=================================================================
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K/A
AMENDMENT NO. 1
TO
ANNUAL REPORT PERSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year Ended December 31, 1998
Commission Registrant; State of Incorporation IRS Employer
File Number Address; and Telephone Number Identification
No.
----------- ---------------------------------- --------------
1-1245 WISCONSIN ELECTRIC POWER COMPANY 39-0476280
(A Wisconsin Corporation)
231 West Michigan Street
P.O. Box 2046
Milwaukee, WI 53201
(414) 221-2345
=================================================================
WISCONSIN ELECTRIC POWER COMPANY
--------------------------------
AMENDMENT NO. 1
TO
1998 ANNUAL REPORT ON FORM 10-K
The undersigned Registrant hereby amends the following items,
financial statements, exhibits or other portions of its Annual Report for
the year ended December 31, 1998 on Form 10-K as set forth in the pages
attached hereto:
PART II
-------
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
In Item 8 of Wisconsin Electric Power Company's Annual Report on Form 10-K
for the year ended December 31, 1998, Wisconsin Electric's Capitalization
Statement at December 31, 1998 and December 31, 1997 is hereby amended to
correct a line description in the Long-Term Debt - First Mortgage Bonds
section. Specifically:
December 31
1998 1997
-------- --------
(Thousands of Dollars)
The line:
6.85% to 7-3/4% due 2016 - 2023 363,443 363,443
is corrected to:
7.05% to 9-1/8% due 2024-2027 363,443 363,443
In addition in Item 8 of Wisconsin Electric Power Company's Annual Report
on Form 10-K for the year ended December 31, 1998, the commercial paper
outstanding at December 31, 1998 in "Note I - Notes Payable" is corrected
from $68,794,000 to $168,794,000.
The remainder of Wisconsin Electric's Item 8, including the Financial
Statements, the Notes to Financial Statements and the Report of Independent
Accountants, is unchanged.
SIGNATURE
---------
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this amendment to be signed on its behalf by
the undersigned, thereunto duly authorized.
WISCONSIN ELECTRIC POWER COMPANY
-------------------------------
(Registrant)
Date: April 13, 1999 By /s/ A. K. Klisurich
-------------------------------
A. K. Klisurich, Controller -
Principal Accounting Officer
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
INCOME STATEMENT
Year Ended December 31
<CAPTION>
1998 1997 1996
---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Revenues
Electric $1,641,403 $1,412,115 $1,393,270
Gas 295,848 355,172 364,875
Steam 20,506 22,315 15,675
---------- ---------- ----------
Total Operating Revenues 1,957,757 1,789,602 1,773,820
Operating Expenses
Fuel (Note H) 308,374 311,966 295,651
Purchased power (Note H) 141,619 132,689 36,216
Cost of gas sold 175,475 233,877 234,254
Other operation expenses 476,279 407,114 391,520
Maintenance 168,120 135,096 103,046
Depreciation (Note C) 241,572 237,698 202,796
Taxes other than income taxes 78,652 73,914 77,866
Federal income tax (Note D) 79,198 40,221 105,656
State income tax (Note D) 18,605 10,558 24,976
Deferred income taxes - net (Note D) (438) 7,937 (1,575)
Investment tax credit - net (Note D) (3,395) (927) (2,430)
---------- ---------- ----------
Total Operating Expenses 1,684,061 1,590,143 1,467,976
Operating Income 273,696 199,459 305,844
Other Income and Deductions
Interest income 21,651 17,974 13,553
Allowance for other funds used
during construction (Note E) 2,936 3,349 3,036
Merger expenses (Note B) - (21,881) -
Miscellaneous - net (Note L) (684) (37,531) (3,642)
Federal income tax (Note D) (2,124) 19,687 (631)
State income tax (Note D) (605) 3,090 (570)
---------- ---------- ----------
Total Other Income
and Deductions 21,174 (15,312) 11,746
Income Before Interest Charges 294,870 184,147 317,590
Interest Charges
Long-term debt 100,420 106,573 100,133
Other interest 11,756 8,730 7,821
Allowance for borrowed funds used
during construction (Note E) (1,480) (1,771) (1,679)
--------- --------- ---------
Total Interest Charges 110,696 113,532 106,275
--------- --------- ---------
Net Income 184,174 70,615 211,315
Preferred Stock Dividend Requirement 1,203 1,203 1,203
--------- --------- ---------
Earnings Available for Common
Stockholder $ 182,971 $ 69,412 $ 210,112
========== ========== ==========
<FN>
Note: Earnings and dividends per share of common stock are not applicable because
all of Wisconsin Electric Power Company's common stock is owned by Wisconsin
Energy Corporation.
