<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/x/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7951
Exact name of registrant as specified in its charter WICOR,Inc.
Wisconsin 39-1346701
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, Wisconsin 53201
---------------------------------------
(Address of principal executive offices)
Registrant's telephone number, including area code 414-291-7026
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value New York Stock Exchange
Associated Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed
all reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) has been subject to such filing
requirements for the past 90 days. X Yes No.
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of registrant's
knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-
affiliates of the registrant: $604,073,514 at February 29, 1996.
Number of shares outstanding of each of the registrant's
classes of common stock, as of February 29, 1996:
Common Stock, $1 par value 18,305,258 shares
Documents Incorporated by Reference
WICOR, Inc. proxy statement dated March 12, 1996 (Part III)
WICOR, Inc. 1995 Annual Report to Shareholders (Parts I and II)<PAGE>
<PAGE> 2
TABLE OF CONTENTS
PAGE
PART I 1
Item 1. Business 1
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
1. Energy 1
A. General 1
B. Gas Markets and Competition 2
C. Gas Supply,Pipe Capacity and Storage 3
(1) General 3
(2) Pipeline Capacity and Storage 3
(3) Term Gas Supply 4
(4) Spot Market Gas Supply 4
D. Wisconsin Regulatory Matters 4
(1) Rate Matters 4
(2) Transition Cost Recovery Policy 5
(3) Gas Cost Recovery Mechanism 5
(4) Service Area Expansion 5
(5) Changing Regulatory Environment 5
E. Employees 5
2. Manufacturing of Pumps and Fluid
Processing and Filtration Equipment 6
A. General 6
B. U.S. Operations 6
C. International Operations 6
D. Raw Materials and Patents 7
E. Employees 7
Item 2. Properties 7
(a) Capital Expenditures 7
(b) Energy............. 7
(c) Manufacturing of Pumps, Fluid Processing
and Filtration Equipment 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of
Security Holders 9
Executive Officers of the Registrant 9
PART II 10
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 11<PAGE>
<PAGE> 3
TABLE OF CONTENTS (continued)
PAGE
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with
Accountants on Accounting and
Financial Disclosure 11
PART III 11
Item 10. Directors and Executive Officers
of the Registrant 11
Item 11. Executive Compensation 11
Item 12. Security Ownership of Certain
Beneficial Owners and Management 12
Item 13. Certain Relationships and Related
Transactions 12
PART IV 12
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 12
(a) Documents Filed as Part of the Report 12
1. All Financial Statements and Financial
Statement Schedules 12
2. Financial Statement Schedules 12
3. Exhibits 12
(b) Reports on Form 8-K 15<PAGE>
<PAGE> 4
PART I
Item 1. BUSINESS
(a) General Development of Business
WICOR, Inc. (the "Company" or "WICOR") is a diversified
holding company with two principal business groups: energy and
manufacturing, with the following subsidiaries engaged in the
indicated businesses. Wisconsin Gas Company ("Wisconsin Gas")
engages in retail distribution of natural gas. As discussed
below, WICOR Energy Services Company ("WES") is a new subsidiary
formed by WICOR to sell energy supplies and energy-related
services. Sta-Rite Industries, Inc. ("Sta-Rite"), SHURflo Pump
Manufacturing Co. ("SHURflo") and Hypro Corporation ("Hypro")
are manufacturers of pumps and fluid processing and filtration
equipment. The Company is a Wisconsin corporation and maintains
its principal executive offices in Milwaukee, Wisconsin.
The Company was incorporated in 1980 at which time it
acquired all the outstanding common stock of Wisconsin Gas
through a merger. The Company acquired all of the outstanding
common stock of Sta-Rite and Shurflo through mergers in 1982 and
1993, respectively.
In March, 1995, the Company formed WICOR Energy Services
Company, as a wholly-owned subsidiary. WES, which does business
as WICOR Gas Marketing, is in the business of selling a variety
of energy supply-related services, including natural gas
purchasing, storage, and energy and risk management.
In July 1995, the Company acquired all of the outstanding
stock of Hypro Corporation through a cash purchase. Hypro is a
manufacturer of pumps and fluid-handling equipment for the
agricultural, high-pressure cleaning, marine, industrial and
firefighting markets.
On January 31, 1996, the Company acquired an 80% ownership
interest in Hydro-Flow Filtration Systems, Inc. ("Hydro-Flow").
Hydro-Flow is a California-based manufacturer of disposable in-
line and cartridge filtration devices for use in water treatment
applications.
At December 31, 1995, the Company (including subsidiaries)
had 3,359 full-time equivalent employees.
(b) Financial Information About Industry Segments
Reference is made to the section entitled "Financial
Review-General Overview" set forth in the Company's 1995 Annual
Report to Shareholders. Such section is included in Exhibit 13
hereto and is hereby incorporated herein by reference.<PAGE>
<PAGE> 5
(c) Narrative Description of Business
1. ENERGY
A. General
Wisconsin Gas is the largest natural gas distribution
public utility in Wisconsin. At December 31, 1995, Wisconsin
Gas distributed gas to approximately 505,000 residential,
commercial and industrial customers in 503 communities
throughout Wisconsin having an estimated population of nearly
2,000,000 based on the State of Wisconsin's estimates for 1995.
Wisconsin Gas is subject to the jurisdiction of the Public
Service Commission of Wisconsin ("PSCW") as to various phases of
its operations, including rates, service and issuance of
securities. See "Wisconsin Regulatory Matters."
WES is in the start-up phase of its business, and
accordingly, its results are not material to the Company's
financial position or results of operations.
B. Gas Markets and Competition
Wisconsin Gas' business is highly seasonal, particularly as
to residential and commercial sales for space heating purposes,
with a substantial portion of its sales occurring in the winter
heating season. Competition in varying degrees exists between
natural gas and other forms of energy available to consumers.
Most of Wisconsin Gas' large commercial and industrial customers
are dual-fuel customers that are equipped to switch between
natural gas and alternate fuels. Wisconsin Gas offers
transportation services for these customers to enable them to
reduce their energy costs and use gas rather than other fuels.
Under gas transportation agreements, customers typically seek to
purchase lower-priced spot market gas directly from producers or
other sellers and arrange with pipelines and Wisconsin Gas to
have the gas transported to their facilities. Wisconsin Gas also
offers gas sales services that are priced to compete with these
transportation services. Wisconsin Gas earns the same margin
(difference between revenue and cost of gas), whether it sells
gas to customers or transports customer-owned gas.<PAGE>
<PAGE> 6
The following table sets forth the volumes of natural gas
delivered by Wisconsin Gas to its customers.
<TABLE>
<CAPTION>
Year Ended
----------------------------------
December 31, December 31,
---------------- ----------------
000's of 000's of
Therms * % Therms * *
Customer Class --------- ----- --------- -----
<S> <C> <C> <C> <C>
Sales
Residential 494,250 38.0 463,690 38.8
Commercial 211,570 16.3 185,980 15.5
Large Volume Commercial
and Industrial Firm 134,960 10.4 145,440 12.2
Commercial and Industrial
Interruptible 313,530 24.1 282,170 23.6
--------- ----- --------- -----
Total Sales 1,154,310 88.8 1,077,280 90.1
Transportation
- --------------
Transported 145,490 11.2 119,080 9.9
--------- ----- --------- -----
Total Gas Throughput 1,299,800 100.0 1,196,360 100.0
========= ===== ========= =====
</TABLE>
*One therm equals 100,000 BTU's.
The volumes shown as transported represent customer-owned
gas that was delivered by Wisconsin Gas to its customers. The
remaining volumes represent quantities sold and delivered to
customers by Wisconsin Gas.
Wisconsin Gas secures approximately 98% of all new
residential heating, 88% of existing residential and commercial
retrofit and 70% of all new commercial construction in its
service territory.
The PSCW has instituted a proceeding to consider how its
regulation of gas distribution utilities should change to
reflect the changing competitive environment in the gas
industry. See "Wisconsin Regulatory Matters". In 1995,
Wisconsin Gas added nearly 10,000 customers and now serves more
than one-half million customers. See "Wisconsin Regulatory
Matters - Service Area Expansion".
Up to 25% of Wisconsin Gas' Milwaukee area annual market
requirements can be supplied through the interstate pipelines of
either ANR Pipeline Company ("ANR") or Northern Natural Gas
Company ("NNG"). This capability enhances competition between
ANR and NNG for services to Wisconsin Gas and its customers, and
Wisconsin Gas believes that such competition provides overall
lower gas costs to all customers than otherwise would exist.<PAGE>
<PAGE> 7
Wisconsin Gas' future ability to maintain its present share
of the industrial dual-fuel market (the market that has
installed capability to use gas or other fuels) depends upon
Wisconsin Gas' success in obtaining long-term and short-term
supplies of natural gas at marketable prices and its success in
arranging or facilitating transportation service for those
customers that desire to buy their own gas supplies. Although
the dual-fuel market comprises approximately 35% of Wisconsin
Gas' annual deliveries, it contributes only about 12% of
Wisconsin Gas' margin.
C. Gas Supply, Pipeline Capacity and Storage
(1) General
Prior to the Federal Energy Regulatory Commission's
("FERC") Order No. 636, the interstate pipelines serving
Wisconsin Gas were the primary suppliers of natural gas to
Wisconsin Gas. During the transition period prior to the
implementation of Order No. 636, Wisconsin Gas gradually assumed
responsibility for the acquisition of supply in the production
areas of North America, as well as the management of
transportation and storage capacities to deliver that supply to
its market area. On November 1, 1993, Wisconsin Gas commenced
full operation and responsibility for its supply and capacity
under the requirements of Order No. 636.
One of the provisions of Order No. 636 is capacity release.
Capacity release creates a secondary market for pipeline
capacity and gas supplies. Local distribution companies, such
as Wisconsin Gas, must contract for capacity and supply
sufficient to meet the peak day firm demand of their customers.
Peak or near peak days occur only a few times each year, so
capacity release facilitates higher utilization of capacity
during those times when the capacity is not needed by the
utility. Through pre-arranged agreements and day-to-day
electronic bulletin board postings, interested parties can
purchase that capacity. The proceeds from these transactions
are passed through to ratepayers, thereby helping to offset the
costs associated with holding the capacity. During 1995,
Wisconsin Gas was an active participant in the capacity release
market.
Operating under Order No. 636, Wisconsin Gas Company has
been able to meet its contractual obligations with both its
suppliers and its customers despite periods of severe cold and
unseasonably warm weather, including record cold weather in late
January and early February, 1996.<PAGE>
<PAGE> 8
(2) Pipeline Capacity and Storage
Interstate pipelines serving Wisconsin originate in three
major gas producing areas of North America: the Oklahoma and
Texas basins, the Gulf of Mexico and western Canada. Wisconsin
Gas has contracted for long-term firm capacity on a relatively
equal basis from each of these areas. This strategy reflects
management's belief that overall supply security is enhanced by
geographic diversification of Wisconsin Gas' supply portfolio
and that Canada represents an important long-term source of
reliable, competitively priced gas.
Because of the seasonal variations in gas usage in
Wisconsin, Wisconsin Gas has also contracted with ANR and NNG
for substantial underground storage capacity, primarily in
Michigan. There are no known underground storage formations in
Wisconsin capable of commercialization. Storage enables
Wisconsin Gas to optimize its overall gas supply and capacity
costs. In summer, gas in excess of market demand is transported
into the storage fields, and in winter, gas is withdrawn from
storage and combined with gas purchased in or near the
production areas ("flowing gas") to meet the increased winter
market demand. As a result, Wisconsin Gas can contract for less
pipeline capacity than would otherwise be necessary, and it can
purchase gas on a more uniform daily basis from suppliers year-
round. Each of these capabilities enables Wisconsin Gas to
reduce its overall costs.
Wisconsin Gas also maintains high deliverability storage in
the production area which is designed to deliver gas when other
supplies cannot be delivered during extremely cold weather.
Wisconsin Gas' firm winter daily transportation and storage
capacity entitlements from pipelines under long-term contracts
are set forth below.
Maximum Daily
(Thousands
Pipeline of Therms*)
---------------- -------------
ANR
Mainline 2,999
Storage 4,879
NNG
Mainline 1,085
Storage 150
Viking
Mainline 72
Peaking Facilities 69
-------------
Total 9,254
=============
*One therm equals 100,000 BTU's.<PAGE>
<PAGE> 9
(3) Term Gas Supply
Wisconsin Gas has contracts for firm supplies with terms in
excess of 30 days with approximately 30 gas suppliers for gas
produced in each of the three producing areas discussed above.
The term contracts have varying durations so that only a portion
of Wisconsin Gas' gas supply expires in any year. Wisconsin Gas
believes the volume of gas under contract is sufficient to meet
its forecasted firm peak day demand. The following table sets
forth Wisconsin Gas' winter season maximum daily firm total gas
supply.
Maximum Daily
(Thousands
of Therms*)
--------------
Domestic flowing gas 2,350
Canadian flowing gas 1,482
Storage withdrawals 5,029
--------------
Total 8,861
==============
*One therm equals 100,000 BTU's.
(4) Spot Market Gas Supply
Wisconsin Gas expects to continue to make gas purchases in
the 30-day spot market as price and other circumstances dictate.
Wisconsin Gas has purchased spot market gas since 1985 and has
supply relationships with a number of sellers from whom it
purchases spot gas.
D. Wisconsin Regulatory Matters
(1) Rate Matters
Wisconsin Gas is subject to the jurisdiction of the PSCW as
to various phases of its operations, including rates, customer
service and issuance of securities.
Wisconsin Gas' rates are subject to a three year margin rate
cap (through October 1997) based on the rates in effect in
November 1993, less a $10.4 million reduction implemented when
the margin cap became effective in November, 1994. The PSCW
order also specified margin rate floors for each rate class.
Wisconsin Gas has the ability to raise or lower margin rates
within the specified range on a quarterly basis. The rates at
December 31, 1995 were $4.5 million below the cap because of
annualized rate reductions of $3.0 million and $1.5 million made
by the utility in 1995<PAGE>
<PAGE> 10
Wisconsin Gas' rates contain clauses providing for periodic
adjustment, with PSCW approval, to reflect changes in purchased
gas costs including the recovery of transition costs passed
through by pipeline suppliers. See "Wisconsin Regulatory
Matters - Transition Cost Recovery Policy" and "Wisconsin
Regulatory Matters - Gas Cost Recovery Mechanism".
(2) Transition Cost Recovery Policy
Under Order No. 636, interstate pipelines are permitted to
recover certain costs incurred in the transition from the
bundled sales service to the unbundled Order No. 636 regime.
ANR and NNG have filed to recover transition costs. ANR and NNG
may file in the future to recover additional transition costs,
and Wisconsin Gas will bear a portion of such additional costs
approved by the FERC. The PSCW has permitted Wisconsin Gas to
recover transition costs from customers through its rates.
In the judgment of management, the incurrence of these
transition costs will have no material effect on Wisconsin Gas'
operations or financial condition under current PSCW policy.
See Note 7a to Notes to Consolidated Financial Statements
contained in Exhibit 13, the Company's 1995 Annual Report to
Shareholders, which note is hereby incorporated herein by
reference.
(3) Gas Cost Recovery Mechanism
The PSCW has instituted a proceeding to determine whether
changes should be made to the purchased gas adjustment ("PGA")
mechanism. In particular, the PSCW is examining whether to
replace the PGA with an incentive mechanism. In general, an
incentive gas cost recovery mechanism would establish a targeted
gas cost, and the utility would be rewarded or penalized based
on its gas costs relative to the target. Hearings are scheduled
for March 1996 and it is expected that any changes to the
current PGA will be effective November 1, 1996. The Company
cannot predict what, if any, changes the PSCW may order, nor the
impact such changes would have.
(4) Service Area Expansion
In recent years, Wisconsin Gas has increased its efforts to
obtain regulatory approvals to extend gas service to previously
unserved communities. In 1995, Wisconsin Gas added nearly
10,000 customers. Over the last five years, Wisconsin Gas has
extended service to 99 new communities and added 52,000
customers.<PAGE>
<PAGE> 11
(5) Changing Regulatory Environment
The PSCW has instituted a proceeding to consider how its
regulation of gas distribution utilities should change to
reflect the changing competitive environment in the gas
industry. To date, the PSCW has made a policy decision to
deregulate gas costs for customer segments with workably
competitive market choices. The PSCW has identified numerous
issues which must be resolved before its policy can be
implemented. A generic proceeding has been instituted during
which these issues will be aired and decided. Hearings are
scheduled to begin in January 1996, with the expectation that
the new regulatory framework will be implemented by the end of
1996. The Company is unable to determine what impact this
proceeding may have on Wisconsin Gas' operations or financial
position.
E. Employees
At December 31, 1995, the energy group had 1,098 full-time
equivalent active employees.
2. MANUFACTURING OF PUMPS AND FLUID PROCESSING AND FILTRATION
EQUIPMENT
A. General
The Company's manufacturing subsidiaries manufacture pumps
and fluid processing and filtration equipment for residential,
agricultural and industrial markets world wide. Manufacturing
and assembly activities are conducted in plants in the United
States, United Kingdom, Australia, Italy, New Zealand, Russia,
Germany and Mexico.
B. U.S. Operations
Water products include jet, centrifugal, sump, submersible
and submersible turbine water pumps, water storage and pressure
tanks, filters, and pump and tank systems. These products pump,
filter and store water used for drinking, cooking, washing and
livestock watering, and are used in private and public swimming
pools, spas, "hot tubs", jetted bathtubs, and fountains. The
manufacturing businesses also produce large higher pressure and
capacity water pumps used in agricultural and turf irrigation
systems and in a wide variety of commercial, industrial and
municipal fluids-handling applications.<PAGE>
<PAGE> 12
Small, high performance pumps, and related fluids-handling
products, are used in four primary markets: (1) the food
service industry, where gas operated pumps are used for pumping
soft drinks made from syrups, and electric motor driven pumps
are used for water boost and drink dispensing; (2) the
recreational vehicle and marine markets, where electric motor
driven pumps are used for a variety of applications including
pumping potable water in travel trailers, motor homes, camping
trailers and boats, and for other applications including marine
wash down, bilge and live well pumping; (3) industrial markets,
where applications are concentrated in the soil extraction
market for use in carpet cleaning machines, agricultural markets
for spraying agricultural pesticides and fertilizers, and
general industrial applications requiring fluid handling; and
(4) the water purification industry, where electric motor driven
pumps are used to pressurize reverse osmosis systems and for
water transfer.
Sales of pumps and water processing equipment are somewhat
related to the seasons of the year as well as the level of acti-
vity in the housing construction industry and are sensitive to
weather, interest rates, discretionary income, and leisure and
recreation spending. The markets for most water and industrial
products are highly competitive, with price, service and product
performance all being important competitive factors. The
Company believes it is a leading producer of pumps for private
water systems and swimming pools and spas and for the food
service and recreational vehicle markets. Management believes
the Company also ranks among the larger producers of pool and
spa filters and submersible turbine pumps. Major brand names
under trademarks include "STA-RITE", "BERKELEY", "SHURflo",
"FLOTEC","Aquatools", "AQUALITY", "FoamPro", "ONGA", "Hypro",
"Sherwood", "SherTech" and "Nocchi".
Domestic pumps and water products are sold and serviced
primarily through a network of independent distributors,
dealers, retailers and manufacturers' representatives serving
the well drilling, hardware, plumbing, pump installing,
irrigation, pool and spa, food service, recreational vehicle,
marine, industrial and do-it-yourself markets. Sales are also
made on a private brand basis to large customers in all water
products markets and to original equipment manufacturers.
Backlog of orders for pumps and water products is not a
significant indicator of future sales.<PAGE>
<PAGE> 13
C. International Operations
International operations are conducted primarily by
international subsidiaries and export operations from the United
States. Products are sold to markets in approximately 100
countries on six continents. Foreign manufacturing is carried
out by United Kingdom, German, Australian, New Zealand, Italian,
Mexican and Russian subsidiaries. The products sold in the
international markets in some cases are similar to those sold in
the United States, but in many instances have distinct features
required for those markets. Product distribution channels are
similar to those for domestic markets. Non-domestic sales,
including exports, were 39% of 1995 manufacturing group sales.
D. Raw Materials and Patents
Raw materials essential to the manufacturing operations are
available from various established sources in the United States
and overseas. The principal raw materials needed for production
of the Company's primary lines of products include cast iron,
aluminum and bronze castings for pumps; copper wire and aluminum
for motors; stainless and carbon sheet steel, bar steel and
tubing; plastic resins for injection molded components; and
powdered metal components. The manufacturing units also purchase
from third party suppliers completely assembled electric motors,
plastic molded parts, elastomers for valves and diaphragms,
components for electric motors, stamped and die cast metal
parts, and hardware and electrical components. Although the
manufacturing subsidiaries own a number of patents and hold
licenses for manufacturing rights under other patents, no one
patent or group of patents is critical to the success of the
manufacturing businesses as a whole.
E. Employees
At December 31, 1995, the manufacturing group had 2,261 full
time equivalent active employees.
Item 2. PROPERTIES
(a) Capital Expenditures
The Company's capital expenditures for the year ended
December 31, 1995, totaled $56.2 million. Retirements during
this period totaled $8.1 million. Except as discussed under
"Legal Proceedings", the Company does not expect to make any
material capital expenditures for environmental control
facilities in 1996.<PAGE>
<PAGE> 14
(b) Energy
Wisconsin Gas owns a distribution system which, on December
31, 1995, included approximately 8,300 miles of distribution and
transmission mains, 414,000 services and 539,000 active meters.
Wisconsin Gas' distribution system consists almost entirely of
plastic and coated steel pipe. Wisconsin Gas also owns its main
office building in Milwaukee, office buildings in certain other
communities in which it serves, gas regulating and metering sta-
tions, peaking facilities and its major service centers,
including garage and warehouse facilities.
The Milwaukee and other office buildings, the principal
service facilities and the gas distribution systems of Wisconsin
Gas are owned by it in fee subject to the lien of its Indenture
of Mortgage and Deed of Trust, dated as of November 1, 1950,
under which its first mortgage bonds are issued, and to permis-
sible encumbrances as therein defined. Where distribution mains
and services occupy private property, Wisconsin Gas in some, but
not all, instances has obtained consents, permits or easements
for such installations from the apparent owners or those in
possession, generally without an examination of title.
(c) Manufacturing of Pumps, Fluid Processing and Filtration
Equipment
The manufacturing group has 15 manufacturing facilities
located in California (2), Michigan, Minnesota, Nebraska,
Wisconsin (2), Germany, Australia (2), Italy (2), New Zealand,
Russia and Mexico. These plants contain a total of
approximately 1,466,000 square feet of floor space. These
businesses also own or lease ten sales/distribution facilities
in the United States, six in Australia, two in England, and one
each in Canada, France, Italy, Mexico, New Zealand and
Singapore.
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than
ordinary routine litigation incidental to the Company's busi-
nesses, to which the Company or any of its subsidiaries is a
party, except as discussed below. There are no material legal
proceedings to which any officer or director of the Company or
any of its subsidiaries is a party or has a material interest
adverse to the Company. There are no material administrative or
judicial proceedings arising under environmental quality or
civil rights statutes pending or known to be contemplated by
governmental agencies to which the Company or any of its
subsidiaries is or would be a party.<PAGE>
<PAGE> 15
The manufacturing subsidiaries are involved in various
environmental matters, including matters in which the
subsidiaries or alleged predecessors have been named as
potentially responsible parties under the Comprehensive
Environmental Response Compensation and Liability Act
("CERCLA"). The Company has established accruals for all
environmental contingencies of which management is aware in
accordance with generally accepted accounting principles. In
establishing these accruals, management considered (a) reports
of environmental consultants retained by the Company, (b) the
costs incurred to date by the Company at sites where clean-up is
presently ongoing and the estimated costs to complete the
necessary remediation work remaining at such sites, (c) the
financial solvency, where appropriate, of other parties that
have been responsible for remediation at specified sites, and
(d) the experience of other parties who have been involved in
the remediation of comparable sites. The accruals recorded by
the Company with respect to environmental matters have not been
reduced by potential insurance or other recoveries and are not
discounted. Although the Company has and will continue to
pursue such claims against insurance carriers and other
responsible parties, future potential recoveries remain
uncertain, and, therefore, were not recorded as a reduction to
the estimated gross environmental liabilities. Based on the
foregoing and given current information, management believes
that future costs in excess of the amounts accrued on all
presently known and quantifiable environmental contingencies
will not be material to the Company's financial position or
results of operations.
Sta-Rite has entered into a contract with the Wisconsin
Department of Natural Resources ("WDNR") to perform and complete
the Remedial Investigation/Feasibility Study and Remedial
Design/Remedial Action phases of the Federal Superfund
environmental process for the Delavan, Wisconsin Municipal Well
No. 4, which is located close to one of Sta-Rite's facilities.
In 1990 and 1991, Sta-Rite provided reserves to cover the
estimated costs under the contract. No additions to reserves
were required since 1991. Although management believes the
amounts reserved will be adequate to effect any necessary
restoration, there is a possibility that additional costs may be
incurred.
In July 1994, Sta-Rite was notified by the WDNR that it
believed solvents used at a manufacturing site previously
operated by Sta-Rite have migrated and contributed to the
contamination of a Deerfield, Wisconsin municipal well, serving
Deerfield residents, and surrounding property. In August, 1995
the WDNR issued an order to investigate, restore and repair the
natural resouces located in Deerfield. Based upon the
preliminary investigation and reserves established, the Company
believes that the resolution of this matter will not have a
material adverse effect upon its financial condition. However,
there is a possibility that costs in excess of the amount
reserved may be incurred in the future.<PAGE>
<PAGE> 16
Wisconsin Gas has identified two previously owned sites on
which it operated manufactured gas plants that are of
environmental concern. Such plants ceased operations prior to
the mid-1950's. Wisconsin Gas has engaged an environmental
consultant to help determine the nature and extent of the
contamination at these sites. Based on the test results obtained
and the possible remediation alternatives available, the Company
has estimated that cleanup costs could range from $22 million to
$75 million. As of December 31, 1995, the Company has accrued
$36.4 million for future cleanup costs. These estimates are
based on current undiscounted costs. It should also be noted
that the numerous assumptions such as the type and extent of
contamination, available remediation techniques, and regulatory
requirements which are used in developing these estimates are
subject to change as new information becomes available. Any such
changes in assumptions could have a significant impact on the
potential liability. Due to anticipated regulatory treatment,
changes in the recorded liability do not immediately impact net
income.
The WDNR issued a Probable Responsible Party letter to
Wisconsin Gas for these two sites in September, 1994. Following
receipt of this letter, Wisconsin Gas and the WDNR held an
initial meeting to discuss the sites. At the meeting it was
agreed that Wisconsin Gas would prepare a remedial action
options report from which it will select specific remedial
actions for recommendation to the WDNR. During 1995, Wisconsin
Gas gathered additional environmental data regarding these two
sites, held extensive discussions concerning remedial options
with current land owners and solicited information from
environmental consulting and remediation firms on technology and
approaches that would best suit the sites. The efforts were
directed toward preparing a remedial action options report and
recommendations for presentation to the WDNR in 1996. Once such
a plan is approved, initial remediation work will begin.
Expenditures over the next three years are expected to total
approximately $20 million. Although most of the work and costs
are expected to be incurred in the first few years of the plan,
monitoring of sites and other necessary actions may be
undertaken for up to 30 years.
In March 1994, Wisconsin Gas commenced suit against nine
insurance carriers seeking a declaratory judgment regarding
insurance coverage for the two sites. Settlements were reached
with each of the carriers during 1994. Additional insurance
recoveries are being pursued. Wisconsin Gas expects full
recovery of incurred remediation costs, less amounts recovered
from insurance carriers. If the amount recovered from the
insurance carriers is insufficient to remediate both sites,
expenditures not recovered are expected to be allowed full
recovery (other than for carrying costs) in rates based upon
recent PSCW orders. Accordingly, a regulatory asset has been
recorded for the accrued cost. Certain related investigation
costs incurred to date are currently being recovered in utility
rates. However, any incurred costs not yet recovered in rates
are not allowed by the PSCW to earn a return. As of December
31, 1995, $4.8 million of such costs had been incurred.<PAGE>
<PAGE> 17
Wisconsin Gas also owns a service center that is constructed
on a site that was previously owned by the City of Milwaukee and
was used by the City as a public dump site. Wisconsin Gas has
conducted a site assessment at the request of the WDNR and has
sent the report of its assessment to the WDNR. Management
cannot predict whether or not the WDNR will require any
remediation action, nor the extent or cost of any remediation
actions that may be required. In the judgment of management,
any remediation costs incurred by Wisconsin Gas will be
recoverable from the City of Milwaukee or in Wisconsin Gas'
rates pursuant to the PSCW's orders discussed above.
