-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, MLMt2WK4b+wbYdle5abRIssGYXCvYBQNKHT0HaO4uzgwKh8KV9LpdJWJtN9H0ncB asauZQPa+4bRhtX/7YSwGA== 0000107815-95-000015.txt : 19950516 0000107815-95-000015.hdr.sgml : 19950516 ACCESSION NUMBER: 0000107815-95-000015 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950331 FILED AS OF DATE: 19950515 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN ENERGY CORP CENTRAL INDEX KEY: 0000783325 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 391391525 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09057 FILM NUMBER: 95538478 BUSINESS ADDRESS: STREET 1: 231 W MICHIGAN ST CITY: MILWAUKEE STATE: WI ZIP: 53201 BUSINESS PHONE: 4142212345 MAIL ADDRESS: STREET 1: PO BOX 2949 CITY: MILWAUKEE STATE: WI ZIP: 53201 10-Q 1 WISCONSIN ENERGY CORPORATION 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 10-Q X QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) - ----- OF THE SECURITIES EXCHANGE ACT OF 1934 For the Quarterly Period Ended March 31, 1995 OR TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) - ----- OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to ------------- ------------- Commission file number 1-9057 WISCONSIN ENERGY CORPORATION (Exact name of registrant as specified in its charter) Wisconsin 39-1391525 (State or other jurisdiction of (I.R.S. Employer Identification No.) incorporation or organization) 231 West Michigan Street, P.O. Box 2949, Milwaukee, Wisconsin 53201 (Address of principal executive offices) (Zip Code) (414) 221-2345 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date. Class Outstanding at May 1, 1995 --------------------------- ------------------------------ $.01 Par Value Common Stock 109,455,406 Shares 2 FORM 10-Q WISCONSIN ENERGY CORPORATION PART I - FINANCIAL INFORMATION ITEM 1. FINANCIAL STATEMENTS WISCONSIN ENERGY CORPORATION CONSOLIDATED CONDENSED INCOME STATEMENT (Unaudited)
Three Months Ended March 31 ------------------------------------- 1995 1994 --------- -------- (Thousands of Dollars) Operating Revenues Electric $343,919 $355,239 Gas 121,100 147,579 Steam 6,103 6,863 --------- --------- Total Operating Revenues 471,122 509,681 Operating Expenses Fuel 67,819 72,476 Purchased power 19,076 11,594 Cost of gas sold 72,803 91,153 Other operation expenses 97,760 107,473 Maintenance 28,372 33,516 Revitalization - 73,900 Depreciation 44,712 44,039 Taxes other than income taxes 19,379 21,068 Federal income tax 29,635 22,743 State income tax 7,100 5,507 Deferred income taxes - net 376 (16,080) Investment tax credit - net (482) (1,144) --------- --------- Total Operating Expenses 386,550 466,245 Operating Income 84,572 43,436 Other Income and Deductions Interest income 3,614 4,724 Allowance for other funds used during construction 825 1,253 Miscellaneous - net 1,350 410 Income taxes 305 123 --------- --------- Total Other Income and Deductions 6,094 6,510 Income Before Interest Charges and Preferred Dividend 90,666 49,946 Interest Charges Interest expense 29,072 27,894 Allowance for borrowed funds used during construction (1,241) (1,159) --------- --------- Total Interest Charges 27,831 26,735 Preferred Dividend Requirement of Subsidiary 301 389 --------- --------- Net Income $ 62,534 $ 22,822 ========= ========= Average Common Shares Outstanding (Thousands) 109,133 107,238 Earnings Per Share of Common Stock $ 0.57 $ 0.21 ========= ========= Dividends Per Share of Common Stock $ 0.3525 $0.33875 ========= ========= See accompanying notes to consolidated financial statements. - 2 -
3 WISCONSIN ENERGY CORPORATION FORM 10-Q CONSOLIDATED CONDENSED BALANCE SHEET (Unaudited)
March 31, 1995 December 31, 1994 ---------------- ----------------- (Thousands of Dollars) Assets ------ Utility Plant Electric $ 4,377,597 $ 4,304,925 Gas 470,549 467,732 Steam 40,114 40,103 Accumulated provision for depreciation (2,184,573) (2,134,469) ------------- ------------- 2,703,687 2,678,291 Construction work in progress 168,391 205,835 Nuclear fuel - net 55,759 56,606 ------------- ------------- Net Utility Plant 2,927,837 2,940,732 Other Property and Investments 608,757 596,719 Current Assets Cash and cash equivalents 16,831 8,976 Accounts receivable 128,879 114,657 Accrued utility revenues 103,737 128,107 Materials, supplies and fossil fuel 136,097 158,946 Prepayments and other assets 72,271 68,272 ------------- ------------- Total Current Assets 457,815 478,958 Deferred Charges and Other Assets Accumulated deferred income taxes 139,758 139,927 Other 250,478 251,923 ------------- ------------- Total Deferred Charges and Other Assets 390,236 391,850 ------------- ------------- Total Assets $ 4,384,645 $ 4,408,259 ============= ============= Capitalization and Liabilities ------------------------------ Capitalization Common stock $ 637,575 $ 625,657 Retained earnings 1,143,010 1,118,909 ------------- ------------- Total Common Stock Equity 1,780,585 1,744,566 Preferred stock-redemption not required 30,451 30,451 Long-term debt 1,249,742 1,283,686 ------------- ------------- Total Capitalization 3,060,778 3,058,703 Current Liabilities Long-term debt due currently 49,633 32,531 Short-term debt 181,574 252,055 Accounts payable 79,787 91,795 Accrued liabilities 85,852 68,234 Other 49,308 29,822 ------------- ------------- Total Current Liabilities 446,154 474,437 Deferred Credits and Other Liabilities Accumulated deferred income taxes 478,974 475,541 Other 398,739 399,578 ------------- ------------- Total Deferred Credits and Other Liabilities 877,713 875,119 ------------- ------------- Total Capitalization and Liabilities $ 4,384,645 $ 4,408,259 ============= ============= See accompanying notes to consolidated financial statements. - 3 -
4 FORM 10-Q WISCONSIN ENERGY CORPORATION CONSOLIDATED STATEMENT OF CASH FLOWS (Unaudited)
Three Months Ended March 31 ---------------------------- 1995 1994 ---- ---- (Thousands of Dollars) Operating Activities: Net income $ 62,534 $ 22,822 Reconciliation to cash: Depreciation 44,712 44,039 Nuclear fuel expense - amortization 5,263 5,816 Conservation expense - amortization 5,156 6,152 Debt premium, discount & expense - amortization 3,107 3,788 Revitalization - net (3,480) 59,381 Deferred income taxes - net 376 (16,080) Investment tax credit - net (482) (1,144) Allowance for other funds used during construction (825) (1,253) Change in: Accounts receivable (14,222) (22,147) Inventories 22,849 46,608 Accounts payable (12,008) (28,838) Other current assets 20,371 31,290 Other current liabilities 37,104 24,117 Other 7,816 1,850 --------- --------- Cash Provided by Operating Activities 178,271 176,401 Investing Activities: Construction expenditures (43,985) (55,261) Allowance for borrowed funds used during construction (1,241) (1,159) Nuclear fuel (5,601) (4,806) Nuclear decommissioning trust (2,575) (3,113) Conservation investments - net (1,103) (4,355) Other (1,741) (12,098) --------- --------- Cash Used in Investing Activities (56,246) (80,792) Financing Activities: Sale of common stock 11,918 14,554 Sale of long-term debt - 9,290 Retirement of long-term debt (17,174) (15,624) Change in short-term debt (70,481) (50,880) Dividends on stock - common (38,433) (36,294) --------- --------- Cash Used in Financing Activities (114,170) (78,954) --------- --------- Change in Cash and Cash Equivalents $ 7,855 $ 16,655 ========= ========= Supplemental Information Disclosures: Cash Paid for - Interest (net of amount capitalized) $ 27,445 $ 25,274 Income taxes 15,120 9,152 See accompanying notes to consolidated financial statements. - 4 -
