UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 2001
Commission Registrant; State of Incorporation IRS Employer
File Number Address; and Telephone Number Identification No.
----------- ---------------------------------- ------------------
001-09057 WISCONSIN ENERGY CORPORATION 39-1391525
(A Wisconsin Corporation)
231 West Michigan Street
P.O. Box 2949
Milwaukee, WI 53201
(414) 221-2345
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 each 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
Registrant's classes of common stock as of the latest practicable
date (July 31, 2001):
Common Stock, $.01 Par Value 116,755,169 shares outstanding.
WISCONSIN ENERGY CORPORATION
--------------------------------
FORM 10-Q REPORT FOR THE QUARTER ENDED JUNE 30, 2001
TABLE OF CONTENTS
Item Page
- ---- ----
Introduction...............................................................
Part I - Financial Information
------------------------------
1. Financial Statements
Consolidated Condensed Income Statements.................................
Consolidated Condensed Balance Sheets....................................
Consolidated Condensed Statements of Cash Flows..........................
Notes to Consolidated Condensed Financial Statements.....................
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................
3. Quantitative and Qualitative Disclosures About Market Risk.................
Part II - Other Information
---------------------------
1. Legal Proceedings..........................................................
6. Exhibits and Reports on Form 8-K...........................................
Signatures.................................................................
INTRODUCTION
Wisconsin Energy Corporation is a diversified holding company
which conducts its operations primarily in three operating
segments: a utility energy segment, a non-utility energy segment
and a manufacturing segment. Unless qualified by their context
when used in this document, the terms "Wisconsin Energy" or the
"Company" refer to the holding company and all of its
subsidiaries. The Company's primary subsidiaries are Wisconsin
Electric Power Company ("Wisconsin Electric"), Wisconsin Gas
Company ("Wisconsin Gas") and WICOR Industries, Inc.
("WICOR Industries").
UTILITY ENERGY SEGMENT: The utility energy segment consists of:
Wisconsin Electric, which serves electric customers in Wisconsin
and the Upper Peninsula of Michigan, gas customers in Wisconsin
and steam customers in metro Milwaukee, Wisconsin; Wisconsin Gas,
which serves gas customers in Wisconsin and water customers in
suburban Milwaukee, Wisconsin; and Edison Sault Electric Company
("Edison Sault"), which serves electric customers in the Upper
Peninsula of Michigan.
NON-UTILITY ENERGY SEGMENT: As of January 1, 2001, the non-
utility energy segment consisted primarily of: Wisvest
Corporation ("Wisvest"), which develops, owns and operates
electric generating facilities and invests in other energy-
related entities; WICOR Energy Services Company ("WICOR Energy"),
which engaged in natural gas purchasing and marketing as well as
energy and price risk management; and FieldTech, Inc.
("FieldTech"), which provides meter reading and technology
services for gas, electric and water utilities. In December
2000, Wisconsin Energy entered into an agreement to sell
Wisvest's two existing non-utility power plants, located in the
state of Connecticut, which would significantly reduce the size
of current non-utility energy segment operations. The pending
sale of these two plants is subject to various regulatory
approvals and other closing conditions. During April 2001, the
operations of WICOR Energy were merged into an unconsolidated
affiliate of Wisconsin Energy. In May 2001, FieldTech was sold
to an unaffiliated third party.
MANUFACTURING SEGMENT: The manufacturing segment consists of
WICOR Industries, an intermediary holding company, and its three
primary subsidiaries: Sta-Rite Industries, Inc. ("Sta-Rite"),
SHURflo Pump Manufacturing Co. ("SHURflo") and Hypro Corporation
("Hypro"), which are manufacturers of pumps, water treatment
products and fluid handling equipment with manufacturing, sales
and distribution facilities in the United States and several
other countries.
OTHER: Other non-utility operating subsidiaries of Wisconsin
Energy include primarily Minergy Corp. ("Minergy"), which
develops and markets recycling technologies, and Wispark LLC
("Wispark"), which develops and invests in real estate. In May
2000, Wisconsin Energy announced that it would sell approximately
80% of its portfolio of Wispark's assets, which is expected to
significantly reduce the size of existing non-utility real estate
operations.
Wisconsin Gas, WICOR Energy, FieldTech and WICOR Industries were
acquired by Wisconsin Energy as a result of the Company's
acquisition of WICOR, Inc. ("WICOR") on April 26, 2000. WICOR
remains a subsidiary of Wisconsin Energy, functioning as an
intermediary holding company of the historical WICOR companies.
The unaudited interim financial statements presented in this
Form 10-Q have been prepared by Wisconsin Energy pursuant to the
rules and regulations of the Securities and Exchange Commission.
Certain information and note disclosures normally included in
financial statements prepared in accordance with generally
accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations. Wisconsin Energy's
financial statements should be read in conjunction with the
financial statements and notes thereto included in Wisconsin
Energy's 2000 Annual Report on Form 10-K.
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)
Three Months Ended June 30 Six Months Ended June 30
-------------------------- --------------------------
2001 2000 2001 2000
----------- ---------- ----------- ----------
(Millions of Dollars, Except Per Share Amounts)
Operating Revenues $859.2 $755.0 $2,214.2 $1,383.0
Operating Expenses
Fuel and purchased power 163.3 163.0 343.8 323.3
Cost of gas sold 114.5 85.8 630.0 154.9
Cost of goods sold 115.0 77.3 221.8 77.3
Other operation and maintenance 257.2 223.5 515.3 410.1
Depreciation, decommissioning
and amortization 86.8 83.3 174.3 155.4
Property and revenue taxes 18.7 20.0 41.5 40.7
------ ------ -------- --------
Total Operating Expenses 755.5 652.9 1,926.7 1,161.7
------ ------ -------- --------
Operating Income 103.7 102.1 287.5 221.3
Other Income (Deductions), Net 37.1 9.9 49.7 16.7
Financing Costs 64.1 60.9 129.5 104.1
------ ------ -------- --------
Income Before Income Taxes 76.7 51.1 207.7 133.9
Income Taxes 30.6 21.0 84.3 53.2
------ ------ -------- --------
Income Before Cumulative Effect of
Change in Accounting Principle 46.1 30.1 123.4 80.7
Cumulative Effect of Change in
Accounting Principle, Net of Tax - - 10.5 -
------ ------ -------- --------
Net Income $46.1 $30.1 $133.9 $80.7
====== ====== ======== ========
Earnings Per Average Common Share-Basic
Before cumulative effect of
change in accounting principle $0.39 $0.25 $1.05 $0.67
Cumulative effect of change
in accounting principle - - 0.09 -
------ ------ -------- --------
Net earnings per share $0.39 $0.25 $1.14 $0.67
====== ====== ======== ========
Average shares outstanding (millions) 117.6 120.8 117.8 120.1
Earnings Per Average Common Share-Diluted
Before cumulative effect of
change in accounting principle $0.39 $0.25 $1.04 $0.67
Cumulative effect of change
in accounting principle - - 0.09 -
------ ------ -------- --------
Net earnings per share $0.39 $0.25 $1.13 $0.67
====== ====== ======== ========
Average shares outstanding (millions) 118.5 121.7 118.6 120.6
Dividends Per Share of Common Stock $0.20 $0.39 $0.40 $0.78
<FN>
The accompanying Notes to Consolidated Condensed Financial Statements are an integral part of
these financial statements.
</FN>
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS
(Unaudited)
June 30, 2001 December 31, 2000
------------- -----------------
(Millions of Dollars)
Assets
------
Property, Plant and Equipment
Utility energy $6,965.7 $7,327.7
Non-utility energy 21.1 21.7
Manufacturing 121.0 119.5
Other 126.1 135.3
Accumulated depreciation (3,796.9) (3,912.9)
-------- --------
3,437.0 3,691.3
Construction work in progress 318.5 246.3
Leased facilities, net 118.8 121.7
Nuclear fuel, net 80.8 93.1
-------- --------
Net Property, Plant and Equipment 3,955.1 4,152.4
Investments 920.8 779.3
Current Assets
Cash and cash equivalents 70.0 40.5
Accounts receivable 498.5 532.6
Accrued revenues 95.6 269.8
Materials, supplies and inventories 338.0 381.7
Assets held for sale 443.7 464.0
Prepayments and other assets 168.2 175.0
-------- --------
Total Current Assets 1,614.0 1,863.6
Deferred Charges and Other Assets
Goodwill, net 815.9 826.9
Other 833.4 783.9
-------- --------
Total Deferred Charges and Other Assets 1,649.3 1,610.8
-------- --------
Total Assets $8,139.2 $8,406.1
======== ========
Capitalization and Liabilities
------------------------------
Capitalization
Common equity $2,058.0 $2,016.8
Preferred stock 30.4 30.4
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the Company 200.0 200.0
Long-term debt 3,388.1 2,732.7
-------- --------
Total Capitalization 5,676.5 4,979.9
Current Liabilities
Long-term debt due currently 68.4 55.4
Short-term debt 627.2 1,386.1
Accounts payable 271.9 427.0
Accrued liabilities 136.3 149.0
Other 136.2 191.2
-------- --------
Total Current Liabilities 1,240.0 2,208.7
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 577.4 587.1
Other 645.3 630.4
-------- --------
Total Deferred Credits and Other Liabilities 1,222.7 1,217.5
-------- --------
Total Capitalization and Liabilities $8,139.2 $8,406.1
======== ========
<FN>
The accompanying Notes to Consolidated Condensed Financial Statements are an integral
part of these financial statements.
</FN>
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended June 30
-------------------------------
2001 2000
----------- -----------
(Millions of Dollars)
Operating Activities
Net income $133.9 $80.7
Reconciliation to cash
Depreciation, decommissioning
and amortization 194.5 166.4
Nuclear fuel expense amortization 15.3 14.7
Deferred income taxes, net (4.4) (6.0)
Investment tax credit, net (2.5) (2.2)
Allowance for other funds
used during construction (0.7) (1.9)
Gains on asset sales (27.5) (5.5)
Change in - Accounts receivable and
accrued revenues 210.4 (24.3)
Inventories 43.3 (7.7)
Other current assets - 59.5
Accounts payable (155.6) 42.0
Other current liabilities (74.9) (7.0)
Other (66.2) (8.2)
-------- --------
Cash Provided by Operating Activities 265.6 300.5
Investing Activities
Capital expenditures (256.1) (303.0)
Acquisitions, net of cash acquired - (1,201.2)
Cash distributions received from ATC 120.0 -
Proceeds from asset sales, net 108.1 25.8
Allowance for borrowed funds
used during construction (5.0) (6.4)
Nuclear fuel (3.3) (21.7)
Nuclear decommissioning funding (8.8) (8.8)
Other (13.4) 6.0
-------- --------
Cash Used in Investing Activities (58.5) (1,509.3)
Financing Activities
Issuance of common stock 27.3 50.4
Repurchase of common stock (63.7) -
Issuance of long-term debt 1,014.8 25.8
Retirement of long-term debt (350.0) (24.2)
Change in short-term debt (758.9) 1,204.2
Dividends paid on common stock (47.1) (93.5)
-------- --------
Cash Provided by (Used in) Financing Activities (177.6) 1,162.7
-------- --------
Change in Cash and Cash Equivalents 29.5 (46.1)
Cash and Cash Equivalents at
Beginning of Period 40.5 73.5
-------- --------
Cash and Cash Equivalents at
End of Period $70.0 $27.4
======== ========
Supplemental Information - Cash Paid For
Interest (net of amount capitalized) $119.3 $111.8
Income taxes 131.4 35.2
<FN>
The accompanying Notes to Consolidated Condensed Financial Statements are an integral
part of these financial statements.
</FN>
WISCONSIN ENERGY CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
GENERAL INFORMATION
1.The accompanying unaudited consolidated condensed financial
statements for Wisconsin Energy Corporation should be read in
conjunction with Item 8, Financial Statements and
Supplementary Data, in Wisconsin Energy's 2000 Annual Report
on Form 10-K for the year ended December 31, 2000. In the
opinion of management, all adjustments, normal and recurring
in nature, necessary to a fair statement of the results of
operations, cash flows and financial position of Wisconsin
Energy, have been included in the accompanying income
statements, statements of cash flows and balance sheets. The
results of operations for the three and six months ended
June 30, 2001 are not necessarily indicative, however, of the
results which may be expected for the entire year 2001
because of seasonal and other factors.
