10-K405 1 1994 WICOR FORM 10-K FOR THE YEAR ENDED 12/31/94 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-K / X / ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 1994 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 incorporation or organization) Identification No.) 626 East Wisconsin Avenue P.O. Box 334 Milwaukee, Wisconsin 53201 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 414-291-7026 Securities registered pursuant to Section 12(b) of the Act: Common Stock, $1 par value New York Stock Exchange Associated Common Stock Purchase Rights New York Stock Exchange Securities registered pursuant to Section 12(g) of the Act: None Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. X Yes No. Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. / X / Aggregate market value of the voting stock held by non-affiliates of the registrant: $474,178,432 at February 28, 1995. Number of shares outstanding of each of the registrant's classes of common stock, as of February 28, 1995: Common Stock, $1 par value 16,934,944 shares Documents Incorporated by Reference: WICOR, Inc. proxy statement dated March 10, 1995 (Part III) WICOR, Inc. 1994 Annual Report to Shareholders (Parts I and II) 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 1 C. Gas Supply and Pipeline Capacity 3 (1) General 3 (2) Pipeline Capacity 4 (3) Term Gas Supply 4 (4) Spot Market Gas Supply 4 D. Wisconsin Regulatory Matters (1) Rate Matters 5 (2) Transition Cost Recovery Policy 5 (3) Service Area Expansion 5 (4) Changing Regulatory Environment 5 E. Employees 5 2. Manufacturing and Sale of Pumps and Water Processing Equipment 6 A. General 6 B. U.S. Operations 6 C. International Operations 6 D. Raw Materials and Patents 7 E. Employees 7 Item 2. Properties 7 (a) Capital Expenditures 7 (b) Retail Distribution of Natural Gas 7 (c) Manufacturing of Pumps and Water Processing Equipment 7 Item 3. Legal Proceedings 7 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 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 12 Item 12. Security Ownership of Certain Beneficial Owners and Management 12 Item 13. Certain Relationships and Related Transactions 12 PART IV 12 Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K 12 (a) Documents Filed as Part of the Report 12 1. All Financial Statements and Financial Statement Schedules 12 2. Financial Statement Schedules 12 3. Exhibits 12 (b) Reports on Form 8-K 15 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 and sale 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. 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. The Company acquired all of the outstanding common stock of Sta-Rite through a merger in 1982. 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 purifications 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. At December 31, 1994, the Company (including subsidiaries) had 3,214 full- time equivalent employees. (b) Financial Information About Industry Segments Reference is made to the section entitled "Financial Review-General Overview" set forth in the Company's 1994 Annual Report to Shareholders. Such section is included in Exhibit 13 hereto and is hereby incorporated herein by reference. (c) Narrative Description of Business 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, 1994, Wisconsin Gas distributed gas to approximately 495,000 residential, commercial and industrial customers in 496 communities throughout Wisconsin having an estimated population of 1,458,000 based on the State of Wisconsin's estimates for 1994. 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 5 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, arranging transportation, and managing other aspects of acquisition, transportation and use of gas. 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 of gas), 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 Year Ended December 31, 1994 December 31, 1993 -------------------- -------------------- Thousands Thousands Customer Class of therms* Percent of therms* Percent --------------------------- ---------- ------- ---------- ------- Residential 463,690 38.8 479,640 39.8 Commercial 185,980 15.5 190,600 15.8 Large Volume Commercial and Industrial Firm 145,440 12.2 152,460 12.7 Commercial and Industrial Interruptible 282,170 23.6 208,490 17.3 Transported 119,080 9.9 174,080 14.4 ---------- ------- ---------- ------- Total Gas Purchased and Transported 1,196,360 100.0 1,205,270 100.0 ========== ======= ========== =======
*One therm equals 100,000 BTU's. 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 establishing the peak day and annual gas requirements that Wisconsin Gas is obligated to supply. The service options program 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 "Wisconsin Regulatory Matters - Gas Supply and Pipeline Capacity." 6 In 1994, Wisconsin Gas became the first utility in the country to offer its large customers the option of locked or capped pricing. Under the locked pricing option, Wisconsin Gas will sell gas at an agreed fixed unit price for a specified period of time, such as a year. Under the capped pricing option, Wisconsin Gas will sell gas at a price not to exceed an agreed unit price. These pricing options enable large customers to budget their gas costs more precisely and also assist Wisconsin Gas in retaining large customers. The PSCW has instituted a proceeding to consider how its regulation of gas distribution utilities should change to reflect the changing competitive environment in the gas industry. See "Wisconsin Regulatory Matters." In 1994, Wisconsin Gas added more than 10,000 customers. See "Wisconsin Regulatory Matters - 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 33% of Wisconsin Gas' annual deliveries, it contributes only about 12% of Wisconsin Gas' margin. C. Gas Supply and Pipeline Capacity (1) General Prior to the Federal Energy Regulatory Commission's ("FERC") Order No. 636, the interstate pipelines serving Wisconsin Gas were the primary suppliers of natural gas to Wisconsin Gas. During the transition period prior to the implementation of Order No. 636, Wisconsin Gas gradually assumed responsibility for the acquisition of supply in the production areas of North America, as well as the management of transportation and storage capacities to deliver that supply to its market area. On November 1, 1993, Wisconsin Gas commenced full operation and responsibility for its supply and capacity under the requirements of Order No. 636. One of the provisions of Order No. 636 is capacity release. Capacity release creates a secondary market for pipeline capacity and gas supplies. Local distribution companies, such as Wisconsin Gas, must contract for capacity and supply sufficient to meet the peak day firm demand of their customers. Peak or near peak days occur only a few times each year, so capacity release facilitates higher utilization of capacity during those times when the capacity is not needed by the utility. Through pre-arranged agreements and day-to-day electronic bulletin board postings, interested parties can purchase that capacity. The proceeds from these transactions are passed-through to ratepayers, thereby helping to offset the costs associated with holding the capacity. During 1994, Wisconsin Gas was an active participant in the capacity release market. During 1993-94, the first year of operating under Order No. 636, Wisconsin Gas Company was able to meet its contractual obligations with both its suppliers and its customers despite unseasonably cold weather in January and February 1994 and unseasonably warm weather in November and December 1994. 7 The following table sets forth the volumes of natural gas purchased by Wisconsin Gas and the volumes transported for customers.
Year Ended Year Ended December 31, 1994 December 31, 1993 -------------------- -------------------- Thousands Thousands Natural Gas Purchased of Therms* Percent of Therms* Percent ------------------------- ---------- ------- ---------- ------- ANR 0 0.0 467,544 38.8 NNG 0 0.0 20,348 1.7 Viking 0 0.0 11,917 1.0 Term contracts (in excess of 30 days) 980,170 81.9 398,197 33.0 Spot Market 97,110 8.1 133,184 11.1 ---------- ------- ---------- ------- Total Gas Purchased 1,077,280 90.0 1,031,190 85.6 Customer Gas Transported 119,080 10.0 174,080 14.4 ---------- ------- ---------- ------- Total Gas Purchased and Transported 1,196,360 100.0 1,205,270 100.0 ========== ======= ========== =======
*One therm equals 100,000 BTU's. Wisconsin Gas purchased no gas from ANR, NNG and Viking in 1994 because Order No. 636 prohibits pipelines from selling gas as they did historically. (2) Pipeline Capacity Interstate pipelines serving Wisconsin originate in three major gas producing areas of North America: the Oklahoma and Texas basins, the Gulf of Mexico and western Canada. Wisconsin Gas has contracted for long-term firm capacity on a relatively equal basis from each of these areas. This strategy reflects management's belief that overall supply security is enhanced by geographic diversification of Wisconsin Gas' supply portfolio and that Canada represents an important long-term source of reliable, competitively priced gas. Because of the seasonal variations in gas usage in Wisconsin, Wisconsin Gas has also contracted with ANR and NNG for substantial underground storage capacity, primarily in Michigan. There are no known underground storage formations in Wisconsin capable of commercialization. Storage enables Wisconsin Gas to 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-round. 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. 8 Maximum Daily (Thousands Pipeline of Therms*) ------------------ ------------- ANR Mainline 2,999 Storage 4,879 NNG Mainline 1,077 Storage 150 Viking Mainline 64 Peaking Facilities 54 ------------- Total 9,223 ============= *One therm equals 100,000 BTU's. (3) Term Gas Supply Wisconsin Gas has term firm contracts (initial terms in excess of 30 days) with approximately 30 gas suppliers for gas produced in each of the three producing areas discussed above. The term contracts have varying durations so that only a portion of Wisconsin Gas' gas supply expires in any year. Wisconsin Gas believes the volume of gas under contract is sufficient to meet its forecasted firm peak day demand. The following table sets forth Wisconsin Gas' winter season maximum daily firm total gas supply. Maximum Daily (Thousands of Therms*) ------------- Domestic flowing gas 2,387 Canadian flowing gas 1,396 Storage withdrawals 5,029 ------------- 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. D. Wisconsin Regulatory Matters (1) Rate Matters Wisconsin Gas is subject to the jurisdiction of the PSCW as to various phases of its operations, including rates, customer service and issuance of securities. In July 1993, Wisconsin Gas submitted an incentive rate making proposal to the PSCW. The PSC significantly modified Wisconsin Gas' proposal in its November 1994 rate order. Under the PSCW rate order, Wisconsin Gas' rates are subject to a three year margin rate cap (through October 1997) based on the rates approved in November 1993. The PSCW order also specified margin rate floors for each rate class. Wisconsin Gas has the ability to raise or lower margin rates within the specified range on a quarterly basis. The rates at December 31, 1994 were at the top of the range. In addition, the PSCW 9 order required Wisconsin Gas to reduce its rates by $10.1 million, on an annual basis, to reflect a reduction in certain non-cash expenses. Over a twelve month period, beginning with the effective date of the order, this rate reduction will result in no net income impact, but will reduce cash flow. The rate order was effective November 14, 1994. Wisconsin Gas' rates contain clauses providing for periodic adjustment, with PSCW approval, to reflect changes in purchased gas costs including the recovery of transition costs passed through by pipeline suppliers. See "Wisconsin Rate Matters - 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 7 to Notes to Consolidated Financial Statements contained in Exhibit 13, the Company's 1994 Annual Report to Shareholders, 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 1994, Wisconsin Gas extended service to nine new communities and added 10,000 customers. Over the last four years, Wisconsin Gas has extended service to 99 new communities and added 42,000 customers. (4) Changing Regulatory Environment The PSCW has instituted a proceeding to consider how its regulation of gas distribution utilities should change to reflect the changing competitive environment in the gas industry. To date, the PSCW has made a policy decision to deregulate gas costs for customer segments with workably competitive market choices. The PSCW has identified numerous issues which must be resolved before its policy can be implemented. A generic proceeding has been instituted during which these issues will be aired and decided. Hearings are scheduled to begin in January 1996, with the expectation that the new regulatory framework will be implemented by the end of 1996. The Company is unable to determine what impact this proceeding may have on Wisconsin Gas' operations or financial position. E. Employees At December 31, 1994, Wisconsin Gas had 1,166 full-time equivalent active employees. 2. MANUFACTURING AND SALE OF PUMPS AND WATER PROCESSING EQUIPMENT A. General The Company's manufacturing subsidiaries manufacture and sell 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, Germany, Italy, Australia, New Zealand and Russia. 10 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 also produce large higher pressure and capacity water pumps used in agricultural and turf irrigation systems and in a wide variety of commercial, industrial and municipal fluids-handling applications. Small, high performance pumps, and related fluids-handling products, are used in four primary markets: (1) the food service industry, where gas operated pumps are used for pumping soft drinks made from syrups, and electric motor driven pumps are used for water boost and drink dispensing; (2) the recreational vehicle and marine markets, where electric motor driven pumps are used for a variety of applications including pumping potable water in travel trailers, motor homes, camping trailers and boats, and for other applications including marine 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 pro- ducer 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", "AQUALITY" and "AQUA TOOLS". Domestic pumps and water products are sold and serviced primarily through a network of independent distributors, dealers, retailers and manufacturers' representatives serving the well drilling, hardware, plumbing, pump installing, irrigation, pool and spa, food service, recreational vehicle, marine, industrial and do-it-yourself markets. Sales are also made on a private brand basis to large customers in all water products markets and to original equipment manufacturers. Backlog of orders for pumps and water products is not a significant indicator of future sales. C. International Operations International operations are conducted primarily by international subsidiaries and export operations from the United States. Products are sold to markets in approximately 110 countries on six continents. Foreign manufac- turing of products from imported and locally manufactured components is carried out by United Kingdom, German, 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 37% of 1994 manufacturing sales. 11 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, 1994, the manufacturing businesses had 2,048 full time equivalent active employees. Item 2. PROPERTIES (a) Capital Expenditures The Company's capital expenditures for the year ended December 31, 1994, totaled $55.1 million. Retirements during this period totaled $10.1 million. Except as discussed in "Legal Proceedings", the Company does not expect to make any material capital expenditures for environmental control facilities in 1995. (b) Retail Distribution of Natural Gas Wisconsin Gas owns a distribution system which, on December 31, 1994, included approximately 8,100 miles of distribution and transmission mains, 407,000 services and 498,000 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 stations, peaking facilities and its major service centers, including garage and warehouse facilities. The Milwaukee and other office buildings, the principal service facilities and the gas distribution systems of Wisconsin Gas are owned by it in fee subject to the lien of its Indenture of Mortgage and Deed of Trust, dated as of November 1, 1950, under which its first mortgage bonds are issued, and to permissible encumbrances as therein defined. Where distribution mains and services occupy private property, Wisconsin Gas in some, but not all, instances has obtained consents, permits or easements for such installations from the apparent owners or those in possession, generally without an examination of title. (c) Manufacturing of Pumps and Water Processing Equipment The manufacturing businesses have 11 manufacturing facilities located in California (2), Nebraska, Wisconsin (2), Germany, Australia (2), Italy, New Zealand and Russia. These plants contain a total of approximately 1,408,000 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 England and France, and one each in Canada, Mexico, New Zealand and Singa- pore. 12 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 ("WDNR") 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 since 1991. Although management believes the amounts reserved will be adequate to effect any necessary restoration, there is a possibility that additional costs may be incurred. In separate lawsuits filed on April 18, 1994, the State of California and two environmental groups sued Sta-Rite and other submersible pump manufacturers claiming violation of the California's Health and Safety Code (Proposition 65). The lawsuits allege certain pumps under certain conditions leach lead into the ground water, resulting in lead levels in drinking water in violation of Proposition 65. The lawsuits seek, among other remedies, injunctive relief and unspecified monetary penalties. Based upon information supplied to it by the environmental groups, the U.S. Environmental Protection Agency advised all owners of certain new submersible well pumps to have their water tested. Based upon its own testing and information currently available, including information from several state agencies, Sta-Rite has established reserves believed to be adequate with respect to these actions and intends to vigorously defend against the claims made. Although management believes the amounts reserved will be adequate to cover any costs, there is a possibility that additional costs may be incurred in the future. In July 1994, Sta-Rite was notified by the WDNR that it believed solvents used at a manufacturing site previously operated by Sta-Rite have migrated and contributed to the contamination of a Deerfield, Wisconsin municipal well, serving Deerfield residents, and surrounding property. Based upon the preliminary investigation and reserves established, the Company believes that the resolution of this matter will not have a material adverse effect upon its financial condition. However, there is a possibility that costs in excess of the amount reserved may be incurred in the future. A lawsuit brought in 1993 by Waste Management of Wisconsin, Inc. against Sta-Rite and other generators for cleanup costs relating to a landfill near Sta- Rite's former Deerfield location was resolved in 1994 within the reserves established. Sta-Rite is also involved in environmental matters with respect to certain other sites. The Company has established accruals for all presently known and quantifiable environmental contingencies relating to these sites in accordance with generally accepted accounting principles. In establishing these accruals, management considered (a) reports of environmental consultants retained by Sta- Rite, (b) the costs incurred to date by Sta-Rite at sites where clean-up is presently ongoing and the estimated costs to complete the necessary restoration work remaining at such sites, (c) the financial solvency, where appropriate, of other parties that have been responsible for restoration at specified sites, and (d) the experience of other parties who have been involved in the restoration 13 of comparable sites. The accruals recorded by the Company with respect to the foregoing environmental matters have not been reduced by potential insurance or other recoveries and are not discounted. Based on the foregoing and given current information, management believes that future costs in excess of the amounts accrued on all presently known and quantifiable environmental contingencies will not be material to the Company's financial position or results of operations. With respect to several other sites in which Sta-Rite may have environmental liability, management is currently conducting investigation to determine the scope, if any, of Sta-Rite's potential liability regarding the restoration of such sites and the estimated costs of the restoration. As a result of the preliminary nature of the investigations, no reasonable estimate can be given regarding the costs, if any, that Sta-Rite may incur with respect to these sites. 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 restoration alternatives available, the Company has estimated that cleanup costs could range from $22 million to $75 million. As of December 31, 1994, the Company has accrued $37.2 million for cleanup costs in addition to $4.0 million of costs already incurred. These estimates are based on current undiscounted costs. It should also be noted that the numerous assumptions such as the type and extent of contamination, available restoration techniques, and regulatory requirements which are used in developing these estimates are subject to change as new information becomes available. Any such changes in assumptions could have a significant impact on the potential liability. The WDNR issued a Potentially Responsible Party letter to Wisconsin Gas for these two sites in September 1994. Following receipt of this letter, Wisconsin Gas and WDNR held an initial meeting to discuss the sites. At the meeting it was agreed that Wisconsin Gas would prepare a remedial action options report from which it will select specific restoration actions for recommendation to the WDNR. This information will be prepared in 1995. Barring unforeseen delays, expenditures by Wisconsin Gas on restoration work could commence as early as 1995 and will increase in future years as plan approvals are obtained. Expenditures over the next several years are expected to total approximately $20 million. Although most of the work and costs are expected to be incurred in the first several years of the plan, monitoring of sites and other necessary actions may be undertaken for up to 30 years. In February 1994, Wisconsin Gas commenced suit against nine insurance carriers seeking a declaratory judgment regarding insurance coverage for the two sites. Settlements were reached with each of the carriers during 1994. If the amount recovered from the insurance carriers is insufficient to remediate both sites, expenditures not recovered will be allowed full recovery (other than for carrying costs) in rates based upon recent PSCW orders. Accordingly, the accrual for future restoration costs has been deferred as a regulatory asset. Certain related investigation costs incurred to date are currently being recovered in utility rates. Wisconsin Gas also owns a service center that is constructed on a site that was previously owned by the City of Milwaukee and was used by the City as a public dump site. Wisconsin Gas has conducted a site assessment at the request of the WDNR and has sent the report of its assessment to the WDNR. Management cannot predict whether or not the WDNR will require any restoration action, nor the extent or cost of any restoration actions that may be required. In the judgment of management, any restoration costs incurred by Wisconsin Gas will be recoverable from the City of Milwaukee or in Wisconsin Gas' rates pursuant to the PSCW's orders discussed above. See Note 7 to Notes to Consolidated Financial Statements contained in Exhibit 13, the Company's 1994 Annual Report to Shareholders, which note is hereby incorporated herein by reference. 14 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 1994. EXECUTIVE OFFICERS OF THE REGISTRANT The following sets forth the names and ages of, and the offices held by, the executive officers of the Company. The officers serve one-year terms commencing with their election at the meeting of the Board of Directors following the annual meeting of shareholders in April.
