September 30
Thousands of Dollars
1994 1993
-------- --------
OPERATING REVENUES . . . . . . . . . . . . . . $480,404 $463,361
-------- --------
OPERATING EXPENSES:
Operations and maintenance . . . . . . . . 249,930 228,398
Administrative and general . . . . . . . . 43,040 39,382
Depreciation and amortization . . . . . . . 44,534 43,776
Taxes other than income taxes . . . . . . . 34,223 33,761
------- --------
Total operating expenses . . . . . . . . 371,727 345,317
------- --------
INCOME FROM OPERATIONS . . . . . . . . . . . . 108,677 118,044
------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense . . . . . . . . . . . . . 39,186 37,296
Interest capitalized and AFUCE . . . . . . (3,242) (2,347)
Other (income) deductions-net . . . . . . . (8,410) (6,139)
------- --------
Total interest expense and other
income-net . . . . . . . . . . . . . 27,534 28,810
------- --------
INCOME BEFORE INCOME TAXES . . . . . . . . . . 81,143 89,234
INCOME TAXES . . . . . . . . . . . . . . . . . 30,652 30,043
------- --------
NET INCOME . . . . . . . . . . . . . . . . . . 50,491 59,191
DEDUCT-Preferred stock dividend requirements . 6,405 6,260
------- --------
INCOME AVAILABLE FOR COMMON STOCK . . . . . . . $44,086 $ 52,931
======= ========
Average common shares outstanding
(thousands) . . . . . . . . . . . . . . . . 53,329 51,523
EARNINGS PER SHARE OF COMMON STOCK . . . . . . $0.83 $1.03
Dividends paid per common share . . . . . . . . $0.93 $0.93
The Accompanying Notes are an Integral Part of These Statements.
4
5
CONSOLIDATED BALANCE SHEETS
The Washington Water Power Company
Thousands of Dollars
September 30, December 31,
1994 1993
------------ ------------
ASSETS:
PROPERTY:
Utility plant in service-net . . . . . . . $1,748,952 $1,667,778
Construction work in progress . . . . . . . 23,885 55,191
---------- ----------
Total . . . . . . . . . . . . . . . . . 1,772,837 1,722,969
Less: Accumulated depreciation and
amortization . . . . . . . . . . . . 490,825 468,978
---------- ----------
Net utility plant . . . . . . . . . . . 1,282,012 1,253,991
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net . . . . . 90,094 94,383
Other-net . . . . . . . . . . . . . . . . . 93,458 79,376
---------- ----------
Total other property and investments . . 183,552 173,759
---------- ----------
CURRENT ASSETS:
Cash and equivalents . . . . . . . . . . . 5,858 11,201
Temporary investments . . . . . . . . . . . 21,946 22,517
Accounts and notes receivable-net . . . . . 44,443 63,649
Materials and supplies, fuel stock and
natural gas stored . . . . . . . . . . . 23,487 19,548
Prepayments and other . . . . . . . . . . . 12,986 5,832
---------- ----------
Total current assets . . . . . . . . . . 108,720 122,747
---------- ----------
DEFERRED CHARGES:
Investment in terminated nuclear
project-net . . . . . . . . . . . . . . 2,811 4,829
Regulatory assets for deferred income tax . 174,277 177,786
Conservation programs . . . . . . . . . . . 64,188 47,612
Other-net . . . . . . . . . . . . . . . . . 67,810 57,114
---------- ----------
Total deferred charges . . . . . . . . . 309,086 287,341
---------- ----------
TOTAL . . . . . . . . . . . . . . . . $1,883,370 $1,837,838
========== ==========
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements
of Capitalization) . . . . . . . . . . . . $1,449,017 $1,416,608
---------- ----------
CURRENT LIABILITIES:
Accounts payable . . . . . . . . . . . . . 33,518 40,169
Taxes accrued . . . . . . . . . . . . . . . 23,774 19,957
Interest accrued . . . . . . . . . . . . . 14,995 10,046
Other . . . . . . . . . . . . . . . . . . . 52,543 44,548
---------- ----------
Total current liabilities . . . . . . . 124,830 114,720
---------- ----------
DEFERRED CREDITS:
Investment tax credits . . . . . . . . . . 2,383 2,456
Deferred income taxes . . . . . . . . . . . 292,691 288,905
Other . . . . . . . . . . . . . . . . . . . 13,268 14,126
---------- ----------
Total deferred credits . . . . . . . . . 308,342 305,487
---------- ----------
MINORITY INTEREST . . . . . . . . . . . . . . . 1,181 1,023
---------- ----------
COMMITMENTS AND CONTINGENCIES (Note 3)
TOTAL . . . . . . . . . . . . . . $1,883,370 $1,837,838
========== ==========
The Accompanying Notes are an Integral Part of These Statements.
5
6
CONSOLIDATED STATEMENTS OF CAPITALIZATION
The Washington Water Power Company
Thousands of Dollars
September 30, December 31,
1994 1993
--------- ---------
COMMON EQUITY: (Note 2)
Common stock, no par value: 200,000,000
shares authorized: shares outstanding:
1994-54,017,315; 1993-52,757,545 . . . . $ 564,907 $ 544,609
Note receivable from employee stock
ownership plan . . . . . . . . . . . . (12,392) (12,756)
Capital stock expense and other paid
in capital . . . . . . . . . . . . . . . (10,013) (9,898)
Retained Earnings . . . . . . . . . . . . . 107,130 112,424
---------- ----------
Total common equity . . . . . . . 649,632 634,379
---------- ----------
PREFERRED STOCK-CUMULATIVE: (Note 2)
10,000,000 shares authorized:
Not subject to mandatory redemption:
Flexible Auction Series J; 500 shares
outstanding ($100,000 stated value) . 50,000 50,000
---------- ----------
Total not subject to mandatory
redemption . . . . . . . . . 50,000 50,000
---------- ----------
Subject to mandatory redemption:
$8.625, Series I; 500,000 shares
outstanding ($100 stated value) . . 50,000 50,000
$6.95, Series K; 350,000 shares
outstanding ($100 stated value) . . 35,000 35,000
---------- ----------
Total subject to mandatory
redemption . . . . . . . . . . . 85,000 85,000
---------- ----------
LONG-TERM DEBT: (Note 2)
First Mortgage Bonds:
4 5/8% due March 1, 1995 . . . . . . . . 10,000 10,000
7 1/8% due December 1, 2013 . . . . . . 66,700 66,700
7 2/5% due December 1, 2016 . . . . . . 17,000 17,000
Secured Medium-Term Notes Series A
4.72% to 8.06% due 1996
through 2023 . . . . . . . . . . . . 250,000 225,000
Secured Medium-Term Notes Series B
7.89% to 7.95% due 2005
through 2006 . . . . . . . . . . . . 31,000 -
---------- ----------
Total first mortgage bonds . . . . . 374,700 318,700
---------- ----------
Pollution Control Bonds:
6% Series due 2023 . . . . . . . . . . . 4,100 4,100
Unsecured Medium-Term Notes:
Series A - 7.94% to 9.58% due
1995 through 2007 . . . . . . . . . 92,500 100,000
Series B - 5.50% to 8.55% due 1995
through 2023 . . . . . . . . . . . . 150,000 150,000
---------- ----------
Total unsecured medium-term notes . . 242,500 250,000
---------- ----------
Notes payable (due within one year) and
commercial paper to be refinanced . . . 33,000 68,001
Other . . . . . . . . . . . . . . . . . . . 10,085 6,428
---------- ----------
Total long-term debt . . . . . . . . 664,385 647,229
---------- ----------
TOTAL CAPITALIZATION . . . . . . . . . . . . . $1,449,017 $1,416,608
========== ==========
The Accompanying Notes are an Integral Part of These Statements.
6
7
CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
The Washington Water Power Company
For the Nine Months Ended September 30
Thousands of Dollars
1994 1993
-------- --------
OPERATING ACTIVITIES:
Net income . . . . . . . . . . . . . . . . $ 50,491 $ 59,191
NON-CASH REVENUES AND EXPENSES
INCLUDED IN NET INCOME:
Depreciation and amortization . . . . . 52,140 49,435
Provision for deferred income taxes . . 7,198 7,606
Allowance for equity funds used during
construction . . . . . . . . . . . . (1,110) (926)
Power and natural gas cost deferrals and
amortization . . . . . . . . . . . . 2,163 (5,266)
Deferred revenues and other-net . . . . (3,487) (3,747)
(Increase) decrease in working capital
components:
Receivables and prepaid
expenses-net . . . . . . . . . . 18,140 26,930
Materials & supplies, fuel stock
and natural gas stored . . . . . (3,967) (5,798)
Payables and other accrued
liabilities . . . . . . . . . . . 2,126 (8,407)
Other-net . . . . . . . . . . . . . . (2,770) 5,913
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES . . . 120,924 124,931
-------- --------
INVESTING ACTIVITIES:
Construction expenditures (excluding
AFUDC-equity funds) . . . . . . . . . . (67,771) (70,755)
Other capital requirements . . . . . . . . (18,470) (21,128)
(Increase) decrease in other noncurrent
balance sheet items-net . . . . . . . . (17,305) 8,507
Assets acquired and investments in
subsidiaries (Note 4) . . . . . . . . . (9,708) (8,186)
--------- --------
NET CASH USED IN INVESTING ACTIVITIES . . . . . (113,254) (91,562)
--------- --------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper,
notes payable and bank borrowings-net . (35,001) 28,000
Sale of unsecured medium-term notes . . . . - 25,000
Redemption and maturity of unsecured
medium-term notes . . . . . . . . . . . (7,500) (50,000)
Sale of secured medium-term notes (a
series of first mortgage bonds) . . . . 56,000 174,000
Redemption of mortgage bonds . . . . . . . - (170,000)
Redemption premiums . . . . . . . . . . . . - (9,595)
Sale of common stock - Net of ESOP note
receivable . . . . . . . . . . . . . . . 12,043 19,575
Miscellaneous-net . . . . . . . . . . . . . 8,666 (8,037)
-------- --------
NET FINANCING ACTIVITIES BEFORE CASH
DIVIDENDS . . . . . . . . . . . . . . . . 34,208 8,943
Less cash dividends paid . . . . . . . . (47,221) (46,201)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES . . . . . (13,013) (37,258)
-------- --------
NET INCREASE (DECREASE) IN CASH AND
EQUIVALENTS . . . . . . . . . . . . . . . . (5,343) (3,889)
CASH AND EQUIVALENTS AT BEGINNING OF PERIOD . . 11,201 8,354
-------- --------
CASH AND EQUIVALENTS AT END OF PERIOD . . . . . $ 5,858 $ 4,465
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW
INFORMATION
Cash paid during the period:
Interest . . . . . . . . . . . . . . . . $30,095 $33,327
Income taxes . . . . . . . . . . . . . . $22,919 $22,894
Non-cash financing and investing activities $8,618 $10,538
The Accompanying Notes are an Integral Part of These Statements.
