-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, lw6KiFZZrI3TyTE4vxb+swvCMjt+ikd9Fnk+s6spMxfZ/vOPCzZBQHKEpqv7oVwI z19b3+PkGG8Ib/kR0PBP2g== 0000314890-94-000004.txt : 19940331 0000314890-94-000004.hdr.sgml : 19940331 ACCESSION NUMBER: 0000314890-94-000004 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 10 CONFORMED PERIOD OF REPORT: 19931231 FILED AS OF DATE: 19940330 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WICOR INC CENTRAL INDEX KEY: 0000314890 STANDARD INDUSTRIAL CLASSIFICATION: 4924 IRS NUMBER: 391346701 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: 34 SEC FILE NUMBER: 001-07951 FILM NUMBER: 94519236 BUSINESS ADDRESS: STREET 1: 626 E WISCONSIN AVE STREET 2: PO BOX 334 CITY: MILWAUKEE STATE: WI ZIP: 53202 BUSINESS PHONE: 4142917026 10-K 1 1993 WICOR FORM 10-K 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1993 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from __________ to __________ Commission file number 1-7951 WICOR, Inc. (Exact name of registrant as specified in its charter) Wisconsin 39-1346701 (State or other jurisdiction of (I.R.S. Employer Identification No) incorporation or organization) 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: $ 467,902,017 at March 23, 1994. Number of shares outstanding of each of the registrant's classes of common stock, as of March 23, 1994: Common Stock, $1 par value 16,919,445 shares Documents Incorporated by Reference WICOR, Inc. proxy statement dated March 10, 1994 (Part III) 2 TABLE OF CONTENTS PAGE PART I 1 Item 1. Business 1 (a) General Development of Business 1 (b) Financial Information about Industry Segments 1 (c) Narrative Description of Business 1 1. Retail Distribution of Natural Gas 1 A. General 1 B. Gas Markets and Competition 2 C. Gas Supply and Pipeline Capacity 3 (1) General 3 (2) Pipeline Capacity 4 (3) Long-Term Gas Supply 4 (4) Spot Market Gas Supply 4 D. Wisconsin Rate and Regulatory Matters 5 (1) Rate Matters 5 (2) Transition Cost Recovery Policy 5 (3) Service Area Expansion 5 E. Employees 5 2. Manufacturing of Pumps and Water Processing Equipment 5 A. General 5 B. U.S. Operations 6 C. International Operations 6 D. Raw Materials and Patents 6 E. Employees 7 3. Exploration and Development of Oil and Natural Gas 7 Item 2. Properties 7 (a) Capital Expenditures 7 (b) Retail Distribution of Natural Gas 7 (c) Manufacturing of Pumps and Water Processing Equipment 7 (d) Exploration and Development of Oil and Natural Gas 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 (i) 3 TABLE OF CONTENTS (continued) PAGE Item 8. Financial Statements and Supplementary Data 11 Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure 11 PART III 11 Item 10. Directors and Executive Officers of the Registrant 11 Item 11. Executive Compensation 11 Item 12. Security Ownership of Certain Beneficial Owners and Management 11 Item 13. Certain Relationships and Related Transactions 11 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. and 2. All Financial Statements and Financial Statement Schedules 12 3. Exhibits 12 (b) Reports on Form 8-K 15 (ii) 4 PART I Item 1. BUSINESS (a) General Development of Business WICOR, Inc. (the "Company" or "WICOR") is a diversified holding company with two principal businesses: natural gas distribution and manufacturing of pumps and water processing equipment. Wisconsin Gas Company ("Wisconsin Gas") engages in retail distribution of natural gas. Sta-Rite Industries, Inc. ("Sta-Rite") and SHURflo Pump Manufacturing Co. ("SHURflo") are manufacturers of pumps and water processing equipment. WEXCO of Delaware, Inc. ("WEXCO"), another subsidiary, previously engaged in exploration for and development of oil and natural gas through financial participation with producers. WEXCO sold substantially all of its assets in 1993. The Company is a Wisconsin corporation and maintains its principal executive offices in Milwaukee, Wisconsin. The Company was incorporated in 1980 at which time it acquired all the outstanding common stock of Wisconsin Gas through a merger. WEXCO, formed in 1978 as a subsidiary of Wisconsin Gas, also became a subsidiary of the Company. The Company acquired all of the outstanding common stock of Sta-Rite through a merger in 1982. In 1991, Sta-Rite completed the sale of its Fluid Power Group and its Heating Group. This decision was part of Sta-Rite's long- term strategy to concentrate on its water products operations and pursue opportunities for further growth. In 1991, Sta-Rite purchased the operating assets of Aquality, Inc., a manufacturer of swimming pool accessories. In April 1992, Sta-Rite purchased a majority shareholder interest in Nocchi Pompe S.p.A., a manufacturer of small water pumps and related equipment, located near Pisa, Italy. During 1992, the Company increased its ownership interest in Filtron Technology Corp. to 21%. In July 1993, the Company acquired all of the outstanding stock of SHURflo through a merger. SHURflo is a manufacturer of small pumps for the food service, recreational vehicle, marine, industrial and water purification markets. In November 1993, Sta-Rite acquired Dega Research Pty, a Melbourne, Australia-based manufacturer of pumps, filters and accessories for the pool and spa market. This acquisition made Sta- Rite the largest pool and spa equipment company in Australia, which is the second largest market in the world for these products. The Company (including subsidiaries) has 3,222 full-time equivalent employees. (b) Financial Information About Industry Segments Reference is made to "Financial Review-General Overview" included in Exhibit 13, which is hereby incorporated herein by reference. (c) Narrative Description of Business 5 1. RETAIL DISTRIBUTION OF NATURAL GAS A. General Wisconsin Gas is the largest natural gas distribution public utility in Wisconsin, where all of its business is conducted. At December 31, 1993, Wisconsin Gas distributed gas to approximately 485,000 residential, commercial and industrial customers in 487 communities throughout Wisconsin with an estimated population of 1,867,000 based on the State of Wisconsin's estimates for 1993. Wisconsin Gas is subject to the jurisdiction of the Public Service Commission of Wisconsin ("PSCW") as to various phases of its operations, including rates, service and issuance of securities. See "Wisconsin Rate and Regulatory Matters." B. Gas Markets and Competition Wisconsin Gas' business is highly seasonal, particularly as to residential and commercial sales for space heating purposes, with a substantial portion of its sales occurring in the winter heating season. Competition in varying degrees exists between natural gas and other forms of energy available to consumers. Most of Wisconsin Gas' large commercial and industrial customers are dual-fuel customers that are equipped to switch between natural gas and alternate fuels. Wisconsin Gas offers transportation services for these customers to enable them to reduce their energy costs and use gas rather than other fuels. Under gas transportation agreements, customers seek to purchase lower-priced spot market gas directly from producers or other sellers and arrange with pipelines and Wisconsin Gas to have the gas transported to their facilities. Wisconsin Gas actively assists customers in buying gas and arranging transportation. Wisconsin Gas also offers gas sales services that are priced to compete with these transportation services. Wisconsin Gas earns the same margin (difference between revenue and cost), whether it sells gas to customers or transports customer-owned gas. The following table sets forth the volumes of natural gas delivered by Wisconsin Gas to its customers.
Year Ended --------------------------------------------- December 31, 1993 December 31, 1992 --------------------- --------------------- Thousands Thousands Customer Class of Therms* Percent of Therms* Percent ---------- --------- ---------- --------- Residential 479,640 39.8 459,050 39.2 Commercial 190,600 15.8 178,400 15.2 Large Volume Commercial and Industrial Firm 152,460 12.7 144,880 12.4 Commercial and Industrial Interruptible 208,490 17.3 173,880 14.9 Transported 174,080 14.4 213,790 18.3 ---------- --------- ---------- --------- Total Gas Purchased and Transported 1,205,270 100.0 1,170,000 100.0 ========== ========= ========== =========
*One therm equals 100,000 BTU's. 6 The volumes shown as transported represent customer-owned gas that was delivered by Wisconsin Gas to its customers. The remaining volumes represent quantities sold to customers by Wisconsin Gas. Wisconsin Gas has taken certain steps in recent years to enable it to compete in an increasingly competitive gas industry. Wisconsin Gas has instituted a service options program which provides customers an array of sales, transportation and related services from which they can choose. The service options program also assists Wisconsin Gas in identifying the peak day and annual gas requirements that Wisconsin Gas is obligated to supply. The service options program thus provides customers with a choice of services that they can select to meet their needs while defining Wisconsin Gas' obligation to obtain and sell gas to customers. In 1993, Wisconsin Gas introduced a gas supply management service aimed at its larger customers. Under this service, Wisconsin Gas manages the customer's gas supply. Gas management service customers are freed from the responsibilities imposed by Federal regulation of dealing with one or more gas suppliers, an interstate pipeline and a utility on a daily basis to order the precise gas supply and capacity necessary to meet their varying daily gas requirements. See "Gas Supply and Pipeline Capacity." In 1993, Wisconsin Gas added more than 14,000 customers, surpassing record totals for the fifth consecutive year. See "Service Area Expansion". Up to 25% of Wisconsin Gas' Milwaukee area annual market requirements can be supplied through the interstate pipelines of either ANR Pipeline Company ("ANR") or Northern Natural Gas Company ("NNG"). This capability enhances competition between ANR and NNG for services to Wisconsin Gas and its customers, and Wisconsin Gas believes that such competition provides overall lower gas costs to all customers than otherwise would exist. Wisconsin Gas' future ability to maintain its present share of the industrial dual-fuel market (the market that has installed capability to use gas or other fuels) depends upon Wisconsin Gas' success in obtaining long-term and short-term supplies of natural gas at marketable prices and its success in arranging or facilitating transportation service for those customers that desire to buy their own gas supplies. Although the dual-fuel market comprises approximately 32% of Wisconsin Gas' annual deliveries, it contributes only about 14% of the company's margin. C. Gas Supply and Pipeline Capacity (1) General In recent years, the natural gas industry has undergone structural changes designed to increase competition. In 1992, the Federal Energy Regulatory Commission ("FERC") issued Order No. 636 which fundamentally restructured the interstate natural gas pipeline industry. Prior to Order No. 636, the pipelines serving Wisconsin Gas were major sellers of gas to Wisconsin Gas. They sold gas on a "bundled" or delivered-to-Wisconsin basis. Under Order No. 636, the pipelines are required to "unbundle" the sale of gas from the related transportation service. Consequently, pipelines may no longer 7 provide the delivered-to-Wisconsin gas sales service. Rather, they must sell gas at or near the point of production in competition with other gas sellers. Under Order No. 636, purchasers such as Wisconsin Gas contract separately with one or more sellers for gas supply and with pipelines for capacity to move the gas to markets or into market area storage for future delivery. In the opinion of management, Order No. 636 will not have a material impact on Wisconsin Gas' earnings. ANR and NNG completed the transition to unbundled service on November 1, 1993. Consequently, Wisconsin Gas has replaced all of its "bundled" pipeline services with "unbundled" firm pipeline transportation and storage services and long-term contracts with producers and marketers for firm gas supply. Thus, 1993 was a transition year in which Wisconsin Gas purchased gas supply and capacity under interim arrangements with pipeline suppliers for much of the year and under the Order No. 636 restructured regime described above for the last two months of the year. The following table sets forth the sources and volumes of gas purchased by Wisconsin Gas and volumes of customer-owned gas transported by Wisconsin Gas.
Year Ended -------------------------------------------------- December 31, 1993 December 31, 1992 ---------------------- ---------------------- Thousands Thousands of Therms* Percent of Therms* Percent ---------- ------- ---------- ------- Natural Gas Purchased ANR 467,544 38.8 408,230 34.9 NNG 20,348 1.7 17,880 1.5 Viking 11,917 1.0 6,990 0.6 Term contracts (in excess of 30 days) 398,197 33.0 - 0.0 Spot Market 133,184 11.1 523,110 44.7 ---------- ------- ---------- ------- Total Gas Purchased 1,031,190 85.6 956,210 81.7 Customer Gas Transported 174,080 14.4 213,790 18.3 ---------- ------- ---------- ------- Total Gas Purchased and Transported 1,205,270 100.0 1,170,000 100.0 ========== ======= ========== =======
*One therm equals 100,000 BTU's. (2) Pipeline Capacity Interstate pipelines serving Wisconsin originate in three major gas producing areas of North America: the traditional Oklahoma and Texas basins; the Gulf of Mexico off-shore from Texas and Louisiana and the adjacent on-shore producing areas of those states; 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. 8 Because of the seasonal variations in gas usage in Wisconsin, Wisconsin Gas has also contracted with ANR and NNG for substantial underground storage capacity, primarily in Michigan. There is no known underground storage capability in Wisconsin. Storage enables Wisconsin Gas to optimize its overall gas supply and capacity costs. In summer, gas in excess of market demand is transported into the storage fields, and in winter, gas is withdrawn from storage and combined with gas purchased in or near the production areas ("flowing gas") to meet the increased winter market demand. As a result, Wisconsin Gas can contract for less pipeline capacity than would otherwise be necessary, and it can purchase gas on a more uniform daily basis from suppliers year-around. Each of these capabilities enables Wisconsin Gas to reduce its overall costs. Wisconsin Gas' firm winter daily transportation and storage capacity entitlements from pipelines under long-term contracts are set forth below. Maximum Daily (Thousands Pipeline of Therms*) ----------------- ------------- ANR Mainline 3,175 Storage 4,996 NNG Mainline 1,226 Storage 145 Viking Mainline 64 ----------- Total 9,606 =========== *One therm equals 100,000 BTU's. (3) Long-Term Gas Supply Wisconsin Gas has long-term firm contracts with approximately 30 gas suppliers for gas produced in each of the three producing areas discussed above. The following table sets forth Wisconsin Gas' winter season maximum daily firm total gas supply. Maximum Daily (Thousands of Therms*) ------------- Domestic flowing gas 2,259 Canadian flowing gas 1,396 Storage withdrawals 5,157 ------------- Total 8,812 ============= *One therm equals 100,000 BTU's. (4) Spot Market Gas Supply Wisconsin Gas expects to continue to make gas purchases in the 30-day spot market as price and other circumstances dictate. Wisconsin Gas has purchased spot market gas since 1985 and has supply relationships with a number of sellers from whom it purchases spot gas. 9 D. Wisconsin Rate and 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. Effective November 12, 1993, the PSCW granted Wisconsin Gas a $12.3 million general rate increase. Wisconsin Gas' authorized return on common equity was reduced from 12.75% to 11.8%. The PSCW has implemented a bi-annual rate case process for energy utilities pursuant to which Wisconsin Gas' next rate change would be effective November 1, 1995. In July 1993, Wisconsin Gas filed a proposal to adjust rates up to a ceiling amount. The ceiling amount is based on the latest allowed rates, adjusted annually for inflation and reduced by a predetermined productivity factor. A decision on the proposal is expected in April 1994. Wisconsin Gas is unable to predict whether the PSCW will approve its proposal. 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 "Transition Cost Recovery Policy". (2) Transition Cost Recovery Policy Under Order No. 636, interstate pipelines are permitted to recover certain costs incurred in the transition from the bundled sales service to the unbundled Order No. 636 regime. ANR and NNG have filed to recover transition costs. ANR and NNG may file in the future to recover additional transition costs, and Wisconsin Gas will bear a portion of such additional costs approved by the FERC. The PSCW has permitted Wisconsin Gas to recover transition costs from customers through its rates. In the judgment of management, the incurrence of these transition costs will have no material effect on Wisconsin Gas' operations or financial condition under current PSCW policy. See Note 8 to Notes to Consolidated Financial Statements contained in Exhibit 13, which note is hereby incorporated herein by reference. (3) Service Area Expansion In recent years, Wisconsin Gas has increased its efforts to obtain regulatory approvals to extend gas service to previously unserved communities. In 1992, Wisconsin Gas extended service to 30 new communities and added 10,400 customers. In 1993, Wisconsin Gas extended service to 41 new communities and added more than 14,000 customers. E. Employees At December 31, 1993, Wisconsin Gas had 1,353 full-time equivalent active employees. 10 2. MANUFACTURING OF PUMPS AND WATER PROCESSING EQUIPMENT A. General The Company's manufacturing subsidiaries manufacture pumps and water processing equipment used to pump, control and filter water, and positive displacement pumps and other accessories used for fluid handling in a wide array of specialized applications and markets. Manufacturing and assembly activities are conducted in plants in the United States, United Kingdom, Canada, Germany, Italy, Australia, New Zealand and Russia. B. U.S. Operations Water products include jet, centrifugal, sump, submersible and submersible turbine water pumps, water storage and pressure tanks, filters, and pump and tank systems. These products pump, filter and store water used for drinking, cooking, washing and livestock watering, and are used in private and public swimming pools, spas, "hot tubs", jetted bathtubs, and fountains. The manufacturing businesses produce large higher pressure and capacity water pumps used in agricultural and turf irrigation systems and in a wide variety of commercial, industrial and municipal fluids- handling applications. Small, high performance pumps, and related fluids-handling products, are used in four primary markets: (1) the food service industry, where gas operated pumps are used for pumping soft drinks made from syrups, and electric motor driven pumps are used for water boost and drink dispensing; (2) the recreational vehicle and marine markets, where electric motor driven pumps are used for a variety of applications including pumping potable water in travel trailers, motor homes, camping trailers and boats, and for other applications including marine wash down, bilge and live well pumping; (3) industrial markets, where applications are concentrated in the soil extraction market for use in carpet cleaning machines, agricultural markets for spraying agricultural pesticides and fertilizers, and general industrial applications requiring fluid handling; and (4) the water purification industry, where electric motor driven pumps are used to pressurize reverse osmosis systems and for water transfer. Sales of pumps and water processing equipment are somewhat related to the seasons of the year as well as the level of activity in the housing construction industry and are sensitive to weather, interest rates, discretionary income, and leisure and recreation spending. The markets for most water and industrial products are highly competitive, with price, service and product performance all being important competitive factors. The Company believes it is a leading producer of pumps for private water systems and swimming pools and spas and for the food service and recreational vehicle markets. The Company's centrifugal pumps command a major share of the agricultural and irrigation centrifugal market. The Company also ranks among the larger producers of pool and spa filters and submersible turbine pumps. Major brand names include "STA-RITE", "BERKELEY", "SHURflo", "FLOTEC", "TOWN & COUNTRY", "SWIMQUIP" and "AQUALITY." 11 Domestic pumps and water products are sold and serviced primarily through a network of independent distributors, dealers and manufacturers' representatives serving the well drilling, hardware, plumbing, pump installing, irriga-tion, pool and spa, food service, recreational vehicle, marine, and industrial markets. Sales are also made on a private brand basis to large customers in all water products markets and to original equipment manufacturers. Backlog of orders for pumps and water products is not a significant indicator of future sales. C. International Operations International operations are conducted primarily by international subsidiaries and export operations from the United States. Products are sold to markets in approximately 110 countries on six continents. Foreign manufacturing of products from imported and locally manufactured components is carried out by United Kingdom, German, Canadian, Australian, New Zealand, Italian, and Russian subsidiaries. The products sold in the international markets are similar to those sold in the United States, but in many instances have distinct features required for those markets. Product distribution channels are similar to those for domestic markets. Non-domestic sales, including exports, were 34% of 1993 manufacturing 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 and aluminum wire for motors; stainless and carbon sheet steel, bar steel and tubing; plastic resins for injection molded components; and powdered metal components. The manufacturing units also purchase from third party suppliers completely assembled electric motors, plastic molded parts, elastomers for valves and diaphragms, components for electric motors, stamped and die cast metal parts, and hardware and electrical components. Although the manufacturing subsidiaries own a number of patents and hold licenses for manufacturing rights under other patents, no one patent or group of patents is critical to the success of the manufacturing businesses as a whole. E. Employees At December 31, 1993, the manufacturing businesses had 1,869 full time equivalent active employees. 3. EXPLORATION AND DEVELOPMENT OF OIL AND NATURAL GAS WEXCO was formed in 1978, a time of national gas shortages, primarily to develop additional future sources of energy for Wisconsin Gas. WEXCO participated in gas and oil exploration and development activities through financial participation with producers. In 1993, in connection with the Company's strategic decision to focus on its primary businesses, WEXCO sold substantially all of its assets. 12 Item 2. PROPERTIES (a) Capital Expenditures The Company's capital expenditures for the year ended December 31, 1993, totaled $51.9 million. Retirements during this period totaled $40.0 million, of which $32.8 million represented the original cost of the WEXCO assets sold. See "Properties - Exploration and Development of Oil and Natural Gas." Except as discussed in "Legal Proceedings", the Company does not expect to make any material capital expenditures for environmental control facilities in 1994. (b) Retail Distribution of Natural Gas Wisconsin Gas owns a distribution system which, on December 31, 1993, included approximately 7,800 miles of distribution and transmission mains, 399,000 services and 488,000 active meters. Wisconsin Gas' distribution system consists almost entirely of plastic and coated steel pipe. Wisconsin Gas also owns its main office building in Milwaukee, office buildings in certain other communities in which it serves, gas regulating and metering sta- tions, peaking facilities and its major service centers, including garage and warehouse facilities. The Milwaukee and other office buildings, the principal service facilities and the gas distribution systems of Wisconsin Gas are owned by it in fee subject to the lien of its Indenture of Mortgage and Deed of Trust, dated as of November 1, 1950, under which its first mortgage bonds are issued, and to permissible encumbrances as therein defined. Where distribution mains and services occupy private property, Wisconsin Gas in some, but not all, instances has obtained consents, permits or easements for such installations from the apparent owners or those in possession, generally without an examination of title. (c) Manufacturing of Pumps and Water Processing Equipment The manufacturing businesses have 12 manufacturing facilities located in California (2), Nebraska, Wisconsin (2), Germany, Italy (2), Australia (2), New Zealand and Russia. These plants contain a total of approximately 790,000 square feet of floor space. These businesses also own or lease seven sales/distribution facilities in the United States, six in Australia, two each in France and England, and one each in Canada and Singapore. (d) Exploration and Development of Oil and Natural Gas In 1993, WEXCO sold substantially all of its assets for approximately their book value of $4.0 million. 13 Item 3. LEGAL PROCEEDINGS There are no material legal proceedings pending, other than ordinary routine litigation incidental to the Company's businesses, to which the Company or any of its subsidiaries is a party, except as discussed below. There are no material legal proceedings to which any officer or director of the Company or any of its subsidiaries is a party or has a material interest adverse to the Company. There are no material administrative or judicial proceedings arising under environmental quality or civil rights statutes pending or known to be contemplated by governmental agencies to which the Company or any of its subsidiaries is or would be a party. Sta-Rite has entered into a contract with the Wisconsin Department of Natural Resources ("DNR") to perform and complete the Remedial Investigation/Feasibility Study and Remedial Design/Remedial Action phases of the Federal Superfund environmental process for the Delavan, Wisconsin Municipal Well No. 4, which is located close to one of Sta-Rite's facilities. In 1990 and 1991, Sta-Rite provided reserves to cover the estimated costs under the contract. No additions to reserves were required in 1992 or 1993. Although management believes the amounts reserved will be adequate to effect any necessary remediation, there is a possibility that unexpected additional costs may be incurred. Sta-Rite, along with other generators, has been sued by Waste Management of Wisconsin, Inc. for cleanup costs relating to a landfill near Sta-Rite's former Deerfield operation. Sta-Rite has established reserves to cover reasonable costs associated with this litigation. Sta-Rite has been notified by two environmental groups in California of their intent to pursue litigation against a number of submersible pump manufacturers, including Sta-Rite, for violations of the state's health and safety code (Proposition 65). The Company is in the process of evaluating the claims. 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, 1993, the Company has accrued $40 million for cleanup costs in addition to $1.6 million of costs already incurred. These estimates are based on current undiscounted costs. It should also be noted that the numerous assumptions such as the type and extent of contamination, available remediation techniques, and regulatory requirements which are used in developing these estimates are subject to change as new information becomes available. Any such changes in assumptions could have a significant impact on the potential liability. A formal remediation plan is currently being developed for presentation to the DNR. Following plan approval and pilot studies, remediation will commence. Barring unforeseen delays, expenditures by Wisconsin Gas on this remediation work will commence in 1994 and increase in future years as plan approvals are obtained. Expenditures over the next three years are expected to 14 total approximately $20 million. Although most of the work and costs will be incurred in the first few years of the plan, monitoring of the sites and other necessary actions may last up to 30 years. Wisconsin Gas is pursuing recovery of these costs from insurance carriers. Any amounts not recoverable from insurance carriers will be allowed full recovery in rates, based on recent PSCW orders. Accordingly, the accrual has been offset by a deferred charge to a regulatory asset. Certain related investigation costs incurred to date are currently being recovered in utility rates. However, any incurred costs not yet recovered in rates are not allowed by the PSCW to earn a return. As of December 31, 1993, $1.6 million of such costs have been incurred. In 1992, the owner of a portion of one of the properties on which manufactured gas operations were conducted commenced suit in Federal district court against Wisconsin Gas. The suit, which was settled in 1993, generally sought indemnity and contribution under Federal statutes and alleged that Wisconsin Gas is liable for remediating the environmental conditions found to be caused by any releases of hazardous substances from the gasification activities at the site. Under the settlement, Wisconsin Gas has agreed to indemnify the owner from any remediation costs attributable to the release of hazardous substances from the gasification activities on the site. In the judgment of management, the settlement does not materially change Wisconsin Gas' responsibility as required by Federal or state statutes for remediating the environmental conditions found to be caused by any releases of hazardous substances from the gasification activities at the site, which ceased about 40 years ago, the cost of any remediation actions that may be required, or its ability to recover such costs in its rates or from insurers. 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 DNR and has sent the report of its assessment to the DNR. Management cannot predict whether or not the DNR 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. 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 1993. 15 EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth the names, ages, and offices held of 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 58 President and Chief Executive Officer of the Company; Chairman and Chief Executive Officer of Sta-Rite; Chairman of Wisconsin Gas and SHURflo. Thomas F. Schrader 44 Vice President of the Company and President and Chief Executive Officer of Wisconsin Gas James C. Donnelly 48 Vice President of the Company and President and Chief Operating Officer of Sta-Rite Joseph P. Wenzler 52 Vice President, Treasurer and Chief Financial Officer of the Company; Vice President and Chief Financial Officer of Wisconsin Gas; and Treasurer and Secretary of SHURflo Robert A. Nuernberg 54 Secretary of the Company and Vice President- Corporate Relations and Secretary of Wisconsin Gas
Mr. Wardeberg was elected to his current positions effective February 1, 1994. Prior thereto he was President and Chief Operating Officer of the Company and Vice Chairman and Chief Executive Officer of Sta-Rite from 1992 to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and Vice President- Water Systems of Sta-Rite from 1989 to 1992. Prior thereto, he was Vice Chairman and Chief Operating Officer of Whirlpool Corporation. 16 Mr. Schrader was elected Vice President of the Company in 1988 and President and Chief Executive Officer of Wisconsin Gas in 1990. Prior thereto, he served as President and Chief Operating Officer of Wisconsin Gas from 1988 to 1990, Executive Vice President from 1986 to 1988, Vice President and Assistant to the Chairman from 1985 to 1986, and Vice President-Market Services from 1983 to 1985. He held several other positions with Wisconsin Gas from 1978 to 1983. Mr. Donnelly was elected President and Chief Operating Officer of Sta-Rite in 1992. Previously he served as Vice President, Treasurer and Chief Financial Officer of the Company and Wisconsin Gas since 1990. He continues as a Vice President of the Company. Mr. Donnelly joined the Company and Wisconsin Gas in 1987 as Vice President and Treasurer. Prior thereto, he served as Vice President-Finance of Eastern Gas and Fuel Associates from 1984 to 1987 and as Vice President-Finance of Boston Gas Company, a subsidiary of Eastern Gas and Fuel Associates, from 1978 to 1984. 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. Prior thereto, he served as Vice President of the Company and President and Chief Executive Officer of Sta-Rite from 1990 to 1992, President and Chief Operating Officer from 1986 to 1990, Executive Vice President from 1985 to 1986, Vice President-Finance, Secretary and Treasurer from 1984 to 1985, and Vice President-Finance and Treasurer from 1981 to 1984. Mr. Nuernberg was elected Secretary of the Company in 1987 and Vice President-Corporate Relations and Secretary of Wisconsin Gas in 1988. Prior thereto, he served as Vice President-Law and Secretary of Wisconsin Gas from 1983 to 1988 and as Secretary from 1982 to 1983. 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 independent 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 1993 and 1992, see "Investor Information" included in Exhibit 13, which is hereby incorporated herein by reference. At December 31, 1993, there were 17,091 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, which note is hereby incorporated herein by reference. 17 By order of the PSCW, Wisconsin Gas is generally permitted to pay dividends up to the amount projected in its rate case. Wisconsin Gas may pay dividends in excess of the projected dividend amount so long as payment will not cause its equity ratio to fall below 48.43%. If payment of projected dividends would cause its common equity ratio to fall below 43% of total capitalization (including short-term debt), or if payment of additional dividends would cause its common equity ratio to fall below 48.43%, Wisconsin Gas must obtain PSCW approval to pay such dividends. Wisconsin Gas has projected the payment of $16 million of dividends to the Company during the 12 months ending October 31, 1994. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, which note is hereby incorporated herein by reference. The PSCW desires Wisconsin Gas to target its common equity level at 43% to 50% of total capitalization. For the year ended December 31, 1993, Wisconsin Gas' average common equity level was 45.16%. In addition, $8.6 million of Sta-Rite net assets at December 31, 1993, plus 50% of Sta-Rite future earnings, are available for dividends to the Company. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, which note is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA Reference is made to "Selected Financial Data" included in Exhibit 13, which is hereby incorporated herein by reference. Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Reference is made to "Financial Review" included in Exhibit 13, which is hereby incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the WICOR, Inc. consolidated balance sheet and consolidated statement of capitalization as of December 31, 1993 and 1992, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1993, together with the report of independent public accountants dated February 11, 1994, all appearing in Exhibit 13, which is hereby incorporated herein by reference. Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE There has been no change in or disagreement with the Company's independent auditors on any matter of accounting principles or practices or financial statement disclosure required to be reported pursuant to this item. 18 PART III Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Reference is made to "Item No. 1: Election of Directors" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for the names, ages, business experience and other information regarding directors and nominees for director of the Company. See "Executive Officers of the Registrant" for information regarding executive officers of the Company. Item 11. EXECUTIVE COMPENSATION Reference is made to "Executive Compensation" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for information on compensation of executive officers of the Company; provided, however, that the subsections entitled "Board Compensation Committee Report on Executive Compensation" and "Executive Compensation - Performance Information" shall not be deemed to be incorporated herein by reference. Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Reference is made to "Security Ownership of Management" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for information regarding voting securities of the Company beneficially owned by its directors and officers. Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Reference is made to "Item No. 1: Election of Directors" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for the information required to be disclosed under this item. 19 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. and 2. All Financial Statements and financial statement schedules. The WICOR, Inc. consolidated balance sheet and statement of capitalization as of December 31, 1993 and 1992, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1993, together with the report of independent public accountants dated February 11, 1994, included in Exhibit 13, which is incorporated herein by reference. Financial statement schedules. Schedule III -- Condensed Statements of Income, Retained Earnings and Cash Flows (Parent Company Only) for the Years Ended December 31, 1993, 1992 and 1991; Condensed Balance Sheet (Parent Company Only) as of December 31, 1993 and 1992; Notes to Parent Company Only Financial Statements. Schedule V -- Property, Plant and Equipment for the Years Ended December 31, 1993, 1992 and 1991. Schedule VI -- Accumulated Depreciation, Depletion and Amortization for the Years Ended December 31, 1993, 1992 and 1991. Schedule VIII -- Valuation and Qualifying Accounts for the Years Ended December 31, 1993, 1992 and 1991. Schedule IX -- Short-term Borrowings for the Years Ended December 31, 1993, 1992 and 1991. Schedule X -- Supplementary Income Statement In- formation for the Years Ended December 31, 1993, 1992 and 1991. 20 Financial statement schedules other than those referred to above have been omitted as not applicable or not required. 3. Exhibits 3.1 WICOR, Inc. Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company's Form 10-K Annual Report for 1992). 3.2 WICOR, Inc. By-laws, as amended (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 No. 33- 50781). 4.1 Indenture of Mortgage and Deed of Trust dated as of November 1, 1950, between Milwaukee Gas Light Company and Mellon National Bank and Trust Company and D. A. Hazlett, Trustees (incorporated by reference to Exhibit 7-E to Milwaukee Gas Light Company's Registration Statement No. 2-8631). 4.2 Eleventh Supplemental Indenture dated as of February 15, 1982, between Wisconsin Gas Company and Mellon Bank, N.A., and N. R. Smith, Trustees (incorporated by reference to Exhibit 4.5 to Wisconsin Gas Company's Form S- 3 Registration Statement No. 33-43729). 4.3 Bond Purchase Agreement dated December 31, 1981, between Wisconsin Gas Company and Teachers Insurance and Annuity Association of America relating to the issuance and sale of $30,000,000 principal amount of First Mortgage Bonds, Adjustable Rate Series due 2002 (incor- porated by reference to Exhibit 4.6 to Wisconsin Gas Company's Form S-3 Registration Statement No. 33-43729). 4.4 Indenture dated as of September 1, 1990, between Wisconsin Gas Company and First Wisconsin Trust Company, Trustee (incorporated by reference to Exhibit 4.11 to Wisconsin Gas Company's Form S-3 Registration Statement No. 33-36639). 4.5 Officers' Certificate, dated as of November 28, 1990, setting forth the terms of Wisconsin Gas Company's 9-1/8% Notes due 1997 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company's Form 8-K Current Report for November, 1990). 21 4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7-1/2% Notes due 1998 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company's Form 8-K Current Report for November, 1991). 4.7 Officers' Certificate, dated as of September 15, 1993, setting forth the terms of Wisconsin Gas Company's 6.60% Debentures due 2013 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company' Form 8-K Current Report for September, 1993). 4.8 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Wisconsin Gas Company and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993). 4.9 Note Agreement dated as of December 1, 1986, among Sta-Rite Industries, Inc., Principal Mutual Life Insurance Company, Aid Association for Lutherans, AAL Employees' Retirement Trust and AAL Savings Plan Trust relating to $12,000,000 Promissory Notes due December 1, 1993 (incorporated by reference to Exhibit 4-Q to the Company's Form 10-K Annual Report for 1986). 4.10 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Sta-Rite Industries, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993). 4.11 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993). 4.12 Rights Agreement dated as of August 29, 1989, between WICOR, Inc. and Manufacturers Hanover Trust Company, Rights Agent (incorporated by reference to Exhibit 4 to the Company's Form 8-K current report for August, 1989). 22 4.13 Loan Agreement, dated as of November 4, 1991, by and among M&I Marshall & Ilsley Bank, Wisconsin Gas Company Employees' Savings Plans Trust and WICOR, Inc. (incorporated by reference to Exhibit 4.16 to the Company's Form 10-K Annual Report for 1991). 4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to and for the benefit of M&I Marshall & Ilsley Bank (incorporated by reference to Exhibit 4.17 to the Company's Form 10-K Annual Report for 1991). Sta-Rite Industries, Inc., a wholly-owned subsidiary of the Registrant, is the obligor under various loan agreements in connection with facilities financed through the issuance of industrial development bonds. The loan agreements and the additional documentation relating to these bond issues are not being filed with this Annual Report on Form 10-K in reliance upon Item 601(b)(4)(iii) of Regulation S-K. Copies of these documents will be furnished to the Securities and Exchange Commission upon request. 10.1 Service Agreement dated as of January 1, 1988, among WICOR, Inc., Wisconsin Gas Company, Sta- Rite Industries, Inc., and WEXCO of Delaware, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K Annual Report for 1988). 10.2 Endorsement of SHURflo Pump Manufacturing Co. dated as of July 28, 1993, to Service Agreement among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc. 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). 23 10.7# WICOR, Inc. 1994 Officers' Incentive Compen- sation Plan. 10.8# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program. 10.9# Wisconsin Gas Company 1994 Officers' Incentive Compensation Plan. 10.10# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan (incorporated by reference to Exhibit 10.23 to the Company's Form 10-K Annual Report for 1992). 10.11# 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). 10.12# 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). 10.13# Sta-Rite Industries, Inc. Officers Supple- mental Retirement Income Program (incorporated by reference to Exhibit 10.28 to the Company's Form 10-K Annual Report for 1989). #Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. 24 10.14# Sta-Rite Industries, Inc. 1994 Officers' Incentive Compensation Plan. 10.15# 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). 10.16# 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). "Financial Review" portions of WICOR, Inc. 1993 Annual Report to Shareholders, including: General Overview, Results of Operations, Liquidity and Capital Resources, Report of Independent Public Accountants, Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated Statement of Capitalization, Consolidated Statement of Common Equity, Quarterly Financial Data (Unaudited), Notes to Consolidated Financial Statements, Selected Financial Data, and Investor Information. 13* "Financial Review" portion of the WICOR, Inc. 1993 Annual Report to Shareholders. 21 Subsidiaries of WICOR, Inc. 23 Consent of independent public accountants. 99 WICOR, Inc. proxy statement dated March 10, 1994. (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.) (b) Reports on Form 8-K. No Form 8-K Current Report was filed during the fourth quarter of 1993. #Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. 25 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 29, 1994 By JOSEPH P. WENZLER ----------------------------------- Vice President, Treasurer, and Chief Financial Officer Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on the succeeding pages by the following persons on behalf of the registrant and in the capacities and on the dates indicated. 26 WICOR, Inc.
