<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant /X/
Filed by a party other than the registrant / /
Check the appropriate box:
/ / Preliminary proxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive proxy statement
/ / Definitive additional materials
/ / Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
WISCONSIN POWER AND LIGHT COMPANY
--------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
WISCONSIN POWER AND LIGHT COMPANY
--------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
/X/ $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11.
(1) Title of each class of securities to which transaction applies:
--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
--------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
--------------------------------------------------------------------------------
(5) Total fee paid:
--------------------------------------------------------------------------------
/ / Fee paid previously with preliminary materials.
--------------------------------------------------------------------------------
/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
--------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
--------------------------------------------------------------------------------
(3) Filing party:
--------------------------------------------------------------------------------
(4) Date filed:
--------------------------------------------------------------------------------
<PAGE> 2
[Logo]
Wisconsin Power & Light Company, 222 West Washington Avenue, P. O. Box 192,
Madison, WI, 53701-0192
Phone: (608) 252-3311
March 27, 1995
TO THE OWNERS OF WISCONSIN POWER AND LIGHT COMPANY:
We extend a cordial invitation to you to join us at the 1995 Annual Meeting
of Shareowners of Wisconsin Power and Light Company (the Company). The meeting
will be held at the Exhibition Hall at the Dane County Expo Center, 1881 Expo
Mall, Madison, Wisconsin, on May 17, 1995, at 10:00 a.m., immediately preceding
the Annual Meeting of Shareowners of WPL Holdings, Inc. To help with directions,
a map showing the location of the meeting site is provided on the last page of
this document. Parking will be available at no cost. If you plan to join us for
the meeting, please indicate the names of the individuals who will be attending
on the enclosed proxy card reservation form.
The enclosed Notice of Annual Meeting and Proxy Statement sets forth the
items to be considered at the meeting. A lunch will be served following the
meeting.
The Company is a subsidiary of WPL Holdings, Inc. (WPLH) and the Company's
preferred stock is the only class of its stock outstanding in the hands of the
public. WPLH owns all of the Company's common stock. The Company and WPLH will
be holding separate shareowner meetings. If you are a shareowner of both WPLH
and the Company, you will receive two Notices of Annual Meeting and Proxy
Statements, one for each company. Shareowners of both companies will also
receive two proxy cards, one for each company. If you are a shareowner of both
companies, you will have to return both proxy cards to vote all your shares.
PLEASE NOTE THAT THE 1994 ANNUAL REPORT OF THE COMPANY APPEARS AS APPENDIX
A TO THIS PROXY STATEMENT.
It is important to your interests, and also is helpful to the directors of
the Company, that all shareowners participate in the affairs of the Company,
regardless of the number of shares owned. Whether or not you plan to attend the
meeting, please sign and date the enclosed proxy card and return it in the
postage paid envelope provided for that purpose. You may, of course, still vote
your shares in person at the meeting even if you have previously returned your
proxy.
Your participation in person or by proxy is very important.
Sincerely,
[Sig.]
ERROLL B. DAVIS, JR.
President and Chief Executive Officer
<PAGE> 3
WISCONSIN POWER AND LIGHT COMPANY
ANNUAL MEETING OF SHAREOWNERS
DATE: MAY 17, 1995
TIME: 10:00 a.m.
LOCATION: Exhibition Hall
Dane County Expo Center
Madison, Wisconsin
(See map printed on last
page of this document.)
SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON AREA).....252-3110
TOLL FREE NUMBER..........1-800-356-5343
<PAGE> 4
[LOGO]
Wisconsin Power & Light Company, 222 West Washington Avenue, P. O. Box 192,
Madison, WI, 53701-0192
Phone: (608) 252-3311
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
10:00 A.M., MAY 17, 1995
The Annual Meeting of Shareowners of Wisconsin Power and Light Company (the
Company) will be held at the Exhibition Hall at the Dane County Expo Center,
1881 Expo Mall, Madison, Wisconsin, on May 17, 1995, at 10:00 a.m., local time,
for the following purposes:
(1) To elect a total of four directors for terms expiring at the 1998
Annual Meeting of Shareowners.
(2) To appoint Arthur Andersen LLP as independent auditors for the calendar
year 1995.
(3) To consider and act upon any other business that may properly come
before the meeting.
The Board of Directors of the Company presently knows of no other business
to come before the meeting.
Only the sole common shareowner, WPL Holdings, Inc., and preferred
shareowners of record on the books of the Company at the close of business on
March 21, 1995, are entitled to vote at the meeting. All such shareowners are
requested to be present at the meeting in person or by proxy.
PLEASE SIGN AND RETURN YOUR PROXY IMMEDIATELY. YOUR PROXY COVERS ALL OF
YOUR SHARES OF THE VARIOUS SERIES OF PREFERRED STOCK OF THE COMPANY. IF YOU
ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AT THE REGISTRATION DESK AND
VOTE IN PERSON. ALL SHAREOWNERS ARE URGED TO RETURN THEIR PROXY PROMPTLY.
THE 1994 ANNUAL REPORT OF THE COMPANY APPEARS AS APPENDIX A TO THIS PROXY
STATEMENT. THE PROXY STATEMENT AND ANNUAL REPORT HAVE BEEN COMBINED INTO A
SINGLE DOCUMENT TO IMPROVE THE EFFECTIVENESS OF OUR FINANCIAL COMMUNICATION AND
TO REDUCE COST, ALTHOUGH THE ANNUAL REPORT DOES NOT CONSTITUTE A PART OF THE
PROXY STATEMENT.
For information purposes only, you will receive under separate cover a copy
of the WPL Holdings, Inc. 1994 Annual Report to shareowners. That document is
sent to you in order that shareowners of the Company may keep up-to-date on
activities of WPL Holdings, Inc. However, the WPL Holdings, Inc. Annual Report
is not intended to be used in conjunction with the solicitation of proxies with
respect to the Company.
By Order of the Board of Directors,
[Sig.]
EDWARD M. GLEASON
Corporate Secretary
March 27, 1995
<PAGE> 5
[Logo]
Wisconsin Power & Light Company, 222 West Washington Avenue, P. O. Box 192,
Madison, WI, 53701-0192
Phone: (608) 252-3311
MARCH 27, 1995
PROXY STATEMENT RELATING TO
1995 ANNUAL MEETING OF SHAREOWNERS
The purposes of the meeting are set forth in the accompanying notice. The
enclosed proxy relating to the meeting is solicited on behalf of the Board of
Directors of the Company and the cost of such solicitation will be borne by the
Company. Following the original solicitation of proxies by mail, beginning on or
about March 27, 1995, certain of the officers and regular employees of the
Company may solicit proxies by telephone, telegraph or in person, but without
extra compensation. The Company will pay to banks, brokers, nominees, and other
fiduciaries their reasonable charges and expenses incurred in forwarding the
proxy material to their principals.
The Company is a subsidiary of WPL Holdings, Inc. (WPLH), which owns all of
the Company's outstanding common stock.
The Company will furnish without charge to each shareowner, who is entitled
to vote at the meeting and who makes a written request, a copy of the Company's
Annual Report on Form 10-K (not including exhibits thereto), as filed pursuant
to the Securities Exchange Act of 1934. Written requests for the Form 10-K
should be mailed to the Corporate Secretary at the address stated above.
PROPOSAL # 1:
ELECTION OF DIRECTORS
Four directors are to be elected at the meeting. L. David Carley, Donald R.
Haldeman, Arnold M. Nemirow, and Judith D. Pyle are nominees to hold office for
terms expiring at the 1998 Annual Meeting of Shareowners of the Company or until
successors have been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the meeting
(assuming a quorum is present), with all shares of Company common stock and
preferred stock voting together as one class. Consequently, any shares not voted
at the meeting, whether due to abstentions, broker nonvotes or otherwise, will
have no impact on the election of directors. A vote shown as withheld on a
returned proxy card will be treated as an abstention. WPLH, which owns all of
the outstanding shares of the Company's common stock, intends to vote all of its
shares "FOR" the Board nominees, thereby assuring the election of such nominees.
The proxies solicited may also be voted for a substitute nominee or nominees in
the event that any of the nominees shall be unable to serve or for good reason
will not serve, a contingency not now anticipated.
Brief biographies of director nominees and continuing directors follow.
These biographies include their age (as of March 15, 1995), an account of their
business experience, and the names of publicly-held and certain other
corporations of which they are also directors, as well as other information
relating to their activities. Except as otherwise indicated, each nominee and
continuing director has been engaged in his or her present principal occupation
for at least the past five years.
<PAGE> 6
Nominees
L. DAVID CARLEY
----------------------
Principal Occupation: Consultant to institutions and
associations in higher education and health delivery;
financial advisor to small businesses.
Age: 66
(Photo)
Served as director from: 1975 to 1977 and since 1983
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Mr. Carley is a trustee of the Kennedy Presidential Library,
and is a former trustee of Kalamazoo College. He is a past member of the Board
of Regents of the University of Wisconsin System, is a past President of the
National Association of Public Television Stations, and is a past President of
the Medical College of Wisconsin. Mr. Carley has been a member of the Board of
WPLH since February 1994.
DONALD R. HALDEMAN
----------------------
Principal Occupation: Executive Vice President and Chief
Executive Officer, Rural Insurance Companies (a mutual
group), Madison, Wisconsin.
Age: 58
(Photo)
Served as director since: July 1985
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Mr. Haldeman is a director of Competitive Wisconsin, Inc.,
and a member of the Board and Chairman of the Natural Resources Foundation of
Wisconsin, Inc. He has served as a member of the Board of WPLH since February
1994, and is also a member of the Board of Visitors for the University of
Wisconsin-Madison School of Veterinary Medicine.
2
<PAGE> 7
ARNOLD M. NEMIROW
----------------------
Principal Occupation: President and Chief Executive
Officer, Bowater, Inc. (a pulp and paper
manufacturer), Greenville, South Carolina.
Age: 51
(Photo)
Served as director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Mr. Nemirow served as President, Chief Executive Officer and
Director of Wausau Paper Mills Company, a pulp and paper manufacturer, from 1990
until joining Bowater, Inc. in July 1994. Mr. Nemirow has served as a director
of WPLH since February 1991. He is a member of the New York Bar.
JUDITH D. PYLE
----------------------
Principal Occupation: Vice Chair and Senior Vice
President of Corporate Marketing of Rayovac
Corporation (a battery and lighting products
manufacturer), Madison, Wisconsin.
(Photo)
Age: 51
Served as a director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Ms. Pyle has served as a director of WPLH since May 1992. She
is also a director of Rayovac Corporation, Firstar Corporation, Oshkosh B'Gosh,
and H. C. Prange Company. She is a member of the Board of Visitors at the
University of Wisconsin School of Business and the School of Family Resources
and Consumer Sciences. In addition, Ms. Pyle is a member of the Board of
Directors of the United Way Foundation, Greater Madison Chamber of Commerce,
Wisconsin Taxpayers Alliance, and is a trustee of the White House Endowment
Fund.
THE BOARD OF DIRECTORS RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREOWNER TO VOTE "FOR" ALL NOMINEES. SHARES OF STOCK
REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" ALL NOMINEES.
3
<PAGE> 8
Continuing Directors
LES ASPIN
----------------------
Principal Occupation: Chairman, President's Foreign
Intelligence Advisory
Board, Washington, DC, and Distinguished Professor for
International Policy,
Marquette University, Milwaukee, Wisconsin.
(Photo)
Age: 56
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1997
----------------------
Other Information: Mr. Aspin has served as Chairman of the President's Foreign
Intelligence Advisory Board, Washington, DC, since May 1994 and as Distinguished
Professor for International Policy at Marquette University, Milwaukee, Wisconsin
since May 1994. Mr. Aspin served as Secretary of Defense under President Clinton
from January 1993 to February 1994. Prior to becoming Secretary of Defense, Mr.
Aspin was a member of the U. S. House of Representatives from 1970 to 1993, and
served as Chairman of the House Armed Services Committee from 1985 to 1993. Mr.
Aspin is also founder of the Wisconsin Procurement Institute, a not-for-profit
organization which assists small businesses in developing business relationships
with the Federal Government. Mr. Aspin has been a director of WPLH since
February 1994.
ERROLL B. DAVIS, JR.
----------------------
Principal Occupation: President and Chief Executive
Officer of the Company;
President and Chief Executive Officer of WPL Holdings,
Inc.; Chairman of
the Board of Heartland Development Corporation.
(Photo)
Age: 50
Served as director since: April 1984
Annual Meeting at which current term of office will
expire: 1997
----------------------
Other Information: Mr. Davis was elected President of the Company in July 1987,
and was elected to his current position with the Company in August 1988. Mr.
Davis joined the Company in August 1978. Mr. Davis was elected President of WPLH
in January 1990, and was elected President and Chief Executive Officer of WPLH
effective July 1, 1990, and has served on the Board of Directors of WPLH since
May 1982. Mr. Davis was elected Chairman of the Board of Heartland Development
Corporation, a subsidiary of WPLH, effective July 1, 1990. He is a director of
the American Gas Association; Amoco Oil Company; Competitive Wisconsin, Inc.;
Electric Power Research Institute; PPG Industries, Inc.; Sentry Insurance
Company; and the Wisconsin Utilities Association. Mr. Davis is also a director
and Chairman of the Wisconsin Association of Manufacturers and Commerce.
4
<PAGE> 9
ROCKNE G. FLOWERS
----------------------
Principal Occupation: President and Director of Nelson
Industries, Inc. (a muffler, filter, industrial
silencer, and active sound and vibration control
technology and manufacturing firm), Stoughton,
Wisconsin.
(Photo)
Age: 63
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1996
----------------------
Other Information: Mr. Flowers has served as a director of WPLH since April
1981. He is also a director of RMT, Inc., a subsidiary of Heartland Development
Corporation; Digisonix, Inc.; American Family Mutual Insurance Company;
Janesville Sand and Gravel Company; M&I Madison Bank; Meriter Health Services,
Inc.; Meriter Hospital; and the Wisconsin History Foundation. He is also a
member of the University of Wisconsin-Madison School of Business Board of
Visitors.
KATHARINE C. LYALL
----------------------
Principal Occupation: President, University of Wisconsin
System, Madison, Wisconsin.
Age: 53
(Photo)
Served as director since: October 1986
Annual Meeting at which current term of office will
expire: 1996
----------------------
Other Information: Ms. Lyall has served as President since April 1992 and prior
thereto served as Executive Vice President of the University of Wisconsin
System. Ms. Lyall has been a director of WPLH since February 1994. Ms. Lyall
also serves on the Board of Directors of the Kemper National Insurance Companies
and the Carnegie Foundation for the Advancement of Teaching. She is a member of
a variety of professional and community organizations, including the American
Economic Association; the Association of American Universities (currently
serving on the Executive Committee); the Wisconsin Academy of Sciences, Arts and
Letters; the American Red Cross (Dane County); Competitive Wisconsin, Inc.; and
Forward Wisconsin. In addition to her administrative position, she is a
Professor of Economics at the University of Wisconsin-Madison.
