<PAGE> 1
<TABLE>
<S> <C>
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, 1993
Commission file number 2-2066
------------
WISCONSIN NATURAL GAS COMPANY
(Exact name of registrant as specified in its charter)
Wisconsin 39-0713260
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2046, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2590
(Registrant's telephone number, including area code)
------------
Securities Registered Pursuant to Section 12(b) of the Act:
Name of Each Exchange
Title of Each Class on which Registered
----------------------------------------- ---------------------
None --
Securities Registered Pursuant to Section 12(g) of the Act:
NONE
(Title of Class)
------------
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 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. (Not applicable; no Section 12 registered securities.) X
-------
------------
Indicate the number of shares outstanding of each of the Registrant's classes of common stock, as of the
latest practicable date.
Class Outstanding at March 1, 1994
----- ----------------------------
COMMON STOCK, $1 PAR VALUE 1,725,000 Shares
The Registrant meets the conditions set forth in General Instruction J(1)(a) and (b)
of Form 10-K and is therefore filing this Form with the reduced disclosure format.
Documents Incorporated by Reference
-----------------------------------
None
</TABLE>
<PAGE> 2
WISCONSIN NATURAL GAS COMPANY
FORM 10-K ANNUAL REPORT TO THE SECURITIES AND EXCHANGE COMMISSION
FOR THE YEAR ENDED DECEMBER 31, 1993
-----------------------------------------------------------------
TABLE OF CONTENTS
-----------------
ITEM PAGE
- ---- ----
PART I
------
1. Business . . . . . . . . . . . . . . . . . . . . . . . . . 3
2. Properties . . . . . . . . . . . . . . . . . . . . . . . . 6
3. Legal Proceedings . . . . . . . . . . . . . . . . . . . . 6
4. Submission of Matters to a Vote of Security Holders . . . 7
PART II
-------
5. Market for Registrant's Common Equity
and Related Stockholder Matters . . . . . . . . . . . 8
6. Selected Financial Data . . . . . . . . . . . . . . . . . 8
7. Management's Discussion and Analysis of Financial
Condition and Results of Operations . . . . . . . . . 8
8. Financial Statements and Supplementary Data . . . . . . . 11
Report of Independent Accountants . . . . . . . . . . . . 24
9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure . . . . . . . 25
PART III
--------
10. Directors and Executive Officers of the Registrant . . . . 25
11. Executive Compensation . . . . . . . . . . . . . . . . . . 25
12. Security Ownership of Certain Beneficial Owners and
Management . . . . . . . . . . . . . . . . . . . . . 25
13. Certain Relationships and Related Transactions . . . . . . 25
PART IV
-------
14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K . . . . . . . . . . . . . . . . . 25
Consent of Independent Accountants . . . . . . . . . . . . 33
Signatures . . . . . . . . . . . . . . . . . . . . . . . . 34
- 2 -
<PAGE> 3
PART I
ITEM 1. BUSINESS
Wisconsin Natural Gas Company ("Wisconsin Natural" or "company"), incorporated
in the State of Wisconsin in 1866, is a wholly-owned subsidiary of Wisconsin
Energy Corporation ("Wisconsin Energy") and is an affiliated company to
Wisconsin Electric Power Company ("Wisconsin Electric"), the electric utility
subsidiary of Wisconsin Energy.
Wisconsin Natural's operations are presently limited to a single business: the
purchase, distribution and sale of natural gas to retail customers and
transportation of customer-owned gas in its three distinct service areas in
Wisconsin: west and south of the City of Milwaukee; the Appleton area and the
Prairie du Chien area. The gas service territory has an estimated population
of over 1,000,000. There were 287,732 customers at December 31, 1993, an
increase of 2.9 percent since December 31, 1992.
Effective January 1, 1994, Wisconsin Southern Gas Company, Inc. ("Wisconsin
Southern") was acquired by Wisconsin Energy through a merger of Wisconsin
Southern into Wisconsin Natural. In the transaction, all outstanding shares
of Wisconsin Southern common stock were converted into 1,637,935 shares of
Wisconsin Energy common stock. An order approving the merger was issued by
the PSCW on December 7, 1993. Wisconsin Natural will continue to use the
acquired facilities of Wisconsin Southern for the distribution and
transportation of natural gas. For additional information, see Item 7.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS.
On January 24, 1994, Wisconsin Energy announced plans to merge Wisconsin
Natural into Wisconsin Electric. The merger, which will be subject to a
number of conditions, including requisite regulatory and other approvals, is
anticipated to be effective by year-end 1994. The merger of Wisconsin Natural
into Wisconsin Electric is expected to improve customer service and reduce
future operating costs.
GAS UTILITY OPERATIONS
Total gas therms delivered by Wisconsin Natural, including customer-owned gas
transported by Wisconsin Natural, increased 4.9 percent in 1993 compared to
1992, largely reflecting colder winter weather during the first quarter of
1993.
Approximately 31 percent of total 1993 deliveries were on interruptible rates.
Wisconsin Natural's maximum daily send-out in 1993 was 478,425 Dths. A
dekatherm ("Dth") is equivalent to ten therms or one million British Thermal
Units ("BTU"). Sales of the gas utility fluctuate with the heating cycle of
the year and are also impacted by varying weather conditions from year-to-
year.
During 1993, ANR Pipeline Company ("ANR"), Wisconsin Natural's largest
pipeline transporter, received approval from the FERC to implement new rates
in compliance with FERC Order 636. Wisconsin Natural's other pipeline
transporters also implemented new rates based on FERC Order 636 during 1993.
The number of service choices now available to Wisconsin Natural has expanded,
but the responsibility for selecting the proper mix and level of services has
commensurately increased.
- 3 -
<PAGE> 4
ITEM 1. BUSINESS - Gas Utility Operations (Cont'd)
As a result of the restructuring of pipeline rates and services under FERC
Order 636, Wisconsin Natural has entered into more than 20 firm gas supply
contracts, which vary in term from less than one year to ten years, that price
natural gas at the market rate. Wisconsin Natural also has other pricing
options, such as fixing future prices for varying terms, built into these
contracts which it can exercise to manage the risk of substantial market price
increases. The gas from these contracts is used to meet customer requirements
and to fill storage during the warm months and is combined with withdrawals
from storage during the heating season to meet system gas demand.
Wisconsin Natural has four firm gas storage and associated firm transportation
agreements with ANR and Natural Gas Pipeline Company of America ("NGPL") which
allow daily withdrawals of 256,900 Dths and an annual capacity of 20 million
Dths. The initial terms of these contracts vary, with the first one expiring
in March 1996 and the last one expiring in October 2002. This storage
effectively replaces storage used by the pipeline companies to provide gas
sales service to Wisconsin Natural in the pre-FERC Order 636 environment. Gas
stored at these facilities is purchased by Wisconsin Natural from a number of
suppliers.
Wisconsin Natural has four transportation contracts each with ANR and NGPL and
one transportation contract with Northern Natural Pipeline Company ("Northern
Natural"). All but three of these contracts expire in 2002 with the remaining
contracts expiring in 1997, 2001 and 2003. In each case, subject to certain
provisions, Wisconsin Natural can extend the terms of these contracts at the
time that the agreements would otherwise expire.
Wisconsin Natural transports gas for its customers who purchase gas directly
from other suppliers. Transported gas accounted for approximately 32 percent
of the company's total therms delivered during 1993, 34 percent during 1992
and 35 percent during 1991.
Wisconsin Natural anticipates that because of the above mentioned
restructuring of ANR's rates and services, some of its existing gas
transportation customers will begin purchasing gas directly from Wisconsin
Natural, thereby reducing the amount of customer-owned gas to be transported.
