<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 1-9057
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1391525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at May 1, 1995
--------------------------- ------------------------------
$.01 Par Value Common Stock 109,455,406 Shares
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<TABLE>
FORM 10-Q
WISCONSIN ENERGY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
<CAPTION>
Three Months Ended March 31
-------------------------------------
1995 1994
--------- --------
(Thousands of Dollars)
<S> <C> <C>
Operating Revenues
Electric $343,919 $355,239
Gas 121,100 147,579
Steam 6,103 6,863
--------- ---------
Total Operating Revenues 471,122 509,681
Operating Expenses
Fuel 67,819 72,476
Purchased power 19,076 11,594
Cost of gas sold 72,803 91,153
Other operation expenses 97,760 107,473
Maintenance 28,372 33,516
Revitalization - 73,900
Depreciation 44,712 44,039
Taxes other than income taxes 19,379 21,068
Federal income tax 29,635 22,743
State income tax 7,100 5,507
Deferred income taxes - net 376 (16,080)
Investment tax credit - net (482) (1,144)
--------- ---------
Total Operating Expenses 386,550 466,245
Operating Income 84,572 43,436
Other Income and Deductions
Interest income 3,614 4,724
Allowance for other funds used
during construction 825 1,253
Miscellaneous - net 1,350 410
Income taxes 305 123
--------- ---------
Total Other Income and Deductions 6,094 6,510
Income Before Interest Charges and Preferred
Dividend 90,666 49,946
Interest Charges
Interest expense 29,072 27,894
Allowance for borrowed funds used
during construction (1,241) (1,159)
--------- ---------
Total Interest Charges 27,831 26,735
Preferred Dividend Requirement of Subsidiary 301 389
--------- ---------
Net Income $ 62,534 $ 22,822
========= =========
Average Common Shares Outstanding (Thousands) 109,133 107,238
Earnings Per Share of Common Stock $ 0.57 $ 0.21
========= =========
Dividends Per Share of Common Stock $ 0.3525 $0.33875
========= =========
<FN>
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE> 3
<TABLE>
WISCONSIN ENERGY CORPORATION FORM 10-Q
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
<CAPTION>
March 31, 1995 December 31, 1994
---------------- -----------------
(Thousands of Dollars)
Assets
------
<S> <C> <C>
Utility Plant
Electric $ 4,377,597 $ 4,304,925
Gas 470,549 467,732
Steam 40,114 40,103
Accumulated provision for depreciation (2,184,573) (2,134,469)
------------- -------------
2,703,687 2,678,291
Construction work in progress 168,391 205,835
Nuclear fuel - net 55,759 56,606
------------- -------------
Net Utility Plant 2,927,837 2,940,732
Other Property and Investments 608,757 596,719
Current Assets
Cash and cash equivalents 16,831 8,976
Accounts receivable 128,879 114,657
Accrued utility revenues 103,737 128,107
Materials, supplies and fossil fuel 136,097 158,946
Prepayments and other assets 72,271 68,272
------------- -------------
Total Current Assets 457,815 478,958
Deferred Charges and Other Assets
Accumulated deferred income taxes 139,758 139,927
Other 250,478 251,923
------------- -------------
Total Deferred Charges and Other Assets 390,236 391,850
------------- -------------
Total Assets $ 4,384,645 $ 4,408,259
============= =============
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 637,575 $ 625,657
Retained earnings 1,143,010 1,118,909
------------- -------------
Total Common Stock Equity 1,780,585 1,744,566
Preferred stock-redemption not required 30,451 30,451
Long-term debt 1,249,742 1,283,686
------------- -------------
Total Capitalization 3,060,778 3,058,703
Current Liabilities
Long-term debt due currently 49,633 32,531
Short-term debt 181,574 252,055
Accounts payable 79,787 91,795
Accrued liabilities 85,852 68,234
Other 49,308 29,822
------------- -------------
Total Current Liabilities 446,154 474,437
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 478,974 475,541
Other 398,739 399,578
------------- -------------
Total Deferred Credits and Other Liabilities 877,713 875,119
------------- -------------
Total Capitalization and Liabilities $ 4,384,645 $ 4,408,259
============= =============
<FN>
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE> 4
<TABLE>
FORM 10-Q
WISCONSIN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
<CAPTION>
Three Months Ended March 31
----------------------------
1995 1994
---- ----
(Thousands of Dollars)
<S> <C> <C>
Operating Activities:
Net income $ 62,534 $ 22,822
Reconciliation to cash:
Depreciation 44,712 44,039
Nuclear fuel expense - amortization 5,263 5,816
Conservation expense - amortization 5,156 6,152
Debt premium, discount & expense - amortization 3,107 3,788
Revitalization - net (3,480) 59,381
Deferred income taxes - net 376 (16,080)
Investment tax credit - net (482) (1,144)
Allowance for other funds used during construction (825) (1,253)
Change in: Accounts receivable (14,222) (22,147)
Inventories 22,849 46,608
Accounts payable (12,008) (28,838)
Other current assets 20,371 31,290
Other current liabilities 37,104 24,117
Other 7,816 1,850
--------- ---------
Cash Provided by Operating Activities 178,271 176,401
Investing Activities:
Construction expenditures (43,985) (55,261)
Allowance for borrowed funds used during construction (1,241) (1,159)
Nuclear fuel (5,601) (4,806)
Nuclear decommissioning trust (2,575) (3,113)
Conservation investments - net (1,103) (4,355)
Other (1,741) (12,098)
--------- ---------
Cash Used in Investing Activities (56,246) (80,792)
Financing Activities:
Sale of common stock 11,918 14,554
Sale of long-term debt - 9,290
Retirement of long-term debt (17,174) (15,624)
Change in short-term debt (70,481) (50,880)
Dividends on stock - common (38,433) (36,294)
--------- ---------
Cash Used in Financing Activities (114,170) (78,954)
--------- ---------
Change in Cash and Cash Equivalents $ 7,855 $ 16,655
========= =========
Supplemental Information Disclosures:
Cash Paid for -
Interest (net of amount capitalized) $ 27,445 $ 25,274
Income taxes 15,120 9,152
<FN>
See accompanying notes to consolidated financial statements.
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</TABLE>
<PAGE> 5
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with the company's 1994 Annual Report on Form 10-K.
In the opinion of management, all adjustments, normal and recurring in
nature, necessary to a fair statement of the results of operations and
financial position of the company have been included in the accompanying
income statement and balance sheet. The results of operations for the
three months ended March 31, 1995 are not, however, necessarily indicative
of the results which may be expected for the year 1995 because of seasonal
and other factors.
2. On April 28, 1995, Wisconsin Energy Corporation ("WEC") and Northern
States Power Company, Minnesota ("NSP") entered into an Agreement and Plan
of Merger ("Agreement"). As a result, a registered utility holding
company, which will be known as Primergy Corporation ("Primergy"), will be
the parent of NSP and the current operating subsidiaries of NSP and WEC.