5 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Unaudited) 1. The accompanying unaudited consolidated financial statements should be read in conjunction with the company's 1994 Annual Report on Form 10-K. In the opinion of management, all adjustments, normal and recurring in nature, necessary to a fair statement of the results of operations and financial position of the company have been included in the accompanying income statement and balance sheet. The results of operations for the three months ended March 31, 1995 are not, however, necessarily indicative of the results which may be expected for the year 1995 because of seasonal and other factors. 2. On April 28, 1995, Wisconsin Energy Corporation ("WEC") and Northern States Power Company, Minnesota ("NSP") entered into an Agreement and Plan of Merger ("Agreement"). As a result, a registered utility holding company, which will be known as Primergy Corporation ("Primergy"), will be the parent of NSP and the current operating subsidiaries of NSP and WEC. Each outstanding share of common stock of WEC will remain outstanding as one share of common stock of Primergy, and each outstanding share of NSP will be converted into 1.626 shares of common stock of Primergy. The business combination is intended to be tax-free for income tax purposes and to be accounted for as a "pooling of interests". The Agreement is subject to various conditions, including approval of the stockholders of WEC and NSP and the approval of various regulatory agencies. WEC anticipates that the completion of the regulatory review and approval process will take approximately 12-18 months and, accordingly, WEC and NSP do not anticipate completing this business combination until late in 1996. ITEM 5. OTHER INFORMATION in Part II of this report discusses further the proposed transaction and provides pro forma combined condensed financial information for Primergy. - 5 - 6 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART I - FINANCIAL INFORMATION ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS On April 28, 1995, Wisconsin Energy Corporation ("Wisconsin Energy") entered into an Agreement and Plan of Merger with Northern States Power Company which provides for a strategic business combination involving the two companies in a "merger-of-equals" transaction. Further information concerning such agreement and proposed transaction and pro forma financial information with respect thereto is included in ITEM 5. OTHER INFORMATION in Part II of this report. LIQUIDITY AND CAPITAL RESOURCES Cash provided by Wisconsin Energy's consolidated operating activities totaled $178 million during the three months ended March 31, 1995. This compares to $176 million provided during the same period in 1994. Wisconsin Energy's consolidated investing activities totaled $56 million for the three months ended March 31, 1995 compared to $81 million during the same period in 1994. Investments during the first quarter of 1995 include $44 million for the construction of new or improved facilities, $6 million for acquisition of nuclear fuel, $1 million for net capitalized conservation expenditures and $3 million for payments to an external trust for the eventual decommissioning of Wisconsin Electric Power Company's ("Wisconsin Electric") Point Beach Nuclear Plant. Capital requirements for the remainder of 1995 are expected to be principally for construction expenditures, capitalized conservation programs and payments to the external trust for the eventual decommissioning of the Point Beach Nuclear Plant. Depending upon market conditions, Wisconsin Electric, the principal utility subsidiary of Wisconsin Energy, may refund some issues of its current debt and issue approximately $100 million of additional long-term debt in a public offering later in 1995. The specific form, amount and timing of debt securities which may be issued have not yet been determined and will depend, to a large extent, on market conditions. Beginning June 1, 1992, Wisconsin Energy began issuing new shares of common stock through the company's stock plans. During the period of December 1, 1988 to June 1, 1992, shares required for these plans were purchased on the open market. From January 1, 1995 to March 31, 1995, cash investments and reinvested dividends aggregating $11.9 million were used to purchase 441,238 new issue shares. RESULTS OF OPERATIONS Net income increased approximately $40 million during the first quarter of 1995 compared to the same period in 1994, reflecting the non-recurring charge in the first quarter of 1994 of approximately $45 million (net of tax) associated with Wisconsin Electric's and Wisconsin Natural Gas Company's ("Wisconsin Natural") restructuring program. This charge included the cost of severance and early retirement packages, elements of a "revitalization" program designed to better position Wisconsin Electric and Wisconsin Natural in a changing market place. It is anticipated that this charge will be offset by the end of 1995 through savings in operation and maintenance costs. - 6 - 7 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART I - FINANCIAL INFORMATION (Cont'd) RESULTS OF OPERATIONS - Cont'd Excluding the non-recurring charge in 1994, net income decreased $5 million in the first quarter of 1995 compared to the same period in 1994. Between the first quarter of 1995 and 1994, total revenues decreased 7.6%. Electric revenues were down 3.2% as a result of lower total electric energy sales and gas margins (operating revenues less cost of gas sold) were down 14.4% as a result of lower natural gas deliveries. The decrease in electric revenues and gas margins was due in large part to warmer than normal weather. As a result of unscheduled outages at two of Wisconsin Electric's most efficient power plants, Pleasant Prairie Power Plant and Point Beach Nuclear Plant, fuel and purchased power expenses increased 3.4% during the three months ended March 31, 1995 compared to 1994. In the first quarter of 1995, other operation and maintenance expenses decreased 10.5% compared to the first quarter of 1994, reflecting among other things the effects of the company's "revitalization" program. An annualized $16,179,000 or 1.3% Wisconsin retail electric fuel adjustment rate decrease became effective on August 4, 1994 for Wisconsin Electric customers. ELECTRIC SALES Three Months Ended March 31 --------------------------- Electric Sales - Megawatt Hours 1995 1994 % Change - ------------------------------- ---------- ---------- -------- Residential 1,689,356 1,795,445 (5.9) Small Commercial and Industrial 1,714,727 1,657,786 3.4 Large Commercial and Industrial 2,542,354 2,462,432 3.2 Other 380,910 439,421 (13.3) ---------- ---------- Total Retail and Municipal 6,327,347 6,355,084 (0.4) Resale-Utilities 202,132 391,458 (48.4) ---------- ---------- Total Sales 6,529,479 6,746,542 (3.2) - ------------------------------- Total electric energy sales during the first quarter of 1995 decreased primarily due to mild winter weather. As measured by heating degree days, the first quarter of 1995 weather was 14.7% warmer compared to the same period in 1994. Electric energy sales to the Empire and Tilden iron ore mines, Wisconsin Electric's two largest customers, decreased 0.8% during the quarter ended March 31, 1995 compared to the same period during 1994. Excluding the mines, total electric sales decreased 3.4%, but sales to all other large commercial and industrial customers increased 4.4% during the first quarter of 1995 compared to the same period in 1994. - 7 - 8 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART I - FINANCIAL INFORMATION (Cont'd) GAS DELIVERIES Three Months Ended March 31 --------------------------- Therms Delivered - Thousands 1995 1994 % Change - ------------------------------- ---------- ---------- -------- Residential 145,203 167,669 (13.4) Commercial and Industrial 90,326 97,891 (7.7) Interruptible 14,099 16,978 (17.0) ---------- ---------- Total Sales 249,628 282,538 (11.6) Transported Customer Owned Gas 81,867 69,263 18.2 ---------- ---------- Total Gas Delivered 331,495 351,801 (5.8) - ------------------------------- Natural gas therm deliveries during the first quarter of 1995 also decreased primarily due to the mild weather described above. The warmer weather significantly reduced residential and commercial sales which have higher margins. Interruptible and transportation deliveries combined showed an increase over the first quarter of 1994. However, the margin on these deliveries is lower than on residential and commercial customers. SOURCES OF NATURAL GAS Wisconsin Natural purchases gas for injection into storage for future withdrawal during the heating season under various arrangements with gas storage facilities. At March 31, 1995 the cost of natural gas stored for future use was $7.3 million, representing a $1.8 million decrease from the cost of natural gas stored at March 31, 1994. Gas stored at these facilities is purchased by Wisconsin Natural from a number of suppliers. For certain other information which may impact Wisconsin Energy's future financial condition or results of operations, see ITEM 1. LEGAL PROCEEDINGS and ITEM 5. OTHER INFORMATION in Part II. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS The following should be read in conjunction with ITEM 3. LEGAL PROCEEDINGS in PART I of Wisconsin Energy's Annual Report on Form 10-K for the year ended December 31, 1994. RATE MATTERS Wisconsin Retail Electric Jurisdiction 1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural sent a letter to the Public Service Commission of Wisconsin ("PSCW") proposing a one year deferral of their scheduled rate case filing. On May 1, 1995, Wisconsin Electric filed with the PSCW required data related to the 1996 test year. This was an abbreviated filing since no increase in rates was requested. The matter is pending. - 8 - 9 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) RATE MATTERS (Cont'd) Wisconsin Retail Gas Jurisdiction 1996 Test Year: On March 27, 1995, Wisconsin Natural and Wisconsin Electric sent a letter to the PSCW proposing a one year deferral of their scheduled rate case filing. On May 1, 1995, Wisconsin Natural filed with the PSCW required data related to the 1996 test year. This was an abbreviated filing since no increase in rates was requested. The matter is pending. Wisconsin Retail Steam Jurisdiction 1996 Test Year: On March 27, 1995, Wisconsin Electric and Wisconsin Natural sent a letter to the PSCW proposing a one year deferral of their scheduled rate case filing. On May 1, 1995, Wisconsin Electric filed with the PSCW required data related to the 1996 test year. This was an abbreviated filing since no increase in rates was requested. The matter is pending. ITEM 5. OTHER INFORMATION GAS SUPPLY PORTFOLIO MANAGEMENT AGREEMENT WITH MIDCON On May 8, 1995, Wisconsin Natural announced that the company has entered into an agreement with MidCon Gas Services Corporation ("MidCon") under which MidCon will provide portfolio management for Wisconsin Natural's gas purchase, transportation and storage contracts. The arrangement, which takes effect on June 1, 1995, will be an integral part of a proposal that will be filed by Wisconsin Natural with the PSCW to replace the current Purchased Gas Adjustment mechanism with a new market-based pricing mechanism. The proposed gas pricing mechanism would link gas commodity prices to market indices and incorporate all other gas supply costs, such as transportation and storage, under a price cap. The price cap will be designed to provide balanced financial incentives and risks for Wisconsin Natural and MidCon based on performance standards, while ensuring a reliable gas supply for consumers. PARIS GENERATING STATION In March 1995, two units, or approximately 150 megawatts of peaking capacity, were placed in-service at the new Paris Generating Station. The natural gas- fired combustion turbine facility is located near Union Grove, Wisconsin. Two additional units, or approximately 150 megawatts of peaking capacity, are expected to be placed in-service at this facility in May 1995. The plant is expected to run less than 500 hours per year. MERGER OF WISCONSIN NATURAL INTO WISCONSIN ELECTRIC Wisconsin Energy intends to merge Wisconsin Natural into Wisconsin Electric to form a single combined utility subsidiary. The merger is intended to improve customer service and reduce operating costs. In October 1994, Wisconsin Electric and Wisconsin Natural filed a joint application to obtain the PSCW's approval of the merger. On May 9, 1995, the PSCW issued an order approving - 9 - 10 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) MERGER OF WISCONSIN NATURAL INTO WISCONSIN ELECTRIC (Cont'd) the merger. In 1994, Wisconsin Electric also filed an application to obtain consent of the Michigan Public Service Commission ("MPSC") to assume Wisconsin Natural's liabilities. On April 27, 1995, the MPSC issued an order approving the merger and the assumption of Wisconsin Natural's liabilities by Wisconsin Electric. Completion of the planned merger is expected to occur by January 1, 1996. MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY As previously reported in WEC's 4/28/95 8-K (as defined below), Wisconsin Energy Corporation, a Wisconsin corporation ("WEC"), Northern States Power Company, a Minnesota corporation ("NSP"), Northern Power Wisconsin Corp., a Wisconsin corporation and wholly-owned subsidiary of NSP ("New NSP"), and WEC Sub Corp., a Wisconsin corporation and wholly-owned subsidiary of WEC ("WEC Sub"), have entered into an Agreement and Plan of Merger, dated as of April 28, 1995 (the "Merger Agreement"), which provides for a strategic business combination involving NSP and WEC in a "merger-of-equals" transaction (the "Transaction"). The Transaction, which was unanimously approved by the Boards of Directors of the constituent companies, is expected to close shortly after all of the conditions to the consummation of the Transaction, including obtaining applicable regulatory approvals, are met or waived. The regulatory approval process is expected to take approximately 12 to 18 months. In the Transaction, the holding company of the combined enterprise will be registered under the Public Utility Holding Company Act of 1935, as amended. The holding company will be named Primergy Corporation ("Primergy") and will be the parent company of both New NSP (NSP, for regulatory reasons, will reincorporate in Wisconsin) and WEC's present principal utility subsidiary, Wisconsin Electric Power Company ("WEPCO"), which will be renamed "Wisconsin Energy Company." Wisconsin Energy Company will include the operations of WEC's other present utility subsidiary, Wisconsin Natural Gas Company ("WNG"), which is anticipated to be merged into WEPCO by January 1, 1996, as previously planned. It is anticipated that, following the Transaction, NSP's Wisconsin utility subsidiary, Northern States Power Company, a Wisconsin corporation, will be merged into Wisconsin Energy Company. The Merger Agreement, the WEC press release issued in connection therewith and the related Stock Option Agreements (defined below) are filed as exhibits to WEC's Current Report on Form 8-K dated as of April 28, 1995, which was filed on May 3, 1995 ("WEC's 4/28/95 8-K"), and are incorporated therein and herein by reference. The descriptions of the Merger Agreement and the Stock Option Agreements set forth herein and therein do not purport to be complete and are qualified in their entirety by the provisions of the Merger Agreement and the Stock Option Agreements, as the case may be, and the other exhibits filed with WEC's 4/28/95 8-K and incorporated as exhibits to this report by reference thereto. - 10 - 11 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd) Under the terms of the Merger Agreement, NSP will be merged with and into New NSP and immediately thereafter WEC Sub will be merged with and into New NSP, with New NSP being the surviving corporation. Each outstanding share of Common Stock, par value $2.50 per share, of NSP ("NSP Common Stock") will be cancelled and converted into the right to receive 1.626 shares of Common Stock, par value $.01 per share, of Primergy ("Primergy Common Stock"). The outstanding shares of WEC Common Stock, par value $.01 per share ("WEC Common Stock"), will remain outstanding, unchanged, as shares of Primergy Common Stock. As of the date of the Merger