1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
Proxy Statement Pursuant to Section 14(a) of
the Securities Exchange Act ofPROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the Registrantregistrant /X/
Filed by a Partyparty other than the Registrant /X/registrant / /
Check the appropriate box:
/ / Preliminary Proxy Statementproxy statement / / Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
/X/ Definitive Proxy Statementproxy statement
/ / Definitive Additional Materialsadditional materials
/ / Soliciting Material Pursuantmaterial pursuant to Section 240.14a-11(c)Rule 14a-11(c) or Section
240.142-12Rule 14a-12
WISCONSIN POWER AND LIGHT COMPANY
- -
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(Name of Registrant as Specified Inin Its Charter)
MERRILL CORPORATION
- -WISCONSIN POWER AND LIGHT COMPANY
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(Name of Person(s) Filing Proxy Statement)Statement, if other than the Registrant)
Payment of Filing Feefiling fee (Check the appropriate box):
/X/ $125 per Exchange Act RulesRule 0-11(c)(1)(ii), 14a-6(i)(1), or 14a-6(i)(2)
or Item 22(a)(2) of Schedule 14A.
/ / $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
/ / Fee computed on table below per Exchange Act Rules 14a-6(i)(4) and
0-11
1)0-11.
(1) Title of each class of securities to which transaction applies:
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2)--------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
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3)--------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:*
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4) Proposed maximum aggregate value of transaction:
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* Set0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined.determined):
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(4) Proposed maximum aggregate value of transaction:
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(5) Total fee paid:
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/ / Fee paid previously with preliminary materials.
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/ / Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the Formform or Scheduleschedule and the date of its filing.
1)(1) Amount Previously Paid:
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2)previously paid:
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(2) Form, Scheduleschedule or Registration Statement No.registration statement no.:
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(3) Filing Party:
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4)party:
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(4) Date Filed:
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[LOGO]2
[Logo]
Wisconsin Power and& Light Company, 222 West Washington Avenue, P.O.P. O. Box 192,
Madison, WI, 53701-0192
TelephonePhone: (608) 252-3311
April 8, 1994March 27, 1995
TO THE OWNERS OF WISCONSIN POWER AND LIGHT COMPANY:
We extend a cordial invitation to you to join us at the 19941995 Annual Meeting
of Shareowners of Wisconsin Power and Light Company (the Company). The meeting
will be held at the Exhibition Hall at the Dane County Coliseum,Expo Center, 1881 Expo
Mall, Madison, Wisconsin, on May 18, 1994,17, 1995, at 10:00 a.m., immediately preceding
the Annual Meeting of Shareowners of WPL Holdings, Inc. To help with directions,
a map showing the location of the meeting site is provided on the last page of
this document. Parking will be available at no cost. If you plan to join us for
the meeting, please indicate the names of the individuals who will be attending
on the enclosed proxy card reservation form.
The enclosed Notice of Annual Meeting and Proxy Statement sets forth the
items to be considered at the meeting. A lunch will be served following the
meeting.
The Company is a subsidiary of WPL Holdings, Inc. (WPLH) and the Company's
preferred stock is the only class of its stock outstanding in the hands of the
public. WPL Holdings, Inc.WPLH owns all of the Company's common stock. The Company and WPL Holdings, Inc.WPLH will
be holding separate shareowner meetings. If you are a shareowner of both WPL HoldingsWPLH
and the Company, you will receive two Notices of Annual Meeting and Proxy
Statements, one for each company. Shareowners of both companies will also
receive two proxy cards, one for each company. If you are a shareowner of both
companies, you will have to return BOTHboth proxy cards to vote all your shares.
PLEASE NOTE THAT THE 19931994 ANNUAL REPORT OF THE COMPANY APPEARS AS APPENDIX
BA TO THIS PROXY STATEMENT.
It is important to your interests, and also is helpful to the directors of
the Company, that all shareowners participate in the affairs of the Company,
regardless of the number of shares owned. Whether or not you plan to attend the
meeting, please sign and date the enclosed proxy card and return it in the
postage paid envelope provided for that purpose. You may, of course, still vote
your shares in person at the meeting even if you have previously returned your
proxy.
Your participation in person or by proxy is very important.
Sincerely,
[GRAPHIC][Sig.]
ERROLL B. DAVIS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICERPresident and Chief Executive Officer
3
WISCONSIN POWER AND LIGHT COMPANY
ANNUAL MEETING OF SHAREOWNERS
DATE: MAY 18, 199417, 1995
TIME: 10:00 a.m.
LOCATION: DANE COUNTY COLISEUM
MADISON, WISCONSINExhibition Hall
Dane County Expo Center
Madison, Wisconsin
(See map printed on the last
page of this document.)
SHAREOWNER INFORMATION NUMBERS
LOCAL CALLS (MADISON AREA) ................ 252-3110.....252-3110
TOLL FREE NUMBER .................... 1-800-356-5343NUMBER..........1-800-356-5343
4
[LOGO]
Wisconsin Power and& Light Company, 222 West Washington Avenue, P.O.P. O. Box 192,
Madison, WI, 53701-0192
TelephonePhone: (608) 252-3311
NOTICE OF ANNUAL MEETING OF SHAREOWNERS
10:00 A.M., MAY 18, 199417, 1995
The Annual Meeting of Shareowners of Wisconsin Power and Light Company (the
Company) will be held at the Exhibition Hall at the Dane County Coliseum,Expo Center,
1881 Expo Mall, Madison, Wisconsin, on May 18, 1994,17, 1995, at 10:00 a.m., local time,
for the following purposes:
(1) To elect a total of sevenfour directors four for terms expiring at the 1997
Annual Meeting of Shareowners, one for a term expiring at the 1996 Annual
Meeting of Shareowners, and two for terms expiring at the 19951998
Annual Meeting of Shareowners.
(2) To appoint Arthur Andersen & Co.LLP as independent auditors for the calendar
year 1994.1995.
(3) To approve proposed amendments of the Company's Restated Articles of
Organization to allow the Company to issue preferred stock with a
variable or floating dividend rate and to effect certain other clarifying
changes.
(4) To consider and act upon any other business that may properly come
before the meeting.
The Board of Directors of the Company presently knows of no other business
to come before the meeting.
Only the sole common shareowner, WPL Holdings, Inc., and preferred
shareowners of record on the books of the Company at the close of business on
March 22, 1994,21, 1995, are entitled to vote at the meeting. All such shareowners are
requested to be present at the meeting in person or by proxy.
PLEASE SIGN AND RETURN YOUR PROXY IMMEDIATELY. YOUR PROXY COVERS ALL OF
YOUR SHARES OF THE VARIOUS SERIES OF PREFERRED STOCK OF THE COMPANY. IF YOU
ATTEND THE MEETING, YOU MAY WITHDRAW YOUR PROXY AT THE REGISTRATION DESK AND
VOTE IN PERSON. ALL SHAREOWNERS ARE URGED TO RETURN THEIR PROXY PROMPTLY.
THE 19931994 ANNUAL REPORT OF THE COMPANY APPEARS AS APPENDIX BA TO THIS PROXY
STATEMENT. THE PROXY STATEMENT AND ANNUAL REPORT HAVE BEEN COMBINED INTO A
SINGLE DOCUMENT TO IMPROVE THE EFFECTIVENESS OF OUR FINANCIAL COMMUNICATION AND
TO REDUCE COST, ALTHOUGH THE ANNUAL REPORT DOES NOT CONSTITUTE A PART OF THE
PROXY STATEMENT.
For information purposes only, you will receive under separate cover a copy
of the WPL Holdings, Inc. 19931994 Annual Report to shareowners. That document is
sent to you in order that shareowners of the Company may keep up-to-date on
activities of WPL Holdings, Inc. However, the WPL Holdings, Inc. Annual Report
is not intended to be used in conjunction with the solicitation of proxies with
respect to the Company.
By Order of the Board of Directors,
[GRAPHIC 1][Sig.]
EDWARD M. GLEASON
CORPORATE SECRETARY
April 8, 1994Corporate Secretary
March 27, 1995
[LOGO]5
[Logo]
Wisconsin Power and& Light Company, 222 West Washington Avenue, P.O.P. O. Box 192,
Madison, WI, 53701-0192
TelephonePhone: (608) 252-3311
APRIL 8, 1994MARCH 27, 1995
PROXY STATEMENT RELATING TO
19941995 ANNUAL MEETING OF SHAREOWNERS
The purposes of the meeting are set forth in the accompanying notice. The
enclosed proxy relating to the meeting is solicited on behalf of the Board of
Directors of the Company and the cost of such solicitation will be borne by the
Company. Following the original solicitation of proxies by mail, beginning on or
about April 8, 1994,March 27, 1995, certain of the officers and regular employees of the
Company may solicit proxies by telephone, telegraph or in person, but without
extra compensation. The Company has retained Morrow & Co., Inc. to assist in the
solicitation of proxies for an estimated fee of $12,500 plus out-of-pocket
expenses. The Company will pay to banks, brokers, nominees, and other
fiduciaries their reasonable charges and expenses incurred in forwarding the
proxy material to their principals.
The Company is a subsidiary of WPL Holdings, Inc. (WPLH), which owns all of
the Company's outstanding common stock.
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH SHAREOWNER, WHO IS ENTITLED
TO VOTE AT THE MEETING AND WHO MAKES A WRITTEN REQUEST, A COPY OF THE COMPANY'S
ANNUAL REPORT ON FORM 10-K (NOT INCLUDING EXHIBITS THERETO), AS FILED PURSUANT
TO THE SECURITIES EXCHANGE ACT OF 1934. WRITTEN REQUESTS FOR THE FORM 10-K
SHOULD BE MAILED TO THE CORPORATE SECRETARY AT THE ADDRESS STATED ABOVE.
REORGANIZATION OF BOARD OF DIRECTORS
In February 1994,The Company will furnish without charge to each shareowner, who is entitled
to vote at the Board of Directorsmeeting and who makes a written request, a copy of the Company's
parent, WPL
Holdings, Inc. (WPLH)Annual Report on Form 10-K (not including exhibits thereto), determined that it was desirable to have common board
membership for WPLH and the Company. Consequently, the Board of Directors of the
Company created three new positions on the Board of Directors of the Company and
appointed those members of the WPLH Board of Directors who were not already
members of the Board of the Company to fill the new vacancies. The newly
appointed members of the Board of the Company were appointedas filed pursuant
to the same class
as held onSecurities Exchange Act of 1934. Written requests for the Board of WPLH as it relatesForm 10-K
should be mailed to the duration of their term of
office. Similar changes were made inCorporate Secretary at the composition of the Board of Directors
of WPLH so that after the reorganization the membership of the Board of the
Company and the Board of WPLH were identical. These changes were made to
facilitate a more strategically coordinated approach in the management of both
companies.
address stated above.
PROPOSAL # 1:
ELECTION OF DIRECTORS
SevenFour directors are to be elected at the meeting. Les Aspin, Erroll B.
Davis, Jr., Milton E. Neshek, and Carol T. Toussaint are nominees to hold office
for terms expiring at the 1997 Annual Meeting of Shareowners of the Company or
until successors have been duly elected and qualified. Rockne G. Flowers is a
nominee to hold office for a term expiring at the 1996 Annual Meeting of
Shareowners of the Company or until a successor has been duly elected and
qualified.L. David Carley, Donald R.
Haldeman, Arnold M. Nemirow, and Judith D. Pyle are nominees to hold office for
terms expiring at the 19951998 Annual Meeting of Shareowners of the Company or until
successors have been duly elected and qualified.
Directors will be elected by a plurality of the votes cast at the meeting
(assuming a quorum is present), with all shares of Company common stock and
preferred stock voting together as one class. Consequently, any shares not voted
at the meeting, whether due to abstentions, broker nonvotes or otherwise, will
have no impact on the election of directors. A vote shown as withheld on a
returned proxy card will be treated as an abstention. WPLH, which owns all of
the outstanding shares of the Company's common stock, intends to vote all of its
shares "FOR" the Board nominees, thereby assuring the election of such nominees.
The proxies solicited may also be voted for a substitute nominee or nominees in
the event that any of the nominees shall be unable to serve or for good reason
will not serve, a contingency not now anticipated.
BRIEF BIOGRAPHIES OF DIRECTOR NOMINEES AND CONTINUING DIRECTORS FOLLOW.
THESE BIOGRAPHIES INCLUDE THEIR AGE (AS OF MARCHBrief biographies of director nominees and continuing directors follow.
These biographies include their age (as of March 15, 1994)1995), AN ACCOUNT OF THEIR
BUSINESS EXPERIENCE, AND THE NAMES OF PUBLICLY-HELD CORPORATIONS OF WHICH THEY
ARE ALSO DIRECTORS, AS WELL AS OTHER INFORMATION RELATING TO THEIR ACTIVITIES.
EXCEPT AS OTHERWISE INDICATED, EACH NOMINEE AND CONTINUING DIRECTOR HAS BEEN
ENGAGED IN HIS OR HER PRESENT PRINCIPAL OCCUPATION FOR AT LEAST THE PAST FIVE
YEARS.
NOMINEES
[PHOTO 1]
LES ASPINan account of their
business experience, and the names of publicly-held and certain other
corporations of which they are also directors, as well as other information
relating to their activities. Except as otherwise indicated, each nominee and
continuing director has been engaged in his or her present principal occupation
for at least the past five years.
6
Nominees
L. DAVID CARLEY
----------------------
Principal Occupation: Consultant to institutions and
associations in higher education and health delivery;
financial advisor to small businesses.
Age: 5566
(Photo)
Served as director from: 1975 to 1977 and since 1983
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Mr. Carley is a trustee of the Kennedy Presidential Library,
and is a former trustee of Kalamazoo College. He is a past member of the Board
of Regents of the University of Wisconsin System, is a past President of the
National Association of Public Television Stations, and is a past President of
the Medical College of Wisconsin. Mr. Carley has been a member of the Board of
WPLH since February 1994.
DONALD R. HALDEMAN
----------------------
Principal Occupation: Executive Vice President and Chief
Executive Officer, Rural Insurance Companies (a mutual
group), Madison, Wisconsin.
Age: 58
(Photo)
Served as director since: July 1985
Annual Meeting at which nominated term of office will
expire: 1998
----------------------
Other Information: Mr. Haldeman is a director of Competitive Wisconsin, Inc.,
and a member of the Board and Chairman of the Natural Resources Foundation of
Wisconsin, Inc. He has served as a member of the Board of WPLH since February
1994, and is also a member of the Board of Visitors for the University of
Wisconsin-Madison School of Veterinary Medicine.
2
7
ARNOLD M. NEMIROW
----------------------
Principal Occupation: President and Chief Executive
Officer, Bowater, Inc. (a pulp and paper
manufacturer), Greenville, South Carolina.
Age: 51
(Photo)
Served as director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1997
OTHER INFORMATION:1998
----------------------
Other Information: Mr. AspinNemirow served as Secretary of Defense under President
Clinton from January 1993 to February 1994. Prior to becoming Secretary of
Defense, Mr. Aspin served as Chairman of the House Armed Services Committee from
1985 to 1993. Mr. Aspin was a member of the U. S. House of Representatives from
1970 to 1993. Mr. Aspin is also founder of the Wisconsin Procurement Institute,
a not-for-profit organization which assists small businesses in developing
business relationships with the Federal government. Mr. Aspin has been a
director of WPLH since February 1994.
2
[PHOTO 2]
ERROLL B. DAVIS,
JR.
Principal occupation: President and Chief Executive
Officer of the Company; President and Chief Executive
Officer of WPL Holdings, Inc.; Chairman of the Board of
Heartland Development Corporation.
Age: 49
Served as director since: April 1984
Annual Meeting at which nominated term of office will
expire: 1997
OTHER INFORMATION: Mr. Davis was elected President of the Company in July 1987,
and was elected to his current position with the Company in August 1988. Mr.
Davis joined the Company in August 1978. Mr. Davis was elected President of WPLH
in January 1990, and was elected President and Chief Executive Officer of WPLH
effective July 1, 1990. Mr. Davis was elected Chairman of the Board of Heartland
Development Corporation, a subsidiary of WPLH, effective July 1, 1990. Mr. Davis
is a member of the Board of Regents of the University of Wisconsin System and a
member of the Carnegie Mellon University Board of Trustees. He is a director of
the American Gas Association; Amoco Oil Company; Competitive Wisconsin, Inc.;
Sentry Insurance Company (a mutual company); and the Wisconsin Utilities
Association. Mr. Davis is also a director and Chairman of the Wisconsin
Association of Manufacturers and Commerce.
[PHOTO 3]
ROCKNE G. FLOWERS
Principal occupation: President and Director of Nelson
Industries, Inc. (a muffler, filter, industrial
silencer, and active sound and vibration control
technology and manufacturing firm), Stoughton,
Wisconsin.
Age: 62
Served as director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1996
OTHER INFORMATION: Mr. Flowers has served as a director of WPLH since April
1981. He is also a director of RMT, Inc.; Nelson Industries, Inc.; Digisonix,
Inc.; American Family Mutual Insurance Company; Janesville Sand and Gravel
Company; M&I Madison Bank; Meriter Health Services, Inc.; Meriter Hospital; and
the Wisconsin History Foundation. He is also a member of the University of
Wisconsin-Madison School of Business Board of Visitors, and the Wisconsin
Judicial Commission.
3
[PHOTO 4]
ARNOLD M. NEMIROW
Principal occupation: President, Chief Executive Officer and
Director of Wausau Paper Mills Company, (aa pulp and paper manufacturer), Wausau, Wisconsin.
Age: 50
Served as director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1995
OTHER INFORMATION:manufacturer, from 1990
until joining Bowater, Inc. in July 1994. Mr. Nemirow has served as a director
of WPLH since February 1991. He is also a director of Community Health Care, Inc. (Wausau Hospital);
Competitive Wisconsin, Inc.; M & I First American National Bank, Wausau;
Leadership Wausau; Leigh Yawkey Woodson Art Museum; Wisconsin Association of
Manufacturers and Commerce (Vice Chair); Wisconsin Paper Council Executive
Committee; and the Wausau YMCA Foundation. He is also a member of the New York Bar.
[PHOTO 5]
MILTON E. NESHEK
Principal occupation: President, Chief Executive Officer
and Director of the law firm of Godfrey, Neshek, Worth,
& Leibsle, S.C., Elkhorn, Wisconsin, and Director,
General Counsel, Assistant Secretary and Manager, New
Market Development, Kikkoman Foods, Inc. (a food
products manufacturer), Walworth, Wisconsin.
Age: 63
Served as director since: November 1984
Annual Meeting at which nominated term of office will
expire: 1997
OTHER INFORMATION: Mr. Neshek has served as a director of WPLH since December
1986. He is also a director of Heartland Properties, Inc.; Capital Square
Financial Corporation; Friends of Milwaukee Public Museum; Midwest U.S.-Japan
Association; Regional Transportation Authority (of southeast Wisconsin); the
Wisconsin Association of Manufacturers and Commerce; and Wisconsin-Chiba, Inc.
He is a Fellow in the American College of Probate Counsel. Mr. Neshek is active
in the Walworth County Bar Association, the State Bar of Wisconsin, and the
American Judicature Society.
4
[PHOTO 6]
JUDITH D. PYLE
----------------------
Principal Occupation: Vice Chair and Senior Vice
President of Corporate Marketing of Rayovac
Corporation (a battery and lighting products
manufacturer), Madison, Wisconsin.
(Photo)
Age: 5051
Served as a director since: February 1994
Annual Meeting at which nominated term of office will
expire: 1995
OTHER INFORMATION:1998
----------------------
Other Information: Ms. Pyle has served as a director of WPLH since May 1992. She
is also a director of Rayovac Corporation, Firstar Corporation, Oshkosh B'Gosh,
and H. C. Prange Company. She is a member of the Board of Visitors at the
University of Wisconsin School of Business and the School of Family Resources
and Consumer Sciences. In addition, Ms. Pyle is a member of the Board of
Directors of the United Way Foundation. SheFoundation, Greater Madison Chamber of Commerce,
Wisconsin Taxpayers Alliance, and is a former membertrustee of the Board
of Directors of the Madison Civic Center Foundation, the United Way of Dane
County, and the Wisconsin Special Olympics.
[PHOTO 7]
CAROL T. TOUSSAINT
Principal occupation: Consultant
Age: 64
Served as director since: August 1976
Annual Meeting at which nominated term of office will
expire: 1997
OTHER INFORMATION: Mrs. Toussaint is an independent consultant on board
organization, fund development and public relations, working primarily with
nonprofit organizations. She is the owner of Vantage Point, a lecture program
business, and an Associate of Kolbe Concepts, Inc., a management consulting
firm. She is an active member and past chair of the Utility Women's Conference
(a national organization open to women serving as directors or officers of
investor-owned electric, gas, water, and telephone companies). She is immediate
past president of the Rotary Club of Madison, and a director of the Evjue
Foundation; Madison Civic Center Foundation; Madison Community Foundation;
Wisconsin History Foundation; and the Wisconsin Taxpayers Alliance. At the
University of Wisconsin-Madison, she serves as a director of the University
Research Park, a member of the Board of Visitors of the School of Business, a
member of the Alumni Association Cabinet 99, and on the Council on Women's
Giving of the Bascom Hill Society of the University Foundation. Mrs. Toussaint
has been a director of WPLH since February 1994.White House Endowment
Fund.
THE BOARD OF DIRECTORS RECOMMENDS THE FOREGOING NOMINEES FOR ELECTION AS
DIRECTORS AND URGES EACH SHAREOWNER TO VOTE "FOR" ALL NOMINEES. SHARES OF STOCK
REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE VOTED "FOR" ALL NOMINEES.
53
CONTINUING DIRECTORS
[PHOTO 8]
L. DAVID CARLEY8
Continuing Directors
LES ASPIN
----------------------
Principal occupation: Consultant to institutionsOccupation: Chairman, President's Foreign
Intelligence Advisory
Board, Washington, DC, and associations in higher education and health delivery;
financial advisor to small businesses.Distinguished Professor for
International Policy,
Marquette University, Milwaukee, Wisconsin.
(Photo)
Age: 65
Served as director from: 1975 to 197756
Served as director since: 1983February 1994
Annual Meeting at which current term of office will
expire: 1995
OTHER INFORMATION:1997
----------------------
Other Information: Mr. Carley is a trusteeAspin has served as Chairman of the Kennedy Presidential Library,President's Foreign
Intelligence Advisory Board, Washington, DC, since May 1994 and isas Distinguished
Professor for International Policy at Marquette University, Milwaukee, Wisconsin
since May 1994. Mr. Aspin served as Secretary of Defense under President Clinton
from January 1993 to February 1994. Prior to becoming Secretary of Defense, Mr.
Aspin was a former trustee of Kalamazoo College. He is a past member of the BoardU. S. House of RegentsRepresentatives from 1970 to 1993, and
served as Chairman of the University of Wisconsin System,House Armed Services Committee from 1985 to 1993. Mr.
Aspin is a past Presidentalso founder of the National AssociationWisconsin Procurement Institute, a not-for-profit
organization which assists small businesses in developing business relationships
with the Federal Government. Mr. Aspin has been a director of Public Television Stations, and is a past President of
the Medical College of Wisconsin.
[PHOTO 9]
DONALD R. HALDEMANWPLH since
February 1994.
ERROLL B. DAVIS, JR.
----------------------
Principal occupation: Executive ViceOccupation: President and Chief Executive
Officer Rural Insurance Companies (a mutual
group), Madison, Wisconsin.of the Company;
President and Chief Executive Officer of WPL Holdings,
Inc.; Chairman of
the Board of Heartland Development Corporation.
(Photo)
Age: 5750
Served as director since: July 1985April 1984
Annual Meeting at which current term of office will
expire: 1995
OTHER INFORMATION:1997
----------------------
Other Information: Mr. HaldemanDavis was elected President of the Company in July 1987,
and was elected to his current position with the Company in August 1988. Mr.
Davis joined the Company in August 1978. Mr. Davis was elected President of WPLH
in January 1990, and was elected President and Chief Executive Officer of WPLH
effective July 1, 1990, and has served on the Board of Directors of WPLH since
May 1982. Mr. Davis was elected Chairman of the Board of Heartland Development
Corporation, a subsidiary of WPLH, effective July 1, 1990. He is a director of
the American Gas Association; Amoco Oil Company; Competitive Wisconsin, Inc.,;
Electric Power Research Institute; PPG Industries, Inc.; Sentry Insurance
Company; and the Wisconsin Utilities Association. Mr. Davis is also a member of the Boarddirector
and Chairman of the Natural Resources FoundationWisconsin Association of Manufacturers and Commerce.
4
9
ROCKNE G. FLOWERS
----------------------
Principal Occupation: President and Director of Nelson
Industries, Inc. (a muffler, filter, industrial
silencer, and active sound and vibration control
technology and manufacturing firm), Stoughton,
Wisconsin.
