10-Q 1 form10q0603.txt 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 June 30, 2003 ------------- 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
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 Form 10-Q 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. 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 [ ] Indicate by check mark whether the registrants are accelerated filers (as defined in Rule 12b-2 of the Exchange Act). Alliant Energy Corporation Yes [ X ] No [ ] Interstate Power and Light Company Yes [ ] No [ X ] Wisconsin Power and Light Company Yes [ ] No [ X ] Number of shares outstanding of each class of common stock as of July 31, 2003:
Alliant Energy Corporation Common stock, $0.01 par value, 110,393,323 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 3 Item 1. Consolidated Financial Statements 3 Alliant Energy Corporation: --------------------------- Consolidated Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002 3 Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 4 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 6 Notes to Consolidated Financial Statements 7 Interstate Power and Light Company: ----------------------------------- Consolidated Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002 18 Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 19 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 21 Notes to Consolidated Financial Statements 22 Wisconsin Power and Light Company: ---------------------------------- Consolidated Statements of Income for the Three and Six Months Ended June 30, 2003 and 2002 23 Consolidated Balance Sheets as of June 30, 2003 and December 31, 2002 24 Consolidated Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 26 Notes to Consolidated Financial Statements 27 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 29 Item 3. Quantitative and Qualitative Disclosures About Market Risk 45 Item 4. Controls and Procedures 45 Part II. Other Information 45 Item 1. Legal Proceedings 45 Item 4. Submission of Matters to a Vote of Security Holders 46 Item 6. Exhibits and Reports on Form 8-K 47 Signatures 48
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DEFINITIONS Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q are defined below: Abbreviation or Acronym Definition ----------------------- ---------- AFUDC....................................... Allowance for Funds Used During Construction Alliant Energy.............................. Alliant Energy Corporation ARO......................................... Asset Retirement Obligation ATC......................................... American Transmission Company LLC Capstone.................................... Capstone Turbine Corporation Corporate Services.......................... Alliant Energy Corporate Services, Inc. DAEC........................................ Duane Arnold Energy Center Dth......................................... Dekatherm EBITDA...................................... Earnings Before Interest, Taxes, Depreciation and Amortization EITF........................................ Emerging Issues Task Force EITF Issue 02-3............................. Issues Related to Accounting for Contracts Involved in Energy Trading and Risk Management Activities EITF Issue 98-10............................ Accounting for Contracts Involved in Energy Trading and Risk Management Activities Enermetrix.................................. Enermetrix, Inc. EPS......................................... Earnings Per Average Common Share FASB........................................ Financial Accounting Standards Board FIN......................................... FASB Interpretation No. FIN 46...................................... Consolidation of Variable Interest Entities GAAP........................................ Accounting Principles Generally Accepted in the U.S. IP&L........................................ Interstate Power and Light Company IPO......................................... Initial Public Offering IRS......................................... Internal Revenue Service ISO......................................... Independent System Operator IUB......................................... Iowa Utilities Board Kewaunee.................................... Kewaunee Nuclear Power Plant KV.......................................... Kilovolt McLeod...................................... McLeodUSA Incorporated MD&A........................................ Management's Discussion and Analysis of Financial Condition and Results of Operations Meridian.................................... Meridian Energy Limited MW.......................................... Megawatt MWh......................................... Megawatt-hour NG Energy................................... NG Energy Trading, LLC PSCW........................................ Public Service Commission of Wisconsin PUHCA....................................... Public Utility Holding Company Act of 1935 Resources................................... Alliant Energy Resources, Inc. 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 SFAS 143.................................... Accounting for Asset Retirement Obligations SmartEnergy................................. SmartEnergy, Inc. South Beloit................................ South Beloit Water, Gas and Electric Company Southern Hydro.............................. Southern Hydro Partnership Synfuel..................................... Alliant Energy Synfuel LLC TBD......................................... To Be Determined TRANSLink................................... TRANSLink Transmission Company LLC U.S. ....................................... United States of America 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 For the Six Months Ended June 30, Ended June 30, 2003 2002 2003 2002 ---------------------------------------------------------------------------------------------------------------------------------- (in thousands, except per share amounts) Operating revenues: Electric utility $444,108 $412,650 $887,133 $783,412 Gas utility 76,392 65,366 334,273 193,607 Non-regulated and other 125,792 66,444 320,676 138,877 ------------- ------------- ------------- ------------- 646,292 544,460 1,542,082 1,115,896 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 87,228 75,148 159,643 137,758 Purchased power 88,053 91,496 218,432 163,833 Cost of utility gas sold 49,744 38,719 238,069 122,475 Other operation and maintenance 265,555 182,936 582,510 368,468 Depreciation and amortization 77,985 70,566 157,584 146,115 Taxes other than income taxes 20,785 25,194 46,861 52,982 ------------- ------------- ------------- ------------- 589,350 484,059 1,403,099 991,631 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Operating income 56,942 60,401 138,983 124,265 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 56,198 46,036 111,712 90,523 Interest income from loans to discontinued operations, net (27) (4,234) (3,281) (7,600) Equity (income) loss from unconsolidated investments (9,237) 6,809 (4,983) 3,596 Allowance for funds used during construction (4,572) (1,696) (8,433) (3,350) Preferred dividend requirements of subsidiaries 3,968 1,682 8,126 3,364 Impairment of available-for-sale securities of McLeodUSA Inc. - 6,044 - 27,218 Miscellaneous, net (7,334) 7,402 (4,919) 17,006 ------------- ------------- ------------- ------------- 38,996 62,043 98,222 130,757 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 17,946 (1,642) 40,761 (6,492) ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Income taxes 6,217 3,866 14,393 6,807 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Income (loss) from continuing operations 11,729 (5,508) 26,368 (13,299) ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Income from discontinued operations, net of tax (Note 8) 20,425 11,823 11,291 29,357 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Income before cumulative effect of changes in accounting principles, net of tax 32,154 6,315 37,659 16,058 ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Cumulative effect of changes in accounting principles, net of tax - - (5,983) - ------------- ------------- ------------- ------------- ---------------------------------------------------------------------------------------------------------------------------------- Net income $32,154 $6,315 $31,676 $16,058 ============= ============= ============= ============= ---------------------------------------------------------------------------------------------------------------------------------- Average number of common shares outstanding (diluted) 93,022 90,553 92,780 90,304 ============= ============= ============= ============= ---------------------------------------------------------------------------------------------------------------------------------- Earnings per average common share (basic and diluted): Income (loss) from continuing operations $0.13 ($0.06) $0.28 ($0.15) Income from discontinued