-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Dse2gp2WksG56JnNYev/ygkoQcuYMT0SIRCtoC5JbjHR2sZtIwaX8PMRfhYr2nFJ wH3cYBNLHllk1PoaUbEYtQ== /in/edgar/work/20000710/0000107815-00-000012/0000107815-00-000012.txt : 20000712 0000107815-00-000012.hdr.sgml : 20000712 ACCESSION NUMBER: 0000107815-00-000012 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 20000426 ITEM INFORMATION: FILED AS OF DATE: 20000710 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN ENERGY CORP CENTRAL INDEX KEY: 0000783325 STANDARD INDUSTRIAL CLASSIFICATION: [4931 ] IRS NUMBER: 391391525 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 8-K/A SEC ACT: SEC FILE NUMBER: 001-09057 FILM NUMBER: 670653 BUSINESS ADDRESS: STREET 1: 231 W MICHIGAN ST STREET 2: P O BOX 2949 CITY: MILWAUKEE STATE: WI ZIP: 53201 BUSINESS PHONE: 4142212345 MAIL ADDRESS: STREET 1: 231 WEST MICHIGAN STREET STREET 2: P O BOX 2949 CITY: MILWAUKEE STATE: WI ZIP: 53201 8-K/A 1 0001.txt AMENDMENT NO. 1 TO WEC 8-K DATED 4/26/00 UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D. C. 20549 FORM 8-K/A Amendment No. 1 to Current Report On Form 8-K PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Date of report (Date of earliest event reported): APRIL 26, 2000 * ----------------- Commission Registrant; State of Incorporation IRS Employer File Number Address; and Telephone Number Identification No. ----------- ---------------------------------- ------------------ 001-09057 WISCONSIN ENERGY CORPORATION 39-1391525 (A Wisconsin Corporation) 231 West Michigan Street P.O. Box 2949 Milwaukee, WI 53201 (414) 221-2345 - --------------- * This Amendment is filed pursuant to the provisions of paragraph (a)(4) of Item 7 of Form 8-K. FORM 8-K/A WISCONSIN ENERGY CORPORATION Amendment No. 1 to Current Report on Form 8-K ---------------------------- Wisconsin Energy Corporation hereby amends the following items, financial statements, exhibits or other portions of its Current Report on Form 8-K dated as of April 26, 2000 (the "4/26/00 8-K") as set forth below: Pursuant to the provisions of paragraph (a)(4) of Item 7 of Form 8-K, Item 7 of the April 26, 2000 8-K is hereby amended to file the pro forma financial information required to be filed in connection with the acquisition reported in Item 2 of the April 26, 2000 8-K. In addition, Item 7 is amended to include unaudited interim consolidated financial statements of WICOR, Inc. for the three months ended March 31, 2000 and March 31, 1999. ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS. (a) Financial Statements of Businesses Acquired: As previously reported, Wisconsin Energy Corporation acquired WICOR, Inc. on April 26, 2000. WICOR is a diversified holding company with two principal business groups: energy services and pump manufacturing. The following financial statements of WICOR (Commission File No. 1-7951) are incorporated herein by reference to Item 8 on pages 25 through 45 of WICOR's Annual Report on Form 10-K for the fiscal year ended December 31, 1999 (a copy of which is filed herewith as Exhibit 99.1): 1. Financial Statements. WICOR's consolidated balance sheets and statements of capitalization as of December 31, 1999 and 1998, and the related consolidated statements of earnings, common equity and cash flows for each of the three years in the period ended December 31, 1999, together with the report of independent public accountants dated January 24, 2000. The unaudited financial statements and notes to financial statements of WICOR for the three months ended March 31, 2000 and March 31, 1999 are filed as Exhibit 99.2 to this report and incorporated by reference herein. (b) Pro Forma Financial Information: The unaudited pro forma combined condensed financial information (the "Pro Forma Information"), filed