(Photo)
Age: 63
Served as director since: February 1994
Annual Meeting at which current term of office will
expire: 1996
----------------------
Other Information: Mr. Flowers has served as a director of WPLH since April
1981. He is also a director of RMT, Inc., a subsidiary of Heartland Development
Corporation; Digisonix, Inc.; American Family Mutual Insurance Company;
Janesville Sand and Gravel Company; M&I Madison Bank; Meriter Health Services,
Inc.; Meriter Hospital; and the Wisconsin Inc.History Foundation. He is also a
member of the Board of Visitors for the University of Wisconsin-Madison School of Veterinary Medicine.
6
[PHOTO 10]Business Board of
Visitors.
KATHARINE C. LYALL
----------------------
Principal occupation:Occupation: President, University of Wisconsin
System, Madison, Wisconsin.
Age: 5253
(Photo)
Served as director since: October 1986
Annual Meeting at which current term of office will
expire: 1996
OTHER INFORMATION:----------------------
Other Information: Ms. Lyall has served as President since April 1992 and prior
thereto served as Executive Vice President of the University of Wisconsin
System. Ms. Lyall has been a director of WPLH since February 1994. Ms. Lyall
also serves on the Board of Directors of the Kemper National Insurance Companies
and the Carnegie Foundation for the Advancement of Teaching. She is a member of
a variety of professional and community organizations, including the American
Economic Association; the Association of American Universities (currently
serving on the Executive Committee); the Wisconsin Academy of Sciences, Arts and
Letters; the American Red Cross (Dane County); Competitive Wisconsin, Inc.; and
Forward Wisconsin. In addition to her administrative position, she is a
Professor of Economics at the University of Wisconsin-Madison.
[PHOTO 11]5
10
MILTON E. NESHEK
----------------------
Principal Occupation: President, Chief Executive Officer
and Director of the law firm of Godfrey, Neshek,
Worth, & Leibsle, S.C., Elkhorn, Wisconsin, and
General Counsel, Assistant Secretary and Manager, New
Market Development, Kikkoman Foods, Inc. (a food
products manufacturer), Walworth, Wisconsin.
(Photo)
Age: 64
Served as director since: November 1984
----------------------
Annual Meeting at which current term of office will
expire: 1997
Other Information: Mr. Neshek has served as a director of WPLH since December
1986. He is also a director of Heartland Properties, Inc. and Capital Square
Financial Corporation, both of which are subsidiaries of Heartland Development
Corporation; Kikkoman Foods, Inc.; Midwest U.S.-Japan Association; Regional
Transportation Authority (of southeast Wisconsin); and Wisconsin-Chiba, Inc. He
is a Fellow in the American College of Probate Counsel. Mr. Neshek is active in
the Walworth County Bar Association, the State Bar of Wisconsin, and the
American Judicature Society.
HENRY C. PRANGE
----------------------
Principal occupation:Occupation: Director and Retired Chairman of
the Board, H. C. Prange Company (retail stores),
Green Bay, Wisconsin.
Age: 6667
(Photo)
Served as director since: December 1965
Annual Meeting at which current term of office will
expire: 1996
OTHER INFORMATION:----------------------
Other Information: Mr. Prange has served as a director of WPLH since December
1986. He is also a director of H. C. Prange Company, and is a past director of
Frederick Atkins, Inc.
[PHOTO 12]
HENRY F. SCHEIGCompany.
6
11
CAROL T. TOUSSAINT
----------------------
Principal occupation: Chairman of the Board, Aid
Association for Lutherans (a fraternal benefit
society), Appleton, Wisconsin.Occupation: Consultant
Age: 6965
Served as director since: July 1980August 1976
(Photo)
Annual Meeting at which current term of office will
expire: 1996
OTHER INFORMATION: Mr. Scheig is1997
----------------------
Other Information: Mrs. Toussaint has served as a director of Aid Association for LutheransWPLH since
February 1994. Mrs. Toussaint is an independent consultant on board
organization, fund development and public relations, working primarily with
nonprofit organizations. She is the owner of Vantage Point, a lecture program
business, and an Associate of Hayes Briscoe, a fund management consulting firm.
She is an active member and past chair of the Utility Women's Conference (a
national organization open to women serving as directors or officers of
investor-owned electric, gas, water, and telephone companies). She is a past
president of the Rotary Club of Madison, and a Trustee of AAL Mutual Funds. Mr. Scheig is past Presidentdirector of the Bay LakesEvjue Foundation;
Madison Civic Center Foundation; Madison Community Foundation; and Wisconsin
History Foundation. At the University of Wisconsin-Madison, she serves as a
director of the University Research Park, a member of the Board of Visitors of
the School of Business, a member of the Alumni Association Cabinet 99, and on
the Council Boy Scoutson Women's Giving of America.the Bascom Hill Society of the University
Foundation.
PROPOSAL # 2:
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company recommends the
reappointment of Arthur Andersen LLP, independent public accountants, as
auditors to examine the financial statements of the Company for 1995. Arthur
Andersen LLP served as auditors for the Company in 1994. In tabulating the votes
for the reappointment of Arthur Andersen LLP, an abstention has the same effect
as a vote against. Beneficially owned shares not voted (broker nonvotes) have no
effect on vote tabulations. WPLH intends to vote all of its shares of common
stock "FOR" the appointment of Arthur Andersen LLP as the Company's independent
auditors for 1995, thereby assuring the appointment of Arthur Andersen LLP.
A representative of Arthur Andersen LLP will be present at the meeting and
will be available to make a statement or to respond to questions, as
appropriate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REAPPOINTMENT OF ARTHUR
ANDERSEN LLP. SHARES OF STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED "FOR" SUCH REAPPOINTMENT.
7
12
MEETINGS AND COMMITTEES OF THE BOARD
During 1993,1994, the Board of Directors had standing Audit, Compensation and
Personnel, and Nominating Committees.
AUDIT COMMITTEE
During 1993,Until February 1994, the Audit Committee consisted of all non-management
members of the Board and was chaired by K. C. Lyall. The committee held two meetings in
1993. Beginning in February 1994,
the committee was reconstituted to consist of L. Aspin, L. D. Carley, R. G.
Flowers, D. R. Haldeman, H. F. Scheig, and K. C. Lyall (Chair). H. F. Scheig
will retire as a director effective on the date of the 1995 Annual Meeting of
Shareowners. The committee held two meetings in 1994. The committee recommends
to the shareowners the independent auditors to be appointed; reviews the reports
and comments of the independent auditors; reviews the activities and reports of
the Company's internal audit staff; and, in response to the reports and comments
of both the independent auditors and internal auditors, recommends to the Board
any action which the Audit Committee considers appropriate.
COMPENSATION AND PERSONNEL COMMITTEE
During 1993,Until February 1994, the Compensation and Personnel Committee consisted of
all directors who arewere not and havehad never been officers, employees, or legal
counsel of the Company, and was chaired by C.T.C. T. Toussaint. The committee held five
meetings in 1993. Beginning in
February 1994, the committee was reconstituted to consist of A.M.A. M. Nemirow, M.E.M.
E. Neshek (Chair), H.C.H. C. Prange, J.D.J. D. Pyle, and C.T.C. T. Toussaint. The committee
held six meetings in 1994. The committee sets executive compensation policy;
reviews the performance of, and approves salaries for, officers and certain
other management personnel; reviews and recommends to the Board new or changed
employee benefit plans; reviews major provisions of negotiated employment
contracts, if any; and reviews human resource development programs.
NOMINATING COMMITTEE
During 1993,Until February 1994, the Nominating Committee consisted of E.B.E. B. Davis, Jr.
(Chair), D.E.D. E. Haldeman, and C.T.C. T. Toussaint. The committee held one meeting in 1993. Beginning in February 1994, the
committee was reconstituted to consist of R.G.L. Aspin, R. G. Flowers, K.C.K. C. Lyall,
A.M.A. M. Nemirow (Chair), H.C.H. C. Prange, and J.D.J. D. Pyle. The committee held one
meeting in 1994. The committee's responsibilities include making recommendations
to the Board of Directors for nominees for election to the Board. In making
recommendations of nominees for election to the Board, the Nominating Committee
will consider nominees recommended by shareowners. Any shareowner wishing to
make a recommendation should write the Chief Executive Officer of the Company,
who will forward all recommendations to the Nominating Committee.
The Board of Directors held eleven meetings during 1993. No director1994. The following
directors attended fewer than 8575% percent of the aggregate number of meetings of
the Board and committees of the Board on which such director served.served: L. Aspin,
J. D. Pyle, and H. F. Scheig.
COMPENSATION OF DIRECTORS
No fees are paid to directors who are officers of the Company (presently,
Mr. Davis). Non-employee directors, whoeach of whom served only on the BoardBoards of the
Company, WPLH and Heartland Development Corporation, received an annual fee of
$24,000. Non-employee directors who served$32,800 for service on the
Boards of both the Company and WPLH received an annual fee of $32,800.all three boards. Travel expenses are paid for
8
13
each meeting day attended. All non-employee directors also received a 25 percent
Company matching contribution in WPLH common stock for limited optional cash
purchases, up to $10,000, of WPLH common stock through the WPLH Dividend
Reinvestment and Stock Purchase Plan. Matching contributions of $2,500 each for
calendar year 19931994 were as follows:made for the following directors: L. DavidD. Carley, $3,751; DonaldD. R.
Haldeman, $3,751;
8
KatharineK. C. Lyall, $3,751; HenryH. F. Scheig, $3,751; Caroland C. T. Toussaint, $2,500;
and James R. Underkofler, $394.Toussaint. Mr. UnderkoflerScheig will retire
as a director effective on the date of the 19941995 Annual Meeting of Shareowners.
DIRECTOR'S CHARITABLE AWARD PROGRAM. In 1993, the Company established the
Director's Charitable Award Program.Program -- The purpose of the Program is to
recognize the interest of the Company and its directors in supporting worthy
institutions, and to enhance the director benefit package so that the Company is
able to continue to attract and retain directors of the highest caliber. Under
the Program, when a director dies, the Company will donate a total of $500,000
to a qualifying charitable organization, or divide such amount between up to
four qualifying organizations, selected by the individual director. The
individual directors derive no financial benefit from the Program. All
deductions for charitable contributions are taken by the Company, and the
donations are funded by the Company through life insurance policies on the
directors. Over the life of the Program, all costs of donations and premiums on
the life insurance policies, including a return of the Company's cost of funds,
will be recovered through the proceeds from life insurance on the directors. The
program, over its life, will not result in any material cost to the Company.
DIRECTOR'S LIFE INSURANCE PROGRAM.Director's Life Insurance Program -- The Company maintains a split-dollar
Director's Life Insurance Program for non-employee directors which provides a
maximum death benefit of $500,000 to each eligible director. Under the
split-dollar arrangement, directors are provided a death benefit only and do not
have any interest in the cash value of the policies. The Life Insurance Program
is structured to pay a portion of the total death benefit to the Company to
reimburse the Company for all costs of the Life Insurance Program, including a
return on its funds. The Life Insurance Program, over its life, will not result
in any material cost to the Company.
9
14
OWNERSHIP OF VOTING SECURITIES
The Company has two classes of voting securities outstanding, common stock
and preferred stock. WPLH owns 100 percent of the outstanding common stock of
the Company. As of January 31, 1994,1995, no shareowner beneficially owned more than
five percent of any series of the Company's preferred stock. Listed in the
following table are the shares of WPLH common stock owned as of January 31,
1994,1995, by the executive officers listed in the Summary Compensation Table and all
of the directors of the Company, as well as the shares owned by directors and
officers as a group. No officers or directors in this table own shares of the
Company's preferred stock.
SHARES
BENEFICIALLY
NAME OF BENEFICIAL OWNER OWNED(1)
- - --------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- ------------
Executives(2)
William D. Harvey................................................................................. 4,458(3)
James E. Johnson.................................................................................. 1,063
Edward F. Killeen................................................................................. 7,737(3)Harvey.......................................................... 6,241(3)
Eliot G. Protsch.................................................................................. 3,419(3)Protsch........................................................... 7,037(3)
A. J. (Nino) Amato......................................................... 1,344(3)
Norman E. Boys............................................................. 3,715
Director Nominees
L. David Carley............................................................ 2,909
Donald R. Haldeman......................................................... 2,807
Arnold M. Nemirow.......................................................... 5,903
Judith D. Pyle............................................................. 3,789
Continuing Directors
Les Aspin......................................................................................... 426(4)Aspin.................................................................. 898
Erroll B. Davis, Jr............................................................................... 6,584(3)Jr........................................................ 8,153(3)(4)
Rockne G. Flowers................................................................................. 5,901
Arnold M. Nemirow................................................................................. 4,782Flowers.......................................................... 6,758
Katharine C. Lyall......................................................... 3,545
Milton E. Neshek.................................................................................. 7,770
Judith D. Pyle.................................................................................... 2,419Neshek........................................................... 9,292
Henry C. Prange............................................................ 7,801(3)
Carol T. Toussaint................................................................................ 6,680
Continuing Directors
L. David Carley................................................................................... 2,339
Donald R. Haldeman................................................................................ 2,205
Katharine C. Lyall................................................................................ 2,524
Henry C. Prange................................................................................... 6,293(3)Toussaint......................................................... 7,741
Retiring Director
Henry F. Scheig................................................................................... 3,192
Retiring Director
James R. Underkofler.............................................................................. 19,708(5)(6)Scheig............................................................ 3,862(5)
All OfficersExecutives and Directors as a Group
(3230 people, including those listed above)......................................................... 113,458
- - ---------
(1) Total shares of WPLH common stock outstanding as of January 31, 1994 were
30,441,027. All individual executives and directors owned beneficially
less than one percent of the total outstanding shares. All executives and
directors as a group own beneficially less than one percent of total
outstanding shares.
(2) Stock ownership for Mr. Davis is shown with director nominees.
(3) Included in the beneficially owned shares shown are the following number
of shares over which the specified individuals have shared voting and
investment power: Mr. Harvey--1,365; Mr. Protsch--271; Mr. Davis--3,882;
Mr. Killeen--4,046; and Mr. Prange--248.above.................................... 99,514
10
(4) Mr. Aspin owned no shares of WPLH common stock as of January 31, 1994;
however, Mr. Aspin was a shareowner of WPLH when he was appointed to the
Board of Directors of the Company in February 1994. As of March 25, 1994,
Mr. Aspin owned 426 shares of WPLH common stock.
(5) Mr. Underkofler owns 10 shares of Company preferred stock, which
represents less than 1 percent of the class of stock owned. Mr.
Underkofler is the only executive or director who owns preferred stock.
(6) Mr. Underkofler will retire as a director effective on the date of the
1994------------
(1) Total shares of WPLH common stock outstanding as of January 31, 1995 were
30,773,588. All individual executives and directors owned beneficially less
than one percent of the total outstanding shares. All executives and
directors as a group owned beneficially less than one percent of the total
outstanding shares.
(2) Stock ownership of Mr. Davis is shown with continuing directors.
(3) Included in the beneficially owned shares shown are the following indirect
ownership interests with shared voting and investment powers: Mr. Harvey --
1,459; Mr. Protsch -- 333; Mr. Amato -- 822; Mr. Davis -- 4,236; and Mr.
Prange -- 248.
(4) Mr. Davis has been awarded 1.67 shares of restricted Heartland Development
Corporation common stock subject to a Restricted Stock Agreement with
Heartland Development Corporation and WPLH.
(5) Mr. Scheig will retire effective on the date of the 1995 Annual Meeting of
Shareowners.
10
15
COMPENSATION OF EXECUTIVE OFFICERS
The following Summary Compensation Table sets forth the total compensation
paid by the Company for all services rendered during 1994, 1993, 1992, and 19911992 to the
Chief Executive Officer and the four other most highly compensated executive
officers.
SUMMARY COMPENSATION TABLE
(DOLLARS)
ANNUAL COMPENSATION
--------------------------------------------------------------------------------------
OTHER ANNUAL ALL OTHER
NAME AND& PRINCIPAL POSITION YEAR SALARY($) BONUS($)SALARY (1) COMPENSATION($)(2)(3) COMPENSATION($)(2)(4)
- - ------------------------------------BONUS(2) COMPENSATION(3) COMPENSATION(4)
------------------------------------- ---- --------- ----------- --------------------- ---------------------------- -------- --------------- ---------------
Erroll B. Davis, Jr................. 1993 365,750 115,796 8,979 57,155Jr.................. 1994 374,913 112,844 13,163 50,796
President and Chief 1993 374,190 115,796 8,979 48,715
Executive Officer 1992 350,000356,783 82,914 9,501 59,139
Executive Officer 1991 270,000 059,474
William D. Harvey...................Harvey.................... 1994 193,654 56,080 5,203 22,632
Senior Vice 1993 163,846168,962 42,104 4,152 29,11924,003
President 1992 146,876 24,119 4,321 18,807
Eliot G. Protsch..................... 1994 178,600 52,715 3,694 17,245
Senior Vice 1992 143,991 24,119 4,321 21,692
President 1991 139,128 0
Eliot G. Protsch.................... 1993 144,748 42,104 2,934 14,122
Senior VicePresident 1992 131,162 23,565 3,163 14,974
President 1991 125,713 0
James E. Johnson.................... 1993 139,169 35,068 6,079 29,641A. J. (Nino) Amato................... 1994 152,426 43,009 5,312 16,970
Senior Vice 1993 140,769 33,240 4,181 17,842
President 1992 137,383 24,870 8,510 40,326104,577 20,725 4,564 16,275
Norman E. Boys....................... 1994 125,000 33,129 1,757 14,121
Vice President 1991 126,000 0
Edward F. Killeen(5)................- 1993 138,386 30,964 8,315 33,964117,696 27,700 1,925 14,042
Power Production 1992 124,812 16,876 2,242 29,023
1991 113,493 0
- - ---------111,274 18,239 1,753 14,322
------------
(1) Includes vacation days sold back to the Company.
(2) Consists of payments under the Company's Management Incentive Plan, which is
a performance-based compensation plan.
(2) In accordance with the rules of the Securities and Exchange Commission
(SEC), the amounts for Other Annual Compensation and All Other
Compensation are first reported for 1992.
(3) Consists of income tax gross-ups for reverse split-dollar life insurance.
(4) All Other Compensation for 1994 consists of: matching contributions to
401(k) plan, Mr. Davis -- $5,623, Mr. Harvey -- $2,905, Mr. Protsch --
$2,171, Mr. Amato -- $2,267, and Mr. Boys -- $1,564; split-dollar life
insurance premiums, Mr. Davis -- $30,902, Mr. Harvey -- $13,206, Mr. Protsch
-- $10,443, Mr. Amato -- $8,046, and Mr. Boys -- $9,852; reverse
split-dollar life insurance premiums, Mr. Davis -- $14,271, Mr. Harvey --
$6,521, Mr. Protsch - $4,631, Mr. Amato -- $6,657 and Mr. Boys -- $2,705.
The split-dollar and reverse split-dollar insurance premiums are calculated
using the "foregone interest" method.
11
(4) All Other Compensation for 1993 consists of: vacation buy-back, Mr.
Davis--$8,440, and Mr. Harvey-- $5,116; matching contributions to 401(k)
plan, Mr. Davis--$5,613, Mr. Harvey--$7,214, Mr. Johnson-- $3,342, Mr.
Protsch--$2,066, and Mr. Killeen--$2,076; split-dollar life insurance
premiums, Mr. Davis $28,408, Mr. Harvey--$9,994, Mr. Johnson--$16,350, Mr.
Protsch--$7,254, and Mr. Killeen--$18,281; reverse split-dollar life
insurance premiums, Mr. Davis--$14,694, Mr. Harvey--$6,795, Mr. Johnson--
$9,949, Mr. Protsch--$4,802, and Mr. Killeen--$13,608. The split-dollar
and reverse split-dollar insurance premiums are calculated using the
"foregone interest" method.
(5) Retired on January 1, 1994.
16
AGREEMENTS WITH EXECUTIVES
During 1994, WPLH, the parent of the Company, entered into employment and
severance agreements with certain executive officers of the Company, including
Messrs. Davis, Harvey, Protsch, Amato, and Boys. WPLH recognized that, in
today's developing competitive marketplace within the energy industry,
circumstances may arise in which a change of control of the Company or WPLH may
occur, through acquisition or otherwise. This potentiality may cause uncertainty
about the continued employment of certain key executives with the Company,
without regard to the competence or past contributions of the executives. WPLH
recognized further that this uncertainty could result in the loss to the Company
and WPLH of valuable services of one or more of the key executives, particularly
during a period where these same executives may be called upon to negotiate on
behalf of the shareowners. Because of the intimate knowledge of the business and
the affairs of the Company which these executives possess, such loss could be to
the detriment of the Company and WPLH. To provide the Company, WPLH and key
executives reasonable security against changes in the relationship of the
executives with the Company and WPLH in the event of a change in control, WPLH
entered into the employment and severance agreements. The agreements provide
that each executive officer covered by the agreements is entitled to benefits
if, within five years after a change in control of WPLH (as defined in the
agreements), the officer's employment is ended through (i) termination, other
than by reason of death or disability or for cause (as defined in the
agreements), or (ii) termination by the officer due to a breach of the agreement
by WPLH or a significant change in the officer's responsibilities, or (iii) in
the case of Mr. Davis' agreement, termination by Mr. Davis following the first
anniversary of the change of control. The benefits provided are: (i) a cash
termination payment of one, two or three times (depending on which executive
officer is involved) the sum of the executive officer's annual salary and his
average annual bonus during the three years before the termination and (ii)
continuation for up to five years of equivalent hospital, medical, dental,
accident, disability and life insurance coverage as in effect at the time of
termination. The agreements also provide the foregoing benefits in connection
with certain terminations which are effected in anticipation of a change of
control. Each agreement provides that if any portion of the benefits under the
agreement or under any other agreement for the officer would constitute an
excess payment for purposes of the Internal Revenue Code, benefits will be
reduced so that the officer will be entitled to receive $1 less than the maximum
amount which he could receive without becoming subject to the 20% excise tax
imposed by the Code on certain excess payments as defined in the Code, or which
WPLH may pay without loss of deduction under the Code.
RETIREMENT PLAN.AND EMPLOYEE BENEFIT PLANS
Salaried employees (including officers) of the Company are eligible to
participate in the Company's Retirement Plan. All eligible persons whose
compensation is reported in the foregoing Summary Compensation Table
participated in the plan during 1993.1994. Contributions to the plan are determined
actuarially, computed on a single-life, annuity basis, and cannot be readily
calculated as applied to any individual participant or small group of
participants. For purposes of the plan, compensation means payment for services
rendered, including vacation and sick pay, and is substantially equivalent to
salary reported in the foregoing Summary Compensation Table. Retirement plan
benefits depend upon length of plan service (up to a maximum of 30 years), age
at retirement, and amount of compensation (determined in accordance with the
plan) and are reduced by up to 50 percent of Social Security benefits. Credited
years of service under the plan for covered persons named in the foregoing
Summary Compensation Table are as follows: James E. Johnson, 30 years; Edward F.
Killeen, 17 years; Erroll B. Davis, Jr., 1415 years;
William D. Harvey, 7 years; Eliot G. Protsch, 1415 years; A. J. (Nino) Amato, 8
years; and William D. Harvey, 6N. E. Boys, 20 years. Assuming retirement at age 65, a retirement planRetirement
Plan participant (in conjunction with the
12
17
Unfunded Supplemental Retirement Plan described below) would be eligible at
retirement for a maximum annual retirement benefit as follows:
RETIREMENT PLAN TABLE
AVERAGE ANNUAL BENEFIT AFTER SPECIFIED YEARS IN PLAN*
ANNUAL ----------------------------------------------------------------------------------------------------------------------
COMPENSATION 5 10 15 20 25 30
------------------------- ------- ------- ------- ------- ------- --------------- -------- -------- --------
$125,000.............................. $10,311 $20,623 $30,934 $41,245 $51,557 $61,868
150,000.............................. 12,603 25,206 37,809 50,412 63,015 75,618
200,000.............................. 17,186 34,373 51,559 68,745 85,932 103,118
250,000.............................. 21,770 43,539 65,309 87,079 108,848 130,618
300,000.............................. 26,353 52,709 79,059 105,412 131,765 158,118
350,000.............................. 30,936 61,873 92,809 123,745 154,682 185,618
400,000.............................. 35,520 71,039 106,559 142,079 177,598 213,118
450,000.............................. 40,103 80,206 120,309 160,412 200,515 240,618
- - ---------
(*) Average annual compensation is based upon the average of the highest 36
consecutive months of compensation. The Retirement Plan benefits shown above
are net of estimated Social Security benefits and do not reflect any
deduction for other amounts. The annual retirement benefits payable are
subject to certain maximum limitations under the Internal Revenue Code (in
general, $115,641 for 1993 and $118,800 for 1994). Payments in excess of
these limits are made from the Unfunded Supplemental Retirement Plan.$125,000............................. $10,259 $20,519 $ 30,778 $ 41,037 $ 51,297 $ 61,556
150,000............................. 12,551 25,102 37,653 50,204 62,755 75,306
200,000............................. 17,134 34,269 51,403 68,537 85,672 102,806
250,000............................. 21,718 43,435 65,153 86,871 108,588 130,306
300,000............................. 26,301 52,602 78,903 105,204 131,505 157,806
350,000............................. 30,884 61,769 92,653 123,537 154,422 185,306
400,000............................. 35,468 70,935 106,403 141,871 177,338 212,806
450,000............................. 40,051 80,102 120,153 160,204 200,255 240,306
475,000............................. 42,343 84,685 127,028 169,371 211,713 254,056
------------
* Average annual compensation is based upon the average of the highest 36
consecutive months of compensation. The Retirement Plan benefits shown above
are net of estimated Social Security benefits and do not reflect any
deductions for other amounts. The annual retirement benefits payable are
subject to certain maximum limitations (in general, $118,800 for 1994 and
$120,000 for 1995) under the Internal Revenue Code. Under the Retirement Plan
and a supplemental survivors income plan, if a Retirement Plan participant
dies prior to retirement, the designated survivor of the participant is
entitled to a
12
monthly income benefit equal to approximately 50 percent (100
percent in the case of certain executive officers and key management
employees) of the monthly retirement benefit which would have been payable to
the participant under the Retirement Plan if the participant had remained
employed by the Company until eligible for normal retirement.
