1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10 - Q
/X/ QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 1995
or
/ / TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-7951
WICOR, Inc.
------------------------------------------------------
(Exact name of registrant as specified in its charter)
Wisconsin 39-134671
------------------------------- --------------------
(State or other jurisdiction of (I.R.S. Employee
incorporation or organization) Identification No.)
626 East Wisconsin Avenue
Post Office Box 334
Milwaukee, Wisconsin 53201
--------------------------------------
(Address of principal executive office)
(414) 291-7026
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(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15 (d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes \X\ No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at March 31, 1995
- -------------------------- ------------------------------
Common Stock, $1 Par Value 16,937,744
2
INTRODUCTION
- -----------------------------------------------------------------
WICOR, Inc. ("WICOR" or "Company"), a corporation organized and existing
under the laws of the State of Wisconsin, is an exempt holding company under
the Public Utility Holding Company Act of 1935. It is the parent of
Wisconsin Gas Company ("Wisconsin Gas"), a natural gas distribution public
utility; Sta-Rite Industries, Inc. ("Sta-Rite"), a manufacturer of pumps and
water processing equipment for the residential, irrigation and pool and spa
markets; and SHURflo Pump Manufacturing Co. ("SHURflo"), a manufacturer of
pumps and fluid-handling equipment for the food service, recreational
vehicle, marine, industrial and water purification markets.
CONTENTS
PAGE
------
PART I. Financial Information.... ...................... 1
Management's Discussion and Analysis of
Interim Financial Statements.................. 2-4
Consolidated Financial Statements of WICOR, Inc. (Unaudited):
-------------------------------------------------------------
Consolidated Statement of Income for the Three
Months Ended March 31, 1995 and 1994.......... 5
Consolidated Balance Sheet as of March 31, 1995
and December 31, 1994......................... 6-7
Consolidated Statement of Cash Flows for the Three
Months Ended March 31, 1995 and 1994.......... 8
Notes to Consolidated Financial Statements...... 9
PART II. Other Information............................... 10-11
Signatures...................................... 12
3
Part I - Financial Information
Financial Statements
--------------------
The consolidated statements included herein have been prepared without audit
pursuant to the rules and regulations of the Securities and Exchange
Commission. Certain information and footnote disclosures normally included
in financial statements prepared in accordance with generally accepted
accounting principles have been condensed or omitted pursuant to such rules
and regulations, although management believes that the disclosures are
adequate to make the information presented not misleading. These condensed
financial statements should be read in conjunction with the audited financial
statements and the notes thereto included in the latest WICOR, Inc. Annual
Report on Form 10-K for the year ended December 31, 1994.
In the opinion of management, the information furnished reflects all
adjustments, which in all circumstances were normal and recurring, necessary
for a fair statement of the results of operations for the interim periods.
Because of seasonal factors, the results of operations for the interim
periods presented are not indicative of the results to be expected for the
full calendar year.
4
Management's Discussion and Analysis
of Interim Financial Statements of
WICOR, Inc.
Results of Operations
- ---------------------
Consolidated net income for the first quarter of 1995 decreased by $3.4
million or 12% compared with the first quarter of 1994. This was primarily
due to gas distribution earnings which decreased by $3.3 million or 13%.
Consolidated net income for the first quarter of 1994 was the highest on
record.
The following factors had a significant effect on the results of operations
during the three-month period ended March 31, 1995.
Gas Distribution
- ----------------
Net income decreased by $3.3 million, or 13%, for the first quarter of 1995
compared with the first quarter of 1994. The decrease in net income for the
first quarter resulted primarily from decreased gas margins which was
partially offset by a decrease in operating expenses. Reduced gas margins in
1995 were due primarily to warmer than normal weather.
Revenues, margins and volumes are summarized below. Margin, defined as
revenues less cost of gas sold, is a better comparative performance indicator
than revenues because the mix of volumes between sales and transportation
service affects revenues but not margin. In addition, changes in the cost of
gas sold are flowed through to revenue under a gas adjustment clause with no
resulting effect on margin.
