<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 June 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 53202
--------------------------------------
(Address of principal executive office)
(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 July 19, 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............... 2-4
Financial Statements of Wisconsin Gas Company (Unaudited):
----------------------------------------------------------
Statements of Operations for the Three and Six
Months Ended June 30, 1996 and 1995........ 5
Balance Sheets as of June 30, 1996 and
December 31, 1995.......................... 6-7
Statements of Cash Flows for the Six
Months Ended June 30, 1996 and 1995........ 8
Notes to Financial Statements................ 9
PART II. Other Information............................ 10
Signatures............................................. 11<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 latest 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 broke even during the second quarter of 1996 compared
to a net loss of $0.5 million during the second quarter of 1995.
Net income for the six months ended June 30, 1996 increased by $5.5
million, or 26%, compared to the same period of last year. The
following factors had a significant effect on the results of
operations during the three- and six-month periods ended June 30,
1996.
The improvement in net income for the second quarter was due
primarily to increased gas margin which resulted from weather that
was colder than normal. The increase in transportation volumes was
due primarily to more customers purchasing gas from sources other
than Wisconsin Gas and transporting the volumes over the Wisconsin
Gas distribution system. However, the movement to transportation
from gas sales has no impact on margin. The increase in quarterly
gas margins were partially offset by increased depreciation
expense. The utility typically posts a loss in the second quarter
as the heating season declines. The increase in 1996 year-to-date
net income was due primarily to colder than normal weather and
decreased operating and maintenance expenses.
Revenues, margins and volumes are summarized below. Margin,
defined as revenues less cost of gas sold, is a better 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 Months Six Months
Ended June 30, Ended June 30,
-------------- % -------------- %
(Millions of Dollars) 1996 1995 Change 1996 1995 Change
- --------------------- ------ ------ ------ ------ ------ ------
<S> <C> <C> <C> <C> <C> <C>
Gas Sales Revenues $104.1 $ 92.5 13 $316.7 $282.9 12
Cost of Gas Sold 69.5 58.1 20 200.3 173.3 16
------ ------ ------ ------
Gas Sales Margin 34.6 34.4 1 116.4 109.6 6
Gas Transport Margin 3.1 1.5 107 6.5 3.6 81
------ ------ ------ ------
Total Margin $ 37.7 $ 35.9 5 $122.9 $113.2 9
====== ====== ====== ======
Three Months Six Months
Ended June 30, Ended June 30,
--------------- % --------------- %
(Millions of Therms) 1996 1995 Change 1996 1995 Change
- -------------------- ------ ------ ------ ------ ------ ------
Sales Volumes
Firm 140.8 127.4 11 548.3 486.0 13
Interruptible 43.8 79.5 (45) 121.0 173.0 (30)
Transportation Volume 58.3 25.7 127 122.7 64.0 92
------ ------ ------ ------
Total Throughput 242.9 232.6 4 792.0 723.0 10
====== ====== ====== ======
Degree Days (Normal:
2nd Qtr. = 941
Six Months = 4,363) 1,203 918 31 4,833 4,086 18
====== ====== ====== ======
</TABLE>
The 11% increase in firm sales volumes for the second quarter of
1996 as compared with the 1995 second quarter was caused
principally by 31% colder weather than the same period of last year
(28% colder than normal). For the six months ended June 30, 1996,
the total margin increase was primarily due to a 13% increase in
firm sales volumes. The weather was 11% colder than normal during
the first six months of 1996 and 18% colder than the same period
in 1995.
Operations and maintenance expenses remained relatively flat during
the second quarter of 1996 compared to the second quarter of 1995.
Year-to-date operation and maintenance expenses decreased $1.3
million compared to the same period of last year. The decrease is
attributable to lower labor and benefit expenses.<PAGE>
<PAGE> 6
Depreciation expense for the three and six months ended June 30,
1996 increased by $1.3 million and $2.5 million, respectively. The
increase is due to additions to plant and increased depreciation
rates permitted by the Public Service Commission of Wisconsin
("PSCW").