Since rates charged for transportation services are designed to recover the
same margin as gas sold directly by Wisconsin Natural, no significant impact
on operating income is expected due to this change.
Wisconsin Natural is the supplier of natural gas for Wisconsin Electric's new
Concord combustion turbine power plant which began operation in July 1993.
Delivery of this facility's fuel requirements is made possible by an eleven
mile pipeline extension which was completed in 1992.
Wisconsin Natural provides utility service to a diversified base of industrial
customers. Major industries served include the paper industry, the food
products industry and the machinery production industry. No single customer
accounted for more than 2.8 percent of total gas therms sold and transported
in 1993.
REGULATION
Wisconsin Natural is subject to the jurisdiction of the Public Service
Commission of Wisconsin ("PSCW") as to gas rates, standards of service,
issuance of securities, construction of new facilities, transactions with
affiliates, billing practices and various other matters.
- 4 -
<PAGE> 5
ITEM 1. BUSINESS - (Cont'd)
RATE MATTERS
See Item 3. LEGAL PROCEEDINGS - "RATE MATTERS" for a discussion of rate
matters, including a discussion of the tariffs with respect to the adjustment
for the cost of gas purchased for resale.
ENERGY EFFICIENCY
The management of Wisconsin Natural believes that a strong and continuing
emphasis must be placed on energy management and efficient energy use.
Wisconsin Natural is continuing to develop programs to meet the identified
needs of its customers and to assist customers and inform them about energy
efficiency options. This policy is regarded by Wisconsin Natural as in the
best interests of its customers and the owners of its securities.
ENVIRONMENTAL COMPLIANCE
Environmental regulations have had no material impact on the financial
position of Wisconsin Natural.
Solid Waste Landfills
Wisconsin Natural provides for the disposal of hazardous wastes through
licensed independent contractors, but federal statutory provisions impose
joint and several liability on the generators of waste for certain clean-up
costs. Remediation-related activity pertaining to specific sites is discussed
below.
Hunt's Landfill: In 1991, Wisconsin Natural was notified by the EPA that it is
a PRP with regard to the former Hunt's Landfill (located in Racine County,
Wisconsin). Wisconsin Electric is also a participant in the clean-up of this
site to avoid litigation with the PRPs. Even though Wisconsin Electric and
Wisconsin Natural have taken the position that they were not responsible for
the disposal of any hazardous substances or materials at the site, both
companies have agreed to participate in the funding as "de minimis" parties in
the execution of a consent decree with the EPA for clean-up. Materials
disposed of at the site by Wisconsin Electric and Wisconsin Natural consisted
primarily of waste paper and soil from construction sites. The portion of
clean-up costs assigned to Wisconsin Electric and Wisconsin Natural is
expected to be about $20,000 in total.
OTHER
Wisconsin Natural is authorized to provide gas service in designated
territories in the state of Wisconsin, as established by indeterminate
permits, certificates of public convenience and necessity, or boundary
agreements with other utilities.
Research and development expenditures of Wisconsin Natural amounted to
$144,000 in 1993, $50,000 in 1992 and $3,000 in 1991. In addition to the
foregoing amounts, Wisconsin Natural paid $619,000 in 1991 and $652,000 in
1992 for support of the Gas Research Institute under a surcharge of 1.42 cents
per Dth sold in 1991 and 1.47 cents per Dth sold in 1992. As a result of the
decoupling of rates and services under FERC Order 636 these surcharges are no
longer determinable.
- 5 -
<PAGE> 6
ITEM 1. BUSINESS - Other (Cont'd)
At December 31, 1993, Wisconsin Natural employed 761 persons, of which 8 were
part-time.
ITEM 2. PROPERTIES
As of December 31, 1993, the gas distribution system of Wisconsin Natural
includes approximately 5,315 miles of mains connected to the ANR, NGPL and
Northern Natural pipeline transmission systems at 12 gate stations. Wisconsin
Natural has a liquefied natural gas storage plant which converts and stores in
liquefied form natural gas received during periods of low consumption. The
liquefied natural gas storage plant has a send-out capability of 68,000 Dths
per day. For information regarding the former Wisconsin Southern Gas Company
Inc., which was merged into Wisconsin Natural effective January 1, 1994, see
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
The liquefied natural gas plant is located on land owned in fee by Wisconsin
Natural. The gas distribution mains and services are located, for the most
part, in public streets and highways and on land owned by others.
ITEM 3. LEGAL PROCEEDINGS
ENVIRONMENTAL MATTERS
Wisconsin Natural is subject to federal, state and certain local laws and
regulations governing the environmental aspects of its operations. Wisconsin
Natural believes that, with immaterial exceptions, its existing facilities are
in compliance with applicable environmental requirements.
As have other public utilities, Wisconsin Natural and/or its predecessors and
affiliates, have operated manufactured gas plants and disposed of ash and
other waste products from electric utility activities. Operations at these
manufactured gas sites ceased over 40 years ago with remediation activities
having been conducted at certain of these sites, while other sites are
currently being or are planned to be investigated. Costs associated with
remediation activities, to the extent not covered by insurance, have been
allowed in rates for utility service. Wisconsin Natural believes any such
future costs will continue to be considered appropriate for inclusion in rates
and therefore will not have a material adverse impact on its financial
condition.
Burlington Manufactured Gas Site: As a result of the acquisition and merger
of Wisconsin Southern into Wisconsin Natural effective January 1, 1994,
Wisconsin Natural has assumed ownership of a manufactured gas site formerly
operated by Wisconsin Southern in Burlington, Wisconsin. Prior to the
acquisition and merger, Wisconsin Southern hired an environmental engineering
firm to perform testing at this site. Wisconsin Southern had recorded a
liability of $3 million for future estimated site remediation costs, based
upon estimates that such costs may total $3-7 million in the future.
Wisconsin Natural believes that all associated costs incurred for remediation
are probable for recovery in future rates based on Wisconsin Southern's
correspondence with the PSCW and prior regulatory treatment by the PSCW.
Under current plans, remediation expenditures could begin during 1994.
See Item 1. BUSINESS - ENVIRONMENTAL COMPLIANCE - "Solid Waste Landfills" for
a discussion of matters related to specific solid waste landfill sites.
- 6 -
<PAGE> 7
ITEM 3. LEGAL PROCEEDINGS - (Cont'd)
RATE MATTERS
Wisconsin Retail Gas Jurisdiction
1993/1994 Rate Case: The PSCW granted an annualized rate increase of $9.2
million, or 3.3 percent, effective September 2, 1993. The new rates, for the
test year ending August 31, 1994, are based on an 11.9 percent regulatory
return on common equity, as determined for ratemaking purposes, down from the
previously authorized return of 12.75 percent.
1994/1995 Test Year: During 1993, the PSCW announced that it will discontinue
the practice of conducting annual rate case proceedings, replacing it with a
new schedule which calls for future rate cases to be conducted once every two
years. As a result, no filing was made with respect to the 1994/1995 test
year.
Purchased Gas Adjustment Tariffs: Sales of natural gas are subject to
adjustment tariffs designed to pass on to gas customers increases or decreases
in the cost of natural gas purchased for resale.
Take-or-Pay and FERC Order 636 Transition Costs
Take-or-pay costs being billed by the pipeline companies are no longer
material. However, as a result of FERC Order 636, pipeline companies are no
longer in the merchant business and have begun billing transition costs, such
as Gas Supply Realignment and stranded capacity costs, to their customers.