UNFUNDED SUPPLEMENTAL RETIREMENT PLAN.Unfunded Supplemental Retirement Plan -- The Company maintains an Unfunded
Supplemental Retirement Plan which provides funds for payment of retirement
benefits above the limitations on payments from qualified pension plans in those
cases where an employee's retirement benefits exceed the qualified plan limits.
Additionally, the plan provides for payments of supplemental retirement benefits
to employees holding the title of Vice President or higher, who have been
granted additional months of service by the Board of Directors for purposes of
computing retirement benefits.
UNFUNDED EXECUTIVE TENURE PLAN.Unfunded Executive Tenure Plan -- The Company maintains an Unfunded
Executive Tenure Plan to provide incentive for key executives to remain in the
service of the Company by providing additional compensation which is payable
only if the executive remains with the Company until retirement (or other
termination if approved by the Board of Directors). Participants in the plan
must be designated by the Chief Executive Officer and approved by the Board. Mr.
Davis was the only active participant in the plan as of December 31, 1993.1994. The
plan provides for monthly payments to a participant after retirement (at or
after age 65, or with Board approval, prior to age 65) for 120 months. The
payments will be equal to 25 percent of the participant's highest average salary
for any consecutive 36-month period. If a participant dies prior to retirement
or before 120 payments have been made, the participant's beneficiary will
receive monthly payments equal to 50 percent of such amount for 120 months in
the case of death before retirement, or if the participant dies after
retirement, 50 percent of such amount for the balance of the 120 months. Annual
benefits of $92,000$104,500 would be payable to Mr. Davis upon retirement, assuming he
continues in the Company's service until retirement at the same salary as was in
effect on December 31, 1993.1994.
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18
REPORT OF THE COMPENSATION AND PERSONNEL COMMITTEE
ON EXECUTIVE COMPENSATION
TO OUR SHAREOWNERS: The Company's principal executive compensation objective is to compensate
executive officers in a manner that will attract and retain the services of an
outstanding management team and provide incentives to motivate superior
performance by key employees. In concert with that objective, the Compensation and Personnel Committee (the
"Committee") of the Board of Directors has a three componentof the Company is comprised of five
independent, nonemployee directors who have no "interlocking" relationships, as
defined by the Securities and Exchange Commission. The Committee assesses the
effectiveness and competitiveness of, approves the design of, and administers
executive compensation policy: (1) annualprograms within a consistent total compensation framework
for the Company. The Committee also reviews and approves all salary arrangements
and other remuneration for executives, evaluates executive performance, and
considers related matters. To support the Committee in carrying out its mission,
Hewitt Associates, an independent consultant, is engaged to provide assistance
in the development of comprehensive executive compensation policies.
The Committee is committed to implementing a total compensation program for
executives which furthers the Company's mission. The Committee, therefore,
adheres to the following compensation policies which are intended to facilitate
the achievement of the Company's business strategies.
- Total compensation should enhance the Company's ability to attract,
retain, and encourage the development of exceptionally knowledgeable and
experienced executives, upon whom, in large part, the successful
operation and management of the Company depends.
- Base salary levels should be targeted at the median level paid to
executives of companies in their respective industry(ies).
- Incentive compensation programs should strengthen the relationship
between pay and performance by emphasizing variable, at-risk compensation
that is consistent with meeting predetermined Company and individual
performance goals.
COMPONENTS OF COMPENSATION
The Committee relates total compensation levels for the Company's senior
executives to the compensation paid to executives of similar companies in the
utility industry. Utility executives' pay is compared to that of executives at
utilities with similar operations in both the Midwest and national markets, as
well as to utilities with similar revenue levels, market capitalizations,
employment levels, and total shareowner returns.
The Committee has reviewed overall compensation levels and compared them to
the benchmarks established. It has been determined that total executive
compensation, including that for Mr. Davis, is in line with the median of the
comparison group of companies.
The current elements of the Company's executive compensation program are
base salary adjustments designedand short-term (annual) incentives. These elements are addressed
separately below. In addition, as discussed under the Long-Term Incentive
section below, the Committee believes long-term (equity) incentives are crucial
for linking executive compensation to the Company's business strategy and the
creation of shareowner value. In this regard, a long-term incentive plan is
proposed for implementation in 1995. In determining each component of
compensation, the Committee considers all elements of an executive's total
compensation package, including benefit and perquisite programs.
14
19
BASE SALARIES
The Committee annually reviews each executive's base salary. Base salaries
are targeted at the median of the utility industry's market rate. Base salaries
are adjusted by the Committee to recognize professional growth andchanges in market rate, varying
levels of responsibility, prior experience, breadth of knowledge as well as
internal equity issues. Increases to adjustbase salaries are driven primarily by
market rate adjustments. In 1994, executives did not receive an across-the-board
salary adjustment. Certain executives received base salary increases in
recognition of increased management responsibilities. Mr. Davis did not receive
a base salary increase in 1994. Greater emphasis was placed on the opportunity
for inflationary pressures, (2)
annualexecutives to increase their earnings through the Management Incentive Plan
awards based on achievingby exceeding specific corporate
performance targets,strategic goals. Future base pay adjustments will be more
closely tied to median market rate changes and (3) promotional increases related to significant
increases in responsibility and/or disparities with comparable positions in the
industry. To assist the Compensation and Personnel Committee in determining and
establishing appropriatewill minimize across-the-board
increases. During 1994, all executive compensation policies, the Committee has
engaged an independent consultant to study the executive compensation policies
and practices of the Company and to make recommendations to the Committee. An
outline of the three elements of the current compensation policy follows:
BASE ADJUSTMENT--Each executive is in a salary grade with a salary range
based on his or her level of experience and responsibility compared to similar
positions within thesalaries were reviewed for median market
rate comparability utilizing utility industry based on thedata contained in compensation
surveys published by Edison Electric Institute, surveyAmerican Gas Association and
several compensation consulting firms. Any recommended changes will be effective
for 1995. All salaried positions will be benchmarked to median market rates
during 1995. Market rates will be reviewed annually.
SHORT-TERM INCENTIVES
The goal of utility executive compensation, andshort-term (annual) incentive programs is to promote the
Committee's pay-for-performance philosophy by providing executives with direct
financial incentives in the broader marketplace based
on information on general industry executive compensation providedform of annual cash bonuses to achieve corporate and
individual performance goals. Annual bonus opportunities allow the Committee to
communicate specific goals that are of primary importance during the coming year
and motivate executives to achieve these goals. Short-term incentive program
performance weighting, targeted and maximum award levels, and performance goals
are reviewed and approved annually by Wyatt Data
Services. All regular
13
salaried employees, including officersthe Committee. A description of the
short-term incentive programs available to executive officers follows.
Wisconsin Power and Light Company received a base salary
adjustment of from 3.5 to 5.5 percent for calendar year 1993, effective on
January 1, 1993, determined by their current positions in their respective
salary ranges. Those nearer to the lower ends of their respective ranges
received the highest percentage increases.
MANAGEMENT INCENTIVE PLANManagement Incentive Plan -- The
Management Incentive Plan (MIP)--The goal of the MIP for the Company is to
place a portion of executives' compensation at risk to encourage and reward a
continued high level of performance each year. The MIP covers utility executives,
including Mr. Davis' utility responsibilities. The MIP isPlan in 1994 was based on
achieving annual targets in several areas of overall corporate performance includingthat
include profitability, operations and maintenance expense reductions, capital
spending reductions, operational efficiency, electric and gas conservation maintenance of competitive
utility rates,goals, and
achievement of electric service reliability standards. Target and maximum bonus
awards were set at the median of the utility market levels. Targets were
considered by the Committee to be achievable, but require above-average
performance from each of the executives. For the 1994 Plan year, all MIP
performance category thresholdstargets were all exceeded except for theelectric service
reliability targets which were affected by unusually severe weather during 1993.and electric conservation goals. The MIPPlan awarded 6370 percent of its
allowable maximum for 1993.1994. Potential MIP awards for executives, other than Mr.
Davis, can range from 0 to 40 percent of annual salary. Awards for 1994 made to top
executives are shown in the Summary Compensation Table.
The 1994 MIP award range for Mr. Davis was 0 to 50 percent of his annual
utilityutility-based salary. MIP awards for other executives range from 0 to 35For 1994 performance, Mr. Davis' annual bonus payment
represented 31 percent of their individual annual salary. Awards for 1993 were made to Mr. Davis and to
other top executiveshis base salary, as shownreflected in the Summary
Compensation Table. MIP programUnder this Plan, Mr. Davis was awarded $128,232 solely in
connection with 1994 performance, categories, targets,as discussed above. The Plan does not allow
for discretion in bonus determinations. Mr. Davis' award range is in line with
the median of the same combined utility and award levels are reviewed annually by the
Committee.
CHIEF EXECUTIVE OFFICER COMPENSATION--Thegeneral industry comparison group
used for base salary comparisons.
15
20
LONG-TERM INCENTIVES
The Committee strongly believes compensation for Mr. Davis,
Presidentsenior executives should
include long-term, at-risk pay to strengthen the alignment of shareowner and
Chief Executive Officer, reported for 1993 reflectsmanagement interests. In this regard, in 1994 the applicationBoard of Directors of WPLH,
the Company's parent, recommended and the shareowners adopted a Long-Term Equity
Incentive Plan in which executives of the policies described above. Mr. Davis also participatesCompany are eligible to participate.
The Plan allows for grants of stock options, restricted stock, and performance
units/shares with respect to WPLH common stock. The Committee believes this Plan
will balance the Company's existing compensation programs by emphasizing
compensation based on the long-term successful performance of the Company.
Further, the Plan can be used to better align the interests of Company employees
with the interests of WPLH as a whole by encouraging Company programs to
encompass a component of total WPLH performance through equity ownership in
WPLH. The initial awards under the other employee benefit plans available to executive officers.Plan will be made in 1995.
POLICY WITH RESPECT TO THE $1 MILLION DEDUCTION LIMIT--Recently enactedLIMIT
Section 162(m) of the Internal Revenue Code generally limits the corporate
deduction for compensation paid to executive officers named in the proxy
statement to $1 million unless certain requirements are met. The Committee has
carefully considered the impact of this new tax code provision. At this time, no
executives will earn compensation in excess of the $1 million cap limitation.limitations.
The Committee, however, will continue to monitor the impact of Section 162(m).
CONCLUSION
The Committee believes the existing executive compensation policies and
programs provide the appropriate level of competitive compensation for Company
executives. In addition, the Committee believes that the long- and short-term
performance incentives effectively align the interests of executives and
shareowners toward a successful future for the Company.
COMPENSATION AND PERSONNEL
COMMITTEE
Milton E. Neshek (Chair)
Arnold M. Nemirow
Henry C. Prange
Judith D. Pyle
Arnold M. Nemirow
Carol T. Toussaint
Henry C. Prange
14
COMPLIANCE WITH SECTION 16(A) OF THE SECURITIES EXCHANGE ACT OF 1934
The Company's directors, its executive officers, and certain other officers
are required to report their ownership of WPLH common stock and the Company's
preferred stockCompany
Preferred Stock and any changes in that ownership to the SEC. AllSecurities and Exchange
Commission (SEC) and the New York Stock Exchange. Other than as indicated below,
all required filings in 19931994 were properly made in a timely fashion, withfashion. Mr. James
R. Underkofler, a Director of the exceptionCompany who retired effective as of the 1994
Annual Meeting of Shareowners, failed to file on a timely basis one purchasereport
relating to the acquisition in 1993 by his IRA of 20451 shares of WPLH common stock of
WPLH, and failed to file on a timely basis two reports during 1994 relating to
the acquisition by Milton E. Neshek, a director,
in April 1993, which was not reported until June 8, 1993.his IRA of 275 shares and the sale by his IRA of 654 shares
of common stock of WPLH.
16
21
In making this
statement,the above statements, the Company has relied on the
representations of the persons involved and on copies of their reports provided to the Company.
PROPOSAL # 2:
APPOINTMENT OF INDEPENDENT AUDITORS
The Audit Committee of the Board of Directors of the Company recommends the
reappointment of Arthur Andersen & Co., independent public accountants, as
auditors to examine the financial statements of the Company for 1994. Arthur
Andersen & Co. served as auditors for the Company in 1993. In tabulating the
votes for the reappointment of Arthur Andersen & Co., an abstention has the same
effect as a vote against. Beneficially owned shares not voted (broker nonvotes)
have no effect on vote tabulations. WPLH intends to vote all of its shares of
common stock "FOR" the appointment of Arthur Andersen & Co. as the Company's
independent auditors for 1994, thereby assuring the appointment of Arthur
Andersen & Co.
A representative of Arthur Andersen & Co. will be present at the meeting and
available to make a statement or to respond to questions, as appropriate.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE REAPPOINTMENT OF ARTHUR
ANDERSEN & CO. SHARES OF STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL
BE VOTED "FOR" SUCH REAPPOINTMENT.
PROPOSAL # 3:
PROPOSED AMENDMENTS TO THE RESTATED
ARTICLES OF ORGANIZATION
INTRODUCTION
The Board of Directors of the Company has unanimously approved and
recommends that the shareowners adopt proposed amendments to Article III of the
Restated Articles of Organization of the Company (the "Articles"). The proposed
amendments, if approved by the shareowners, would make it possible for the
Company to issue shares of preferred stock with a variable or floating dividend
rate. At present, the Company is only permitted under the Articles to issue
preferred stock with a fixed dividend rate. If approved, the proposed amendments
would also (i) eliminate references in the Articles to shares of the Company's
7.56% Preferred Stock, 8.48% Preferred Stock and 12% Preferred Stock (all of
which shares have been redeemed by the Company and accordingly reclassified as
authorized but unissued shares of preferred stock without designation as to
series) and eliminate certain provisions governing redemption premiums on other
series of outstanding preferred stock which, due to the passage of time, are no
longer in effect, (ii) consolidate into a new paragraph of Article III and
confirm various provisions of the Articles which set forth the terms of the
shares of those series of preferred stock currently outstanding (without
effecting substantive changes to the terms of such series), and (iii) effect
several other clarifying changes as described in greater detail below.
15
Pursuant to the Articles, the Company is authorized to issue 3,750,000
shares of preferred stock, without par value, in various series, provided that
the aggregate stated value thereof does not exceed $150 million at any time. As
of March 22, 1994, of the 3,750,000 authorized shares of preferred stock, there
was a total of 1,049,225 shares outstanding, which outstanding shares were
divided into seven different series as follows: 99,970 shares of 4 1/2%
Preferred Stock, 74,912 shares of 4.80% Preferred Stock, 64,979 shares of 4.96%
Preferred Stock, 29,957 shares of 4.40% Preferred Stock, 29,947 shares of 4.76%
Preferred Stock, 599,460 shares of 6.50% Preferred Stock, and 150,000 shares of
6.20% Preferred Stock. The remaining authorized but unissued shares of preferred
stock are subject to issuance by the Company in such series and on such terms as
the Articles permit and as the Board of Directors may deem advisable. The
proposed amendments would not change the number of shares or the aggregate
stated value of preferred stock that the Company is authorized to issue.
The text of the proposed amendments is attached hereto as Appendix A. Each
shareowner is urged to read Appendix A carefully, togetherfiled
with the summary of
certain important aspects of the proposed amendments which follows. The
discussion below is qualified in its entirety by reference to the full text of
the proposed amendments.
PURPOSE AND EFFECTS
The primary purpose of the proposed amendments is to provide the Company
with greater flexibility with respect to its financing alternatives and to
increase the Company's access to financial markets. If given the ability to
issue preferred stock for which the dividend rate is not fixed, the Company will
be better positioned to take advantage of fluctuations in interest rates and
therefore possibly obtain lower-cost financing. The proceeds from the issuance
of variable rate preferred stock (assuming shareowner approval of the proposed
amendments) would be available for general corporate purposes, including the
possible future redemption of outstanding series of the Company's first mortgage
bonds.
Existing provisions of the Articles relating to the issuance of preferred
stock require that the annual rate of dividend for each series of preferred
stock be fixed (although the rates may vary from series to series) and that the
dividends on all series of preferred stock be paid or set apart on the same date
(on a quarterly basis) and in the same proportionate amount. THE PROPOSED
AMENDMENTS WOULD NOT AFFECT THE TIMING OF DIVIDEND PAYMENTS ON OR THE DIVIDEND
PERIODS OF SHARES OF PREFERRED STOCK WITH A FIXED DIVIDEND RATE, BUT WOULD ALLOW
THE BOARD OF DIRECTORS TO ESTABLISH DIFFERENT DIVIDEND PERIODS AMONG SERIES OF
PREFERRED STOCK WITH VARIABLE DIVIDEND RATES (AND ALLOW FOR SUCH DIVIDEND
PERIODS TO BE CHANGED FROM TIME TO TIME AS SPECIFIED IN THE PARTICULAR SERIES).
The proposed amendments would also eliminate the requirement that dividends be
paid or set apart in a proportionate amount for each share of preferred stock at
any time that a dividend is paid on or set apart for a specific series of
preferred stock. In light of the possibility under the proposed amendments of
having dividend periods which no longer coincide, this change is intended to
eliminate the administrative burden and cost to the Company of having to set
apart dividends during the course of a dividend period for one series of
preferred stock in order to pay the dividend on another series at the conclusion
of such latter series' respective dividend period. THE PROPOSED AMENDMENTS DO
PROVIDE, HOWEVER, THAT NO DIVIDEND MAY BE PAID ON ANY SERIES OF PREFERRED STOCK
UNLESS, AT THE TIME FOR SUCH DIVIDEND PAYMENT, CUMULATIVE DIVIDENDS ON ALL
OUTSTANDING SERIES OF PREFERRED STOCK FOR ALL THEN COMPLETED DIVIDEND PERIODS
HAVE BEEN PAID OR SET APART.
Similarly, the current Articles provide that no dividend may be paid on the
Company's common stock (all of which is held by WPLH) unless cumulative
dividends for all past dividend periods and the current
16
period for all series of preferred stock then outstanding have been paid or set
apart. The proposed amendments would modify this provision so that common stock
dividends could be paid, provided that dividends had been paid or set apart with
respect to all series of outstanding preferred stock for all then completed
dividend periods. This change is intended, as discussed in a similar context
above, to eliminate the burden and cost to the Company of having to set apart a
dividend for a series of preferred stock during the course of a dividend period
for such series.
Under the present Articles, holders of preferred stock are entitled to elect
a majority of the Board of Directors of the Company for so long as the Company
is in default in an amount equal to four full quarterly dividends on all shares
of preferred stock then outstanding. To account for the issuance of variable
rate preferred stock which may have dividend periods that do not coincide with
the quarterly periods of the fixed rate preferred stock, the proposed amendments
would give holders of preferred stock the right to elect a majority of the
directors in the event the Company was in default on dividends on preferred
stock in an amount equal to the dividend requirement for one year on all then
outstanding shares of preferred stock. For purposes of this provision and
elsewhere in the Articles, the proposed amendments would provide, in the case of
variable rate preferred stock, that the dividend requirement for one year be
calculated by using the dividend rate in effect with respect to each variable
rate series at the time the determination is made.
The proposed amendments would also clarify that shares of any series of
preferred stock which have been redeemed or reacquired by the Company will have
the status of authorized but unissued shares of preferred stock, without
designation as to series, until such shares are once more designated as part of
a particular series by the Board of Directors. The proposed amendments would
similarly clarify the authority of the Board of Directors to provide, in the
resolution creating a new series of preferred stock, that the shares of such
series be entitled to a "no call" period during which time such shares would not
be subject to redemption by the Company.
The remaining changes effected by the proposed amendments would conform
various provisions of the Articles to provide for the issuance of variable rate
preferred stock.
VOTE REQUIRED FOR ADOPTION OF THE AMENDMENTS
The affirmative vote of holders of both two-thirds of the voting power of
the outstanding preferred stock entitled to vote thereon, with all series of
preferred stock voting together as a separate class, and a majority of the
voting power of all outstanding shares of preferred stock and common stock of
the Company entitled to vote thereon, will be required to approve the proposed
amendments. Any shares not voted at the annual meeting, whether due to
abstentions, broker nonvotes or otherwise, will have the effect of a vote
against the proposed amendments. WPLH intends to vote all of the outstanding
shares of the Company's common stock "FOR" the proposed amendments.
THE BOARD OF DIRECTORS RECOMMENDS THAT SHAREOWNERS VOTE "FOR" THE PROPOSED
AMENDMENTS. SHARES OF STOCK REPRESENTED BY EXECUTED BUT UNMARKED PROXIES WILL BE
VOTED "FOR" THE PROPOSED AMENDMENTS.SEC.
GENERAL
VOTING.Voting. The outstanding voting securities of the Company on the record date
stated below consisted of 13,236,601 shares of common stock (all of which are
held by WPLH) and 1,049,225 shares of preferred stock (issued in various
series).
17
Only shareowners of the Company of record on its books at the close of
business on March 22, 1994,21, 1995, are entitled to vote at the meeting. Each such
shareowner is entitled to vote on each matter submitted to a vote at the
meeting. WPLH, the sole holder of the Company's common stock, has one vote for
each share it holds on the record date. Every holder of preferred stock has, for
each share of preferred stock held by him or her on the record date, that number
of votes (including any fractional vote) determined by dividing the stated value
of such shares by 100. Shareowners may vote either in person or by duly
authorized proxy. The giving of proxies by shareowners will not affect their
right to vote their shares if they attend the meeting and desire to vote in
person. Presence at the meeting of a shareowner who signed a proxy, however,
does not itself revoke the proxy. A proxy may be revoked by the person giving
it, any time before it is voted, by advising the Secretary of the Company prior
to such voting. A proxy may also be revoked by a shareowner who duly executes
another proxy bearing a later date but prior to the voting. All shares
represented by effective proxies on the enclosed form, received by the Company,
will be voted at the meeting or any adjourned session of the meeting, all in
accordance with the terms of such proxies.
PROPOSALS OF SHAREOWNERS.Proposals of Shareowners. Under the rules of the SEC, any shareowner
proposal intended to be presented at the 19951996 Annual Meeting of Shareowners must
be received at the principal office of the Company no later than December 9,
1994,November 28,
1995, in order to be eligible to be considered for inclusion in the Company's
proxy materials relating to that meeting.
OTHER BUSINESS.Other Business. The meeting is being held for the purposes set forth in the
notice accompanying this proxy statement. The Board of Directors of the Company
knows of no business to be transacted at the meeting other than that set forth
in the notice. However, if any other business should properly be presented to
the meeting, the proxies will be voted in respect thereof in accordance with the
judgment of the person or persons voting the proxies.
WISCONSIN POWER AND LIGHT COMPANY
[GRAPHIC][SIG]
ERROLL B. DAVIS, JR.
