UNITED STATES
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 (Fee Required)
For the fiscal year ended December 31, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (No Fee Required)
For the transition period from __________ to __________
Commission file number 1-9894
WPL HOLDINGS, INC.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1380265
(State or other jurisdiction of (I.R.S. Employer Identification Number)
incorporation or organization)
222 West Washington Avenue, Madison, Wisconsin 53703
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (608) 252-3311
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
Common Stock (Par Value $.01 Per Share) New York Stock Exchange
Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of class)
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 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.[ ]
The aggregate market value of the voting stock held by
nonaffiliates of the registrant: $842,426,972 based upon the closing price
as of January 31, 1995 of the registrant's Common Stock, $.01 par value,
on the New York Stock Exchange as reported in the Wall Street Journal.
Indicate the number of shares outstanding of each of the
registrant's classes of common stock, as of the latest practicable date.
Class Outstanding at January 31, 1995
Common Stock, $.01 par value 30,773,588 shares
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the Company's 1995 Proxy Statement relating to its
1995 Annual Meeting of Shareowners (to be filed with the Commission under
Regulation 14A within 120 days after the end of the registrant's fiscal
year) are incorporated by reference into Part III hereof.
<PAGE>
WPL HOLDINGS, INC.
FORM 10-K
December 31, 1994
TABLE OF CONTENTS
Part I. Business............................................ 2
Properties.......................................... 16
Legal Proceedings................................... 18
Submission of Matters to a Vote of Security Holders. 19
Executive Officers.................................. 19
Part II. Financial Information............................... 20
Part III. Directors and Executive Officers
Information....................................... 52
Part IV. Exhibits............................................ 53
Signatures.................................................... 56
Report of Independent Public Accountants on Schedules......... 57
<PAGE>
PART I
ITEM 1. BUSINESS
WPL Holdings, Inc. (referred to herein as the "Company") was
incorporated under the laws of the State of Wisconsin on April 22, 1981
and operates as a holding company with both utility and nonregulated
businesses. It is the parent company of a public utility, Wisconsin Power
and Light Company ("WPL") and its related subsidiaries, and of Heartland
Development Corporation ("HDC"), the parent corporation for the Company's
nonregulated businesses. The Company has no employees who are not also
employees of WPL and or HDC. See Item 8 - "Financial Statements and
Supplementary Data, Notes to Consolidated Financial Statements", Note 12,
for financial information related to the Company's business segments.
WPL
WPL, incorporated in Wisconsin on February 21, 1917 as the
Eastern Wisconsin Electric Company, is a public utility predominately
engaged in the transmission and distribution of electric energy and the
generation and bulk purchase of electric energy for sale. WPL also
transports, distributes and sells natural gas purchased from gas
suppliers. Nearly all of WPL's customers are located in south and central
Wisconsin. WPL operates in municipalities pursuant to permits of
indefinite duration which are regulated by Wisconsin law. WPL does not
derive a material portion of its revenues from any one customer.
WPL owns all of the outstanding capital stock of South Beloit
Water, Gas and Electric Company ("South Beloit"), a public utility
supplying electric, gas and water service, principally in Winnebago
County, Illinois, which was incorporated on July 23, 1908.
WPL also owns varying interests in several other subsidiaries
and investments which are not material to WPL's operations.
Regulation
WPL is subject to regulation by the Public Service Commission
of Wisconsin ("PSCW") as to retail utility rates and service, accounts,
issuance and use of proceeds of securities, certain additions and
extensions to facilities, and in other respects. South Beloit is subject
to regulation by the Illinois Commerce Commission ("ICC") for similar
items. The Federal Energy Regulatory Commission ("FERC") has jurisdiction
under the Federal Power Act over certain of the electric utility
facilities and operations, wholesale rates and accounting practices of
WPL and in certain other respects. Certain of WPL's natural gas
facilities and operations are subject to the jurisdiction of the FERC
under the Natural Gas Act. The Company is presently exempt from all
provisions of the Public Utility Holding Company Act of 1935, except
provisions relating to the acquisition of securities of other public
utility companies.
The PSCW has recently opened a formal docket initiating an
inquiry into the future structure of the electric utility industry in
Wisconsin. The goals of Wisconsin utility regulation and the principles
to be used in choosing among alternative proposals have been identified.
WPL has submitted its preferred structure which, in summary form, calls
for open access to transmission and distribution systems and a competitive
power generation marketplace. It is not possible at this time to predict
the outcome of these proceedings.
With respect to environmental matters impacting WPL and its
subsidiaries, the United States Environmental Protection Agency administers
certain federal statutes with administrative responsibility with respect
to others being delegated to the Wisconsin Department of Natural Resources
("DNR"). In addition, the DNR has jurisdiction over air and water quality
standards associated with fossil fuel fired electric generation and the
level and flow of water, safety and other matters pertaining to
hydroelectric generation.
WPL is subject to the jurisdiction of the Nuclear Regulatory
Commission ("NRC") with respect to the Kewaunee Nuclear Power Plant
("Kewaunee") and to the jurisdiction of the United States Department of
Energy ("DOE") with respect to the disposal of nuclear fuel and other
radioactive wastes from Kewaunee.
Employees
At year-end 1994, WPL employed 2,391 persons, of whom 1,924 were
considered electric utility employees, 334 were considered gas utility
employees and 133 were considered other utility employees. WPL has a
three-year contract with members of the International Brotherhood of
Electrical Workers, Local 965, that is in effect until June 1, 1996. The
contract covers 1,647 of WPL's employees.
ELECTRIC OPERATIONS:
General
WPL provides electricity in a service territory of approximately
16,000 square miles in 35 counties in southern and central Wisconsin and
four counties in northern Illinois. As of December 31, 1994, WPL provided
retail electric service to approximately 371,000 customers in 663 cities,
villages and towns, and wholesale service to 27 municipal utilities, one
privately owned utility, three rural electric cooperatives and to the
Wisconsin Public Power, Inc. system, which provides retail service to nine
communities.
WPL owns 20,969 miles of electric transmission and distribution
lines and 362 substations located adjacent to the communities served.
WPL's electric sales are seasonal to some extent with the yearly
peak normally occurring in the summer months. WPL also experiences a
smaller winter peak in December or January.
Fuel
In 1994, approximately 80 percent of WPL's net kilowatthour
generation of electricity was fueled by coal and 17 percent by nuclear
fuel (provided by WPL's 41 percent ownership interest in Kewaunee). The
remaining electricity generated was produced by hydroelectric, oil-fired
and natural gas generation.
Coal
WPL anticipates that its average fuel costs will likely increase
in the future, due to cost escalation provisions in existing coal and
transportation contracts.
The estimated coal requirements of WPL's generating units
(including jointly-owned facilities) for the years 1995 through 2014 total
about 167 million tons. Present coal supply contracts and transportation
contracts (excluding extension options) cover approximately 14 percent and
21 percent, respectively, of this estimated requirement. WPL will seek
renewals of existing contracts or additional sources of supply and
negotiate new or additional transportation contracts to satisfy these
requirements and to comply with environmental regulations.
Nuclear
Kewaunee is jointly-owned by WPL (41%), Wisconsin Public Service
Corporation (41.2%) and Madison Gas & Electric Company (17.8%). Wisconsin
Public Service Corporation (WPSC) is the operating partner. The plant
began commercial operation in 1974.
WPSC, the plant operator, is a member of the INPO, an
organization of nuclear utilities which promotes excellence in all aspects
of nuclear plant operations. INPO manages the accreditation process for
industry training programs, which includes periodic accreditation of those
training programs by an independent organization, the NNAB. All ten
accredited training programs at Kewaunee are currently in good standing
with the NNAB.
The supply of nuclear fuel for the Kewaunee plant involves the
mining and milling of uranium ore to uranium concentrates, the conversion
of uranium concentrates to uranium hexafluoride, enrichment of the uranium
hexafluoride and fabrication of the enriched uranium into usable fuel
assemblies. After a region (approximately one-third of the nuclear fuel
assemblies in the reactor) of spent fuel is removed from the reactor, it
is placed in temporary storage for cooling in a spent fuel pool at the
plant site. Permanent storage is addressed below. Presently, there are
no operating facilities in the United States reprocessing commercial
nuclear fuel. A discussion of the nuclear fuel supply for Kewaunee, which
requires approximately 250,000 pounds of uranium concentrates per year
follows:
(a) Requirements for uranium are met through spot market purchases
of uranium. In general, a four-year supply of uranium is
maintained.
(b) Uranium hexafluoride, from inventory and from spot market
purchases, was used to satisfy converted material requirements
in 1994. Conversion services relating to uranium hexafluoride
will be purchased on the spot market in the future.
(c) In 1994, enriched uranium was procured from COGEMA, Inc.
pursuant to a contract last amended in 1993. Enrichment
services were purchased from the Department of Energy (DOE),
under the terms of the utility services contract. This
contract is in effect for the life of Kewaunee. The
partnership is committed to take 70 percent of its annual
requirements in 1995, and in alternate years thereafter, from
the DOE.
(d) Fuel fabrication requirements through June 15, 1995 are
covered by contract. This contract contains an option to
allow extension of the contract through 1998. WPSC is
negotiating a contract for fuel fabrication extending through
2001.
(e) Beyond the stated periods for Kewaunee, additional contracts
for uranium concentrates, conversion to uranium hexafluoride,
fabrication and spent fuel storage will have to be procured.
The prices for the foregoing are expected to increase.
The National Energy Policy Act of 1992 provides that both the
Federal government and the nuclear utilities fund the decontamination and
decommissioning of the three federal gaseous diffusion plants in the
United States. This will require the owners of Kewaunee to pay
approximately $15 million in current dollars over a period of 15 years.
WPL's share amounts to an annual payment of approximately $410,000.
The steam generator tubes at the Kewaunee plant are susceptible to
corrosion characteristics, a condition that has been experienced
throughout the nuclear industry. Annual inspections are performed to
identify degraded tubes. Degraded tubes are either repaired by sleeving
or are removed from service by plugging. The steam generators were
designed with approximately 15 percent heat transfer margin, meaning that
full power should be sustainable with the equivalent of 15 percent of the
steam generator tubes plugged. Tube plugging and the build-up of deposits
on the tubes affect the heat-transfer capability of the steam generators
to the point where eventually full power operation is not possible and
there is a gradual decrease in the capacity of the plant. As a result of
this process, Kewaunee's capacity could be reduced by as much as 20% by
the year 2013 when the current operating license expires. Currently, the
equivalent of approximately 12 percent of the tubes in the steam generator
are plugged. WPL and the joint-owners recently completed studies
evaluating the economics of replacing the two steam generators at
Kewaunee. The studies resulted in the conclusion that the most prudent
course of action is to continue operation of the existing steam
generators. WPL and the other joint-owners continue to evaluate
appropriate strategies, including replacement, as well as continued
operation of the steam generator without replacement. WPL and the joint-
owners also continue to fund the development of welded repair technology
for steam generator tubes. The plant is expected to be operated until at
least 2013. WPL and the joint-owners are also continuing to evaluate and
implement initiatives to improve the performance of Kewaunee which already
performs at above average levels for the industry. These initiatives
include conversion from a 12-month to an 18-month fuel cycle and numerous
other cost reduction measures. These initiatives have resulted in
reductions in Kewaunee operating and maintenance costs since 1991.
Physical decommissioning is expected to occur during the period 2014
to 2021 with additional expenditures being incurred during the period 2022
to 2050 related to the storage of spent nuclear fuel at the site.
Wisconsin utilities operating nuclear generating plants are required by
the PSCW to establish external trust funds to provide for the
decommissioning of such plants. The market value of the investments in
the funds established by WPL at December 31, 1994 totaled $51.8 million.
Additionally, in July 1994, the PSCW issued a generic order covering
utilities that have nuclear generation. This order standardizes the
escalation assumptions to be used in determining nuclear decommissioning
liabilities.
WPL's share of the decommissioning costs is estimated to be $159
million (in 1994 dollars, assuming the plant is operating through 2013)
based on a 1992 study, using the immediate dismantlement method of
decommissioning. The undiscounted amount of decommissioning costs
estimated to be expended between the years 2014 and 2050 is $1,016
million. After-tax earnings on the tax-qualified and nontax-qualified
decommissioning funds are assumed to be 6.1% and 5.1%, respectively. The
future escalation rate is assumed to be 6.5%.
Pursuant to the Nuclear Waste Policy Act of 1982, the DOE has
entered into a contract with WPL to accept, transport and dispose of spent
nuclear fuel beginning no later than January 31, 1998. It is likely that
the DOE will delay the acceptance of spent nuclear fuel beyond 1998. A
fee to offset the costs of the DOE's disposal for all spent fuel used
since April 7, 1983 has been assessed by the DOE at one mill per net
kilowatthour of electricity generated and sold by the Kewaunee nuclear
power plant. An additional one-time fee was paid for the disposal of
spent nuclear fuel used to generate electricity prior to April 7, 1983.
Spent fuel is currently stored at Kewaunee. The existing capacity
of the spent fuel storage facility will enable storage of the projected
quantities of spent fuel through April 2001. WPL is currently evaluating
options for the storage of additional quantities beyond 2001. Several
technologies are available. An investment of approximately $2.5 million
in the early 2000's could provide additional storage sufficient to meet
spent fuel storage needs until the expiration of the current operating
license.
The Low-Level Radioactive Waste Policy Act of 1980 as amended in
1985 provides that states may enter into compacts to provide for regional
low-level waste disposal facilities. Wisconsin is a member of the Midwest
Interstate Low-Level Radioactive Waste Compact. The state of Ohio has
been selected as the host state for the Midwest Compact and is proceeding
with the preliminary phases of site selection. In June of 1994, the
Branwell, South Carolina disposal facility, which had been accepting
Kewaunee low level radioactive waste materials, discontinued taking waste
materials from outside its region. WPL expects to have sufficient storage
space of its own to satisfy low level radioactive waste disposal needs
until the Ohio facility accepts low level radioactive waste materials.
Recovery of Electric Fuel Costs
In 1994 WPL did not automatically pass changes in electric fuel costs
through to its Wisconsin retail electric customers. Instead, rates were
based on estimated per unit fuel costs established during rate proceedings
and were not subject to change by fuel cost fluctuations unless actual
costs were outside specified limits. If actual fuel costs had varied from
the estimated costs by more than +10 percent in a month or by more than
+3 percent for the test year to date, rates could have been adjusted,
based on the results of a special fuel cost hearing. During 1994, fuel
costs remained within the aforementioned parameters. See Note 1F in the
Notes to Consolidated Financial Statements included as part of Item 8
hereto.
WPL's wholesale rates and South Beloit's retail rates contain fuel
adjustment clauses pursuant to which rates are adjusted monthly to reflect
changes in the costs of fuel.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED ELECTRIC STATISTICS
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Area served (end of period):
Population--retail (estimated)(a).......... 822,000 818,000 807,000 799,000 777,000
Cities, villages and towns served--retail.. 607 609 611 611 604
Customers served (end of period):
Residential and farm....................... 322,924 316,870 310,702 304,825 302,942
Industrial................................. 776 714 727 679 635
Commercial................................. 43,793 42,884 42,287 41,190 40,358
Wholesale.................................. 31 32 30 31 31
Class A.................................... 11 7 9 10 10
Other...................................... 1,256 1,236 950 1,173 1,147
--------- --------- --------- --------- ---------
Total.................................... 368,791 361,743 354,705 347,908 345,123
========= ========= ========= ========= =========
Sales--kilowatt-hours (in thousands):
Residential and farm....................... 2,776,895 2,751,363 2,614,439 2,729,917 2,566,093
Industrial................................. 3,764,953 3,540,082 3,377,132 3,185,101 3,173,932
Commercial................................. 1,688,349 1,629,911 1,551,823 1,558,297 1,492,255
Wholesale.................................. 2,207,098 2,105,905 1,994,722 1,979,832 1,885,424
Class A.................................... 367,023 282,226 213,697 461,357 352,129
Other...................................... 54,217 51,073 55,230 54,376 55,101
--------- --------- --------- --------- ---------
Total.................................... 10,858,535 10,360,560 9,807,043 9,968,880 9,524,934
========= ========= ========= ========= =========
Electric operating revenues (in thousands):
Residential and farm....................... 194,242 184,176 171,887 179,751 170,875
Industrial................................. 140,487 132,903 128,467 124,212 124,972
Commercial................................. 101,382 95,977 91,707 92,628 89,618
Wholesale.................................. 76,056 69,757 67,326 68,154 65,983
Class A.................................... 10,344 9,198 10,159 14,677 9,784
Other...................................... 9,236 11,176 8,189 9,130 9,587
--------- --------- --------- --------- ---------
Total.................................... 531,747 503,187 477,735 488,552 470,819
========= ========= ========= ========= =========
Percent of generation by fuel type:
Coal....................................... 80.4% 80.3% 79.8% 81.1% 79.6%
Nuclear.................................... 16.8% 16.5% 17.4% 15.7% 17.6%
Hydroelectric.............................. 2.4% 2.9% 2.6% 2.6% 2.5%
Natural gas................................ 0.3% 0.2% 0.1% 0.5% 0.2%
Oil........................................ 0.1% 0.1% 0.1% 0.1% 0.1%
--------- --------- --------- --------- ---------
Total.................................... 100.0% 100.0% 100.0% 100.0% 100.0%
========= ========= ========= ========= =========
System capacity--at time of system peak:
(kWh's)
Company plants (including jointly owned)... 2,193,000 2,019,000 1,934,000 1,932,000 1,936,000
Firm purchased (sold) power................ 40,000 83,000 110,000 70,000 (55,000)
--------- --------- --------- --------- ---------
Total.................................... 2,233,000 2,102,000 2,044,000 2,002,000 1,881,000
System peak demand......................... 2,002,000 1,971,000 1,971,000 1,863,000 1,798,000
--------- --------- --------- --------- ---------
Reserve margin at time of peak............. 231,000 131,000 73,000 139,000 83,000
========= ========= ========= ========= =========
Fuel cost per kilowatt-hour (cents).......... 1.410 1.349 1.365 1.392 1.419
Cost per million BTU (all fuels) (cents)..... 124.76 128.69 130.80 132.70 134.86
BTU per kilowatthour generated (heat rate)... 10,451 10,483 10,438 10,493 10,519
Average annual electric bill per
residential and farm customer.............. $607 $587 $558 $594 $573
Average annual kilowatt-hour use per
residential and farm customer.............. 8,662 8,772 8,492 9,015 8,603
<FN>
(a) The estimated population for towns served jointly with other electric utilities has been
based upon a ratio of 2.5 population per retail electric customer.
</TABLE>
GAS OPERATIONS:
General
As of December 31, 1994, WPL provided retail natural gas service
to approximately 141,000 customers in 239 cities, villages and towns in
22 counties in southern and central Wisconsin and one county in northern
Illinois.
WPL's gas sales follow a seasonal pattern. There is an annual
base load of gas used for heating, cooking, water heating and other
purposes, with a large peak occurring during the heating season.
In 1994, WPL continued to purchase significant volumes of lower
cost gas directly from producers and marketers and transported those
volumes over its two major pipeline supplier's systems. This replaced
higher cost gas historically purchased directly from the major pipeline
systems.
Gas Supplies
During 1993, both of the interstate pipelines which serve WPL,
ANR Pipeline and Northern Natural Pipeline, completed their transition to
providing unbundled services as mandated by the FERC in its Order 636. As
a result, WPL now contracts with these two parties for various unbundled
services such as firm and interruptible transportation, firm and
interruptible storage service and "no-notice" service. WPL and its gas
customers have benefited from enhanced access to competitively priced gas
supplies, and from more flexible transportation services. As part of this
restructuring, pipelines have sought and received authorization to recover
from their customers certain transition costs associated with
restructuring. WPL is passing these costs along to its retail gas
customers pursuant to provisions of its retail gas tariffs.
The gas industry, in general, was put to a severe test during
the first quarter of 1994 in the wake of the coldest weather on record.
On January 18, 1994, the temperature averaged -17F in Madison, Wisconsin
and did not rise above -7F. WPL set a record peak day load of 251,194
MMBTU. Overall throughput for January was 23% above forecast. Through
effective use of transportation, supply, and storage contracts and by
invoking tariff language allowing interruption and constraint of gas
supplies to WPL's large industrial and commercial customers, WPL was able
to maintain gas flows within the parameters imposed by its pipeline
contracts. By doing so, WPL avoided substantial penalty exposure from the
pipeline companies for unauthorized use of gas. WPL's large industrial
and commercial customers served under interruptible rates moved to
alternate fuel supplies during the periods of interruption and constraint.
These customers pay a discounted rate year round in exchange for WPL's
right to interrupt service to their facilities.
WPL's portfolio of natural gas contracts over the last several
years is as follows:
<TABLE>
<CAPTION>
ANR Pipeline
Contract year 1990-91 1991-92 1992-93 1993-94 1994-1995
<S> <C> <C> <C> <C> <C>
Maximum daily entitlement:
(000's Dt per day)
Contract demand 81.5 81.5 81.5 -- --
Firm transportation 25.9 25.9 25.9 79.0 79.0
Firm storage 40.1 40.1 40.1 85.5 85.5
------ ------ ------ ------ -------
Total 147.5 147.5 147.5 163.5 163.5
------ ------ ------ ------ -------
Maximum annual entitlement
(000's Dt) 11,680 11,680 N/A N/A N/A
<CAPTION>
Northern Natural Pipeline
Contract year 1990-91 1991-92 1992-93 1993-94 1994-1995
(a) (a) (a)
Maximum daily entitlement:
(000's Dt per day)
Contract demand 19.9 16.9 -- -- --
Firm transportation 13.7 26.5 53.6 53.6 53.6
Firm storage - 2.2 1.5 8.5 8.5
"Unbundled" sales - - 16.9 1.4 1.4
------ ------ ------ ------ ------
Total 33.6 45.6 53.6 53.6 53.6
====== ====== ====== ====== ======
Maximum annual entitlement
(000's Dt) 5,815 N/A N/A N/A N/A
<FN>
(a) Total no longer equals sum of components. Currently, Northern Natural requires that WPL hold firm transportation
equal to its total peak-day requirements. Firm storage, "unbundled" sales from Northern Natural, and third party
gas supply (not shown) are all eligible gas sources to be moved to WPL's city gates via this firm transportation.
Contract demand services from Northern Natural have been eliminated.
</TABLE>
As the natural gas market continues to evolve, WPL continuously
evaluates products and services provided by pipelines and gas suppliers to
meet the changing needs of its firm and interruptible gas customers.
<PAGE>
<TABLE>
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED GAS STATISTICS
<CAPTION>
Year Ended December 31,
1994 1993 1992 1991 1990
<S> <C> <C> <C> <C> <C>
Area served (end of period):
Population -- retail (estimated)(a)...... 399,000 391,000 377,000 375,000 363,000
Cities, villages and towns served --
retail................................ 239 217 194 199 195
Customers served (end of period):
Residential.............................. 124,938 120,829 116,642 113,475 110,606
Commercial firm.......................... 15,082 14,644 14,209 13,848 13,384
Industrial firm.......................... 449 444 447 443 438
Interruptible............................ 272 261 262 215 211
Transportation........................... 135 85 109 46 59
------- ------- ------- ------- -------
Total................................ 140,876 136,263 131,669 128,027 124,698
======= ======= ======= ======= =======
Sales - Therms (in thousands) (b):
Residential.............................. 119,562 120,005 114,131 114,772 102,048
Commercial firm.......................... 70,702 69,389 66,272 67,015 59,123
Industrial firm.......................... 16,785 17,649 15,815 16,436 15,202
Interruptible............................ 24,809 27,872 25,497 26,025 35,434
Interdepartmental sales.................. 7,425 3,346 1,923 5,530 2,537
Transported gas.......................... 85,364 84,877 69,244 61,001 56,493
------- ------- ------- ------- -------
Total................................ 324,647 323,138 292,882 290,779 270,837
======= ======= ======= ======= =======
Gas operating revenues (in thousands):
Residential.............................. $71,555 $71,632 $63,699 $63,521 $59,793
Commercial firm.......................... 34,644 33,456 30,486 29,640 27,509
Industrial firm.......................... 7,273 7,292 6,668 6,767 6,542
Interruptible............................ 8,777 10,685 14,589 12,051 11,563
Interdepartmental sales and other........ 2,779 400 281 1,469 883
Transported gas.......................... 15,112 14,919 3,639 4,327 4,133
------- ------- ------- ------- -------
Total................................ $140,140 $138,384 $119,362 $117,775 $110,423
======= ======= ======= ======= =======
Average annual residential heating use --
therms................................... 1,022 1,052 1,029 1,069 978
Average annual gas bill per residential
heating customer......................... $613 $631 $573 $590 $572
<FN>
(a) The estimated population for towns served jointly with other gas utilities has been based upon a ratio of 2.5
population per retail gas customer.
(b) One therm equals 100,000 British Thermal Units and is a measure of the heat content of natural gas.
</TABLE>
Environmental Matters
WPL cannot precisely forecast the effect of future environmental
regulations by Federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps
to anticipate the future while meeting the requirements of current
environmental regulations. The Clean Air Act Amendments of 1977 and
subsequent amendments to the Clean Air Act, as well as the new laws
affecting the handling and disposal of solid and hazardous wastes along
with clean air legislation passed in 1990 by Congress, could affect the
siting, construction and operating costs of both present and future
generating units.
Under the Federal Clean Water Act, National Pollutant Discharge
Elimination System permits for generating station discharge into water
ways are required to be obtained from the DNR to which the permit program
has been delegated. These permits must be periodically renewed. WPL has
obtained such permits for all of its generating stations or has filed
timely applications for renewals of such permits.
Air quality regulations promulgated by the DNR in accordance
with Federal standards impose statewide restrictions on the emission of
particulates, sulfur dioxide, nitrogen oxides and other air pollutants and
require permits from the DNR for the operation of emission sources. WPL
currently has the necessary permits to operate its fossil-fueled
generating facilities. With the passage of the new Federal Clean Air Act
Amendments, the states are required to include these provisions into their
permit requirements. WPL has submitted timely Title V permit applications
in compliance with schedules set forth by the regulators. The operating
permits, when issued, will consolidate all existing air permit conditions
and regulatory requirements into one permit for each facility. Permits
may be issued in late 1995 or 1996. Until such time, the facilities will
continue to operate under their existing permit conditions.
Pursuant to Section 144.386(2)of the Wisconsin Statutes, WPL has
submitted data and plans for 1995 sulfur dioxide emissions compliance.
Actual 1994 emissions were reported to the DNR. WPL is currently in
compliance with this state requirement. WPL will make any necessary
operational changes in fuel types and power plant dispatch to comply with
the system emissions limit of 1.2 pounds SO2 per million BTU.