Three Months Ended
March 31,
--------------------- %
1995 1994 Change
-------- -------- ------
(Millions of Dollars)
- ---------------------
Gas Sales Revenues $ 190.3 $ 240.1 (21)
Cost of Gas Sold 115.2 153.3 (25)
-------- --------
Gas Sales Margin 75.1 86.8 (13)
Gas Transport Margin 2.2 2.1 5
-------- --------
Total Margin $ 77.3 $ 88.9 (13)
======== ========
(Millions of Therms)
- --------------------
Sales Volumes
Firm 358.5 401.3 (11)
Interruptible 93.6 85.5 8
Transportation Volume 38.3 34.7 10
-------- --------
Total Throughput 490.4 521.5 (6)
======== ========
Degree Days (Normal = 3,443) 3,168 3,663 (14)
======== ========
/TABLE
5
Total gas margins decreased by $11.6 million, or 13%, for the first quarter
of 1995 compared to the first quarter of 1994 primarily as a result of a 11%
decrease in firm sales volumes. The weather was 8% warmer than normal during
the first quarter of 1995 and 14% warmer than the same quarter in 1994.
Operations and maintenance expenses decreased by $6.2 million, or 18%,
compared with the first quarter of 1994. The decrease was due primarily to
employee benefits expense ($4.3 million, which includes a one-time charge of
$2.7 million relating to a 1994 early retirement program), conservation
programs expense ($.9 million), general office costs ($.5 million) and
uncollectible accounts expense ($.5 million). The reduction was partially
offset by increases in outside consultant services ($.6 million).
Manufacturing
- -------------
Manufacturing net income for the first quarter of $3.3 million was 2% lower
than the first quarter of 1994. Included in the first quarter earnings is a
gain of $841,000 ($.05 per share), after applicable income taxes, resulting
from the Company's sale of its minority interest in Filtron Technologies
Corporation.
Net sales were $76.8 million for the first quarter of 1995, down 2% from the
comparable period in 1994. International sales for the first quarter
continued their strong growth, increasing by $4.2 million to $30.5 million,
or 16% over the first quarter of 1994. The increase in international sales
was due primarily to new product sales in the European markets and strong
pool/spa product sales in the Australian markets. Domestic sales for the
first quarter decreased by $5.9 million, or 11%, over the same period of last
year. Strong domestic sales during the fourth quarter of 1994 increased
customer inventories, thus curtailing product demand in the first quarter of
1995. Dry weather during the period substantially reduced sales of sump and
drainer pumps, which had surged during the extremely wet weather the previous
year. Improvements were seen in the recreational vehicle, marine, industrial
and water purification markets
First quarter operating expenses increased by 3.5% primarily due to increased
international sales.
Non-Operating Income/Expense and Income Taxes
- ---------------------------------------------
Interest expense increased by $.4 million, or 10%, over the first quarter of
1994. The increase was due primarily to higher interest rates offset in part
by reduced borrowing levels.
Other income and expenses increased by $1.5 million over the first quarter of
1994. The largest component of this increase related to the sale of the
Company's investment in Filtron Technologies Corporation for an after-tax
gain of $841,000 ($.05 per share).
Income tax expense was $2.1 million lower for the first quarter of 1995,
compared to the same period last year, reflecting a decrease in pre-tax
income.
Financial Condition
- -------------------
Cash flow from operations for the first quarter of 1995 improved slightly by
$.8 million to $86.3 million compared to the first quarter of 1994.
6
The improvement is due primarily to pipeline refunds of $14.8 million (these
amounts are expected to be refunded to customers), offset in part by lower
net income and increased manufacturing inventories. Cash flow from changes
in both accounts receivable and accounts payable were offsetting and had
little impact on the quarter.
Capital expenditures for the three months ended March 31, 1995 increased $1.5
million to $10.2 million compared to the same period of the prior year.
Additional capital expenditures of $48.0 million are expected for the
remainder of 1995.
The first quarter, due to seasonal effects in each business, is typically a
period of cash generation for the gas distribution business and cash use for
the manufacturing operation. There will be a need for additional short-term
borrowing during the third and fourth quarters of 1995 to finance working
capital, primarily gas purchased for injection into storage.
Commercial paper of $9.0 million is classified as long-term debt as the
Company intends to refinance it on a long-term basis either through continued
short-term borrowing or available credit facilities.
The WICOR Plan 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. Beginning in
February of 1995, the WICOR Plan share requirements were met through open
market purchases of common stock.
7
WICOR, INC.