PRESIDENT AND CHIEF EXECUTIVE OFFICER
18President and Chief Executive Officer
17
22
APPENDIX A
PROPOSED AMENDMENTS TO RESTATED ARTICLES OF ORGANIZATION
Article IIIWISCONSIN POWER AND LIGHT COMPANY
ANNUAL REPORT
CONTENTS PAGE
------------------------------------------------------------------------------------ -----
The Company......................................................................... A-2
Selected Financial Data............................................................. A-3
Management's Discussion and Analysis of Financial Condition and Results of
Operations........................................................................ A-3
Report of Independent Public Accountants............................................ A-12
Consolidated Financial Statements:
Consolidated Balance Sheets....................................................... A-13
Consolidated Statements of Income................................................. A-15
Consolidated Statements of Cash Flows............................................. A-16
Consolidated Statements of Capitalization......................................... A-17
Consolidated Statement of Common Shareowner's Investment.......................... A-18
Notes to Consolidated Financial Statements........................................ A-19
Shareowner Information.............................................................. A-32
Form 10-K Information............................................................... A-32
Executive Officers of the Company................................................... A-32
A-1
23
WISCONSIN POWER AND LIGHT COMPANY
1994 ANNUAL REPORT
THE COMPANY
On March 1, 1988, after obtaining shareowner and all the necessary
regulatory approvals, Wisconsin Power and Light Company (the "Company" or "WPL")
effected a corporate restructuring which included the formation of a holding
company, WPL Holdings, Inc. WPL Holdings, Inc. is the parent company of WPL and
its utility subsidiaries and of Heartland Development Corporation, the parent
corporation for non-regulated businesses.
WPL, incorporated in Wisconsin on February 21, 1917 as set forth belowthe Eastern
Wisconsin Electric Company, is marked to reflect changes that would be
effected by the proposed amendments. Additions are in all capital letters and
deletions have been indicated by including an * (asterisk) before and after this
material.
------------------------
ARTICLE III
(1) The authorized capital stock of the Corporation is Two Hundred Forty
Million Dollars ($240,000,000) and is divided into Three Million Seven Hundred
Fifty Thousand (3,750,000) shares of Preferred Stock without par value, provided
that the aggregate stated value thereof shall not exceed $150,000,000 at any
time, and Eighteen Million (18,000,000) shares of Common Stock of the par value
of $5 per share. All shares of the authorized Preferred Stock at any time having
the status of authorized and unissued shares may be issued in one or more
series, with such stated values, with such designation or designations and with
such terms and conditions as to redemption (but the redemption price shall be
not less than the stated value), as to rate of dividend (which *shall be
expresseda public utility predominately engaged in the
designationtransmission and distribution of electric energy and the shares* MAY BE FIXED OR VARIABLE) AND
FREQUENCY OF DIVIDEND PAYMENT,generation and as to sinking fund provisions (if any) for
the redemption orbulk
purchase of shares, applicableelectric energy for sale. It also transports, distributes and sells
natural gas purchased from gas suppliers. Nearly all of WPL's customers are
located in south and central Wisconsin. WPL operates in municipalities pursuant
to the sharespermits of each series as
may be determined *and fixed*indefinite duration which are regulated by the BoardWisconsin law. WPL does
not derive a material portion of Directors of the Corporation in
the resolution authorizing the issue of such shares. Shares of any series of
Preferred Stock may not be issued for a consideration less than the stated value
thereof. *Each share of the Corporation's 4 1/2% Preferred Stock, 4.80%
Preferred Stock, 4.96% Preferred Stock, 4.40% Preferred Stock, 4.76% Preferred
Stock, 8.48% Preferred Stock, 7.56% Preferred Stock and 12% Preferred Stock now
outstanding shall have a stated value of $100.*
(2) The holders of the Preferred Stockits revenues from time to time outstanding shall
be entitled to receive, in respect of each share held, dividends upon the stated
value thereof at the *annual* rate specified *in the designation of* FOR such
share, payable quarter-yearly*,* IN THE CASE OF A SHARE OF PREFERRED STOCK WITH
A FIXED RATE OF DIVIDEND OR PAYABLE AS SPECIFIED BY THE BOARD OF DIRECTORS OF
THE CORPORATION IN THE RESOLUTION AUTHORIZING THE ISSUE OF SUCH SHARES IN THE
CASE OF A SHARE OF PREFERRED STOCK WITH A VARIABLE RATE OF DIVIDEND, IN EITHER
CASE when and as declared by the Board of Directors, out of the surplus or net
profits of the Corporation. Such dividends shall be cumulative from and
including the first day of the dividend period in which such share shall have
been originally issued; and shall FOR ANY COMPLETED DIVIDEND PERIOD be paid, or
declared and set apart for payment, before any dividends shall be declared or
paid on or set apart for the Common Stock, so that if for any COMPLETED *past*
dividend period *or the current dividend period* dividends on the Preferred
Stock shall not have been paid, or declared and set apart for payment, the
deficiency shall be fully paid or declared and funds set apart for the payment
thereof before any dividends shall be declared or paid on or set apart for the
Common Stock. The holders of *the* SHARES OF ANY SERIES OF Preferred Stock shall
not be entitled to receive any dividends thereon except dividends at the
*annual* rate *hereinbefore* provided BY THE BOARD OF DIRECTORS IN THE
RESOLUTION AUTHORIZING THE ISSUE OF SUCH SHARES. The term "dividend period", as
used herein,
A-1
refers to EITHER each period of three consecutive calendar months ending,
respectively, February 28, May 31, August 31 and November 30 in each year IN THE
CASE OF A SERIES OF PREFERRED STOCK HAVING A FIXED RATE OF DIVIDEND OR, IN THE
CASE OF A SERIES OF PREFERRED STOCK HAVING A VARIABLE RATE OF DIVIDEND, SUCH
PERIOD AS SHALL EITHER BE SPECIFIED BY THE BOARD OF DIRECTORS OF THE CORPORATION
IN THE RESOLUTION AUTHORIZING THE ISSUE OF SHARES OF SUCH SERIES OR DETERMINED
IN ACCORDANCE WITH THE AUTHORITY GRANTED IN SAID RESOLUTION. *No dividend shall
at any time be paid on or set apart for any share unless at the same time there
shall be paid on or set apart for all shares of Preferred Stock then outstanding
dividends in such amount that the holders of all shares of Preferred Stock shall
receive or have set apart for them a uniform percentage of the full annual
dividend to which they are, respectively, entitled.* All shares of Preferred
Stock, regardless of designation, shall constitute one class of stock and,
excepting only as to the stated values thereof, the *rates of dividends payable*
DIVIDEND rates (WHETHER FIXED OR VARIABLE) *of* AND THE FREQUENCY OF dividend*s*
*payable* PAYMENTS thereon, the price at which, and the terms and conditions on
which, shares may be redeemed and sinking fund provisions for the redemption or
purchase of shares, shall be of equal rank and confer equal rights upon the
holders thereof. *All shares of Preferred Stock of the same stated value per
share at any time outstanding which bear the same dividend rate shall constitute
one series of Preferred Stock and all shares of any one series of Preferred
Stock shall be alike in all respects.* NO DIVIDEND SHALL BE PAID ON ANY SERIES
OF PREFERRED STOCK FOR A DIVIDEND PERIOD AT THE CONCLUSION OF SUCH PERIOD UNLESS
AT THAT TIME ALL CUMULATIVE DIVIDENDS UPON THE PREFERRED STOCK OF ALL SERIES
THEN OUTSTANDING FOR ALL COMPLETED DIVIDEND PERIODS SHALL HAVE BEEN PAID OR
DECLARED AND SET APART FOR PAYMENT. When full cumulative dividends as aforesaid
upon the Preferred Stock of all series then outstanding for all COMPLETED *past*
dividend periods *and for the current dividend period* shall have been paid or
declared and set apart for payment, the Board of Directors may declare dividends
on the Common Stock of the Corporation, subject to the restrictions hereinafter
contained.
(3) In the event of the liquidation, dissolution or winding up, whether
voluntary or involuntary, of the Corporation, the holders of the Preferred Stock
shall be entitled to be paid in full, out of the net assets of the Corporation,
the stated value of their shares and, to the extent that there may be profits
properly applicable thereto (whether capitalized or not), the unpaid dividends
accrued thereon before any amount shall be paid out of such assets to the
holders of the Common Stock. After such payment in full to the holders of the
Preferred Stock, the remaining assets shall be divided among and paid to the
holders of the Common Stock.
(4) *(a)* The Corporation, on the sole authority of its Board of Directors,
shall have the right (SUBJECT TO THE SPECIFIC TERMS OF ANY SERIES OF PREFERRED
STOCK AS FIXED BY THE BOARD OF DIRECTORS) at any time or from time to time to
redeem and retire all or part of the Preferred Stock or all or part of the
shares of one or more series of Preferred Stock upon and by the payment to the
holders of the shares to be redeemed, or upon or by setting aside, as
hereinafter provided, for the benefit of such holders, the stated value of each
share to be redeemed, together with all unpaid accrued dividends thereon, and,
in addition thereto, *a* THE premium *as follows: for each share of 4 1/2%
Preferred Stock, a premium of $7; for each share of 4.80% Preferred Stock, a
premium of $1; for each share of 4.96% Preferred Stock, a premium of $1; for
each share of 4.40% Preferred Stock, a premium of $4.50; for each share of 4.76%
Preferred Stock, a premium of $1; for each share of 8.48% Preferred Stock, a
premium of $6 to and including June 30, 1981, a premium of $3 if redeemed after
June 30, 1981 and to and including June 30, 1986, and thereafter a premium of
$1; for each share of 7.56% Preferred Stock, a premium of $8.56 to and including
May 31, 1978; a premium of $6.04 if redeemed after May 31, 1978 and to and
including May 31, 1983, a premium of $3.52 if redeemed after May 31, 1983 and to
and including May 31, 1988, and thereafter a premium of $1, provided, that none
of the 7.56% Preferred Stock may be redeemed prior to June 1, 1978, if such
redemption is for the purpose of refunding or is in
A-2
anticipation of the refunding of such 7.56% Preferred Stock through the issuance
of any shares of Preferred Stock or of any other stock ranking prior to or on a
parity with Preferred Stock, if such shares have a dividend cost to the
Corporation of less than 7.539% per annum; for each share of 12% Preferred
Stock, a premium of $18 if redeemed after August 31, 1979 and to and including
August 31, 1984, $5 if redeemed after August 31, 1984 and to and including
August 31, 1989, and thereafter a premium of $1, provided that none of the
shares of 12% Preferred Stock may be redeemed at the option of the Corporation
(except for purposes of satisfying the sinking fund relating to the shares of
12% Preferred Stock) prior to September 1, 1979; and for each share of any other
series, the premium* (IF ANY) fixed for the shares of such series; provided,
however, that not less than thirty (30) days previous to the date fixed for
redemption, notice of the intention of the Corporation to redeem such stock,
specifying the stock to be redeemed and the date and place of redemption, (i)
shall be published in a newspaper of general circulation published in the City
of Madison, Wisconsin, and also in a newspaper of general circulation published
in the City of Chicago, Illinois, and in a newspaper of general circulation
published in the City of New York, New York, and (ii) shall be deposited in a
United States post office or mail box at any place in the United States
addressed to each holder of record of the shares to be redeemed at his address
as the same appears upon the records of the Corporation; but in mailing such
notice unintentional omissions or errors in names or addresses shall not impair
the validity of the notice of redemption. In every case of the redemption of
less thancustomer.
WPL owns all of the outstanding sharescapital stock of anySouth Beloit Water, Gas
and Electric Company ("South Beloit"), a public utility supplying electric, gas
and water service, principally in Winnebago County, Illinois, which was
incorporated on July 23, 1908.
WPL also owns varying interests in several other subsidiaries and
investments which are not material to WPL's operations.
ELECTRIC OPERATIONS
WPL provides electricity in a service territory of approximately 16,000
square miles in 35 counties in southern and central Wisconsin and four counties
in northern Illinois. As of December 31, 1994, the Company provided retail
electric service to approximately 371,000 customers in 663 cities, villages and
towns, and wholesale service to 27 municipal utilities, one seriesprivately owned
utility, three rural electric cooperatives and to Wisconsin Public Power, Inc.
System, which provides retail service to nine communities.
WPL owns 20,969 miles of Preferred Stock,electric transmission and distribution lines and
362 substations located adjacent to the sharescommunities served.
WPL's electric sales are seasonal, to some extent, with the yearly peak
normally occurring in the summer months. WPL also experiences a smaller winter
peak in December or January.
GAS OPERATIONS
As of such seriesDecember 31, 1994, WPL provided retail natural gas service to
be redeemed shall be chosen by lot orapproximately 141,000 customers in such239 cities, villages and towns in 22 counties
in southern and central Wisconsin and one county in northern Illinois.
WPL's gas sales follow a seasonal pattern. There is an annual base load of
gas used for heating, cooking, water heating and other manner as may be prescribed by resolution of the Board of Directors. The
Corporation may deposit,purposes, with a bank or trust company, which shall be named inlarge
peak occurring during the noticeheating season.
In 1994, WPL continued to purchase significant volumes of redemption, shall be located in the City of Milwaukee, Wisconsin,
or in Chicago, Illinois, or in New York, New York,lower cost gas
directly from producers and shall then have capital,
surplusmarketers and undivided profits of at least $1,000,000, the aggregate redemption
price of the shares to be redeemed, in trust for the payment on or before the
redemption date to or upon the order of the holders of such shares, upon
surrender of the certificates for such shares. Such deposit in trust may, at the
option of the Corporation, be upon terms whereby in case the holder of any
shares of Preferred Stock called for redemption shall not, within ten years
after the date fixed for redemption of such shares, claim the amount on deposit
with any bank or trust company for the payment of the redemption price of said
shares, such bank or trust company shall on demand pay to or upon the written
order of the Corporation ortransported those volumes over its successor the amount so deposited and thereupon
such bank or trust company shall be released from any and all further liability
with respect to the payment of such redemption price and the holder of said
shares shall be entitled to look only to the Corporation or its successor for
the payment thereof. Upon the giving of notice of redemption and upon the
deposit of the redemption price, as aforesaid, or, if no such deposit is made,
upon the redemption date (unless the Corporation defaults in making payment of
the redemption price as set forth in such notice), such holders shall cease to
be stockholders with respect to said shares, and from and after the making of
said deposit and the giving of said notice, or, if no such deposit is made,
after the redemption date (the Corporation not having defaulted in making
payment of the redemption price as set forth in such notice), said shares shall
no longer be transferable on the books of the Corporation, and the said holders
shall have no interest in or claim against the Corporation with respect to said
shares, but shall be entitled only to receive said moneys on the date fixed for
redemption as aforesaid from said bank or trust company, ortwo
major pipeline supplier's systems. This replaced higher cost gas historically
purchased directly from the Corporation, without interest thereon, upon surrender of the certificates as
aforesaid.
The term "accrued dividends" shall be deemed to mean, in respect of any
share of the Preferred Stock as of any given date, the amount of dividends
payable on such share, computed, at the *annual* dividend rate (WHICH MAY BE
FIXED OR VARIABLE) for such share, from the date on which dividends thereon
became
A-3major pipeline systems.
A-2
cumulative to and including such given date, less the aggregate amount of all
dividends which have been paid or which have been declared and set apart for
payment on such share. Accumulations of dividends shall not bear interest.
Nothing herein contained shall limit any legal right of the Corporation to
purchase any shares of the Preferred Stock.
*(b)**Shares of the 12% Preferred Stock shall be redeemable at the option of
the Corporation, from time to time on or after September 1, 1978, for purposes
of satisfying the sinking fund for shares of the 12% Preferred Stock, upon the
notice and in the manner and with the effect hereinabove provided, at a price
equal to $100 per share plus accrued dividends to the date of redemption;
provided that no more than 15,000 shares of 12% Preferred Stock shall be
redeemable in any 12-month period ending August 31 in each year for purposes of
satisfying such sinking fund and all shares redeemed in any such 12-month period
shall be cancelled and retired and applied to the sinking fund for such period.
Every notice of redemption of shares of 12% Preferred Stock pursuant to this
grammatical paragraph shall state that the shares called for redemption are
being redeemed in satisfaction of such sinking fund.*
*During each 12-month period ending August 31 in each year, beginning in
1979, as and for a sinking fund for the shares of 12% Preferred Stock, the
Corporation shall, subject to the restrictions contained in this grammatical
paragraph, redeem and retire 7,500 shares of 12% Preferred Stock (being 5% of
the number of shares of 12% Preferred Stock originally issued) at the sinking
fund redemption price of $100 per share plus accrued dividends to the date of
redemption (such required redemptions being hereinafter referred to as the
"sinking fund requirement for the 12% Preferred Stock"). The sinking fund
requirement for the 12% Preferred Stock shall be cumulative so that if the
Corporation shall fail to satisfy in full the sinking fund requirement for the
12% Preferred Stock in any such 12-month period, the amount of the deficiency
shall be added to the sinking fund requirement for the 12% Preferred Stock for
succeeding 12-month periods until such deficiency shall be made good. Such
deficiency shall be made good as soon as practicable. In the event the
Corporation should be in arrears in the sinking fund requirement for the 12%
Preferred Stock for any such 12-month period or periods (whether or not for a
reason set forth in the penultimate sentence of this grammatical paragraph), and
so long as the Corporation shall remain in arrears in such requirement, the
Corporation may not purchase, redeem or pay dividends on any of its stock
ranking junior to the shares of 12% Preferred Stock. The Corporation may satisfy
the whole or any part of the sinking fund requirement for the 12% Preferred
Stock for any such 12-month period by canceling and retiring, prior to the end
of such 12-month period, shares of 12% Preferred Stock purchased by the
Corporation or shares of 12% Preferred Stock redeemed by the Corporation
otherwise than pursuant to the immediately preceding grammatical paragraph. The
Corporation may redeem through the sinking fund during any such 12-month period
not more than 7,500 additional shares of the shares of 12% Preferred Stock. The
application of such additional shares so redeemed to the sinking fund
requirement for the 12% Preferred Stock will not reduce the sinking fund
requirement for the 12% Preferred Stock in any subsequent 12-month period, and
the right of the Corporation to apply such additional shares to the sinking fund
requirement for the 12% Preferred Stock will not be cumulative. All shares of
12% Preferred Stock redeemed or purchased, including those applied to meet the
sinking fund requirement for the 12% Preferred Stock, shall be cancelled and
retired and shall become authorized but unissued shares of Preferred Stock but
may not be reissued as shares of 12% Preferred Stock. No shares of 12% Preferred
Stock shall be redeemed to satisfy the sinking fund unless, at the date such
shares are called for redemption, full dividends on all shares of the Preferred
Stock of the
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Corporation for all prior periods shall have been paid or declared and set apart
for payment. Nothing contained in this grammatical paragraph shall be deemed to
require the Corporation to redeem or purchase shares of 12% Preferred Stock at a
time when it may not legally do so.*
*Whenever less than all of the shares of 12% Preferred Stock are to be
called for redemption, the shares to be redeemed shall be selected by lot or in
such impartial manner as the Board of Directors of the Corporation may
determine.*
ANY SHARES24
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
ANY SERIESFINANCIAL CONDITION AND RESULTS OF PREFERRED STOCK WHICH SHALL AT ANY TIME HAVE
BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE CORPORATION SHALL, AFTER SUCH
REDEMPTION OR REACQUISITION, HAVE THE STATUS OF AUTHORIZED BUT UNISSUED SHARES
OF PREFERRED STOCK OF THE CORPORATION, WITHOUT DESIGNATION AS TO SERIES, UNTIL
SUCH SHARES ARE ONCE MORE DESIGNATED AS PART OF A PARTICULAR SERIES BY THE BOARD
OF DIRECTORS OF THE CORPORATION.
(5) So long as any shares of Preferred Stock of any series are outstanding,
the Corporation shall not, without the affirmative vote of the record holders of
shares of Preferred Stock of all series at the time outstanding, voting
separately as one class, having in the aggregate a number of votes, calculated
as provided in Paragraph (8)(a) hereof, at least equal to two-thirds of the
total number of votes, as so calculated, possessed by all such holders:
(a) Amend the provisions of the Restated Articles of Organization so as
to create or authorize any stock ranking prior in any respect to the
Preferred Stock; or issue any such stock; or
(b) Change, by amendment to the Restated Articles of Organization, or
otherwise, the terms and provisions of the Preferred Stock so as to affect
adversely the rights and preferences of the holders thereof; provided,
however, that if any such change will affect adversely the holders of one or
more, but less than all, of the series of Preferred Stock at the time
outstanding, there shall be required the vote only of the holders of the
series so adversely affected at the time outstanding having in the aggregate
a number of votes, calculated as provided in Paragraph (8)(a) hereof, at
least equal to two-thirds of the total number of votes, as so calculated,
possessed by all such holders of such series; or
(c) Issue any shares of the Preferred Stock or shares of any stock
ranking on a parity with the Preferred Stock, other than in exchange for, or
for the purpose of effecting the redemption or other retirement of, shares
of Preferred Stock, or shares of any stock ranking on a parity therewith, at
the time outstanding, having an aggregate amount of par value and/or stated
value of not less than the aggregate amount of par value or stated value of
the shares to be issued, unless:
(A) The gross income (determined in accordance with accepted
accounting principles) of the Corporation available for the payment of
interest charges shall, for a period of twelve consecutive calendar
months within the fifteen calendar months next preceding the issue of
such shares, have been at least one and one-half (1 1/2) times the sum of
(i) the interest for one year on all funded indebtedness, and notes
payable of the Corporation maturing more than twelve months after the
date of issue of such shares, which shall be outstanding at the date of
the issue of said shares, and (ii) an amount equal to the dividend
requirement for one year on all shares of the Preferred Stock of all
series and on all other shares of stock, if any, ranking prior to or on a
parity with the Preferred Stock, which shall be outstanding after the
issue of the shares proposed to be issued, PROVIDED THAT,
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IN THE CASE OF ANY SHARES OF PREFERRED STOCK WHICH DO NOT HAVE A FIXED
RATE OF DIVIDEND, THE DIVIDEND REQUIREMENT FOR ONE YEAR SHALL BE
CALCULATED BY USING THE RATE OF DIVIDEND IN EFFECT WITH RESPECT TO SUCH
SHARES AT THE TIME OF SUCH DETERMINATION; and
(B) The capital represented by the Common Stock and the surplus
accounts of the Corporation shall be not less than the aggregate amount
payable on the involuntary dissolution, liquidation or winding up of the
Corporation, in respect of all shares of Preferred Stock and all shares
of stock, if any, ranking prior thereto, or on a parity therewith, which
shall be outstanding after the issue of the shares proposed to be issued.
No consent of the holders of Preferred Stock shall be required in respect of
any transaction enumerated in this Paragraph (5) if at or prior to the time when
such transaction is to take effect provision is made for the redemption or other
retirement of all shares of Preferred Stock at the time outstanding, the consent
of which would otherwise be required hereunder.
(6) So long as any shares of the Preferred Stock are outstanding, the
Corporation shall not, without the affirmative vote of the record holders of
shares of Preferred Stock of all series then outstanding having in the aggregate
a number of votes, calculated as provided in Paragraph (8)(a) hereof, at least
equal to a majority of the total number of votes, as so calculated, possessed by
all such holders,
(a) Issue or assume any unsecured indebtedness (as hereinafter defined)
for any purpose other than the refunding of secured or unsecured
indebtedness, theretofore created or assumed by the Corporation and then
outstanding, or the retiring, by redemption or otherwise, of shares of the
Preferred Stock or shares of any stock ranking prior thereto or on a parity
therewith, if immediately after such issue or assumption the total principal
amount of all unsecured indebtedness issued or assumed by the Corporation
and then outstanding would exceed twenty per centum (20%) of the aggregate
of (i) the total principal amount of all bonds or other securities
representing secured indebtedness issued or assumed by the Corporation and
then outstanding, and (ii) the total of the capital and surplus of the
Corporation, as then recorded on its books; or
(b) Merge or consolidate with any other corporation or corporations or
sell all or substantially all of the assets of the Corporation unless such
merger, consolidation or sale or the issue or assumption of all securities
to be issued or assumed in connection therewith shall have been ordered,
approved or permitted by the Securities and Exchange Commission under the
Public Utility Holding Company Act of 1935, or by any successor commission
or regulatory authority of the United States of America then having
jurisdiction in the premises.
No consent of the holders of the Preferred Stock shall be required, however,
if at or prior to the issue of any unsecured indebtedness, or such
consolidation, merger or sale, provision is made for the redemption or other
retirement of all shares of Preferred Stock then outstanding.
"Unsecured indebtedness" as that term is used in this Paragraph (6) shall
mean all unsecured notes, debentures or other securities representing unsecured
indebtedness (whether having a single maturity, serial maturities or sinking
fund or other similar periodic principal or debt retirement payment provisions)
which has a final maturity date, determined as of the date of issuance or
assumption by the Corporation, of less than three years.
A-6
No provision contained in this Paragraph (6), or in Paragraph (5) of this
Article III, is intended or shall be construed to relieve the Corporation from
compliance with any applicable statutory provision requiring the vote or consent
of a greater number of the holders of the outstanding shares of the Preferred
Stock.
