1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/ X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1994
OR
/ / TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7951
WICOR, Inc.
(Exact name of registrant as specified in its charter)
Wisconsin 39-1346701
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, Wisconsin 53201
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 414-291-7026
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value New York Stock Exchange
Associated Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
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. X Yes No.
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. / X /
Aggregate market value of the voting stock held by non-affiliates of the
registrant:
$474,178,432 at February 28, 1995.
Number of shares outstanding of each of the registrant's classes of common
stock, as of February 28, 1995:
Common Stock, $1 par value 16,934,944 shares
Documents Incorporated by Reference:
WICOR, Inc. proxy statement dated March 10, 1995 (Part III)
WICOR, Inc. 1994 Annual Report to Shareholders (Parts I and II)
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TABLE OF CONTENTS
PAGE
PART I . 1
Item 1. Business 1
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
1. Retail Distribution of Natural Gas 1
A. General 1
B. Gas Markets and Competition 1
C. Gas Supply and Pipeline Capacity 3
(1) General 3
(2) Pipeline Capacity 4
(3) Term Gas Supply 4
(4) Spot Market Gas Supply 4
D. Wisconsin Regulatory Matters
(1) Rate Matters 5
(2) Transition Cost Recovery Policy 5
(3) Service Area Expansion 5
(4) Changing Regulatory Environment 5
E. Employees 5
2. Manufacturing and Sale of Pumps and Water
Processing Equipment 6
A. General 6
B. U.S. Operations 6
C. International Operations 6
D. Raw Materials and Patents 7
E. Employees 7
Item 2. Properties 7
(a) Capital Expenditures 7
(b) Retail Distribution of Natural Gas 7
(c) Manufacturing of Pumps and Water Processing
Equipment 7
Item 3. Legal Proceedings 7
Item 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
PART II 10
Item 5. Market for Registrant's Common Equity and Related
Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis
of Results of Operations and
Financial Condition 11
3
TABLE OF CONTENTS (continued)
PAGE
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 11
PART III 11
Item 10. Directors and Executive Officers of
the Registrant 11
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain
Beneficial Owners and Management 12
Item 13. Certain Relationships and Related
Transactions 12
PART IV 12
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 12
(a) Documents Filed as Part of the Report 12
1. All Financial Statements and Financial
Statement Schedules 12
2. Financial Statement Schedules 12
3. Exhibits 12
(b) Reports on Form 8-K 15
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PART I
Item 1. BUSINESS
(a) General Development of Business
WICOR, Inc. (the "Company" or "WICOR") is a diversified holding company
with two principal businesses: natural gas distribution and manufacturing and
sale of pumps and water processing equipment. Wisconsin Gas Company ("Wisconsin
Gas") engages in retail distribution of natural gas. Sta-Rite Industries, Inc.
("Sta-Rite") and SHURflo Pump Manufacturing Co. ("SHURflo") are manufacturers
of pumps and water processing equipment. The Company is a Wisconsin corporation
and maintains its principal executive offices in Milwaukee, Wisconsin.
The Company was incorporated in 1980 at which time it acquired all the
outstanding common stock of Wisconsin Gas through a merger. The Company
acquired all of the outstanding common stock of Sta-Rite through a merger in
1982.
In July 1993, the Company acquired all of the outstanding stock of SHURflo
through a merger. SHURflo is a manufacturer of small pumps for the food
service, recreational vehicle, marine, industrial and water purifications
markets.
In November 1993, Sta-Rite acquired Dega Research Pty, a Melbourne,
Australia-based manufacturer of pumps, filters and accessories for the pool and
spa market. This acquisition made Sta-Rite the largest pool and spa equipment
company in Australia, which is the second largest market in the world for these
products.
At December 31, 1994, the Company (including subsidiaries) had 3,214 full-
time equivalent employees.
(b) Financial Information About Industry Segments
Reference is made to the section entitled "Financial Review-General
Overview" set forth in the Company's 1994 Annual Report to Shareholders. Such
section is included in Exhibit 13 hereto and is hereby incorporated herein by
reference.
(c) Narrative Description of Business
1. RETAIL DISTRIBUTION OF NATURAL GAS
A. General
Wisconsin Gas is the largest natural gas distribution public utility in
Wisconsin, where all of its business is conducted. At December 31, 1994,
Wisconsin Gas distributed gas to approximately 495,000 residential, commercial
and industrial customers in 496 communities throughout Wisconsin having an
estimated population of 1,458,000 based on the State of Wisconsin's estimates
for 1994. Wisconsin Gas is subject to the jurisdiction of the Public Service
Commission of Wisconsin ("PSCW") as to various phases of its operations,
including rates, service and issuance of securities. See "Wisconsin Rate and
Regulatory Matters."
B. Gas Markets and Competition
Wisconsin Gas' business is highly seasonal, particularly as to residential
and commercial sales for space heating purposes, with a substantial portion of
its sales occurring in the winter heating season. Competition in varying
degrees exists between natural gas and other forms of energy available to
consumers. Most of Wisconsin Gas' large commercial and industrial customers
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are dual-fuel customers that are equipped to switch between natural gas and
alternate fuels. Wisconsin Gas offers transportation services for these
customers to enable them to reduce their energy costs and use gas rather than
other fuels. Under gas transportation agreements, customers seek to purchase
lower-priced spot market gas directly from producers or other sellers and
arrange with pipelines and Wisconsin Gas to have the gas transported to their
facilities. Wisconsin Gas actively assists customers in buying gas, arranging
transportation, and managing other aspects of acquisition, transportation and
use of gas. Wisconsin Gas also offers gas sales services that are priced to
compete with these transportation services. Wisconsin Gas earns the same margin
(difference between revenue and cost of gas), whether it sells gas to customers
or transports customer-owned gas.
The following table sets forth the volumes of natural gas delivered by
Wisconsin Gas to its customers.
Year Ended Year Ended
December 31, 1994 December 31, 1993
-------------------- --------------------
Thousands Thousands
Customer Class of therms* Percent of therms* Percent
--------------------------- ---------- ------- ---------- -------
Residential 463,690 38.8 479,640 39.8
Commercial 185,980 15.5 190,600 15.8
Large Volume Commercial and
Industrial Firm 145,440 12.2 152,460 12.7
Commercial and Industrial
Interruptible 282,170 23.6 208,490 17.3
Transported 119,080 9.9 174,080 14.4
---------- ------- ---------- -------
Total Gas Purchased and
Transported 1,196,360 100.0 1,205,270 100.0
========== ======= ========== =======
*One therm equals 100,000 BTU's.
The volumes shown as transported represent customer-owned gas that was
delivered by Wisconsin Gas to its customers. The remaining volumes represent
quantities sold to customers by Wisconsin Gas.
Wisconsin Gas has taken certain steps in recent years to enable it to
compete in an increasingly competitive gas industry. Wisconsin Gas has
instituted a service options program which provides customers an array of sales,
transportation and related services from which they can choose. The service
options program also assists Wisconsin Gas in establishing the peak day and
annual gas requirements that Wisconsin Gas is obligated to supply. The service
options program provides customers with a choice of services that they can
select to meet their needs while defining Wisconsin Gas' obligation to obtain
and sell gas to customers.
In 1993, Wisconsin Gas introduced a gas supply management service aimed at
its larger customers. Under this service, Wisconsin Gas manages the customer's
gas supply. Gas management service customers are freed from the
responsibilities imposed by Federal regulation of dealing with one or more gas
suppliers, an interstate pipeline and a utility on a daily basis to order the
precise gas supply and capacity necessary to meet their varying daily gas
requirements. See "Wisconsin Regulatory Matters - Gas Supply and Pipeline
Capacity."
