Item 1. Business.
General Description of Business
The registrant, Madison Gas and Electric Company (the Company), a Wisconsin corporation organized as such in 1896, is a public utility engaged in the generation and transmission of electric energy and in its distribution in Madison and its environs (250 square miles) and in the purchase, transportation, and distribution of natural gas in Columbia, Dane, Iowa, Juneau, Monroe, and Vernon counties, Wisconsin (975 square miles). See Exhibit No. 21 herein for a description of the Company's wholly owned subsidiaries.
The Company is subject to regulation by the Public Service Commission of Wisconsin (PSCW) as to rates, accounts, issuance of securities, plant and transmission line siting, and in other respects. The Federal Energy Regulatory Commission (FERC) has jurisdiction, under the Federal Power Act, over certain of the accounting practices of the Company and in certain other respects. The Nuclear Regulatory Commission (NRC) has jurisdiction over the operation of the Kewaunee Nuclear Power Plant (Kewaunee). The Company has a 17.8 percent ownership interest in Kewaunee. The other owners are Wisconsin Public Service Corporation (WPSC), which operates Kewaunee, and Wisconsin Power and Light Company (WPL).
The Company is also subject to regulation with regard to air quality, water quality, and solid waste (see I-6 and I-7) and may be subject to regulation with regard to other environmental matters by various federal, state, and local authorities, including the Wisconsin Department of Natural Resources (DNR), which has jurisdiction over air and water quality, and solid and hazardous waste standards, and regulates the electric generating operations of the Company with respect to pollution and environmental control matters. The Company has met the requirements of current environmental regulations. Unknown additional expenditures may be required for pollution control equipment and for the modification of existing plants to comply with future unknown environmental regulations. For example, the emerging issue of global warming could result in significant compliance cost for carbon dioxide emission controls. Except as set forth below, the amounts of such expenditures and the period of time over which they may be required to be made are not known. The Company is unable to predict whether compliance with future pollution control regulations would involve curtailments of operations or reductions in generating capacity or efficiency of present generating facilities or delays in the construction and operation of future generating facilities. Under both the National Environmental Policy Act and the Wisconsin Environmental Policy Act, the Company must obtain the necessary authorizations or permits from regulatory agencies for any new projects or other major actions significantly affecting the quality of the human environment after all aspects of the proposed project or action are subjected to a complete environmental review and a detailed environmental impact statement is issued.
Electric Operations
At December 31, 1993, the Company supplied electric service to 117,043 customers, of whom 104,637 were located in the cities of Fitchburg, Madison, Middleton, and Monona, and 12,406 in adjacent areas. Of the total number of customers, 101,722 were residential and 15,187 were commercial. For 1993, residential and commercial electric service revenues comprised 35 percent and 53 percent, respectively, of total electric revenues. The remaining electric revenues during 1993 were from industrial sales (5 percent), sales to public authorities including the University of Wisconsin (6 percent), and sales to other utilities (less than 1 percent). The electric operations accounted for 60 percent of the total revenues of the Company.
See Item 2
Item 2. Properties.
The following table presents the generating capability in service at December 31, 1993:
Commercial Net Capability No. of Plants Operation Date Fuel (Megawatts) Units Steam Plants Columbia 1975 & 1978 Low-Sulfur Coal 225(1)(2) 2 Kewaunee 1974 Nuclear 93(1)(3) 1 Blount 1957 & 1961 Coal/Gas 103 2 (Madison) 1938 & 1942 Gas/Coal 40 2 1949 Coal/Gas 23 1 1964 - 1968 Gas/Oil 34 4 Combustion Turbines 1964 - 1973 Gas/Oil 90 5 Total 608
(1) Base load generation. (2) Company's 22% share of two 525-mw units located near Portage, Wis. (3) Company's 17.8% share of 525-mw unit located near Kewaunee, Wis.
Major electric transmission and distribution lines and substations in service at December 31, 1993, are as follows:
Miles Lines Overhead Lines Underground Lines Transmission: 345 kV 124 - 138 kV 112 3 69 kV 91 21 Distribution: 13.8 kV and under 1,850 875
Substations Installed Capacity (KVA) Transmission (22) 4,073,400 Distribution (33) 324,100
Gas facilities include 1,659 miles of distribution mains and one propane air plant capable of producing a maximum daily capacity of 9,000 dekatherms of natural gas equivalent. One propane air plant was retired in 1992.
