<PAGE>
<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1997
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
WICOR, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-1346701
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue,
Post Office Box 334,
Milwaukee, Wisconsin 53201
--------------------------------------- ----------
(Address of principal executive office) (Zip Code)
(414) 291-7026
----------------------------------------------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes /X/ No / /
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at April 24, 1997
- -------------------------- -----------------------------
Common Stock, $1 Par Value 18,414,309
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INTRODUCTION
WICOR, Inc. ("WICOR" or the "Company") is a diversified holding company with
two principal business groups: an energy group responsible for natural gas
distribution and related services, and a manufacturing group responsible for
the manufacture 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 its subsidiary, Wisconsin Gas Company
("Wisconsin Gas"), the oldest and largest natural gas distribution utility in
Wisconsin. Through several nonutility subsidiaries, the Company also engages
in the manufacture and sale of pumps and processing equipment. The Company's
manufactured products primarily have water system, pool and spa, agricultural,
RV/marine and beverage/food service applications. The Company markets its
manufactured products in 100 countries. The Company is incorporated under
the laws of the State of Wisconsin and is exempt from registration as a
holding company under the Public Utility Holding Company Act of 1935, as
amended.
CONTENTS
PAGE
------
PART I.
Financial Information 1
Management's Discussion and Analysis of
Interim Financial Statements 2-4
Consolidated Financial Statements of WICOR, Inc. (Unaudited):
Consolidated Statements of Operation for the Three
Months Ended March 31, 1997 and 1996 5
Consolidated Balance Sheets as of
March 31, 1997 and December 31, 1996 6-7
Consolidated Statements of Cash Flows for the Three
Months Ended March 31, 1997 and 1996 8
Notes to Consolidated Financial Statements 9
PART II.
Other Information 10
Signatures 11
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Part I - Financial Information
Financial Statements
--------------------
The consolidated statements included herein have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included in
financial statements prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules and
regulations, although management believes that the disclosures are adequate to
make the information presented not misleading. These condensed financial
statements should be read in conjunction with the audited financial statements
and the notes thereto included in the WICOR, Inc. Annual Report on Form 10-K
for the year ended December 31, 1996.
In the opinion of management, the information furnished reflects all
adjustments, which in all circumstances were normal and recurring, necessary
for a fair presentation of the results of operations for the interim periods.
Because of seasonal factors, the results of operations for the interim periods
presented are not necessarily indicative of the results to be expected for the
full calendar year.
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<PAGE> 4
Management's Discussion and Analysis
of Interim Financial Statements of
WICOR, Inc.
Results of Operations
- ---------------------
Consolidated net income for the first quarter of 1997 decreased by $3.0
million, or 10%, to $27.9 million compared to the same period of the prior
year. The decrease is attributable to the energy group earnings which
declined by $2.8 million, or 11%.
The following factors had a significant effect on the results of operations
during the three-month period ended March 31, 1997.
Energy
- ------
Net income decreased to $23.8 million from $26.6 million, or 11%, for the
first quarter of 1997 compared with the first quarter of 1996. The decline is
attributable to lower gas margins which were partially offset by decreased
depreciation expense. The lower gas margins resulted from decreased firm
sales volumes and a $3.0 million voluntary annual rate reduction effective
November 1, 1996.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas sold, is a better comparative performance indicator
than revenues because the mix of volumes between sales and transportation
service affects revenues but not margin. In addition, changes in the cost of
gas sold are flowed through to revenue under a gas adjustment clause with no
resulting effect on margin. The following tables set forth margin and volume
data for the Energy Group and utility, respectively, for each of the quarters
ended March 31.