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
STATEMENT OF CASH FLOWS
Year Ended December 31
<CAPTION>
1998 1997 1996
---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Activities
Net income $184,174 $ 70,615 $211,315
Reconciliation to cash
Depreciation 241,572 237,698 202,796
Nuclear fuel expense - amortization 18,922 5,426 21,887
Conservation expense - amortization 22,498 22,498 22,498
Debt premium, discount &
expense - amortization 3,794 7,561 9,762
Deferred income taxes - net (438) 7,937 (1,575)
Investment tax credit - net (3,395) (927) (2,430)
Allowance for other funds used
during construction (2,936) (3,349) (3,036)
Write-off of merger costs - 21,881 -
Write-down of equipment - 30,000 -
Change in - Accounts receivable (26,537) 145 4,220
Inventories (811) (12,788) (30,703)
Accounts payable 26,706 (3,097) 38,779
Other current assets 14,224 10,782 (14,297)
Other current liabilities (14,268) 29,074 (2,780)
Other 26,868 (52,759) 4,874
------- -------- -------
Cash Provided by Operating Activities 490,373 370,697 461,310
Investing Activities
Construction expenditures (328,482) (260,649) (319,832)
Allowance for borrowed funds used
during construction (1,480) (1,771) (1,679)
Nuclear fuel (10,183) (6,352) (26,053)
Nuclear decommissioning trust (31,379) (27,248) (26,309)
Other (1,873) 22,359 (7,892)
-------- -------- -------
Cash Used in Investing Activities (373,397) (273,661) (381,765)
Financing Activities
Retirement of preferred stock - - (1)
Sale of long-term debt 169,434 - 230,094
Retirement of long-term debt (78,779) (171,155) (52,921)
Change in short-term debt (23,344) 197,243 (105,304)
Stockholder capital contribution - 100,000 -
Dividends on - Common stock (179,001) (213,692) (167,889)
Preferred stock (1,203) (1,203) (1,203)
-------- -------- -------
Cash Used in Financing Activities (112,893) (88,807) (97,224)
-------- -------- --------
Change in Cash and Cash Equivalents $ 4,083 $ 8,229 $(17,679)
======== ======== ========
Supplemental Information
Cash Paid For
Interest (net of amount capitalized) $125,344 $112,682 $ 94,845
Income taxes 106,550 45,210 107,682
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
BALANCE SHEET
December 31
ASSETS
<CAPTION>
1998 1997
---- ----
(Thousands of Dollars)
<S> <C> <C>
Utility Plant
Electric $4,820,239 $4,690,347
Gas 523,187 492,271
Steam 62,832 61,921
Common 420,750 330,761
---------- ----------
5,827,008 5,575,300
Accumulated provision for depreciation (2,973,007) (2,700,839)
---------- ----------
2,854,001 2,874,461
Construction work in progress 109,412 81,612
Leased facilities - net (Note H) 133,007 138,687
Nuclear fuel - net (Note H) 87,660 90,219
---------- ----------
Net Utility Plant 3,184,080 3,184,979
Other Property and Investments
Nuclear decommissioning trust fund (Note F) 518,505 404,240
Other 60,123 84,223
---------- ----------
Total Other Property and Investments 578,628 488,463
Current Assets
Cash and cash equivalents 14,183 10,100
Accounts receivable, net of allowance for
doubtful accounts - $16,621 and $15,641 166,648 140,111
Accrued utility revenues 129,463 141,273
Fossil fuel (at average cost) 123,616 124,045
Materials and supplies (at average cost) 74,399 73,159
Prepayments 59,046 56,192
Other 767 6,035
---------- ----------
Total Current Assets 568,122 550,915
Deferred Charges and Other Assets
Accumulated deferred income taxes (Note D) 190,114 169,306
Deferred regulatory assets (Note A) 222,951 215,200
Other 25,047 58,977
---------- ----------
Total Deferred Charges and Other Assets 438,112 443,483
---------- ----------
Total Assets $4,768,942 $4,667,840
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
BALANCE SHEET
December 31
CAPITALIZATION AND LIABILITIES
<CAPTION>
1998 1997
---- ----
(Thousands of Dollars)
<S> <C> <C>
Capitalization (See Capitalization Statement)
Common stock equity $1,698,478 $1,694,508
Preferred stock 30,450 30,450
Long-term debt (Note H) 1,512,531 1,448,558
---------- ----------
Total Capitalization 3,241,459 3,173,516
Current Liabilities
Long-term debt due currently (Note H) 112,454 81,389
Notes payable (Note I) 219,289 242,633
Accounts payable 169,503 142,797
Payroll and vacation accrued 29,569 25,392
Taxes accrued - income and other 31,475 38,475
Interest accrued 19,864 20,012
Other 46,574 57,871
---------- ----------
Total Current Liabilities 628,728 608,569
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Note D) 559,574 521,429
Accumulated deferred investment tax credits 83,476 86,871
Deferred regulatory liabilities (Note A) 157,951 173,688
Other 97,754 103,767
---------- ----------
Total Deferred Credits and Other Liabilities 898,755 885,755
Commitments and Contingencies (Note L)
---------- ----------
Total Capitalization and Liabilities $4,768,942 $4,667,840
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
CAPITALIZATION STATEMENT
December 31
<CAPTION>
1998 1997
---- ----
(Thousands of Dollars)
<S> <C> <C>
Common Stock Equity (See Common Stock Equity Statement)
Common stock - $10 par value; authorized 65,000,000 shares;
outstanding - 33,289,327 shares $ 332,893 $ 332,893
Other paid in capital 380,689 380,689
Retained earnings 984,896 980,926
---------- ----------
Total Common Stock Equity 1,698,478 1,694,508
Preferred Stock - Cumulative
Six Per Cent. Preferred Stock - $100 par value; authorized
45,000 shares; outstanding - 44,498 shares 4,450 4,450
Serial preferred stock - $100 par value; authorized 2,286,500 shares;
outstanding - 3.60% Series - 260,000 shares 26,000 26,000
---------- ----------
Total Preferred Stock (Note G) 30,450 30,450
Long-Term Debt
First mortgage bonds - 5-1/8% to 7-1/4% due 1998-2004 231,000 291,000
6.85% to 7-3/4% due 2016-2023 209,000 209,000
7.05% to 9-1/8% due 2024-2027 363,443 363,443
Debentures (unsecured) - 6-1/2% to 9.47% due 2006-2095 480,600 331,300
Notes (unsecured) - Variable rate due 2006-2030 165,350 165,350
6.36% effective rate due 2006 9,642 10,847
Obligations under capital leases 189,980 182,450
Unamortized discount - net (24,030) (23,443)
Long-term debt due currently (112,454) (81,389)
---------- ----------
Total Long-Term Debt (Note H) 1,512,531 1,448,558
---------- ----------
Total Capitalization $3,241,459 $3,173,516
========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
<TABLE>
WISCONSIN ELECTRIC POWER COMPANY
COMMON STOCK EQUITY STATEMENT
<CAPTION>
Common Stock
-------------------
$10 Par Other Paid Retained
Shares Value In Capital Earnings Total
------ ------- ---------- -------- -----
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Balance - December 31, 1995 33,289,327 $332,893 $280,689 $1,082,983 $1,696,565
Net income 211,315 211,315
Cash dividends
Common stock (167,889) (167,889)
Preferred stock (1,203) (1,203)
---------- -------- -------- ---------- ----------
Balance - December 31, 1996 33,289,327 332,893 280,689 1,125,206 1,738,788
Net income 70,615 70,615
Cash dividends
Common stock (213,692) (213,692)
Preferred stock (1,203) (1,203)
Stockholder capital contribution 100,000 100,000
---------- -------- -------- ---------- ----------
Balance - December 31, 1997 33,289,327 332,893 380,689 980,926 1,694,508
Net income 184,174 184,174
Cash dividends
Common stock (179,001) (179,001)
Preferred stock (1,203) (1,203)
---------- -------- -------- ---------- ----------
Balance - December 31, 1998 33,289,327 $332,893 $380,689 $ 984,896 $1,698,478
========== ======== ======== ========== ==========
<FN>
The accompanying notes are an integral part of these financial statements.
