1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D. C. 20549
FORM 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1995
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
- ----- OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
------------- -------------
Commission file number 1-9057
WISCONSIN ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Wisconsin 39-1391525
(State or other jurisdiction of (I.R.S. Employer Identification No.)
incorporation or organization)
231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
(414) 221-2345
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No
--- ---
Indicate the number of shares outstanding of each of the issuer's classes
of common stock, as of the latest practicable date.
Class Outstanding at July 28, 1995
--------------------------- ----------------------------
$.01 Par Value Common Stock 109,936,834 Shares
2
FORM 10-Q
WISCONSIN ENERGY CORPORATION
PART I - FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
Three Months Ended Six Months Ended
June 30 June 30
------------------ ------------------
1995 1994 1995 1994
---- ---- ---- ----
(Thousands of Dollars)
Operating Revenues
Electric $347,277 $339,275 $691,196 $694,514
Gas 55,175 58,502 176,275 206,081
Steam 2,641 2,563 8,744 9,426
-------- -------- -------- --------
Total Operating Revenues 405,093 400,340 876,215 910,021
Operating Expenses
Fuel 71,611 71,485 139,430 143,961
Purchased power 8,130 10,040 27,206 21,634
Cost of gas sold 32,536 37,285 105,339 128,438
Other operation expenses 97,859 100,197 195,619 207,670
Maintenance 30,840 30,420 59,212 63,936
Revitalization - - - 73,900
Depreciation 45,436 43,350 90,148 87,389
Taxes other than income taxes 17,158 19,347 36,537 40,415
Federal income tax 23,376 21,414 53,011 44,157
State income tax 5,528 5,077 12,628 10,584
Deferred income taxes - net 1,530 (985) 1,906 (17,065)
Investment tax credit - net (1,759) (1,144) (2,241) (2,288)
-------- -------- -------- --------
Total Operating Expenses 332,245 336,486 718,795 802,731
Operating Income 72,848 63,854 157,420 107,290
Other Income and Deductions
Interest income 4,153 3,216 7,767 7,940
Allowance for other funds used
during construction 829 1,508 1,654 2,761
Miscellaneous - net 1,513 1,469 2,863 1,879
Income taxes 2 331 307 454
-------- -------- -------- --------
Total Other Income and Deductions 6,497 6,524 12,591 13,034
Income Before Interest Charges and Preferred
Dividend 79,345 70,378 170,011 120,324
Interest Charges
Interest expense 28,658 27,950 57,730 55,844
Allowance for borrowed funds used
during construction (1,209) (1,362) (2,450) (2,521)
-------- -------- -------- --------
Total Interest Charges 27,449 26,588 55,280 53,323
Preferred Dividend Requirement of
Subsidiary 301 360 602 749
-------- -------- -------- --------
Net Income $ 51,595 $ 43,430 $114,129 $ 66,252
======== ======== ======== ========
Average Shares Outstanding (Thousands) 109,569 107,808 109,352 107,525
Earnings Per Share of Common Stock $ 0.47 $ 0.40 $ 1.04 $ 0.62
======== ======== ======== ========
Dividends Per Share of Common Stock $ 0.3675 $ 0.3525 $ 0.72 $0.69125
======== ======== ======== ========
<FN>
See accompanying notes to consolidated financial statements.
- 2 -
3
WISCONSIN ENERGY CORPORATION FORM 10-Q
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
June 30, 1995 December 31, 1994
------------- -----------------
(Thousands of Dollars)
Assets
------
Utility Plant
Electric $4,473,238 $4,304,925
Gas 474,795 467,732
Steam 39,700 40,103
Accumulated provision for depreciation (2,222,972) (2,134,469)
---------- ----------
2,764,761 2,678,291
Construction work in progress 125,888 205,835
Nuclear fuel - net 56,873 56,606
---------- ----------
Net Utility Plant 2,947,522 2,940,732
Other Property and Investments 618,972 596,719
Current Assets
Cash and cash equivalents 14,424 8,976
Accounts receivable 124,606 114,657
Accrued utility revenues 98,360 128,107
Materials, supplies and fossil fuel 155,320 158,946
Prepayments and other assets 90,150 68,272
---------- ----------
Total Current Assets 482,860 478,958
Deferred Charges and Other Assets
Accumulated deferred income taxes 137,514 139,927
Other 254,176 251,923
---------- ----------
Total Deferred Charges and Other Assets 391,690 391,850
---------- ----------
Total Assets $4,441,044 $4,408,259
========== ==========
Capitalization and Liabilities
------------------------------
Capitalization
Common stock $ 649,879 $ 625,657
Retained earnings 1,154,373 1,118,909
---------- ----------
Total Common Stock Equity 1,804,252 1,744,566
Preferred stock - redemption not required 30,451 30,451
Long-term debt 1,253,148 1,283,686
---------- ----------
Total Capitalization 3,087,851 3,058,703
Current Liabilities
Long-term debt due currently 52,879 32,531
Short-term debt 240,821 252,055
Accounts payable 70,039 91,795
Accrued liabilities 61,433 68,234
Other 51,845 29,822
---------- ----------
Total Current Liabilities 477,017 474,437
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 480,367 475,541
Other 395,809 399,578
---------- ----------
Total Deferred Credits and Other Liabilities 876,176 875,119
---------- ----------
Total Capitalization and Liabilities $4,441,044 $4,408,259
========== ==========
<FN>