Agreement, NSP had 67.3 million common shares outstanding and WEC had 109.4 million common shares outstanding. Based on such capitalization, the Transaction would result in the common shareholders of NSP receiving 50% of the common equity of Primergy and the common shareholders of WEC owning the other 50% of the common equity of Primergy. Each outstanding share of Cumulative Preferred Stock, par value $100.00 per share, of NSP will be cancelled and converted into the right to receive one share of Cumulative Preferred Stock, par value $100.00 per share, of New NSP with identical rights (including dividend rights) and designations. WEPCO's outstanding preferred stock will be unchanged in the Transaction. It is anticipated that Primergy will adopt NSP's dividend payment level adjusted for the exchange ratio. NSP currently pays $2.64 per share annually, and WEC's annual dividend rate is currently $1.47 per share. Based on the exchange ratio and NSP's current dividend rate, the pro forma dividend rate for Primergy would be $1.62 per share. The Transaction is subject to customary closing conditions, including, without limitation, the receipt of required shareholder approvals of WEC and NSP; and the receipt of all necessary governmental approvals and the making of all necessary governmental filings, including approvals of state utility regulators in Wisconsin, Minnesota and certain other states, the approval of the Federal Energy Regulatory Commission, the Securities and Exchange Commission (the "SEC") and the Nuclear Regulatory Commission, and the filing of the requisite notification with the Federal Trade Commission and the Department of Justice under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, and the expiration of the applicable waiting period thereunder. The Transaction is also subject to receipt of assurances from the Internal Revenue Service and opinions of counsel that the Transaction will qualify as a tax-free reorganization, and the assurances from the parties' independent accountants that the Transaction will qualify as a pooling of interests for accounting purposes. In addition, the Transaction is conditioned upon the effectiveness of a registration statement to be filed by WEC with the SEC with respect to shares of the Primergy Common Stock to be issued in the Transaction and the approval for listing of such shares on the New York Stock Exchange. (See Article VIII of the Merger Agreement.) Shareholder meetings to vote upon the Transaction will be convened as soon as practicable and are expected to be held in the third or fourth quarter of 1995. - 11 - 12 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd) The Merger Agreement contains certain covenants of the parties pending the consummation of the Transaction. Generally, the parties must carry on their businesses in the ordinary course consistent with past practice, may not increase dividends on common stock beyond specified levels, and may not issue any capital stock beyond certain limits. The Merger Agreement also contains restrictions on, among other things, charter and bylaw amendments, capital expenditures, acquisitions, dispositions, incurrence of indebtedness, certain increases in employee compensation and benefits, and affiliate transactions. (See Article VI of the Merger Agreement.) The Merger Agreement provides that, after the effectiveness of the Transaction (the "Effective Time"), the corporate headquarters and principal executive offices of Primergy and NSP will be located in Minneapolis, Minnesota, and the headquarters of Wisconsin Energy Company will remain in Milwaukee, Wisconsin. Primergy's Board of Directors, which will be divided into three classes, will consist of a total of 12 directors, 6 of whom will be designated by WEC and 6 of whom will be designated by NSP. Mr. James J. Howard, the current Chairman of the Board, President and Chief Executive Officer ("CEO") of NSP, will serve as CEO of Primergy from the Effective Time until the later of 16 months after the Effective Time or the date of the annual meeting of shareholders of Primergy that occurs in 1998 and Chairman of Primergy until the later of July 1, 2000 or two years after he ceases to be CEO. Mr. Abdoo, the current Chairman of the Board, President and CEO of WEC, will serve as Vice Chairman of the Board, President and Chief Operating Officer of Primergy until the date when Mr. Howard ceases to be CEO, at which time he will assume the additional role of CEO. Mr. Abdoo will assume the position of Chairman when Mr. Howard ceases to be Chairman. The Merger Agreement may be terminated under certain circumstances, including (1) by mutual consent of the parties; (2) by any party if the Transaction is not consummated by April 30, 1997 (provided, however, that such termination date shall be extended to October 31, 1997 if all conditions to closing the Transaction, other than the receipt of certain consents and/or statutory approvals by any of the parties, have been satisfied by April 30, 1997); (3) by any party if either NSP's or WEC's shareholders vote against the Transaction or if any state or federal law or court order prohibits the Transaction; (4) by a non-breaching party if there exist breaches of any representations or warranties contained in the Merger Agreement as of the date thereof, which breaches, individually or in the aggregate, would result in a material adverse effect on the breaching party and which is not cured within twenty (20) days after notice; (5) by a non-breaching party if there occur breaches of specified covenants or material breaches of any covenant or agreement which are not cured within twenty (20) days after notice; (6) by either party if the Board of Directors of the other party shall withdraw or adversely modify its recommendation of the Transaction or shall approve any competing transaction; or (7) by either party, under certain circumstances, as a result of a third-party tender offer or business combination proposal which such party, pursuant to its directors' fiduciary duties, is, in the opinion of such party's counsel and after the other party has first been given an opportunity to make concessions and adjustments in the terms of the Merger Agreement, required to accept. - 12 - 13 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd) The Merger Agreement provides that if a breach described in clause (4) or (5) of the previous paragraph occurs, then, if such breach is not willful, the non-breaching party is entitled to reimbursement of its out-of-pocket expenses, not to exceed $10 million. In the event of a willful breach, the non-breaching party will be entitled to its out-of-pocket expenses (which shall not be limited to $10 million) and any remedies it may have at law or in equity, provided that if, at the time of the breaching party's willful breach, there shall have been a third party tender offer or business combination proposal which shall not have been rejected by the breaching party and withdrawn by the third party, and within two and one-half years of any termination by the non-breaching party, the breaching party accepts an offer to consummate or consummates a business combination with such third party, then such breaching party, upon the signing of a definitive agreement relating to such a business combination, or, if no such agreement is signed then at the closing of such business combination, will pay to the non-breaching party an additional fee equal to $75 million. The Merger Agreement also requires payment of a termination fee of $75 million (and reimbursement of out-of- pocket expenses) by one party (the "Payor") to the other in certain circumstances, if (i) the Merger Agreement is terminated (x) as a result of the acceptance by the Payor of a third-party tender offer or business combination proposal, (y) following a failure of the shareholders of the Payor to grant their approval to the Transaction or (z) as a result of the Payor's material failure to convene a shareholder meeting, distribute