-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, S/fwMRcAvZEAVe+IXwIAPi81HiRMMh0ViRlCtchH3CEnemdqNtr96QNNIFdeKdK/ PdB74fsxlxL8lN5JD6jnVg== 0000107832-02-000044.txt : 20020515 0000107832-02-000044.hdr.sgml : 20020515 20020515113019 ACCESSION NUMBER: 0000107832-02-000044 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020331 FILED AS OF DATE: 20020515 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE POWER & LIGHT CO CENTRAL INDEX KEY: 0000052485 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 420331370 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04117 FILM NUMBER: 02649226 BUSINESS ADDRESS: STREET 1: 200 FIRST ST SE STREET 2: ALLIANT ENERGY TOWER CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193984411 FORMER COMPANY: FORMER CONFORMED NAME: IES UTILITIES INC DATE OF NAME CHANGE: 19940107 FORMER COMPANY: FORMER CONFORMED NAME: IOWA RAILWAY & LIGHT CORP DATE OF NAME CHANGE: 19670629 FORMER COMPANY: FORMER CONFORMED NAME: IOWA ELECTRIC LIGHT & POWER CO DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANT ENERGY CORP CENTRAL INDEX KEY: 0000352541 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 391380265 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-09894 FILM NUMBER: 02649227 BUSINESS ADDRESS: STREET 1: 4902 NORTH BILTMORE LANE STREET 2: PO BOX 77007 CITY: MADISON STATE: WI ZIP: 53707-1007 BUSINESS PHONE: 608-458-3314 MAIL ADDRESS: STREET 1: 4902 NORTH BILTMORE LANE STREET 2: PO BOX 77007 CITY: MADISON STATE: WI ZIP: 53707-1007 FORMER COMPANY: FORMER CONFORMED NAME: WPL HOLDINGS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE ENERGY CORP DATE OF NAME CHANGE: 19980427 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN POWER & LIGHT CO CENTRAL INDEX KEY: 0000107832 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390714890 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-00337 FILM NUMBER: 02649229 BUSINESS ADDRESS: STREET 1: 4902 NORTH BILTMORE LANE STREET 2: PO BOX 77007 CITY: MADISON STATE: WI ZIP: 53707-1007 BUSINESS PHONE: 608-4583314 10-Q 1 march10q2002.txt MARCH 2002 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2002 -------------- or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______
Commission Name of Registrant, State of Incorporation, IRS Employer File Number Address of Principal Executive Offices and Telephone Number Identification Number - ----------- ----------------------------------------------------------- --------------------- 1-9894 ALLIANT ENERGY CORPORATION 39-1380265 (a Wisconsin corporation) 4902 N. Biltmore Lane Madison, Wisconsin 53718 Telephone (608)458-3311 0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370 (an Iowa corporation) Alliant Energy Tower Cedar Rapids, Iowa 52401 Telephone (319)786-4411 0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890 (a Wisconsin corporation) 4902 N. Biltmore Lane Madison, Wisconsin 53718 Telephone (608)458-3311 Former Address of Alliant Energy Corporation and Wisconsin Power and Light Company ---------------------------------------------------------------------------------- 222 West Washington Avenue Madison, Wisconsin 53703 Telephone (608)252-3311
Indicate by check mark whether the registrants (1) have 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 registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No -------- ------- This combined Form 10-Q is separately filed by Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company. Information contained in the quarterly report relating to Interstate Power and Light Company and Wisconsin Power and Light Company is filed by such registrant on its own behalf. Each of Interstate Power and Light Company and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself.
Number of shares outstanding of each class of common stock as of April 30, 2002: Alliant Energy Corporation Common stock, $0.01 par value, 90,292,143 shares outstanding Interstate Power and Light Company Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation) Wisconsin Power and Light Company Common stock, $5 par value, 13,236,601 shares outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation)
TABLE OF CONTENTS Page ---- Part I. Financial Information 4 Item 1. Consolidated Financial Statements 4 Alliant Energy Corporation: --------------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2002 and 2001 4 Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 5 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 7 Notes to Consolidated Financial Statements 8 Interstate Power and Light Company: ----------------------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2002 and 2001 15 Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 16 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 18 Notes to Consolidated Financial Statements 19 Wisconsin Power and Light Company: ---------------------------------- Consolidated Statements of Income for the Three Months Ended March 31, 2002 and 2001 20 Consolidated Balance Sheets as of March 31, 2002 and December 31, 2001 21 Consolidated Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 23 Notes to Consolidated Financial Statements 24 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 25 Item 3. Quantitative and Qualitative Disclosures About Market Risk 35 Part II. Other Information 36 Item 1. Legal Proceedings 36 Item 6. Exhibits and Reports on Form 8-K 36 Signatures 37
2 DEFINITIONS Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q are defined below:
Abbreviation or Acronym Definition - ----------------------- ---------- Alliant Energy.............................. Alliant Energy Corporation APB......................................... Accounting Principles Board Opinion ATC......................................... American Transmission Company, LLC Capstone.................................... Capstone Turbine Corporation Cargill-Alliant............................. Cargill-Alliant, LLC Corporate Services.......................... Alliant Energy Corporate Services, Inc. Dth......................................... Dekatherm Enermetrix.................................. Enermetrix, Inc. EPA......................................... U.S. Environmental Protection Agency EPS......................................... Earnings Per Average Common Share FERC........................................ Federal Energy Regulatory Commission IESU........................................ IES Utilities Inc. IPC......................................... Interstate Power Company IP&L........................................ Interstate Power and Light Company ISO......................................... Independent System Operator IUB......................................... Iowa Utilities Board McLeod...................................... McLeodUSA Incorporated MD&A........................................ Management's Discussion and Analysis of Financial Condition and Results of Operations MG&E........................................ Madison Gas & Electric Company MW.......................................... Megawatt MWh......................................... Megawatt-hour PSCW........................................ Public Service Commission of Wisconsin PUHCA....................................... Public Utility Holding Company Act of 1935 Resources................................... Alliant Energy Resources, Inc. RTO......................................... Regional Transmission Organization SEC......................................... Securities and Exchange Commission SFAS........................................ Statement of Financial Accounting Standards SFAS 115.................................... Accounting for Certain Investments in Debt and Equity Securities SFAS 133.................................... Accounting for Derivative Instruments and Hedging Activities Southern Hydro.............................. Southern Hydro Partnership TRANSLink................................... TRANSLink Transmission Company LLC U.S. ....................................... United States Whiting..................................... Whiting Petroleum Corporation WP&L........................................ Wisconsin Power and Light Company WUHCA....................................... Wisconsin Utility Holding Company Act
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PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - ----------------------------------------------------------------------------------------------------- (in thousands, except per share amounts) Operating revenues: Electric utility $370,762 $411,943 Gas utility 128,241 289,818 Non-regulated and other 137,234 150,952 ----------------- ----------------- 636,237 852,713 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 62,610 75,184 Purchased power 72,337 98,733 Cost of utility gas sold 83,756 238,258 Other operation and maintenance 238,803 238,196 Depreciation and amortization 86,732 84,622 Taxes other than income taxes 29,566 28,444 ----------------- ----------------- 573,804 763,437 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Operating income 62,433 89,276 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 47,007 49,744 Equity (income) loss from unconsolidated investments (23,711) 7,073 Allowance for funds used during construction (1,654) (2,302) Preferred dividend requirements of subsidiaries 1,682 1,680 Impairment of McLeodUSA Inc. investment 21,174 - Miscellaneous, net 2,565 (1,150) ----------------- ----------------- 47,063 55,045 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Income before income taxes 15,370 34,231 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Income taxes 5,627 12,164 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Income before cumulative effect of a change in accounting principle, net of tax 9,743 22,067 ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Cumulative effect of a change in accounting principle, net of tax - (12,868) ----------------- ----------------- - ----------------------------------------------------------------------------------------------------- Net income $9,743 $9,199 ================= ================= - ----------------------------------------------------------------------------------------------------- Average number of common shares outstanding (diluted) 90,054 79,198 ================= ================= - ----------------------------------------------------------------------------------------------------- Earnings per average common share (basic and diluted): Income before cumulative effect of a change in accounting principle $0.11 $0.28 Cumulative effect of a change in accounting principle - (0.16) ----------------- ----------------- Net income $0.11 $0.12 ================= ================= - ----------------------------------------------------------------------------------------------------- Dividends declared per common share $0.50 $0.50 ================= ================= - ----------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS March 31, 2002 December 31, ASSETS (Unaudited) 2001 - ---------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility: Electric plant in service $5,178,619 $5,123,781 Gas plant in service 602,164 597,494 Other plant in service 524,121 517,938 Accumulated depreciation (3,440,278) (3,374,867) --------------- --------------- Net plant 2,864,626 2,864,346 Construction work in progress 111,455 111,069 Nuclear fuel, net of amortization 50,159 54,811 Other, net 8,008 7,383 --------------- --------------- Total utility 3,034,248 3,037,609 --------------- --------------- Non-regulated and other: Investments: Whiting (oil and gas) 405,716 396,860 Affordable housing, transportation and other 260,440 253,121 International 252,806 169,522 Integrated Services 106,507 104,740 Non-regulated generation, Corporate Services and other 152,520 116,229 Accumulated depreciation, depletion and amortization (233,582) (215,284) --------------- --------------- Total non-regulated and other 944,407 825,188 --------------- --------------- 3,978,655 3,862,797 --------------- --------------- - ---------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 68,875 86,618 Restricted cash 51,573 43,726 Accounts receivable: Customer, less allowance for doubtful accounts of $9,815 and $8,598, respectively 81,327 66,192 Unbilled utility revenues 56,953 71,388 Other, less allowance for doubtful accounts of $405 and $319, respectively 70,032 73,855 Income tax refunds receivable 44,229 29,474 Production fuel, at average cost 47,936 54,707 Materials and supplies, at average cost 55,267 54,401 Gas stored underground, at average cost 27,555 57,114 Other 119,048 89,367 --------------- --------------- 622,795 626,842 --------------- --------------- - ---------------------------------------------------------------------------------------------------- Investments: Investments in unconsolidated foreign entities 504,739 572,555 Nuclear decommissioning trust funds 338,615 332,953 Investment in McLeodUSA Inc. 10,089 20,739 Investment in ATC and other 223,870 228,274 --------------- --------------- 1,077,313 1,154,521 --------------- --------------- - ---------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 247,015 241,973 Deferred charges and other 496,878 361,549 --------------- --------------- 743,893 603,522 --------------- --------------- - ---------------------------------------------------------------------------------------------------- Total assets $6,422,656 $6,247,682 =============== =============== - ---------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) March 31, 2002 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 