================================================================================
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended March 31, 2001
Commission Registrant; State of Incorporation IRS Employer
File Number Address; and Telephone Number Identification No.
----------- ---------------------------------- ------------------
[WISCONSIN ENERGY CORPORATION LOGO]
001-09057 WISCONSIN ENERGY CORPORATION 39-1391525
(A Wisconsin Corporation)
231 West Michigan Street
P.O. Box 2949
Milwaukee, WI 53201
(414) 221-2345
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 each 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 Registrant's classes of
common stock, as of the latest practicable date (April 30, 2001):
Common Stock, $.01 Par Value 117,795,663 shares outstanding.
================================================================================
WISCONSIN ENERGY CORPORATION
------------------------
FORM 10-Q REPORT FOR THE QUARTER ENDED MARCH 31, 2001
TABLE OF CONTENTS
Item Page
- ---- ----
Introduction............................................................... 3
Part I - Financial Information
------------------------------
1. Financial Statements
Consolidated Condensed Income Statement.................................. 4
Consolidated Condensed Balance Sheet..................................... 5
Consolidated Condensed Statement of Cash Flows........................... 6
Notes to Consolidated Condensed Financial Statements..................... 7
2. Management's Discussion and Analysis of
Financial Condition and Results of Operations............................. 13
3. Quantitative and Qualitative Disclosures About Market Risk................. 27
Part II - Other Information
---------------------------
1. Legal Proceedings.......................................................... 28
4. Submission of Matters to a Vote of Security Holders........................ 28
5. Other Information.......................................................... 29
6. Exhibits and Reports on Form 8-K........................................... 30
Signatures................................................................. 31
2
INTRODUCTION
Wisconsin Energy Corporation is a diversified holding company which conducts its
operations primarily in three operating segments: a utility energy segment, a
non-utility energy segment and a manufacturing segment. Unless qualified by
their context when used in this document, the terms "Wisconsin Energy" or the
"Company" refer to the holding company and all of its subsidiaries. The
Company's primary subsidiaries are Wisconsin Electric Power Company ("Wisconsin
Electric"), Wisconsin Gas Company ("Wisconsin Gas") and WICOR Industries, Inc.
Utility Energy Segment: The utility energy segment consists of: Wisconsin
Electric, which serves electric customers in Wisconsin and the Upper Peninsula
of Michigan, gas customers in Wisconsin and steam customers in metro Milwaukee;
Wisconsin Gas, which serves gas customers in Wisconsin and water customers in
suburban Milwaukee; and Edison Sault Electric Company ("Edison Sault"), which
serves electric customers in the Upper Peninsula of Michigan.
Non-Utility Energy Segment: As of January 1, 2001, the non-utility energy
segment consisted primarily of: Wisvest Corporation ("Wisvest"), which develops,
owns and operates electric generating facilities and invests in other energy-
related entities; WICOR Energy Services Company ("WICOR Energy"), which engages
in natural gas purchasing and marketing as well as energy and price risk
management; and FieldTech, Inc. ("FieldTech"), which provides meter reading and
technology services for gas, electric and water utilities. In December 2000,
Wisconsin Energy entered into an agreement to sell Wisvest's two existing non-
utility power plants, located in the state of Connecticut, which will
significantly reduce the size of current non-utility energy segment operations.
The sale of these two plants, which were originally acquired in April 1999, is
expected to close in the next few months subject to various regulatory approvals
and other closing conditions. During 2001, WICOR Energy was merged into an
unconsolidated affiliate of Wisconsin Energy. In May 2001, FieldTech was sold
to an unaffiliated third party for approximately $20 million.
Manufacturing Segment: The manufacturing segment consists of WICOR Industries,
Inc., an intermediary holding company, and its three primary subsidiaries: Sta-
Rite Industries, Inc. ("Sta-Rite"), SHURflo Pump Manufacturing Co. ("SHURflo")
and Hypro Corporation ("Hypro"), which are manufacturers of pumps, water
treatment products and fluid handling equipment with manufacturing, sales and
distribution facilities in the United States and several other countries.
Other: Other non-utility operating subsidiaries of Wisconsin Energy include
primarily Minergy Corp. ("Minergy"), which develops and markets recycling
technologies, and Wispark LLC ("Wispark"), which develops and invests in real
estate. In May 2000, Wisconsin Energy announced that it would sell
approximately 80% of its portfolio of Wispark's assets during the following two
years, which is expected to significantly reduce the size of existing non-
utility real estate operations.
Wisconsin Gas, WICOR Energy, FieldTech, WICOR Industries, Sta-Rite, SHURflo and
Hypro were acquired by Wisconsin Energy as a result of the Company's acquisition
of WICOR, Inc. ("WICOR") on April 26, 2000. WICOR remains a subsidiary of
Wisconsin Energy, functioning as an intermediary holding company of the
historical WICOR companies.
The unaudited interim financial statements presented in this Form 10-Q have been
prepared by Wisconsin Energy pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and note 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. Wisconsin Energy's financial statements should be read
in conjunction with the financial statements and notes thereto included in
Wisconsin Energy's 2000 Annual Report on Form 10-K.
3
PART I - FINANCIAL INFORMATION
------------------------------
ITEM 1. FINANCIAL STATEMENTS
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENT
(Unaudited)
Three Months Ended March 31
---------------------------------------------
2001 2000
---------------- ----------------
(Millions of Dollars, Except Per Share Amounts)
Operating Revenues $1,355.0 $628.0
Operating Expenses
Fuel and purchased power 180.5 160.3
Cost of gas sold 515.5 69.1
Cost of goods sold 106.8 -
Other operation and maintenance 258.1 186.6
Depreciation, decommissioning
and amortization 87.5 72.1
Property and revenue taxes 22.8 20.7
-------- ------
Total Operating Expenses 1,171.2 508.8
-------- ------
Operating Income 183.8 119.2
Other Income (Deductions), Net 12.6 6.8
Financing Costs 65.4 43.2
-------- ------
Income Before Income Taxes 131.0 82.8
Income Taxes 53.7 32.2
-------- ------
Income Before Cumulative Effect of
Change in Accounting Principle 77.3 50.6
Cumulative Effect of Change in
Accounting Principle, Net of Tax 10.5 -
-------- ------
Net Income $ 87.8 $ 50.6
======== ======
Earnings Per Average Common Share - Basic
Before cumulative effect of
change in accounting principle $ 0.65 $ 0.42
Cumulative effect of change
in accounting principle 0.09 -
-------- ------
Net earnings per share $ 0.74 $ 0.42
======== ======
Average shares outstanding (millions) 117.9 119.5
Earnings Per Average Common Share - Diluted
Before cumulative effect of
change in accounting principle $ 0.65 $ 0.42
Cumulative effect of change
in accounting principle 0.09 -
-------- ------
Net earnings per share $ 0.74 $ 0.42
======== ======
Average shares outstanding (millions) 118.7 119.5
Dividends Per Share of Common Stock $ 0.20 $ 0.39
The accompanying notes are an integral part of these financial statements.
4
WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEET
(Unaudited)
March 31, 2001 December 31, 2000
-------------- -----------------
(Millions of Dollars)
Assets
------
Property, Plant and Equipment
Utility energy $ 6,911.7 $ 7,327.7
Non-utility energy 22.0 21.7
Manufacturing 119.9 119.5
Other 88.2 135.3
Accumulated depreciation (3,766.2) (3,912.9)
--------- ---------
3,375.6 3,691.3
Construction work in progress 351.7 246.3
Leased facilities, net 120.2 121.7
Nuclear fuel, net 85.5 93.1
--------- ---------
Net Property, Plant and Equipment 3,933.0 4,152.4
Investments 1,041.5 779.3
Current Assets
Cash and cash equivalents 59.1 40.5
Accounts receivable 649.1 532.6
Accrued revenues 170.6 269.8
Materials, supplies and inventories 283.4 381.7
Assets held for sale 450.8 464.0
Prepayments and other assets 166.8 175.0
--------- ---------
Total Current Assets 1,779.8 1,863.6
Deferred Charges and Other Assets
Goodwill, net 821.1 826.9
Other 838.5 783.9
--------- ---------
Total Deferred Charges and Other Assets 1,659.6 1,610.8
--------- ---------
Total Assets $ 8,413.9 $ 8,406.1
========= =========
Capitalization and Liabilities
------------------------------
Capitalization
Common equity $ 2,042.6 $ 2,016.8
Preferred stock 30.4 30.4
Company-obligated mandatorily redeemable
preferred securities of subsidiary trust
holding solely debentures of the Company 200.0 200.0
Long-term debt 3,408.1 2,732.7
--------- ---------
Total Capitalization 5,681.1 4,979.9
Current Liabilities
Long-term debt due currently 57.0 55.4
Short-term debt 785.0 1,386.1
Accounts payable 321.6 427.0
Accrued liabilities 176.6 149.0
Other 145.7 191.2
--------- ---------
Total Current Liabilities 1,485.9 2,208.7
Deferred Credits and Other Liabilities
Accumulated deferred income taxes 582.3 587.1
Other 664.6 630.4
--------- ---------
Total Deferred Credits and Other
Liabilities 1,246.9 1,217.5
--------- ---------
Total Capitalization and Liabilities $ 8,413.9 $ 8,406.1
========= =========
The accompanying notes are an integral part of these financial statements.
