1
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
/X/ ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1996
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.
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(Exact name of registrant as specified in its charter)
Wisconsin 39-1346701
------------------------------- -------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
626 East Wisconsin Avenue
P.O. Box 334
Milwaukee, Wisconsin 53201
---------------------------------------- ---------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 414-291-7026
Securities registered pursuant to Section 12(b) of the Act:
Common Stock, $1 par value New York Stock Exchange
Associated Common Stock Purchase Rights New York Stock Exchange
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. X Yes No.
Indicate by check mark if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [ X ]
Aggregate market value of the voting stock held by non-affiliates of the
registrant: $638,392,028 at February 28, 1997.
Number of shares outstanding of each of the registrant's classes of common
stock, as of February 28, 1997:
Common Stock, $1 par value 18,413,709 shares
Documents Incorporated by Reference
WICOR, Inc. proxy statement dated March 13, 1997 (Part III)
WICOR, Inc. 1996 Annual Report to Shareholders (Parts I and II)
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TABLE OF CONTENTS
PAGE
PART I 1
Item 1. Business 1
(a) General Development of Business 1
(b) Financial Information about Industry Segments 1
(c) Narrative Description of Business 1
1. Energy.. 1
A. General 1
B. Gas Markets and Competition 2
C. Gas Supply, Pipeline Capacity and Storage 3
(1) General 3
(2) Pipeline Capacity and Storage 3
(3) Term Gas Supply 4
(4) Spot Market Gas Supply 4
D. Wisconsin Regulatory Matters 4
(1) Rate Matters 4
(2) Transition Cost Recovery Policy 5
(3) Gas Cost Recovery Mechanism 5
(4) Service Area Expansion 5
(5) Changing Regulatory Environment 5
E. Employees 5
2. Manufacturing of Pumps, Fluid
Processing and Filtration Equipment 6
A. General 6
B. U.S. Operations 6
C. International Operations 6
D. Raw Materials and Patents 7
E. Employees 7
Item 2. Properties 7
(a) Capital Expenditures 7
(b) Energy 7
(c) Manufacturing of Pumps, Fluid Processing and Filtration
Equipment 7
Item 3. Legal Proceedings 8
Item 4. Submission of Matters to a Vote of Security Holders 9
Executive Officers of the Registrant 9
PART II. 10
Item 5. Market for Registrant's Common Equity
and Related Stockholder Matters 10
Item 6. Selected Financial Data 11
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition 11
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TABLE OF CONTENTS (continued)
PAGE
Item 8. Financial Statements and Supplementary Data 11
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 11
PART III. 12
Item 10. Directors and Executive Officers Of the Registrant 12
Item 11. Executive Compensation 12
Item 12. Security Ownership of Certain
Beneficial Owners and Management 12
Item 13. Certain Relationships and Related Transactions 12
PART IV. 12
Item 14. Exhibits, Financial Statement Schedules,
and Reports on Form 8-K 12
(a) Documents Filed as Part of the Report 12
1. All Financial Statements and Financial
Statement Schedules 12
2. Financial Statement Schedules 12
3. Exhibits 12
(b) Reports on Form 8-K 15
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PART I
Item 1. BUSINESS
(a) General Development of Business
WICOR, Inc. (the "Company" or "WICOR") is a diversified holding company
with two principal business groups: energy services and pump manufacturing,
with the following subsidiaries engaged in the indicated businesses.
Wisconsin Gas Company ("Wisconsin Gas") engages in retail sales and
distribution of natural gas. WICOR Energy Services Company ("WICOR Energy")
sells energy and energy-related services. FieldTech, Inc. ("FieldTech")
performs contract meter reading, manages field operations and provides
billing services for gas, electric and water utilities. Sta-Rite
Industries, Inc. ("Sta-Rite"), SHURFlo Pump Manufacturing Co. ("SHURflo")
and Hypro Corporation ("Hypro") are manufacturers of pumps and fluid
processing and filtration equipment. WICOR Industries, Inc. ("WICOR
Industries") is an intermediate holding company which was formed during 1996
to hold the stock of the manufacturing subsidiaries. The Company is a
Wisconsin corporation and maintains its principal executive offices in
Milwaukee, Wisconsin.
The Company was incorporated in 1980, when it acquired all the
outstanding common stock of Wisconsin Gas through a merger. The Company
acquired all of the outstanding common stock of Sta-Rite, SHURflo and Hypro
through acquisitions in 1982, 1993, and 1995 respectively.
In March 1995, the Company formed WICOR Energy, as a wholly-owned
subsidiary. WICOR Energy, is in the business of selling natural gas
purchasing, energy and price risk management services.
In July 1995, the company acquired all of the outstanding stock of
Hypro Corporation through a cash purchase. Hypro is a manufacturer of pumps
and fluid-handling equipment for the agricultural, high-pressure cleaning,
marine, industrial and firefighting markets.
In January 1996, the Company acquired an 80% ownership interest in
Hydro-Flow Filtration Systems, Inc. ("Hydro-Flow"). Hydro-Flow is a
California-based manufacturer of disposable in-line and cartridge filtration
devices for use in water treatment applications. Hydro-Flow operates as a
subsidiary of Sta-Rite.
In October 1996, the Company incorporated FieldTech, which had been a
division of Wisconsin Gas. FieldTech's services include contract meter
reading, installation of metering devices, meter reading training,
management of utility field operations and billing for gas, electric and
water utilities.
In December 1996, the Company formed WICOR Industries as an
intermediate manufacturing holding company for the purpose of improving the
Company's ability to raise debt capital for its manufacturing business at a
lower cost, to secure additional flexibility in structuring borrowings, and
to provide better access to capital markets.
At December 31, 1996, the Company (including subsidiaries) had 3,475
employees
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(b) Financial Information About Industry Segments
Refer to the section entitled "Financial Review-General Overview" set
forth in the Company's 1996 Annual Report to Shareholders. That section is
included in Exhibit 13 hereto and is hereby incorporated herein by
reference.
(c) Narrative Description of Business
1. ENERGY
A. General
Wisconsin Gas is the largest natural gas distribution public utility in
Wisconsin. At December 31, 1996, Wisconsin Gas distributed gas to
approximately 513,000 residential, commercial and industrial customers in
514 communities throughout Wisconsin. Wisconsin Gas' service area has an
estimated population of approximately 2,000,000 based on State of
Wisconsin's estimates for 1996. Wisconsin Gas is subject to the jurisdic-
tion of the Public Service Commission of Wisconsin ("PSCW") as to various
phases of its operations, including rates, service and issuance of
securities. See "Wisconsin Regulatory Matters."
WICOR Energy and FieldTech are in their second year of operations, and
their results are not material to the Company's financial position or
results of operations.
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B. Gas Markets and Competition
Wisconsin Gas' business is highly seasonal, particularly as to
residential and commercial sales for space heating purposes, with a
substantial portion of its sales occurring in the winter heating season.
Competition in varying degrees exists between natural gas and other forms of
energy available to consumers. Most of Wisconsin Gas' large commercial and
industrial customers are dual-fuel customers that are equipped to switch
between natural gas and alternate fuels. Wisconsin Gas offers
transportation services for these customers to enable them to reduce their
energy costs and use gas rather than other fuels. Under gas transportation
agreements, customers purchase gas directly from producers or other sellers
and arrange with pipelines and Wisconsin Gas to have the gas transported to
the facilities where it is used. Wisconsin Gas also offers to sell gas at
prices that are competitive with third-party sellers. Wisconsin Gas earns
the same margin (difference between revenue and cost of gas), whether it
sells gas and transportation to customers or only transports third-party
gas.
The following table sets forth the volumes of natural gas delivered by
Wisconsin Gas to its customers.