7
8
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
The Washington Water Power Company
For the Three Months Ended September 30
Thousands of Dollars
1994 1993
---------- ----------
OPERATING REVENUES:
Electric . . . . . . . . . . . . . . . . . $ 103,960 $ 97,832
Natural gas . . . . . . . . . . . . . . . . 21,158 20,590
Non-utility . . . . . . . . . . . . . . . . 17,216 5,085
---------- --------
Total operating revenues . . . . . . . . $ 142,334 $123,507
========== ========
OPERATIONS AND MAINTENANCE EXPENSES:
Electric:
Power purchased . . . . . . . . . . . . $ 28,190 $ 23,393
Fuel for generation . . . . . . . . . . 10,201 8,944
Other electric . . . . . . . . . . . . . 15,363 17,589
Natural gas:
Natural gas purchased for resale . . . . 13,045 11,113
Other natural gas . . . . . . . . . . . 3,626 3,364
Non-utility . . . . . . . . . . . . . . . . 10,297 239
---------- ---------
Total operations and maintenance
expenses . . . . . . . . . . . . . . $ 80,722 $ 64,642
========== =========
ADMINISTRATIVE AND GENERAL EXPENSES:
Electric . . . . . . . . . . . . . . . . . $ 7,466 $ 7,970
Natural gas . . . . . . . . . . . . . . . 2,146 2,291
Non-utility . . . . . . . . . . . . . . . . 3,049 3,491
---------- ---------
Total administrative and general
expenses . . . . . . . . . . . . . . $ 12,661 $ 13,752
========== =========
DEPRECIATION AND AMORTIZATION EXPENSES:
Electric . . . . . . . . . . . . . . . . . $ 12,132 $ 12,272
Natural gas . . . . . . . . . . . . . . . . 2,090 2,242
Non-utility . . . . . . . . . . . . . . . . 818 503
---------- ---------
Total depreciation and amortization
expenses . . . . . . . . . . . . . . $ 15,040 $ 15,017
========== =========
INCOME FROM OPERATIONS:
Electric . . . . . . . . . . . . . . . . . $ 21,341 $ 19,646
Natural gas . . . . . . . . . . . . . . . . (1,148) 192
Non-utility . . . . . . . . . . . . . . . . 2,780 565
--------- --------
Total income from operations . . . . . . $ 22,973 $ 20,403
========== =========
INCOME AVAILABLE FOR COMMON STOCK:
Utility operations . . . . . . . . . . . . $ 2,626 $ 3,582
Non-utility operations . . . . . . . . . . 3,292 1,730
---------- ---------
Total income available for common stock $ 5,918 $ 5,312
========== =========
ASSETS: (1993 amounts at December 31)
Electric . . . . . . . . . . . . . . . . . $1,397,186 $1,375,502
Natural gas . . . . . . . . . . . . . . . . 244,688 207,101
Common plant . . . . . . . . . . . . . . . 24,703 0
Other utility assets . . . . . . . . . . . 70,906 52,092
Non-utility assets . . . . . . . . . . . . 145,887 129,179
---------- ----------
Total assets . . . . . . . . . . . . . . $1,883,370 $1,763,874
========== ==========
CAPITAL EXPENDITURES (excluding AFUDC):
Electric . . . . . . . . . . . . . . . . . $ 17,459 $ 21,627
Natural gas . . . . . . . . . . . . . . . . 8,649 8,169
Common plant . . . . . . . . . . . . . . . 5,189 6,110
Non-utility . . . . . . . . . . . . . . . . 1,476 726
---------- ----------
Total capital expenditures . . . . . . . $ 32,773 $ 36,632
========== ==========
The Accompanying Notes are an Integral Part of These Statements.
8
9
SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
The Washington Water Power Company
For the Nine Months Ended September 30
Thousands of Dollars
1994 1993
---------- ----------
OPERATING REVENUES:
Electric . . . . . . . . . . . . . . . . . $330,006 $343,845
Natural gas . . . . . . . . . . . . . . . . 100,937 90,139
Non-utility . . . . . . . . . . . . . . . . 49,461 29,377
-------- --------
Total operating revenues . . . . . . . . $480,404 $463,361
======== ========
OPERATIONS AND MAINTENANCE EXPENSES:
Electric:
Power purchased . . . . . . . . . . . . $ 74,447 $ 86,786
Fuel for generation . . . . . . . . . . 28,721 24,013
Other electric . . . . . . . . . . . . . 45,809 49,454
Natural gas:
Natural gas purchased for resale . . . . 59,142 46,097
Other natural gas . . . . . . . . . . . 10,405 10,370
Non-utility . . . . . . . . . . . . . . . . 31,406 11,678
-------- --------
Total operations and maintenance
expenses . . . . . . . . . . . . . . $249,930 $228,398
======== ========
ADMINISTRATIVE AND GENERAL EXPENSES:
Electric . . . . . . . . . . . . . . . . . $ 25,569 $ 23,462
Natural gas . . . . . . . . . . . . . . . 7,730 7,093
Non-utility . . . . . . . . . . . . . . . . 9,741 8,827
-------- --------
Total administrative and general
expenses . . . . . . . . . . . . . . $ 43,040 $ 39,382
======== ========
DEPRECIATION AND AMORTIZATION EXPENSES:
Electric . . . . . . . . . . . . . . . . . $ 36,215 $ 34,889
Natural gas . . . . . . . . . . . . . . . . 6,116 6,610
Non-utility . . . . . . . . . . . . . . . . 2,203 2,277
-------- --------
Total depreciation and amortization
expenses . . . . . . . . . . . . . . $ 44,534 $ 43,776
======== ========
INCOME FROM OPERATIONS:
Electric . . . . . . . . . . . . . . . . . $ 91,887 $ 98,544
Natural gas . . . . . . . . . . . . . . . . 11,492 13,944
Non-utility . . . . . . . . . . . . . . . . 5,298 5,556
-------- --------
Total income from operations . . . . . . $108,677 $118,044
======== ========
INCOME AVAILABLE FOR COMMON STOCK:
Utility operations . . . . . . . . . . . . $ 37,185 $ 44,290
Non-utility operations . . . . . . . . . . 6,901 8,641
-------- --------
Total income available for common stock $ 44,086 $ 52,931
======== ========
ASSETS: (1993 amounts at December 31)
Electric . . . . . . . . . . . . . . . . . $1,397,186 $1,375,502
Natural gas . . . . . . . . . . . . . . . . 244,688 207,101
Common plant . . . . . . . . . . . . . . . 24,703 0
Other utility assets . . . . . . . . . . . 70,906 52,092
Non-utility assets . . . . . . . . . . . . 145,887 129,179
---------- ----------
Total assets . . . . . . . . . . . . . . $1,883,370 $1,763,874
========== ==========
CAPITAL EXPENDITURES (excluding AFUDC):
Electric . . . . . . . . . . . . . . . . . $ 54,591 $ 53,437
Natural gas . . . . . . . . . . . . . . . . 22,229 19,785
Common plant . . . . . . . . . . . . . . . 14,271 14,737
Non-utility . . . . . . . . . . . . . . . . 7,443 1,709
-------- --------
Total capital expenditures . . . . . . . $ 98,534 $ 89,668
======== ========
The Accompanying Notes are an Integral Part of These Statements.
9
10
THE WASHINGTON WATER POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements of The Washington Water Power Company
(Company) for the interim periods ended September 30, 1994 and 1993 are
unaudited but, in the opinion of management, reflect all adjustments,
consisting only of normal recurring accruals, necessary for a fair statement of
the results of operations for those interim periods. The results of operations
for the interim periods are not necessarily indicative of the results to be
expected for the full year. These financial statements do not contain the
detail or footnote disclosure concerning accounting policies and other matters
which would be included in full fiscal year financial statements; therefore,
they should be read in conjunction with the Company's audited financial
statements included in the Company's Annual Report on Form 10-K for the year
ended December 31, 1993.
NOTE 1. RECLASSIFICATIONS
Certain prior year amounts related to segment information have been
reclassified due to a current year change in the allocation method for common
plant, plant-related costs and administrative and general expenses.
NOTE 2. FINANCINGS
Reference is made to the information relating to financings and borrowings as
discussed under the caption "Liquidity and Capital Resources" in Item 2.
"Management's Discussion and Analysis of Financial Condition and Results of
Operations".
NOTE 3. COMMITMENTS AND CONTINGENCIES
SUPPLY SYSTEM PROJECT 3
In 1985, the Company and the Bonneville Power Administration (BPA) reached a
settlement surrounding litigation related to the suspension of construction of
Washington Public Power Supply System (Supply System) Project 3. Project 3 is
a partially constructed 1,240 MW nuclear generating plant in which the Company
has a 5% interest. Under the settlement agreement, the Company receives power
deliveries from BPA from 1987 to 2017 in proportion to the Company's investment
in Project 3.
The settlement with BPA and other parties does not affect the Company's
obligations under the Ownership Agreement among the owners of Project 3. BPA
proposed termination of Projects 1 and 3 and the Supply System has voted to
invoke the termination procedures under the Ownership Agreement. The Company
would be reimbursed for the cost of termination under the settlement with BPA.
The only material claim against the Company arising out of the Company's
involvement in Project 3, which is still pending in the United States District
Court for the Western District of Washington (District Court), is the claim of
Chemical Bank, as bond fund trustee for Supply System Projects 4 and 5, against
all owners of Projects 1, 2 and 3 for unjust enrichment in the allocation of
certain costs of common services and facilities among the Supply System's five
nuclear projects. Projects 4 and 5 were being constructed adjacent to Projects
1 and 3, respectively, under a plan to share certain costs. Chemical Bank is
seeking a reallocation of $495 million in costs (plus interest since
commencement of construction in 1976) originally allocated to Projects 4 and 5.
On October 7, 1992, the District Court issued an order ruling in favor of the
defendants, including the Company, that the "proportional" allocation
methodology actually employed by the Supply System was permitted by the
Projects 4 and 5 bond resolution. This ruling does not resolve all cost
reallocation claims pending in the District Court, including whether the Supply
System correctly followed its methodology. Chemical Bank has indicated its
intent to assert claims for cost reallocations based upon other theories which
have not been litigated. The case is now in the discovery phase on those
claims, as settlement talks were not successful.
The Company cannot predict whether Chemical Bank will ultimately be successful
in its claim for reallocation of any of the costs of Supply System projects,
nor can the Company predict any amounts which might be reallocated to Project 3
or to the Company due to its 5% ownership interest therein. The Company also
has claims pending against the Supply System and Chemical Bank with respect to
a subordinated loan made by the Company to Projects 4 and 5 in 1981, in the
amount of approximately $11 million including interest. The District Court has
yet to rule on the Company's motion to set-off the amount due on the loan,
including interest, against any recovery by
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THE WASHINGTON WATER POWER COMPANY
Chemical Bank on its cost reallocation claims. The District Court appointed a
Settlement Master to explore settlement of some or all of the issues, and
preliminary meetings have been held with him. Meanwhile, the District Court
set a trial date for July 15, 1995, for the litigation of all remaining issues
affecting the Company. The Company intends to continue to defend this suit
vigorously. Since the discovery is not yet complete, the Company is unable to
assess the likelihood of an adverse outcome in this litigation, or estimate an
amount or range of potential loss in the event of an adverse outcome.
NEZ PERCE TRIBE
On December 6, 1991, the Nez Perce Tribe filed an action against the Company in
U. S. District Court for the District of Idaho alleging, among other things,
that two dams formerly operated by the Company, the Lewiston Dam on the
Clearwater River and the Grangeville Dam on the South Fork of the Clearwater
River, provided inadequate passage to migrating anadromous fish in violation of
rights under treaties between the Tribe and the United States made in 1855 and
1863. The Lewiston and Grangeville Dams, which had been owned and operated by
other utilities under hydroelectric licenses from the Federal Power Commission
(FPC, predecessor of the Federal Energy Regulatory Commission (FERC)) prior to
acquisition by the Company, were acquired by the Company in 1937 with the
approval of the FPC, but were dismantled and removed in 1973 and 1963,
respectively. The Tribe initially indicated through expert opinion disclosures
that they were seeking actual and punitive damages of $208 million. However,
supplemental disclosures reflect allegations of actual loss under different
assumptions of between $425 million and $650 million. On September 24, 1994,
in a companion case involving similar issues, the Federal District Court for
Idaho dismissed an action by the Tribe against the Idaho Power Company. The
Company intends to file a similar motion for summary judgment or dismissal.
Since discovery is not yet complete, should this matter proceed to trial the
Company is unable to assess the likelihood of an adverse outcome in this
litigation, or estimate an amount or range of potential loss in the event of an
adverse outcome.
