1
UNITED STATES
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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission 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
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(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
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Web site: http://www.wwpco.com
None
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(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
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At July 31, 1997, 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
Part I. Financial Information: Page No.
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Item 1.Financial Statements
Consolidated Statements of Income - Three Months Ended
June 30, 1997 and 1996................................ 3
Consolidated Statements of Income - Six Months Ended
June 30, 1997 and 1996................................ 4
Consolidated Balance Sheets - June 30, 1997
and December 31, 1996................................. 5
Consolidated Statements of Capitalization - June 30, 1997
and December 31, 1996................................. 6
Consolidated Statements of Cash Flows - Six Months Ended
June 30, 1997 and 1996................................ 7
Schedule of Information by Business Segments -
Three Months Ended June 30, 1997 and 1996............. 8
Schedule of Information by Business Segments -
Six Months Ended June 30, 1997 and 1996............... 9
Notes to Consolidated Financial Statements............... 10
Item 2.Management's Discussion and Analysis of
Financial Condition and Results of Operations............ 12
Part II. Other Information:
Item 5.Other Information..................................... 16
Item 6.Exhibits and Reports on Form 8-K...................... 17
Signature............................................................... 18
3
CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
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For the Three Months Ended June 30
Thousands of Dollars
1997 1996
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OPERATING REVENUES $ 236,274 $ 195,900
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OPERATING EXPENSES:
Operations and maintenance 147,288 101,774
Administrative and general 25,832 18,747
Depreciation and amortization 17,458 18,000
Taxes other than income taxes 11,027 13,023
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Total operating expenses 201,605 151,544
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INCOME FROM OPERATIONS 34,669 44,356
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OTHER INCOME (EXPENSE):
Interest expense (16,200) (15,261)
Interest on income tax recovery 47,337 -
Net gain on subsidiary transactions 3,339 -
Merger-related expenses - (14,013)
Other income (deductions)-net (6,340) 433
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Total other income (expense)-net 28,136 (28,841)
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INCOME BEFORE INCOME TAXES 62,805 15,515
INCOME TAXES 14,330 6,547
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NET INCOME 48,475 8,968
DEDUCT-Preferred stock dividend requirements 1,812 2,141
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INCOME AVAILABLE FOR COMMON STOCK $ 46,663 $ 6,827
========= =========
Average common shares outstanding (thousands) 55,960 55,960
EARNINGS PER SHARE OF COMMON STOCK $ 0.83 $ 0.12
Dividends paid per common share $ 0.31 $ 0.31
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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4
CONSOLIDATED STATEMENTS OF INCOME
The Washington Water Power Company
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For the Six Months Ended June 30
Thousands of Dollars
1997 1996
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OPERATING REVENUES $ 520,285 $ 443,903
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OPERATING EXPENSES:
Operations and maintenance 314,627 231,634
Administrative and general 46,014 37,977
Depreciation and amortization 34,920 35,275
Taxes other than income taxes 25,997 26,715
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Total operating expenses 421,558 331,601
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INCOME FROM OPERATIONS 98,727 112,302
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OTHER INCOME (EXPENSE):
Interest expense (32,516) (30,566)
Interest on income tax recovery 47,337 -
Net gain on subsidiary transactions 3,454 17,064
Merger-related expenses - (15,513)
Other income (deductions)-net 360 121
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Total other income (expense)-net 18,635 (28,894)
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INCOME BEFORE INCOME TAXES 117,362 83,408
INCOME TAXES 39,039 32,531
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NET INCOME 78,323 50,877
DEDUCT-Preferred stock dividend requirements 3,590 4,407
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INCOME AVAILABLE FOR COMMON STOCK $ 74,733 $ 46,470
========= =========
Average common shares outstanding (thousands) 55,960 55,959
EARNINGS PER SHARE OF COMMON STOCK $ 1.34 $ 0.83
Dividends paid per common share $ 0.62 $ 0.62
THE ACCOMPANYING NOTES ARE AN INTEGRAL PART OF THESE STATEMENTS.