5
<PAGE> 10
MILTON E. NESHEK
----------------------
Principal Occupation: President, Chief Executive Officer
and Director of the law firm of Godfrey, Neshek,
Worth, & Leibsle, S.C., Elkhorn, Wisconsin, and
General Counsel, Assistant Secretary and Manager, New
Market Development, Kikkoman Foods, Inc. (a food
products manufacturer), Walworth, Wisconsin.
(Photo)
Age: 64
Served as director since: November 1984
----------------------
Annual Meeting at which current term of office will
expire: 1997
Other Information: Mr. Neshek has served as a director of WPLH since December
1986. He is also a director of Heartland Properties, Inc. and Capital Square
Financial Corporation, both of which are subsidiaries of Heartland Development
Corporation; Kikkoman Foods, Inc.; Midwest U.S.-Japan Association; Regional
Transportation Authority (of southeast Wisconsin); and Wisconsin-Chiba, Inc. He
is a Fellow in the American College of Probate Counsel. Mr. Neshek is active in
the Walworth County Bar Association, the State Bar of Wisconsin, and the
American Judicature Society.
HENRY C. PRANGE
----------------------
Principal Occupation: Director and Retired Chairman of
the Board, H. C. Prange Company (retail stores),
Green Bay, Wisconsin.
Age: 67
(Photo)
Served as director since: December 1965
Annual Meeting at which current term of office will
expire: 1996
----------------------
Other Information: Mr. Prange has served as a director of WPLH since December
1986. He is also a director of H. C. Prange Company.
6
<PAGE> 11
CAROL T. TOUSSAINT
----------------------
Principal Occupation: Consultant
Age: 65
Served as director since: August 1976
(Photo)
Annual Meeting at which current term of office will
expire: 1997
----------------------
Other Information: Mrs. Toussaint has served as a director of WPLH since
February 1994. Mrs. Toussaint is an independent consultant on board
organization, fund development and public relations, working primarily with
nonprofit organizations. She is the owner of Vantage Point, a lecture program
business, and an Associate of Hayes Briscoe, a fund management consulting firm.
She is an active member and past chair of the Utility Women's Conference (a
national organization open to women serving as directors or officers of
investor-owned electric, gas, water, and telephone companies). She is a past
president of the Rotary Club of Madison, and a director of the Evjue Foundation;
Madison Civic Center Foundation; Madison Community Foundation; and Wisconsin
History Foundation. At the University of Wisconsin-Madison, she serves as a
director of the University Research Park, a member of the Board of Visitors of
the School of Business, a member of the Alumni Association Cabinet 99, and on
the Council on Women's Giving of the Bascom Hill Society of the University
Foundation.
PROPOSAL # 2:
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company recommends the
reappointment of Arthur Andersen LLP, independent public accountants, as
auditors to examine the financial statements of the Company for 1995. Arthur
Andersen LLP served as auditors for the Company in 1994. In tabulating the votes
for the reappointment of Arthur Andersen LLP, an abstention has the same effect
as a vote against. Beneficially owned shares not voted (broker nonvotes) have no
effect on vote tabulations. WPLH intends to vote all of its shares of common
stock "FOR" the appointment of Arthur Andersen LLP as the Company's independent
auditors for 1995, thereby assuring the appointment of Arthur Andersen LLP.
A representative of Arthur Andersen LLP will be present at the meeting and
will be available to make a statement or to respond to questions, as
appropriate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REAPPOINTMENT OF ARTHUR
ANDERSEN LLP. SHARES OF STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED "FOR" SUCH REAPPOINTMENT.
7
<PAGE> 12
MEETINGS AND COMMITTEES OF THE BOARD
During 1994, the Board of Directors had standing Audit, Compensation and
Personnel, and Nominating Committees.
AUDIT COMMITTEE
Until February 1994, the Audit Committee consisted of all non-management
members of the Board and was chaired by K. C. Lyall. Beginning in February 1994,
the committee was reconstituted to consist of L. Aspin, L. D. Carley, R. G.
Flowers, D. R. Haldeman, H. F. Scheig, and K. C. Lyall (Chair). H. F. Scheig
will retire as a director effective on the date of the 1995 Annual Meeting of
Shareowners. The committee held two meetings in 1994. The committee recommends
to the shareowners the independent auditors to be appointed; reviews the reports
and comments of the independent auditors; reviews the activities and reports of
the Company's internal audit staff; and, in response to the reports and comments
of both the independent auditors and internal auditors, recommends to the Board
any action which the Audit Committee considers appropriate.
COMPENSATION AND PERSONNEL COMMITTEE
Until February 1994, the Compensation and Personnel Committee consisted of
all directors who were not and had never been officers, employees, or legal
counsel of the Company, and was chaired by C. T. Toussaint. Beginning in
February 1994, the committee was reconstituted to consist of A. M. Nemirow, M.
E. Neshek (Chair), H. C. Prange, J. D. Pyle, and C. T. Toussaint. The committee
held six meetings in 1994. The committee sets executive compensation policy;
reviews the performance of, and approves salaries for, officers and certain
other management personnel; reviews and recommends to the Board new or changed
employee benefit plans; reviews major provisions of negotiated employment
contracts, if any; and reviews human resource development programs.
NOMINATING COMMITTEE
Until February 1994, the Nominating Committee consisted of E. B. Davis, Jr.
(Chair), D. E. Haldeman, and C. T. Toussaint. Beginning in February 1994, the
committee was reconstituted to consist of L. Aspin, R. G. Flowers, K. C. Lyall,
A. M. Nemirow (Chair), H. C. Prange, and J. D. Pyle. The committee held one
meeting in 1994. The committee's responsibilities include making recommendations
to the Board of Directors for nominees for election to the Board. In making
recommendations of nominees for election to the Board, the Nominating Committee
will consider nominees recommended by shareowners. Any shareowner wishing to
make a recommendation should write the Chief Executive Officer of the Company,
who will forward all recommendations to the Nominating Committee.
The Board of Directors held eleven meetings during 1994. The following
directors attended fewer than 75% percent of the aggregate number of meetings of
the Board and committees of the Board on which such director served: L. Aspin,
J. D. Pyle, and H. F. Scheig.
COMPENSATION OF DIRECTORS
No fees are paid to directors who are officers of the Company (presently,
Mr. Davis). Non-employee directors, each of whom served on the Boards of the
Company, WPLH and Heartland Development Corporation, received an annual fee of
$32,800 for service on all three boards. Travel expenses are paid for
8
<PAGE> 13
each meeting day attended. All non-employee directors also received a 25 percent
Company matching contribution in WPLH common stock for limited optional cash
purchases, up to $10,000, of WPLH common stock through the WPLH Dividend
Reinvestment and Stock Purchase Plan. Matching contributions of $2,500 each for
calendar year 1994 were made for the following directors: L. D. Carley, D. R.
Haldeman, K. C. Lyall, H. F. Scheig, and C. T. Toussaint. Mr. Scheig will retire
as a director effective on the date of the 1995 Annual Meeting of Shareowners.
Director's Charitable Award Program -- The purpose of the Program is to
recognize the interest of the Company and its directors in supporting worthy
institutions, and to enhance the director benefit package so that the Company is
able to continue to attract and retain directors of the highest caliber. Under
the Program, when a director dies, the Company will donate a total of $500,000
to a qualifying charitable organization, or divide such amount between up to
four qualifying organizations, selected by the individual director. The
individual directors derive no financial benefit from the Program. All
deductions for charitable contributions are taken by the Company, and the
donations are funded by the Company through life insurance policies on the
directors. Over the life of the Program, all costs of donations and premiums on
the life insurance policies, including a return of the Company's cost of funds,
will be recovered through the proceeds from life insurance on the directors. The
program, over its life, will not result in any material cost to the Company.
Director's Life Insurance Program -- The Company maintains a split-dollar
Director's Life Insurance Program for non-employee directors which provides a
maximum death benefit of $500,000 to each eligible director. Under the
split-dollar arrangement, directors are provided a death benefit only and do not
have any interest in the cash value of the policies. The Life Insurance Program
is structured to pay a portion of the total death benefit to the Company to
reimburse the Company for all costs of the Life Insurance Program, including a
return on its funds. The Life Insurance Program, over its life, will not result
in any material cost to the Company.
9
<PAGE> 14
OWNERSHIP OF VOTING SECURITIES
The Company has two classes of voting securities outstanding, common stock
and preferred stock. WPLH owns 100 percent of the outstanding common stock of
the Company. As of January 31, 1995, no shareowner beneficially owned more than
five percent of any series of the Company's preferred stock. Listed in the
following table are the shares of WPLH common stock owned as of January 31,
1995, by the executive officers listed in the Summary Compensation Table and all
of the directors of the Company, as well as the shares owned by directors and
officers as a group. No officers or directors in this table own shares of the
Company's preferred stock.
<TABLE>
<CAPTION>
SHARES
BENEFICIALLY
BENEFICIAL OWNER OWNED(1)
----------------------------------------------------------------------------- ------------
<S> <C>
Executives(2)
William D. Harvey.......................................................... 6,241(3)
Eliot G. Protsch........................................................... 7,037(3)
A. J. (Nino) Amato......................................................... 1,344(3)
Norman E. Boys............................................................. 3,715
Director Nominees
L. David Carley............................................................ 2,909
Donald R. Haldeman......................................................... 2,807
Arnold M. Nemirow.......................................................... 5,903
Judith D. Pyle............................................................. 3,789
Continuing Directors
Les Aspin.................................................................. 898
Erroll B. Davis, Jr........................................................ 8,153(3)(4)
Rockne G. Flowers.......................................................... 6,758
Katharine C. Lyall......................................................... 3,545
Milton E. Neshek........................................................... 9,292
Henry C. Prange............................................................ 7,801(3)
Carol T. Toussaint......................................................... 7,741
Retiring Director
Henry F. Scheig............................................................ 3,862(5)
All Executives and Directors as a Group
30 people, including those listed above.................................... 99,514
</TABLE>
------------
(1) Total shares of WPLH common stock outstanding as of January 31, 1995 were
30,773,588. All individual executives and directors owned beneficially less
than one percent of the total outstanding shares. All executives and
directors as a group owned beneficially less than one percent of the total
outstanding shares.
(2) Stock ownership of Mr. Davis is shown with continuing directors.
(3) Included in the beneficially owned shares shown are the following indirect
ownership interests with shared voting and investment powers: Mr. Harvey --
1,459; Mr. Protsch -- 333; Mr. Amato -- 822; Mr. Davis -- 4,236; and Mr.
Prange -- 248.
(4) Mr. Davis has been awarded 1.67 shares of restricted Heartland Development
Corporation common stock subject to a Restricted Stock Agreement with
Heartland Development Corporation and WPLH.
(5) Mr. Scheig will retire effective on the date of the 1995 Annual Meeting of
Shareowners.
10
<PAGE> 15
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation
paid by the Company for all services rendered during 1994, 1993, and 1992 to the
Chief Executive Officer and the four other most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
(DOLLARS)
<TABLE>
<CAPTION>
ANNUAL COMPENSATION
-----------------------------------------
OTHER ANNUAL ALL OTHER
NAME & PRINCIPAL POSITION YEAR SALARY (1) BONUS(2) COMPENSATION(3) COMPENSATION(4)
------------------------------------- ---- ---------- -------- --------------- ---------------
<S> <C> <C> <C> <C> <C>
Erroll B. Davis, Jr.................. 1994 374,913 112,844 13,163 50,796
President and Chief 1993 374,190 115,796 8,979 48,715
Executive Officer 1992 356,783 82,914 9,501 59,474
William D. Harvey.................... 1994 193,654 56,080 5,203 22,632
Senior Vice 1993 168,962 42,104 4,152 24,003
President 1992 146,876 24,119 4,321 18,807
Eliot G. Protsch..................... 1994 178,600 52,715 3,694 17,245
Senior Vice 1993 144,748 42,104 2,934 14,122
President 1992 131,162 23,565 3,163 14,974
A. J. (Nino) Amato................... 1994 152,426 43,009 5,312 16,970
Senior Vice 1993 140,769 33,240 4,181 17,842
President 1992 104,577 20,725 4,564 16,275
Norman E. Boys....................... 1994 125,000 33,129 1,757 14,121
Vice President - 1993 117,696 27,700 1,925 14,042
Power Production 1992 111,274 18,239 1,753 14,322
</TABLE>
------------
(1) Includes vacation days sold back to the Company.
(2) Consists of payments under the Company's Management Incentive Plan, which is
a performance-based compensation plan.
(3) Consists of income tax gross-ups for reverse split-dollar life insurance.
(4) All Other Compensation for 1994 consists of: matching contributions to
401(k) plan, Mr. Davis -- $5,623, Mr. Harvey -- $2,905, Mr. Protsch --
$2,171, Mr. Amato -- $2,267, and Mr. Boys -- $1,564; split-dollar life
insurance premiums, Mr. Davis -- $30,902, Mr. Harvey -- $13,206, Mr. Protsch
-- $10,443, Mr. Amato -- $8,046, and Mr. Boys -- $9,852; reverse
split-dollar life insurance premiums, Mr. Davis -- $14,271, Mr. Harvey --
$6,521, Mr. Protsch - $4,631, Mr. Amato -- $6,657 and Mr. Boys -- $2,705.
The split-dollar and reverse split-dollar insurance premiums are calculated
using the "foregone interest" method.
