<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1996
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7530
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
Milwaukee, Wisconsin 53201
--------------------------------------------------------
(Address of principal executive office include zip code)
(414) 385-7000
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15 (d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest practicable
date.
Class Outstanding at October 18, 1996
--------------------------- -------------------------------
Common Stock, $8 Par Value 1,125<PAGE>
<PAGE> 2
INTRODUCTION
Wisconsin Gas Company ("Wisconsin Gas" or "Company"), a natural
gas distribution public utility, is a Wisconsin corporation and
a wholly owned subsidiary of WICOR, Inc. ("WICOR"), a
diversified holding company.
CONTENTS
PAGE
------
PART I. Financial Information....................... 1
Management's Discussion and Analysis of
Interim Financial Statements.............. 2-3
Financial Statements of Wisconsin Gas Company (Unaudited):
----------------------------------------------------------
Statements of Operation for the Three and Nine
Months Ended September 30, 1996 and 1995.. 4
Balance Sheets as of September 30, 1996 and
December 31, 1995......................... 5-6
Statements of Cash Flows for the Nine
Months Ended September 30, 1996 and 1995.. 7
Notes to Financial Statements............... 8
PART II. Other Information........................... 9
Signatures............................................ 10<PAGE>
<PAGE> 3
Part I - Financial Information
Financial Statements
--------------------
The financial statements included herein have been prepared
without audit pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the
disclosures are adequate to make the information presented not
misleading. These condensed financial statements should be read
in conjunction with the audited financial statements and the
notes thereto included in the Wisconsin Gas Annual Report on
Form 10-K for the year ended December 31, 1995.
In the opinion of management, the information furnished reflects
all adjustments, which in all circumstances were normal and
recurring, necessary for a fair presentation of the results of
operations for the interim periods.
Because of seasonal factors, the results of operations for the
interim periods presented are not necessarily indicative of the
results to be expected for the full calendar year.<PAGE>
<PAGE> 4
Management's Discussion and Analysis
of Interim Financial Statements of
Wisconsin Gas Company
Results of Operations
---------------------
The Company typically incurs a loss in the third quarter due to
the seasonal nature of the gas distribution utility business.
The net loss for the third quarter of 1996 was $7.0 million, or
6% less than the net loss for the 1995 third quarter. Net
income for the nine months ended September 30, 1996, increased
by $5.9 million, or 43%, compared to the same period of last
year. The following factors had a significant effect on the
results of operations during the three- and nine-month periods
ended September 30, 1996.
The decline in the net loss for the third quarter resulted
primarily from decreased operating and maintenance expenses and
lower interest expense, which were partially offset by increased
depreciation expense and lower gas margins. The lower gas
margins resulted from slightly lower firm sales volumes and a $3
million annual rate reduction effective November 1, 1995. The
increase in 1996 year-to-date net income, due primarily to
decreased operating and maintenance expenses, lower interest
expense and colder than normal weather, was partially offset by
increased depreciation expense and rate reductions.
