|
x
|
Annual Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
|
¨
|
Transition Report Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
|
Minnesota
|
41-0418150
|
|
(State or other jurisdiction of incorporation or organization)
|
(I.R.S. Employer Identification No.)
|
Title of Each Class
|
Name of Each Stock Exchange on Which Registered
|
|
Common Stock, without par value
|
New York Stock Exchange
|
Large Accelerated Filer
x
|
Accelerated Filer
¨
|
Non-Accelerated Filer
¨
|
Smaller Reporting Company
¨
|
Abbreviation or Acronym
|
Term
|
ALLETE
|
ALLETE, Inc.
|
ALLETE Properties
|
ALLETE Properties, LLC and its subsidiaries
|
AFUDC
|
Allowance for Funds Used During Construction - the cost of both debt and equity funds used to finance utility plant additions during construction periods
|
ARS
|
Auction Rate Securities
|
ATC
|
American Transmission Company LLC
|
Basin
|
Basin Electric Power Cooperative
|
Bison 1
|
Bison 1 Wind Project
|
Bison 2
|
Bison 2 Wind Project
|
BNI Coal
|
BNI Coal, Ltd.
|
Boswell
|
Boswell Energy Center
|
CO
2
|
Carbon Dioxide
|
Company
|
ALLETE, Inc. and its subsidiaries
|
DC
|
Direct Current
|
EPA
|
Environmental Protection Agency
|
ESOP
|
Employee Stock Ownership Plan
|
FASB
|
Financial Accounting Standards Board
|
FERC
|
Federal Energy Regulatory Commission
|
Form 8-K
|
ALLETE Current Report on Form 8-K
|
Form 10-K
|
ALLETE Annual Report on Form 10-K
|
Form 10-Q
|
ALLETE Quarterly Report on Form 10-Q
|
FTR
|
Financial Transmission Rights
|
GAAP
|
Accounting Principles Generally Accepted in the United States
|
GHG
|
Greenhouse Gases
|
Hibbard
|
Hibbard Renewable Energy Center
|
IBEW Local 31
|
International Brotherhood of Electrical Workers Local 31
|
IBEW Local 1593
|
International Brotherhood of Electrical Workers Local 1593
|
Invest Direct
|
ALLETE’s Direct Stock Purchase and Dividend Reinvestment Plan
|
kV
|
Kilovolt(s)
|
Laskin
|
Laskin Energy Center
|
Manitoba Hydro
|
Manitoba Hydro-Electric Board
|
MBtu
|
Million British thermal units
|
Medicare Part D
|
Medicare Part D provision of the Patient Protection and Affordable Care Act of 2010
|
Mesabi Nugget
|
Mesabi Nugget Delaware, LLC
|
Minnesota Power
|
An operating division of ALLETE, Inc.
|
Minnkota Power
|
Minnkota Power Cooperative, Inc.
|
MISO
|
Midwest Independent Transmission System Operator, Inc.
|
Moody’s
|
Moody’s Investors Service, Inc.
|
MPCA
|
Minnesota Pollution Control Agency
|
MPUC
|
Minnesota Public Utilities Commission
|
MW / MWh
|
Megawatt(s) / Megawatt-hour(s)
|
NextEra Energy
|
NextEra Energy Resources, LLC
|
NDPSC
|
North Dakota Public Service Commission
|
NOL
|
Net Operating Loss
|
Non-residential
|
Retail commercial, non-retail commercial, office, industrial, warehouse, storage and institutional
|
NO
2
|
Nitrogen Dioxide
|
NO
X
|
Nitrogen Oxides
|
Note ___
|
Note ___ to the consolidated financial statements in this Form 10-K
|
NPDES
|
National Pollutant Discharge Elimination System
|
NYSE
|
New York Stock Exchange
|
OES
|
Minnesota Office of Energy Security
|
Oliver Wind I
|
Oliver Wind I Energy Center
|
Oliver Wind II
|
Oliver Wind II Energy Center
|
Palm Coast Park
|
Palm Coast Park development project in Florida
|
Palm Coast Park District
|
Palm Coast Park Community Development District
|
PolyMet
|
PolyMet Mining Corporation
|
PPA
|
Power Purchase Agreement
|
PSCW
|
Public Service Commission of Wisconsin
|
PUHCA 2005
|
Public Utility Holding Company Act of 2005
|
Rainy River Energy
|
Rainy River Energy Corporation - Wisconsin
|
RSOP
|
Retirement Savings and Stock Ownership Plan
|
SEC
|
Securities and Exchange Commission
|
SO
2
|
Sulfur Dioxide
|
Square Butte
|
Square Butte Electric Cooperative
|
Standard & Poor’s
|
Standard & Poor’s Ratings Services, a division of The McGraw-Hill Companies, Inc.
|
SWL&P
|
Superior Water, Light and Power Company
|
Taconite Harbor
|
Taconite Harbor Energy Center
|
Taconite Ridge
|
Taconite Ridge Energy Center
|
Town Center
|
Town Center at Palm Coast development project in Florida
|
Town Center District
|
Town Center at Palm Coast Community Development District
|
WDNR
|
Wisconsin Department of Natural Resources
|
·
|
our ability to successfully implement our strategic objectives;
|
·
|
prevailing governmental policies, regulatory actions, and legislation, including those of the United States Congress, state legislatures, the FERC, the MPUC, the PSCW, the NDPSC, the EPA and various state, local and county regulators, and city administrators, about allowed rates of return, financings, industry and rate structure, acquisition and disposal of assets and facilities, real estate development, operation and construction of plant facilities, recovery of purchased power, capital investments and other expenses, present or prospective wholesale and retail competition (including but not limited to transmission costs), zoning and permitting of land held for resale and environmental matters;
|
·
|
our ability to manage expansion and integrate acquisitions;
|
·
|
the potential impacts of climate change and future regulation to restrict the emissions of GHG on our Regulated Operations
;
|
·
|
effects of restructuring initiatives in the electric industry;
|
·
|
economic and geographic factors, including political and economic risks;
|
·
|
changes in and compliance with laws and regulations;
|
·
|
weather conditions;
|
·
|
natural disasters and pandemic diseases;
|
·
|
war and acts of terrorism;
|
·
|
wholesale power market conditions;
|
·
|
population growth rates and demographic patterns;
|
·
|
effects of competition, including competition for retail and wholesale customers;
|
·
|
changes in the real estate market;
|
·
|
pricing and transportation of commodities;
|
·
|
changes in tax rates or policies or in rates of inflation;
|
·
|
project delays or changes in project costs;
|
·
|
availability and management
of construction materials and skilled construction labor for capital projects;
|
·
|
changes in operating expenses and capital expenditures;
|
·
|
global and domestic economic conditions affecting us or our customers;
|
·
|
our ability to access capital markets and bank financing;
|
·
|
changes in interest rates and the performance of the financial markets;
|
·
|
our ability to replace a mature workforce and retain qualified, skilled and experienced personnel; and
|
·
|
the outcome of legal and administrative proceedings (whether civil or criminal) and settlements that affect the business and profitability of ALLETE.
|
Item 1.
|
Business
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Consolidated Operating Revenue – Millions
|
$907.0
|
$759.1
|
$801.0
|
Percentage of Consolidated Operating Revenue
|
|||
Regulated Operations
|
92%
|
90%
|
89%
|
Investments and Other
|
8%
|
10%
|
11%
|
100%
|
100%
|
100%
|
Regulated Utility Electric Sales
|
||||||
Year Ended December 31
|
2010
|
%
|
2009
|
%
|
2008
|
%
|
Millions of Kilowatt-hours
|
||||||
Retail and Municipals
|
||||||
Residential
|
1,150
|
9
|
1,164
|
10
|
1,172
|
9
|
Commercial
|
1,433
|
11
|
1,420
|
12
|
1,454
|
12
|
Industrial
|
6,804
|
52
|
4,475
|
37
|
7,192
|
57
|
Municipals (FERC rate regulated)
|
1,006
|
7
|
992
|
8
|
1,002
|
8
|
Total Retail and Municipals
|
10,393
|
79
|
8,051
|
67
|
10,820
|
86
|
Other Power Suppliers
|
2,745
|
21
|
4,056
|
33
|
1,800
|
14
|
Total Regulated Utility Electric Sales
|
13,138
|
100
|
12,107
|
100
|
12,620
|
100
|
Industrial Customer Electric Sales
|
||||||
Year Ended December 31
|
2010
|
%
|
2009
|
%
|
2008
|
%
|
Millions of Kilowatt-hours
|
||||||
Taconite Producers
|
4,324
|
64
|
2,124
|
47
|
4,579
|
64
|
Paper, Pulp and Wood Products
|
1,573
|
23
|
1,454
|
33
|
1,567
|
22
|
Pipelines
|
494
|
7
|
504
|
11
|
582
|
8
|
Other Industrial
|
413
|
6
|
393
|
9
|
464
|
6
|
Total Industrial Customer Electric Sales
|
6,804
|
100
|
4,475
|
100
|
7,192
|
100
|
(a)
|
The contract will terminate four years from the date of written notice from either Minnesota Power or the customer. No notice of contract cancellation has been given by either party. Thus, the earliest date of cancellation is January 31, 2015.
|
(b)
|
United States Steel Corporation owns both the Minntac Plant in Mountain Iron, MN and the Keewatin Taconite Plant in Keewatin, MN.
|
(c)
|
As of February 1, 2011, the contract has not reached the period of advance notice of cancellation.
|
Regulated Utility
Power Supply
|
Unit
No.
|
Year
Installed
|
Net
Capability
|
Year Ended
December 31, 2010
Generation and Purchases
|
|
MW
|
MWh
|
%
|
|||
Coal-Fired
|
|||||
Boswell Energy Center
|
1
|
1958
|
68
|
||
in Cohasset, MN
|
2
|
1960
|
66
|
||
3
|
1973
|
362
|
|||
4
|
1980
|
468
|
|||
964
|
5,680,246
|
42.2%
|
|||
Laskin Energy Center
|
1
|
1953
|
56
|
||
in Hoyt Lakes, MN
|
2
|
1953
|
51
|
||
107
|
516,369
|
3.8
|
|||
Taconite Harbor Energy Center
|
1
|
1957
|
76
|
||
in Schroeder, MN
|
2
|
1957
|
76
|
||
3
|
1967
|
79
|
|||
231
|
1,244,316
|
9.2
|
|||
Total Coal
|
1,302
|
7,440,931
|
55.2
|
||
Biomass/Coal/Natural Gas
|
|||||
Hibbard Renewable Energy Center
|
|||||
in Duluth, MN
|
3 & 4
|
1949, 1951
|
54
|
163,945
|
1.2
|
Cloquet Energy Center
in Cloquet, MN
|
5
|
2001
|
22
|
104,636
|
0.8
|
Total Biomass/Coal/Natural Gas
|
76
|
268,581
|
2.0
|
||
Hydro
|
|||||
Group consisting of ten stations in MN
|
Various
|
101
|
418,286
|
3.1
|
|
Wind
(a)
|
|||||
Taconite Ridge
in Mt. Iron, MN
|
1-10
|
2008
|
4
|
63,958
|
0.5
|
Bison 1
in Center, ND
|
1-16
|
2010
|
8
|
10,274
|
0.1
|
Total Wind
|
12
|
74,232
|
0.6
|
||
Total Company Generation
|
1,491
|
8,202,030
|
60.9
|
||
Long-Term Purchased Power
|
|||||
Lignite Coal – Square Butte near Center, ND
|
1,294,082
|
9.6
|
|||
Wind – Oliver County, ND
|
331,541
|
2.5
|
|||
Hydro – Manitoba Hydro in Winnipeg, MB, Canada
|
523,825
|
3.9
|
|||
Total Long-Term Purchased Power
|
2,149,448
|
16.0
|
|||
Other Purchased Power
(b)
|
3,112,782
|
23.1
|
|||
Total Purchased Power
|
5,262,230
|
39.1
|
|||
Total
|
1,491
|
13,464,260
|
100.0%
|
(a)
|
The nameplate capacity of Taconite Ridge is 25 MW. The nameplate capacity of the first phase of Bison 1 is 36.8 MW and was commissioned December 8, 2010. The capacity reflected in the table is actual accredited capacity of the facility. Accredited capacity is the amount of net generating capability associated with the facility for which capacity credit was obtained using limited historical data. As more data is collected, actual accredited capacity may increase.
|
(b)
|
Includes short-term market purchases in the MISO market and from Other Power Suppliers.
|
Coal Delivered to Minnesota Power
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Average Price per Ton
|
$25.49
|
$24.99
|
$22.73
|
Average Price per MBtu
|
$1.42
|
$1.37
|
$1.25
|
·
|
Increased system flexibility to adapt to volatile business cycles and varied future industrial load scenarios;
|
·
|
Reductions in the emission of GHGs (primarily CO
2
); and
|
·
|
Compliance with mandated renewable energy standards.
|
Non-Rate Base Power Supply
|
Unit No.
|
Year
Installed
|
Year
Acquired
|
Net
Capability (MW)
|
Rapids Energy Center
(a)
|
||||
in Grand Rapids, MN
|
||||
Steam – Biomass
(b)
|
6 & 7
|
1969, 1980
|
2000
|
29
|
Hydro – Conventional Run-of-River
|
4 & 5
|
1917
|
2000
|
1
|
(a)
|
The net generation is primarily dedicated to the needs of one customer.
|
(b)
|
Rapids Energy Center is supplemented by coal.
|
·
|
Expand our renewable energy supply.
|
·
|
Improve the efficiency of our coal-based generation facilities, as well as other process efficiencies.
|
·
|
Provide energy conservation initiatives for our customers and engage in other demand side efforts.
|
·
|
Support research of technologies to reduce carbon emissions from generation facilities and support carbon sequestration efforts.
|
·
|
Achieve overall carbon emission reductions.
|
Executive Officers
|
Initial Effective Date
|
Alan R. Hodnik
, Age 51
|
|
President and Chief Executive Officer – ALLETE
|
May 1, 2010
|
President – ALLETE
|
May 1, 2009
|
Chief Operating Officer – Minnesota Power
|
May 8, 2007
|
Senior Vice President – Minnesota Power Operations
|
September 22, 2006
|
Vice President – Minnesota Power Generation
|
May 1, 2005
|
Robert J. Adams
, Age 48
|
|
Vice President – Business Development and Chief Risk Officer
|
May 13, 2008
|
Vice President – Utility Business Development
|
February 1, 2004
|
Deborah A. Amberg
, Age 45
|
|
Senior Vice President, General Counsel and Secretary
|
January 1, 2006
|
Vice President, General Counsel and Secretary
|
March 8, 2004
|
Steven Q. DeVinck
, Age 51
|
|
Controller and Vice President – Business Support
|
December 5, 2009
|
Controller
|
July 12, 2006
|
David J. McMillan
, Age 49
|
|
Senior Vice President - Marketing, Regulatory and Public Affairs – ALLETE
|
January 1, 2006
|
Executive Vice President - Minnesota Power
|
January 1, 2006
|
Senior Vice President - Marketing and Public Affairs – ALLETE
|
October 2, 2003
|
Mark A. Schober
, Age 55
|
|
Senior Vice President and Chief Financial Officer
|
July 1, 2006
|
Senior Vice President and Controller
|
February 1, 2004
|
Donald W. Stellmaker
, Age 53
|
|
Treasurer
|
July 24, 2004
|
|
Mr. DeVinck
was Director of Nonutility Business Development, and Assistant Controller
.
|
Item 1A.
|
Risk Factors
|
|
·
|
severe or unexpected weather conditions;
|
|
·
|
seasonality;
|
|
·
|
changes in electricity usage;
|
|
·
|
transmission or transportation constraints, inoperability or inefficiencies;
|
|
·
|
availability of competitively priced alternative energy sources;
|
|
·
|
changes in supply and demand for energy;
|
|
·
|
changes in power production capacity;
|
|
·
|
outages at Minnesota Power’s generating facilities or those of our competitors;
|
|
·
|
changes in production and storage levels of natural gas, lignite, coal, crude oil and refined products;
|
|
·
|
natural disasters, wars, sabotage, terrorist acts or other catastrophic events; and
|
|
·
|
federal, state, local and foreign energy, environmental, or other regulation and legislation.
|
Item 1B.
|
Unresolved Staff Comments
|
Item 2.
|
Properties
|
Item 3.
|
Legal Proceedings
|
Item 4.
|
Removed and Reserved
|
Item 5.
|
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities
|
Item 6.
|
Selected Financial Data
|
2010
|
2009
|
2008
|
2007
|
2006
|
|||||
Millions
|
|||||||||
Operating Revenue
|
$907.0
|
$759.1
|
$801.0
|
$841.7
|
$767.1
|
||||
Operating Expenses
|
771.2
|
653.1
|
679.2
|
710.0
|
628.8
|
||||
Income from Continuing Operations Before
Non-Controlling Interest – Net of Tax
|
74.8
|
60.7
|
83.0
|
89.5
|
81.9
|
||||
Income (Loss) from Discontinued Operations – Net of Tax
|
–
|
–
|
–
|
–
|
(0.9)
|
||||
Net Income
|
74.8
|
60.7
|
83.0
|
89.5
|
81.0
|
||||
Less: Non-Controlling Interest in Subsidiaries
|
(0.5)
|
(0.3)
|
0.5
|
1.9
|
4.6
|
||||
Net Income Attributable to ALLETE
|
75.3
|
61.0
|
82.5
|
87.6
|
76.4
|
||||
Common Stock Dividends
|
60.8
|
56.5
|
50.4
|
44.3
|
40.7
|
||||
Earnings Retained in Business
|
$14.5
|
$4.5
|
$32.1
|
$43.3
|
$35.7
|
||||
Shares Outstanding – Millions
|
|||||||||
Year-End
|
35.8
|
35.2
|
32.6
|
30.8
|
30.4
|
||||
Average
(a)
|
|||||||||
Basic
|
34.2
|
32.2
|
29.2
|
28.3
|
27.8
|
||||
Diluted
|
34.3
|
32.2
|
29.3
|
28.4
|
27.9
|
||||
Diluted Earnings (Loss) Per Share
|
|||||||||
Continuing Operations
|
$2.19
|
$1.89
|
$2.82
|
$3.08
|
$2.77
|
||||
Discontinued Operations
(b)
|
–
|
–
|
–
|
–
|
(0.03)
|
||||
Total Diluted Earnings (Loss) Per Share
|
$2.19
|
$1.89
|
$2.82
|
$3.08
|
$2.74
|
||||
Total Assets
|
$2,574.9
|
$2,393.1
|
$2,134.8
|
$1,644.2
|
|
$1,533.4
|
|||
Long-Term Debt
|
771.6
|
695.8
|
588.3
|
410.9
|
359.8
|
||||
Return on Common Equity
|
7.8%
|
6.9%
|
10.7%
|
12.4%
|
12.1%
|
||||
Common Equity Ratio
|
56%
|
57%
|
58%
|
64%
|
63%
|
||||
Dividends Declared per Common Share
|
$1.76
|
$1.76
|
$1.72
|
$1.64
|
$1.45
|
||||
Dividend Payout Ratio
|
81%
|
93%
|
61%
|
53%
|
53%
|
||||
Book Value Per Share at Year-End
|
$27.25
|
$26.39
|
$25.37
|
$24.11
|
$21.90
|
||||
Capital Expenditures by Segment
|
|||||||||
Regulated Operations
|
$256.4
|
$299.2
|
$317.0
|
$220.6
|
$107.5
|
||||
Investments and Other
|
3.6
|
4.5
|
5.9
|
3.3
|
1.9
|
||||
Total Capital Expenditures
|
$260.0
|
$303.7
|
$322.9
|
$223.9
|
$109.4
|
(a)
|
Excludes unallocated ESOP shares.
|
(b)
|
Operating results of our Water Services businesses are included in discontinued operations, and accordingly, amounts have been restated for 2006.
|
Item 7.
|
Management’s Discussion and Analysis of Financial Condition and Results of Operations
|
Kilowatt-hours Sold
|
2010
|
2009
|
Quantity
Variance
|
%
Variance
|
|||
Millions
|
|||||||
Regulated Utility
|
|||||||
Retail and Municipals
|
|||||||
Residential
|
1,150
|
1,164
|
(14)
|
(1.2) %
|
|||
Commercial
|
1,433
|
1,420
|
13
|
0.9 %
|
|||
Industrial
|
6,804
|
4,475
|
2,329
|
52.0 %
|
|||
Municipals
|
1,006
|
992
|
14
|
1.4 %
|
|||
Total Retail and Municipals
|
10,393
|
8,051
|
2,342
|
29.1 %
|
|||
Other Power Suppliers
|
2,745
|
4,056
|
(1,311)
|
(32.3) %
|
|||
Total Regulated Utility Kilowatt-hours Sold
|
13,138
|
12,107
|
1,031
|
8.5 %
|
ALLETE Properties
|
2010
|
2009
|
||
Revenue and Sales Activity
|
Quantity
|
Amount
|
Quantity
|
Amount
|
Dollars in Millions
|
||||
Revenue from Land Sales
|
||||
Acres
(a)
|
–
|
–
|
35
|
$3.8
|
Revenue from Land Sales
(b)
|
–
|
3.8
|
||
Other Revenue
(c)
|
$2.2
|
0.2
|
||
Total ALLETE Properties Revenue
|
$2.2
|
$4.0
|
(a)
|
Acreage amounts are shown on a gross basis, including wetlands and non-controlling interest.
|
(b)
|
Reflects total contract sales price on closed land transactions. Land sales are recorded using a percentage-of-completion method.
|
(c)
|
Other Revenue includes a $0.7 million pretax gain in 2010 due to the return of seller-financed property from an entity which filed for voluntary Chapter 11 bankruptcy in June 2009
.