5
WISCONSIN ENERGY CORPORATION
CONSOLIDATED STATEMENT OF CASH FLOWS
(Unaudited)
Three Months Ended March 31
---------------------------------------
2001 2000
------------- --------------
(Millions of Dollars)
Operating Activities
Net income $ 87.8 $ 50.6
Reconciliation to cash
Depreciation, decommissioning and amortization 97.7 76.3
Nuclear fuel expense amortization 8.4 7.2
Deferred income taxes, net (8.1) (2.5)
Investment tax credit, net (1.3) (1.1)
Allowance for other funds
used during construction (0.3) (0.9)
Gains on asset sales (2.4) -
Change in - Accounts receivable and accrued revenues (17.3) 10.7
Inventories 98.3 35.6
Other current assets 8.2 24.4
Accounts payable (105.4) 17.2
Other current liabilities (17.9) 52.5
Other (33.5) (8.6)
------- -------
Cash Provided by Operating Activities 114.2 261.4
Investing Activities
Capital expenditures (124.9) (135.0)
Proceeds from asset sales, net 13.6 6.6
Allowance for borrowed funds
used during construction (3.2) (3.1)
Nuclear fuel (1.0) (10.6)
Nuclear decommissioning funding (4.4) (4.4)
Other (0.3) (3.0)
------- -------
Cash Used in Investing Activities (120.2) (149.5)
Financing Activities
Issuance of common stock 14.8 23.1
Repurchase of common stock (39.8) -
Issuance of long-term debt 992.3 15.5
Retirement of long-term debt (318.0) (15.5)
Change in short-term debt (601.1) (137.2)
Dividends paid on common stock (23.6) (46.5)
------- -------
Cash Provided by (Used in) Financing Activities 24.6 (160.6)
------- -------
Change in Cash and Cash Equivalents 18.6 (48.7)
Cash and Cash Equivalents at Beginning of Period 40.5 73.5
------- -------
Cash and Cash Equivalents at End of Period $ 59.1 $ 24.8
======= =======
Supplemental Information - Cash Paid (Received) For
Interest (net of amount capitalized) $ 53.1 $ 31.2
Income taxes 43.3 (25.9)
The accompanying notes are an integral part of these financial statements.
6
WISCONSIN ENERGY CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)
GENERAL INFORMATION
1. The accompanying unaudited consolidated condensed financial statements for
Wisconsin Energy Corporation should be read in conjunction with Item 8,
Financial Statements and Supplementary Data, in Wisconsin Energy's 2000
Annual Report on Form 10-K for the year ended December 31, 2000. In the
opinion of management, all adjustments, normal and recurring in nature,
necessary to a fair statement of the results of operations, cash flows and
financial position of Wisconsin Energy, have been included in the
accompanying income statements, statements of cash flows and balance sheets.
The results of operations for the three months ended March 31, 2001 are not
necessarily indicative, however, of the results which may be expected for the
entire year 2001 because of seasonal and other factors.
2. Due in part to the acquisition of WICOR in April 2000 (see Note 3), Wisconsin
Energy has modified certain income statement and balance sheet presentations.
Prior year financial statement amounts have been reclassified to conform to
their current year presentation. These reclassifications had no effect on
net income or earnings per share.
ACQUISITION OF WICOR, INC.
3. On April 26, 2000, the Company acquired all of the outstanding common stock
of WICOR, Inc., a diversified utility holding company. The acquisition was
accounted for as a purchase under Accounting Principles Board Opinion No. 16,
Accounting for Business Combinations, and accordingly, the operating results
have been included in the Company's consolidated results of operations from
the date of acquisition.
The following unaudited pro forma data summarize the results of operations
for the periods indicated as if the WICOR acquisition had been completed as
of the beginning of the periods presented. The pro forma amounts give effect
to actual operating results prior to the acquisition, adjusted to include the
pro forma effect of interest expense, amortization of intangibles and income
taxes. The pro forma information does not necessarily reflect the actual
results that would have occurred nor is it necessarily indicative of future
results of operations of the combined companies.
Three Months Ended March 31
------------------------------------------
2001 2000
Wisconsin Energy Corporation Actual Pro Forma (a)
---------------------------- ----------- -----------------
(Millions of Dollars, Except Per Share Amounts)
Total Operating Revenues $1,355.0 $967.2
Net Income $ 87.8 $ 59.6
Earnings Per Share
Basic $ 0.74 $ 0.50
Diluted $ 0.74 $ 0.50
(a) Pro forma assumes that the WICOR acquisition occurred on January 1, 2000
and includes estimated merger-related costs.
7
ASSET SALES AND DIVESTITURES
4. As previously reported, the Company's management announced a strategy in
2000, which, among other things, identified the divestiture of non-core
investments. Wisconsin Energy held the following assets for sale as of
March 31, 2001 and December 31, 2000:
Assets Held For Sale March 31, 2001 December 31, 2000
- ---------------------- ---------------- -------------------
(Millions of Dollars)
Non-Utility Energy $331.8 $331.8
Other - Real Estate 119.0 132.2
------ ------
Total $450.8 $464.0
====== ======
During the first quarter of 2001, Wispark sold approximately $13 million of
real estate assets as part of a previously announced plan and anticipates
selling the balance of the assets identified for sale over the next two
years. The Company expects to close on the sale of Wisvest's two fossil-
fueled generating stations in the state of Connecticut in the next few
months subject to various regulatory approvals and other closing conditions.
Also as previously reported, the Company expects to receive additional
proceeds during the second quarter of 2001 related to the sale of Wisvest's
interest in Blythe Energy, LLC, an independent power production project in
the state of California, subject to completion of certain regulatory and
contractual matters. In May 2001, the Company received net proceeds of
approximately $20 million as a result of the sale of FieldTech to an
unaffiliated third party.
Effective January 1, 2001 Wisconsin Electric and Edison Sault transferred
electric utility transmission system assets with a net book value of
approximately $252 million to the American Transmission Company LLC ("ATC")
in exchange for a combined approximately 45% equity interest in this new
company.
In April 2001, the ATC issued debt and distributed $93 million of cash back
to Wisconsin Electric and Edison Sault as a return of the original equity
contribution. The Company expects to receive additional cash distributions
of $24 million from the ATC prior to the end of 2001 subject to final audit.
The Company anticipates that transfer of its electric transmission assets to
the ATC will be earnings neutral. However, transfer of the assets has
resulted in a change in where earnings are reflected on the income
statement. Prior to the asset transfer, transmission-related costs were
recorded in Other Operation and Maintenance expense, Depreciation expense
and Interest expense. Following transfer of the transmission assets, the
Company reports fees paid to the ATC for electric transmission service in
Other Operation and Maintenance expense and recognizes an equity interest in
the ATC's reported earnings in Other Income, Net.
8
RESERVE FOR NON-RECURRING CHARGES
5. In connection with the WICOR merger and the divestiture of non-core
businesses, Wisconsin Energy recorded certain reserves in the fourth quarter
of 2000 for approximately 300 employees who were to receive benefits under
severance agreements and enhanced retirement initiatives. As of March 31,
2001, approximately $8.1 million of severance benefits related to 153
employees remained as an outstanding liability on the balance sheet.
LONG-TERM DEBT
6. In March 2001, Wisconsin Energy issued $1 billion of intermediate-term
unsecured senior securities, consisting of $550 million of 5.875% Senior
Notes due April 1, 2006 and $450 million of 6.50% Senior Notes due April 1,
2011. Proceeds from these debt issues were added to the Company's general
funds and were used to repay commercial paper borrowings related primarily
to the WICOR acquisition.
COMMON EQUITY
7. Comprehensive Income includes all changes in equity during a period except
those resulting from investments by and distributions to owners. Prior to
April 2000, Wisconsin Energy had no items of Other Comprehensive Income to
report. However, as a result of its acquisition of WICOR on April 26, 2000
and due to the adoption of Statement of Financial Accounting Standards
No. 133, Accounting for Derivative Instruments and Hedging Activities
("FAS 133"), in January 2001 (see Note 8), Wisconsin Energy had the
following total Comprehensive Income during the three months ended
March 31, 2001 and 2000:
Three Months Ended March 31
-------------------------------
Comprehensive Income 2001 2000
--------------------- ------ ------
(Millions of Dollars)
Net Income $ 87.8 $50.6
Other Comprehensive Income (Loss)
Currency Translation Adjustments (2.3) -
Minimum Pension Liability (0.7) -
Unrealized Losses During the Period
on Derivatives Qualified as Hedges
Unrealized losses due to cumulative
effect of change in accounting
principle (2.1) -
Less: Reclassification for gains
included in net income 2.1 -
Other unrealized losses (6.3) -
------ -----
Net Unrealized Losses During the Period (10.5) -
------ -----
Other Comprehensive Income (Loss) (13.5) -
------ -----
Total Comprehensive Income $ 74.3 $50.6
====== =====
In 2000, the Board of Directors approved a common stock repurchase plan which
authorizes the Company to purchase up to $400 million of its shares of common
stock in the open market. During the first quarter of 2001, Wisconsin Energy
purchased approximately 1.9 million shares of common stock for $39.8 million
resulting in total purchases to date under the plan of 6.9 million shares for
$140.6 million. The Company is currently retiring the stock that is
purchased.
9
During the first quarter of 2001, Wisconsin Energy issued approximately
0.8 million new shares of common stock totaling $14.8 million related to the
Company's dividend reinvestment plan, other benefit plans and the exercise of
stock options.