Revenues, margins and volumes are summarized below. Margin,
defined as revenues less cost of gas sold, is a better
comparative performance indicator than revenues because the mix
of volumes between sales and transportation service affects
revenues but not margin. In addition, changes in the cost of
gas sold are flowed through to revenue under a gas adjustment
clause with no resulting effect on margin.<PAGE>
<PAGE> 5
<TABLE>
<CAPTION>
Three Nine
Months Ended Months Ended
September 30, September 30,
----------------- % ----------------- %
(Millions of Dollars) 1996 1995 Change 1996 1995 Change
--------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Gas Sales Revenues $ 69.4 $ 69.6 - $386.1 $352.5 10
Cost of Gas Sold 49.2 47.5 4 249.5 220.8 13
------ ------ ------ ------
Gas Sales Margin 20.2 22.1 (9) 136.6 131.7 4
Gas Transport Margin 2.8 1.3 115 9.3 4.9 90
------ ------ ------ ------
Total Margin $ 23.0 $ 23.4 (2) $145.9 $136.6 7
====== ====== ====== ======
(Millions of Therms)
--------------------
Sales Volumes
Firm 56.9 60.4 (6) 605.2 546.3 11
Interruptible 31.8 69.5 (54) 152.8 242.5 (37)
Transportation Volume 60.4 24.2 145 183.1 88.2 108
------ ------ ------ ------
Total Throughput 149.1 154.1 (3) 941.1 877.0 7
====== ====== ====== ======
Degree Days (Normal:
3rd Qtr. = 156
Nine Months = 4,519) 123 165 (25) 5,011 4,251 18
====== ====== ====== ======
</TABLE>
The decrease in firm sales volumes for the third quarter of 1996
as compared with the 1995 third quarter was caused principally by
warmer weather. The increase in transportation volumes was due
mainly to more companies purchasing gas from sources other than
Wisconsin Gas and transporting the volumes over the Wisconsin Gas
distribution system. The movement to transportation from gas
sales had no impact on margin. For the nine months ended
September 30, 1996, the total margin increase was largely the
result of an 11% increase in firm sales volumes. The weather was
11% colder than normal during the first nine months of 1996 and
18% colder than the same period in 1995.
Operating and maintenance expenses decreased by $1.1 million,
or 5%, and $2.4 million, or 3%, for the respective three- and
nine-month periods ended September 30, 1996, compared with the
same periods of 1995. The decrease for the quarter and year-
to-date periods was due mainly to lower labor and benefit
expenses.<PAGE>
<PAGE> 6
Depreciation expense for the three and nine months ended
September 30, 1996 increased by $0.6 million, or 9%, and $3.1
million, or 15%, respectively, compared with the same periods
of last year. The increase is due to additions to plant and
increased depreciation rates permitted by the Public Service
Commission of Wisconsin (PSCW).
Interest expense decreased by $0.3 million, or 9%, and $1.1
million, or 10%, for the three- and nine-months ended September
30, 1996, compared with the similar periods of 1995, due
primarily to the Company's refinancing of long-term debt in the
fourth quarter of 1995.
Income tax expense was $4.1 million higher for the first nine
months of 1996, compared with the same period last year,
reflecting increased pre-tax income.
Liquidity and Capital Resources
-------------------------------
Cash flow from operations for the nine months ended September
30, 1996, decreased by $25.3 million, or 28%, from the
comparable period in 1995. Due to the seasonal nature of the
energy business, accrued revenues, accounts receivable and
accounts payable levels are higher in the heating season as
compared with the summer months. The Company stores gas during
the non-heating months and withdraws the gas during the heating
months. Cash flow related to gas in storage decreased by $31.2
million, for the nine months ended September 30, 1996, due to a
higher 1996 weighted average cost of gas relative to 1995. In
addition, withdrawals from storage during the first nine months
of 1996 were 31% lower than in the same period in 1995.
Increases in net income of $5.9 million and collections of
accounts receivable of $16.6 million partially offset decreases
in cash flow from operations during the first nine months of
1996.
Capital expenditures for the nine months ended September 30,
1996 decreased by 22% to $24.7 million.
The Company anticipates additional short-term borrowing during
the fourth quarter of 1996 to finance working capital needs
primarily related to gas storage and the financing of accounts
receivable during the heating season.<PAGE>
<PAGE> 7
State Regulatory Matters
------------------------
On October 10, 1996, the PSCW approved a one-year extension, to
November 1, 1998, of the Productivity-based Alternative
Ratemaking Mechanism (PARM), an incentive-based ratemaking
mechanism. Within the PARM pilot program, Wisconsin Gas
voluntarily reduced its base rates by $1.5 million and $3.0
million on an annualized basis effective August 1, 1995, and
November 1, 1995, respectively. With these reductions,
Wisconsin Gas' rates recover $4.5 million per year less than
the maximum margin allowed by the PSCW's November 1994 rate
order. The Company announced a further $3 million rate
reduction on an annualized basis effective November 1, 1996.