2001 - --------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $0.01 par value - authorized 200,000,000 shares; outstanding 90,226,072 and 89,682,334 shares, respectively $902 $897 Additional paid-in capital 1,255,973 1,239,793 Retained earnings 797,185 832,293 Accumulated other comprehensive loss (138,219) (152,434) Shares in deferred compensation trust - 139,476 and 71,958 shares at an average cost of $30.09 and $30.68 per share, respectively (4,197) (2,208) -------------------- -------------------- Total common equity 1,911,644 1,918,341 -------------------- -------------------- Cumulative preferred stock of subsidiaries, net 113,997 113,953 Long-term debt (excluding current portion) 2,638,916 2,457,941 -------------------- -------------------- 4,664,557 4,490,235 -------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 41,231 10,506 Variable rate demand bonds 55,100 55,100 Commercial paper 65,949 68,389 Other short-term borrowings 41,707 84,318 Accounts payable 205,891 245,480 Accrued interest 48,239 35,713 Accrued taxes 104,356 90,413 Other 173,952 149,818 -------------------- -------------------- 736,425 739,737 -------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 624,404 632,472 Accumulated deferred investment tax credits 58,368 59,398 Pension and other benefit obligations 101,984 96,496 Environmental liabilities 49,311 49,144 Other 143,547 136,822 -------------------- -------------------- 977,614 974,332 -------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Minority interest 44,060 43,378 -------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $6,422,656 $6,247,682 ==================== ==================== - --------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - ---------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $9,743 $9,199 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 86,732 84,622 Amortization of nuclear fuel 5,096 5,421 Amortization of deferred energy efficiency expenditures 983 7,952 Deferred tax benefits and investment tax credits (7,612) (16,522) Equity (income) loss from unconsolidated investments, net (23,711) 7,073 Distributions from equity method investments 4,227 211 Impairment of McLeodUSA Inc. investment 21,174 - Cumulative effect of a change in accounting principle, net of tax - 12,868 Other 9,541 3,666 Other changes in assets and liabilities: Accounts receivable 3,123 11,839 Income tax refunds receivable (14,755) (3,867) Gas stored underground 29,559 28,240 Accounts payable (28,542) (62,774) Accrued interest 12,526 7,753 Accrued taxes 13,943 28,259 Benefit obligations and other 29,335 36,007 -------------- -------------- Net cash flows from operating activities 151,362 159,947 -------------- -------------- - ---------------------------------------------------------------------------------------------------- Cash flows from financing activities: Common stock dividends (44,851) (39,489) Proceeds from issuance of common stock 14,285 675 Net change in Resources' credit facility 85,115 97,500 Proceeds from issuance of other long-term debt 28,579 201,140 Reductions in other long-term debt (14,201) (546) Net change in other short-term borrowings (23,768) (243,428) Other (3,628) (6,469) -------------- -------------- Net cash flows from financing activities 41,531 9,383 -------------- -------------- - ---------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Construction and acquisition expenditures: Regulated domestic utilities (66,832) (60,461) Non-regulated businesses and other (141,920) (129,823) Nuclear decommissioning trust funds (15,437) (15,437) Other 13,553 2,867 -------------- -------------- Net cash flows used for investing activities (210,636) (202,854) -------------- -------------- - ---------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (17,743) (33,524) -------------- -------------- - ---------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 86,618 148,415 -------------- -------------- - ---------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $68,875 $114,891 ============== ============== - ---------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $34,327 $41,455 ============== ============== Income taxes $1,696 $5,881 ============== ============== Noncash investing and financing activities: Capital lease obligations incurred $448 $3,220 ============== ============== - ---------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7 ALLIANT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The interim consolidated financial statements included herein have been prepared by Alliant Energy, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include Alliant Energy and its consolidated subsidiaries (including IP&L, WP&L, Resources and Corporate Services). These financial statements should be read in conjunction with the financial statements and the notes thereto included in Alliant Energy's, IP&L's and WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2002 and 2001, (b) the consolidated financial position at March 31, 2002 and December 31, 2001, and (c) the consolidated statement of cash flows for the three months ended March 31, 2002 and 2001, have been made. Because of the seasonal nature of Alliant Energy's utility operations, results for the three months ended March 31, 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. 2. Alliant Energy's comprehensive income (loss), and the components of other comprehensive income (loss), net of taxes, for the three months ended March 31 were as follows (in thousands):
2002 2001 ------------- ------------- Net income $9,743 $9,199 Other comprehensive income (loss): Unrealized gains (losses) on securities: Unrealized holding losses arising during period, net of tax (1) (5,350) (127,620) Less: reclassification adjustment for losses included in net income, net of tax (2) (16,185) -- ------------- ------------- Net unrealized gains (losses) on securities 10,835 (127,620) ------------- ------------- Foreign currency translation adjustments 6,872 (47,592) ------------- ------------- Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding gains arising during period, net of tax 565 270 Less: reclassification adjustment for gains (losses) included in net income, net of tax 4,057 (3,797) ------------- ------------- Net unrealized gains (losses) on qualifying derivatives (3,492) 4,067 ------------- ------------- Other comprehensive income (loss) 14,215 (171,145) ------------- ------------- Comprehensive income (loss) $23,958 ($161,946) ============= =============
(1) Primarily due to quarterly adjustments to the estimated fair value of Alliant Energy's investment in McLeod (the 2002 amount reflects adjustments only through January 30, 2002; refer to Note 8 for additional information). (2) The first quarter 2002 earnings include pre-tax losses of $21.2 million and $5.0 million related to asset valuation charges for Alliant Energy's McLeod and Capstone investments, respectively. 8 3. Certain financial information relating to Alliant Energy's significant business segments is presented below. Intersegment revenues were not material to Alliant Energy's operations.
Regulated Domestic Utilities Non-regulated Businesses Alliant ---------------------------------------- ----------------------------- Energy Electric Gas Other Total Whiting Other Total Other Consolidated ----------------------------------------------------------------------------------------------- (in thousands) Three Months Ended March 31, 2002 - --------------------------------- Operating revenues $370,762 $128,241 $9,340 $508,343 $21,848 $107,415 $129,263 ($1,369) $636,237 Operating income (loss) 46,407 13,428 2,459 62,294 (218) 541 323 (184) 62,433 Net income (loss) 26,977 26,977 44 (15,145) (15,101) (2,133) 9,743 Three Months Ended March 31, 2001 - --------------------------------- Operating revenues $411,943 $289,818 $10,796 $712,557 $42,776 $98,136 $140,912 ($756) $852,713 Operating income (loss) 56,574 19,481 892 76,947 20,499 (8,619) 11,880 449 89,276 Cumulative effect of a change in accounting principle, net of tax -- -- -- (12,868) (12,868) -- (12,868) Net income (loss) 33,328 33,328 13,001 (36,006) (23,005) (1,124) 9,199
The non-regulated net loss for the three months ended March 31, 2002 included after-tax asset valuation charges of $12.9 million related to Alliant Energy's McLeod investment and $8.2 million related to Alliant Energy's investments in Enermetrix and Capstone. Included in the non-regulated net loss for the three months ended March 31, 2002 and 2001 was after-tax non-cash SFAS 133 valuation income (charges) of $20 million and ($24) million, respectively, related to electricity derivatives held by Alliant Energy's Australian investment (Southern Hydro). 4. The provisions for income taxes are based on the estimated annual effective tax rate, which differs from the federal statutory rate of 35% principally due to state income taxes, the impact of foreign income and associated taxes, tax credits, effects of utility rate making and certain non-deductible expenses. 5. Alliant Energy continues to utilize derivative instruments to manage its exposures to various market risks as described in Alliant Energy's, IP&L's and WP&L's Annual Report on Form 10-K for the year ended December 31, 2001. The following information supplements, and should be read in conjunction with, Note 10(a) in Alliant Energy's "Notes to Consolidated Financial Statements" in the Form 10-K for the year ended December 31, 2001. For the three months ended March 31, 2002, an insignificant amount of income was recognized in connection with hedge ineffectiveness in accordance with SFAS 133. At March 31, 2002, the maximum length of time over which Alliant Energy hedged its exposure to the variability in future cash flows for forecasted transactions was twelve months and Alliant Energy estimates that losses of $1.9 million will be reclassified from accumulated other comprehensive loss into earnings within the twelve months between April 1, 2002 and March 31, 2003 as the hedged transactions affect earnings. 6. A reconciliation of the weighted average common shares outstanding used in the basic and diluted earnings per share calculation for the three months ended March 31 was as follows:
2002 2001 ---------------- ---------------- Weighted average common shares outstanding: Basic earnings per share calculation 89,964,212 79,027,898 Effect of dilutive securities 89,812 170,384 ---------------- ---------------- Diluted earnings per share calculation 90,054,024 79,198,282 ================ ================
For the three months ended March 31, 2002 and 2001, 1,831,088 and 1,068,128 options, respectively, to purchase shares of common stock, with an average exercise price of $30.86 and $31.55, respectively, were excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average market price. 9 7. Alliant Energy adopted SFAS 142, "Goodwill and Other Intangible Assets," as of January 1, 2002, which resulted in goodwill no longer being subject to amortization. Consolidated goodwill and other intangible assets are not material to Alliant Energy, and are primarily included in "Deferred charges and other" on the Consolidated Balance Sheets. Had SFAS 142 been adopted January 1, 2001, for the three months ended March 31, 2001, net income would have increased $0.8 million and basic and diluted EPS would have increased $0.01 per share. 8. Prior to January 31, 2002, Alliant Energy's investment in McLeod was accounted for under the provisions of SFAS 115. On January 31, 2002, McLeod filed a pre-negotiated plan of reorganization in a Chapter 11 bankruptcy proceeding and the trading of McLeod's common stock was suspended by Nasdaq. Subsequently, Alliant Energy discontinued accounting for its investment in McLeod under the provisions of SFAS 115. Alliant Energy's cost basis in the available-for-sale securities was reduced from $28 million at December 31, 2001 to a new cost basis of $7 million ($0.18 per share) at January 31, 2002. As a result, the cumulative unrealized pre-tax loss of $21 million (including an unrealized pre-tax loss of $8 million accumulated from January 1, 2002 to January 30, 2002) associated with its previously classified available-for-sale securities was reclassified to earnings in the first quarter of 2002. Alliant Energy's McLeod shares designated as trading securities at December 31, 2001 were adjusted during the first quarter of 2002 to the last quoted market price on January 30, 2002 ($0.18 per share) to a new cost basis of $3 million resulting in a pre-tax charge to earnings in the first quarter of 2002 on the trading securities of $3 million. From January 31, 2002 to March 31, 2002, Alliant Energy accounted for the aggregate $10 million investment in McLeod as a cost method investment following the provisions of APB 18, "The Equity Method of Accounting for Investments in Common Stock." 9. Alliant Energy has fully and unconditionally guaranteed the payment of principal and interest on various debt securities issued by Resources and, as a result, is required to present condensed consolidating financial statements. No other Alliant Energy subsidiaries are guarantors of Resources' debt securities. Alliant Energy's condensed consolidating financial statements are as follows: 10