See accompanying notes to consolidated financial statements.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Six Months Ended June 30
------------------------
1995 1994
---- ----
(Thousands of Dollars)
Operating Activities:
Net income $114,129 $ 66,252
Reconciliation to cash:
Depreciation 90,148 87,389
Nuclear fuel expense - amortization 11,129 10,706
Conservation expense - amortization 10,554 11,942
Debt premium, discount & expense - amortization 6,029 7,352
Revitalization - net (5,447) 57,878
Deferred income taxes - net 1,906 (17,065)
Investment tax credit - net (2,241) (2,288)
Allowance for other funds used during construction (1,654) (2,761)
Change in: Accounts receivable (9,949) 3,040
Inventories 3,626 25,962
Accounts payable (21,756) (33,253)
Other current assets 7,869 11,364
Other current liabilities 15,222 21,071
Other 5,235 (7,021)
-------- --------
Cash Provided by Operating Activities 224,800 240,568
Investing Activities:
Construction expenditures (118,865) (117,425)
Allowance for borrowed funds used during construction (2,450) (2,521)
Nuclear fuel (12,627) (16,426)
Nuclear decommissioning trust (5,102) (5,080)
Conservation investments - net 2,312 (7,459)
Other (6,085) (19,464)
-------- --------
Cash Used in Investing Activities (142,817) (168,375)
Financing Activities:
Sale of common stock 24,215 28,800
Sale of long-term debt 11,960 20,369
Retirement of preferred stock - (5,250)
Retirement of long-term debt (22,818) (21,812)
Change in short-term debt (11,234) (18,413)
Dividends on stock - common (78,658) (74,264)
-------- --------
Cash Used in Financing Activities (76,535) (70,570)
-------- --------
Change in Cash and Cash Equivalents $ 5,448 $ 1,623
======== ========
Supplemental Information Disclosures:
Cash Paid for -
Interest (net of amount capitalized) $ 50,418 $ 46,403
Income taxes 82,965 79,012
<FN>
See accompanying notes to consolidated financial statements.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
--------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. The accompanying unaudited consolidated financial statements should be
read in conjunction with the company's 1994 Annual Report on Form 10-K.
In the opinion of management, all adjustments, normal and recurring in
nature, necessary to a fair statement of the results of operations and
financial position of the company have been included in the accompanying
income statement and balance sheet. The results of operations for the
three months and the six months ended June 30, 1995 are not, however,
necessarily indicative of the results which may be expected for the year
1995 because of seasonal and other factors.
2. On April 28, 1995, Wisconsin Energy Corporation ("WEC") and Northern
States Power Company, Minnesota ("NSP") entered into an Agreement and Plan
of Merger, which was amended and restated as of July 26, 1995 ("Merger
Agreement"). The Merger Agreement provides for a strategic business
combination involving NSP and WEC in a "merger-of-equals" transaction. As
a result, a registered utility holding company, which will be known as
Primergy Corporation ("Primergy"), will be the parent of NSP and the
current operating subsidiaries of NSP and WEC. The business combination
is intended to be tax-free for income tax purposes and to be accounted for
as a "pooling of interests".
The Merger Agreement is subject to various conditions, including approval
of the stockholders of WEC and NSP and the approval of various regulatory
agencies. On July 10, 1995 WEC and NSP filed an application and
supporting testimony with the Federal Energy Regulatory Commission seeking
approval of the proposed merger. Similar filings will be made later this
year with regulatory agencies in states where WEC and NSP provide utility
services. The Merger Agreement and certain related matters will be
submitted to shareholders of WEC and NSP for their consideration at
meetings scheduled for September 13, 1995. WEC and NSP anticipate
completing this business combination late in 1996. ITEM 5. OTHER
INFORMATION in Part II of this report contains further information
concerning the proposed transaction and provides pro forma combined
condensed financial information for Primergy.
3. WEC intends to merge its gas utility subsidiary, Wisconsin Natural Gas
Company, into its electric utility subsidiary, Wisconsin Electric Power
Company to form a single combined utility subsidiary. All required
regulatory approvals for the merger have been received. Completion of the
planned merger is expected to occur by January 1, 1996.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Wisconsin Energy Corporation ("Wisconsin Energy" or "WEC") has entered into an
agreement with Northern States Power Company ("NSP") which provides for a
strategic business combination involving the two companies in a "merger-of-
equals" transaction. Further information concerning such agreement and
proposed transaction and pro forma financial information with respect thereto
is included in ITEM 5. OTHER INFORMATION in Part II of this report.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by Wisconsin Energy's consolidated operating activities totaled
$225 million during the six months ended June 30, 1995. This compares to $241
million provided during the same period in 1994.