as Exhibit 99.3 to this report and incorporated by reference herein, illustrates the pro forma effect of the acquisition of WICOR, through a merger of a subsidiary of Wisconsin Energy into WICOR, accounted for as a purchase. As reflected in the Pro Forma Information, Wisconsin Energy acquired all outstanding shares of WICOR common stock (except for restricted shares) in exchange for the payment of approximately $1.2 billion in cash. Wisconsin Energy obtained the cash needed to pay the merger consideration through the issuance of commercial paper in the institutional private placement market, and arranged a $1.0 billion 364-day bank back-up facility and a $0.5 billion 3-year bank back-up credit facility to provide credit support for the issuance of Wisconsin Energy's commercial paper. In addition approximately $300 million of WICOR debt remained outstanding. The Unaudited Pro Forma Combined Condensed Income Statements for the fiscal year ended December 31, 1999 and for the three months ended March 31, 2000 have been prepared as if the merger occurred as of January 1, 1999. The Unaudited Pro Forma Combined Condensed Balance Sheet has been prepared as if the merger occurred on March 31, 2000. The Pro Forma Information is based upon the historical consolidated financial statements of Wisconsin Energy and WICOR, combined and adjusted to give effect to the merger and to related transactions (including the related financing) as described in the notes to this information. The purchase accounting adjustments made in connection with development of the Pro Forma Information are preliminary and may be adjusted. Certain amounts in the WICOR financial statements have been reclassified to conform to Wisconsin Energy's presentation. The Unaudited Pro Forma Combined Condensed Income Statements do not reflect any estimated cost savings related to the merger nor the costs to achieve such savings. The Pro Forma Information should be read in conjunction with the historical financial statements and related notes of Wisconsin Energy and WICOR. Management believes that the pro forma adjustments and the underlying assumptions reasonably present the significant pro forma effects of the merger. Upon completion of post-merger restructuring activities, the actual financial position and results of operations of the combined entity may differ, perhaps significantly, from the pro forma amounts reflected herein because of changes in operating results between the dates of the pro forma financial information and the date on which the purchase accounting adjustments are finalized. The Pro Forma Information is not necessarily indicative of actual operating results or financial position had the transactions occurred as of the dates indicated above, nor do they purport to indicate operating results or financial position which may be attained in the future. (c) Exhibits: See Exhibit Index following the Signature page of this report, which is incorporated herein by reference. FORM 8-K/A SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized. WISCONSIN ENERGY CORPORATION (Registrant) By: /s/ Paul Donovan ----------------------------- Paul Donovan, Senior Vice President and Chief Financial Officer Date: July 10, 2000