</TABLE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (cont'd)
WISCONSIN ELECTRIC POWER COMPANY
NOTES TO FINANCIAL STATEMENTS
A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
GENERAL: The accounting records of Wisconsin Electric Power Company
("Wisconsin Electric") are maintained as prescribed by the Federal Energy
Regulatory Commission, modified for requirements of the Public Service
Commission of Wisconsin ("PSCW").
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of certain assets and
liabilities and disclosure of contingent assets and liabilities at the date
of financial statements and the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from those
estimates.
REVENUES: Utility revenues are recognized on the accrual basis and
include estimated amounts for service rendered but not billed.
FUEL: The cost of fuel is expensed in the period consumed.
PROPERTY: Property is recorded at cost. Additions to and significant
replacements of utility property are charged to utility plant at cost;
minor items are charged to maintenance expense. Cost includes material,
labor and allowance for funds used during construction (see Note E). The
cost of depreciable utility property, together with removal cost less
salvage, is charged to accumulated provision for depreciation when property
is retired.
In 1998, Wisconsin Electric began classifying certain utility plant as
common. Common plant is allocated to electric, gas and steam utility plant
in rate proceedings. All periods presented have been reclassified for
comparative purposes.
REGULATORY MATTERS: Pursuant to Statement of Financial Accounting
Standards No. 71, Accounting for the Effects of Certain Types of
Regulation, Wisconsin Electric capitalizes, as regulatory assets, incurred
costs which are expected to be recovered in future utility rates.
Wisconsin Electric also records, as regulatory liabilities, the current
recovery in utility rates of costs which are expected to be paid in the
future.
The following deferred regulatory assets and liabilities are reflected in
the Balance Sheet at December 31.
1998 1997
---- ----
(Thousands of Dollars)
Deferred Regulatory Assets
Deferred income taxes $160,752 $151,157
Department of Energy assessments 24,841 28,575
Deferred nuclear costs 15,324 17,681
Purchase power commitment 13,379 5,050
Other 8,655 12,737
-------- --------
Total Deferred Regulatory Assets $222,951 $215,200
======== ========
Deferred Regulatory Liabilities
Deferred income taxes $141,356 $148,292
Tax and interest refunds 8,667 13,943
Other 7,928 11,453
-------- --------
Total Deferred Regulatory Liabilities $157,951 $173,688
======== ========
Wisconsin Electric directs a variety of demand-side management programs to
help foster energy conservation by its customers. As authorized by the
PSCW, Wisconsin Electric capitalized certain conservation program costs
prior to 1995. Utility rates approved by the PSCW provide for a current
return on these conservation investments. As of December 31, 1998, there
were $46.4 million of conservation investments on the Balance Sheet in
other property and investments which will be amortized on a straight line
basis to income over the next two years as well as $69.5 million of
conservation investments as of December 31, 1997.
STATEMENT OF CASH FLOWS: Cash and cash equivalents include marketable
debt securities acquired three months or less from maturity. During 1997,
Wisconsin Electric recorded a $140 million non-cash capital lease
transaction for a long-term power purchase contract (see Note H).
NEW PRONOUNCEMENTS: On June 15, 1998, the Financial Accounting Standards
Board issued Statement of Financial Accounting Standards No. 133,
Accounting for Derivative Instruments and Hedging Activities ("FAS 133").
FAS 133 is effective January 1, 2000 for Wisconsin Electric. FAS 133
requires that all derivative instruments be recorded on the balance sheet
at their fair value. Changes in the fair value of derivatives are recorded
each period in current earnings or in other comprehensive income depending
upon how the derivative is designated. Based upon the current limited use
of derivative instruments at Wisconsin Electric, the adoption of FAS 133
would not have a significant effect on its results of operations or
financial position.
B - MERGERS
NORTHERN STATES POWER COMPANY: On May 16, 1997, the Boards of Directors
of Wisconsin Energy and Northern States Power Company, a Minnesota
corporation, agreed to terminate by mutual written consent an Agreement and
Plan of Merger which provided for a business combination of Wisconsin
Energy, parent company of Wisconsin Electric, and Northern States Power
Company to form Primergy Corporation. Primergy Corporation would have
become the parent company of Wisconsin Electric under the proposed business
combination. As a result, Wisconsin Energy recorded a $30.7 million charge
in the second quarter of 1997 ($18.8 million net of tax or approximately
17 cents per share) to write off deferred transaction costs and costs to
achieve the merger, of which approximately $21.9 million was attributable
to Wisconsin Electric.
C - DEPRECIATION
Depreciation expense is accrued at straight line rates over the estimated
useful lives of the assets. These rates are certified by the PSCW and
include estimates for salvage and removal costs. Depreciation as a percent
of average depreciable utility plant was 4.4% in 1998, 4.5% in 1997 and
4.1% in 1996. Nuclear plant decommissioning is accrued as depreciation
expense (see Note F). For contributions in aid of construction remaining
on the Balance Sheet that were collected prior to 1991, Wisconsin Electric
had been amortizing approximately $3 million per year as a credit to
depreciation expense. In its 1998 Rate Order, the PSCW authorized
Wisconsin Electric to amortize the remaining $45.7 million balance of pre-
1991 contributions in aid of construction at December 31, 1997 on a
straight line basis over the 1998-1999 biennial period. As a result,
credits to depreciation expense for pre-1991 contributions were
$22.9 million in 1998, $3.5 million in 1997 and $3.4 million in 1996.