DERIVATIVE INSTRUMENTS
8. In June 1998, the Financial Accounting Standards Board issued FAS 133, which
has been amended by FAS 137, Accounting for Derivative Instruments and
Hedging Activities - Deferral of the Effective Date of FAS 133, an amendment
of FAS 133, and by FAS 138, Accounting for Certain Derivative Instruments and
Certain Hedging Activities, an amendment of FAS 133. FAS 133 requires that
every derivative instrument be recorded on the balance sheet as an asset or
liability measured at its fair value and that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met.
As of the date of initial adoption, FAS 133 requires that the difference
between the fair value of derivative instruments recorded on the balance
sheet and the previous carrying amount of those derivatives be reported in
Net Income or Accumulated Other Comprehensive Income, as appropriate, as a
cumulative effect of a change in accounting principle. The adoption of FAS
133 by Wisconsin Energy as of January 1, 2001 resulted in an increase in net
income of $10.5 million reported as a cumulative effect of change in
accounting principle. This transition adjustment is related to fuel oil
forward and swap contracts utilized by Wisvest-Connecticut LLC, a wholly-
owned subsidiary of Wisvest, to mitigate the commodity risk associated with
generation costs. These contracts are defined as derivatives under FAS 133
and do not qualify for hedge accounting treatment. It is expected that this
gain will unwind during 2001 through normal operations and through the
expected sale of Wisvest-Connecticut's two power plants in the state of
Connecticut (see note 4).
Wisconsin Energy has a limited number of other financial and physical
commodity contracts that are defined as derivatives under FAS 133 and that
qualify for cash flow hedge accounting. These cash flow hedging instruments
are comprised of electric forward contracts which are used to manage the
supply and demand for electricity and gas futures and basis swap contracts
utilized by Wisconsin Gas to manage the cost of gas. With the adoption of
FAS 133 on January 1, 2001, the fair market values of these derivative
instruments have been recorded as assets and liabilities on the balance sheet
and as a cumulative effect of a change in accounting principle in Accumulated
Other Comprehensive Income in accordance with the transition provisions of
FAS 133. The impact of this transition as of January 1, 2001 was a
$2.1 million reduction in Accumulated Other Comprehensive Income.
During the first quarter of 2001, $2.1 million of net gains included in the
cumulative effect of a change in accounting principle component of
Accumulated Other Comprehensive Income were reclassified into earnings
resulting in a remaining balance of ($4.2) million as of March 31, 2001.
Wisconsin Energy estimates that the remaining balance will be reclassified
into earnings within the twelve months between January 1, 2001 and
December 31, 2001.
Future changes in the fair market values of these cash flow hedging
instruments, to the extent that the hedges are effective at mitigating the
underlying commodity risk, will be recorded in Accumulated Other
Comprehensive Income. At the date the underlying transaction occurs, the
amounts in Accumulated Other Comprehensive Income will be reported in
earnings. The ineffective portion of the derivative's change in fair value
will be recognized in earnings immediately. In the case of Wisconsin Gas,
the ineffective portion is recorded as a regulatory asset or liability as
these transactions are part of the purchased gas adjustment clause.
10
For the period ended March 31, 2001, the amount of hedge ineffectiveness was
immaterial. Wisconsin Energy did not exclude any components of derivative
gains or losses from the assessment of hedge effectiveness and there were no
reclassifications into earnings as a result of the discontinuance of hedges.
As of March 31, 2001, the maximum length of time over which Wisconsin Energy
is hedging its exposure to the variability in future cash flows of forecasted
transactions is nine months, and Wisconsin Energy estimates that losses of
$0.8 million will be reclassified from Accumulated Other Comprehensive Income
into earnings within the twelve months between April 1, 2001 and March 31,
2002 as the hedged transactions affect earnings.
Near the end of the first quarter of 2001, Wisconsin Energy settled several
treasury lock agreements entered into earlier in the quarter to mitigate
interest rate risk associated with the issuance of $1 billion of
intermediate-term unsecured senior notes in March 2001 (see Note 6). As
these agreements qualified for cash flow hedge accounting treatment under
FAS 133, the payment made upon settlement of these agreements is deferred in
Accumulated Other Comprehensive Income and will be amortized as an increase
to interest expense over the same period in which the interest cost on the
debt issuance is recognized in income. Wisconsin Energy estimates that
during the next twelve months, $0.7 million will be reclassified from
Accumulated Other Comprehensive Income as a reduction in earnings.
The Company believes that its electric capacity contracts qualify for and
have been designated as normal under the normal purchase and sale exception
of FAS 133 and, therefore, are not derivative instruments. The Financial
Accounting Standards Board is currently reviewing whether to allow electric
capacity option contracts to qualify for the normal purchase and sale
exception. The Financial Accounting Standards Board's final conclusion may
impact the Company's ongoing application of FAS 133 related to its electric
capacity contracts.
SEGMENT INFORMATION
9. Summarized financial information concerning Wisconsin Energy's reportable
operating segments for the three month periods ended March 31, 2001 and 2000
is shown in the following table. Current year information is not comparable
with the prior year due to the addition of the operating results of the WICOR
subsidiaries at the end of April 2000 and to the allocation of merger-related
costs (principally goodwill amortization and interest expense) to the
operating segments.
Reportable Operating Segments
-------------------------------------------------------- Other (a),
Energy Corporate &
Wisconsin ------------------------------------- Reconciling Total
Energy Corporation Utility Non-Utility Manufacturing Eliminations Consolidated
- --------------------------- ----------------- ------------------ ----------------- ------------------ -----------------
(Millions of Dollars)
Three Months Ended
- ------------------
March 31, 2001
Operating Revenues (b) $1,045.8 $153.3 $143.2 $ 12.7 $1,355.0
Operating Income (Loss) 167.3 8.9 10.8 (3.2) 183.8
Income (Loss) Before
Merger-Related Costs (c) 88.3 13.5 7.1 (6.8) 102.1
Net Income (Loss) 82.4 13.5 2.5 (10.6) 87.8
Capital Expenditures 71.3 23.2 6.1 24.3 124.9
Total Assets 6,468.3 626.9 864.4 454.3 8,413.9
11
Reportable Operating Segments
-------------------------------------------------------- Other (a),
Energy Corporate &
Wisconsin ------------------------------------- Reconciling Total
Energy Corporation Utility Non-Utility Manufacturing Eliminations Consolidated
- --------------------------- ----------------- ------------------ ----------------- ------------------ -----------------
(Millions of Dollars)
Three Months Ended
- ------------------
March 31, 2000
Operating Revenues (b) $ 549.7 $ 69.2 $ - $ 9.1 $ 628.0
Operating Income (Loss) 122.9 (1.9) - (1.8) 119.2
Income (Loss) Before
Merger-Related Costs (c) 59.3 (4.3) - (4.4) 50.6
Net Income (Loss) 59.3 (4.3) - (4.4) 50.6
Capital Expenditures 90.4 17.7 - 26.9 135.0
Total Assets 4,882.3 670.2 - 483.2 6,035.7
(a) Other includes all other non-utility activities, primarily non-utility real
estate investment and development by Wispark and non-utility investment in
recycling technology by Minergy as well as interest on corporate debt.
(b) Intersegment revenues are not material.
(c) Merger-related costs represent WICOR acquisition purchase accounting
entries including goodwill and interest expense.
12
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
On April 26, 2000, Wisconsin Energy acquired WICOR, Inc. This business
combination was accounted for as a purchase, and, therefore, is reflected
prospectively in Wisconsin Energy's consolidated financial statements from and
after the date of the acquisition.
Cautionary Factors: A number of forward-looking statements are included in this
document. When used, the terms "anticipate," "believe," "estimate," "expect,"
"objective," "plan," "possible," "potential," "project" and similar expressions
are intended to identify forward-looking statements. Forward-looking statements
are subject to certain risks, uncertainties and assumptions which could cause
actual results to differ materially from those that are described, including the
factors that are noted below in "Factors Affecting Results of Operations."
RESULTS OF OPERATIONS - 2001 FIRST QUARTER
CONSOLIDATED EARNINGS
The following table compares Wisconsin Energy's diluted earnings per share by
business segment during the first quarter of 2001 with similar information
during the first quarter of 2000. The following table also includes pro forma
earnings per share by segment during the first quarter of 2000 as if WICOR had
been a part of Wisconsin Energy since January 1, 2000.
2000
2001 -------------------------------
Diluted Earnings Per Share Actual Pro Forma (a) Actual
- -------------------------------------- ---------- ---------------- ---------
Utility Energy Segment $ 0.74 $ 0.66 $ 0.50
Non-Utility Energy Segment 0.03 (0.04) (0.04)
Manufacturing Segment 0.06 0.06 -
Other and Merger Costs (b) (0.18) (0.18) (0.04)
------ ------ ------
Earnings Before Accounting Change 0.65 0.50 0.42
Accounting Change (c) 0.09 - -
------ ------ ------
Net Earnings $ 0.74 $ 0.50 $ 0.42
====== ====== ======
(a) Pro forma assumes that the WICOR acquisition occurred on January 1, 2000
and includes estimated merger-related costs.
(b) Includes the holding company, other non-utility companies and merger-
related costs.
(c) Reflects the initial cumulative effect of adoption on January 1, 2001 of
FAS 133, all of which is attributable to the non-utility energy segment.