Year Ended
---------------------------------------------
December 31, 1996 December 31, 1995
--------------------- ---------------------
Thousands Thousands
of Therms* Percent of Therms* Percent
Customer Class ----------- ------- ------------ -------
Sales
Residential 529,910 39.1 494,250 38.0
Commercial 242,570 17.9 211,570 16.3
Large Volume Commercial and
Industrial Firm 110,780 8.2 134,960 10.6
Commercial and Industrial
Interruptible 196,240 14.5 313,530 24.1
----------- ------- ------------ -------
Total Sales 1,079,500 79.7 1,154,310 88.8
Transportation -
Transported 275,780 20.3 145,490 11.2
----------- ------- ------------ -------
Total Gas Throughput 1,355,280 100.0 1,299,800 100.0
=========== ======= ============ =======
*One therm equals 100,000 BTU's.
The volumes shown as transported represent third-party gas that was
delivered by Wisconsin Gas to its customers. The remaining volumes
represent quantities sold and delivered to customers by Wisconsin Gas.
Wisconsin Gas secures approximately 98% of all new residential
heating, 88% of existing residential and commercial retrofit and 70% of
all new commercial construction customers in its service territory. Up
to 25% of Wisconsin Gas' Milwaukee area annual market requirements can
be supplied through the interstate pipelines of either ANR Pipeline
Company ("ANR") or Northern Natural Gas Company ("NNG"). This
capability enhances competition between ANR and NNG for services to
Wisconsin Gas and its customers, and management believes that such
competition provides overall lower gas costs to all customers than
otherwise would exist
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Federal and state regulators continue to implement policies to
bring more competition to the gas industry. The PSCW has instituted a
proceeding to consider how its regulation of gas distribution utilities
should change to reflect the changing competitive environment in the gas
industry. While the gas utility distribution function is expected to
remain a heavily regulated, monopoly function, the sales of the natural
gas commodity and related services, which were formerly utility monopoly
functions, are expected to become increasingly subject to competition
from third parties. Given this regulatory policy and the fact that
Wisconsin Gas' earnings are the same whether it sells and distributes
the gas or only distributes it, Wisconsin Gas is pursuing a long-term
strategy to no longer sell gas. WICOR Energy sells gas on a for-profit
basis and will seek to replace Wisconsin Gas for a significant number of
Wisconsin Gas' customers as well as those of other utilities. Wisconsin
Gas must obtain PSCW approval to implement its strategy. To date, the
PSCW has stated that it will permit utilities to discontinue the sale of
gas on a market segment by market segment basis, when it determines that
there is adequate and persistent competition in the particular segment.
So far, the PSCW has not permitted the by any utility to discontinue the
sale of gas.
With PSCW approval, Wisconsin Gas has implemented a small-customer gas-
supplier choice pilot program that is designed (1) to test market acceptance
of third-party gas sellers, (2) third-party seller interest in selling gas
in different market segments, and (3) Wisconsin Gas' capabilities to
administer a distribution-only business. The pilot program, which began on
November 1, 1996, was oversubscribed and has 1,460 small commercial and
residential participants. Wisconsin Gas expects to continue the pilot
program, with certain modifications, for a second year beginning November 1,
1997.
Wisconsin Gas also has taken steps to enable its large firm commercial
and industrial customers to transfer from sales and distribution to
distribution-only service. As a consequence of state regulatory policies
and Wisconsin Gas' actions, the volume of gas sold by third parties and
distributed by Wisconsin Gas increased by 90% in 1996 compared with 1995.
See "Wisconsin Regulatory Matters". In 1996, Wisconsin Gas added over 8,000
customers and has added more than 52,000 customers over the past five years.
See "Wisconsin Regulatory Matters - Service Area Expansion".
Wisconsin Gas' future ability to maintain its present share of the
industrial dual-fuel market (the market that is equipped to use gas or other
fuels) depends on the success of Wisconsin Gas and third-party gas sellers
in obtaining long-term and short-term supplies of natural gas at marketable
prices and their success in arranging or facilitating competitively priced
transportation service for those customers that desire to buy their own gas
supplies. Although the dual-fuel market comprises approximately 35% of
Wisconsin Gas' annual deliveries, it contributes only about 12% of Wisconsin
Gas' margin
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C. Gas Supply, Pipeline Capacity and Storage
(1) General
Prior to the Federal Energy Regulatory Commission's ("FERC") Order No.
636, the interstate pipelines serving Wisconsin Gas were the primary sellers
of natural gas to Wisconsin Gas. Order No. 636 required the pipelines to
discontinue the sale of gas on a delivered basis. During the transition
period prior to the implementation of Order No. 636, Wisconsin Gas gradually
assumed responsibility for the acquisition of supply from other sellers in
the production areas of North America, as well as the management of
transportation and storage capacities to deliver that supply to its market
area. On November 1, 1993, Wisconsin Gas commenced full operation and
responsibility for its supply and capacity under the requirements of Order
No. 636.
One of the provisions of Order No. 636 is capacity release. Capacity
release creates a secondary market for pipeline long-line and storage
capacity and for gas supplies. Local distribution companies, such as
Wisconsin Gas, must contract for capacity and supply sufficient to meet the
firm peak day demand of their customers. Peak or near peak days generally
occur only a few times each year, so capacity release facilitates higher
utilization of capacity and supply during those times when the capacity and
supply are not needed by the utility. Through pre-arranged agreements and
day-to-day electronic bulletin board postings, interested parties can
purchase that excess capacity and supply. The proceeds from these
transactions are passed through to ratepayers, thereby helping to mitigate
the fixed costs associated with maintaining peak levels of capacity and gas
supply. During 1996, Wisconsin Gas was an active participant in the
capacity release market
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Operating under Order No. 636, Wisconsin Gas has been able to meet its
contractual obligations with both its suppliers and its customers despite
periods of severe cold or unseasonably warm weather.
(2) Pipeline Capacity and Storage
Interstate pipelines serving Wisconsin originate in three major gas
producing areas of North America: the Oklahoma and Texas basins, the Gulf
of Mexico and western Canada. Wisconsin Gas has contracted for long-term
firm capacity on a relatively equal basis from each of these areas. This
strategy reflects management's belief that overall supply security is
enhanced by geographic diversification of Wisconsin Gas' supply portfolio
and that Canada represents an important long-term source of reliable,
competitively priced gas.
Because of the daily and seasonal variations in gas usage in Wisconsin,
Wisconsin Gas has also contracted with ANR and NNG for substantial
underground storage capacity, primarily in Michigan. There are no known
underground storage formations in Wisconsin capable of commercialization.
Storage enables Wisconsin Gas to manage significant changes in daily demand
and to optimize its overall gas supply and capacity costs. In summer, gas
in excess of market demand is transported into the storage fields, and in
winter, gas is withdrawn from storage and combined with gas purchased in or
near the production areas ("flowing gas") to meet the increased winter
market demand. As a result, Wisconsin Gas can contract for less long-line
pipeline capacity than would otherwise be necessary, and it can purchase gas
on a more uniform daily basis from suppliers year-round. Each of these
capabilities enables Wisconsin Gas to reduce its overall costs.
Wisconsin Gas also maintains high deliverability storage in the mid-
continent and Southeast production areas, as well as the market area. This
storage capacity is designed to deliver gas when other supplies cannot be
delivered during extremely cold weather in the producing areas, which can
reduce long-line supply.
Wisconsin Gas' firm winter daily transportation and storage capacity
entitlements from pipelines under long-term contracts are set forth below.
Maximum Daily
(Thousands
Pipeline of Therms*)
----------- -------------
ANR
Mainline 2,991
Storage 4,879
NNG
Mainline 1,093
Storage 150
Viking
Mainline 75
Peaking Facilities 76
-------------
Total 9,264
*One therm equals 100,000 BTU's
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(3) Term Gas Supply
Wisconsin Gas has contracts for firm supplies with terms in excess of
30 days with approximately 20 gas suppliers for gas produced in each of the
three producing areas discussed above. The term contracts have varying
durations so that only a portion of Wisconsin Gas' gas supply expires in any
year. Management believes the volume of gas under contract is sufficient to
meet its forecasted firm peak day demand. The following table sets forth
Wisconsin Gas' winter season maximum daily firm total gas supply.
Maximum Daily
(Thousands
of Therms*)
-------------
Domestic flowing gas 2,370
Canadian flowing gas 1,498
Storage withdrawals 5,029
Total 8,897
*One therm equals 100,000 BTU's.