11
<PAGE> 16
AGREEMENTS WITH EXECUTIVES
During 1994, WPLH, the parent of the Company, entered into employment and
severance agreements with certain executive officers of the Company, including
Messrs. Davis, Harvey, Protsch, Amato, and Boys. WPLH recognized that, in
today's developing competitive marketplace within the energy industry,
circumstances may arise in which a change of control of the Company or WPLH may
occur, through acquisition or otherwise. This potentiality may cause uncertainty
about the continued employment of certain key executives with the Company,
without regard to the competence or past contributions of the executives. WPLH
recognized further that this uncertainty could result in the loss to the Company
and WPLH of valuable services of one or more of the key executives, particularly
during a period where these same executives may be called upon to negotiate on
behalf of the shareowners. Because of the intimate knowledge of the business and
the affairs of the Company which these executives possess, such loss could be to
the detriment of the Company and WPLH. To provide the Company, WPLH and key
executives reasonable security against changes in the relationship of the
executives with the Company and WPLH in the event of a change in control, WPLH
entered into the employment and severance agreements. The agreements provide
that each executive officer covered by the agreements is entitled to benefits
if, within five years after a change in control of WPLH (as defined in the
agreements), the officer's employment is ended through (i) termination, other
than by reason of death or disability or for cause (as defined in the
agreements), or (ii) termination by the officer due to a breach of the agreement
by WPLH or a significant change in the officer's responsibilities, or (iii) in
the case of Mr. Davis' agreement, termination by Mr. Davis following the first
anniversary of the change of control. The benefits provided are: (i) a cash
termination payment of one, two or three times (depending on which executive
officer is involved) the sum of the executive officer's annual salary and his
average annual bonus during the three years before the termination and (ii)
continuation for up to five years of equivalent hospital, medical, dental,
accident, disability and life insurance coverage as in effect at the time of
termination. The agreements also provide the foregoing benefits in connection
with certain terminations which are effected in anticipation of a change of
control. Each agreement provides that if any portion of the benefits under the
agreement or under any other agreement for the officer would constitute an
excess payment for purposes of the Internal Revenue Code, benefits will be
reduced so that the officer will be entitled to receive $1 less than the maximum
amount which he could receive without becoming subject to the 20% excise tax
imposed by the Code on certain excess payments as defined in the Code, or which
WPLH may pay without loss of deduction under the Code.
RETIREMENT AND EMPLOYEE BENEFIT PLANS
Salaried employees (including officers) of the Company are eligible to
participate in the Company's Retirement Plan. All eligible persons whose
compensation is reported in the foregoing Summary Compensation Table
participated in the plan during 1994. Contributions to the plan are determined
actuarially, computed on a single-life, annuity basis, and cannot be readily
calculated as applied to any individual participant or small group of
participants. For purposes of the plan, compensation means payment for services
rendered, including vacation and sick pay, and is substantially equivalent to
salary reported in the foregoing Summary Compensation Table. Retirement plan
benefits depend upon length of plan service (up to a maximum of 30 years), age
at retirement, and amount of compensation (determined in accordance with the
plan) and are reduced by up to 50 percent of Social Security benefits. Credited
years of service under the plan for covered persons named in the foregoing
Summary Compensation Table are as follows: Erroll B. Davis, Jr., 15 years;
William D. Harvey, 7 years; Eliot G. Protsch, 15 years; A. J. (Nino) Amato, 8
years; and N. E. Boys, 20 years. Assuming retirement at age 65, a Retirement
Plan participant (in conjunction with the
12
<PAGE> 17
Unfunded Supplemental Retirement Plan described below) would be eligible at
retirement for a maximum annual retirement benefit as follows:
RETIREMENT PLAN TABLE
<TABLE>
<CAPTION>
AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN*
ANNUAL ------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30
------------ ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
$125,000............................. $10,259 $20,519 $ 30,778 $ 41,037 $ 51,297 $ 61,556
150,000............................. 12,551 25,102 37,653 50,204 62,755 75,306
200,000............................. 17,134 34,269 51,403 68,537 85,672 102,806
250,000............................. 21,718 43,435 65,153 86,871 108,588 130,306
300,000............................. 26,301 52,602 78,903 105,204 131,505 157,806
350,000............................. 30,884 61,769 92,653 123,537 154,422 185,306
400,000............................. 35,468 70,935 106,403 141,871 177,338 212,806
450,000............................. 40,051 80,102 120,153 160,204 200,255 240,306
475,000............................. 42,343 84,685 127,028 169,371 211,713 254,056
</TABLE>
------------
* Average annual compensation is based upon the average of the highest 36
consecutive months of compensation. The Retirement Plan benefits shown above
are net of estimated Social Security benefits and do not reflect any
deductions for other amounts. The annual retirement benefits payable are
subject to certain maximum limitations (in general, $118,800 for 1994 and
$120,000 for 1995) under the Internal Revenue Code. Under the Retirement Plan
and a supplemental survivors income plan, if a Retirement Plan participant
dies prior to retirement, the designated survivor of the participant is
entitled to a monthly income benefit equal to approximately 50 percent (100
percent in the case of certain executive officers and key management
employees) of the monthly retirement benefit which would have been payable to
the participant under the Retirement Plan if the participant had remained
employed by the Company until eligible for normal retirement.
Unfunded Supplemental Retirement Plan -- The Company maintains an Unfunded
Supplemental Retirement Plan which provides funds for payment of retirement
benefits above the limitations on payments from qualified pension plans in those
cases where an employee's retirement benefits exceed the qualified plan limits.
Additionally, the plan provides for payments of supplemental retirement benefits
to employees holding the title of Vice President or higher, who have been
granted additional months of service by the Board of Directors for purposes of
computing retirement benefits.
Unfunded Executive Tenure Plan -- The Company maintains an Unfunded
Executive Tenure Plan to provide incentive for key executives to remain in the
service of the Company by providing additional compensation which is payable
only if the executive remains with the Company until retirement (or other
termination if approved by the Board of Directors). Participants in the plan
must be designated by the Chief Executive Officer and approved by the Board. Mr.
Davis was the only active participant in the plan as of December 31, 1994. The
plan provides for monthly payments to a participant after retirement (at or
after age 65, or with Board approval, prior to age 65) for 120 months. The
payments will be equal to 25 percent of the participant's highest average salary
for any consecutive 36-month period. If a participant dies prior to retirement
or before 120 payments have been made, the participant's beneficiary will
receive monthly payments equal to 50 percent of such amount for 120 months in
the case of death before retirement, or if the participant dies after
retirement, 50 percent of such amount for the balance of the 120 months. Annual
benefits of $104,500 would be payable to Mr. Davis upon retirement, assuming he
continues in the Company's service until retirement at the same salary as was in
effect on December 31, 1994.
13
<PAGE> 18
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
TO OUR SHAREOWNERS: The Compensation and Personnel Committee (the
"Committee") of the Board of Directors of the Company is comprised of five
independent, nonemployee directors who have no "interlocking" relationships, as
defined by the Securities and Exchange Commission. The Committee assesses the
effectiveness and competitiveness of, approves the design of, and administers
executive compensation programs within a consistent total compensation framework
for the Company. The Committee also reviews and approves all salary arrangements
and other remuneration for executives, evaluates executive performance, and
considers related matters. To support the Committee in carrying out its mission,
Hewitt Associates, an independent consultant, is engaged to provide assistance
in the development of comprehensive executive compensation policies.
The Committee is committed to implementing a total compensation program for
executives which furthers the Company's mission. The Committee, therefore,
adheres to the following compensation policies which are intended to facilitate
the achievement of the Company's business strategies.
- Total compensation should enhance the Company's ability to attract,
retain, and encourage the development of exceptionally knowledgeable and
experienced executives, upon whom, in large part, the successful
operation and management of the Company depends.
- Base salary levels should be targeted at the median level paid to
executives of companies in their respective industry(ies).
- Incentive compensation programs should strengthen the relationship
between pay and performance by emphasizing variable, at-risk compensation
that is consistent with meeting predetermined Company and individual
performance goals.
COMPONENTS OF COMPENSATION
The Committee relates total compensation levels for the Company's senior
executives to the compensation paid to executives of similar companies in the
utility industry. Utility executives' pay is compared to that of executives at
utilities with similar operations in both the Midwest and national markets, as
well as to utilities with similar revenue levels, market capitalizations,
employment levels, and total shareowner returns.
The Committee has reviewed overall compensation levels and compared them to
the benchmarks established. It has been determined that total executive
compensation, including that for Mr. Davis, is in line with the median of the
comparison group of companies.
The current elements of the Company's executive compensation program are
base salary and short-term (annual) incentives. These elements are addressed
separately below. In addition, as discussed under the Long-Term Incentive
section below, the Committee believes long-term (equity) incentives are crucial
for linking executive compensation to the Company's business strategy and the
creation of shareowner value. In this regard, a long-term incentive plan is
proposed for implementation in 1995. In determining each component of
compensation, the Committee considers all elements of an executive's total
compensation package, including benefit and perquisite programs.
14
<PAGE> 19
BASE SALARIES
The Committee annually reviews each executive's base salary. Base salaries
are targeted at the median of the utility industry's market rate. Base salaries
are adjusted by the Committee to recognize changes in market rate, varying
levels of responsibility, prior experience, breadth of knowledge as well as
internal equity issues. Increases to base salaries are driven primarily by
market rate adjustments. In 1994, executives did not receive an across-the-board
salary adjustment. Certain executives received base salary increases in
recognition of increased management responsibilities. Mr. Davis did not receive
a base salary increase in 1994. Greater emphasis was placed on the opportunity
for executives to increase their earnings through the Management Incentive Plan
by exceeding specific strategic goals. Future base pay adjustments will be more
closely tied to median market rate changes and will minimize across-the-board
increases. During 1994, all executive salaries were reviewed for median market
rate comparability utilizing utility industry data contained in compensation
surveys published by Edison Electric Institute, American Gas Association and
several compensation consulting firms. Any recommended changes will be effective
for 1995. All salaried positions will be benchmarked to median market rates
during 1995. Market rates will be reviewed annually.
SHORT-TERM INCENTIVES
The goal of short-term (annual) incentive programs is to promote the
Committee's pay-for-performance philosophy by providing executives with direct
financial incentives in the form of annual cash bonuses to achieve corporate and
individual performance goals. Annual bonus opportunities allow the Committee to
communicate specific goals that are of primary importance during the coming year
and motivate executives to achieve these goals. Short-term incentive program
performance weighting, targeted and maximum award levels, and performance goals
are reviewed and approved annually by the Committee. A description of the
short-term incentive programs available to executive officers follows.
Wisconsin Power and Light Company Management Incentive Plan -- The
Management Incentive Plan (MIP) for the Company covers utility executives,
including Mr. Davis' utility responsibilities. The Plan in 1994 was based on
achieving annual targets in several areas of overall corporate performance that
include profitability, operations and maintenance expense reductions, capital
spending reductions, operational efficiency, electric conservation goals, and
achievement of electric service reliability standards. Target and maximum bonus
awards were set at the median of the utility market levels. Targets were
considered by the Committee to be achievable, but require above-average
performance from each of the executives. For the 1994 Plan year, all MIP
performance category targets were exceeded except for electric service
reliability and electric conservation goals. The Plan awarded 70 percent of its
allowable maximum for 1994. Potential MIP awards for executives, other than Mr.
Davis, range from 0 to 40 percent of annual salary. Awards for 1994 made to top
executives are shown in the Summary Compensation Table.
The 1994 MIP award range for Mr. Davis was 0 to 50 percent of his annual
utility-based salary. For 1994 performance, Mr. Davis' annual bonus payment
represented 31 percent of his base salary, as reflected in the Summary
Compensation Table. Under this Plan, Mr. Davis was awarded $128,232 solely in
connection with 1994 performance, as discussed above. The Plan does not allow
for discretion in bonus determinations. Mr. Davis' award range is in line with
the median of the same combined utility and general industry comparison group
used for base salary comparisons.
15
<PAGE> 20
LONG-TERM INCENTIVES
The Committee strongly believes compensation for senior executives should
include long-term, at-risk pay to strengthen the alignment of shareowner and
management interests. In this regard, in 1994 the Board of Directors of WPLH,
the Company's parent, recommended and the shareowners adopted a Long-Term Equity
Incentive Plan in which executives of the Company are eligible to participate.
The Plan allows for grants of stock options, restricted stock, and performance
units/shares with respect to WPLH common stock. The Committee believes this Plan
will balance the Company's existing compensation programs by emphasizing
compensation based on the long-term successful performance of the Company.
Further, the Plan can be used to better align the interests of Company employees
with the interests of WPLH as a whole by encouraging Company programs to
encompass a component of total WPLH performance through equity ownership in
WPLH. The initial awards under the Plan will be made in 1995.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy
statement to $1 million unless certain requirements are met. The Committee has
carefully considered the impact of this tax code provision. At this time, no
executives will earn compensation in excess of the $1 million cap limitations.
The Committee, however, will continue to monitor the impact of Section 162(m).
CONCLUSION
The Committee believes the existing executive compensation policies and
programs provide the appropriate level of competitive compensation for Company
executives. In addition, the Committee believes that the long- and short-term
performance incentives effectively align the interests of executives and
shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL
COMMITTEE
Milton E. Neshek (Chair)
Arnold M. Nemirow
Henry C. Prange
Judith D. Pyle
Carol T. Toussaint
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors, its executive officers, and certain other officers
are required to report their ownership of WPLH common stock and Company
Preferred Stock and any changes in that ownership to the Securities and Exchange
Commission (SEC) and the New York Stock Exchange. Other than as indicated below,
all required filings in 1994 were properly made in a timely fashion. Mr. James
R. Underkofler, a Director of the Company who retired effective as of the 1994
Annual Meeting of Shareowners, failed to file on a timely basis one report
relating to the acquisition in 1993 by his IRA of 451 shares of common stock of
WPLH, and failed to file on a timely basis two reports during 1994 relating to
the acquisition by his IRA of 275 shares and the sale by his IRA of 654 shares
of common stock of WPLH.
16
<PAGE> 21
In making the above statements, the Company has relied on the
representations of the persons involved and on copies of their reports filed
with the SEC.
GENERAL
Voting. The outstanding voting securities of the Company on the record date
stated below consisted of 13,236,601 shares of common stock (all of which are
held by WPLH) and 1,049,225 shares of preferred stock (issued in various
series).
Only shareowners of the Company of record on its books at the close of
business on March 21, 1995, are entitled to vote at the meeting. Each such
shareowner is entitled to vote on each matter submitted to a vote at the
meeting. WPLH, the sole holder of the Company's common stock, has one vote for
each share it holds on the record date. Every holder of preferred stock has, for
each share of preferred stock held by him or her on the record date, that number
of votes (including any fractional vote) determined by dividing the stated value
of such shares by 100. Shareowners may vote either in person or by duly
authorized proxy. The giving of proxies by shareowners will not affect their
right to vote their shares if they attend the meeting and desire to vote in
person. Presence at the meeting of a shareowner who signed a proxy, however,
does not itself revoke the proxy. A proxy may be revoked by the person giving
it, any time before it is voted, by advising the Secretary of the Company prior
to such voting. A proxy may also be revoked by a shareowner who duly executes
another proxy bearing a later date but prior to the voting. All shares
represented by effective proxies on the enclosed form, received by the Company,
will be voted at the meeting or any adjourned session of the meeting, all in
accordance with the terms of such proxies.
Proposals of Shareowners. Under the rules of the SEC, any shareowner
proposal intended to be presented at the 1996 Annual Meeting of Shareowners must
be received at the principal office of the Company no later than November 28,
1995, in order to be eligible to be considered for inclusion in the Company's
proxy materials relating to that meeting.