WPL's compliance strategy for Wisconsin's sulfur dioxide law
(discussed above) and the Federal Clear Air Act Amendments required plant
upgrades at its generating facilities. The majority of these projects
were completed in 1993. WPL has installed continuous emission monitoring
systems at all of its coal fired boilers in compliance with Federal
requirements. Monitoring for sulfur dioxide was also required by Title IV
of the Federal Clean Air Act at WPL's South Fond du Lac combustion turbine
site. These requirements were also met. Additional monitoring systems
for nitrogen oxides will be required by January 1, 1996 at the combustion
turbine site. WPL will install these monitors in 1995. No significant
investments are anticipated at this time to meet the requirements of the
Federal Clean Air Act Amendments.
Pursuant to Section 311(j)(5) of the Clean Water Act, WPL has
submitted facility response plans for the Rock River generating station
and the South Fond du Lac combustion turbine site. The plans address
pollution prevention and spill response activities for those facilities
with capacity to store in excess of one million gallons of oil.
WPL maintains licenses for all its ash disposal facilities and
regularly reports to the DNR groundwater data and quantities of ash
landfilled or reused. The landfills are operated according to a Plan of
Operation approved by the DNR.
WPL's accumulated pollution abatement expenditures through
December 31, 1994, totaled approximately $133 million. The major
expenditures consist of about $60 million for the installation of
electrostatic precipitators for the purpose of reducing particulate
emissions from WPL's coal-fired generating stations and approximately
$73 million for other pollution abatement equipment at the Columbia, Edge-
water, Kewaunee, Nelson Dewey, Rock River and Blackhawk plants.
Expenditures during 1994 totalled approximately $5 million. Estimated
future pollution abatement expenditures total $1.5 million through 1996.
WPL's estimated pollution abatement expenditures are subject to continuing
review and are revised from time to time due to escalation of construction
costs, changes in construction plans and changes in environmental
regulations.
See "Electric Operations - Fuel" for information concerning the
disposal of spent nuclear fuel and high level nuclear waste.
Manufactured Gas Plant Sites
Historically, WPL has owned 11 properties that have been
associated with the production of manufactured gas. Currently, WPL owns
five of these sites, three are owned by municipalities, and the remaining
three are owned by private companies. In 1989, WPL initiated
investigation of these manufactured gas plant sites. The DNR has been
involved in reviewing investigation plans and has received ongoing reports
regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its
investigations and studies. WPL confirmed that there was no contamination
at two of the sites and received a close out letter from the DNR related
to one of those sites and requested a close out letter for the other site.
Additionally, the investigation of historical records at a third site
indicated a minimal likelihood of any significant environmental impacts.
In February 1993, WPL completed cost estimates for the environmental
remediation of the eight remaining sites. The results of this analysis
indicate that during the next 34 years, WPL will expend approximately $81
million for feasibility studies, data collection, soil remediation
activities, groundwater research and groundwater remediation activities,
including construction of slurry containment walls and the installation of
groundwater pump and treatment facilities. This estimate was based on
various assumptions, and is subject to continuous review and revision by
management.
The cost estimate set forth above assumes 4 percent average
inflation over a 34 year period. The cost estimate also contemplates that
primarily groundwater pump and treatment activities will take place after
1998 through and including 2027. During this time, WPL estimates that it
will incur average annual costs of $2.0 million to complete the planned
groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has
approved a five year amortization of the unamortized balance of
environmental costs expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there
are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the
issues related to the above manufactured gas plant sites without
significant revision to the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management
believes that future costs of remediating these manufactured gas plant
sites will be recovered in rates.
HDC
Incorporated in 1988, HDC is the parent company of all of the
Company's nonutility businesses. HDC and its principal subsidiaries are
engaged in business development in three major areas: (1) environmental
engineering and consulting, (2) affordable housing, and (3) energy
services.
At year-end 1994, HDC employed approximately 1,444 persons: 839
in the area of environmental engineering and consulting, 149 in the area
of affordable housing, 439 in the area of energy services, and 17 at the
HDC level.
ENVIRONMENTAL ENGINEERING AND CONSULTING:
WPL acquired RMT, Inc. in 1983. It subsequently became a wholly
owned subsidiary of HDC in 1988. In 1992, HDC transferred its ownership
of RMT to Environmental Holding Company ("EHC), a wholly owned subsidiary
of HDC and the parent company for its environmental engineering and
consulting activities. RMT is a Madison, Wisconsin based environmental
and engineering consulting company that serves clients nationwide in a
variety of industrial segment markets. The most significant of these are
foundries, chemical companies, pulp and paper processors, and other
manufacturers. RMT specializes in solid and hazardous waste management,
ground water quality protection, industrial design and hygiene
engineering, laboratory services, and air and water pollution control.
RMT owns and operates chemical and soil-testing laboratories in Madison
and leases biological-testing laboratories in Greenville, South Carolina.
EHC acquired Jones & Neuse, Inc. ("J&N") in 1993. J&N is based
in Austin, Texas and serves EHC's gulf coast region. J&N has four
additional Texas offices, a Louisiana office and a Mexican subsidiary (ABC
Estudios y Projectos). It provides full capabilities in air quality,
water quality, hazardous and solid waste engineering, and remedial
projects.
In addition to J&N, EHC acquired Hydroscience, Inc.
("Hydroscience") and Four Nines, Inc. ("Four Nines") in 1993. In 1994,
Hydroscience and Four Nines were merged into RMT.
In 1994, RMT acquired Braithwaite Consultants, Inc.
("Braithwaite"), located in Ann Arbor, Michigan. Braithwaite, combined
with the Lansing, MI office of RMT, will primarily serve the Michigan
marketplace.
AFFORDABLE HOUSING:
Formed by HDC in 1988, Heartland Properties, Inc. ("HPI") is
responsible for the development and management of HDC's real estate and
housing investments. HPI's primary focus has been the development,
construction, and management of affordable housing and historic
rehabilitation properties in Wisconsin, Indiana, Michigan, and Illinois.
As of December 31, 1994, HPI's level of investment in housing was
approximately $98 million, providing nearly 2,250 units to a diverse group
of residents.
Toolkit Property Management Systems, Inc. ("Toolkit"), organized
in 1993, provides property management services for many of HPI's housing
projects.
To facilitate HPI's development and financing efforts, HDC
incorporated Capital Square Financial Corporation ("Capital Square") in
1992 and Heartland Capital Company LLC ("HCC") in 1994 to provide mortgage
banking services and construction financing services, respectively, to the
affordable housing market.
Heartland Retirement Services, Inc. ("HRS"), organized in 1993,
provides a comprehensive range of housing related products for the fastest
growing segment of the American population, older adults.
ENERGY SERVICES:
A&C Enercom, Inc. ("A&C") was acquired by HDC in 1993. A&C, a
utility service company, is based in Atlanta, Georgia and provides a
variety of services including marketing and demand side management
primarily to public electric and gas utilitiy companies.
Entec Consulting, Inc. ("Entec"), acquired by HDC in 1993, is a
Madison, Wisconsin based firm that provides full-service consulting to the
utility industry for power generation computer software programs.
In 1994, A&C sold Ecogroup, Inc. Ecogroup, a Phoenix, Arizona
based company initially acquired by A&C in 1993, provides energy and
environmental programs primarily for the electric and gas utility
industry.
HDC has begun an assessment of the strategic fit of its utility
service business and is considering various alternatives, including the
possible sale of part or all of this business.
ITEM 2. PROPERTIES
WPL
The following table gives information with respect to electric
generating facilities of WPL (including WPL's portion of those facilities
jointly-owned).
<TABLE>
<CAPTION>
1994 Summer
Capability
WPL Portion Ownership
Type/ in kilowatts Interest
Location Name Fuel (kw) in Facility
<S> <C> <C> <C> <C>
Steam
Beloit, WI Blackhawk Natural Gas 54,500 100%
Janesville, WI Rock River Coal 149,800 100%
Cassville, WI Nelson Dewey Coal 211,800 100%
Sheboygan, WI Edgewater #3 Coal 70,000 100%
Sheboygan, WI Edgewater #4 Coal 221,500 68.2%
Sheboygan, WI Edgewater #5 Coal 290,100 75%
Kewaunee, WI Kewaunee Nuclear 215,700 41%
Portage, WI Columbia Energy Coal 461,500 46.2%
Center
Hydro
Wisconsin Dells, WI Kilbourn Hydro 5,800 100%
Prairie du Sac, WI Prairie du Sac Hydro 14,200 100%
Wisconsin River Petenwell/ Hydro 6,100 33%
Power Co. Castle Rock
4 small units at
various locations Hydro 1,500 100%
Combustion Turbine
Janesville, WI Rock River Natural Gas
or Oil 130,300 100%
Fond du Lac, WI South Fond du Lac Natural Gas
Unit 2 and 3 or Oil 166,700 100%
Edgerton, WI Sheepskin Natural Gas
or Oil 37,500 100%
-------
Total 2,037,000
=========
</TABLE>
The maximum net hourly peak load on WPL's electric system was
2,002,000 kw and occurred on June 16, 1994. At the time of such peak
load, 2,386,000 kw were produced by generating facilities operated by WPL
(including other company shared jointly-owned facilities). WPL delivered
934,000 kw of power and received 540,000 kw of power from external
sources. During the year ended December 31, 1994, about 84.4 percent of
WPL's total kilowatthour requirements were generated by company-owned and
jointly-owned facilities and the remaining 15.6 percent was purchased.
Substantially all of WPL's facilities are subject to the lien of its first
mortgage bond indenture.
HDC:
The following table gives information with respect to rental
properties associated with HPI's affordable housing and historic
rehabilitation project developments as of December 31, 1994.
Location Housing Development Resident Type Amount
(In Thousands)
Property:
Antigo, WI The Depot Families $ 2,219
Appleton, WI Lincoln Mills Families/Elderly 4,495
Appleton, WI Ravine Mills Families/Elderly 2,510
Appleton, WI The Mills II Families/Elderly 7,394
DePere, WI Lawton Foundry Families 4,354
Madison, WI The Avenue Disabled/Families 2,899
Madison, WI YWCA Women & Homeless 5,593
Marinette, WI Dunlap Square Families/Elderly 8,974
Marshfield, WI The Woodlands Families/Elderly 2,615
McFarland, WI The Cottages Families/Elderly 2,390
Sheboygan Falls, WI Jung Apartments Families 3,628
Sheboygan, WI Sunnyside Townhouses Families 2,543
Sheboygan, WI Brickner Woolen Mills Families/Elderly 3,283
Sun Prairie, WI Vandenburg Heights Families 2,997
Verona, WI Sugar Creek Elderly 3,027
Various Other Families, Elderly,
Singles, Disabled
& Homeless 45,834
-------
Total property 104,755
Accumulated depreciation (8,138)
-------
Net property $96,617
=======
Occupancy rates in the 60 properties/investments owned by HPI
averaged 94 percent during 1994.
HDC has no other properties which it considers to be material in
relation to the Company's consolidated financial statements.
ITEM 3. LEGAL PROCEEDINGS
There are no material pending legal proceedings, other than
ordinary routine litigation incidental to the business, to which the
Company or any of its subsidiaries is a party or to which any of their
property is subject.
ENVIRONMENTAL MATTERS
The information required by Item 3 is included in this Form 10-K
in Note 11c to Notes to Consolidated Financial Statements, which
information is incorporated herein by reference.
RATE MATTERS
The information required by Item 3 is included in Items 6 and 7
of this Form 10-K within the Management's Discussion and Analysis of
Financial Condition and Results of Operations narrative under the caption
"Rates and Regulatory Matters."
<TABLE>
RECENT RATE CASE PROCEEDINGS
<CAPTION> Increase Ordered or
Increase (Decrease) Requested Negotiated Date
(Decrease) Ordered or % Return on % Return on Increase
Rate Case Type of Application Test Requested Negotiated Common Common (Decrease)
Designation Service(a) Date Year ($ Millions) ($ Millions) Equity Equity Effective
<S> <C> <C> <C> <C> <C> <C>
WPL Retail (PSC)
6680-UR-103 e,g,w 02-29-88 1988-89 14.7 5.5 13.25 13.10 10-18-88
6680-UR-104 e,g,w 12-30-88 1989-90 17.4 5.3 13.10 13.00 11-12-89
6680-UR-105 e,g,w 12-29-89 1990-91 9.0 (10.8) 13.10 12.90 08-01-90
6680-UR-106 e,g,w 12-28-90 1991-92 18.7 (0.1) 13.25 12.90 08-01-91
6680-UR-107 e,g,w 12-30-91 1992-93 17.8 (0.9) 13.10 12.40 01-01-93
6680-UR-108 e,g,w 01-04-93 1993-94 24.5 17.7 12.60 11.60 10-01-93
6680-UR-109 e,g,w 02-01-94 1995-96 3.8 (11.6) 12.20 11.50 01-01-95
WPL Wholesale (FERC)
ER87-554 e 07-31-87 1987-88 (1.2) (.9) 13.00 (b) 01-01-88
ER93 e 05-28-93 1993-94 2.0 2.0 11.00 (b) 10-01-93
South Beloit (ICC)
85-0505 e,w 11-08-85 1985-86 1.4(c) .9 15.00 13.80 09-27-86
<FN>
(a) e-electric, g-gas, w-water.
(b) Return on equity was not specified in the negotiated settlement agreement.
(c) On 05-07-86, South Beloit Water, Gas and Electric Co. adjusted the increase requested downward to $1.1 million.
</TABLE>
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 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
Erroll B. Davis, Jr, 50, was elected President on January 17,
1990 and Chief Executive Officer, effective July 1, 1990 of the Company.
He has served as President and Chief Executive Officer of WPL since
August 1, 1988. He has served as a director of the Company since March
1988.
Lance W. Ahearn, 46, was elected President of HDC effective
April 1, 1990 and Chief Executive Officer effective May 4, 1990. Prior
to joining HDC, he held several management positions with Bucyrus Erie
Company, Milwaukee, Wisconsin.
Edward M. Gleason, 54, was elected Vice President, Treasurer
and Corporate Secretary of the Company effective October 3, 1993. He
previously served as Vice President-Finance and Treasurer of WPL since May
1986. Mr. Gleason functions as the principal financial officer of the
Company.
William D. Harvey, 45, was appointed Senior Vice President of
WPL effective October 3, 1993. He previously served as Vice President-
Natural Gas and General Counsel since August 1992, Vice President-General
Counsel since October 1, 1990 and Vice President-Associate General Counsel
since July 1986. Prior to joining WPL, he was a member of the law firm
of Wheeler, Van Sickle, Anderson, Norman and Harvey.
Eliot G. Protsch, 41, was appointed Senior Vice President of
WPL effective October 3, 1993. He previously served as Vice President-
Customer Services and Sales since August 1992, Vice President and General
Manager-Energy Services since January 1989 and District Manager, Dane
County, since October 1986.
A.J. (Nino) Amato, 43, was appointed Senior Vice President of
WPL effective October 3, 1993. He previously served as Vice President -
Marketing and Strategic Planning of WPL since December 1992, Vice
President - Marketing and Communications of WPL since January 1989 and
Director of Electric Marketing and Customer Service since October 1988.
He had been President of Forward Wisconsin, Inc. from 1987 to 1988.
Daniel A. Doyle, 36, was appointed Vice President-Finance,
Controller and Treasurer of WPL on December 25, 1994. He previously
served as Controller and Treasurer of WPL since October 3, 1993. He has
served as Controller of WPL since July 1992. Prior to joining WPL, he was
Controller of Central Vermont Public Service Corporation since December
1988.
Steve F. Price, 42, was appointed Assistant Corporate Secretary
and Assistant Treasurer on April 15, 1992. He had been Cash Management
Supervisor since December 1987. He was also appointed Assistant Corporate
Secretary of WPL on April 15, 1992.
NOTE: All ages are as of December 31, 1994. None of the executive
officers listed above is related to any director of the Board
or nominee for director of the Company.
Executive officers of the Company have no definite terms of
office and serve at the pleasure of the Board of Directors.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER
MATTERS
The Company's Common Stock trades on the New York Stock Exchange. Quarterly
Price Ranges and Dividends with respect to the Common Stock are as follows:
<TABLE>
<CAPTION>
1994 1993
---------------------------------- ------------------------------------
Quarter High Low Dividend High Low Dividend
<S> <C> <C> <C> <C> <C> <C>
First $32 7/8 $27 3/4 $ .48 $36 $32 1/2 $ .475
Second 30 3/4 26 3/8 .48 36 3/4 33 1/8 .475
Third 29 7/8 27 .48 36 1/4 35 .475
Fourth 28 7/8 26 7/8 .48 36 31 1/2 .475
------- ------- ------ ------- ------- -------
Year $32 7/8 $26 3/8 $ 1.92 $36 3/4 $31 1/2 $ 1.90
======= ======= ====== ======= ======= ======
</TABLE>
Year-end stock price: $27 3/8
At December 31, 1994, there were approximately 37,049 holders of
record of the Company's common stock including underlying holders in the
Company's Dividend Reinvestment and Stock Purchase Plan.
WPL's retail rate order effective January 1, 1995, requires WPL to
maintain a utility common equity level of 51.93 percent of total utility
capitalization during the two year test year ending December 31, 1996.
In addition, the PSCW ordered that it must approve the payment of dividends
by WPL to the Company that are in excess of the level forecasted for 1995
($58.1 million), if such dividends would reduce WPL's average common equity
ratio below 51.93 percent.
ITEMS 6 AND 7. SELECTED FINANCIAL DATA AND MANAGEMENT'S DISCUSSION AND
ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
WPL HOLDINGS, INC.
Management's Discussion and Analysis of Financial Condition and Results of
Operations
<TABLE>
SELECTED FINANCIAL DATA
<CAPTION>
1994 1993 1992 1991 1990
(In Millions Except for Per Share Data)
<C> <S> <S> <S> <S> <S>
Operating revenues................. $ 816 $ 773 $ 673 $ 670 $ 618
Net income......................... $ 65 $ 63 $ 58 $ 66 $ 60
Earnings per share................. $ 2.13 $ 2.11 $ 2.10 $ 2.42 $ 2.23
Total assets (at December 31)...... $1,806 $1,762 $1,566 $1,383 $1,261
Long-term debt, net (at December 31) $ 448 $ 425 $ 418 $ 367 $ 343
Cash dividends paid per share...... $ 1.92 $ 1.90 $ 1.86 $ 1.80 $ 1.74
</TABLE>
1994 COMPARED WITH 1993
OVERVIEW
Earnings per share of WPL Holdings, Inc. (the "Company") common stock
increased to $2.13 in 1994 compared with $2.11 in 1993. Earnings for 1994
were significantly affected by two non-recurring items from the Company's
utility subsidiary Wisconsin Power and Light Company ("WPL"). These items
were the reversal of a coal contract penalty in the 1st quarter and costs
associated with early retirement and severance programs which primarily
occurred in the 4th quarter. Both of these items are discussed in the
"Other Events" section of Management's Discussion and Analysis. The
following breakout presents the recurring aspects of 1994's operations.
1994 1993
Earnings per share, as reported $2.13 $2.11
Less: Increase in earnings from
reversal of coal contract
penalty (.16) ( - )
Add: Decrease in earnings from
costs associated with early
retirement and severance
programs .27 .04
----- -----
Earnings per share before the
above non-recurring items $2.24 $2.15
===== =====
The increase in the "Earnings per share before the above non-recurring
items" primarily reflects an increase in operating earnings from WPL. The
increase was somewhat offset by program start-up costs associated with
expansion of the affordable housing and energy services businesses of the
Company's non-regulated subsidiary, Heartland Development Corp. ("HDC").
<TABLE>
Electric Operations
<CAPTION>
Revenues &
Costs Per
kWh's Sold, kWh Sold
Revenues % Generated % Generated Customers at
and Costs Change and Purchased Change & Purch. End of Year
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
and farm $194,242 $184,176 5% 2,776,895 2,751,363 1% $.070 $.067 325,063 316,870
Industrial 140,487 132,903 6% 3,764,953 3,540,082 6% .037 .038 776 714
Commercial 101,382 95,977 6% 1,688,349 1,629,911 4% .060 .059 43,868 42,884
Wholesale and
Class A 86,400 78,955 9% 2,574,121 2,388,131 8% .034 .033 81 39
Other 9,236 11,176 -17% 54,518 51,073 7% .169 .219 1,477 1,236
-------- -------- ---- ---------- --------- ---- ----- ----- ------- -------
Total 531,747 503,187 6% 10,858,836 10,360,560 5% $.049 $.049 371,265 361,743
========== ========= ==== ===== ===== ======= =======
Elec. production
fuels 123,469 123,919 0% 9.445,950 9,180,484 3% $.013 $.013
========== ========= ==== ===== =====
Purchased power 37,913 28,574 33% 1,780,451 1,481,993 20% $.021 $.019
-------- -------- ---- ========== ========= ==== ===== =====
Margin $370,365 $350,694 6%
======== ======== ====
</TABLE>
WPL's electric margin increased during 1994 compared to 1993. The primary
factor was a 3.8 percent retail rate increase effective October 1, 1993.
Strong economic conditions in the industrial and commercial customer
classes contributed higher sales and customer growth. A colder than
normal January and a very warm mid-September offset relatively mild summer
conditions in July and August making 1994 a relatively average year in
terms of degree day impacts on sales volumes. Electric production fuel
costs were stable in 1994. The volume of purchased power increased as a
result of WPL's efforts to conserve coal inventories during a rail strike
in the 3rd quarter of 1994. See "Other Events" for details.
<TABLE>
Gas Operations
<CAPTION>
Revenues &
Revenues % Therms Sold % Costs Per Therm Customers at
and Costs Change & Purchased Change Sold, & Purch. End of Year
1994 1993 1994 1993 1994 1993 1994 1993
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 71,555 $ 71,632 0% 119,562 120,005 0% $.60 $.60 124,938 120,829
Firm 41,918 40,748 3% 87,487 87,038 1% .48 .47 15,531 15,088
Interruptible 8,777 10,685 -22% 24,809 27,872 -13% .36 .39 272 261
Transportation 15,112 14,205 7% 85,364 84,877 1% .18 .17 135 85
Other 2,284 -- -% 7,536 -- -% .31 -- 90 --
-------- -------- ---- -------- -------- ----- ---- ---- ------- -------
Total 139,646 137,270 2% 324,758 319,792 2% $.44 $.43 140,966 136,263
======== ======== ===== ==== ==== ======= =======
Purchased gas 88,553 90,505 -3% 293,547 285,531 4% $.31 $.32
-------- -------- ----- ======== ======== ===== ==== ====
Margin $ 51,093 $ 46,765 10%
======== ======== =====
</TABLE>
Gas margin increased in 1994 from 1993 primarily based on two factors: 1)
a 1.4 percent retail rate increase effective October 1, 1993 and, 2) an
increase in customers in the higher rate firm service resulted in a more
favorable sales mix. The overall cost of purchased gas declined
reflecting WPL's effective use of opportunities on the gas spot market.
Fees, Rents and Other Operating Revenues ("Other Revenues")
Environmental services revenues increased due to continued strong demand.
Other revenues increased due to an increased number of affordable housing
project syndications and the inclusion of the full year of revenues in
1994 for A&C Enercom Consultants, Inc. that was acquired in February,
1993.
Other Operation Expense
The increase in other operation expense is primarily related to the early
retirement and severance programs discussed later in the "Other Events"
section and increased program start-up costs associated with the expansion
of the Company's affordable housing and energy services businesses.
Offsetting these costs were reductions in WPL's operating costs resulting
from the ongoing reengineering of its processes.
Maintenance
Maintenance expense decreased between years due to the variation in the
timing and extent of WPL's maintenance outages at its generating
facilities between years. Secondarily, a severe storm in the summer of
1993 increased 1993's maintenance expense related to service restoration.
Depreciation and Amortization
Depreciation expense increased, principally reflecting increased property
additions, and increased decommissioning costs for WPL.
Other Income and (Deductions)
Other income increased due to the reversal of a coal contract penalty
discussed later in the "Other Events" section.
Income Taxes
Income taxes increased between years primarily due to higher taxable
income.
Affordable housing tax credits declined as HPI reduced its ownership
interests in qualifying properties late in 1993, placing more emphasis on
the generation of syndication and development fees and retaining only
small ownership interests in additional properties.
1993 COMPARED WITH 1992
OVERVIEW
Earnings per share of the Company common stock increased to $2.11 in 1993
compared with $2.10 in 1992. The increase in earnings primarily reflected
an increase in earnings from WPL. The principle factors leading to
increased earnings included warmer summer weather and lower electric fuel
costs per kWh which yielded higher electric margins for WPL. These
increases were somewhat offset by increased depreciation expense resulting
from additional investment in utility plant and property additions, a
change in the mix of gas sales from higher margin sales to lower margin
sales, the increase in the Federal corporate tax rate from 34 percent to
35 percent and a one-time 4-cent-per-share charge associated with a
voluntary separation program for the executive management group at the
utility.
The Company's nonregulated subsidiary, HDC, contributed to earnings
through its principal businesses: 1) environmental engineering and
consulting, 2) affordable housing, and 3) energy products and services.
<TABLE>
Electric Operations
<CAPTION>
Revenues &
Costs Per
kWh's Sold, kWh Sold
Revenues % Generated % Generated Customers at
and Costs Change and Purchased Change & Purch. End of Year
1993 1992 1993 1992 1993 1992 1993 1992
(In Thousands) (In Thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential
and farm $184,176 $171,887 7% 2,751,363 2,614,439 5% $.067 $.066 316,870 310,702
Industrial 132,903 128,467 3% 3,540,082 3,377,132 5% .038 .038 714 727
Commercial 95,977 91,707 5% 1,629,911 1,551,823 5% .059 .059 42,884 42,287
Wholesale and
Class A 78,955 77,485 2% 2,388,131 2,208,419 8% .033 .035 39 39
Other 11,176 8,189 36% 51,073 55,230 -8% .219 .148 1,236 950
-------- -------- ---- ---------- --------- ---- ----- ----- ------- -------
Total 503,187 477,735 5% 10,360,560 9,807,043 6% $.049 $.049 361,743 354,705
========== ======== ==== ===== ===== ======= =======
Elec. production
fuels 123,919 123,440 .4% 9,180,484 9,041,317 2% $.013 $.014
========== ========= ==== ===== =====
Purchased power 28,574 24,427 17% 1,481,993 1,124,667 32% $.019 $.022
-------- -------- ---- ========== ========= ==== ===== =====
Margin $350,694 $329,868 6%
======== ======== ====
</TABLE>
WPL's electric margin in dollars increased during 1993 compared with 1992
due to increased demand for electricity brought on by warmer summer
weather. Residential customers, being the most weather sensitive,
experienced the most significant increases. Wisconsin's strong economy
kept the commercial and industrial classes growing steadily. These
increases were coupled with declining electric production fuel costs per
kWh. The decrease in electric production fuels was due to WPL's
aggressive pursuit of additional spot coal purchase opportunities as its
longer term contracts began to expire. Additionally, a highly competitive
rail transportation environment significantly reduced the cost of
transporting the coal. Also, lower cost purchased power became available
due to excess capacity in the bulk-power market.