(4) Spot Market Gas Supply
Wisconsin Gas expects to continue to make gas purchases in the 30-day
spot market as price and other circumstances dictate. Wisconsin Gas has
purchased spot market gas since 1985 and has supply relationships with a
number of sellers from whom it purchases spot gas.
D. Wisconsin Regulatory Matters
(1) Rate Matters
Wisconsin Gas is subject to the jurisdiction of the PSCW as to various
phases of its operations, including rates, customer service and issuance of
securities.
Wisconsin Gas' rates were made subject to a three-year total margin rate
cap (through October 1997) based on the rates in effect in November 1994.
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, 1996, were
$7.5 million below the cap because of annualized rate reductions of $4.5
million and $3.0 million made by the utility in 1995 and 1996, respectively.
On October 10, 1996, the PSCW approved a one-year extension, to November 1,
1998, of the margin cap mechanism.
Wisconsin Gas' rates contain clauses providing for periodic adjustment,
with PSCW approval, to reflect changes in purchased gas costs including the
recovery of transition costs passed through by pipeline suppliers. See
"Wisconsin Regulatory Matters - Transition Cost Recovery Policy" and
"Wisconsin Regulatory Matters - Gas Cost Recovery Mechanism"
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(2) Transition Cost Recovery Policy
Under Order No. 636, interstate pipelines are permitted to recover
certain costs incurred in the transition from the bundled sales service to
the unbundled Order No. 636 regime. ANR and NNG have filed to recover
transition costs and may file in the future to recover additional transition
costs. Wisconsin Gas will bear a portion of such additional costs approved
by the FERC. The PSCW has permitted Wisconsin Gas to recover transition
costs from customers through its rates.
In the judgment of management, the incurrence of these transition costs
will have no material effect on Wisconsin Gas' operations or financial
condition under current PSCW policy. See Note 7a to Notes to Consolidated
Financial Statements contained in Exhibit 13, portions of the Company's 1996
Annual Report to Shareholders, which note is hereby incorporated herein by
reference.
(3) Gas Cost Recovery Mechanism
In 1996, the PSCW concluded a proceeding in which it determined that it
prefers that a performance based gas cost recovery mechanism replace the
traditional purchased gas adjustment ("PGA") mechanism. In general, a
performance-based gas cost recovery mechanism would establish a targeted gas
cost. Depending on the mechanism selected, the utility may be rewarded or
penalized based on its gas costs relative to the target. Hearings to
consider a performance-based gas cost recovery mechanism for Wisconsin Gas
are expected to be scheduled for mid-1997, and it is uncertain whether any
changes to the current PGA for Wisconsin Gas will become effective before
1998. It is expected that the performance-based cost gas cost recovery
mechanism will apply so long as Wisconsin Gas remains a gas seller.
Management cannot predict what, if any, changes to Wisconsin Gas' PGA the
PSCW may order, nor the impact such changes would have.
(4) Service Area Expansion
In recent years, Wisconsin Gas has increased its efforts to obtain
regulatory approvals to extend gas service to previously unserved
communities and to convert to natural gas potential customers with homes or
businesses located near the company's distribution system. Whether or not
Wisconsin Gas remains a gas seller, it will continue to distribute gas to
customers. In 1996, Wisconsin Gas added over 8,000 new customers. Over the
last five years, Wisconsin Gas has added new 52,000 customers
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(5) Changing Regulatory Environment
The PSCW has instituted a proceeding to consider how its regulation of
gas distribution utilities should change to reflect the changing competitive
environment in the gas industry. To date, the PSCW has made a policy
decision to deregulate gas costs for customer segments with workably
competitive market choices. The PSCW has identified numerous issues which
must be resolved before its policy can be implemented. A generic proceeding
has been instituted during which these issues were aired and decided. The
PSCW is expected to make decisions in this proceeding during the first
quarter of 1997. The Company is unable to determine what impact this
proceeding may have on Wisconsin Gas' operations or financial position.
E. Employees
At December 31, 1996, the energy group had 1,095 full-time active
employees.
2. MANUFACTURING OF PUMPS AND FLUID PROCESSING AND FILTRATION EQUIPMENT
A. General
The Company's manufacturing subsidiaries manufacture pumps and fluid
processing and filtration equipment for residential, agricultural and
industrial markets world-wide. Manufacturing and assembly activities are
conducted in plants in the United States, Australia, Italy, New Zealand,
Germany and Mexico.
B. U.S. Operations
Water products include jet, centrifugal, sump, submersible and
submersible turbine water pumps, water storage and pressure tanks,
residential in-line and pool and spa filters, and pump and tank systems.
These products pump, filter and store water used for drinking, cooking,
washing and livestock watering, and are used in private and public swimming
pools, spas, "hot tubs", jetted bathtubs, and fountains. The manufacturing
businesses also produce large higher pressure and capacity water pumps used
in agricultural and turf irrigation systems and in a wide variety of
commercial, industrial and municipal fluids-handling applications.
Small, high performance pumps, and related fluids-handling products, are
used in four primary markets: (1) the food service industry, where gas
operated pumps are used for pumping soft drinks made from syrups, and
electric motor driven pumps are used for water boost and drink dispensing;
(2) the recreational vehicle and marine markets, where electric motor driven
pumps are used for a variety of applications including pumping potable water
in travel trailers, motor homes, camping trailers and boats, and for other
applications including marine engine cooling, and marine wash down, bilge
and live well pumping; (3) industrial markets, where applications are
concentrated in the soil extraction market for use in carpet cleaning
machines, agricultural markets for spraying agricultural pesticides and
fertilizers, firefighting markets, and general industrial applications
requiring fluid handling; and (4) the water purification industry, where
electric motor driven pumps are used to pressurize reverse osmosis systems
and for water transfer
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Sales of pumps and water processing equipment are somewhat related to
the seasons of the year as well as the level of activity in the housing
construction industry and are sensitive to weather, interest rates,
discretionary income, and leisure and recreation spending. The markets for
most water and industrial products are highly competitive, with price,
service and product performance all being important competitive factors.
The Company believes it is a leading producer of pumps for private water
systems and swimming pools and spas, and for the food service, recreational
vehicle, agricultural spraying, and marine engine cooling markets.
Management believes the Company also ranks among the larger producers of
pool and spa filters, submersible turbine pumps and pumps for firefighting.
Major brand names under trademarks include "Sta-Rite", "Berkeley",
"SHURflo", "Flotec", "AquaTools", "Hydro-Flow", "FoamPro", "Onga", "Hypro",
"Sherwood", "SherTech", "Teel" and "Nocchi".
Domestic pumps and water products are sold and serviced primarily
through a network of independent distributors, dealers, retailers and
manufacturers' representatives serving the well drilling, hardware,
plumbing, pump installing, irrigation, pool and spa, food service,
recreational vehicle, marine, industrial, commercial and do-it-yourself
markets. Sales are also made on a private brand basis to large customers in
all water products markets and to original equipment manufacturers.
Backlog of orders for pumps and water products is not a significant
indicator of future sales.
C. International Operations
International operations are conducted primarily by international
subsidiaries and export operations from the United States. Products are
sold to markets in approximately 100 countries on six continents. Foreign
manufacturing is carried out by German, Australian, New Zealand, Italian and
Mexican subsidiaries. The products sold in the international markets in
some cases are similar to those sold in the United States, but in many
instances have distinct features required for those markets.
Product distribution channels are similar to those for domestic markets.
Non-domestic operating revenues, including exports, were 34% of 1996
manufacturing group sales.
D. Raw Materials and Patents
Raw materials essential to the manufacturing operations are available
from various established sources in the United States and overseas. The
principal raw materials needed for production of the Company's primary lines
of products include cast iron, aluminum and bronze castings for pumps;
copper wire, steel and aluminum for motors; stainless and carbon sheet
steel, bar steel and tubing; plastic resins for injection molded components;
and powdered metal components. The manufacturing units also purchase from
third party suppliers completely assembled electric motors, plastic molded
parts, elastomers for valves and diaphragms, components for electric motors,
stamped and die- cast metal parts, and hardware and electrical components.