Consolidated Statement of Income (Unaudited)
[CAPTION]
Three Months Ended
March 31
----------------------------
(Thousands of Dollars) 1995 1994
------------ ------------
Operating Revenues:
Gas distribution............................. $ 192,483 $ 242,148
Manufacturing and Other...................... 76,821 78,477
------------ ------------
269,304 320,625
------------ ------------
Operating Expenses:
Cost of gas sold............................. 115,153 153,291
Manufacturing cost of sales.................. 55,791 56,182
Operating and maintenance.................... 45,968 51,614
Depreciation and amortization................ 7,091 7,330
Taxes, other than income taxes............... 2,453 2,764
------------ ------------
226,456 271,181
------------ ------------
Operating Income............................... 42,848 49,444
------------ ------------
Interest expense............................... (4,722) (4,299)
Other income and expenses...................... 1,714 219
------------ ------------
Income Before Income Taxes..................... 39,840 45,364
Income Taxes................................... 15,051 17,162
------------ ------------
Net Income..................................... $ 24,789 28,202
============ ============
Income Per Common Share........................ $ 1.46 $ 1.71
============ ============
Cash Dividends Per Common Share................ $ 0.40 $ 0.39
============ ============
Average Common Shares Outstanding (Thousands).. 16,933 16,478
The accompanying notes are an integral part of this statement.
8
WICOR, INC.
Consolidated Balance Sheet
March 31,
1995 December 31,
(Unaudited) 1994
Assets ------------- ------------
- ------ (Thousands of Dollars)
Current Assets:
Cash and cash equivalents......................... $ 23,671 $ 35,138
Accounts receivable, less allowance for
doubtful accounts of $13,083 and $9,233,
respectively.................................... 150,021 103,487
Accrued utility revenues.......................... 31,351 40,327
Manufacturing inventories......................... 65,384 60,239
Gas in storage, at weighted average cost.......... 3,364 38,050
Deferred income taxes............................. 15,640 15,540
Prepayments and other............................. 17,795 19,519
------------- ------------
307,226 312,300
Property, Plant and Equipment (less accumulated ------------- ------------
depreciation of $416,298 and $407,121,
respectively)................................... 415,251 415,563
------------- ------------
Deferred Charges and Other:
Systems development costs......................... 32,737 34,071
Deferred environmental costs...................... 41,527 41,942
Prepaid pension costs............................. 31,299 30,865
Gas transition costs.............................. 5,599 7,411
Other regulatory assets........................... 50,504 51,543
Other............................................. 33,423 37,013
------------- ------------
195,089 202,845
------------- ------------
$ 917,566 $ 930,708
============= ============
The accompanying notes are an integral part of this statement.
9
WICOR, INC.
Consolidated Balance Sheet
March 31,
1995 December 31,
(Unaudited) 1994
Liabilities and Capitalization ------------- ------------
- ------------------------------ (Thousands of Dollars)
Current Liabilities:
Accounts payable.................................. $ 53,570 $ 65,626
Refundable gas costs ............................. 71,784 18,058
Short-term borrowings............................. 20,034 111,506
Current portion of long-term debt................. 2,888 5,031
Accrued taxes..................................... 20,224 8,400
Accrued payroll and benefits...................... 15,215 15,141
Other............................................. 12,119 15,661
------------- ------------
195,834 239,423
------------- ------------
Deferred Credits and Other:
Deferred income taxes............................. 42,678 42,322
Environmental remediation costs................... 36,753 37,188
Postretirement benefit obligation................. 69,447 69,730
Unamortized investment tax credit................. 7,737 8,187
Gas transition costs.............................. 5,599 7,411
Other regulatory liabilities...................... 60,579 54,636
Other............................................. 20,241 18,674
------------- ------------
243,034 238,148
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Capitalization:
Long-term debt.................................... 168,448 161,669
Common stock...................................... 16,938 16,918
Other paid-in capital............................. 180,474 180,000
Retained earnings ................................ 119,433 101,418
Unearned compensation - ESOP and restricted stock. (6,595) (6,868)
------------- ------------
478,698 453,137
------------- ------------
$ 917,566 $ 930,708
============= ============
The accompanying notes are an integral part of this statement.
10
WICOR, INC.
Consolidated Statement of Cash Flows (Unaudited)
(Thousands of Dollars)
Three Months Ended
March 31,
-----------------------
1995 1994
---------- ----------
Operations:
Net income.......................................... $ 24,789 $ 28,202
Adjustments to reconcile net income to net
cash flows:
Depreciation and amortization..................... 11,837 11,918
Deferred income taxes............................. 256 1,440
Change in:
Receivables..................................... (37,558) (55,849)
Manufacturing inventories....................... (5,145) 1,431
Gas in storage.................................. 34,686 37,769
Other current assets............................ 163 (1,243)
Accounts payable................................ (12,056) 4,931
Refundable gas costs............................ 53,726 41,388
Accrued taxes................................... 13,385 12,348
Accrued payroll and benefits.................... 74 662
Other current liabilities....................... (3,542) 537
Other non-current assets and liabilities, net... 5,663 1,980
---------- ----------
86,278 85,514
---------- ----------
Investment Activities:
Capital expenditures.............................. (10,156) (8,625)
Proceeds from sale of investment.................. 5,099 -
Other ............................................ 45 45
---------- ----------
(5,012) (8,580)
---------- ----------
Financing Activities:
Change in short-term borrowings................... (82,284) (75,372)
Reduction in long-term debt ...................... (4,169) (2,085)
Issuance of long-term debt........................ - -
Issuance of common stock ......................... 494 2,427
Dividends paid on common stock, less
amounts reinvested ............................ (6,774) (5,671)
---------- ----------
(92,733) (80,701)
---------- ----------
Change in Cash and Cash Equivalents................... (11,467) (3,767)
Cash and Cash Equivalents at Beginning of Period...... 35,138 22,953
---------- ----------
Cash and Cash Equivalents at End of Period............ $ 23,671 $ 19,186
========== ==========
The accompanying notes are an integral part of this statement.