proxy materials and, subject to its board of directors' fiduciary duties, recommend the Transaction to its shareholders; (ii) at the time of such termination or prior to the meeting of such party's shareholders there shall have been a third- party tender offer or business combination proposal which shall not have been rejected by the Payor and withdrawn by such third party; and (iii) within two and one-half years of any such termination described in clause (i) above, the Payor accepts an offer to consummate or consummates a business combination with such third party. Such termination fee and out-of-pocket expenses referred to in the previous sentence shall be paid upon the signing of a definitive agreement between the Payor and the third party, or, if no such agreement is signed, then at the closing of such third-party business combination. The termination fees payable by NSP or WEC under these provisions and the aggregate amount which could be payable by NSP or WEC upon a required purchase of the options granted pursuant to the Stock Option Agreements (defined below) may not exceed $125 million in the aggregate. (See Article IX of the Merger Agreement.) Concurrently with the Merger Agreement, the parties have entered into reciprocal stock option agreements (the "Stock Option Agreements") each granting the other an irrevocable option to purchase up to that number of shares of common stock of the other company which equals 19.9% of the number of shares of common stock of the other company outstanding on April 28, 1995 at an exercise price of $44.075 per share of NSP common stock or $27.675 per share of WEC common stock, as the case may be, under certain circumstances if the Merger Agreement becomes terminable by one party as a result of the other party's breach or as a result of the other party becoming the subject of a - 13 - 14 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) MERGER AGREEMENT WITH NORTHERN STATES POWER COMPANY (Cont'd) third-party proposal for a business combination. Any party whose option becomes exercisable (the "Exercising Party") may request the other party to repurchase from it all or any portion of the Exercising Party's option at the price specified in the Stock Option Agreements. (See the Stock Option Agreements). Primergy is expected to be the tenth-largest investor-owned utility company in the United States based on the $6.0 billion current combined market capitalization of WEC and NSP. For the year-ended December 31, 1994, the combined revenues of WEC and NSP were $4.2 billion, with total assets of more than $10 billion. Primergy will serve approximately 2.3 million electric customers and 750,000 natural gas customers. Its service territory will include portions of Minnesota, Wisconsin, North Dakota, South Dakota and the Upper Peninsula of Michigan. The business of Primergy will consist of utility operations and various non-utility enterprises, including independent power projects. A preliminary estimate indicates that the Transaction will result in net savings of approximately $2.0 billion in costs over 10 years. The synergies created by the Transaction will allow the companies to implement a reduction in electric retail rates followed by a rate freeze for electric retail customers through the year 2000. Following announcement of the Transaction, on May 1, 1995 Standard & Poor's Corporation ("S&P") reported that it was placing on CreditWatch with negative implications its AA+ senior secured debt and AA+ preferred stock ratings of WEPCO and its AA senior unsecured debt rating of Wisconsin Michigan Investment Corporation (a non-utility subsidiary of WEC). In addition, S&P indicated that while its AA senior secured debt rating of WNG would remain on CreditWatch, where it was placed on April 25, 1994, the implications were revised to negative from positive. S&P stated that if the Transaction is completed, the likely credit rating for the senior secured debt of WEPCO is expected to be AA or AA-. As part of its ratings process, S&P intends to review the financial and operating plans of the merged utilities. Also on May 1, 1995, citing WEPCO's continued operation as a separate utility subsidiary after the Transaction, its strength within its rating category and its strong capital structure, Moody's Investors Service confirmed its Aa2 first mortgage bond rating of WEPCO. Both NSP and WEC recognize that the divestiture of their existing gas operations and certain non-utility operations is a possibility under the new registered holding company structure, but will seek approval from the SEC to maintain such businesses. If divestiture is ultimately required, the SEC has historically allowed companies sufficient time to accomplish divestitures in a manner that protects shareholder value. - 14 - 15 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) FINANCIAL STATEMENTS OF NSP The consolidated financial statements of NSP listed in the descriptions of Exhibits (99)-1 and (99)-2 in paragraph (a) of Item 6 of this report are incorporated herein by reference. The audited financial statements so listed are included in Item 8 of NSP's Annual Report on Form 10-K for the fiscal year ended December 31, 1994 (File No. 1-3034). The unaudited interim financial statements so listed are included in Item 1 in Part I of NSP's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995 (File No. 1-3034). UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION The following unaudited pro forma financial information combines the historical consolidated balance sheets and statements of income of NSP and WEC after giving effect to the proposed business combination transaction ("Transaction") to form Primergy Corporation ("Primergy"). The unaudited pro forma combined condensed balance sheet at March 31, 1995 gives effect to the Transaction as if it had occurred at March 31, 1995. The unaudited pro forma combined condensed statements of income for each of the three years in the period ended December 31, 1994, the three months ended March 31, 1995 and 1994 and the twelve months ended March 31, 1995, give effect to the Transaction as if it had occurred at January 1, 1992. These statements are prepared on the basis of accounting for the Transaction as a pooling of interests and are based on the assumptions set forth in the notes thereto. The WEC income statements for the three months ended March 31, 1994 and the fiscal year ended December 31, 1994 include a significant one-time pretax charge of $73.9 million for revitalization costs recorded in the first quarter of 1994. To provide a more representative recent twelve-month period summarizing combined operating results, a pro forma combined condensed statement of income for the twelve months ended March 31, 1995 is also presented. The following pro forma financial information has been prepared from, and should be read in conjunction with, the historical consolidated financial statements and related notes thereto of NSP and WEC. The following information is not necessarily indicative of the financial position or operating results that would have occurred had the Transaction been consummated on the date, or at the beginning of the periods, for which the Transaction is being given effect nor is it necessarily indicative of future operating results or financial position. - 15 - 16 PRIMERGY CORPORATION FORM 10-Q UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET MARCH 31, 1995 (In thousands)