Consolidated earnings during the first quarter of 2001 increased to $0.74 per
share from $0.42 per share during the first quarter of 2000, reflecting a one-
time cumulative gain from a change in accounting principle of $0.09 per share as
a result of the Company's adoption on January 1, 2001 of FAS 133. Excluding the
accounting change, Wisconsin Energy's earnings grew to $0.65 per share during
the first quarter of 2001. The Company estimates that the acquisition of WICOR
in April 2000 contributed $0.16 per share to this increase in earnings during
the first quarter of 2001.
On a pro forma basis, earnings before the accounting change increased from $0.50
per share during the first quarter of 2000 to $0.65 per share during the first
quarter of 2001. An increase in gas and electric utility gross margins as a
result of rate increases and due to cooler winter weather during the first
quarter of 2001 primarily contributed to an $0.08 per share growth in earnings
by the utility energy segment. Earnings of the non-utility energy segment
increased by $0.07 per share due to improved financial
13
performance by Wisvest. On a pro forma basis, manufacturing segment earnings per
share excluding merger-related costs were unchanged primarily due to a weakening
economy. For purposes of this discussion, merger-related costs represent WICOR
acquisition purchase accounting entries including goodwill and interest expense.
A more detailed analysis of earnings contributions by segment follows.
UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Utility energy segment net income increased by $23.1 million or 39.0% between
the first quarter of 2001 and the first quarter of 2000, $19.1 million of which
is attributable to Wisconsin Gas Company, acquired as part of the acquisition of
WICOR in April 2000. Due to the seasonality of the gas heating business,
utilities such as Wisconsin Gas or Wisconsin Electric's gas operations
historically record earnings in the first and fourth quarters and incur losses
in the second and third quarters.
The following table reconciles the change in the contribution to net income by
Wisconsin Energy's utility energy segment between the first quarter of 2000 and
the first quarter of 2001.
Three Months Ended March 31
--------------------------------------------------------------------------
Increase (Decrease)
----------------------------------------------------
Wisconsin
Utility Energy Segment 2000 Gas (a) Other (b) Total 2001
- ------------------------------------ ------ --------------- --------------- --------- --------
(Millions of Dollars)
Operating Revenues
Electric $423.8 $ - $ 31.6 $ 31.6 $ 455.4
Gas 118.5 332.3 130.2 462.5 581.0
Other 7.4 0.3 1.7 2.0 9.4
------ ------ ------ ------ --------
Total Operating Revenues 549.7 332.6 163.5 496.1 1,045.8
Fuel and Purchased Power 109.7 - 24.1 24.1 133.8
Cost of Gas Sold 69.1 252.8 120.6 373.4 442.5
------ ------ ------ ------ --------
Gross Margin 370.9 79.8 18.8 98.6 469.5
Other Operating Expenses
Other Operation and Maintenance 162.8 22.4 17.4 39.8 202.6
Depreciation, Decommissioning
and Amortization 67.4 13.5 (1.3) 12.2 79.6
Property and Revenue Taxes 17.8 1.4 0.8 2.2 20.0
------ ------ ------ ------ --------
Operating Income 122.9 42.5 1.9 44.4 167.3
Other Income, Net 3.5 0.1 6.1 6.2 9.7
Financing Costs 29.5 9.3 0.5 9.8 39.3
------ ------ ------ ------ --------
Income Before Income Taxes 96.9 33.3 7.5 40.8 137.7
Income Taxes 37.6 14.2 3.5 17.7 55.3
------ ------ ------ ------ --------
Net Income $ 59.3 $ 19.1 $ 4.0 $ 23.1 $ 82.4
====== ====== ====== ====== ========
(a) Wisconsin Energy's financial statements reflect the operations of Wisconsin
Gas subsequent to the WICOR merger on April 26, 2000.
(b) Other includes Wisconsin Electric, Edison Sault and consolidating
adjustments and eliminations between the utilities.
Net income for Wisconsin Energy's other utility subsidiaries, Wisconsin Electric
Power Company and Edison Sault Electric Company, increased by $4.0 million
between the comparative periods primarily due to higher electric utility gross
margins (electric utility operating revenues less fuel and purchased power
expenses) and to higher gas utility gross margins (gas utility operating
revenues less cost of gas sold) during the first quarter of 2001. The Company
attributes the increases in electric and gas utility gross margins primarily to
rate increases that were in effect during the first quarter of 2001 but not
during the first quarter of 2000, and, to a lesser extent, to cooler winter
weather during the first quarter of 2001. Additional information concerning the
utility energy segment's electric and gas gross margins may be found below.
14
To eliminate the impact of the acquisition of Wisconsin Gas on the analysis of
utility segment operating income, the following pro forma discussion includes
Wisconsin Gas as if it had been a part of Wisconsin Energy during all of the
comparative periods.
Pro Forma Utility Energy Segment Operating Income
The following table compares the pro forma operating income of Wisconsin
Energy's utility energy segment during the first quarter of 2001 with similar
pro forma information for the first quarter of 2000 as if Wisconsin Gas had been
a part of Wisconsin Energy since January 1, 2000. The information excludes
merger-related goodwill amortization expenses during the first quarter of 2001
in order to maintain comparability.
Three Months Ended March 31
---------------------------------------
Pro Forma (a)
Utility Energy Segment 2001 2000 % Change
-------------------------- -------- ------ ----------
(Millions of Dollars)
Operating Revenues
Electric $ 455.4 $423.8 7.5%
Gas 581.0 294.4 97.4%
Other 9.4 7.4 27.0%
-------- ------
Total Operating Revenues 1,045.8 725.6 44.1%
Fuel and Purchased Power 133.8 109.7 22.0%
Cost of Gas Sold 442.5 171.9 157.4%
-------- ------
Gross Margin 469.5 444.0 5.7%
Other Operating Expenses
Other Operation and Maintenance 202.6 189.8 6.7%
Depreciation, Decommissioning
and Amortization 76.7 76.5 0.3%
Property and Revenue Taxes 20.0 19.1 4.7%
-------- ------
Operating Income $ 170.2 $158.6 7.3%
======== ======
(a) Includes Wisconsin Gas as if it had been part of Wisconsin Energy since
January 1, 2000 but excludes merger-related goodwill amortization expenses.
On a pro forma basis, utility energy segment operating income increased by
$11.6 million or 7.3% during the first quarter of 2001 when compared with the
first quarter of 2000 primarily due to higher gross margins on electric and gas
utility operating revenues, offset in part by higher other operation and
maintenance expenses. For further information concerning electric and pro forma
gas utility gross margins, see the sections that follow.
Other Operation and Maintenance Expenses: On a pro forma basis, other
operation and maintenance expenses increased by $12.8 million or 6.7% during the
first quarter of 2001 when compared with the first quarter of 2000. The most
significant changes in other operation and maintenance expenses include
$3.7 million of higher customer account expenses due in large part to an
increase in bad debts and approximately $11.0 million of higher electric
transmission expenses due to a change in how electric transmission costs are
recorded. On January 1, 2001, Wisconsin Electric and Edison Sault transferred
all of their electric utility transmission assets to the ATC in exchange for
equity interests in this new company. The transfer of these assets is expected
to be earnings neutral to the Company. However, because all costs related to
electric transmission operations, including associated depreciation and
financing costs, are now billed to the Company by the ATC, all of these costs
are being reported in Other Operation and Maintenance expenses rather than in
other lines on the income statement. For additional information, see Note 4 in
Item 1, Financial Statements - "Notes to Consolidated Condensed Financial
Statements," in Part I of this report.
15
Electric Utility Revenues, Gross Margins and Sales
The following table compares Wisconsin Energy's total electric utility operating
revenues and its gross margin during the first quarter of 2001 with similar
information for the first quarter of 2000.
Three Months Ended March 31
------------------------------------
Electric Utility Operations 2001 2000 % Change
- ------------------------------- ------- ------ -------------
(Millions of Dollars)
Electric Operating Revenues $455.4 $423.8 7.5%
Fuel and Purchased Power
Fuel 79.5 73.4 8.3%
Purchased Power 52.4 34.4 52.3%
------ ------
Total Fuel and Purchased Power 131.9 107.8 22.4%
------ ------
Gross Margin $323.5 $316.0 2.4%
====== ======
During the first quarter of 2001, total electric utility operating revenues
increased by $31.6 million or 7.5% when compared with the first quarter of 2000.
Wisconsin Energy estimates that approximately $29.5 million of this growth was
due to electric retail rate increases that became effective in April 2000, in
August 2000 and on January 1, 2001 and to an interim rate increase that became
effective in February 2001 under Wisconsin's fuel cost adjustment procedure. In
May 2001, the interim fuel rates were increased again by a final order. For
additional information, see Item 1, Legal Proceedings - "Utility Rates and
Regulatory Matters," in Part II of this report.
Between the comparative periods, total fuel and purchased power expenses
increased by $24.1 million or 22.4% primarily due to significantly higher
natural gas prices during 2001 and , to a lesser extent, due to higher fixed
demand charges associated with long-term power purchase contracts in effect
during 2001. The higher fuel and purchased power expenses offset much of the
impact on electric revenues of the electric rate increases noted above such that
total gross margin on electric operating revenues increased by $7.5 million or
2.4% during the first quarter of 2001.
Total electric megawatt-hour sales increased by 0.5% during the first quarter of
2001 due to a 5.5% increase in sales to the Empire and Tilden iron ore mines,
Wisconsin Electric's two largest retail customers. Excluding the Empire and
Tilden mines, Wisconsin Energy's total electric energy sales were flat between
the comparative periods. The following table compares Wisconsin Energy's
electric utility operating revenues and electric utility megawatt-hour sales by
customer class during the first quarter of 2001 with similar information for the
first quarter of 2000.