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Three Months Ended March 31, 2002 and 2001 Alliant Energy Other Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ---------------------------------------------------------------------------- Three Months Ended March 31, 2002 (in thousands) - --------------------------------- Operating revenues: Electric utility $- $- $370,762 $- $370,762 Gas utility - - 128,241 - 128,241 Non-regulated and other - 129,263 76,299 (68,328) 137,234 ---------------------------------------------------------------------------- - 129,263 575,302 (68,328) 636,237 ---------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 62,610 - 62,610 Purchased power - - 72,337 - 72,337 Cost of utility gas sold - - 83,756 - 83,756 Other operation and maintenance 508 108,224 196,274 (66,203) 238,803 Depreciation and amortization - 17,016 69,716 - 86,732 Taxes other than income taxes - 3,700 27,954 (2,088) 29,566 ---------------------------------------------------------------------------- 508 128,940 512,647 (68,291) 573,804 ---------------------------------------------------------------------------- Operating income (loss) (508) 323 62,655 (37) 62,433 ---------------------------------------------------------------------------- Interest expense and other: Interest expense 758 20,226 27,543 (1,520) 47,007 Equity (income) loss from unconsolidated investments 229 (19,446) (4,494) - (23,711) Allowance for funds used during construction - - (1,654) - (1,654) Preferred dividend requirements of subsidiaries - - 1,682 - 1,682 Impairment of McLeodUSA Inc. investment - 21,174 - - 21,174 Miscellaneous, net (12,758) 9,029 (7,272) 13,566 2,565 ---------------------------------------------------------------------------- (11,771) 30,983 15,805 12,046 47,063 ---------------------------------------------------------------------------- Income (loss) before income taxes 11,263 (30,660) 46,850 (12,083) 15,370 ---------------------------------------------------------------------------- Income tax expense (benefit) 1,520 (15,708) 19,852 (37) 5,627 ---------------------------------------------------------------------------- Net income (loss) $9,743 ($14,952) $26,998 ($12,046) $9,743 ============================================================================ Three Months Ended March 31, 2001 - --------------------------------- Operating revenues: Electric utility $- $- $411,943 $- $411,943 Gas utility - - 289,818 - 289,818 Non-regulated and other - 140,912 65,904 (55,864) 150,952 ---------------------------------------------------------------------------- - 140,912 767,665 (55,864) 852,713 ---------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 75,184 - 75,184 Purchased power - - 98,733 - 98,733 Cost of utility gas sold - - 238,258 - 238,258 Other operation and maintenance - 109,311 182,868 (53,983) 238,196 Depreciation and amortization - 15,168 69,454 - 84,622 Taxes other than income taxes - 4,553 25,832 (1,941) 28,444 ---------------------------------------------------------------------------- - 129,032 690,329 (55,924) 763,437 ---------------------------------------------------------------------------- Operating income - 11,880 77,336 60 89,276 ---------------------------------------------------------------------------- Interest expense and other: Interest expense 5,018 18,177 31,401 (4,852) 49,744 Equity (income) loss from unconsolidated investments (3,003) 15,015 (4,939) - 7,073 Allowance for funds used during construction - - (2,302) - (2,302) Preferred dividend requirements of subsidiaries - - 1,680 - 1,680 Miscellaneous, net (11,127) 732 (4,009) 13,254 (1,150) ---------------------------------------------------------------------------- (9,112) 33,924 21,831 8,402 55,045 ---------------------------------------------------------------------------- Income (loss) before income taxes 9,112 (22,044) 55,505 (8,342) 34,231 ---------------------------------------------------------------------------- Income tax expense (benefit) (87) (9,955) 22,147 59 12,164 ---------------------------------------------------------------------------- Income (loss) before cumulative effect of a change in accounting principle, net of tax 9,199 (12,089) 33,358 (8,401) 22,067 ---------------------------------------------------------------------------- Cumulative effect of a change in accounting principle, net of tax - (12,868) - - (12,868) ---------------------------------------------------------------------------- Net income (loss) $9,199 ($24,957) $33,358 ($8,401) $9,199 ============================================================================
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Alliant Energy Corporation Condensed Consolidating Balance Sheet as of March 31, 2002 Alliant Other Energy Alliant Consolidated Parent Energy Consolidating Alliant ASSETS Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------------- Property, plant and equipment: (in thousands) Utility: Electric plant in service $- $- $5,178,619 $- $5,178,619 Other plant in service - - 1,126,285 - 1,126,285 Accumulated depreciation - - (3,440,278) - (3,440,278) Construction work in progress - - 111,455 - 111,455 Nuclear fuel, net of amortization - - 50,159 - 50,159 Other, net - - 8,008 - 8,008 ------------------------------------------------------------------------- Total utility - - 3,034,248 - 3,034,248 ------------------------------------------------------------------------- Non-regulated and other: International - 252,806 - - 252,806 Other - 864,069 61,225 (111) 925,183 Accumulated depreciation, depletion and amortization - (230,538) (3,044) - (233,582) ------------------------------------------------------------------------- Total non-regulated and other - 886,337 58,181 (111) 944,407 ------------------------------------------------------------------------- - 886,337 3,092,429 (111) 3,978,655 ------------------------------------------------------------------------- Current assets: Income tax refunds receivable 4,811 33,007 6,411 - 44,229 Prepaid gross receipts tax - - 19,255 - 19,255 Production fuel, at average cost - 3,939 43,997 - 47,936 Materials and supplies, at average cost - 4,940 50,327 - 55,267 Gas stored underground, at average cost - 13,621 13,934 - 27,555 Derivative assets - 27,913 1,931 - 29,844 Other 165,169 282,516 181,975 (230,951) 398,709 ------------------------------------------------------------------------- 169,980 365,936 317,830 (230,951) 622,795 ------------------------------------------------------------------------- Investments: Consolidated subsidiaries 1,785,832 - - (1,785,832) - Investment in McLeodUSA Inc. - 10,089 - - 10,089 Other 32,746 550,162 484,331 (15) 1,067,224 ------------------------------------------------------------------------- 1,818,578 560,251 484,331 (1,785,847) 1,077,313 ------------------------------------------------------------------------- ------------------------------------------------------------------------- Deferred charges and other - 271,594 472,299 - 743,893 ------------------------------------------------------------------------- Total assets $1,988,558 $2,084,118 $4,366,889 ($2,016,909) $6,422,656 ========================================================================= CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $1,256,875 $232,743 $789,510 ($1,022,253) $1,256,875 Retained earnings 797,185 160,491 741,427 (901,918) 797,185 Accumulated other comprehensive loss (138,219) (121,857) (16,362) 138,219 (138,219) Shares in deferred compensation trust (4,197) - - - (4,197) ------------------------------------------------------------------------- Total common equity 1,911,644 271,377 1,514,575 (1,785,952) 1,911,644 ------------------------------------------------------------------------- Cumulative preferred stock of subsidiaries, net - - 113,997 - 113,997 Long-term debt (excluding current portion) 24,000 1,286,648 1,328,268 - 2,638,916 ------------------------------------------------------------------------ 1,935,644 1,558,025 2,956,840 (1,785,952) 4,664,557 ------------------------------------------------------------------------ Current liabilities: Current maturities and sinking funds - 40,671 560 - 41,231 Other short-term borrowings - 41,707 - - 41,707 Accrued interest 2,616 22,984 22,639 - 48,239 Accrued taxes - 13,779 90,577 - 104,356 Other 48,304 154,782 528,757 (230,951) 500,892 ------------------------------------------------------------------------ 50,920 273,923 642,533 (230,951) 736,425 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Other long-term liabilities and deferred credits 1,994 208,110 767,516 (6) 977,614 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Minority interest - 44,060 - - 44,060 ------------------------------------------------------------------------ Total capitalization and liabilities $1,988,558 $2,084,118 $4,366,889 ($2,016,909) $6,422,656 ========================================================================
12
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001 Alliant Other Energy Alliant Consolidated Parent Energy Consolidating Alliant ASSETS Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------------ Property, plant and equipment: (in thousands) Utility: Electric plant in service $- $- $5,123,781 $- $5,123,781 Other plant in service - - 1,115,432 - 1,115,432 Accumulated depreciation - - (3,374,867) - (3,374,867) Construction work in progress - - 111,069 - 111,069 Nuclear fuel, net of amortization - - 54,811 - 54,811 Other, net - - 7,383 - 7,383 ------------------------------------------------------------------------ Total utility - - 3,037,609 - 3,037,609 ------------------------------------------------------------------------ Non-regulated and other: International - 169,522 - - 169,522 Other - 819,690 51,371 (111) 870,950 Accumulated depreciation, depletion and amortization - (212,927) (2,357) - (215,284) ------------------------------------------------------------------------ Total non-regulated and other - 776,285 49,014 (111) 825,188 ------------------------------------------------------------------------ - 776,285 3,086,623 (111) 3,862,797 ------------------------------------------------------------------------ Current assets: Income tax refunds receivable 7,552 15,511 6,411 - 29,474 Prepaid gross receipts tax - - 25,673 - 25,673 Production fuel, at average cost - 5,310 49,397 - 54,707 Materials and supplies, at average cost - 4,611 49,790 - 54,401 Gas stored underground, at average cost - 16,480 40,634 - 57,114 Derivative assets - 544 5,961 - 6,505 Other 184,623 245,207 228,268 (259,130) 398,968 ------------------------------------------------------------------------ 192,175 287,663 406,134 (259,130) 626,842 ------------------------------------------------------------------------ Investments: Consolidated subsidiaries 1,793,737 - - (1,793,737) - Investment in McLeodUSA Inc. - 20,739 - - 20,739 Other 32,814 623,053 477,929 (14) 1,133,782 ------------------------------------------------------------------------ 1,826,551 643,792 477,929 (1,793,751) 1,154,521 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Deferred charges and other - 124,737 478,785 - 603,522 ------------------------------------------------------------------------ Total assets $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682 ======================================================================== CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $1,240,690 $232,743 $789,002 ($1,021,745) $1,240,690 Retained earnings 832,293 175,443 749,102 (924,545) 832,293 Accumulated other comprehensive loss (152,434) (140,137) (12,297) 152,434 (152,434) Shares in deferred compensation trust (2,208) - - - (2,208) ------------------------------------------------------------------------ Total common equity 1,918,341 268,049 1,525,807 (1,793,856) 1,918,341 ------------------------------------------------------------------------ Cumulative preferred stock of subsidiaries, net - - 113,953 - 113,953 Long-term debt (excluding current portion) 24,000 1,105,792 1,328,149 - 2,457,941 ------------------------------------------------------------------------ 1,942,341 1,373,841 2,967,909 (1,793,856) 4,490,235 ------------------------------------------------------------------------ Current liabilities: Current maturities and sinking funds - 9,946 560 - 10,506 Other short-term borrowings - 84,318 - - 84,318 Accrued interest 2,100 10,022 23,591 - 35,713 Accrued taxes - 13,026 77,387 - 90,413 Other 70,763 99,797 607,357 (259,130) 518,787 ------------------------------------------------------------------------ 72,863 217,109 708,895 (259,130) 739,737 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Other long-term liabilities and deferred credits 3,522 198,149 772,667 (6) 974,332 ------------------------------------------------------------------------ ------------------------------------------------------------------------ Minority interest - 43,378 - - 43,378 ------------------------------------------------------------------------ Total capitalization and liabilities $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682 ========================================================================
13
