<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7530
WISCONSIN GAS COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0476515
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 414-291-7000
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes No.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. / X /
Aggregate market value of the voting stock held by non-affiliates of the
registrant: None
Number of shares outstanding of each of the registrant's classes of common
stock, as of February 28, 1995:
Common Stock, $8 par value 1,125 shares
Documents Incorporated by Reference.
WICOR, Inc. proxy statement dated March 10, 1995 (Part III)
Reduced Disclosure Format
The registrant meets the conditions set forth in General Instructions
(J)(1)(a) and (b) of Form 10-K and is therefore filing with the reduced
disclosure format.<PAGE>
<PAGE> 2
TABLE OF CONTENTS
PAGE
PART I. 1
Item 1. Business 1
(a) General 1
(b) Gas Supply and Pipeline Capacity 1
(1) General 1
(2) Pipeline Capacity 2
(3) Term Gas Supply 3
(4) Spot Market Gas Supply 3
(c) Employee 3
Item 2. Properties 3
Item 3. Legal Proceedings 3
Item 4. Submission of Matters to a Vote of Security Holders 4
PART II. 4
Item 5. Market for Registrant's Common Equity and
Related Stockholder Matters 4
Item 6. Selected Financial Data 5
Item 7. Management's Discussion and Analysis of
Results of Operations and Financial
Condition 5
Item 8. Financial Statements and Supplementary Data 5
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 5
Part III. 5
Item 10. Directors and Executive Officers of the Registrant 5
Item 11. Executive Compensation 5
Item 12. Security Ownership of Certain
Beneficial Owners and Management 5
Item 13. Certain Relationships and Related Transactions 5
Part IV. 5
Item 14. Exhibits, Financial Statement Schedules
and Reports on Form 8-K 5
(a) Documents Filed as Part of the Report 5
1. All Financial Statements and Report of
Independent Public Accountants 5
2. Financial Statement Schedules 6
3. Exhibits 6
(b) Reports on Form 8-K 8
<PAGE>
<PAGE> 3
PART I
Item 1. BUSINESS
(a) General
Wisconsin Gas Company (the "Company" or "Wisconsin Gas") is a Wisconsin
corporation and a wholly-owned subsidiary of WICOR, Inc. ("WICOR") and
maintains its principal executive offices in Milwaukee, Wisconsin. The
Company is the largest natural gas distribution public utility in Wisconsin,
where all of its business is conducted. At December 31, 1994, Wisconsin Gas
distributed gas to approximately 495,000 residential, commercial and
industrial customers in 496 communities throughout Wisconsin having an
estimated population of 1,458,000 based on the State of Wisconsin's estimates
for 1994. The Company is subject to the jurisdiction of the Public Service
Commission of Wisconsin ("PSCW") as to various phases of its operations,
including rates, service and issuance of securities.
Wisconsin Gas' business is highly seasonal, particularly as to
residential and commercial sales for space heating purposes, with a
substantial portion of its sales occurring in the winter heating season. The
following table sets forth the volumes of natural gas delivered by Wisconsin
Gas to its customers.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1994 December 31, 1993
-------------------- --------------------
Thousands Thousands
Customer Class of Therms* Percent of Therms* Percent
------------------------ ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Residential 463,690 38.8 479,640 39.8
Commercial 185,980 15.5 190,600 15.8
Large Volume Commercial
and Industrial Firm 145,440 12.2 152,460 12.7
Commercial and Industrial
Interruptible 282,170 23.6 208,490 17.3
Transported 119,080 9.9 174,080 14.4
---------- ------- ---------- -------
Total Gas Purchased
and Transported 1,196,360 100.0 1,205,270 100.0
========== ======= ========== =======
</TABLE>
*One therm equals 100,000 BTU's
The volumes shown as transported represent customer-owned gas that was
delivered by Wisconsin Gas to such customers. The remaining volumes
represent quantities sold to customers by the Company.
(b) Gas Supply and Pipeline Capacity
(1) General
Prior to the Federal Energy Regulatory Commission's ("FERC") Order No.
636, the interstate pipelines serving Wisconsin Gas were the primary
suppliers of natural gas to Wisconsin Gas. During the transition period
prior to the issuance of Order No. 636, Wisconsin Gas gradually assumed
responsibility for the acquisition of supply in the production areas of North
America, as well as the management of transportation and storage capacities
to deliver that supply to its market area. On November 1, 1993, Wisconsin
Gas commenced full operation and responsibility for its supply and capacity
under the requirements of Order No. 636.<PAGE>
<PAGE> 4
One of the provisions of Order No. 636 is capacity release. Capacity
release creates a secondary market for pipeline capacity and gas supplies.
Local distribution companies, such as Wisconsin Gas, must contract for
capacity and supply sufficient to meet the peak day firm demand of their
customers. Peak or near peak days occur only a few times each year, so
capacity release facilitates higher utilization of capacity during those
times when the capacity is not needed by the utility. Through pre-arranged
agreements and day-to-day electronic bulletin board postings, interested
parties can purchase that capacity. The proceeds from these transactions are
passed-through to the ratepayers, thereby helping to offset the costs
associated with holding the capacity. During 1994, Wisconsin Gas was an
active participant in the capacity release market.
During 1993-94, the first year of operating under Order No. 636, the
Company was able to meet its contractual obligations with both its suppliers
and its customers despite unseasonably cold weather in January and February
1994 and unseasonably warm weather in November and December 1994. The
following table sets forth the volumes of natural gas purchased by Wisconsin
Gas and the volumes transported for customers.
<TABLE>
<CAPTION>
Year Ended Year Ended
December 31, 1994 December 31, 1993
-------------------- --------------------
Thousands Thousands
Natural Gas Purchased of Therms* Percent of Therms* Percent
--------------------------- ---------- ------- ---------- -------
<S> <C> <C> <C> <C>
Natural Gas Purchased
ANR 0 0.0 467,544 38.8
NNG 0 0.0 20,348 1.7
Viking 0 0.0 11,917 1.0
Term contracts
(in excess of 30 days) 980,170 81.9 398,197 33.0
Spot Market 97,110 8.1 133,184 11.1
---------- ------- ---------- -------
Total Gas Purchased 1,077,280 90.0 1,031,190 85.6
Customer Gas Transported 119,080 10.0 174,080 14.4
---------- ------- ---------- -------
Total Gas Purchased
and Transported 1,196,360 100.0 1,205,270 100.0
========== ======= ========== =======
</TABLE>
*One therm equals 100,000 BTU's.
Wisconsin Gas purchased no gas from ANR, NNG and Viking in 1994 because
Order No. 636 prohibits pipelines from selling gas as they did historically.
(2) Pipeline Capacity
Interstate pipelines serving Wisconsin originate in three major gas
producing areas of North America: the Oklahoma and Texas basins, the Gulf of
Mexico and western Canada. Wisconsin Gas has contracted for long-term firm
capacity on a relatively equal basis from each of these areas. This strategy
reflects management's belief that overall supply security is enhanced by
geographic diversification of the Company's supply portfolio and that Canada
represents an important long-term source of reliable, competitively priced
gas.<PAGE>
<PAGE> 5
Because of the seasonal variations in gas usage in Wisconsin, Wisconsin
Gas has also contracted with ANR and NNG for substantial underground storage
capacity, primarily in Michigan. There are no known underground storage
formations in Wisconsin capable of commercialization. Storage enables
Wisconsin Gas to optimize its overall gas supply and capacity costs. In
summer, gas in excess of market demand is transported into the storage
fields, and in winter, gas is withdrawn from storage and combined with gas
purchased in or near the production areas ("flowing gas") to meet the
increased winter market demand. As a result, Wisconsin Gas can contract for
less pipeline capacity than would otherwise be necessary, and it can purchase
gas on a more uniform daily basis from suppliers year-round. Each of these
capabilities enables Wisconsin Gas to reduce its overall costs.
Wisconsin Gas' firm winter daily transportation and storage capacity
entitlements from pipelines under long-term contracts are set forth below.
Maximum
(Thousands
Pipeline of Therms*)
------------------ -----------
ANR
Mainline 2,999
Storage 4,879
NNG
Mainline 1,077
Storage 150
Viking
Mainline 64
Peaking Facilities 54
-----------
Total 9,223
===========
*One therm equals 100,000 BTU's.
(3) Term Gas Supply
Wisconsin Gas has term firm contracts (initial terms in excess of 30
days) with approximately 30 gas suppliers for gas produced in each of the
three producing areas discussed above. The term contracts have varying
durations so that only a portion of the Company's gas supply expires in any
year. the Company believes the volume of gas under contract is sufficient to
meet its forecasted firm peak day demand. The following table sets forth
Wisconsin Gas' winter season maximum daily firm total gas supply.
Maximum
(Thousands
of Therms*)
-----------
Domestic flowing gas 2,387
Canadian flowing gas 1,396
Storage withdrawals 5,029
-----------
Total 8,812
===========
*One therm equal 100,000 BTU's.
(4) Spot Market Gas Supply
Wisconsin Gas expects to continue to make gas purchases in the 30-day
spot market as price and other circumstances dictate. The Company has
purchased spot market gas since 1985 and has supply relationships with a
number of sellers from whom it purchases spot gas.<PAGE>
<PAGE> 6
(c) Employees
The Company had 1,166 full-time equivalent active employees at December
31, 1994.
Item 2. PROPERTIES
Wisconsin Gas owns a distribution system which, on December 31, 1994,
included approximately 8,100 miles of distribution and transmission mains,
407,000 services and 498,000 active meters. The Company's distribution
system consists almost entirely of plastic and coated steel pipe. The
Company owns its main office building in Milwaukee, office buildings in
certain other communities in which it serves, gas regulating and metering
stations, peaking facilities and its major service centers, including garage
and warehouse facilities. The Milwaukee and other office buildings, the
principal service facilities and the gas distribution systems of Wisconsin
Gas are owned by it in fee subject to the lien of its Indenture of Mortgage
and Deed of Trust, dated as of November 1, 1950, under which its first
mortgage bonds are issued, and to permissible encumbrances as therein
defined.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than ordinary
routine litigation incidental to the Company's business, to which the Company
is a party, except as discussed below. There are no material legal
proceedings to which any officer or director is a party or has a material
interest adverse to the Company's. There are no material administrative or
judicial proceedings arising under environmental quality or civil rights
statutes pending or known to be contemplated by governmental agencies to
which the Company is or would be a party.
Wisconsin Gas has identified two previously owned sites on which it
operated manufactured gas plants that are of environmental concern. Such
plants ceased operations prior to the mid-1950's. Wisconsin Gas has engaged
an environmental consultant to help determine the nature and extent of the
contamination at these sites. Based on the test results obtained and the
possible restoration alternatives available, the Company has estimated that
cleanup costs could range from $22 million to $75 million. As of December
31, 1994, the Company has accrued $37.2 million for cleanup costs in addition
to $4.0 million of costs already incurred. These estimates are based on
current undiscounted costs. It should also be noted that the numerous
assumptions such as the type and extent of contamination, available
restoration techniques, and regulatory requirements which are used in
developing these estimates are subject to change as new information becomes
available. Any such changes in assumptions could have a significant impact
on the potential liability.
The Wisconsin Department of Natural Resources ("WDNR") issued a
Potentially Responsible Party letter to Wisconsin Gas for these two sites in
September 1994. Following receipt of this letter, Wisconsin Gas and WDNR
held an initial meeting to discuss the sites. At the meeting it was agreed
that Wisconsin Gas would prepare a remedial action options report from which
it will select specific restoration actions for recommendation to the WDNR.
This information will be prepared in the first quarter of 1995. Barring
unforeseen delays, expenditures by Wisconsin Gas on restoration work could
commence as early as 1995 and will increase in future years as plan approvals
are obtained. Expenditures over the next several years are expected to total
approximately $20 million. Although most of the work and costs are expected
to be incurred in the first several years of the plan, monitoring of sites
and other necessary actions may be undertaken for up to 30 years.<PAGE>
<PAGE> 7
In February 1994, Wisconsin Gas commenced suit against nine insurance
carriers seeking a declaratory judgment regarding insurance coverage for the
two sites. Settlements were reached with each of the carriers during 1994.
If the amount recovered from the insurance carriers is insufficient to
remediate both sites, expenditures not recovered will be allowed full
recovery (other than for carrying costs) in rates based upon recent PSCW
orders. Accordingly, the accrual for future restoration costs has been
deferred as a regulatory asset. Certain related investigation costs incurred
to date are currently being recovered in utility rates.
Wisconsin Gas also owns a service center that is constructed on a site
that was previously owned by the City of Milwaukee and was used by the City
as a public dump site. The Company has conducted a site assessment at the
request of the WDNR and has sent the report of its assessment to the WDNR.
Management cannot predict whether or not the WDNR will require any
restoration action, nor the extent or cost of any restoration actions that
may be required. In the judgment of management, any restoration costs
incurred by the Company will be recoverable from the City of Milwaukee or in
Wisconsin Gas' rates under the PSC orders discussed above.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
Omitted pursuant to General Instruction J (2) (c).
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
WICOR owns all the issued and outstanding common stock of the Company.
The Wisconsin Business Corporation Law, the Company's Indenture of Mortgage
and Deed of Trust and the indentures supplemental thereto, and the agreements
under which debt is outstanding each contain certain restrictions on the
payment of dividends on common stock. By order of the PSCW, Wisconsin Gas is
generally permitted to pay dividends up to the amount projected in its rate
case. The Company may pay dividends in excess of the projected dividend
amount so long as payment will not caused the equity ratio to fall below
48.43%. If payment of projected dividends would cause its equity ratio to
fall below 43% or if payment of additional dividends would cause its equity
ratio to fall below 48.43%, Wisconsin Gas must obtain PSCW approval to pay
such dividends. Wisconsin Gas has projected the payment of $16 million of
dividends during the 12 months ending October 31, 1995. See Note 6 of Notes
to Financial Statements contained in Exhibit 13, the WICOR 1994 Annual Report
to Shareholders, which note is incorporated herein by reference. The PSCW
desires Wisconsin Gas to target its common equity level at 43% to 50% of
total capitalization. For the year ended December 31, 1994, the Company's
average common equity level was 48.82%. The Company paid cash
dividends of $16,000,000 on common stock to WICOR in 1994 and 1993,
respectively.
Item 6. SELECTED FINANCIAL DATA
Omitted pursuant to General Instruction J(2)(a).
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS
OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to the section entitled "Financial Review" set forth
in the WICOR 1994 Annual Report to Shareholders. Such section is included in
Exhibit 13, which, insofar as it pertains to the Company, is hereby
incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Financial statements for the Company together with the report of
independent public accountants are included in Part IV of this report.<PAGE>
<PAGE> 8
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS
ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in or disagreement with the Company's
independent auditors on any matter of accounting principles or practices or
financial statement disclosure required to be reported pursuant to this item.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Omitted pursuant to General Instruction J(2)(c).
Item 11. EXECUTIVE COMPENSATION
Omitted pursuant to General Instruction J(2)(c).
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Omitted pursuant to General Instruction J(2)(c).
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Omitted pursuant to General Instruction J(2)(c).
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS
ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
1. All Financial Statements and Report of Independent Public
Accountants.
Statement of Income.
Balance Sheet.
Statement of Cash Flows.
Statement of Common Equity.
Statement of Capitalization.
Notes to Financial Statements.
2. Financial Statement Schedules.
Not required.
3. Exhibits
3.1 Wisconsin Gas Company Restated Articles of
Incorporation, as amended (incorporated by reference to
Exhibit 3.1 to the Company's Form 10-K Annual Report for
1988).
3.2 Amendment to Wisconsin Gas Company By-laws, effective
February 28, 1995.
3.3 Wisconsin Gas Company By-laws, as amended.
4.1 Indenture of Mortgage and Deed of Trust dated as of
November 1, 1950, between Milwaukee Gas Light Company
and Mellon National Bank and Trust Company and D. A.
Hazlett, Trustees (incorporated by reference to Exhibit
7-E to the Company's Registration Statement
No. 2-8631).<PAGE>
<PAGE> 9
4.2 Eleventh Supplemental Indenture dated as of February 15,
1982, between Wisconsin Gas Company and Mellon Bank,
N.A., and N. R. Smith, Trustees (incorporated by
reference to Exhibit 4.5 to the Company's Form S-3
Registration Statement No. 33-43729).
4.3 Bond Purchase Agreement dated December 31, 1981, between
Wisconsin Gas Company and Teachers Insurance and Annuity
Association of America relating to the issuance and sale
of $30,000,000 principal amount of First Mortgage Bonds,
Adjustable Rate Series due 2002 (incorporated by
reference to Exhibit 4-6 to the Company's Form S-3
Registration Statement No. 33-43729).
4.4 Indenture dated as of September 1, 1990, between
Wisconsin Gas Company and First Wisconsin Trust Company,
Trustee (incorporated by reference to Exhibit 4.11 to
the Company's Form S-3 Registration Statement No. 33-
36639).
4.5 Officers' Certificate dated as of November 28, 1990,
setting forth the terms of the Company's 9-1/8% Notes
due 1997 (incorporated by reference to Exhibit 4.1 to
the Company's Form 8-K Current Report for November 30,
1990).
4.6 Officers' Certificate dated as of November 19, 1991,
setting forth the terms of Wisconsin Gas Company's 7-
1/2% Notes due 1998 (incorporated by reference to
Exhibit 4.1 to Wisconsin Gas Company's Form 8-K Current
Report for November 19, 1991).
4.7 Officers' Certificate, dated as of September 15, 1993,
setting forth the terms of the Company's 6.60%
debentures due 2013 (incorporated by reference to
Exhibit 4.1 to the Company's Form 8-K Current Report for
September, 1993).
4.8 Revolving Credit and Term Loan Agreement dated as of
March 29, 1993, among Wisconsin Gas Company and the Bank
of New York, Citibank, N.A., Firstar Bank of Milwaukee,
N. A. Harris Trust & Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly
Report on Form 10-Q dated as of August 9, 1993).
4.9 Extension of Revolving Credit and Term Loan Agreement
dated as of February 18, 1994, among Wisconsin Gas
Company and Citibank, N.A., Firstar Bank Milwaukee,
Harris Trust and Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent.
4.10 Loan Agreement dated as of November 4, 1991, by and
among M&I Marshall & Ilsley Bank, Wisconsin Gas Company
Employee's Savings Plans Trust and WICOR, Inc.
(incorporated by reference to Exhibit 4.16 to the
Company's Form 10-K Annual Report for 1991).
10.1 Service Agreement dated as of January 1, 1988, among
WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries,
Inc. and WEXCO of Delaware, Inc. (incorporated by
reference to Exhibit 10.1 the Company's Form 10-K Annual
Report for 1988).<PAGE>
<PAGE> 10
10.2# WICOR, Inc. 1987 Stock Option Plan, as amended
(incorporated by reference to Exhibit 4.1 to the WICOR,
Inc. Form S-8 Registration Statement No. 33-67134).
10.3# Forms of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.20 to the
Company's Form 10-K Annual Report for 1991).
10.4# WICOR, Inc. 1992 Director Stock Option Plan
(incorporated by reference to Exhibit 4.1 to WICOR,
Inc.'s Form S-8 Registration No. 33-67132).
10.5# Form of nonstatutory stock agreement used in conjunction
with the WICOR, Inc. 1992 Director Stock Option Plan
(incorporated by reference to Exhibit 4.2 to WICOR,
Inc.'s Form S-8 Registration Statement No. 37-67132).
10.6# WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.1 to the WICOR,
Inc. Form S-8 Registration Statement No. 33-55755).
10.7# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1994 Long-Term
Performance Plan (incorporated by reference to Exhibit
4.2 to the WICOR, Inc. Form S-8 Registration Statement
No. 33-55755).
10.8# Form of restricted stock agreement used in connection
with the WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.3 to the WICOR,
Inc. Form S-8 Registration Statement No. 33-55755).
10.9# Wisconsin Gas Company Principal Officers' Supplemental
Retirement Income Program (incorporated by reference to
Exhibit 10.6 to the Company's Form 10-K Annual Report
for 1993).
10.10# Wisconsin Gas Company 1995 Officers' Incentive
Compensation Plan.
10.11# Wisconsin Gas Company Officers' Medical Expense
Reimbursement Plan (incorporated by reference to Exhibit
10.22 to the Company's Form 10-K Annual Report for
1992).
10.12# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.23 to the
Company's Form 10-K Annual Report for 1992).
10.13# Form of Deferred Compensation Agreement between
Wisconsin Gas Company and certain of its officers
(incorporated by reference to Exhibit 10.25 to the
Company's Form 10-K Annual Report for 1991).
10.14# WICOR, Inc. Retirement Plan for Directors, as amended
(incorporated by reference to Exhibit 10.25 to the
Company's Form 10-K Annual Report for 1992).
13 "Financial Review" portions of WICOR, Inc. 1994 Annual
Report to Shareholders.
27 Financial Data Schedule.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed during the fourth quarter
of 1994.
# Indicates a plan under which compensation is paid or payable to
directors or executive officers of the Company.
<PAGE>
<PAGE> 11
SIGNATURES
Pursuant to the requirements of Section 13 or 15 (d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
WISCONSIN GAS COMPANY
Date: March 13, 1995 By JOSEPH P. WENZLER
-----------------------
Joseph P. Wenzler
Vice President and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the succeeding pages by the following persons
on behalf of the registrant and in the capacities and on the dates indicated.
<PAGE>
<PAGE> 12
WISCONSIN GAS COMPANY
<TABLE>
<CAPTION>
Signature Title Date
------------------------------ ----------------------------- --------------
<S> <C> <C>
THOMAS F. SCHRADER
Thomas F. Schrader President, Chief Executive
Officer and Director
(Principal Executive Officer) March 13, 1995
JOSEPH P. WENZLER
Joseph P. Wenzler Vice President and March 13, 1995
Chief Financial Officer
(Principal Financial and
Principal Accounting Officer)
WENDELL F. BUECHE
Wendell F. Bueche Director March 13, 1995
WILLIE D. DAVIS Director March 13, 1995
Willie D. Davis
JERE D. MCGAFFEY
Jere D. McGaffey Director March 13, 1995
DANIEL F. MCKEITHAN, JR.
Daniel F. McKeithan, Jr. Director March 13, 1995
GUY A. OSBORN
Guy A. Osborn Director March 13, 1995
STUART W. TISDALE
Stuart W. Tisdale Director March 13, 1995
GEORGE E. WARDEBERG
George E. Wardeberg Director March 13, 1995
ESSIE M. WHITELAW
Essie M. Whitelaw Director March 13, 1995
WILLIAM B. WINTER
William B. Winter Director March 13, 1995
</TABLE>
<PAGE>
<PAGE> 13
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wisconsin Gas Company:
We have audited the accompanying balance sheet and statement of capital-
ization of WISCONSIN GAS COMPANY (a Wisconsin corporation and a wholly owned
subsidiary of WICOR, Inc.) as of December 31, 1994 and 1993, and the related
statements of income, common equity and cash flows for each of the three
years in the period ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and signi-
ficant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the financial position of Wisconsin Gas Company as of
December 31, 1994 and 1993, and the results of its operations and its cash
flows for each of the three years in the period ended December 31, 1994, in
conformity with generally accepted accounting principles.
