1
EXHIBIT 13
GENERAL OVERVIEW
WICOR has two significant business segments: gas distribution and
manufacturing. Gas distribution is the primary business, as it accounted for
64% of consolidated revenues and 67% of consolidated operating income in
1994. However, the manufacturing segment has grown significantly in recent
years with operating income more than doubling since 1992.
WICOR earnings were $33.2 million in 1994, or $1.99 per share of common
stock, compared with $29.3 million, or $1.82 per share in 1993, and $22.8
million, or $1.47 per share in 1992 ($14.8 million, or $0.96 per share after
the cumulative effect of accounting changes).
Gas sales volumes decreased in 1994, despite substantial customer
additions, primarily as a result of warmer than normal weather, after having
increased in 1993 as a result of colder weather and customer additions in
1992 and 1993. Manufacturing operations in 1994 continued to show significant
improvement as a result of more favorable economic conditions, continuing
strong international sales, and new product introductions.
Net cash flows from operations for the years 1992 through 1994 totalled
$144.0 million. Cash proceeds from the $92.2 million net increase in long-
term debt, common stock and short-term debt, along with the net cash flows
from operations provided most of the funding for $178.8 million of capital
expenditures and $64.2 million of dividends for that three year period.
Segment data for WICOR's operations are summarized below in millions of
dollars.
Operating Revenues 1994 1993 1992
----------------------------- -------- -------- --------
Gas distribution $ 556.6 $ 574.8 $ 495.4
Manufacturing 311.2 274.7 252.0
-------- -------- --------
$ 867.8 $ 849.5 $ 747.4
======== ======== ========
Depreciation and Amortization 1994 1993 1992
----------------------------- -------- -------- --------
Gas distribution $ 37.4 $ 34.8 $ 30.5
Manufacturing 9.7 8.9 9.7
-------- -------- --------
$ 47.1 $ 43.7 $ 40.2
======== ======== ========
Operating Income 1994 1993 1992
----------------------------- -------- -------- --------
Gas distribution $ 44.4 $ 46.2 $ 43.3
Manufacturing 22.2 17.8 10.0
-------- -------- --------
$ 66.6 $ 64.0 $ 53.3
======== ======== ========
Estimated Actual
Capital Expenditures 1995 1994 1993 1992
----------------------------- ---------- -------- -------- --------
Gas distribution $ 49.7 $ 44.6 $ 42.3 $ 62.1
Manufacturing 20.3 10.5 9.6 9.8
---------- -------- -------- --------
$ 70.0 $ 55.1 $ 51.9 $ 71.9
========== ======== ======== ========
/TABLE
2
Identifiable Assets 1994 1993 1992
------------------------------ -------- -------- --------
Gas distribution $ 707.9 $ 737.2 $ 634.6
Manufacturing 222.8 196.5 191.2
-------- -------- --------
$ 930.7 $ 933.7 $ 825.8
======== ======== ========
RESULTS OF OPERATIONS
Gas Distribution --
Although sales margins increased in 1994, they were offset by higher
levels of operating expenses, resulting in a decrease in operating income as
compared with 1993. The 1994 earnings reflect a 10.1% return on weighted
average utility common equity. A $10.1 million or 4.9% annual margin rate
decrease, became effective on November 14, 1994. That rate order also
retained the authorized return on utility common equity of 11.8%. Margins
benefited in 1993 from rate increases effective in November 1992 and November
1993.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas, is a better comparative performance indicator than
revenues. Transportation service revenues are recorded at the same margin as
sales with no corresponding cost of gas amount. Therefore, for a given rate
class, the volume mix between sales and transportation service affects
revenues but not margin. In addition, changes in cost of gas flow through to
revenue under a gas adjustment clause, with no effect on margin.
(Millions of Dollars) 1994 1993 1992
------------------------- -------- -------- --------
Gas sales revenue $ 550.0 $ 565.1 $ 485.3
Cost of gas sold 357.5 382.0 319.4
Gas sales margin 192.5 183.1 165.9
Gas transportation margin 6.6 9.7 10.1
-------- -------- --------
Total margin $ 199.1 $ 192.8 $ 176.0
======== ======== ========
(Millions of Therms) 1994 1993 1992
------------------------- -------- -------- --------
Sales volumes
Firm 795 823 782
Interruptible 282 208 174
Transport volumes 119 174 214
-------- -------- --------
Total throughput 1,196 1,205 1,170
======== ======== ========
/TABLE
3
Total gas margin increased by 3% and 10% in 1994 and 1993,
respectively. The increase in 1994 was due to 1993 rate increases which were
offset by the impact of lower volume sales and the 1994 rate decrease. Lower
volumes in 1994 were primarily due to weather which was 5% warmer than 1993.
Assuming normal weather in 1994 WICOR earnings would have been approximately
$0.26 per share higher. The increase in 1993 gas margins was due primarily to
rate increases in 1993 and 1992 and to increased sales volumes. Weather in
1993 which was 1% colder than 1992 and a 3% increase in residential customers
helped to increase the 1993 sales volumes. In 1994 and 1993 a number of
industrial customers switched between interruptible sales and transportation
services. There is no impact on margins from the switching activity.
Operation and maintenance expenses increased by $6.1 million or 6% in
1994. The increase was in large measure due to increases in uncollectible
receivables expense ($2.8 million) and amortization of business system
software costs ($1.6 million). These increases in expenses are being
recovered in rates on an annual basis under the November 1993 rate order.
Included in 1994 operations expense is a one-time charge of $2.7 million
relating to the election by 131 employees of an early retirement option.
Savings in 1994 from these retirements have been realized and have offset
this charge. Operation and maintenance expenses increased by $10.9 million or
11% in 1993. The increase was primarily due to higher costs for employee
benefits, business systems software amortization, conservation programs, and
uncollectible receivables. These additional costs are being recovered as a
result of the 1992 and 1993 rate orders.
Manufacturing Operations --
Manufacturing operating income in 1994 was $22.2 million compared with
$17.8 million in 1993 and $10.0 million in 1992. The improvements were
primarily the result of increased sales. Sales in 1994 were $311.2 million,
an increase of 13% over 1993. International sales improved by 21% and
domestic sales also contributed to the increase. Significant sales
improvements were noted in the water systems, pool and spa, recreational
vehicle, marine, and industrial markets.
Sales in 1993 were $274.7 million, an increase of 9% over 1992 sales of
$252.0 million. Improvements were noted in sales of water systems, drainers
and environmental pumps as well as pumps for the food service, marine, water
purification and industrial markets. The improved economy and favorable
weather conditions also were significant factors contributing to the
increase.
International and export sales represented 37% of manufacturing sales
in 1994 and 34% in both 1993 and 1992. The increase in 1994 is primarily
related to sales growth that occurred in the Company's Australian and
European markets.
Operating expenses increased in 1994 by 11% over 1993 primarily as a
result of increased sales. As a percentage of sales, however, 1994 operating
expenses declined slightly from 1993. Operating expenses decreased by 2% in
1993, despite the 9% increase in sales. Much of the 1993 savings was
generated through administrative personnel reductions in 1992 and 1993.
Bar chart of WICOR Operating Income by segment
(millions of dollars)
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Gas distribution $ 34.9 $ 39.5 $ 43.3 $ 46.2 $ 44.4
Maunufacturing 9.7 11.7 10.0 17.8 22.2
------ ------ ------ ------ ------
$ 44.6 $ 51.2 $ 53.3 $ 64.0 $ 66.6
====== ====== ====== ====== ======
/TABLE
4
Interest Expense, Other Income and Expenses and Income Taxes --
The 1994 decrease in interest expense as compared to 1993 was due
primarily to a September 1993 long-term debt refinancing and to reduced
levels of short-term borrowings. Both interest income and interest expense
declined in 1993 as a result of lower interest rates.
Income tax expense decreased in 1994 despite the increase in pre-tax
book income. The effective income tax rate was reduced in 1994 primarily as a
result of utilizing foreign tax incentives and the settlement of disputed tax
matters. Income tax expense increased in 1993 primarily as a result of higher
pre-tax book income and a 1% increase in the federal tax rate to 35%
effective January 1, 1993.
Accounting Changes --
The cumulative effect of accounting changes
related to the recording of income taxes and postretirement benefits totaled
$8.0 million in 1992. The impact of adopting these two accounting changes,
effective January 1, 1992, is discussed in Notes 3 and 9.
Effects of Changing Prices --
It is management's view that changes in the rate of inflation have not
had a significant effect on WICOR's income over the past three years.
Inflationary increases have been recovered through price increases or
productivity improvements.
In November 1994, Wisconsin Gas received approval from the Public
Service Commission of Wisconsin (PSCW) to use an alternative method of
ratemaking that includes a three year margin rate cap. After reviewing the
impact of the margin rate cap and other factors, management believes that
productivity improvements are likely to offset the impact of inflationary
cost increases. This alternative method is discussed on page 22 under
"Regulatory Matters."
