<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
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 August 1, 1995
------------------------- -----------------------------
$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.
<PAGE> 2
<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 Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
(Thousands of Dollars)
<S> <C> <C> <C> <C>
Operating Revenues $ 55,175 $ 58,502 $176,275 $206,081
Operating Expenses
Cost of gas sold 32,536 37,285 105,339 128,438
Other operation expenses 14,245 14,962 29,856 33,260
Maintenance 1,201 1,787 2,512 3,304
Revitalization - - - 10,400
Depreciation 4,364 4,183 8,756 8,329
Income taxes 174 (784) 10,067 7,030
-------- -------- -------- --------
Total Operating Expenses 52,520 57,433 156,530 190,761
Operating Income 2,655 1,069 19,745 15,320
Other Income and Deductions
Miscellaneous - net 143 161 261 290
Income Taxes (58) (49) (105) (103)
-------- -------- -------- --------
Total Other Income and Deductions 85 112 156 187
Income Before Interest Charges 2,740 1,181 19,901 15,507
Interest Charges 1,617 1,772 3,696 3,864
-------- -------- -------- --------
Net Income (Loss) $ 1,123 $ (591) $ 16,205 $ 11,643
======== ======== ======== ========
<FN>
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.
- 2 -
</TABLE>
<PAGE> 3
<TABLE>
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Plant $475,853 $468,224
Accumulated provision for depreciation (228,542) (220,192)
-------- --------
Net Utility Plant 247,311 248,032
Other Property and Investments 2,432 2,344
Current Assets
Cash and cash equivalents 2,423 3,392
Accounts receivable 25,182 22,286
Accrued utility revenues 6,543 33,056
Materials, supplies and natural gas
stored 22,871 33,213
Prepayments and other assets 5,110 4,599
-------- --------
Total Current Assets 62,129 96,546
Deferred Charges and Other Assets
Accumulated deferred income taxes 18,774 18,799
Other 10,389 10,897
-------- --------
Total Deferred Charges and Other Assets 29,163 29,696
-------- --------
Total Assets $341,035 $376,618
======== ========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 81,016 $ 81,016
Retained earnings 61,886 51,106
-------- --------
Total Common Stock Equity 142,902 132,122
Long-term debt 66,551 66,519
-------- --------
Total Capitalization 209,453 198,641
Current Liabilities
Long-term debt due currently - 12,290
Short-term debt 13,299 55,478
Accounts payable 21,407 23,575
Accrued liabilities 4,250 12,313
Other 26,822 9,248
-------- --------
Total Current Liabilities 65,778 112,904
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 32,643 32,182
Other 33,161 32,891
-------- --------
Total Deferred Credits and Other Liabilities 65,804 65,073
-------- --------
Total Capitalization and Liabilities $341,035 $376,618
======== ========
<FN>
See accompanying notes to financial statements.
- 3 -
</TABLE>
<PAGE> 4
<TABLE>
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Six Months Ended June 30
--------------------------
1995 1994
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $16,205 $11,643
Reconciliation to cash:
Depreciation 8,756 8,329
Revitalization - net (311) 8,531
Deferred income taxes - net 500 (2,571)
Investment tax credit - net (222) (248)
Change in: Accounts receivable (2,896) 299
Inventories 10,342 14,389
Accounts payable (2,168) (8,712)
Other current assets 26,002 31,351
Other current liabilities 9,511 15,838
Other 1,628 431
-------- --------
Cash Provided by Operating Activities 67,347 79,280
Investing Activities:
Construction expenditures (8,426) (8,171)
Other - (2,216)
-------- --------
Cash Used in Investing Activities (8,426) (10,387)
Financing Activities:
Sale of long-term debt - 9,290
Retirement of long-term debt (12,286) (10,748)
Change in short-term debt (42,179) (62,310)
Dividends on stock - common (5,425) (5,250)
-------- --------
Cash Used in Financing Activities (59,890) (69,018)
-------- --------
Change in Cash and Cash Equivalents $ (969) $ (125)
======== ========
Supplemental Information Disclosures:
Cash Paid for:
Interest (net of amount capitalized) $ 3,829 $ 3,836
Income taxes 17,982 6,900
<FN>
See accompanying notes to financial statements.
