Annual Report (Form 10-K), fiscal year 1993

Item 1. BUSINESS
(a) General Development of Business
WICOR, Inc. (the "Company" or "WICOR") is a diversified holding company with two principal businesses: natural gas distribution and manufacturing of pumps and water processing equipment. Wisconsin Gas Company ("Wisconsin Gas") engages in retail distribution of natural gas. Sta-Rite Industries, Inc. ("Sta-Rite") and SHURflo Pump Manufacturing Co. ("SHURflo") are manufacturers of pumps and water processing equipment. WEXCO of Delaware, Inc. ("WEXCO"), another subsidiary, previously engaged in exploration for and development of oil and natural gas through financial participation with producers. WEXCO sold substantially all of its assets in 1993. The Company is a Wisconsin corporation and maintains its principal executive offices in Milwaukee, Wisconsin.
The Company was incorporated in 1980 at which time it acquired all the outstanding common stock of Wisconsin Gas through a merger. WEXCO, formed in 1978 as a subsidiary of Wisconsin Gas, also became a subsidiary of the Company. The Company acquired all of the outstanding common stock of Sta-Rite through a merger in 1982.
In 1991, Sta-Rite completed the sale of its Fluid Power Group and its Heating Group. This decision was part of Sta-Rite's long- term strategy to concentrate on its water products operations and pursue opportunities for further growth.
In 1991, Sta-Rite purchased the operating assets of Aquality, Inc., a manufacturer of swimming pool accessories. In April 1992, Sta-Rite purchased a majority shareholder interest in Nocchi Pompe S.p.A., a manufacturer of small water pumps and related equipment, located near Pisa, Italy. During 1992, the Company increased its ownership interest in Filtron Technology Corp. to 21%.
In July 1993, the Company acquired all of the outstanding stock of SHURflo through a merger. SHURflo is a manufacturer of small pumps for the food service, recreational vehicle, marine, industrial and water purification markets.
In November 1993, Sta-Rite acquired Dega Research Pty, a Melbourne, Australia-based manufacturer of pumps, filters and accessories for the pool and spa market. This acquisition made Sta- Rite the largest pool and spa equipment company in Australia, which is the second largest market in the world for these products.
The Company (including subsidiaries) has 3,222 full-time equivalent employees.
(b) Financial Information About Industry Segments
Reference is made to "Financial Review-General Overview" included in Exhibit 13, which is hereby incorporated herein by reference.
(c) Narrative Description of Business
1. RETAIL DISTRIBUTION OF NATURAL GAS A. General
Wisconsin Gas is the largest natural gas distribution public utility in Wisconsin, where all of its business is conducted. At December 31, 1993, Wisconsin Gas distributed gas to approximately 485,000 residential, commercial and industrial customers in 487 communities throughout Wisconsin with an estimated population of 1,867,000 based on the State of Wisconsin's estimates for 1993. Wisconsin Gas is subject to the jurisdiction of the Public Service Commission of Wisconsin ("PSCW") as to various phases of its operations, including rates, service and issuance of securities. See "Wisconsin Rate and Regulatory Matters."
B. Gas Markets and Competition
Wisconsin Gas' business is highly seasonal, particularly as to residential and commercial sales for space heating purposes, with a substantial portion of its sales occurring in the winter heating season. Competition in varying degrees exists between natural gas and other forms of energy available to consumers. Most of Wisconsin Gas' large commercial and industrial customers are dual-fuel customers that are equipped to switch between natural gas and alternate fuels. Wisconsin Gas offers transportation services for these customers to enable them to reduce their energy costs and use gas rather than other fuels. Under gas transportation agreements, customers seek to purchase lower-priced spot market gas directly from producers or other sellers and arrange with pipelines and Wisconsin Gas to have the gas transported to their facilities. Wisconsin Gas actively assists customers in buying gas and arranging transportation. Wisconsin Gas also offers gas sales services that are priced to compete with these transportation services. Wisconsin Gas earns the same margin (difference between revenue and cost), whether it sells gas to customers or transports customer-owned gas.
The following table sets forth the volumes of natural gas delivered by Wisconsin Gas to its customers.
*One therm equals 100,000 BTU's.
The volumes shown as transported represent customer-owned gas that was delivered by Wisconsin Gas to its customers. The remaining volumes represent quantities sold to customers by Wisconsin Gas.
Wisconsin Gas has taken certain steps in recent years to enable it to compete in an increasingly competitive gas industry. Wisconsin Gas has instituted a service options program which provides customers an array of sales, transportation and related services from which they can choose. The service options program also assists Wisconsin Gas in identifying the peak day and annual gas requirements that Wisconsin Gas is obligated to supply. The service options program thus provides customers with a choice of services that they can select to meet their needs while defining Wisconsin Gas' obligation to obtain and sell gas to customers.
In 1993, Wisconsin Gas introduced a gas supply management service aimed at its larger customers. Under this service, Wisconsin Gas manages the customer's gas supply. Gas management service customers are freed from the responsibilities imposed by Federal regulation of dealing with one or more gas suppliers, an interstate pipeline and a utility on a daily basis to order the precise gas supply and capacity necessary to meet their varying daily gas requirements. See "Gas Supply and Pipeline Capacity."
In 1993, Wisconsin Gas added more than 14,000 customers, surpassing record totals for the fifth consecutive year. See "Service Area Expansion".