Bar chart of WICOR Return on Average Common Equity
before cumulative effects of accounting changes
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Percent 6.8% 9.5% 9.2% 11.2% 11.6%
LIQUIDITY AND CAPITAL RESOURCES
Over the last three years, the Company has generated sufficient cash
flows from operations to cover operating expenses, dividends, and a portion
of investment activities. Cash flow from operations increased to $103.6
million in 1994, compared with $3.4 million in 1993 and $37.0 million in
1992. The comparative increase and decrease in cash flow in 1994 and 1993,
respectively, are primarily due to funds used by Wisconsin Gas to purchase
its initial inventory of gas held in storage. As discussed under regulatory
matters, one of the impacts of Federal Energy Regulatory Commission (FERC)
Order No. 636 is that utilities such as Wisconsin Gas must assume the
responsibility for purchasing gas supplies and maintaining gas in storage.
Previously, the pipelines performed those functions.
Investment Activities --
Capital expenditures increased by $3.1 million in 1994 after decreasing
by $20.0 million in 1993 and increasing by $26.8 million in 1992. Utility
expenditures returned to more normal levels in 1994 and 1993 following
completion of a major expansion project in 1992. Both utility capital
expenditures and manufacturing capital expenditures are expected to increase
in 1995, and most likely will be funded from operations.
5
In July 1993, WICOR merged with Shurflo by exchanging approximately $27
million of WICOR stock for the outstanding common stock of Shurflo. See Note
2 for a further discussion of this transaction. The Company, either directly
or through its subsidiaries, has invested $0.1 million, $2.1 million, and
$9.8 million in 1994, 1993, and 1992, respectively, in other acquisition
activity.
In January 1995, WICOR sold its interest in Filtron Technology Corp., a
manufacturer of filtration products for approximately $5 million.
In January 1992, the PSCW issued an order prescribing an equity-based
formula for determining the limitation on non-utility investments. As of
December 31, 1994, WICOR would be permitted to invest an additional $78.7
million in nonutility investments under this order. Nonutility subsidiaries
can also borrow additional amounts for acquisitions within certain PSCW
guidelines (See Note 6).
Bar chart of Annual Degree Days
% warmer than 20-year average
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
% warmer 16.0% 10.8% 6.4% 4.1% 9.0%
Financing Activities --
The Company does not anticipate the need to issue any long-term debt in
1995, but it may, in 1996, refinance $50.0 million of notes issued by
Wisconsin Gas that are due in 1997. During 1993, Wisconsin Gas issued $45
million of 6.6% Notes due in 2013, the proceeds of which were used to
refinance $45 million of first mortgage bonds which had higher interest
rates. There were no issues of long-term debt in 1992. The Company's debt
portion of capitalization decreased to 36% in 1994 as compared to 38% in 1993
and 40% in 1992. The utility's embedded cost of long-term debt was 8.1%,
8.9%, and 9.2% at December 31, 1994, 1993, and 1992, respectively.
WICOR raised its dividend by 3% in 1994, 1993, and 1992. The current
annual dividend rate is $1.60 per share. At December 31, 1994 the Company had
$57.4 million of unrestricted retained earnings available for dividend
payments to shareholders.
In October 1992, the Company established the WICOR Plan which allows
customers, shareholders, employees, Wisconsin residents and certain suppliers
to purchase WICOR common stock directly and through dividend reinvestment
without paying fees or service charges. During 1994 and 1993, respectively,
511,000 and 685,000 shares of common stock were issued through the WICOR Plan
and through various employee benefit plans. These stock issuances provided
funds to the Company of $10.6 million and $16.7 million. Beginning in 1995,
it is anticipated that the share requirements for the WICOR Plan will be met
through open market purchases of common stock.
As described in Note 6, a November 1993 PSCW rate order retained
certain limitations with respect to equity levels and dividend payments of
Wisconsin Gas. Restrictions imposed by the PSCW are not expected to have any
material effect on WICOR's ability to meet its cash obligations.
Bar chart of Manufacturing International and Export Sales
millions of dollars
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Dollars $ 64.9 $ 75.5 $ 85.9 $ 93.8 $114.2
/TABLE
6
Wisconsin Gas' ratio of pre-tax earnings to fixed charges was 2.9 in
1994 and 1993 and 2.8 in 1992, as earnings and fixed charges remained
somewhat constant.
Access to the credit markets and the costs associated therewith can be
correlated to credit quality. The utility's unsecured bond rating was
increased in 1993 by Moody's Investors Service from A1 to Aa3. The rating
from Standard & Poor's Corporation remained at AA-. Such ratings are not a
recommendation to buy, sell or hold securities, but rather an indication of
credit worthiness.
The following is a summary of the meanings of the ratings shown above
and the relative rank of the Company's rating within each agency's
classification system. Moody's top four corporate bond ratings (Aaa, Aa, A
and Baa) are generally considered "investment grade." Obligations which are
rated "Aa" are judged to be of high quality by all standards. Together with
the Aaa group they comprise what are generally known as high-grade bonds. Aa
securities are rated lower than the Aaa rated bonds because margins of
protection may not be as large as in Aaa securities or fluctuation of
protective elements may be of greater amplitude or there may be other
elements present which make the long-term risk appear somewhat larger than
the Aaa securities. A numerical modifier ranks the security within the
category with a "1" indicating the high end, a "2" indicating the midrange
and a "3" indicating the low end of the category. Standard & Poor's top four
corporate bond ratings (AAA, AA, A and BBB) are considered "investment
grade." Based on Standard & Poor's rating system, debt rated "AA" has a very
strong capacity to pay interest and repay principal and differs from the
highest rated issues only in small degree. A plus (+) or minus (-) sign may
be used after Standard & Poor's ratings to designate the relative position of
a credit rating within the rating category.
Commercial paper carrying an A-1+ rating by Standard & Poor's
Corporation and P-1 by Moody's Investors Service is routinely issued by
Wisconsin Gas as needed to finance seasonal working capital needs,
principally customer receivables and gas in storage. Such ratings are not a
recommendation to buy, sell, or hold securities, but rather an indication of
credit worthiness. Moody's top three short-term debt ratings (P-1, P-2 and P-
3) are generally considered investment grade and are intended to indicate the
relative repayment ability of related issuers. According to Moody's rating
system, short-term debt rated "P-1" has a superior ability for repayment of
senior short-term debt obligations. The utility had no short-term debt
outstanding for two months in 1994.
Bar chart of WICOR Capital Expenditures
millions of dollars
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Gas distribution $ 28.0 $ 34.6 $ 62.1 $ 42.3 $ 44.6
Manufacturing 8.3 10.5 9.8 9.6 10.5
------ ------ ------ ------ ------
$ 36.3 $ 45.1 $ 71.9 $ 51.9 $ 55.1
====== ====== ====== ====== ======
In March 1993, WICOR and its subsidiaries renewed a three-year
revolving credit agreement, including separate agreements for $25 million for
WICOR, $30 million for Wisconsin Gas, and $15 million for Sta-Rite. In 1994
the revolving credit agreement was extended an additional year to March 1997.
In 1993, Sta-Rite renewed a $25 million commercial paper issuance facility.
Commercial paper outstanding at December 31, 1994 and 1993 was $94.6 million
and $117.1 million, respectively.
The Company believes that it has adequate capacity to fund its
operations for the foreseeable future through its borrowing arrangements and
internally generated cash.
7
Regulatory Matters --
In July 1993, Wisconsin Gas submitted an incentive rate making proposal
to the PSCW. In its November 1994 rate order, the PSCW significantly modified
the Wisconsin Gas proposal. 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 are at the top of the range. In addition, the PSCW 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. Under the purchased gas
adjustment provision of its rate schedules, Wisconsin Gas continues to
recover the actual purchased gas costs it incurs.
Bar chart of WICOR Capitalization
percent
1990 1991 1992 1993 1994
------ ------ ------ ------ ------
Long-term debt 35.4% 40.9% 40.1% 37.9% 35.7%
Common stock 64.6% 59.1% 59.9% 62.1% 64.3%
Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting
for the Effects of Certain Types of Regulation" provides that rate-regulated
public utilities such as Wisconsin Gas record certain costs and credits
allowed in the ratemaking process in different periods than would be required
for unregulated businesses. These costs and credits are deferred as
regulatory assets or regulatory liabilities and are recorded on the income
statement at the time they are recognized in rates. SFAS No. 71 continues to
be applicable to Wisconsin Gas in that its rates are approved by a third
party regulator and are designed to recover its cost of service. Wisconsin
Gas believes its current cost based rates are competitive in the current
environment.
In April 1992, the FERC issued Order No. 636 requiring interstate
pipelines to "unbundle" their services. As a result, Wisconsin Gas purchases
gas supplies separately from interstate transportation services. The utility
has greater responsibility for managing its gas supply in a more competitive
market. Variable-term market sensitive contracts and the increased use of gas
in storage are being used to assure future supply. In spite of severely cold
weather in January 1994, Wisconsin Gas was able to meet the needs of its
customers under these changing conditions.
Pipelines have been allowed to pass through to local gas distributors
various costs incurred in the transition to Order No. 636. The PSCW has
authorized that such costs that have been passed through to Wisconsin Gas be
recovered in rates charged to customers. Although complete assurance cannot
be given, it is believed that any additional future transition costs will
also be recoverable from customers.