Signature Title Date - ------------------------ ------------------------- ----------------- GEORGE E. WARDEBERG - ------------------------ George E. Wardeberg President, Chief Executive March 29, 1994 Officer and Director (Principal Executive Officer) JOSEPH P. WENZLER - ------------------------ Joseph P. Wenzler Vice President, Treasurer March 29, 1994 and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) WENDELL F. BUECHE Director March 29, 1994 - ------------------------ Wendell F. Bueche WILLIE D. DAVIS Director March 29, 1994 - ------------------------ Willie D. Davis JAMES L. FORBES Director March 29, 1994 - ------------------------ James L. Forbes JERE D. MCGAFFEY Director March 29, 1994 - ------------------------ Jere D. McGaffey DANIEL F. MCKEITHAN, JR. Director March 29, 1994 - ------------------------ Daniel F. McKeithan, Jr. GUY A. OSBORN Director March 29, 1994 - ------------------------ Guy A. Osborn THOMAS F. SCHRADER Director March 29, 1994 - ------------------------ Thomas F. Schrader STUART W. TISDALE Director March 29, 1994 - ------------------------ Stuart W. Tisdale ESSIE M. WHITELAW Director March 29, 1994 - ------------------------ Essie M. Whitelaw WILLIAM B. WINTER Director March 29, 1994 - ------------------------ William B. Winter 27 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES To WICOR, Inc.: We have audited in accordance with generally accepted auditing standards, the consolidated financial statements included in Exhibit 13 to this Form 10-K, and have issued our report thereon dated February 11, 1994. Our report on the consolidated financial statements includes an explanatory paragraph with respect to the change in the methods of accounting for income taxes and postretirement benefits other than pensions in 1992 as discussed in Notes 3 and 10 to the consolidated financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. Supplemental Schedules III, V, VI, VIII, IX and X are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic consolidated financial statements. These schedules have been subjected to the auditing procedures applied in the audit of the basic consolidated financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic consolidated financial statements taken as a whole. ARTHUR ANDERSEN & CO. Milwaukee, Wisconsin, February 11, 1994. 28 Schedule III - Condensed Parent Company Financial Statements WICOR, INC. (Parent Company Only) Statement of Income
Year Ended December 31, -------------------------------- 1993 1992 1991 -------------------------------- (Thousands of Dollars) Income: Equity in income(loss) of subsidiaries after dividends: Wisconsin Gas Company................... $ 3,870 $ 4,060 $ 1,086 Sta-Rite Industries, Inc................ 2,506 (2,540) (833) Shurflo Pump Manufacturing Co........... 2,865 2,295 1,439 Wexco of Delaware, Inc.................. (118) 401 (760) Filtron Technology, Inc................. 233 167 - -------- -------- -------- 9,356 4,383 932 Cash dividends from: Wisconsin Gas Company................... 16,000 14,000 16,000 Sta-Rite Industries, Inc................ 5,000 5,000 5,000 Shurflo Pump Manufacturing Co........... 500 - - Wexco of Delaware, Inc.................. - - 1,000 Interest income........................... 267 451 594 -------- -------- -------- 31,123 23,834 23,526 -------- -------- -------- Expenses: Operating (Supplemental Note B)........... 1,942 1,333 494 Interest ................................. 259 63 125 -------- -------- -------- 2,201 1,396 619 -------- -------- -------- Income Before Parent Company Income Taxes... 28,922 22,438 22,907 Income Taxes................................ (391) (326) (59) -------- -------- -------- Income Before Cumulative Effects of Accounting Changes........................ 29,313 22,764 22,966 Cumulative Effects of Accounting Changes: Postretirement benefits other than pensions (net of income tax benefit of $4,110)................................. - (6,165) - Income taxes ............................. - (1,800) - -------- -------- -------- Net Income.................................. $ 29,313 $ 14,799 $ 22,966 ======== ======== ======== The accompanying notes are an integral part of this statement. /TABLE 29 Schedule III - Condensed Parent Company Financial Statements (continued) WICOR, INC. (Parent Company Only) Statement of Retained Earnings
Year Ended December 31, -------------------------------- 1993 1992 1991 -------------------------------- (Thousands of Dollars) Balance - Beginning of Year................. $ 90,102 $ 97,906 $ 96,087 Add: Net income.............................. 29,313 14,799 22,966 -------- -------- -------- 119,415 112,705 119,053 Deduct: Cash dividends on common stock.......... 24,099 21,869 20,437 Other................................... 673 734 710 -------- -------- -------- Balance - End of Year ...................... $ 94,643 $ 90,102 $ 97,906 ======== ======== ======== The accompanying notes are an integral part of this statement. /TABLE 30 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) -------------------------------- 1993 1992 1991 -------------------------------- Operations- Net income ............................... $ 29,313 $ 14,799 $ 22,966 Adjustments to reconcile net income to net cash flows: Equity in (income) losses of subsidiaries.......................... (9,356) (4,383) (932) Cumulative effect of change in accounting principles, net of income tax benefit of $4,110................. - 7,965 - Change in deferred income taxes......... (73) (73) - Change in intercompany receivables...... (7,342) 4,285 (341) Change in income taxes payable.......... 6,923 (3,445) 972 Change in other current assets.......... 98 (124) 543 Change in other current liabilities..... 178 176 (843) Change in other non-current assets and liabilities........................... (185) (578) (154) --------- --------- --------- 19,556 18,622 22,211 --------- --------- --------- Investment Activities- Investments in subsidiaries............... (12,000) (15,000) (4,000) Acquisitions.............................. - (3,202) - --------- --------- --------- (12,000) (18,202) (4,000) --------- --------- --------- Financing Activities- Issuance of common stock.................. 16,682 6,081 11,844 Dividends paid on common stock, less amounts reinvested...................... (21,450) (19,458) (18,304) --------- --------- --------- (4,768) (13,377) (6,460) --------- --------- --------- Change in Cash and Cash Equivalents......... 2,788 (12,957) 11,751 Cash and Cash Equivalents at Beginning of Year................................... 4,317 17,274 5,523 --------- --------- --------- Cash and Cash Equivalents at End of Year.... $ 7,105 $ 4,317 $ 17,274 ========= ========= ========= Supplemental Disclosure of Cash Flow Information Cash paid (received) during the year for: Interest.................................. $ 1 $ 36 $ 89 Income taxes.............................. 2,805 (462) (36) The accompanying notes are an integral part of this statement. /TABLE 31 Schedule III - Condensed Parent Company Financial Statements (continued)
WICOR, INC. (Parent Company Only) Balance Sheet As of December 31, ---------------------- (Thousands of Dollars) 1993 1992 ---------------------- Assets - ------ Current Assets: Cash and cash equivalents............................. $ 7,105 $ 4,317 Intercompany receivable (Supplemental Note A)......... 2,162 (5,180) Deferred income taxes................................. 146 - Other................................................. 112 210 --------- --------- 9,525 (653) --------- --------- Investment in Subsidiaries, at equity: Wisconsin Gas Company................................. 174,648 158,551 Sta-Rite Industries, Inc.............................. 75,397 74,362 Shurflo Pump Manufacturing Co......................... 11,639 9,458 Wexco of Delaware, Inc................................ 4,308 4,426 Filtron Technology, Inc............................... 3,623 3,418 --------- --------- 269,615 250,215 --------- --------- Deferred Taxes ......................................... - 73 Deferred Charges and Other.............................. 591 655 --------- --------- $ 279,731 $ 250,290 ========= ========= Liabilities and Capitalization - ------------------------------ Current Liabilities: Income taxes payables ................................ $ 2,875 $ (4,048) Other................................................. 353 175 --------- --------- 3,228 (3,873) --------- --------- Deferred Credits........................................ (1,257) 275 --------- --------- Capitalization: ESOP loan guarantee (Supplemental Note C)............. 7,484 8,601 Common equity: Common stock, $1 par value, authorized 60,000,000 shares; outstanding 16,407,000 and 15,722,000 shares, respectively ............................. 16,407 15,722 Other paid-in-capital .............................. 166,710 148,064 Retained earnings .................................. 94,643 90,102 Unearned compensation (Supplemental Note C)......... (7,484) (8,601) --------- --------- 277,760 253,888 --------- --------- $ 279,731 $ 250,290 ========= ========= The accompanying notes are an integral part of this statement. /TABLE 32 Schedule III - Condensed Parent Company Financial Statements (continued) WICOR, INC. Notes to Parent Company Only Financial Statements The following are supplemental notes to the WICOR, Inc. (Parent Company Only) financial statements and should be read in conjunction with the WICOR, Inc. Consolidated Financial Statements and Notes thereto included herein under Item 8: SUPPLEMENTAL NOTES A. Net amounts due from subsidiaries result from intercompany transactions including advances and federal income tax liabilities, less payments of expenses by subsidiaries on behalf of WICOR, Inc. B. During 1993, 1992 and 1991, the parent company allocated certain administrative and operating expenses to the following subsidiaries using an allocation method approved by the PSCW:
1993 1992 1991 ----------- ----------- ----------- Wisconsin Gas Company $1,507,000 $1,325,000 $1,052,000 Sta-Rite Industries, Inc. 747,000 757,000 684,000 Shurflo Pump Manufacturing Co. 127,000 - - Wexco of Delaware, Inc. 7,000 21,000 18,000 ----------- ----------- ------------ $2,388,000 $2,103,000 $1,754,000 =========== =========== ============
C. In November 1991, WICOR, Inc. (Parent Company Only) established an Employee Stock Ownership Plan (ESOP) covering non-union employees of Wisconsin Gas. Because the parent company has guaranteed the loan, the unpaid balance is shown as a liability on the balance sheet with a like amount of unearned compensation recorded as a reduction of stockholders' equity. The ESOP trustee is repaying the $10 million loan with dividends paid on the shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions to the ESOP. 33
WICOR, INC. Schedule V Schedule V--PROPERTY, PLANT AND EQUIPMENT Year Ended December 31, 1993 Retirements Balance at or Sales Other Balance at Beginning at Cost Changes End of of Period Additions (Note 1) (Note 2) Period ----------- --------- ----------- ----------- ---------- GAS DISTRIBUTION (THOUSANDS OF DOLLARS) - -------------------------------------- GAS UTILITY PLANT, at original cost: Production $ 784 $ 8 $ 6 $ - $ 786 Storage 1,377 - - - 1,377 Transmission 14,106 - - - 14,106 Distribution 536,571 29,569 1,910 - 564,230 General 82,017 14,486 3,073 - 93,430 Construction work in progress 3,289 (2,326) - - 963 Intangibles 211 - - - 211 ----------- --------- ----------- ----------- ---------- 638,355 41,737 4,989 - 675,103 OTHER PHYSICAL PROPERTY, at cost 4,508 516 159 - 4,865 ----------- --------- ----------- ----------- ---------- Total 642,863 42,253 5,148 - 679,968 ----------- --------- ----------- ----------- ---------- MANUFACTURING - ------------------------------- LAND 3,185 (7) 167 105 3,116 BUILDINGS 21,716 775 545 351 22,297 MACHINERY AND EQUIPMENT 61,630 9,140 1,267 (690) 68,813 CONSTRUCTION WORK IN PROGRESS 3,608 (255) - 157 3,510 ----------- --------- ----------- ----------- ---------- Total 90,139 9,653 1,979 (77) 97,736 ----------- --------- ----------- ----------- ---------- OIL AND GAS 32,838 - 32,838 - - ----------- --------- ----------- ----------- ---------- Total property, plant and equipment $765,840 $51,906 $39,965 $(77) $777,704 =========== ========= =========== =========== ========== Note 1 - Retirements for gas distribution include $100,000 of land. Note 2 - Other Changes within Manufacturing - Machinery and Equipment include $212,000 of additions for the two month's ended December 31, 1992. See Note 2 within Notes to Consolidated Financial Statements. /TABLE 34
WICOR, INC. Schedule V Schedule V--PROPERTY, PLANT AND EQUIPMENT Year Ended December 31, 1992 Balance at Retirements Balance at Beginning or Sales Other Changes End of of Period Additions at Cost (Note 1) Period ---------- --------- ----------- ------------- ---------- GAS DISTRIBUTION (THOUSANDS OF DOLLARS) - --------------------- GAS UTILITY PLANT, at original cost: Production $ 784 $ - $ - $ - $ 784 Storage 1,377 - - - 1,377 Transmission 14,108 - 2 - 14,106 Distribution 486,298 52,589 1,834 (482) 536,571 General 73,838 9,594 1,975 560 82,017 Construction work in progress 4,000 (711) - - 3,289 Intangibles 211 - - - 211 ---------- --------- ----------- ------------- ---------- 580,616 61,472 3,811 78 638,355 OTHER PHYSICAL PROPERTY, at cost 4,149 653 216 (78) 4,508 ---------- --------- ----------- ------------- ---------- Total 584,765 62,125 4,027 - 642,863 ---------- --------- ----------- ------------- ---------- MANUFACTURING - ------------------------- LAND 1,631 111 39 1,482 3,185 BUILDINGS 18,761 650 102 2,407 21,716 MACHINERY AND EQUIPMENT 55,465 9,864 2,908 (791) 61,630 CONSTRUCTION WORK IN PROGRESS 4,545 (1,577) - 640 3,608 ---------- --------- ----------- ------------- ---------- Total 80,402 9,048 3,049 3,738 90,139 ---------- --------- ----------- ------------- ---------- OIL AND GAS 32,397 700 259 - 32,838 ---------- --------- ----------- ------------- ---------- Total property, plant and equipment $ 697,564 $ 71,873 $ 7,335 $ 3,738 $ 765,840 ========== ========= =========== ============= ========== Note 1 - The Nocchi acquisition accounts for $1,653,000, $2,634,000, $2,542,000 and $65,000 of land, buildings, machinery and equipment and construction in progress, respectively, in manufacturing's other changes. The reclass of a mainframe computer residual resulted in a writedown of gross basis of ($1,148,000) in manufacturing machinery and equipment. Most other changes are due to currency adjustments and other reclassifications between categories. /TABLE 35
WICOR, INC. Schedule V Schedule V--PROPERTY, PLANT AND EQUIPMENT Year Ended December 31, 1991 Retirements Balance at or Sales Balance at Beginning at Cost Other Changes End of of Period Additions (Note 1) (Note 2) Period GAS DISTRIBUTION ---------- --------- ----------- ------------- ---------- - --------------------- (THOUSANDS OF DOLLARS) GAS UTILITY PLANT, at original cost: Production $ 784 $ - $ - $ - $ 784 Storage 1,377 - - - 1,377 Transmission 14,177 24 2 (91) 14,108 Distribution 465,423 22,863 1,988 - 486,298 General 68,312 8,088 2,562 - 73,838 Construction work in progress 993 3,007 - - 4,000 Intangibles 211 - - - 211 ---------- --------- ----------- ------------- ---------- 551,277 33,982 4,552 (91) 580,616 OTHER PHYSICAL PROPERTY, at cost 3,783 491 216 91 4,149 ---------- --------- ----------- ------------- ---------- Total 555,060 34,473 4,768 0 584,765 ---------- --------- ----------- ------------- ---------- MANUFACTURING - ------------------------- LAND 1,470 - - 161 1,631 BUILDINGS 16,370 447 - 1,944 18,761 MACHINERY AND EQUIPMENT 53,307 7,724 5,997 431 55,465 CONSTRUCTION WORK IN PROGRESS 2,575 2,126 - (156) 4,545 ---------- --------- ----------- ------------- ---------- Total 73,722 10,297 5,997 2,380 80,402 ---------- --------- ----------- ------------- ---------- OIL AND GAS 32,218 343 164 - 32,397 ---------- --------- ----------- ------------- ---------- Total property, plant and equipment $ 661,000 $ 45,113 $ 10,929 $ 2,380 $ 697,564 ========== ========= =========== ============= ========== Note 1 - Retirements for gas distribution include $46,000 of land. Note 2 - The other change in manufacturing buildings includes $2,113,000 for reclassifying Webster buildings that were not sold in the divestiture from net assets from discontinued operations to buildings. The other change in manufacturing machinery and equipment is primarily comprised of the purchase of Aquality machinery. /TABLE 36
WICOR, Inc. SCHEDULE VI-- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION Schedule VI Year Ended December 31, 1993 Additions (Note 3) Deductions (Thousands of Dollars) Provisions Charged to ------------------------------ Balance at ------------------------ Retirements Removal Balance Beginning Clearing and or Sales Cost, Less at End of GAS DISTRIBUTION (Note 1) of Period Income Other Accounts at Cost Salvage Other Period - ------------------------- ----------- -------- -------------- ------------- ---------- ----- --------- GAS UTILITY PLANT: General $293,462 $27,624 $ - $ 3,002 $783 $ - $317,301 Amortization of other limited-term utility investments 1,439 268 - - - - 1,707 Trans., tools and equip. 8,512 - 1,610 1,887 (405) 404 8,236 Retire. work in progress - - - - - - - ----------- -------- -------------- ------------- ---------- ------ -------- 303,413 27,892(a) 1,610 4,889 378 404 327,244 OTHER PHYSICAL PROPERTY 2,638 536(b) - 159 - - 3,015 ----------- -------- -------------- ------------- ---------- ------ -------- Total 306,051 28,428 1,610 5,048 378 404 330,259 ----------- -------- -------------- ------------- ---------- ------ -------- MANUFACTURING (Note 2) - ----------------------- BUILDINGS 6,178 933 - 227 - (474) 7,358 MACHINERY AND EQUIPMENT 33,544 7,438 - 986 - 609 39,387 ----------- -------- -------------- ------------- ---------- ------ -------- Total 39,722 8,371(c) - 1,213 - 135 46,745 ----------- -------- -------------- ------------- ---------- ------ -------- OIL AND GAS 28,520 -(a) - 28,520 - - - ----------- -------- -------------- ------------- ---------- ------ -------- Total $374,293 $36,799 $1,610(b) $34,781 $378 $539 $377,004 =========== ======== ============== ============= ========== ====== ======== Notes 1 -Composite depreciation rates approximated 4.7% for 1993. 2 -Depreciation was calculated over the estimated useful lives of the respective assets: Buildings, 10-40 years; Machinery and equipment, 4-10 years. 3 -Provisions per the Consolidated Statement of Cash Flows were as follows: (a) Depreciation, depletion and amortization as shown per the Consolidated Statement of Income (Includes miscellaneous amortizations totalling $152,000 not shown above.) $ 28,044 (b) Depreciation charged to income, clearing and other accounts 2,146 (c) Depreciation charged to manufacturing cost of sales 8,371 Other amortization charged to income accounts 5,177 ---------- Depreciation, depletion and amort. as shown per the Consolidated Statement of Cash Flows $ 43,738 ========== /TABLE 37
WICOR, Inc. SCHEDULE VI-- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION Schedule VI Year Ended December 31, 1992 Additions (Note 3) Deductions (Thousands of Dollars) Provisions Charged to ------------------------------- Balance at ------------------------ Retirements Removal Balance Beginning Clearing and or Sales Cost, Less at End of GAS DISTRIBUTION (Note 1) of Period Income Other Accounts at Cost Salvage Other Period - ------------------------- ---------- -------- -------------- ----------- ---------- ------- --------- GAS UTILITY PLANT: General $ 272,115 $ 25,245 $ - $ 3,235 $ 666 $ (3) $ 293,462 Amortization of other limited-term utility investments 1,220 232 - 8 5 - 1,439 Trans., tools and equip 7,386 - 1,694 568 (103) 103 8,512 Retire. work in prog (10) - - - (10) - - ---------- -------- -------------- ----------- ---------- ------- --------- 280,711 25,477(a) 1,694 3,811 558 100 303,413 OTHER PHYSICAL PROPERTY 2,364 490(b) - 216 - - 2,638 ---------- -------- -------------- ----------- ---------- ------- --------- Total 283,075 25,967 1,694 4,027 558 100 306,051 ---------- -------- -------------- ----------- ---------- ------- --------- MANUFACTURING (Note 2) - ----------------------- BUILDINGS 5,407 749 - 32 - (54) 6,178 MACHINERY AND EQUIPMENT 30,431 7,313 - 2,455 - 1,745 33,544 ---------- -------- -------------- ----------- ---------- ------- --------- Total 35,838 8,062(c) - 2,487 - 1,691 39,722 ---------- -------- -------------- ----------- ---------- ------- --------- OIL AND GAS 27,726 1,053(a) - 259 - - 28,520 ---------- -------- -------------- ----------- ---------- ------- --------- Total $ 346,639 $ 35,082 $ 1,694(b)$ 6,773 $ 558 $ 1,791 $ 374,293 ========== ======== ============== =========== ========== ======= ========= Notes 1 - Composite depreciation rates approximated 4.7% for 1992. 2 - Depreciation was calculated over the estimated useful lives of the respective assets: Buildings, 10-40 years; Machinery and equipment, 4-10 years. 3 - Provisions per the Consolidated Statement of Cash Flows were as follows: (a) Deprec., depletion and amort. as shown per the Consolidated Statement of Income $ 26,650 (Includes miscellaneous amortizations totalling $120,000 not shown above) (b) Depreciation charged to income, clearing and other accounts 2,184 (c) Depreciation charged to manufacturing cost of sales 8,062 Other amortization charged to income accounts 3,304 --------- Depreciation, depletion and amortization as shown per the Consolidated Statement of Cash Flows $ 40,200 ========= /TABLE 38
WICOR, Inc. SCHEDULE VI-- ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION Schedule VI Year Ended December 31, 1991 Additions (Note 3) Deductions (Thousands of Dollars) Provisions Charged to ------------------------------- Balance at ------------------------ Retirements Removal Balance Beginning Clearing and or Sales Cost, Less at End GAS DISTRIBUTION(Note 1) of Period Income Other Accounts at Cost Salvage Other of Period - ------------------------ ---------- -------- -------------- ----------- ---------- ------- --------- GAS UTILITY PLANT: General $251,711 $23,700 $ - $ 2,735 $ 635 $ (74) $272,115 Amortization of other limited-term utility investments 1,020 200 - - - - 1,220 Trans., tools and equip 7,441 - 1,716 1,771 (290) 290 7,386 Retirement work in prog (56) - - - (46) - (10) ---------- -------- -------------- ----------- ---------- ------- --------- 260,116 23,900(a) 1,716 4,506 299 216 280,711 OTHER PHYSICAL PROPERTY 2,133 447(b) - 216 - - 2,364 ---------- -------- -------------- ----------- ---------- ------- --------- Total 262,249 24,347 1,716 4,722 299 216 283,075 ---------- -------- -------------- ----------- ---------- ------- --------- MANUFACTURING (Note 2) - ---------------------- BUILDINGS 3,471 666 - - - (1,270) 5,407 MACHINERY AND EQUIPMENT 29,415 6,511 - 5,049 - 446 30,431 ---------- -------- -------------- ----------- ---------- ------- --------- Total 32,886 7,177(c) - 5,049 - (824) 35,838 ---------- -------- -------------- ----------- ---------- ------- --------- OIL AND GAS 27,031 859(a) - 164 - - 27,726 ---------- -------- -------------- ----------- ---------- ------- --------- Total $ 322,166 $ 32,383 $ 1,716(b) $ 9,935 $ 299 $ (608) $346,639 ========== ======== ============== =========== ========== ======= ========= Notes 1 - Composite depreciation rates approximated 4.7% for 1991. 2 - Depreciation was calculated over the estimated useful lives of the respective assets: Buildings, 10-40 years; Machinery and equipment, 4-10 years. 3 - Provisions per the Consolidated Statement of Cash Flows were as follows: (a) Deprec., depletion and amort. as shown per the Consolidated Statement of Income $ 24,759 (b) Depreciation charged to income, clearing and other accounts 2,163 (c) Depreciation charged to manufacturing cost of sales 7,177 Other amortization charged to income accounts 2,183 -------- Depreciation, depletion and amortization as shown per the Consolidated Statement of Cash Flows $ 36,282 ======== /TABLE 39
WICOR, Inc. Schedule VIII SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS Years Ended December 31, 1993, 1992 and 1991 Additions Deductions From --------------------- Reserves for Balance at Provisions Charged to Purposes for Balance Beginning --------------------- Which the Reserves at End Description of Period Income Other (1) Were Provided of Period ----------- ---------- --------- ---------- ------------------ ---------- (Thousands of Dollars) Year Ended December 31, 1993: - ---------------------------- Reserves deducted from assets in the accompanying Consolidated Balance Sheet- Allowance for doubtful accounts $ 7,344 $ 13,784 $ 1,684 $ 13,461 $ 9,351 ========== ========= ========== ================== ========== Year Ended December 31, 1992: - ---------------------------- Reserves deducted from assets in the accompanying Consolidated Balance Sheet - Allowance for doubtful accounts $ 6,014 $ 11,791 $ 3,717 $ 14,178 $ 7,344 ========== ========= ========== ================== ========== Year Ended December 31, 1991: - ---------------------------- Reserves deducted from assets in the accompanying Consolidated Balance Sheet - Allowance for doubtful accounts $ 4,257 $ 12,249 $ 1,345 $ 11,837 $ 6,014 ========== ========== ========== ================== ========= (1) Other provisions primarily represent deferred Wisconsin Gas Company provisions for doubtful accounts over or (under) the amount allowed for ratemaking purposes of $12,931,000, $10,807,000 and $10,912,000 in 1993, 1992 and 1991, respectively, less amortizations of $1,166,000, $(1,046,000) and $(742,000) in 1993, 1992 and 1991, respectively, relating to deferrals from prior years, as ordered by the PSCW. See Note 1e of Notes to Consolidated Financial Statements. /TABLE 40
WICOR, INC. Schedule IX SCHEDULE IX--SHORT-TERM BORROWINGS Years Ended December 31, 1993, 1992 and 1991 Daily Balance Weighted Maximum Amount Average Amount Weighted Average Category of Aggregate at End Average Outstanding Outstanding Interest Rate Short-term Borrowings of Period Interest Rate During the Period During the Period During the Period - --------------------- ----------- ------------- ----------------- ----------------- ----------------- (Thousands of Dollars) 1993 - ---- Bank notes payable $ 17,818 5.1% (a) $ 20,053 $ 14,594 7.2% Commercial paper 117,100 3.4% 118,500 64,208 3.3% All categories 134,918 3.6% 135,342 78,802 4.0% 1992 - ---- Bank notes payable $ 16,825 8.6% (a) $ 29,271 $ 22,389 10.0% Commercial paper 56,275 3.6% 56,275 12,689 3.6% All categories 73,100 4.7% 78,078 35,078 7.7% 1991 - ---- Bank notes payable $ 18,872 8.3% (a) $ 24,414 $ 19,080 11.5% Commercial paper 12,000 4.5% 35,000 14,349 6.2% All categories 30,872 6.8% 54,402 33,429 9.2% (a) Includes foreign borrowings based on local prime rates /TABLE 41
SCHEDULE X WICOR, Inc. SCHEDULE X -- SUPPLEMENTARY INCOME STATEMENT INFORMATION Years Ended December 31, 1993, 1992 and 1991 Year Ended December 31 --------------------------------- 1993 1992 1991 --------------------------------- (Thousands of Dollars) Maintenance and repairs $ 9,983 $ 9,301 $ 9,495 ========= ========= ========= Taxes, Other Than Income Taxes did not contain a single category in excess of one percent of Operating Revenues as shown in the related Consolidated Statement of Income, and thus are not set forth above. Royalty expense, advertising costs and amortization of intangible assets did not exceed one percent of Operating Revenues as shown in the related Consolidated Statement of Income, and thus are not set forth above.