Other Business. The meeting is being held for the purposes set forth in the
notice accompanying this proxy statement. The Board of Directors of the Company
knows of no business to be transacted at the meeting other than that set forth
in the notice. However, if any other business should properly be presented to
the meeting, the proxies will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
WISCONSIN POWER AND LIGHT COMPANY
[SIG]
ERROLL B. DAVIS, JR.
President and Chief Executive Officer
17
<PAGE> 22
APPENDIX A
WISCONSIN POWER AND LIGHT COMPANY
ANNUAL REPORT
<TABLE>
<CAPTION>
CONTENTS PAGE
------------------------------------------------------------------------------------ -----
<S> <C>
The Company......................................................................... A-2
Selected Financial Data............................................................. A-3
Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ A-3
Report of Independent Public Accountants............................................ A-12
Consolidated Financial Statements:
Consolidated Balance Sheets....................................................... A-13
Consolidated Statements of Income................................................. A-15
Consolidated Statements of Cash Flows............................................. A-16
Consolidated Statements of Capitalization......................................... A-17
Consolidated Statement of Common Shareowner's Investment.......................... A-18
Notes to Consolidated Financial Statements........................................ A-19
Shareowner Information.............................................................. A-32
Form 10-K Information............................................................... A-32
Executive Officers of the Company................................................... A-32
</TABLE>
A-1
<PAGE> 23
WISCONSIN POWER AND LIGHT COMPANY
1994 ANNUAL REPORT
THE COMPANY
On March 1, 1988, after obtaining shareowner and all the necessary
regulatory approvals, Wisconsin Power and Light Company (the "Company" or "WPL")
effected a corporate restructuring which included the formation of a holding
company, WPL Holdings, Inc. WPL Holdings, Inc. is the parent company of WPL and
its utility subsidiaries and of Heartland Development Corporation, the parent
corporation for non-regulated businesses.
WPL, incorporated in Wisconsin on February 21, 1917 as the Eastern
Wisconsin Electric Company, is a public utility predominately engaged in the
transmission and distribution of electric energy and the generation and bulk
purchase of electric energy for sale. It also transports, distributes and sells
natural gas purchased from gas suppliers. Nearly all of WPL's customers are
located in south and central Wisconsin. WPL operates in municipalities pursuant
to permits of indefinite duration which are regulated by Wisconsin law. WPL does
not derive a material portion of its revenues from any one customer.
WPL owns all of the outstanding capital stock of South Beloit Water, Gas
and Electric Company ("South Beloit"), a public utility supplying electric, gas
and water service, principally in Winnebago County, Illinois, which was
incorporated on July 23, 1908.
WPL also owns varying interests in several other subsidiaries and
investments which are not material to WPL's operations.
ELECTRIC OPERATIONS
WPL provides electricity in a service territory of approximately 16,000
square miles in 35 counties in southern and central Wisconsin and four counties
in northern Illinois. As of December 31, 1994, the Company provided retail
electric service to approximately 371,000 customers in 663 cities, villages and
towns, and wholesale service to 27 municipal utilities, one privately owned
utility, three rural electric cooperatives and to Wisconsin Public Power, Inc.
System, which provides retail service to nine communities.
WPL owns 20,969 miles of electric transmission and distribution lines and
362 substations located adjacent to the communities served.
WPL's electric sales are seasonal, to some extent, with the yearly peak
normally occurring in the summer months. WPL also experiences a smaller winter
peak in December or January.
GAS OPERATIONS
As of December 31, 1994, WPL provided retail natural gas service to
approximately 141,000 customers in 239 cities, villages and towns in 22 counties
in southern and central Wisconsin and one county in northern Illinois.
WPL's gas sales follow a seasonal pattern. There is an annual base load of
gas used for heating, cooking, water heating and other purposes, with a large
peak occurring during the heating season.
In 1994, WPL continued to purchase significant volumes of lower cost gas
directly from producers and marketers and transported those volumes over its two
major pipeline supplier's systems. This replaced higher cost gas historically
purchased directly from the major pipeline systems.
A-2
<PAGE> 24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Operating revenues.................................. $ 674 $ 645 $ 601 $ 610 $ 585
Net income.......................................... $ 68 $ 60 $ 55 $ 64 $ 61
Total assets (at December 31)....................... $1,585 $1,551 $1,414 $1,250 $1,213
Long-term debt, net (at December 31)................ $ 337 $ 336 $ 336 $ 291 $ 328
</TABLE>
1994 COMPARED WITH 1993
OVERVIEW
Net income of Wisconsin Power and Light Company ("WPL" or the "Company")
increased to $68.2 million in 1994 compared with $60.2 million in 1993. Net
income for 1994 was significantly affected by two non-recurring items. These
items were the reversal of a coal contract penalty in the 1st quarter and costs
associated with early retirement and severance programs, which primarily
occurred in the 4th quarter. Both of these items are discussed in the "Other
Events" section of Management's Discussion and Analysis. The following breakout
presents the recurring aspects of 1994's operations.
<TABLE>
<CAPTION>
1994 1993
----- -----
(IN MILLIONS)
<S> <C> <C>
Net Income, as reported........................................ $68.2 $60.2
Less: Increase in Net Income from reversal of coal contract
penalty...................................................... (5.3) (--)
Add: Decrease in Net Income from costs associated with early
retirement and severance programs............................ 8.2 1.1
----- -----
Net Income before the above non-recurring items................ $71.9 $61.3
===== =====
</TABLE>
The increase in the "Net income before the above non-recurring items"
primarily reflects an increase in operating earnings.
A-3
<PAGE> 25
ELECTRIC OPERATIONS
<TABLE>
<CAPTION>
REVENUES &
COSTS PER KWH
KWH'S SOLD, GENERATED SOLD GENERATED CUSTOMERS AT END
REVENUES AND COSTS AND PURCHASED & PURCH. OF YEAR
------------------- % ----------------------- % --------------- -----------------
1994 1993 CHANGE 1994 1993 CHANGE 1994 1993 1994 1993
-------- -------- ------ ---------- ---------- ------ ------ ------ ------- -------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential & farm.... $194,242 $184,176 5% 2,776,895 2,751,363 1% $ .070 $ .067 325,063 316,870
Industrial............ 140,487 132,903 6 3,764,953 3,540,082 6 .037 .038 776 714
Commercial............ 101,382 95,977 6 1,688,349 1,629,911 4 .060 .059 43,868 42,884
Wholesale & Class A... 86,400 78,955 9 2,574,121 2,388,131 8 .034 .033 81 39
Other................. 9,236 11,176 -17 54,518 51,073 7 .169 .219 1,477 1,236
-------- -------- ---------- ---------- ------ ------ ------- -------
Total............... 531,747 503,187 6 10,858,836 10,360,560 5 $ .049 $ .049 371,265 361,743
========== ========== ===== ===== ======== ========
Elec. prod. fuels..... 123,469 123,919 0 9,445,950 9,180,484 3 $ .013 $ .013
========== ========== ===== =====
Purchased power....... 37,913 28,574 33 1,780,451 1,481,993 20% $ .021 $ .019
========== ========== ======= ===== =====
-------- --------
Margin................ $370,365 $350,694 6%
========= ========= =======
</TABLE>
WPL's electric margin increased during 1994 compared to 1993. The primary
factor was a 3.8 percent retail rate increase effective October 1, 1993. Strong
economic conditions in the industrial and commercial customer classes
contributed higher sales and customer growth. A colder than normal January and a
very warm mid-September offset relatively mild summer conditions in July and
August making 1994 a relatively average year in terms of impacts on sales
volumes. Electric production fuel costs were reasonably stable for 1994. The
volume of purchased power increased as a result of WPL's efforts to conserve
coal inventories during a rail strike in the 3rd quarter of 1994. See "Other
Events" for details.
GAS OPERATIONS
<TABLE>
<CAPTION>
REVENUES &
COSTS PER
THERMS SOLD & THERM SOLD & CUSTOMERS AT END
REVENUES AND COSTS PURCHASED PURCH. OF YEAR
------------------- % ----------------- % ------------ -----------------
1994 1993 CHANGE 1994 1993 CHANGE 1994 1993 1994 1993
-------- -------- ------ ------- ------- ------ ---- ---- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential........... $ 71,555 $ 71,632 0% 119,562 120,005 0% $.60 $.60 124,938 120,829
Firm.................. 41,918 40,748 3 87,487 87,038 1 .48 .47 15,531 15,088
Interruptible......... 8,777 10,685 -22 24,809 27,872 -11 .35 .38 272 261
Transportation........ 15,112 14,205 5 85,364 84,877 1 .18 .18 135 85
Other................. 213 -- -- -- -- -- -- -- 90 --
-------- -------- ------- ------- ---- ---- ------- -------
Total............... 137,575 137,270 1 317,222 319,792 0 $.43 $.43 140,966 136,263
======== ======== ==== ==== ======== ========
-------- --------
Purchased gas......... 86,586 90,505 -4 293,547 285,531 4% $.29 $.32
======== ======== ======= ==== ====
-------- --------
Margin................ $ 50,989 $ 46,765 10%
========= ========= =======
</TABLE>
Gas margin increased in 1994 from 1993 primarily based on two factors: 1) a
1.4 percent retail rate increase effective October 1, 1993 and, 2) an increase
in customers in the higher rate firm service which
A-4
<PAGE> 26
improved the sales mix. The overall cost of purchased gas declined reflecting
WPL's effective use of opportunities on the gas spot market.
OTHER OPERATION
Other operation expense increased due to the early retirement and severance
programs discussed in the "Other Events" section.
MAINTENANCE
Maintenance expense decreased between years due to variation in the timing
and extent of maintenance on its generating facilities between years.
Secondarily, a severe storm in the summer of 1993 increased 1993's maintenance
expense related to service restoration.
DEPRECIATION AND AMORTIZATION
Depreciation expense increased, principally reflecting increased property
additions and increased decommissioning costs.
OTHER INCOME AND (DEDUCTIONS)
Other income increased resulting from the reversal of a coal contract
penalty discussed later in the "Other Events" section.
INCOME TAXES
Income taxes increased between years primarily due to higher taxable
income.
1993 COMPARED WITH 1992
COMPANY OVERVIEW
Net income of the Company increased to $60.2 million in 1993 compared with
$55.4 million in 1992. The principle factors leading to increased earnings
included warmer summer weather and lower electric fuel costs per kWh which
yielded higher electric margins. These increases were somewhat offset by
increased depreciation expense resulting from additional investment in utility
plant and property additions, a change in the mix of gas sales from higher
margin sales to lower margin sales, the increase in the federal corporate tax
rate from 34 percent to 35 percent and a one-time 4-cent-per-share charge
associated with a voluntary separation program for the executive management
group.
A-5
<PAGE> 27
ELECTRIC OPERATIONS
<TABLE>
<CAPTION>
REVENUES &
COSTS PER KWH
SOLD
KWH'S SOLD, GENERATED GENERATED & CUSTOMERS AT END
REVENUES AND COSTS AND PURCHASED PURCH. OF YEAR
------------------- % ---------------------- % ------------- -----------------
1993 1992 CHANGE 1993 1992 CHANGE 1993 1992 1993 1992
-------- -------- ------ ---------- --------- ------ ----- ----- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential and farm... $184,176 $171,887 7% 2,751,363 2,614,439 5% $.067 $.066 316,870 310,702
Industrial............. 132,903 128,467 3 3,540,082 3,377,132 5 .038 .038 714 727
Commercial............. 95,977 91,707 5 1,629,911 1,551,823 5 .059 .059 42,884 42,287
Wholesale & Class A.... 78,955 77,485 2 2,388,131 2,208,419 8 .033 .035 39 39
Other.................. 11,176 8,189 36 51,073 55,230 -8 .219 .148 1,236 950
-------- -------- ---------- --------- ----- ----- ------- -------
Total................ 503,187 477,735 5 10,360,560 9,807,043 6 $.049 $.049 361,743 354,705
========== ========= ======= ===== ===== ======== ========
Elec. prod. fuels...... 123,919 123,440 .4 9,186,134 9,041,317 2 $.014 $.014
========== ========= ======= ===== =====
Purchased power........ 28,574 24,427 17 1,481,993 1,124,667 32% $.019 $.022
========== ========= ======= ===== =====
-------- --------
Margin................. $350,694 $329,868 6%
========= ========= =======
</TABLE>
Electric margin in dollars increased during 1993 compared with 1992 due to
increased demand for electricity brought on by warmer summer weather.
Residential customers, being the most weather sensitive, experienced the most
significant increases. Wisconsin's strong economy kept the commercial and
industrial classes growing steadily. These increases were coupled with declining
electric production fuel costs per kWh. The decrease in electric production fuel
cost per kWh was due to WPL's aggressive pursuit of additional spot coal
purchase opportunities as its longer term contracts began to expire.
Additionally, a highly competitive rail transportation environment significantly
reduced the cost of transporting the coal. Also, lower cost purchased power
became available due to excess capacity in the bulk power market.
GAS OPERATIONS
<TABLE>
<CAPTION>
% %
CHANGE CHANGE
------ REVENUES & THERMS ------ COSTS PER
REVENUES THERM SOLD CUSTOMERS AT END
AND COSTS SOLD & PURCHASED & PURCH. OF YEAR
------------------- ----------------- ------------ -----------------
1993 1992 1993 1992 1993 1992 1993 1992
-------- -------- ------- ------- ---- ---- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential........... $ 71,632 $ 63,699 12% 120,005 114,131 5% $.60 $.56 120,829 116,642
Firm.................. 40,748 37,154 10 87,038 82,087 6 .47 .45 15,088 14,656
Interruptible......... 10,685 9,554 12 27,872 25,497 9 .38 .37 261 262
Transportation........ 14,205 8,674 72 84,877 69,244 23 .18 .13 85 109
Other................. -- 281 -- -- 1,923 -- -- .15 -- --
-------- -------- ------- ------- ---- ---- ------- -------
Total............... 137,270 119,362 16 319,792 292,882 10 $.43 $.41 136,263 131,669
======== ======== ====== ==== ==== ======== ========
Purchased gas......... 90,505 77,112 18 285,531 260,354 11% $.32 $.30
======== ======== ====== ==== ====
-------- --------
Margin................ $ 46,765 $ 42,250 11%
========= ========= =======
</TABLE>
Gas revenues for 1992 were affected by the recognition of a $4.9 million
before-tax refund to its natural gas customers resulting from an adjustment in
the calculation of the purchased gas adjustment clause.
A-6
<PAGE> 28
Without the impact of this revenue adjustment, comparative gas margins would
have declined for 1993 compared with 1992.