Environmental Matters --
Wisconsin Gas is in the process of preparing a remedial action options
report and recommendation for presentation to the Wisconsin Department of
Natural Resources concerning two previously owned sites on which it operated
manufactured gas plants. Wisconsin Gas currently anticipates that the costs
incurred in the remediation effort will be recoverable from insurers or
through rates and will not have a material adverse effect on the Company's
liquidity or results of operations.
8
The manufacturing segment has provided reserves believed sufficient to
cover its estimated costs related to contamination associated with Sta-Rite's
manufacturing facilities. (See Note 7 for a more detailed discussion of these
matters.)
9
TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WICOR, INC.:
We have audited the accompanying consolidated balance sheets and
statements of capitalization of WICOR, Inc. (a Wisconsin corporation) and
subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, common equity and cash flows for each of the three
years in the period ended December 31, 1994. These financial statements are
the responsibility of WICOR Inc.'s management. Our responsibility is to
express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements.
An audit also includes assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe our audits provide a reasonable
basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of WICOR, Inc. and
subsidiaries as of December 31, 1994 and 1993, and the results of their
operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 3 and 9 to the Consolidated Financial Statements,
effective January 1, 1992, WICOR Inc. changed its methods of accounting for
income taxes and postretirement benefits other than pensions.
Milwaukee, Wisconsin Arthur Andersen LLP
February 2, 1995
10
CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars,
Except per Share Amounts)
Year Ended December 31, 1994 1993 1992
---------- ---------- ----------
Operating Revenues
Gas distribution $ 556,587 $ 574,835 $ 495,415
Manufacturing 311,168 274,693 251,994
---------- ---------- ----------
867,755 849,528 747,409
---------- ---------- ----------
Operating Costs and Expenses
Cost of gas sold 357,482 382,027 319,377
Manufacturing cost of sales 222,679 197,297 180,388
Operations and maintenance 181,820 169,068 159,009
Depreciation and amortization 29,416 28,044 26,650
Taxes, other than income taxes 9,748 9,141 8,670
---------- ---------- ----------
801,145 785,577 694,094
---------- ---------- ----------
Operating Income 66,610 63,951 53,315
---------- ---------- ----------
Interest expense (16,698) (17,428) (18,126)
Other income and expenses 574 266 1,124
---------- ---------- ----------
Income Before Income Taxes 50,486 46,789 36,313
Income taxes 17,312 17,476 13,549
---------- ---------- ----------
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 $4.1 million
income tax benefit) - - (6,165)
Income taxes - - (1,800)
---------- ---------- ----------
Net Income $ 33,174 $ 29,313 $ 14,799
========== ========== ==========
Per Share of Common Stock
Income before cumulative effects
of accounting changes $ 1.99 $ 1.82 $ 1.47
Cumulative effect of accounting change
for postretirement benefits - - (0.40)
Cumulative effect of accounting change
for income taxes - - (0.11)
---------- ---------- ----------
Net Income $ 1.99 $ 1.82 $ 0.96
========== ========== ==========
Cash dividends $ 1.58 $ 1.54 $ 1.50
Average Common Shares Outstanding (000's) 16,708 16,096 15,490
The accompanying notes are an integral part of this statement.
11
CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars) December 31, 1994 1993
---------- ----------
Assets
Current Assets
Cash and cash equivalents $ 35,138 $ 22,953
Accounts receivable, less allowance
for doubtful accounts of $9,233
and $9,351, respectively 103,487 111,408
Accrued utility revenues 40,327 53,483
Manufacturing inventories 60,239 58,079
Gas in storage, at weighted average cost 38,050 44,697
Deferred income taxes 15,540 10,005
Prepayments and other 19,519 13,969
---------- ----------
312,300 314,594
---------- ----------
Property, Plant and Equipment, at cost
Gas distribution 718,988 679,968
Manufacturing 103,696 97,736
---------- ----------
822,684 777,704
Less accumulated depreciation
and amortization 407,121 377,004
---------- ----------
415,563 400,700
---------- ----------
Deferred Charges and Other
Systems development costs 34,071 38,808
Deferred environmental costs 41,942 41,641
Prepaid pension costs 30,865 29,580
Gas transition costs 7,411 15,485
Other regulatory assets 51,543 57,211
Other 37,013 35,707
---------- ----------
202,845 218,432
---------- ----------
$ 930,708 $ 933,726
========== ==========
The accompanying notes are an integral part of this statement.
12
CONSOLIDATED BALANCE SHEETS
(Thousands of dollars)
December 31, 1994 1994 1993
---------- ----------
Liabilities and Capitalization
Current Liabilities
Accounts payable $ 65,626 $ 62,683
Short-term borrowings 111,506 134,918
Refundable gas costs 18,058 15,596
Current portion of long-term debt 5,031 2,847
Accrued taxes 8,400 10,089
Accrued payroll and benefits 15,141 14,656
Other 15,661 15,199
---------- ----------
239,423 255,988
---------- ----------
Deferred Credits and Other
Deferred income taxes 42,322 45,878
Environmental remediation costs 37,188 40,000
Postretirement benefit obligation 69,730 67,510
Unamortized investment tax credit 8,187 8,654
Gas transition costs 7,411 15,485
Other regulatory liabilities 54,636 50,179
Other 18,674 14,526
---------- ----------
238,148 242,232
---------- ----------
Commitments and Contingencies (Note 7)
---------- ----------
Capitalization (See accompanying statement)
Long-term debt 161,669 165,230
Redeemable preferred stock - -
Common equity 291,468 270,276
---------- ----------
453,137 435,506
---------- ----------
$ 930,708 $ 933,726
========== ==========
The accompanying notes are an integral part of this statement.
13
CONSOLIDATED STATEMENTS OF CASH FLOW
Increase (Decrease) in Cash and Cash Equivalents
(Thousands of Dollars)
Year Ended December 31, 1994 1993 1992
---------- ---------- ----------
Operations
Net income $ 33,174 $ 29,313 $ 14,799
Adjustments to reconcile net income to
net cash flow from operating activities:
Cumulative effect of changes in
accounting principles, net of $4,110
income tax benefit - - 7,965
Depreciation and amortization 47,097 43,738 40,200
Deferred income taxes (9,091) (3,969) (2,958)
Changes in:
Receivables 21,105 (13,993) (8,627)
Manufacturing inventories (2,027) (2,590) (839)
Gas in storage 6,647 (38,050) (6,252)
Other current assets (4,827) (569) 6,016
Systems development costs (841) (6,530) (9,976)
Accounts payable 2,943 (11,055) (2,259)
Refundable gas costs 2,462 1,955 5,633
Accrued taxes (2,412) 9,169 (2,098)
Other current liabilities 947 (292) (1,754)
Other noncurrent assets and liabilities 8,374 (3,726) (2,838)
---------- ---------- ----------
Cash provided by operating activities 103,551 3,401 37,012
---------- ---------- ----------
Investment Activities
Capital expenditures (55,051) (51,906) (71,873)
Proceeds from sale of assets 42 5,328 761
Acquisitions (72) (2,120) (9,776)
Other, net 343 541 274
---------- ---------- ----------
Cash (used in) investing activities (54,738) (48,157) (80,614)
---------- ---------- ----------
Financing Activities
Change in short-term borrowings (21,617) 59,603 35,726
Issuance of long-term debt 1,869 47,446 ,173
Reduction of long-term debt (4,795) (50,982) (8,674)
Issuance of common stock 10,649 16,682 6,079
Dividends paid on common stock,
less amounts reinvested (23,247) (21,450) (19,459)
Other 513 (222) (734)
---------- ---------- ----------
Cash (used in) provided
by financing activities (36,628) 51,077 13,111
---------- ---------- ----------
Change in Cash and Cash Equivalents 12,185 6,321 (30,491)
Cash and cash equivalents at
beginning of year 22,953 16,632 47,123
---------- ---------- ----------
Cash and Cash Equivalents at End of Year $ 35,138 $ 22,953 $ 16,632
========== ========== ==========
The accompanying notes are an integral part of this statement.
14
CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands of Dollars) December 31, 1994 1993
---------- ----------
Long-Term Debt
Wisconsin Gas:
First mortgage bonds
Adjustable Rate Series, 7.4% and
8.1%, respectively, due 2002 $ 10,000 $ 14,000
9-1/8% Notes due 1997 50,000 50,000
7-1/2% Notes due 1998 40,000 40,000
6.6% Notes due 2013 45,000 45,000
Sta-Rite:
First mortgage bonds, adjustable
rate, 7.8% to 8.1%, due semi-
annually through 2000 1,203 1,431
Industrial revenue bonds, 7-7/8%,
payable through 2000 2,190 2,575
Commercial paper under multi-year
credit agreement 6,853 4,758
Capital lease obligations and other 1,222 1,338
Unamortized (discount), net (1,169) (1,356)
ESOP loan guarantee 6,370 7,484
---------- ----------
161,669 165,230
---------- ----------
Redeemable Preferred Stock
WICOR:
$1.00 par value; authorized
1,500,000 shares - -
Wisconsin Gas:
Without par value, cumulative;
authorized 1,500,000 shares - -
---------- ----------
- -
---------- ----------
Common Equity
Common stock, $1.00 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 - ESOP
and restricted stock (6,868) (7,484)
---------- ----------
291,468 270,276
---------- ----------
Total Capitalization $ 453,137 $ 435,506
========== ==========
The accompanying notes are an integral part of this statement.