Each outstanding share of common stock of WEC will remain outstanding as
one share of common stock of Primergy, and each outstanding share of NSP
will be converted into 1.626 shares of common stock of Primergy. The
business combination is intended to be tax-free for income tax purposes
and to be accounted for as a "pooling of interests". The Agreement is
subject to various conditions, including approval of the stockholders of
WEC and NSP and the approval of various regulatory agencies. WEC
anticipates that the completion of the regulatory review and approval
process will take approximately 12-18 months and, accordingly, WEC and NSP
do not anticipate completing this business combination until late in 1996.
ITEM 5. OTHER INFORMATION in Part II of this report discusses further the
proposed transaction and provides pro forma combined condensed financial
information for Primergy.
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<PAGE> 6
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On April 28, 1995, Wisconsin Energy Corporation ("Wisconsin Energy") entered
into an Agreement and Plan of Merger with Northern States Power Company which
provides for a strategic business combination involving the two companies in a
"merger-of-equals" transaction. Further information concerning such agreement
and proposed transaction and pro forma financial information with respect
thereto is included in ITEM 5. OTHER INFORMATION in Part II of this report.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by Wisconsin Energy's consolidated operating activities totaled
$178 million during the three months ended March 31, 1995. This compares to
$176 million provided during the same period in 1994.
Wisconsin Energy's consolidated investing activities totaled $56 million for
the three months ended March 31, 1995 compared to $81 million during the same
period in 1994. Investments during the first quarter of 1995 include $44
million for the construction of new or improved facilities, $6 million for
acquisition of nuclear fuel, $1 million for net capitalized conservation
expenditures and $3 million for payments to an external trust for the eventual
decommissioning of Wisconsin Electric Power Company's ("Wisconsin Electric")
Point Beach Nuclear Plant.
Capital requirements for the remainder of 1995 are expected to be principally
for construction expenditures, capitalized conservation programs and payments
to the external trust for the eventual decommissioning of the Point Beach
Nuclear Plant. Depending upon market conditions, Wisconsin Electric, the
principal utility subsidiary of Wisconsin Energy, may refund some issues of
its current debt and issue approximately $100 million of additional long-term
debt in a public offering later in 1995. The specific form, amount and timing
of debt securities which may be issued have not yet been determined and will
depend, to a large extent, on market conditions.
Beginning June 1, 1992, Wisconsin Energy began issuing new shares of common
stock through the company's stock plans. During the period of December 1,
1988 to June 1, 1992, shares required for these plans were purchased on the
open market. From January 1, 1995 to March 31, 1995, cash investments and
reinvested dividends aggregating $11.9 million were used to purchase 441,238
new issue shares.
RESULTS OF OPERATIONS
Net income increased approximately $40 million during the first quarter of
1995 compared to the same period in 1994, reflecting the non-recurring charge
in the first quarter of 1994 of approximately $45 million (net of tax)
associated with Wisconsin Electric's and Wisconsin Natural Gas Company's
("Wisconsin Natural") restructuring program. This charge included the cost of
severance and early retirement packages, elements of a "revitalization"
program designed to better position Wisconsin Electric and Wisconsin Natural
in a changing market place. It is anticipated that this charge will be offset
by the end of 1995 through savings in operation and maintenance costs.
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<PAGE> 7
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
Excluding the non-recurring charge in 1994, net income decreased $5 million in
the first quarter of 1995 compared to the same period in 1994.
Between the first quarter of 1995 and 1994, total revenues decreased 7.6%.
Electric revenues were down 3.2% as a result of lower total electric energy
sales and gas margins (operating revenues less cost of gas sold) were down
14.4% as a result of lower natural gas deliveries. The decrease in electric
revenues and gas margins was due in large part to warmer than normal weather.
As a result of unscheduled outages at two of Wisconsin Electric's most
efficient power plants, Pleasant Prairie Power Plant and Point Beach Nuclear
Plant, fuel and purchased power expenses increased 3.4% during the three
months ended March 31, 1995 compared to 1994. In the first quarter of 1995,
other operation and maintenance expenses decreased 10.5% compared to the first
quarter of 1994, reflecting among other things the effects of the company's
"revitalization" program.
An annualized $16,179,000 or 1.3% Wisconsin retail electric fuel adjustment
rate decrease became effective on August 4, 1994 for Wisconsin Electric
customers.
ELECTRIC SALES
Three Months Ended March 31
---------------------------
Electric Sales - Megawatt Hours 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,689,356 1,795,445 (5.9)
Small Commercial and Industrial 1,714,727 1,657,786 3.4
Large Commercial and Industrial 2,542,354 2,462,432 3.2
Other 380,910 439,421 (13.3)
---------- ----------
Total Retail and Municipal 6,327,347 6,355,084 (0.4)
Resale-Utilities 202,132 391,458 (48.4)
---------- ----------
Total Sales 6,529,479 6,746,542 (3.2)
- -------------------------------
Total electric energy sales during the first quarter of 1995 decreased
primarily due to mild winter weather. As measured by heating degree days, the
first quarter of 1995 weather was 14.7% warmer compared to the same period in
1994.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, decreased 0.8% during the quarter ended
March 31, 1995 compared to the same period during 1994. Excluding the mines,
total electric sales decreased 3.4%, but sales to all other large commercial
and industrial customers increased 4.4% during the first quarter of 1995
compared to the same period in 1994.
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<PAGE> 8
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
GAS DELIVERIES
Three Months Ended March 31
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 145,203 167,669 (13.4)
Commercial and Industrial 90,326 97,891 (7.7)
Interruptible 14,099 16,978 (17.0)
---------- ----------
Total Sales 249,628 282,538 (11.6)
Transported Customer Owned Gas 81,867 69,263 18.2
---------- ----------
Total Gas Delivered 331,495 351,801 (5.8)
- -------------------------------
Natural gas therm deliveries during the first quarter of 1995 also decreased
primarily due to the mild weather described above. The warmer weather
significantly reduced residential and commercial sales which have higher
margins. Interruptible and transportation deliveries combined showed an
increase over the first quarter of 1994. However, the margin on these
deliveries is lower than on residential and commercial customers.
SOURCES OF NATURAL GAS
Wisconsin Natural purchases gas for injection into storage for future
withdrawal during the heating season under various arrangements with gas
storage facilities. At March 31, 1995 the cost of natural gas stored for
future use was $7.3 million, representing a $1.8 million decrease from the
cost of natural gas stored at March 31, 1994. Gas stored at these facilities
is purchased by Wisconsin Natural from a number of suppliers.
For certain other information which may impact Wisconsin Energy's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following should be read in conjunction with ITEM 3. LEGAL PROCEEDINGS in
PART I of Wisconsin Energy's Annual Report on Form 10-K for the year ended
December 31, 1994.
RATE MATTERS
Wisconsin Retail Electric Jurisdiction
1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural
sent a letter to the Public Service Commission of Wisconsin ("PSCW") proposing
a one year deferral of their scheduled rate case filing. On May 1, 1995,
Wisconsin Electric filed with the PSCW required data related to the 1996 test
year. This was an abbreviated filing since no increase in rates was
requested. The matter is pending.