Up to 25% of Wisconsin Gas' Milwaukee area annual market requirements can be supplied through the interstate pipelines of either ANR Pipeline Company ("ANR") or Northern Natural Gas Company ("NNG"). This capability enhances competition between ANR and NNG for services to Wisconsin Gas and its customers, and Wisconsin Gas believes that such competition provides overall lower gas costs to all customers than otherwise would exist.
Wisconsin Gas' future ability to maintain its present share of the industrial dual-fuel market (the market that has installed capability to use gas or other fuels) depends upon Wisconsin Gas' success in obtaining long-term and short-term supplies of natural gas at marketable prices and its success in arranging or facilitating transportation service for those customers that desire to buy their own gas supplies. Although the dual-fuel market comprises approximately 32% of Wisconsin Gas' annual deliveries, it contributes only about 14% of the company's margin.
C. Gas Supply and Pipeline Capacity
(1) General
In recent years, the natural gas industry has undergone structural changes designed to increase competition. In 1992, the Federal Energy Regulatory Commission ("FERC") issued Order No. 636 which fundamentally restructured the interstate natural gas pipeline industry. Prior to Order No. 636, the pipelines serving Wisconsin Gas were major sellers of gas to Wisconsin Gas. They sold gas on a "bundled" or delivered-to-Wisconsin basis. Under Order No. 636, the pipelines are required to "unbundle" the sale of gas from the related transportation service. Consequently, pipelines may no longer provide the delivered-to-Wisconsin gas sales service. Rather, they must sell gas at or near the point of production in competition with other gas sellers. Under Order No. 636, purchasers such as Wisconsin Gas contract separately with one or more sellers for gas supply and with pipelines for capacity to move the gas to markets or into market area storage for future delivery. In the opinion of management, Order No. 636 will not have a material impact on Wisconsin Gas' earnings.
ANR and NNG completed the transition to unbundled service on November 1, 1993. Consequently, Wisconsin Gas has replaced all of its "bundled" pipeline services with "unbundled" firm pipeline transportation and storage services and long-term contracts with producers and marketers for firm gas supply. Thus, 1993 was a transition year in which Wisconsin Gas purchased gas supply and capacity under interim arrangements with pipeline suppliers for much of the year and under the Order No. 636 restructured regime described above for the last two months of the year. The following table sets forth the sources and volumes of gas purchased by Wisconsin Gas and volumes of customer-owned gas transported by Wisconsin Gas.
*One therm equals 100,000 BTU's.
(2) Pipeline Capacity
Interstate pipelines serving Wisconsin originate in three major gas producing areas of North America: the traditional Oklahoma and Texas basins; the Gulf of Mexico off-shore from Texas and Louisiana and the adjacent on-shore producing areas of those states; and western Canada. Wisconsin Gas has contracted for long-term firm capacity on a relatively equal basis from each of these areas. This strategy reflects management's belief that overall supply security is enhanced by geographic diversification of Wisconsin Gas' supply portfolio and that Canada represents an important long-term source of reliable, competitively priced gas.
Because of the seasonal variations in gas usage in Wisconsin, Wisconsin Gas has also contracted with ANR and NNG for substantial underground storage capacity, primarily in Michigan. There is no known underground storage capability in Wisconsin. Storage enables Wisconsin Gas to optimize its overall gas supply and capacity costs. In summer, gas in excess of market demand is transported into the storage fields, and in winter, gas is withdrawn from storage and combined with gas purchased in or near the production areas ("flowing gas") to meet the increased winter market demand. As a result, Wisconsin Gas can contract for less pipeline capacity than would otherwise be necessary, and it can purchase gas on a more uniform daily basis from suppliers year-around. Each of these capabilities enables Wisconsin Gas to reduce its overall costs.
Wisconsin Gas' firm winter daily transportation and storage capacity entitlements from pipelines under long-term contracts are set forth below.
Maximum Daily (Thousands Pipeline of Therms*) ----------------- ------------- ANR Mainline 3,175 Storage 4,996 NNG Mainline 1,226 Storage 145 Viking Mainline 64 ----------- Total 9,606 =========== *One therm equals 100,000 BTU's.
(3) Long-Term Gas Supply
Wisconsin Gas has long-term firm contracts with approximately 30 gas suppliers for gas produced in each of the three producing areas discussed above. The following table sets forth Wisconsin Gas' winter season maximum daily firm total gas supply.
Maximum Daily (Thousands of Therms*) ------------- Domestic flowing gas 2,259 Canadian flowing gas 1,396 Storage withdrawals 5,157 ------------- Total 8,812 =============
*One therm equals 100,000 BTU's.
(4) Spot Market Gas Supply
Wisconsin Gas expects to continue to make gas purchases in the 30-day spot market as price and other circumstances dictate. Wisconsin Gas has purchased spot market gas since 1985 and has supply relationships with a number of sellers from whom it purchases spot gas. D. Wisconsin Rate and Regulatory Matters
(1) Rate Matters
Wisconsin Gas is subject to the jurisdiction of the PSCW as to various phases of its operations, including rates, customer service and issuance of securities.
Effective November 12, 1993, the PSCW granted Wisconsin Gas a $12.3 million general rate increase. Wisconsin Gas' authorized return on common equity was reduced from 12.75% to 11.8%.
The PSCW has implemented a bi-annual rate case process for energy utilities pursuant to which Wisconsin Gas' next rate change would be effective November 1, 1995. In July 1993, Wisconsin Gas filed a proposal to adjust rates up to a ceiling amount. The ceiling amount is based on the latest allowed rates, adjusted annually for inflation and reduced by a predetermined productivity factor. A decision on the proposal is expected in April 1994. Wisconsin Gas is unable to predict whether the PSCW will approve its proposal.