42 TABLE OF CONTENTS TO EXHIBITS Page 3.1 WICOR, Inc. Restated Articles of Incorporation, as amended (incorporated by reference) 3.2 WICOR, Inc. By-laws, as amended (incorporated by reference) 4.1 Indenture of Mortgage and Deed of Trust dated as of November 1, 1950, between Milwaukee Gas Light Company and Mellon National Bank and Trust Company and D. A. Hazlett, Trustees (incorporated by reference) 4.2 Eleventh Supplemental Indenture dated as of February 15, 1982, between Wisconsin Gas Company and Mellon Bank, N.A., and N. R. Smith, Trustees (incorporated by reference) 4.3 Bond Purchase Agreement dated December 31, 1981, between Wisconsin Gas Company and Teachers Insurance and Annuity Association of America relating to the issuance and sale of $30,000,000 principal amount of First Mortgage Bonds, Adjustable Rate Series due 2002 (incorporated by reference) 4.4 Indenture dated as of September 1, 1990, between Wisconsin Gas Company and First Wisconsin Trust Company, Trustee (incorporated by reference) 4.5 Officers' Certificate, dated as of November 28, 1990, setting forth the terms of Wisconsin Gas Company's 9- 1/8% Notes due 1997 (incorporated by reference) 4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7- 1/2% Notes due 1988 (incorporated by reference) 4.7 Officers' Certificate, dated as of September 15, 1993, setting forth the terms of Wisconsin Gas Company's 6.60% Debentures due 2013 (incorporated by reference) 4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7- 1/2% Notes due 1988 (incorporated by reference) 4.8 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Wisconsin Gas Company and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference) 4.9 Note Agreement dated as of December 1, 1986, among Sta-Rite Industries, Inc., Principal Mutual Life Insurance Company, Aid Association for Lutherans, AAL Employees' Retirement Trust and AAL Savings Plan Trust relating to $12,000,000 Promissory Notes due December 1, 1993 (incorporated by reference) (i) 43 PAGE 4.10 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Sta-Rite Industries, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference) 4.11 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference) 4.12 Rights Agreement dated as of August 29, 1989, between WICOR, Inc. and Manufacturers Hanover Trust Company, Rights Agent (incorporated by reference) 4.13 Loan Agreement, dated as of November 4, 1991, by and among M&I Marshall & Ilsley Bank, Wisconsin Gas Company Employees' Savings Plan Trust and WICOR, Inc. (incorporated by reference) 4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to and for the benefit of M&I Marshall & Ilsley Bank (incorporated by reference) 10.1 Service Agreement dated as of January 1, 1988, among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc. (incorporated by reference) 10.2* Endorsement of SHURflo Pump Manufacturing Co. dated as of July 28, 1993, to Service Agreement among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc. 10.3# WICOR, Inc. 1987 Stock Option Plan (incorporated by reference) 10.4# Forms of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1987 Stock Option Plan (incorporated by reference) 10.5# WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference) 10.6# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference) 10.7*# WICOR, Inc. 1994 Officers' Incentive Compensation Plan 10.8*# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program *Indicates document filed herewith. # Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. (ii) 44 PAGE 10.9*# Wisconsin Gas Company 1994 Officers' Incentive Compensation Plan 10.10# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan (incorporated by reference) 10.11# Wisconsin Gas Company Group Travel Accident Plan (incorporated by reference) 10.12# Form of Deferred Compensation Agreements between Wisconsin Gas Company and certain of its executive officers (incorporated by reference) 10.13# Sta-Rite Industries Officers' Supplemental Retirement Income Program (incorporated by reference) 10.14*# Sta-Rite Industries, Inc. 1994 Officers' Incentive Compensation Plan 10.15# Sta-Rite Industries, Inc. Group Travel Accident Plan (incorporated by reference) 10.16# WICOR, Inc. Retirement Plan for Directors (incorporated by reference) 13* "Financial Review" portions of the WICOR, Inc. 1993 Annual Report to Shareholders 21* Subsidiaries of WICOR, Inc 23* Consent of independent public accountants 99* WICOR, Inc. proxy statement dated March 10, 1994 *Indicates document filed herewith. # Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. (iii) EX-10.2 2 1993 SHURFLO ENDORSEMENT 1 ENDORSEMENT NO. 1 Exhibit 10.2 TO SERVICE AGREEMENT (DATED AS OF JANUARY 1, 1988) WHEREAS, pursuant to Article VII, Section 2 of the Service Agreement among and between WICOR, Inc. ("WICOR"), Wisconsin Gas Company, Sta-Rite Industries, Inc. and WEXCO of Delaware, Inc., dated as of January 1, 1988 ("Agreement"), new subsidiaries acquired by WICOR may become parties to the Agreement by endorsement after review and approval by the Public Service Commission of Wisconsin; and WHEREAS, on July 28, 1993, WICOR acquired all of the outstanding common stock of Carr-Griff, Inc. (d/b/a SHURflo); and WHEREAS, the corporate name of Carr-Griff, Inc. has been changed to SHURflo Pump Manufacturing Co. ("SHURflo"); and WHEREAS, the parties desire to add SHURflo as a party to the Agreement and to be bound by all the terms and conditions of the Agreement. NOW, THEREFORE, SHURflo agrees to become a party to the Agreement and to be bound by all the terms and conditions of the Agreement. IN WITNESS WHEREOF, SHURflo Pump Manufacturing Co. has caused this Endorsement to be executed in its name and on its behalf by its duly authorized officers as of the 28th day of July, 1993. ATTEST: SHURflo Pump Manufacturing Co. Karen E. Spors by: Stuart W. Tisdale - ----------------------- ------------------------------ Assistant Secretary Chairman EX-17.7 3 1994 WICOR INCENTIVE PLAN 1 EXHIBIT 10.7 WICOR, INC. OFFICERS' INCENTINE COMPENSATION PLAN 1994 I. OBJECTIVES The principal objectives of the Plan are: A. To motivate and to provide incentive for key officers of WICOR to achieve superior operating results for the benefit of both customers and stockholders. B. To assist in the retention of quality senior management. C. To yield competitive total compensation levels when performance goals are attained. D. To document the basis of participation by plan participants in subsidiary companies' incentive compensation plans, and to provide supplemental WICOR incentive compensation as required to achieve the above objectives. II. ELIGIBILITY Participation in the Plan is limited to designated WICOR corporate officers and subsidiary unit heads. The Chief Executive Officer will be responsible for recommending eligibility changes to the Compensation Committee of the Board of Directors of WICOR, Inc. III. AMOUNT OF POTENTIAL AWARD A. The minimum, target and maximum award opportunities for each executive, as a percentage of base salary, are as follows:
AWARD AS A PERCENT OF SALARY ------------------------------------------ Position Minimum Target Maximum ---------- ------------ ------------ ------------ CEO, WICOR 0% 50% 75.0% Others 0% 40% 60.0% /TABLE 2 B. Each executive's award will be determined based on a combination of WICOR, subsidiary and individual performance, with specific weights as follows:
Percentage Of Award Determined By: ------------------------------------ Position WICOR Subsidiary Individual Performance Performance Performance -------------- ----------- ----------- ----------- CEO, WICOR 75% 0% 25% Subsidiary Unit Head 25% 50% 25% CFO, WICOR 75% 0% 25%
Determination of the WICOR performance and individual performance portions of the award are described in Section IV of this document. The Subsidiary performance portion is determined according to the Officer Incentive Compensation Plan for that subsidiary. IV. PERFORMANCE CRITERIA AND OBJECTIVE SETTING A. Overall WICOR performance will be measured by earnings per share. Threshold, Target and Maximum EPS performance levels, and incentive awards corresponding to each performance level are as follows:
Performance Award As % Performance As % Of 1994 Of Target Level Target EPS Award ---------------- -------------- -------------- -------------- Below Threshold less than 83% less than 0.0% $1.82 Threshold 83% $1.82 1.0% Target 100% $2.16 100% (budget) Maximum or Above 120% $2.59 150% or more or more
For performance at levels between Threshold and Target or between Target and Maximum, award calculations will be pro-rated on a linear basis. 3 B. The individual component of total incentive compensation will be determined by the WICOR Compensation Committee based on recommendations from the CEO reflecting the individual's overall performance as measured against previously identified and agreed upon goals and objectives. The award may vary up to 150% of the individ- ual performance portion of the target award, and will be determined and paid independently of Corporate financial performance. C. If the Compensation Committee of WICOR, Inc. determines that corporate performance was inadequate, it may exercise discretion to reduce or eliminate any or all bonus payments. V. PERFORANCE PERIOD Company performance goals will be for the 1994 calendar year. VI. FORM AND TIMING OF AWARD PAYMENTS A. Awards will be determined and paid as soon as practicable after the close of the Plan year. B. At each participant's discretion and with the concurrence of the Compensation Committee of WICOR, Inc., awards may be paid in one of three ways: 1. Lump Sum 2. Partly in lump sum and the remainder in deferred annual installments. 3. Completely in deferred annual installments. C. The Company will offer a deferred payment option to those officers who prefer not to receive their awards in current cash, following these guidelines: 1. Deferred incentive award payments will be carried as an accrued liability with an interest rate (three-year treasury bill rate) credited each year. 2. Deferred elections must be made prior to the end of the performance period, and a definite time period for deferral must be specified. VII. IMPLEMENTATION A. The effective date of the Plan is January 1, 1994. 4 VIII. PLAN ADMINISTRATION A. Compensation Committee 1. The Plan will be administered by the Compensation Committee of the Board of Directors of WICOR, Inc. 2. The Committee's administration is subject to approval of the Board of Directors of WICOR, Inc. 3. The decisions of the Board are final and binding on all Plan participants. 4. The Board retains the right to terminate or amend the Plan as it may deem advisable. B. Partial Year Participation: 1. Participants must be employed by the Company on the last day of the Plan year in order to receive a bonus for that year. However, once earned, a bonus will be paid to a participant regardless of whether he/she is employed by the company on the date payment is made. 2. Awards for part year participants will be pro-rated based on the proportion of the year that the participant was in the Plan. This includes participants who terminate employment due to death, disability or retirement. 3. Participants who terminate employment with the Company prior to the last day of the Plan year shall forfeit all rights to an incentive award payment under the Plan except for terminations due to death, retirement or disability. 4. A participant is deemed to be disabled if he/she becomes eligible for benefits under the Company's Long Term Disability Plan. EX-10.8 4 1994 WIS GAS CO SUPPLEMENTAL RETIREMENT PLAN 1 WISCONSIN GAS COMPANY Exhibit 10.8 PRINCIPAL OFFICERS' SUPPLEMENTAL RETIREMENT INCOME PROGRAM 1. Purpose of the Program The purpose of the Wisconsin Gas Company Supplemental Retire- ment Income Program (the "Program") is fivefold: (i) to reimburse a corporate officer of Wisconsin Gas Company (the "Company") for any reduction in his benefit payments under the Wisconsin Gas Company Pension Plan for Non-Union Employees (the "Pension Plan") which may be caused by the limitations imposed thereon by Internal Revenue Code Section 415 (the "415 Limit") or Internal Revenue Code Section 401(a)(17) (the "Compensation Limit") and/or by the exclusion from the definition of compensation under the Pension Plan of any earnings paid by Sta-Rite Industries, Inc. to its corporate officers, any such earnings voluntarily deferred pursuant to a non-qualified deferred compensation arrangement or any bonuses (the "Sta-Rite/Bonus Exclusion"), any amounts voluntarily deferred from Company salary pursuant to a non-qualified deferred compensation arrangement (the "Deferred Compensation Exclusion") or any bonuses payable by the Company (provided that any bonus payments shall be pro-rated on a monthly basis over the calendar year for which the bonus payments are applicable) (the "Company Bonus Exclusion); (ii) to reimburse a corporate officer of the Company for any reduction in his employer or employee contribution allocations under the Wisconsin Gas Company Employees' Savings Plan (the "Savings Plan") which may be caused by the 415 Limit and/or by the Deferred Compensation Exclusion; (iii) to provide retirement income for any principal corporate officer retiring on or after January 1, 1987 to replace the post-retirement life insurance benefit program which will not be available to anyone retiring after December 31, 1986; (iv) to provide incentive and reward to such principal officer through additional retirement income in recognition of his meritorious service and material contribution to the Company's continued growth and development; and (v) to assist the Company in retaining and attracting high caliber key executives upon whose efforts the future successful and profitable operation of its business is dependent. 2. Effective Date The Program was originally adopted effective as of January 1, 1983 as the replacement for the Wisconsin Gas Company Corporate Officer Post-Retirement Benefit Plan in effect prior to that date and was amended effective April 1, 1991 and January 1, 1993. This is an amendment and restatement of the Program and is effective January 1, 1994. 2 3. Participants in the Program Any principal officer of Wisconsin Gas Company and any employee of WICOR, Inc. who either is a WICOR, Inc. officer or holds a position with WICOR, Inc. equivalent to a Company salary grade fifteen (15) and sixteen (16) shall be eligible to participate in this Program. An officer who is concurrently employed by and participating in the employee benefit plans of an affiliate corporation shall not be eligible to participate. As soon as practicable after the Board's adoption of the restated Program, each present eligible corporate officer shall be notified of his participant status under the Program and given a copy thereof by the Wisconsin Gas Company Employee Benefit Plan Committee (the "Committee"). The Committee shall provide similar notice to any individual who subsequently becomes an eligible corporate officer within thirty (30) days of such event. As a condition of Program participation, each such principal officer shall execute a written document in a form prescribed by the Committee evidencing, among other things, his understanding and acceptance of all terms and conditions of the Program. 4. Savings Plan Benefits The Company shall establish a Savings Plan Bookkeeping Reserve Account (the "Reserve Account") for each participant as follows: (a) As of each December 31 during the participant's employment with the Company as an officer commencing December 31, 1983, an amount shall be credited to the Reserve Account equal to the difference between (i) four percent (4%) of the participant's aggregate compensation as defined in the Savings Plan and the amount by which such compensation is reduced by the Deferred Compensation Exclusion for such calendar year; and (ii) the actual employer contribution to the Savings Plan allocable to the account of the participant for such calendar year, excluding any participant deposits thereunder. Notwith- standing the foregoing, in the event a participant fails to make deposits equal to four percent (4%) of his Compensation as defined in the Savings Plan during a calendar year and such failure was not caused by the 415 Limit as estimated by the Company, the reference to four percent (4%) in (i) above shall be reduced to the percentage of the participant's compensation as defined in the Savings Plan contributed by the participant to the Savings Plan for such year. (b) Pursuant to a salary reduction agreement, if any, executed by the Company and a participant in the form attached hereto as Exhibit A (the "Salary Reduction Agreement"), an amount shall be credited by the Company to the Reserve Account for such participant equal to the amount, if any, by which the participant's salary is reduced by the Salary Reduction Agreement (the "Pre-Tax Employee Contribution"). The credit to the Reserve Account for the Pre-Tax Employee Contribution shall be 3 made as of the time specified in the Salary Reduction Agreement. The Pre-Tax Employee Contribution under the Salary Reduction Agreement is a non-qualified deferred compensation agreement for purposes of computing the Deferred Compensation Exclusion under the Program. (c) The Salary Reduction Agreement may also provide that the participant will contribute an amount to the Company to be credited to the Reserve Account for such participant (the "Post-Tax Employee Contribution"). The credit to the Reserve Account for the Post-Tax Employee Contribution shall be made as of the time specified in the Salary Reduction Agreement and may be made by payroll deduction or other method provided therein. (d) As of the last day of each month, commencing January 31, 1984, and prior to any distribution pursuant to subparagraphs (e) and (f) below, an additional amount shall be credited to the Reserve Account as an interest equivalent on the balance credited to the Reserve Account as of the last day of the previous month. The interest rate earned will be that rate earned for such month by the "Fixed-Income Fund" under the Savings Plan. (e) Payment of the amounts credited to the Reserve Account for each participant shall commence during the month of January immediately following the calendar year in which occurs the participant's termination of employment with the Company or WICOR, Inc. and shall be made in a lump sum. A transfer of employment to Sta-Rite Industries, Inc. shall not be treated as a termination of employment causing a required distribution hereunder. (f) In the event of a participant's death before benefits hereunder have been paid to him, any amount allocated to the Reserve Account shall be paid in a lump sum in the month following such death to such beneficiary or beneficiaries as the participant shall designate by written instrument delivered to the Secretary of the Company, or if no such written instrument is properly delivered or if such designated beneficiary predeceases the participant, to the executors, administrators, or personal representatives of the participant's estate. (g) The Reserve Account shall be utilized solely as a device for the measurement and determination of the amount to be paid to a participant at the times specified above for the payment of Savings Plan benefits. Neither the Reserve Account nor any other reserve established on the Company's books to reflect the liabilities under this Plan shall constitute or be treated as a trust fund of any kind. On the contrary, it is expressly agreed and understood that the Company shall not be required to set aside any assets with respect hereto and that any assets actually held by the Company with reference to this Plan shall be and remain the sole property of the Company, and that neither a participant nor a participant's 4 beneficiaries, heirs, legal representatives or assigns shall have ownership rights of any nature with respect thereto, unless and until such time as such assets are paid over and transferred to the participant or the participant's beneficiaries, as herein provided. (h) The Program shall accept a transfer from the Sta-Rite Industries Officers' Supplemental Retirement Income Program ("Sta-Rite Supplemental Plan") for Stuart W. Tisdale and Joseph P. Wenzler of the obligations and liabilities under Section 4 thereof with respect to a deferred savings plan account, which amount shall be treated as the opening balance of said individual's Reserve Account. 5. Pension Plan Benefits For purposes of this paragraph, "Unrestricted Pension Benefit" means the amount which would have been payable from the Pension Plan if the: (1) 415 Limit, (2) Compensation Limit, (3) Sta- Rite/Bonus Exclusion, (4) Wisconsin Bonus Exclusion, (5) Deferred Compensation Exclusion and (6) the amendment that froze benefit accruals as of December 31, 1988 for "super highly compensated" participants (provided such frozen benefit accruals have not been adjusted by subsequent amendments to the Pension Plan) did not apply, calculated as of the participant's date of retirement based on the applicable optional payment method, but subject to adjustment from time to time for applicable cost of living increases. "Restricted Benefit Amount" means the amount actually payable from the Pension Plan calculated as of the participant's date of retirement based on the applicable optional payment method, but subject to adjustment from time to time for applicable cost of living increases and for reductions in the 415 Limit and the Compensation Limit. For purposes of calculating Mr. Tisdale's Unrestricted Pension Benefit, this Program shall recognize the transfer from the Sta- Rite Supplemental Plan of the obligations and liabilities under Section 5 thereof, using the terms of the Company's Pension Plan, including the special years of service granted for purposes of the supplement pursuant to Exhibit I of the Sta-Rite Supplemental Plan. Pension Plan benefits are only available to a participant who is a corporate officer immediately prior to his normal or early retirement from the Company under the terms of the Pension Plan. An eligible participant and his beneficiary(ies) shall receive from the Company amounts as specified below. (a) Married Participants - Joint and Survivor Annuity. A participant who is lawfully married at his retirement date and elects to receive his benefits from the Pension Plan in any joint and survivor annuity form available thereunder with his spouse designated as the survivor annuitant, shall receive a monthly supplement for his lifetime. The supplement shall be equal to the difference between (i) the Unrestricted Pension Benefit payable on a life only annuity basis under the terms of 5 the Pension Plan and (ii) the Restricted Benefit Amount payable on a joint and fifty percent (50%) survivor annuity basis under the terms of the Pension Plan. If the participant predeceases his spouse, fifty percent (50%) of such difference shall then be paid monthly to his surviving spouse during her lifetime. If both the participant and his spouse die prior to the end of the ten (10) year period commencing on his retirement date, fifty percent (50%) of the aggregated monthly amount received by him under the Pension Plan and this subparagraph 5(a) shall be paid for the balance of such ten (10) year period to the beneficiary designated in writing by him for that purpose or, in the absence of such a designated beneficiary, to the estate of the last survivor of the participant and his spouse. (b) Unmarried Participants - Ten-Year Certain Annuity. A participant who is unmarried at his retirement date and elects to receive his benefits from the Pension Plan in the ten (10) year period certain annuity form available thereunder, shall receive a monthly supplement for his lifetime. The supplement shall be equal to the difference between (i) the Unrestricted Pension Benefit payable on a life only annuity basis under the terms of the Pension Plan and (ii) the Restricted Benefit Amount payable in a ten (10) year period certain annuity form under the terms of the Pension Plan. If the participant dies prior to the end of the ten (10) year period commencing on his retirement date, the supplement shall be paid for the balance of such ten (10) year period to the beneficiary designated in writing by him for the purpose or, in the absence of such a designated beneficiary, to the estate of the participant. (c) Lump Sum Pension Plan Distribution. A participant who elects to receive his benefits from the Pension Plan in a lump sum distribution at his retirement date shall receive a supplement hereunder based on the difference between (i) the Unrestricted Pension Benefit, and (ii) the restricted Benefit Amount, both calculated on a life only annuity basis. In the event the lump sum value of such difference payable on a monthly life only annuity basis calculated using the Pension Plan factors is less than $100,000, such amount shall be paid to the participant in a lump sum with no survivor benefits. In the event the lump sum value is $100,000 or more, the difference between (i) and (ii) above shall be paid monthly to the participant for his lifetime. If the participant predeceases the spouse to whom he was married at his retirement date, if any, fifty percent (50%) of such monthly supplement shall be paid monthly to his surviving spouse during her lifetime. If both the participant and his spouse, if applicable, die prior to the end of the ten (10) year period commencing on his retirement date, fifty percent (50%) of such supplement to the participant shall be paid for the balance of such ten (10) year period to the beneficiary designated in 6 writing by him for that purpose or, in the absence of such a designated beneficiary, to the estate of the last survivor of the participant and his spouse as of his retirement date, if any. (d) Other Participants. A participant who retires pursuant to the normal or early retirement provisions of the Pension Plan and does not satisfy the requirements for a supplement under subparagraph (a), (b) or (c) above shall receive a monthly supplement pursuant to this subparagraph (d). The supplement shall be equal to the difference between (i) the Unrestricted Pension Benefit and (ii) the Restricted Benefit Amount, both calculated according to the form of payment elected for his Pension Plan benefits. The supplement shall be paid for the participant's lifetime, and in the event the participant's death and payment election form cause a Pension Plan payment to a beneficiary, a portion of the supplement shall be paid to such beneficiary during the period of any related Pension Plan payment. The portion of the supplement to be paid shall equal the portion of the participant's Pension Plan benefit which is continued for such beneficiary. 6. Supplemental Retirement Benefits Supplemental retirement benefits shall be available to a participant who is a principal corporate officer immediately prior to his normal or early retirement from the Company under the terms of the Pension Plan, if such retirement occurs on or after January 1, 1987 but before December 31, 1992. After December 31, 1992, these supplemental Retirement Benefits shall be available to the following Company officers to the extent that they satisfy the retirement qualification requirement herein: Messrs. Schrader, Nuernberg, Giroux, Osborn, Petry and Zeddun. The monthly supplement is equal to $2,083.33 ($25,000 annually) and shall commence to the participant at the later of attainment of age sixty-five (65) or retirement. Payments shall be made as of the first day of the month commencing with the month following the qualifying event and shall continue for one hundred eighty (180) months. If the participant dies (i) after commencement of benefits but prior to the end of the fifteen (15) year period or (ii) after retirement but prior to attainment of age sixty-five (65), the supplement shall be paid for the balance of such period to the beneficiary designated in writing by him for that purpose or, in the absence of such a designated beneficiary, to the estate of the participant. Payments under (ii) above shall commence as of the month following the participant's death and shall continue for the fifteen (15) year period. 7. Administration of the Program The Program shall be administered by the Committee; provided that a participant in the Program who is a Committee member may not participate in any Committee action regarding his benefits hereunder. The Committee shall have all such powers that may be necessary to carry out the provisions of the Program in the absence 7 of any action by the Board, including without limitation, the power to delegate administrative matters to other persons, to construe and interpret the Program, to adopt and revise rules, regulations and forms relating to and consistent with the Program's terms and to make any other determinations which it deems necessary or advisable for the implementation and administration of the Program; provided, however, that the right and power to amend and/or terminate the Program are reserved exclusively to the Board. Subject to the foregoing, all decisions and determinations by the Committee shall be final, binding and conclusive as to all parties, including without limitation the Company, any participant hereunder and all other employees and persons. 8. Source of Benefit Payments No funds or other assets of the Company shall be segregated and attributable to any benefit payments to be made at a later time as hereinabove provided, but rather benefit payments under the Program shall be made from the general assets of the Company at the time any such payment becomes due and payable. Benefit payments under the Program are to be taken as deductions for income tax purposes in the Company's fiscal year that they are actually made. At such time as any benefit payments are made, it shall be determined by the Company whether any portion thereof is allocable to WICOR, Inc. and/or Sta-Rite Industries, Inc. because of their recipient having also served as a corporate officer of either or both of those corporation; and, if such is the case, the Company shall obtain reimbursement from WICOR, Inc. and/or Sta-Rite Industries, Inc., as appropriate, for such allocable portion. No participant or surviving spouse or beneficiary thereof shall have any proprietary rights of any nature whatsoever with respect to any benefit payments, unless and until such time a benefit payment, and then only as to the amount of such payment, is made to such participant or the surviving spouse or beneficiaries thereof, as the case may be. 9. Non-Alienation of Payments Any benefits payable under the Program shall not be subject in any manner to alienation, sale, transfer, assignment, pledge, attachment, garnishment or encumbrance of any kind, by will, or by inter vivos instrument. Any attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any such benefit payment, whether currently or thereafter payable, shall not be recognized by the Committee or the Company. Any benefit payment due hereunder shall not in any manner be liable for or subject to the debts or liabilities of any participant or the surviving spouse or beneficiary thereof, as the case may be. If any such participant, surviving spouse or beneficiary shall attempt to alienate, sell, transfer, assign, pledge or otherwise encumber any benefit payments to be made to that person under the Program or any part thereof, or if by reason of such person's bankruptcy or other event happening at any time, such payments would devolve upon anyone else or would not be enjoyed by such person, then the Committee, in its discretion, may terminate such person's interest in any such benefit payment, and hold or apply it to or for the benefit of that person, the spouse, children, or other dependents thereof, or any 8 of them, in such manner as the Committee may deem proper. 10. Incompetency Every person receiving or claiming benefit payments under the Program shall be conclusively presumed to be mentally competent until the date on which the Committee receives a written notice, in a form and manner acceptable to the Committee, that such person is incompetent and that a guardian, conservator, or other person legally vested with the care of his estate has been appointed. In the event a guardian or conservator of the estate of any person receiving or claiming benefit payments under this Program shall be appointed by a court of competent jurisdiction, payments may be made to such guardian or conservator; provided that proper proof of appointment and continuing qualification is furnished in a form and manner acceptable to the Committee. Any such payment so made shall be a complete discharge of any liability therefor. 11. Limitation of Rights against the Company Participation in this Program, or any modifications thereof, or the payments of any benefits hereunder, shall not be construed as giving to any participant any right to be retained in the service of the Company, limiting in any way the right of the Company to terminate such participant's employment at any time, evidencing any agreement or understanding express or implied, that the Company will employ such participant in any particular position or at any particular rate of compensation and/or guaranteeing such participant any right to receive any other form or amount of remuneration from the Company. 12. Construction The Program shall be construed, administrated and governed in all respects under and by the laws of the State of Wisconsin. Wherever any words are used herein in the masculine, they shall be construed as though they were used in the feminine for all cases where they would so apply; and wherever any words are used herein in the singular or the plural, they shall be construed as though they were used in the plural or the singular, as the case may be, in all cases where they would so apply. The words "hereof", "herein", "hereunder" and other similar compounds of the word "here" shall mean and refer to this entire documents and not to any particular paragraph. 13. Liability Neither the Company nor any shareholder, director, officer or other employee of the Company or any member of the Committee or any other person shall be jointly or severally liable for any act or failure to act hereunder, except for gross negligence or fraud. 14. Amendment or Termination of the Plan The Company, by action of the Board, reserves the right to amend, modify, terminate or discontinue the Program at any time; and such action shall be final, binding and conclusive as to all 9 parties, including any participant hereunder, any surviving spouse or beneficiary thereof and all other Company employees and persons; provided, however, that any such Board action to terminate or discontinue the Program or to change the monthly payment amount or the time and manner of payment thereof as then provided in the Program shall not be effective and operative unless and until written consent thereto is obtained from each participant affected by such action or, if any such participant is not then living, from the surviving spouse or beneficiary thereof, as the case may be. 15. Successors or Assigns The terms and conditions of the Program, as amended and in effect from time to time, shall be binding upon the successors and assigns of the Company, including without limitation any entity into which the Company may be merged or with which the Company may be consolidated. 10 WISCONSIN GAS COMPANY PRINCIPAL OFFICERS' SUPPLEMENTAL RETIREMENT INCOME PROGRAM Exhibit A Salary Reduction Agreement This Agreement is being made and entered into as of this ______ day of _______________, 19___, by and between Wisconsin Gas Company, a Wisconsin corporation (the "Company") and ________________________________ (the "Participant"). 1. Effective with respect to salary earned on and after _______________________ (a payroll period commencement date after the execution of this Agreement), the Company and the Participant agree to defer $______________ per payroll period from the Participant's salary. Such deferred amount shall be credited to the Reserve Account as a Pre-Tax Employee Contribution as of the time the deferred amount would have been paid to the Employee but for this Agreement. 2. Effective on and after ______________________ (a payroll period commencement date after the execution of this Agreement), the Participant directs the Company to deduct from the Participant's salary $________________ per payroll period on an after-tax basis as a Post-Tax Employee Contribution. Such deducted amount shall be credited to the Reserve Account as of the time the deducted amount would have been paid to the participant but for this Agreement. 3. On ______________________, the Participant shall give to the Company in a lump sum $_______________ as a Post-Tax Employee Contribution. Such amount shall be credited to the Reserve Account as of the first day of the month following the date of receipt. Any election under paragraphs 1 or 2 above may be changed on a prospective basis by action of either the Company or the Participant. WISCONSIN GAS COMPANY By: _______________________________ _______________________________ Participant Instructions - ------------ This form is an optional election by principal corporate officers participating under the Program. Company-paid benefits are provided under the Program whether or not Pre-Tax Employee Contributions or Post-Tax Employee Contributions are elected. An officer can elect any combination of 1, 2 or 3 (or note of them), but the maximum amount of such contribution will be determined from time to time by the Company. 11 WISCONSIN GAS COMPANY PRINCIPAL OFFICERS' SUPPLEMENTAL RETIREMENT INCOME PROGRAM I, ___________________________, hereby acknowledge that I received a copy of this Program, as restated, effective January 1, 1994 and that I understand and accept all the terms and conditions thereof. __________________________ _______________________________ Date Signature [Execution of this form is a condition of participation in the Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program.] EX-10.9 5 1994 WISCONSIN GAS INCENTIVE PLAN 1 Exhibit 10.9 Wisconsin Gas Company Officers' Incentive Compensation Plan 1994 I. OBJECTIVES The principal objectives of the Plan are: A. To motivate and to provide incentive for key officers of Wisconsin Gas Company to achieve superior operating results for the benefit of both customers and stockholders. B. To assist in the retention of quality senior management. C. To yield competitive total compensation levels when performance goals are attained. II. ELIGIBILITY Participation in the Plan is limited to designated corporate officers of Wisconsin Gas. The Chief Executive Officer of WICOR will be responsible for recommending eligibility changes to the Compensation Committee of the Board of Directors of WICOR, Inc. III. AMOUNT OF POTENTIAL AWARD A. The minimum, target and maximum award opportunities for each officer, as a percentage of base salary, are as follows:
Award as % of Salary ------------------------------------------- Position Minimum Target Maximum --------------- ------------- ------------ ------------ President & CEO 0% 40% 60% VP 0% 20% 30%
B. Only 50% of the President & CEO's award opportunity will be determined according to the provisions of this Plan. Of that 50%, 67% will be determined by Performance Plus and 33% will be determined by Net Income as a percentage of budget. The remaining 50% will be determined based on the WICOR Officers' Incentive Compensation Plan. 2 IV. PERFORMANCE CRITERIA AND OBJECTIVE SETTING A. Each executive's incentive award will be related to the achievement of Company performance goals, and a component reflecting individual performance. B. Total incentive opportunity is further based on the following measures: - 50% Performance Plus (Company-wide operational and financial incentive Plan) - 25% Net Income as a percentage of budget - 25% Individual Therefore, 75% of the total bonus opportunity is based on operational and financial results and 25% is based on individual performance. The individual portion of the incentive payout will be based on the individual's overall performance as measured against previously identified and agreed upon goals and objectives. The award may vary up to 150% of the individual performance portion of the target award, and will be determined and paid independently of Company financial performance. C. If the Compensation Committee of WICOR, Inc. determines that the Net Income level was inadequate or that services to customers did not meet corporate goals or standards developed, it may exercise discretion to reduce or eliminate any or all bonus payments. V. PERFORMANCE PERIOD Company performance goals will be for the 1994 calendar year. VI. BONUS AWARD DETERMINATION A. Performance Plus. Each year management will recommend specific goals for safety, customer service and cost effectiveness. Associated with various levels of performance for each goal will be a certain number of award points. The cumulative total of these points adjusted by a "multiplier", based on Net Income as a percent of budget, will determine the formula payout under this portion of the Plan. For 1994, the performance measures and related points and the "multiplier" are set forth in Exhibit I. B. Net Income as a Percentage of Budget Actual net income as a percentage of budget will generate incentive compensation equal to 25% of the target award multiplied by the following percentages: 3
Net Income Award Determination ------------------------------------------------- Net Income as % of Target Performance Level % of Budget Awarded ------------------- ------------- ----------- Less than Threshold Less than 87% 0.0% Threshold 87% 1.0% Target 100% 100.0% Maximum 120% 150.0%
For performance at levels between Threshold and Target or between Target and Maximum, award calculations will be pro-rated on a linear basis. For 1994, the amount of targeted net income is set forth in Exhibit 10.9a. C. Total performance awards will be calculated by combining the payouts from Performance Plus, Net Income and Individual Components. VII. FORM AND TIMING OF AWARD PAYMENTS A. Awards will be determined and paid as soon as practicable after the close of the Plan year. B. At each participant's discretion and with the concurrence of the Compensation Committee of WICOR, Inc., awards may be paid in one of three ways: 1. Lump Sum 2. Partly in lump sum, and the remainder in deferred annual installments. 3. Completely in deferred annual installments. C. The Company will offer a deferred payment option to those officers who prefer not to receive their awards in current cash, following these guidelines: 1. Deferred incentive award payments will be carried as an accrued liability with an interest rate (three-year treasury bill rate) credited each year. 2. Deferral elections must be made prior to the end of the performance period, and a definite time period for deferral must be specified. 4 VIII. PLAN ADMINISTRATION A. Compensation Committee: 1. The Plan will be administered by the Compensation Committee of the Board of Directors of WICOR, Inc. 2. The Committee's administration is subject to approval of the Board of Directors of WICOR, Inc. 3. The decisions of the Board are final and binding on all Plan participants. 4. The Board retains the right to terminate or amend the Plan as it may deem advisable. 5. In evaluating actual Company performance results in comparison with pre-established objectives established for the Plan year, and in establishing resulting incentive compensation levels, the Compensation Committee, at their sole discretion, may take unusual and unique factors into consideration as they deem appropriate. Similarly, the Committee may modify performance targets during the course of a Plan year if significant change takes place which would affect the measure. 6. It shall be the Committee's responsibility to review the overall reasonableness of incentive compensation paid to participants of this Plan in relation to overall services performed and results obtained by the Company during the Plan year. The Committee shall make its determination on the basis of its judgement as to what constitutes satisfactory performance with respect to the fulfillment of the Company's mission or charter. Issues to be considered shall include, but not be limited to the following: a. Quality and level of service provided to customers. b. Health and safety considerations. c. Maintenance of specific required standards of performance. d. Representation of shareholders' interests (including Rate of Return achieved compared to allowed). Based upon this review, the incentive compensation paid to participants may be reduced or withheld so that the total compensation paid will be reasonable in relation to services performed. The decisions of the Committee are final and binding on all parties. 5 B. Partial Year Participation: 1. Participants must be employed by the Company on the last day of the Plan year in order to receive a bonus for that year. However, once earned, a bonus will be paid to a participant regardless of whether he/she is employed by the Company on the date payment is made. 2. Awards for part year participants will be pro-rated based on the proportion of the year that the participant was in the Plan. This includes participants who terminate employment due to death, disability or retirement. 3. Participants who terminate employment with the Company prior to the last day of the Plan year shall forfeit all rights to an incentive award payment under the Plan except for terminations due to death, retirement or disability. 4. A participant is deemed to be disabled if he/she becomes eligible for benefits under the Company's Long Term Disability Plan. 6 Exhibit 10.9a Wisconsin Gas Company Incentive Compensation Plan Formula Performance Goals 1994 Performance Plus* ----------------- Maximum Points ---------- 1. Customer Service Favorability/Customer Satisfaction 10 2. Safety On-the-Job Injuries 5 Claims 5 3. Cost Effectiveness Operation & Maintenance Expense 5 Change in Residential Rates 5 ------------- Maximum Total Points (Target = 20 points) 30 ============= 4. Multiplier Net Income as % of Budget Multiplier ------------------------- ---------- Less than 87% 0.0000 87% 0.0100 90% 0.2385 95% 0.6192 100% 1.0000 110% 1.1667 120% 1.3333 * This is a summarization of the Performance Plus Plan which will govern the actual calculation of the payout amounts.