As discussed in Notes 2 and 8 to Wisconsin Gas Company's Financial
Statements, effective January 1, 1992, Wisconsin Gas Company changed its
methods of accounting for income taxes and postretirement benefits other than
pensions.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 2, 1995<PAGE>
<PAGE> 14
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Statements of Income
Year Ended December 31,
--------------------------------
1994 1993 1992
--------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Operating Revenues.......................... $556,587 $574,835 $495,415
--------- --------- ---------
Operating Expenses:
Cost of gas sold.......................... 357,482 382,027 319,377
Operations................................ 108,397 102,385 91,782
Maintenance............................... 7,409 7,279 6,952
Depreciation.............................. 29,260 27,892 25,477
Taxes, other than income taxes............ 9,675 9,063 8,548
--------- --------- ---------
512,223 528,646 452,136
--------- --------- ---------
Operating Income............................ 44,364 46,189 43,279
--------- --------- ---------
Interest expense............................ 14,348 14,781 14,889
Other income and expenses................... 127 258 119
--------- --------- ---------
Income Before Income Taxes.................. 29,889 31,150 28,271
Income Taxes................................ 10,993 11,280 10,211
--------- --------- ---------
Net Income.................................. $ 18,896 $ 19,870 $ 18,060
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 15
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Balance Sheet
As of December 31,
-----------------------
1994 1993
-----------------------
(Thousands of Dollars)
<S> <C> <C>
Assets
------
Property, Plant and Equipment, at cost............... $718,988 $679,968
Less - Accumulated depreciation.................... 356,033 330,259
--------- ---------
362,955 349,709
--------- ---------
Current Assets:
Cash and cash equivalents.......................... 17,279 9,680
Accounts receivable, less allowance for doubtful
accounts of $7,159,000 and $7,365,000,
respectively..................................... 42,662 64,006
Accounts receivable, intercompany, net............. 1,359 (5,720)
Accrued utility revenues........................... 40,327 53,483
Materials and supplies, at weighted average cost... 2,983 3,255
Gas in storage, at weighted average cost........... 38,050 44,697
Deferred income taxes.............................. 13,183 8,280
Prepaid taxes...................................... 6,813 6,090
Other.............................................. 2,269 2,128
--------- ---------
164,925 185,899
--------- ---------
Deferred Charges and Other:
Systems development costs.......................... 34,071 38,808
Deferred environmental costs....................... 41,942 41,641
Other regulatory assets............................ 51,543 57,211
Gas transition costs............................... 7,411 15,485
Prepaid pension costs.............................. 25,394 24,418
Other.............................................. 19,610 18,321
--------- ---------
179,971 195,884
--------- ---------
$707,851 $731,492
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 16
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Balance Sheet
As of December 31,
-----------------------
1994 1993
-----------------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization and Liabilities
------------------------------
Capitalization (See accompanying statement):
Long-term debt....................................... $143,831 $147,644
Preferred stock...................................... - -
Common equity........................................ 182,995 174,646
--------- ---------
326,826 322,290
--------- ---------
Current Liabilities:
Accounts payable..................................... 44,645 45,828
Refundable gas costs................................. 18,058 15,596
Short-term borrowings................................ 85,000 108,000
Current portion of long-term debt.................... 4,000 2,000
Accrued payroll and benefits......................... 7,313 7,560
Accrued taxes........................................ 1,164 2,462
Other................................................ 3,477 3,715
--------- ---------
163,657 185,161
--------- ---------
Deferred Credits and Other:
Deferred income taxes................................ 40,002 43,590
Postretirement benefit obligation.................... 55,624 53,895
Environmental remediation costs...................... 37,188 40,000
Unamortized investment tax credit.................... 8,187 8,654
Gas transition costs................................. 7,411 15,485
Other regulatory liabilities......................... 54,636 50,179
Other................................................ 14,320 12,238
--------- ---------
217,368 224,041
--------- ---------
Commitments and Contingencies (Note 6)
--------- ---------
$707,851 $731,492
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 17
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Statements of Cash Flow
Increase (Decrease) in Cash and Cash Equivalents
Year Ended December 31,
---------------------------------
(Thousands of Dollars) 1994 1993 1992
---------------------------------
<S> <C> <C> <C>
Operations:
Net income............................... $ 18,896 $ 19,870 $ 18,060
Adjustments to reconcile net income to
cash provided by operating activities:
Depreciation and amortization.......... 37,419 34,786 30,520
Deferred income taxes.................. (8,491) (4,851) 6,392
Change in:
Receivables.......................... 34,500 (9,821) (7,281)
Gas in storage....................... 6,647 (38,050) (6,252)
Other current assets................. (6,948) (94) (2,691)
Deferred systems development costs... (841) (6,530) (9,976)
Accounts payable..................... (1,183) (11,284) (2,370)
Accrued taxes........................ (2,021) 1,432 1,646
Refundable gas costs................. 2,462 1,955 5,633
Other current liabilities............ (485) 10,006 (544)
Other noncurrent assets and
liabilities........................ 7,474 (5,974) (6,633)
--------- --------- ---------
87,429 (8,555) 26,504
--------- --------- ---------
Investment Activities:
Capital expenditures..................... (44,626) (42,253) (62,125)
Other,net................................ 343 541 274
--------- --------- ---------
(44,283) (41,712) (61,851)
--------- --------- ---------
Financing Activities:
Change in short-term borrowings.......... (23,000) 59,000 37,000
Issuance of long-term debt............... - 45,000 -
Reduction of long-term debt.............. (2,000) (46,771) (4,950)
Donated capital from WICOR, Inc.......... 5,000 12,000 15,000
Cash dividends paid to WICOR, Inc........ (16,000) (16,000) (14,000)
Other.................................... 453 225 141
--------- --------- ---------
(35,547) 53,454 33,191
--------- --------- ---------
Change in Cash and Cash Equivalents........ 7,599 3,187 (2,156)
Cash and Cash Equivalents at beginning
of year.................................. 9,680 6,493 8,649
--------- --------- ---------
Cash and Cash Equivalents at end of year... $ 17,279 $ 9,680 $ 6,493
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 18
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Statements of Common Equity
Year Ended December 31,
---------------------------------
1994 1993 1992
---------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Common Stock
Balance at beginning and end of year.... $ 9 $ 9 $ 9
--------- --------- ---------
Other Paid-In Capital
Balance at beginning of year............ 113,300 101,075 85,933
Donated capital from WICOR, Inc....... 5,000 12,000 15,000
Other................................. 453 225 142
--------- --------- ---------
Balance at end of year.................. 118,753 113,300 101,075
--------- --------- ---------
Retained Earnings
Balance at beginning of year............ 61,337 57,467 53,407
Net income............................ 18,896 19,870 18,060
Cash dividends paid to WICOR, Inc..... (16,000) (16,000) (14,000)
--------- --------- ---------
Balance at end of year.................. 64,233 61,337 57,467
--------- --------- ---------
Total Common Equity at end of year........ $182,995 $174,646 $158,551
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 19
<TABLE>
<CAPTION>
WISCONSIN GAS COMPANY
Statements of Capitalization
As of December 31,
-----------------------
1994 1993
-----------------------
(Thousands of Dollars)
<S> <C> <C>
Long-Term Debt
First mortgage bonds
Adjustable Rate Series, 7.4% and 8.1%,
respectively, due 2002............................ $ 10,000 $ 14,000
9-1/8% Notes due 1997................................. 50,000 50,000
7-1/2% Notes due 1998................................. 40,000 40,000
6.6% Notes due 2013................................... 45,000 45,000
Unamortized debt discount and expense................. (1,169) (1,356)
--------- ---------
143,831 147,644
--------- ---------
Preferred Stock
Without par value, cumulative; authorized 1,500,000
shares, none outstanding............................ - -
--------- ---------
Common Equity
Common Stock, $8 par value, authorized 5,000,000
shares, 1,125 shares outstanding.................... 9 9
Other paid-in capital................................. 118,753 113,300
Retained earnings..................................... 64,233 61,337
--------- ---------
182,995 174,646
--------- ---------
$326,826 $322,290
========= =========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 20
Wisconsin Gas Company
Notes to Financial statements
1. ACCOUNTING POLICIES
a. Business
Wisconsin Gas is a public utility engaged in the distribution of
natural gas throughout Wisconsin. Most of its revenues, however, are derived
from gas delivered in southeastern Wisconsin. Wisconsin Gas is subject to
regulation by the Public Service Commission of Wisconsin (PSCW) and gives
recognition to ratemaking policies substantially in accordance with the
Federal Energy Regulatory Commission (FERC) System of Accounts.
b. Gas Distribution Revenues and Purchased Gas Costs
Utility billings are rendered on a cycle basis. Revenues include
estimated amounts accrued for service provided but not yet billed.
Wisconsin Gas' rate schedules contain purchased gas adjustment
(PGA) provisions which permit the recovery of actual purchased gas costs
incurred. The difference between actual gas costs incurred and costs
recovered through rates, adjusted for inventory activity, is deferred as a
current asset or liability. The deferred balance is returned to or recovered
from customers at intervals throughout the year and any residual balance at
the annual October 31 reconciliation date is subsequently refunded to or
recovered from customers.
The PSCW is currently permitting Wisconsin Gas to recover pipeline
supplier take-or-pay settlement costs, allocating a portion of the direct-
billed costs to each customer class, including transportation customers.
c. Plant and Depreciation
Gas distribution property, plant and equipment is stated at
original cost, including overhead allocations. Upon ordinary retirement of
plant assets, their cost plus cost of removal, net of salvage, is charged to
accumulated depreciation, and no gain or loss is recognized.
The depreciation of Wisconsin Gas' assets is computed using
straight-line rates over estimated useful lives and considers salvage value.
These rates have been consistently used for ratemaking purposes. The
composite rates are 4.5% for 1994 and 4.7% for 1993 and 1992.
d. Regulatory Accounting and Deferred Charges
Wisconsin Gas accounts for its regulated operations in accordance
with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting
for the Effects of Certain Types of Regulation." This statement sets forth
the application of generally accepted accounting principles to those
companies whose rates are determined by an independent third-party regulator.
The economic effects of regulation can result in regulated companies
recording costs that have been or are expected to be allowed in the
ratemaking process in a period different from the period in which the costs
would be charged to expense by an unregulated enterprise. When this occurs,
costs are deferred as assets in the balance sheet (regulatory assets) and
recorded as expenses as those same amounts are reflected in rates.
Additionally, regulators can impose liabilities upon a regulated company for
amounts previously collected from customers and for amounts that are expected
to be refunded to customers (regulatory liabilities).
The amounts recorded as regulatory assets and regulatory
liabilities in the balance sheet at December 31, 1994 and 1993 are as
follows:<PAGE>
<PAGE> 21
(Thousands of Dollars) 1994 1993
---------- ----------
Regulatory assets:
Deferred environmental costs $ 41,942 $ 41,641
Income tax-related amounts
due from customers (Note 2) 3,711 5,650
Postretirement benefit
costs (Note 8) 47,832 51,561
Gas transition costs 7,411 15,485
Other 16,000 14,499
---------- ----------
$ 116,896 $ 128,836
========== ==========
Regulatory liabilities:
Income tax-related amounts
due to customers (Note 2) $ 18,792 $ 21,762
Pension costs (Note 8) 22,333 22,808
Refundable gas costs 18,058 15,596
Other 14,469 4,658
---------- ----------
$ 73,652 $ 64,824
========== ==========
Consistent with PSCW regulation, Wisconsin Gas has capitalized computer
systems development costs which are to be amortized over a five- to ten- year
period, generally as the respective systems become operational.
Wisconsin Gas is precluded from discontinuing service to residential
customers within its service area during a certain portion of the heating
season. Any differences between doubtful account provisions based on actual
experience and provisions allowed for ratemaking purposes by the PSCW are
deferred for later recovery in rates as a cost of service. The most recent
PSCW rate order provides for a $13.9 million allowable annual provision for
doubtful accounts, including amortization of prior deferred amounts. See
Notes 6 and 8 for discussion of additional deferred charges.
e. Income Taxes
Wisconsin Gas as a wholly owned subsidiary of WICOR, Inc. is included
in WICOR's consolidated Federal income tax return and allocates Federal
current tax expense or credits to Wisconsin Gas based on its respective
separate tax computation. Beginning with 1992, the Wisconsin Gas has provided
deferred income taxes in accordance with SFAS 109 "Accounting for Income
Taxes," to reflect tax effects of reporting book and taxable income in
different periods (See Note 2).
Investment tax credits were recorded as a deferred credit on the
balance sheet and are being amortized to income over the applicable service
lives of the related properties in accordance with regulatory treatment.
f. Cash Flows
Wisconsin Gas considers all highly liquid debt instruments purchased
with an original maturity of three months or less to be cash equivalents. Due
to the short maturity of these instruments, market value approximates cost.
For purposes of the Consolidated Statements of Cash Flow, income taxes
paid (net of refunds) and interest paid (excluding capitalized interest) were
as follows for each of the years ended December 31, 1994, 1993 and 1992:
(Thousands of Dollars) 1994 1993 1992
----------------------- ---------- ---------- ----------
Income taxes paid $ 30,059 $ 8,188 $ 4,824
Interest paid $ 13,374 $ 15,043 $ 14,334 <PAGE>
<PAGE> 22
g. Reclassifications
Certain prior year financial statement amounts have been reclassified
to conform to their current year presentation.
2. INCOME TAXES
In the fourth quarter of 1992, Wisconsin Gas adopted SFAS No. 109,
"Accounting for Income Taxes," retroactive to January 1, 1992. Under the
liability method prescribed by SFAS No. 109, deferred taxes are provided
based upon enacted tax laws and rates applicable to the periods in which the
taxes become payable. Changes in Wisconsin Gas' deferred income taxes arising
from the adoption represent amounts recoverable or refundable through future
rates and have been recorded as regulatory assets and liabilities on the
balance sheet.
The current and deferred components of income tax expense for each of
the years ended December 31, are as follows:
(Thousands of Dollars) 1994 1993 1992
------------------------ ---------- ---------- ----------
Current
Federal $ 19,245 $ 15,082 $ 1,916
State 4,771 3,761 811
---------- ---------- ----------
Total Current 24,016 18,843 2,727
---------- ---------- ----------
Deferred
Federal (10,789) (6,432) 5,916
State (2,234) (1,131) 1,568
---------- ---------- ----------
Total Deferred (13,023) (7,563) 7,484
---------- ---------- ----------
Total Provision $ 10,993 $ 11,280 $ 10,211
========== ========== ==========
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as a result of the following differences:
<TABLE>
<CAPTION>
(Thousands of Dollars)
Year ended December 31, 1994 1993 1992
-------------------------- --------------- --------------- ---------------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rates $10,461 35.0% $10,910 35.0% $ 9,612 34.0%
State income taxes, net 1,707 5.7 1,601 5.1 1,470 5.2
Investment credit restored (461) (1.5) (473) (1.5) (502) (1.8)
Excess deferred
tax amortization (505) (1.7) (532) (1.7) (507) (1.8)
Other, net (209) (0.7) (226) (0.7) 138 0.5
--------------- --------------- ---------------
Effective Tax Rates $10,993 36.8% $11,280 36.2% $10,211 36.1%
=============== =============== ===============
/TABLE
<PAGE>
<PAGE> 23
The components of deferred income tax assets and liabilities at
December 31, 1994 and 1993 are as follows:
(Thousands of Dollars) 1994 1993
-------------------------- ---------- ----------
Deferred Income Tax Assets
Recoverable gas costs $ 7,258 $ 5,928
Inventory 3,755 -
Deferred compensation 1,335 1,194
Other 835 1,158
---------- ----------
$ 13,183 $ 8,280
========== ==========
Deferred Income Tax Liabilities
Property related $ 34,643 $ 31,477
Systems development costs 13,675 15,576
Investment tax credit (5,416) (5,725)
Gas transition costs 2,974 5,633
Postretirement benefits (3,122) (931)
Deferred compensation (2,160) (1,959)
Other (592) (481)
---------- ----------
$ 40,022 $ 43,590
========== ==========
3. SHORT-TERM BORROWINGS
As of December 31, 1994 and 1993, Wisconsin Gas had total unsecured
lines of credit available from banks of $135.0 million and $110.0 million,
respectively. At December 31, 1994, $85.0 million of commercial paper was
outstanding at a weighted average interest rate of 5.9%. At December 31,
1993, $108.0 million of commercial paper was outstanding at a weighted
average interest rate of 3.3%.
These borrowing arrangements may require the maintenance of average
compensating balances which are generally satisfied by balances maintained
for normal business operations and may be withdrawn at any time.
4. LONG-TERM DEBT
In September 1993, Wisconsin Gas issued $45 million of 6.6% Notes due
in 2013, the proceeds of which were used to refinance $45 million of first
mortgage bonds which have higher average interest rates. There were no
issuances of long-term debt in 1992. Substantially all gas distribution
property is subject to a first mortgage lien. Maturities and sinking fund
requirements during the succeeding five years on all long-term debt total
$2.0 million, $2.0 million, $52.0 million, $42.0 million and $2.0 million in
1995, 1996, 1997, 1998 and 1999, respectively.
5. RESTRICTIONS
A November 1993 rate order issued by the PSCW sets an equity range of
43% to 50% for the utility and also requires Wisconsin Gas to request PSCW
approval prior to the payment of dividends on its common stock to WICOR if
the payment would reduce its common equity (net assets) below 43% of total
capitalization (including short-term debt). Under this requirement, $22.2
million of Wisconsin Gas' net assets at December 31, 1994, plus future
earnings, were available for such dividends without PSCW approval. In
addition, the PSCW must also approve any dividends in excess of $16 million
for any 12 month period beginning November 1 if such dividends would dilute
Wisconsin Gas' total equity below 48.43% of its total capitalization.
Wisconsin Gas paid $4 million in dividends in November 1994 and expects to
pay $16 million in dividends for the 12 months ending October, 1995.<PAGE>
<PAGE> 24
6. COMMITMENTS AND CONTINGENCIES
a. Gas Supply
Wisconsin Gas has agreements for firm pipeline and storage capacity
that expire at various dates through 2008. The aggregate amount of required
payments under such agreements totals approximately $1.04 billion, with
annual required payments of $132 million in 1995, $130 million in 1996, $126
million in 1997, $111 million in 1998 and $108 million in 1999. Wisconsin
Gas' total payments of fixed charges under all agreements were $130.4 million
in 1994, $133.9 million in 1993 and $83.5 million in 1992. The purchased gas
adjustment provisions of Wisconsin Gas' rate schedules permit the recovery of
gas costs from its customers. In 1992, the FERC issued Order No. 636 that,
among other things, mandated the unbundling of interstate pipeline sales
service and established certain open access transportation regulations that
became effective beginning in the 1993-94 heating season. Order No. 636
permits pipeline suppliers to pass through to Wisconsin Gas any prudently
incurred transition costs, such as unrecovered gas costs, gas supply
realignment costs and stranded investment costs. Wisconsin Gas estimates its
portion of such costs from all of its pipeline suppliers would approximate
$37.9 million based upon prior filings with FERC by the pipeline suppliers.
The pipeline suppliers will continue to file quarterly with the FERC for
recovery of actual costs incurred.
The FERC has allowed ANR Pipeline Company to recover capacity and
"above market" supply costs associated with quantities purchased from Dakota
Gasification Company ("Dakota") under a long-term contract expiring in the
year 2009. Consistent with guidelines set forth in Order No. 636 ANR has
allocated 90% of Dakota costs to firm transportation service recoverable
through a reservation rate surcharge and 10% to interruptible service.
Pending a final settlement with all affected parties, ANR currently recovers
the difference between costs paid to Dakota and the current market price.
Based on Wisconsin Gas contracted quantities with ANR, Wisconsin Gas is
currently paying approximately $500,000 per month of Dakota costs. This
amount varies month-to-month and across years based on the spread between ANR
contract terms with Dakota and the market indices for pricing spot gas.
Transition costs billed to Wisconsin Gas are being recovered from
customers under the purchased gas provisions within its rate schedules.
Assuming no drastic changes in the market for natural gas, Wisconsin Gas does
not expect transition costs to significantly affect the total cost of gas to
its customers because (1) Wisconsin Gas will purchase its wellhead gas
supplies based upon market prices that should be below the cost of gas
previously embedded in the bundled pipeline sales service and (2) many
elements of transition costs were previously embedded in the rates for the
pipelines' bundled sales service. The unbundling of pipeline sales service
requires Wisconsin Gas to contract directly and separately for wellhead gas
supply and firm transportation services. As a result of FERC Order No. 636,
Wisconsin Gas began contracting directly for underground storage in 1993.
b. Capital Expenditures
Certain commitments have been made in connection with 1995 capital
expenditures. Wisconsin Gas capital expenditures for 1995 are estimated at
$50 million.
c. Environmental Matters
Wisconsin Gas has identified two previously owned sites on which it
operated manufactured gas plants that are of environmental concern. Such
plants ceased operations prior to the mid-1950's. Wisconsin Gas has engaged
an environmental consultant to help determine the nature and extent of the
contamination at these sites. Based on the test results obtained and the
possible remediation alternatives available, the Company has estimated that
cleanup costs could range from $22 million to $75 million. As of December 31,
1994, the Company has accrued $37.2 million for cleanup costs in addition to
$4.0 million of costs already incurred. These estimates are based on current
undiscounted costs. It should also be noted that the numerous assumptions
such as the type and extent of contamination, available remediation<PAGE>
<PAGE> 25
techniques, and regulatory requirements which are used in developing these
estimates are subject to change as new information becomes available. Any
such changes in assumptions could have a significant impact on the potential
liability.
The Wisconsin Department of Natural Resources (WDNR) issued a Probable
Responsible Party letter to Wisconsin Gas for these two sites in September
1994. Following receipt of this letter, Wisconsin Gas and WDNR held an
initial meeting to discuss the sites. At the meeting it was agreed that
Wisconsin Gas would prepare a remedial action options report from which it
will select specific remedial actions for recommendation to the WDNR. This
information will be prepared in the first quarter of 1995. Barring unforeseen
delays, expenditures by Wisconsin Gas on remediation work will commence in
1995 and increase in future years as plan approvals are obtained.
Expenditures over the next three years are expected to total approximately
$20 million. Although most of the work and the cost are expected to be
incurred in the first few years of the plan, monitoring of sites and other
necessary actions may be undertaken for up to 30 years.
In March 1994, Wisconsin Gas commenced suit against nine insurance
carriers seeking a declaratory judgment regarding insurance coverage for the
two sites. Settlements were reached with each of the carriers during 1994. If
the amount recovered from the insurance carriers is insufficient to
remediateboth sites, expenditures not recovered will be allowed full recovery
(other than for carrying costs) in rates based upon recent PSCW orders.
Accordingly, the accrual for future remediation costs has been deferred as a
regulatory asset. Certain related investigation costs incurred to date are
currently being recovered in utility rates. However, any incurred costs not
yet recovered in rates are not allowed by the PSCW to earn a return. As of
December 31, 1994, $4.0 million of such costs had been incurred.
d. Other
The Company is party to various legal proceedings arising in the
ordinary course of business which are not expected to have a material effect
on the financial statements of the Company.
7. COMMON STOCK AND OTHER PAID-IN CAPITAL
During the first quarter of 1994, WICOR invested $5 million in
Wisconsin Gas. In the first, third and fourth quarters of 1993, WICOR
invested $2 million, $8 million and $2 million, respectively, in Wisconsin
Gas.