Year-to-date income tax expense increased by $4.1 million, or 32%,
reflecting the increase in pre-tax income.
Financial Condition
- -------------------
Cash flow from operations for the six months ended June 30, 1996
decreased by $17.0 million, or 14%, to $104.8 million compared to
same period of 1995. Due to the seasonal nature of the energy
business, accrued revenues, accounts receivable and accounts
payable are higher in the heating season as compared with the
warmer months. The decrease of $20.2 million in cash flow related
to gas in storage was due primarily to a 31% decrease in
withdrawals during the first six months of 1996 compared to the
same period in 1995. Gas in storage at December 31, 1995 was 5.7
million dekatherms lower than the amount in storage at December 31,
1994 due to a marginally colder than normal fourth quarter of 1995
and the unusually warm fourth quarter of 1994. Year-to-date
withdrawals from gas in storage reflected a weighted average cost
of gas ("WACOG") that was 18% lower than the same period in 1995.
In addition, the injection WACOG during the second quarter of 1996
was 41% higher than the same period in 1995. Cash flow from
operations in the first six months of 1996 did not benefit from the
one-time pipeline refunds which were made in comparable period of
1995. Such refunds were ultimately returned to customers during
the latter half of 1995. Increased net income in the first six
months of 1996 partially offset decreases in cash flow from
operations during this period.
There will be a need for additional short-term borrowing during the
third and fourth quarters of 1996 to finance working capital needs
primarily related to gas purchased for injection into storage and
accounts receivable. The Company has existing lines of credit to
satisfy this working capital need.
Cash flow from operations exceeded capital expenditures and
dividend requirements for the first six months in both 1996 and
1995.<PAGE>
<PAGE> 7
Capital expenditures through June 1996 decreased by $6.0 million,
or 31%, to $13.3 million. The decrease was due primarily to
unfavorable construction conditions. Additional capital
expenditures of approximately $30 million are expected for the
remainder of 1996. Cash flow from operations is expected to be
sufficient to fund the remaining capital expenditures for 1996.
Most of the expenditures will be for expansion and renewal of the
gas distribution system.
Regulatory Matters
- ------------------
The Company 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
has the ability to raise or lower margin rates within a specified
range on a quarterly basis.
On June 27, 1996, the PSCW approved a Company proposal to conduct
a two year pilot program ("Gas Advantage"), beginning November 1,
1996, to test the introduction of competition to 1,200 small
commercial and 1,000 residential customers. Customers who enroll
in the pilot will have the ability to choose the supplier of
natural gas from various gas marketers under an open market
concept. Wisconsin Gas will continue to distribute the gas to
participating customers at the same margin rate it charges for
bundled sales services. The Company will bill the gas marketers
for transporting natural gas to the customers. Customers will
receive their monthly bills from the marketers. The Gas Advantage
program is designed to enhance competition by enabling customers
to compare services and prices available from Wisconsin Gas and
third party marketers.
