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 March 31, 1996
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
THE WASHINGTON WATER POWER COMPANY
(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
(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 May 1, 1996, 55,960,360 shares of Registrant's Common Stock, no par value
(the only class of common stock), were outstanding.
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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
March 31, 1996 and 1995........................................... 3
Consolidated Balance Sheets - March 31, 1996
and December 31, 1995............................................. 4
Consolidated Statements of Capitalization - March 31, 1996
and December 31, 1995............................................. 5
Consolidated Statements of Cash Flows - Three Months Ended
March 31, 1996 and 1995........................................... 6
Schedule of Information by Business Segments - Three Months Ended
March 31, 1996 and 1995........................................... 7
Notes to Consolidated Financial Statements ........................... 8
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations ........................ 13
Part II. Other Information:
Item 5. Other Information............................................... 16
Item 6. Exhibits and Reports on Form 8-K ............................... 17
Signature.......................................................................... 18
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CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
- --------------------------------------------------------------------------------
For the Three Months Ended March 31
Thousands of Dollars
1996 1995
--------- ---------
OPERATING REVENUES .......................... $ 248,004 $ 197,928
--------- ---------
OPERATING EXPENSES:
Operations and maintenance ............... 129,967 93,794
Administrative and general ............... 20,740 16,118
Depreciation and amortization ............ 17,159 15,418
Taxes other than income taxes ............ 13,692 14,124
--------- ---------
Total operating expenses ............... 181,558 139,454
--------- ---------
INCOME FROM OPERATIONS ...................... 66,446 58,474
--------- ---------
OTHER INCOME (EXPENSE):
Interest expense ......................... (15,306) (14,730)
Net gain on subsidiary transactions ...... 16,986 1,918
Other income (deductions)-net ............ (233) (477)
--------- ---------
Total other income (expense)-net ....... 1,447 (13,289)
--------- ---------
INCOME BEFORE INCOME TAXES .................. 67,893 45,185
INCOME TAXES ................................ 25,984 16,732
--------- ---------
NET INCOME .................................. 41,909 28,453
DEDUCT-Preferred stock dividend requirements 2,266 2,297
--------- ---------
INCOME AVAILABLE FOR COMMON STOCK ........... $ 39,643 $ 26,156
========= =========
Average common shares outstanding (thousands) 55,958 54,582
EARNINGS PER SHARE OF COMMON STOCK .......... $ 0.71 $ 0.48
Dividends paid per common share ............. $ 0.31 $ 0.31
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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CONSOLIDATED BALANCE SHEETS
The Washington Water Power Company
- --------------------------------------------------------------------------------
Thousands of Dollars
March 31, December 31,
1996 1995
---------- ------------
ASSETS:
PROPERTY:
Utility plant in service-net .............................. $1,894,110 $1,880,620
Construction work in progress ............................. 24,373 23,046
---------- ----------
Total ................................................... 1,918,483 1,903,666
Less: Accumulated depreciation and amortization .......... 558,149 546,248
---------- ----------
Net utility plant ....................................... 1,360,334 1,357,418
---------- ----------
OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net .......................... 80,595 82,252
Non-utility properties and investments .................... 157,125 135,612
Other-net ................................................. 20,987 9,593
---------- ----------
Total other property and investments .................... 258,707 227,457
---------- ----------
CURRENT ASSETS:
Cash and cash equivalents ................................. 17,211 5,164
Temporary cash investments ................................ 28,401 27,395
Accounts and notes receivable-net ......................... 97,734 102,389
Materials and supplies, fuel stock and natural gas stored . 36,413 38,004
Prepayments and other ..................................... 13,255 11,020
---------- ----------
Total current assets .................................... 193,014 183,972
---------- ----------
DEFERRED CHARGES:
Regulatory assets for deferred income tax ................. 168,263 169,432
Conservation programs ..................................... 61,414 62,793
Prepaid power purchases ................................... 36,603 32,605
Unamortized debt expense .................................. 24,894 25,684
Other-net ................................................. 38,532 39,541
---------- ----------
Total deferred charges .................................. 329,706 330,055
---------- ----------
TOTAL ................................................. $2,141,761 $2,098,902
========== ==========
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements of Capitalization) $1,590,544 $1,590,412
---------- ----------
CURRENT LIABILITIES:
Accounts payable .......................................... 50,043 64,841
Taxes and interest accrued ................................ 71,577 39,415
Other ..................................................... 76,589 64,703
---------- ----------
Total current liabilities ............................... 198,209 168,959
---------- ----------
DEFERRED CREDITS:
Deferred income taxes ..................................... 313,127 307,529
Other ..................................................... 39,881 32,002
---------- ----------
Total deferred credits .................................. 353,008 339,531
---------- ----------
COMMITMENTS AND CONTINGENCIES (Notes 2 and 4)
TOTAL ................................................. $2,141,761 $2,098,902
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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CONSOLIDATED STATEMENTS OF CAPITALIZATION
The Washington Water Power Company
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Thousands of Dollars
March 31, December 31,
1996 1995
----------- ------------
COMMON EQUITY:
Common stock, no par value: 200,000,000 shares authorized:
shares outstanding: 1996-55,960,360; 1995-55,947,967 .................... $ 594,853 $ 594,636
Note receivable from employee stock ownership plan ........................ (11,540) (11,690)
Capital stock expense and other paid in capital ........................... (10,086) (10,072)
Unrealized investment gain-net ............................................ 27,088 19,220
Retained earnings ......................................................... 147,389 125,031
----------- -----------
Total common equity ................................................... 747,704 717,125
----------- -----------
PREFERRED STOCK-CUMULATIVE: (Note 1)
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 1)
First Mortgage Bonds:
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 ....................... 250,000 250,000
Series B - 6.50% to 8.25% due 1997 through 2010 ....................... 141,000 141,000
----------- -----------
Total first mortgage bonds ............................................ 474,700 474,700
----------- -----------
Pollution Control Bonds:
6% Series due 2023 ...................................................... 4,100 4,100
Unsecured Medium-Term Notes:
Series A - 7.94% to 9.58% due 1997 through 2007 ......................... 72,500 72,500