8. BENEFIT PLANS
a. Pension Plans
Wisconsin Gas has non-contributory pension plans which cover
substantially all its employees and include benefits based on levels of
compensation and years of service. Employer contributions and funding
policies are consistent with funding requirements of Federal law and
regulations. Commencing November 1, 1992, Wisconsin Gas pension costs or
credits included in the utility cost of service have been calculated in
accordance with SFAS No. 87 and are recoverable from customers. Prior to this
date, pension costs were recoverable in rates as funded.
The following table sets forth the funded status of pension plans at
December 31, 1994 and 1993. The cumulative difference between the amounts
funded and the amounts based on SFAS No. 87 through November 1, 1992 is being
amortized over an eight-year period effective November 1, 1994 and totalled
$22.3 million at December 31, 1994.<PAGE>
<PAGE> 26
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
---------------------- --------------------
(Thousands of Dollars) 1994 1993 1994 1993
---------------------- ---------- ---------- --------- ----------
<S> <C> <C> <C> <C>
Accumulated benefit
obligation
Vested benefits $ (64,291) $ (65,913) $ (4,983) $ (5,696)
Nonvested benefits (10,050) (9,842) (1,082) -
---------- ---------- --------- ----------
(74,341) (75,755) (6,065) (5,696)
Effect of projected future
compensation levels (36,340) (42,985) (492) (360)
---------- ---------- --------- ----------
Projected benefit obligation (110,681) (118,740) (6,557) (6,056)
Plan assets at fair value 148,588 176,053 - -
---------- ---------- --------- ----------
Plan assets greater (less)
than projected benefit
obligation 37,907 57,313 (6,557) (6,056)
Unrecognized net (asset)
liability at September 30,
1985 being recognized over
approximately 16 years (14,329) (18,458) 887 959
Unrecognized prior
service costs 3,890 5,174 253 -
Unrecognized net (gain) loss (2,074) (19,611) 657 438
Additional minimum
liability recorded - - (1,307) (1,037)
---------- ---------- --------- ----------
Accrued pension asset
(liability) $ 25,394 $ 24,418 $ (6,067) $ (5,696)
========== ========== ========= ==========
</TABLE>
The weighted average discount rate assumptions used in determining the
actuarial present value of the projected benefit obligation were 8.25%, 7.5%
and 7.75% for 1994, 1993 and 1992, respectively. For 1994, the expected long-
term rate of return on assets was 8.5% and the long-term rate of compensation
growth was 5.5%. For both 1993 and 1992, the expected long-term rate of
return on assets and long-term rate of compensation growth were 8.0% and
6.0%, respectively.
Net pension costs for each of the years ended December 31, include the
following (income) expense:
(Thousands of Dollars) 1994 1993 1992
--------------------------- ---------- ---------- ----------
Service costs $ 4,265 $ 4,872 $ 3,882
Interest costs on projected
benefit obligations 8,860 9,023 7,512
Actual loss (gain) on
plan assets 1,880 (13,474) (11,879)
Net amortization and deferral (15,195) (1,424) (993)
Gain on early
retirement incentive (268) - -
Amortization of
regulatory liability (475) - -
Adjustment to utility
funded amount - - 1,513
---------- ---------- ----------
Net pension (income) cost $ (933) $ (1,003) $ 35
========== ========== ==========<PAGE>
<PAGE> 27
The decrease in pension cost from 1992 to 1993 was due to the adoption
by the PSCW of SFAS No. 87 for ratemaking purposes, effective November 1,
1992.
b. Postretirement Health Care and Life Insurance
In addition to providing pension benefits, Wisconsin Gas provides
certain health care and life insurance benefits for retired employees when
they reach normal retirement age while working for the Company. Wisconsin Gas
funds the accrual annually based on the maximum tax deductible amount.
Effective January 1, 1992, Wisconsin Gas adopted SFAS No. 106,
"Employers Accounting for Postretirement Benefits Other Than Pensions", for
its retiree benefit plans. Under SFAS No. 106, the Company is required to
accrue the estimated cost of retiree benefit payments, other than pensions,
during the employees' active service period. In 1992, Wisconsin Gas
recognized the accumulated benefit obligation (APBO) and a related regulatory
asset, as mandated by the PSCW. Amortization of the regulatory asset is
recoverable in rates over a 20-year period. Accordingly, the cumulative
effect for the Company of adopting SFAS No. 106 as of December 31, 1992, was
an increase in the APBO of $54.7 million which was offset by the related
regulatory asset.
Net postretirement health care and life insurance costs for each of the
years ended December 31, consisted of the following components:
(Thousands of Dollars) 1994 1993 1992
---------------------- ---------- ---------- ----------
Service cost $ 2,492 $ 2,575 $ 2,475
Interest cost on projected
benefit obligation 5,665 5,396 5,173
Actual loss (gain) on
plan assets 147 (1,414) (895)
Amortization of regulatory asset 2,778 2,651 2,778
Net amortization and deferral (2,628) - -
Loss on early retirement
incentive 3,650 - -
Adjustment to utility
funded amount - - (2,108)
---------- ---------- ----------
Net postretirement benefit cost $ 12,104 $ 9,208 $ 7,423
========== ========== ==========
The 1994 postretirement benefit cost was increased due to the early
retirement of 131 employees under a voluntary early retirement incentive plan
for employees age 55 and over.
The following table sets forth the plans' funded status, reconciled
with amounts recognized in the Company's Statement of Financial Position at
December 31, 1994 and 1993, respectively.
Accumulated benefit obligation
(Thousands of Dollars) 1994 1993
-------------------------------- ---------- ----------
Retirees $ (40,510) $ (32,855)
Active employees (26,716) (48,009)
---------- ----------
Accumulated benefit obligation (67,226) (80,864)
Plan assets at fair value 30,666 25,753
---------- ----------
Accumulated benefit obligation
in excess of plan assets (36,560) (55,111)
Unrecognized prior service costs (16,347) -
Unrecognized actuarial
(gain) loss (2,717) 1,216
---------- ----------
Accrued postretirement benefit $ (55,624) $ (53,895)
========== ==========<PAGE>
<PAGE> 28
The postretirement benefit cost components for 1994 were calculated
assuming health care cost trend rates beginning at 11% in 1994 and decreasing
to 6% in 25 years. The health care cost trend rate has a significant effect
on the amounts reported. Increasing the assumed health care cost trend rates
by one percentage point in each year would increase the APBO as of December
31, 1994 by $10.3 million and the aggregate of the service and interest cost
components of postretirement expense by $1.4 million.
The assumed discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation was 8.25% and
7.50% in 1994 and 1993, respectively. Plan assets are primarily invested in
equities and fixed income securities.
c. Retirement Savings Plans
Wisconsin Gas maintains various employee savings plans, which provide
employees a mechanism to contribute amounts up to 16% of their compensation
for the year. Company matching contributions may be made for up to 5% of
eligible compensation including 1% for the Employee Stock Ownership Plan
(ESOP). See Note 8.d. Total contributions were valued at $1.3 million in
1994, $1.3 million in 1993 and $1.2 million in 1992.
d. Employee Stock Ownership Plan
In November 1991, WICOR established an ESOP covering non-union
employees of Wisconsin Gas. The ESOP funds employee benefits of up to 1% of
compensation with Company common stock distributed through the ESOP.
The ESOP used the proceeds from a $10 million, 3-year adjustable rate
loan with a 6.56% interest rate at December 31, 1994, guaranteed by WICOR, to
purchase 431,266 shares of original issue WICOR common stock. The ESOP
extended the adjustable rate loan, with similar terms, until November 3,
1995. Because WICOR has guaranteed the loan, the unpaid balance ($6.4
million) is shown as long-term debt with a like amount of unearned
compensation being recorded as a reduction of common equity on WICOR's
balance sheet.
The ESOP trustee is repaying the $10 million loan with dividends on
shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions
to the ESOP.
e. Postemployment Benefit Plans
Effective January 1, 1994 the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which requires accrual
for all other postemployment benefits. Total postemployment benefit expense
in 1994 was $0.6 million including a one-time cumulative adjustment. The
incremental costs of adopting this statement are insignificant on an ongoing
basis.
9. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of Wisconsin Gas' long-term debt is estimated based on
the quoted market prices of U.S. Treasury issues having a similar term to
maturity, adjusted for the Company's bond rating and the present value of
future cash flows.
Because Wisconsin Gas operates in a regulated environment, shareholders
would probably not be affected by realization of gains or losses on
extinguishment of its outstanding fixed-rate debt. Realized gains would be
refunded to and losses would be recovered from customers through gas rates.
The estimated fair value of Wisconsin Gas' long-term debt at December
31, is as follows:
(Thousands of Dollars) 1994 1993
------------------------ ---------- ----------
Carrying amount $ 143,831 $ 147,644
Fair value $ 141,335 $ 158,578 <PAGE>
<PAGE> 29
10. QUARTERLY FINANCIAL DATA (Unaudited)
Because seasonal factors significantly affect Wisconsin Gas operations,
the following data is not comparable between quarters:
<TABLE>
<CAPTION>
(thousands of dollars) First Second Third Fourth
----------------------- --------- --------- --------- ---------
<S> <C> <C> <C> <C>
1994 Quarters
Operating Revenues $242,148 $ 99,349 $ 76,675 $138,415
Operating Income (Loss) $ 43,331 $ (3,680) $(13,172) $ 17,885
Net Income (Loss) $ 24,878 $ (4,292) $(10,485) $ 8,795
1993 Quarters
Operating Revenues $205,426 $112,448 $ 81,761 $175,200
Operating Income (Loss) $ 37,647 $ (1,454) $(12,937) $ 22,933
Net Income (Loss) $ 21,661 $ (3,253) $(10,747) $ 12,209 <PAGE>
<PAGE> 30
TABLE OF CONTENTS
TO EXHIBITS
3.1 Wisconsin Gas Company Restated Articles of Incorporation,
as amended (incorporated by reference)
3.2* Amendment to Wisconsin Gas Company By-Laws, effective
February 28, 1995
3.3* Wisconsin Gas Company By-Laws, as amended
4.1 Indenture of Mortgage and Deed of Trust dated as of
November 1, 1950, between Milwaukee Gas Light Company
and Mellon National Bank and Trust Company and D. A.
Hazlett, Trustees (incorporated by reference)
4.2 Eleventh Supplemental Indenture dated as of February 15,
1982, between Wisconsin Gas Company and Mellon Bank, N.A.,
and N. R. Smith, Trustees (incorporated by reference)
4.3 Bond Purchase Agreement dated December 31, 1981, between
Wisconsin Gas Company and Teachers Insurance and Annuity
Association of America relating to the issuance and sale of
$30,000,000 principal amount of First Mortgage Bonds,
Adjustable Rate Series due 2002 (incorporated by
reference)
4.4 Indenture dated as of September 1, 1990, between Wisconsin
Gas Company and First Wisconsin Trust Company, Trustee
(incorporated by reference)
4.5 Officers' Certificate dated as of November 28, 1990,
setting forth the terms of Wisconsin Gas Company's 9-1/8%
Notes due 1997 (incorporated by reference)
4.6 Officers' Certificate dated as of November 19, 1991,
setting forth the terms of Wisconsin Gas Company's 7-
1/2% Notes due 1988 (incorporated by reference)
4.7 Officers' Certificate, dated as of September 15, 1993, setting forth
the terms of the Company's 6.60% Debentures due 2013 (incorporated
by reference)
4.8 Revolving Credit and Term Loan Agreement dated as of March 29, 1993,
among Wisconsin Gas Company and Citibank, N.A., Firstar Bank of
Milwaukee, N. A., Harris Trust Savings Bank, M&I
Marshall & Ilsley Bank and Citibank, N.A., as Agent
(incorporated by reference)
4.9* Extension of Revolving Credit and Long-Term Agreement dated as of
February 28, 1994, among Wisconsin Gas Company and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust and Savings Bank, M&I
Marshall & Ilsley Bank and Citibank, N.A., as Agent
4.10 Loan Agreement dated as of November 4, 1991, by and among M&I
Marshall & Ilsley Bank, Wisconsin Gas Company Employees' Savings
Plan Trust and WICOR, Inc. (incorporated by reference).
10.1 Service Agreement dated as of January 1, 1988, among WICOR,
Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc. and
WEXCO of Delaware, Inc. (incorporated by reference) <PAGE>
<PAGE> 31
10.2# WICOR, Inc. 1987 Stock Option Plan, as amended (incorporated by
reference)
10.3# Form of nonstatutory stock option agreement used in
connection with WICOR, Inc. 1987 Stock Option Plan
(incorporated by reference)
10.4# WICOR, Inc. 1992 Director Stock Option Plan (incorporated by
reference)
10.5# Form of nonstatutory stock option agreement used in
conjunction with the WICOR, Inc. 1992 Director Stock
Option Plan (incorporated by reference)
10.6# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by
reference)
10.7# Form of nonstatutory stock option agreement used in connection with
the WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference)
10.8# Form of restricted stock agreement used in connection with the
WICOR, Inc. 1994 Long-Term Performance Plan (incorporated
by reference)
10.9# Wisconsin Gas Company Principal Officers' Supplemental
Retirement Income Program (incorporated by reference)
10.10*# Wisconsin Gas Company 1995 Officers' Incentive Compensation
Plan
10.11# Wisconsin Gas Company Officers' Medical Expense Reimbursement
Plan (incorporated by reference)
10.12# Wisconsin Gas Company Group Travel Accident Plan (incorporated
by reference)
10.13# Form of Deferred Compensation Agreement between Wisconsin
Gas Company and certain of its officers (incorporated by
reference)
10.14# WICOR, Inc. Retirement Plan for Directors, as amended (incorporated
by reference)
13* "Financial Review" portion of WICOR, Inc. 1994 Annual Report
to Shareholders
27* Financial Data Schedule
* Indicates document filed herewith
# Indicates a plan under which compensation is paid or payable to
directors or executive officers of the Company.<PAGE>
</TABLE>
<PAGE>
<PAGE> 1
Exhibit 3.2
Wisconsin Gas Company
Amendment to By-Laws
Effective February 28, 1995
RESOLVED, that the second sentence of Section 3.01 of the Company's By-Laws
be, and it hereby is, amended to read as follows:
"The Board of Directors shall consist of ten (10) members."
FURTHER RESOLVED, that the foregoing shall be effective February 28, 1995.
<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 3.3
BY-LAWS
OF
WISCONSIN GAS COMPANY
(a Wisconsin corporation)
Effective August 1, 1993<PAGE>
<PAGE> 2
BY-LAWS
OF
WISCONSIN GAS COMPANY
(a Wisconsin corporation)
Effective August 1, 1993
ARTICLE I. OFFICES
A. Principal and Business Offices
The corporation may have such principal and other business offices,
either within or without the State of Wisconsin, as the Board of Directors
may designate or as the business of the corporation may require from time to
time.
B. Registered Office
The registered office of the corporation required by the Wisconsin
Business Corporation Law to be maintained in the State of Wisconsin may be,
but need not be, identical with the principal office in the State of
Wisconsin, and the address of the registered office may be changed from time
to time by the Board of Directors or by the registered agent. The business
office of the registered agent of the corporation shall be identical to such
registered office.
ARTICLE II. SHAREHOLDERS
A. Annual Meeting
The annual meeting of the shareholders shall be held on the fourth
Thursday in April of each year at 9:00 a.m. local time, or at such other time
and date within thirty days before or after such date as may be fixed by or
under the authority of the Board of Directors, for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal
holiday in the State of Wisconsin, such meeting shall be held on the next
succeeding business day.
B. Special Meetings
Special meetings of the shareholders, for any purpose or purposes,
unless otherwise prescribed by the Wisconsin Business Corporation Law, may be
called by the Board of Directors, the Chairman, the Vice Chairman or the
President. The corporation shall call a special meeting of shareholders in
the event that the holders of at least 10% of all of the votes entitled to be
cast on any issue proposed to be considered at the proposed special meeting
sign, date and deliver to the corporation one or more written demands for the
meeting describing one or more purposes for which it is to be held. The
corporation shall give notice of such a special meeting within thirty (30)
days after the date that the demand is delivered to the corporation.
C. Place of Meeting
The Board of Directors may designate any place, either within or
without the State of Wisconsin, as the place of meeting for any annual or
special meeting of shareholders. If no designation is made,
the place of meeting shall be the principal office of the corporation. Any
meeting may be adjourned to reconvene at any place designated by vote of the
shares represented thereat.<PAGE>
<PAGE> 3
D. Notice of Meeting
Written notice stating the date, time and place of any meeting of
shareholders and, in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered not less than ten (10) days
nor more than sixty (60) days before the date of the meeting (unless a
different time is provided by the Wisconsin Business Corporation Law or the
articles of incorporation), either personally or by mail, by or at the
direction of the Chairman, the Vice Chairman, the President or the Secretary,
to each shareholder of record entitled to vote at such meeting and to such
other persons as required by the Wisconsin Business Corporation Law. If
mailed, such notice shall be deemed to be effective when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the stock record books of the corporation, with postage thereon
prepaid. If an annual or special meeting of shareholders is adjourned to a
different date, time or place, the corporation shall not be required to give
notice of the new date, time or place if the new date, time or place is
announced at the meeting before adjournment; provided, however, that if a new
record date for an adjourned meeting is or must be fixed, the corporation
shall give notice of the adjourned meeting to persons who are shareholders as
of the new record date.
E. Waiver of Notice
A shareholder may waive any notice required by the Wisconsin Business
Corporation Law, the articles of incorporation or these by-laws before or
after the date and time stated in the notice. The waiver shall be in writing
and signed by the shareholder entitled to the notice, contain the same
information that would have been required in the notice under applicable
provisions of the Wisconsin Business Corporation Law (except that the time
and place of meeting need not be stated) and be delivered to the corporation
for inclusion in the corporate records. A shareholder's attendance at a
meeting, in person or by proxy, waives objection to all of the following:
(a) lack of notice or defective notice of the meeting, unless the shareholder
at the beginning of the meeting or promptly upon arrival objects to holding
the meeting or transacting business at the meeting; and (b) consideration of
a particular matter at the meeting that is not within the purpose described
in the meeting notice, unless the shareholder objects to considering the
matter when it is presented.
F. Fixing of Record Date
The Board of Directors may fix in advance a date as the record date for
the purpose of determining shareholders entitled to notice of and to vote at
any meeting of shareholders, shareholders entitled to demand a special
meeting as contemplated by Section 2.02 hereof, shareholders entitled to take
any other action, or shareholders for any other purpose. Such record date
shall not be more than seventy (70) days prior to the date on which the
particular action, requiring such determination of shareholders, is to be
taken. If no record date is fixed by the Board of Directors or by the
Wisconsin Business Corporation Law for the determination of shareholders
entitled to notice of and to vote at a meeting of shareholders, the record
date shall be the close of business on the day before the first notice is
given to shareholders. If no record date is fixed by the Board of Directors
or by the Wisconsin Business Corporation Law for the determination of
shareholders entitled to demand a special meeting as contemplated in Section
2.02 hereof, the record date shall be the date that the first shareholder
signs the demand. Except as provided by the Wisconsin Business Corporation
Law for a court-ordered adjournment, a determination of shareholders
entitled to notice of and to vote at a meeting of shareholders is effective
for any adjournment of such meeting unless the Board of Directors fixes a new
record date, which it shall do if the meeting is adjourned to a date<PAGE>
<PAGE> 4
more than one hundred twenty (120) days after the date fixed for the original
meeting. The record date for determining shareholders entitled to a
distribution (other than a distribution involving a purchase, redemption or
other acquisition of the corporation's shares) or a share dividend is the
date on which the Board of Directors authorized the distribution or share
dividend, as the case may be, unless the Board of Directors fixes a different
record date.
G. Shareholders' List for Meetings
After a record date for a special or annual meeting of shareholders has
been fixed, the corporation shall prepare a list of the names of all of the
shareholders entitled to notice of the meeting. The list shall be arranged
by class or series of shares, if any, and show the address of and number of
shares held by each shareholder. Such list shall be available for inspection
by any shareholder, beginning two (2) business days after notice of the
meeting is given for which the list was prepared and continuing to the date
of the meeting, at the corporation's principal office or at a place
identified in the meeting notice in the city where the meeting will be held.
A shareholder or his or her agent may, on written demand, inspect and,
subject to the limitations imposed by the Wisconsin Business Corporation Law,
copy the list, during regular business hours and at his or her expense,
during the period that it is available for inspection pursuant to this
Section 2.07. The corporation shall make the shareholders' list available at
the meeting and any shareholder or his or her agent or attorney may inspect
the list at any time during the meeting or any adjournment thereof. Refusal
or failure to prepare or make available the shareholders' list shall not
affect the validity of any action taken at a meeting of shareholders.
H. Quorum and Voting Requirements
Shares entitled to vote as a separate voting group may take action on a
matter at a meeting only if a quorum of those shares exists with respect to
that matter. If the corporation has only one class of common stock
outstanding, such class shall constitute a separate voting group for purposes
of this Section 2.08. Except as otherwise provided in the articles of
incorporation, any by-law adopted under authority granted in the articles of
incorporation, or the Wisconsin Business Corporation Law, a majority of the
votes entitled to be cast on the matter shall constitute a quorum of the
voting group for action on that matter. Once a share is represented for any
purpose at a meeting, other than for the purpose of objecting to holding the
meeting or transacting business at the meeting, it is considered present for
purposes of determining whether a quorum exists for the remainder of the
meeting and for any adjournment of that meeting unless a new record date is
or must be set for the adjourned meeting. If a quorum exists, except in the
case of the election of directors, action on a matter shall be approved if
the votes cast within the voting group favoring the action exceed the votes
cast opposing the action, unless the articles of incorporation, any by-law
adopted under authority granted in the articles of incorporation, or the
Wisconsin Business Corporation Law requires a greater number of affirmative
votes. Unless otherwise provided in the articles of incorporation, directors
shall be elected by a plurality of the votes cast by the shares entitled to
vote in the election of directors at a meeting at which a quorum is present.
For purposes of this Section 2.08, "plurality" means that the individuals
with the largest number of votes are elected as directors up to the maximum
number of directors to be chosen at the meeting. Though less than a quorum
of the outstanding votes of a voting group are represented at a meeting, a
majority of the votes so represented may adjourn the meeting from time to
time without further notice. At such adjourned meeting at which a quorum
shall be present or represented, any business may be transacted which might
have been transacted at the meeting as originally noticed.
<PAGE> 5
I. Conduct of Meeting
The Chairman, and in his or her absence, the Vice Chairman, and in his
or her absence, the President, and in his or her absence, a Vice President in
the order provided under Section 4.10 hereof, and in their absence, any
person chosen by the shareholders present shall call the meeting of the
shareholders to order and shall act as chairman of the meeting, and the
Secretary of the corporation shall act as secretary of all meetings of the
shareholders, but, in the absence of the Secretary, the presiding officer may
appoint any other person to act as secretary of the meeting.
J. Proxies
At all meetings of shareholders, a shareholder may vote his or her
shares in person or by proxy. A shareholder may appoint a proxy to vote or
otherwise act for the shareholder by signing an appointment form, either
personally or by his or her attorney-in-fact. An appointment of a proxy is
effective when received by the Secretary or other officer or agent of the
corporation authorized to tabulate votes. An appointment is valid for eleven
(11) months from the date of its signing unless a different period is
expressly provided in the appointment form. The presence of a shareholder
who has filed a proxy shall not of itself constitute revocation. The Board
of Directors shall have the power and authority to make rules establishing
presumptions as to the validity and sufficiency of proxies.