<TABLE>
Gas Operations
<CAPTION>
Revenues &
Revenues % Therms Sold % Costs Per Therm Customers at
and Costs Change & Purchased Change Sold, & Purch. End of Year
1993 1992 1993 1992 1993 1992 1993 1992
(in thousands) (in thousands)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Residential $ 71,632 $ 63,699 13% 120,005 114,131 6% $.60 $.56 120,829 116,642
Firm 40,748 37,154 10% 87,038 82,087 7% .47 .46 15,088 14,656
Interruptible 10,685 9,554 12% 27,872 25,497 10% .39 .38 261 262
Transportation 14,205 8,674 64% 84,877 69,244 19% .17 .13 85 109
Other -- 281 -% -- 1,923 -% -- .15 -- --
-------- -------- ----- -------- -------- ----- ---- ---- ------- -------
Total 137,270 119,362 16% 319,792 292,882 10% $.43 $.41 136,263 131,669
======== ======== ===== ==== ==== ======= =======
Purchased gas 90,505 77,112 18% 285,531 258,431 11% $.32 $.30
-------- -------- ----- ======== ======== ===== ==== ====
Margin $ 46,765 $ 42,250 11%
======== ======== =====
</TABLE>
WPL's gas revenues for 1992 were affected by the recognition of a $4.9
million before-tax refund to its natural gas customers resulting from an
adjustment in the calculation of the purchased gas adjustment clause.
Without the impact of this revenue adjustment, comparative gas margins
would have declined for 1993 compared with 1992.
The overall increases in gas revenues and purchased gas costs between
years resulted primarily from increased volumes procured on behalf of
transportation customers. This had the impact of decreasing margins as a
percentage of total revenues. A change in the mix of gas sales from
higher margin residential sales to lower margin sales also moved margins
downward. Offsetting this decline, Wisconsin's strong economy enabled
growth in the commercial and industrial classes, and there was also some
overall increase in the demand for natural gas due to colder weather.
Fees, Rents and Other Operating Revenues ("Other Revenues")
Other revenues increased between years as a result of RMT's and HPI's
growth in their respective businesses and the result of acquisitions in
the environmental and energy-services businesses.
Other Operation Expense
Other operation expense also increased as a result of the above factors.
An additional increase resulted from higher WPL employee benefit expense
(see Notes to Consolidated Financial Statements, Note 7). These increases
were offset somewhat by decreases in WPL's conservation program
expenditures and decreases in fees associated with the sale of WPL's
accounts receivable due to a decline in interest rates. Additionally,
WPL's cost management efforts have helped control annual inflationary
pressures on general and administrative costs.
Depreciation and Amortization
Depreciation and amortization expense increased, principally reflecting
increased property additions and the commencement of deferred charge
amortizations approved in WPL's rate orders received in December 1992 and
October 1993. The most significant amortizations include the amortization
related to an acquisition adjustment which resulted from the purchase of
transmission facilities and the amortization of costs incurred related to
the remediation of former manufactured gas plant sites (see Notes to the
Consolidated Financial Statements, Note 11).
Allowance for Funds Used During Construction ("AFUDC")
Total AFUDC increased in 1993 compared with 1992, reflecting the greater
amounts of construction work in progress including the costs associated
with WPL's construction of two 86-megawatt combustion-turbine generators.
Interest Expense
Interest expense on debt decreased between years, primarily reflecting the
benefits of WPL's refinancing efforts.
LIQUIDITY AND CAPITAL RESOURCES
Rates and Regulatory Matters
On December 9, 1994, the Public Service Commission of Wisconsin ("PSCW")
issued rate order UR-109, effective for a two-year period beginning
January 1, 1995. The order included the following decisions on WPL's
retail rate application as filed on February 4, 1994: 1) electric
revenues will be decreased by approximately $12.3 million (2.8 percent)
annually, 2) natural gas revenues will be increased by approximately $.7
million (.5 percent) annually, 3) return on common equity will be 11.5
percent versus WPL's previously allowed return on equity of 11.6 percent.
Further, the PSCW approved certain incentive programs described below:
1. The electric fuel adjustment mechanism was eliminated. In its
absence, WPL will benefit from reductions in fuel cost. Conversely,
WPL will be exposed to increases in fuel costs.
2. The automatic purchased gas adjustment clause was also eliminated.
In the future, the fluctuations in the commodity cost of gas above or
below a prescribed commodity price index will serve to increase or
decrease WPL's margin on gas sales. Fixed demand costs are excluded
from the incentive program. Both benefits and exposures are subject
to ratepayer sharing provisions, which are capped at $1.1 million.
3. In order to promote air quality and reliability, there are SO2
emissions and service reliability incentive clauses. Positive
incentive available under these clauses is a pre-tax $1.5 million
for the SO2 emissions and a pre-tax $.5 million for the service
reliability. WPL's earnings are also negatively exposed for equal
amounts. Since WPL is allowed to collect all revenues under these
programs in advance, up to $4.0 million annually of pre-tax revenue
may be collected subject to refund upon final determination of
performance under this program.
Industry Outlook
The PSCW has recently opened a formal docket initiating an inquiry into
the future structure of the electric utility industry in Wisconsin. The
goals of Wisconsin utility regulation and the principles to be used in
choosing among alternative proposals have been identified. WPL has
submitted its preferred structure which, in summary form, calls for open
access to transmission and distribution systems and a competitive power
generation market place. It is not possible at this time to predict the
outcome of these proceedings.
Financing and Capital Structure
The level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions.
The Company's operating subsidiaries generally issue short-term debt to
provide interim financing of construction and capital expenditures in
excess of available internally generated funds. The subsidiaries
periodically reduce their outstanding short-term debt through the issuance
of long-term debt and through the Company's additional investment in their
common equity. To maintain flexibility in its capital structure and to
take advantage of favorable short-term rates, the Company also uses
proceeds from the sales of accounts receivable and unbilled revenues to
finance a portion of its long-term cash needs. The Company anticipates
that short-term debt funds will continue to be available at reasonable
costs due to strong ratings by independent utility analysts and rating
services. WPL commercial paper has been rated A-1+ by Standard & Poor's
Corp. and P-1 by Moody's Investors Service.
Bank lines of credit of $97.5 million at December 31, 1994 are available
to support these borrowings.
The Company's capitalization at December 31, 1994, including the current
maturities of long-term debt, variable rate demand bonds and short-term
debt, consisted of 48.8 percent common equity, 4.9 percent preferred stock
and 46.3 percent long-term debt. The common-equity-to-total
capitalization ratio at December 31, 1994 increased to 48.8 percent from
47.9 percent at December 31, 1993.
The retail rate order effective January 1, 1995, requires WPL to maintain
a utility common equity level of 51.93 percent of total utility
capitalization during the two-year test year ending December 31, 1996. In
addition, the PSCW ordered that it must approve the payment of dividends
by WPL to the Company that are in excess of the level forecasted for 1995
($58.1 million), if such dividends would reduce WPL's average common
equity ratio below 51.93 percent.
Capital Requirements
The Company's largest subsidiary, WPL, is capital-intensive and requires
large investments in long-lived assets. Therefore, the Company's most
significant capital requirements relate to WPL construction expenditures.
Estimated capital requirements of WPL for the next five years are as
follows:
<TABLE>
<CAPTION>
Capital Requirements
1995 1996 1997 1998 1999
(in millions)
<S> <C> <C> <C> <C> <C>
Construction expenditures $131.2 $100.4 $132.2 $119.6 $130.6
Changes in working capital
and other (4.6) (5.5) 67.0 16.3 (3.8)
------ ------ ------ ------ ------
Construction and operating
capital $126.6 $ 94.9 $199.2 $135.9 $126.8
Manufactured gas plant site
remediation expenditures 2.0 9.2 10.5 9.6 .6
------ ------ ------ ------ ------
Total capital requirements $128.6 $104.1 $209.7 $145.5 $127.4
====== ====== ====== ====== ======
</TABLE>
Included in the construction expenditure estimates, in addition to the
recurring additions and improvements to the distribution and transmission
systems, are the following: 1) expenditures for managing and controlling
electric line losses and for the electric delivery system that will reduce
electric line losses and enhance WPL's interconnection capability with
other utilities; 2) expenditures related to environmental compliance
issues, including the installation of additional emissions-monitoring
equipment and coal-handling equipment; 3) expenditures associated with the
construction of an 86-megawatt combustion-turbine generator expected to
become operational in 1996.
The Company's capital requirements may also be impacted by decisions
relating to the Kewaunee Nuclear Power Plant ("Kewaunee"). The steam
generator tubes at Kewaunee are susceptible to corrosion characteristics,
a condition that has been experienced throughout the nuclear industry.
Annual inspections are performed to identify degraded tubes. Degraded
tubes are either repaired by sleeving or are removed from service by
plugging. The steam generators were designed with an approximately 15
percent heat transfer margin, meaning that full power should be
sustainable with the equivalent of 15 percent of the steam generator
tubes plugged. Tube plugging and the build-up of deposits on the tubes
affect the heat-transfer capability of the steam generators to the point
where eventually full-power operation is not possible and there is a
gradual decrease in the capacity of the plant. The plant's capacity
could be reduced by as much as 20% by the year 2013 when the current
operating license expires. Currently, the equivalent of approximately
12 percent of the tubes in the steam generators are plugged. WPL and
the joint-owners recently completed studies evaluating the economics of
replacing the two steam generators at Kewaunee. The studies resulted
in the conclusion that the most prudent course of action is to continue
operation of the existing steam generators. WPL and the other joint-
owners continue to evaluate appropriate strategies, including
replacement, as well as continued operation of the steam generators
without replacement. WPL and the joint owners also continue to fund the
development of welded repair technology for steam generator tubes. The
plant is expected to be operated until at least 2013. WPL and the joint-
owners are also continuing to evaluate and implement initiatives to
improve the performance of Kewaunee, which already performs at above-
average levels for the industry. These initiatives include conversion
from a 12-month to an 18-month fuel cycle and numerous other cost
reduction measures. These initiatives have resulted in reductions in
Kewaunee operating and maintenance costs since 1991.
HDC has expanded its energy related products and services business and its
environmental services through investment in existing businesses during
1994. In addition to its investment in affordable housing, HPI continues
to market its affordable housing expertise by expanding its business to
provide assistance to other corporate/public investors in their
development, operation and financing of affordable housing projects.
HDC has begun an assessment of the strategic fit of its utility service
business and is considering various alternatives, including the possible
sale of part or all of this business.
In 1994, A&C Enercom sold its EcoGroup operations. EcoGroup, a Phoenix,
Arizona based company initially acquired by A&C Enercom in 1993, provided
energy and environmental programs primarily for the electric and gas
utility industry.
Capital Resources
One of the Company's objectives is to finance construction expenditures
through internally generated funds supplemented, when required, by outside
financing. With this objective in place, the Company has financed an
average of 85 percent of its construction expenditures during the last
five years from internal sources. However, during the next five years,
the Company expects this percentage to be reduced primarily due to the
continuation of major construction expenditures and the maturity of $64
million of WPL first mortgage bonds. External financing sources such as
the issuance of long-term debt, common stock and short-term borrowings
will be used by the Company to finance the remaining construction
expenditure requirements for this period. Current forecasts are that
$40.5 million of additional equity and $65 million of long-term debt will
be issued over the next three years.
In 1994, the Company increased its dividends by 1.1 percent and issued
337,980 new shares of common stock through its Dividend Reinvestment and
Stock Purchase Plan and 401(k) Savings Plan, generating proceeds of $9.7
million.
INFLATION
Under current rate-making methodologies prescribed by the various
commissions that regulate WPL, projected or forecasted operating costs,
including the impacts of inflation, are incorporated into WPL revenue
requirements. Accordingly, the impacts of inflation on WPL are currently
mitigated. Although rates will be held flat until at least 1997,
management expects that any impact of inflation will be mitigated by
customer growth and productivity improvements. Inflationary impacts on
the non-regulated businesses are not anticipated to be material to the
Company.
OTHER EVENTS
Coal Contract Penalty
In November 1989, the PSCW concluded that WPL did not properly administer
a coal contract, resulting in an assessment to compensate ratepayers for
excess fuel costs having been incurred. As a result, WPL recorded a
reserve in 1989 that had an after-tax affect of reducing 1989 net income
by $4.9 million. The PSCW decision was found to represent unlawful
retroactive rate-making by both the Dane County Circuit Court and the
Wisconsin Court of Appeals. The case was then appealed to the Wisconsin
Supreme Court.
In January, 1994, the Wisconsin Supreme Court affirmed the decisions of
the Dane County Circuit Court and Wisconsin Court of Appeals. In
management's opinion, all avenues for appeal have been exhausted. As a
result, WPL reversed the entire reserve and was also allowed to collect
interest on amounts of the penalty previously refunded to ratepayers. The
reversal of the reserve plus interest had an after-tax affect of
increasing net income in 1994 by $5.3 million.
Early Retirement and Severance Programs
Given the expectation of increasing competition, WPL has continued to
reengineer its processes to implement cost efficiencies in its operations.
In connection with these efforts, WPL offered voluntary early retirement
programs and voluntary severance programs to affected employees in 1994
and 1993. These programs primarily closed late in the fourth quarter of
1994 and 1993.
In terms of pre-tax costs, the early retirement programs totalled $9.8
million and the severance programs totalled $3.9 million for a grand total
of $13.7 million in 1994. For 1993, program costs totalled $1.8 million.
Coal Transporter's Strike
One of WPL's major coal transporters experienced a labor strike during the
third quarter of 1994. During the term of the strike (55 days), WPL's
ability to receive coal from its suppliers was impaired, which required
WPL to use some of its existing coal reserves and to purchase additional
power. On August 29, 1994, President Clinton, acting under the Railway
Labor Act, forced a temporary end (the "cooling off period") to the strike
by ordering the railroad union employees back to work and establishing a
three member Presidential Emergency Board to draft a recommended
settlement. Railroad management and the United Transportation Union have
subsequently settled on a contract. As of December 31, 1994, the existing
and anticipated financial impact on WPL's operating results was not
material.
Environmental
WPL cannot precisely forecast the effect of future environmental
regulations by federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps
to anticipate the future while meeting the requirements of current
environmental regulations. The Clean Air Act Amendments of 1977 and
subsequent amendments to the Clean Air Act, as well as the new laws
affecting the handling and disposal of solid and hazardous wastes, along
with the clean air legislation passed in 1990 by Congress, could affect
the siting, construction and operating costs of both present and future
generating units.
Under the Federal Clean Water Act, National Pollutant Discharge
Elimination System permits for generating station discharge into water
ways are required to be obtained from the Wisconsin Department of Natural
Resources (DNR). WPL has obtained such permits for all of its generating
stations or has filed timely applications for renewals.
Air quality regulations promulgated by the DNR in accordance with federal
standards impose statewide restrictions on the emission of particulates,
sulfur dioxide, nitrogen oxides and other air pollutants and require
permits from the DNR for the operation of emission sources. WPL currently
has the necessary permits to operate its fossil-fueled generating
facilities. However, beginning in 1994, new permits were required for all
major facilities in Wisconsin. WPL's Columbia Generating facility
submitted a permit application on May 1, 1994. The remaining facilities
will be addressed in early 1995.
WPL's compliance strategy for Wisconsin's 1993 sulfur dioxide law and the
Federal Clean Air Act Amendments required plant upgrades at its generating
facilities. The majority of these projects were completed in 1993 and
1994. WPL has installed continuous emissions monitoring systems at all of
its coal fired boilers. No additional costs for compliance with these
acid-rain-prevention requirements are anticipated at this time.
Also see Note 11c in the Notes to the Consolidated Financial Statements
for a discussion of WPL's manufactured gas plant sites.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To WPL Holdings, Inc.:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of WPL HOLDINGS, INC. (a Wisconsin
corporation) and subsidiaries as of December 31, 1994 and 1993, and the
related consolidated statements of income, common shareowners' investment
and cash flows for each of the three years in the period ended December
31, 1994. These financial statements are the responsibility of the
company's management. Our responsibility is to express an opinion on
these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are
free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles
used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe that our audits
provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of WPL Holdings,
Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the
period ended December 31, 1994, in conformity with generally accepted
accounting principles.
Milwaukee, Wisconsin, ARTHUR ANDERSEN LLP
February 1, 1995
<PAGE>
<TABLE>
WPL HOLDINGS, INC.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, 1994 1993
(dollars in thousands)
<S> <C> <C>
ASSETS
Utility plant:
Plant in service--
Electric.............................................. $1,611,351 $1,518,701
Gas................................................... 204,514 194,283
Water................................................. 22,070 20,437
Common................................................ 123,254 106,803
---------- ----------
1,961,189 1,840,224
Dedicated decommissioning funds......................... 51,791 49,803
---------- ----------
2,012,980 1,890,027
Less--Accumulated provision for depreciation............ 808,853 763,027
---------- ----------
1,204,127 1,127,000
Construction work in progress........................... 42,732 75,732
Nuclear fuel, net....................................... 19,396 18,000
---------- ----------
Total utility plant................................... 1,266,255 1,220,732
Other property and equipment:
Rental, net............................................. 96,536 100,515
Other, net.............................................. 26,693 17,872
---------- ----------
Total other property and equipment, net............... 123,229 118,387
Investments............................................... 12,320 15,525
---------- ----------
Current assets:
Cash and equivalents.................................... 7,273 19,468
Net accounts receivable and unbilled revenue, less
allowance for doubtful accounts of $1,964 and
$1,662, respectively.................................. 71,465 67,623
Coal, at average cost................................... 15,824 16,042
Materials and supplies, at average cost................. 21,618 21,679
Gas in storage, at average cost......................... 7,975 8,754
Prepayments and other................................... 30,279 23,251
---------- ----------
Total current assets.................................. 154,434 156,817
---------- ----------
Restricted cash........................................... 3,217 6,712
---------- ----------
Deferred charges:
Regulatory assets....................................... 144,476 148,805
Other................................................... 101,970 94,921
---------- ----------
Total deferred charges................................ 246,446 243,726
---------- ----------
TOTAL ASSETS.............................................. $1,805,901 $1,761,899
========== ===========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareowners' investment.......................... $ 597,798 $ 582,966
Subsidiary preferred stock not mandatorily redeemable... 59,963 59,963
Long-term debt, net..................................... 448,110 425,105
---------- ----------
Total capitalization.................................. 1,105,871 1,068,034
---------- ----------
Current liabilities:
Current maturities of long-term debt.................... 2,832 782
Variable rate demand bonds.............................. 56,975 56,975
Short-term debt......................................... 64,501 91,902
Accounts payable and accruals........................... 71,949 78,195
Accrued payroll and vacation............................ 17,357 17,287
Accrued (pre-paid) taxes................................ 6,395 (570)
Accrued interest........................................ 9,138 9,282
Other................................................... 21,925 21,168
--------- ---------
Total current liabilities............................. 251,072 275,021
--------- ---------
Other credits:
Accumulated deferred income taxes....................... 224,049 212,844
Accumulated deferred investment tax credits............. 40,758 42,684
Accrued environmental remediation costs................. 79,280 80,973
Deferred credits and other.............................. 104,871 82,343
--------- ---------
448,958 418,844
--------- ---------
Commitments and contingencies (Notes 2 and 11)
TOTAL CAPITALIZATION AND LIABILITIES...................... $1,805,901 $1,761,899
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Year Ended December 31, 1994 1993 1992
(in thousands except per-share data)
<S> <C> <C> <C>
Operating revenues:
Electric................................... $531,747 $503,187 $477,735
Gas........................................ 139,646 137,270 119,362
Fees, rents and other...................... 144,766 131,486 76,176
-------- -------- --------
816,159 771,943 673,273
-------- -------- --------
Operating expenses:
Electric production fuels.................. 123,469 123,919 123,440
Purchased power............................ 37,913 28,574 24,427
Purchased gas.............................. 88,553 90,505 77,112
Other operation............................ 279,721 256,509 196,044
Maintenance................................ 41,227 44,763 45,081
Depreciation and amortization.............. 81,480 69,112 59,949
Taxes other than income.................... 33,787 32,378 29,261
-------- -------- --------
686,150 645,760 555,314
-------- -------- --------
Operating income............................. 130,009 126,183 117,959
-------- -------- --------
Other income and (deductions):
Allowance for equity funds used during
construction............................. 3,009 2,977 2,351
Other, net................................. 7,610 (633) 2,390
-------- -------- --------
10,619 2,344 4,741
-------- -------- --------
Interest expense:
Interest on debt........................... 37,686 38,073 38,954
Allowance for borrowed funds used during
construction............................. (1,029) (1,053) (1,329)
-------- -------- --------
36,657 37,020 37,625
-------- -------- --------
Income before income taxes................... 103,971 91,507 85,075
Income taxes................................. 35,411 25,056 23,257
Preferred stock dividends of subsidiary...... 3,310 3,928 3,811
-------- -------- --------
Net income................................... $ 65,250 $ 62,523 $ 58,007
======== ======= ========
Weighted average number of shares of common
stock outstanding.......................... 30,671 29,681 27,559
======== ======== ========
Earnings per share........................... $ 2.13 $ 2.11 $ 2.10
======== ======== ========
Cash dividends paid per share................ $ 1.92 $ 1.90 $ 1.86
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Year Ended December 31, 1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Cash flows generated from (used for)
operating activities:
Net income........................................... $ 65,250 $ 62,523 $ 58,007
Adjustments to reconcile net income to net cash
generated from operating activities:
Depreciation and amortization...................... 81,480 69,112 59,949
Deferred income taxes.............................. 10,321 5,015 8,124
Investment tax credit restored..................... (1,926) (1,967) (2,125)
Amortization of nuclear fuel....................... 6,707 7,049 7,961
Allowance for equity funds used during construction (3,009) (2,977) (2,351)
Other, net......................................... (408) (7,201) (1,731)
Changes in assets and liabilities:
Restricted cash.................................... 3,495 5,417 23,513
Net accounts receivable and unbilled revenue....... (3,842) (11,578) (10,744)
Coal............................................... 217 2,943 2,666
Materials and supplies............................. 61 (6) 1,769
Gas in storage..................................... 779 (4,463) 1,403
Prepayments and other.............................. (7,028) (1,226) 4,453
Accounts payable and accruals...................... (6,245) 760 3,587
Accrued taxes...................................... 6,965 1,438 (5,414)
Other, net......................................... 20,451 9,194 (12,020)
--------- -------- --------
Net cash generated from operating activities..... 173,268 148,435 137,047
--------- -------- --------
Cash flows generated from (used for)
financing activities:
Issuance of common stock............................. - 58,575 -
Issuance of long-term debt........................... - 11,538 289,510
Issuance of preferred stock.......................... - 29,986 -
Redemption of preferred stock........................ - (29,986) -
Long-term debt maturities, redemptions and sinking
fund requirements................................... 24,993 (7,257) (243,641)
Net change in short-term debt........................ (27,401) 20,475 18,589
Common stock cash dividends, less dividends
reinvested.......................................... (49,357) (40,342) (32,668)
Other, net........................................... (1,061) (2,052) (1,462)
--------- -------- --------
Net cash (used for) generated from financing
activities..................................... (52,826) 40,937 30,328
--------- -------- --------
Cash flows generated from (used for)
investing activities:
Additions to utility plant, excluding AFUDC.......... (123,460) (149,333) (123,321)
Allowance for borrowed funds used during construction (1,029) (1,053) (1,329)
Dedicated decommissioning funds...................... (1,988) (9,426) (3,737)
Purchase of other property and equipment............. (6,160) (16,553) (44,097)
Other, net........................................... - 2,123 2,003
-------- --------- --------
Net cash (used for) investing activities......... (132,637) (174,242) (170,481)
-------- --------- --------
Net increase (decrease) in cash and equivalents........ (12,195) 15,130 (3,106)
Cash and equivalents at beginning of year.............. 19,468 4,338 7,444
-------- --------- --------
Cash and equivalents at end of year.................... $ 7,273 $ 19,468 $ 4,338
======== ========= ========
Supplemental disclosures of cash flow information:
Cash paid during the year:
Interest on debt..................................... $ 36,914 $ 36,759 $ 37,763
Preferred stock dividends of subsidiary.............. $ 3,310 $ 3,928 $ 3,811
Income taxes......................................... $ 22,902 $ 20,743 $ 21,201
Non-cash financing activites:
Dividends reinvested................................. $ 9,653 $ 15,284 $ 17,533
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
December 31, 1994 1993
(in thousands except per-share data)
<S> <C> <C>
Common shareowners' investment:
Common stock, $.01 par value, authorized--
100,000,000 shares; issued and outstanding--30,773,588
shares and 30,438,654 shares, respectively.................... $ 308 $ 305
Additional paid-in capital..................................... 304,442 297,916
Reinvested earnings............................................ 293,048 284,745
-------- --------
Total common shareowners' investment....................... $597,798 $582,966
-------- --------
Preferred stock:
Wisconsin Power and Light Company--
Cumulative, without par value, authorized 3,750,000 shares,
maximum aggregate stated value $150,000,000;
Preferred stock without mandatory redemption, $100 stated
value--
4.50% series, 99,970 shares outstanding.................... 9,997 9,997
4.80% series, 74,912 shares outstanding.................... 7,491 7,491
4.96% series, 64,979 shares outstanding.................... 6,498 6,498
4.40% series, 29,957 shares outstanding.................... 2,996 2,996
4.76% series, 29,947 shares outstanding.................... 2,995 2,995
6.20% series, 150,000 shares outstanding................... 15,000 15,000
Cumulative, without par value, $25 stated value,
6.50% series, 599,460 shares outstanding................... 14,986 14,986
------ ------
Total preferred stock...................................... $59,963 $59,963
Long-term debt:
Wisconsin Power and Light Company--
First mortgage bonds:
Series L, 6.25%, due 1998..................................... 8,899 8,899
1984 Series A, variable rate, due 2014 (5.40% at Dec. 31,
1994)....................................................... 8,500 8,500
1988 Series A, variable rate, due 2015 (5.80% at Dec. 31,
1994)....................................................... 14,600 14,600
1990 Series V, 9.3%, due 2025................................. 50,000 50,000
1991 Series A, variable rate, due 2015 (5.95% at Dec. 31,
1994)....................................................... 16,000 16,000
1991 Series B, variable rate, due 2005 (5.95% at Dec. 31,
1994)....................................................... 16,000 16,000
1991 Series C, variable rate, due 2000 (5.95% at Dec. 31,
1994)....................................................... 1,000 1,000
1991 Series D, variable rate, due 2000 (5.95% at Dec. 31,
1994)....................................................... 875 875
1992 Series W, 8.6%, due 2027................................. 90,000 90,000
1992 Series X, 7.75%, due 2004................................ 62,000 62,000
1992 Series Y, 7.6%, due 2005................................. 72,000 72,000
1992 Series Z, 6.125%, due 1997............................... 55,000 55,000
------- -------
Total first mortgage bonds............................... $394,874 $394,874
------- -------
Heartland Development Corporation--
Multifamily Housing Revenue Bonds issued
by various housing and community
development authorities, due 2004-2024, 1.8% - 7.55%........ 39,169 40,010
Other mortgage notes payable, due 1996-2042, 0% - 10.75%...... 41,235 38,881
--------- --------
$80,404 $78,891
--------- --------
WPL Holdings, Inc.--
8.96% Senior notes, due 1997.................................. 10,000 10,000
8.59% Senior notes, due 2004.................................. 24,000 -
Other......................................................... - 519
--------- --------
$34,000 $10,519
--------- --------
Less--
Current maturities............................................ (2,832) (782)
Variable rate demand bonds.................................... (56,975) (56,975)
Unamortized discount and premium, net......................... (1,361) (1,422)
--------- ---------
Total long-term debt, net................................... $448,110 $425,105
--------- ---------
TOTAL CAPITALIZATION............................................ $1,105,871 $1,068,034
========= =========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
<TABLE>
WPL HOLDINGS, INC.