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Three Months Ended March 31, 2002 and 2001 Alliant Other Energy Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------ Three Months Ended March 31, 2002 (in thousands) - --------------------------------- Net cash flows from operating activities $11,687 $8,692 $144,711 ($13,728) $151,362 ------------------------------------------------------------------ Cash flows from (used for) financing activities: Common stock dividends (44,851) - (34,673) 34,673 (44,851) Net change in Resources' credit facility - 85,115 - - 85,115 Proceeds from issuance of other long-term debt - 28,579 - - 28,579 Net change in other short-term borrowings (7,593) (2,603) (13,572) - (23,768) Other 14,329 (14,401) (4,646) 1,174 (3,544) ------------------------------------------------------------------ Net cash flows from (used for) financing activities (38,115) 96,690 (52,891) 35,847 41,531 ------------------------------------------------------------------ Cash flows from (used for) investing activities: Construction and acquisition expenditures: Regulated domestic utilities - - (66,832) - (66,832) Non-regulated businesses and other - (131,538) (10,382) - (141,920) Other 22,103 19,652 (21,520) (22,119) (1,884) ------------------------------------------------------------------ Net cash flows from (used for) investing activities 22,103 (111,886) (98,734) (22,119) (210,636) ------------------------------------------------------------------ Net decrease in cash and temporary cash investments (4,325) (6,504) (6,914) - (17,743) ------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 6,381 66,012 14,225 - 86,618 ------------------------------------------------------------------ Cash and temporary cash investments at end of period $2,056 $59,508 $7,311 $- $68,875 ================================================================== Supplemental cash flows information: Cash paid (refunded) during the period for: Interest $243 $7,261 $26,823 $- $34,327 ================================================================== Income taxes $- ($45) $1,741 $- $1,696 ================================================================== Noncash investing and financing activities: Capital lease obligations incurred $- $- $448 $- $448 ================================================================== Three Months Ended March 31, 2001 - --------------------------------- Net cash flows from operating activities $20,926 $26,796 $146,582 ($34,357) $159,947 ------------------------------------------------------------------ Cash flows from (used for) financing activities: Common stock dividends (39,489) - (36,037) 36,037 (39,489) Net change in Resources' credit facility - 97,500 - - 97,500 Proceeds from issuance of other long-term debt - 1,140 200,000 - 201,140 Net change in other short-term borrowings 34,068 (74,153) (100,687) (102,656) (243,428) Other 680 (540) (8,035) 1,555 (6,340) ------------------------------------------------------------------ Net cash flows from (used for) financing activities (4,741) 23,947 55,241 (65,064) 9,383 ------------------------------------------------------------------ Cash flows from (used for) investing activities: Construction and acquisition expenditures: Regulated domestic utilities - - (60,461) - (60,461) Non-regulated businesses and other - (123,121) (6,702) - (129,823) Other 3,309 9,691 (22,245) (3,325) (12,570) ------------------------------------------------------------------ Net cash flows from (used for) investing activities 3,309 (113,430) (89,408) (3,325) (202,854) ------------------------------------------------------------------ Net increase (decrease) in cash and temporary cash investments 19,494 (62,687) 112,415 (102,746) (33,524) ------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 574 133,957 13,884 - 148,415 ------------------------------------------------------------------ Cash and temporary cash investments at end of period $20,068 $71,270 $126,299 ($102,746) $114,891 ================================================================== Supplemental cash flows information: Cash paid during the period for: Interest $4,783 $13,689 $22,983 $- $41,455 ================================================================== Income taxes $1,000 $439 $4,442 $- $5,881 ================================================================== Noncash investing and financing activities: Capital lease obligations incurred $- $- $3,220 $- $3,220 ==================================================================
14
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - ---------------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $199,003 $221,552 Gas utility 71,742 164,186 Steam 8,050 9,643 ---------------------- --------------------- 278,795 395,381 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 32,342 40,112 Purchased power 28,159 46,363 Cost of gas sold 46,360 132,006 Other operation and maintenance 80,656 84,454 Depreciation and amortization 36,211 36,889 Taxes other than income taxes 16,916 15,586 ---------------------- --------------------- 240,644 355,410 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Operating income 38,151 39,971 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 16,274 17,478 Allowance for funds used during construction (980) (1,185) Miscellaneous, net (428) (2,211) ---------------------- --------------------- 14,866 14,082 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Income before income taxes 23,285 25,889 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Income taxes 10,410 10,205 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Net income 12,875 15,684 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 855 852 ---------------------- --------------------- - ---------------------------------------------------------------------------------------------------------------------- Earnings available for common stock $12,020 $14,832 ====================== ===================== - ---------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
15
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS March 31, 2002 December 31, ASSETS (Unaudited) 2001 - ------------------------------------------------------------------------------------------------------------------ (in thousands) Property, plant and equipment: Electric plant in service $3,380,425 $3,344,188 Gas plant in service 318,214 316,613 Steam plant in service 59,683 59,452 Other plant in service 185,871 182,868 Accumulated depreciation (2,082,746) (2,046,756) ------------------ ----------------- Net plant 1,861,447 1,856,365 Construction work in progress 69,428 73,241 Leased nuclear fuel, net of amortization 34,241 37,407 Other, net 7,324 6,703 ------------------ ----------------- 1,972,440 1,973,716 ------------------ ----------------- - ------------------------------------------------------------------------------------------------------------------ Current assets: Cash and temporary cash investments 5,735 8,962 Accounts receivable: Customer, less allowance for doubtful accounts of $1,646 and $1,564, respectively 12,041 19,950 Associated companies 4,119 4,718 Other, less allowance for doubtful accounts of $405 and $319, respectively 16,365 25,497 Income tax refunds receivable 6,412 6,412 Production fuel, at average cost 29,574 32,083 Materials and supplies, at average cost 29,418 29,121 Gas stored underground, at average cost 4,559 18,447 Regulatory assets 9,729 12,495 Prepayments and other 5,607 5,060 ------------------ ----------------- 123,559 162,745 ------------------ ----------------- - ------------------------------------------------------------------------------------------------------------------ Investments: Nuclear decommissioning trust funds 118,872 117,159 Other 15,181 15,157 ------------------ ----------------- 134,053 132,316 ------------------ ----------------- - ------------------------------------------------------------------------------------------------------------------ Other assets: Regulatory assets 129,219 132,109 Deferred charges and other 28,976 31,103 ------------------ ----------------- 158,195 163,212 ------------------ ----------------- - ------------------------------------------------------------------------------------------------------------------ Total assets $2,388,247 $2,431,989 ================== ================= - ------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
16
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (Continued) March 31, 2002 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 2001 - -------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $2.50 par value - authorized 24,000,000 shares; 13,370,788 shares outstanding $33,427 $33,427 Additional paid-in capital 422,445 422,461 Retained earnings 360,137 368,203 Accumulated other comprehensive loss (2,131) (2,131) ------------------ ----------------- Total common equity 813,878 821,960 ------------------ ----------------- Cumulative preferred stock, not mandatorily redeemable 29,139 29,139 Cumulative preferred stock, mandatorily redeemable 24,895 24,850 Long-term debt (excluding current portion) 860,155 860,068 ------------------ ----------------- 1,728,067 1,736,017 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 560 560 Capital lease obligations 14,021 15,292 Notes payable to associated companies 29,246 38,047 Accounts payable 41,961 55,249 Accounts payable to associated companies 35,493 38,255 Accrued interest 14,654 14,715 Accrued taxes 71,694 70,747 Other 31,186 36,424 ------------------ ----------------- 238,815 269,289 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 266,579 268,010 Accumulated deferred investment tax credits 33,878 34,491 Pension and other benefit obligations 42,722 40,573 Environmental liabilities 36,197 38,206 Capital lease obligations 20,273 22,171 Other 21,716 23,232 ------------------ ----------------- 421,365 426,683 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $2,388,247 $2,431,989 ================== ================= - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
17
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - --------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $12,875 $15,684 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 36,211 36,889 Amortization of leased nuclear fuel 3,615 3,998 Amortization of deferred energy efficiency expenditures 983 7,952 Deferred tax benefits and investment tax credits (2,180) (6,714) Refueling outage provision 2,005 1,245 Other 272 597 Other changes in assets and liabilities: Accounts receivable 17,640 10,027 Gas stored underground 13,888 19,277 Accounts payable (9,451) (37,744) Accrued taxes 947 18,460 Adjustment clause balances (8,345) 7,108 Benefit obligations and other 7,362 3,961 -------------- -------------- Net cash flows from operating activities 75,822 80,740 -------------- -------------- - --------------------------------------------------------------------------------------------------- Cash flows from (used for) financing activities: Common stock dividends (20,086) (20,085) Preferred stock dividends (855) (852) Proceeds from issuance of long-term debt - 200,000 Net change in short-term borrowings (8,801) (169,314) Principal payments under capital lease obligations (3,516) (4,226) Other 29 (2,210) -------------- -------------- Net cash flows from (used for) financing activities (33,229) 3,313 -------------- -------------- - --------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (38,260) (32,083) Nuclear decommissioning trust funds (1,502) (1,502) Other (6,058) (5,451) -------------- -------------- Net cash flows used for investing activities (45,820) (39,036) -------------- -------------- - --------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments (3,227) 45,017 -------------- -------------- - --------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 8,962 9,626 -------------- -------------- - --------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $5,735 $54,643 ============== ============== - --------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $16,044 $11,321 ============== ============== Income taxes $ - $400 ============== ============== Noncash investing and financing activities: Capital lease obligations incurred and other $448 $3,220 ============== ============== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
18 INTERSTATE POWER AND LIGHT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to IP&L. 1. The interim consolidated financial statements included herein have been prepared by IP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The merger of IPC with and into IESU was effective January 1, 2002 and IESU changed its name to IP&L. These statements are prepared on the basis of accounting for the merger as a common control merger. Certain adjustments have been made to the prior period amounts as part of the restatement to reflect the common control transaction. IP&L is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with IESU's financial statements and the notes thereto included in IP&L's latest Annual Report on Form 10-K and with IP&L's pro forma combined financial statements and notes thereto included in IP&L's Current Report on Form 8-K dated January 1, 2002, as amended by IP&L's Current Report on Form 8-K/A. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2002 and 2001, (b) the consolidated financial position at March 31, 2002 and December 31, 2001, and (c) the consolidated statement of cash flows for the three months ended March 31, 2002 and 2001, have been made. Because of the seasonal nature of IP&L's operations, results for the three months ended March 31, 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. 2. IP&L's comprehensive income, and the components of other comprehensive income, net of taxes, for the three months ended March 31 were as follows (in thousands):
2002 2001 ------------ ------------ Earnings available for common stock $12,020 $14,832 Other comprehensive income: Reclassification adjustment for losses included in earnings available for common stock related to derivatives qualified as hedges, net of tax -- 18 ------------ ------------ Other comprehensive income -- 18 ------------ ------------ Comprehensive income $12,020 $14,850 ============ ============
3. Certain financial information relating to IP&L's significant business segments is presented below. Intersegment revenues were not material to IP&L's operations.