NET INCOME AS A % OF BUDGET Minimum (87%) $19,819,000 Target (100%) $22,780,000 Maximum (120%) $27,336,000 /TABLE EX-10.14 6 1994 STA-RITE INCENTIVE PLAN 1 Exhibit 10.14 Sta-Rite Industries, Inc. Officers' Incentive Compensation Plan 1994 I. Objectives The principal objectives of the Plan are: A. To motivate and to provide incentive for key officers of Sta-Rite to achieve superior operating results for the benefit of both customers and stockholders. B. To assist in the retention of quality senior management. C. To yield competitive total compensation levels when performance goals are attained. II. ELIGIBILTY Participation in the Plan is limited to designated officers of Sta-Rite Industries, Inc. The Chief Executive Officer, WICOR will be responsible for recommending eligibility changes to the Compensation Committee of the Board of Directors of WICOR, Inc. III. AMOUNT OF POTENTIAL AWARD A. The minimum, target and maximum award opportunities for each officer level position, as a percentage of base salary, are as follows: CAPTION> Award as Percent of Base Salary ----------------------------------------- Position Minimum Target Maximum ----------------- ----------- ------------ ------------ President and COO 0% 40% 60.0% VP 0% 30% 45.0%
B. Only 50% of the President and COO's award opportunity will be determined according to the provisions of this Plan. Of that 50%, 67% will be determined by Net Income and 33% will be determined by Return on Assets. The remaining 50% will be determined based on the WICOR Officers' Incentive Compensation Plan. 2 IV. PERFORMANCE CRITERIA AND OBJECTIVE SETTING A. Participants' bonus opportunity is based on consolidated Company performance. B. Total bonus opportunity is further based on the following: - 50% net earnings (dollars) - 25% return on total assets - 25% individual Therefore, 75% of the total bonus opportunity is based on financial results (formula); and 25% is based on individual performance. The individual portion of the incentive payout will be based on the individual's overall performance as measured against previously identified and agreed upon goals and objectives. The award may vary up to 150% of the individual performance portion of the target award, and will be determined and paid independently of Company financial performance. C. If the Compensation Committee of WICOR, Inc. determines that corporate performance was inadequate, it may exercise discretion to reduce or eliminate any or all bonus payments. D. Formula bonus objectives are: 1. Total Company A. Net earnings: defined as absolute dollars of reported net earnings (after-tax) of the Company for the Plan year. B. Return on total assets: defined as reported net earnings (after-tax) divided by average (twelve months) total assets (both current and non-current) of the Company for the Plan year. 2. The specific target levels will be changed from year to year to reflect the changing emphasis of the business plan. Specific target levels for 1994 are set forth on Exhibit 14.a. V. PERFORMANCE PERIOD Company performance goals will be for the 1994 calendar year. 3 VI. BONUS AWARD DETERMINATION A. Each year management will establish appropriate formula performance levels for minimum, target and maximum bonus awards. B. As noted in Section III A, the target bonus amount for the President and COO is 40% of salary and the target bonus for all other officers is 30% of salary. C. Bonus awards for formula and discretionary portions will be evaluated and computed separately. 1. Formula bonus awards will be determined based on achieving the performance levels indicated in the following schedule:
Level of Performance Objective Percent of Level Achieved Target Awarded ------------------------ ----------------- ---------------- Less than Threshold Less than 75% 0.0% Threshold 75% 1.0% Target 100% 100.0% Maximum 120% 150.0%
For performance between Threshold and Target or between Target and Maximum, award calculations will be pro-rated on a linear basis. VII. FORM AND TIMING OF AWARD PAYMENTS A. Awards will be determined and paid as soon as practical after the close of the Plan year. B. At each participant's discretion and with the concurrence of the Compensation Committee of WICOR, Inc., awards may be paid in one of three ways: 1. Lump sum. 2. Partly in lump sum, and the remainder in deferred annual installments. 3. Completely in deferred annual installments. C. The Company will offer a deferred payment option to those officers who prefer not to receive their awards in current cash, following these guidelines: 4 1. Deferred incentive award payments will be carried as an accrued liability with an interest rate (three-year treasury bill rate) credited each year. 2. Deferral elections must be made prior to the end of the performance period, and a definite time period for deferral must be specified. VIII. PLAN ADMINISTRATION A. Compensation Committee: 1. The Plan will be administered by the Compensation Committee of the Board of Directors of WICOR, Inc. ("Committee"). 2. The Committee's administration is subject to approval of the Board of Directors of WICOR, Inc. 3. The decisions of the board are final and binding on all participants. 4. The Board retains the right to terminate or amend the Plan as it may deem advisable. B. Partial Year Participation: 1. Participants must be employed by the Company on the last day of the Plan year in order to receive an incentive award for that year. However, once earned, the award will be paid to a participant regardless of whether he/she is employed by the Company on the date payment is made. 2. Awards for part year participants will be pro-rated based on the proportion of the year that the participant was in the Plan. This includes participants who terminate employment due to death, disability or retirement. 3. Participants who terminate employment with the Company prior to the last day of the Plan year shall forfeit all rights to an incentive award payment under the Plan except for terminations due to death, retirement or disability. 4. A participant is deemed to be disabled if he/she becomes eligible for benefits under the Company's Long Term Disability Plan. 5 Exhibit 10.14a Sta-Rite Industries, Inc. Incentive Compensation Plan Formula Performance Goals - 1994
Performance Goal: Net Earnings ($000) Return on Assets ----------------- ------------------- ---------------- Minimum $ 7,500 4.50% Target $ 10,000 6.00% Maximum $ 12,000 7.20%
EX-13 7 1993 ANNUAL REPORT - FINANCIAL REVIEW 1 EXHIBIT 13 GENERAL OVERVIEW WICOR has two significant business segments: gas distribution and manufacturing. Gas distribution is the primary business as it accounted for 68% of consolidated revenues and 72% of consolidated operating income in 1993 with manufacturing contributing the balance. The manufacturing segment has grown significantly through the 1993 acquisition of SHURflo Pump Manufacturing Co. (Shurflo), a manufacturer of small pumps for the food service and recreational markets. The acquisition was accounted for as a pooling of interests. As a result, prior years have been restated. Shurflo added $46.6 million of revenues and $5.0 million of operating income to consolidated results in 1993. During the second quarter the Company sold all of its oil and gas properties held by its subsidiary, Wexco of Delaware, Inc. at approximately book value for $4.0 million. WICOR earnings were $29.3 million in 1993, or $1.82 per share of common stock, compared with $22.8 million, or $1.47 per share in 1992 ($14.8 million, or $.96 per share after the cumulative effect of accounting changes) and $23.0 million, or $1.54 per share in 1991. Gas sales increased in 1993 as a result of colder weather and customer additions in 1992 and 1993. Manufacturing operations showed significant improvement as a result of an improved competitive domestic position, continuing strong international sales, and the recovering residential construction market. Net cash flows from operations for the years 1991 through 1993 totalled $90.8 million. Cash proceeds of $24.4 million received in 1991 from the sale of discontinued operations and a $129.5 million net increase in long-term debt, common stock and short-term debt, along with the net cash flows from operations provided the funding for $168.9 million of capital expenditures and $59.2 million of dividends for the three years. Segment data for WICOR's operations are summarized below.
Operating Revenues (Millions of Dollars) 1993 1992 1991 - ---------------------------------------- -------- -------- -------- Gas Distribution $ 574.8 $ 495.4 $ 474.7 Manufacturing 274.7 252.0 242.1 -------- -------- -------- $ 849.5 $ 747.4 $ 716.8 ======== ======== ======== Depreciation, Depletion and Amortization (Millions of Dollars) - ---------------------------------------- Gas Distribution $ 34.8 $ 30.5 $ 28.3 Manufacturing 8.9 9.7 8.0 -------- -------- -------- $ 43.7 $ 40.2 $ 36.3 ======== ======== ======== Operating Income (Millions of Dollars) - ---------------------------------------- Gas Distribution $ 46.2 $ 43.3 $ 39.5 Manufacturing 17.8 10.0 11.7 -------- -------- -------- $ 64.0 $ 53.3 $ 51.2 ======== ======== ======== /TABLE 2
Actual Capital Expenditures Estimated ------------------------------ (Millions of Dollars) 1994 1993 1992 1991 - ------------------------------ -------- -------- -------- -------- Gas Distribution $ 57.4 $ 42.3 $ 62.1 $ 34.6 Manufacturing 13.9 9.6 9.8 10.5 -------- -------- -------- -------- $ 71.3 $ 51.9 $ 71.9 $ 45.1 ======== ======== ======== ========
Identifiable Assets at December 31 (Millions of Dollars) 1993 1992 1991 - ---------------------------------- -------- -------- -------- Gas Distribution $ 737.2 $ 634.6 $ 486.2 Manufacturing 196.5 191.2 184.1 -------- -------- -------- $ 933.7 $ 825.8 $ 670.3 ======== ======== ========
VERTICAL BAR GRAPH OF WICOR OPERATING INCOME millions of dollars 1989 1990 1991 1992 1993 - -------------------- -------- -------- -------- -------- -------- Gas Distribution $ 53.8 $ 34.9 $ 39.5 $ 43.3 $ 46.2 Manufacturing 16.9 9.7 11.7 10.0 17.8 -------- -------- -------- -------- -------- $ 70.7 $ 44.6 $ 51.2 $ 53.3 $ 64.0 ======== ======== ======== ======== ========
VERTICAL BAR GRAPH OF WICOR'S RETURN ON AVERAGE COMMON EQUITY BEFORE CUMULATIVE EFFECTS OF ACCOUNTING CHANGES 1989 1990 1991 1992 1993 -------- -------- -------- -------- -------- percent 14.3% 6.8% 9.5% 9.2% 11.2% Note: 1989 and 1990 are based on income from continuing operations /TABLE 3 RESULTS OF OPERATIONS Gas Distribution - ---------------- Increased sales margins in 1993 and 1992 were sufficient to offset higher levels of operating expenses, resulting in increases in operating income. Margins benefited in 1993 from rate increases effective in November 1992 and November 1993. The 1993 earnings reflect an 11.3% return on weighted average common equity. A $12.3 million or 2.9% annual rate increase, effective on November 12, 1993, included a reduction in the authorized return on common equity to 11.8% from the previously authorized 12.75%. Revenues, margins and volumes are summarized below. Margin, defined as revenues less cost of gas, is a better comparative performance indicator than revenues. Transportation service revenues are recorded at margin with no corresponding cost of gas amount. Therefore, for a given rate class, the volume mix between sales and transportation service affects revenues but not margin. In addition, changes in cost of gas are flowed through to revenue under a gas adjustment clause, with no effect on margin.
(Millions of Dollars) 1993 1992 1991 - ------------------------------- -------- -------- -------- Gas sales revenue $ 565.1 $ 485.3 $ 465.4 Gas purchase costs 382.0 319.4 303.4 -------- -------- -------- Gas sales margin 183.1 165.9 162.0 Gas transportation margin 9.7 10.1 9.3 -------- -------- -------- Total margin $ 192.8 $ 176.0 $ 171.3 ======== ======== ======== (Millions of Therms) - ------------------------------- Sales volumes Firm 823 782 792 Interruptible 208 174 174 Transportation volumes 174 214 197 -------- -------- -------- Total throughput 1,205 1,170 1,163 ======== ======== ========
VERTICAL BAR GRAPH OF ANNUAL DEGREE DAYS % COLDER (WARMER) THAN 20-YEAR AVERAGE 1989 1990 1991 1992 1993 -------- -------- -------- -------- -------- % colder (warmer) 1.5% (16.0%) (10.8%) (6.4%) (4.1%)
Total gas margin increased by 10% and 3% for 1993 and 1992, respectively. Weather in 1993 was 1% colder than 1992. Weather in 1992 was 4% colder than 1991. The number of residential customers increased by 3% in 1993 and 2% in 1992 due to expansion into rural markets. Industrial throughput remained at the same approximate level in 1993 and 1992. Much of the industrial market has dual fuel capability and as such is sensitive to changing prices of natural gas and alternate fuels. 4 Operation and maintenance expenses increased by $10.9 million or 11% in 1993. In addition to normal inflation, the increase was due to higher costs for employee benefits, business systems software amortization, conservation programs, and uncollectible receivables. Operation and maintenance expenses decreased by $0.9 million or 1% in 1992. The reduction was in large measure due to decreases in employee benefits and other operating costs. Manufacturing Operations - ------------------------ Manufacturing operating income in 1993 was $17.8 million compared with $10.0 million in 1992 and $11.7 million in 1991. Sales in 1993 were $274.7 million, an increase of 9% over 1992 sales of $252.0 million. Improvements were noted in sales of water systems, drainers and environmental pumps as well as pumps for the food service, marine, water purification and industrial markets. The improved economy and favorable weather conditions were significant factors contributing to the increase. Sales in 1992 were $252.0 million, an increase of 4% over 1991 sales of $242.1 million. International and export sales increases were somewhat offset by decreases in domestic markets. International and export sales represented 34% of manufacturing sales in both 1993 and 1992. Significant growth has occurred in the Australian and European markets, despite a weak European economy.
VERTICAL BAR GRAPH OF MANUFACTURING INTERNATIONAL AND EXPORT SALES 1989 1990 1991 1992 1993 ------ ------ ------ ------ ------ millions of dollars $63.3 $64.9 $75.5 $85.9 $93.8
As a result of continuing efforts to control costs, operating expenses decreased by 2% in 1993, despite the 9% increase in sales. This is a significant improvement over the 6% increase in 1992. Much of the 1993 savings was generated through administrative personnel reductions in 1992 and 1993. Other Income (Deductions) and Income Taxes - ------------------------------------------ Other net deductions increased by less than 1% in 1993. Both interest income and interest expense declined as a result of lower interest rates. In September 1993 the utility refinanced $45 million of long-term debt to take advantage of lower interest rates. The 1992 increase in other net deductions was due to a higher interest expense as increased borrowings were used to finance higher utility capital expenditures. Income tax expense increased in 1993 primarily as a result of higher pre-tax book income and a 1% increase in the federal tax rate effective January 1, 1993. Income tax expense increased in 1992 as both pre-tax book income and the effective tax rate increased. 5 Accounting Changes - ------------------ The cumulative effect of accounting changes related to the recording of income taxes and postretirement benefits totaled $8.0 million in 1992 . The impact of adopting these two accounting changes, effective January 1, 1992, is discussed in Notes 3 and 10. Effects of Changing Prices - -------------------------- It is management's view that changes in the rate of inflation have not had a significant effect on income over the past three years. Utility operating cost increases due to inflation are generally recoverable through increased revenues due to the utility's forward looking test year. Wisconsin Gas has proposed to the Public Service Commission of Wisconsin (PSCW) an alternative method of ratemaking that may have an impact on how inflationary costs are recovered. This alternative method is discussed in the following section. LIQUIDITY AND CAPITAL RESOURCES Over the last three years, the Company has generated sufficient cash flows from operations to cover operating expenses, dividends, and a portion of investment activities. Cash flow from operations decreased to $3.4 million in 1993, compared with $37.0 million in 1992 and $50.4 million in 1991. The 1993 decrease is primarily due to funds used by the utility to purchase gas held in storage. As discussed under regulatory matters, one of the impacts of Federal Energy Regulatory Commission (FERC) Order No. 636 is that utilities such as Wisconsin Gas must assume the responsibility for purchasing gas supplies and maintaining gas in storage. Previously, the pipelines performed those functions. Accordingly, Wisconsin Gas is now required to finance its own gas in storage. In the future, Wisconsin Gas does not expect to experience increases of gas in storage as large as that of 1993. Investment Activities - --------------------- Capital expenditures decreased by $20.0 million in 1993 after increasing by $26.8 million in 1992. Utility expenditures returned to more normal levels in 1993 following completion of a major expansion project in 1992. Utility capital expenditures are expected to increase substantially in 1994 as several expansion projects are anticipated. In July 1993, WICOR merged with Shurflo by exchanging approximately $27 million of WICOR stock for the outstanding common stock of Shurflo. See Note 2 for a further discussion of this transaction. The Company, either directly or through its subsidiaries, has invested $2.1 million, $9.8 million and $4.2 million in 1993, 1992 and 1991, respectively, in other acquisition activity. In January 1992, the PSCW issued an order prescribing an equity-based formula for determining the limitation on non-utility investments. As of December 31, 1993, WICOR would be permitted to invest an additional $77.8 million in nonutility investments under this order. Nonutility subsidiaries can also borrow additional amounts for acquisitions within certain PSCW guidelines (See Note 6). 6
VERTICAL BAR GRAPH OF WICOR CAPITAL EXPENDITURES 1994 millions of dollars 1989 1990 1991 1992 1993 Est - ------------------- ------ ------ ------ ------ ------ ------ Gas distribution $25.8 $28.0 $34.6 $62.1 $42.3 $57.4 Manufacturing 9.1 8.3 10.5 9.8 9.6 13.9 ------ ------ ------ ------ ------ ------ $34.9 $36.3 $45.1 $71.9 $51.9 $71.3 ====== ====== ====== ====== ====== ======
Funds from Financing - -------------------- During 1993, the utility issued $45 million of 6.6% Notes due in 2013, the proceeds of which were used to refinance $45 million of outstanding higher cost first mortgage bonds due in 1994 and 1995. There were no issues of long-term debt in 1992. The Company does not anticipate the need to issue any long-term debt in 1994. The Company's debt portion of capitalization decreased to 38% in 1993 as compared to 40% in 1992 and 41% in 1991. The utility's embedded cost of long-term debt decreased from 9.2% at December 31, 1992 to 8.9% at December 31, 1993. WICOR raised its dividend by 3% in both 1993 and 1992. The annual rate is now $1.56 per share. At December 31, 1993 the company had $35.4 million of unrestricted retained earnings available for dividend payments to shareholders. In October 1992, the Company established the WICOR Plan which allows customers, shareholders, employees and Wisconsin residents to purchase WICOR common stock directly and through dividend reinvestment without paying fees or service charges. During 1993, 685,000 shares of common stock were issued through the WICOR Plan and by the exercise of employee stock options. These stock sales provided funds to the Company of $16.7 million. The holding company structure provides the Company with the flexibility to maintain its financial strength in a changing business environment while insulating Wisconsin Gas from nonutility risk. Centralized equity financing is available whereby equity capital raised may be reinvested by the Company in its subsidiaries. As described in Note 6, a November 1993 PSCW rate order updated certain limitations with respect to equity levels and dividend payments of Wisconsin Gas. Under the order, the equity floor was lowered to reflect the need for increased short-term debt financing for seasonal gas storage. The limitations on dividend payments were unchanged from prior years.
VERTICAL BAR GRAPH OF WICOR'S CAPITALIZATION percent 1989 1990 1991 1992 1993 - ------------------- ------ ------ ------ ------ ------ long-term debt 33.4% 35.4% 40.9% 40.1% 37.9% common stock 66.6 64.6 59.1 59.9 62.1 /TABLE 7 Restrictions imposed by the PSCW are not expected to have any material effect on WICOR's ability to meet its cash obligations. WICOR invested $12 million and $15 million in Wisconsin Gas during 1993 and 1992, respectively. The utility's ratio of pre-tax earnings to fixed charges increased to 2.9 in 1993 due to higher earnings and lower interest rates compared with 2.8 in 1992. The decrease in 1992 from 3.0 in 1991 was due to higher debt levels in 1992. Access to securities markets can be correlated to credit quality. The utility's unsecured bond rating was increased in 1993 by Moody's Investors Service from A1 to Aa3. The rating from Standard & Poor's Corporation remained at AA-. Commercial paper carrying an A-1+ rating by Standard & Poor's Corporation and P-1 by Moody's Investors Service is routinely issued by the utility as needed to finance seasonal working capital needs, principally customer receivables and gas in storage. In March 1993, WICOR and its subsidiaries renewed a three-year revolving credit agreement, including separate agreements for $25 million for the WICOR parent company, $30 million for Wisconsin Gas, and $15 million for Sta-Rite. In 1993, Sta-Rite renewed a $25 million commercial paper issuance facility. Commercial paper outstanding at December 31, 1993 and 1992 was $117.1 million and $56.3 million, respectively. The increase was due, primarily, to financing of higher levels of gas in storage. Regulatory Matters - ------------------ In 1993, the PSCW adopted a biennial rate case process to replace the existing annual process. The biennial process utilizes a traditional cost based rate of return regulatory procedure with the resulting rates made effective for two years. As an alternative, Wisconsin Gas has proposed to the PSCW the adoption of a Productivity-based Alternative Ratemaking Mechanism (PARM). Developed as a four year pilot program, the PARM would feature an inflation-based rate cap and a weather adjustment mechanism. The PARM is designed to focus management's attention on long-term productivity improvements rather than on responding to uncontrollable weather variations. This will provide Wisconsin Gas with appropriate incentives to control costs and to prepare for the competitive environment that is resulting from the deregulation and restructuring of the gas industry. The PARM proposal is currently being reviewed by the PSCW. Management is not able to assess the ultimate outcome of the proposal. In April 1992, the FERC issued Order 636 requiring interstate pipelines to "unbundle" their services. As a result, gas supplies are sold separately from interstate transportation services. Distribution companies such as Wisconsin Gas contract separately with gas suppliers to buy gas to be delivered to the pipelines and contract with the pipelines for transportation from gas production areas to utility market areas. While Wisconsin Gas has been buying a portion of its supply requirements in this manner for several years, as FERC policies have evolved, it is now required to purchase all of its supplies in this manner. As a result, the utility has greater responsibility for managing its gas supply in a more competitive market. Variable-term market sensitive contracts and the increased use of gas in storage are being used to assure future supply. 8 Pipelines have been allowed to pass through to local gas distributors such as Wisconsin Gas various costs incurred in the transition to Order 636. The PSCW has authorized that such costs that have been passed through to Wisconsin Gas be recovered in rates charged to customers. Although complete assurance cannot be given, it is believed that any additional future transition costs will also be recoverable from customers. Environmental Matters - --------------------- Wisconsin Gas has investigated its past gas manufacturing practices to determine the environmental remediation efforts that will be required. Wisconsin Gas has identified two previously owned sites on which it operated manufactured gas plants where contaminated soils are present. Wisconsin Gas is in the process of reviewing investigative reports and developing a feasibility study for presentation to and discussion with the Wisconsin Department of Natural Resources. The utility anticipates that the costs incurred in this effort will be recoverable from insurers or through rates. (See Note 7 for a more detailed discussion of this matter.) The manufacturing segment has provided reserves believed sufficient to cover its estimated costs related to contamination associated with Sta-Rite's manufacturing facilities. 9 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareholders and Board of Directors of WICOR, Inc.: We have audited the accompanying consolidated balance sheets and statements of capitalization of WICOR, Inc. (a Wisconsin corporation) and subsidiaries as of December 31, 1993 and 1992, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1993. These financial statements are the responsibility of WICOR, Inc.'s management. Our responsibility is to express an opinion on these statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WICOR, Inc. and subsidiaries as of December 31, 1993 and 1992, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1993, in conformity with generally accepted accounting principles. As discussed in Notes 3 and 10 to the Consolidated Financial Statements, effective January 1, 1992, WICOR, Inc. changed its methods of accounting for income taxes and postretirement benefits other than pensions. Milwaukee, Wisconsin, ARTHUR ANDERSEN & CO. February 11, 1994. 10 CONSOLIDATED STATEMENT OF INCOME
(Thousands of Dollars, Except per Share Amounts) Year Ended December 31, 1993 1992* 1991* ---------- ---------- ---------- Operating Revenues Gas distribution $ 574,835 $ 495,415 $ 474,702 Manufacturing and other 274,693 251,994 242,065 ---------- ---------- ---------- 849,528 747,409 716,767 ---------- ---------- ---------- Operating Costs and Expenses Purchased gas 382,027 319,377 303,441 Manufacturing cost of sales 197,297 180,388 173,014 Operations and maintenance 169,068 159,009 156,015 Depreciation, depletion and amortization 28,044 26,650 24,759 Taxes, other than income taxes 9,141 8,670 8,360 ---------- ---------- ---------- 785,577 694,094 665,589 ---------- ---------- ---------- Operating Income 63,951 53,315 51,178 ---------- ---------- ---------- Other Income (Deductions) Interest expense (17,428) (18,126) (16,804) Interest income 590 1,084 1,575 Other, net (324) 40 (307) ---------- ---------- ---------- (17,162) (17,002) (15,536) ---------- ---------- ---------- Income Before Income Taxes 46,789 36,313 35,642 Income taxes 17,476 13,549 12,676 ---------- ---------- ---------- Income Before Cumulative Effects of Accounting Changes 29,313 22,764 22,966 Cumulative effects of accounting changes: Postretirement benefits other than pensions (net of $4.1 million income tax benefit) - (6,165) - Income taxes - (1,800) - ---------- ---------- ---------- Net Income $ 29,313 $ 14,799 $ 22,966 ========== ========== ========== Per Share of Common Stock Income before cumulative effects of accounting changes $ 1.82 $ 1.47 $ 1.54 Cumulative effect of accounting change for postretirement benefits - (0.40) - Cumulative effect of accounting change for income taxes - (0.11) - ---------- ---------- ---------- Net Income $ 1.82 $ 0.96 $ 1.54 ========== ========== ========== Cash dividends $ 1.54 $ 1.50 $ 1.46 Average Common Shares Outstanding (thousands) 16,096 15,490 14,890 ========== ========== ========== *Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2).The accompanying notes are an integral part of this statement. /TABLE 11 CONSOLIDATED BALANCE SHEET
(Thousands of Dollars) December 31, ------------------------- 1993 1992* ---------- ---------- Assets Current Assets Cash and cash equivalents $ 22,953 $ 16,632 Accounts receivable, less allowance for doubtful accounts of $9,351 and $7,344, respectively 111,408 103,063 Accrued utility revenues 53,483 48,029 Manufacturing inventories 58,079 54,873 Gas in storage, at weighted average cost 44,697 6,647 Deferred income taxes 10,005 6,829 Prepayments and other 13,969 13,339 ---------- ---------- 314,594 249,412 ---------- ---------- Property, Plant and Equipment, at cost Gas distribution 679,968 642,863 Manufacturing 97,736 90,139 Oil and gas - 32,838 ---------- ---------- 777,704 765,840 Less accumulated depreciation, depletion and amortization 377,004 374,293 ---------- ---------- 400,700 391,547 ---------- ---------- Deferred Charges and Other Deferred systems development costs 38,808 36,265 Other regulatory assets 57,211 58,973 Deferred environmental costs 41,641 - Prepaid pension costs 29,580 28,158 Gas transition costs 15,485 25,329 Other 35,707 36,090 ---------- ---------- 218,432 184,815 ---------- ---------- $ 933,726 $ 825,774 ========== ========== * Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2). The accompanying notes are an integral part of this statement.
