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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 March 31, 1997
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
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(Exact name of registrant as specified in its charter)
Wisconsin 39-0476515
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(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue, Milwaukee, Wisconsin 53202
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(Address of principal executive office) (Zip Code)
(414) 385-7000
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(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 April 24, 1997
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Common Stock, $8 Par Value 1,125
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INTRODUCTION
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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
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PAGE
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PART I. Financial Information 1
Management's Discussion and Analysis of
Interim Financial Statements 2-3
Financial Statements of Wisconsin Gas Company (Unaudited):
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Statements of Operation for the Three
Months Ended March 31, 1997 and 1996 4
Balance Sheets as of March 31, 1997 and
December 31, 1996 5-6
Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 7
Notes to Financial Statements 8
PART II. Other Information 9
Signatures 10
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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 Company Annual Report on
Form 10-K for the year ended December 31, 1996.
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.
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Management's Discussion and Analysis
of Interim Financial Statements of
Wisconsin Gas Company
Results of Operations
- ---------------------
Net income decreased by $2.6 million, or 10%, for the first quarter of 1997
compared to the same quarter of last year. The following factors had a
significant effect on the results of operations during the three-month period
ended March 31, 1997.
The decline in net income for the first quarter resulted primarily from
decreased gas margins which were partially offset by lower operating and
maintenance expenses and lower depreciation expense. The lower gas margins
resulted from decreased firm sales volumes due to warmer weather and a
voluntary $3.0 million annual rate reduction effective November 1, 1996.
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.
Three
Months Ended
March 31
------------- %
(Millions of Dollars) 1997 1996 Change
- --------------------- ------ ------ ------
Gas Sales Revenues $219.5 $212.6 3
Cost of Gas Sold 148.4 130.8 13
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Gas Sales Margin 71.1 81.8 (13)
Gas Transport Margin 6.7 3.4 97
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Total Margin $ 77.8 $ 85.2 (9)
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(Millions of Therms)
- --------------------
Sales Volumes
Firm 361.5 407.5 (11)
Interruptible 34.1 77.2 (56)
Transportation Volume 122.8 64.4 91
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Total Throughput 518.4 549.1 (6)
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Degree Days (Normal:
1st Qtr. = 3,438) 3,315 3,630 (9)
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The decrease in firm sales volumes for the first quarter of 1997 as compared
with the 1996 first quarter was caused principally by warmer weather. The
weather was 9% warmer than the same period in 1996 and 4% warmer than normal
during the first three months of 1997. The increase in transportation volumes
was due mainly to more customers 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.
Operating and maintenance expenses decreased by $1.7 million, or 6%, for the
three-month period ended March 31, 1997, compared with the same period of
1996. The decrease for the quarter was due mainly to lower labor and labor
related expenses.
Depreciation expense for the three months ended March 31, 1997 decreased by
$0.7 million, or 9%, compared with the same period of last year. The 1997
decrease was due to the one-time impact of the application of new
depreciation rates permitted by the Public Service Commission of Wisconsin
in 1996.
Interest expense increased by $0.1 million, or 3%, for the three-months
ended March 31, 1997, compared with the similar periods of 1996, due
primarily to slightly higher short-term debt levels during the period.
Income tax expense was $2.3 million lower for the first three months of
1997, compared with the same period last year, reflecting decreased pre-tax
income.
Financial Condition
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Cash flow from operations for the three months ended March 31, 1997
decreased by $34.8 million, or 41%, from the comparable period in 1996. 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 cash flow decline was due primarily to
increased gas prices which have not yet been collected from the Company's
customers.
Capital expenditures for the three months ended March 31, 1997 decreased by
7% to $5.3 million.
The Company anticipates additional short-term borrowings during the third
and fourth quarters of 1997 to finance working capital, primarily gas in
storage and the financing of accounts receivable during the heating season.
The Company has the capacity under its existing credit facilities to support
the additional borrowings. In addition, the Company has initiated
discussions with its commercial banks to extend the term of its existing
seasonal and revolving credit facilities.