WISCONSIN ENERGY CORPORATION (Commission File No. 001-09057) EXHIBIT INDEX to CURRENT REPORT ON FORM 8-K Date of Report: April 26, 2000 As amended by Amendment No. 1 thereto on Form 8-K/A ("Amendment No. 1") Exhibit Incorporated Herein Filed Number Description by Reference to Herewith - ------ ----------- --------------- -------- 2.1 Agreement and Plan of Merger, dated as Appendix A to the joint of June 27, 1999, as amended as of proxy statement/prospectus September 9, 1999, by and among dated September 10, 1999, Wisconsin Energy Corporation, WICOR, included in Wisconsin Inc. and CEW Acquisition, Inc. Energy's Registration on Form S-4 filed on September 9, 1999 (File No. 333-86827)(the "Form S-4") 2.2 Amendment to Agreement and Plan of Exhibit 2.2 to the Form S-4 Merger dated as of September 9, 1999 2.3 Second Amendment to Agreement and X (1) Plan of Merger dated as of April 26, 2000 23.1 Consent of Arthur Andersen LLP X (1) 99.1 WICOR, Inc.'s consolidated balance X (1) sheets and statements of capitalization as of December 31, 1999 and 1998, and the related consolidated statements of earnings, common equity and cash flows for each of the three years in the period ended December 31, 1999, together with the report of independent public accountants dated January 24, 2000. 99.2 WICOR, Inc.'s unaudited consolidated X (2) balance sheets as of March 31, 2000 and December 31, 1999, unaudited consolidated statements of operation and cash flows for each of the three month periods ended March 31, 2000 and March 31, 1999 and related unaudited notes to consolidated financial statements. 99.3 Wisconsin Energy Corporation's X (2) unaudited pro forma combined condensed balance sheet as of March 31, 2000, unaudited pro forma combined condensed income statements for the fiscal year ended December 31, 1999 and for the three months ended March 31, 2000, and related notes to unaudited pro forma combined condensed financial information. (1) Filed with original April 26, 2000 (2) Filed with Amendment No. 1
EX-99.2 2 0002.txt WICOR FINANCIAL STATEMENTS - 3 MO ENDED 3/31/00 Exhibit 99.2
WICOR, INC. Consolidated Statements of Operation (Unaudited) (Amounts in Thousands, Except Per Share Data) Three Months Ended March 31 --------------------------- 2000 1999 -------- -------- Operating Revenues: Energy $197,003 $187,182 Manufacturing 142,238 117,059 -------- -------- 339,241 304,241 -------- -------- Operating Costs and Expenses: Cost of gas sold 120,745 107,579 Manufacturing cost of sales 100,374 82,999 Operation and maintenance 57,938 51,975 Depreciation and amortization 9,676 9,092 Taxes, other than income taxes 2,338 2,504 -------- -------- 291,071 254,149 -------- -------- Operating Income 48,170 50,092 -------- -------- Interest Expense (5,139) (4,457) Merger Costs (447) - Other Income, net (414) 770 -------- -------- Income Before Income Taxes 42,170 46,405 Income Tax Provision 16,182 17,539 -------- -------- Net Earnings $25,988 $28,866 ======== ======== Per Share of Common Stock: Basic earnings $0.69 $0.77 Diluted earnings $0.68 $0.77 Cash Dividends paid $0.225 $0.220 Average shares outstanding 37,848 37,413 Average diluted shares outstanding 38,414 37,619 The accompanying notes are an integral part of these statements.
WICOR, INC. Consolidated Balance Sheets March 31, 2000 December 31, 1999 (Unaudited) -------------- ----------------- (Thousands of Dollars) Assets - ------ Current Assets: Cash and cash equivalents $7,738 $12,859 Accounts receivable, less allowance for doubtful accounts of $17,529 and $13,166, respectively 210,049 152,127 Accrued revenues 33,680 50,462 Manufacturing inventories 93,868 89,963 Gas in storage, at weighted average cost 9,985 42,754 Deferred income taxes 19,874 19,902 Prepayments and other 14,361 18,514 ---------- ---------- 389,555 386,581 ---------- ---------- Property, Plant and Equipment (less accumulated depreciation of $574,387 and $565,641, respectively) 459,560 463,068 ---------- ---------- Deferred Charges and Other: Goodwill 96,783 93,928 Regulatory assets 50,724 51,686 Prepaid pension costs 60,904 58,833 Other 35,741 35,827 ---------- ---------- 244,152 240,274 ---------- ---------- $1,093,267 $1,089,923 ========== ========== The accompanying notes are an integral part of these statements.