Wisconsin Gas' rates contain clauses providing for periodic adjustment, with PSCW approval, to reflect changes in purchased gas costs including the recovery of transition costs passed through by pipeline suppliers. See "Transition Cost Recovery Policy".
(2) Transition Cost Recovery Policy
Under Order No. 636, interstate pipelines are permitted to recover certain costs incurred in the transition from the bundled sales service to the unbundled Order No. 636 regime. ANR and NNG have filed to recover transition costs. ANR and NNG may file in the future to recover additional transition costs, and Wisconsin Gas will bear a portion of such additional costs approved by the FERC. The PSCW has permitted Wisconsin Gas to recover transition costs from customers through its rates.
In the judgment of management, the incurrence of these transition costs will have no material effect on Wisconsin Gas' operations or financial condition under current PSCW policy. See Note 8 to Notes to Consolidated Financial Statements contained in Exhibit 13, which note is hereby incorporated herein by reference.
(3) Service Area Expansion
In recent years, Wisconsin Gas has increased its efforts to obtain regulatory approvals to extend gas service to previously unserved communities. In 1992, Wisconsin Gas extended service to 30 new communities and added 10,400 customers. In 1993, Wisconsin Gas extended service to 41 new communities and added more than 14,000 customers.
E. Employees
At December 31, 1993, Wisconsin Gas had 1,353 full-time equivalent active employees.
2. MANUFACTURING OF PUMPS AND WATER PROCESSING EQUIPMENT
A. General
The Company's manufacturing subsidiaries manufacture pumps and water processing equipment used to pump, control and filter water, and positive displacement pumps and other accessories used for fluid handling in a wide array of specialized applications and markets. Manufacturing and assembly activities are conducted in plants in the United States, United Kingdom, Canada, Germany, Italy, Australia, New Zealand and Russia.
B. U.S. Operations
Water products include jet, centrifugal, sump, submersible and submersible turbine water pumps, water storage and pressure tanks, filters, and pump and tank systems. These products pump, filter and store water used for drinking, cooking, washing and livestock watering, and are used in private and public swimming pools, spas, "hot tubs", jetted bathtubs, and fountains. The manufacturing businesses produce large higher pressure and capacity water pumps used in agricultural and turf irrigation systems and in a wide variety of commercial, industrial and municipal fluids- handling applications.
Small, high performance pumps, and related fluids-handling products, are used in four primary markets: (1) the food service industry, where gas operated pumps are used for pumping soft drinks made from syrups, and electric motor driven pumps are used for water boost and drink dispensing; (2) the recreational vehicle and marine markets, where electric motor driven pumps are used for a variety of applications including pumping potable water in travel trailers, motor homes, camping trailers and boats, and for other applications including marine wash down, bilge and live well pumping; (3) industrial markets, where applications are concentrated in the soil extraction market for use in carpet cleaning machines, agricultural markets for spraying agricultural pesticides and fertilizers, and general industrial applications requiring fluid handling; and (4) the water purification industry, where electric motor driven pumps are used to pressurize reverse osmosis systems and for water transfer.
Sales of pumps and water processing equipment are somewhat related to the seasons of the year as well as the level of activity in the housing construction industry and are sensitive to weather, interest rates, discretionary income, and leisure and recreation spending. The markets for most water and industrial products are highly competitive, with price, service and product performance all being important competitive factors. The Company believes it is a leading producer of pumps for private water systems and swimming pools and spas and for the food service and recreational vehicle markets. The Company's centrifugal pumps command a major share of the agricultural and irrigation centrifugal market. The Company also ranks among the larger producers of pool and spa filters and submersible turbine pumps. Major brand names include "STA-RITE", "BERKELEY", "SHURflo", "FLOTEC", "TOWN & COUNTRY", "SWIMQUIP" and "AQUALITY."
Domestic pumps and water products are sold and serviced primarily through a network of independent distributors, dealers and manufacturers' representatives serving the well drilling, hardware, plumbing, pump installing, irriga-tion, pool and spa, food service, recreational vehicle, marine, and industrial markets. Sales are also made on a private brand basis to large customers in all water products markets and to original equipment manufacturers.
Backlog of orders for pumps and water products is not a significant indicator of future sales.
C. International Operations
International operations are conducted primarily by international subsidiaries and export operations from the United States. Products are sold to markets in approximately 110 countries on six continents. Foreign manufacturing of products from imported and locally manufactured components is carried out by United Kingdom, German, Canadian, Australian, New Zealand, Italian, and Russian subsidiaries. The products sold in the international markets are similar to those sold in the United States, but in many instances have distinct features required for those markets. Product distribution channels are similar to those for domestic markets. Non-domestic sales, including exports, were 34% of 1993 manufacturing sales.
D. Raw Materials and Patents
Raw materials essential to the manufacturing operations are available from various established sources in the United States and overseas. The principal raw materials needed for production of the Company's primary lines of products include cast iron, aluminum and bronze castings for pumps; copper and aluminum wire for motors; stainless and carbon sheet steel, bar steel and tubing; plastic resins for injection molded components; and powdered metal components. The manufacturing units also purchase from third party suppliers completely assembled electric motors, plastic molded parts, elastomers for valves and diaphragms, components for electric motors, stamped and die cast metal parts, and hardware and electrical components. Although the manufacturing subsidiaries own a number of patents and hold licenses for manufacturing rights under other patents, no one patent or group of patents is critical to the success of the manufacturing businesses as a whole.
E. Employees
At December 31, 1993, the manufacturing businesses had 1,869 full time equivalent active employees.