D - INCOME TAXES
Wisconsin Electric follows the liability method in accounting for income
taxes. The liability method provides that deferred tax assets and
liabilities be recorded based on the difference between the tax bases of
assets and liabilities and their carrying amounts for financial reporting
purposes.
The following table is a summary of income tax expense and a reconciliation
of total income tax expense with the tax expected at the federal statutory
rate.
1998 1997 1996
---- ---- ----
(Thousands of Dollars)
Current tax expense $100,532 $ 28,002 $131,833
Deferred income taxes - net (438) 7,937 (1,575)
Investment tax credit - net (3,395) (927) (2,430)
-------- -------- --------
Total Tax Expense $ 96,699 $ 35,012 $127,828
======== ======== ========
Income Before Income Taxes
and Preferred Dividend $280,873 $105,627 $339,143
======== ======== ========
Expected tax at federal statutory rate $ 98,306 $ 36,969 $118,700
State income tax net of federal
tax benefit 13,461 6,125 17,624
Flowback of prior contributions
in aid of construction (8,039) (1,157) (1,157)
Investment tax credit restored (4,690) (4,487) (4,509)
Other (no item over 5% of expected tax) (2,339) (2,438) (2,830)
-------- -------- --------
Total Tax Expense $ 96,699 $ 35,012 $127,828
======== ======== ========
Statement of Financial Accounting Standards No. 109, Accounting for Income
Taxes ("FAS 109"), requires the recording of deferred assets and
liabilities to recognize the expected future tax consequences of events
that have been reflected in Wisconsin Electric's financial statements or
tax returns and the adjustment of deferred tax balances to reflect tax rate
changes. Following is a summary of deferred income taxes under FAS 109 at
December 31.
1998 1997
---- ----
(Thousands of Dollars)
Deferred Income Tax Assets
Decommissioning trust $ 48,812 $ 43,405
Construction advances 54,820 49,202
Other 86,482 76,699
-------- --------
Total Deferred Income Tax Assets $190,114 $169,306
======== ========
Deferred Income Tax Liabilities
Property related $542,898 $510,621
Other 16,676 10,808
-------- --------
Total Deferred Income Tax Liabilities $559,574 $521,429
======== ========
Wisconsin Electric has also recorded deferred regulatory assets and
liabilities representing the future expected impact of deferred taxes on
utility revenues (see Note A).
E - ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Allowance for funds used during construction ("AFUDC") is included in
utility plant accounts and represents the cost of borrowed funds used
during plant construction and a return on stockholders' capital used for
construction purposes. On the Income Statement, the cost of borrowed funds
(before income taxes) is a reduction of interest expense and the return on
stockholders' capital is an item of non-cash other income.
As approved by the PSCW, AFUDC was capitalized during the following periods
on 50% of construction work in progress at the following rates:
* June 1, 1998 - December 31, 1998 10.21%
* February 18, 1997 - May 31, 1998 10.29%
* January 1, 1996 - February 17, 1997 10.17%
F - NUCLEAR OPERATIONS
POINT BEACH NUCLEAR PLANT: Wisconsin Electric owns and operates two
approximately 500 megawatt electric generating units at Point Beach Nuclear
Plant ("Point Beach") in Two Rivers, Wisconsin. During 1998, 1997 and
1996, Point Beach provided 18%, 6% and 24%, respectively, of Wisconsin
Electric's net electric energy supply. The United States Nuclear
Regulatory Commission operating licenses for Point Beach expire in October
2010 for Unit 1 and in March 2013 for Unit 2.
In 1997, the PSCW authorized Wisconsin Electric to defer certain nuclear
non-fuel operation and maintenance costs in excess of those included in
1997 rates. As a result, Wisconsin Electric deferred $18 million during
1997. During 1998, the PSCW authorized a five year recovery in the
electric retail jurisdiction in the State of Wisconsin of the excess 1997
nuclear non-fuel operation and maintenance costs, and Wisconsin Electric
began amortizing the $18 million of deferred costs on a straight line basis
over the five year recovery period. As of December 31, 1998, $15 million
of deferred costs remain on the Balance Sheet in Deferred Charges and Other
Assets - Deferred Regulatory Assets (see Note A).
NUCLEAR INSURANCE: The Price-Anderson Act as amended and extended to
August 1, 2002, currently limits the total public liability for damages
arising from a nuclear incident at a nuclear power plant to approximately
$9.8 billion, of which $200 million is covered by liability insurance
purchased from private sources, and $9.6 billion is covered by an industry
retrospective loss sharing plan whereby in the event of a nuclear incident
resulting in damages exceeding the private insurance coverage, each owner
of a nuclear plant would be assessed a deferred premium of up to
$88.1 million per reactor (Wisconsin Electric owns two) with a limit of
$10 million per reactor within one calendar year. As the owner of Point
Beach, Wisconsin Electric would be obligated to pay its proportionate share
of any such assessment.
Wisconsin Electric participated in an industry-wide insurance program, with
an aggregate limit of $200 million which covered radiation injury claims of
nuclear workers first employed after 1987. This program was replaced with
a new program (which has no retrospective assessment provisions) at the end
of 1997. However, the discovery period for claims covered under the former
program remains open until the end of 2007 for those few former insureds
who no longer need to participate in the new, replacement program. If
claims in excess of the funds available under the old program develop,
Wisconsin Electric would be assessed up to a maximum of approximately
$3.1 million per reactor.
Wisconsin Electric, through its membership in Nuclear Electric Insurance
Limited ("NEIL"), carries decontamination, property damage and
decommissioning shortfall insurance covering losses of up to $1.5 billion
(subject to a $1 million deductible for each loss) at Point Beach. Under
policies issued by NEIL, the insured member is liable for a retrospective
premium adjustment in the event of catastrophic losses exceeding the full
financial resources of NEIL. Wisconsin Electric's maximum retrospective
liability under its policies is $10.1 million.
Wisconsin Electric also maintains insurance with NEIL covering business
interruption and extra expenses during any prolonged accidental outage (in
excess of 23 weeks) at Point Beach, where such outage is caused by
accidental property damage from radioactive contamination or other risks of
direct physical loss. Wisconsin Electric's maximum retrospective liability
under this policy is $5.1 million.