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In 1994, Wisconsin Gas became the first utility in the country to offer its
large customers the option of locked or capped pricing. Under the locked
pricing option, Wisconsin Gas will sell gas at an agreed fixed unit price for
a specified period of time, such as a year. Under the capped pricing option,
Wisconsin Gas will sell gas at a price not to exceed an agreed unit price.
These pricing options enable large customers to budget their gas costs more
precisely and also assist Wisconsin Gas in retaining large customers.
The PSCW has instituted a proceeding to consider how its regulation of gas
distribution utilities should change to reflect the changing competitive
environment in the gas industry. See "Wisconsin Regulatory Matters."
In 1994, Wisconsin Gas added more than 10,000 customers. See "Wisconsin
Regulatory Matters - Service Area Expansion".
Up to 25% of Wisconsin Gas' Milwaukee area annual market requirements can
be supplied through the interstate pipelines of either ANR Pipeline Company
("ANR") or Northern Natural Gas Company ("NNG"). This capability enhances
competition between ANR and NNG for services to Wisconsin Gas and its customers,
and Wisconsin Gas believes that such competition provides overall lower gas
costs to all customers than otherwise would exist.
Wisconsin Gas' future ability to maintain its present share of the
industrial dual-fuel market (the market that has installed capability to use gas
or other fuels) depends upon Wisconsin Gas' success in obtaining long-term and
short-term supplies of natural gas at marketable prices and its success in
arranging or facilitating transportation service for those customers that desire
to buy their own gas supplies. Although the dual-fuel market comprises
approximately 33% of Wisconsin Gas' annual deliveries, it contributes only about
12% of Wisconsin Gas' margin.
C. Gas Supply and Pipeline Capacity
(1) General
Prior to the Federal Energy Regulatory Commission's ("FERC") Order No. 636,
the interstate pipelines serving Wisconsin Gas were the primary suppliers of
natural gas to Wisconsin Gas. During the transition period prior to the
implementation of Order No. 636, Wisconsin Gas gradually assumed responsibility
for the acquisition of supply in the production areas of North America, as well
as the management of transportation and storage capacities to deliver that
supply to its market area. On November 1, 1993, Wisconsin Gas commenced full
operation and responsibility for its supply and capacity under the requirements
of Order No. 636.
One of the provisions of Order No. 636 is capacity release. Capacity
release creates a secondary market for pipeline capacity and gas supplies.
Local distribution companies, such as Wisconsin Gas, must contract for capacity
and supply sufficient to meet the peak day firm demand of their customers. Peak
or near peak days occur only a few times each year, so capacity release
facilitates higher utilization of capacity during those times when the capacity
is not needed by the utility. Through pre-arranged agreements and day-to-day
electronic bulletin board postings, interested parties can purchase that
capacity. The proceeds from these transactions are passed-through to
ratepayers, thereby helping to offset the costs associated with holding the
capacity. During 1994, Wisconsin Gas was an active participant in the capacity
release market.
During 1993-94, the first year of operating under Order No. 636, Wisconsin
Gas Company was able to meet its contractual obligations with both its suppliers
and its customers despite unseasonably cold weather in January and February 1994
and unseasonably warm weather in November and December 1994.
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The following table sets forth the volumes of natural gas purchased by
Wisconsin Gas and the volumes transported for customers.
Year Ended Year Ended
December 31, 1994 December 31, 1993
-------------------- --------------------
Thousands Thousands
Natural Gas Purchased of Therms* Percent of Therms* Percent
------------------------- ---------- ------- ---------- -------
ANR 0 0.0 467,544 38.8
NNG 0 0.0 20,348 1.7
Viking 0 0.0 11,917 1.0
Term contracts
(in excess of 30 days) 980,170 81.9 398,197 33.0
Spot Market 97,110 8.1 133,184 11.1
---------- ------- ---------- -------
Total Gas Purchased 1,077,280 90.0 1,031,190 85.6
Customer Gas Transported 119,080 10.0 174,080 14.4
---------- ------- ---------- -------
Total Gas Purchased
and Transported 1,196,360 100.0 1,205,270 100.0
========== ======= ========== =======
*One therm equals 100,000 BTU's.
Wisconsin Gas purchased no gas from ANR, NNG and Viking in 1994 because
Order No. 636 prohibits pipelines from selling gas as they did historically.
(2) Pipeline Capacity
Interstate pipelines serving Wisconsin originate in three major gas
producing areas of North America: the Oklahoma and Texas basins, the Gulf of
Mexico and western Canada. Wisconsin Gas has contracted for long-term firm
capacity on a relatively equal basis from each of these areas. This strategy
reflects management's belief that overall supply security is enhanced by
geographic diversification of Wisconsin Gas' supply portfolio and that Canada
represents an important long-term source of reliable, competitively priced gas.
Because of the seasonal variations in gas usage in Wisconsin, Wisconsin Gas
has also contracted with ANR and NNG for substantial underground storage
capacity, primarily in Michigan. There are no known underground storage
formations in Wisconsin capable of commercialization. Storage enables Wisconsin
Gas to optimize its overall gas supply and capacity costs. In summer, gas in
excess of market demand is transported into the storage fields, and in winter,
gas is withdrawn from storage and combined with gas purchased in or near the
production areas ("flowing gas") to meet the increased winter market demand. As
a result, Wisconsin Gas can contract for less pipeline capacity than would
otherwise be necessary, and it can purchase gas on a more uniform daily basis
from suppliers year-round. Each of these capabilities enables Wisconsin Gas to
reduce its overall costs.
Wisconsin Gas' firm winter daily transportation and storage capacity
entitlements from pipelines under long-term contracts are set forth
below.
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Maximum Daily
(Thousands
Pipeline of Therms*)
------------------ -------------
ANR
Mainline 2,999
Storage 4,879
NNG
Mainline 1,077
Storage 150
Viking
Mainline 64
Peaking Facilities 54
-------------
Total 9,223
=============
*One therm equals 100,000 BTU's.
(3) Term Gas Supply
Wisconsin Gas has term firm contracts (initial terms in excess of 30 days)
with approximately 30 gas suppliers for gas produced in each of the three
producing areas discussed above. The term contracts have varying durations so
that only a portion of Wisconsin Gas' gas supply expires in any year. Wisconsin
Gas believes the volume of gas under contract is sufficient to meet its
forecasted firm peak day demand. The following table sets forth Wisconsin Gas'
winter season maximum daily firm total gas supply.
Maximum Daily
(Thousands
of Therms*)
-------------
Domestic flowing gas 2,387
Canadian flowing gas 1,396
Storage withdrawals 5,029
-------------
Total 8,812
=============
*One therm equals 100,000 BTU's.
(4) Spot Market Gas Supply
Wisconsin Gas expects to continue to make gas purchases in the 30-day spot
market as price and other circumstances dictate. Wisconsin Gas has purchased
spot market gas since 1985 and has supply relationships with a number of sellers
from whom it purchases spot gas.
D. Wisconsin Regulatory Matters
(1) Rate Matters
Wisconsin Gas is subject to the jurisdiction of the PSCW as to various
phases of its operations, including rates, customer service and issuance of
securities.