Also included in 2010 were $0.3 million of forfeited deposits and $0.3 million related to a lawsuit settlement.
|
Kilowatt-hours Sold
|
2009
|
2008
|
Quantity Variance
|
%
Variance
|
Millions
|
||||
Regulated Utility
|
||||
Retail and Municipals
|
||||
Residential
|
1,164
|
1,172
|
(8)
|
(0.7)%
|
Commercial
|
1,420
|
1,454
|
(34)
|
(2.3)%
|
Industrial
|
4,475
|
7,192
|
(2,717)
|
(37.8)%
|
Municipals
|
992
|
1,002
|
(10)
|
(1.0)%
|
Total Retail and Municipals
|
8,051
|
10,820
|
(2,769)
|
(25.6)%
|
Other Power Suppliers
|
4,056
|
1,800
|
2,256
|
125.3%
|
Total Regulated Utility
Kilowatt-hours Sold
|
12,107
|
12,620
|
(513)
|
(4.1)%
|
ALLETE Properties
|
2009
|
2008
|
||
Revenue and Sales Activity
|
Quantity
|
Amount
|
Quantity
|
Amount
|
Dollars in Millions
|
||||
Revenue from Land Sales
|
||||
Acres
(a)
|
35
|
$3.8
|
219
|
$6.3
|
Contract Sales Price
(b)
|
3.8
|
6.3
|
||
Revenue Recognized from Previously Deferred Sales
|
–
|
3.7
|
||
Revenue from Land Sales
|
3.8
|
10.0
|
||
Other Revenue
(c)
|
0.2
|
8.3
|
||
Total ALLETE Properties Revenue
|
$4.0
|
$18.3
|
(a)
|
Acreage amounts are shown on a gross basis, including wetlands and non-controlling interest.
|
(b)
|
Reflected total contract sales price on closed land transactions. Land sales are recorded using a percentage-of-completion method. (See Note 1. Operations and Significant Accounting Policies.)
|
(c)
|
Included a $4.5 million pretax gain from the sale of a shopping center in Winter Haven, Florida in 2008.
|
·
|
Increased system flexibility to adapt to volatile business cycles and varied future industrial load scenarios;
|
·
|
Reductions in the emission of GHGs (primarily CO
2
); and
|
·
|
Compliance with mandated renewable energy standards.
|
Summary of Development Projects
|
Total
|
Residential
|
Non-residential
|
|
Land Available-for-Sale
|
Ownership
|
Acres
(a)
|
Units
(b)
|
Sq. Ft.
(b, c)
|
Current Development Projects
|
||||
Town Center
|
80%
|
862
|
2,177
|
2,225,200
|
Palm Coast Park
|
100%
|
3,842
|
3,564
|
3,056,800
|
Total Current Development Projects
|
4,704
|
5,741
|
5,282,000
|
|
Proposed Development Project
|
||||
Ormond Crossings
|
100%
|
2,924
|
2,950
|
3,215,000
|
Other
|
||||
Lake Swamp Wetland Mitigation Project
|
100%
|
3,049
|
(d)
|
(d)
|
Total of Development Projects
|
10,677
|
8,691
|
8,497,000
|
(a)
|
Acreage amounts are approximate and shown on a gross basis, including wetlands and non-controlling interest.
|
(b)
|
Estimated and includes non-controlling interest. Density at build out may differ from these estimates.
|
(c)
|
Depending on the project, non-residential includes retail commercial, non-retail commercial, office, industrial, warehouse, storage and institutional.
|
(d)
|
Lake Swamp wetland mitigation bank is a regionally significant wetlands mitigation bank that was permitted by the St. Johns River Water Management District in 2008 and by the U.S. Army Corps of Engineers in December 2009. Wetland mitigation credits will be used at Ormond Crossings and will also be available for sale to developers of other projects that are located in the bank’s service area.
|
ALLETE Properties also has 1,979 acres of other land available-for-sale outside of the three development projects.
|
Year Ended December 31
|
2010
|
%
|
2009
|
%
|
2008
|
%
|
Millions
|
||||||
Common Equity
|
$976.0
|
55
|
$929.5
|
57
|
$827.1
|
57
|
Non-Controlling Interest
|
9.0
|
1
|
9.5
|
–
|
9.8
|
1
|
Long-Term Debt (Including Current Maturities)
|
785.0
|
44
|
701.0
|
43
|
598.7
|
42
|
Short-Term Debt
|
1.0
|
–
|
1.9
|
–
|
6.0
|
–
|
$1,771.0
|
100
|
$1,641.9
|
100
|
$1,441.6
|
100
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Cash and Cash Equivalents at Beginning of Period
|
$25.7
|
$102.0
|
$23.3
|
Cash Flows from (used for)
|
|||
Operating Activities
|
228.7
|
137.4
|
153.6
|
Investing Activities
|
(250.9)
|
(320.0)
|
(276.1)
|
Financing Activities
|
41.4
|
106.3
|
201.2
|
Change in Cash and Cash Equivalents
|
19.2
|
(76.3)
|
78.7
|
Cash and Cash Equivalents at End of Period
|
$44.9
|
$25.7
|
$102.0
|
Payments Due by Period
|
|||||
Contractual Obligations
|
Less than
|
1 to 3
|
4 to 5
|
After
|
|
As of December 31, 2010
|
Total
|
1 Year
|
Years
|
Years
|
5 Years
|
Millions
|
|||||
Long-Term Debt
|
$1,322.5
|
$54.3
|
$210.3
|
$105.8
|
$952.1
|
Pension
|
102.0
|
7.8
|
74.2
|
20.0
|
–
|
Other Postretirement Benefit Plans
|
68.5
|
12.9
|
35.9
|
19.7
|
–
|
Operating Lease Obligations
|
86.8
|
8.1
|
25.6
|
15.0
|
38.1
|
Uncertain Tax Positions
(a)
|
–
|
–
|
–
|
–
|
–
|
Unconditional Purchase Obligations
|
444.6
|
124.4
|
106.0
|
43.4
|
170.8
|
$2,024.4
|
$207.5
|
$452.0
|
$203.9
|
$1,161.0
|
(a)
|
Excludes $12.3 million of non-current unrecognized tax benefits due to uncertainty regarding the timing of future cash payments related to uncertain tax positions.
|
Credit Ratings
|
Standard & Poor’s
|
Moody’s
|
Issuer Credit Rating
|
BBB+
|
Baa1
|
Commercial Paper
|
A-2
|
P-2
|
Senior Secured
|
||
First Mortgage Bonds
(a)
|
A–
|
A2
|
Unsecured Debt
|
||
Collier County Industrial Development Revenue Bonds – Fixed Rate
|
BBB
|
–
|
(a)
|
Includes collateralized pollution control bonds.
|
Capital Expenditures
|
2011
|
2012
|
2013
|
2014
|
2015
|
Total
|
||
Millions
|
||||||||
Regulated Utility Operations
|
||||||||
Base and Other
|
$88
|
$91
|
$92
|
$94
|
$99
|
$464
|
||
Current Cost Recovery
(a)
|
||||||||
Renewable
|
126
|
117
|
2
|
8
|
1
|
254
|
||
Transmission
(b)
|
15
|
33
|
49
|
25
|
3
|
125
|
||
Total Current Cost Recovery
|
141
|
150
|
51
|
33
|
4
|
379
|
||
Regulated Utility Capital Expenditures
|
229
|
241
|
143
|
127
|
103
|
843
|
||
Other
|
22
|
25
|
14
|
8
|
8
|
77
|
||
Total Capital Expenditures
|
$251
|
$266
|
$157
|
$135
|
$111
|
$920
|
(a)
|
Estimated current capital expenditures recoverable outside of a rate case.
|
(b)
|
Transmission capital expenditures related to CapX2020 are estimated at approximately $115 million.
|
Expected Maturity Date
|
||||||||
Interest Rate Sensitive
|
Fair
|
|||||||
Financial Instruments
|
2011
|
2012
|
2013
|
2014
|
2015
|
Thereafter
|
Total
|
Value
|
Dollars in Millions
|
||||||||
Long-Term Debt
|
||||||||
Fixed Rate
|
$1.6
|
$1.6
|
$71.1
|
$19.5
|
$0.6
|
$617.3
|
$711.7
|
$723.4
|
Average Interest Rate – %
|
5.9
|
5.9
|
5.2
|
6.9
|
5.3
|
6.0
|
5.8
|
|
Variable Rate
|
$11.8
|
$1.7
|
$2.8
|
–
|
$15.7
|
$41.3
|
$73.3
|
$73.3
|
Average Interest Rate – %
(a)
|
3.5
|
1.7
|
0.6
|
–
|
0.5
|
0.3
|
1.0
|
(a)
|
Assumes rate in effect at December 31, 2010, remains constant through remaining term.
|
Item 7A.
|
Quantitative and Qualitative Disclosures about Market Risk
|
Item 8.
|
Financial Statements and Supplementary Data
|
Item 9.
|
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
|
Item 9A.
|
Controls and Procedures
|
Item 10.
|
Directors, Executive Officers and Corporate Governance
|
|
·
|
Directors.
The information regarding directors will be included in the “Election of Directors” section;
|
|
·
|
Audit Committee Financial Expert.
The information regarding the Audit Committee financial expert will be included in the “Audit Committee Report” section;
|
|
·
|
Audit Committee Members.
The identity of the Audit Committee members is included in the “Audit Committee Report” section;
|
|
·
|
Executive Officers.
The information regarding executive officers is included in Part I of this Form 10-K; and
|
|
·
|
Section 16(a) Compliance.
The information regarding Section 16(a) compliance will be included in the “Ownership of ALLETE Common Stock – Section 16(a) Beneficial Ownership Reporting Compliance” section.
|
|
·
|
Corporate Governance Guidelines;
|
|
·
|
Audit Committee Charter;
|
|
·
|
Executive Compensation Committee Charter; and
|
|
·
|
Corporate Governance and Nominating Committee Charter.
|
Item 11.
|
Executive Compensation
|
Item 12.
|
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters
|
Item 13.
|
Certain Relationships and Related Transactions, and Director Independence
|
Item 14.
|
Principal Accounting Fees and Services
|
Item 15.
|
Exhibits and Financial Statement Schedules
|
+*10(j)2
|
-
|
Amendments through December 2003 to the Minnesota Power and Affiliated Companies Executive Investment Plan I (filed as Exhibit 10(v)2 to the 2003 Form 10-K, File No. 1-3548).
|
|
+*10(j)3
|
-
|
July 2004 Amendment to the Minnesota Power and Affiliated Companies Executive Investment Plan I (filed as Exhibit 10(b) to the June 30, 2004, Form 10-Q, File No. 1-3548).
|
|
+*10(j)4
|
-
|
August 2006 Amendment to the Minnesota Power and Affiliated Companies Executive Investment Plan I (filed as Exhibit 10(b) to the September 30, 2006, Form 10-Q, File No. 1-3548).
|
|
+*10(k)1
|
-
|
Minnesota Power and Affiliated Companies Executive Investment Plan II, as amended and restated, effective November 1, 1988 (filed as Exhibit 10(d) to the 1988 Form 10-K, File No. 1-3548).
|
|
+*10(k)2
|
-
|
Amendments through December 2003 to the Minnesota Power and Affiliated Companies Executive Investment Plan II (filed as Exhibit 10(w)2 to the 2003 Form 10-K, File No. 1-3548).
|
|
+*10(k)3
|
-
|
July 2004 Amendment to the Minnesota Power and Affiliated Companies Executive Investment Plan II (filed as Exhibit 10(c) to the June 30, 2004, Form 10-Q, File No. 1-3548).
|
|
+*10(k)4
|
-
|
August 2006 Amendment to the Minnesota Power and Affiliated Companies Executive Investment Plan II (filed as Exhibit 10(c) to the September 30, 2006, Form 10-Q, File No. 1-3548).
|
|
+*10(l)
|
-
|
Deferred Compensation Trust Agreement, as amended and restated, effective January 1, 1989 (filed as Exhibit 10(f) to the 1988 Form 10-K, File No. 1-3548).
|
|
+*10(m)1
|
-
|
ALLETE Executive Long-Term Incentive Compensation Plan as amended and restated effective January 1, 2006 (filed as Exhibit 10 to the May 16, 2005, Form 8-K, File No. 1-3548).
|
|
+10(m)2
|
-
|
Amendment to the ALLETE Executive Long-Term Incentive Compensation Plan, effective January 1, 2011.
|
|
+*10(m)3
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan 2006 Nonqualified Stock Option Grant (filed as Exhibit 10(a)1 to the January 30, 2006, Form 8-K, File No. 1-3548).
|
|
+*10(m)4
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Nonqualified Stock Option Grant Effective 2007 (filed as Exhibit 10(m)6 to the 2006 Form 10-K, File No. 1-3548).
|
|
+*10(m)5
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2007 (filed as Exhibit 10(m)7 to the 2006 Form 10-K, File No. 1-3548).
|
|
+*10(m)6
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2008 (filed as Exhibit 10(m)10 to the 2007 Form 10-K, File No. 1-3548).
|
|
+*10(m)7
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2009 (filed as Exhibit 10(m)11 to the 2008 Form 10-K, File No. 1-3548).
|
|
+*10(m)8
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan – Restricted Stock Unit Grant Effective 2009 (filed as Exhibit 10(m)12 to the 2008 Form 10-K, File No. 1-3548).
|
|
+*10(m)9
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2010 (filed as Exhibit 10(m)8 to the 2009 Form 10-K, File No. 1-3548).
|
|
+*10(m)10
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan – Restricted Stock Unit Grant Effective 2010 (filed as Exhibit 10(m)9 to the 2009 Form 10-K, File No. 1-3548).
|
|
+10(m)11
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan Performance Share Grant Effective 2011.
|
|
+10(m)12
|
-
|
Form of ALLETE Executive Long-Term Incentive Compensation Plan – Restricted Stock Unit Grant Effective 2011.
|
|
+*10(n)1
|
-
|
Minnesota Power (now ALLETE) Director Stock Plan, effective January 1, 1995 (filed as Exhibit 10 to the March 31, 1995, Form 10-Q, File No. 1-3548).
|
|
+*10(n)2
|
-
|
Amendments through December 2003 to the Minnesota Power (now ALLETE) Director Stock Plan (filed as Exhibit 10(z)2 to the 2003 Form 10-K, File No. 1-3548).
|
|
+*10(n)3
|
-
|
July 2004 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(e) to the June 30, 2004, Form 10-Q, File No. 1-3548).
|
|
+*10(n)4
|
-
|
January 2007 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(n)4 to the 2006 Form 10-K, File No. 1-3548).
|
|
+*10(n)5
|
-
|
May 2009 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(b) to the June 30, 2009, Form 10-Q, File No. 1-3548).
|
|
+*10(n)6
|
-
|
May 2010 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10(a) to the June 30, 2010, Form 10-Q, File No. 1-3548).
|
|
+*10(n)7
|
-
|
October 2010 Amendment to the ALLETE Director Stock Plan (filed as Exhibit 10 to the September 30, 2010, Form 10-Q, File No. 1-3548).
|
|
+*10(n)8
|
-
|
ALLETE Non-Management Director Compensation Summary Effective May 1, 2010 (filed as Exhibit 10(b) to the March 31, 2010, Form 10-Q, File No. 1-3548).
|
+10(n)9
|
-
|
ALLETE Non-Management Director Compensation Summary effective January 19, 2011.
|
|
+*10(o)1
|
-
|
Minnesota Power (now ALLETE) Director Compensation Deferral Plan Amended and Restated, effective January 1, 1990 (filed as Exhibit 10(ac) to the 2002 Form 10-K, File No. 1-3548).
|
|
+*10(o)2
|
-
|
October 2003 Amendment to the Minnesota Power (now ALLETE) Director Compensation Deferral Plan (filed as Exhibit 10(aa)2 to the 2003 Form 10-K, File No. 1-3548).
|
|
+*10(o)3
|
-
|
January 2005 Amendment to the ALLETE Director Compensation Deferral Plan (filed as Exhibit 10(c) to the March 31, 2005, Form 10-Q, File No. 1-3548).
|
|
+*10(o)4
|
-
|
August 2006 Amendment to the ALLETE Director Compensation Deferral Plan (filed as Exhibit 10(d) to the September 30, 2006, Form 10-Q, File No. 1-3548).
|
|
+*10(o)5
|
-
|
ALLETE Non-Employee Director Compensation Deferral Plan II, effective May 1, 2009 (filed as Exhibit 10(a) to the June 30, 2009, Form 10-Q, File No. 1-3548).
|
|
+*10(p)
|
-
|
ALLETE Director Compensation Trust Agreement, effective October 11, 2004 (filed as Exhibit 10(a) to the September 30, 2004, Form 10-Q, File No. 1-3548).
|
|
+10(q)
|
-
|
ALLETE and Affiliated Companies Change in Control Severance Plan, as amended and restated, effective January 19, 2011.
|
|
12
|
-
|
Computation of Ratios of Earnings to Fixed Charges.
|
|
21
|
-
|
Subsidiaries of the Registrant.
|
|
23(a)
|
-
|
Consent of Independent Registered Public Accounting Firm.
|
|
31(a)
|
-
|
Rule 13a-14(a)/15d-14(a) Certification by the Chief Executive Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
31(b)
|
-
|
Rule 13a-14(a)/15d-14(a) Certification by the Chief Financial Officer Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.
|
|
32
|
-
|
Section 1350 Certification of Annual Report by the Chief Executive Officer and Chief Financial Officer Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.
|
|
99
|
-
|
ALLETE News Release dated February 16, 2011, announcing earnings for the year ended December 31, 2010.