Name Age Offices Held ------------------- --- ---------------------- George E. Wardeberg 59 President and Chief Executive Officer of the Company, and Chairman of Wisconsin Gas, Sta-Rite and SHURflo Thomas F. Schrader 45 Vice President of the Company and President and Chief Executive Officer of Wisconsin Gas James C. Donnelly 49 Vice President of the Company and President and Chief Executive Officer of Sta-Rite Joseph P. Wenzler 53 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
Each of the executive officers has held his position for more than five years, except as follows: Mr. Wardeberg was elected to his current positions effective February 1, 1994. Prior thereto, he was President and Chief Operating Officer of the Company and Vice Chairman and Chief Executive Officer of Sta-Rite from 1992 to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and Vice President-Water Systems of Sta-Rite from 1989 to 1992. Prior thereto, he was Vice Chairman and Chief Operating Officer of Whirlpool Corporation. Mr. Donnelly was elected President and Chief Executive Officer of Sta- Rite in 1994. He has been a Vice President of the Company since 1987. Previously, he served as President and Chief Operating Officer of Sta-Rite from 1992 to 1994, and as Vice President, Treasurer and Chief Financial Officer of the Company and Wisconsin Gas from 1990 to 1992. 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. 15 Mr. Wenzler was elected Vice President, Treasurer and Chief Financial Officer of the Company and Vice President and Chief Financial Officer of Wisconsin Gas in 1992 and as Treasurer and Secretary of SHURflo in 1993. Prior thereto, he served as Vice President of the Company and President and Chief Executive Officer of Sta-Rite from 1990 to 1992, and President and Chief Operating Officer of Sta-Rite from 1986 to 1990. PART II Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS The Company's common stock and the associated common stock purchase rights (which do not currently trade independently of the common stock) are traded on the New York Stock Exchange. For information regarding the high and low sales prices for the Company's common stock and dividends paid per share in each quarter of 1994 and 1993, see the section entitled "Investor Information" set forth in the Company's 1994 Annual Report to Share- holders. Such section is included in Exhibit 13 hereto and is hereby incorporated herein by reference. At December 31, 1994, there were 16,517 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, the Company's Annual Report to Shareholders, which note is hereby incorporated herein by reference. By order of the PSCW, Wisconsin Gas is generally permitted to pay dividends up to the amount projected in its rate case. 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, 1995. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, the Company's 1994 Annual Report to Shareholders, 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, 1994, Wisconsin Gas' average common equity level was 48.82%. In addition, $8.5 million of Sta-Rite net assets at December 31, 1994, 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, the Company's 1994 Annual Report to Shareholders, which note is incorporated herein by reference. Item 6. SELECTED FINANCIAL DATA Reference is made to the section entitled "Selected Financial Data" set forth in the Company's 1994 Annual Report to Shareholders. Such section is included in Exhibit 13 hereto and is hereby incorporated herein by reference. 16 Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Reference is made to the section entitled "Financial Review" set forth in the Company's 1994 Annual Report to Shareholders. Such section is included in Exhibit 13 hereto and is hereby incorporated herein by reference. Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Reference is made to the WICOR, Inc. consolidated balance sheets and consolidated statements of capitalization as of December 31, 1994 and 1993, and the related consolidated statements of income, common equity and cash flow for each of the three years in the period ended December 31, 1994, together with the report of independent public accountants dated February 2, 1995, all appearing in Exhibit 13, the Company's 1994 Annual Report to Shareholders, 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. 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, 1995, 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" included in Part I hereof for information regarding executive officers of the Company. Item 11. EXECUTIVE COMPENSATION Reference is made to "Executive Compensation" included in the WICOR proxy statement dated March 10, 1995, 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, 1995, 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, 1995, which is hereby incorporated herein by reference, for the information required to be disclosed under this item. 17 PART IV Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K (a) The following documents are filed as part of this Annual Report on Form 10-K: 1. All Financial Statements. The WICOR, Inc. consolidated balance sheets and statements of capitalization as of December 31, 1994 and 1993, and the related consolidated statements of income, common equity and cash flow for each of the three years in the period ended December 31, 1994, together with the report of independent public accountants dated February 2, 1995, included in Exhibit 13, the Company's 1994 Annual Report to Shareholders, which is incorporated herein by reference. 2. Financial statement schedules. Schedule III -- Condensed Statements of Income, Retained Earnings and Cash Flow (Parent Company Only) for the Years Ended December 31, 1994, 1993 and 1992; Condensed Balance Sheets (Parent Company Only) as of December 31, 1994 and 1993; Notes to Parent Company Only Financial Statements. Financial statement schedules other than those referred to above have been omitted as not applicable or not required. 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 Amendment to WICOR, Inc. By-laws, effective February 28, 1995. 3.3 WICOR, Inc. By-laws, as amended. 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 (incorporated by reference to Exhibit 4.6 to Wisconsin Gas Company's Form S-3 Registration Statement No. 33-43729). 18 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). 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's 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 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). 4.10 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). 4.11 Extension of Revolving Credit and Term Loan Agreements, effective March 29, 1994, among WICOR, Inc., Wisconsin Gas Company and Sta-Rite Industries, Inc., respectively, and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Saving Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent. 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). 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). 19 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. (incorporated by reference to Exhibit 10.2 to the Company's Form 10-K Annual Report for 1993). 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 connec- tion with the WICOR, Inc. 1987 Stock Option Plan (incorporated by reference to Exhibit 10.20 to the Company's Form 10-K Annual Report for 1991). 10.5# WICOR, Inc. 1992 Director Stock Option Plan, (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 Registration Statement No. 33-67132). 10.6# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference to Exhibit 4.2 to the Company's Form S-8 Registration Statement No. 33-67132). 10.7# WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 Registration Statement No. 33-55755). 10.8# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1994 Long-Term Performance Plan, (incorporated by reference to Exhibit 4.2 to the Company's Form S-8 Registration Statement No. 33-55755). 10.9# Form of restricted stock agreement used in connection with the WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference to Exhibit 4.3 to the Company's Form S-8 Registration Statement No. 33-55755). 10.10# WICOR, Inc. 1995 Officers' Incentive Compensation Plan. 20 10.11# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program (incorporated by reference to Exhibit 10.8 to the Company's Form 10-K Annual Report for 1993). 10.12# Wisconsin Gas Company 1995 Officers' Incentive Compensation Plan. 10.13# 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). 10.14# 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). 10.15# 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). 10.16# Sta-Rite Industries, Inc. Officers Supplemental Retirement Income Program (incorporated by reference to Exhibit 10.28 to the Company's Form 10-K Annual Report for 1989). 10.17# Sta-Rite Industries, Inc. 1995 Officers' Incentive Compensation Plan. 10.18# 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). 10.19# WICOR, Inc. Retirement Plan for Directors, as amended (incorporated by reference to Exhibit 10.29 to the Company's Form 10-K Annual Report for 1992). 13 Portions of the WICOR, Inc. 1994 Annual Report to Shareholders incorporated by reference herein. 21 Subsidiaries of WICOR, Inc. 23 Consent of independent public accountants. 27 Financial Data Schedule. 99 WICOR, Inc. proxy statement dated March 10, 1995. (Except to the extent incorporated by reference, this proxy statement is not deemed "filed" with the Securities and Exchange Commission as part of this Form 10-K.) #Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. (b) Reports on Form 8-K. No Current Report on Form 8-K was filed during the fourth quarter of 1994. 21 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. WICOR, Inc. Date: March 13, 1995 By JOSEPH P. WENZLER ------------------------------ 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. 22 WICOR, Inc.
Signature Title Date ------------------------ ----------------------------- -------------- GEORGE E. WARDEBERG George E. Wardeberg President, Chief Executive March 13, 1995 Officer and Director (Principal Executive Officer) JOSEPH P. WENZLER Joseph P. Wenzler Vice President, Treasurer March 13, 1995 and Chief Financial Officer (Principal Financial Officer and Principal Accounting Officer) WENDELL F. BUECHE Director March 13, 1995 Wendell F. Bueche WILLIE D. DAVIS Director March 13, 1995 Willie D. Davis JERE D. MCGAFFEY Director March 13, 1995 Jere D. McGaffey DANIEL F. MCKEITHAN, JR. Director March 13, 1995 Daniel F. McKeithan, Jr. GUY A. OSBORN Director March 13, 1995 Guy A. Osborn THOMAS F. SCHRADER Director March 13, 1995 Thomas F. Schrader STUART W. TISDALE Director March 13, 1995 Stuart W. Tisdale ESSIE M. WHITELAW Director March 13, 1995 Essie M. Whitelaw WILLIAM B. WINTER Director March 13, 1995 William B. Winter /TABLE 23 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 2, 1995. 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 9 to the consolidated financial statements. Our audit was made for the purpose of forming an opinion on those statements taken as a whole. Supplemental Schedule III is the responsibility of the Company's management and is presented for purposes of complying with the Securities and Exchange Commission's rules and is not part of the basic consolidated financial statements. This schedule has 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 LLP Milwaukee, Wisconsin, February 2, 1995 24 Schedule III - Condensed Parent Company Financial Statements
WICOR, INC. (Parent Company Only) Statement of Income Year Ended December 31, --------------------------------- 1994 1993 1992 --------------------------------- (Thousands of Dollars) Income: Equity in income of subsidiaries after dividends......................... $ 10,154 $ 9,356 $ 4,383 Cash dividends from subsidiaries.......... 23,000 21,500 19,000 Interest income........................... 373 267 451 --------- --------- --------- 33,527 31,123 23,834 --------- --------- --------- Expenses: Operating (Supplemental Note B)........... 455 1,942 1,333 Interest ................................. 163 259 63 --------- --------- --------- 618 2,201 1,396 --------- --------- --------- Income Before Parent Company Income Taxes... 32,909 28,922 22,438 Income Taxes................................ (265) (391) (326) --------- --------- --------- Income Before Cumulative Effects of Accounting Changes........................ 33,174 29,313 22,764 Cumulative Effects of Accounting Changes: Postretirement benefits other than pensions (net of income tax benefit of $4,110)................................. - - (6,165) Income taxes ............................. - - (1,800) --------- --------- --------- Net Income.................................. $ 33,174 $ 29,313 $ 14,799 ========= ========= =========
The accompanying notes are an integral part of this statement. 25 Schedule III - Condensed Parent Company Financial Statements (continued)
WICOR, INC. (Parent Company Only) Balance Sheet As of December 31, ---------------------- (Thousands of Dollars) 1994 1993 Assets ---------------------- ------ Current Assets: Cash and cash equivalents............................. $ 13,076 $ 7,105 Intercompany receivable, net (Supplemental Note A).... 2,039 2,162 Other................................................. 79 112 ---------- ---------- 15,194 9,379 ---------- ---------- Investment in Subsidiaries, at equity................... 286,725 269,615 ---------- ---------- Deferred Income Taxes .................................. 204 146 Deferred Charges and Other.............................. 491 591 ---------- ---------- $ 302,614 $ 279,731 ========== ========== Liabilities and Capitalization ------------------------------ Current Liabilities: Income taxes payable.................................. $ 4,423 $ 2,875 Other................................................. 99 353 ---------- ---------- 4,522 3,228 ---------- ---------- Deferred Credits........................................ 254 (1,257) ---------- ---------- Capitalization: ESOP loan guarantee (Supplemental Note C)............. 6,370 7,484 ---------- ---------- Common equity: Common stock, $1 par value, authorized 60,000,000 shares; outstanding 16,918,000 and 16,407,000 shares, respectively ............................. 16,918 16,407 Other paid-in-capital .............................. 180,000 166,710 Retained earnings .................................. 101,418 94,643 Unearned compensation (Supplemental Note C)......... (6,868) (7,484) ---------- ---------- Total common equity............................... 291,468 270,276 ---------- ---------- $ 302,614 $ 279,731 ========== ==========
The accompanying notes are an intergral part of this statement. 26 Schedule III - Condensed Parent Company Financial Statements (continued)
WICOR, INC. (Parent Company Only) Statement of Retained Earnings Year Ended December 31, --------------------------------- 1994 1993 1992 --------------------------------- (Thousands of Dollars) Balance - Beginning of Year................. $ 94,643 $ 90,102 $ 97,906 Add: Net income.............................. 33,174 29,313 14,799 --------- --------- --------- 127,817 119,415 112,705 Deduct: Cash dividends on common stock.......... 26,399 24,099 21,869 Other................................... - 673 734 --------- --------- --------- Balance - End of Year ...................... $101,418 $ 94,643 $ 90,102 ========= ========= =========
The accompanying notes are an integral part of this statement. 27 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) --------------------------------- 1994 1993 1992 --------------------------------- Operations- Net income ............................... $ 33,174 $ 29,313 $ 14,799 Adjustments to reconcile net income to net cash flows: Equity in (income) losses of subsidiaries.......................... (10,154) (9,356) (4,383) Cumulative effect of change in accounting principles, net of income tax benefit of $4,110................. - - 7,965 Change in deferred income taxes......... (58) (73) (73) Change in intercompany receivables...... 123 (7,342) 4,285 Change in income taxes payable.......... 1,548 6,923 (3,445) Change in other current assets.......... 33 98 (124) Change in other current liabilities..... (254) 178 176 Change in other non-current assets and liabilities........................... (843) (185) (578) --------- --------- --------- 23,569 19,556 18,622 --------- --------- --------- Investment Activities- Investments in subsidiaries............... (5,000) (12,000) (15,000) Acquisitions.............................. - - (3,202) --------- --------- --------- (5,000) (12,000) (18,202) --------- --------- --------- Financing Activities- Issuance of common stock.................. 10,649 16,682 6,081 Dividends paid on common stock, less amounts reinvested...................... (23,247) (21,450) (19,458) --------- --------- --------- (12,598) (4,768) (13,377) --------- --------- --------- Change in Cash and Cash Equivalents......... 5,971 2,788 (12,957) Cash and Cash Equivalents at Beginning of Year................................... 7,105 4,317 17,274 --------- --------- --------- Cash and Cash Equivalents at End of Year.... $ 13,076 $ 7,105 $ 4,317 ========= ========= ========= Supplemental Disclosure of Cash Flow Information Cash paid (received) during the year for: Interest paid............................. $ - $ 1 $ 36 Income taxes paid......................... (4,440) 2,805 (462)
The accompanying notes are an integral part of this statement. 28 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 1994, 1993 and 1992, the parent company allocated certain administrative and operating expenses to the following subsidiaries using an allocation method approved by the PSCW:
1994 1993 1992 ---------- ---------- ---------- Administrative and oper- ating expenses allocated to subsidiaries $2,452,000 $2,388,000 $2,103,000 ========== ========== ==========
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. 29 TABLE OF CONTENTS TO EXHIBITS 3.1 WICOR, Inc. Restated Articles of Incorporation, as amended (incorporated by reference) 3.2* Amendment to WICOR, Inc. By-laws, effective February 28, 1995 3.3* WICOR, Inc. By-laws, as amended 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 byreference) 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 and Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference) 4.9 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) 4.10 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) 30 4.11* Extension of Revolving Credit and Term Loan Agreements, effective March 29, 1994, among WICOR, Inc., Wisconsin Gas Company and Sta-Rite Industries, Inc., respective, and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley and Citibank, N.A. as Agent 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. (incorporated by references) 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 Long-Term Performance Plan (incorporated by reference) 10.8# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference) 10.9# Form of restricted stock agreement used in connection with the WICOR, Inc. 1994 Long-Term Performance Plan (incorporated by reference) 10.10*# WICOR, Inc. 1995 Officers' Incentive Compensation Plan 10.11# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program (incorporated by reference) 10.12*# Wisconsin Gas Company 1995 Officers' Incentive Compensation Plan 10.13# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan (incorporated by reference) 10.14# Wisconsin Gas Company Group Travel Accident Plan (incorporated by reference) 10.15# Form of Deferred Compensation Agreements between Wisconsin Gas Company and certain of its executive officers (incorporated by reference) 10.16# Sta-Rite Industries Officers' Supplemental Retirement Income Program (incorporated by reference) 31 10.17*# Sta-Rite Industries, Inc. 1995 Officers' Incentive Compensation Plan 10.18#Sta-Rite Industries, Inc. Group Travel Accident Plan (incorporated by reference) 10.19# WICOR, Inc. Retirement Plan for Directors (incorporated by reference) 13* Financial Review" portion of the WICOR, Inc. 1994 Annual Report to Shareholders 21* Subsidiaries of WICOR, Inc 23* Consent of independent public accountants 27* Financial Data Schedule 99* WICOR, Inc. proxy statement dated March 10, 1995 * Indicates document filed herewith. # Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. EX-3 2 EX 3.2 1 Exhibit 3.2 WICOR, Inc. Amendment to By-Laws Effective February 28, 1995 RESOLVED, that the second sentence of Section 3.01 of the Corporation's By- Laws be, and it hereby is, amended to read as follows: "The number of directors of the corporation shall be ten (10), divided into three classes of three (3, three (3) and four (4) directors, respectively, and designated as Class I, Class II and Class III, respectively." FURTHER RESOLVED, that the foregoing resolution shall be effective February 28, 1995. EX-3 3 EX 3.3 1 EXHIBIT 3.3 BY-LAWS OF WICOR, INC. (a Wisconsin corporation) Effective August 1, 1993 2 BY-LAWS OF WICOR, INC. (a Wisconsin corporation) Effective August 1, 1993 ARTICLE I. OFFICES A. Principal and Business Offices The corporation may have such principal and other business offices, either within or without the State of Wisconsin, as the Board of Directors may designate or as the business of the corporation may require from time to time. B. Registered Office The registered office of the corporation required by the Wisconsin Business Corporation Law to be maintained in the State of Wisconsin may be, but need not be, identical with the principal office in the State of Wisconsin, and the address of the registered office may be changed from time to time by the Board of Directors or by the registered agent. The business office of the registered agent of the corporation shall be identical to such registered office. ARTICLE II. SHAREHOLDERS A. Annual Meeting The annual meeting of the shareholders shall be held on the fourth Thursday in April of each year at 11:00 a.m. local time, or at such other time and date within thirty days before or after such date as may be fixed by or under the authority of the Board of Directors, for the purpose of electing directors and for the transaction of such other business as may come before the meeting. If the day fixed for the annual meeting shall be a legal holiday in the State of Wisconsin, such meeting shall be held on the next succeeding business day. B. Special Meetings Special meetings of the shareholders, for any purpose or purposes, unless otherwise prescribed by the Wisconsin Business Corporation Law, may be called by the Board of Directors, the Chairman, the Vice Chairman or the President. The corporation shall call a special meeting of shareholders in the event that the holders of at least 10% of all of the votes entitled to be cast on any issue proposed to be considered at the proposed special meeting sign, date and deliver to the corporation one or more written demands for the meeting describing one or more purposes for which it is to be held. The corporation shall give notice of such a special meeting within thirty (30) days after the date that the demand is delivered to the corporation. C. Place of Meeting The Board of Directors may designate any place, either within or without the State of Wisconsin, as the place of meeting for any annual or special meeting of shareholders. If no designation is made, the place of meeting shall be the principal office of the corporation. Any meeting may be adjourned to reconvene at any place designated by vote of the shares represented there at. 3 D. Notice of Meeting Written notice stating the date, time and place of any meeting of shareholders and, in case of a special meeting, the purpose or purposes for which the meeting is called, shall be delivered not less than ten (10) days nor more than sixty (60) days before the date of the meeting (unless a different time is provided by the Wisconsin Business Corporation Law or the articles of incorporation), either personally or by mail, by or at the direction of the Chairman, the Vice Chairman, the President or the Secretary, to each shareholder of record entitled to vote at such meeting and to such other persons as required by the Wisconsin Business Corporation Law. If mailed, such notice shall be deemed to be effective when deposited in the United States mail, addressed to the shareholder at his or her address as it appears on the stock record books of the corporation, with postage thereon prepaid. If an annual or special meeting of shareholders is adjourned to a different date, time or place, the corporation shall not be required to give notice of the new date, time or place if the new date, time or place is announced at the meeting before adjournment; provided, however, that if a new record date for an adjourned meeting is or must be fixed, the corporation shall give notice of the adjourned meeting to persons who are shareholders as of the new record date. E. Waiver of Notice A shareholder may waive any notice required by the Wisconsin Business Corporation Law, the articles of incorporation or these by-laws before or after the date and time stated in the notice. The waiver shall be in writing and signed by the shareholder entitled to the notice, contain the same information that would have been required in the notice under applicable provisions of the Wisconsin Business Corporation Law (except that the time and place of meeting need not be stated) and be delivered to the corporation for inclusion in the corporate records. A shareholder's attendance at a meeting, in person or by proxy, waives objection to all of the following: (a) lack of notice or defective notice of the meeting, unless the shareholder at the beginning of the meeting or promptly upon arrival objects to holding the meeting or transacting business at the meeting; and (b) consideration of a particular matter at the meeting that is not within the purpose described in the meeting notice, unless the shareholder objects to considering the matter when it is presented. F. Fixing of Record Date The Board of Directors may fix in advance a date as the record date for the purpose of determining shareholders entitled to notice of and to vote at any meeting of shareholders, shareholders entitled to demand a special meeting as contemplated by Section 2.2 hereof, shareholders entitled to take any other action, or shareholders for any other purpose. Such record date shall not be more than seventy (70) days prior to the date on which the particular action, requiring such determination of shareholders, is to be taken. If no record date is fixed by the Board of Directors or by the Wisconsin Business Corporation Law for the determination of shareholders entitled to notice of and to vote at a meeting of shareholders, the record date shall be the close of business on the day before the first notice is given to shareholders. If no record date is fixed by the Board of Directors or by the Wisconsin Business Corporation Law for the determination of shareholders entitled to demand a special meeting as contemplated in Section 2.2 hereof, the record date shall be the date that the first shareholder signs the demand. Except as provided by the Wisconsin Business Corporation Law for a court-ordered adjournment, a determination of shareholders entitled to notice of and to vote at a meeting of shareholders is effective for any adjournment of such meeting unless the Board of Directors fixes a new record date, which it shall do if the meeting is adjourned to a date more than one hundred twenty (120) days after the date fixed for the original meeting. The record date for determining shareholders entitled to a distribution 4 (other than a distribution involving a purchase, redemption or other acquisition of the corporation's shares) or a share dividend is the date on which the Board of Directors authorized the distribution or share dividend, as the case may be, unless the Board of Directors fixes a different record date. G. Shareholders' List for Meetings After a record date for a special or annual meeting of shareholders has been fixed, the corporation shall prepare a list of the names of all of the shareholders entitled to notice of the meeting. The list shall be arranged by class or series of shares, if any, and show the address of and number of shares held by each shareholder. Such list shall be available for inspection by any shareholder, beginning two (2) business days after notice of the meeting is given for which the list was prepared and continuing to the date of the meeting, at the corporation's principal office or at a place identified in the meeting notice in the city where the meeting will be held. A shareholder or his or her agent may, on written demand, inspect and, subject to the limitations imposed by the Wisconsin Business Corporation Law, copy the list, during regular business hours and at his or her expense, during the period that it is available for inspection pursuant to this Section 2.7. The corporation shall make the shareholders' list available at the meeting and any shareholder or his or her agent or attorney may inspect the list at any time during the meeting or any adjournment thereof. Refusal or failure to prepare or make available the shareholders' list shall not affect the validity of any action taken at a meeting of shareholders. H. Quorum and Voting Requirements Shares entitled to vote as a separate voting group may take action on a matter at a meeting only if a quorum of those shares exists with respect to that matter. If the corporation has only one class of common stock outstanding, such class shall constitute a separate voting group for purposes of this Section 2.8. Except as otherwise provided in the articles of incorporation, any by-law adopted under authority granted in the articles of incorporation, or the Wisconsin Business Corporation Law, a majority of the votes entitled to be cast on the matter shall constitute a quorum of the voting group for action on that matter. Once a share is represented for any purpose at a meeting, other than for the purpose of objecting to holding the meeting or transacting business at the meeting, it is considered present for purposes of determining whether a quorum exists for the remainder of the meeting and for any adjournment of that meeting unless a new record date is or must be set for the adjourned meeting. If a quorum exists, except in the case of the election of directors, action on a matter shall be approved if the votes cast within the voting group favoring the action exceed the votes cast opposing the action, unless the articles of incorporation, any by-law adopted under authority granted in the articles of incorporation, or the Wisconsin Business Corporation Law requires a greater number of affirmative votes. Unless otherwise provided in the articles of incorporation, directors shall be elected by a plurality of the votes cast by the shares entitled to vote in the election of directors at a meeting at which a quorum is present. For purposes of this Section 2.8, "plurality" means that the individuals with the largest number of votes are elected as directors up to the maximum number of directors to be chosen at the meeting. Though less than a quorum of the outstanding votes of a voting group are represented at a meeting, a majority of the votes so represented may adjourn the meeting from time to time without further notice. At such adjourned meeting at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the meeting as originally noticed. I. Conduct of Meeting The Chairman, and in his or her absence, the Vice Chairman, and in his or her absence, the President, and in his or her absence, a Vice President in the order provided under Section 4.10 hereof, and in their absence, any person chosen by the shareholders present shall call the meeting of the shareholders to order and shall act as chairman of the meeting, and the Secretary of the corporation shall act as secretary of all meetings of 5 the shareholders, but, in the absence of the Secretary, the presiding officer may appoint any other person to act as secretary of the meeting. J. Proxies At all meetings of shareholders, a shareholder may vote his or her shares in person or by proxy. A shareholder may appoint a proxy to vote or otherwise act for the shareholder by signing an appointment form, either personally or by his or her attorney-in-fact. An appointment of a proxy is effective when received by the Secretary or other officer or agent of the corporation authorized to tabulate votes. An appointment is valid for eleven (11) months from the date of its signing unless a different period is expressly provided in the appointment form. The presence of a shareholder who has filed a proxy shall not of itself constitute revocation. The Board of Directors shall have the power and authority to make rules establishing presumptions as to the validity and sufficiency of proxies. K. Voting of Shares Except as provided in the articles of incorporation or in the Wisconsin Business Corporation Law, each outstanding share, regardless of class, is entitled to one vote on each matter voted on at a meeting of shareholders. L. Action without Meeting Any action required or permitted by the articles of incorporation or these by-laws or any provision of the Wisconsin Business Corporation Law to be taken at a meeting of the shareholders may be taken without a meeting and without action by the Board of Directors if a written consent or consents, describing the action so taken, is signed by all of the shareholders entitled to vote with respect to the subject matter thereof and delivered to the corporation for inclusion in the corporate records. M. Acceptance of Instruments Showing Shareholder Action If the name signed on a vote, consent, waiver or proxy appointment corresponds to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of a shareholder. If the name signed on a vote, consent, waiver or proxy appointment does not correspond to the name of a shareholder, the corporation, if acting in good faith, may accept the vote, consent, waiver or proxy appointment and give it effect as the act of the shareholder if any of the following apply: (1) The shareholder is an entity and the name signed purports to be that of an officer or agent of the entity. (2) The name purports to be that of a personal representative, administrator, executor, guardian or conservator representing the shareholder and, if the corporation requests, evidence of fiduciary status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment. (3) The name signed purports to be that of a receiver or trustee in bankruptcy of the shareholder and, if the corporation requests, evidence of this status acceptable to the corporation is presented with respect to the vote, consent, waiver or proxy appointment. (4) The name signed purports to be that of a pledgee, beneficial owner, or attorney-in-fact of the shareholder and, if the corporation requests, evidence acceptable to the corporation of the signatory's authority to sign for the shareholder is presented with respect to the vote, consent, waiver or proxy appointment. 