The transition costs to be billed to Wisconsin Natural are currently estimated
to be about $10.0 million annually during 1994-1995, $7.5 million annually
during 1996-1997 and $2.5 million each year thereafter until 2008. These
estimates include the components attributable to the former Wisconsin Southern
Gas Company Inc., which was acquired by Wisconsin Energy through a merger of
Wisconsin Southern into Wisconsin Natural effective January 1, 1994. The PSCW
is allowing the local gas distribution companies to pass these costs on to
their customers through the purchased gas adjustment mechanism.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of the fiscal year covered by this report.
- 7 -
<PAGE> 8
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY
AND RELATED STOCKHOLDER MATTERS
The amount of cash dividends declared on Wisconsin Natural's Common Stock
during the two most recent fiscal years are set forth below. Dividends were
paid to Wisconsin Natural's sole common stockholder, Wisconsin Energy.
Total
Quarter Dividend
- ----------------------------------------------------------------------------
1992 1 $2,121,750
2 2,121,750
3 2,121,750
4 2,121,750
- ----------------------------------------------------------------------------
1993 1 $2,121,750
2 2,121,750
3 2,121,750
4 2,121,750
- ----------------------------------------------------------------------------
ITEM 6. SELECTED FINANCIAL DATA
Information required by Item 6 is omitted pursuant to General Instruction
J(2)(a) of Form 10-K.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
Information required by Item 7 is omitted pursuant to General Instruction
J(2)(a) of Form 10-K and in lieu thereof Wisconsin Natural provides the
following:
Wisconsin Natural's revenues increased $41.7 million, or 17.4 percent, in 1993
compared to 1992. This reflects the recovery of increased purchased gas
costs, the increase in natural gas therm deliveries made during 1993 and
annualized retail rate increases of $4.0 million, or 1.4 percent, effective
October 15, 1992 and $9.2 million, or 3.3 percent, effective September 2,
1993.
Total gas therms delivered by Wisconsin Natural increased 4.9 percent in 1993
compared to 1992, largely reflecting colder winter weather during the first
quarter of 1993.
The $32 million increase in the cost of gas sold during 1993 compared to 1992
reflects the impact of a higher average delivered cost of gas and the 8.7
percent increase in natural gas therm sales during 1993. Changes in the cost
of purchased gas are reflected in rates through Wisconsin Natural's purchased
gas adjustment clause. For further discussion of purchased gas contracts and
gas market purchases see Item 1. BUSINESS - "Gas Utility Operations".
- 8 -
<PAGE> 9
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Cont'd)
Other operation expenses were $7 million higher during 1993 compared to 1992
reflecting an increase in postretirement benefit costs associated with the
adoption of Statement of Accounting Standards No. 106 ("FAS No. 106") -
Employers' Accounting for Postretirement Benefits Other Than Pensions" (see
Note C to the Financial Statements - Benefits Other Than Pensions) and growth
in conservation related expenses associated with improving the efficiency of
customers' use of natural gas.
Effective January 1, 1994, Wisconsin Southern Gas Company, Inc. ("Wisconsin
Southern") was acquired by Wisconsin Energy through a merger of Wisconsin
Southern into Wisconsin Natural. In the transaction, structured as a tax-free
reorganization, all outstanding shares of Wisconsin Southern common stock were
converted into 1,637,935 shares of Wisconsin Energy common stock, with
fractional interests paid in cash, based on an exchange ratio of 1.6330 shares
of Wisconsin Energy common stock for each outstanding share of Wisconsin
Southern common stock. The merger has been structured to qualify as a pooling
of interests for accounting and financial reporting purposes beginning in
1994.
Wisconsin Southern was a gas utility engaged in the purchase, distribution,
transportation and sale of natural gas for residential, commercial and
industrial consumption in a service territory contiguous to Wisconsin
Natural's service territory located in southeastern Wisconsin. Following the
merger, Wisconsin Natural now serves approximately 336,000 customers and is
Wisconsin's second largest gas distribution company. For additional
information, see Note M - Subsequent Events in the Notes to Financial
Statements.
In January 1992, Wisconsin Natural issued $10 million of 5-5/8% Series and $10
million of 6-5/8% Series First Mortgage Bonds, using the proceeds to refund
its 8-3/4% and 8-3/8% Series First Mortgage Bonds.
In August 1992, Wisconsin Natural issued $25 million of 6-1/8% Debentures due
September 1, 1997, using the proceeds to redeem $24 million of its 9-1/4%
Series First Mortgage Bonds.
Depending on market conditions and other factors, additional debt refundings
may occur.
In December 1992, Wisconsin Natural issued $25 million of 8-1/4% Debentures
due December 15, 2022, using the proceeds to repay short-term borrowings which
had been incurred to finance part of the company's on-going capital
requirements.
Wisconsin Natural's parent, Wisconsin Energy, made capital contributions of
$10 million and $7 million to Wisconsin Natural in 1993 and 1991,
respectively, which were used to reduce short-term debt.
Wisconsin Electric and Wisconsin Natural Revitalization
In response to increasing competitive pressures in the markets for electricity
and natural gas, Wisconsin Electric and Wisconsin Natural have developed a
revitalization process to increase efficiencies and improve customer service.
- 9 -
<PAGE> 10
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS - (Cont'd)
Wisconsin Electric and Wisconsin Natural are "reengineering" and restructuring
their organizations. The new structures consolidate many business functions.
This "reengineering" and restructuring of the business systems will lead to a
reduction in the total Wisconsin Electric/Wisconsin Natural workforce.
Effective in early 1994, employees have the option of choosing a voluntary
separation package. An early retirement option also has been offered to
qualified employees. As a result, it is currently estimated that Wisconsin
Energy's utility subsidiaries will incur non-recurring reorganization charges
aggregating between $30 to $75 million during 1994. The portion attributable
to Wisconsin Natural is currently estimated to be between $3 to $10 million.
See Note C to the Financial Statements - Benefits Other Than Pensions, for
additional information. It is expected that these costs will be offset,
before the end of 1995, by the reductions in future operating costs that these
programs will achieve.
In addition to the corporate restructuring at Wisconsin Electric and Wisconsin
Natural, as part of this revitalization effort, Wisconsin Energy announced its
intent to merge the two companies to form a single combined utility
subsidiary. The proposed merger will accomplish the goal of improved customer
service and will also enable the reduction of operating costs. The merger,
which is anticipated to be effective by year-end 1994, will be subject to a
number of conditions, including regulatory and other approvals.
The following details the principal changes in revenues and expenses
contributing to the decrease in net income in 1993.