(This exhibit has been furnished and shall not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, nor shall it be deemed incorporated by reference in any filing under the Securities Act of 1933, except as shall be expressly set forth by specific reference in such filing.)
|
*
|
Incorporated herein by reference as indicated.
|
+
|
Management contract or compensatory plan or arrangement pursuant to Item 15(b).
|
ALLETE, Inc.
|
||
Dated: February 16, 2011
|
By
|
Alan R. Hodnik
|
Alan R. Hodnik
|
||
President and Chief Executive Officer
|
Signature
|
Title
|
Date
|
||
Alan R. Hodnik
|
President and Chief Executive Officer
|
February 16, 2011
|
||
Alan R. Hodnik
|
|
(Principal Executive Officer)
|
||
Mark A. Schober
|
Senior Vice President and Chief Financial Officer
|
February 16, 2011
|
||
Mark A. Schober
|
|
(Principal Financial Officer)
|
||
Steven Q. DeVinck
|
Controller and Vice President – Business Support
|
February 16, 2011
|
||
Steven Q. DeVinck
|
(Principal Accounting Officer)
|
Signature
|
Title
|
Date
|
||
Kathleen A. Brekken
|
Director
|
February 16, 2011
|
||
Kathleen A. Brekken
|
||||
Kathryn W. Dindo
|
Director
|
February 16, 2011
|
||
Kathryn W. Dindo
|
||||
Heidi J. Eddins
|
Director
|
February 16, 2011
|
||
Heidi J. Eddins
|
||||
Sidney W. Emery, Jr.
|
Director
|
February 16, 2011
|
||
Sidney W. Emery, Jr.
|
||||
James S. Haines, Jr
|
Director
|
February 16, 2011
|
||
James S. Haines, Jr
|
||||
James J. Hoolihan
|
Director
|
February 16, 2011
|
||
James J. Hoolihan
|
||||
Madeleine W. Ludlow
|
Director
|
February 16, 2011
|
||
Madeleine W. Ludlow
|
||||
Douglas C. Neve
|
Director
|
February 16, 2011
|
||
Douglas C. Neve
|
||||
Leonard C. Rodman
|
Director
|
February 16, 2011
|
||
Leonard C. Rodman
|
||||
Donald J. Shippar
|
Director
|
February 16, 2011
|
||
Donald J. Shippar
|
||||
Bruce W. Stender
|
Director
|
February 16, 2011
|
||
Bruce W. Stender
|
As of December 31
|
2010
|
2009
|
Millions
|
||
Assets
|
||
Current Assets
|
||
Cash and Cash Equivalents
|
$44.9
|
$25.7
|
Short-Term Investments
|
6.7
|
–
|
Accounts Receivable (Less Allowance of $0.9 and $0.9)
|
99.5
|
118.5
|
Inventories
|
60.0
|
57.0
|
Prepayments and Other
|
28.6
|
24.3
|
Total Current Assets
|
239.7
|
225.5
|
Property, Plant and Equipment – Net
|
1,805.6
|
1,622.7
|
Regulatory Assets
|
310.2
|
293.2
|
Investment in ATC
|
93.3
|
88.4
|
Other Investments
|
126.0
|
130.5
|
Other Non-Current Assets
|
34.3
|
32.8
|
Total Assets
|
$2,609.1
|
$2,393.1
|
Liabilities and Equity
|
||
Liabilities
|
||
Current Liabilities
|
||
Accounts Payable
|
$75.4
|
$62.1
|
Accrued Taxes
|
22.0
|
20.6
|
Accrued Interest
|
13.4
|
11.1
|
Long-Term Debt Due Within One Year
|
13.4
|
5.2
|
Notes Payable
|
1.0
|
1.9
|
Other
|
33.7
|
32.2
|
Total Current Liabilities
|
158.9
|
133.1
|
Long-Term Debt
|
771.6
|
695.8
|
Deferred Income Taxes
|
325.2
|
253.1
|
Regulatory Liabilities
|
43.6
|
47.1
|
Other Non-Current Liabilities
|
324.8
|
325.0
|
Total Liabilities
|
1,624.1
|
1,454.1
|
Commitments and Contingencies (Note 10)
|
||
Equity
|
||
ALLETE’s Equity
|
||
Common Stock Without Par Value, 80.0 Shares Authorized, 35.8 and 35.2
|
||
Shares Outstanding
|
636.1
|
613.4
|
Unearned ESOP Shares
|
(36.8)
|
(45.3)
|
Accumulated Other Comprehensive Loss
|
(23.2)
|
(24.0)
|
Retained Earnings
|
399.9
|
385.4
|
Total ALLETE Equity
|
976.0
|
929.5
|
Non-Controlling Interest in Subsidiaries
|
9.0
|
9.5
|
Total Equity
|
985.0
|
939.0
|
Total Liabilities and Equity
|
$2,609.1
|
$2,393.1
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions Except Per Share Amounts
|
|||
Operating Revenue
|
|||
Operating Revenue
|
$907.0
|
$766.7
|
$801.0
|
Prior Year Rate Refunds
|
–
|
(7.6)
|
–
|
Total Operating Revenue
|
907.0
|
759.1
|
801.0
|
Operating Expenses
|
|||
Fuel and Purchased Power
|
325.1
|
279.5
|
305.6
|
Operating and Maintenance
|
365.6
|
308.9
|
318.1
|
Depreciation
|
80.5
|
64.7
|
55.5
|
Total Operating Expenses
|
771.2
|
653.1
|
679.2
|
Operating Income
|
135.8
|
106.0
|
121.8
|
Other Income (Expense)
|
|||
Interest Expense
|
(39.2)
|
(33.8)
|
(26.3)
|
Equity Earnings in ATC
|
17.9
|
17.5
|
15.3
|
Other
|
4.6
|
1.8
|
15.6
|
Total Other Income (Expense)
|
(16.7)
|
(14.5)
|
4.6
|
Income Before Non-Controlling Interest and Income Taxes
|
119.1
|
91.5
|
126.4
|
Income Tax Expense
|
44.3
|
30.8
|
43.4
|
Net Income
|
74.8
|
60.7
|
83.0
|
Less: Non-Controlling Interest in Subsidiaries
|
(0.5)
|
(0.3)
|
0.5
|
Net Income Attributable to ALLETE
|
$75.3
|
$61.0
|
$82.5
|
Average Shares of Common Stock
|
|||
Basic
|
34.2
|
32.2
|
29.2
|
Diluted
|
34.3
|
32.2
|
29.3
|
Basic Earnings Per Share of Common Stock
|
$2.20
|
$1.89
|
$2.82
|
Diluted Earnings Per Share of Common Stock
|
$2.19
|
$1.89
|
$2.82
|
Dividends Per Share of Common Stock
|
$1.76
|
$1.76
|
$1.72
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Operating Activities
|
|||
Net Income
|
$74.8
|
$60.7
|
$83.0
|
Allowance for Funds Used During Construction
|
(4.2)
|
(5.8)
|
(3.3)
|
Loss (Income) from Equity Investments, Net of Dividends
|
(3.1)
|
0.1
|
(3.1)
|
Gain on Real Estate Foreclosure
|
(0.7)
|
–
|
–
|
Gain on Sale of Assets
|
–
|
(0.2)
|
(4.8)
|
Gain on Sale of Available-for-sale Securities
|
–
|
–
|
(6.4)
|
Loss on Impairment of Assets
|
–
|
3.1
|
–
|
Depreciation Expense
|
80.5
|
64.7
|
55.5
|
Amortization of Debt Issuance Costs
|
0.9
|
0.9
|
0.8
|
Deferred Income Tax Expense
|
66.0
|
75.2
|
38.8
|
Share-Based Compensation Expense
|
2.2
|
2.1
|
1.8
|
ESOP Compensation Expense
|
7.1
|
6.5
|
10.1
|
Bad Debt Expense
|
1.1
|
1.3
|
0.7
|
Changes in Operating Assets and Liabilities
|
|||
Accounts Receivable
|
17.9
|
(43.5)
|
2.4
|
Inventories
|
(3.0)
|
(7.3)
|
(0.2)
|
Prepayments and Other
|
(4.3)
|
–
|
11.2
|
Accounts Payable
|
5.8
|
10.5
|
(14.1)
|
Other Current Liabilities
|
5.2
|
5.3
|
5.9
|
Regulatory and Other Assets
|
16.3
|
(18.3)
|
(1.8)
|
Regulatory and Other Liabilities
|
(33.8)
|
(17.9)
|
(22.9)
|
Cash from Operating Activities
|
228.7
|
137.4
|
153.6
|
Investing Activities
|
|||
Proceeds from Sale of Available-for-sale Securities
|
0.6
|
8.9
|
62.3
|
Payments for Purchase of Available-for-sale Securities
|
(2.3)
|
(2.2)
|
(44.8)
|
Investment in ATC
|
(1.6)
|
(7.8)
|
(7.4)
|
Changes to Other Investments
|
1.3
|
(0.7)
|
(9.2)
|
Additions to Property, Plant and Equipment
|
(248.9)
|
(318.5)
|
(301.1)
|
Proceeds from Sale of Assets
|
–
|
0.3
|
20.4
|
Other
|
–
|
–
|
3.7
|
Cash for Investing Activities
|
(250.9)
|
(320.0)
|
(276.1)
|
Financing Activities
|
|||
Proceeds from Issuance of Common Stock
|
20.5
|
65.2
|
71.1
|
Proceeds from Issuance of Long-Term Debt
|
155.0
|
111.4
|
198.7
|
Changes in Notes Payable
|
(0.9)
|
(4.1)
|
6.0
|
Reductions of Long-Term Debt
|
(71.0)
|
(9.1)
|
(22.7)
|
Debt Issuance Costs
|
(1.4)
|
(0.6)
|
(1.5)
|
Dividends on Common Stock
|
(60.8)
|
(56.5)
|
(50.4)
|
Cash from Financing Activities
|
41.4
|
106.3
|
201.2
|
Change in Cash and Cash Equivalents
|
19.2
|
(76.3)
|
78.7
|
Cash and Cash Equivalents at Beginning of Period
|
25.7
|
102.0
|
23.3
|
Cash and Cash Equivalents at End of Period
|
$44.9
|
$25.7
|
$102.0
|
Accumulated
|
|||||
Total
|
Other
|
Unearned
|
|||
Shareholders’
|
Retained
|
Comprehensive
|
ESOP
|
Common
|
|
Equity
|
Earnings
|
Income (Loss)
|
Shares
|
Stock
|
|
Millions
|
|||||
Balance as of December 31, 2007
|
$742.6
|
$350.4
|
$(4.5)
|
$(64.5)
|
$461.2
|
Comprehensive Income
|
|||||
Net Income
|
83.0
|
83.0
|
|||
Other Comprehensive Income – Net of Tax
|
|||||
Unrealized Loss on Securities – Net
|
(6.0)
|
(6.0)
|
|||
Reclassification Adjustment for Gains Included in Income
|
(3.7)
|
(3.7)
|
|||
Defined Benefit Pension and Other Postretirement Plans
|
(18.8)
|
(18.8)
|
|||
Total Comprehensive Income
|
54.5
|
||||
Non-Controlling Interest in Subsidiaries
|
(0.5)
|
(0.5)
|
|||
Comprehensive Income Attributable to ALLETE
|
54.0
|
||||
Adjustment to apply change in Pension and Postretirement measurement date
|
(1.6)
|
(1.6)
|
|||
Common Stock Issued – Net
|
72.9
|
72.9
|
|||
Dividends Declared
|
(50.4)
|
(50.4)
|
|||
ESOP Shares Earned
|
9.6
|
9.6
|
|||
Balance as of December 31, 2008
|
827.1
|
380.9
|
(33.0)
|
(54.9)
|
534.1
|
Comprehensive Income
|
|||||
Net Income
|
60.7
|
60.7
|
|||
Other Comprehensive Income – Net of Tax
|
|||||
Unrealized Gain on Securities – Net
|
2.8
|
2.8
|
|||
Defined Benefit Pension and Other Postretirement Plans
|
6.2
|
6.2
|
|||
Total Comprehensive Income
|
69.7
|
||||
Non-Controlling Interest in Subsidiaries
|
0.3
|
0.3
|
|||
Comprehensive Income Attributable to ALLETE
|
70.0
|
||||
Common Stock Issued – Net
|
79.3
|
79.3
|
|||
Dividends Declared
|
(56.5)
|
(56.5)
|
|||
ESOP Shares Earned
|
9.6
|
9.6
|
|||
Balance as of December 31, 2009
|
929.5
|
385.4
|
(24.0)
|
(45.3)
|
613.4
|
Comprehensive Income
|
|||||
Net Income
|
74.8
|
74.8
|
|||
Other Comprehensive Income – Net of Tax
|
|||||
Unrealized Gain on Securities – Net
|
0.8
|
0.8
|
|||
Total Comprehensive Income
|
75.6
|
||||
Non-Controlling Interest in Subsidiaries
|
0.5
|
0.5
|
|||
Comprehensive Income Attributable to ALLETE
|
76.1
|
||||
Common Stock Issued – Net
|
22.7
|
22.7
|
|||
Dividends Declared
|
(60.8)
|
(60.8)
|
|||
ESOP Shares Earned
|
8.5
|
8.5
|
|||
Balance as of December 31, 2010
|
$976.0
|
$399.9
|
$(23.2)
|
$(36.8)
|
$636.1
|
Note 1.
|
Operations and Significant Accounting Policies
|
Note 1.
|
Operations and Significant Accounting Policies (Continued)
|
Consolidated Statement of Cash Flows
|
|||
Supplemental Disclosure
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Cash Paid During the Period for
|
|||
Interest – Net of Amounts Capitalized
|
$35.7
|
$29.8
|
$25.2
|
Income Taxes (Net of refunds received of $57.1, $6.7 and $–)
(a)
|
$(54.2)
|
$(5.6)
|
$6.5
|
Noncash Investing and Financing Activities
|
|||
Increase (Decrease) in Accounts Payable for Capital Additions to Property, Plant and Equipment
|
$7.5
|
$(24.1)
|
$17.1
|
AFUDC – Equity
|
$4.2
|
$5.8
|
$3.3
|
ALLETE Common Stock contributed to the Pension Plan
|
–
|
$(12.0)
|
–
|
(a)
|
Due to bonus depreciation provisions in the Small Business Jobs Act of 2010 and the American Recovery and Reinvestment Act of 2009, lower estimated tax payments were made in 2010 and 2009. Refunds received in 2010 resulted from a 2009 NOL which was utilized by carrying it back against prior years’ taxable income and the completion of a state income tax audit.
|
Accounts Receivable
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Trade Accounts Receivable
|
||
Billed
|
$67.6
|
$56.5
|
Unbilled
|
18.9
|
15.1
|
Less: Allowance for Doubtful Accounts
|
0.9
|
0.9
|
Total Trade Accounts Receivable
|
85.6
|
70.7
|
Income Taxes Receivable
|
13.9
|
47.8
|
Total Accounts Receivable – Net
|
$99.5
|
$118.5
|
Inventories
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Fuel
|
$22.9
|
$23.0
|
Materials and Supplies
|
37.1
|
34.0
|
Total Inventories
|
$60.0
|
$57.0
|
Note 1.
|
Operations and Significant Accounting Policies (Continued)
|
Prepayments and Other Current Assets
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Deferred Fuel Adjustment Clause (See Note 5. Regulatory Matters)
|
$20.6
|
$15.5
|
Other
|
8.0
|
8.8
|
Total Prepayments and Other Current Assets
|
$28.6
|
$24.3
|
Other Non-Current Liabilities
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Future Benefit Obligation Under Defined Benefit Pension and Other Postretirement Plans
|
$231.4
|
$231.2
|
Asset Retirement Obligation (See Note 3. Property, Plant and Equipment)
|
50.3
|
44.6
|
Other
|
43.1
|
49.2
|
Total Other Non-Current Liabilities
|
$324.8
|
$325.0
|
Note 1.
|
Operations and Significant Accounting Policies (Continued)
|
Note 2.
|
Business Segments
|
Regulated
|
Investments
|
||
Consolidated
|
Operations
|
and Other
|
|
Millions
|
|||
2010
|
|||
Operating Revenue
|
$907.0
|
$835.5
|
$71.5
|
Fuel and Purchased Power
|
325.1
|
325.1
|
–
|
Operating and Maintenance
|
365.6
|
292.3
|
73.3
|
Depreciation Expense
|
80.5
|
76.1
|
4.4
|
Operating Income (Loss)
|
135.8
|
142.0
|
(6.2)
|
Interest Expense
|
(39.2)
|
(32.3)
|
(6.9)
|
Equity Earnings in ATC
|
17.9
|
17.9
|
–
|
Other Income
|
4.6
|
3.8
|
0.8
|
Income (Loss) Before Non-Controlling Interest and Income Taxes
|
119.1
|
131.4
|
(12.3)
|
Income Tax Expense (Benefit)
|
44.3
|
51.6
|
(7.3)
|
Net Income (Loss)
|
74.8
|
79.8
|
(5.0)
|
Less: Non-Controlling Interest in Subsidiaries
|
(0.5)
|
–
|
(0.5)
|
Net Income (Loss) Attributable to ALLETE
|
$75.3
|
$79.8
|
$(4.5)
|
Total Assets
|
$2,609.1
|
$2,375.4
|
$233.7
|
Capital Additions
|
$260.0
|
$256.4
|
$3.6
|
Regulated
|
Investments
|
||
Consolidated
|
Operations
|
and Other
|
|
Millions
|
|||
2009
|
|||
Operating Revenue
|
$766.7
|
$689.4
|
$77.3
|
Prior Year Rate Refunds
|
(7.6)
|
(7.6)
|
–
|
Total Operating Revenue
|
759.1
|
681.8
|
77.3
|
Fuel and Purchased Power
|
279.5
|
279.5
|
–
|
Operating and Maintenance
|
308.9
|
235.8
|
73.1
|
Depreciation Expense
|
64.7
|
60.2
|
4.5
|
Operating Income (Loss)
|
106.0
|
106.3
|
(0.3)
|
Interest Expense
|
(33.8)
|
(28.3)
|
(5.5)
|
Equity Earnings in ATC
|
17.5
|
17.5
|
–
|
Other Income (Expense)
|
1.8
|
5.8
|
(4.0)
|
Income (Loss) Before Non-Controlling Interest and Income Taxes
|
91.5
|
101.3
|
(9.8)
|
Income Tax Expense (Benefit)
|
30.8
|
35.4
|
(4.6)
|
Net Income (Loss)
|
60.7
|
65.9
|
(5.2)
|
Less: Non-Controlling Interest in Subsidiaries
|
(0.3)
|
–
|
(0.3)
|
Net Income (Loss) Attributable to ALLETE
|
$61.0
|
$65.9
|
$(4.9)
|
Total Assets
|
$2,393.1
|
$2,184.0
|
$209.1
|
Capital Additions
|
$303.7
|
$299.2
|
$4.5
|
Note 2.