2.Due in part to the acquisition of WICOR in April 2000 (see
Note 4), Wisconsin Energy has modified certain income
statement and balance sheet presentations. Prior year
financial statement amounts have been reclassified to conform
to their current year presentation. These reclassifications
had no effect on net income or earnings per share.
NEW ACCOUNTING PRONOUNCEMENTS
3.BUSINESS COMBINATIONS AND GOODWILL: In June 2001, the
Financial Accounting Standards Board authorized issuance of
Statement of Financial Accounting Standards No. 141, Business
Combinations ("FAS 141"), and FAS 142, Goodwill and Other
Intangible Assets. Both accounting pronouncements will be
effective beginning January 1, 2002, although both standards
require that business combinations which occur after June 30,
2001 be accounted for using the new accounting standards.
Under FAS 141, all future business combinations must be
accounted for using the purchase method, thereby eliminating
the pooling of interest method. Under FAS 142, goodwill is
no longer subject to amortization. However, goodwill along
with other intangibles will be subject to new fair value-
based rules for measuring impairment and resulting write-
downs, if any, will be reflected as a change in accounting
principle during transition and in operating expense in
subsequent periods. The transition calls for an impairment
test for intangible assets with indefinite lives to be
performed in the first quarter of 2002 and for an impairment
test for goodwill to be finalized by the end of 2002.
Wisconsin Energy is in the process of evaluating the impact
of the new standards. Currently, the Company amortizes
goodwill expense. For the year 2002, the Company expects
that FAS 142 will increase net income by approximately
$0.18 per share due to the elimination of goodwill
amortization. Wisconsin Energy has not yet evaluated the
application of the new impairment rules to the recorded
goodwill balance and therefore has not yet determined the
effect of the implementation of that portion of FAS 142.
ASSET RETIREMENT OBLIGATIONS: In June 2001, the Financial
Accounting Standards Board authorized issuance of FAS 143,
Accounting for Asset Retirement Obligations. FAS 143, which
is effective for fiscal years beginning after June 15, 2002,
requires entities to record the fair value of a legal
liability for an asset retirement obligation in the period in
which it is incurred. When the liability is recorded, the
entity capitalizes the costs of the liability by increasing
the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value each
period, and the capitalized cost is depreciated over the
useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its
recorded amount or incurs a gain or loss upon settlement.
The Company expects to adopt FAS 143 effective
January 1, 2003.
The scope of FAS 143 includes decommissioning costs for Point
Beach Nuclear Plant ("Point Beach") and may also apply to
other facilities of the Company. The Company has not yet
performed a detailed assessment of the specific applicability
and implications of FAS 143. Currently, nuclear
decommissioning liabilities are accrued as depreciation
expense under an external sinking fund method as these costs
are recovered through rates over the expected service lives
of the two generating units at Point Beach. FAS 143 will
require the Company to record the full decommissioning
liability and a corresponding asset, which will then be
depreciated over the remaining expected service lives of the
plant's generating units. Any changes in depreciation
expense due to differing assumptions between FAS 143 and
those currently required by the Public Service Commission of
Wisconsin ("PSCW") are not expected to be material and would
most likely be recoverable in rates.
MERGERS AND ACQUISITIONS
4.On April 26, 2000, the Company acquired all of the
outstanding common stock of WICOR, Inc., a diversified
utility holding company. The acquisition was accounted for
as a purchase under Accounting Principles Board Opinion
No. 16, Accounting for Business Combinations, and
accordingly, WICOR's operating results have been included in
the Company's consolidated results of operations from the
date of acquisition.
The following unaudited pro forma data summarize the results
of operations for the periods indicated as if the WICOR
acquisition had been completed as of the beginning of the
periods presented. The pro forma amounts give effect to
actual operating results prior to the acquisition, adjusted
to include the pro forma effect of interest expense, of
amortization of intangibles as well as of purchase accounting
adjustments to certain assets and liabilities, and the effect
of income taxes. The pro forma information does not
necessarily reflect the actual results that would have
occurred nor is it necessarily indicative of future results
of operations of the combined companies.
Six Months Ended June 30
----------------------------------
2001 2000
Wisconsin Energy Corporation Actual Pro Forma (a)
- ---------------------------- ---------- -------------
(Millions of Dollars, Except Per Share Amounts)
Total Operating Revenues $2,214.2 $1,818.2
Net Income $133.9 $88.2
Earnings Per Share
Basic $1.14 $0.73
Diluted 1.13 0.73
(a) Pro forma assumes that the WICOR acquisition occurred on
January 1, 2000 and includes estimated merger-related costs.
In July 2001, Sta-Rite completed the acquisitions of Vico
Products Manufacturing Co., Inc. and Ultra Jet Canada,
leading manufacturers of spa and jetted tub pumps and
fittings with total annual sales of approximately
$41 million. The aggregate purchase price for this
transaction was approximately $34 million and was financed
using corporate working capital and short-term borrowings.
The acquisition was accounted for as a purchase, and the
acquired companies' results of operations will be included in
the consolidated financial statements from the acquisition
date. The excess of the purchase price over the estimated
fair value of the net assets of the acquired company is
expected to be approximately $26 million, which will be
recorded as goodwill. Due to the size of the transaction,
Wisconsin Energy has not presented pro forma financial
information.
ASSET SALES AND DIVESTITURES
5.As previously reported, the Company's management announced a
strategy in 2000, which, among other things, identified the
divestiture of non-core investments. Wisconsin Energy held
the following assets for sale as of June 30, 2001 and
December 31, 2000:
Assets Held For Sale June 30, 2001 December 31, 2000
- -------------------- ------------- -----------------
(Millions of Dollars)
Non-Utility Energy $337.5 $331.8
Other - Real Estate 106.2 132.2
------ ------
Total $443.7 $464.0
====== ======
In December 2000, the Company announced the planned sale of
Wisvest's two non-utility power plants in the state of
Connecticut. The Company is working towards closing on the
sale of these two fossil-fueled generating stations by the
end of the fourth quarter of 2001 subject to various
regulatory approvals and other closing conditions. In late
July 2001, sale of these plants was delayed when the Federal
Energy Regulatory Commission ("FERC") directed its staff to
convene a technical conference on the impact of these sales
on competition. The FERC asked its staff to report back
within 90 days. The matter is pending.
During the first half of 2001, Wispark sold approximately
$26.0 million of real estate assets as part of a previously
announced plan.
As previously reported, the Company sold FieldTech and
Wisvest's interest in Blythe Energy, LLC, an independent
power production project in the state of California, in
separate transactions during the second quarter of 2001.
Wisconsin Energy realized after-tax gains of approximately
$16.5 million or $0.14 per share as a result of the sales of
FieldTech and Blythe.
Effective January 1, 2001, Wisconsin Electric and Edison
Sault transferred electric utility transmission system assets
with a net book value of approximately $254.9 million to
American Transmission Company LLC ("ATC") in exchange for an
equity interest in this new company. During the first half
of 2001, ATC issued debt and distributed $120.0 million of
cash back to Wisconsin Electric and Edison Sault as a partial
return of the original equity contribution.
The Company anticipates that the transfer of its electric
transmission assets to ATC will be earnings neutral.
However, the asset transfer has changed where transmission-
related activities are reflected on the income statement.
Prior to the asset transfer, transmission-related costs were
recorded in Other Operation and Maintenance expense,
Depreciation expense and Interest expense. Following
transfer of the transmission assets, the Company reports fees
paid to ATC for electric transmission service in Other
Operation and Maintenance expense and recognizes an equity
interest in ATC's reported earnings in Other Income
(Deductions), Net.
RESERVE FOR NON-RECURRING CHARGES
6.In connection with the WICOR merger and the divestiture of
non-core businesses, Wisconsin Energy recorded certain
reserves in the fourth quarter of 2000 for approximately 300
employees who were to receive benefits under severance
agreements and enhanced retirement initiatives. As of
June 30, 2001, approximately $6.7 million of severance
benefits related to 136 employees remained as an outstanding
liability on the balance sheet.
COMMON EQUITY
7.Comprehensive Income includes all changes in equity during a
period except those resulting from investments by and
distributions to owners. Prior to April 2000, Wisconsin
Energy had no items of Other Comprehensive Income to report.
However, as a result of its acquisition of WICOR on April 26,
2000 and due to the adoption of FAS 133, Accounting for
Derivative Instruments and Hedging Activities, in January
2001 (see Note 8), Wisconsin Energy had the following total
Comprehensive Income during the six months ended June 30,
2001 and 2000:
Six Months Ended June 30
------------------------
Comprehensive Income 2001 2000
- ---------------------------- -------- --------
(Millions of Dollars)
Net Income $133.9 $80.7
Other Comprehensive Income (Loss)
Currency Translation Adjustments (2.2) 0.6
Minimum Pension Liability (0.7) -
Unrealized Gains (Losses) During the Period
on Derivatives Qualified as Hedges
Unrealized losses due to cumulative
effect of change in accounting principle (2.1) -
Other unrealized gains (losses) (1.8) -
Less: Reclassification for gains
(losses) included in net income 1.3 -
------ -----
Net Unrealized Gains (Losses) (5.2) -
------ -----
Total Other Comprehensive Income (Loss) (8.1) 0.6
------ -----
Total Comprehensive Income $125.8 $81.3
====== =====
In 2000, the Board of Directors approved a common stock
repurchase plan which authorizes the Company to purchase up
to $400 million of its shares of common stock in the open
market. During the first six months of 2001, Wisconsin
Energy purchased 2.9 million shares of common stock for
$63.7 million resulting in total purchases through June 30,
2001 under the plan of 7.9 million shares for $164.5 million.
The Company is currently retiring the stock that is purchased.
During the first half of 2001, Wisconsin Energy issued
approximately 1.4 million new shares of common stock totaling
$27.3 million related to the Company's dividend reinvestment
plan, other benefit plans and the exercise of stock options.
DERIVATIVE INSTRUMENTS
8.In June 1998, the Financial Accounting Standards Board issued
FAS 133, which was amended by FAS 137, Accounting for
Derivative Instruments and Hedging Activities - Deferral of
the Effective Date of FAS 133, an amendment of FAS 133, and
by FAS 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FAS 133. FAS 133
requires that every derivative instrument be recorded on the
balance sheet as an asset or liability measured at its fair
value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge
accounting criteria are met.
As of the date of initial adoption, FAS 133 requires that the
difference between the fair value of derivative instruments
recorded on the balance sheet and the previous carrying
amount of those derivatives be reported in Net Income or
Accumulated Other Comprehensive Income, as appropriate, as a
cumulative effect of a change in accounting principle. The
adoption of FAS 133 by Wisconsin Energy on January 1, 2001
resulted in an increase in net income of $10.5 million
reported as a cumulative effect of change in accounting
principle. This transition adjustment is related to fuel oil
forward and swap contracts utilized by Wisvest-Connecticut
LLC, a wholly-owned subsidiary of Wisvest, to mitigate the
commodity risk associated with generation costs. These
contracts are defined as derivatives under FAS 133 and do not
qualify for hedge accounting treatment. It is expected that
this gain will unwind during 2001 through normal operations
and through the expected sale of Wisvest-Connecticut's two
power plants in the state of Connecticut (see Note 5).
Wisconsin Energy has a limited number of other financial and
physical commodity contracts that are defined as derivatives
under FAS 133 and that qualify for cash flow hedge
accounting. These cash flow hedging instruments are
comprised of electric forward contracts which are used to
manage the supply of and demand for electricity and gas
futures and basis swap contracts utilized by Wisconsin Gas to
manage the cost of gas. With the adoption of FAS 133 on
January 1, 2001, the fair market values of these derivative
instruments have been recorded as assets and liabilities on
the balance sheet and as a cumulative effect of a change in
accounting principle in Accumulated Other Comprehensive
Income in accordance with the transition provisions of
FAS 133. The impact of this transition as of January 1, 2001
was a $2.1 million reduction in Accumulated Other
Comprehensive Income.
During the first six months of 2001, $1.3 million of net
gains included in the cumulative effect of a change in
accounting principle component of Accumulated Other
Comprehensive Income were reclassified into earnings
resulting in a remaining balance of ($3.4 million) as of
June 30, 2001. Wisconsin Energy estimates that this
remaining balance will be reclassified into earnings between
July 1, 2001 and December 31, 2001.