Electric Gas Other Total ------------------------------------------------------- (in thousands) Three Months Ended March 31, 2002 --------------------------------- Operating revenues $199,003 $71,742 $8,050 $278,795 Operating income 27,898 8,180 2,073 38,151 Earnings available for common stock 12,020 12,020 Three Months Ended March 31, 2001 --------------------------------- Operating revenues $221,552 $164,186 $9,643 $395,381 Operating income 25,903 13,361 707 39,971 Earnings available for common stock 14,832 14,832
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WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - --------------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $171,759 $190,391 Gas utility 56,499 125,632 Water 1,290 1,153 ---------------------- --------------------- 229,548 317,176 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric production fuels 30,269 35,072 Purchased power 44,177 52,370 Cost of gas sold 37,396 106,252 Other operation and maintenance 51,107 45,635 Depreciation and amortization 33,506 32,565 Taxes other than income taxes 8,950 8,306 ---------------------- --------------------- 205,405 280,200 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Operating income 24,143 36,976 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 10,196 11,196 Equity income from unconsolidated investments (4,387) (4,850) Allowance for funds used during construction (674) (1,117) Miscellaneous, net (6,141) 481 ---------------------- --------------------- (1,006) 5,710 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Income before income taxes 25,149 31,266 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Income taxes 9,404 12,000 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Net income 15,745 19,266 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 828 828 ---------------------- --------------------- - --------------------------------------------------------------------------------------------------------------------- Earnings available for common stock $14,917 $18,438 ====================== ===================== - --------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS March 31, 2002 December 31, ASSETS (Unaudited) 2001 - --------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Electric plant in service $1,798,194 $1,779,593 Gas plant in service 283,950 280,881 Water plant in service 32,582 32,497 Other plant in service 245,985 243,121 Accumulated depreciation (1,357,532) (1,328,111) ----------------- ------------------ Net plant 1,003,179 1,007,981 Construction work in progress 42,028 37,828 Nuclear fuel, net of amortization 15,919 17,404 Other, net 682 681 ----------------- ------------------ 1,061,808 1,063,894 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 535 4,389 Accounts receivable: Customer, less allowance for doubtful accounts of $1,708 and $1,543, respectively 24,129 33,190 Associated companies 1,010 3,676 Other 15,507 16,571 Production fuel, at average cost 14,423 17,314 Materials and supplies, at average cost 20,909 20,669 Gas stored underground, at average cost 9,375 22,187 Prepaid gross receipts tax 19,255 25,673 Other 7,473 13,018 ----------------- ------------------ 112,616 156,687 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 219,742 215,794 Investment in ATC and other 128,071 127,941 ----------------- ------------------ 347,813 343,735 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 117,796 109,864 Deferred charges and other 197,534 205,702 ----------------- ------------------ 315,330 315,566 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Total assets $1,837,567 $1,879,882 ================= ================== - --------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (Continued) March 31, 2002 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 2001 - --------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $5 par value - authorized 18,000,000 shares; 13,236,601 shares outstanding $66,183 $66,183 Additional paid-in capital 264,603 264,603 Retained earnings 381,662 381,333 Accumulated other comprehensive loss (14,232) (10,167) ------------------ ----------------- Total common equity 698,216 701,952 ------------------ ----------------- Cumulative preferred stock 59,963 59,963 Long-term debt (excluding current portion) 468,114 468,083 ------------------ ----------------- 1,226,293 1,229,998 ------------------ ----------------- - --------------------------------------------------------------------------------------------------------------------- Current liabilities: Variable rate demand bonds 55,100 55,100 Notes payable to associated companies 56,224 90,816 Accounts payable 73,636 98,173 Accounts payable to associated companies 32,823 36,678 Other 61,613 35,219 ------------------ ----------------- 279,396 315,986 ------------------ ----------------- - --------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 198,072 206,245 Accumulated deferred investment tax credits 24,490 24,907 Customer advances 32,007 34,178 Pension and other benefit obligations 18,261 18,175 Other 59,048 50,393 ------------------ ----------------- 331,878 333,898 ------------------ ----------------- - --------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,837,567 $1,879,882 ================== ================= - --------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
22
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Three Months Ended March 31, 2002 2001 - ----------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $15,745 $19,266 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 33,506 32,565 Amortization of nuclear fuel 1,481 1,423 Deferred tax benefits and investment tax credits (4,033) (4,626) Equity income from unconsolidated investments, net (4,387) (4,850) Distributions from equity method investments 4,227 211 Other (6,808) (2,373) Other changes in assets and liabilities: Accounts receivable 12,791 4,914 Production fuel 2,891 6,280 Gas stored underground 12,812 7,255 Prepaid gross receipts tax 6,418 5,772 Accounts payable (23,945) (34,660) Accrued taxes 11,356 10,455 Benefit obligations and other 27,318 18,244 ---------------- --------------- Net cash flows from operating activities 89,372 59,876 ---------------- --------------- - ----------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends (14,588) (15,953) Preferred stock dividends (828) (828) Net change in short-term borrowings (34,592) 5,605 Other - 82 ---------------- --------------- Net cash flows used for financing activities (50,008) (11,094) ---------------- --------------- - ----------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (28,572) (28,379) Nuclear decommissioning trust funds (13,935) (13,935) Other (711) (1,245) ---------------- --------------- Net cash flows used for investing activities (43,218) (43,559) ---------------- --------------- - ----------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments (3,854) 5,223 ---------------- --------------- - ----------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 4,389 2,584 ---------------- --------------- - ----------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $535 $7,807 ================ =============== - ----------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $10,780 $11,662 ================ =============== Income taxes $1,701 $3,984 ================ =============== - ----------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23 WISCONSIN POWER AND LIGHT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to WP&L. 1. The interim consolidated financial statements included herein have been prepared by WP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the U.S. have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include WP&L and its consolidated subsidiaries. WP&L is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three months ended March 31, 2002 and 2001, (b) the consolidated financial position at March 31, 2002 and December 31, 2001, and (c) the consolidated statement of cash flows for the three months ended March 31, 2002 and 2001, have been made. Because of the seasonal nature of WP&L's operations, results for the three months ended March 31, 2002 are not necessarily indicative of results that may be expected for the year ending December 31, 2002. 2. WP&L's comprehensive income, and the components of other comprehensive income (loss), net of taxes, for the three months ended March 31 were as follows (in thousands):
2002 2001 ------------ ------------ Earnings available for common stock $14,917 $18,438 Other comprehensive income (loss): Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding gains arising during period, net of tax 222 964 Less: reclassification adjustment for gains (losses) included in earnings available for common stock, net of tax 4,287 (3,781) ------------ ------------ Net unrealized gains (losses) on qualifying derivatives (4,065) 4,745 ------------ ------------ Other comprehensive income (loss) (4,065) 4,745 ------------ ------------ Comprehensive income $10,852 $23,183 ============ ============
3. Certain financial information relating to WP&L's significant business segments is presented below. Intersegment revenues were not material to WP&L's operations.
Electric Gas Other Total -------------------------------------------------------- (in thousands) Three Months Ended March 31, 2002 --------------------------------- Operating revenues $171,759 $56,499 $1,290 $229,548 Operating income 18,509 5,248 386 24,143 Earnings available for common stock 14,917 14,917 Three Months Ended March 31, 2001 --------------------------------- Operating revenues $190,391 $125,632 $1,153 $317,176 Operating income 30,671 6,120 185 36,976 Earnings available for common stock 18,438 18,438
24 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. This MD&A includes information relating to Alliant Energy, IP&L and WP&L (as well as Resources and Corporate Services). Where appropriate, information relating to a specific entity has been segregated and labeled as such. The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report as well as the financial statements, notes and MD&A included in Alliant Energy's, IP&L's and WP&L's latest Annual Report on Form 10-K. FORWARD-LOOKING STATEMENTS Statements contained in this report (including MD&A) that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include: factors listed in "Other Matters - Other Future Considerations" and in "Future Earnings Outlook;" weather effects on sales and revenues; general economic and political conditions in Alliant Energy's domestic service territories; federal, state and international regulatory or governmental actions, including issues associated with the deregulation of the domestic utility industry and the ability to obtain adequate and timely rate relief; unanticipated construction and acquisition expenditures; issues related to stranded costs and the recovery thereof; unanticipated issues related to the supply of purchased electricity and price thereof; unexpected issues related to the operations of Alliant Energy's nuclear facilities; unanticipated costs associated with certain environmental remediation efforts being undertaken by Alliant Energy and with environmental compliance generally; unanticipated developments that adversely impact Alliant Energy's strategy to grow its non-regulated businesses; Alliant Energy's ability to identify and successfully complete acquisitions and development projects; improved results from Alliant Energy's Brazil investments, as well as continued growth in earnings from its China investments; unanticipated shifts in earnings at Whiting; continued improved profitability of Alliant Energy's other non-regulated businesses as a whole, including the Integrated Services and Generation and Trading business units; no material permanent declines in the fair market value of, or expected cash flows from, Alliant Energy's investments; technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; political, legal, economic and exchange rate conditions in foreign countries Alliant Energy has investments in; and changes in the rate of inflation. Alliant Energy assumes no obligation, and disclaims any duty, to update the forward-looking statements in this report. UTILITY INDUSTRY REVIEW A summary of the regulatory environment is included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Set forth below are several recent developments relating to the regulatory environment. Overview - In September 2001, six electric utility companies, including IESU - -------- and IPC, filed an application with FERC to create TRANSLink, a for-profit, transmission-only company. In April 2002, FERC conditionally approved the formation of TRANSLink and TRANSLink's participation in the Midwest ISO. Current plans call for IP&L to contribute its transmission assets, which have an estimated net book value of approximately $317 million, to TRANSLink in exchange for a corresponding ownership interest in TRANSLink. The TRANSLink proposal is also subject to receipt of all required state regulatory approvals. TRANSLink is currently expected to be operational in 2003. FERC is pursuing a redesign of the electric wholesale markets and is expected to issue proposed market rules in the Summer of 2002, which will define the manner in which electric markets operate and the role that RTOs will perform 25 in that market. Alliant Energy cannot presently predict the impact these proposed rules may have on its financial condition and results of