LITTLE FALLS PROJECT
Pending before the U. S. District Court in the Eastern District of Washington
is the case of Spokane Tribe of Indians v. WWP. This matter involves a claim
of the Spokane Tribe of Indians for damages arising out of the Company's Little
Falls Hydroelectric Development that was constructed on the Spokane River
pursuant to a 1905 Act of Congress. The Tribe claimed the Company's dam
interfered with Indian fishing rights and sought a declaratory judgment and
quiet title to part of the property comprising the Little Falls Hydroelectric
Development. However, WWP, the Tribe and the Bureau of Indian Affairs signed a
settlement agreement on September 9, 1994 which provides for an initial payment
of $1.0 million to the Tribe plus an additional $3.2 million will be paid over
the next five years for fish and wildlife enhancement projects. An accrual of
$4.2 million was made during June 1994 and is reflected in the Company's
financial statements. Thereafter, annual payments will also be made to the
Tribe, which will be tied to generation at the Little Falls Project and
escalate at the rate of 4.1 percent per year, with the first installment of
$375,000 to be made by January 31, 1995. By the end of 1994 it is expected
that the Secretary of the Interior and the Tribe will execute an irrevocable
easement and license to WWP to the property comprising the Little Falls
Hydroelectric Development. After the execution of the easement and license,
the lawsuit will be dismissed with prejudice.
STEAM HEAT PLANT
The Company recently completed an updated investigation of an oil spill
that occurred several years ago in downtown Spokane at the site of the
Company's steam heat plant. The Company purchased the plant in 1916 and
operated it as a non-regulated plant until it was deactivated in 1986 in a
business decision unrelated to the leak. After the Bunker C fuel oil spill,
initial studies suggested that the oil was being adequately contained by both
geological features and man-made structures. The Washington State Department
of Ecology (DOE) concurred with these findings. However, more recent tests
confirm that the oil has migrated beyond the steam plant property. On December
6, 1993, the Company asked the DOE to enter into negotiations for a Consent
Decree which will provide for additional remedial investigation and a
feasibility study. Public comment on the Consent Decree has been received and
the Consent Decree was entered on November 8, 1994, which provides for 22
additional soil borings to be made around the site. In December 1993, the
Company established a reserve of $2.0 million.
FIRESTORM
On October 16, 1991, gale-force winds struck a five-county area in Eastern
Washington and a seven-county area in
11
12
THE WASHINGTON WATER POWER COMPANY
northern Idaho. These winds were responsible for causing 92 separate wildland
fires, resulting in two deaths and the loss of 114 homes and other structures,
some of which were located in the Company's service territory. On October 13,
1993, three separate class action lawsuits were filed by private individuals in
the Superior Court of Spokane County in connection with fires occurring in the
Midway, Nine Mile and Chattaroy regions of eastern Washington. Service of
these suits, together with a fourth suit, occurred on January 7, 1994. The
Company was subsequently served with eight additional suits in connection with
such fires prior to the expiration of the statute of limitations on October 16,
1994. Complainants allege various theories of tortious conduct, including
negligence, creation of a public nuisance, strict liability and trespass. The
lawsuits seek recovery for property damage, emotional and mental distress, lost
income and punitive damages, but do not specify the amount of damages being
sought. The Superior Court has indicated that it intends to certify the four
initial lawsuits as class actions, but a motion for reconsideration is pending
and will be the subject of a motion for discretionary appellate review. The
Company intends to vigorously defend against all such pending claims. Since
the discovery is not yet complete, the Company is unable to assess the
likelihood of an adverse outcome in this litigation, or estimate an amount or
range of potential loss in the event of an adverse outcome.
OTHER CONTINGENCIES
The Company has long-term contracts related to the purchase of fuel for thermal
generation, natural gas and hydroelectric power. Terms of the natural gas
purchase contracts range from one month to five years and the majority provide
for minimum purchases at the then effective market rate. The Company also has
various agreements for the purchase, sale or exchange of power with other
utilities, cogenerators, small power producers and government agencies.
NOTE 4. ACQUISITIONS
On February 15, 1994, the Company announced it had reached agreement to acquire
the northern Idaho electric properties of Pacific Power & Light Company, an
operating division of PacifiCorp (Pacific). The adjusted cash purchase price
will be approximately $30 million, subject to adjustments upon closing. The
approximate book value of the assets is $23.1 million. Pacific's northern
Idaho electric system currently serves approximately 9,600 customers. Approval
of the acquisition was received from the FERC on July 22, 1994. On October 5,
1994, the Idaho Public Utilities Commission (IPUC) issued an order approving
the purchase subject to various conditions. Both Pacific and the Company have
asked for reconsideration of some conditions of the order and closing of the
transaction will not occur unless and until certain issues are favorably
resolved on reconsideration by the IPUC. The Company believes this acquisition
will not have a material impact on its financial position or its results of
operations.
NOTE 5. PROPOSED MERGER
As previously reported in the Company's Current Report on Form 8-K dated June
27, 1994 (Form 8-K), the Company, Sierra Pacific Resources (SPR), Sierra
Pacific Power Company (SPPC), a subsidiary of SPR, and a newly-formed
subsidiary of the Company, WPM Corp. (renamed Resources West Energy Corporation
(Resources West) on August 1, 1994), entered into an Agreement and Plan of
Reorganization and Merger, dated as of June 27, 1994 and as amended October 4,
1994 (Merger Agreement) providing for the combination of the Company, SPR and
SPPC. Pursuant to the Merger Agreement, each of the Company, SPR and SPPC will
be merged with and into Resources West, with Resources West being the surviving
corporation.
The merger is subject to certain customary closing conditions, including,
without limitation, the receipt of all necessary governmental approvals,
including the approval of FERC and approvals of the state utility commissions
of California, Idaho, Montana, Nevada, Oregon and Washington. Approvals from
the common and preferred shareholders of the merging companies will be sought
at shareholder meetings, which are currently scheduled to be held on November
18, 1994. Applications seeking approval of the merger were filed with FERC on
August 4, 1994 and in Idaho, Nevada, Oregon and Washington on August 10, 1994;
the California application was filed on August 29, 1994. The Montana
application was filed on September 1, 1994 and an order was issued by the
Montana Public Service Commission on October 17, 1994 stating that it would not
exercise jurisdiction over the merger. A number of entities have intervened or
expressed their intent to intervene either at the federal level or before the
various state commissions. However, the approvals in the other jurisdictions
and the implementation process are expected to be completed by the fourth
quarter of 1995.
The merger will be accounted for using the pooling-of-interests method of
accounting.
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THE WASHINGTON WATER POWER COMPANY
See the Form 8-K, or the Registration Statement on Form S-4 of Resources West
(Registration No. 33-55763) including the prospectus of Resources West and the
Joint Proxy Statement of the Company, SPR and SPPC, for additional details
relating to the terms of the proposed merger.
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THE WASHINGTON WATER POWER COMPANY
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The Company is primarily engaged as a utility in the generation, purchase,
transmission, distribution and sale of electric energy and the purchase,
transportation, distribution and sale of natural gas. Natural gas operations
are affected to a significant degree by weather conditions and customer growth.
The Company's electric operations are highly dependent upon hydroelectric
generation for its power supply. As a result, the electric operations of the
Company are significantly affected by weather and streamflow conditions, and to
a lesser degree, by customer growth. Revenues from the sale of surplus energy
to other utilities and the cost of power purchases vary from year to year
depending on streamflow conditions and the wholesale power market. The
wholesale power market in the Northwest region is affected by several factors,
including the availability of water for hydroelectric generation, the
availability of base load plants in the region and the demand for power from
the Southwest region. Usage by retail customers varies from year to year
primarily as a result of weather conditions, the economy in the Company's
service area, customer growth and conservation.
The Company will continue to emphasize the efficient use of energy by its
customers, increase efforts to grow its customer base, especially natural gas,
and continue to manage its operating costs, increase revenues and improve
margins. The Company will also pursue resource opportunities through system
upgrades, purchases, demand side management and other options that will result
in obtaining electric power and natural gas supplies at the lowest possible
cost.
RESULTS OF OPERATIONS
OVERALL OPERATIONS
Overall earnings per share for the third quarter of 1994 increased to
$0.11 from $0.10 in 1993. Total earnings per share for the first nine months
of 1994 decreased to $0.83 from $1.03 for the same period in 1993. The
year-to-date change was primarily the result of unfavorable weather conditions
and decreased electric wholesale sales during the first quarter of 1994.
Weather during the first nine months of 1994 was 22% warmer than for the
comparable period in 1993. The warm weather reduced customer usage during the
first half of the year, but increased residential and commercial electric sales
during the third quarter, and had a significant impact on electric and natural
gas revenues. The 1993 year-to-date results also reflect a large short-term
wholesale sale of energy during the first quarter of 1993 that increased
wholesale revenues for that period but did not recur in 1994.
Utility income available for common stock contributed $0.05 to
earnings per share for the third quarter of 1994 compared to $0.07 in the third
quarter of 1993. Non-utility income available for common stock contributed
$0.06 to earnings per share for the third quarter of 1994 compared with $0.03
for the same period in 1993. For the first nine months of 1994, utility income
available for common stock contributed $0.70 to earnings per share compared to
$0.86 during 1993. Non-utility income available for common stock contributed
$0.13 to earnings per share for the first nine months of 1994 compared with
$0.17 in 1993. The year-to-date decline in utility earnings is primarily due
to unfavorable weather conditions during the first half of the year and
decreased electric wholesale sales during the first quarter of 1994, as
discussed above. The decrease in non-utility results is primarily due to
transactional gains recorded by Pentzer Corporation (Pentzer) in 1993.
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THE WASHINTGON WATER POWER COMPANY
ELECTRIC OPERATIONS
Operating income summary
(Dollars in thousands)
Three months ended Nine months ended
September 30 Change September 30 Change
------------ ------ ------------ ------
1994 1993 Amount % 1994 1993 Amount %
------- ------- ------ - --------- -------- ------ -
Operating Revenues . . . . . . . . . $103,960 $97,832 $6,128 6 $330,006 $343,845 $(13,839) (4)
Operating Expenses:
Purchased power . . . . . . . . . 28,190 23,393 4,797 21 74,447 86,786 (12,339) (14)
Fuel for generation . . . . . . . 10,201 8,944 1,257 14 28,721 24,013 4,708 20
Other operating and maintenance . 15,363 17,589 (2,226) (13) 45,809 49,454 (3,645) (7)
Administrative and general . . . 7,466 7,970 (504) (6) 25,569 23,462 2,107 9
Depreciation and amortization . . 12,132 12,272 (140) (1) 36,215 34,889 1,326 4
Taxes other than income . . . . . 9,267 8,018 1,249 16 27,358 26,697 661 2
-------- ------- ------ -------- -------- --------
Total operating expenses . . 82,619 78,186 4,433 6 238,119 245,301 (7,182) (3)
-------- ------- ------ -------- -------- --------
Income from operations . . . . . . . 21,341 19,646 1,695 9 91,887 98,544 (6,657) (7)
Electric operating income taxes. 4,291 4,550 (259) (6) 24,732 27,456 (2,724) (10)
-------- ------- ------ -------- -------- -------
Net operating income (1) . . . . . . $ 17,050 $15,096 $1,954 13 $ 67,155 $ 71,088 $(3,933) (6)
======== ======= ====== ======== ======== =======
(1) Does not include interest expense or other income.
Electric operating revenues increased $6.1 million in the third quarter of 1994
over 1993. Residential and commercial revenues rose by a combined $5.7 million
due to increased kWh sales resulting from warmer weather and customer growth.
Temperatures were 73% warmer in the third quarter of 1994 compared to the same
period in 1993, which resulted in higher loads due to air conditioning use.