Thousands of Dollars
--------------------
Aggregate increase in gas therm sales
net of increase in gas therms purchased $ 7,812
Aggregate decrease in revenue per therm sold
net of decrease in cost of gas per therm
purchased 1,704
---------
$ 9,516
Increase in other operation expenses $(7,226)
Decrease in maintenance 84
Increase in depreciation (765)
Increase in taxes other than income taxes (303)
Increase in operating income taxes (412)
Decrease in other income (165)
Increase in interest charges (842)
---------
(9,629)
-------
Decrease in net income $ (113)
=======
- 10 -
<PAGE> 11
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
WISCONSIN NATURAL GAS COMPANY
STATEMENT OF INCOME AND RETAINED EARNINGS
Year Ended December 31
1993 1992 1991
---- ---- ----
(Thousands of Dollars)
Operating Revenues $281,718 $239,991 $233,120
Operating Expenses
Cost of gas sold 183,759 151,548 148,386
Other operation expenses 45,611 38,385 37,402
Maintenance 5,934 6,018 6,055
Depreciation (Note D) 14,511 13,746 12,699
Taxes other than income taxes 4,783 4,480 3,924
Federal income tax (Note E) 5,324 5,929 4,640
State income tax (Note E) 1,393 1,548 1,217
Deferred income taxes - net (Note E) 1,062 (104) 985
Investment tax credit - net (Note E) (456) (462) (467)
-------- -------- --------
Total Operating Expenses 261,921 221,088 214,841
Operating Income 19,797 18,903 18,279
Other Income and Deductions
Interest income 336 525 491
Allowance for other funds used during
construction (Note F) 4 32 196
Miscellaneous - net (85) (52) (45)
Federal income tax (Note E) (88) (155) (147)
State income tax (Note E) (21) (39) (37)
-------- -------- --------
Total Other Income and Deductions 146 311 458
Income Before Interest Charges 19,943 19,214 18,737
Interest Charges
Long-term debt 6,090 4,958 5,009
Other interest 1,348 1,654 1,742
Allowance for borrowed funds used during
construction (Note F) (2) (18) (109)
-------- -------- --------
Total Interest Charges 7,436 6,594 6,642
-------- -------- --------
Net Income 12,507 12,620 12,095
Retained Earnings - Balance, January 1 41,214 37,081 33,473
-------- -------- --------
53,721 49,701 45,568
Cash Dividends Common Stock (8,487) (8,487) (8,487)
-------- -------- --------
Balance, December 31 $ 45,234 $ 41,214 $ 37,081
======== ======== ========
NOTE: Earnings and Dividends per share of common stock are not applicable
because all of the company's common stock is owned by Wisconsin Energy
Corporation.
See Notes to Financial Statements.
- 11 -
<PAGE> 12
WISCONSIN NATURAL GAS COMPANY
STATEMENT OF CASH FLOWS
Year Ended December 31
1993 1992 1991
---- ---- ----
(Thousands of Dollars)
Operating Activities
Net income $ 12,507 $ 12,620 $ 12,095
Reconciliation to cash
Depreciation 14,511 13,746 12,699
Deferred income taxes - net 1,062 (104) 985
Investment tax credit - net (456) (462) (467)
Allowance for other funds used
during construction (4) (32) (196)
Change in Accounts receivable (2,607) 1,636 (6,213)
Inventories (25,034) (3,061) (6,862)
Accounts payable (3,875) 5,059 (6,652)
Other current assets (2,695) (2,934) 3,829
Other current liabilities 3,347 (3,147) (584)
Other 576 781 (267)
------- ------- -------
Cash Provided by (Used in) Operating Activities (2,668) 24,102 8,367
Investing Activities
Construction expenditures (21,361) (22,578) (20,587)
Allowance for borrowed funds used
during construction (2) (18) (109)
Other 432 (428) (407)
------- ------- -------
Cash Used in Investing Activities (20,931) (23,024) (21,103)
Financing Activities
Sale of long-term debt - 69,032 -
Retirement of long-term debt (2,991) (53,674) -
Change in short-term debt 24,925 (4,840) 13,275
Stockholder contribution 10,000 - 7,000
Dividends on common stock (8,487) (8,487) (8,487)
------- ------- -------
Cash Provided by Financing Activities 23,447 2,031 11,788
Change in Cash and Cash Equivalents $ (152) $ 3,109 $ (948)
======= ======= =======
Supplemental information disclosures
Cash Paid for
Interest (net of amount capitalized) $ 6,684 $ 6,400 $ 6,722
Income taxes 5,800 9,519 6,800
See Notes to Financial Statements.
- 12 -
<PAGE> 13
WISCONSIN NATURAL GAS COMPANY
BALANCE SHEET
December 31
ASSETS
1993 1992
---- ----
(Thousands of Dollars)
Utility Plant $393,032 $372,956
Accumulated provision for depreciation (180,202) (165,920)
-------- --------
Net Utility Plant 212,830 207,036
Other Property and Investments 70 71
Current Assets
Cash and cash equivalents 6,318 6,470
Accounts receivable, net of allowance
for doubtful accounts - $999 and $919 23,251 20,644
Accrued utility revenues 34,961 32,407
Materials and supplies (at average cost) 2,641 2,546
Natural gas stored
(at first-in, first-out cost) 36,571 11,632
Prepayments and other assets 3,091 2,950
-------- --------
Total Current Assets 106,833 76,649
Deferred Charges and Other Assets
Accumulated deferred income taxes (Note E) 11,918 3,993
Deferred take-or-pay buyout 606 3,316
Deferred regulatory assets (Note A) 3,879 -
Other 1,843 2,587
-------- --------
Total Deferred Charges and Other Assets 18,246 9,896
-------- --------
Total Assets $337,979 $293,652
======== ========
See Notes to Financial Statements.
- 13 -
<PAGE> 14
WISCONSIN NATURAL GAS COMPANY
BALANCE SHEET
December 31
CAPITALIZATION AND LIABILITIES
1993 1992
---- ----
(Thousands of Dollars)
Capitalization (See Capitalization Statement)
Common stock equity $114,734 $100,714
Long-term debt (Note I) 71,192 74,059
-------- --------
Total Capitalization 185,926 174,773
Current Liabilities
Long-term debt due currently (Note I) 1,200 1,200
Notes payable (Note J) 68,508 43,583
Accounts payable 24,434 28,309
Payroll and vacation accrued 2,587 2,427
Taxes accrued - income and other 4,047 2,069
Interest accrued 1,458 1,516
Other 1,776 509
-------- -------
Total Current Liabilities 104,010 79,613
Deferred Credits and Other Liabilities
Accumulated deferred income taxes (Note E) 28,657 28,264
Accumulated deferred investment tax credits 6,667 7,123
Deferred take-or-pay buyout 606 3,316
Deferred regulatory liabilities (Note A) 11,530 -
Other 583 563
-------- -------
Total Deferred Credits and Other
Liabilities 48,043 39,266
Commitments and Contingencies (Note L)
-------- --------
Total Capitalization and Liabilities $337,979 $293,652
======== ========
See Notes to Financial Statements.
- 14 -
<PAGE> 15
WISCONSIN NATURAL GAS COMPANY
CAPITALIZATION STATEMENT
December 31
1993 1992
---- ----
(Thousands of Dollars)
Common Stock Equity
Common stock ($1 par value; authorized 38,000,000
shares; issued 1,725,000 shares) $ 1,725 $ 1,725
Other paid in capital 67,775 57,775
Retained earnings 45,234 41,214
-------- --------
Total Common Stock Equity 114,734 100,714
Long-Term Debt
First mortgage bonds
Series Due
------ ---
5-5/8% 1995 10,000 10,000
6-5/8% 1997 10,000 10,000
9-1/4% 2016 3,000 6,000
-------- --------
23,000 26,000
Debentures (unsecured)
6-1/8% Series due 1997 25,000 25,000
8-1/4% Series due 2022 25,000 25,000
Unamortized discount - net (608) (741)
Long-term debt due currently (1,200) (1,200)
-------- --------
Total Long-Term Debt 71,192 74,059
-------- --------
Total Capitalization $185,926 $174,773
======== ========
See Notes to Financial Statements.
- 15 -
<PAGE> 16
WISCONSIN NATURAL GAS COMPANY
NOTES TO FINANCIAL STATEMENTS
A - Summary of Significant Accounting Policies
- ----------------------------------------------
General
- -------
The accounting records of the company are kept as prescribed by the Public
Service Commission of Wisconsin (PSCW).
Revenues
- --------
Utility revenues are recognized on the accrual basis and include estimated
amounts for service rendered but not billed.