Although the manufacturing subsidiaries own a number of patents and hold
licenses for manufacturing rights under other patents, no one patent or
group of patents is critical to the success of the manufacturing businesses
as a whole
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E. Employees
At December 31, 1996, the manufacturing group had 2,380 full time active
employees.
Item 2. PROPERTIES
(a) Capital Expenditures
The Company's capital expenditures for the year ended December 31, 1996,
totaled $51.7 million. Retirements during this period totaled $10.3
million. Except as discussed under "Legal Proceedings", the Company does
not expect to make any material capital expenditures for environmental
control facilities in 1997.
(b) Energy
Wisconsin Gas owns a distribution system which, on December 31, 1996,
included approximately 8,500 miles of distribution and transmission mains,
427,300 services and 515,700 active meters. Wisconsin Gas' distribution
system consists almost entirely of plastic and coated steel pipe. Wisconsin
Gas also owns its main office building in Milwaukee, office buildings in
certain other communities in which it serves, gas regulating and metering
stations, peaking facilities and its major service centers, including garage
and warehouse facilities.
The Milwaukee and other office buildings, the principal service
facilities and the gas distribution systems of Wisconsin Gas are owned by it
in fee subject to the lien of its Indenture of Mortgage and Deed of Trust,
dated as of November 1, 1950, under which its first mortgage bonds are
issued, and to permissible encumbrances as therein defined. Where
distribution mains and services occupy private property, Wisconsin Gas in
some, but not all, instances has obtained consents, permits or easements for
such installations from the apparent owners or those in possession,
generally without an examination of title.
(c) Manufacturing of Pumps, Fluid Processing and Filtration Equipment
The manufacturing group has 13 manufacturing facilities located in
California (3), Minnesota, Nebraska, Wisconsin (2), Germany, Australia,
Italy (2), New Zealand and Mexico. These plants contain a total of
approximately 1,298,000 square feet of floor space. Consolidations to be
completed in 1997 will reduce the number of manufacturing facilities to 12.
The Company through its manufacturing business also owns or leases ten
sales/distribution facilities in the United States, five in Australia, two
in England, and one each in Canada, France, Italy, Mexico, Russia, New
Zealand and Singapore
15
Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than ordinary
routine litigation incidental to the Company's businesses, to which the
Company or any of its subsidiaries is a party, except as discussed below.
There are no material legal proceedings to which any officer or director of
the Company or any of its subsidiaries is a party or has a material interest
adverse to the Company. There are no material administrative or judicial
proceedings arising under environmental quality or civil rights statutes
pending or known to be contemplated by governmental agencies to which the
Company or any of its subsidiaries is or would be a party.
The manufacturing subsidiaries are involved in various environmental
matters, including matters in which the subsidiaries or alleged predecessors
have been named as potentially responsible parties under the Comprehensive
Environmental Response Compensation and Liability Act ("CERCLA"). The
Company has established accruals for all environmental contingencies of
which management is aware in accordance with generally accepted accounting
principles. In establishing these accruals, management considered (a)
reports of environmental consultants retained by the Company, (b) the costs
incurred to date by the Company at sites where clean-up is presently ongoing
and the estimated costs to complete the necessary remediation work remaining
at such sites, (c) the financial solvency, where appropriate, of other
parties that have been responsible for remediation at specified sites, and
(d) the experience of other parties who have been involved in the
remediation of comparable sites. The accruals recorded by the Company with
respect to environmental matters have not been reduced by potential
insurance or other recoveries and are not discounted. Although the Company
has and will continue to pursue such claims against insurance carriers and
other responsible parties, future potential recoveries remain uncertain,
and, therefore, were not recorded as a reduction to the estimated gross
environmental liabilities. Based on the foregoing and given current
information, management believes that future costs in excess of the amounts
accrued on all presently known and quantifiable environmental contingencies
described above will not be material to the Company's financial position or
results of operations.
Set forth below are descriptions of several of the environmental matters
involving the manufacturing subsidiaries.
In July 1994, Sta-Rite was notified by the WDNR that the WDNR believes
solvents used at a manufacturing site previously operated by Sta-Rite have
migrated and contributed to the contamination of a Deerfield, Wisconsin
municipal well, serving Deerfield residents, and surrounding property. In
August, 1995 the WDNR issued an order to investigate, restore and repair the
natural resources located in Deerfield. The order was withdrawn on November
6, 1996. Although the Village of Deerfield has brought suit against Sta-
Rite, alleging damages of $500,000 for a new well, management believes that
the resolution of this matter will not have a material adverse effect upon
its financial condition or results of operations. However, there is a
possibility that costs in excess of the amount reserved may be incurred in
the future.
16
In addition to the matters involving the manufacturing subsidiaries,
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, 1996, the Company has accrued $36.2 million for future cleanup costs.
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. Due to anticipated
regulatory treatment, changes in the recorded liability do not immediately
impact net income.
The 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 the 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 would select specific remedial actions for
recommendation to the WDNR. During the last several years, Wisconsin Gas
has gathered additional environmental data regarding these two sites, held
extensive discussions concerning remedial options with current land owners
and solicited information from environmental consulting and remediation
firms on technology and approaches that would best suit the sites. The
efforts were directed toward preparing a remedial action options report and
recommendations for presentation to the WDNR in 1997. Once such a plan is
approved, initial remediation work will begin. Expenditures over the next
three years are expected to total approximately $10 million. Although most
of the work and costs 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.
Additional insurance recoveries for small amounts were achieved in 1996.
Wisconsin Gas expects full rate recovery of incurred remediation costs, less
amounts recovered from insurance carriers. If the amount recovered from the
insurance carriers is insufficient to remediate both sites, expenditures not
recovered are expected to be allowed full recovery (other than for carrying
costs) in rates based upon recent PSCW orders. Accordingly, a
regulatory asset has been recorded for the accrued cost. 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
17
On February 21, 1997, Wisconsin Gas was named by the defendant in an
environmental cleanup lawsuit as a co-defendant. The suit involves
contamination of a Milwaukee area industrial site by wood chips
characteristic of those used in the manufactured gas process. Wisconsin Gas
believes it is not the source of the contaminated wood chips and intends to
vigorously defend the suit. Although the Company is unable to predict the
outcome of the litigation, management believes that amounts recovered from
its insurance carriers or through rate recovery will be sufficient to cover
any such liability.
Wisconsin Gas also owns a service center that is constructed on a site
that was previously owned by the City of Milwaukee and was used by the City
as a public dump site. Wisconsin Gas has conducted a site assessment at the
request of the WDNR and has sent the report of its assessment to the WDNR.
Management cannot predict whether or not the WDNR will require any
remediation action, nor the extent or cost of any remediation actions that
may be required. In the judgment of management, any remediation costs
incurred by Wisconsin Gas will be recoverable from the City of Milwaukee or
in Wisconsin Gas' rates pursuant to the PSCW's orders discussed above.
See Note 7c to Notes to Consolidated Financial Statements contained in
Exhibit 13, portions of the Company's 1996 Annual Report to Shareholders,
which note is hereby incorporated herein by reference.
18
Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the
fourth quarter of 1996.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names and ages of, and the offices held by,
the executive officers of the Company. The officers serve one-year terms
commencing with their election at the meeting of the Board of Directors
following the annual meeting of shareholders in April.
Name Age Offices Held
- -------------------------- ----- --------------------------------------
George E. Wardeberg 61 President and Chief Executive Officer
of the Company and WICOR Industries, and
Chairman of Wisconsin Gas, Sta-Rite,
SHURflo, Hypro, WICOR Energy and FieldTech
Thomas F. Schrader 47 Vice President of the Company and
President and Chief Executive Officer of
Wisconsin Gas, WICOR Energy and FieldTech
James C. Donnelly 51 Vice President of the Company and
President and Chief Executive Officer of
Sta-Rite
Joseph P. Wenzler 55 Vice President, Treasurer and Chief
Financial Officer of the Company and WICOR
Industries; Vice President and Chief
Financial Officer of Wisconsin Gas;
Treasurer and Secretary of SHURflo and
Hypro; and Vice President and Treasurer
of WICOR Energy and FieldTech
Robert A. Nuernberg 57 Secretary of the Company, WICOR Energy
Services and FieldTech; and Vice
President-Corporate Relations and
Secretary of Wisconsin Gas
Each of the executive officers has held his position for more than five
years, except as follows:
Mr. Wardeberg was elected to his current positions effective February
1, 1994. Prior thereto, he was President and Chief Operating Officer of the
Company and Vice Chairman and Chief Executive Officer of Sta-Rite from 1992
to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and
Vice President-Water Systems of Sta-Rite from 1989 to 1992. Previously, he
was Vice Chairman and Chief Operating Officer of Whirlpool Corporation.