In July 1993, Wisconsin Gas submitted an incentive rate making proposal to
the PSCW. The PSC significantly modified Wisconsin Gas' proposal in its
November 1994 rate order. Under the PSCW rate order, Wisconsin Gas' rates are
subject to a three year margin rate cap (through October 1997) based on the
rates approved in November 1993. The PSCW order also specified margin rate
floors for each rate class. Wisconsin Gas has the ability to raise or lower
margin rates within the specified range on a quarterly basis. The rates at
December 31, 1994 were at the top of the range. In addition, the PSCW
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order required Wisconsin Gas to reduce its rates by $10.1 million, on an
annual basis, to reflect a reduction in certain non-cash expenses. Over a
twelve month period, beginning with the effective date of the order, this rate
reduction will result in no net income impact, but will reduce cash flow. The
rate order was effective November 14, 1994.
Wisconsin Gas' rates contain clauses providing for periodic adjustment,
with PSCW approval, to reflect changes in purchased gas costs including the
recovery of transition costs passed through by pipeline suppliers. See
"Wisconsin Rate Matters - Transition Cost Recovery Policy".
(2) Transition Cost Recovery Policy
Under Order No. 636, interstate pipelines are permitted to recover certain
costs incurred in the transition from the bundled sales service to the unbundled
Order No. 636 regime. ANR and NNG have filed to recover transition costs. ANR
and NNG may file in the future to recover additional transition costs, and
Wisconsin Gas will bear a portion of such additional costs approved by the
FERC. The PSCW has permitted Wisconsin Gas to recover transition costs from
customers through its rates.
In the judgment of management, the incurrence of these transition costs
will have no material effect on Wisconsin Gas' operations or financial condition
under current PSCW policy. See Note 7 to Notes to Consolidated Financial
Statements contained in Exhibit 13, the Company's 1994 Annual Report to
Shareholders, which note is hereby incorporated herein by reference.
(3) Service Area Expansion
In recent years, Wisconsin Gas has increased its efforts to obtain
regulatory approvals to extend gas service to previously unserved communities.
In 1994, Wisconsin Gas extended service to nine new communities and added 10,000
customers. Over the last four years, Wisconsin Gas has extended service to 99
new communities and added 42,000 customers.
(4) Changing Regulatory Environment
The PSCW has instituted a proceeding to consider how its regulation of gas
distribution utilities should change to reflect the changing competitive
environment in the gas industry. To date, the PSCW has made a policy decision
to deregulate gas costs for customer segments with workably competitive market
choices. The PSCW has identified numerous issues which must be resolved before
its policy can be implemented. A generic proceeding has been instituted during
which these issues will be aired and decided. Hearings are scheduled to begin
in January 1996, with the expectation that the new regulatory framework will be
implemented by the end of 1996. The Company is unable to determine what impact
this proceeding may have on Wisconsin Gas' operations or financial position.
E. Employees
At December 31, 1994, Wisconsin Gas had 1,166 full-time equivalent active
employees.
2. MANUFACTURING AND SALE OF PUMPS AND
WATER PROCESSING EQUIPMENT
A. General
The Company's manufacturing subsidiaries manufacture and sell pumps and
water processing equipment used to pump, control and filter water, and positive
displacement pumps and other accessories used for fluid handling in a wide array
of specialized applications and markets. Manufacturing and assembly activities
are conducted in plants in the United States, United Kingdom, Germany, Italy,
Australia, New Zealand and Russia.
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B. U.S. Operations
Water products include jet, centrifugal, sump, submersible and submersible
turbine water pumps, water storage and pressure tanks, filters, and pump and
tank systems. These products pump, filter and store water used for drinking,
cooking, washing and livestock watering, and are used in private and public
swimming pools, spas, "hot tubs", jetted bathtubs, and fountains. The
manufacturing businesses also produce large higher pressure and capacity water
pumps used in agricultural and turf irrigation systems and in a wide variety of
commercial, industrial and municipal fluids-handling applications.
Small, high performance pumps, and related fluids-handling products, are
used in four primary markets: (1) the food service industry, where gas operated
pumps are used for pumping soft drinks made from syrups, and electric motor
driven pumps are used for water boost and drink dispensing; (2) the recreational
vehicle and marine markets, where electric motor driven pumps are used for a
variety of applications including pumping potable water in travel trailers,
motor homes, camping trailers and boats, and for other applications including
marine wash down, bilge and live well pumping; (3) industrial markets, where
applications are concentrated in the soil extraction market for use in carpet
cleaning machines, agricultural markets for spraying agricultural pesticides and
fertilizers, and general industrial applications requiring fluid handling; and
(4) the water purification industry, where electric motor driven pumps are used
to pressurize reverse osmosis systems and for water transfer.
Sales of pumps and water processing equipment are somewhat related to the
seasons of the year as well as the level of activity in the housing construction
industry and are sensitive to weather, interest rates, discretionary income, and
leisure and recreation spending. The markets for most water and industrial
products are highly competitive, with price, service and product performance all
being important competitive factors. The Company believes it is a leading pro-
ducer of pumps for private water systems and swimming pools and spas and for the
food service and recreational vehicle markets. The Company's centrifugal pumps
command a major share of the agricultural and irrigation centrifugal market.
The Company also ranks among the larger producers of pool and spa filters and
submersible turbine pumps. Major brand names include "STA-RITE", "BERKELEY",
"SHURflo", "FLOTEC", "AQUALITY" and "AQUA TOOLS".
Domestic pumps and water products are sold and serviced primarily through
a network of independent distributors, dealers, retailers and manufacturers'
representatives serving the well drilling, hardware, plumbing, pump installing,
irrigation, pool and spa, food service, recreational vehicle, marine, industrial
and do-it-yourself markets. Sales are also made on a private brand basis to
large customers in all water products markets and to original equipment
manufacturers.
Backlog of orders for pumps and water products is not a significant
indicator of future sales.
C. International Operations
International operations are conducted primarily by international
subsidiaries and export operations from the United States. Products are sold
to markets in approximately 110 countries on six continents. Foreign manufac-
turing of products from imported and locally manufactured components is carried
out by United Kingdom, German, Australian, New Zealand, Italian, and Russian
subsidiaries. The products sold in the international markets are similar to
those sold in the United States, but in many instances have distinct features
required for those markets. Product distribution channels are similar to those
for domestic markets. Non-domestic sales, including exports, were 37% of 1994
manufacturing sales.
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D. Raw Materials and Patents
Raw materials essential to the manufacturing operations are available from
various established sources in the United States and overseas. The principal
raw materials needed for production of the Company's primary lines of products
include cast iron, aluminum and bronze castings for pumps; copper and aluminum
wire for motors; stainless and carbon sheet steel, bar steel and tubing; plastic
resins for injection molded components; and powdered metal components. The
manufacturing units also purchase from third party suppliers completely
assembled electric motors, plastic molded parts, elastomers for valves and
diaphragms, components for electric motors, stamped and die cast metal parts,
and hardware and electrical components. Although the manufacturing subsidiaries
own a number of patents and hold licenses for manufacturing rights under other
patents, no one patent or group of patents is critical to the success of the
manufacturing businesses as a whole.
E. Employees
At December 31, 1994, the manufacturing businesses had 2,048 full time
equivalent active employees.
Item 2. PROPERTIES
(a) Capital Expenditures
The Company's capital expenditures for the year ended December 31, 1994,
totaled $55.1 million. Retirements during this period totaled $10.1 million.
Except as discussed in "Legal Proceedings", the Company does not expect to make
any material capital expenditures for environmental control facilities in 1995.