Series B - 5.50% to 8.55% due 1996 through 2023 ......................... 135,000 135,000
----------- -----------
Total unsecured medium-term notes ..................................... 207,500 207,500
----------- -----------
Notes payable (due within one year) to be refinanced ...................... -- 29,500
Other ..................................................................... 21,540 22,487
----------- -----------
Total long-term debt .................................................. 707,840 738,287
----------- -----------
TOTAL CAPITALIZATION ......................................................... $ 1,590,544 $ 1,590,412
=========== ===========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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CONSOLIDATED STATEMENTS OF CASH FLOWS
Increase (Decrease) in Cash and Cash Equivalents
The Washington Water Power Company
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For the Three Months Ended March 31
Thousands of Dollars
1996 1995
-------- --------
OPERATING ACTIVITIES:
Net income ............................................................... $ 41,909 $ 28,453
NON-CASH REVENUES AND EXPENSES
INCLUDED IN NET INCOME:
Depreciation and amortization .......................................... 17,159 15,418
Provision for deferred income taxes .................................... 1,678 (182)
Allowance for equity funds used during construction .................... (170) (218)
Power and natural gas cost deferrals and amortization .................. 6,163 5,729
Deferred revenues and other-net ........................................ 3,764 3,712
(Increase) decrease in working capital components:
Receivables and prepaid expenses-net ................................ 4,419 994
Materials & supplies, fuel stock and natural gas stored ............. 1,590 (2,136)
Payables and other accrued liabilities .............................. 14,079 15,635
Other-net ........................................................... 6,825 (8,151)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES ................................... 97,416 59,254
-------- --------
INVESTING ACTIVITIES:
Construction expenditures (excluding AFUDC-equity funds) ................. (15,910) (16,570)
Other capital requirements ............................................... (2,034) 343
(Increase) decrease in other noncurrent balance sheet items-net .......... (18,281) 1,011
Assets acquired and investments in subsidiaries (Note 3) ................. (234) (938)
-------- --------
NET CASH USED IN INVESTING ACTIVITIES ....................................... (36,459) (16,154)
-------- --------
FINANCING ACTIVITIES:
Increase (decrease) in commercial paper, notes payable
and bank borrowings-net ................................................ (29,500) (33,500)
Maturity of unsecured medium-term notes .................................. -- (15,000)
Sale of secured medium-term notes ........................................ -- 30,000
Maturity of first mortgage bonds ......................................... -- (10,000)
Sale of common stock-net ................................................. (3,103) 3,468
Other-net ................................................................ (392) (2,512)
-------- --------
NET FINANCING ACTIVITIES BEFORE CASH DIVIDENDS .............................. (32,995) (27,544)
Less cash dividends paid .............................................. (15,915) (16,202)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES ....................................... (48,910) (43,746)
-------- --------
NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS ........................ 12,047 (646)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD ............................ 5,164 5,178
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD .................................. $ 17,211 $ 4,532
======== ========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest ............................................................... $ 11,652 $ 7,929
Income taxes ........................................................... $ 1,564 $ 894
Non-cash financing and investing activities .............................. $ 32,125 $ 2,955
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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SCHEDULE OF INFORMATION BY BUSINESS SEGMENTS
The Washington Water Power Company
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For the Three Months Ended March 31
Thousands of Dollars
1996 1995
---------- ----------
OPERATING REVENUES:
Electric ..................................... $ 155,817 $ 125,821
Natural gas .................................. 62,213 59,136
Non-utility .................................. 29,974 12,971
---------- ----------
Total operating revenues ................... $ 248,004 $ 197,928
========== ==========
OPERATIONS AND MAINTENANCE EXPENSES:
Electric:
Power purchased ............................ $ 38,510 $ 22,952
Fuel for generation ........................ 7,314 7,723
Other electric ............................. 22,797 17,803
Natural gas:
Natural gas purchased for resale ........... 34,756 34,818
Other natural gas .......................... 4,440 3,746
Non-utility .................................. 22,150 6,752
---------- ----------
Total operations and maintenance expenses .. $ 129,967 $ 93,794
========== ==========
ADMINISTRATIVE AND GENERAL EXPENSES:
Electric ..................................... $ 13,042 $ 9,669
Natural gas .................................. 4,359 3,268
Non-utility .................................. 3,339 3,181
---------- ----------
Total administrative and general expenses .. $ 20,740 $ 16,118
========== ==========
DEPRECIATION AND AMORTIZATION EXPENSES:
Electric ..................................... $ 12,758 $ 12,120
Natural gas .................................. 2,663 2,445
Non-utility .................................. 1,738 853
---------- ----------
Total depreciation and amortization expenses $ 17,159 $ 15,418
========== ==========
INCOME FROM OPERATIONS:
Electric ..................................... $ 50,922 $ 45,147
Natural gas .................................. 13,101 11,626
Non-utility .................................. 2,423 1,701
---------- ----------
Total income from operations ............... $ 66,446 $ 58,474
========== ==========
INCOME AVAILABLE FOR COMMON STOCK:
Utility operations ........................... $ 27,917 $ 23,686
Non-utility operations ....................... 11,726 2,470
---------- ----------
Total income available for common stock .... $ 39,643 $ 26,156
========== ==========
ASSETS: (1995 amounts at December 31)
Electric ..................................... $1,461,887 $1,440,560
Natural gas .................................. 256,825 274,408
Common plant ................................. 28,056 28,104
Other utility assets ......................... 145,343 129,319
Non-utility assets ........................... 249,650 226,511
---------- ----------
Total assets ............................... $2,141,761 $2,098,902
========== ==========
CAPITAL EXPENDITURES (excluding AFUDC/AFUCE):
Electric ..................................... $ 8,658 $ 11,100
Natural gas .................................. 5,180 6,730
Common plant ................................. 1,530 3,081
Non-utility .................................. 323 349
---------- ----------
Total capital expenditures ................. $ 15,691 $ 21,260
========== ==========
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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THE WASHINGTON WATER POWER COMPANY
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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
The accompanying financial statements of The Washington Water Power Company
(Company) for the interim periods ended March 31, 1996 and 1995 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, 1995.