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WISCONSIN GAS COMPANY
Statements of Operation (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1997 1996
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<S> <C> <C>
Operating Revenues $ 226,242 $ 216,111
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Operating Expenses:
Cost of gas sold 148,371 130,763
Operations 24,063 25,876
Maintenance 1,995 1,901
Depreciation 7,584 8,312
Taxes, other than income taxes 2,558 2,506
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184,571 169,358
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Operating Income 41,671 46,753
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Interest Expense 3,334 3,230
Other Income and (Expenses), net 188 (95)
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Income Before Income Taxes 38,525 43,428
Income Tax Provision 14,609 16,926
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Net Income $ 23,916 $ 26,502
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 7
WISCONSIN GAS COMPANY
Balance Sheets
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
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(Thousands of Dollars)
<S> <C> <C>
Assets
- ------
Property, Plant and Equipment, at cost $ 774,653 $ 786,486
Less - Accumulated depreciation 399,373 409,151
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375,280 377,335
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Current Assets:
Cash and cash equivalents 4,576 8,960
Accounts receivable, less allowance
for doubtful accounts of $16,473
and $12,363, respectively 116,173 73,540
Accounts receivable - intercompany, net 1,737 76
Accrued utility revenues 27,328 54,382
Materials and supplies, at weighted average cost 3,321 3,098
Gas in storage, at weighted average cost 7,767 32,684
Deferred income taxes 17,879 17,879
Prepaid taxes 4,495 6,411
Other 2,056 1,668
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185,332 198,698
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Deferred Charges and Other:
Regulatory assets 100,413 101,808
Systems development costs 21,645 23,052
Prepaid pension costs 31,237 30,112
Other 7,085 7,372
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160,380 162,344
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$ 720,992 $ 738,377
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</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
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Wisconsin Gas Company
Balance Sheets
(continued)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
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<S> <C> <C>
Capitalization and Liabilities
- ------------------------------
Capitalization:
Common stock $ 9 $ 9
Other paid-in capital 119,858 119,095
Retained earnings 107,089 88,670
Long-term debt 150,504 152,453
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377,460 360,227
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Current Liabilities:
Accounts payable 39,726 64,548
Refundable gas costs 52,047 31,545
Short-term borrowings 24,000 65,500
Current portion of long-term debt 2,000 2,000
Accrued payroll and benefits 6,994 8,116
Accrued taxes 15,623 712
Other 5,050 4,334
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145,440 176,755
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Deferred Credits and Other:
Regulatory liabilities 59,675 61,749
Deferred income taxes 35,569 35,569
Postretirement benefit obligation 51,279 51,359
Environmental remediation costs 36,138 36,222
Unamortized investment tax credit 6,899 7,265
Other 8,532 9,231
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198,092 201,395
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$ 720,992 $ 738,377
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</TABLE>
The accompanying notes are an integral part of these statements.
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<PAGE> 9
WISCONSIN GAS COMPANY
Statements of Cash Flows (Unaudited)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-----------------------
1997 1996
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(Thousands of Dollars)
<S> <C> <C>
Operations:
Net income $ 23,916 $ 26,502
Adjustments to reconcile net income
to net cash flows:
Depreciation and amortization 9,610 10,415
Deferred income taxes - 142
Change in:
Receivables (15,579) (33,446)
Gas in storage 24,917 20,269
Other current assets (2,272) (329)
Accounts payable (24,822) 8,060
Accrued taxes 16,827 14,382
Refundable gas costs 20,502 41,626
Other current liabilities (406) (402)
Other non-current assets
and liabilities (2,798) (2,486)
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49,895 84,733
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Investment Activities:
Capital expenditures (5,347) (5,732)
Other, net 68 18
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(5,279) (5,714)
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Financing Activities:
Change in short-term borrowings (41,500) (57,500)
Reduction of long-term debt (2,000) (4,000)
Cash dividends paid to WICOR, Inc. (5,500) (5,000)
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(49,000) (66,500)
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Change in Cash and Cash Equivalents (4,384) 12,519
Cash and Cash Equivalents at
Beginning of Period 8,960 7,463
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Cash and Cash Equivalents at End of Period $ 4,576 $ 19,982
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.
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Notes to Financial Statements (Unaudited):
1) At March 31, 1997, Wisconsin Gas had total unsecured lines of credit
available from several banks of $135 million. As of March 31, 1997,
commercial paper totaling $24 million was outstanding under these credit
agreements with a weighted average interest rate of 6.7%.
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 Three Months
Ended March 31,
----------------------
1997 1996
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(Thousands of Dollars)
Income taxes paid $ 2,003 $ 6,502
Interest paid $ 2,400 $ 2,415
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Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits - None
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 first quarter of 1997.
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<PAGE> 12 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: April 29, 1997 By: /s/ Joseph P. Wenzler
----------------------------
Joseph P. Wenzler
Vice President and Chief
Financial Officer
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WICOR, Inc.
Exhibit Index - FORM 10-Q
Exhibit No. Exhibit
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27 Financial data schedule (EDGAR version only
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<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
Wisconsin Gas Company FORM 10-Q for the three months ended March 31, 1997 and is
qualified in its entirety by reference to such financial statements and the
related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 375,280
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 185,332
<TOTAL-DEFERRED-CHARGES> 160,380
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 720,992
<COMMON> 9
<CAPITAL-SURPLUS-PAID-IN> 119,858
<RETAINED-EARNINGS> 107,089
<TOTAL-COMMON-STOCKHOLDERS-EQ> 226,956
0
0
<LONG-TERM-DEBT-NET> 150,504
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 150,000
<COMMERCIAL-PAPER-OBLIGATIONS> 24,000
<LONG-TERM-DEBT-CURRENT-PORT> 2,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 317,532
<TOT-CAPITALIZATION-AND-LIAB> 720,992
<GROSS-OPERATING-REVENUE> 226,242
<INCOME-TAX-EXPENSE> 14,609
<OTHER-OPERATING-EXPENSES> 184,571
<TOTAL-OPERATING-EXPENSES> 199,180
<OPERATING-INCOME-LOSS> 27,062
<OTHER-INCOME-NET> 188
<INCOME-BEFORE-INTEREST-EXPEN> 27,250
<TOTAL-INTEREST-EXPENSE> 3,334
<NET-INCOME> 23,916
0
<EARNINGS-AVAILABLE-FOR-COMM> 0
<COMMON-STOCK-DIVIDENDS> 5,500
<TOTAL-INTEREST-ON-BONDS> 217
<CASH-FLOW-OPERATIONS> 49,895
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