Property
- --------
Property is recorded at cost. Additions to and significant replacements of
utility property are charged to utility plant at cost; minor items are charged
to maintenance expense. Cost includes material, labor and allowance for funds
used during construction (see Note F). The cost of depreciable utility
property, together with removal cost less salvage, is charged to accumulated
provision for depreciation when property is retired.
Deferred Regulatory Assets and Liabilities
- ------------------------------------------
Pursuant to Statement of Financial Accounting Standards No. 71, Accounting for
the Effects of Certain Types of Regulation, the company capitalizes as
deferred regulatory assets incurred costs which are expected to be recovered
in future utility rates. The company also records as deferred regulatory
liabilities the current recovery in utility rates of costs which are expected
to be paid in the future.
The significant portion of the company's deferred regulatory assets and
liabilities relate to the amounts recorded due to the adoption of Statement of
Financial Accounting Standards No. 109, Accounting for Income Taxes (FAS 109).
See Note E.
Statement of Cash Flows
- -----------------------
Cash and cash equivalents includes marketable debt securities acquired three
months or less from maturity.
B - Pension Plans
- -----------------
Effective in 1993, the PSCW adopted Statement of Financial Accounting
Standards No. 87, Employers' Accounting for Pensions (FAS 87), for ratemaking.
For 1992 and 1991, the PSCW recognized funded amounts for ratemaking and the
company charged the following amounts to expense as paid, $165,000 and
$555,000, respectively.
- 16 -
<PAGE> 17
B - Pension Plans - (Cont'd)
- ----------------------------
The company has several noncontributory pension plans covering all eligible
employees. Pension benefits are based on years of service and the employee's
compensation. The majority of the plans' assets are equity securities; other
assets include corporate and government bonds, guaranteed investment contracts
and real estate. The plans are funded to meet the requirements of the
Employee Retirement Income Security Act of 1974.
In the opinion of the company, current pension trust assets and amounts which
are expected to be paid to the trust in the future will be adequate to meet
future pension payment obligations to current and future retirees.
Pension Cost calculated per FAS 87 1993 1992 1991
- ---------------------------------- ------ ------ ------
(Thousands of Dollars)
Components of Net Periodic Pension Cost,
Year Ended December 31 -
Cost of pension benefits earned by
employees $ 1,207 $ 1,077 $ 967
Interest cost on projected benefit
obligation 3,633 3,264 3,085
Actual return on plan assets (4,292) (1,599) (9,878)
Net amortization and deferral 305 (3,318) 5,875
------- ------- ------
Total pension cost (credit) calculated
under FAS 87 $ 853 $ (576) $ 49
======= ======= ======
Actuarial Present Value of Accumulated
Benefit Obligation, at December 31 -
Vested benefits-employees' right to
receive benefit no longer contingent
upon continued employment $39,142 $34,112
Nonvested benefits-employees' right to
receive benefit contingent upon
continued employment 428 424
------- -------
Total obligation $39,570 $34,536
======= =======
Funded Status of Plans: Pension Assets and
Obligations at December 31 -
Pension assets at fair market value $55,224 $52,172
Projected benefit obligation
at present value (50,455) (43,112)
Unrecognized transition asset (1,511) (1,635)
Unrecognized prior service cost 1,908 1,854
Unrecognized net gain (2,802) (6,806)
------- ------
Projected status of plans $ 2,364 $ 2,473
======= ======
Rates used for calculations (%) -
Discount Rate-interest rate used to
adjust for the time value of money 7.5 8.0 8.0
Assumed rate of increase in
compensation levels 5.0 5.0 5.0
Expected long-term rate of return
on pension assets 9.0 9.0 9.0
- 17 -
<PAGE> 18
C - Benefits Other Than Pensions
- --------------------------------
In January 1993, the company adopted prospectively Statement of Financial
Accounting Standards No. 106, Employers' Accounting for Postretirement
Benefits Other Than Pensions (FAS 106), and elected the 20 year option for
amortization of the previously unrecognized accumulated postretirement benefit
obligation. The PSCW has issued an order recognizing FAS 106 for ratemaking;
therefore adoption has no material impact on net income. For years prior to
1993 the cost of these postretirement benefits was expensed when paid and was
$614,000 in 1992, and $527,000 in 1991.
The company sponsors defined benefit postretirement plans that cover both
salaried and nonsalaried employees who retire at age 55 or older with at least
10 years of credited service. The postretirement medical plan provides
coverage to retirees and their dependents. Retirees contribute to the medical
plan. The group life insurance benefit is based on employee compensation and
is reduced upon retirement.
Employees' Benefit Trusts (Trusts) are used to fund a major portion of
postretirement benefits. The funding policy for the Trusts is to maximize tax
deductibility. The majority of the Trusts' assets are mutual funds.
Postretirement Benefit Cost calculated per FAS 106 (Thousands of Dollars)
- --------------------------------------------------
Components of Net Periodic Postretirement Benefit Cost,
Year Ended December 31, 1993 -
Cost of postretirement benefits earned by employees $ 297
Interest cost on projected benefit obligation 1,024
Actual return on plan assets (221)
Net amortization and deferral 520
--------
Total postretirement benefit cost calculated $ 1,620
under FAS 106 ========
Funded Status of Plans: Postretirement Obligations
and Assets at December 31, 1993 -
Accumulated Postretirement Benefit Obligation at
December 31, 1993 -
Retirees $ (5,710)
Fully eligible active plan participants (2,221)
Other active plan participants (6,039)
--------
Total obligation (13,970)
Postretirement assets at fair market value 2,771
--------
Accumulated postretirement benefit obligation in
excess of plan assets (11,199)
Unrecognized transition obligation 9,787
Unrecognized net loss 336
--------
Accrued Postretirement Benefit Obligation $ (1,076)
========
- 18 -
<PAGE> 19
C - Benefits Other Than Pensions - (Cont'd)
- -------------------------------------------
Rates used for calculations (%) -
Discount Rate-interest rate used to adjust
for the time value of money 7.5
Assumed rate of increase in compensation levels 5.0
Expected long-term rate of return on
postretirement assets 9.0
Health care cost trend rate 14.0 declining to
5.0 in 2002
Changes in health care cost trend rates will affect the amounts reported. For
example, a 1% increase in rates would increase the accumulated postretirement
benefit obligation as of December 31, 1993 by $1,000,000 and the aggregate of
the service and interest cost components of net periodic postretirement
benefit cost for the year then ended by $100,000.
Statement of Financial Accounting Standards No. 112, Employers' Accounting for
Postemployment Benefits (FAS 112), was issued in 1992. This statement
establishes standards of financial accounting and reporting for the estimated
cost of benefits provided by an employer to former or inactive employees after
employment but before retirement. The company adopted FAS 112 prospectively
for 1994. It is anticipate that adoption will not have a material effect on
net income.
The company has announced a Voluntary Severance Package (VSP) and Early
Retirement Incentive Program (ERIP) effective January 1994 and March 1994,
respectively to eligible employees. The availability of these plans to
various bargaining units is based upon agreements made between the company and
the unions. These plans are available to all management employees but not
elected officers.
The VSP includes a severance payment, medical/dental insurance, outplacement
services, personal financial planning and tuition support. ERIP provides for
a monthly income supplement, medical benefits, and personal financial
planning. It is estimated that 8%-20% of total employees will elect one of
these plans. The estimated cost associated with these plans is $3,000,000 -
$10,000,000.
D - Depreciation
- ----------------
Depreciation expense is accrued at straight line rates, certified by the PSCW,
which include estimates of salvage and removal costs.