NOTE 1. 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 2. COMMITMENTS AND CONTINGENCIES
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
(the "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.
Discovery had been stayed pending a decision by the Court on a case involving
some similar issues brought by the Tribe against Idaho Power Company. The Court
has since decided these issues and has dismissed all claims against Idaho Power.
The Idaho Power case has now been appealed by the Nez Perce Tribe to the Ninth
Circuit Court of Appeals. On November 21, 1994, the Company filed its Motion and
Brief in Support of Summary Judgment of Dismissal. The Nez Perce Tribe has filed
a reply brief, and has requested oral argument. A hearing on the Company's
Motion for Summary Judgment was held by the Court on July 27, 1995. On September
22, 1995, the federal magistrate issued a written opinion recommending to the
District Court that the Company's Motion for Summary Judgment be granted and the
Tribe's claims dismissed. On March 28, 1996, a U.S. District judge entered a
summary judgment in favor of the Company dismissing the complaint. The Tribe
filed a notice of appeal to the Ninth Circuit Court of Appeals on April 24,
1996. The Company is presently 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.
OIL SPILL
The Company completed an updated investigation of an oil spill from an
underground storage tank 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 spill. 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 showed that the oil has migrated approximately one city block
beyond the steam plant property. On December 6, 1993, the Company asked the DOE
to enter into negotiations for a Consent Decree which provided for additional
remedial investigation and a feasibility study. The Consent Decree, entered on
November 8, 1994, provided for 22 additional soil borings to be made around the
site,
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THE WASHINGTON WATER POWER COMPANY
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which have been completed. The Company completed a remedial
investigation/feasibility study (RI/FS) report, which was submitted to the DOE.
The DOE issued a responsiveness summary in April 1996 which presented the DOE
and public comments on the RI/FS. The DOE will now work on drafting the clean-up
action plan, which should be completed in mid-July. It is anticipated that the
clean-up action plan will be approved by the fall of 1996. The oil spill
clean-up will begin once approval is received and will likely extend into 1997.
As of March 31, 1996, an accrual of $3.1 million is reflected on the Company's
financial statements, which represents the Company's best estimate of its
liability.
On August 17, 1995, a lawsuit was filed against the Company in Superior Court of
the State of Washington for Spokane County by Davenport Sun International Hotels
and Properties, Inc., the owner of a hotel property in downtown Spokane,
Washington. The Complaint alleges that the oil released from the Company's
Central Steamplant trespassed on property owned by the plaintiff. In addition,
the plaintiff claims that the Steamplant has caused a diminution of value of
plaintiff's land. Generally, the Complaint is based on a claim of negligence,
trespass and nuisance. Discovery has been initiated by the Company and is in the
initial stages. The matter has not been set for trial. The Company is presently
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.
FIRESTORM
On October 16, 1991, gale-force winds struck a five-county area in eastern
Washington and a seven-county area in 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. Five separate class action lawsuits were originally
filed against the Company by private individuals in the Superior Court of
Spokane County on October 13, 1993. These suits concern fires identified as
Midway, Golden Cirrus, Nine Mile, Ponderosa and Chattaroy. All of these suits
were certified as class actions on September 16, 1994, and bifurcated for trial
of liability and damage issues by order of the same date. The Company's Motion
for Reconsideration was denied on October 21, 1994, and a Motion for
Discretionary Review of the Court's decision on certification of class actions
was timely filed with the Washington Court of Appeals (Division III) on November
14, 1994.
The Company was also served with two suits in Spokane County Superior Court
filed on April 20, 1994 and on September 15, 1994, both of which sought
individual damages from separate fires within the Chattaroy Fire complex. Five
additional and separate suits were brought by Grange Insurance Company, and were
filed in Spokane County Superior Court on October 10, 1994, for approximately
$2.2 million paid to Grange insureds for the same fire areas. Two additional
class action suits were also filed - one in Lincoln County Superior Court, filed
on October 14, 1994, for a fire known as "Nine Mile West" (previously included
in the Spokane County Nine Mile suit certified as a class action), and the
second in Spokane County Superior Court, filed on October 14, 1994, for the
Ponderosa Fire area (which had not been the subject of previous suit). The
Lincoln County suit has been transferred to Spokane County and both suits have
now also been certified as class actions.