It should not be assumed that, in the event of a major nuclear incident,
any insurance or statutory limitation of liability would protect Wisconsin
Electric from material adverse impact.
NUCLEAR DECOMMISSIONING: Wisconsin Electric expects to operate the two
units at Point Beach to the expiration of their current operating licenses.
The estimated cost to decommission the plant in 1998 dollars is
$489 million based upon a site specific decommissioning cost study
completed in 1998. Assuming plant shutdown at the expiration of the
current operating licenses, prompt dismantlement and annual escalation of
costs at specific inflation factors established by the PSCW, it is
projected that approximately $1.8 billion will be spent over a thirty-three
year period, beginning in 2010, to decommission the plant.
Nuclear decommissioning costs are accrued as depreciation expense over the
expected service lives of the two units following an external sinking fund
method. It is expected that the annual payments to the Nuclear
Decommissioning Trust Fund ("Fund") along with the earnings on the Fund
will provide sufficient funds at the time of decommissioning. Wisconsin
Electric believes it is probable that any shortfall in funding would be
recoverable in utility rates.
As required by Statement of Financial Accounting Standards No. 115,
Accounting for Certain Investments in Debt and Equity Securities, Wisconsin
Electric's debt and equity security investments in the Fund are classified
as available for sale. Gains and losses on the Fund were determined on the
basis of specific identification; net unrealized holding gains on the Fund
were recorded as part of accumulated provision for depreciation.
Following is a summary of decommissioning costs and earnings charged to
depreciation expense and the Fund balance included in accumulated provision
for depreciation at December 31. The Fund balance is stated at fair value.
1998 1997 1996
---- ---- ----
(Thousands of Dollars)
Decommissioning costs $ 15,461 $ 11,402 $15,418
Earnings 15,918 15,846 10,891
-------- -------- -------
Depreciation Expense $ 31,379 $ 27,248 $26,309
======== ======== =======
Total costs accrued to date $320,356 $288,977
Unrealized gain 198,149 115,263
-------- --------
Accumulated Provision for Depreciation $518,505 $404,240
======== ========
DECONTAMINATION AND DECOMMISSIONING FUND: The Energy Policy Act of 1992
establishes a Uranium Enrichment Decontamination and Decommissioning Fund
("D&D Fund") for the United States Department of Energy's nuclear fuel
enrichment facilities. Deposits to the D&D Fund are derived in part from
special assessments on utilities using enrichment services. As of
December 31, 1998, Wisconsin Electric has recorded its remaining estimated
liability equal to the projected special assessments of $21.4 million. A
corresponding deferred regulatory asset is detailed in Note A. The
deferred regulatory asset will be amortized to nuclear fuel expense and
included in utility rates over the next nine years. In the 1998 Rate
Order, the PSCW approved recovery over the 1998-1999 biennial period of
D&D Fund costs disallowed in 1997.
G - PREFERRED STOCK
Serial preferred stock authorized but unissued is cumulative, $25 par
value, 5,000,000 shares.
In the event of default in the payment of preferred dividends, no dividends
or other distributions may be paid on Wisconsin Electric's common stock.
The 3.60% series preferred stock is redeemable in whole or in part at the
option of Wisconsin Electric at $101 per share plus any accrued dividends.
The fair value of Wisconsin Electric's preferred stock was $20.2 million
and $17.8 million at December 31, 1998 and 1997, respectively.
H - LONG-TERM DEBT
FIRST MORTGAGE BONDS, DEBENTURES AND NOTES: The maturities and sinking
fund requirements through 2003 for the aggregate amount of long-term debt
outstanding (excluding obligations under capital lease) at December 31,
1998 are shown below.
(Thousands of Dollars)
1999 $92,905
2000 1,905
2001 1,905
2002 1,905
2003 1,905
Sinking fund requirements for the years 1999 through 2003, included in the
table above, are $9.5 million. Substantially all utility plant is subject
to the mortgage.
Long-term debt premium or discount and expense of issuance are amortized by
the straight line method over the lives of the debt issues and included as
interest expense. Unamortized amounts pertaining to reacquired debt are
written off currently, when acquired for sinking fund purposes, or
amortized in accordance with PSCW orders, when acquired for early
retirement.
In June 1998, Wisconsin Electric issued $150 million of 6-1/2% debentures
due 2028. Proceeds from the issue were added to Wisconsin Electric's
general funds and were used to reduce short-term borrowings and for other
general corporate purposes.
Following is Wisconsin Electric's long-term debt outstanding at
December 31.
1998 1997
---- ----
(Thousands of Dollars)
First Mortgage Bonds
5-1/8% Series due 1998 $ - $ 60,000
6-1/2% Series due 1999 40,000 40,000
6-5/8% Series due 1999 51,000 51,000
7-1/4% Series due 2004 140,000 140,000
7-1/8% Series due 2016 100,000 100,000
6.85% Series due 2021 9,000 9,000
7-3/4% Series due 2023 100,000 100,000
7.05% Series due 2024 60,000 60,000
9-1/8% Series due 2024 3,443 3,443
8-3/8% Series due 2026 100,000 100,000
7.70% Series due 2027 200,000 200,000
Debentures (unsecured)
6-5/8% due 2006 200,000 200,000
9.47% due 2006 5,600 6,300
8-1/4% due 2022 25,000 25,000
6-1/2% due 2028 150,000 -
6-7/8% due 2095 100,000 100,000
Notes (unsecured)
Variable rate due 2006 1,000 1,000
Variable rate due 2015 17,350 17,350
Variable rate due 2016 67,000 67,000
Variable rate due 2030 80,000 80,000
6.36% effective rate due 2006 9,642 10,847
Obligations under capital leases 189,980 182,450
Unamortized discount - net (24,030) (23,443)
Long-term debt due currently (112,454) (81,389)
---------- ----------
Total Long-Term Debt $1,512,531 $1,448,558
========== ==========
At December 31, 1998, the interest rate for the $67 million variable rate
note due 2016 was 4.10% and the interest rate for the $98.35 million
variable rate notes due 2006-2030 was 3.95%.