Future changes in the fair market values of these cash flow
hedging instruments, to the extent that the hedges are
effective at mitigating the underlying commodity risk, will
be recorded in Accumulated Other Comprehensive Income. At
the date the underlying transaction occurs, the amounts in
Accumulated Other Comprehensive Income will be reported in
earnings. The ineffective portion of the derivative's change
in fair value will be recognized in earnings immediately. In
the case of Wisconsin Gas, the ineffective portion is
recorded as a regulatory asset or liability as these
transactions are part of the purchased gas adjustment clause.
For the six month period ended June 30, 2001, the amount of
hedge ineffectiveness was immaterial. Wisconsin Energy did
not exclude any components of derivative gains or losses from
the assessment of hedge effectiveness. A loss of
$0.4 million was reclassified into earnings as a result of
the discontinuance of hedges. As of June 30, 2001, the
maximum length of time over which Wisconsin Energy is hedging
its exposure to the variability in future cash flows of
forecasted transactions is nine months, and Wisconsin Energy
estimates that gains of $3.5 million will be reclassified
from Accumulated Other Comprehensive Income into earnings
within the twelve months between July 1, 2001 and June 30,
2002 as the hedged transactions affect earnings.
Near the end of the first quarter of 2001, Wisconsin Energy
settled several treasury lock agreements entered into earlier
in the quarter to mitigate interest rate risk associated with
the issuance of $1 billion of intermediate-term unsecured
senior notes in March 2001. As these agreements qualified
for cash flow hedge accounting treatment under FAS 133, the
payment made upon settlement of these agreements is deferred
in Accumulated Other Comprehensive Income and will be
amortized as an increase to interest expense over the same
period in which the interest cost on the debt issuance is
recognized in income. Through June 30, 2001, $0.2 million
was reclassified to interest expense. Wisconsin Energy
estimates that during the next twelve months, $0.7 million
will be reclassified from Accumulated Other Comprehensive
Income as a reduction in earnings.
Previously, the Company had concluded that its electric
capacity purchase contracts qualified for and were designated
as normal under the normal purchase and sale exception of
FAS 133. The Financial Accounting Standards Board has
determined that, subject to certain criteria, electric
capacity option contracts qualify for the normal purchase and
sale exception, confirming the Company's prior conclusion.
SEGMENT INFORMATION
9.Summarized financial information concerning Wisconsin
Energy's reportable operating segments for the three and six
month periods ended June 31, 2001 and 2000 is shown in the
following table. Current year information is not comparable
with the prior year due to the addition of the operating
results of the WICOR subsidiaries at the end of April 2000
and to the allocation of merger-related costs (principally
goodwill amortization and interest expense) to the
operating segments.
Reportable Operating Segments
----------------------------------------
Energy Other (a),
------------------------- Corporate &
Wisconsin Reconciling Total
Energy Corporation Utility Non-Utility Manufacturing Eliminations Consolidated
- ------------------ ---------- ----------- ------------- ------------ ------------
(Millions of Dollars)
Three Months Ended
------------------
June 30, 2001
Operating Revenues (b) $624.0 $67.4 $156.6 $11.2 $859.2
Operating Income (Loss) 80.8 9.3 15.9 (2.3) 103.7
Income (Loss) Before
Merger-Related Costs (c) 35.6 20.0 10.4 (5.8) 60.2
Net Income (Loss) 29.8 20.0 5.7 (9.4) 46.1
Capital Expenditures 97.9 18.6 6.0 8.7 131.2
June 30, 2000
Operating Revenues (b) $552.7 $81.3 $109.8 $11.2 $755.0
Operating Income 88.6 0.2 12.4 0.9 102.1
Income (Loss) Before
Merger-Related Costs (c) 37.8 0.3 7.8 (3.7) 42.2
Net Income (Loss) 34.2 0.3 5.0 (9.4) 30.1
Capital Expenditures 96.4 52.1 2.5 17.0 168.0
Six Months Ended
----------------
June 30, 2001
Operating Revenues (b) $1,669.8 $220.7 $299.8 $23.9 $2,214.2
Operating Income (Loss) 248.1 18.2 26.7 (5.5) 287.5
Income (Loss) Before
Merger-Related Costs (c) 123.9 33.5 17.5 (12.6) 162.3
Net Income (Loss) 112.2 33.5 8.2 (20.0) 133.9
Capital Expenditures 169.2 41.8 12.1 33.0 256.1
Total Assets 6,264.8 605.1 848.8 420.5 8,139.2
June 30, 2000
Operating Revenues (b) $1,102.4 $150.5 $109.8 $20.3 $1,383.0
Operating Income (Loss) 211.5 (1.7) 12.4 (0.9) 221.3
Income (Loss) Before
Merger-Related Costs (c) 97.1 (4.0) 7.8 (8.1) 92.8
Net Income (Loss) 93.5 (4.0) 5.0 (13.8) 80.7
Capital Expenditures 186.9 69.8 2.5 43.8 303.0
Total Assets 6,144.5 739.6 799.7 541.1 8,224.9
(a) Other includes all other non-utility activities, primarily
non-utility real estate investment and development by Wispark and
non-utility investment in recycling technology by Minergy as well
as interest on corporate debt.
(b) Intersegment revenues are not material.
(c) Merger-related costs represent WICOR acquisition purchase
accounting entries including primarily goodwill and interest
expense.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
On April 26, 2000, Wisconsin Energy acquired WICOR. This
business combination was accounted for as a purchase, and,
therefore, is reflected prospectively in Wisconsin Energy's
consolidated financial statements from and after the date of the
acquisition.
CAUTIONARY FACTORS: A number of forward-looking statements are
included in this document. When used, the terms "anticipate,"
"believe," "estimate," "expect," "objective," "plan," "possible,"
"potential," "project" and similar expressions are intended to
identify forward-looking statements. Forward-looking statements
are subject to certain risks, uncertainties and assumptions which
could cause actual results to differ materially from those that
are described, including the factors that are noted below in
"Factors Affecting Results of Operations."
RESULTS OF OPERATIONS - THREE MONTHS ENDED JUNE 30, 2001
CONSOLIDATED EARNINGS
The following table compares Wisconsin Energy's diluted earnings
per share by business segment during the second quarter of 2001
with similar information during the second quarter of 2000. The
following table also includes pro forma earnings per share by
segment during the second quarter of 2000 as if WICOR had been a
part of Wisconsin Energy since January 1, 2000.
Three Months Ended June 30
------------------------------------
2000
2001 ------------------------
Diluted Earnings Per Share Actual Pro Forma (a) Actual
- ------------------------------------ ------ ------------- ------
Utility Energy Segment $0.30 $0.32 $0.31
Non-Utility Energy Segment 0.03 - -
Manufacturing Segment 0.09 0.08 0.07
Other and Merger-Related Costs (b) (0.17) (0.17) (0.13)
----- ----- -----
Earnings Before Non-Recurring Items 0.25 0.23 0.25
Non-Recurring Items (c) 0.14 - -
----- ----- -----
Net Earnings $0.39 $0.23 $0.25
===== ===== =====
(a) Pro forma assumes that the WICOR acquisition occurred on
January 1, 2000 and, for comparability, includes estimated
recurring merger-related costs prior to the merger.
(b) Includes the holding company, other non-utility companies
and merger-related costs.
(c) Reflects gains on asset sales during the second quarter of
2001 of $0.14 per share, all of which is attributable to the non-
utility energy segment.
Consolidated earnings during the second quarter of 2001 increased
to $0.39 per share from $0.25 per share during the second quarter
of 2000, primarily reflecting gains on non-recurring asset sales
in the amount of $0.14 per share during 2001. Additional
information concerning the non-recurring asset sales may be found
in Note 5 in Item 1, Financial Statements - "Notes to
Consolidated Condensed Financial Statements," in Part I of
this report.
Excluding the non-recurring gains and assuming that the WICOR
acquisition occurred on January 1, 2000, pro forma earnings
increased by 8.7% to $0.25 per share during the second quarter of
2001 from $0.23 per share during the second quarter of 2000.
Between the comparative periods, utility energy segment earnings
decreased by $0.02 per share before merger-related costs
primarily due to the costs of a scheduled refueling outage at
Point Beach during the second quarter of 2001 and to a decline in
pro forma gas utility gross margins. During 2001, non-utility
energy segment earnings increased by $0.03 per share before
merger-related costs due to improved financial performance by
Wisvest, and manufacturing segment earnings were relatively
unchanged primarily due to a softening domestic and world
economy. For purposes of this discussion, merger-related costs
represent WICOR acquisition purchase accounting entries including
goodwill and interest expense. A more detailed analysis of
earnings contributions by segment follows.
UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Actual utility energy segment net income decreased by
$4.4 million or 12.9% between the second quarter of 2001 and the
second quarter of 2000, primarily reflecting the scheduled
refueling at Point Beach Nuclear Plant during the second quarter
of 2001. The outage was completed on time and all scheduled work
was done. During 2000, Wisconsin Electric did not perform a
refueling at Point Beach until the fourth quarter. Electric
utility gross margins (electric utility operating revenues less
fuel and purchased power expenses) were up due to a series of
rate increases while gas utility gross margins (gas utility
operating revenues less cost of gas sold) grew primarily as a
result of Wisconsin Gas operations, acquired as part of the
acquisition of WICOR on April 26, 2001. The following table
reconciles the change in the actual contribution to net income by
Wisconsin Energy's utility energy segment between the
comparative periods.
Three Months Ended June 30
----------------------------------------------------------------
Increase (Decrease)
----------------------------------------
Wisconsin
Utility Energy Segment 2000 Gas (a) Other (b) Total 2001
- ---------------------------- -------- ----------- ----------- --------- --------
(Millions of Dollars)
Operating Revenues
Electric $435.4 $ - $14.4 $14.4 $449.8
Gas 111.9 52.1 6.4 58.5 170.4
Other 5.4 - (1.6) (1.6) 3.8
------ ----- ----- ----- ------
Total Operating Revenues 552.7 52.1 19.2 71.3 624.0
Fuel and Purchased Power 119.8 - 6.4 6.4 126.2
Cost of Gas Sold 68.7 38.5 7.8 46.3 115.0
------ ----- ----- ----- ------
Gross Margin 364.2 13.6 5.0 18.6 382.8
Other Operating Expenses
Other Operation and Maintenance 181.6 3.1 22.2 25.3 206.9
Depreciation, Decommissioning
and Amortization 75.9 5.1 (2.4) 2.7 78.6
Property and Revenue Taxes 18.1 0.7 (2.3) (1.6) 16.5
------ ----- ----- ----- ------
Operating Income 88.6 4.7 (12.5) (7.8) 80.8
Other Income, Net 1.8 0.2 2.7 2.9 4.7
Financing Costs 33.8 4.2 (1.2) 3.0 36.8
------ ----- ----- ----- ------
Income Before Income Taxes 56.6 0.7 (8.6) (7.9) 48.7
Income Taxes 22.4 0.3 (3.8) (3.5) 18.9
------ ----- ----- ----- ------
Net Income $34.2 $0.4 ($4.8) ($4.4) $29.8
====== ===== ===== ===== ======
(a) Wisconsin Energy's financial statements reflect the
operations of Wisconsin Gas subsequent to the WICOR merger on
April 26, 2000.
(b) Other includes Wisconsin Electric, Edison Sault and
consolidating adjustments and eliminations between the utilities.
Pro Forma Utility Energy Segment Operating Income
To eliminate the impact of the acquisition of Wisconsin Gas on
the analysis of utility segment operating income and maintain
comparability, the following pro forma discussion includes
Wisconsin Gas as if it had been a part of Wisconsin Energy during
all periods but excludes merger-related costs.
On a pro forma basis, utility energy segment operating income
decreased by $11.6 million or 12.2% during the second quarter of
2001 primarily due to higher fuel and purchased power costs,
lower gas utility gross margins and higher other operation and
maintenance expenses offset in part by higher electric utility
operating revenues. The following table compares the pro forma
operating income of Wisconsin Energy's utility energy segment
during the three months ended June 30, 2001 with similar
information for the three months ended June 30, 2000.