WICOR, INC. Consolidated Balance Sheets (continued) March 31, 2000 December 31, 1999 (Unaudited) -------------- ----------------- (Thousands of Dollars) Liabilities and Capitalization - ------------------------------ Current Liabilities: Short-term borrowings $63,737 $116,602 Accounts payable 88,172 78,258 Current portion of long-term debt 8,466 11,017 Refundable gas costs 46,447 24,043 Accrued payroll and benefits 17,883 25,799 Accrued taxes 20,824 5,786 Other 21,987 25,288 ---------- ---------- 267,516 286,793 ---------- ---------- Deferred Credits and Other: Postretirement benefit obligation 52,162 53,864 Regulatory liabilities 25,747 27,742 Deferred income taxes 55,931 55,650 Accrued environmental remediation costs 6,358 3,372 Unamortized investment tax credit 5,568 5,909 Other 16,880 17,483 ---------- ---------- 162,646 164,020 ---------- ---------- Capitalization: Long-term debt 213,234 205,444 Common stock 37,897 37,819 Other paid-in capital 226,705 225,638 Retained earnings 198,847 181,376 Accumulated other comprehensive income (10,049) (8,220) Unearned compensation - ESOP and restricted stock (3,529) (2,947) ---------- ---------- 663,105 639,110 ---------- ---------- $1,093,267 $1,089,923 ========== ========== The accompanying notes are an integral part of these statements.
WICOR, INC. Consolidated Statement of Cash Flows (Unaudited) (Thousands of Dollars) Three Months Ended March 31 --------------------------- 2000 1999 ----------- ----------- Operations: Net earnings $25,988 $28,866 Adjustments to reconcile net earnings to net cash flows: Depreciation and amortization 15,493 14,118 Deferred income taxes 277 125 Net pension and other postretirement benefit (income) (3,584) (2,155) Change in: Receivables (40,842) (32,728) Manufacturing inventories (3,333) 1,658 Gas in storage 32,769 25,196 Accounts payable 9,756 526 Refundable gas costs 22,404 31,545 Accrued taxes 16,246 14,004 Other (10,806) (9,013) ------- ------- 64,368 72,142 ------- ------- Investing Activities: Capital expenditures (10,155) (8,162) Acquisitions (4,828) - Other 16 (23) ------- ------- (14,967) (8,185) ------- ------- Financing Activities: Change in short-term borrowings (44,865) (63,830) Reduction in long-term debt (2,285) (2,157) Issuance of common stock 1,145 693 Dividends paid on common stock (8,517) (8,277) ------- ------- (54,522) (73,571) ------- ------- Change in Cash and Cash Equivalents (5,121) (9,614) Cash and Cash Equivalents at Beginning of Period 12,859 13,383 ------- ------- Cash and Cash Equivalents at End of Period $7,738 $3,769 ======= ======= The accompanying notes are an integral part of these statements.
Notes to Consolidated Financial Statements (Unaudited): 1) The Company and its subsidiaries maintain lines of credit worldwide. At March 31, 2000 the Company had borrowings of $63.7 million and availability of $243.4 million under unsecured lines of credit with several banks. A total of $58.2 million of commercial paper, classified as short-term borrowings, was outstanding as of March 31, 2000 at a weighted average interest rate of 6.2%. 2) 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 the Three Months Ended March 31, -------------------- 2000 1999 ---- ---- (Thousands of Dollars) Income taxes paid $2,667 $4,784 Interest paid $5,792 $3,570
3) Total comprehensive income for the three months ended March 31, 2000 and 1999 is as follows:
2000 1999 ---- ---- Net earnings $25,988 $28,866 Other comprehensive income Currency translation adjustments (1,829) (379) ------- ------- Total comprehensive income $24,159 $28,487 ======= =======
4) Business Segment Information The Company is a diversified holding company with two principal business segments: an Energy Group responsible for natural gas distribution and related services, and a Manufacturing Group responsible for the manufacture of pumps and processing equipment used to pump, control, transfer, hold and filter water and other fluids. The Company's reportable segments are managed separately because each business requires different technology and marketing strategies. Most of the businesses were acquired as a unit, and the management at the time of the acquisition was retained. The accounting policies of the reportable segments are the same as those described in Note 1 of Notes to the Consolidated Financial Statements contained in the WICOR, Inc. annual report on Form 10-K for the fiscal year ended December 31, 1999. The Company evaluates the performance of its operating segments based on income from continuing operations. Intersegment sales and transfers are not significant. Information regarding products and services and geographic areas are not presented as they are not included in measures that are reviewed by the Company. Summarized financial information concerning the Company's reportable segments for the three-month's ending March 31, 2000 and 1999 is shown in the following table. The other energy category includes the results of the parent company only and non-regulated energy operations involved in energy and risk management services, automated meter reading and other related services.