operations. Rates and Regulatory Matters - ---------------------------- WP&L - In April 2002, the PSCW issued an interim rate order in WP&L's current retail rate case authorizing a total increase of approximately $49 million ($34 million for retail electric and $15 million for retail natural gas). The interim rates became effective April 25, 2002, and if final rates are set lower than interim rates, customers would receive a refund of the difference, plus interest. As of April 2002, WP&L's final rate request totaled $85 million ($58 million for retail electric, $25 million for retail natural gas and $2 million for water) and final rates, as approved by the PSCW, are expected to be implemented in late June or early July 2002. Also, in February 2002, WP&L filed a $6.2 million request with FERC for new wholesale electric base rates. In May 2002, WP&L filed a $59 million ($48 million for retail electric, $10 million for retail natural gas and $1 million for retail water) base rate increase request with the PSCW to be effective on January 1, 2003. This 2003 increase is related to infrastructure investments in reliability, fuel and purchased-power costs, and costs related to increasing the amount of WP&L's equity. In March 2002, WP&L filed with the PSCW to refund approximately $4 million to customers based on lower than projected fuel and purchased-power costs in 2001. In addition, in March 2002, WP&L filed with and received approval from the PSCW for a decrease in retail electric rates of approximately $19 million, effective March 23, 2002, based on lower 2002 fuel and purchased-power costs. The refund amounts ultimately provided by WP&L are subject to PSCW approval. WP&L had recorded the necessary reserves for refunds at March 31, 2002. IP&L - In March 2002, IP&L filed an electric base rate case with the IUB requesting an increase in electric revenues of approximately $82 million for recovery of its investments in its infrastructure that are intended to enable IP&L to continue delivering reliable utility service. Also in March 2002, IP&L filed a request for interim rate relief related to such filing of approximately $22 million. If granted, the interim and final rate increases will go into effect, subject to refund, no later than 90 days and 10 months, respectively, after the filing. IP&L plans on filing a natural gas base rate case with the IUB in the Summer of 2002. In January 2001, the IUB issued an order requiring IESU and IPC to file a joint fuel procurement plan for the purpose of evaluating the reasonableness of the Iowa utilities' fuel procurement contracts. In April 2002, the IUB issued an order which found no reason to require a refund of past fuel and purchased-power cost collections or disallow recovery of ongoing collections. However, the IUB indicated it will continue to examine in other forums several issues related to purchased-power contracts, the design of the fuel cost recovery mechanism and long-term planning practices. IP&L cannot presently predict the impact this matter may have on its financial condition and results of operations. ALLIANT ENERGY RESULTS OF OPERATIONS Unless otherwise noted, all "per share" references in the Results of Operations section refer to earnings per diluted share. Overview - First Quarter Results - Alliant Energy's EPS for the first quarter - -------------------------------- of 2002 and 2001 were as follows:
2002 2001 -------- -------- EPS per accounting principles generally accepted in the U.S. $0.11 $0.12 Plus: EPS related to non-cash SFAS 133 valuation charges: Electricity derivatives of a foreign affiliate of Alliant Energy -- 0.30 30-year exchangeable senior notes 0.02 0.03 Valuation charge related to Alliant Energy's McLeod investment 0.14 -- Less: EPS related to non-cash SFAS 133 income from the valuation of electricity derivatives of a foreign affiliate of Alliant Energy 0.22 -- -------- -------- Adjusted EPS $0.05 $0.45 ======== ========
26 The first quarter 2002 decrease in adjusted earnings was primarily due to a decrease from Alliant Energy's non-regulated businesses of $0.31 per share. Contributing to the decrease were lower earnings from Alliant Energy's: Investments business unit of $0.16 per share; the Integrated Services business unit of $0.07 per share; the International business unit of $0.04 per share; and a $0.04 per share asset valuation charge at Alliant Energy's Energy Technologies division. Earnings from utility operations decreased $0.08 per share due to increased operating expenses and lower electric and gas margins. In the previous table, all of the adjustments to EPS per accounting principles generally accepted in the U.S. were recorded at Alliant Energy's non-regulated businesses. The lower earnings from the Investments business unit were largely due to a 64% decrease in Whiting's average gas sales prices compared to the extraordinarily high gas prices of the first quarter of 2001. A 28% decrease in average oil sales prices and decreased oil volumes sold also contributed to the earnings decrease. These items were partially offset by an increase in gas sales volumes. The reduced earnings at the Integrated Services business unit were primarily due to recording an asset valuation charge of $0.06 per share in the first quarter of 2002 related to its $10 million investment in Enermetrix, an energy technology start-up enterprise. Alliant Energy divested its ownership interest in Enermetrix in the second quarter of 2002. The decrease in income from the International business unit was primarily due to lower results from its Southern Hydro generation investment in Australia. Such earnings decrease resulted from lower sales due to mild weather conditions and lower spot market prices. A slight increase in earnings from Alliant Energy's China investments was offset by a modest decrease in earnings from its Brazil investments. Due to Brazil's drought conditions, earnings were negatively impacted in the first quarter of 2002 by a government-imposed rationing program. Brazil has recently received significant rainfall and, therefore, the government completely lifted its rationing program effective March 1, 2002. As a result, Alliant Energy expects electricity sales to begin returning to more normal levels through the rest of the year. In addition, wholesale spot market prices in Brazil have been unusually low. These lower market prices have impacted the profitability of a new thermal plant constructed by Alliant Energy and its Brazilian partners that began operating in late 2001. Alliant Energy's Energy Technologies division recorded an asset valuation charge of $0.04 per share in the first quarter of 2002 related to its $10 million investment in Capstone, a publicly-traded microturbine producer. Electric Utility Operations - Electric margins and MWh sales for Alliant - --------------------------- Energy for the three months ended March 31 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2002 2001 Change 2002 2001 Change --------------------------------------- ----------------------------------- Residential $137,247 $149,687 (8%) 1,874 1,971 (5%) Commercial 77,792 85,054 (9%) 1,295 1,331 (3%) Industrial 108,080 116,667 (7%) 2,846 2,982 (5%) ---------------------------- ----------------------- Total from ultimate customers 323,119 351,408 (8%) 6,015 6,284 (4%) Sales for resale 36,410 48,423 (25%) 1,202 1,257 (4%) Other 11,233 12,112 (7%) 44 42 5% ---------------------------- ----------------------- Total revenues/sales 370,762 411,943 (10%) 7,261 7,583 (4%) ======================= Electric production fuels expense 58,760 68,274 (14%) Purchased-power expense 72,337 98,733 (27%) ---------------------------- Margin $239,665 $244,936 (2%) ============================
Electric margin decreased $5.3 million, or 2%, primarily related to decreased retail sales due to extremely mild weather in the first quarter of 2002 and a continuing sluggish economy in the upper Midwest. Reduced energy conservation revenues also contributed to the decrease. These items were partially offset by lower purchased-power and fuel costs and increased sales from continued retail customer growth. The economic slowdown had the most significant impact on electric industrial sales, which were down nearly 5% for the three-month period. Refer to "Utility Industry Review - Rates and Regulatory Matters" for discussion of various rate filings. 27 Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for the - ---------------------- three months ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold ----------------------------------- ---------------------------------- 2002 2001 Change 2002 2001 Change ----------------------------------- ---------------------------------- Residential $76,586 $166,557 (54%) 13,419 15,580 (14%) Commercial 37,996 89,055 (57%) 7,830 9,059 (14%) Industrial 6,041 14,623 (59%) 1,469 1,630 (10%) Transportation/other 7,618 19,583 (61%) 12,814 13,959 (8%) -------------------------- ---------------------- Total revenues/sales 128,241 289,818 (56%) 35,532 40,228 (12%) ====================== Cost of utility gas sold 83,756 238,258 (65%) -------------------------- Margin $44,485 $51,560 (14%) ==========================
Gas revenues and cost of utility gas sold decreased significantly due to the large decrease in natural gas prices from the first quarter of 2001. Due to Alliant Energy's rate recovery mechanisms for gas costs, these increases alone had little impact on gas margin. Gas margin decreased $7.1 million, or 14%, primarily due to the impact of lower sales resulting from extremely mild weather in the first quarter of 2002 and continued sluggish economic conditions in the upper Midwest. Reduced energy conservation revenues also contributed to the decrease. These items were partially offset by increased sales from continued retail customer growth and improved performance related to WP&L's performance-based commodity cost recovery program. Refer to "Utility Industry Review - Rates and Regulatory Matters" for discussion of various rate filings. Non-regulated and Other Revenues - Details regarding Alliant Energy's - -------------------------------- non-regulated and other revenues and data relating to Whiting's oil and gas operations for the three months ended March 31 were as follows:
Non-regulated and other revenues (in thousands): 2002 2001 -------------- -------------- Integrated Services $57,206 $84,199 Investments: Whiting 21,848 42,776 Other 10,786 10,609 International 27,852 6,287 Other 19,542 7,081 -------------- -------------- $137,234 $150,952 ============== ============== Whiting's volumes sold (in thousands): Oil (barrels) 466 565 Gas (Dth) 4,943 4,322 Whiting's average product prices: Oil $18.50 $25.71 Gas $2.34 $6.45
The decreased Integrated Services revenues were primarily due to decreased gas revenues resulting from lower natural gas prices and volumes sold. Reduced revenues at Whiting were primarily due to lower oil and gas prices and lower oil volumes, partially offset by higher gas volumes. International revenues increased primarily due to the acquisitions of additional combined heat and power facilities in China in 2001. Other revenues increased primarily due to the fourth quarter 2001 acquisition of a controlling interest in SmartEnergy, Inc., an energy services company operating in competitive energy markets. 28 Other Operating Expenses - Other operation and maintenance expenses for the - ------------------------ three months ended March 31 were as follows (in thousands): 2002 2001 -------------- ---------------- Utility $131,763 $130,089 Integrated Services 52,622 80,186 Investments: Whiting 11,742 11,729 Other 6,866 7,063 International 22,473 8,464 Other 13,337 665 -------------- ---------------- $238,803 $238,196 ============== ================ The utility increase was primarily due to increased generation, employee benefits and energy delivery costs, largely offset by reduced energy conservation expenses. Alliant Energy's remaining price freezes (which were implemented in connection with the three-way merger in 1998) expired in April 2002. Alliant Energy is addressing the recovery of its utility cost increases related to ongoing investments to continue providing safe and reliable utility service through rate filings in Wisconsin, Iowa and with FERC in 2002 (refer to "Utility Industry Review - Rates and Regulatory Matters" for additional information). The Integrated Services decrease was primarily due to decreased gas costs resulting from lower natural gas prices and volumes sold. The increase at the International business unit was primarily due to the 2001 China acquisitions. Other increased primarily due to expenses of SmartEnergy, Inc. Depreciation and amortization expense increased $2.1 million, primarily due to increased earnings on the WP&L nuclear decommissioning trust fund and utility property additions. Such increases were partially offset by $3.4 million from the implementation of lower depreciation rates at IP&L on January 1, 2002, resulting from an updated depreciation study, and lower decommissioning expense based on reduced funding levels at WP&L. The accounting for earnings on the nuclear decommissioning trust fund results in no net income impact. Miscellaneous, net income increases for earnings on the trust fund and the corresponding offset is recorded through depreciation expense at WP&L. Interest Expense and Other - Equity income (loss) from Alliant Energy's - -------------------------- unconsolidated investments for the