Operating Revenues Megawatt-Hour Sales
Three Months Ended March 31 Three Months Ended March 31
------------------------------------ -------------------------------------
Electric Utility Operations 2001 2000 % Change 2001 2000 % Change
- ------------------------------- ------ ------ ------------ ------- ------- ------------
(Millions of Dollars) (Thousands)
Customer Class
Residential $159.7 $147.7 8.1% 1,933.1 1,899.0 1.8%
Small Commercial/Industrial 143.4 128.6 11.5% 2,154.6 2,043.7 5.4%
Large Commercial/Industrial 116.9 113.3 3.2% 2,829.1 2,859.4 (1.1%)
Other-Retail/Municipal 17.1 14.8 15.5% 461.4 424.7 8.6%
Resale-Utilities 14.6 13.4 9.0% 447.8 563.1 (20.5%)
Other-Operating Revenues 3.7 6.0 (38.3%) - - -
------ ------ ------- -------
Total $455.4 $423.8 7.5% 7,826.0 7,789.9 0.5%
====== ====== ======= =======
16
Operating Revenues Megawatt-Hour Sales
Three Months Ended March 31 Three Months Ended March 31
------------------------------------ -------------------------------------
Electric Utility Operations 2001 2000 % Change 2001 2000 % Change
- ------------------------------- ------ ------ ------------ ------- ------- ------------
Weather - Degree Days (a)
Heating (3,306 Normal) 3,395 2,931 15.8%
Cooling (0 Normal) - - -
(a) As measured at Mitchell International Airport in Milwaukee, Wisconsin.
Normal degree days are based upon a twenty-year moving average.
As noted above, total electric megawatt-hour sales were flat between the
comparative periods excluding the Empire and Tilden mines. The upward impact on
electric sales of cooler winter weather and customer growth in the residential
and small commercial/industrial customer classes during the first quarter of
2001 was offset to some extent by the downward impact on electric sales of a
weakening economy during the first quarter of 2001. As measured by heating
degree days, the first quarter of 2001 was 15.8% cooler than the first quarter
of 2000 and 2.7% cooler than normal, increasing electric sales to weather-
sensitive customers in the residential and small commercial/industrial customer
classes. However, sales to large commercial/industrial customers excluding the
Empire and Tilden mines decreased by 2.7% during the first quarter of 2001,
reflecting the softening economy.
Gas Utility Revenues, Gross Margins and Therm Deliveries
The following table compares Wisconsin Energy's actual gas utility operating
revenues, gross margin and gas utility therm deliveries during the first quarter
of 2001 with similar information for the first quarter of 2000.
Gross Margin Therm Deliveries
Three Months Ended March 31 (a) Three Months Ended March 31 (a)
------------------------------------- --------------------------------------
Gas Utility Operations 2001 2000 % Change 2001 2000 % Change
--------------------------- ------- ------ ------------ --------- ------- ------------
(Millions of Dollars) (Millions)
Operating Revenues
Residential $377.2 $ 78.2 382.4% 385.2 139.6 175.9%
Commercial/Industrial 183.4 41.7 339.8% 203.6 85.5 138.1%
Interruptible 9.1 1.4 550.0% 10.1 4.3 134.9%
------ ------ ----- -----
Total Retail Gas Sales 569.7 121.3 369.7% 598.9 229.4 161.1%
Transported Customer-Owned Gas 12.7 5.3 139.6% 247.2 109.2 126.4%
Transported - Interdepartmental 0.3 0.4 (25.0%) 3.2 8.1 (60.5%)
Other-Operating Revenues (1.7) (8.5) 80.0% - - -
------ ------ ----- -----
Total Operating Revenues 581.0 118.5 390.3% 849.3 346.7 145.0%
===== =====
Cost of Gas Sold 442.5 69.1 540.4%
------ ------
Gross Margin $138.5 $ 49.4 180.4%
====== ======
(a) Wisconsin Energy's gas utility information reflects the operations of
Wisconsin Gas subsequent to the WICOR merger on April 26, 2000. For
further information concerning gas utility operations during the
comparative periods, see "Pro Forma Gas Utility Revenues, Gross Margins and
Therm Deliveries" below.
Comparative gas utility operating revenues, gross margins and therm deliveries
increased significantly during the first quarter of 2001 primarily due to the
acquisition of Wisconsin Gas in April 2000. To eliminate the impact of the
acquisition of Wisconsin Gas on the analysis of gas utility operations, the
following discussion includes Wisconsin Gas as if it had been a part of
Wisconsin Energy during all of the comparative periods.
17
Pro Forma Gas Utility Revenues, Gross Margins and Therm Deliveries
The following table compares Wisconsin Energy's gas utility operating revenues
and gross margins during the first quarters of 2001 and 2000 on a pro forma
basis as if Wisconsin Gas had been part of Wisconsin Energy since January 1,
2000. Gross margin is a better performance indicator than revenues because
changes in the cost of gas sold flow through to revenue under gas cost recovery
mechanisms that do not impact gross margin.
Three Months Ended March 31
Pro Forma (a) -----------------------------------
Gas Utility Operations 2001 2000 % Change
- ----------------------------- ------ ------ -----------
(Millions of Dollars)
Gas Operating Revenues $581.0 $294.4 97.4%
Cost of Gas Sold 442.5 171.9 157.4%
------ ------
Gross Margin $138.5 $122.5 13.1%
====== ======
(a) Includes Wisconsin Gas as if it had been part of Wisconsin Energy since
January 1, 2000.
Gross margin on gas utility operating revenues increased by $16.0 million or
13.1% during the first quarter of 2001 when compared with pro forma gross margin
during the first quarter of 2000. Wisconsin Energy attributes most of this
increase to higher therm deliveries to weather sensitive customers as a result
of cooler winter weather during the first quarter of 2001, and, to a lesser
extent, to retail gas rate increases at Wisconsin Electric that became effective
in August 2000.
Significantly higher prices for natural gas since the first quarter of 2000
primarily drove a 97.4% increase in gas utility operating revenues and a 157.4%
increase in the cost of gas sold during the first quarter of 2001. The cost of
natural gas rose approximately 86% between the first quarter of 2000 and the
first quarter of 2001, affecting Wisconsin Energy's gas as well as electric
utility operations. Based upon March closing prices for natural gas futures on
the New York Mercantile Exchange, the cost of gas increased from $2.900 per
decatherm in April 2000 to $5.384 per decatherm in April 2001. As noted above,
such gas cost increases do not affect the margin earned on each therm of gas
delivered as a result of the Company's gas cost recovery mechanisms. However,
higher gas prices can adversely affect the Company's therm deliveries to the
extent that customers reduce consumption through lower thermostat settings or
through fuel switching.
The following table compares Wisconsin Energy's gas utility operating revenues
and natural gas therm deliveries by customer class during the first quarter of
2001 with similar pro forma information for the first quarter of 2000.
Operating Revenues Therm Deliveries
Three Months Ended March 31 Three Months Ended March 31
Pro Forma (a) ------------------------------------ ---------------------------------
Gas Utility Operations 2001 2000 % Change 2001 2000 % Change
- ------------------------------------ ------ ------ ------------ ----- ----- ------------
(Millions of Dollars) (Millions)
Customer Class
Residential $377.2 $205.3 83.7% 385.2 335.6 14.8%
Commercial/Industrial 183.4 97.3 88.5% 203.6 191.6 6.3%
Interruptible 9.1 4.8 89.6% 10.1 12.7 (20.5%)
------ ------ ----- -----
Total Retail Gas Sales 569.7 307.4 85.3% 598.9 539.9 10.9%
Transported Customer-Owned Gas 12.7 13.5 (5.9%) 247.2 273.1 (9.5%)
Transported - Interdepartmental 0.3 0.4 (25.0%) 3.2 8.1 (60.5%)
Other-Operating Revenues (1.7) (26.9) 93.7% - - -
------ ------ ----- -----
Total Operating Revenues $581.0 $294.4 97.4% 849.3 821.1 3.4%
====== ====== ===== =====
18
Operating Revenues Therm Deliveries
Three Months Ended March 31 Three Months Ended March 31
Pro Forma (a) ------------------------------ ----------------------------
Gas Utility Operations 2001 2000 % Change 2001 2000 % Change
- ------------------------------------ ------ ------ ------------ ------ ------ -----------
Weather - Degree Days (b)
Heating (3,306 Normal) 3,395 2,931 15.8%
(a) Includes Wisconsin Gas as if it had been part of Wisconsin Energy since
January 1, 2000.
(b) As measured at Mitchell International Airport in Milwaukee, Wisconsin.
Normal degree days are based upon a twenty-year moving average.
Total therm deliveries of natural gas increased by 3.4% during the first quarter
of 2001 primarily due to a weather-related 14.8% increase in deliveries to
higher-margin residential customers, who tend to be more weather sensitive than
other customer classes. As noted above, the first quarter of 2001 was 15.8%
cooler than the first quarter of 2000 and 2.7% cooler than normal. During the
first quarter of 2001, however, residential therm deliveries were lower than
anticipated, reflecting the adverse effects of significantly higher gas prices.
Deliveries to the interruptible and transportation customer classes decreased
during the first quarter of 2001 in large part to due fuel switching and to a
weakening economy during the first quarter of 2001.