3. EXPLORATION AND DEVELOPMENT OF OIL AND NATURAL GAS
WEXCO was formed in 1978, a time of national gas shortages, primarily to develop additional future sources of energy for Wisconsin Gas. WEXCO participated in gas and oil exploration and development activities through financial participation with producers. In 1993, in connection with the Company's strategic decision to focus on its primary businesses, WEXCO sold substantially all of its assets.
Item 2.



Item 2. PROPERTIES
(a) Capital Expenditures
The Company's capital expenditures for the year ended December 31, 1993, totaled $51.9 million. Retirements during this period totaled $40.0 million, of which $32.8 million represented the original cost of the WEXCO assets sold. See "Properties - Exploration and Development of Oil and Natural Gas." Except as discussed in "Legal Proceedings", the Company does not expect to make any material capital expenditures for environmental control facilities in 1994.
(b) Retail Distribution of Natural Gas
Wisconsin Gas owns a distribution system which, on December 31, 1993, included approximately 7,800 miles of distribution and transmission mains, 399,000 services and 488,000 active meters. Wisconsin Gas' distribution system consists almost entirely of plastic and coated steel pipe. Wisconsin Gas also owns its main office building in Milwaukee, office buildings in certain other communities in which it serves, gas regulating and metering sta- tions, peaking facilities and its major service centers, including garage and warehouse facilities.
The Milwaukee and other office buildings, the principal service facilities and the gas distribution systems of Wisconsin Gas are owned by it in fee subject to the lien of its Indenture of Mortgage and Deed of Trust, dated as of November 1, 1950, under which its first mortgage bonds are issued, and to permissible encumbrances as therein defined. Where distribution mains and services occupy private property, Wisconsin Gas in some, but not all, instances has obtained consents, permits or easements for such installations from the apparent owners or those in possession, generally without an examination of title.
(c) Manufacturing of Pumps and Water Processing Equipment
The manufacturing businesses have 12 manufacturing facilities located in California (2), Nebraska, Wisconsin (2), Germany, Italy (2), Australia (2), New Zealand and Russia. These plants contain a total of approximately 790,000 square feet of floor space. These businesses also own or lease seven sales/distribution facilities in the United States, six in Australia, two each in France and England, and one each in Canada and Singapore.
(d) Exploration and Development of Oil and Natural Gas
In 1993, WEXCO sold substantially all of its assets for approximately their book value of $4.0 million.
Item 3.

Item 3. LEGAL PROCEEDINGS
There are no material legal proceedings pending, other than ordinary routine litigation incidental to the Company's businesses, to which the Company or any of its subsidiaries is a party, except as discussed below. There are no material legal proceedings to which any officer or director of the Company or any of its subsidiaries is a party or has a material interest adverse to the Company. There are no material administrative or judicial proceedings arising under environmental quality or civil rights statutes pending or known to be contemplated by governmental agencies to which the Company or any of its subsidiaries is or would be a party.
Sta-Rite has entered into a contract with the Wisconsin Department of Natural Resources ("DNR") to perform and complete the Remedial Investigation/Feasibility Study and Remedial Design/Remedial Action phases of the Federal Superfund environmental process for the Delavan, Wisconsin Municipal Well No. 4, which is located close to one of Sta-Rite's facilities. In 1990 and 1991, Sta-Rite provided reserves to cover the estimated costs under the contract. No additions to reserves were required in 1992 or 1993. Although management believes the amounts reserved will be adequate to effect any necessary remediation, there is a possibility that unexpected additional costs may be incurred.
Sta-Rite, along with other generators, has been sued by Waste Management of Wisconsin, Inc. for cleanup costs relating to a landfill near Sta-Rite's former Deerfield operation. Sta-Rite has established reserves to cover reasonable costs associated with this litigation.
Sta-Rite has been notified by two environmental groups in California of their intent to pursue litigation against a number of submersible pump manufacturers, including Sta-Rite, for violations of the state's health and safety code (Proposition 65). The Company is in the process of evaluating the claims.
Wisconsin Gas has identified two previously owned sites on which it operated manufactured gas plants that are of environmental concern. Such plants ceased operations prior to the mid-1950's. Wisconsin Gas has engaged an environmental consultant to help determine the nature and extent of the contamination at these sites. Based on the test results obtained and the possible remediation alternatives available, the Company has estimated that cleanup costs could range from $22 million to $75 million. As of December 31, 1993, the Company has accrued $40 million for cleanup costs in addition to $1.6 million of costs already incurred. These estimates are based on current undiscounted costs. It should also be noted that the numerous assumptions such as the type and extent of contamination, available remediation techniques, and regulatory requirements which are used in developing these estimates are subject to change as new information becomes available. Any such changes in assumptions could have a significant impact on the potential liability.
A formal remediation plan is currently being developed for presentation to the DNR. Following plan approval and pilot studies, remediation will commence. Barring unforeseen delays, expenditures by Wisconsin Gas on this remediation work will commence in 1994 and increase in future years as plan approvals are obtained. Expenditures over the next three years are expected to
total approximately $20 million. Although most of the work and costs will be incurred in the first few years of the plan, monitoring of the sites and other necessary actions may last up to 30 years.
Wisconsin Gas is pursuing recovery of these costs from insurance carriers. Any amounts not recoverable from insurance carriers will be allowed full recovery in rates, based on recent PSCW orders. Accordingly, the accrual has been offset by a deferred charge to a regulatory asset. Certain related investigation costs incurred to date are currently being recovered in utility rates. However, any incurred costs not yet recovered in rates are not allowed by the PSCW to earn a return. As of December 31, 1993, $1.6 million of such costs have been incurred.