Energy ------------------------------------- REGULATED OTHER TOTAL MANUFACTURING CONSOLIDATED --------- ----- ----- ------------- ------------ (Thousands of Dollars) 2000 - ---- Revenues $176,049 $20,954 $197,003 $142,238 $339,241 Depreciation and amortization $10,846 $33 $10,879 $4,614 $15,493 Net earnings (loss) $19,913 $(592) $19,321 $6,667 $25,988 Total assets $651,518 $13,650 $665,168 $428,099 $1,093,267 Capital expenditures $6,748 $122 $6,870 $3,285 $10,155 1999 - ---- Revenues $170,397 $16,785 $187,182 $117,059 $304,241 Depreciation and amortization $10,333 $26 $10,359 $3,759 $14,118 Net earnings $22,970 $255 $23,225 $5,641 $28,866 Total assets $637,354 $15,887 $653,241 $350,638 $1,003,879 Capital expenditures $5,546 $66 $5,612 $2,550 $8,162
EX-99.3 3 0003.txt WEC UNAUDITED PRO FORMA FINANCIAL INFORMATION
Exhibit 99.3 WISCONSIN ENERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT REFLECTING COMPLETION OF THE MERGER WITH WICOR, INC. Twelve Months Ended December 31, 1999 Wisconsin Pro Forma Pro Forma Energy WICOR Adjustments Combined ----------- --------- -------------- ------------ (In Thousands, Except Per Share Amounts) Operating Revenues $2,272,639 $1,010,113 $ - $3,282,752 Operating Expenses Fuel 352,979 - - 352,979 Purchased power 235,101 - - 235,101 Cost of gas sold 174,046 297,222 - 471,268 Cost of goods sold - 357,704 - 357,704 Other operation and maintenance 708,758 204,290 607 (b) 3,290 (a) 916,945 Depreciation and amortization 270,484 37,091 18,322 (c) 6,622 (d) 332,519 Property and revenue tax 74,877 7,852 (3,290) (a) 79,439 ---------- -------- -------- ---------- Operating Income 456,394 105,954 (25,551) 536,797 Other Income and Deductions 14,215 (1,589) - 12,626 Interest Charges and Other (150,473) (16,555) (74,995) (e) (242,023) ---------- -------- -------- ---------- Income Before Income Taxes 320,136 87,810 (100,546) 307,400 Provision (Benefit) for Income Taxes 111,147 33,977 (33,712) (f) 111,412 ---------- -------- -------- ---------- Net Income $208,989 $53,833 ($66,834) $195,988 ========== ======== ======== ========== Earnings Per Share Basic $1.79 $1.67 Diluted $1.79 $1.65 Weighted Average Shares Common shares outstanding 117,019 58 (h) 117,077 Diluted shares outstanding 117,019 1,527 (h) 118,546 See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information.
WISCONSIN ENERGY CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED INCOME STATEMENT REFLECTING COMPLETION OF THE MERGER WITH WICOR, INC. Three Months Ended March 31, 2000 Wisconsin Pro Forma Pro Forma Energy WICOR Adjustments Combined ----------- --------- -------------- ------------ (In Thousands, Except Per Share Amounts) Operating Revenues $627,750 $339,241 $ - $966,991 Operating Expenses Fuel 94,553 - - 94,553 Purchased power 65,779 - - 65,779 Cost of gas sold 69,292 120,745 - 190,037 Cost of goods sold - 100,374 - 100,374 Other operation and maintenance 185,140 57,938 152 (b) 1,130 (a) 244,360 Depreciation and amortization 103,660 9,676 4,581 (c) 1,655 (d) 119,572 Property and revenue tax 20,727 2,338 (1,130) (a) 21,935 -------- -------- -------- --------- Operating Income 88,599 48,170 (6,388) 130,381 Other Income and Deductions 37,392 (861) - 36,531 Interest Charges and Other (43,170) (5,139) (18,749) (e) (67,058) -------- -------- -------- --------- Income Before Income Taxes 82,821 42,170 (25,137) 99,854 Provision (Benefit) for Income Taxes 32,227 16,182 (8,428) (f) 39,981 -------- -------- -------- --------- Net Income $50,594 $25,988 ($16,709) $59,873 ======== ======== ======== ========= Earnings Per Share Basic $0.42 $0.50 Diluted $0.42 $0.50 Weighted Average Shares Common shares outstanding 119,512 58 (h) 119,570 Diluted shares outstanding 119,512 587 (h) 120,099 See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information.