(b) Retail Distribution of Natural Gas
Wisconsin Gas owns a distribution system which, on December 31, 1994,
included approximately 8,100 miles of distribution and transmission mains,
407,000 services and 498,000 active meters. Wisconsin Gas' distribution system
consists almost entirely of plastic and coated steel pipe. Wisconsin Gas also
owns its main office building in Milwaukee, office buildings in certain other
communities in which it serves, gas regulating and metering stations, peaking
facilities and its major service centers, including garage and warehouse
facilities.
The Milwaukee and other office buildings, the principal service facilities
and the gas distribution systems of Wisconsin Gas are owned by it in fee subject
to the lien of its Indenture of Mortgage and Deed of Trust, dated as of
November 1, 1950, under which its first mortgage bonds are issued, and to
permissible encumbrances as therein defined. Where distribution mains and
services occupy private property, Wisconsin Gas in some, but not all, instances
has obtained consents, permits or easements for such installations from the
apparent owners or those in possession, generally without an examination of
title.
(c) Manufacturing of Pumps and Water Processing Equipment
The manufacturing businesses have 11 manufacturing facilities located in
California (2), Nebraska, Wisconsin (2), Germany, Australia (2), Italy, New
Zealand and Russia. These plants contain a total of approximately 1,408,000
square feet of floor space. These businesses also own or lease seven
sales/distribution facilities in the United States, six in Australia, two each
in England and France, and one each in Canada, Mexico, New Zealand and Singa-
pore.
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Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than ordinary
routine litigation incidental to the Company's businesses, to which the Company
or any of its subsidiaries is a party, except as discussed below. There are no
material legal proceedings to which any officer or director of the Company or
any of its subsidiaries is a party or has a material interest adverse to the
Company. There are no material administrative or judicial proceedings arising
under environmental quality or civil rights statutes pending or known to be
contemplated by governmental agencies to which the Company or any of its
subsidiaries is or would be a party.
Sta-Rite has entered into a contract with the Wisconsin Department of
Natural Resources ("WDNR") to perform and complete the Remedial
Investigation/Feasibility Study and Remedial Design/Remedial Action phases of
the Federal Superfund environmental process for the Delavan, Wisconsin Municipal
Well No. 4, which is located close to one of Sta-Rite's facilities. In 1990 and
1991, Sta-Rite provided reserves to cover the estimated costs under the
contract. No additions to reserves were required since 1991. Although
management believes the amounts reserved will be adequate to effect any
necessary restoration, there is a possibility that additional costs may be
incurred.
In separate lawsuits filed on April 18, 1994, the State of California and
two environmental groups sued Sta-Rite and other submersible pump manufacturers
claiming violation of the California's Health and Safety Code (Proposition 65).
The lawsuits allege certain pumps under certain conditions leach lead into the
ground water, resulting in lead levels in drinking water in violation of
Proposition 65. The lawsuits seek, among other remedies, injunctive relief and
unspecified monetary penalties. Based upon information supplied to it by the
environmental groups, the U.S. Environmental Protection Agency advised all
owners of certain new submersible well pumps to have their water tested. Based
upon its own testing and information currently available, including information
from several state agencies, Sta-Rite has established reserves believed to be
adequate with respect to these actions and intends to vigorously defend against
the claims made. Although management believes the amounts reserved will be
adequate to cover any costs, there is a possibility that additional costs may
be incurred in the future.
In July 1994, Sta-Rite was notified by the WDNR that it believed solvents
used at a manufacturing site previously operated by Sta-Rite have migrated and
contributed to the contamination of a Deerfield, Wisconsin municipal well,
serving Deerfield residents, and surrounding property. Based upon the
preliminary investigation and reserves established, the Company believes that
the resolution of this matter will not have a material adverse effect upon its
financial condition. However, there is a possibility that costs in excess of
the amount reserved may be incurred in the future.
A lawsuit brought in 1993 by Waste Management of Wisconsin, Inc. against
Sta-Rite and other generators for cleanup costs relating to a landfill near Sta-
Rite's former Deerfield location was resolved in 1994 within the reserves
established.
Sta-Rite is also involved in environmental matters with respect to certain
other sites. The Company has established accruals for all presently known and
quantifiable environmental contingencies relating to these sites in accordance
with generally accepted accounting principles. In establishing these accruals,
management considered (a) reports of environmental consultants retained by Sta-
Rite, (b) the costs incurred to date by Sta-Rite at sites where clean-up is
presently ongoing and the estimated costs to complete the necessary restoration
work remaining at such sites, (c) the financial solvency, where appropriate, of
other parties that have been responsible for restoration at specified sites,
and (d) the experience of other parties who have been involved in the
restoration
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of comparable sites. The accruals recorded by the Company with respect to the
foregoing environmental matters have not been reduced by potential insurance or
other recoveries and are not discounted. Based on the foregoing and given
current information, management believes that future costs in excess of the
amounts accrued on all presently known and quantifiable environmental
contingencies will not be material to the Company's financial position or
results of operations. With respect to several other sites in which Sta-Rite
may have environmental liability, management is currently conducting
investigation to determine the scope, if any, of Sta-Rite's potential liability
regarding the restoration of such sites and the estimated costs of the
restoration. As a result of the preliminary nature of the investigations, no
reasonable estimate can be given regarding the costs, if any, that Sta-Rite may
incur with respect to these sites. Wisconsin Gas has identified two previously
owned sites on which it operated manufactured gas plants that are of
environmental concern. Such plants ceased operations prior to the mid-1950's.
Wisconsin Gas has engaged an environmental consultant to help determine the
nature and extent of the contamination at these sites. Based on the test
results obtained and the possible restoration alternatives available, the
Company has estimated that cleanup costs could range from $22 million to $75
million. As of December 31, 1994, the Company has accrued $37.2 million for
cleanup costs in addition to $4.0 million of costs already incurred. These
estimates are based on current undiscounted costs. It should also be noted that
the numerous assumptions such as the type and extent of contamination, available
restoration techniques, and regulatory requirements which are used in developing
these estimates are subject to change as new information becomes available. Any
such changes in assumptions could have a significant impact on the potential
liability.
The WDNR issued a Potentially Responsible Party letter to Wisconsin Gas for
these two sites in September 1994. Following receipt of this letter, Wisconsin
Gas and WDNR held an initial meeting to discuss the sites. At the meeting it
was agreed that Wisconsin Gas would prepare a remedial action options report
from which it will select specific restoration actions for recommendation to the
WDNR. This information will be prepared in 1995. Barring unforeseen delays,
expenditures by Wisconsin Gas on restoration work could commence as early as
1995 and will increase in future years as plan approvals are obtained.
Expenditures over the next several years are expected to total approximately $20
million. Although most of the work and costs are expected to be incurred in the
first several years of the plan, monitoring of sites and other necessary actions
may be undertaken for up to 30 years.
In February 1994, Wisconsin Gas commenced suit against nine insurance
carriers seeking a declaratory judgment regarding insurance coverage for the two
sites. Settlements were reached with each of the carriers during 1994. If the
amount recovered from the insurance carriers is insufficient to remediate both
sites, expenditures not recovered will be allowed full recovery (other than for
carrying costs) in rates based upon recent PSCW orders. Accordingly, the
accrual for future restoration costs has been deferred as a regulatory asset.
Certain related investigation costs incurred to date are currently being
recovered in utility rates.