In 1992, the owner of a portion of one of the properties on which manufactured gas operations were conducted commenced suit in Federal district court against Wisconsin Gas. The suit, which was settled in 1993, generally sought indemnity and contribution under Federal statutes and alleged that Wisconsin Gas is liable for remediating the environmental conditions found to be caused by any releases of hazardous substances from the gasification activities at the site. Under the settlement, Wisconsin Gas has agreed to indemnify the owner from any remediation costs attributable to the release of hazardous substances from the gasification activities on the site. In the judgment of management, the settlement does not materially change Wisconsin Gas' responsibility as required by Federal or state statutes for remediating the environmental conditions found to be caused by any releases of hazardous substances from the gasification activities at the site, which ceased about 40 years ago, the cost of any remediation actions that may be required, or its ability to recover such costs in its rates or from insurers.
Wisconsin Gas also owns a service center that is constructed on a site that was previously owned by the City of Milwaukee and was used by the City as a public dump site. Wisconsin Gas has conducted a site assessment at the request of the DNR and has sent the report of its assessment to the DNR. Management cannot predict whether or not the DNR will require any remediation action, nor the extent or cost of any remediation actions that may be required. In the judgment of management, any remediation costs incurred by Wisconsin Gas will be recoverable from the City of Milwaukee or in Wisconsin Gas' rates.
Item 4.

Item 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted to a vote of security holders during the fourth quarter of 1993.
EXECUTIVE OFFICERS OF THE REGISTRANT
The following sets forth the names, ages, and offices held of the executive officers of the Company. The officers serve one- year terms commencing with their election at the meeting of the Board of Directors following the annual meeting of shareholders in April.
Mr. Wardeberg was elected to his current positions effective February 1, 1994. Prior thereto he was President and Chief Operating Officer of the Company and Vice Chairman and Chief Executive Officer of Sta-Rite from 1992 to 1994; Vice Chairman of Wisconsin Gas and SHURflo from 1993 to 1994; and Vice President- Water Systems of Sta-Rite from 1989 to 1992. Prior thereto, he was Vice Chairman and Chief Operating Officer of Whirlpool Corporation. Mr. Schrader was elected Vice President of the Company in 1988 and President and Chief Executive Officer of Wisconsin Gas in 1990. Prior thereto, he served as President and Chief Operating Officer of Wisconsin Gas from 1988 to 1990, Executive Vice President from 1986 to 1988, Vice President and Assistant to the Chairman from 1985 to 1986, and Vice President-Market Services from 1983 to 1985. He held several other positions with Wisconsin Gas from 1978 to 1983.
Mr. Donnelly was elected President and Chief Operating Officer of Sta-Rite in 1992. Previously he served as Vice President, Treasurer and Chief Financial Officer of the Company and Wisconsin Gas since 1990. He continues as a Vice President of the Company. Mr. Donnelly joined the Company and Wisconsin Gas in 1987 as Vice President and Treasurer. Prior thereto, he served as Vice President-Finance of Eastern Gas and Fuel Associates from 1984 to 1987 and as Vice President-Finance of Boston Gas Company, a subsidiary of Eastern Gas and Fuel Associates, from 1978 to 1984.
Mr. Wenzler was elected Vice President, Treasurer and Chief Financial Officer of the Company and Vice President and Chief Financial Officer of Wisconsin Gas in 1992. Prior thereto, he served as Vice President of the Company and President and Chief Executive Officer of Sta-Rite from 1990 to 1992, President and Chief Operating Officer from 1986 to 1990, Executive Vice President from 1985 to 1986, Vice President-Finance, Secretary and Treasurer from 1984 to 1985, and Vice President-Finance and Treasurer from 1981 to 1984.
Mr. Nuernberg was elected Secretary of the Company in 1987 and Vice President-Corporate Relations and Secretary of Wisconsin Gas in 1988. Prior thereto, he served as Vice President-Law and Secretary of Wisconsin Gas from 1983 to 1988 and as Secretary from 1982 to 1983.
PART II
Item 5.

Item 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common stock and the associated common stock purchase rights (which do not currently trade independent of the common stock) are traded on the New York Stock Exchange. For information regarding the high and low sales prices for the Company's common stock and dividends paid per share in each quarter of 1993 and 1992, see "Investor Information" included in Exhibit 13, which is hereby incorporated herein by reference.
At December 31, 1993, there were 17,091 holders of record of WICOR common stock.
The Company's ability to pay dividends is dependent to a great extent on the ability of its subsidiaries to pay dividends. The Wisconsin Business Corporation Law and the indentures and agreements under which debt of the Company and its subsidiaries is outstanding each contain certain restrictions on the payment of dividends on common stock by the Company's subsidiaries. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, which note is hereby incorporated herein by reference. By order of the PSCW, Wisconsin Gas is generally permitted to pay dividends up to the amount projected in its rate case. Wisconsin Gas may pay dividends in excess of the projected dividend amount so long as payment will not cause its equity ratio to fall below 48.43%. If payment of projected dividends would cause its common equity ratio to fall below 43% of total capitalization (including short-term debt), or if payment of additional dividends would cause its common equity ratio to fall below 48.43%, Wisconsin Gas must obtain PSCW approval to pay such dividends. Wisconsin Gas has projected the payment of $16 million of dividends to the Company during the 12 months ending October 31, 1994. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, which note is hereby incorporated herein by reference. The PSCW desires Wisconsin Gas to target its common equity level at 43% to 50% of total capitalization. For the year ended December 31, 1993, Wisconsin Gas' average common equity level was 45.16%.