Wisconsin Energy's consolidated investing activities totaled $143 million for
the six months ended June 30, 1995 compared to $168 million during the same
period in 1994. Investments during the first half of 1995 include $119
million for the construction of new or improved facilities, $13 million for
acquisition of nuclear fuel, and $5 million for payments to an external trust
for the eventual decommissioning of Wisconsin Electric Power Company's
("Wisconsin Electric") Point Beach Nuclear Plant.
Capital requirements for the remainder of 1995 are expected to be principally
for construction expenditures, purchase of nuclear fuel, and payments to the
external trust for the eventual decommissioning of the Point Beach Nuclear
Plant. Depending upon market conditions, Wisconsin Electric, the principal
utility subsidiary of Wisconsin Energy, may refund some issues of its current
debt and issue approximately $100 million of additional long-term debt in a
public offering later in 1995. The specific form, amount and timing of debt
securities which may be issued have not yet been determined and will depend,
to a large extent, on market conditions.
Beginning June 1, 1992, Wisconsin Energy began issuing new shares of common
stock through the company's stock plans. Previously, shares required for
these plans were purchased on the open market. From January 1, 1995 to June
30, 1995, cash investments and reinvested dividends aggregating $24.2 million
were used to purchase 876,935 new issue shares.
RESULTS OF OPERATIONS
Second Quarter Results:
Net Income increased 18.8% or by approximately $8.2 million during the second
quarter of 1995 compared to the same period during 1994.
Total revenues increased 1.2% during the second quarter of 1995 compared to
the second quarter of 1994. Electric revenues increased 2.4%. Primarily due
to warm weather in June 1995, total electric retail revenues increased 3.5% in
these comparative periods. In the second quarter of 1995, gas revenues
decreased 5.7% from the same period in 1994. However, gas margins (operating
revenue less cost of gas sold) increased 6.7% in these comparative periods as
a result of an increase in gas deliveries.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
RESULTS OF OPERATIONS - Cont'd
With the additional peaking capacity at the Paris Generating Station, the need
for firm purchase power contracts was eliminated, resulting in a decrease of
19% in purchased power expenses between the three months ended June 30, 1995
and 1994. For the same periods, other operation and maintenance expenses also
decreased 1.5%.
The annualized $16,179,000 or 1.3% Wisconsin retail electric fuel adjustment
rate decrease that became effective on August 4, 1994 for Wisconsin Electric
customers remains effective in 1995.
ELECTRIC SALES
Three Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 1,609,772 1,472,750 9.3
Small Commercial and Industrial 1,702,127 1,661,575 2.4
Large Commercial and Industrial 2,644,998 2,611,826 1.3
Other 376,125 396,838 (5.2)
---------- ----------
Total Retail and Municipal 6,333,022 6,142,989 3.1
Resale-Utilities 240,058 408,691 (41.3)
---------- ----------
Total Sales 6,573,080 6,551,680 0.3
- -------------------------------
Total electric kilowatt-hour sales during the second quarter of 1995 were flat
compared to 1994. As measured by cooling degree days, the month of June 1995
was 6% warmer than June 1994, helping to push residential electric kilowatt-
hour sales 9.3% higher in the second quarter of 1995 compared to the same
period in 1994.
Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin
Electric's two largest customers, decreased 2.4% during the quarter ended
June 30, 1995 compared to the same period during 1994. Excluding the mines,
total electric sales increased 0.6% and sales to the remaining large
commercial and industrial customers increased 2.3% during the second quarter
of 1995 compared to the same period in 1994.
GAS DELIVERIES
Three Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 49,845 42,982 16.0
Commercial and Industrial 30,652 28,495 7.6
Interruptible 11,900 10,612 12.1
---------- ----------
Total Sales 92,397 82,089 12.6
Transported Customer Owned Gas 59,967 55,365 8.3
---------- ----------
Total Gas Delivered 152,364 137,454 10.8
- -------------------------------
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
GAS DELIVERIES - Cont'd
Natural gas therm deliveries during the second quarter of 1995 increased
10.8%, primarily due to cooler weather. As measured by heating degree days,
the second quarter of 1995 weather was 4.9% cooler compared to the same period
in 1994.
SOURCES OF NATURAL GAS
Wisconsin Natural Gas Company ("Wisconsin Natural") purchases gas for
injection into storage for future withdrawal during the heating season under
various arrangements with gas storage facilities. At June 30, 1995, the cost
of natural gas stored for future use was $18.1 million, representing a $6.4
million decrease from the cost of natural gas stored at June 30, 1994. Gas
stored at these facilities is purchased by Wisconsin Natural from a number of
suppliers.
For additional information regarding matters pertaining to gas operations,
refer to ITEM 1. BUSINESS - GAS UTILITY OPERATIONS in PART I of Wisconsin
Energy's Annual Report on Form 10-K for the year ended December 31, 1994.
Year-to-Date Results:
Net Income increased 72% or by approximately $47.9 million during the six
months ended June 30, 1995 compared to the same period in 1994, reflecting a
non-recurring charge in the first quarter of 1994 of approximately $45 million
(net of tax) associated with Wisconsin Electric's and Wisconsin Natural's
restructuring program. This charge included the cost of severance and early
retirement packages, elements of a "revitalization" program designed to better
position Wisconsin Electric and Wisconsin Natural in a changing market place.