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5
CONSOLIDATED BALANCE SHEETS
The Washington Water Power Company
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Thousands of Dollars
June 30, December 31,
1997 1996
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ASSETS:
PROPERTY:
Utility plant in service-net $1,991,740 $1,951,604
Construction work in progress 35,091 38,696
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Total 2,026,831 1,990,300
Less: Accumulated depreciation and amortization 617,696 592,424
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Net utility plant 1,409,135 1,397,876
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OTHER PROPERTY AND INVESTMENTS:
Investment in exchange power-net 72,137 75,312
Non-utility properties and investments-net 153,802 149,747
Other-net 23,975 22,670
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Total other property and investments 249,914 247,729
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CURRENT ASSETS:
Cash and cash equivalents 29,921 8,211
Temporary cash investments 25,704 19,709
Accounts and notes receivable-net 117,277 148,742
Materials and supplies, fuel stock and natural gas stored 34,633 31,729
Prepayments and other 19,900 19,998
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Total current assets 227,435 228,389
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DEFERRED CHARGES:
Regulatory assets for deferred income tax 170,954 164,753
Conservation programs 55,570 57,703
Prepaid power purchases 25,652 30,935
Unamortized debt expense 24,936 23,148
Other-net 31,135 26,765
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Total deferred charges 308,247 303,304
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TOTAL $2,194,731 $2,177,298
CAPITALIZATION AND LIABILITIES:
CAPITALIZATION (See Consolidated Statements of Capitalization) $1,614,108 $1,590,262
CURRENT LIABILITIES:
Accounts payable 88,797 95,268
Taxes and interest accrued 38,171 37,344
Other 57,414 70,873
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Total current liabilities 184,382 203,485
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NON-CURRENT LIABILITIES AND DEFERRED CREDITS:
Non-current liabilities 30,897 27,855
Deferred income taxes 348,029 312,529
Other 17,315 43,167
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Total non-current liabilities and deferred credits 396,241 383,551
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COMMITMENTS AND CONTINGENCIES (Note 3)
TOTAL $2,194,731 $2,177,298
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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
June 30, December 31,
1997 1996
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COMMON EQUITY:
Common stock, no par value: 200,000,000 shares authorized;
55,960,360 shares outstanding $ 594,853 $ 594,853
Note receivable from employee stock ownership plan (10,662) (11,009)
Capital stock expense and other paid in capital (10,120) (10,112)
Unrealized investment gain-net 9,820 5,703
Retained earnings 171,755 131,301
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Total common equity 755,646 710,736
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PREFERRED STOCK-CUMULATIVE:
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
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Total not subject to mandatory redemption 50,000 50,000
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Subject to mandatory redemption:
$8.625, Series I; 100,000 and 300,000 shares outstanding
($100 stated value) 10,000 30,000
$6.95, Series K; 350,000 shares outstanding ($100 stated value) 35,000 35,000
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Total subject to mandatory redemption 45,000 65,000
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COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED
TRUST SECURITIES:
7 7/8%, Series A, due 2037 60,000 -
Floating Rate, Series B, due 2037 50,000 -
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Total company-obligated mandatorily redeemable preferred trust
securities 110,000 -
LONG-TERM DEBT:
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 - 5.95% to 8.06% due 2000 through 2023 212,000 227,000
Series B - 6.50% to 8.25% due 1997 through 2010 141,000 141,000
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Total first mortgage bonds 436,700 451,700
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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 - 6.75% to 8.23% due 1999 through 2023 115,000 120,000
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Total unsecured medium-term notes 187,500 192,500
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Notes payable (due within one year) to be refinanced - 85,000
Other 25,162 31,226
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Total long-term debt 653,462 764,526
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TOTAL CAPITALIZATION $ 1,614,108 $ 1,590,262
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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 Six Months Ended June 30
Thousands of Dollars
1997 1996
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OPERATING ACTIVITIES:
Net income $ 78,323 $ 50,877
NON-CASH REVENUES AND EXPENSES
INCLUDED IN NET INCOME:
Depreciation and amortization 34,920 35,275
Provision for deferred income taxes 34,983 2,256
Allowance for equity funds used during construction (599) (355)
Power and natural gas cost deferrals and amortization (12,850) 6,539
Deferred revenues and other-net (15,685) 6,140
(Increase) decrease in working capital components:
Receivables and prepaid expenses-net 11,793 8,599
Materials & supplies, fuel stock and natural gas stored (3,556) 1,494
Payables and other accrued liabilities (1,583) (9,454)
Other-net 12,710 5,245
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NET CASH PROVIDED BY OPERATING ACTIVITIES 138,456 106,616
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INVESTING ACTIVITIES:
Construction expenditures (excluding AFUDC-equity funds) (37,625) (36,826)
Other capital requirements (4,079) (349)
(Increase) decrease in other noncurrent balance sheet items-net 8,255 8,024
Assets acquired and investments in subsidiaries (1,689) (27,488)
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NET CASH USED IN INVESTING ACTIVITIES (35,138) (56,639)
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FINANCING ACTIVITIES:
Increase (decrease) in short-term borrowings (85,000) 1,500
Proceeds from issuance of preferred trust securities 110,000 -
Repurchase and maturity of long-term debt (20,000) (15,000)
Redemption of preferred stock (20,000) (20,000)
Sale of common stock-net 347 (6,201)
Other-net (28,595) 19,976
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NET FINANCING ACTIVITIES BEFORE CASH DIVIDENDS (43,248) (19,725)
Less cash dividends paid (38,360) (32,231)
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NET CASH USED IN FINANCING ACTIVITIES (81,608) (51,956)
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NET INCREASE/(DECREASE) IN CASH AND CASH EQUIVALENTS 21,710 (1,979)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 8,211 5,164
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CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 29,921 $ 3,185
========= =========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the period:
Interest $ 36,913 $ 28,088
Income taxes $ 33,955 $ 26,039
Non-cash financing and investing activities $ 1,290 $ 36,150
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 June 30
Thousands of Dollars
1997 1996