Residential customers increased by approximately 5,850, or 3%, and commercial
customers grew by over 600 customers, or 2%, in the third quarter of 1994 as
compared to third quarter 1993. Wholesale revenues decreased by $0.8 million,
or 4%, as kWh sales decreased by 30%, but were partially offset by average
prices that were 38% higher in the third quarter of 1994 than during the same
period in 1993. The decreased wholesale sales and higher average prices were
the result of significantly decreased hydroelectric generation due to low
streamflows. Precipitation in the area during 1994 has been less than
two-thirds of normal and streamflows on the Spokane River reached their lowest
levels in 66 years this past summer.
Year-to-date, revenues decreased in all classes except commercial for 1994 as
compared to 1993. Weather that was 22% warmer than in 1993 contributed to a
$6.5 million, or 6%, decrease in residential revenues. Commercial revenues
increased by $3.6 million during the first nine months of 1994 as compared to
1993, due to air conditioning load during the third quarter of 1994 and
customer growth. Wholesale revenues decreased by $15.7 million, or 19%, during
the first nine months of 1994 when compared to the same period in 1993, due
primarily to a large sale of surplus energy over a six-week period in the first
quarter of 1993 which was not repeated in 1994.
ELECTRIC REVENUES AND KWH SALES BY SERVICE CLASS
Class Increase (Decrease) from prior year
----- -----------------------------------
Three months ended September 30, 1994 Nine months ended September 30, 1994
------------------------------------- ------------------------------------
REVENUE KWH SALES REVENUE KWH SALES
------- --------- ------- ---------
(Dollars and kWhs in millions)
Residential . . . . . . . . . . . . . $2.6 9% 59.0 10% $(6.5) (6)% (93.7) (4)%
Commercial . . . . . . . . . . . . . 3.1 10 65.2 11 3.6 4 79.4 5
Industrial . . . . . . . . . . . . . 0.9 6 24.1 6 (0.2) (1) 37.8 3
Other utilities . . . . . . . . . . . (0.8) (4) (227.6) (30) (15.7) (19) (409.5) (16)
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THE WASHINGTON WATER POWER COMPANY
Purchased power expense increased by $4.8 million and fuel costs were up by
$1.3 million in the third quarter of 1994, primarily due to significantly
decreased hydroelectric generation due to low streamflows. In October 1989,
the Idaho Public Utilities Commission (IPUC) approved a power cost adjustment
mechanism (PCA) which allows the Company to change rates to recover or rebate a
portion of the difference between actual and allowed net power supply costs.
The PCA decreased other operating and maintenance expenses in the third quarter
of 1994 by $2.7 million over the comparable period of 1993 as a result of low
streamflows and higher wholesale market prices.
Purchased power decreased by $12.3 million in the first nine months of 1994 and
fuel expense increased $4.7 million. Purchased power expense declined
primarily due to the purchase of energy to complete a large sale of wholesale
energy in the first quarter of 1993 that was not repeated in 1994. Fuel
expense increased from 1993 due to increased generation from thermal plants due
to low streamflows in 1994. The PCA decreased other operating and maintenance
expenses by $3.0 million during the first nine months of 1994 as compared to
1993 due primarily to low streamflows and higher wholesale market prices. The
decreased amount of power purchased in 1994 resulted in lower transmission
costs, which caused a portion of the decrease in other operating and
maintenance expenses. Administrative and general expenses increased by $2.1
million in the first nine months of 1994 primarily due to labor-related costs.
NATURAL GAS OPERATIONS
Operating income summary
(Dollars in thousands)
Three months ended Nine months ended
September 30 Change September 30 Change
------------ ------ ------------ ------
1994 1993 Amount % 1994 1993 Amount %
------- ------- ------ -- -------- -------- ------- --
Operating Revenues . . . . . . . . . . $21,158 $20,590 $ 568 3 $100,937 $90,139 $10,798 12
Operating Expenses:
Natural gas purchased . . . . . . . 13,045 11,113 1,932 17 59,142 46,097 13,045 28
Other operating and maintenance . . 3,626 3,364 262 8 10,405 10,370 35 -
Administrative and general . . . . . 2,146 2,291 (145) (6) 7,730 7,093 637 9
Depreciation and amortization . . . 2,090 2,242 (152) (7) 6,116 6,610 (494) (7)
Taxes other than income . . . . . . 1,399 1,388 11 1 6,052 6,025 27 -
------- ------ ------- ------- ------- -------
Total operating expenses . . . 22,306 20,398 1,908 9 89,445 76,195 13,250 17
------- ------ ------- ------- ------- -------
Income from operations . . . . . . . . (1,148) 192 (1,340) - 11,492 13,944 (2,452) (18)
Natural gas oper. income taxes. . . . . (1,063) (692) (371) (54) 2,654 3,073 (419) (14)
------- ------ ------- ------- ------- -------
Net operating income (1) . . . . . . . $ (85) $ 884 $ (969) - $ 8,838 $10,871 $(2,033) (19)
======= ====== ======= ======= ======= =======
Actual Heating Degree Days (2) . . . . 120 451 (331) (73) 3,626 4,653 (1,027) (22)
Historical Heating Degree Days (3) . . 309 289 4,243 4,324
Actual Degree Days as a Percent
of Historical Degree Days . . . . . 39% 156% 85% 108%
(1) Does not include interest expense or other income.
(2) Heating degree days information is for Spokane area.
(3) Historical degree days represent the 30-year average.
Total natural gas revenues increased by $0.6 million in the third quarter of
1994 over the third quarter of 1993. Natural gas revenues from WWP
(Washington and Idaho) operations increased by $1.1 million, or 8% in the third
quarter of 1994. WPNG revenues (Oregon and California) decreased by $0.5
million, or 9%, in the third quarter of 1994 as compared to the same period in
1993. In each service area, revenues were unfavorably impacted by warmer than
normal weather during the third quarter of 1994, as compared to 1993, that was
not offset by customer growth. WWP operations were able to offset the negative
effects of warmer weather with sales of natural gas to other utilities, which
began in June 1994 (see table on next page). These revenues were offset by
like increases in purchased gas expense. Margins from these transactions will
be credited back to customers through rate changes for the cost of gas. The
average number of customers increased in both areas in the residential and
commercial classes in the third quarter of 1994 as compared to 1993. WWP
residential customers rose 11,600, or 11%, while WPNG residential customers
increased by approximately 4,700 or 8%. WWP commercial customers increased by
approximately 550, or 4%, and WPNG commercial customers rose by over 350, or 4%.
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THE WASHINGTON WATER POWER COMPANY
Total natural gas revenues increased during the first nine months of 1994 over
the same time period in 1993. WWP revenues increased by $9.1 million, or 15%,
while revenues from WPNG increased by $1.7 million, or 5%, during the first
nine months of 1994 compared to the same period in 1993. The increased
revenues were due to customer growth and higher average prices than last year,
which offset the impact of year-to-date temperatures in 1994 that were 22%
warmer than in 1993. WWP and WPNG residential and commercial customers grew by
approximately 11% and 8%, respectively, during the first nine months of 1994
compared to the same period in 1993. Customer growth in the WWP service area
during the three and nine-month periods ended September 30, 1994 was primarily
the result of the Company's emphasis on conversions from electric service to
natural gas. Recent revisions in the Company's demand side management programs
may lessen the pace of conversions in the future.
NATURAL GAS REVENUES AND THERM SALES BY SERVICE CLASS
Three months ended September 30, 1994 Nine months ended September 30, 1994
------------------------------------- ------------------------------------
REVENUE THERM SALES REVENUE THERM SALES
------- ----------- ------- -----------
(Dollars and therms in millions)
Residential . . . . . . . . . . $(1.3) (16)% (4.6) (29)% $4.1 10% (7.0) (7)%
Commercial . . . . . . . . . . (0.6) (10) (2.4) (14) 4.0 14 (0.7) (1)
Industrial - firm . . . . . . . (0.1) (9) (0.6) (15) (0.2) (4) (2.2) (16)
Industrial - interruptible . . 0.1 9 2.7 84 (0.5) (14) (0.4) (4)
Other utilities . . . . . . . . 2.7 - 19.4 - 3.8 - 25.5 -
Transportation . . . . . . . . (0.1) (4) (2.2) (5) (0.1) (2) (8.1) (5)
Natural gas purchased expense increased by $1.9 million, or 17%, in the third
quarter of 1994 as compared to third quarter 1993. The increased cost was
primarily the result of an increase in therm sales of 12.4 million, or 15%,
primarily due to sales to other utilities. Income tax expense decreased $0.4
million, or 54%, due to decreased operating income in the third quarter of
1994.
Natural gas purchased expense increased $13.0 million, or 28%, in the first
nine months of 1994. The higher purchased gas costs resulted primarily from
increased therm sales of 6.7 million therms, or 2%, primarily due to sales to
other utilities. Income tax expense decreased $0.4 million, or 14%, during the
first nine months of 1994 due to decreased operating income for the nine-month
period.
NON-UTILITY OPERATIONS
Operating income summary
(Dollars in thousands)
Three months ended Nine months ended
September 30 Change September 30 Change
------------ ------ ------------ ------
1994 1993 Amount % 1994 1993 Amount %
------ ------ ------ - ------- ------ ------ -
Operating revenues . . . . . . $17,216 $5,085 $12,131 - $49,461 $29,377 $20,084 68
Operating expenses . . . . . . 14,436 4,520 9,916 - 44,163 23,821 20,342 85
------- ------ ------- ------- ------- -------
Operating income . . . . . . . 2,780 565 2,215 - 5,298 5,556 (258) (5)
Other income - net . . . . . . 2,183 1,797 386 21 5,121 3,175 1,946 61
------- ------ ------- ------- ------- -------
Income before income taxes . . 4,963 2,362 2,601 - 10,419 8,731 1,688 19
Income tax provision (benefit) 1,671 632 1,039 - 3,518 90 3,428 -
------- ------ ------- ------- ------- -------
Net income . . . . . . . . . . $ 3,292 $1,730 $ 1,562 90 $ 6,901 $ 8,641 $(1,740) (20)
======= ====== ======= ======= ======= =======
Non-utility operations include the results of Pentzer and three other minor
subsidiary companies. Pentzer's business strategy is to acquire controlling
interests in a broad range of middle-market companies, to help these companies
grow through internal development and strategic acquisitions, and to sell the
portfolio investments to the public or to strategic buyers when it becomes most
advantageous in meeting Pentzer's return on invested capital objectives.
Pentzer's goal is to produce financial returns for the Company's shareholders
that, over the long term, should be
17
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THE WASHINGTON WATER POWER COMPANY
higher than that of the utility operations. From time to time, a significant
portion of Pentzer's earnings contributions may be the result of transactional
gains. Accordingly, although the income stream is expected to be positive, it
may be uneven from year to year.
Pentzer's earnings for the third quarter of 1994 exceeded 1993 by $1.7 million
primarily as a result of improved earnings from its portfolio of investments.
In addition, 1994 transactional gains exceeded 1993 transactional gains by $0.8
million.
Pentzer's earnings for the first nine months of 1994 were less than 1993 by
$1.5 million primarily due to the impact in 1993 of transactional gains of $2.8
million, after-tax, and the recognition in 1993 of an income tax benefit of
$2.2 million due to tax loss carryforwards in a subsidiary. Transactional
gains through the first nine months of 1994 totaled $2.1 million. The
year-to-date 1994 non-transactional earnings from Pentzer's portfolio of
investments exceeded 1993 by $1.4 million.
In March 1994, Pentzer acquired The Form House, Inc., a bindery services
company that serves customers in the advertising, printing, publishing and
direct mail industries. In June 1994, Pentzer acquired Safety Speed Cut
Manufacturing Co., Inc., a designer and manufacturer of panel saws, routers and
accessories.
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THE WASHINGTON WATER POWER COMPANY
LIQUIDITY AND CAPITAL RESOURCES.