WISCONSIN ENERGY CORPPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET REFLECTING COMPLETION OF THE MERGER WITH WICOR, INC. March 31, 2000 Wisconsin Pro Forma Pro Forma Energy WICOR Adjustments Combined ----------- --------- -------------- ------------ (In Thousands) Assets ------ Property, Plant & Equipment $3,889,712 $459,560 $35,444 (g) $4,384,716 Investments 969,921 - 8,266 (a) 978,187 Current Assets Cash & cash equivalents 24,746 7,738 - 32,484 Accounts receivable-net, including accrued utility revenues 366,165 243,729 - 609,894 Materials, supplies and inventory 196,051 103,853 15,555 (g) 6,748 (a) 322,207 Prepayments and other current assets 99,487 34,235 (5,919) (g) (6,748) (a) 121,055 ---------- ---------- --------- ---------- Total Current Assets 686,449 389,555 9,636 1,085,640 ---------- ---------- --------- ---------- Deferred Charges and Other Assets Goodwill 57,386 96,783 732,889 (g) 887,058 Regulatory assets 204,562 50,724 - 255,286 Accumulated deferred income taxes 199,832 - - 199,832 Other assets, including prepaid pension costs 190,154 96,645 185,988 (g) (8,266) (a) 464,521 ---------- ---------- --------- ---------- Total Deferred Charges and Other Assets 651,934 244,152 910,611 1,806,697 ---------- ---------- --------- ---------- Total Assets $6,198,016 $1,093,267 $963,957 $8,255,240 ========== ========== ========= ========== Capitalization and Liabilities ------------------------------ Capitalization Common stock equity $2,034,985 $449,871 ($411,856) (g) $2,073,000 Preferred stock 30,450 - - 30,450 Wisconsin Energy-obligated redeemable preferred securities of subsidiary trust 200,000 - - 200,000 Long-term debt 2,135,505 213,234 (13,538) (g) 2,335,201 ---------- ---------- --------- ---------- Total Capitalization 4,400,940 663,105 (425,394) 4,638,651 ---------- ---------- --------- ---------- Current Liabilities Short-term debt, including long-term debt due currently 439,624 72,203 1,195,004 (h) 1,706,831 Accounts payable 191,196 88,172 - 279,368 Accrued liabilities and other 200,390 107,141 16,105 (g) 323,636 ---------- ---------- --------- ---------- Total Current Liabilities 831,210 267,516 1,211,109 2,309,835 ---------- ---------- --------- ---------- Deferred Credits and Other Liabilities Accumulated deferred income taxes 624,325 55,931 48,625 (g) 728,881 Regulatory liabilities 123,160 25,747 181,557 (g) 330,464 Other, including postretirement benefit obligation 218,381 80,968 (51,940) (g) 247,409 ---------- ---------- --------- ---------- Total Deferred Credits and Other Liabilities 965,866 162,646 178,242 1,306,754 ---------- ---------- --------- ---------- Total Capitalization and Liabilities $6,198,016 $1,093,267 $963,957 $8,255,240 ========== ========== ========= ========== See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Information.