Wisconsin Gas also owns a service center that is constructed on a site that
was previously owned by the City of Milwaukee and was used by the City as a
public dump site. Wisconsin Gas has conducted a site assessment at the request
of the WDNR and has sent the report of its assessment to the WDNR. Management
cannot predict whether or not the WDNR will require any restoration action, nor
the extent or cost of any restoration actions that may be required. In the
judgment of management, any restoration costs incurred by Wisconsin Gas will be
recoverable from the City of Milwaukee or in Wisconsin Gas' rates pursuant to
the PSCW's orders discussed above.
See Note 7 to Notes to Consolidated Financial Statements contained in
Exhibit 13, the Company's 1994 Annual Report to Shareholders, which note is
hereby incorporated herein by reference.
14
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth
quarter of 1994.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names and ages of, and the offices held by,
the executive officers of the Company. The officers serve one-year terms
commencing with their election at the meeting of the Board of Directors
following the annual meeting of shareholders in April.
Name Age Offices Held
------------------- --- ----------------------
George E. Wardeberg 59 President and Chief
Executive Officer of the
Company, and Chairman of
Wisconsin Gas, Sta-Rite
and SHURflo
Thomas F. Schrader 45 Vice President of the
Company and President and
Chief Executive Officer of
Wisconsin Gas
James C. Donnelly 49 Vice President of the
Company and President and
Chief Executive Officer of
Sta-Rite
Joseph P. Wenzler 53 Vice President, Treasurer
and Chief Financial
Officer of the Company;
Vice President and Chief
Financial Officer of
Wisconsin Gas; and
Treasurer and Secretary of
SHURflo
Robert A. Nuernberg 54 Secretary of the Company
and Vice President-
Corporate Relations and
Secretary of Wisconsin Gas
Each of the executive officers has held his position for more than five
years, except as follows:
Mr. Wardeberg was elected to his current positions effective February 1,
1994. Prior thereto, he was President and Chief Operating Officer of the
Company and Vice Chairman and Chief Executive Officer of Sta-Rite from 1992
to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and
Vice President-Water Systems of Sta-Rite from 1989 to 1992. Prior thereto,
he was Vice Chairman and Chief Operating Officer of Whirlpool Corporation.
Mr. Donnelly was elected President and Chief Executive Officer of Sta-
Rite in 1994. He has been a Vice President of the Company since 1987.
Previously, he served as President and Chief Operating Officer of Sta-Rite
from 1992 to 1994, and as Vice President, Treasurer and Chief Financial
Officer of the Company and Wisconsin Gas from 1990 to 1992. Mr. Donnelly
joined the Company and Wisconsin Gas in 1987 as Vice President and Treasurer.
Prior thereto, he served as Vice President-Finance of Eastern Gas and Fuel
Associates.
15
Mr. Wenzler was elected Vice President, Treasurer and Chief Financial
Officer of the Company and Vice President and Chief Financial Officer of
Wisconsin Gas in 1992 and as Treasurer and Secretary of SHURflo in 1993.
Prior thereto, he served as Vice President of the Company and President and
Chief Executive Officer of Sta-Rite from 1990 to 1992, and President and
Chief Operating Officer of Sta-Rite from 1986 to 1990.
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock and the associated common stock purchase
rights (which do not currently trade independently of the common stock) are
traded on the New York Stock Exchange. For information regarding the high
and low sales prices for the Company's common stock and dividends paid per
share in each quarter of 1994 and 1993, see the section entitled "Investor
Information" set forth in the Company's 1994 Annual Report to Share-
holders. Such section is included in Exhibit 13 hereto and is
hereby incorporated herein by reference.
At December 31, 1994, there were 16,517 holders of record of WICOR
common stock.
The Company's ability to pay dividends is dependent to a great extent on
the ability of its subsidiaries to pay dividends. The Wisconsin Business
Corporation Law and the indentures and agreements under which debt of the
Company and its subsidiaries is outstanding each contain certain restrictions
on the payment of dividends on common stock by the Company's subsidiaries.
See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit
13, the Company's Annual Report to Shareholders, which note is hereby
incorporated herein by reference.
By order of the PSCW, Wisconsin Gas is generally permitted to pay
dividends up to the amount projected in its rate case. Wisconsin Gas may pay
dividends in excess of the projected dividend amount so long as payment will
not cause its equity ratio to fall below 48.43%. If payment of projected
dividends would cause its common equity ratio to fall below 43% of total
capitalization (including short-term debt), or if payment of additional
dividends would cause its common equity ratio to fall below 48.43%, Wisconsin
Gas must obtain PSCW approval to pay such dividends. Wisconsin Gas has
projected the payment of $16 million of dividends to the Company during the
12 months ending October 31, 1995. See Note 6 of Notes to Consolidated
Financial Statements contained in Exhibit 13, the Company's 1994 Annual
Report to Shareholders, which note is hereby incorporated herein by
reference. The PSCW desires Wisconsin Gas to target its common equity level
at 43% to 50% of total capitalization. For the year ended December 31, 1994,
Wisconsin Gas' average common equity level was 48.82%.
In addition, $8.5 million of Sta-Rite net assets at December 31, 1994,
plus 50% of Sta-Rite future earnings, are available for dividends to the
Company. See Note 6 of Notes to Consolidated Financial Statements contained
in Exhibit 13, the Company's 1994 Annual Report to Shareholders, which note
is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the section entitled "Selected Financial Data" set
forth in the Company's 1994 Annual Report to Shareholders. Such section is
included in Exhibit 13 hereto and is hereby incorporated herein by
reference.
16
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Reference is made to the section entitled "Financial Review" set forth
in the Company's 1994 Annual Report to Shareholders. Such section is
included in Exhibit 13 hereto and is hereby incorporated herein by reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the WICOR, Inc. consolidated balance sheets and
consolidated statements of capitalization as of December 31, 1994 and 1993,
and the related consolidated statements of income, common equity and cash
flow for each of the three years in the period ended December 31, 1994,
together with the report of independent public accountants dated February 2,
1995, all appearing in Exhibit 13, the Company's 1994 Annual Report to
Shareholders, which is hereby incorporated herein by reference.
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in or disagreement with the Company's
independent auditors on any matter of accounting principles or practices or
financial statement disclosure required to be reported pursuant to this item.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to "Item No. 1: Election of Directors" included in
the WICOR proxy statement dated March 10, 1995, which is hereby incorporated
herein by reference, for the names, ages, business experience and other
information regarding directors and nominees for director of the Company.
See "Executive Officers of the Registrant" included in Part I hereof for
information regarding executive officers of the Company.
Item 11. EXECUTIVE COMPENSATION
Reference is made to "Executive Compensation" included in the WICOR
proxy statement dated March 10, 1995, which is hereby incorporated herein by
reference, for information on compensation of executive officers of the
Company; provided, however, that the subsections entitled "Board Compensation
Committee Report on Executive Compensation" and "Executive Compensation -
Performance Information" shall not be deemed to be incorporated herein by
reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS
AND MANAGEMENT
Reference is made to "Security Ownership of Management" included in the
WICOR proxy statement dated March 10, 1995, which is hereby incorporated
herein by reference, for information regarding voting securities of the
Company beneficially owned by its directors and officers.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to "Item No. 1: Election of Directors" included in
the WICOR proxy statement dated March 10, 1995, which is hereby incorporated
herein by reference, for the information required to be disclosed under this
item.