12 CONSOLIDATED BALANCE SHEET
(Thousands of Dollars) December 31, ------------------------- 1993 1992* ---------- ---------- Liabilities and Capitalization Current Liabilities Accounts payable $ 62,683 $ 73,785 Short-term borrowings 134,918 73,100 Refundable gas costs 15,596 13,641 Current portion of long-term debt 2,847 5,829 Accrued taxes 10,089 920 Accrued payroll and benefits 14,656 12,087 Other 15,199 19,135 ---------- ---------- 255,988 198,497 ---------- ---------- Deferred Credits and Other Environmental remediation costs 40,000 - Unamortized investment tax credit 8,654 9,128 Deferred income taxes 45,878 46,671 Gas transition costs 15,485 25,329 Other regulatory liabilities 50,179 52,544 Postretirement benefit obligation 67,510 67,938 Other 14,526 16,209 ---------- ---------- 242,232 217,819 ---------- ---------- Commitments and Contingencies (Note 7) Capitalization (See accompanying statement) Long-term debt 165,230 164,171 Redeemable preferred stock - - Common equity 270,276 245,287 ---------- ---------- 435,506 409,458 ---------- ---------- $ 933,726 $ 825,774 ========== ========== * Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2). The accompanying notes are an integral part of this statement. /TABLE 13 CONSOLIDATED STATEMENT OF CASH FLOWS Increase (Decrease) in Cash and Cash Equivalents
(Thousands of Dollars) Year Ended December 31, 1993 1992* 1991* --------- --------- --------- Operations Net income $ 29,313 $ 14,799 $ 22,966 Adjustments to reconcile net income to net cash flow from operating activities: Cumulative effect of changes in accounting principles, net of $4,110 income tax benefit - 7,965 - Depreciation, depletion and amortization 43,738 40,200 36,282 Deferred income taxes (3,969) (2,958) 2,953 Changes in: Receivables (13,993) (8,627) (7,056) Manufacturing inventories (2,590) (839) 9,384 Gas in storage (38,050) (6,252) 4,754 Other current assets (569) 6,016 (261) Systems development costs (6,530) (9,976) (10,174) Accounts payable (11,055) (2,259) 270 Refundable gas costs 1,955 5,633 (3,884) Accrued taxes 9,169 (2,098) (1,567) Other current liabilities (292) (1,754) (136) Other noncurrent assets and liabilities (3,726) (2,838) (1,293) Net assets of discontinued operations - - (1,825) --------- --------- --------- Cash provided by operating activities 3,401 37,012 50,413 --------- --------- --------- Investment Activities Capital expenditures (51,906) (71,873) (45,113) Net proceeds from sale of assets 5,328 761 - Net proceeds from sale of discontinued operations - - 24,395 Acquisitions (2,120) (9,776) (4,152) Other, net 541 274 994 --------- --------- --------- Cash (used in) investing activities (48,157) (80,614) (23,876) --------- --------- --------- Financing Activities Change in short-term borrowings 59,603 35,726 (5,729) Issuance of long-term debt 47,446 173 40,023 Reduction of long-term debt (50,982) (8,674) (22,691) Issuance of common stock 16,682 6,079 11,844 Dividends paid on common stock, less amounts reinvested (21,450) (19,459) (18,304) Other (222) (734) (710) --------- --------- --------- Cash provided by financing activities 51,077 13,111 4,433 --------- --------- --------- Change in Cash and Cash Equivalents 6,321 (30,491) 30,970 Cash and cash equivalents at beginning of year 16,632 47,123 16,153 --------- --------- --------- Cash and Cash Equivalents at End of Year $ 22,953 $ 16,632 $ 47,123 ========= ========= ========= *Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2). The accompanying notes are an integral part of this statement. /TABLE 14 CONSOLIDATED STATEMENT OF CAPITALIZATION
(Thousands of Dollars) December 31, 1993 1992* - ------------------------------------------- ---------- ---------- Long-Term Debt, Excluding Current Portion Wisconsin Gas: First mortgage bonds 8-1/2% Series due 1994 $ - $ 9,560 9-3/4% Series due 1995 - 35,000 Adjustable Rate Series, 8.1% and 8.8%, respectively, due 2002 14,000 16,000 9-1/8% Notes due 1997 50,000 50,000 7-1/2% Notes due 1998 40,000 40,000 6.6% Notes due 2013 45,000 - Sta-Rite: First mortgage bonds, adjustable rate, 7.8% to 8.1%, due semi-annually through 2000 1,431 2,107 Industrial revenue bonds, 7-7/8%, payable through 2000 2,575 2,935 Commercial paper under multi-year credit agreement 4,758 - Capital lease obligations and other 1,338 1,041 Unamortized (discount), net (1,356) (1,073) ESOP loan guarantee 7,484 8,601 ---------- ---------- 165,230 164,171 ---------- ---------- Redeemable Preferred Stock WICOR: $1.00 par value; authorized 1,500,000 shares - - Wisconsin Gas: Without par value, cumulative; authorized 1,500,000 shares - - ---------- ---------- - - ---------- ---------- Common Equity Common stock, $1.00 par value, authorized 60,000,000 shares; outstanding 16,407,000 and 15,722,000 shares, respectively 16,407 15,722 Other paid in capital 166,710 148,064 Retained earnings 94,643 90,102 Unearned compensation-ESOP (7,484) (8,601) ---------- ---------- 270,276 245,287 ---------- ---------- Total Capitalization $ 435,506 $ 409,458 ========== ========== * Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2).The accompanying notes are an integral part of this statement. /TABLE 15 CONSOLIDATED STATEMENT OF COMMON EQUITY
(Thousands of Dollars) December 31, 1993 1992* 1991* ---------- ---------- ---------- Common Stock Balance at beginning of year* $ 15,722 $ 15,366 $ 14,731 Issued in connection with dividend reinvestment, customer stock purchase and employee benefit plans 685 356 635 ---------- ---------- ---------- Balance at end of year 16,407 15,722 15,366 ---------- ---------- ---------- Other Paid-in Capital Balance at beginning of year* 148,064 139,931 126,589 Received in connection with dividend reinvestment, customer stock purchase and employee benefits plans 18,646 8,133 13,342 ---------- ---------- ---------- Balance at end of year 166,710 148,064 139,931 ---------- ---------- ---------- Retained Earnings Balance at beginning of year* 90,102 97,906 96,087 Net income 29,313 14,799 22,966 Dividends on common stock (24,099) (21,869) (20,437) Other (673) (734) (710) ---------- ---------- ---------- Balance at end of year 94,643 90,102 97,906 ---------- ---------- ---------- Unearned Compensation-ESOP Balance at beginning of year (8,601) (9,750) - Loan for ESOP shares purchased - - (10,000) Loan payments 1,117 1,149 250 ---------- ---------- ---------- Balance at End of Year (7,484) (8,601) (9,750) ---------- ---------- ---------- Total Common Equity at End of Year $ 270,276 $ 245,287 $ 243,453 ========== ========== ========== * Restated to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2). The accompanying notes are an integral part of this statement. /TABLE 16 QUARTERLY FINANCIAL DATA (UNAUDITED) Because seasonal factors significantly affect Wisconsin Gas operations, the following data is not comparable between quarters:
(Thousands of Dollars, Except per Share Amounts) Quarters: First Second Third Fourth - ----------------------------------- --------- ---------- ---------- ---------- 1993 (b) Operating revenues $272,660 $190,223 $152,801 $233,844 Operating income 41,689 5,881 (8,406) 24,787 Income available for common stock 23,935 576 (8,597) 13,399 Net income per common share (a) 1.51 0.04 (0.53) 0.82 - ------------------------------------------------------------------------------- 1992 (b) Operating revenues $242,271 $155,514 $125,295 $224,329 Operating income 32,266 5,221 (8,532) 24,360 Income before cumulative effect of changes in accounting 17,629 367 (8,253) 13,021 Income available for common stock 9,664 367 (8,253) 13,021 Income per common share before cumulative effect (a) 1.14 0.02 (0.53) 0.83 Net income per common share (a) 0.63 0.02 (0.53) 0.83 - ------------------------------------------------------------------------------- (a) Quarterly earnings per share may not total to the amounts reported for the year since the computation is based on weighted average common shares outstanding during each quarter. (b) Restated all quarters of 1992 and first and second quarters of 1993 to reflect the merger with Shurflo, which has been accounted for as a pooling of interests (see Note 2). /TABLE 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES a. Principles of Consolidation The consolidated financial statements include the accounts of WICOR, Inc., and its wholly-owned subsidiaries (WICOR or the Company): Wisconsin Gas Company (Wisconsin Gas), Sta-Rite Industries, Inc. (Sta-Rite), and SHURflo Pump Manufacturing Co. (Shurflo). All appropriate intercompany transactions have been eliminated. b. Business Wisconsin Gas is a public utility engaged in the distribution of natural gas throughout Wisconsin. Most of its revenues, however, are derived from gas delivered in southeastern Wisconsin. Wisconsin Gas is subject to regulation by the Public Service Commission of Wisconsin (PSCW) and gives recognition to ratemaking policies substantially in accordance with the Federal Energy Regulatory Commission (FERC) System of Accounts. Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting for the Effects of Certain Types of Regulation" provides that rate-regulated public utilities such as Wisconsin Gas record certain costs and credits allowed in the ratemaking process in different periods than for the unregulated subsidiaries. These costs and credits are deferred as regulatory assets or regulatory liabilities and are recorded on the income statement at the time they are recognized in rates. Sta-Rite manufactures pumps and water processing equipment and sells its products in approximately 110 countries. Shurflo, which merged with the Company during the third quarter of 1993 (See Note 2), manufactures pumps for the food service, recreational vehicle, marine, industrial and water purification markets. c. Gas Distribution Revenues and Purchased Gas Costs Utility billings are rendered on a cycle basis. Revenues include estimated amounts accrued for service provided but not yet billed. Wisconsin Gas' rate schedules contain purchased gas adjustment (PGA) provisions which permit the recovery of actual purchased gas costs incurred. The difference between actual gas costs incurred and costs recovered through rates, adjusted for inventory activity, is deferred as a current asset or liability. The deferred balance is returned to or recovered from customers at intervals throughout the year and any residual balance at the annual October 31 reconciliation date is subsequently refunded to or recovered from customers. The PSCW is currently permitting Wisconsin Gas to recover pipeline supplier take-or-pay settlement costs, allocating a portion of the direct-billed costs to each customer class, including transportation customers (See Note 8). 18 d. Plant and Depreciation Gas distribution property, plant and equipment is stated at original cost, including overhead allocations. Upon ordinary retirement of plant assets, their cost plus cost of removal, net of salvage, is charged to accumulated depreciation, and no gain or loss is recognized. Wisconsin Gas depreciation is computed using straight-line rates established by the PSCW equivalent to composite rates of 4.7% for each of the years 1993, 1992 and 1991. Depreciation of manufacturing property is calculated under the straight-line method over the estimated useful lives of the assets (3 to 10 years for equipment and 30 years for buildings) and is primarily reported as a cost of sales. e. Deferred Charges Consistent with PSCW regulation, Wisconsin Gas has deferred computer systems development costs which are to be amortized over a five to ten year period, generally as the respective systems become operational. Wisconsin Gas is precluded from discontinuing service to residential customers within its service area during a certain portion of the heating season. Any differences between doubtful account provisions based on actual experience and provisions allowed for ratemaking purposes by the PSCW are deferred for later recovery in rates as a cost of service. The most recent PSCW rate order provides for a $16.1 million allowable annual provision for doubtful accounts, including amortization of prior deferred amounts. See Notes 7, 8 and 10 for discussion of additional deferred charges. f. Income Taxes The Company files a consolidated Federal income tax return and allocates Federal current tax expense or credits to each subsidiary based on its respective separate tax computation. Beginning with 1992, the Company has provided deferred income taxes in accordance with SFAS 109 "Accounting for Income Taxes," to reflect tax effects of reporting book and taxable income in different periods (See Note 3). For Wisconsin Gas, investment tax credits were recorded as a deferred credit on the balance sheet and are being amortized to income over the applicable service lives of the related properties in accordance with regulatory treatment. g. Net Income per Common Share Net income per common share is based on the weighted average number of shares. Employee stock options are not recognized in the computation of earnings per common share as they are not materially dilutive. h. Manufacturing Inventories Approximately 54% and 57% of manufacturing inventories, in 1993 and 1992 respectively, are priced using the last-in, first-out (LIFO) method (not in excess of market), with the remaining inventories priced using first-in, first-out (FIFO). 19 If the (FIFO) method had been used entirely, manufacturing inventories would have been $8.0 million and $8.3 million higher at December 31, 1993 and 1992, respectively. i. Cash Flows The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Due to the short maturity of these instruments, market value approximates cost. In connection with the sale of discontinued operations, Sta-Rite received $1.4 million in notes receivable in 1991. The Company's dividends reinvested (pursuant to its dividend reinvestment plan) totalled $2.6 million, $2.4 million and $2.1 million for 1993, 1992, and 1991, respectively. For purposes of the Consolidated Statement of Cash Flows, income taxes paid (net of refunds) and interest paid (excluding capitalized interest) were as follows for each of the years ended December 31, 1993, 1992 and 1991:
(Thousands of Dollars) 1993 1992 1991 - ---------------------------- ---------- ---------- ---------- Income taxes paid $ 16,106 $ 8,805 $ 11,418 Interest paid $ 17,678 $ 17,404 $ 16,827
j. Reclassifications Certain prior year financial statement amounts have been reclassified to conform to their current year presentation. 2. MERGERS AND ACQUISITIONS On July 28, 1993, a subsidiary of the Company completed its merger with Carr-Griff, Inc. which became SHURflo Pump Manufacturing Co., a wholly-owned subsidiary of WICOR, Inc. Shurflo designs, manufactures and sells pumps to the food service, recreational vehicle, marine, industrial and water purification markets. The Company issued approximately 0.9 million shares of common stock, valued at approximately $27 million, for all the outstanding common stock of Shurflo. This transaction was accounted for as a pooling of interests; therefore, prior financial statements have been restated to reflect this merger. 20 Net sales and net income included in the Company's Consolidated Statements of Income are as follows:
(Thousands of Dollars) Year Ended December 31, 1992 1991 - -------------------------------- ---------- ---------- Net sales: WICOR $ 704,905 $ 681,708 Shurflo 42,504 35,059 ---------- ---------- $ 747,409 $ 716,767 ========== ========== Net income before accounting changes: WICOR $ 20,469 $ 21,527 Shurflo 2,295 1,439 ---------- ---------- $ 22,764 $ 22,966 ========== ==========
3. INCOME TAXES In the fourth quarter of 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes," retroactive to January 1, 1992. Under the liability method prescribed by SFAS No. 109, deferred taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes became payable. This adoption resulted in a net loss from the cumulative effect of the change in accounting principle of $1.8 million for the nonregulated subsidiaries. Changes in Wisconsin Gas's deferred income taxes arising from the adoption represent amounts recoverable or refundable through future rates and have been recorded as regulatory assets totalling $4.6 million and liabilities totalling $29.7 million on the balance sheet for 1992. The current and deferred components of income tax expense from continuing operations are as follows:
(Thousands of Dollars) Year ended December 31, 1993 1992 1991 -------- -------- -------- Current Federal $18,576 $ 3,818 $ 6,706 State 4,742 1,405 1,788 Foreign 834 800 266 -------- -------- -------- Total Current 24,152 6,023 8,760 -------- -------- -------- Deferred Federal (6,432) 5,974 3,725 State (961) 1,588 618 Foreign 717 (36) (427) -------- -------- -------- Total Deferred (6,676) 7,526 3,916 -------- -------- -------- Total Provision $17,476 $13,549 $12,676 ======== ======== ======== /TABLE 21 The components of deferred income tax assets and liabilities are as follows:
(Thousands of Dollars) December 31 1993 1992 -------- -------- Deferred Income Tax Assets Recoverable gas costs $ 5,928 $ 1,267 Inventory (2,052) (2,036) Deferred compensation 1,873 1,711 Other 4,256 5,887 -------- -------- $10,005 $ 6,829 ======== ======== Deferred Income Tax Liabilities Property related $37,496 $37,617 Systems development costs 15,576 14,268 Investment tax credit (5,725) (5,896) Gas transition costs 5,633 9,765 Postretirement benefits (5,503) (4,509) Deferred compensation (2,747) (2,459) Pension benefits 2,249 1,469 Recoverable gas costs - (3,400) Other (1,101) (184) -------- -------- $45,878 $46,671 ======== ======== The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:
1993 1992 1991 -------------- -------------- -------------- Statutory U.S. tax rates $16,376 35.0% $12,346 34.0% $12,118 34.0% State income taxes, net 2,326 5.0 1,841 5.1 1,795 5.0 Excess of foreign over U.S. statutory tax rate 886 1.9 843 2.3 (336) (0.9) Investment credit restored (473) (1.0) (502) (1.4) (481) (1.4) Excess deferred tax amortization (532) (1.1) (507) (1.4) (474) (1.3) Other, net (1,107) (2.4) (472) (1.3) 54 0.2 -------- ----- -------- ----- -------- ----- Effective Tax Rates $17,476 37.4% $13,549 37.3% $12,676 35.6% ======== ===== ======== ===== ======== =====
Under SFAS No. 109, assets and liabilities acquired in purchase business combinations are assigned their fair values assuming equal bases, and deferred taxes are provided for lower or higher tax bases. Under previous accounting rules, values assigned were net-of-tax. In adopting SFAS No. 109, the Company adjusted the carrying amount of various WICOR, Inc. acquisitions made in prior years. 22 4. SHORT-TERM BORROWINGS
(Thousands of Dollars) December 31 1993 1992 - ---------------------------------- ---------- ---------- Notes payable to banks U.S. subsidiaries $ 3,600 $ 1,410 Non U.S. subsidiaries 14,218 15,415 Commercial paper - U.S. 117,100 56,275 ---------- ---------- $ 134,918 $ 73,100 ========== ==========
Weighted average interest rates on debt outstanding at end of year: Notes payable to banks U.S. subsidiaries 4.1% 5.1% Non-U.S. subsidiaries 5.3% 8.9% Commercial paper - U.S. 3.4% 3.6%
As of December 31, 1993 and 1992, the Company had total unsecured lines of credit available from banks of $183.4 million and $95.8 million, respectively. These borrowing arrangements may require the maintenance of average compensating balances, which are generally satisfied by balances maintained for normal business operations, and may be withdrawn at any time. 5. LONG-TERM DEBT In September 1993, Wisconsin Gas issued $45 million of 6.6% Notes due in 2013, the proceeds of which were used to refinance $45 million of outstanding higher cost first mortgage bonds due in 1994 and 1995. There were no issuances of long-term debt in 1992. In November 1991, Wisconsin Gas issued $40 million of 7-1/2% Notes due in 1998. A portion of the proceeds was used to redeem the remaining $10.4 million of 6-5/8% First Mortgage Bonds at their maturity dates. Substantially all gas distribution and certain manufacturing property and plant is subject to first mortgage liens. Maturities and sinking fund requirements during the succeeding five years on all long-term debt total $3.0 million, $3.0 million, $7.6 million, $53.4 million and $43.0 million in 1994, 1995, 1996, 1997 and 1998, respectively. 6. RESTRICTIONS A November 1993 rate order sets an equity range of 43% to 50% for the utility and also requires Wisconsin Gas to request PSCW approval prior to the payment of dividends on its common stock to WICOR if the payment would reduce its common equity (net assets) below 43% of total capitalization (including short-term debt). 23 Under this requirement, $8.1 million of Wisconsin Gas's net assets at December 31, 1993, plus future earnings, were available for such dividends without PSCW approval. In addition, the PSCW imposes certain limitations on the ability of Wisconsin Gas to pay dividends to WICOR in excess of the level indicated in the projected test year if such dividends would dilute Wisconsin Gas's total equity below 48.43% of its total capitalization. The utility dividend payout indicated in the projected test year ending October 31, 1994 is $16 million of which $4 million was paid in November, 1993. In connection with its long-term debt agreements, Sta-Rite is subject to restrictions on working capital, shareholder's equity and debt. These agreements also limit the amount of retained earnings available for the payment of cash dividends to WICOR and for certain investments. At December 31, 1993, $8.6 million of Sta-Rite net assets plus 50% of its future retained earnings were available for payment of dividends to WICOR. Combined restricted common equity of the Company's subsidiaries totaled $234.8 million under the most restrictive provisions as of December 31, 1993; accordingly, $35.5 million of consolidated retained earnings is available for payment of dividends. Historically, the PSCW has imposed restrictions on public utility holding companies, including WICOR, relating to future nonutility investments. In January 1992, the PSCW approved amendments to limitations set on the Company. The PSCW order states that the utility should remain the predominant business, generally as measured by equity, within the holding company system. The amount allowable for such future investment at December 31, 1993 was $77.8 million. Also, nonutility subsidiaries can borrow additional amounts for acquisitions; however, if debt for the consolidated nonutility entities exceeds 40% of total capitalization for these entities, further PSCW actions may be necessary. 7. COMMITMENTS AND CONTINGENCIES Certain commitments have been made in connection with 1994 capital expenditures. Wisconsin Gas capital expenditures for 1994 are estimated at $57.4 million. Manufacturing capital expenditures for 1994 are estimated at $13.9 million. Wisconsin Gas has variable-term contracts with its interstate pipeline and gas suppliers to purchase transportation capacity and natural gas. PGA provisions permit the recovery of actual purchased capacity and gas costs incurred. 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, 1993 the Company has accrued $40 million for cleanup costs in addition to $1.6 million of costs already incurred. These estimates are based on current undiscounted costs. It should also be noted that the numerous assumptions such as the type and extent of contamination, available remediation techniques, and regulatory requirements which are used in developing these estimates are subject to change as new information becomes available. 24 Any such changes in assumptions could have a significant impact on the potential liability. A formal remediation plan is currently being developed for presentation to the Wisconsin Department of Natural Resources. Following plan approval and pilot studies, remediation will commence. Barring unforeseen delays, expenditures by Wisconsin Gas on this remediation work will commence in 1994 and increase in future years as plan approvals are obtained. Expenditures over the next three years are expected to total approximately $20 million. Although most of the work and costs will be incurred in the first few years of the plan, monitoring of the sites and other necessary techniques may last up to 30 years. Wisconsin Gas is pursuing recovery of these costs from insurance carriers. Any amounts not recoverable from insurance carriers will be allowed full recovery in rates based on recent PSCW orders. Accordingly, the accrual has been offset by a deferred charge to a regulatory asset. Certain related investigation costs incurred to date are currently being recovered in utility rates. However, any incurred costs not yet recovered in rates are not allowed by the PSCW to earn a return. As of December 31, 1993 $1.6 million of such costs have been incurred. During 1990, Sta-Rite contracted with the Wisconsin Department of Natural Resources to complete the investigation and remediation phases of the federal Superfund environmental process for contaminants associated with one of Sta-Rite's manufacturing facilities. Management believes the amounts reserved will be adequate to remedy the problem. The Company is party to various legal proceedings arising in the ordinary course of business which are not expected to have a material effect on the financial statements of the Company. 8. FERC ORDER NO. 636 On April 8, 1992, the FERC issued Order No. 636 which restructured the interstate natural gas pipeline business. Pipeline suppliers will be allowed to recover significant transition costs from Wisconsin Gas necessary to implement "unbundled" services such that gas supplies would be sold separately from interstate transportation services. Wisconsin Gas' liability for certain of these costs is being contested at FERC and in court. The extent of this future liability is not estimable at this time due to a number of factors including the future cost of gas and the outcome of ongoing litigation. However, on the basis of previous PSCW ratemaking relative to the recovery of gas purchased and related costs, Wisconsin Gas anticipates that pipeline transition cost billings will also be recoverable from ratepayers. 9. COMMON STOCK AND OTHER PAID-IN CAPITAL As of December 31, 1993, 16,407,234 shares were issued and outstanding and 2,813,538 shares are reserved for issuance under the Company's dividend reinvestment, stock option and 401(k) plans. In addition, 19,221,072 shares are reserved pursuant to the Company's shareholder rights plan. Under certain circumstances, each right entitles the shareholder to purchase one common share at an exercise price of $75, subject to adjustment. The rights are not exercisable until ten business days after a person or group announces a tender offer 25 or exchange offer which would result in their acquiring ownership of 20% or more of the Company's outstanding common stock or after a person or group acquires at least 20% of the Company's outstanding common shares. If, after 20% or more of the outstanding shares of WICOR common stock is acquired by a person or group and the Company is then acquired by that person or group, rights holders would be entitled to purchase shares of common stock of the acquiring person or group having a market value of two times the exercise price of the rights. The rights do not have any voting rights and may be redeemed at a price of $.01 per right. The rights expire on August 29, 1999. During the first, third and fourth quarters of 1993, the Company invested $2 million, $8 million and $2 million, respectively, in Wisconsin Gas. In the first and third quarters of 1992, the Company invested $5 million and $10 million, respectively, in Wisconsin Gas. 10. BENEFIT PLANS a. Pension Plans The Company's subsidiaries have non-contributory pension plans which cover substantially all their employees and include benefits based on levels of compensation and years of service. Employer contributions and funding policies are consistent with funding requirements of Federal law and regulations. Commencing on November 1, 1992, Wisconsin Gas pension costs or credits are calculated in accordance with SFAS No. 87 and are recoverable from or refunded to customers. Prior to this date, pension costs were recoverable in rates as funded. The following table sets forth the funded status of pension plans, including minor underfunded plans, at December 31, 1993 and 1992. The recorded cumulative adjustment to the utility funded amount was $21.3 million and was offset by a regulatory liability. 26
Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets --------------------- --------------------- (Thousands of Dollars) December 31, 1993 1992 1993 1992 - ----------------------------------- ---------- ---------- ---------- ---------- Accumulated benefit obligation Vested benefits $(103,260) $(101,717) $ (6,471) $ (4,971) Nonvested benefits (11,198) (6,119) (87) (81) ---------- ---------- ---------- ---------- (114,458) (107,836) (6,558) (5,052) Effect of projected future compensation levels (49,961) (38,121) (537) (364) ---------- ---------- ---------- ---------- Projected benefit obligation (164,419) (145,957) (7,095) (5,416) Plan assets at fair value 228,091 212,463 176 177 ---------- ---------- ---------- ---------- Plan assets greater (less) than projected benefit obligation 63,672 66,506 (6,919) (5,239) Unrecognized net (asset) liability at September 30, 1985 being recognized over approximately 16 years (21,185) (23,191) 1,104 1,074 Unrecognized prior service costs 6,166 4,518 - 1 Unrecognized net (gain) loss (19,073) (19,675) 348 - Additional minimum liability recorded - - (1,037) (890) ---------- ---------- ---------- ---------- Accrued pension asset (liability) $ 29,580 $ 28,158 $ (6,504) $ (5,054) ========== ========== ========== ==========
The weighted average discount rate assumptions used in determining the actuarial present value of the projected benefit obligation were 7.5%, 7.75% and 7.75% for 1993, 1992 and 1991, respectively. For 1991 through 1993, the expected long-term rate of return on assets and long-term rate of compensation growth were 8.2% and 6.0%, respectively. Net pension costs include the following (income) expense:
(Thousands of Dollars) Year Ended December 31 1993 1992 1991 - -------------------------------------- ---------- ---------- ---------- Service costs $ 5,658 $ 5,189 $ 4,695 Interest costs on projected benefit obligations 11,807 10,977 10,255 Actual return on assets (18,016) (16,085) (31,029) Net amortization and deferral (69) (1,127) 14,326 Adjustment to utility funded amount - 1,513 2,029 ---------- ---------- ---------- Net pension (income) cost $ (620) $ 467 $ 276 ========== ========== ========== /TABLE 27 The decrease in pension cost from 1992 to 1993 was due to the adoption by the PSCW of SFAS No. 87 for ratemaking purposes, effective November 1, 1992. b. Postretirement Health Care and Life Insurance In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees when they reach normal retirement age while working for the Company. Wisconsin Gas funds the accrual annually based on the maximum tax deductible amount. For Sta-Rite, until 1992, the cost of these retiree benefits has been recognized as an expense as claims were incurred. Company expenses recorded totalled $8.4 million for 1991. Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions", for its retiree benefit plans. Under SFAS No. 106, the Company is required to accrue the estimated cost of retiree benefit payments, other than pensions, during the employees' active service period. Wisconsin Gas, as mandated by the PSCW, recognized the accumulated benefit obligation and a related regulatory asset of $54.1 million at adoption. Amortization of the regulatory asset is recoverable in its rates over a 20-year period. Sta-Rite recognized such amounts as a cumulative effect. Accordingly, the cumulative effects for the Company of adopting SFAS No. 106 as of December 31, 1992, were an increase in the accumulated postretirement benefit obligation (APBO) of $65.0 million and a decrease in 1992 net earnings of $6.2 million ($0.40 per share). Net postretirement health care and life insurance costs consisted of the following components:
(Thousands of Dollars) 1993 1992 - -------------------------------------- ---------- ---------- Service cost $ 2,813 $ 2,711 Interest cost on projected benefit obligation 6,495 6,181 Return on plan assets (1,414) (895) Amortization of transition obligation 2,651 2,778 Adjustment to utility funded amount - (2,108) ---------- ---------- Net postretirement benefit cost $ 10,545 $ 8,667 ========== ==========
The increase in postretirement benefit cost from 1992 to 1993 was due to the adoption by the PSCW of SFAS No. 106 for ratemaking purposes, effective November 1, 1992. 28 The following table sets forth the plans' funded status, reconciled with amounts recognized in the Company's Statement of Financial Position at December 31, 1993 and 1992, respectively.