15
CONSOLIDATED STATEMENTS OF COMMON EQUITY
(Thousands of Dollars)
December 31, 1994 1993 1992
---------- ---------- ----------
Common Stock:
Balance at beginning of year $ 16,407 $ 15,722 $ 15,366
Issued in connection with dividend
reinvestment, customer stock purchase
and employee benefit plans 511 685 356
---------- ---------- ----------
Balance at end of year 16,918 16,407 15,722
---------- ---------- ----------
Other Paid-in Capital:
Balance at beginning of year 166,710 148,064 139,931
Received in connection with dividend
reinvestment, customer stock purchase
and employee benefits plans 13,290 18,646 8,133
---------- ---------- ----------
Balance at end of year 180,000 166,710 148,064
---------- ---------- ----------
Retained Earnings:
Balance at beginning of year 94,643 90,102 97,906
Net income 33,174 29,313 14,799
Dividends on common stock (26,399) (24,099) (21,869)
Other - (673) (734)
---------- ---------- ----------
Balance at end of year 101,418 94,643 90,102
---------- ---------- ----------
Unearned Compensation - ESOP
and restricted stock:
Balance at beginning of year (7,484) (8,601) (9,750)
Loan payments 1,114 1,117 1,149
Issuance of restricted stock (723) - -
Amortization of restricted stock 225 - -
---------- ---------- ----------
Balance at end of year (6,868) (7,484) (8,601)
---------- ---------- ----------
Total Common Equity at End of Year $ 291,468 $ 270,276 $ 245,287
========== ========== ==========
The accompanying notes are an integral part of this statement.
16
QUARTERLY FINANCIAL DATA (UNAUDITED)
Because seasonal factors significantly affect the Company's operations
(particularly at the Wisconsin Gas level), the following data may not be
comparable between quarters:
(Thousands of Dollars, Except
per Share Amounts) Quarters: First Second Third Fourth
------------------------------------------ -------- --------- --------
1994
Operating revenues $ 320,625 $186,079 $151,037 $210,014
Operating income (loss) $ 49,444 $ 5,500 $ (8,668) $ 20,334
Income available for common stock$ 28,202 $ 998 $ (8,069) $ 12,043
Net income (loss) per
common share (a) $ 1.71 $ 0.06 $ (0.48) $ 0.71
1993
Operating revenues $ 272,660 $190,223 $152,801 $233,844
Operating income (loss) $ 41,689 $ 5,881 $ (8,406) $ 24,787
Income available for common stock$ 23,935 $ 576 $ (8,597) $ 13,399
Net income (loss) per
common share (a) $ 1.51 $ 0.04 $ (0.53) $ 0.82
(a) Quarterly earnings per share may not total to the amounts reported for
the year since the computation is based on weighted average common shares
outstanding during each quarter.
17
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. ACCOUNTING POLICIES
A. Principles of Consolidation
The consolidated financial statements include the accounts of WICOR,
Inc., (WICOR or the Company) and its wholly-owned subsidiaries: Wisconsin Gas
Company (Wisconsin Gas), Sta-Rite Industries, Inc. (Sta-Rite), and SHURflo
Pump Manufacturing Co. (Shurflo). All appropriate intercompany transactions
have been eliminated. Certain amounts in financial statements of prior years
have been reclassified to conform to the presentation of the current year.
B. Business
Wisconsin Gas is a public utility engaged in the distribution of
natural gas throughout Wisconsin. Most of its revenues, however, are derived
from gas delivered in southeastern Wisconsin. Wisconsin Gas is subject to
regulation by the Public Service Commission of Wisconsin (PSCW) and gives
recognition to ratemaking policies substantially in accordance with the
Federal Energy Regulatory Commission (FERC) System of Accounts.
Sta-Rite manufactures pumps and water processing equipment and sells
its products in approximately 110 countries.
Shurflo, which merged with the Company during the third quarter of 1993
(See Note 2), manufactures pumps for the food service, recreational vehicle,
marine, industrial and water purification markets.
C. Gas Distribution Revenues and Purchased Gas Costs
Utility billings are rendered on a cycle basis. Revenues include
estimated amounts accrued for service provided but not yet billed.
Wisconsin Gas' rate schedules contain purchased gas adjustment (PGA)
provisions which permit the recovery of actual purchased gas costs incurred.
The difference between actual gas costs incurred and costs recovered through
rates, adjusted for inventory activity, is deferred as a current asset or
liability. The deferred balance is returned to or recovered from customers at
intervals throughout the year and any residual balance at the annual October
31 reconciliation date is subsequently refunded to or recovered from
customers.
The PSCW is currently permitting Wisconsin Gas to recover pipeline
supplier take-or-pay settlement costs, allocating a portion of the direct-
billed costs to each customer class, including transportation customers.
D. Plant and Depreciation
Gas distribution property, plant and equipment is stated at original
cost, including overhead allocations. Upon ordinary retirement of plant
assets, their cost plus cost of removal, net of salvage, is charged to
accumulated depreciation, and no gain or loss is recognized.
The depreciation of Wisconsin Gas' assets is computed using straight-
line rates over estimated useful lives and considers salvage value. These
rates have been consistently used for ratemaking purposes. The composite
rates are 4.5% for 1994 and 4.7% for 1993 and 1992. Depreciation of
manufacturing property is calculated under the straight-line method over the
estimated useful lives of the assets (3 to 10 years for equipment and 30
years for buildings) and is primarily reported as a cost of sales.
E. Regulatory Accounting and Deferred Charges
The Company and Wisconsin Gas account for their regulated operations in
accordance with Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation." This statement
sets forth the application of generally accepted accounting principles to
those companies whose rates are determined by an independent third-party
regulator. The economic effects of regulation can result in regulated
companies recording costs that have been or are expected to be allowed in the
ratemaking process in a period different from the period in which the costs
would be charged to expense by an unregulated enterprise. When this occurs,
costs are deferred as assets in the balance sheet (regulatory assets) and
recorded as expenses as those same amounts are reflected in rates.
Additionally, regulators can impose liabilities upon a regulated company for
amounts previously collected from customers and for amounts that are expected
to be refunded to customers (regulatory liabilities).
18
The amounts recorded as regulatory assets and regulatory liabilities in
the Consolidated Balance Sheet at December 31, 1994 and 1993 are as follows:
(Thousands of Dollars) 1994 1993
-------------------------------------- ---------- ----------
Regulatory assets:
Deferred environmental costs $ 41,942 $ 41,641
Income tax-related amounts due from
customers (Note 3) 3,711 5,650
Postretirement benefit costs (Note 9) 47,832 51,561
Gas transition costs 7,411 15,485
Other 16,000 14,499
---------- ----------
$ 116,896 $ 128,836
========== ==========
Regulatory liabilities:
Income tax-related amounts due to
customers (Note 3) $ 18,792 $ 21,762
Pension costs (Note 9) 22,333 22,808
Refundable gas costs 18,058 15,596
Other 14,469 4,658
---------- ----------
$ 73,652 $ 64,824
========== ==========
Consistent with PSCW regulation, Wisconsin Gas has capitalized computer
systems development costs which are to be amortized over a five- to ten- year
period, generally as the respective systems become operational.
Wisconsin Gas is precluded from discontinuing service to residential
customers within its service area during a certain portion of the heating
season. Any differences between doubtful account provisions based on actual
experience and provisions allowed for ratemaking purposes by the PSCW are
deferred for later recovery in rates as a cost of service. The most recent
PSCW rate order provides for a $13.9 million allowable annual provision for
doubtful accounts, including amortization of prior deferred amounts. See
Notes 7 and 9 for discussion of additional deferred charges.
F. Income Taxes
The Company files a consolidated Federal income tax return and
allocates Federal current tax expense or credits to each subsidiary based on
its respective separate tax computation. Beginning with 1992, the Company has
provided deferred income taxes in accordance with SFAS 109 "Accounting for
Income Taxes," to reflect tax effects of reporting book and taxable income in
different periods (See Note 3).
For Wisconsin Gas, investment tax credits were recorded as a deferred
credit on the balance sheet and are being amortized to income over the
applicable service lives of the related properties in accordance with
regulatory treatment.
G. Net Income per Common Share
Net income per common share is based on the weighted average number of
shares. Employee stock options are not recognized in the computation of
earnings per common share as they are not materially dilutive.
H. Manufacturing Inventories
Approximately 49% and 54% of manufacturing inventories, in 1994 and
1993, respectively, are priced using the last-in, first-out (LIFO) method
(not in excess of market), with the remaining inventories priced using the
first-in, first-out (FIFO) method.
If the (FIFO) method had been used exclusively, manufacturing
inventories would have been $8.4 million and $8.0 million higher at December
31, 1994 and 1993, respectively.
19
I. Cash Flows
The Company considers all highly liquid debt instruments purchased with
an original maturity of three months or less to be cash equivalents. Due to
the short maturity of these instruments, market value approximates cost.
The Company's dividends reinvested (pursuant to its dividend
reinvestment plan) totalled $3.2 million, $2.6 million and $2.4 million for
1994, 1993, and 1992, respectively.