Wisconsin Gas has the ability to raise or lower margin rates
within a specified range on a quarterly basis.<PAGE>
<PAGE> 8
WISCONSIN GAS COMPANY
Statements of Operation (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
----------------------- -------------------------
1996 1995 1996 1995
----------- ----------- ------------ ------------
(Thousands of Dollars) (Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues 71,951 $ 70,959 $ 395,331 $ 357,428
----------- ----------- ------------ ------------
Operating Expenses:
Cost of gas sold 49,198 47,545 249,474 220,818
Operations 18,999 20,426 66,903 70,610
Maintenance 2,439 2,068 6,557 5,247
Depreciation 7,887 7,254 24,614 21,466
Taxes, other than
income taxes 2,176 2,279 7,044 6,981
----------- ----------- ------------ ------------
80,699 79,572 354,592 325,122
----------- ----------- ------------ ------------
Operating Income(Loss) (8,748) (8,613) 40,739 32,306
----------- ----------- ------------ ------------
Interest Expense 3,086 3,406 9,357 10,421
Other Income/(Expenses) 521 250 858 309
----------- ----------- ------------ ------------
Income (Loss) Before
Income Taxes (11,313) (11,769) 32,240 22,194
Income Tax (Benefit)/
Provision (4,337) (4,364) 12,713 8,564
----------- ----------- ------------ ------------
Net (Loss) Income $ (6,976) $ (7,405) $ 19,527 $ 13,630
=========== =========== ============ ============
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<PAGE> 9
WISCONSIN GAS COMPANY
Balance Sheets
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Assets
------
Property, Plant and Equipment, at cost $ 777,410 $ 757,825
Less - Accumulated depreciation 403,618 382,424
----------- ------------
373,792 375,401
----------- ------------
Current Assets:
Cash and cash equivalents 989 7,463
Accounts receivable, less allowance
for doubtful accounts of $11,341
and $7,955, respectively 35,853 65,477
Accounts receivable - intercompany, net 3,378 (5,910)
Accrued utility revenues 7,041 46,935
Materials and supplies, at weighted average cost 3,459 3,364
Gas in storage, at weighted average cost 48,061 23,928
Deferred income taxes 16,599 16,781
Prepaid taxes 3,748 6,420
Other 1,337 1,201
----------- ------------
120,465 165,659
----------- ------------
Deferred Charges and Other:
Regulatory assets 103,403 104,145
Systems development costs 24,459 28,868
Prepaid pension costs 29,338 27,012
Other 7,446 6,458
----------- ------------
164,646 166,483
----------- ------------
$ 658,903 $ 707,543
=========== ============
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<PAGE> 10
WISCONSIN GAS COMPANY
Balance Sheets
<TABLE>
<CAPTION>
September 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
<S> <C> <C>
Capitalization and Liabilities
------------------------------
Capitalization:
Common stock $ 9 $ 9
Other paid-in capital 118,842 118,842
Retained earnings 80,840 76,310
Long-term debt 152,402 154,246
----------- ------------
352,093 349,407
----------- ------------
Current Liabilities:
Accounts payable 24,517 41,079
Refundable gas costs 27,792 34,347
Short-term borrowings 31,000 57,500
Current portion of long-term debt 2,000 4,000
Accrued payroll and benefits 12,724 8,711
Accrued taxes (5) 1,062
Other 5,327 4,689
----------- ------------
103,355 151,388
----------- ------------
Deferred Credits and Other:
Regulatory liabilities 63,315 64,896
Deferred income taxes 36,226 36,654
Postretirement benefit obligation 51,450 52,968
Environmental remediation costs 36,242 36,381
Unamortized investment tax credit 7,510 7,724
Other 8,712 8,125
----------- ------------
203,455 206,748
----------- ------------
$ 658,903 $ 707,543
=========== ============
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<PAGE> 11
WISCONSIN GAS COMPANY
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
------------------------
1996 1995
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operations:
Net income $ 19,527 $ 13,630
Adjustments to reconcile net income
to net cash flows:
Depreciation and amortization 30,837 27,286
Deferred income taxes (246) 3,434
Change in:
Receivables 69,518 52,873
Gas in storage (24,133) 7,069
Other current assets (9,519) (10,164)
Accounts payable (16,562) (11,636)
Accrued taxes 1,186 992
Refundable gas costs (6,555) (2,855)
Accrued payroll and benefits 4,013 5,954
Other current liabilities 1,057 1,309
Other non-current assets
and liabilities (5,597) 915
---------- ----------
63,526 88,807
---------- ----------
Investment Activities:
Capital expenditures (24,659) (31,440)
Other, net 159 244
---------- ----------
(24,500) (31,196)
---------- ----------
Financing Activities:
Change in short-term borrowings (26,500) (50,000)
Reduction of long-term debt (4,000) (4,000)
Cash dividends paid to WICOR, Inc. (15,000) (12,000)
---------- ----------
(45,500) (66,000)
---------- ----------
Change in Cash and Cash Equivalents (6,474) (8,389)
Cash and Cash Equivalents at
Beginning of Period 7,463 17,279
---------- ----------
Cash and Cash Equivalents at End of Period $ 989 $ 8,890
========== ==========
The accompanying notes are an integral part of these statements.