Accumulated benefit obligation (Thousands of Dollars) 1993 1992 - ------------------------------------- ---------- ---------- Retirees $ (43,548) $ (42,313) Active employees (52,327) (44,141) ---------- ---------- Accumulated benefit obligation (95,875) (86,454) Plan assets at fair value 25,753 19,139 ---------- ---------- Accumulated benefit obligation in excess of plan assets (70,122) (67,315) Unrecognized actuarial loss/(gain) 2,612 (623) ---------- ---------- Accrued postretirement benefit $ (67,510) $ (67,938) ========== ==========
The postretirement benefit cost components for 1993 were calculated assuming health care cost trend rates ranging up to 13% for 1993 and decreasing to 6% over 10 to 25 years. The health care cost trend rate has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the APBO as of December 31, 1993 by $14.7 million and the aggregate of the service and interest cost components of postretirement expense by $1.8 million. The assumed discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 7.50% and 7.75% in 1993 and 1992, respectively. Plan assets are primarily invested in common stock and fixed income securities. c. Retirement Savings Plans Wisconsin Gas and Sta-Rite maintain various employee savings plans, which provide employees a mechanism to contribute amounts up to 16% of their compensation for the year. Company matching contributions may be made up to 5% of eligible compensation including 1% for the ESOP. Total contributions were valued at $1.8 million in 1993, $1.6 million in 1992 and $1.4 million in 1991. d. Employee Stock Ownership Plan In November 1991, WICOR established an Employee Stock Ownership Plan (ESOP) covering non-union employees of Wisconsin Gas. The ESOP funds employee benefits of up to 1% of compensation with Company common stock distributed through the ESOP. 29 The ESOP used the proceeds from a $10 million, 3-year adjustable rate loan with a 3.98% interest rate at December 31, 1993, guaranteed by the Company, to purchase 431,266 shares of original issue WICOR common stock. Because the Company has guaranteed the loan, the unpaid balance is shown as long-term debt with a like amount of unearned compensation being recorded as a reduction of common equity on the Company's balance sheet. The ESOP trustee is repaying the $10 million loan with dividends on shares of WICOR common stock in the Employee Stock Ownership Plan and with Wisconsin Gas contributions to the ESOP. e. Stock Options The Company has a total of 151 employees participating in one or more of its common stock option plans. Changes in stock options outstanding for all plans were as follows:
1993 1992 1991 ---------- ---------- ---------- Outstanding at January 1 763,342 712,392 703,562 Granted 180,350 178,900 143,700 Exercised/Canceled (148,767) (127,950) (134,870) ---------- ---------- ---------- Outstanding at December 31 794,925 763,342 712,392 ========== ========== ========== Exercise price per share $10.38- $10.38- $10.38- $27.31 $24.44 $23.06 ========== ========== ========== Available for future grant at year-end 783,116 261,000 433,200
All options, except for 45,333 and 46,850 granted in 1993 and 1992, respectively, which may vest in 1996 and 1995, respectively, are currently exercisable at prices not less than the fair market value on the date of grant and expire not later than eleven years from the date of grant. f. Postemployment Benefit Plans The FASB has issued statement SFAS No. 112, "Employers Accounting for Postemployment Benefits," to be adopted no later than January 1, 1994, which requires accrual for all other postemployment benefits. In management's opinion, any unrecorded liabilities are expected to be recoverable in future rates for utility operations and are not significant. 30 11. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Company's long-term debt is estimated based on the quoted market prices of U.S. Treasury issues having a similar term to maturity, adjusted for the Company's bond rating and the present value of future cash flows. Because Wisconsin Gas operates in a regulated environment, shareholders would probably not be affected by realization of gains or losses on extinguishment of its outstanding fixed-rate debt. Realized gains would be refunded to and losses would be recovered from customers through gas rates. The estimated fair value of WICOR's long-term debt at December 31, is as follows:
(Thousands of Dollars) 1993 1992 - ----------------------------------- ---------- ---------- Carrying amount $ 165,230 $ 164,171 Fair value $ 175,213 $ 175,411
12. OTHER FINANCIAL INFORMATION See page 22 for unaudited quarterly financial data. See Financial Review on page 13 for industry segment data. 31
SELECTED FINANCIAL DATA (Thousands of Dollars, Except Per Share Amounts) 1993 1992 1991 1990 - ----------------------------------- --------- --------- --------- --------- INCOME STATEMENT (2)(4) Operating revenues $849,528 $747,409 $716,767 $696,023 Net income $ 29,313 $ 14,799 $ 22,966 $ 16,651 Net income per common share (1) $ 1.82 $ 0.96 $ 1.54 $ 1.14 ========= ========= ========= ========= BALANCE SHEET (4) Capitalization at year-end Long-term debt $165,230 $164,171 $168,366 $130,215 Redeemable preferred stock - - - - Common equity 270,276 245,287 243,453 237,407 --------- --------- --------- --------- $435,506 $409,458 $411,819 $367,622 ========= ========= ========= ========= Total assets at year-end (2) $933,726 $825,774 $670,250 $651,559 ========= ========= ========= ========= COMMON STOCK DATA Dividends per common share (1) $ 1.54 $ 1.50 $ 1.46 $ 1.42 Book value per common share (1)(4) $ 16.47 $ 15.60 $ 15.84 $ 16.12 Market-to-book at year-end (%)(4) 191 175 153 122 Dividend payout ratio (%)(2)(3)(5) 82.2 96.1 89.0 117.2 Yield at year-end (%) 5.0 5.6 6.1 7.3 Return on average common equity(%)(2)(3)(6) 11.2 9.2 9.5 6.8 P/E ratio at year-end (2)(3)(4) 17.3 18.5 15.7 17.2 Price range $ 25-5/8- $ 22-7/8- $ 18-5/8- $ 18-1/4- $ 32-7/8 $ 27-3/8 $ 24-3/8 $ 25-1/4 Shareholders at year-end 17,091 17,780 18,503 19,463 ========= ========= ========= ========= OTHER GENERAL DATA (2)(4) Cash flow from operations $ 3,401 $ 37,012 $ 50,413 $ 10,022 Capital expenditures $ 51,906 $ 71,873 $ 45,113 $ 37,529 Debt/equity ratio at year-end 38/62 40/60 41/59 35/65 Employees at year-end 3,222 3,178 3,196 3,152 ========= ========= ========= ========= GAS DISTRIBUTION OPERATIONS Gas sold and transported (thousands of dekatherms-MDth) Residential 47,964 45,905 45,614 43,020 Commercial 19,060 17,840 17,861 16,319 Industrial firm 15,246 14,488 15,690 15,106 Industrial interruptible 20,849 17,388 17,440 16,620 Transported 17,408 21,379 19,658 16,565 --------- --------- --------- --------- 120,527 117,000 116,263 107,630 ========= ========= ========= ========= Customers at year-end 485,103 470,956 460,549 452,906 Customers served per employee 359 331 323 321 Average cost of gas per Dth purchased $ 3.76 $ 3.34 $ 3.18 $ 3.30 Average annual residential bill $ 779 $ 712 $ 677 $ 670 Average use per residential customer (Dth) 116 115 117 113 Degree days 6,775 6,683 6,416 6,103 % colder (warmer) than normal (4.1) (6.4) (10.8) (16.0) ========= ========= ========= ========= MANUFACTURING OPERATIONS (2)(4) Operating revenues $274,693 $251,994 $242,065 $238,484 International and export sales as a % of total sales 34 34 31 27 ========= ========= ========= ========= DATA FOR CONTINUING OPERATIONS (3)(4) Operating revenues $849,528 $747,409 $716,767 $696,023 Net income $ 29,313 $ 22,764 $ 22,966 $16,651 Net income per common share (1) $ 1.82 $ 1.47 $ 1.54 $ 1.04 (1) Adjusted for a two-for-one stock split in March 1989. (2) Includes continuing operations and discontinued operations up to the year disposition was authorized. (3) Before effects of 1992 accounting changes (See Note 2). Adjusted for merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989. /TABLE 32
SELECTED FINANCIAL DATA (Thousands of Dollars, Except per Share Amounts) 1989 1988 1987 1986 - ---------------------------------- --------- --------- --------- --------- INCOME STATEMENT(2)(4) Operating revenues $741,218 $780,633 $699,418 $761,104 Net income $ 33,881 $ 34,163 $ 19,682 $ 19,780 Net income per common share(1) $ 2.33 $ 2.38 $ 1.39 $ 1.53 ========= ========= ========= ========= BALANCE SHEET(4) Capitalization at year end Long-term debt $122,639 $133,034 $127,833 $144,495 Redeemable preferred stock - - 8,000 14,267 Common equity 244,351 227,080 207,658 203,477 --------- --------- --------- --------- $366,990 $360,114 $343,491 $362,239 ========= ========= ========= ========= Total assets at year end(2) $620,548 $565,967 $536,998 $542,036 ========= ========= ========= ========= COMMON STOCK DATA Dividends per common share(1) $ 1.37 $ 1.32 $ 1.30 $ 1.28 Book value per common share(1)(4) $ 16.83 $ 15.82 $ 14.68 $ 15.74 Market-to-book at year-end(%)(4) 148 123 117 134 Dividend payout ratio(%)(2)(3)(5) 55.0 52.0 91.1 79.9 Yield at year-end(%) 5.6 6.9 7.6 6.1 Return on average common equity(%)(2)(3)(6) 14.3 15.3 9.3 10.5 P/E ratio at year-end(2)(3)(4) 10.7 8.2 12.4 13.8 Price range $ 19-3/8- $ 15-5/8- $ 13-3/8- $ 14-3/4- $ 25-3/8 $ 20-7/8 $ 21-7/8 $ 23 Shareholders at year end 20,509 21,611 23,010 23,987 ========= ========= ========= ========= OTHER GENERAL DATA(2)(4) Cash flow from operations $ 94,623 $ 73,526 $ 41,237 $ 63,583 Capital expenditures $ 40,944 $ 48,295 $ 34,264 $ 36,498 Debt/equity ratio at year end 33/67 37/63 37/63 40/60 Employees at year end 3,696 3,927 4,040 3,932 ========= ========= ========= ========= GAS DISTRIBUTION OPERATIONS Gas sold and transported (thousands of dekatherms-MDth) Residential 48,154 46,769 39,369 42,837 Commercial 18,089 17,012 14,510 15,292 Industrial firm 16,915 16,808 16,106 19,379 Industrial interruptible 5,475 3,752 4,714 22,403 Transported 29,158 29,639 26,129 5,502 --------- --------- --------- --------- 117,791 113,980 100,828 105,413 ========= ========= ========= ========= Customers at year-end 445,771 439,063 432,509 426,481 Customers served per employee 319 311 288 277 Average cost of gas per Dth purchased $ 3.15 $ 3.68 $ 3.74 $ 3.75 Average annual residential bill $ 758 $ 770 $ 660 $ 761 Average use per residential customer (Dth) 129 127 108 120 Degree days 7,382 7,124 6,185 6,788 % colder (warmer) than normal 1.5 (2.0) (14.8) (7.3) ========= ========= ========= ========= MANUFACTURING OPERATIONS(2)(4) Operating revenues $298,791 $303,071 $274,335 $228,306 International and export sales as a % of total sales 24 22 20 16 ========= ========= ========= ========= DATA FOR CONTINUING OPERATIONS(3)(4) Operating revenues $684,900 $717,081 Net income $ 33,359 $ 30,400 Net income per common share(1) $ 2.30 $ 2.12 (1) Adjusted for a two-for-one stock split in March 1989. (2) Includes continuing operations and discontinued operations up to the year disposition was authorized. (3) Before effects of 1992 accounting changes (See Note 2). Adjusted for merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989. /TABLE 33
(Thousands of Dollars, Except Per Share Amounts) 1985 1984 1983 - ---------------------------------------- --------- --------- --------- INCOME STATEMENT(2)(4) Operating Revenues $853,175 $839,965 $789,847 Net income $ 24,900 $ 24,145 $ 16,837 Net income per common share(1) $ 1.98 $ 1.95 $ 1.49 ========= ========= ========= BALANCE SHEET(4) Capitalization at year-end Long-term debt $154,159 $131,750 $153,052 Redeemable preferred stock 18,200 19,000 19,800 Common equity 173,941 160,690 143,626 --------- --------- --------- $346,300 $311,440 $316,478 ========= ========= ========= Total assets at year-end(2) $531,192 $499,734 $483,174 ========= ========= ========= COMMON STOCK DATA Dividends per common share(1) $ 1.18 $ 1.11 $ 1.07 Book value per common share(1)(4) $ 13.81 $ 12.97 $ 12.60 Market-to-book ratio at year-end(%)(4) 112 104 84 Dividend payout ratio(%)(2)(3)(5) 57.0 54.0 71.6 Yield at year-end(%) 7.6 8.3 10.1 Return on average common equity(%)(2)(3)(6) 14.6 15.1 11.9 Price/earnings ratio at year-end(2)(3)(4) 7.8 6.9 7.1 Price range $ 13- $10-1/8- $ 9-3/8- $ 15-3/4 $ 13-7/8 $ 11-5/8 Shareholders at year-end 26,083 28,581 31,077 ========= ========= ========= OTHER GENERAL DATA Cash flow from operations $ 46,342 $ 45,801 $ 36,249 Capital expenditures $ 32,381 $ 32,273 $ 22,962 Debt/equity ratio at year-end 45/55 42/58 48/52 Employees at year-end 3,641 3,513 3,228 ========= ========= ========= GAS DISTRIBUTION OPERATIONS Gas sold and transported (thousands of dekatherms-MDth) Residential 44,813 43,961 44,611 Commercial 16,394 15,007 14,769 Industrial firm 22,541 22,969 23,350 Industrial interruptible 31,675 34,056 31,262 Transported 1,716 - - --------- --------- --------- 117,139 115,993 113,992 ========= ========= ========= Customers at year-end 420,967 415,297 411,070 Customers served per employee 279 268 265 Average cost of gas per Dth purchased $ 4.13 $ 4.16 $ 4.36 Average annual residential bill $ 838 $ 849 $ 856 Average use per residential customer (Dth) 128 127 131 Degree days 7,325 6,844 7,203 % colder(warmer) than normal (0.5) (7.0) (2.3) ========= ========= ========= MANUFACTURING OPERATIONS(2)(4) Operating revenues $214,644 $197,737 $152,929 International and export sales as a % of total sales 12 14 15 (1) Adjusted for a two-for-one stock split in March 1989. (2) Includes continuing operations and discontinued operations up to the year disposition was authorized. (3) Before effects of 1992 accounting changes (See Note 2). Adjusted for merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989. /TABLE 34 INVESTOR INFORMATION Common Stock Dividends Dividends on common stock are normally paid in February, May, August and November. The following table shows cash dividends paid per share in 1993 and 1992:
Quarter 1993 1992 - ------------------- -------- -------- first $ .380 $ .370 second .380 .370 third .390 .380 fourth .390 .380
VERTICAL BAR CHART OF WICOR'S HIGH AND LOW COMMON STOCK PRICE PER SHARE BY QUARTER
Year/Quarter -------------------------------------- 93/1 93/2 93/3 93/4 -------- -------- -------- -------- high $ 29 $31-3/8 $32-3/4 $32-7/8 low $25-5/8 $27-3/4 $29-3/8 $ 28
Year/Quarter -------------------------------------- 92/1 92/2 92/3 92/4 -------- -------- -------- -------- high $26-1/8 $24-5/8 $27-1/4 $27-3/8 low $ 23 $22-7/8 $ 23 $24-3/8
WICOR's stock price reached a record high of $32-7/8 during the last quarter of 1993. EX-21 8 SUBSIDIARIES OF WICOR, INC. 1 Exhibit 21 WICOR, Inc. Subsidiaries of the Registrant
Percent Voting Subsidiaries of WICOR, Inc. State of Incorporation Stock Owned - ---------------------------- ---------------------- --------------- Wisconsin Gas Company Wisconsin 100% Sta-Rite Industries, Inc. Wisconsin 100% SHURflo Pump Manufacturing Co. California 100% WEXCO of Delaware, Inc. Delaware 100% Filtron Technology Corporation Massachusetts 21%
Subsidiaries of Sta-Rite State or Country Percent Voting Industries in which Incorporated Stock Owned - ------------------------ --------------------- -------------- WICOR Canada Inc. Canada 100% Sta-Rite Foreign Sales Virgin Islands 100% Corporation Sta-Rite Industries GmbH Germany .5% Europa WICOR Industries (Australia) Pty. Ltd. Australia 100% Onga (New Zealand) Pty. Ltd. New Zealand 100% Sta-Rite Holdings, B.V. Netherlands 100% Nocchi Pompe S.p.A. Italy 47% Webster Electric Co. Delaware 100%
Subsidiary of WICOR Country in Which Percent Voting (Australia) Pty. Ltd. Incorporated Stock Owned - -------------------------- --------------------- -------------- Onga Pty. Ltd. Australia 100%
Subsidiaries of Sta-Rite Country in Which Percent Voting Holdings, B.V. Incorporated Stock Owned - -------------------------- --------------------- -------------- Sta-Rite Industries Germany 95.5% GmbH Europa Nocchi Pompe S.p.A. Italy 30%
Subsidiary of Nocchi Pompe, Country in Which Percent Voting S.p.A. Incorporated Stock Owned - ------------------------------ --------------------- -------------- Midi Pompes S.a.r.l. France 100%
Subsidiary of SHURflo Pump Country in Which Percent Voting Manufacturing Company Incorporated Stock Owned - ------------------------------ --------------------- -------------- SHURflo Ltd. England 100% /TABLE EX-23 9 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS 1 EXHIBIT 23 CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS ----------------------------------------- As independent public accountants, we hereby consent to the incorporation of our reports included in and incorporated by reference in this Form 10-K, into the Company's previously filed Registration Statements on Form S-8 (Nos. 2-93964, 2-93963, 2-91073, 2-87076, 2-83206, 2-72454, 33-16489, 33-36457, 33-43645, 33-67132 and 33-67134) and Form S-3 (Nos. 33-28289, 33-50682 and 33-50781). ARTHUR ANDERSEN & CO. Milwaukee, Wisconsin, March 28, 1994. EX-99 10 WICOR, INC. PROXY STATEMENT DATED MARCH 10, 1994 1 WICOR 626 East Wisconsin Avenue P.O. Box 334 Milwaukee, WI 53201 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held April 28, 1994 To the Shareholders of WICOR, Inc.: NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of WICOR, Inc. will be held Thursday, April 28, 1994, at 2:00 P.M. (local time), at the Italian Community Center, 631 East Chicago Street, Milwaukee, Wisconsin, for the following purposes: 1. To elect four directors to hold office until the 1997 Annual Meeting of Shareholders and until their successors are duly elected and qualified. 2. To consider and approve the WICOR, Inc. 1994 Long-Term Performance Plan. 3. To consider and act upon any other business which may be properly brought before the Annual Meeting or any adjournment thereof. The close of business Tuesday, February 22, 1994, has been fixed as the record date for the determination of shareholders entitled to receive notice of, and to vote at, the Annual Meeting and any adjournment thereof. A proxy and Proxy Statement are enclosed herewith. By Order of the Board of Directors ROBERT A. NUERNBERG Secretary March 10, 1994 YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE MEETING, PLEASE DATE THE ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS, SIGN EXACTLY AS YOUR NAME APPEARS, AND RETURN IMMEDIATELY. 2 WICOR 626 East Wisconsin Avenue P.O. Box 334 Milwaukee, Wisconsin 53201 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS To Be Held April 28, 1994 This Proxy Statement is being furnished to shareholders by the Board of Directors of WICOR, Inc. (the "Company") beginning on or about March 10, 1994, in connection with a solicitation of proxies by the Board of Directors of the Company (the "Board") for use at the Annual Meeting of Shareholders (the "Annual Meeting") to be held on Thursday, April 28, 1994, at 2:00 P.M.(local time), at the Italian Community Center, 631 East Chicago Street, Milwaukee, Wisconsin, and at all adjournments thereof, for the purposes set forth in the attached Notice of Annual Meeting of Shareholders. Execution of a proxy given in response to this solicitation will not affect a shareholder's right to attend the Annual Meeting and to vote in person. Presence at the Annual Meeting of a shareholder who has signed a proxy does not in itself revoke a proxy. Any shareholder giving a proxy may revoke it at any time before it is exercised by giving notice thereof to the Company in writing or in open meeting. Unless so revoked, the shares represented by proxies received by the Board will be voted at the Annual Meeting and at any adjournment thereof. A properly executed proxy will be voted as directed therein by the shareholder. Only holders of record of the Company's Common Stock, $1 par value ("Common Stock"), at the close of business on February 22, 1994, are entitled to vote at the Annual Meeting and at any adjournment thereof. On that date, the Company had outstanding and entitled to vote 16,474,394 shares of Common Stock. The record holder of each outstanding share of Common Stock is entitled to one vote per share. The Company is a holding company. Its subsidiaries include Wisconsin Gas Company ("Wisconsin Gas"), Sta-Rite Industries, Inc. ("Sta-Rite") and SHURflo Pump Manufacturing Co. ("SHURflo"). ITEM NO. 1: ELECTION OF DIRECTORS The Board consists of 11 directors. The Company's By-laws provide that the directors shall be divided into three classes, with staggered terms of three years each. At the Annual Meeting, shareholders will elect four directors to hold office until the 1997 Annual Meeting of Shareholders and until their successors are duly elected and qualified. Directors are elected by a plurality of the votes cast (assuming a quorum is present at the Annual Meeting). Consequently any shares not voted, whether due to abstentions, broker non-votes or otherwise, have no impact on the election of directors. Unless shareholders otherwise specify, the shares represented by the proxies received will be voted "FOR" the indicated nominees for election as directors. The Board has no reason to believe that any of the listed nominees will be unable or unwilling to continue to serve as a director if elected. However, in the event that any nominee should be unable or for good cause unwilling to serve, the shares represented by proxies received will be voted for another nominee selected by the Board. The following tabulation sets forth information regarding the four nominees for election as directors and the seven continuing directors. Except as otherwise noted, each such person has engaged in the principal occupation or employment and held the offices shown for more than the past five years. A photograph of each nominee and director continuing in office appears adjacent to the nominee's/director's name and personal information. 3 NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS For Three-Year Terms Expiring April, 1997
WILLIE D. DAVIS Mr. Davis, 59, is President, Chief Audit and Nominating Executive Officer and a director of Committees All Pro Broadcasting, Inc., which owns Director since 1990 and operates radio stations in Los Angeles and Milwaukee. Mr. Davis is a director of Alliance Bank, The Dow Chemical Co., Johnson Controls, Inc., Kmart Corp., L.A. Gear Inc., MGM Grand Inc. and Sara Lee Corporation. JAMES L. FORBES Mr. Forbes, 61, is President and Chief Audit and Compensation Executive Officer and a director of Committees Badger Meter, Inc., a manufacturer and Director since 1990 marketer of flow measurement products. Mr. Forbes joined Badger Meter in 1979. He was elected President in 1982 and Chief Executive Officer in 1987. He is a director of Blue Cross & Blue Shield United of Wisconsin, Firstar Corporation, Firstar Trust Company, United Wisconsin Services, Inc., and Universal Foods Corporation. GUY A. OSBORN Mr. Osborn, 58, is Chairman, Chief Audit (Chairman) and Executive Officer and a director of Compensation Committees Universal Foods Corporation, an inter- Director since 1987 national manufacturer and marketer of value-added food products. He joined Universal Foods in 1971 and held several executive positions before becoming President and Chief Operating Officer in 1984. He was elected President and Chief Executive Officer in 1988 and assumed his current position in 1990. He is a director of Firstar Corporation, Firstar Bank Milwaukee, N.A., and Fleming Companies, Inc. WILLIAM B. WINTER Mr. Winter, 65, is Chairman, Chief Nominating and Retirement Executive Officer and a director of Plans Investment Bucyrus-Erie Company, a manufacturer (Chairman) Committees of mining machinery, and its parent Director since 1980 corporation B-E Holdings Inc. (1). He joined Bucyrus-Erie in 1953, became a Vice President in 1965, and was named President and Chief Operating Officer in 1978. In 1988 a group of the corporation's senior management, including Mr. Winter, and outside in- vestors acquired all of the common stock of B-E Holdings Inc., and Mr. Winter assumed his current positions. /TABLE 4 MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE Terms Expiring April, 1995
WENDELL F. BUECHE Mr. Bueche, 63, is the President, Chief Compensation (Chairman) Executive Officer and a director of and Retirement Plans IMC Fertilizer Group, Inc., a producer Investment Committees of fertilizers. He was named to that Director since 1984 position in 1993. Mr. Bueche previously was Chairman, President and Chief Executive Officer of Allis- Chalmers Corporation until his retirement in 1988. Mr. Bueche is a director of Marshall & Ilsley Corporation. DANIEL F. McKEITHAN, JR. Mr. McKeithan, 58, is President, Chief Compensation and Retirement Executive Officer and a director of Plans Investment Committees Tamarack Petroleum Co., Inc., an Director since 1989 operator of producing oil and gas wells. He has held that position since 1981. He is also President and Chief Executive Officer of Active Investor Management, Inc., a manager of oil and gas wells. He has held that position since 1984. From 1976 to 1982 he was Chairman of Jos. Schlitz Brewing Co. He is a director of Firstar Corporation and The Marcus Corporation, and is a trustee of The Northwestern Mutual Life Insurance Company. GEORGE E. WARDEBERG Mr. Wardeberg, 58, is President and Nominating Committee Chief Executive Officer of the Company, Director since 1992 Chairman of Wisconsin Gas and SHURflo, and Chairman and Chief Executive Officer of Sta-Rite. He has held these positions since February 1994. Previously, he was President and Chief Operating Officer of the Company from 1992 to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; Vice Chairman and Chief Executive Officer of Sta-Rite from 1993 to 1994; Vice President - Water Systems of Sta- Rite from 1989 to 1992; and Vice Chairman and Chief Operating Officer of Whirlpool Corporation from 1985 to 1989. He is a director of M&I Marshall & Ilsley Bank. ESSIE M. WHITELAW Ms. Whitelaw, 45, is President and Audit and Retirement Chief Operating Officer of Blue Plans Investment Committees Cross & Blue Shield United of Director since 1992 Wisconsin, a comprehensive health insurer. She has held that position since 1992. Prior thereto, she was Vice President - Southeastern Region from 1988 to 1992, Vice President - Claims from 1987 to 1988, and Vice President - Customer Service from 1986 to 1987 of Blue Cross & Blue Shield United of Wisconsin. She is a director of Universal Foods Corporation. /TABLE 5 MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE Terms Expiring April, 1996
JERE D. McGAFFEY Mr. McGaffey, 58, is a partner in the Nominating (Chairman) and law firm of Foley & Lardner. (2) He has Retirement Plans Investment been in practice with that firm since Committees 1961 and has been a partner since 1968. Director since 1980 Mr. McGaffey is a director of Smith Investment Company. THOMAS F. SCHRADER Mr. Schrader, 44, is President and Director since 1988 Chief Executive Officer of Wisconsin Gas and Vice President of the Company. He has been with Wisconsin Gas since 1978, serving as Vice President from 1983 to 1986, Executive Vice President from 1986 to 1988 and President and Chief Operating Officer from 1988 to 1990. He assumed his current position with Wisconsin Gas in 1990. He was elected Vice President of the Company in 1988. Mr. Schrader is a director of Firstar Trust Company. STUART W. TISDALE Mr. Tisdale, 65, served as Chairman Audit and Nominating and Chief Executive Officer of the Committees Company until his retirement in Director since 1980 February 1994. Mr. Tisdale joined Sta- Rite as President and Chief Executive Officer in 1976. After Sta-Rite merged with the Company in 1982, Mr. Tisdale became Vice President of the Company in 1983, President in 1984, President and Chief Executive Officer in 1986, and Chairman and Chief Executive Officer in 1992. Mr. Tisdale is a director of Marshall & Ilsley Corporation, Modine Manufacturing Co. and Twin Disc Inc.
(1) On February 18, 1994, B-E Holdings, Inc. and Bucyrus-Erie Company filed a voluntary prepackaged joint plan of reorganization in the United States Bankruptcy Court. (2) Foley & Lardner was retained in 1993 by the Company and its subsidiaries to provide legal services and has been similarly retained in 1994. 6 THE BOARD OF DIRECTORS The Board held nine meetings in 1993. Each director attended at least 75% of the total of such meetings and meetings of any committees on which such director served. The Board maintains standing Audit, Nominating and Compensation Committees. The Audit Committee held two meetings in 1993. The committee's func- tions include recommending the selection of the independent auditors each year; consulting with the independent auditors regarding the scope and plan of audit, internal controls, fees, non-audit services (including the possible effect of such services on the independence of the auditors), the audit report and related matters; reviewing other accounting, internal audit and financial matters; investigating accounting, auditing or financial exceptions which may occur; and overseeing the corporate compliance programs of the Company and its subsidiaries. The Nominating Committee held two meetings in 1993. The committee's functions include recommending those persons to be nominated by the Board for election as directors of the Company at the next Annual Meeting of Shareholders and recommending the person to fill any unexpired term on the Board which may occur. The committee will consider nominees recommended by shareholders, but has no established procedures which must be followed to make recommendations. The Compensation Committee held two meetings in 1993. The committee's functions include reviewing and recommending adjustments to the salaries of the officers of the Company and its subsidiaries and administering the 1981 Stock Option Plan, the 1987 Stock Option Plan, the 1992 Director Stock Option Plan, and the incentive compensation plans of the Company and its subsidiaries. The Company pays its directors who are not officers of the Company, Wisconsin Gas, Sta-Rite or SHURflo an annual retainer fee of $10,000, plus $600 for each meeting they attend of the Board and committees of the Board on which they serve. Committee chairmen are paid an additional annual retainer fee of $1,000. Committee chairmen receive meeting fees for meetings with the Chief Executive Officer of the Company in preparation for regular committee meetings. Wisconsin Gas pays its directors who are not officers of the Company, Wisconsin Gas, Sta-Rite or SHURflo an annual retainer fee of $7,000, plus $600 for each meeting of the Wisconsin Gas board they attend. Directors who are also officers of the Company, Wisconsin Gas, Sta-Rite or SHURflo receive no fees for service as directors of those companies. Presently, all directors of the Company are also directors of Wisconsin Gas. Non-employee directors participate in the 1992 Director Stock Option Plan, pursuant to which options to purchase 2,000 shares of Common Stock are automatically granted annually on the fourth Tuesday in February to each non-employee director. The exercise price per share for options granted under the 1992 Director Stock Option Plan is equal to the fair market value of a share of Common Stock on the date of grant. On February 23, 1993, Messrs. Bueche, Davis, Forbes, McGaffey, McKeithan, Osborn and Winter and Ms. Whitelaw each received an option to purchase 2,000 shares of Common Stock at a per-share exercise price of $27.3125. Options granted under the 1992 Director Stock Option Plan are immediately exercisable and have a ten- year term; provided, however, that no option may be exercised after 24 months have elapsed from the date the optionee ceased being a director. On February 22, 1994, options to purchase an additional 2,000 shares of Common Stock were granted to the non-employee directors at a per-share exercise price of $30.4375. The Company and Wisconsin Gas each maintain a deferred compensation plan for active directors which entitles a director of the respective corporation to defer directors' fees until the director ceases to be an active director. All amounts deferred are unsecured and accrue interest at the prevailing announced prime interest rate of a major commercial bank. 7 The Company and Wisconsin Gas maintain retirement plans for directors who are not officers of the Company or its subsidiaries, have reached the age of 65, and have served at least five years as a director of the Company or Wisconsin Gas. Retired directors receive essentially the same annual compensation as active directors receive ($16,000 from the Company and $11,200 from Wisconsin Gas for 1994). Retirement benefits are payable for a period equal to the director's service as a director, up to 10 years, or until the death of the retired director, whichever occurs earlier. SECURITY OWNERSHIP OF MANAGEMENT The following tabulation sets forth the number of shares of Common Stock beneficially owned, as of February 28, 1994, by each director and nominee, each executive officer named in the Summary Compensation Table, and all directors and executive officers as a group.