|
Business Segments (Continued)
|
Regulated
|
Investments
|
||
Consolidated
|
Operations
|
and Other
|
|
Millions
|
|||
2008
|
|||
Operating Revenue
|
$801.0
|
$712.2
|
$88.8
|
Fuel and Purchased Power
|
305.6
|
305.6
|
–
|
Operating and Maintenance
|
318.1
|
239.3
|
78.8
|
Depreciation Expense
|
55.5
|
50.7
|
4.8
|
Operating Income
|
121.8
|
116.6
|
5.2
|
Interest Expense
|
(26.3)
|
(24.0)
|
(2.3)
|
Equity Earnings in ATC
|
15.3
|
15.3
|
–
|
Other Income
|
15.6
|
3.6
|
12.0
|
Income Before Non-Controlling Interest and Income Taxes
|
126.4
|
111.5
|
14.9
|
Income Tax Expense (Benefit)
|
43.4
|
43.6
|
(0.2)
|
Net Income
|
83.0
|
67.9
|
15.1
|
Less: Non-Controlling Interest in Subsidiaries
|
0.5
|
–
|
0.5
|
Net Income Attributable to ALLETE
|
$82.5
|
$67.9
|
$14.6
|
Total Assets
|
$2,134.8
|
$1,832.1
|
$302.7
|
Capital Additions
|
$322.9
|
$317.0
|
$5.9
|
Note 3.
|
Property, Plant and Equipment
|
Property, Plant and Equipment
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Regulated Utility
|
$2,649.2
|
$2,415.7
|
Construction Work in Progress
|
86.6
|
89.6
|
Accumulated Depreciation
|
(975.8)
|
(928.8)
|
Regulated Utility Plant – Net
|
1,760.0
|
1,576.5
|
Non-Rate Base Energy Operations
|
88.4
|
87.0
|
Construction Work in Progress
|
4.5
|
3.6
|
Accumulated Depreciation
|
(48.0)
|
(45.5)
|
Non-Rate Base Energy Operations Plant – Net
|
44.9
|
45.1
|
Other Plant – Net
|
0.7
|
1.1
|
Property, Plant and Equipment – Net
|
$1,805.6
|
$1,622.7
|
Estimated Useful Lives of Property, Plant and Equipment
|
||||
Regulated Utility –
|
Generation
|
1 to 35 years
|
Non-Rate Base Operations
|
3 to 61 years
|
Transmission
|
42 to 61 years
|
Other Plant
|
5 to 25 years
|
|
Distribution
|
14 to 65 years
|
Note 3.
|
Property, Plant and Equipment (Continued)
|
Asset Retirement Obligation
|
|
Millions
|
|
Obligation as of December 31, 2008
|
$39.5
|
Accretion Expense
|
2.3
|
Additional Liabilities Incurred in 2009
|
2.8
|
Obligation as of December 31, 2009
|
44.6
|
Accretion Expense
|
2.9
|
Additional Liabilities Incurred in 2010
|
2.8
|
Obligation as of December 31, 2010
|
$50.3
|
Note 4.
|
Jointly-Owned Electric Facility
|
Plant in Service
|
Accumulated Depreciation
|
Construction Work in Progress
|
% Ownership
|
|||||
Millions
|
||||||||
Boswell Unit 4
|
$407.5
|
$175.5
|
$19.6
|
80
|
||||
CapX2020
|
–
|
–
|
11.3
|
9.3 – 14.7
|
||||
Total
|
$407.5
|
$175.5
|
$30.9
|
Note 5.
|
Regulatory Matters
|
Note 5.
|
Regulatory Matters (Continued)
|
Deferred Regulatory Assets and Liabilities
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Deferred Regulatory Assets
|
||
Future Benefit Obligations Under
|
||
Defined Benefit Pension and Other Postretirement Plans
(a)
|
$257.9
|
$235.8
|
Boswell Unit 3 Environmental Rider
(b)
|
20.5
|
20.9
|
Deferred Fuel
(c)
|
20.6
|
20.8
|
Income Taxes
|
17.3
|
15.7
|
Asset Retirement Obligation
|
7.8
|
6.3
|
Deferred MISO Costs
|
0.9
|
2.4
|
Premium on Reacquired Debt
|
1.8
|
2.0
|
Other
|
4.0
|
4.8
|
Total Deferred Regulatory Assets
|
$330.8
|
$308.7
|
Deferred Regulatory Liabilities
|
||
Income Taxes
|
$23.4
|
$25.9
|
Plant Removal Obligations
|
16.9
|
16.9
|
Other
|
3.3
|
4.3
|
Total Deferred Regulatory Liabilities
|
$43.6
|
$47.1
|
(a)
|
See Note 15. Pension and Other Postretirement Benefit Plans.
|
(b)
|
MPUC-approved current cost recovery rider related to environmental improvements that were placed in service in November 2009. As part of our 2010 rate case, on November 2, 2010, the MPUC approved a proposal to move the rider balance to Property, Plant and Equipment to recover in rate base, which will be effective upon a final rate order.
|
(c)
|
As of December 31, 2009, under our 2008 rate case, $5 million of this balance related to deferred fuel costs incurred under the former base cost of fuel calculation. During the fourth quarter of 2010, it was determined that the asset was no longer probable of recovery in future utility rates and was therefore written off.
|
(a)
|
Current deferred regulatory assets consist of deferred fuel costs and are included in prepayments and other on the consolidated balance sheet.
|
Note 6.
|
Investment in ATC
|
Note 6.
|
Investment in ATC (Continued)
|
ALLETE’s Interest in ATC
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Equity Investment Beginning Balance
|
$88.4
|
$76.9
|
Cash Investments
|
1.6
|
7.8
|
Equity in ATC Earnings
|
17.9
|
17.5
|
Distributed ATC Earnings
|
(14.6)
|
(13.8)
|
Equity Investment Ending Balance
|
$93.3
|
$88.4
|
Income Statement Data
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Revenue
|
$556.7
|
$521.5
|
$466.6
|
Operating Expense
|
251.1
|
230.3
|
209.0
|
Other Expense
|
85.9
|
77.8
|
69.6
|
Net Income
|
$219.7
|
$213.4
|
$188.0
|
ALLETE’s Equity in Net Income
|
$17.9
|
$17.5
|
$15.3
|
Note 7.
|
Investments
|
Other Investments
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
ALLETE Properties
|
$94.0
|
$93.1
|
Available-for-sale Securities
(a)
|
25.2
|
29.5
|
Other
|
6.8
|
7.9
|
Total Other Investments
|
$126.0
|
$130.5
|
(a)
|
As of December 31, 2010, our remaining $6.7 million of Auction Rate Securities were classified as short-term as they were called prior to December 31, 2010, and redeemed at carrying value on January 5, 2011.
|
Note 7.
|
Investments (Continued)
|
ALLETE Properties
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Land Held-for-Sale Beginning Balance
|
$74.9
|
$71.2
|
Additions during period:
|
||
Deeds to Collateralized Property
(a)
|
9.9
|
–
|
Capitalized Improvements and Other
|
1.2
|
5.6
|
Deductions during period: Cost of Real Estate Sold
|
–
|
(1.9)
|
Land Held-for-Sale Ending Balance
|
86.0
|
74.9
|
Long-Term Finance Receivables (net of allowances of $0.8 and $0.4)
(a)
|
3.7
|
12.9
|
Other
|
4.3
|
5.3
|
Total Real Estate Assets
|
$94.0
|
$93.1
|
(a)
|
The deeds to collateralized property resulted primarily from an entity which filed for voluntary Chapter 11 bankruptcy and were recorded at fair value net of estimated selling costs. The change in the long-term finance receivables was primarily a result of the same transaction.
|
Available-For-Sale Securities
|
||||
Millions
|
Gross Unrealized
|
|||
As of December 31
|
Cost
|
Gain
|
(Loss)
|
Fair Value
|
2010
|
$27.4
|
$0.2
|
$(2.4)
|
$25.2
|
2009
|
$33.1
|
$0.1
|
$(3.7)
|
$29.5
|
2008
|
$40.5
|
–
|
$(7.9)
|
$32.6
|
Net Unrealized
|
||||
Net
|
Gross Realized
|
Gain (Loss) in Other
|
||
Year Ended December 31
|
Proceeds
|
Gain
|
(Loss)
|
Comprehensive Income
|
2010
|
$(1.7)
|
–
|
–
|
$1.4
|
2009
|
$6.7
|
–
|
–
|
$4.5
|
2008
|
$17.5
|
$6.5
|
$(0.1)
|
$(9.7)
|
Note 8.
|
Fair Value
|
At Fair Value as of December 31, 2010
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
$19.4
|
–
|
–
|
$19.4
|
Available-for-sale Securities
|
||||
Corporate Debt Securities
|
–
|
$7.5
|
–
|
7.5
|
Debt Securities Issued by States of the United States (ARS)
(a)
|
–
|
–
|
$6.7
|
6.7
|
Total Available-for-sale Securities
|
–
|
7.5
|
6.7
|
14.2
|
Money Market Funds
|
0.8
|
–
|
–
|
0.8
|
Total Fair Value of Assets
|
$20.2
|
$7.5
|
$6.7
|
$34.4
|
Liabilities:
|
||||
Deferred Compensation
|
–
|
$13.3
|
–
|
$13.3
|
Total Fair Value of Liabilities
|
–
|
$13.3
|
–
|
$13.3
|
Total Net Fair Value of Assets (Liabilities)
|
$20.2
|
$(5.8)
|
$6.7
|
$21.1
|
(a)
|
The remaining $6.7 million of ARS were redeemed at carrying value on January 5, 2011.
|
Debt Securities
|
||
Issued by the States
|
||
Recurring Fair Value Measures
|
of the United States
|
|
Activity in Level 3
|
Derivatives
|
(ARS)
|
Millions
|
||
Balance as of December 31, 2009
|
$0.7
|
$6.7
|
Purchases, sales, issuances and settlements, net
|
(0.7)
|
–
|
Level 3 transfers in
|
–
|
–
|
Balance as of December 31, 2010
(
a)
|
–
|
$6.7
|
(a)
|
The remaining $6.7 million of ARS were redeemed at carrying value on January 5, 2011.
|
Note 8.
|
Fair Value (Continued)
|
At Fair Value as of December 31, 2009
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
$17.8
|
–
|
–
|
$17.8
|
Available-for-sale Securities
|
||||
Corporate Debt Securities
|
–
|
$6.4
|
–
|
6.4
|
Debt Securities Issued by States of the United States (ARS)
|
–
|
–
|
$6.7
|
6.7
|
Total Available-for-sale Securities
|
–
|
6.4
|
6.7
|
13.1
|
Derivatives
|
–
|
–
|
0.7
|
0.7
|
Money Market Funds
|
1.4
|
–
|
–
|
1.4
|
Total Fair Value of Assets
|
$19.2
|
$6.4
|
$7.4
|
$33.0
|
Liabilities:
|
||||
Deferred Compensation
|
–
|
$14.6
|
–
|
$14.6
|
Total Fair Value of Liabilities
|
–
|
$14.6
|
–
|
$14.6
|
Total Net Fair Value of Assets (Liabilities)
|
$19.2
|
$(8.2)
|
$7.4
|
$18.4
|
Debt Securities
|
||
Issued by the States
|
||
Recurring Fair Value Measures
|
of the United States
|
|
Activity in Level 3
|
Derivatives
|
(ARS)
|
Millions
|
||
Balance as of December 31, 2008
|
–
|
$15.2
|
Purchases, sales, issuances and settlements, net
(
a)
|
$0.7
|
(8.5)
|
Level 3 transfers in
|
–
|
–
|
Balance as of December 31, 2009
|
$0.7
|
$6.7
|
(a)
|
ARS were redeemed during 2009 at carrying value.
|
Financial Instruments
|
Carrying Amount
|
Fair Value
|
Millions
|
||
Long-Term Debt, Including Current Portion
|
||
December 31, 2010
|
$785.0
|
$796.7
|
December 31, 2009
|
$701.0
|
$734.8
|
Note 9.
|
Short-Term and Long-Term Debt
|
Note 9.
|
Short-Term and Long-Term Debt (Continued)
|
Issue Date
|
Maturity
|
Principal Amount
|
Interest Rate
|
February 17, 2010
|
April 15, 2021
|
$15 Million
|
4.85%
|
February 17, 2010
|
April 15, 2025
|
$30 Million
|
5.10%
|
February 17, 2010
|
April 15, 2040
|
$35 Million
|
6.00%
|
Issue Date
|
Maturity
|
Principal Amount
|
Interest Rate
|
August 17, 2010
|
October 15, 2025
|
$30 Million
|
4.90%
|
August 17, 2010
|
April 15, 2040
|
$45 Million
|
5.82%
|
Note 9.
|
Short-Term and Long-Term Debt (Continued)
|
Long-Term Debt
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
First Mortgage Bonds
|
||
4.86% Series Due 2013
|
$60.0
|
$60.0
|
6.94% Series Due 2014
|
18.0
|
18.0
|
7.70% Series Due 2016
|
20.0
|
20.0
|
8.17% Series Due 2019
|
42.0
|
42.0
|
5.28% Series Due 2020
|
35.0
|
35.0
|
4.85% Series Due 2021
|
15.0
|
–
|
4.95% Pollution Control Series F Due 2022
|
111.0
|
111.0
|
6.02% Series Due 2023
|
75.0
|
75.0
|
4.90% Series Due 2025
|
30.0
|
–
|
5.10% Series Due 2025
|
30.0
|
–
|
5.99% Series Due 2027
|
60.0
|
60.0
|
5.69% Series Due 2036
|
50.0
|
50.0
|
6.00% Series Due 2040
|
35.0
|
–
|
5.82% Series Due 2040
|
45.0
|
–
|
SWL&P First Mortgage Bonds
|
||
7.25% Series Due 2013
|
10.0
|
10.0
|
Senior Unsecured Notes 5.99% Due 2017
|
50.0
|
50.0
|
Variable Demand Revenue Refunding Bonds Series 1997 A, B, and C Due 2012 – 2020
|
28.3
|
28.3
|
Industrial Development Revenue Bonds 6.5% Due 2025
|
6.0
|
6.0
|
Industrial Development Variable Rate Demand Refunding
|
||
Revenue Bonds Series 2006 Due 2025
|
27.8
|
27.8
|
Line of Credit Facility
(a)
|
–
|
65.0
|
Other Long-Term Debt, 1.0% – 8.0% Due 2011 – 2037
|
36.9
|
42.9
|
Total Long-Term Debt
|
785.0
|
701.0
|
Less: Due Within One Year
|
13.4
|
5.2
|
Net Long-Term Debt
|
$771.6
|
$695.8
|
(a)
|
A portion of the proceeds from the issuance on February 17, 2010, of $80 million principal amount of First Mortgage Bonds due in 2021, 2025 and 2040, was used to repay the outstanding borrowings on the Line of Credit Facility as of December 31, 2009.
|
Note 10.
|
Commitments, Guarantees and Contingencies
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
·
|
Expand our renewable energy supply.
|
·
|
Improve the efficiency of our coal-based generation facilities, as well as other process efficiencies.
|
·
|
Provide energy conservation initiatives for our customers and engage in other demand side efforts.
|
·
|
Support research of technologies to reduce carbon emissions from generation facilities and support carbon sequestration efforts.
|
·
|
Achieve overall carbon emission reductions.
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
Note 10.
|
Commitments, Guarantees and Contingencies (Continued)
|
Note 11.
|
Common Stock and Earnings Per Share
|
Summary of Common Stock
|
Shares
|
Equity
|
Thousands
|
Millions
|
|
Balance as of December 31, 2007
|
30,827
|
$461.2
|
2008 Employee Stock Purchase Plan
|
17
|
0.6
|
Invest Direct
|
161
|
6.9
|
Options and Stock Awards
|
24
|
4.6
|
Equity Issuance Program
|
1,556
|
60.8
|
Balance as of December 31, 2008
|
32,585
|
$534.1
|
2009 Employee Stock Purchase Plan
|
24
|
0.7
|
Invest Direct
|
456
|
13.6
|
Options and Stock Awards
|
8
|
1.1
|
Equity Issuance Program
|
1,685
|
51.9
|
Contributions to Pension
|
463
|
12.0
|
Balance as of December 31, 2009
|
35,221
|
$613.4
|
2010 Employee Stock Purchase Plan
|
19
|
0.6
|
Invest Direct
|
346
|
11.7
|
Options and Stock Awards
|
51
|
4.4
|
Equity Issuance Program
|
180
|
6.0
|
Balance as of December 31, 2010
|
35,817
|
$636.1
|
Note 11.
|
Common Stock and Earnings Per Share (Continued)
|
Reconciliation of Basic and Diluted
|
|||
Earnings Per Share
|
Dilutive
|
||
Year Ended December 31
|
Basic
|
Securities
|
Diluted
|
Millions Except Per Share Amounts
|
|||
2010
|
|||
Net Income Attributable to ALLETE
|
$75.3
|
–
|
$75.3
|
Common Shares
|
34.2
|
0.1
|
34.3
|
Per Share of Common Stock
|
$2.20
|
–
|
$2.19
|
2009
|
|||
Net Income Attributable to ALLETE
|
$61.0
|
–
|
$61.0
|
Common Shares
|
32.2
|
–
|
32.2
|
Per Share of Common Stock
|
$1.89
|
–
|
$1.89
|
2008
|
|||
Net Income Attributable to ALLETE
|
$82.5
|
–
|
$82.5
|
Common Shares
|
29.2
|
0.1
|
29.3
|
Per Share of Common Stock
|
$2.82
|
–
|
$2.82
|
Note 12.
|
Other Income (Expense)
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
AFUDC - Equity
|
$4.2
|
$5.8
|
$3.3
|
Investments and Other Income
(a)
|
0.4
|
(4.0)
|
12.3
|
Total Other Income
|
$4.6
|
$1.8
|
$15.6
|
(a)
|
In 2008, Investment and Other Income included a gain from the sale of certain available-for-sale securities. The gain was triggered when securities were sold to reallocate investments to meet defined investment allocations based upon an approved investment strategy.
|
Note 13.
|
Income Tax Expense
|
Note 13.
|
Income Tax Expense (Continued)
|
Income Tax Expense
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Current Tax Expense (Benefit)
|
|||
Federal
(a)
|
$(23.0)
|
$(42.6)
|
$6.2
|
State
|
1.3
|
(1.8)
|
(1.6)
|
Total Current Tax Expense (Benefit)
|
(21.7)
|
(44.4)
|
4.6
|
Deferred Tax Expense
|
|||
Federal
(b)
|
61.4
|
66.0
|
29.3
|
State
|
5.3
|
10.3
|
13.4
|
Change in Valuation Allowance
|
0.2
|
(0.1)
|
(2.9)
|
Investment Tax Credit Amortization
|
(0.9)
|
(1.0)
|
(1.0)
|
Total Deferred Tax Expense
|
66.0
|
75.2
|
38.8
|
Total Income Tax Expense
|
$44.3
|
$30.8
|
$43.4
|
(a)
|
The 2010
federal current tax benefit is primarily due to the implementation of tax planning initiatives and bonus depreciation provisions in the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 and the Small Business Jobs Act of 2010. The 2009 federal current tax benefit is primarily due to bonus depreciation provisions of the American Recovery and Reinvestment Act of 2009.
|
(b)
|
The 2010 federal deferred tax expense is primarily due to tax planning initiatives and bonus depreciation provisions of the Small Business Jobs Act of 2010 and the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010. Also included in 2010 is a one-time charge of $4.0 million as a result of the Patient Protection and Affordable Care Act. The 2009 federal deferred tax expense is primarily due to bonus depreciation provisions of the American Recovery and Reinvestment Act of 2009.