Item 3.
Item 3. Legal Proceedings.
Regarding Note 5 entitled "Commitments and Contingencies" in the Notes to Consolidated Financial Statements of the 1992 Annual Report to Shareholders, which was filed with the 1992 Form 10-K, which is incorporated herein by reference, the Wisconsin Supreme Court ruled in favor of Wisconsin Power and Light Company and the issue was thus resolved.
Item 4.
Item 4. Results of Votes of Security Holders.
No matters were submitted to a vote of security holders during the fourth quarter of the fiscal year.
PART II
Item 5.
Item 5. Market for the Registrant's Common Stock and Related Stockholder Matters
The principal market in which the common stock of the Company is traded is The Nasdaq Stock Market under the symbol MDSN. The approximate number of stockholders of record on February 1, 1994, was 16,170. The Company's transfer agent and registrar is Harris Trust and Savings Bank, Chicago, Illinois. The high and low sales prices for the common stock on The Nasdaq Stock Market and the dividends paid per common share for each quarter for the past two fiscal years are shown below:
Common Stock Price Range Dividends Per Share 1993 1993 High Low
First quarter ........ $35 1/2 $30 1/4 $0.455 Second quarter ....... $35 1/4 $32 3/4 $0.455 Third quarter ........ $36 3/4 $32 3/4 $0.465 Fourth quarter ....... $36 1/2 $32 3/4 $0.465
Common Stock Price Range Dividends Per Share 1992 1992 High Low
First quarter ........ $31 1/4 $29 $0.44 Second quarter ....... $31 3/4 $28 1/2 $0.44 Third quarter ........ $33 1/4 $28 3/4 $0.455 Fourth quarter ....... $34 1/2 $30 $0.455
[TEXT]
Item 7.
Item 7. Management's Discussion and Analysis of Financial Condition and Results of Operations
See Item 8
Item 8. Financial Statements and Supplementary Data
The required information for Items 7 and 8 is included in the Company's Current Report on Form 8-K under Item 5, Exhibit 99, dated February 11, 1994, Commission File No. 0-1125, except as listed below:
Quarterly Financial Information (Unaudited)
Quarters Ended (1) March 31 June 30 Sept. 30 Dec. 31 (Thousands of Dollars) Operating Revenues: Electric ..................... $34,771 $35,106 $43,066 $34,258 Gas .......................... 38,180 15,199 10,446 33,107 Total ...................... 72,951 50,305 53,512 67,365 Operating Expenses .............. 62,230 43,967 44,866 58,840 Net Operating Income ......... 10,721 6,338 8,646 8,525 Interest, Preferred Dividends, and Other ...................... 2,677 2,479 2,451 2,437 Earnings on Common Stock .... $ 8,044 $ 3,859 $ 6,195 $ 6,088 Earnings per Common Share (2) ... $0.75 $0.36 $0.58 $0.57
Operating Revenues: Electric ..................... $33,626 $34,432 $40,754 $33,834 Gas .......................... 32,296 12,486 7,783 32,791 Total ...................... 65,922 46,918 48,537 66,625 Operating Expenses .............. 56,633 40,452 39,537 56,318 Net Operating Income ......... 9,289 6,466 9,000 10,307 Interest, Preferred Dividends, and Other ...................... 2,829 3,106 2,923 2,903 Earnings on Common Stock .... $ 6,460 $ 3,360 $ 6,077 $ 7,404 Earnings per Common Share (2) ... $0.60 $0.31 $0.57 $0.69
Notes:
(1) The quarterly results of operations within a year are not comparable because of seasonal and other factors.
(2) The sum of earnings per share of common stock for any four quarterly periods may vary slightly from the earnings per share of common stock for the equivalent 12-month period due to the effect of rounding each quarterly period separately.
Responsibility for Financial Statements
The management of Madison Gas and Electric Company is responsible for the preparation and presentation of the financial information in this Annual Report. The following financial statements have been prepared in accordance with generally accepted accounting principles consistently applied and reflect management's best estimates and informed judgments as required.
To fulfill these responsibilities, management has developed and maintains a comprehensive system of internal operating, accounting, and financial controls. These controls provide reasonable assurance that the Company's assets are safeguarded, transactions are properly recorded, and the resulting financial statements are reliable. An internal audit function assists management in monitoring the effectiveness of the controls.