Title of Class - ---------------- Common Stock Name of Beneficial Owner - ---------------------- Wendell F. Bueche Willie D. Davis James C. Donnelly James L. Forbes Jere D. McGaffey Daniel F. McKeithan, Jr. Guy A. Osborn Thomas F. Schrader Stuart W. Tisdale George E. Wardeberg Joseph P. Wenzler Essie M. Whitelaw William B. Winter All directors and executive officers as a group (14 persons). Amount and Nature of Beneficial Ownership (1)(2) - ------------------- 6,356 4,500 46,394 5,000 6,798 5,000 6,000 95,862 211,492 (4) 23,799 106,187 (5) 4,000 6,420 573,423 Percent of Class (3) - ---------- - - - - - - - - 1.3% - - - - - - - 3.4%
(1) Each beneficial owner exercises sole voting and investment power with respect to the shares shown as owned beneficially, except as noted in footnotes (4) and (5). (2) Includes the following numbers of shares covered under options exercisable as of or within 60 days of February 28, 1994: Mr. Donnelly, 45,200; Mr. Schrader, 73,400; Mr. Tisdale, 135,692; Mr. Wenzler, 69,800; Messrs Bueche, Davis, Forbes, McGaffey, McKeithan, Osborn and Winter and Ms. Whitelaw, 4,000 each. (3) Where no percentage figure is set out in this column, the person owns less than 1% of the outstanding shares. (4) Includes 4,852 shares owned by Mr. Tisdale's spouse. (5) Includes 526 shares owned by Mr. Wenzler's spouse. EXECUTIVE COMPENSATION The following tabulation is a three-year summary of the compensation awarded or paid to, or earned by, the Company's chief executive officer and its four most highly compensated executive officers whose total cash compensation exceeded $100,000 in 1993. 8 SUMMARY COMPENSATION TABLE
Long-Term Compen- Annual Compensation sation --------------------------------------------- ---------- Awards ---------- Securities Other Annual Underlying All Other Name and Principal Compensation Options/ Compensation Position Year Salary($) Bonus($) ($) (1) SARs(#) ($) (2) - ------------------------------- ---- --------- -------- ------------ ---------- ------------ Stuart W. Tisdale, Chairman and 1993 $488,750 $244,375 26,100 $19,533 Chief Executive Officer of 1992 470,000 145,000 25,000 14,574 the Company and Chairman of 1991 435,000 180,000 18,000 9,112 Wisconsin Gas, Sta-Rite and SHURflo (3) George E. Wardeberg, President and 1993 272,000 150,000 $52,459 18,000 16,257 Chief Operating Officer of the 1992 220,567 37,825 6,000 4,364 Company, Vice Chairman and 1991 185,000 0 4,000 2,456 Chief Executive Officer of Sta-Rite and Vice Chairman of Wisconsin Gas and SHURflo (4) Thomas F. Schrader, Vice President 1993 260,000 142,881 10,500 15,192 of the Company and President and 1992 248,500 75,000 13,200 13,776 Chief Executive Officer of 1991 226,125 100,000 12,000 10,966 Wisconsin Gas James C. Donnelly, Vice President 1993 236,250 110,174 7,950 15,203 of the Company and President and 1992 208,725 35,163 8,850 13,011 Chief Operating Officer of 1991 182,500 47,750 9,000 10,224 Sta-Rite Joseph P. Wenzler, Vice President, 1993 245,300 100,629 9.750 15,131 Treasurer and Chief Financial 1992 245,300 33,695 13,200 6,171 Officer of the Company; Vice 1991 231,023 50,000 12,000 3,753 President and Chief Financial Officer of Wisconsin Gas; and Secretary and Treasurer of SHURflo (5)
(1) Of the amount reported in this column for Mr. Wardeberg, $43,255 represents a one-time club membership fee. The aggregate amount of personal benefits provided by the Company and its subsidiaries to the other executive officers named in this table in any year, and for Mr. Wardeberg in 1991 and 1992, did not exceed the lesser of $50,000 or 10% of each executive officer's annual salary and bonus reported in the table for any of the years indicated. (2) The amounts shown in this column for 1993 are comprised of the following items: Company contributions to 401(k) and supplemental savings plans: Mr. Tisdale $16,667; Mr. Wardeberg $13,391; Mr. Schrader $12,326; Mr. Donnelly $11,743; and Mr. Wenzler $12,265. Supplemental medical insurance premium: Mr. Tisdale $2,866; Mr. Wardeberg $2,866; Mr. Schrader $2,866; Mr. Donnelly $2,866; and Mr. Wenzler $2,866. Above market earnings on deferred compensation: Mr. Donnelly $594. (3) Mr. Tisdale retired February 1, 1994. (4) On February 1, 1994, Mr. Wardeberg was elected President and Chief Executive Officer of the Company; Chairman of Wisconsin Gas and SHURflo; and Chairman and Chief Executive Officer of Sta-Rite. (5) Mr. Wenzler was elected Secretary and Treasurer of SHURflo on July 28, 1993. Stock Option Information - ------------------------ The Company has in effect the 1987 Stock Option Plan pursuant to which options to purchase Common Stock may be granted to key employees (including executive officers) of the Company and its subsidiaries. The following tabulation sets forth information regarding grants of options made by the Company in 1993 to the executive officers named in the Summary Compensation Table. No SARs have been awarded under the 1987 Plan. 9 OPTION/SAR GRANTS IN 1993 FISCAL YEAR
Grant Individual Grants Date Value - ------------------------------------------------------------------------------------------ ------------ Percent of Total Options Number of Sec. Granted to Exercise or Grant Under. Opt./SARs Employees in Base Price Expiration Date Present Name Granted (#) Fiscal Year ($/sh.) Date Value(3) - ---------------------- ---------------- -------------- ---------- ------------ ------------ Stuart W. Tisdale 26,100 (1) 21.9% $27.3125 2/23/04 $ 88,479 George E. Wardeberg 12,000 (1) 10.0 27.3125 2/23/04 40,680 6,000 (2) 27.3125 2/23/04 20,340 Thomas F. Schrader 7,000 (1) 5.9 27.3125 2/23/04 23,730 3,500 (2) 27.3125 2/23/04 11,865 James C. Donnelly 5,300 (1) 4.4 27.3125 2/23/04 17,967 2,650 (2) 27.3125 2/23/04 8,984 Joseph P. Wenzler 6,500 (1) 5.5 27.3125 2/23/04 22,035 3,250 (2) 27.3125 2/23/04 11,018
(1) These options are nonstatutory stock options for purposes of the Internal Revenue Code. The options became exercisable on February 23, 1993. (2) These options are not immediately exercisable. They will become exercisable on February 23, 1996, provided a specified total return to shareholders objective for the period 1993 to 1995 is achieved. These options are nonstatutory stock options for purposes of the Internal Revenue Code. (3) Amounts in this column were calculated using the Black-Scholes option pricing model. The model assumes: (a) an option term of 11 years; (b) a risk-free interest rate of 7.0%; (c) volatility (variance of rate of return) of .2038; and (d) a dividend yield of 6.5%. The following tabulation sets forth information regarding the exercise of stock options during 1993 and the unexercised options held at December 31, 1993, by each of the executive officers named in the Summary Compensation Table. AGGREGATED OPTION/SAR EXERCISES IN 1993 FISCAL YEAR AND FY-END OPTION/SAR VALUES
Numbers of Securities Value of Unexercised Underlying Unexercised In-the-Money Options/ Options/SARs at FY-End (#) SARs at FY-End ($) Shares Acquired Value -------------------------------------------------------------- Name on Exercise (#) Realized ($) Exercisable Unexercisable Exercisable Unexercisable - ----------------- --------------- ------------ ----------- ------------- ----------- ------------- Stuart W. Tisdale 5,000 $ 82,188 133,692 0 $1,280,732 $ 0 George E. Wardeberg 12,000 27,750 0 8,000 0 39,250 Thomas F. Schrader 2,000 27,625 75,400 7,900 810,124 45,731 James C. Donnelly 0 0 45,200 5,600 453,956 31,931 Joseph P. Wenzler 2,100 33,272 69,800 7,650 753,655 44,684 /TABLE 10 Pension and Retirement Plans - ---------------------------- The Company and its subsidiaries maintain pension and retirement plans in which the executive officers and other employees participate. The companies also maintain supplemental retirement plans for officers and certain other employees to reflect certain compensation that is excluded under the retirement plans and to provide benefits that otherwise would have been accrued or payable except for the limitations imposed by the Internal Revenue Code. The following tabulation sets forth the annual retirement benefits payable under the pension plans, as supplemented, for the indicated levels of final average earnings with various periods of credited service. Benefits reflected in the table are based on an assumed retirement age of 65. PENSION PLAN TABLE
Years of Service ------------------------------------------------ Remuneration 15 20 25 30 35 - ------------ -------- -------- -------- -------- -------- $ 200,000 $ 58,616 $ 78,155 $ 89,424 $ 92,424 $ 95,424 250,000 73,466 97,955 112,074 115,824 119,474 300,000 88,316 117,755 134,724 139,224 143,724 350,000 103,166 137,555 157,374 162,624 167,874 400,000 118,016 157,355 180,024 186,024 192,024 450,000 132,866 177,155 202,674 209,424 216,174 500,000 147,716 196,955 225,324 232,824 240,324 550,000 162,566 216,755 247,974 256,224 264,474 600,000 177,416 236,555 270,624 279,624 288,624
The compensation covered by the pension plan, as supplemented, for the named executive officers includes all compensation reported for each individual as salary and bonus in the Summary Compensation Table. Messrs. Tisdale, Wardeberg, Schrader, Donnelly and Wenzler have 30, 4, 15, 6 and 20 years, respectively, of credited service under the pension plan. Pursuant to the supplemental retirement plan, Mr. Tisdale, who retired February 1, 1994, receives supplemental retirement benefits computed under the benefit formula, but with the years of credited service from 1986 through 1994 deemed to be 2-1/2 years for each year of actual credited service. The effect of this supplemental program is to provide Mr. Tisdale, commencing at age 65, with approximately the same aggregate retirement benefit under the pension plan, as supplemented, as he would have received at that age under the pension plan if he had 30 years of credited service. Pursuant to a supplemental retirement plan, Mr. Schrader will receive a supplemental retirement benefit of $25,000 per year for 15 years beginning at age 65, payable in monthly installments. 11 A retired executive officer who is married at the time of retirement and selects one of the available joint and surviving spouse annuity payment options will also receive the difference between the monthly benefits payable under the single life annuity payment option and the 50% joint and surviving spouse annuity payment option for the lives of the retired officer and spouse. Upon the death of the retired officer, the surviving spouse will receive 50% of the supplemental benefit for life. The retirement benefits set out in the above table are based on a straight life annuity. The election of other available payment options would change the retirement benefits shown in the table. The plan does not provide for reduction of retirement benefits to offset Social Security or any other retirement benefits. BOARD COMPENSATION COMMITTEE REPORT ON EXECUTIVE COMPENSATION The Company's executive compensation program is administered by the Compensation Committee of the Board. The Compensation Committee is comprised of four independent, non-employee directors. Following Compensation Committee review and approval, matters relating to executive compensation (other than the grant of stock options) are submitted to the full Board for approval. The Compensation Committee utilizes an independent compensation consultant. The consultant provides advice to the Committee on compensation-related issues, including incentive plan design and competitive compensation data for officer positions. Compensation Policies - --------------------- Policies are used to set a general direction and as a backdrop against which specific compensation decisions are made. - Design of executive pay programs is intended to attract and retain top talent, motivate and reward performance. - Differences in pay practices and performance measures between the Company's primary lines of business are recognized. - Compensation opportunities, by component and in the aggregate, are targeted at the median (50th percentile) of competitive practice. - Achievement of incentive compensation levels is dependent on attainment of performance goals as agreed to by the Board annually. These goals relate to the achievement of the Company's operating and financial plan, individual objectives and milestones in the Company's longer-term strategic plan. - In business units where an all-employee bonus or profit-sharing program exists, a portion of each executive's incentive compensation is determined on the same criteria. - The focus on enhancement of shareholder value is accomplished by tying a significant portion of total pay to performance of the Company's stock. In assessing executive performance and pay, the members of the Compensation Committee consider factors outside the formal incentive plans. These factors include operational and financial measures not specifically incorporated in the incentive plans, and actual performance in dealing with unanticipated business conditions during the year. The Compensation Committee believes such factors should be considered in addition to the more formalized factors to assess and reward executive performance properly. 12 Components of Compensation - -------------------------- Base salary --- The Compensation Committee uses comparison information to target salary ranges for its officers in both its utility and manufacturing businesses. Competitive data sources vary by business unit. Salary range midpoints for gas utility positions are set relative to a comparison of other relevant gas utilities; a substantial number (more than 75%) of the proxy peer group companies comprising the Kidder, Peabody Gas Distribution Utility Index are included in this survey sample. Salary range midpoints for the Company's non-utility positions are set relative to a comparison to other relevant manufacturing organizations. In both cases, salary ranges are targeted at or near the 50th percentile of the competitive data. Annual Incentive Plan --- The Company and each subsidiary has an annual incentive compensation plan tailored to that company. The Company's officers hold executive positions with the Company and one or more of its operating subsidiaries. As a result, they also participate in the incentive plans of each subsidiary of which they serve as an officer on a pro rated basis. The plans set incentive targets for each officer ranging from 25% to 50% of base salary. The Company's annual incentive plan is entirely discretionary, but awards generally are based on overall corporate financial performance and achievement of non-financial and individual performance objectives. The annual incentive plans of the operating subsidiaries are designed to compensate the officers of each subsidiary primarily on a formula basis. The formula for the gas utility bases 75% of the targeted award on financial, customer service and safety factors. The formula for the manufacturing company bases 67% of the targeted award on financial factors. The balance of the targeted awards for each subsidiary company is based upon non-financial and individual objectives. These factors include product leadership, market leadership, asset management, personnel management and development, customer service, safety, and achievement of personal objectives. Long-term incentive plan --- The Company's long-term incentive compensation plan provides for annual awards of stock options under the Company's 1987 Stock Option Plan. Both "standard" and "performance" non- statutory stock options are granted under the plan. Standard options are immediately vested and exercisable. Performance options vest and become exercisable after three years, provided that a specified three-year total return to shareholder objective is achieved. The targets for standard option awards are established as percentages of salary, which are converted into option awards based on the value of a share of the Common Stock on the date of grant. Performance option awards equal approximately 50% of the standard option awards. The plan, which was developed for the Company by a nationally-recognized compensation consulting firm, targets each officer's long-term incentive opportunity at the 75th percentile of competitive practice for outstanding performance. Compensation for 1994 --- During late 1993 and early 1994, the Compensation Committee and management have been working with an outside consultant to refine the approach to incentive compensation for the Company's top officers. This approach, which is implemented for 1994, is consistent with the overall compensation policies stated earlier. The revised compensation approach provides for: - Specific performance measures and standards for the annual incentive plan for the Company and operating subsidiary officers. For Company officers, this replaces a more discretionary approach used in prior years. Holding company officers will have their incentives based entirely on the Company's earning per share (EPS) performance relative to pre-established standards. Operating subsidiary presidents will have their incentives based upon a combination of the operating company's income performance, other key subsidiary objectives, and Company EPS performance (75% weight will be on the operating company measures). 13 - A long-term incentive that will be split 50%/50% (based on value) between stock options and a new performance share plan. Stock options will be granted annually. Performance shares will be granted bi-annually and will be earned-out based upon the Company's three- year total shareholder return performance relative to the proxy peer group for holding company officers and subsidiary presidents. Selected subsidiary officers will also participate in this plan; for these individuals shares will be earned-out based strictly upon a specific three-year financial performance goal for the subsidiary company. Compensation of Officers - ------------------------ The Compensation Committee sets base salaries of officers within the established ranges. The Compensation Committee considers specified financial measures tailored to the Company and each subsidiary, each officer's contribution to achieving corporate goals, and such officer's achievement of personal performance objectives. Examples of financial measures are net income earned relative to budget, return on total assets, return on sales, and rate of return earned versus allowed. Examples of personal performance objectives are set out below in the discussion of the chief executive officer's compensation. Since the Company's principal subsidiaries operate in different industries with different compensation practices, and since each officer's duties differ, the Compensation Committee weighs the financial factors differently for each officer. For example, the rate of return earned versus that nominally allowed by state regulatory authorities having jurisdiction over the gas utility subsidiary is applicable only to officers of the utility company, whereas return on total assets and return on sales are applicable primarily to officers of the manufacturing subsidiaries. As stated above, a portion of each officer's annual incentive award, if any, is formula-based. The Compensation Committee has generally based the individual portion of incentive awards on achievement of the overall corporate financial, subsidiary non-financial and individual performance objectives. During the last three years, incentive awards to officers, other than the chief executive officer, have ranged from zero to 110% of target. The range of standard stock option awards to all officers is prescribed by the long-term incentive plan approved by the Compensation Committee. The specific number of standard options awarded within the range is determined by the Compensation Committee based on the number of options to be awarded to all key employees of the Company and its subsidiaries, the number of options previously granted and outstanding, overall corporate performance and personal performance. As stated, generally the number of performance options awarded equals 50% of the number of standard options awarded. However, the Compensation Committee may exercise its discretion in determining the precise grant to each officer. Compensation of the Chief Executive Officer - ------------------------------------------- For 1993, the Compensation Committee increased the base salary of Stuart W. Tisdale, the Company's Chief Executive Officer, by $25,000, or 5.3% effective April 1, 1993. The increase was based on his overall performance, as demonstrated by the increase in the Company's total return to shareholders in 1992 compared to the peer group which is shown in the graph in the Performance Presentation section below, and his position in the salary range. The increase sets Mr. Tisdale's salary in the fourth quartile of the range targeted by the Compensation Committee. The Compensation Committee awarded Mr. Tisdale 26,100 standard options in 1993. The total number of options awarded was at the targeted number established in the long-term incentive compensation plan and reflects the fact that the Compensation Committee began the practice of granting the additional performance options in 1992. However, recognizing both Mr. Tisdale's pending retirement in February 1994, and the fact that performance options vest in 1996 if the financial objective for the period 1993 to 1995 is met, the Compensation Committee granted Mr. Tisdale only standard options. 14 The incentive awarded to Mr. Tisdale for 1993 was $244,375, or 50% of his salary as compared to a target of 50% of salary. This award reflects Mr. Tisdale's significant contributions to the Company during 1993. The Company's financial objectives were met with net earnings and earnings per share increasing 29% and 24%, respectively. The total return to shareholders was 22% for 1993 as compared to the total return of the Standard & Poor's stock index and industry peer group index of 10% and 13%, respectively. In addition, Mr. Tisdale accomplished his personal objectives in the areas of executive succession planning, strategic planning and acquisitions. Compliance with New Tax Regulations - ----------------------------------- The Company has considered the implications of the new Section 162(m) tax rules regarding deductibility of annual executive compensation over $1 million. The cash compensation levels for Company officers fall well below this level and, hence, no specific changes are proposed to the cash compensation program. However, it is important to note that many of the changes described above are consistent with the new tax rules regarding performance-based compensation incentives. The Compensation Committee does, however, intend to seek qualification of the stock components of the program as "performance-based compensation" plans pursuant to these tax rules. To that end, proposals are included in this Proxy Statement establishing a per-person limitation for stock option and restricted stock awards, and details of the new performance share plan are disclosed and submitted for shareholder approval. Wendell F. Bueche, Chairman James L. Forbes Daniel F. McKeithan, Jr. Guy A. Osborn Members of the Compensation Committee PERFORMANCE PRESENTATION The following graph compares the yearly percentage change in the Company's cumulative total shareholder return (dividends declared plus share appreciation) to the S&P 500 Stock Index and the Kidder, Peabody Gas Distribution Utility Index, comprised of 35 U.S. natural gas distribution utilities. The information presented assumes that all dividends were reinvested. [Performance graph will appear here.] Comparison of Five-Year Cumulative Return Among WICOR, Inc., S&P 500 Index and Kidder, Peapody Gas Distribution Utility Index
Measurement Period - FYE Measurement Point - December 31, 1988 ---------------------------------------------------- 1988 1989 1990 1991 1992 1993 ------ ------ ------ ------ ------ ------ WICOR $ 100 $ 135 $ 114 $ 151 $ 180 $ 218 S & P 500 $ 100 $ 132 $ 128 $ 166 $ 179 $ 197 Kidder $ 100 $ 134 $ 130 $ 149 $ 175 $ 199
15 ITEM NO. 2: APPROVAL OF THE 1994 LONG-TERM PERFORMANCE PLAN General - ------- The purpose of the WICOR, Inc. 1994 Long-Term Performance Plan (the "1994 Plan") is to enhance the ability of the Company and its affiliates to attract, retain and motivate key salaried employees upon whom, in large measure, the sustained growth and profitability of the Company depend, and to provide incentives to those key salaried employees that are more directly linked to the profitability of the Company's businesses and increases in shareholder value. The Company currently has in effect the 1987 Stock Option Plan. The Company also has a 1981 Stock Option Plan which expired on December 16, 1991, except as to outstanding options. As of March 1, 1994, approximately 643,900 shares of Common Stock were available for grant under the 1987 Stock Option Plan. However, if the 1994 Plan is approved and adopted by the shareholders at the Annual Meeting, no additional options will be granted under the 1987 Stock Option Plan. To allow for various equity-based compensation awards to be made by the Company, the 1994 Plan was adopted by the Board on March 1, 1994, and is effective as of that date, subject to approval by the shareholders at the Annual Meeting. The following summary description of the 1994 Plan is qualified in its entirety by reference to the full text of the 1994 Plan which is attached to this Proxy Statement as Appendix 1. Administration - -------------- The 1994 Plan is administered by the Compensation Committee (the "Committee") of the Board of Directors consisting of four non-employee directors who are "disinterested persons" within the meaning of Rule 16b-3 under the Securities Exchange Act of 1934 (the "Exchange Act"). Subject to the terms of the 1994 Plan, the Committee has authority to interpret the 1994 Plan, prescribe, amend and rescind rules and regulations relating to the 1994 Plan, and make all other determinations necessary or advisable for the administration of the 1994 Plan. Participation - ------------- The Committee will select participants in the 1994 Plan from among key salaried employees of the Company and its affiliates. The Committee will solicit and consider recommendations of the Chief Executive Officer in determining those key salaried employees who will be eligible to participate in the 1994 Plan. Approximately 90 employees are currently eligible to participate in the 1994 Plan. Stock Subject to the 1994 Plan - ------------------------------ The 1994 Plan provides for the issuance of up to 820,000 shares of Common Stock, subject to adjustment as described below. Awards may be granted as options (either incentive stock options or non-qualified stock options), stock appreciation rights or restricted stock. No participant can be granted awards that could result in such participant exercising options for, or stock appreciation rights with respect to, more than 125,000 shares of Common Stock or receiving restricted stock awards for more than 25,000 shares of restricted stock under the 1994 Plan. If an option granted under the 1994 Plan expires, is forfeited, is canceled or is terminated unexercised as to any shares, such shares will again be available for issuance under the 1994 Plan, provided that if a new award for additional shares is granted to a participant in connection with such an expiration, forfeiture, cancellation or termination, then the shares subject to the expiration, forfeiture, cancellation or termination will reduce the number of shares that can otherwise be issued under the 1994 Plan. Shares to be issued under the 1994 Plan may be either authorized but unissued or treasury shares. In the event of any change in the outstanding shares of Common Stock by reason of a stock dividend or split, recapitalization, merger, consolidation, combination, spin-off, exchange of shares or other similar corporate change, the number of shares subject to outstanding options and their stated option prices, and the number of shares subject to the 1994 16 Plan, will be adjusted equitably by the Committee. In such event, the Committee will also adjust equitably the number of shares subject to restricted stock grants and the number of outstanding stock appreciation rights and related grant values. Options - ------- Options may be granted to participants at such times as determined by the Committee. The Committee will also determine the number of options granted and whether an option is to be an incentive stock option or non- qualified stock option. Pursuant to the Internal Revenue Code of 1986, as amended (the "Code"), the aggregate fair market value of Common Stock with respect to which incentive stock options are exercisable for the first time by a participant during any calendar year shall not exceed $100,000. The option price per share of Common Stock will be fixed by the Committee, but will not be less than the fair market value of the Common Stock on the date of grant and cannot be subsequently changed except as noted above. No option shall be granted, directly or indirectly, in connection with the expiration, forfeiture, cancellation or termination of an option previously granted under the 1994 Plan prior to its normal expiration date if such expired, forfeited, cancelled or terminated option had an exercise price higher than the exercise price of the option proposed to be granted. The Committee will determine the expiration date of each option, but the expiration date will not be later than the tenth anniversary of the grant date. Options will be exercisable at such times and be subject to such restrictions and conditions as the Committee deems necessary or advisable. No options will be assignable or transferable by a participant, except by will or the laws of descent and distribution and may be exercised during the life of the participant only by the participant. The Committee may impose other restrictions on transferability and exercisability of awards granted under the 1994 Plan to ensure compliance with Rule 16b-3 under the Exchange Act. At the time of exercise, the option price must be paid in full. The Committee will determine the form of payment, which may include either (i) cash; (ii) tendering shares of stock having a fair market value at the time of exercise equal to the option price; (iii) electing to have the Company withhold from shares of stock otherwise issuable upon exercise that number of shares of stock having a fair market value at the time of exercise equal to the option price; (iv) a combination of (i), (ii) and (iii); or (v) such other form of payment as the Committee determines. The Committee may permit the practice known as "pyramiding" whereby shares of stock acquired upon exercise of an option are simultaneously surrendered in exchange for all or part of the remaining shares subject to the option. Stock Appreciation Rights - ------------------------- The Committee may also grant stock appreciation rights under the 1994 Plan, independently or in tandem with, a related option. Stock appreciation rights give the participant the right to receive a payment (in cash, shares of Common Stock, or a combination thereof as the Committee shall determine) equal to the excess of the fair market value of a share of Common Stock at the date of exercise over the option exercise price. Stock appreciation rights will be exercisable at such times, and on such conditions as the Committee shall determine. Stock appreciation rights granted to officers must be exercised in compliance with Rule 16b-3 under the Exchange Act, and the Committee may impose such conditions on exercise as may be required to satisfy the requirements of Rule 16b-3. When a stock appreciation right granted in tandem with a related option is exercised, the number of shares issuable under the related option will be reduced by the number of shares covered by the stock appreciation right, and such shares cannot be granted again under the 1994 Plan. The exercise of an option will result in an equivalent reduction in the number of shares covered by the related stock appreciation right, except that if a stock appreciation right is granted for less than all of the shares covered by the related option, no such reduction will be made until such time as the number of shares exercised under the option exceeds the number of shares not covered by the stock appreciation right. 17 Under generally accepted accounting principles, outstanding stock appreciation rights (whether granted independently or in tandem with stock options) require a charge against Company income equal to the increase in the value of such stock appreciation rights. No comparable charge against Company income is required for outstanding stock options. Restricted Stock - ---------------- The Committee may grant shares of restricted stock to participants in such amounts and at such times as it will determine. Restricted stock awards to Company officers and the Chairman and President of each Company subsidiary will be based on attaining, over a period of at least three years, a specified compounded annual total shareholder return (stock price appreciation plus Company cash dividends paid and assumed to be reinvested in Common Stock) compared to a specified group of gas distribution utilities. Shares of restricted stock may not be transferred in any way, other than by will or by the laws of descent and distribution, for the period of restriction. The restrictions applicable to the participants will be set by the Committee. After the period of restriction, the shares of restricted stock become freely transferable. The Committee may impose such restrictions on restricted stock as it may deem appropriate. If any dividends or distributions are paid in shares of capital stock, the shares will be subject to the same restrictions on transferability as the shares on which the dividends or distributions are paid. Under generally accepted accounting principles, the compensation expense for restricted stock will be recognized on a current basis by the Company throughout the performance period. Tax Withholding - --------------- Whenever shares of Common Stock are to be issued under the 1994 Plan, the Company may withhold from any cash otherwise payable to the participant or require the participant to remit to the Company an amount sufficient to satisfy federal, state and local withholding taxes. Unless the Committee determines otherwise, and subject to the requirements of Rule 16b-3 under the Exchange Act, a participant may satisfy such withholding requirements by tendering already owned shares of Common Stock or requiring the Company to withhold shares of Common Stock from the exercised option stock. Certain Federal Income Tax Consequences - --------------------------------------- Stock Options --- The grant of a stock option under the 1994 Plan will create no income tax consequences to the employee or the Company. An employee who is granted a non-qualified stock option will generally recognize ordinary income at the time of exercise in an amount equal to the excess of the fair market value of the Common Stock at such time over the exercise price. The Company will be entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the employee. A subsequent disposition of the Common Stock will give rise to capital gain or loss to the extent the amount realized from the sale differs from the tax basis, i.e., the fair market value of the Common Stock on the date of exercise. This capital gain or loss will be a long-term capital gain or loss if the Common Stock has been held for more than one year from the date of exercise. In general, an employee will recognize no income or gain at the time of exercise of an incentive stock option (except that the alternative minimum tax may apply). If the employee holds the shares of Common Stock acquired pursuant to the exercise of an incentive stock option for at least two years from the date of grant and one year form the date of exercise, any gain or loss realized by the employee on disposition of the Common Stock will be treated as a long-term capital gain or loss. No deduction will be allowed to the Company. If these holding period requirements are not satisfied, the employee will recognize ordinary income at the time of the disposition equal to the lesser of (i) the gain realized on the disposition; or (ii) the difference between the exercise price and the fair market value of the shares of Common Stock on the date of exercise. The Company will be entitled to a deduction in the same amount and at the same time as ordinary income is recognized by the employee. The Committee may provide for a 18 sharing between the Company and the participant of any tax benefits to the Company arising from such disqualifying disposition. Any additional gain realized by the employee over the fair market value at the time of exercise will be treated as a capital gain. This capital gain will be a long-term capital gain if the Common Stock has been held for more than one year from the date of exercise. Stock Appreciation Rights --- The grant of a stock appreciation right will create no income tax consequences for the employee or the Company. Upon exercise of a stock appreciation right, the employee will recognize ordinary income equal to the amount of any cash and the fair market value of any shares of Common Stock or other property received, except that if the employee receives stock upon exercise of a stock appreciation right, recognition of income may be deferred in accordance with the rules applicable to such an award. The Company will be entitled to a deduction in the same amount and at the same time as income is recognized by the employee. Restricted Stock --- An employee will not recognize income upon the award of restricted stock under the 1994 Plan unless the election described below is made. However, an individual who has not made such an election will recognize ordinary income at the end of the applicable restriction period in an amount equal to the fair market value of the restricted stock at such time. The Company will be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. Any otherwise taxable disposition of the restricted stock after the end of the applicable restriction period will result in capital gain or loss (long- term or short-term depending on the length of time the restricted stock is held after the end of the applicable restriction period). Dividends paid in cash and received by a participant prior to the end of the applicable restriction period will constitute ordinary income to the participant, and the Company will be entitled to a corresponding deduction for such dividends. Any dividends paid in stock will be treated as an award of additional restricted stock subject to the tax treatment described above. An employee may, within 30 days after the date of the award of restricted stock, elect to recognize ordinary income as of the date of the award in an amount equal to the fair market value of such restricted stock on the date of the award. The Company will be entitled to a corresponding deduction in the same amount and at the same time as the participant recognizes income. If the election is made, any cash dividends received with respect to the restricted stock will be treated as dividend income to the participant in the year of payment and will not be deductible by the Company. Any otherwise taxable disposition of the restricted stock (other than by forfeiture) will result in capital gain or loss (long-term or short- term depending on the holding period). If the participant who has made an election subsequently forfeits the restricted stock, the participant will not be entitled to deduct the amount previously included in income as a loss. The Company would then be required to include as ordinary income the amount of the deduction it originally claimed with respect to such shares. Outstanding Awards - ------------------ As of date hereof, 137,200 non-qualified stock options and 23,000 shares of restricted stock have been granted under the 1994 Plan to 81 participants, subject to approval of the 1994 Plan by the shareholders. Duration of Plan - ---------------- The 1994 Plan will remain in effect until all Common Stock subject to it has been purchased or acquired, unless terminated earlier by the Board of Directors. However, no option, stock appreciation right or restricted stock may be granted after March 1, 2004. Amendment, Modification and Termination - --------------------------------------- The Board of Directors may amend, modify or terminate the 1994 Plan at any time, provided that no such action of the Board, without approval of the shareholders, may (i) increase the maximum number of shares issuable under the 1994 Plan or the maximum number of shares which can be awarded to any participant; (ii) modify the performance criteria pursuant to which restricted stock vests; (iii) materially modify the eligibility requirements 19 for participation in the 1994 Plan; or (iv) materially increase the benefits to participants under the 1994 Plan. Termination, amendment or modification of the 1994 Plan will not adversely affect the right of participants under options, stock appreciation rights or restricted stock previously granted, without the consent of the participant. Vote Required - ------------- The affirmative vote of a majority of the votes cast on the proposal by shareholders is required for approval of the 1994 Plan, provided that a majority of the outstanding shares of the Company's Common Stock are voted on the proposal. Assuming such proviso is met, any shares not voted (whether by broker nonvote or otherwise, except abstention) have no impact on the vote. Shares as to which holders abstain from voting will be treated as votes against the proposal. The shares represented by the proxies received will be voted FOR approval of the adoption of the 1994 Plan, unless a vote against such approval or to abstain from voting is specifically indicated on the proxy. THE BOARD OF DIRECTORS RECOMMENDS THAT THE SHAREHOLDERS VOTE "FOR" APPROVAL OF THE WICOR, INC. 1994 LONG-TERM PERFORMANCE PLAN SHAREHOLDER PROPOSALS Proposals which shareholders of the Company intend to present at the 1995 Annual Meeting of Shareholders must be received by the Company by the close of business on November 10, 1994. 