Three Months Ended June 30
Pro Forma (a) -----------------------------------------
Utility Energy Segment 2001 2000 % Change
- ---------------------------- ---- ---- --------
(Millions of Dollars)
Operating Revenues
Electric $449.8 $435.4 3.3%
Gas 170.4 151.9 12.2%
Other 3.8 5.5 (30.9%)
------ ------
Total Operating Revenues 624.0 592.8 5.3%
Fuel and Purchased Power 126.2 119.8 5.3%
Cost of Gas Sold 115.0 93.0 23.7%
------ ------
Gross Margin 382.8 380.0 0.7%
Other Operating Expenses
Other Operation and Maintenance 206.9 187.8 10.2%
Depreciation, Decommissioning
and Amortization 75.8 77.1 (1.7%)
Property and Revenue Taxes 16.5 19.9 (17.1%)
------ ------
Operating Income $83.6 $95.2 (12.2%)
====== ======
(a) Includes Wisconsin Gas as if it had been part of Wisconsin
Energy since January 1, 2000 but excludes merger-related
expenses.
Electric Utility Revenues, Gross Margins and Sales
The following table compares Wisconsin Energy's actual total
electric utility operating revenues and its gross margin during
the second quarter of 2001 with similar information for the
second quarter of 2000.
Three Months Ended June 30
-----------------------------------------
Electric Utility Operations 2001 2000 % Change
- ----------------------------- ---- ---- --------
(Millions of Dollars)
Electric Operating Revenues $449.8 $435.4 3.3%
Fuel and Purchased Power
Fuel 73.6 74.3 (0.9%)
Purchased Power 51.4 44.4 15.8%
------ ------
Total Fuel and Purchased Power 125.0 118.7 5.3%
------ ------
Gross Margin $324.8 $316.7 2.6%
====== ======
During the second quarter of 2001, total electric utility
operating revenues increased by $14.4 million or 3.3% when
compared with the second quarter of 2000. Wisconsin Energy
attributes all of this growth to electric retail rate increases
in Wisconsin that became effective in August 2000 and on
January 1, 2001 and to an interim rate increase that became
effective in February 2001 under Wisconsin's fuel cost adjustment
procedure. In May 2001, the interim fuel rates were increased
again by a final order. For additional information, see Item 1,
Legal Proceedings - "Utility Rates and Regulatory Matters," in
Part II of this report. A 5.0% decrease in electric megawatt-
hour sales during the second quarter of 2001 offset much of the
revenue growth caused by the rate increases.
Between the comparative periods, total fuel and purchased power
expenses increased by $6.3 million or 5.3% primarily due to the
scheduled Point Beach outage. As noted above, Point Beach
Nuclear Plant underwent a successful refueling outage in the
second quarter of 2001. However, the outage required Wisconsin
Electric to acquire more expensive purchased power. No
additional planned outages are scheduled at Point Beach during
the remainder of 2001. In addition, Pleasant Prairie Power
Plant, the Company's largest coal-fired plant, experienced an
unplanned outage during 2001. As a result of these outages, and,
to a lesser extent, due to higher natural gas commodity prices
and higher fixed demand charges associated with long-term power
purchase contracts in effect during 2001, purchased power
expenses increased by $7.0 million or 15.8% during the second
quarter of 2001. The higher fuel and purchased power expenses
absorbed most of the impact of the electric rate increases noted
above such that total gross margin on electric utility operating
revenues increased by $8.1 million or 2.6% during the second
quarter of 2001.
The following table compares Wisconsin Energy's electric utility
operating revenues and electric utility megawatt-hour sales by
customer class during the second quarter of 2001 with similar
information for the second quarter of 2000.
Operating Revenues Megawatt-Hour Sales
Three Months Ended June 30 Three Months Ended June 30
-------------------------------- --------------------------------
Electric Utility Operations 2001 2000 % Change 2001 2000 % Change
- ----------------------------- ---- ---- -------- ---- ---- --------
(Millions of Dollars) (Thousands)
Customer Class
Residential $152.4 $139.8 9.0% 1,781.3 1,749.6 1.8%
Small Commercial/Industrial 145.5 135.9 7.1% 2,068.0 2,075.4 (0.4%)
Large Commercial/Industrial 119.5 120.7 (1.0%) 2,722.6 3,010.2 (9.6%)
Other-Retail/Municipal 17.3 15.1 14.6% 447.3 419.2 6.7%
Resale-Utilities 11.6 16.2 (28.4%) 350.8 503.1 (30.3%)
Other-Operating Revenues 3.5 7.7 (54.5%) - - -
------ ------ ------- -------
Total $449.8 $435.4 3.3% 7,370.0 7,757.5 (5.0%)
====== ====== ======= =======
Weather - Degree Days (a)
Heating (959 Normal) 847 952 (11.0%)
Cooling (170 Normal) 168 160 5.0%
(a) As measured at Mitchell International Airport in Milwaukee,
Wisconsin. Normal degree days are based upon a twenty-year
moving average.
As noted above, total electric megawatt-hour sales fell by 5.0%
during the second quarter of 2001 reflecting a softening economy
that is primarily affecting large commercial/industrial customers
such as Wisconsin Electric's largest retail customers, two iron
ore mines to whom sales decreased by 260.0 thousand megawatt-
hours or 38.5% between the comparative periods. Excluding these
two mines, Wisconsin Energy's total electric energy sales volumes
fell by 1.8% and sales volumes to the remaining large
commercial/industrial customers fell by 1.2% between the
comparative periods.
Pro Forma Gas Utility Revenues,
Gross Margins and Therm Deliveries
To eliminate the impact of the acquisition of Wisconsin Gas on
the analysis of gas utility operations, the following discussion
includes Wisconsin Gas as if it had been a part of Wisconsin
Energy since January 1, 2000.
A comparison of Wisconsin Energy's gas utility operating
revenues, gross margins and gas deliveries on a pro forma basis
follows. Gross margin is a better performance indicator than
revenues because changes in the cost of gas sold flow through to
revenue under gas cost recovery mechanisms that do not impact
gross margin. As can be seen below, gas operating revenues grew
by $18.5 million or 12.2% between the second quarter of 2001 and
the second quarter of 2000 offset by a $22.0 million increase in
purchased gas costs.
Three Months Ended June 30
Pro Forma ---------------------------------------
Gas Utility Operations 2001 2000 (a) % Change
- -------------------------- -------- -------- --------
(Millions of Dollars)
Gas Operating Revenues $170.4 $151.9 12.2%
Cost of Gas Sold 115.0 93.0 23.7%
------ ------
Gross Margin $55.4 $58.9 (5.9%)
====== ======
(a) Information for the year 2000 includes Wisconsin Gas as if
it had been part of Wisconsin Energy since January 1, 2000.
Higher prices for natural gas drove much of the 12.2% increase in
operating revenues and the 23.7% increase in the cost of gas sold
during the second quarter of 2001. As noted above, such gas cost
increases do not affect the margin earned on each therm of gas
delivered as a result of the Company's gas cost recovery
mechanisms. However, higher gas prices can adversely affect the
Company's therm deliveries to the extent that customers reduce
consumption through lower thermostat settings or through fuel
switching. As of August 2001, commodity gas prices have dropped
from the historically high prices experienced during the first
six months of 2001 and are comparable to the prices in effect in
August 2000. It is not clear how volume trends experienced to
date during 2001 will change in response to the lower commodity
prices for the remainder of the year. Gas margins were down
5.9% reflecting a 14.1% volume reduction in therm deliveries,
but were partially offset by an increase in the average number of
customers which favorably impacted the fixed component of
operating revenues that is not affected by decreased volumes.
Retail gas rate increases at Wisconsin Electric that became
effective in August 2000 also contributed to the increase in gas
utility operating revenues and helped mitigate the decline in
gross margin between the comparative periods.
The following table compares Wisconsin Energy's gas utility
operating revenues and natural gas therm deliveries by customer
class during the second quarter of 2001 with similar pro forma
information for the second quarter of 2000.
Operating Revenues Therm Deliveries
Three Months Ended June 30 Three Months Ended June 30
Pro Forma -------------------------------- --------------------------------
Gas Utility Operations 2001 2000 (a) % Change 2001 2000 (a) % Change
- ---------------------------- -------- -------- -------- -------- -------- --------
(Millions of Dollars) (Millions)
Customer Class
Residential $91.3 $82.5 10.7% 98.8 111.3 (11.2%)
Commercial/Industrial 47.8 38.6 23.8% 62.9 65.7 (4.3%)
Interruptible 3.4 3.6 (5.6%) 5.0 7.1 (29.6%)
------ ------ ----- -----
Total Retail Gas Sales 142.5 124.7 14.3% 166.7 184.1 (9.5%)
Transported Customer-Owned Gas 7.3 8.7 (16.1%) 158.5 185.2 (14.4%)
Transported-Interdepartmental 0.3 0.6 (50.0%) 4.4 14.6 (69.9%)
Other-Operating Revenues 20.3 17.9 13.4% - - -
------ ------ ----- -----
Total Operating Revenues $170.4 $151.9 12.2% 329.6 383.9 (14.1%)
====== ====== ===== =====
Weather - Degree Days (b)
Heating (959 Normal) 847 952 (11.0%)
(a) Information for the year 2000 includes Wisconsin Gas as if
it had been part of Wisconsin Energy since January 1, 2000.
(b) As measured at Mitchell International Airport in Milwaukee,
Wisconsin. Normal degree days are based upon a twenty-year
moving average.
On a pro forma basis, total therm deliveries of natural gas
decreased by 14.1% during the second quarter of 2001. The
reduction was largely due to warmer weather in 2001 compared with
2000, which affected volumes in the residential and small
commercial customer classes. Large commercial/industrial and
transportation volumes declined primarily due to fuel switching
resulting from the high commodity cost of natural gas and, to a
lesser extent, by the softening economy.
Other Utility Segment Items
PRO FORMA OTHER OPERATION AND MAINTENANCE EXPENSES: On a pro
forma basis, other operation and maintenance expenses increased
by $19.1 million or 10.2% during the second quarter of 2001 when
compared with the second quarter of 2000, $10.0 million of which
was attributable to the scheduled refueling outage at Point Beach
during the second quarter of 2001 noted above. Electric
transmission costs were $12.1 million higher during 2001
primarily caused by a change in how these costs are recorded. On
January 1, 2001, Wisconsin Electric and Edison Sault transferred
all of their electric utility transmission assets to ATC in
exchange for equity interests in this new company. The increase
in other operation and maintenance expenses associated with
electric transmission operations was offset by reduced
depreciation expense, reduced interest expense and earnings from
Wisconsin Energy's equity investment in ATC. The net effect of
these changes resulted in a non-material change to pre-tax income
between the comparative periods as a result of transmission-
related activities.
OTHER INCOME, NET: Actual Other Income, Net increased by
$2.7 million during the second quarter of 2001 due to recognition
of equity in the earnings of ATC in 2001.
NON-UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Actual non-utility energy segment net income increased by
$19.7 million during the second quarter of 2001 primarily due to
the non-recurring sale of certain assets and, to a lesser extent,
due to improved results at Wisvest.
As previously reported, the Company completed the sale during the
second quarter of 2001 of its wholly-owned subsidiary, FieldTech,
Inc., a meter services company, and the sale of its interest in
Blythe Energy, LLC, an independent power production project in
the state of California. These sales resulted in non-recurring
after-tax gains of approximately $16.5 million or $0.14 per
share.
Also as previously reported, the Company announced in December
2000 the sale of Wisvest's two non-utility power plants in the
state of Connecticut. In late July 2001, sale of these plants
was delayed when the FERC directed its staff to convene a
technical conference on the impact of these sales on competition.
The matter is pending.
The following table reconciles the change in the contribution to
earnings by Wisconsin Energy's non-utility energy segment between
the second quarter of 2000 and the second quarter of 2001. In
addition, the table compares electric megawatt-hour sales from
independent power production activities as well as electric
megawatt-hour sales and natural gas therm sales as a result of
non-utility energy marketing, trading and services activities.