NSP WEC Pro Forma Pro Forma Pro Forma Balance Sheet (As Reported) (As Reported) Adjustments Combined ------------------------------------------ -------------- -------------- -------------- -------------- Assets Utility Plant Electric $ 6,407,107 $ 4,544,978 $ - $ 10,952,085 Gas 679,587 471,559 - 1,151,146 Other 271,924 40,114 - 312,038 ------------- ------------- ------------- ------------- Total 7,358,618 5,056,651 - 12,415,269 Accumulated provision for depreciation (3,189,171) (2,184,573) - (5,373,744) Nuclear fuel - net 90,795 55,759 - 146,554 ------------- ------------- ------------- ------------- Net Utility Plant 4,260,242 2,927,837 - 7,188,079 Current Assets Cash and cash equivalents 36,525 16,831 - 53,356 Accounts receivable - net 290,284 128,879 - 419,163 Accrued utility revenues 81,999 103,737 - 185,736 Fossil fuel inventories 46,229 65,998 - 112,227 Material & supplies inventories 104,739 70,099 - 174,838 Prepayments and other 50,754 72,271 - 123,025 ------------- ------------- ------------- ------------- Total Current Assets 610,530 457,815 - 1,068,345 Other Assets Regulatory Assets 351,729 332,089 - 683,818 External decommissioning fund 160,731 239,940 - 400,671 Investments in non-regulated projects and other investments 220,080 115,346 - 335,426 Non-regulated property - net 175,654 97,907 - 273,561 Intangible assets and other (Note 4) 135,410 213,711 (139,758) 209,363 ------------- ------------- ------------- ------------- Total Other Assets 1,043,604 998,993 (139,758) 1,902,839 ------------- ------------- ------------- ------------- Total Assets $ 5,914,376 $ 4,384,645 $ (139,758) $ 10,159,263 ============= ============= ============= ============= Liabilities and Equity Capitalization Common stock equity: Common stock (Note 1) $ 168,186 $ 1,094 $ (167,092) $ 2,188 Other stockholders' equity (Note 1) 1,751,891 1,779,491 167,092 3,698,474 ------------- ------------- ------------- ------------- Total Common Stock Equity 1,920,077 1,780,585 - 3,700,662 Cumulative preferred stock and premium 240,469 30,451 - 270,920 Long-term debt 1,456,217 1,249,742 - 2,705,959 ------------- ------------- ------------- ------------- Total Capitalization 3,616,763 3,060,778 - 6,677,541 Current Liabilities Current portion of long-term debt 160,606 49,633 - 210,239 Short-term debt 157,648 181,574 - 339,222 Accounts payable 179,279 79,787 - 259,066 Taxes accrued 256,616 38,617 - 295,233 Other accrued liabilities 139,255 96,543 - 235,798 ------------- ------------- ------------- ------------- Total Current Liabilities 893,404 446,154 - 1,339,558 Other Liabilities Deferred income taxes (Note 4) 850,823 478,974 (139,758) 1,190,039 Deferred investment tax credits 171,544 93,034 - 264,578 Regulatory liabilities 208,329 172,466 - 380,795 Other liabilities and deferred credits 173,513 133,239 - 306,752 ------------- ------------- ------------- ------------- Total Other Liabilities 1,404,209 877,713 (139,758) 2,142,164 ------------- ------------- ------------- ------------- Total Capitalization and Liabilities $ 5,914,376 $ 4,384,645 $ (139,758) $ 10,159,263 ============= ============= ============= ============= See accompanying notes to pro forma combined condensed financial statements. - 16 -
17 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 3 MONTHS ENDED MARCH 31, 1995 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ------------ Utility Operating Revenues Electric $ 497,314 $ 343,919 $ - $ 841,233 Gas 163,853 121,100 - 284,953 Steam - 6,103 - 6,103 ---------- ---------- ---------- ---------- Total Operating Revenues 661,167 471,122 - 1,132,289 Utility Operating Expenses Electric Production-Fuel and Purchased Power 135,071 86,895 - 221,966 Cost of Gas Sold & Transported 99,301 72,803 - 172,104 Other Operation 130,627 97,760 - 228,387 Maintenance 37,767 28,372 - 66,139 Depreciation and Amortization 71,831 44,712 - 116,543 Taxes Other Than Income Taxes 62,279 19,379 - 81,658 Revitalization Charges - - - - Income Taxes 36,593 36,629 - 73,222 ---------- ---------- ---------- ---------- Total Operating Expenses 573,469 386,550 - 960,019 ---------- ---------- ---------- ---------- Utility Operating Income 87,698 84,572 - 172,270 Other Income (Expense) Equity Earnings of Unconsolidated Investees 10,506 - - 10,506 Other Income and Deductions - Net 761 6,094 - 6,855 ---------- ---------- ---------- ---------- Total Other Income (Expense) 11,267 6,094 - 17,361 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 98,965 90,666 - 189,631 Interest Charges 30,775 27,831 - 58,606 Preferred Dividends of Subsidiaries 3,201 301 - 3,502 ---------- ---------- ---------- ---------- Net Income $ 64,989 $ 62,534 $ - $ 127,523 ========== ========== ========== ========== Average Common Shares Outstanding (Note 1) 67,004 109,133 41,945 218,082 Earnings Per Common Share $ 0.97 $ 0.57 $ 0.58 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 17 -
18 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 3 MONTHS ENDED MARCH 31, 1994 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ------------ Utility Operating Revenues Electric $ 494,031 $ 355,239 $ - $ 849,270 Gas 189,431 147,579 - 337,010 Steam - 6,863 - 6,863 ---------- ---------- ---------- ---------- Total Operating Revenues 683,462 509,681 - 1,193,143 Utility Operating Expenses Electric Production-Fuel and Purchased Power 132,471 84,070 - 216,541 Cost of Gas Sold & Transported 121,805 91,153 - 212,958 Other Operation 133,487 107,473 - 240,960 Maintenance 40,469 33,516 - 73,985 Depreciation and Amortization 67,345 44,039 - 111,384 Taxes Other Than Income Taxes 59,929 21,068 - 80,997 Revitalization Charges - 73,900 - 73,900 Income Taxes 42,161 11,026 - 53,187 ---------- ---------- ---------- ---------- Total Operating Expenses 597,667 466,245 - 1,063,912 ---------- ---------- ---------- ---------- Utility Operating Income 85,795 43,436 - 129,231 Other Income (Expense) Equity Earnings of Unconsolidated Investees (107) - - (107) Other Income and Deductions - Net 4,474 6,510 - 10,984 ---------- ---------- ---------- ---------- Total Other Income (Expense) 4,367 6,510 - 10,877 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 90,162 49,946 - 140,108 Interest Charges 24,368 26,735 - 51,103 Preferred Dividends of Subsidiaries 3,057 389 - 3,446 ---------- ---------- ---------- ---------- Net Income $ 62,737 $ 22,822 $ - $ 85,559 ========== ========== ========== ========== Average Common Shares Outstanding (Note 1) 66,742 107,238 41,780 215,760 Earnings Per Common Share $ 0.94 $ 0.21 $ 0.40 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 18 -
19 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 12 MONTHS ENDED MARCH 31, 1995 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ------------ Utility Operating Revenues Electric $2,069,927 $1,392,242 $ - $3,462,169 Gas 394,325 297,870 - 692,195 Steam - 13,521 - 13,521 ---------- ---------- ---------- ---------- Total Operating Revenues 2,464,252 1,703,633 - 4,167,885 Utility Operating Expenses Electric Production-Fuel and Purchased Power 573,477 331,310 - 904,787 Cost of Gas Sold & Transported 240,939 181,161 - 422,100 Other Operation 533,310 389,298 - 922,608 Maintenance 167,444 119,458 - 286,902 Depreciation and Amortization 278,287 178,287 - 456,574 Taxes Other Than Income Taxes 236,914 74,346 - 311,260 Revitalization Charges - - - - Income Taxes 123,661 125,364 - 249,025 ---------- ---------- ---------- ---------- Total Operating Expenses 2,154,032 1,399,224 - 3,553,256 ---------- ---------- ---------- ---------- Utility Operating Income 310,220 304,409 - 614,629 Other Income (Expense) Equity Earnings of Unconsolidated Investees 46,477 - - 46,477 Other Income and Deductions - Net 2,797 26,549 - 29,346 ---------- ---------- ---------- ---------- Total Other Income (Expense) 49,274 26,549 - 75,823 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 359,494 330,958 - 690,452 Interest Charges 113,623 109,115 - 222,738 Preferred Dividends of Subsidiaries 12,509 1,263 - 13,772 ---------- ---------- ---------- ---------- Net Income $ 233,362 $ 220,580 $ - $ 453,942 ========== ========== ========== ========== Average Common Shares Outstanding (Note 1) 66,896 108,492 41,877 217,265 Earnings Per Common Share $ 3.49 $ 2.03 $ 2.09 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 19 -