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<PAGE> 9
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
RATE MATTERS (Cont'd)
Wisconsin Retail Gas Jurisdiction
1996 Test Year: On March 27, 1995, Wisconsin Natural and Wisconsin Electric
sent a letter to the PSCW proposing a one year deferral of their scheduled
rate case filing. On May 1, 1995, Wisconsin Natural filed with the PSCW
required data related to the 1996 test year. This was an abbreviated filing
since no increase in rates was requested. The matter is pending.
Wisconsin Retail Steam Jurisdiction
1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural
sent a letter to the PSCW proposing a one year deferral of their scheduled
rate case filing. On May 1, 1995, Wisconsin Electric filed with the PSCW
required data related to the 1996 test year. This was an abbreviated filing
since no increase in rates was requested. The matter is pending.
ITEM 5. OTHER INFORMATION
GAS SUPPLY PORTFOLIO MANAGEMENT AGREEMENT WITH MIDCON
On May 8, 1995, Wisconsin Natural announced that the company has entered into
an agreement with MidCon Gas Services Corporation ("MidCon") under which
MidCon will provide portfolio management for Wisconsin Natural's gas purchase,
transportation and storage contracts. The arrangement, which takes effect on
June 1, 1995, will be an integral part of a proposal that will be filed by
Wisconsin Natural with the PSCW to replace the current Purchased Gas
Adjustment mechanism with a new market-based pricing mechanism. The proposed
gas pricing mechanism would link gas commodity prices to market indices and
incorporate all other gas supply costs, such as transportation and storage,
under a price cap. The price cap will be designed to provide balanced
financial incentives and risks for Wisconsin Natural and MidCon based on
performance standards, while ensuring a reliable gas supply for consumers.
PARIS GENERATING STATION
In March 1995, two units, or approximately 150 megawatts of peaking capacity,
were placed in-service at the new Paris Generating Station. The natural gas-
fired combustion turbine facility is located near Union Grove, Wisconsin. Two
additional units, or approximately 150 megawatts of peaking capacity, are
expected to be placed in-service at this facility in May 1995. The plant is
expected to run less than 500 hours per year.
MERGER OF WISCONSIN NATURAL INTO WISCONSIN ELECTRIC
Wisconsin Energy intends to merge Wisconsin Natural into Wisconsin Electric to
form a single combined utility subsidiary. The merger is intended to improve
customer service and reduce operating costs. In October 1994, Wisconsin
Electric and Wisconsin Natural filed a joint application to obtain the PSCW's
approval of the merger. On May 9, 1995, the PSCW issued an order approving
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<PAGE> 10
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
MERGER OF WISCONSIN NATURAL INTO WISCONSIN ELECTRIC (Cont'd)
the merger. In 1994, Wisconsin Electric also filed an application to obtain
consent of the Michigan Public Service Commission ("MPSC") to assume Wisconsin
Natural's liabilities. On April 27, 1995, the MPSC issued an order approving
the merger and the assumption of Wisconsin Natural's liabilities by Wisconsin
Electric. Completion of the planned merger is expected to occur by January 1,
1996.
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
As previously reported in WEC's 4/28/95 8-K (as defined below), Wisconsin
Energy Corporation, a Wisconsin corporation ("WEC"), Northern States Power
Company, a Minnesota corporation ("NSP"), Northern Power Wisconsin Corp., a
Wisconsin corporation and wholly-owned subsidiary of NSP ("New NSP"), and WEC
Sub Corp., a Wisconsin corporation and wholly-owned subsidiary of WEC ("WEC
Sub"), have entered into an Agreement and Plan of Merger, dated as of April
28, 1995 (the "Merger Agreement"), which provides for a strategic business
combination involving NSP and WEC in a "merger-of-equals" transaction (the
"Transaction"). The Transaction, which was unanimously approved by the Boards
of Directors of the constituent companies, is expected to close shortly after
all of the conditions to the consummation of the Transaction, including
obtaining applicable regulatory approvals, are met or waived. The regulatory
approval process is expected to take approximately 12 to 18 months.
In the Transaction, the holding company of the combined enterprise will be
registered under the Public Utility Holding Company Act of 1935, as amended.
The holding company will be named Primergy Corporation ("Primergy") and will
be the parent company of both New NSP (NSP, for regulatory reasons, will
reincorporate in Wisconsin) and WEC's present principal utility subsidiary,
Wisconsin Electric Power Company ("WEPCO"), which will be renamed "Wisconsin
Energy Company." Wisconsin Energy Company will include the operations of
WEC's other present utility subsidiary, Wisconsin Natural Gas Company ("WNG"),
which is anticipated to be merged into WEPCO by January 1, 1996, as previously
planned. It is anticipated that, following the Transaction, NSP's Wisconsin
utility subsidiary, Northern States Power Company, a Wisconsin corporation,
will be merged into Wisconsin Energy Company.
The Merger Agreement, the WEC press release issued in connection therewith and
the related Stock Option Agreements (defined below) are filed as exhibits to
WEC's Current Report on Form 8-K dated as of April 28, 1995, which was filed
on May 3, 1995 ("WEC's 4/28/95 8-K"), and are incorporated therein and herein
by reference. The descriptions of the Merger Agreement and the Stock Option
Agreements set forth herein and therein do not purport to be complete and are
qualified in their entirety by the provisions of the Merger Agreement and the
Stock Option Agreements, as the case may be, and the other exhibits filed with
WEC's 4/28/95 8-K and incorporated as exhibits to this report by reference
thereto.
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<PAGE> 11
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd)
Under the terms of the Merger Agreement, NSP will be merged with and into New
NSP and immediately thereafter WEC Sub will be merged with and into New NSP,
with New NSP being the surviving corporation. Each outstanding share of
Common Stock, par value $2.50 per share, of NSP ("NSP Common Stock") will be
cancelled and converted into the right to receive 1.626 shares of Common
Stock, par value $.01 per share, of Primergy ("Primergy Common Stock"). The
outstanding shares of WEC Common Stock, par value $.01 per share ("WEC Common
Stock"), will remain outstanding, unchanged, as shares of Primergy Common
Stock. As of the date of the Merger Agreement, NSP had 67.3 million common
shares outstanding and WEC had 109.4 million common shares outstanding. Based
on such capitalization, the Transaction would result in the common
shareholders of NSP receiving 50% of the common equity of Primergy and the
common shareholders of WEC owning the other 50% of the common equity of
Primergy. Each outstanding share of Cumulative Preferred Stock, par value
$100.00 per share, of NSP will be cancelled and converted into the right to
receive one share of Cumulative Preferred Stock, par value $100.00 per share,
of New NSP with identical rights (including dividend rights) and designations.
WEPCO's outstanding preferred stock will be unchanged in the Transaction.
It is anticipated that Primergy will adopt NSP's dividend payment level
adjusted for the exchange ratio. NSP currently pays $2.64 per share annually,
and WEC's annual dividend rate is currently $1.47 per share. Based on the
exchange ratio and NSP's current dividend rate, the pro forma dividend rate
for Primergy would be $1.62 per share.