Complainants in all cases allege various theories of tortious conduct, including
negligence, creation of a public nuisance, strict liability and trespass; in
most cases, complainants allege that fires were caused by electric distribution
and/or transmission lines downed by wind-downed trees. 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. Ongoing
discovery is limited due to a stay of the proceedings pending review by the
Washington Supreme Court of a trial court decision ordering the disqualification
of plaintiff's counsel. Argument before the Washington Supreme Court was heard
on an expedited basis in November 1995; however, the Court has yet to issue its
opinion. The Company is presently unable to assess the likelihood of an adverse
outcome or estimate an amount or range of potential loss in the event of an
adverse outcome. Trials are scheduled to commence on various dates between
February 3, 1997 and November 2, 1998. The Company was previously presented with
a claim from the Washington State Department of Natural Resources (DNR) for fire
suppression costs associated with five of these fires in eastern Washington. The
total of the DNR claim was $1.0 million. On July 22, 1993, the Company entered
into a settlement with the DNR whereby the Company agreed to pay $200,000 to DNR
in full settlement of any and all DNR claims; however, there was no admission of
liability on the part of the Company.
WILLIAMS LAKE LAWSUIT
On December 21, 1995, a lawsuit was commenced in Vancouver, British Columbia
against the Company's subsidiary, Pentzer Corporation (Pentzer), by Tondu Energy
Systems, Inc. and T.E.S. Williams Lake Partnership alleging contract violations,
conspiracy, misrepresentation and breach of fiduciary duties in regard to the
1993 sale of
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THE WASHINGTON WATER POWER COMPANY
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assets of Pentzer Energy Services, Inc. to B.C. Gas, Inc. and a U.S. subsidiary
of B.C. Gas. The claims involve an alleged first right to purchase interests in
the Williams Lake, British Columbia wood-fired generating station. The suit
seeks damages in excess of $10 million, plus exemplary damages, prejudgment
interest, costs and attorneys' fees. Also named as defendants are B.C. Gas,
Inc., Inland Pacific Energy (Williams Lake) Corp., Pentzer Energy Services, Inc.
and WP Energy Company. This action originally had been filed in Spokane Superior
Court against each of the same defendants and Washington Water Power. By order
dated June 6, 1995, all claims against Washington Water Power were dismissed
with prejudice by that court and the claims against the remaining defendants
were dismissed without prejudice on the grounds that the lawsuit should have
been brought in British Columbia. The Company is presently unable to assess the
likelihood of an adverse outcome, or estimate an amount or range of potential
loss in the event of an adverse outcome.
OTHER CONTINGENCIES
The Company routinely assesses, based on in-depth studies, expert analyses and
legal reviews, its contingencies, obligations and commitments for remediation of
contaminated sites, including assessments of ranges and probabilities of
recoveries from other responsible parties who have and have not agreed to a
settlement and recoveries from insurance carriers. The Company's policy is to
immediately accrue and charge to current expense identified exposures related to
environmental remediation sites based on estimates of investigation, cleanup and
monitoring costs to be incurred.
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 electric energy with
other utilities, cogenerators, small power producers and government agencies.
NOTE 3. ACQUISITIONS AND DISPOSITIONS
On March 1, 1996, Pentzer Development Corporation, a subsidiary of Pentzer, sold
the Spokane Industrial Park. The sale resulted in a gain of approximately $11.1
million, net of taxes and other adjustments, which was recognized in the first
quarter of 1996.
NOTE 4. PROPOSED MERGER
In June 1994, the Company, Sierra Pacific Resources (SPR), Sierra Pacific Power
Company, a subsidiary of SPR (SPPC), and Altus Corporation, a newly formed
subsidiary of the Company (Altus, formerly named Resources West Energy
Corporation), entered into an Agreement and Plan of Reorganization and Merger,
dated as of June 27, 1994, as amended October 4, 1994 which provides for the
merger of the Company, SPR and SPPC with and into Altus. In 1994, applications
seeking approval of the merger were filed with the FERC and with the state
utility commissions of California, Idaho, Montana, Nevada, Oregon and
Washington. The Montana Public Service Commission issued an order in October
1994 declining to exercise jurisdiction. The Company has received orders
approving the merger from the commissions of all the other states. On November
29, 1995, the FERC ordered evidentiary hearings concerning the proposed merger.
An administrative law judge has been assigned to the merger proceeding and a
pre-hearing conference was held on December 13, 1995 to set a procedural
schedule. The companies filed supplemental testimony on February 1, 1996.
Hearings are scheduled to begin on June 24, 1996. Based on this schedule, the
companies believe an order could be issued by the FERC in 1996 or early 1997.
The merger is designed to qualify as a pooling-of-interests for accounting and
financial reporting purposes. Under this method of accounting, the recorded
assets and liabilities of the Company, SPR and SPPC would be carried forward to
the consolidated financial statements of Altus at their recorded amounts; income
of Altus would include income of the Company, SPR and SPPC for the entire fiscal
year in which the merger occurs; and the reported income of the separate
corporations for prior periods would be combined and restated as income of
Altus.