6 (5) Two or more persons are the shareholders as co-tenants or fiduciaries and the name signed purports to be the name of at least one of the co-owners and the person signing appears to be acting on behalf of all co-owners. The corporation may reject a vote, consent, waiver or proxy appointment if the Secretary or other officer or agent of the corporation who is authorized to tabulate votes, acting in good faith, has reasonable basis for doubt about the validity of the signature on it or about the signatory's authority to sign for the shareholder. ARTICLE III BOARD OF DIRECTORS A. General Powers, Classification and Number All corporate powers shall be exercised by or under the authority of, and the business affairs of the corporation managed under the direction of, the Board of Directors. The number of directors of the corporation shall be eleven (11), divided into three classes of four (4), four (4), and three (3) directors, respectively, and designated as Class I, Class II and Class III, respectively. At each annual meeting of shareholders the successors to the class of directors whose terms shall expire at the time of such annual meeting shall be elected to hold office until the third succeeding annual meeting of shareholders and until their successors are elected and qualified. B. Tenure and Qualifications Each director shall hold office until the next annual meeting of shareholders in the year in which such director's term expires and until his or her successor shall have been elected and, if necessary, qualified, or until there is a decrease in the number of directors which takes effect after the expiration of his or her term, or until his or her prior retirement, death, resignation or removal. The retirement or resignation of a director who is an officer of this corporation or an affiliated corporation, but not also the chief executive officer of this corporation, shall take effect at the time he or she ceases to hold his or her position as an officer of this corporation or an affiliated corporation. Any other director shall resign from the Board of Directors effective as of the annual meeting of shareholders next following the date on which he or she attains the age of seventy (70) years. No person shall be eligible for election as a director after he or she shall have attained the age of seventy (70) years. A director may be removed from office only as provided in the articles of incorporation at a meeting of the shareholders called for the purpose of removing the director, and the meeting notice shall state that the purpose, or one of the purposes, of the meeting is removal of the director. A director may resign at any time by delivering written notice which complies with the Wisconsin Business Corporation Law to the Board of Directors, to the Chairman or the President (in his or her capacity as chairperson of the Board of Directors) or to the corporation. A director's resignation is effective when the notice is delivered unless the notice specifies a later effective date. Directors need not be residents of the State of Wisconsin or shareholders of the corporation. No other restrictions, limitations or qualifications may be imposed on individuals for service as a director. C. Regular Meetings A regular meeting of the Board of Directors shall be held without other notice than this by-law immediately after the annual meeting of shareholders and each adjourned session thereof. The place of such regular meeting shall be the principal business office of the corporation in the State of Wisconsin, or such other suitable place as may be announced at such 7 meeting of shareholders. The Board of Directors may provide, by resolution, the date, time and place, either within or without the State of Wisconsin, for the holding of additional regular meetings of the Board of Directors without other notice than such resolution. D. Special Meetings Special meetings of the Board of Directors may be called by or at the request of the Chairman, the Vice Chairman, the President, Secretary or any two (2) directors. The Chairman, the Vice Chairman, the President or Secretary may fix any place, either within or without the State of Wisconsin, as the place for holding any special meeting of the Board of Directors, and if no other place is fixed the place of the meeting shall be the principal business office of the corporation in the State of Wisconsin. E. Notice; Waiver Notice of each meeting of the Board of Directors (unless otherwise provided in or pursuant to Section 3.3) shall be given by written notice delivered or communicated in person, by telegraph, teletype, facsimile or other form of wire or wireless communication, or by mail or private carrier, to each director at his business address or at such other address as such director shall have designated in writing filed with the Secretary, in each case not less than forty-eight (48) hours prior to the meeting. The notice need not describe the purpose of the meeting of the Board of Directors or the business to be transacted at such meeting. If mailed, such notice shall be deemed to be effective when deposited in the United States mail so addressed, with postage thereon prepaid. If notice is given by telegram, such notice shall be deemed to be effective when the telegram is delivered to the telegraph company. If notice is given by private carrier, such notice shall be deemed to be effective when delivered to the private carrier. Whenever any notice whatever is required to be given to any director of the corporation under the articles of incorporation or these by-laws or any provision of the Wisconsin Business Corporation Law, a waiver thereof in writing, signed at any time, whether before or after the date and time of meeting, by the director entitled to such notice shall be deemed equivalent to the giving of such notice. The corporation shall retain any such waiver as part of the permanent corporate records. A director's attendance at or participation in a meeting waives any required notice to him or her of the meeting unless the director at the beginning of the meeting or promptly upon his or her arrival objects to holding the meeting or transacting business at the meeting and does not thereafter vote for or assent to action taken at the meeting. F. Quorum Except as otherwise provided by the Wisconsin Business Corporation Law or by the articles of incorporation or these by-laws, a majority of the number of directors specified in Section 3.1 of these by-laws shall constitute a quorum for the transaction of business at any meeting of the Board of Directors. Except as otherwise provided by the Wisconsin Business Corporation Law or by the articles of incorporation or by these by-laws, a quorum of any committee of the Board of Directors created pursuant to Section 3.12 hereof shall consist of a majority of the number of directors appointed to serve on the committee. A majority of the directors present (though less than such quorum) may adjourn any meeting of the Board of Directors or any committee thereof, as the case may be, from time to time without further notice. 8 G. Manner of Acting The affirmative vote of a majority of the directors present at a meeting of the Board of Directors or a committee thereof at which a quorum is present shall be the act of the Board of Directors or such committee, as the case may be, unless the Wisconsin Business Corporation Law, the articles of incorporation or these by-laws require the vote of a greater number of directors. H. Conduct of Meetings The Chairman, and in his or her absence, the Vice Chairman, and in his or her absence, the President, and in his or her absence, a Vice President in the order provided under Section 4.10, and in their absence, any director chosen by the directors present, shall call meetings of the Board of Directors to order and shall act as chairman of the meeting. The Secretary of the corporation shall act as secretary of all meetings of the Board of Directors but in the absence of the Secretary, the presiding officer may appoint any other person present to act as secretary of the meeting. Minutes of any regular or special meeting of the Board of Directors shall be prepared and distributed to each director. I. Vacancies Any vacancies occurring in the Board of Directors, including a vacancy created by an increase in the number of directors, shall be filled only as provided in the articles of incorporation. A vacancy that will occur at a specific later date, because of a resignation effective at a later date or otherwise, may be filled before the vacancy occurs, but the new director may not take office until the vacancy occurs. J. Compensation The Board of Directors, irrespective of any personal interest of any of its members, may establish reasonable compensation of all directors for services to the corporation as directors, officers or otherwise, or may delegate such authority to an appropriate committee. The Board of Directors also shall have authority to provide for or delegate authority to an appropriate committee to provide for reasonable pensions, disability or death benefits, and other benefits or payments, to directors, officers and employees and to their estates, families, dependents or beneficiaries on account of prior services rendered by such directors, officers and employees to the corporation. K. Presumption of Assent A director who is present and is announced as present at a meeting of the Board of Directors or any committee thereof created in accordance with Section 3.12 hereof, when corporate action is taken, assents to the action taken unless any of the following occurs: (a) the director objects at the beginning of the meeting or promptly upon his or her arrival to holding the meeting or transacting business at the meeting; (b) the director dissents or abstains from an action taken and minutes of the meeting are prepared that show the director's dissent or abstention from the action taken; (c) the director delivers written notice that complies with the Wisconsin Business Corporation Law of his or her dissent or abstention to the presiding officer of the meeting before its adjournment or to the corporation immediately after adjournment of the meeting; or (d) the director dissents or abstains from an action taken, minutes of the meeting are prepared that fail to show the director's dissent or abstention from the action taken, and the director delivers to the corporation a written notice of that failure that complies with the Wisconsin Business Corporation Law promptly after receiving the minutes. Such right of dissent or abstention shall not apply to a director who votes in favor of the action taken. 9 L. Committees The Board of Directors by resolution adopted by the affirmative vote of a majority of all of the directors then in office may create one or more committees, appoint members of the Board of Directors to serve on the committees and designate other members of the Board of Directors to serve as alternates. Each committee shall have two (2) or more members who shall, unless otherwise provided by the Board of Directors, serve at the pleasure of the Board of Directors. A committee may be authorized to exercise the authority of the Board of Directors, except that a committee may not do any of the following: (a) authorize distributions; (b) approve or propose to shareholders action that the Wisconsin Business Corporation Law requires to be approved by shareholders; (c) fill vacancies on the Board of Directors or, unless the Board of Directors provides by resolution that vacancies on a committee shall be filled by the affirmative vote of the remaining committee members, on any Board committee; (d) amend the corporation's articles of incorporation; (e) adopt, amend or repeal by-laws; (f) approve a plan of merger not requiring shareholder approval; (g) authorize or approve reacquisition of shares, except according to a formula or method prescribed by the Board of Directors; and (h) authorize or approve the issuance or sale or contract for sale of shares, or determine the designation and relative rights, preferences and limitations of a class or series of shares, except that the Board of Directors may authorize a committee to do so within limits prescribed by the Board of Directors. Unless otherwise provided by the Board of Directors in creating the committee, a committee may employ counsel, accountants and other consultants to assist it in the exercise of its authority. M. Alternate Members of Committees The Board of Directors may appoint annually and from time to time, as alternate members of any committee of the Board of Directors, directors to serve whenever designated by the committee or by the Chairman, the Vice Chairman or the President to take the place of absent members, or to fill vacancies on such committee until the next meeting of the Board of Directors. An alternate member of any committee so designated to serve shall receive compensation for such service as fixed by the Board of Directors. N. Telephonic Meetings Except as herein provided and notwithstanding any place set forth in the notice of the meeting or these by-laws, members of the Board of Directors (and any committees thereof created pursuant to Section 3.12 hereof) may participate in regular or special meetings by, or through the use of, any means of communication by which all participants may simultaneously hear each other, such as by conference telephone. If a meeting is conducted by such means, then at the commencement of such meeting the presiding officer shall inform the participating directors that a meeting is taking place at which official business may be transacted. Any participant in a meeting by such means shall be deemed present in person at such meeting. Notwithstanding the foregoing, no action may be taken at any meeting held by such means on any particular matter which the presiding officer determines, in his or her sole discretion, to be inappropriate under the circumstances for action at a meeting held by such means. Such determination shall be made and announced in advance of such meeting. O. Action Without Meeting Any action required or permitted by the Wisconsin Business Corporation Law to be taken at a meeting of the Board of Directors or a committee thereof created pursuant to Section 3.12 hereof may be taken without a meeting if the action is taken by all members of the Board or of the committee. The action shall be evidenced by one or more written consents describing the action taken, signed by each director or committee member and retained by 10 the corporation. Such action shall be effective when the last director or committee member signs the consent, unless the consent specifies a different effective date. ARTICLE IV OFFICERS A. Number The principal officers of the corporation shall be a President, the number of Vice Presidents as authorized from time to time by the Board of Directors, a Secretary, and a Treasurer, each of whom shall be elected by the Board of Directors. A Chairman, a Vice Chairman and such other officers and assistant officers as may be deemed necessary may be elected or appointed by the Board of Directors. The Board of Directors may also authorize any duly appointed officer to appoint one or more officers or assistant officers. Any two (2) or more offices may be held by the same person. B. Election and Term of Office The officers of the corporation to be elected by the Board of Directors shall be elected annually by the Board of Directors at the first meeting of the Board of Directors held after each annual meeting of the shareholders. If the election of officers shall not be held at such meeting, such election shall be held as soon thereafter as is practicable. Each officer shall hold office until his or her successor shall have been duly elected or until his or her prior death, resignation or removal. C. Removal The Board of Directors may remove any officer and, unless restricted by the Board of Directors or these by-laws, an officer may remove any officer or assistant officer appointed by that officer, at any time, with or without cause and notwithstanding the contract rights, if any, of the officer removed. The appointment of an officer does not of itself create contract rights. D. Resignation An officer may resign at any time by delivering notice to the corporation that complies with the Wisconsin Business Corporation Law. The resignation shall be effective when the notice is delivered, unless the notice specifies a later effective date and the corporation accepts the later effective date. E. Vacancies A vacancy in any principal office because of death, resignation, removal, disqualification or otherwise, shall be filled by the Board of Directors for the unexpired portion of the term. If a resignation of an officer is effective at a later date as contemplated by Section 4.4 hereof, the Board of Directors may fill the pending vacancy before the effective date if the Board provides that the successor may not take office until the effective date. F. Chief Executive Officer The Board of Directors shall from time to time designate the Chairman, if any, the Vice Chairman, if any, or the President as the Chief Executive Officer of the corporation. The President shall be the Chief Executive Officer when the offices of Chairman and Vice Chairman are vacant, or when the Board of Directors has not designated the Chairman, if any, or the Vice Chairman, if any, as Chief Executive Officer. Subject to the control of the Board of Directors, the Chief Executive Officer shall in general supervise and control all of the business and affairs of the corporation and 11 shall perform all duties incident to the office of Chief Executive Officer and such other duties as may be prescribed by the Board of Directors from time to time. G. Chairman The Chairman, if any, shall, when present, preside at all meetings of the shareholders and the Board of Directors. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents and employees shall hold office at the discretion of the Chairman. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize any other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, he or she shall perform all duties incident to the office of Chairman and such other duties as may be prescribed by the Board of Directors from time to time. H. Vice Chairman The Vice Chairman, if any, shall have such authority and responsibilities as may be prescribed by the Board of Directors from time to time. In the absence of the Chairman, or in the event of the Chairman's death or inability to act, or in the event for any reason it shall be impracticable for the Chairman to act personally, the Vice Chairman shall perform the duties of the Chairman, and when so acting, shall have all the powers of and be subject to all of the restrictions upon the Chairman. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents shall hold office at the discretion of the Vice Chairman. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize the President or other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, he or she shall perform all duties incident to the office of Vice Chairman and such other duties as may be prescribed by the Chairman or the Board of Directors from time to time. I. President The President shall have such authority and responsibility as may be prescribed by the Board of Directors from time to time. In the absence of the Vice Chairman, if any, or in the event of the Vice Chairman's death or inability to act, or in the event for any reason it shall be impracticable for the Vice Chairman to act personally, the President shall perform the duties of the Vice Chairman, and when so acting, shall have all the powers of and be subject to all the restrictions upon the Vice Chairman. He or she shall have authority, subject to such rules as may be prescribed by the Board of Directors, to appoint such agents and employees of the corporation as he or she shall deem necessary, to prescribe their powers, duties and compensation, and to delegate authority to them. Such agents shall hold office at the discretion of the President. He or she shall have authority to sign, execute and acknowledge, on behalf of the corporation, all deeds, mortgages, bonds, stock certificates, contracts, leases, reports and 12 all other documents or instruments necessary or proper to be executed in the course of the corporation's regular business, or which shall be authorized by resolution of the Board of Directors; and, except as otherwise provided by law or the Board of Directors, he or she may authorize any other officer or agent of the corporation to sign, execute and acknowledge such documents or instruments in his or her place and stead. In general, he or she shall perform all duties incident to the office of President and such other duties as may be prescribed by the Chairman, or Vice Chairman, if any, or the Board of Directors from time to time. J. The Vice Presidents In the absence of the President, or in the event of the President's death, inability or refusal to act, or in the event for any reason it shall be impracticable for the President to act personally, the Vice President (or in the event there be more than one Vice President, the Vice Presidents in the order designated by the Board of Directors, or in the absence of any designation, then in the order of their election) shall perform the duties of the President, and when so acting, shall have all the powers of and be subject to all the restrictions upon the President. Any Vice President may sign, with the Secretary or Assistant Secretary, certificates for shares of the corporation; and shall perform such other duties and have such authority as from time to time may be delegated or assigned to him or her by the Chairman or Vice Chairman, if any, by the President or the Board of Directors. The execution of any instrument of the corporation by any Vice President shall be conclusive evidence, as to third parties, of his or her authority to act in the stead of the Chairman, the Vice Chairman or the President. K. The Secretary The Secretary shall: (a) keep minutes of the meetings of the shareholders and of the Board of Directors (and of committees thereof) in one or more books provided for that purpose (including records of actions taken by the shareholders or the Board of Directors (or committees thereof) without a meeting); (b) see that all notices are duly given in accordance with the provisions of these by-laws or as required by the Wisconsin Business Corporation Law; (c) be custodian of the corporate records and of the seal of the corporation and see that the seal of the corporation is affixed to all documents the execution of which on behalf of the corporation under its seal is duly authorized; (d) maintain a record of the shareholders of the corporation, in a form that permits preparation of a list of the names and addresses of all shareholders, by class or series of shares and showing the number and class or series of shares held by each shareholder; (e) sign with the Chairman, the Vice Chairman, the President or a Vice President, certificates for shares of the corporation, the issuance of which shall have been authorized by resolution of the Board of Directors; (f) have general charge of the stock transfer books of the corporation; and (g) in general perform all duties incident to the office of Secretary and have such other duties and exercise such authority as from time to time may be delegated or assigned by the Chairman, the Vice Chairman, the President or the Board of Directors. L. The Treasurer The Treasurer shall: (a) have charge and custody of and be responsible for all funds and securities of the corporation; (b) maintain appropriate accounting records; (c) receive and give receipts for moneys due and payable to the corporation from any source whatsoever, and deposit all such moneys in the name of the corporation in such banks, trust companies or other depositaries as shall be selected in accordance with the provisions of Section 5.4; and (d) in general perform all of the duties incident to the office of Treasurer and have such other duties and exercise such other authority as from time to time may be delegated or assigned by the Chairman, the Vice Chairman, the President or the Board of Directors. If required by the Board of Directors, the Treasurer shall give a bond for the 13 faithful discharge of his or her duties in such sum and with such surety or sureties as the Board of Directors shall determine. M. Assistant Secretaries and Assistant Treasurers There shall be such number of Assistant Secretaries and Assistant Treasurers as the Board of Directors may from time to time authorize. The Assistant Secretaries may sign with the Chairman, the Vice Chairman, the President or a Vice President certificates for shares of the corporation the issuance of which shall have been authorized by a resolution of the Board of Directors. The Assistant Treasurers shall respectively, if required by the Board of Directors, give bonds for the faithful discharge of their duties in such sums and with such sureties as the Board of Directors shall determine. The Assistant Secretaries and Assistant Treasurers, in general, shall perform such duties and have such authority as shall from time to time be delegated or assigned to them by the Secretary or the Treasurer, respectively, or by the Chairman, the Vice Chairman, the President or the Board of Directors. N. Other Assistants and Acting Officers The Board of Directors shall have the power to appoint, or to authorize any duly appointed officer of the corporation to appoint, any person to act as assistant to any officer, or as agent for the corporation in his or her stead, or to perform the duties of such officer whenever for any reason it is impracticable for such officer to act personally, and such assistant or acting officer or other agent so appointed by the Board of Directors or an authorized officer shall have the power to perform all the duties of the office to which he or she is so appointed to be an assistant, or as to which he or she is so appointed to act, except as such power may be otherwise defined or restricted by the Board of Directors or the appointing officer. ARTICLE V CONTRACTS, LOANS, CHECKS AND DEPOSITS; SPECIAL CORPORATE ACTS A. Contracts The Board of Directors may authorize any officer or officers, agent or agents, to enter into any contract or execute or deliver any instrument in the name of and on behalf of the corporation, and such authorization may be general or confined to specific instances. In the absence of other designation, all deeds, mortgages and instruments of assignment or pledge made by the corporation shall be executed in the name of the corporation by the Chairman, the Vice Chairman, the President or one of the Vice Presidents and by the Secretary, an Assistant Secretary, the Treasurer or an Assistant Treasurer; the Secretary or an Assistant Secretary, when necessary or required, shall affix the corporate seal, if any, thereto; and when so executed no other party to such instrument or any third party shall be required to make any inquiry into the authority of the signing officer or officers. B. Loans No indebtedness for borrowed money shall be contracted on behalf of the corporation and no evidences of such indebtedness shall be issued in its name unless authorized by or under the authority of a resolution of the Board of Directors. Such authorization may be general or confined to specific instances. 