The overall increases in gas revenues and purchased gas costs between years
resulted primarily from increased volumes procured on behalf of transportation
customers. This had the impact of decreasing margins as a percentage of total
revenues. A change in the mix of gas sales from higher margin residential sales
to lower margin sales also moved margins downward. Offsetting this decline,
Wisconsin's strong economy enabled growth in the commercial and industrial
classes, and there was also some overall increase in the demand for natural gas
due to colder weather.
OTHER OPERATION EXPENSE
An increase in other operation expense resulted from higher WPL employee
benefit expense (see Notes to Consolidated Financial Statements, Note 7). These
increases were offset somewhat by decreases in conservation program expenditures
and decreases in fees associated with the sale of accounts receivable due to a
decline in interest rates. Additionally, cost management efforts have helped
control annual inflationary pressures on general and administrative costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased, principally reflecting
increased property additions and the commencement of deferred charge
amortizations approved in WPL's rate orders received in December 1992 and
October 1993. The most significant amortizations include the amortization
related to an acquisition adjustment which resulted from the purchase of
transmission facilities and the amortization of costs incurred related to the
remediation of former manufactured gas plant sites (see Notes to the
Consolidated Financial Statements, Note 11).
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION ("AFUDC")
Total AFUDC increased in 1993 compared with 1992, reflecting the greater
amounts of construction work in progress including the costs associated with
WPL's construction of two 86-megawatt combustion-turbine generators.
LIQUIDITY AND CAPITAL RESOURCES
RATES AND REGULATORY MATTERS
On December 9, 1994, the Public Service Commission of Wisconsin (PSCW)
issued rate order UR-109, effective for a two-year period beginning January 1,
1995. The order included the following decisions on WPL's retail rate
application as filed on February 4, 1994: 1) electric revenues will be decreased
by approximately $12.3 million (2.8 percent) annually, 2) natural gas revenues
will be increased by approximately $.7 million (.5 percent) annually, 3) return
on common equity will be 11.5 percent versus WPL's previously allowed return on
equity of 11.6 percent.
Further, the PSCW approved certain incentive programs described below:
1. The electric fuel adjustment mechanism was eliminated. In its
absence, WPL will benefit from reductions in fuel cost. Conversely, WPL
will be exposed to increases in fuel costs.
A-7
<PAGE> 29
2. The automatic purchased gas adjustment clause was also eliminated.
In the future, the fluctuations in the commodity cost of gas above or below
a prescribed commodity price index will serve to increase or decrease WPL's
margin on gas sales. Fixed demand costs are excluded from the incentive
program. Both benefits and exposures are subject to ratepayer sharing
provisions, which are capped at $1.1 million.
3. In order to promote air quality and reliability, there are SO2
emissions and service reliability incentive clauses. Positive incentive
available under these clauses is $1.5 million for the SO2 emissions and $.5
million for the service reliability. WPL's earnings are also negatively
exposed for equal amounts. Since WPL is allowed to collect all revenues
under these programs in advance, up to $4.0 million annually of pre-tax
revenue may be collected subject to refund upon final determination of
performance under this program.
INDUSTRY OUTLOOK
The PSCW has recently opened a formal docket initiating an inquiry into the
future structure of the electric utility industry in Wisconsin. The goals of
Wisconsin utility regulation and the principles to be used in choosing among
alternative proposals have been identified. WPL has submitted its preferred
structure which, in summary form, calls for open access to transmission and
distribution systems and a competitive power generation marketplace. It is not
possible at this time to predict the outcome of these proceedings.
FINANCING AND CAPITAL STRUCTURE
The level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions. The
Company's operating subsidiaries generally issue short-term debt to provide
interim financing of construction and capital expenditures in excess of
available internally generated funds. The subsidiaries periodically reduce their
outstanding short-term debt through the issuance of long-term debt and through
the Company's additional investment in their common equity. To maintain
flexibility in its capital structure and to take advantage of favorable short-
term rates, WPL also uses proceeds from the sales of accounts receivable and
unbilled revenues to finance a portion of its long-term cash needs. The Company
also anticipates that short-term debt funds will continue to be available at
reasonable costs due to strong ratings by independent utility analysts and
rating services. Commercial paper has been rated A-1+ by Standard & Poor's Corp.
and P-1 by Moody's Investors Service.
Bank lines of credit of $70 million at December 31, 1994 are available to
support these borrowings.
The Company's capitalization at December 31, 1994, including the current
maturities of long-term debt, variable rate demand bonds and short-term debt,
consisted of 52 percent common equity, 6 percent preferred stock and 42 percent
long-term debt. The common-equity-to-total-capitalization ratio at December 31,
1994 increased to 52 percent from 51 percent at December 31, 1993.
The retail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility capitalization
during the two-year test year ending December 31, 1996. In addition, the PSCW
ordered that it must approve the payment of dividends by WPL that are in excess
of the level forecasted for 1995 ($58.1 million), if such dividends would reduce
WPL's average common equity ratio below 51.93 percent.
A-8
<PAGE> 30
CAPITAL REQUIREMENTS
WPL is a capital-intensive business and requires large investments in
long-lived assets. Therefore, the Company's most significant capital
requirements relate to construction expenditures. Estimated capital requirements
for the next five years are as follows:
<TABLE>
<CAPTION>
CAPITAL REQUIREMENTS
----------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
(IN MILLIONS)
<S> <C> <C> <C> <C> <C>
Construction expenditures............. $131.2 $100.4 $132.2 $119.6 $130.6
Changes in working capital and
other............................... (4.6) (5.5) 67.0 16.3 (3.8)
------ ------ ------ ------ ------
Construction and operating capital.... $126.6 $ 94.9 $199.2 $135.9 $126.8
Manufactured gas plant site
remediation expenditures............ 2.0 9.2 10.5 9.6 .6
------ ------ ------ ------ ------
Total capital requirements............ $128.6 $104.1 $209.7 $145.5 $127.4
====== ====== ====== ====== ======
</TABLE>
Included in the construction expenditure estimates, in addition to the
recurring additions and improvements to the distribution and transmission
systems, are the following: 1) expenditures for managing and controlling
electric line losses and for the electric delivery system that will reduce
electric line losses and enhance WPL's interconnection capability with other
utilities; 2) expenditures related to environmental compliance issues including
the installation of additional emissions monitoring equipment and coal handling
equipment; 3) expenditures associated with the construction of an 86-megawatt
combustion-turbine generator expected to become operational in 1996.
The steam generator tubes at the Kewaunee Nuclear Power Plant ("Kewaunee")
are susceptible to corrosion characteristics, a condition that has been
experienced throughout the nuclear industry. Annual inspections are performed to
identify degraded tubes. Degraded tubes are either repaired by sleeving or are
removed from service by plugging. The steam generators were designed with an
approximately 15 percent heat transfer margin, meaning that full power should be
sustainable with the equivalent of 15 percent of the steam generator tubes
plugged. Tube plugging and the build-up of deposits on the tubes affect the
heat-transfer capability of the steam generators to the point where eventually
full-power operation is not possible and there is a gradual decrease in the
capacity of the plant. The plant's capacity could be reduced by as much as 20%
by the year 2013 when the current operating license expires. Currently, the
equivalent of approximately 12 percent of the tubes in the steam generators are
plugged. WPL and the joint-owners recently completed studies evaluating the
economics of replacing the two steam generators at Kewaunee. The studies
resulted in the conclusion that the most prudent course of action is to continue
operation of the existing steam generators. WPL and the other joint-owners
continue to evaluate appropriate strategies, including replacement, as well as
continued operation of the steam generators without replacement. WPL and the
joint-owners also continue to fund the development of welded repair technology
for steam generator tubes. The plant is expected to be operated until at least
2013. WPL and the joint-owners are also continuing to evaluate and implement
initiatives to improve the performance of Kewaunee, which already performs at
above-average levels for the industry. These initiatives include conversion from
a 12-month to an 18-month fuel cycle and numerous other cost reduction measures.
These initiatives have resulted in reductions in Kewaunee operating and
maintenance costs since 1991.
A-9
<PAGE> 31
CAPITAL RESOURCES
One of the Company's objectives is to finance construction expenditures
through internally generated funds supplemented, when required, by outside
financing. With this objective in place, the Company has financed an average of
79 percent of its construction expenditures during the last five years from
internal sources. However, during the next five years, the Company expects this
percentage to be reduced primarily due to the continuation of major construction
expenditures and the maturity of $64 million of WPL first mortgage bonds.
External financing sources such as the issuance of long-term debt, common stock
and short-term borrowings will be used by the Company to finance the remaining
construction expenditure requirements for this period. Current forecasts are
that $40.5 million of additional equity and $65 million of long-term debt will
be issued over the next three years.
INFLATION
Under current rate-making methodologies prescribed by the various
commissions that regulate WPL, projected or forecasted operating costs,
including the impacts of inflation, are incorporated into WPL revenue
requirements. Accordingly, the impacts of inflation on WPL are currently
mitigated. Although rates will be held flat until at least 1997, management
expects that any impact of inflation will be mitigated by customer growth and
productivity improvements. Inflationary impacts on the non-regulated businesses
are not anticipated to be material to the Company.
OTHER EVENTS
In November 1989, the PSCW concluded that WPL did not properly administer a
coal contract, resulting in an assessment to compensate ratepayers for excess
fuel costs having been incurred. As a result, WPL recorded a reserve in 1989
that had an after-tax affect of reducing 1989 net income by $4.9 million. The
PSCW decision was found to represent unlawful retroactive rate-making by both
the Dane County Circuit Court and the Wisconsin Court of Appeals. The case was
then appealed to the Wisconsin Supreme Court.
In January, 1994, the Wisconsin Supreme Court affirmed the decisions of the
Dane County Circuit Court and Wisconsin Court of Appeals. In management's
opinion, all avenues for appeal have been exhausted. As a result, WPL reversed
the entire reserve and was also allowed to collect interest on amounts of the
penalty previously refunded to ratepayers. The reversal of the reserve plus
interest had an after-tax affect of increasing net income in 1994 by $5.3
million.
Given the expectation of increasing competition, WPL has continued to
reengineer its processes to implement cost efficiencies in its operations. In
connection with these efforts, WPL offered voluntary early retirement programs
and voluntary severance programs to affected employees in 1994 and 1993. These
programs primarily closed late in the fourth quarter of 1994 and 1993.
For 1994, in terms of cost, the early retirement programs totalled $9.8
million and the severance programs totalled $3.9 million for a grand total of
$13.7 million. For 1993, program costs totalled $1.8 million.
One of WPL's major coal transporters experienced a labor strike during the
third quarter of 1994. During the term of the strike (55 days), WPL's ability to
receive coal from its suppliers was impaired, which required WPL to use some of
its existing coal reserves and to purchase additional power. On August 29, 1994,
President Clinton, acting under the Railway Labor Act, forced a temporary end
(the "cooling off period") to the strike by ordering the railroad union
employees back to work and establishing a three member Presidential
A-10
<PAGE> 32
Emergency Board to draft a recommended settlement. Railroad management and the
United Transportation Union have subsequently settled on a contract. As of
December 31, 1994, the existing and anticipated financial impact on WPL's
operating results was not material.
WPL cannot precisely forecast the effect of future environmental
regulations by federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps to
anticipate the future while meeting the requirements of current environmental
regulations. The Clean Air Act Amendments of 1977 and subsequent amendments to
the Clean Air Act, as well as the new laws affecting the handling and disposal
of solid and hazardous wastes along with the clean air legislation passed in
1990 by Congress, could affect the siting, construction and operating costs of
both present and future generating units.
Under the Federal Clean Water Act, National Pollutant Discharge Elimination
System permits for generating station discharge into water ways are required to
be obtained from the Wisconsin Department of Natural Resources. WPL has obtained
such permits for all of its generating stations or has filed timely applications
for renewals.
Air quality regulations promulgated by the DNR in accordance with federal
standards impose statewide restrictions on the emission of particulates, sulfur
dioxide, nitrogen oxides and other air pollutants and require permits from the
DNR for the operation of emission sources. WPL currently has the necessary
permits to operate its fossil-fueled generating facilities. However, beginning
in 1994, new permits were required for all major facilities in Wisconsin. WPL's
Columbia Generating facility submitted a permit application on May 1, 1994. The
remaining facilities will be addressed in early 1995.
WPL's compliance strategy for Wisconsin's 1993 sulfur dioxide law and the
Federal Clean Air Act Amendments required plant upgrades at its generating
facilities. The majority of these projects were completed in 1993 and 1994. WPL
has installed continuous emissions monitoring systems at all of its coal fired
boilers. No additional costs for compliance with these acid-rain-prevention
requirements are anticipated at this time.
Also see Note 11c in the Notes to the Consolidated Financial Statements for
a discussion of WPL's manufactured gas plant sites.