For purposes of the Consolidated Statements of Cash Flows, income taxes
paid (net of refunds) and interest paid (excluding capitalized interest) were
as follows for each of the years ended December 31, 1994, 1993 and 1992:
(Thousands of Dollars) 1994 1993 1992
-------------------------------- ---------- ---------- ----------
Income taxes paid $ 31,384 $ 16,106 $ 8,805
Interest paid $ 15,714 $ 17,678 $ 17,404
J. Derivative Financial Instruments
The Company, through a manufacturing subsidiary, has only limited
involvement with derivative financial instruments and does not use them for
trading or speculative purposes. Foreign exchange futures and forward
contracts are used to hedge foreign exchange exposure resulting from
intercompany purchases of products from United States plants. Gains and
losses from open contracts are deferred until recognized as part of the
purchase transaction. Such gains and losses included in net income in the
Consolidated Statements of Income for the years ended December 31, 1994, 1993
and 1992 were not material.
2. MERGERS AND ACQUISITIONS
On July 28, 1993, the Company completed its merger with Carr-Griff,
Inc. which became SHURflo Pump Manufacturing Co., a wholly-owned subsidiary
of WICOR, Inc. Shurflo designs, manufactures and sells pumps to the food
service, recreational vehicle, marine, industrial and water purification
markets. The Company issued approximately 0.9 million shares of common stock,
valued at approximately $27 million, for all the outstanding common stock
of Shurflo. This transaction was accounted for as a pooling of interests.
3. INCOME TAXES
In the fourth quarter of 1992, the Company adopted SFAS No. 109,
"Accounting for Income Taxes," retroactive to January 1, 1992. Under the
liability method prescribed by SFAS No. 109, deferred taxes are provided
based upon enacted tax laws and rates applicable to the periods in which the
taxes become payable. This adoption resulted in a net loss from the
cumulative effect of the change in accounting principle of $1.8 million for
the nonregulated subsidiaries. Changes in Wisconsin Gas' deferred income
taxes arising from the adoption represent amounts recoverable or refundable
through future rates and have been recorded as regulatory assets and
liabilities on the balance sheet.
The current and deferred components of income tax expense for each of
the years ended December 31, are as follows:
20
(Thousands of Dollars) 1994 1993 1992
---------------------------- ---------- ---------- ----------
Current
Federal $ 23,516 $ 18,576 $ 3,818
State 5,816 4,742 1,405
Foreign 1,627 834 800
---------- ---------- ----------
Total Current 30,959 24,152 6,023
---------- ---------- ----------
Deferred
Federal (11,247) (6,432) 5,974
State (2,012) (961) 1,588
Foreign (388) 717 (36)
---------- ---------- ----------
Total Deferred (13,647) (6,676) 7,526
---------- ---------- ----------
Total Provision $ 17,312 $ 17,476 $ 13,549
========== ========== ==========
The provision for income taxes differs from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate
to pretax income as a result of the following differences:
(Thousands of Dollars)
Year ended December 31, 1994 1993 1992
--------------- ---------------- ----------------
Statutory U.S. tax rates $17,670 35.0% $16,376 35.0% $12,346 34.0%
State income taxes, net 2,518 5.0 2,326 5.0 1,841 5.1
Excess of foreign (benefit)
provision over U.S. stat-
utory tax rate (174) (0.3) 886 1.9 843 2.3
Investment credit restored (461) (0.9) (473) (1.0) (502) (1.4)
Excess deferred tax
amortization (505) (1.0) (532) (1.1) (507) (1.4)
Settlement of disputed
tax matters (998) (2.0) - - - -
Other, net (738) (1.5) (1,107) (2.4) (472) (1.3)
---------------- ---------------- ----------------
Effective Tax Rates $17,312 34.3% $17,476 37.4% $13,549 37.3%
================ ================ ================
/TABLE
21
The components of deferred income tax assets and liabilities at
December 31, 1994 and 1993 are as follows:
(Thousands of Dollars) 1994 1993
---------------------------------- ---------- ----------
Deferred Income Tax Assets
Recoverable gas costs $ 7,258 $ 5,928
Inventory 1,935 (2,052)
Deferred compensation 2,026 1,873
Other 4,321 4,256
---------- ----------
$ 15,540 $10,005
========== ==========
Deferred Income Tax Liabilities
Property related $ 41,054 $ 37,496
Systems development costs 13,675 15,576
Investment tax credit (5,416) (5,725)
Gas transition costs 2,974 5,633
Postretirement benefits (8,059) (5,503)
Deferred compensation (3,055) (2,747)
Pension benefits 2,842 2,249
Other (1,693) (1,101)
---------- ----------
$ 42,322 $ 45,878
========== ==========
4. SHORT-TERM BORROWINGS
As of December 31, 1994 and 1993, the Company had total unsecured lines
of credit available from banks of $206.5 million and $183.4 million,
respectively. These borrowing arrangements may require the maintenance of
average compensating balances, which are generally satisfied by balances
maintained for normal business operations, and may be withdrawn at any time.
December 31,
(Thousands of Dollars) 1994 1993
-------------------------------- ---------- ----------
Notes payable to banks
U.S. subsidiaries $ 100 $ 3,600
Non-U.S. subsidiaries 16,835 14,218
Commercial paper - U.S. 94,571 117,100
---------- ----------
$ 111,506 $ 134,918
========== ==========
Weighted average interest rates
on debt outstanding at end of year:
Notes payable to banks
U.S. subsidiaries 7.5% 4.1%
Non-U.S. subsidiaries 6.2% 5.3%
Commercial paper - U.S. 5.9% 3.4%
/TABLE
22
5. LONG-TERM DEBT
In September 1993, Wisconsin Gas issued $45 million of 6.6% Notes due
in 2013, the proceeds of which were used to refinance $45 million of first
mortgage bonds which have higher average interest rates. There were no
issuances of long-term debt in 1992. Substantially all gas distribution and
certain manufacturing property and plant is subject to first mortgage liens.
Maturities and sinking fund requirements during the succeeding five years on
all long-term debt total $4.9 million, $4.7 million, $58.3 million, $42.8
million and $2.8 million in 1995, 1996, 1997, 1998 and 1999, respectively.
6. RESTRICTIONS
A November 1993 rate order issued by the PSCW sets an equity range of
43% to 50% for the utility and also requires Wisconsin Gas to request PSCW
approval prior to the payment of dividends on its common stock to WICOR if
the payment would reduce its common equity (net assets) below 43% of total
capitalization (including short-term debt). Under this requirement, $22.2
million of Wisconsin Gas' net assets at December 31, 1994, plus future
earnings, were available for such dividends without PSCW approval. In
addition, the PSCW must also approve any dividends in excess of $16 million
for any 12 month period beginning November 1 if such dividends would dilute
Wisconsin Gas' total equity below 48.43% of its total capitalization.
Wisconsin Gas paid $4 million in dividends in November 1994 and expects to
pay $16 million in dividends for the 12 months ending October, 1995.
In connection with its long-term debt agreements, Sta-Rite is subject
to restrictions on working capital, shareholder's equity and debt. These
agreements also limit the amount of retained earnings available for the
payment of cash dividends to WICOR and for certain investments. At December
31, 1994, $8.5 million of Sta-Rite net assets plus 50% of its future earnings
were available for payment of dividends to WICOR.
Combined restricted common equity of the Company's subsidiaries totaled
$234.1 million under the most restrictive provisions as of December 31, 1994;
accordingly, $57.4 million of consolidated retained earnings is available for
payment of dividends.
Historically, the PSCW has imposed restrictions on public utility
holding companies, including WICOR, relating to future nonutility
investments. In January 1992, the PSCW approved amendments to limitations set
on the Company. The PSCW order states that Wisconsin Gas should remain the
predominant business, generally as measured by equity, within the holding
company system. The amount allowable for future nonutility investment at
December 31, 1994 was $78.7 million. Also, nonutility subsidiaries can borrow
additional amounts for acquisitions; however, if debt for the consolidated
nonutility entities exceeds 40% of total capitalization for these entities,
further PSCW actions may be necessary.
7. COMMITMENTS AND CONTINGENCIES
A. Gas Supply
Wisconsin Gas has agreements for firm pipeline and storage capacity
that expire at various dates through 2008. The aggregate amount of required
payments under such agreements totals approximately $1,040 million, with
annual required payments of $132 million in 1995, $130 million in 1996, $126
million in 1997, $111 million in 1998 and $108 million in 1999. Wisconsin
Gas' total payments of fixed charges under all agreements were $130.4 million
in 1994, $133.9 million in 1993 and $83.5 million in 1992. The purchased gas
adjustment provisions of Wisconsin Gas' rate schedules permit the recovery of
gas costs from its customers. In 1992, the FERC issued Order No. 636 that,
among other things, mandated the unbundling of interstate pipeline sales
service and established certain open access transportation regulations that
became effective beginning in the 1993-94 heating season. Order No. 636
permits pipeline suppliers to pass through to Wisconsin Gas any prudently
incurred transition costs, such as unrecovered gas costs, gas supply
realignment costs and stranded investment costs. Wisconsin Gas estimates its
portion of such costs from all of its pipeline suppliers would approximate
$37.9 million based upon prior filings with FERC by the pipeline suppliers.