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OPERATING REVENUES:
Energy Delivery $ 77,665 $ 73,493
Energy Trading 122,781 86,905
Non-energy 35,828 35,502
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Total operating revenues $ 236,274 $ 195,900
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OPERATIONS AND MAINTENANCE EXPENSES:
Energy Delivery:
Natural gas purchased for resale $ 17,594 $ 15,313
Other 14,957 14,648
Energy Trading:
Power and natural gas purchased 66,497 27,586
Fuel for generation 5,981 6,394
Other 15,972 11,196
Non-energy 26,287 26,637
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Total operations and maintenance expenses $ 147,288 $ 101,774
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ADMINISTRATIVE AND GENERAL EXPENSES:
Energy Delivery $ 14,172 $ 11,646
Energy Trading 7,651 4,372
Non-energy 4,009 2,729
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Total administrative and general expenses $ 25,832 $ 18,747
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DEPRECIATION AND AMORTIZATION EXPENSES:
Energy Delivery $ 8,094 $ 8,426
Energy Trading 6,448 7,004
Non-energy 2,916 2,570
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Total depreciation and amortization expenses $ 17,458 $ 18,000
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INCOME FROM OPERATIONS:
Energy Delivery $ 14,780 $ 13,761
Energy Trading 17,901 27,159
Non-energy 1,988 3,436
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Total income from operations $ 34,669 $ 44,356
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INCOME AVAILABLE FOR COMMON STOCK:
Energy operations $ 43,531 $ 5,406
Non-energy operations 3,132 1,421
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Total income available for common stock $ 46,663 $ 6,827
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ASSETS: (1996 amounts at December 31)
Energy Delivery $ 1,034,853 $ 1,014,451
Energy Trading 655,431 683,599
Other energy 254,305 223,379
Non-energy 250,142 255,869
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Total assets $ 2,194,731 $ 2,177,298
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CAPITAL EXPENDITURES (excluding AFUDC/AFUCE):
Energy Delivery $ 18,940 $ 18,327
Energy Trading (1,837) 1,726
Non-energy 3,320 782
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Total capital expenditures $ 20,423 $ 20,835
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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 Six Months Ended June 30
Thousands of Dollars
1997 1996
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OPERATING REVENUES:
Energy Delivery $ 196,545 $ 194,684
Energy Trading 248,856 183,743
Non-energy 74,884 65,476
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Total operating revenues $ 520,285 $ 443,903
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OPERATIONS AND MAINTENANCE EXPENSES:
Energy Delivery:
Natural gas purchased for resale $ 49,933 $ 50,069
Other 28,701 29,565
Energy Trading:
Power and natural gas purchased 138,404 66,097
Fuel for generation 15,643 13,708
Other 27,027 23,516
Non-energy 54,919 48,679
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Total operations and maintenance expenses $ 314,627 $ 231,634
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ADMINISTRATIVE AND GENERAL EXPENSES:
Energy Delivery $ 25,683 $ 23,804
Energy Trading 12,566 8,119
Non-energy 7,765 6,054
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Total administrative and general expenses $ 46,014 $ 37,977
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DEPRECIATION AND AMORTIZATION EXPENSES:
Energy Delivery $ 16,217 $ 16,933
Energy Trading 13,061 13,917
Non-energy 5,642 4,425
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Total depreciation and amortization expenses $ 34,920 $ 35,275
========== ==========
INCOME FROM OPERATIONS:
Energy Delivery $ 56,456 $ 54,046
Energy Trading 36,970 52,392
Non-energy 5,301 5,864
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Total income from operations $ 98,727 $ 112,302
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INCOME AVAILABLE FOR COMMON STOCK:
Energy operations $ 70,261 $ 33,318
Non-energy operations 4,472 13,152
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Total income available for common stock $ 74,733 $ 46,470
========== ==========
ASSETS: (1996 amounts at December 31)
Energy Delivery $1,034,853 $1,014,451
Energy Trading 655,431 683,599
Other energy 254,305 223,379
Non-energy 250,142 255,869
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Total assets $2,194,731 $2,177,298
========== ==========
CAPITAL EXPENDITURES (excluding AFUDC/AFUCE):
Energy Delivery $ 32,190 $ 32,611
Energy Trading 483 2,810
Non-energy 4,464 1,149
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Total capital expenditures $ 37,137 $ 36,570
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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 June 30, 1997 and 1996 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, 1996
(1996 Form 10-K).
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
NEW ACCOUNTING STANDARDS
The Financial Accounting Standards Board (FASB) issued FAS No. 130, entitled
"Reporting Comprehensive Income," which is effective for fiscal years beginning
after December 15, 1997 and FAS No. 131, entitled "Disclosure about Segments of
an Enterprise and Related Information," which is effective for financial
statements for periods beginning after December 15, 1997. FAS 130 requires
companies to (a) classify items of other comprehensive income by their nature in
a financial statement and (b) display the accumulated balance of other
comprehensive income separately from retained earnings and additional paid-in
capital in the equity section of a statement of financial position. The Company
is currently evaluating the impact of this standard on the Company's financial
position and results of operations. FAS 131 requires public enterprises to
report financial and descriptive information on the basis that it is used
internally for evaluating segment performance and deciding how to allocate
resources to segments. The Company does not expect that this statement will have
a material effect on the Company's financial statements or disclosures.
NOTE 2. FINANCINGS
COMPANY-OBLIGATED MANDATORILY REDEEMABLE PREFERRED SECURITIES
On January 23, 1997, Washington Water Power Capital I, a business trust, issued
to the public $60,000,000 of Preferred Trust Securities having a distribution
rate of 7 7/8%. Concurrent with the issuance of the Preferred Trust Securities,
the Trust issued $1,855,675 of Common Trust Securities to the Company. The sole
assets of the Trust are the Company's 7 7/8% Junior Subordinated Deferrable
Interest Debentures, Series A, with a principal amount of $61,855,675. These
debt securities may be redeemed at the Company's option on or after January 15,
2002 and mature January 15, 2037.
On June 3, 1997, Washington Water Power Capital II, a business trust, issued to
the public $50,000,000 of Preferred Trust Securities having a floating
distribution rate of LIBOR plus 0.875%, calculated and reset quarterly
(initially 6.6875%). Concurrent with the issuance of the Preferred Trust
Securities, the Trust issued $1,547,000 of Common Trust Securities to the
Company. The sole assets of the Trust are the Company's Floating Rate Junior
Subordinated Deferrable Interest Debentures, Series B, with a principal amount
of $51,547,000. These debt securities may be redeemed at the Company's option on
or after June 1, 2007 and mature June 1, 2037.