K. Voting of Shares
Except as provided in the articles of incorporation or in the Wisconsin
Business Corporation Law, each outstanding share, regardless of class, is
entitled to one vote on each matter voted on at a meeting of shareholders.
L. Action without Meeting
Any action required or permitted by the articles of incorporation or
these by-laws or any provision of the Wisconsin Business Corporation Law to
be taken at a meeting of the shareholders may be taken without a meeting and
without action by the Board of Directors if a written consent or consents,
describing the action so taken, is signed by all of the shareholders entitled
to vote with respect to the subject matter thereof and delivered to the
corporation for inclusion in the corporate records.
M. Acceptance of Instruments Showing Shareholder Action
If the name signed on a vote, consent, waiver or proxy appointment
corresponds to the name of a shareholder, the corporation, if acting in good
faith, may accept the vote, consent, waiver or proxy appointment and give it
effect as the act of a shareholder. If the name signed on a vote, consent,
waiver or proxy appointment does not correspond to the name of a shareholder,
the corporation, if acting in good faith, may accept the vote, consent,
waiver or proxy appointment and give it effect as the act of the shareholder
if any of the following apply:
(1) The shareholder is an entity and the name signed purports to be
that of an officer or agent of the entity.
(2) The name purports to be that of a personal representative,
administrator, executor, guardian or conservator representing the shareholder
and, if the corporation requests, evidence of fiduciary status acceptable to
the corporation is presented with respect to the vote, consent, waiver or
proxy appointment.
(3) The name signed purports to be that of a receiver or trustee in
bankruptcy of the shareholder and, if the corporation requests,<PAGE>
<PAGE> 6
evidence of this status acceptable to the corporation is presented with
respect to the vote, consent, waiver or proxy appointment.
(4) The name signed purports to be that of a pledgee, beneficial
owner, or attorney-in-fact of the shareholder and, if the corporation
requests, evidence acceptable to the corporation of the signatory's authority
to sign for the shareholder is presented with respect to the vote, consent,
waiver or proxy appointment.
(5) Two or more persons are the shareholders as co-tenants or
fiduciaries and the name signed purports to be the name of at least one of
the co-owners and the person signing appears to be acting on behalf of all
co-owners.
The corporation may reject a vote, consent, waiver or proxy appointment
if the Secretary or other officer or agent of the corporation who is
authorized to tabulate votes, acting in good faith, has reasonable basis for
doubt about the validity of the signature on it or about the signatory's
authority to sign for the shareholder.
ARTICLE III. BOARD OF DIRECTORS
A. General Powers, Classification and Number
All corporate powers shall be exercised by or under the authority of,
and the business affairs of the corporation managed under the direction of,
the Board of Directors. The number of directors of the corporation shall be
eleven (11).
B. Tenure and Qualifications
Each director shall hold office until the next annual meeting of
shareholders and until his or her successor shall have been elected and, if
necessary, qualified, or until his or her prior retirement, death,
resignation or removal. The retirement or resignation of a director who is
an officer of this corporation or an affiliated corporation, but not also the
chief executive officer of this corporation's parent corporation, shall take
effect at the time he or she ceases to hold his or her position as an officer
of this corporation or an affiliated corporation. Any other director shall
resign from the Board of Directors effective as of the annual meeting of
shareholders next following the date on which he or she attains the age of
seventy (70) years. A director may be removed from office at a meeting of
the shareholders called for the purpose of removing the director, and the
meeting notice shall state that the purpose, or one of the purposes, of the
meeting is removal of the director. A director may be removed from office
with or without cause if the number of votes cast to remove the director
exceeds the number of votes cast not to remove such director. A director may
resign at any time by delivering written notice which complies with the
Wisconsin Business Corporation Law to the Board of Directors, to the Chairman
or to the corporation. A director's resignation is effective when the notice
is delivered unless the notice specifies a later effective date. Directors
need not be residents of the State of Wisconsin or shareholders of the
corporation. No other restrictions, limitations or qualifications may be
imposed on individuals for service as a director.
C. Regular Meetings
A regular meeting of the Board of Directors shall be held without other
notice than this by-law immediately after the annual meeting of shareholders
and each adjourned session thereof. The place of such regular meeting shall
be the principal business office of the corporation in the State of
Wisconsin, or such other suitable place as may be announced at such meeting
of shareholders. The Board of Directors may provide, by resolution,<PAGE>
<PAGE> 7
the date, time and place, either within or without the State of Wisconsin,
for the holding of additional regular meetings of the Board of Directors
without other notice than such resolution.
D. Special Meetings
Special meetings of the Board of Directors may be called by or at the
request of the Chairman, the Vice Chairman, the President, Secretary or any
two (2) directors. The Chairman, the Vice Chairman, the President or
Secretary may fix any place, either within or without the State of Wisconsin,
as the place for holding any special meeting of the Board of Directors, and
if no other place is fixed the place of the meeting shall be the principal
business office of the corporation in the State of Wisconsin.
E. Notice; Waiver
Notice of each meeting of the Board of Directors (unless otherwise
provided in or pursuant to Section 3.03) shall be given by written notice
delivered or communicated in person, by telegraph, teletype, facsimile or
other form of wire or wireless communication, or by mail or private carrier,
to each director at his business address or at such other address as such
director shall have designated in writing filed with the Secretary, in each
case not less than forty-eight (48) hours prior to the meeting. The notice
need not describe the purpose of the meeting of the Board of Directors or the
business to be transacted at such meeting. If mailed, such notice shall be
deemed to be effective when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice is given by telegram, such notice
shall be deemed to be effective when the telegram is delivered to the
telegraph company. If notice is given by private carrier, such notice shall
be deemed to be effective when delivered to the private carrier. Whenever
any notice whatever is required to be given to any director of the
corporation under the articles of incorporation or these by-laws or any
provision of the Wisconsin Business Corporation Law, a waiver thereof in
writing, signed at any time, whether before or after the date and time of
meeting, by the director entitled to such notice shall be deemed equivalent
to the giving of such notice. The corporation shall retain any such waiver
as part of the permanent corporate records. A director's attendance at or
participation in a meeting waives any required notice to him or her of the
meeting unless the director at the beginning of the meeting or promptly upon
his or her arrival objects to holding the meeting or transacting business at
the meeting and does not thereafter vote for or assent to action taken at the
meeting.
F. Quorum
Except as otherwise provided by the Wisconsin Business Corporation Law
or by the articles of incorporation or these by-laws, a majority of the
number of directors specified in Section 3.01 of these by-laws shall
constitute a quorum for the transaction of business at any meeting of the
Board of Directors. Except as otherwise provided by the Wisconsin Business
Corporation Law or by the articles of incorporation or by these by-laws, a
quorum of any committee of the Board of Directors created pursuant to Section
3.12 hereof shall consist of a majority of the number of directors appointed
to serve on the committee. A majority of the directors present (though less
than such quorum) may adjourn any meeting of the Board of Directors or any
committee thereof, as the case may be, from time to time without further
notice.
G. Manner of Acting
The affirmative vote of a majority of the directors present at a
meeting of the Board of Directors or a committee thereof at which a quorum is
present shall be the act of the Board of Directors or such committee,<PAGE>
<PAGE> 8
as the case may be, unless the Wisconsin Business Corporation Law, the
articles of incorporation or these by-laws require the vote of a greater
number of directors.
H. Conduct of Meetings
The Chairman, and in his or her absence, the Vice Chairman, and in his
or her absence, the President, and in his or her absence, a Vice President in
the order provided under Section 4.10, and in their absence, any director
chosen by the directors present, shall call meetings of the Board of
Directors to order and shall act as chairman of the meeting. The Secretary
of the corporation shall act as secretary of all meetings of the Board of
Directors but in the absence of the Secretary, the presiding officer may
appoint any other person present to act as secretary of the meeting. Minutes
of any regular or special meeting of the Board of Directors shall be prepared
and distributed to each director.
I. Vacancies
Any vacancies occurring in the Board of Directors, including a vacancy
created by an increase in the number of directors, shall be filled only as
provided in the articles of incorporation. A vacancy that will occur at a
specific later date, because of a resignation effective at a later date or
otherwise, may be filled before the vacancy occurs, but the new director may
not take office until the vacancy occurs.
J. Compensation
The Board of Directors, irrespective of any personal interest of any of
its members, may establish reasonable compensation of all directors for
services to the corporation as directors, officers or otherwise, or may
delegate such authority to an appropriate committee. The Board of Directors
also shall have authority to provide for or delegate authority to an
appropriate committee to provide for
reasonable pensions, disability or death benefits, and other benefits or
payments, to directors, officers and employees and to their estates,
families, dependents or beneficiaries on account of prior services rendered
by such directors, officers and employees to the corporation.
K. Presumption of Assent
A director who is present and is announced as present at a meeting of
the Board of Directors or any committee thereof created in accordance with
Section 3.12 hereof, when corporate action is taken, assents to the action
taken unless any of the following occurs: (a) the director objects at the
beginning of the meeting or promptly upon his or her arrival to holding the
meeting or transacting business at the meeting; (b) the director dissents or
abstains from an action taken and minutes of the meeting are prepared that
show the director's dissent or abstention from the action taken; (c) the
director delivers written notice that complies with the Wisconsin Business
Corporation Law of his or her dissent or abstention to the presiding officer
of the meeting before its adjournment or to the corporation immediately after
adjournment of the meeting; or (d) the director dissents or abstains from an
action taken, minutes of the meeting are prepared that fail to show the
director's dissent or abstention from the action taken, and the director
delivers to the corporation a written notice of that failure that complies
with the Wisconsin Business Corporation Law promptly after receiving the
minutes. Such right of dissent or abstention shall not apply to a director
who votes in favor of the action taken.<PAGE>
<PAGE> 9
L. Committees
The Board of Directors by resolution adopted by the affirmative vote of
a majority of all of the directors then in office may create one or more
committees, appoint members of the Board of Directors to serve on the
committees and designate other members of the Board of Directors to serve as
alternates. Each committee shall have two (2) or more members who shall,
unless otherwise provided by the Board of Directors, serve at the pleasure of
the Board of Directors. A committee may be authorized to exercise the
authority of the Board of Directors, except that a committee may not do any
of the following: (a) authorize distributions; (b) approve or propose to
shareholders action that the Wisconsin Business Corporation Law requires to
be approved by shareholders; (c) fill vacancies on the Board of Directors or,
unless the Board of Directors provides by resolution that vacancies on a
committee shall be filled by the affirmative vote of the remaining committee
members, on any Board committee; (d) amend the corporation's articles of
incorporation; (e) adopt, amend or repeal by-laws; (f) approve a plan of
merger not requiring shareholder approval; (g) authorize or approve
reacquisition of shares, except according to a formula or method prescribed
by the Board of Directors; and (h) authorize or approve the issuance or sale
or contract for sale of shares, or determine the designation and relative
rights, preferences and limitations of a class or series of shares, except
that the Board of Directors may authorize a committee to do so within limits
prescribed by the Board of Directors. Unless otherwise provided by the Board
of Directors in creating the committee, a committee may employ counsel,
accountants and other consultants to assist it in the exercise of its
authority.
M. Alternate Members of Committees
The Board of Directors may appoint annually and from time to time, as
alternate members of any committee of the Board of Directors, directors to
serve whenever designated by the committee or by the Chairman, the Vice
Chairman or the President to take the place of absent members, or to fill
vacancies on such committee until the next meeting of the Board of Directors.
An alternate member of any committee so designated to serve shall receive
compensation for such service as fixed by the Board of Directors.
N. Telephonic Meetings
Except as herein provided and notwithstanding any place set forth in
the notice of the meeting or these by-laws, members of the Board of Directors
(and any committees thereof created pursuant to Section 3.12 hereof) may
participate in regular or special meetings by, or through the use of, any
means of communication by which all participants may simultaneously hear each
other, such as by conference telephone. If a meeting is conducted by such
means, then at the commencement of such meeting the presiding officer shall
inform the participating directors that a meeting is taking place at which
official business may be transacted. Any participant in a meeting by such
means shall be deemed present in person at such meeting. Notwithstanding the
foregoing, no action may be taken at any meeting held by such means on any
particular matter which the presiding officer determines, in his or her sole
discretion, to be inappropriate under the circumstances for action at a
meeting held by such means. Such determination shall be made and announced
in advance of such meeting.
O. Action Without Meeting
Any action required or permitted by the Wisconsin Business Corporation
Law to be taken at a meeting of the Board of Directors or a committee thereof
created pursuant to Section 3.12 hereof may be taken without a meeting if the
action is taken by all members of the Board or of the committee. The action
shall be evidenced by one or more written consents describing the<PAGE>
<PAGE> 10
action taken, signed by each director or committee member and retained by the
corporation. Such action shall be effective when the last director or
committee member signs the consent, unless the consent specifies a different
effective date.
ARTICLE IV. OFFICERS
A. Number
The principal officers of the corporation shall be a Chairman, a
President, the number of Vice Presidents as authorized from time to time by
the Board of Directors, a Secretary, and a Treasurer, each of whom shall be
elected by the Board of Directors. A Vice Chairman and such other officers
and assistant officers as may be deemed necessary may be elected or appointed
by the Board of Directors. The Board of Directors may also authorize any
duly appointed officer to appoint one or more officers or assistant officers.
Any two (2) or more offices may be held by the same person.
B. Election and Term of Office
The officers of the corporation to be elected by the Board of Directors
shall be elected annually by the Board of Directors at the first meeting of
the Board of Directors held after each annual meeting of the shareholders.
If the election of officers shall not be held at such meeting, such election
shall be held as soon thereafter as is practicable. Each officer shall hold
office until his or her successor shall have been duly elected or until his
or her prior death, resignation or removal.
C. Removal
The Board of Directors may remove any officer and, unless restricted by
the Board of Directors or these by-laws, an officer may remove any officer or
assistant officer appointed by that officer, at any time, with or without
cause and notwithstanding the contract rights, if any, of the officer
removed. The appointment of an officer does not of itself create contract
rights.
D. Resignation
An officer may resign at any time by delivering notice to the
corporation that complies with the Wisconsin Business Corporation Law. The
resignation shall be effective when the notice is delivered, unless the
notice specifies a later effective date and the corporation accepts the later
effective date.
E. Vacancies
A vacancy in any principal office because of death, resignation,
removal, disqualification or otherwise, shall be filled by the Board of
Directors for the unexpired portion of the term. If a resignation of an
officer is effective at a later date as contemplated by Section 4.04 hereof,
the Board of Directors may fill the pending vacancy before the effective date
if the Board provides that the successor may not take office until the
effective date.
F. Chief Executive Officer.
The Board of Directors shall from time to time designate the Chairman,
the Vice Chairman, if any, or the President as the Chief Executive Officer of
the corporation. The President shall be the Chief Executive Officer when the
offices of Chairman and Vice Chairman are vacant, or when the Board of
Directors has not designated the Chairman or the Vice Chairman, if<PAGE>
<PAGE> 11
any, as Chief Executive Officer. Subject to the control of the Board of
Directors, the Chief Executive Officer shall in general supervise and control
all of the business and affairs of the corporation and shall perform all
duties incident to the office of Chief Executive Officer and such other
duties as may be prescribed by the Board of Directors from time to time.
G. Chairman
The Chairman shall, when present, preside at all meetings of the
shareholders and the Board of Directors. He or she shall have authority,
subject to such rules as may be prescribed by the Board of Directors, to
appoint such agents and employees of the corporation as he or she shall deem
necessary, to prescribe their powers, duties and compensation, and to
delegate authority to them. Such agents and employees shall hold office at
the discretion of the Chairman. He or she shall have authority to sign,
execute and acknowledge, on behalf of the corporation, all deeds, mortgages,
bonds, stock certificates, contracts, leases, reports and all other documents
or instruments necessary or proper to be executed in the course of the
corporation's regular business, or which shall be authorized by resolution of
the Board of Directors; and, except as otherwise provided by law or the Board
of Directors, he or she may authorize any other officer or agent of the
corporation to sign, execute and acknowledge such documents or instruments in
his or her place and stead. In general, he or she shall perform all duties
incident to the office of Chairman and such other duties as may be prescribed
by the Board of Directors from time to time.
H. Vice Chairman
The Vice Chairman, if any, shall have such authority and
responsibilities as may be prescribed by the Board of Directors from time to
time. In the absence of the Chairman, or in the event of the Chairman's
death or inability to act, or in the event for any reason it shall be
impracticable for the Chairman to act personally, the Vice Chairman shall
perform the duties of the Chairman, and when so acting, shall have all the
powers of and be subject to all of the restrictions upon the Chairman. He or
she shall have authority, subject to such rules as may be prescribed by the
Board of Directors, to appoint such agents and employees of the corporation
as he or she shall deem necessary, to prescribe their powers, duties and
compensation, and to delegate authority to them. Such agents shall hold
office at the discretion of the Vice Chairman. He or she shall have
authority to sign, execute and acknowledge, on behalf of the corporation, all
deeds, mortgages, bonds, stock certificates, contracts, leases, reports and
all other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by
law or the Board of Directors, he or she may authorize the President or other
officer or agent of the corporation to sign, execute and acknowledge such
documents or instruments in his or per place and stead. In general, he or
she shall perform all duties incident to the office of Vice Chairman and such
other duties as may be prescribed by the Chairman or the Board of Directors
from time to time.
I. President
Subject to Section 4.06 hereof, the President shall be the Chief
Executive Officer of the corporation and, subject to the control of the Board
of Directors, shall supervise and control all the affairs of the corporation.
In the absence of the Vice Chairman, or in the event of the Vice Chairman's
death or inability to act, or in the event for any reason it shall be
impracticable for the Vice Chairman to act personally, the President shall
perform the duties of the Vice Chairman, and when so acting, shall have all
the powers of and be subject to all the restrictions upon the Vice Chairman.
He or she shall have authority, subject to such rules as may be<PAGE>
<PAGE> 12
prescribed by the Board of Directors, to appoint such agents and employees of
the corporation as he or she shall deem necessary, to prescribe their powers,
duties and compensation, and to delegate authority to them. Such agents
shall hold office at the discretion of the President. He or she shall have
authority to sign, execute and acknowledge, on behalf of the corporation, all
deeds, mortgages, bonds, stock certificates, contracts, leases, reports and
all other documents or instruments necessary or proper to be executed in the
course of the corporation's regular business, or which shall be authorized by
resolution of the Board of Directors; and, except as otherwise provided by
law or the Board of Directors, he or she may authorize any other officer or
agent of the corporation to sign, execute and acknowledge such documents or
instruments in his or her place and stead. In general, he or she shall
perform all duties incident to the office of President and such other duties
as may be prescribed by the Chairman, or the Vice Chairman, if any, or the
Board of Directors from time to time.
J. The Vice Presidents
In the absence of the President, or in the event of the President's
death, inability or refusal to act, or in the event for any reason it shall
be impracticable for the President to act personally, the Vice President (or
in the event there be more than one Vice President, the Vice Presidents in
the order designated by the Board of Directors, or in the absence of any
designation, then in the order of their election) shall perform the duties of
the President and, when so acting, shall have all the powers of and be
subject to all the restrictions upon the President. Any Vice President may
sign, with the Secretary or Assistant Secretary, certificates for shares of
the corporation; and shall perform such other duties and have such authority
as from time to time may be delegated or assigned to him or her by the
Chairman, the Vice Chairman, the President or the Board of Directors. The
execution of any instrument of the corporation by any Vice President shall be
conclusive evidence, as to third parties, of his or her authority to act in
the stead of the Chairman, the Vice Chairman or the President.
K. The Secretary
The Secretary shall: (a) keep minutes of the meetings of the
shareholders and of the Board of Directors (and of committees thereof) in one
or more books provided for that purpose (including records of actions taken
by the shareholders or the Board of Directors (or committees thereof) without
a meeting); (b) see that all notices are duly given in accordance with the
provisions of these by-laws or as required by the Wisconsin Business
Corporation Law; (c) be custodian of the corporate records and of the seal of
the corporation and see that the seal of the corporation is affixed to all
documents the execution of which on behalf of the corporation under its seal
is duly authorized; (d) maintain a record of the shareholders of the
corporation, in a form that permits preparation of a list of the names and
addresses of all shareholders, by class or series of shares and showing the
number and class or series of shares held by each shareholder; (e) sign with
the Chairman, the Vice Chairman, the President or a Vice President,
certificates for shares of the corporation, the issuance of which shall have
been authorized by resolution of the Board of Directors; (f) have general
charge of the stock transfer books of the corporation; and (g) in general
perform all duties incident to the office of Secretary and have such other
duties and exercise such authority as from time to time may be delegated or
assigned by the Chairman, the Vice Chairman, the President or the Board of
Directors.
L. The Treasurer
The Treasurer shall: (a) have charge and custody of and be responsible
for all funds and securities of the corporation; (b) maintain appropriate
accounting records; (c) receive and give receipts for moneys due and<PAGE>
<PAGE> 13
payable to the corporation from any source whatsoever, and deposit all such
moneys in the name of the corporation in such banks, trust companies or other
depositaries as shall be selected in accordance with the provisions of
Section 5.04; and (d) in general perform all of the duties incident to the
office of Treasurer and have such other duties and exercise such other
authority as from time to time may be delegated or assigned by the Chairman,
the Vice Chairman, the President or the Board of Directors. If required by
the Board of Directors, the Treasurer shall give a bond for the faithful
discharge of his or her duties in such sum and with such surety or sureties
as the Board of Directors shall determine.
M. Assistant Secretaries and Assistant Treasurers
There shall be such number of Assistant Secretaries and Assistant
Treasurers as the Board of Directors may from time to time authorize. The
Assistant Secretaries may sign with the Chairman, the Vice Chairman, the
President or a Vice President certificates for shares of the corporation the
issuance of which shall have been authorized by a resolution of the Board of
Directors. The Assistant Treasurers shall respectively, if required by the
Board of Directors, give bonds for the faithful discharge of their duties in
such sums and with such sureties as the Board of Directors shall determine.
The Assistant Secretaries and Assistant Treasurers, in general, shall perform
such duties and have such authority as shall from time to time be delegated
or assigned to them by the Secretary or the Treasurer, respectively, or by
the Chairman, the Vice Chairman, the President or the Board of Directors.
N. Other Assistants and Acting Officers
The Board of Directors shall have the power to appoint, or to authorize
any duly appointed officer of the corporation to appoint, any person to act
as assistant to any officer, or as agent for the corporation in his or her
stead, or to perform the duties of such officer whenever for any reason it is
impracticable for such officer to act personally, and such assistant or
acting officer or other agent so appointed by the Board of Directors or an
authorized officer shall have the power to perform all the duties of the
office to which he or she is so appointed to be an assistant, or as to which
he or she is so appointed to act, except as such power may be otherwise
defined or restricted by the Board of Directors or the appointing officer.
ARTICLE V. CONTRACTS, LOANS, CHECKS
AND DEPOSITS; SPECIAL CORPORATE ACTS
A. Contracts
The Board of Directors may authorize any officer or officers, agent or
agents, to enter into any contract or execute or deliver any instrument in
the name of and on behalf of the corporation, and such authorization may be
general or confined to specific instances. In the absence of other
designation, all deeds, mortgages and instruments of assignment or pledge
made by the corporation shall be executed in the name of the corporation by
the Chairman, the Vice Chairman, the President or one of the Vice Presidents
and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant
Treasurer; the Secretary or an Assistant Secretary, when necessary or
required, shall affix the corporate seal, if any, thereto; and when so
executed no other party to such instrument or any third party shall be
required to make any inquiry into the authority of the signing officer or
officers.