It is anticipated that this charge will be offset by the end of 1995 through
savings in operation and maintenance costs.
Excluding the non-recurring charge in 1994, net income increased approximately
$2.9 million during the six month period ended June 30, 1995 compared to the
same period during 1994.
During the first six months of 1995 compared to the first six months of 1994,
total revenues decreased 3.7%. Electric revenues were down 0.5% as a result
of lower total electric energy sales. Gas revenues decreased 14.5% and gas
margins (operating revenues less cost of gas sold) were down 8.6% as a result
of lower natural gas deliveries.
Because of unscheduled outages during the first quarter of 1995 at two of
Wisconsin Electric's most efficient power plants, Pleasant Prairie Power Plant
and Point Beach Nuclear Plant, Wisconsin Electric purchased replacement energy
on the spot market, resulting in increased purchased power costs of 25.8%
during the six months ended June 30, 1995 compared to 1994. This was
partially offset by a 3.1% decrease in fuel expenses between these same two
periods such that total costs for fuel and purchased power was up only 0.6%.
In the first six months of 1995, other operation and maintenance expenses
decreased 6.2% compared to the first six months of 1994, reflecting among
other things, the effects of the company's "revitalization" program.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART I - FINANCIAL INFORMATION (Cont'd)
ELECTRIC SALES
Six Months Ended June 30
---------------------------
Electric Sales - Megawatt Hours 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 3,299,128 3,268,195 0.9
Small Commercial and Industrial 3,416,854 3,319,361 2.9
Large Commercial and Industrial 5,187,352 5,074,258 2.2
Other 757,035 836,259 (9.5)
---------- ----------
Total Retail and Municipal 12,660,369 12,498,073 1.3
Resale-Utilities 442,190 800,149 (44.7)
---------- ----------
Total Sales 13,102,559 13,298,222 (1.5)
- -------------------------------
Total electric kilowatt-hour sales during the first six months of 1995
declined 1.5% compared to 1994 primarily to lower sales to other utilities.
Retail electric sales increased 2% during the period.
Electric energy sales to the Empire and Tilden iron ore mines decreased 1.6%
during the six months ended June 30, 1995 compared to the same period during
1994. Excluding the mines, total electric sales decreased 1.5% but sales to
the remaining large commercial and industrial customers increased 3.3% during
the six months ended June 30, 1995 compared to the same period during 1994.
GAS DELIVERIES
Six Months Ended June 30
---------------------------
Therms Delivered - Thousands 1995 1994 % Change
- ------------------------------- ---------- ---------- --------
Residential 195,048 210,651 (7.4)
Commercial and Industrial 120,978 126,385 (4.3)
Interruptible 25,999 27,590 (5.8)
---------- ----------
Total Sales 342,025 364,626 (6.2)
Transported Customer Owned Gas 141,834 124,628 13.8
---------- ----------
Total Gas Delivered 483,859 489,254 (1.1)
- -------------------------------
Natural gas therm deliveries during the first six months of 1995 also
decreased primarily due to mild weather in the first quarter of 1995. As
measured by heating degree days, the first quarter of 1995 was 14.7% warmer
compared to the same period in 1994. The warmer winter weather reduced
residential and commercial sales which have higher margins. Interruptible and
transportation deliveries combined showed an increase over the same period.
However, the margin on these deliveries is lower than for residential and
commercial customers.
For certain other information which may impact Wisconsin Energy's future
financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS
and ITEM 5. OTHER INFORMATION in Part II.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The following information should be read in conjunction with ITEM 3. LEGAL
PROCEEDINGS in PART I of Wisconsin Energy's Annual Report on Form 10-K for the
year ended December 31, 1994 and ITEM 1. LEGAL PROCEEDINGS in PART II of
Wisconsin Energy's Quarterly Report on Form 10-Q for the quarter ended
March 31, 1995.
RATE MATTERS
Wisconsin Retail Electric and Steam Jurisdictions
1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural
sent a letter to the Public Service Commission of Wisconsin ("PSCW") proposing
a one year deferral of their scheduled rate case filing. On May 1, 1995,
Wisconsin Electric and Wisconsin Natural filed with the PSCW required data
related to the 1996 test year. This was an abbreviated filing since no
increase in rates was requested. The Citizens Utility Board ("CUB") filed a
petition seeking a reduction in rates of $100 million and a hearing on the
companies' request for a freeze on rates in 1996. Other parties filed in
support of CUB's petition. The companies are opposing the petition. The PSCW
staff has reviewed the companies' data and has developed a preliminary
recommendation for an electric rate decrease of between 2% and 3%, a gas rate
decrease of approximately 2.5%, and a steam rate decrease of about 5%. The
PSCW staff recommendation is based upon a regulatory return on equity of
11.3%. This matter is expected to come before the PSCW in mid-August or
September 1995. Any change in rates would likely not take effect until after
January 1, 1996.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Wisconsin Energy's 1995 Annual Meeting of Stockholders held on May 17,
1995, all of the board of directors' nominees named below were elected as
directors of the class whose term expires in 1998 by the indicated votes cast
for and withheld with respect to each nominee. There was no solicitation in
opposition to the nominees proposed in the proxy statement and there were no
abstentions or broker non-votes with respect to the election of directors.