The Company has guaranteed the payment of distributions on, and redemption price
and liquidation amount in respect of, the Preferred Trust Securities to the
extent that the Trust has funds available for such payment from the debt
securities. Upon maturity or prior redemption of such debt securities, the Trust
Securities will be mandatorily redeemed. The Company's consolidated statement of
capitalization reflects only the $60 million and $50 million of Preferred Trust
Securities.
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
The Company and certain of its subsidiaries are parties to various legal claims,
actions and complaints. Although the Company cannot predict with certainty
whether or not it will ultimately be successful in these legal proceedings,
management believes that as of this time, it has adequately reserved for any
potential liabilities and that the ultimate outcome of all the claims and
actions should not have a material adverse effect on the Company's consolidated
operations, financial condition or liquidity. For information about specific
legal proceedings involving the
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THE WASHINGTON WATER POWER COMPANY
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Company or its subsidiaries, reference is made to the Company's 1996 Form 10-K.
To-date, there have been no material developments since that report was issued.
NOTE 4. INCOME TAX RECOVERY
In June 1997, the Company received $81 million from the Internal Revenue Service
(IRS) to settle an income tax claim relating to its investment in the terminated
nuclear project 3 of the Washington Public Power Supply System (WNP3). The $81
million recovery included $34 million in income taxes the Company overpaid in
prior years plus $47 million in accrued interest, which contributed $41.4
million, or $0.74 per share, to net income.
The Company had claimed that it realized a loss in 1985 relating to its $195
million investment in WNP3 entitling it to current tax deductions. The IRS,
however, originally denied the Company's claim and ruled that the investment
should be written off over 32.5 years, the term of a settlement agreement
between the Company and the Bonneville Power Administration relating to WNP3.
The Company disagreed with this ruling and had been pursuing a reversal for
several years. The IRS has now agreed with the Company's position.
The Company entered into settlement agreements with the Washington Utilities and
Transportation Commission (WUTC) and the Idaho Public Utilities Commission
(IPUC) in 1987 and 1988 providing for the recovery through retail prices of
approximately 60% of the Company's $195 million investment in WNP3. As a result
of these agreements, customers have been and will continue to receive the tax
benefits relating to the recoverable portion of WNP3 over the recovery periods
specified in the settlement agreements. The settlement agreements resulted in a
write-off of approximately $75 million of the Company's WNP3 investment, with
the entire write-off charged to shareholders. The tax recovery and related
accrued interest from the IRS will flow through to the benefit of shareholders.
The cash will be used to fund new business investment, including growth
opportunities in national energy markets, and will reduce the need for issuance
of long-term debt during 1997.
NOTE 5. ACQUISITIONS AND DISPOSITIONS
Avista Energy, Inc. (Avista Energy), the Company's national energy marketing
company, began operations in the third quarter of 1997. Several alliances and
partnerships have been entered into since the beginning of the year. A limited
liability company, Howard/Avista Energy, LLC, in which Avista Energy will have a
50% ownership, was formed with Howard Energy Marketing, effective August 1,
1997. Avista Energy's initial equity investment in Howard/Avista Energy LLC was
$25 million. Results from this company will be accounted for under the equity
method starting in the third quarter of 1997. Avista Energy has also formed an
alliance with Chelan County Public Utility District (Chelan PUD), located in
Washington state, under which Avista Energy will market a significant portion of
Chelan PUD's hydroelectric resources to other utilities throughout the Northwest
and will manage the real-time scheduling on such output beginning in August
1997. Avista Energy reached a joint venture agreement with Energy West
Incorporated, a diversified energy and retail propane company in Montana. The
two companies will develop and implement a direct access, retail power marketing
business in Montana. In November 1996, an alliance was formed with Mock Energy
Services, California's largest natural gas marketer, to market natural gas and
electric commodity services to industrial and large commercial customers
throughout California. In addition, a Houston-based operation was initiated in
July.
In May 1997, Pentzer Corporation (Pentzer) sold its interest in a portfolio
company, Safety Speed Cut, resulting in a gain of approximately $2.0 million,
net of taxes. In July 1997, Pentzer acquired two new companies - Target
Woodworks, Inc., a Florida-based company, and White Plus, a California-based
company. Both provide point-of-purchase and in-store merchandising services.
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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 operates as a regulated utility providing electric and natural gas
sales and services and as a non-regulated entity providing both energy and
non-energy products and services. The energy business consists of two lines of
business -- Energy Delivery (Transmission and Distribution) and Energy Trading
(Generation and Resources). The non-energy business primarily includes the
operations of the portfolio companies of Pentzer, a wholly owned subsidiary of
the Company.
The Energy Delivery business includes transmission and distribution services for
retail electric operations and all natural gas operations, as well as other
energy products and services. 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.
The Energy Trading business includes generation and production, short and
long-term wholesale electric and natural gas commodity trading and sales, and
energy services. Revenues from the sale of energy to other utilities and the
cost of electric power purchases vary from year to year depending on the
electric wholesale power market, which 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 other areas of the
country. Other factors affecting the wholesale power market include an
increasing number of power brokers and marketers and competition from low cost
generation being developed by independent power producers. This business also
includes the results of two new non-regulated energy subsidiaries, Avista Energy
and Avista Advantage, Inc. Avista Energy focuses on commodity trading, energy
marketing and other related businesses on a national basis. Avista Advantage
provides a variety of energy-related products and services to commercial and
industrial customers on a national basis. See Note 5 of Notes to Financial
Statements for a description of start-up activities related to these companies.
The non-energy business primarily consists of Pentzer, which is the parent
company to the majority of the Company's non-energy businesses.