Depreciation as a percent of average depreciable utility plant was 4.0% in
1993 and 1992 and 3.9% in 1991.
E - Income Taxes
- ----------------
Comprehensive interperiod income tax allocation is used for federal and state
temporary differences. The federal investment tax credit is accounted for on
the deferred basis and is reflected in income ratably over the life of the
related property.
- 19 -
<PAGE> 20
E - Income Taxes - (Cont'd)
- ---------------------------
Following is a summary of income tax expense and a reconciliation of total
income tax expense with the tax expected at the federal statutory rate.
1993 1992 1991
------- ------- -------
(Thousands of Dollars)
Current tax expense $ 6,826 $ 7,671 $ 6,041
Investment tax credit-net (456) (462) (467)
Deferred tax expense 1,062 (104) 985
------- ------- -------
Total tax expense $ 7,432 $ 7,105 $ 6,559
======= ======= =======
Income before income taxes $19,939 $19,725 $18,654
======= ======= =======
Expected tax at federal
statutory rate $ 6,979 $ 6,706 $ 6,342
State income tax net of federal
tax reduction 1,106 1,107 1,036
Investment tax credit restored (456) (462) (467)
Deferred tax restored -
rate differential (234) (255) (255)
Other (no item over 5% of
expected tax) 37 9 (97)
------- ------- -------
Total tax expense $ 7,432 $ 7,105 $ 6,559
======= ======= =======
FAS 109 requires the recording of deferred assets and liabilities to recognize
the expected future tax consequences of events that have been reflected in the
company's financial statements or tax returns, the adjustment of deferred tax
balances to reflect tax rate changes and the recognition of previously
unrecorded deferred taxes. The company adopted FAS 109 prospectively in 1993.
Following is a summary of deferred income taxes as of December 31, 1993, after
FAS 109 adoption, and December 31, 1992, prior to adoption.
1993 1992
------- -------
(Thousands of Dollars)
Deferred Income Tax Assets
Construction advances $ 8,720 $ 3,993
Other 3,198 -
------- -------
Total Deferred Income Tax Assets $11,918 $ 3,993
======= =======
Deferred Income Tax Liabilities
Plant related $26,397 $28,264
Other 2,260 -
------- -------
Total Deferred Income Tax Liabilities $28,657 $28,264
======= =======
The company also has recorded deferred regulatory assets and liabilities of
$3,879,000 and $11,530,000, respectively, as of December 31, 1993, which
represent the future expected impact of deferred taxes on utility revenues.
Adoption of FAS 109 had no material effect on net income.
- 20 -
<PAGE> 21
F - Allowance for Funds Used During Construction (AFUDC)
- --------------------------------------------------------
Through August 1993, AFUDC is capitalized in utility plant accounts and
represents the cost of borrowed funds used during construction and a rate of
return on stockholder's capital used for construction purposes. On the income
statement the cost of borrowed funds (before income taxes) is a reduction of
interest expense and the return on stockholder's capital is an item of noncash
other income. Beginning September 1993, all construction work in progress
(CWIP) is allowed to earn a current return.
AFUDC was capitalized at the following rates, as approved by the PSCW:
October 1992 - August 1993 Current return on investment for selected
projects included in CWIP; 10.97% for
remaining CWIP
September 1991 - September 1992 Current return on investment for selected
projects included in CWIP; 11.19% for
remaining CWIP
January 1991 - August 1991 11.37% for all projects
G - Transactions With Associated Companies
- ------------------------------------------
Managerial, financial, accounting, legal, data processing and other services
may be rendered between associated companies and are billed in accordance with
service agreements approved by the PSCW. The company also sells gas to
Wisconsin Electric Power Company (WE), another subsidiary of Wisconsin Energy
Corporation (WEC), for electric generation at rates approved by the PSCW. The
company received from WEC a stockholder contribution of $10,000,000 and
$7,000,000 in 1993 and 1991, respectively.
H - Preferred Stock
- -------------------
Serial Preferred Stock authorized but unissued is cumulative, $100 par value,
120,000 shares.
I - Long-Term Debt
- ------------------
The maturities and sinking fund requirements through 1998 for the aggregate
amount of long-term debt outstanding at December 31, 1993 are shown below.
1994 $ 1,200,000
1995 11,200,000
1996 600,000
1997 35,000,000
1998 -
Sinking fund requirements for the years 1994 through 1998, included in the
table above, are $3,000,000. Substantially all utility plant is subject to
the applicable mortgage.
Long-term debt premium or discount and expense of issuance are amortized by
the straight line method over the lives of the debt issues and included as
interest expense. Unamortized amounts pertaining to reacquired debt are
written off currently, when acquired for sinking fund purposes, or amortized
in accordance with PSCW orders, when acquired for early retirement.
- 21 -
<PAGE> 22
J - Notes Payable
- -----------------
Short-term notes payable consist of:
December 31
1993 1992
------ ------
(Thousands of Dollars)
Banks $39,999 $ 4,999
Commercial paper 28,509 38,584
------- -------
$68,508 $43,583
======= =======
Unused lines of credit for short-term borrowings amounted to $35,509,000
at December 31, 1993. In support of various informal lines of credit from
banks, the company has agreed to pay commitment fees; these commitment fees
are not significant.
K - Fair Value of Financial Instruments
- ---------------------------------------
Statement of Financial Accounting Standards No. 107, Disclosures about Fair
Value of Financial Instruments (FAS 107), requires, if practicable, disclosure
of the fair value of financial instruments, both assets and liabilities
recognized and not recognized in the balance sheet. The fair values provided
below represent the amounts at which the financial instruments could have been
exchanged between willing parties on December 31.
Fair value is estimated based upon the market value of the financial
instrument or upon instruments with similar characteristics. For most
financial instruments held by the company, book value approximates fair value.
The value of financial instruments recognized on the balance sheet, for which
book value does not approximate fair value, is as follows:
December 31
1993 1992
Book Fair Book Fair
Value Value Value Value
-------- -------- -------- --------
(Thousands of dollars)
Debentures $ 50,000 $ 54,469 $ 50,000 $ 50,219
In 1993, the FASB issued Statement of Financial Accounting Standards No. 115
(FAS 115), Accounting for Certain Investments in Debt and Equity Securities.
This standard addresses the accounting and reporting for investments in equity
securities that have readily determinable fair values and for all investments
in debt securities. The company adopted FAS 115 prospectively in 1994. It is
anticipated that adoption will not have a material effect on net income.
- 22 -
<PAGE> 23
L - Commitments and Contingencies
- ---------------------------------
Discussion of take-or-pay costs and FERC Order 636 transition costs billed by
natural gas pipeline companies can be found elsewhere in this report in "Legal
Proceedings - Rate Matters" in Item 3.
M - Subsequent Events
- ---------------------
Effective January 1, 1994 Wisconsin Energy Corporation (WEC) acquired all of
the outstanding common stock of Wisconsin Southern Gas Company, Inc. (WSG)
through a statutory merger of WSG into WN in which all of WSG's common stock
was converted into common stock of WEC. WSG was a gas utility engaged in the
purchase, distribution, transportation and sale of natural gas primarily in a
section of southeastern Wisconsin which is contiguous to WN's service
territory. WSG was merged into WN using the pooling of interests method of
accounting. Accordingly, historical financial data in future reports will be
restated to include WSG. The following unaudited proforma data summarizes the
combined results of operations of the company and WSG as though the merger had
occurred at the beginning of 1991:
(Thousands of Dollars) 1993 1992 1991
---- ---- ----
Total operating revenues $331,301 $283,699 $273,804
Net income 14,155 14,209 12,913
In January 1994, WEC announced plans to merge WN into Wisconsin Electric Power
Company, a wholly-owned utility subsidiary of WEC. The merger, subject to
requisite regulatory and other approvals, is anticipated to be effective by
year-end 1994.