Name of Nominee For Withheld
--------------------- ---------- ----------
Robert A. Cornog 87,069,522 2,151,111
Richard R. Grigg, Jr. 87,063,256 2,157,376
Frederick P. Stratton, Jr. 87,137,447 2,083,186
The appointment of Price Waterhouse LLP as independent public accountant for
1995 was approved by the stockholders by a vote of 87,815,612 votes for and
810,472 votes against such approval. There were no abstentions and no broker
non-votes with respect to such approval.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS - Cont'd
Three additional proposals, including two stockholder proposals, were
presented to the meeting for a vote. The results of the voting of such
proposals are as follows:
Broker
Proposal For Against Abstain Non-Votes
- -------------------------- ---------- ---------- --------- ----------
Approve Amendment and
Restatement of WEC's Restated
Articles of Incorporation 65,491,666 11,691,369 1,354,262 10,683,335
Stockholder Proposal #1
To Declassify the
Board of Directors 23,661,578 52,578,704 2,297,015 10,683,335
Stockholder Proposal #2
To Amend the Bylaws to
Prohibit Certain Individuals
From Serving as a WEC
Director 9,239,670 66,305,795 2,991,832 10,683,335
Further information concerning these matters, including the complete text of
the proposals presented for a vote and the name of each other director whose
term of office as a director continued after the meeting to expire in 1996 or
1997, is contained in Wisconsin Energy's Proxy Statement dated April 10, 1995
with respect to the 1995 Annual Meeting of Stockholders.
ITEM 5. OTHER INFORMATION
PARIS GENERATING STATION
In June 1995, two units, or approximately 150 megawatts of peaking capacity,
were placed in-service marking the completion of the new Paris Generating
Station. Previously in March 1995, two units, or another approximately 150
megawatts of peaking capacity, were placed in-service at this facility.
Capital expenditures associated with the four units at this facility total
approximately $105 million. The 300 megawatt natural gas-fired combustion
turbine facility, located near Union Grove, Wisconsin is expected to run less
than 500 hours per year, helping meet electric peak demand requirements.
RECORD ELECTRIC PEAK DEMAND
On July 31, 1995, Wisconsin Electric reached a new all-time electric peak
demand of 5,368 megawatts, during a period of unusually hot and humid weather.
The previous record peak demand prior to the summer of 1995 of 4,950 megawatts
was set on June 14, 1994.
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FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
PURCHASED GAS ADJUSTMENT MECHANISM
On June 30, 1995, Wisconsin Natural filed with the PSCW a proposal to replace
the current Purchased Gas Adjustment ("PGA") mechanism with a new market-based
pricing mechanism. The proposed gas pricing mechanism would link gas
commodity prices to market indices and incorporate all other gas supply costs
such as transportation and storage, under a price cap. The price cap would be
designed to provide balanced financial incentives and risks for Wisconsin
Natural based on performance standards, while ensuring a reliable gas supply
for consumers. On July 25, 1995, the PSCW decided to analyze and review this
proposal as part of a generic PGA docket that will review alternatives for gas
cost recovery. The matter is pending.
MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY
On April 28, 1995, WEC entered into an Agreement and Plan of Merger with NSP
which provides for a strategic business combination involving the two
companies in a "merger-of-equals" transaction, as previously reported in WEC's
Current Report on Form 8-K dated as of April 28, 1995 and in its Quarterly
Report on Form 10-Q for the quarter ended March 31, 1995 ("WEC's
3/31/95 10-Q"). The Agreement and Plan of Merger was amended and restated as
of July 26, 1995 to make certain nonsubstantive changes. The Amended and
Restated Agreement and Plan of Merger, dated as of April 28, 1995, as amended
and restated as of July 26, 1995, is referred to herein as the "Merger
Agreement." Further information concerning such agreement and proposed
transaction is included in ITEM 1. FINANCIAL STATEMENTS, Notes to Financial
Statements, in Part I of this report, and detailed information with respect
thereto will be included in the Joint Proxy Statement/Prospectus which will be
sent to shareholders of NSP and WEC in connection with their respective
shareholder meetings to vote on the Merger Agreement and certain related
matters.
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION
The following unaudited pro forma financial information combines the
historical consolidated balance sheets and statements of income of Wisconsin
Energy and NSP after giving effect to the proposed business combination
transaction ("Transaction") to form Primergy Corporation ("Primergy"). This
pro forma financial information updates through the second quarter of 1995 pro
forma financial information included in ITEM 5. OTHER INFORMATION in Part II
of WEC's 3/31/95 10-Q. (WEC's 3/31/95 10-Q also contains unaudited pro forma
combined condensed statements of income of Primergy for each of the three
years in the period ended December 31, 1994, which are not repeated herein.)