CONSOLIDATED STATEMENTS OF COMMON
SHAREOWNERS' INVESTMENT
<CAPTION>
Year Ended December 31, 1994 1993 1992
(dollars in thousands)
<S> <C> <C> <C>
Common stock:
Balance at beginning of year....................... $ 305 $ 278 $ 273
Issued in connection with public offering........ - 17 -
Issued in connection with acquisitions........... - 5 -
Issued in connection with dividend reinvestment
plan........................................... 3 5 5
-------- -------- --------
Balance at end of year............................. 308 305 278
-------- -------- --------
Additional paid-in capital:
Balance at beginning of year....................... 297,916 204,041 187,532
Received in connection with public offering...... - 58,558 -
Received in connection with acquisitions......... - 20,721 -
Received in connection with dividend reinvestment
plan........................................... 9,650 15,279 17,528
Common stock issuance expense.................... - (1,888) -
Other............................................ (3,124) 1,205 (1,019)
-------- -------- --------
Balance at end of year............................. 304,442 297,916 204,041
-------- -------- --------
Reinvested earnings:
Balance at beginning of year....................... 284,745 279,217 271,854
Net income....................................... 65,250 62,523 58,007
Cash dividends ($1.92 per share, $1.90
per share, and $1.86 per share, respectively).. (59,010) (55,626) (50,201)
Expense of issuing stock and other............... 2,063 (1,369) (443)
-------- -------- --------
Balance at end of year............................. 293,048 284,745 279,217
-------- -------- --------
TOTAL COMMON SHAREOWNERS' INVESTMENT................ $597,798 $582,966 $483,536
======== ======== ========
</TABLE>
The accompanying notes are an integral part of the consolidated financial
statements.
<PAGE>
WPL HOLDINGS, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (dollars in thousands except as
otherwise indicated)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING
POLICIES:
a. Business and Consolidation:
WPL Holdings, Inc. (the "Company" or "WPLH") is the parent holding company
of Wisconsin Power and Light Company ("WPL") and Heartland Development
Corporation ("HDC"). The consolidated financial statements include the
Company and its consolidated subsidiaries, WPL and HDC, along with their
respective subsidiaries. Certain amounts from prior years have been
reclassified to conform with the current year presentation.
WPL is a public utility predominantly engaged in the transmission and
distribution of electric energy and the generation and bulk purchase of
electric energy for sale. WPL also transports, distributes and sells
natural gas purchased from gas suppliers. Nearly all of WPL's retail
customers are located in south and central Wisconsin. WPL's principal
consolidated subsidiary is South Beloit Water, Gas and Electric Company.
HDC and its principal subsidiaries are engaged in business development in
three major areas: 1) environmental services through the Environmental
Holding Company ("EHC"), the parent company of RMT, Inc. ("RMT"), Jones
and Neuse, Inc., and QES, Inc., 2) affordable housing and historic
rehabilitation through Heartland Properties, Inc. ("HPI") and 3) energy
services, which includes ENSERV, Inc., A&C Enercom Consultants, Inc. and
Entec Consulting, Inc.
b. Regulation:
WPL's financial records are maintained in accordance with the uniform
system of accounts prescribed by its regulators. The Public Service
Commission of Wisconsin ("PSCW") and the Illinois Commerce Commission have
jurisdiction over retail rates, which represent approximately 83 percent
of electric revenues plus all gas revenues. The Federal Energy Regulatory
Commission ("FERC") has jurisdiction over wholesale electric rates
representing the balance of electric revenues. Statement of Financial
Accounting Standards ("SFAS") No. 71, "Accounting for the Effects of
Certain Types of Regulation" provides that rate-regulated public utilities
such as WPL record certain costs and credits allowed in the ratemaking
process in different periods than for unregulated entities. These are
deferred as regulatory assets or regulatory liabilities and are recognized
in the Consolidated Statements of Income at the time they are reflected in
rates.
c. Utility Plant and Other Property and Equipment:
Utility plant and other property and equipment are recorded at original
cost and cost, respectively. Utility plant costs include financing costs
that are capitalized through the PSCW-approved allowance for funds used
during construction ("AFUDC"). The AFUDC capitalization rates approximate
WPL's cost of capital. These capitalized costs are recovered in rates as
the cost of the utility plant is depreciated.
Normal repairs, maintenance and minor items of utility plant and other
property and equipment are expensed. Ordinary utility plant retirements,
including removal costs less salvage value, are charged to accumulated
depreciation upon removal from utility plant accounts, and no gain or loss
is recognized. Upon retirement or sale of other property and equipment,
the cost and related accumulated depreciation are removed from the
accounts and any gain or loss is included in other income and deductions.
d. Nuclear Fuel:
Nuclear fuel is recorded at its original cost and is amortized to expense
based upon the quantity of heat produced for the generation of
electricity. This accumulated amortization assumes spent nuclear fuel
will have no residual value. Estimated future disposal costs of such fuel
are expensed based on kilowatthours generated.
e. Revenue:
WPL accrues utility revenues for services provided but not yet billed.
HDC records revenues earned but not billed and revenues from professional
services rendered as incurred using a time-and-materials basis.
f. Electric Production Fuels and Purchased Gas:
(1)Electric Production Fuels:
Through 1994, the PSCW retail electric rates provided a range from
which actual fuel costs could vary in relation to costs forecasted
and used in rates. If actual fuel costs fell outside this range, a
hearing could be held to determine if a rate change was necessary,
and a rate increase or decrease could result.
Beginning with WPL's latest rate order UR-109, effective January 1,
1995, the automatic fuel adjustment clause was eliminated. In its
absence, WPL will benefit from reductions in fuel cost.
Conversely, WPL will be exposed to increases in fuel costs.
An automatic fuel adjustment clause for the FERC wholesale portion
of WPL's electric business operates to increase or decrease monthly
rates based on changes in fuel costs.
(2)Purchased Gas:
Through 1994, WPL's base gas cost recovery rates permitted the
recovery of or refund to all customers for any increases or
decreases in the cost of gas purchased from WPL's suppliers through
a monthly purchased gas adjustment clause.
Beginning with UR-109, the monthly purchased gas adjustment clause
was also eliminated. In the future, the fluctuations in the
commodity cost of gas above or below a prescribed commodity price
index will serve to increase or decrease WPL's margin on gas sales.
Fixed demand costs are excluded from the incentive program. Both
benefits and/or exposures are subject to ratepayer sharing
provisions, which are capped at $1.1 million.
g. Cash and Equivalents:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying
amount approximates fair value because of the short maturity of these
items.
h. Income Taxes:
The Company files a consolidated federal income tax return. Under the
terms of an agreement between WPLH and its subsidiaries, WPL and HDC
calculate their respective federal tax provisions and make payments to
WPLH as if they were separate taxable entities. Beginning in 1993, the
Company fully provides deferred income taxes in accordance with SFAS
No.109, "Accounting for Income Taxes," to reflect tax effects of reporting
book and tax items in different periods.
As part of HPI's investments in affordable housing, HPI is eligible to
claim affordable housing and historic rehabilitation credits. These tax
credits can be recognized to the extent the Company has consolidated taxes
payable.
i. Goodwill:
The excess of the purchase cost over the fair value of net assets acquired
is amortized over 20 to 30 years on a straight-line basis based on its
estimated useful benefit. Subsequent to its acquisitions, the Company
continually evaluates whether later events and circumstances have occurred
that indicate the remaining estimated useful life of goodwill may warrant
revision or that the remaining balance of goodwill may not be recoverable.
To evaluate goodwill for possible impairment, the Company uses a forecast
of the related business's discounted earnings over the remaining life of
the goodwill. Goodwill (net of accumulated amortization) was $20,135 and
$20,920 at December 31, 1994 and 1993, respectively.
NOTE 2. PROPERTY:
a. Jointly-Owned Utility Plants:
WPL participates with other Wisconsin utilities in the construction and
operation of several jointly-owned utility generating plants. The chart
below represents WPL's proportionate share of such plants as reflected in
the Consolidated Balance Sheets at December 31, 1994 and 1993:
<TABLE>
<CAPTION>
1994 1993
----------------------------- ------------------------------
Plant Accumulated Plant Accumulated
Ownership Inservice Plant MW in Provision for in Provision for
Interest % Date Capacity Service Depreciation CWIP Service Depreciation CWIP
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Coal:
Columbia Energy
Center 46.2 1975 & 1978 1,023 $159,650 $ 78,573 $1,484 $159,818 $ 76,602 $1,986
Edgewater Unit 4 68.2 1969 330 50,206 25,394 181 49,631 24,160 83
Edgewater Unit 5 75.0 1985 380 225,336 63,324 26 224,902 58,338 21
Nuclear:
Kewaunee Nuclear
Power Plant 41.0 1974 535 132,726 72,637 452 133,342 69,647 848
-------- -------- ------ -------- --------- -------
Total $567,918 $239,928 $2,143 $567,693 $228,747 $2,938
======== ======== ====== ======== ========= ======
</TABLE>
Each of the respective joint owners finances its portion of construction
costs. WPL's share of operation and maintenance expenses is included in
the Consolidated Statements of Income.
b. Capital Expenditures:
The Company's capital expenditures for 1995 are estimated to total $102
million. Substantial commitments have been incurred for such
expenditures.
NOTE 3. DEPRECIATION:
The Company uses the straight-line method of depreciation. For utility
plant, straight-line depreciation is computed on the average balance of
depreciable property at individual straight-line PSCW approved rates that
consider the estimated useful life and removal cost or salvage value as
follows:
Electric Gas Water Common
1994 3.2% 3.7% 2.5% 7.2%
1993 3.2% 3.7% 2.5% 7.3%
1992 3.2% 3.7% 2.6% 7.1%
Estimated useful lives related to other property and equipment are from 3
to 12 years for equipment and 31.5 to 40 years for buildings.
NOTE 4. NUCLEAR OPERATIONS:
Depreciation expense related to the Kewaunee Nuclear Power Plant
("Kewaunee") includes a provision to accrue for the cost of
decommissioning over the life of the plant, which totalled $13.4 million,
$6.1 million and $3.9 million in 1994, 1993 and 1992, respectively.
Wisconsin utilities with ownership of nuclear generating plants are
required by the PSCW to establish and make annual contributions to
external trust funds to provide for plant decommissioning. Additionally,
in July 1994, the PSCW issued a generic order covering utilities that have
nuclear generation. This order standardizes the escalation assumptions to
be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million
(in 1994 dollars, assuming the plant is operating through 2013) based on a
1992 study, using the immediate dismantlement method of decommissioning.
The undiscounted amount of decommissioning costs estimated to be expended
between the years 2014 and 2050 is $1.016 billion. After-tax earnings on
the tax-qualified and nontax-qualified decommissioning funds are assumed
to be 6.1 percent and 5.1 percent, respectively. The future escalation
rate is assumed to be 6.5 percent.
Decommissioning costs and a charge to offset earnings on the external
trusts are recorded as portions of depreciation expense and accumulated
provision for depreciation on the Statements of Consolidated Income and
the Consolidated Balance Sheets, respectively. As of December 31, 1994,
the total decommissioning costs included in the accumulated provision for
depreciation were approximately $62.8 million.
WPL has established external trusts to hold decommissioning funds, and the
PSCW has approved WPL's funding plan which provides for annual
contributions of current accruals over the remaining service lives of the
nuclear plants. The earnings on the external trusts accumulate in the
fund balance and in the accumulated provision for depreciation. Such
earnings on the external trust funds, which have been offset by a charge
to depreciation expense on the Statements of Consolidated Income, were
$2.7, $1.1 and $1.2 million for the years ended December 31, 1994, 1993
and 1992, respectively.
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy
("DOE") is responsible for the ultimate storage and disposal of spent
nuclear fuel removed from nuclear reactors.
Interim storage space for spent nuclear fuel is currently provided at
Kewaunee. Currently there is on-site storage capacity for spent fuel
through the year 1999. Nuclear fuel, net, at December 31, consists of:
1994 1993
Original cost of nuclear fuel $155,190 $147,325
Less--Accumulated amortization 135,794 129,325
-------- --------
Nuclear fuel, net $ 19,396 $ 18,000
======== ========
The Price Anderson Act provides for the payment of funds for public
liability claims arising from a nuclear incident. Accordingly, in the
event of a nuclear incident, WPL, as a 41-percent owner of Kewaunee, is
subject to an overall assessment of approximately $32.5 million per
incident for its ownership share of this reactor, not to exceed $4.1
million payable in any given year.
Through its membership in Nuclear Electric Insurance Limited, WPL has
obtained property damage and decontamination insurance totalling $1.5
billion for loss from damage at Kewaunee. In addition, WPL maintains
outage and replacement power insurance coverage totalling $101.4 million
in the event an outage exceeds 21 weeks.
NOTE 5. NET ACCOUNTS RECEIVABLE:
WPL has a contract with a financial organization to sell, with limited
recourse, certain accounts receivable and unbilled revenues. These
receivables include customer receivables resulting from sales to other
public utilities as well as from billings to the co-owners of the jointly-
owned electric generating plants that WPL operates. The contract allows
WPL to sell up to $150 million of receivables at any time. Expenses
related to the sale of receivables are paid to the financial organization
under this contract and include, along with various other fees, a monthly
discount charge on the outstanding balance of receivables sold that
approximated a 4.86 percent annual rate during 1994. These costs are
recovered in retail utility rates as an operating expense. All billing
and collection functions remain the responsibility of WPL. The contract
expires August 19, 1995, unless extended by mutual agreement.
As of December 31, 1994 and 1993, proceeds from the sale of accounts
receivable totalled $76.5 million and $74 million, respectively. During
1994, WPL sold an average of $82.3 million of accounts receivable per
month, compared with $75.9 million in 1993.
As a result of its diversified customer base and WPL's sale of
receivables, the Company does not have any significant concentrations of
credit risk in the December 31, 1994, net accounts receivable balance.
NOTE 6. REGULATORY ASSETS AND REGULATORY LIABILITIES:
Certain costs and credits are deferred and amortized in accordance with
authorized or expected rate-making treatment. As of December 31, 1994 and
1993, regulatory created assets include the following:
1994 1993
Environmental remediation costs $ 82,179 $ 82,380
Tax related (see Note 8) 43,736 47,787
Jurisdictional plant differences 7,173 6,533
Decontamination and decommissioning
costs of federal enrichment facilities 7,100 6,181
Other 4,288 5,924
-------- --------
$144,476 $148,805
======== ========
As of December 31, 1994 and 1993, regulatory created liabilities included
$6,738 and $6,618 respectively, for amounts due to customers related to
the sale of air emissions credits.
NOTE 7. EMPLOYEE BENEFIT PLANS:
a. Pension Plans:
WPL has non-contributory, defined benefit retirement plans covering
substantially all employees. The benefits are based upon years of service
and levels of compensation. WPL's funding policy is to contribute at
least the statutory minimum to a trust.
The projected unit credit actuarial cost method was used to compute net
pension costs and the accumulated and projected benefit obligations. The
discount rate used in determining those benefit obligations was 8.25, 7.25
and 8.00 percent for 1994, 1993 and 1992 respectively. The long-term rate
of return on assets used in determining those benefit obligations was
9.00, 9.75 and 10.00 percent for 1994, 1993, and 1992, respectively.
The following table sets forth the funded status of the WPL plans and
amounts recognized in the Company's Consolidated Balance Sheets at
December 31, 1994 and 1993:
1994 1993
Accumulated benefit obligation--
Vested benefits $(134,829) $(135,303)
Non-vested benefits (3,295) (2,962)
--------- ----------
$(138,124) $(138,265)
--------- ----------
Projected benefit obligation $(154,283) $(164,271)
Plan assets at fair value, primarily
common stocks and fixed income
securities 178,095 183,881
--------- ---------
Plan assets in excess of projected
benefit obligation 23,812 19,610
Unrecognized net transition asset (19,376) (21,823)
Unrecognized prior service cost 5,679 7,691
Unrecognized net loss 14,737 20,650
--------- ---------
Pre-paid pension costs, included in
deferred charges and other $ 24,852 $ 26,128
========= =========
The net pension (benefit) recognized in the Consolidated Statements of
Income for 1994, 1993 and 1992 included the following components:
1994 1993 1992
Service cost $ 5,123 $ 4,263 $ 3,912
Interest cost on projected benefit
obligation 12,051 11,614 10,615
Actual return on assets 1,016 (24,759) (12,143)
Amortization and deferral (17,795) 8,430 (5,317)
-------- -------- --------
Net pension cost (benefit) $ 395 $ (452) $ (2,933)
======== ======== ========
b. Postretirement Health Care and Life Insurance:
Effective January 1, 1993, the Company prospectively adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions".
SFAS No. 106 establishes standards of financial accounting and reporting
for the Company's postretirement health care and life insurance benefits.
SFAS No. 106 requires the accrual of the expected cost of such benefits
during the employees' years of service based on actuarial methodologies
that closely parallel pension accounting requirements. WPL has elected
delayed recognition of the transition obligation and is amortizing the
discounted present value of the transition obligation to expense over 20
years. For WPL, the cost of providing postretirement benefits, including
the transition obligation, is being recovered in retail rates under
current regulatory practices.
The following table sets forth the plans' funded status:
1994 1993
Accumulated postretirement benefit
obligation--
Retirees $(29,273) $(27,358)
Fully eligible active plan participants (5,998) (5,429)
Other active plan participants (7,675) (9,980)
-------- --------
Accumulated benefit obligation (42,946) (42,767)
Plan assets at fair value 9,767 7,073
-------- --------
Accumulated benefit obligation
in excess of plan assets $(33,179) $(35,694)
Unrecognized transition obligation 26,474 29,638
Unrecognized loss (2,570) 2,025
-------- --------
Accrued postretirement benefits liability $ (9,275) $ (4,031)
======== ========
For 1994 and 1993, the annual net postretirement benefits costs recognized
in the Consolidated Statements of Income consist of the following
components:
1994 1993
Service cost $ 1,739 $ 1,463
Interest cost on projected benefit
obligation 3,135 3,151
Actual return on plan assets (253) (696)
Amortization of transition obligation 1,527 1,560
Amortization and deferral (381) (27)
------- -------
Net postretirement benefits cost $ 5,767 $ 5,451
====== ======
The postretirement benefits cost components for 1994 were calculated
assuming health care cost trend rates ranging from 11.5 percent for 1994
and decreasing to 5 percent by the year 2002. The health care cost trend
rate considers estimates of health care inflation, changes in utilization
or delivery, technological advances, and changes in the health status of
the plan participants. Increasing the health care cost trend rate by one
percentage point in each year would increase the accumulated
postretirement benefit obligation as of December 31, 1994 by $2.5 million
and the aggregate of the service and interest cost components of the net
periodic postretirement benefit cost for the year by $.4 million.
The assumed discount rate used in determining the accumulated
postretirement obligation was 8.25 and 7.25 percent in 1994 and 1993,
respectively. The long-term rate of return on assets was 9.00 and 9.50
percent in 1994 and 1993, respectively. Plan assets are primarily
invested in common stock, bonds and fixed income securities. The
Company's funding policy is to contribute the tax-advantaged maximum to a
trust.
The costs for the postretirement health care and life insurance benefits,
based on an actuarial determination were $1.3 million in 1992.
c. Other Postemployment Benefits:
In November 1992, the Financial Accounting Standards Board issued SFAS
No. 112, "Employers' Accounting for Postemployment Benefits". SFAS No.
112, which was effective January 1, 1994, establishes standards of
financial accounting and reporting for the estimated cost of benefits
provided by an employer to former or inactive employees after employment
but before retirement. The effect of adopting SFAS No. 112 was not
material.
NOTE 8. INCOME TAXES:
The following table reconciles the statutory federal income tax rate to
the effective income tax rate:
1994 1993 1992
Statutory federal income tax rate 35.0% 35.0% 34.0%
State income taxes, net of federal
benefit 5.3 5.1 7.0
Investment tax credits restored (1.9) (2.1) (2.7)
Amortization of excess deferred taxes (1.6) (1.7) (1.8)
Affordable housing and historical tax
credits (4.6) (5.7) (7.5)
Other differences, net 1.9 (3.2) (.6)
---- ---- ----
Effective income tax rate 34.1% 27.4% 28.4%
==== ==== ====
The breakdown of income tax expense as reflected in the Consolidated
Statements of Income is as follows:
1994 1993 1992
Current Federal $26,161 $20,725 $19,703
Current state 5,673 6,500 5,343
Deferred 10,321 5,015 8,124
Investment tax credit restored (1,926) (1,967) (2,125)
Affordable housing and historical
tax credits (4,818) (5,217) (7,788)
------- ------- -------
$35,411 $25,056 $23,257
======= ======= =======
In 1992, deferred taxes arising from utility plant timing differences, the
qualified nuclear decommissioning trust contribution, employee benefits
and other totalled $4,104, $709, $2,081, and $1,230, respectively.
The temporary differences that resulted in accumulated deferred income tax
(assets) and liabilities as of December 31 are as follows:
1994 1993
Accelerated depreciation and other
plant related $186,565 $171,993
Excess deferred taxes 21,215 22,744
Unamortized investment tax credits (21,784) (22,812)
Allowance for equity funds used during
construction 14,384 13,518
Regulatory liability 17,553 19,179
Other 6,116 8,222
-------- --------
$224,049 $212,844
======== ========
Changes in WPL's deferred income taxes arising from the adoption of SFAS
No. 109 represent amounts recoverable or refundable through future rates
and have been recorded as net regulatory assets totalling approximately
$26 million and $29 million in 1994 and 1993, respectively, on the
Consolidated Balance Sheets. These net regulatory assets are being
recovered in rates over the estimated remaining useful lives of the assets
to which they pertain.
NOTE 9. SHORT-TERM DEBT AND LINES OF CREDIT:
The Company and its subsidiaries maintain bank lines of credit, most of
which are at the bank prime rates, to obtain short-term borrowing
flexibility, including pledging lines of credit as security for any
commercial paper outstanding. Amounts available under these lines of
credit totalled $97.5 million, $100 million and $70 million as of December
31, 1994, 1993 and 1992, respectively. Information regarding short-term
debt and lines of credit is as follows:
1994 1993 1992
As of end of year--
Lines of credit borrowings $ - $ 2,000 $ -
Commercial paper outstanding $ 50,500 $49,000 $26,000
Notes payable outstanding $ 14,001 $40,954 $44,095
Discount rates on commercial
paper 5.64%-6.12% 3.24%-3.40% 3.15%-3.90%
Interest rates on notes payable 6.04%-6.07% 3.34%-3.35% 3.46%-3.62%
For the year ended--
Maximum month-end amount of
short-term debt $ 81,000 $92,000 $70,155
Average amount of short-term
debt (based on daily
outstanding balances) $ 61,835 $56,250 $41,882
Average interest rate on
short-term debt 4.49% 3.33% 3.78%
NOTE 10. CAPITALIZATION:
a. Common Shareowners' Investment:
During 1994, 1993 and 1992, respectively, the Company issued 337,980,
451,233 and 528,142 new shares of common stock through its Dividend
Reinvestment and Stock Purchase Plan and 401(k) Savings Plan, generating
proceeds of $9.6 million, $15.3 million and $17.5 million, respectively.
On April 27, 1993, a public offering of 1.65 million newly issued shares
of the Company's common stock, priced at $35.50 per share, raised net
proceeds of $56.7 million. The proceeds were used by the Company to
refinance short-term debt and for general corporate purposes including
construction.
In February 1989, the Board of Directors of the Company declared a
dividend distribution of one common stock purchase right ("right") on each
outstanding share of the Company's common stock. Each right would
initially entitle shareowners to buy one-half of one share of the
Company's common stock at an exercise price of $60.00 per share, subject
to adjustment. The rights are not currently exercisable, but would become
exercisable if certain events occurred related to a person or group
acquiring or attempting to acquire 20 percent or more of the outstanding
shares of common stock. The rights expire on February 22, 1999, unless
the rights are earlier redeemed or exchanged by the Company.
Authorized shares of common stock total 100,000,000 as of December 31,
1994, and can be categorized as follows:
No. Of Shares
Issued and outstanding . . . . . . . . . . . . . . 30,773,588
Reserved for issuance for Dividend
Reinvestment and Stock Purchase Plan . . . . . . 645,973
Reserved for issuance for WPLH Long-Term
Equity Incentive Plan . . . . . . . . . . . . . . 1,000,000
Common Stock Rights Agreement . . . . . . . . . . . 15,709,781
Unreserved . . . . . . . . . . . . . . . . . . . . 51,870,658
------------
Total authorized . . . . . . . . . . . . . . . 100,000,000
------------
A retail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility
capitalization during the test year January 1, 1995 to December 31, 1996.