- 4 -
</TABLE>
<PAGE> 5
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 1994 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 six months ended June 30, 1995 are not, however, necessarily
indicative of the results which may be expected for the year 1995 because
of seasonal and other factors.
2. On April 28, 1995, Wisconsin Energy Corporation ("WEC"), Wisconsin Natural
Gas Company's ("Wisconsin Natural") parent company, and Northern States
Power Company, Minnesota ("NSP") entered into an Agreement and Plan of
Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement"). The Merger Agreement provides for a strategic business
combination involving NSP and WEC in a "merger-of-equals" transaction. As
a result, a registered utility holding company, which will be known as
Primergy Corporation ("Primergy"), will be the parent of NSP and the
current operating subsidiaries of NSP and WEC. The business combination
is intended to be tax-free for income tax purposes and to be accounted for
as a "pooling of interests".
The Merger Agreement is subject to various conditions, including approval
of the stockholders of WEC and NSP and the approval of various regulatory
agencies. On July 10, 1995 WEC and NSP filed an application and
supporting testimony with the Federal Energy Regulatory Commission seeking
approval of the proposed merger. Similar filings will be made later this
year with regulatory agencies in states where WEC and NSP provide utility
services. The Merger Agreement and certain other related matters will be
submitted to shareholders of WEC and NSP for their consideration at
meetings scheduled for September 13, 1995. WEC and NSP anticipate
completing this business combination late in 1996. ITEM 5. OTHER
INFORMATION in Part II of this report contains further information
concerning the proposed transaction.
3. WEC intends to merge Wisconsin Natural into Wisconsin Electric Power
Company, the principal subsidiary of WEC, to form a single combined
utility subsidiary. All required regulatory approvals for the merger have
been received. Completion of the planned merger is expected to occur by
January 1, 1996.
- 5 -
<PAGE> 6
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
Wisconsin Energy Corporation ("Wisconsin Energy" or "WEC"), the parent company
of Wisconsin Natural Gas Company ("Wisconsin Natural"), has entered into an
agreement with Northern States Power Company ("NSP") which provides for a
strategic business combination involving WEC and NSP in a "merger-of-equals"
transaction. Further information concerning such agreement and proposed
transaction is included in ITEM 5. OTHER INFORMATION in Part II of this
report.
RESULTS OF OPERATIONS
Second Quarter Results:
Net income increased $1.7 million during the second quarter of 1995 compared
to the same period during 1994. In the second quarter of 1995, gas revenues
decreased 5.7% from the same period in 1994. However, gas margins (operating
revenue less cost of gas sold) increased 6.7% in these comparative periods as
a result of an increase in gas deliveries. For the same periods, other
operation and maintenance expenses decreased 7.8%.
GAS DELIVERIES
Three Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 49,845 42,982 16.0
Commercial and Industrial 30,652 28,495 7.6
Interruptible 11,900 10,612 12.1
---------- ----------
Total Sales 92,397 82,089 12.6
Transported Customer Owned Gas 59,967 55,365 8.3
---------- ----------
Total Gas Delivered 152,364 137,454 10.8
- -------------------------------
Natural gas therm deliveries during the second quarter of 1995 increased
10.8%, primarily due to cooler weather. As measured by heating degree days,
the second quarter of 1995 weather was 4.9% cooler compared to the same period
in 1994.
SOURCES OF NATURAL GAS
Wisconsin Natural purchases gas for injection into storage for future
withdrawal during the heating season under various arrangements with gas
storage facilities. At June 30, 1995, the cost of natural gas stored for
future use was $18.1 million, representing a $6.4 million decrease from the
cost of natural gas stored at June 30, 1994. 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, 1994.