A-11
<PAGE> 33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of WISCONSIN POWER AND LIGHT COMPANY (a Wisconsin corporation)
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, common shareowners' investment and cash flows for each of
the three years in the period ended December 31, 1994. 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 in accordance with generally accepted auditing
standards. Those standards 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. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Wisconsin Power and Light
Company and subsidiaries as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 1, 1995
A-12
<PAGE> 34
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Utility plant:
Plant in service--
Electric........................................................ $1,611,351 $1,518,701
Gas............................................................. 204,514 194,283
Water........................................................... 22,070 20,437
Common.......................................................... 123,255 106,803
---------- ----------
1,961,190 1,840,224
Dedicated decommissioning funds.................................... 51,791 49,803
---------- ----------
2,012,981 1,890,027
Less--Accumulated provision for depreciation....................... 808,853 763,027
---------- ----------
1,204,128 1,127,000
Construction work in progress...................................... 42,731 75,732
Nuclear fuel, net.................................................. 19,396 18,000
---------- ----------
Total utility plant................................................ 1,266,255 1,220,732
Other property and equipment, net.................................... 9,133 652
---------- ----------
Investments.......................................................... 12,228 12,537
---------- ----------
Current assets:
Cash and equivalents............................................... 2,234 5,930
Net accounts receivable and unbilled revenue, less allowance for
doubtful accounts of $209 and $259, respectively................ 21,689 30,572
Accounts receivable from parent for income taxes................... -- 2,117
Coal, at average cost.............................................. 15,824 16,042
Materials and supplies, at average cost............................ 20,835 21,679
Gas in storage, at average cost.................................... 7,975 8,754
Prepayments and other.............................................. 22,310 21,677
---------- ----------
Total current assets............................................ 90,867 106,771
---------- ----------
Deferred charges:
Regulatory assets.................................................. 144,476 148,805
Other.............................................................. 62,165 61,160
---------- ----------
Total deferred charges.......................................... 206,641 209,965
---------- ----------
TOTAL ASSETS.................................................... $1,585,124 $1,550,657
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-13
<PAGE> 35
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
CAPITALIZATION AND LIABILITIES
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
<S> <C> <C>
Capitalization:
Common shareowner's investment..................................... $ 544,506 $ 522,703
Preferred stock not mandatorily redeemable......................... 59,963 59,963
First mortgage bonds, net.......................................... 336,538 336,477
---------- ----------
Total capitalization.......................................... 941,007 919,143
---------- ----------
Current liabilities:
Variable rate demand bonds......................................... 56,975 56,975
Short-term debt.................................................... 50,500 59,000
Accounts payable and accruals...................................... 67,518 72,430
Accrued payroll and vacation....................................... 12,624 12,092
Accrued taxes...................................................... 7,299 804
Accrued interest................................................... 7,669 7,695
Other.............................................................. 12,456 16,431
---------- ----------
Total current liabilities..................................... 215,041 225,427
---------- ----------
Other credits:
Accumulated deferred income taxes.................................. 222,373 210,762
Accumulated deferred investment tax credits........................ 40,758 42,684
Accrued environmental remediation costs............................ 79,280 80,973
Deferred credits and other......................................... 86,665 71,668
---------- ----------
429,076 406,087
---------- ----------
Contingencies (Notes 2 and 11)
TOTAL CAPITALIZATION AND LIABILITIES.......................... $1,585,124 $1,550,657
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-14
<PAGE> 36
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Operating revenues:
Electric.................................................... $531,747 $503,187 $477,735
Gas......................................................... 137,575 137,270 119,362
Water....................................................... 4,133 3,927 3,722
-------- -------- --------
673,455 644,384 600,819
Operating expenses:
Electric production fuels................................... 123,469 123,919 123,440
Purchased power............................................. 37,913 28,574 24,427
Purchased gas............................................... 86,586 90,505 77,112
Other operation............................................. 148,361 139,075 128,992
Maintenance................................................. 41,227 44,763 45,081
Depreciation................................................ 73,194 61,197 56,416
Taxes--
Current federal income................................... 26,727 25,063 21,641
Deferred income........................................ 10,270 5,053 6,270
Investment tax credit (restored)....................... (1,926) (1,967) (2,125)
Current state income................................... 6,147 6,580 5,160
Other.................................................. 27,100 26,145 26,170
-------- -------- --------
579,068 548,907 512,584
-------- -------- --------
Net operating income.......................................... 94,387 95,477 88,235
-------- -------- --------
Other income and (deductions):
Allowance for equity funds used during construction......... 3,009 2,977 2,351
Other, net.................................................. 7,726 (2,188) 299
Current federal income tax.................................. (1,480) (519) 274
Deferred income tax......................................... (2,029) (419) 131
-------- -------- --------
7,226 (149) 3,055
-------- -------- --------
Income before interest expense................................ 101,613 95,328 91,290
-------- -------- --------
Interest expense:
Interest on bonds........................................... 28,796 28,422 29,254
Allowance for borrowed funds used during construction....... (1,029) (1,053) (1,329)
Other....................................................... 2,352 3,854 4,146
-------- -------- --------
30,119 31,223 32,071
-------- -------- --------
Income before preferred dividends............................. 71,494 64,105 59,219
Preferred stock dividends..................................... 3,310 3,928 3,811
-------- -------- --------
Net income.................................................... $ 68,184 $ 60,177 $ 55,408
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-15
<PAGE> 37
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Cash flows generated from (used for) operating activities:
Income before preferred stock dividends........................... $ 71,494 $ 64,105 $ 59,219
Adjustments to reconcile net income to net cash generated from
operating activities:
Depreciation.................................................... 73,194 61,197 56,416
Deferred income taxes and other................................. 10,270 5,053 6,139
Investment tax credit restored.................................. (1,926) (1,967) (2,125)
Amortization of nuclear fuel.................................... 6,707 7,049 7,961
Allowance for equity funds used during construction............. (3,009) (2,977) (2,351)
Other, net...................................................... 6,561 7,201 252
Changes in assets and liabilities:
Net accounts receivable and unbilled revenue.................... 16,335 4,124 (9,162)
Coal............................................................ 218 2,943 2,666
Materials and supplies.......................................... 884 (6) 1,769
Gas in storage.................................................. 779 (4,463) 1,403
Prepayments and other........................................... (634) (383) (1,895)
Accounts payable and accruals................................... (4,912) 640 6,901
Accrued taxes................................................... (3,775) (538) (1,680)
Other, net...................................................... 14,571 11,222 (9,029)
--------- --------- ---------
Net cash generated from operating activities.................. 186,757 153,200 116,484
Cash flows generated from (used for) financing activities:
Common stock cash dividends....................................... (55,911) (54,327) (51,166)
Issuance of first mortgage bonds.................................. -- -- 279,000
Issuance of preferred stock....................................... -- 29,986 --
Redemption of preferred stock..................................... -- (29,986) --
Preferred stock issuance expense.................................. -- (1,083) --
Preferred stock dividends......................................... (3,310) (3,928) (3,811)
Net change in short-term debt..................................... (8,500) 8,000 14,000
Current bond maturities and sinking fund retirements.............. -- (100) (239,031)
Equity contribution from parent................................... 9,649 61,399 10,002
--------- --------- ---------
Net cash (used for) generated from financing activities....... (58,072) 9,961 8,994
Cash flows generated from (used for) investing activities:
Additions to utility plant, excluding AFUDC....................... (123,959) (149,333) (123,321)
Allowance for borrowed funds used during construction............. (1,029) (1,053) (1,329)
Dedicated decommissioning funds................................... (1,988) (9,426) (3,737)
Other, net........................................................ (5,405) 2,200 1,974
--------- --------- ---------
Net cash used for investing activities.......................... (132,381) (157,612) (126,413)
Net (decrease) increase in cash and equivalents..................... (3,696) 5,549 (935)
Cash and equivalents at beginning of year........................... 5,930 381 1,316
--------- --------- ---------
Cash and equivalents at end of year................................. $ 2,234 $ 5,930 $ 381
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on debt.............................................. $ 30,156 $ 32,246 $ 32,254
Income taxes.................................................. $ 29,642 $ 32,465 $ 31,766
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-16
<PAGE> 38
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Common shareowner's investment:
Common stock, $5 par value, authorized--18,000,000 shares; issued and
outstanding--13,236,601 shares.................................... $ 66,183 $ 66,183
Premium on capital stock............................................. 197,423 187,773
Capital surplus...................................................... 1,747 1,747
Reinvested earnings.................................................. 279,153 267,000
-------- --------
Total common shareowner's investment............................ 544,506 522,703
Preferred stock not mandatorily redeemable:
Cumulative, without par value, $100 stated value, authorized
3,750,000 shares, maximum aggregate stated value $150,000,000
4.50% series, 99,970 shares outstanding......................... 9,997 9,997
4.80% series, 74,912 shares outstanding......................... 7,491 7,491
4.96% series, 64,979 shares outstanding......................... 6,498 6,498
4.40% series, 29,957 shares outstanding......................... 2,996 2,996
4.76% series, 29,947 shares outstanding......................... 2,995 2,995
6.20% series, 150,000 shares outstanding........................ 15,000 15,000
Cumulative, without par value, $25 stated value, 6.50% series,
599,460 shares outstanding........................................ 14,986 14,986
-------- --------
Total preferred stock........................................... 59,963 59,963
First mortgage bonds:
Series L, 6.25%, due 1998............................................ 8,899 8,899
1984 Series A, variable rate, due 2014 (5.40% at December 31,
1994)............................................................. 8,500 8,500
1988 Series A, variable rate, due 2015 (5.80% at December 31,
1994)............................................................. 14,600 14,600
1990 Series V, 9.3%, due 2025........................................ 50,000 50,000
1991 Series A, variable rate, due 2015 (5.95% at December 31,
1994)............................................................. 16,000 16,000
1991 Series B, variable rate, due 2005 (5.95% at December 31,
1994)............................................................. 16,000 16,000
1991 Series C, variable rate, due 2000 (5.95% at December 31,
1994)............................................................. 1,000 1,000
1991 Series D, variable rate, due 2000 (5.95% at December 31,
1994)............................................................. 875 875
Series W, 8.6%, due 2027............................................. 90,000 90,000
Series X, 7.75%, due 2004............................................ 62,000 62,000
Series Y, 7.6%, due 2005............................................. 72,000 72,000
Series Z, 6.125%, due 1997........................................... 55,000 55,000
-------- --------
394,874 394,874
Less--
Variable rate demand bonds........................................... (56,975) (56,975)
Unamortized discount................................................. (1,361) (1,422)
-------- --------
Total first mortgage bonds, net................................. 336,538 336,477
-------- --------
TOTAL CAPITALIZATION......................................... $941,007 $919,143
======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-17
<PAGE> 39
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF COMMON SHAREOWNER'S INVESTMENT
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C>
Common stock:
Balance at beginning and end of year........................ $ 66,183 $ 66,183 $ 66,183
Premium on capital stock:
Balance at beginning of year................................ 187,774 126,374 116,372
Equity contribution from parent.......................... 9,649 61,399 10,002
-------- -------- --------
Balance at end of year...................................... 197,423 187,773 126,374
Capital surplus:
Balance at beginning and end of year........................ 1,747 1,747 1,747
-------- -------- --------
Reinvested earnings:
Balance at beginning of year................................ 267,000 262,233 257,991
Add--Income before preferred dividends...................... 71,494 64,105 59,219
Deduct--
Cash dividends on preferred stock........................ (3,310) (3,928) (3,811)
Cash dividends to parent on common stock................. (55,911) (54,327) (51,166)
Preferred stock issuance expense......................... -- (1,083) --
Other.................................................... (120) -- --
-------- -------- --------
Balance at end of year...................................... 279,153 267,000 262,233
TOTAL COMMON SHAREOWNER'S INVESTMENT.......................... $544,506 $522,703 $456,537
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
A-18
<PAGE> 40
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
A. BUSINESS AND CONSOLIDATION:
Wisconsin Power and Light Company ("WPL" or the "Company") is a
wholly-owned subsidiary of WPL Holdings, Inc. ("WPLH").
WPL is a public utility predominantly engaged in the transmission and
distribution of electric energy and the generation and bulk purchase of electric
energy for sale. WPL also transports, distributes and sells natural gas
purchased from gas suppliers. Nearly all of WPL's retail customers are located
in south and central Wisconsin. WPL's principal consolidated subsidiary is South
Beloit Water, Gas and Electric Company. Certain amounts from prior years have
been reclassified to conform with the current year presentation.
B. REGULATION:
WPL's financial records are maintained in accordance with the uniform
system of accounts prescribed by its regulators. The Public Service Commission
of Wisconsin ("PSCW") and the Illinois Commerce Commission have jurisdiction
over retail rates, which represent approximately 83 percent of electric revenues
plus all gas revenues. The Federal Energy Regulatory Commission ("FERC") has
jurisdiction over wholesale electric rates representing the balance of electric
revenues. Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation" provides that
rate-regulated public utilities such as WPL record certain costs and credits
allowed in the rate-making process in different periods than for unregulated
entities. These are deferred as regulatory assets or regulatory liabilities and
are recognized in the Consolidated Statements of Income at the time they are
reflected in rates.
C. UTILITY PLANT AND OTHER PROPERTY AND EQUIPMENT:
Utility plant and other property and equipment are recorded at original
cost and cost, respectively. Utility plant costs include financing costs that
are capitalized through the PSCW-approved allowance for funds used during
construction ("AFUDC"). The AFUDC capitalization rates approximate WPL's cost of
capital. These capitalized costs are recovered in rates as the cost of the
utility plant is depreciated.
Normal repairs, maintenance and minor items of utility plant and other
property and equipment are expensed. Ordinary utility plant retirements,
including removal costs less salvage value, are charged to accumulated
depreciation upon removal from utility plant accounts, and no gain or loss is
recognized. Upon retirement or sale of other property and equipment, the cost
and related accumulated depreciation are removed from the accounts and any gain
or loss is included in other income and deductions.
D. NUCLEAR FUEL:
Nuclear fuel is recorded at its original cost and is amortized to expense
based upon the quantity of heat produced for the generation of electricity. This
accumulated amortization assumes spent nuclear fuel will have no residual value.
Estimated future disposal costs of such fuel are expensed based on kilowatthours
generated.
E. REVENUE:
WPL accrues utility revenues for services provided but not yet billed.
A-19
<PAGE> 41
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES: (CONTINUED)
F. ELECTRIC PRODUCTION FUELS AND PURCHASED GAS:
(1) Electric Production Fuels:
Through 1994, the PSCW retail electric rates provided a range from
which actual fuel costs could vary in relation to costs forecasted and used
in rates. If actual fuel costs fell outside this range, a hearing could be
held to determine if a rate change was necessary, and a rate increase or
decrease could result.
Beginning with WPL's latest rate order UR-109, effective January 1,
1995, the automatic fuel adjustment clause was eliminated. In its absence,
WPL will benefit from reductions in fuel cost. Conversely, WPL will be
exposed to increases in fuel costs.
An automatic fuel adjustment clause for the FERC wholesale portion of
WPL's electric business operates to increase or decrease monthly rates
based on changes in fuel costs.
(2) Purchased Gas:
Through 1994, WPL's base gas cost recovery rates permitted the
recovery of or refund to all customers for any increases or decreases in
the cost of gas purchased from WPL's suppliers through a monthly purchased
gas adjustment clause.
Beginning with UR-109, the monthly purchased gas adjustment clause was
also eliminated. In the future, the fluctuations in the commodity cost of
gas above or below a prescribed commodity price index will serve to
increase or decrease WPL's margin on gas sales. Fixed demand costs are
excluded from the incentive program. Both benefits and exposures are
subject to ratepayer sharing provisions, which are capped at $1.1 million.
G. CASH AND EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value because of the short maturity of these items.
H. INCOME TAXES:
Under the terms of an agreement with WPLH, the Company calculates its
federal tax provisions and makes payments to WPLH as if it were a separate
taxable entity. Beginning in 1993, WPL fully provides deferred income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes", to reflect tax
effects of reporting book and tax items in different periods.