Mr. Donnelly was elected President and Chief Executive Officer of Sta-
Rite in 1994. He has been a Vice President of the Company since 1987.
Previously, he served as President and Chief Operating Officer of Sta-Rite
from 1992 to 1994, and as Vice President, Treasurer and Chief Financial
Officer of the Company and Wisconsin Gas from 1990 to 1992
19
Mr. Wenzler was elected Vice President, Treasurer and Chief Financial
Officer of the Company and Vice President and Chief Financial Officer of
Wisconsin Gas in 1992 and as Treasurer and Secretary of SHURflo in 1993.
Previously, he served as Vice President of the Company and President and
Chief Executive Officer of Sta-Rite from 1990 to 1992.
Each of the executive officers assumed their positions with Hypro in
July, 1995, when Hypro was acquired, with WICOR Energy in March, 1995, when
that company was formed and with FieldTech in October, 1996, when that
company was formed
20
PART II
Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
The Company's common stock and the associated common stock purchase
rights (which do not currently trade independently of the common stock) are
traded on the New York Stock Exchange. For information regarding the high
and low sales prices for the Company's common stock and dividends paid per
share in each quarter of 1996 and 1995, see the section entitled "Investor
Information" set forth in the Company's 1996 Annual Report to Shareholders.
That section is included in Exhibit 13 hereto and is hereby incorporated
herein by reference.
At December 31, 1996, there were 23,339 holders of record of WICOR
common stock.
The Company's ability to pay dividends is dependent to a great extent
on the ability of its subsidiaries to pay dividends. The Wisconsin Business
Corporation Law and the indentures and agreements under which debt of the
Company and its subsidiaries is outstanding each contain certain
restrictions on the payment of dividends on common stock by the Company's
subsidiaries. See Note 6 of Notes to Consolidated Financial Statements
contained in Exhibit 13, portions of the Company's 1996 Annual Report to
Shareholders, which note is hereby incorporated herein by reference.
By order of the PSCW, Wisconsin Gas is generally permitted to pay
dividends up to the amount projected in its rate case ($16 million).
Wisconsin Gas may pay dividends in excess of $16 million so long as the
payment will not cause its equity ratio to fall below 48.43%. If payment of
projected dividends would cause its 13-month average common equity ratio to
fall below 43% of total capitalization (including short-term debt), or if
payment of additional dividends would cause its common equity ratio to fall
below 48.43%, Wisconsin Gas must obtain PSCW approval to pay such dividends.
Wisconsin Gas has projected the payment of $21.5 million of dividends to the
Company during the 12 months ending October 31, 1997. See Note 6 of Notes
to Consolidated Financial Statements contained in Exhibit 13, portions of
the Company's 1996 Annual Report to Shareholders, which note is hereby
incorporated herein by reference. For the year ended December 31, 1996,
Wisconsin Gas' average common equity level was 53.3%.
In addition, $5.6 million of Sta-Rite's net assets at December 31,
1996, plus 50% of Sta-Rite's future earnings, are available for dividends to
the Company. See Note 6 of Notes to Consolidated Financial Statements
contained in Exhibit 13, portions of the Company's 1996 Annual Report to
Shareholders, which note is incorporated herein by reference.
Item 6. SELECTED FINANCIAL DATA
Reference is made to the section entitled "Selected Financial Data" set
forth in the Company's 1996 Annual Report to Shareholders. Such section is
included in Exhibit 13 hereto and is hereby incorporated herein by
reference
21
Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF
OPERATIONS AND FINANCIAL CONDITION
Reference is made to the section entitled "Financial Review" set forth
in the Company's 1996 Annual Report to Shareholders. Such section is
included in Exhibit 13 hereto and is hereby incorporated herein by
reference.
Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the Company's consolidated balance sheets and
consolidated statements of capitalization as of December 31, 1996 and 1995,
and the related consolidated statements of income, common equity and cash
flows for each of the three years in the period ended December 31, 1996,
together with the report of independent public accountants dated January 27,
1997, all appearing in Exhibit 13, portions of the Company's 1996 Annual
Report to Shareholders, which is hereby incorporated herein by reference.
22
Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in or disagreement with the Company's
independent public accountants on any matter of accounting principles or
practices or financial statement disclosure required to be reported pursuant
to this item.
PART III
Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to "Item No. 1: Election of Directors" included in
the WICOR proxy statement dated March 13, 1997, which is hereby incorporated
herein by reference, for the names, ages, business experience and other
information regarding directors and nominees for election as directors of
the Company. See "Executive Officers of the Registrant" included in Part I
hereof for information regarding executive officers of the Company.
Item 11. EXECUTIVE COMPENSATION
Reference is made to "Executive Compensation" included in the WICOR
proxy statement dated March 13, 1997, which is hereby incorporated herein by
reference, for information on compensation of executive officers of the
Company; provided, however, that the subsections entitled "Board
Compensation Committee Report on Executive Compensation" and "Executive
Compensation - Performance Information" shall not be deemed to be
incorporated herein by reference.
Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to "Security Ownership of Management and Certain
Beneficial Owners" included in the WICOR proxy statement dated March 13,
1997, which is hereby incorporated herein by reference, for information
regarding voting securities of the Company beneficially owned by its
directors and officers and certain other beneficial owners.
Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to "Item No. 1: Election of Directors" included in
the WICOR proxy statement dated March 13, 1997, which is hereby incorporated
herein by reference, for the information required to be disclosed under this
item
23
PART IV
Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form
10-K:
1. All Financial Statements. The Company's consolidated balance
sheets and statements of capitalization as of December 31, 1996 and
1995, and the related consolidated statements of income, common
equity and cash flow for each of the three years in the period
ended December 31, 1996, together with the report of independent
public accountants dated January 27, 1997, included in Exhibit 13,
portions of the Company's 1996 Annual Report to Shareholders, which
is incorporated herein by reference.
2. Financial statement schedules.
Schedule III -- Condensed Statements of Income, Retained Earnings
and Cash Flows (Parent Company Only) for the
Years Ended December 31, 1996, 1995 and 1994;
Condensed Balance Sheets (Parent Company Only) as
of December 31, 1996 and 1995; Notes to Parent
Company Only Financial Statements.
Financial statement schedules other than those referred to above have
been omitted as not applicable or not required.
24
3. Exhibits
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K Annual Report for 1992).
3.2 WICOR, Inc. By-laws, as amended (incorporated by reference to
Exhibit 3.3 to the Company's Form 10-K Annual Report for
1994).
4.1 Indenture of Mortgage and Deed of Trust dated as of November 1,
1950, between Milwaukee Gas Light Company and Mellon
National Bank and Trust Company and D. A. Hazlett, Trustees
(incorporated by reference to Exhibit 7-E to Milwaukee Gas
Light Company's Registration Statement No. 2-8631).
4.2 Bond Purchase Agreement dated December 31, 1981, between Wisconsin
Gas Company and Teachers Insurance and Annuity Association
of America relating to the issuance and sale of $30,000,000
principal amount of First Mortgage Bonds, Adjustable Rate
Series due 2002 (incorporated by reference to Exhibit 4.6
to Wisconsin Gas Company's Form S-3 Registration Statement
No. 33-43729).
4.3 Indenture dated as of September 1, 1990, between Wisconsin Gas
Company and First Wisconsin Trust Company, Trustee
(incorporated by reference to Exhibit 4.11 to Wisconsin Gas
Company's Form S-3 Registration Statement No. 33-36639).