operations 0.22 0.13 0.12 0.33 Cumulative effect of changes in accounting principles - - (0.06) - ------------- ------------- ------------- ------------- Net income $0.35 $0.07 $0.34 $0.18 ============= ============= ============= ============= ---------------------------------------------------------------------------------------------------------------------------------- Dividends declared per common share $0.25 $0.50 $0.50 $1.00 ============= ============= ============= ============= ---------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, ASSETS 2003 2002 ---------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility: Electric plant in service $5,513,787 $5,295,381 Gas plant in service 628,651 613,122 Other plant in service 549,774 530,456 Accumulated depreciation (3,439,286) (3,573,407) ----------------- ---------------- Net plant 3,252,926 2,865,552 Construction work in progress: Power Iowa generating facility 186,277 10,651 Other 238,141 252,445 Other, net 64,720 68,340 ----------------- ---------------- Total utility 3,742,064 3,196,988 ----------------- ---------------- Non-regulated and other, net: Non-regulated generation 209,326 156,699 International 197,285 171,179 Integrated Services 69,762 73,983 Investments 53,522 54,303 Corporate Services and other 69,978 75,282 ----------------- ---------------- Total non-regulated and other 599,873 531,446 ----------------- ---------------- 4,341,937 3,728,434 ----------------- ---------------- ---------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 67,236 62,859 Restricted cash 9,191 9,610 Accounts receivable: Customer, less allowance for doubtful accounts of $5,051 and $4,364 57,728 69,413 Unbilled utility revenues 16,316 50,624 Other, less allowance for doubtful accounts of $750 and $845 68,025 60,107 Income tax refunds receivable 143,802 97,469 Production fuel, at average cost 57,541 63,126 Materials and supplies, at average cost 66,861 58,603 Gas stored underground, at average cost 46,656 62,797 Regulatory assets 59,731 46,076 Assets of discontinued operations (Note 8) 633,840 969,291 Other 68,099 74,314 ----------------- ---------------- 1,295,026 1,624,289 ----------------- ---------------- ---------------------------------------------------------------------------------------------------------------- Investments: Investments in unconsolidated foreign entities 446,338 373,816 Nuclear decommissioning trust funds 367,004 344,892 Investment in ATC and other 230,204 217,992 ----------------- ---------------- 1,043,546 936,700 ----------------- ---------------- ---------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 337,573 302,365 Deferred charges and other 365,453 409,607 ----------------- ---------------- 703,026 711,972 ----------------- ---------------- ---------------------------------------------------------------------------------------------------------------- Total assets $7,383,535 $7,001,395 ================= ================ ---------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) June 30, December 31, CAPITALIZATION AND LIABILITIES 2003 2002 --------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $0.01 par value - authorized 200,000,000 shares; outstanding 93,076,105 and 92,304,220 shares $931 $923 Additional paid-in capital 1,308,190 1,293,919 Retained earnings 743,698 758,187 Accumulated other comprehensive loss (133,931) (209,943) Shares in deferred compensation trust - 256,228 and 239,467 shares at an average cost of $28.03 and $28.80 per share (7,181) (6,896) -------------------- -------------------- Total common equity 1,911,707 1,836,190 -------------------- -------------------- Cumulative preferred stock of subsidiaries, net 205,063 205,063 Long-term debt (excluding current portion) 2,388,437 2,609,803 -------------------- -------------------- 4,505,207 4,651,056 -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 70,839 46,591 Variable rate demand bonds 55,100 55,100 Commercial paper 316,400 195,500 Other short-term borrowings 24,004 113,721 Accounts payable 247,393 282,855 Accrued taxes 126,187 105,521 Liabilities of discontinued operations (Note 8) 204,671 138,251 Other 200,522 184,771 -------------------- -------------------- 1,245,116 1,122,310 -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 663,238 630,625 Accumulated deferred investment tax credits 51,811 54,375 Asset retirement obligations (Note 11) 368,040 - Pension and other benefit obligations 197,776 181,010 Environmental liabilities 41,953 48,730 Other 264,595 269,864 -------------------- -------------------- 1,587,413 1,184,604 -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------- Minority interest 45,799 43,425 -------------------- -------------------- --------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $7,383,535 $7,001,395 ==================== ==================== --------------------------------------------------------------------------------------------------------------------- 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 Six Months Ended June 30, 2003 2002 ---------------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $31,676 $16,058 Adjustments to reconcile net income to net cash flows from operating activities: Income from discontinued operations, net of tax (11,291) (29,357) Depreciation and amortization 157,584 146,115 Other amortizations 33,288 21,938 Deferred tax expense (benefit) and investment tax (credits) 30,869 (20,634) Equity loss (income) from unconsolidated investments, net (4,983) 3,596 Distributions from equity method investments 6,942 11,812 Non-cash valuation (income) charges (577) 52,641 Refueling outage provision (11,391) 3,972 Cumulative effect of changes in accounting principles, net of tax 5,983 - Other (14,198) (14,213) Other changes in assets and liabilities: Accounts receivable 38,075 34,397 Income tax refunds receivable (46,333) (27,515) Gas stored underground 16,141 15,891 Accounts payable (42,348) (5,747) Accrued taxes 20,666 14,167 Other 10,617 39,209 ------------------ ----------------- Net cash flows from operating activities 220,720 262,330 ------------------ ----------------- ---------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Common stock dividends (46,165) (89,891) Proceeds from issuance of common stock 13,005 28,711 Net change in Resources' credit facility - 192,761 Proceeds from issuance of other long-term debt 60,000 - Reductions in other long-term debt (3,740) (14,090) Net change in commercial paper and other short-term borrowings 31,183 31,484 Net change in loans to discontinued operations (25,181) (112,601) Other (19,746) (8,773) ------------------ ----------------- Net cash flows from financing activities 9,356 27,601 ------------------ ----------------- ---------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Construction and acquisition expenditures: Regulated domestic utilities (263,000) (173,774) Non-regulated businesses (212,305) (113,406) Corporate Services and other (2,742) (16,903) Nuclear decommissioning trust funds (6,911) (17,658) Proceeds from asset dispositions 244,220 1,722 Other 15,039 12,995 ------------------ ----------------- Net cash flows used for investing activities (225,699) (307,024) ------------------ ----------------- ---------------------------------------------------------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments 4,377 (17,093) ------------------ ----------------- ---------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 62,859 67,886 ------------------ ----------------- ---------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $67,236 $50,793 ================== ================= ---------------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $96,842 $89,128 ================== ================= Income taxes, net of refunds $28,224 $5,879 ================== ================= Noncash investing and financing activities: Debt extinguished directly by sale of Australian business $127,595 $- ================== ================= Capital lease obligations incurred $2,377 $473 ================== ================= ---------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6 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 GAAP 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 Current Report on Form 8-K, dated June 4, 2003, and 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 and six months ended June 30, 2003 and 2002, (b) the consolidated financial position at June 30, 2003 and Dec. 31, 2002, and (c) the consolidated statement of cash flows for the six months ended June 30, 2003 and 2002, have been made. Because of the seasonal nature of Alliant Energy's utility operations, results for the three and six months ended June 30, 2003 are not necessarily indicative of results that may be expected for the year ending Dec. 31, 2003. Certain prior period amounts have been reclassified on a basis consistent with the current period presentation. 2. Alliant Energy's comprehensive income (loss), and the components of other comprehensive income (loss), net of taxes, for the three and six months ended June 30 were as follows (in thousands):