As of March 31, 1996, $15.2 million in merger transaction and transition costs
have been deferred and are included on the Company's balance sheet as Other
Deferred Charges. The cost of severance and early retirement options
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THE WASHINGTON WATER POWER COMPANY
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elected by certain eligible employees affected by the merger is expected to be
approximately $11.2 million. The Company will determine the treatment of these
costs based on regulatory rulings, generally accepted accounting principles and
tax regulations. It is anticipated that for accounting purposes these merger
transaction and transition costs will be expensed by Altus in the quarter the
merger is completed.
As previously reported, the cost savings from the merger were initially
estimated to approximate $450 million, net of merger transaction and transition
costs, over a 10 year period following the consummation of the merger. However,
in new analyses of benefits filed with the FERC, the total net savings estimate
was reduced by approximately $80 million over 10 years. This reflects the
decision by the companies not to pursue a firm transmission interconnection
path, which resulted in a decrease in savings of $52 million, as well as the
identification by the companies of a $28 million increase in the costs of
severance programs and other transaction and transition costs. In addition,
based upon preliminary analyses, the Company anticipated further reductions in
the cost savings estimated to result from the merger. While the Company is
currently unable to definitively quantify such additional reductions in cost
savings, the Company believes that such reductions could be in the range of $20
million to $40 million.
The analyses employed in order to develop estimates of specific amounts of
savings to be achieved as a result of the merger were necessarily based upon
various assumptions which involve judgments with respect to, among other things,
future national and regional economic and competitive conditions, inflation
rates, regulatory treatment, weather conditions, financial market conditions,
interest rates, future business decisions, and other uncertainties, all of which
are difficult to predict and many of which are beyond the control of the
Company, SPR, SPPC and Altus. Accordingly, while the Company believes that such
assumptions are reasonable for purposes of the development of estimates of cost
savings, there can be no assurance that such assumptions will approximate actual
experience or that all such savings will be realized. Additionally, the
treatment of the benefits and cost savings will depend on the terms of the
regulatory approvals received in the various jurisdictions in which the Company
and SPPC operate their businesses.
The following pro forma condensed financial information combines the historical
consolidated balance sheets and statements of income of the Company and SPR
after giving effect to the merger. The unaudited pro forma condensed
consolidated balance sheet at March 31, 1996 gives effect to the merger as if it
had occurred at March 31, 1996. The unaudited pro forma condensed consolidated
statement of income for the quarter ended March 31, 1996 gives effect to the
merger as if it had occurred at January 1, 1996. These statements are prepared
on the basis of accounting for the merger as a pooling-of-interests and are
based on the assumptions set forth in the paragraph below. The pro forma
condensed financial information has been prepared from, and should be read in
conjunction with the Company's historical consolidated financial statements and
related notes thereto of which this note is a part and SPR's historical
consolidated financial statements and related notes thereto included in reports
filed by SPR pursuant to the Securities Exchange Act, as amended. The
information contained herein with respect to SPR and its subsidiaries has been
supplied by SPR. The information is not necessarily indicative of the financial
position or operating results that would have occurred had the merger been
consummated on the date, or at the beginning of the periods, for which the
merger is being given effect, nor is it necessarily indicative of future
operating results or financial position.
Intercompany transactions (including purchased and exchanged power transactions)
between the Company and SPR during the periods presented were not material and,
accordingly, no pro forma adjustments were made to eliminate such transactions.
For comparative purposes, certain historical amounts have been reclassified to
conform to the pro forma condensed financial statement format. The net cost
savings estimated to be achieved by the merger are not reflected in the pro
forma financial statements. Pro forma per share data and common shares
outstanding for Altus give effect to the conversion of each share of WWP Common
Stock into one share of Altus Common Stock and the conversion of each share of
SPR Common Stock into 1.44 shares of Altus Common Stock.
Unaudited Pro Forma Condensed Consolidated Balance Sheets at March 31, 1996 (in
thousands of dollars):
WWP SPR ALTUS
---------- ---------- ----------
Assets
Utility plant in service-net ............. $1,894,110 $1,823,481 $3,717,591
Construction work in progress ............ 24,373 171,818 196,191
---------- ---------- ----------
Total ................................ 1,918,483 1,995,299 3,913,782
Accumulated depreciation and amortization 558,149 569,446 1,127,595
---------- ---------- ----------
Net utility plant ..................... 1,360,334 1,425,853 2,786,187
Other property and investments ........... 258,707 45,367 304,074
Current assets ........................... 193,014 138,758 331,772
Deferred charges ......................... 329,706 164,224 493,930
---------- ---------- ----------
Total assets ......................... $2,141,761 $1,774,202 $3,915,963
========== ========== ==========
Capitalization and Liabilities
Common stock and additional paid-in capital $ 594,853 $ 466,887 $1,061,740
Other shareholders equity ................ 152,851 89,739 242,590
Preferred stock .......................... 135,000 86,715 221,715
Long-term debt ........................... 707,840 603,023 1,310,863
---------- ---------- ----------
Total capitalization ................. 1,590,544 1,246,364 2,836,908
Current liabilities ...................... 198,209 179,732 377,941
Deferred income taxes .................... 313,127 153,750 466,877
Other deferred credits ................... 39,881 194,356 234,237
---------- ---------- ----------
Total capitalization and liabilities . $2,141,761 $1,774,202 $3,915,963
========== ========== ==========
Common shares outstanding (thousands) .... 55,960 30,236 99,500
11
12
THE WASHINGTON WATER POWER COMPANY
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Unaudited Pro Forma Condensed Consolidated Statements of Income for the three
months ended March 31, 1996 (in thousands of dollars, except per share amounts):
WWP SPR ALTUS
-------- -------- --------
Operating revenues.................... $248,004 $163,826 $411,830
Operating expenses.................... 181,558 123,154 304,712
Income from operations................ 66,446 40,672 107,118
Net income............................ 41,909 19,571 61,480
Income available for common stock .... 39,643 17,786 57,429
Average common shares outstanding 55,958 30,113 99,321
Earnings per share.................... $0.71 $0.59 $0.58
12
13
THE WASHINGTON WATER POWER COMPANY
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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 new wholesale contracts and 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 in the
Southwest region. Other factors affecting the wholesale power market include new
entrants in the wholesale market, such as power brokers and marketers, and
competition from low cost generation being developed by independent power
producers. 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, conservation, appliance efficiency and other technology.
