<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended September 30, 1994
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 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) 221-2345
(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 November 1, 1994
------------------------- -------------------------------
$1 Par Value Common Stock 1,725,000 Shares
The registrant meets the conditions set forth in General Instruction H(1)(a)
and (b) of Form 10-Q for omission of data by certain wholly-owned subsidiaries
and is therefore filing this Form with the reduced disclosure format.
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<TABLE>
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN NATURAL GAS COMPANY
CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended Nine Months Ended
September 30 September 30
------------------ ------------------
1994 1993 * 1994 1993 *
---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues $ 37,563 $ 42,421 $243,644 $226,423
Operating Expenses
Cost of gas sold 23,149 29,746 151,587 147,179
Other operation expenses 15,511 15,484 48,771 45,727
Maintenance 1,544 1,897 4,848 5,117
Revitalization - - 10,400 -
Depreciation 4,231 4,098 12,560 12,216
Income taxes (3,764) (4,291) 3,266 3,447
-------- -------- -------- --------
Total Operating Expenses 40,671 46,934 231,432 213,686
Operating Income (3,108) (4,513) 12,212 12,737
Other Income and Deductions
Miscellaneous - net 101 92 391 289
Income taxes (59) (39) (162) (120)
-------- -------- -------- --------
Total Other Income and Deductions 42 53 229 169
Income Before Interest Charges (3,066) (4,460) 12,441 12,906
Interest Charges 1,948 2,192 5,812 6,323
-------- -------- -------- --------
Net Income (Loss) $ (5,014) $ (6,652) $ 6,629 $ 6,583
======== ======== ======== ========
<FN>
* Restated to reflect the merger of Wisconsin Southern Gas Company, Inc.
into Wisconsin Natural Gas Company effective on 1/1/94.
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 accompanying notes to financial statements.
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</TABLE>
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<TABLE>
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
September 30, 1994 December 31, 1993 *
------------------ -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Plant $459,065 $444,453
Accumulated provision for depreciation (216,140) (205,247)
-------- --------
Net Utility Plant 242,925 239,206
Other Property and Investments 2,353 1,013
Current Assets
Cash and cash equivalents 6,429 6,964
Accounts receivable 7,178 27,715
Accrued utility revenues 9,094 39,153
Materials, supplies and natural gas
stored 38,988 43,089
Prepayments and other assets 3,284 3,768
-------- --------
Total Current Assets 64,973 120,689
Deferred Charges and Other Assets
Accumulated deferred income taxes 17,864 14,370
Other 10,524 10,182
-------- --------
Total Deferred Charges and Other Assets 28,388 24,552
-------- --------
Total Assets $338,639 $385,460
======== ========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 81,016 $ 81,016
Retained earnings 45,551 46,797
-------- --------
Total Common Stock Equity 126,567 127,813
Long-term debt 68,217 80,482
-------- --------
Total Capitalization 194,784 208,295
Current Liabilities
Long-term debt due currently 10,570 2,653
Short-term debt 39,554 75,308
Accounts payable 17,070 29,561
Accrued liabilities 5,754 9,918
Other 4,063 3,448
-------- --------
Total Current Liabilities 77,011 120,888
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 31,348 30,083
Other 35,496 26,194
-------- --------
Total Deferred Credits and Other Liabilities 66,844 56,277
-------- --------
Total Capitalization and Liabilities $338,639 $385,460
======== ========
<FN>
* Restated to reflect the merger of Wisconsin Southern Gas Company, Inc.
into Wisconsin Natural Gas Company effective on 1/1/94.
See accompanying notes to financial statements.
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</TABLE>
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<TABLE>
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended September 30
------------------------------
1994 1993 *
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $ 6,629 $ 6,583
Reconciliation to cash:
Depreciation 12,560 12,216
Revitalization - net 7,920 -
Deferred income taxes - net (2,229) 1,232
Investment tax credit - net (372) (342)
Change in: Accounts receivable 20,537 12,849
Inventories 4,101 (34,842)
Accounts payable (12,491) (6,403)
Other current assets 30,543 19,158
Other current liabilities (3,549) (362)
Other 2,131 845
-------- --------
Cash Provided by Operating Activities 65,780 10,934
Investing Activities:
Construction expenditures (15,957) (15,605)
Other (2,323) (443)
-------- --------
Cash Used in Investing Activities (18,280) (16,048)
Financing Activities:
Sale of long-term debt 9,290 (43)
Retirement of long-term debt (13,696) (4,048)
Change in short-term debt (35,754) 18,015
Dividends on stock - common (7,875) (7,211)
Other - 18
-------- --------
Cash Provided by (Used in) Financing Activities (48,035) 6,731
-------- --------
Change in Cash and Cash Equivalents $ (535) $ 1,617
======== ========
Supplemental Information Disclosures:
Cash Paid for:
Interest (net of amount capitalized) $ 6,008 $ 6,333
Income taxes 9,946 5,253
<FN>
* Restated to reflect the merger of Wisconsin Southern Gas Company, Inc.
into Wisconsin Natural Gas Company effective on 1/1/94.