- 6 -
<PAGE> 7
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-----------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
Year-to-Date Results:
Net income increased approximately $4.6 million during the six months ended
June 30, 1995 compared to the same period in 1994, reflecting a non-recurring
charge in the first quarter of 1994 of approximately $6 million (net of tax)
associated with Wisconsin Natural's restructuring program. This charge
included the cost of severance and early retirement packages, elements of a
"revitalization" program designed to better position Wisconsin Natural in a
changing market place. It is anticipated that this charge will be offset by
the end of 1995 through savings in operation and maintenance costs. Excluding
the non-recurring charge in 1994, net income decreased approximately $1.4
million during the six months period ended June 30, 1995 compared to the same
period during 1994.
Gas revenues decreased 14.5% and gas margins (operating revenue less cost of
gas sold) decreased 8.6% as a result of lower natural gas deliveries. This
was offset somewhat by a 11.5% reduction in operating and maintenance
expenses, reflecting among other things, the effects of the company's
"revitalization" program.
GAS DELIVERIES
Six Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 195,048 210,651 (7.4)
Commercial and Industrial 120,978 126,385 (4.3)
Interruptible 25,999 27,590 (5.8)
---------- ----------
Total Sales 342,025 364,626 (6.2)
Transported Customer Owned Gas 141,834 124,628 13.8
---------- ----------
Total Gas Delivered 483,859 489,254 (1.1)
- -------------------------------
Natural gas therm deliveries during the first six months of 1995 also
decreased primarily due to the mild winter weather in the first quarter of
1995. As measured by heating degree days, the first quarter of 1995 was 14.7%
warmer compared to the same period in 1994. The warmer winter weather reduced
residential and commercial sales which have higher margins. Interruptible and
transportation deliveries combined showed an increase over the same period.
However, the margin on these deliveries is lower than on residential and
commercial customers.
For certain other information which may impact Wisconsin Natural's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
- 7 -
<PAGE> 8
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-----------------------------------
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, 1994 and ITEM 1. LEGAL PROCEEDINGS in PART II of
Wisconsin Natural's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
RATE MATTERS
Wisconsin Retail Gas Jurisdiction
1996 Test Year: On March 27, 1995, Wisconsin Electric Power Company ("Wisconsin
Electric") and Wisconsin Natural sent a letter to the Public Service
Commission of Wisconsin ("PSCW") proposing a one year deferral of their
scheduled rate case filing. On May 1, 1995, Wisconsin Electric and Wisconsin
Natural filed with the PSCW required data related to the 1996 test year. This
was an abbreviated filing since no increase in rates was requested. The
Citizens Utility Board ("CUB") filed a petition seeking a reduction in rates
of $100 million and a hearing on the companies' request for a freeze on rates
in 1996. Other parties filed in support of CUB's petition. The companies are
opposing the petition. The PSCW staff has reviewed the companies' data and
has developed a preliminary recommendation for an electric rate decrease of
between 2% and 3%, a gas rate decrease of approximately 2.5%, and a steam rate
decrease of about 5%. The PSCW staff recommendation is based upon a
regulatory return on equity of 11.3%. This matter is expected to come before
the PSCW in mid-August or September 1995. Any change in rates would likely
not take effect until after January 1, 1996.
ITEM 5. OTHER INFORMATION
PURCHASED GAS ADJUSTMENT MECHANISM
On June 30, 1995, Wisconsin Natural filed with the PSCW a proposal to replace
the current Purchased Gas Adjustment ("PGA") mechanism with a new market-based
pricing mechanism. The proposed gas pricing mechanism would link gas
commodity prices to market indices and incorporate all other gas supply costs
such as transportation and storage, under a price cap. The price cap would be
designed to provide balanced financial incentives and risks for Wisconsin
Natural based on performance standards, while ensuring a reliable gas supply
for consumers. On July 25, 1995, the PSCW decided to analyze and review this
proposal as part of a generic PGA docket that will review alternatives for gas
cost recovery. The matter is pending.