B. Loans
No indebtedness for borrowed money shall be contracted on behalf of the
corporation and no evidences of such indebtedness shall be issued in<PAGE>
<PAGE> 14
its name unless authorized by or under the authority of a resolution of the
Board of Directors. Such authorization may be general or confined to
specific instances.
C. Checks, Drafts, etc.
All checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the corporation, shall
be signed by such officer or officers, agent or agents of the corporation and
in such manner as shall from time to time be determined by or under the
authority of a resolution of the Board of Directors.
D. Deposits
All funds of the corporation not otherwise employed shall be deposited
from time to time to the credit of the corporation in such banks, trust
companies or other depositaries as may be selected by or under the authority
of a resolution of the Board of Directors.
E. Voting of Securities Owned by this Corporation
Subject always to the specific directions of the Board of Directors,
(a) any shares or other securities issued by any other corporation and owned
or controlled by this corporation may be voted at any meeting of security
holders of such other corporation by the Chairman of this corporation if he
or she be present, or in his or her absence, by the Vice Chairman of this
corporation if he or she be present, or in his or her absence, by the
President of this corporation if he or she be present, or in his or her
absence by any Vice President of this corporation who may be present, and (b)
whenever, in the judgment of the Chairman, or in his or her absence, of the
Vice Chairman, or in his or her absence, of the President, or in his or her
absence, any Vice President, it is desirable for this corporation to execute
a proxy or written consent in respect to any shares or other securities
issued by any other corporation and owned by this corporation, such proxy or
consent shall be executed in the name of this corporation by the Chairman,
the Vice Chairman, the President or one of the Vice Presidents of this
corporation, without necessity of any authorization by the Board of
Directors, affixation of corporate seal, if any, or countersignature or
attestation by another officer. Any person or persons designated in the
manner above stated as the proxy or proxies of this corporation shall have
full right, power and authority to vote the shares or other securities issued
by such other corporation and owned by this corporation the same as such
shares or other securities might be voted by this corporation.
ARTICLE VI. CERTIFICATES FOR SHARES; TRANSFER OF SHARES
A. Certificates for Shares
Certificates representing shares of the corporation shall be in such
form, consistent with the Wisconsin Business Corporation Law, as shall be
determined by the Board of Directors. Such certificates shall be signed by
the Chairman, the Vice Chairman, the President or a Vice President and by the
Secretary or an Assistant Secretary. All certificates for shares shall be
consecutively numbered or otherwise identified. The name and address of the
person to whom the shares represented thereby are issued, with the number of
shares and date of issue, shall be entered on the stock transfer books of the
corporation. All certificates surrendered to the corporation for transfer
shall be cancelled and no new certificate shall be issued until the former
certificate for a like number of shares shall have been surrendered and
cancelled, except as provided in Section 6.06.<PAGE>
<PAGE> 15
B. Facsimile Signatures and Seal
The seal of the corporation on any certificates for shares may be a
facsimile. The signature of the Chairman, the Vice Chairman, the President
or Vice President and the Secretary or Assistant Secretary upon a certificate
may be facsimiles if the certificate is manually signed on behalf of a
transfer agent, or a registrar, other than the corporation itself or an
employee of the corporation.
C. Signature by Former Officers
The validity of a share certificate is not affected if a person who
signed the certificate (either manually or in facsimile) no longer holds
office when the certificate is issued.
D. Transfer of Shares
Prior to due presentment of a certificate for shares for registration
of transfer the corporation may treat the registered owner of such shares as
the person exclusively entitled to vote, to receive notifications and
otherwise to have and exercise all the rights and power of an owner. Where a
certificate for shares is presented to the corporation with a request to
register for transfer, the corporation shall not be liable to the owner or
any other person suffering loss as a result of such registration of transfer
if (a) there were on or with the certificate the necessary endorsements, and
(b) the corporation had no duty to inquire into adverse claims or has
discharged any such duty. The corporation may require reasonable assurance
that such endorsements are genuine and effective and compliance with such
other regulations as may be prescribed by or under the authority of the Board
of Directors.
E. Restrictions on Transfer
The face or reverse side of each certificate representing shares shall
bear a conspicuous notation of any restriction imposed by the corporation
upon the transfer of such shares.
F. Lost, Destroyed or Stolen Certificates
Where the owner claims that certificates for shares have been lost,
destroyed or wrongfully taken, a new certificate shall be issued in place
thereof if the owner (a) so requests before the corporation has notice that
such shares have been acquired by a bona fide purchaser, (b) files with the
corporation a sufficient indemnity bond if required by the Board of Directors
or any principal officer, and (c) satisfies such other reasonable
requirements as may be prescribed by or under the authority of the Board of
Directors.
G. Consideration for Shares
The Board of Directors may authorize shares to be issued for
consideration consisting of any tangible or intangible property or benefit to
the corporation, including cash, promissory notes, services performed,
contracts for services to be performed or other securities of the
corporation. Before the corporation issues shares, the Board of Directors
shall determine that the consideration received or to be received for the
shares to be issued is adequate. The determination of the Board of Directors
is conclusive insofar as the adequacy of consideration for the issuance of
shares relates to whether the shares are validly issued, fully paid and
nonassessable. The corporation may place in escrow shares issued in whole or
in part for a contract for future services or benefits, a promissory<PAGE>
<PAGE> 16
note, or otherwise for property to be issued in the future, or make other
arrangements to restrict the transfer of the shares, and may credit
distributions in respect of the shares against their purchase price, until
the services are performed, the benefits or property are received or the
promissory note is paid. If the services are not performed, the benefits or
property are not received or the promissory note is not paid, the corporation
may cancel, in whole or in part, the shares escrowed or restricted and the
distributions credited.
H. Stock Regulations
The Board of Directors shall have the power and authority to make all
such further rules and regulations not inconsistent with law as it may deem
expedient concerning the issue, transfer and registration of shares of the
corporation.
ARTICLE VII. SEAL
The Board of Directors shall provide for a corporate seal for the
corporation which shall be circular in form and shall have inscribed thereon
the name of the corporation, the state of incorporation and the words
"Corporate Seal".
ARTICLE VIII. INDEMNIFICATION
The corporation shall, to the fullest extent permitted or required by
Sections 180.0850 to 180.0859, inclusive, of the Wisconsin Business
Corporation Law, including any amendments thereto (but in the case of any
such amendment, only to the extent such amendment permits or requires the
corporation to provide broader indemnification rights than prior to such
amendment), indemnify its Directors and Officers against any and all
Liabilities, and advance any and all reasonable Expenses, incurred thereby in
any Proceeding to which any such Director of Officer is a Party because he or
she is or was a Director or Officer of the corporation. The corporation
shall also indemnify an employee who is not a Director or Officer, to the
extent that the employee has been successful on the merits or otherwise in
defense of a Proceeding, for all reasonable Expenses incurred in the
Proceeding if the employee was a Party because he or she is or was an
employee of the corporation. The rights to indemnification granted hereunder
shall not be deemed exclusive of any other rights to indemnification against
Liabilities or the advancement of Expenses which a Director, Officer or
employee may be entitled under any written agreement, Board resolution, vote
of shareholders, the Wisconsin Business Corporation Law or otherwise. The
corporation may, but shall not be required to, supplement the foregoing
rights to indemnification against Liabilities and advancement of Expenses
under this Section 8.01 by the purchase of insurance on behalf of any one or
more of such Directors, Officers or employees, whether or not the corporation
would be obligated to indemnify or advance Expenses to such Director, Officer
or employee under this Section 8.01. All capitalized terms used in this
Article VIII and not otherwise defined herein shall have the meaning set
forth in Section 180.0850 of the Wisconsin Business Corporation Law.
ARTICLE IX. AMENDMENTS
A. By Shareholders
Except as otherwise provided in the articles of incorporation, the
shareholders shall have the power to adopt, amend, alter, change or repeal
any of the by-laws of the corporation at any annual or special meeting of the
shareholders at which a quorum is in attendance.<PAGE>
<PAGE> 17
B. By Directors
Except as otherwise provided by the Wisconsin Business Corporation Law
or in the articles of incorporation, the Board of Directors shall have the
power to adopt, amend, alter, change or repeal any of the by-laws of the
corporation by the affirmative vote of a majority of the directors present at
any meeting of the Board of Directors at which a quorum is in attendance; but
no by-law adopted by the shareholders shall be amended or repealed by the
Board of Directors if the by-law so adopted so provides. The manner of
adoption of these by-laws or any section or provision thereof shall not be
deemed to impair or negate the power of the Board of Directors to adopt,
amend, alter, change or repeal these by-laws as provided herein.
C. Implied Amendments
Any action taken or authorized by the shareholders or by the Board of
Directors which would be inconsistent with the by-laws then in effect but
which is taken or authorized by affirmative vote of not less than the number
of shares or the number of directors required to amend the by-laws so that
the by-laws would be consistent with such action shall be given the same
effect as though the by-laws had been temporarily amended or suspended so
far, but only so far, as is necessary to permit the specific action so taken
or authorized.
<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 4-9
Citicorp Securities, Inc.
February 14, 1994
To: The Lenders in the WICOR, Inc., Wisconsin Gas Company, and Sta-Rite
Industries, Inc. Credit Agreements dated March 29, 1993
Re: Extension Request
Ladies and Gentlemen:
WICOR, Wisconsin Gas and Sta-Rite Industries have each requested a one-year
extension of the Termination Date under Section 2.17 of their respective
credit agreements (attached). If approved by all Lenders, the new
Termination Date as extended would be March 29, 1997 unless the Commitments
were terminated or reduced in whole pursuant to Sections 2.05 or 6.01.
Audited financial statements for each company are not available at this time.
The companies have provided unaudited financial statements certified by a
senior financial officer, copies of which are enclosed with this letter.
Audited financials will follow shortly as required under the extension
provisions.
would you please notify Citibank of your decision by March 17, 1994? If you
approve the extension, please indicate your approval by signing at the
appropriate place at the bottom of the two copies of this letter. Please
return both copies to me. I will notify the banks of the outcome as soon as
all Lenders have responded. If approved, the extension would be effective on
the anniversary date of the credit agreements, and I will send copies of all
the signatures for your files.
Should you have any questions, please call me at (212)559-6086.
Sincerely,
Emily J. Eisenlohr Approved By Anita J. Brichell
Vice President -------------------
Title: Vice President
attach Bank Citibank, N.A.
Date March 15, 1994
cc: James J. Monnat
Arthur R. Meyer<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 10.10
Wisconsin Gas Company
Officers' Incentive Compensation Plan
1995
I. Objectives
The principal objectives of the Plan are:
A. To motivate and to provide incentive for key officers and
executive management team (EMT) of Wisconsin Gas Company to
achieve superior operating results for the benefit of both
customers and stockholders.
B. To assist in the retention of quality senior management.
C. To yield competitive total compensation levels when performance
goals are attained.
II. Eligibility
Participation in the Plan is limited to designated corporate officers
and EMT of Wisconsin Gas. The Chief Executive Officer of WICOR will be
responsible for recommending eligibility changes to the Compensation
Committee of the Board of Directors of WICOR, Inc.
III. Amount of Potential Award
A. The minimum, target and maximum award opportunities for each
participant, as a percentage of base salary, are as follows:
Award as % of Salary
------------------------------
Position Minimum Target Maximum
---------------- --------- -------- ---------
President & CEO 0% 40% 60%
VP and EMT 0% 20% 30%
B. Only 50% of the President & CEO's award opportunity will be
determined according to the provisions of this Plan. Of that
50%, 67% will be determined by Performance Plus and 33% will be
determined by Net Income as a percentage of budget. The remain-
ing 50% will be determined based on the WICOR Officers' Incentive
Compensation Plan.
IV. Performance Criteria and Objective Setting
A. Each executive's incentive award will be related to the
achievement of Company performance goals, and a component
reflecting individual performance.
B. Total incentive opportunity is further based on the following
measures:
- 50% Performance Plus (Company-wide operational and
financial incentive Plan)
- 25% Net Income as a percentage of budget
- 25% Individual<PAGE>
<PAGE> 2
Therefore, 75% of the total bonus opportunity is based on
operational and financial results and 25% is based on individual
performance.
The individual portion of the incentive payout will be based on
the individual's overall performance as measured against
previously identified and agreed upon goals and objectives. The
award may vary up to 150% of the individual performance portion
of the target award, and will be determined and paid
independently of Company financial performance.
C. If the Compensation Committee of WICOR, Inc. determines that the
Net Income level was inadequate or that services to customers did
not meet corporate goals or standards developed, it may exercise
discretion to reduce or eliminate any or all bonus payments.
V. Performance Period
Company performance goals will be for the 1995 calendar year.
VI. Bonus Award Determination
A. Performance Plus. Each year management will recommend specific
goals for safety, customer service and cost effectiveness.
Associated with various levels of performance for each goal will
be a certain number of award points. The cumulative total of
these points adjusted by a "multiplier", based on Net Income as a
percent of budget, will determine the formula payout under this
portion of the Plan.
For 1995, the performance measures and related points and the
"multiplier" are set forth in Exhibit I.
B. Net Income as a Percentage of Budget
Actual net income as a percentage of budget will generate
incentive compensation equal to 25% of the target award
multiplied by the following percentages:
<TABLE>
<CAPTION>
Net Income Award Determination
--------------------------------------------
Net Income
as % of % of Target
Performance Level Budget Awarded
------------------- ---------- -----------
<S> <C> <C>
Less than Threshold < 85% 0.0%
Threshold 85% 1.0%
Target 100% 100.0%
Maximum 120% 150.0%
</TABLE>
For performance at levels between Threshold and Target or between
Target and Maximum, award calculations will be pro-rated on a
linear basis.
For 1995, the amount of targeted net income is set forth in
Exhibit I.
C. Total performance awards will be calculated by combining the
payouts from Performance Plus, Net Income and Individual
Components.<PAGE>
<PAGE> 3
VII. Form and Timing of Award Payments
A. Awards will be determined and paid as soon as practicable after
the close of the Plan year.
B. At each participant's discretion and with the concurrence of the
Compensation Committee of WICOR, Inc., awards may be paid in one
of three ways:
1. Lump Sum
2. Partly in lump sum, and the remainder in deferred annual
installments.
3. Completely in deferred annual installments.
C. The Company will offer a deferred payment option to those
participants who prefer not to receive their awards in current
cash, following these guidelines:
1. Deferred incentive award payments will be carried as an
accrued liability with an interest rate (three-year
treasury bill rate) credited each year.
2. Deferral elections must be made prior to the end of the
performance period, and a definite time period for deferral
must be specified.
VIII. Plan Administration
A. Compensation Committee:
1. The Plan will be administered by the Compensation Committee
of the Board of Directors of WICOR, Inc.
2. The Committee's administration is subject to approval of
the Board of Directors of WICOR, Inc.
3. The decisions of the Board are final and binding on all
Plan participants.
4. The Board retains the right to terminate or amend the Plan
as it may deem advisable.
5. In evaluating actual Company performance results in
comparison with pre-established objectives established for
the Plan year, and in establishing resulting incentive
compensation levels, the Compensation Committee, at their
sole discretion, may take unusual and unique factors into
consideration as they deem appropriate. Similarly, the
Committee may modify performance targets during the course
of a Plan year if significant change takes place which
would affect the measure.
6. It shall be the Committee's responsibility to review the
overall reasonableness of incentive compensation paid to
participants of this Plan in relation to overall services
performed and results obtained by the Company during the
Plan year. The Committee shall make its determination on
the basis of its judgement as to what constitutes
satisfactory performance with respect to the fulfillment of
the Company's mission or charter. Issues to be considered
shall include, but not be limited to the
following:<PAGE>
<PAGE> 4
a. Quality and level of service provided to customers.
b. Health and safety considerations.
c. Maintenance of specific required standards of
performance.
d. Representation of shareholders' interests (including
Rate of Return achieved compared to allowed).
Based upon this review, the incentive compensation paid to
participants may be reduced or withheld so that the total
compensation paid will be reasonable in relation to services
performed. The decisions of the Committee are final and binding
on all parties.
B. Partial Year Participation:
1. Participants must be employed by the Company on the last
day of the Plan year in order to receive a bonus for that
year. However, once earned, a bonus will be paid to a
participant regardless of whether he/she is employed by the
Company on the date payment is made.
2. Awards for part year participants will be pro-rated based
on the proportion of the year that the participant was in
the Plan. This includes participants who terminate
employment due to death, disability or retirement.
3. Participants who terminate employment with the Company
prior to the last day of the Plan year shall forfeit all
rights to an incentive award payment under the Plan except
for terminations due to death, retirement or disability.
4. A participant is deemed to be disabled if he/she becomes
eligible for benefits under the Company's Long Term
Disability Plan.
<PAGE>
<PAGE> 5
Exhibit I
Wisconsin Gas Company
Incentive Compensation Plan
Formula Performance Goals
1995
Performance Plus*
Maximum
Points
1. Rate Improvement
Improvement in Residential Rates 5
2. Customer Service
Favorability/Customer Satisfaction 5
3. Safety 5
4. Cost Effectiveness
Operation & Maintenance Expense 5
5. Competitiveness
Margin Rate Reductions 5
----------
Maximum Total Points (Target = 15 points) 25
==========
6. Multiplier
Net Income as % of Budget Multiplier
------------------------- ------------
Less than 85% 0.0000
85% 0.0100
90% 0.3333
95% 0.6667
100% 1.0000
110% 1.2500
120% 1.5000
* This is a summarization of the Performance Plus Plan which will govern
the actual calculation of the payout amounts.
Net Income as a % of Budget
Minimum (85%) $19,690,000
Target (100%) $23,165,000
Maximum (120%) $27,798,000 <PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 13
GENERAL OVERVIEW
WICOR has two significant business segments: gas distribution and
manufacturing. Gas distribution is the primary business, as it accounted for
64% of consolidated revenues and 67% of consolidated operating income in
1994. However, the manufacturing segment has grown significantly in recent
years with operating income more than doubling since 1992.
WICOR earnings were $33.2 million in 1994, or $1.99 per share of common
stock, compared with $29.3 million, or $1.82 per share in 1993, and $22.8
million, or $1.47 per share in 1992 ($14.8 million, or $0.96 per share after
the cumulative effect of accounting changes).
Gas sales volumes decreased in 1994, despite substantial customer
additions, primarily as a result of warmer than normal weather, after having
increased in 1993 as a result of colder weather and customer additions in
1992 and 1993. Manufacturing operations in 1994 continued to show significant
improvement as a result of more favorable economic conditions, continuing
strong international sales, and new product introductions.
Net cash flows from operations for the years 1992 through 1994 totalled
$144.0 million. Cash proceeds from the $92.2 million net increase in long-
term debt, common stock and short-term debt, along with the net cash flows
from operations provided most of the funding for $178.8 million of capital
expenditures and $64.2 million of dividends for that three year period.
Segment data for WICOR's operations are summarized below in millions of
dollars.
<TABLE>
<CAPTION>
Operating Revenues 1994 1993 1992
----------------------------- -------- -------- --------
<S> <C> <C> <C>
Gas distribution $ 556.6 $ 574.8 $ 495.4
Manufacturing 311.2 274.7 252.0
-------- -------- --------
$ 867.8 $ 849.5 $ 747.4
======== ======== ========
Depreciation and Amortization 1994 1993 1992
----------------------------- -------- -------- --------
Gas distribution $ 37.4 $ 34.8 $ 30.5
Manufacturing 9.7 8.9 9.7
-------- -------- --------
$ 47.1 $ 43.7 $ 40.2
======== ======== ========
Operating Income 1994 1993 1992
----------------------------- -------- -------- --------
Gas distribution $ 44.4 $ 46.2 $ 43.3
Manufacturing 22.2 17.8 10.0
-------- -------- --------
$ 66.6 $ 64.0 $ 53.3
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
Estimated Actual
Capital Expenditures 1995 1994 1993 1992
----------------------------- ---------- -------- -------- --------
<S> <C> <C> <C> <C>
Gas distribution $ 49.7 $ 44.6 $ 42.3 $ 62.1
Manufacturing 20.3 10.5 9.6 9.8
---------- -------- -------- --------
$ 70.0 $ 55.1 $ 51.9 $ 71.9
========== ======== ======== ========
/TABLE
<PAGE>
<PAGE> 2
<TABLE>
<CAPTION>
Identifiable Assets 1994 1993 1992
------------------------------ -------- -------- --------
<S> <C> <C> <C>
Gas distribution $ 707.9 $ 737.2 $ 634.6
Manufacturing 222.8 196.5 191.2
-------- -------- --------
$ 930.7 $ 933.7 $ 825.8
======== ======== ========
</TABLE>
RESULTS OF OPERATIONS
Gas Distribution --
Although sales margins increased in 1994, they were offset by higher
levels of operating expenses, resulting in a decrease in operating income as
compared with 1993. The 1994 earnings reflect a 10.1% return on weighted
average utility common equity. A $10.1 million or 4.9% annual margin rate
decrease, became effective on November 14, 1994. That rate order also
retained the authorized return on utility common equity of 11.8%. Margins
benefited in 1993 from rate increases effective in November 1992 and November
1993.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas, is a better comparative performance indicator than
revenues. Transportation service revenues are recorded at the same margin as
sales with no corresponding cost of gas amount. Therefore, for a given rate
class, the volume mix between sales and transportation service affects
revenues but not margin. In addition, changes in cost of gas flow through to
revenue under a gas adjustment clause, with no effect on margin.
<TABLE>
<CAPTION>
(Millions of Dollars) 1994 1993 1992
------------------------- -------- -------- --------
<S> <C> <C> <C>
Gas sales revenue $ 550.0 $ 565.1 $ 485.3
Cost of gas sold 357.5 382.0 319.4
Gas sales margin 192.5 183.1 165.9
Gas transportation margin 6.6 9.7 10.1
-------- -------- --------
Total margin $ 199.1 $ 192.8 $ 176.0
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
(Millions of Therms) 1994 1993 1992
------------------------- -------- -------- --------
<S> <C> <C> <C>
Sales volumes
Firm 795 823 782
Interruptible 282 208 174
Transport volumes 119 174 214
-------- -------- --------
Total throughput 1,196 1,205 1,170
======== ======== ========
/TABLE
<PAGE>
<PAGE> 3
Total gas margin increased by 3% and 10% in 1994 and 1993,
respectively. The increase in 1994 was due to 1993 rate increases which were
offset by the impact of lower volume sales and the 1994 rate decrease. Lower
volumes in 1994 were primarily due to weather which was 5% warmer than 1993.
Assuming normal weather in 1994 WICOR earnings would have been approximately
$0.26 per share higher. The increase in 1993 gas margins was due primarily to
rate increases in 1993 and 1992 and to increased sales volumes. Weather in
1993 which was 1% colder than 1992 and a 3% increase in residential customers
helped to increase the 1993 sales volumes. In 1994 and 1993 a number of
industrial customers switched between interruptible sales and transportation
services. There is no impact on margins from the switching activity.