Three Months Ended June 30
-----------------------------------------------------------------
Increase (Decrease)
----------------------------------------
Non-Utility Energy Segment 2000 WICOR (a) Other (b) Total 2001
- ---------------------------- -------- ----------- ----------- --------- --------
(Millions of Dollars, Except Statistics)
Operating Revenues
Independent Power Production $34.3 $ - $21.2 $21.2 $55.5
Energy Marketing, Trading &
Services 33.6 (18.0) (7.8) (25.8) 7.8
Other 13.4 (0.1) (9.2) (9.3) 4.1
----- ----- ----- ----- -----
Total Operating Revenues 81.3 (18.1) 4.2 (13.9) 67.4
Fuel and Purchased Power 43.2 - (6.1) (6.1) 37.1
Cost of Gas Sold 17.1 (17.6) - (17.6) (0.5)
Cost of Goods Sold 1.8 0.5 - 0.5 2.3
----- ----- ----- ----- -----
Gross Margin 19.2 (1.0) 10.3 9.3 28.5
Other Operating Expenses 19.0 (0.3) 0.5 0.2 19.2
----- ----- ----- ----- -----
Operating Income 0.2 (0.7) 9.8 9.1 9.3
Other Income, Net 8.4 5.9 14.8 20.7 29.1
Financing Costs 8.0 0.2 (2.3) (2.1) 5.9
----- ----- ----- ----- -----
Income Before Income Taxes 0.6 5.0 26.9 31.9 32.5
Income Taxes 0.3 1.9 10.3 12.2 12.5
----- ----- ----- ----- -----
Net Income $0.3 $3.1 $16.6 $19.7 $20.0
===== ===== ===== ===== =====
Statistics
Independent Power Production
Electric Megawatt-Hour
Sales (Thousands) 938.6 - 157.7 157.7 1,096.3
Energy Marketing, Trading &
Services
Electric Megawatt-Hour
Sales (Thousands) 382.2 - (175.4) (175.4) 206.8
Gas Therm Sales (Millions) 34.6 (34.6) - (34.6) -
(a) Wisconsin Energy's financial statements and statistics
reflect the operations of WICOR Energy and FieldTech,
subsidiaries of WICOR, subsequent to the merger on April 26,
2000. During April 2001, the operations of WICOR Energy were
merged into an unconsolidated affiliate of Wisconsin Energy. In
May 2001, FieldTech was sold to an unrelated third party.
(b) Other consists primarily of Wisvest.
MANUFACTURING SEGMENT CONTRIBUTION TO NET INCOME
On an actual basis, the manufacturing segment contributed
$5.7 million to net income during the second quarter of 2001
compared with $5.0 million during the second quarter of 2000.
Prior to the WICOR acquisition, Wisconsin Energy did not have a
manufacturing segment. The following table reconciles the change
in the contribution to earnings by Wisconsin Energy's
manufacturing segment between the second quarter of 2000 and the
second quarter of 2001.
Three Months Ended June 30
----------------------------------------
Increase
Manufacturing Segment (a) 2000 (b) (Decrease) 2001
- ------------------------------------- ---------- ---------- ----------
(Millions of Dollars)
Operating Revenues
Domestic $83.9 $37.2 $121.1
International 25.9 9.6 35.5
----- ----- ------
Total Operating Revenues 109.8 46.8 156.6
Cost of Goods Sold 76.1 35.7 111.8
----- ----- ------
Gross Margin 33.7 11.1 44.8
Other Operating Expenses 21.3 7.6 28.9
----- ----- ------
Operating Income 12.4 3.5 15.9
Other Income, Net 0.1 (0.1) -
Financing Costs 3.6 1.9 5.5
----- ----- ------
Income Before Income Taxes 8.9 1.5 10.4
Income Taxes 3.9 0.8 4.7
----- ----- ------
Net Earnings $5.0 $0.7 $5.7
===== ===== ======
(a) For further information concerning manufacturing segment
operations during the comparative periods, see "Pro Forma
Manufacturing Segment Results" below.
(b) Wisconsin Energy's financial statements reflect the
operations of WICOR Industries, Inc. subsequent to the WICOR
merger on April 26, 2000.
Pro Forma Manufacturing Segment Results
To eliminate the impact of the acquisition of WICOR on the
analysis of the manufacturing segment, the following discussion
includes WICOR Industries as if it had been a part of Wisconsin
Energy since January 1, 2000 but excludes merger-related costs.
The manufacturing segment would have posted pro forma net income
of approximately $10.4 million during the second quarter of 2001
compared with pro forma net income of $9.3 million during the
second quarter of 2000.
On a pro forma basis, manufacturing operating revenues were flat
but operating income improved 11.7% between the comparative
periods primarily due to a softening economy offset by the
continuation of cost improvement programs and contributions from
new product introductions and recent acquisitions. Second
quarter 2001 sales in the consumer sensitive pool/spa,
recreational vehicle and marine markets held steady with the
prior year. However, sales in the agricultural markets during
the second quarter of 2001 continued a trend of performing below
the prior year as the lagging agricultural economy was impacted
by a delayed planting season as well as the effects on this
sector of high energy costs and low commodity prices. Sales in
the water systems markets were up in the second quarter of 2001.
International sales for the second quarter of 2001 decreased in
large part due to the translation of foreign currency results
into U.S. dollars resulting from a stronger U.S. dollar in 2001.
The following table provides additional detail about the pro
forma operating revenues, gross margin and operating income of
the manufacturing segment during the comparative periods.
Three Months Ended June 30
------------------------------------------------
Pro Forma (a)
Manufacturing Segment 2001 2000 % Change
- ---------------------------- -------- -------- --------
(Millions of Dollars)
Operating Revenues
Domestic $121.1 $119.4 1.4%
International 35.5 37.7 (5.8%)
------ ------
Total Operating Revenues 156.6 157.1 (0.3%)
Cost of Goods Sold 110.8 112.9 (1.9%)
------ ------
Gross Margin 45.8 44.2 3.6%
Other Operating Expenses 26.7 27.1 (1.5%)
------ ------
Operating Income $19.1 $17.1 11.7%
====== ======
(a) Includes WICOR Industries, Inc. as if it had been part of
Wisconsin Energy since January 1, 2000 but excludes merger-
related expenses.
As described in further detail in Note 4 in Item 1, Financial
Statements - "Notes to Consolidated Condensed Financial
Statements," in Part I of this report, Sta-Rite completed the
acquisitions of Vico Products Manufacturing Co., Inc. and Ultra
Jet Canada in July 2001. Subject to the successful integration
of these companies into the manufacturing segment, Wisconsin
Energy expects this acquisition to be slightly accretive to
earnings during the second half of 2001.
RESULTS OF OPERATIONS - SIX MONTHS ENDED JUNE 30, 2001
CONSOLIDATED EARNINGS
Consolidated earnings increased by $0.46 per share to $1.13 per
share during the first six months of 2001, including a $0.17 per
share increase from the WICOR companies, which were acquired in
April 2000, a non-recurring $0.09 per share cumulative gain in
the first quarter of 2001 from a change in accounting principle,
and non-recurring gains on asset sales during the second quarter
of 2001 in the amount of $0.14 per share.
Excluding the non-recurring items and assuming that the WICOR
acquisition had occurred on January 1, 2000, pro forma earnings
increased by 23.3% to $0.90 per share during the first half of
2001 from $0.73 per share during the first half of 2000. Between
the comparative periods, utility energy segment earnings grew
$0.06 per share before merger-related costs primarily due to an
increase in electric utility gross margins offset in part by the
costs of a scheduled refueling outage at Point Beach during the
second quarter of 2001. During 2001, non-utility energy segment
earnings increased by $0.08 per share due to improved financial
performance by Wisvest, and manufacturing segment earnings grew
by $0.02 per share. For purposes of this discussion, merger-
related costs represent WICOR acquisition purchase accounting
entries including goodwill and interest expense.
The following table compares Wisconsin Energy's diluted earnings
per share by business segment during the first six months of 2001
with similar information during the first six months of 2000.
The following table also includes pro forma earnings per share by
segment during the first six months of 2000 as if WICOR had been
a part of Wisconsin Energy since January 1, 2000.
Six Months Ended June 30
------------------------------------
2000
2001 --------------------------
Diluted Earnings Per Share Actual Pro Forma (a) Actual
- ------------------------------------ ------ ------------- ------
Utility Energy Segment $1.04 $0.98 $0.80
Non-Utility Energy Segment 0.05 (0.03) (0.03)
Manufacturing Segment 0.15 0.13 0.07
Other and Merger-Related Costs (b) (0.34) (0.35) (0.17)
----- ----- -----
Earnings Before Non-Recurring Items 0.90 0.73 0.67
Non-Recurring Items (c) 0.23 - -
----- ----- -----
Net Earnings $1.13 $0.73 $0.67
===== ===== =====
(a) Pro forma assumes that the WICOR acquisition occurred on
January 1, 2000 and, for comparability, includes estimated
recurring merger-related costs prior to the merger.
(b) Includes the holding company, other non-utility companies
and merger-related costs.
(c) Reflects gains on asset sales of $0.14 per share during the
second quarter of 2001 and the initial cumulative effect of
adoption on January 1, 2001 of FAS 133 in the amount of
$0.09 per share. All non-recurring items are attributable
to the non-utility energy segment.
A more detailed analysis of earnings contributions by
segment follows.
UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Actual utility energy segment net income increased by
$18.7 million or 20.0% between the first six months of 2001 and
the first six months of 2000, all of which is attributable to
Wisconsin Gas operations, acquired as part of the acquisition of
WICOR in April 2000. The following table reconciles the change
in the actual contribution to net income by Wisconsin Energy's
utility energy segment between the comparative periods.
Six Months Ended June 30
----------------------------------------------------------------
Increase (Decrease)
----------------------------------------
Wisconsin
Utility Energy Segment 2000 Gas (a) Other (b) Total 2001
- ---------------------------- -------- ----------- ----------- --------- --------
(Millions of Dollars)
Operating Revenues
Electric $859.2 $ - $46.0 $46.0 $905.2
Gas 230.4 384.4 136.6 521.0 751.4
Other 12.8 0.3 0.1 0.4 13.2
------- ----- ----- ------ -------
Total Operating Revenues 1,102.4 384.7 182.7 567.4 1,669.8
Fuel and Purchased Power 229.5 - 30.5 30.5 260.0
Cost of Gas Sold 137.8 291.3 128.4 419.7 557.5
------- ----- ----- ------ -------
Gross Margin 735.1 93.4 23.8 117.2 852.3
Other Operating Expenses
Other Operation and Maintenance 344.4 25.5 39.6 65.1 409.5
Depreciation, Decommissioning
and Amortization 143.3 18.6 (3.7) 14.9 158.2
Property and Revenue Taxes 35.9 2.1 (1.5) 0.6 36.5
------- ----- ----- ------ -------
Operating Income 211.5 47.2 (10.6) 39.6 248.1
Other Income, Net 5.3 0.3 8.8 9.1 14.4
Financing Costs 63.3 13.5 (0.7) 12.8 76.1
------- ----- ----- ------ -------
Income Before Income Taxes 153.5 34.0 (1.1) 32.9 186.4
Income Taxes 60.0 14.5 (0.3) 14.2 74.2
------- ----- ----- ------ -------
Net Income $93.5 $19.5 ($0.8) $18.7 $112.2
======= ===== ===== ====== =======
(a) Wisconsin Energy's financial statements reflect the
operations of Wisconsin Gas subsequent to the WICOR merger on
April 26, 2000.
(b) Other includes Wisconsin Electric, Edison Sault and
consolidating adjustments and eliminations between the utilities.
Net income for Wisconsin Energy's other utility subsidiaries,
Wisconsin Electric and Edison Sault, was virtually unchanged
between the comparative periods primarily because higher electric
utility gross margins and slightly higher gas utility gross
margins during the first half of 2001 were offset by higher other
operation and maintenance expenses. The Company attributes the
increases in electric and gas utility gross margins primarily to
rate increases that were in effect during the first six months of
2001 but not during the first six months of 2000, and, to a
lesser extent, to cooler winter weather during the first quarter
of 2001, which increased higher margin electric and gas retail
sales volumes during 2001.
Pro Forma Utility Energy Segment Operating Income
To eliminate the impact of the acquisition of Wisconsin Gas on
the analysis of utility segment operating income, the following
pro forma discussion includes Wisconsin Gas as if it had been a
part of Wisconsin Energy during all periods but excludes merger-
related costs.
On a pro forma basis, utility energy segment operating income was
unchanged between the comparative periods. Higher electric and
pro forma gas utility gross margins were offset by higher other
operation and maintenance expenses. The following table compares
the pro forma operating income of Wisconsin Energy's utility
energy segment during the six months ended June 30, 2001 with
similar information for the six months ended June 30, 2000.
