Exhibit 99.04
UNAUDITED PRO FORMA FINANCIAL INFORMATION
The following unaudited pro forma financial information adjusts the
historical consolidated balance sheet and statements of income of NSP after
giving effect to their proposed business combination transaction with WEC (the
Transaction) to form Primergy and a new subsidiary structure. The unaudited
pro forma condensed balance sheet at Dec. 31, 1996 gives effect to the
Transaction as if it had occurred on that date. The unaudited pro forma
condensed statements of income for each of the three years in the period ended
Dec. 31, 1996 give effect to the Transaction as if it had occurred at Jan. 1,
1994. 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 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. 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. Completion of the Transaction is subject to numerous conditions,
many of which are beyond NSP's control.
New NSP Pro Forma Condensed Information
The pro forma financial information adjusts the historical financial
statements of NSP after giving effect to the Transaction, including the
reincorporation of NSP in Wisconsin, the merger of the Wisconsin Company into
Wisconsin Energy Company, and the transfer of ownership of all of the current
NSP subsidiaries to Primergy.
NEW NSP
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1996
(In thousands)
Pro Forma Adjustments
NSP See Reincorp. NSP-W All Pro Forma
(As Reported) Note Merger Divestiture Other Total New NSP
Utility Operating Revenues
Electric $2,127,413 2,4 $0 ($377,073) $256,418 ($120,655) $2,006,758
Gas 526,793 2,4 0 (88,756) (11,457) (100,213) 426,580
Total Operating Revenues 2,654,206 0 (465,829) 244,961 (220,868) 2,433,338
Utility Operating Expenses
Electric Production-Fuel and
Purchased Power 541,267 2,4 0 (178,657) 218,719 40,062 581,329
Cost of Gas Sold & Transported 335,453 2,4 0 (58,347) 7,499 (50,848) 284,605
Other Operation 554,946 2,4 0 (77,851) 31,500 (46,351) 508,595
Maintenance 155,830 2 0 (19,617) (1,831) (21,448) 134,382
Depreciation and Amortization 306,432 2 0 (35,731) (1,201) (36,932) 269,500
Taxes Other Than Income Taxes 232,824 2 0 (14,332) (1,548) (15,880) 216,944
Income Taxes 161,410 2 0 (24,688) (1,558) (26,246) 135,164
Total Operating Expenses 2,288,162 0 (409,223) 251,580 (157,643) 2,130,519
Utility Operating Income 366,044 0 (56,606) (6,619) (63,225) 302,819
Other Income (Expense)
Equity Earnings of Unconsolidated
Investees 31,025 2 0 (358) (30,667) (31,025) 0
Other Income and Deductions - Net 8,169 2,3 0 (658) (1,700) (2,358) 5,811
Total Other Income (Expense) 39,194 0 (1,016) (32,367) (33,383) 5,811
Income before Interest Charges 405,238 0 (57,622) (38,986) (96,608) 308,630
Interest Charges 130,699 2,3 0 (18,925) (20,977) (39,902) 90,797
Net Income 274,539 0 (38,697) (18,009) (56,706) 217,833
Preferred Dividends 12,245 0 0 0 0 12,245
Earnings Available for Common
Stockholders $262,294 $0 ($38,697) ($18,009) ($56,706) $205,588
See accompanying notes to unaudited pro forma New NSP condensed financial statements.
NEW NSP
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1995
(In thousands)
Pro Forma Adjustments
NSP See Reincorp. NSP-W All Pro Forma
(As Reported) Note Merger Divestiture Other Total New NSP
Utility Operating Revenues
Electric $2,142,770 2,4 $0 ($381,040) $258,101 ($122,939) $2,019,831
Gas 425,814 2,4 0 (78,058) (11,674) (89,732) 336,082
Total Operating Revenues 2,568,584 0 (459,098) 246,427 (212,671) 2,355,913
Utility Operating Expenses
Electric Production-Fuel and
Purchased Power 570,245 2,4 0 (178,446) 221,962 43,516 613,761
Cost of Gas Sold & Transported 256,758 2,4 0 (52,356) 4,466 (47,890) 208,868
Other Operation 560,734 2,4 0 (79,472) 31,084 (48,388) 512,346
Maintenance 158,203 2 0 (20,780) (1,777) (22,557) 135,646
Depreciation and Amortization 290,184 2 0 (33,097) (1,128) (34,225) 255,959
Taxes Other Than Income Taxes 239,433 2 0 (14,109) (1,837) (15,946) 223,487
Income Taxes 147,148 2 0 (24,662) (1,032) (25,694) 121,454
Total Operating Expenses 2,222,705 0 (402,922) 251,738 (151,184) 2,071,521
Utility Operating Income 345,879 0 (56,176) (5,311) (61,487) 284,392
Other Income (Expense)
Equity Earnings of Unconsolidated
Investees 59,067 2 0 (1,162) (57,905) (59,067) 0
Other Income and Deductions - Net (6,261) 2,3 0 (981) 17,867 16,886 10,625
Total Other Income (Expense) 52,806 0 (2,143) (40,038) (42,181) 10,625
Income before Interest Charges 398,685 0 (58,319) (45,349) (103,668) 295,017
Interest Charges 122,890 2,3 0 (19,102) (11,629) (30,731) 92,159
Net Income 275,795 0 (39,217) (33,720) (72,937) 202,858
Preferred Dividends 12,449 0 0 0 0 12,449
Earnings Available for Common
Stockholders $263,346 $0 ($39,217) ($33,720) ($72,937) $190,409
See accompanying notes to unaudited pro forma New NSP condensed financial statements.