RESULTS OF OPERATIONS
OVERALL OPERATIONS
Overall earnings per share for the first quarter of 1996 increased to
$0.71 from $0.48 in 1995. The increase in earnings was primarily the result of a
$11.1 million transactional gain, net of tax and other adjustments, from the
sale of property held for sale by one of Pentzer Corporation's (Pentzer)
subsidiaries. Transactional gains during the first quarter of 1995 totaled $1.3
million, net of tax, from the sale of a portion of Itron, Inc. (Itron) stock
owned by Pentzer. The increase in earnings was also due to improved utility
results, primarily as a result of increased sales, due to both the growing
wholesale electric business and temperatures 9% colder than normal during the
first quarter of 1996 which increased retail sales to both natural gas and
electric customers.
Utility income available for common stock contributed $0.50 to earnings
per share for the first quarter of 1996 compared to $0.43 in the first quarter
of 1995. Non-utility income available for common stock contributed $0.21 to
earnings per share for the first quarter of 1996 compared to $0.05 in the same
period in 1995.
UTILITY OPERATIONS
REVENUES
Electric operating revenues increased $30.0 million in the first quarter of 1996
over 1995. Residential and commercial revenues rose by a combined $7.1 million
in the first three months of 1996 due to weather conditions, which resulted in
increased customer usage, and a 2.7% growth in residential and commercial
customers. Weather was 9% colder than normal during the first quarter of 1996,
compared to 10% warmer than normal in the first quarter of 1995. Wholesale
revenues totaled $44.0 million in the first quarter of 1996, an increase of
$23.6 million, as a result of new firm wholesale contracts and increased
secondary sales, as a result of improved streamflow conditions which led to the
increased availability of hydroelectric generation in the region. Hydroelectric
generation was 158% above normal, due to streamflows which were 265% of normal
during the first three months of 1996. Wholesale kWh sales more than tripled,
which more than offset the decline of 34% in average prices in the first quarter
of 1996 as compared to 1995.
Total natural gas revenues increased by $3.1 million in the first quarter of
1996 compared to the same period in 1995, primarily due to increased usage from
residential and commercial customers due to colder than normal weather and
increased non-retail sales. Revenues from non-retail sales were offset by like
increases in purchased gas expense. Margins from these non-retail transactions
were credited back to customers through rate changes for the cost of natural
gas. The number of total natural gas customers increased approximately 5.7% in
the first quarter of 1996 as compared to 1995.
13
14
THE WASHINGTON WATER POWER COMPANY
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OPERATING EXPENSES
New firm wholesale contracts and increased spot market sales, combined with
increased electric retail sales as a result of colder than normal temperatures
during the first quarter of 1996 caused electric purchased power costs to
increase by $15.6 million over 1995.
Other operating and maintenance expenses increased by $5.0 million, or 28%, for
electric operations and $0.7 million, or 19%, for natural gas operations during
the first quarter of 1996. The increased electric expenses included a $2.0
million increase in the Idaho Power Cost Adjustment (PCA) and a $0.6 million
increase in lease payments associated with the Rathdrum combustion turbine, as
lease payments did not begin until February of 1995. Both electric and natural
gas operations were affected by increased expenses related to amortization of
the Demand Side Management programs and increases in uncollectible accounts and
other expenses related to customer services.
Administrative and general expenses increased by $4.5 million in the first
quarter of 1996, primarily due to a $1.5 million reserve established for
severance payments, a $1.6 million write-off of regulatory deferrals of pension
expenses and other labor-related costs.
Income taxes increased by $2.8 million and $0.4 million for electric and natural
gas operations, respectively, from the first quarter of 1995, as a result of
increased operating income in the first quarter of 1996.
NON-UTILITY OPERATIONS
Non-utility operations include the results of Pentzer and six other
subsidiaries. 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 either 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 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 first quarter of 1996 exceeded 1995 by $9.4 million
primarily due to the impact of a transactional gain of $11.1 million, net of tax
and other adjustments, from the sale of Spokane Industrial Park, previously
owned and operated by Pentzer's subsidiary, Pentzer Development Corporation.
Transactional gains in the first quarter of 1995 were $1.3 million, net of tax,
from the sale of a portion of Itron stock owned by Pentzer.