4.4 Officers' Certificate, dated as of November 19, 1991, setting forth
the terms of Wisconsin Gas Company's 7-1/2% Notes due 1998
(incorporated by reference to Exhibit 4.1 to Wisconsin Gas
Company's Form 8-K Current Report dated November 19, 1991).
4.5 Officers' Certificate, dated as of September 15, 1993, setting
forth the terms of Wisconsin Gas Company's 6.60% Debentures
due 2013 (incorporated by reference to Exhibit 4.1 to
Wisconsin Gas Company's Form 8-K Current Report for
September, 1993).
4.6 Officers' Certificate, dated as of November 7, 1995, setting forth
the terms of Wisconsin Gas Company's 6-3/8% Notes due
2005(incorporated by reference to Exhibit 4 to Wisconsin Gas
Company's Form 8-K Current Report dated November 7, 1995).
4.7 Revolving Credit Agreement, dated as of March 29, 1993, among
Wisconsin Gas Company and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall
& Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993)
25
4.8 Revolving Credit Agreement, dated as of March 29, 1993, among Sta-
Rite Industries, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall
& Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.9 Revolving Credit Agreement, dated as of March 29, 1993, among
WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley
Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.10 Extension of Revolving Credit Agreement, dated as of March 10, 1995,
among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Saving Bank, M&I Marshall & Ilsley Bank and Citibank,
N.A., as Agent (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated April 28, 1995).
4.11 Extension of Revolving Credit Agreement, dated as of 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 (incorporated by reference to Exhibit 4.2 to the
Company's Quarterly Report on Form 10-Q dated April 28,
1995).
4.12 Extension of Revolving Credit Agreement, dated as of 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
(incorporated by reference to Exhibit 4.3 to the Company's
Quarterly Report on Form 10-Q dated April 28, 1995).
4.13 Rights Agreement dated as of August 29, 1989, between WICOR, Inc.
and Manufacturers Hanover Trust Company, Rights Agent
(incorporated by reference to Exhibit 4 to the Company's
Form 8-K Current Report for August, 1989).
4.14 Loan Agreement, dated as of March 29, 1996, by and among ABN AMRO
Bank, N.V., Wisconsin Gas Company Employees' Savings Plans
Trust and WICOR, Inc. (incorporated by reference to Exhibit
4.1 to the Company's quarterly report on Form 10-Q dated
April 26, 1996).
4.15 Guarantee, dated as of March 29, 1996, from WICOR, Inc. to and for
the benefit of ABN AMRO Bank, N.V.
4.16 First Amendment, dated as of November 27, 1996, to Loan Agreement,
dated as of March 29, 1996, by and among WICOR, Inc. Master
Savings Trust (formerly the Wisconsin Gas Company
Employees' Savings Plans Trust), WICOR, Inc. and ABN AMRO
Bank, N.V
26
4.17 Revolving Credit Agreement Amendment, effective July 12, 1995,
among WICOR, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust and Savings Bank, M&I
Marshall and Ilsley Bank and Citibank, N.A., as Agent
(incorporated by reference to Exhibit 4.4 to the Company's
Quarterly Report on Form 10-Q dated October 25, 1995).
4.18 Credit Agreement, dated as of July 18, 1995, among HC 1995
Acquisition, Inc. (n/k/a Hypro Corporation) and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust and Savings
Bank and M&I Marshall & Ilsley Bank and Citibank, N.A. as
Agent (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated July 31,
1995).
4.19 Loan Agreement Amendment effective July 11, 1996, by and among
Hypro Corporation and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust and Savings Bank and M&I
Marshall & Ilsley Bank and Citibank, N.A. as Agent
(incorporated by reference to Exhibit 4.1 to the Company's
Quarterly Report on Form 10-Q dated July 30, 1996).
4.20 Securities Loan Agreement, effective June 22, 1996, among Citibank,
N.A. and Sta-Rite Industries, Inc. (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report
on Form 10-Q dated July 30, 1996).
10.1 Service Agreement dated as of June 1, 1994, among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc., WEXCO of
Delaware, Inc. and SHURflo Pump Manufacturing Co.
(incorporated by reference Exhibit 10.1 to the Company's
Form 10-K Annual Report for 1995).
10.2 Endorsement of Hypro Corporation dated as of July 19, 1995, to
Service Agreement among WICOR, Inc., Wisconsin Gas Company,
Sta-Rite Industries, Inc. and WEXCO of Delaware, Inc.
(incorporated by reference to Exhibit 10.2 to the Company's
Form 10-K Annual Report for 1995)
27
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended
(incorporated by reference to Exhibit 4.1 to the Company's
Form S-8 Registration Statement No. 33-67134).
10.4# Forms of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1987 Stock Option Plan
(incorporated by reference to Exhibit 10.20 to the
Company's Form 10-K Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan (incorporated
by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-67132).
10.6# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1992 Director Stock Option
Plan (incorporated by reference to Exhibit 4.2 to the
Company's Form S-8 Registration Statement No. 33-67132).
10.7# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated
by reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-55755).
10.8# Form of nonstatutory stock option agreement used in
connection with the WICOR, Inc. 1994 Long-Term Performance
Plan (incorporated by reference to Exhibit 4.2 to the
Company's Form S-8 Registration Statement No. 33-55755).
10.9# Form of restricted stock agreement used in connection with
the WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.3 to the Company's
Form S-8 Registration Statement No. 33-55755).
10.10# WICOR, Inc. 1997 Officers' Incentive Compensation Plan.
10.11# Wisconsin Gas Company Principal Officers' Supplemental
Retirement Income Program (incorporated by reference to
Exhibit 10.8 to the Company's Form 10-K Annual Report for
1993).
10.12# Wisconsin Gas Company 1997 Officers' Incentive Compensation
Plan.
10.13# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K Annual Report for 1992).
10.14# Form of Deferred Compensation Agreements between Wisconsin
Gas Company and certain of its executive officers
(incorporated by reference to Exhibit 10.30 to the
Company's Form 10-K Annual Report for 1990).
10.15# Sta-Rite Industries, Inc. 1997 Officers' Incentive
Compensation Plan.
10.16# Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K Annual Report for 1992)
28
10.17# WICOR, Inc. Retirement Plan for Directors, as amended
(incorporated by reference to Exhibit 10.29 to the
Company's Form 10-K Annual Report for 1992).
13 Portions of the WICOR, Inc. 1996 Annual Report to Shareholders.
21 Subsidiaries of WICOR, Inc.
23 Consent of independent public accountants.
27 Financial Data Schedule. (EDGAR version only)
99 WICOR, Inc. proxy statement dated March 13, 1997. (Except to the
extent incorporated by reference, this proxy statement is
not deemed "filed" with the Securities and Exchange
Commission as part of this Form 10-K.)
29
#Indicates a plan under which compensation is paid or payable to directors
or executive officers of the Company.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed during the fourth quarter of
1996.
30
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned, thereunto duly authorized.
WICOR, Inc.
Date: March 13, 1997 By JOSEPH P. WENZLER
Joseph P. Wenzler
Vice President, Treasurer, and
Chief Financial Officer
31
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed on the succeeding pages by the following persons
on behalf of the registrant and in the capacities and on the dates
indicated.
WICOR, Inc.
Signature Title Date
- ----------------------- -------------------------------- --------------
GEORGE E. WARDEBERG
George E. Wardeberg President, Chief Executive March 13, 1997
Officer and Director
(Principal Executive Officer)
JOSEPH P. WENZLER
Joseph P. Wenzler Vice President, Treasurer March 13, 1997
and Chief Financial Officer
(Principal Financial Officer
and Principal Accounting
Officer)
WENDELL F. BUECHE Director March 13, 1997
Wendell F. Bueche
WILLIE D. DAVIS Director March 13, 1997
Willie D. Davis
JERE D. MCGAFFEY Director March 13, 1997
Jere D. McGaffey
DANIEL F. MCKEITHAN, JR. Director March 13, 1997
Daniel F. McKeithan, Jr.