The Report of Independent Accountants on the financial statements by Coopers & Lybrand appears below. The responsibility of the independent accountants is limited to the audit of the financial statements presented and the expression of an opinion as to their fairness.
The Board of Directors maintains oversight of the Company's financial situation through its monthly review of operations and financial condition and its selection of the independent accountants. The Audit Committee, comprised of all Board members who are not employees or officers of the Company, also meets periodically with the independent accountants and the Company's internal audit staff who have complete access to and meet with the Audit Committee, without management representatives present, to review accounting, auditing, and financial matters. Pertinent items discussed at the meetings are reviewed with the full Board of Directors.
/s/ David C. Mebane David C. Mebane President, Chief Executive Officer and Chief Operating Officer
/s/ Joseph T. Krzos Joseph T. Krzos Vice President - Finance
Report of Independent Public Accountants
To the Shareholders and Board of Directors, Madison Gas and Electric Company:
We have audited the accompanying consolidated balance sheet and statement of capitalization of MADISON GAS AND ELECTRIC COMPANY (a Wisconsin corporation) and subsidiaries as of December 31, 1992, and the related consolidated statements of income, retained income, and cash flows for each of the two years in the period ended December 31, 1992. These financial statements are the responsibility of the Company's management. Our responsibility is to express 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 perform 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 amounts 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 Madison Gas and Electric Company and subsidiaries as of December 31, 1992, and the results of their operations and their cash flows for each of the two years ended December 31, 1992, in conformity with generally accepted accounting principles.
ARTHUR ANDERSEN & CO. Chicago, Illinois February 12, 1993
Item 9.
Item 9. Disagreements on Accounting and Financial Disclosure
None.
PART III
Item 10.
Item 10. Directors and Executive Officers of the Registrant
Information concerning the Directors of the Company is contained in the definitive proxy statement under the section "Election of Directors" filed on March 24, 1994, with the Securities and Exchange Commission, which is incorporated herein by reference.
Executive Officers of the Registrant (elected annually by Directors) Service Eff. Years as Executive Title Date Officer
Frank C. Vondrasek Chairman 01/01/94 19 Age: 65 Chairman and CEO 10/01/91 President and COO 01/01/88 Executive VP 06/01/80
David C. Mebane President, CEO and COO 01/01/94 13 Age: 60 President and COO 10/01/91 Senior VP and General Counsel 01/01/88 Vice President and General Counsel 04/17/85
Robert E. Domek Senior VP - Human Resources 05/03/93 5 Age: 63 Vice President - Human Resources 12/01/91 Asst. VP - Human Resources 10/01/89 Director - Personnel 01/01/69
Joseph T. Krzos Vice President - Finance 12/01/92 8 Age: 50 Asst. VP - Accounting and Control 12/01/91 Treasurer 05/01/88 Assistant Treasurer 06/01/86
Richard H. Thies VP - Gas Systems Operation 07/01/86 8 Age: 52
Mark C. Williamson Vice President - Energy Services 05/03/93 2 Age: 40 Asst. VP - Energy Services 06/01/92 Exec. Director - Electric Supply 12/01/91 Corporate Attorney 12/01/89 Senior Staff Attorney 12/01/87
Gary J. Wolter VP - Administration and Secretary 12/01/91 3 Age: 39 Secretary and Corporate Attorney 12/01/89 Corporate Attorney 02/13/84
Terry A. Hanson Treasurer 12/01/91 3 Age: 42 Manager - Internal Audit 09/01/84
Burnett F. Adams Asst. VP - Procurement & Div. Oper. 05/03/93 1 Age: 41 Exec. Dir. - Materials and Fuel 12/01/91 Director - Gas Rates and Supply 07/01/88
James C. Boll Asst. VP - Law and Corp. Comm. 05/03/93 1 Age: 58 Exec. Dir. - Law and Corp. Comm. 01/13/92 Dir. - Public Affairs and Risk Mgmt. 06/01/91 Director - Risk Management 03/05/90
Thomas R. Krull Asst. VP - Elec. Trans. & Dist. 05/03/93 1 Age: 44 Exec. Dir. - Elec. Trans. & Dist. 12/01/91 Director - Elec. Trans. & Dist. 09/01/89 Asst. Dir. - Elec. Trans. & Dist. 04/01/89 Manager - Elec. Trans. & Dist. 07/01/85
Item 11.