In addition, the PSCW ordered that it must approve the payment of
dividends by WPL to the Company that are in excess of the level forecasted
in the rate order ($58.1 million), if such dividends would reduce WPL's
average common equity ratio below 51.93 percent.
b. Preferred Stock:
On October 27, 1993, WPL issued two new series of preferred stock through
two separate public offerings. The 6.2 percent Series is non-redeemable
for ten years and the 6.5 percent Series is non-redeemable for five years.
The proceeds from the sale were used to retire 150,000 shares of 7.56
percent Series and 149,865 shares of 8.48 percent Series preferred stock.
c. Long-term Debt:
Substantially all of WPL's utility plant is secured by its first mortgage
bonds. Current maturities of long-term debt are as follows: $2.8 million
in 1995, $3.3 million in 1996, $67.6 million in 1997, $11.6 million in
1998 and $2.1 million in 1999.
The Company has $150 million of notional principal under interest rate
swap contracts. The fair value of these contracts was not material as of
December 31, 1994.
The fair value of the Company's long-term debt based on quoted market
prices for similar issues at December 31, 1994 and 1993 was $501,530 and
$518,251, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
a. Coal Contract Commitments:
To ensure an adequate supply of coal, WPL has entered into certain
long-term coal contracts. These contracts include a demand or take-or-pay
clause under which payments are required if contracted quantities are not
purchased. Purchase obligations on these coal and related rail contracts
total approximately $149 million through December 31, 2003. WPL's
management believes it will meet minimum coal and rail purchase
obligations under the contracts. Minimum purchase obligations on these
contracts over the next five years are estimated to be $25 million in 1995
and $26 million in 1996, 1997, 1998 and 1999, respectively.
b. Purchased Power and Gas:
Under firm purchase power and gas contracts, WPL is obligated as follows
(dollars in millions):
Purchased Power Purchased Gas
Purchase Purchase Decatherms
Obligation MW's Obligation (in millions)
1995 $ 8.3 1,920 $ 67 89
1996 8.1 1,830 67 90
1997 10.9 1,944 55 78
1998 15.6 2,505 45 66
1999 18.8 2,910 41 53
Thereafter 106.5 12,720 77 101
------ ------ ---- ---
$168.2 23,829 $352 477
====== ====== ==== ===
c. Manufactured Gas Plant Sites:
Historically, WPL has owned 11 properties that have been associated with
the production of manufactured gas. Currently, WPL owns five of these
sites, three are owned by municipalities, and the remaining three are
owned by private companies. In 1989, WPL initiated investigation of these
manufactured gas plant sites. The Wisconsin Department of Natural
Resources ("DNR") has been involved in reviewing investigation plans and
has received ongoing reports regarding these investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations
and studies. WPL confirmed that there was no contamination at two of the
sites. WPL received a close-out letter from the DNR related to one of
those sites and requested a close-out letter for the other site.
Additionally, the investigation of historical records at a third site
indicated a minimal likelihood of any significant environmental impacts.
In February 1993, WPL completed cost estimates for the environmental
remediation of the eight remaining sites. The results of this analysis
indicate that during the next 35 years, WPL will expend approximately $81
million for feasibility studies, data collection, soil remediation
activities, groundwater research and groundwater remediation activities,
including construction of slurry containment walls and the installation of
groundwater pump and treatment facilities. This estimate was based on
various assumptions, and is subject to continuous review and revision by
management.
The cost estimate set forth above assumes 4 percent average inflation over
a 35 year period. The cost estimate also contemplates that primarily
groundwater pump and treatment activities will take place after 1998
through and including 2027. During this time, WPL estimates that it will
incur average annual costs of $2.0 million to complete the planned
groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a five
year amortization of the unamortized balance of environmental costs
expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there
are other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related
to the above manufactured gas plant sites without significant revision to
the above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes
that future costs of remediating these manufactured gas plant sites will
be recovered in rates.
NOTE 12. SEGMENT INFORMATION:
The following table sets forth certain information relating to the
Company's consolidated operations:
Year Ended December 31,
1994 1993 1992
Operation information:
Customer revenues--
Electric $ 531,747 $ 503,187 $ 477,735
Gas 139,646 137,270 119,362
Environmental services 87,673 81,396 67,533
Other 57,093 50,090 8,643
---------- ---------- ----------
Total operating revenues $ 816,159 $ 771,943 $ 673,273
========== ========== ==========
Operating income (loss)--
Electric $ 120,218 $ 118,785 $ 109,459
Gas 13,344 10,431 8,724
Environmental services 6,038 4,219 3,542
Other (a) (9,591) (7,252) (3,766)
Other income and (deductions),
net 10,619 2,344 4,741
Interest expense, net (36,657) (37,020) (37,625)
Income taxes (35,411) (25,056) (23,257)
Preferred stock dividends
of subsidiary (3,310) (3,928) (3,811)
---------- ---------- ----------
Net income $ 65,250 $ 62,523 $ 58,007
========== ========== ==========
Investment information:
Identifiable assets,
including allocated common
plant at December 31--
Electric $1,197,060 $1,170,010 $1,064,418
Gas 235,862 228,257 210,965
Environmental services 41,187 40,124 31,400
Other 331,792 323,508 259,115
---------- ---------- ----------
Total assets $1,805,901 $1,761,899 $1,565,898
========== ========== ==========
Other information:
Construction and nuclear fuel
expenditures--
Electric $ 113,836 $ 139,805 $ 113,252
Gas 19,683 18,876 13,974
Other 6,169 18,538 45,606
---------- ---------- ----------
Total construction and
nuclear fuel
expenditures $ 139,688 $ 177,219 $ 172,832
========== ========== ==========
Provision for depreciation
and amortization--
Electric $ 65,195 $ 53,398 $ 49,554
Gas 8,082 7,329 6,578
Other 8,203 8,385 3,817
---------- ---------- ----------
Total provision for
depreciation $ 81,480 $ 69,112 $ 59,949
========== ========== ==========
(a) Excludes the effects of affordable housing and historical tax
credits of $4.8 million, $5.2 million and $7.8 million in 1994, 1993
and 1992, respectively.
NOTE 13. ACQUISITIONS:
On August 31, 1993, the Company issued 515,993 shares of Company common
stock in exchange for the outstanding common and preferred stock of Jones
and Neuse, Inc. ("JN"), a 250-employee environmental consulting and
engineering service firm based in Austin, Texas. This transaction was
accounted for as a pooling of interests. The Company positioned JN as a
service region of its own 550-employee environmental consulting and
engineering company, RMT, a subsidiary of HDC.
In February 1993, HDC acquired A&C Enercom Consultants, Inc., a Georgia
corporation, for cash and new shares of the Company's common stock. A&C
Enercom provides demand-side management and energy-related consulting
services, primarily to public electric and gas utility companies.
NOTE 14. CONSOLIDATED QUARTERLY FINANCIAL DATA (Unaudited):
Seasonal factors significantly affect WPL and, therefore, the data
presented below should not be expected to be comparable between quarters
nor necessarily indicative of the results to be expected for an annual
period.
The amounts below were not audited by independent public accountants, but
reflect all adjustments necessary, in the opinion of the Company, for a
fair presentation of the data.
Operating Operating Earnings
Quarter Ended Revenues Income Net Income Per Share
1994: (in thousands except for per-share data)
March 31 $234,178 $47,245 $26,369 $.87
June 30 181,285 20,864 10,303 .33
September 30 193,706 33,515 15,309 .50
December 31 209,555 28,385 13,269 .43
1993:
March 31 $209,250 $36,490 $19,766 $.70
June 30 173,631 19,872 7,190 .24
September 30 173,869 29,358 13,258 .44
December 31 216,307 40,463 22,309 .73
<PAGE>
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The information required by Item 10 relating to directors and
nominees for election as directors at the Company's 1995 Annual Meeting of
Shareowners is incorporated herein by reference to the information under
the caption "Election of Directors" in the Company's Proxy Statement for
its 1995 Annual Meeting of Shareowners (the "1995 Proxy Statement"). The
1995 Proxy Statement will be filed with the Securities and Exchange
Commission within 120 days after the end of the Company's fiscal year.
The information required by Item 10 relating to executive officers is
set forth in Part I of this Annual Report on Form 10-K. The information
required by Item 10 relating to delinquent filers is incorporated herein
by reference to the information under the caption "Compliance with Section
16(a) of the Securities Exchange Act of 1934" in the 1995 Proxy Statement.
ITEM 11. EXECUTIVE COMPENSATION
The information required by Item 11 is incorporated herein by
reference to the information under the captions "Compensation of Executive
Officers" and "Compensation of Directors" (but not including the Report of
the Compensation and Personnel Committee on Executive Compensation) in the
1995 Proxy Statement. The 1995 Proxy Statement will be filed with the
Securities and Exchange Commission within 120 days after the end of the
Company's fiscal year.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The information required by Item 12 is incorporated herein by
reference to the information under the caption "Ownership of Voting
Securities" in the 1995 Proxy Statement. The 1995 Proxy Statement will be
filed with the Securities and Exchange Commission within 120 days after
the end of the Company's fiscal year.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The information required by Item 13 is incorporated by reference
to the information under the caption "Compensation of Executive Officers"
(but not including the Report of the Compensation and Personnel Committee
on Executive Compensation) in the 1995 Proxy Statement. The 1995 Proxy
Statement will be filed with the Securities and Exchange Commission within
120 days after the end of the Company's fiscal year.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM
8-K
(a) (1) Consolidated Financial Statements
Included in Part II of this report:
Report of Independent Public Accountants
Consolidated Statements of Income for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Balance Sheets, December 31, 1994 and 1993
Consolidated Statements of Cash Flows for the Years Ended
December 31, 1994, 1993 and 1992
Consolidated Statements of Capitalization, December 31,
1994 and 1993
Consolidated Statements of Common Shareowners' Investment
Notes to Consolidated Financial Statements
(a) (2) Financial Statement Schedules
For each of the years ended December 31, 1994, 1993 and 1992
Schedule I. Parent Company Financial Statements
Schedule II. Valuation and Qualifying Accounts and
Reserves
All other schedules are omitted because they are not applicable
or not required, or because that required information is shown
either in the consolidated financial statements or in the notes
thereto.
(a) (3) Exhibits
The following Exhibits are filed herewith or incorporated herein
by reference. Documents indicated by an asterisk (*) are
incorporated herein by reference.
3A* Restated Articles of Incorporation (incorporated by
reference to Exhibit 4.1 to the Company's Form S-3
Registration Statement No. 33-59972)
3B By-Laws of the Company as revised to February 23, 1994
4A* Indenture of Mortgage or Deed of Trust dated August 1,
1941, between WPL and First Wisconsin Trust Company and
George B. Luhman, as Trustees, incorporated by reference
to Exhibit 7(a) in File No. 2-6409, and the indentures
supplemental thereto dated, respectively, January 1,
1948, September 1, 1948, June 1, 1950, April 1, 1951,
April 1, 1952, September 1, 1953, October 1, 1954,
March 1, 1959, May 1, 1962, August 1, 1968, June 1,
1969, October 1, 1970, July 1, 1971, April 1, 1974,
December 1, 1975, May 1, 1976, May 15, 1978, August 1,
1980, January 15, 1981, August 1, 1984, January 15,
1986, June 1, 1986, August 1, 1988, December 1, 1990,
September 1, 1991, October 1, 1991, March 1, 1992, May
1, 1992, June 1, 1992 and July 1, 1992 (incorporated by
reference to Second Amended Exhibit 7(b) in File No.
2-7361; Amended Exhibit 7(c) incorporated by reference
to File No. 2-7628; Amended Exhibit 7.02 in File No.
2-8462; Amended Exhibit 7.02 in File No. 2-8882; Second
Amendment Exhibit 4.03 in File No. 2-9526; Amended
Exhibit 4.03 in File No. 2-10406; Amended Exhibit 2.02
in File No. 2-11130; Amended Exhibit 2.02 in File No.
2-14816; Amended Exhibit 2.02 in File No. 2-20372;
Amended Exhibit 2.02 in File No. 2-29738; Amended
Exhibit 2.02 in File No. 2-32947; Amended Exhibit 2.02
in File No. 2-38304; Amended Exhibit 2.02 in File No.
2-40802; Amended Exhibit 2.02 in File No. 2-50308;
Exhibit 2.01(a) in File No. 2-57775; Amended Exhibit
2.02 in File No. 2-56036; Amended Exhibit 2.02 in File
No. 2-61439; Exhibit 4.02 in File No. 2-70534; Amended
Exhibit 4.03 File No. 2-70534; Exhibit 4.02 in File No.
33-2579; Amended incorporated by reference to Exhibit
4.03 in File No. 33-2579; Amended Exhibit 4.02 in File
No. 33-4961; Exhibit 4B to WPL's Form 10-K for the year
ended December 31, 1988, Exhibit 4.1 to WPL's Form 8-K
dated December 10, 1990, Amended Exhibit 4.26 in File
No. 33-45726, Amended Exhibit 4.27 in File No.33-45726,
Exhibit 4.1 to WPL's Form 8-K dated March 9, 1992,
Exhibit 4.1 to WPL's Form 8-K dated May 12, 1992,
Exhibit 4.1 to WPL's Form 8-K dated June 29, 1992 and
Exhibit 4.1 to WPL's Form 8-K dated July 20, 1992)
4B* Rights Agreement, dated as of February 22, 1989, between
the Company and Morgan Shareholder Services Trust
Company (incorporated by reference to Exhibit 4 to the
Company's current report on Form 8-K dated February 27,
1989)
10A*# Executive Tenure Compensation Plan, as revised November
1992 (incorporated by reference to Exhibit 10A to the
Company's Form 10-K for the year ended December 31,
1992)
10B*# Form of Supplemental Retirement Plan, as revised
November 1992 (incorporated by reference to Exhibit 10B
to the Company's Form 10-K for the year ended December
31, 1992)
10C*# Forms of Deferred Compensation Plans, as amended June,
1990 (incorporated by reference to Exhibit 10C to the
Company's Form 10-K for the year ended December 31,
1990)
10C.1*# Officer's Deferred Compensation Plan II, as adopted
September 1992 (incorporated by reference to Exhibit
10C.1 to the Company's Form 10-K for the year ended
December 31, 1992)
10C.2*# Officer's Deferred Compensation Plan III, as adopted
January 1993 (incorporated by reference to Exhibit 10C.2
to the Company's Form 10-K for the year ended December
31, 1993)
10D*# Pre-Retirement Survivor's Income Supplemental Plan, as
revised November 1992 (incorporated by reference to
Exhibit 10F to the Company's Form 10-K for the year
ended December 31, 1992)
10E*# Wisconsin Power and Light Company Management Incentive
Plan (incorporated by reference to Exhibit 10H to the
Company's Form 10-K for the year ended December 31,
1992)
10F# Deferred Compensation Plan for Directors, as amended
January 17, 1995
10G*# WPL Holdings, Inc. Long-Term Equity Incentive Plan
(incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
10H*# Key Executive Employment and Severance Agreement by and
between WPL Holdings, Inc., and E.B. Davis, Jr.
(incorporated by reference to Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
10I*# Form of Key Executive Employment and Severance Agreement
by and between WPL Holdings, Inc. and each of L.W.
Ahearn, W.D. Harvey, E.G. Protsch and A.J. Amato
(incorporated by reference to Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1994)
10J*# Form of Key Executive Employment and Severance Agreement
by and between WPL Holdings, Inc. and each of E.M.
Gleason, B.J. Swan, D.A. Doyle, N.E. Boys, D.E.
Ellestad, P.J. Wegner and K.K. Zuhlke (incorporated by
reference to Exhibit 4.4 to the Company's Quarterly
Report on Form 10-Q for the quarter ended June 30, 1994)
10K*# Restricted Stock Agreement -- Lance Ahearn (incorporated
by reference to Exhibit 10J to the Company's Form 10-K
for the year ended December 31, 1992)
10L# Restricted Stock Agreement -- Erroll B. Davis
10M# Summary of Heartland Development Corporation Short-
Term Incentive Plan
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
99* 1995 Proxy Statement for the Annual Meeting of
Shareowners to be held May 17, 1995 [The Proxy Statement
for the 1995 Annual Meeting of Shareowners will be filed
with the Securities and Exchange Commission under
Regulation 14A within 120 days after the end of the
Company's fiscal year; except to the extent incorporated
by reference, the Proxy Statement for the 1995 Annual
Meeting of Shareowners shall not be deemed to be filed
with the Securities and Exchange Commission as part of
this Annual Report on Form 10-K]
Pursuant to Item 601(b)(4)(iii) of Regulation S-K, the Company
hereby agrees to furnish to the Securities and Exchange
Commission, upon request, any instrument defining the rights of
holders of unregistered long-term debt not filed as an exhibit
to this Form 10-K. No such instrument authorizes securities in
excess of 10 percent of the total assets of the Company.
# - A management contract or compensatory plan or arrangement.
(b) Reports on Form 8-K.
None
<PAGE>
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 on the 22nd day of February, 1995.
WPL HOLDINGS, INC.
By:/s/ Erroll B. Davis, Jr.
Erroll B. Davis, Jr.
President and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities indicated on the 22nd day of
February 1995.
/s/ Erroll B. Davis, Jr. President, Chief Executive Officer
Erroll B. Davis, Jr. and Director (principal executive
officer)
/s/ Edward M. Gleason Vice President, Treasurer and Corporate
Edward M. Gleason Secretary (principal financial officer)
/s/ Daniel A. Doyle Vice President - Finance, Controller
Daniel A. Doyle and Treasurer - Wisconsin Power and
Light Company (principal accounting
officer)
/s/ Les Aspin Director /s/ Milton E. Neshek Director
Les Aspin Milton E. Neshek
/s/ L. David Carley Director /s/ Henry C. Prange Director
L. David Carley Henry C. Prange
/s/ Rockne G. Flowers Director /s/ Judith D. Pyle Director
Rockne G. Flowers Judith D. Pyle
/s/ Donald R. Haldeman Director /s/ Henry F. Scheig Director
Donald R. Haldeman Henry F. Scheig
/s/ Katharine C. Lyall Director /s/ Carol T. Toussaint Director
Katharine C. Lyall Carol T. Toussaint
/s/ Arnold M. Nemirow Director
Arnold M. Nemirow
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To WPL Holdings, Inc.:
We have audited in accordance with generally accepted auditing standards,
the consolidated financial statements included in the 1994 Form 10-K of
WPL Holdings, Inc. and have issued our report thereon dated February 1,
1995. Our audit was made for the purpose of forming an opinion on those
statements taken as a whole. Supplemental Schedules I and II are the
responsibility of the Company's management and are presented for purposes
of complying with the Securities and Exchange Commission's rules and are
not part of the basic consolidated financial statements. These schedules
have 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.
Milwaukee, Wisconsin, ARTHUR ANDERSEN LLP
February 1, 1995
<PAGE>
WPL HOLDINGS, INC.
INDEX TO FINANCIAL STATEMENT SCHEDULES
FOR THE YEARS ENDED DECEMBER 31, 1994, 1993 AND 1992
FINANCIAL STATEMENT SCHEDULES:
I. Parent Company Financial Statements
II. Valuation and Qualifying Accounts and Reserves
NOTE: All other schedules are omitted because they are not
applicable or not required, or because that required
information is shown either in the financial statements or in
the notes thereto.
<PAGE>
SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
<TABLE>
WPL HOLDINGS, INC.
(Parent Company Only)
STATEMENTS OF INCOME AND REINVESTED EARNINGS
<CAPTION>
As of December 31,
1994 1993 1992
(In Thousands)
<S> <C> <C> <C>
Income:
Cash dividends................................ $59,010 $56,068 $51,385
Undistributed subsidiary earnings (loss):
Heartland Development Corporation......... (4,706) 1,337 857
Wisconsin Power and Light Company......... 12,173 5,850 4,243
Investment income and other................... 681 33 182
------ ------- ------
67,158 63,288 56,667
------ ------- ------
Expenses:
Operating (Note D)........................... 1,978 1,018 90
Interest and other............................ 842 805 658
------ ------ ------
2,820 1,823 748
------ ------ ------
Income before income tax benefit.................. 64,338 61,465 55,919
------ ------ ------
Income tax benefit (expense):
Current....................................... 974 750 372
Deferred...................................... (62) 308 730
------ ------ ------
912 1,058 1,102
------ ------ ------
Net income........................................ 65,250 62,523 57,021
------ ------ ------
Reinvested earnings, beginning of year............ 284,745 276,968 270,266
Cash dividends................................ (59,010) (55,626) (50,201)
Expense of issuing preferred stock............ 0 (1,082) 0
Other......................................... 2,063 1,962 (118)
------- ------- -------
Reinvested earnings at end of year................ $293,048 $284,745 $276,968
======= ======= =======
</TABLE>
The accompanying notes are an integral part of these state
<PAGE>
SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPL HOLDINGS, INC.
(Parent Company Only)
BALANCE SHEET
As of December 31,
1994 1993
(In Thousands)
ASSETS
Current assets:
Cash and equivalents........................ $1,061 $8,642
Accounts receivable - affiliates (Note B)... 187 109
Notes receivable - affiliates (Note B)..... 28,471 24,948
-------- --------
29,719 33,699
-------- --------
Accounts receivable from WPL Holding DRIP....... 250 150
-------- -------
Tax benefit receivable.......................... 1,219 2,156
-------- -------
Property and equipment.......................... 1,009 1,023
-------- -------
Investments and other........................... 267 677
-------- -------
Investments in Subsidiaries, at equity:
Heartland Development Corporation........... 66,834 71,439
Wisconsin Power and Light Company........... 544,506 522,667
-------- -------
611,340 594,106
Deferred income taxes........................... 372 372
-------- --------
Total Assets.................................... $644,176 $632,183
======== ========
LIABILITIES AND CAPITALIZATION
Current liabilities:
Short term debt (Note C)................... $11,500 $32,958
Accounts payable - affiliates (Note B)..... (149) 4,727
Accounts payable............................ 3 3
Accrued taxes............................... (912) (94)
Accrued interest and other.................. 220 739
Dividends payable........................... 228 148
------- -------
10,890 38,481
Long-term debt.................................. 34,000 10,463
Deferred taxes.................................. 274
Deferred credit................................. 1,214 273
------- -------
35,488 10,736
------- -------
Capitalization:
Common shareowners' investment:
Common stock, $.01 par value, authorized
100,000,000 shares; issued and
outstanding -- 30,773,588 shares and
30,438,654 shares at December 31,
1994 and 1993, respectively............. 308 305
Additional paid-in-capital................ 304,442 297,916
Reinvested earnings....................... 293,048 284,745
-------- --------
Total Capitalization.................. 597,798 582,966
-------- --------
Total Capitalization and Liabilities............ $644,176 $632,183
======== ========
The accompanying notes are an integral part of these statements.
<PAGE>
SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPL HOLDINGS, INC.
(Parent Company Only)
<TABLE>
STATEMENT OF CASH FLOWS
<CAPTION>
As of December 31,
1994 1993 1992
(In Thousands)
<S> <C> <C> <C>
Cash flows generated from (used for) operating
activities:
Net income....................................... $65,250 $62,523 $57,021
Undistributed earnings of subsidiaries........... (7,467) (7,187) (5,100)
Equity Investments in subsidiaries and other..... (9,649) (77,196) (17,818)
Depreciation..................................... 13 12 3
Deferred income taxes............................ (62) (308) (730)
Changes in assets and liabilities:
Receivables.................................. (2,764) 3,703 (11,218)
Investments.................................. 7 (553) 780
Accounts payable............................. (4,876) (3,798) 5,747
Accrued taxes................................ (818) (94) (199)
Accrued interest and other................... (519) 36 368
Dividends payable............................ 80 (165) (10)
Other........................................ 355 (27) (16)
Net cash generated from (used for)
operating activities................... 39,550 (23,054) 28,828
Cash flows generated from (used for) financing
activities:
Issuance of common stock......................... -- 58,575 --
Common stock issuance expense.................... -- (1,888) --
Issuance of long-term debt....................... 23,537 -- --
Long-term debt maturities........................ (56) -- (57)
Net change in short term debt.................... (21,402) 13,807 3,773
Common stock cash dividends less dividends
reinvested.................................... (49,357) (40,342) (32,668)
Other............................................ 147 1,205 (1,144)
Net cash (used for) generated from
financincing activities................. (47,131) 31,357 (30,096)
Cash flows generated from (used for) investing
activities:
Purchase of property and equipment............... -- -- (39)
Net cash used for investing activities........ -- -- (39)
Net (decrease) increase in cash and equivalents...... (7,581) 8,303 (1,307)
Cash and equivalents at beginning of year............ 8,642 339 1,646
Cash and equivalents at end of year.................. $1,061 $8,642 $339
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on debt............................. $2,097 $627 $658
Income taxes................................. $16,412 $14,685 $17,411
Noncash financing activities:
Dividends reinvested......................... $9,653 $15,284 $17,533
</TABLE>
The accompanying notes are an integral part of these statements.
<PAGE>
SCHEDULE I - CONDENSED
PARENT COMPANY FINANCIAL STATEMENTS
WPL HOLDINGS, INC.
Supplemental Notes to Parent Company Only Financial Statements
The following are supplemental notes to the WPL Holdings, Inc. (the
"Company") Parent Company Financial Statements and should be read in
conjunction with the Consolidated Financial Statements and Notes thereto
included in the WPL Holdings, Inc. 1994 Annual Report, which are hereby
incorporated herein by reference.
Note A. The parent company files a consolidated federal income tax return
with its subsidiaries.
Note B. Net amounts due to (due from) affiliates result from intercompany
transactions including loans, federal income tax liabilities and
an administrative allowance.
Note C. Information regarding short-term debt is as follows:
1994 1993
(In Thousands)
As of end of year:
Notes payable outstanding................ $11,500 $32,958
Interest rates on notes payable.......... 6.06% 3.58%
For the year ended:
Maximum month-end amount of short-term
debt................................... $52,500 $36,000
Average amount of short-term debt........ $36,462 $25,827
Average interest rate on short-term debt. 4.56% 3.37%
Note D. During 1994, 1993 and 1992, Wisconsin Power and Light Company
allocated and billed certain administrative and general expenses to the
Company using an allocation method approved by the Public Service
Commission of Wisconsin. These expenses totalled $759,000, $777,000 and
$867,000 during 1994, 1993 and 1992, respectively.