17
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND
REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
1. All Financial Statements. The WICOR, Inc. consolidated balance
sheets and statements of capitalization as of December 31, 1994 and
1993, and the related consolidated statements of income, common
equity and cash flow for each of the three years in the period ended
December 31, 1994, together with the report of independent public
accountants dated February 2, 1995, included in Exhibit 13, the
Company's 1994 Annual Report to Shareholders, which is incorporated
herein by reference.
2. Financial statement schedules.
Schedule III -- Condensed Statements of Income, Retained Earnings
and Cash Flow (Parent Company Only) for the Years
Ended December 31, 1994, 1993 and 1992; Condensed
Balance Sheets (Parent Company Only) as of
December 31, 1994 and 1993; Notes to Parent
Company Only Financial Statements.
Financial statement schedules other than those referred to above have
been omitted as not applicable or not required.
3. Exhibits
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K Annual Report for 1992).
3.2 Amendment to WICOR, Inc. By-laws, effective February 28,
1995.
3.3 WICOR, Inc. By-laws, as amended.
4.1 Indenture of Mortgage and Deed of Trust dated as of November
1, 1950, between Milwaukee Gas Light Company and Mellon
National Bank and Trust Company and D. A. Hazlett, Trustees
(incorporated by reference to Exhibit 7-E to Milwaukee Gas
Light Company's Registration Statement No. 2-8631).
4.2 Eleventh Supplemental Indenture dated as of February 15,
1982, between Wisconsin Gas Company and Mellon Bank, N.A.,
and N. R. Smith, Trustees (incorporated by reference to
Exhibit 4.5 to Wisconsin Gas Company's Form S-3 Registration
Statement No. 33-43729).
4.3 Bond Purchase Agreement dated December 31, 1981, between
Wisconsin Gas Company and Teachers Insurance and Annuity
Association of America relating to the issuance and sale of
$30,000,000 principal amount of First Mortgage Bonds,
Adjustable Rate Series due 2002 (incorporated by reference
to Exhibit 4.6 to Wisconsin Gas Company's Form S-3
Registration Statement No. 33-43729).
18
4.4 Indenture dated as of September 1, 1990, between Wisconsin
Gas Company and First Wisconsin Trust Company, Trustee
(incorporated by reference to Exhibit 4.11 to Wisconsin Gas
Company's Form S-3 Registration Statement No. 33-36639).
4.5 Officers' Certificate, dated as of November 28, 1990,
setting forth the terms of Wisconsin Gas Company's 9-1/8%
Notes due 1997 (incorporated by reference to Exhibit 4.1 to
Wisconsin Gas Company's Form 8-K Current Report for
November, 1990).
4.6 Officers' Certificate, dated as of November 19, 1991,
setting forth the terms of Wisconsin Gas Company's 7-1/2%
Notes due 1998 (incorporated by reference to Exhibit 4.1 to
Wisconsin Gas Company's Form 8-K Current Report for
November, 1991).
4.7 Officers' Certificate, dated as of September 15, 1993,
setting forth the terms of Wisconsin Gas Company's 6.60%
Debentures due 2013 (incorporated by reference to Exhibit
4.1 to Wisconsin Gas Company's Form 8-K Current Report for
September, 1993).
4.8 Revolving Credit and Term Loan Agreement, dated as of March
29, 1993, among Wisconsin Gas Company and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank,
M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent
(incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q dated as of August 9, 1993).
4.9 Revolving Credit and Term Loan Agreement, dated as of March
29, 1993, among Sta-Rite Industries, Inc. and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings
Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as
Agent (incorporated by reference to Exhibit 4.3 to the
Company's Quarterly Report on Form 10-Q dated as of August
9, 1993).
4.10 Revolving Credit and Term Loan Agreement, dated as of March
29, 1993, among WICOR, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall &
Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.11 Extension of Revolving Credit and Term Loan Agreements,
effective March 29, 1994, among WICOR, Inc., Wisconsin Gas
Company and Sta-Rite Industries, Inc., respectively, and
Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust &
Saving Bank, M&I Marshall & Ilsley Bank and Citibank, N.A.,
as Agent.
4.12 Rights Agreement dated as of August 29, 1989, between WICOR,
Inc. and Manufacturers Hanover Trust Company, Rights Agent
(incorporated by reference to Exhibit 4 to the Company's
Form 8-K current report for August, 1989).
4.13 Loan Agreement, dated as of November 4, 1991, by and among
M&I Marshall & Ilsley Bank, Wisconsin Gas Company Employees'
Savings Plans Trust and WICOR, Inc. (incorporated by
reference to Exhibit 4.16 to the Company's Form 10-K Annual
Report for 1991).
19
4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to
and for the benefit of M&I Marshall & Ilsley Bank
(incorporated by reference to Exhibit 4.17 to the Company's
Form 10-K Annual Report for 1991).
Sta-Rite Industries, Inc., a wholly-owned subsidiary of the
Registrant, is the obligor under various loan agreements in
connection with facilities financed through the issuance of
industrial development bonds. The loan agreements and the
additional documentation relating to these bond issues are
not being filed with this Annual Report on Form 10-K in
reliance upon Item 601(b)(4)(iii) of Regulation S-K. Copies
of these documents will be furnished to the Securities and
Exchange Commission upon request.
10.1 Service Agreement dated as of January 1, 1988, among WICOR,
Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and
WEXCO of Delaware, Inc. (incorporated by reference to
Exhibit 10.1 to the Company's Form 10-K Annual Report for
1988).
10.2 Endorsement of SHURflo Pump Manufacturing Co. dated as of
July 28, 1993, to Service Agreement among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO
of Delaware, Inc. (incorporated by reference to Exhibit
10.2 to the Company's Form 10-K Annual Report for 1993).
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended (incorporated
by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-67134).
10.4# Forms of nonstatutory stock option agreement used in connec-
tion with the WICOR, Inc. 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.20 to the Company's
Form 10-K Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan, (incorporated
by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-67132).
10.6# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1992 Director Stock Option
Plan (incorporated by reference to Exhibit 4.2 to the
Company's Form S-8 Registration Statement No. 33-67132).
10.7# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by
reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-55755).
10.8# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1994 Long-Term Performance
Plan, (incorporated by reference to Exhibit 4.2 to the
Company's Form S-8 Registration Statement No. 33-55755).
10.9# Form of restricted stock agreement used in connection with
the WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.3 to the Company's
Form S-8 Registration Statement No. 33-55755).
10.10# WICOR, Inc. 1995 Officers' Incentive Compensation Plan.
20
10.11# Wisconsin Gas Company Principal Officers' Supplemental
Retirement Income Program (incorporated by reference to
Exhibit 10.8 to the Company's Form 10-K Annual Report for
1993).
10.12# Wisconsin Gas Company 1995 Officers' Incentive Compensation
Plan.
10.13# Wisconsin Gas Company Officers' Medical Expense
Reimbursement Plan (incorporated by reference to Exhibit
10.23 to the Company's Form 10-K Annual Report for 1992).
10.14# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.24 to the Company's
Form 10-K Annual Report for 1992).
10.15# Form of Deferred Compensation Agreements between Wisconsin
Gas Company and certain of its executive officers
(incorporated by reference to Exhibit 10.30 to the Company's
Form 10-K Annual Report for 1990).
10.16# Sta-Rite Industries, Inc. Officers Supplemental Retirement
Income Program (incorporated by reference to Exhibit 10.28
to the Company's Form 10-K Annual Report for 1989).