A-20
<PAGE> 42
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PROPERTY:
A. JOINTLY-OWNED UTILITY PLANTS:
WPL participates with other Wisconsin utilities in the construction and
operation of several jointly-owned utility generating plants. The chart below
represents WPL's proportionate share of such plants as reflected in the
Consolidated Balance Sheets at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
------------------------------- -------------------------------
OWNERSHIP ACCUMULATED ACCUMULATED
INTEREST INSERVICE PLANT MW PLANT IN PROVISION FOR PLANT IN PROVISION FOR
% DATE CAPACITY SERVICE DEPRECIATION CWIP SERVICE DEPRECIATION CWIP
--------- ----------- -------- -------- ------------- ------ -------- ------------- ------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal:
Columbia Energy Center.... 46.2 1975 & 1978 1,023 $159,650 $ 78,573 $1,484 $159,818 $ 76,602 $1,986
Edgewater Unit 4.......... 68.2 1969 330 50,206 25,394 181 49,631 24,160 83
Edgewater Unit 5.......... 75.0 1985 380 225,336 63,324 26 224,902 58,338 21
Nuclear:
Kewaunee Nuclear Power
Plant................... 41.0 1974 535 132,726 72,637 452 133,342 69,647 848
-------- ------------- ------ -------- ------------- ------
Total....................... $567,918 $ 239,928 $2,143 $567,693 $ 228,747 $2,938
======== =========== ====== ======== =========== ======
</TABLE>
Each of the respective joint-owners finances its portion of construction
costs. WPL's share of operation and maintenance expenses is included in the
Consolidated Statements of Income.
B. CAPITAL EXPENDITURES:
The Company's capital expenditures for 1995 are estimated to total $128.6
million. Substantial commitments have been incurred for such expenditures.
NOTE 3. DEPRECIATION:
The Company uses the straight-line method of depreciation. For utility
plant, straight-line depreciation is computed on the average balance of
depreciable property at individual straight-line PSCW approved rates that
consider the estimated useful life and removal cost or salvage value as follows:
<TABLE>
<CAPTION>
ELECTRIC GAS WATER COMMON
-------- --- ----- ------
<S> <C> <C> <C> <C>
1994.......................................... 3.2% 3.7% 2.5% 7.2%
1993.......................................... 3.2% 3.7% 2.5% 7.3%
1992.......................................... 3.2% 3.7% 2.6% 7.1%
</TABLE>
NOTE 4. NUCLEAR OPERATIONS:
Depreciation expense related to the Kewaunee Nuclear Power Plant
("Kewaunee") includes a provision to accrue for the cost of decommissioning over
the life of the plant, which totalled $13.4 million, $6.1 million and $3.9
million in 1994, 1993 and 1992, respectively. Wisconsin utilities with ownership
of nuclear generating plants are required by the PSCW to establish and make
annual contributions to external trust funds to provide for plant
decommissioning. Additionally, in July 1994, the PSCW issued a generic order
covering utilities that
A-21
<PAGE> 43
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. NUCLEAR OPERATIONS: (CONTINUED)
have nuclear generation. This order standardizes the escalation assumptions to
be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million
(in 1994 dollars, assuming the plant is operating through 2013) based on a 1992
study, using the immediate dismantlement method of decommissioning. The
undiscounted amount of decommissioning costs estimated to be expended between
the years 2014 and 2050 is $1.016 billion. After-tax earnings on the
tax-qualified and non-tax-qualified decommissioning funds are assumed to be 6.1
percent and 5.1 percent, respectively. The future escalation rate is assumed to
be 6.5 percent.
Decommissioning costs and a charge to offset earnings on the external
trusts are recorded as portions of depreciation expense and accumulated
provision for depreciation on the Statements of Consolidated Income and the
Consolidated Balance Sheets, respectively. As of December 31, 1994, the total
decommissioning costs included in the accumulated provision for depreciation
were approximately $62.8 million.
WPL has established external trusts to hold decommissioning funds, and the
PSCW has approved WPL's funding plan which provides for annual contributions of
current accruals over the remaining service lives of the nuclear plants. The
earnings on the external trusts accumulate in the fund balance and in the
accumulated provision for depreciation. Such earnings on the external trust
funds, which have been offset by a charge to depreciation expense on the
Statements of Consolidated Income, were $2.7, $1.1 and $1.2 for the years ended
December 31, 1994, 1993 and 1992, respectively.
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy
("DOE") is responsible for the ultimate storage and disposal of spent nuclear
fuel removed from nuclear reactors. Interim storage space for spent nuclear fuel
is currently provided at the Kewaunee Nuclear Power Plant. Currently there is
on-site storage capacity for spent fuel through the year 1999. Nuclear fuel,
net, at December 31, consists of:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Original cost of nuclear fuel............................ $155,190 $147,325
Less -- Accumulated amortization......................... 135,794 129,325
-------- --------
Nuclear fuel, net........................................ $ 19,396 $ 18,000
======== ========
</TABLE>
The Price Anderson Act provides for the payment of funds for public
liability claims arising from a nuclear incident. Accordingly, in the event of a
nuclear incident, WPL, as a 41-percent owner of the Kewaunee Nuclear Power
Plant, is subject to an overall assessment of approximately $32.5 million per
incident for its ownership share of this reactor, not to exceed $4.1 million
payable in any given year.
Through its membership in Nuclear Electric Insurance Limited, WPL has
obtained property damage and decontamination insurance totalling $1.5 billion
for loss from damage at the Kewaunee Nuclear Power Plant. In addition, WPL
maintains outage and replacement power insurance coverage totalling $101.4
million in the event an outage exceeds 21 weeks.
A-22
<PAGE> 44
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. NET ACCOUNTS RECEIVABLE:
WPL has a contract with a financial organization to sell, with limited
recourse, certain accounts receivable and unbilled revenues. These receivables
include customer receivables resulting from sales to other public utilities as
well as from billings to the co-owners of the jointly-owned electric generating
plants that WPL operates. The contract allows WPL to sell up to $150 million of
receivables at any time. Expenses related to the sale of receivables are paid to
the financial organization under this contract and include, along with various
other fees, a monthly discount charge on the outstanding balance of receivables
sold that approximated a 4.86 percent annual rate during 1994. These costs are
recovered in retail utility rates as an operating expense. All billing and
collection functions remain the responsibility of WPL. The contract expires
August 19, 1995, unless extended by mutual agreement.
As of December 31, 1994 and 1993, proceeds from the sale of accounts
receivable totalled $76.5 million and $74 million, respectively. During 1994,
WPL sold an average of $82.3 million of accounts receivable per month, compared
with $75.9 million in 1993.
As a result of its diversified customer base and WPL's sale of receivables,
the Company does not have any significant concentrations of credit risk in the
December 31, 1994, net accounts receivable balance.
NOTE 6. REGULATORY ASSETS AND REGULATORY LIABILITIES:
Certain costs and credits are deferred and amortized in accordance with
authorized or expected rate-making treatment. As of December 31, 1994 and 1993,
regulatory created assets include the following:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Environmental remediation costs.......................... $ 82,179 $ 82,380
Tax related (see Note 8)................................. 43,736 47,787
Jurisdictional plant differences......................... 7,173 6,533
Decontamination and decommissioning costs of federal
enrichment facilities.................................. 7,100 6,181
Other.................................................... 4,288 5,924
-------- --------
$144,476 $148,805
======== ========
</TABLE>
As of December 31, 1994 and 1993, regulatory created liabilities included
$6,738 and $6,618 respectively, for amounts due to customers related to the sale
of air emissions credits.
NOTE 7. EMPLOYEE BENEFIT PLANS:
A. PENSION PLANS:
WPL has non-contributory, defined benefit retirement plans covering
substantially all employees. The benefits are based upon years of service and
levels of compensation. WPL's funding policy is to contribute at least the
statutory minimum to a trust.
A-23
<PAGE> 45
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The projected unit credit actuarial cost method was used to compute net
pension costs and the accumulated and projected benefit obligations. The
discount rate used in determining those benefit obligations was 8.25, 7.25 and
8.00 percent for 1994, 1993 and 1992, respectively. The long-term rate of return
on assets used in determining those benefit obligations was 9.00, 9.75, and
10.00 percent for 1994, 1993 and 1992, respectively.
The following table sets forth the funded status of the WPL plans and
amounts recognized in the Company's Consolidated Balance Sheets at December 31,
1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
--------- ---------
<S> <C> <C>
Accumulated benefit obligation--
Vested benefits...................................... $(134,829) $(135,303)
Non-vested benefits.................................. (3,295) (2,962)
--------- ---------
$(138,124) $(138,265)
--------- ---------
Projected benefit obligation........................... $(154,283) $(164,271)
Plan assets at fair value, primarily common stocks and
fixed income securities.............................. 178,095 183,881
--------- ---------
Plan assets in excess of projected benefit
obligation........................................... 23,812... 19,610
Unrecognized net transition asset...................... (19,376) (21,823)
Unrecognized prior service cost........................ 5,679.... 7,691
Unrecognized net loss.................................. 14,737 20,650
--------- ---------
Pre-paid pension costs, included in deferred charges
and other............................................ $ 24,852 $ 26,128
========= =========
</TABLE>
The net pension (benefit) recognized in the Consolidated Statements of
Income for 1994, 1993 and 1992 included the following components:
<TABLE>
<CAPTION>
1994 1993 1992
-------- -------- --------
<S> <C> <C> <C>
Service cost.................................... $ 5,123 $ 4,263 $ 3,912
Interest cost on projected benefit obligation... 12,051 11,614 10,615
Actual return on assets......................... 1,016 (24,759) (12,143)
Amortization and deferral....................... (17,795) 8,430 (5,317)
-------- -------- --------
Net pension (benefit)........................... $ 395 $ (452) $ (2,933)
======== ======== ========
</TABLE>
B. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE:
Effective January 1, 1993, the Company prospectively adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS
No. 106 establishes standards of financial accounting and reporting for the
Company's postretirement health care and life insurance benefits. SFAS No. 106
requires the accrual of the expected cost of such benefits during the employees'
years of service based
A-24
<PAGE> 46
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
on actuarial methodologies that closely parallel pension accounting
requirements. WPL has elected delayed recognition of the transition obligation
and is amortizing the discounted present value of the transition obligation to
expense over 20 years. The cost of providing postretirement benefits, including
the transition obligation, is being recovered in retail rates under current
regulatory practices.
The following table sets forth the plans' funded status:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Accumulated postretirement benefit obligation--
Retirees............................................... $(29,273) $(27,358)
Fully eligible active plan participants................ (5,998) (5,429)
Other active plan participants......................... (7,675) (9,980)
-------- --------
Accumulated benefit obligation......................... (42,946) (42,767)
Plan assets at fair value.............................. 9,767 7,073
-------- --------
Accumulated benefit obligation in excess of plan
assets.............................................. $(33,179) $(35,694)
Unrecognized transition obligation..................... 26,474 29,638
Unrecognized loss...................................... (2,570) 2,025
-------- --------
Accrued postretirement benefits liability.............. $ (9,275) $ (4,031)
======== ========
</TABLE>
For 1994 and 1993, the annual net postretirement benefits cost recognized
in the Consolidated Statements of Income consist of the following components:
<TABLE>
<CAPTION>
1994 1993
------ ------
<S> <C> <C>
Service cost................................................. $1,739 $1,463
Interest cost on projected benefit obligation................ 3,135 3,151
Actual return on plan assets................................. (253) (696)
Amortization of transition obligation........................ 1,527 1,560
Amortization and deferral.................................... (381) (27)
------ ------
Net postretirement benefits cost............................. $5,767 $5,451
====== ======
</TABLE>
The postretirement benefits cost components for 1994 were calculated
assuming health-care cost trend rates ranging from 11.5 percent for 1994 and
decreasing to 5 percent by the year 2002. The health-care cost trend rate
considers estimates of health care inflation, changes in utilization or
delivery, technological advances, and changes in the health status of the plan
participants. Increasing the health-care cost trend rate by one percentage point
in each year would increase the accumulated postretirement benefit obligation as
of December 31, 1994 by $2.5 million and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for the
year by $.4 million.
A-25
<PAGE> 47
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The assumed discount rate used in determining the accumulated
postretirement obligation was 8.25 and 7.25 percent in 1994 and 1993,
respectively. The long-term rate of return on assets was 9.00 and 9.50 percent
in 1994 and 1993, respectively. Plan assets are primarily invested in common
stock, bonds and fixed income securities. The Company's funding policy is to
contribute the tax-advantaged maximum to a trust.
The costs for the postretirement health care and life insurance benefits,
based on an actuarial determination were $1.3 million in 1992.
C. OTHER POSTEMPLOYMENT BENEFITS:
In November 1992, the Financial Accounting Standards Board issued No. 112,
"Employers' Accounting for Postemployment Benefits". SFAS No. 112, which was
effective January 1, 1994, 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 effect of
adopting SFAS No. 112 was not material.
NOTE 8. INCOME TAXES:
The following table reconciles the statutory federal income tax rate to the
effective income tax rate:
<TABLE>
<CAPTION>
1994 1993 1992
---- ---- ----
<S> <C> <C> <C>
Statutory federal income tax rate...................... 35.0% 35.0% 34.0%
State income taxes, net of federal benefit............. 5.6 6.1 6.0
Investment tax credits restored........................ (1.7) (2.0) (2.4)
Amortization of excess deferred taxes.................. (1.5) (1.5) (1.6)
Other differences, net................................. 1.1 (1.9) (2.0)
---- ---- ----
Effective income tax rate.............................. 38.5% 35.7% 34.0%
==== ==== ====
</TABLE>
In 1992, deferred taxes arising from utility plant timing differences, the
qualified nuclear decommissioning trust contribution, employee benefits and
other totalled $4,104, $709, $2,081, and ($755), respectively.
The temporary differences that resulted in accumulated deferred income tax
(assets) and liabilities as of December 31 are as follows:
<TABLE>
<CAPTION>
1994 1993
-------- --------
<S> <C> <C>
Accelerated depreciation and other plant related......... $186,565 $171,993
Excess deferred taxes.................................... 21,215 22,744
Unamortized investment tax credits....................... (21,784) (22,812)
Allowance for equity funds used during construction...... 14,384 13,518
Regulatory liability..................................... 17,553 19,179
Other............................................... 4,440 6,140
-------- --------
$222,373 $210,762
======== ========
</TABLE>
A-26
<PAGE> 48
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES: (CONTINUED)
Changes in WPL's deferred income taxes arising from the adoption of SFAS
No. 109 represent amounts recoverable or refundable through future rates and
have been recorded as net regulatory assets totalling approximately $26 million
and $29 million in 1994 and 1993, respectively, on the Consolidated Balance
Sheets. These net regulatory assets are being recovered in rates over the
estimated remaining useful lives of the assets to which they pertain.