Non-utility operating revenues and expenses increased by $17.0 million and $16.3
million, respectively, in the first quarter of 1996 over the previous year,
primarily as a result of acquisitions over the past year. Income from
non-utility operations increased by 42% to $2.4 million during the first three
months of 1996.
14
15
THE WASHINGTON WATER POWER COMPANY
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LIQUIDITY AND CAPITAL RESOURCES
UTILITY
The Company funds capital expenditures with a combination of
internally-generated cash and external financing. The level of cash generated
internally and the amount that is available for capital expenditures fluctuates
annually. Cash provided by operating activities remains the Company's primary
source of funds for operating needs, dividends and construction expenditures.
Operating Activities Cash available from operating activities in the first
quarter of 1996 increased by over $38 million from the same period in 1995
primarily due to decreases in various working capital components, such as
receivables, materials and supplies, fuel stock and natural gas stored and
prepayments on power contracts, partially offset by a decrease in payables. See
the Consolidated Statements of Cash Flows for additional details.
Investing Activities Cash used in investing activities increased by more than
$20 million in the first three months of 1996, when compared to the same period
in 1995, primarily due to the establishment of trusts for pension benefits and
reclamation costs and the net effect on cash flows of transactions related to
the sale of property by Pentzer. A portion of the purchase price resulted in the
receipt of a note receivable. See the Consolidated Statements of Cash Flows for
additional information.
Financing Activities Cash used in financing activities increased by
approximately $5 million in the first quarter of 1996 when compared to the same
period in 1995. Bank borrowings decreased by $29.5 million in the first quarter
of 1996 as a result of increased cash from operating activities. The only
securities issued in the first quarter of 1996 were approximately 12,000 shares
of common stock for $0.2 million in proceeds from the Company's Dividend
Reinvestment Plan. The Company is now purchasing shares in the open market to
fulfill the requirements of the Dividend Reinvestment and employee benefit
plans.
Capital expenditures are financed on an interim basis with short-term debt. The
Company has $160 million in committed lines of credit. In addition, the Company
may borrow up to $60 million through other borrowing arrangements with banks. As
of March 31, 1996, no balances were outstanding under either the lines of credit
or the other borrowing arrangements with banks. The Company had $8.7 million in
temporary investments and marketable securities at March 31, 1996.
During the 1996-1998 period, utility capital expenditures are expected to be
$237 million, and $90 million will be required for long-term debt maturities and
preferred stock sinking fund requirements. During this three-year period, the
Company estimates that internally-generated funds will provide approximately 95%
of the funds needed for its capital expenditure program. Minimal amounts of
external financing will be required to fund maturing long-term debt, preferred
stock sinking fund requirements and the remaining portion of capital
expenditures. These estimates of capital expenditures are subject to continuing
review and adjustment. Actual capital expenditures may vary from these estimates
due to factors such as changes in business conditions, construction schedules
and environmental requirements. These projections relate to the Company on a
stand-alone basis and do not reflect any adjustment for the effects of the
proposed merger of the Company, SPR and SPPC with and into Altus. See Item 5.
Other Information - Regulatory Proceedings for additional information relating
to the merger.
NON-UTILITY
The non-utility operations have $40 million in borrowing arrangements ($26.9
million outstanding as of March 31, 1996) to fund corporate requirements on an
interim basis. At March 31, 1996, the non-utility operations had $33.3 million
in cash and marketable securities with $27.9 million in long-term debt
outstanding.
The 1996-1998 non-utility capital expenditures are expected to be $6 million,
and $21 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.
These estimates of capital expenditures are subject to continuing review and
adjustment. Actual capital expenditures may vary from these estimates due to
factors such as changes in business conditions, acquisitions or sales of
businesses and other transactions.
15
16
THE WASHINGTON WATER POWER COMPANY
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TOTAL COMPANY
The Company's total common equity increased by $30.6 million during the first
three months of 1996 to $748 million. The increase was primarily due to a $7.9
million increase in unrealized investment gains from Pentzer's investment in
Itron and other marketable securities and a $22.4 million increase in retained
earnings. The Company's consolidated capital structure at March 31, 1996, was
45% debt, 8% preferred stock and 47% common equity as compared to 46% debt, 9%
preferred stock and 45% common equity at year-end 1995.
PART II. OTHER INFORMATION
ITEM 5. OTHER INFORMATION.
REGULATORY PROCEEDINGS.
Merger On June 28, 1994, the Company announced that it had entered into a
proposed merger agreement with SPR, SPPC and Altus. Applications seeking
approval of the merger were filed with the FERC and with the state utility
commissions in the states of California, Idaho, Montana, Nevada, Oregon and
Washington. The Montana Public Service Commission issued an order in October
1994 declining to exercise jurisdiction. The Company has received orders
approving the merger from the commissions of all the other states. On November
29, 1995, the FERC ordered evidentiary hearings concerning the proposed merger.
Hearings are scheduled to begin on June 24, 1996. Based on this schedule, the
Company believes an order approving the merger could be issued by the FERC in
1996 or early 1997. Most of the final orders issued by state commissions include
a "reopener" clause that allows the state proceedings to be reopened if any
party believes that the FERC and any other state commission has taken some
action which makes the Stipulation in such state undesirable. See Note 4 to
Financial Statements for additional information.