(7) So long as any shares of the Preferred Stock are outstanding, the
Corporation shall not pay any dividends on its Common Stock (other than
dividends payable in Common Stock) or make any distribution on or purchase or
otherwise acquire for value any of its Common Stock (each such payment,
distribution, purchase and/or acquisition being herein referred to as a "common
stock dividend"), except to the extent permitted by the following provisions of
this Paragraph (7):
(a) No common stock dividend shall be declared or paid in an amount
which, together with all other common stock dividends declared in the year
ending with (and including) the date of the declaration of such common stock
dividend, would in the aggregate exceed fifty per centum (50%) of the net
income of the Corporation available for dividends on its Common Stock for
the twelve consecutive calendar months ending on the last day of the
calendar month next preceding the declaration of such common stock dividend,
if at the end of such calendar month (next preceding the date of the
declaration of such common stock dividend) the ratio (herein referred to as
the "capitalization ratio") of the Common Stock Equity (as hereinafter
defined) of the Corporation, to the total capital (as hereinafter defined)
of the Corporation shall be less than twenty per centum (20%).
(b) If such capitalization ratio, determined as aforesaid, shall be
twenty per centum (20%) or more, but less than twenty-five per centum (25%),
no common stock dividend shall be declared or paid in an amount which,
together with all other common stock dividends declared in the year ending
on (and including) the date of the declaration of such common stock
dividend, would exceed seventy-five per centum (75%) of the net income of
the Corporation available for dividends on its Common Stock for the twelve
consecutive calendar months ending on the last day of the calendar month
next preceding the declaration of such common stock dividend.
(c) If such capitalization ratio, determined as aforesaid, shall be in
excess of twenty-five per centum (25%), no common stock dividend shall be
declared or paid which would reduce such capitalization ratio to less than
twenty-five per centum (25%) except to the extent permitted by the next
preceding paragraphs (a) and (b) hereof.
"Common Stock Equity" as that term is used in this Paragraph (7) shall
consist of the sum of (1) the capital represented by the issued and outstanding
shares of Common Stock (including premiums on common stock) and (2) the surplus
accounts of the Corporation, less (i) any known, or estimated if not known,
excess of the value, as recorded on the Corporation's books, over the original
cost, of used and useful utility plant and other property, unless such excess is
being amortized, or provided for by reserves, and (ii) any excess of the
aggregate amount payable on the involuntary dissolution, liquidation or winding
up of the Corporation, in respect of all its outstanding shares of preferred
stock over the aggregate par value of, or stated value represented by, such
preferred shares unless such excess is being amortized, or provided for by
reserves, and (iii) any items such as debt discount, premium and expense,
capital stock discount and expense and similar items, classified as assets on
the balance sheet of the Corporation, unless such items are being amortized, or
provided for by reserves. The "total capital of the Corporation" shall consist
of the sum of (i) the principal amount of all outstanding indebtedness of the
Corporation maturing one year or more after the date of the issue thereof and
(ii) the par or stated value of all outstanding capital stock (including
A-7
premiums on capital stock) of all classes of the Corporation, and (iii) the
surplus accounts of the Corporation. All indebtedness and capital stock owned by
the Corporation shall be excluded in determining total capital. Surplus accounts
used in computing capitalization ratios shall be adjusted to eliminate all
amounts, if any, restricted by the provisions of any indenture, or supplements
thereto, securing bonds of the Corporation and to reflect payment of the
proposed Common Stock dividend. In computing, for the purposes of this Paragraph
(7), the "net income of the Corporation available for dividends on its Common
Stock" for any period of twelve consecutive calendar months, there shall be
deducted from such net income an amount equal to the annual charge made by the
Corporation in such period for the amortization of Plant Acquisition Adjustments
Account. Purchases or other acquisitions of Common Stock shall be deemed, for
the purposes of this Paragraph (7), to have been declared as of the date on
which such purchases or acquisitions are consummated.
(8) (a) Every record holder of outstanding shares of Common Stock and every
record holder of outstanding shares of Preferred Stock shall be entitled to vote
in respect of the election of directors and upon all other matters, except as
otherwise provided in this Paragraph (8) and except as otherwise provided in
Paragraphs (5) and (6) of this Article III. Every holder of Common Stock at any
time entitled to vote shall have one vote for each share held by him. Every
holder of Preferred Stock at any time entitled to vote shall have, for each
share of Preferred Stock held by him, that number of votes (including any
fractional vote) determined by dividing the stated value of such share by 100.
(b) If and when dividends, payable on the Preferred Stock, shall be in
default in an amount equivalent to *four full quarter-yearly dividends* THE
DIVIDEND REQUIREMENT FOR ONE YEAR on all shares of Preferred Stock then
outstanding (PROVIDED THAT, IN THE CASE OF ANY SHARES OF PREFERRED STOCK WHICH
DO NOT HAVE A FIXED RATE OF DIVIDEND, THE DIVIDEND REQUIREMENT FOR ONE YEAR
SHALL BE CALCULATED BY USING THE RATE OF DIVIDEND IN EFFECT WITH RESPECT TO SUCH
SHARES AT THE TIME OF SUCH DETERMINATION) and until all dividends then in
default on the Preferred Stock shall have been paid, the record holders of the
shares of Preferred Stock, voting separately as one class, shall be entitled, at
each meeting of the shareholders at which directors are elected, to elect the
smallest number of directors necessary to constitute a majority of the full
Board of Directors, and the record holders of the shares of Common Stock, voting
separately as a class, shall be entitled at any such meeting to elect the
remaining directors of the Corporation. The term of office of each director of
the Corporation shall terminate upon the election of his successor. At each
election of directors by a class vote pursuant to the provisions of this
paragraph, the class first electing the directors which it is entitled to elect
shall name the directors who are to be succeeded by the directors then elected
by such class, whereupon the term of office of the directors so named shall
terminate. The term of office of the directors not so named shall terminate upon
the election by the other class of the directors which it is entitled to elect.
(c) If and when all dividends then in default on the Preferred Stock then
outstanding shall be paid, the holders of the shares of the Preferred Stock
shall thereupon be divested of the special right with respect to the election of
directors provided in subparagraph (b) of this Paragraph (8), and the voting
power of holders of shares of the Preferred Stock and the Common Stock shall
revert to the status existing before the occurrence of such default, but always
subject to the same provisions for vesting such special right in the Preferred
Stock in case of further like default or defaults in dividends thereon.
Dividends shall be deemed to have been paid, as that term is used in
subparagraph (c) of this Paragraph (8), whenever such dividends shall
A-8
have been declared and paid, or declared and provision made for the payment
thereof, or whenever there shall be surplus and net profits of the Corporation
legally available for the payment thereof which shall have accrued since the
date of the default giving rise to such special voting right.
(d) In case of any vacancy in the Board of Directors occurring among the
directors elected by the holders of the shares of the Preferred Stock, as a
class, pursuant to subparagraph (b) of this Paragraph (8), the holders of the
shares of the Preferred Stock then outstanding and entitled to vote may elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In case of a vacancy in the Board of Directors occurring among
the directors elected by the holders of the shares of the Common Stock, as a
class, pursuant to subparagraph (b) of this Paragraph (8), the holders of the
shares of the Common Stock then outstanding and entitled to vote may elect a
successor to hold office for the unexpired term of the director whose place
shall be vacant. In all other cases, any vacancy occurring among the directors
shall be filled in the manner provided in Article IV of these Restated Articles
of Organization.
(e) Whenever the holders of the shares of the Preferred Stock, as a class,
become entitled to elect directors of the Corporation pursuant to subparagraph
(b) or (d) of this Paragraph (8), or whenever the holders of the shares of the
Common Stock, as a class, become entitled to elect directors of the Corporation
pursuant to subparagraph (b) or (d) of this Paragraph (8), a special meeting of
the holders of the shares of the Preferred Stock or of the holders of the shares
of the Common Stock, as the case may be, for the election of such directors,
shall be held at any time thereafter upon call by the holders of not less than
1,000 shares of the Common Stock or by the holders of shares of the Preferred
Stock having an aggregate stated value of not less than $100,000, as the case
may be, or upon call by the Secretary of the Corporation at the request in
writing of any stockholder addressed to him at the principal office of the
Corporation. If no such special meeting be called or be requested to be called,
the election of the directors to be elected by the holders of the shares of the
Preferred Stock, voting as a class, and of those to be elected by the holders of
the shares of the Common Stock, voting as a class, shall take place at the next
annual meeting of the stockholders of the Corporation next succeeding the
accrual of such special voting right. At all meetings of stockholders at which
directors are elected during such times as the holders of shares of the
Preferred Stock shall have the special right, voting separately as one class, to
elect directors pursuant to subparagraph (b) of this Paragraph (8), the presence
in person or by proxy of the holders of a majority of the outstanding shares of
the Common Stock shall be required to constitute a quorum of such class for the
election of directors, and the presence in person or by proxy of the holders of
that number of the outstanding shares of all series of the Preferred Stock
having a majority of the total number of votes possessed by all holders of
Preferred Stock entitled to vote at such meeting shall be required to constitute
a quorum of such class for the election of directors; provided, however, that
the absence of a quorum of the holders of stock of either such class shall not
prevent the election at any such meeting or adjournment thereof of directors by
the other such class if the necessary quorum of the holders of stock of such
class is present in person or by proxy at such meeting; and provided further
that in the absence of a quorum of the holders of stock of either such class,
the holders of the stock of such class who are present in person or by proxy
shall have power upon the majority vote of those votes represented at the
meeting to adjourn the election of the directors to be elected by such class
from time to time without notice other than announcement at the meeting until
the requisite number of votes of such class shall be represented by stockholders
present in person or by proxy.
A-9
(f) Except when some mandatory provision of law shall be controlling, no
particular series of the Preferred Stock shall be entitled to vote as a separate
series or class on any matter and all shares of the Preferred Stock of all
series shall be deemed to constitute but one class for any purpose for which a
vote of the stockholders of the Corporation by classes may now or hereafter be
required.
(9) UPON THE COMPLETION OF ANY NECESSARY FILINGS RELATING TO A RESOLUTION
ADOPTED BY THE BOARD OF DIRECTORS OF THE CORPORATION AUTHORIZING THE ISSUE OF
SHARES OF A NEW SERIES OF PREFERRED STOCK PURSUANT TO PARAGRAPH (1) HEREOF, THE
TERMS OF THE NEW SERIES AS ADOPTED THEREIN, WHICH SHALL CONSTITUTE AN AMENDMENT
OF THESE RESTATED ARTICLES OF ORGANIZATION, SHALL BE DEEMED TO BE AN ADDITIONAL
SUBPARAGRAPH TO THIS PARAGRAPH (9), AND MAY BE SO CERTIFIED BY ANY OFFICER OF
THE CORPORATION OR BY ANY PUBLIC OFFICIAL WHOSE DUTY IT MAY BE TO CERTIFY COPIES
OF THESE RESTATED ARTICLES OF ORGANIZATION OR AMENDMENTS THERETO.
(A) 4 1/2% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "4 1/2%
PREFERRED STOCK". THE NUMBER OF SHARES OF 4 1/2% PREFERRED STOCK SHALL BE
LIMITED TO 100,000. THE STATED VALUE OF THE 4 1/2% PREFERRED STOCK SHALL
BE $100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 4 1/2% PREFERRED STOCK SHALL BE 4 1/2% PER ANNUM ON THE
STATED VALUE THEREOF.
(C) REDEMPTION. THE SHARES OF 4 1/2% PREFERRED STOCK SHALL BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE BOARD OF DIRECTORS OF THE
CORPORATION, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, UPON THE
NOTICE AND IN THE MANNER AND WITH THE EFFECT PROVIDED IN THESE RESTATED
ARTICLES OF ORGANIZATION AT THE STATED VALUE PER SHARE, TOGETHER WITH
UNPAID ACCRUED DIVIDENDS TO THE DATE OF REDEMPTION, AND, IN ADDITION
THERETO, A PREMIUM OF $7 PER SHARE. ALL SHARES OF 4 1/2% PREFERRED STOCK
WHICH SHALL AT ANY TIME HAVE BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE
CORPORATION SHALL, AFTER SUCH REDEMPTION OR REACQUISITION, HAVE THE
STATUS OF AUTHORIZED BUT UNISSUED SHARES OF PREFERRED STOCK OF THE
CORPORATION, WITHOUT DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE
MORE DESIGNATED AS PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS
OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 4 1/2% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 4 1/2% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(B) 4.80% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "4.80%
PREFERRED STOCK". THE NUMBER OF SHARES OF 4.80% PREFERRED STOCK SHALL BE
LIMITED TO 75,000. THE STATED VALUE OF THE 4.80% PREFERRED STOCK SHALL BE
$100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 4.80% PREFERRED STOCK SHALL BE 4.80% PER ANNUM ON THE
STATED VALUE THEREOF.
(C) REDEMPTION. THE SHARES OF 4.80% PREFERRED STOCK SHALL BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE BOARD OF DIRECTORS OF THE
CORPORATION, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, UPON THE
NOTICE AND IN THE MANNER AND WITH THE EFFECT PROVIDED IN THESE RESTATED
ARTICLES OF ORGANIZATION
A-10
AT THE STATED VALUE PER SHARE, TOGETHER WITH UNPAID ACCRUED DIVIDENDS TO
THE DATE OF REDEMPTION, AND, IN ADDITION THERETO, A PREMIUM OF $1 PER
SHARE. ALL SHARES OF 4.80% PREFERRED STOCK WHICH SHALL AT ANY TIME HAVE
BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE CORPORATION SHALL, AFTER
SUCH REDEMPTION OR REACQUISITION, HAVE THE STATUS OF AUTHORIZED BUT
UNISSUED SHARES OF PREFERRED STOCK OF THE CORPORATION, WITHOUT
DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE MORE DESIGNATED AS
PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 4.80% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 4.80% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(C) 4.96% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "4.96%
PREFERRED STOCK". THE NUMBER OF SHARES OF 4.96% PREFERRED STOCK SHALL BE
LIMITED TO 65,000. THE STATED VALUE OF THE 4.96% PREFERRED STOCK SHALL BE
$100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 4.96% PREFERRED STOCK SHALL BE 4.96% PER ANNUM ON THE
STATED VALUE THEREOF.
(C) REDEMPTION. THE SHARES OF 4.96% PREFERRED STOCK SHALL BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE BOARD OF DIRECTORS OF THE
CORPORATION, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, UPON THE
NOTICE AND IN THE MANNER AND WITH THE EFFECT PROVIDED IN THESE RESTATED
ARTICLES OF ORGANIZATION AT THE STATED VALUE PER SHARE, TOGETHER WITH
UNPAID ACCRUED DIVIDENDS TO THE DATE OF REDEMPTION, AND, IN ADDITION
THERETO, A PREMIUM OF $1 PER SHARE. ALL SHARES OF 4.96% PREFERRED STOCK
WHICH SHALL AT ANY TIME HAVE BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE
CORPORATION SHALL, AFTER SUCH REDEMPTION OR REACQUISITION, HAVE THE
STATUS OF AUTHORIZED BUT UNISSUED SHARES OF PREFERRED STOCK OF THE
CORPORATION, WITHOUT DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE
MORE DESIGNATED AS PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS
OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 4.96% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 4.96% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(D) 4.40% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "4.40%
PREFERRED STOCK". THE NUMBER OF SHARES OF 4.40% PREFERRED STOCK SHALL BE
LIMITED TO 30,000. THE STATED VALUE OF THE 4.40% PREFERRED STOCK SHALL BE
$100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 4.40% PREFERRED STOCK SHALL BE 4.40% PER ANNUM ON THE
STATED VALUE THEREOF.
(C) REDEMPTION. THE SHARES OF 4.40% PREFERRED STOCK SHALL BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE BOARD OF DIRECTORS OF THE
CORPORATION, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, UPON THE
NOTICE AND IN THE MANNER AND WITH THE EFFECT PROVIDED IN THESE RESTATED
ARTICLES OF ORGANIZATION
A-11
AT THE STATED VALUE PER SHARE, TOGETHER WITH UNPAID ACCRUED DIVIDENDS TO
THE DATE OF REDEMPTION, AND, IN ADDITION THERETO, A PREMIUM OF $4.50 PER
SHARE. ALL SHARES OF 4.40% PREFERRED STOCK WHICH SHALL AT ANY TIME HAVE
BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE CORPORATION SHALL, AFTER
SUCH REDEMPTION OR REACQUISITION, HAVE THE STATUS OF AUTHORIZED BUT
UNISSUED SHARES OF PREFERRED STOCK OF THE CORPORATION, WITHOUT
DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE MORE DESIGNATED AS
PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 4.40% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 4.40% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(E) 4.76% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "4.76%
PREFERRED STOCK". THE NUMBER OF SHARES OF 4.76% PREFERRED STOCK SHALL BE
LIMITED TO 30,000. THE STATED VALUE OF THE 4.76% PREFERRED STOCK SHALL BE
$100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 4.76% PREFERRED STOCK SHALL BE 4.76% PER ANNUM ON THE
STATED VALUE THEREOF.
(C) REDEMPTION. THE SHARES OF 4.76% PREFERRED STOCK SHALL BE
SUBJECT TO REDEMPTION AT THE OPTION OF THE BOARD OF DIRECTORS OF THE
CORPORATION, IN WHOLE AT ANY TIME OR IN PART FROM TIME TO TIME, UPON THE
NOTICE AND IN THE MANNER AND WITH THE EFFECT PROVIDED IN THESE RESTATED
ARTICLES OF ORGANIZATION AT THE STATED VALUE PER SHARE, TOGETHER WITH
UNPAID ACCRUED DIVIDENDS TO THE DATE OF REDEMPTION, AND, IN ADDITION
THERETO, A PREMIUM OF $1 PER SHARE. ALL SHARES OF 4.76% PREFERRED STOCK
WHICH SHALL AT ANY TIME HAVE BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE
CORPORATION SHALL, AFTER SUCH REDEMPTION OR REACQUISITION, HAVE THE
STATUS OF AUTHORIZED BUT UNISSUED SHARES OF PREFERRED STOCK OF THE
CORPORATION, WITHOUT DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE
MORE DESIGNATED AS PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS
OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 4.76% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 4.76% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(F) 6.20% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "6.20%
PREFERRED STOCK". THE NUMBER OF SHARES OF 6.20% PREFERRED STOCK SHALL BE
LIMITED TO 150,000. THE STATED VALUE OF THE 6.20% PREFERRED STOCK SHALL
BE $100 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 6.20% PREFERRED STOCK SHALL BE 6.20% PER ANNUM ON THE
STATED VALUE THEREOF, AND SUCH DIVIDENDS SHALL BE CUMULATIVE FROM AND
INCLUDING SEPTEMBER 1, 1993.
(C) REDEMPTION. THE 6.20% PREFERRED STOCK SHALL NOT BE REDEEMABLE
PRIOR TO OCTOBER 15, 2003. ON AND AFTER OCTOBER 15, 2003, THE SHARES
OF 6.20% PREFERRED STOCK SHALL BE SUBJECT TO REDEMPTION AT THE
A-12
OPTION OF THE BOARD OF DIRECTORS OF THE CORPORATION, IN WHOLE AT ANY TIME
OR IN PART FROM TIME TO TIME, UPON THE NOTICE AND IN THE MANNER AND WITH
THE EFFECT PROVIDED IN THESE RESTATED ARTICLES OF ORGANIZATION AT THE
STATED VALUE PER SHARE, TOGETHER WITH UNPAID ACCRUED DIVIDENDS TO THE
DATE OF REDEMPTION, AND, IN ADDITION THERETO, THE FOLLOWING PREMIUM:OPERATIONS
SELECTED FINANCIAL DATA
IF REDEEMED DURING THE IF REDEEMED DURING THE
TWELVE MONTH PERIOD TWELVE MONTH PERIOD
BEGINNING OCTOBER 15 PREMIUM BEGINNING OCTOBER 15 PREMIUM
- - ---------------------------------------- ----------- ---------------------------------------- -----------1994 1993 1992 1991 1990
------ ------ ------ ------ ------
(IN MILLIONS)
2003....................................
Operating revenues.................................. $ 3.10 2008....................................674 $ 1.55
2004.................................... 2.79 2009.................................... 1.24
2005.................................... 2.48 2010.................................... 0.93
2006.................................... 2.17 2011.................................... 0.62
2007.................................... 1.86 2012.................................... 0.31
THEREAFTER.............................. 0.00645 $ 601 $ 610 $ 585
Net income.......................................... $ 68 $ 60 $ 55 $ 64 $ 61
Total assets (at December 31)....................... $1,585 $1,551 $1,414 $1,250 $1,213
Long-term debt, net (at December 31)................ $ 337 $ 336 $ 336 $ 291 $ 328
ALL SHARES OF 6.20% PREFERRED STOCK WHICH SHALL AT ANY TIME HAVE BEEN
REDEEMED OR OTHERWISE REACQUIRED BY THE CORPORATION SHALL, AFTER SUCH
REDEMPTION OR REACQUISITION, HAVE THE STATUS OF AUTHORIZED BUT UNISSUED
SHARES OF PREFERRED STOCK OF THE CORPORATION, WITHOUT DESIGNATION AS TO
SERIES, UNTIL SUCH SHARES ARE ONCE MORE DESIGNATED AS PART OF A
PARTICULAR SERIES BY THE BOARD OF DIRECTORS OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 6.20% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
(E) OTHER TERMS. SHARES OF 6.20% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION1994 COMPARED WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
(G) 6.50% PREFERRED STOCK
(A) DESIGNATION AND AMOUNT. THE CORPORATION IS AUTHORIZED TO ISSUE
A SERIES OF PREFERRED STOCK, WHICH IS HEREBY DESIGNATED AS "6.50%
PREFERRED STOCK". THE NUMBER OF SHARES OF 6.50% PREFERRED STOCK SHALL BE
LIMITED TO 599,460. THE STATED VALUE OF THE 6.50% PREFERRED STOCK SHALL
BE $25 PER SHARE.
(B) RATE OF DIVIDEND. THE RATE OF DIVIDEND APPLICABLE TO EACH OF
THE SHARES OF 6.50% PREFERRED STOCK SHALL BE 6.50% PER ANNUM ON THE
STATED VALUE THEREOF, AND SUCH DIVIDENDS SHALL BE CUMULATIVE FROM AND
INCLUDING SEPTEMBER 1, 1993.
(C) REDEMPTION. THE 6.50% PREFERRED STOCK SHALL NOT BE REDEEMABLE
PRIOR TO NOVEMBER 1, 1998. ON AND AFTER NOVEMBER 1, 1998, THE SHARES
OF 6.50% PREFERRED STOCK SHALL BE SUBJECT TO REDEMPTION AT THE OPTION OF
THE BOARD OF DIRECTORS OF THE CORPORATION, IN WHOLE AT ANY TIME OR IN
PART FROM TIME TO TIME, UPON THE NOTICE AND IN THE MANNER AND WITH THE
EFFECT PROVIDED IN THESE RESTATED ARTICLES OF ORGANIZATION AT THE STATED
VALUE PER SHARE, TOGETHER WITH UNPAID ACCRUED DIVIDENDS TO THE DATE OF
REDEMPTION. ALL SHARES OF 6.50% PREFERRED STOCK WHICH SHALL AT ANY TIME
HAVE BEEN REDEEMED OR OTHERWISE REACQUIRED BY THE CORPORATION SHALL,
AFTER SUCH REDEMPTION OR REACQUISITION, HAVE THE STATUS OF AUTHORIZED BUT
UNISSUED SHARES OF PREFERRED STOCK OF THE CORPORATION, WITHOUT
DESIGNATION AS TO SERIES, UNTIL SUCH SHARES ARE ONCE MORE DESIGNATED AS
PART OF A PARTICULAR SERIES BY THE BOARD OF DIRECTORS OF THE CORPORATION.
(D) NO SINKING FUND. SHARES OF 6.50% PREFERRED STOCK SHALL NOT BE
ENTITLED TO ANY SINKING FUND.
A-13
(E) OTHER TERMS. SHARES OF 6.50% PREFERRED STOCK SHALL BE SUBJECT
TO THE OTHER TERMS, PROVISIONS AND RESTRICTIONS SET FORTH IN THESE
RESTATED ARTICLES OF ORGANIZATION WITH RESPECT TO THE SHARES OF PREFERRED
STOCK OF THE CORPORATION.
*(9)*(10) No share of stock or evidence of indebtedness shall be deemed to
be "outstanding", as that term is used in these Restated Articles of
Organization if, prior to or concurrently with the event in reference to which a
determination as to the amount thereof outstanding is to be made, the requisite
funds for the redemption thereof shall be deposited in trust for that purpose
and the requisite notice for the redemption thereof shall be given or the
depositary of such funds shall be irrevocably authorized and directed to give or
complete such notice of redemption.
*(10)*(11) No holder of capital stock of the Corporation shall have any
preemptive right to purchase, acquire or subscribe to any capital stock or other
securities issued or sold by the Corporation, including any such capital stock
or other securities now or hereafter authorized.