14 C. Checks, Drafts, etc All checks, drafts or other orders for the payment of money, notes or other evidences of indebtedness issued in the name of the corporation, shall be signed by such officer or officers, agent or agents of the corporation and in such manner as shall from time to time be determined by or under the authority of a resolution of the Board of Directors. D. Deposits All funds of the corporation not otherwise employed shall be deposited from time to time to the credit of the corporation in such banks, trust companies or other depositaries as may be selected by or under the authority of a resolution of the Board of Directors. E. Voting of Securities Owned by this Corporation Subject always to the specific directions of the Board of Directors, (a) any shares or other securities issued by any other corporation and owned or controlled by this corporation may be voted at any meeting of security holders of such other corporation by the Chairman of this corporation if he or she be present, or in his or her absence, by the Vice Chairman of this corporation if he or she be present, or in his or her absence, by the President of this corporation if he or she be present, or in his or her absence by any Vice President of this corporation who may be present, and (b) whenever, in the judgment of the Chairman, or in his or her absence, the Vice Chairman, or in his or her absence, the President, or in his or her absence, any Vice President, it is desirable for this corporation to execute a proxy or written consent in respect to any shares or other securities issued by any other corporation and owned by this corporation, such proxy or consent shall be executed in the name of this corporation by the Chairman, the Vice Chairman, the President or one of the Vice Presidents of this corporation, without necessity of any authoriza-tion by the Board of Directors, affixation of corporate seal, if any, or countersignature or attestation by another officer. Any person or persons designated in the manner above stated as the proxy or proxies of this corporation shall have full right, power and authority to vote the shares or other securities issued by such other corporation and owned by this corporation the same as such shares or other securities might be voted by this corporation. ARTICLE VI CERTIFICATES FOR SHARES; TRANSFER OF SHARES A. Certificates for Shares Certificates representing shares of the corporation shall be in such form, consistent with the Wisconsin Business Corporation Law, as shall be determined by the Board of Directors. Such certificates shall be signed by the Chairman, the Vice Chairman, the President or a Vice President and by the Secretary or an Assistant Secretary. All certificates for shares shall be consecutively numbered or otherwise identified. The name and address of the person to whom the shares represented thereby are issued, with the number of shares and date of issue, shall be entered on the stock transfer books of the corporation. All certificates surrendered to the corporation for transfer shall be cancelled and no new certificate shall be issued until the former certificate for a like number of shares shall have been surrendered and cancelled, except as provided in Section 6.6. B. Facsimile Signatures and Seal The seal of the corporation on any certificates for shares may be a facsimile. The signature of the Chairman, the Vice Chairman, the President or Vice President and the Secretary or Assistant Secretary upon a certificate may be facsimiles if the certificate is manually signed on behalf 15 of a transfer agent, or a registrar, other than the corporation itself or an employee of the corporation. C. Signature by Former Officers The validity of a share certificate is not affected if a person who signed the certificate (either manually or in facsimile) no longer holds office when the certificate is issued. D. Transfer of Shares Prior to due presentment of a certificate for shares for registration of transfer the corporation may treat the registered owner of such shares as the person exclusively entitled to vote, to receive notifications and otherwise to have and exercise all the rights and power of an owner. Where a certificate for shares is presented to the corporation with a request to register for transfer, the corporation shall not be liable to the owner or any other person suffering loss as a result of such registration of transfer if (a) there were on or with the certificate the necessary endorsements, and (b) the corporation had no duty to inquire into adverse claims or has discharged any such duty. The corporation may require reasonable assurance that such endorsements are genuine and effective and compliance with such other regulations as may be prescribed by or under the authority of the Board of Directors. E. Restrictions on Transfer The face or reverse side of each certificate representing shares shall bear a conspicuous notation of any restriction imposed by the corporation upon the transfer of such shares. F. Lost, Destroyed or Stolen Certificates Where the owner claims that certificates for shares have been lost, destroyed or wrongfully taken, a new certificate shall be issued in place thereof if the owner (a) so requests before the corporation has notice that such shares have been acquired by a bona fide purchaser, (b) files with the corporation a sufficient indemnity bond if required by the Board of Directors or any principal officer, and (c) satisfies such other reasonable requirements as may be prescribed by or under the authority of the Board of Directors. G. Consideration for Shares The Board of Directors may authorize shares to be issued for consideration consisting of any tangible or intangible property or benefit to the corporation, including cash, promissory notes, services performed, contracts for services to be performed or other securities of the corporation. Before the corporation issues shares, the Board of Directors shall determine that the consideration received or to be received for the shares to be issued is adequate. The determination of the Board of Directors is conclusive insofar as the adequacy of consideration for the issuance of shares relates to whether the shares are validly issued, fully paid and nonassessable. The corporation may place in escrow shares issued in whole or in part for a contract for future services or benefits, a promissory note, or otherwise for property to be issued in the future, or make other arrangements to restrict the transfer of the shares, and may credit distributions in respect of the shares against their purchase price, until the services are performed, the benefits or property are received or the promissory note is paid. If the services are not performed, the benefits or property are not received or the promissory note is not paid, the corporation may cancel, in whole or in part, the shares escrowed or restricted and the distributions credited. 16 H. Stock Regulations The Board of Directors shall have the power and authority to make all such further rules and regulations not inconsistent with law as it may deem expedient concerning the issue, transfer and registration of shares of the corporation. ARTICLE VII SEAL The Board of Directors shall provide for a corporate seal for the corporation which shall be circular in form and shall have inscribed thereon the name of the corporation, the state of incorporation and the words "Corporate Seal". ARTICLE VIII INDEMNIFICATION Provision of Indemnification. The corporation shall, to the fullest extent permitted or required by Sections 180.0850 to 180.0859, inclusive, of the Wisconsin Business Corpora-tion Law, including any amendments thereto (but in the case of any such amendment, only to the extent such amendment permits or requires the corporation to provide broader indemnification rights than prior to such amendment), indemnify its Directors and Officers against any and all Liabilities, and advance any and all reasonable Expenses, incurred thereby in any Proceeding to which any such Director of Officer is a Party because he or she is or was a Director or Officer of the corporation. The corporation shall also indemnify an employee who is not a Director or Officer, to the extent that the employee has been successful on the merits or otherwise in defense of a Proceeding, for all reasonable Expenses incurred in the Proceeding if the employee was a Party because he or she is or was an employee of the corporation. The rights to indemnification granted hereunder shall not be deemed exclusive of any other rights to indemnification against Liabilities or the advancement of Expenses which a Director, Officer or employee may be entitled under any written agreement, Board resolution, vote of shareholders, the Wisconsin Business Corporation Law or otherwise. The corporation may, but shall not be required to, supplement the foregoing rights to indemnification against Liabilities and advancement of Expenses under this Section 8.1 by the purchase of insurance on behalf of any one or more of such Directors, Officers or employees, whether or not the corporation would be obligated to indemnify or advance Expenses to such Director, Officer or employee under this Section 8.1. All capitalized terms used in this Article VIII and not otherwise defined herein shall have the meaning set forth in Section 180.0850 of the Wisconsin Business Corporation Law. ARTICLE IX AMENDMENTS A. By Shareholder Except as otherwise provided in the articles of incorporation and these by-laws, the shareholders shall have the power to adopt, amend, alter, change or repeal any of the by-laws of the corporation by the affirmative vote of shareholders holding not less than a majority of the voting power of the then outstanding shares of all classes of capital stock of the corporation generally possession, voting rights present or represented at any annual or special meeting of the shareholders at which a quorum is in attendance. B. By Directors Except as otherwise provided by the Wisconsin Business Corporation Law, the articles of incorporation and these by-laws, the Board of Directors shall have the power to adopt, amend, alter, change or repeal any of the by-laws of the corporation by the affirmative vote of a majority of the directors present at any meeting of the Board of Directors at which a quorum is in attendance; but no by-law adopted by the shareholders shall be 17 amended or repealed by the Board of Directors if the by-law so adopted so provides. The manner of adoption of these by-laws or any section or provision thereof shall not be deemed to impair or negate the power of the Board of Directors to adopt, amend, alter, change or repeal these by-laws as provided herein. C. Implied Amendments Any action taken or authorized by the shareholders or by the Board of Directors which would be inconsistent with the by-laws then in effect but which is taken or authorized by affirmative vote of not less than the number of shares or the number of directors required to amend the by-laws so that the by-laws would be consistent with such action shall be given the same effect as though the by-laws had been temporarily amended or suspended so far, but only so far, as is necessary to permit the specific action so taken or authorized. EX-4 4 EX 4.11 1 EXHIBIT 4-11 Citicorp Securities, Inc. February 14, 1994 To: The Lenders in the WICOR, Inc., Wisconsin Gas Company, and Sta-Rite Industries, Inc. Credit Agreements dated March 29, 1993 Re: Extension Request Ladies and Gentlemen: WICOR, Wisconsin Gas and Sta-Rite Industries have each requested a one-year extension of the Termination Date under Section 2.17 of their respective credit agreements (attached). If approved by all Lenders, the new Termination Date as extended would be March 29, 1997 unless the Commitments were terminated or reduced in whole pursuant to Sections 2.05 or 6.01. Audited financial statements for each company are not available at this time. The companies have provided unaudited financial statements certified by a senior financial officer, copies of which are enclosed with this letter. Audited financials will follow shortly as required under the extension provisions. would you please notify Citibank of your decision by March 17, 1994? If you approve the extension, please indicate your approval by signing at the appropriate place at the bottom of the two copies of this letter. Please return both copies to me. I will notify the banks of the outcome as soon as all Lenders have responded. If approved, the extension would be effective on the anniversary date of the credit agreements, and I will send copies of all the signatures for your files. Should you have any questions, please call me at (212)559-6086. Sincerely, Emily J. Eisenlohr Approved By Anita J. Brichell Vice President ------------------- Title: Vice President attach Bank Citibank, N.A. Date March 15, 1994 cc: James J. Monnat Arthur R. Meyer EX-10 5 EX 10.10 1 EXHIBIT 10.10 WICOR, Inc. Officers' Incentive Compensation Plan 1995 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 Percent of Salary ------------------------------ Position Minimum Target Maximum -------------- --------- -------- --------- CEO, WICOR 0% 50% 75.0% Others 0% 40% 60.0% 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: ----------------------------- WICOR Subsidi- Individ- Perform- ary Per- ual Per- Position ance formance formance ------------- -------- -------- -------- 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 2 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: Perform- Award As Performance ance As % 1995 % Of Tar- Level Of Target EPS get Award ---------------- --------- -------- --------- Below Threshold < 85% < $2.00 0.0% Threshold 85% $2.00 1.0% Target 100% $2.34 - 100% (budget) Maximum or Above 120% or $2.81 or 150% more more For performance at levels between Threshold and Target or between Target and Maximum, award calculations will be pro-rated on a linear basis. 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 individual performance portion of the target award, and will be determined and paid independently of Corporate financial perfor- mance. 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. Performance Period Company performance goals will be for the 1995 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: 3 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, 1995. 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 6 EX 10.12 1 EXHIBIT 10.12 Wisconsin Gas Company Officers' Incentive Compensation Plan 1995 I. Objectives The principal objectives of the Plan are: A. To motivate and to provide incentive for key officers and executive management team (EMT) 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 and EMT 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 participant, as a percentage of base salary, are as follows: Award as % of Salary ------------------------------ Position Minimum Target Maximum ---------------- --------- -------- --------- President & CEO 0% 40% 60% VP and EMT 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 remain- ing 50% will be determined based on the WICOR Officers' Incentive Compensation Plan. 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 2 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 1995 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 1995, 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:
Net Income Award Determination -------------------------------------------- Net Income as % of % of Target Performance Level Budget Awarded ------------------- ---------- ----------- Less than Threshold < 85% 0.0% Threshold 85% 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 1995, the amount of targeted net income is set forth in Exhibit I. C. Total performance awards will be calculated by combining the payouts from Performance Plus, Net Income and Individual Components. 3 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 participants 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. 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: 4 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. 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. 5 Exhibit I Wisconsin Gas Company Incentive Compensation Plan Formula Performance Goals 1995 Performance Plus* Maximum Points 1. Rate Improvement Improvement in Residential Rates 5 2. Customer Service Favorability/Customer Satisfaction 5 3. Safety 5 4. Cost Effectiveness Operation & Maintenance Expense 5 5. Competitiveness Margin Rate Reductions 5 ---------- Maximum Total Points (Target = 15 points) 25 ========== 6. Multiplier Net Income as % of Budget Multiplier ------------------------- ------------ Less than 85% 0.0000 85% 0.0100 90% 0.3333 95% 0.6667 100% 1.0000 110% 1.2500 120% 1.5000 * 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 (85%) $19,690,000 Target (100%) $23,165,000 Maximum (120%) $27,798,000 EX-10 7 EX 10.17 1 EXHIBIT 10.17 Sta-Rite Industries, Inc. Officers' Incentive Compensation Plan 1995 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. Eligibility 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: Award as Percent of Base Salary ------------------------------- Position Minimum Target Maximum ----------------- ----------- -------- --------- President and CEO 0% 40% 60.0% VP 0% 30% 45.0% B. Only 50% of the President and CEO'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. 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. 2 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 indepen- dently 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 1995 are set forth on Exhibit I. V. Performance Period Company performance goals will be for the 1995 calendar year. VI. Bonus Award Determination A. Each year management will establish appropriate formula perfor- mance levels for minimum, target and maximum bonus awards. B. As noted in Section III A, the target bonus amount for the President and CEO 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 Treshold < 79% 0.0% Threshold 79% 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. 3 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. 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. 4 Exhibit I Sta-Rite Industries, Inc. Incentive Compensation Plan Formula Performance Goals 1995 Performance Goal: Net Earnings ($000) Return an Assets ----------------- ------------------- ---------------- Minimum $ 9,900 5.5% Target $12,500 6.9% Maximum $15,000 8.3% EX-13 8 EX 13 1 EXHIBIT 13 GENERAL OVERVIEW WICOR has two significant business segments: gas distribution and manufacturing. Gas distribution is the primary business, as it accounted for 64% of consolidated revenues and 67% of consolidated operating income in 1994. However, the manufacturing segment has grown significantly in recent years with operating income more than doubling since 1992. WICOR earnings were $33.2 million in 1994, or $1.99 per share of common stock, compared with $29.3 million, or $1.82 per share in 1993, and $22.8 million, or $1.47 per share in 1992 ($14.8 million, or $0.96 per share after the cumulative effect of accounting changes). Gas sales volumes decreased in 1994, despite substantial customer additions, primarily as a result of warmer than normal weather, after having increased in 1993 as a result of colder weather and customer additions in 1992 and 1993. Manufacturing operations in 1994 continued to show significant improvement as a result of more favorable economic conditions, continuing strong international sales, and new product introductions. Net cash flows from operations for the years 1992 through 1994 totalled $144.0 million. Cash proceeds from the $92.2 million net increase in long- term debt, common stock and short-term debt, along with the net cash flows from operations provided most of the funding for $178.8 million of capital expenditures and $64.2 million of dividends for that three year period. Segment data for WICOR's operations are summarized below in millions of dollars.
Operating Revenues 1994 1993 1992 ----------------------------- -------- -------- -------- Gas distribution $ 556.6 $ 574.8 $ 495.4 Manufacturing 311.2 274.7 252.0 -------- -------- -------- $ 867.8 $ 849.5 $ 747.4 ======== ======== ======== Depreciation and Amortization 1994 1993 1992 ----------------------------- -------- -------- -------- Gas distribution $ 37.4 $ 34.8 $ 30.5 Manufacturing 9.7 8.9 9.7 -------- -------- -------- $ 47.1 $ 43.7 $ 40.2 ======== ======== ======== Operating Income 1994 1993 1992 ----------------------------- -------- -------- -------- Gas distribution $ 44.4 $ 46.2 $ 43.3 Manufacturing 22.2 17.8 10.0 -------- -------- -------- $ 66.6 $ 64.0 $ 53.3 ======== ======== ========
Estimated Actual Capital Expenditures 1995 1994 1993 1992 ----------------------------- ---------- -------- -------- -------- Gas distribution $ 49.7 $ 44.6 $ 42.3 $ 62.1 Manufacturing 20.3 10.5 9.6 9.8 ---------- -------- -------- -------- $ 70.0 $ 55.1 $ 51.9 $ 71.9 ========== ======== ======== ======== /TABLE 2
Identifiable Assets 1994 1993 1992 ------------------------------ -------- -------- -------- Gas distribution $ 707.9 $ 737.2 $ 634.6 Manufacturing 222.8 196.5 191.2 -------- -------- -------- $ 930.7 $ 933.7 $ 825.8 ======== ======== ========
RESULTS OF OPERATIONS Gas Distribution -- Although sales margins increased in 1994, they were offset by higher levels of operating expenses, resulting in a decrease in operating income as compared with 1993. The 1994 earnings reflect a 10.1% return on weighted average utility common equity. A $10.1 million or 4.9% annual margin rate decrease, became effective on November 14, 1994. That rate order also retained the authorized return on utility common equity of 11.8%. Margins benefited in 1993 from rate increases effective in November 1992 and November 1993. Revenues, margins and volumes are summarized below. Margin, defined as revenues less cost of gas, is a better comparative performance indicator than revenues. Transportation service revenues are recorded at the same margin as sales with no corresponding cost of gas amount. Therefore, for a given rate class, the volume mix between sales and transportation service affects revenues but not margin. In addition, changes in cost of gas flow through to revenue under a gas adjustment clause, with no effect on margin.
(Millions of Dollars) 1994 1993 1992 ------------------------- -------- -------- -------- Gas sales revenue $ 550.0 $ 565.1 $ 485.3 Cost of gas sold 357.5 382.0 319.4 Gas sales margin 192.5 183.1 165.9 Gas transportation margin 6.6 9.7 10.1 -------- -------- -------- Total margin $ 199.1 $ 192.8 $ 176.0 ======== ======== ========
(Millions of Therms) 1994 1993 1992 ------------------------- -------- -------- -------- Sales volumes Firm 795 823 782 Interruptible 282 208 174 Transport volumes 119 174 214 -------- -------- -------- Total throughput 1,196 1,205 1,170 ======== ======== ======== /TABLE 3 Total gas margin increased by 3% and 10% in 1994 and 1993, respectively. The increase in 1994 was due to 1993 rate increases which were offset by the impact of lower volume sales and the 1994 rate decrease. Lower volumes in 1994 were primarily due to weather which was 5% warmer than 1993. Assuming normal weather in 1994 WICOR earnings would have been approximately $0.26 per share higher. The increase in 1993 gas margins was due primarily to rate increases in 1993 and 1992 and to increased sales volumes. Weather in 1993 which was 1% colder than 1992 and a 3% increase in residential customers helped to increase the 1993 sales volumes. In 1994 and 1993 a number of industrial customers switched between interruptible sales and transportation services. There is no impact on margins from the switching activity. Operation and maintenance expenses increased by $6.1 million or 6% in 1994. The increase was in large measure due to increases in uncollectible receivables expense ($2.8 million) and amortization of business system software costs ($1.6 million). These increases in expenses are being recovered in rates on an annual basis under the November 1993 rate order. Included in 1994 operations expense is a one-time charge of $2.7 million relating to the election by 131 employees of an early retirement option. Savings in 1994 from these retirements have been realized and have offset this charge. Operation and maintenance expenses increased by $10.9 million or 11% in 1993. The increase was primarily due to higher costs for employee benefits, business systems software amortization, conservation programs, and uncollectible receivables. These additional costs are being recovered as a result of the 1992 and 1993 rate orders. Manufacturing Operations -- Manufacturing operating income in 1994 was $22.2 million compared with $17.8 million in 1993 and $10.0 million in 1992. The improvements were primarily the result of increased sales. Sales in 1994 were $311.2 million, an increase of 13% over 1993. International sales improved by 21% and domestic sales also contributed to the increase. Significant sales improvements were noted in the water systems, pool and spa, recreational vehicle, marine, and industrial markets. Sales in 1993 were $274.7 million, an increase of 9% over 1992 sales of $252.0 million. Improvements were noted in sales of water systems, drainers and environmental pumps as well as pumps for the food service, marine, water purification and industrial markets. The improved economy and favorable weather conditions also were significant factors contributing to the increase. International and export sales represented 37% of manufacturing sales in 1994 and 34% in both 1993 and 1992. The increase in 1994 is primarily related to sales growth that occurred in the Company's Australian and European markets. Operating expenses increased in 1994 by 11% over 1993 primarily as a result of increased sales. As a percentage of sales, however, 1994 operating expenses declined slightly from 1993. Operating expenses decreased by 2% in 1993, despite the 9% increase in sales. Much of the 1993 savings was generated through administrative personnel reductions in 1992 and 1993.
Bar chart of WICOR Operating Income by segment (millions of dollars) 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ Gas distribution $ 34.9 $ 39.5 $ 43.3 $ 46.2 $ 44.4 Maunufacturing 9.7 11.7 10.0 17.8 22.2 ------ ------ ------ ------ ------ $ 44.6 $ 51.2 $ 53.3 $ 64.0 $ 66.6 ====== ====== ====== ====== ====== /TABLE 4 Interest Expense, Other Income and Expenses and Income Taxes -- The 1994 decrease in interest expense as compared to 1993 was due primarily to a September 1993 long-term debt refinancing and to reduced levels of short-term borrowings. Both interest income and interest expense declined in 1993 as a result of lower interest rates. Income tax expense decreased in 1994 despite the increase in pre-tax book income. The effective income tax rate was reduced in 1994 primarily as a result of utilizing foreign tax incentives and the settlement of disputed tax matters. Income tax expense increased in 1993 primarily as a result of higher pre-tax book income and a 1% increase in the federal tax rate to 35% effective January 1, 1993. Accounting Changes -- The cumulative effect of accounting changes related to the recording of income taxes and postretirement benefits totaled $8.0 million in 1992. The impact of adopting these two accounting changes, effective January 1, 1992, is discussed in Notes 3 and 9. Effects of Changing Prices -- It is management's view that changes in the rate of inflation have not had a significant effect on WICOR's income over the past three years. Inflationary increases have been recovered through price increases or productivity improvements. In November 1994, Wisconsin Gas received approval from the Public Service Commission of Wisconsin (PSCW) to use an alternative method of ratemaking that includes a three year margin rate cap. After reviewing the impact of the margin rate cap and other factors, management believes that productivity improvements are likely to offset the impact of inflationary cost increases. This alternative method is discussed on page 22 under "Regulatory Matters."
Bar chart of WICOR Return on Average Common Equity before cumulative effects of accounting changes 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ Percent 6.8% 9.5% 9.2% 11.2% 11.6%
LIQUIDITY AND CAPITAL RESOURCES Over the last three years, the Company has generated sufficient cash flows from operations to cover operating expenses, dividends, and a portion of investment activities. Cash flow from operations increased to $103.6 million in 1994, compared with $3.4 million in 1993 and $37.0 million in 1992. The comparative increase and decrease in cash flow in 1994 and 1993, respectively, are primarily due to funds used by Wisconsin Gas to purchase its initial inventory of gas held in storage. As discussed under regulatory matters, one of the impacts of Federal Energy Regulatory Commission (FERC) Order No. 636 is that utilities such as Wisconsin Gas must assume the responsibility for purchasing gas supplies and maintaining gas in storage. Previously, the pipelines performed those functions. Investment Activities -- Capital expenditures increased by $3.1 million in 1994 after decreasing by $20.0 million in 1993 and increasing by $26.8 million in 1992. Utility expenditures returned to more normal levels in 1994 and 1993 following completion of a major expansion project in 1992. Both utility capital expenditures and manufacturing capital expenditures are expected to increase in 1995, and most likely will be funded from operations. 5 In July 1993, WICOR merged with Shurflo by exchanging approximately $27 million of WICOR stock for the outstanding common stock of Shurflo. See Note 2 for a further discussion of this transaction. The Company, either directly or through its subsidiaries, has invested $0.1 million, $2.1 million, and $9.8 million in 1994, 1993, and 1992, respectively, in other acquisition activity. In January 1995, WICOR sold its interest in Filtron Technology Corp., a manufacturer of filtration products for approximately $5 million. In January 1992, the PSCW issued an order prescribing an equity-based formula for determining the limitation on non-utility investments. As of December 31, 1994, WICOR would be permitted to invest an additional $78.7 million in nonutility investments under this order. Nonutility subsidiaries can also borrow additional amounts for acquisitions within certain PSCW guidelines (See Note 6).