NON-UTILITY ENERGY SEGMENT CONTRIBUTION TO NET INCOME
Non-utility energy segment net income increased by $17.8 million during the
first quarter of 2001, $10.5 million of which represents a gain on the
cumulative effect of a change in accounting principle associated with the
adoption of FAS 133. For additional information, see Note 8 in Item 1,
Financial Statements - "Notes to Consolidated Condensed Financial Statements,"
in Part I of this report. The remainder of the earnings increase primarily
represents improved results at Wisvest during the first quarter of 2001. As
previously discussed, the Company announced in December 2000 the sale of
Wisvest's two non-utility power plants in the state of Connecticut, which is
expected to close in the next few months.
The following table reconciles the change in the contribution to earnings by
Wisconsin Energy's non-utility energy segment between the first quarter of 2000
and the first quarter of 2001. In addition, the table compares electric
megawatt-hour sales from independent power production activities as well as
electric megawatt-hour sales and natural gas therm sales as a result of non-
utility energy marketing, trading and services activities.
19
Three Months Ended March 31
--------------------------------------------------
Increase (Decrease)
----------------------------
Non-Utility Energy Segment 2000 WICOR (a) Other (b) Total 2001
- ---------------------------------------------- ------ ---------- --------- ------ --------
(Millions of Dollars, Except Statistics)
Operating Revenues
Independent Power Production $ 31.8 $ - $ 30.4 $ 30.4 $ 62.2
Energy Marketing, Trading & Services 31.4 78.9 (20.4) 58.5 89.9
Other 6.0 0.2 (5.0) (4.8) 1.2
------ ------ ------ ------ --------
Total Operating Revenues 69.2 79.1 5.0 84.1 153.3
Fuel and Purchased Power 50.6 - (3.9) (3.9) 46.7
Cost of Gas Sold - 73.0 - 73.0 73.0
Cost of Goods Sold - 4.4 - 4.4 4.4
------ ------ ------ ------ --------
Gross Margin 18.6 1.7 8.9 10.6 29.2
Other Operating Expenses 20.5 1.6 (1.8) (0.2) 20.3
------ ------ ------ ------ --------
Operating Income (1.9) 0.1 10.7 10.8 8.9
Other Income, Net 3.1 - (1.9) (1.9) 1.2
Financing Costs 7.8 0.3 (3.1) (2.8) 5.0
------ ------ ------ ------ --------
Income Before Income Taxes (6.6) (0.2) 11.9 11.7 5.1
Income Taxes (2.3) - 4.4 4.4 2.1
------ ------ ------ ------ --------
Income Before Accounting Change (4.3) (0.2) 7.5 7.3 3.0
Cumulative Effect of Accounting Change - - 10.5 10.5 10.5
------ ------ ------ ------ --------
Net Income $(4.3) $(0.2) $ 18.0 $ 17.8 $ 13.5
====== ====== ====== ====== ========
Statistics
Independent Power Production
Electric Megawatt-Hour Sales (Thousands) 760.7 - 540.5 540.5 1,301.2
Energy Marketing, Trading & Services
Electric Megawatt-Hour Sales (Thousands) 225.6 - 123.2 123.2 348.8
Gas Therm Sales (Millions) - 100.3 - 100.3 100.3
(a) Wisconsin Energy's financial statements and statistics reflect the
operations of WICOR Energy and FieldTech, subsidiaries of WICOR, subsequent
to the merger on April 26, 2000. During 2001, WICOR Energy was merged into
an unconsolidated affiliate of Wisconsin Energy. In May 2001, FieldTech
was sold to an unrelated third party for approximately $20 million.
(b) Other consists primarily of Wisvest.
MANUFACTURING SEGMENT CONTRIBUTION TO NET INCOME
The manufacturing segment contributed $2.5 million to net income during the
first quarter of 2001. Prior to the WICOR acquisition, Wisconsin Energy did not
have a manufacturing segment. The following table summarizes the manufacturing
segment's contribution to Wisconsin Energy's net income during the first quarter
of 2001.
20
Three Months Ended
Manufacturing Segment March 31, 2001
--------------------------- ------------------------
(Millions of Dollars)
Operating Revenues (a)
Domestic $108.2
International 35.0
------
Total Operating Revenues 143.2
Cost of Goods Sold 102.5
------
Gross Margin 40.7
Other Operating Expenses 29.9
------
Operating Income 10.8
Other Income, Net 0.1
Financing Costs 5.9
------
Income Before Income Taxes 5.0
Income Taxes 2.5
------
Net Earnings $ 2.5
======
(a) For further information concerning manufacturing segment revenues and gross
margin during the comparative periods, see "Pro Forma Manufacturing Segment
Results" below.
Pro Forma Manufacturing Segment Results
Assuming that WICOR had been a part of Wisconsin Energy since January 1, 2000
and excluding costs related to the WICOR merger, the manufacturing segment would
have posted pro forma net income of approximately $7.1 million during the first
quarter of 2001 compared with pro forma net income of $6.7 million during the
first quarter of 2000. Wisconsin Energy attributes this increase primarily to
greater product demand in several key markets including the water systems and
water treatment markets as well as to increased cost controls over manufacturing
and operating expenses. However, during the first quarter of 2001, the
manufacturing segment noticed a softening in product demand in the consumer
sensitive pool, recreational vehicle and marine markets as a result of the
weakening economy. This trend may result in lower than anticipated earnings
contributions by the manufacturing segment during 2001. International revenues
and earnings contributions were lower during the first quarter of 2001 than
during the same period in 2000 primarily due to a strong U.S. dollar, a weak
Australian economy and delays related to new product shipments in Europe.
The following table reconciles the pro forma change in revenues and gross margin
of the manufacturing segment between the first quarter of 2000 and the first
quarter of 2001 as if the manufacturing segment had been part of Wisconsin
Energy since January 1, 2000.
Three Months Ended March 31
-----------------------------------------
Pro Forma Increase
Manufacturing Gross Margin 2000 (Decrease) 2001
- ----------------------------- ------ ----------------- ------
(Millions of Dollars)
Operating Revenues
Domestic $105.3 $ 2.9 $108.2
International 36.9 (1.9) 35.0
------ ------ ------
Total Operating Revenues 142.2 1.0 143.2
Cost of Goods Sold 100.4 1.1 101.5
------ ------ ------
Gross Margin $ 41.8 $(0.1) $ 41.7
====== ====== ======
21
LIQUIDITY AND CAPITAL RESOURCES
CASH FLOWS
The following summarizes Wisconsin Energy's cash flows during the first three
months of 2001 and 2000:
Three Months Ended March 31
-------------------------------
Wisconsin Energy Corporation 2001 2000
---------------------------- ------- -------
(Millions of Dollars)
Cash Provided by (Used in):
Operating Activities $ 114.2 $ 261.4
Investing Activities (120.2) (149.5)
Financing Activities 24.6 (160.6)
Operating Activities
Cash provided by operating activities decreased to $114.2 million during the
first three months of 2001 compared with $261.4 million during the same period
in 2000, reflecting higher first quarter 2001 earnings offset by (1) an increase
in working capital requirements associated with higher gas costs and with the
seasonal nature of gas utility operations, (2) an increase in income taxes paid
as a result of higher earnings during the first quarter of 2001, (3) a
$35 million tax refund received in the first quarter of 2000 related to
litigation, and (4) a $20 million contribution to the Wisconsin Energy
Foundation in the first quarter of 2001. The Company expects that its working
capital requirements will be reduced during the second quarter of 2001 as it
collects its winter heating receivables.
Investing Activities
During the first three months of 2001, Wisconsin Energy spent $120.2 million on
investing activities, including capital expenditures of $71.3 million on utility
plant, $23.2 million on non-utility energy projects, $6.1 million on
manufacturing and $24.3 million on other non-utility activities. Due to the
timing of refueling outages at Point Beach Nuclear Plant, the Company spent
$9.6 million less during the first quarter of 2001 on the acquisition of nuclear
fuel when compared with the first quarter of 2000. During the first quarter of
2001, the Company continued its program of divesting of non-core businesses and
assets, including the receipt of $13.6 million of net proceeds for the sale of
non-utility real estate assets held by Wispark.
Financing Activities
During the first three months of 2001, Wisconsin Energy received $24.6 million
of net cash from financing activities compared with using net cash in the amount
of $160.6 million during the first three months of 2000.
In March 2001, Wisconsin Energy received approximately $990 million of cash
through the issuance of $1 billion of intermediate-term unsecured senior notes.
Proceeds from the issuance of these debt securities were added to the Company's
general funds and were used to repay commercial paper borrowings related
primarily to the WICOR acquisition.
During the first quarter of 2001, Wisconsin Energy purchased approximately
1.9 million shares of common stock for $39.8 million under a $400 million board-
approved repurchase program that was
22
initiated in 2000. Also during the first quarter of 2001, Wisconsin Energy
issued approximately 0.8 million new shares of common stock aggregating
$14.8 million related to the Company's dividend reinvestment plan, other benefit
plans and the exercise of stock options.
CAPITAL RESOURCES AND REQUIREMENTS
Capital Resources
Cash requirements during the remaining three quarters of 2001 are expected to be
met through a combination of internal sources of funds from operations, cash
distributions from the ATC, asset sales and short-term borrowings. In April
2001, Wisconsin Energy received $93 million of cash distributions from the ATC
and anticipates receiving additional cash distributions of $24 million prior to
the end of 2001 subject to audit. In addition, the Company currently expects to
receive approximately $500 million of net proceeds during the remainder of 2001
as a result of asset sales.