UTILITY
On August 25, 1994, the Company issued the remaining $4 million of Secured
Medium Term Notes, Series A with a twelve year maturity and a 7.90% coupon rate
plus an additional $26 million of Secured Medium Term Notes, Series B (Series
B) with a twelve year maturity and a 7.89% coupon rate. On November 3, 1994,
the Company issued $5 million of Series B with a three year maturity and a
7.52% coupon rate.
On August 4 and 9, 1994, respectively, $5 million of 8.95% and $2.5 million of
8.90% Unsecured Medium Term Notes, Series A Due 1999 were redeemed at 100% of
their principal amount.
The Company has a number of common stock ownership plans which provide
additional equity to fund the Company's capital expenditure program. These
include a Dividend Reinvestment and Stock Purchase Plan, a Periodic Offering
Program, and an Investment and Employee Stock Ownership Plan. During the first
nine months of 1994, the Company issued and sold over 1,300,000 shares of
Common Stock for proceeds of over $21 million under these plans.
Capital expenditures are financed on an interim basis with short-term debt.
The Company has $160 million in committed lines of credit, a portion of which
backs up a $50 million commercial paper facility. In addition, the Company may
borrow up to $60 million through other borrowing arrangements with banks. As
of September 30, 1994, $23 million was outstanding under the other short-term
borrowing arrangements and $10 million was outstanding under the committed
lines of credit but there was no outstanding balance under the commercial paper
facility.
In the third quarter of 1994 the Company executed a sale and leaseback
agreement relating to certain qualifying internally developed customer service
and other related software systems. The lease qualifies as an operating lease
and the lease payments will be recorded as an operating expense. As of
September 30, 1994, systems with a cost of $15.4 million had been sold and
leased under this agreement. An additional $5.6 million of systems may be sold
or leased under this agreement.
During the 1994-1996 period, capital expenditures are currently estimated to be
$278 million, a reduction from the original forecast as detailed in the
Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1994.
Internally-generated funds are currently estimated to provide 57% of the funds
required for the Company's capital expenditures program from 1994-1996, during
which time external financing will be required to fund $90 million of long-term
debt maturities, preferred stock sinking fund requirements and the remaining
portion of capital expenditures.
NON-UTILITY
The non-utility operations have $44.0 million in short-term borrowing
arrangements available ($21.1 million in current liabilities outstanding at
September 30, 1994) to fund capital expenditures and other corporate
requirements on an interim basis. At September 30, 1994, the non- utility
operations had $26.9 million in cash and marketable securities and $13.2
million in long-term debt outstanding.
The 1994-1996 non-utility capital expenditures are expected to be $8 million,
and $1 million in debt maturities will also occur. During the next three
years, internally-generated cash and other debt obligations are expected to
provide the majority of the funds for the non-utility capital expenditure
requirements.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
Outstanding shares of the Company's no par value Common Stock are listed on
both the New York Stock Exchange and the Pacific Stock Exchange.
REGULATORY PROCEEDINGS.
On June 28, 1994, the Company announced that it had entered into a proposed
merger agreement with SPR, SPPC and Resources West. Applications seeking
approval of the merger have been filed with the FERC and with the state utility
commissions in the states of California, Idaho, Montana, Nevada, Oregon and
Washington. See Note 5 to Financial Statements contained in Item 1 of Part I
of this Report for additional information.
19
20
THE WASHINGTON WATER POWER COMPANY
On October 5, 1994, the IPUC issued an order giving conditional approval
regarding the Company's proposed acquisition of the northern Idaho properties
of Pacific. See Note 4 to Financial Statements for additional information.
In August 1994, the IPUC issued a ruling to the Idaho Power Company that
effectively canceled the proposed long-term sale of capacity and energy from
the Company which was announced on March 25, 1994 and disclosed in the
Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.
Natural Gas Service
In mid-July, the Company filed natural gas trackers with the Washington
Utilities and Transportation Commission (WUTC) and the California Public
Utilities Commission (CPUC) primarily to reflect changes in the cost of
purchased natural gas during the past year. The trackers in Washington and
California reflect approximately a 9% increase but will result in no additional
net income to the Company. At the same time a natural gas tracker was filed
with the IPUC for a 4% decrease primarily due to a change in cost determination
methodology which resulted in an over-collection of past purchased natural gas
costs. The tracker in Washington was approved on August 31, 1994, effective
September 1, 1994, authorizing an 8.75% overall increase. The tracker in Idaho
was approved and became effective on September 1, 1994 authorizing a 3.98%
decrease. The CPUC application is expected to be approved effective January 1,
1995.
On August 16, 1994, the Public Utility Commission of Oregon (OPUC) approved
Pilot High Efficiency Space Heating and High Efficiency Water Heating Equipment
Programs. Both programs began on August 17, 1994, will run through December
30, 1996 and are available to qualifying residential customers.
In mid-October, the Company filed a natural gas tracker with the OPUC
requesting a 5.75% increase and a December 1, 1994 effective date. As with the
earlier applications, this tracker primarily reflects changes in the cost of
purchased natural gas during the past year and will result in no additional net
income to the Company.
Electric Service
On July 18, 1994, the IPUC approved an indefinite extension of the Company's
Power Cost Adjustment (PCA) mechanism with minor modifications beginning August
1, 1994. The modifications sought by the Company included elimination of the
contract tracker portion, which was approved by the Commission, and inclusion
of incremental costs of combustion turbine resources, which was rejected by the
Commission at this time. On September 15, 1994, a notice was filed with the
IPUC that the $2.2 million surcharge trigger had been exceeded and requested a
PCA increase effective for a twelve month period beginning December 1, 1994.
On October 24, 1994, the Company filed an application with both the WUTC and
the IPUC for a new Demand-Side Management Tariff Rider. This special tariff
would be used solely to cover costs directly associated with current customer
efficiency programs, which are estimated to be approximately $5.7 million.
ADDITIONAL FINANCIAL DATA.
The following table reflects the ratio of earnings to fixed charges and the
ratio of earnings to fixed charges and preferred dividend requirements:
12 Months Ended
---------------
September 30, December 31,
1994 1993
---- ----
Ratio of Earnings to Fixed Charges 3.21 (x) 3.45 (x)
Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements 2.56 (x) 2.77 (x)
The Company has long-term purchased power arrangements with various Public
Utility Districts, with interest on these contracts included in purchased power
expenses. These amounts do not have a material impact on fixed charges ratios.
20
21
THE WASHINGTON WATER POWER COMPANY
PRO FORMA CONSOLIDATED FINANCIAL INFORMATION.
The pro forma financial information on the following pages combines the
historical consolidated balance sheets of the Company and SPR after giving
effect to the Merger as if the Merger had occurred on September 30, 1994 and
the historical consolidated income statements as if the Merger had occurred at
the beginning of the periods presented. The pro forma financial information
should be read in conjunction with the Company's consolidated financial
statements and related notes thereto included in Item 1 of Part I of this
Report and SPR's consolidated financial statements and related notes thereto
included in reports filed by SPR pursuant to the Securities Exchange Act of
1934, as amended. The information contained herein with respect to SPR and its
subsidiaries has been supplied by SPR.
21
22
RESOURCES WEST ENERGY CORPORATION
PRO FORMA CONSOLIDATED BALANCE SHEET
AT SEPTEMBER 30, 1994
(thousands of dollars)
(unaudited)
WWP SPR PRO FORMA
---------- ---------- ----------
ASSETS:
PROPERTY:
Utility plant in service-net............................ $1,748,952 $1,752,460 $3,501,412
Construction work in progress........................... 23,885 62,549 $86,434
---------- ---------- ----------
Total.................................................. 1,772,837 1,815,009 3,587,846
Less: accumulated depreciation and amortization......... 490,825 498,550 989,375
---------- ---------- ----------
Net utility plant...................................... 1,282,012 1,316,459 2,598,471
---------- ---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net........................ 90,094 - 90,094
Other-net............................................... 93,458 20,634 114,092
---------- ---------- ----------
Total other property and investments................... 183,552 20,634 204,186
---------- ---------- ----------
CURRENT ASSETS:
Cash and temporary investments.......................... 27,804 10,366 38,170
Accounts and notes receivable-net of
uncollectibles (Note 3)............................... 44,443 52,355 96,798
Materials, supplies, fuel and natural gas
inventories (average cost).............................. 23,487 31,293 54,780
Prepayments and other................................... 12,986 5,522 18,508
---------- ---------- ----------
Total current assets................................... 108,720 99,536 208,256
---------- ---------- ----------
DEFERRED CHARGES:
Deferred energy costs................................... 10,209 33,690 43,899
Regulatory assets for deferred income tax .............. 174,277 70,479 244,756
Other regulatory assets................................. 8,221 45,260 53,481
Conservation programs................................... 64,188 10,003 74,191
Other-net............................................... 52,191 15,123 67,314
---------- ---------- ----------
Total deferred charges................................. 309,086 174,555 483,641
---------- ---------- ----------
TOTAL................................................. $1,883,370 $1,611,184 $3,494,554
========== ========== ==========
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION:
Common stock and additional paid in capital (Note 4).... $564,907 $448,622 1,013,529
Other shareholders equity (includes retained earnings).. 84,725 49,909 134,634
Preferred stock - not subject to mandatory redemption... 50,000 73,115 123,115
Preferred stock - subject to mandatory redemption....... 85,000 20,400 105,400
Long-term debt.......................................... 664,385 565,180 1,229,565
---------- ---------- ----------
Total capitalization................................... 1,449,017 1,157,226 2,606,243
---------- ---------- ----------
CURRENT LIABILITIES:
Short-term borrowings................................... - 40,113 40,113
Current maturities of long-term debt and preferred stock 2,402 7,413 9,815
Accounts payable........................................ 33,518 45,627 79,145
Taxes payable........................................... 23,774 3,195 26,969
Interest payable........................................ 14,995 14,122 29,117
Dividends declared...................................... - 10,128 10,128
Other................................................... 50,141 13,886 64,027
---------- ---------- ----------
Total current liabilities.............................. 124,830 134,484 259,314
---------- ---------- ----------
DEFERRED CREDITS:
Investment tax credits.................................. 2,383 46,209 48,592
Deferred income taxes................................... 292,691 159,124 451,815
Regulatory tax liability................................ - 47,453 47,453
Customer advances for construction...................... 2,297 40,709 43,006
Other................................................... 10,971 25,979 36,950
---------- ---------- ----------
Total deferred credits................................. 308,342 319,474 627,816
---------- ---------- ----------
MINORITY INTEREST ....................................... 1,181 - 1,181
---------- ---------- ----------
TOTAL................................................. $1,883,370 $1,611,184 $3,494,554
========== ========== ==========
The accompanying Notes to The Pro Forma Consolidated Balance Sheet
and Statements of Income are an intregal part of these statements.
22
23
RESOURCES WEST ENERGY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE THREE MONTHS ENDED SEPTEMBER 30, 1994
(Thousands of dollars, except per share amounts)
(unaudited)
WWP SPR PRO FORMA
-------- -------- ---------
OPERATING REVENUES....................... $142,334 $158,180 $300,514
-------- -------- --------
OPERATING EXPENSES:
Operations.............................. 80,722 104,316 185,038
Maintenance............................. 12,661 3,377 16,038
Depreciation and amortization........... 15,040 13,374 28,414
Taxes other than income taxes........... 10,938 4,338 15,276
-------- -------- --------
Total operating expenses............... 119,361 125,405 244,766
-------- -------- --------
INCOME FROM OPERATIONS................... 22,973 32,775 55,748
-------- -------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense........................ 13,751 10,561 24,312
Interest capitalized and AFUCE.......... (435) (673) (1,108)
Other (income) deductions-net........... (3,100) (983) (4,083)
-------- -------- --------
Total interest expense and other
income-net........................... 10,216 8,905 19,121
-------- -------- --------
INCOME BEFORE INCOME TAXES............... 12,757 23,870 36,627
INCOME TAXES............................. 4,653 8,569 13,222
-------- -------- --------
INCOME BEFORE PREFERRED DIVIDENDS........ 8,104 15,301 23,405
DEDUCT-Preferred stock dividend
requirements........................... 2,186 1,925 4,111
-------- -------- --------
INCOME AVAILABLE FOR COMMON STOCK........ $ 5,918 $ 13,376 $ 19,294
======== ======== ========
Average common shares outstanding
(thousands) (Note 1).................... 53,751 29,269 95,898
EARNINGS PER SHARE....................... $0.11 $0.46 $0.20
The accompanying Notes to The Pro Forma Consolidated Balance Sheet
and Statements of Income are an intregal part of these statements.