|
Reconciliation of Taxes from Federal Statutory
|
|||
Rate to Total Income Tax Expense
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Income Before Non-Controlling Interest and Income Taxes
|
$119.1
|
$91.5
|
$126.4
|
Statutory Federal Income Tax Rate
|
35%
|
35%
|
35%
|
Income Taxes Computed at 35 percent Statutory Federal Rate
|
$41.7
|
$32.0
|
$44.2
|
Increase (Decrease) in Tax Due to:
|
|||
State Income Taxes – Net of Federal Income Tax Benefit
|
4.5
|
5.4
|
4.8
|
Impact of Patient Protection and Affordable Care Act
|
4.0
|
–
|
–
|
Regulatory Differences for Utility Plant
|
(2.0)
|
(2.5)
|
(1.6)
|
Production Tax Credit
|
(1.6)
|
(1.2)
|
(0.4)
|
Other
|
(2.3)
|
(2.9)
|
(3.6)
|
Total Income Tax Expense
|
$44.3
|
$30.8
|
$43.4
|
Note 13.
|
Income Tax Expense (Continued)
|
Deferred Tax Assets and Liabilities
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Deferred Tax Assets
|
||
Employee Benefits and Compensation
(a)
|
$121.8
|
$118.2
|
Property Related
|
51.1
|
46.5
|
NOL and Tax Credit Carryforward
|
28.2
|
–
|
Investment Tax Credits
|
9.7
|
10.0
|
Other
|
12.7
|
14.4
|
Gross Deferred Tax Assets
|
223.5
|
189.1
|
Deferred Tax Asset Valuation Allowance
|
(0.5)
|
(0.3)
|
Total Deferred Tax Assets
|
$223.0
|
$188.8
|
Deferred Tax Liabilities
|
||
Property Related
|
$387.2
|
$294.1
|
Regulatory Asset for Benefit Obligations
|
105.8
|
96.5
|
Unamortized Investment Tax Credits
|
13.7
|
14.1
|
Partnership Basis Differences
|
19.4
|
14.6
|
Other
|
27.3
|
28.2
|
Total Deferred Tax Liabilities
|
$553.4
|
$447.5
|
Net Deferred Income Taxes
|
$330.4
|
$258.7
|
Recorded as:
|
||
Net Current Deferred Tax Liabilities
(b)
|
$5.2
|
$5.6
|
Net Long-Term Deferred Tax Liabilities
|
325.2
|
253.1
|
Net Deferred Income Taxes
|
$330.4
|
$258.7
|
(a)
|
Includes unfunded employee benefits
|
(b)
|
Included in Other Current Liabilities.
|
NOL and Tax Credit Carryforwards
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Federal NOL carryforward
(a)
|
$62.0
|
$7.3
|
Federal tax credit carryforwards
|
3.7
|
1.9
|
State NOL carryforward
(a)
|
71.7
|
59.6
|
State tax credit carryforwards, net of federal detriment
|
1.7
|
0.1
|
(a)
|
Pretax amounts
|
Gross Unrecognized Income Tax Benefits
|
2010
|
2009
|
2008
|
Millions
|
|||
Balance at January 1
|
$9.5
|
$8.0
|
$5.3
|
Additions for Tax Positions Related to the Current Year
|
–
|
0.5
|
0.7
|
Reductions for Tax Positions Related to the Current Year
|
(0.2)
|
–
|
–
|
Additions for Tax Positions Related to Prior Years
|
4.4
|
1.0
|
4.5
|
Reduction for Tax Positions Related to Prior Years
|
–
|
–
|
(2.5)
|
Settlements
|
(0.3)
|
–
|
–
|
Lapse of Statute
|
(1.1)
|
–
|
–
|
Balance as of December 31
|
$12.3
|
$9.5
|
$8.0
|
Note 13.
|
Income Tax Expense (Continued)
|
Note 14.
|
Other Comprehensive Income (Loss)
|
Other Comprehensive Income (Loss)
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Net Income
|
$74.8
|
$60.7
|
$83.0
|
Other Comprehensive Income
|
|||
Unrealized Gain on Securities
Net of income taxes of $0.6, $1.7, and $(3.7)
|
0.8
|
2.8
|
(6.0)
|
Reclassification Adjustment for Losses Included in Income
Net of income taxes of $–, $–, and $(2.7)
|
–
|
–
|
(3.7)
|
Defined Benefit Pension and Other Postretirement Plans
Net of income taxes of $–, $4.1, and $(13.3)
|
–
|
6.2
|
(18.8)
|
Total Other Comprehensive Income (Loss)
|
0.8
|
9.0
|
(28.5)
|
Total Comprehensive Income
|
$75.6
|
$69.7
|
$54.5
|
Less: Non-Controlling Interest in Subsidiaries
|
(0.5)
|
(0.3)
|
0.5
|
Comprehensive Income Attributable to ALLETE
|
$76.1
|
$70.0
|
$54.0
|
Accumulated Other Comprehensive Income (Loss)
|
||
As of December 31
|
2010
|
2009
|
Millions
|
||
Unrealized Loss on Securities
|
$(1.0)
|
$(1.8)
|
Defined Benefit Pension and Other Postretirement Plans
|
(22.2)
|
(22.2)
|
Total Accumulated Other Comprehensive Loss
|
$(23.2)
|
$(24.0)
|
Note 15.
|
Pension and Other Postretirement Benefit Plans |
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Pension Obligation and Funded Status
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Accumulated Benefit Obligation
|
$485.6
|
$435.9
|
Change in Benefit Obligation
|
||
Obligation, Beginning of Year
|
$465.2
|
$440.4
|
Service Cost
|
6.2
|
5.7
|
Interest Cost
|
26.2
|
26.2
|
Actuarial Loss
|
47.1
|
14.6
|
Benefits Paid
|
(27.2)
|
(25.5)
|
Participant Contributions
|
8.1
|
3.9
|
Obligation, End of Year
|
$525.6
|
$465.3
|
Change in Plan Assets
|
||
Fair Value, Beginning of Year
|
$327.6
|
$273.7
|
Actual Return on Plan Assets
|
45.6
|
41.6
|
Employer Contribution
|
36.0
|
37.8
|
Benefits Paid
|
(27.2)
|
(25.5)
|
Fair Value, End of Year
|
$382.0
|
$327.6
|
Funded Status, End of Year
|
$(143.6)
|
$(137.7)
|
Net Pension Amounts Recognized in Consolidated Balance Sheet Consist of:
|
||
Current Liabilities
|
$(0.9)
|
$(0.9)
|
Noncurrent Liabilities
|
$(142.8)
|
$(136.8)
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Unrecognized Pension Costs
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Net Loss
|
$225.1
|
$196.5
|
Prior Service Cost
|
1.4
|
1.8
|
Total Unrecognized Pension Costs
|
$226.5
|
$198.3
|
Components of Net Periodic Pension Expense
|
|||
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
Service Cost
|
$6.2
|
$5.7
|
$5.8
|
Interest Cost
|
26.2
|
26.2
|
25.4
|
Expected Return on Plan Assets
|
(33.7)
|
(33.8)
|
(32.5)
|
Amortization of Loss
|
6.6
|
3.4
|
1.6
|
Amortization of Prior Service Costs
|
0.5
|
0.6
|
0.6
|
Net Pension Expense
|
$5.8
|
$2.1
|
$0.9
|
Information for Pension Plans with an Accumulated Benefit Obligation in Excess of Plan Assets
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Projected Benefit Obligation
|
$525.6
|
$465.3
|
Accumulated Benefit Obligation
|
$485.6
|
$435.9
|
Fair Value of Plan Assets
|
$382.0
|
$327.6
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Postretirement Health and Life Obligation and Funded Status
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Change in Benefit Obligation
|
||
Obligation, Beginning of Year
|
$192.1
|
$166.9
|
Service Cost
|
4.8
|
4.1
|
Interest Cost
|
10.9
|
10.0
|
Actuarial Loss
|
17.6
|
18.4
|
Participant Contributions
|
2.1
|
1.7
|
Plan Amendments
|
(14.2)
|
(1.3)
|
Benefits Paid
|
(9.2)
|
(7.7)
|
Obligation, End of Year
|
$204.1
|
$192.1
|
Change in Plan Assets
|
||
Fair Value, Beginning of Year
|
$96.4
|
$78.6
|
Actual Return on Plan Assets
|
12.0
|
13.9
|
Employer Contribution
|
13.4
|
9.9
|
Participant Contributions
|
2.0
|
1.6
|
Benefits Paid
|
(9.1)
|
(7.6)
|
Fair Value, End of Year
|
$114.7
|
$96.4
|
Funded Status, End of Year
|
$(89.4)
|
$(95.7)
|
Net Postretirement Health and Life Amounts Recognized in Consolidated Balance Sheet Consist of:
|
||
Current Liabilities
|
$(0.8)
|
$(0.8)
|
Noncurrent Liabilities
|
$(88.6)
|
$(94.8)
|
Unrecognized Postretirement Health and Life Costs
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Net Loss
|
$80.1
|
$69.6
|
Prior Service Cost
|
(11.2)
|
(1.3)
|
Transition Obligation
|
0.2
|
6.9
|
Total Unrecognized Postretirement Health and Life Costs
|
$69.1
|
$75.2
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Other Changes in Postretirement Benefit Plan Assets and Benefit Obligations
Recognized in Other Comprehensive Income and Regulatory Assets
|
||
Year Ended December 31
|
2010
|
2009
|
Millions
|
||
Net Loss
|
$15.3
|
$12.9
|
Prior Service Cost (Credit) Arising During the Period
|
(14.2)
|
(1.3)
|
Amortization of Prior Service Cost
|
0.1
|
–
|
Amortization of Transition Obligation
|
(2.5)
|
(2.5)
|
Amortization of Loss
|
(4.8)
|
(2.5)
|
Total Recognized in Other Comprehensive Income and Regulatory Assets
|
$(6.1)
|
$6.6
|
Estimated Future Benefit Payments
|
||
Postretirement
|
||
Pension
|
Health and Life
|
|
Millions
|
||
2011
|
$27.5
|
$8.5
|
2012
|
$28.4
|
$9.5
|
2013
|
$29.4
|
$10.5
|
2014
|
$30.6
|
$11.6
|
2015
|
$31.8
|
$12.7
|
Years 2016 – 2020
|
$174.6
|
$73.3
|
Postretirement
|
||
Pension
|
Health and Life
|
|
Millions
|
||
Net Loss
|
$0.3
|
$8.5
|
Prior Service Costs
|
$12.1
|
$(1.7)
|
Transition Obligations
|
–
|
$0.1
|
Total Pension and Postretirement Health and Life Costs
|
$12.4
|
$6.9
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Actual Plan Asset Allocations
|
||||
Pension
|
Postretirement
Health and Life
(a)
|
|||
2010
|
2009
|
2010
|
2009
|
|
Equity Securities
|
52%
|
53%
|
58%
|
54%
|
Debt Securities
|
29%
|
28%
|
33%
|
38%
|
Real Estate
|
5%
|
5%
|
–
|
–
|
Private Equity
|
14%
|
14%
|
9%
|
8%
|
100%
|
100%
|
100%
|
100%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
Plan Asset Target Allocations
|
||
Postretirement
|
||
Pension
|
Health and Life
(a)
|
|
Equity Securities
|
50%
|
48%
|
Debt Securities
|
30%
|
34%
|
Real Estate
|
10%
|
9%
|
Private Equity
|
10%
|
9%
|
100%
|
100%
|
(a)
|
Includes VEBAs and irrevocable grantor trusts.
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
At Fair Value as of December 31, 2010
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
||||
U.S. Large-cap
(a)
|
$30.4
|
$29.9
|
$3.5
|
$63.8
|
U.S. Mid-cap Growth
(a)
|
14.0
|
13.7
|
1.6
|
29.3
|
U.S. Small-cap
(a)
|
13.7
|
13.5
|
1.6
|
28.8
|
International
|
–
|
77.1
|
–
|
77.1
|
Debt Securities:
|
||||
Mutual Funds
|
46.5
|
–
|
46.5
|
|
Fixed Income
|
–
|
65.7
|
–
|
65.7
|
Other Types of Investments:
|
||||
Private Equity Funds
|
–
|
–
|
50.7
|
50.7
|
Real Estate
|
–
|
–
|
20.1
|
20.1
|
Total Fair Value of Assets
|
$104.6
|
$199.9
|
$77.5
|
$382.0
|
Equity Securities
|
|||
Activity in Level 3
|
(Auction Rate Securities)
|
Private Equity Funds
|
Real Estate
|
Millions
|
|||
Balance as of December 31, 2009
|
$9.1
|
$44.7
|
$17.3
|
Actual Return on Plan Assets
|
–
|
(4.1)
|
(6.1)
|
Purchases, sales, and settlements, net
|
(2.4)
|
10.1
|
8.9
|
Balance as of December 31, 2010
|
$6.7
|
$50.7
|
$20.1
|
At Fair Value as of December 31, 2009
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
||||
U.S. Large-cap
(a)
|
$23.2
|
$27.5
|
$5.2
|
$55.9
|
U.S. Mid-cap Growth
(a)
|
8.9
|
10.6
|
2.0
|
21.5
|
U.S. Small-cap
(a)
|
8.6
|
10.1
|
1.9
|
20.6
|
International
|
–
|
66.4
|
–
|
66.4
|
ALLETE
|
9.9
|
–
|
–
|
9.9
|
Debt Securities:
|
||||
Mutual Funds
|
32.0
|
–
|
–
|
32.0
|
Fixed Income
|
–
|
59.3
|
–
|
59.3
|
Other Types of Investments:
|
||||
Private Equity Funds
|
–
|
–
|
44.7
|
44.7
|
Real Estate
|
–
|
–
|
17.3
|
17.3
|
Total Fair Value of Assets
|
$82.6
|
$173.9
|
$71.1
|
$327.6
|
(a)
|
The underlying investments classified under U.S. Equity Securities consist of Money Market Funds and U.S. Government Bonds (Level 1), Hedge Funds (Level 2), and Auction Rate Securities (Level 3), which are combined with futures, which settle daily, in a portable alpha program to achieve the returns of the U.S. Equity Securities Large-cap, Mid-cap Growth, and Small-cap funds. Our exposure with respect to these investments includes both the futures and the underlying investments.
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Recurring Fair Value Measures
|
Equity Securities
|
||
Activity in Level 3
|
(Auction Rate Securities)
|
Private Equity Funds
|
Real Estate
|
Millions
|
|||
Balance as of December 31, 2008
|
$10.2
|
$43.2
|
$17.0
|
Actual Return on Plan Assets
|
0.1
|
(8.7)
|
(8.6)
|
Purchases, sales, and settlements, net
|
(1.1)
|
10.2
|
8.9
|
Balance as of December 31, 2009
|
$9.1
|
$44.7
|
$17.3
|
At Fair Value as of December 31, 2010
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
||||
U.S. Large-cap
|
$15.7
|
–
|
–
|
$15.7
|
U.S. Mid-cap Growth
|
11.4
|
–
|
–
|
11.4
|
U.S. Small-cap
|
11.5
|
–
|
–
|
11.5
|
International
|
26.8
|
–
|
–
|
26.8
|
Debt Securities:
|
||||
Mutual Funds
|
9.0
|
–
|
–
|
9.0
|
Fixed Income
|
–
|
$27.9
|
–
|
27.9
|
Other Types of Investments:
|
||||
Private Equity Funds
|
–
|
–
|
$12.4
|
12.4
|
Total Fair Value of Assets
|
$74.4
|
$27.9
|
$12.4
|
$114.7
|
Activity in Level 3
|
Private Equity Funds
|
Millions
|
|
Balance as of December 31, 2009
|
$9.4
|
Actual Return on Plan Assets
|
1.4
|
Purchases, sales, and settlements, net
|
1.6
|
Balance as of December 31, 2010
|
$12.4
|
At Fair Value as of December 31, 2009
|
||||
Recurring Fair Value Measures
|
Level 1
|
Level 2
|
Level 3
|
Total
|
Millions
|
||||
Assets:
|
||||
Equity Securities
|
||||
U.S. Large-cap
|
$13.4
|
–
|
–
|
$13.4
|
U.S. Mid-cap Growth
|
9.0
|
–
|
–
|
9.0
|
U.S. Small-cap
|
6.3
|
–
|
–
|
6.3
|
International
|
21.4
|
–
|
–
|
21.4
|
Debt Securities:
|
||||
Mutual Funds
|
5.5
|
–
|
–
|
5.5
|
Fixed Income
|
–
|
$31.4
|
–
|
31.4
|
Other Types of Investments:
|
||||
Private Equity Funds
|
–
|
–
|
$9.4
|
9.4
|
Total Fair Value of Assets
|
$55.6
|
$31.4
|
$9.4
|
$96.4
|
Activity in Level 3
|
Private Equity Funds
|
Millions
|
|
Balance as of December 31, 2008
|
$7.9
|
Actual Return on Plan Assets
|
(1.1)
|
Purchases, sales, and settlements, net
|
2.6
|
Balance as of December 31, 2009
|
$9.4
|
Note 15.
|
Pension and Other Postretirement Benefit Plans (Continued)
|
Note 16.
|
Employee Stock and Incentive Plans
|
Year Ended December 31
|
2010
|
2009
|
2008
|
Millions
|
|||
ESOP Shares
|
|||
Allocated
|
2.2
|
2.2
|
2.0
|
Unallocated
|
1.3
|
1.5
|
1.9
|
Total
|
3.5
|
3.7
|
3.9
|
Fair Value of Unallocated Shares
|
$48.4
|
$49.0
|
$61.3
|
Note 16.
|
Employee Stock and Incentive Plans (Continued)
|
2008
|
|
Risk-Free Interest Rate
|
2.8%
|
Expected Life
|
5 Years
|
Expected Volatility
|
20%
|
Dividend Growth Rate
|
4.4%
|
Note 16.
|
Employee Stock and Incentive Plans (Continued)
|
2010
|
2009
|
2008
|
||||
Weighted-Average
|
Weighted-Average
|
Weighted-Average
|
||||
Number of
|
Exercise
|
Number of
|
Exercise
|
Number of
|
Exercise
|
|
Options
|
Price
|
Options
|
Price
|
Options
|
Price
|
|
Outstanding as of January 1,
|
646,235
|
$40.05
|
672,419
|
$39.99
|
510,992
|
$39.83
|
Granted
(a)
|
–
|
–
|
–
|
–
|
180,815
|
$39.10
|
Exercised
|
40,769
|
$27.76
|
4,508
|
$18.85
|
16,627
|
$25.56
|
Forfeited
|
44,579
|
$43.16
|
21,676
|
$42.62
|
2,761
|
$39.39
|
Outstanding as of December 31,
|
560,887
|
$40.69
|
646,235
|
$40.05
|
672,419
|
$39.99
|
Exercisable as of December 31,
|
523,491
|
$39.76
|
512,743
|
$37.34
|
406,894
|
$34.48
|
(a)
|
Stock options have not been granted since 2008.