*(11)*(12) The Corporation reserves the right to increase or decrease its
authorized capital stock, or any class or series thereof, or to reclassify the
same, and to amend, alter, change or repeal any provision contained in these
Restated Articles of Organization, or in any amendment thereto, in the manner
now or hereafter prescribed by law, but subject to such conditions and
limitations as are hereinbefore prescribed, and all rights conferred upon
stockholders in these Restated Articles of Organization, or any amendment
thereto, are granted subject to this reservation.
* * *
A-14
[LOCATION OF MEETING MAP]
[logo]
WP&L
Wisconsin Power & Light
PROXY CARD AND ANNUAL MEETING RESERVATION
The Annual Meeting of Shareowners will be held at the Dane County Coliseum, 1881
Expo Mall, Madison, Wisconsin, on Wednesday, May 18, 1994, at 10:00 a.m.. The
enclosed Proxy Statement contains additional information about the meeting
location.
Please review, complete and SIGN the Proxy Card.
----
If you are attending the Annual Meeting, please detach and return the completed
Annual Meeting reservation Form with the SIGNED PROXY CARD in the enclosed
------
envelope.
TO AVOID UNNECESSARY EXPENSE, WE ARE ASKING SHAREOWNERS TO CONTACT SHAREOWNER
SERVICES AT 1-800-356-5343 IF THEY NEED TO CANCEL THEIR RESERVATION.
PLEASE DETACH AND RETURN THE COMPLETED AND SIGNED PROXY CARD.
------
IMPORTANT
---------
YOU ARE URGED TO DATE AND SIGN THE ENCLOSED PROXY AND RETURN IT PROMPTLY. THIS
WILL HELP SAVE THE EXPENSE OF FOLLOW-UP LETTERS TO SHAREOWNERS WHO HAVE NOT
RESPONDED.
TOLL FREE SHAREOWNER INFORMATION NUMBERS
- - ----------------------------------------
Local (Madison)..................................................252-3110
All Other Areas............................................1-800-356-5343
Please FOLD here and DETACH Proxy Card
1. ELECTION OF DIRECTORS- Nominees for terms ending:
(*) TO WITHHOLD AUTHORITY TO VOTE FOR ANY INDIVIDUAL NOMINEE, STRIKE A LINE
THROUGH THE NOMINEE'S NAME IN THE LIST BELOW AND MARK AN (X) IN THE 'FOR
ALL EXCEPT' BOX.
1995 - Arnold M. Nemirow, Judith D. Pyle
1996 - Rockne G. Flowers
1997 - Les Aspin, Erroll B. Davis, Jr., Milton E. Neshek, Carol T. Toussaint
For All
Withhold For All
For All Except(*)
2. PROPOSAL TO APPOINT ARTHUR ANDERSEN & CO. AS INDEPENDENT AUDITORS FOR 1994.
For
Against
Abstain
3. PROPOSAL TO AMEND THE ARTICLES OF ORGANIZATION TO ALLOW FOR THE ISSUANCE
OF VARIABLE RATE PREFERRED STOCK AND TO EFFECT CERTAIN OTHER CLARIFYING
CHANGES.
For
Against
Abstain
PROXY
Please date and sign your name(s) exactly as shown above and mail promptly in
the enclosed envelope.
- - ------------------------------------------------- Dated --------------------
- - ------------------------------------------------- Dated --------------------
(Signature(s)
IMPORTANT: When signing as attorney, executor, administrator, trustee, or
guardian, please give your full title as such. In the case of JOINT HOLDERS,
all should sign.
I (WE) WILL ATTEND THE ANNUAL MEETING LUNCHEON.
Please list your name(s) and your guest(s) below:
- - -------------------------------------------------
- - -------------------------------------------------
- - -------------------------------------------------
RETURN THIS STUB WITH YOUR PROXY CARD TO RESERVE LUNCH.
[logo]
WP&L
Wisconsin Power & Light
P.O. Box 2568
Madison, WI 53701-2568
ANNUAL MEETING OF SHAREOWNERS - MAY 18, 1994
The undersigned appoints Erroll B. Davis, Jr. and Edward M. Gleason, or
either of them, attorneys and proxies, with power of substitution, to vote all
shares of preferred stock1993
OVERVIEW
Net income of Wisconsin Power and Light Company ("WPL" or the "Company")
increased to $68.2 million in 1994 compared with $60.2 million in 1993. Net
income for 1994 was significantly affected by two non-recurring items. These
items were the reversal of recorda coal contract penalty in the name1st quarter and costs
associated with early retirement and severance programs, which primarily
occurred in the 4th quarter. Both of these items are discussed in the undersigned at"Other
Events" section of Management's Discussion and Analysis. The following breakout
presents the closerecurring aspects of business1994's operations.
1994 1993
----- -----
(IN MILLIONS)
Net Income, as reported........................................ $68.2 $60.2
Less: Increase in Net Income from reversal of coal contract
penalty...................................................... (5.3) (--)
Add: Decrease in Net Income from costs associated with early
retirement and severance programs............................ 8.2 1.1
----- -----
Net Income before the above non-recurring items................ $71.9 $61.3
===== =====
The increase in the "Net income before the above non-recurring items"
primarily reflects an increase in operating earnings.
A-3
25
ELECTRIC OPERATIONS
REVENUES &
COSTS PER KWH
KWH'S SOLD, GENERATED SOLD GENERATED CUSTOMERS AT END
REVENUES AND COSTS AND PURCHASED & PURCH. OF YEAR
------------------- % ----------------------- % --------------- -----------------
1994 1993 CHANGE 1994 1993 CHANGE 1994 1993 1994 1993
-------- -------- ------ ---------- ---------- ------ ------ ------ ------- -------
(IN THOUSANDS) (IN THOUSANDS)
Residential & farm.... $194,242 $184,176 5% 2,776,895 2,751,363 1% $ .070 $ .067 325,063 316,870
Industrial............ 140,487 132,903 6 3,764,953 3,540,082 6 .037 .038 776 714
Commercial............ 101,382 95,977 6 1,688,349 1,629,911 4 .060 .059 43,868 42,884
Wholesale & Class A... 86,400 78,955 9 2,574,121 2,388,131 8 .034 .033 81 39
Other................. 9,236 11,176 -17 54,518 51,073 7 .169 .219 1,477 1,236
-------- -------- ---------- ---------- ------ ------ ------- -------
Total............... 531,747 503,187 6 10,858,836 10,360,560 5 $ .049 $ .049 371,265 361,743
========== ========== ===== ===== ======== ========
Elec. prod. fuels..... 123,469 123,919 0 9,445,950 9,180,484 3 $ .013 $ .013
========== ========== ===== =====
Purchased power....... 37,913 28,574 33 1,780,451 1,481,993 20% $ .021 $ .019
========== ========== ======= ===== =====
-------- --------
Margin................ $370,365 $350,694 6%
========= ========= =======
WPL's electric margin increased during 1994 compared to 1993. The primary
factor was a 3.8 percent retail rate increase effective October 1, 1993. Strong
economic conditions in the industrial and commercial customer classes
contributed higher sales and customer growth. A colder than normal January and a
very warm mid-September offset relatively mild summer conditions in July and
August making 1994 a relatively average year in terms of impacts on March 22,sales
volumes. Electric production fuel costs were reasonably stable for 1994. The
volume of purchased power increased as a result of WPL's efforts to conserve
coal inventories during a rail strike in the 3rd quarter of 1994. See "Other
Events" for details.
GAS OPERATIONS
REVENUES &
COSTS PER
THERMS SOLD & THERM SOLD & CUSTOMERS AT END
REVENUES AND COSTS PURCHASED PURCH. OF YEAR
------------------- % ----------------- % ------------ -----------------
1994 1993 CHANGE 1994 1993 CHANGE 1994 1993 1994 1993
-------- -------- ------ ------- ------- ------ ---- ---- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
Residential........... $ 71,555 $ 71,632 0% 119,562 120,005 0% $.60 $.60 124,938 120,829
Firm.................. 41,918 40,748 3 87,487 87,038 1 .48 .47 15,531 15,088
Interruptible......... 8,777 10,685 -22 24,809 27,872 -11 .35 .38 272 261
Transportation........ 15,112 14,205 5 85,364 84,877 1 .18 .18 135 85
Other................. 213 -- -- -- -- -- -- -- 90 --
-------- -------- ------- ------- ---- ---- ------- -------
Total............... 137,575 137,270 1 317,222 319,792 0 $.43 $.43 140,966 136,263
======== ======== ==== ==== ======== ========
-------- --------
Purchased gas......... 86,586 90,505 -4 293,547 285,531 4% $.29 $.32
======== ======== ======= ==== ====
-------- --------
Margin................ $ 50,989 $ 46,765 10%
========= ========= =======
Gas margin increased in 1994 atfrom 1993 primarily based on two factors: 1) a
1.4 percent retail rate increase effective October 1, 1993 and, 2) an increase
in customers in the Annual Meetinghigher rate firm service which
A-4
26
improved the sales mix. The overall cost of Shareownerspurchased gas declined reflecting
WPL's effective use of opportunities on the gas spot market.
OTHER OPERATION
Other operation expense increased due to the early retirement and severance
programs discussed in the "Other Events" section.
MAINTENANCE
Maintenance expense decreased between years due to variation in the timing
and extent of maintenance on its generating facilities between years.
Secondarily, a severe storm in the summer of 1993 increased 1993's maintenance
expense related to service restoration.
DEPRECIATION AND AMORTIZATION
Depreciation expense increased, principally reflecting increased property
additions and increased decommissioning costs.
OTHER INCOME AND (DEDUCTIONS)
Other income increased resulting from the reversal of a coal contract
penalty discussed later in the "Other Events" section.
INCOME TAXES
Income taxes increased between years primarily due to higher taxable
income.
1993 COMPARED WITH 1992
COMPANY OVERVIEW
Net income of the Company increased to $60.2 million in 1993 compared with
$55.4 million in 1992. The principle factors leading to increased earnings
included warmer summer weather and lower electric fuel costs per kWh which
yielded higher electric margins. These increases were somewhat offset by
increased depreciation expense resulting from additional investment in utility
plant and property additions, a change in the mix of gas sales from higher
margin sales to lower margin sales, the increase in the federal corporate tax
rate from 34 percent to 35 percent and a one-time 4-cent-per-share charge
associated with a voluntary separation program for the executive management
group.
A-5
27
ELECTRIC OPERATIONS
REVENUES &
COSTS PER KWH
SOLD
KWH'S SOLD, GENERATED GENERATED & CUSTOMERS AT END
REVENUES AND COSTS AND PURCHASED PURCH. OF YEAR
------------------- % ---------------------- % ------------- -----------------
1993 1992 CHANGE 1993 1992 CHANGE 1993 1992 1993 1992
-------- -------- ------ ---------- --------- ------ ----- ----- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
Residential and farm... $184,176 $171,887 7% 2,751,363 2,614,439 5% $.067 $.066 316,870 310,702
Industrial............. 132,903 128,467 3 3,540,082 3,377,132 5 .038 .038 714 727
Commercial............. 95,977 91,707 5 1,629,911 1,551,823 5 .059 .059 42,884 42,287
Wholesale & Class A.... 78,955 77,485 2 2,388,131 2,208,419 8 .033 .035 39 39
Other.................. 11,176 8,189 36 51,073 55,230 -8 .219 .148 1,236 950
-------- -------- ---------- --------- ----- ----- ------- -------
Total................ 503,187 477,735 5 10,360,560 9,807,043 6 $.049 $.049 361,743 354,705
========== ========= ======= ===== ===== ======== ========
Elec. prod. fuels...... 123,919 123,440 .4 9,186,134 9,041,317 2 $.014 $.014
========== ========= ======= ===== =====
Purchased power........ 28,574 24,427 17 1,481,993 1,124,667 32% $.019 $.022
========== ========= ======= ===== =====
-------- --------
Margin................. $350,694 $329,868 6%
========= ========= =======
Electric margin in dollars increased during 1993 compared with 1992 due to
increased demand for electricity brought on by warmer summer weather.
Residential customers, being the most weather sensitive, experienced the most
significant increases. Wisconsin's strong economy kept the commercial and
industrial classes growing steadily. These increases were coupled with declining
electric production fuel costs per kWh. The decrease in electric production fuel
cost per kWh was due to WPL's aggressive pursuit of additional spot coal
purchase opportunities as its longer term contracts began to expire.
Additionally, a highly competitive rail transportation environment significantly
reduced the cost of transporting the coal. Also, lower cost purchased power
became available due to excess capacity in the bulk power market.
GAS OPERATIONS
% %
CHANGE CHANGE
------ REVENUES & THERMS ------ COSTS PER
REVENUES THERM SOLD CUSTOMERS AT END
AND COSTS SOLD & PURCHASED & PURCH. OF YEAR
------------------- ----------------- ------------ -----------------
1993 1992 1993 1992 1993 1992 1993 1992
-------- -------- ------- ------- ---- ---- ------- -------
(IN THOUSANDS) (IN THOUSANDS)
Residential........... $ 71,632 $ 63,699 12% 120,005 114,131 5% $.60 $.56 120,829 116,642
Firm.................. 40,748 37,154 10 87,038 82,087 6 .47 .45 15,088 14,656
Interruptible......... 10,685 9,554 12 27,872 25,497 9 .38 .37 261 262
Transportation........ 14,205 8,674 72 84,877 69,244 23 .18 .13 85 109
Other................. -- 281 -- -- 1,923 -- -- .15 -- --
-------- -------- ------- ------- ---- ---- ------- -------
Total............... 137,270 119,362 16 319,792 292,882 10 $.43 $.41 136,263 131,669
======== ======== ====== ==== ==== ======== ========
Purchased gas......... 90,505 77,112 18 285,531 260,354 11% $.32 $.30
======== ======== ====== ==== ====
-------- --------
Margin................ $ 46,765 $ 42,250 11%
========= ========= =======
Gas revenues for 1992 were affected by the recognition of a $4.9 million
before-tax refund to its natural gas customers resulting from an adjustment in
the calculation of the purchased gas adjustment clause.
A-6
28
Without the impact of this revenue adjustment, comparative gas margins would
have declined for 1993 compared with 1992.
The overall increases in gas revenues and purchased gas costs between years
resulted primarily from increased volumes procured on behalf of transportation
customers. This had the impact of decreasing margins as a percentage of total
revenues. A change in the mix of gas sales from higher margin residential sales
to lower margin sales also moved margins downward. Offsetting this decline,
Wisconsin's strong economy enabled growth in the commercial and industrial
classes, and there was also some overall increase in the demand for natural gas
due to colder weather.
OTHER OPERATION EXPENSE
An increase in other operation expense resulted from higher WPL employee
benefit expense (see Notes to Consolidated Financial Statements, Note 7). These
increases were offset somewhat by decreases in conservation program expenditures
and decreases in fees associated with the sale of accounts receivable due to a
decline in interest rates. Additionally, cost management efforts have helped
control annual inflationary pressures on general and administrative costs.
DEPRECIATION AND AMORTIZATION
Depreciation and amortization expense increased, principally reflecting
increased property additions and the commencement of deferred charge
amortizations approved in WPL's rate orders received in December 1992 and
October 1993. The most significant amortizations include the amortization
related to an acquisition adjustment which resulted from the purchase of
transmission facilities and the amortization of costs incurred related to the
remediation of former manufactured gas plant sites (see Notes to the
Consolidated Financial Statements, Note 11).
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION ("AFUDC")
Total AFUDC increased in 1993 compared with 1992, reflecting the greater
amounts of construction work in progress including the costs associated with
WPL's construction of two 86-megawatt combustion-turbine generators.
LIQUIDITY AND CAPITAL RESOURCES
RATES AND REGULATORY MATTERS
On December 9, 1994, the Public Service Commission of Wisconsin (PSCW)
issued rate order UR-109, effective for a two-year period beginning January 1,
1995. The order included the following decisions on WPL's retail rate
application as filed on February 4, 1994: 1) electric revenues will be decreased
by approximately $12.3 million (2.8 percent) annually, 2) natural gas revenues
will be increased by approximately $.7 million (.5 percent) annually, 3) return
on common equity will be 11.5 percent versus WPL's previously allowed return on
equity of 11.6 percent.
Further, the PSCW approved certain incentive programs described below:
1. The electric fuel adjustment mechanism was eliminated. In its
absence, WPL will benefit from reductions in fuel cost. Conversely, WPL
will be exposed to increases in fuel costs.
A-7
29
2. The automatic purchased gas adjustment clause was also eliminated.
In the future, the fluctuations in the commodity cost of gas above or below
a prescribed commodity price index will serve to increase or decrease WPL's
margin on gas sales. Fixed demand costs are excluded from the incentive
program. Both benefits and exposures are subject to ratepayer sharing
provisions, which are capped at $1.1 million.
3. In order to promote air quality and reliability, there are SO2
emissions and service reliability incentive clauses. Positive incentive
available under these clauses is $1.5 million for the SO2 emissions and $.5
million for the service reliability. WPL's earnings are also negatively
exposed for equal amounts. Since WPL is allowed to collect all revenues
under these programs in advance, up to $4.0 million annually of pre-tax
revenue may be collected subject to refund upon final determination of
performance under this program.
INDUSTRY OUTLOOK
The PSCW has recently opened a formal docket initiating an inquiry into the
future structure of the electric utility industry in Wisconsin. The goals of
Wisconsin utility regulation and the principles to be used in choosing among
alternative proposals have been identified. WPL has submitted its preferred
structure which, in summary form, calls for open access to transmission and
distribution systems and a competitive power generation marketplace. It is not
possible at this time to predict the outcome of these proceedings.
FINANCING AND CAPITAL STRUCTURE
The level of short-term borrowings fluctuates based on seasonal corporate
needs, the timing of long-term financing and capital market conditions. The
Company's operating subsidiaries generally issue short-term debt to provide
interim financing of construction and capital expenditures in excess of
available internally generated funds. The subsidiaries periodically reduce their
outstanding short-term debt through the issuance of long-term debt and through
the Company's additional investment in their common equity. To maintain
flexibility in its capital structure and to take advantage of favorable short-
term rates, WPL also uses proceeds from the sales of accounts receivable and
unbilled revenues to finance a portion of its long-term cash needs. The Company
also anticipates that short-term debt funds will continue to be available at
reasonable costs due to strong ratings by independent utility analysts and
rating services. Commercial paper has been rated A-1+ by Standard & Poor's Corp.
and P-1 by Moody's Investors Service.
Bank lines of credit of $70 million at December 31, 1994 are available to
support these borrowings.
The Company's capitalization at December 31, 1994, including the current
maturities of long-term debt, variable rate demand bonds and short-term debt,
consisted of 52 percent common equity, 6 percent preferred stock and 42 percent
long-term debt. The common-equity-to-total-capitalization ratio at December 31,
1994 increased to 52 percent from 51 percent at December 31, 1993.
The retail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility capitalization
during the two-year test year ending December 31, 1996. In addition, the PSCW
ordered that it must approve the payment of dividends by WPL that are in excess
of the level forecasted for 1995 ($58.1 million), if such dividends would reduce
WPL's average common equity ratio below 51.93 percent.
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30
CAPITAL REQUIREMENTS
WPL is a capital-intensive business and requires large investments in
long-lived assets. Therefore, the Company's most significant capital
requirements relate to construction expenditures. Estimated capital requirements
for the next five years are as follows:
CAPITAL REQUIREMENTS
----------------------------------------------
1995 1996 1997 1998 1999
------ ------ ------ ------ ------
(IN MILLIONS)
Construction expenditures............. $131.2 $100.4 $132.2 $119.6 $130.6
Changes in working capital and
other............................... (4.6) (5.5) 67.0 16.3 (3.8)
------ ------ ------ ------ ------
Construction and operating capital.... $126.6 $ 94.9 $199.2 $135.9 $126.8
Manufactured gas plant site
remediation expenditures............ 2.0 9.2 10.5 9.6 .6
------ ------ ------ ------ ------
Total capital requirements............ $128.6 $104.1 $209.7 $145.5 $127.4
====== ====== ====== ====== ======
Included in the construction expenditure estimates, in addition to the
recurring additions and improvements to the distribution and transmission
systems, are the following: 1) expenditures for managing and controlling
electric line losses and for the electric delivery system that will reduce
electric line losses and enhance WPL's interconnection capability with other
utilities; 2) expenditures related to environmental compliance issues including
the installation of additional emissions monitoring equipment and coal handling
equipment; 3) expenditures associated with the construction of an 86-megawatt
combustion-turbine generator expected to become operational in 1996.
The steam generator tubes at the Kewaunee Nuclear Power Plant ("Kewaunee")
are susceptible to corrosion characteristics, a condition that has been
experienced throughout the nuclear industry. Annual inspections are performed to
identify degraded tubes. Degraded tubes are either repaired by sleeving or are
removed from service by plugging. The steam generators were designed with an
approximately 15 percent heat transfer margin, meaning that full power should be
sustainable with the equivalent of 15 percent of the steam generator tubes
plugged. Tube plugging and the build-up of deposits on the tubes affect the
heat-transfer capability of the steam generators to the point where eventually
full-power operation is not possible and there is a gradual decrease in the
capacity of the plant. The plant's capacity could be reduced by as much as 20%
by the year 2013 when the current operating license expires. Currently, the
equivalent of approximately 12 percent of the tubes in the steam generators are
plugged. WPL and the joint-owners recently completed studies evaluating the
economics of replacing the two steam generators at Kewaunee. The studies
resulted in the conclusion that the most prudent course of action is to continue
operation of the existing steam generators. WPL and the other joint-owners
continue to evaluate appropriate strategies, including replacement, as well as
continued operation of the steam generators without replacement. WPL and the
joint-owners also continue to fund the development of welded repair technology
for steam generator tubes. The plant is expected to be operated until at least
2013. WPL and the joint-owners are also continuing to evaluate and implement
initiatives to improve the performance of Kewaunee, which already performs at
above-average levels for the industry. These initiatives include conversion from
a 12-month to an 18-month fuel cycle and numerous other cost reduction measures.
These initiatives have resulted in reductions in Kewaunee operating and
maintenance costs since 1991.
A-9
31
CAPITAL RESOURCES
One of the Company's objectives is to finance construction expenditures
through internally generated funds supplemented, when required, by outside
financing. With this objective in place, the Company has financed an average of
79 percent of its construction expenditures during the last five years from
internal sources. However, during the next five years, the Company expects this
percentage to be reduced primarily due to the continuation of major construction
expenditures and the maturity of $64 million of WPL first mortgage bonds.
External financing sources such as the issuance of long-term debt, common stock
and short-term borrowings will be used by the Company to finance the remaining
construction expenditure requirements for this period. Current forecasts are
that $40.5 million of additional equity and $65 million of long-term debt will
be issued over the next three years.
INFLATION
Under current rate-making methodologies prescribed by the various
commissions that regulate WPL, projected or forecasted operating costs,
including the impacts of inflation, are incorporated into WPL revenue
requirements. Accordingly, the impacts of inflation on WPL are currently
mitigated. Although rates will be held flat until at least 1997, management
expects that any impact of inflation will be mitigated by customer growth and
productivity improvements. Inflationary impacts on the non-regulated businesses
are not anticipated to be material to the Company.
OTHER EVENTS
In November 1989, the PSCW concluded that WPL did not properly administer a
coal contract, resulting in an assessment to compensate ratepayers for excess
fuel costs having been incurred. As a result, WPL recorded a reserve in 1989
that had an after-tax affect of reducing 1989 net income by $4.9 million. The
PSCW decision was found to represent unlawful retroactive rate-making by both
the Dane County Coliseum, Madison,Circuit Court and the Wisconsin Court of Appeals. The case was
then appealed to the Wisconsin Supreme Court.
In January, 1994, the Wisconsin Supreme Court affirmed the decisions of the
Dane County Circuit Court and Wisconsin Court of Appeals. In management's
opinion, all avenues for appeal have been exhausted. As a result, WPL reversed
the entire reserve and was also allowed to collect interest on amounts of the
penalty previously refunded to ratepayers. The reversal of the reserve plus
interest had an after-tax affect of increasing net income in 1994 by $5.3
million.
Given the expectation of increasing competition, WPL has continued to
reengineer its processes to implement cost efficiencies in its operations. In
connection with these efforts, WPL offered voluntary early retirement programs
and voluntary severance programs to affected employees in 1994 and 1993. These
programs primarily closed late in the fourth quarter of 1994 and 1993.
For 1994, in terms of cost, the early retirement programs totalled $9.8
million and the severance programs totalled $3.9 million for a grand total of
$13.7 million. For 1993, program costs totalled $1.8 million.
One of WPL's major coal transporters experienced a labor strike during the
third quarter of 1994. During the term of the strike (55 days), WPL's ability to
receive coal from its suppliers was impaired, which required WPL to use some of
its existing coal reserves and to purchase additional power. On August 29, 1994,
President Clinton, acting under the Railway Labor Act, forced a temporary end
(the "cooling off period") to the strike by ordering the railroad union
employees back to work and establishing a three member Presidential
A-10
32
Emergency Board to draft a recommended settlement. Railroad management and the
United Transportation Union have subsequently settled on a contract. As of
December 31, 1994, the existing and anticipated financial impact on WPL's
operating results was not material.