23
24
RESOURCES WEST ENERGY CORPORATION
PRO FORMA CONSOLIDATED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994
(Thousands of dollars, except per share amounts)
(unaudited)
WWP SPR PRO FORMA
-------- -------- ---------
OPERATING REVENUES....................... $480,404 $448,133 $928,537
-------- -------- --------
OPERATING EXPENSES:
Operations.............................. 249,930 292,665 542,595
Maintenance............................. 43,040 12,126 55,166
Depreciation and amortization........... 44,534 39,006 83,540
Taxes other than income taxes........... 34,223 12,658 46,881
-------- -------- --------
Total operating expenses............... 371,727 356,455 728,182
-------- -------- --------
INCOME FROM OPERATIONS................... 108,677 91,678 200,355
-------- -------- --------
INTEREST EXPENSE AND (OTHER INCOME):
Interest expense........................ 39,186 31,420 70,606
Interest capitalized and AFUCE.......... (3,242) (3,265) (6,507)
Other (income) deductions-net........... (8,410) (3,003) (11,413)
-------- -------- --------
Total interest expense and other
income - net......................... 27,534 25,152 52,686
-------- -------- --------
INCOME BEFORE INCOME TAXES............... 81,143 66,526 147,669
INCOME TAXES............................. 30,652 22,612 53,264
-------- -------- --------
INCOME BEFORE PREFERRED DIVIDENDS........ 50,491 43,914 94,405
DEDUCT-Preferred stock dividend
requirements........................... 6,405 6,009 12,414
-------- -------- --------
INCOME AVAILABLE FOR COMMON STOCK........ $ 44,086 $ 37,905 $ 81,991
======== ======== ========
Average common shares outstanding
(thousands)(Note 1).................... 53,329 29,171 95,335
EARNINGS PER SHARE....................... $0.83 $1.30 $0.86
The accompanying Notes to The Pro Forma Consolidated Balance Sheet
and Statements of Income are an intregal part of these statements.
24
25
RESOURCES WEST ENERGY CORPORATION
NOTES TO THE PRO FORMA CONSOLIDATED BALANCE SHEET AND STATEMENTS OF INCOME
1. The Pro Forma Consolidated Financial Statements reflect the conversion of
each share of SPR Common Stock outstanding into 1.44 shares of Resources West
Common Stock and the conversion of each share of WWP Common Stock outstanding
into one share of Resources West Common Stock. The Pro Forma Consolidated
Financial Statements are presented as if the companies were combined during all
periods included therein.
2. All references to per share information for WWP have been adjusted to
reflect the two-for-one common stock split which became effective on November
9, 1993.
3. The Accounts and Notes Receivable are reported on the Balance Sheet net of
the Allowance for Uncollectible Accounts. The balances of the Allowance for
Uncollectible Accounts (in thousands) at September 30, 1994 are: WWP, $833;
SPR, $1,039; and Pro Forma, $1,872.
4. The number of shares of common stock outstanding at September 30, 1994 are:
WWP, 54,017,315 shares; SPR, 29,297,550 shares; and Pro Forma, 96,205,787
shares.
5. The Pro Forma Financial Statements do not reflect the $450 million (net)
cost savings estimated to be achieved in the ten year period following the
consummation of the Merger.
6. Intercompany transactions (including purchased and exchanged power
transactions) between WWP and SPR during the periods presented were not
material and, accordingly, no pro forma adjustments were made to eliminate such
transactions.
7. For comparative purposes, certain historical amounts have been reclassified
to conform to the pro forma financial statement format.
25
26
THE WASHINGTON WATER POWER COMPANY
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
4(a) Bylaws of The Washington Water Power Company, as
amended May 12, 1994.
4(b) Amendment No. 2 to the Shareholder Rights Plan, dated
as of June 27, 1994.
12 Computation of ratio of earnings to fixed charges and
preferred dividend requirements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
26
27
THE WASHINGTON WATER POWER COMPANY
SIGNATURE
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.
THE WASHINGTON WATER POWER COMPANY
----------------------------------
(Registrant)
Date: November 10, 1994 /s/ J. E. Eliassen
------------------
J. E. Eliassen
Vice President - Finance and
Chief Financial Officer
Principal Accounting and
Financial Officer)
27
1
Exhibit 4(a)
BYLAWS
OF
The Washington Water Power
Company
As Amended May 12, 1994
2
BYLAWS
OF
THE WASHINGTON WATER POWER COMPANY
* * * * *
ARTICLE I.
OFFICES
The principal office of the Corporation shall be in the City of
Spokane, Washington. The Corporation may have such other offices, either
within or without the State of Washington, as the Board of Directors may
designate from time to time.
ARTICLE II.
SHAREHOLDERS
SECTION 1. ANNUAL MEETING. The Annual Meeting of Shareholders shall
be held on such date in the month of May in each year as determined by the
Board of Directors for the purpose of electing directors and for the
transaction of such other business as may come before the meeting. If the day
fixed for the Annual Meeting shall be a legal holiday, such meeting shall be
held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the President, the Chairman of the Board, the majority of the
Board of Directors, the Executive Committee of the Board, and shall be called
by the President at the request of the holders of not less than two-thirds
(2/3) of the voting power of all shares of the voting stock voting together as
a single class. Only those matters that are specified in the call of or
request for a special meeting may be considered or voted at such meeting.
SECTION 3. PLACE OF MEETING. Meetings of the shareholders, whether
they be annual or special, shall be held at the principal office of the
Corporation, unless a place, either within or without the state, is otherwise
designated by the Board of Directors in the notice provided to shareholders of
such meetings.
SECTION 4. NOTICE OF MEETING. Written or printed notice of every
meeting of shareholders shall be mailed by the Corporate Secretary or any
Assistant Corporate Secretary, not less than ten (10) nor more than fifty (50)
days before the date of the meeting, to each holder of record of stock entitled
to vote at the meeting. The notice shall be mailed to each shareholder at his
last known post office address, provided, however, that if a shareholder is
present at a meeting, or waives notice thereof in writing before or after the
meeting, the notice of the meeting to such shareholders shall be unnecessary.
SECTION 5. VOTING OF SHARES. At every meeting of shareholders each
holder of stock entitled to vote thereat shall be entitled to one vote for each
share of such stock held in his name on the books of the Corporation, subject
to the provisions of applicable law and the Articles of Incorporation, and may
vote and otherwise act in person or by proxy; provided, however, that in
elections of directors there shall be cumulative voting as provided by law and
by the Articles of Incorporation.
SECTION 6. QUORUM. The holders of a majority of the number of
outstanding shares of stock of the Corporation entitled to vote thereat,
present in person or by proxy at any meeting, shall constitute a quorum, but
less than a quorum shall have power to adjourn any meeting from time to time
without notice. No change shall be made in this Section 6 without the
affirmative vote of the holders of at least a majority of the outstanding
shares of stock entitled to vote.
2
3
SECTION 7. CLOSING OF TRANSFER BOOKS OR FIXING OF RECORD DATE. For
the purposes of determining shareholders entitled to notice of or to vote at
any meeting of shareholders or any adjournment thereof, or shareholders
entitled to receive payment of any dividend, or in order to make a
determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall be
closed for a stated period but not to exceed, in any case, fifty (50) days. If
the stock transfer books shall be closed for the purpose of determining
shareholders entitled to notice of or to vote at a meeting of shareholders,
such books shall be closed for at least ten (10) days immediately preceding
such meeting. In lieu of closing the stock transfer books, the Board of
Directors may fix in advance a date as the record date for any such
determination of shareholders, such date in any case to be not more than fifty
(50) days and, in case of a meeting of shareholders, not less than ten (10)
days prior to the date on which the particular action, requiring such
determination of shareholders, is to be taken. When a determination of
shareholders entitled to vote at any meeting of shareholders has been made as
provided in this section, such determination shall apply to any adjournment
thereof.
SECTION 8. VOTING RECORD. The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least ten
(10) days before each meeting of shareholders, a complete record of the
shareholders entitled to vote at such meeting or any adjournment thereof,
arranged in alphabetical order, with the address of and the number of shares
held by each, which record, for a period of ten (10) days prior to such
meeting, shall be kept on file at the registered office of the Corporation.
Such record shall be produced and kept open at the time and place of the
meeting and shall be subject to the inspection of any shareholder during the
whole time of the meeting for the purposes thereof.
SECTION 9. CONDUCT OF PROCEEDINGS. The Chairman of the Board shall
preside at all meetings of the shareholders. In the absence of the Chairman,
the President shall preside and in the absence of both, the Executive Vice
President shall preside. The members of the Board of Directors present at the
meeting may appoint any officer of the Corporation or member of the Board to
act as Chairman of any meeting in the absence of the Chairman, the President,
or Executive Vice President. The Corporate Secretary of the Corporation, or in
his absence, an Assistant Corporate Secretary, shall act as Secretary at all
meetings of the shareholders. In the absence of the Corporate Secretary or
Assistant Corporate Secretary at any meeting of the shareholders, the presiding
officer may appoint any person to act as Secretary of the meeting.
SECTION 10. PROXIES. At all meetings of shareholders, a shareholder
may vote in person or by proxy executed in writing by the shareholder or by his
duly authorized attorney in fact. Such proxy shall be filed with the Corporate
Secretary of the Corporation before or at the time of the meeting.
ARTICLE III.
BOARD OF DIRECTORS
SECTION 1. GENERAL POWERS. The powers of the Corporation shall be
exercised by or under the authority of the Board of Directors, except as
otherwise provided by the laws of the State of Washington and the Articles of
Incorporation.
SECTION 2. NUMBER AND TENURE. The number of Directors of the
Corporation shall be ten (10); provided, however, that if the right to elect a
majority of the Board of Directors shall have accrued to the holders of the
Preferred Stock as provided in paragraph (1) of subdivision (j) of Article
THIRD of the Articles of Incorporation, then, during such period as such
holders shall have such right, the number of directors may exceed ten.
Directors shall be divided into three classes, as nearly equal in number as
possible. At each Annual Meeting of Shareholders, directors elected to succeed
those directors whose terms expire shall be elected for a term of office to
expire at the third succeeding Annual Meeting of Shareholders after their
election. Notwithstanding the foregoing, directors elected
3
4
by the holders of the Preferred Stock in accordance with paragraph (1) of
subdivision (j) of Article THIRD of the Articles of Incorporation shall be
elected for a term which shall expire not later than the next Annual Meeting of
Shareholders. All directors shall hold office until the expiration of their
respective terms of office and until their successors shall have been elected
and qualified.
SECTION 3. REGULAR MEETINGS. The regular annual meeting of the Board
of Directors shall be held immediately following the adjournment of the annual
meeting of the shareholders. At such meeting the Board of Directors, including
directors newly elected, shall organize itself for the coming year, shall elect
officers of the Corporation for the ensuing year, and shall transact all such
further business as may be necessary or appropriate. The Board shall hold
regular quarterly meetings, without call or notice, on the first Friday in the
months of August, November and February throughout the year. If any such date
shall fall on a legal holiday, the meeting scheduled for that date shall be
held on the next ensuing business day that is not a legal holiday. At such
quarterly meetings the Board of Directors shall transact all business properly
brought before the Board. Written notice of the annual and quarterly meetings
of the Board shall be given to each director at least two (2) full days in
advance of the meeting.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board, the
President, the Executive Vice President or any three (3) directors. Notice of
any special meeting shall be given to each director at least two (2) days in
advance of the meeting.