10.17# Sta-Rite Industries, Inc. 1995 Officers' Incentive
Compensation Plan.
10.18# Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference to Exhibit 10.28 to the Company's
Form 10-K Annual Report for 1992).
10.19# WICOR, Inc. Retirement Plan for Directors, as amended
(incorporated by reference to Exhibit 10.29 to the Company's
Form 10-K Annual Report for 1992).
13 Portions of the WICOR, Inc. 1994 Annual Report to
Shareholders incorporated by reference herein.
21 Subsidiaries of WICOR, Inc.
23 Consent of independent public accountants.
27 Financial Data Schedule.
99 WICOR, Inc. proxy statement dated March 10, 1995. (Except
to the extent incorporated by reference, this proxy
statement is not deemed "filed" with the Securities and
Exchange Commission as part of this Form 10-K.)
#Indicates a plan under which compensation is paid or payable to directors or
executive officers of the Company.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed during the fourth quarter of
1994.
21
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be signed
on its behalf by the undersigned, thereunto duly authorized.
WICOR, Inc.
Date: March 13, 1995 By JOSEPH P. WENZLER
------------------------------
Joseph P. Wenzler
Vice President, Treasurer, and
Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the succeeding pages by the following
persons on behalf of the registrant and in the capacities and on the dates
indicated.
22
WICOR, Inc.
Signature Title Date
------------------------ ----------------------------- --------------
GEORGE E. WARDEBERG
George E. Wardeberg President, Chief Executive March 13, 1995
Officer and Director
(Principal Executive Officer)
JOSEPH P. WENZLER
Joseph P. Wenzler Vice President, Treasurer March 13, 1995
and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
WENDELL F. BUECHE Director March 13, 1995
Wendell F. Bueche
WILLIE D. DAVIS Director March 13, 1995
Willie D. Davis
JERE D. MCGAFFEY Director March 13, 1995
Jere D. McGaffey
DANIEL F. MCKEITHAN, JR. Director March 13, 1995
Daniel F. McKeithan, Jr.
GUY A. OSBORN Director March 13, 1995
Guy A. Osborn
THOMAS F. SCHRADER Director March 13, 1995
Thomas F. Schrader
STUART W. TISDALE Director March 13, 1995
Stuart W. Tisdale
ESSIE M. WHITELAW Director March 13, 1995
Essie M. Whitelaw
WILLIAM B. WINTER Director March 13, 1995
William B. Winter
/TABLE
23
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To WICOR, Inc.:
We have audited in accordance with generally accepted auditing standards, the
consolidated financial statements included in Exhibit 13 to this Form 10-K,
and have issued our report thereon dated February 2, 1995. Our report on the
consolidated financial statements includes an explanatory paragraph with
respect to the change in the methods of accounting for income taxes and
postretirement benefits other than pensions in 1992 as discussed in Notes 3
and 9 to the consolidated financial statements. Our audit was made for the
purpose of forming an opinion on those statements taken as a whole.
Supplemental Schedule III is the responsibility of the Company's management
and is presented for purposes of complying with the Securities and Exchange
Commission's rules and is not part of the basic consolidated financial
statements. This schedule has been subjected to the auditing procedures
applied in the audit of the basic consolidated financial statements and, in
our opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic consolidated
financial statements taken as a whole.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 2, 1995
24
Schedule III - Condensed
Parent Company Financial Statements
WICOR, INC.
(Parent Company Only)
Statement of Income
Year Ended December 31,
---------------------------------
1994 1993 1992
---------------------------------
(Thousands of Dollars)
Income:
Equity in income of subsidiaries
after dividends......................... $ 10,154 $ 9,356 $ 4,383
Cash dividends from subsidiaries.......... 23,000 21,500 19,000
Interest income........................... 373 267 451
--------- --------- ---------
33,527 31,123 23,834
--------- --------- ---------
Expenses:
Operating (Supplemental Note B)........... 455 1,942 1,333
Interest ................................. 163 259 63
--------- --------- ---------
618 2,201 1,396
--------- --------- ---------
Income Before Parent Company Income Taxes... 32,909 28,922 22,438
Income Taxes................................ (265) (391) (326)
--------- --------- ---------
Income Before Cumulative Effects of
Accounting Changes........................ 33,174 29,313 22,764
Cumulative Effects of Accounting Changes:
Postretirement benefits other than
pensions (net of income tax benefit of
$4,110)................................. - - (6,165)
Income taxes ............................. - - (1,800)
--------- --------- ---------
Net Income.................................. $ 33,174 $ 29,313 $ 14,799
========= ========= =========
The accompanying notes are an integral part of this statement.
25
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, INC.
(Parent Company Only)
Balance Sheet
As of December 31,
----------------------
(Thousands of Dollars) 1994 1993
Assets ----------------------
------
Current Assets:
Cash and cash equivalents............................. $ 13,076 $ 7,105
Intercompany receivable, net (Supplemental Note A).... 2,039 2,162
Other................................................. 79 112
---------- ----------
15,194 9,379
---------- ----------
Investment in Subsidiaries, at equity................... 286,725 269,615
---------- ----------
Deferred Income Taxes .................................. 204 146
Deferred Charges and Other.............................. 491 591
---------- ----------
$ 302,614 $ 279,731
========== ==========
Liabilities and Capitalization
------------------------------
Current Liabilities:
Income taxes payable.................................. $ 4,423 $ 2,875
Other................................................. 99 353
---------- ----------
4,522 3,228
---------- ----------
Deferred Credits........................................ 254 (1,257)
---------- ----------
Capitalization:
ESOP loan guarantee (Supplemental Note C)............. 6,370 7,484
---------- ----------
Common equity:
Common stock, $1 par value, authorized 60,000,000
shares; outstanding 16,918,000 and 16,407,000
shares, respectively ............................. 16,918 16,407
Other paid-in-capital .............................. 180,000 166,710
Retained earnings .................................. 101,418 94,643
Unearned compensation (Supplemental Note C)......... (6,868) (7,484)
---------- ----------
Total common equity............................... 291,468 270,276
---------- ----------
$ 302,614 $ 279,731
========== ==========
The accompanying notes are an intergral part of this statement.
26
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, INC.
(Parent Company Only)
Statement of Retained Earnings
Year Ended December 31,
---------------------------------
1994 1993 1992
---------------------------------
(Thousands of Dollars)
Balance - Beginning of Year................. $ 94,643 $ 90,102 $ 97,906
Add:
Net income.............................. 33,174 29,313 14,799
--------- --------- ---------
127,817 119,415 112,705
Deduct:
Cash dividends on common stock.......... 26,399 24,099 21,869
Other................................... - 673 734
--------- --------- ---------
Balance - End of Year ...................... $101,418 $ 94,643 $ 90,102
========= ========= =========
The accompanying notes are an integral part of this statement.
27
Schedule III - Condensed
Parent Company Only Financial Statements (continued)
WICOR, INC.