RESULTS OF OPERATIONS
OVERALL OPERATIONS
Second quarter 1997 net income available for common stock was $46.7 million, a
$39.9 million increase from 1996 second quarter net income of $6.8 million. The
increase in earnings was primarily the result of an income tax recovery which
resulted in a $41.4 million, or $0.74 per share, increase in after-tax income
during the second quarter of 1997 (see Note 4 of Notes to Financial Statements
for additional information) and the expensing of $14.0 million, or $0.16 per
share, in merger costs during the second quarter of 1996 related to the
terminated proposed merger between the Company and Sierra Pacific Resources.
Overall earnings per share for the second quarter of 1997 increased to $0.83
from $0.12 in 1996. Energy operations contributed $0.78 to earnings per share
for the second quarter of 1997 compared to $0.10 in the second quarter of 1996.
The increase in earnings per share from the income tax recovery was partially
offset by several non-operating and operating accruals and accounting
adjustments. Non-energy operations contributed $0.05 to earnings per share for
the second quarter of 1997 compared to $0.02 in the same period in 1996. The
increase in non-energy earnings was largely the result of a $2.0 million
transactional gain, net of tax, from the sale of Pentzer's interest in one of
its portfolio companies during the second quarter of 1997.
Net income available for common stock for the first half of 1997 was $74.7
million, a $28.2 million increase from net income of $46.5 million during the
first six months of 1996. The increase in earnings was primarily the result of
the income tax recovery mentioned above and the expensing of $15.5 million, or
$0.18 per share, in merger costs in the 1996 period. The 1996 results also
included a $10.8 million transactional gain, net of tax and other adjustments,
from the sale of property held for sale by one of Pentzer's subsidiaries.
Overall earnings per share for the first six months of 1997 increased to $1.34
from $0.83 in 1996. Energy operations contributed $1.26 to earnings per share
for the first six months of 1997 compared to $0.60 in the first half of 1996.
The increase in earnings per share from the income tax recovery was partially
offset by several non-operating and operating accruals and accounting
adjustments. Non-energy operations contributed $0.08 to earnings per share for
the first six months of 1997 compared to $0.23 in the same period in 1996. The
decrease in non-energy earnings was primarily the result of a $10.8 million
transactional gain ($0.19 per share), net of tax and other adjustments, from the
sale of property held for sale by one of Pentzer's subsidiaries which occurred
in the first quarter of 1996.
Other income (deductions) for both the three and six months periods included
$47.3 million in interest income on the income tax recovery, which was partially
offset by several non-operating accruals and accounting adjustments. Income
taxes increased $7.8 million and $6.5 million in the second quarter and first
half of 1997, respectively, over 1996 primarily due to the taxes on the interest
income received as a part of the income tax recovery, partially offset by an
$11.4 million income tax benefit associated with the income tax recovery. The
year-to-date income taxes were also partially offset by first quarter 1997
adjustments related to revised estimates on certain tax issues. The preferred
stock dividend decreased by $0.3 million and $0.8 million in the second quarter
and first half of 1997, respectively, from 1996 due to the redemption of $20
million in Preferred Stock, Series I in June of 1997 and 1996.
12
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THE WASHINGTON WATER POWER COMPANY
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ENERGY OPERATIONS
ENERGY DELIVERY
Energy Delivery income from operations increased by $1.0 million, or 7%, in the
second quarter of 1997 over the same period in 1996. The increase was due to
increased transmission revenues, a rate settlement and customer growth. Energy
Delivery's operating revenues and expenses increased by $4.2 million and $3.2
million, respectively, during the second quarter of 1997 as compared to 1996.
Retail electric revenues increased $1.4 million in the second quarter of 1997
compared to the same period in 1996, primarily as a result of 2% customer
growth, increased residential and commercial usage and increased transmission
revenues resulting from increased wholesale sales. Total natural gas revenues
increased $2.7 million in the second quarter of 1997 from 1996, primarily due to
increased sales for resale, 6% customer growth and an $0.8 million natural gas
rate settlement in California. Commercial natural gas revenues decreased in the
second quarter of 1997 from 1996, due to lower commercial therm sales as a
result of decreased customer usage. In addition, residential and commercial
natural gas revenues were affected by decreases in natural gas prices due to
purchased gas cost adjustments effective in Washington, Idaho and Oregon, which
decreased the prices paid by customers in 1997 by 4.4%, 8.5% and 8.59%,
respectively.
Natural gas purchased expense increased $2.3 million, or 15%, during the second
quarter of 1997 as compared to 1996, primarily due to increased volume of sales
for resale. A large portion of purchased gas expense is variable costs, with the
result that increases or decreases in purchased gas expense are generally offset
by like changes in revenues. Administrative and general expenses increased by
$2.5 million in the second quarter of 1997, compared to 1996, due primarily to
accruals related to employee compensation. Taxes other than income decreased
$1.6 million in the second quarter of 1997 from the previous year due to lower
accruals in 1997 for property taxes, and higher generation taxes in 1996 in
Idaho and Montana due to higher hydroelectric generation.
Energy Delivery income from operations increased by $2.4 million, or 4%, in the
first half of 1997 over the same period in 1996. The increase was due to
increased transmission revenues, a rate settlement and customer growth,
partially offset by warmer weather and decreased natural gas prices. Energy
Delivery's operating revenues and expenses increased by $1.9 million and
decreased by $0.5 million, respectively, during the first six months of 1997
compared to 1996.