Six Months Ended June 30
Pro Forma (a) --------------------------------------
Utility Energy Segment 2001 2000 % Change
- ---------------------------- -------- -------- --------
(Millions of Dollars)
Operating Revenues
Electric $905.2 $859.2 5.4%
Gas 751.4 446.3 68.4%
Other 13.2 13.1 0.8%
------- -------
Total Operating Revenues 1,669.8 1,318.6 26.6%
Fuel and Purchased Power 260.0 229.5 13.3%
Cost of Gas Sold 557.5 264.8 110.5%
------- -------
Gross Margin 852.3 824.3 3.4%
Other Operating Expenses
Other Operation and Maintenance 409.5 377.9 8.4%
Depreciation, Decommissioning
and Amortization 152.4 153.6 (0.8%)
Property and Revenue Taxes 36.5 38.9 (6.2%)
------- -------
Operating Income $253.9 $253.9 -
======= =======
(a) Includes Wisconsin Gas as if it had been part of Wisconsin
Energy since January 1, 2000 but excludes merger-related
expenses.
Electric Utility Revenues, Gross Margins and Sales
The following table compares Wisconsin Energy's actual total
electric utility operating revenues and gross margin during the
first half of 2001 with similar information for the first half
of 2000.
Six Months Ended June 30
--------------------------------------
Electric Utility Operations 2001 2000 % Change
- ----------------------------- -------- -------- --------
(Millions of Dollars)
Electric Operating Revenues $905.2 $859.2 5.4%
Fuel and Purchased Power
Fuel 153.1 147.7 3.7%
Purchased Power 103.8 78.8 31.7%
------ ------
Total Fuel and Purchased Power 256.9 226.5 13.4%
------ ------
Gross Margin $648.3 $632.7 2.5%
====== ======
During the first six months of 2001, total electric utility
operating revenues increased by $46.0 million or 5.4% when
compared with the first half of 2000. Wisconsin Energy
attributes this growth to electric retail rate increases in
Wisconsin that became effective in April 2000, in August 2000 and
on January 1, 2001 and to an interim rate increase that became
effective in February 2001 under Wisconsin's fuel cost adjustment
procedure. In May 2001, the interim fuel rates were increased
again by a final order. A 2.3% decrease in electric megawatt-
hour sales during the first half of 2001 offset much of the
revenue growth caused by the rate increases.
Between the comparative periods, total fuel and purchased power
expenses increased by $30.4 million or 13.4% primarily due to
significantly higher natural gas prices, the scheduled Point
Beach outage during 2001 noted earlier and, to a lesser extent,
to higher fixed demand charges associated with long-term power
purchase contracts in effect during 2001. The higher fuel and
purchased power expenses offset much of the impact on electric
revenues of the electric rate increases noted above such that
total gross margin on electric operating revenues increased by
$15.6 million or 2.5% during the first half of 2001.
The following table compares Wisconsin Energy's electric utility
operating revenues and electric utility megawatt-hour sales by
customer class during the first six months of 2001 with similar
information for the first six months of 2000.
Operating Revenues Megawatt-Hour Sales
Six Months Ended June 30 Six Months Ended June 30
-------------------------------- --------------------------------
Electric Utility Operations 2001 2000 % Change 2001 2000 % Change
- ----------------------------- ---- ---- -------- ---- ---- --------
(Millions of Dollars) (Thousands)
Customer Class
Residential $312.1 $287.5 8.6% 3,714.4 3,648.6 1.8%
Small Commercial/Industrial 288.9 264.5 9.2% 4,222.6 4,119.1 2.5%
Large Commercial/Industrial 236.4 234.0 1.0% 5,551.7 5,869.6 (5.4%)
Other-Retail/Municipal 34.4 29.9 15.1% 908.7 843.9 7.7%
Resale-Utilities 26.2 29.6 (11.5%) 798.6 1,066.2 (25.1%)
Other-Operating Revenues 7.2 13.7 (47.4%) - - -
------ ------ -------- --------
Total $905.2 $859.2 5.4% 15,196.0 15,547.4 (2.3%)
====== ====== ======== ========
Weather - Degree Days (a)
Heating (4,265 Normal) 4,242 3,883 9.2%
Cooling (170 Normal) 168 161 4.3%
(a) As measured at Mitchell International Airport in Milwaukee,
Wisconsin. Normal degree days are based upon a twenty-year
moving average.
As noted above, total electric megawatt-hour sales fell by 2.3%
during the first six months of 2001 reflecting a softening
economy that is primarily affecting large commercial/industrial
customers such as Wisconsin Electric's largest retail customers,
two iron ore mines to whom sales decreased by 228 thousand
megawatt-hours or 18.1% between the comparative periods.
Excluding these two mines, Wisconsin Energy's total electric
energy sales volumes fell by 0.9% and sales volumes to the
remaining large commercial/industrial customers fell by 2.0%
between the comparative periods.
Pro Forma Gas Utility Revenues, Gross Margins and
Therm Deliveries
To eliminate the impact of the acquisition of Wisconsin Gas on
the analysis of gas utility operations, the following discussion
includes Wisconsin Gas as if it had been a part of Wisconsin
Energy since January 1, 2000.
A comparison of Wisconsin Energy's gas utility operating
revenues, gross margins and gas deliveries on a pro forma basis
follows. Gross margin is a better performance indicator than
revenues because changes in the cost of gas sold flow through to
revenue under gas cost recovery mechanisms that do not impact
gross margin. As can be seen below, gas operating revenues grew
by $305.1 million or 68.4% between the first half of 2001 and the
first half of 2000 offset by a $292.7 million increase in
purchased gas costs.
Six Months Ended June 30
Pro Forma ---------------------------------------
Gas Utility Operations 2001 2000 (a) % Change
- -------------------------- -------- -------- --------
(Millions of Dollars)
Gas Operating Revenues $751.4 $446.3 68.4%
Cost of Gas Sold 557.5 264.8 110.5%
------ ------
Gross Margin $193.9 $181.5 6.8%
====== ======
(a) Information for the year 2000 includes Wisconsin Gas as if
it had been part of Wisconsin Energy since January 1, 2000.
Higher prices for natural gas drove much of the 68.4% increase in
operating revenues and the 110.5% increase in the cost of gas
sold during the first half of 2001. As noted above, such gas
cost increases do not affect the margin earned on each therm of
gas delivered as a result of the Company's gas cost recovery
mechanisms. However, higher gas prices can adversely affect the
Company's therm deliveries to the extent that customers reduce
consumption through lower thermostat settings or through fuel
switching. Gas margins were up 6.8%, reflecting an increase in
retail gas sales to weather sensitive customers as a result of
cooler weather during the first part of 2001, and, to a lesser
extent, to retail gas rate increases at Wisconsin Electric that
became effective in August 2000.
The following table compares Wisconsin Energy's gas utility
operating revenues and natural gas therm deliveries by customer
class during the first six months of 2001 with similar pro forma
information for the first six months of 2000.
Operating Revenues Therm Deliveries
Six Months Ended June 30 Six Months Ended June 30
Pro Forma -------------------------------- --------------------------------
Gas Utility Operations 2001 2000 (a) % Change 2001 2000 (a) % Change
- ---------------------------- -------- -------- -------- -------- -------- --------
(Millions of Dollars) (Millions)
Customer Class
Residential $468.5 $287.8 62.8% 484.0 446.9 8.3%
Commercial/Industrial 231.2 135.9 70.1% 266.5 257.3 3.6%
Interruptible 12.5 8.4 48.8% 15.1 19.8 (23.7%)
------ ------ ------- -------
Total Retail Gas Sales 712.2 432.1 64.8% 765.6 724.0 5.7%
Transported Customer-Owned Gas 20.0 22.2 (9.9%) 405.7 458.3 (11.5%)
Transported-Interdepartmental 0.6 1.0 (40.0%) 7.6 22.7 (66.5%)
Other-Operating Revenues 18.6 (9.0) 306.7% - - -
------ ------ ------- -------
Total Operating Revenues $751.4 $446.3 68.4% 1,178.9 1,205.0 (2.2%)
====== ====== ======= =======
Weather - Degree Days (b)
Heating (4,265 Normal) 4,242 3,883 9.2%
(a) Information for the year 2000 includes Wisconsin Gas as if
it had been part of Wisconsin Energy since January 1, 2000.
(b) As measured at Mitchell International Airport in Milwaukee,
Wisconsin. Normal degree days are based upon a twenty-year
moving average.
On a pro forma basis, total therm deliveries of natural gas
decreased by 2.2% during the first half of 2001, but varied
within customer classes. Volume deliveries for the residential
and commercial customer classes increased by 8.3% and 3.6%,
respectively, reflecting colder weather experienced during the
winter heating season, which was 9.2% colder as measured by
heating degree days. Residential and commercial customers are
more weather sensitive and contribute higher margins per therm
than other customers. The increase caused by the colder weather
was partially offset by customer conservation due to the higher
cost of gas and to the weaker economy, which primarily affected
commercial/industrial gas consumption. Transportation volumes
were 11.5% lower than the prior year reflecting fuel switching to
lower-cost fuel options and, to a lesser extent, the
softening economy.
Other Utility Segment Items
PRO FORMA OTHER OPERATION AND MAINTENANCE EXPENSES: On a pro
forma basis, other operation and maintenance expenses increased
by $31.6 million or 8.4% during the first six months of 2001 when
compared with the first six months of 2000. The most significant
changes in other operation and maintenance expenses include
$17.2 million of higher non-fuel nuclear expenses, $10.0 million
of which was attributable to the scheduled refueling outage at
Point Beach Nuclear Plant during the second quarter of 2001, and
approximately $23.1 million of higher electric transmission
expenses primarily caused by a change in how electric
transmission costs are recorded and reported as a result of the
transfer of Wisconsin Electric's and Edison Sault's electric
transmission assets to ATC on January 1, 2001.
OTHER INCOME, NET: Actual Other Income, Net increased by
$9.1 million during the first half of 2001 due primarily to
recognition of equity in the earnings of ATC in 2001.
NON-UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Actual non-utility energy segment net income increased by
$37.5 million during the first half of 2001, $10.5 million of
which reflect a non-recurring after-tax gain on the cumulative
effect of a change in accounting principle associated with the
adoption of FAS 133 on January 1, 2001 and $16.5 million of which
reflect after-tax gains on the non-recurring sale of certain
assets during the second quarter of 2001. The remainder of the
earnings increase primarily represents improved results at Wisvest.
The following table reconciles the change in the contribution to
earnings by Wisconsin Energy's non-utility energy segment between
the first six months of 2000 and the first six months of 2001.
In addition, the table compares electric megawatt-hour sales from
independent power production activities as well as electric
megawatt-hour sales and natural gas therm sales as a result of
non-utility energy marketing, trading and services activities.
Six Months Ended June 30
------------------------------------------------------------------
Increase (Decrease)
---------------------------------------
Non-Utility Energy Segment 2000 WICOR (a) Other (b) Total 2001
- ---------------------------- -------- ----------- ----------- --------- --------
(Millions of Dollars, Except Statistics)
Operating Revenues
Independent Power Production $66.1 $ - $51.6 $51.6 $117.7
Energy Marketing, Trading &
Services 65.0 60.9 (28.2) 32.7 97.7
Other 19.4 0.1 (14.2) (14.1) 5.3
----- ----- ----- ----- ------
Total Operating Revenues 150.5 61.0 9.2 70.2 220.7
Fuel and Purchased Power 93.8 - (10.0) (10.0) 83.8
Cost of Gas Sold 17.1 55.4 - 55.4 72.5
Cost of Goods Sold 1.8 4.9 - 4.9 6.7
----- ----- ----- ----- ------
Gross Margin 37.8 0.7 19.2 19.9 57.7
Other Operating Expenses 39.5 1.3 (1.3) - 39.5
----- ----- ----- ----- ------
Operating Income (Loss) (1.7) (0.6) 20.5 19.9 18.2
Other Income, Net 11.5 5.9 12.9 18.8 30.3
Financing Costs 15.8 0.5 (5.4) (4.9) 10.9
----- ----- ----- ----- ------
Income Before Income Taxes (6.0) 4.8 38.8 43.6 37.6
Income Taxes (2.0) 1.9 14.7 16.6 14.6
----- ----- ----- ----- ------
Income Before Accounting Change (4.0) 2.9 24.1 27.0 23.0
Cumulative Effect of
Accounting Change - - 10.5 10.5 10.5
----- ----- ----- ----- ------
Net Income (Loss) $(4.0) $2.9 $34.6 $37.5 $33.5
===== ===== ===== ===== ======
Statistics
Independent Power Production
Electric Megawatt-Hour
Sales (Thousands) 1,699.3 - 698.2 698.2 2,397.5
Energy Marketing, Trading &
Services
Electric Megawatt-Hour
Sales (Thousands) 731.0 - (298.6) (298.6) 432.4
Gas Therm Sales (Millions) 34.6 65.7 - 65.7 100.3
(a) Wisconsin Energy's financial statements and statistics
reflect the operations of WICOR Energy and FieldTech,
subsidiaries of WICOR, subsequent to the merger on April 26,
2000. During April 2001, the operations of WICOR Energy were
merged into an unconsolidated affiliate of Wisconsin Energy. In
May 2001, FieldTech was sold to an unrelated third party.