On July 2, 1996, the PSCW indicated in open meeting discussions
that they wanted to move away from the dollar-for-dollar recovery
of gas costs that occurs under the current purchased gas adjustment
clause mechanism. The Commissioners agreed not to place
restrictions on which gas cost recovery mechanisms ("GCRM") local
distribution companies ("LDC") could use and agreed not to require
LDC's to use the same mechanism. Under the GCRM, the utility will
assume the risk of under-recovering its gas and interstate capacity
costs but will have the opportunity to earn incentives if it keeps
its costs below the established benchmark levels. The Company
expects that the earliest that it could file and obtain approval
for a GCRM would be the second quarter of 1997.<PAGE>
<PAGE> 8
WISCONSIN GAS COMPANY
Statements of Operations (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended Six Months Ended
June 30, June 30,
---------------------- ----------------------
1996 1995 1996 1995
---------- ---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues........... $ 107,269 $ 93,985 $ 323,380 $ 286,469
---------- ---------- ---------- ----------
Operating Expenses:
Cost of gas sold........... 69,513 58,120 200,276 173,273
Operations................. 22,028 22,428 47,904 50,184
Maintenance................ 2,217 1,684 4,118 3,179
Depreciation............... 8,415 7,146 16,727 14,212
Taxes, other than
income taxes............ 2,362 2,260 4,868 4,702
---------- ---------- ---------- ----------
104,535 91,638 273,893 245,550
---------- ---------- ---------- ----------
Operating Income (Loss)...... 2,734 2,347 49,487 40,919
---------- ---------- ---------- ----------
Interest Expense............. 3,041 3,202 6,271 7,015
Other Income/(Deductions).... 432 243 337 59
---------- ---------- ---------- ----------
Income (Loss) Before
Income Taxes............... 125 (612) 43,553 33,963
Income Tax
Provision/(Benefit)....... 124 (115) 17,050 12,928
---------- ---------- ---------- ----------
Net Income (Loss)............ $ 1 $ (497) $ 26,503 $ 21,035
========== ========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 9
WISCONSIN GAS COMPANY
Balance Sheets
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Assets
- ------
Property, Plant and Equipment, at cost........... $ 767,487 $ 757,825
Less - Accumulated depreciation................ 396,693 382,424
----------- ------------
370,794 375,401
----------- ------------
Current Assets:
Cash and cash equivalents...................... 27,541 7,463
Accounts receivable, less allowance for
doubtful accounts of $11,341 and
$7,955, respectively......................... 68,581 65,477
Accrued utility revenues....................... 7,019 46,935
Materials and supplies,
at weighted average cost..................... 3,591 3,364
Gas in storage, at weighted average cost....... 20,580 23,928
Deferred income taxes.......................... 16,781 16,781
Prepaid taxes.................................. 5,290 6,420
Other.......................................... 1,611 1,201
----------- ------------
150,994 171,569
----------- ------------
Deferred Charges and Other:
Regulatory assets.............................. 103,209 104,145
Systems development costs...................... 25,929 28,868
Prepaid pension costs.......................... 28,563 27,012
Other.......................................... 7,169 6,458
----------- ------------
164,870 166,483
----------- ------------
$ 686,658 $ 713,453
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 10
WISCONSIN GAS COMPANY
Balance Sheets
<TABLE>
<CAPTION>
June 30,
1996 December 31,
(Unaudited) 1995
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Capitalization:
Common stock.............................. $ 9 $ 9
Other paid-in capital..................... 118,842 118,842
Retained earnings......................... 92,817 76,310
Long-term debt............................ 152,360 154,246
----------- ------------
364,028 349,407
----------- ------------
Current Liabilities:
Accounts payable.......................... 33,461 41,079
Accounts payable - intercompany, net...... 6,167 5,910
Refundable gas costs...................... 58,165 34,347
Short-term borrowings..................... - 57,500
Current portion of long-term debt......... 2,000 4,000
Accrued payroll and benefits.............. 11,242 8,711
Accrued taxes............................. 2,744 1,062
Other..................................... 4,041 4,689
----------- ------------
117,820 157,298
----------- ------------
Deferred Credits and Other:
Regulatory liabilities.................... 63,627 64,896
Deferred income taxes..................... 36,796 36,654
Postretirement benefit obligation......... 51,956 52,968
Environmental remediation costs........... 36,268 36,381