Retail electric revenues increased $2.3 million in the first half of 1997
compared to 1996, due to a $2.8 million increase in transmission revenues as a
result of increased wholesale electric sales, partially offset by decreased
industrial sales. Total natural gas revenues decreased $0.5 million in the first
six months of 1997 from 1996, primarily due to decreased retail therm sales as a
result of normal weather during the first half of 1997, compared to 11% colder
than normal in the same period in 1996. In addition, residential and commercial
revenues also declined due to decreases in natural gas prices. Purchased gas
cost adjustments effective in Washington, Idaho and Oregon decreased the prices
paid by customers in 1997 by the amounts reported above.
Natural gas purchased expense decreased $0.1 million during the first half of
1997 as compared to 1996, primarily due to decreased therm sales. Natural gas
operations were negatively affected by a $0.8 million write-off of a natural gas
transaction software program during the first quarter of 1997. Administrative
and general expenses increased by $1.9 million in the first six months of 1997
compared to 1996, due primarily to accruals related to employee compensation.
ENERGY TRADING
Energy Trading income from operations decreased by $9.3 million, or 34%, in the
second quarter of 1997 from the same period in 1996. The decrease was due to the
expiration of older sales contracts with higher margins, lower unit margins on
new sales contracts, lower hydroelectric generation, a $3.0 million PCA
adjustment, higher transmission expenses and start-up costs at the two new
non-regulated subsidiaries. Energy Trading's operating revenues and expenses
increased by $35.9 million and $45.1 million, respectively, during the second
quarter of 1997 as compared to 1996.
Energy Trading revenues increased due to new power contracts for long-term
wholesale electric service and increased short-term sales. Revenues from
long-term sales increased $9.1 million in the second quarter of 1997 over 1996,
while revenues from short-term sales increased $24.1 million during the same
period. Total sales volumes during the second quarter of 1997 increased 63% from
the same period in 1996. Long-term sales volumes decreased 0.1 million mwhs, or
9%, while short-term sales increased by 1.7 million mwhs, or 119%.
Commitments under new long-term wholesale sales contracts and increased
short-term sales, combined with increased costs under some long-term purchased
power contracts, resulted in a $37.3 million increase in electric purchased
power expense in the second quarter of 1997 over 1996, which accounts for the
majority of the increase in Energy Trading's operating expenses. Hydroelectric
generation for the second quarter of 1997 was slightly below that of the same
period of 1996, which was the Company's highest year ever for hydroelectric
generation.
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THE WASHINGTON WATER POWER COMPANY
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Other operating and maintenance expenses increased $4.8 million in
the second quarter of 1997 from the same period in 1996. The Idaho Power Cost
Adjustment (PCA), which allows the Company to change prices to recover or rebate
a portion of the difference between actual and allowed net power supply costs,
increased expenses by $1.9 million during the second quarter of 1997 as compared
to the same period in 1996, primarily due to a $3.0 million adjustment from
prior periods. Transmission expense increased by $1.8 million in the second
quarter of 1997 over 1996, due to a $1.1 million accrual related to prior
periods and increased wholesale sales. Administrative and general expenses
increased by $3.3 million in the second quarter of 1997 compared to 1996, due
primarily to accruals related to employee compensation and higher regulatory
fees.
Energy Trading income from operations decreased by $15.4 million, or 29%, in the
first half of 1997 over the same period in 1996. The decrease was due to the
expiration of older sales contracts with higher margins, lower unit margins on
new sales contracts, lower hydroelectric generation, a $3.0 million PCA
adjustment, higher transmission expenses and start-up costs at the two new
non-regulated subsidiaries. Energy Trading's operating revenues and expenses
increased by $65.1 million and $80.5 million, respectively, during the first six
months of 1997 compared to 1996.
Energy Trading revenues increased due to new power contracts for long-term
wholesale electric service and increased short-term sales. Revenues from
long-term sales increased $16.1 million in the first six months of 1997 over
1996, while revenues from short-term sales increased $45.6 million during the
same period. Total sales volumes during the first half of 1997 increased 76%
over the same period in 1996, while average prices were down by approximately 5%
from the first six months of 1996. Long-term sales volumes increased 0.3 million
mwhs, or 15%, while short-term sales increased by 3.2 million mwhs, or 126%.
Purchased power expense increased $70.7 million, or 107%, in the first half of
1997 over 1996, which accounts for the majority of the year-to-date increase in
Energy Trading's operating expenses. During the first six months of 1997,
hydroelectric generation was 13% below that of the same period of 1996. Fuel
costs increased $1.9 million in the first six months of 1997 compared to 1996
due to increased generation at thermal plants to support increased wholesale
sales. Other operating and maintenance expenses increased $3.5 million in the
first half of 1997 from the same period in 1996. PCA expenses decreased by $0.4
million in the first six months of 1997 from 1996, in spite of the adjustment in
the second quarter, due to surcharges that were in effect in 1996 as compared to
rebates in effect in 1997. Transmission expenses increased $2.1 million in the
six-month period of 1997 over 1996 due to the second quarter accrual and
increased wholesale sales. Administrative and general expenses increased by $4.4
million in the first half of 1997, compared to 1996, due primarily to the
accruals and higher fees mentioned above.
NON-ENERGY OPERATIONS
The non-energy business primarily consists of Pentzer, which is the parent
company to the majority of the Company's non-energy businesses. 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 those of the energy 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.
Non-energy income available for common stock for the second quarter of 1997 was
$3.1 million, which represents a $1.7 million increase from second quarter 1996
earnings. The 1997 earnings increase primarily resulted from a transactional
gain totaling $2.0 million, net of taxes, recorded by Pentzer as a result of the
sale of its interest in a portfolio company. Non-transactional income from
portfolio companies in 1997 was lower than 1996 by $0.8 million. Non-energy
operating revenues and expenses increased by $0.3 million and $1.8 million,
respectively, during the second quarter of 1997 as compared to 1996 primarily as
a result of increased business activity from Pentzer's portfolio companies.