- 23 -
<PAGE> 24
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and the
Stockholder of Wisconsin Natural Gas Company
In our opinion, the financial statements listed under Item 14(a)(1) and (2) on
pages 25 and 26 present fairly, in all material respects, the financial
position of Wisconsin Natural Gas Company at December 31, 1993 and 1992, and
the results of its operations and its cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles. These financial statements are the responsibility of
the Company's management; our responsibility is to express an opinion on these
financial statements based on our audits. We conducted our audits of these
financial statements in accordance with generally accepted auditing standards
which require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements, assessing
the accounting principles used and significant estimates made by management,
and evaluating the overall financial statement presentation. We believe that
our audits provide a reasonable basis for the opinion expressed above. As
discussed in the Notes to Financial Statements, the Company changed its method
of accounting for income taxes and postretirement benefits effective
January 1, 1993. We concur with these changes in accounting.
/s/Price Waterhouse
- -------------------
PRICE WATERHOUSE
Milwaukee, Wisconsin
January 26, 1994
- 24 -
<PAGE> 25
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING
AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Information called for by Item 10 is omitted pursuant to General Instruction
J(2)(c) to Form 10-K.
ITEM 11. EXECUTIVE COMPENSATION
Information called for by Item 11 is omitted pursuant to General Instruction
J(2)(c) to Form 10-K.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Information called for by Item 12 is omitted pursuant to General Instruction
J(2)(c) to Form 10-K.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Information called for by Item 13 is omitted pursuant to General Instruction
J(2)(c) to Form 10-K.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) 1. Financial Statements
Included in Part II of this report:
Statement of Income and Retained Earnings for the
three years ended December 31, 1993
Statement of Cash Flows for the three years ended
December 31, 1993
Balance Sheet at December 31, 1993 and 1992
Capitalization Statement at December 31, 1993 and 1992
Notes to Financial Statements
Report of Independent Accountants
- 25 -
<PAGE> 26
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES,
AND REPORTS ON FORM 8-K (Cont'd)
(a) 2. Financial Statement Schedules
Included in Part IV of this report:
For the three years ended December 31, 1993
Schedule V Property, Plant and Equipment
Schedule VI Accumulated Depreciation,
Depletion, and Amortization of
Property, Plant and Equipment
Schedule IX Short-Term Borrowings
Schedule X Supplementary Income Statement
Information
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements
or notes thereto.
3. Exhibits
The following Exhibits are filed with this report:
Exhibit No.
(23) Consent of Independent Accountants, dated
March 30, 1994 appearing on page 33 of this
Annual Report on Form 10-K for the year ended
December 31, 1993.
In addition to the Exhibit shown above, which is filed herewith, Wisconsin
Natural hereby incorporates the following Exhibits pursuant to Exchange Act
Rule 12b-32 and Regulation Section 201.24 by reference to the filings set
forth below:
(2) Agreement and Plan of Reorganization, dated as of
July 30, 1993, by and among Wisconsin Energy
Corporation, Wisconsin Natural Gas Company and
Wisconsin Southern Gas Company, Inc., including the
related Plan and Agreement of Merger between
Wisconsin Natural and Wisconsin Southern.
(Exhibit A to the Proxy Statement/Prospectus dated
October 20, 1993 contained in the Registration
Statement of Wisconsin Energy Corporation on
Form S-4, No. 33-50653)
(3)-1 Restated Articles of Incorporation of Wisconsin
Natural Gas Company, as adopted on December 1, 1982.
(Exhibit (3)-1 to Wisconsin Natural's 1982 Form 10-K
in File No. 2-2066)
2 Bylaws of Wisconsin Natural Gas Company, as
amended to November 23, 1992. (Exhibit (3)-1
to Wisconsin Natural's 1992 Form 10-K in File
No. 2-2066)
- 26 -
<PAGE> 27
Mortgage, Indenture or Under
Supplemental Indenture Date Exhibit # File No.
------------------------------------------------------------
(4)-1 Mortgage and Deed of 6/1/50 7-C 2-8457
Trust
2 Third 9/1/57 2-D 2-13563
3 Fourth 10/15/61 2-E 2-18922
4 Fifth 11/1/62 2-F 2-20799
5 Sixth 10/1/65 2-G 2-24012
6 Seventh 9/15/67 2-H 2-27101
7 Eighth 9/15/69 4-J 2-34303
8 Ninth 7/1/71 (4)-1 2-2066
(1980
Form 10-K)
9 Tenth 9/15/86 (4)-9 2-2066
(1986
Form 10-K)
10 Eleventh 1/15/92 (4)-1 2-2066
(1991
Form 10-K)
11 Twelfth 11/1/92 (4)-1 2-2066
(9/30/92
Form 10-Q)
12 Thirteenth 1/1/94 (4)-1 2-2066
(1/01/94
Form 8-K)
13 Indenture for Debt 9/1/92 (4)-2 2-2066
Securities (9/30/92
(the "Indenture") Form 10-Q)
14 Securities 9/1/92 (4)-3 2-2066
Resolution No. 1 (9/30/92
under the Indenture Form 10-Q)
15 Securities 12/1/92 (4)-1 2-2066
Resolution No. 2 (1992
under the Indenture Form 10-K)
16 Thirteenth Supplemental
Indenture, dated
January 1, 1994, to
Indenture dated
September 1, 1950 of
Wisconsin Southern Gas
Company, Inc. (to reflect
the assumption of bonds (4)-2 2-2066
by Wisconsin Natural in (1/01/94
connection with merger). Form 8-K)
All agreements and instruments with respect to long-term debt not
exceeding 10% of the total assets of the Registrant have been
omitted as permitted by related instructions. The Registrant agrees
pursuant to Item 601(b)(4) of Regulation S-K to furnish to the
Securities and Exchange Commission, upon request, a copy of all
such agreements and instruments.
(10)-1 Supplemental Benefits Agreement between Wisconsin
Natural and employee Ronald K. Espe dated
December 14, 1990. (Exhibit (10)-1 to Wisconsin
Natural's 1990 Form 10-K in File No. 2-2066) *
- 27 -
<PAGE> 28
2 Service Agreement dated January 1, 1987 between
Wisconsin Natural Gas Company, Wisconsin Energy
Corporation and other non-utility affiliated
companies. (Exhibit (10)-(a) to Wisconsin
Natural's Form 8-K dated January 2, 1987 in
File No. 2-2066)
* Management contracts and executive compensation plans or arrangements
required to be filed as exhibits pursuant to Item 14(c) of Form 10-K.
Certain compensatory plans in which directors or executive officers of
the Registrant are eligible to participate are not filed in reliance
on the exclusion in Item 601(b)(10)(iii)(B)(6) of Regulation S-K.
(b) Reports on Form 8-K
No reports on Form 8-K were filed during the fourth quarter of the year ended
December 31, 1993.
However, a report on Form 8-K dated January 1, 1994 was filed by Wisconsin
Natural reporting the effectiveness of the acquisition of Wisconsin Southern
Gas Company, Inc. by Wisconsin Energy through a merger of Wisconsin Southern
Gas Company, Inc. into Wisconsin Natural, a wholly-owned subsidiary of
Wisconsin Energy, and filing the related historical financial statements and
pro forma financial information.