FERC Order No. 888 As previously reported, on March 29, 1995, the FERC issued a
Notice of Proposed Rulemaking (NOPR) relating to transmission services and a
supplemental NOPR on Recovery of Stranded Costs, and on April 24, 1996, the FERC
issued its final rule in Order No. 888. The final rule requires public utilities
operating under the Federal Power Act to provide third-party access to their
transmission systems. Each utility is also required to establish separate rates
for its transmission and generation services for new wholesale service. Further,
utilities are required to take transmission service under the same tariffs
applicable to third-party users. The final rule does not change FERC's policy
statement on transmission pricing, issued in October 1994, which permits zonal
transmission rates in limited circumstances.
16
17
THE WASHINGTON WATER POWER COMPANY
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While the FERC confirmed the authority of the States over local distribution and
over the service of delivering electric energy to ultimate customers, the FERC
asserted its jurisdiction over the rates, terms and conditions of unbundled
retail transmission service in interstate commerce. Generally, unbundled retail
wheeling customers will take service under the same FERC tariff as wholesale
customers. However, if the unbundled retail wheeling occurs as part of a State
retail access program, the FERC will defer to State requests for a separate
retail transmission tariff varying from the general wholesale transmission
tariff so long as such retail tariff is consistent with FERC's open access
policies and comparability principles.
The final rule contained in Order No. 888 also provides a basis for recovery by
regulated public utilities of legitimate and verifiable stranded costs
associated with existing wholesale requirements customers and retail customers
who become unbundled wholesale transmission customers of the utility. The FERC
will consider allowing recovery of stranded investment costs associated with
retail wheeling only if a state regulatory commission lacks the authority to
consider that issue.
The Company does not believe that Order No. 888 will have a material effect on
the results of operations of the Company, considered alone. However, the Company
is evaluating the provisions of Order No. 888 in the context of the proceeding
before the FERC for approval of the Merger, as well as the possible effect
thereof in the States in which Altus would do business.
Direct Access Tariff On May 6, 1996, the Company filed with the Washington
Utilities and Transportation Commission (WUTC) and the Idaho Public Utilities
Commission (IPUC) an experimental Direct Access and Delivery Service (DADS)
tariff that would allow eligible customers to choose their supplier to serve a
portion of their electric load. Eligible customers would include 30 of the
Company's largest customers in the two states. These customers' total load
represents about 112 average megawatts (aMw), or 15 percent of the Company's
total electric retail load; up to one-third of this load, or 37 aMw, could be
purchased from an alternative energy supplier if the DADS tariff is approved.
The balance of their electric load would continue to be served by the Company
and the Company would provide distribution and transmission service at a charge
for all energy delivered. This trial tariff would be effective from September 1,
1996 through August 31, 1998. The proposed tariff would not affect the rates for
other customer classes during or after the experimental period. The Company
intends to absorb any margin losses associated with loads served on the DADS
tariff, but is not expected to have a material impact on the financial condition
or results of operations of the Company.
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
-------------------------
March 31, December 31,
1996 1995
--------- ------------
Ratio of Earnings to Fixed Charges 3.54 (x) 3.22 (x)
Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements .. 2.88 (x) 2.61 (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.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits.
12 Computation of ratio of earnings to fixed charges and
preferred dividend requirements.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
17
18
THE WASHINGTON WATER POWER COMPANY
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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: May 15, 1996 /s/ J. E. Eliassen
---------------------------
J. E. Eliassen
Vice President - Finance and
Chief Financial Officer
(Principal Accounting and
Financial Officer)
18
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
March 31, --------------------------------------------------
1996 1995 1994 1993 1992
-------- -------- -------- -------- --------
Fixed charges, as defined:
Interest on long-term debt $ 56,263 $ 55,580 $ 49,566 $ 47,129 $ 51,727
Amortization of debt expense
and premium - net 3,334 3,441 3,511 3,004 1,814
Interest portion of rentals 4,204 3,962 1,282 924 1,105
-------- -------- -------- -------- --------
Total fixed charges $ 63,801 $ 62,983 $ 54,359 $ 51,057 $ 54,646
======== ======== ======== ======== ========
Earnings, as defined:
Net income from continuing ops $100,576 $ 87,121 $ 77,197 $ 82,776 $ 72,267
Add (deduct):
Income tax expense 61,669 52,416 44,696 42,503 41,330
Total fixed charges above 63,801 62,983 54,359 51,057 54,646
-------- -------- -------- -------- --------
Total earnings $226,046 $202,520 $176,252 $176,336 $168,243
======== ======== ======== ======== ========
Ratio of earnings to fixed charges 3.54 3.22 3.24 3.45 3.08
Fixed charges and preferred dividend requirements:
Fixed charges above $ 63,801 $ 62,983 $ 54,359 $ 51,057 $ 54,646
Preferred dividend requirements (2) 14,665 14,612 13,668 12,615 10,716
-------- -------- -------- -------- --------
Total $ 78,466 $ 77,595 $ 68,027 $ 63,672 $ 65,362
======== ======== ======== ======== ========
Ratio of earnings to fixed charges
and preferred dividend requirements 2.88 2.61 2.59 2.77 2.57
(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
3-MOS
DEC-31-1996
MAR-31-1996
PER-BOOK
1,360,334
258,707
193,014
329,706
0
2,141,761
583,313
17,002
147,389
747,704
85,000
50,000
651,851
0
16,264
0
40,336
0
4,725
1,553
544,328
2,141,761
248,004
25,984
181,558
181,558
66,446
16,753
83,199
15,306
41,909
2,266
39,643
17,348
0
97,416
0.71
0.71
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.