The Company has access to outside capital markets and has been able to generate
funds internally and externally to meet its capital requirements. Wisconsin
Energy's ability to attract the necessary financial capital at reasonable terms
is critical to the Company's overall strategic plan. Wisconsin Energy believes
that it has adequate capacity to fund its operations for the foreseeable future
through its borrowing arrangements and internally generated cash.
On March 31, 2001, Wisconsin Energy had $1.7 billion of available unused lines
of bank credit on a consolidated basis. Wisconsin Energy has historically used
these lines primarily to support its outstanding commercial paper and other
short-term borrowings.
The following table shows Wisconsin Energy's consolidated capitalization
structure at March 31, 2001 and at December 31, 2000:
Capitalization Structure March 31, 2001 December 31, 2000
- ----------------------------- -------------------------- ------------------------
(Millions of Dollars)
Common Equity $2,042.6 31.3% $2,016.8 31.4%
Preferred Stock 30.4 0.5% 30.4 0.5%
Trust Preferred Securities 200.0 3.1% 200.0 3.1%
Long-Term Debt (including
current maturities) 3,465.1 53.1% 2,788.1 43.4%
Short-Term Debt 785.0 12.0% 1,386.1 21.6%
-------- ----- -------- -----
Total $6,523.1 100.0% $6,421.4 100.0%
======== ===== ======== =====
Access to capital markets at a reasonable cost is determined in large part by
credit quality. The following table summarizes the current ratings of the debt
securities of Wisconsin Energy and its subsidiaries by Standard & Poors
Corporation ("S&P"), Moody's Investors Service ("Moody's") and Fitch.
Commercial paper of WICOR Industries, Inc. is unrated.
S&P Moody's Fitch
------------ ------------- ------------
Wisconsin Energy Corporation
Commercial Paper A-1 P-1 F1
Unsecured Senior Debt A+ A2 A+
23
S&P Moody's Fitch
------------ ------------- ------------
Wisconsin Electric Power Company
Commercial Paper A-1+ P-1 F1+
Secured Senior Debt AA- Aa2 AA
Unsecured Debt A+ Aa3 AA-
Preferred Stock A aa3 AA-
Wisconsin Gas Company
Commercial Paper A-1+ P-1 F1+
Unsecured Senior Debt AA- Aa2 AA-
Wisconsin Energy Capital Corporation
Unsecured Debt A+ A2 A+
WEC Capital Trust I
Trust Preferred Securities A- a2 A
S&P's current outlook for Wisconsin Energy and its subsidiaries is negative
while Fitch currently maintains a negative outlook for Wisconsin Energy
Corporation and for Wisconsin Energy Capital Corporation. Fitch's outlook for
Wisconsin Electric and Wisconsin Gas is currently stable, while Moody's current
outlook for Wisconsin Energy and its subsidiaries is stable.
These ratings provide a significant degree of flexibility in obtaining funds on
competitive terms and reflect the views of the rating agencies. An explanation
of the significance of these ratings may be obtained from each rating agency.
Such ratings are not a recommendation to buy, sell or hold securities, but
rather an indication of creditworthiness. Any rating can be revised upward or
downward or withdrawn at any time by a rating agency if it decides that the
circumstances warrant the change. Each rating should be evaluated independently
of any other rating.
Capital Requirements
Capital requirements during the remainder of 2001 are expected to be principally
for capital expenditures, for long and short-term debt retirements, maturities
and sinking fund requirements, for payments to the Nuclear Decommissioning Trust
Fund for the eventual decommissioning of Point Beach Nuclear Plant and for the
repurchase of a portion of the outstanding shares of Wisconsin Energy common
stock. Wisconsin Energy's total consolidated capital expenditure budget for the
remainder of 2001 is approximately $590 million. Assuming, among other factors,
planned asset sales during 2001, the Company expects its overall debt levels to
decline by approximately $300 million and its debt to total capital ratio to
decline to 63% by the end of 2001 from 65% as of March 31, 2001.
FACTORS AFFECTING RESULTS OF OPERATIONS
OUTLOOK
The following outlook includes forward-looking statements subject to certain
risks, uncertainties and assumptions. Actual results may vary materially.
Factors that could cause actual results to differ materially include, but are
not limited to: general economic conditions; business, competitive and
regulatory conditions in the deregulating and consolidating energy industry, in
general, and in the Company's utility service territories; availability of the
Company's generating facilities; changes in purchased power costs and supply
availability; changes in coal or natural gas prices and supply availability;
unusual weather; risks associated with non-utility diversification; regulatory
decisions;
24
obtaining the necessary regulatory approvals and investment capital to implement
the "Power the Future" strategy; the timing and extent of realization of
anticipated synergy benefits from the WICOR merger; disposition of legal
proceedings; and foreign governmental, economic, political and currency risk;
continuation of the common stock repurchase plan during 2001 and other factors
referred to under "Cautionary Factors" below.
Earnings: In its 2000 Annual Report on Form 10-K, Wisconsin Energy had
projected that its 2001 earnings would be in the range of $2.00 to $2.25 per
diluted share. During the first quarter of 2001, the Company estimates that
earnings were reduced by $0.07 per share due to higher fuel expenses not
recovered in rates. In addition, the Company estimates that a softening economy
has the potential of reducing the earnings contribution from the manufacturing
segment by $0.05 to $0.07 per share during 2001. However, in spite of these
reductions and subject to the many variables that could affect such a
projection, Wisconsin Energy continues to believe that it can achieve earnings
in the range of $2.00 to $2.25 per diluted share during the year 2001.
UTILITY RATES AND REGULATORY MATTERS
See Item 1. Legal Proceedings - "Utility Rates and Regulatory Matters" in
Part II of this report for information related to the Company's fuel cost
adjustment procedure.
MARKET RISKS
Interest Rate Risk: As previously reported, Wisconsin Energy financed the
acquisition of WICOR through $1.2 billion of commercial paper issued in the
institutional private placement market. In March 2001, the Company refinanced
approximately $1 billion of this commercial paper with unsecured senior notes,
locking in $550 million of five-year notes at an all-in cost of 6.29% and
$450 million of ten-year notes at an all-in cost of 6.76%.
CAUTIONARY FACTORS
This report and other documents or oral presentations contain or may contain
forward-looking statements made by or on behalf of Wisconsin Energy. Such
statements are based upon management's current expectations and are subject to
risks and uncertainties that could cause Wisconsin Energy's actual results to
differ materially from those contemplated in the statements. Readers are
cautioned not to place undue reliance on the forward-looking statements. When
used in written documents or oral presentations, the terms "anticipate,"
"believe," "estimate," "expect," "objective," "plan," "possible," "potential,"
"project" and similar expressions are intended to identify forward-looking
statements. In addition to the assumptions and other factors referred to
specifically in connection with such statements, factors that could cause
Wisconsin Energy's actual results to differ materially from those contemplated
in any forward-looking statements include, among others, the following.
Operating, Financial and Industry Factors
. Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; availability of electric generating
facilities; unscheduled generation outages, or unplanned maintenance or
repairs; unanticipated changes in fossil fuel, nuclear fuel, purchased
power, gas supply or water supply costs or availability due to higher
demand, shortages, transportation problems or other developments;
nonperformance by electric energy or natural gas suppliers under existing
power purchase or gas supply contracts; nuclear or environmental
25
incidents; resolution of used nuclear fuel storage and disposal issues;
electric transmission or gas pipeline system constraints; unanticipated
organizational structure or key personnel changes; collective bargaining
agreements with union employees or work stoppages; inflation rates; or
demographic and economic factors affecting utility service territories or
operating environment.
. Regulatory factors such as unanticipated changes in rate-setting policies or
procedures; unanticipated changes in regulatory accounting policies and
practices; industry restructuring initiatives; transmission system operation
and/or administration initiatives; recovery of costs of previous investments
made under traditional regulation; required approvals for new construction;
changes in the United States Nuclear Regulatory Commission's regulations
related to Point Beach Nuclear Plant; changes in the United States
Environmental Protection Agency's regulations as well as regulations from
the Wisconsin or Michigan Departments of Natural Resources or the state of
Connecticut related to emissions from fossil-fueled power plants; or the
siting approval process for new generation and transmission facilities.
. The rapidly changing and increasingly competitive electric and gas utility
environment as market-based forces replace strict industry regulation and
other competitors enter the electric and gas markets resulting in increased
wholesale and retail competition.
. Consolidation of the industry as a result of the combination and acquisition
of utilities in the Midwest, nationally and globally.
. Restrictions imposed by various financing arrangements and regulatory
requirements on the ability of its subsidiaries to transfer funds to
Wisconsin Energy in the form of cash dividends, loans or advances.
. Changes in social attitudes regarding the utility and power industries.
. Customer business conditions including demand for their products or services
and supply of labor and material used in creating their products and
services.
. The cost and other effects of legal and administrative proceedings,
settlements, investigations and claims, and changes in those matters,
including the final outcome of the Giddings & Lewis, Inc./City of West Allis
lawsuit against Wisconsin Electric.
. Factors affecting the availability or cost of capital such as: changes in
interest rates; the Company's capitalization structure; market perceptions
of the utility industry, the Company or any of its subsidiaries; or security
ratings.
. Federal, state or local legislative factors such as changes in tax laws or
rates; changes in trade, monetary and fiscal policies, laws and regulations;
electric and gas industry restructuring initiatives; or changes in
environmental laws and regulations.