See Note 7c to Notes to Consolidated Financial Statements
contained in Exhibit 13, the Company's 1995 Annual Report to
Shareholders, which note is hereby incorporated herein by
reference.
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders
during the fourth quarter of 1995.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names and ages of, and the
offices held by, the executive officers of the Company. The
officers serve one-year terms commencing with their election at
the meeting of the Board of Directors following the annual
meeting of shareholders in April.
Name Age Offices Held
- -------------------- --- --------------------------------
George E. Wardeberg 60 President and Chief Executive
Officer of the Company, and
Chairman of Wisconsin Gas,
Sta-Rite, SHURflo, Hypro and WICOR
Energy Services
Thomas F. Schrader 46 Vice President of the Company and
President and Chief Executive
Officer of Wisconsin Gas and WICOR
Energy Services
James C. Donnelly 50 Vice President of the Company and
President and Chief Executive
Officer of Sta-Rite
Joseph P. Wenzler 54 Vice President, Treasurer and
Chief Financial Officer of the
Company; Vice President and Chief
Financial Officer of Wisconsin
Gas; Treasurer and Secretary of
SHURflo and Hypro; and Vice
President and Treasurer of WICOR
Energy Services
Robert A. Nuernberg 56 Secretary of the Company and WICOR
Energy Services; and Vice-
President-Corporate Relations and
Secretary of Wisconsin Gas
<PAGE>
<PAGE> 18
Each of the executive officers has held his position for
more than five years, except as follows:
Mr. Wardeberg was elected to his current positions
effective February 1, 1994. Prior thereto, he was President and
Chief Operating Officer of the Company and Vice Chairman and
Chief Executive Officer of Sta-Rite from 1992 to 1994; Vice
Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and
Vice President-Water Systems of Sta-Rite from 1989 to 1992.
Prior thereto, he was Vice Chairman and Chief Operating Officer
of Whirlpool Corporation.
Mr. Donnelly was elected President and Chief Executive
Officer of Sta-Rite in 1994. He has been a Vice President of
the Company since 1987. Previously, he served as President and
Chief Operating Officer of Sta-Rite from 1992 to 1994, and as
Vice President, Treasurer and Chief Financial Officer of the
Company and Wisconsin Gas from 1990 to 1992. Mr. Donnelly
joined the Company and Wisconsin Gas in 1987 as Vice President
and Treasurer. Prior thereto, he served as Vice President-
Finance of Eastern Gas and Fuel Associates.
Mr. Wenzler was elected Vice President, Treasurer and Chief
Financial Officer of the Company and Vice President and Chief
Financial Officer of Wisconsin Gas in 1992 and as Treasurer and
Secretary of SHURflo in 1993. Prior thereto, he served as Vice
President of the Company and President and Chief Executive
Officer of Sta-Rite from 1990 to 1992, and President and Chief
Operating Officer of Sta-Rite from 1986 to 1990.
Each of the executive officers assumed their positions with
Hypro in July, 1995, when Hypro was acquired, and with WICOR
Energy Services in March, 1995, when that company was formed.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock and the associated common stock
purchase rights (which do not currently trade independently of
the common stock) are traded on the New York Stock Exchange.
For information regarding the high and low sales prices for the
Company's common stock and dividends paid per share in each
quarter of 1995 and 1994, see the section entitled "Investor
Information" set forth in the Company's 1995 Annual Report to
Shareholders. Such section is included in Exhibit 13 hereto and
is hereby incorporated herein by reference.
At December 31, 1995, there were 15,238 holders of record
of WICOR common stock.<PAGE>
<PAGE> 19
The Company's ability to pay dividends is dependent to a
great extent on the ability of its subsidiaries to pay
dividends. The Wisconsin Business Corporation Law and the
indentures and agreements under which debt of the Company and
its subsidiaries is outstanding each contain certain
restrictions on the payment of dividends on common stock by the
Company's subsidiaries. See Note 6 of Notes to Consolidated
Financial Statements contained in Exhibit 13, the Company's 1995
Annual Report to Shareholders, which note is hereby incorporated
herein by reference.
By order of the PSCW, Wisconsin Gas is generally permitted
to pay dividends up to the amount projected in its rate case
($16 million). Wisconsin Gas may pay dividends in excess of $16
million so long as the payment will not cause its equity ratio
to fall below 48.43%. If payment of projected dividends would
cause its common equity ratio to fall below 43% of total
capitalization (including short-term debt), or if payment of
additional dividends would cause its common equity ratio to fall
below 48.43%, Wisconsin Gas must obtain PSCW approval to pay
such dividends. Wisconsin Gas has projected the payment of $19
million of dividends to the Company during the 12 months ending
October 31, 1996. See Note 6 of Notes to Consolidated Financial
Statements contained in Exhibit 13, the Company's 1995 Annual
Report to Shareholders, which note is hereby incorporated herein
by reference. The PSCW desires Wisconsin Gas to target its
common equity level at 43% to 50% of total capitalization. For
the year ended December 31, 1995, Wisconsin Gas' average common
equity level was 51%.
In addition, $6.3 million of Sta-Rite net assets at
December 31, 1995, plus 50% of Sta-Rite future earnings, are
available for dividends to the Company. See Note 6 of Notes to
Consolidated Financial Statements contained in Exhibit 13, the
Company's 1995 Annual Report to Shareholders, which note is
incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the section entitled "Selected
Financial Data" set forth in the Company's 1995 Annual Report to
Shareholders. Such section is included in Exhibit 13 hereto and
is hereby incorporated herein by reference.
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Reference is made to the section entitled "Financial
Review" set forth in the Company's 1995 Annual Report to
Shareholders. Such section is included in Exhibit 13 hereto and
is hereby incorporated herein by reference.<PAGE>
<PAGE> 20
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the WICOR, Inc. consolidated balance
sheets and consolidated statements of capitalization as of
December 31, 1995 and 1994, and the related consolidated
statements of income, common equity and cash flow for each of
the three years in the period ended December 31, 1995, together
with the report of independent public accountants dated January
22, 1996, all appearing in Exhibit 13, the Company's 1995 Annual
Report to Shareholders, which is hereby incorporated herein by
reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in or disagreement with the
Company's independent auditors on any matter of accounting
principles or practices or financial statement disclosure re-
quired to be reported pursuant to this item.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to "Item No. 1: Election of Directors"
included in the WICOR proxy statement dated March 12, 1996,
which is hereby incorporated herein by reference, for the names,
ages, business experience and other information regarding
directors and nominees for director of the Company. See
"Executive Officers of the Registrant" included in Part I hereof
for information regarding executive officers of the Company.
Item 11. EXECUTIVE COMPENSATION
Reference is made to "Executive Compensation" included in
the WICOR proxy statement dated March 12, 1996, which is hereby
incorporated herein by reference, for information on compen-
sation of executive officers of the Company; provided, however,
that the subsections entitled "Board Compensation Committee
Report on Executive Compensation" and "Executive Compensation -
Performance Information" shall not be deemed to be incorporated
herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Reference is made to "Security Ownership of Management"
included in the WICOR proxy statement dated March 12, 1996,
which is hereby incorporated herein by reference, for
information regarding voting securities of the Company
beneficially owned by its directors and officers.<PAGE>
<PAGE> 21
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to "Item No. 1: Election of Directors"
included in the WICOR proxy statement dated March 12, 1996,
which is hereby incorporated herein by reference, for the
information required to be disclosed under this item.
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual
Report on Form 10-K:
1. All Financial Statements. The WICOR, Inc. consolidated
balance sheets and statements of capitalization as of
December 31, 1995 and 1994, and the related consolidated
statements of income, common equity and cash flow for
each of the three years in the period ended December 31,
1995, together with the report of independent public
accountants dated January 22, 1996, included in Exhibit
13, the Company's 1995 Annual Report to Shareholders,
which is incorporated herein by reference.
2. Financial statement schedules.
Schedule III Condensed Statements of Income, Retained
Earnings and Cash Flow (Parent Company
Only) for the Years Ended December 31,
1995, 1994 and 1993; Condensed Balance
Sheets (Parent Company Only) as of
December 31, 1995 and 1994; Notes to
Parent Company Only Financial Statements.
Financial statement schedules other than those referred to
above have been omitted as not applicable or not required.
3. Exhibits
3.1 WICOR, Inc. Restated Articles of Incorporation, as
amended (incorporated by reference to Exhibit 3.1 to
the Company's Form 10-K Annual Report for 1992).
3.2 WICOR, Inc. By-laws, as amended (incorporated by
reference to Exhibit 3.3 to the company's Form 10-K
Annual Report for 1994).
4.1 Indenture of Mortgage and Deed of Trust dated as of
November 1, 1950, between Milwaukee Gas Light
Company and Mellon National Bank and Trust Company
and D. A. Hazlett, Trustees (incorporated by
reference to Exhibit 7-E to Milwaukee Gas Light
Company's Registration Statement No. 2-8631).<PAGE>
<PAGE> 22
4.2 Bond Purchase Agreement dated December 31, 1981,
between Wisconsin Gas Company and Teachers Insurance
and Annuity Association of America relating to the
issuance and sale of $30,000,000 principal amount of
First Mortgage Bonds, Adjustable Rate Series due
2002 (incorporated by reference to Exhibit 4.6 to
Wisconsin Gas Company's Form S-3 Registration
Statement No. 33-43729).
4.3 Indenture dated as of September 1, 1990, between
Wisconsin Gas Company and First Wisconsin Trust
Company, Trustee (incorporated by reference to
Exhibit 4.11 to Wisconsin Gas Company's Form S-3
Registration Statement No. 33-36639).
4.4 Officers' Certificate, dated as of November 19,
1991, setting forth the terms of Wisconsin Gas
Company's 7-1/2% Notes due 1998 (incorporated by
reference to Exhibit 4.1 to Wisconsin Gas Company's
Form 8-K Current Report for November, 1991).
4.5 Officers' Certificate, dated as of September 15,
1993, setting forth the terms of Wisconsin Gas
Company's 6.60% Debentures due 2013 (incorporated by
reference to Exhibit 4.1 to Wisconsin Gas Company's
Form 8-K Current Report for September, 1993).
4.6 Officers' Certificate, dated as of November 7, 1996,
setting forth the terms of Wisconsin Gas Company's
6-3/8% Notes due 2005 (incorporated by reference to
Exhibit 4 to Wisconsin Gas Company's Form 8-K
Current Report dated November 7, 1995).
4.7 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among Wisconsin Gas Company and
Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris
Trust & Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q dated as of August 9, 1993).
4.8 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among Sta-Rite Industries, Inc.
and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q dated as of August 9, 1993).
4.9 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among WICOR, Inc. and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust &
Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).<PAGE>
<PAGE> 23
4.10 Extension of Revolving Credit and Term Loan
Agreement, effective March 10, 1995, among WICOR,
Inc. and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust & Saving Bank, M&I Marshall &
Ilsley Bank and Citibank, N.A., as Agent
(incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated April
28, 1995).
4.11 Extension of Revolving Credit Agreement dated March
10, 1995, among Wisconsin Gas Company and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust and
Savings Bank and M&I Marshall and Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q dated April 28, 1995).
4.12 Extension of Revolving Credit Agreement dated March
10, 1995, among Sta-Rite and Citibank, N.A., Firstar
Bank Milwaukee, N.A., Harris Trust and Savings Bank
and M&I Marshall and Ilsley Bank and Citibank, N.A.,
as Agent (incorporated by reference to Exhibit 4.3
to the Company's Quarterly Report on Form 10-Q dated
April 28, 1995).
4.13 Rights Agreement dated as of August 29, 1989,
between WICOR, Inc. and Manufacturers Hanover Trust
Company, Rights Agent (incorporated by reference to
Exhibit 4 to the Company's Form 8-K current report
for August, 1989).
4.14 Loan Agreement, dated as of November 4, 1991, by and
among M&I Marshall & Ilsley Bank, Wisconsin Gas
Company Employees' Savings Plans Trust and WICOR,
Inc. (incorporated by reference to Exhibit 4.16 to
the Company's Form 10-K Annual Report for 1991).
4.15 Guaranty, dated as of November 4, 1991, from WICOR,
Inc. to and for the benefit of M&I Marshall & Ilsley
Bank (incorporated by reference to Exhibit 4.17 to
the Company's Form 10-K Annual Report for 1991).
4.16 Revolving Credit Agreement Amendment, effective July
12, 1995, among WICOR, Inc. and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust and
Savings Bank, M&I Marshall and Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.4 to the Company's Quarterly Report on
Form 10-Q dated October 25, 1995).
4.17 Loan Agreement Amendment effective December 21,
1995, by and among Wisconsin Gas Company Employees'
Savings Plans Trust, WICOR, Inc. and M&I Marshall
and Ilsley Bank.<PAGE>
<PAGE> 24
Sta-Rite Industries, Inc., a wholly-owned subsidiary
of the Registrant, is the obligor under various loan
agreements in connection with facilities financed
through the issuance of industrial development
bonds. The loan agreements and the additional
documentation relating to these bond issues are not
being filed with this Annual Report on Form 10-K in
reliance upon Item 601(b)(4)(iii) of Regulation S-K.
Copies of these documents will be furnished to the
Securities and Exchange Commission upon request.
10.1 Service Agreement dated as of June 1, 1994, among
WICOR, Inc., Wisconsin Gas Company, Sta-Rite
Industries, Inc., WEXCO of Delaware, Inc. and
SHURflo Pump Manufacturing Co.
10.2 Endorsement of Hypro Corporation dated as of July
19, 1995, to Service Agreement among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc. and
WEXCO of Delaware, Inc.
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-67134).
10.4# Forms of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1987 Stock Option
Plan (incorporated by reference to Exhibit 10.20 to
the Company's Form 10-K Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan,
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-67132).
10.6# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1992 Director Stock
Option Plan (incorporated by reference to Exhibit
4.2 to the Company's Form S-8 Registration Statement
No. 33-67132).
10.7# WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-55755).
10.8# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1994 Long-Term
Performance Plan, (incorporated by reference to
Exhibit 4.2 to the Company's Form S-8 Registration
Statement No. 33-55755).
10.9# Form of restricted stock agreement used in
connection with the WICOR, Inc. 1994 Long-Term
Performance Plan (incorporated by reference to
Exhibit 4.3 to the Company's Form S-8 Registration
Statement No. 33-55755).<PAGE>
<PAGE> 25
10.10# WICOR, Inc. 1996 Officers' Incentive Compensation
Plan.
10.11# Wisconsin Gas Company Principal Officers'
Supplemental Retirement Income Program (incorporated
by reference to Exhibit 10.8 to the Company's Form
10-K Annual Report for 1993).
10.12# Wisconsin Gas Company 1996 Officers' Incentive
Compensation Plan.
10.13# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K Annual Report for 1992).
10.14# Form of Deferred Compensation Agreements between
Wisconsin Gas Company and certain of its executive
officers (incorporated by reference to Exhibit 10.30
to the Company's Form 10-K Annual Report for 1990).
10.15# Sta-Rite Industries, Inc. Officers Supplemental
Retirement Income Program (incorporated by reference
to Exhibit 10.28 to the Company's Form 10-K Annual
Report for 1989).
10.16# Sta-Rite Industries, Inc. 1996 Officers' Incentive
Compensation Plan.
10.17# Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K Annual Report for 1992).
10.18# WICOR, Inc. Retirement Plan for Directors, as
amended (incorporated by reference to Exhibit 10.29
to the Company's Form 10-K Annual Report for 1992).
13 Portions of the WICOR, Inc. 1995 Annual Report to
Shareholders incorporated by reference herein.
21 Subsidiaries of WICOR, Inc.
23 Consent of independent public accountants.
27 Financial Data Schedule. (EDGAR version only)
99 WICOR, Inc. proxy statement dated March 12, 1996.
(Except to the extent incorporated by reference,
this proxy statement is not deemed "filed" with the
Securities and Exchange Commission as part of this
Form 10-K.)
#Indicates a plan under which compensation is paid or payable to
directors or executive officers of the Company.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed during the fourth
quarter of 1995.<PAGE>
<PAGE> 26
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
WICOR, Inc.
Date: March 12, 1996 By JOSEPH P. WENZLER
------------------------------
Joseph P. Wenzler
Vice President, Treasurer, and
Chief Financial Officer<PAGE>
<PAGE> 27
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed on the succeeding pages by
the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
WICOR, Inc.
Signature Title Date
GEORGE E. WARDEBERG
George E. Wardeberg President, Chief Executive March 12, 1996
Officer and Director
(Principal Executive Officer)
JOSEPH P. WENZLER
Joseph P. Wenzler Vice President, Treasurer March 12, 1996
and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
WENDELL F. BUECHE Director March 12, 1996
Wendell F. Bueche
WILLIE D. DAVIS Director March 12, 1996
Willie D. Davis
JERE D. MCGAFFEY Director March 12, 1996
Jere D. McGaffey
DAN F. MCKEITHAN,JR Director March 12, 1996
Daniel F. McKeithan, Jr.
GUY A. OSBORN Director March 12, 1996
Guy A. Osborn
THOMAS F. SCHRADER Director March 12, 1996
Thomas F. Schrader
STUART W. TISDALE Director March 12, 1996
Stuart W. Tisdale
ESSIE M. WHITELAW Director March 12, 1996
Essie M. Whitelaw
WILLIAM B. WINTER Director March 12, 1996
William B. Winter<PAGE>
<PAGE> 28
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To WICOR, Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in
Exhibit 13 to this Form 10-K, and have issued our report thereon
dated January 22, 1996. Our audit was made for the purpose of
forming an opinion on those statements taken as a whole.
Supplemental Schedule III is the responsibility of the Company's
management and is presented for purposes of complying with the
Securities and Exchange Commission's rules and is not part of
the basic consolidated financial statements. This schedule has
been subjected to the auditing procedures applied in the audit
of the basic consolidated financial statements and, in our
opinion, fairly state in all material respects the financial
data required to be set forth therein in relation to the basic
consolidated financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
January 22, 1996<PAGE>
<PAGE> 29
Schedule III - Condensed
Parent Company Financial Statements
<TABLE>
<CAPTION>
WICOR, INC.
(Parent Company Only)
Statement of Income
Year Ended December 31,
---------------------------------
1995 1994 1993
---------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Income:
Equity in income of subsidiaries
after dividends......................... $ 16,052 $ 10,154 $ 9,356
Cash dividends from subsidiaries.......... 23,000 23,000 21,500
Interest income and other................. 2,237 373 267
--------- --------- ---------
41,289 33,527 31,123
--------- --------- ---------
Expenses:
Operating (Supplemental Note C)........... 1,120 455 1,942
Interest ................................. 275 163 259
--------- --------- ---------
1,395 618 2,201
--------- --------- ---------
Income Before Parent Company Income Taxes... 39,894 32,909 28,922
Income Taxes................................ 367 (265) (391)
--------- --------- ---------
Net Income.................................. $ 39,527 $ 33,174 $ 29,313
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 30
Schedule III - Condensed
Parent Company Financial Statements (continued)
<TABLE>
<CAPTION>
WICOR, INC.
(Parent Company Only)
Statement of Retained Earnings
Year Ended December 31,
---------------------------------
1995 1994 1993
---------------------------------
(Thousands of Dollars)
<S> <C> <C> <C>
Balance - Beginning of Year................. $101,418 $ 94,643 $ 90,102
Add:
Net income.............................. 39,527 33,174 29,313
--------- --------- ---------
140,945 127,817 119,415
Deduct:
Cash dividends on common stock.......... 27,454 26,399 24,099
Other................................... - - 673
--------- --------- ---------
Balance - End of Year ...................... $113,491 $101,418 $ 94,643
========= ========= =========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 31
Schedule III - Condensed
Parent Company Only Financial Statements (continued)
<TABLE>
<CAPTION>
WICOR, INC.
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Year Ended December 31,
(Thousands of Dollars) --------------------------------
1995 1994 1993
--------------------------------
<S> <C> <C> <C>
Operations-
Net income ............................... $ 39,527 $ 33,174 $ 29,313
Adjustments to reconcile net income to
net cash flows:
Equity in (income) losses of
subsidiaries.......................... (16,052) (10,154) (9,356)
Change in deferred income taxes......... 12 (58) (73)
Change in intercompany receivables...... (11,715) 123 (7,342)
Change in income taxes payable.......... 597 1,548 6,923
Change in other current assets.......... 3 33 98
Change in other current liabilities..... 62 (254) 178
Change in other non-current assets and
liabilities........................... (1,149) (843) (185)
--------- --------- ---------
11,285 23,569 19,556
Investment Activities --------- --------- ---------
Investments in subsidiaries............... (37,875) (5,000) (12,000)
Proceeds from sale of assets.............. 5,099 - -
--------- --------- ---------
(32,776) (5,000) (12,000)
Financing Activities- --------- --------- ---------
Issuance of common stock.................. 40,285 10,649 16,682
Dividends paid on common stock, less
amounts reinvested...................... (27,454) (23,247) (21,450)
--------- --------- ---------
12,831 (12,598) (4,768)
--------- --------- ---------
Change in Cash and Cash Equivalents......... (8,660) 5,971 2,788
Cash and Cash Equivalents at Beginning
of Year................................... 13,076 7,105 4,317
--------- --------- ---------
Cash and Cash Equivalents at End of Year.... $ 4,416 $ 13,076 $ 7,105
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid (received) during the year for:
Interest paid............................. $ - $ - $ 1
Income taxes paid......................... 1,525 (4,440) 2,805
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 32
Schedule III - Condensed
Parent Company Financial Statements (continued)
<TABLE>
<CAPTION>
WICOR, INC.
(Parent Company Only)
Balance Sheet
As of December 31,
----------------------
(Thousands of Dollars) 1995 1994
----------------------
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents............................. $ 4,416 $ 13,076
Intercompany receivable, net (Supplemental Note B).... 13,754 2,039
Other................................................. 76 79
---------- ----------
18,246 15,194
---------- ----------
Investment in Subsidiaries, at equity................... 337,241 286,725
---------- ----------
Deferred Income Taxes .................................. 192 204
Deferred Charges and Other.............................. 578 491
---------- ----------
$ 356,257 $ 302,614
========== ==========
Liabilities and Capitalization
- ------------------------------
Current Liabilities:
Income taxes payable.................................. $ 5,020 $ 4,423
Other................................................. 161 99
---------- ----------
5,181 4,522
---------- ----------
Deferred Credits........................................ 495 254
---------- ----------
Capitalization:
ESOP loan guarantee (Supplemental Note D)............. 5,315 6,370
---------- ----------
Common equity:
Common stock, $1 par value, authorized 60,000,000
shares; outstanding 18,237,000 and 16,918,000
shares, respectively ............................. 18,237 16,918
Other paid-in-capital .............................. 219,133 180,000
Retained earnings .................................. 113,491 101,418
Unearned compensation (Supplemental Note D)......... (5,595) (6,868)
---------- ----------
Total common equity............................... 345,266 291,468
---------- ----------
$ 356,257 $ 302,614
========== ==========
</TABLE>
The accompanying notes are an integral part of this statement.<PAGE>
<PAGE> 33
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, Inc.
Notes to Parent Company Only Financial Statements
The following are supplemental notes to the WICOR, Inc. (Parent
Company Only) financial statements and should be read in
conjunction with the WICOR, Inc. Consolidated Financial
Statements and Notes thereto included herein under Item 8:
SUPPLEMENTAL NOTES
A. The parent company files a consolidated Federal income
tax return with its subsidiaries.
B. Net amounts due from subsidiaries result from
intercompany transactions including advances and Federal
income tax liabilities, less payments of expenses by
subsidiaries on behalf of WICOR, Inc.
C. During 1995, 1994 and 1993, the parent company allocated
certain administrative and operating expenses to its
subsidiaries using an allocation method approved by the
PSCW:
<TABLE>
<CAPTIONS>
1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Administrative and operating
expenses allocated
to subsidiaries $2,409,000 $2,452,000 $2,388,000
========== ========== ==========
D. In November 1991, WICOR, Inc. (Parent Company Only)
established an Employee Stock Ownership Plan (ESOP)
covering non-union employees of Wisconsin Gas. Because
the parent company has guaranteed the loan, the unpaid
balance is shown as a liability on the balance sheet with
a like amount of unearned compensation recorded as a
reduction of stockholders' equity.
The ESOP trustee is repaying the $10 million loan with
dividends paid on the shares of WICOR common stock in the
ESOP and with Wisconsin Gas contributions to the ESOP.<PAGE>
<PAGE> 34
3.1 WICOR, Inc. Restated Articles of Incorporation, as
amended (incorporated by reference to Exhibit 3.1 to
the Company's Form 10-K Annual Report for 1992).
3.2 WICOR, Inc. By-laws, as amended (incorporated by
reference to Exhibit 3.3 to the company's Form 10-K
Annual Report for 1994).
4.1 Indenture of Mortgage and Deed of Trust dated as of
November 1, 1950, between Milwaukee Gas Light
Company and Mellon National Bank and Trust Company
and D. A. Hazlett, Trustees (incorporated by
reference to Exhibit 7-E to Milwaukee Gas Light
Company's Registration Statement No. 2-8631).
4.2 Bond Purchase Agreement dated December 31, 1981,
between Wisconsin Gas Company and Teachers Insurance
and Annuity Association of America relating to the
issuance and sale of $30,000,000 principal amount of
First Mortgage Bonds, Adjustable Rate Series due
2002 (incorporated by reference to Exhibit 4.6 to
Wisconsin Gas Company's Form S-3 Registration
Statement No. 33-43729).
4.3 Indenture dated as of September 1, 1990, between
Wisconsin Gas Company and First Wisconsin Trust
Company, Trustee (incorporated by reference to
Exhibit 4.11 to Wisconsin Gas Company's Form S-3
Registration Statement No. 33-36639).
4.4 Officers' Certificate, dated as of November 19,
1991, setting forth the terms of Wisconsin Gas
Company's 7-1/2% Notes due 1998 (incorporated by
reference to Exhibit 4.1 to Wisconsin Gas Company's
Form 8-K Current Report for November, 1991).
4.5 Officers' Certificate, dated as of September 15,
1993, setting forth the terms of Wisconsin Gas
Company's 6.60% Debentures due 2013 (incorporated by
reference to Exhibit 4.1 to Wisconsin Gas Company's
Form 8-K Current Report for September, 1993).
4.6 Officers' Certificate, dated as of November 7, 1996,
setting forth the terms of Wisconsin Gas Company's
6-3/8% Notes due 2005 (incorporated by reference to
Exhibit 4 to Wisconsin Gas Company's Form 8-K
Current Report dated November 7, 1995).
4.7 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among Wisconsin Gas Company and
Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris
Trust & Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q dated as of August 9, 1993).<PAGE>
<PAGE> 35
4.8 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among Sta-Rite Industries, Inc.
and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly
Report on Form 10-Q dated as of August 9, 1993).
4.9 Revolving Credit and Term Loan Agreement, dated as
of March 29, 1993, among WICOR, Inc. and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust &
Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.10 Extension of Revolving Credit and Term Loan
Agreement, effective March 10, 1995, among WICOR,
Inc. and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust & Saving Bank, M&I Marshall &
Ilsley Bank and Citibank, N.A., as Agent
(incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated April
28, 1995).
4.11 Extension of Revolving Credit Agreement dated March
10, 1995, among Wisconsin Gas Company and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust and
Savings Bank and M&I Marshall and Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.2 to the Company's Quarterly Report on
Form 10-Q dated April 28, 1995).
4.12 Extension of Revolving Credit Agreement dated March
10, 1995, among Sta-Rite and Citibank, N.A., Firstar
Bank Milwaukee, N.A., Harris Trust and Savings Bank
and M&I Marshall and Ilsley Bank and Citibank, N.A.,
as Agent (incorporated by reference to Exhibit 4.3
to the Company's Quarterly Report on Form 10-Q dated
April 28, 1995).
4.13 Rights Agreement dated as of August 29, 1989,
between WICOR, Inc. and Manufacturers Hanover Trust
Company, Rights Agent (incorporated by reference to
Exhibit 4 to the Company's Form 8-K current report
for August, 1989).
4.14 Loan Agreement, dated as of November 4, 1991, by and
among M&I Marshall & Ilsley Bank, Wisconsin Gas
Company Employees' Savings Plans Trust and WICOR,
Inc. (incorporated by reference to Exhibit 4.16 to
the Company's Form 10-K Annual Report for 1991).<PAGE>
<PAGE> 36
4.15 Guaranty, dated as of November 4, 1991, from WICOR,
Inc. to and for the benefit of M&I Marshall & Ilsley
Bank (incorporated by reference to Exhibit 4.17 to
the Company's Form 10-K Annual Report for 1991).