GUY A. OSBORN Director March 13, 1997
Guy A. Osborn
THOMAS F. SCHRADER Director March 13, 1997
Thomas F. Schrader
STUART W. TISDALE Director March 13, 1997
Stuart W. Tisdale
ESSIE M. WHITELAW Director March 13, 1997
Essie M. Whitelaw
WILLIE B. WINTER Director March 13, 1997
William B. Winter
32
Schedule III - Condensed
Parent Company Financial Statements
WICOR, INC.
(Parent Company Only)
Statement of Income
Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(Thousands of Dollars)
Income:
Equity in income of subsidiaries
after dividends $ 19,023 $ 16,052 $ 10,154
Cash dividends from subsidiaries 28,044 23,000 23,000
Interest income and other 722 2,237 373
---------- ---------- ----------
47,789 41,289 33,527
---------- ---------- ----------
Expenses:
Operating (Supplemental Note C) 868 1,120 455
Interest 62 275 163
---------- ---------- ----------
930 1,395 618
---------- ---------- ----------
Income Before Parent
Company Income Taxes 46,859 39,894 32,909
Income Taxes 88 367 (265)
---------- ---------- ----------
Net Income $ 46,771 $ 39,527 $ 33,174
========== ========== ==========
The accompanying notes are an integral part of these statements.
33
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, INC.
(Parent Company Only)
Balance Sheet
As of December 31,
----------------------
(Thousands of Dollars) 1996 1995
Assets ---------- ----------
- ------
Current Assets:
Cash and cash equivalents $ 1,458 $ 4,416
Intercompany receivable,
net (Supplemental Note B) 12,012 13,754
Other 51 76
---------- ----------
13,521 18,246
---------- ----------
Investment in Subsidiaries, at equity 360,047 337,241
---------- ----------
Deferred Income Taxes 186 192
Deferred Charges and Other 1,426 578
---------- ----------
$ 375,180 $ 356,257
========== ==========
Liabilities and Capitalization
- ------------------------------
Current Liabilities:
Income taxes payable $ 511 $ 5,020
Other 650 161
---------- ----------
1,161 5,181
---------- ----------
Deferred Credits 1,160 620
---------- ----------
Capitalization:
ESOP loan guarantee(Supplemental Note D) 4,407 5,315
---------- ----------
Common equity:
Common stock, $1 par value,
authorized 60,000,000 shares;
outstanding 18,237,000 and 16,918,000
shares, respectively 18,407 18,237
Other paid-in-capital 224,041 219,133
Retained earnings 129,777 113,491
Cumulative translation adjustment 1,349 (125)
Unearned compensation
(Supplemental Note D) (5,122) (5,595)
---------- ----------
Total common equity 368,452 345,141
---------- ----------
$ 375,180 $ 356,257
========== ==========
The accompanying notes are an integral part of these statements.
34
Schedule III - Condensed
Parent Company Only Financial Statements (continued)
WICOR, INC.
Statement of Cash Flows
Increase (Decrease) in Cash and Cash Equivalents
Year Ended December 31,
(Thousands of Dollars) ----------------------------------
1996 1995 1994
Operations- ---------- ---------- ----------
Net income $ 46,771 $ 39,527 $ 33,174
Adjustments to reconcile net income to
net cash flows:
Equity in (income) losses of
subsidiaries (19,023) (16,052) (10,154)
Change in deferred income taxes 6 12 (58)
Change in intercompany receivables 1,742 (11,715) 123
Change in income taxes payable (4,509) 597 1,548
Change in other current assets 25 3 33
Change in other current liabilities 489 62 (254)
Change in other non-current assets and
liabilities (719) (1,149) (843)
---------- ---------- ----------
24,782 11,285 23,569
---------- ---------- ----------
Investment Activities-
Investments in subsidiaries (600) (37,875) (5,000)
Proceeds from sale of assets - 5,099 -
---------- ---------- ----------
(600) (32,776) (5,000)
---------- ---------- ----------
Financing Activities-
Issuance of common stock 3,345 40,285 10,649
Dividends paid on common stock, less
amounts reinvested (30,485) (27,454) (23,247)
---------- ---------- ----------
(27,140) 12,831 (12,598)
---------- ---------- ----------
Change in Cash and Cash Equivalents (2,958) (8,660) 5,971
Cash and Cash Equivalents at Beginning
of Year 4,416 13,076 7,105
---------- ---------- ----------
Cash and Cash Equivalents at End of Yr $ 1,458 $ 4,416 $ 13,076
========== ========== ==========
Supplemental Disclosure
Cash paid (received) during the yr for:
Interest paid $ 1 $ - $ -
Income taxes paid $ 202 $ 1,525 $ (4,440)
The accompanying notes are an integral part of these statements.
35
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, INC.
(Parent Company Only)
Statement of Retained Earnings
Year Ended December 31,
----------------------------------
1996 1995 1994
---------- ---------- ----------
(Thousands of Dollars)
Balance - Beginning of Year $ 113,491 $ 101,418 $ 94,643
Add:
Net income 46,771 39,527 33,174
---------- ---------- ----------
160,262 140,945 127,817
Deduct:
Cash dividends on common stock 30,485 27,454 26,399
---------- ---------- ----------
Balance - End of Year $ 129,777 $ 113,491 $ 101,418
========== ========== ==========
The accompanying notes are an integral part of these statements.
36
Schedule III - Condensed
Parent Company Financial Statements (continued)
WICOR, Inc.
Notes to Parent Company Only Financial Statements
The following are supplemental notes to the WICOR, Inc. (Parent Company
Only) financial statements and should be read in conjunction with the
WICOR, Inc. Consolidated Financial Statements and Notes thereto included
herein under Item 8:
SUPPLEMENTAL NOTES
A. The parent company files a consolidated Federal income tax return
with its subsidiaries.
B. Net amounts due from subsidiaries result from intercompany
transactions including advances and Federal income tax liabilities,
less payments of expenses by subsidiaries on behalf of WICOR, Inc.
C. During 1996, 1995 and 1994, the parent company allocated certain
administrative and operating expenses to its subsidiaries using an
allocation method approved by the Public Service Commission of
Wisconsin:
1996 1995 1994
---------- ---------- ----------
Administrative and operating expenses
allocated to subsidiaries $2,579,000 $2,409,000 $2,452,000
========== ========== ==========
D. In November 1991, WICOR, Inc. established an Employee Stock
Ownership Plan (ESOP) covering non-union employees of Wisconsin Gas
Company. Because the parent company has guaranteed the loan, the
unpaid balance is shown as a liability on the balance sheet with a
like amount of unearned compensation recorded as a reduction of
stockholders' equity.
The ESOP trustee is repaying the $10 million loan with dividends
paid on the shares of WICOR, Inc. common stock in the ESOP and with
Wisconsin Gas Company contributions to the ESOP.
37
INDEX to Exhibits
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended
(incorporated by reference to Exhibit 3.1 to the Company's
Form 10-K Annual Report for 1992).
3.2 WICOR, Inc. By-laws, as amended (incorporated by reference to
Exhibit 3.3 to the Company's Form 10-K Annual Report for
1994).
4.1 Indenture of Mortgage and Deed of Trust dated as of November 1,
1950, between Milwaukee Gas Light Company and Mellon
National Bank and Trust Company and D. A. Hazlett, Trustees
(incorporated by reference to Exhibit 7-E to Milwaukee Gas
Light Company's Registration Statement No. 2-8631).
4.2 Bond Purchase Agreement dated December 31, 1981, between Wisconsin
Gas Company and Teachers Insurance and Annuity Association
of America relating to the issuance and sale of $30,000,000
principal amount of First Mortgage Bonds, Adjustable Rate
Series due 2002 (incorporated by reference to Exhibit 4.6
to Wisconsin Gas Company's Form S-3 Registration Statement
No. 33-43729).
4.3 Indenture dated as of September 1, 1990, between Wisconsin Gas
Company and First Wisconsin Trust Company, Trustee
(incorporated by reference to Exhibit 4.11 to Wisconsin Gas
Company's Form S-3 Registration Statement No. 33-36639).
