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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549

 

FORM 10-Q

QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934

 

For the Quarterly Period Ended June 30, 2004

 

 

Commission

Registrant; State of Incorporation

IRS Employer

File Number

Address; and Telephone Number

Identification No.
     
     

001-09057

WISCONSIN ENERGY CORPORATION

39-1391525
 

(A Wisconsin Corporation)

  
 

231 West Michigan Street

  
 

P.O. Box 2949

  
 

Milwaukee, WI 53201

  
 

(414) 221-2345

  

 

Indicate by check mark whether the Registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that each Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes [X]    No [  ]

Indicate by check mark whether the Registrant is an accelerated filer (as defined in Rule 12b-2 of the Exchange Act).    Yes [X]    No [  ]

Indicate the number of shares outstanding of each of the Registrant's classes of common stock as of the latest practicable date (June 30, 2004):

 

Common Stock, $.01 Par Value,

117,609,417 shares outstanding.




 

 

 

 
 

WISCONSIN ENERGY CORPORATION

  
 

                                    

  
     
 

FORM 10-Q REPORT FOR THE QUARTER ENDED JUNE 30, 2004

  
     
     
     
 

TABLE OF CONTENTS

  

Item

  

Page
     
 

Introduction .................................................................................................................

 3
     
     
 

Part I -- Financial Information

  
     

1.

Financial Statements

  
     
 

    Consolidated Condensed Income Statements .............................................................

 4
     
 

    Consolidated Condensed Balance Sheets ...................................................................

 5
     
 

    Consolidated Condensed Statements of Cash Flows ..................................................

 6
     
 

    Notes to Consolidated Condensed Financial Statements ..............................................

 7
     

2.

Management's Discussion and Analysis of

  
 

    Financial Condition and Results of Operations ............................................................

16
     

3.

Quantitative and Qualitative Disclosures About Market Risk ..........................................

40
     

4.

Controls and Procedures ..............................................................................................

40
     
 

Part II -- Other Information

  
     

1.

Legal Proceedings .......................................................................................................

41
     

2.

Changes in Securities, Use of Proceeds and Issuer Purchases of Equity Securities ..........

42
     

4.

Submission of Matters to a Vote of Security Holders .....................................................

42
     

5.

Other Information...............................................................................................

43
     

6.

Exhibits and Reports on Form 8-K ................................................................................

44
     
 

Signatures ...................................................................................................................

46


2

 

 

 

INTRODUCTION

Wisconsin Energy Corporation is a diversified holding company which, during this reporting period, conducted its operations primarily in three operating segments: a utility energy segment, a non-utility energy segment and a manufacturing segment. Unless qualified by their context when used in this document, the terms Wisconsin Energy, the Company, Our, Us or We refer to the holding company and all of its subsidiaries. Our primary subsidiaries are Wisconsin Electric Power Company (Wisconsin Electric), Wisconsin Gas LLC, formerly Wisconsin Gas Company (Wisconsin Gas), and W.E. Power, LLC (We Power). The sale of the manufacturing segment was completed effective July 31, 2004 and this segment is reported as discontinued operations.

Utility Energy Segment:   Our utility energy segment consists of: Wisconsin Electric, which serves electric customers in Wisconsin and the Upper Peninsula of Michigan, gas customers in Wisconsin and steam customers in metro Milwaukee, Wisconsin; Wisconsin Gas, which serves gas customers in Wisconsin and water customers in suburban Milwaukee, Wisconsin; and Edison Sault Electric Company (Edison Sault), which serves electric customers in the Upper Peninsula of Michigan. Wisconsin Electric and Wisconsin Gas operate under the trade name of "We Energies".

Non-Utility Energy Segment:   Our non-utility energy segment consists of We Power and Wisvest Corporation (Wisvest). We Power was formed in 2001 to design, construct, own, finance and lease the new generating capacity included in our Power the Future strategy. Wisvest owns and has investments in electric generating facilities and other energy-related entities and assets. As a result of a change in corporate strategy to focus on our Power the Future strategy, we have reduced the operations of Wisvest.