Income from operations totaled $2.0 million, which was a $1.4 million decrease
in 1997 from 1996.
Non-energy income available for common stock for the first half of 1997 was $4.5
million, which represents an $8.7 million decrease from first half 1996
earnings. The 1996 earnings primarily resulted from a transactional gain
totaling $10.8 million, net of taxes and other adjustments, recorded by
Pentzer as a result of the sale of property by one of its subsidiary companies.
Non-transactional income from portfolio companies in 1997 was down slightly
from 1996. Non-energy operating revenues and expenses increased by $9.4 million
and $10.0 million, respectively, during the first six months of 1997 as
compared to 1996, primarily as a result of increased business activity from
Pentzer's portfolio companies. Income from operations totaled $5.3 million,
which was a $0.6 million decrease in 1997 from 1996.
14
15
THE WASHINGTON WATER POWER COMPANY
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LIQUIDITY AND CAPITAL RESOURCES
OVERALL OPERATIONS
Operating Activities Net cash provided by operating activities in the first half
of 1997 increased by $31.8 million from the same period in 1996 due in large
part to the $27.4 million increase in net income from the income tax recovery.
In addition, changes in various working capital components, such as increased
payables and decreased receivables increased cashflows by $13.5 million over the
same period of last year. When the effects of non-cash items, such as the
increased provision for deferred income taxes from the income tax recovery and
adjustments for depreciation and the FAS 109 regulatory asset are removed from
net income, there is an additional increase in cash provided by operating
activities. Power and natural gas cost deferrals decreased cashflows in 1997 as
a result of PCA rebates in effect in 1997 as compared to surcharges in effect
during the first half of 1996, increased natural gas prices during the first
part of 1997 and reduced prices paid by natural gas customers in the current
year.
Investing Activities Net cash used in investing activities totaled $35.1 million
in the first six months of 1997 compared to $56.6 million in the same period in
1996. Cash used in investing activities was higher during the first half of 1996
as a result of the establishment of trusts totaling $10.8 million for
postretirement medical benefits and coal reclamation costs and the $8.2 million
net effect on cash flows of transactions related to the sale of property by
Pentzer. Pentzer received a promissory note for a portion of the sale price of
an industrial park in the first quarter of 1996.
Financing Activities Net cash used in financing activities totaled $81.6 million
in the first six months of 1997 compared to $52.0 million in 1996. Bank
borrowings were decreased by $85.0 million, preferred stock totaling $20.0
million was redeemed and $20.0 million of long-term debt was repurchased in the
first half of 1997 with the proceeds of $110 million of Preferred Trust
Securities which were issued in January and June of 1997. In addition, the
Company used the net proceeds from the issuance of the Preferred Trust
Securities to redeem all of the Company's $50,000,000 Series J Auction Rate
Preferred Stock on August 7, 1997. See Note 2 of Notes to Financial Statements
for additional information about these securities. The reduction of $28.6
million in Other-net reflects the repayment of short-term borrowings and
long-term debt by Pentzer during 1997, as compared to increasing its borrowings
in the first half of 1996.
ENERGY OPERATIONS
The Company funds its energy 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 capital expenditures.
Capital expenditures are financed on an interim basis with short-term debt. The
Company has $120 million in committed lines of credit, a reduction of $40
million from previous levels. In addition, the Company may borrow up to $60
million through other borrowing arrangements with banks. As of June 30, 1997, no
balances were outstanding under any of these agreements and arrangements.
During the 1997-1999 period, energy capital expenditures are expected to be $239
million, and, in addition, $138.5 million will be required for long-term debt
maturities and repurchases and preferred stock sinking fund requirements. During
this three-year period, the Company estimates that internally-generated funds
will provide approximately 113% of the funds needed for its capital expenditure
program. External financing will be required to fund a portion of the maturing
long-term debt and preferred stock sinking fund 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, construction schedules and environmental
requirements.
NON-ENERGY OPERATIONS
The non-energy operations have $77.0 million in short-term borrowing
arrangements available ($12.7 million outstanding as of June 30, 1997) to fund
corporate requirements on an interim basis. At June 30, 1997, the non-energy
operations had $44.6 million in cash and marketable securities with $33.9
million in long-term debt outstanding.
The 1997-1999 non-energy capital expenditures are expected to be $12 million,
and $30 million in debt will mature in this period. During the next three years,
internally-generated cash and other debt obligations are expected to provide the
majority of the funds for the non-energy 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 $44.9 million during the first
six months of 1997 to $755.6 million, primarily due to a $40.5 million increase
in retained earnings as a result of the income tax recovery. The Company's
consolidated capital structure at June 30, 1997, was 40% debt, 13% preferred
stock (including the new Preferred Trust Securities) and 47% common equity as
compared to 48% debt, 7% preferred stock and 45% common equity at year-end 1996.
SAFE HARBOR FOR FORWARD LOOKING STATEMENTS.
The Company is including the following cautionary statement in this Form 10-Q to
make applicable and to take advantage of the safe harbor provisions of the
Private Securities Litigation Reform Act of 1995 for any forward-looking
statements made by, or on behalf of, the Company. Forward-looking statements are
all statements other than statements of historical fact, including without
limitation those that are identified by the use of the words "anticipates,"
"estimates," "expects," "intends," "plans," "predicts," and similar expressions.
