WISCONSIN ENERGY CORP - 10-Q Quarterly Report

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 September 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 the Registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ]

Indicate 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 (September 30, 2004):

Common Stock, $.01 Par Value,

117,027,363 shares outstanding.

		WISCONSIN ENERGY CORPORATION


		FORM 10-Q REPORT FOR THE QUARTER ENDED SEPTEMBER 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 .................................................................		17

3.	Quantitative and Qualitative Disclosures About Market Risk ..............................................		41

4.	Controls and Procedures ........................................................................................................		42

	Part II -- Other Information

1.	Legal Proceedings ..................................................................................................................		42

2.	Unregistered Sales of Equity Securities and
	Use of Proceeds [and Issuer Purchases of Equity Securities] ................................................		43

6.	Exhibits and Reports on Form 8-K .......................................................................................		43

	Signatures ...............................................................................................................................		45

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. The sale of the manufacturing segment was completed effective July 31, 2004 and this segment is reported as discontinued operations. 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).

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 to Wisconsin Electric 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 Power the Future, 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.

Other: Other non-utility operating subsidiaries of Wisconsin Energy include Minergy Corp. (Minergy), which has $26 million of assets and develops and markets recycling technologies, and Wispark LLC (Wispark), which has $141 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.

PART I -- FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED INCOME STATEMENTS
(Unaudited)

				Three Months Ended		Nine Months Ended
				September 30		September 30

				2004	2003	2004	2003

				(Millions of Dollars, Except Per Share Amounts)

	Operating Revenues			$696.6	$695.8	$2,478.9	$2,455.4

	Operating Expenses
		Fuel and purchased power		161.5	161.1	457.9	438.8
		Cost of gas sold		80.9	83.9	596.2	622.5
		Other operation and maintenance		249.2	229.3	760.1	703.1
		Depreciation, decommissioning
			and amortization	83.5	84.5	244.3	247.8
		Property and revenue taxes		22.3	20.6	66.1	62.0
		Asset valuation charges, net		149.0	37.4	149.0	37.4

	Total Operating Expenses			746.4	616.8	2,273.6	2,111.6


	Operating Income (Loss)			(49.8)	79.0	205.3	343.8

	Other Income and (Deductions), Net			(3.1)	9.5	11.9	30.5

	Financing Costs			46.2	54.1	151.1	160.3


	Income (Loss) From Continuing
		Operations Before Income Taxes		(99.1)	34.4	66.1	214.0

	Income Taxes			(32.9)	13.1	29.0	75.2

	Income (Loss) from Continuing Operations			(66.2)	21.3	37.1	138.8

	Income from Discontinued
		Operations, Net of Tax (Note 3)		150.6	9.6	176.7	33.4


	Net Income			$84.4	$30.9	$213.8	$172.2




	Earnings (Loss) Per Share (Basic)
			Continuing operations	($0.56)	$0.18	$0.31	$1.19
			Discontinued operations	1.28	0.08	1.50	0.28

	Total Earnings Per Share (Basic)			$0.72	$0.26	$1.81	$1.47




	Earnings (Loss) Per Share (Diluted)
			Continuing operations	($0.56)	$0.18	$0.31	$1.18
			Discontinued operations	1.27	0.08	1.48	0.28

	Total Earnings Per Share (Diluted)			$0.71	$0.26	$1.79	$1.46




	Weighted Average Common
		Shares Outstanding (Millions)
			Basic	117.4	117.4	118.0	116.8
			Diluted	118.7	118.8	119.5	117.9

	Dividends Per Share of Common Stock			$0.21	$0.20	$0.62	$0.60

	The accompanying Notes to Consolidated Condensed Financial Statements are an integral part
		of these financial statements.

WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED BALANCE SHEETS

			(Unaudited)
			September 30, 2004	December 31, 2003

			(Millions of Dollars)
Assets

Property, Plant and Equipment
	In service		$8,198.7	$8,342.4
	Accumulated depreciation		(3,075.8)	(3,021.3)

			5,122.9	5,321.1
	Construction work in progress		512.5	296.2
	Leased facilities, net		100.3	104.6
	Nuclear fuel, net		66.5	78.4

		Net Property, Plant and Equipment	5,802.2	5,800.3

Investments
	Nuclear decommissioning trust fund		688.2	674.4
	Other		266.4	276.9

		Total Investments	954.6	951.3

Current Assets
	Cash and cash equivalents		47.7	28.1
	Accounts receivable		281.7	333.7
	Accrued revenues		108.3	212.2
	Materials, supplies and inventories		426.8	385.6
	Assets held for sale		-	938.0
	Other		126.0	168.2

		Total Current Assets	990.5	2,065.8

Deferred Charges and Other Assets
	Regulatory assets		708.1	612.3
	Goodwill, net		441.9	441.9
	Other		115.2	93.5

		Total Deferred Charges and Other Assets	1,265.2	1,147.7

Total Assets			$9,012.5	$9,965.1




Capitalization and Liabilities

Capitalization
	Common equity		$2,431.9	$2,358.7
	Preferred stock of subsidiary		30.4	30.4
	Long-term debt		3,065.2	3,570.5

		Total Capitalization	5,527.5	5,959.6

Current Liabilities
	Long-term debt due currently		28.7	166.2
	Short-term debt		356.3	590.8
	Accounts payable		236.0	248.7
	Accrued liabilities		204.5	126.1
	Liabilities held for sale		-	251.7
	Other		150.7	83.6

		Total Current Liabilities	976.2	1,467.1

Deferred Credits and Other Liabilities
	Regulatory liabilities		891.2	887.7
	Asset retirement obligations		756.3	732.0
	Deferred income taxes - long-term		448.5	570.8
	Other		412.8	347.9

		Total Deferred Credits and Other Liabilities	2,508.8	2,538.4

Total Capitalization and Liabilities			$9,012.5	$9,965.1





The accompanying Notes to Consolidated Condensed Financial Statements are an integral part
	of these financial statements.

WISCONSIN ENERGY CORPORATION
CONSOLIDATED CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited)

				Nine Months Ended September 30

				2004	2003

				(Millions of Dollars)
Operating Activities
	Net income			$213.8	$172.2
	Income from discontinued operations, net of tax			(176.7)	(33.4)
	Reconciliation to cash
		Depreciation, decommissioning and amortization		271.3	269.9
		Nuclear fuel expense amortization		17.3	20.1
		Equity in earnings of unconsolidated affiliates		(22.8)	(17.2)
		Asset valuation charges, net		149.0	37.4
		Deferred income taxes and investment tax credits, net		(114.7)	19.7
		Accrued income taxes, net		49.7	(39.6)
		Change in - Accounts receivable and accrued revenues		156.0	135.0
			Inventories	(41.2)	(90.9)
			Other current assets	42.8	19.3
			Accounts payable	(28.3)	(26.1)
			Other current liabilities	79.9	18.5
		Other		(10.5)	(11.5)

Cash Provided by Operating Activities				585.6	473.4

Investing Activities
	Capital expenditures			(415.7)	(494.7)
	Acquisitions and investments			-	(4.1)
	Proceeds from asset sales, net			902.3	13.7
	Nuclear fuel			(6.2)	(21.9)
	Nuclear decommissioning funding			(13.2)	(13.2)
	Other			0.3	40.7

Cash Provided by (Used in) Investing Activities				467.5	(479.5)

Financing Activities
	Issuance of common stock and exercise of stock options			63.6	42.8
	Repurchase of common stock			(140.6)	(6.8)
	Dividends paid on common stock			(73.2)	(70.0)
	Issuance of long-term debt			-	842.4
	Retirement and redemption of long-term debt			(648.8)	(522.7)
	Change in short-term debt			(234.5)	(272.0)
	Other			-	(22.5)

Cash Used in Financing Activities				(1,033.5)	(8.8)


Change in Cash and Cash Equivalents from Continuing Operations				19.6	(14.9)


Cash and Cash Equivalents at Beginning of Period				28.1	35.0


Cash and Cash Equivalents at End of Period				$47.7	$20.1




Supplemental Information - Cash Paid For
	Interest (net of amount capitalized)			$138.9	$126.5
	Income taxes (net of refunds)			$101.9	$101.3


The accompanying Notes to Consolidated Condensed Financial Statements are an integral part
	of these financial statements.