Three Months Six Months ------------------------------ -------------------------------- 2003 2002 2003 2002 ------------- -------------- -------------- --------------- Net income $32,154 $6,315 $31,676 $16,058 Unrealized holding gains (losses) on securities, net of tax 4,362 (4,810) 3,405 (10,160) Less: reclassification adjustment for gains (losses) included in net income, net of tax (1) 1,003 (3,538) 1,003 (19,723) ------------- -------------- -------------- --------------- Net unrealized gains (losses) on securities 3,359 (1,272) 2,402 9,563 ------------- -------------- -------------- --------------- Foreign currency translation adjustments, net of tax 41,274 (50,257) 69,506 (43,385) ------------- -------------- -------------- --------------- Unrealized holding gains (losses) on qualifying derivatives, net of tax 394 (631) (4,880) (66) Less: reclassification adjustment for gains (losses) included in net income, net of tax (2,972) (651) (8,984) 3,406 ------------- -------------- -------------- --------------- Net unrealized gains (losses) on qualifying derivatives 3,366 20 4,104 (3,472) ------------- -------------- -------------- --------------- Other comprehensive income (loss) 47,999 (51,509) 76,012 (37,294) ------------- -------------- -------------- --------------- Comprehensive income (loss) $80,153 ($45,194) $107,688 ($21,236) ============= ============== ============== ===============
(1) The three- and six-month 2002 earnings include after-tax losses of $3.5/$16.5 million and $0/$3.2 million related to asset valuation charges for Alliant Energy's McLeod (available-for-sale securities) and Capstone investments, respectively. 7 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 International Other Total Other Consolidated ------------------------------------------------------------------------------------------------- (in thousands) Three Months Ended June 30, 2003 -------------------------------- Operating revenues $444,108 $76,392 $9,664 $530,164 $26,671 $90,931 $117,602 ($1,474) $646,292 Operating income (loss) 63,242 (6,865) 1,945 58,322 3,788 (4,775) (987) (393) 56,942 Income (loss) from continuing operations 22,639 2,048 (4,252) (2,204) (8,706) 11,729 Income (loss) from discontinued operations, net of tax -- 40,292 (19,867) 20,425 -- 20,425 Net income (loss) 22,639 42,340 (24,119) 18,221 (8,706) 32,154 Three Months Ended June 30, 2002 -------------------------------- Operating revenues $412,650 $65,366 $8,728 $486,744 $23,693 $35,903 $59,596 ($1,880) $544,460 Operating income (loss) 61,941 (783) 1,597 62,755 561 (2,896) (2,335) (19) 60,401 Income (loss) from continuing operations 26,930 (15,186) (10,383) (25,569) (6,869) (5,508) Income from discontinued operations, net of tax -- 6,866 4,957 11,823 -- 11,823 Net income (loss) 26,930 (8,320) (5,426) (13,746) (6,869) 6,315 Six Months Ended June 30, 2003 ------------------------------ Operating revenues $887,133 $334,273 $20,523 $1,241,929 $55,142 $248,013 $303,155 ($3,002) $1,542,082 Operating income (loss) 99,996 28,189 3,395 131,580 9,571 (2,116) 7,455 (52) 138,983 Income (loss) from continuing operations 53,610 (6,338) (6,537) (12,875) (14,367) 26,368 Income (loss) from discontinued operations, net of tax -- 44,658 (33,367) 11,291 -- 11,291 Cumulative effect of changes in accounting principles, net of tax -- -- (5,983) (5,983) -- (5,983) Net income (loss) 53,610 38,320 (45,887) (7,567) (14,367) 31,676 Six Months Ended June 30, 2002 ------------------------------ Operating revenues $783,412 $193,607 $18,068 $995,087 $49,424 $74,634 $124,058 ($3,249) $1,115,896 Operating income (loss) 108,348 12,645 4,056 125,049 3,011 (3,592) (581) (203) 124,265 Income (loss) from continuing operations 53,907 (23,380) (34,824) (58,204) (9,002) (13,299) Income from discontinued operations, net of tax -- 23,551 5,806 29,357 -- 29,357 Net income (loss) 53,907 171 (29,018) (28,847) (9,002) 16,058
4. The provisions for income taxes for earnings from continuing operations 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 utilizes derivative instruments to manage its exposures to various market risks as described in Alliant Energy's Current Report on Form 8-K, dated June 4, 2003, and IP&L's and WP&L's Annual Report on Form 10-K for the year ended Dec. 31, 2002. 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 8-K, dated June 4, 2003. For the six months ended June 30, 2003, no income or loss was recognized in connection with hedge ineffectiveness in accordance with SFAS 133. At June 30, 2003, the maximum length of time over which Alliant Energy hedged its exposure to the variability in future cash flows for forecasted transactions was 14 months (six months for discontinued operations) and Alliant Energy estimates that income of $0.1 million (including losses of $0.8 million for discontinued operations) will be reclassified from 8 accumulated other comprehensive loss into earnings within the twelve months between July 1, 2003 and June 30, 2004 as the hedged transactions affect earnings. 6. A reconciliation of the weighted average common shares outstanding used in the basic and diluted EPS calculation for the three and six months ended June 30 was as follows:
Three Months Six Months ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------- ------------- ------------- ------------- Weighted average common shares outstanding: Basic EPS calculation 92,911,219 90,470,080 92,711,140 90,217,146 Effect of dilutive securities 110,661 82,978 68,987 86,395 Diluted EPS calculation 93,021,880 90,553,058 92,780,127 90,303,541
Options to purchase shares of common stock were excluded from the calculation of diluted EPS as the exercise prices were greater than the average market price for the three and six months ended June 30 as follows:
Three Months Six Months ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------- ------------- ------------- ------------- Options to purchase shares of common stock 3,552,262 3,830,442 4,175,799 2,830,765 Average exercise price $29.47 $29.50 $28.03 $29.94
The effect on net income and EPS for the three and six months ended June 30 if Alliant Energy had applied the fair value recognition provisions of SFAS 123, "Accounting for Stock-Based Compensation," to the stock options issued under its two stock-based incentive compensation plans was as follows (dollars in thousands):
Three Months Six Months ------------------------------ ------------------------------ 2003 2002 2003 2002 ------------- ------------- ------------- ------------- Net income, as reported $32,154 $6,315 $31,676 $16,058 Less: stock-based compensation expense, net of tax 259 644 1,150 1,287 ------------- ------------- ------------- ------------- Pro forma net income $31,895 $5,671 $30,526 $14,771 ============= ============= ============= ============= EPS (basic and diluted): As reported $0.35 $0.07 $0.34 $0.18 Pro forma $0.34 $0.06 $0.33 $0.16
7. On Jan. 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. Consequently, Alliant Energy discontinued accounting for its investment in McLeod under the provisions of SFAS 115 and reduced the cost basis of its investments to the last quoted market price on Jan. 30, 2002. In June 2002, Alliant Energy received from McLeod under its plan of reorganization an initial distribution of approximately 3.3 million shares of new common stock and classified 0.9 million and 2.4 million shares as trading and available-for-sale securities, respectively. With the receipt of the new McLeod common shares and the resumption of trading on Nasdaq, Alliant Energy resumed accounting for its McLeod investments under SFAS 115 and adjusted its cost basis to the quoted market price on the date the shares were received. As a result of these events, Alliant Energy recognized pre-tax impairment charges in the first six months of 2002 for available-for-sale securities totaling $27.2 million ($21.2 million recognized in the first quarter and $6.0 million recognized in the second quarter). 8. Alliant Energy announced in November 2002 its commitment to pursue the sale of, or other exit strategies for, certain non-regulated businesses in 2003. Alliant Energy has applied the provisions of SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to certain of its assets which were held for sale. SFAS 144 requires that a long-lived asset classified as held for sale be measured at the lower of its carrying amount or fair value, less costs to sell, and to cease depreciation, depletion and amortization. At Dec. 31, 2002, Alliant Energy's oil and gas (Whiting), Australian (including Southern Hydro), affordable housing and SmartEnergy businesses were classified as held for sale. In April 2003, Alliant Energy completed the sale of its Australian assets (including Southern Hydro) to New Zealand-based Meridian. The sale enabled Alliant Energy to reduce its 9 indebtedness by approximately $320 million in the second quarter of 2003. Alliant Energy also completed the sale of its affordable housing and SmartEnergy businesses in July 2003 and these sales enabled Alliant Energy to reduce its indebtedness by approximately $110 million. Alliant Energy currently intends to sell 51% or more of its interest in Whiting later in 2003 in a proposed IPO and currently plans to divest its remaining interest by June 30, 2004. The operating results for these businesses have been separately classified and reported as discontinued operations in Alliant Energy's Consolidated Financial Statements. A summary of the components of discontinued operations in Alliant Energy's Consolidated Statements of Income for the three and six months ended June 30 was as follows (in thousands):