Three
Months Ended
March 31,
------------- %
(Millions of Dollars) 1997 1996 Change
- -------------------------- ------ ------ ------
Energy Revenues $237.0 $219.5 8
Cost of Gas Sold 164.4 137.3 20
------ ------
Sales Margin 72.6 82.2 (12)
Gas Transportation Margin 6.7 3.4 97
------ ------
Gross Margin 79.3 85.6 (7)
------ ------
Operation and Maintenance 27.7 27.8 -
Depreciation and Amortization 7.6 8.3 (8)
Interest and Other 3.1 3.3 (6)
Taxes, Other Than Income Taxes 2.6 2.6 -
------ ------
Income Before Income Taxes 38.3 43.6 (12)
Income Tax Expense 14.5 17.0 (15)
------ ------
Net Income $ 23.8 $ 26.6 (11)
====== ======
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<PAGE> 5
Three
Months Ended
March 31,
-------------- %
(Millions of Therms) 1997 1996 Change
- -------------------- ------ ------ ------
Sales Volumes
Firm 361.5 407.5 (11)
Interruptible 34.1 77.2 (56)
Transportation Volumes 122.8 64.4 91
------ ------
Total Throughput 518.4 549.1 (6)
====== ======
Degree Days (Normal:
1st Qtr. = 3,438) 3,315 3,630 (9)
====== ======
The decrease in firm sales volumes for the first quarter of 1997 as compared
with the 1996 first quarter was caused by warmer weather. The increase in
transportation volumes was due mainly to more customers purchasing gas from
sources other than Wisconsin Gas and transporting the volumes over the
Wisconsin Gas distribution system. The movement to transportation from gas
sales had no impact on margin. The weather was 4% warmer than normal during
the first three months of 1997 and 9% warmer than the same period in 1996.
Operating and maintenance expenses remained relatively flat during the
three-month period ended March 31, 1997, compared with the same period of
1996.
Depreciation expense for the three months ended March 31, 1997 decreased by
$0.7 million, or 8%, compared with the same period of last year. The 1997
decrease was due to the one-time impact of the application of new
depreciation rates permitted by the Public Service Commission of Wisconsin
in 1996.
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<PAGE> 6
Manufacturing
- -------------
The manufacturing group posted earnings of $4.1 million for the first
quarter of 1997 compared to $4.3 million in the first quarter of 1996
Financial data regarding the Manufacturing Group are set forth in the table
below.
Three
Months Ended
March 31,
----------------- %
1997 1996 Change
-------- -------- ------
(Millions of Dollars)
- ---------------------
Net Sales $ 105.3 $ 105.8 -
Cost of Goods Sold 77.0 75.8 2
-------- --------
Gross Profit 28.3 30.0 (6)
Operating Expenses 20.9 22.0 (5)
-------- --------
Operating Income 7.4 8.0 (8)
Interest and Other 1.1 1.3 (15)
-------- --------
Income Before Income Taxes 6.3 6.7 (6)
Income Tax Expense 2.2 2.4 (8)
-------- --------
Net Income $ 4.1 $ 4.3 (5)
======== ========
Net sales for the first quarter of 1997 remained flat compared to the same
period in 1996, reflecting comparable overall sales activity in both
domestic and international markets. While sales were level in total,
increased sales in water systems, food service, fire fighting and
RV/marine were offset by reductions in pool/spa and agricultural markets.
Fluctuations in quarterly sales by market were generally the result of
economic, weather or timing related shifts in customer demand, and are not
considered significant or unusual.
Gross profit margins were 26.9% for the 1997 first quarter as compared to
28.4% for the first quarter of 1996. Quarterly operating margins were
curbed by several factors, including lower margins related to product mix
and manufacturing variances principally related to facility consolidation.
Manufacturing operating expenses for the quarter declined by 5% compared
to the same period in 1996. The decrease is due to cost reduction
programs implemented in 1996, lower selling expenses and currency exchange
gains
<PAGE>
<PAGE> 7
Consolidated Non-Operating Income and Income Taxes
- --------------------------------------------------
Interest expense decreased $0.1, or 3%, to $4.4 million for the three-
months ended March 31, 1997, compared to the same period of 1996, due
primarily to lower interest rates.
Income tax expense was $2.7 million lower for the first three months of
1997, compared to the same period last year, reflecting decreased pre-tax
income.
Liquidity and Capital Resources
- -------------------------------
Cash flow from operations for the three months ended March 31, 1997
decreased by $37.7 million, or 51%, from the comparable period in 1996.
Due to the seasonal nature of the energy business, accrued revenues,
accounts receivable and accounts payable levels are higher in the heating
season as compared with the summer months. The cash flow decline is due
primarily to increased gas prices which have not yet been collected from
customers.
Capital expenditures for the three months ended March 31, 1997 of $8.9
million remained flat compared to the same period in 1996.
During the third quarter of 1997, the Company plans to refinance the
remaining principal balance (approximately $27 million) of the credit
facility entered into in connection with the July 1995 acquisition of
Hypro Corporation. In addition, the Company has initiated discussions
with its commercial banks to extend the term of its existing revolving
credit facilities.