Such statements are inherently subject to a variety of risks and uncertainties
that could cause actual results to differ materially from those expressed. Such
risks and uncertainties include, among others, changes in the utility regulatory
environment, wholesale and retail competition, weather conditions and various
other matters, many of which are beyond the Company's control. These
forward-looking statements speak only as of the date of the report. The Company
expressly undertakes no obligation to update or revise any forward-looking
statement contained herein to reflect any change in the Company's expectations
with regard thereto or any change in events, conditions, or circumstances on
which any such statement is based. See "Safe Harbor for Forward Looking
Statements" in the Company's 1996 Form 10-K under Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations -
Future Outlook.
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The 1997 Annual Meeting of Shareholders of the Company was held on May 20, 1997.
The re-election of directors with expiring terms and the election of two new
directors were the only matters voted upon at the meeting. There were 55,960,360
shares of Common Stock issued and outstanding as of March 20, 1997, the proxy
record date, with 47,902,930 shares represented at said meeting. The details of
the voting are shown below:
Against
For or Withheld
---------- -----------
Re-election of Directors
W. Lester Bryan 45,582,358 958,339
R. John Taylor 45,666,399 874,298
Election of New Directors
Sarah M.R. (Sally) Jewell 45,601,399 939,298
John F. Kelly 45,599,467 941,230
ITEM 5. OTHER INFORMATION.
REGULATORY PROCEEDINGS.
Natural Gas General Rate Case The Company filed a natural gas general rate case
in Washington in June 1997 seeking an overall natural gas price increase of $7.9
million to offset increases in the cost of maintaining and operating the
Company's natural gas distribution system. The proposed price increases are not
likely to go into effect until early 1998.
Power Cost Adjustment The Company filed a proposal with the IPUC to extend an
existing 2.344% power cost adjustment rebate for 12 months. The rebate, which
was originally intended to expire on August 31, 1997, would instead expire on
August 31, 1998.
More Options for Power Services In February, the Company filed with the WUTC and
the IPUC an experimental More Options for Power Services (MOPS) tariff to allow
residents and businesses in the towns of Odessa and Harrington, Washington and
approximately 2,800 other randomly selected residential and commercial customers
in Washington and Idaho direct access to alternative energy providers. The WUTC
and IPUC approved the two-year program, to begin in mid-1997. However, the
Company will defer implementation of the random selection portion of the program
until some later date due to lack of supplier participation. Two energy
suppliers are currently in the process of marketing to the customers in Odessa
and Harrington. It is unlikely that any
16
17
THE WASHINGTON WATER POWER COMPANY
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alternative service will occur before early September. The program costs and
margin losses associated with this program are not expected to have a material
impact of the Company's financial condition or results of operations.
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
June 30, December 31,
1997 1996
-------------- --------------
Ratio of Earnings to Fixed Charges 3.56 (x) 2.97 (x)
Ratio of Earnings to Fixed Charges and
Preferred Dividend Requirements 3.06 (x) 2.50 (x)
The Company has long-term purchased power arrangements with various Public
Utility Districts and the interest expense components of these contracts are
included in purchased power expenses. These interest amounts are not included in
the fixed charges and would 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.
Dated June 25, 1997, regarding the income tax recovery the Company
received from the Internal Revenue Service.
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: August 14, 1997 /s/ J. E. Eliassen
------------------------
J. E. Eliassen
Senior Vice President 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
Consolidated
(Thousands of Dollars)
12 Mos. Ended Years Ended December 31
June 30, -----------------------------------------------------
1997 1996 1995 1994 1993
-------- -------- -------- -------- --------
Fixed charges, as defined:
Interest on long-term debt $ 62,439 $ 60,256 $ 55,580 $ 49,566 $ 47,129
Amortization of debt expense
and premium - net 2,767 2,998 3,441 3,511 3,004
Interest portion of rentals 4,335 4,311 3,962 1,282 924
-------- -------- -------- -------- --------
Total fixed charges $ 69,541 $ 67,565 $ 62,983 $ 54,359 $ 51,057
-------- -------- -------- -------- --------
Earnings, as defined:
Net income from continuing ops $110,899 $ 83,453 $ 87,121 $ 77,197 $ 82,776
Add (deduct):
Income tax expense 67,369 49,509 52,416 44,696 42,503
Total fixed charges above 69,541 67,565 62,983 54,359 51,057
-------- -------- -------- -------- --------
Total earnings $247,809 $200,527 $202,520 $176,252 $176,336
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges 3.56 2.97 3.22 3.24 3.45
Fixed charges and preferred dividend requirements:
Fixed charges above $ 69,541 $ 67,565 $ 62,983 $ 54,359 $ 51,057
Preferred dividend requirements (2) 11,511 12,711 14,612 13,668 12,615
-------- -------- -------- -------- --------
Total $ 81,052 $ 80,276 $ 77,595 $ 68,027 $ 63,672
-------- -------- -------- -------- --------
Ratio of earnings to fixed charges
and preferred dividend requirements 3.06 2.50 2.61 2.59 2.77
(1) Interest on long-term debt includes the interest accrued for the new
Preferred Trust Securities issued in 1997.
(2) Preferred dividend requirements have been grossed up to their pre-tax level.
UT
1,000
6-MOS
DEC-31-1997
JUN-30-1997
PER-BOOK
1,409,135
249,914
227,435
308,247
0
2,194,731
584,191
(300)
171,755
755,646
155,000
50,000
597,897
13,004
19,123
0
38,698
0
5,442
1,876
558,045
2,194,731
520,285
39,039
421,558
421,558
98,727
51,151
149,878
32,516
78,323
3,590
74,733
34,695
0
138,456
1.34
1.34
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.