See accompanying notes to financial statements.
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</TABLE>
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FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-------------------------------
NOTES TO FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited financial statements should be read in
conjunction with the company's 1993 Annual Report on Form 10-K. In the
opinion of management, all adjustments, normal and recurring in nature,
necessary to a fair statement of the results of operations and financial
position of the company have been included in the accompanying income
statement and balance sheet. The results of operations for the three
months and nine months ended September 30, 1994 are not, however,
necessarily indicative of the results which may be expected for the year
1994 because of seasonal and other factors.
2. In the first quarter of 1994, Wisconsin Natural Gas Company recorded
a $10.4 million charge related to its revitalization program. The charge
reflects primarily the costs of voluntary severance and early retirement
packages which are being used to reduce employee staffing levels.
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FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
--------------------------------
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Third Quarter Results:
Total gas deliveries increased 4.6% during the three months ended September
30, 1994 relative to the same period in 1993 while Operating Revenues
decreased $4.9 million, adjusted for the merger of Wisconsin Southern Gas
Company Inc. ("Wisconsin Southern") into Wisconsin Natural Gas Company
("Wisconsin Natural") effective January 1, 1994. Revenues declined primarily
due to lower purchased gas costs during the period. Contributing to the
increase in gas deliveries was an increase in sales to the Concord Generating
Station of 2.8 million therms in the Interruptible class. Sales to the
Concord Station, a four unit peaking power plant owned by Wisconsin Electric
Power Company, principal subsidiary of Wisconsin Energy Corporation, are at
rates approved by the Public Service Commission of Wisconsin ("PSCW"). Two of
the Concord units were in operation in 1993 and all four units were in
operation in 1994.
The merger of Wisconsin Southern into Wisconsin Natural was structured to
qualify as a pooling of interests for accounting and financial reporting
purposes beginning in 1994. Accordingly, historical financial data is
restated to include Wisconsin Southern.
GAS DELIVERIES
Three Months Ended
September 30
---------------------------
Therms Delivered - Thousands 1994 1993* % Change
- ------------------------------- ---------- ---------- --------
Residential 22,575 20,497 10.1
Commercial and Industrial 14,250 17,345 (17.8)
Interruptible 9,586 5,788 65.6
---------- ----------
Total Sales 46,411 43,630 6.4
Transported Customer Owned Gas 50,397 48,926 3.0
---------- ----------
Total Gas Delivered 96,808 92,556 4.6
- -------------------------------
* Note: The 1993 amounts for gas therms delivered have been restated to
reflect the merger of Wisconsin Southern into Wisconsin Natural effective
on 1/1/94.
Wisconsin Natural transports gas for its customers who purchase gas directly
from other suppliers, which accounted for approximately 52.1% of total therms
delivered by Wisconsin Natural during the third quarter of 1994 compared to
52.9% during the third quarter of 1993.
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FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
SOURCES OF NATURAL GAS
As a result of FERC Order 636, 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.
Wisconsin Natural arranges for its own gas supply under contracts with terms
of various lengths. Changes in the cost of natural gas purchased at market
prices are passed through to customers via Wisconsin Natural's purchased gas
adjustment clause.
With the decoupling of rates and services under FERC Order 636, Wisconsin
Natural has been purchasing more gas than it has in the past for storage
pending future withdrawal during the heating season under various arrangements
that it has made with gas storage facilities. 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. At September 30,
1994 the cost of natural gas stored for future use was $35.2 million compared
to $47.5 million stored at September 30, 1993. Gas stored at these facilities
is purchased by Wisconsin Natural from a number of suppliers.
For additional information regarding matters pertaining to gas operations,
refer to ITEM 1. BUSINESS - GAS UTILITY OPERATIONS in PART I of Wisconsin
Natural's Annual Report on Form 10-K for the year ended December 31, 1993.
Year-to-Date Results:
Net income during the nine months ended September 30, 1994 was flat compared
to the same period during 1993. A 7.6% increase in operating revenues was
largely offset by a non-recurring charge of approximately $6 million (net of
tax) incurred during the first quarter of 1994 as part of the "Revitalization"
program undertaken at Wisconsin Natural. This charge includes the cost of
voluntary severance and early retirement packages used to reduce employee
staffing levels by up to 150 employees. It is anticipated that this charge
will be offset by the end of 1995 through savings in operation and maintenance
costs. The ultimate timing of the cash flows for this item will depend in
part upon the funding limitations of the Wisconsin Natural pension plans, $2.5
million have been paid through September 30, 1994. Excluding the non-
recurring charge, earnings would have increased by about $6 million during the
first nine months when compared to last year.
The increase in operating revenues was largely the result of increased gas
deliveries and the $9.2 million, or 3.3% annualized rate increase effective
since September 2, 1993 offset by lower purchased gas costs.