WISCONSIN ENERGY MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
On April 28, 1995, Wisconsin Energy Corporation ("Wisconsin Energy" or "WEC"),
the parent company of Wisconsin Natural Gas Company ("Wisconsin Natural"),
entered into an Agreement and Plan of Merger with Northern States Power
Company ("NSP") which provides for a strategic business combination involving
Wisconsin Energy and NSP in a "merger-of-equals" transaction, as previously
- 8 -
<PAGE> 9
FORM 10-Q
WISCONSIN NATURAL GAS COMPANY
-----------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 5. OTHER INFORMATION (Cont'd)
reported in WEC's Current Report on Form 8-K dated as of April 28, 1995 and in
its Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 ("WEC's
3/31/95 10-Q"). The Agreement and Plan of Merger was amended and restated as
of July 26, 1995 to make certain nonsubstantive changes. The Amended and
Restated Agreement and Plan of Merger, dated as of April 28, 1995, as amended
and restated as of July 26, 1995, is referred to herein as the "Merger
Agreement." Further information concerning such agreement and proposed
transaction is included in ITEM 1. FINANCIAL STATEMENTS, Notes to Financial
Statements, in Part I of this report, and detailed information with respect
thereto will be included in the Joint Proxy Statement/Prospectus which will be
sent to shareholders of NSP and WEC in connection with their respective
shareholder meetings to vote on the Merger Agreement and certain related
matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following Exhibit is filed with this report:
Exhibit No.
(27)-1 Wisconsin Natural Gas Company Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057; certain other related documents were also filed as
exhibits to such report.) (The Amended and Restated Merger
Agreement, dated as of April 28, 1995, as amended and restated
as of July 26, 1995, will be filed as an exhibit to Wisconsin
Energy Corporation's Registration Statement on Form S-4 to be
filed for the registration under the Securities Act of 1933 of
the securities to be issued pursuant to the Amended and
Restated Merger Agreement.)
(b) Reports on Form 8-K:
No current reports on Form 8-K were filed in the quarter ended June 30,
1995.
- 9 -
<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/R. R. Grigg, Jr.
------------------------------------
Date: August 3, 1995 R. R. Grigg, Jr., President and
Chief Operating Officer
/s/A. K. Klisurich
------------------------------------
Date: August 3, 1995 A. K. Klisurich, Controller - Chief
Accounting Officer
- 10 -
<PAGE> 11
Wisconsin Natural Gas Company
EXHIBIT INDEX
-------------
Form 10-Q for Quarter ended 6/30/95
Exhibit
Number
-------
(27)-1 Wisconsin Natural Gas Company Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057; certain other related documents were also filed as
exhibits to such report.) (The Amended and Restated Merger
Agreement, dated as of April 28, 1995, as amended and restated
as of July 26, 1995, will be filed as an exhibit to Wisconsin
Energy Corporation's Registration Statement on Form S-4 to be
filed for the registration under the Securities Act of 1933 of
the securities to be issued pursuant to the Amended and
Restated Merger Agreement.)
- 11 -
</DOCUMENT/>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN NATURAL FOR
THE SIX MONTHS ENDED JUNE 30, 1995 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-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<PERIOD-TYPE> 6-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 247,311
<OTHER-PROPERTY-AND-INVEST> 2,432
<TOTAL-CURRENT-ASSETS> 62,129
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 29,163
<TOTAL-ASSETS> 341,035
<COMMON> 1,725
<CAPITAL-SURPLUS-PAID-IN> 79,291
<RETAINED-EARNINGS> 61,886
<TOTAL-COMMON-STOCKHOLDERS-EQ> 142,902
0
0
<LONG-TERM-DEBT-NET> 66,551
<SHORT-TERM-NOTES> 13,299
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 118,283
<TOT-CAPITALIZATION-AND-LIAB> 341,035
<GROSS-OPERATING-REVENUE> 176,275
<INCOME-TAX-EXPENSE> 10,067
<OTHER-OPERATING-EXPENSES> 146,463
<TOTAL-OPERATING-EXPENSES> 156,530
<OPERATING-INCOME-LOSS> 19,745
<OTHER-INCOME-NET> 156
<INCOME-BEFORE-INTEREST-EXPEN> 19,901
<TOTAL-INTEREST-EXPENSE> 3,696
<NET-INCOME> 16,205
0
<EARNINGS-AVAILABLE-FOR-COMM> 16,205
<COMMON-STOCK-DIVIDENDS> 5,425
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 67,347
<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.
</TABLE>