NEW NSP
UNAUDITED PRO FORMA CONDENSED STATEMENT OF INCOME
TWELVE MONTHS ENDED DECEMBER 31, 1994
(In thousands)
Pro Forma Adjustments
NSP See Reincorp. NSP-W All Pro Forma
(As Reported) Note Merger Divestiture Other Total New NSP
Utility Operating Revenues
Electric $2,066,644 2,4 $0 ($375,105) $260,720 ($114,385) $1,952,259
Gas 419,903 2,4 0 (76,715) (12,485) (89,200) 330,703
Total Operating Revenues 2,486,547 0 (451,820) 248,235 (203,585) 2,282,962
Utility Operating Expenses
Electric Production-Fuel and
Purchased Power 570,880 2,4 0 (179,558) 223,109 43,551 614,431
Cost of Gas Sold & Transported 263,905 2,4 0 (53,484) 2,657 (50,827) 213,078
Other Operation 535,706 2,4 0 (77,958) 31,168 (46,790) 488,916
Maintenance 170,145 2 0 (22,385) (1,344) (23,729) 146,416
Depreciation and Amortization 273,801 2 0 (30,774) (1,016) (31,790) 242,011
Taxes Other Than Income Taxes 234,564 2 0 (13,710) (1,905) (15,615) 218,949
Income Taxes 129,228 2 0 (19,077) (1,046) (20,123) 109,105
Total Operating Expenses 2,178,229 0 (396,946) 251,623 (145,323) 2,032,906
Utility Operating Income 308,318 0 (54,874) (3,388) (58,262) 250,056
Other Income (Expense)
Equity Earnings of Unconsolidated
Investees 41,709 2 0 (429) (41,280) (41,709) 0
Other Income and Deductions - Net 663 2,3 0 (816) 2,931 2,115 2,778
Total Other Income (Expense) 42,372 0 (1,245) (38,349) (39,594) 2,778
Income before Interest Charges 350,690 0 (56,119) (41,737) (97,856) 252,834
Interest Charges 107,215 2,3 0 (17,574) (9,829) (27,403) 79,812
Net Income 243,475 0 (38,545) (31,908) (70,453) 173,022
Preferred Dividends 12,364 0 0 0 0 12,364
Earnings Available for Common
Stockholders $231,111 $0 ($38,545) ($31,908) ($70,453) $160,658
See accompanying notes to unaudited pro forma New NSP condensed financial statements.
NEW NSP
UNAUDITED PRO FORMA CONDENSED BALANCE SHEET
DECEMBER 31, 1996
(In thousands)
Pro Forma Adjustments
NSP See Reincorp. NSP-W All Pro Forma
(As Reported) Note Merger Divestiture Other Total New NSP
ASSETS
UTILITY PLANT
Electric $6,766,896 2 $0 ($894,143) $0 ($894,143) $5,872,753
Gas 750,449 2,5 0 (99,817) (121,936) (221,753) 528,696
Other 331,441 2 0 (67,262) 0 (67,262) 264,179
Total 7,848,786 0 (1,061,222) (121,936) (1,183,158) 6,665,628
Accumulated provision for depreciation (3,611,244) 2,5 0 395,619 76,487 472,106 (3,139,138)
Nuclear fuel - net 100,338 0 0 0 0 100,338
Net utility plant 4,337,880 0 (665,603) (45,449) (711,052) 3,626,828
CURRENT ASSETS
Cash and cash equivalents 51,118 2 0 (208) (33,281) (33,489) 17,629
Accounts receivable - net 371,654 2,3,4 0 (40,250) (31,268) (71,518) 300,136
Accrued utility revenues 147,366 2 0 (21,074) 0 (21,074) 126,292
Fossil fuel inventories 45,013 2 0 (7,780) 0 (7,780) 37,233
Material & supplies inventories 109,425 2 0 (5,918) (2,901) (8,819) 100,606
Prepayments and other 72,647 2 0 (11,703) (24,130) (35,833) 36,814
Total current assets 797,223 0 (86,933) (91,580) (178,513) 618,710
OTHER ASSETS
Regulatory assets 354,128 2 0 (37,102) (475) (37,577) 316,551
External decommissioning fund 260,756 0 0 0 0 260,756
Investments in non-regulated projects and other
investments 451,223 2,3 0 (7,433) (409,134) (416,567) 34,656
Non-regulated property - net 192,790 2 0 (2,799) (165,898) (168,697) 24,093
Intangible assets and other 242,900 2 0 (9,261) (123,806) (133,067) 109,833
Total other assets 1,501,797 0 (56,595) (699,313) (755,908) 745,889
TOTAL ASSETS $6,636,900 $0 ($809,131) ($836,342)($1,645,473) $4,991,427
LIABILITIES AND EQUITY
CAPITALIZATION
Common stock $172,659 1,2 $0 ($86,200) $86,200 $0 $172,659
Other stockholders' equity 1,963,221 1,2 0 (245,212) (567,374) (812,586) 1,150,635
Total common stock equity 2,135,880 0 (331,412) (481,174) (812,586) 1,323,294
Cumulative preferred stock and premium 240,469 0 0 0 0 240,469
Long-term debt 1,592,568 2,3 0 (231,688) (281,972) (513,660) 1,078,908
Total capitalization 3,968,917 0 (563,100) (763,146) (1,326,246) 2,642,671
CURRENT LIABILITIES
Current portion of long-term debt 261,218 2 0 0 (16,253) (16,253) 244,965
Short-term debt 368,367 2,3 0 (39,300) (6,436) (45,736) 322,631
Accounts payable 236,341 2,4 0 (16,493) (21,251) (37,744) 198,597
Taxes accrued 204,348 2 0 (1,641) (6,339) (7,980) 196,368