Three Months Six Months ------------------------------ ---------------------------- 2003 2002 2003 2002 ------------- ------------- ------------ ------------ Operating revenues $52,703 $54,490 $119,612 $94,623 Operating expenses 30,591 45,060 71,387 86,624 Interest expense and other (pre-tax numbers): Gain on sale of Australian business (74,721) -- (72,115) -- Valuation adjustments and selling costs 41,363 -- 76,244 -- Southern Hydro SFAS 133 loss (income) 132 (8,336) (14,689) (36,805) Other 4,659 8,080 14,677 14,898 ------------- ------------- ------------ ------------ Income before income taxes 50,679 9,686 44,108 29,906 Income tax expense (benefit) 30,254 (2,137) 32,817 549 ------------- ------------- ------------ ------------ Income from discontinued operations, net of tax $20,425 $11,823 $11,291 $29,357 ============= ============= ============ ============
The valuation adjustments reflect updated estimates of the market value, less selling costs, of assets classified as held for sale. Alliant Energy's Australian business entered into electricity derivative contracts that were not designated as hedges (as defined by SFAS 133) to manage the electricity commodity price risk associated with anticipated sales into the spot market and the loss (income) in the previous table reflects the change in the fair value of these electricity derivative contracts. A summary of the components of assets and liabilities of discontinued operations on Alliant Energy's Consolidated Balance Sheets was as follows (in thousands):
June 30, 2003 Dec. 31, 2002 ---------------- ---------------- Assets of discontinued operations: Property, plant and equipment, net $527,246 $644,910 Current assets 83,746 113,866 Investments 4,860 6,824 Deferred charges and other 17,988 203,691 ---------------- ---------------- Total assets of discontinued operations $633,840 $969,291 ================ ================ Liabilities of discontinued operations: Long-term debt (excluding current portion) $101,145 $-- Current liabilities 43,069 73,343 Other long-term liabilities and deferred credits 60,146 64,784 Minority interest 311 124 ---------------- ---------------- Total liabilities of discontinued operations 204,671 138,251 ---------------- ---------------- Net assets of discontinued operations $429,169 $831,040 ================ ================
10 A summary of the components of cash flows for discontinued operations for the six months ended June 30 was as follows (in thousands):
2003 2002 ------------- ------------ Net cash flows from operating activities $50,947 $18,338 Net cash flows from (used for) financing activities (8,582) 137,598 Net cash flows used for investing activities (21,453) (150,559) ------------- ------------ Net increase in cash and temporary cash investments 20,912 5,377 Cash and temporary cash investments at beginning of period 16,043 5,775 ------------- ------------ Cash and temporary cash investments at end of period $36,955 $11,152 ============= ============ Supplemental cash flows information: Cash paid (received) during the period for: Interest $14,111 $7,886 ============= ============ Income taxes, net of refunds ($17,246) $19 ============= ============
9. Alliant Energy utilizes limited off-balance sheet entities for its synthetic lease financings and its utility accounts receivable sales program. Alliant Energy does not currently anticipate these entities will require consolidation under the guidelines of FIN 46 in the third quarter of 2003. 10. In accordance with the provisions of FIN 45, "Guarantor's Accounting and Disclosure Requirements for Guarantees, Including Indirect Guarantees of Indebtedness to Others," as of June 30, 2003 and Dec. 31, 2002, Alliant Energy had a guarantee outstanding to support a third-party financing arrangement of approximately $4 million that is not included on Alliant Energy's Consolidated Balance Sheets. The guarantee expires in December 2007, the maturity date of the underlying debt. Alliant Energy has also guaranteed the residual value of its synthetic leases totaling $76 million in the aggregate that is not included on Alliant Energy's Consolidated Balance Sheets. The guarantees extend through the maturity of each respective underlying lease, the latest of which is April 2015. Under the purchase and sale agreement (Agreement) with Meridian relating to the sale of Alliant Energy's Australian assets, Alliant Energy agreed to indemnify Meridian for losses resulting from the breach of the representations and warranties made by Alliant Energy as of the closing date, and for breach of its obligations under the Agreement. Based on exchange rates as of June 30, 2003, the indemnification is limited to approximately $398 million until September 2003, $199 million from October 2003 through July 2004, and $57 million thereafter until October 2007. The indemnification limit is subject to fluctuations in foreign currency exchange rates. Alliant Energy believes the likelihood of having to make any material cash payments under this indemnification is remote. 11. Alliant Energy adopted SFAS 143 on Jan. 1, 2003, which provides accounting and disclosure requirements for retirement obligations associated with long-lived assets (AROs). SFAS 143 requires that when an asset is placed in service the present value of retirement costs for which Alliant Energy has a legal obligation must be recorded as liabilities with an equivalent amount added to the asset cost. The liability is accreted to its present value each period and the capitalized cost is depreciated over the useful life of the related asset. Upon settlement of the liability, an entity settles the obligation for its recorded amount or incurs a gain or loss. The scope of SFAS 143 as it relates to Alliant Energy primarily includes decommissioning costs for DAEC and Kewaunee. It also applies to a smaller extent to several other regulated and non-regulated assets including, but not limited to, active ash landfills, water intake facilities, underground storage tanks, groundwater wells, transmission and distribution equipment, easements, leases and the dismantlement of certain hydro facilities. Other than DAEC and Kewaunee, Alliant Energy's current AROs are not significant. Alliant Energy revised the previously reported amounts recorded upon adoption in the first quarter of 2003 (the revision had an offsetting impact on regulatory assets with no impact on net income) and recorded the following balance sheet entries for accretion and depreciation in 2003 related to SFAS 143 (in millions): 11
Adoption on Accretion and Jan. 1, 2003 Depreciation Total -------------- --------------- ------------ Assets: Electric plant in service - IP&L $24 $-- $24 Electric plant in service - WP&L 24 -- 24 Utility accumulated depreciation - IP&L 106 -- 106 Utility accumulated depreciation - WP&L 148 -- 148 Other assets - regulatory assets - IP&L 50 7 57 Other assets - regulatory assets - WP&L 3 6 9 ------------ Total assets $368 ============ Liabilities: AROs - IP&L $180 $7 $187 AROs - WP&L 175 6 181 ------------ Total liabilities $368 ============