. Authoritative generally accepted accounting principle or policy changes from
such standard setting bodies as the Financial Accounting Standards Board and
the Securities and Exchange Commission.
. Unanticipated technological developments that result in competitive
disadvantages and create the potential for impairment of existing assets.
. Possible risks associated with non-utility diversification, such as: general
economic conditions; competition; operating risks; dependence upon certain
suppliers and customers; the cyclical nature of property values that could
affect real estate investments; unanticipated changes in
26
environmental or energy regulations; timely regulatory approval without
onerous conditions of potential acquisitions; risks associated with minority
investments, where there is a limited ability to control the development,
management or operation of the project; and the risk of higher interest
costs associated with potentially reduced securities ratings by independent
rating agencies as a result of these and other factors.
. Legislative or regulatory restrictions or caps on non-utility acquisitions,
investments or projects, including the state of Wisconsin's amended public
utility holding company law.
. Factors affecting foreign non-utility operations and investments, including:
foreign governmental actions; foreign economic and currency risks; political
instability; and unanticipated changes in foreign environmental or energy
regulations.
. Factors which impede execution of Wisconsin Energy's "Power the Future"
strategy announced in September 2000 and revised in February 2001, including
receipt of necessary state and federal regulatory approvals and amendment of
applicable laws in the state of Wisconsin, and obtaining the investment
capital from outside sources necessary to implement the strategy.
. Other business or investment considerations that may be disclosed from time
to time in Wisconsin Energy's Securities and Exchange Commission filings or
in other publicly disseminated written documents.
Business Combination Factors
. Unanticipated costs or difficulties related to the integration of the
businesses of Wisconsin Energy and WICOR.
. Unexpected difficulties or delays in realizing anticipated net cost savings
or unanticipated effects of the qualified five-year electric and gas rate
freeze ordered by the Public Service Commission of Wisconsin ("PSCW") as a
condition of approval of the merger.
Wisconsin Energy undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of new information, future
events or otherwise.
*****
For certain other information which may impact Wisconsin Energy's future
financial condition or results of operations, see Item 1, Financial Statements -
"Notes to Financial Statements," in Part I of this report as well as Item 1,
Legal Proceedings, in Part II of this report.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
For information concerning interest rate risk at Wisconsin Energy Corporation,
see Item 2, Management's Discussion and Analysis of Financial Condition and
Results of Operations - "Factors Affecting Results of Operations," in Part I of
this report. For information concerning other market risk exposures, see
Item 7, Management's Discussion and Analysis of Financial Condition and Results
of Operations - "Factors Affecting Results of Operations - Market Risks," in
Part II of Wisconsin Energy's 2000 Annual Report on Form 10-K.
27
PART II - OTHER INFORMATION
---------------------------
ITEM 1. LEGAL PROCEEDINGS
The following should be read in conjunction with Item 3, Legal Proceedings, in
Part I of Wisconsin Energy's 2000 Annual Report on Form 10-K.
UTILITY RATES AND REGULATORY MATTERS
Wisconsin Retail Jurisdiction
Fuel Cost Adjustment Procedure: As previously reported, Wisconsin Electric
operates under a fuel cost adjustment clause for its fuel and purchased power
costs associated with the generation and delivery of electricity. On
December 8, 2000, Wisconsin Electric submitted an application with the PSCW
seeking a $51.4 million increase in rates on an expedited basis to recover
increased costs of fuel and purchased power in 2001. Wisconsin Electric revised
its projected fuel cost shortfall on January 10, 2001 to reflect updated natural
gas cost projections for 2001. This update resulted in a request for an
additional $11.1 million in 2001, bringing the total requested increase to
$62.5 million. Hearings on this matter were held in mid-January 2001. On
February 9, 2001, the PSCW issued an interim order authorizing a $37.8 million
increase in rates for 2001 fuel costs. Hearings on the final phase of the case
were held in late March and early April 2001. The PSCW issued a final order on
May 3, 2001, effective immediately, authorizing a total increase in rates of
$58.7 million for 2001 fuel costs, subject to refund. Assuming normal weather
for the remainder of the year, the Company estimates that it will under recover
a total of $15 million of fuel costs ($0.07 per diluted share) as a result of
increased fuel and purchased power costs during 2001.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At Wisconsin Energy's 2001 Annual Meeting of Stockholders held on May 2, 2001,
shareholders voted on the following items with the following results:
Item 1 - Election of Directors for Terms Expiring in 2004: The Board of
Directors' nominees named below were elected as directors by the indicated votes
and percentages cast for each nominee. Directors are elected by a plurality of
the votes cast by the shares entitled to vote. Any shares not voted, whether by
withheld authority, broker non-votes or otherwise, have no effect in the
election of directors. There was no solicitation in opposition to the nominees
proposed in the Proxy Statement.
Name of Nominee For Withheld
- -------------------------- -------------------------- -------------------------
Robert A. Cornog 95,976,241 (94.2%) 5,925,452 (5.8%)
Richard R. Grigg 97,698,162 (95.9%) 4,203,531 (4.1%)
Frederick P. Stratton, Jr. 95,249,406 (93.5%) 6,652,287 (6.5%)
28
Item 2 - Amendments to 1993 Omnibus Stock Incentive Plan: Proposed amendments
to the 1993 Omnibus Stock Incentive Plan were approved as follows. Approval of
these amendments required an affirmative vote of a majority of the votes cast on
the proposal provided that total votes cast represented more than 50% of shares
entitled to vote.
Broker
For Against Abstain Non-Votes
- ---------------------------- ----------------------------- -------------- --------------
65,386,172 (77.1%) 19,450,657 (22.9%) 1,894,425 15,170,439
Item 3 - Declassification of Board of Directors: A shareholder proposal
requesting that the Board of Directors take the necessary steps to declassify
the Board and establish annual elections of all Directors was approved as
follows. Approval of this proposal required an affirmative vote of a majority
of the votes cast on the proposal.
Broker
For Against Abstain Non-Votes
- ---------------------------- ----------------------------- -------------- --------------
46,618,453 (55.5%) 37,343,553 (44.5%) 2,769,247 15,170,439
If the Board of Directors decides to take the necessary steps to declassify the
Board, a subsequent affirmative vote of at least 80% of Wisconsin Energy's
outstanding shares would be required to enact the change per Wisconsin Energy's
Bylaws.
Of 118,182,934 voting shares outstanding as of the March 6, 2001 record date for
the annual meeting, 101,901,692 shares (86.2% of the shares outstanding) were
represented at the meeting.
Further information concerning these matters, including the names of Directors
whose terms as a director continued after the meeting, is contained in Wisconsin
Energy's Proxy Statement dated March 20, 2001 with respect to the 2001 Annual
Meeting of Stockholders.
ITEM 5. OTHER INFORMATION
2002 ANNUAL MEETING DATE; DEADLINES FOR SHAREHOLDER PROPOSALS
Wisconsin Energy Corporation's 2002 Annual Meeting of Stockholders will be held
on May 2, 2002.
. Pursuant to Rule 14a-8 under the Securities Exchange Act of 1934, the
deadline for submitting shareholder proposals for inclusion in Wisconsin
Energy's proxy statement and form of proxy for the 2002 Annual Meeting is
November 20, 2001.
. The date after which notice of a shareholder proposal submitted outside of
the processes of Rule 14a-8 is considered untimely is February 21, 2002.
Under Wisconsin Energy's advance notice bylaw, such a proposal must be
received no earlier than January 22, 2002 (100 days before the May 2, 2002
scheduled date of the Annual Meeting) and no later than February 21, 2002 (70
days before such scheduled date).
29
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) EXHIBITS
The following Exhibits are filed in this Form 10-Q report:
Exhibit No.
- -----------
4.1 Securities Resolution No. 2 of Wisconsin Energy Corporation under
the Wisconsin Energy Indenture, dated as of March 23, 2001.
10.1 Benefit exchange documents with Paul Donovan and Wisconsin Energy
Corporation, effective April 23, 2001.
(a) Exchange Agreement
(b) Letter Agreement
(c) Split Dollar Agreement
(d) Collateral Assignment
10.2 Benefit exchange documents with George E. Wardeberg and Wisconsin
Energy Corporation, effective April 19, 2001.
(a) Exchange Agreement
(b) Letter Agreement
(c) Split Dollar Agreement
(d) Collateral Assignment
10.3 2001 Revised forms of award agreements under 1993 Omnibus Stock
Incentive Plan, as amended, for restricted stock awards, incentive
stock option awards and non-qualified stock option awards.
10.4 1993 Omnibus Stock Incentive Plan as amended and restated, that was
approved by the shareholders at the annual meeting. (Incorporated
by reference to Appendix A to the Proxy Statement dated March 20,
2001 for the 2001 annual meeting of shareholders).
(b) REPORTS ON FORM 8-K
A Current Report on Form 8-K dated as of March 2, 2001 was filed by
Wisconsin Energy on March 2, 2001 to report its 2000 Annual Financial
Statements and Review of Operations.
A Current Report on Form 8-K dated as of March 8, 2001 was filed by
Wisconsin Energy on March 15, 2001 to report a change in accountants.
No other reports on Form 8-K were filed by Wisconsin Energy during the
quarter ended March 31, 2001.
30
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
WISCONSIN ENERGY CORPORATION
----------------------------
(Registrant)
/s/PAUL DONOVAN
---------------------------------------
Date: May 14, 2001 Paul Donovan, Senior Vice President,
Chief Financial Officer and duly
authorized officer
31