Operation and maintenance expenses increased by $6.1 million or 6% in
1994. The increase was in large measure due to increases in uncollectible
receivables expense ($2.8 million) and amortization of business system
software costs ($1.6 million). These increases in expenses are being
recovered in rates on an annual basis under the November 1993 rate order.
Included in 1994 operations expense is a one-time charge of $2.7 million
relating to the election by 131 employees of an early retirement option.
Savings in 1994 from these retirements have been realized and have offset
this charge. Operation and maintenance expenses increased by $10.9 million or
11% in 1993. The increase was primarily due to higher costs for employee
benefits, business systems software amortization, conservation programs, and
uncollectible receivables. These additional costs are being recovered as a
result of the 1992 and 1993 rate orders.
Manufacturing Operations --
Manufacturing operating income in 1994 was $22.2 million compared with
$17.8 million in 1993 and $10.0 million in 1992. The improvements were
primarily the result of increased sales. Sales in 1994 were $311.2 million,
an increase of 13% over 1993. International sales improved by 21% and
domestic sales also contributed to the increase. Significant sales
improvements were noted in the water systems, pool and spa, recreational
vehicle, marine, and industrial markets.
Sales in 1993 were $274.7 million, an increase of 9% over 1992 sales of
$252.0 million. Improvements were noted in sales of water systems, drainers
and environmental pumps as well as pumps for the food service, marine, water
purification and industrial markets. The improved economy and favorable
weather conditions also were significant factors contributing to the
increase.
International and export sales represented 37% of manufacturing sales
in 1994 and 34% in both 1993 and 1992. The increase in 1994 is primarily
related to sales growth that occurred in the Company's Australian and
European markets.
Operating expenses increased in 1994 by 11% over 1993 primarily as a
result of increased sales. As a percentage of sales, however, 1994 operating
expenses declined slightly from 1993. Operating expenses decreased by 2% in
1993, despite the 9% increase in sales. Much of the 1993 savings was
generated through administrative personnel reductions in 1992 and 1993.
<TABLE>
<CAPTION>
Bar chart of WICOR Operating Income by segment
(millions of dollars)
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Gas distribution $ 34.9 $ 39.5 $ 43.3 $ 46.2 $ 44.4
Maunufacturing 9.7 11.7 10.0 17.8 22.2
------ ------ ------ ------ ------
$ 44.6 $ 51.2 $ 53.3 $ 64.0 $ 66.6
====== ====== ====== ====== ======
/TABLE
<PAGE>
<PAGE> 4
Interest Expense, Other Income and Expenses and Income Taxes --
The 1994 decrease in interest expense as compared to 1993 was due
primarily to a September 1993 long-term debt refinancing and to reduced
levels of short-term borrowings. Both interest income and interest expense
declined in 1993 as a result of lower interest rates.
Income tax expense decreased in 1994 despite the increase in pre-tax
book income. The effective income tax rate was reduced in 1994 primarily as a
result of utilizing foreign tax incentives and the settlement of disputed tax
matters. Income tax expense increased in 1993 primarily as a result of higher
pre-tax book income and a 1% increase in the federal tax rate to 35%
effective January 1, 1993.
Accounting Changes --
The cumulative effect of accounting changes
related to the recording of income taxes and postretirement benefits totaled
$8.0 million in 1992. The impact of adopting these two accounting changes,
effective January 1, 1992, is discussed in Notes 3 and 9.
Effects of Changing Prices --
It is management's view that changes in the rate of inflation have not
had a significant effect on WICOR's income over the past three years.
Inflationary increases have been recovered through price increases or
productivity improvements.
In November 1994, Wisconsin Gas received approval from the Public
Service Commission of Wisconsin (PSCW) to use an alternative method of
ratemaking that includes a three year margin rate cap. After reviewing the
impact of the margin rate cap and other factors, management believes that
productivity improvements are likely to offset the impact of inflationary
cost increases. This alternative method is discussed on page 22 under
"Regulatory Matters."
<TABLE>
<CAPTION>
Bar chart of WICOR Return on Average Common Equity
before cumulative effects of accounting changes
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Percent 6.8% 9.5% 9.2% 11.2% 11.6%
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Over the last three years, the Company has generated sufficient cash
flows from operations to cover operating expenses, dividends, and a portion
of investment activities. Cash flow from operations increased to $103.6
million in 1994, compared with $3.4 million in 1993 and $37.0 million in
1992. The comparative increase and decrease in cash flow in 1994 and 1993,
respectively, are primarily due to funds used by Wisconsin Gas to purchase
its initial inventory of gas held in storage. As discussed under regulatory
matters, one of the impacts of Federal Energy Regulatory Commission (FERC)
Order No. 636 is that utilities such as Wisconsin Gas must assume the
responsibility for purchasing gas supplies and maintaining gas in storage.
Previously, the pipelines performed those functions.
Investment Activities --
Capital expenditures increased by $3.1 million in 1994 after decreasing
by $20.0 million in 1993 and increasing by $26.8 million in 1992. Utility
expenditures returned to more normal levels in 1994 and 1993 following
completion of a major expansion project in 1992. Both utility capital
expenditures and manufacturing capital expenditures are expected to increase
in 1995, and most likely will be funded from operations.<PAGE>
<PAGE> 5
In July 1993, WICOR merged with Shurflo by exchanging approximately $27
million of WICOR stock for the outstanding common stock of Shurflo. See Note
2 for a further discussion of this transaction. The Company, either directly
or through its subsidiaries, has invested $0.1 million, $2.1 million, and
$9.8 million in 1994, 1993, and 1992, respectively, in other acquisition
activity.
In January 1995, WICOR sold its interest in Filtron Technology Corp., a
manufacturer of filtration products for approximately $5 million.
In January 1992, the PSCW issued an order prescribing an equity-based
formula for determining the limitation on non-utility investments. As of
December 31, 1994, WICOR would be permitted to invest an additional $78.7
million in nonutility investments under this order. Nonutility subsidiaries
can also borrow additional amounts for acquisitions within certain PSCW
guidelines (See Note 6).
<TABLE>
<CAPTION>
Bar chart of Annual Degree Days
% warmer than 20-year average
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
% warmer 16.0% 10.8% 6.4% 4.1% 9.0%
</TABLE>
Financing Activities --
The Company does not anticipate the need to issue any long-term debt in
1995, but it may, in 1996, refinance $50.0 million of notes issued by
Wisconsin Gas that are due in 1997. During 1993, Wisconsin Gas issued $45
million of 6.6% Notes due in 2013, the proceeds of which were used to
refinance $45 million of first mortgage bonds which had higher interest
rates. There were no issues of long-term debt in 1992. The Company's debt
portion of capitalization decreased to 36% in 1994 as compared to 38% in 1993
and 40% in 1992. The utility's embedded cost of long-term debt was 8.1%,
8.9%, and 9.2% at December 31, 1994, 1993, and 1992, respectively.
WICOR raised its dividend by 3% in 1994, 1993, and 1992. The current
annual dividend rate is $1.60 per share. At December 31, 1994 the Company had
$57.4 million of unrestricted retained earnings available for dividend
payments to shareholders.
In October 1992, the Company established the WICOR Plan which allows
customers, shareholders, employees, Wisconsin residents and certain suppliers
to purchase WICOR common stock directly and through dividend reinvestment
without paying fees or service charges. During 1994 and 1993, respectively,
511,000 and 685,000 shares of common stock were issued through the WICOR Plan
and through various employee benefit plans. These stock issuances provided
funds to the Company of $10.6 million and $16.7 million. Beginning in 1995,
it is anticipated that the share requirements for the WICOR Plan will be met
through open market purchases of common stock.
As described in Note 6, a November 1993 PSCW rate order retained
certain limitations with respect to equity levels and dividend payments of
Wisconsin Gas. Restrictions imposed by the PSCW are not expected to have any
material effect on WICOR's ability to meet its cash obligations.
<TABLE>
<CAPTION>
Bar chart of Manufacturing International and Export Sales
millions of dollars
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Dollars $ 64.9 $ 75.5 $ 85.9 $ 93.8 $114.2
/TABLE
<PAGE>
<PAGE> 6
Wisconsin Gas' ratio of pre-tax earnings to fixed charges was 2.9 in
1994 and 1993 and 2.8 in 1992, as earnings and fixed charges remained
somewhat constant.
Access to the credit markets and the costs associated therewith can be
correlated to credit quality. The utility's unsecured bond rating was
increased in 1993 by Moody's Investors Service from A1 to Aa3. The rating
from Standard & Poor's Corporation remained at AA-. Such ratings are not a
recommendation to buy, sell or hold securities, but rather an indication of
credit worthiness.
The following is a summary of the meanings of the ratings shown above
and the relative rank of the Company's rating within each agency's
classification system. Moody's top four corporate bond ratings (Aaa, Aa, A
and Baa) are generally considered "investment grade." Obligations which are
rated "Aa" are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high-grade bonds. Aa
securities are rated lower than the Aaa rated bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities. A numerical modifier ranks the security within the
category with a "1" indicating the high end, a "2" indicating the midrange
and a "3" indicating the low end of the category. Standard & Poor's top four
corporate bond ratings (AAA, AA, A and BBB) are considered "investment
grade." Based on Standard & Poor's rating system, debt rated "AA" has a very
strong capacity to pay interest and repay principal and differs from the
highest rated issues only in small degree. A plus (+) or minus (-) sign may
be used after Standard & Poor's ratings to designate the relative position of
a credit rating within the rating category.
Commercial paper carrying an A-1+ rating by Standard & Poor's
Corporation and P-1 by Moody's Investors Service is routinely issued by
Wisconsin Gas as needed to finance seasonal working capital needs,
principally customer receivables and gas in storage. Such ratings are not a
recommendation to buy, sell, or hold securities, but rather an indication of
credit worthiness. Moody's top three short-term debt ratings (P-1, P-2 and P-
3) are generally considered investment grade and are intended to indicate the
relative repayment ability of related issuers. According to Moody's rating
system, short-term debt rated "P-1" has a superior ability for repayment of
senior short-term debt obligations. The utility had no short-term debt
outstanding for two months in 1994.
<TABLE>
<CAPTION>
Bar chart of WICOR Capital Expenditures
millions of dollars
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Gas distribution $ 28.0 $ 34.6 $ 62.1 $ 42.3 $ 44.6
Manufacturing 8.3 10.5 9.8 9.6 10.5
------ ------ ------ ------ ------
$ 36.3 $ 45.1 $ 71.9 $ 51.9 $ 55.1
====== ====== ====== ====== ======
</TABLE>
In March 1993, WICOR and its subsidiaries renewed a three-year
revolving credit agreement, including separate agreements for $25 million for
WICOR, $30 million for Wisconsin Gas, and $15 million for Sta-Rite. In 1994
the revolving credit agreement was extended an additional year to March 1997.
In 1993, Sta-Rite renewed a $25 million commercial paper issuance facility.
Commercial paper outstanding at December 31, 1994 and 1993 was $94.6 million
and $117.1 million, respectively.
The Company believes that it has adequate capacity to fund its
operations for the foreseeable future through its borrowing arrangements and
internally generated cash. <PAGE>
<PAGE> 7
Regulatory Matters --
In July 1993, Wisconsin Gas submitted an incentive rate making proposal
to the PSCW. In its November 1994 rate order, the PSCW significantly modified
the Wisconsin Gas proposal. Under the PSCW rate order, Wisconsin Gas rates
are subject to a three year margin rate cap (through October 1997) based on
the rates approved in November 1993. The PSCW order also specified margin
rate floors for each rate class. Wisconsin Gas has the ability to raise or
lower margin rates within the specified range on a quarterly basis. The rates
at December 31, 1994 are at the top of the range. In addition, the PSCW order
required Wisconsin Gas to reduce its rates by $10.1 million, on an annual
basis, to reflect a reduction in certain non-cash expenses. Over a twelve
month period, beginning with the effective date of the order, this rate
reduction will result in no net income impact, but will reduce cash flow. The
rate order was effective November 14, 1994. Under the purchased gas
adjustment provision of its rate schedules, Wisconsin Gas continues to
recover the actual purchased gas costs it incurs.
<TABLE>
<CAPTION>
Bar chart of WICOR Capitalization
percent
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C>
Long-term debt 35.4% 40.9% 40.1% 37.9% 35.7%
Common stock 64.6% 59.1% 59.9% 62.1% 64.3%
</TABLE>
Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting
for the Effects of Certain Types of Regulation" provides that rate-regulated
public utilities such as Wisconsin Gas record certain costs and credits
allowed in the ratemaking process in different periods than would be required
for unregulated businesses. These costs and credits are deferred as
regulatory assets or regulatory liabilities and are recorded on the income
statement at the time they are recognized in rates. SFAS No. 71 continues to
be applicable to Wisconsin Gas in that its rates are approved by a third
party regulator and are designed to recover its cost of service. Wisconsin
Gas believes its current cost based rates are competitive in the current
environment.
In April 1992, the FERC issued Order No. 636 requiring interstate
pipelines to "unbundle" their services. As a result, Wisconsin Gas purchases
gas supplies separately from interstate transportation services. The utility
has greater responsibility for managing its gas supply in a more competitive
market. Variable-term market sensitive contracts and the increased use of gas
in storage are being used to assure future supply. In spite of severely cold
weather in January 1994, Wisconsin Gas was able to meet the needs of its
customers under these changing conditions.
Pipelines have been allowed to pass through to local gas distributors
various costs incurred in the transition to Order No. 636. The PSCW has
authorized that such costs that have been passed through to Wisconsin Gas be
recovered in rates charged to customers. Although complete assurance cannot
be given, it is believed that any additional future transition costs will
also be recoverable from customers.
Environmental Matters --
Wisconsin Gas is in the process of preparing a remedial action options
report and recommendation for presentation to the Wisconsin Department of
Natural Resources concerning two previously owned sites on which it operated
manufactured gas plants. Wisconsin Gas currently anticipates that the costs
incurred in the remediation effort will be recoverable from insurers or
through rates and will not have a material adverse effect on the Company's
liquidity or results of operations. <PAGE>
<PAGE> 8
The manufacturing segment has provided reserves believed sufficient to
cover its estimated costs related to contamination associated with Sta-Rite's
manufacturing facilities. (See Note 7 for a more detailed discussion of these
matters.)<PAGE>
<PAGE> 9
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WICOR, INC.:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of WICOR, Inc. (a Wisconsin corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, common equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are
the responsibility of WICOR Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards 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.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WICOR, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 3 and 9 to the Consolidated Financial Statements,
effective January 1, 1992, WICOR Inc. changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
Milwaukee, Wisconsin Arthur Andersen LLP
February 2, 1995
<PAGE>
<PAGE> 10
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
(Thousands of Dollars,
Except per Share Amounts)
Year Ended December 31, 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues
Gas distribution $ 556,587 $ 574,835 $ 495,415
Manufacturing 311,168 274,693 251,994
---------- ---------- ----------
867,755 849,528 747,409
---------- ---------- ----------
Operating Costs and Expenses
Cost of gas sold 357,482 382,027 319,377
Manufacturing cost of sales 222,679 197,297 180,388
Operations and maintenance 181,820 169,068 159,009
Depreciation and amortization 29,416 28,044 26,650
Taxes, other than income taxes 9,748 9,141 8,670
---------- ---------- ----------
801,145 785,577 694,094
---------- ---------- ----------
Operating Income 66,610 63,951 53,315
---------- ---------- ----------
Interest expense (16,698) (17,428) (18,126)
Other income and expenses 574 266 1,124
---------- ---------- ----------
Income Before Income Taxes 50,486 46,789 36,313
Income taxes 17,312 17,476 13,549
---------- ---------- ----------
Income Before Cumulative Effects of
Accounting Changes 33,174 29,313 22,764
Cumulative effects of accounting changes:
Postretirement benefits other than
pensions (net of $4.1 million
income tax benefit) - - (6,165)
Income taxes - - (1,800)
---------- ---------- ----------
Net Income $ 33,174 $ 29,313 $ 14,799
========== ========== ==========
Per Share of Common Stock
Income before cumulative effects
of accounting changes $ 1.99 $ 1.82 $ 1.47
Cumulative effect of accounting change
for postretirement benefits - - (0.40)
Cumulative effect of accounting change
for income taxes - - (0.11)
---------- ---------- ----------
Net Income $ 1.99 $ 1.82 $ 0.96
========== ========== ==========
Cash dividends $ 1.58 $ 1.54 $ 1.50
Average Common Shares Outstanding (000's) 16,708 16,096 15,490
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 11
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1994 1993
---------- ----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 35,138 $ 22,953
Accounts receivable, less allowance
for doubtful accounts of $9,233
and $9,351, respectively 103,487 111,408
Accrued utility revenues 40,327 53,483
Manufacturing inventories 60,239 58,079
Gas in storage, at weighted average cost 38,050 44,697
Deferred income taxes 15,540 10,005
Prepayments and other 19,519 13,969
---------- ----------
312,300 314,594
---------- ----------
Property, Plant and Equipment, at cost
Gas distribution 718,988 679,968
Manufacturing 103,696 97,736
---------- ----------
822,684 777,704
Less accumulated depreciation
and amortization 407,121 377,004
---------- ----------
415,563 400,700
---------- ----------
Deferred Charges and Other
Systems development costs 34,071 38,808
Deferred environmental costs 41,942 41,641
Prepaid pension costs 30,865 29,580
Gas transition costs 7,411 15,485
Other regulatory assets 51,543 57,211
Other 37,013 35,707
---------- ----------
202,845 218,432
---------- ----------
$ 930,708 $ 933,726
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 12
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
(Thousands of dollars)
December 31, 1994 1994 1993
---------- ----------
<S> <C> <C>
Liabilities and Capitalization
Current Liabilities
Accounts payable $ 65,626 $ 62,683
Short-term borrowings 111,506 134,918
Refundable gas costs 18,058 15,596
Current portion of long-term debt 5,031 2,847
Accrued taxes 8,400 10,089
Accrued payroll and benefits 15,141 14,656
Other 15,661 15,199
---------- ----------
239,423 255,988
---------- ----------
Deferred Credits and Other
Deferred income taxes 42,322 45,878
Environmental remediation costs 37,188 40,000
Postretirement benefit obligation 69,730 67,510
Unamortized investment tax credit 8,187 8,654
Gas transition costs 7,411 15,485
Other regulatory liabilities 54,636 50,179
Other 18,674 14,526
---------- ----------
238,148 242,232
---------- ----------
Commitments and Contingencies (Note 7)
---------- ----------
Capitalization (See accompanying statement)
Long-term debt 161,669 165,230
Redeemable preferred stock - -
Common equity 291,468 270,276
---------- ----------
453,137 435,506
---------- ----------
$ 930,708 $ 933,726
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 13
CONSOLIDATED STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
(Thousands of Dollars)
Year Ended December 31, 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operations
Net income $ 33,174 $ 29,313 $ 14,799
Adjustments to reconcile net income to
net cash flow from operating activities:
Cumulative effect of changes in
accounting principles, net of $4,110
income tax benefit - - 7,965
Depreciation and amortization 47,097 43,738 40,200
Deferred income taxes (9,091) (3,969) (2,958)
Changes in:
Receivables 21,105 (13,993) (8,627)
Manufacturing inventories (2,027) (2,590) (839)
Gas in storage 6,647 (38,050) (6,252)
Other current assets (4,827) (569) 6,016
Systems development costs (841) (6,530) (9,976)
Accounts payable 2,943 (11,055) (2,259)
Refundable gas costs 2,462 1,955 5,633
Accrued taxes (2,412) 9,169 (2,098)
Other current liabilities 947 (292) (1,754)
Other noncurrent assets and liabilities 8,374 (3,726) (2,838)
---------- ---------- ----------
Cash provided by operating activities 103,551 3,401 37,012
---------- ---------- ----------
Investment Activities
Capital expenditures (55,051) (51,906) (71,873)
Proceeds from sale of assets 42 5,328 761
Acquisitions (72) (2,120) (9,776)
Other, net 343 541 274
---------- ---------- ----------
Cash (used in) investing activities (54,738) (48,157) (80,614)
---------- ---------- ----------
Financing Activities
Change in short-term borrowings (21,617) 59,603 35,726
Issuance of long-term debt 1,869 47,446 ,173
Reduction of long-term debt (4,795) (50,982) (8,674)
Issuance of common stock 10,649 16,682 6,079
Dividends paid on common stock,
less amounts reinvested (23,247) (21,450) (19,459)
Other 513 (222) (734)
---------- ---------- ----------
Cash (used in) provided
by financing activities (36,628) 51,077 13,111
---------- ---------- ----------
Change in Cash and Cash Equivalents 12,185 6,321 (30,491)
Cash and cash equivalents at
beginning of year 22,953 16,632 47,123
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 35,138 $ 22,953 $ 16,632
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.
<PAGE>
<PAGE> 14
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1994 1993
---------- ----------
<S> <C> <C>
Long-Term Debt
Wisconsin Gas:
First mortgage bonds
Adjustable Rate Series, 7.4% and
8.1%, respectively, due 2002 $ 10,000 $ 14,000
9-1/8% Notes due 1997 50,000 50,000
7-1/2% Notes due 1998 40,000 40,000
6.6% Notes due 2013 45,000 45,000
Sta-Rite:
First mortgage bonds, adjustable
rate, 7.8% to 8.1%, due semi-
annually through 2000 1,203 1,431
Industrial revenue bonds, 7-7/8%,
payable through 2000 2,190 2,575
Commercial paper under multi-year
credit agreement 6,853 4,758
Capital lease obligations and other 1,222 1,338
Unamortized (discount), net (1,169) (1,356)
ESOP loan guarantee 6,370 7,484
---------- ----------
161,669 165,230
---------- ----------
Redeemable Preferred Stock
WICOR:
$1.00 par value; authorized
1,500,000 shares - -
Wisconsin Gas:
Without par value, cumulative;
authorized 1,500,000 shares - -
---------- ----------
- -
---------- ----------
Common Equity
Common stock, $1.00 par value,
authorized 60,000,000 shares;
outstanding 16,918,000
and 16,407,000 shares, respectively 16,918 16,407
Other paid in capital 180,000 166,710
Retained earnings 101,418 94,643
Unearned compensation - ESOP
and restricted stock (6,868) (7,484)
---------- ----------
291,468 270,276
---------- ----------
Total Capitalization $ 453,137 $ 435,506
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 15
CONSOLIDATED STATEMENTS OF COMMON EQUITY
<TABLE>
<CAPTION>
(Thousands of Dollars)
December 31, 1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Common Stock:
Balance at beginning of year $ 16,407 $ 15,722 $ 15,366
Issued in connection with dividend
reinvestment, customer stock purchase
and employee benefit plans 511 685 356
---------- ---------- ----------
Balance at end of year 16,918 16,407 15,722
---------- ---------- ----------
Other Paid-in Capital:
Balance at beginning of year 166,710 148,064 139,931
Received in connection with dividend
reinvestment, customer stock purchase
and employee benefits plans 13,290 18,646 8,133
---------- ---------- ----------
Balance at end of year 180,000 166,710 148,064
---------- ---------- ----------
Retained Earnings:
Balance at beginning of year 94,643 90,102 97,906
Net income 33,174 29,313 14,799
Dividends on common stock (26,399) (24,099) (21,869)
Other - (673) (734)
---------- ---------- ----------
Balance at end of year 101,418 94,643 90,102
---------- ---------- ----------
Unearned Compensation - ESOP
and restricted stock:
Balance at beginning of year (7,484) (8,601) (9,750)
Loan payments 1,114 1,117 1,149
Issuance of restricted stock (723) - -
Amortization of restricted stock 225 - -
---------- ---------- ----------
Balance at end of year (6,868) (7,484) (8,601)
---------- ---------- ----------
Total Common Equity at End of Year $ 291,468 $ 270,276 $ 245,287
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 16
QUARTERLY FINANCIAL DATA (UNAUDITED)
Because seasonal factors significantly affect the Company's operations
(particularly at the Wisconsin Gas level), the following data may not be
comparable between quarters:
<TABLE>
<CAPTION>
(Thousands of Dollars, Except
per Share Amounts) Quarters: First Second Third Fourth
------------------------------------------ -------- --------- --------
<S> <C> <C> <C> <C>
1994
Operating revenues $ 320,625 $186,079 $151,037 $210,014
Operating income (loss) $ 49,444 $ 5,500 $ (8,668) $ 20,334
Income available for common stock$ 28,202 $ 998 $ (8,069) $ 12,043
Net income (loss) per
common share (a) $ 1.71 $ 0.06 $ (0.48) $ 0.71
1993
Operating revenues $ 272,660 $190,223 $152,801 $233,844
Operating income (loss) $ 41,689 $ 5,881 $ (8,406) $ 24,787
Income available for common stock$ 23,935 $ 576 $ (8,597) $ 13,399
Net income (loss) per
common share (a) $ 1.51 $ 0.04 $ (0.53) $ 0.82
</TABLE>
(a) Quarterly earnings per share may not total to the amounts reported for
the year since the computation is based on weighted average common shares
outstanding during each quarter.<PAGE>
<PAGE> 17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
A. Principles of Consolidation
The consolidated financial statements include the accounts of WICOR,
Inc., (WICOR or the Company) and its wholly-owned subsidiaries: Wisconsin Gas
Company (Wisconsin Gas), Sta-Rite Industries, Inc. (Sta-Rite), and SHURflo
Pump Manufacturing Co. (Shurflo). All appropriate intercompany transactions
have been eliminated. Certain amounts in financial statements of prior years
have been reclassified to conform to the presentation of the current year.