As it relates to regulated operations, Alliant Energy believes it is probable that any differences between expenses under SFAS 143 and expenses recovered currently in rates will be recoverable in future rates, and is deferring such expenses as a regulatory asset. Upon adoption of SFAS 143, Alliant Energy also recognized a $3.9 million impact as a cumulative effect of a change in accounting principle at its oil and gas business (the business was reported as an asset held for sale and a discontinued operation at June 30, 2003). IP&L and WP&L have previously recognized removal costs as a component of depreciation expense and accumulated depreciation for other non-nuclear assets that do not have associated legal retirement obligations with regulatory rate recovery. As of Jan. 1, 2003, IP&L and WP&L estimate that they had approximately $275 million and $140 million, respectively, of such regulatory liabilities recorded in "Accumulated depreciation" on their Consolidated Balance Sheets. If SFAS 143 had been adopted as of Jan. 1, 2000, IP&L and WP&L would have recorded ARO SFAS 143 liabilities of approximately $180 million and $175 million at Dec. 31, 2002, $168 million and $161 million at Dec. 31, 2001 and $157 million and $147 million at Dec. 31, 2000, respectively. 12. Alliant Energy's natural gas marketing business, NG Energy, is impacted by EITF Issue 02-3, which requires that all sales of energy and the related cost of energy purchased under contracts that meet the definition of energy trading contracts and that are derivatives under SFAS 133, must be reflected on a net basis in the income statement for all periods presented. Under the guidance of EITF Issue 98-10, Alliant Energy had reported its energy trading contracts and related gas in storage at fair market value, and reported related revenues and expenses on a gross basis in the income statement. EITF Issue 02-3 rescinded EITF Issue 98-10 on a prospective basis. Accordingly, any new contracts entered into after Oct. 25, 2002 have been reported on a historical cost basis rather than at fair market value unless the contract meets the definition of a derivative under SFAS 133. Alliant Energy adopted EITF Issue 02-3 on Jan. 1, 2003 for all contracts that were in place and storage gas acquired prior to Oct. 25, 2002, and reclassified prior period trading contracts on a net basis in the income statement. The impact of transitioning from reporting inventory and existing contracts that were not derivatives under SFAS 133 at fair value to historical cost resulted in a cumulative effect charge of $2.1 million (net of a deferred tax benefit of $1.4 million) in the first quarter of 2003. Commencing January 1, 2003, NG Energy has very few contracts that are accounted for as derivatives under SFAS 133 and that are also classified as trading contracts, therefore almost all of its sales of energy and cost of sales in the first six months of 2003 are reported on a gross basis. Because substantially all of its contracts prior to 2003 were classified as trading contracts under EITF Issue 98-10, primarily all of its sales of energy and cost of sales for the first six months of 2002 are reported on a net basis. For the six months ended June 30, 2002, NG Energy recorded $2 million of net revenues related to $43 million of gross revenues, less $41 million of gas costs. 13. 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 Alliant Energy subsidiaries are guarantors of Resources' debt securities. Alliant Energy's condensed consolidating financial statements are as follows: 12
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Three Months Ended June 30, 2003 and 2002 Alliant Energy Other Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy -------------------------------------------------------------------- Three Months Ended June 30, 2003 (in thousands) -------------------------------- Operating revenues: Electric utility $- $- $444,108 $- $444,108 Gas utility - - 76,392 - 76,392 Non-regulated and other - 117,602 99,649 (91,459) 125,792 -------------------------------------------------------------------- - 117,602 620,149 (91,459) 646,292 -------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 87,239 (11) 87,228 Purchased power - - 87,504 549 88,053 Cost of utility gas sold - - 49,744 - 49,744 Other operation and maintenance 846 108,080 237,914 (81,285) 265,555 Depreciation and amortization 10 8,836 73,219 (4,080) 77,985 Taxes other than income taxes 3 1,673 21,051 (1,942) 20,785 -------------------------------------------------------------------- 859 118,589 556,671 (86,769) 589,350 -------------------------------------------------------------------- Operating income (loss) (859) (987) 63,478 (4,690) 56,942 -------------------------------------------------------------------- Interest expense and other: Interest expense 2,637 26,864 28,305 (1,608) 56,198 Interest income from loans to discontinued operations, net - (27) - - (27) Equity income from unconsolidated investments - (3,494) (4,434) (1,309) (9,237) Allowance for funds used during construction - - (4,606) 34 (4,572) Preferred dividend requirements of subsidiaries - - 3,968 - 3,968 Miscellaneous, net (40,875) (5,570) 788 38,323 (7,334) -------------------------------------------------------------------- (38,238) 17,773 24,021 35,440 38,996 -------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 37,379 (18,760) 39,457 (40,130) 17,946 -------------------------------------------------------------------- Income tax expense (benefit) 5,225 (16,556) 17,421 127 6,217 -------------------------------------------------------------------- Income (loss) from continuing operations 32,154 (2,204) 22,036 (40,257) 11,729 -------------------------------------------------------------------- Income from discontinued operations, net of tax - 20,425 - - 20,425 -------------------------------------------------------------------- Net income $32,154 $18,221 $22,036 ($40,257) $32,154 ==================================================================== Three Months Ended June 30, 2002 -------------------------------- Operating revenues: Electric utility $- $- $412,650 $- $412,650 Gas utility - - 65,366 - 65,366 Non-regulated and other - 59,596 83,609 (76,761) 66,444 -------------------------------------------------------------------- - 59,596 561,625 (76,761) 544,460 -------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 75,148 - 75,148 Purchased power - - 91,496 - 91,496 Cost of utility gas sold - - 38,719 - 38,719 Other operation and maintenance 424 53,269 204,677 (75,434) 182,936 Depreciation and amortization - 7,165 63,401 - 70,566 Taxes other than income taxes - 1,496 25,009 (1,311) 25,194 -------------------------------------------------------------------- 424 61,930 498,450 (76,745) 484,059 -------------------------------------------------------------------- Operating income (loss) (424) (2,334) 63,175 (16) 60,401 -------------------------------------------------------------------- Interest expense and other: Interest expense 973 18,802 27,789 (1,528) 46,036 Interest income from loans to discontinued operations, net - (4,234) - - (4,234) Equity (income) loss from unconsolidated investments 321 9,967 (3,479) - 6,809 Allowance for funds used during construction - - (1,696) - (1,696) Preferred dividend requirements of subsidiaries - - 1,682 - 1,682 Impairment of available-for-sale securities of McLeodUSA Inc. - 6,044 - - 6,044 Miscellaneous, net (14,793) 8,623 (1,360) 14,932 7,402 -------------------------------------------------------------------- (13,499) 39,202 22,936 13,404 62,043 -------------------------------------------------------------------- Income (loss) from continuing operations before income taxes 13,075 (41,536) 40,239 (13,420) (1,642) -------------------------------------------------------------------- Income tax expense (benefit) 6,760 (16,175) 13,297 (16) 3,866 -------------------------------------------------------------------- Income (loss) from continuing operations 6,315 (25,361) 26,942 (13,404) (5,508) -------------------------------------------------------------------- Income from discontinued operations, net of tax - 11,823 - - 11,823 -------------------------------------------------------------------- Net income (loss) $6,315 ($13,538) $26,942 ($13,404) $6,315 ====================================================================
13
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Six Months Ended June 30, 2003 and 2002 Alliant Energy Other Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------ Six Months Ended June 30, 2003 (in thousands) ------------------------------ Operating revenues: Electric utility $- $- $887,133 $- $887,133 Gas utility - - 334,273 - 334,273 Non-regulated and other - 303,155 197,835 (180,314) 320,676 ------------------------------------------------------------------ - 303,155 1,419,241 (180,314) 1,542,082 ------------------------------------------------------------------ Operating expenses: Electric and steam production fuels - - 159,670 (27) 159,643 Purchased power - - 217,883 549 218,432 Cost of utility gas sold - - 238,069 - 238,069 Other operation and maintenance 1,159 275,344 464,153 (158,146) 582,510 Depreciation and amortization 18 16,955 148,556 (7,945) 157,584 Taxes other than income taxes 5 3,401 47,327 (3,872) 46,861 ------------------------------------------------------------------ 1,182 295,700 1,275,658 (169,441) 1,403,099 ------------------------------------------------------------------ Operating income (loss) (1,182) 7,455 143,583 (10,873) 138,983 ------------------------------------------------------------------ Interest expense and other: Interest expense 6,537 53,714 55,833 (4,372) 111,712 Interest income from loans to discontinued operations, net - (3,281) - - (3,281) Equity (income) loss from unconsolidated investments - 4,981 (8,655) (1,309) (4,983) Allowance for funds used during construction - - (8,514) 81 (8,433) Preferred dividend requirements of subsidiaries - - 8,126 - 8,126 Miscellaneous, net (48,785) (2,646) 6,303 