The unaudited pro forma combined condensed balance sheet at June 30, 1995
gives effect to the Transaction as if it had occurred at June 30, 1995. The
unaudited pro forma combined condensed statements of income for the six months
ended June 30, 1995 and 1994 and the twelve months ended June 30, 1995, give
effect to the Transaction as if it had occurred at January 1, 1994. These
statements are prepared on the basis of accounting for the Transaction as a
pooling of interests and are based on the assumptions set forth in the notes
thereto.
- 12 -
13
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (Cont'd)
The Wisconsin Energy income statement for the six months ended June 30, 1994
includes a significant one-time pretax charge of $73.9 million for
revitalization costs recorded in the first quarter of 1994. To provide a more
representative recent twelve-month period summarizing combined operating
results, a pro forma combined condensed statement of income for the twelve
months ended June 30, 1995 is also presented.
The following pro forma financial information has been prepared from, and
should be read in conjunction with, the historical consolidated financial
statements and related notes thereto of Wisconsin Energy and NSP. The
following information is not necessarily indicative of the financial position
or operating results that would have occurred had the Transaction been
consummated on the date, or at the beginning of the periods, for which the
Transaction is being given effect nor is it necessarily indicative of future
operating results or financial position.
- 13 -
14
PRIMERGY CORPORATION FORM 10-Q
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
JUNE 30, 1995
(In thousands)
NSP WEC Pro Forma Pro Forma
Pro Forma Balance Sheet (As Reported) (As Reported) Adjustments Combined
------------------------------------------ -------------- -------------- -------------- --------------
Assets
Utility Plant
Electric $ 6,456,240 $ 4,598,068 $ - $ 11,054,308
Gas 687,963 475,853 - 1,163,816
Other 287,969 39,700 - 327,669
------------- ------------- ------------- -------------
Total 7,432,172 5,113,621 - 12,545,793
Accumulated provision for depreciation (3,258,535) (2,222,972) - (5,481,507)
Nuclear fuel - net 86,016 56,873 - 142,889
------------- ------------- ------------- -------------
Net Utility Plant 4,259,653 2,947,522 - 7,207,175
Current Assets
Cash and cash equivalents 58,371 14,424 - 72,795
Accounts receivable - net 289,612 124,606 - 414,218
Accrued utility revenues 93,545 98,360 - 191,905
Fossil fuel inventories 41,836 84,466 - 126,302
Material & supplies inventories 105,379 70,854 - 176,233
Prepayments and other 50,083 90,150 - 140,233
------------- ------------- ------------- -------------
Total Current Assets 638,826 482,860 - 1,121,686
Other Assets
Regulatory Assets 357,328 287,654 - 644,982
External decommissioning fund 173,881 253,657 - 427,538
Investments in non-regulated projects
and other investments 266,021 116,746 - 382,767
Non-regulated property - net 177,398 101,457 - 278,855
Intangible assets and other (Note 4) 130,772 251,148 (137,514) 244,406
------------- ------------- ------------- -------------
Total Other Assets 1,105,400 1,010,662 (137,514) 1,978,548
------------- ------------- ------------- -------------
Total Assets $ 6,003,879 $ 4,441,044 $ (137,514) $ 10,307,409
============= ============= ============= =============
Liabilities and Equity
Capitalization
Common stock equity:
Common stock (Note 1) $ 168,767 $ 1,098 $ (167,669) $ 2,196
Other stockholders' equity (Note 1) 1,774,940 1,803,154 167,669 3,745,763
------------- ------------- ------------- -------------
Total Common Stock Equity 1,943,707 1,804,252 - 3,747,959
Cumulative preferred stock and premium 240,469 30,451 - 270,920
Long-term debt 1,465,599 1,253,148 - 2,718,747
------------- ------------- ------------- -------------
Total Capitalization 3,649,775 3,087,851 - 6,737,626
Current Liabilities
Current portion of long-term debt 168,324 52,879 - 221,203
Short-term debt 309,929 240,821 - 550,750
Accounts payable 181,631 70,039 - 251,670
Taxes accrued 145,761 10,104 - 155,865
Other accrued liabilities 136,424 103,174 - 239,598
------------- ------------- ------------- -------------
Total Current Liabilities 942,069 477,017 - 1,419,086
Other Liabilities
Deferred income taxes (Note 4) 856,503 480,367 (137,514) 1,199,356
Deferred investment tax credits 168,599 91,913 - 260,512
Regulatory liabilities 214,495 167,638 - 382,133
Other liabilities and deferred credits 172,438 136,258 - 308,696
------------- ------------- ------------- -------------
Total Other Liabilities 1,412,035 876,176 (137,514) 2,150,697
------------- ------------- ------------- -------------
Total Capitalization and Liabilities $ 6,003,879 $ 4,441,044 $ (137,514) $ 10,307,409
============= ============= ============= =============
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 14 -
15
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
6 MONTHS ENDED JUNE 30, 1995
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