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<PAGE> 8
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
GAS DELIVERIES
Nine Months Ended September 30
------------------------------
Therms Delivered - Thousands 1994 1993* % Change
- ------------------------------- ---------- ---------- --------
Residential 233,226 216,924 7.5
Commercial and Industrial 140,635 134,982 4.2
Interruptible 37,176 22,696 63.8
---------- ----------
Total Sales 411,037 374,602 9.7
Transported Customer Owned Gas 175,025 185,427 (5.6)
---------- ----------
Total Gas Delivered 586,062 560,029 4.6
- -------------------------------
* Note: The 1993 amounts for gas therms delivered have been restated to
reflect the merger of Wisconsin Southern into Wisconsin Natural effective
on 1/1/94.
Natural gas therm deliveries during the first nine months of 1994 were
positively impacted by, among other things, colder weather conditions during
the first quarter of 1994. As measured by heating degree days, the first
quarter of 1994 was 9% colder compared to the same period during 1993. Also
contributing to the higher therm deliveries was an increase in sales of 7
million therms to the Concord Generating Station in the Interruptible class.
Customer-owned gas transported by Wisconsin Natural accounted for 29.9% of
total therms delivered during the nine months ended September 30, 1994
compared to 33.1% in the same period during 1993. Largely due to the Federal
Energy Regulatory Commission ("FERC") Order 636, which has fostered increased
competition in the natural gas industry, Wisconsin Natural believes that some
of its existing gas transportation customers will switch to purchasing gas
directly from Wisconsin Natural, reducing the amount of customer-owned gas to
be transported. However, 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.
For certain other information which may impact Wisconsin Natural's future
financial condition or results of operations, see ITEM 5. OTHER INFORMATION in
Part II.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with ITEM 3. LEGAL
PROCEEDINGS in PART I of Wisconsin Natural's Annual Report on Form 10-K for
the year ended December 31, 1993.
Personal Injury Suit
On October 1, 1994, a jury returned a $2.85 million verdict against Wisconsin
Natural Gas Company in a case in Circuit Court, Milwaukee County, involving a
gas pipe fire. Wisconsin Natural has filed motions after the verdict seeking
dismissal of the case as a matter of law or new trial, and/or reduction of the
damage award. The contract with the construction company that installed the
gas pipe provides for indemnification of Wisconsin Natural and notice has been
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<PAGE> 9
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
---------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 1. LEGAL PROCEEDINGS (Cont'd)
Personal Injury Suit (Cont'd)
given to the construction company and its insurers that Wisconsin Natural
intends to pursue its indemnification rights. The matter is pending.
The Company is self-insured for the first $2 million of any liability loss.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibit is filed with this report:
(27) Wisconsin Natural Gas Company Financial Data
Schedule for the nine months ended September 30, 1994.
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed in the quarter ended
September 30, 1994.
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<PAGE> 10
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-------------------------------
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 NATURAL GAS COMPANY
--------------------------------------
(Registrant)
s/J. W. Boston
------------------------------------
Date: November 14, 1994 J. W. Boston, President and Chief
Operating Officer
s/A. K. Klisurich
------------------------------------
Date: November 14, 1994 A. K. Klisurich, Controller
(Chief Accounting Officer)
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WISCONSIN NATURAL GAS COMPANY
----------------------------------
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1994
Exhibit
Number
- -------
(27) Wisconsin Natural Gas Company Financial Data Schedule
for the nine months ended September 30, 1994.
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<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN NATURAL
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND IS QUALIFIED
IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> SEP-30-1994
<PERIOD-TYPE> 9-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 242,925
<OTHER-PROPERTY-AND-INVEST> 2,353
<TOTAL-CURRENT-ASSETS> 64,973
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 28,388
<TOTAL-ASSETS> 338,639
<COMMON> 34,500
<CAPITAL-SURPLUS-PAID-IN> 46,516
<RETAINED-EARNINGS> 45,551
<TOTAL-COMMON-STOCKHOLDERS-EQ> 126,567
0
0
<LONG-TERM-DEBT-NET> 68,217
<SHORT-TERM-NOTES> 27,999
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 11,555
<LONG-TERM-DEBT-CURRENT-PORT> 10,570
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 93,731
<TOT-CAPITALIZATION-AND-LIAB> 338,639
<GROSS-OPERATING-REVENUE> 243,644
<INCOME-TAX-EXPENSE> 3,266
<OTHER-OPERATING-EXPENSES> 228,166
<TOTAL-OPERATING-EXPENSES> 231,432
<OPERATING-INCOME-LOSS> 12,212
<OTHER-INCOME-NET> 229
<INCOME-BEFORE-INTEREST-EXPEN> 12,441
<TOTAL-INTEREST-EXPENSE> 5,812
<NET-INCOME> 6,629
0
<EARNINGS-AVAILABLE-FOR-COMM> 6,629
<COMMON-STOCK-DIVIDENDS> 7,875
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 65,780
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
Earnings per share of common stock is not applicable because all of
the company's common stock is owned by Wisconsin Energy Corporation.
See financial statements and footnotes in accompanying 10-Q.