40,209 (4,919) ------------------------------------------------------------------ (42,248) 52,768 53,093 34,609 98,222 ------------------------------------------------------------------ Income (loss) from continuing operations before income taxes 41,066 (45,313) 90,490 (45,482) 40,761 ------------------------------------------------------------------ Income tax expense (benefit) 9,390 (32,438) 37,452 (11) 14,393 ------------------------------------------------------------------ Income (loss) from continuing operations 31,676 (12,875) 53,038 (45,471) 26,368 ------------------------------------------------------------------ Income from discontinued operations, net of tax - 11,291 - - 11,291 ------------------------------------------------------------------ Income (loss) before cumulative effect of changes in accounting principles, net of tax 31,676 (1,584) 53,038 (45,471) 37,659 ------------------------------------------------------------------ Cumulative effect of changes in accounting principles, net of tax - (5,983) - - (5,983) ------------------------------------------------------------------ Net income (loss) $31,676 ($7,567) $53,038 ($45,471) $31,676 ================================================================== Six Months Ended June 30, 2002 ------------------------------ Operating revenues: Electric utility $- $- $783,412 $- $783,412 Gas utility - - 193,607 - 193,607 Non-regulated and other - 124,058 159,909 (145,090) 138,877 ------------------------------------------------------------------ - 124,058 1,136,928 (145,090) 1,115,896 ------------------------------------------------------------------ Operating expenses: Electric and steam production fuels - - 137,758 - 137,758 Purchased power - - 163,833 - 163,833 Cost of utility gas sold - - 122,475 - 122,475 Other operation and maintenance 931 108,091 401,083 (141,637) 368,468 Depreciation and amortization - 13,130 132,985 - 146,115 Taxes other than income taxes - 3,418 52,964 (3,400) 52,982 ------------------------------------------------------------------ 931 124,639 1,011,098 (145,037) 991,631 ------------------------------------------------------------------ Operating income (loss) (931) (581) 125,830 (53) 124,265 ------------------------------------------------------------------ Interest expense and other: Interest expense 1,732 36,509 55,330 (3,048) 90,523 Interest income from loans to discontinued operations, net - (7,600) - - (7,600) Equity (income) loss from unconsolidated investments 550 11,019 (7,973) - 3,596 Allowance for funds used during construction - - (3,350) - (3,350) Preferred dividend requirements of subsidiaries - - 3,364 - 3,364 Impairment of available-for-sale securities of McLeodUSA Inc. - 27,218 - - 27,218 Miscellaneous, net (27,551) 24,690 (8,630) 28,497 17,006 ------------------------------------------------------------------ (25,269) 91,836 38,741 25,449 130,757 ------------------------------------------------------------------ Income (loss) from continuing operations before income taxes 24,338 (92,417) 87,089 (25,502) (6,492) ------------------------------------------------------------------ Income tax expense (benefit) 8,280 (34,569) 33,149 (53) 6,807 ------------------------------------------------------------------ Income (loss) from continuing operations 16,058 (57,848) 53,940 (25,449) (13,299) ------------------------------------------------------------------ Income from discontinued operations, net of tax - 29,357 - - 29,357 ------------------------------------------------------------------ Net income (loss) $16,058 ($28,491) $53,940 ($25,449) $16,058 ==================================================================
14
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of June 30, 2003 Alliant Energy Other Consolidated Parent Alliant Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy --------------------------------------------------------------------------------- (in thousands) ASSETS Property, plant and equipment: Utility: Electric plant in service $- $- $5,513,787 $- $5,513,787 Other plant in service - - 1,178,425 - 1,178,425 Accumulated depreciation - - (3,439,286) - (3,439,286) Construction work in progress: Power Iowa generating facility - - 186,277 - 186,277 Other - - 238,141 - 238,141 Other, net - - 64,720 - 64,720 --------------------------------------------------------------------------------- Total utility - - 3,742,064 - 3,742,064 --------------------------------------------------------------------------------- Non-regulated and other, net: Non-regulated generation - 209,326 - - 209,326 Other - 320,433 70,225 (111) 390,547 --------------------------------------------------------------------------------- Total non-regulated and other - 529,759 70,225 (111) 599,873 --------------------------------------------------------------------------------- - 529,759 3,812,289 (111) 4,341,937 --------------------------------------------------------------------------------- Current assets: Income tax refunds receivable 24,825 92,339 26,638 - 143,802 Gas stored underground, at average cost - 16,211 30,445 - 46,656 Regulatory assets - - 59,731 - 59,731 Assets of discontinued operations - 633,840 - - 633,840 Other 132,803 178,489 398,126 (298,421) 410,997 --------------------------------------------------------------------------------- 157,628 920,879 514,940 (298,421) 1,295,026 --------------------------------------------------------------------------------- Investments: Consolidated subsidiaries 1,864,611 - 10 (1,864,621) - Other 12,037 510,849 520,660 - 1,043,546 --------------------------------------------------------------------------------- 1,876,648 510,849 520,670 (1,864,621) 1,043,546 --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- Deferred charges and other 1,138 127,620 609,971 (35,703) 703,026 --------------------------------------------------------------------------------- Total assets $2,035,414 $2,089,107 $5,457,870 ($2,198,856) $7,383,535 ================================================================================= CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $1,309,121 $232,743 $906,128 ($1,138,871) $1,309,121 Retained earnings 743,698 107,271 752,514 (859,785) 743,698 Accumulated other comprehensive loss (133,931) (90,619) (43,312) 133,931 (133,931) Shares in deferred compensation trust (7,181) - - - (7,181) --------------------------------------------------------------------------------- Total common equity 1,911,707 249,395 1,615,330 (1,864,725) 1,911,707 --------------------------------------------------------------------------------- Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063 Long-term debt (excluding current portion) 24,000 1,130,757 1,233,680 - 2,388,437 --------------------------------------------------------------------------------- 1,935,707 1,380,152 3,054,073 (1,864,725) 4,505,207 --------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds - 6,439 64,400 - 70,839 Commercial paper 86,000 - 230,400 - 316,400 Other short-term borrowings - 74,017 73,613 (123,626) 24,004 Liabilities of discontinued operations - 204,671 - - 204,671 Other 10,567 185,194 608,236 (174,795) 629,202 --------------------------------------------------------------------------------- 96,567 470,321 976,649 (298,421) 1,245,116 --------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Asset retirement obligations - - 368,040 - 368,040 Other 3,140 192,835 1,059,108 (35,710) 1,219,373 --------------------------------------------------------------------------------- 3,140 192,835 1,427,148 (35,710) 1,587,413 --------------------------------------------------------------------------------- --------------------------------------------------------------------------------- Minority interest - 45,799 - - 45,799 --------------------------------------------------------------------------------- Total capitalization and liabilities $2,035,414 $2,089,107 $5,457,870 ($2,198,856) $7,383,535 =================================================================================