The pipeline suppliers will continue to file quarterly with the FERC for
recovery of actual costs incurred.
23
The FERC has allowed ANR Pipeline Company to recover capacity and
"above market" supply costs associated with quantities purchased from Dakota
Gasification Company ("Dakota") under a long-term contract expiring in the
year 2009. Consistent with guidelines set forth in Order No. 636 ANR has
allocated 90% of Dakota costs to firm transportation service recoverable
through a reservation rate surcharge and 10% to interruptible service.
Pending a final settlement with all affected parties, ANR currently recovers
the difference between costs paid to Dakota and the current market price.
Based on Wisconsin Gas contracted quantities with ANR, Wisconsin Gas is
currently paying approximately $500,000 per month of Dakota costs. This
amount varies month-to-month and across years based on the spread between ANR
contract terms with Dakota and the market indices for pricing spot gas.
Transition costs billed to Wisconsin Gas are being recovered from
customers under the purchased gas provisions within its rate schedules.
Assuming no drastic changes in the market for natural gas, Wisconsin Gas does
not expect transition costs to significantly affect the total cost of gas to
its customers because (1) Wisconsin Gas will purchase its wellhead gas
supplies based upon market prices that should be below the cost of gas
previously embedded in the bundled pipeline sales service and (2) many
elements of transition costs were previously embedded in the rates for the
pipelines' bundled sales service. The unbundling of pipeline sales service
requires Wisconsin Gas to contract directly and separately for wellhead gas
supply and firm transportation services. As a result of FERC Order No. 636,
Wisconsin Gas has contracted directly for underground storage in 1993.
B. Capital Expenditures
Certain commitments have been made in connection with 1995 capital
expenditures. Wisconsin Gas capital expenditures for 1995 are estimated at
$50 million. Manufacturing capital expenditures for 1995 are estimated at $20
million.
C. Environmental Matters
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 remediation 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 remediation
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 Wisconsin Department of Natural Resources (WDNR) issued a Probable
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 remedial actions for recommendation to the WDNR. This
information will be prepared in the first quarter of 1995. Barring unforeseen
delays, expenditures by Wisconsin Gas on remediation work will commence in
1995 and increase in future years as plan approvals are obtained.
Expenditures over the next three years are expected to total approximately
$20 million. Although most of the work and the cost are expected to be
incurred in the first few years of the plan, monitoring of sites and other
necessary actions may be undertaken for up to 30 years.
In March 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 has been offset by a deferred charge to a regulatory
24
asset. Certain related investigation costs incurred to date are currently
being recovered in utility rates. However, any incurred costs not yet
recovered in rates are not allowed by the PSCW to earn a return. As of
December 31, 1994, $4.0 million of such costs had been incurred.
On April 18, 1994, lawsuits were filed in Superior Court in Alameda
County, California, by the Attorney General of the State of California and
two environmental groups against four submersible pump manufacturers,
including Sta-Rite. The suit alleges that the four manufacturers have
produced and sold pumps with brass components which leach levels of lead in
excess of the levels permitted under California law. The lawsuits seek, among
other remedies, injunctive relief and unspecified monetary penalties. Sta-
Rite and the other named defendants dispute the allegations made in the
lawsuits and Sta-Rite intends to vigorously defend itself against the
actions. Based upon its investigation and the reserves established, the
Company believes resolution of the matter will not have a material, adverse
effect upon its results of operations or financial condition.
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 have caused, or contributed to, the contamination of a
Deerfield, Wisconsin, municipal well and surrounding property. The population
of Deerfield is approximately 1,260 people. Based upon the current
investigation and reserves established, the Company believes that the
resolution of this matter will not have a material, adverse effect upon its
results of operations or financial condition.
D. Other
The Company is party to various legal proceedings arising in the
ordinary course of business which are not expected to have a material effect
on the financial statements of the Company.
8. COMMON STOCK AND OTHER PAID-IN CAPITAL
As of December 31, 1994, 16,918,004 shares of common stock were issued
and outstanding and 3,112,806 shares were reserved for issuance under the
Company's dividend reinvestment, stock and incentive savings plans. In
addition, 20,041,872 shares are reserved pursuant to the Company's
shareholder rights plan.
Under certain circumstances, each right entitles the shareholder to
purchase one common share at an exercise price of $75, subject to adjustment.
The rights are not exercisable until ten business days after a person or
group announces a tender offer or exchange offer which would result in their
acquiring ownership of 20% or more of the Company's outstanding common stock
or after a person or group acquires at least 20% of the Company's outstanding
common shares. If, after 20% or more of the outstanding shares of WICOR
common stock is acquired by a person or group and the Company is then
acquired by that person or group, rights holders would be entitled to
purchase shares of common stock of the acquiring person or group having a
market value of two times the exercise price of the rights. The rights do not
have any voting rights and may be redeemed at a price of $.01 per right. The
rights expire on August 29, 1999.
9. BENEFIT PLANS
A. Pension Plans
The Company's subsidiaries have non-contributory pension plans which
cover substantially all their employees and include benefits based on levels
of compensation and years of service. Employer contributions and funding
policies are consistent with funding requirements of Federal law and
regulations. Commencing November 1, 1992, Wisconsin Gas pension costs or
credits have been calculated in accordance with SFAS No. 87 and are
recoverable from customers. Prior to this date, pension costs were
recoverable in rates as funded.
The following table sets forth the funded status of pension plans at
December 31, 1994 and 1993. The cumulative difference between the amounts
funded and the amounts based on SFAS No. 87 through November 1, 1992 is being
amortized over an eight-year period effective November 1, 1994 and totalled
$22.3 million at December 31, 1994.
25
Assets Exceed Accumulated Benefits
Accumulated Benefits Exceed Assets
----------------------- -----------------------
(Thousands of
Dollars) December 31, 1994 1993 1994 1993
----------------------------- ---------- ---------- ---------- ----------
Accumulated benefit obligation
Vested benefits $ (97,478) $(103,260) $ (5,825) $ (6,471)
Nonvested benefits (10,827) (11,198) (1,185) (87)
---------- ---------- ---------- ----------
(108,305) (114,458) (7,010) (6,558)
Effect of projected future
compensation levels (41,021) (49,961) (677) (537)
---------- ---------- ---------- ----------
Projected benefit obligation (149,326) (164,419) (7,687) (7,095)
Plan assets at fair value 197,278 228,091 209 176
---------- ---------- ---------- ----------
Plan assets greater(less) than
projected benefit obligation 47,952 63,672 (7,478) (6,919)
Unrecognized net (asset)
liability at September 30,
1985 being recognized over
approximately 16 years (16,777) (21,185) 1,035 1,104
Unrecognized prior
service costs 4,794 6,166 253 -
Unrecognized net (gain) loss (5,104) (19,073) 523 348
Additional minimum lia-
bility recorded - - (1,307) (1,037)
---------- ---------- ---------- ----------
Accrued pension asset
(liability) $ 30,865 $ 29,580 $ (6,974) $ (6,504)
========== ========== ========== ==========
The weighted average discount rate assumptions used in determining the
actuarial present value of the projected benefit obligation were 8.25%, 7.5%
and 7.75% for 1994, 1993 and 1992, respectively. For 1994, the expected long-
term rate of return on assets and long-term rate of compensation growth were
8.6% and 5.3%, respectively. For 1993 and 1992, the expected long-term rate
of return on assets and long-term rate of compensation growth were 8.2% and
6.0%, respectively.
Net pension costs for each of the years ended December 31, include the
following (income) expense:
(Thousands of Dollars) 1994 1993 1992
------------------------------------ ---------- ---------- ----------
Service costs $ 5,260 $ 5,658 $ 5,189
Interest costs on projected
benefit obligations 12,249 11,807 10,977
Actual loss (gain) on plan assets 1,225 (18,016) (16,085)
Net amortization and deferral (18,896) (69) (1,127)
Gain on early retirement incentive (268) - -
Amortization of regulatory liability (475) - -
Adjustment to utility funded amount - - 1,513
---------- ---------- ----------
Net pension (income) cost $ (905) $ (620) $ 467
========== ========== ==========
/TABLE
26
The decrease in pension cost from 1992 to 1993 was due to the adoption
by the PSCW of SFAS No. 87 for ratemaking purposes, effective November 1,
1992.
B. Postretirement Health Care and Life Insurance
In addition to providing pension benefits, the Company provides certain
health care and life insurance benefits for retired employees when they reach
normal retirement age while working for the Company. Wisconsin Gas funds the
accrual annually based on the maximum tax deductible amount.
Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers
Accounting for Postretirement Benefits Other Than Pensions", for its retiree
benefit plans. Under SFAS No. 106, the Company is required to accrue the
estimated cost of retiree benefit payments, other than pensions, during the
employees' active service period. Wisconsin Gas, as mandated by the PSCW,
recognized the accumulated benefit obligation and a related regulatory asset
of $54.1 million at adoption. Amortization of the regulatory asset is
recoverable in its rates over a 20-year period. Sta-Rite recognized such
amounts as a cumulative effect. Accordingly, the cumulative effects for the
Company of adopting SFAS No. 106 as of December 31, 1992, were an increase in
the accumulated postretirement benefit obligation (APBO) of $65.0 million and
a decrease in 1992 net earnings of $6.2 million ($0.40 per share).