<PAGE>
SCHEDULE II
WPL HOLDINGS, INC. AND SUBSIDIARIES
<TABLE>
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
($ In Thousands)
<CAPTION>
Additions
Balance at Charged to Balance a
beginning costs and end of
Description of period expenses Deductions period
<S> <C> <C> <C> <C>
Year ended December 31, 1994:
Allowance for doubtful accounts... $1,662 $1,027 $725 [1] $1,964
===== ===== === ======
Year ended December 31, 1993:
Allowance for doubtful accounts... $732 $1,540 $610 [1] $1,662
==== ===== === ======
Year ended December 31, 1992:
Allowance for doubtful accounts... $949 $115 $332 [1] $732
==== ===== === ====
<FN>
[1] Uncollectible accounts written off, net of recoveries.
</TABLE>
<PAGE>
EXHIBIT INDEX
Exhibit
No. Description
3B By-Laws of as revised to February 23, 1994
10F Deferred Compensation Plan for Directors, as amended
January 17, 1995
10L Restricted Stock Agreement -- Erroll B. Davis
10M Summary of Heartland Development Corporation Short-
Term Incentive Plan
21 Subsidiaries of the Company
23 Consent of Independent Public Accountants
27 Financial Data Schedule
BYLAWS OF
WPL HOLDINGS, INC.
Revised At February 23, 1994
ARTICLE I
SEAL
The corporate seal shall have inscribed thereon the name of the
corporation and the words "Corporate Seal, Wisconsin".
ARTICLE II
Stocks and Transfers
Section 1 - Each holder of fully paid stock shall be entitled to a
certificate or certificates of stock, stating the number of shares owned
by such shareowner and the designation of the Class and Series in which
issued. All stock certificates shall be signed by the President or the
Vice President and by the Secretary of the Company, and be sealed with the
corporate seal of the Company, which seal may be facsimile, engraved or
printed. If and when a Transfer Agent and/or a Registrar shall have been
appointed by the Board with respect to the shares of any class of stock,
or series thereof, of the Company, the certificates representing such
shares shall also be countersigned by such Transfer Agent and/or
countersigned and registered by such Registrar, as the case may be.
Certificates which have been countersigned by a Transfer Agent and
countersigned and registered by a Registrar, in both cases duly appointed
by the Board of Directors for such purpose, may bear the signatures of the
President or the Vice President and the Secretary of the Company in
facsimile, engraved or printed; provided, that no certificate bearing the
facsimile signatures of the Officers of the Company shall be valid or
effective for any purpose unless and until it shall have been so
countersigned and registered. In case any such Officer who has signed any
stock certificate, or whose facsimile signature has been placed thereon,
shall have ceased to be such Officer before such certificate is issued,
such certificate may be issued by the Company with the same effect as if
such Officer had not ceased to be such at the date of its issue.
Section 2 - The stock of the Company shall be divided into such
Classes, with such relative rights and preferences, as shall be provided
by the Articles of Organization of the Company as the same may from time
to time be amended in accordance with the laws of Wisconsin.
Section 3 - Shares of stock shall be transferable only on the books
of the Company; and upon proper endorsement and surrender of the
outstanding certificates representing the same. Subject to such
conditions as the Board of Directors may, by Resolution, establish: (a)
If an outstanding certificate of stock shall be lost, destroyed or stolen,
the holder thereof may have a new certificate issued, upon producing
evidence satisfactory to the Officers of the Company, of such loss,
destruction or theft; and upon furnishing to the Company a bond of
indemnity, surety bond, or such other assurance as the Officers may
require. (b) Where any outstanding certificates of stock are deemed
abandoned by the holder thereof, pursuant to the unclaimed property or
escheatment laws of any state having jurisdiction thereof, the Officers of
the Company are authorized and directed to cause the transfer and delivery
of said certificates or to cause the issuance of replacement certificates,
to such person or persons as may be entitled thereto in accordance with
such escheatment laws.
Section 4 - Transfer books may be closed by order of the Board of
Directors for short periods, not exceeding forty days at any one time, for
any legal purpose, as the Board of Directors shall deem advisable.
ARTICLE III
Meetings of Shareowners
Section 1 - The Annual Meeting of the Shareowners shall be held on
the fourth Wednesday in May of each year (or if such day be a legal
holiday in Wisconsin, then upon the following day); or on such other day
of each year as the Board of Directors may determine. Each such meeting
shall be held at the hour of 10:00 o'clock A.M. at the office of the
Company in Madison, Wisconsin, unless the Board of Directors shall
otherwise order. The Annual Meeting shall be held for the purposes of
electing Directors, selecting the Company's independent auditors and of
transacting such other business as may properly come before the meeting.
Section 2 - Special Meetings of the shareowners may be called by the
Chairperson of the Board; the Chief Executive Officer; or by the Board of
Directors; or by the Secretary when requested by the owners of shares of
outstanding voting stock having in the aggregate a number of votes at
least equal to one-fifth of the aggregate number of votes possessed by all
such owners; or in such other manner as may be provided by statute.
Section 3 - Notice of the time and place of each Annual or Special
Meeting of Shareowners shall be sent by mail to the recorded address of
each shareowner not less than ten days before the date of the meeting,
except in cases where other special method of notice may be required by
statute, in which case the statutory method shall be followed. The notice
of a special meeting shall state the object of the meeting. Notice of any
meeting of the shareowners may be waived by any shareowners.
Section 4 - At all meetings of shareowners, the representation of
owners of that number of shares of stock entitled to vote at such meeting
having in the aggregate a number of votes at least equal to a majority of
the aggregate number of votes entitled to vote at such meeting shall be
necessary to constitute a quorum for the transaction of any business,
other than (a) adjourning from time to time until a quorum shall be
obtained, or (b) adjourning sine die, and for any such adjournment a
majority vote of whatever shares of stock shall be represented shall be
sufficient.
Section 5 - The Chairperson of the Board when he or she is the Chief
Executive Officer, and when he or she is not the Chief Executive Officer
or in his or her absence or at his or her request the President, and in
the absence of both the Chairperson of the Board and the President then a
Vice President, and if no Vice President be in attendance at the meeting
then a Director selected by the Directors attending the meeting, or if no
selection is made then the Director in attendance with the longest tenure
in such office, shall preside at each meeting of shareowners, and the
Secretary of the Company shall act as Secretary of each shareowner
meeting.
Section 6 - Any shareowner having the right to vote at a meeting of
shareowners may exercise such right by voting in person or by proxy at
such meeting.
ARTICLE IV
Board of Directors
Section 1 - The number of Directors constituting the Board of
Directors shall be a minimum of seven (7) and a maximum of thirteen (13).
Whenever a vacancy(ies) occurs on the Board of Directors such that there
are less than seven (7) Directors remaining, the remaining Directors shall
constitute the Board of Directors until the vacancy(ies) are filled by a
vote of the majority of the Directors remaining in office, even if less
than a quorum, said vacancy(ies) to be filled as soon as reasonably
possible. When there are seven (7) or more Directors and a vacancy
occurs, including a vacancy created by an increase in the number of
Directors, it shall be filled or not filled at the discretion of the Board
of Directors.
Section 2 - No person who has attained 70 years of age shall be
eligible for election or reelection to the Board of Directors. Any
Director who has attained 70 years of age shall resign from the Board of
Directors effective as of the next Annual Meeting of Shareowners. Except
for the Chief Executive Officer, any Officer or employee of the Company
serving as a Director who retires or resigns from his or her office or
employment with the Company shall simultaneously resign from the Board of
Directors. Any Director who is unavailable for reasonably regular
attendance at meetings of the Board shall resign as a Director.
Section 3 - The Board of Directors may hold regular or special
meetings in or outside the State of Wisconsin.
Section 4 - A regular meeting of the Board of Directors shall be held
within 30 days after the Annual Meeting of Shareowners in each year,
provided a quorum for such meeting can be obtained, and thereafter regular
meetings of the Board of Directors shall be held at such time and place
and in such manner as may be determined by the Board, at such hour as the
notice of meeting may provide.
Section 5 - Special meetings of the Board may be called at any time
by the Chairperson, the Chief Executive Officer, or in the absence of the
Chairperson when Chief Executive Officer, by the President, or by a Vice
President when acting as Chief Executive Officer, or by any two Directors,
by mailing to each Director, not less than three days before the time of
such meeting, a written notice stating the time and place and manner of
holding such meeting.
Section 6 - (a) Any or all members of the Board of Directors, or any
committee thereof, may participate in a regular or special meeting by, or
to conduct the meeting through, the use of any means of communication by
which any of the following occurs:
1) All participating directors may simultaneously hear each
other during the meeting.
2) All communication during the meeting is immediately
transmitted to each participating director, and each
participating director is able to immediately send messages
to all other participating directors.
(b) If a meeting is conducted by the means of communication
described herein, all participating directors shall be
informed that a meeting is taking place at which official
business may be transacted.
(c) A director participating in a meeting by means of such
communication is deemed to be present in person at the
meeting.
Section 7 - Notice of any meeting of the Board may be waived by any
Director.
Section 8 - A majority of the Board of Directors shall constitute a
quorum for the transaction of business at any meeting of the Board, but a
fewer number may adjourn the meeting to some other day or sine die. The
person designated by Section 5 of Article III above shall preside at
meetings of the Board of Directors, and the Secretary shall act as
Secretary. The members of the Board who are Officers or employees of the
Company shall receive no separate fee for serving as a Director of the
Company. Other members of the Board shall be paid such fees as the Board
shall from time to time determine by resolution.
ARTICLE V
Committees
Section 1 - The Board of Directors may, by resolution passed by a
majority of the whole Board, designate from their number an Executive
Committee of such number, not less than three, as the Board may fix from
time to time.
The Executive Committee may make its own rules of procedure and shall meet
where and as provided by such rules, or by resolution of the Board of
Directors. A majority of the members of the Committee shall constitute a
quorum for the transaction of business. During the intervals between the
meetings of the Board of Directors, the Executive Committee shall have all
the powers of the Board in the management of the business and affairs of
the Company, including power to authorize the seal of the Company to be
affixed to all papers which may require it, and, by majority vote of all
its members, exercise any and all such powers in such manner as such
Committee shall deem best for the interests of the Company, in all cases
in which specific directions shall not have been given by the Board of
Directors.
Section 2 - The Board of Directors may, by resolution passed by a
majority of the whole Board, designate from their number various
Committees from time to time as corporate needs may dictate. The
Committees may make their own rules of procedure and shall meet where and
as provided by such rules, or by resolution of the Board of Directors. A
majority of the members of the Committee shall constitute a quorum for the
transaction of business.
Section 3 - An Audit Committee is hereby established, and shall
consist of at least three (3) members all of whom shall be outside members
of the Board of Directors. The Chairperson and the members of the
Committee shall be elected by a majority vote of the members of the Board
of Directors at the Annual Board Meeting following the Annual Meeting of
Shareowners, except that any vacancies on said Committee may be filled at
any time by action of the Board of Directors. Said Committee shall meet
at the call of any one of its members, but in no event shall it meet less
than once a year. Such meeting may be held on a day separate from or the
same as the regular monthly meeting of the Board of Directors. Subsequent
to each such Committee meeting, a report of the actions taken by such
Committee shall be made to the Board of Directors.
The functions of said Committee shall be to:
1. Recommend to the shareowners the independent auditors of the
Company.
2. Discuss with the independent auditors the scope of their audit.
3. Discuss with the independent auditors and the management the
Company's accounting principles, policies and practices and its
reporting policies and practices.
4. Discuss with the independent auditors the results of their audit.
5. Discuss with the independent auditors the adequacy of the
Company's or any of its subsidiaries accounting, financial and
operating controls.
6. Discuss with appropriate officers and staff the scope and results
of internal audits and initiate such accounting principles,
policies and practices, and reporting policies and practices as
it may deem necessary or proper.
7. Approve or disapprove annually, each defined group of non-audit
services performed by the independent auditors, which
consideration may occur before or after performance, giving due
regard to the possible effect of such performance upon the
independence of the independent auditors; and, if considered
prior to such performance, shall include a limitation upon the
magnitude of such services.
Section 4 - A Compensation and Personnel Committee is hereby
established. Said Committee shall consist of at least three (3) Directors
who are not and never have been officers, employees or legal counsel of
the Company. The Chairperson and the members of the Compensation and
Personnel Committee shall be elected by a majority vote of the members of
the Board of Directors at the Annual Board Meeting following the Annual
Meeting of Shareowners, except that any vacancies on said Committee may be
filled at any time by action of the Board of Directors. The Committee
shall have the following powers and responsibilities:
1. Review and recommend to the Board new employee benefit plans
or changes, i.e. pension, life, hospital, disability, etc.
2. Review major provisions of any negotiated union contract
prior to or during negotiations.
3. Review and approve any executive officer employment
contracts.
4. Review human resource development programs.
5. Review management development programs.
6. Review the internal equity and external competitiveness of
all executive, management and salary pay grades.
7. Review and authorize salary adjustments for all management
payroll, and non-executive officers' pay grades as a group.
All salary ranges and performance for executive officers
shall be reviewed individually by the Committee.
8. Review as a group overall adjustments for all non-management
payroll salary grades.
9. Review personnel budgets.
Said Committee shall meet at such times as it determines, but at
least twice each year, and shall meet at the request of the Chief
Executive Officer, President or any Committee member. Such meeting may be
held on a day separate from or the same as the regular monthly meeting of
the Board of Directors. Subsequent to each such Committee meeting, a
report of the actions taken by such Committee shall be made to the Board
of Directors.
Section 5 - A Nominating Committee shall be established and shall
consist of at least three (3) members, all of whom shall be outside
members of the Board of Directors. The Chairperson and the members of the
Committee shall be elected by a majority vote of the members of the Board
of Directors at the Annual Board Meeting following the Annual Meeting of
Shareowners, except that any vacancies on said Committee may be filled at
any time by action of the Board of Directors. Said Committee shall meet
at the call of any one of its members, but in no event shall it meet less
than once a year for the express purpose of recommending nominees for
election to the Board at the Annual Meeting of Shareowners.
The function of this Committee shall be to recommend to the Board of
Directors nominations for election to the Board of Directors and to review
the appropriateness of continued membership on the Board of present Board
members.
Section 6 - The Executive and other Committees shall keep regular
minutes of their proceedings and report the same to the Board when
required.
Section 7 - A majority of the members of a committee shall constitute
a quorum for the transaction of business at any meeting of a committee of
the Board, but a fewer number may adjourn the meeting to some other day or
sine die. Each committee shall arrange for the keeping of its own
minutes.
ARTICLE VI
Officers
Section 1 - There shall be elected by the Board of Directors at its
first regular meeting after the Annual Meeting of Shareowners in each
year, a Chief Executive Officer, who may be designated either Chairperson
of the Board or President or both. The Board may elect a Chairperson of
the Board who is not designated the Chief Executive Officer. At the same
meeting the Board shall elect the following principal Officers, namely,
Vice Presidents with such designations as the Board of Directors at the
time may decide upon, a Treasurer and a Secretary. The Board may also
elect a Controller or assign the duties of the Controller to another
officer. Any two of such offices, except those of President and Vice
President, those of Chairperson of the Board and Vice President, may be
held and the duties thereof may be performed by one person. The Board of
Directors in its discretion may also elect for any year one or more
Assistant Secretaries, one or more Assistant Treasurers, one or more
Assistant Controllers, and such other Officers as may from time to time be
provided for by the Board of Directors. All Officers unless sooner
removed shall hold their respective offices until the first regular
meeting of the Board of Directors after the next succeeding Annual Meeting
of Shareowners and until their successors, willing to serve, shall have
been elected, but any Officer may be removed from office at any time at
the pleasure of the Board of Directors. All Officers shall be bonded in
such form, in such amounts, and with such sureties as determined by the
Board of Directors.
Section 2 - Subject to the control of the Board of Directors the
Chief Executive Officer designated by the Board of Directors shall have
and be responsible for the general management and direction of the
business of the Company, shall establish the lines of authority and
supervision of the Officers and employees of the Company, shall have the
power to appoint and remove and discharge any and all agents and employees
of the Company not elected or appointed directly by the Board of
Directors, and shall assist the Board in the formulation of policies of
the Company. The Chairperson of the Board if Chief Executive Officer may
delegate any part of his or her duties to the President, or to one or more
of the Vice Presidents of the Company.
Section 3 - The Chairperson of the Board if not designated as the
Chief Executive Officer of the Company shall assist the Board in the
formulation of policies and may make recommendations therefore.
Information as to the affairs of the Company in addition to that contained
in the regular reports shall be furnished to him or her on request. He or
she may make suggestions and recommendations to the Chief Executive
Officer regarding any matters relating to the affairs of the Company and
shall be available for consultation and advice.
Section 4 - The President when he or she is not designated as and
does not have the powers of the Chief Executive Officer shall have such
other powers and duties as usually devolve upon the President of a Company
and such other and further powers and duties as may from time to time be
prescribed by the Board of Directors or be delegated to him or her by the
Chairperson of the Board. In the absence or inability of the Chairperson
of the Board to act as Chief Executive Officer the powers and duties of
the Chief Executive Officer shall temporarily devolve upon the President.
Section 5 - The Vice Presidents shall have such powers and duties as
may be prescribed for him or her by the Board of Directors and by the
Chief Executive Officer.
Section 6 - The Secretary shall attend all meetings of the Board of
Directors, shall keep a true and faithful record thereof in proper books
to be provided for that purpose, and shall be responsible for the custody
and care of the corporate seal, corporate records and minute books of the
Company, and of all other books, documents and papers as in the practical
business operation of the Company shall naturally belong in the office or
custody of the Secretary, or shall be placed in his or her custody by the
Chief Executive Officer or by the Board of Directors. He or she shall
also act as Secretary of all shareowners' meetings, and keep a record
thereof. He or she shall, except as may be otherwise required by statute
or by these bylaws, sign, issue and publish all notices required for
meetings of shareowners and of the Board of Directors. He or she shall be
responsible for the custody of the stock books of the Company and shall
keep a suitable record of the addresses of shareowners. He or she shall
also be responsible for the collection, custody and disbursement of the
funds received for dividend reinvestment. He or she shall sign stock
certificates, bonds and mortgages, and all other documents and papers to
which his or her signature may be necessary or appropriate, shall affix
the seal of the corporation to all instruments requiring the seal, and
shall have such other powers and duties as are commonly incidental to the
office of Secretary, or as may be prescribed for him or her by the Chief
Executive Officer or by the Board of Directors.
Section 7 - The Treasurer shall have charge of, and be responsible
for, the collection, receipt, custody and disbursement of the funds of the
Company, and shall deposit its funds in the name of the Company in such
banks, trust companies, or safety vaults as the Board of Directors may
direct, and shall keep a proper record of cash receipts and disbursements.
He or she may, in the absence of the Secretary and Assistant Secretaries
sign stock certificates. He or she shall be responsible for the custody
of such books, receipted vouchers and other books and papers as in the
practical business operation of the Company shall naturally belong in the
office or custody of the Treasurer, or shall be placed in his or her
custody by the Chief Executive Officer, or by the Board of Directors. He
or she shall sign checks, drafts, and other paper providing for the
payment of money by the Company for operating purposes in the usual course
of business, and shall have such other powers and duties as are commonly
incidental to the office of Treasurer, or as may be prescribed for him or
her by the Chief Executive Officer or by the Board of Directors.
Section 8 - The Controller shall be the principal accounting Officer
of the Company. He or she shall have general supervision over the books
of accounts of the Company. He or she shall examine the accounts of all
Officers and employees from time to time and as often as practicable, and
shall see that proper returns are made of all receipts from all sources.
All bills, properly made in detail and certified, shall be submitted to
him or her, and he or she shall audit and approve the same if found
satisfactory and correct, but he or she shall not approve any voucher
unless charges covered by the voucher have been previously approved
through work orders, requisition or otherwise by the head of the
department in which it originated, or unless he or she shall be otherwise
satisfied of its propriety and correctness. He or she shall have full
access to all minutes, contracts, correspondence and other papers and
records of the Company relating to its business matters, and shall be
responsible for the custody of such books and documents as shall naturally
belong in the custody of the Controller and as shall be placed in his or
her custody by the Chief Executive Officer or by the Board of Directors.
The Controller shall have such other powers and duties as are commonly
incidental to the office of Controller, or as may be prescribed for him or
her by the Chief Executive Officer or by the Board of Directors.
Section 9 - The Assistant Secretaries, Assistant Treasurers and
Assistant Controllers shall respectively assist the Secretary, Treasurer
and Controller of the Company in the performance of the respective duties
assigned to such principal Officer, and in assisting his or her principal
Officer each assistant Officer shall to that extent and for such purpose
have the same powers as his or her principal Officer. The powers and
duties of any such principal Officer shall temporarily devolve upon an
assistant Officer in case of the absence, disability, death, resignation
or removal from office of such principal Officer.
Section 10 - In the event of the untimely death or absence or
inability to act of the Chief Executive Officer, his or her powers and
duties shall devolve temporarily in the following manner: first, any
former Chief Executive Officer who is a member of the board, next, to the
Board member with the longest tenure on the Board. Within sixty (60)
days, the temporary Chief Executive Officer shall notify the outside
members of the Board of the absence or inability to act of the Chief
Executive Officer and shall convene a meeting of the outside members of
the Board, who shall act as a Committee. The Committee shall determine
and evaluate all the facts pertinent to the Chief Executive Officer's
absence or inability to act, and then make such recommendations to the
Board of Directors as it deems appropriate under the circumstances. The
Board of Directors shall meet and act upon said recommendations within
thirty (30) days following the determinations of said Committee.
ARTICLE VII
Cash Management
Section 1 - Deposits - The funds of the Company shall be deposited to
its credit in such banks or trust companies ("depositories") as the
Treasurer shall designate or in the manner provided in Paragraph 5 of
Section 2 of this Article. All deposits in any depository shall be made
initially to the general account of the Company and not to any special
account, fund or deposit. All special accounts, funds or deposits shall
be created and maintained solely by transfers of funds from the general
account.
Section 2 - Withdrawals and Check Signing -
1. Funds shall be withdrawn only by Company check or draft except:
(a) to effect transfers of funds between Company accounts
maintained at one or more depositories, (b) as provided in
paragraph 5 of this Section 2 and Section 3 of this Article, or
(c) as provided by resolution of the Board of Directors.
2. No debts shall be contracted except for current expenses unless
authorized by the Board of Directors or the Executive Committee,
and no invoices shall be paid by the Treasurer unless audited and
approved by the Controller or by a person or committee
specifically authorized by the Board of Directors or the
Executive Committee to audit and approve invoices for payment.
3. Checks, drafts and notes drawn on any account or deposit of the
Company shall be valid instruments when signed on behalf of the
Company by the President or the Treasurer. Instruments may be
signed by the facsimile signature of the President or the
Treasurer.
4. For the purposes of this Section, a facsimile signature of any
Officer of the Company shall mean a stamp or perforation of that
Officer's signature. Each depository is authorized to honor
instruments signed in this manner provided the facsimile
resembles a specimen on file which has been certified by the
Secretary or other duly authorized Officer of the Company.
5. In addition to the provisions of Section 1 of this Article VII
the Treasurer of the Company is authorized to establish petty
cash funds, on an imprest basis. Each such account shall be
designated as a "Cashier's Trust Account" and shall be separately
maintained and accounted for by the cashier or other employee
assigned such responsibility by the Treasurer.
(a) Checks drawn on a Cashier's Trust Account may be signed and
countersigned on behalf of the Company by such employees as
the Treasurer or President may from time to time authorize
and designate; provided, however, that no such check shall
be signed and countersigned by the same person.
(b) No payment out of petty cash funds, whether by cash or
check, shall exceed $2,500.
6. Checks drawn on special accounts which the Company creates or
maintains for the payment of dividends may be signed by the
manual or facsimile signature of its Chief Executive Officer or
President and shall not require any countersignature.
7. All bonds and notes issued under an indenture or mortgage shall
be executed on behalf of the Company by the manual or facsimile
signature of its Chief Executive Officer, President or the
Treasurer and its Secretary unless otherwise provided by
resolution of the Board of Directors.
Section 3 - Special Withdrawals - The President or Treasurer of the
Company, or any person authorized in writing by any of the foregoing
Officers, is authorized to direct any depository:
(a) to charge amounts directly to the account of the Company
without the issuance of a check or draft of the Company, for
the purpose of paying principal of and interest on bonds and
notes issued by the Company, and
(b) to accept and process data submitted via electronic means or
by wire transfer for purposes of receipt or disbursement of
funds;
provided that such direction is in writing and describes the type of such
transactions permitted to be made by such depository.
ARTICLE VIII
Miscellaneous
Section 1 - All dividends shall be declared by a vote of the Board of
Directors.
Section 2 - The fiscal year of the Company shall close at the end of
December of each calendar year.
Section 3 - All or any shares of stock of any corporation owned by
this Company may be voted at any meeting of the shareowners of such
corporation by the Chief Executive Officer of this Company or such other
person as may be designated by the Board of Directors for that purpose,
upon any question that may be presented at such meeting, and the Chief
Executive Officer or such other person may, on behalf of the Company,
waive any notice of the calling of such meeting required by any statute or
by-law and consent to the holding of any such meeting without notice. The
Chief Executive Officer or such other person as may be designated by the
Board of Directors to vote stock owned by this Company shall have
authority to give to any person a written proxy, in the name of this
Company and under its corporate seal, to vote at any meeting of the
shareowners of any corporation all or any shares of stock of such
corporation owned by this Company, upon any question that may be presented
at such meeting, with full power to waive any notice of the calling of
such meeting required by any statute or by-law and to consent to the
holding of any such meeting without notice.
ARTICLE IX
Amendment or Repeal of Bylaws
These bylaws may be altered, amended or repealed by the Board of
Directors at any regular or special meeting of the Board, or at any Annual
Meeting or Special Meeting of Shareowners by the affirmative vote of
owners of shares of outstanding voting stock of the Company having in the
aggregate a number of votes at least equal to a majority of the aggregate
number of votes possessed by all such owners (provided it shall have been
stated in the notice calling any such Special Meeting of Shareowners that
it is proposed at such meeting to alter, amend or rescind the bylaws), or
in such other manner as may be provided by law or in the Restated Articles
of Organization.
ARTICLE X
Indemnification and Liability of
Corporate Directors and Officers
Section 1 - Definitions Applicable to Article X - In this Article X:
1. "Corporation" means WPL Holdings, Inc.
2. "Director or Officer" means any of the following:
a. A natural person who is or was a Director or Officer of the
Corporation.
b. A natural person who, while a Director or Officer of the
Corporation, is or was serving at the Corporation's request
as a Director, Officer, partner, trustee, member of any
governing or decision-making committee, employee or agent of
another corporation or foreign corporation, partnership,
joint venture, trust or other enterprise.
c. A natural person who, while a Director or Officer of the
Corporation, is or was serving an employee benefit plan
because his or her duties to the Corporation also impose
duties on, or otherwise involve services by, the person to
the plan or to participants in or beneficiaries of the plan.
d. Unless the context requires otherwise, the estate or personal
representative of a Director or Officer.