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Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002 Alliant Energy Other Consolidated Parent Alliant Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ----------------------------------------------------------------------------------- (in thousands) ASSETS Property, plant and equipment: Utility: Electric plant in service $- $- $5,295,381 $- $5,295,381 Other plant in service - - 1,143,578 - 1,143,578 Accumulated depreciation - - (3,573,407) - (3,573,407) Construction work in progress: Power Iowa generating facility - - 10,651 - 10,651 Other - - 252,445 - 252,445 Other, net - - 68,340 - 68,340 ----------------------------------------------------------------------------------- Total utility - - 3,196,988 - 3,196,988 ----------------------------------------------------------------------------------- Non-regulated and other, net: Non-regulated generation - 156,699 - - 156,699 Other - 299,355 75,503 (111) 374,747 ----------------------------------------------------------------------------------- Total non-regulated and other - 456,054 75,503 (111) 531,446 ----------------------------------------------------------------------------------- - 456,054 3,272,491 (111) 3,728,434 ----------------------------------------------------------------------------------- Current assets: Income tax refunds receivable 18,175 72,882 6,412 - 97,469 Gas stored underground, at average cost - 26,668 36,129 - 62,797 Regulatory assets - - 46,076 - 46,076 Assets of discontinued operations - 969,291 - - 969,291 Other 254,461 177,538 453,052 (436,395) 448,656 ----------------------------------------------------------------------------------- 272,636 1,246,379 541,669 (436,395) 1,624,289 ----------------------------------------------------------------------------------- Investments: Consolidated subsidiaries 1,817,341 - 10 (1,817,351) - Other 11,660 430,173 494,867 - 936,700 ----------------------------------------------------------------------------------- 1,829,001 430,173 494,877 (1,817,351) 936,700 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- Deferred charges and other - 127,834 611,721 (27,583) 711,972 ----------------------------------------------------------------------------------- Total assets $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395 =================================================================================== CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $1,294,842 $232,743 $906,261 ($1,139,004) $1,294,842 Retained earnings 758,187 114,838 773,556 (888,394) 758,187 Accumulated other comprehensive loss (209,943) (166,947) (42,996) 209,943 (209,943) Shares in deferred compensation trust (6,896) - - - (6,896) ----------------------------------------------------------------------------------- Total common equity 1,836,190 180,634 1,636,821 (1,817,455) 1,836,190 ----------------------------------------------------------------------------------- Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063 Long-term debt (excluding current portion) 24,000 1,290,205 1,295,598 - 2,609,803 ----------------------------------------------------------------------------------- 1,860,190 1,470,839 3,137,482 (1,817,455) 4,651,056 ----------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds - 41,511 5,080 - 46,591 Commercial paper 135,500 - 60,000 - 195,500 Other short-term borrowings 85,000 194,482 79,003 (244,764) 113,721 Liabilities of discontinued operations - 138,251 - - 138,251 Other 17,696 190,587 611,595 (191,631) 628,247 ----------------------------------------------------------------------------------- 238,196 564,831 755,678 (436,395) 1,122,310 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- Other long-term liabilities and deferred credits 3,251 181,345 1,027,598 (27,590) 1,184,604 ----------------------------------------------------------------------------------- ----------------------------------------------------------------------------------- Minority interest - 43,425 - - 43,425 ----------------------------------------------------------------------------------- Total capitalization and liabilities $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395 ===================================================================================
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Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Six Months Ended June 30, 2003 and 2002 Alliant Energy Other Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- Six Months Ended June 30, 2003 (in thousands) ------------------------------ Net cash flows from (used for) operating activities $21,622 ($37,485) $290,180 ($53,597) $220,720 ------------------------------------------------------------------ Cash flows from (used for) financing activities: Common stock dividends (46,165) - (74,079) 74,079 (46,165) Proceeds from issuance of other long-term debt - 60,000 - - 60,000 Net change in commercial paper and other short-term borrowings (13,362) (120,465) 165,010 - 31,183 Net change in loans to discontinued operations - (25,181) - - (25,181) Other 11,316 (1,655) (28,402) 8,260 (10,481) ------------------------------------------------------------------ Net cash flows from (used for) financing activities (48,211) (87,301) 62,529 82,339 9,356 ------------------------------------------------------------------ Cash flows from (used for) investing activities: Construction and acquisition expenditures: Regulated domestic utilities - - (371,847) 108,847 (263,000) Non-regulated businesses - (212,305) - - (212,305) Corporate Services and other (50) - (2,692) - (2,742) Proceeds from asset dispositions - 352,579 488 (108,847) 244,220 Other 28,582 (3,305) 11,593 (28,742) 8,128 ------------------------------------------------------------------ Net cash flows from (used for) investing activities 28,532 136,969 (362,458) (28,742) (225,699) ------------------------------------------------------------------ Net increase (decrease) in cash and temporary cash investments 1,943 12,183 (9,749) - 4,377 ------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 4 47,236 15,619 - 62,859 ------------------------------------------------------------------ Cash and temporary cash investments at end of period $1,947 $59,419 $5,870 $- $67,236 ================================================================== Supplemental cash flows information: Cash paid (received) during the period for: Interest $6,620 $38,435 $51,787 $- $96,842 ================================================================== Income taxes, net of refunds $13,890 ($18,336) $32,670 $- $28,224 ================================================================== Noncash investing and financing activities: Debt extinguished directly by sale of Australian business $- $127,595 $- $- $127,595 ================================================================== Capital lease obligations incurred $- $- $2,377 $- $2,377 ================================================================== Six Months Ended June 30, 2002 ------------------------------ Net cash flows from (used for) operating activities ($8,931) $20,334 $279,741 ($28,814) $262,330 ------------------------------------------------------------------ Cash flows from (used for) financing activities: Common stock dividends (89,891) - (69,731) 69,731 (89,891) Net change in Resources' credit facility - 192,761 - - 192,761 Net change in commercial paper and other short-term borrowings 20,827 (15,862) 24,580 1,939 31,484 Net change in loans to discontinued operations - (112,601) - - (112,601) Other 28,748 (12,590) (13,167) 2,857 5,848 ------------------------------------------------------------------ Net cash flows from (used for) financing activities (40,316) 51,708 (58,318) 74,527 27,601 ------------------------------------------------------------------ Cash flows from (used for) investing activities: Construction and acquisition expenditures: Regulated domestic utilities - - (173,774) - (173,774) Non-regulated businesses - (113,406) - - (113,406) Corporate Services and other - - (16,903) - (16,903) Proceeds from asset dispositions 81 1,641 - - 1,722 Other 43,756 25,106 (29,751) (43,774) (4,663) ------------------------------------------------------------------ Net cash flows from (used for) investing activities 43,837 (86,659) (220,428) (43,774) (307,024) ------------------------------------------------------------------ Net increase (decrease) in cash and temporary cash investments (5,410) (14,617) 995 1,939 (17,093) ------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 6,381 60,237 3,207 (1,939) 67,886 ------------------------------------------------------------------ Cash and temporary cash investments at end of period $971 $45,620 $4,202 $- $50,793 ================================================================== Supplemental cash flows information: Cash paid during the period for: Interest $1,618 $37,265 $50,245 $- $89,128 ================================================================== Income taxes, net of refunds $- $1,428 $4,451 $- $5,879 ================================================================== Noncash investing and financing activities: Capital lease obligations incurred $- $- $473 $- $473 ==================================================================