The Company anticipates additional short-term borrowing during the third
and fourth quarters of 1997 to finance working capital, primarily gas in
storage and the financing of accounts receivable during the heating
season.
<PAGE>
<PAGE> 8
WICOR, INC.
Consolidated Statements of Operation (Unaudited)
(Thousands of dollars, Except Per Share Data)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
-------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operating Revenues:
Energy $ 243,731 $ 222,954
Manufacturing 105,334 105,793
----------- -----------
349,065 328,747
----------- -----------
Operating Costs and Expenses:
Cost of gas sold 164,421 137,325
Manufacturing cost of sales 77,044 75,838
Operations and maintenance 48,223 49,467
Depreciation and amortization 7,939 8,667
Taxes, other than income taxes 2,559 2,507
----------- -----------
300,186 273,804
----------- -----------
Operating Income 48,879 54,943
----------- -----------
Interest Expense (4,438) (4,583)
Other Income and (Expenses) 172 30
----------- -----------
Income Before Income Taxes 44,613 50,390
Income Tax Provision 16,705 19,441
----------- -----------
Net Income $ 27,908 $ 30,949
=========== ===========
Per Share of Common Stock:
Net Income $ 1.52 $ 1.69
Cash Dividends $ 0.42 $ 0.41
Average Common Shares
Outstanding (Thousands) 18,413 18,298
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 9
WICOR, INC.
Consolidated Balance Sheets
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
----------- ------------
(Thousands of Dollars)
<S> <C> <C>
Assets
- ------
Current Assets:
Cash and cash equivalents $ 11,148 $ 18,784
Accounts receivable, less allowance
for doubtful accounts of $18,743
and $14,429, respectively 208,688 150,076
Accrued utility revenues 31,750 59,794
Manufacturing inventories 73,683 72,316
Gas in storage, at weighted average cost 7,959 33,463
Deferred income taxes 21,705 21,706
Prepayments and other 15,405 16,566
----------- ------------
370,338 372,705
Property, Plant and Equipment (less accum- ----------- ------------
ulated depreciation of $469,987
and $477,577, respectively) 438,293 441,408
----------- ------------
Deferred Charges and Other:
Regulatory assets 100,413 101,808
Goodwill 60,554 61,366
Prepaid pension costs 38,193 36,869
Systems development costs 21,645 23,052
Other 20,499 20,444
----------- ------------
241,304 243,539
----------- ------------
$1,049,935 $ 1,057,652
=========== ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 10
WICOR, INC.
Consolidated Balance Sheets
(continued)
<TABLE>
<CAPTION>
March 31,
1997 December 31,
(Unaudited) 1996
------------ ------------
(Thousands of Dollars)
<S> <C> <C>
Liabilities and Capitalization
- ------------------------------
Current Liabilities:
Accounts payable $ 74,328 $ 98,951
Refundable gas costs 52,046 31,545
Short-term borrowings 86,183 114,810
Current portion of long-term debt 3,582 4,061
Accrued taxes 18,422 1,260
Accrued payroll and benefits 14,718 17,246
Other 17,610 21,464
------------ ------------
266,889 289,337
------------ ------------
Deferred Credits and Other:
Postretirement benefit obligation 66,434 66,391
Regulatory liabilities 59,675 61,749
Deferred income taxes 39,623 39,668
Accrued environmental remediation costs 36,138 36,222
Unamortized investment tax credit 6,899 7,265
Other 16,875 19,399
------------ ------------
225,644 230,694
------------ ------------
Capitalization:
Long-term debt 169,780 169,169
Common stock 18,414 18,407
Other paid-in capital 225,304 224,041
Retained earnings 149,951 129,777
Cumulative currency translation adjustment (793) 1,349
Unearned compensation - ESOP
and restricted stock (5,254) (5,122)
------------ ------------
557,402 537,621
------------ ------------
$ 1,049,935 $ 1,057,652
============ ============
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 11
WICOR, INC.