Manufacturing Segment:   Our manufacturing segment consisted of WICOR Industries, LLC (WICOR Industries), an intermediary holding company, and its three primary subsidiaries: Sta-Rite Industries, LLC (Sta-Rite), SHURflo, LLC (SHURflo) and Hypro, LLC (Hypro), which are manufacturers of pumps, water treatment products and fluid handling equipment with manufacturing, sales and distribution facilities in the United States and several other countries. Effective July 31, 2004, we sold this segment to Pentair, Inc. Accordingly, this segment is reflected as discontinued operations in the accompanying financial statements. For further information see Note 3 -- Discontinued Operations and Assets Held for Sale.

Other:   Other non-utility operating subsidiaries of Wisconsin Energy include Minergy Corp. (Minergy), which has $55 million of assets and develops and markets recycling technologies, and Wispark LLC (Wispark), which has $145 million of assets and develops and invests in real estate.

We have prepared the unaudited interim financial statements presented in this Form 10-Q pursuant to the rules and regulations of the Securities and Exchange Commission. We have condensed or omitted some information and note disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles pursuant to these rules and regulations. Our financial statements should be read in conjunction with the financial statements and notes thereto included in our 2003 Annual Report on Form 10-K.



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PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WISCONSIN ENERGY CORPORATION

CONSOLIDATED CONDENSED INCOME STATEMENTS

(Unaudited)

Three Months Ended June 30

Six Months Ended June 30

2004

2003

2004

2003

(Millions of Dollars, Except Per Share Amounts)

Operating Revenues

$716.4

$708.2

$1,782.3

$1,759.6

Operating Expenses

Fuel and purchased power

152.1

138.5

296.4

277.7

Cost of gas sold

129.5

143.6

515.3

538.6

Other operation and maintenance

256.0

230.5

510.9

473.8

Depreciation, decommissioning

and amortization

83.6

82.7

160.8

163.3

Property and revenue taxes

21.8

20.3

43.8

41.4

Total Operating Expenses

643.0

615.6

1,527.2

1,494.8

Operating Income

73.4

92.6

255.1

264.8

Other Income, Net

10.3

13.3

15.0

21.0

Financing Costs

50.7

55.1

104.9

106.2

Income From Continuing

Operations Before Income Taxes

33.0

50.8

165.2

179.6

Income Taxes

12.1

15.8

61.9

62.1

Income from Continuing Operations

20.9

35.0

103.3

117.5

Income from Discontinued

Operations, Net of Tax (Note 3)

17.7

14.3

26.1

23.8

Net Income

$38.6

$49.3

$129.4

$141.3

Earnings Per Share (Basic)

Continuing operations

$0.18

$0.30

$0.87

$1.01

Discontinued operations

0.15

0.12

0.22

0.20

Total Earnings Per Share (Basic)

$0.33

$0.42

$1.09

$1.21

Earnings Per Share (Diluted)

Continuing operations

$0.17

$0.30

$0.86

$1.00

Discontinued operations

0.15

0.12

0.22

0.20

Total Earnings Per Share (Diluted)

$0.32

$0.42

$1.08

$1.20

Weighted Average Common

Shares Outstanding (Millions)

Basic

118.0

116.7

118.2

116.4

Diluted

119.5

117.9

119.9

117.4

Dividends Per Share of Common Stock

$0.21

$0.20

$0.42

$0.40

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part

of these financial statements.



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WISCONSIN ENERGY CORPORATION

CONSOLIDATED CONDENSED BALANCE SHEETS

(Unaudited)

June 30, 2004

December 31, 2003

(Millions of Dollars)

Assets

Property, Plant and Equipment

In service

$8,435.9

$8,342.4

Accumulated depreciation

(3,139.5)

(3,021.3)

5,296.4

5,321.1

Construction work in progress

422.0

296.2

Leased facilities, net

101.8

104.6

Nuclear fuel, net

67.6

78.4

Net Property, Plant and Equipment

5,887.8

5,800.3

Investments

Nuclear decommissioning trust fund

686.8

674.4

Other

260.6

276.9

Total Investments

947.4

951.3

Current Assets

Cash and cash equivalents

21.4

28.1

Accounts receivable

329.2

333.7

Accrued revenues

111.2

212.2

Materials, supplies and inventories

312.8

385.6

Assets held for sale (Note 3)