OBLIGATIONS UNDER CAPITAL LEASE: Wisconsin Electric has a nuclear fuel
leasing arrangement with Wisconsin Electric Fuel Trust ("Trust") which is
treated as a capital lease. The nuclear fuel is leased and amortized to
fuel expense for a period of 60 months or until the removal of the fuel
from the reactor, if earlier. Lease payments include charges for the cost
of fuel burned, financing costs and management fees. In the event
Wisconsin Electric or the Trust terminates the lease, the Trust would
recover its unamortized cost of nuclear fuel from Wisconsin Electric.
Under the lease terms, Wisconsin Electric is in effect the ultimate
guarantor of the Trust's commercial paper and line of credit borrowings
financing the investment in nuclear fuel. Interest expense on the nuclear
fuel lease, included in fuel expense, was $3.1 million, $0.9 million and
$2.3 million during 1998, 1997 and 1996, respectively.
To meet a portion of its electric energy supply needs, Wisconsin Electric
entered into a long-term power purchase contract with an unaffiliated
independent power producer, LSP-Whitewater Limited Partnership ("LS
Power"). The contract, for 236 megawatts of firm capacity from LS Power's
gas-fired cogeneration facility located in Whitewater, Wisconsin, includes
no minimum energy requirements. When the contract expires in 2022,
Wisconsin Electric may, at its option and with proper notice, renew for
another ten years or purchase the generating facility at fair value or
allow the contract to expire. Wisconsin Electric treats this contract as a
capital lease. The leased facility and corresponding obligation under
capital lease were recorded at the estimated fair value of the plant's
electric generating facilities. The leased facility is being amortized on
a straight line basis over the original 25-year term of the contract.
Beginning with commercial operation of LS Power's facility in September
1997, imputed interest costs on the purchase power obligation were
$22.9 million and $6.5 million during 1998 and 1997, respectively, and
total amortization costs of the leased facilities were $5.7 million and
$1.6 million during 1998 and 1997, respectively. The long-term power
purchase contract is treated as an operating lease for rate-making
purposes. As a result, the difference between the minimum lease payments
and the sum of the imputed interest and amortization costs are recorded as
a deferred regulatory asset (see Note A). Due to the timing of the minimum
lease payments, Wisconsin Electric expects the regulatory asset to increase
to approximately $78 million by the year 2009 and the total obligation
under capital lease to increase to $160 million by the year 2005 before
each is reduced over the remaining life of the contract. The minimum lease
payments are classified as purchased power expense on the Income Statement.
Interest expense on the purchase power obligation, included in purchased
power expense, was $20.3 million and $5.6 million during 1998 and 1997,
respectively.
Provided below is a summary of Wisconsin Electric's nuclear fuel and leased
facilities at December 31.
1998 1997
---- ----
(Thousands of Dollars)
Nuclear Fuel
Under capital lease $100,809 $ 95,464
Accumulated provision for amortization (62,888) (59,783)
In process/stock 49,739 54,538
-------- --------
Total Nuclear Fuel $ 87,660 $ 90,219
======== ========
Leased Facilities
Long-term purchase power commitment $140,312 $140,312
Accumulated provision for amortization (7,305) (1,625)
-------- --------
Total Leased Facilities $133,007 $138,687
======== ========
Future minimum lease payments under the capital leases and the present
value of the net minimum lease payments as of December 31, 1998 are as
follows:
Purchase
Nuclear Power
Fuel Lease Commitment Total
---------- ---------- -----
(Thousands of Dollars)
1999 $ 21,678 $ 24,123 $ 45,801
2000 13,841 25,031 38,872
2001 7,433 25,968 33,401
2002 3,664 26,961 30,625
2003 1,071 27,954 29,025
Later Years - 560,191 560,191
-------- -------- --------
Total Minimum Lease Payments 47,687 690,228 737,915
Less: Estimated Executory Costs - (139,956) (139,956)
-------- -------- --------
Net Minimum Lease Payments 47,687 550,272 597,959
Less: Interest (4,093) (403,886) (407,979)
-------- -------- --------
Present Value of Net Minimum
Lease Payments 43,594 146,386 189,980
Less: Due Currently (19,549) - (19,549)
-------- -------- --------
$ 24,045 $146,386 $170,431
======== ======== ========
FAIR VALUE: The carrying amount of Wisconsin Electric's long-term debt
outstanding (excluding obligations under capital lease) was $1,459 million
and $1,371 million at December 31, 1998 and 1997, respectively, with a fair
value of $1,544 million and $1,411 million, respectively. The fair value
of the first mortgage bonds and debentures is estimated based upon the
market value of the same or similar issues. Book value approximates fair
value for Wisconsin Electric's unsecured notes.
I - NOTES PAYABLE
Short-term notes payable balances and their corresponding weighted average
interest rates at December 31 consist of:
1998 1997
---- ----
Interest Interest
Balance Rate Balance Rate
------- ---- ------- ----
(Thousands of Dollars)
Banks $ 50,495 5.42% $ 50,495 5.89%
Commercial paper 168,794 5.32% 192,138 5.84%
-------- --------
$219,289 $242,633
======== ========
Unused lines of credit for short-term borrowing amounted to $128 million at
December 31, 1998, all of which supports commercial paper. In support of
various informal lines of credit from banks, Wisconsin Electric has agreed
to maintain unrestricted compensating balances or to pay commitment fees;
neither the compensating balances nor the commitment fees are significant.
J - BENEFITS
Wisconsin Electric provides defined benefit pension and other
postretirement benefit plans to employees. The status of these plans,
including a reconciliation of benefit obligations, a reconciliation of plan
assets and the funded status of the plans follows. Also disclosed below is
the aggregate funded status of those pension and other postretirement
benefit plans with accumulated net benefit obligations in excess of plan
assets.