|
Range of Exercise Price
|
|||
As of December 31, 2010
|
$18.85 to $29.79
|
$37.76 to $41.35
|
$44.15 to $48.65
|
Options Outstanding and Exercisable:
|
|||
Number Outstanding and Exercisable
|
44,738
|
296,770
|
181,983
|
Weighted Average Remaining Contractual Life (Years)
|
1.5
|
5.4
|
5.5
|
Weighted Average Exercise Price
|
$26.96
|
$39.44
|
$46.37
|
2010
|
2009
|
2008
|
||||
Weighted-
|
Weighted-
|
Weighted-
|
||||
Average
|
Average
|
Average
|
||||
Number of
|
Grant Date
|
Number of
|
Grant Date
|
Number of
|
Grant Date
|
|
Shares
|
Fair Value
|
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|
Non-vested as of January 1,
|
121,825
|
$41.96
|
79,238
|
$47.94
|
68,501
|
$45.63
|
Granted
|
49,302
|
$35.44
|
69,800
|
$35.06
|
36,684
|
$54.05
|
Unearned Grant Award
|
(22,909)
|
$54.50
|
(24,615)
|
$41.97
|
(23,624)
|
$42.80
|
Forfeited
|
(25,729)
|
$36.45
|
(2,598)
|
$38.78
|
(2,323)
|
$50.87
|
Non-vested as of December 31,
|
122,489
|
$38.15
|
121,825
|
$41.96
|
79,238
|
$47.94
|
Note 16.
|
Employee Stock and Incentive Plans (Continued)
|
2010
|
2009
|
|||
Weighted- Average
|
Weighted- Average
|
|||
Number of
|
Grant Date
|
Number of
|
Grant Date
|
|
Shares
|
Fair Value
|
Shares
|
Fair Value
|
|
Available as of January 1,
|
28,983
|
$29.41
|
–
|
–
|
Granted
|
26,589
|
$31.83
|
30,465
|
$29.41
|
Awarded
|
(3,091)
|
$29.75
|
–
|
–
|
Forfeited
|
(8,678)
|
$30.62
|
(1,482)
|
$29.41
|
Available as of December 31,
|
43,803
|
$30.61
|
28,983
|
$29.41
|
Note 17.
|
Derivatives
|
Note 18.
|
Quarterly Financial Data (Unaudited)
|
Quarter Ended
|
Mar. 31
|
Jun. 30
|
Sept. 30
|
Dec. 31
|
Millions Except Earnings Per Share
|
||||
2010
|
||||
Operating Revenue
|
$233.6
|
$211.2
|
$224.1
|
$238.1
|
Operating Income
|
$46.1
|
$31.7
|
$35.3
|
$22.7
|
Net Income Attributable to ALLETE
|
$23.0
|
$19.4
|
$19.6
|
$13.3
|
Earnings Per Share of Common Stock
|
||||
Basic
|
$0.68
|
$0.57
|
$0.57
|
$0.38
|
Diluted
|
$0.68
|
$0.57
|
$0.56
|
$0.38
|
2009
|
||||
Operating Revenue
|
$199.6
|
$164.7
|
$178.8
|
$216.0
|
Operating Income
|
$31.1
|
$15.7
|
$25.4
|
$33.8
|
Net Income Attributable to ALLETE
|
$16.9
|
$9.4
|
$16.0
|
$18.7
|
Earnings Per Share of Common Stock
|
||||
Basic
|
$0.55
|
$0.29
|
$0.49
|
$0.56
|
Diluted
|
$0.55
|
$0.29
|
$0.49
|
$0.56
|
Balance at
|
Additions
|
Deductions
|
Balance at
|
||
Beginning
|
Charged
|
Other
|
from
|
End of
|
|
of Period
|
to Income
|
Charges
|
Reserves
(a)
|
Period
|
|
Millions
|
|||||
Reserve Deducted from Related Assets
|
|||||
Reserve For Uncollectible Accounts
|
|||||
2008 Trade Accounts Receivable
|
$1.0
|
$1.0
|
–
|
$1.3
|
$0.7
|
Finance Receivables – Long-Term
|
$0.2
|
–
|
–
|
$0.1
|
$0.1
|
2009 Trade Accounts Receivable
|
$0.7
|
$1.3
|
–
|
$1.1
|
$0.9
|
Finance Receivables – Long-Term
|
$0.1
|
$0.3
|
–
|
–
|
$0.4
|
2010 Trade Accounts Receivable
|
$0.9
|
$1.1
|
–
|
$1.1
|
$0.9
|
Finance Receivables – Long-Term
|
$0.4
|
$0.8
|
–
|
$ 0.4
|
$0.8
|
Deferred Asset Valuation Allowance
|
|||||
2008 Deferred Tax Assets
|
$3.3
|
$ (2.9)
|
–
|
–
|
$0.4
|
2009 Deferred Tax Assets
|
$0.4
|
$ (0.1)
|
–
|
–
|
$0.3
|
2010 Deferred Tax Assets
|
$0.3
|
$0.2
|
–
|
–
|
$0.5
|
|
Article 1.Establishment and Purpose
|
Base Salary
|
$
|
Times
|
|
Award Opportunity (percent of base salary)
|
%
|
Equals
|
|
Target Award
|
$
|
Goal Performance Level
|
Payout as Percent of
Target Award
|
Award Amount
|
Superior
|
200%
|
$
|
Target
|
100%
|
$
|
Threshold
|
37.5%
|
$
|
Below Threshold
|
0%
|
$
|
Goal
|
|||||||
Weighting
|
|||||||
Financial Goals
|
|||||||
Net Income from Continuing Operations
|
50%
|
||||||
Cash from Operating Activities
|
25%
|
||||||
Strategic Goals
|
25%
|
||||||
100%
|
|
Effective January 1, 2011, the Company hereby amends SERP I to provide that the SERP I retirement benefit not yet paid to a participant is forfeited in the event the participant has a separation from service for cause and to incorporate any compensation recovery policy adopted by the Company. |
|
Effective January 1, 2011, all amounts payable to Participants in accordance with this Plan are subject to, and the Company hereby incorporates into this SERP I, the terms of any compensation recovery policy or policies established and amended by the Company from time to time (“Compensation Recovery Policy”). |
|
(Q)
|
“Misconduct” means the occurrence of either or both of the following, as determined in its sole discretion by either the Executive Compensation Committee of the Company’s Board of Directors with respect to Section 16 Officers of the Company, or the Administrator with respect to any other Participant:
|
|
(a)
|
an act or omission by the Participant involving dishonesty in connection with his or her responsibilities as an employee of the Company; or
|
|
(b)
|
the Participant’s conviction of, or entry of a plea of
nolo contendere
to, any felony or a misdemeanor involving moral turpitude, provided that a misdemeanor motor vehicle violation will not constitute a crime of moral turpitude unless it involves driving while impaired within the scope of employment or another serious driving offense committed within the scope of employment.
|
|
Notwithstanding any other term or condition in this Section 4, a Participant will forfeit any vested Retirement Benefit attributable to any year during which the Participant engaged in Misconduct and any subsequent period. For purposes of calculating the Retirement Benefit of any Participant who engaged in Misconduct, the Participant’s Final Average Earnings and Years of Credited Service will exclude the period during which the Participant engaged in Misconduct and any subsequent period. |
|
All benefits are subject to the provisions of Sections 1.3, regardless of whether distributions have commenced. |
TABLE OF CONTENTS
|
Page
|
|||
ARTICLE 1 Establishment and Purpose
|
2
|
|||
1.1
|
Establishment
|
2
|
||
1.2
|
Compensation Recovery Policy
|
3
|
||
ARTICLE 2 Section 409A Plans and Organization
|
3
|
|||
2.1
|
Section 409A Plans
|
3
|
||
2.2
|
Organization
|
3
|
||
2.3
|
Section 409A Compliance
|
3
|
||
ARTICLE 3 Administration
|
4
|
|||
3.1
|
Administrator
|
4
|
||
3.2
|
Duties
|
4
|
||
3.3
|
Agents
|
4
|
||
3.4
|
Binding Effect of Decisions
|
4
|
||
3.5
|
Employer Information
|
4
|
||
ARTICLE 4 Participation
|
4
|
|||
4.1
|
Eligibility and Commencement of Participation
|
4
|
||
4.2
|
Special Rule for Initial Participation
|
5
|
||
4.3
|
Termination of Participation
|
5
|
||
ARTICLE 5 Annual Make-Up Award
|
5
|
|||
5.1
|
Eligibility
|
5
|
||
5.2
|
Amount of Annual Make-Up Award
|
5
|
||
5.3
|
Payment
|
6
|
||
5.4
|
Forfeiture of Annual Make-up Award
|
6
|
||
ARTICLE 6 SERP II Account Balance Plan for Employees
|
7
|
|||
6.1
|
Elective Deferrals
|
7
|
||
6.2
|
Non-Elective Deferrals
|
8
|
||
6.3
|
FICA and Other Taxes
|
8
|
||
6.4
|
Distributions
|
8
|
||
6.5
|
Additional Distribution Rules
|
10
|
||
6.6
|
Subsequent Changes in Time and Form of Distributions
|
11
|
||
ARTICLE 7 Accounts and Investments
|
12
|
|||
7.1
|
Establishment of Accounts
|
12
|
||
7.2
|
Timing of Credits to Accounts
|
12
|
||
7.3
|
Vesting
|
12
|
||
7.4
|
Investments
|
12
|
||
7.5
|
Valuation Date
|
12
|
||
ARTICLE 8 SERP II Retirement Benefit
|
12
|
|||
8.1
|
Eligibility
|
12
|
||
8.2
|
Vesting and Forfeiture
|
13
|
||
8.3
|
Retirement Benefit
|
13
|
||
8.4
|
Forfeiture of Vested Retirement Benefit for Misconduct
|
13
|
||
8.5
|
Time and Form of Distributions
|
14
|
||
8.6
|
Additional Distribution Rules
|
14
|
||
8.7
|
Subsequent Changes in Time and Form of Payment
|
16
|
||
8.8
|
FICA and Other Taxes
|
16
|
||
ARTICLE 9 Payment Acceleration and Delay
|
16
|
|||
9.1
|
Permitted Accelerations of Payment
|
16
|
||
9.2
|
Permissible Payment Delays
|
17
|
||
9.3
|
Suspension Not Allowed
|
18
|
||
ARTICLE 10 Beneficiary Designation
|
18
|
|||
10.1
|
Beneficiary
|
18
|
||
10.2
|
No Beneficiary Designation
|
18
|
||
ARTICLE 11 Claims Procedures
|
18
|
|||
11.1
|
Presentation of Claim
|
18
|
||
11.2
|
Notification of Decision
|
18
|
||
11.3
|
Review of a Denied Claim
|
19
|
||
11.4
|
Decision on Review
|
20
|
||
11.5
|
Other Remedies
|
20
|
||
ARTICLE 12 Amendment or Termination
|
21
|
|||
ARTICLE 13 Miscellaneous Provisions
|
21
|
|||
13.1
|
Unsecured General Creditor
|
21
|
||
13.2
|
Employer’s Liability
|
21
|
||
13.3
|
Nonassignability
|
21
|
||
13.4
|
No Right to Employment
|
21
|
||
13.5
|
Incompetency
|
22
|
||
13.6
|
Tax Withholding
|
22
|
||
13.7
|
Furnishing Information
|
22
|
||
13.8
|
Notice
|
22
|
||
13.9
|
Gender and Number
|
22
|
||
13.10
|
Headings
|
22
|
||
13.11
|
Applicable Law and Construction
|
22
|
||
13.12
|
Invalid or Unenforceable Provisions
|
22
|
||
13.13
|
Successors
|
23
|
||
APPENDIX A
|
24
|
1.1
|
Establishment
. This document includes the terms of the ALLETE and Affiliated Companies Supplemental Executive Retirement Plan II. The purpose of SERP II is to provide eligible Employees (i) an opportunity to elect to defer compensation and (ii) a supplemental Retirement Benefit, the primary purpose of which is to compensate for annual compensation limits and maximum benefit limitations imposed by the Code on Retirement Plans maintained by the Company.
|
1.2
|
Compensation Recovery Policy
.
Effective January 1, 2011, all amounts payable to Participants in accordance with this Plan are subject to, and the Company hereby incorporates into this SERP II, the terms of any compensation recovery policy or policies established and amended by the Company from time to time (“Compensation Recovery Policy”).
|
2.1
|
Section 409A Plans
.
|
2.1.1
|
An elective account balance plan for Employees for purposes of Elective Deferrals;
|
2.1.2
|
A non-elective account balance plan for Employees for purposes of Non-Elective Deferrals; and
|
2.1.3
|
A non-account balance plan for Employees.
|
2.2
|
Organization
.
|
2.2.1
|
The provisions of Article 5 apply only for purposes of identifying employees eligible to receive an Annual Make-Up Award and the amount of the award, if any.
|
2.2.2
|
The provisions of Articles 6 and 7 apply only to the extent that SERP II provides for Employees’ Elective Deferrals, or Non-Elective Deferrals or both, which, for purposes of Section 409A, represent the elective and non-elective account balance plans identified in subsections 2.1.1 and 2.1.2, respectively.
|
2.2.3
|
The provisions of Article 8 apply only to the extent that SERP II provides for Retirement Benefits, which represent the non-account balance plan identified in subsection 2.1.3.
|
2.3
|
Section 409A Compliance
.
|
3.1
|
Administrator
.
|
3.2
|
Duties
.
|
3.3
|
Agents
.
|
3.4
|
Binding Effect of Decisions
.
|
3.5
|
Employer Information
.
|
4.1
|
Eligibility and Commencement of Participation
.
|
4.2
|
Special Rule for Initial Participation
.
|
4.3
|
Termination of Participation
.
|
5.1
|
Eligibility
.
|
5.2
|
Amount of Annual Make-Up Award
.
|
5.2.1
|
Flexible Dollar Makeup
.
The Flexible Dollar Makeup for a Plan Year shall equal the product of A and B, with A equal to the sum of (i) 2% and (ii) the Participant’s life insurance percentage under the Minnesota Power and Affiliated Companies Flexible Compensation Plan for nonunion employees, and B equal to the sum of: (a) the total of the Participant’s Annual Incentive Award and other awards (to the extent included in calculations for the Retirement Plans) for such year, and (b) the Participant’s Salary (determined as of October 1 of the prior Plan Year) in excess of the Code section 401(a)(17) limitation in effect for that Plan Year.
|
5.2.2
|
RSOP Allocation Makeup
.
For a Participant who was a Participant as of September 30, 2006, for so long as he remains continuously eligible as a Participant, the RSOP Allocation Makeup for a Plan Year shall equal the product of C and D, with C equal to the sum of (i) 1.5% and (ii) the percentage (if any) being allocated for that year as an excess amount pursuant to the RSOP, and D equal to the sum of (a) the total of the Participant’s Annual Incentive Award and other award (to the extent included in calculations for the Retirement Plans) for such year, and (b) the amount of the Participant’s Salary in excess of the Code section 401(a)(17) limitation in effect for that Plan Year.
|
5.2.3
|
RSOP Match Allocation Makeup
.
The RSOP Match Allocation Makeup for a Plan Year shall equal the excess of G over H, with G equal to the lesser of: (i) the sum of the Participant’s Elective Deferrals out of Salary and RSOP deferrals (including both pre-tax and Roth after-tax deferrals), and (ii) with respect to any Eligible Employee who was a Participant as of September 30, 2006, for so long as he remains continuously eligible as a Participant, 4% of the Participant’s Salary plus Bonus; or with respect to any Eligible Employee who becomes a Participant on or after October 1, 2006, 5% of the Participant’s Salary plus Bonus; and H equal to RSOP matching contributions for the Plan Year on behalf of the Participant.
|
5.3
|
Payment
.
|
5.4
|
Forfeiture of Annual Make-Up Award
.
Notwithstanding any other term or provision of this Article 5, if a Participant engages in Misconduct, the Participant shall forfeit or repay, as necessary, any Annual Make-Up Award payable on account of the period during which the Misconduct occurred and any subsequent period.
|
6.1
|
Elective Deferrals
.
|
6.1.1
|
Deferral Elections
.
For each Plan Year, a Participant may elect to defer some or all of Salary, Bonus, and, if eligible, an Annual Make-up Award, Severance Pay and Other Awards. Elections are effective on a calendar year basis and become irrevocable no later than the date specified by the Administrator, but in any event before the beginning of the Plan Year to which the elections relate. A Participant’s elections will become effective only if the forms required by the Administrator have been properly completed and signed by the Participant, timely delivered to the Administrator, and accepted by the Administrator. A Participant who fails to file elections before the required date will be treated as having elected not to defer any amounts for the following Plan Year. For any Plan Year the Administrator may, in its sole discretion, decide not to allow one or more Participants to defer certain types of compensation.
|
6.1.2
|
Special Rule for Performance-Based Compensation
.
The Administrator, in its complete and sole discretion, may allow a Participant to revise a deferral election with respect to a Bonus if the Administrator determines that the Bonus is performance-based compensation within the meaning of Section 409A and the election becomes irrevocable no later than the earlier of: (a) six months preceding the end of the performance period to which the Bonus relates; or (b) the date as of which the Bonus has become readily ascertainable, within the meaning of Section 409A.
|
6.1.3
|
Special Rule for Severance Pay
.
A Participant may elect to defer all or a portion of Severance Pay by filing with the Administrator an irrevocable deferral election no later than the date the Participant obtains a legally binding right to the Severance Pay.
|
6.1.4
|
Cancellation of Deferral Election due to Disability
.
If a Participant becomes disabled, the Administrator may, in its sole discretion, cancel the Participant’s deferral election, with respect to amounts to be deferred on or after the cancellation, by the end of the year during which the Participant becomes disabled, or, if later, the 15
th
day of the third month following the date on which the Participant becomes disabled. For purposes of this Section, a Participant shall be disabled if the Participant is suffering from any medically determinable physical or mental impairment resulting in the Participant’s inability to perform the duties of his position or any substantially similar position, if such impairment can be expected to result in death or can be expected to last for a continuous period of six months.
|
6.1.5
|
Cancellation of Deferral Election due to Unforeseeable Emergency
.
If a Participant experiences an Unforeseeable Emergency during a Plan Year, the Participant may submit to the Administrator a written request to cancel Elective Deferrals for the Plan Year to satisfy the Unforeseeable Emergency. If the Administrator either approves the Participant’s request to cancel Elective Deferrals for the Plan Year, or approves a request for a distribution of in accordance with Section 6.4.6, then effective as of the date the request is approved the Administrator shall cancel the Participant’s deferral elections for the remainder of the Plan Year. A Participant whose Elective Deferrals are canceled during a Plan Year in accordance with this section may elect Elective Deferrals for the following Plan Year; provided, however, if required to comply with Treasury Regulations section 1.401(k)-1(d)(3), the Participant may not elect to defer any amounts attributable to periods less than six months from the date on which the Participant receives a distribution on account of an Unforeseeable Emergency.
|
6.1.6
|
Withholding of Deferrals
.
The Administrator will withhold Elective Deferrals not later than the end of the calendar year during which the Company would otherwise have paid the amounts to the Participant but for the Participant’s deferral election. The Administrator will not withhold Elective Deferrals from a Participant’s Salary during any period in which the Participant is on an unpaid leave of absence.
|
6.2
|
Non-Elective Deferrals
.
|
6.2.1
|
Annual Make-Up Award
.
If the Administrator determines that a Participant’s Salary exceeds the Code section 401(a)(17) limit, the Administrator shall automatically credit the Participant’s Annual Make-up Award to the Participant’s Account.
|
6.2.2
|
162(m) Deferrals
.
The Administrator shall automatically credit a Participant’s 162(m) Deferrals to the Participant’s Account.
|
6.3
|
FICA and Other Taxes
.
|
6.4
|
Distributions
.
|
6.4.1
|
Specified Year
.