Utility Operating Revenues
Electric $1,016,931 $ 691,196 $ - $1,708,127
Gas 233,909 176,275 - 410,184
Steam - 8,744 - 8,744
---------- ---------- ---------- ----------
Total Operating Revenues 1,250,840 876,215 - 2,127,055
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 284,148 166,636 - 450,784
Cost of Gas Sold & Transported 139,613 105,339 - 244,952
Other Operation 261,621 195,619 - 457,240
Maintenance 81,025 59,212 - 140,237
Depreciation and Amortization 143,899 90,148 - 234,047
Taxes Other Than Income Taxes 124,352 36,537 - 160,889
Revitalization Charges - - - -
Income Taxes 60,322 65,304 - 125,626
---------- ---------- ---------- ----------
Total Operating Expenses 1,094,980 718,795 - 1,813,775
---------- ---------- ---------- ----------
Utility Operating Income 155,860 157,420 - 313,280
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 18,470 - - 18,470
Other Income and Deductions - Net 15,696 12,591 - 28,287
---------- ---------- ---------- ----------
Total Other Income (Expense) 34,166 12,591 - 46,757
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 190,026 170,011 - 360,037
Interest Charges 62,024 55,280 - 117,304
Preferred Dividends of Subsidiaries 6,327 602 - 6,929
---------- ---------- ---------- ----------
Net Income $ 121,675 $ 114,129 $ - $ 235,804
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 67,107 109,352 42,009 218,468
Earnings Per Common Share $ 1.81 $ 1.04 $ 1.08
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 15 -
16
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
6 MONTHS ENDED JUNE 30, 1994
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
Utility Operating Revenues
Electric $1,007,382 $ 694,514 $ - $1,701,896
Gas 258,044 206,081 - 464,125
Steam - 9,426 - 9,426
---------- ---------- ---------- ----------
Total Operating Revenues 1,265,426 910,021 - 2,175,447
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 284,767 165,595 - 450,362
Cost of Gas Sold & Transported 163,631 128,438 - 292,069
Other Operation 259,068 207,670 - 466,738
Maintenance 81,913 63,936 - 145,849
Depreciation and Amortization 135,711 87,389 - 223,100
Taxes Other Than Income Taxes 118,376 40,415 - 158,791
Revitalization Charges - 73,900 - 73,900
Income Taxes 70,638 35,388 - 106,026
---------- ---------- ---------- ----------
Total Operating Expenses 1,114,104 802,731 - 1,916,835
---------- ---------- ---------- ----------
Utility Operating Income 151,322 107,290 - 258,612
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 12,757 - - 12,757
Other Income and Deductions - Net 3,435 13,034 - 16,469
---------- ---------- ---------- ----------
Total Other Income (Expense) 16,192 13,034 - 29,226
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 167,514 120,324 - 287,838
Interest Charges 48,911 53,323 - 102,234
Preferred Dividends of Subsidiaries 6,113 749 - 6,862
---------- ---------- ---------- ----------
Net Income $ 112,490 $ 66,252 $ - $ 178,742
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 66,765 107,525 41,795 216,085
Earnings Per Common Share $ 1.68 $ 0.62 $ 0.83
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 16 -
17
FORM 10-Q
PRIMERGY CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME
12 MONTHS ENDED JUNE 30, 1995
(In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma
(As Reported) (As Reported) Adjustments Combined
----------- ----------- ----------- ------------
Utility Operating Revenues
Electric $2,076,194 $1,400,244 $ - $3,476,438
Gas 395,768 294,543 - 690,311
Steam - 13,599 - 13,599
---------- ---------- ---------- ----------
Total Operating Revenues 2,471,962 1,708,386 - 4,180,348
Utility Operating Expenses
Electric Production-Fuel and Purchased Power 570,257 329,526 - 899,783
Cost of Gas Sold & Transported 239,425 176,412 - 415,837
Other Operation 538,725 386,960 - 925,685
Maintenance 169,257 119,878 - 289,135
Depreciation and Amortization 281,990 180,373 - 462,363
Taxes Other Than Income Taxes 240,540 72,157 - 312,697
Revitalization Charges - - - -
Income Taxes 118,912 129,677 - 248,589
---------- ---------- ---------- ----------
Total Operating Expenses 2,159,106 1,394,983 - 3,554,089
---------- ---------- ---------- ----------
Utility Operating Income 312,856 313,403 - 626,259
Other Income (Expense)
Equity Earnings of Unconsolidated Investees 41,576 - - 41,576
Other Income and Deductions - Net 18,770 26,522 - 45,292
---------- ---------- ---------- ----------
Total Other Income (Expense) 60,346 26,522 - 86,868
---------- ---------- ---------- ----------
Income Before Interest Charges
and Preferred Dividends 373,202 339,925 - 713,127
Interest Charges 120,328 109,976 - 230,304
Preferred Dividends of Subsidiaries 12,578 1,204 - 13,782
---------- ---------- ---------- ----------
Net Income $ 240,296 $ 228,745 $ - $ 469,041
========== ========== ========== ==========
Average Common Shares Outstanding (Note 1) 67,004 108,931 41,945 217,880
Earnings Per Common Share $ 3.59 $ 2.10 $ 2.15
========== ========== ==========
<FN>
See accompanying notes to pro forma combined condensed financial statements.