WISCONSIN ENERGY CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL INFORMATION (In Thousands) This unaudited pro forma financial information gives effect to the acquisition of WICOR, Inc. by Wisconsin Energy Corporation on April 26, 2000, accounted for as a purchase transaction under Accounting Principles Board Opinion No. 16, Business Combinations. The pro forma information does not reflect anticipated recurring savings arising from integrating the operations of the two companies nor any costs to achieve such savings. Wisconsin Energy's Unaudited Pro Forma Combined Condensed Financial Information assumes that the WICOR acquisition occurred (1) as of January 1, 1999, for purposes of the Unaudited Pro Forma Combined Condensed Income Statements and (2) on March 31, 2000 for purposes of the Unaudited Pro Forma Combined Condensed Balance Sheet. a. Reclassification of amounts to conform the companies' historical presentation. b. Based upon revised actuarial information, WICOR's annual pension income will decrease by $0.4 million and annual post retirement benefit expense will increase by an additional $0.2 million (Net increase in expense of $0.6 million per year or $0.2 million per quarter). c. Amortization of goodwill over 40 years ($732.9 million/40 years = $18.3 million per year or $4.6 million per quarter). d. Additional depreciation and amortization resulting from the increased fair value of property, plant, and equipment and intangible assets acquired based upon various estimated useful lives ($6.6 million per year or $1.7 million per quarter). e. Incremental interest expense based upon an assumed rate of 6.1% ($1.2 billion x 6.1% = $72.9 million per year or $18.2 million per quarter). A 1/8 percent change in the interest rate would increase or decrease annual interest expense by approximately $1.5 million. Related debt issue of $2.7 million will be amortized over three years ($2.1 million for the first year and $0.3 million for the remaining two years). Wisconsin Energy initially funded the acquisition of WICOR through issuance of $1.2 billion of commercial paper with a weighted average effective interest rate of 6.1%. Wisconsin Energy has arranged for two new bank back-up credit facilities to provide credit support for the issuance of Wisconsin Energy's commercial paper: a $1.0 billion 364-day bank back-up credit facility and a $500 million three-year bank back-up credit facility. Wisconsin Energy may refinance all or a portion of the $1.2 billion of short- term debt with medium or long-term debt. Any refinancing of the short-term debt issued to acquire WICOR is not included in this pro forma financial information. f. Reduction of income taxes relating to the foregoing adjustments. g. Adjustments to WICOR's assets acquired and liabilities assumed to reflect fair value, purchase accounting adjustments and related tax effects. The preliminary purchase price allocation, including the excess of the purchase price over the fair value of net assets acquired at the date of acquisition, is as follows: Purchase price $1,242,343 Historical net book value of assets acquired 462,646 ---------- Excess of purchase price over net book value of assets acquired 779,697 Allocated to: Inventories (15,555) Property, plant and equipment (35,444) Intangible assets (63,093) Prepaid pension asset (136,360) Postretirement benefit obligation (60,788) Regulatory liabilities 181,557 Deferred tax liabilities 54,544 Long-term debt (13,538) Other current and noncurrent assets and liabilities 41,869 ---------- Remaining excess of cost over fair value of net assets acquired (goodwill) $732,889 ==========
Some of the foregoing purchase price allocations, which are currently being finalized and may be revised at a later date, are based upon preliminary studies and valuations of the fair value of the acquired assets and assumed liabilities. Management does not believe that the final purchase price allocations will produce materially different results than those reflected herein. h. Purchase price was financed with 100% debt. In addition, WICOR's equity- based compensation awards outstanding at the effective time of the merger were converted into 57,745 shares of restricted Wisconsin Energy common stock ($1.2 million), into options for up to 4,571,345 shares of Wisconsin Energy common stock ($35.9 million) with a weighted average exercise price of $13.70 per share, and into deferred stock units payable in 105,520 shares of Wisconsin Energy common stock. The purchase price also included $10.2 million of transaction costs. -----END PRIVACY-ENHANCED MESSAGE-----