SECTION 5. EMERGENCY MEETINGS. In the event of a catastrophe or a
disaster causing the injury or death to members of the Board of Directors and
the principal officers of the Corporation, any director or officer may call an
emergency meeting of the Board of Directors. Notice of the time and place of
the emergency meeting shall be given not less than two (2) days prior to the
meeting and may be given by any available means of communication. The director
or directors present at the meeting shall constitute a quorum for the purpose
of filling vacancies determined to exist. The directors present at the
emergency meeting may appoint such officers as necessary to fill any vacancies
determined to exist. All appointments under this section shall be temporary
until a special meeting of the shareholders and directors is held as provided
in these Bylaws.
SECTION 6. CONFERENCE BY TELEPHONE. The members of the Board of
Directors, or of any committee created by the Board, may participate in a
meeting of the Board or of the committee by means of a conference telephone or
similar communication equipment by means of which all persons participating in
the meeting can hear each other at the same time. Participation in a meeting
by such means shall constitute presence in person at a meeting.
SECTION 7. QUORUM. A majority of the number of directors shall
constitute a quorum for the transaction of business at any meeting of the Board
of Directors. The action of a majority of the directors present at a meeting
at which a quorum is present shall be the action of the Board.
SECTION 8. ACTION WITHOUT A MEETING. Any action required by law to
be taken at a meeting of the directors of the Corporation, or any action which
may be taken at a meeting of the directors or of a committee, may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the directors, or all of the members of the
committee, as the case may be. Such consent shall have the same effect as a
unanimous vote.
SECTION 9. VACANCIES. Subject to the provisions of paragraph (1) of
subdivision (j) of Article THIRD of the Articles of Incorporation, (a) any
vacancy occurring in the Board of Directors may be filled by the affirmative
vote of a majority of the remaining directors though less than a quorum of the
Board of Directors and any director so elected to fill a vacancy shall be
elected for the unexpired term of his or her predecessor in office and (b) any
directorship to be filled by reason of an increase in the
4
5
number of directors may be filled by the Board of Directors for a term of
office continuing only until the next election of directors by the
shareholders.
SECTION 10. RESIGNATION OF DIRECTOR. Any director or member of any
committee may resign at any time. Such resignation shall be made in writing
and shall take effect at the time specified therein. If no time is specified,
it shall take effect from the time of its receipt by the Corporate Secretary,
who shall record such resignation, noting the day, hour and minute of its
reception. The acceptance of a resignation shall not be necessary to make it
effective.
SECTION 11. REMOVAL. Subject to the provisions of paragraph (1) of
subdivision (j) of Article THIRD of the Articles of Incorporation, any director
may be removed from office at any time, but only for cause and only by the
affirmative vote of the holders of at least a majority of the voting power of
all of the shares of capital stock of the Corporation entitled generally to
vote in the election of directors voting together as a single class, at a
meeting of shareholders called expressly for that purpose; provided, however,
that if less than the entire Board of Directors is to be removed, no one of the
directors may be removed if the votes cast against the removal of such director
would be sufficient to elect such director if then cumulatively voted at an
election of the class of directors of which such director is a part. No
decrease in the number of directors constituting the Board of Directors shall
shorten the term of any incumbent director.
SECTION 12. ORDER OF BUSINESS. The Chairman of the Board shall
preside at all meetings of the directors. In the absence of the Chairman, the
officer or member of the Board designated by the Board of Directors shall
preside. At meetings of the Board of Directors, business shall be transacted
in such order as the Board may determine. Minutes of all proceedings of the
Board of Directors, or committees appointed by it, shall be prepared and
maintained by the Corporate Secretary or an Assistant Corporate Secretary and
the original shall be maintained in the principal office of the Corporation.
SECTION 13. NOMINATION OF DIRECTORS. Subject to the provisions of
paragraph (1) of subdivision (j) of Article THIRD of the Articles of
Incorporation, nominations for the election of directors may be made by the
Board of Directors, or a nominating committee appointed by the Board of
Directors, or by any holder of shares of the capital stock of the Corporation
entitled generally to vote in the election of directors (such stock being
hereinafter in this Section called "Voting Stock"). However, any holder of
shares of the Voting Stock may nominate one or more persons for election as
directors at a meeting only if written notice of such shareholder's intent to
make such nomination or nominations has been given, either by personal delivery
or by United States mail, postage prepaid, to the Corporate Secretary not later
than (i) with respect to an election to be held at an annual meeting of
shareholders, ninety (90) days in advance of such meeting and (ii) with respect
to an election to be held at a special meeting of shareholders for the election
of directors, the close of business on the seventh day following the date on
which notice of such meeting is first given to shareholders. Each such notice
shall set forth: (a) the name and address of the shareholder who intends to
make the nomination and of the person or persons to be nominated; (b) a
representation that such shareholder is a holder of record of shares of the
Voting Stock of the Corporation and intends to appear in person or by proxy at
the meeting to nominate the person or persons identified in the notice; (c) a
description of all arrangements or understandings between such shareholder and
each nominee and any other person or persons (naming such person or persons)
pursuant to which the nomination or nominations are to be made by such
shareholder; (d) such other information regarding each nominee proposed by such
shareholder as would be required to be included in a proxy statement under the
Securities Exchange Act of 1934, as amended, and the rules and regulations
thereunder (or any subsequent revisions replacing such Act, rules or
regulations) if the nominee(s) had been nominated, or were intended to be
nominated, by the Board of Directors; and (e) the consent of each nominee to
serve as a Director of the Corporation if so elected. The Chairman of the
meeting may refuse to acknowledge the nomination of any person not made in
compliance with the foregoing procedure.
5
6
SECTION 14. PRESUMPTION OF ASSENT. A director of the Corporation who
is present at a meeting of the Board of Directors, or of a committee thereof,
at which action on any corporate matter is taken, shall be presumed to have
assented to the action unless his dissent shall be entered in the minutes of
the meeting or unless he shall file his written dissent to such action with the
person acting as the Secretary of the meeting before the adjournment thereof or
shall forward such dissent by registered mail to the Corporate Secretary of the
Corporation immediately after the adjournment of the meeting. Such right to
dissent shall not apply to a director who voted in favor of such action.
SECTION 15. RETIREMENT OF DIRECTORS. Directors who are 70 years of
age or more shall retire from the Board effective at the conclusion of the
Annual Meeting of Shareholders held in the year in which their term expires,
and any such Director shall not be nominated for election at such Annual
Meeting. The foregoing shall be effective in 1988 and thereafter as to any
Director who is 70 years of age or more during the year in which his or her
term expires.
ARTICLE IV.
EXECUTIVE COMMITTEE
AND
ADDITIONAL COMMITTEES
SECTION 1. APPOINTMENT. The Board of Directors, by resolution
adopted by a majority of the Board, may designate three or more of its members
to constitute an Executive Committee. The designation of such committee and
the delegation thereto of authority shall not operate to relieve the Board of
Directors, or any member thereof, of any responsibility imposed by law.
SECTION 2. AUTHORITY. The Executive Committee, when the Board of
Directors is not in session, shall have and may exercise all of the authority
of the Board of Directors including authority to authorize distributions or the
issuance of shares of stock, except to the extent, if any, that such authority
shall be limited by the resolution appointing the Executive Committee or by
law.
SECTION 3. TENURE. Each member of the Executive Committee shall hold
office until the next regular annual meeting of the Board of Directors
following his designation and until his successor is designated as a member of
the Executive Committee.
SECTION 4. MEETINGS. Regular meetings of the Executive Committee may
be held without notice at such times and places as the Executive Committee may
fix from time to time by resolution. Special meetings of the Executive
Committee may be called by any member thereof upon not less than two (2) days
notice stating the place, date and hour of the meeting, which notice may be
written or oral. Any member of the Executive Committee may waive notice of any
meeting and no notice of any meeting need be given to any member thereof who
attends in person.
SECTION 5. QUORUM. A majority of the members of the Executive
Committee shall constitute a quorum for the transaction of business at any
meeting thereof. Actions by the Executive Committee must be authorized by the
affirmative vote of a majority of the appointed members of the Executive
Committee.
SECTION 6. ACTION WITHOUT A MEETING. Any action required or
permitted to be taken by the Executive Committee at a meeting may be taken
without a meeting if a consent in writing, setting forth the action so taken,
shall be signed by all of the members of the Executive Committee.
SECTION 7. PROCEDURE. The Executive Committee shall select a
presiding officer from its members and may fix its own rules of procedure which
shall not be inconsistent with these Bylaws. It shall keep regular minutes of
its proceedings and report the same to the Board of Directors for its
information at a meeting thereof held next after the proceedings shall have
been taken.
6
7
SECTION 8. COMMITTEES ADDITIONAL TO EXECUTIVE COMMITTEE. The Board of
Directors may, by resolution, designate one or more other committees, each such
committee to consist of two or more of the directors of the Corporation. A
majority of the members of any such committee may determine its action and fix
the time and place of its meetings unless the Board of Directors shall
otherwise provide.
ARTICLE V.
OFFICERS
SECTION 1. NUMBER. The Board of Directors shall elect one of its
members Chairman of the Board and shall elect one of its members as President
of the Corporation and the offices of Chairman and President may be held by the
same person. The Board of Directors shall also elect one or more Vice
Presidents, a Corporate Secretary, a Treasurer and may from time to time elect
such other officers as the Board deems appropriate. The same person may be
appointed to more than one office except the offices of President and Corporate
Secretary.
SECTION 2. ELECTION AND TERM OF OFFICE. The officers of the
Corporation shall be elected by the Board of Directors at the annual meeting of
the Board. Each officer shall hold office until his successor shall have been
duly elected and qualified.
SECTION 3. REMOVAL. Any officer or agent may be removed by the Board
of Directors whenever in its judgment the best interests of the Corporation
will be served thereby, but such removal shall be without prejudice to contract
rights, if any, of the person so removed. Election or appointment of an
officer or agent shall not of itself create contract rights.
SECTION 4. VACANCIES. A vacancy in any office because of death,
resignation, removal, disqualification or otherwise may be filled by the Board
of Directors for the unexpired portion of the term.
SECTION 5. POWERS AND DUTIES. The officers shall have such powers
and duties as usually pertain to their offices, except as modified by the Board
of Directors, and shall have such other powers and duties as may from time to
time be conferred upon them by the Board of Directors.
ARTICLE VI.
CONTRACTS, CHECKS AND DEPOSITS
SECTION 1. CONTRACTS. The Board of Directors may authorize any
officer or officers or agents, to enter into any contract or to execute and
deliver any instrument in the name of and on behalf of the Corporation, and
such authority may be general or confined to specific instances.
SECTION 2. CHECKS/DRAFTS/NOTES. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the Corporation shall be signed by such officer or officers, agent
or agents of the Corporation and in such manner as shall from time to time be
determined by resolution of the Board of Directors.
SECTION 3. DEPOSITS. All funds of the Corporation not otherwise
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositories as the Board of Directors
by resolution may select.
ARTICLE VII.
CERTIFICATES FOR SHARES AND THEIR TRANSFER
7
8
SECTION 1. CERTIFICATES FOR SHARES. Certificates representing shares
of the Corporation shall be in such form as shall be determined by-the Board of
Directors and shall contain such information as prescribed by law. Such
certificates shall be signed by the President or a Vice President and by either
the Corporate Secretary or an Assistant Corporate Secretary, and sealed with
the corporate seal or a facsimile thereof. The signatures of such officers
upon a certificate may be facsimiles. The name and address of the person to
whom the shares represented thereby are issued, with the number of shares and
date of issue, shall be entered on the stock transfer books of the Corporation.