three months ended March 31 was as follows (in thousands): 2002 2001 ------------- ------------- Australia/New Zealand $21.1 ($15.2) ATC 4.1 4.8 China 0.3 1.4 Cargill-Alliant (0.2) 3.0 Brazil (1.7) (1.5) Other 0.1 0.4 ------------- ------------- $23.7 ($7.1) ============= ============= Equity income from unconsolidated investments increased $30.8 million, primarily due to a $36.5 million increase in income at Alliant Energy's Australian investment (Southern Hydro), partially offset by reduced income at Alliant Energy's electricity trading joint venture due to fewer weather-related trading opportunities. The Southern Hydro increase included a $38.8 million increase in pre-tax non-cash SFAS 133 valuation income associated with their electricity derivatives. Such increase was partially offset by lower sales due to mild weather conditions and lower spot market prices. In March 2002, Alliant Energy acquired a controlling interest in Southern Hydro and therefore changed from the equity method of accounting to the consolidation method at such time. 29 In the first quarter of 2002, Alliant Energy wrote down its investment in McLeod available-for-sale securities to a value of $0.18 per share, the price it traded at prior to Nasdaq halting trading upon McLeod's bankruptcy filing. The write-down resulted in a pre-tax asset valuation charge of $21.2 million. Refer to Note 8 of Alliant Energy's Notes to Consolidated Financial Statements and "Other Matters - Other Future Considerations" for further discussion. Miscellaneous, net income decreased $3.7 million, largely due to pre-tax asset valuation charges for other-than-temporary declines in value of Alliant Energy's investments in Enermetrix ($8.5 million charge) and Capstone ($5.0 million charge). These charges were partially offset by pre-tax non-cash SFAS 133 valuation income of $7.1 million associated with electricity derivatives at Southern Hydro after the investment was consolidated and increased earnings on the nuclear decommissioning trust funds. Income Taxes - The effective income tax rates for the first quarter of 2002 - ------------ and 2001 were 33.0% and 33.9%, respectively. Cumulative Effect of a Change in Accounting Principle - In the first quarter - ----------------------------------------------------- of 2001, Alliant Energy recorded a charge of $12.9 million relating to the adoption of SFAS 133 on January 1, 2001 at Southern Hydro. IP&L RESULTS OF OPERATIONS Overview - First Quarter Results - Earnings available for common stock - -------------------------------- decreased $2.8 million, primarily due to lower gas margins, higher energy delivery and generation expenses and lower electric sales. These items were partially offset by lower purchased-power costs. Electric Utility Operations - Electric margins and MWh sales for IP&L for the - --------------------------- three months ended March 31 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ------------------------------------- 2002 2001 Change 2002 2001 Change --------------------------------------- ------------------------------------- Residential $75,965 $83,109 (9%) 1,023 1,064 (4%) Commercial 46,081 50,527 (9%) 788 789 -- Industrial 62,867 68,399 (8%) 1,834 1,886 (3%) ---------------------------- ------------------------- Total from ultimate customers 184,913 202,035 (8%) 3,645 3,739 (3%) Sales for resale 7,998 13,080 (39%) 309 412 (25%) Other 6,092 6,437 (5%) 27 26 4% ---------------------------- ------------------------- Total revenues/sales 199,003 221,552 (10%) 3,981 4,177 (5%) ========================= Electric production fuels expense 28,492 33,202 (14%) Purchased-power expense 28,159 46,363 (39%) ---------------------------- Margin $142,352 $141,987 -- ============================
Electric margin increased $0.4 million, primarily due to decreased purchased-power capacity costs and increased sales from continued retail customer growth. These items were largely offset by lower sales due to extremely mild weather conditions in the first quarter of 2002 compared to 2001 and a continuing sluggish economy in the upper Midwest as well as reduced energy conservation revenues of $5.1 million. The recovery for energy conservation revenues in Iowa is in accordance with IUB orders (a portion of these recoveries is offset as they are also amortized to expense in other operation and maintenance expense). Refer to "Utility Industry Review - Rates and Regulatory Matters - IP&L" for discussion of an IP&L rate filing. 30 Gas Utility Operations - Gas margins and Dth sales for IP&L for the three - ---------------------- months ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2002 2001 Change 2002 2001 Change --------------------------------------- ------------------------------------ Residential $43,860 $99,464 (56%) 7,938 9,472 (16%) Commercial 21,503 52,059 (59%) 4,496 5,375 (16%) Industrial 3,467 8,957 (61%) 884 1,050 (16%) Transportation/other 2,912 3,706 (21%) 7,926 8,555 (7%) ---------------------------- ------------------------- Total revenues/sales 71,742 164,186 (56%) 21,244 24,452 (13%) ========================= Cost of gas sold 46,360 132,006 (65%) ---------------------------- Margin $25,382 $32,180 (21%) ============================
Gas revenues and cost of gas sold decreased significantly due to the large decrease in natural gas prices from the first quarter of 2001. Such decreases alone had no impact on IP&L's gas margin given its rate recovery mechanism for gas costs. Gas margin decreased $6.8 million, or 21%, primarily due to reduced energy conservation revenues of $3.6 million and the impact of lower sales resulting from extremely mild weather in the first quarter of 2002 compared to 2001 and continued sluggish economic conditions in the upper Midwest. Refer to "Utility Industry Review - Rates and Regulatory Matters - IP&L" for discussion of an upcoming IP&L rate filing. Other Operating Expenses - Other operation and maintenance expenses decreased - ------------------------ $3.8 million, primarily due to a decrease of $7.7 million in energy conservation expenses, partially offset by increased energy delivery and generation expenses. Depreciation and amortization expense decreased $0.7 million, primarily due to $3.4 million from the implementation of lower depreciation rates on January 1, 2002, resulting from an updated depreciation study, largely offset by property additions. Income Taxes - The effective income tax rates were 44.7% and 39.4% for the - ------------ first quarter of 2002 and 2001, respectively. The increase was primarily due to increases in property-related temporary differences for which deferred taxes are not provided pursuant to rate making principles. WP&L RESULTS OF OPERATIONS Overview - First Quarter Results - Earnings available for common stock - -------------------------------- decreased $3.5 million, primarily due to lower electric margins and increased other operation and maintenance expenses. Electric Utility Operations - Electric margins and MWh sales for WP&L for the - --------------------------- three months ended March 31 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ------------------------------------- 2002 2001 Change 2002 2001 Change --------------------------------------- ------------------------------------- Residential $61,282 $66,578 (8%) 851 907 (6%) Commercial 31,711 34,527 (8%) 507 542 (6%) Industrial 45,213 48,268 (6%) 1,012 1,096 (8%) ---------------------------- -------------------------- Total from ultimate customers 138,206 149,373 (7%) 2,370 2,545 (7%) Sales for resale 28,412 35,343 (20%) 894 845 6% Other 5,141 5,675 (9%) 17 16 6% ---------------------------- -------------------------- Total revenues/sales 171,759 190,391 (10%) 3,281 3,406 (4%) ========================== Electric production fuels expense 30,269 35,072 (14%) Purchased-power expense 44,177 52,370 (16%) ---------------------------- Margin $97,313 $102,949 (5%) ============================
31 Electric margin decreased $5.6 million, or 5%, primarily due to lower sales resulting from continued sluggish economic conditions in the upper Midwest and extremely mild weather conditions in the first quarter of 2002, partially offset by lower fuel and purchased-power costs impacting margin and increased sales from continued retail customer growth. Refer to "Utility Industry Review - Rates and Regulatory Matters - WP&L" for information on WP&L's rate filings. Gas Utility Operations - Gas margins and Dth sales for WP&L for the three - ---------------------- months ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------- 2002 2001 Change 2002 2001 Change --------------------------------------- ------------------------------------- Residential $32,726 $67,093 (51%) 5,481 6,108 (10%) Commercial 16,493 36,996 (55%) 3,334 3,684 (10%) Industrial 2,574 5,666 (55%) 585 580 1% Transportation/other 4,706 15,877 (70%) 4,888 5,404 (10%) ----------------------------- ------------------------ Total revenues/sales 56,499 125,632 (55%) 14,288 15,776 (9%) ======================== Cost of gas sold 37,396 106,252 (65%) ----------------------------- Margin $19,103 $19,380 (1%) =============================
Gas revenues and cost of gas sold decreased significantly due to the large decrease in natural gas prices from the first quarter of 2001. Due to WP&L's rate recovery mechanism for gas costs, these decreases alone had little impact on gas margin. Gas margin decreased $0.3 million, or 1%, primarily from lower sales due to the extremely mild weather conditions in the first quarter of 2002 and continued sluggish economic conditions in the upper Midwest. These items were partially offset by increased sales from continued retail customer growth and improved performance related to WP&L's performance-based commodity cost recovery program. Refer to "Utility Industry Review - Rates and Regulatory Matters - WP&L" for information on WP&L's rate filings. Other Operating Expenses - Other operation and maintenance expenses increased - ------------------------ $5.5 million, primarily due to increased generation and employee benefits expenses. Depreciation and amortization expense increased $0.9 million, primarily due to increased earnings on the nuclear decommissioning trust fund, partially offset by lower decommissioning expense based on reduced funding levels. The accounting for earnings on the nuclear decommissioning trust fund results in no net income impact. Miscellaneous, net income is increased for earnings on the trust fund, which is offset in depreciation expense. Interest Expense and Other - Miscellaneous, net income increased $6.6 - -------------------------- million, primarily due to increased earnings on the nuclear decommissioning trust fund. Income Taxes - The effective income tax rates were 37.4% and 38.4% for the - ------------ first quarter of 2002 and 2001, respectively. LIQUIDITY AND CAPITAL RESOURCES Cash Flows for the Three-Month Periods - Alliant Energy's cash flows from - -------------------------------------- financing activities increased $32 million primarily due to changes in the amount of debt issued and retired. IP&L's cash flows used for financing activities increased $37 million primarily due to changes in the amount of debt issued and retired. WP&L's cash flows from operating activities increased $29 million primarily due to changes in working capital; and cash flows used for financing activities increased $39 million primarily due to changes in the amount of debt issued and retired. 