/TABLE
<PAGE>
<PAGE> 12
Notes to Financial Statements (Unaudited):
------------------------------------------
1) At September 30, 1996, Wisconsin Gas had total unsecured
lines of credit available from several banks of $135
million. As of September 30, 1996, commercial paper
totaling $31 million was outstanding under these credit
agreements with a weighted average interest rate of 5.5%.
2) For purposes of the Statements of Cash Flows, income taxes
paid, net of refunds, and interest paid (excluding
capitalized interest) were as follows:
For the Nine Months
Ended September 30,
----------------------
1996 1995
-------- --------
(Thousands of Dollars)
Income taxes paid $ 23,718 $ 17,964
Interest paid $ 7,725 $ 9,158<PAGE>
<PAGE> 13
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits -
27 Financial data schedule (EDGAR version only).
(b) Reports on Form 8-K. There were no reports on Form 8-K
filed by the Company during the third quarter of 1996.<PAGE>
<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
WISCONSIN GAS COMPANY
Dated: October 30, 1996 By: /s/ Joseph P. Wenzler
-------------------------
Joseph P. Wenzler
Vice President and Chief
Financial Officer<PAGE>
<PAGE> 15
Wisconsin Gas Company
Exhibit Index - FORM 10-Q
Exhibit No. Exhibit
----------- ----------------------------------------------
27 Financial data schedule (EDGAR version only).<PAGE>
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary information extracted from the Wisconsin Gas
Company FORM 10-Q for the nine months ended September 30, 1996 and is qualified
in its entirety by reference to such financial statements and the related
footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 373,792
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 120,465
<TOTAL-DEFERRED-CHARGES> 164,646
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 658,903
<COMMON> 9
<CAPITAL-SURPLUS-PAID-IN> 118,842
<RETAINED-EARNINGS> 80,840
<TOTAL-COMMON-STOCKHOLDERS-EQ> 199,691
0
0
<LONG-TERM-DEBT-NET> 152,402
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 150,000
<COMMERCIAL-PAPER-OBLIGATIONS> 31,000
<LONG-TERM-DEBT-CURRENT-PORT> 2,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 273,810
<TOT-CAPITALIZATION-AND-LIAB> 658,903
<GROSS-OPERATING-REVENUE> 395,331
<INCOME-TAX-EXPENSE> 12,713
<OTHER-OPERATING-EXPENSES> 354,592
<TOTAL-OPERATING-EXPENSES> 367,305
<OPERATING-INCOME-LOSS> 28,026
<OTHER-INCOME-NET> 858
<INCOME-BEFORE-INTEREST-EXPEN> 28,884
<TOTAL-INTEREST-EXPENSE> 9,357
<NET-INCOME> 19,527
0
<EARNINGS-AVAILABLE-FOR-COMM> 19,527
<COMMON-STOCK-DIVIDENDS> 15,000
<TOTAL-INTEREST-ON-BONDS> 681
<CASH-FLOW-OPERATIONS> 63,526
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