The Transaction is subject to customary closing conditions, including, without
limitation, the receipt of required shareholder approvals of WEC and NSP; and
the receipt of all necessary governmental approvals and the making of all
necessary governmental filings, including approvals of state utility
regulators in Wisconsin, Minnesota and certain other states, the approval of
the Federal Energy Regulatory Commission, the Securities and Exchange
Commission (the "SEC") and the Nuclear Regulatory Commission, and the filing
of the requisite notification with the Federal Trade Commission and the
Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act
of 1976, as amended, and the expiration of the applicable waiting period
thereunder. The Transaction is also subject to receipt of assurances from the
Internal Revenue Service and opinions of counsel that the Transaction will
qualify as a tax-free reorganization, and the assurances from the parties'
independent accountants that the Transaction will qualify as a pooling of
interests for accounting purposes. In addition, the Transaction is
conditioned upon the effectiveness of a registration statement to be filed by
WEC with the SEC with respect to shares of the Primergy Common Stock to be
issued in the Transaction and the approval for listing of such shares on the
New York Stock Exchange. (See Article VIII of the Merger Agreement.)
Shareholder meetings to vote upon the Transaction will be convened as soon as
practicable and are expected to be held in the third or fourth quarter of
1995.
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<PAGE> 12
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd)
The Merger Agreement contains certain covenants of the parties pending the
consummation of the Transaction. Generally, the parties must carry on their
businesses in the ordinary course consistent with past practice, may not
increase dividends on common stock beyond specified levels, and may not issue
any capital stock beyond certain limits. The Merger Agreement also contains
restrictions on, among other things, charter and bylaw amendments, capital
expenditures, acquisitions, dispositions, incurrence of indebtedness, certain
increases in employee compensation and benefits, and affiliate transactions.
(See Article VI of the Merger Agreement.)
The Merger Agreement provides that, after the effectiveness of the Transaction
(the "Effective Time"), the corporate headquarters and principal executive
offices of Primergy and NSP will be located in Minneapolis, Minnesota, and the
headquarters of Wisconsin Energy Company will remain in Milwaukee, Wisconsin.
Primergy's Board of Directors, which will be divided into three classes, will
consist of a total of 12 directors, 6 of whom will be designated by WEC and 6
of whom will be designated by NSP. Mr. James J. Howard, the current Chairman
of the Board, President and Chief Executive Officer ("CEO") of NSP, will serve
as CEO of Primergy from the Effective Time until the later of 16 months after
the Effective Time or the date of the annual meeting of shareholders of
Primergy that occurs in 1998 and Chairman of Primergy until the later of
July 1, 2000 or two years after he ceases to be CEO. Mr. Abdoo, the current
Chairman of the Board, President and CEO of WEC, will serve as Vice Chairman
of the Board, President and Chief Operating Officer of Primergy until the date
when Mr. Howard ceases to be CEO, at which time he will assume the additional
role of CEO. Mr. Abdoo will assume the position of Chairman when Mr. Howard
ceases to be Chairman.
The Merger Agreement may be terminated under certain circumstances, including
(1) by mutual consent of the parties; (2) by any party if the Transaction is
not consummated by April 30, 1997 (provided, however, that such termination
date shall be extended to October 31, 1997 if all conditions to closing the
Transaction, other than the receipt of certain consents and/or statutory
approvals by any of the parties, have been satisfied by April 30, 1997); (3)
by any party if either NSP's or WEC's shareholders vote against the
Transaction or if any state or federal law or court order prohibits the
Transaction; (4) by a non-breaching party if there exist breaches of any
representations or warranties contained in the Merger Agreement as of the date
thereof, which breaches, individually or in the aggregate, would result in a
material adverse effect on the breaching party and which is not cured within
twenty (20) days after notice; (5) by a non-breaching party if there occur
breaches of specified covenants or material breaches of any covenant or
agreement which are not cured within twenty (20) days after notice; (6) by
either party if the Board of Directors of the other party shall withdraw or
adversely modify its recommendation of the Transaction or shall approve any
competing transaction; or (7) by either party, under certain circumstances, as
a result of a third-party tender offer or business combination proposal which
such party, pursuant to its directors' fiduciary duties, is, in the opinion of
such party's counsel and after the other party has first been given an
opportunity to make concessions and adjustments in the terms of the Merger
Agreement, required to accept.
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<PAGE> 13
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd)
The Merger Agreement provides that if a breach described in clause (4) or (5)
of the previous paragraph occurs, then, if such breach is not willful, the
non-breaching party is entitled to reimbursement of its out-of-pocket
expenses, not to exceed $10 million. In the event of a willful breach, the
non-breaching party will be entitled to its out-of-pocket expenses (which
shall not be limited to $10 million) and any remedies it may have at law or in
equity, provided that if, at the time of the breaching party's willful breach,
there shall have been a third party tender offer or business combination
proposal which shall not have been rejected by the breaching party and
withdrawn by the third party, and within two and one-half years of any
termination by the non-breaching party, the breaching party accepts an offer
to consummate or consummates a business combination with such third party,
then such breaching party, upon the signing of a definitive agreement relating
to such a business combination, or, if no such agreement is signed then at the
closing of such business combination, will pay to the non-breaching party an
additional fee equal to $75 million. The Merger Agreement also requires
payment of a termination fee of $75 million (and reimbursement of out-of-
pocket expenses) by one party (the "Payor") to the other in certain
circumstances, if (i) the Merger Agreement is terminated (x) as a result of
the acceptance by the Payor of a third-party tender offer or business
combination proposal, (y) following a failure of the shareholders of the Payor
to grant their approval to the Transaction or (z) as a result of the Payor's
material failure to convene a shareholder meeting, distribute proxy materials
and, subject to its board of directors' fiduciary duties, recommend the
Transaction to its shareholders; (ii) at the time of such termination or prior
to the meeting of such party's shareholders there shall have been a third-
party tender offer or business combination proposal which shall not have been
rejected by the Payor and withdrawn by such third party; and (iii) within two
and one-half years of any such termination described in clause (i) above, the
Payor accepts an offer to consummate or consummates a business combination
with such third party. Such termination fee and out-of-pocket expenses
referred to in the previous sentence shall be paid upon the signing of a
definitive agreement between the Payor and the third party, or, if no such
agreement is signed, then at the closing of such third-party business
combination. The termination fees payable by NSP or WEC under these
provisions and the aggregate amount which could be payable by NSP or WEC upon
a required purchase of the options granted pursuant to the Stock Option
Agreements (defined below) may not exceed $125 million in the aggregate. (See
Article IX of the Merger Agreement.)
Concurrently with the Merger Agreement, the parties have entered into
reciprocal stock option agreements (the "Stock Option Agreements") each
granting the other an irrevocable option to purchase up to that number of
shares of common stock of the other company which equals 19.9% of the number
of shares of common stock of the other company outstanding on April 28, 1995
at an exercise price of $44.075 per share of NSP common stock or $27.675 per
share of WEC common stock, as the case may be, under certain circumstances if
the Merger Agreement becomes terminable by one party as a result of the other
party's breach or as a result of the other party becoming the subject of a
- 13 -
<PAGE> 14
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd)
third-party proposal for a business combination. Any party whose option
becomes exercisable (the "Exercising Party") may request the other party to
repurchase from it all or any portion of the Exercising Party's option at the
price specified in the Stock Option Agreements. (See the Stock Option
Agreements).