Net postretirement health care and life insurance costs for each of the
years ended December 31, consisted of the following components:
(Thousands of Dollars) 1994 1993 1992
--------------------------------- ---------- ---------- ----------
Service cost $ 2,688 $ 2,813 $ 2,711
Interest cost on projected
benefit obligation 6,913 6,495 6,181
Actual loss (gain) on plan assets 147 (1,414) (895)
Amortization of regulatory asset 2,778 2,651 2,778
Net amortization and deferral (2,549) - -
Loss on early retirement incentive 3,650 - -
Adjustment to utility funded amount - - (2,108)
---------- ---------- ----------
Net postretirement benefit cost $ 13,627 $ 10,545 $ 8,667
========== ========== ==========
The 1994 postretirement benefit cost was increased due to the early
retirement of 131 employees under a voluntary early retirement incentive plan
for employees age 55 and over.
The following table sets forth the plans' funded status, reconciled
with amounts recognized in the Company's Statement of Financial Position at
December 31, 1994 and 1993, respectively.
Accumulated benefit obligation
(Thousands of Dollars) 1994 1993
-------------------------------- ---------- ----------
Retirees $ (54,088) $ (43,548)
Active employees (29,544) (52,327)
---------- ----------
Accumulated benefit obligation (83,632) (95,875)
Plan assets at fair value 30,666 25,753
---------- ----------
Accumulated benefit obligation
in excess of plan assets (52,966) (70,122)
Unrecognized prior service costs (16,347) -
Unrecognized actuarial gain (loss) (417) 2,612
---------- ----------
Accrued postretirement benefit $ (69,730) $ (67,510)
========== ==========
27
The postretirement benefit cost components for 1994 were calculated
assuming health care cost trend rates ranging up to 11% for 1994 and
decreasing to 5.5% over 9 to 24 years. The health care cost trend rate has a
significant effect on the amounts reported. Increasing the assumed health
care cost trend rates by one percentage point in each year would increase the
APBO as of December 31, 1994 by $12.0 million and the aggregate of the
service and interest cost components of postretirement expense by $1.6
million.
The assumed discount rate used in determining the actuarial present
value of the accumulated postretirement benefit obligation was 8.25% and
7.50% in 1994 and 1993, respectively. Plan assets are primarily invested in
equities and fixed income securities.
C. Retirement Savings Plans
Wisconsin Gas and Sta-Rite maintain various employee savings plans,
which provide employees a mechanism to contribute amounts up to 16% of their
compensation for the year. Company matching contributions may be made for up
to 5% of eligible compensation including 1% for the Employee Stock Ownership
Plan (ESOP). Total contributions were valued at $1.7 million in 1994, $1.8
million in 1993 and $1.6 million in 1992.
D. Employee Stock Ownership Plan
In November 1991, WICOR established an ESOP covering non-union
employees of Wisconsin Gas. The ESOP funds employee benefits of up to 1% of
compensation with Company common stock distributed through the ESOP.
The ESOP used the proceeds from a $10 million, 3-year adjustable rate
loan with a 6.56% interest rate at December 31, 1994, guaranteed by the
Company, to purchase 431,266 shares of original issue WICOR common stock. The
Company extended the adjustable rate loan, with similar terms, until November
3, 1995. Because the Company has guaranteed the loan, the unpaid balance
($6.4 million) is shown as long-term debt with a like amount of unearned
compensation being recorded as a reduction of common equity on the Company's
balance sheet.
The ESOP trustee is repaying the $10 million loan with dividends on
shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions
to the ESOP.
E. Stock Options
The Company has a total of 140 employees participating in one or more
of its common stock option plans. All options, except for 39,783 performance
options granted in 1993, which may vest in 1996, are currently exercisable at
prices not less than the fair market value on the date of grant and expire
not later than eleven years from the date of grant. Changes in stock options
outstanding for all plans were as follows:
1994 1993 1992
---------- ---------- ----------
Outstanding at January 1 794,925 763,342 712,392
Granted 135,800 180,350 178,900
Exercised/Canceled (266,092) (148,767) (127,950)
---------- ---------- ----------
Outstanding at December 31 664,633 794,925 763,342
========== ========== ==========
Exercise price per share $ 13.38- $ 10.38- $ 10.38-
$ 30.63 $ 27.31 $ 24.44
Available for future
grant at year-end 743,600 783,116 261,000
/TABLE
28
Under the Company's 1994 Long-Term Performance Plan, which was approved
by the shareholders in April 1994, awards up to 820,000 shares of common
stock may be granted. The shares may be granted as incentive stock options,
nonqualified stock options, stock appreciation rights or restricted stock.
Awards of restricted stock subject to performance vesting criteria have
been granted under the 1994 Plan. These awards will vest only if the Company
achieves certain financial goals over the three-year performance periods
1994-96. Recipients of restricted stock awards are not required to provide
consideration to the Company other than rendering service and have the right
to vote the shares and the right to receive dividends thereon.
A total of 23,800 restricted shares (net of cancellations) were issued
in 1994. Initially, the total market value of the shares is treated as
unearned compensation and is charged to expense over the vesting periods. For
both restricted stock and performance option shares, adjustments are made to
expense for changes in market value and achievement of financial goals.
Unearned compensation charged to expense in 1994 was $0.2 million for
performance options and $0.2 million for restricted stock.
F. Postemployment Benefit Plans
Effective January 1, 1994 the Company adopted SFAS No. 112,
"Employers' Accounting for Postemployment Benefits," which requires accrual
for all other postemployment benefits. Total postemployment benefit expense
in 1994 was $0.6 million including a one-time cumulative adjustment. The
incremental costs of adopting this statement are insignificant on an ongoing
basis.
10. FAIR VALUE OF FINANCIAL INSTRUMENTS
The fair value of the Company's long-term debt is estimated based on
the quoted market prices of U.S. Treasury issues having a similar term to
maturity, adjusted for the Company's bond rating and the present value of
future cash flows.
Because Wisconsin Gas operates in a regulated environment, shareholders
would probably not be affected by realization of gains or losses on
extinguishment of its outstanding fixed-rate debt. Realized gains would be
refunded to and losses would be recovered from customers through gas rates.
The estimated fair value of WICOR's long-term debt at December 31, is
as follows:
(Thousands of Dollars) 1994 1993
---------------------------- ---------- ----------
Carrying amount $161,669 $165,230
Fair value $159,318 $175,213
11. OTHER FINANCIAL INFORMATION
See page 28 for unaudited quarterly financial data. See Financial
Review on page 19 for industry segment data.