4.16 Revolving Credit Agreement Amendment, effective July
12, 1995, among WICOR, Inc. and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust and
Savings Bank, M&I Marshall and Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference
to Exhibit 4.4 to the Company's Quarterly Report on
Form 10-Q dated October 25, 1995).
4.17* Loan Agreement Amendment effective December 21,
1995, by and among Wisconsin Gas Company Employees'
Savings Plans Trust, WICOR, Inc. and M&I Marshall
and Ilsley Bank.
Sta-Rite Industries, Inc., a wholly-owned subsidiary
of the Registrant, is the obligor under various loan
agreements in connection with facilities financed
through the issuance of industrial development
bonds. The loan agreements and the additional
documentation relating to these bond issues are not
being filed with this Annual Report on Form 10-K in
reliance upon Item 601(b)(4)(iii) of Regulation S-K.
Copies of these documents will be furnished to the
Securities and Exchange Commission upon request.
10.1* Service Agreement dated as of June 1, 1994, among
WICOR, Inc., Wisconsin Gas Company, Sta-Rite
Industries, Inc., WEXCO of Delaware, Inc. and
SHURflo Pump Manufacturing Co.
10.2* Endorsement of Hypro Corporation dated as of July
19, 1995, to Service Agreement among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc. and
WEXCO of Delaware, Inc.
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-67134).
10.4# Forms of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1987 Stock Option
Plan (incorporated by reference to Exhibit 10.20 to
the Company's Form 10-K Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan,
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-67132).<PAGE>
<PAGE> 37
10.6# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1992 Director Stock
Option Plan (incorporated by reference to Exhibit
4.2 to the Company's Form S-8 Registration Statement
No. 33-67132).
10.7# WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.1 to the
Company's Form S-8 Registration Statement No.
33-55755).
10.8# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1994 Long-Term
Performance Plan, (incorporated by reference to
Exhibit 4.2 to the Company's Form S-8 Registration
Statement No. 33-55755).
10.9# Form of restricted stock agreement used in
connection with the WICOR, Inc. 1994 Long-Term
Performance Plan (incorporated by reference to
Exhibit 4.3 to the Company's Form S-8 Registration
Statement No. 33-55755).
10.10#* WICOR, Inc. 1996 Officers' Incentive Compensation
Plan.
10.11# Wisconsin Gas Company Principal Officers'
Supplemental Retirement Income Program (incorporated
by reference to Exhibit 10.8 to the Company's Form
10-K Annual Report for 1993).
10.12#* Wisconsin Gas Company 1996 Officers' Incentive
Compensation Plan.
10.13# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K Annual Report for 1992).
10.14# Form of Deferred Compensation Agreements between
Wisconsin Gas Company and certain of its executive
officers (incorporated by reference to Exhibit 10.30
to the Company's Form 10-K Annual Report for 1990).
10.15# Sta-Rite Industries, Inc. Officers Supplemental
Retirement Income Program (incorporated by reference
to Exhibit 10.28 to the Company's Form 10-K Annual
Report for 1989).
10.16#* Sta-Rite Industries, Inc. 1996 Officers' Incentive
Compensation Plan.
10.17# Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K Annual Report for 1992).<PAGE>
<PAGE> 38
10.18# WICOR, Inc. Retirement Plan for Directors, as
amended (incorporated by reference to Exhibit 10.29
to the Company's Form 10-K Annual Report for 1992).
13* Portions of the WICOR, Inc. 1995 Annual Report to
Shareholders incorporated by reference herein.
21* Subsidiaries of WICOR, Inc.
23* Consent of independent public accountants.
27* Financial Data Schedule. (EDGAR version only)
99* WICOR, Inc. proxy statement dated March 12, 1996.
(Except to the extent incorporated by reference,
this proxy statement is not deemed "filed" with the
Securities and Exchange Commission as part of this
Form 10-K.)
* Idicates document filed herewith.
#Indicates a plan under which compensation is paid or payable to
directors or executive officers of the Company.
<PAGE>
</TABLE>
<PAGE> 1
EXHIBIT 4.17
THIRD AMENDMENT
TO
LOAN AGREEMENT
This Third Amendment to Loan Agreement is made and entered
into as of the 21st day of December, 1995, by and among
Wisconsin Gas Company Employees' Saving Plans Trust (the
"Trust"), WICOR, Inc. (the "Company") and M & I Marshall &
Ilsley Bank, a Wisconsin banking corporation (the "Bank"). All
terms not otherwise defined herein shall have the meanings
assigned to such terms in the Loan Agreement by and among the
Trust, the Company and the Bank dated as of November 4, 1991
(the "Agreement") as amended.
WITNESETH
WHEREAS, the stated maturity of the ESOP Note (as amended)
is December 29, 1995; and
WHEREAS, the Trust has requested that the maturity date of
the ESOP Note be extended until March 29, 1996 and the Bank has
agreed to such extension.
NOW, THEREFORE, the parties hereto agree as follows:
1. Amendment of Subsection 2.1. Subsection 2.1 of the
Agreement (as amended) shall be, and it hereby is, further
amended by deleting the first sentence thereof in its entirety
and, in lieu thereof, inserting the following:
"Subject to the terms and conditions hereof, the Bank
agrees to lend to the Trust, on the Effective Date, Ten Million
Dollars ($10,000,000), which amount shall be payable in nineteen
(19) consecutive installments, consisting of eighteen (18)
consecutive Quarterly installments of Two Hundred Fifty Thousand
Dollars ($250,000) each payable on the last Business Day of each
Quarter commencing on November 30, 1991, and a final payment in
the amount of the outstanding principal balance on March 29,
1996.
2. Amendment of Subsection 2.2. Subsection 2.2 of the
Agreement (as amended) shall be, and it hereby is, further
amended by deleting part (b) thereof in its entirety and, in
lieu thereof, inserting the following:
<PAGE> 2
"(b) be stated to mature on March 29, 1996, and be payable
as provided in subsection 2.1 hereof, and"
3. Effectiveness of Amendment. This Amendment shall
become effective upon receipt of the Bank of (I) copy of this
Amendment duly executed by the rust, the Bank and the Company,
(ii) the Consent of Guarantor attached to this amendment duly
executed by the Company and (iii) the Amended and Restated
Promissory Note substantially in the form attached hereto as
Exhibit A executed by the Trust which Note shall hereinafter
constitute the ESOP Note.
4. Miscellaneous
(a) The Trust hereby represents and warrants to the Bank
that all of the representations and warranties made by the Trust
in the Loan Documents are true and correct on the date of this
Amendment and that no Default or Event of Default under the
Agreement has occurred and is continuing as of the date of this
Amendment.
(b) The Company hereby represents and warrants to the Bank
that all of the representations and warranties made by the
Company in the Loan Documents are true and correct on the date
of this Amendment, that no Default or Event of Default under the
Agreement has occurred and is continuing as of the date of this
Amendment; that the making, execution and delivery of this
Amendment, and performance of and compliance with the terms of
the Agreement, as hereby amended, (I) have been duly authorized
by the Boards of directors of Wisconsin gas and of the Company
and by all other actions, (ii) do not and will not conflict
with, contravene or violate any provision of, or result in a
breach of or default under, or require the waiver (not already
obtained) of any provision of or the consent (not already given)
of any Person under the terms of the Trust Agreement and (iii)
will not violate, conflict with, or constitute a default under
any law, regulation, order or any other requirement of any
court, tribunal, arbitrator, or Governmental Authority, that the
Agreement, as amended hereby and the ESOP Note, as now amended
and restated by the Amended and Restated Promissory Note
constitute valid and legally binding obligations of the Trust,
and are enforceable in accordance with their respective terms,
except as limited by bankruptcy, insolvency, reorganization,
moratorium or other laws relating to or affecting generally the
enforcement of creditors' rights
<PAGE> 3
(c) Each reference in the Agreement to "this agreement":
and each reference in the ESOP Note and the Guaranty to
"Agreement" shall be deemed a reference to the Agreement as
amended by this Third Amendment and the First and Second
Amendments entered into on November 4, 1994, and November 3,
1995, respectively.
(d) Except as amended by this Amendment (and the prior
amendments dated November 4, 1994, and November 3, 1995); the
terms and conditions of the Agreement shall remain in all other
respects in full force and effect.
(e) The Company acknowledges and agrees that pursuant to
section 11.6 of the Guaranty, the Company shall cause Wisconsin
Gas to reimburse the Bank for all of its out-of-pocket costs
and expenses incurred in connection with this Amendment t,
including the fees and disbursements of the counsel to the Bank
for the preparation hereof and expenses incurred in connection
herewith.
(f) The Amendment and the rights and obligations of the
parties hereto shall be governed by the laws of the State of
Wisconsin.
IN WITNESS WHEREOF, the parties hereto have caused this
Third Amendment to Loan Agreement to be executed by their
respective officers as of the date first written above.
MARSHALL & ILSLEY TRUST COMPANY
AS TRUSTEE FOR THE WISCONSIN GAS COMPANY
EMPLOYEES' SAVINGS PLANS TRUST
By: Charlene Kelimann, VP
(Title)
WICOR, INC.
By:J.P. Wenzler VP, Treasurer & CFO
(Title)
M&I MARSHALL & ILSLEY BANK
By Brian Cooper, VP
(Title)
By Gina A. Peters, SVP
(Title)
<PAGE> 4
CONSENT OF GUARANTOR
The undersigned hereby (I) acknowledges and agrees that the
Guaranty executed by the undersigned is and remains in full
force and effect subject to no defense, counterclaim or offset
of any kind, (ii) acknowledges its receipt of a copy of the
foregoing Amendment, acknowledges that it has received notice of
the extension of the time for payment of the ESOP Loan pursuant
to such Amendment and hereby consents and agrees to the terms of
the foregoing Amendment, all in accordance with Section 7 of the
Guaranty and (iii) acknowledges and agrees that the giving of
the undersigned's consent to the foregoing Amendment shall not
in any way be construed to require the giving of the
undersigned's consent to any future amendment.
Dated as of December 21, 1995.
WICOR, INC.
By JP Wenzler, VP, Treasurer & CFO
(Title)
1
<PAGE>
<PAGE> 1
EXHIBIT 10.1
WICOR, INC. SYSTEM
SERVICE AGREEMENT
This Service Agreement (the "Agreement") is made and entered
into as of the 1st day of June, 1994, by and among WICOR, Inc., a
Wisconsin corporation ("WICOR"), Wisconsin Gas Company, a
Wisconsin corporation ("Wisconsin Gas"), WEXCO of Delaware, Inc.,
a Delaware corporation ("WEXCO"), Sta-Rite Industries, Inc., a
Wisconsin corporation ("Sta-Rite") and SHURflo Pump Manufacturing
Company, a California corporation ("SHURflo"), and supersedes the
Service Agreement dated as of January 1, 1988, as amended by
endorsement dated as of July 28, 1993.
WHEREAS, WICOR is a holding company owning all of the issued
and outstanding common stock of its subsidiaries, Wisconsin Gas,
WEXCO, Sta-Rite and SHURflo; and
WHEREAS, WICOR, WEXCO, Sta-Rite and SHURflo (hereinafter
referred to as "Nonutility Affiliates") are affiliated interested
with Wisconsin Gas pursuant to Stats., ss. 196.52 and 196.795; and
WHEREAS, it is necessary and convenient for WICOR to provide
certain common services for the benefit of its subsidiaries; and
WHEREAS, from time to time it may be necessary, convenient or
economical for any one of the parties to this Agreement to provide
certain services to one or more of the other parties, which may
require that Wisconsin Gas make available public utility affiliate
employees and/or property as referred to in s. 196.795(5)(r) and
(s) Stats.; and
WHEREAS, it is necessary and appropriate that pursuant to ss.
196.52 and 196.795, Stats., the costs for the aforementioned
services be determined, allocated and distributed.
NOW, THEREFORE, it is agreed by and among the parties as
follows:
ARTICLE I
AGREEMENT TO FURNISH SERVICES
1. WICOR agrees to provide certain common services and to
incur certain common expenses and fees, all as described in more
detail hereafter, for the benefit of its subsidiaries.
2. Each of the parties agrees to use its best efforts to
furnish such services as may from time to time be reasonably
requested by another party.
<PAGE>
<PAGE> 2
ARTICLE II
DESCRIPTION OF SERVICES AND PROPERTY
The services that may be requested by a party hereto and
furnished pursuant to this Agreement shall include, but are not
limited to, the following: management, supervisory, accounting,
legal, financial, employee benefit services pursuant to an Order
of the Public Service Commission of Wisconsin dated April 28,
1994, in Docket 05-UI-106 ("April 28, 1994 Order"), and similar
services.
Any party shall have the right, exercisable at its sole
discretion, to refuse to perform services or to provide property
to any other party, except as provided in the April 28, 1994
Order.
Wisconsin Gas may, in its sole discretion, sell, lease,
transfer to or exchange with a Nonutility Affiliate, property, as
defined in s. 196.795(5)(s), Stats., independent of and not
related to the provision of any of the services identified above.
Such property shall be provided in accordance with the provisions
of s. 196.795(5)(s), Stats. and Wisconsin Gas shall be compensated
for such property at the fair market value of such property.
ARTICLE III
COMPENSATION FOR SERVICES
Compensation for services or property provided by Wisconsin
Gas to a Nonutility Affiliate shall be at the greater of the cost
to Wisconsin Gas or the fair market value of such services. For
purposes of this Agreement, the cost to Wisconsin Gas of each such
service shall include those costs listed in Article V.
A Nonutility Affiliate may, if in its sole discretion it
elects to do so, provide services comparable to those listed
above, or property (both real and personal) to Wisconsin Gas upon
request.
Compensation for services provided by a Nonutility Affiliate
to Wisconsin Gas shall be at the lesser of the fair market value
or the cost to the Nonutility Affiliate of such services. For
purposes of this Agreement, the cost of each such service shall
include those costs listed in Article V.
The fair market value of a service provided by Wisconsin Gas
to a Nonutility Affiliate shall be equal to the cost which the
Nonutility Affiliate would have paid to obtain such service if
Wisconsin Gas could not or would not provide such service. In
determining the fair market value of a service it provides,
Wisconsin Gas shall make a good faith effort to identify the
resources necessary to perform the service, and the value of such
service based on a general knowledge of the relevant market for
such service as well as, if available, comparison with bids or
quotations for such a service. If Wisconsin Gas, despite its good
faith efforts, is not able to determine the fair market value of
a service, the fair market value shall be deemed to be equal to
the cost to Wisconsin Gas.<PAGE>
<PAGE> 3
The fair market value of a service provided by Wisconsin Gas
to a Nonutility Affiliate shall be compared to the cost to
Wisconsin Gas of providing the service and the Nonutility
Affiliate shall be charged the greater of the fair market value or
the cost of providing the service.
ARTICLE IV
DESCRIPTION OF COST ALLOCATION
1. It is understood and agreed that each party shall bear
all costs the incurrence of which benefits solely such party, and
that each subsidiary shall bear a fair and equitable portion of
costs the incurrence of which benefits partly but not solely such
subsidiary.
2. Costs incurred initially by the parties are identified
below.
a. "Subsidiary Sole Costs" are costs
incurred initially by any subsidiary solely
for its benefit or directly for the benefit
of any single subsidiary.
b. "Subsidiary Shared Costs" are costs
incurred initially by any subsidiary, partly
for the benefit of at least two but not all
of the subsidiaries.
c. "Common Costs" are costs incurred by any
party which benefit the subsidiaries, which
include, but are not limited to, those items
set forth in Exhibit A attached hereto.
d. "WICOR Sole Costs" are costs incurred by
any party which do not benefit the
subsidiaries, which include, but are not
limited to, costs, expenses and fees incurred
in conjunction with investigating, reviewing
or planning a potential acquisition or
divestiture of any equity or ownership
interest in another corporation or business
enterprise and costs, expenses and fees
incurred in consummating any acquisition or
divestiture of such interest. Such costs
include interest expense associated with any
funds borrowed to finance an acquisition.
3. Costs identified above shall be apportioned and borne as
follows:
a. Subsidiary Sole Costs shall be borne by,
billed to or otherwise recorded as costs of
the subsidiary receiving the benefit
associated with the costs.
<PAGE>
<PAGE> 4
b. Subsidiary Shared Costs shall be
examined and apportioned in a manner designed
to match cost responsibility with benefits
received. The costs so apportioned shall be
borne by, billed to or otherwise recorded as
costs of each subsidiary receiving a benefit
associated with the incurrence of the costs.
c. Common Costs shall be apportioned to,
borne by, billed to or recorded as costs of
each subsidiary according to the allocation
formula and procedures set forth in Exhibit B
attached hereto and made a part hereof. The
percentage allocations applicable to each
subsidiary set forth in Exhibit B shall be
recalculated annually using the formula and
procedures set forth in Exhibit B, which
among other things provides for using amounts
recorded on the books of account of the
parties at the end of the three preceding
calendar years.
d. WICOR Sole Costs shall be borne by,
billed to or otherwise recorded as costs of
WICOR.
4. The cost for services rendered by any part to any of the
other parties shall be accounted for and billed on a current
monthly basis with settlement of such billings to be made within
30 days after billing.
ARTICLE V
IDENTIFICATION OF COSTS TO BE ALLOCATED
1. The various costs referred to in this Agreement and to
be allocated to and borne by the parties as set forth herein
include:
a. The cost of any employee's services,
which shall be determined in the following
manner;
i. Actual Compensation based on direct labor expense
shall be determined for each employee and shall
include consideration for paid absences, such as
vacation and illness.
ii. The result calculated above will be multiplied by
both a fringe benefit percent and a "loading
factor." The fringe benefit percent shall include
the cost of such items as medical and dental
insurance, pensions, social security and life
insurance. The "loading factor" shall include such
intangible costs as activities necessary to
maintain professional licenses, other permits and
special skills, general training and business
reading and membership or participation in trade
associations and professional and business
organizations.
b. The cost of any property used in
connection with the services hereunder,
including, but not limited to, materials,
equipment, supplies and the like, as
reflected by the actual cost as recorded on
the books of account of the party supplying
such items. The cost of such property shall
include a return on the depreciated original
cost equal to the return authorized in the
latest Wisconsin Gas rate case.<PAGE>
<PAGE> 5
c. Travel and other out-of-pocket expenses
at actual cost as recorded on the books of
account of the party furnishing such items.
d. Fees and expenses incurred for outside
management, supervisory, accounting, legal,
financial, or similar services at actual cost
as recorded on the books of account of the
party initially bearing such cost.
ARTICLE VI
Each person who is an officer of both Wisconsin Gas and one
or more of the nonutility affiliates, or a person who is a member
of the incidental supporting staff of such officer, shall keep a
daily record of the amount of time devoted to nonutility
affiliates. Actual compensation based on direct labor expense
shall be determined for each employee and shall include
consideration for paid absences such as vacation and illness.
This amount shall be adjusted by both a loading factor and a
fringe benefit allocation factor as described in Article V.
ARTICLE VII
EFFECTIVE DATE - TERM - CANCELLATION
1. This Agreement shall commence as of the date first
written above or 60 days after approval by the Public Service
Commission of Wisconsin, whichever occurs first, and shall
continue until cancelled upon 60 days written notice by any party
to the other parties.
2. It is contemplated that, if and when WICOR acquires new
subsidiaries, such subsidiaries may become parties to this
Agreement by endorsement after review and approval by the Public
Service Commission of Wisconsin.
3. It shall not be necessary for the parties to amend or
re-execute this Agreement in the event that allocation percentages
set forth in Exhibit B are changed as a result of the annual
recalculation of such percentages, or that new subsidiaries become
parties to this Agreement.
ARTICLE VIII
MISCELLANEOUS
1. Nothing herein contained shall be construed to release
the officers and directors of the parties from the obligation to
perform the duties of such offices or to limit the exercise of
their lawful powers.
2. The performance of this Agreement shall be subject to
valid rules, regulations and orders of any regulatory body having
jurisdiction, including approval by the Public Service Commission
of Wisconsin. The parties hereto acknowledge that Wisconsin Gas
is subject to the provisions of s. 196.795(5)(r) and (s), Stats.,
regarding the use of "public utility affiliate employe's services"
and "property" and agree that Wisconsin Gas shall minimize the use
of any "public utility affiliate employe's services" or "property"
as required by those subsections.<PAGE>
<PAGE> 6
3. Nothing herein shall limit the authority of the Public
Service Commission of Wisconsin with respect to inclusion or
exclusion of costs for the purpose of setting rates for Wisconsin
Gas, or limit the powers of that commission in any other respect.
4. All prior service agreements among the parties shall be
and hereby are terminated, without liability to any party;
provided, however, that all services performed and costs incurred
prior to the date hereof under such contracts shall be accounted
for under such contracts.<PAGE>
<PAGE> 7
IN WITNESS WHEREOF, each of the parties hereto has caused
these presents to be executed in its name on its behalf by its
duly authorized officers as of the day and year first above
written.
ATTEST: WICOR, Inc.
R.A. Nuernberg BY T.F. Schrader
Secretary President
ATTEST: Wisconsin Gas Company
R.A. Nuernberg BY J.D. Donnelly
Secretary President
ATTEST: Sta-Rite Industries, Inc.
R.A. Nuernberg BY
Secretary President
ATTEST: WEXCO of Delaware, Inc.
R.A. Nuernberg BY R. Phillips
Secretary President
ATTEST: SHURflo Pump Manufacturing
Company
R.A. Nuernberg BY G. Wardeberg
Assistant Secretary Chairman
<PAGE>
<PAGE> 8
Exhibit
A
COMMON COSTS
The component costs of the Common Cost category of costs
include but are not limited to the following:
Accounting
WICOR Parent Company Records and Financial Statements
WICOR Consolidated Financial Statements
External WICOR Reports and Summary Internal Information
Annual Meeting Information
Invoice and Check Processing - WICOR
Accounting Research
Treasury Activities
Shareholder Activities (i.e., dividends, stock options, etc.)
Coordination of Cash Activities - WICOR
Annual Meeting Involvement
Financial Planning
Public Information
External WICOR Reports
WICOR News Releases
Annual Meeting Activities
General Activities
Time and Expenses of Officers and Employees of Subsidiaries
Devoted to
WICOR Matters Other Than Those Matters Constituting WICOR Sole
Costs
Secretarial Support
Annual Meeting - Proxy Handling
External Reports
Shareholder Activities
Tax
WICOR Tax Matters
Legal
Monitoring of Contracts/Consultants
Research
Other
Fringe Benefits Related to Direct and Indirect Labor
Stockholder Expense
Independent Accountants - Audit Activities
Outside Counsel - Legal Matters
Personal Expenses of Common Employees
Office Space
<PAGE>
<PAGE> 9
Exhibit
B
ALLOCATION OF COMMON COSTS
It is understood and agreed by the parties that certain costs
incurred by or on behalf of WICOR provide a substantial benefit to
the subsidiaries. Some of the costs incurred would be, and were
prior to the establishment of WICOR, direct costs of the
individual subsidiary companies. Other costs would be duplicated
at each subsidiary were they not performed at the WICOR level.
The allocation method used to allocate Common Costs
emphasizes the operations of the subsidiaries by weighing equally
total assets, operating expenses (less income taxes) and gross
payroll of each subsidiary.
The allocation factors will be determined annually. Each
subsidiary's percentage of total assets, operating expenses (less
income taxes) and gross payroll will be calculated by comparing
such items to the sum of the subsidiaries' assets, operating
expenses (less income taxes) and gross payroll. Such figures will
be determined for the three years preceding the year for which the
allocation is to be made. The percentages of assets, operating
expenses and payroll so determined for such subsidiary will
themselves be averaged to arrive at each subsidiary's overall
average percentage to be used in allocating Common Costs. The
calculation of the allocation percentages as will be used for 1994
is attached hereto as Schedule 1.
If and when subsidiaries join the WICOR system, allocation
factors will be determined as if the subsidiary joining the system
were in the system for the entire period covered by the
calculation. These new allocation factors shall be applied to the
Common Cost pool commencing on the effective date of the new
subsidiary's acquisition or formation.
If the joining subsidiary does not have operating results for
any portion of the period, its share of Common Costs will be based
upon financial analysis until such time as actual operating
results are available.
<PAGE>
<PAGE>
<PAGE> 1
ENDORSEMENT NO. 2
TO
SERVICE AGREEMENT
(DATED AS OF JUNE 1, 1994)
WHEREAS, pursuant to Article VII, Section 2 of the Service
Agreement among and between WICOR, Inc. ("WICOR"), Wisconsin Gas
Company, Sta-Rite Industries, Inc. and WEXCO of Delaware, Inc.,
and SHURflo Pump Manufacturing Co., dated as of June 1, 1994
("Agreement"), new subsidiaries acquired by WICOR may become
parties to the Agreement by endorsement after review and approval
by the Public Service Commission of Wisconsin; and
WHEREAS, on July 19, 1995, WICOR acquired all of the outstanding
common stock of Hypro Corporation; and
WHEREAS, the parties desire to add Hypro Corporation as a party
to the Agreement by endorsement;
NOW, THEREFORE, Hypro Corporation agrees to become a party to
the Agreement and to be bound by all the terms and conditions of
the Agreement.
IN WITNESS WHEREOF, Hypro Corporationhas caused this Endorsement
to be executed in its name and on its behalf by its duly
authorized officers as of the 19th day of July, 1995.
ATTEST: Hypro Corporation
R.A. Nuernberg By W. Ted Dudley
Assistant Secretary Chairman<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 10.11
WICOR, Inc.
Officers' Incentive Compensation Plan
1996
I. Objectives
The principal objectives of the Plan are:
A. To motivate and to provide incentive for key officers of WICOR
to achieve superior operating results for the benefit of both
customers and stockholders.
B. To assist in the retention of quality senior management.
C. To yield competitive total compensation levels when
performance goals are attained.
D. To document the basis of participation by plan participants in
subsidiary companies' incentive compensation plans, and to
provide supplemental WICOR incentive compensation as required
to achieve the above objectives.
II. Eligibility
Participation in the Plan is limited to designated WICOR corporate
officers and subsidiary unit heads. The Chief Executive Officer
will be responsible for recommending eligibility changes to the
Compensation Committee of the Board of Directors of WICOR, Inc.
III. Amount of Potential Award
A. The minimum, target and maximum award opportunities for each
executive, as a percentage of base salary, are as follows:
Award as Percent of Salary
---------------------------------
Position Minimum Target Maximum
------------- -------- -------- ---------
CEO, WICOR 0% 50% 75.0%
Others 0% 40% 60.0%
<PAGE>
<PAGE> 2
B. Each executive's award will be determined based on a
combination of WICOR, subsidiary and individual performance,
with specific weights as follows:
Percentage of Award Determined By:
------------------------------------
Position WICOR Subsidiary Individual
Performance Performance Performance
-------------------- ----------- ----------- -----------
CEO, WICOR 75% 0% 25%
Subsidiary Unit Head 25% 50% 25%
CFO, WICOR 75% 0% 25%
Determination of the WICOR performance and individual
performance portions of the award are described in Section IV
of this document. The Subsidiary performance portion is
determined according to the Officer Incentive Compensation
Plan for that subsidiary.
IV. Performance Criteria and Objective Setting
A. Overall WICOR performance will be measured by earnings per
share. Threshold, Target and Maximum EPS performance levels,
and incentive awards corresponding to each performance level
are as follows:
Performance Award As %
Performance As % of 1996 Of Target
Level Target EPS Award
---------------- ------------- -------------------
Below Threshold less than 85% less than 0.0%
$2.18
Threshold 85% $2.18 1.0%
Target 100% $2.56 100%
(budget)
Maximum or Above 120% or more $3.07 150%
or more
For performance at levels between Threshold and Target or
between Target and Maximum, award calculations will be pro-
rated on a linear basis.
<PAGE>
<PAGE> 3
B. The individual component of total incentive compensation will
be determined by the WICOR Compensation Committee based on
recommendations from the CEO reflecting the individual's
overall performance as measured against previously identified
and agreed upon goals and objectives. The award may vary up
to 150% of the individual performance portion of the target
award, and will be determined and paid independently of
Corporate financial performance.
C. If the Compensation Committee of WICOR, Inc. determines that
corporate performance was inadequate, it may exercise
discretion to reduce or eliminate any or all bonus payments.
V. Performance Period
Company performance goals will be for the 1996 calendar year.
VI. Form and Timing of Award Payments
A. Awards will be determined and paid as soon as practicable
after the close of the Plan year.