4.4 Officers' Certificate, dated as of November 19, 1991, setting forth
the terms of Wisconsin Gas Company's 7-1/2% Notes due 1998
(incorporated by reference to Exhibit 4.1 to Wisconsin Gas
Company's Form 8-K Current Report dated November 19, 1991).
4.5 Officers' Certificate, dated as of September 15, 1993, setting forth
the terms of Wisconsin Gas Company's 6.60% Debentures due
2013 (incorporated by reference to Exhibit 4.1 to Wisconsin
Gas Company's Form 8-K Current Report for September, 1993).
4.6 Officers' Certificate, dated as of November 7, 1995, setting forth
the terms of Wisconsin Gas Company's 6-3/8% Notes due
2005(incorporated by reference to Exhibit 4 to Wisconsin Gas
Company's Form 8-K Current Report dated November 7, 1995).
4.7 Revolving Credit Agreement, dated as of March 29, 1993, among
Wisconsin Gas Company and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall
& Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.8 Revolving Credit Agreement, dated as of March 29, 1993, among Sta-
Rite Industries, Inc. and Citibank, N.A., Firstar Bank
Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall
& Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly Report
on Form 10-Q dated as of August 9, 1993).
4.9 Revolving Credit Agreement, dated as of March 29, 1993, among WICOR,
Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and
Citibank, N.A., as Agent (incorporated by reference to
Exhibit 4.1 to the Company's Quarterly Report on Form 10-
Q dated as of August 9, 1993).
4.10 Extension of Revolving Credit Agreement, dated as of March 10, 1995,
among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A.,
Harris Trust & Saving Bank, M&I Marshall & Ilsley Bank and Citibank,
N.A., as Agent (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated April 28, 1995)
38
4.11 Extension of Revolving Credit Agreement, dated as of 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
(incorporated by reference to Exhibit 4.2 to the Company's
Quarterly Report on Form 10-Q dated April 28, 1995).
4.12 Extension of Revolving Credit Agreement, dated as of 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 (incorporated by
reference to Exhibit 4.3 to the Company's Quarterly Report
on Form 10-Q dated April 28, 1995).
4.13 Rights Agreement dated as of August 29, 1989, between WICOR, Inc.
and Manufacturers Hanover Trust Company, Rights Agent
(incorporated by reference to Exhibit 4 to the Company's
Form 8-K Current Report for August, 1989).
4.14 Loan Agreement, dated as of March 29, 1996, by and among ABN AMRO
Bank, N.V., Wisconsin Gas Company Employees' Savings Plans
Trust and WICOR, Inc. (incorporated by reference to Exhibit
4.1 to the Company's quarterly report on Form 10-Q dated
April 26, 1996).
4.15* Guarantee, dated as of March 29, 1996, from WICOR, Inc. to and for
the benefit of ABN AMRO Bank, N.V.
4.16* First Amendment, dated as of November 27, 1996, to Loan Agreement,
dated as of March 29, 1996, by and among WICOR, Inc. Master
Savings Trust (formerly the Wisconsin Gas Company
Employees' Savings Plans Trust), WICOR, Inc. and ABN AMRO
Bank, N.V.
4.17 Revolving Credit Agreement Amendment, effective July 12, 1995, among
WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust and Savings Bank, M&I Marshall and
Ilsley Bank and Citibank, N.A., as Agent (incorporated by
reference to Exhibit 4.4 to the Company's Quarterly Report
on Form 10-Q dated October 25, 1995).
4.18 Credit Agreement, dated as of July 18, 1995, among HC 1995
Acquisition, Inc. (n/k/a Hypro Corporation) and Citibank,
N.A., Firstar Bank Milwaukee, N.A., Harris Trust and Savings
Bank and M&I Marshall & Ilsley Bank and Citibank, N.A. as
Agent (incorporated by reference to Exhibit 4.1 to the
Company's Quarterly Report on Form 10-Q dated July 31,
1995).
4.19 Loan Agreement Amendment effective July 11, 1996, by and among Hypro
Corporation and Citibank, N.A., Firstar Bank Milwaukee,
N.A., Harris Trust and Savings Bank and M&I Marshall &
Ilsley Bank and Citibank, N.A. as Agent (incorporated by
reference to Exhibit 4.1 to the Company's Quarterly Report
on Form 10-Q dated July 30, 1996).
4.20 Securities Loan Agreement, effective June 22, 1996, among Citibank,
N.A. and Sta-Rite Industries, Inc. (incorporated by
reference to Exhibit 4.2 to the Company's Quarterly Report
on Form 10-Q dated July 30, 1996).
10.1 Service Agreement dated as of June 1, 1994, among WICOR, Inc.,
Wisconsin Gas Company, Sta-Rite Industries, Inc., WEXCO of Delaware,
Inc. and SHURflo Pump Manufacturing Co. (incorporated by reference
Exhibit 10.1 to the Company's Form 10-K Annual Report for 1995)
39
10.2 Endorsement of Hypro Corporation dated as of July 19, 1995, to
Service Agreement among WICOR, Inc., Wisconsin Gas Company, Sta-Rite
Industries, Inc. and WEXCO of Delaware, Inc. (incorporated by reference to
Exhibit 10.2 to the Company's Form 10-K Annual Report for 1995).
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended (incorporated by
reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-67134).
10.4# Forms of nonstatutory stock option agreement used in connection with
the WICOR, Inc. 1987 Stock Option Plan (incorporated by
reference to Exhibit 10.20 to the Company's Form 10-K
Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan (incorporated by
reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-67132).
10.6# Form of nonstatutory stock option agreement used in connection with
the WICOR, Inc. 1992 Director Stock Option Plan
(incorporated by reference to Exhibit 4.2 to the Company's
Form S-8 Registration Statement No. 33-67132).
10.7# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by
reference to Exhibit 4.1 to the Company's Form S-8
Registration Statement No. 33-55755).
10.8# Form of nonstatutory stock option agreement used in connection with
the WICOR, Inc. 1994 Long-Term Performance Plan
(incorporated by reference to Exhibit 4.2 to the Company's
Form S-8 Registration Statement No. 33-55755).
10.9# Form of restricted stock agreement used in connection with the
WICOR, Inc. 1994 Long-Term Performance Plan (incorporated
by reference to Exhibit 4.3 to the Company's Form S-8
Registration Statement No. 33-55755).
10.10#* WICOR, Inc. 1997 Officers' Incentive Compensation Plan.
10.11# Wisconsin Gas Company Principal Officers' Supplemental
Retirement Income Program (incorporated by reference to
Exhibit 10.8 to the Company's Form 10-K Annual Report for
1993).
10.12#* Wisconsin Gas Company 1997 Officers' Incentive Compensation
Plan.
10.13# Wisconsin Gas Company Group Travel Accident Plan
(incorporated by reference to Exhibit 10.24 to the
Company's Form 10-K Annual Report for 1992).
10.14# Form of Deferred Compensation Agreements between Wisconsin
Gas Company and certain of its executive officers
(incorporated by reference to Exhibit 10.30 to the
Company's Form 10-K Annual Report for 1990).
10.15#* Sta-Rite Industries, Inc. 1997 Officers' Incentive
Compensation Plan.
10.16# Sta-Rite Industries, Inc. Group Travel Accident Plan
(incorporated by reference to Exhibit 10.28 to the
Company's Form 10-K Annual Report for 1992).
10.17# WICOR, Inc. Retirement Plan for Directors, as amended
(incorporated by reference to Exhibit 10.29 to the
Company's Form 10-K Annual Report for 1992).
40
13* Portions of the WICOR, Inc. 1996 Annual Report to Shareholders.
21* Subsidiaries of WICOR, Inc.
23* Consent of independent public accountants.
27* Financial Data Schedule. (EDGAR version only)
99* WICOR, Inc. proxy statement dated March 13, 1997. (Except to the
extent incorporated by reference, this proxy statement is
not deemed "filed" with the Securities and Exchange
Commission as part of this Form 10-K.)
* Indicates document filed herewith.
#Indicates a plan under which compensation is paid or payable to directors or
executive officers of the Company.