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Year Ended December 31,
(Thousands of Dollars) ---------------------------------
1994 1993 1992
---------------------------------
Operations-
Net income ............................... $ 33,174 $ 29,313 $ 14,799
Adjustments to reconcile net income to
net cash flows:
Equity in (income) losses of
subsidiaries.......................... (10,154) (9,356) (4,383)
Cumulative effect of change in
accounting principles, net of income
tax benefit of $4,110................. - - 7,965
Change in deferred income taxes......... (58) (73) (73)
Change in intercompany receivables...... 123 (7,342) 4,285
Change in income taxes payable.......... 1,548 6,923 (3,445)
Change in other current assets.......... 33 98 (124)
Change in other current liabilities..... (254) 178 176
Change in other non-current assets and
liabilities........................... (843) (185) (578)
--------- --------- ---------
23,569 19,556 18,622
--------- --------- ---------
Investment Activities-
Investments in subsidiaries............... (5,000) (12,000) (15,000)
Acquisitions.............................. - - (3,202)
--------- --------- ---------
(5,000) (12,000) (18,202)
--------- --------- ---------
Financing Activities-
Issuance of common stock.................. 10,649 16,682 6,081
Dividends paid on common stock, less
amounts reinvested...................... (23,247) (21,450) (19,458)
--------- --------- ---------
(12,598) (4,768) (13,377)
--------- --------- ---------
Change in Cash and Cash Equivalents......... 5,971 2,788 (12,957)
Cash and Cash Equivalents at Beginning
of Year................................... 7,105 4,317 17,274
--------- --------- ---------
Cash and Cash Equivalents at End of Year.... $ 13,076 $ 7,105 $ 4,317
========= ========= =========
Supplemental Disclosure of Cash Flow Information
Cash paid (received) during the year for:
Interest paid............................. $ - $ 1 $ 36
Income taxes paid......................... (4,440) 2,805 (462)
The accompanying notes are an integral part of this statement.
28
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, Inc.
Notes to Parent Company Only Financial Statements
The following are supplemental notes to the WICOR, Inc. (Parent
Company Only) financial statements and should be read in conjunction with the
WICOR, Inc. Consolidated Financial Statements and Notes thereto included herein
under Item 8:
SUPPLEMENTAL NOTES
A. Net amounts due from subsidiaries result from intercompany transactions
including advances and Federal income tax liabilities, less payments of
expenses by subsidiaries on behalf of WICOR, Inc.
B. During 1994, 1993 and 1992, the parent company allocated certain
administrative and operating expenses to the following subsidiaries using
an allocation method approved by the PSCW:
1994 1993 1992
---------- ---------- ----------
Administrative and oper-
ating expenses allocated
to subsidiaries $2,452,000 $2,388,000 $2,103,000
========== ========== ==========
C. In November 1991, WICOR, Inc. (Parent Company Only) established an
Employee Stock Ownership Plan (ESOP) covering non-union employees of
Wisconsin Gas. Because the parent company has guaranteed the loan, the
unpaid balance is shown as a liability on the balance sheet with a like
amount of unearned compensation recorded as a reduction of stockholders'
equity.
The ESOP trustee is repaying the $10 million loan with dividends paid on
the shares of WICOR common stock in the ESOP and with Wisconsin Gas
contributions to the ESOP.
29
TABLE OF CONTENTS
TO EXHIBITS
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended
(incorporated by reference)
3.2* Amendment to WICOR, Inc. By-laws, effective February 28, 1995
3.3* WICOR, Inc. By-laws, as amended
4.1 Indenture of Mortgage and Deed of Trust dated as of November 1, 1950,
between Milwaukee Gas Light Company and Mellon National Bank and Trust
Company and D. A. Hazlett, Trustees (incorporated by reference)
4.2 Eleventh Supplemental Indenture dated as of February 15, 1982, between
Wisconsin Gas Company and Mellon Bank, N.A., and N. R. Smith, Trustees
(incorporated by reference)
4.3 Bond Purchase Agreement dated December 31, 1981, between Wisconsin Gas
Company and Teachers Insurance and Annuity Association of America
relating to the issuance and sale of $30,000,000 principal amount of
First Mortgage Bonds, Adjustable Rate Series due 2002 (incorporated
byreference)
4.4 Indenture dated as of September 1, 1990, between Wisconsin Gas Company
and First Wisconsin Trust Company, Trustee (incorporated by reference)
4.5 Officers' Certificate, dated as of November 28, 1990, setting forth the
terms of Wisconsin Gas Company's 9-1/8% Notes due 1997 (incorporated
by reference)
4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the
terms of Wisconsin Gas Company's 7-1/2% Notes due 1988 (incorporated
by reference)
4.7 Officers' Certificate, dated as of September 15, 1993, setting forth
the terms of Wisconsin Gas Company's 6.60% Debentures due 2013
(incorporated by reference)
4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the
terms of Wisconsin Gas Company's 7-1/2% Notes due 1988 (incorporated
by reference)
4.8 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993,
among Wisconsin Gas Company and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust and Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference)
4.9 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993,
among Sta-Rite Industries, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent (incorporated by reference)
4.10 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993,
among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank,
N.A., as Agent (incorporated by reference)
30
4.11* Extension of Revolving Credit and Term Loan Agreements, effective March
29, 1994, among WICOR, Inc., Wisconsin Gas Company and Sta-Rite
Industries, Inc., respective, and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley
and Citibank, N.A. as Agent
4.12 Rights Agreement dated as of August 29, 1989, between WICOR, Inc. and
Manufacturers Hanover Trust Company, Rights Agent (incorporated by
reference)
4.13 Loan Agreement, dated as of November 4, 1991, by and among M&I Marshall
& Ilsley Bank, Wisconsin Gas Company Employees' Savings Plan Trust and
WICOR, Inc. (incorporated by reference)
4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to and for the
benefit of M&I Marshall & Ilsley Bank (incorporated by reference)
10.1 Service Agreement dated as of January 1, 1988, among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of
Delaware, Inc. (incorporated by reference)
10.2 Endorsement of SHURflo Pump Manufacturing Co. dated as of July 28,
1993, to Service Agreement among WICOR, Inc., Wisconsin Gas Company,
Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc. (incorporated
by references)
10.3# WICOR, Inc. 1987 Stock Option Plan (incorporated by reference)
10.4# Forms of nonstatutory stock option agreement used in connection with
the WICOR, Inc. 1987 Stock Option Plan (incorporated by reference)
10.5# WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference)
10.6# Form of nonstatutory stock option agreement used in connection with the
WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference)
10.7# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference)
10.8# Form of nonstatutory stock option agreement used in connection with the
WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference)
10.9# Form of restricted stock agreement used in connection with the WICOR,
Inc. 1994 Long-Term Performance Plan (incorporated by reference)
10.10*# WICOR, Inc. 1995 Officers' Incentive Compensation Plan
10.11# Wisconsin Gas Company Principal Officers' Supplemental Retirement
Income Program (incorporated by reference)
10.12*# Wisconsin Gas Company 1995 Officers' Incentive Compensation Plan
10.13# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan
(incorporated by reference)
10.14# Wisconsin Gas Company Group Travel Accident Plan (incorporated by
reference)
10.15# Form of Deferred Compensation Agreements between Wisconsin Gas Company
and certain of its executive officers (incorporated by reference)
10.16# Sta-Rite Industries Officers' Supplemental Retirement Income Program
(incorporated by reference)
31
10.17*# Sta-Rite Industries, Inc. 1995 Officers' Incentive Compensation Plan
10.18#Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference)
10.19# WICOR, Inc. Retirement Plan for Directors (incorporated by reference)
13* Financial Review" portion of the WICOR, Inc. 1994 Annual Report to
Shareholders
21* Subsidiaries of WICOR, Inc
23* Consent of independent public accountants
27* Financial Data Schedule
99* WICOR, Inc. proxy statement dated March 10, 1995
* Indicates document filed herewith.
# Indicates a plan under which compensation is paid or payable to directors or
executive officers of the Company.