B. At each participant's discretion and with the concurrence of
the Compensation Committee of WICOR, Inc., awards may be paid
in one of three ways:
1. Lump Sum
2. Partly in lump sum and the remainder in deferred annual
installments.
3. Completely in deferred annual installments.
C. The Company will offer a deferred payment option to those
officers who prefer not to receive their awards in current
cash, following these guidelines:
1. Deferred incentive award payments will be carried as an
accrued liability with an interest rate (three-year
treasury bill rate) credited each year.
2. Deferred elections must be made prior to June 30, 1996,
and a definite time period for deferral must be
specified.
VII. Implementation
A. The effective date of the Plan is January 1, 1996.
<PAGE>
<PAGE> 4
VIII. Plan Administration
A. Compensation Committee
1. The Plan will be administered by the Compensation
Committee of the Board of Directors of WICOR, Inc.
2. The Committee's administration is subject to approval of
the Board of Directors of WICOR, Inc.
3. The decisions of the Board are final and binding on all
Plan participants.
4. The Board retains the right to terminate or amend the
Plan as it may deem advisable.
B. Partial Year Participation:
1. Participants must be employed by the Company on the last
day of the Plan year in order to receive a bonus for
that year. However, once earned, a bonus will be paid
to a participant regardless of whether he/she is
employed by the company on the date payment is made.
2. Awards for part year participants will be pro-rated
based on the proportion of the year that the participant
was in the Plan. This includes participants who
terminate employment due to death, disability or
retirement.
3. Participants who terminate employment with the Company
prior to the last day of the Plan year shall forfeit all
rights to an incentive award payment under the Plan
except for terminations due to death, retirement or
disability.
4. A participant is deemed to be disabled if he/she becomes
eligible for benefits under the Company's Long Term
Disability Plan.<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 10.13
Wisconsin Gas Company
Officers' Incentive Compensation Plan
1996
I. Objectives
The principal objectives of the Plan are:
A. To motivate and to provide incentive for key officers and
executive management team (EMT) of Wisconsin Gas Company to
achieve superior operating results for the benefit of both
customers and stockholders.
B. To assist in the retention of quality senior management.
C. To yield competitive total compensation levels when
performance goals are attained.
II. Eligibility
Participation in the Plan is limited to designated corporate
officers and EMT of Wisconsin Gas. The Chief Executive Officer of
WICOR will be responsible for recommending eligibility changes to
the Compensation Committee of the Board of Directors of WICOR, Inc.
III. Amount of Potential Award
A. The minimum, target and maximum award opportunities for each
participant, as a percentage of base salary, are as follows:
Award as a % of Salary
-------------------------------------
Position Minimum Target Maximum
------------------ --------- ---------- ---------
President & CEO 0% 40% 60%
VP and EMT 0% 20% 30%
B. Only 50% of the President & CEO's award opportunity will be
determined according to the provisions of this Plan. Of that
50%, 67% will be determined by Performance Plus and 33% will
be determined by Net Income as a percentage of budget. The
remaining 50% will be determined based on the WICOR Officers'
Incentive Compensation Plan.
<PAGE>
<PAGE> 2
IV. Performance Criteria and Objective Setting
A. Each executive's incentive award will be related to the
achievement of Company performance goals, and a component
reflecting individual performance.
B. Total incentive opportunity is further based on the following
measures:
- 50% Performance Plus (Company-wide operational and
financial incentive Plan)
- 25% Net Income as a percentage of budget
- 25% Individual
Therefore, 75% of the total bonus opportunity is based on
operational and financial results and 25% is based on
individual performance.
The individual portion of the incentive payout will be based
on the individual's overall performance as measured against
previously identified and agreed upon goals and objectives.
The award may vary up to 150% of the individual performance
portion of the target award, and will be determined and paid
independently of Company financial performance.
C. If the Compensation Committee of WICOR, Inc. determines that
the Net Income level was inadequate or that services to
customers did not meet corporate goals or standards developed,
it may exercise discretion to reduce or eliminate any or all
bonus payments.
V. Performance Period
Company performance goals will be for the 1996 calendar year.
VI. Bonus Award Determination
A. Performance Plus. Each year management will recommend
specific goals for safety, customer service and cost
effectiveness. Associated with various levels of performance
for each goal will be a certain number of award points. The
cumulative total of these points adjusted by a "multiplier",
based on Net Income as a percent of budget, will determine the
formula payout under this portion of the Plan.
For 1996, the performance measures and related points and the
"multiplier" are set forth in Exhibit 10.13a.
B. Net Income as a Percentage of Budget
Actual net income as a percentage of budget will generate
incentive compensation equal to 25% of the target award
multiplied by the following percentages:<PAGE>
<PAGE> 3
Net Income % of
as % Target
Performance Level of Budget Awarded
------------------- -------------- -----------
Less than threshold Less than 85% 0.0%
Threshold 85% 1.0%
Target 100% 100.0%
Maximum 120% 150.0%
For performance at levels between Threshold and Target or
between Target and Maximum, award calculations will be pro-
rated on a linear basis.
For 1996, the amount of targeted net income is set forth in
Exhibit 10.13a.
C. Total performance awards will be calculated by combining the
payouts from Performance Plus, Net Income and Individual
Components.
VII. Form and Timing of Award Payments
A. Awards will be determined and paid as soon as practicable
after the close of the Plan year.
B. At each participant's discretion and with the concurrence of
the Compensation Committee of WICOR, Inc., awards may be paid
in one of three ways:
1. Lump Sum
2. Partly in lump sum, and the remainder in deferred annual
installments.
3. Completely in deferred annual installments.
C. The Company will offer a deferred payment option to those
participants who prefer not to receive their awards in current
cash, following these guidelines:
1. Deferred incentive award payments will be carried as an
accrued liability with an interest rate (three-year
treasury bill rate) credited each year.
2. Deferral elections must be made prior to June 30, 1996,
and a definite time period for deferral must be
specified.
<PAGE>
<PAGE> 4
VIII. Plan Administration
A. Compensation Committee:
1. The Plan will be administered by the Compensation
Committee of the Board of Directors of WICOR, Inc.
2. The Committee's administration is subject to approval of
the Board of Directors of WICOR, Inc.
3. The decisions of the Board are final and binding on all
Plan participants.
4. The Board retains the right to terminate or amend the
Plan as it may deem advisable.
5. In evaluating actual Company performance results in
comparison with pre-established objectives established
for the Plan year, and in establishing resulting
incentive compensation levels, the Compensation
Committee, at their sole discretion, may take unusual
and unique factors into consideration as they deem
appropriate. Similarly, the Committee may modify
performance targets during the course of a Plan year if
significant change takes place which would affect the
measure.
6. It shall be the Committee's responsibility to review the
overall reasonableness of incentive compensation paid to
participants of this Plan in relation to overall
services performed and results obtained by the Company
during the Plan year. The Committee shall make its
determination on the basis of its judgement as to what
constitutes satisfactory performance with respect to the
fulfillment of the Company's mission or charter. Issues
to be considered shall include, but not be limited to
the following:
a. Quality and level of service provided to
customers.
b. Health and safety considerations.
c. Maintenance of specific required standards of
performance.
d. Representation of shareholders' interests
(including Rate of Return achieved compared to
allowed).
Based upon this review, the incentive compensation paid to
participants may be reduced or withheld so that the total
compensation paid will be reasonable in relation to services
performed. The decisions of the Committee are final and
binding on all parties.
<PAGE>
<PAGE> 5
B. Partial Year Participation:
1. Participants must be employed by the Company on the last
day of the Plan year in order to receive a bonus for
that year. However, once earned, a bonus will be paid
to a participant regardless of whether he/she is
employed by the Company on the date payment is made.
2. Awards for part year participants will be pro-rated
based on the proportion of the year that the participant
was in the Plan. This includes participants who
terminate employment due to death, disability or
retirement.
3. Participants who terminate employment with the Company
prior to the last day of the Plan year shall forfeit all
rights to an incentive award payment under the Plan
except for terminations due to death, retirement or
disability.
4. A participant is deemed to be disabled if he/she becomes
eligible for benefits under the Company's Long Term
Disability Plan.
<PAGE>
<PAGE> 6
Exhibit 10.13a
Wisconsin Gas Company
Incentive Compensation Plan
Formula Performance Goals
1996
Performance Plus*
Maximum
Points
-------
1. Rate Improvement
Improvement in Residential Rates 10
2. Customer Service
Favorability/Customer Satisfaction 10
3. Safety 10
4. Cost Effectiveness
Operation & Maintenance Expense 10
-------
Maximum Total Points (Target = 24 points) 40
5. Multiplier
Net Income as % of Multiplier
Budget
-------------------- --------------------
Less than 85% 0.0000
85% 0.0100
90% 0.3333
95% 0.6667
100% 1.0000
110% 1.2500
120% 1.5000
* This is a summarization of the Performance Plus Plan which will
govern the actual calculation of the payout amounts.
Net Income as a % of Budget
-----------------------------------------
Minimum (85%) $23,035,000
Target (100%) $27,100,000
Maximum (120%) $32,520,000
<PAGE>
<PAGE>
<PAGE> 1
EXHIBIT 10.17
Sta-Rite Industries, Inc.
Officers' Incentive Compensation Plan
1996
I. Objectives
The principal objectives of the Plan are:
A. To motivate and to provide incentive for key officers of Sta-
Rite to achieve superior operating results for the benefit of
both customers and stockholders.
B. To assist in the retention of quality senior management.
C. To yield competitive total compensation levels when
performance goals are attained.
II. Eligibility
Participation in the Plan is limited to designated officers of Sta-
Rite Industries, Inc. The Chief Executive Officer, WICOR will be
responsible for recommending eligibility changes to the Compensation
Committee of the Board of Directors of WICOR, Inc.
III. Amount of Potential Award
A. The minimum, target and maximum award opportunities for each
officer level position, as a percentage of base salary, are as
follows:
Award as Percent of Base Salary
-------------------------------------
Position Minimum Target Maximum
-------------------- --------- ---------- ---------
President and CEO 0% 40% 60.0%
VP 0% 30% 45.0%
B. Only 50% of the President and CEO's award opportunity will be
determined according to the provisions of this Plan. Of that
50%, 67% will be determined by Net Income and 33% will be
determined by Return on Assets. The remaining 50% will be
determined based on the WICOR Officers' Incentive Compensation
Plan.<PAGE>
<PAGE> 2
IV. Performance Criteria and Objective Setting
A. Participants' bonus opportunity is based on consolidated
Company performance.
B. Total bonus opportunity is further based on the following:
- 50% net earnings (dollars)
- 25% return on total assets
- 25% individual
Therefore, 75% of the total bonus opportunity is based on
financial results (formula); and 25% is based on individual
performance.
The individual portion of the incentive payout will be based
on the individual's overall performance as measured against
previously identified and agreed upon goals and objectives.
The award may vary up to 150% of the individual performance
portion of the target award, and will be determined and paid
independently of Company financial performance.
C. If the Compensation Committee of WICOR, Inc. determines that
corporate performance was inadequate, it may exercise
discretion to reduce or eliminate any or all bonus payments.
D. Formula bonus objectives are:
1. Total Company
A. Net earnings: defined as absolute dollars of
reported net earnings (after-tax) of the Company
for the Plan year.
B. Return on total assets: defined as reported net
earnings (after-tax) divided by average (twelve
months) total assets (both current and non-
current) of the Company for the Plan year.
2. The specific target levels will be changed from year to
year to reflect the changing emphasis of the business
plan. Specific target levels for 1996 are set forth on
Exhibit 10.17a.
V. Performance Period
Company performance goals will be for the 1996 calendar year.
<PAGE>
<PAGE> 3
VI. Bonus Award Determination
A. Each year management will establish appropriate formula
performance levels for minimum, target and maximum bonus
awards.
B. As noted in Section III A, the target bonus amount for the
President and CEO is 40% of salary and the target bonus for
all other officers is 30% of salary.
C. Bonus awards for formula and discretionary portions will be
evaluated and computed separately.
1. Formula bonus awards will be determined based on
achieving the performance levels indicated in the
following schedule:
Level of
Performance Objective Percent of
Level Achieved Target Awarded
------------------- ------------- --------------
Less than Threshold Less than 80% 0.0%
Threshold 80% 30.0%
Target 100% 100.0%
Maximum 120% 150.0%
For performance between Threshold and Target or between
Target and Maximum, award calculations will be pro-rated
on a linear basis.
VII. Form and Timing of Award Payments
A. Awards will be determined and paid as soon as practical after
the close of the Plan year.
B. At each participant's discretion and with the concurrence of
the Compensation Committee of WICOR, Inc., awards may be paid
in one of three ways:
1. Lump sum.
2. Partly in lump sum, and the remainder in deferred annual
installments.
3. Completely in deferred annual installments.
C. The Company will offer a deferred payment option to those
officers who prefer not to receive their awards in current
cash, following these guidelines:<PAGE>
<PAGE> 4
1. Deferred incentive award payments will be carried as an
accrued liability with an interest rate (three-year
treasury bill rate) credited each year.
2. Deferral elections must be made prior to June 30 1996,
and a definite time period for deferral must be
specified.
VIII. Plan Administration
A. Compensation Committee:
1. The Plan will be administered by the Compensation
Committee of the Board of Directors of WICOR, Inc.
("Committee").
2. The Committee's administration is subject to approval of
the Board of Directors of WICOR, Inc.
3. The decisions of the board are final and binding on all
participants.
4. The Board retains the right to terminate or amend the
Plan as it may deem advisable.
B. Partial Year Participation:
1. Participants must be employed by the Company on the last
day of the Plan year in order to receive an incentive
award for that year. However, once earned, the award
will be paid to a participant regardless of whether
he/she is employed by the Company on the date payment is
made.
2. Awards for part year participants will be pro-rated
based on the proportion of the year that the participant
was in the Plan. This includes participants who
terminate employment due to death, disability or
retirement.
3. Participants who terminate employment with the Company
prior to the last day of the Plan year shall forfeit all
rights to an incentive award payment under the Plan
except for terminations due to death, retirement or
disability.
4. A participant is deemed to be disabled if he/she becomes
eligible for benefits under the Company's Long Term
Disability Plan.
<PAGE>
<PAGE> 5
Exhibit 10.17a
Sta-Rite Industries, Inc.
Incentive Compensation Plan
Formula Performance Goals 1996
Performance Goal Net Earnings ($000) Return on Assets
---------------------- ------------------- ----------------
Minimum $10,000 5.4%
Target $12,000 6.7%
Maximum $15,000 8.1%<PAGE>
<PAGE>
<PAGE> 1
MANAGEMENT DISCUSSION AND ANALYSIS
GENERAL OVERVIEW
The Company is a diversified holding company with two principal business
groups: Energy and Manufacturing. The Energy Group consists of natural gas
distribution and related services and the Manufacturing Group focuses on
pumps and processing equipment used to pump, control, transfer, hold and
filter water and other fluids. The Company engages in natural gas
distribution through Wisconsin Gas Company ( Wisconsin Gas ), the oldest and
largest natural gas distribution utility in Wisconsin. Wisconsin Gas is
subject to regulation by the Public Service Commission of Wisconsin ( PSCW ).
At December 31, 1995, Wisconsin Gas served approximately 505,000 customers
in 503 communities. The Energy Group accounted for 61% and 74% of the
Company s 1995 operating revenues and operating income, respectively.
Through its manufacturing subsidiaries, the Company engages in the
manufacture and sale of pumps, fluid processing and filtration equipment.
The Company s products are used primarily in water system, pool and spa,
agriculture, RV/marine and beverage/food service applications. The Company
markets its manufactured products in 100 countries. The Manufacturing Group
accounted for 39% and 26% of the Company s 1995 operating revenues and
operating income, respectively.
WICOR s 1995 earnings were $39.5 million, or $2.32 per common share,
compared with 1994 earnings of $33.2 million, or $1.99 per common share, and
1993 earnings of $29.3 million, or $1.82 per common share.
Gas sales volumes increased in 1995 primarily as a result of colder weather
and customer additions. Gas sales volumes decreased in 1994 due to warmer
weather, the impact of which was partially offset by customer additions. The
Company anticipates future customer additions to be in line with 1995 and
1994 levels. Manufacturing operations in 1995 reported increased sales in
several key segments, including water purification and agriculture, but
earnings declined due to higher material costs in both domestic and
international markets. International sales continued their strong growth.
Net cash flows from operations for the years 1993 through 1995 totalled
$176.9 million. Cash proceeds of $110.5 million resulting from the net
increase in long-term debt, common stock and short- term debt, along with
the net cash flows from operations, provided funding for $163.2 million of
capital expenditures, $60.4 million in acquisitions and $78.0 million of
dividends for that three-year period. Segment data for WICOR s operations
are summarized below in millions of dollars.
1995 1994 1993
Operating Revenues ------ ------ ------
Energy $522.8 $556.6 $574.8
Manufacturing 337.8 311.2 274.7
------ ------ ------
$860.6 $867.8 $849.5
====== ====== ======
1995 1994 1993
Depreciation and Amortization ------ ------ ------
Energy $36.7 $37.4 $34.8
Manufacturing 11.8 9.7 8.9
------ ------ ------
$48.5 $47.1 $43.7
====== ====== ======<PAGE>
<PAGE> 2
1995 1994 1993
Operating Income ------ ------ ------
Energy $58.8 $44.4 $46.2
Manufacturing 20.3 22.2 17.8
------ ------ ------
$79.1 $66.6 $64.0
====== ====== ======
Actual
Estimated -------------------------------
1996 1995 1994 1993
Capital Expenditures ------ ------ ------ ------
Energy $48.1 $42.9 $44.6 $42.3
Manufacturing 18.7 13.3 10.5 9.6
------ ------ ------ ------
$66.8 $56.2 $55.1 $51.9
====== ====== ====== ======
1995 1994 1993
Identifiable Assets -------- -------- --------
Energy $ 718.3 $ 707.9 $ 737.2
Manufacturing 290.2 222.8 196.5
-------- -------- --------
$1,008.5 $ 930.7 $ 933.7
======== ======== ========
RESULTS OF OPERATIONS
Energy Group --
The Company s primary energy business is the distribution of natural gas
through its Wisconsin Gas subsidiary. In 1995, the Company formed two non-
regulated energy services-related businesses, WICOR Energy Services Company,
a wholly owned subsidiary of the Company, and FieldTech, a division of
Wisconsin Gas. These businesses offer a variety of services, including
natural gas supply and related services and energy risk management; and
contract meter reading, management of field operations and billing services
for public and municipal gas, water and electric utilities. The Company
views these businesses as important elements in meeting increasing
competitive challenges in the natural gas industry and as a new source of
growth for its energy related operations. The revenues derived from these
businesses are not, however, material to the Company at the present time.
Increased sales margins for the Energy Group combined with lower levels of
operating expenses resulted in an increase in operating income in 1995 as
compared with 1994. Utility margin rates were reduced $10.1 million annually
by a November 1994 rate order of the PSCW and $4.5 million annually by two
voluntary rate reductions in 1995. These margin reductions have been more
than offset by decreases in operating expenses.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas, is a better comparative performance indicator
than revenues. Transportation service revenues are recorded at the same
margin as sales with no corresponding cost of gas amount. Therefore, for a
given rate class, the volume mix between sales and transportation service
affects revenues but not margin. In addition, changes in cost of gas flow
through to revenue under a gas adjustment clause, with no effect on margin.<PAGE>
<PAGE> 3
1995 1994 1993
(Millions of Dollars) -------- -------- --------
Gas sales revenue $ 515.0 $ 550.0 $ 565.1
Cost of gas sold 322.2 357.5 382.0
-------- -------- --------
Gas sales margin 192.8 192.5 183.1
Gas transportation margin 7.8 6.6 9.7
-------- -------- --------
Total margin $ 200.6 $ 199.1 $ 192.8
======== ======== ========
1995 1994 1993
(Millions of Therms) -------- -------- --------
Sales volumes
Firm 841 795 823
Interruptible 314 282 208
Transport volumes 145 119 174
-------- -------- --------
Total throughput 1,300 1,196 1,205
======== ======== ========
Total gas margin increased by 1% and 3% in 1995 and 1994, respectively. The
increase in 1995 margin was due to higher volume sales which resulted
primarily from weather which was 6% colder than 1994, offset in part by the
rate reductions discussed above. The increase in 1994 margin was due to a
November 1993 rate increase, offset by the impact of lower volume sales and
the November 1994 rate decrease. Lower volumes in 1994 were primarily due to
weather which was 5% warmer than 1993. In 1994, a number of industrial
customers switched from transportation services to interruptible sales. This
trend reversed in 1995. The Company anticipates more customers will switch
to transportation services in 1996. Under current rates, there is no impact
on margins from this switching activity.
Operation and maintenance expenses decreased by $12.3 million, or 11%, in
1995 as compared with 1994. The decrease was due primarily to lower labor
and related benefit expenses ($6.3 million), the impact of the November 1994
rate reduction which reduced non-cash amortizations by $5.7 million and the
nonrecurrence of a one-time charge of $2.7 million relating to a 1994 early
retirement program taken in the first quarter of 1994. Operation and
maintenance expenses increased by $6.1 million, or 6%, in 1994 as compared
with the prior year. The increase was in large measure due to increases in
uncollectible receivables expense ($2.8 million), the one-time charge of
$2.7 million described above and amortization of business system software
costs ($1.6 million). Savings from a reduced work force were somewhat offset
by higher labor rates. Except for the 1994 early retirement program charge,
these increases in expenses were recovered in rates on an annual basis under
the November 1993 rate order. Since July 1993, the Wisconsin Gas work force
has declined by 319 employees, or 23%, through early retirement, involuntary
severance and attrition.<PAGE>
<PAGE> 4
Manufacturing Group --
Manufacturing operating income in 1995 was $20.3 million compared with $22.2
million in 1994 and $17.8 million in 1993. The 1995 decrease in operating
income was the result of soft domestic markets, sharply higher material
costs in both domestic and international operations and a falloff in the
Company s Australian operations. Furthermore, a combination of substantially
reduced manufacturing inventories in North America and lower sales
domestically and in Australia resulted in underutilized manufacturing
capacity for the year. Management believes that these are short-term
problems and are not indicative of the outlook for the manufacturing
business in the long run. Manufacturing sales in 1995 were $337.8 million,
an increase of 9% over 1994. International sales increased by 14% while
domestic sales increased by 5% over the comparable period in 1994. On July
19, 1995, the Company acquired Hypro Corporation ( Hypro ) (See Note 2 of
Notes to Consolidated Financial Statements). The Company s consolidated
financial statements include the operating results of Hypro from the date of
acquisition. Pro forma results of operations have not been presented because
the effect of this acquisition was not significant. Hypro s post acquisition
sales were $18.4 million.
Sales in 1994 were $311.2 million, an increase of 13% over 1993.
International sales improved by 21% and domestic sales also contributed to
the increase. Significant sales improvements were noted in the water
systems, pool and spa, recreational vehicle, marine and industrial markets.
International and export sales represented 39%, 37% and 34% of manufacturing
sales in 1995, 1994 and 1993, respectively. The increase in 1995 was due
primarily to continued sales growth that occurred in the Company s European
markets.
Operating expenses increased in 1995 by 8% over 1994 due primarily to the
addition of Hypro operating expenses. As a percentage of sales, 1995
operating expenses remained flat compared to the same period in 1994.
Operating expenses increased in 1994 by 11% over 1993 primarily as a result
of increased sales.
Interest Expense, Other Income and Expenses and Income Taxes --
The 1995 increase in interest expense as compared to 1994 was due primarily
to increased manufacturing borrowings for higher international working
capital requirements, the debt incurred for the Hypro acquisition and
slightly higher interest rates. The 1994 decrease in interest expense as
compared to 1993 was due primarily to a September 1993 long-term debt
refinancing and to reduced levels of short-term borrowings.
The 1995 increase in other income was due primarily to the sale of the
Company s investment in Filtron Technologies Corporation ( Filtron ) for a
pre-tax gain of $1.4 million, $0.8 million after tax.
Income tax expense increased in 1995 reflecting increased pre-tax income.
Income tax expense decreased in 1994 despite the increase in pre-tax book
income. The effective income tax rate was reduced in 1994 primarily as a
result of utilizing foreign tax incentives and the settlement of disputed
tax matters.<PAGE>
<PAGE> 5
Accounting Changes --
In March 1995, the Financial Accounting Standards Board ( FASB ) issued
Statement of Financial Accounting Standards ( SFAS ) No. 121, Accounting for
the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed
Of. The Company is required to adopt this Statement no later than its 1996
fiscal year.
In October 1995, SFAS No. 123, Accounting for Stock Based Compensation, was
issued and also requires adoption by the Company no later than its 1996
fiscal year. The standard requires expanded disclosures, and permits, but
does not require, changes in the accounting for stock based compensation.
The implementation of SFAS No. 121 and SFAS No. 123 is not expected to have
a material impact on the financial statements.
Effects of Changing Prices --
It is management s view that changes in the rate of inflation have not had a
significant effect on WICOR s income over the past three years. Inflationary
increases generally have been recovered through productivity improvements
and/or product price increases. The Company continues to monitor the impact
of inflation in order to minimize its effects in future years through
pricing strategies, productivity improvements and cost reductions.
In November 1994, Wisconsin Gas received approval from the PSCW to use an
alternative method of rate making that includes a three-year margin rate
cap. After reviewing the impact of the margin rate cap and other factors,
management believes that productivity improvements have and will continue to
offset the impact of inflationary cost increases. This alternative method is
discussed on page 23 under Regulatory Matters.
LIQUIDITY AND CAPITAL RESOURCES
Over the last three years, the Company has generated sufficient cash flows
from operations to cover operating expenses, dividends and a portion of
investment activities. Cash flow from operations totalled $69.9 million for
1995, compared with $103.6 million and $3.4 million for 1994 and 1993,
respectively. The Company s cash flow provided by operating activities for
1995 included net income of $39.5 million; depreciation and amortization of
$48.5 million; and a net increase in working capital, excluding cash and
short-term debt. Cash flow provided by operating activities for 1994
included net income of $33.2 million; depreciation and amortization of $47.1
million; and a net decrease in working capital, excluding cash and short-
term debt. Cash flow provided by operating activities for 1993 included net
income of $29.3 million; depreciation and amortization of $43.7 million; and
a net increase in working capital, excluding cash and short-term debt. These
items were offset with funds used by Wisconsin Gas to purchase its initial
inventory of gas held in storage. One of the impacts of Federal Energy
Regulatory Commission ( FERC ) Order No. 636 is that utilities such as
Wisconsin Gas must assume the responsibility for purchasing gas supplies and
maintaining gas in storage. Previously, the pipeline companies performed
those functions.<PAGE>
<PAGE> 6
Investment Activities --
Capital expenditures increased by $1.1 million and $3.2 million in 1995 and
1994, respectively. Utility expenditures returned to more normal levels
during the three-year period ending in 1995 following completion of a major
expansion project in 1992. Both utility and manufacturing capital
expenditures are expected to increase modestly in 1996, and are expected to
be funded from operations.
In January 1995, WICOR sold its interest in Filtron, a manufacturer of
filtration products, for approximately $5.1 million.
In July 1995, the Company acquired Hypro for $58 million in cash and the
assumption of $13.3 million in operating liabilities. The acquisition was
initially financed with borrowings under a credit facility entered into in
connection with the acquisition. A portion of these borrowings were repaid
during 1995 with the net proceeds from an offering of WICOR common stock.
See Financing Activities and Note 2 of Notes to Consolidated Financial
Statements for further discussion of this transaction.
In July 1993, WICOR acquired Shurflo Pump Manufacturing Co. ( Shurflo ) by
exchanging approximately $27 million of WICOR stock for the outstanding
common stock of Shurflo. See Note 2 of Notes to Consolidated Financial
Statements for a further discussion of this transaction.
In 1992, the PSCW issued an order prescribing an equity-based formula for
determining the limitation on non-utility investments. As of December 31,
1995, WICOR would be permitted to invest an additional $52.6 million in
nonutility equity under this order. Nonutility subsidiaries can also borrow
additional amounts for acquisitions within certain PSCW guidelines (See Note
6 of Notes to Consolidated Financial Statements).
Financing Activities --
During the latter part of each year, the energy business generally incurs
short-term debt to finance increases in gas in storage and customer accounts
receivable. The short-term debt is normally eliminated by the second quarter
of the year as gas in storage is depleted and cash is received from winter
heating sales.