In addition, $8.6 million of Sta-Rite net assets at December 31, 1993, plus 50% of Sta-Rite future earnings, are available for dividends to the Company. See Note 6 of Notes to Consolidated Financial Statements contained in Exhibit 13, which note is incorporated herein by reference.
Item 6.

Item 6. SELECTED FINANCIAL DATA
Reference is made to "Selected Financial Data" included in Exhibit 13, which is hereby incorporated herein by reference.
Item 7.

Item 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
Reference is made to "Financial Review" included in Exhibit 13, which is hereby incorporated herein by reference.
Item 8.


Item 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Reference is made to the WICOR, Inc. consolidated balance sheet and consolidated statement of capitalization as of December 31, 1993 and 1992, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1993, together with the report of independent public accountants dated February 11, 1994, all appearing in Exhibit 13, which is hereby incorporated herein by reference.
Item 9.

Item 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
There has been no change in or disagreement with the Company's independent auditors on any matter of accounting principles or practices or financial statement disclosure required to be reported pursuant to this item. PART III
Item 10.



Item 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Reference is made to "Item No. 1: Election of Directors" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for the names, ages, business experience and other information regarding directors and nominees for director of the Company. See "Executive Officers of the Registrant" for information regarding executive officers of the Company.
Item 11.

Item 11. EXECUTIVE COMPENSATION
Reference is made to "Executive Compensation" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for information on compensation of executive officers of the Company; provided, however, that the subsections entitled "Board Compensation Committee Report on Executive Compensation" and "Executive Compensation - Performance Information" shall not be deemed to be incorporated herein by reference.
Item 12.

Item 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
Reference is made to "Security Ownership of Management" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for information regarding voting securities of the Company beneficially owned by its directors and officers.
Item 13.

Item 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Reference is made to "Item No. 1: Election of Directors" included in the WICOR proxy statement dated March 10, 1994, which is hereby incorporated herein by reference, for the information required to be disclosed under this item.
PART IV
Item 14.

Item 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K
(a) The following documents are filed as part of this Annual Report on Form 10-K:
1. and 2. All Financial Statements and financial statement schedules. The WICOR, Inc. consolidated balance sheet and statement of capitalization as of December 31, 1993 and 1992, and the related consolidated statements of income, common equity and cash flows for each of the three years in the period ended December 31, 1993, together with the report of independent public accountants dated February 11, 1994, included in Exhibit 13, which is incorporated herein by reference.
Financial statement schedules.
Schedule III -- Condensed Statements of Income, Retained Earnings and Cash Flows (Parent Company Only) for the Years Ended December 31, 1993, 1992 and 1991; Condensed Balance Sheet (Parent Company Only) as of December 31, 1993 and 1992; Notes to Parent Company Only Financial Statements.
Schedule V -- Property, Plant and Equipment for the Years Ended December 31, 1993, 1992 and 1991.
Schedule VI -- Accumulated Depreciation, Depletion and Amortization for the Years Ended December 31, 1993, 1992 and 1991.
Schedule VIII -- Valuation and Qualifying Accounts for the Years Ended December 31, 1993, 1992 and 1991.
Schedule IX -- Short-term Borrowings for the Years Ended December 31, 1993, 1992 and 1991.
Schedule X -- Supplementary Income Statement In- formation for the Years Ended December 31, 1993, 1992 and 1991.
Financial statement schedules other than those referred to above have been omitted as not applicable or not required.
3. Exhibits
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended (incorporated by reference to Exhibit 3.1 to the Company's Form 10-K Annual Report for 1992).
3.2 WICOR, Inc. By-laws, as amended (incorporated by reference to Exhibit 4.2 to the Company's Registration Statement on Form S-3 No. 33- 50781).
4.1 Indenture of Mortgage and Deed of Trust dated as of November 1, 1950, between Milwaukee Gas Light Company and Mellon National Bank and Trust Company and D. A. Hazlett, Trustees (incorporated by reference to Exhibit 7-E to Milwaukee Gas Light Company's Registration Statement No. 2-8631).
4.2 Eleventh Supplemental Indenture dated as of February 15, 1982, between Wisconsin Gas Company and Mellon Bank, N.A., and N. R. Smith, Trustees (incorporated by reference to Exhibit 4.5 to Wisconsin Gas Company's Form S- 3 Registration Statement No. 33-43729).
4.3 Bond Purchase Agreement dated December 31, 1981, between Wisconsin Gas Company and Teachers Insurance and Annuity Association of America relating to the issuance and sale of $30,000,000 principal amount of First Mortgage Bonds, Adjustable Rate Series due 2002 (incor- porated by reference to Exhibit 4.6 to Wisconsin Gas Company's Form S-3 Registration Statement No. 33-43729).
4.4 Indenture dated as of September 1, 1990, between Wisconsin Gas Company and First Wisconsin Trust Company, Trustee (incorporated by reference to Exhibit 4.11 to Wisconsin Gas Company's Form S-3 Registration Statement No. 33-36639).
4.5 Officers' Certificate, dated as of November 28, 1990, setting forth the terms of Wisconsin Gas Company's 9-1/8% Notes due 1997 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company's Form 8-K Current Report for November, 1990).
4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7-1/2% Notes due 1998 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company's Form 8-K Current Report for November, 1991).