29
selected financial data -- 1994 to 1991
(Thousands of Dollars,
Except Per Share Amounts) 1994 1993 1992 1991
--------- --------- --------- ---------
Consolidated
Operating Data:
Operating revenues (7) $ 867,755 $ 849,528 $ 747,409 $ 716,767
Net income from continuing
operations $ 33,174 $ 29,313 $ 22,764 $ 22,966
Net income $ 33,174 $ 29,313 $ 14,799 $ 22,966
Common Stock Data:
Net income per share from
continuing operations $ 1.99 $ 1.82 $ 1.47 $ 1.54
Net income per common share (1) $ 1.99 $ 1.82 $ 0.96 $ 1.54
Cash dividends per common share(1) $ 1.58 $ 1.54 $ 1.50 $ 1.46
Book value per common share (1)(4) $ 17.23 $ 16.47 $ 15.60 $ 15.84
Balance Sheet Data:
Long-term debt $ 161,669 $ 165,230 $ 164,171 $ 168,366
Redeemable preferred stock - - - -
Common equity 291,468 270,276 245,287 243,453
--------- --------- --------- ---------
Capitalization at year-end $ 453,137 $ 435,506 $ 409,458 $ 411,819
========= ========= ========= =========
Total assets at year-end (2) $ 930,708 $ 933,726 $ 825,774 $ 670,250
========= ========= ========= =========
Other General Data:
Market-to-book ratio at
year-end (%)(4) 165 191 175 153
Dividend payout ratio (%)(2)(3)(5) 79.6 82.2 96.1 89.0
Yield at year-end (%) 5.6 5.0 5.6 6.1
Return on average common
equity (%)(2)(3)(6) 11.6 11.2 9.2 9.5
Price/earnings ratio at
year-end (2)(3)(4) 14.3 17.3 18.5 15.7
Price range $ 25 1/2- $ 25 5/8- $ 22 7/8- $ 18 5/8-
$ 32 5/8 $ 32 7/8 $ 27 3/8 $ 24 3/8
Shareholders at year-end 16,517 17,091 17,780 18,503
Cash flow from operations $ 103,551 $ 3,401 $ 37,012 $ 50,413
Capital expenditures $ 55,051 $ 51,906 $ 71,873 $ 45,113
Employees at year-end 3,214 3,222 3,178 3,196
Debt/equity ratio at year-end 36/64 38/62 40/60 41/59
Gas Distribution Operations
Operating revenues $ 556,587 $ 574,835 $ 495,415 $ 474,702
Net income $ 18,896 $ 19,870 $ 18,060 $ 17,086
Capital expenditures $ 44,626 $ 42,253 $ 62,125 $ 34,473
Gas sold and transported (thousands
of dekatherms-MDth)
Residential 46,369 47,964 45,905 45,614
Commercial 18,598 19,060 17,840 17,861
Industrial firm 14,544 15,246 14,488 15,690
Industrial interruptible 28,217 20,849 17,388 17,440
Transported 11,908 17,408 21,379 19,658
--------- --------- --------- ---------
119,636 120,527 117,000 116,263
========= ========= ========= =========
/TABLE
30
selected financial data -- 1994 to 1991 (continued)
1994 1993 1992 1991
--------- --------- --------- ---------
Customers at year-end 495,129 485,103 470,956 460,549
Customers served per employee 419 352 331 323
Average cost of gas per
Dth purchased $ 3.34 $ 3.76 $ 3.34 $ 3.18
Average annual residential bill $ 719 $ 779 $ 712 $ 677
Average use per residential
customer (Dth) 110 116 115 117
Degree days 6,431 6,775 6,683 6,416
% colder (warmer) than normal (9.0) (4.1) (6.4) (10.8)
Manufacturing Operations (2)(4)
Operating revenues $ 311,168 $ 274,693 $ 251,994 $ 242,065
International and export sales
as a % of total sales 37 34 34 31
Net income (3) $ 14,278 $ 9,443 $ 4,704 $ 5,880
Capital expenditures $ 10,425 $ 9,653 $ 9,748 $ 10,640
/TABLE
31
selected financial data 1990 to 1987
(Thousands of Dollars,
Except Per Share Amounts) 1990 1989 1988 1987
--------- --------- --------- ---------
Consolidated
Operating Data:
Operating revenues (7) $ 696,023 $ 741,218 $ 780,633 $ 699,418
Net income from continuing
operations $ 16,651 $ 33,359 $ 30,400 $ 17,215
Net income $ 16,651 $ 33,881 $ 34,163 $ 19,682
Common Stock Data:
Net income per share from
continuing operations $ 1.14 $ 2.30 $ 2.12 $ 1.22
Net income per common share (1) $ 1.14 $ 2.33 $ 2.38 $ 1.39
Cash dividends per common share(1) $ 1.42 $ 1.37 $ 1.32 $ 1.30
Book value per common share(1)(4)$ 16.12 $ 16.83 $ 15.82 $ 14.68
Balance Sheet Data:
Long-term debt $ 130,215 $ 122,639 $ 133,034 $ 127,833
Redeemable preferred stock - - - 8,000
Common equity 237,407 244,351 227,080 207,658
--------- --------- --------- ---------
Capitalization at year-end $ 367,622 $ 366,990 $ 360,114 $ 343,491
========= ========= ========= =========
Total assets at year-end (2) $ 651,559 $ 620,548 $ 565,967 $ 536,998
========= ========= ========= =========
Other General Data:
Market-to-book ratio at
year-end (%)(4) 122 148 123 117
Dividend payout ratio (%)(2)(3)(5) 117.2 55.0 52.0 91.1
Yield at year-end (%) 7.3 5.6 6.9 7.6
Return on average common
equity (%)(2)(3)(6) 6.8 14.3 15.3 9.3
Price/earnings ratio at
year-end (2)(3)(4) 17.2 10.7 8.2 12.4
Price range $ 181/4- $ 19 3/8- $ 15 5/8- $ 13 3/8-
$ 251/4 $ 25 3/8 $ 20 7/8 $ 21 7/8
Shareholders at year-end 19,463 20,509 21,611 23,010
Cash flow from operations $ 10,022 $ 94,623 $ 73,526 $ 41,237
Capital expenditures $ 37,529 $ 40,944 $ 48,295 $ 34,264
Employees at year-end 3,152 3,696 3,927 4,040
Debt/equity ratio at year-end 35/65 33/67 37/63 37/63
Gas Distribution Operations
Operating revenues $ 455,559 $ 441,477 $ 476,904 $ 424,069
Net income $ 13,195 $ 25,169 $ 23,223 $ 12,580
Capital expenditures $ 27,978 $ 25,813 $ 37,148 $ 24,344
Gas sold and transported
(thousands of dekatherms-MDth)
Residential 43,020 48,154 46,769 39,369
Commercial 16,319 18,089 17,012 14,510
Industrial firm 15,106 16,915 16,808 16,106
Industrial interruptible 16,620 5,475 3,752 4,714
Transported 16,565 29,158 29,639 26,129
--------- --------- --------- ---------
107,630 117,791 113,980 100,828
========= ========= ========= =========
/TABLE
32
selected financial data -- 1990 to 1987 (continued)
1990 1989 1988 1987
--------- --------- --------- ---------
Customers at year-end 452,906 445,771 439,063 432,509
Customers served per employee 321 319 311 288
Average cost of gas per
Dth purchased $ 3.30 $ 3.15 $ 3.68 $ 3.74
Average annual residential bill $ 670 $ 758 $ 770 $ 660
Average use per residential
customer (Dth) 113 129 127 108
Degree days 6,103 7,382 7,124 6,185
% colder (warmer) than normal (16.0) 1.5 (2.0) (14.8)
Manufacturing Operations (2)(4)
Operating revenues $ 240,464 $ 300,156 $ 303,729 $ 275,349
International and export sales
as a % of total sales 27 24 22 20
Net income (3) $ 3,456 $ 8,712 $ 10,940 $ 7,102
Capital expenditures $ 9,551 $ 15,131 $ 11,147 $ 9,920
/TABLE
33
selected financial data -- 1986 to 1984
(Thousands of Dollars,
Except Per Share Amounts) 1986 1985 1984
--------- --------- ---------
Consolidated
Operating Data:
Operating revenues (7) $ 761,104 $ 853,175 $ 839,965
Net income from continuing operations $ 17,363 N/A N/A
Net income $ 19,780 $ 24,900 $ 24,145
Common Stock Data:
Net income per share from
continuing operations $ 1.34 N/A N/A
Net income per common share (1) $ 1.53 $ 1.98 $ 1.95
Cash dividends per common share (1) $ 1.28 $ 1.18 $ 1.11
Book value per common share (1)(4) $ 15.74 $ 13.81 $ 12.97
Balance Sheet Data:
Long-term debt $ 144,495 $ 154,159 $ 131,750
Redeemable preferred stock 14,267 18,200 19,000
Common equity 203,477 173,941 160,690
--------- --------- ---------
Capitalization at year-end $ 362,239 $ 346,300 $ 311,440
========= ========= =========
Total assets at year-end (2) $ 542,036 $ 531,192 $ 499,734
Other General Data:
Market-to-book ratio at year-end (%)(4) 134 112 104
Dividend payout ratio (%)(2)(3)(5) 79.9 57.0 54.0
Yield at year-end (%) 6.1 7.6 8.3
Return on average common equity (%)(2)(3)(6) 10.5 14.6 15.1
Price/earnings ratio at year-end (2)(3)(4) 13.8 7.8 6.9
Price range $ 14 3/4- $ 13- $ 10 1/8-
$ 23 $ 15 3/4 $ 13 7/8
Shareholders at year-end 23,987 26,083 28,581
Cash flow from operations $ 63,583 $ 46,342 $ 45,801
Capital expenditures $ 36,498 $ 32,381 $ 32,273
Employees at year-end 3,932 3,641 3,513
Debt/equity ratio at year-end 40/60 45/55 42/58
Gas Distribution Operations
Operating revenues $ 531,970 $ 637,167 $ 640,508
Net income $ 14,338 $ 17,460 $ 17,348
Capital expenditures $ 28,353 $ 23,208 $ 22,161
Gas sold and transported (thousands
of dekatherms-MDth)
Residential 42,837 44,813 43,961
Commercial 15,292 16,394 15,007
Industrial firm 19,379 22,541 22,969
Industrial interruptible 22,403 31,675 34,056
Transported 5,502 1,716 -
--------- --------- ---------
105,413 117,139 115,993
========= ========= =========
Customers at year-end 426,481 420,967 415,297
Customers served per employee 277 279 268
Average cost of gas per Dth purchased $ 3.75 $ 4.13 $ 4.16
Average annual residential bill $ 761 $ 838 $ 849
Average use per residential customer (Dth) 120 128 127
Degree days 6,788 7,325 6,844
% colder (warmer) than normal (7.3) (0.5) (7.0)
Manufacturing Operations (2)(4)
Operating revenues $ 229,134 $ 216,008 $ 199,457
International and export sales
as a % of total sales 16 12 14
Net income (3) $ 5,442 $ 7,440 $ 6,797
Capital expenditures $ 8,145 $ 9,173 $ 10,112
/TABLE
34
(1) Adjusted for a two-for-one stock split in March 1989.
(2) Includes continuing operations and discontinued operations up to the year
disposition was authorized.
(3) Before effects of 1992 accounting changes (See Note 2). Adjusted for
merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989.
(7) Includes revenues (in thousands) from discontinued operations from 1986
to 1989 of $58,209, $58,318, $63,552 and $56,318, respectively. Data
from 1985 and 1984 is not available.
N/A - Data not available.