In November 1995, Wisconsin Gas issued $65 million of 63/8% Notes due in
2005, the proceeds of which were used to redeem, at par, $50 million of
91/8% Notes due in 1997. The remainder of the proceeds were used to retire
short-term debt which had been incurred for working capital purposes. During
1993, Wisconsin Gas issued $45 million of 6.6% Notes due in 2013, the
proceeds of which were used to refinance $45 million of first mortgage bonds
which had higher interest rates. The Company s ratio of debt to
capitalization decreased to 34% in 1995 as compared to 36% in 1994 and 38%
in 1993. The utility s embedded cost of long-term debt was 8.1%, 8.1% and
8.9% for the years ended December 31, 1995, 1994 and 1993, respectively.
In December 1995, the Company completed a public offering of 1,265,000
shares of common stock for the purpose of repaying a portion of the
borrowings under the credit facility entered into in connection with the
July 1995 acquisition of Hypro. Amounts remaining outstanding under this
credit facility accrued interest at an annual rate of approximately 5.9% as
of December 31, 1995, and mature in July 1996. Net proceeds to the Company
from the common stock offering, after deduction of associated expenses, were
$38.9 million. In the first half of 1996, the Company, and/or one of its
subsidiaries, plans to issue long-term debt for the purpose of repaying the
remaining balance of the credit facility.<PAGE>
<PAGE> 7
WICOR raised its dividend by approximately 3% in each of 1995, 1994 and
1993. The current annual dividend rate is $1.64 per share. At December 31,
1995, the Company had $104.1 million of unrestricted retained earnings
available for dividend payments to shareholders.
The WICOR Plan, established in 1992, allows customers, shareholders,
employees, Wisconsin residents and certain suppliers to purchase WICOR
common stock directly and through dividend reinvestment without paying fees
or service charges. During 1995, 1994 and 1993, respectively, 54,000,
511,000 and 685,000 shares of WICOR common stock were issued through the
WICOR Plan and through various employee benefit plans. These stock issuances
provided funds to the Company of $1.2 million, $10.6 million and $16.7
million in 1995, 1994 and 1993, respectively. Effective February 1, 1995,
share requirements for the WICOR Plan have been met through open market
purchases of WICOR common stock.
As described in Note 6 of Notes to Consolidated Financial Statements, a 1993
PSCW rate order retained certain limitations with respect to equity levels
and dividend payments of Wisconsin Gas. Restrictions imposed by the PSCW are
not expected to have any material effect on WICOR s ability to meet its cash
obligations.
Wisconsin Gas ratio of pre-tax earnings to fixed charges was 4.0 in 1995
and 2.9 in 1994, as a result of higher earnings and fixed charges that
remained relatively constant.
Access to credit markets and the costs associated therewith can be
correlated to credit quality. Wisconsin Gas unsecured bond rating from
Moody s Investors Service and Standard and Poor s Corporation remained in
1995 at Aa3 and AA-, respectively. Such ratings are not a recommendation to
buy, sell or hold securities, but rather an indication of creditworthiness.
The following is a summary of the meanings of the ratings shown above and
the relative rank of the Company s rating within each agency s
classification system. Moody s top four corporate bond ratings (Aaa, Aa, A
and Baa) are generally considered investment grade. Obligations which are
rated Aa are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high-grade bonds. Aa
securities are rated lower than the Aaa rated bonds because margins of
protection may not be as large as in Aaa securities; or fluctuation of
protective elements may be of greater amplitude; or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities. A numerical modifier ranks the security within the
category with a 1 indicating the high end, a 2 indicating the midrange and
a 3 indicating the low end of the category. Standard & Poor s top four
corporate bond ratings (AAA, AA, A and BBB) are considered investment
grade. Based on Standard & Poor s rating system, debt rated AA has a very
strong capacity to pay interest and repay principal and differs from the
highest rated issues only in small degree. A plus (+) or minus (-) sign may
be used after Standard & Poor s ratings to designate the relative position
of a credit rating within the rating category.<PAGE>
<PAGE> 8
Commercial paper carrying an A-1+ rating by Standard & Poor s Corporation
and P-1 by Moody s Investors Service is routinely issued by Wisconsin Gas as
needed to finance seasonal working capital needs, principally customer
receivables and gas in storage. Such ratings are not a recommendation to
buy, sell, or hold securities, but rather an indication of creditworthiness.
Moody s top three short-term debt ratings (P-1, P-2 and P-3) are generally
considered investment grade and are intended to indicate the relative
repayment ability of related issuers. According to Moody s rating system,
short-term debt rated P-1 has a superior ability for repayment of senior
short-term debt obligations. Wisconsin Gas had no short-term debt
outstanding for five months and two months in 1995 and 1994, respectively.
WICOR and its subsidiaries maintain multi-year revolving credit agreements
expiring in March 1998, including separate agreements of $25 million for
WICOR, $30 million for Wisconsin Gas and $15 million for Sta-Rite. Wisconsin
Gas finances working capital by issuing commercial paper in the open market.
In 1993, Sta-Rite renewed a $25 million commercial paper issuance facility.
Commercial paper outstanding, on a consolidated basis, at December 31, 1995
and 1994 was $60.0 million and $94.6 million, respectively.
The Company believes that it has adequate capacity to fund its operations
for the foreseeable future through its borrowing arrangements and internally
generated cash.
Regulatory Matters --
Wisconsin Gas is subject to the jurisdiction of the PSCW as to various
phases of its operations, including rates, service and issuance of
securities. The PSCW has instituted a generic proceeding to consider how its
regulation of gas distribution utilities should change to reflect the
changing competitive environment in the gas industry. To date, the PSCW has
made a policy decision to deregulate the sale of natural gas in customer
segments with workably competitive market choices. Hearings are tentatively
planned for 1996, with the expectation that the general policy decisions
defining the scope of a new regulatory framework will be made by the end of
1996. The Company is unable to determine what impact this proceeding may
have on Wisconsin Gas future operations.
Under current utility regulation Wisconsin Gas only earns a profit on the
transportation of natural gas and not on the sale of natural gas. Because of
this and consistent with the PSCW s policy decision, Wisconsin Gas is
actively seeking to create the competitive market conditions necessary to
exit the natural gas sales business and provide only gas transportation
services within its utility service territory. To that end, Wisconsin Gas
made a filing with the PSCW on December 29, 1995, designed to enhance the
competitive market for gas sales to non-residential customers. In general,
under its filing Wisconsin Gas proposes to provide new services to enable
third-party marketers of natural gas to establish pools, or groups, of
customers. A customer pool would effectively be treated by Wisconsin Gas as
if it were a single customer, thereby greatly reducing the administrative
burden and costs incidental to marketers serving a large number of
customers. The Wisconsin Gas filing also proposes changes to the gas sales
rate schedules applicable to its largest interruptible customers. The
changes are designed to enhance competition by enabling those customers to
compare services and prices available from Wisconsin Gas and third-party
marketers.<PAGE>
<PAGE> 9
Wisconsin Gas expects to make another filing during the first half of 1996
to implement a residential customer supplier choice demonstration program.
Such a program would test market acceptance of competition by enabling
third-party gas marketers to pool residential customers in a manner similar
to that described above for non-residential customers.
The Company is unable to predict: (1) whether the PSCW will approve
Wisconsin Gas pending and future filings nor when any such approvals will
be issued and become effective, (2) the length of time it will take for
Wisconsin Gas to fully exit the gas sales business for all customer classes,
if indeed it will be permitted to do so, and (3) whether and to what extent
shareholders might be required to bear any costs that may arise in
connection with contractual commitments and additional costs involved in
transforming Wisconsin Gas business.
In July 1995, the PSCW initiated a proceeding to develop principles and
analyze alternatives for gas utilities to recover purchased gas costs to
replace the traditional purchased gas adjustment ( PGA ) mechanism. The PSCW
staff is soliciting proposals from interested parties. It is possible that
some form of gas cost incentive mechanism will be recommended for adoption
by the PSCW. In general, an incentive mechanism would establish a targeted
gas cost for a utility and would reward or penalize that utility based on
its actual gas costs incurred relative to the target. The PSCW has scheduled
hearings for March 1996, with any changes in the PGA mechanism to be
effective November 1, 1996. The Company is unable to predict whether any
changes to the PGA mechanism will be adopted or the effect any changes that
are adopted may have.
Under a November 1994 rate order, Wisconsin Gas rates are subject to a
three-year margin rate cap (through October 1997) based upon rates approved
in November 1993. The PSCW order also specified margin rate floors for each
rate class. Wisconsin Gas has the ability to raise or lower margin rates
within the specified range on a quarterly basis. Wisconsin Gas reduced its
base rates by $1.5 million and $3.0 million on an annualized basis effective
August 1, 1995, and November 1, 1995, respectively. With these reductions,
Wisconsin Gas rates are designed to recover $4.5 million per year less than
the maximum margin recovery allowed by the PSCW s rate order.
On November 1, 1993, ANR Pipeline Company ( ANR ), Wisconsin Gas principal
pipeline supplier, filed for a general rate increase with the FERC. The
filing proposes increases in many areas of ANR s regulated cost of service.
The FERC ordered a reduction or elimination of certain cost increases and
permitted ANR to place the balance of the rate increase into effect on May
1, 1994, subject to refund of any amounts ultimately determined to be unjust
and unreasonable. Hearings began January 31, 1996. The Company believes that
any amount by which ANR is ultimately permitted to increase its rates in
this proceeding will not have a material impact on Wisconsin Gas or the
Company.
SFAS No. 71 Accounting for the Effects of Certain Types of Regulation
provides that rate-regulated public utilities such as Wisconsin Gas record
certain costs and credits allowed in the ratemaking process in different
periods than would be required for unregulated businesses. These costs and
credits are deferred as regulatory assets or regulatory liabilities and are
recorded on the income statement at the time they are recognized in rates.
SFAS No. 71 continues to be applicable to Wisconsin Gas in that its rates
are approved by a third party regulator and are designed to recover its cost
of service. Wisconsin Gas believes its current cost based rates are
competitive in the open market.<PAGE>
<PAGE> 10
Pipeline companies have been allowed to pass through to local gas
distributors various costs incurred in the transition to FERC Order No. 636.
The PSCW has authorized that such costs that have been passed through to
Wisconsin Gas be recovered in rates charged to customers. Although complete
assurance cannot be given, it is believed that any additional future
transition costs will also be recoverable from customers.
Environmental Matters --
Wisconsin Gas is in the process of preparing a remedial action options
report and recommendation for presentation to the Wisconsin Department of
Natural Resources concerning two previously owned sites on which it operated
manufactured gas plants. Wisconsin Gas currently anticipates that the costs
incurred in the remediation effort will be recoverable from insurers or
through rates and will not have a material adverse effect on the Company s
liquidity or results of operations.
The manufacturing segment has provided reserves believed sufficient to cover
its estimated costs related to contamination associated with its
manufacturing facilities.
For additional disclosure regarding environmental matters, see Note 7 of
Notes to Consolidated Financial Statements.
*** FOUR BAR CHARTS FOLLOW THIS DISCUSSION ***
WICOR Operating Income
(millions of dollars)
year 91 92 93 94 95
------ ------ ------ ------ ------
energy $39.5 $43.3 $46.2 $44.4 $58.8
manufacturing 11.7 10.0 17.8 22.2 20.3
------ ------ ------ ------ ------
total $51.2 $53.3 $64.0 $66.6 $79.1
====== ====== ====== ====== ======
WICOR Return on Average Common Equity
before cumulative effects of accounting changes
year 91 92 93 94 95
------ ------ ------ ------ ------
9.5 9.2 11.2 11.6 13.1
Annual Degree Days
% warmer than 20-year average
year 91 92 93 94 95
------ ------ ------ ------ ------
10.8 6.4 4.1 9.0 2.8
Manufacturing International and Export Sales
(millions of dollars)
year 91 92 93 94 95
------ ------ ------ ------ ------
75.5 85.9 93.8 114.2 130.2<PAGE>
<PAGE> 11
To the Shareholders and Board of Directors of WICOR, Inc.:
We have audited the accompanying consolidated balance sheets and statements
of capitalization of WICOR, Inc. (a Wisconsin corporation) and subsidiaries
as of December 31, 1995 and 1994, and the related consolidated statements of
income, common equity and cash flows for each of the three years in the
period ended December 31, 1995. These financial statements are the
responsibility of WICOR, Inc. 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
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 WICOR, Inc. and
subsidiaries as of December 31, 1995 and 1994, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1995, in conformity with generally accepted accounting
principles.
Milwaukee, Wisconsin Arthur Andersen LLP
January 22, 1996<PAGE>
<PAGE> 12
Consolidated Statements of Income
(Thousands of Dollars, Except per Share Amounts)
<TABLE>
<CAPTION>
Year Ended December 31, 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Operating Revenues
Energy $ 522,840 $ 556,587 $ 574,835
Manufacturing 337,754 311,168 274,693
---------- ---------- ----------
860,594 867,755 849,528
---------- ---------- ----------
Operating Costs and Expenses
Cost of gas sold 322,198 357,482 382,027
Manufacturing cost of sales 245,688 222,679 197,297
Operations and maintenance 174,515 181,820 169,068
Depreciation and amortization 29,696 29,416 28,044
Taxes, other than income taxes 9,421 9,748 9,141
---------- ---------- ----------
781,518 801,145 785,577
---------- ---------- ----------
Operating Income 79,076 66,610 63,951
---------- ---------- ----------
Interest expense (19,299) (16,698) (17,428)
Other income and expenses 2,438 574 266
---------- ---------- ----------
Income Before Income Taxes 62,215 50,486 46,789
Income taxes 22,688 17,312 17,476
---------- ---------- ----------
Net Income $ 39,527 $ 33,174 $ 29,313
========== ========== ==========
Per Share of Common Stock
Net income $ 2.32 $ 1.99 $ 1.82
Cash dividends $ 1.62 $ 1.58 $ 1.54
Average common shares outstanding (thousands) 17,020 16,708 16,096
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 13
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1995 1994
----------- -----------
<S> <C> <C>
Assets
Current Assets
Cash and cash equivalents $ 20,380 $ 35,138
Accounts receivable, less allowance for
doubtful accounts of $10,343 and $9,233,
respectively 132,203 103,487
Accrued utility revenues 48,847 40,327
Manufacturing inventories 68,236 60,239
Gas in storage, at weighted average cost 24,117 38,050
Deferred income taxes 20,256 15,540
Prepayments and other 14,990 19,519
----------- -----------
329,029 312,300
----------- -----------
Property, Plant and Equipment, at cost
Gas distribution 757,950 718,988
Manufacturing 119,032 103,696
----------- -----------
876,982 822,684
Less accumulated depreciation
and amortization 440,942 407,121
----------- -----------
436,040 415,563
----------- -----------
Deferred Charges and Other
Regulatory assets 104,145 116,896
Goodwill 61,096 6,914
Prepaid pension costs 33,073 30,865
Systems development costs 28,868 34,071
Other 16,263 14,099
----------- -----------
243,445 202,845
----------- -----------
$1,008,514 $ 930,708
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 14
Consolidated Balance Sheets
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1995 1994
----------- -----------
<S> <C> <C>
Liabilities and Capitalization
Current Liabilities
Short-term borrowings $ 106,377 $ 111,506
Accounts payable 63,920 65,626
Refundable gas costs 34,347 18,058
Accrued payroll and benefits 16,340 15,141
Current portion of long-term debt 6,836 5,031
Accrued taxes 6,940 8,400
Other 19,638 15,661
----------- -----------
254,398 239,423
----------- -----------
Deferred Credits and Other
Postretirement benefit obligation 67,306 69,730
Regulatory liabilities 64,896 60,900
Deferred income taxes 39,282 42,322
Accrued environmental remediation costs 36,381 37,188
Unamortized investment tax credit 7,724 8,187
Accrued pipeline transition costs 261 7,411
Other 18,287 12,410
----------- -----------
234,137 238,148
----------- -----------
Commitments and Contingencies (Note 7)
Capitalization (See accompanying statement)
Long-term debt 174,713 161,669
Redeemable preferred stock - -
Common equity 345,266 291,468
----------- -----------
519,979 453,137
----------- -----------
$1,008,514 $ 930,708
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 15
Consolidated Statements of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
<TABLE>
<CAPTION>
(Thousands of Dollars) Year Ended December 31, 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Operations
Net income $ 39,527 $ 33,174 $ 29,313
Adjustments to reconcile net income to
net cash flow from operating activities:
Depreciation and amortization 48,477 47,097 43,738
Deferred income taxes (6,436) (9,091) (3,969)
Changes in:
Receivables (33,298) 21,105 (13,993)
Manufacturing inventories (1,931) (2,027) (2,590)
Gas in storage 14,121 6,647 (38,050)
Other current assets 3,545 (4,827) (569)
Systems development costs - (841) (6,530)
Accounts payable (6,889) 2,943 (11,055)
Refundable gas costs 16,289 2,462 1,955
Accrued taxes (7,839) (2,412) 9,169
Other current liabilities 5,176 947 (292)
Other noncurrent assets and liabilities (824) 8,374 (3,726)
---------- ---------- ----------
Cash provided by operating activities 69,918 103,551 3,401
---------- ---------- ----------
Investment Activities
Capital expenditures (56,241) (55,051) (51,906)
Proceeds from sale of assets 5,099 42 5,328
Acquisitions (58,256) (72) (2,120)
Other, net 365 343 541
---------- ---------- ----------
Cash (used in) investing activities (109,033) (54,738) (48,157)
---------- ---------- ----------
Financing Activities
Change in short-term borrowings 4,059 (21,617) 59,603
Issuance of long-term debt 65,000 1,869 47,446
Reduction of long-term debt (57,700) (4,795) (50,982)
Issuance of common stock 40,285 10,649 16,682
Dividends paid on common stock,
less amounts reinvested (27,454) (23,247) (21,450)
Other 167 513 (222)
---------- ---------- ----------
Cash (used) provided by financing activities 24,357 (36,628) 51,077
---------- ---------- ----------
Change in Cash and Cash Equivalents (14,758) 12,185 6,321
Cash and cash equivalents at beginning of year 35,138 22,953 16,632
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 20,380 $ 35,138 $ 22,953
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 16
Consolidated Statements of Capitalization
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1995 1994
---------- ----------
<S> <C> <C>
Long-Term Debt
Wisconsin Gas:
First mortgage bonds
Adjustable Rate Series,
9.3% and 7.4%, respectively, due 1999 $ 6,000 $ 10,000
9-1/8% Notes due 1997 - 50,000
7-1/2% Notes due 1998 40,000 40,000
6.6% Notes due 2013 45,000 45,000
6-3/8% Notes due 2005 65,000 -
Sta-Rite:
First mortgage notes, adjustable rate, 5.3%
to 5.8%, due semi-annually through 2000 909 1,203
Industrial revenue bonds, 7.84%,
payable through 2000 1,770 2,190
Commercial paper under multi-year
credit agreement 11,202 6,853
Capital lease obligations and other 1,271 1,222
Unamortized (discount), net (1,754) (1,169)
ESOP loan guarantee 5,315 6,370
---------- ----------
174,713 161,669
---------- ----------
Redeemable Preferred Stock
WICOR:
$1.00 par value; authorized 1,500,000 shares - -
Wisconsin Gas:
Without par value, cumulative;
authorized 1,500,000 shares - -
---------- ----------
- -
---------- ----------
Common Equity
Common stock, $1.00 par value, authorized
60,000,000 shares; outstanding 18,237,000
and 16,918,000 shares, respectively 18,237 16,918
Other paid-in capital 219,133 180,000
Retained earnings 113,491 101,418
Unearned compensation-ESOP and restricted stock (5,595) (6,868)
---------- ----------
345,266 291,468
---------- ----------
Total Capitalization $ 519,979 $ 453,137
========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 17
Consolidated Statements of Common Equity
<TABLE>
<CAPTION>
(Thousands of Dollars) December 31, 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Common Stock
Balance at beginning of year $ 16,918 $ 16,407 $ 15,722
Issued in connection with underwritten
public offering 1,265 - -
Issued in connection with dividend
reinvestment, customer stock purchase
and employee benefit plans 54 511 685
---------- ---------- ----------
Balance at end of year 18,237 16,918 16,407
---------- ---------- ----------
Other Paid-in Capital
Balance at beginning of year 180,000 166,710 148,064
Issued in connection with underwritten
public offering 37,684 - -
Received in connection with dividend
reinvestment, customer stock purchase
and employee benefits plans 1,449 13,290 18,646
---------- ---------- ----------
Balance at end of year 219,133 180,000 166,710
---------- ---------- ----------
Retained Earnings
Balance at beginning of year 101,418 94,643 90,102
Net income 39,527 33,174 29,313
Dividends on common stock (27,454) (26,399) (24,099)
Other - - (673)
---------- ---------- ----------
Balance at end of year 113,491 101,418 94,643
---------- ---------- ----------
Unearned Compensation - ESOP and Restricted Stock
Balance at beginning of year (6,868) (7,484) (8,601)
Loan payments 1,055 1,114 1,117
Issuance of restricted stock - (723) -
Amortization of restricted stock 218 225 -
---------- ---------- ----------
Balance at end of year (5,595) (6,868) (7,484)
---------- ---------- ----------
Total Common Equity at End of Year $ 345,266 $ 291,468 $ 270,276
========== ========== ==========
</TABLE>
The accompanying notes are an integral part of these statements.<PAGE>
<PAGE> 18
Quarterly Financial Data (Unaudited)
Because seasonal factors significantly affect the Company s operations
(particularly at the Wisconsin Gas level), the following data may not be
comparable between quarters:
<TABLE>
<CAPTION>
(Thousands of Dollars, Except per Share Amounts)
Quarters: First Second Third Fourth
----------- ---------- ----------- ----------
<S> <C> <C> <C> <C>
1995
- ---------------------------------------
Operating revenues $ 269,304 $ 179,199 $ 162,738 $ 249,353
Operating income (loss) $ 42,848 $ 8,456 $ (3,033) $ 30,805
Income available for common stock $ 24,789 $ 2,678 $ (4,944) $ 17,004
Net income(loss)/common share(a) $ 1.46 $ 0.16 $ (0.29) $ 0.99
1994
- ---------------------------------------
Operating revenues $ 320,625 $ 186,079 $ 151,037 $ 210,014
Operating income (loss) $ 49,444 $ 5,500 $ (8,668) $ 20,334
Income available for common stock $ 28,202 $ 998 $ (8,069) $ 12,043
Net income(loss)/common share(a) $ 1.71 $ 0.06 $ (0.48) $ 0.71
</TABLE>
(a) Quarterly earnings per share may not total to the amounts reported for
the year since the computation is based on weighted average common
shares outstanding during each quarter.<PAGE>
<PAGE> 19
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1 ACCOUNTING POLICIES
a Principles of Consolidation
The consolidated financial statements include the accounts of WICOR, Inc.,
(WICOR or the Company) and its wholly-owned subsidiaries: Wisconsin Gas
Company (Wisconsin Gas), WICOR Energy Services Company (WESCO), Sta-Rite
Industries, Inc. (Sta-Rite), SHURflo Pump Manufacturing Co. (Shurflo) and
Hypro Corporation (Hypro). All appropriate intercompany transactions have
been eliminated.
b Business
The Company is a diversified holding Company with two principal business
groups: energy and manufacturing of pumps and processing equipment used to
pump, control, transfer, hold and filter water and other fluids. The Company
engages in natural gas distribution through Wisconsin Gas, the oldest and
largest natural gas distribution utility in Wisconsin. Wisconsin Gas is
subject to regulation by the Public Service Commission of Wisconsin (PSCW)
and gives recognition to ratemaking policies substantially in accordance
with the Federal Energy Regulatory Commission (FERC) System of Accounts. At
December 31, 1995, Wisconsin Gas served approximately 505,000 customers in
503 communities. The natural gas distribution and related services group
accounted for 61% and 74% of the Company s 1995 operating revenues and
operating income, respectively. Through several nonutility subsidiaries, the
Company also engages in the manufacture and sale of pumps, fluid processing
and filtration equipment. The Company s products are used primarily in water
system, pool and spa, agriculture, RV/marine and beverage/ food service
applications. The manufacturing group accounted for 39% and 26% of the
Company s 1995 operating revenues and operating income, respectively.
c Gas Distribution Revenues and Purchased Gas Costs
Utility billings are rendered on a cycle basis. Revenues include estimated
amounts accrued for service provided but not yet billed.
Wisconsin Gas rate schedules contain purchased gas adjustment (PGA)
provisions which permit the recovery of actual purchased gas costs incurred.
The difference between actual gas costs incurred and costs recovered through
rates, adjusted for inventory activity, is deferred as a current asset or
liability. The deferred balance is returned to or recovered from customers
at intervals throughout the year and any residual balance at the annual
October 31 reconciliation date is subsequently refunded to or recovered from
customers.
The PSCW is currently permitting Wisconsin Gas to recover pipeline supplier
take-or-pay settlement costs, allocating a portion of the direct-billed
costs to each customer class, including transportation customers.
d Plant and Depreciation
Gas distribution property, plant and equipment is stated at original cost,
including overhead allocations. Upon ordinary retirement of plant assets,
their cost plus cost of removal, net of salvage, is charged to accumulated
depreciation, and no gain or loss is recognized.<PAGE>
<PAGE> 20
The depreciation of Wisconsin Gas assets is computed using straight-line
rates over estimated useful lives and considers salvage value. These rates
have been consistently used for ratemaking purposes. The composite rates are
4.2%, 4.5% and 4.7% for 1995, 1994 and 1993, respectively. Depreciation of
manufacturing property is calculated under the straight-line method over the
estimated useful lives of the assets (3 to 10 years for equipment and 30
years for buildings) and is primarily reported as a cost of sales.
e Regulatory Accounting
The Company and Wisconsin Gas account for their regulated operations in
accordance with Statement of Financial Accounting Standards (SFAS) No. 71,
Accounting for the Effects of Certain Types of Regulation. This statement
sets forth the application of generally accepted accounting principles to
those companies whose rates are determined by an independent third-party
regulator. The economic effects of regulation can result in regulated
companies recording costs that have been or are expected to be allowed in
the ratemaking process in a period different from the period in which the
costs would be charged to expense by an unregulated enterprise. When this
occurs, costs are deferred as assets in the balance sheet (regulatory
assets) and recorded as expenses in the periods those same amounts are
reflected in rates. Additionally, regulators can impose liabilities upon a
regulated company for amounts previously collected from customers and for
amounts that are expected to be refunded to customers (regulatory
liabilities).
The amounts recorded as regulatory assets and regulatory liabilities in the
Consolidated Balance Sheet at December 31, 1995 and 1994 are as follows:
(Thousands of Dollars) 1995 1994
---------- ----------
Regulatory assets:
Postretirement benefit
costs (Note 9) $ 45,054 $ 47,832
Deferred environmental costs 41,457 41,942
Pipeline transition costs 261 7,411
Income tax-related amounts
due from customers 3,357 3,711
Other 14,016 16,000
---------- ----------
$ 104,145 $ 116,896
========== ==========
Regulatory liabilities:
Income tax-related amounts
due to customers $ 22,891 $ 24,098
Pension costs (Note 9) 19,482 22,333
Other 22,523 14,469
---------- ----------
$ 64,896 $ 60,900
========== ==========
Consistent with PSCW regulation, Wisconsin Gas has capitalized computer
systems development costs and amortizes the costs to expense over a five- to
ten- year period.
Wisconsin Gas is precluded from discontinuing service to residential
customers within its service area during a certain portion of the heating
season. Any differences between doubtful account provisions based on actual
experience and provisions allowed for ratemaking purposes by the PSCW are
deferred for later recovery in rates as a cost of service. The most recent
PSCW rate order provides for a $13.9 million allowable annual provision for
doubtful accounts, including amortization of prior deferred amounts.<PAGE>
<PAGE> 21
See Notes 7 and 9 for discussion of additional regulatory assets.
f Income Taxes
The Company files a consolidated Federal income tax return and allocates
Federal current tax expense or credits to each subsidiary based on its
respective separate tax computation.
For Wisconsin Gas, investment tax credits were recorded as a deferred credit
on the balance sheet and are being amortized to income over the applicable
service lives of the related properties consistent with regulatory
treatment.
g Net Income per Common Share
Net income per common share is based on the weighted average number of
shares. Employee stock options are not recognized in the computation of
earnings per common share as they are not materially dilutive.
h Manufacturing Inventories
Approximately 58% and 48% of manufacturing inventories, in 1995 and 1994,
respectively, are priced using the last-in, first-out (LIFO) method (not in
excess of market), with the remaining inventories priced using the first-in,
first-out (FIFO) method. If the FIFO method had been used exclusively,
manufacturing inventories would have been $7.9 million and $8.4 million
higher at December 31, 1995 and 1994, respectively.
i Cash Flows
The Company considers all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash equivalents. Due to the
short maturity of these instruments, market value approximates cost.