(b) Other consists primarily of Wisvest.
MANUFACTURING SEGMENT CONTRIBUTION TO NET INCOME
On an actual basis, the manufacturing segment contributed
$8.2 million to net income during the first half of 2001 compared
with $5.0 million during the first half of 2000. Prior to the
WICOR acquisition, Wisconsin Energy did not have a manufacturing
segment. The following table reconciles the change in the
contribution to earnings by Wisconsin Energy's manufacturing
segment between the first six months of 2000 and the first six
months of 2001.
Six Months Ended June 30
----------------------------------------
Manufacturing Segment (a) 2000 (b) Increase (Decrease) 2001
- ------------------------------------- -------- ------------------- --------
(Millions of Dollars)
Operating Revenues
Domestic $83.9 $145.4 $229.3
International 25.9 44.6 70.5
----- ------ ------
Total Operating Revenues 109.8 190.0 299.8
Cost of Goods Sold 76.1 139.1 215.2
----- ------ ------
Gross Margin 33.7 50.9 84.6
Other Operating Expenses 21.3 36.6 57.9
----- ------ ------
Operating Income 12.4 14.3 26.7
Other Income, Net 0.1 - 0.1
Financing Costs 3.6 7.8 11.4
----- ------ ------
Income Before Income Taxes 8.9 6.5 15.4
Income Taxes 3.9 3.3 7.2
----- ------ ------
Net Earnings $5.0 $3.2 $8.2
===== ====== ======
(a) For further information concerning manufacturing segment
operations during the comparative periods, see "Pro Forma
Manufacturing Segment Results" below.
(b) Wisconsin Energy's financial statements reflect the
operations of WICOR Industries, Inc. subsequent to the WICOR
merger on April 26, 2000.
Pro Forma Manufacturing Segment Results
To eliminate the impact of the acquisition of WICOR on the
analysis of the manufacturing segment, the following discussion
includes WICOR Industries as if it had been a part of Wisconsin
Energy since January 1, 2000 but excludes merger-related costs.
The manufacturing segment would have posted pro forma net income
of approximately $17.5 million during the first half of 2001
compared with pro forma net income of $16.0 million during the
first half of 2000.
On a pro forma basis, manufacturing operating revenues were
relatively flat between the comparative periods primarily due to
a softening domestic and international economy, but operating
income was up 10.7% primarily due to the continuation of cost
improvement programs. Sales in the water systems markets were up
during the first half of 2001 but other markets experienced flat
or decreased sales due mainly to poor market and economic
conditions. This trend may result in lower than anticipated
earnings contributions by the manufacturing segment during the
remainder of 2001. International revenues and earnings
contributions were lower during the first six months of 2001 than
during the same period in 2000 primarily due to a strong U.S.
dollar, a weak Australian economy and delays related to new
product shipments in Europe.
The following table provides additional detail about the pro
forma operating revenues, gross margin and operating income of
the manufacturing segment during the comparative periods.
Six Months Ended June 30
Pro Forma (a) ----------------------------------------------
Manufacturing Segment 2001 2000 % Change
- ---------------------------- ------ ------ --------
(Millions of Dollars)
Operating Revenues
Domestic $229.3 $224.7 2.0%
International 70.5 74.6 (5.5%)
------ ------
Total Operating Revenues 299.8 299.3 0.2%
Cost of Goods Sold 213.2 213.3 -
------ ------
Gross Margin 86.6 86.0 0.7%
Other Operating Expenses 53.6 56.2 (4.6%)
------ ------
Operating Income $33.0 $29.8 10.7%
====== ======
(a) Includes WICOR Industries, Inc. as if it had been part of
Wisconsin Energy since January 1, 2000 but excludes merger-
related expenses.
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The following summarizes Wisconsin Energy's cash flows during the
six month periods ended June 30, 2001 and June 30, 2000:
Six Months Ended June 30
--------------------------
Wisconsin Energy Corporation 2001 2000
- ---------------------------- -------- --------
(Millions of Dollars)
Cash Provided by (Used in)
Operating Activities $265.6 $300.5
Investing Activities (58.5) (1,509.3)
Financing Activities (177.6) 1,162.7
Operating Activities
Cash provided by operating activities decreased to $265.6 million
during the first six months of 2001 compared with $300.5 million
during the same period in 2000, reflecting higher 2001 earnings
offset by (1) an increase in working capital requirements, (2) an
increase in income taxes paid as a result of higher earnings
during the first six months of 2001, (3) a $35 million tax refund
received in the first quarter of 2000 related to litigation, and
(4) a $20 million payment to the Wisconsin Energy Foundation in
the first quarter of 2001.
Investing Activities
During the first six months of 2001, Wisconsin Energy spent a net
total of $58.5 million on investing activities. The Company
incurred capital expenditures of $169.2 million on utility plant,
$41.8 million on non-utility energy projects, $12.1 million on
manufacturing and $33.0 million on other non-utility activities.
These investments were offset by the receipt of $120.0 million of
cash distributions from ATC and $108.1 million of net proceeds
from asset sales primarily from the Company's continued program
to divest of non-core businesses and assets. Due to different
refueling outage schedules at Point Beach Nuclear Plant between
the comparative periods, the Company spent $18.4 million less
during the first half of 2001 on the acquisition of nuclear fuel
when compared with the first half of 2000. During the six months
ended June 30, 2000, Wisconsin Energy spent $1.5 billion in
investing activities, primarily reflecting the $1.2 billion
acquisition of WICOR in April 2000.
Financing Activities
During the first six months of 2001, Wisconsin Energy used
$177.6 million of net cash in financing activities compared with
receiving net cash in the amount of $1.2 billion during the first
six months of 2000, reflecting in large part the initial
financing of the WICOR acquisition in 2000 as well as debt
retirements and common stock repurchases in 2001.
In March 2001, Wisconsin Energy received approximately
$990 million of cash through the issuance of $1 billion of
intermediate-term unsecured senior notes. Proceeds from the
issuance of these debt securities were added to the Company's
general funds and were used to repay commercial paper borrowings
related primarily to the WICOR acquisition.
During the first half of 2001, Wisconsin Energy purchased
approximately 2.9 million shares of common stock for
$63.7 million under a $400 million board-approved repurchase
program that was initiated in 2000. Also during the first half
of 2001, Wisconsin Energy issued approximately 1.4 million new
shares of common stock aggregating $27.3 million related to the
Company's dividend reinvestment plan, other benefit plans and the
exercise of stock options.
CAPITAL RESOURCES AND REQUIREMENTS
Capital Resources
Cash requirements during the remaining six months of 2001 are
expected to be met through a combination of internal sources of
funds from operations, asset sales and short-term borrowings.
The Company currently expects to receive approximately
$500 million of net proceeds from asset sales during the
remainder of 2001 including anticipated net proceeds of
approximately $325 million related to the sale of Wisvest's two
power plants in the state of Connecticut. For additional
information concerning the pending sale of these two plants, see
Note 5 in Item 1, Financial Statements - "Notes to Consolidated
Condensed Financial Statements," in Part I of this report.
The Company has access to outside capital markets and has been
able to generate funds internally and externally to meet its
capital requirements. Wisconsin Energy's ability to attract the
necessary financial capital at reasonable terms is critical to
the Company's overall strategic plan. Wisconsin Energy believes
that it has adequate capacity to fund its operations for the
foreseeable future through its borrowing arrangements and
internally generated cash.
On June 30, 2001, Wisconsin Energy had $1.3 billion of total
available unused short-term credit on a consolidated basis. On
that date, Wisconsin Energy had $1.6 billion of available unused
lines of bank credit on a consolidated basis to support its
outstanding commercial paper and other short-term borrowings.
The following table shows Wisconsin Energy's consolidated
capitalization structure at June 30, 2001 and at
December 31, 2000:
Capitalization Structure June 30, 2001 December 31, 2000
- ------------------------ ------------- -----------------
(Millions of Dollars)
Common Equity $2,058.0 32.3% $2,016.8 31.4%
Preferred Stock 30.4 0.5% 30.4 0.5%
Trust Preferred Securities 200.0 3.1% 200.0 3.1%
Long-Term Debt (including
current maturities) 3,456.5 54.3% 2,788.1 43.4%
Short-Term Debt 627.2 9.8% 1,386.1 21.6%
-------- ----- -------- ------
Total $6,372.1 100.0% $6,421.4 100.0%
======== ===== ======== ======
Access to capital markets at a reasonable cost is determined in
large part by credit quality. The following table summarizes the
current ratings of the debt securities of Wisconsin Energy and
its subsidiaries by Standard & Poors Corporation ("S&P"), Moody's
Investors Service ("Moody's") and Fitch. Commercial paper of
WICOR Industries is unrated.
S & P Moody's Fitch
--------- --------- ---------
Wisconsin Energy Corporation
Commercial Paper A-1 P-1 F1
Unsecured Senior Debt A+ A2 A+
Wisconsin Electric Power Company
Commercial Paper A-1+ P-1 F1+
Secured Senior Debt AA- Aa2 AA
Unsecured Debt A+ Aa3 AA-
Preferred Stock A A2 AA-
Wisconsin Gas Company
Commercial Paper A-1+ P-1 F1+
Unsecured Senior Debt AA- Aa2 AA-
Wisconsin Energy Capital Corporation
Unsecured Debt A+ A2 A+
WEC Capital Trust I
Trust Preferred Securities A- A3 A
On July 27, 2001, Moody's assigned new ratings of `A2' for
Wisconsin Electric's Preferred Stock and `A3' for WEC Capital
Trust I Trust Preferred Securities as part of its global
recalibration of all issuer preferred stock to promote cross-
sector comparability.
S&P's current outlook for Wisconsin Energy and its subsidiaries
is negative while Fitch currently maintains a negative outlook
for Wisconsin Energy Corporation and for Wisconsin Energy Capital
Corporation. Fitch's outlook for Wisconsin Electric and
Wisconsin Gas is currently stable, while Moody's current outlook
for Wisconsin Energy and its subsidiaries is stable.
These ratings provide a significant degree of flexibility in
obtaining funds on competitive terms and reflect the views of the
rating agencies. An explanation of the significance of these
ratings may be obtained from each rating agency. Such ratings
are not a recommendation to buy, sell or hold securities, but
rather an indication of creditworthiness. Any rating can be
revised upward or downward or withdrawn at any time by a rating
agency if it decides that the circumstances warrant the change.
Each rating should be evaluated independently of any other
rating.
Capital Requirements
Capital requirements during the remainder of 2001 are expected to
be principally for capital expenditures; for long- and short-term
debt retirements, maturities and sinking fund requirements; for
payments to the Nuclear Decommissioning Trust Fund for the
eventual decommissioning of Point Beach; for the purchase of
nuclear fuel; and for repurchase of a portion of the outstanding
shares of the Company's common stock. Wisconsin Energy's total
consolidated capital expenditure budget for the remainder of 2001
is approximately $460 million. Assuming, among other factors,
planned asset sales during 2001, the Company expects its overall
debt levels to decline by approximately $150 million during the
second half of 2001 and its debt to total capital ratio to
decline to approximately 63% by the end of 2001 from 64% as of
June 30, 2001.
FACTORS AFFECTING RESULTS OF OPERATIONS
OUTLOOK
The following outlook includes forward-looking statements subject
to certain risks, uncertainties and assumptions. Actual results
may vary materially. Factors that could cause actual results to
differ materially include, but are not limited to: general
economic conditions; business, competitive and regulatory
conditions in the deregulating and consolidating energy industry,
in general, and in the Company's utility service territories;
availability of the Company's generating facilities; changes in
purchased power costs and supply availability; changes in coal or
natural gas prices and supply availability; unusual weather;
risks associated with non-utility diversification; regulatory
decisions; obtaining the necessary regulatory approvals and
investment capital to implement the "Power the Future" strategy;
the timing and extent of realization of anticipated synergy
benefits from the WICOR merger; disposition of legal proceedings;
and foreign governmental, economic, political and currency risk;
continuation of the common stock repurchase plan and other
factors referred to under "Cautionary Factors" below.