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
---------------- --------------------
1998 1997 1998 1997
---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Change in Benefit Obligation
Benefit Obligation at January 1 $649,256 $601,213 $ 148,181 $ 142,783
Service cost 12,408 9,216 2,654 1,911
Interest cost 46,261 45,613 11,676 10,343
Plan participants' contributions - - 5,908 4,903
Plan amendments - 1,379 3,737 (4,828)
Actuarial loss 51,512 35,985 22,283 6,359
Benefits paid (45,001) (44,150) (15,603) (13,290)
-------- -------- --------- ---------
Benefit Obligation at December 31 $714,436 $649,256 $ 178,836 $ 148,181
-------- -------- --------- ---------
Change in Plan Assets
Fair Value at January 1 $761,881 $687,482 $ 59,841 49,424
Actual return on plan assets 104,264 114,294 8,515 10,555
Employer contributions 7,347 4,255 10,252 8,249
Plan participants' contributions - - 5,908 4,903
Benefits paid (45,001) (44,150) (15,603) (13,290)
-------- -------- --------- ---------
Fair Value at December 31 $828,491 $761,881 $ 68,913 $ 59,841
-------- -------- --------- ---------
Funded Status of Plans
Funded status at December 31 $114,055 $112,625 $(109,923) $ (88,340)
Unrecognized
Net actuarial (gain) loss (119,025) (123,094) 4,587 (14,458)
Prior service cost 31,284 34,344 2,582 (938)
Net transition obligation (asset) (27,207) (31,009) 64,239 68,825
-------- -------- --------- ---------
Net Accrued Benefit Cost $ (893) $ (7,134) $ (38,515) $ (34,911)
======== ======== ========= =========
Funded Status of Plans with Net
Benefit Obligations at December 31
Fair value of plan assets $ - $ - $ 68,444 $ 59,394
Less: Benefit obligation - - (178,563) (147,919)
-------- ------- --------- ---------
Net Benefit Obligation $ - $ - $(110,119) $ (88,525)
======== ======== ========= =========
</TABLE>
The components of net periodic pension and other postretirement benefit
costs as well as the weighted-average assumptions used in accounting for
the plans include the following:
<TABLE>
<CAPTION>
Other Postretirement
Pension Benefits Benefits
------------------------ ------------------------
1998 1997 1996 1998 1997 1996
---- ---- ---- ---- ---- ----
(Thousand of Dollars)
<S> <C> <C> <C> <C> <C> <C>
Net Periodic Benefit Cost
Service cost $12,408 $ 9,216 $ 9,912 $ 2,654 $ 1,911 $ 2,436
Interest cost 46,261 45,613 41,454 11,677 10,343 10,456
Expected return on plan assets (56,822) (51,592) (48,494) (5,008) (4,085) (3,708)
Amortization of
Transition obligation (asset) (3,801) (3,802) (3,802) 4,586 4,586 4,887
Prior service cost 3,061 3,061 1,755 217 (100) (100)
Actuarial loss (gain) - - - (270) (235) (272)
------- ------- ------- ------- ------- -------
Net Periodic Benefit Cost $ 1,107 $ 2,496 $ 825 $13,856 $12,420 $13,699
======= ======= ======= ======= ======= =======
Weighted-Average Assumptions
at December 31 (%)
Discount rate 6.75 7.25 7.75 6.75 7.25 7.75
Expected return on plan assets 9.0 9.0 9.0 9.0 9.0 9.0
Rate of compensation increase 4.75 to 4.75 to 4.75 to 4.75 to 4.75 to 4.75 to
5.0 5.0 5.0 5.0 5.0 5.0
</TABLE>
PENSION PLANS: Pension plan assets, the majority of which are equity
securities, are held by pension trusts. Other pension plan assets include
corporate and government bonds and real estate. In the opinion of
Wisconsin Electric, current pension trust assets and amounts which are
expected to be paid to the trusts in the future will be adequate to meet
pension payment obligations to current and future retirees.
OTHER POSTRETIREMENT BENEFIT PLANS: Wisconsin Electric uses Employees'
Benefit Trusts to fund a major portion of other postretirement benefits for
its employees. The majority of the trusts' assets are mutual funds.
The assumed health care cost trend rate at December 31, 1998 was 6.0% for
those under age 65 and 6.8% for those over age 65, decreasing gradually to
5.0% in 2004 and thereafter. Assumed health care cost trend rates have a
significant effect on the amounts reported for the health care plans.
A one-percentage-point change in assumed health care cost trend rates would
have the following effects:
1% 1%
Increase Decrease
-------- --------
(Thousands of Dollars)
Effect on
Postretirement benefit obligation $17,058 ($14,957)
Total of service and interest cost components 1,650 (1,430)
K - SEGMENT REPORTING
Wisconsin Electric, a public utility incorporated in the State of
Wisconsin, has organized its operating segments according to how it is
currently regulated. Operating segments are defined as components of an
enterprise about which separate financial information is available that is
evaluated regularly in deciding how to allocate resources or in assessing
performance. Wisconsin Electric's reportable operating segments include
electric, gas and steam utility segments.
The electric utility segment derives its revenues from the generation,
transmission, distribution and sale of electric energy in southeastern
(including metropolitan Milwaukee), east central and northern Wisconsin and
in the Upper Peninsula of Michigan. The gas utility segment derives its
revenues from the purchase, distribution and sale of natural gas to retail
customers and the transportation of customer-owned gas in four service
areas in southeastern, east central, western, and northern Wisconsin. The
steam utility segment derives its revenues from the production,
distribution and sale of steam to space heating and processing customers in
the Milwaukee area.
The following summarizes the reportable operating segments of Wisconsin
Electric for the years ended December 31.