Beginning in 1995, dividends to be reinvested in shareholder accounts were
purchased in the open market. The Company s dividends reinvested (pursuant
to its dividend reinvestment plan) totalled $3.2 million and $2.6 million
for 1994 and 1993, respectively.
For purposes of the Consolidated Statements of Cash Flows, income taxes paid
(net of refunds) and interest paid (excluding capitalized interest) were as
follows for each of the years ended December 31, 1995, 1994 and 1993:
(Thousands of Dollars) 1995 1994 1993
-------- -------- --------
Income taxes paid $ 27,801 $ 31,384 $ 16,106
Interest paid $ 18,855 $ 15,714 $ 17,678
j Derivative Financial Instruments
The Company has a limited involvement with derivative financial instruments
and does not use them for trading or speculative purposes. Foreign exchange
futures and forward contracts are used to hedge foreign exchange exposure
resulting from international purchases or sales of products. Gains and
losses from open contracts are deferred until recognized as part of the
purchase transaction. Such gains and losses included in net income in the
Consolidated Statements of Income for the years ended December 31, 1995,
1994 and 1993 were not material. Wisconsin Gas purchased options in 1995 to
hedge a small portion of gas costs incurred for resale. The cost of the
options and any gains or losses realized do not affect income since they are
accounted for under the purchased gas adjustment clause.<PAGE>
<PAGE> 22
k Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the amounts reported in the financial statements and
accompanying notes. Actual results could differ from those results.
l Reclassifications
Certain prior year financial statement amounts have been reclassified to
conform to their current year presentation.
2 MERGERS AND ACQUISITIONS
On July 19, 1995, the Company completed the acquisition of Hypro for $58
million in cash and the assumption of operating liabilities totaling $13.3
million. Hypro designs, manufactures and markets pumps and water processing
equipment for the agricultural, high-pressure cleaning, marine, industrial
and fire protection markets. The acquisition has been accounted for as a
purchase and the results of operations of Hypro have been included in the
consolidated financial statements commencing July 19, 1995. The purchase
price was allocated to the net assets based upon their estimated fair market
values. The excess of the purchase price over the estimated fair value of
net assets acquired amounted to approximately $58 million, which has been
recorded as goodwill and is being amortized straight line over 40 years.
On July 28, 1993, the Company completed its merger with Carr-Griff, Inc.
which became SHURflo, a wholly-owned subsidiary of WICOR, Inc. Shurflo
designs,
manufactures and sells pumps to the food service, recreational vehicle,
marine, industrial and water purification markets. The Company issued
approximately 0.9 million shares of common stock, valued at approximately
$27 million, for all the outstanding common stock of Shurflo. This
transaction was accounted for as a pooling of interests.
3 INCOME TAXES
The current and deferred components of income tax expense for each of the
years ended December 31, are as follows:
<TABLE>
<CAPTION>
(Thousands of Dollars) 1995 1994 1993
---------- ---------- ----------
<S> <C> <C> <C>
Current
Federal $ 25,728 $ 23,516 $ 18,576
State 6,641 5,816 4,742
Foreign 1,256 1,627 834
---------- ---------- ----------
Total Current 33,625 30,959 24,152
---------- ---------- ----------
Deferred
Federal (10,275) (11,247) (6,432)
State (1,816) (2,012) (961)
Foreign 1,154 (388) 717
---------- ---------- ----------
Total Deferred (10,937) (13,647) (6,676)
---------- ---------- ----------
Total Provision $ 22,688 $ 17,312 $ 17,476
========== ========== ==========
/TABLE
<PAGE>
<PAGE> 23
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as a result of the following differences:
<TABLE>
<CAPTION>
(Thousands of Dollars)
Year ended December 31, 1995 1994 1993
-------------- -------------- --------------
<S> <C> <C> <C> <C> <C> <C>
Statutory U.S. tax rates $21,775 35.0% $17,670 35.0% $16,376 35.0%
State income taxes, net 3,235 5.2 2,518 5.0 2,326 5.0
Excess of foreign (benefit) provision
over U.S. statutory tax rate 378 0.6 (174)(0.3) 886 1.9
Investment credit restored (457)(0.7) (461)(0.9) (473)(1.0)
Amortization of excess deferred taxes (507)(0.8) (505)(1.0) (532)(1.1)
Settlement of disputed tax matters - - (998)(2.0) - -
Other, net (1,736)(2.8) (738)(1.5) (1,107)(2.4)
-------------- -------------- --------------
Effective Tax Rates $22,688 36.5% $17,312 34.3% $17,476 37.4%
============== ============== ==============
</TABLE>
The components of deferred income tax assets and liabilities at December 31,
1995 and 1994 are as follows:
(Thousands of Dollars) 1995 1994
--------------------
Deferred Income Tax Assets
Recoverable gas costs $ 13,416 $ 7,258
Inventory 1,290 1,935
Deferred compensation 2,416 2,026
Other 3,134 4,321
--------------------
$ 20,256 $ 15,540
====================
Deferred Income Tax Liabilities
Property related $ 44,647 $ 41,054
Systems development costs 11,586 13,675
Investment tax credit (5,109) (5,416)
Gas transition costs 105 2,974
Postretirement benefits (8,195) (8,059)
Deferred compensation (3,044) (3,055)
Pension benefits 5,039 2,842
Environmental (4,725) (1,669)
Other (1,022) (24)
--------------------
$ 39,282 $ 42,322
====================<PAGE>
<PAGE> 24
4 SHORT-TERM BORROWINGS
As of December 31, 1995 and 1994, the Company had total unsecured lines of
credit available from banks of $204.2 million and $206.5 million,
respectively. These borrowing arrangements may require the maintenance of
average compensating balances, which are generally satisfied by balances
maintained for normal business operations, and may be withdrawn at any time.
(Thousands of Dollars) December 31, 1995 1994
--------------------
Notes payable to banks
U.S. subsidiaries $ 27,000 $ 100
Non-U.S. subsidiaries 19,352 16,835
Commercial paper - U.S. 60,025 94,571
--------------------
$ 106,377 $ 111,506
====================
Weighted average interest rates on
debt outstanding at end of year:
Notes payable to banks
U.S. subsidiaries 5.9% 7.5%
Non-U.S. subsidiaries 9.2% 6.2%
Commercial paper - U.S. 5.9% 5.9%
Highest month-end balance $ 129,058 $ 111,506
Average month-end balance $ 71,911 $ 63,451
5 LONG-TERM DEBT
In November 1995, Wisconsin Gas issued $65 million of 6 3/8% Notes due in
2005, a portion of the proceeds were used to redeem $50 million of 9 1/8%
Notes due in 1997. In September 1993, Wisconsin Gas issued $45 million of
6.6% Notes due in 2013, the proceeds of which were used to refinance $45
million of first mortgage bonds. Substantially all gas distribution and
certain manufacturing property and plant is subject to first mortgage liens.
Maturities and sinking fund requirements during the succeeding five years on
all long-term debt total $6.8 million, $14.9 million, $43.0 million, $2.1
million and $0.4 million in 1996, 1997, 1998, 1999 and 2000, respectively.
6 RESTRICTIONS
A November 1993 rate order issued by the PSCW sets an equity range of 43% to
50% for Wisconsin Gas and also requires Wisconsin Gas to request PSCW
approval prior to the payment of dividends on its common stock to WICOR if
the payment would reduce its common equity (net assets) below 43% of total
capitalization (including short-term debt). Under this requirement, $26.8
million of Wisconsin Gas net assets at December 31, 1995, plus future
earnings, were available for such dividends without PSCW approval. In
addition, the PSCW must also approve any dividends in excess of $16 million
for any 12 month period beginning November 1 if such dividends would reduce
Wisconsin Gas total equity below 48.43% of its total capitalization.
Wisconsin Gas paid $4 million in dividends in November 1995 and expects to
pay $19 million in dividends for the 12 months ending October 1996.<PAGE>
<PAGE> 25
In connection with its long-term debt agreements, Sta-Rite is subject to
restrictions on working capital, shareholder equity and debt. These
agreements also limit the amount of retained earnings available for the
payment of cash dividends to WICOR and for certain investments. At December
31, 1995, $6.3 million of Sta-Rite net assets plus 50% of its future
earnings were available for payment of dividends
to WICOR.
Combined restricted common equity of the Company s subsidiaries totaled
$241.2 million under the most restrictive provisions as of December 31,
1995; accordingly, $104.1 million of consolidated retained earnings is
available for payment of dividends.
Historically, the PSCW has imposed restrictions on public utility holding
companies, including WICOR, relating to future nonutility investments. Under
current restrictions, Wisconsin Gas should remain the predominant business,
generally as measured by equity, within the holding company system. Under
these restrictions, the amount allowable for future nonutility equity
investment at December 31, 1995, was $52.6 million. Also, nonutility
subsidiaries can borrow additional amounts for acquisitions; however, if
debt for the combined nonutility entities exceeds 40% of total
capitalization for these entities, further PSCW actions may be necessary.
Debt was 32% of total capitalization for the nonutility entities at December
31, 1995.
7 COMMITMENTS AND CONTINGENCIES
a Gas Supply
Wisconsin Gas has agreements for firm pipeline and storage capacity that
expire at various dates through 2008. The aggregate amount of required
payments under such agreements totals approximately $1,010 million, with
annual required payments of $133 million in 1996, $132 million in 1997, $125
million in 1998, $123 million in 1999 and $123 million in 2000. Wisconsin
Gas total payments of fixed charges under all agreements were $130.5
million in 1995, $130.4 million in 1994 and $133.9 million in 1993. The
purchased gas adjustment provisions of Wisconsin Gas rate schedules permit
the recovery of gas costs from its customers. In 1992, the FERC issued Order
No. 636 that, among other things, mandated the unbundling of interstate
pipeline sales service and established certain open access transportation
regulations that became effective beginning in the 1993-94 heating season.
Order No. 636 permits pipeline suppliers to pass through to Wisconsin Gas
any prudently incurred transition costs, such as unrecovered gas costs, gas
supply realignment costs and stranded investment costs. Wisconsin Gas
estimates its portion of such costs from all of its pipeline suppliers would
approximate $14.5 million at December 31, 1995, based upon prior filings
with FERC by the pipeline suppliers. The pipeline suppliers will continue to
file quarterly with the FERC for recovery of actual costs incurred.
The FERC has allowed ANR Pipeline Company to recover capacity and above
market supply costs associated with quantities purchased from Dakota
Gasification Company ( Dakota ) under a long-term contract expiring in the
year 2009. Consistent with guidelines set forth in Order No. 636 ANR has
allocated 90% of Dakota costs to firm transportation service recoverable
through a reservation rate surcharge and 10% to interruptible service. ANR
and other pipelines reached a settlement with Dakota governing the price of
Dakota gas. A FERC administrative law judge ( ALJ ) has overturned the
settlement and ordered refunds of amounts collected from pipeline customers.<PAGE>
<PAGE> 26
The ALJ s decision is subject to review by FERC. Pending a final resolution,
ANR currently recovers the difference between costs paid to Dakota and the
current market price. Based on Wisconsin Gas contracted quantities with ANR,
Wisconsin Gas is currently paying approximately $500,000 per month of Dakota
costs. This amount varies month-to-month and across years based on the
spread between ANR contract terms with Dakota and the market indices for
pricing spot gas.
Transition costs billed to Wisconsin Gas are being recovered from customers
under the purchased gas provisions within its rate schedules. Assuming no
drastic changes in the market for natural gas, Wisconsin Gas does not expect
pipeline transition costs to significantly affect the total cost of gas to
its customers because (1) Wisconsin Gas will purchase its wellhead gas
supplies based upon market prices that should be below the cost of gas
previously embedded in the bundled pipeline sales service and (2) many
elements of transition costs were previously embedded in the rates for the
pipelines bundled sales service. The unbundling of pipeline sales service
requires Wisconsin Gas to contract directly and separately for wellhead gas
supply and firm transportation services. As a result of FERC Order No. 636,
Wisconsin Gas has contracted directly for underground storage since 1993.
b Capital Expenditures
Certain commitments have been made in connection with 1996 capital
expenditures. Energy Group s capital expenditures for 1996 are estimated at
$48 million. The Manufacturing Group s capital expenditures for 1996 are
estimated at $19 million.
c Environmental Matters
Wisconsin Gas has identified two previously owned sites on which it operated
manufactured gas plants that are of environmental concern. Such plants
ceased operations prior to the mid-1950 s. Wisconsin Gas has engaged an
environmental consultant to help determine the nature and extent of the
contamination at these sites. Based on the test results obtained and the
possible remediation alternatives available, the Company has estimated that
cleanup costs could range from $22 million to $75 million. As of December
31, 1995, the Company has accrued $36.4 million for future cleanup costs.
These estimates are based on current undiscounted costs. It should also be
noted that the numerous assumptions such as the type and extent of
contamination, available remediation techniques, and regulatory requirements
which are used in developing these estimates are subject to change as new
information becomes available. Any such changes in assumptions could have a
significant impact on the potential liability. Due to anticipated regulatory
treatment, as discussed below, changes in the recorded liability do not
immediately impact net income.
The Wisconsin Department of Natural Resources ( WDNR ) issued a Probable
Responsible Party letter to Wisconsin Gas for these two sites in September
1994. Following receipt of this letter, Wisconsin Gas and the WDNR held an
initial meeting to discuss the sites. At the meeting it was agreed that
Wisconsin Gas would prepare a remedial action options report from which it
will select specific remedial actions for recommendation to the WDNR. During
1995 the Company gathered additional environmental data regarding these two
sites, held extensive discussions concerning remedial options with current
land owners and solicited information from environmental consulting and
remediation firms on technology and approaches that would best suit the
sites. These efforts were directed toward preparing a remedial action
options report and recommendations for presentation to the WDNR during 1996.
Once such a plan is approved, initial remediation work will begin.<PAGE>
<PAGE> 27
Expenditures over the next three years are expected to total approximately
$20.0 million. Although most of the work and the cost are expected to be
incurred in the first few years of the plan, monitoring of sites and other
necessary actions may be undertaken for up to 30 years.
In March 1994, Wisconsin Gas commenced suit against nine insurance carriers
seeking a declaratory judgment regarding insurance coverage for the two
sites. Settlements were reached with each of the carriers during 1994.
Additional insurance recoveries are being pursued. Under recent PSCW rate
orders, the Company expects full recovery of incurred remediation costs,
less amounts recovered from insurance carriers. If the amount recovered from
the insurance carriers is insufficient to remediate both sites, expenditures
not recovered will be allowed full recovery (other than for carrying costs)
in rates based upon recent PSCW orders. Accordingly, a regulatory asset has
been recorded for the accrued cost. Certain related investigation costs
incurred to date are currently being recovered in utility rates. However,
any incurred costs not yet recovered in rates are not allowed by the PSCW to
earn a return. As of December 31, 1995, $4.8 million of such costs had been
incurred.
The manufacturing subsidiaries are involved in various environmental
matters, including matters in which the subsidiaries or alleged predecessors
have been named as potentially responsible parties under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA). The Company
has established accruals for all environmental contingencies of which
management is currently aware in accordance with generally accepted
accounting principles. In establishing these accruals, management considered
(a) reports of environmental consultants retained by the Company, (b) the
costs incurred to date by the Company at sites where clean-up is presently
ongoing and the estimated costs to complete the necessary remediation work
remaining at such sites, (c) the financial solvency, where appropriate, of
other parties that have been responsible for effecting remediation at
specified sites, and (d) the experience of other parties who have been
involved in the remediation of comparable sites. The accruals recorded by
the Company with respect to environmental matters have not been reduced by
potential insurance or other recoveries and are not discounted. Although the
Company has and will continue to pursue such claims against insurance
carriers and other responsible parties, future potential recoveries remain
uncertain and, therefore, were not recorded as reduction to the estimated
gross environmental liabilities. Based on the foregoing and given current
information, management believes that future costs in excess of the amounts
accrued on all presently known and quantifiable environmental contingencies
will not be material to the Company s financial position or results of
operations.
d Other
The Company is party to various legal proceedings arising in the ordinary
course of business which are not expected to have a material effect on the
Company s financial position or results of operations.<PAGE>
<PAGE> 28
8 COMMON STOCK AND OTHER PAID-IN CAPITAL
The Company s articles of incorporation authorize 60,000,000 shares of
common stock, of which 18,236,998 shares and 16,918,004 shares were
outstanding at December 31, 1995 and 1994, respectively. In December 1995,
the Company sold in a public offering 1,265,000 shares of its common stock
which generated net proceeds of approximately $38.9 million. The proceeds
were used to pay a portion of the debt incurred for the acquisition of
Hypro. Common stock totaling 2,853,563 shares is reserved for issuance under
the Company s dividend reinvestment, stock and incentive savings plans. In
addition, 21,306,072 shares are reserved pursuant to the Company s
shareholder rights plan.
Under certain circumstances, each right entitles the shareholder to purchase
one common share at an exercise price of $75, subject to adjustment. The
rights are not exercisable until ten business days after a person or group
announces a tender offer or exchange offer which would result in their
acquiring ownership of 20% or more of the Company s outstanding common stock
or after a person or group acquires at least 20% of the Company s
outstanding common shares. Under certain circumstances, including the
existence of a 20% acquiring party, each holder of a right, other than the
acquiring party, will have the right to purchase at the exercise price WICOR
common stock having a value of two times the exercise price. If, after 20%
or more of the outstanding shares of WICOR common stock is acquired by a
person or group and the Company is then acquired by that person or group,
rights holders would be entitled to purchase shares of common stock of the
acquiring person or group having a market value of two times the exercise
price of the rights. The rights do not have any voting rights and may be
redeemed at a price of $.01 per right. The rights expire on August 29, 1999.
9 BENEFIT PLANS
a Pension Plans
The Company s subsidiaries have non-contributory pension plans which cover
substantially all their employees and include benefits based on levels of
compensation and years of service. Employer contributions and funding
policies are consistent with funding requirements of Federal law and
regulations. Commencing November 1, 1992, Wisconsin Gas pension costs or
credits have been calculated in accordance with SFAS No. 87 and are
recoverable from customers. Prior to this date, pension costs were
recoverable in rates as funded.
The following table sets forth the funded status of pension plans at
December 31, 1995 and 1994. The cumulative difference between the amounts
funded and the amounts based on SFAS No. 87 through November 1, 1992, is
recorded as a regulatory liability and is being amortized as a reduction of
pension expense over an eight-year period effective November 1, 1994.<PAGE>
<PAGE> 29
<TABLE>
<CAPTION>
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
---------------------- ----------------------
(Thousands of Dollars) December 31, 1995 1994 1995 1994
----------------------------------------
<S> <C> <C> <C> <C>
Accumulated benefit obligation
Vested benefits $(110,484)$ (97,478)$ (7,234)$ (5,825)
Nonvested benefits (12,339) (10,827) (1,457) (1,185)
----------------------------------------
(122,823) (108,305) (8,691) (7,010)
Effect of projected future
compensation levels (43,481) (41,021) (1,267) (677)
----------------------------------------
Projected benefit obligation (166,304) (149,326) (9,958) (7,687)
Plan assets at fair value 217,156 197,278 474 209
----------------------------------------
Plan assets greater (less) than
projected benefit obligation 50,852 47,952 (9,484) (7,478)
Unrecognized net (asset) liability at
September 30, 1985 being recognized
over approximately 16 years (15,024) (16,777) 966 1,035
Unrecognized prior service costs 4,422 4,794 258 253
Unrecognized net (gain) loss (7,177) (5,104) 1,143 523
Additional minimum liability recorded - - (1,468) (1,307)
----------------------------------------
Prepaid pension asset (accrued liability) $ 33,073 $ 30,865 $ (8,585) $ (6,974)
========================================
</TABLE>
The weighted average discount rate assumptions used in determining the
actuarial present value of the projected benefit obligation were 7.5%, 8.25%
and 7.5% for 1995, 1994 and 1993, respectively. The expected long-term rate
of return on assets was 8.6% for 1995 and 1994 and 8.2% for 1993. The
expected long-term rate of compensation growth was 5.3% for 1995 and 1994
and 6.0% for 1993.
Net pension (income) costs for each of the years ended December 31, include
the following components:
(Thousands of Dollars) 1995 1994 1993
------------------------------
Service costs $ 4,374 $ 5,260 $ 5,658
Interest costs on projected
benefit obligations 12,830 12,249 11,807
Actual (gain) loss on plan assets (29,107) 1,225 (18,016)
Net amortization and deferral 10,760 (18,896) (69)
Gain on early retirement incentive - (268) -
Amortization of regulatory liability (2,851) (475) -
------------------------------
Net pension income $ (3,994)$ (905)$ (620)
==============================<PAGE>
<PAGE> 30
b Postretirement Health Care and Life Insurance
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees when they
reach normal retirement age while working for the Company. Wisconsin Gas
funds the accrual annually based on the maximum tax deductible amount.
Commencing January 1, 1992, Wisconsin Gas postretirement benefit costs have
been calculated in accordance with SFAS No. 106 and are recoverable from
customers. The cumulative difference between the amounts funded and the
amounts based on SFAS No. 106 through January 1, 1992, is recorded as a
regulatory asset and is being amortized over a twenty-year period effective
January 1, 1992.
The following table sets forth the plans funded status, reconciled with
amounts recognized in the Company s Statement of Financial Position at
December 31, 1995 and 1994, respectively.
Accumulated benefit obligation
(Thousands of Dollars) 1995 1994
--------------------
Retirees $ (55,729)$ (54,088)
Active employees (42,044) (29,544)
--------------------
Accumulated benefit obligation (97,773) (83,632)
Plan assets at fair value 39,417 30,666
--------------------
Accumulated benefit obligation
in excess of plan assets (58,356) (52,966)
Unrecognized prior service costs (15,915) (16,347)
Unrecognized actuarial gain (loss) 6,965 (417)
--------------------
Accrued postretirement benefit $ (67,306)$ (69,730)
====================
Net postretirement health care and life insurance costs for each of the
years ended December 31, consisted of the following components:
(Thousands of Dollars) 1995 1994 1993
------------------------------
Service cost $ 2,023 $ 2,688 $ 2,813
Interest cost on projected
benefit obligation 6,694 6,913 6,495
Actual (gain) loss on plan assets (6,185) 147 (1,414)
Amortization of regulatory asset 2,778 2,778 2,651
Net amortization and deferral 2,531 (2,549) -
Loss on early retirement incentive - 3,650 -
------------------------------
Net postretirement benefit cost $ 7,841 $ 13,627 $ 10,545
==============================
The 1994 postretirement benefit cost was increased due to the early
retirement of 131 employees under a voluntary early retirement incentive
plan at Wisconsin Gas for employees age 55 and over. <PAGE>
<PAGE> 31
The postretirement benefit cost components for 1995 were calculated assuming
health care cost trend rates ranging up to 11% for 1995 and decreasing to
5.0% over 8 to 23 years. The health care cost trend rate has a significant
effect on the amounts reported. Increasing the assumed health care cost
trend rates by one percentage point in each year would increase the
accumulated postretirement benefit obligation ( APBO ) as of December 31,
1995 by $14.7 million and the aggregate of the service and interest cost
components of postretirement expense by $1.9 million.
The assumed discount rate used in determining the actuarial present value of
the APBO was 7.5% and 8.25% in 1995 and 1994, respectively. Plan assets are
primarily invested in equities and fixed income securities.
c Retirement Savings Plans
Wisconsin Gas and Sta-Rite maintain various employee savings plans, which
provide employees a mechanism to contribute amounts up to 16% of their
compensation for the year. Company matching contributions may be made for up
to 5% of eligible compensation including 1% for the Employee Stock Ownership
Plan ( ESOP ). Total contributions were valued at $1.7 million in 1995, $1.7
million in 1994 and $1.8 million in 1993.
d Employee Stock Ownership Plan
In November 1991, WICOR established an ESOP covering non-union employees of
Wisconsin Gas. The ESOP funds employee benefits of up to 1% of compensation
with Company common stock distributed through the ESOP. The ESOP used the
proceeds from a $10 million, 3-year adjustable rate loan (6.44% interest
rate at December 31, 1995), guaranteed by the Company, to purchase 431,266
shares of WICOR common stock. The Company extended the adjustable rate loan,
with similar terms, until March 29, 1996. The unpaid balance ($5.3 million)
is shown as long-term debt with a like amount of unearned compensation
reported as a reduction of common equity on the Company s balance sheet. The
Company expects to refinance the adjustable rate loan in the first quarter
of 1996.
The ESOP trustee is repaying the $10 million loan with dividends on shares
of WICOR common stock in the ESOP and with Wisconsin Gas contributions to
the ESOP.
e Stock Options
The Company has a total of 135 employees participating in one or more of its
common stock option plans. All options were granted at prices not less than
the fair market value on the date of grant and expire not later than eleven
years from the date of grant. Changes in stock options outstanding for all
plans were as follows:
1995 1994 1993
------------------------------
Outstanding at January 1 664,633 794,925 763,342
Granted 136,400 135,800 180,350
Exercised/Canceled (55,983) (266,092) (148,767)
------------------------------
Outstanding at December 31 745,050 664,633 794,925
==============================
Exercise price per share $ 15.34- $ 13.38- $ 10.38-
$ 30.63 $ 30.63 $ 27.31
Available for future grant at year-end 607,200 743,600 783,116 <PAGE>
<PAGE> 32
Under the Company s 1994 Long-Term Performance Plan ( 1994 Plan ), awards
covering up to 820,000 shares of common stock may be granted. The types of
awards that may be granted under the 1994 Plan include incentive stock
options, nonqualified stock options, stock appreciation rights and
restricted stock.
Awards of restricted stock subject to performance vesting criteria have been
granted under the 1994 Plan. These awards will vest only if the Company
achieves certain financial goals over the three-year performance periods
1994 to 1996. Recipients of restricted stock awards are not required to
provide consideration to the Company other than rendering service and have
the right to vote the shares and the right to receive dividends thereon.
A total of 23,000 restricted shares (net of cancellations) were issued in
1994. Initially, the total market value of the shares is treated as unearned
compensation and is charged to expense over the vesting periods. For both
restricted stock and performance option shares, adjustments are made to
expense for changes in market value and progress towards achievement of
financial goals. Unearned compensation charged to expense was $0.1 million
and $0.2 million for performance options, and $0.2 million for restricted
stock in 1995 and 1994, respectively.
f Postemployment Benefit Plans
Effective January 1, 1994, the Company adopted SFAS No. 112, Employers
Accounting for Postemployment Benefits, which requires accrual for all other
postemployment benefits. Total postemployment benefit expense was $0.6
million in 1995 and 1994, respectively, including a one-time cumulative
adjustment in 1994. The incremental costs of adopting this statement are
insignificant on an ongoing basis.
10 FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of cash and cash equivalents, accounts receivable and
short-term borrowings approximates fair value due to the short-term
maturities of these instruments.
The fair value of the Company s long-term debt is estimated based on the
quoted market prices of U.S. Treasury issues having a similar term to
maturity, adjusted for the Company s bond rating and the present value of
future cash flows.
Because Wisconsin Gas operates in a regulated environment, shareholders
would probably not be affected by realization of gains or losses on
extinguishment of its outstanding fixed-rate debt. Realized gains would be
refunded to and losses would be recovered from customers through gas rates.
The estimated fair value of WICOR s financial instruments at December 31, is
as follows:
<TABLE>
<CAPTION>
1995 1994
---------------------- ----------------------
Carrying Fair Carrying Fair
(Thousands of Dollars) Amount Value Amount Value
----------------------------------------
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 20,380 $ 20,380 $ 35,138 $ 35,138
Accounts receivable $ 132,203 $ 132,203 $ 103,487 $ 103,487
Short-term debt $ 106,377 $ 106,377 $ 111,506 $ 111,506
Long-term debt $ 174,713 $ 176,700 $ 161,669 $ 159,318
/TABLE
<PAGE>
<PAGE> 33
11 OTHER FINANCIAL INFORMATION
See page 28 for unaudited quarterly financial data. See Financial Review
on page 19 for industry segment data.