957.9

938.0

Other

158.3

168.2

Total Current Assets

1,890.8

2,065.8

Deferred Charges and Other Assets

Regulatory assets

662.4

612.3

Goodwill, net

441.9

441.9

Other

98.1

93.5

Total Deferred Charges and Other Assets

1,202.4

1,147.7

Total Assets

$9,928.4

$9,965.1

Capitalization and Liabilities

Capitalization

Common equity

$2,398.7

$2,358.7

Preferred stock of subsidiary

30.4

30.4

Long-term debt

3,367.2

3,570.5

Total Capitalization

5,796.3

5,959.6

Current Liabilities

Long-term debt due currently

168.6

166.2

Short-term debt

609.0

590.8

Accounts payable

227.9

248.7

Accrued liabilities

84.3

126.1

Liabilities held for sale (Note 3)

272.4

251.7

Other

135.6

83.6

Total Current Liabilities

1,497.8

1,467.1

Deferred Credits and Other Liabilities

Regulatory liabilities

884.0

887.7

Asset retirement obligations

750.4

732.0

Deferred income taxes - long-term

615.3

570.8

Other

384.6

347.9

Total Deferred Credits and Other Liabilities

2,634.3

2,538.4

Total Capitalization and Liabilities

$9,928.4

$9,965.1

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part

of these financial statements.



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WISCONSIN ENERGY CORPORATION

CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS

(Unaudited)

Six Months Ended June 30

2004

2003

(Millions of Dollars)

Operating Activities

Net income

$129.4

$141.3

Income from discontinued operations, net of tax

(26.1)

(23.8)

Reconciliation to cash

Depreciation, decommissioning and amortization

179.4

178.0

Nuclear fuel expense amortization

10.7

13.6

Equity in earnings of unconsolidated affiliates

(14.9)

(11.9)

Deferred income taxes and investment tax credits, net

(4.7)

(11.2)

Accrued income taxes, net

(33.3)

(24.0)

Change in -

Accounts receivable and accrued revenues

105.5

86.4

Inventories

72.8

4.8

Other current assets

21.9

5.6

Accounts payable

(20.8)

(22.2)

Other current liabilities

43.6

20.0

Other

30.5

6.2

Cash Provided by Operating Activities

494.0

362.8

Investing Activities

Capital expenditures

(254.9)

(306.8)

Acquisitions and investments

1.7

(4.0)

Proceeds from asset sales, net

15.9

12.6

Nuclear fuel

(0.4)

(16.8)

Nuclear decommissioning funding

(8.8)

(8.8)

Other

31.4

3.5

Cash Used in Investing Activities

(215.1)

(320.3)

Financing Activities

Issuance of common stock and exercise of stock options

47.8

29.3

Repurchase of common stock

(98.7)

(6.8)

Dividends paid on common stock

(48.5)

(46.6)

Issuance of long-term debt

17.4

840.8

Retirement and redemption of long-term debt

(221.8)

(456.3)

Change in short-term debt

18.2

(392.9)

Other

-   

(21.0)

Cash Used in Financing Activities

(285.6)

(53.5)

Change in Cash and Cash Equivalents from Continuing Operations

(6.7)

(11.0)

Cash and Cash Equivalents at Beginning of Period

28.1

35.0

Cash and Cash Equivalents at End of Period

$21.4

$24.0

Supplemental Information - Cash Paid For

Interest (net of amount capitalized)

$116.2

$109.4

Income taxes (net of refunds)

$57.5

$101.1

The accompanying Notes to Consolidated Condensed Financial Statements are an integral part

of these financial statements.



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WISCONSIN ENERGY CORPORATION
NOTES TO CONSOLIDATED CONDENSED FINANCIAL STATEMENTS
(Unaudited)

 

 1 -- GENERAL INFORMATION

Our accompanying unaudited consolidated condensed financial statements should be read in conjunction with Item 8, Financial Statements and Supplementary Data, in our 2003 Annual Report on Form 10-K. In the opinion of management, we have included all adjustments, normal and recurring in nature, necessary to a fair presentation of the results of operations, cash flows and financial position in the accompanying income statements, statements of cash flows and balance sheets. The results of operations for the three and six months ended June 30, 2004 are not necessarily indi