<TABLE>
<CAPTION>
Reportable Operating Segments (a)
Electric Gas Steam Total
-------- --- ----- -----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
1998
External revenues $1,641,283 $293,250 $20,506 $1,955,039
Intersegment revenues (b) 120 2,598 - 2,718
---------- -------- ------- ----------
Total Operating Revenues $1,641,403 $295,848 $20,506 $1,957,757
========== ======== ======= ==========
Depreciation $ 215,669 $ 23,272 $ 2,631 $ 241,572
Operating Income Taxes 92,582 1,055 333 93,970
Operating Income (c) 251,582 19,180 2,934 273,696
Segment Assets (d) 4,087,413 421,951 48,358 4,557,722
Construction Expenditures 283,367 43,447 1,600 328,414
1997
External revenues $1,411,962 $349,971 $22,315 $1,784,248
Intersegment revenues (b) 153 5,201 - 5,354
---------- -------- ------- ----------
Total Operating Revenues $1,412,115 $355,172 $22,315 $1,789,602
========== ======== ======= ==========
Depreciation $ 213,785 $ 21,421 $ 2,492 $ 237,698
Operating Income Taxes 48,442 7,973 1,374 57,789
Operating Income (c) 170,117 25,122 4,220 199,459
Segment Assets (d) 3,900,889 392,865 45,131 4,338,885
Construction Expenditures 236,384 22,977 1,006 260,367
1996
External revenues $1,393,057 $361,101 $15,675 $1,769,833
Intersegment revenues (b) 213 3,774 - 3,987
---------- -------- ------- ----------
Total Operating Revenues $1,393,270 $364,875 $15,675 $1,773,820
========== ======== ======= ==========
Depreciation $ 183,159 $ 18,246 $ 1,391 $ 202,796
Operating Income Taxes 110,752 14,516 1,359 126,627
Operating Income (c) 269,068 33,204 3,572 305,844
Segment Assets (d) 3,646,997 400,582 46,499 4,094,078
Construction Expenditures 272,838 22,851 21,651 317,340
<FN>
(a) The accounting policies of the operating segments are the same as
those described in the summary of significant accounting policies
(see Note A).
(b) Wisconsin Electric accounts for intersegment revenues at a tariff
rate established by the PSCW.
(c) Interest income and expense are not recorded to the segments to
determine segment operating income.
(d) Common utility plant is allocated to electric, gas and steam to
determine segment assets (see Note A).
</TABLE>
A reconciliation of the totals reported for the operating segments to the
applicable line items in the financial statements is as follows:
1998 1997 1996
---- ---- ----
(Thousands of Dollars)
Assets
Reportable segments $4,557,722 $4,338,885 $4,094,078
Non-utility 4,769 5,308 9,199
Other - corporate (a) 206,451 323,647 403,883
---------- ---------- ----------
Total Assets $4,768,942 $4,667,840 $4,507,160
========== ========== ==========
Construction Expenditures
Reportable segments $ 328,414 $ 260,367 $ 317,340
Non-utility 68 282 2,492
---------- ---------- ----------
Total Construction Expenditures $ 328,482 $ 260,649 $ 319,832
========== ========== ==========
(a) Primarily other property and investments, materials and supplies
and deferred charges.
L - COMMITMENTS AND CONTINGENCIES
KIMBERLY COGENERATION EQUIPMENT: In conjunction with a proposal to
construct a cogeneration facility in Kimberly, Wisconsin, Wisconsin
Electric purchased three combustion turbines, three heat recovery boilers
and a steam turbine (the "Equipment"). Wisconsin Electric carried the
Equipment at a cost of approximately $66.3 million, entertaining numerous
proposals and projects for which the Equipment could be used. During 1997,
Wisconsin Electric continued to review its options for use or sale of the
Equipment. In the fourth quarter of 1997, WISVEST Corporation, a non-
utility subsidiary of Wisconsin Energy, entered into the final phase of
negotiations for a joint independent power project involving the Equipment.
Under the provisions of Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets and for Long-
Lived Assets to Be Disposed Of, Wisconsin Electric refined its cash flow
projection for the Equipment based upon this proposal. As measured by
expected gross cash flows to be earned under this project, Wisconsin
Electric determined that an impairment existed. As a result, Wisconsin
Electric recorded a $30.0 million impairment charge in the fourth quarter
of 1997 which was included in the Miscellaneous - Net Other Income and
Deductions line of the Income Statement. During the second quarter of
1998, WISVEST Corporation purchased the Equipment from Wisconsin Electric.
MANUFACTURED GAS PLANT SITES: Wisconsin Electric continues a voluntary
program to investigate the remediation of eleven former manufactured gas
plant sites. Wisconsin Electric currently estimates that future costs for
detailed site investigation and remediation will be $25 million to
$40 million over the next ten years. Actual costs are uncertain pending
the results of further site specific investigations and the selection of
site specific remediation.
Of the eleven sites, Wisconsin Electric has begun remediation activities at
the former manufactured gas plant site in the City of Burlington,
Wisconsin. Wisconsin Electric also expects to begin remediation in 1999 at
sites in Fort Atkinson and Kenosha, Wisconsin. Wisconsin Electric's
expected remediation of these sites is anticipated to be accomplished at an
aggregate cost of between $6 million and $11 million.
In Wisconsin Electric's February 13, 1997 Rate Order, the PSCW amplified
its position on the recovery of manufactured gas plant site remediation
costs. It reiterated its position that such costs should be deferred and
amortized and recovered, without carrying costs, in future rate cases.
Since the timing and recovery of MGP remediation costs will be affected by
the biennial rate case cycle, the timing and magnitude of remediation
expenditures, and their recovery may be affected.
M - TRANSACTIONS WITH ASSOCIATED COMPANIES
Managerial, financial, accounting, legal, data processing and other
services may be rendered between associated companies and are billed in
accordance with service agreements approved by the PSCW. Wisconsin
Electric received stockholder capital contributions from Wisconsin Energy
of $100 million in 1997.
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the
Stockholder of Wisconsin Electric Power Company
In our opinion, the financial statements listed in the index appearing
under Item 14(a)(1) present fairly, in all material respects, the financial
position of Wisconsin Electric Power Company at December 31, 1998 and 1997,
and the results of its operations and its cash flows for each of the three
years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to
express an opinion on these financial statements based on our audits. We
conducted our audits of these statements in accordance with generally
accepted auditing standards which require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements, assessing the accounting principles used and significant
estimates made by management and evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for
the opinion expressed above.
/s/PricewaterhouseCoopers LLP
- -----------------------------
PRICEWATERHOUSECOOPERS LLP
Milwaukee, Wisconsin
January 27, 1999