Selected Financial Data
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Consolidated
Operating Data:
Operating revenues (6) $ 860,594 $ 867,755 $ 849,528 $ 747,409 $ 716,767 $ 696,023 $ 741,218 $ 780,633
Net income continuing operations $ 39,527 $ 33,174 $ 29,313 $ 22,764 $ 22,966 $ 16,651 $ 33,359 $ 30,400
Net income $ 39,527 $ 33,174 $ 29,313 $ 14,799 $ 22,966 $ 16,651 $ 33,881 $ 34,163
Common Stock Data:
Net income per share
from continuing operations $ 2.32 $ 1.99 $ 1.82 $ 1.47 $ 1.54 $ 1.14 $ 2.30 $ 2.12
Net income per common share (1) $ 2.32 $ 1.99 $ 1.82 $ 0.96 $ 1.54 $ 1.14 $ 2.33 $ 2.38
Cash dividends per common share(1) $ 1.62 $ 1.58 $ 1.54 $ 1.50 $ 1.46 $ 1.42 $ 1.37 $ 1.32
Book value per common share (1) $ 18.93 $ 17.23 $ 16.47 $ 15.60 $ 15.84 $ 16.12 $ 16.83 $ 15.82
Balance Sheet Data:
Long-term debt $ 174,713 $ 161,669 $ 165,230 $ 164,171 $ 168,366 $ 130,215 $ 122,639 $ 133,034
Redeemable preferred stock - - - - - - - -
Common equity 345,266 291,468 270,276 245,287 243,453 237,407 244,351 227,080
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
Capitalization at year-end $ 519,979 $ 453,137 $ 435,506 $ 409,458 $ 411,819 $ 367,622 $ 366,990 $ 360,114
========== ========== ========== ========== ========== ========== ========== ==========
Total assets at year-end (2) $1,008,514 $ 930,708 $ 933,726 $ 825,774 $ 670,250 $ 651,559 $ 620,548 $ 565,967
Other General Data:
Market-to-book ratio at year-end (%) 170 165 191 175 153 122 148 123
Dividend payout ratio (%)(2)(3)(4) 69.5 79.6 82.2 96.1 89.0 117.2 55.0 52.0
Yield at year-end (%) 5.1 5.6 5.0 5.6 6.1 7.3 5.6 6.9
Return ave common equity (%)(2)(3)(5) 13.1 11.6 11.2 9.2 9.5 6.8 14.3 15.3
PE ratio at year-end (2)(3) 13.9 14.3 17.3 18.5 15.7 17.2 10.7 8.2
Price range $ 26 5/8 - $ 25 1/2 - $ 25 5/8 - $ 22 7/8 - $ 18 5/8 - $ 18 1/4 - $ 19 3/8 - $ 15 5/8 -
$ 32 7/8 $ 32 5/8 $ 32 7/8 $ 27 3/8 $ 24 3/8 $ 25 1/4 $ 25 3/8 $ 20 7/8
/TABLE
<PAGE>
<PAGE> 34
<TABLE>
<CAPTION>
1995 1994 1993 1992 1991 1990 1989 1988
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Shareholders at year-end 15,238 16,517 17,091 17,780 18,503 19,463 20,509 21,611
Cash flow from operations $ 69,918 $ 103,551 $ 3,401 $ 37,012 $ 50,413 $ 10,022 $ 94,623 $ 73,526
Capital expenditures $ 56,241 $ 55,051 $ 51,906 $ 71,873 $ 45,113 $ 37,529 $ 40,944 $ 48,295
Employees at year-end 3,359 3,214 3,222 3,178 3,196 3,152 3,696 3,927
Debt/equity ratio at year-end 34/66 36/64 38/62 40/60 41/59 35/65 33/67 37/63
Energy Operations
Operating revenues $ 522,840 $ 556,587 $ 574,835 $ 495,415 $ 474,702 $ 455,559 $ 441,477 $ 476,904
Net income $ 27,701 $ 18,896 $ 19,870 $ 18,060 $ 17,086 $ 13,195 $ 25,169 $ 23,223
Capital expenditures $ 42,852 $ 44,626 $ 42,253 $ 62,125 $ 34,473 $ 27,978 $ 25,813 $ 37,148
Gas sold and transported (MDth)
Residential 49,425 46,369 47,964 45,905 45,614 43,020 48,154 46,769
Commercial 21,157 18,598 19,060 17,840 17,861 16,319 18,089 17,012
Industrial firm 13,496 14,544 15,246 14,488 15,690 15,106 16,915 16,808
Industrial interruptible 31,353 28,217 20,849 17,388 17,440 16,620 5,475 3,752
Transported 14,549 11,908 17,408 21,379 19,658 16,565 29,158 29,639
---------- ---------- ---------- ---------- ---------- ---------- ---------- ----------
129,980 119,636 120,527 117,000 116,263 107,630 117,791 113,980
========== ========== ========== ========== ========== ========== ========== ==========
Customers at year-end 504,746 495,129 485,103 470,956 460,549 452,906 445,771 439,063
Customers served per employee 471 419 352 331 323 321 319 311
Average cost of gas per Dth purchased $ 2.79 $ 3.34 $ 3.76 $ 3.34 $ 3.18 $ 3.30 $ 3.15 $ 3.68
Average annual residential bill $ 686 $ 719 $ 779 $ 712 $ 677 $ 670 $ 758 $ 770
Average per residential customer (Dth) 114 110 116 115 117 113 129 127
Degree days 6,836 6,431 6,775 6,683 6,416 6,103 7,382 7,124
% colder (warmer) than normal (2.8) (9.0) (4.1) (6.4) (10.8) (16.0) 1.5 (2.0)
Manufacturing Operations (2)
Operating revenues $ 337,754 $ 311,168 $ 274,693 $ 251,994 $ 242,065 $ 240,464 $ 300,156 $ 303,729
International and export sales
as a % of total sales 39 37 34 34 31 27 24 22
Net income (3) $ 11,826 $ 14,278 $ 9,443 $ 4,704 $ 5,880 $ 3,456 $ 8,712 $ 10,940
Capital expenditures $ 13,389 $ 10,425 $ 9,653 $ 9,748 $ 10,640 $ 9,551 $ 15,131 $ 11,147
</TABLE>
(1) Adjusted for a two-for-one stock split in March 1989.
(2) Includes continuing operations and discontinued operations up to the
year disposition was authorized.
(3) Before effects of 1992 accounting changes. Adjusted for merger with
Shurflo through (4) 1988 and (5) 1989.
(6) Includes revenues (in thousands) from discontinued operations from
1986 to 1989 of $58,209, $58,318, $63,552 and $56,318, respectively.
Data from 1985 are not available. Note: Hypro operations are
reflected as of July 19, 1995.<PAGE>
<PAGE> 35
Selected Financial Data
(Thousands of Dollars, Except Per Share Amounts)
<TABLE>
<CAPTION>
1987 1986 1985
---------- ---------- ----------
<S> <C> <C> <C>
Consolidated
Operating Data:
Operating revenues (6) $ 699,418 $ 761,104 $ 853,175
Net income from continuing operations$ 17,215 $ 17,363 $ N/A
Net income $ 19,682 $ 19,780 $ 24,900
Common Stock Data:
Net income per share
from continuing operations $ 1.22 $ 1.34 $ N/A
Net income per common share (1) $ 1.39 $ 1.53 $ 1.98
Cash dividends per common share(1) $ 1.30 $ 1.28 $ 1.18
Book value per common share (1) $ 14.68 $ 15.74 $ 13.81
Balance Sheet Data:
Long-term debt $ 127,833 $ 144,495 $ 154,159
Redeemable preferred stock 8,000 14,267 18,200
Common equity 207,658 203,477 173,941
---------- ---------- ----------
Capitalization at year-end $ 343,491$ 362,239 $ 346,300
========== ========== ==========
Total assets at year-end (2) $ 536,998$ 542,036 $ 531,192
Other General Data:
Market-to-book ratio at year-end (%)117 134 112
Dividend payout ratio (%)(2)(3)(4) 91.1 79.9 57.0
Yield at year-end (%) 7.6 6.1 7.6
Return ave common equity (%)(2)(3)(5) 9.3 10.5 14.6
PE ratio at year-end (2)(3) 12.4 13.8 7.8
Price range $ 13 3/8 - $ 14 3/4 - $ 13 -
$ 21 7/8 $ 23 $ 15 3/4
/TABLE
<PAGE>
<PAGE> 36
<TABLE>
<CAPTION>
1987 1986 1985
---------- ---------- ----------
<S> <C> <C> <C>
Shareholders at year-end 23,010 23,987 26,083
Cash flow from operations $ 41,237$ 63,583$ 46,342
Capital expenditures $ 34,264$ 36,498$ 32,381
Employees at year-end 4,040 3,932 3,641
Debt/equity ratio at year-end 37/63 40/60 45/55
Energy Operations
Operating revenues $ 424,069$ 531,970$ 637,167
Net income $ 12,580$ 14,338$ 17,460
Capital expenditures $ 24,344$ 28,353$ 23,208
Gas sold and transported (MDth)
Residential 39,369 42,837 44,813
Commercial 14,510 15,292 16,394
Industrial firm 16,106 19,379 22,541
Industrial interruptible 4,714 22,403 31,675
Transported 26,129 5,502 1,716
---------- ---------- ----------
100,828 105,413 117,139
========== ========== ==========
Customers at year-end 432,509 426,481 420,967
Customers served per employee 288 277 279
Average cost of gas per Dth purchased$ 3.74 $ 3.75 $ 4.13
Average annual residential bill $ 660 $ 761 $ 838
Average per residential customer (Dth) 108 120 128
Degree days 6,185 6,788 7,325
% colder (warmer) than normal (14.8) (7.3) (0.5)
Manufacturing Operations (2)
Operating revenues $ 275,349$ 229,134$ 216,008
International and export sales
as a % of total sales 20 16 12
Net income (3) $ 7,102$ 5,442$ 7,440
Capital expenditures $ 9,920$ 8,145 $ 9,173
/TABLE
<PAGE>
<PAGE> 1
<TABLE>
<CAPTION>
EXHIBIT 21
WICOR, Inc.
Subsidiaries of the Registrant
<S> <C> <C>
State or Country Percent Voting
Subsidiaries of WICOR, Inc. in Which Incorporated Stock Owned
- -------------------------- ---------------------- --------------
Wisconsin Gas Company Wisconsin 100%
Sta-Rite Industries, Inc. Wisconsin 100%
SHURflo Pump Manufacturing Company California 100%
Hypro Corporation Minnesota 100%
WEXCO of Delaware, Inc. Delaware 100%
Hydro-Flow Filtration Systems, Inc. California 80%
WICOR FSC, Inc. Barbados 100%
WICOR Energy Service Company Wisconsin 100%
Subsidiaries of Sta-Rite State or Country Percent Voting
Industries in Which Incorporated Stock Owned
- --------------------------- ---------------------- --------------
WICOR Canada Inc. Canada 100%
Sta-Rite de Mexico Mexico 80%
Sta-Rite Industries GmbH Germany .5%
Europa
WICOR Industries
(Australia) Pty. Ltd. Australia 100%
Onga (New Zealand) Pty. Ltd. New Zealand 100%
Sta-Rite Holdings, B.V. Netherlands 100%
Nocchi Pompe S.p.A. Italy 47%
Webster Electric Co. Delaware 100%
Subsidiary of WICOR Country in Which Percent Voting
(Australia) Pty. Ltd. Incorporated Stock Owned
- ---------------------------- ---------------- --------------
Onga Pty. Ltd. Australia 100%
Dega Research Pty. Ltd. Australia 100%
Subsidiaries of Sta-Rite Country in Which Percent Voting
Holdings, B.V. Incorporated Stock Owned
- ----------------------------- ----------------- --------------
Sta-Rite Industries Germany 95.5%
GmbH Europa
Nocchi Pompe S.p.A. Italy 30%
Subsidiary of Nocchi Pompe, Country in Which Percent Voting
S.p.A. Incorporated Stock Owned
- ----------------------------- ---------------- --------------
Midi Pompes S.a.r.l. France 100%
Nocchi Pompe Moscow Russia 90%
Subsidiary of SHURflo Pump Country in Which Percent Voting
Manufacturing Company Incorporated Stock Owned
- ----------------------------- ----------------- --------------
SHURflo Ltd. England 100%
</TABLE>
<PAGE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
-----------------------------------------
As independent public accountants, we hereby consent to the
incorporation of our reports included in and incorporated by
reference in this Form 10-K, into the Company's previously filed
Registration Statements on Form S-8 (Nos. 2-93964, 2-93963,
2-87076, 2-72454, 33-16489, 33-36457, 33-43645, 33-67132,
33-67134 and 33-55755) and Form S-3 (Nos. 33-28289 and 33-
50682).
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 12, 1996<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the WICOR,
Inc. 1995 Form 10-K for the year ended 31, 1995 and is qualified in its
entirety by reference to such financial statements and the related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> DEC-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 375,516
<OTHER-PROPERTY-AND-INVEST> 60,524
<TOTAL-CURRENT-ASSETS> 329,029
<TOTAL-DEFERRED-CHARGES> 243,445
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,008,514
<COMMON> 18,237
<CAPITAL-SURPLUS-PAID-IN> 219,133
<RETAINED-EARNINGS> 107,896
<TOTAL-COMMON-STOCKHOLDERS-EQ> 345,266
0
0
<LONG-TERM-DEBT-NET> 174,713
<SHORT-TERM-NOTES> 27,000
<LONG-TERM-NOTES-PAYABLE> 145,000
<COMMERCIAL-PAPER-OBLIGATIONS> 60,025
<LONG-TERM-DEBT-CURRENT-PORT> 6,836
0
<CAPITAL-LEASE-OBLIGATIONS> 1,271
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 394,674
<TOT-CAPITALIZATION-AND-LIAB> 1,008,514
<GROSS-OPERATING-REVENUE> 860,594
<INCOME-TAX-EXPENSE> 22,688
<OTHER-OPERATING-EXPENSES> 781,518
<TOTAL-OPERATING-EXPENSES> 804,206
<OPERATING-INCOME-LOSS> 56,388
<OTHER-INCOME-NET> 2,438
<INCOME-BEFORE-INTEREST-EXPEN> 58,826
<TOTAL-INTEREST-EXPENSE> 19,299
<NET-INCOME> 39,527
0
<EARNINGS-AVAILABLE-FOR-COMM> 39,527
<COMMON-STOCK-DIVIDENDS> 27,454
<TOTAL-INTEREST-ON-BONDS> 1,000
<CASH-FLOW-OPERATIONS> 69,918
<EPS-PRIMARY> 2.32
<EPS-DILUTED> 2.32
</TABLE>
<PAGE>
<PAGE> 1
EXHIBIT 99
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 Sec. 240.14a-11(c) or Sec. 240.14a-12
WICOR, Inc.
-----------------------------------------------
(Name of Registrant as Specified in its Charter)
- -----------------------------------------------------------------------
(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 Rules 0-11(c)(1)(ii), 14a-6(i)(1), 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>
<PAGE> 2
WICOR
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, WI 53201
NOTICE OF ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 25, 1996
To the Shareholders of
WICOR, Inc.:
NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of
WICOR, Inc. will be held Thursday, April 25, 1996, at 2:00 P.M. (local
time), at the Italian Community Center, 631 East Chicago Street, Milwaukee,
Wisconsin, for the following purposes:
1. To elect three directors to hold office until the 1999 Annual
Meeting of Shareholders and until their successors are duly elected and
qualified.
2. To consider and act upon any other business which may be
properly brought before the Annual Meeting or any adjournment thereof.
The close of business Tuesday, February 20, 1996, has been fixed as
the record date for the determination of shareholders entitled to receive
notice of, and to vote at, the Annual Meeting and any adjournment thereof.
A proxy and Proxy Statement are enclosed herewith.
By Order of the Board of Directors
Robert A. Nuernberg
Secretary
March 12, 1996
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE MEETING,
PLEASE DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF
DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS, AND RETURN IMMEDIATELY.<PAGE>
<PAGE> 3
WICOR
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, Wisconsin 53201
PROXY STATEMENT
FOR
ANNUAL MEETING OF SHAREHOLDERS
To Be Held April 25, 1996
This Proxy Statement is being furnished to shareholders by the Board
of Directors of WICOR, Inc. (the "Company") beginning on or about March 12,
1996, in connection with a solicitation of proxies by the Board of Directors
of the Company (the "Board") for use at the Annual Meeting of Shareholders
(the "Annual Meeting") to be held on Thursday, April 25, 1996, at 2:00
P.M.(local time), at the Italian Community Center, 631 East Chicago Street,
Milwaukee, Wisconsin, and at all adjournments thereof, for the purposes set
forth in the attached Notice of Annual Meeting of Shareholders.
Execution of a proxy given in response to this solicitation will not
affect a shareholder's right to attend the Annual Meeting and to vote in
person. Presence at the Annual Meeting of a shareholder who has signed a
proxy does not in itself revoke a proxy. Any shareholder giving a proxy may
revoke it at any time before it is exercised by giving notice thereof to the
Company in writing or in open meeting. Unless so revoked, the shares
represented by proxies received by the Board will be voted at the Annual
Meeting and at any adjournment thereof. A properly executed proxy will be
voted as directed therein by the shareholder.
Only holders of record of the Company's Common Stock, $1 par value
("Common Stock"), at the close of business on February 20, 1996, are
entitled to vote at the Annual Meeting and at any adjournment thereof. On
that date, the Company had outstanding and entitled to vote 18,300,133
shares of Common Stock. The record holder of each outstanding share of
Common Stock is entitled to one vote per share.
The Company is a holding company. Its principal subsidiaries include
Wisconsin Gas Company ("Wisconsin Gas"), Sta-Rite Industries, Inc.
("Sta-Rite"),SHURflo Pump Manufacturing Co. ("SHURflo") and Hypro
Corporation ("Hypro").<PAGE>
<PAGE> 4
ITEM NO. 1: ELECTION OF DIRECTORS
The Board consists of 10 directors. The Company's By-laws provide
that the directors shall be divided into three classes, with staggered terms
of three years each. At the Annual Meeting, shareholders will elect three
directors to hold office until the 1999 Annual Meeting of Shareholders and
until their successors are duly elected and qualified. Directors are
elected by a plurality of the votes cast (assuming a quorum is present at
the Annual Meeting). Consequently any shares not voted, whether due to
abstentions, broker non-votes or otherwise, have no impact on the election
of directors. However, abstentions and broker non-votes are counted in
determining whether a quorum is present at the meeting.
Unless shareholders otherwise specify, the shares represented by the
proxies received will be voted "FOR" the indicated nominees for election as
directors. The Board has no reason to believe that any of the listed
nominees will be unable or unwilling to continue to serve as a director if
elected. However, in the event that any nominee should be unable or for
good cause unwilling to serve, the shares represented by proxies received
will be voted for another nominee selected by the Board.
The following tabulation sets forth information regarding the three
nominees for election as directors and the seven continuing directors.
Except as otherwise noted, each such person has engaged in the principal
occupation or employment and held the offices shown for more than the past
five years.
NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS
For Three-Year Terms Expiring April, 1999
A photograph of each nominee and director continuing in office appears
adjacent to the nominee's/director's name and personal information.
JERE D. McGAFFEY Mr. McGaffey, 60, is a partner in the
Nominating (Chairman) and law firm of Foley & Lardner. (1) He has
Retirement Plans Investment been in practice with that firm since
Committees 1961 and has been a partner since 1968.
Director since 1980 Mr. McGaffey is a director of Smith Investment
Company.
THOMAS F. SCHRADER Mr. Schrader, 46, is President and
Director since 1988 Chief Executive Officer of Wisconsin
Gas and Vice President of the Company. He has
been with Wisconsin Gas since 1978 and assumed
his current position in 1990. He was elected
Vice President of the Company in 1988. Mr.
Schrader is a director of Firstar Trust
Company.
STUART W. TISDALE Mr. Tisdale, 67, is the Retired Chairman
Audit and Nominating and Chief Executive Officer of the
Committees Company. He is a director of Marshall &
Director since 1980 Ilsley Corporation, M&I Marshall & Ilsley
Bank, Modine Manufacturing Co. and Twin Disc
Inc.
(1) Foley & Lardner was retained in 1995 by the Company and its
subsidiaries to provide legal services and has been similarly retained in
1996.<PAGE>
<PAGE> 5
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Terms Expiring April, 1997
WILLIE D. DAVIS Mr. Davis, 61, is President, Chief
Audit (Chairman) and Compensation Executive Officer and a director of
Committees All Pro Broadcasting, Inc., which owns
Director since 1990 and operates radio stations in Los
Angeles and Milwaukee. Mr. Davis is a
director of Alliance Bank, The Dow
Chemical Co., Johnson Controls, Inc.,
Kmart Corp., L.A. Gear Inc., MGM Grand
Inc., Rally's Hamburgers, Inc., Sara Lee
Corporation and Strong Capital
Management, Inc.
GUY A. OSBORN Mr. Osborn, 60, is Chairman, Chief
Compensation (Chairman) and Executive Officer and a director of
and Retirement Plans Investment Universal Foods Corporation, an inter-
Committees national manufacturer and marketer of
Director since 1987 value-added food products. He joined
Universal Foods in 1971 and assumed his
current position in 1990. He is a
director of Firstar Corporation, Firstar
Bank Milwaukee, N.A., and Fleming
Companies, Inc., and is a Trustee of The
Northwestern Mutual Life Insurance
Company.
WILLIAM B. WINTER Mr. Winter, 67, is the Retired Chairman,
Audit and Nominating Chief Executive Officer and Director of
Committees Bucyrus-Erie Company, a manufacturer of
Directors since 1980 mining machinery, and its parent
corporation B-E Holdings Inc. He served
as Chairman and Chief Executive Officer
from 1988 until his retirement in 1994.
MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE
Terms Expiring April, 1998
WENDELL F. BUECHE Mr. Bueche, 65, is the Chairman, Chief
Audit and Compensation Executive Officer and a director of IMC
Committees Global, Inc., a producer and marketer
Director since 1984 of crop nutrients. He was named to that
position in 1993. Mr. Bueche previously
was Chairman, President and Chief
Executive Officer of Allis-Chalmers
Corporation. Mr. Bueche is a director
of Marshall & Ilsley Bank.<PAGE>
<PAGE> 6
DANIEL F. McKEITHAN, JR. Mr. McKeithan, 60, is President, Chief
Compensation and Retirement Executive Officer and a director of
Plans Investment (Chairman) Tamarack Petroleum Company, Inc., an
Committees operator of producing oil and gas wells.
Director since 1989 He is also President and Chief Executive
Officer of Active Investor Management,
Inc., a manager of oil and gas wells;
and SeiTech Development, Inc., an oil
and gas exploration and development
company, which he formed in 1995
GEORGE E. WARDEBERG Mr. Wardeberg, 60, is President and
Nominating Committee Chief Executive Officer of the Company,
Director since 1992 and Chairman of Wisconsin Gas, Sta-Rite,
SHURflo and Hypro. He has held these
positions since 1994. He served in
other executive capacities with the
Company and its subsidiaries from 1989
until he assumed his current position.
He is a director of M&I Marshall &
Ilsley Bank.
ESSIE M. WHITELAW Ms. Whitelaw, 47, is President and
Nominating and Retirement Chief Operating Officer of Blue
Plans Investment Committees Cross & Blue Shield United of
Director since 1992 Wisconsin, a comprehensive health care
insurer. She has held that position
since 1992. She served in other
executive capacities with Blue Cross &
Blue Shield United from 1986 until she
assumed her current position. She is a
director of Universal Foods Corporation.
<PAGE>
<PAGE> 7
THE BOARD OF DIRECTORS
GENERAL --
The Board held eight meetings in 1995. Each director attended at
least 75% of the total of such meetings and meetings of any committees on
which such director served. The Board maintains standing Audit, Nominating
and Compensation Committees.
The Audit Committee held two meetings in 1995. The committee's
functions include recommending the selection of the independent auditors
each year; consulting with the independent auditors regarding the scope and
plan of audit, internal controls, fees, non-audit services (including the
possible effect of such services on the independence of the auditors), the
audit report and related matters; reviewing other accounting, internal audit
and financial matters; investigating accounting, auditing or financial
exceptions which may occur; and overseeing the corporate compliance programs
of the Company and its subsidiaries.
The Nominating Committee held two meetings in 1995. The committee's
functions include recommending those persons to be nominated by the Board
for election as directors of the Company at the next Annual Meeting of
Shareholders and recommending the person to fill any unexpired term on the
Board which may occur. The committee will consider nominees recommended by
shareholders, but has no established procedures which must be followed to
make recommendations.
The Compensation Committee held two meetings in 1995. The committee's
functions include reviewing and recommending adjustments to the salaries of
the officers of the Company and the presidents of its subsidiaries;
administering the 1981 Stock Option Plan, the 1987 Stock Option Plan, the
1992 Director Stock Option Plan, the 1994 Long-Term Performance Plan and the
other incentive compensation plans of the Company and its subsidiaries; and
reviewing and recommending director compensation.
COMPENSATION OF DIRECTORS --
The Company pays its directors who are not officers of the Company,
Wisconsin Gas, Sta-Rite, SHURflo or Hypro an annual retainer fee of $10,000,
plus $600 for each meeting they attend of the Board and committees of the
Board on which they serve. Committee chairmen are paid an additional annual
retainer fee of $1,000. Committee chairmen receive meeting fees for
meetings with the Chief Executive Officer of the Company in preparation for
regular committee meetings. Wisconsin Gas pays its directors who are not
officers of the Company, Wisconsin Gas, Sta-Rite, SHURflo or Hypro an annual
retainer fee of $7,000, plus $600 for each meeting of the Wisconsin Gas
board they attend. Directors who are also officers of the Company,
Wisconsin Gas, Sta-Rite, SHURflo or Hypro receive no fees for service as
directors of those companies. Presently, all directors of the Company are
also directors of Wisconsin Gas.
Non-employee directors participate in the 1992 Director Stock Option
Plan, pursuant to which options to purchase 2,000 shares of Common Stock are
automatically granted annually on the fourth Tuesday in February to each
non-employee director. The exercise price per share for options granted
under the 1992 Director Stock Option Plan is equal to the fair market value
of a share of Common Stock on the date of grant. On February 28, 1995,
Messrs. Bueche, Davis, McGaffey, McKeithan, Osborn, Tisdale and Winter and
Ms. Whitelaw each received an option to purchase 2,000 shares of Common
Stock at a per-share exercise price of $28.75. Options granted under the
1992 Director Stock Option Plan are immediately exercisable and have a
ten-year term; provided, however, that no option may be exercised after 24
months have elapsed from the date the optionee ceased being a director.
<PAGE>
<PAGE> 8
On February 27, 1996, options to purchase an additional 2,000 shares of
Common Stock were granted to the non-employee directors at a per-share
exercise price of $33.0625.
The Company and Wisconsin Gas each maintain a deferred compensation
plan for active directors which entitles a director of the respective
corporation to defer directors' fees until the director ceases to be an
active director. All amounts deferred are unsecured and accrue interest at
the prevailing announced prime interest rate of a major commercial bank.
The Company and Wisconsin Gas maintain retirement plans for directors
who are not officers of the Company or its subsidiaries, have reached the
age of 65, and have served at least five years as a director of the Company
or Wisconsin Gas. Retired directors receive essentially the same annual
compensation as active directors receive ($16,000 from the Company and
$11,200 from Wisconsin Gas for 1995). Retirement benefits are payable for a
period equal to the director's service as a director, up to 10 years, or
until the death of the retired director, whichever occurs earlier.
SECURITY OWNERSHIP OF MANAGEMENT
The following tabulation sets forth the number of shares of Common
Stock beneficially owned, as of February 28, 1996, by each director and
nominee, each executive officer named in the Summary Compensation Table, and
all directors and executive officers as a group.
Amount and Nature
Title of Name of of Beneficial Percent of
Class Beneficial Owner Ownership (1)(2)(3) Class (4)
- ------------ ------------------------ ------------------- ----------
Common Stock Wendell F. Bueche 10,362 -
Willie D. Davis 8,500 -
James C. Donnelly 70,091 -
Jere D. McGaffey 11,024 -
Daniel F. McKeithan, Jr. 9,000 -
Robert A. Nuernberg 42,676 -
Guy A. Osborn 10,000 -
Thomas F. Schrader 119,199 -
Stuart W. Tisdale 86,226 (5) -
George E. Wardeberg 63,508 -
Joseph P. Wenzler 126,721 (6) -
Essie M. Whitelaw 8,000 -
William B. Winter 10,588 (7) -
All directors and exec-
utive officers as a
group (13 persons) 575,895 3.2%
<PAGE>
<PAGE> 9
(1) Each beneficial owner exercises sole voting and investment power with
respect to the shares shown as owned beneficially, except as noted in
footnotes (3), (5), (6) and (7).
(2) Includes the following numbers of shares covered under options
exercisable as of or within 60 days of February 28, 1996: Mr.
Donnelly, 60,150; Mr. Nuernberg, 31,849; Mr. Schrader, 83,424; Mr.
Wardeberg, 19,500; Mr. Wenzler, 80,250; Messrs Bueche, Davis, McGaffey,
McKeithan, Osborn and Winter and Ms. Whitelaw, 8,000 each; Mr. Tisdale,
6,000 and all directors and executive officers as a group, 337,173.