11
Notes to Consolidated Financial Statements (Unaudited):
- -------------------------------------------------------
1) At March 31, 1995 WICOR had borrowings of $16.2 million and
availability of $216.9 million under unsecured lines of credit with
several banks.
A total of $3.8 million of commercial paper, classified as short-term
borrowings, was outstanding as of March 31, 1995 at a weighted average
interest rate of 6.2%.
2) For purposes of the Consolidated Statement of Cash Flows, income taxes
paid, net of refunds, and interest paid (excluding capitalized
interest) were as follows:
For the Three Months
Ended March 31,
---------- ------------
1995 1994
---------- ----------
(Thousands of Dollars)
Income taxes paid $ 3,699 $ 6,735
Interest paid $ 4,175 $ 3,404
12
Part II - Other Information
Item 1. Legal Proceedings
Sta-Rite - On March 14, 1995 the U.S. Environmental Protection Agency
notified Sta-Rite and its former Fluid Controls subsidiary of their potential
liability under the Comprehensive Environmental Response, Compensation and
Liability Act (CERCLA) at a waste site located in Greer, South Carolina. As
a generator of certain substances, Sta-Rite and Fluid Controls have been
named (along with many other entities some of which are larger and some of
which are smaller than Sta-Rite) as potentially responsible parties, with
respect to this site. Sta-Rite is currently reviewing available records and
gathering information regarding this matter. Based upon available
information, the Company does not believe the costs it may incur will have a
material effect upon its operations. The Company is investigating whether
its general liability insurance provides coverage for any remediation costs
it may incur.
Details regarding other environmental litigation, claims and potential claims
were previously reported in the Company's Annual Report on Form 10-K for the
year ended December 31, 1994
13
Item 6. Exhibits and Reports on Form 8-K
- ----------------------------------------
(a) Exhibits
4.1 Extension of Revolving Credit Agreement dated March 10,
1995, among WICOR, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust and Savings Bank and M&I
Marshall and Ilsley Bank and Citibank, N.A., as agent.
4.2 Extension of Revolving Credit Agreement dated March 10,
1995, among Wisconsin Gas Company and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust and Savings Bank
and M&I Marshall and Ilsley Bank and Citibank, N.A., as
agent.
4.3 Extension of Revolving Credit Agreement dated March 10,
1995, among Sta-Rite and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust and Savings Bank and M&I
Marshall and Ilsley Bank and Citibank, N.A., as agent.
27 Financial data schedule.
(b) Reports on Form 8-K - There were no reports on Form 8-K filed for
the first quarter of 1995.
14
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WICOR, INC.
Dated: April 28, 1995 By: /s/ Joseph P. Wenzler
Joseph P. Wenzler
Vice President, Treasurer
and Chief Financial Officer
15
WICOR, Inc.
Exhibit Index - Form 10-Q
Exhibit No. Exhibit
- ----------- ---------------------------------------------
4.1 Extension of Revolving Credit Agreement dated
March 10, 1995, among WICOR, Inc. and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust
and Savings Bank and M&I Marshall and Ilsley Bank
and Citibank, N.A., as agent.
4.2 Extension of Revolving Credit Agreement dated
March 10, 1995, among Wisconsin Gas Company and
Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust and Savings Bank and M&I Marshall and
Ilsley Bank and Citibank, N.A., as agent.
4.3 Extension of Revolving Credit Agreement dated
March 10, 1995, among Sta-Rite and Citibank, N.A.,
Firstar Bank Milwaukee, N.A., Harris Trust and
Savings Bank and M&I Marshall and Ilsley Bank and
Citibank, N.A., as agent.
27 Financial data schedule