3. "Expenses" include fees, costs, charges, disbursements, attorney
fees and any other expenses incurred in connection with a
proceeding.
4. "Liability" includes the obligation to pay a judgment,
settlement, penalty, assessment, forfeiture or fine, including an
excise tax assessed with respect to an employee benefit plan, and
reasonable expenses.
5. "Party" includes a natural person who was or is, or who is
threatened to be made, a named defendant or respondent in a
proceeding.
6. "Proceeding" means any threatened, pending or completed civil,
criminal, administrative or investigative action, suit,
arbitration or other proceeding, whether formal or informal,
which involves foreign, federal, state or local law and which is
brought by or in the right of the Corporation or by any other
person.
Section 2 - Mandatory Indemnification -
1. The Corporation shall indemnify a Director or Officer, to the
extent he or she has been successful on the merits or otherwise
in the defense of a proceeding, for all reasonable expenses
incurred in the proceeding if the Director or Officer was a party
because he or she is a Director or Officer of the Corporation.
2. a. In cases not included under sub. 1., the Corporation shall
indemnify a Director or Officer against liability incurred by the
Director or Officer in a proceeding to which the Director or
Officer was a party because he or she is a Director or Officer of
the Corporation, unless liability was incurred because the
Director or Officer breached or failed to perform a duty he or
she owes to the Corporation and the breach or failure to perform
constitutes any of the following:
1) A willful failure to deal fairly with the Corporation or
its shareholders in connection with a matter in which the
Director or Officer has a material conflict of interest.
2) A violation of criminal law, unless the Director or
Officer had reasonable cause to believe his or her
conduct was lawful or no reasonable cause to believe his
or her conduct was unlawful.
3) A transaction from which the Director or Officer derived
an improper personal profit.
4) Willful misconduct.
b. Determination of whether indemnification is required under
this subsection shall be made under Section 3.
c. The termination of a proceeding by judgment, order,
settlement or conviction, or upon a plea of no contest or an
equivalent plea, does not, by itself, create a presumption
that indemnification of the Director or Officer is not
required under this subsection.
3. A Director or Officer who seeks indemnification under this
section shall make a written request to the Corporation.
4. a. Indemnification under this Article X is not required to the
extent limited by the articles of incorporation under
Section 180.048, Wis. Stats.
b. Indemnification under this Article X is not required if the
Director or Officer has previously received indemnification
or allowance of expenses from any person, including the
Corporation, in connection with the same proceeding.
Section 3 - Determination of Right to Indemnification - Unless
otherwise provided by the articles of incorporation or bylaws or by
written agreement between the Director or Officer and the Corporation, the
Director or Officer seeks indemnification under Section 2, 2. shall select
one of the following means for determining his or her right to
indemnification:
1. By a majority vote of a quorum of the Board of Directors
consisting of Directors not at the time parties to the same or
related proceedings. If a quorum of disinterested Directors
cannot be obtained, by majority vote of a committee duly
appointed by the Board of Directors and consisting solely of 2 or
more Directors not at the time parties to the same or related
proceedings. Directors who are parties to the same or related
proceedings may participate in the designation of members of the
committee.
2. By independent legal counsel selected by a quorum of the Board of
Directors or its committee in the manner prescribed in 1., above,
if unable to obtain such a quorum or committee, by a majority
vote of the full Board of Directors, including Directors who are
parties to the same or related proceedings.
3. By a panel of three arbitrators consisting of one arbitrator
selected by those Directors entitled under 2., above, to select
independent legal counsel, one arbitrator selected by the
Director or Officer seeking indemnification and one arbitrator
selected by the two arbitrators previously selected.
4. By an affirmative vote of shares as provided in Section 180.28,
Wis. Stats., shares owned by, or voted under the control of,
persons who are at the time parties to the same or related
proceedings, whether as plaintiffs or defendants or in any other
capacity, may not be voted in making the determination.
5. By a court under Section 180.051, Wis. Stats., as created by 1987
Wisconsin Act 13.
6. By any other method provided for in any additional right to
indemnification permitted under Section 5, below.
Section 4 - Allowance of Expenses as Incurred - Upon written request
by a Director or Officer who is a party to a proceeding, the Corporation
may pay or reimburse his or her reasonable expenses as incurred if the
Director or Officer provides the Corporation with all of the following:
1. A written affirmation of his or her good faith belief that he or
she has not breached or failed to perform his or her duties to
the Corporation.
2. A written undertaking, executed personally or on his or her
behalf, to repay the allowance and/if required by the
Corporation, to pay reasonable interest on the allowance to the
extent that it is ultimately determined under Section 3, above,
that indemnification under Section 2, above, is not required and
that indemnification is not ordered by a court. The undertaking
under this subsection shall be an unlimited general obligation of
the Director or Officer and may be accepted without reference to
his or her ability to repay the allowance. The undertaking may
be secured or unsecured.
Section 5 - Additional Rights to Indemnification and Allowance of
Expenses
1. Except as provided in 2. below, Sections 2 and 4 above, do not
preclude any additional right to indemnification or allowance of
expenses that a Director or Officer may have under any of the
following:
a. The articles of incorporation or bylaws.
b. A written agreement between the Director or Officer and the
Corporation.
c. A resolution of the Board of Directors.
d. A resolution, after notice, adopted by a majority vote of all
the Corporation's voting shares then issued and outstanding.
2. Regardless of the existence of an additional right under
subsection 1., above, the Corporation may not indemnify a
Director or Officer, or permit a Director or Officer to retain
any allowance of expenses unless it is determined by or on behalf
of the Corporation that the Director or Officer did not breach or
fail to perform a duty he or she owes to the Corporation which
constitutes conduct under Section 2, 2. a. 1), 2), 3) or 4). A
Director or Officer who is a party to the same or related
proceeding for which indemnification or an allowance of expenses
is sought may not participate in a determination under this
subsection.
3. No provision of this Article X shall affect the Corporation's
power to pay or reimburse expenses incurred by a Director or
Officer in any of the following circumstances:
a. As a witness in a proceeding to which he or she is not a
party.
b. As a plaintiff or petitioner in a proceeding because he or
she is or was an employee, agent, Director or Officer of the
Corporation.
Section 6 - Insurance - The Corporation may purchase and maintain
insurance on behalf of an individual who is an employee, agent, Director
or Officer of the Corporation against liability asserted against or
incurred by the individual in his or her capacity as an employee, agent,
Director or Officer or arising from his or her status as an employee,
agent, Director or Officer, regardless of whether the Corporation is
required or authorized to indemnify or allow expenses to the individual
against the same liability under Sections 2, 3, 4 or 5 of this Article X.
Section 7 - Indemnification and Insurance Against Securities Law
Claims - Sections 1 through 6, inclusive, apply to the extent applicable
to any other proceeding, to any proceeding involving a federal or state
statute, rule or regulation regulating the offer, sale or purchase of
securities, securities brokers or dealers, or investment companies or
investment advisers.
Section 8 - Reliance by Directors or Officers -
1. Unless the Director or Officer has knowledge that makes reliance
unwarranted, a Director or Officer, in discharging his or her
duties to the Corporation, may rely on information, opinions,
reports or statements, any of which may be written or oral,
formal or informal, including financial statements and other
financial data, if prepared or presented by any of the following:
a. An Officer or employee of the Corporation whom the Director
or Officer believes in good faith to be reliable and
competent in the matters presented.
b. Legal counsel, public accountants or other persons as to
matters the Director or Officer believes in good faith are
within the person's professional or expert competence.
c. In the case of reliance by a Director, a committee of the
Board of Directors of which the Director is not a member if
the Director believes in good faith that the committee merits
confidence.
2. This section does not apply to a Director's reliance under
Section 180.40(3), Wis. Stats., as in effect on the date of
adoption hereof.
Section 9 - Consideration of Interests in Addition to Shareholders'
Interests - In discharging his or her duties to the Corporation and in
determining what he or she believes to be in the best interests of the
Corporation, a Director or Officer may, in addition to considering the
effects of any action on shareholders, consider the following:
1. The effects of the action on employees, suppliers and customers
of the Corporation.
2. The effects of the action on communities in which the Corporation
operates.
3. Any other factors the Director or Officer considers pertinent.
WPL HOLDINGS, INC.
WISCONSIN POWER AND LIGHT COMPANY
HEARTLAND DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Adopted June 27, 1990
Amended January 17, 1995
<PAGE>
WPL HOLDINGS, INC.
WISCONSIN POWER AND LIGHT COMPANY
HEARTLAND DEVELOPMENT CORPORATION
DEFERRED COMPENSATION PLAN FOR DIRECTORS
Section I - Definitions
The following definitions shall be applicable throughout the Deferred
Compensation Plan:
1.1 "Company" shall mean either WPL Holdings, Inc., Wisconsin Power and
Light Company, or Heartland Development Corporation.
1.2 "Board" shall mean the Board of Directors of the Company.
1.3 "Director Fees" shall mean any fees received during the Plan Year
for services rendered as a Director.
1.4 "Effective Date" shall mean June 27, 1990.
1.5 "Participant" shall mean any Director designated as eligible under
Section 3.1 who has elected, under the terms and conditions of the
Plan, to defer payments of all or allowable portions of Director
Fees.
1.6 "Participant Account" shall mean the participant's account
established pursuant to Section 4.1.
1.7 "Compensation and Personnel Committee" shall mean the Compensation
and Personnel Committee, or its equivalent, of the Board or its
designated appointee.
1.8 "Personal Representative" shall mean the person or persons who upon
the death, disability or incompetency of a Participant shall have
acquired, by will, by laws of decent and distribution or by other
legal proceedings, the right to the Participant's Account.
1.9 "Plan" shall mean this Deferred Compensation Plan.
1.10 "Plan Year" shall be the calendar year.
1.11 "Unforeseeable Emergency" means an unanticipated emergency that is
caused by an event beyond the control of the Participant or
beneficiary.
Section II - General
2.1 The purpose of this Deferred Compensation Plan is to provide
flexibility to members of the Company's Board of Directors, who are
not employees of the Company, in their receipt of Director Fees.
Section III - Eligibility and Selection of Participants
3.1 Participation in the Plan shall be limited to members of the Board
of Directors, except those Directors who are employees of the
Company.
Section IV - Election to Defer
4.1 An eligible Director may elect, under the terms and conditions of
the Plan, to defer all or an allowable portion specified under
Section 5.2 of Director Fees. Such election shall be made by
written notice in the manner specified by the Compensation and
Personnel Committee and shall be irrevocable when made except as
provided in Section 12.1.
4.2 Election to defer Director Fees shall be made prior to the first day
of each Plan Year.
4.3 In the first year in which a Participant becomes eligible to
participate in the Plan, the newly eligible Participant shall make
an election to defer compensation for services to be performed
subsequent to the election within 30 days after the date the
Participant becomes eligible.
Section V - Deferral Amount Selection
5.1 Participants of the Plan may elect to defer a percentage amount (if
any) of Director Fees.
5.2 If deferral is elected, any percentage deferral from 1% to 100%
shall be permitted.
Section VI - Intentionally Left Blank
Section VII - Manner and Timing of Distribution
7.1 Plan Participants may choose to receive payment of deferred amounts
and investment earnings by one of the alternative methods stated
hereunder:
(a) (i) one lump sum payment in any year between the current year
and the anticipated year of conclusion of membership on
the Board as specified by the Participant.
(ii) annual installments (not to exceed 10), the first of
which shall be paid commencing in the year so specified
by the Participant.
(b) Upon the anticipated conclusion of membership on the Board (or
one tax year thereafter) in either:
(i) one lump sum payment in the year so specified by the
Participant.
(ii) annual installments (not to exceed 10), the first of
which shall be paid commencing in the year so specified
by the Participant.
7.2 Plan Participants electing to receive payments of deferred amounts
and investment earnings in the manner specified in
paragraph 7.1(a)(i) and (ii) will receive the lump sum payment or
installment payment on the fourth Friday in January in the calendar
year so designated by the Participant.
7.3 Plan participants electing to receive payments of deferred amounts
and investment earnings in the manner specified in paragraph 7.1(b)
(i) and (ii) will receive payments as follows:
(a) One lump sum payment shall be paid either the fourth Friday
following the date of conclusion of membership on the Board or
on the fourth Friday of January following the year of
conclusion of membership on the Board as specified by the
Participant.
(b) Annual installments, the first of which shall be paid either on
the fourth Friday following the date of conclusion of
membership on the Board or the fourth Friday of January
following the year of conclusion of membership on the Board as
specified by the Participant. Installment payments for
subsequent years will be made on the fourth Friday in January
until all such installments have been paid.
7.4 Notwithstanding the provisions outlined in 7.1 - 7.3 above,
Participants who die or are involuntarily terminated as a member of
the Board shall receive a distribution equal to the value of their
account in a lump sum payment. Such distributions shall be made on
the fourth Friday of the month following the month in which the
Participant ceases to be a member of the Board.
Section VIII - Interest Credit to Participant Accounts
8.1 All deferred amounts credited to a Participant's Account shall be
credited interest on December 31 at a rate equivalent to the
A-Utility Bond yield (as reported in the Federal Reserve statistical
release H.15) using the average of the rates reported for the last
Friday of each month for the preceding twelve (12) calendar months.
Interest shall continue to be credited and compounded in this manner
until the final payment shall have been made from the Participant's
Account.
Partial year interest accruals for Participants who because of
financial hardship, termination or death during the Plan Year will
also be computed at a rate equivalent to the A-Utility Bond yield
(in the manner prescribed above) using the average rates from the
January 1 preceding the Participant's termination date through the
fourth Friday of the month preceding the Participant's termination
date. Interest payments will apply to amounts deferred up to the
date the plan distribution is made.
8.2 The interest credit rate determined in Section 8.1 will be applied
to the average Participant Account balance for that period.
Section IX - Rights of Participants and Forfeiture
9.1 Nothing contained in the Plan shall
(a) confer upon any Director the right to continue on the Board of
Directors, or
(b) require the Company to pay any Director Fees, except as
provided for herein, or
(c) confer upon any Director or other person any claim or right to
any distribution under the Plan except in accordance with its
terms.
9.2 No right or interest of any Participant in the Plan shall, prior to
actual payment or distribution to such Participant, be assignable or
transferable in whole or in part, either voluntarily or by operation
of law or otherwise, or be subject to payment of debts of any
Participant by execution, levy, garnishment, attachment, pledge,
bankruptcy of in any other manner.
9.3 If a Participant has elected to defer pursuant to Section 4.1 and
his or her services as a member of the Board are terminated
voluntarily or involuntarily, the Participant shall retain all
rights to the undistributed amounts credited to his or her
Participant Account.
9.4 The deferral amount and investment earnings of the plan is and shall
remain at all times subject to the claims of the general creditors
of the Company. As such, the Plan Participants have the status of
general unsecured creditors of the Company and this Plan constitutes
a mere promise by the Company to make benefit payments to
Participants in the future.
9.5 It is the intention of all parties involved that the arrangements be
unfunded for tax purposes and for purposes of title I of ERISA.
Section X - Death of Participant
10.1 Should a Participant die, the amount of such Participant's Account
shall be distributed to the Participant's Personal Representative.
Such distributions shall be made in a lump sum pursuant to
Sections 7.4, 8.1 and 8.2.
Section XI - Distribution in the Event of Financial Hardship
11.1 The Compensation and Personnel Committee may allow a partial or
total distribution of amounts in a Participant's Account upon the
Participant's request and a demonstration by the Participant of
financial hardship as a result of an Unforeseeable Emergency. The
amount of any such distribution shall be limited to the amount
deemed necessary by the Compensation and Personnel Committee to
alleviate or remedy the Participant's hardship. Such distributions
shall be made in a lump sum pursuant to Sections 8.1 and 8.2 on the
fourth Friday of the month following the month of committee
approval.
Section XII - Stopping Deferral
12.1 The Compensation and Personnel Committee may allow a Participant to
cease deferrals during the plan year on the Board meeting date
following the committee approval in response to an Unforeseeable
Emergency.
Section XIII - Distribution in the Event of Significant Change in Tax Law
13.1 Under the terms of the Deferred Compensation Plan for Directors, the
Compensation and Personnel Committee may allow payments to a
Participant before any payments would otherwise be due if the
Compensation and Personnel Committee determines, based on changes
in the Federal tax or revenue laws, a published ruling or similar
announcement issued by the Internal Revenue Service, a regulation
issued by the Secretary of the Treasury, a decision by a court of
competent jurisdiction involving a Participant or a beneficiary, or
a closing agreement made under section 7121 of the Internal Revenue
Code which has been approved by the Internal Revenue Service and
involves a Participant, that a Participant has or will recognize
income for Federal income tax purposes with respect to amounts that
are or will be payable under the Plan before such amounts are to be
paid.
Section XIV - Administration
14.1 The Compensation and Personnel Committee may from time to time
amend, suspend, terminate or reinstate any or all of the provisions
of the Plan as may seem necessary or advisable for the
administration of the Plan.
14.2 The Compensation and Personnel Committee shall, subject to express
provisions of the Plan, have power to construe the Plan, to
prescribe rules and regulations relating to the Plan and to make all
other determinations necessary or advisable for the administration
of the Plan. The Compensation and Personnel Committee may correct
any defect or supply any omission or reconcile any inconsistency in
the Plan in the manner and to the extent it shall deem expedient to
carry it into effect.
14.3 Manner of Election - The Compensation and Personnel Committee shall
ensure that all individuals entitled to make the election to defer
are provided an election form at least thirty (30) days before such
election must be made in accordance with Section 4.1 and received in
writing in order to be effective. This election form shall include
the following items, which must be completed in full in order to be
effective:
(a) The amount to be deferred, expressed as a percentage of
Director Fees to become payable during the calendar year in
question;
(b) The number of installments for the payment of the deferred
compensation; and
(c) The date of the first installment payment.
14.4 All expenses and costs incurred in connection with the
administration and operation of the Plan shall be borne by the
Company.
Section XV - Funding
15.1 Benefits under this Plan shall be paid from the general assets of
the Company. This Plan shall be administered as an unfunded plan
which is not intended to meet the qualification requirements of
Section 401 of the Internal Revenue Code.
<PAGE>
WPL HOLDINGS, INC.
DEFERRED COMPENSATION PLAN FOR DIRECTORS
ELECTION OF DEFERMENT
In accordance with the provisions of the Deferred Compensation Plan, I
hereby elect to defer Director Fees earned by me for my services from
January 1, 19__ to December 31, 19__ as follows:
AMOUNT OF DEFERRAL
Amount of Deferral: _________________% (Percentage of Director Fees)
PAYMENT OPTIONS (Specify One)
(a) Payment in _____ (any year subsequent to the current year) according
to:
(i) lump sum payment
(ii) ____ annual installments (not to exceed 10)
(b) Upon the anticipated conclusion of my membership on the Board of
Directors (or one tax year thereafter) according to:
(i) lump sum payment in the year of anticipated conclusion of my
membership on the Board of Directors _____, or one tax year
thereafter_____ (check one).
(ii) ______ annual installments (not to exceed 10) the first of
which shall be paid commencing in the year of anticipated
conclusion of my membership on the Board of Directors ____, or
one tax year thereafter _____ (check one).
I hereby agree to be bound by the terms of the Plan, including any
amendment thereof, and recognize that the foregoing election is
irrevocable and may not be altered by me.
___________________________________
Signature of Director Date
Received on behalf of WPL Holdings, Inc.
By: _________________________________
Date: ______________________
Return to Corporate Secretary by December 31.
RESTRICTED STOCK AGREEMENT
THIS AGREEMENT made as of the 21st day of December, 1994, by and
between Heartland Development Corporation, a Wisconsin corporation (the
"Company"), Erroll B. Davis, Jr. (the "Shareholder"), and the spouse of
the Shareholder, and WPL Holdings, Inc., a Wisconsin corporation
("Holdings").
WITNESSETH:
WHEREAS, the Shareholder serves as President of Holdings with
supervisory responsibility for the Company and serves as Chairman of the
Company;
WHEREAS, to promote continuity of management and retain the
services of the Shareholder and enhance the interest of the Shareholder in
the success of the Company, Holdings believes it is in its and its
shareholders' best interests to grant an equity interest in the Company to
the Shareholder and to provide the Shareholder with rights to exchange
shares of the Company for shares of Common Stock, $.01 par value
("Holdings Common Stock") of Holdings, which exchange is intended by
Holdings and the Shareholder to qualify as a reorganization under the
Internal Revenue Code Section 368(a)(1)(B);
WHEREAS, Holdings, the Company and the Shareholder believe it to
be in the best interests of the parties hereto to assure the continuity of
ownership of the shares of Common Stock, no par value per share, of the
Company ("Stock") to be granted to the Shareholder pursuant to this
Agreement by providing for, among other things, certain restrictions on
the transfer of such Stock;
WHEREAS, the Wisconsin Marital Property Law, Wisconsin Statutes
Chapter 766, effective January 1, 1986, may have the effect of vesting in
the Shareholder's spouse (the "Spouse") an interest in the Stock to be
owned by the Shareholder, which interest may take the form of an interest
in marital property or deferred marital property under such law; and
WHEREAS, the Shareholder desires to provide for the disposition
of any interest that the Shareholder's Spouse may obtain in the
Shareholder's Stock by reason of the Wisconsin Marital Property Law.
NOW, THEREFORE, in consideration of the mutual covenants and
agreements contained herein, the parties hereto mutually agree and
covenant as follows:
1. Definitions. For purposes of this Agreement, the following
terms have the meanings set forth below:
"Cause" means any one or more of the following: (i) theft,
dishonesty, fraudulent misconduct, gross dereliction of duty or other
grave misconduct on the part of the Shareholder which is substantially
injurious to Holdings or the Company or (ii) repeated and demonstrated
failure to perform material duties in a competent and efficient manner.
"Disability" means the Shareholder becomes physically or
mentally disabled so as to become unable, for a period of more than six
(6) consecutive months, to perform his duties hereunder on substantially a
full-time basis.
"Divorce" is defined in Section 9(A).
"Net Book Value Per Share" means the value of the Company's
consolidated tangible assets minus all of its consolidated liabilities as
reflected on the Company's financial statements for the year end
immediately preceding the date in question, divided by the number of
shares of Stock outstanding as of the date of such financial statements,
plus any additional shares of Stock that have vested in the Shareholder
pursuant to this Agreement subsequent to the date of such financial
statements (with such share numbers appropriately adjusted for any stock
splits); provided, however, that no value shall be given to goodwill,
going concern value, trademarks, copyrights, licenses, trade names,
patents or other intangible assets of the Company. Net Book Value Per
Share shall be determined in accordance with generally accepted accounting
principles consistently applied. If the Company has obtained audited
financial statements for such fiscal year, such audited financial
statements shall be conclusively used in such calculation.
"Pledge" is defined in Section 6(A).
"Public Offering" means an underwritten offering to the public,
or distribution to the shareholders of Holdings, of equity securities
which results in at least 20% of the total value of the Company's equity
securities being held by 500 or more shareholders other than Holdings.
"Purchaser." The Company shall at all times have the right (but
not the obligation) to arrange for the purchase by one or more Purchasers
in the Company's stead of all or part of any Stock that the Company has
the right or obligation to purchase pursuant to any Section of this
Agreement. The term "Purchaser" shall mean an individual or entity
designated by the Company to purchase Stock in lieu of the Company, as
provided by the preceding sentence, in such amounts and on such terms and
conditions as the Company shall determine. Such designation of a Purchaser
or Purchasers and such determination of amounts, terms and conditions
shall be made by the Company's Board of Directors. Each Purchaser shall
pay its pro rata share of the aggregate purchase price as set forth in the
appropriate Section of this Agreement for any Stock purchased by such
Purchaser.
"Sale Notice" is defined in Section 10(A).
"Sale of the Company" means (i) the transfer for value of more
than 50% of the shares of Stock owned by the existing shareholders in the
aggregate, or of voting trust certificates representing such shares, to a
purchaser or purchasers, other than one or more of the existing
shareholders, in a transaction or series of transactions in any one (1)
year period; or (ii) the merger or consolidation of the Company so that
upon completion of such transaction the existing shareholders own less
than 50% of the outstanding Stock of the successor; or (iii) the sale of
substantially all of the Company's assets to one or more third parties for
value in one transaction or a series of related transactions. "Sale of the
Company" shall not include a Public Offering, a pledge of Stock by the
Company's majority shareholder or a transfer of such Stock by the
Company's majority shareholder to its primary lenders.
"Transfer" is defined in Section 4(A).
"Transferee" is defined in Section 9(D).
"Transfer Notice" is defined in Section 5(A).
"Valuation Formula Price" means a price as of the most recent
Fiscal Year as determined by an independent appraiser selected by the
Compensation Committee of the Board of Directors of Holdings and the
Shareholder, provided however, if Holdings and the Shareholder cannot
agree on an appraiser each of Holdings and the Shareholder shall select an
appraiser and each of such appraisers so selected shall select a third
appraiser. The Valuation Formula Price shall be the average of the fair
market values determined by such three appraisers.
2. Grant of Stock. In consideration of the continued
employment of the Shareholder by Holdings and the Company, the Company
grants to the Shareholder 1.67 shares of Stock upon the terms and
conditions set forth herein.
3. Vesting. As long as the Shareholder is still serving the
Company as its Chairman, the Stock granted to the Shareholder pursuant to
Section 2 hereof shall vest in the Shareholder as follows: (i) .4175
shares of Stock on December 21, 1994; (ii) .4175 shares of Stock on March
31, 1995; (iii) .4175 shares of Stock on March 31, 1996; and (iv) .4175
shares of Stock on March 31, 1997. Notwithstanding the vesting schedule
above, (A) all shares of Stock granted to the Shareholder pursuant to
Section 2 hereof shall vest in the Shareholder if there is a Sale of or
public offering by the Company and (B) in the event of the Executive's
death or Disability prior to March 31, 1997, a pro rata portion (based on
the number of days elapsed from the immediately preceding March 31 to the
date of death or Disability) of the Stock that would have vested on the
next succeeding March 31 shall vest as of the date of death or Disability.
4. Restrictions on Transferability.
(A) Except as hereinafter provided, the Shareholder may not
sell, pledge, encumber, transfer by or pursuant to a gift or bequest or
otherwise transfer or dispose of, and will not permit to be sold,
encumbered, attached, or otherwise disposed of or transferred in any
manner, either voluntarily or by operation of law (collectively referred
to as "Transfer"), all or any portion of the Stock granted to the
Shareholder pursuant to this Agreement, or any Stock at any time hereafter
acquired by the Shareholder in respect of such Stock, except in accordance
with and subject to the terms of this Agreement.