EARNINGS: In its 2000 Annual Report on Form 10-K, Wisconsin
Energy had projected that its 2001 earnings would be in the range
of $2.00 to $2.25 per diluted share. As previously reported, the
Company estimates that earnings were reduced by $0.07 per share
due to higher fuel expenses during 2001 not recovered in rates.
In addition, the softening economy has had an impact on utility
and manufacturing segment operating results. However, in spite
of these factors and subject to the many variables that could
affect such a projection, Wisconsin Energy continues to expect to
achieve earnings for 2001 in the range of $2.00 to $2.25 per
diluted share, although most likely in the lower end of this range. This
forecast assumes, among other factors, normal weather, the
achievement of merger savings, and continuation of the share
repurchase program for the remaining six months of 2001.
UTILITY RATES AND REGULATORY MATTERS
See Item 1, Legal Proceedings - "Utility Rates and Regulatory
Matters" in Part II of this report for information related to the
Company's fuel cost adjustment procedure.
ENVIRONMENTAL MATTERS
Air Quality
MERCURY EMISSION CONTROL RULEMAKING: As required by the 1990
amendments to the Federal Clean Air Act, the United States
Environmental Protection Agency ("EPA") issued a regulatory
determination in December 2000 that utility mercury emissions
should be regulated. The EPA will develop draft rules within the
next three years. In June 2001, the Wisconsin Department of
Natural Resources ("WDNR") independently developed draft mercury
emission control rules that would affect electric utilities in
Wisconsin. The draft rules call for 30%, 50% and 90% reductions
in mercury air emissions over 5, 10 and 15 years, respectively.
The draft rules also require offsets for new mercury-emitting
generating facilities. Wisconsin's draft rules are not expected
to be finalized before the end of 2001 and will likely be revised
before being finalized. The Company is currently unable to
predict the ultimate rules that will be developed and adopted by
the EPA or the WDNR, nor is it able to predict the impacts, if
any, that the EPA's and WDNR's mercury emission control
rulemakings might have on the operations of its existing or
potential coal-fired generating facilities.
MARKET RISKS
COMMODITY PRICE RISK: Wisconsin Gas has an established
commodity risk management program that has been approved by the
Public Service Commission of Wisconsin ("PSCW"). On July 12,
2001, an identical risk management program was approved by the
PSCW for the gas utility operations of Wisconsin Electric. These
programs allow the Company's gas utilities to utilize call and
put option contracts to reduce market risk associated with
fluctuations in the price of natural gas purchases and gas in
storage. Under these programs, Wisconsin Gas and Wisconsin
Electric have the ability to hedge up to 50% of their planned
flowing gas and storage inventory volumes. The cost of
applicable call and put option contracts, as well as gains or
losses realized under the contracts, do not affect net income as
they are fully recovered under the purchase gas adjustment
clauses of Wisconsin Gas and Wisconsin Electric gas cost recovery
mechanisms. In addition, under the Gas Cost Incentive Mechanism,
Wisconsin Gas and Wisconsin Electric use derivative financial
instruments to manage the cost of gas. The cost of these
financial instruments, as well as any gains or losses on the
contracts, are subject to sharing under the incentive mechanisms.
CAUTIONARY FACTORS
This report and other documents or oral presentations contain or
may contain forward-looking statements made by or on behalf of
Wisconsin Energy. Such statements are based upon management's
current expectations and are subject to risks and uncertainties
that could cause Wisconsin Energy's actual results to differ
materially from those contemplated in the statements. Readers
are cautioned not to place undue reliance on the forward-looking
statements. When used in written documents or oral
presentations, the terms "anticipate," "believe," "estimate,"
"expect," "objective," "plan," "possible," "potential," "project"
and similar expressions are intended to identify forward-looking
statements. In addition to the assumptions and other factors
referred to specifically in connection with such statements,
factors that could cause Wisconsin Energy's actual results to
differ materially from those contemplated in any forward-looking
statements include, among others, the following.
Operating, Financial and Industry Factors
* Factors affecting utility operations such as unusual weather
conditions; catastrophic weather-related damage; availability of
electric generating facilities; unscheduled generation outages,
or unplanned maintenance or repairs; unanticipated changes in
fossil fuel, nuclear fuel, purchased power, gas supply or water
supply costs or availability due to higher demand, shortages,
transportation problems or other developments; nonperformance by
electric energy or natural gas suppliers under existing power
purchase or gas supply contracts; nuclear or environmental
incidents; resolution of used nuclear fuel storage and disposal
issues; electric transmission or gas pipeline system constraints;
unanticipated organizational structure or key personnel changes;
collective bargaining agreements with union employees or work
stoppages; inflation rates; or demographic and economic factors
affecting utility service territories or operating environment.
* Regulatory factors such as unanticipated changes in rate-
setting policies or procedures; unanticipated changes in
regulatory accounting policies and practices; industry
restructuring initiatives; transmission system operation and/or
administration initiatives; recovery of costs of previous
investments made under traditional regulation; required approvals
for new construction; changes in the United States Nuclear
Regulatory Commission's regulations related to Point Beach
Nuclear Plant; changes in the United States Environmental
Protection Agency's regulations as well as regulations from the
Wisconsin or Michigan Departments of Natural Resources or the
state of Connecticut related to emissions from fossil-fueled
power plants such as carbon dioxide, sulfur dioxide, nitrogen
oxide, small particulates or mercury; or the siting approval
process for new generation and transmission facilities.
* The rapidly changing and increasingly competitive electric and
gas utility environment as market-based forces replace strict
industry regulation and other competitors enter the electric and
gas markets resulting in increased wholesale and retail
competition.
* Consolidation of the industry as a result of the combination
and acquisition of utilities in the Midwest, nationally
and globally.
* Restrictions imposed by various financing arrangements and
regulatory requirements on the ability of its subsidiaries to
transfer funds to Wisconsin Energy in the form of cash dividends,
loans or advances.
* Changes in social attitudes regarding the utility and power
industries.
* Customer business conditions including demand for their
products or services and supply of labor and material used in
creating their products and services.
* The cost and other effects of legal and administrative
proceedings, settlements, investigations and claims, and changes
in those matters, including the final outcome of the Giddings &
Lewis, Inc./City of West Allis lawsuit against Wisconsin Electric.
* Factors affecting the availability or cost of capital such as:
changes in interest rates; the Company's capitalization
structure; market perceptions of the utility industry, the
Company or any of its subsidiaries; or security ratings.
* Federal, state or local legislative factors such as changes in
tax laws or rates; changes in trade, monetary and fiscal
policies, laws and regulations; electric and gas industry
restructuring initiatives; or changes in environmental laws
and regulations.
* Authoritative generally accepted accounting principle or
policy changes, such as issuance of FAS 142 and FAS 143 during
the summer of 2001, from such standard setting bodies as the
Financial Accounting Standards Board and the Securities and
Exchange Commission.
* Unanticipated technological developments that result in
competitive disadvantages and create the potential for impairment
of existing assets.
* Possible risks associated with non-utility diversification,
such as: general economic conditions; competition; operating
risks; dependence upon certain suppliers and customers; the
cyclical nature of property values that could affect real estate
investments; unanticipated changes in environmental or energy
regulations; timely regulatory approval without onerous
conditions of potential acquisitions or divestitures, including
the pending sale of Wisvest's two power plants in the state of
Connecticut; risks associated with minority investments, where
there is a limited ability to control the development, management
or operation of the project; and the risk of higher interest
costs associated with potentially reduced securities ratings by
independent rating agencies as a result of these and
other factors.
* Legislative or regulatory restrictions or caps on non-utility
acquisitions, investments or projects, including the state of
Wisconsin's amended public utility holding company law.
* Factors affecting foreign non-utility operations and
investments, including: foreign governmental actions; foreign
economic and currency risks; political instability; and
unanticipated changes in foreign environmental or energy
regulations.
* Factors which impede execution of Wisconsin Energy's "Power
the Future" strategy announced in September 2000 and revised in
February 2001, including receipt of necessary state and federal
regulatory approvals and amendment of applicable laws in the
state of Wisconsin, and obtaining the investment capital from
outside sources necessary to implement the strategy.
* Other business or investment considerations that may be
disclosed from time to time in Wisconsin Energy's Securities and
Exchange Commission filings or in other publicly disseminated
written documents.
Business Combination Factors
* Unanticipated costs or difficulties related to the integration
of the businesses of Wisconsin Energy and WICOR.
* Unexpected difficulties or delays in realizing anticipated net
cost savings or unanticipated effects of the qualified five-year
electric and gas rate freeze ordered by the Public Service
Commission of Wisconsin as a condition of approval of the merger.
Wisconsin Energy undertakes no obligation to publicly update or
revise any forward-looking statements, whether as a result of new
information, future events or otherwise.
*****
For certain other information which may impact Wisconsin Energy's
future financial condition or results of operations, see Item 1,
Financial Statements - "Notes to Consolidated Condensed Financial
Statements," in Part I of this report as well as Item 1, Legal
Proceedings, in Part II of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT
MARKET RISK
For information concerning commodity price risks at Wisconsin
Energy Corporation, see Item 2, Management's Discussion and
Analysis of Financial Condition and Results of Operations -
"Factors Affecting Results of Operations," in Part I of this
report. For information concerning interest rate risks, see
Item 2, Management's Discussion and Analysis of Financial
Condition and Results of Operations - "Factors Affecting Results
of Operations," in Part II of Wisconsin Energy's Quarterly Report
on Form 10-Q for the period ended March 31, 2001. For
information concerning other market risk exposures, see Item 7,
Management's Discussion and Analysis of Financial Condition and
Results of Operations - "Factors Affecting Results of Operations -
Market Risks," in Part II of Wisconsin Energy's 2000 Annual
Report on Form 10-K.
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 2000 Annual Report
on Form 10-K and Item 1, Legal Proceedings, in Part II of
Wisconsin Energy's Quarterly Report on Form 10-Q for the period
ended March 31, 2001.
UTILITY RATES AND REGULATORY MATTERS
Wisconsin Retail Jurisdiction
FUEL COST ADJUSTMENT PROCEDURE: On June 4, 2001, the Wisconsin
Industrial Energy Group and the Citizens Utility Board petitioned
the Dane County Circuit Court for review of previously disclosed
decisions of the PSCW authorizing Wisconsin Electric to add a
surcharge to its electric rates to recover its expected 2001 fuel
costs. The first decision was issued on February 8, 2001 and
authorized an interim surcharge of $37.8 million on an annual
basis subject to refund pending issuance of a final order. On
May 3, 2001, the PSCW replaced the interim surcharge with a
final, authorized fuel surcharge of $58.7 million on an
annualized basis subject to refund if the revenues collected are
in excess of the fuel costs actually incurred or if they generate
excess earnings.
The petitioners allege that the PSCW made various material errors
of law and procedure as a result of which the Court should set
aside both the interim and final orders and remand the case to
the PSCW. The matter is pending. Wisconsin Electric intends to
vigorously defend the PSCW's orders and believes the Court will
affirm the PSCW's actions.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following Exhibits are filed with or incorporated by
reference in this Form 10-Q report:
Exhibit No.
-----------
10.1 Supplemental Pension Benefit agreement between
Wisconsin Energy Corporation and Stephen Dickson,
effective May 23, 2001.
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K dated as of May 31, 2001 was
filed by Wisconsin Energy on June 1, 2001 to report the sale
of certain non-utility energy segment assets.
A Current Report on Form 8-K dated as of June 4, 2001 was
filed by Wisconsin Energy on June 7, 2001 to report a lawsuit
filed against the PSCW challenging the PSCW's decisions
regarding interim and final rate increases authorizing
Wisconsin Electric to recover its expected 2001 fuel costs.
No other reports on Form 8-K were filed by Wisconsin Energy
during the quarter ended June 30, 2001.
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/PAUL DONOVAN
------------------------------------
Date: August 13, 2001 Paul Donovan, Senior Vice President,
Chief Financial Officer and duly
authorized officer
WISCONSIN ENERGY CORPORATION
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 2001
EXHIBIT INDEX
The following exhibits are filed with or incorporated by reference in
this report:
Exhibit No.
-----------
10.1 Supplemental Pension Benefit agreement between
Wisconsin Energy Corporation and Stephen Dickson,
effective May 23, 2001.