Primergy is expected to be the tenth-largest investor-owned utility company in
the United States based on the $6.0 billion current combined market
capitalization of WEC and NSP. For the year-ended December 31, 1994, the
combined revenues of WEC and NSP were $4.2 billion, with total assets of more
than $10 billion. Primergy will serve approximately 2.3 million electric
customers and 750,000 natural gas customers. Its service territory will
include portions of Minnesota, Wisconsin, North Dakota, South Dakota and the
Upper Peninsula of Michigan. The business of Primergy will consist of utility
operations and various non-utility enterprises, including independent power
projects.
A preliminary estimate indicates that the Transaction will result in net
savings of approximately $2.0 billion in costs over 10 years. The synergies
created by the Transaction will allow the companies to implement a reduction
in electric retail rates followed by a rate freeze for electric retail
customers through the year 2000.
Following announcement of the Transaction, on May 1, 1995 Standard & Poor's
Corporation ("S&P") reported that it was placing on CreditWatch with negative
implications its AA+ senior secured debt and AA+ preferred stock ratings of
WEPCO and its AA senior unsecured debt rating of Wisconsin Michigan Investment
Corporation (a non-utility subsidiary of WEC). In addition, S&P indicated
that while its AA senior secured debt rating of WNG would remain on
CreditWatch, where it was placed on April 25, 1994, the implications were
revised to negative from positive. S&P stated that if the Transaction is
completed, the likely credit rating for the senior secured debt of WEPCO is
expected to be AA or AA-. As part of its ratings process, S&P intends to
review the financial and operating plans of the merged utilities. Also on May
1, 1995, citing WEPCO's continued operation as a separate utility subsidiary
after the Transaction, its strength within its rating category and its strong
capital structure, Moody's Investors Service confirmed its Aa2 first mortgage
bond rating of WEPCO.
Both NSP and WEC recognize that the divestiture of their existing gas
operations and certain non-utility operations is a possibility under the new
registered holding company structure, but will seek approval from the SEC to
maintain such businesses. If divestiture is ultimately required, the SEC has
historically allowed companies sufficient time to accomplish divestitures in a
manner that protects shareholder value.
- 14 -
<PAGE> 15
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
FINANCIAL STATEMENTS OF NSP
The consolidated financial statements of NSP listed in the descriptions of
Exhibits (99)-1 and (99)-2 in paragraph (a) of Item 6 of this report are
incorporated herein by reference. The audited financial statements so listed
are included in Item 8 of NSP's Annual Report on Form 10-K for the fiscal year
ended December 31, 1994 (File No. 1-3034). The unaudited interim financial
statements so listed are included in Item 1 in Part I of NSP's Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 (File No. 1-3034).
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of NSP and WEC
after giving effect to the proposed business combination transaction
("Transaction") to form Primergy Corporation ("Primergy"). The unaudited pro
forma combined condensed balance sheet at March 31, 1995 gives effect to the
Transaction as if it had occurred at March 31, 1995. The unaudited pro forma
combined condensed statements of income for each of the three years in the
period ended December 31, 1994, the three months ended March 31, 1995 and 1994
and the twelve months ended March 31, 1995, give effect to the Transaction as
if it had occurred at January 1, 1992. These statements are prepared on the
basis of accounting for the Transaction as a pooling of interests and are
based on the assumptions set forth in the notes thereto.
The WEC income statements for the three months ended March 31, 1994 and the
fiscal year ended December 31, 1994 include a significant one-time pretax
charge of $73.9 million for revitalization costs recorded in the first quarter
of 1994. To provide a more representative recent twelve-month period
summarizing combined operating results, a pro forma combined condensed
statement of income for the twelve months ended March 31, 1995 is also
presented.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of NSP and WEC. The following
information is not necessarily indicative of the financial position or
operating results that would have occurred had the Transaction been
consummated on the date, or at the beginning of the periods, for which the
Transaction is being given effect nor is it necessarily indicative of future
operating results or financial position.
- 15 -
<PAGE> 16
<TABLE>
PRIMERGY CORPORATION FORM 10-Q
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
MARCH 31, 1995
(In thousands)
<CAPTION>
NSP WEC Pro Forma Pro Forma
Pro Forma Balance Sheet (As Reported) (As Reported) Adjustments Combined
------------------------------------------ -------------- -------------- -------------- --------------
Assets
<S> <C> <C> <C> <C>
Utility Plant
Electric $ 6,407,107 $ 4,544,978 $ - $ 10,952,085
Gas 679,587 471,559 - 1,151,146
Other 271,924 40,114 - 312,038
------------- ------------- ------------- -------------
Total 7,358,618 5,056,651 - 12,415,269
Accumulated provision for depreciation (3,189,171) (2,184,573) - (5,373,744)
Nuclear fuel - net 90,795 55,759 - 146,554
------------- ------------- ------------- -------------
Net Utility Plant 4,260,242 2,927,837 - 7,188,079
Current Assets
Cash and cash equivalents 36,525 16,831 - 53,356
Accounts receivable - net 290,284 128,879 - 419,163
Accrued utility revenues 81,999 103,737 - 185,736
Fossil fuel inventories 46,229 65,998 - 112,227
Material & supplies inventories 104,739 70,099 - 174,838
Prepayments and other 50,754 72,271 - 123,025
------------- ------------- ------------- -------------
Total Current Assets 610,530 457,815 - 1,068,345
Other Assets
Regulatory Assets 351,729 332,089 - 683,818
External decommissioning fund 160,731 239,940 - 400,671
Investments in non-regulated projects
and other investments 220,080 115,346 - 335,426
Non-regulated property - net 175,654 97,907 - 273,561
Intangible assets and other (Note 4) 135,410 213,711 (139,758) 209,363
------------- ------------- ------------- -------------
Total Other Assets 1,043,604 998,993 (139,758) 1,902,839
------------- ------------- ------------- -------------
Total Assets $ 5,914,376 $ 4,384,645 $ (139,758) $ 10,159,263
============= ============= ============= =============
Liabilities and Equity
Capitalization
Common stock equity:
Common stock (Note 1) $ 168,186 $ 1,094 $ (167,092) $ 2,188
Other stockholders' equity (Note 1) 1,751,891 1,779,491 167,092 3,698,474
------------- ------------- ------------- -------------
Total Common Stock Equity 1,920,077 1,780,585 - 3,700,662
Cumulative preferred stock and premium 240,469 30,451 - 270,920
Long-term debt 1,456,217 1,249,742 - 2,705,959
------------- ------------- ------------- -------------
Total Capitalization 3,616,763 3,060,778 - 6,677,541
Current Liabilities
Current portion of long-term debt 160,606 49,633 - 210,239
Short-term debt 157,648 181,574 - 339,222
Accounts payable 179,279 79,787 - 259,066
Taxes accrued 256,616 38,617 - 295,233
Other accrued liabilities 139,255 96,543 - 235,798
------------- ------------- ------------- -------------