Bar chart of Annual Degree Days % warmer than 20-year average 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ % warmer 16.0% 10.8% 6.4% 4.1% 9.0%
Financing Activities -- The Company does not anticipate the need to issue any long-term debt in 1995, but it may, in 1996, refinance $50.0 million of notes issued by Wisconsin Gas that are due in 1997. During 1993, Wisconsin Gas issued $45 million of 6.6% Notes due in 2013, the proceeds of which were used to refinance $45 million of first mortgage bonds which had higher interest rates. There were no issues of long-term debt in 1992. The Company's debt portion of capitalization decreased to 36% in 1994 as compared to 38% in 1993 and 40% in 1992. The utility's embedded cost of long-term debt was 8.1%, 8.9%, and 9.2% at December 31, 1994, 1993, and 1992, respectively. WICOR raised its dividend by 3% in 1994, 1993, and 1992. The current annual dividend rate is $1.60 per share. At December 31, 1994 the Company had $57.4 million of unrestricted retained earnings available for dividend payments to shareholders. In October 1992, the Company established the WICOR Plan which allows customers, shareholders, employees, Wisconsin residents and certain suppliers to purchase WICOR common stock directly and through dividend reinvestment without paying fees or service charges. During 1994 and 1993, respectively, 511,000 and 685,000 shares of common stock were issued through the WICOR Plan and through various employee benefit plans. These stock issuances provided funds to the Company of $10.6 million and $16.7 million. Beginning in 1995, it is anticipated that the share requirements for the WICOR Plan will be met through open market purchases of common stock. As described in Note 6, a November 1993 PSCW rate order retained certain limitations with respect to equity levels and dividend payments of Wisconsin Gas. Restrictions imposed by the PSCW are not expected to have any material effect on WICOR's ability to meet its cash obligations.
Bar chart of Manufacturing International and Export Sales millions of dollars 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ Dollars $ 64.9 $ 75.5 $ 85.9 $ 93.8 $114.2 /TABLE 6 Wisconsin Gas' ratio of pre-tax earnings to fixed charges was 2.9 in 1994 and 1993 and 2.8 in 1992, as earnings and fixed charges remained somewhat constant. Access to the credit markets and the costs associated therewith can be correlated to credit quality. The utility's unsecured bond rating was increased in 1993 by Moody's Investors Service from A1 to Aa3. The rating from Standard & Poor's Corporation remained at AA-. Such ratings are not a recommendation to buy, sell or hold securities, but rather an indication of credit worthiness. The following is a summary of the meanings of the ratings shown above and the relative rank of the Company's rating within each agency's classification system. Moody's top four corporate bond ratings (Aaa, Aa, A and Baa) are generally considered "investment grade." Obligations which are rated "Aa" are judged to be of high quality by all standards. Together with the Aaa group they comprise what are generally known as high-grade bonds. Aa securities are rated lower than the Aaa rated bonds because margins of protection may not be as large as in Aaa securities or fluctuation of protective elements may be of greater amplitude or there may be other elements present which make the long-term risk appear somewhat larger than the Aaa securities. A numerical modifier ranks the security within the category with a "1" indicating the high end, a "2" indicating the midrange and a "3" indicating the low end of the category. Standard & Poor's top four corporate bond ratings (AAA, AA, A and BBB) are considered "investment grade." Based on Standard & Poor's rating system, debt rated "AA" has a very strong capacity to pay interest and repay principal and differs from the highest rated issues only in small degree. A plus (+) or minus (-) sign may be used after Standard & Poor's ratings to designate the relative position of a credit rating within the rating category. Commercial paper carrying an A-1+ rating by Standard & Poor's Corporation and P-1 by Moody's Investors Service is routinely issued by Wisconsin Gas as needed to finance seasonal working capital needs, principally customer receivables and gas in storage. Such ratings are not a recommendation to buy, sell, or hold securities, but rather an indication of credit worthiness. Moody's top three short-term debt ratings (P-1, P-2 and P- 3) are generally considered investment grade and are intended to indicate the relative repayment ability of related issuers. According to Moody's rating system, short-term debt rated "P-1" has a superior ability for repayment of senior short-term debt obligations. The utility had no short-term debt outstanding for two months in 1994.
Bar chart of WICOR Capital Expenditures millions of dollars 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ Gas distribution $ 28.0 $ 34.6 $ 62.1 $ 42.3 $ 44.6 Manufacturing 8.3 10.5 9.8 9.6 10.5 ------ ------ ------ ------ ------ $ 36.3 $ 45.1 $ 71.9 $ 51.9 $ 55.1 ====== ====== ====== ====== ======
In March 1993, WICOR and its subsidiaries renewed a three-year revolving credit agreement, including separate agreements for $25 million for WICOR, $30 million for Wisconsin Gas, and $15 million for Sta-Rite. In 1994 the revolving credit agreement was extended an additional year to March 1997. In 1993, Sta-Rite renewed a $25 million commercial paper issuance facility. Commercial paper outstanding at December 31, 1994 and 1993 was $94.6 million and $117.1 million, respectively. The Company believes that it has adequate capacity to fund its operations for the foreseeable future through its borrowing arrangements and internally generated cash. 7 Regulatory Matters -- In July 1993, Wisconsin Gas submitted an incentive rate making proposal to the PSCW. In its November 1994 rate order, the PSCW significantly modified the Wisconsin Gas proposal. Under the PSCW rate order, Wisconsin Gas rates are subject to a three year margin rate cap (through October 1997) based on the rates approved in November 1993. The PSCW order also specified margin rate floors for each rate class. Wisconsin Gas has the ability to raise or lower margin rates within the specified range on a quarterly basis. The rates at December 31, 1994 are at the top of the range. In addition, the PSCW order required Wisconsin Gas to reduce its rates by $10.1 million, on an annual basis, to reflect a reduction in certain non-cash expenses. Over a twelve month period, beginning with the effective date of the order, this rate reduction will result in no net income impact, but will reduce cash flow. The rate order was effective November 14, 1994. Under the purchased gas adjustment provision of its rate schedules, Wisconsin Gas continues to recover the actual purchased gas costs it incurs.
Bar chart of WICOR Capitalization percent 1990 1991 1992 1993 1994 ------ ------ ------ ------ ------ Long-term debt 35.4% 40.9% 40.1% 37.9% 35.7% Common stock 64.6% 59.1% 59.9% 62.1% 64.3%
Statement of Financial Accounting Standards (SFAS) No. 71 "Accounting for the Effects of Certain Types of Regulation" provides that rate-regulated public utilities such as Wisconsin Gas record certain costs and credits allowed in the ratemaking process in different periods than would be required for unregulated businesses. These costs and credits are deferred as regulatory assets or regulatory liabilities and are recorded on the income statement at the time they are recognized in rates. SFAS No. 71 continues to be applicable to Wisconsin Gas in that its rates are approved by a third party regulator and are designed to recover its cost of service. Wisconsin Gas believes its current cost based rates are competitive in the current environment. In April 1992, the FERC issued Order No. 636 requiring interstate pipelines to "unbundle" their services. As a result, Wisconsin Gas purchases gas supplies separately from interstate transportation services. The utility has greater responsibility for managing its gas supply in a more competitive market. Variable-term market sensitive contracts and the increased use of gas in storage are being used to assure future supply. In spite of severely cold weather in January 1994, Wisconsin Gas was able to meet the needs of its customers under these changing conditions. Pipelines have been allowed to pass through to local gas distributors various costs incurred in the transition to Order No. 636. The PSCW has authorized that such costs that have been passed through to Wisconsin Gas be recovered in rates charged to customers. Although complete assurance cannot be given, it is believed that any additional future transition costs will also be recoverable from customers. Environmental Matters -- Wisconsin Gas is in the process of preparing a remedial action options report and recommendation for presentation to the Wisconsin Department of Natural Resources concerning two previously owned sites on which it operated manufactured gas plants. Wisconsin Gas currently anticipates that the costs incurred in the remediation effort will be recoverable from insurers or through rates and will not have a material adverse effect on the Company's liquidity or results of operations. 8 The manufacturing segment has provided reserves believed sufficient to cover its estimated costs related to contamination associated with Sta-Rite's manufacturing facilities. (See Note 7 for a more detailed discussion of these matters.) 9 TO THE SHAREHOLDERS AND BOARD OF DIRECTORS OF WICOR, INC.: We have audited the accompanying consolidated balance sheets and statements of capitalization of WICOR, Inc. (a Wisconsin corporation) and subsidiaries as of December 31, 1994 and 1993, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1994. These financial statements are the responsibility of WICOR Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WICOR, Inc. and subsidiaries as of December 31, 1994 and 1993, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1994, in conformity with generally accepted accounting principles. As discussed in Notes 3 and 9 to the Consolidated Financial Statements, effective January 1, 1992, WICOR Inc. changed its methods of accounting for income taxes and postretirement benefits other than pensions. Milwaukee, Wisconsin Arthur Andersen LLP February 2, 1995 10 CONSOLIDATED STATEMENTS OF INCOME
(Thousands of Dollars, Except per Share Amounts) Year Ended December 31, 1994 1993 1992 ---------- ---------- ---------- Operating Revenues Gas distribution $ 556,587 $ 574,835 $ 495,415 Manufacturing 311,168 274,693 251,994 ---------- ---------- ---------- 867,755 849,528 747,409 ---------- ---------- ---------- Operating Costs and Expenses Cost of gas sold 357,482 382,027 319,377 Manufacturing cost of sales 222,679 197,297 180,388 Operations and maintenance 181,820 169,068 159,009 Depreciation and amortization 29,416 28,044 26,650 Taxes, other than income taxes 9,748 9,141 8,670 ---------- ---------- ---------- 801,145 785,577 694,094 ---------- ---------- ---------- Operating Income 66,610 63,951 53,315 ---------- ---------- ---------- Interest expense (16,698) (17,428) (18,126) Other income and expenses 574 266 1,124 ---------- ---------- ---------- Income Before Income Taxes 50,486 46,789 36,313 Income taxes 17,312 17,476 13,549 ---------- ---------- ---------- Income Before Cumulative Effects of Accounting Changes 33,174 29,313 22,764 Cumulative effects of accounting changes: Postretirement benefits other than pensions (net of $4.1 million income tax benefit) - - (6,165) Income taxes - - (1,800) ---------- ---------- ---------- Net Income $ 33,174 $ 29,313 $ 14,799 ========== ========== ========== Per Share of Common Stock Income before cumulative effects of accounting changes $ 1.99 $ 1.82 $ 1.47 Cumulative effect of accounting change for postretirement benefits - - (0.40) Cumulative effect of accounting change for income taxes - - (0.11) ---------- ---------- ---------- Net Income $ 1.99 $ 1.82 $ 0.96 ========== ========== ========== Cash dividends $ 1.58 $ 1.54 $ 1.50 Average Common Shares Outstanding (000's) 16,708 16,096 15,490
The accompanying notes are an integral part of this statement. 11 CONSOLIDATED BALANCE SHEETS
(Thousands of Dollars) December 31, 1994 1993 ---------- ---------- Assets Current Assets Cash and cash equivalents $ 35,138 $ 22,953 Accounts receivable, less allowance for doubtful accounts of $9,233 and $9,351, respectively 103,487 111,408 Accrued utility revenues 40,327 53,483 Manufacturing inventories 60,239 58,079 Gas in storage, at weighted average cost 38,050 44,697 Deferred income taxes 15,540 10,005 Prepayments and other 19,519 13,969 ---------- ---------- 312,300 314,594 ---------- ---------- Property, Plant and Equipment, at cost Gas distribution 718,988 679,968 Manufacturing 103,696 97,736 ---------- ---------- 822,684 777,704 Less accumulated depreciation and amortization 407,121 377,004 ---------- ---------- 415,563 400,700 ---------- ---------- Deferred Charges and Other Systems development costs 34,071 38,808 Deferred environmental costs 41,942 41,641 Prepaid pension costs 30,865 29,580 Gas transition costs 7,411 15,485 Other regulatory assets 51,543 57,211 Other 37,013 35,707 ---------- ---------- 202,845 218,432 ---------- ---------- $ 930,708 $ 933,726 ========== ==========
The accompanying notes are an integral part of this statement. 12 CONSOLIDATED BALANCE SHEETS
(Thousands of dollars) December 31, 1994 1994 1993 ---------- ---------- Liabilities and Capitalization Current Liabilities Accounts payable $ 65,626 $ 62,683 Short-term borrowings 111,506 134,918 Refundable gas costs 18,058 15,596 Current portion of long-term debt 5,031 2,847 Accrued taxes 8,400 10,089 Accrued payroll and benefits 15,141 14,656 Other 15,661 15,199 ---------- ---------- 239,423 255,988 ---------- ---------- Deferred Credits and Other Deferred income taxes 42,322 45,878 Environmental remediation costs 37,188 40,000 Postretirement benefit obligation 69,730 67,510 Unamortized investment tax credit 8,187 8,654 Gas transition costs 7,411 15,485 Other regulatory liabilities 54,636 50,179 Other 18,674 14,526 ---------- ---------- 238,148 242,232 ---------- ---------- Commitments and Contingencies (Note 7) ---------- ---------- Capitalization (See accompanying statement) Long-term debt 161,669 165,230 Redeemable preferred stock - - Common equity 291,468 270,276 ---------- ---------- 453,137 435,506 ---------- ---------- $ 930,708 $ 933,726 ========== ==========
The accompanying notes are an integral part of this statement. 13 CONSOLIDATED STATEMENTS OF CASH FLOW Increase (Decrease) in Cash and Cash Equivalents
(Thousands of Dollars) Year Ended December 31, 1994 1993 1992 ---------- ---------- ---------- Operations Net income $ 33,174 $ 29,313 $ 14,799 Adjustments to reconcile net income to net cash flow from operating activities: Cumulative effect of changes in accounting principles, net of $4,110 income tax benefit - - 7,965 Depreciation and amortization 47,097 43,738 40,200 Deferred income taxes (9,091) (3,969) (2,958) Changes in: Receivables 21,105 (13,993) (8,627) Manufacturing inventories (2,027) (2,590) (839) Gas in storage 6,647 (38,050) (6,252) Other current assets (4,827) (569) 6,016 Systems development costs (841) (6,530) (9,976) Accounts payable 2,943 (11,055) (2,259) Refundable gas costs 2,462 1,955 5,633 Accrued taxes (2,412) 9,169 (2,098) Other current liabilities 947 (292) (1,754) Other noncurrent assets and liabilities 8,374 (3,726) (2,838) ---------- ---------- ---------- Cash provided by operating activities 103,551 3,401 37,012 ---------- ---------- ---------- Investment Activities Capital expenditures (55,051) (51,906) (71,873) Proceeds from sale of assets 42 5,328 761 Acquisitions (72) (2,120) (9,776) Other, net 343 541 274 ---------- ---------- ---------- Cash (used in) investing activities (54,738) (48,157) (80,614) ---------- ---------- ---------- Financing Activities Change in short-term borrowings (21,617) 59,603 35,726 Issuance of long-term debt 1,869 47,446 ,173 Reduction of long-term debt (4,795) (50,982) (8,674) Issuance of common stock 10,649 16,682 6,079 Dividends paid on common stock, less amounts reinvested (23,247) (21,450) (19,459) Other 513 (222) (734) ---------- ---------- ---------- Cash (used in) provided by financing activities (36,628) 51,077 13,111 ---------- ---------- ---------- Change in Cash and Cash Equivalents 12,185 6,321 (30,491) Cash and cash equivalents at beginning of year 22,953 16,632 47,123 ---------- ---------- ---------- Cash and Cash Equivalents at End of Year $ 35,138 $ 22,953 $ 16,632 ========== ========== ==========
The accompanying notes are an integral part of this statement. 14 CONSOLIDATED STATEMENTS OF CAPITALIZATION
(Thousands of Dollars) December 31, 1994 1993 ---------- ---------- Long-Term Debt Wisconsin Gas: First mortgage bonds Adjustable Rate Series, 7.4% and 8.1%, respectively, due 2002 $ 10,000 $ 14,000 9-1/8% Notes due 1997 50,000 50,000 7-1/2% Notes due 1998 40,000 40,000 6.6% Notes due 2013 45,000 45,000 Sta-Rite: First mortgage bonds, adjustable rate, 7.8% to 8.1%, due semi- annually through 2000 1,203 1,431 Industrial revenue bonds, 7-7/8%, payable through 2000 2,190 2,575 Commercial paper under multi-year credit agreement 6,853 4,758 Capital lease obligations and other 1,222 1,338 Unamortized (discount), net (1,169) (1,356) ESOP loan guarantee 6,370 7,484 ---------- ---------- 161,669 165,230 ---------- ---------- Redeemable Preferred Stock WICOR: $1.00 par value; authorized 1,500,000 shares - - Wisconsin Gas: Without par value, cumulative; authorized 1,500,000 shares - - ---------- ---------- - - ---------- ---------- Common Equity Common stock, $1.00 par value, authorized 60,000,000 shares; outstanding 16,918,000 and 16,407,000 shares, respectively 16,918 16,407 Other paid in capital 180,000 166,710 Retained earnings 101,418 94,643 Unearned compensation - ESOP and restricted stock (6,868) (7,484) ---------- ---------- 291,468 270,276 ---------- ---------- Total Capitalization $ 453,137 $ 435,506 ========== ==========
The accompanying notes are an integral part of this statement. 15 CONSOLIDATED STATEMENTS OF COMMON EQUITY
(Thousands of Dollars) December 31, 1994 1993 1992 ---------- ---------- ---------- Common Stock: Balance at beginning of year $ 16,407 $ 15,722 $ 15,366 Issued in connection with dividend reinvestment, customer stock purchase and employee benefit plans 511 685 356 ---------- ---------- ---------- Balance at end of year 16,918 16,407 15,722 ---------- ---------- ---------- Other Paid-in Capital: Balance at beginning of year 166,710 148,064 139,931 Received in connection with dividend reinvestment, customer stock purchase and employee benefits plans 13,290 18,646 8,133 ---------- ---------- ---------- Balance at end of year 180,000 166,710 148,064 ---------- ---------- ---------- Retained Earnings: Balance at beginning of year 94,643 90,102 97,906 Net income 33,174 29,313 14,799 Dividends on common stock (26,399) (24,099) (21,869) Other - (673) (734) ---------- ---------- ---------- Balance at end of year 101,418 94,643 90,102 ---------- ---------- ---------- Unearned Compensation - ESOP and restricted stock: Balance at beginning of year (7,484) (8,601) (9,750) Loan payments 1,114 1,117 1,149 Issuance of restricted stock (723) - - Amortization of restricted stock 225 - - ---------- ---------- ---------- Balance at end of year (6,868) (7,484) (8,601) ---------- ---------- ---------- Total Common Equity at End of Year $ 291,468 $ 270,276 $ 245,287 ========== ========== ==========
The accompanying notes are an integral part of this statement. 16 QUARTERLY FINANCIAL DATA (UNAUDITED) Because seasonal factors significantly affect the Company's operations (particularly at the Wisconsin Gas level), the following data may not be comparable between quarters:
(Thousands of Dollars, Except per Share Amounts) Quarters: First Second Third Fourth ------------------------------------------ -------- --------- -------- 1994 Operating revenues $ 320,625 $186,079 $151,037 $210,014 Operating income (loss) $ 49,444 $ 5,500 $ (8,668) $ 20,334 Income available for common stock$ 28,202 $ 998 $ (8,069) $ 12,043 Net income (loss) per common share (a) $ 1.71 $ 0.06 $ (0.48) $ 0.71 1993 Operating revenues $ 272,660 $190,223 $152,801 $233,844 Operating income (loss) $ 41,689 $ 5,881 $ (8,406) $ 24,787 Income available for common stock$ 23,935 $ 576 $ (8,597) $ 13,399 Net income (loss) per common share (a) $ 1.51 $ 0.04 $ (0.53) $ 0.82
(a) Quarterly earnings per share may not total to the amounts reported for the year since the computation is based on weighted average common shares outstanding during each quarter. 17 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. ACCOUNTING POLICIES A. Principles of Consolidation The consolidated financial statements include the accounts of WICOR, Inc., (WICOR or the Company) and its wholly-owned subsidiaries: Wisconsin Gas Company (Wisconsin Gas), Sta-Rite Industries, Inc. (Sta-Rite), and SHURflo Pump Manufacturing Co. (Shurflo). All appropriate intercompany transactions have been eliminated. Certain amounts in financial statements of prior years have been reclassified to conform to the presentation of the current year. B. Business Wisconsin Gas is a public utility engaged in the distribution of natural gas throughout Wisconsin. Most of its revenues, however, are derived from gas delivered in southeastern Wisconsin. Wisconsin Gas is subject to regulation by the Public Service Commission of Wisconsin (PSCW) and gives recognition to ratemaking policies substantially in accordance with the Federal Energy Regulatory Commission (FERC) System of Accounts. Sta-Rite manufactures pumps and water processing equipment and sells its products in approximately 110 countries. Shurflo, which merged with the Company during the third quarter of 1993 (See Note 2), manufactures pumps for the food service, recreational vehicle, marine, industrial and water purification markets. C. Gas Distribution Revenues and Purchased Gas Costs Utility billings are rendered on a cycle basis. Revenues include estimated amounts accrued for service provided but not yet billed. Wisconsin Gas' rate schedules contain purchased gas adjustment (PGA) provisions which permit the recovery of actual purchased gas costs incurred. The difference between actual gas costs incurred and costs recovered through rates, adjusted for inventory activity, is deferred as a current asset or liability. The deferred balance is returned to or recovered from customers at intervals throughout the year and any residual balance at the annual October 31 reconciliation date is subsequently refunded to or recovered from customers. The PSCW is currently permitting Wisconsin Gas to recover pipeline supplier take-or-pay settlement costs, allocating a portion of the direct- billed costs to each customer class, including transportation customers. D. Plant and Depreciation Gas distribution property, plant and equipment is stated at original cost, including overhead allocations. Upon ordinary retirement of plant assets, their cost plus cost of removal, net of salvage, is charged to accumulated depreciation, and no gain or loss is recognized. The depreciation of Wisconsin Gas' assets is computed using straight- line rates over estimated useful lives and considers salvage value. These rates have been consistently used for ratemaking purposes. The composite rates are 4.5% for 1994 and 4.7% for 1993 and 1992. Depreciation of manufacturing property is calculated under the straight-line method over the estimated useful lives of the assets (3 to 10 years for equipment and 30 years for buildings) and is primarily reported as a cost of sales. E. Regulatory Accounting and Deferred Charges The Company and Wisconsin Gas account for their regulated operations in accordance with Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for the Effects of Certain Types of Regulation." This statement sets forth the application of generally accepted accounting principles to those companies whose rates are determined by an independent third-party regulator. The economic effects of regulation can result in regulated companies recording costs that have been or are expected to be allowed in the ratemaking process in a period different from the period in which the costs would be charged to expense by an unregulated enterprise. When this occurs, costs are deferred as assets in the balance sheet (regulatory assets) and recorded as expenses as those same amounts are reflected in rates. Additionally, regulators can impose liabilities upon a regulated company for amounts previously collected from customers and for amounts that are expected to be refunded to customers (regulatory liabilities). 18 The amounts recorded as regulatory assets and regulatory liabilities in the Consolidated Balance Sheet at December 31, 1994 and 1993 are as follows:
(Thousands of Dollars) 1994 1993 -------------------------------------- ---------- ---------- Regulatory assets: Deferred environmental costs $ 41,942 $ 41,641 Income tax-related amounts due from customers (Note 3) 3,711 5,650 Postretirement benefit costs (Note 9) 47,832 51,561 Gas transition costs 7,411 15,485 Other 16,000 14,499 ---------- ---------- $ 116,896 $ 128,836 ========== ========== Regulatory liabilities: Income tax-related amounts due to customers (Note 3) $ 18,792 $ 21,762 Pension costs (Note 9) 22,333 22,808 Refundable gas costs 18,058 15,596 Other 14,469 4,658 ---------- ---------- $ 73,652 $ 64,824 ========== ==========