4.7 Officers' Certificate, dated as of September 15, 1993, setting forth the terms of Wisconsin Gas Company's 6.60% Debentures due 2013 (incorporated by reference to Exhibit 4.1 to Wisconsin Gas Company' Form 8-K Current Report for September, 1993).
4.8 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Wisconsin Gas Company and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.2 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993).
4.9 Note Agreement dated as of December 1, 1986, among Sta-Rite Industries, Inc., Principal Mutual Life Insurance Company, Aid Association for Lutherans, AAL Employees' Retirement Trust and AAL Savings Plan Trust relating to $12,000,000 Promissory Notes due December 1, 1993 (incorporated by reference to Exhibit 4-Q to the Company's Form 10-K Annual Report for 1986).
4.10 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Sta-Rite Industries, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.3 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993).
4.11 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust & Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference to Exhibit 4.1 to the Company's Quarterly Report on Form 10-Q dated as of August 9, 1993).
4.12 Rights Agreement dated as of August 29, 1989, between WICOR, Inc. and Manufacturers Hanover Trust Company, Rights Agent (incorporated by reference to Exhibit 4 to the Company's Form 8-K current report for August, 1989).
4.13 Loan Agreement, dated as of November 4, 1991, by and among M&I Marshall & Ilsley Bank, Wisconsin Gas Company Employees' Savings Plans Trust and WICOR, Inc. (incorporated by reference to Exhibit 4.16 to the Company's Form 10-K Annual Report for 1991).
4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to and for the benefit of M&I Marshall & Ilsley Bank (incorporated by reference to Exhibit 4.17 to the Company's Form 10-K Annual Report for 1991).
Sta-Rite Industries, Inc., a wholly-owned subsidiary of the Registrant, is the obligor under various loan agreements in connection with facilities financed through the issuance of industrial development bonds. The loan agreements and the additional documentation relating to these bond issues are not being filed with this Annual Report on Form 10-K in reliance upon Item 601(b)(4)(iii) of Regulation S-K. Copies of these documents will be furnished to the Securities and Exchange Commission upon request.
10.1 Service Agreement dated as of January 1, 1988, among WICOR, Inc., Wisconsin Gas Company, Sta- Rite Industries, Inc., and WEXCO of Delaware, Inc. (incorporated by reference to Exhibit 10.1 to the Company's Form 10-K Annual Report for 1988).
10.2 Endorsement of SHURflo Pump Manufacturing Co. dated as of July 28, 1993, to Service Agreement among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc.
10.3# WICOR, Inc. 1987 Stock Option Plan, as amended (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 Registration Statement No. 33-67134).
10.4# Forms of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1987 Stock Option Plan (incorporated by reference to Exhibit 10.20 to the Company's Form 10-K Annual Report for 1991).
10.5# WICOR, Inc. 1992 Director Stock Option Plan, (incorporated by reference to Exhibit 4.1 to the Company's Form S-8 Registration Statement No. 33-67132).
10.6# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference to Exhibit 4.2 to the Company's Form S-8 Registration Statement No. 33-67132).
10.7# WICOR, Inc. 1994 Officers' Incentive Compen- sation Plan.
10.8# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program.
10.9# Wisconsin Gas Company 1994 Officers' Incentive Compensation Plan.
10.10# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan (incorporated by reference to Exhibit 10.23 to the Company's Form 10-K Annual Report for 1992).
10.11# Wisconsin Gas Company Group Travel Accident Plan (incorporated by reference to Exhibit 10.24 to the Company's Form 10-K Annual Report for 1992).
10.12# Form of Deferred Compensation Agreements between Wisconsin Gas Company and certain of its executive officers (incorporated by reference to Exhibit 10.30 to the Company's Form 10-K Annual Report for 1990).
10.13# Sta-Rite Industries, Inc. Officers Supple- mental Retirement Income Program (incorporated by reference to Exhibit 10.28 to the Company's Form 10-K Annual Report for 1989).
#Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company. 10.14# Sta-Rite Industries, Inc. 1994 Officers' Incentive Compensation Plan.
10.15# Sta-Rite Industries, Inc. Group Travel Accident Plan (incorporated by reference to Exhibit 10.28 to the Company's Form 10-K Annual Report for 1992).
10.16# WICOR, Inc. Retirement Plan for Directors, as amended (incorporated by reference to Exhibit 10.29 to the Company's Form 10-K Annual Report for 1992).
"Financial Review" portions of WICOR, Inc. 1993 Annual Report to Shareholders, including: General Overview, Results of Operations, Liquidity and Capital Resources, Report of Independent Public Accountants, Consolidated Statement of Income, Consolidated Balance Sheet, Consolidated Statement of Cash Flows, Consolidated Statement of Capitalization, Consolidated Statement of Common Equity, Quarterly Financial Data (Unaudited), Notes to Consolidated Financial Statements, Selected Financial Data, and Investor Information.
13* "Financial Review" portion of the WICOR, Inc. 1993 Annual Report to Shareholders.
21 Subsidiaries of WICOR, Inc.
23 Consent of independent public accountants.
99 WICOR, Inc. proxy statement dated March 10, 1994. (Except to the extent incorporated by reference, this proxy statement is not deemed "filed" with the Securities and Exchange Commission as part of this Form 10-K.)
(b) Reports on Form 8-K.
No Form 8-K Current Report was filed during the fourth quarter of 1993.
#Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company.
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.
WICOR, Inc.
Date: March 29, 1994 By JOSEPH P. WENZLER ----------------------------------- Vice President, Treasurer, and Chief Financial Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed on the succeeding pages by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
WICOR, Inc.