Total Current Liabilities 893,404 446,154 - 1,339,558
Other Liabilities
Deferred income taxes (Note 4) 850,823 478,974 (139,758) 1,190,039
Deferred investment tax credits 171,544 93,034 - 264,578
Regulatory liabilities 208,329 172,466 - 380,795
Other liabilities and deferred credits 173,513 133,239 - 306,752
------------- ------------- ------------- -------------
Total Other Liabilities 1,404,209 877,713 (139,758) 2,142,164
------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 5,914,376 $ 4,384,645 $ (139,758) $ 10,159,263
============= ============= ============= =============
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 16 -
</TABLE>
<PAGE> 17
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
3 MONTHS ENDED MARCH 31, 1995
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $ 497,314 $ 343,919 $ - $ 841,233
Gas 163,853 121,100 - 284,953
Steam - 6,103 - 6,103
---------- ---------- ---------- ----------
Total Operating Revenues 661,167 471,122 - 1,132,289
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 135,071 86,895 - 221,966
Cost of Gas Sold & Transported 99,301 72,803 - 172,104
Other Operation 130,627 97,760 - 228,387
Maintenance 37,767 28,372 - 66,139
Depreciation and Amortization 71,831 44,712 - 116,543
Taxes Other Than Income Taxes 62,279 19,379 - 81,658
Revitalization Charges - - - -
Income Taxes 36,593 36,629 - 73,222
---------- ---------- ---------- ----------
Total Operating Expenses 573,469 386,550 - 960,019
---------- ---------- ---------- ----------
Utility Operating Income 87,698 84,572 - 172,270
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 10,506 - - 10,506
Other Income and Deductions - Net 761 6,094 - 6,855
---------- ---------- ---------- ----------
Total Other Income (Expense) 11,267 6,094 - 17,361
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 98,965 90,666 - 189,631
Interest Charges 30,775 27,831 - 58,606
Preferred Dividends of Subsidiaries 3,201 301 - 3,502
---------- ---------- ---------- ----------
Net Income $ 64,989 $ 62,534 $ - $ 127,523
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 67,004 109,133 41,945 218,082
Earnings Per Common Share $ 0.97 $ 0.57 $ 0.58
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 17 -
</TABLE>
<PAGE> 18
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
3 MONTHS ENDED MARCH 31, 1994
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $ 494,031 $ 355,239 $ - $ 849,270
Gas 189,431 147,579 - 337,010
Steam - 6,863 - 6,863
---------- ---------- ---------- ----------
Total Operating Revenues 683,462 509,681 - 1,193,143
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 132,471 84,070 - 216,541
Cost of Gas Sold & Transported 121,805 91,153 - 212,958
Other Operation 133,487 107,473 - 240,960
Maintenance 40,469 33,516 - 73,985
Depreciation and Amortization 67,345 44,039 - 111,384
Taxes Other Than Income Taxes 59,929 21,068 - 80,997
Revitalization Charges - 73,900 - 73,900
Income Taxes 42,161 11,026 - 53,187
---------- ---------- ---------- ----------
Total Operating Expenses 597,667 466,245 - 1,063,912
---------- ---------- ---------- ----------
Utility Operating Income 85,795 43,436 - 129,231
Other Income (Expense)
Equity Earnings of Unconsolidated Investees (107) - - (107)
Other Income and Deductions - Net 4,474 6,510 - 10,984
---------- ---------- ---------- ----------
Total Other Income (Expense) 4,367 6,510 - 10,877
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 90,162 49,946 - 140,108
Interest Charges 24,368 26,735 - 51,103
Preferred Dividends of Subsidiaries 3,057 389 - 3,446
---------- ---------- ---------- ----------
Net Income $ 62,737 $ 22,822 $ - $ 85,559
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 66,742 107,238 41,780 215,760
Earnings Per Common Share $ 0.94 $ 0.21 $ 0.40
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 18 -
</TABLE>
<PAGE> 19
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED MARCH 31, 1995
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $2,069,927 $1,392,242 $ - $3,462,169
Gas 394,325 297,870 - 692,195
Steam - 13,521 - 13,521
---------- ---------- ---------- ----------
Total Operating Revenues 2,464,252 1,703,633 - 4,167,885
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 573,477 331,310 - 904,787
Cost of Gas Sold & Transported 240,939 181,161 - 422,100
Other Operation 533,310 389,298 - 922,608
Maintenance 167,444 119,458 - 286,902
Depreciation and Amortization 278,287 178,287 - 456,574
Taxes Other Than Income Taxes 236,914 74,346 - 311,260
Revitalization Charges - - - -
Income Taxes 123,661 125,364 - 249,025
---------- ---------- ---------- ----------
Total Operating Expenses 2,154,032 1,399,224 - 3,553,256
---------- ---------- ---------- ----------
Utility Operating Income 310,220 304,409 - 614,629
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 46,477 - - 46,477
Other Income and Deductions - Net 2,797 26,549 - 29,346
---------- ---------- ---------- ----------
Total Other Income (Expense) 49,274 26,549 - 75,823
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 359,494 330,958 - 690,452
Interest Charges 113,623 109,115 - 222,738
Preferred Dividends of Subsidiaries 12,509 1,263 - 13,772
---------- ---------- ---------- ----------
Net Income $ 233,362 $ 220,580 $ - $ 453,942
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 66,896 108,492 41,877 217,265
Earnings Per Common Share $ 3.49 $ 2.03 $ 2.09
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 19 -
</TABLE>
<PAGE> 20
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED DECEMBER 31, 1994
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $2,066,644 $1,403,562 $ - $3,470,206
Gas 419,903 324,349 - 744,252
Steam - 14,281 - 14,281
---------- ---------- ---------- ----------
Total Operating Revenues 2,486,547 1,742,192 - 4,228,739
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 570,880 328,485 - 899,365
Cost of Gas Sold & Transported 263,443 199,511 - 462,954
Other Operation 536,168 399,011 - 935,179
Maintenance 170,145 124,602 - 294,747
Depreciation and Amortization 273,801 177,614 - 451,415
Taxes Other Than Income Taxes 234,564 76,035 - 310,599
Revitalization Charges - 73,900 - 73,900
Income Taxes 129,228 99,761 - 228,989
---------- ---------- ---------- ----------
Total Operating Expenses 2,178,229 1,478,919 - 3,657,148
---------- ---------- ---------- ----------
Utility Operating Income 308,318 263,273 - 571,591
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 35,863 - - 35,863
Other Income and Deductions - Net 6,509 26,965 - 33,474
---------- ---------- ---------- ----------
Total Other Income (Expense) 42,372 26,965 - 69,337
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 350,690 290,238 - 640,928
Interest Charges 107,215 108,019 - 215,234
Preferred Dividends of Subsidiaries 12,364 1,351 - 13,715
---------- ---------- ---------- ----------
Net Income $ 231,111 $ 180,868 $ - $ 411,979
========== ========== ========== ==========
Average Common Outstanding Shares (Note 1) 66,845 108,025 41,845 216,715
Earnings Per Common Share $ 3.46 $ 1.67 $ 1.90
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 20 -
</TABLE>
<PAGE> 21
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED DECEMBER 31, 1993
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $1,974,916 $1,347,844 $ - $3,322,760
Gas 429,076 331,301 - 760,377
Steam - 14,090 - 14,090
---------- ---------- ---------- ----------
Total Operating Revenues 2,403,992 1,693,235 - 4,097,227
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 524,126 318,265 - 842,391