Other accrued liabilities 166,126 2 0 (31,978) 719 (31,259) 134,867
Total current liabilities 1,236,400 0 (89,412) (49,560) (138,972) 1,097,428
OTHER LIABILITIES
Deferred income taxes 804,342 2 0 (100,898) (9,656) (110,554) 693,788
Deferred investment tax credits 149,606 2 0 (20,024) (1,853) (21,877) 127,729
Regulatory liabilities 302,647 2 0 (19,409) (35) (19,444) 283,203
Other liabilities and deferred credits 174,988 2 0 (16,288) (12,092) (28,380) 146,608
Total other liabilities 1,431,583 0 (156,619) (23,636) (180,255) 1,251,328
TOTAL LIABILITIES AND EQUITY $6,636,900 $0 ($809,131) ($836,342)($1,645,473) $4,991,427
See accompanying notes to unaudited pro forma New NSP condensed financial statements.
NEW NSP
NOTES TO UNAUDITED PRO FORMA CONDENSED FINANCIAL STATEMENTS
1. NSP common stock with a $2.50 par value will be canceled and replaced
with common stock of New NSP, which will be issued to Primergy, with the
same $2.50 par value. As a result, no pro forma adjustments were
necessary for stock activity related to the Transaction.
2. Subsidiary assets, liabilities, equity and results of operations have
been eliminated from consolidated NSP amounts to reflect the merger of
NSP-W into Wisconsin Energy Company and the transfer of ownership and
control of all other subsidiaries from NSP to Primergy. Primergy's
equity investment in New NSP is assumed to reflect the reduction in net
assets related to the merger of NSP-W into Wisconsin Energy Company and
transfer of investments in other subsidiaries from NSP to Primergy.
3. NSP financing of subsidiary capital and cash flow requirements has been
adjusted to reflect the transfer of such items to Primergy. Pro forma
adjustments reflect the elimination of (a) notes receivable and advances
from subsidiaries; (b) NSP debt incurred to finance the notes and
advances; (c) interest income earned on the notes and advances; and (d)
interest expense accrued on the debt incurred to finance the notes and
advances.
4. After the Transaction, NSP will not retain ownership of subsidiaries
currently being consolidated. Consequently, intercompany transactions
between NSP and its current subsidiaries have not been eliminated in the
pro forma financial statements.
The most significant intercompany transactions are power sales to and
purchases from the Wisconsin Company pursuant to an interchange
agreement with NSP. The interchange pricing and cost sharing
arrangements are expected to be restructured as a result of the
Transaction. However, at this time the amount of any changes to
interchange power purchases or sales cannot be estimated. Consequently,
no pro forma adjustments have been made to operating revenues, operating
expenses, or accounts receivable from (or payable to) associated
companies for the effects of interchange restructuring.
5. The Merger Agreement provides that certain gas utility properties and
operations in Wisconsin (currently owned by the Wisconsin Company) will
be transferred to New NSP as part of the Transaction. Pro forma
adjustments have not been made for this transfer due to immateriality.
As of Dec. 31, 1996, the properties to be transferred include utility
plant with a net book value of approximately $20 million. For the years
ended Dec. 31, 1996, 1995 and 1994, the operations to be transferred
generated revenues of approximately $32 million, $29 million and $27
million, respectively. The amount of related operating expenses have
not been quantified. This transfer is to ensure compliance with certain
provisions of the Wisconsin Holding Company Act. The assets and
liabilities to be transferred are expected to relate to gas utility
properties directly contiguous to NSP's utility service territory in
Minnesota.
6. Certain reclassifications have been made to the 1995 and 1994 NSP
Wisconsin Company financial statements to conform with the 1996
presentation. These classifications had no effect on net income or
earnings per share.
7. 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. None of these estimated cost savings, the costs to achieve
such savings, or the transaction costs have been reflected in the pro
forma condensed financial statements.