WPL cannot precisely forecast the effect of future environmental
regulations by federal, state and local authorities upon its generating,
transmission and other facilities, or its operations, but has taken steps to
anticipate the future while meeting the requirements of current environmental
regulations. The Clean Air Act Amendments of 1977 and subsequent amendments to
the Clean Air Act, as well as the new laws affecting the handling and disposal
of solid and hazardous wastes along with the clean air legislation passed in
1990 by Congress, could affect the siting, construction and operating costs of
both present and future generating units.
Under the Federal Clean Water Act, National Pollutant Discharge Elimination
System permits for generating station discharge into water ways are required to
be obtained from the Wisconsin Department of Natural Resources. WPL has obtained
such permits for all of its generating stations or has filed timely applications
for renewals.
Air quality regulations promulgated by the DNR in accordance with federal
standards impose statewide restrictions on the emission of particulates, sulfur
dioxide, nitrogen oxides and other air pollutants and require permits from the
DNR for the operation of emission sources. WPL currently has the necessary
permits to operate its fossil-fueled generating facilities. However, beginning
in 1994, new permits were required for all major facilities in Wisconsin. WPL's
Columbia Generating facility submitted a permit application on May 18, 19941, 1994. The
remaining facilities will be addressed in early 1995.
WPL's compliance strategy for Wisconsin's 1993 sulfur dioxide law and the
Federal Clean Air Act Amendments required plant upgrades at 10:00 a.m.,its generating
facilities. The majority of these projects were completed in 1993 and 1994. WPL
has installed continuous emissions monitoring systems at all adjournments thereof, upon matters that may properly come before the meeting,
including the matters describedof its coal fired
boilers. No additional costs for compliance with these acid-rain-prevention
requirements are anticipated at this time.
Also see Note 11c in the Company's NoticeNotes to the Consolidated Financial Statements for
a discussion of Annual MeetingWPL's manufactured gas plant sites.
A-11
33
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Wisconsin Power and Light Company:
We have audited the accompanying consolidated balance sheets and statements
of Shareowners and Proxy Statement dated April 8, 1994, sugject to any directions
on the reverse sidecapitalization of this card.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF WISCONSIN POWER AND LIGHT COMPANY.
IF NO CHOICE IS SPECIFIED, THE PROXIES SHALL VOTE FOR THE PROPOSALS.
---
(continuedCOMPANY (a Wisconsin corporation)
and subsidiaries as of December 31, 1994 and 1993, and the related consolidated
statements of income, common shareowners' investment and cash flows for each of
the three years in the period ended December 31, 1994. These financial
statements are the responsibility of the Company's management. Our
responsibility is to be signedexpress an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and datedperform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the other side)
APPENDIX
Picturesamounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of each Wisconsin Power and Light
Co. Board member appears nextCompany and subsidiaries as of December 31, 1994 and 1993, and the results of
their operations and their cash flows for each of the three years in the period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin,
February 1, 1995
A-12
34
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS
ASSETS
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
Utility plant:
Plant in service--
Electric........................................................ $1,611,351 $1,518,701
Gas............................................................. 204,514 194,283
Water........................................................... 22,070 20,437
Common.......................................................... 123,255 106,803
---------- ----------
1,961,190 1,840,224
Dedicated decommissioning funds.................................... 51,791 49,803
---------- ----------
2,012,981 1,890,027
Less--Accumulated provision for depreciation....................... 808,853 763,027
---------- ----------
1,204,128 1,127,000
Construction work in progress...................................... 42,731 75,732
Nuclear fuel, net.................................................. 19,396 18,000
---------- ----------
Total utility plant................................................ 1,266,255 1,220,732
Other property and equipment, net.................................... 9,133 652
---------- ----------
Investments.......................................................... 12,228 12,537
---------- ----------
Current assets:
Cash and equivalents............................................... 2,234 5,930
Net accounts receivable and unbilled revenue, less allowance for
doubtful accounts of $209 and $259, respectively................ 21,689 30,572
Accounts receivable from parent for income taxes................... -- 2,117
Coal, at average cost.............................................. 15,824 16,042
Materials and supplies, at average cost............................ 20,835 21,679
Gas in storage, at average cost.................................... 7,975 8,754
Prepayments and other.............................................. 22,310 21,677
---------- ----------
Total current assets............................................ 90,867 106,771
---------- ----------
Deferred charges:
Regulatory assets.................................................. 144,476 148,805
Other.............................................................. 62,165 61,160
---------- ----------
Total deferred charges.......................................... 206,641 209,965
---------- ----------
TOTAL ASSETS.................................................... $1,585,124 $1,550,657
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
A-13
35
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (CONTINUED)
CAPITALIZATION AND LIABILITIES
YEAR ENDED DECEMBER 31,
------------------------
1994 1993
---------- ----------
(IN THOUSANDS)
Capitalization:
Common shareowner's investment..................................... $ 544,506 $ 522,703
Preferred stock not mandatorily redeemable......................... 59,963 59,963
First mortgage bonds, net.......................................... 336,538 336,477
---------- ----------
Total capitalization.......................................... 941,007 919,143
---------- ----------
Current liabilities:
Variable rate demand bonds......................................... 56,975 56,975
Short-term debt.................................................... 50,500 59,000
Accounts payable and accruals...................................... 67,518 72,430
Accrued payroll and vacation....................................... 12,624 12,092
Accrued taxes...................................................... 7,299 804
Accrued interest................................................... 7,669 7,695
Other.............................................................. 12,456 16,431
---------- ----------
Total current liabilities..................................... 215,041 225,427
---------- ----------
Other credits:
Accumulated deferred income taxes.................................. 222,373 210,762
Accumulated deferred investment tax credits........................ 40,758 42,684
Accrued environmental remediation costs............................ 79,280 80,973
Deferred credits and other......................................... 86,665 71,668
---------- ----------
429,076 406,087
---------- ----------
Contingencies (Notes 2 and 11)
TOTAL CAPITALIZATION AND LIABILITIES.......................... $1,585,124 $1,550,657
========= =========
The accompanying notes are an integral part of the consolidated financial
statements.
A-14
36
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
Operating revenues:
Electric.................................................... $531,747 $503,187 $477,735
Gas......................................................... 137,575 137,270 119,362
Water....................................................... 4,133 3,927 3,722
-------- -------- --------
673,455 644,384 600,819
Operating expenses:
Electric production fuels................................... 123,469 123,919 123,440
Purchased power............................................. 37,913 28,574 24,427
Purchased gas............................................... 86,586 90,505 77,112
Other operation............................................. 148,361 139,075 128,992
Maintenance................................................. 41,227 44,763 45,081
Depreciation................................................ 73,194 61,197 56,416
Taxes--
Current federal income................................... 26,727 25,063 21,641
Deferred income........................................ 10,270 5,053 6,270
Investment tax credit (restored)....................... (1,926) (1,967) (2,125)
Current state income................................... 6,147 6,580 5,160
Other.................................................. 27,100 26,145 26,170
-------- -------- --------
579,068 548,907 512,584
-------- -------- --------
Net operating income.......................................... 94,387 95,477 88,235
-------- -------- --------
Other income and (deductions):
Allowance for equity funds used during construction......... 3,009 2,977 2,351
Other, net.................................................. 7,726 (2,188) 299
Current federal income tax.................................. (1,480) (519) 274
Deferred income tax......................................... (2,029) (419) 131
-------- -------- --------
7,226 (149) 3,055
-------- -------- --------
Income before interest expense................................ 101,613 95,328 91,290
-------- -------- --------
Interest expense:
Interest on bonds........................................... 28,796 28,422 29,254
Allowance for borrowed funds used during construction....... (1,029) (1,053) (1,329)
Other....................................................... 2,352 3,854 4,146
-------- -------- --------
30,119 31,223 32,071
-------- -------- --------
Income before preferred dividends............................. 71,494 64,105 59,219
Preferred stock dividends..................................... 3,310 3,928 3,811
-------- -------- --------
Net income.................................................... $ 68,184 $ 60,177 $ 55,408
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
A-15
37
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEAR ENDED DECEMBER 31,
-----------------------------------
1994 1993 1992
--------- --------- ---------
(IN THOUSANDS)
Cash flows generated from (used for) operating activities:
Income before preferred stock dividends........................... $ 71,494 $ 64,105 $ 59,219
Adjustments to reconcile net income to net cash generated from
operating activities:
Depreciation.................................................... 73,194 61,197 56,416
Deferred income taxes and other................................. 10,270 5,053 6,139
Investment tax credit restored.................................. (1,926) (1,967) (2,125)
Amortization of nuclear fuel.................................... 6,707 7,049 7,961
Allowance for equity funds used during construction............. (3,009) (2,977) (2,351)
Other, net...................................................... 6,561 7,201 252
Changes in assets and liabilities:
Net accounts receivable and unbilled revenue.................... 16,335 4,124 (9,162)
Coal............................................................ 218 2,943 2,666
Materials and supplies.......................................... 884 (6) 1,769
Gas in storage.................................................. 779 (4,463) 1,403
Prepayments and other........................................... (634) (383) (1,895)
Accounts payable and accruals................................... (4,912) 640 6,901
Accrued taxes................................................... (3,775) (538) (1,680)
Other, net...................................................... 14,571 11,222 (9,029)
--------- --------- ---------
Net cash generated from operating activities.................. 186,757 153,200 116,484
Cash flows generated from (used for) financing activities:
Common stock cash dividends....................................... (55,911) (54,327) (51,166)
Issuance of first mortgage bonds.................................. -- -- 279,000
Issuance of preferred stock....................................... -- 29,986 --
Redemption of preferred stock..................................... -- (29,986) --
Preferred stock issuance expense.................................. -- (1,083) --
Preferred stock dividends......................................... (3,310) (3,928) (3,811)
Net change in short-term debt..................................... (8,500) 8,000 14,000
Current bond maturities and sinking fund retirements.............. -- (100) (239,031)
Equity contribution from parent................................... 9,649 61,399 10,002
--------- --------- ---------
Net cash (used for) generated from financing activities....... (58,072) 9,961 8,994
Cash flows generated from (used for) investing activities:
Additions to utility plant, excluding AFUDC....................... (123,959) (149,333) (123,321)
Allowance for borrowed funds used during construction............. (1,029) (1,053) (1,329)
Dedicated decommissioning funds................................... (1,988) (9,426) (3,737)
Other, net........................................................ (5,405) 2,200 1,974
--------- --------- ---------
Net cash used for investing activities.......................... (132,381) (157,612) (126,413)
Net (decrease) increase in cash and equivalents..................... (3,696) 5,549 (935)
Cash and equivalents at beginning of year........................... 5,930 381 1,316
--------- --------- ---------
Cash and equivalents at end of year................................. $ 2,234 $ 5,930 $ 381
========== ========== ==========
Supplemental disclosures of cash flow information:
Cash paid during the year for:
Interest on debt.............................................. $ 30,156 $ 32,246 $ 32,254
Income taxes.................................................. $ 29,642 $ 32,465 $ 31,766
The accompanying notes are an integral part of the consolidated financial
statements.
A-16
38
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
YEAR ENDED DECEMBER
31,
---------------------
1994 1993
-------- --------
(IN THOUSANDS)
Common shareowner's investment:
Common stock, $5 par value, authorized--18,000,000 shares; issued and
outstanding--13,236,601 shares.................................... $ 66,183 $ 66,183
Premium on capital stock............................................. 197,423 187,773
Capital surplus...................................................... 1,747 1,747
Reinvested earnings.................................................. 279,153 267,000
-------- --------
Total common shareowner's investment............................ 544,506 522,703
Preferred stock not mandatorily redeemable:
Cumulative, without par value, $100 stated value, authorized
3,750,000 shares, maximum aggregate stated value $150,000,000
4.50% series, 99,970 shares outstanding......................... 9,997 9,997
4.80% series, 74,912 shares outstanding......................... 7,491 7,491
4.96% series, 64,979 shares outstanding......................... 6,498 6,498
4.40% series, 29,957 shares outstanding......................... 2,996 2,996
4.76% series, 29,947 shares outstanding......................... 2,995 2,995
6.20% series, 150,000 shares outstanding........................ 15,000 15,000
Cumulative, without par value, $25 stated value, 6.50% series,
599,460 shares outstanding........................................ 14,986 14,986
-------- --------
Total preferred stock........................................... 59,963 59,963
First mortgage bonds:
Series L, 6.25%, due 1998............................................ 8,899 8,899
1984 Series A, variable rate, due 2014 (5.40% at December 31,
1994)............................................................. 8,500 8,500
1988 Series A, variable rate, due 2015 (5.80% at December 31,
1994)............................................................. 14,600 14,600
1990 Series V, 9.3%, due 2025........................................ 50,000 50,000
1991 Series A, variable rate, due 2015 (5.95% at December 31,
1994)............................................................. 16,000 16,000
1991 Series B, variable rate, due 2005 (5.95% at December 31,
1994)............................................................. 16,000 16,000
1991 Series C, variable rate, due 2000 (5.95% at December 31,
1994)............................................................. 1,000 1,000
1991 Series D, variable rate, due 2000 (5.95% at December 31,
1994)............................................................. 875 875
Series W, 8.6%, due 2027............................................. 90,000 90,000
Series X, 7.75%, due 2004............................................ 62,000 62,000
Series Y, 7.6%, due 2005............................................. 72,000 72,000
Series Z, 6.125%, due 1997........................................... 55,000 55,000
-------- --------
394,874 394,874
Less--
Variable rate demand bonds........................................... (56,975) (56,975)
Unamortized discount................................................. (1,361) (1,422)
-------- --------
Total first mortgage bonds, net................................. 336,538 336,477
-------- --------
TOTAL CAPITALIZATION......................................... $941,007 $919,143
======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
A-17
39
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF COMMON SHAREOWNER'S INVESTMENT
YEAR ENDED DECEMBER 31,
--------------------------------
1994 1993 1992
-------- -------- --------
(IN THOUSANDS)
Common stock:
Balance at beginning and end of year........................ $ 66,183 $ 66,183 $ 66,183
Premium on capital stock:
Balance at beginning of year................................ 187,774 126,374 116,372
Equity contribution from parent.......................... 9,649 61,399 10,002
-------- -------- --------
Balance at end of year...................................... 197,423 187,773 126,374
Capital surplus:
Balance at beginning and end of year........................ 1,747 1,747 1,747
-------- -------- --------
Reinvested earnings:
Balance at beginning of year................................ 267,000 262,233 257,991
Add--Income before preferred dividends...................... 71,494 64,105 59,219
Deduct--
Cash dividends on preferred stock........................ (3,310) (3,928) (3,811)
Cash dividends to parent on common stock................. (55,911) (54,327) (51,166)
Preferred stock issuance expense......................... -- (1,083) --
Other.................................................... (120) -- --
-------- -------- --------
Balance at end of year...................................... 279,153 267,000 262,233
TOTAL COMMON SHAREOWNER'S INVESTMENT.......................... $544,506 $522,703 $456,537
======== ======== ========
The accompanying notes are an integral part of the consolidated financial
statements.
A-18
40
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES:
A. BUSINESS AND CONSOLIDATION:
Wisconsin Power and Light Company ("WPL" or the "Company") is a
wholly-owned subsidiary of WPL Holdings, Inc. ("WPLH").
WPL is a public utility predominantly engaged in the transmission and
distribution of electric energy and the generation and bulk purchase of electric
energy for sale. WPL also transports, distributes and sells natural gas
purchased from gas suppliers. Nearly all of WPL's retail customers are located
in south and central Wisconsin. WPL's principal consolidated subsidiary is South
Beloit Water, Gas and Electric Company. Certain amounts from prior years have
been reclassified to conform with the current year presentation.
B. REGULATION:
WPL's financial records are maintained in accordance with the uniform
system of accounts prescribed by its regulators. The Public Service Commission
of Wisconsin ("PSCW") and the Illinois Commerce Commission have jurisdiction
over retail rates, which represent approximately 83 percent of electric revenues
plus all gas revenues. The Federal Energy Regulatory Commission ("FERC") has
jurisdiction over wholesale electric rates representing the balance of electric
revenues. Statement of Financial Accounting Standards ("SFAS") No. 71,
"Accounting for the Effects of Certain Types of Regulation" provides that
rate-regulated public utilities such as WPL record certain costs and credits
allowed in the rate-making process in different periods than for unregulated
entities. These are deferred as regulatory assets or regulatory liabilities and
are recognized in the Consolidated Statements of Income at the time they are
reflected in rates.
C. UTILITY PLANT AND OTHER PROPERTY AND EQUIPMENT:
Utility plant and other property and equipment are recorded at original
cost and cost, respectively. Utility plant costs include financing costs that
are capitalized through the PSCW-approved allowance for funds used during
construction ("AFUDC"). The AFUDC capitalization rates approximate WPL's cost of
capital. These capitalized costs are recovered in rates as the cost of the
utility plant is depreciated.
Normal repairs, maintenance and minor items of utility plant and other
property and equipment are expensed. Ordinary utility plant retirements,
including removal costs less salvage value, are charged to accumulated
depreciation upon removal from utility plant accounts, and no gain or loss is
recognized. Upon retirement or sale of other property and equipment, the cost
and related accumulated depreciation are removed from the accounts and any gain
or loss is included in other income and deductions.
D. NUCLEAR FUEL:
Nuclear fuel is recorded at its original cost and is amortized to expense
based upon the quantity of heat produced for the generation of electricity. This
accumulated amortization assumes spent nuclear fuel will have no residual value.
Estimated future disposal costs of such fuel are expensed based on kilowatthours
generated.
E. REVENUE:
WPL accrues utility revenues for services provided but not yet billed.
A-19
41
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING AND REPORTING POLICIES: (CONTINUED)
F. ELECTRIC PRODUCTION FUELS AND PURCHASED GAS:
(1) Electric Production Fuels:
Through 1994, the PSCW retail electric rates provided a range from
which actual fuel costs could vary in relation to costs forecasted and used
in rates. If actual fuel costs fell outside this range, a hearing could be
held to determine if a rate change was necessary, and a rate increase or
decrease could result.
Beginning with WPL's latest rate order UR-109, effective January 1,
1995, the automatic fuel adjustment clause was eliminated. In its absence,
WPL will benefit from reductions in fuel cost. Conversely, WPL will be
exposed to increases in fuel costs.
An automatic fuel adjustment clause for the FERC wholesale portion of
WPL's electric business operates to increase or decrease monthly rates
based on changes in fuel costs.
(2) Purchased Gas:
Through 1994, WPL's base gas cost recovery rates permitted the
recovery of or refund to all customers for any increases or decreases in
the cost of gas purchased from WPL's suppliers through a monthly purchased
gas adjustment clause.
Beginning with UR-109, the monthly purchased gas adjustment clause was
also eliminated. In the future, the fluctuations in the commodity cost of
gas above or below a prescribed commodity price index will serve to
increase or decrease WPL's margin on gas sales. Fixed demand costs are
excluded from the incentive program. Both benefits and exposures are
subject to ratepayer sharing provisions, which are capped at $1.1 million.
G. CASH AND EQUIVALENTS:
The Company considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents. The carrying amount
approximates fair value because of the short maturity of these items.
H. INCOME TAXES:
Under the terms of an agreement with WPLH, the Company calculates its
federal tax provisions and makes payments to WPLH as if it were a separate
taxable entity. Beginning in 1993, WPL fully provides deferred income taxes in
accordance with SFAS No. 109, "Accounting for Income Taxes", to reflect tax
effects of reporting book and tax items in different periods.
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2. PROPERTY:
A. JOINTLY-OWNED UTILITY PLANTS:
WPL participates with other Wisconsin utilities in the construction and
operation of several jointly-owned utility generating plants. The chart below
represents WPL's proportionate share of such plants as reflected in the
Consolidated Balance Sheets at December 31, 1994 and 1993:
1994 1993
------------------------------- -------------------------------
OWNERSHIP ACCUMULATED ACCUMULATED
INTEREST INSERVICE PLANT MW PLANT IN PROVISION FOR PLANT IN PROVISION FOR
% DATE CAPACITY SERVICE DEPRECIATION CWIP SERVICE DEPRECIATION CWIP
--------- ----------- -------- -------- ------------- ------ -------- ------------- ------
Coal:
Columbia Energy Center.... 46.2 1975 & 1978 1,023 $159,650 $ 78,573 $1,484 $159,818 $ 76,602 $1,986
Edgewater Unit 4.......... 68.2 1969 330 50,206 25,394 181 49,631 24,160 83
Edgewater Unit 5.......... 75.0 1985 380 225,336 63,324 26 224,902 58,338 21
Nuclear:
Kewaunee Nuclear Power
Plant................... 41.0 1974 535 132,726 72,637 452 133,342 69,647 848
-------- ------------- ------ -------- ------------- ------
Total....................... $567,918 $ 239,928 $2,143 $567,693 $ 228,747 $2,938
======== =========== ====== ======== =========== ======
Each of the respective joint-owners finances its portion of construction
costs. WPL's share of operation and maintenance expenses is included in the
Consolidated Statements of Income.
B. CAPITAL EXPENDITURES:
The Company's capital expenditures for 1995 are estimated to total $128.6
million. Substantial commitments have been incurred for such expenditures.
NOTE 3. DEPRECIATION:
The Company uses the straight-line method of depreciation. For utility
plant, straight-line depreciation is computed on the average balance of
depreciable property at individual straight-line PSCW approved rates that
consider the estimated useful life and removal cost or salvage value as follows:
ELECTRIC GAS WATER COMMON
-------- --- ----- ------
1994.......................................... 3.2% 3.7% 2.5% 7.2%
1993.......................................... 3.2% 3.7% 2.5% 7.3%
1992.......................................... 3.2% 3.7% 2.6% 7.1%
NOTE 4. NUCLEAR OPERATIONS:
Depreciation expense related to the Kewaunee Nuclear Power Plant
("Kewaunee") includes a provision to accrue for the cost of decommissioning over
the life of the plant, which totalled $13.4 million, $6.1 million and $3.9
million in 1994, 1993 and 1992, respectively. Wisconsin utilities with ownership
of nuclear generating plants are required by the PSCW to establish and make
annual contributions to external trust funds to provide for plant
decommissioning. Additionally, in July 1994, the PSCW issued a generic order
covering utilities that
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4. NUCLEAR OPERATIONS: (CONTINUED)
have nuclear generation. This order standardizes the escalation assumptions to
be used in determining nuclear decommissioning liabilities.
WPL's share of the decommissioning costs is estimated to be $159 million
(in 1994 dollars, assuming the plant is operating through 2013) based on a 1992
study, using the immediate dismantlement method of decommissioning. The
undiscounted amount of decommissioning costs estimated to be expended between
the years 2014 and 2050 is $1.016 billion. After-tax earnings on the
tax-qualified and non-tax-qualified decommissioning funds are assumed to be 6.1
percent and 5.1 percent, respectively. The future escalation rate is assumed to
be 6.5 percent.
Decommissioning costs and a charge to offset earnings on the external
trusts are recorded as portions of depreciation expense and accumulated
provision for depreciation on the Statements of Consolidated Income and the
Consolidated Balance Sheets, respectively. As of December 31, 1994, the total
decommissioning costs included in the accumulated provision for depreciation
were approximately $62.8 million.
WPL has established external trusts to hold decommissioning funds, and the
PSCW has approved WPL's funding plan which provides for annual contributions of
current accruals over the remaining service lives of the nuclear plants. The
earnings on the external trusts accumulate in the fund balance and in the
accumulated provision for depreciation. Such earnings on the external trust
funds, which have been offset by a charge to depreciation expense on the
Statements of Consolidated Income, were $2.7, $1.1 and $1.2 for the years ended
December 31, 1994, 1993 and 1992, respectively.
Under the Nuclear Waste Policy Act of 1982, the U.S. Department of Energy
("DOE") is responsible for the ultimate storage and disposal of spent nuclear
fuel removed from nuclear reactors. Interim storage space for spent nuclear fuel
is currently provided at the Kewaunee Nuclear Power Plant. Currently there is
on-site storage capacity for spent fuel through the year 1999. Nuclear fuel,
net, at December 31, consists of:
1994 1993
-------- --------
Original cost of nuclear fuel............................ $155,190 $147,325
Less -- Accumulated amortization......................... 135,794 129,325
-------- --------
Nuclear fuel, net........................................ $ 19,396 $ 18,000
======== ========
The Price Anderson Act provides for the payment of funds for public
liability claims arising from a nuclear incident. Accordingly, in the event of a
nuclear incident, WPL, as a 41-percent owner of the Kewaunee Nuclear Power
Plant, is subject to an overall assessment of approximately $32.5 million per
incident for its ownership share of this reactor, not to exceed $4.1 million
payable in any given year.