Item 11. Executive Compensation
See Item 12
Item 12. Security Ownership of Certain Beneficial Owners and Management
The required information for Items 11 and 12 is included in the Company's definitive proxy statement under the section "Executive Compensation," not including "Report on Executive Compensation" and "Company Performance," and under the section "Beneficial Ownership of Common Stock by Directors and Executive Officers" filed with the Securities and Exchange Commission on March 24, 1994, which is incorporated herein by reference.
Item 13.
Item 13. Certain Relationships and Related Transactions
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MADISON GAS AND ELECTRIC COMPANY (Registrant)
Date March 24, 1994 By /s/ David C. Mebane David C. Mebane President, Chief Executive Officer and Chief Operating Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities indicated on March 24, 1994.
SIGNATURE TITLE
/s/ David C. Mebane President, Chief Executive David C. Mebane Officer and Chief Operating Officer and Director (Principal Executive Officer)
/s/ Joseph T. Krzos Vice President - Finance Joseph T. Krzos (Principal Financial Officer and Principal Accounting Officer)
/s/ Frank C. Vondrasek Chairman and Director Frank C. Vondrasek
/s/ Jean Manchester Biddick Director Jean Manchester Biddick
/s/ Richard E. Blaney Director Richard E. Blaney
Director Robert M. Bolz
/s/ Donald J. Helfrecht Director Donald J. Helfrecht
/s/ Frederic E. Mohs Director Frederic E. Mohs
/s/ Robert B. Rennebohm Director Robert B. Rennebohm
/s/ Phillip C. Stark Director Phillip C. Stark
/s/ H. Lee Swanson Director H. Lee Swanson
PART IV
Item 14.
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
a)1. Financial Statements (consolidated, as of December 31, 1993 and 1992, and for each of the three years in the period ended December 31, 1993).
Statements of Income* Balance Sheets* Statements of Capitalization* Statements of Retained Income* Statements of Cash Flows* Notes to Consolidated Financial Statements* Management's Responsibility for Financial Statements (included under Item 8 herein, page II-4) Report of Independent Accountants (for fiscal 1993)*
*Incorporated by reference in Item 8 herein.
2. Financial Statement Schedules.
The following financial statement schedules of the Company, and the accountants' report thereon, and other report appear on the indicated pages in this Form 10-K Annual Report:
Description Page
Report of Independent Accountants on Financial Statement Schedules (for fiscal 1993) IV-2
Schedule V - Utility Plant -- for the years ended December 31, 1993, 1992, and 1991 -
Schedule VI - Accumulated Provision for Depreciation -- for the years ended December 31, 1993, 1992, and 1991
Schedule X - Supplementary Income Statement Information -- for the years ended December 31, 1993, 1992, and 1991
Report of former Independent Public Accountants on fiscal years 1992 and 1991 Financial Statements II-5
Report of former Independent Public Accountants on fiscal years 1992 and 1991 Financial Statement Schedules IV-3
Report of Independent Accountants
Our report on the consolidated financial statements of Madison Gas and Electric Company has been incorporated by reference in this Form 10-K from Exhibit 99 of the Form 8-K, dated February 11, 1994, of Madison Gas and Electric Company. In connection with our audit of such financial statements, we have also audited the related financial statement schedules for the year ended December 31, 1993, listed in the index in Item 14(a)2. of this Form 10-K.
In our opinion, the financial statement schedules referred to above, when considered in relation to the basic financial statements taken as a whole, present fairly, in all material respects, the information required to be included therein.
COOPERS & LYBRAND Milwaukee, Wisconsin February 11, 1994
Report of Independent Public Accountants
We have audited, in accordance with generally accepted auditing standards, the consolidated balance sheet and statement of capitalization of Madison Gas and Electric Company and subsidiaries as of December 31, 1992, and the related consolidated statements of income, retained income, and cash flows for each of the two years in the period ended December 31, 1992, included in the Company's Annual Report to Shareholders incorporated by reference in this Annual Report on Form 10-K, and have issued our report thereon dated February 12, 1993.