Consistent with PSCW regulation, Wisconsin Gas has capitalized computer systems development costs which are to be amortized over a five- to ten- year period, generally as the respective systems become operational. Wisconsin Gas is precluded from discontinuing service to residential customers within its service area during a certain portion of the heating season. Any differences between doubtful account provisions based on actual experience and provisions allowed for ratemaking purposes by the PSCW are deferred for later recovery in rates as a cost of service. The most recent PSCW rate order provides for a $13.9 million allowable annual provision for doubtful accounts, including amortization of prior deferred amounts. See Notes 7 and 9 for discussion of additional deferred charges. F. Income Taxes The Company files a consolidated Federal income tax return and allocates Federal current tax expense or credits to each subsidiary based on its respective separate tax computation. Beginning with 1992, the Company has provided deferred income taxes in accordance with SFAS 109 "Accounting for Income Taxes," to reflect tax effects of reporting book and taxable income in different periods (See Note 3). For Wisconsin Gas, investment tax credits were recorded as a deferred credit on the balance sheet and are being amortized to income over the applicable service lives of the related properties in accordance with regulatory treatment. G. Net Income per Common Share Net income per common share is based on the weighted average number of shares. Employee stock options are not recognized in the computation of earnings per common share as they are not materially dilutive. H. Manufacturing Inventories Approximately 49% and 54% of manufacturing inventories, in 1994 and 1993, respectively, are priced using the last-in, first-out (LIFO) method (not in excess of market), with the remaining inventories priced using the first-in, first-out (FIFO) method. If the (FIFO) method had been used exclusively, manufacturing inventories would have been $8.4 million and $8.0 million higher at December 31, 1994 and 1993, respectively. 19 I. Cash Flows The Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. Due to the short maturity of these instruments, market value approximates cost. The Company's dividends reinvested (pursuant to its dividend reinvestment plan) totalled $3.2 million, $2.6 million and $2.4 million for 1994, 1993, and 1992, respectively. For purposes of the Consolidated Statements of Cash Flows, income taxes paid (net of refunds) and interest paid (excluding capitalized interest) were as follows for each of the years ended December 31, 1994, 1993 and 1992:
(Thousands of Dollars) 1994 1993 1992 -------------------------------- ---------- ---------- ---------- Income taxes paid $ 31,384 $ 16,106 $ 8,805 Interest paid $ 15,714 $ 17,678 $ 17,404
J. Derivative Financial Instruments The Company, through a manufacturing subsidiary, has only limited involvement with derivative financial instruments and does not use them for trading or speculative purposes. Foreign exchange futures and forward contracts are used to hedge foreign exchange exposure resulting from intercompany purchases of products from United States plants. Gains and losses from open contracts are deferred until recognized as part of the purchase transaction. Such gains and losses included in net income in the Consolidated Statements of Income for the years ended December 31, 1994, 1993 and 1992 were not material. 2. MERGERS AND ACQUISITIONS On July 28, 1993, the Company completed its merger with Carr-Griff, Inc. which became SHURflo Pump Manufacturing Co., a wholly-owned subsidiary of WICOR, Inc. Shurflo designs, manufactures and sells pumps to the food service, recreational vehicle, marine, industrial and water purification markets. The Company issued approximately 0.9 million shares of common stock, valued at approximately $27 million, for all the outstanding common stock of Shurflo. This transaction was accounted for as a pooling of interests. 3. INCOME TAXES In the fourth quarter of 1992, the Company adopted SFAS No. 109, "Accounting for Income Taxes," retroactive to January 1, 1992. Under the liability method prescribed by SFAS No. 109, deferred taxes are provided based upon enacted tax laws and rates applicable to the periods in which the taxes become payable. This adoption resulted in a net loss from the cumulative effect of the change in accounting principle of $1.8 million for the nonregulated subsidiaries. Changes in Wisconsin Gas' deferred income taxes arising from the adoption represent amounts recoverable or refundable through future rates and have been recorded as regulatory assets and liabilities on the balance sheet. The current and deferred components of income tax expense for each of the years ended December 31, are as follows: 20
(Thousands of Dollars) 1994 1993 1992 ---------------------------- ---------- ---------- ---------- Current Federal $ 23,516 $ 18,576 $ 3,818 State 5,816 4,742 1,405 Foreign 1,627 834 800 ---------- ---------- ---------- Total Current 30,959 24,152 6,023 ---------- ---------- ---------- Deferred Federal (11,247) (6,432) 5,974 State (2,012) (961) 1,588 Foreign (388) 717 (36) ---------- ---------- ---------- Total Deferred (13,647) (6,676) 7,526 ---------- ---------- ---------- Total Provision $ 17,312 $ 17,476 $ 13,549 ========== ========== ==========
The provision for income taxes differs from the amount of income tax determined by applying the applicable U.S. statutory federal income tax rate to pretax income as a result of the following differences:
(Thousands of Dollars) Year ended December 31, 1994 1993 1992 --------------- ---------------- ---------------- Statutory U.S. tax rates $17,670 35.0% $16,376 35.0% $12,346 34.0% State income taxes, net 2,518 5.0 2,326 5.0 1,841 5.1 Excess of foreign (benefit) provision over U.S. stat- utory tax rate (174) (0.3) 886 1.9 843 2.3 Investment credit restored (461) (0.9) (473) (1.0) (502) (1.4) Excess deferred tax amortization (505) (1.0) (532) (1.1) (507) (1.4) Settlement of disputed tax matters (998) (2.0) - - - - Other, net (738) (1.5) (1,107) (2.4) (472) (1.3) ---------------- ---------------- ---------------- Effective Tax Rates $17,312 34.3% $17,476 37.4% $13,549 37.3% ================ ================ ================ /TABLE 21 The components of deferred income tax assets and liabilities at December 31, 1994 and 1993 are as follows:
(Thousands of Dollars) 1994 1993 ---------------------------------- ---------- ---------- Deferred Income Tax Assets Recoverable gas costs $ 7,258 $ 5,928 Inventory 1,935 (2,052) Deferred compensation 2,026 1,873 Other 4,321 4,256 ---------- ---------- $ 15,540 $10,005 ========== ========== Deferred Income Tax Liabilities Property related $ 41,054 $ 37,496 Systems development costs 13,675 15,576 Investment tax credit (5,416) (5,725) Gas transition costs 2,974 5,633 Postretirement benefits (8,059) (5,503) Deferred compensation (3,055) (2,747) Pension benefits 2,842 2,249 Other (1,693) (1,101) ---------- ---------- $ 42,322 $ 45,878 ========== ==========
4. SHORT-TERM BORROWINGS As of December 31, 1994 and 1993, the Company had total unsecured lines of credit available from banks of $206.5 million and $183.4 million, respectively. These borrowing arrangements may require the maintenance of average compensating balances, which are generally satisfied by balances maintained for normal business operations, and may be withdrawn at any time.
December 31, (Thousands of Dollars) 1994 1993 -------------------------------- ---------- ---------- Notes payable to banks U.S. subsidiaries $ 100 $ 3,600 Non-U.S. subsidiaries 16,835 14,218 Commercial paper - U.S. 94,571 117,100 ---------- ---------- $ 111,506 $ 134,918 ========== ==========
Weighted average interest rates on debt outstanding at end of year: Notes payable to banks U.S. subsidiaries 7.5% 4.1% Non-U.S. subsidiaries 6.2% 5.3% Commercial paper - U.S. 5.9% 3.4% /TABLE 22 5. LONG-TERM DEBT In September 1993, Wisconsin Gas issued $45 million of 6.6% Notes due in 2013, the proceeds of which were used to refinance $45 million of first mortgage bonds which have higher average interest rates. There were no issuances of long-term debt in 1992. Substantially all gas distribution and certain manufacturing property and plant is subject to first mortgage liens. Maturities and sinking fund requirements during the succeeding five years on all long-term debt total $4.9 million, $4.7 million, $58.3 million, $42.8 million and $2.8 million in 1995, 1996, 1997, 1998 and 1999, respectively. 6. RESTRICTIONS A November 1993 rate order issued by the PSCW sets an equity range of 43% to 50% for the utility and also requires Wisconsin Gas to request PSCW approval prior to the payment of dividends on its common stock to WICOR if the payment would reduce its common equity (net assets) below 43% of total capitalization (including short-term debt). Under this requirement, $22.2 million of Wisconsin Gas' net assets at December 31, 1994, plus future earnings, were available for such dividends without PSCW approval. In addition, the PSCW must also approve any dividends in excess of $16 million for any 12 month period beginning November 1 if such dividends would dilute Wisconsin Gas' total equity below 48.43% of its total capitalization. Wisconsin Gas paid $4 million in dividends in November 1994 and expects to pay $16 million in dividends for the 12 months ending October, 1995. In connection with its long-term debt agreements, Sta-Rite is subject to restrictions on working capital, shareholder's equity and debt. These agreements also limit the amount of retained earnings available for the payment of cash dividends to WICOR and for certain investments. At December 31, 1994, $8.5 million of Sta-Rite net assets plus 50% of its future earnings were available for payment of dividends to WICOR. Combined restricted common equity of the Company's subsidiaries totaled $234.1 million under the most restrictive provisions as of December 31, 1994; accordingly, $57.4 million of consolidated retained earnings is available for payment of dividends. Historically, the PSCW has imposed restrictions on public utility holding companies, including WICOR, relating to future nonutility investments. In January 1992, the PSCW approved amendments to limitations set on the Company. The PSCW order states that Wisconsin Gas should remain the predominant business, generally as measured by equity, within the holding company system. The amount allowable for future nonutility investment at December 31, 1994 was $78.7 million. Also, nonutility subsidiaries can borrow additional amounts for acquisitions; however, if debt for the consolidated nonutility entities exceeds 40% of total capitalization for these entities, further PSCW actions may be necessary. 7. COMMITMENTS AND CONTINGENCIES A. Gas Supply Wisconsin Gas has agreements for firm pipeline and storage capacity that expire at various dates through 2008. The aggregate amount of required payments under such agreements totals approximately $1,040 million, with annual required payments of $132 million in 1995, $130 million in 1996, $126 million in 1997, $111 million in 1998 and $108 million in 1999. Wisconsin Gas' total payments of fixed charges under all agreements were $130.4 million in 1994, $133.9 million in 1993 and $83.5 million in 1992. The purchased gas adjustment provisions of Wisconsin Gas' rate schedules permit the recovery of gas costs from its customers. In 1992, the FERC issued Order No. 636 that, among other things, mandated the unbundling of interstate pipeline sales service and established certain open access transportation regulations that became effective beginning in the 1993-94 heating season. Order No. 636 permits pipeline suppliers to pass through to Wisconsin Gas any prudently incurred transition costs, such as unrecovered gas costs, gas supply realignment costs and stranded investment costs. Wisconsin Gas estimates its portion of such costs from all of its pipeline suppliers would approximate $37.9 million based upon prior filings with FERC by the pipeline suppliers. The pipeline suppliers will continue to file quarterly with the FERC for recovery of actual costs incurred. 23 The FERC has allowed ANR Pipeline Company to recover capacity and "above market" supply costs associated with quantities purchased from Dakota Gasification Company ("Dakota") under a long-term contract expiring in the year 2009. Consistent with guidelines set forth in Order No. 636 ANR has allocated 90% of Dakota costs to firm transportation service recoverable through a reservation rate surcharge and 10% to interruptible service. Pending a final settlement with all affected parties, ANR currently recovers the difference between costs paid to Dakota and the current market price. Based on Wisconsin Gas contracted quantities with ANR, Wisconsin Gas is currently paying approximately $500,000 per month of Dakota costs. This amount varies month-to-month and across years based on the spread between ANR contract terms with Dakota and the market indices for pricing spot gas. Transition costs billed to Wisconsin Gas are being recovered from customers under the purchased gas provisions within its rate schedules. Assuming no drastic changes in the market for natural gas, Wisconsin Gas does not expect transition costs to significantly affect the total cost of gas to its customers because (1) Wisconsin Gas will purchase its wellhead gas supplies based upon market prices that should be below the cost of gas previously embedded in the bundled pipeline sales service and (2) many elements of transition costs were previously embedded in the rates for the pipelines' bundled sales service. The unbundling of pipeline sales service requires Wisconsin Gas to contract directly and separately for wellhead gas supply and firm transportation services. As a result of FERC Order No. 636, Wisconsin Gas has contracted directly for underground storage in 1993. B. Capital Expenditures Certain commitments have been made in connection with 1995 capital expenditures. Wisconsin Gas capital expenditures for 1995 are estimated at $50 million. Manufacturing capital expenditures for 1995 are estimated at $20 million. C. Environmental Matters Wisconsin Gas has identified two previously owned sites on which it operated manufactured gas plants that are of environmental concern. Such plants ceased operations prior to the mid-1950's. Wisconsin Gas has engaged an environmental consultant to help determine the nature and extent of the contamination at these sites. Based on the test results obtained and the possible remediation alternatives available, the Company has estimated that cleanup costs could range from $22 million to $75 million. As of December 31, 1994, the Company has accrued $37.2 million for cleanup costs in addition to $4.0 million of costs already incurred. These estimates are based on current undiscounted costs. It should also be noted that the numerous assumptions such as the type and extent of contamination, available remediation techniques, and regulatory requirements which are used in developing these estimates are subject to change as new information becomes available. Any such changes in assumptions could have a significant impact on the potential liability. The Wisconsin Department of Natural Resources (WDNR) issued a Probable Responsible Party letter to Wisconsin Gas for these two sites in September 1994. Following receipt of this letter, Wisconsin Gas and WDNR held an initial meeting to discuss the sites. At the meeting it was agreed that Wisconsin Gas would prepare a remedial action options report from which it will select specific remedial actions for recommendation to the WDNR. This information will be prepared in the first quarter of 1995. Barring unforeseen delays, expenditures by Wisconsin Gas on remediation work will commence in 1995 and increase in future years as plan approvals are obtained. Expenditures over the next three years are expected to total approximately $20 million. Although most of the work and the cost are expected to be incurred in the first few years of the plan, monitoring of sites and other necessary actions may be undertaken for up to 30 years. In March 1994, Wisconsin Gas commenced suit against nine insurance carriers seeking a declaratory judgment regarding insurance coverage for the two sites. Settlements were reached with each of the carriers during 1994. If the amount recovered from the insurance carriers is insufficient to remediate both sites, expenditures not recovered will be allowed full recovery (other than for carrying costs) in rates based upon recent PSCW orders. Accordingly, the accrual has been offset by a deferred charge to a regulatory 24 asset. Certain related investigation costs incurred to date are currently being recovered in utility rates. However, any incurred costs not yet recovered in rates are not allowed by the PSCW to earn a return. As of December 31, 1994, $4.0 million of such costs had been incurred. On April 18, 1994, lawsuits were filed in Superior Court in Alameda County, California, by the Attorney General of the State of California and two environmental groups against four submersible pump manufacturers, including Sta-Rite. The suit alleges that the four manufacturers have produced and sold pumps with brass components which leach levels of lead in excess of the levels permitted under California law. The lawsuits seek, among other remedies, injunctive relief and unspecified monetary penalties. Sta- Rite and the other named defendants dispute the allegations made in the lawsuits and Sta-Rite intends to vigorously defend itself against the actions. Based upon its investigation and the reserves established, the Company believes resolution of the matter will not have a material, adverse effect upon its results of operations or financial condition. In July 1994, Sta-Rite was notified by the WDNR that it believed solvents used at a manufacturing site previously operated by Sta-Rite have migrated and have caused, or contributed to, the contamination of a Deerfield, Wisconsin, municipal well and surrounding property. The population of Deerfield is approximately 1,260 people. Based upon the current investigation and reserves established, the Company believes that the resolution of this matter will not have a material, adverse effect upon its results of operations or financial condition. D. Other The Company is party to various legal proceedings arising in the ordinary course of business which are not expected to have a material effect on the financial statements of the Company. 8. COMMON STOCK AND OTHER PAID-IN CAPITAL As of December 31, 1994, 16,918,004 shares of common stock were issued and outstanding and 3,112,806 shares were reserved for issuance under the Company's dividend reinvestment, stock and incentive savings plans. In addition, 20,041,872 shares are reserved pursuant to the Company's shareholder rights plan. Under certain circumstances, each right entitles the shareholder to purchase one common share at an exercise price of $75, subject to adjustment. The rights are not exercisable until ten business days after a person or group announces a tender offer or exchange offer which would result in their acquiring ownership of 20% or more of the Company's outstanding common stock or after a person or group acquires at least 20% of the Company's outstanding common shares. If, after 20% or more of the outstanding shares of WICOR common stock is acquired by a person or group and the Company is then acquired by that person or group, rights holders would be entitled to purchase shares of common stock of the acquiring person or group having a market value of two times the exercise price of the rights. The rights do not have any voting rights and may be redeemed at a price of $.01 per right. The rights expire on August 29, 1999. 9. BENEFIT PLANS A. Pension Plans The Company's subsidiaries have non-contributory pension plans which cover substantially all their employees and include benefits based on levels of compensation and years of service. Employer contributions and funding policies are consistent with funding requirements of Federal law and regulations. Commencing November 1, 1992, Wisconsin Gas pension costs or credits have been calculated in accordance with SFAS No. 87 and are recoverable from customers. Prior to this date, pension costs were recoverable in rates as funded. The following table sets forth the funded status of pension plans at December 31, 1994 and 1993. The cumulative difference between the amounts funded and the amounts based on SFAS No. 87 through November 1, 1992 is being amortized over an eight-year period effective November 1, 1994 and totalled $22.3 million at December 31, 1994. 25
Assets Exceed Accumulated Benefits Accumulated Benefits Exceed Assets ----------------------- ----------------------- (Thousands of Dollars) December 31, 1994 1993 1994 1993 ----------------------------- ---------- ---------- ---------- ---------- Accumulated benefit obligation Vested benefits $ (97,478) $(103,260) $ (5,825) $ (6,471) Nonvested benefits (10,827) (11,198) (1,185) (87) ---------- ---------- ---------- ---------- (108,305) (114,458) (7,010) (6,558) Effect of projected future compensation levels (41,021) (49,961) (677) (537) ---------- ---------- ---------- ---------- Projected benefit obligation (149,326) (164,419) (7,687) (7,095) Plan assets at fair value 197,278 228,091 209 176 ---------- ---------- ---------- ---------- Plan assets greater(less) than projected benefit obligation 47,952 63,672 (7,478) (6,919) Unrecognized net (asset) liability at September 30, 1985 being recognized over approximately 16 years (16,777) (21,185) 1,035 1,104 Unrecognized prior service costs 4,794 6,166 253 - Unrecognized net (gain) loss (5,104) (19,073) 523 348 Additional minimum lia- bility recorded - - (1,307) (1,037) ---------- ---------- ---------- ---------- Accrued pension asset (liability) $ 30,865 $ 29,580 $ (6,974) $ (6,504) ========== ========== ========== ==========
The weighted average discount rate assumptions used in determining the actuarial present value of the projected benefit obligation were 8.25%, 7.5% and 7.75% for 1994, 1993 and 1992, respectively. For 1994, the expected long- term rate of return on assets and long-term rate of compensation growth were 8.6% and 5.3%, respectively. For 1993 and 1992, the expected long-term rate of return on assets and long-term rate of compensation growth were 8.2% and 6.0%, respectively. Net pension costs for each of the years ended December 31, include the following (income) expense:
(Thousands of Dollars) 1994 1993 1992 ------------------------------------ ---------- ---------- ---------- Service costs $ 5,260 $ 5,658 $ 5,189 Interest costs on projected benefit obligations 12,249 11,807 10,977 Actual loss (gain) on plan assets 1,225 (18,016) (16,085) Net amortization and deferral (18,896) (69) (1,127) Gain on early retirement incentive (268) - - Amortization of regulatory liability (475) - - Adjustment to utility funded amount - - 1,513 ---------- ---------- ---------- Net pension (income) cost $ (905) $ (620) $ 467 ========== ========== ========== /TABLE 26 The decrease in pension cost from 1992 to 1993 was due to the adoption by the PSCW of SFAS No. 87 for ratemaking purposes, effective November 1, 1992. B. Postretirement Health Care and Life Insurance In addition to providing pension benefits, the Company provides certain health care and life insurance benefits for retired employees when they reach normal retirement age while working for the Company. Wisconsin Gas funds the accrual annually based on the maximum tax deductible amount. Effective January 1, 1992, the Company adopted SFAS No. 106, "Employers Accounting for Postretirement Benefits Other Than Pensions", for its retiree benefit plans. Under SFAS No. 106, the Company is required to accrue the estimated cost of retiree benefit payments, other than pensions, during the employees' active service period. Wisconsin Gas, as mandated by the PSCW, recognized the accumulated benefit obligation and a related regulatory asset of $54.1 million at adoption. Amortization of the regulatory asset is recoverable in its rates over a 20-year period. Sta-Rite recognized such amounts as a cumulative effect. Accordingly, the cumulative effects for the Company of adopting SFAS No. 106 as of December 31, 1992, were an increase in the accumulated postretirement benefit obligation (APBO) of $65.0 million and a decrease in 1992 net earnings of $6.2 million ($0.40 per share). Net postretirement health care and life insurance costs for each of the years ended December 31, consisted of the following components:
(Thousands of Dollars) 1994 1993 1992 --------------------------------- ---------- ---------- ---------- Service cost $ 2,688 $ 2,813 $ 2,711 Interest cost on projected benefit obligation 6,913 6,495 6,181 Actual loss (gain) on plan assets 147 (1,414) (895) Amortization of regulatory asset 2,778 2,651 2,778 Net amortization and deferral (2,549) - - Loss on early retirement incentive 3,650 - - Adjustment to utility funded amount - - (2,108) ---------- ---------- ---------- Net postretirement benefit cost $ 13,627 $ 10,545 $ 8,667 ========== ========== ==========