Consolidated Statement of Cash Flows (Unaudited)
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
--------------------------
1997 1996
----------- -----------
<S> <C> <C>
Operations:
Net income $ 27,908 $ 30,949
Adjustments to reconcile net income to
net cash flows:
Depreciation and amortization 13,324 13,481
Deferred income taxes (44) 167
Change in:
Receivables (30,568) (54,617)
Manufacturing inventories (1,367) (3,688)
Gas in storage 25,504 20,362
Other current assets (315) (432)
Accounts payable (24,623) 14,325
Refundable gas costs 20,501 41,626
Accrued taxes 18,638 17,407
Accrued payroll and benefits (2,528) (801)
Other current liabilities (3,854) (1,373)
Other non-current assets
and liabilities, net (6,514) (3,689)
----------- -----------
36,062 73,717
----------- -----------
Investment Activities:
Capital expenditures (8,976) (8,911)
Other 68 18
----------- -----------
(8,908) (8,893)
----------- -----------
Financing Activities:
Change in short-term borrowings (25,627) (46,880)
Reduction in long-term debt (2,700) (4,042)
Issuance of long-term debt - 366
Issuance of common stock 1,270 2,052
Dividends paid on common stock, less
amounts reinvested (7,733) (7,502)
----------- -----------
(34,790) (56,006)
----------- -----------
Change in Cash and Cash Equivalents (7,636) 8,818
Cash and Cash Equivalents at
Beginning of Period 18,784 20,380
----------- -----------
Cash and Cash Equivalents at End of Period $ 11,148 $ 29,198
=========== ===========
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
<PAGE> 12
Notes to Consolidated Financial Statements (Unaudited):
1) At March 31, 1997 WICOR had borrowings of $19.1 million and availability
of $217.8 million under unsecured lines of credit with several banks.
The Company reclassified $6.0 million of commercial paper as long-term
debt as of March 31, 1997.
A total of $36.7 million of commercial paper, classified as short-term
debt, was outstanding as of March 31, 1997 at a weighted average
interest rate of 6.2%.
2) 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 the Three Months
Ended March 31,
----------------------
1997 1996
---------- ----------
(Thousands of Dollars)
Income taxes paid $ 1,062 $ 5,204
Interest paid $ 3,920 $ 3,555
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<PAGE> 13
Part II - Other Information
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
27 Financial data schedule (EDGAR version only).
(b) Reports on Form 8-K - There were no reports on Form 8-K filed by
the Company during the first quarter of 1997.
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<PAGE> 14
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WICOR, INC.
Dated: April 29, 1997 By: /s/ Joseph P. Wenzler
----------------------
Joseph P. Wenzler
Vice President, Treasurer
and Chief Financial Office
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<PAGE> 15
WICOR, Inc.
Exhibit Index - FORM 10-Q
Exhibit No. Exhibit
- ---------- -----------------------------------------------
27 Financial data schedule (EDGAR version only
<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the WICOR,
Inc. FORM 10-Q for the three months ended March 31, 1997 and is qualified in its
entirety by reference to such financial statements and the related footnotes.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 375,280
<OTHER-PROPERTY-AND-INVEST> 63,013
<TOTAL-CURRENT-ASSETS> 370,338
<TOTAL-DEFERRED-CHARGES> 241,304
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,049,935
<COMMON> 18,414
<CAPITAL-SURPLUS-PAID-IN> 225,304
<RETAINED-EARNINGS> 143,904
<TOTAL-COMMON-STOCKHOLDERS-EQ> 387,622
0
0
<LONG-TERM-DEBT-NET> 169,780
<SHORT-TERM-NOTES> 27,000
<LONG-TERM-NOTES-PAYABLE> 150,000
<COMMERCIAL-PAPER-OBLIGATIONS> 36,658
<LONG-TERM-DEBT-CURRENT-PORT> 3,582
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 425,293
<TOT-CAPITALIZATION-AND-LIAB> 1,049,935
<GROSS-OPERATING-REVENUE> 349,065
<INCOME-TAX-EXPENSE> 16,705
<OTHER-OPERATING-EXPENSES> 300,186
<TOTAL-OPERATING-EXPENSES> 316,891
<OPERATING-INCOME-LOSS> 32,174
<OTHER-INCOME-NET> 172
<INCOME-BEFORE-INTEREST-EXPEN> 32,346
<TOTAL-INTEREST-EXPENSE> 4,438
<NET-INCOME> 27,908
0
<EARNINGS-AVAILABLE-FOR-COMM> 27,908
<COMMON-STOCK-DIVIDENDS> 7,733
<TOTAL-INTEREST-ON-BONDS> 270
<CASH-FLOW-OPERATIONS> 36,062
<EPS-PRIMARY> 1.52
<EPS-DILUTED> 1.52
</TABLE>