A Participant may elect to receive a distribution of Elective Deferrals in a Specified Year, which may be no earlier than the third Plan Year beginning after the date on which the Participant initially elects to receive a distribution in a Specified Year. Except as otherwise provided in this subsection or in Section 6.6, once a Participant has elected to receive a distribution in a Specified Year, the Participant may not elect to receive a distribution in a different Specified Year. Beginning during the year preceding any Specified Year previously elected by the Participant, the Participant may elect to receive a distribution of Elective Deferrals in a later Specified Year, subject, however, to the restrictions of this subsection. All amounts distributed in a Specified Year will be paid in a single lump sum.
|
6.4.2
|
Separation from Service
.
A Participant may elect to receive a distribution commencing either upon a Separation from Service, or during any of the first five years following the year of the Separation from Service. A Participant may elect to receive a distribution in the form of a lump sum, monthly installments over a period of five (5), ten (10), or fifteen (15) years, or a combination of both a lump sum and installments.
|
6.4.3
|
Disability
.
A Participant may elect to receive a distribution on account of Disability. Distributions upon Disability will commence on the earlier of the Participant’s 65
th
birthday or the second anniversary of the Disability, unless changed in accordance with Section 6.6. A Participant may elect to receive the distribution in the form of a lump sum, monthly installments over a period of five (5), ten (10), or fifteen (15) years, or a combination of both a lump sum and installments. Notwithstanding any other election by a Participant relating to a distribution upon Disability, if a Participant dies after commencement of a Disability but before the year during which distributions would commence, the Participant’s Account shall be distributed in accordance with the Participant’s election regarding distributions upon death.
|
6.4.4
|
Death
.
A Participant may elect to receive a distribution commencing upon death or during any of the first five years following the year of death. A Participant may elect to receive a distribution in the form of a lump sum, monthly installments over a period of five (5), ten (10), or fifteen (15) years, or a combination of both a lump sum and installments.
|
6.4.5
|
Unforeseeable Emergency
.
A Participant may submit a written request for a distribution on account of an Unforeseeable Emergency. Upon approval by the Administrator of a Participant’s request, the Participant’s Account, or that portion of a Participant’s Account deemed necessary by the Administrator to satisfy the Unforeseeable Emergency (determined in a manner consistent with Section 409A) plus amounts necessary to pay taxes reasonably anticipated because of the distribution, will be distributed in a single lump sum.
|
6.5
|
Additional Distribution Rules
.
|
6.5.1
|
Default Time and Form of Distribution
.
If a Participant fails timely to elect a time and form of distribution, the Participant’s Account will be distributed upon any Separation from Service, including death, in the form of a single lump sum payment.
|
6.5.2
|
Commencement of Distributions
.
Except as otherwise provided in this section, if a Participant has elected to receive a distribution commencing upon a Distribution Event, or if a distribution is required upon a Distribution Event, distribution will commence between the date of the Distribution Event and the end of the year in which the Distribution Event occurs. If a Participant has elected, or is required, to receive a distribution commencing upon a Distribution Event, and the Distribution Event occurs on or after October 1 of a Plan Year, the distribution may, to the extent permitted by Section 409A, commence after the Distribution Event and on or before the 15
th
day of the third calendar month following the Distribution Event, even if after the end of the year during which the Distribution Event occurs; provided, however, the Participant will not be permitted, directly or indirectly, to designate the taxable year of the distribution. If a Participant has elected to receive a distribution commencing during any of the first five years following the year of a Distribution Event, the distribution will commence during the year elected by the Participant. If a Participant has elected to receive a distribution in a Specified Year, the distribution will occur during the Specified Year. Any distribution that complies with this section shall be deemed for all purposes to comply with the Plan requirements regarding the time and form of distributions.
|
6.5.3
|
Installments
.
If a Participant elects to receive distributions in monthly installments, the Participant’s Account will be paid in substantially equal monthly installments in consecutive years over the period elected by the Participant. Each monthly installment will be paid during the Plan Year in which it is due, commencing as described in Section 6.5.2. During the Plan Year in which distributions commence, the Participant will receive one installment for each calendar month beginning after the date of the Distribution Event, or, if the Participant has elected to receive a distribution commencing during any of the first five years following the year of a Distribution Event, one monthly installment for each calendar month beginning after the anniversary date of the Distribution Event. During the distribution period, the Participant’s Account will be credited with interest compounded monthly at a rate of 7.5% per year. Any installment distribution that complies with this section shall be deemed for all purposes to comply with the Plan requirements regarding the time and form of distributions.
|
6.5.4
|
Death After Commencement of Distributions
.
Upon the death of a Participant after distributions of the Participant’s Account have commenced, the balance of the Participant’s Account will be distributed to the Participant’s Beneficiary at the same times and in the same forms that the Account would have been distributed to the Participant if the Participant had survived.
|
6.5.5
|
Distributions to Specified Employees
.
Notwithstanding anything to the contrary in this Plan, if a Participant becomes entitled to a distribution on account of a Separation from Service and is a Specified Employee on the date of the Separation from Service, distributions shall not commence until the earlier of: (i) the expiration of the six-month period beginning on the date of Participant’s Separation from Service, or (ii) the date of Participant’s death. Payments to which a Specified Employee would otherwise be entitled during this six-month period shall be accumulated and paid, together with earnings that have accrued during this six-month delay, during the seventh month following the date of the Participant’s Separation from Service, or, if earlier, the date of the Participant’s death.
|
6.5.6
|
Effect of Change in Control
.
Notwithstanding a Participant’s elections regarding distributions upon a Separation from Service and a distribution in a Specified Year, if (a) the Participant has a Separation from Service within two years following a Change in Control or (b) a Change in Control occurs within six months after the Participant has a Separation from Service, the Participant shall receive a distribution of the Participant’s entire Account in a single lump sum upon the later of the Separation from Service or the Change in Control, whether or not distributions have already commenced.
|
6.6
|
Subsequent Changes in Time and Form of Distributions
.
|
7.1
|
Establishment of Accounts
.
|
7.2
|
Timing of Credits to Accounts
.
|
7.3
|
Vesting
.
|
7.4
|
Investments
.
|
7.5
|
Valuation Date
.
|
8.1
|
Eligibility
.
|
8.2
|
Vesting; Forfeiture of Unvested Retirement Benefit
.
|
8.3
|
Retirement Benefit
.
|
8.3.1
|
Final Average Earnings
.
Final Average Earnings include the sum of: (i) the Participant’s four highest consecutive Annual Incentive Awards and Other Awards within the “applicable 15-year period,” and (ii) the Participant’s highest Basic Compensation during any consecutive 48-month period within the “applicable 15-year period” to the extent that Basic Compensation exceeds the limitation on compensation imposed by Code section 401(a)(17). Compensation in excess of the limitation on compensation imposed by Code section 401(a)(17) shall be determined by using the limit in effect on the first day of the 48-month period described in (i) and the next three anniversaries of that date. With respect to a Participant who becomes entitled to a distribution upon Retirement, the “applicable 15-year period” shall be the fifteen (15) years preceding the date of Retirement. With respect to a Participant who becomes entitled to a distribution because of Disability, the “applicable 15-year period” shall be the 15-year period that: (i) ends no earlier than the Participant’s Disability and no later than the Participant’s sixty-fifth (65
th)
birthday; and (ii) would result in the greatest Retirement Benefit.
|
8.3.2
|
Years of Credited Service
.
A Participant will receive credit for years of Credited Service after September 30, 2006, only to the extent that: (i) the Participant has been continuously employed since that date by a Related Company in management salary grades SA – SM; and (ii) distributions of Retirement Benefits have not commenced.
|
8.4
|
Forfeiture of Vested Retirement Benefit for Misconduct
.
Notwithstanding any other term or condition in this Article 8, a Participant will forfeit any vested Retirement Benefit attributable to any year during which the Participant engaged in Misconduct and any subsequent period. For purposes of calculating the Retirement Benefit of any Participant who engaged in Misconduct, the Participant’s Final Average Earnings and Years of Credited Service will exclude the period during which the Participant engaged in Misconduct and any subsequent period.
|
8.5
|
Time and Form of Distributions
.
Subject to the provisions of Section 8.6, a Participant will become entitled to a distribution of vested Retirement Benefits, in the form determined by this section, upon the earlier of: (i) Retirement; (ii) Disability; or (iii) solely with respect to a Participant who vests after becoming Disabled, the earlier of death or attainment of age 65.
|
|
8.5.1
|
Election of Alternative Forms of Distribution
.
A Participant may elect to receive the Retirement Benefit in one of the following forms, each of which shall be actuarially equivalent: (i) monthly installments over a 15-year period, (ii) a monthly life annuity, (iii) a lump sum payment; or (iv) a combination of a lump sum and either (i) or (ii). Actuarially equivalence will be calculated using actuarial factors adopted by the Administrator from time to time. Effective as of December 31, 2008, Participant elections regarding the form of distribution are irrevocable and will remain in effect until the Retirement Benefits are paid in full unless a Participant elects to change the time and form of payment in accordance with Section 8.7.
|
|
8.5.2
|
Default Form of Payment
.
If a Participant fails to elect a form of payment with respect to the Participant’s Retirement Benefit before December 31, 2008, the Retirement Benefit will be paid in the form of monthly installments over a 15-year period unless the Participant elects to change the time and form of payment in accordance with Section 8.7.
|
|
8.6.1
|
Commencement of Distributions
.
Distributions on account of a Distribution Event other than Disability will commence between the date of the Distribution Event and the end of the year in which the Distribution Event occurs. If a Distribution Event other than Disability occurs on or after October 1 of a Plan Year, the distribution may, to the extent permitted by Section 409A, commence after the Distribution Event and on or before the 15
th
day of the third calendar month following the Distribution Event, even if after the end of the year during which the Distribution Event occurs; provided, however, the Participant will not be permitted, directly or indirectly, to designate the taxable year of the distribution. Any distribution that complies with this section shall be deemed for all purposes to comply with the Plan requirements regarding the time and form of distributions.
|
|
8.6.2
|
Distributions to Specified Employees
.
Notwithstanding anything to the contrary in this Plan, if a Participant becomes entitled to a distribution on account of a Retirement and is a Specified Employee on the date of the Retirement, distributions shall not commence until the earlier of: (i) the expiration of the six-month period beginning on the date of Participant’s Retirement, or (ii) the date of the Participant’s death. Payments to which a Specified Employee would otherwise be entitled during this six-month period shall be accumulated and paid, together with earnings (calculated using the interest rate adopted by the Administrator for determining actuarial equivalence) that have accrued during this six-month delay, during the seventh month following the date of the Participant’s Retirement, or, if earlier, the date of the Participant’s death.
|
|
8.6.3
|
Disability
.
Unless subsequently changed in accordance with the Plan, distributions on account of Disability will commence on the earlier of the Participant’s 65
th
birthday or the second anniversary of the Disability.
|
|
8.6.4
|
Annuity Payments and Installments
.
If a Participant elects to receive all or a portion of the distributions in monthly installments, that portion to be paid in installments will be paid in substantially equal monthly installments in consecutive months over a 15-year period. If a Participant elects to receive all or a portion of the distributions in the form of a life annuity, that portion to be paid as a life annuity will be paid in monthly installments in consecutive months for the remainder of the Participant’s life, in the case of a unmarried Participant, and in the case of a married Participant over the lives of the Participant and the Participant’s Eligible Surviving Spouse. Each monthly installment or life annuity payment will be paid during the Plan Year in which it is due, commencing as described in Section 8.6.1. During the Plan Year in which distributions commence, the Participant will receive one installment or life annuity payment for each calendar month beginning after the date of the Distribution Event. If the Participant has elected to be paid in installments, during the distribution period the portion of the Participant’s Account to be paid in installments will be credited with interest compounded monthly at the interest rate used by the Administrator to determine actuarial equivalence. Any distribution that complies with this section shall be deemed for all purposes to comply with the Plan requirements regarding the time and form of distributions.
|
|
8.6.5
|
Death After Commencement of Benefits
.
Upon the death of a Participant after distributions of the Participant’s Retirement Benefit have commenced, the remainder of the Participant’s Retirement Benefit will continue to be distributed to the Participant’s Beneficiary at the same time and in the same form as the benefit would have been distributed to the Participant had the Participant survived, except to the extent that the Participant had elected a life annuity: (i) if the Participant has an Eligible Surviving Spouse on the date of death, the surviving spouse will receive 60% of the Participant’s life annuity benefit for the remainder of the spouse’s life and (ii) if the Participant does not have an Eligible Surviving Spouse, the annuity will cease as of the first day of the month following the month during which the Participant died.
|
|
8.6.6
|
Effect of Change of Control
.
With respect to any Participant whose Retirement Benefit distributions have commenced, or would commence, upon a Separation from Service, if (a) the Participant’s Separation from Service occurs within two years following a Change in Control or (b) a Change in Control occurs within six months after the Participant’s Separation from Service, then notwithstanding the Participant’s elections regarding distributions upon a Separation from Service, the Participant shall receive a distribution of the Participant’s entire remaining vested Retirement Benefit in a single lump sum upon the later of the Separation from Service or the Change in Control, whether or not distributions have already commenced. Any Retirement Benefit that does not become payable in a lump sum in accordance with this section will vest, if at all, in accordance with Section 8.2, will become payable in accordance with Section 8.5, and will otherwise remain subject to the provisions of Article 8.
|
9.1
|
Permitted Accelerations of Payment
.
|
9.1.1
|
Distribution in the Event of Taxation
.
If, for any reason, all or any portion of any benefit provided by the Plan becomes taxable to a Participant because of a violation of Section 409A prior to receipt, the Participant may file a written request with the Administrator for a distribution of that portion of the Plan benefit that has become taxable. Upon the grant of such a request, which grant shall not be unreasonably withheld, the Participant shall receive a distribution equal to the taxable portion of the Plan benefit. If the request is granted, the tax liability distribution shall be paid between the date on which the Participant’s request is approved and the end of the Plan Year during which the approval occurred, or if later, the 15
th
day of the third calendar month following the date on which the Participant’s request is approved.
|
9.1.2
|
Compliance with Ethics Laws or Conflicts of Interests Laws
.
The Administrator is authorized, in its sole discretion, to accelerate the time or schedule of a payment to the extent necessary to avoid the violation of any applicable federal, state, local, or foreign ethics law or conflicts of interest law as provided in Section 409A.
|
9.1.3
|
Small Accounts
.
The Administrator may, in its sole discretion, distribute in a single lump sum the aggregate amounts of Deferrals or Elective Deferrals or both credited to the Participant’s Account, along with any related earnings, provided: (i) the distribution results in the payment of the Participant’s entire interest in the Account and all Aggregated Plans, and (ii) the total payment does not exceed the applicable dollar limit under Code section 402(g)(1)(B). The Administrator shall notify the Participant in writing if the Administrator exercises its discretion pursuant to this Section.
|
9.1.4
|
Settlement of a Bona Fide Dispute
.
The Administrator may, in its sole discretion, accelerate the time or schedule of a distribution as part of a settlement of a bona fide dispute between the Participant and the Employer over the Participant’s right to a distribution provided that the distribution relates only to the deferred compensation in dispute and the Employer is not experiencing a downturn in financial health.
|
9.1.5
|
Settlement of Debt
.
The Administrator may, in its sole discretion, accelerate the time or schedule of a payment to satisfy an ordinary debt owed by the Participant to the Employer at the time the debt becomes due as provided in Section 409A.
|
9.2
|
Permissible Payment Delays
.
|
9.2.1
|
If the distribution would jeopardize the Employer’s ability to continue as a going concern, provided that the delayed amount is distributed in the first calendar year in which the payment would not have such effect.
|
9.2.2
|
If the Company reasonably anticipates that its deduction with respect to a distribution, if paid as scheduled, could be limited or barred by the application of Code section 162(m), provided the delayed amount is distributed in the first calendar year in which the Company reasonably anticipates that the deduction would not be limited or barred by the application of Code section 162(m).
|
9.2.3
|
If the distribution would violate Federal securities or other applicable laws, provided that the delayed amount is distributed at the earliest date at which the Administrator reasonably anticipates that the distribution will not cause such violation.
|
9.2.4
|
If calculation of the distribution is not administratively practicable due to events beyond the control of the Participant, provided that the delayed amount is distributed in the first calendar year in which the calculation of the distribution is administratively practicable.
|
9.3
|
Suspension Not Allowed
.
|
10.1
|
Beneficiary
.
|
10.2
|
No Beneficiary Designation
.
|
11.1
|
Presentation of Claim
.
|
11.2
|
Notification of Decision
.
|
11.2.1
|
That the claim has been allowed in full; or
|
11.2.2
|
That the claim has been denied, in whole or in part, and such notice must set forth in a manner calculated to be understood by the Claimant:
|
(a)
|
The specific reason(s) for the denial of the claim, or any part of it;
|
(b)
|
Specific reference(s) to pertinent provisions of the Plan upon which such denial was based;
|
(c)
|
A description of any additional material or information necessary for the Claimant to perfect the claim, and an explanation of why such material or information is necessary; and
|
(d)
|
An explanation of the claim review procedures and time limits, including a statement of the Claimant’s right to initiate a civil action pursuant to section 502(a) of ERISA following an adverse determination upon review.
|
11.2.3
|
If the Administrator determines that an extension of time for processing is required, written notice of the extension shall be furnished to the Claimant prior to termination of the original 90-day period. In no event shall such extension exceed 90 days from the end of such initial period.
|
11.2.4
|
In the case of a claim for disability benefits, the Administrator shall notify the Claimant, in accordance with subsection 11.2.2 above, within 45 days after the claim is received. The notification shall advise the Claimant whether the Administrator’s denial relied upon any specific rule, guideline, protocol or scientific or clinical judgment.
|
11.2.5
|
In the case of a claim for disability benefits, if the Administrator determines that an extension of time for processing is required due to matters beyond the control of the Plan, written notice of the extension shall be furnished to the Claimant prior to termination of the original 45-day period. Such extension shall not exceed 30 days from the end of the initial period. If, prior to the end of the first 30-day extension period, the Administrator determines that, due to matters beyond the control of the Plan, an additional extension of time for processing is required, written notice of a second 30-day extension shall be furnished to the Claimant prior to termination of the first 30-day extension.
|
11.3
|
Review of a Denied Claim
.
|
11.3.1
|
May request reasonable access to, and copies of, all documents, records, and other information relevant to the claim, which shall be provided to Claimant free of charge; and
|
11.3.2
|
May submit written comments or other documents.
|
11.4
|
Decision on Review
.
|
11.4.1
|
That the claim has been allowed in full; or
|
11.4.2
|
That the claim has been denied, in whole or in part, and such notice must set forth:
|
(a)
|
Specific reasons for the decision;
|
(b)
|
Specific reference(s) to the pertinent Plan provisions upon which the decision was based;
|
(c)
|
A statement that Claimant is entitled to reasonable access to, and copies of, all documents, records or other information relevant to the claim upon request and free of charge;
|
(d)
|
A statement regarding the Claimant’s right to initiate an action pursuant to section 502(a) of ERISA; and
|
(e)
|
Such other matters as the Administrator deems relevant.
|
11.4.3
|
In the case of a claim for disability benefits, the notice shall set forth:
|
(a)
|
Whether the Administrator’s denial relied upon any specific rule, guideline, protocol or scientific or clinical judgment; and
|
(b)
|
The following statement: “You and your Plan may have other voluntary alternative dispute resolution options, such as mediation. One way to find out what may be available is to contact your local U.S. Department of Labor Office and your State insurance regulatory agency.”
|
11.5
|
Other Remedies
.
|
13.1
|
Unsecured General Creditor
.
|
13.2
|
Employer’s Liability
.
|
13.3
|
Nonassignability
.
|
13.4
|
No Right to Employment
.
|
13.5
|
Incompetency
.
|
13.6
|
Tax Withholding
.
|
13.7
|
Furnishing Information
.
|
13.8
|
Notice
.
|
13.9
|
Gender and Number
.
|
13.10
|
Headings
.
|
13.11
|
Applicable Law and Construction
.
|
13.12
|
Invalid or Unenforceable Provisions
.
|
13.13
|
Successors
.
|
(i)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that, together with stock previously held by the acquirer, constitutes more than fifty (50%) percent of the total fair market value or total voting power of Company stock. If any one Person, or more than one Person acting as a group, is considered to own more than fifty (50%) percent of the total fair market value or total voting power of Company stock, the acquisition of additional stock by the same Person or Persons acting as a group does not cause a Change in Control. An increase in the percentage of stock owned by any one Person, or Persons acting as a group, as a result of a transaction in which Company acquires its stock in exchange for property, is treated as an acquisition of stock;
|
(ii)
|
(b) the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) ownership of Company stock possessing at least thirty (30%) percent of the total voting power of Company stock;
|
(iii)
|
(c) the date a majority of the members of the Company’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of appointment or election; or
|
(iv)
|
(d) the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) assets from the Company that have a total gross fair market value equal to at least forty (40%) percent of the total gross fair market value of all the Company’s assets immediately prior to the acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the corporation’s assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
|
(i)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;
|
(ii)
|
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Employer’s accident and health plan;
|
(iii)
|
determined to be totally disabled by the Social Security Administration; or
|
(iv)
|
disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition of disability applied under such disability insurance program complies with the foregoing definition of Disability.
|
|
Its:
|
President and Chief Executive Officer
|
1.
|
The following is added at the end Section 1.1:
|
|
Effective January 1, 2011, the Company hereby amends the Plan to incorporate any compensation recovery policy adopted by the Company, to explicitly prohibit re-pricing and cash |
|
buyouts of Options and SARs granted under the Plan unless approved by Company shareholders, and to provide that in connection with a Change in Control, so long as the successor assumes a Restricted Stock Grant, the restrictions will be deemed to have lapsed upon the Participant’s termination of employment by the company in connection with the Change in Control. |
2.
|
A new Section 1.4 is added at the end of Article 1 to read as follows:
|
|
1.4
Compensation Recovery Policy.