Cost of Gas Sold & Transported 282,028 214,132 - 496,160
Other Operation 516,568 399,135 - 915,703
Maintenance 161,413 156,085 - 317,498
Depreciation and Amortization 264,517 167,066 - 431,583
Taxes Other Than Income Taxes 223,108 74,653 - 297,761
Revitalization Charges - - - -
Income Taxes 128,346 98,463 - 226,809
---------- ---------- ---------- ----------
Total Operating Expenses 2,100,106 1,427,799 - 3,527,905
---------- ---------- ---------- ----------
Utility Operating Income 303,886 265,436 - 569,322
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 3,030 - - 3,030
Other Income and Deductions - Net 12,916 32,073 - 44,989
---------- ---------- ---------- ----------
Total Other Income (Expense) 15,946 32,073 - 48,019
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 319,832 297,509 - 617,341
Interest Charges 108,092 102,997 - 211,089
Preferred Dividends of Subsidiaries 14,580 4,377 - 18,957
---------- ---------- ---------- ----------
Net Income $ 197,160 $ 190,135 $ - $ 387,295
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 65,211 105,878 40,822 211,911
Earnings Per Common Share $ 3.02 $ 1.80 $ 1.83
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 21 -
</TABLE>
<PAGE> 22
<TABLE>
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED DECEMBER 31, 1992
(In thousands, except per share amounts)
<CAPTION>
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Utility Operating Revenues
Electric $1,823,316 $1,298,723 $ - $3,122,039
Gas 336,206 283,699 - 619,905
Steam - 13,093 - 13,093
---------- ---------- ---------- ----------
Total Operating Revenues 2,159,522 1,595,515 - 3,755,037
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 451,696 330,461 - 782,157
Cost of Gas Sold & Transported 220,370 177,947 - 398,317
Other Operation 512,833 367,020 - 879,853
Maintenance 180,585 150,462 - 331,047
Depreciation and Amortization 242,914 164,367 - 407,281
Taxes Other Than Income Taxes 204,439 73,714 - 278,153
Revitalization Charges - - - -
Income Taxes 90,669 89,838 - 180,507
---------- ---------- ---------- ----------
Total Operating Expenses 1,903,506 1,353,809 - 3,257,315
---------- ---------- ---------- ----------
Utility Operating Income 256,016 241,706 - 497,722
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 2,382 - - 2,382
Other Income and Deductions - Net 5,570 26,136 - 31,706
---------- ---------- ---------- ----------
Total Other Income (Expense) 7,952 26,136 - 34,088
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 263,968 267,842 - 531,810
Interest Charges 103,040 90,687 - 193,727
Preferred Dividends of Subsidiaries 16,172 5,916 - 22,088
---------- ---------- ---------- ----------
Income Before Accounting Change $ 144,756 $ 171,239 $ - $ 315,995
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 62,641 103,382 39,213 205,236
Earnings Per Common Share $ 2.31 $ 1.66 $ 1.54
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 22 -
</TABLE>
<PAGE> 23
FORM 10-Q
PRIMERGY CORPORATION
------------------------------------------
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma combined condensed financial statements reflect the
conversion of each share of NSP Common Stock outstanding ($2.50 par value)
into 1.626 shares of Primergy Common Stock ($.01 par value) and the
continuation of each share of WEC Common Stock outstanding as one share of
Primergy Common Stock ($.01 par value), as provided in the Merger
Agreement. The pro forma combined condensed financial statements are
presented as if the companies were combined during all periods included
therein.
2. The allocation between NSP and WEC and their customers of the estimated
cost savings resulting from the Transaction, net of the costs incurred to
achieve such savings, will be subject to regulatory review and approval.
Transaction costs are currently estimated to be approximately $30 million
(including fees for financial advisors, accountants, attorneys, filings
and printing). None of the estimated cost savings, the cost to achieve
such savings, or the transaction costs have been reflected in the pro
forma combined condensed financial statements.
3. Intercompany transactions (including purchased and exchanged power
transactions) between NSP and WEC during the periods presented were not
material and, accordingly, no pro forma adjustments were made to
eliminate such transactions.
4. A pro forma adjustment has been made to conform the presentation of
noncurrent deferred income taxes in the pro forma combined condensed
balance sheet into one net amount. All other report presentation
and accounting policy differences are immaterial and have not been
adjusted in the pro forma combined condensed financial statements.
- 23 -
<PAGE> 24
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
The following Exhibits are filed with this report:
(23)-1 Independent Auditors' Consent of Deloitte & Touche LLP.
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
three months ended March 31, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057.) ("WEC's 4/28/95 8-K")
(2)-2 WEC Stock Option Agreement, dated as of April 28, 1995, by and
among Northern States Power Company and Wisconsin Energy
Corporation. (Exhibit (2)-2 to WEC's 4/28/95 8-K.)
(2)-3 NSP Stock Option Agreement, dated as of April 28, 1995, by and
among Wisconsin Energy Corporation and Northern States Power
Company. (Exhibit (2)-3 to WEC's 4/28/95 8-K.)
(2)-4 Committees of the Board of Directors of Primergy Corporation.
(Exhibit (2)-4 to WEC's 4/28/95 8-K.)
(2)-5 Form of Employment Agreement of James J. Howard. (Exhibit
(2)-5 to WEC's 4/28/95 8-K.)
(2)-6 Form of Employment Agreement of Richard A. Abdoo. (Exhibit
(2)-6 to WEC's 4/28/95 8-K.)
(2)-7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp. (Exhibit (2)-7 to WEC's
4/28/95 8-K.)
(2)-8 Letter Agreement, dated January 17, 1995, between Northern
States Power Company and Wisconsin Energy Corporation.
(Exhibit (2)-8 to WEC's Schedule 13D dated May 4, 1995 with
respect to the NSP Stock Option Agreement.)
(2)-9 Letter Agreement, dated April 26, 1995, between Northern
States Power Company and Wisconsin Energy Corporation amending
Letter Agreement dated January 17, 1995. (Exhibit (2)-9 to
WEC's Schedule 13D dated May 4, 1995 with respect to the NSP
Stock Option Agreement.)
- 24 -
<PAGE> 25
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (Cont'd)
(99)-1 Audited Financial Statements of Northern States Power Company.
(Item 8 of Northern States Power Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, File
No. 1-3034):
Independent Auditors' Report.
Consolidated Statements of Income for the three years ended
December 31, 1994.
Consolidated Statements of Cash Flows for the three years
ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Changes in Common Stockholders'
Equity for the three years ended December 31, 1994.
Consolidated Statements of Capitalization at December 31, 1994
and 1993.
Notes to Financial Statements.
(99)-2 Unaudited Interim Financial Statements of Northern States
Power Company. (Item 1 in Part I of Northern States Power
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, File No. 1-3034):
Consolidated Statements of Income for the three months ended
March 31, 1995 and 1994.
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994.
Consolidated Balance Sheets at March 31, 1995 and December 31,
1994.
Notes to Financial Statements.
(99)-3 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation. (Exhibit (99)-1 to WEC's 4/28/95 8-K.)