(B) For purposes of this Agreement, all references to Stock
owned or held by the Shareholder shall include, without limitation, all
interests in Stock now owned or hereafter acquired by the Spouse as
marital property or pursuant to the Spouse's elective rights to deferred
marital property or to an augmented marital property estate. The creation
of an interest in the Stock in the Spouse by operation of marital property
laws during the Shareholder's lifetime shall not be deemed to be a
Transfer of such Stock or any portion thereof for purposes of this
Agreement so long as (i) the Stock in which such interest is created
continues to be registered solely in the name of the Shareholder and (ii)
the Shareholder maintains full management and control rights with respect
to such Stock; provided, however, that if either of the foregoing
conditions shall cease to be satisfied, then the Shareholder and the
Company shall have the option to purchase the Spouse's interest in the
Stock in the sequence and manner and upon the same terms and conditions as
specified in Section 9 hereof as if the marital relationship of the
Shareholder and the Spouse had been terminated. During the marriage of
the Shareholder and the Spouse, the Shareholder's obligation to sell or to
offer to sell Stock and the Company's option or right to purchase the
Stock hereunder shall include an obligation on the part of the Spouse to
sell or to offer to sell any interest of the Spouse in the Stock in the
same manner and upon the same terms and conditions.
(C) Anything in this Agreement to the contrary notwithstanding,
the Shareholder may not Transfer any shares of Stock granted pursuant to
Section 2 hereof until such shares are vested pursuant to Section 3
hereof.
5. Right of First Refusal.
(A) If the Shareholder desires to Transfer any Stock (other
than pursuant to Sections 6 or 7 or to the Company), then the Shareholder
shall give prior written notice ("Transfer Notice") of such intention to
the Company specifying the name of the proposed transferee, the proposed
consideration for such transfer, the number of shares involved and all
other terms of the proposed transfer. Such Transfer Notice shall
constitute an offer to sell to the Company the number of shares of Stock
indicated in the Transfer Notice at a price per share equal to the lesser
of the price specified in the Transfer Notice per share or the Net Book
Value Per Share (or if after March 31, 1997, the Valuation Formula Price)
as of the date of the Transfer Notice. Within thirty (30) days after
receipt of such Transfer Notice, the Company may, at its option, elect to
purchase all, but not less than all, of the shares of Stock offered. The
Company shall exercise its option to purchase by delivering written notice
thereof to the Shareholder within the option period.
(B) If the Company elects to purchase the Shareholder's Stock
as provided in Section 5(A), then the terms of payment for such purchase
shall be the terms offered by the Shareholder's proposed transferee as
specified in the Transfer Notice; provided, however, if the shares of
Stock are offered for purchase because of a Transfer by operation of law,
the terms of such purchase shall be cash at the closing. The closing of
any sale made pursuant to Section 5(A) hereof shall be held not later than
sixty (60) days after receipt of the Transfer Notice by the Company or on
such other date as mutually agreed by the Company and the Shareholder.
(C) If the Company is entitled to purchase the Shareholder's
Stock as provided herein but does not elect to do so, then the Shareholder
may make a bona fide transfer of the Stock described in the Transfer
Notice to the prospective purchaser named in the Transfer Notice. Such
transfer shall be made only in strict accordance with the specific terms
stated in the Transfer Notice and only if such purchaser agrees in writing
to sign a counterpart of this Agreement so as to impose on the Stock so
transferred restrictions on further transferability identical to the
restrictions imposed by this Agreement, and to bind the transferee as if
such transferee were a party hereto. If, however, the Shareholder fails
to make such transfer in compliance with this Section 5(B) within thirty
(30) days following the expiration of the last time period provided in
Section 5(A) above, the Shareholder's Stock shall again become subject to
all the restrictions of this Agreement.
6. Pledge. If the Shareholder desires to voluntarily Transfer
by pledge, security interest or other encumbrance ("Pledge") any of the
Shareholder's Stock (other than to the Company), then the Shareholder
shall first give notice thereof to the Company, setting forth the terms of
Pledge and affording to the Company a period of not less than ten (10)
days within which to consult and advise with the Shareholder and attempt
to arrange an acceptable alternative to such Pledge, if desirable and
feasible. Such notice period may be waived or shortened by written notice
from the Company to the Shareholder. Any attempted Pledge in violation of
this Agreement shall be void. If no mutually acceptable alternative is
arranged within such period, then the Shareholder shall be free to effect
such Pledge, provided that the Shareholder shall continue to be subject to
all of the terms and provisions of this Agreement in respect to the
Shareholder's interest in the Pledged Stock, and the holding by the
pledgee shall likewise be subject to all such terms and provisions as
though the pledgee were a party hereto. So long as such Pledge is in
effect, if the Shareholder shall default (or be deemed by the pledgee to
be in default), then the Company shall at all times thereafter have the
immediate and continuing option to purchase the Pledged Stock (whether
still in Pledge or in the ownership of the pledgee or any other
transferee) upon notice by the Company to the Shareholder, pledgee or
other record holder, at the Net Book Value Per Share as of the date of
default and in current and immediately available funds within thirty (30)
days after notice has been given of election to purchase such shares or on
such other date as mutually agreed by the Company and the Shareholder,
pledgee or other recordholder, as the case may be.
7. Termination of Employment.
(A) In the event of the Shareholder's death, Disability or
termination from employment without Cause, or resignation after March 31,
1997 or termination for Cause after March 31, 1997, (i) the Shareholder or
the personal representative of the Shareholder's estate shall be required
to sell all Stock held or owned by such Shareholder, and the Company shall
be required to purchase all such Stock, at a purchase price per share
equal to the Valuation Formula Price as of the date of death, Disability
or termination or resignation after March 31, 1997, as the case may be;
and (ii) any shares of Stock granted to the Shareholder pursuant to
Section 2 hereof but not vested pursuant to Section 3 hereof shall
automatically be forfeited and returned to the Company and any dividend or
other distribution held in trust by the Company pursuant to Section 13
hereof and applicable to such shares shall automatically be forfeited to
the Company.
(B) In the event of the Shareholder's resignation from his
employment by Holdings or the Company prior to March 31, 1997 or Holdings
or the Company's termination of the Shareholder's employment for Cause
prior to March 31, 1997, (i) such Shareholder shall be required to sell
all Stock held or owned by such Shareholder, and the Company shall be
required to purchase all such Stock at a purchase price per share equal to
the Net Book Value Per Share as of the date of resignation or termination,
and (ii) any shares of Stock granted to the Shareholder pursuant to
Section 2 hereof but not vested pursuant to Section 3 hereof shall
automatically be forfeited and returned to the Company and any dividend or
other distribution held in trust by the Company pursuant to Section 13
hereof and applicable to such shares shall automatically be forfeited to
the Company.
(C) For purchases and sales pursuant to Section 7(A) or 7(B),
the purchase price shall be paid in current and immediately available
funds within thirty (30) days after such termination described in Section
7(A) or 7(B) or on such other date as mutually agreed by the Company and
the Shareholder or the personal representative of the Shareholder's
estate, as the case may be.
8. Involuntary Transfer. Whenever the Shareholder has any
notice or knowledge of any attempted, impending or consummated involuntary
Transfer of any of the Shareholder's Stock, whether by operation of law or
otherwise, the Shareholder shall give immediate written notice thereof to
the Company. Whenever the Company has any other notice or knowledge of
any such attempted, impending or consummated involuntary Transfer, it may
give written notice thereof to the Shareholder. In either case, the
Shareholder will forthwith disclose to the Company all pertinent
information in his possession relating thereto. If any Stock is subject
to any such involuntary Transfer, the Company shall at all times have the
immediate and continuing option to purchase such Stock upon notice by the
Company to the Shareholder or other record holder, at the Net Book Value
Per Share or in event of an involuntary transfer after March 31, 1997, at
the Valuation Formula Price as of the date of involuntary Transfer and in
current and immediately available funds within thirty (30) days after
notice has been given of election to purchase such shares or on such other
date as mutually agreed by the Company and the Shareholder or other record
holder, as the case may be, and Stock so purchased shall in every case be
free and clear of such Transfer.
9. Termination of Marital Relationship.
(A) If the marital relationship of the Shareholder and the
Spouse is terminated by the death of the Spouse or by divorce, annulment,
legal separation or other termination by judicial process ("Divorce") and
the Shareholder does not receive, or succeed to, all interests of the
Spouse in Stock acquired through marital property laws or otherwise,
whether by testamentary disposition, operation of law, property settlement
agreement, court order or otherwise, then the Shareholder will have the
option to purchase any part or all of the Spouse's interest in the Stock
and the Spouse or the personal representative of the Spouse's estate, as
the case may be, shall be obligated to sell such interest in the Stock at
the Net Book Value Per Share if prior to March 31, 1997, and thereafter at
the Valuation Formula Price as of the date of death or Divorce, as the
case may be, and in current and immediately available funds within thirty
(30) days after notice has been given (as provided for below) or on such
other date as mutually agreed by the Company, the Shareholder and the
Spouse or the personal representative of the Spouse's estate, as the case
may be.
(B) If the Shareholder elects to purchase the Spouse's interest
in the Stock in whole or in part, the Shareholder shall signify such
election and the portion of the Spouse's interest in the Stock to be
purchased by written notice delivered to the Spouse or the personal
representative of the Spouse's estate and to the Company within sixty (60)
days after the date of the Spouse's death or the effective date of the
Divorce.
(C) If the Shareholder fails to exercise such option in full
within such 60-day period, the Company shall, during the 60-day period
following the later of (i) the expiration of the 60-day period described
in Section 9(B) or (ii) the date upon which the Company shall receive
actual notice of the Spouse's death or Divorce, have the option to
purchase that portion of the Spouse's interest in the Stock not purchased
by the Shareholder upon written notice delivered within such latter 60-day
period to the Spouse or to the personal representative of the Spouse's
estate. If the Company elects to purchase that portion of the Spouse's
interest not purchased by the Shareholder as provided herein, the price
shall be the Net Book Value Per Share if prior to December 21, 1997, and
thereafter at the Valuation Formula Price as of the date of death or
Divorce, as the case may be, and such payment shall be in current and
immediately available funds within thirty (30) days after notice of such
election has been given or on such other date as mutually agreed by the
Company and the Spouse or the personal representative of the Spouse's
estate, as the case may be.
(D) Upon lapse in whole or in part of the Shareholder's and the
Company's option heretofore described, the Spouse or the personal
representative of the Spouse's estate, as the case may be, shall continue
to be bound by the provisions of this Agreement with respect to any
interest in the Stock not purchased pursuant to this Section 9; provided,
however, that the personal representative may transfer any part or all of
the Stock not so purchased pursuant to the terms of the Spouse's Last Will
and Testament or other estate planning documents or pursuant to the laws
of intestacy (if applicable) of the state of which the Spouse shall have
been a resident on the date of the Spouse's death (the transferee being
hereinafter referred to as "Transferee"); provided, further, that all
interests in the Stock so transferred shall continue to be subject to all
of the terms and conditions of this Agreement. The Shareholder's
obligation to sell or to offer to sell Stock pursuant to this Agreement
shall include an obligation on the part of the Spouse, the personal
representative of the Spouse's estate, or the Transferee to sell or to
offer to sell the interest in the Stock owned by such person in the same
manner and upon the same terms and conditions. In the absence of a court
order, no obligation to cause shares representing an interest in the Stock
owned by the Spouse, the personal representative of the Spouse's estate or
the Transferee to be registered in such person's name if such shares shall
then be registered in the Shareholder's name. The Company shall have the
right to require, as a condition to any transfer of Stock on the books of
the Company, that the Transferee execute a shareholders' agreement
substantially in the form of this Agreement.
10. Sale of the Company.
(A) In the event of an impending Sale of the Company, the
Company shall send prior written notice of such impending sale (the "Sale
Notice") to the Shareholder, which notice shall set forth the
consideration to be paid for each share of Stock and the terms and
conditions of the proposed sale. Within five (5) days after the date of
the Sale Notice, the Shareholder shall have the right to require, by
written notice to the Company, that all, but not less than all, of his
Stock, whether vested pursuant to Section 3 hereof or not, be included in
such sale, on substantially the same terms and conditions and for the same
or equivalent consideration as are available to other shareholders. If
the Sale of the Company is accomplished pursuant to a sale of
substantially all of the Company's assets, then the Company shall fulfill
its obligation under this Section by distributing to the Shareholder his
pro-rata share of the proceeds of such sale.
(B) If the Sale Notice so provides, the Shareholder shall be
required to sell all of his Stock at the same price, on the same terms and
conditions, at such time (which may be immediately) and in such manner as
specified in the Sale Notice.
11. Public Offering. In the event of a Public Offering,
Sections 4(A), 5, 6, 7, 8, 9, 10 and 11.1 of this Agreement shall
terminate; provided, however, that obligations to make payments, if the
event creating such obligations occurred prior to the Public Offering,
shall not hereby be terminated.
11.1 Exchange of Stock for WPL Holdings, Inc. Common Stock.
(A) Commencing on March 31, 1997 and on March 31 of each year
thereafter, or next succeeding business day if such date is not a business
day, (each such date separately the "Exchange Date"), the Shareholder
shall be entitled to exchange 33 1/3% of the shares of Stock owned by the
Shareholder on the Exchange Date for shares of Holdings Common Stock. If
the Shareholder does not exercise his exchange option on any Exchange
Date, he shall then be entitled to exchange the following Applicable
Percentage of shares of Stock owned on subsequent Exchange Dates.
Years from Applicable
Previous Exchange Date Percentage
1 33 1/3
2 55
3 70
4 80
5 100
When the remaining shares of Stock owned by the Shareholder
equal .5 shares or less, the next Applicable Percentage shall be 100%.
For purposes of such exchange, each share of Stock shall be
valued at the Valuation Formula Price and shares of Holdings Common Stock
shall be valued at their Fair Market Value. Fair Market Value of Holdings
Common Stock means average of the per share closing prices in its
principal trading market for the Holdings Common Stock for the five (5)
trading days next preceding the Exchange Date.
(B) All shares of Holdings Common Stock exchanged pursuant to
this Agreement will be subject to the following agreement: (i) the shares
may not be sold, transferred or otherwise alienated or hypothecated except
in compliance with the Securities Act of 1933 and applicable State
securities laws; and (ii) the Company may require the Shareholder to enter
into an appropriate agreement at the time of delivery of Holdings Common
Stock.
12. Voting Rights. The Shareholder shall have voting rights
for all Stock granted pursuant to Section 2 hereof regardless of whether
it has vested pursuant to Section 3 hereof.
13. Dividends and Other Distributions. Unless specifically
determined by the Board of Directors and reflected in written notice to
the Shareholder, no dividends or other distributions will be paid with
respect to the Stock owned by the Shareholder; provided, however, that
dividends may be paid on Stock owned by Holdings ("Holdings Stock")
respecting capital invested in the Company by Holdings after January 1,
1992, which dividends shall for purposes of this Agreement be deemed to be
return of capital to Holdings, and the Shareholder shall have no rights to
receive or participate pro rata or otherwise in such distributions. The
total amount of dividends on Holdings Stock shall not exceed the portion
of paid-in capital and retained earnings allocated to Holdings Stock. All
dividends on Holdings Stock shall be considered a repurchase of Holdings
Stock at the Valuation Formula Price next preceding the date of any
dividend payment. The Shareholder and Holdings recognize that the
agreements set forth in this Paragraph 13 result in the creation of two
(2) classes of Common Stock, no par value, of the Company and agree to
execute appropriate amendments to the Articles of Incorporation reflecting
such agreement.
14. Endorsement on Stock Certificates. Conspicuously noted on
each certificate representing Stock now owned or hereafter acquired by the
Shareholder (or his Spouse or transferee) shall be a legend reading
substantially as follows:
"ANY SALE, ASSIGNMENT, TRANSFER, PLEDGE OR ANY OTHER
DISPOSITION OF THE SHARES OF STOCK REPRESENTED BY THIS
CERTIFICATE IS RESTRICTED BY, AND SUBJECT TO, THE TERMS AND
PROVISIONS OF A RESTRICTED STOCK AGREEMENT DATED AS OF
_______________. A COPY OF SUCH AGREEMENT AND OF ALL AMENDMENTS
OR SUPPLEMENTS THERETO IS ON FILE IN THE OFFICE OF THE SECRETARY
OF THE COMPANY. BY ACCEPTANCE OF THIS CERTIFICATE, THE HOLDER
AGREES TO BE BOUND BY THE TERMS OF SAID AGREEMENT AND ALL
AMENDMENTS OR SUPPLEMENTS THERETO."
15. Certain Breaches. If the Shareholder refuses to deliver
stock certificates representing Stock in breach of this Agreement (as
determined by the Company's legal counsel), the Company shall have the
right to cancel the outstanding stock certificates owned or held by or in
the name of the Shareholder and to reissue stock certificates representing
such shares in the name of the Company and/or any Purchaser upon the
payment of the appropriate aggregate purchase price as provided herein,
and the defaulting Shareholder agrees to indemnify and hold the Company
and any Purchaser harmless from and against all costs, damages and
expenses as a result of such breach.
16. Certain Actions by the Company. The Shareholder agrees
that, if the Company is unable to make any purchase required of it
hereunder because of the provisions of applicable statutes or of its
Articles of Incorporation or By-Laws, the Company, the Shareholder, and
the Spouse, transferees and legal representatives of the Shareholder and
his/her Spouse shall take such corporate action as may be necessary to
permit the Company to make such purchase, including without limitation any
action necessary to recapitalize the Company to increase the surplus of
the Company to an amount adequate to pay the purchase price of the Stock
to be so purchased; provided, however, that the foregoing shall not be
construed to require any such person to make any additional personal
investment in the Company. Notwithstanding the foregoing, nothing
contained in this Agreement shall require the Company to purchase or
impose any liability upon the Company for failing to purchase Stock if
such purchase would render the Company insolvent or would be prohibited by
law or any applicable state or federal regulation. The Shareholder
further agrees that nothing in this Agreement shall in any way limit the
Company's rights to issue additional shares of Stock provided, however, in
the event that shares are issued at less than Net Book Value Per Share (or
if after March 31, 1997, the Valuation Formula Price) the Board shall make
such an equitable adjustment, as it shall determine in its reasonable
discretion in the price at which shares held by the Shareholder may be
repurchased by the Company.
17. Withholding Tax. If the Company determines that it is
required to withhold state or federal income tax or FICA tax as a result
of the vesting of the Shareholder's Stock, the Shareholder will make
arrangements satisfactory to the Company to enable it to satisfy such
withholding requirements. Notwithstanding the foregoing, the Shareholder
may elect, by written notice to the Company delivered ten (10) business
days prior to any regular date for the vesting of Stock pursuant to
Section 3 (or upon execution of this Agreement for Stock vesting upon such
execution), to satisfy the Shareholder's obligation under this Section as
to Stock vesting on such date by requesting the Company to purchase from
the Shareholder on the vesting date, at a price per share of Stock equal
to the Net Book Value Per Share, an amount of the Stock to be vested equal
in value to the lesser of (A) the amount the Company has determined it is
required to withhold on such date and (B) the amount set forth in the
Shareholder's request. The Company shall be obligated to comply with each
such request under this Section 17.
18. Termination. Except as otherwise provided herein, this
Agreement and all provisions thereof shall continue in force and effect
until terminated by a majority of the Board of Directors of the Company
and the Shareholder; provided, however, that obligations to make payments,
if the events creating such obligations occurred prior to the termination,
shall not hereby be terminated.
19. Notice. Every notice or request required or permitted
herein shall be in writing and shall be deemed given when delivered
personally, sent by telecopy or facsimile (with receipt acknowledged) or
mailed by United States registered or certified mail, return receipt
requested and postage prepaid, to the recipient. Such notice, request or
other communication will be sent to each party hereto at the addresses
indicated below, until some other address shall have been designated in a
written notice given in like manner:
(A) If to Holdings or the Company, to:
WPL Holdings, Inc.
Heartland Development Corporation
c/o WPL Holdings, Inc.
222 West Washington Avenue
P.O. Box 2568
Madison, Wisconsin 53701-2568
Attention: Edward M. Gleason
With a copy to:
Foley & Lardner
777 East Wisconsin Avenue
Milwaukee, Wisconsin 53202-5367
Attention: Benjamin F. Garmer, III
(B) If to the Shareholder or his Spouse, to:
Erroll B. Davis, Jr.
7829 Noll Valley Road
Verona, Wisconsin 53593
20. Severability, Governing Law and Effect of Invalid
Provisions. The invalidity or unenforceability of any particular
provision of this Agreement shall not affect the other provisions hereof,
and this Agreement shall be construed in all respects as if such invalid
or unenforceable provision were omitted. This Agreement shall be governed
by the laws of the State of Wisconsin.
21. Successors and Assigns. This Agreement and each provision
thereof (whether expressed or not) shall be binding upon and inure to the
benefit of Holdings, the Company, the Shareholder, the Spouse and their
respective successors, heirs, legatees, executors, personal
representatives and assigns.
22. Headings. The headings of this Agreement are intended
solely for convenience of reference and shall be given no effect in the
construction or interpretation of this Agreement.
23. Counterparts. This Agreement may be executed in two or
more counterparts, each of which shall be deemed an original, but all of
which together shall constitute but one and the same instrument.
24. Entire Agreement. This Agreement constitutes the entire
agreement between the parties hereto with respect to the subject matter
hereof and may not be modified orally or in any manner other than by any
agreement in writing signed by all of the parties hereto.
IN WITNESS WHEREOF, the parties have executed this Agreement as
of the day and year first above written.
WPL HOLDINGS, INC.
("Holdings")
[Corporate Seal] By: /s/ Edward M. Gleason
Its: Vice President
HEARTLAND DEVELOPMENT CORPORATION
(the "Company")
[Corporate Seal] By: /s/ Edward M. Gleason
Its: Assistant Secretary
SHAREHOLDER
/s/ Erroll B. Davis, Jr.
Erroll B. Davis, Jr.
The undersigned Spouse of the Shareholder acknowledges that she
has read this Agreement and consents to its terms, to the disposition made
herein of any interest she may have in the Shareholder's Stock at any time
through marital property or otherwise and to the determination of purchase
price.
/s/ Elaine E. Davis
Name Elaine E. Davis
Heartland Development Corporation Short-Term Incentive Plan
Plan Summary
In January of 1995, Heartland Development Corporation ("HDC")
adopted the Heartland Development Corporation Short-Term Incentive Plan
(the "Plan"). The Plan includes salaried corporate management employees
of HDC
Payments under the Plan are determined by 1) the achievement by
HDC of certain net income and return on equity targets, and 2) the
achievement of certain defined objectives. These objectives are specified
to the individual participant. Potential payouts range from 80% of annual
salary for Lance W. Ahearn, the President of HDC, to 10% of annual salary
for lower level management employees.
EXHIBIT 21
WPL HOLDINGS, INC. AND SUBSIDIARIES
SUBSIDIARIES
The material subsidiaries of the Company as of December 31, 1994, are as
follows:
% of Voting
Stock Owned
Directly or
State of Indirectly by
Name of Subsidiary Incorp. the Company
A. Wisconsin Power and Light Company Wisconsin 100%
1. South Beloit Water, Gas
and Electric Company Illinois 100%
2. REAC, Inc Wisconsin 100%
3. NUFUS Resources, Inc Wisconsin 100%
4. Wisconsin River Power Company Wisconsin 33-1/3%
5. Wisconsin Valley Improvement
Company Wisconsin 13%
B. Heartland Development Corporation Wisconsin 97.60%
1. Energy Services
A. A&C Enercom Consultants, Inc. Wisconsin 92.72%
B. Entec Consulting, Inc. Wisconsin 100%
C. Heartland Energy Services, Inc. Wisconsin 100%
D. Enserv, Inc. Wisconsin 100%
E. Heartland Fuels Corportion Wisconsin 80%
2. Environmental Services
A. Environmental Holding Company Wisconsin 90.80%
B. RMT, Inc. Wisconsin 100%
C. Jones & Neuse, Inc. Wisconsin 100%
D. QES, Inc. Wisconsin 100%
3. Affordable Housing
A. Heartland Properties, Inc. Wisconsin 100%
B. Tool Kit Property Management
Systems, Inc. Wisconsin 100%
C. Heartland Retirement Services Wisconsin 95.50%
D. Capital Square Financial Corp. Wisconsin 100%
E. Heartland Capital Co. Wisconsin 47%
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation
of our reports included in this WPL Holdings, Inc. Form 10-K into WPL
Holdings, Inc.'s previously filed Registration Statements on Form S-8
(Nos. 33-6671 and 2-78551) and Form S-3 (No. 33-21482).
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
March 6, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL
STATEMENTS CONTAINED IN THE FORM 10-K FILED BY WPL HOLDINGS, INC. FOR THE YEAR
ENDED DECEMBER 31, 1994 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> YEAR
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,266,255
<OTHER-PROPERTY-AND-INVEST> 135,549
<TOTAL-CURRENT-ASSETS> 154,434
<TOTAL-DEFERRED-CHARGES> 249,663
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,805,901
<COMMON> 308
<CAPITAL-SURPLUS-PAID-IN> 304,442
<RETAINED-EARNINGS> 293,048
<TOTAL-COMMON-STOCKHOLDERS-EQ> 597,798
0
59,963
<LONG-TERM-DEBT-NET> 448,110
<SHORT-TERM-NOTES> 56,975
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 64,501
<LONG-TERM-DEBT-CURRENT-PORT> 2,832
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 575,722
<TOT-CAPITALIZATION-AND-LIAB> 1,805,901
<GROSS-OPERATING-REVENUE> 816,159
<INCOME-TAX-EXPENSE> 35,411
<OTHER-OPERATING-EXPENSES> 279,721
<TOTAL-OPERATING-EXPENSES> 686,150
<OPERATING-INCOME-LOSS> 130,009
<OTHER-INCOME-NET> 10,619
<INCOME-BEFORE-INTEREST-EXPEN> 140,628
<TOTAL-INTEREST-EXPENSE> 36,657
<NET-INCOME> 68,560
3,310
<EARNINGS-AVAILABLE-FOR-COMM> 65,250
<COMMON-STOCK-DIVIDENDS> 59,010
<TOTAL-INTEREST-ON-BONDS> 36,914
<CASH-FLOW-OPERATIONS> 173,268
<EPS-PRIMARY> 2.13
<EPS-DILUTED> 0<F1>
<FN>
<F1>Applicable accounting rules do not require WPL Holdings, Inc. to report
earnings per share on a fully diluted basis.
</FN>
</TABLE>