Our audits were made for the purpose of forming an opinion on those statements taken as a whole. The financial statement schedules listed in Item 14(a)2 as of December 31, 1992, and the two years then ended are the responsibility of the Company's management and are presented for purposes of complying with the Securities and Exchange Commission's rules and are not part of the basic financial statements. These financial statement schedules have been subjected to the auditing procedures applied in the audits of the basic financial statements and, in our opinion, fairly state in all material respects the financial data required to be set forth therein in relation to the basic financial statements taken as a whole.
ARTHUR ANDERSEN & CO. Chicago, Illinois February 12, 1993
3. All exhibits, including those incorporated by reference.
Exhibits:
No. Description of Document
3A Articles of Incorporation as in effect at January 5, 1994.
3B By-Laws as in effect at January 1, 1991. (Incorporated by reference to Exhibit 3B with 1991 10-K in File No. 0-1125.)
4A Indenture of Mortgage and Deed of Trust between the Company and Firstar Trust Company, as Trustee, dated as of January 1, 1946, and filed as Exhibit 7-D to SEC File No. 0-1125 and the following indentures supplemental thereto are incorporated herein by reference:
Supplemental SEC Indenture Dated as of Exhibit No. File No. Fourth 4/01/61 2-B-5 2-17774 Fifth 6/01/66 4-B-6 2-25244 Sixth 7/01/69 2-B-7 2-33250 Seventh 1/15/71 2.08 2-38980 Eighth 5/01/74 2.03 2-50507 Ninth 11/15/75 2.04 2-54821 Tenth1 11/01/76 2.03 2-60227 Eleventh1&2 12/01/82 2 0-1125 Twelfth 11/15/86 4.2 33-9054 Thirteenth1 10/14/88 4B 0-1125 (1988 10-K) Fourteenth 04/01/92 4C 0-1125 (1992 10-K) Fifteenth 04/01/92 4D 0-1125 (1992 10-K) Sixteenth 10/01/92 4E 0-1125 (1992 10-K) Seventeenth 02/01/93 4F 0-1125 (1992 10-K)
1Exempted transaction under Section 4(2) of the Securities Act. 2Filed in connection with Form 8-K.
10A Copy of Joint Power Supply Agreement with Wisconsin Power and Light Company and Wisconsin Public Service Corporation dated February 2, 1967. (Incorporated by reference to Exhibit 4.09 in File No. 2-27308.)
10B Copy of Joint Power Supply Agreement (Exclusive of Exhibits) with Wisconsin Power and Light Company and Wisconsin Public Service Corporation dated July 26, 1973, amending Exhibit 5.04.
(Incorporated by reference to Exhibit 5.04A in File No. 2-48781.)
10D Copy of revised Agreement for Construction and Operation of Columbia Generating Plant with Wisconsin Power and Light Company and Wisconsin Public Service Corporation dated July 26, 1973. (Incorporated by reference to Exhibit 5.07 in File No. 2-48781.)
10F Copy of severance agreement with certain key employees dated June 16, 1989. (Incorporated by reference to Exhibit 10F with 1989 10-K in File No. 0-1125.)
12 Statement regarding computation of ratios (page II-2).
21 Subsidiaries of the Registrant.
23.1 Consent of Independent Accountants.
23.2 Consent of Independent Public Accountants.
(b) Reports on Form 8-K.
No Current Report on Form 8-K was filed for the quarter ended December 31, 1993.
On March 4, 1994, the Company filed a Current Report on Form 8-K dated February 11, 1994, under Item 5, "Other Events," which contains, under Exhibit 99, the audited consolidated financial statements of the Company for the year ended December 31, 1993; Notes to Consolidated Financial Statements; and Management's Discussion and Analysis of Financial Condition and Operations.
[TEXT] Schedule X
MADISON GAS AND ELECTRIC COMPANY AND CONSOLIDATED SUBSIDIARIES
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION FOR THE YEARS ENDED DECEMBER 31, 1993, 1992, AND 1991
The amounts of maintenance and repairs, amortization of intangible assets, and taxes that have been charged to other accounts are not significant. Rents and advertising costs charged to income and clearing accounts are not significant. No royalties were paid. Provisions for gross receipts tax charged to tax expense is as follows:
Year Ended December 31, 1993 1992 1991 (Thousands of Dollars)
Gross Receipts .......... $5,371 $5,495 $5,223