B. Business
Wisconsin Gas is a public utility engaged in the distribution of
natural gas throughout Wisconsin. Most of its revenues, however, are derived
from gas delivered in southeastern Wisconsin. Wisconsin Gas is subject to
regulation by the Public Service Commission of Wisconsin (PSCW) and gives
recognition to ratemaking policies substantially in accordance with the
Federal Energy Regulatory Commission (FERC) System of Accounts.
Sta-Rite manufactures pumps and water processing equipment and sells
its products in approximately 110 countries.
Shurflo, which merged with the Company during the third quarter of 1993
(See Note 2), manufactures pumps for the food service, recreational vehicle,
marine, industrial and water purification markets.
C. Gas Distribution Revenues and Purchased Gas Costs
Utility billings are rendered on a cycle basis. Revenues include
estimated amounts accrued for service provided but not yet billed.
Wisconsin Gas' rate schedules contain purchased gas adjustment (PGA)
provisions which permit the recovery of actual purchased gas costs incurred.
The difference between actual gas costs incurred and costs recovered through
rates, adjusted for inventory activity, is deferred as a current asset or
liability. The deferred balance is returned to or recovered from customers at
intervals throughout the year and any residual balance at the annual October
31 reconciliation date is subsequently refunded to or recovered from
customers.
The PSCW is currently permitting Wisconsin Gas to recover pipeline
supplier take-or-pay settlement costs, allocating a portion of the direct-
billed costs to each customer class, including transportation customers.
D. Plant and Depreciation
Gas distribution property, plant and equipment is stated at original
cost, including overhead allocations. Upon ordinary retirement of plant
assets, their cost plus cost of removal, net of salvage, is charged to
accumulated depreciation, and no gain or loss is recognized.
The depreciation of Wisconsin Gas' assets is computed using straight-
line rates over estimated useful lives and considers salvage value. These
rates have been consistently used for ratemaking purposes. The composite
rates are 4.5% for 1994 and 4.7% for 1993 and 1992. Depreciation of
manufacturing property is calculated under the straight-line method over the
estimated useful lives of the assets (3 to 10 years for equipment and 30
years for buildings) and is primarily reported as a cost of sales.
E. Regulatory Accounting and Deferred Charges
The Company and Wisconsin Gas account for their regulated operations in
accordance with Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." This statement
sets forth the application of generally accepted accounting principles to
those companies whose rates are determined by an independent third-party
regulator. The economic effects of regulation can result in regulated
companies recording costs that have been or are expected to be allowed in the
ratemaking process in a period different from the period in which the costs
would be charged to expense by an unregulated enterprise. When this occurs,
costs are deferred as assets in the balance sheet (regulatory assets) and
recorded as expenses as those same amounts are reflected in rates.
Additionally, regulators can impose liabilities upon a regulated company for
amounts previously collected from customers and for amounts that are expected
to be refunded to customers (regulatory liabilities).<PAGE>
<PAGE> 18
The amounts recorded as regulatory assets and regulatory liabilities in
the Consolidated Balance Sheet at December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993
-------------------------------------- ---------- ----------
<S> <C> <C>
Regulatory assets:
Deferred environmental costs $ 41,942 $ 41,641
Income tax-related amounts due from
customers (Note 3) 3,711 5,650
Postretirement benefit costs (Note 9) 47,832 51,561
Gas transition costs 7,411 15,485
Other 16,000 14,499
---------- ----------
$ 116,896 $ 128,836
========== ==========
Regulatory liabilities:
Income tax-related amounts due to
customers (Note 3) $ 18,792 $ 21,762
Pension costs (Note 9) 22,333 22,808
Refundable gas costs 18,058 15,596
Other 14,469 4,658
---------- ----------
$ 73,652 $ 64,824
========== ==========
</TABLE>
Consistent with PSCW regulation, Wisconsin Gas has capitalized computer
systems development costs which are to be amortized over a five- to ten- year
period, generally as the respective systems become operational.
Wisconsin Gas is precluded from discontinuing service to residential
customers within its service area during a certain portion of the heating
season. Any differences between doubtful account provisions based on actual
experience and provisions allowed for ratemaking purposes by the PSCW are
deferred for later recovery in rates as a cost of service. The most recent
PSCW rate order provides for a $13.9 million allowable annual provision for
doubtful accounts, including amortization of prior deferred amounts. See
Notes 7 and 9 for discussion of additional deferred charges.
F. Income Taxes
The Company files a consolidated Federal income tax return and
allocates Federal current tax expense or credits to each subsidiary based on
its respective separate tax computation. Beginning with 1992, the Company has
provided deferred income taxes in accordance with SFAS 109 "Accounting for
Income Taxes," to reflect tax effects of reporting book and taxable income in
different periods (See Note 3).
For Wisconsin Gas, investment tax credits were recorded as a deferred
credit on the balance sheet and are being amortized to income over the
applicable service lives of the related properties in accordance with
regulatory treatment.
G. Net Income per Common Share
Net income per common share is based on the weighted average number of
shares. Employee stock options are not recognized in the computation of
earnings per common share as they are not materially dilutive.
H. Manufacturing Inventories
Approximately 49% and 54% of manufacturing inventories, in 1994 and
1993, respectively, are priced using the last-in, first-out (LIFO) method
(not in excess of market), with the remaining inventories priced using the
first-in, first-out (FIFO) method.
If the (FIFO) method had been used exclusively, manufacturing
inventories would have been $8.4 million and $8.0 million higher at December
31, 1994 and 1993, respectively.<PAGE>
<PAGE> 19
I. Cash Flows
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents. Due to
the short maturity of these instruments, market value approximates cost.
The Company's dividends reinvested (pursuant to its dividend
reinvestment plan) totalled $3.2 million, $2.6 million and $2.4 million for
1994, 1993, and 1992, respectively.
For purposes of the Consolidated Statements of Cash Flows, income taxes
paid (net of refunds) and interest paid (excluding capitalized interest) were
as follows for each of the years ended December 31, 1994, 1993 and 1992:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
-------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Income taxes paid $ 31,384 $ 16,106 $ 8,805
Interest paid $ 15,714 $ 17,678 $ 17,404
</TABLE>
J. Derivative Financial Instruments
The Company, through a manufacturing subsidiary, has only limited
involvement with derivative financial instruments and does not use them for
trading or speculative purposes. Foreign exchange futures and forward
contracts are used to hedge foreign exchange exposure resulting from
intercompany purchases of products from United States plants. Gains and
losses from open contracts are deferred until recognized as part of the
purchase transaction. Such gains and losses included in net income in the
Consolidated Statements of Income for the years ended December 31, 1994, 1993
and 1992 were not material.
2. MERGERS AND ACQUISITIONS
On July 28, 1993, the Company completed its merger with Carr-Griff,
Inc. which became SHURflo Pump Manufacturing Co., a wholly-owned subsidiary
of WICOR, Inc. Shurflo designs, manufactures and sells pumps to the food
service, recreational vehicle, marine, industrial and water purification
markets. The Company issued approximately 0.9 million shares of common stock,
valued at approximately $27 million, for all the outstanding common stock
of Shurflo. This transaction was accounted for as a pooling of interests.
3. INCOME TAXES
In the fourth quarter of 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," retroactive to January 1, 1992. Under the
liability method prescribed by SFAS No. 109, deferred taxes are provided
based upon enacted tax laws and rates applicable to the periods in which the
taxes become payable. This adoption resulted in a net loss from the
cumulative effect of the change in accounting principle of $1.8 million for
the nonregulated subsidiaries. Changes in Wisconsin Gas' deferred income
taxes arising from the adoption represent amounts recoverable or refundable
through future rates and have been recorded as regulatory assets and
liabilities on the balance sheet.
The current and deferred components of income tax expense for each of
the years ended December 31, are as follows:<PAGE>
<PAGE> 20
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
---------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Current
Federal $ 23,516 $ 18,576 $ 3,818
State 5,816 4,742 1,405
Foreign 1,627 834 800
---------- ---------- ----------
Total Current 30,959 24,152 6,023
---------- ---------- ----------
Deferred
Federal (11,247) (6,432) 5,974
State (2,012) (961) 1,588
Foreign (388) 717 (36)
---------- ---------- ----------
Total Deferred (13,647) (6,676) 7,526
---------- ---------- ----------
Total Provision $ 17,312 $ 17,476 $ 13,549
========== ========== ==========
</TABLE>
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as a result of the following differences:
<TABLE>
<CAPTION>
(Thousands of Dollars)
Year ended December 31, 1994 1993 1992
--------------- ---------------- ----------------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rates $17,670 35.0% $16,376 35.0% $12,346 34.0%
State income taxes, net 2,518 5.0 2,326 5.0 1,841 5.1
Excess of foreign (benefit)
provision over U.S. stat-
utory tax rate (174) (0.3) 886 1.9 843 2.3
Investment credit restored (461) (0.9) (473) (1.0) (502) (1.4)
Excess deferred tax
amortization (505) (1.0) (532) (1.1) (507) (1.4)
Settlement of disputed
tax matters (998) (2.0) - - - -
Other, net (738) (1.5) (1,107) (2.4) (472) (1.3)
---------------- ---------------- ----------------
Effective Tax Rates $17,312 34.3% $17,476 37.4% $13,549 37.3%
================ ================ ================
/TABLE
<PAGE>
<PAGE> 21
The components of deferred income tax assets and liabilities at
December 31, 1994 and 1993 are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993
---------------------------------- ---------- ----------
<S> <C> <C>
Deferred Income Tax Assets
Recoverable gas costs $ 7,258 $ 5,928
Inventory 1,935 (2,052)
Deferred compensation 2,026 1,873
Other 4,321 4,256
---------- ----------
$ 15,540 $10,005
========== ==========
Deferred Income Tax Liabilities
Property related $ 41,054 $ 37,496
Systems development costs 13,675 15,576
Investment tax credit (5,416) (5,725)
Gas transition costs 2,974 5,633
Postretirement benefits (8,059) (5,503)
Deferred compensation (3,055) (2,747)
Pension benefits 2,842 2,249
Other (1,693) (1,101)
---------- ----------
$ 42,322 $ 45,878
========== ==========
</TABLE>
4. SHORT-TERM BORROWINGS
As of December 31, 1994 and 1993, the Company had total unsecured lines
of credit available from banks of $206.5 million and $183.4 million,
respectively. These borrowing arrangements may require the maintenance of
average compensating balances, which are generally satisfied by balances
maintained for normal business operations, and may be withdrawn at any time.
<TABLE>
<CAPTION>
December 31,
(Thousands of Dollars) 1994 1993
-------------------------------- ---------- ----------
<S> <C> <C>
Notes payable to banks
U.S. subsidiaries $ 100 $ 3,600
Non-U.S. subsidiaries 16,835 14,218
Commercial paper - U.S. 94,571 117,100
---------- ----------
$ 111,506 $ 134,918
========== ==========
</TABLE>
<TABLE>
<CAPTION>
<S> <C> <C>
Weighted average interest rates
on debt outstanding at end of year:
Notes payable to banks
U.S. subsidiaries 7.5% 4.1%
Non-U.S. subsidiaries 6.2% 5.3%
Commercial paper - U.S. 5.9% 3.4%
/TABLE
<PAGE>
<PAGE> 22
5. LONG-TERM DEBT
In September 1993, Wisconsin Gas issued $45 million of 6.6% Notes due
in 2013, the proceeds of which were used to refinance $45 million of first
mortgage bonds which have higher average interest rates. There were no
issuances of long-term debt in 1992. Substantially all gas distribution and
certain manufacturing property and plant is subject to first mortgage liens.
Maturities and sinking fund requirements during the succeeding five years on
all long-term debt total $4.9 million, $4.7 million, $58.3 million, $42.8
million and $2.8 million in 1995, 1996, 1997, 1998 and 1999, respectively.
6. RESTRICTIONS
A November 1993 rate order issued by the PSCW sets an equity range of
43% to 50% for the utility and also requires Wisconsin Gas to request PSCW
approval prior to the payment of dividends on its common stock to WICOR if
the payment would reduce its common equity (net assets) below 43% of total
capitalization (including short-term debt). Under this requirement, $22.2
million of Wisconsin Gas' net assets at December 31, 1994, plus future
earnings, were available for such dividends without PSCW approval. In
addition, the PSCW must also approve any dividends in excess of $16 million
for any 12 month period beginning November 1 if such dividends would dilute
Wisconsin Gas' total equity below 48.43% of its total capitalization.
Wisconsin Gas paid $4 million in dividends in November 1994 and expects to
pay $16 million in dividends for the 12 months ending October, 1995.
In connection with its long-term debt agreements, Sta-Rite is subject
to restrictions on working capital, shareholder's equity and debt. These
agreements also limit the amount of retained earnings available for the
payment of cash dividends to WICOR and for certain investments. At December
31, 1994, $8.5 million of Sta-Rite net assets plus 50% of its future earnings
were available for payment of dividends to WICOR.
Combined restricted common equity of the Company's subsidiaries totaled
$234.1 million under the most restrictive provisions as of December 31, 1994;
accordingly, $57.4 million of consolidated retained earnings is available for
payment of dividends.
Historically, the PSCW has imposed restrictions on public utility
holding companies, including WICOR, relating to future nonutility
investments. In January 1992, the PSCW approved amendments to limitations set
on the Company. The PSCW order states that Wisconsin Gas should remain the
predominant business, generally as measured by equity, within the holding
company system. The amount allowable for future nonutility investment at
December 31, 1994 was $78.7 million. Also, nonutility subsidiaries can borrow
additional amounts for acquisitions; however, if debt for the consolidated
nonutility entities exceeds 40% of total capitalization for these entities,
further PSCW actions may be necessary.
7. COMMITMENTS AND CONTINGENCIES
A. Gas Supply
Wisconsin Gas has agreements for firm pipeline and storage capacity
that expire at various dates through 2008. The aggregate amount of required
payments under such agreements totals approximately $1,040 million, with
annual required payments of $132 million in 1995, $130 million in 1996, $126
million in 1997, $111 million in 1998 and $108 million in 1999. Wisconsin
Gas' total payments of fixed charges under all agreements were $130.4 million
in 1994, $133.9 million in 1993 and $83.5 million in 1992. The purchased gas
adjustment provisions of Wisconsin Gas' rate schedules permit the recovery of
gas costs from its customers. In 1992, the FERC issued Order No. 636 that,
among other things, mandated the unbundling of interstate pipeline sales
service and established certain open access transportation regulations that
became effective beginning in the 1993-94 heating season. Order No. 636
permits pipeline suppliers to pass through to Wisconsin Gas any prudently
incurred transition costs, such as unrecovered gas costs, gas supply
realignment costs and stranded investment costs. Wisconsin Gas estimates its
portion of such costs from all of its pipeline suppliers would approximate
$37.9 million based upon prior filings with FERC by the pipeline suppliers.
The pipeline suppliers will continue to file quarterly with the FERC for
recovery of actual costs incurred.<PAGE>
<PAGE> 23
The FERC has allowed ANR Pipeline Company to recover capacity and
"above market" supply costs associated with quantities purchased from Dakota
Gasification Company ("Dakota") under a long-term contract expiring in the
year 2009. Consistent with guidelines set forth in Order No. 636 ANR has
allocated 90% of Dakota costs to firm transportation service recoverable
through a reservation rate surcharge and 10% to interruptible service.
Pending a final settlement with all affected parties, ANR currently recovers
the difference between costs paid to Dakota and the current market price.
Based on Wisconsin Gas contracted quantities with ANR, Wisconsin Gas is
currently paying approximately $500,000 per month of Dakota costs. This
amount varies month-to-month and across years based on the spread between ANR
contract terms with Dakota and the market indices for pricing spot gas.
Transition costs billed to Wisconsin Gas are being recovered from
customers under the purchased gas provisions within its rate schedules.
Assuming no drastic changes in the market for natural gas, Wisconsin Gas does
not expect transition costs to significantly affect the total cost of gas to
its customers because (1) Wisconsin Gas will purchase its wellhead gas
supplies based upon market prices that should be below the cost of gas
previously embedded in the bundled pipeline sales service and (2) many
elements of transition costs were previously embedded in the rates for the
pipelines' bundled sales service. The unbundling of pipeline sales service
requires Wisconsin Gas to contract directly and separately for wellhead gas
supply and firm transportation services. As a result of FERC Order No. 636,
Wisconsin Gas has contracted directly for underground storage in 1993.
B. Capital Expenditures
Certain commitments have been made in connection with 1995 capital
expenditures. Wisconsin Gas capital expenditures for 1995 are estimated at
$50 million. Manufacturing capital expenditures for 1995 are estimated at $20
million.
C. Environmental Matters
Wisconsin Gas has identified two previously owned sites on which it
operated manufactured gas plants that are of environmental concern. Such
plants ceased operations prior to the mid-1950's. Wisconsin Gas has engaged
an environmental consultant to help determine the nature and extent of the
contamination at these sites. Based on the test results obtained and the
possible remediation alternatives available, the Company has estimated that
cleanup costs could range from $22 million to $75 million. As of December 31,
1994, the Company has accrued $37.2 million for cleanup costs in addition to
$4.0 million of costs already incurred. These estimates are based on current
undiscounted costs. It should also be noted that the numerous assumptions
such as the type and extent of contamination, available remediation
techniques, and regulatory requirements which are used in developing these
estimates are subject to change as new information becomes available. Any
such changes in assumptions could have a significant impact on the potential
liability.
The Wisconsin Department of Natural Resources (WDNR) issued a Probable
Responsible Party letter to Wisconsin Gas for these two sites in September
1994. Following receipt of this letter, Wisconsin Gas and WDNR held an
initial meeting to discuss the sites. At the meeting it was agreed that
Wisconsin Gas would prepare a remedial action options report from which it
will select specific remedial actions for recommendation to the WDNR. This
information will be prepared in the first quarter of 1995. Barring unforeseen
delays, expenditures by Wisconsin Gas on remediation work will commence in
1995 and increase in future years as plan approvals are obtained.
Expenditures over the next three years are expected to total approximately
$20 million. Although most of the work and the cost are expected to be
incurred in the first few years of the plan, monitoring of sites and other
necessary actions may be undertaken for up to 30 years.
In March 1994, Wisconsin Gas commenced suit against nine insurance
carriers seeking a declaratory judgment regarding insurance coverage for the
two sites. Settlements were reached with each of the carriers during 1994. If
the amount recovered from the insurance carriers is insufficient to remediate
both sites, expenditures not recovered will be allowed full recovery (other
than for carrying costs) in rates based upon recent PSCW orders. Accordingly,
the accrual has been offset by a deferred charge to a regulatory<PAGE>
<PAGE> 24
asset. Certain related investigation costs incurred to date are currently
being recovered in utility rates. However, any incurred costs not yet
recovered in rates are not allowed by the PSCW to earn a return. As of
December 31, 1994, $4.0 million of such costs had been incurred.
On April 18, 1994, lawsuits were filed in Superior Court in Alameda
County, California, by the Attorney General of the State of California and
two environmental groups against four submersible pump manufacturers,
including Sta-Rite. The suit alleges that the four manufacturers have
produced and sold pumps with brass components which leach levels of lead in
excess of the levels permitted under California law. The lawsuits seek, among
other remedies, injunctive relief and unspecified monetary penalties. Sta-
Rite and the other named defendants dispute the allegations made in the
lawsuits and Sta-Rite intends to vigorously defend itself against the
actions. Based upon its investigation and the reserves established, the
Company believes resolution of the matter will not have a material, adverse
effect upon its results of operations or financial condition.
In July 1994, Sta-Rite was notified by the WDNR that it believed
solvents used at a manufacturing site previously operated by Sta-Rite have
migrated and have caused, or contributed to, the contamination of a
Deerfield, Wisconsin, municipal well and surrounding property. The population
of Deerfield is approximately 1,260 people. Based upon the current
investigation and reserves established, the Company believes that the
resolution of this matter will not have a material, adverse effect upon its
results of operations or financial condition.
D. Other
The Company is party to various legal proceedings arising in the
ordinary course of business which are not expected to have a material effect
on the financial statements of the Company.
8. COMMON STOCK AND OTHER PAID-IN CAPITAL
As of December 31, 1994, 16,918,004 shares of common stock were issued
and outstanding and 3,112,806 shares were reserved for issuance under the
Company's dividend reinvestment, stock and incentive savings plans. In
addition, 20,041,872 shares are reserved pursuant to the Company's
shareholder rights plan.
Under certain circumstances, each right entitles the shareholder to
purchase one common share at an exercise price of $75, subject to adjustment.
The rights are not exercisable until ten business days after a person or
group announces a tender offer or exchange offer which would result in their
acquiring ownership of 20% or more of the Company's outstanding common stock
or after a person or group acquires at least 20% of the Company's outstanding
common shares. If, after 20% or more of the outstanding shares of WICOR
common stock is acquired by a person or group and the Company is then
acquired by that person or group, rights holders would be entitled to
purchase shares of common stock of the acquiring person or group having a
market value of two times the exercise price of the rights. The rights do not
have any voting rights and may be redeemed at a price of $.01 per right. The
rights expire on August 29, 1999.