20 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 12 MONTHS ENDED DECEMBER 31, 1994 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ----------- Utility Operating Revenues Electric $2,066,644 $1,403,562 $ - $3,470,206 Gas 419,903 324,349 - 744,252 Steam - 14,281 - 14,281 ---------- ---------- ---------- ---------- Total Operating Revenues 2,486,547 1,742,192 - 4,228,739 Utility Operating Expenses Electric Production-Fuel and Purchased Power 570,880 328,485 - 899,365 Cost of Gas Sold & Transported 263,443 199,511 - 462,954 Other Operation 536,168 399,011 - 935,179 Maintenance 170,145 124,602 - 294,747 Depreciation and Amortization 273,801 177,614 - 451,415 Taxes Other Than Income Taxes 234,564 76,035 - 310,599 Revitalization Charges - 73,900 - 73,900 Income Taxes 129,228 99,761 - 228,989 ---------- ---------- ---------- ---------- Total Operating Expenses 2,178,229 1,478,919 - 3,657,148 ---------- ---------- ---------- ---------- Utility Operating Income 308,318 263,273 - 571,591 Other Income (Expense) Equity Earnings of Unconsolidated Investees 35,863 - - 35,863 Other Income and Deductions - Net 6,509 26,965 - 33,474 ---------- ---------- ---------- ---------- Total Other Income (Expense) 42,372 26,965 - 69,337 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 350,690 290,238 - 640,928 Interest Charges 107,215 108,019 - 215,234 Preferred Dividends of Subsidiaries 12,364 1,351 - 13,715 ---------- ---------- ---------- ---------- Net Income $ 231,111 $ 180,868 $ - $ 411,979 ========== ========== ========== ========== Average Common Outstanding Shares (Note 1) 66,845 108,025 41,845 216,715 Earnings Per Common Share $ 3.46 $ 1.67 $ 1.90 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 20 -
21 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 12 MONTHS ENDED DECEMBER 31, 1993 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ----------- Utility Operating Revenues Electric $1,974,916 $1,347,844 $ - $3,322,760 Gas 429,076 331,301 - 760,377 Steam - 14,090 - 14,090 ---------- ---------- ---------- ---------- Total Operating Revenues 2,403,992 1,693,235 - 4,097,227 Utility Operating Expenses Electric Production-Fuel and Purchased Power 524,126 318,265 - 842,391 Cost of Gas Sold & Transported 282,028 214,132 - 496,160 Other Operation 516,568 399,135 - 915,703 Maintenance 161,413 156,085 - 317,498 Depreciation and Amortization 264,517 167,066 - 431,583 Taxes Other Than Income Taxes 223,108 74,653 - 297,761 Revitalization Charges - - - - Income Taxes 128,346 98,463 - 226,809 ---------- ---------- ---------- ---------- Total Operating Expenses 2,100,106 1,427,799 - 3,527,905 ---------- ---------- ---------- ---------- Utility Operating Income 303,886 265,436 - 569,322 Other Income (Expense) Equity Earnings of Unconsolidated Investees 3,030 - - 3,030 Other Income and Deductions - Net 12,916 32,073 - 44,989 ---------- ---------- ---------- ---------- Total Other Income (Expense) 15,946 32,073 - 48,019 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 319,832 297,509 - 617,341 Interest Charges 108,092 102,997 - 211,089 Preferred Dividends of Subsidiaries 14,580 4,377 - 18,957 ---------- ---------- ---------- ---------- Net Income $ 197,160 $ 190,135 $ - $ 387,295 ========== ========== ========== ========== Average Common Shares Outstanding (Note 1) 65,211 105,878 40,822 211,911 Earnings Per Common Share $ 3.02 $ 1.80 $ 1.83 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 21 -
22 FORM 10-Q PRIMERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME 12 MONTHS ENDED DECEMBER 31, 1992 (In thousands, except per share amounts)
NSP WEC Pro Forma Pro Forma (As Reported) (As Reported) Adjustments Combined ----------- ----------- ----------- ----------- Utility Operating Revenues Electric $1,823,316 $1,298,723 $ - $3,122,039 Gas 336,206 283,699 - 619,905 Steam - 13,093 - 13,093 ---------- ---------- ---------- ---------- Total Operating Revenues 2,159,522 1,595,515 - 3,755,037 Utility Operating Expenses Electric Production-Fuel and Purchased Power 451,696 330,461 - 782,157 Cost of Gas Sold & Transported 220,370 177,947 - 398,317 Other Operation 512,833 367,020 - 879,853 Maintenance 180,585 150,462 - 331,047 Depreciation and Amortization 242,914 164,367 - 407,281 Taxes Other Than Income Taxes 204,439 73,714 - 278,153 Revitalization Charges - - - - Income Taxes 90,669 89,838 - 180,507 ---------- ---------- ---------- ---------- Total Operating Expenses 1,903,506 1,353,809 - 3,257,315 ---------- ---------- ---------- ---------- Utility Operating Income 256,016 241,706 - 497,722 Other Income (Expense) Equity Earnings of Unconsolidated Investees 2,382 - - 2,382 Other Income and Deductions - Net 5,570 26,136 - 31,706 ---------- ---------- ---------- ---------- Total Other Income (Expense) 7,952 26,136 - 34,088 ---------- ---------- ---------- ---------- Income Before Interest Charges and Preferred Dividends 263,968 267,842 - 531,810 Interest Charges 103,040 90,687 - 193,727 Preferred Dividends of Subsidiaries 16,172 5,916 - 22,088 ---------- ---------- ---------- ---------- Income Before Accounting Change $ 144,756 $ 171,239 $ - $ 315,995 ========== ========== ========== ========== Average Common Shares Outstanding (Note 1) 62,641 103,382 39,213 205,236 Earnings Per Common Share $ 2.31 $ 1.66 $ 1.54 ========== ========== ========== See accompanying notes to pro forma combined condensed financial statements. - 22 -
23 FORM 10-Q PRIMERGY CORPORATION ------------------------------------------ NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. The pro forma combined condensed financial statements reflect the conversion of each share of NSP Common Stock outstanding ($2.50 par value) into 1.626 shares of Primergy Common Stock ($.01 par value) and the continuation of each share of WEC Common Stock outstanding as one share of Primergy Common Stock ($.01 par value), as provided in the Merger Agreement. The pro forma combined condensed financial statements are presented as if the companies were combined during all periods included therein. 2. The allocation between NSP and WEC and their customers of the estimated cost savings resulting from the Transaction, net of the costs incurred to achieve such savings, will be subject to regulatory review and approval. Transaction costs are currently estimated to be approximately $30 million (including fees for financial advisors, accountants, attorneys, filings and printing). None of the estimated cost savings, the cost to achieve such savings, or the transaction costs have been reflected in the pro forma combined condensed financial statements. 3. Intercompany transactions (including purchased and exchanged power transactions) between NSP and WEC during the periods presented were not material and, accordingly, no pro forma adjustments were made to eliminate such transactions. 4. A pro forma adjustment has been made to conform the presentation of noncurrent deferred income taxes in the pro forma combined condensed balance sheet into one net amount. All other report presentation and accounting policy differences are immaterial and have not been adjusted in the pro forma combined condensed financial statements. - 23 - 24 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits. The following Exhibits are filed with this report: (23)-1 Independent Auditors' Consent of Deloitte & Touche LLP. (27)-1 Wisconsin Energy Corporation Financial Data Schedule for the three months ended March 31, 1995. The following Exhibits are incorporated herein by reference: (2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by and among Northern States Power Company, Wisconsin Energy Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp. (Exhibit (2)-1 to Wisconsin Energy Corporation's Current Report on Form 8-K dated as of April 28, 1995, File No. 1-9057.) ("WEC's 4/28/95 8-K") (2)-2 WEC Stock Option Agreement, dated as of April 28, 1995, by and among Northern States Power Company and Wisconsin Energy Corporation. (Exhibit (2)-2 to WEC's 4/28/95 8-K.) (2)-3 NSP Stock Option Agreement, dated as of April 28, 1995, by and among Wisconsin Energy Corporation and Northern States Power Company. (Exhibit (2)-3 to WEC's 4/28/95 8-K.) (2)-4 Committees of the Board of Directors of Primergy Corporation. (Exhibit (2)-4 to WEC's 4/28/95 8-K.) (2)-5 