20 OTHER MATTERS Arthur Andersen & Co. was retained as the Company's independent auditors for the year ended December 31, 1993 and, upon the recommendation of the Audit Committee, the Board has reappointed Arthur Andersen & Co. as independent public accountants for the Company for the year ending December 31, 1994. A representative of Arthur Andersen & Co. is expected to be present at the Annual Meeting with the opportunity to make a statement if such representative desires to do so, and it is expected that such representative will be available to respond to appropriate questions. The Company will file with the Securities and Exchange Commission on or before March 31, 1994, an annual report on Form 10-K for the fiscal year ended December 31, 1993. The Company will provide without charge a copy of this Form 10-K (including financial statements and financial statement schedules, but not including exhibits thereto) to each person who is a record or beneficial holder of shares of Common Stock as of the record date for the Annual Meeting and who submits a written request for it. A request for a Form 10-K should be addressed to Robert A. Nuernberg, Secretary, WICOR, Inc., P.O. Box 334, Milwaukee, Wisconsin 53201. Management does not intend to present to the Annual Meeting any matters other than the matters described in this Proxy Statement. Management knows of no other matters to be brought before the Annual Meeting. However, if any other matters are properly brought before the Annual Meeting, it is the intention of the persons named in the enclosed form of proxy to vote thereon in accordance with their best judgment. The cost of soliciting proxies will be borne by the Company. The Company expects to solicit proxies primarily by mail. Proxies may also be solicited personally and by telephone by certain officers of the Company and regular employees of its subsidiaries. The Company has also retained D.F. King and Company, Inc. to solicit proxies. The estimated cost of such proxy solicitation is $4,500, plus out-of-pocket expenses. The Company may reimburse brokers and other nominees for their expenses in communicating with the persons for whom they hold Common Stock. By Order of the Board of Directors Robert A. Nuernberg Secretary March 10, 1994 21 APPENDIX 1 WICOR, INC. 1994 LONG-TERM PERFORMANCE PLAN Section 1. Purpose - ------------------- The purpose of the WICOR, Inc. 1994 Long-Term Performance Plan (the "Plan") is to enhance the ability of WICOR, Inc. (together with any successor thereto, the "Company") and its Affiliates (as defined below) to attract, retain and motivate key salaried employees upon whom, in large measure, the sustained growth and profitability of the Company depend and to provide incentives to such key salaried employees which are more directly linked to the profitability of the Company's businesses and increases in shareholder value. Section 2. Definitions - ----------------------- As used in the Plan, the following terms shall have the respective meanings set forth below: (a) "Affiliate" shall mean any entity that, directly or through one or more intermediaries, is controlled by, controls, or is under common control with, the Company. (b) "Award" shall mean any Option, Stock Appreciation Right or Restricted Stock granted under the Plan. (c) "Award Agreement" shall mean any written agreement, contract, or other instrument or document evidencing any Award granted under the Plan. (d) "Code" shall mean the Internal Revenue Code of 1986, as amended from time to time. (e) "Commission" shall mean the United States Securities and Exchange Commission or any successor agency. (f) "Committee" shall mean a committee of the Board of Directors of the Company designated by such Board to administer the Plan and composed of not less than two directors, each of whom is a "disinterested person" within the meaning of Rule 16b-3. (g) "Exchange Act" shall mean the Securities Exchange Act of 1934, as amended from time to time. (h) "Fair Market Value" shall mean, with respect to any property (including, without limitation, any Shares or other securities), the fair market value of such property determined by such methods or procedures as shall be established from time to time by the Committee. (i) "Incentive Stock Option" shall mean an Option granted under Section 6(a) of the Plan that is intended to meet the requirements of Section 422 of the Code, or any successor provision thereto. (j) "Key Salaried Employee" shall mean any officer or other key salaried employee of the Company or of any Affiliate who is responsible for or contributes to the management, growth or profitability of the business of the Company or any Affiliate as determined by the Committee. (k) "Non-Qualified Stock Option" shall mean an Option granted under Section 6(a) of the Plan that is not intended to be an Incentive Stock Option. (l) "Option" shall mean an Incentive Stock Option or a Non-Qualified Stock Option. (m) "Participant" shall mean a Key Salaried Employee designated to be granted an Award under the Plan. 23 (n) "Person" shall mean any individual, corporation, partnership, association, limited liability company, joint-stock company, trust, unincorporated organization, or government or political subdivision thereof. (o) "Released Securities" shall mean Shares of Restricted Stock with respect to which all applicable restrictions have expired, lapsed, or been waived. (p) "Restricted Securities" shall mean Awards of Restricted Stock or other Awards under which issued and outstanding Shares are held subject to certain restrictions. (q) "Restricted Stock" shall mean any Shares granted under Section 6(c) of the Plan. (r) "Rule 16b-3" shall mean Rule 16b-3 as promulgated by the Commission under the Exchange Act, or any successor rule or regulation thereto. (s) "Shares" shall mean shares of common stock of the Company and such other securities or property as may become subject to Awards pursuant to an adjustment made under Section 4(b) of the Plan. (t) "Stock Appreciation Right" shall mean any right granted under Section 6(b) of the Plan. (u) "Total Shareholder Return" shall mean the appreciation of the price of a share of common stock of the Company, plus the value of dividends paid thereon assuming reinvestment in common stock of the Company. Section 3. Administration - -------------------------- The Plan shall be administered by the Committee; provided, however, that if at any time the Committee shall not be in existence, the functions of the Committee as specified in the Plan shall be exercised by those members of the Board of Directors of the Company who qualify as "disinterested persons" under Rule 16b-3. Subject to the terms of the Plan and applicable law, the Committee shall have full power and authority to: (i) designate Participants; (ii) determine the type or types of Awards to be granted to each Participant under the Plan; (iii) determine the number of Shares to be covered by (or with respect to which payments, rights, or other matters are to be calculated in connection with) Awards granted to Participants; (iv) determine the terms and conditions of any Award granted to a Participant; (v) determine whether, to what extent, and under what circumstances Awards granted to Participants may be settled or exercised in cash, Shares, other securities, other Awards, or other property, or canceled, forfeited, or suspended to the extent permitted in Section 7 of the Plan, and the method or methods by which Awards may be settled, exercised, canceled, forfeited, or suspended; (vi) determine whether, to what extent, and under what circumstances cash, Shares, other securities, other Awards, other property, and other amounts payable with respect to an Award granted to Participants under the Plan shall be deferred either automatically or at the election of the holder thereof or of the Committee; (vii) interpret and administer the Plan and any instrument or agreement relating to, or Award made under, the Plan (including, without limitation, any Award Agreement); (viii) establish, amend, suspend, or waive such rules and regulations and appoint such agents as it shall deem appropriate for the proper administration of the Plan; and (ix) make any other determination and take any other action that the Committee deems necessary or desirable for the administration of the Plan. Unless otherwise expressly provided in the Plan, all designations, determinations, interpretations, and other decisions under or with respect to the Plan or any Award shall be within the sole discretion of the Committee, may be made at any time, and shall be final, conclusive, and binding upon all Persons, including the Company, any Affiliate, any Participant, any holder or beneficiary of any Award, any shareholder, and any employee of the Company or of any Affiliate. The Committee shall solicit and consider the recommendations of the Chief Executive Officer of the Company with regard to, among other things, the designation of Participants, the type of Awards to be granted under the Plan to such Participants and the number of Shares to be subject thereto, and the other terms and conditions of Awards granted to Participants, subject to the limitations of Rule 16b-3. 24 Section 4. Shares Available for Award - -------------------------------------- (a) Shares Available --- Subject to adjustment as provided in Section 4(b): (i) Number of Shares Available --- The total number of Shares with respect to which Awards may be granted under the Plan shall be 820,000. If, after the effective date of the Plan, any Shares covered by an Award granted under the Plan, or to which any Award relates, are forfeited or if an Award otherwise terminates, expires or is canceled prior to the delivery of all of the Shares or of other consideration issuable or payable pursuant to such Award and if such forfeiture, termination, expiration or cancellation occurs prior to the payment of dividends or the exercise by the holder of other indicia of ownership of the Shares to which the Award relates, then the number of Shares counted against the number of Shares available under the Plan in connection with the grant of such Award, to the extent of any such forfeiture, termination, expiration or cancellation, shall again be available for granting of additional Awards under the Plan; provided, however, that if an Award covering additional Shares is granted to a Participant in connection with such forfeiture, termination, expiration or cancellation, then the Shares subject to the forfeiture, termination, expiration or cancellation shall be counted against the total number of Shares with respect to which Awards may be granted under the Plan and the maximum number of Shares that may be the subject of Awards granted to individual Participants under the Plan in an amount equal to the number of Shares to which such additional grant relates. (ii) Limitation on Awards to Individual Participants --- No Participant shall be granted Awards that could result in such Participant exercising Options for, or Stock Appreciation Rights with respect to, more than 125,000 Shares or receiving more than 25,000 Shares of Restricted Stock under the Plan. (iii) Accounting for Awards --- The number of Shares covered by an Award under the Plan, or to which such Award relates, shall be counted on the date of grant of such Award against the number of Shares available for granting Awards under the Plan; provided, however, that if Options and Stock Appreciation Rights are granted in tandem and the exercise of either an Option or Stock Appreciation Right results in an offsetting reduction in the number of Options or Stock Appreciation Rights subject to the Award, then the number of Shares to which such Award relates shall only be counted against the number of Shares available for granting Awards under the Plan to the extent of the aggregate number of Shares as to which such Award may be exercised. (iv) Sources of Shares Deliverable Under Awards --- Any Shares delivered pursuant to an Award may consist, in whole or in part, of authorized and unissued Shares or of treasury Shares. (b) Adjustments --- In the event that the Company shall pay a dividend on its common stock in Shares, effect a stock split, or effect a similar corporate transaction or event that affects the Shares such that an adjustment is determined by the Committee to be appropriate in order to prevent dilution or enlargement of the benefits or potential benefits intended to be made available under the Plan, then the number of Shares subject to the Plan and which thereafter may be made the subject of Awards and the number of Shares subject to outstanding Awards under the Plan, and the exercise and grant prices thereof, shall be equitably adjusted by the Committee/such that the number of Shares, as adjusted, shall bear the same relation to the total number of outstanding shares of common stock of the Company following the transaction or event as immediately prior to such transaction or event; provided, however, in each case, that with respect to Awards of Incentive Stock Options no such adjustment shall be authorized to the extent that such authority would cause the Plan to violate Section 422(b)(1) of the Code or any successor provision thereto; and provided further, however, that the number of Shares subject to any Award payable or denominated in Shares shall always be a whole number. Section 5. Eligibility - ----------------------- Any Key Salaried Employee, including any executive officer or employee who is also a director of the Company or of any Affiliate, who is not a member of the Committee shall be eligible to be designated a Participant. 25 Section 6. Awards - ------------------ (a) Options --- The Committee is hereby authorized to grant Options to Participants with the terms and conditions as set forth below and with such additional terms and conditions, in either case not inconsistent with the provisions of the Plan, as the Committee shall determine; provided, however, that no Option shall be granted, directly or indirectly, in connection with the forfeiture, termination, cancellation or expiration of an Option previously granted under the Plan prior to its normal expiration date if such forfeited, terminated, canceled or expired Option has an exercise price higher than the Option proposed to be granted. (i) Exercise Price --- The exercise price per Share under an Option shall be determined by the Committee; provided, however, that such exercise price shall not be less than 100% of the Fair Market Value of a Share on the date of grant of such Option; and provided further, that such exercise price shall not be adjusted following the date of grant of such Option except as provided in Section 4(b) hereof. (ii) Option Term --- The term of each Option shall be fixed by the Committee; provided, however, that in no event shall the term of any Option exceed a period of ten years from the date of its grant. (iii) Exercisability and Method of Exercise --- An Option shall become exercisable in such manner and within such period or periods and in such installments or otherwise as shall be determined by the Committee. The Committee also shall determine the method or methods by which, and the form or forms, including, without limitation, cash, Shares, other securities, other Awards, or other property, or any combination thereof, having a Fair Market Value on the exercise date equal to the relevant exercise price, in which payment of the exercise price with respect to any Option may be made or deemed to have been made. (iv) Incentive Stock Options --- The terms of any Incentive Stock Option granted under the Plan shall comply in all respects with the provisions of Section 422 of the Code, or any successor provision thereto, and any regulations promulgated thereunder. (b) Stock Appreciation Rights --- The Committee is hereby authorized to grant Stock Appreciation Rights to Participants. Subject to the terms of the Plan and any applicable Award Agreement, a Stock Appreciation Right granted under the Plan shall confer on the holder thereof a right to receive, upon exercise thereof, the excess of (i) the Fair Market Value of one Share on the date of exercise over (ii) the grant price of the right as specified by the Committee, which shall not be less than the Fair Market Value of one Share on the date of grant of the Stock Appreciation Right. Subject to the terms of the Plan, the grant price, term, methods of exercise, methods of settlement (including whether the Participant will be paid in cash or Shares, or a combination thereof), and any other terms and conditions of any Stock Appreciation Right shall be as determined by the Committee; provided, however, that the grant price of a Stock Appreciation Right may not be adjusted following the date of grant of such Stock Appreciation Right except as provided in Section 4(b) hereof. The Committee may impose such conditions or restrictions on the exercise of any Stock Appreciation Right as it may deem appropriate, including, without limitation, restricting the time of exercise of the Stock Appreciation Right to specified periods as may be necessary to satisfy the requirements of Rule 16b-3. (c) Restricted Stock Awards --- (i) Issuance --- The Committee is hereby authorized to grant Awards of Restricted Stock to Participants. (ii) Restrictions --- Shares of Restricted Stock granted to Participants shall be subject to such restrictions as the Committee may impose, which restrictions may lapse separately or in combination at such time or times, in such installments or otherwise, as the Committee may deem appropriate. 26 (iii) Performance Criteria --- The restrictions applicable to Company executives and the Chairman and President of each subsidiary of the Company shall be based on the criteria of attaining over a period of at least three years a compounded annual percentage rate of Total Shareholder Return compared to a specified group of gas distribution utilities. The restrictions applicable to other executives of the subsidiaries shall be as determined by the Committee. (iv) Registration --- Any Restricted Stock granted under the Plan to a Participant may be evidenced in such manner as the Committee may deem appropriate. In the event any stock certificate is issued in respect of Shares of Restricted Stock granted under the Plan to a Participant, such certificate shall be registered in the name of the Participant and shall bear an appropriate legend (as determined by the Committee) referring to the terms, conditions, and restrictions applicable to such Restricted Stock. (v) Payment of Restricted Stock --- At the end of the applicable restriction period relating to Restricted Stock granted to a Participant, one or more stock certificates for the appropriate number of Shares, free of restrictions, shall be delivered to the Participant, or, if the Participant received stock certificates representing the Restricted Stock at the time of grant, the legends placed on such certificates shall be removed. (vi) Forfeiture --- Except as otherwise determined by the Committee, upon termination of employment of a Participant (as determined under criteria established by the Committee) for any reason during the applicable restriction period, all Shares of Restricted Stock still subject to restriction shall be forfeited by the Participant and reacquired by the Company. (d) General --- (i) No Consideration for Awards --- Awards shall be granted to Participants for no cash consideration unless otherwise determined by the Committee. (ii) Award Agreements --- Each Award granted under the Plan shall be evidenced by an Award Agreement in such form (consistent with the terms of the Plan) as shall have been approved by the Committee. (iii) Awards May Be Granted Separately or Together --- Awards to Participants under the Plan may be granted either alone or in addition to, in tandem with, or in substitution for any other Award or any award granted under any other plan of the Company or any Affiliate. Awards granted in addition to or in tandem with other Awards, or in addition to or in tandem with awards granted under any other plan of the Company or any Affiliate, may be granted either at the same time as or at a different time from the grant of such other Awards or awards. (iv) Limits on Transfer of Awards --- No Award (other than Released Securities), and no right under any such Award, shall be assignable, alienable, saleable, or transferable by a Participant otherwise than by will or by the laws of descent and distribution (or, in the case of an Award of Restricted Securities, to the Company); provided, however, that a Participant at the discretion of the Committee may be entitled, in the manner established by the Committee, to designate a beneficiary or beneficiaries to exercise his or her rights, and to receive any property distributable, with respect to any Award upon the death of the Participant. Each Award, and each right under any Award, shall be exercisable, during the lifetime of the Participant, only by such individual or, if permissible under applicable law, by such individual's guardian or legal representative. No Award (other than Released Securities), and no right under any such Award, may be pledged, alienated, attached, or otherwise encumbered, and any purported pledge, alienation, attachment, or encumbrance thereof shall be void and unenforceable against the Company or any Affiliate. (v) Term of Awards --- Except as otherwise provided in the Plan, the term of each Award shall be for such period as may be determined by the Committee. 27 (vi) Rule 16b-3 Six-Month Limitations --- To the extent required in order to comply with Rule 16b-3 only, any equity security offered pursuant to the Plan may not be sold for at least six months after acquisition, except in the case of death or disability, and any derivative security issued pursuant to the Plan shall not be exercisable for at least six months, except in case of death or disability of the holder thereof. Terms used in the preceding sentence shall, for the purposes of such sentence only, have the meanings, if any, assigned or attributed to them under Rule 16b-3. (vii) Share Certificates; Representation by Participants --- In addition to the restrictions imposed pursuant to Section 6(c) hereof, all certificates for Shares delivered under the Plan pursuant to any Award or the exercise thereof shall be subject to such stop transfer orders and other restrictions as the Committee may deem advisable under the Plan or the rules, regulations, and other requirements of the Commission, any stock exchange or other market upon which such Shares are then listed or traded, and any applicable federal or state securities laws, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. The Committee may require each Participant or other Person who acquires Shares under the Plan by means of an Award originally made to a Participant to represent to the Company in writing that such Participant or other Person is acquiring the Shares without a view to the distribution thereof. Section 7. Amendment and Termination; Waiver of Conditions - ----------------------------------------------------------- (a) Amendments to the Plan --- The Board of Directors of the Company may amend, alter, suspend, discontinue, or terminate the Plan at any time; provided, however, that no amendment, alteration, suspension, discontinuation or termination of the Plan shall in any manner (except as otherwise provided in this Section 7) adversely affect any Award granted and then outstanding under the Plan without the consent of the Participant; provided further that, notwithstanding any other provision of the Plan or any Award Agreement, without the approval of the shareholders of the Company, no amendment, alteration, suspension, discontinuation, or termination of the Plan shall be made that would: (i) increase the total number of Shares available for Awards under the Plan or the maximum number of Shares with respect to which Awards may be made to individual Participants, except as provided in Section 4(b) hereof; (ii) modify the performance criteria pursuant to which Restricted Stock vests; (iii) materially increase the benefits accruing to Participants under the Plan; or (iv) materially modify the requirements as to eligibility for participation in the Plan. (b) Adjustments of Awards Upon Certain Acquisitions --- In the event the Company or any Affiliate shall assume outstanding employee awards or the right or obligation to make future such awards in connection with the acquisition of another business or another corporation or business entity, the Committee may make such adjustments, not inconsistent with the terms of the Plan, in the terms of Awards granted to Participants as it shall deem appropriate in order to achieve reasonable comparability or other equitable relationship between the assumed awards and the Awards granted under the Plan to Participants as so adjusted. (c) Correction of Defects, Omissions, and Inconsistencies --- The Committee may correct any defect, supply any omission, or reconcile any inconsistency in any Award or Award Agreement in the manner and to the extent it shall deem necessary or desirable to carry the Plan into effect. Section 8. General Provisions - ------------------------------ (a) No Rights to Awards --- No Key Salaried Employee, Participant or other Person shall have any claim to be granted any Award under the Plan, and there is no obligation for uniformity of treatment of Key Salaried Employees, Participants, or holders or beneficiaries of Awards under the 28 Plan. The terms and conditions of Awards need not be the same with respect to each Participant. (b) Withholding --- No later than the date as of which an amount first becomes includible in the gross income of a Participant for federal income tax purposes with respect to any Award under the Plan, the Participant shall pay to the Company, or make arrangements satisfactory to the Company regarding the payment of, any federal, state, local or foreign taxes of any kind required by law to be withheld with respect to such amount. Unless otherwise determined by the Committee, withholding obligations arising with respect to Awards to Participants under the Plan may be settled with Shares (other than Restricted Securities), including Shares that are part of, or are received upon exercise of, the Award that gives rise to the withholding requirement. The obligations of the Company under the Plan shall be conditional on such payment or arrangements, and the Company and any Affiliate shall, to the extent permitted by law, have the right to deduct any such taxes from any payment otherwise due to the Participant. The Committee may establish such procedures as it deems appropriate for the settling of withholding obligations with Shares, including, without limitation, the establishment of such procedures as may be necessary to satisfy the requirements of Rule 16b-3. (c) No Limit on Other Compensation Arrangements --- Nothing contained in the Plan shall prevent the Company or any Affiliate from adopting or continuing in effect other or additional compensation arrangements, and such arrangements may be either generally applicable or applicable only in specific cases. (d) Rights and Status of Recipients of Awards --- The grant of an Award shall not be construed as giving a Participant the right to be retained in the employ of the Company or any Affiliate. Further, the Company or any Affiliate may at any time dismiss a Participant from employment, free from any liability, or any claim under the Plan. Except for rights accorded under the Plan and under any applicable Award Agreement, Participants shall have no rights as holders of Shares as a result of the granting of Awards hereunder. (e) Unfunded Status of the Plan --- Unless otherwise determined by the Committee, the Plan shall be unfunded and shall not create (or be construed to create) a trust or a separate fund or funds. The Plan shall not establish any fiduciary relationship between the Company and any Participant or other Person. To the extent any Person holds any right by virtue of a grant under the Plan, such right (unless otherwise determined by the Committee) shall be no greater than the right of an unsecured general creditor of the Company. (f) Governing Law --- The validity, construction, and effect of the Plan and any rules and regulations relating to the Plan shall be determined in accordance with the internal laws of the State of Wisconsin and applicable federal law. (g) Severability --- If any provision of the Plan or any Award Agreement or any Award is or becomes or is deemed to be invalid, illegal, or unenforceable in any jurisdiction, or as to any Person or Award, or would disqualify the Plan, any Award Agreement or any Award under any law deemed applicable by the Committee, such provision shall be construed or deemed amended to conform to applicable laws, or if it cannot be so construed or deemed amended without, in the determination of the Committee, materially altering the intent of the Plan, any Award Agreement or the Award, such provision shall be stricken as to such jurisdiction, Person, or Award, and the remainder of the Plan, any such Award Agreement and any such Award shall remain in full force and effect. (h) No Fractional Shares --- No fractional Shares or other securities shall be issued or delivered pursuant to the Plan, any Award Agreement or any Award, and the Committee shall determine (except as otherwise provided in the Plan) whether cash, other securities, or other property shall be paid or transferred in lieu of any fractional Shares or other securities, or whether such fractional Shares or other securities or any rights thereto shall be canceled, terminated, or otherwise eliminated. 29 (i) Headings --- Headings are given to the Sections and subsections of the Plan solely as a convenience to facilitate reference. Such headings shall not be deemed in any way material or relevant to the construction or interpretation of the Plan or any provision thereof. Section 9. Effective Date of the Plan - -------------------------------------- The Plan shall be effective as of March 1, 1994, subject, however, to the approval of the Plan by the shareholders of the Company at the next annual meeting of shareholders, or any adjournment thereof, within twelve months following the date of adoption of the Plan by the Board of Directors of the Company. Section 10. Term of the Plan - ----------------------------- No Award shall be granted under the Plan after March 1, 2004. However, unless otherwise expressly provided in the Plan or in an applicable Award Agreement, any Award theretofore granted may extend beyond such date, and, to the extent set forth in the Plan, the authority of the Committee to amend, alter, adjust, suspend, discontinue, or terminate any such Award, or to waive any conditions or restrictions with respect to any such Award, and the authority of the Board of Directors of the Company to amend the Plan, shall extend beyond such date. 30 [X] Please mark your votes as this WICOR VOTING AUTHORIZATION - ---------------------------------------------------------------------------- The Board of Directors recommends a vote FOR all nominees in Item 1 and FOR Item 2. - ---------------------------------------------------------------------------- 1. Election of the following nominees 2. To approve and adopt the as WICOR, directors for three-year terms: WICOR Inc. 1994 Long-Term Performance Plan Willie D. Davis, James L. Forbes, Guy A. Osborn, and William B. Winter FOR all nominees WITHHOLD (except as marked AUTHORITY to the contrary) to vote for all nominees FOR AGAINST ABSTAIN / / / / / / / / / / (Instruction: To withhold authority to vote for any nominee write the name below) ----------------------------------------------- . . . . . . . . . . . . . . . . . . . . . . . . Please check this box if . . you plan to attend the . . annual meeting . . / / . . . . This Voting Authoriza- . . tion is Solicited by the . . Board of Directors . . . . . . . . . . . . . . . . . . . . . . . . Signature(s) _________________________________ Date __________________ NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - FOLD AND DETACH HERE March 10, 1994 Dear WICOR Shareholder: Enclosed is a notice of WICOR's annual shareholders meeting, coming up April 28, 1994, in Milwaukee. Also enclosed is a proxy statement and voting authorization card. You have already received a copy of the 1993 WICOR annual report. It's important that you fill out and return the authorization card as soon as possible. It entitles you, as an owner of WICOR common stock through our company's savings plan, to vote your interest at the annual meeting. Filing out the card directs Citibank, N.A., as Trustee of your shares held in the savings plan as of February 22,1994, to vote them on your behalf. You must return your marked and signed card in order to have the Trustee vote your shares. The WICOR Board of Directors urges you to exercise this right to vote. To make sure your vote counts, and to prevent the expense of WICOR sending further reminder notices, please mark and sign your voting authorization card now and return it to Citibank in the enclosed envelope. Thank you. Sincerely, Robert A. Nuernberg Secretary YOUR VOTE IS IMPORTANT. TO ASSURE YOUR REPRESENTATION AT THE WICOR SHAREHOLDERS ANNUAL MEETING, MARK YOUR VOTES ON THE ENCLOSED VOTING AUTHORIZATION CARD, DATE IT, SIGN IT EXACTLY AS YOUR NAME APPEARS AND RETURN IT TODAY IN THE ENCLOSED ENVELOPE. 31 WICOR VOTING AUTHORIZATION The undersigned acknowledges receipt of the WICOR, Inc. Annual Report for 1993 and the proxy solicitation material relative to the Annual Meeting of Shareholders of WICOR, Inc. to be held April 28, 1994. As to my interest in the Common Stock of WICOR, Inc. held by Citibank, N.A., the Trustee under the Wisconsin Gas Company Non-Union Employees' Savings Plan, Wisconsin Gas Company Local 6-18 Savings Plan and Wisconsin Gas Company Local No. 1 Savings Plan, I hereby instruct the Trustee to vote as indicated on the reverse side. The shares represented by this authorization will be voted as directed by the undersigned. If no direction is given when the duly executed authorization is returned, the Trustee cannot vote such shares. THIS VOTING AUTHORIZATION IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS OF WICOR, INC., APRIL 28, 1994. (continued on the reverse side) 32 /X/ Please mark your votes as this WICOR PROXY ______________ Account Number - ---------------------------------------------------------------------------- The Board of Directors recommends a vote FOR all nominees in Item 1 and FOR Item 2. - ---------------------------------------------------------------------------- 1. Election of the following nominees 2. To approve and adopt the directors for three-year terms: WICOR, Inc. 1994 Long-Term Willie D. Davis, James L. Forbes, Performance Plan Guy A. Osborn, and William B. Winter FOR all nominees WITHHOLD (except as marked AUTHORITY to the contrary) to vote for all nominees FOR AGAINST ABSTAIN / / / / / / / / / / (Instruction: To withhold authority to vote for any nominee write the name below) ----------------------------------------------- . . . . . . . . . . . . . . . . . . . Please check this box if you plan . . to attend the annual meeting . . [ ] . . . . This Proxy is Solicited by the . . Board of Directors . . . . . . . . . . . . . . . . . . . Signature(s) ____________________________________ Date __________________ NOTE: Please sign as name appears hereon. Joint owners should each sign. When signing as attorney, executor, administrator, trustee or guardian, please give full title as such. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - FOLD AND DETACH HERE March 10, 1994 Dear WICOR Shareholder: We're pleased to send you the enclosed 1993 annual report and proxy materials. I hope you'll find the annual report interesting and informative, and that you'll exercise your right to vote at the annual meeting by returning your proxy card promptly. I'd also like to invite you to attend WICOR's Annual Meeting of Shareholders on Thursday, April 28, 1994. This year's meeting will be held a the Italian Community Center, 631 East Chicago Street, Milwaukee, Wisconsin, beginning at 2:00 p.m. (Central Time). A map with directions to the center is on the reverse side of this letter. Free parking is available in a lot on the south side of the building. At the meeting, we will elect directors and consider a proposal to adopt a long-term performance plan for key employees. As an investor in WICOR, you have a right and a responsibility to vote on issues affecting your company. Regardless of whether you plan to attend the annual meeting, please mark the appropriate boxes on the proxy form, and then date, sign and promptly return the form in the enclosed, postage-paid envelope. If you sign and return the proxy form without specifying your choices, your shares will be voted according to the recommendations of your board of directors. If you plan to attend the annual meeting, please check the appropriate box on the proxy card. We welcome your comments and suggestions, and we will provide time during the meeting for questions from shareholders. I hope to see you on April 28. Sincerely, George E. Wardeberg President and Chief Executive Officer 33 WICOR COMMON SHAREHOLDER PROXY The undersigned hereby appoints George E. Wardeberg and Joseph P. Wenzler, and each of them, as proxy with the power of substitution (to act by a majority present or if only one acts then by that one) to vote for the undersigned as indicated on the reverse side and in their discretion on such other matters as may properly be considered at the Annual Meeting of Shareholders of WICOR, Inc. to be held Thursday, April 28, 1994, at 2:00 P.M., at the Italian Community Center, 631 E. Chicago Street, Milwaukee, Wisconsin, and at any adjournments thereof. The shares represented by this proxy will be voted as directed by the shareholder. If no direction is given when the duly executed proxy is returned, such shares will be voted "FOR" all nominees in Item 1 and "FOR" Item 2 described on the reverse side. Please mark, date and sign on the reverse side exactly as name appears and return in the enclosed postage-paid envelope. If shares are held jointly, each shareholder named should sign. If signing as attorney, administrator, executor, trustee or guardian, please give full title as such. If a corporation, please sign in full corporate name by duly authorized officer. THIS PROXY IS SOLICITED BY THE BOARD OF DIRECTORS FOR USE AT THE ANNUAL MEETING OF SHAREHOLDERS OF WICOR, INC., APRIL 28, 1994. (continued on the reverse side) - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - Map of downtown Milwaukee, Wisconsin, showing location of annual meeting -----END PRIVACY-ENHANCED MESSAGE-----