(3) Includes the following numbers of shares of restricted stock over which
the holders have sole voting but no investment power: Mr. Donnelly,
8,000; Mr. Nuernberg, 1,600; Mr. Schrader, 8,000; Mr. Wardeberg,
14,000; and Mr. Wenzler, 6,000; and all directors and executive
officers as a group, 37,600. The restricted stock vests in three years
after the grant if the Company's total return to shareholders for the
three-year period exceeds a pre-established goal.
(4) Where no percentage figure is set out in this column, the person owns
less than 1% of the outstanding shares.
(5) Includes 4,852 shares owned by Mr. Tisdale's spouse.
(6) Includes 526 shares owned by Mr. Wenzler's spouse.
(7) Includes 2,588 shares owned by Mr. Winter's spouse.<PAGE>
<PAGE> 10
EXECUTIVE COMPENSATION
The following tabulation is a three-year summary of the
compensation awarded or paid to, or earned by, the persons who served as
Company's chief executive officer during 1995 and each of the Company's
four other most highly compensated executive officers whose total cash
compensation exceeded $100,000 in 1995.
<TABLE>
<CAPTION>
SUMMARY COMPENSATION TABLE
Annual Compensation Long Term Compensation Awards
-------------------------------- --------------------------------------
Securities
Other Annual Restricted Underlying All Other
Compensation Stock Options/ Compensation
Name and Principal Position Year Salary($) Bonus($) ($) (1) Awards($)(2) SARs(#) ($)(3)
- ----------------------------------- ---- -------- -------- ------------ ------------ ----------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
George E. Wardeberg, President 1995 $368,750 $192,455 15,000 $ 16,250
and Chief Executive Officer of 1994 327,500 113,200 $ 185,250 15,000 19,241
the Company, and Chairman of 1993 272,000 150,000 $ 52,459 18,000 16,257
Wisconsin Gas, Sta-Rite, SHURflo
and Hypro(4)
Thomas F. Schrader, Vice President 1995 278,500 176,857 10,000 12,640
of the Company and President and 1994 264,925 65,163 123,500 10,000 16,112
Chief Executive Officer of 1993 260,000 142,881 10,500 15,192
Wisconsin Gas
James C. Donnelly, Vice President 1995 267,800 28,253 10,000 13,185
of the Company and President 1994 251,633 105,020 123,500 10,000 15,848
and Chief Executive Officer of 1993 236,250 110,174 7,950 15,203
Sta-Rite
Joseph P. Wenzler, Vice President, 1995 261,850 106,710 7,500 11,974
Treasurer and Chief Financial 1994 252,650 69,800 92,625 7,500 15,498
Officer of the Company; Vice 1993 245,300 100,629 9,750 15,131
President and Chief Financial
Officer of Wisconsin Gas; and
Secretary and Treasurer of
SHURflo and Hypro (5)
Robert A. Nuernberg, Secretary 1995 138,000 48,307 2,000 6,900
of the Company; Vice President- 1994 133,000 7,000 24,700 2,000 9,516
Corporate Relations and Secretary 1993 131,000 25,000 3,000 9,416
of Wisconsin Gas
/TABLE
<PAGE>
<PAGE> 11
(1) The aggregate amount of personal benefits provided by the Company and
its subsidiaries to the other executive officers named in this table in
any year did not exceed the lesser of $50,000 or 10% of each officer's
annual salary and bonuses reported in the table for any of the years
indicated, except Mr. Wardeberg in 1993.
(2) The amounts in the table reflect the market value on the date of grant
of restricted stock awarded under the 1994 Long-Term Performance Plan.
The number of shares of restricted stock held by the executive officers
named in the table and the market value of such shares as of December
31, 1995, were as follows: Mr. Wardeberg, 6,000 shares, $193,500;
Messrs. Schrader and Donnelly, 4,000 shares, $129,000; Mr. Wenzler,
3,000 shares, $96,750; and Mr. Nuernberg, 800 shares, $25,800. The
restricted stock vests in 1997 provided the Company's three-year
(1994-96) total return to shareholders exceeds a pre-established goal.
Holders of shares of restricted stock are entitled to receive dividends
on such shares.
(3) The amounts shown in this column for 1995 are comprised of the
following items: Company contributions to 401(k) and supplemental
savings plans: Mr. Wardeberg, $16,250; Mr. Schrader, $12,640; Mr.
Donnelly, $12,212; Mr. Wenzler, $11,974; and Mr. Nuernberg, $6,900.
Above market earnings on deferred compensation: Mr. Donnelly, $973.
(4) On February 1, 1994, Mr. Wardeberg was elected President and Chief
Executive Officer of the Company and Chairman of Wisconsin Gas,
Sta-Rite and SHURflo. He was elected Chairman of Hypro on July 19,
1995.
(5) Mr. Wenzler was elected Secretary and Treasurer of SHURflo in 1993 and
of Hypro on July 19, 1995.
STOCK OPTION INFORMATION
The Company has in effect equity plans pursuant to which options to
purchase Common Stock may be granted to key employees (including executive
officers) of the Company and its subsidiaries. The following tabulation
sets forth information regarding grants of options made by the Company in
1995 to the executive officers named in the Summary Compensation Table. No
SARs were awarded in 1995.
OPTION/SAR GRANTS IN 1995 FISCAL YEAR
<TABLE>
<CAPTION>
Individual Grants Grant Date Value
--------------------------------------------------------- ----------------
% of Total
Options
Number of Sec. Granted to Exercise or
Under. Opt./SARs Employees Base Price Expiration Grant Date
Name Granted (#)(1) in Fiscal Year ($/sh.) Date Present Value(2)
- ------------------- ---------------- -------------- ----------- ---------- ----------------
<S> <C> <C> <C> <C> <C>
George E. Wardeberg 15,000 12.5 $ 28.25 2/21/05 $ 51,150
Thomas F. Schrader 10,000 8.3 28.25 2/21/05 34,100
James C. Donnelly 10,000 8.3 28.25 2/21/05 34,100
Joseph P. Wenzler 7,500 6.2 28.25 2/21/05 25,575
Robert A. Nuernberg 2,000 1.7 28.25 2/21/05 6,820
/TABLE
<PAGE>
<PAGE> 12
(1) The options reflected in the table (which are nonstatutory stock
options for purposes of the Internal Revenue Code) were granted on
February 21, 1995 and vest ratably over the three-year period from the
date of grant.
(2) Amounts in this column were calculated using the Black-Scholes option
pricing model. The model assumes: (a) an option term of 10 years; (b)
a risk-free interest rate of 5.75%; (c) volatility (variance of rate of
return) of 0.1676; (d) an annual discount of 3% over the vesting period
for the risk of forfeiture; and (e) a dividend yield of 5.7%. The
actual value, if any, that an optionee may realize upon exercise will
depend upon the excess of the price of the Common Stock over the option
exercise price on the date that the option is exercised. There is no
assurance that the value received by the optionee will be at or near
the value estimated by the Black-Scholes model.
The following tabulation sets forth information regarding the exercise
of stock options during 1995 and the unexercised options held at December
31, 1995, by each of the executive officers named in the Summary
Compensation Table.
AGGREGATED OPTION/SAR EXERCISES
IN 1995 FISCAL YEAR,
AND FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
Numbers of Securities Value of Unexercised
Underlying Unexercised In-the-Money
Options/SARs Options/SARs
at FY-End (#) at FY-End ($)
---------------------- ----------------------
Shares Value
Acquired on Realized Exer- Unexer- Exer- Unexer-
Name Exercise (#) ($) cisable cisable cisable cisable
- ------------------- ------------- ----------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
George E. Wardeberg 2,000 $ 10,875 5,000 31,000 $ 8,125 $ 105,875
Thomas F. Schrader 3,000 39,469 77,133 20,167 799,122 68,115
James C. Donnelly 0 0 51,483 19,317 516,319 63,918
Joseph P. Wenzler 1,300 19,053 72,800 15,750 744,581 54,172
Robert A. Nuernberg 2,000 34,187 32,766 4,334 365,569 15,105
/TABLE
<PAGE>
<PAGE> 13
PENSION AND RETIREMENT PLANS
The Company and its subsidiaries maintain pension and retirement plans
in which the executive officers and other employees participate. The
companies also maintain supplemental retirement plans for officers and
certain other employees to reflect certain compensation that is excluded
under the retirement plans and to provide benefits that otherwise would have
been accrued or payable except for the limitations imposed by the Internal
Revenue Code.
The following tabulation sets forth the annual retirement benefits
payable under the pension plans, as supplemented, for the indicated levels
of final average earnings with various periods of credited service.
Benefits reflected in the table are based on an assumed retirement age of
65.
<TABLE>
<CAPTION>
PENSION PLAN TABLE
Years of Service
Remuneration 10 15 20 25 30
- --------------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C>
$200,000 $39,004 $ 58,506 $ 78,008 $ 89,259 $ 92,259
250,000 48,904 73,356 97,808 111,909 115,659
300,000 58,804 88,206 117,608 134,559 139,059
350,000 68,704 103,056 137,408 157,209 162,459
400,000 78,604 117,906 157,208 179,859 185,859
450,000 88,504 132,756 177,008 202,509 209,259
</TABLE>
The compensation covered by the pension plan, as supplemented, for the
named executive officers includes all compensation reported for each
individual as salary and bonus in the Summary Compensation Table. Messrs.
Wardeberg, Schrader, Donnelly, Wenzler and Nuernberg have 6, 17, 8, 22 and
26 years, respectively, of credited service under the pension plan.
Pursuant to a supplemental retirement plan, Messrs. Schrader and Nuernberg
will receive a supplemental retirement benefit of $25,000 per year for 15
years beginning at age 65, payable in monthly installments.
A retired executive officer who is married at the time of retirement
and selects one of the available joint and surviving spouse annuity payment
options will also receive the difference between the monthly benefits
payable under the single life annuity payment option and the 50% joint and
surviving spouse annuity payment option for the lives of the retired officer
and spouse. Upon the death of the retired officer, the surviving spouse
will receive 50% of the supplemental benefit for life.
The retirement benefits set out in the above table are based on a
straight life annuity. The election of other available payment options
would change the retirement benefits shown in the table. The plan does not
provide for reduction of retirement benefits to offset Social Security or
any other retirement benefits.<PAGE>
<PAGE> 14
BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION
The Company's executive compensation program is administered by the
Compensation Committee of the Board. The Compensation Committee is
comprised of four independent, non-employee directors. Following
Compensation Committee review and approval, matters relating to executive
compensation (other than the grant of stock options and restricted stock)
are submitted to the full Board for approval. The Compensation Committee
utilizes an independent compensation consultant. The consultant provides
advice to the Committee on compensation-related issues, including incentive
plan design and competitive compensation data for officer positions.
Compensation Policies --
Policies are used to set a general direction and as a backdrop against
which specific compensation decisions are made.
- Design of executive pay programs is intended to attract and
retain top talent, motivate and reward performance.
- Differences in pay practices and performance measures between the
Company's primary lines of business are recognized.
- Compensation opportunities, by component and in the aggregate,
are targeted at the median (50th percentile) of competitive
practice.
- Achievement of incentive compensation levels is dependent on
attainment of performance goals as agreed to by the Board
annually. These goals relate to the achievement of the Company's
operating and financial plan, individual objectives and
milestones in the Company's longer-term strategic plan.
- In business units where an all-employee bonus or profit-sharing
program exists, a portion of each executive's incentive
compensation is determined on the same criteria.
- The focus on enhancement of shareholder value is accomplished by
tying a significant portion of total pay to performance of the
Company's stock.
In assessing executive performance and pay, the members of the
Compensation Committee consider and weigh in their judgment factors outside
the formal incentive plans. These factors include operational and financial
measures not specifically incorporated in the incentive plans, and actual
performance in dealing with unanticipated business conditions during the
year. The Compensation Committee believes such factors should be considered
in addition to the more formalized factors to assess and reward executive
performance properly.
Base salary midpoints, annual incentive targets and long-term incentive
grants are set based on a competitive analysis conducted by the independent
compensation consultant. As indicated above, compensation opportunities, by
component and in the aggregate, are set at or near the 50th percentile of
competitive practice for comparably sized organizations. Rates for the gas
utility positions are set using survey sources from the utility industry.
There is substantial overlap between the companies in these surveys and the
companies used in the peer company index in the Performance Graph. Rates
for the nonutility positions are set using survey sources from general
industry; there is no overlap with the Performance Graph peer companies
here.<PAGE>
<PAGE> 15
Components of Compensation --
Base salary. The Compensation Committee targets salary range midpoints
as indicated above. Individual salaries range above and below the midpoint
based upon an individual's past and current performance, and expectations
for future performance. The factors considered in this review are job
specific and vary depending on the individual's position. There is no
specific weighting given to these factors.
Annual incentive plan. The Company's annual incentive compensation plan
tailors each officer's incentive potential to that officer's Company and
subsidiary responsibilities. The plan sets incentive targets ranging from
20% to 50% of base salary. The plan is designed to compensate the officers
primarily on a formula basis. For the Chief Executive Officer and the Chief
Financial Officer, the formula bases 75% of the targeted award on the
Company's earnings per share (EPS) and 25% on individual performance
objectives. For Company Vice Presidents, who are also the subsidiary
presidents, the formula bases 25% of the targeted award on the Company's
earnings per share, 25% on individual performance objectives, and 50% on
subsidiary performance objectives. Subsidiary performance objectives for
Wisconsin Gas include financial, customer service and safety objectives
(weighted at 67% of this component) and financial objectives (weighted at
33%). Performance objectives for Sta-Rite include net earnings (weighted at
67% of this component) and return on assets (weighted at 33%). Individual
performance objectives vary among the officers, but may include such things
as cost management, product development, sales growth, personnel management
and development, and management of specific projects. The Compensation
Committee exercises its judgment on a case-by-case basis in determining the
weight to be accorded any individual performance objective.
Long-term incentive plan. The Company's long-term incentive
compensation plan provides for annual awards of stock options and biennial
awards of performance-based restricted stock. The plan splits an officer's
long-term incentive opportunity equally (based on value) between stock
options and performance-based restricted stock. The independent compensation
consultant provides the Compensation Committee with a long-term incentive
grant schedule that approximates a market median grant opportunity. The
Compensation Committee reserves the right to adjust this schedule upward or
downward based on Company performance; however, it is the Compensation
Committee's intention that in most cases grants will be provided at targeted
levels.
Stock options may be incentive stock options or nonstatutory options
which have a term of not more than ten years and have an exercise price
equal to the fair market value on the date of grant. The Compensation
Committee determines the manner and conditions under which the options
become exercisable. The number of options granted is based on the
participant's office or position, with an equal number of shares generally
being granted to individuals holding the same or similar positions, such as
vice president of an operating subsidiary. Performance-based restricted
stock will vest three years from the year of grant provided the Company's
three-year total return to shareholders equals or exceeds pre-established
goals relative to the Performance Graph peer group (the PaineWebber Gas
Distribution Utility Index). For other subsidiary officers who participate
in the plan, the restricted stock will vest in three-years provided the
appropriate subsidiary's three-year financial performance (three-year
cumulative earnings for Wisconsin Gas and return on assets for Sta-Rite)
equals or exceeds the pre-established goal.<PAGE>
<PAGE> 16
Compensation of Officers --
The Compensation Committee sets base salaries of officers within the
established ranges. The Compensation Committee considers specified financial
measures tailored to the Company and each subsidiary, each officer's
contribution to achieving corporate goals, and such officer's achievement of
personal performance objectives. Examples of financial measures are net
income earned relative to budget, return on total assets, return on sales,
and rate of return earned versus allowed. The Compensation Committee weighs
the financial measures differently for each officer, in recognition that the
Company's principal subsidiaries operate in different industries with
different compensation practices and that the officers' responsibilities
differ. For example, the rate of return earned versus that nominally
allowed by state regulatory authorities having jurisdiction over the gas
utility subsidiary is applicable only to officers of the utility company,
whereas return on total assets and return on sales are applicable primarily
to officers of the manufacturing subsidiaries. Examples of personal
performance objectives considered by the Compensation Committee are set out
above in the discussion of the Annual Incentive Plan. The Compensation
Committee exercises its judgment in determining the relative weight to be
accorded each personal objective.
As stated above, each officer's annual incentive award, if any, is
based on a formula, although the Compensation Committee exercises its
judgment in determining the weights to be accorded the achievement of
personal objectives. Long-term incentive awards (stock options and
restricted stock) are also formula-based, with individual awards being set
relative to the officer's position. The specific number of stock options
awarded is based on the number of options to be awarded to all key employees
of the Company and its subsidiaries and the number of options previously
granted and outstanding, as determined by the Compensation Committee.
Options granted in 1995 were nonstatutory, have a term of ten years, and
first become exercisable one-third each year on the first, second and third
anniversary of the grant. No restricted stock grants were made in 1995.
Compensation of the Chief Executive Officer --
For 1995, the Compensation Committee increased the base salary of
George E. Wardeberg, the Company's Chief Executive Officer, by $25,000 or
7.1% effective April 1, 1995. The increase reflects his overall
performance, as demonstrated by the increase in the Company's total return
to shareholders in 1995 compared to the peer group which is shown in the
graph in the Performance Presentation section below, and his position in the
salary range. The increase sets Mr. Wardeberg's salary in the first
quartile of the range targeted by the Compensation Committee.
The Compensation Committee awarded Mr. Wardeberg 15,000 nonstatutory
stock options in 1995. The number of options awarded was at the targeted
number established in the long-term incentive compensation plan.
The annual incentive award to Mr. Wardeberg for 1995 was $192,455, or
52% of his salary as compared to a target of 50% of salary. This award
reflects Mr. Wardeberg's significant contributions to the Company during
1995. The Company's financial objectives were met with net earnings and
earnings per share increasing 19% and 17%, respectively. WICOR also
outperformed both its industry peers and the S&P 500 Stock Index over the
last five years as shown in the accompanying Total Return Comparison
performance graph. In addition, Mr. Wardeberg accomplished his personal
objectives in the areas of growth, human resources and preserving the
Company's financial strength. The Compensation Committee exercised its
judgment in determining the weights accorded to his accomplishment of these
personal objectives.<PAGE>
<PAGE> 17
Compliance with Tax Regulations --
The Company has considered the implications of the Section 162(m) tax
rules regarding deductibility of annual executive compensation over $1
million. The cash compensation levels for Company officers fall well below
this level and, hence, no specific changes are proposed to the cash
compensation program. However, it is important to note that most of the
components of compensation described above are consistent with the tax rules
regarding performance-based compensation incentives.
The Compensation Committee did, however, seek qualification of the
stock components of the program as "performance-based compensation" plans
pursuant to these tax rules. To that end, proposals were included in the
1994 Proxy Statement establishing a per-person limitation for stock option
and restricted stock awards. The proposals were approved by the
shareholders.
Guy A. Osborn, Chairman
Wendell F. Bueche
Willie D. Davis
Daniel F. McKeithan, Jr.
Members of the Compensation Committee
PERFORMANCE PRESENTATION
The following graph compares the yearly percentage change in the
Company's cumulative total shareholder return (dividends declared plus share
appreciation) to the S&P 500 Stock Index and the PaineWebber Gas
Distribution Utility Index, comprised of 35 U.S. natural gas distribution
utilities. The information presented assumes that all dividends were
reinvested.
[Performance graph will appear here.]
TOTAL RETURN COMPARISON *
Value of $100 Invested Year-End 1990
1990 1991 1992 1993 1994 1995
------ ------ ------ ------ ------ ------
WICOR $ 100 $ 132 $ 157 $ 191 $ 182 $ 218
S&P 500 $ 100 $ 130 $ 140 $ 155 $ 156 $ 215
Industry $ 100 $ 114 $ 135 $ 153 $ 134 $ 173
**
* Includes reinvested dividends
** Paine Webber Gas Distribution Utility Index
SHAREHOLDER PROPOSALS
Proposals which shareholders of the Company intend to present at the
1996 Annual Meeting of Shareholders must be received by the Company by the
close of business on November 14, 1996.<PAGE>
<PAGE> 18
OTHER MATTERS
Arthur Andersen LLP was retained as the Company's independent auditors
for the year ended December 31, 1995 and, upon the recommendation of the
Audit Committee, the Board has reappointed Arthur Andersen as independent
public accountants for the Company for the year ending December 31, 1996. A
representative of Arthur Andersen is expected to be present at the Annual
Meeting with the opportunity to make a statement if such representative
desires to do so, and it is expected that such representative will be
available to respond to appropriate questions.
The Company will file with the Securities and Exchange Commission on or
before March 30, 1996, an annual report on Form 10-K for the fiscal year
ended December 31, 1995. The Company will provide without charge a copy of
this Form 10-K (including financial statements and financial statement
schedules, but not including exhibits thereto) to each person who is a
record or beneficial holder of shares of Common Stock as of the record date
for the Annual Meeting and who submits a written request for it. A request
for a Form 10-K should be addressed to Robert A. Nuernberg, Secretary,
WICOR, Inc., P.O. Box 334, Milwaukee, Wisconsin 53201.
Management does not intend to present to the Annual Meeting any matters
other than the matters described in this Proxy Statement. Management knows
of no other matters to be brought before the Annual Meeting. However, if
any other matters are properly brought before the Annual Meeting, it is the
intention of the persons named in the enclosed form of proxy to vote thereon
in accordance with their best judgment.
The cost of soliciting proxies will be borne by the Company. The
Company expects to solicit proxies primarily by mail. Proxies may also be
solicited personally and by telephone by certain officers of the Company and
regular employees of its subsidiaries. The Company may reimburse brokers
and other nominees for their expenses in communicating with the persons for
whom they hold Common Stock.
By Order of the Board of Directors
Robert A. Nuernberg
Secretary
March 12, 1996<PAGE>
<PAGE> 19
APPENDIX I
WICOR
VOTING AUTHORIZATION
[X] Please mark your
votes as this
WICOR
VOTING AUTHORIZATION
- ----------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees in Item 1.
- ----------------------------------------------------------------------------
1. Election of the following nominees as directors for three-year terms:
Jere D. McGaffey, Thomas F. Schrader and Stuart W. Tisdale
FOR all nominees WITHHOLD
(except as marked AUTHORITY
to the contrary) to vote for all nominees
/ / / /
(Instruction: To withhold authority to vote
for any nominee write the name below)
-------------------------------------------
. . . . . . . . . . . . . . . . . . . . . . Please check this box if
. . you plan to attend the
. . annual meeting
. . / /
. .
. . This Voting Authoriza-
. . tion is Solicited by the
. . Board of Directors
. . . . . . . . . . . . . . . . . . . . . .
Signature(s) _________________________________ Date ________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
March 12, 1996
Dear WICOR Shareholder:
Enclosed is a notice of WICOR's annual shareholders meeting, coming up
April 25, 1996, in Milwaukee. Also enclosed is a proxy statement and voting
authorization card. You have already received a copy of the 1995 WICOR
annual report.
It's important that you fill out and return the authorization card as soon
as possible. It entitles you, as an owner of WICOR common stock through our
company's savings plan, to vote your interest at the annual meeting.
Filing out the card directs the Trustee of your shares held
in the savings plan as of February 20, 1996, to vote them on your behalf.
You must return your marked and signed card in order to have the Trustee
vote your shares.
The WICOR Board of Directors urges you to exercise this right to vote. To
make sure your vote counts, and to prevent the expense of WICOR sending
further reminder notices, please mark and sign your voting authorization
card now and return it to the Trustee in the enclosed envelope.
Thank you,
Sincerely,
George E. Wardeberg
President and Chief Executive Officer<PAGE>
<PAGE> 20
YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE WICOR
SHAREHOLDERS ANNUAL MEETING, MARK YOUR VOTES ON THE ENCLOSED VOTING
AUTHORIZATION CARD, DATE IT, SIGN IT EXACTLY AS YOUR NAME APPEARS AND RETURN
IT TODAY IN THE ENCLOSED ENVELOPE.
--- (BACKSIDE OF VOTER AUTHORIZATION FORM) ---
WICOR
VOTING AUTHORIZATION
The undersigned acknowledges receipt of the WICOR, Inc. Annual Report for
1995 and the proxy solicitation material relative to the Annual Meeting of
Shareholders of WICOR, Inc. to be held April 25, 1996. As to my interest in
the Common Stock of WICOR, Inc. held by Marshall and Ilsley Trust Company,
the Trustee under the Wisconsin Gas Company Non-Union Employees' Savings
Plan, Wisconsin Gas Company Local 6-18 Savings Plan, Wisconsin Gas Company
Local No. 1 Savings Plan and the Sta-Rite Industries' Incentive Savings
Plan, I hereby instruct the Trustee to vote as indicated on the reverse
side.
The shares represented by this authorization will be voted as directed by
the undersigned. If no direction is given when the duly executed
authorization is returned, the Trustee cannot vote such shares.
THIS VOTING AUTHORIZATION IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT
THE ANNUAL MEETING OF SHAREHOLDERS OF WICOR, INC., APRIL 25, 1996.
(continued on the reverse side)
<PAGE>
<PAGE> 21
APPENDIX II
/X/ Please mark your
votes as this
WICOR
PROXY
- ------------------------------------------------------------------------
The Board of Directors recommends a vote FOR all nominees in Item 1.
- ------------------------------------------------------------------------
1. Election of the following nominees as directors for three-year terms:
Jere D. McGaffey, Thomas F. Schrader and Stuart W. Tisdale
FOR all nominees WITHHOLD
(except as marked AUTHORITY
to the contrary) to vote for all nominees
/ / / /
(Instruction: To withhold authority to vote for
any nominee write the name below)
-----------------------------------------------
Please check this box
if you plan to attend
the annual meeting
[ ]
This Proxy is Solicited
by the Board of Directors
Signature(s) ____________________________________ Date __________________
NOTE: Please sign as name appears hereon. Joint owners should each sign.
When signing as attorney, executor, administrator, trustee or guardian,
please give full title as such.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
March 13, 1996
Dear WICOR Shareholder:
We're pleased to send you the enclosed 1995 annual report and proxy
materials. I hope you'll find the annual report interesting and
informative, and that you'll exercise your right to vote at the annual
meeting by returning your proxy card promptly.
I'd also like to invite you to attend WICOR's Annual Meeting of Shareholders
on Thursday, April 25, 1996. This year's meeting will be held at the
Italian Community Center, 631 East Chicago Street, Milwaukee, Wisconsin,
beginning at 2:00 p.m. (Central Time). A map with directions to the center
is on the reverse side of this letter. Free parking is available in a lot
on the south side of the building.
At the meeting, we will elect directors, discuss 1995 performance and talk
about the future. As an investor in WICOR, you have a right and a
responsibility to vote on issues affecting your company. Regardless of
whether you plan to attend the annual meeting, please mark the appropriate
boxes on the proxy form, and then date, sign and promptly return the form in
the enclosed, postage-paid envelope. If you sign and return the proxy form
without specifying your choices, your shares will be voted according to the
recommendations of your board of directors.
If you plan to attend the annual meeting, please check the appropriate box
on the proxy card. We welcome your comments and suggestions, and we will
provide time during the meeting for questions from shareholders. I hope to
see you on April 25.
Sincerely,
George E. Wardeberg
President and Chief Executive Officer<PAGE>
<PAGE> 22
WICOR
COMMON SHAREHOLDER PROXY
The undersigned hereby appoints George E. Wardeberg and Joseph P. Wenzler,
and each of them, as proxy with the power of substitution (to act by a
majority present or if only one acts then by that one) to vote for the
undersigned as indicated on the reverse side and in their discretion on such
other matters as may properly be considered at the Annual Meeting of
Shareholders of WICOR, Inc. to be held Thursday, April 25, 1996, at 2:00
P.M., at the Italian Community Center, 631 E. Chicago Street, Milwaukee,
Wisconsin, and at any adjournments thereof.
The shares represented by this proxy will be voted as directed by the
shareholder. If no direction is given when the duly executed proxy is
returned, such shares will be voted "FOR" all nominees in Item 1 and in the
discretion of the proxies on any other items of business as may properly
arise at the meeting.
Please mark, date and sign on the reverse side exactly as name appears and
return in the enclosed postage-paid envelope. If shares are held jointly,
each shareholder named should sign. If signing as attorney, administrator,
executor, trustee or guardian, please give full title as such. If a
corporation, please sign in full corporate name by duly authorized officer.
THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL
MEETING OF SHAREHOLDERS OF WICOR, INC., APRIL 25, 1996.
- - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - -
FOLD AND DETACH HERE
Map of downtown Milwaukee, Wisconsin, showing
location of annual meeting and the routes to
take from Chicago, Green Bay and Madison.
<PAGE>