Unamortized investment tax credit......... 7,377 7,724
Other..................................... 8,786 8,125
----------- ------------
204,810 206,748
----------- ------------
$ 686,658 $ 713,453
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 11
WISCONSIN GAS COMPANY
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Six Months Ended
June 30,
-----------------------
1996 1995
---------- ----------
(Thousands of Dollars)
<S> <C> <C>
Operations:
Net income................................... $ 26,503 $ 21,035
Adjustments to reconcile net income to
net cash flows:
Depreciation and amortization.............. 20,902 17,986
Deferred income taxes...................... 142 376
Change in:
Receivables.............................. 36,812 26,811
Gas in storage........................... 3,348 23,582
Other current assets..................... (637) (2,044)
Accounts payable......................... (7,618) (10,280)
Accrued taxes............................ 2,524 3,139
Refundable gas costs..................... 23,818 32,506
Accrued payroll and benefits............. 2,531 3,524
Other current liabilities................ (103) 270
Other non-current assets and liabilities. (3,418) 4,930
---------- ----------
104,804 121,835
---------- ----------
Investment Activities:
Capital expenditures......................... (13,309) (19,356)
Other, net................................... 83 210
---------- ----------
(13,226) (19,146)
---------- ----------
Financing Activities:
Change in short-term borrowings.............. (57,500) (85,000)
Reduction of long-term debt.................. (4,000) (4,000)
Cash dividends paid to WICOR, Inc............ (10,000) (8,000)
---------- ----------
(71,500) (97,000)
---------- ----------
Change in Cash and Cash Equivalents............ 20,078 5,689
Cash and Cash Equivalents at Beginning
of Period.................................... 7,463 17,279
---------- ----------
Cash and Cash Equivalents at End of Period..... $ 27,541 $ 22,968
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 12
Notes to Financial Statements (Unaudited):
- ------------------------------------------
1) At June 30, 1996, Wisconsin Gas had total unsecured lines of
credit available from several banks of $120 million. As of
June 30, 1996, no short-term borrowings were outstanding
under these credit agreements.
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 six months
ended June 30,
------------------------
1996 1995
---------- ----------
(Thousands of Dollars)
Income taxes paid $ 16,267 $ 13,004
Interest paid $ 5,990 $ 7,100
<PAGE>
<PAGE> 13
Part II - Other Information
Item 4. Results of Votes of Security Holders
- --------------------------------------------
On April 25, 1996, the following persons were elected as
directors of Wisconsin Gas to serve one-year terms: George E.
Wardeberg, Stuart W. Tisdale, Wendell F. Bueche, Willie D.
Davis, Jere D. McGaffey, Daniel F. McKeithan, Jr., Guy A.
Osborn, Thomas F. Schrader, Essie M. Whitelaw and William B.
Winter. All of the issued and outstanding shares of common
stock, $8 par value, of Wisconsin Gas (1,125 shares) were
voted in favor of the election of the foregoing persons.
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 second 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: July 30, 1996 By: /s/ Joseph P. Wenzler
---------------------------
Joseph P. Wenzler
Vice President and Chief
Financial Officer<PAGE>
<PAGE> 15
WICOR, Inc.
Exhibit Index - Form 10-Q
Exhibit No. Exhibit
- ----------- ---------------------------------------------------
27 Financial data schedule<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Wisconsin Gas Company FORM 10-Q for the three and six months ended June 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> 6-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 370,794
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 150,994
<TOTAL-DEFERRED-CHARGES> 164,870
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 686,658
<COMMON> 9
<CAPITAL-SURPLUS-PAID-IN> 118,842
<RETAINED-EARNINGS> 92,817
<TOTAL-COMMON-STOCKHOLDERS-EQ> 211,668
0
0
<LONG-TERM-DEBT-NET> 152,360
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 150,000
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 2,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 320,630
<TOT-CAPITALIZATION-AND-LIAB> 686,658
<GROSS-OPERATING-REVENUE> 323,380
<INCOME-TAX-EXPENSE> 17,050
<OTHER-OPERATING-EXPENSES> 273,893
<TOTAL-OPERATING-EXPENSES> 290,943
<OPERATING-INCOME-LOSS> 32,437
<OTHER-INCOME-NET> 337
<INCOME-BEFORE-INTEREST-EXPEN> 32,774
<TOTAL-INTEREST-EXPENSE> 6,271
<NET-INCOME> 26,503
0
<EARNINGS-AVAILABLE-FOR-COMM> 26,503
<COMMON-STOCK-DIVIDENDS> 10,000
<TOTAL-INTEREST-ON-BONDS> 464
<CASH-FLOW-OPERATIONS> 104,804
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