The 1994 postretirement benefit cost was increased due to the early retirement of 131 employees under a voluntary early retirement incentive plan for employees age 55 and over. The following table sets forth the plans' funded status, reconciled with amounts recognized in the Company's Statement of Financial Position at December 31, 1994 and 1993, respectively. Accumulated benefit obligation (Thousands of Dollars) 1994 1993 -------------------------------- ---------- ---------- Retirees $ (54,088) $ (43,548) Active employees (29,544) (52,327) ---------- ---------- Accumulated benefit obligation (83,632) (95,875) Plan assets at fair value 30,666 25,753 ---------- ---------- Accumulated benefit obligation in excess of plan assets (52,966) (70,122) Unrecognized prior service costs (16,347) - Unrecognized actuarial gain (loss) (417) 2,612 ---------- ---------- Accrued postretirement benefit $ (69,730) $ (67,510) ========== ========== 27 The postretirement benefit cost components for 1994 were calculated assuming health care cost trend rates ranging up to 11% for 1994 and decreasing to 5.5% over 9 to 24 years. The health care cost trend rate has a significant effect on the amounts reported. Increasing the assumed health care cost trend rates by one percentage point in each year would increase the APBO as of December 31, 1994 by $12.0 million and the aggregate of the service and interest cost components of postretirement expense by $1.6 million. The assumed discount rate used in determining the actuarial present value of the accumulated postretirement benefit obligation was 8.25% and 7.50% in 1994 and 1993, respectively. Plan assets are primarily invested in equities and fixed income securities. C. Retirement Savings Plans Wisconsin Gas and Sta-Rite maintain various employee savings plans, which provide employees a mechanism to contribute amounts up to 16% of their compensation for the year. Company matching contributions may be made for up to 5% of eligible compensation including 1% for the Employee Stock Ownership Plan (ESOP). Total contributions were valued at $1.7 million in 1994, $1.8 million in 1993 and $1.6 million in 1992. D. Employee Stock Ownership Plan In November 1991, WICOR established an ESOP covering non-union employees of Wisconsin Gas. The ESOP funds employee benefits of up to 1% of compensation with Company common stock distributed through the ESOP. The ESOP used the proceeds from a $10 million, 3-year adjustable rate loan with a 6.56% interest rate at December 31, 1994, guaranteed by the Company, to purchase 431,266 shares of original issue WICOR common stock. The Company extended the adjustable rate loan, with similar terms, until November 3, 1995. Because the Company has guaranteed the loan, the unpaid balance ($6.4 million) is shown as long-term debt with a like amount of unearned compensation being recorded as a reduction of common equity on the Company's balance sheet. The ESOP trustee is repaying the $10 million loan with dividends on shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions to the ESOP. E. Stock Options The Company has a total of 140 employees participating in one or more of its common stock option plans. All options, except for 39,783 performance options granted in 1993, which may vest in 1996, are currently exercisable at prices not less than the fair market value on the date of grant and expire not later than eleven years from the date of grant. Changes in stock options outstanding for all plans were as follows:
1994 1993 1992 ---------- ---------- ---------- Outstanding at January 1 794,925 763,342 712,392 Granted 135,800 180,350 178,900 Exercised/Canceled (266,092) (148,767) (127,950) ---------- ---------- ---------- Outstanding at December 31 664,633 794,925 763,342 ========== ========== ========== Exercise price per share $ 13.38- $ 10.38- $ 10.38- $ 30.63 $ 27.31 $ 24.44 Available for future grant at year-end 743,600 783,116 261,000 /TABLE 28 Under the Company's 1994 Long-Term Performance Plan, which was approved by the shareholders in April 1994, awards up to 820,000 shares of common stock may be granted. The shares may be granted as incentive stock options, nonqualified stock options, stock appreciation rights or restricted stock. Awards of restricted stock subject to performance vesting criteria have been granted under the 1994 Plan. These awards will vest only if the Company achieves certain financial goals over the three-year performance periods 1994-96. Recipients of restricted stock awards are not required to provide consideration to the Company other than rendering service and have the right to vote the shares and the right to receive dividends thereon. A total of 23,800 restricted shares (net of cancellations) were issued in 1994. Initially, the total market value of the shares is treated as unearned compensation and is charged to expense over the vesting periods. For both restricted stock and performance option shares, adjustments are made to expense for changes in market value and achievement of financial goals. Unearned compensation charged to expense in 1994 was $0.2 million for performance options and $0.2 million for restricted stock. F. Postemployment Benefit Plans Effective January 1, 1994 the Company adopted SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which requires accrual for all other postemployment benefits. Total postemployment benefit expense in 1994 was $0.6 million including a one-time cumulative adjustment. The incremental costs of adopting this statement are insignificant on an ongoing basis. 10. FAIR VALUE OF FINANCIAL INSTRUMENTS The fair value of the Company's long-term debt is estimated based on the quoted market prices of U.S. Treasury issues having a similar term to maturity, adjusted for the Company's bond rating and the present value of future cash flows. Because Wisconsin Gas operates in a regulated environment, shareholders would probably not be affected by realization of gains or losses on extinguishment of its outstanding fixed-rate debt. Realized gains would be refunded to and losses would be recovered from customers through gas rates. The estimated fair value of WICOR's long-term debt at December 31, is as follows: (Thousands of Dollars) 1994 1993 ---------------------------- ---------- ---------- Carrying amount $161,669 $165,230 Fair value $159,318 $175,213 11. OTHER FINANCIAL INFORMATION See page 28 for unaudited quarterly financial data. See Financial Review on page 19 for industry segment data. 29 selected financial data -- 1994 to 1991
(Thousands of Dollars, Except Per Share Amounts) 1994 1993 1992 1991 --------- --------- --------- --------- Consolidated Operating Data: Operating revenues (7) $ 867,755 $ 849,528 $ 747,409 $ 716,767 Net income from continuing operations $ 33,174 $ 29,313 $ 22,764 $ 22,966 Net income $ 33,174 $ 29,313 $ 14,799 $ 22,966 Common Stock Data: Net income per share from continuing operations $ 1.99 $ 1.82 $ 1.47 $ 1.54 Net income per common share (1) $ 1.99 $ 1.82 $ 0.96 $ 1.54 Cash dividends per common share(1) $ 1.58 $ 1.54 $ 1.50 $ 1.46 Book value per common share (1)(4) $ 17.23 $ 16.47 $ 15.60 $ 15.84 Balance Sheet Data: Long-term debt $ 161,669 $ 165,230 $ 164,171 $ 168,366 Redeemable preferred stock - - - - Common equity 291,468 270,276 245,287 243,453 --------- --------- --------- --------- Capitalization at year-end $ 453,137 $ 435,506 $ 409,458 $ 411,819 ========= ========= ========= ========= Total assets at year-end (2) $ 930,708 $ 933,726 $ 825,774 $ 670,250 ========= ========= ========= ========= Other General Data: Market-to-book ratio at year-end (%)(4) 165 191 175 153 Dividend payout ratio (%)(2)(3)(5) 79.6 82.2 96.1 89.0 Yield at year-end (%) 5.6 5.0 5.6 6.1 Return on average common equity (%)(2)(3)(6) 11.6 11.2 9.2 9.5 Price/earnings ratio at year-end (2)(3)(4) 14.3 17.3 18.5 15.7 Price range $ 25 1/2- $ 25 5/8- $ 22 7/8- $ 18 5/8- $ 32 5/8 $ 32 7/8 $ 27 3/8 $ 24 3/8 Shareholders at year-end 16,517 17,091 17,780 18,503 Cash flow from operations $ 103,551 $ 3,401 $ 37,012 $ 50,413 Capital expenditures $ 55,051 $ 51,906 $ 71,873 $ 45,113 Employees at year-end 3,214 3,222 3,178 3,196 Debt/equity ratio at year-end 36/64 38/62 40/60 41/59 Gas Distribution Operations Operating revenues $ 556,587 $ 574,835 $ 495,415 $ 474,702 Net income $ 18,896 $ 19,870 $ 18,060 $ 17,086 Capital expenditures $ 44,626 $ 42,253 $ 62,125 $ 34,473 Gas sold and transported (thousands of dekatherms-MDth) Residential 46,369 47,964 45,905 45,614 Commercial 18,598 19,060 17,840 17,861 Industrial firm 14,544 15,246 14,488 15,690 Industrial interruptible 28,217 20,849 17,388 17,440 Transported 11,908 17,408 21,379 19,658 --------- --------- --------- --------- 119,636 120,527 117,000 116,263 ========= ========= ========= ========= /TABLE 30
selected financial data -- 1994 to 1991 (continued) 1994 1993 1992 1991 --------- --------- --------- --------- Customers at year-end 495,129 485,103 470,956 460,549 Customers served per employee 419 352 331 323 Average cost of gas per Dth purchased $ 3.34 $ 3.76 $ 3.34 $ 3.18 Average annual residential bill $ 719 $ 779 $ 712 $ 677 Average use per residential customer (Dth) 110 116 115 117 Degree days 6,431 6,775 6,683 6,416 % colder (warmer) than normal (9.0) (4.1) (6.4) (10.8) Manufacturing Operations (2)(4) Operating revenues $ 311,168 $ 274,693 $ 251,994 $ 242,065 International and export sales as a % of total sales 37 34 34 31 Net income (3) $ 14,278 $ 9,443 $ 4,704 $ 5,880 Capital expenditures $ 10,425 $ 9,653 $ 9,748 $ 10,640 /TABLE 31 selected financial data 1990 to 1987
(Thousands of Dollars, Except Per Share Amounts) 1990 1989 1988 1987 --------- --------- --------- --------- Consolidated Operating Data: Operating revenues (7) $ 696,023 $ 741,218 $ 780,633 $ 699,418 Net income from continuing operations $ 16,651 $ 33,359 $ 30,400 $ 17,215 Net income $ 16,651 $ 33,881 $ 34,163 $ 19,682 Common Stock Data: Net income per share from continuing operations $ 1.14 $ 2.30 $ 2.12 $ 1.22 Net income per common share (1) $ 1.14 $ 2.33 $ 2.38 $ 1.39 Cash dividends per common share(1) $ 1.42 $ 1.37 $ 1.32 $ 1.30 Book value per common share(1)(4)$ 16.12 $ 16.83 $ 15.82 $ 14.68 Balance Sheet Data: Long-term debt $ 130,215 $ 122,639 $ 133,034 $ 127,833 Redeemable preferred stock - - - 8,000 Common equity 237,407 244,351 227,080 207,658 --------- --------- --------- --------- Capitalization at year-end $ 367,622 $ 366,990 $ 360,114 $ 343,491 ========= ========= ========= ========= Total assets at year-end (2) $ 651,559 $ 620,548 $ 565,967 $ 536,998 ========= ========= ========= ========= Other General Data: Market-to-book ratio at year-end (%)(4) 122 148 123 117 Dividend payout ratio (%)(2)(3)(5) 117.2 55.0 52.0 91.1 Yield at year-end (%) 7.3 5.6 6.9 7.6 Return on average common equity (%)(2)(3)(6) 6.8 14.3 15.3 9.3 Price/earnings ratio at year-end (2)(3)(4) 17.2 10.7 8.2 12.4 Price range $ 181/4- $ 19 3/8- $ 15 5/8- $ 13 3/8- $ 251/4 $ 25 3/8 $ 20 7/8 $ 21 7/8 Shareholders at year-end 19,463 20,509 21,611 23,010 Cash flow from operations $ 10,022 $ 94,623 $ 73,526 $ 41,237 Capital expenditures $ 37,529 $ 40,944 $ 48,295 $ 34,264 Employees at year-end 3,152 3,696 3,927 4,040 Debt/equity ratio at year-end 35/65 33/67 37/63 37/63 Gas Distribution Operations Operating revenues $ 455,559 $ 441,477 $ 476,904 $ 424,069 Net income $ 13,195 $ 25,169 $ 23,223 $ 12,580 Capital expenditures $ 27,978 $ 25,813 $ 37,148 $ 24,344 Gas sold and transported (thousands of dekatherms-MDth) Residential 43,020 48,154 46,769 39,369 Commercial 16,319 18,089 17,012 14,510 Industrial firm 15,106 16,915 16,808 16,106 Industrial interruptible 16,620 5,475 3,752 4,714 Transported 16,565 29,158 29,639 26,129 --------- --------- --------- --------- 107,630 117,791 113,980 100,828 ========= ========= ========= ========= /TABLE 32
selected financial data -- 1990 to 1987 (continued) 1990 1989 1988 1987 --------- --------- --------- --------- Customers at year-end 452,906 445,771 439,063 432,509 Customers served per employee 321 319 311 288 Average cost of gas per Dth purchased $ 3.30 $ 3.15 $ 3.68 $ 3.74 Average annual residential bill $ 670 $ 758 $ 770 $ 660 Average use per residential customer (Dth) 113 129 127 108 Degree days 6,103 7,382 7,124 6,185 % colder (warmer) than normal (16.0) 1.5 (2.0) (14.8) Manufacturing Operations (2)(4) Operating revenues $ 240,464 $ 300,156 $ 303,729 $ 275,349 International and export sales as a % of total sales 27 24 22 20 Net income (3) $ 3,456 $ 8,712 $ 10,940 $ 7,102 Capital expenditures $ 9,551 $ 15,131 $ 11,147 $ 9,920 /TABLE 33 selected financial data -- 1986 to 1984
(Thousands of Dollars, Except Per Share Amounts) 1986 1985 1984 --------- --------- --------- Consolidated Operating Data: Operating revenues (7) $ 761,104 $ 853,175 $ 839,965 Net income from continuing operations $ 17,363 N/A N/A Net income $ 19,780 $ 24,900 $ 24,145 Common Stock Data: Net income per share from continuing operations $ 1.34 N/A N/A Net income per common share (1) $ 1.53 $ 1.98 $ 1.95 Cash dividends per common share (1) $ 1.28 $ 1.18 $ 1.11 Book value per common share (1)(4) $ 15.74 $ 13.81 $ 12.97 Balance Sheet Data: Long-term debt $ 144,495 $ 154,159 $ 131,750 Redeemable preferred stock 14,267 18,200 19,000 Common equity 203,477 173,941 160,690 --------- --------- --------- Capitalization at year-end $ 362,239 $ 346,300 $ 311,440 ========= ========= ========= Total assets at year-end (2) $ 542,036 $ 531,192 $ 499,734 Other General Data: Market-to-book ratio at year-end (%)(4) 134 112 104 Dividend payout ratio (%)(2)(3)(5) 79.9 57.0 54.0 Yield at year-end (%) 6.1 7.6 8.3 Return on average common equity (%)(2)(3)(6) 10.5 14.6 15.1 Price/earnings ratio at year-end (2)(3)(4) 13.8 7.8 6.9 Price range $ 14 3/4- $ 13- $ 10 1/8- $ 23 $ 15 3/4 $ 13 7/8 Shareholders at year-end 23,987 26,083 28,581 Cash flow from operations $ 63,583 $ 46,342 $ 45,801 Capital expenditures $ 36,498 $ 32,381 $ 32,273 Employees at year-end 3,932 3,641 3,513 Debt/equity ratio at year-end 40/60 45/55 42/58 Gas Distribution Operations Operating revenues $ 531,970 $ 637,167 $ 640,508 Net income $ 14,338 $ 17,460 $ 17,348 Capital expenditures $ 28,353 $ 23,208 $ 22,161 Gas sold and transported (thousands of dekatherms-MDth) Residential 42,837 44,813 43,961 Commercial 15,292 16,394 15,007 Industrial firm 19,379 22,541 22,969 Industrial interruptible 22,403 31,675 34,056 Transported 5,502 1,716 - --------- --------- --------- 105,413 117,139 115,993 ========= ========= ========= Customers at year-end 426,481 420,967 415,297 Customers served per employee 277 279 268 Average cost of gas per Dth purchased $ 3.75 $ 4.13 $ 4.16 Average annual residential bill $ 761 $ 838 $ 849 Average use per residential customer (Dth) 120 128 127 Degree days 6,788 7,325 6,844 % colder (warmer) than normal (7.3) (0.5) (7.0) Manufacturing Operations (2)(4) Operating revenues $ 229,134 $ 216,008 $ 199,457 International and export sales as a % of total sales 16 12 14 Net income (3) $ 5,442 $ 7,440 $ 6,797 Capital expenditures $ 8,145 $ 9,173 $ 10,112 /TABLE 34 (1) Adjusted for a two-for-one stock split in March 1989. (2) Includes continuing operations and discontinued operations up to the year disposition was authorized. (3) Before effects of 1992 accounting changes (See Note 2). Adjusted for merger with Shurflo through (4) 1984, (5) 1988 and (6) 1989. (7) Includes revenues (in thousands) from discontinued operations from 1986 to 1989 of $58,209, $58,318, $63,552 and $56,318, respectively. Data from 1985 and 1984 is not available. N/A - Data not available. EX-21 9 EX 21 1 EXHIBIT 21
WICOR, Inc. Subsidiaries of the Registrant State or Country Percent Voting Subsidiaries of WICOR, Inc. in Which Incorporated Stock Owned ---------------------------------- --------------------- -------------- Wisconsin Gas Company Wisconsin 100% Sta-Rite Industries, Inc. Wisconsin 100% SHURflo Pump Manufacturing Company California 100% WEXCO of Delaware, Inc. Delaware 100% WICOR FSC, Inc. Barbados 100% Subsidiaries of Sta-Rite Industries ----------------------------------- WICOR Canada Inc. Canada 100% Sta-Rite de Mexico Mexico 80% 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 (Australia) Pty. Ltd ---------------------------------- Onga Pty. Ltd. Australia 100% Dega Research Pty. Ltd. Australia 100% Subsidiaries of Sta-Rite Holdings, B.V. ---------------------------------- Sta-Rite Industries Germany 95.5% GmbH Europa Nocchi Pompe S.p.A. Italy 30% Subsidiary of Nocchi Pompe, S.p.A. ---------------------------------- Midi Pompes S.a.r.l. France 100% Nocchi Pompe Moscow Russia 90% Subsidiary of SHURflo Pump Manufacturing Company ---------------------------------- SHURflo Ltd. England 100% /TABLE EX-23 10 EX 23 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, 33-67134 and 33-55755) and Form S-3 (Nos. 33- 28289, 33-50682 and 33-50781). ARTHUR ANDERSEN LLP Milwaukee, Wisconsin, March 13, 1995 EX-27 11 EX 27
UT This schedule contains summary financial information extracted from the WICOR, Inc. Form 10-K for the year ended December 31, 1994 and is qualified inits entirety by reference to such financial statements and the related footnotes. 1,000 YEAR DEC-31-1994 DEC-31-1994 PER-BOOK 362,955 52,608 312,300 202,845 0 930,708 16,918 180,000 94,550 291,468 0 0 161,669 0 135,000 94,571 5,031 0 1,222 0 377,969 930,708 867,755 17,312 801,145 818,457 49,298 574 49,872 16,698 33,174 0 33,174 26,399 1,340 103,551 1.99 1.99
EX-99 12 EX 99 1995 WICOR PROXY 1 SCHEDULE 14A INFORMATION Proxy Statement Pursuant to Section 14(a) of the Securities Exchange Act of 1934 (Amendment No. ____) Filed by the Registrant [X] Filed by a Party other than the Registrant [ ] Check the appropriate box: [ ] Preliminary Proxy Statement [ ] Confidential, for Use of the Commission Only (as permitted by Rule 14a-6(e)(2)) [X] Definitive Proxy Statement [ ] Definitive Additional Materials [ ] Soliciting Material Pursuant to Sec. 240.14a-11(c) or Sec. 240.14a-12 WICOR, Inc. ----------------------------------------------- (Name of Registrant as Specified in its Charter) ----------------------------------------------------------------------- (Name of Person(s) Filing Proxy Statement, if other than the Registrant) Payment of Filing Fee (Check the appropriate box): [X] $125 per Exchange Act Rules 0-11(c)(1)(ii), 14a-6(i)(1), 14a-6(i)(2) or Item 22(a)(2) of Schedule 14A. [ ] $500 per each party to the controversy pursuant to Exchange Act Rule 14a-6(i)(3). [ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and 0-11 1) Title of each class of securities to which transaction applies: 2) Aggregate number of securities to which transaction applies: 3) Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined): 4) Proposed maximum aggregate value of transaction: 5) Total fee paid: [ ] Fee paid previously with preliminary materials. [ ] Check box if any part of the fee is offset as provided by Exchange Act Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid previously. Identify the previous filing by registration statement number, or the Form or Schedule and the date of its filing. 1) Amount Previously Paid: 2) Form, Schedule or Registration Statement No.: 3) Filing Party: 4) Date Filed: 2 WICOR 626 East Wisconsin Avenue P.O. Box 334 Milwaukee, WI 53201 NOTICE OF ANNUAL MEETING OF SHAREHOLDERS To Be Held April 27, 1995 To the Shareholders of WICOR, Inc.: NOTICE IS HEREBY GIVEN THAT the Annual Meeting of Shareholders of WICOR, Inc. will be held Thursday, April 27, 1995, 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 1998 Annual Meeting of Shareholders and until their successors are duly elected and qualified. 2. 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 Friday, February 17, 1995, 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, 1995 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. 3 WICOR 626 East Wisconsin Avenue P.O. Box 334 Milwaukee, Wisconsin 53201 PROXY STATEMENT FOR ANNUAL MEETING OF SHAREHOLDERS To Be Held April 27, 1995 This Proxy Statement is being furnished to shareholders by the Board of Directors of WICOR, Inc. (the "Company") beginning on or about March 10, 1995, 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 27, 1995, 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 17, 1995, are entitled to vote at the Annual Meeting and at any adjournment thereof. On that date, the Company had outstanding and entitled to vote 16,933,944 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 Manufacturing Co. ("SHURflo"). ITEM NO. 1: ELECTION OF DIRECTORS The Board consists of 10 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 1998 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. However, abstentions and broker non-votes are counted in determining whether a quorum is present at the meeting. 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 six 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. 4 A photograph of each director and director continuing in office appears adjacent to the nominee's/director's name and personal information. NOMINEES FOR ELECTION TO THE BOARD OF DIRECTORS For Three-Year Terms Expiring April, 1998 WENDELL F. BUECHE Mr. Bueche, 64, is the Chairman, Chief Compensation (Chairman) Executive Officer and a director of and Retirement Plans IMC Global, 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. Mr. Bueche is a director of Marshall & Ilsley Corporation and M&I Marshall & Ilsley Bank. DANIEL F. McKEITHAN, JR. Mr. McKeithan, 59, is President, Chief Compensation and Retirement Executive Officer and a director of Plans Investment Committees Tamarack Petroleum Company, 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, 59, is President and Nominating Committee Chief Executive Officer of the Director since 1992 Company and Chairman of Wisconsin Gas, Sta-Rite and SHURflo. He has held these positions since 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, 46, 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 care 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. 5 MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE Terms Expiring April, 1996 JERE D. McGAFFEY Mr. McGaffey, 59, is a partner in the Nominating (Chairman) and law firm of Foley & Lardner. (1) He Retirement Plans Investment has been in practice with that firm Committees since 1961 and has been a partner Director since 1980 since 1968. Mr. McGaffey is a director of Smith Investment Company. THOMAS F. SCHRADER Mr. Schrader, 45, 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, 66, served as Chairman Audit and Nominating and Chief Executive Officer of the Committees Company from 1986 until his retirement Director since 1980 in February 1994. He is a director of Marshall & Ilsley Corporation, M&I Marshall & Ilsley Bank, Modine Manufacturing Co. and Twin Disc Inc. MEMBERS OF THE BOARD OF DIRECTORS CONTINUING IN OFFICE Terms Expiring April, 1997 WILLIE D. DAVIS Mr. Davis, 60, 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., Rally's Hamburgers, Inc., Sara Lee Corporation and Strong Cornelius Capital Management, Inc. GUY A. OSBORN Mr. Osborn, 59, 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., and is a Trustee of Northwestern Mutual Life Insurance Company. 6 WILLIAM B. WINTER Mr. Winter, 66, is Retired Chairman, Nominating and Retirement Chief Executive Officer and Director Plans Investment of Bucyrus-Erie Company, a (Chairman) Committees manufacturer of mining machinery, and Director since 1980 its parent corporation B-E Holdings Inc. (2). He joined Bucyrus-Erie in 1953 and was Chairman and Chief Executive Officer from 1988 until his retirement in 1994. (1) Foley & Lardner was retained in 1994 by the Company and its subsidiaries to provide legal services and has been similarly retained in 1995. (2) 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. On December 1, 1994, the Bankruptcy Court approved the plan of reorganization. The companies were released from bankruptcy on December 14, 1994. THE BOARD OF DIRECTORS General ------- The Board held eight meetings in 1994. 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 1994. 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 1994. 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 Share- holders and recommending the person to fill any unexpired term on the Board which may occur. The committee will consider nominees recommended by share- holders, but has no established procedures which must be followed to make recommendations. The Compensation Committee held three meetings in 1994. 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, the 1994 Long-Term Performance Plan and the other incentive compensation plans of the Company and its subsidiaries. Compensation of Directors ------------------------- 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. 7 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 22, 1994, Messrs. Bueche, Davis, McGaffey, McKeithan, Osborn, Tisdale and Winter and Ms. Whitelaw each received an option to purchase 2,000 shares of Common Stock at a per-share exercise price of $30.4375. 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 28, 1995, 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 $28.75. 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. 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, 1995, by each director and nominee, each executive officer named in the Summary Compensation Table, and all directors and executive officers as a group.