C. In November 1991, WICOR, Inc. (Parent Company Only) established an Employee Stock Ownership Plan (ESOP) covering non-union employees of Wisconsin Gas. Because the parent company has guaranteed the loan, the unpaid balance is shown as a liability on the balance sheet with a like amount of unearned compensation recorded as a reduction of stockholders' equity.
The ESOP trustee is repaying the $10 million loan with dividends paid on the shares of WICOR common stock in the ESOP and with Wisconsin Gas contributions to the ESOP.
TO EXHIBITS Page
3.1 WICOR, Inc. Restated Articles of Incorporation, as amended (incorporated by reference)
3.2 WICOR, Inc. By-laws, as amended (incorporated by reference)
4.1 Indenture of Mortgage and Deed of Trust dated as of November 1, 1950, between Milwaukee Gas Light Company and Mellon National Bank and Trust Company and D. A. Hazlett, Trustees (incorporated by reference)
4.2 Eleventh Supplemental Indenture dated as of February 15, 1982, between Wisconsin Gas Company and Mellon Bank, N.A., and N. R. Smith, Trustees (incorporated by reference)
4.3 Bond Purchase Agreement dated December 31, 1981, between Wisconsin Gas Company and Teachers Insurance and Annuity Association of America relating to the issuance and sale of $30,000,000 principal amount of First Mortgage Bonds, Adjustable Rate Series due 2002 (incorporated by reference)
4.4 Indenture dated as of September 1, 1990, between Wisconsin Gas Company and First Wisconsin Trust Company, Trustee (incorporated by reference)
4.5 Officers' Certificate, dated as of November 28, 1990, setting forth the terms of Wisconsin Gas Company's 9- 1/8% Notes due 1997 (incorporated by reference)
4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7- 1/2% Notes due 1988 (incorporated by reference)
4.7 Officers' Certificate, dated as of September 15, 1993, setting forth the terms of Wisconsin Gas Company's 6.60% Debentures due 2013 (incorporated by reference)
4.6 Officers' Certificate, dated as of November 19, 1991, setting forth the terms of Wisconsin Gas Company's 7- 1/2% Notes due 1988 (incorporated by reference)
4.8 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Wisconsin Gas Company and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference)
4.9 Note Agreement dated as of December 1, 1986, among Sta-Rite Industries, Inc., Principal Mutual Life Insurance Company, Aid Association for Lutherans, AAL Employees' Retirement Trust and AAL Savings Plan Trust relating to $12,000,000 Promissory Notes due December 1, 1993 (incorporated by reference)
(i) PAGE 4.10 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among Sta-Rite Industries, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference)
4.11 Revolving Credit and Term Loan Agreement, dated as of March 29, 1993, among WICOR, Inc. and Citibank, N.A., Firstar Bank Milwaukee, N.A., Harris Trust Savings Bank, M&I Marshall & Ilsley Bank and Citibank, N.A., as Agent (incorporated by reference)
4.12 Rights Agreement dated as of August 29, 1989, between WICOR, Inc. and Manufacturers Hanover Trust Company, Rights Agent (incorporated by reference)
4.13 Loan Agreement, dated as of November 4, 1991, by and among M&I Marshall & Ilsley Bank, Wisconsin Gas Company Employees' Savings Plan Trust and WICOR, Inc. (incorporated by reference)
4.14 Guaranty, dated as of November 4, 1991, from WICOR, Inc. to and for the benefit of M&I Marshall & Ilsley Bank (incorporated by reference)
10.1 Service Agreement dated as of January 1, 1988, among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc. (incorporated by reference)
10.2* Endorsement of SHURflo Pump Manufacturing Co. dated as of July 28, 1993, to Service Agreement among WICOR, Inc., Wisconsin Gas Company, Sta-Rite Industries, Inc., and WEXCO of Delaware, Inc.
10.3# WICOR, Inc. 1987 Stock Option Plan (incorporated by reference)
10.4# Forms of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1987 Stock Option Plan (incorporated by reference)
10.5# WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference)
10.6# Form of nonstatutory stock option agreement used in connection with the WICOR, Inc. 1992 Director Stock Option Plan (incorporated by reference)
10.7*# WICOR, Inc. 1994 Officers' Incentive Compensation Plan
10.8*# Wisconsin Gas Company Principal Officers' Supplemental Retirement Income Program
*Indicates document filed herewith.
# Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company.
(ii) PAGE
10.9*# Wisconsin Gas Company 1994 Officers' Incentive Compensation Plan
10.10# Wisconsin Gas Company Officers' Medical Expense Reimbursement Plan (incorporated by reference)
10.11# Wisconsin Gas Company Group Travel Accident Plan (incorporated by reference)
10.12# Form of Deferred Compensation Agreements between Wisconsin Gas Company and certain of its executive officers (incorporated by reference)
10.13# Sta-Rite Industries Officers' Supplemental Retirement Income Program (incorporated by reference)
10.14*# Sta-Rite Industries, Inc. 1994 Officers' Incentive Compensation Plan
10.15# Sta-Rite Industries, Inc. Group Travel Accident Plan (incorporated by reference)
10.16# WICOR, Inc. Retirement Plan for Directors (incorporated by reference)
13* "Financial Review" portions of the WICOR, Inc. 1993 Annual Report to Shareholders
21* Subsidiaries of WICOR, Inc
23* Consent of independent public accountants
99* WICOR, Inc. proxy statement dated March 10, 1994
*Indicates document filed herewith.
# Indicates a plan under which compensation is paid or payable to directors or executive officers of the Company.
(iii)