NOTE 9. SHORT-TERM DEBT AND LINES OF CREDIT:
The Company maintains bank lines of credit, most of which are at the bank
prime rates, to obtain short-term borrowing flexibility, including pledging
lines of credit as security for any commercial paper outstanding. Amounts
available under these lines of credit totalled $70 million as of December 31,
1994. Information regarding short-term debt and lines of credit is as follows:
<TABLE>
<CAPTION>
1994 1993 1992
----------- ----------- -----------
<S> <C> <C> <C>
As of end of year--
Commercial paper outstanding.................... $50,500 $49,000 $26,000
Notes payable outstanding....................... $-- $10,000 $25,000
Discount rates on commercial paper.............. 5.64%-6.12% 3.24%-3.40% 3.15%-3.90%
Interest rates on notes payable................. --% 3.34% 3.46%-3.62%
For the year ended--
Maximum month-end amount of short-term debt..... $50,500 $59,000 $51,000
Average amount of short-term debt (based on
daily outstanding balances).................. $25,374 $30,423 $22,160
Average interest rate on short-term debt........ 5.89% 3.29% 3.63%
</TABLE>
NOTE 10. CAPITALIZATION:
A. COMMON SHAREOWNERS' INVESTMENT:
A retail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility capitalization
during the test year January 1, 1995 to December 31, 1996. In addition, the PSCW
ordered that it must approve the payment of dividends by WPL to WPLH that are in
excess of the level forecasted in the rate order ($58.1 million), if such
dividends would reduce WPL's average common equity ratio below 51.93 percent.
B. PREFERRED STOCK:
On October 27, 1993, WPL issued two new series of preferred stock through
two separate public offerings. The 6.2 percent Series is non-redeemable for ten
years and the 6.5 percent Series is non-redeemable for five years. The proceeds
from the sale were used to retire 150,000 shares of 7.56 percent Series and
149,865 shares of 8.48 percent Series preferred stock.
A-27
<PAGE> 49
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. CAPITALIZATION: (CONTINUED)
C. LONG-TERM DEBT:
Substantially all of WPL's utility plant is secured by its first mortgage
bonds. Current maturities of long-term debt are as follows: $0 in 1995 and 1996,
$55 million in 1997, $8.9 million in 1998 and $0 in 1999.
The Company has $130 million of notional principal under interest rate swap
contracts. The fair value of these contracts was not material as of December 31,
1994.
The fair value of the Company's long-term debt based on quoted market
prices for similar issues at December 31, 1994 and 1993 was $386,520 and
$428,841, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
A. COAL CONTRACT COMMITMENTS:
To ensure an adequate supply of coal, WPL has entered into certain
long-term coal contracts. These contracts include a demand or take-or-pay clause
under which payments are required if contracted quantities are not purchased.
Purchase obligations on these coal and related rail contracts total
approximately $149 million through December 31, 2003. WPL's management believes
it will meet minimum coal and rail purchase obligations under the contracts.
Minimum purchase obligations on these contracts over the next five years are
estimated to be $25 million in 1995 and $26 million in 1996, 1997, 1998 and
1999.
B. PURCHASED POWER AND GAS:
Under firm purchase power and gas contracts, WPL is obligated as follows
(dollars in millions):
<TABLE>
<CAPTION>
PURCHASED POWER PURCHASED GAS
-------------------- ---------------------------
PURCHASE PURCHASE DECATHERMS
OBLIGATION MW'S OBLIGATION (IN MILLIONS)
---------- ------ ---------- -------------
<S> <C> <C> <C> <C>
1995................................... $ 8.3 1,920 $ 67 89
1996................................... 8.1 1,830 67 90
1997................................... 10.9 1,944 55 78
1998................................... 15.6 2,505 45 66
1999................................... 18.8 2,910 41 53
Thereafter............................. 106.5 12,720 77 101
---------- ------ ---------- ---
$168.2 23,829 $352 477
======== ====== ======== =========
</TABLE>
C. MANUFACTURED GAS PLANT SITES:
Historically, WPL has owned 11 properties that have been associated with
the production of manufactured gas. Currently, WPL owns five of these sites,
three are owned by municipalities, and the remaining three are owned by private
companies. In 1989, WPL initiated investigation of these manufactured gas plant
sites.
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<PAGE> 50
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Wisconsin Department of Natural Resources ("DNR") has been involved in
reviewing investigation plans and has received ongoing reports regarding these
investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations
and studies. WPL confirmed that there was no contamination at two of the sites.
WPL received a close-out letter from the DNR related to one of those sites and
requested a close-out letter for the other site. Additionally, the investigation
of historical records at a third site indicated a minimal likelihood of any
significant environmental impacts. In February 1993, WPL completed cost
estimates for the environmental remediation of the eight remaining sites. The
results of this analysis indicate that during the next 35 years, WPL will expend
approximately $81 million for feasibility studies, data collection, soil
remediation activities, groundwater research and groundwater remediation
activities, including construction of slurry containment walls and the
installation of groundwater pump and treatment facilities. This estimate was
based on various assumptions, and is subject to continuous review and revision
by management.
The cost estimate set forth above assumes 4 percent average inflation over
a 35 year period. The cost estimate also contemplates that primarily groundwater
pump and treatment activities will take place after 1998 through and including
2027. During this time, WPL estimates that it will incur average annual costs of
$2.0 million to complete the planned groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a
five-year amortization of the unamortized balance of environmental costs
expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there are
other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related
to the above manufactured gas plant sites without significant revision to the
above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes
that future costs of remediating these manufactured gas plant sites will be
recovered in rates.
A-29
<PAGE> 51
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. SEGMENT INFORMATION:
The following table sets forth certain information relating to the
Company's consolidated operations:
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
<S> <C> <C> <C>
Operation information:
Customer revenues--
Electric............................................ $ 531,747 $ 503,187 $ 477,735
Gas................................................. 137,575 137,270 119,362
Water............................................... 4,133 3,927 3,722
---------- ---------- ----------
Total operating revenues.......................... $ 673,455 $ 644,384 $ 600,819
========= ========= =========
Operating income (loss)--
Electric............................................ $ 121,136 $ 118,785 $ 109,459
Gas................................................. 13,334 10,431 8,724
Water............................................... 1,134 990 998
Income taxes, current and deferred..................... (44,726) (35,667) (30,541)
Other income and (deductions), net..................... 10,735 789 2,650
Interest expense, net.................................. (30,119) (31,223) (32,071)
Preferred dividends.................................... (3,310) (3,928) (3,811)
---------- ---------- ----------
Net income........................................ $ 68,184 $ 60,177 $ 55,408
========= ========= =========
Investment information:
Identifiable assets, including allocated common plant
at December 31--
Electric............................................ $1,176,670 $1,170,010 $1,064,418
Gas................................................. 234,815 228,257 210,965
Water............................................... 18,791 17,703 14,464
Assets not allocated................................... 154,848 134,687 123,803
---------- ---------- ----------
Total assets...................................... $1,585,124 $1,550,657 $1,413,650
========= ========= =========
Other information:
Construction and nuclear fuel expenditures--
Electric............................................ $ 103,420 $ 139,805 $ 113,252
Gas................................................. 20,319 18,876 13,974
Water............................................... 2,149 1,908 1,538
---------- ---------- ----------
Total construction and nuclear fuel
expenditures................................... $ 125,888 $ 160,589 $ 128,764
========= ========= =========
Provision for depreciation and amortization--
Electric............................................ $ 64,695 $ 53,398 $ 49,554
Gas................................................. 8,082 7,329 6,578
Water............................................... 417 470 284
---------- ---------- ----------
Total provision for depreciation.................. $ 73,194 $ 61,197 $ 56,416
========= ========= =========
</TABLE>
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<PAGE> 52
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED):
Seasonal factors significantly affect WPL and, therefore, the data
presented below should not be expected to be comparable between quarters nor
necessarily indicative of the results to be expected for an annual period.
The amounts below were not audited by independent public accountants, but
reflect all adjustments necessary, in the opinion of the Company, for a fair
presentation of the data.
<TABLE>
<CAPTION>
OPERATING OPERATING
QUARTER ENDED REVENUES INCOME NET INCOME
--------------------------------------------- --------- --------- ----------
(IN THOUSANDS)
<S> <C> <C> <C>
1994:
March 31................................... $ 201,309 $31,684 $ 26,633
June 30.................................... 148,425 15,838 11,231
September 30............................... 156,483 24,470 16,927
December 31................................ 169,803 22,395 13,393
1993:
March 31................................... $ 182,023 $26,405 $ 17,740
June 30.................................... 141,049 16,936 8,237
September 30............................... 144,440 21,045 13,096
December 31................................ 177,986 31,091 21,104
</TABLE>
A-31
<PAGE> 53
SHAREOWNER INFORMATION
MARKET INFORMATION
The 4.50% series of preferred stock is listed under the American Stock
Exchange, with the trading symbol Wis Pr. All other series of perferred stock
are traded on the over-the-counter market. Seventy-two percent of the Company's
preferred individual shareowners are Wisconsin residents.
DIVIDEND INFORMATION
Preferred stock dividends paid per share for each quarter during 1994 were
as follows:
<TABLE>
<CAPTION>
SERIES DIVIDEND SERIES DIVIDEND
--- -------- ------ --------
<S> <C> <C> <C>
4.40% $1.10 4.96% $ 1.24
4.50% $1.125 6.20% $ 1.55
4.76% $1.19 6.50% $ 0.4025
4.80% $1.20
</TABLE>
As authorized by the Wisconsin Power and Light Company Board of Directors,
dividend record and payment dates normally are as follows:
<TABLE>
<CAPTION>
RECORD DATE PAYMENT DATE
------------------------------ ------------
<S> <C>
February 28 March 15
May 31 June 15
August 31 September 15
November 30 December 15
</TABLE>
STOCK TRANSFER AGENT AND REGISTRAR
WPL Holdings, Inc.
Shareowner Services
P. O. Box 2568
Madison, WI 53701-2568
FORM 10-K INFORMATION
A Copy of Form 10-K as filed with the Securities and Exchange Commission
will be provided without charge upon request. Requests may be directed to
Shareowner Services.
EXECUTIVE OFFICERS OF THE COMPANY
ERROLL B. DAVIS, JR, 50, was elected President and Chief Executive Officer,
effective August 1, 1988 and has been a board member since April 1984. He had
been Executive Vice President since May 1984, Vice President--Finance and Public
Affairs since November 1982 and Vice President--Finance since August 1978. Mr.
Davis was elected President of WPL Holdings, Inc. on January 17, 1990 and Chief
Executive Officer of WPL Holdings, Inc. effective July 1, 1990. He has served as
a director of WPL Holdings, Inc. since March 1988.
A-32
<PAGE> 54
A.J. (NINO) AMATO, 43, was appointed Senior Vice President effective
October 3, 1993. He previously served as Vice President--Marketing and Strategic
Planning since December 1992, Vice president--Marketing and Communications since
January 1989 and Director of Electric Marketing and Customer Service since
October 1988. He had been President of Forward Wisconsin, Inc. from 1987 to
1988.
NORMAN E. BOYS, 50, was elected Vice President of Power Production
effective January 1, 1989. He previously served as the Director of Power
Production since October 1987 and Generating Station Manager at the Edgewater
Generating Station since August 1984.
DANIEL A. DOYLE, 36, was appointed Vice President--Finance, Controller and
Treasurer effective December 25, 1994. He previously served as Controller and
Treasurer of WPL since October 3, 1993. Prior to joining the Company, he was
Controller of Central Vermont Public Service Corporation since December 1988.
DAVID E. ELLESTAD, 54, was appointed Vice President-Electrical Engineering
and Operations on August 1, 1992. He previously served as Vice
President-Engineering and Operations since 1988; Vice President of Electrical
Engineering and Procurement since January 1, 1986; Director of Electrical
Engineering & Procurement since May 1985 and Director of Electrical Engineering
since November 1979.
EDWARD M. GLEASON, 54, was elected Corporate Secretary effective December
15, 1993. He previously served as Vice-President Finance and Treasurer since May
1986, Controller and Treasurer since October 1985 and Treasurer since May 1983.
Mr. Gleason is also Vice President, Treasurer and Corporate Secretary of WPL
Holdings, Inc. since October 1993.
THOMAS J. HANDZIAK, 31, was elected Assistant Controller on September 20,
1993. Prior to joining the Company, he was employed by Arthur Andersen & Co. as
an Audit Staff Assistant, Audit Senior and Audit Manager with primary
responsibilities of auditing and providing financial consulting services to
large publicly held corporations.
THOMAS L. HANSON, 41, was elected Assistant Treasurer on May 17, 1989. He
had been Financial Relations Supervisor in the Treasury Department since October
1987.
WILLIAM D. HARVEY, 45, was appointed Senior Vice President effective
October 3, 1992, Vice President-General Counsel since October 1, 1990 and Vice
President-Associate General Counsel since July 1986. Prior to joining the
Company, he was a member of the law firm of Wheeler, Van Sickle, Anderson,
Norman and Harvey.
STEVEN F. PRICE, 42, was appointed Assistant Corporate Secretary on April
15, 1992. He had been Cash Management Supervisor since December 1987. He was
also appointed Assistant Corporate Secretary and Assistant Treasurer of WPL
Holdings, Inc. on April 15, 1992.
ELIOT G. PROTSCH, 41, was appointed Senior Vice President effective October
3, 1993. He previously served as Vice President-Customer Services and Sales
since August 1992, Vice President and General Manager-Energy Services since
January 1989 and District Manager, Dane County, since October 1986.
JOSEPH SHEFCHEK, 38, was elected Assistant Vice President of Environmental
Affairs and Research effective December 25, 1994. He previously served as
Director of Environmental Affairs and Research since June 1991. Before joining
the Company, he held various environmental engineering positions in private
industry and government.
A-33
<PAGE> 55
BARBARA SWAN, 43, was elected Vice President-General Counsel effective
December 25, 1994. She previously served as General Counsel since 1993 and
Associate General Counsel from 1987 to 1993.
PAMELA J. WEGNER, 47, was elected Vice President-Information Services and
Administration on October 13, 1994. Prior to joining the Company, she was the
Administrator of the Division of Finance and Program Management in the Wisconsin
Department of Administration since 1987. She served as Administrator of the
Division of Administrative Services in the Wisconsin Department of Revenue from
1983 to 1987.
KIM K. ZUHLKE, 41, was elected Vice President--Customer Services and Sales
effective October 3, 1993. He previously served as Director of Marketing and
Sales Services since 1991, Director of Market Research, Planning and Development
since February 1990, Director of Customer Services since 1988 and District
Manager at Beaver Dam since April 1984.
NOTE: All ages are as of December 31, 1994. None of the executive officers
listed above is related to any director of the Board or nominee for
director of the Company.
Executive officers of the Company have no definite terms of office and
serve at the pleasure of the Board of Directors.
A-34
<PAGE> 56
[Map showing the location of meeting.]
TAKE THE RIMROCK ROAD EXIT #262 OR THE JOHN NOLEN DR. EXIT #263
OFF AND ON HIGHWAY 12 AND 18.