Amount and Nature Title of Name of of Beneficial Percent of Class Beneficial Owner Ownership (1)(2)(3) Class (4) ------------ -------------------- --------------------- ---------- Common Stock Wendell F. Bueche 8,359 - Willie D. Davis 6,500 - James C. Donnelly 56,956 - Jere D. McGaffey 8,908 - Daniel F. McKeithan,Jr. 7,000 - Robert A. Nuernberg 44,213 - Guy A. Osborn 8,000 - Thomas F. Schrader 108,232 - Stuart W. Tisdale 135,506 (5) - George E. Wardeberg 40,917 - Joseph P. Wenzler 116,175 (6) - Essie M. Whitelaw 6,000 - William B. Winter 8,553 - All directors and 553,319 3.3% executive officers as a group (13 persons) /TABLE 8 (1) Each beneficial owner exercises sole voting and investment power with respect to the shares shown as owned beneficially, except as noted in footnotes (3), (5) and (6). (2) Includes the following numbers of shares covered under options exercisable as of or within 60 days of February 28, 1995: Mr. Donnelly, 51,483; Mr. Nuernberg, 34,766; Mr. Schrader, 79,133; Mr. Wardeberg, 7,000; Mr. Wenzler, 74,100; Mr. Tisdale, 4,000; Messrs Bueche, Davis, McGaffey, McKeithan, Osborn and Winter and Ms. Whitelaw, 6,000 each; and all directors and executive officers as a group, 265,400. (3) Includes the following numbers of shares of restricted stock over which the holders have sole voting but no investment power: Mr. Donnelly, 4,000; Mr. Nuernberg, 800; Mr. Schrader, 4,000; Mr. Wardeberg, 6,000; and Mr. Wenzler, 3,000; and all directors and executive officers as a group, 17,800. The restricted stock vests in 1997 if the Company's total return to shareholders for the three-year period 1994-96 exceeds a pre-established goal. (4) Where no percentage figure is set out in this column, the person owns less than 1% of the outstanding shares. (5) Includes 4,852 shares owned by Mr. Tisdale's spouse. (6) 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 persons who served as Company's chief executive officer during 1994 and each of the Company's four other most highly compensated executive officers whose total cash compensation exceeded $100,000 in 1994. 9 SUMMARY COMPENSATION TABLE
Long Term Annual Compensation Compensation Awards --------------------------------------- ------------------------- Securities Other Annual Restricted Underlying All Other Name and Principal Compensation Stock Options/ Compensation Position Year Salary($) Bonus($) ($)(1) Awards($)(2) SARs(#) ($) (3) -------------------------------- ---- ---------- ----------- ------------ ------------ ---------- ------ ------ Stuart W. Tisdale, Chairman 1994 $106,681(5) $ 33,538 $ 25,170 $ 0 $ 2,302 and Chief Executive Officer of 1993 488,750 244,375 26,100 19,533 the Company and Chairman of 1992 470,000 145,000 25,000 14,574 Wisconsin Gas, Sta-Rite and SHURflo (4) George E.Wardeberg, President and 1994 327,500 113,200 $ 185,250 15,000 19,241 Chief Executive Officer of the 1993 272,000 150,000 52,459 18,000 16,257 Company and Chairman of Wiscon- 1992 220,567 37,825 6,000 4,364 sin Gas, Sta-Rite and SHURflo(6) Thomas F. Schrader, Vice President 1994 264,925 65,163 123,500 10,000 16,112 of the Company and President and 1993 260,000 142,881 10,500 15,192 Chief Executive Officer of 1992 248,500 75,000 13,200 13,776 Wisconsin Gas James C. Donnelly, Vice President 1994 251,633 105,020 123,500 10,000 15,848 of the Company and President and 1993 236,250 110,174 7,950 15,203 Chief Executive Officer of 1992 208,725 35,163 8,850 13,011 Sta-Rite Joseph P. Wenzler, Vice President, 1994 252,650 69,800 92,625 7,500 15,498 Treasurer and Chief Financial 1993 245,300 100,629 9,750 15,131 Officer of the Company; Vice 1992 245,300 33,695 13,200 6,171 President and Chief Financial Officer of Wisconsin Gas; and Secretary and Treasurer of SHURflo (7) Robert A. Nuernberg, Secretary 1994 133,000 7,000 24,700 2,000 9,516 of the Company; Vice President- 1993 131,000 25,000 3,000 9,416 Corporate Relations and 1992 127,000 16,500 4,500 9,216 Secretary of Wisconsin Gas /TABLE 10 (1) The amount reported in this column for Mr. Tisdale represents financial planning services. 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. Tisdale in 1992 and 1993, did not exceed the lesser of $50,000 or 10% of each officer's annual salary and bonuses reported in the table for any of the years indicated, except Mr. Wardeberg in 1993. (2) The amounts in the table reflect the market value on the date of grant of restricted stock awarded under the 1994 Long-Term Performance Plan. The number of shares of restricted stock held by the executive officers named in the table and the market value of such shares as of December 31, 1994, were as follows: Mr. Wardeberg, 6,000 shares, $170,250; Messrs. Schrader and Donnelly, 4,000 shares, $113,500; Mr. Wenzler, 3,000 shares, $85,125; and Mr. Nuernberg, 800 shares, $22,700. The restricted stock vests in 1997 provided the Company's three-year (1994-96) total return to shareholders exceeds a pre-established goal. Holders of shares of restricted stock are entitled to receive dividends on such shares. (3) The amounts shown in this column for 1994 are comprised of the following items: Company contributions to 401(k) and supplemental savings plans: Mr. Tisdale $2,063; Mr. Wardeberg $16,375; Mr. Schrader $13,246; Mr. Donnelly $12,982; Mr. Wenzler $12,632; and Mr. Nuernberg, $6,650. Supplemental medical insurance premium: Mr. Tisdale $239; Mr. Wardeberg $2,866; Mr. Schrader $2,866; Mr. Donnelly $2,866; Mr. Wenzler $2,866; and Mr. Nuernberg, $2,866. (4) Mr. Tisdale retired as an executive officer of the Company on February 1, 1994. (5) Includes vacation pay accrued but unused in 1994. (6) On February 1, 1994, Mr. Wardeberg was elected as President and Chief Executive Officer of the Company and as Chairman of Wisconsin Gas, Sta-Rite and SHURflo. (7) Mr. Wenzler was elected Secretary and Treasurer of SHURflo on July 28, 1994. Stock Option Information ------------------------ The Company has in effect equity plans pursuant to which options to purchase Common Stock may be granted to key employees (including executive officers) of the Company and its subsidiaries. The following tabulation sets forth information regarding grants of options made by the Company in 1994 to the executive officers named in the Summary Compensation Table. No SARs were awarded in 1994. OPTION/SAR GRANTS IN 1994 FISCAL YEAR
Individual Grants ---------------------------------------------------------------------------------- Percent of Total Number of Sec. Options Granted Exercise or Grant Date Under. Opt./SARs to Employees Base Price Expiration Present Name Granted (#)(1) in Fiscal Year ($/sh.) Date Value(2) ------------------- ---------------- ---------------- ----------- --------- ---------- Stuart W. Tisdale 2,000 (3) 0 $ 30.4375 2/22/04 $ 8,200 George E. Wardeberg 15,000 12.7 30.625 2/23/04 61,500 Thomas F. Schrader 10,000 8.5 30.625 2/23/04 41,000 James C. Donnelly 10,000 8.5 30.625 2/23/04 41,000 Joseph P. Wenzler 7,500 6.4 30.625 2/23/04 30,750 Robert A. Nuernberg 2,000 1.7 30.625 2/23/04 8,200 /TABLE 11 (1) The options reflected in the table (which are nonstatutory stock options for purposes of the Internal Revenue Code) were granted on February 22, 1994 and vest ratably over the three-year period from the date of grant. (2) Amounts in this column were calculated using the Black-Scholes option pricing model. The model assumes: (a) an option term of 10 years; (b) a risk-free interest rate of 6.5%; (c) volatility (variance of rate of return) of .1828; (d) an annual discount of 3% over the vesting period for the risk of forfeiture; and (e) a dividend yield of 5.87%. The actual value, if any, that an optionee may realize upon exercise will depend upon the excess of the price of the Common Stock over the option exercise price on the date that the option is exercised. There is no assurance that the value received by the optionee will be at or near the value estimated by the Black-Scholes model. (3) These options were granted to Mr. Tisdale, in his capacity as a director, under the 1992 Director Stock Option Plan. See Compensation of Directors. Mr. Tisdale received no options in 1994 in his capacity as an executive officer of the Company, as he retired as an executive officer on February 1, 1995. The following tabulation sets forth information regarding the exercise of stock options during 1994 and the unexercised options held at December 31, 1994, by each of the executive officers named in the Summary Compensation Table. 12
AGGREGATED OPTION/SAR EXERCISES IN 1994 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 107,592 $ 553,659 2,000 0 $ 0 $ 0 George E. Wardeberg 0 0 0 23,000 0 14,256 Thomas F. Schrader 3,000 50,438 72,400 17,900 516,468 21,044 James C. Donnelly 0 0 45,200 15,600 312,706 14,431 Joseph P. Wenzler 2,600 33,069 67,200 15,150 467,721 20,778 Robert A. Nuernberg 5,000 86,875 32,600 4,500 260,256 8,031
13 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 $ 58,561 $ 78,081 $ 89,341 $ 92,341 $ 95,341 250,000 73,411 97,881 111,991 115,741 119,491 300,000 88,261 117,681 134,641 139,141 143,641 350,000 103,111 137,481 157,291 162,541 167,791 400,000 117,961 157,281 179,941 185,941 191,941 450,000 132,811 177,081 202,591 209,341 216,091 500,000 147,661 196,881 225,241 232,741 240,241 550,000 162,511 216,281 247,891 256,141 264,391 600,000 177,361 236,481 270,541 279,541 288,541
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. Wardeberg, Schrader, Donnelly, Wenzler and Nuernberg have 5, 16, 7, 21 and 25 years, respectively, of credited service under the pension plan. Mr. Tisdale, who retired February 1, 1994, receives retirement benefits computed under the benefit formula based on 30 years of credited service. Pursuant to a supplemental retirement plan, Messrs. Schrader and Nuernberg will receive a supplemental retirement benefit of $25,000 per year for 15 years beginning at age 65, payable in monthly installments. 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. 14 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 three independent, non-employee directors. Following Compensation Committee review and approval, matters relating to executive compensation (other than the grant of stock options and restricted stock) 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 and weigh in their judgment 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. Base salary midpoints, annual incentive targets and long-term incentive grants are set based on a competitive analysis conducted by the independent compensation consultant. As indicated above, compensation opportunities, by component and in the aggregate, are set at or near the 50th percentile of competitive practice for comparably sized organizations. Rates for the gas utility positions are set using survey sources from the utility industry. There is substantial overlap between the companies in these surveys and the companies used in the peer company index in the Performance Graph. Rates for the nonutility positions are set using survey sources from general industry; there is no overlap with the Performance Graph peer companies here. Components of Compensation -------------------------- Base salary -- The Compensation Committee targets salary range midpoints as indicated above. Individual salaries range above and below the midpoint based upon an individual's past and current performance, and expectations for future performance. The factors considered in this review are job specific and vary depending on the individual's position. There is no specific weighting given to these factors. 15 Annual incentive plan -- The Company's annual incentive compensation plan tailors each officer's incentive potential to that officer's Company and subsidiary responsibilities. The plan sets incentive targets ranging from 20% to 50% of base salary. The plan is designed to compensate the officers primarily on a formula basis. For the Chief Executive Officer and the Chief Financial Officer, the formula bases 75% of the targeted award on the Company's earnings per share (EPS) and 25% on individual performance objectives. For Company Vice Presidents, who are also the subsidiary presidents, the formula bases 25% of the targeted award on the Company's EPS, 25% on individual performance objectives, and 50% on subsidiary performance objectives. Subsidiary performance objectives for Wisconsin Gas include financial, customer service and safety objectives (weighted at 67% of this component) and financial objectives (weighted at 33%). Performance objectives for Sta-Rite include net earnings (weighted at 67% of this component) and return on assets (weighted at 33%). Individual performance objectives vary among the officers, but may include such things as cost management, product development, sales growth, personnel management and development, and management of specific projects. The Compensation Committee exercises its judgment on a case-by-case basis in determining the weight to be accorded any individual performance objective. Long-term incentive plan -- The Company's long-term incentive compensation plan provides for annual awards of stock options and biennial awards of performance-based restricted stock. The plan splits an officer's long-term incentive opportunity equally (based on value) between stock options and performance-based restricted stock. The independent compensation consultant provides the Compensation Committee with a long-term incentive grant schedule that approximates a market median grant opportunity. The Compensation Committee reserves the right to adjust this schedule upward or downward based on Company performance; however, it is the Compensation Committee's intention that in most cases grants will be provided at targeted levels. Stock options may be incentive stock options or nonstatutory options which have a term of not more than ten years and have an exercise price equal to the fair market value on the date of grant. The Compensation Committee determines the manner and conditions under which the options become exercisable. The number of options granted is based on the participant's office or position, with an equal number of shares generally being granted to individuals holding the same or similar positions, such as vice president of an operating subsidiary. Performance-based restricted stock will vest three years from the year of grant provided the Company's three-year total return to shareholders equals or exceeds pre-established goals relative to the Performance Graph peer group (the Paine Webber Gas Distribution Utility Index). For other subsidiary officers who participate in the plan, the restricted stock will vest in three-years provided the appropriate subsidiary's three-year financial performance (three-year cumulative earnings for Wisconsin Gas and return on assets for Sta-Rite) equals or exceeds the pre-established goal. 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. The Compensation Committee weighs the financial measures differently for each officer, in recognition that the Company's principal subsidiaries operate in different industries with different compensation practices and that the officers' responsibilities differ. 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. Examples of personal performance objectives considered by the Compensation Committee are set out above in 16 the discussion of the Annual Incentive Plan. The Compensation Committee exercises its judgment in determining the relative weight to be accorded each personal objective. As stated above, each officer's annual incentive award, if any, is based on a formula, although the Compensation Committee exercises its judgment in determining the weights to be accorded the achievement of personal objectives. Long-term incentive awards (stock options and restricted stock) are also formula-based, with individual awards being set relative to the officer's position. The specific number of stock options awarded is based on the number of options to be awarded to all key employees of the Company and its subsidiaries and the number of options previously granted and outstanding, as determined by the Compensation Committee. Options granted in 1994 were non-statutory, have a term of ten years, and first become exercisable one-third each year on the first, second and third anniversary of the grant. Restricted stock grants were made at the targeted amounts. Compensation of the Chief Executive Officer ------------------------------------------- Stuart W. Tisdale served as the Company's Chief Executive Officer until February 1, 1994. Mr. Tisdale received no long-term incentive award or any increase in base salary in 1994. He received a prorated annual incentive award of $33,538. For 1994, the Compensation Committee increased the base salary of George E. Wardeberg, the Company's Chief Executive Officer beginning February 1, 1994, by $78,000 or 29% effective April 1, 1994. The increase reflects his increased responsibilities as Chief Executive Officer, his overall performance, as demonstrated by the increase in the Company's total return to shareholders in 1993 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. Wardeberg's salary in the first quartile of the range targeted by the Compensation Committee. The Compensation Committee awarded Mr. Wardeberg 15,000 nonstatutory stock options and 6,000 shares of performance-based restricted stock in 1994. The number of options and the number of shares of restricted stock awarded were at the targeted number established in the long-term incentive compensation plan. The annual incentive award to Mr. Wardeberg for 1994 was $113,200, or 35% of his salary as compared to a target of 50% of salary. This award reflects Mr. Wardeberg's contributions to the Company during 1994. The less than targeted incentive award was caused by certain financial objectives not being met due to weather that was 9% warmer than normal. This resulted in less than targeted earnings at the Company's gas distribution operation. However, the Company's manufacturing operations had a strong year with net earnings up 51% for the year. As a result, WICOR's net earnings and earnings per share increased 13% and 9%, respectively. WICOR also outperformed its industry peers, achieving a total return to shareholders ranking in the top third nationwide. In addition, Mr. Wardeberg accomplished his personal objectives in the areas of growth, human resources and preserving the Company's financial strength. The Compensation Committee exercised its judgment in determining the weights accorded to his accomplishment of these personal objectives. Compliance with Tax Regulations ------------------------------- The Company has considered the implications of the 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 most of the components of compensation described above are consistent with the tax rules regarding performance-based compensation incentives. 17 The Compensation Committee did, however, seek qualification of the stock components of the program as "performance-based compensation" plans pursuant to these tax rules. To that end, proposals were included in the 1994 Proxy Statement establishing a per-person limitation for stock option and restricted stock awards. The proposals were approved by the shareholders. Wendell F. Bueche, Chairman Daniel F. McKeithan, Jr. Guy A. Osborn Members of the Compensation Committee 18 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 Paine Webber Gas Distribution Utility Index, comprised of 35 U.S. natural gas distribution utilities. The Paine Webber index is identical to the Kidder, Peabody Gas Distribution Utility Index used by the Company in prior years. The name change reflects the acquisition of Kidder, Peabody by Paine Webber in 1994. 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 Paine Webber 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 Paine Webber $ 100 $ 134 $ 130 $ 149 $ 175 $ 199
SHAREHOLDER PROPOSALS Proposals which shareholders of the Company intend to present at the 1996 Annual Meeting of Shareholders must be received by the Company by the close of business on November 19, 1995. OTHER MATTERS Arthur Andersen LLP was retained as the Company's independent auditors for the year ended December 31, 1994 and, upon the recommendation of the Audit Committee, the Board has reappointed Arthur Andersen as independent public accountants for the Company for the year ending December 31, 1995. A representative of Arthur Andersen 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, 1995, an annual report on Form 10-K for the fiscal year ended December 31, 1994. 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. 19 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 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 March 10, 1995 Secretary 20 APPENDIX I WICOR VOTER AUTHORIZATION CARD [X] Please mark your votes as this WICOR VOTING AUTHORIZATION ---------------------------------------------------------------------------- The Board of Directors recommends a vote FOR all nominees in Item 1. ---------------------------------------------------------------------------- 1. Election of the following nominees as directors for three-year terms: Wendell F. Bueche, Daniel F. McKeithan, Jr., George E. Wardeberg and Essie M. Whitelaw FOR all nominees WITHHOLD (except as marked AUTHORITY to the contrary) to vote for all nominees / / / / (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 9, 1995 Dear WICOR Shareholder: Enclosed is a notice of WICOR's annual shareholders meeting, coming up April 27, 1995, in Milwaukee. Also enclosed is a proxy statement and voting authorization card. You have already received a copy of the 1994 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 17, 1995, 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 the Trustee in the enclosed envelope. Thank you, Sincerely, Robert A. Nuernberg Secretary 21 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. --- (BACKSIDE OF VOTER AUTHORIZATION FORM) --- WICOR VOTING AUTHORIZATION The undersigned acknowledges receipt of the WICOR, Inc. Annual Report for 1994 and the proxy solicitation material relative to the Annual Meeting of Shareholders of WICOR, Inc. to be held April 27, 1995. 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, or held by M and I Marshall and Ilsley Bank, the trustee under the Sta-Rite Industries' Incentive 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 27, 1995. (continued on the reverse side) 22 APPENDIX II COMMON STOCK PROXY CARD /X/ Please mark your votes as this WICOR PROXY ------------------------------------------------------------------------ The Board of Directors recommends a vote FOR all nominees in Item 1. ------------------------------------------------------------------------ 1. Election of the following nominees as directors for three-year terms: Wendell F. Bueche, Daniel F. McKeithan, Jr., George E. Wardeberg and Essie M. Whitelaw FOR all nominees WITHHOLD (except as marked AUTHORITY to the contrary) to vote for all nominees / / / / (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 9, 1995 Dear WICOR Shareholder: We're pleased to send you the enclosed 1994 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 27, 1995. This year's meeting will be held at 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, discuss 1994 performance and talk about the future. 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 27. Sincerely, George E. Wardeberg President and Chief Executive Officer 23 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 27, 1995, 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 in the discretion of the proxies on any other items of business as may properly arise at the meeting. 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 27, 1995. - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - - FOLD AND DETACH HERE Map of downtown Milwaukee, Wisconsin, showing location of annual meeting. 24 APPENDIX III Proxy cover letter to Sta-Rite employees. March 10, 1995 Dear Incentive Savings Plan Participant: This year, for the first time, employees who hold WICOR stock through Sta-Rite's 401K (Incentive Savings Plan) are receiving the enclosed WICOR Proxy statement and Voter Authorization Card. These materials make it possible for you to vote your stock at WICOR's annual meeting, which will be held at the Italian Community Center in Milwaukee on April 27. I encourage you to exercise your right to vote by filling out the authorization card and returning it as soon as you can. The card allows the Trustee of your shares to vote the shares on your behalf as you direct. This year, as you will notice on the Voter Authorization Card, four of the ten directors on the WICOR Board of Directors are up for reelection to the board. A complete list of board members appears in the enclosed proxy statement and in the annual report, which you should have already received. The report also contains a variety of significant financial data and other important information about our parent company and its subsidiaries, including Sta-Rite. As the accompanying letter from Mr. Nuernberg says, your vote is important. I hope you will return your signed voting authorization card today. Thank you. Sincerely, Jim Donnelly President and CEO