Form of Employment Agreement of James J. Howard. (Exhibit (2)-5 to WEC's 4/28/95 8-K.) (2)-6 Form of Employment Agreement of Richard A. Abdoo. (Exhibit (2)-6 to WEC's 4/28/95 8-K.) (2)-7 Form of Amended and Restated Articles of Incorporation of Northern Power Wisconsin Corp. (Exhibit (2)-7 to WEC's 4/28/95 8-K.) (2)-8 Letter Agreement, dated January 17, 1995, between Northern States Power Company and Wisconsin Energy Corporation. (Exhibit (2)-8 to WEC's Schedule 13D dated May 4, 1995 with respect to the NSP Stock Option Agreement.) (2)-9 Letter Agreement, dated April 26, 1995, between Northern States Power Company and Wisconsin Energy Corporation amending Letter Agreement dated January 17, 1995. (Exhibit (2)-9 to WEC's Schedule 13D dated May 4, 1995 with respect to the NSP Stock Option Agreement.) - 24 - 25 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (Cont'd) (99)-1 Audited Financial Statements of Northern States Power Company. (Item 8 of Northern States Power Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3034): Independent Auditors' Report. Consolidated Statements of Income for the three years ended December 31, 1994. Consolidated Statements of Cash Flows for the three years ended December 31, 1994. Consolidated Balance Sheets at December 31, 1994 and 1993. Consolidated Statements of Changes in Common Stockholders' Equity for the three years ended December 31, 1994. Consolidated Statements of Capitalization at December 31, 1994 and 1993. Notes to Financial Statements. (99)-2 Unaudited Interim Financial Statements of Northern States Power Company. (Item 1 in Part I of Northern States Power Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3034): Consolidated Statements of Income for the three months ended March 31, 1995 and 1994. Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and 1994. Consolidated Balance Sheets at March 31, 1995 and December 31, 1994. Notes to Financial Statements. (99)-3 Press Release, dated May 1, 1995, of Wisconsin Energy Corporation. (Exhibit (99)-1 to WEC's 4/28/95 8-K.) (b) Reports on Form 8-K. No reports on Form 8-K were filed during the quarter ended March 31, 1995. A Current Report on Form 8-K dated as of April 28, 1995 was filed on May 3, 1995 with respect to the Merger Agreement. - 25 - 26 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. WISCONSIN ENERGY CORPORATION -------------------------------------- (Registrant) s/ R. A. Abdoo -------------------------------------- Date: May 12, 1995 R. A. Abdoo, Chairman of the Board, President and Chief Executive Officer s/ J. G. Remmel -------------------------------------- Date: May 12, 1995 J. G. Remmel, Vice President and Treasurer - Principal Financial Officer - 26 - 27 WISCONSIN ENERGY CORPORATION ---------------------------------- EXHIBIT INDEX Quarterly Report on Form 10-Q For the Quarter Ended March 31, 1995 Exhibit Number - ------- The following Exhibits are filed with this report: (23)-1 Independent Auditors' Consent of Deloitte & Touche LLP. (27) Wisconsin Energy Corporation Financial Data Schedule for the three months ended March 31, 1995. The following Exhibits are incorporated herein by reference: (2)-1 Agreement and Plan of Merger, dated as of April 28, 1995, by and among Northern States Power Company, Wisconsin Energy Corporation, Northern Power Wisconsin Corp. and WEC Sub Corp. (Exhibit (2)-1 to Wisconsin Energy Corporation's Current Report on Form 8-K dated as of April 28, 1995, File No. 1-9057.) ("WEC's 4/28/95 8-K") (2)-2 WEC Stock Option Agreement, dated as of April 28, 1995, by and among Northern States Power Company and Wisconsin Energy Corporation. (Exhibit (2)-2 to WEC's 4/28/95 8-K.) (2)-3 NSP Stock Option Agreement, dated as of April 28, 1995, by and among Wisconsin Energy Corporation and Northern States Power Company. (Exhibit (2)-3 to WEC's 4/28/95 8-K.) (2)-4 Committees of the Board of Directors of Primergy Corporation. (Exhibit (2)-4 to WEC's 4/28/95 8-K.) (2)-5 Form of Employment Agreement of James J. Howard. (Exhibit (2)-5 to WEC's 4/28/95 8-K.) (2)-6 Form of Employment Agreement of Richard A. Abdoo. (Exhibit (2)-6 to WEC's 4/28/95 8-K.) (2)-7 Form of Amended and Restated Articles of Incorporation of Northern Power Wisconsin Corp. (Exhibit (2)-7 to WEC's 4/28/95 8-K.) (2)-8 Letter Agreement, dated January 17, 1995, between Northern States Power Company and Wisconsin Energy Corporation. (Exhibit (2)-8 to WEC's Schedule 13D dated May 4, 1995 with respect to the NSP Stock Option Agreement.) - 27 - 28 FORM 10-Q WISCONSIN ENERGY CORPORATION ------------------------------ PART II - OTHER INFORMATION (Cont'd) The following Exhibits are incorporated herein by reference (Cont'd): (2)-9 Letter Agreement, dated April 26, 1995, between Northern States Power Company and Wisconsin Energy Corporation amending Letter Agreement dated January 17, 1995. (Exhibit (2)-9 to WEC's Schedule 13D dated May 4, 1995 with respect to the NSP Stock Option Agreement.) (99)-1 Audited Financial Statements of Northern States Power Company. (Item 8 of Northern States Power Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994, File No. 1-3034): Independent Auditors' Report. Consolidated Statements of Income for the three years ended December 31, 1994. Consolidated Statements of Cash Flows for the three years ended December 31, 1994. Consolidated Balance Sheets at December 31, 1994 and 1993. Consolidated Statements of Changes in Common Stockholders' Equity for the three years ended December 31, 1994. Consolidated Statements of Capitalization at December 31, 1994 and 1993. Notes to Financial Statements. (99)-2 Unaudited Interim Financial Statements of Northern States Power Company. (Item 1 in Part I of Northern States Power Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995, File No. 1-3034): Consolidated Statements of Income for the three months ended March 31, 1995 and 1994. Consolidated Statements of Cash Flows for the three months ended March 31, 1995 and 1994. Consolidated Balance Sheets at March 31, 1995 and December 31, 1994. Notes to Financial Statements. (99)-3 Press Release, dated May 1, 1995, of Wisconsin Energy Corporation. (Exhibit (99)-1 to WEC's 4/28/95 8-K.) - 28 - EX-23.1 2 INDEPENDENT AUDITORS' CONSENT OF DELOITTE & TOUCHE LLP 1 Exhibit (23)-1 (3/31/95 10-Q) INDEPENDENT AUDITORS' CONSENT We consent to the incorporation by reference in the Registration Statements and related Prospectuses of Wisconsin Energy Corporation, listed below, of our report dated February 8, 1995, which expresses an unqualified opinion and includes an explanatory paragraph relating to Northern States Power Company's change in method of accounting for certain postretirement health care costs in 1993, appearing in Item 8 of the Annual Report on Form 10-K of Northern States Power Company (Minnesota) (File No. 1-3034) for the year ended December 31, 1994. 1. Registration Statements on Form S-3 (Registration Nos. 33-43737 and 33-57765) - Stock Plus Investment Plan 2. Registration Statement on Form S-8 (Registration No. 33-34656) - Represented Employee Savings Plan 3. Registration Statement on Form S-8 (Registration No. 33-34657) - Management Employee Savings Plan /s/ Deloitte & Touche LLP - ------------------------- DELOITTE & TOUCHE LLP Minneapolis, Minnesota May 12, 1995 - 1 - EX-27 3 WEC SCHEDULE UT - THREE MONTHS ENDED MARCH 31, 1995
UT THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE UNAUDITED FINANCIAL STATEMENTS OF WISCONSIN ENERGY CORPORATION FOR THE THREE MONTHS ENDED MARCH 31, 1995 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 1,000 U.S. DOLLARS DEC-31-1995 JAN-01-1995 MAR-31-1995 3-MOS 1 PER-BOOK 2,927,837 608,757 457,815 0 390,236 4,384,645 1,094 636,481 1,143,010 1,780,585 0 30,451 1,137,263 80,274 92,910 101,300 30,395 0 19,569 19,238 1,092,660 4,384,645 471,122 36,629 349,921 386,550 84,572 6,094 90,666 27,831 62,835 301 62,534 38,433 0 178,271 .57 .57 See financial statements and footnotes in accompanying 10-Q.
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