Additionally, a report on Form 8-K dated January 24, 1994 was filed by
Wisconsin Natural reporting the announced plan of Wisconsin Energy to merge
Wisconsin Natural into Wisconsin Energy's wholly-owned principal utility
subsidiary, Wisconsin Electric, anticipated to be effective by year-end 1994.
- 28 -
<PAGE> 29
WISCONSIN NATURAL GAS COMPANY
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
DECEMBER 31
Col. A Col. F
------ -------------------------------
Classification 1993 1992 1991
-------------- ---- ---- ----
(Thousands of Dollars)
Gas Utility Plant
Storage Plant $ 9,101 $ 9,101 $ 9,030
Distribution Plant 345,732 328,110 309,846
General Plant 37,712 34,490 33,239
Work in Progress 487 1,255 972
-------- -------- --------
Total Gas Utility Plant 393,032 372,956 353,087
Nonutility Property 70 79 79
-------- -------- --------
Total Property and Plant $393,102 $373,035 $353,166
======== ======== ========
Note: Neither total additions nor total retirements in 1993, 1992, and 1991
amounted to more than 10% of the total property balances at December
31 of these years. All additions were for ordinary extensions and
improvements of the system. Additions include Allowance for Funds
Used During Construction of $6,000 in 1993, $50,000 in 1992, and
$305,000 in 1991. Total additions and retirements for the years
1991-1993 are shown below.
1993 1992 1991
---- ---- ----
(Thousands of Dollars)
Total Additions $ 21,367 $ 22,628 $ 20,892
Total Retirements 1,300 2,759 1,364
Depreciation
Depreciation expense is accrued at straight line rates certified by the
PSCW. The average depreciation rate was 4.0% in 1993, 4.0% in 1992
and 3.9% in 1991.
- 29 -
<PAGE> 30
<TABLE>
WISCONSIN NATURAL GAS COMPANY
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND
AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Other
Balance at Charged to Changes- Balance at
Description Beginning of Costs and Add End of
Period Expenses Retirements (Deduct) Period
(Note A)
------------ ---------- ----------- -------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Year Ended December 31, 1993:
- -----------------------------
Accumulated Depreciation
Gas Utility $165,920 $16,207 $ 903 $(1,022) $180,202
Nonutility 8 - 8 - -
-------- ------- ------ -------- --------
Total $165,928 $16,207 $ 911 $(1,022) $180,202
======== ======= ====== ======== ========
Year Ended December 31, 1992:
- -----------------------------
Accumulated Depreciation
Gas Utility $154,739 $15,431 $3,144 $(1,106) $165,920
Nonutility 8 - - - 8
-------- ------- ------ -------- --------
Total $154,747 $15,431 $3,144 $(1,106) $165,928
======== ======= ====== ======== ========
Year Ended December 31, 1991:
- -----------------------------
Accumulated Depreciation
Gas Utility $143,210 $14,365 $1,772 $(1,064) $154,739
Nonutility 8 - - - 8
-------- ------- ------ -------- --------
Total $143,218 $14,365 $1,772 $(1,064) $154,747
======== ======= ====== ======== ========
<FN>
Note A - After deduction of net salvage from property retired.
- 30 -
</TABLE>
<PAGE> 31
<TABLE>
WISCONSIN NATURAL GAS COMPANY
SCHEDULE IX - SHORT-TERM BORROWINGS
<CAPTION>
Col. A Col. B Col. C Col. D Col. E Col. F
Maximum Average Weighted
Weighted Amount Amount Average
Balance at Average Outstanding Outstanding Interest
Category of Aggregate End of Interest During the During the Rate During
Short-Term Borrowings Period Rate Period Period the Period
(Note A) (Note B) (Note C)
- --------------------- ----------- -------- ------------ ----------- -----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Year 1993
- ---------
Notes payable to banks $39,999 3.28% $39,999 $10,207 3.20%
Commercial paper 28,509 3.31% 65,518 28,580 3.36%
Year 1992
- ---------
Notes payable to banks $ 4,999 4.08% $ 4,999 $ 4,999 3.94%
Commercial paper $38,584 3.54% $57,418 $32,273 4.08%
Year 1991
- ---------
Notes payable to banks $ 4,999 4.24% $ 4,999 $ 4,999 5.96%
Commercial paper $43,424 5.09% $43,424 $22,931 6.35%
<FN>
Note A - Bank loans include a note due within one year. Commercial paper outstanding at
December 31, 1993 is due within one month.
Note B - Based on daily amounts outstanding.
Note C - The weighted average interest rate was derived by relating short-term interest expense to
average short-term loans outstanding.
- 31 -
</TABLE>
<PAGE> 32
WISCONSIN NATURAL GAS COMPANY
SCHEDULE X - SUPPLEMENTARY INCOME STATEMENT INFORMATION (Note A)
Col. A Col. B
Charged to Costs and Expenses
-----------------------------
Item 1993 1992 1991
---- ---- ---- ----
(Thousands of Dollars)
Taxes other than payroll and
income taxes
Wisconsin license fee tax $2,328 $2,221 $2,128
Other(B) 421 308 (75)
------ ------ ------
Total $2,749 $2,529 $2,053
====== ====== ======
Note A - Maintenance expense and depreciation are shown on the Income
Statement. No royalties were paid and advertising costs did
not exceed 1% of revenues.
Note B - 1991 includes Wisconsin ad valorem tax refunds for years
1984-1985 and 1986-1989.
1992 includes Wisconsin ad valorem tax refunds for years
1986-1989.
- 32 -
<PAGE> 33
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements and Prospectuses constituting part of the Registration Statements
on Form S-3 (Nos. 33-41368 and 33-48927) of Wisconsin Natural Gas Company of
our report dated January 26, 1994 appearing on page 24 of this Form 10-K.
/s/Price Waterhouse
- -------------------
PRICE WATERHOUSE
Milwaukee, Wisconsin
March 30, 1994
- 33 -
<PAGE> 34
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 NATURAL GAS COMPANY
/s/R. A. Abdoo
By -------------------------------------
Date March 30, 1994 (R. A. Abdoo, Chairman of the Board
and Chief Executive Officer)
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
Signature and Title Date
/s/R. A. Abdoo
- ----------------------------------------------- March 30, 1994
(R. A. Abdoo, Chairman of the Board and
Chief Executive Officer and Director
- Principal Executive Officer)
/s/R. K. Espe
- ----------------------------------------------- March 30, 1994
(R. K. Espe, President and Chief
Operating Officer and Director)
/s/J. G. Remmel
- ----------------------------------------------- March 30, 1994
(J. G. Remmel, Chief Financial Officer and
Director - Principal Financial Officer)
/s/A. K. Klisurich
- ----------------------------------------------- March 30, 1994
(A. K. Klisurich, Controller
- Principal Accounting Officer)
/s/R. H. Gorske
- ----------------------------------------------- March 30, 1994
(R. H. Gorske, Vice President and
General Counsel and Director)
/s/D. K. Porter
- ----------------------------------------------- March 30, 1994
(D. K. Porter, Vice President and Director)
- 34 -
<PAGE> 35
Wisconsin Natural Gas Company
EXHIBIT INDEX
-------------
1993 Annual Report on Form 10-K
Exhibit
Number
-------
(23) Consent of Independent Accountants, dated March 30, 1994 appearing
on page 33 of this Annual Report on Form 10-K for the year ended
December 31, 1993.
The foregoing Exhibit is filed with this report. The additional Exhibits
which are incorporated by reference are listed in Item 14(a)(3) of this
report.
- 35 -