All certificates surrendered to the Corporation for transfer shall be cancelled
and no new certificate shall be issued until the former certificate for a like
number of shares shall have been surrendered and cancelled, except that in case
of a lost, destroyed or mutilated certificate a new one may be issued therefor
upon such terms and indemnity to the Corporation as the Board of Directors may
prescribe.
SECTION 2. TRANSFER OF SHARES. Transfer of shares of the Corporation
shall be made only on the stock transfer books of the Corporation by the holder
of record thereof or by his legal representative, who shall furnish proper
evidence of authority to transfer, or by his attorney thereunto authorized by
power of attorney duly executed and filed with the Corporate Secretary of the
Corporation, and on surrender for cancellation of the certificate for such
shares. The person in whose name shares stand on the books of the Corporation
shall be deemed by the Corporation to be the owner thereof for all purposes.
The Board of Directors shall have power to appoint one or more transfer agents
and registrars for transfer and registration of certificates of stock.
ARTICLE VIII.
CORPORATE SEAL
The seal of the Corporation shall be in such form as the Board of
Directors shall prescribe.
ARTICLE IX.
INDEMNIFICATION
SECTION 1. INDEMNIFICATION OF DIRECTORS AND OFFICERS. The
Corporation shall indemnify and reimburse the expenses of any person who is or
was a director, officer, agent or employee of the Corporation or is or was
serving at the request of the Corporation as a director, officer, partner,
trustee, employee, or agent of another enterprise or employee benefit plan to
the extent permitted by and in accordance with Article SEVENTH of the Company's
Articles of Incorporation and as permitted by law.
SECTION 2. LIABILITY INSURANCE. The Corporation shall have the power
to purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee, or agent of the Corporation or is or was serving
at the request of the Corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust, other enterprise, or
employee benefit plan against any liability asserted against him and incurred
by him in any such capacity or arising out of his status as such, whether or
not the Corporation would have the power to indemnify him against such
liability under the laws of the State of Washington.
SECTION 3. RATIFICATION OF ACTS OF DIRECTOR, OFFICER OR SHAREHOLDER.
Any transaction questioned in any shareholders' derivative suit on the ground
of lack of authority, defective or irregular execution, adverse interest of
director, officer or shareholder, nondisclosure, miscomputation, or the
application of improper principles or practices of accounting may be ratified
before or after judgment, by the Board of Directors or by the shareholders in
case less than a quorum of directors are qualified; and, if so ratified, shall
have the same force and effect as if the questioned transaction had been
originally duly authorized, and said ratification shall be binding upon the
Corporation and its shareholders and shall constitute a bar to any claim or
execution of any judgment in respect of such questioned transaction.
8
9
ARTICLE X.
AMENDMENTS
Except as to Section 6 of Article II of these Bylaws, the Board of
Directors may alter or amend these Bylaws at any meeting duly held, the notice
of which includes notice of the proposed amendment. Bylaws adopted by the
Board of Directors shall be subject to change or repeal by the shareholders;
provided, however, that Section 2 of the Article II, Section 2 (other than the
provision thereof specifying the number of Directors of the Corporation), and
Sections 9, 11 and 13 of Article III and this proviso shall not be altered,
amended or repealed, and no provision inconsistent therewith or herewith shall
be included in these Bylaws, without the affirmative votes of the holders of at
least eighty percent (80%) of the voting power of all the shares of the Voting
Stock voting together as a single class.
9
1
Exhibit 4(b)
AMENDMENT NO. 2
to
RIGHTS AGREEMENT
AMENDMENT NO. 2, dated as of June 27, 1994, to the Rights
Agreement, dated as of February 16, 1990, between The Washington Water Power
Company, a Washington corporation (the "Company"), and The Bank of New York, as
Rights Agent (the "Rights Agent"), as heretofore amended by Amendment No. 1
thereto, dated as of May 10, 1994 (the "Rights Agreement").
WHEREAS, all capitalized terms used herein, unless otherwise
defined, shall have the respective meanings ascribed to them in the Rights
Agreement; and
WHEREAS, the Company has entered into an Agreement and Plan of
Reorganization and Merger, dated as of June 27, 1994 (the "Merger Agreement"),
with Sierra Pacific Resources, a Nevada corporation ("SPR"), Sierra Pacific
Power Company, a Nevada corporation and a subsidiary of SPR ("SPPC") and WPM
Corp., a Nevada Corporation and a wholly-owned subsidiary of the Company ("WPM
Corp.") pursuant to which each of the Company, SPR and SPPC will be merged with
and into WPM Corp.; and
WHEREAS, to facilitate consummation of the transactions
contemplated by the Merger Agreement, the Company desires to amend the Rights
Agreement to provide for the expiration of the Rights immediately prior to the
Effective Time of the Merger (as each of such terms is defined in the Merger
Agreement) without further action on the part of the Company; and
NOW, THEREFORE, pursuant to Section 26 of the Rights
Agreement, in order to make provision in regard to certain matters or questions
arising under the Rights Agreement which the Company deems necessary and
desirable and which are consistent with the objectives of the Board of
Directors of the Company in adopting the Rights Agreement, the Company and the
Rights Agent hereby amend the Rights Agreement as follows:
1. Amendment of Section 7(a). Section 7(a) of the Rights
Agreement is hereby amended by deleting it in its entirety and substituting
therefor the following:
(a) Subject to Section 7(e) and Section 9 hereof, at any time after
the Distribution Date and immediately prior to the earlier of (i) the
close of business on February 16, 2000 (the "Final Expiration Date"),
(ii) the time at which the Rights are redeemed or exchanged as
provided in Section 23 hereof (the "Redemption Date"), and (iii) the
Effective Time of the Merger (as each such term is defined in the
Agreement and Plan of Reorganization and Merger, dated as of June 27,
1994 (the "Merger Agreement"), by and among the Company, Sierra
Pacific Resources, Sierra Pacific Power Company and WPM Corp., a
wholly owned Subsidiary of the Company), the
2
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Registered Holder of any Right Certificate may exercise the Rights
evidenced thereby (except as otherwise provided herein, including
without limitation, any restriction on exercisability set forth in or
resulting from Section 9, Section 11(a)(iii), Section 14 and Section
20(j) hereof) in whole or in part upon surrender of the Right
Certificate, with the form of election to purchase and the certificate
on the reverse side thereof duly executed, to the Rights Agent at the
principal shareholder services office of the Rights Agent, together
with payment of the portion of the aggregate Exercise Price applicable
to such Rights Certificate which is correlative to the extent to which
the Rights evidenced by such Rights Certificate are being exercised.
2. Acknowledgement. The Company and the Rights Agent hereby
acknowledge and confirm that none of Sierra Pacific Resources ("SPR"), Sierra
Pacific Power Company ("SPPC") nor WPM Corp., a wholly-owned subsidiary of the
Company ("WPM Corp."), nor any of their Affiliates or Associates is deemed to
be an "Acquiring Person" and, therefore, it is hereby acknowledged and
confirmed that no Shares Acquisition Date or Distribution Date has occurred or
will occur as a result of (i) the execution and delivery of the Agreement and
Plan of Reorganization and Merger, dated as of June 27, 1994, by and among the
Company, SPR, SPPC and WPM Corp., as the same may be amended from time to time
(the "Merger Agreement") or (ii) the consummation of the Merger (as such term
is defined in the Merger Agreement).
3. Rights Agreement Remains in Full Force and Effect. Except
as provided in this Amendment to Rights Agreement, the Rights Agreement remains
unmodified and in full force and effect.
4. Counterparts. This Amendment may be executed in any
number of counterparts and each of such counterparts shall for all purposes be
deemed to be an original, and all such counterparts shall together constitute
but one and the same instrument.
3
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IN WITNESS WHEREOF, the Company and the Rights Agent have
caused this Amendment No. 2 to be duly executed as of the day and year first
above written.
THE WASHINGTON WATER POWER COMPANY
By: /s/ Ronald R. Peterson
--------------------------------
Name: Ronald R. Peterson
Title: Treasurer
THE BANK OF NEW YORK
By: /s/ Robert Dietz
--------------------------------
Name: Robert Dietz
Title: Asst. Vice President
1
EXHIBIT 12
THE WASHINGTON WATER POWER COMPANY
Computation of Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements(1)
Consolidated
(Thousands of Dollars)
12 Mos. Ended Years Ended December 31
September 30 -------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
Fixed charges, as defined:
Interest on long-term debt $48,430 $47,129 $51,727 $52,801 $56,202
Amortization of debt expense
and premium - net 3,593 3,004 1,814 1,751 1,558
Interest portion of rentals 1,053 924 1,105 1,018 1,012
------- ------- ------- ------- -------
Total fixed charges $53,076 $51,057 $54,646 $55,570 $58,772
======= ======= ======= ======= =======
Earnings, as defined:
Net income from continuing ops. $74,076 $82,776 $72,267 $70,631 $72,147
Add (deduct):
Income tax expense 43,112 42,503 41,330 38,086 33,150
Total fixed charges above 53,076 51,057 54,646 55,570 58,772
-------- -------- -------- -------- --------
Total earnings $170,264 $176,336 $168,243 $164,287 $164,069
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 3.21 3.45 3.08 2.96 2.79
Fixed charges and preferred
dividend requirements:
Fixed charges above $53,076 $51,057 $54,646 $55,570 $58,772
Preferred dividend requirements(2) 13,415 12,615 10,716 14,302 12,287
------- ------- ------- ------- -------
Total $66,491 $63,672 $65,362 $69,872 $71,059
======= ======= ======= ======= =======
Ratio of earnings to fixed charges
and preferred dividend requirements 2.56 2.77 2.57 2.35 2.31
(1) Calculations have been restated to reflect the results from continuing
operations (ie. excluding discontinued coal mining operations).
(2) Preferred dividend requirements have been grossed up to their pre-tax
level.
UT
1,000
9-MOS
DEC-31-1994
SEP-30-1994
PER-BOOK
1,282,012
183,552
108,720
309,086
0
1,883,370
552,515
(10,013)
107,130
649,632
85,000
50,000
575,621
33,000
10,755
0
47,419
0
10
7
431,926
1,883,370
480,404
30,652
371,727
371,727
108,677
8,410
117,087
35,944
50,491
6,405
44,086
49,592
0
120,924
0.83
0.83
LONG-TERM DEBT-NET DOES NOT MATCH THE AMOUNT REPORTED ON THE COMPANY'S
CONSOLIDATED STATEMENT OF CAPITALIZATION AS LONG-TERM DEBT DUE TO THE OTHER
CATEGORIES REQUIRED BY THIS SCHEDULE.
OTHER ITEMS CAPITAL AND LIABILITIES INCLUDES THE CURRENT
LIABILITIES, DEFERRED CREDITS AND MINORITY INTEREST, LESS CERTAIN AMOUNTS
INCLUDED UNDER LONG-TERM DEBT-CURRENT PORTION AND LEASES-CURRENT, FROM THE
COMPANY'S CONSOLIDATED BALANCE SHEET.
THE COMPANY DOES NOT INCLUDE INCOME TAX EXPENSE AS AN OPERATING EXPENSE
ITEM. IT IS INCLUDED ON THE COMPANY'S STATEMENTS AS A BELOW-THE-LINE ITEM.
INCOME BEFORE INTEREST EXPENSE IS NOT A SPECIFIC LINE ITEM ON THE COMPANY'S
INCOME STATEMENTS. THE COMPANY COMBINES TOTAL INTEREST EXPENSE AND OTHER INCOME
TO CALCULATE INCOME BEFORE INCOME TAXES.