- 17 -
18
FORM 10-Q
PRIMERGY CORPORATION
------------------------------------------
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. The pro forma combined condensed financial statements reflect the
conversion of each share of NSP Common Stock ($2.50 par value) outstanding
into 1.626 shares of Primergy Common Stock ($.01 par value) and the
continuation of each share of WEC Common Stock ($.01 par value)
outstanding as one share of Primergy Common Stock, as provided in the
Merger Agreement. The pro forma combined condensed financial statements
are presented as if the companies were combined during all periods
included therein.
2. The allocation between NSP and WEC and their customers of the estimated
cost savings resulting from the Transaction, net of the costs incurred to
achieve such savings, will be subject to regulatory review and approval.
Transaction costs are currently estimated to be approximately $30 million
(including fees for financial advisors, attorneys, accountants,
consultants, filings and printing). None of these estimated cost savings,
the costs to achieve such savings, or the transaction costs have been
reflected in the pro forma combined condensed financial statements.
3. Intercompany transactions (including purchased and exchanged power
transactions) between NSP and WEC during the periods presented were not
material and, accordingly, no pro forma adjustments were made to
eliminate such transactions.
4. A pro forma adjustment has been made to conform the presentation of
noncurrent deferred income taxes in the pro forma combined condensed
balance sheet into one net amount. All other financial statement
presentation and accounting policy differences are immaterial and have not
been adjusted in the pro forma combined condensed financial statements.
- 18 -
19
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
PART II - OTHER INFORMATION (Cont'd)
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits. The following Exhibits are filed with this report:
Exhibit No.
(3)-1 Restated Articles of Incorporation of Wisconsin Energy
Corporation, as amended and restated effective June 12, 1995.
(10)-1 Supplemental Benefits Agreement between Wisconsin Energy
Corporation and Richard A. Abdoo dated November 21, 1994, and
April 26, 1995 letter amendment.
(10)-2 Supplemental Executive Retirement Plan of Wisconsin Energy
Corporation, as amended April 26, 1995.
(10)-3 WEC Senior Executive Severance Policy, as adopted effective
April 28, 1995 and amended on July 26, 1995.
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057; certain other related documents were also filed as
exhibits to such report.) (The Amended and Restated Merger
Agreement, dated as of April 28, 1995, as amended and restated
as of July 26, 1995, will be filed as an exhibit to Wisconsin
Energy Corporation's Registration Statement on Form S-4 to be
filed for the registration under the Securities Act of 1933 of
the securities to be issued pursuant to the Amended and
Restated Merger Agreement.)
(99)-1 Primergy Corporation unaudited pro forma combined condensed
statements of income for each of the three years in the period
ended December 31, 1994. (Included in Wisconsin Energy's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.)
(b) Reports on Form 8-K:
A Current Report on Form 8-K, dated as of April 28, 1995, was filed on
May 3, 1995 with respect to the Agreement and Plan of Merger, dated as
of April 28, 1995, by and among Northern States Power Company, Wisconsin
Energy Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
- 19 -
20
FORM 10-Q
WISCONSIN ENERGY CORPORATION
------------------------------
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
--------------------------------------
(Registrant)
/s/ R. A. Abdoo
--------------------------------------
Date: August 3, 1995 R. A. Abdoo, Chairman of the Board,
President and Chief Executive
Officer
/s/ J. G. Remmel
--------------------------------------
Date: August 3, 1995 J. G. Remmel, Vice President
and Treasurer - Principal
Financial Officer
- 20 -
21
Wisconsin Energy Corporation
EXHIBIT INDEX
-------------
Form 10-Q for Quarter ended 6/30/95
Exhibit
Number
-------
The following Exhibits are filed with this report:
(3)-1 Restated Articles of Incorporation of Wisconsin Energy
Corporation, as amended and restated effective June 12, 1995.
(10)-1 Supplemental Benefits Agreement between Wisconsin Energy
Corporation and Richard A. Abdoo dated November 21, 1994, and
April 26, 1995 letter amendment.
(10)-2 Supplemental Executive Retirement Plan of Wisconsin Energy
Corporation, as amended April 26, 1995.
(10)-3 WEC Senior Executive Severance Policy, as adopted effective
April 28, 1995 and amended on July 26, 1995.
(27)-1 Wisconsin Energy Corporation Financial Data Schedule for the
six months ended June 30, 1995.
The following Exhibits are incorporated herein by reference:
(2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by
and among Northern States Power Company, Wisconsin Energy
Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp.
(Exhibit (2)-1 to Wisconsin Energy Corporation's Current
Report on Form 8-K dated as of April 28, 1995, File No.
1-9057.) (The Amended and Restated Merger Agreement, dated as
of April 28, 1995, as amended and restated as of July 26,
1995, will be filed as an exhibit to Wisconsin Energy
Corporation's Registration Statement on Form S-4 to be filed
for the registration under the Securities Act of 1933 of the
securities to be issued pursuant to the Amended and Restated
Merger Agreement.)
(99)-1 Primergy Corporation unaudited pro forma combined condensed
statements of income for each of the three years in the period
ended December 31, 1994. (Included in Wisconsin Energy's
Quarterly Report on Form 10-Q for the quarter ended March 31,
1995.)
- 21 -