Through its membership in Nuclear Electric Insurance Limited, WPL has
obtained property damage and decontamination insurance totalling $1.5 billion
for loss from damage at the Kewaunee Nuclear Power Plant. In addition, WPL
maintains outage and replacement power insurance coverage totalling $101.4
million in the event an outage exceeds 21 weeks.
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44
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5. NET ACCOUNTS RECEIVABLE:
WPL has a contract with a financial organization to sell, with limited
recourse, certain accounts receivable and unbilled revenues. These receivables
include customer receivables resulting from sales to other public utilities as
well as from billings to the co-owners of the jointly-owned electric generating
plants that WPL operates. The contract allows WPL to sell up to $150 million of
receivables at any time. Expenses related to the sale of receivables are paid to
the financial organization under this contract and include, along with various
other fees, a monthly discount charge on the outstanding balance of receivables
sold that approximated a 4.86 percent annual rate during 1994. These costs are
recovered in retail utility rates as an operating expense. All billing and
collection functions remain the responsibility of WPL. The contract expires
August 19, 1995, unless extended by mutual agreement.
As of December 31, 1994 and 1993, proceeds from the sale of accounts
receivable totalled $76.5 million and $74 million, respectively. During 1994,
WPL sold an average of $82.3 million of accounts receivable per month, compared
with $75.9 million in 1993.
As a result of its diversified customer base and WPL's sale of receivables,
the Company does not have any significant concentrations of credit risk in the
December 31, 1994, net accounts receivable balance.
NOTE 6. REGULATORY ASSETS AND REGULATORY LIABILITIES:
Certain costs and credits are deferred and amortized in accordance with
authorized or expected rate-making treatment. As of December 31, 1994 and 1993,
regulatory created assets include the following:
1994 1993
-------- --------
Environmental remediation costs.......................... $ 82,179 $ 82,380
Tax related (see Note 8)................................. 43,736 47,787
Jurisdictional plant differences......................... 7,173 6,533
Decontamination and decommissioning costs of federal
enrichment facilities.................................. 7,100 6,181
Other.................................................... 4,288 5,924
-------- --------
$144,476 $148,805
======== ========
As of December 31, 1994 and 1993, regulatory created liabilities included
$6,738 and $6,618 respectively, for amounts due to customers related to the sale
of air emissions credits.
NOTE 7. EMPLOYEE BENEFIT PLANS:
A. PENSION PLANS:
WPL has non-contributory, defined benefit retirement plans covering
substantially all employees. The benefits are based upon years of service and
levels of compensation. WPL's funding policy is to contribute at least the
statutory minimum to a brief summarytrust.
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45
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The projected unit credit actuarial cost method was used to compute net
pension costs and the accumulated and projected benefit obligations. The
discount rate used in determining those benefit obligations was 8.25, 7.25 and
8.00 percent for 1994, 1993 and 1992, respectively. The long-term rate of his/her experiencereturn
on pages 2assets used in determining those benefit obligations was 9.00, 9.75, and
10.00 percent for 1994, 1993 and 1992, respectively.
The following table sets forth the funded status of the WPL plans and
amounts recognized in the Company's Consolidated Balance Sheets at December 31,
1994 and 1993:
1994 1993
--------- ---------
Accumulated benefit obligation--
Vested benefits...................................... $(134,829) $(135,303)
Non-vested benefits.................................. (3,295) (2,962)
--------- ---------
$(138,124) $(138,265)
--------- ---------
Projected benefit obligation........................... $(154,283) $(164,271)
Plan assets at fair value, primarily common stocks and
fixed income securities.............................. 178,095 183,881
--------- ---------
Plan assets in excess of projected benefit
obligation........................................... 23,812... 19,610
Unrecognized net transition asset...................... (19,376) (21,823)
Unrecognized prior service cost........................ 5,679.... 7,691
Unrecognized net loss.................................. 14,737 20,650
--------- ---------
Pre-paid pension costs, included in deferred charges
and other............................................ $ 24,852 $ 26,128
========= =========
The net pension (benefit) recognized in the Consolidated Statements of
Income for 1994, 1993 and 1992 included the following components:
1994 1993 1992
-------- -------- --------
Service cost.................................... $ 5,123 $ 4,263 $ 3,912
Interest cost on projected benefit obligation... 12,051 11,614 10,615
Actual return on assets......................... 1,016 (24,759) (12,143)
Amortization and deferral....................... (17,795) 8,430 (5,317)
-------- -------- --------
Net pension (benefit)........................... $ 395 $ (452) $ (2,933)
======== ======== ========
B. POSTRETIREMENT HEALTH CARE AND LIFE INSURANCE:
Effective January 1, 1993, the Company prospectively adopted SFAS No. 106,
"Employers' Accounting for Postretirement Benefits Other Than Pensions". SFAS
No. 106 establishes standards of financial accounting and reporting for the
Company's postretirement health care and life insurance benefits. SFAS No. 106
requires the accrual of the expected cost of such benefits during the employees'
years of service based
A-24
46
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
on actuarial methodologies that closely parallel pension accounting
requirements. WPL has elected delayed recognition of the transition obligation
and is amortizing the discounted present value of the transition obligation to
expense over 20 years. The cost of providing postretirement benefits, including
the transition obligation, is being recovered in retail rates under current
regulatory practices.
The following table sets forth the plans' funded status:
1994 1993
-------- --------
Accumulated postretirement benefit obligation--
Retirees............................................... $(29,273) $(27,358)
Fully eligible active plan participants................ (5,998) (5,429)
Other active plan participants......................... (7,675) (9,980)
-------- --------
Accumulated benefit obligation......................... (42,946) (42,767)
Plan assets at fair value.............................. 9,767 7,073
-------- --------
Accumulated benefit obligation in excess of plan
assets.............................................. $(33,179) $(35,694)
Unrecognized transition obligation..................... 26,474 29,638
Unrecognized loss...................................... (2,570) 2,025
-------- --------
Accrued postretirement benefits liability.............. $ (9,275) $ (4,031)
======== ========
For 1994 and 1993, the annual net postretirement benefits cost recognized
in the Consolidated Statements of Income consist of the following components:
1994 1993
------ ------
Service cost................................................. $1,739 $1,463
Interest cost on projected benefit obligation................ 3,135 3,151
Actual return on plan assets................................. (253) (696)
Amortization of transition obligation........................ 1,527 1,560
Amortization and deferral.................................... (381) (27)
------ ------
Net postretirement benefits cost............................. $5,767 $5,451
====== ======
The postretirement benefits cost components for 1994 were calculated
assuming health-care cost trend rates ranging from 11.5 percent for 1994 and
decreasing to 5 percent by the year 2002. The health-care cost trend rate
considers estimates of health care inflation, changes in utilization or
delivery, technological advances, and changes in the health status of the plan
participants. Increasing the health-care cost trend rate by one percentage point
in each year would increase the accumulated postretirement benefit obligation as
of December 31, 1994 by $2.5 million and the aggregate of the service and
interest cost components of the net periodic postretirement benefit cost for the
year by $.4 million.
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47
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7. EMPLOYEE BENEFIT PLANS: (CONTINUED)
The assumed discount rate used in determining the accumulated
postretirement obligation was 8.25 and 7.25 percent in 1994 and 1993,
respectively. The long-term rate of return on assets was 9.00 and 9.50 percent
in 1994 and 1993, respectively. Plan assets are primarily invested in common
stock, bonds and fixed income securities. The Company's funding policy is to
contribute the tax-advantaged maximum to a trust.
The costs for the postretirement health care and life insurance benefits,
based on an actuarial determination were $1.3 million in 1992.
C. OTHER POSTEMPLOYMENT BENEFITS:
In November 1992, the Financial Accounting Standards Board issued No. 112,
"Employers' Accounting for Postemployment Benefits". SFAS No. 112, which was
effective January 1, 1994, establishes standards of financial accounting and
reporting for the estimated cost of benefits provided by an employer to former
or inactive employees after employment but before retirement. The effect of
adopting SFAS No. 112 was not material.
NOTE 8. INCOME TAXES:
The following table reconciles the statutory federal income tax rate to the
effective income tax rate:
1994 1993 1992
---- ---- ----
Statutory federal income tax rate...................... 35.0% 35.0% 34.0%
State income taxes, net of federal benefit............. 5.6 6.1 6.0
Investment tax credits restored........................ (1.7) (2.0) (2.4)
Amortization of excess deferred taxes.................. (1.5) (1.5) (1.6)
Other differences, net................................. 1.1 (1.9) (2.0)
---- ---- ----
Effective income tax rate.............................. 38.5% 35.7% 34.0%
==== ==== ====
In 1992, deferred taxes arising from utility plant timing differences, the
qualified nuclear decommissioning trust contribution, employee benefits and
other totalled $4,104, $709, $2,081, and ($755), respectively.
The temporary differences that resulted in accumulated deferred income tax
(assets) and liabilities as of December 31 are as follows:
1994 1993
-------- --------
Accelerated depreciation and other plant related......... $186,565 $171,993
Excess deferred taxes.................................... 21,215 22,744
Unamortized investment tax credits....................... (21,784) (22,812)
Allowance for equity funds used during construction...... 14,384 13,518
Regulatory liability..................................... 17,553 19,179
Other............................................... 4,440 6,140
-------- --------
$222,373 $210,762
======== ========
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 8. INCOME TAXES: (CONTINUED)
Changes in WPL's deferred income taxes arising from the adoption of SFAS
No. 109 represent amounts recoverable or refundable through 7.future rates and
have been recorded as net regulatory assets totalling approximately $26 million
and $29 million in 1994 and 1993, respectively, on the Consolidated Balance
Sheets. These net regulatory assets are being recovered in rates over the
estimated remaining useful lives of the assets to which they pertain.
NOTE 9. SHORT-TERM DEBT AND LINES OF CREDIT:
The Company maintains bank lines of credit, most of which are at the bank
prime rates, to obtain short-term borrowing flexibility, including pledging
lines of credit as security for any commercial paper outstanding. Amounts
available under these lines of credit totalled $70 million as of December 31,
1994. Information regarding short-term debt and lines of credit is as follows:
1994 1993 1992
----------- ----------- -----------
As of end of year--
Commercial paper outstanding.................... $50,500 $49,000 $26,000
Notes payable outstanding....................... $-- $10,000 $25,000
Discount rates on commercial paper.............. 5.64%-6.12% 3.24%-3.40% 3.15%-3.90%
Interest rates on notes payable................. --% 3.34% 3.46%-3.62%
For the year ended--
Maximum month-end amount of short-term debt..... $50,500 $59,000 $51,000
Average amount of short-term debt (based on
daily outstanding balances).................. $25,374 $30,423 $22,160
Average interest rate on short-term debt........ 5.89% 3.29% 3.63%
NOTE 10. CAPITALIZATION:
A. COMMON SHAREOWNERS' INVESTMENT:
A mapretail rate order effective January 1, 1995, requires WPL to maintain a
utility common equity level of 51.93 percent of total utility capitalization
during the test year January 1, 1995 to December 31, 1996. In addition, the PSCW
ordered that it must approve the payment of dividends by WPL to WPLH that are in
excess of the level forecasted in the rate order ($58.1 million), if such
dividends would reduce WPL's average common equity ratio below 51.93 percent.
B. PREFERRED STOCK:
On October 27, 1993, WPL issued two new series of preferred stock through
two separate public offerings. The 6.2 percent Series is non-redeemable for ten
years and the 6.5 percent Series is non-redeemable for five years. The proceeds
from the sale were used to retire 150,000 shares of 7.56 percent Series and
149,865 shares of 8.48 percent Series preferred stock.
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 10. CAPITALIZATION: (CONTINUED)
C. LONG-TERM DEBT:
Substantially all of WPL's utility plant is secured by its first mortgage
bonds. Current maturities of long-term debt are as follows: $0 in 1995 and 1996,
$55 million in 1997, $8.9 million in 1998 and $0 in 1999.
The Company has $130 million of notional principal under interest rate swap
contracts. The fair value of these contracts was not material as of December 31,
1994.
The fair value of the Company's long-term debt based on quoted market
prices for similar issues at December 31, 1994 and 1993 was $386,520 and
$428,841, respectively.
NOTE 11. COMMITMENTS AND CONTINGENCIES:
A. COAL CONTRACT COMMITMENTS:
To ensure an adequate supply of coal, WPL has entered into certain
long-term coal contracts. These contracts include a demand or take-or-pay clause
under which payments are required if contracted quantities are not purchased.
Purchase obligations on these coal and related rail contracts total
approximately $149 million through December 31, 2003. WPL's management believes
it will meet minimum coal and rail purchase obligations under the contracts.
Minimum purchase obligations on these contracts over the next five years are
estimated to be $25 million in 1995 and $26 million in 1996, 1997, 1998 and
1999.
B. PURCHASED POWER AND GAS:
Under firm purchase power and gas contracts, WPL is obligated as follows
(dollars in millions):
PURCHASED POWER PURCHASED GAS
-------------------- ---------------------------
PURCHASE PURCHASE DECATHERMS
OBLIGATION MW'S OBLIGATION (IN MILLIONS)
---------- ------ ---------- -------------
1995................................... $ 8.3 1,920 $ 67 89
1996................................... 8.1 1,830 67 90
1997................................... 10.9 1,944 55 78
1998................................... 15.6 2,505 45 66
1999................................... 18.8 2,910 41 53
Thereafter............................. 106.5 12,720 77 101
---------- ------ ---------- ---
$168.2 23,829 $352 477
======== ====== ======== =========
C. MANUFACTURED GAS PLANT SITES:
Historically, WPL has owned 11 properties that have been associated with
the production of manufactured gas. Currently, WPL owns five of these sites,
three are owned by municipalities, and the remaining three are owned by private
companies. In 1989, WPL initiated investigation of these manufactured gas plant
sites.
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11. COMMITMENTS AND CONTINGENCIES: (CONTINUED)
The Wisconsin Department of Natural Resources ("DNR") has been involved in
reviewing investigation plans and has received ongoing reports regarding these
investigations.
In 1992, and into the beginning of 1993, WPL continued its investigations
and studies. WPL confirmed that there was no contamination at two of the sites.
WPL received a close-out letter from the DNR related to one of those sites and
requested a close-out letter for the other site. Additionally, the investigation
of historical records at a third site indicated a minimal likelihood of any
significant environmental impacts. In February 1993, WPL completed cost
estimates for the environmental remediation of the eight remaining sites. The
results of this analysis indicate that during the next 35 years, WPL will expend
approximately $81 million for feasibility studies, data collection, soil
remediation activities, groundwater research and groundwater remediation
activities, including construction of slurry containment walls and the
installation of groundwater pump and treatment facilities. This estimate was
based on various assumptions, and is subject to continuous review and revision
by management.
The cost estimate set forth above assumes 4 percent average inflation over
a 35 year period. The cost estimate also contemplates that primarily groundwater
pump and treatment activities will take place after 1998 through and including
2027. During this time, WPL estimates that it will incur average annual costs of
$2.0 million to complete the planned groundwater remediation activities.
With respect to rate recovery of these costs, the PSCW has approved a
five-year amortization of the unamortized balance of environmental costs
expended to date.
In addition, WPL is pursuing insurance recovery for the costs of
remediating these sites and is investigating to determine whether there are
other parties who may be responsible for some of the clean-up costs.
Through 1994, management has continued its oversight of the issues related
to the above manufactured gas plant sites without significant revision to the
above estimates and assumptions.
Based on the present regulatory record at the PSCW, management believes
that future costs of remediating these manufactured gas plant sites will be
recovered in rates.
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51
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12. SEGMENT INFORMATION:
The following table sets forth certain information relating to the
Company's consolidated operations:
YEAR ENDED DECEMBER 31,
--------------------------------------
1994 1993 1992
---------- ---------- ----------
Operation information:
Customer revenues--
Electric............................................ $ 531,747 $ 503,187 $ 477,735
Gas................................................. 137,575 137,270 119,362
Water............................................... 4,133 3,927 3,722
---------- ---------- ----------
Total operating revenues.......................... $ 673,455 $ 644,384 $ 600,819
========= ========= =========
Operating income (loss)--
Electric............................................ $ 121,136 $ 118,785 $ 109,459
Gas................................................. 13,334 10,431 8,724
Water............................................... 1,134 990 998
Income taxes, current and deferred..................... (44,726) (35,667) (30,541)
Other income and (deductions), net..................... 10,735 789 2,650
Interest expense, net.................................. (30,119) (31,223) (32,071)
Preferred dividends.................................... (3,310) (3,928) (3,811)
---------- ---------- ----------
Net income........................................ $ 68,184 $ 60,177 $ 55,408
========= ========= =========
Investment information:
Identifiable assets, including allocated common plant
at December 31--
Electric............................................ $1,176,670 $1,170,010 $1,064,418
Gas................................................. 234,815 228,257 210,965
Water............................................... 18,791 17,703 14,464
Assets not allocated................................... 154,848 134,687 123,803
---------- ---------- ----------
Total assets...................................... $1,585,124 $1,550,657 $1,413,650
========= ========= =========
Other information:
Construction and nuclear fuel expenditures--
Electric............................................ $ 103,420 $ 139,805 $ 113,252
Gas................................................. 20,319 18,876 13,974
Water............................................... 2,149 1,908 1,538
---------- ---------- ----------
Total construction and nuclear fuel
expenditures................................... $ 125,888 $ 160,589 $ 128,764
========= ========= =========
Provision for depreciation and amortization--
Electric............................................ $ 64,695 $ 53,398 $ 49,554
Gas................................................. 8,082 7,329 6,578
Water............................................... 417 470 284
---------- ---------- ----------
Total provision for depreciation.................. $ 73,194 $ 61,197 $ 56,416
========= ========= =========
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WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13. CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED):
Seasonal factors significantly affect WPL and, therefore, the data
presented below should not be expected to be comparable between quarters nor
necessarily indicative of the results to be expected for an annual period.
The amounts below were not audited by independent public accountants, but
reflect all adjustments necessary, in the opinion of the Company, for a fair
presentation of the data.
OPERATING OPERATING
QUARTER ENDED REVENUES INCOME NET INCOME
--------------------------------------------- --------- --------- ----------
(IN THOUSANDS)
1994:
March 31................................... $ 201,309 $31,684 $ 26,633
June 30.................................... 148,425 15,838 11,231
September 30............................... 156,483 24,470 16,927
December 31................................ 169,803 22,395 13,393
1993:
March 31................................... $ 182,023 $26,405 $ 17,740
June 30.................................... 141,049 16,936 8,237
September 30............................... 144,440 21,045 13,096
December 31................................ 177,986 31,091 21,104
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SHAREOWNER INFORMATION
MARKET INFORMATION
The 4.50% series of preferred stock is listed under the American Stock
Exchange, with the trading symbol Wis Pr. All other series of perferred stock
are traded on the over-the-counter market. Seventy-two percent of the Company's
preferred individual shareowners are Wisconsin residents.
DIVIDEND INFORMATION
Preferred stock dividends paid per share for each quarter during 1994 were
as follows:
SERIES DIVIDEND SERIES DIVIDEND
--- -------- ------ --------
4.40% $1.10 4.96% $ 1.24
4.50% $1.125 6.20% $ 1.55
4.76% $1.19 6.50% $ 0.4025
4.80% $1.20
As authorized by the Wisconsin Power and Light Company Board of Directors,
dividend record and payment dates normally are as follows:
RECORD DATE PAYMENT DATE
------------------------------ ------------
February 28 March 15
May 31 June 15
August 31 September 15
November 30 December 15
STOCK TRANSFER AGENT AND REGISTRAR
WPL Holdings, Inc.
Shareowner Services
P. O. Box 2568
Madison, WI 53701-2568
FORM 10-K INFORMATION
A Copy of Form 10-K as filed with the Securities and Exchange Commission
will be provided without charge upon request. Requests may be directed to
Shareowner Services.
EXECUTIVE OFFICERS OF THE COMPANY
ERROLL B. DAVIS, JR, 50, was elected President and Chief Executive Officer,
effective August 1, 1988 and has been a board member since April 1984. He had
been Executive Vice President since May 1984, Vice President--Finance and Public
Affairs since November 1982 and Vice President--Finance since August 1978. Mr.
Davis was elected President of WPL Holdings, Inc. on January 17, 1990 and Chief
Executive Officer of WPL Holdings, Inc. effective July 1, 1990. He has served as
a director of WPL Holdings, Inc. since March 1988.
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54
A.J. (NINO) AMATO, 43, was appointed Senior Vice President effective
October 3, 1993. He previously served as Vice President--Marketing and Strategic
Planning since December 1992, Vice president--Marketing and Communications since
January 1989 and Director of Electric Marketing and Customer Service since
October 1988. He had been President of Forward Wisconsin, Inc. from 1987 to
1988.
NORMAN E. BOYS, 50, was elected Vice President of Power Production
effective January 1, 1989. He previously served as the Director of Power
Production since October 1987 and Generating Station Manager at the Edgewater
Generating Station since August 1984.
DANIEL A. DOYLE, 36, was appointed Vice President--Finance, Controller and
Treasurer effective December 25, 1994. He previously served as Controller and
Treasurer of WPL since October 3, 1993. Prior to joining the Company, he was
Controller of Central Vermont Public Service Corporation since December 1988.
DAVID E. ELLESTAD, 54, was appointed Vice President-Electrical Engineering
and Operations on August 1, 1992. He previously served as Vice
President-Engineering and Operations since 1988; Vice President of Electrical
Engineering and Procurement since January 1, 1986; Director of Electrical
Engineering & Procurement since May 1985 and Director of Electrical Engineering
since November 1979.
EDWARD M. GLEASON, 54, was elected Corporate Secretary effective December
15, 1993. He previously served as Vice-President Finance and Treasurer since May
1986, Controller and Treasurer since October 1985 and Treasurer since May 1983.
Mr. Gleason is also Vice President, Treasurer and Corporate Secretary of WPL
Holdings, Inc. since October 1993.
THOMAS J. HANDZIAK, 31, was elected Assistant Controller on September 20,
1993. Prior to joining the Company, he was employed by Arthur Andersen & Co. as
an Audit Staff Assistant, Audit Senior and Audit Manager with primary
responsibilities of auditing and providing financial consulting services to
large publicly held corporations.
THOMAS L. HANSON, 41, was elected Assistant Treasurer on May 17, 1989. He
had been Financial Relations Supervisor in the Treasury Department since October
1987.
WILLIAM D. HARVEY, 45, was appointed Senior Vice President effective
October 3, 1992, Vice President-General Counsel since October 1, 1990 and Vice
President-Associate General Counsel since July 1986. Prior to joining the
Company, he was a member of the law firm of Wheeler, Van Sickle, Anderson,
Norman and Harvey.
STEVEN F. PRICE, 42, was appointed Assistant Corporate Secretary on April
15, 1992. He had been Cash Management Supervisor since December 1987. He was
also appointed Assistant Corporate Secretary and Assistant Treasurer of WPL
Holdings, Inc. on April 15, 1992.
ELIOT G. PROTSCH, 41, was appointed Senior Vice President effective October
3, 1993. He previously served as Vice President-Customer Services and Sales
since August 1992, Vice President and General Manager-Energy Services since
January 1989 and District Manager, Dane County, since October 1986.
JOSEPH SHEFCHEK, 38, was elected Assistant Vice President of Environmental
Affairs and Research effective December 25, 1994. He previously served as
Director of Environmental Affairs and Research since June 1991. Before joining
the Company, he held various environmental engineering positions in private
industry and government.
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BARBARA SWAN, 43, was elected Vice President-General Counsel effective
December 25, 1994. She previously served as General Counsel since 1993 and
Associate General Counsel from 1987 to 1993.
PAMELA J. WEGNER, 47, was elected Vice President-Information Services and
Administration on October 13, 1994. Prior to joining the Company, she was the
Administrator of the Division of Finance and Program Management in the Wisconsin
Department of Administration since 1987. She served as Administrator of the
Division of Administrative Services in the Wisconsin Department of Revenue from
1983 to 1987.
KIM K. ZUHLKE, 41, was elected Vice President--Customer Services and Sales
effective October 3, 1993. He previously served as Director of Marketing and
Sales Services since 1991, Director of Market Research, Planning and Development
since February 1990, Director of Customer Services since 1988 and District
Manager at Beaver Dam since April 1984.
NOTE: All ages are as of December 31, 1994. None of the executive officers
listed above is related to any director of the Board or nominee for
director of the Company.
Executive officers of the Company have no definite terms of office and
serve at the pleasure of the Board of Directors.
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56
[Map showing the location of the meeting appears on the back cover.meeting.]
TAKE THE RIMROCK ROAD EXIT #262 OR THE JOHN NOLEN DR. EXIT #263
OFF AND ON HIGHWAY 12 AND 18.