(b) Reports on Form 8-K.
No reports on Form 8-K were filed during the quarter ended March 31,
1995.
A Current Report on Form 8-K dated as of April 28, 1995 was
filed on May 3, 1995 with respect to the Merger Agreement.
- 25 -
<PAGE> 26
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
--------------------------------------
(Registrant)
s/ R. A. Abdoo
--------------------------------------
Date: May 12, 1995 R. A. Abdoo, Chairman of the Board,
President and Chief Executive
Officer
s/ J. G. Remmel
--------------------------------------
Date: May 12, 1995 J. G. Remmel, Vice President
and Treasurer - Principal
Financial Officer
- 26 -
<PAGE> 27
WISCONSIN ENERGY CORPORATION
----------------------------------
EXHIBIT INDEX
Quarterly Report on Form 10-Q
For the Quarter Ended March 31, 1995
Exhibit
Number
- -------
The following Exhibits are filed with this report:
(23)-1 Independent Auditors' Consent of Deloitte & Touche LLP.
(27) Wisconsin Energy Corporation Financial Data Schedule for the
three months ended March 31, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057.) ("WEC's 4/28/95 8-K")
(2)-2 WEC Stock Option Agreement, dated as of April 28, 1995, by and
among Northern States Power Company and Wisconsin Energy
Corporation. (Exhibit (2)-2 to WEC's 4/28/95 8-K.)
(2)-3 NSP Stock Option Agreement, dated as of April 28, 1995, by and
among Wisconsin Energy Corporation and Northern States Power
Company. (Exhibit (2)-3 to WEC's 4/28/95 8-K.)
(2)-4 Committees of the Board of Directors of Primergy Corporation.
(Exhibit (2)-4 to WEC's 4/28/95 8-K.)
(2)-5 Form of Employment Agreement of James J. Howard. (Exhibit
(2)-5 to WEC's 4/28/95 8-K.)
(2)-6 Form of Employment Agreement of Richard A. Abdoo. (Exhibit
(2)-6 to WEC's 4/28/95 8-K.)
(2)-7 Form of Amended and Restated Articles of Incorporation of
Northern Power Wisconsin Corp. (Exhibit (2)-7 to WEC's
4/28/95 8-K.)
(2)-8 Letter Agreement, dated January 17, 1995, between Northern
States Power Company and Wisconsin Energy Corporation.
(Exhibit (2)-8 to WEC's Schedule 13D dated May 4, 1995 with
respect to the NSP Stock Option Agreement.)
- 27 -
<PAGE> 28
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
The following Exhibits are incorporated herein by reference (Cont'd):
(2)-9 Letter Agreement, dated April 26, 1995, between Northern
States Power Company and Wisconsin Energy Corporation amending
Letter Agreement dated January 17, 1995. (Exhibit (2)-9 to
WEC's Schedule 13D dated May 4, 1995 with respect to the NSP
Stock Option Agreement.)
(99)-1 Audited Financial Statements of Northern States Power Company.
(Item 8 of Northern States Power Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994, File
No. 1-3034):
Independent Auditors' Report.
Consolidated Statements of Income for the three years ended
December 31, 1994.
Consolidated Statements of Cash Flows for the three years
ended December 31, 1994.
Consolidated Balance Sheets at December 31, 1994 and 1993.
Consolidated Statements of Changes in Common Stockholders'
Equity for the three years ended December 31, 1994.
Consolidated Statements of Capitalization at December 31, 1994
and 1993.
Notes to Financial Statements.
(99)-2 Unaudited Interim Financial Statements of Northern States
Power Company. (Item 1 in Part I of Northern States Power
Company's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995, File No. 1-3034):
Consolidated Statements of Income for the three months ended
March 31, 1995 and 1994.
Consolidated Statements of Cash Flows for the three months
ended March 31, 1995 and 1994.
Consolidated Balance Sheets at March 31, 1995 and December 31,
1994.
Notes to Financial Statements.
(99)-3 Press Release, dated May 1, 1995, of Wisconsin Energy
Corporation. (Exhibit (99)-1 to WEC's 4/28/95 8-K.)
- 28 -
<PAGE> 1
Exhibit (23)-1
(3/31/95 10-Q)
INDEPENDENT AUDITORS' CONSENT
We consent to the incorporation by reference in the Registration Statements
and related Prospectuses of Wisconsin Energy Corporation, listed below, of our
report dated February 8, 1995, which expresses an unqualified opinion and
includes an explanatory paragraph relating to Northern States Power Company's
change in method of accounting for certain postretirement health care costs in
1993, appearing in Item 8 of the Annual Report on Form 10-K of Northern States
Power Company (Minnesota) (File No. 1-3034) for the year ended December 31,
1994.
1. Registration Statements on Form S-3 (Registration Nos. 33-43737 and
33-57765) - Stock Plus Investment Plan
2. Registration Statement on Form S-8 (Registration No. 33-34656) -
Represented Employee Savings Plan
3. Registration Statement on Form S-8 (Registration No. 33-34657) -
Management Employee Savings Plan
/s/ Deloitte & Touche LLP
- -------------------------
DELOITTE & TOUCHE LLP
Minneapolis, Minnesota
May 12, 1995
- 1 -
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND> THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED
FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN ENERGY
CORPORATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
<MULTIPLIER> 1,000
<S> <C>
<CURRENCY> U.S. DOLLARS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<PERIOD-TYPE> 3-MOS
<EXCHANGE-RATE> 1
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 2,927,837
<OTHER-PROPERTY-AND-INVEST> 608,757
<TOTAL-CURRENT-ASSETS> 457,815
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 390,236
<TOTAL-ASSETS> 4,384,645
<COMMON> 1,094
<CAPITAL-SURPLUS-PAID-IN> 636,481
<RETAINED-EARNINGS> 1,143,010
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,780,585
0
30,451
<LONG-TERM-DEBT-NET> 1,137,263
<SHORT-TERM-NOTES> 80,274
<LONG-TERM-NOTES-PAYABLE> 92,910
<COMMERCIAL-PAPER-OBLIGATIONS> 101,300
<LONG-TERM-DEBT-CURRENT-PORT> 30,395
0
<CAPITAL-LEASE-OBLIGATIONS> 19,569
<LEASES-CURRENT> 19,238
<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,092,660
<TOT-CAPITALIZATION-AND-LIAB> 4,384,645
<GROSS-OPERATING-REVENUE> 471,122
<INCOME-TAX-EXPENSE> 36,629
<OTHER-OPERATING-EXPENSES> 349,921
<TOTAL-OPERATING-EXPENSES> 386,550
<OPERATING-INCOME-LOSS> 84,572
<OTHER-INCOME-NET> 6,094
<INCOME-BEFORE-INTEREST-EXPEN> 90,666
<TOTAL-INTEREST-EXPENSE> 27,831
<NET-INCOME> 62,835
301
<EARNINGS-AVAILABLE-FOR-COMM> 62,534
<COMMON-STOCK-DIVIDENDS> 38,433
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 178,271
<EPS-PRIMARY> .57
<EPS-DILUTED> .57
<FN>
See financial statements and footnotes in accompanying 10-Q.
</TABLE>