32 Short-Term Debt - In March 2002, Alliant Energy filed an application with the - ---------------- SEC requesting, among other things, authority through December 31, 2004, for Alliant Energy to issue and sell up to an aggregate amount of $1 billion of short-term debt outstanding at any one time, Alliant Energy to guarantee borrowings by Resources in an aggregate amount that would not exceed $700 million at any one time, IP&L to issue short-term debt in a principal amount which would not at any time exceed $300 million and to modify the utility money pool agreement in certain respects. It is currently anticipated that WP&L will withdraw from the utility money pool during the second quarter of 2002 and meet its short-term borrowing needs by issuing its own commercial paper at rates similar to the money pool rates. Environmental - A summary of Alliant Energy's environmental matters is - ------------- included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Alliant Energy's, IP&L's and WP&L's environmental matters have not changed materially from those reported in the 2001 Form 10-K. Construction and Acquisition Expenditures - Under the Power Iowa program, - ----------------------------------------- IP&L recently announced plans to build a 500 MW natural gas-fired facility in Iowa which is expected to be operational in 2004. IP&L currently estimates it will cost nearly $400 million to construct the plant. OTHER MATTERS Market Risk Sensitive Instruments and Positions - Alliant Energy's primary - ----------------------------------------------- market risk exposures are associated with interest rates, commodity prices, equity prices and currency exchange rates. Alliant Energy has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. A summary of Alliant Energy's market risks is included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Alliant Energy's market risks have not changed materially from those reported in the 2001 Form 10-K. Critical Accounting Policies - A summary of Alliant Energy's critical - ---------------------------- accounting policies is included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Alliant Energy's critical accounting policies have not changed materially from those reported in the 2001 Form 10-K. Other Future Considerations - In addition to items discussed earlier in MD&A, - --------------------------- the following items could impact Alliant Energy's future financial condition or results of operations: On April 17, 2002, McLeod announced its pre-negotiated plan of reorganization had become effective and it had emerged from Chapter 11 bankruptcy protection. As a result, on April 18, 2002, McLeod's new common stock resumed trading on Nasdaq. The plan of reorganization included the cancellation of all the old common stock of McLeod and the issuance of new common stock to various claimants identified in the plan. In May 2002, Alliant Energy expects to receive its initial distribution under the plan of approximately 3.3 million shares of new common stock of McLeod (for SFAS 115 purposes, Alliant Energy will classify 2.4 million shares as available-for-sale and 0.9 million shares as trading). The ultimate number of new common shares to be issued to Alliant Energy under the plan is dependent on the resolution of disputed claims against McLeod. McLeod has reserved 18 million shares of new common stock pending such resolution. The reserved shares remaining, if any, after resolution of the disputed claims, will be distributed pro-rata to the holders of the old common stock as of the distribution record date. Depending on the resolution of the disputed claims, Alliant Energy could receive anywhere from zero to 1.6 million shares of additional new McLeod common stock. With the initial receipt of the new common shares under the plan and the resumption of trading on Nasdaq in the second quarter of 2002, Alliant Energy will resume accounting for its McLeod investment under SFAS 115. Alliant Energy currently expects to incur an additional impairment charge in the second quarter of 2002 upon the resumption of accounting under SFAS 115. Refer to Note 8 of Alliant Energy's Notes to Consolidated Financial Statements for additional information. 33 FUTURE EARNINGS OUTLOOK Alliant Energy has revised its guidance for estimated adjusted earnings in 2002 to a range of $2.10 to $2.30 per diluted share from its previous guidance of $2.45 to $2.65. The guidance does include the asset valuation charges of $0.10 per share recorded in the first quarter of 2002 related to Alliant Energy's Enermetrix and Capstone investments. Adjusted earnings are reported (accounting principles generally accepted in the U.S.) earnings excluding the impact of certain non-cash SFAS 133 valuation adjustments, the asset valuation charge recorded in the first quarter of $0.14 per share related to Alliant Energy's McLeod investment (and any additional potential charges Alliant Energy may incur in 2002 related to its McLeod investment), gains or losses realized from potential sales of non-strategic assets or the potential Brazil charge as discussed later. The reduction in the earnings guidance was largely the result of the following factors: o Weather: Alliant Energy's domestic utility business was negatively impacted by extremely mild weather conditions in the Midwest in the first quarter of 2002. o Economy: Alliant Energy's utility and Integrated Services businesses continued to be impacted by weaker than expected economic conditions in the first quarter of 2002. Alliant Energy believes signs of an economic recovery are evident, which may translate into improved financial results by these businesses in the latter half of 2002. o Rate cases: Uncertainty regarding the timing and potential amount of recovery from Alliant Energy's pending utility rate filings in several jurisdictions. Alliant Energy's remaining price freezes expired in April 2002. Alliant Energy has been earning less than its authorized rate of returns in these jurisdictions and is addressing the recovery of its cost increases through rate filings in Wisconsin, Iowa and with FERC. Alliant Energy is proactively managing the regulatory process in each jurisdiction and expects to have rate relief in place in each jurisdiction later this year. o Lower oil and gas prices: The updated earnings guidance reflects the impact of lower oil and gas prices than the pricing assumptions utilized in the previous earnings guidance. Oil and gas prices have rebounded somewhat compared to prices in early 2002 so earnings upside exists should such recovery continue and prices eventually stabilize at higher levels. o Lower results from our Brazil investments: In addition to the anticipated benefits Alliant Energy expects to realize from its electricity sales in Brazil returning to more normal levels, Alliant Energy and its Brazilian partners have taken various actions to improve the results of its Brazilian investments. Such initiatives include executing an extensive operational improvement plan designed to achieve significant reductions in commercial energy losses and enhanced collection of customer receivables. Also, the Brazilian government is conducting a comprehensive review of the electric industry, including the wholesale spot market, and associated regulatory policies. Alliant Energy is an active participant in this process. The restructuring, which is expected to be completed later this year, should produce a more stable and predictable regulatory environment. Material benefits from the operational improvement and industry restructuring initiatives likely will not begin to impact results until the latter half of 2002, however. 34 Drivers for Alliant Energy's earnings estimates include, but are not limited to: o Weather conditions in its domestic and international utility service territories o Economic development and sales growth in its utility service territories o Cost control and operational efficiencies in its utility operations o Ability of its utility subsidiaries to recover their operating costs, and to earn a reasonable rate of return, in current and future rate proceedings o Ability to recover its purchased-power and fuel costs, both domestically and internationally o Improved results of its Brazil investments through factors discussed earlier as well as the continued growth in earnings from its China investments o Improved earnings from Whiting from current levels, including the recovery and stability of oil and gas prices and continued successful execution of its acquisition strategy o Continued improved profitability of its other non-regulated businesses as a whole, including the Integrated Services and Generation and Trading business units o No additional material permanent declines in the fair market value of, or expected cash flows from, Alliant Energy's investments o Other stable business conditions, including an improving economy Alliant Energy is committed to maintaining its dividend at the current rate and its investment-grade credit ratings and reasonable capitalization ratios. Alliant Energy continues its ongoing process of evaluating the sale of certain non-strategic assets and it is possible that gains realized later in 2002 from such sales could offset some or all of Alliant Energy's 2002 asset valuation charges included in its adjusted earnings. Also, potential sales of non-strategic assets would enable Alliant Energy to continue sharpening its strategic focus on its core businesses. In connection with a regulatory ruling in Brazil, Alliant Energy's Brazil investments recorded an asset in the fourth quarter of 2001 related to revenues to be collected in future periods. Alliant Energy's share of the asset was approximately $35 million. In April 2002, the Brazil legislature approved a law that could unfavorably modify the terms of the original regulatory ruling. The law remains subject to Brazil presidential approval as well as clarification and implementation by the Brazil regulator. While the ultimate outcome could require Alliant Energy to record an accounting charge to write-off some or all of the asset later in 2002, Alliant Energy still expects its Brazil investments to collect a significant portion, if not all, of the revenues in future rates. Alliant Energy continues to exercise a prudent capital expenditure program while executing its growth strategy, and will limit additional investments in businesses not performing up to its expectations as the focus will be on improved operations and profitability of these businesses. Alliant Energy's strategic plan includes investing in generation and other energy-related projects; better connecting with customers through enhanced service reliability, value-added products and services, and e-business initiatives; and growing the non-regulated side of its business through partnerships and acquisitions in generation projects, oil and gas investments, international markets and other strategic initiatives. Alliant Energy realized 15% and 10% of its adjusted earnings from its non-regulated businesses in 2001 and 2000, respectively, and its goal is to have such businesses contribute more than 25% of its adjusted earnings within the next three years. Alliant Energy believes that successful implementation of these strategies will contribute significantly to Alliant Energy achieving its targeted long-term annual growth rate of 7% to 10% in adjusted earnings. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and Qualitative Disclosures About Market Risk are reported under Item 2 MD&A "Other Matters - Market Risk Sensitive Instruments and Positions." 35 PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS In October 2000, Alliant Energy and WP&L filed a federal lawsuit seeking declaratory relief regarding whether certain provisions of WUHCA are unconstitutional as a violation of the interstate commerce and equal protection provisions of the U.S. constitution. Alliant Energy and WP&L are challenging the provisions of WUHCA which restrict ownership in utility holding companies, limit the investments those companies can make and place significant restrictions on companies that invest in Wisconsin utility holding companies. Alliant Energy and WP&L also requested that the court consider the constitutionality of issues related to the asset cap on non-utility investments imposed by WUHCA. Alliant Energy and WP&L were seeking only declaratory relief and not damages in the litigation. In February 2001, the lawsuit was dismissed based on lack of allegations of "injury in fact." Alliant Energy and WP&L filed a motion for reconsideration with the court, which was denied in April 2001. Alliant Energy and WP&L appealed the lower court's rulings to the 7th Circuit Court of Appeals. In January 2002, the 7th Circuit reversed the district court's decision and remanded the case back to the district court for hearing. The trial is scheduled to be held in May 2002. Alliant Energy and WP&L cannot currently predict the outcome of this litigation. In the second quarter of 1999, WP&L received a demand for arbitration from MG&E pursuant to the terms of joint plant operating agreements between the parties regarding issues of ownership and operation of the Columbia Energy Center. In March 2001, an arbitration panel issued its decision upholding WP&L's position that the plant was well-operated and maintained and in compliance with the terms of the joint plant operating agreements. MG&E moved the state court to certify the arbitration decision, which the court did in December 2001. In February 2002, MG&E filed a motion in the court challenging the sufficiency of resolutions passed by Alliant Energy in conjunction with the arbitration decision. In March 2002, the motion was heard by the court and the judge agreed with MG&E's position, resulting in Alliant Energy having to modify the language of its original resolution. WP&L will review its options once the court issues an order. Alliant Energy and WP&L cannot currently predict the outcome of the court's order. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: --------- None. (b) Reports on Form 8-K: -------------------- Alliant Energy Alliant Energy filed a Current Report on Form 8-K, dated January 1, 2002, as amended by Alliant Energy's Current Report on Form 8-K/A, reporting (under Items 2 and 7) that the merger of IPC with and into IESU was consummated on January 1, 2002. Alliant Energy filed a Current Report on Form 8-K, dated January 29, 2002, reporting (under Item 5) that it issued a press release announcing its earnings for the fourth quarter and year ended December 31, 2001. IP&L IP&L filed a Current Report on Form 8-K, dated January 1, 2002, as amended by IP&L's Current Report on Form 8-K/A, reporting (under Items 2 and 7) that the merger of IPC with and into IESU was consummated on January 1, 2002. WP&L - None. 36 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company have each duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized on the 15th day of May 2002.
ALLIANT ENERGY CORPORATION - -------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- John E. Kratchmer (Principal Accounting Officer and Authorized Signatory) INTERSTATE POWER AND LIGHT COMPANY - ---------------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- John E. Kratchmer (Principal Accounting Officer and Authorized Signatory) WISCONSIN POWER AND LIGHT COMPANY - --------------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
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