Effective January 1, 2011, all Grants are subject to the terms of any compensation recovery policy or policies established by the Company as
|
|
such policy or policies may be amended from time to time (“Compensation Recovery Policy”). The Company hereby incorporates the terms of the Compensation Recovery Policy into the Plan. |
3.
|
Section 5.3 is deleted in its entirety and replaced with the following:
|
|
5.3
O
ption Price.
The Option Price for each Option granted under the Plan shall be the Fair Market Value of a Share on the date of grant, or such higher price as the Committee may
|
|
determine. Except in connection with a corporate transaction involving the Company (including, but not limited to, any stock dividend, stock split, recapitalization, reorganization, merger, spin-off
or exchange of shares), the terms of an outstanding award may not be adjusted or amended to reduce the exercise price of any outstanding Option granted under the Plan without shareholder
approval; nor may an outstanding award for Options granted under the Plan be cancelled, exchanged, bought out or surrendered in exchange for cash or another award or Options with an exercise
price that is less than the exercise price of the original Option without shareholder approval.
|
|
Except in connection with a corporate transaction involving the Company (including, but not limited to, any stock dividend, stock split, recapitalization, reorganization, merger, spin-off |
|
or exchange of shares), the terms of an outstanding award may not be adjusted or amended to reduce the exercise price of any outstanding SAR granted under the Plan without shareholder approval; nor may an outstanding award for SARs granted under the Plan be cancelled, exchanged, bought out or surrendered in exchange for cash or another award or SARs with an exercise price that is less than the exercise price of the original SAR without shareholder approval.
|
(b)
|
Any Period of Restriction and other restrictions imposed on Restricted Stock shall be deemed to have expired. No Period of Restriction and other restrictions will be deemed to have
expired, however, if and to the extent that the Restricted Stock Grant is, in connection with the Change in Control, fully assumed by the successor corporation or parent thereof; in such
case, any Period of Restriction and other restrictions imposed on Restricted Stock shall be deemed to have expired upon a Participant’s termination of employment by the successor
corporation for reasons other than cause within 18 months following the occurrence of the Change in Control.
|
(a)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;
|
(b)
|
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Employer’s accident and health plan;
|
(c)
|
determined to be totally disabled by the Social Security Administration; or
|
(d)
|
disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition of disability applied under such disability insurance program complies with the foregoing definition of Disability.
|
(i)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires ownership of stock of the Company that, together with stock previously held by the acquirer, constitutes more than fifty (50%) percent of the total fair market value or total voting power of Company stock. If any one Person, or more than one Person acting as a group, is considered to own more than fifty (50%) percent of the total fair market value or total voting power of Company stock, the acquisition of additional stock by the same Person or Persons acting as a group does not cause a Change in Control. An increase in the percentage of stock owned by any one Person, or Persons acting as a group, as a result of a transaction in which Company acquires its stock in exchange for property, is treated as an acquisition of stock;
|
(ii)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) ownership of Company stock possessing at least thirty (30%) percent of the total voting power of Company stock;
|
(iii)
|
the date a majority of the members of the Company’s board of directors is replaced during any twelve (12) month period by directors whose appointment or election is not endorsed by a majority of the members of the board of directors prior to the date of appointment or election; or
|
(iv)
|
the date any one Person, or more than one Person acting as a group (as the term “group” is used in Treasury Regulations section 1.409A-3(i)(5)(v)(B)), acquires (or has acquired during the twelve (12) month period ending on the date of the most recent acquisition by that Person or Persons) assets from the Company that have a total gross fair market value equal to at least forty (40%) percent of the total gross fair market value of all the Company’s assets immediately prior to the acquisition or acquisitions. For this purpose, “gross fair market value” means the value of the corporation’s assets, or the value of the assets being disposed of, without regard to any liabilities associated with these assets.
|
(i)
|
unable to engage in any substantial gainful activity by reason of any medically determinable physical or mental impairment that can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months;
|
(ii)
|
by reason of any medically determinable physical or mental impairment which can be expected to result in death or can be expected to last for a continuous period of not less than twelve (12) months, receiving income replacement benefits for a period of not less than three (3) months under the Employer’s accident and health plan;
|
(iii)
|
determined to be totally disabled by the Social Security Administration; or
|
(iv)
|
disabled pursuant to an Employer-sponsored disability insurance arrangement provided that the definition of disability applied under such disability insurance program complies with the foregoing definition of Disability.
|
10.8
|
“
Specified Employee
” means an Participant who is subject to the six-month delay rule described in Code section 409A(2)(B)(i), determined in accordance with guidelines adopted by the
|
Board from time to time as permitted by Section 409A of the Code and Treasury Regulations section 1.409A-1 et seq., as they both may be amended from time to time, and other guidance issued by the Treasury Department and Internal Revenue Service thereunder.
|
|
Board Retainers
(1) (2)
Stock
Cash
|
$60,000
$35,000
|
Committee Cash Retainers
(1) (2)
Audit
Executive Compensation
Corporate Governance & Nominating
|
$9,000
$7,500
$7,500
|
Chair Cash Retainers
(1) (2)
Audit
Executive Compensation
Corporate Governance & Nominating
|
$8,500
$5,500
$4,500
|
Lead Director
(1) (2) (3)
Board Stock Retainer
Board Cash Retainer
Lead Director Cash Retainer
|
$60,000
$35,000
$25,000
|
Board Chairman
(1) (2) (3)
Board Stock Retainer
Board Cash Retainer
|
$90,000
$85,000
|
(1)
|
Cash and stock retainers may be deferred under the Director Compensation Deferral Plan II.
|
(2)
|
Cash retainers may be elected to be received in ALLETE stock.
|
(3)
|
Lead Director and Board Chairman are not eligible for other committee or chair retainers.
|
Year Ended December 31
|
2010
|
2009
|
2008
|
2007
|
2006
|
Millions
|
|||||
Earnings, as defined:
|
|||||
Pretax Income Before Non-Controlling Interest
|
$119.1
|
$91.5
|
$126.4
|
$137.2
|
$128.2
|
Add: Fixed Charges
|
43.4
|
38.3
|
30.3
|
26.6
|
27.7
|
Less: Non-Controlling Interest
(a)
|
–
|
–
|
–
|
–
|
–
|
Undistributed Income from Less than 50 percent
|
|||||
Owned Equity Investment
|
3.4
|
3.7
|
3.8
|
3.3
|
2.3
|
Total Earnings as defined
|
$159.1
|
$126.1
|
$152.9
|
$160.5
|
$153.6
|
Fixed Charges:
|
|||||
Interest on Long-Term Debt
|
$39.7
|
$34.2
|
$27.4
|
$23.2
|
$22.8
|
Other Interest Charges
|
1.0
|
1.6
|
0.4
|
1.5
|
2.9
|
Interest Component of All Rentals (b)
|
2.7
|
2.5
|
2.5
|
1.9
|
2.0
|
Total Fixed Charges
|
$43.4
|
$38.3
|
$30.3
|
$26.6
|
$27.7
|
Ratio of Earnings to Fixed Charges
|
3.67
|
3.29
|
5.05
|
6.03
|
5.55
|
ALLETE, Inc.
(d.b.a. ALLETE; Minnesota Power; Minnesota Power, Inc.;
|
Minnesota
|
||||||||||
Minnesota Power & Light Company; MPEX; MPEX A Division of Minnesota Power)
|
|||||||||||
ALLETE Automotive Services, LLC
|
Minnesota
|
||||||||||
ALLETE Capital II
|
Delaware
|
||||||||||
ALLETE Capital III
|
Delaware
|
||||||||||
ALLETE Properties, LLC
(d.b.a. ALLETE Properties)
|
Minnesota
|
||||||||||
ALLETE Commercial, LLC
|
Florida
|
||||||||||
Cape Coral Holdings, Inc.
|
Florida
|
||||||||||
Lake Swamp, LLC
|
Florida
|
||||||||||
Lehigh Acquisition Corporation
|
Delaware
|
||||||||||
Florida Landmark Communities, LLC
|
Florida
|
||||||||||
Lehigh Corporation
|
Florida
|
||||||||||
Mardem, LLC
|
|||||||||||
Palm Coast Holdings, Inc.
|
Florida
|
||||||||||
Port Orange Holdings, LLC
|
Florida
|
||||||||||
Interlachen Lakes Estates, LLC
|
Florida
|
||||||||||
Palm Coast Land, LLC
|
Florida
|
||||||||||
Tomoka Holdings, LLC
|
Florida
|
||||||||||
ALLETE Water Services, Inc.
|
Minnesota
|
||||||||||
Florida Water Services Corporation
|
Florida
|
||||||||||
Energy Replacement Property, LLC
|
Minnesota
|
||||||||||
Georgia Water Services Corporation
|
Georgia
|
||||||||||
Energy Land, Incorporated
|
Wisconsin
|
||||||||||
Lakeview Financial Corporation I
|
Minnesota
|
||||||||||
Lakeview Financial Corporation II
|
Minnesota
|
||||||||||
Logistics Coal, LLC
|
Minnesota
|
||||||||||
Minnesota Power Enterprises, Inc.
|
Minnesota
|
||||||||||
ALLETE Renewable Resources, Inc.
|
|||||||||||
BNI Coal, Ltd.
|
North Dakota
|
||||||||||
MP Affiliate Resources, Inc.
|
Minnesota
|
||||||||||
Rainy River Energy Corporation
|
Minnesota
|
||||||||||
Rainy River Energy Corporation - Wisconsin
|
Wisconsin
|
||||||||||
Synertec, Incorporated
|
Minnesota
|
||||||||||
Upper Minnesota Properties, Inc.
|
Minnesota
|
||||||||||
Upper Minnesota Properties - Development, Inc.
|
Minnesota
|
||||||||||
Upper Minnesota Properties - Irving, Inc.
|
Minnesota
|
||||||||||
Upper Minnesota Properties - Meadowlands, Inc.
|
Minnesota
|
||||||||||
MP Investments, Inc.
|
Delaware
|
||||||||||
RendField Land Company, Inc.
|
Minnesota
|
||||||||||
Superior Water, Light and Power Company
|
Wisconsin
|
1.
|
I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2010, of ALLETE;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 16, 2011
|
Alan R. Hodnik
|
|
Alan R. Hodnik
|
|
President and Chief Executive Officer
|
1.
|
I have reviewed this annual report on Form 10-K for the fiscal year ended December 31, 2010, of ALLETE;
|
2.
|
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
|
3.
|
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
|
4.
|
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
|
|
a.
|
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
|
|
b.
|
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
|
|
c.
|
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
|
|
d.
|
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
|
5.
|
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
|
|
a.
|
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
|
|
b.
|
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.
|
Date: February 16, 2011
|
Mark A. Schober
|
|
Mark A. Schober
|
|
Senior Vice President and Chief Financial Officer
|
1.
|
The Annual Report on Form 10-K of ALLETE for the fiscal year ended December 31, 2009, (Report) fully complies with the requirements of Section 13(a) of the Securities Exchange Act of 1934 (15 U.S.C. 78m); and
|
2.
|
The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of ALLETE.
|
Date: February 16, 2011
|
Alan R. Hodnik
|
|
Alan R. Hodnik
|
|
President and Chief Executive Officer
|
Date: February 16, 2011
|
Mark A. Schober
|
|
Mark A. Schober
|
|
Senior Vice President and Chief Financial Officer
|
NEWS
|
Exhibit 99
|
|
For Release:
|
February 16, 2011
|
|
Investor Contact:
|
Tim Thorp
|
|
218-723-3953
|
||
tthorp@allete.com
|
||
Quarter Ended
|
Year to Date
|
|||||
|
2010
|
2009
|
2010
|
2009
|
||
Operating Revenue
|
||||||
Operating Revenue
|
$238.1
|
$216.0
|
$907.0
|
$766.7
|
||
Prior Year Rate Refunds
|
–
|
–
|
–
|
(7.6)
|
||
Total Operating Revenue
|
238.1
|
216.0
|
907.0
|
759.1
|
||
Operating Expenses
|
||||||
Fuel and Purchased Power
|
92.0
|
80.1
|
325.1
|
279.5
|
||
Operating and Maintenance
|
102.7
|
84.2
|
365.6
|
308.9
|
||
Depreciation
|
20.7
|
17.9
|
80.5
|
64.7
|
||
Total Operating Expenses
|
215.4
|
182.2
|
771.2
|
653.1
|
||
Operating Income
|
22.7
|
33.8
|
135.8
|
106.0
|
||
Other Income (Expense)
|
||||||
Interest Expense
|
(11.1)
|
(8.4)
|
(39.2)
|
(33.8)
|
||
Equity Earnings in ATC
|
4.5
|
4.6
|
17.9
|
17.5
|
||
Other
|
0.8
|
(2.0)
|
4.6
|
1.8
|
||
Total Other Income (Expense)
|
(5.8)
|
(5.8)
|
(16.7)
|
(14.5)
|
||
Income Before Non-Controlling Interest and Income Taxes
|
16.9
|
28.0
|
119.1
|
91.5
|
||
Income Tax Expense
|
3.8
|
9.3
|
44.3
|
30.8
|
||
Net Income
|
13.1
|
18.7
|
74.8
|
60.7
|
||
Less: Non-Controlling Interest in Subsidiaries
|
(0.2)
|
–
|
(0.5)
|
(0.3)
|
||
Net Income Attributable to ALLETE
|
$13.3
|
$18.7
|
$75.3
|
$61.0
|
||
Average Shares of Common Stock
|
||||||
Basic
|
34.5
|
33.4
|
34.2
|
32.2
|
||
Diluted
|
34.7
|
33.5
|
34.3
|
32.2
|
||
Basic Earnings Per Share of Common Stock
|
$0.38
|
$0.56
|
$2.20
|
$1.89
|
||
Diluted Earnings Per Share of Common Stock
|
0.38
|
0.56
|
2.19
|
1.89
|
||
Dividends Per Share of Common Stock
|
$0.44
|
$0.44
|
$1.76
|
$1.76
|
Dec. 31,
|
Dec. 31,
|
Dec. 31
|
Dec. 31,
|
|||
|
2010
|
2009
|
|
2010
|
2009
|
|
Assets
|
Liabilities and Equity
|
|||||
Cash and Short-Term Investments
|
$51.6
|
$25.7
|
Current Liabilities
|
$158.9
|
$133.1
|
|
Other Current Assets
|
188.1
|
199.8
|
Long-Term Debt
|
771.6
|
695.8
|
|
Property, Plant and Equipment
|
1,805.6
|
1,622.7
|
Other Liabilities
|
324.8
|
325.0
|
|
Regulatory Assets
|
310.2
|
293.2
|
Regulatory Liabilities
|
43.6
|
47.1
|
|
Investment in ATC
|
93.3
|
88.4
|
Deferred Income Taxes
|
325.2
|
253.1
|
|
Investments
|
126.0
|
130.5
|
Equity
|
985.0
|
939.0
|
|
Other
|
34.3
|
32.8
|
|
|||
Total Assets
|
$2,609.1
|
$2,393.1
|
Total Liabilities and Equity
|
$2,609.1
|
$2,393.1
|
Quarter Ended
|
Year to Date
|
|||||||
ALLETE, Inc.
|
December 31,
|
December 31,
|
||||||
Income (Loss)
|
2010
|
2009
|
2010
|
2009
|
||||
Millions
|
||||||||
Regulated Operations
|
$14.6
|
$20.9
|
$79.8
|
$65.9
|
||||
Investments and Other
|
(1.3)
|
(2.2)
|
(4.5)
|
(4.9)
|
||||
Net Income Attributable to ALLETE
|
$13.3
|
$18.7
|
$75.3
|
$61.0
|
||||
Diluted Earnings Per Share
|
$0.38
|
$0.56
|
$2.19
|
$1.89
|
Statistical Data
|
||||||||
Corporate
|
||||||||
Common Stock
|
||||||||
High
|
$37.95
|
$35.29
|
$37.95
|
$35.29
|
||||
Low
|
$34.81
|
$32.23
|
$29.99
|
$23.35
|
||||
Close
|
$37.26
|
$32.68
|
$37.26
|
$32.68
|
||||
Book Value
|
$27.25
|
$26.39
|
$27.25
|
$26.39
|
Kilowatt-hours Sold
|
||||||||
Millions
|
||||||||
Regulated Utility
|
||||||||
Retail and Municipals
|
||||||||
Residential
|
303
|
308
|
1,150
|
1,164
|
||||
Commercial
|
359
|
358
|
1,433
|
1,420
|
||||
Municipals
|
260
|
262
|
1,006
|
992
|
||||
Industrial
|
1,848
|
1,294
|
6,804
|
4,475
|
||||
Total Retail and Municipal
|
2,770
|
2,222
|
10,393
|
8,051
|
||||
Other Power Suppliers
|
577
|
981
|
2,745
|
4,056
|
||||
Total Regulated Utility
|
3,347
|
3,203
|
13,138
|
12,107
|
||||
Non-regulated Energy Operations
|
31
|
41
|
118
|
203
|
||||
Total Kilowatt-hours Sold
|
3,378
|
3,244
|
13,256
|
12,310
|
||||