9. BENEFIT PLANS
A. Pension Plans
The Company's subsidiaries have non-contributory pension plans which
cover substantially all their employees and include benefits based on levels
of compensation and years of service. Employer contributions and funding
policies are consistent with funding requirements of Federal law and
regulations. Commencing November 1, 1992, Wisconsin Gas pension costs or
credits have been calculated in accordance with SFAS No. 87 and are
recoverable from customers. Prior to this date, pension costs were
recoverable in rates as funded.
The following table sets forth the funded status of pension plans at
December 31, 1994 and 1993. The cumulative difference between the amounts
funded and the amounts based on SFAS No. 87 through November 1, 1992 is being
amortized over an eight-year period effective November 1, 1994 and totalled
$22.3 million at December 31, 1994.<PAGE>
<PAGE> 25
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
----------------------- -----------------------
(Thousands of
Dollars) December 31, 1994 1993 1994 1993
----------------------------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Vested benefits $ (97,478) $(103,260) $ (5,825) $ (6,471)
Nonvested benefits (10,827) (11,198) (1,185) (87)
---------- ---------- ---------- ----------
(108,305) (114,458) (7,010) (6,558)
Effect of projected future
compensation levels (41,021) (49,961) (677) (537)
---------- ---------- ---------- ----------
Projected benefit obligation (149,326) (164,419) (7,687) (7,095)
Plan assets at fair value 197,278 228,091 209 176
---------- ---------- ---------- ----------
Plan assets greater(less) than
projected benefit obligation 47,952 63,672 (7,478) (6,919)
Unrecognized net (asset)
liability at September 30,
1985 being recognized over
approximately 16 years (16,777) (21,185) 1,035 1,104
Unrecognized prior
service costs 4,794 6,166 253 -
Unrecognized net (gain) loss (5,104) (19,073) 523 348
Additional minimum lia-
bility recorded - - (1,307) (1,037)
---------- ---------- ---------- ----------
Accrued pension asset
(liability) $ 30,865 $ 29,580 $ (6,974) $ (6,504)
========== ========== ========== ==========
</TABLE>
The weighted average discount rate assumptions used in determining the
actuarial present value of the projected benefit obligation were 8.25%, 7.5%
and 7.75% for 1994, 1993 and 1992, respectively. For 1994, the expected long-
term rate of return on assets and long-term rate of compensation growth were
8.6% and 5.3%, respectively. For 1993 and 1992, the expected long-term rate
of return on assets and long-term rate of compensation growth were 8.2% and
6.0%, respectively.
Net pension costs for each of the years ended December 31, include the
following (income) expense:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
------------------------------------ ---------- ---------- ----------
<S> <C> <C> <C>
Service costs $ 5,260 $ 5,658 $ 5,189
Interest costs on projected
benefit obligations 12,249 11,807 10,977
Actual loss (gain) on plan assets 1,225 (18,016) (16,085)
Net amortization and deferral (18,896) (69) (1,127)
Gain on early retirement incentive (268) - -
Amortization of regulatory liability (475) - -
Adjustment to utility funded amount - - 1,513
---------- ---------- ----------
Net pension (income) cost $ (905) $ (620) $ 467
========== ========== ==========
/TABLE
<PAGE>
<PAGE> 26
The decrease in pension cost from 1992 to 1993 was due to the adoption
by the PSCW of SFAS No. 87 for ratemaking purposes, effective November 1,
1992.
B. Postretirement Health Care and Life Insurance
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees when they reach
normal retirement age while working for the Company. Wisconsin Gas funds the
accrual annually based on the maximum tax deductible amount.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions", for its retiree
benefit plans. Under SFAS No. 106, the Company is required to accrue the
estimated cost of retiree benefit payments, other than pensions, during the
employees' active service period. Wisconsin Gas, as mandated by the PSCW,
recognized the accumulated benefit obligation and a related regulatory asset
of $54.1 million at adoption. Amortization of the regulatory asset is
recoverable in its rates over a 20-year period. Sta-Rite recognized such
amounts as a cumulative effect. Accordingly, the cumulative effects for the
Company of adopting SFAS No. 106 as of December 31, 1992, were an increase in
the accumulated postretirement benefit obligation (APBO) of $65.0 million and
a decrease in 1992 net earnings of $6.2 million ($0.40 per share).
Net postretirement health care and life insurance costs for each of the
years ended December 31, consisted of the following components:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1994 1993 1992
--------------------------------- ---------- ---------- ----------
<S> <C> <C> <C>
Service cost $ 2,688 $ 2,813 $ 2,711
Interest cost on projected
benefit obligation 6,913 6,495 6,181
Actual loss (gain) on plan assets 147 (1,414) (895)
Amortization of regulatory asset 2,778 2,651 2,778
Net amortization and deferral (2,549) - -
Loss on early retirement incentive 3,650 - -
Adjustment to utility funded amount - - (2,108)
---------- ---------- ----------
Net postretirement benefit cost $ 13,627 $ 10,545 $ 8,667
========== ========== ==========
</TABLE>
The 1994 postretirement benefit cost was increased due to the early
retirement of 131 employees under a voluntary early retirement incentive plan
for employees age 55 and over.
The following table sets forth the plans' funded status, reconciled
with amounts recognized in the Company's Statement of Financial Position at
December 31, 1994 and 1993, respectively.
Accumulated benefit obligation
(Thousands of Dollars) 1994 1993
-------------------------------- ---------- ----------
Retirees $ (54,088) $ (43,548)
Active employees (29,544) (52,327)
---------- ----------
Accumulated benefit obligation (83,632) (95,875)
Plan assets at fair value 30,666 25,753
---------- ----------
Accumulated benefit obligation
in excess of plan assets (52,966) (70,122)
Unrecognized prior service costs (16,347) -
Unrecognized actuarial gain (loss) (417) 2,612
---------- ----------
Accrued postretirement benefit $ (69,730) $ (67,510)
========== ==========<PAGE>
<PAGE> 27
The postretirement benefit cost components for 1994 were calculated
assuming health care cost trend rates ranging up to 11% for 1994 and
decreasing to 5.5% over 9 to 24 years. The health care cost trend rate has a
significant effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
APBO as of December 31, 1994 by $12.0 million and the aggregate of the
service and interest cost components of postretirement expense by $1.6
million.
The assumed discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation was 8.25% and
7.50% in 1994 and 1993, respectively. Plan assets are primarily invested in
equities and fixed income securities.
C. Retirement Savings Plans
Wisconsin Gas and Sta-Rite maintain various employee savings plans,
which provide employees a mechanism to contribute amounts up to 16% of their
compensation for the year. Company matching contributions may be made for up
to 5% of eligible compensation including 1% for the Employee Stock Ownership
Plan (ESOP). Total contributions were valued at $1.7 million in 1994, $1.8
million in 1993 and $1.6 million in 1992.
D. Employee Stock Ownership Plan
In November 1991, WICOR established an ESOP covering non-union
employees of Wisconsin Gas. The ESOP funds employee benefits of up to 1% of
compensation with Company common stock distributed through the ESOP.
The ESOP used the proceeds from a $10 million, 3-year adjustable rate
loan with a 6.56% interest rate at December 31, 1994, guaranteed by the
Company, to purchase 431,266 shares of original issue WICOR common stock. The
Company extended the adjustable rate loan, with similar terms, until November
3, 1995. Because the Company has guaranteed the loan, the unpaid balance
($6.4 million) is shown as long-term debt with a like amount of unearned
compensation being recorded as a reduction of common equity on the Company's
balance sheet.
The ESOP trustee is repaying the $10 million loan with dividends on
shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions
to the ESOP.
E. Stock Options
The Company has a total of 140 employees participating in one or more
of its common stock option plans. All options, except for 39,783 performance
options granted in 1993, which may vest in 1996, are currently exercisable at
prices not less than the fair market value on the date of grant and expire
not later than eleven years from the date of grant. Changes in stock options
outstanding for all plans were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Outstanding at January 1 794,925 763,342 712,392
Granted 135,800 180,350 178,900
Exercised/Canceled (266,092) (148,767) (127,950)
---------- ---------- ----------
Outstanding at December 31 664,633 794,925 763,342
========== ========== ==========
Exercise price per share $ 13.38- $ 10.38- $ 10.38-
$ 30.63 $ 27.31 $ 24.44
Available for future
grant at year-end 743,600 783,116 261,000
/TABLE
<PAGE>
<PAGE> 28
Under the Company's 1994 Long-Term Performance Plan, which was approved
by the shareholders in April 1994, awards up to 820,000 shares of common
stock may be granted. The shares may be granted as incentive stock options,
nonqualified stock options, stock appreciation rights or restricted stock.
Awards of restricted stock subject to performance vesting criteria have
been granted under the 1994 Plan. These awards will vest only if the Company
achieves certain financial goals over the three-year performance periods
1994-96. Recipients of restricted stock awards are not required to provide
consideration to the Company other than rendering service and have the right
to vote the shares and the right to receive dividends thereon.
A total of 23,800 restricted shares (net of cancellations) were issued
in 1994. Initially, the total market value of the shares is treated as
unearned compensation and is charged to expense over the vesting periods. For
both restricted stock and performance option shares, adjustments are made to
expense for changes in market value and achievement of financial goals.
Unearned compensation charged to expense in 1994 was $0.2 million for
performance options and $0.2 million for restricted stock.
F. Postemployment Benefit Plans
Effective January 1, 1994 the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which requires accrual
for all other postemployment benefits. Total postemployment benefit expense
in 1994 was $0.6 million including a one-time cumulative adjustment. The
incremental costs of adopting this statement are insignificant on an ongoing
basis.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt is estimated based on
the quoted market prices of U.S. Treasury issues having a similar term to
maturity, adjusted for the Company's bond rating and the present value of
future cash flows.
Because Wisconsin Gas operates in a regulated environment, shareholders
would probably not be affected by realization of gains or losses on
extinguishment of its outstanding fixed-rate debt. Realized gains would be
refunded to and losses would be recovered from customers through gas rates.
The estimated fair value of WICOR's long-term debt at December 31, is
as follows:
(Thousands of Dollars) 1994 1993
---------------------------- ---------- ----------
Carrying amount $161,669 $165,230
Fair value $159,318 $175,213
11. OTHER FINANCIAL INFORMATION
See page 28 for unaudited quarterly financial data. See Financial
Review on page 19 for industry segment data.<PAGE>
<PAGE> 29
selected financial data -- 1994 to 1991
<TABLE>
<CAPTION>
(Thousands of Dollars,
Except Per Share Amounts) 1994 1993 1992 1991
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Consolidated
Operating Data:
Operating revenues (7) $ 867,755 $ 849,528 $ 747,409 $ 716,767
Net income from continuing
operations $ 33,174 $ 29,313 $ 22,764 $ 22,966
Net income $ 33,174 $ 29,313 $ 14,799 $ 22,966
Common Stock Data:
Net income per share from
continuing operations $ 1.99 $ 1.82 $ 1.47 $ 1.54
Net income per common share (1) $ 1.99 $ 1.82 $ 0.96 $ 1.54
Cash dividends per common share(1) $ 1.58 $ 1.54 $ 1.50 $ 1.46
Book value per common share (1)(4) $ 17.23 $ 16.47 $ 15.60 $ 15.84
Balance Sheet Data:
Long-term debt $ 161,669 $ 165,230 $ 164,171 $ 168,366
Redeemable preferred stock - - - -
Common equity 291,468 270,276 245,287 243,453
--------- --------- --------- ---------
Capitalization at year-end $ 453,137 $ 435,506 $ 409,458 $ 411,819
========= ========= ========= =========
Total assets at year-end (2) $ 930,708 $ 933,726 $ 825,774 $ 670,250
========= ========= ========= =========
Other General Data:
Market-to-book ratio at
year-end (%)(4) 165 191 175 153
Dividend payout ratio (%)(2)(3)(5) 79.6 82.2 96.1 89.0
Yield at year-end (%) 5.6 5.0 5.6 6.1
Return on average common
equity (%)(2)(3)(6) 11.6 11.2 9.2 9.5
Price/earnings ratio at
year-end (2)(3)(4) 14.3 17.3 18.5 15.7
Price range $ 25 1/2- $ 25 5/8- $ 22 7/8- $ 18 5/8-
$ 32 5/8 $ 32 7/8 $ 27 3/8 $ 24 3/8
Shareholders at year-end 16,517 17,091 17,780 18,503
Cash flow from operations $ 103,551 $ 3,401 $ 37,012 $ 50,413
Capital expenditures $ 55,051 $ 51,906 $ 71,873 $ 45,113
Employees at year-end 3,214 3,222 3,178 3,196
Debt/equity ratio at year-end 36/64 38/62 40/60 41/59
Gas Distribution Operations
Operating revenues $ 556,587 $ 574,835 $ 495,415 $ 474,702
Net income $ 18,896 $ 19,870 $ 18,060 $ 17,086
Capital expenditures $ 44,626 $ 42,253 $ 62,125 $ 34,473
Gas sold and transported (thousands
of dekatherms-MDth)
Residential 46,369 47,964 45,905 45,614
Commercial 18,598 19,060 17,840 17,861
Industrial firm 14,544 15,246 14,488 15,690
Industrial interruptible 28,217 20,849 17,388 17,440
Transported 11,908 17,408 21,379 19,658
--------- --------- --------- ---------
119,636 120,527 117,000 116,263
========= ========= ========= =========
/TABLE
<PAGE>
<PAGE> 30
<TABLE>
<CAPTION>
selected financial data -- 1994 to 1991 (continued)
1994 1993 1992 1991
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Customers at year-end 495,129 485,103 470,956 460,549
Customers served per employee 419 352 331 323
Average cost of gas per
Dth purchased $ 3.34 $ 3.76 $ 3.34 $ 3.18
Average annual residential bill $ 719 $ 779 $ 712 $ 677
Average use per residential
customer (Dth) 110 116 115 117
Degree days 6,431 6,775 6,683 6,416
% colder (warmer) than normal (9.0) (4.1) (6.4) (10.8)
Manufacturing Operations (2)(4)
Operating revenues $ 311,168 $ 274,693 $ 251,994 $ 242,065
International and export sales
as a % of total sales 37 34 34 31
Net income (3) $ 14,278 $ 9,443 $ 4,704 $ 5,880
Capital expenditures $ 10,425 $ 9,653 $ 9,748 $ 10,640
/TABLE
<PAGE>
<PAGE> 31
selected financial data 1990 to 1987
<TABLE>
<CAPTION>
(Thousands of Dollars,
Except Per Share Amounts) 1990 1989 1988 1987
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Consolidated
Operating Data:
Operating revenues (7) $ 696,023 $ 741,218 $ 780,633 $ 699,418
Net income from continuing
operations $ 16,651 $ 33,359 $ 30,400 $ 17,215
Net income $ 16,651 $ 33,881 $ 34,163 $ 19,682
Common Stock Data:
Net income per share from
continuing operations $ 1.14 $ 2.30 $ 2.12 $ 1.22
Net income per common share (1) $ 1.14 $ 2.33 $ 2.38 $ 1.39
Cash dividends per common share(1) $ 1.42 $ 1.37 $ 1.32 $ 1.30
Book value per common share(1)(4)$ 16.12 $ 16.83 $ 15.82 $ 14.68
Balance Sheet Data:
Long-term debt $ 130,215 $ 122,639 $ 133,034 $ 127,833
Redeemable preferred stock - - - 8,000
Common equity 237,407 244,351 227,080 207,658
--------- --------- --------- ---------
Capitalization at year-end $ 367,622 $ 366,990 $ 360,114 $ 343,491
========= ========= ========= =========
Total assets at year-end (2) $ 651,559 $ 620,548 $ 565,967 $ 536,998
========= ========= ========= =========
Other General Data:
Market-to-book ratio at
year-end (%)(4) 122 148 123 117
Dividend payout ratio (%)(2)(3)(5) 117.2 55.0 52.0 91.1
Yield at year-end (%) 7.3 5.6 6.9 7.6
Return on average common
equity (%)(2)(3)(6) 6.8 14.3 15.3 9.3
Price/earnings ratio at
year-end (2)(3)(4) 17.2 10.7 8.2 12.4
Price range $ 181/4- $ 19 3/8- $ 15 5/8- $ 13 3/8-
$ 251/4 $ 25 3/8 $ 20 7/8 $ 21 7/8
Shareholders at year-end 19,463 20,509 21,611 23,010
Cash flow from operations $ 10,022 $ 94,623 $ 73,526 $ 41,237
Capital expenditures $ 37,529 $ 40,944 $ 48,295 $ 34,264
Employees at year-end 3,152 3,696 3,927 4,040
Debt/equity ratio at year-end 35/65 33/67 37/63 37/63
Gas Distribution Operations
Operating revenues $ 455,559 $ 441,477 $ 476,904 $ 424,069
Net income $ 13,195 $ 25,169 $ 23,223 $ 12,580
Capital expenditures $ 27,978 $ 25,813 $ 37,148 $ 24,344
Gas sold and transported
(thousands of dekatherms-MDth)
Residential 43,020 48,154 46,769 39,369
Commercial 16,319 18,089 17,012 14,510
Industrial firm 15,106 16,915 16,808 16,106
Industrial interruptible 16,620 5,475 3,752 4,714
Transported 16,565 29,158 29,639 26,129
--------- --------- --------- ---------
107,630 117,791 113,980 100,828
========= ========= ========= =========
/TABLE
<PAGE>
<PAGE> 32
<TABLE>
<CAPTION>
selected financial data -- 1990 to 1987 (continued)
1990 1989 1988 1987
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Customers at year-end 452,906 445,771 439,063 432,509
Customers served per employee 321 319 311 288
Average cost of gas per
Dth purchased $ 3.30 $ 3.15 $ 3.68 $ 3.74
Average annual residential bill $ 670 $ 758 $ 770 $ 660
Average use per residential
customer (Dth) 113 129 127 108
Degree days 6,103 7,382 7,124 6,185
% colder (warmer) than normal (16.0) 1.5 (2.0) (14.8)
Manufacturing Operations (2)(4)
Operating revenues $ 240,464 $ 300,156 $ 303,729 $ 275,349
International and export sales
as a % of total sales 27 24 22 20
Net income (3) $ 3,456 $ 8,712 $ 10,940 $ 7,102
Capital expenditures $ 9,551 $ 15,131 $ 11,147 $ 9,920
/TABLE
<PAGE>
<PAGE> 33
selected financial data -- 1986 to 1984
<TABLE>
<CAPTION>
(Thousands of Dollars,
Except Per Share Amounts) 1986 1985 1984
--------- --------- ---------
<S> <C> <C> <C>
Consolidated
Operating Data:
Operating revenues (7) $ 761,104 $ 853,175 $ 839,965
Net income from continuing operations $ 17,363 N/A N/A
Net income $ 19,780 $ 24,900 $ 24,145
Common Stock Data:
Net income per share from
continuing operations $ 1.34 N/A N/A
Net income per common share (1) $ 1.53 $ 1.98 $ 1.95
Cash dividends per common share (1) $ 1.28 $ 1.18 $ 1.11
Book value per common share (1)(4) $ 15.74 $ 13.81 $ 12.97
Balance Sheet Data:
Long-term debt $ 144,495 $ 154,159 $ 131,750
Redeemable preferred stock 14,267 18,200 19,000
Common equity 203,477 173,941 160,690
--------- --------- ---------
Capitalization at year-end $ 362,239 $ 346,300 $ 311,440
========= ========= =========
Total assets at year-end (2) $ 542,036 $ 531,192 $ 499,734
Other General Data:
Market-to-book ratio at year-end (%)(4) 134 112 104
Dividend payout ratio (%)(2)(3)(5) 79.9 57.0 54.0
Yield at year-end (%) 6.1 7.6 8.3
Return on average common equity (%)(2)(3)(6) 10.5 14.6 15.1
Price/earnings ratio at year-end (2)(3)(4) 13.8 7.8 6.9
Price range $ 14 3/4- $ 13- $ 10 1/8-
$ 23 $ 15 3/4 $ 13 7/8
Shareholders at year-end 23,987 26,083 28,581
Cash flow from operations $ 63,583 $ 46,342 $ 45,801
Capital expenditures $ 36,498 $ 32,381 $ 32,273
Employees at year-end 3,932 3,641 3,513
Debt/equity ratio at year-end 40/60 45/55 42/58
Gas Distribution Operations
Operating revenues $ 531,970 $ 637,167 $ 640,508
Net income $ 14,338 $ 17,460 $ 17,348
Capital expenditures $ 28,353 $ 23,208 $ 22,161
Gas sold and transported (thousands
of dekatherms-MDth)
Residential 42,837 44,813 43,961
Commercial 15,292 16,394 15,007
Industrial firm 19,379 22,541 22,969
Industrial interruptible 22,403 31,675 34,056
Transported 5,502 1,716 -
--------- --------- ---------
105,413 117,139 115,993
========= ========= =========
Customers at year-end 426,481 420,967 415,297
Customers served per employee 277 279 268
Average cost of gas per Dth purchased $ 3.75 $ 4.13 $ 4.16
Average annual residential bill $ 761 $ 838 $ 849
Average use per residential customer (Dth) 120 128 127
Degree days 6,788 7,325 6,844
% colder (warmer) than normal (7.3) (0.5) (7.0)
Manufacturing Operations (2)(4)
Operating revenues $ 229,134 $ 216,008 $ 199,457
International and export sales
as a % of total sales 16 12 14
Net income (3) $ 5,442 $ 7,440 $ 6,797
Capital expenditures $ 8,145 $ 9,173 $ 10,112
/TABLE
<PAGE>
<PAGE> 34
(1) Adjusted for a two-for-one stock split in March 1989.
(2) Includes continuing operations and discontinued operations up to the year
disposition was authorized.
(3) Before effects of 1992 accounting changes (See Note 2). Adjusted for
merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989.
(7) Includes revenues (in thousands) from discontinued operations from 1986
to 1989 of $58,209, $58,318, $63,552 and $56,318, respectively. Data
from 1985 and 1984 is not available.
N/A - Data not available.<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Wisconsin Gas Company Form 10-K for the year ended December 31, 1994 and is
qualified in its entirety by reference to such financial statements and the
related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 362,955
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 164,925
<TOTAL-DEFERRED-CHARGES> 179,971
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 707,851
<COMMON> 9
<CAPITAL-SURPLUS-PAID-IN> 118,753
<RETAINED-EARNINGS> 64,233
<TOTAL-COMMON-STOCKHOLDERS-EQ> 182,995
0
0
<LONG-TERM-DEBT-NET> 143,831
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 135,000
<COMMERCIAL-PAPER-OBLIGATIONS> 85,000
<LONG-TERM-DEBT-CURRENT-PORT> 4,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 292,025
<TOT-CAPITALIZATION-AND-LIAB> 707,851
<GROSS-OPERATING-REVENUE> 556,587
<INCOME-TAX-EXPENSE> 10,993
<OTHER-OPERATING-EXPENSES> 512,223
<TOTAL-OPERATING-EXPENSES> 523,216
<OPERATING-INCOME-LOSS> 33,371
<OTHER-INCOME-NET> (127)
<INCOME-BEFORE-INTEREST-EXPEN> 33,244
<TOTAL-INTEREST-EXPENSE> 14,348
<NET-INCOME> 18,896
0
<EARNINGS-AVAILABLE-FOR-COMM> 18,896
<COMMON-STOCK-DIVIDENDS> 16,000
<TOTAL-INTEREST-ON-BONDS> 1,069
<CASH-FLOW-OPERATIONS> 87,429
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