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INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Six Months Ended June 30, Ended June 30, 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------ (in thousands) Operating revenues: Electric utility $234,716 $226,266 $465,045 $425,269 Gas utility 40,665 35,512 167,342 107,254 Steam 8,264 7,500 17,746 15,550 --------------- --------------- --------------- --------------- 283,645 269,278 650,133 548,073 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Electric and steam production fuels 53,126 43,360 87,327 75,702 Purchased power 37,438 37,062 82,494 65,221 Cost of gas sold 27,222 22,210 118,993 68,570 Other operation and maintenance 84,976 80,037 169,563 160,693 Depreciation and amortization 40,990 36,341 81,417 72,552 Taxes other than income taxes 12,385 16,103 28,085 33,019 --------------- --------------- --------------- --------------- 256,137 235,113 567,879 475,757 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Operating income 27,508 34,165 82,254 72,316 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Interest expense and other: Interest expense 17,130 16,718 34,174 32,992 Allowance for funds used during construction (3,516) (1,437) (6,060) (2,417) Miscellaneous, net 593 (3,271) (207) (3,699) --------------- --------------- --------------- --------------- 14,207 12,010 27,907 26,876 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 13,301 22,155 54,347 45,440 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Income taxes 5,429 6,354 21,518 16,764 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Net income 7,872 15,801 32,829 28,676 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Preferred dividend requirements 3,140 853 6,470 1,708 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Earnings available for common stock $4,732 $14,948 $26,359 $26,968 =============== =============== =============== =============== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, ASSETS 2003 2002 ------------------------------------------------------------------------------------------------------------------ (in thousands) Property, plant and equipment: Electric plant in service $3,581,691 $3,451,547 Gas plant in service 334,875 326,470 Steam plant in service 59,737 59,737 Other plant in service 204,063 195,328 Accumulated depreciation (2,124,261) (2,163,371) ------------------ ----------------- Net plant 2,056,105 1,869,711 Construction work in progress: Power Iowa generating facility 186,277 10,651 Other 147,674 155,699 Other, net 46,979 50,529 ------------------ ----------------- 2,437,035 2,086,590 ------------------ ----------------- ------------------------------------------------------------------------------------------------------------------ Current assets: Cash and temporary cash investments 3,725 6,076 Accounts receivable: Customer, less allowance for doubtful accounts of $1,562 and $894 14,436 42,647 Associated companies 30,246 79,105 Other, less allowance for doubtful accounts of $312 and $388 28,045 27,898 Income tax refunds receivable 22,432 6,412 Production fuel, at average cost 38,084 36,852 Materials and supplies, at average cost 34,876 28,821 Gas stored underground, at average cost 12,650 19,450 Regulatory assets 32,999 18,077 Prepayments and other 8,942 7,529 ------------------ ----------------- 226,435 272,867 ------------------ ----------------- ------------------------------------------------------------------------------------------------------------------ Investments: Nuclear decommissioning trust funds 133,865 121,158 Other 13,502 13,492 ------------------ ----------------- 147,367 134,650 ------------------ ----------------- ------------------------------------------------------------------------------------------------------------------ Other assets: Regulatory assets 242,801 199,691 Deferred charges and other 37,942 44,608 ------------------ ----------------- 280,743 244,299 ------------------ ----------------- ------------------------------------------------------------------------------------------------------------------ Total assets $3,091,580 $2,738,406 ================== ================= ------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
19
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) June 30, December 31, CAPITALIZATION AND LIABILITIES 2003 2002 -------------------------------------------------------------------------------------------------------------------- (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 477,542 477,701 Retained earnings 357,699 374,428 Accumulated other comprehensive loss (18,887) (18,887) ------------------ ------------------ Total common equity 849,781 866,669 ------------------ ------------------ Cumulative preferred stock 145,100 145,100 Long-term debt (excluding current portion) 827,409 827,389 ------------------ ------------------ 1,822,290 1,839,158 ------------------ ------------------ -------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 2,400 5,080 Commercial paper 155,900 - Accounts payable 90,165 83,126 Accounts payable to associated companies 48,786 41,537 Accrued interest 14,738 14,628 Accrued taxes 60,363 62,135 Accumulated refueling outage provision 2,454 13,845 Other 46,686 40,946 ------------------ ------------------ 421,492 261,297 ------------------ ------------------ -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 334,369 313,308 Accumulated deferred investment tax credits 29,374 31,135 Asset retirement obligations 186,852 - Pension and other benefit obligations 97,271 88,449 Regulatory liabilities 75,957 78,995 Environmental liabilities 35,848 39,849 Other 88,127 86,215 ------------------ ------------------ 847,798 637,951 ------------------ ------------------ -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $3,091,580 $2,738,406 ================== ================== -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
INTERSTATE POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, 2003 2002 ------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $32,829 $28,676 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 81,417 72,552 Amortization of leased nuclear fuel 5,751 7,537 Deferred tax expense (benefit) and investment tax (credits) 17,320 (4,617) Refueling outage provision (11,391) 3,972 Other (317) 2,306 Other changes in assets and liabilities: Accounts receivable 76,923 (257) Income tax refunds receivable (16,020) - Gas stored underground 6,800 10,452 Adjustment clause balances (10,027) (6,301) Other 14,182 26,172 ------------------ ------------------ Net cash flows from operating activities 197,467 140,492 ------------------ ------------------ ------------------------------------------------------------------------------------------------------------- Cash flows from (used for) financing activities: Common stock dividends (43,088) (40,170) Preferred stock dividends (6,470) (1,708) Reductions in long-term debt (1,680) (560) Net change in short-term borrowings 155,900 25,045 Principal payments under capital lease obligations (6,934) (7,156) Other (625) (172) ------------------ ------------------ Net cash flows from (used for) financing activities 97,103 (24,721) ------------------ ------------------ ------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (298,247) (104,743) Nuclear decommissioning trust funds (5,473) (3,004) Other 6,799 (8,030) ------------------ ------------------ Net cash flows used for investing activities (296,921) (115,777) ------------------ ------------------ ------------------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (2,351) (6) ------------------ ------------------ ------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 6,076 87 ------------------ ------------------ ------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $3,725 $81 ================== ================== ------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $31,608 $30,578 ================== ================== Income taxes, net of refunds $9,065 $ - ================== ================== Noncash investing and financing activities: Capital lease obligations incurred $2,377 $473 ================== ================== ------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
21 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 GAAP 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 IP&L and its consolidated subsidiaries. IP&L is a direct subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in IP&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 and six months ended June 30, 2003 and 2002, (b) the consolidated financial position at June 30, 2003 and Dec. 31, 2002, and (c) the consolidated statement of cash flows for the six months ended June 30, 2003 and 2002, have been made. Because of the seasonal nature of IP&L's operations, results for the three and six months ended June 30, 2003 are not necessarily indicative of results that may be expected for the year ending Dec. 31, 2003. Certain prior period amounts have been reclassified on a basis consistent with the current period presentation. 2. For the three and six months ended June 30, 2003 and 2002, IP&L had no other comprehensive income, thus IP&L's comprehensive income was equal to its earnings available for common stock for all periods. 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 June 30, 2003 -------------------------------- Operating revenues $234,716 $40,665 $8,264 $283,645 Operating income (loss) 29,071 (3,261) 1,698 27,508 Earnings available for common stock 4,732 Three Months Ended June 30, 2002 -------------------------------- Operating revenues $226,266 $35,512 $7,500 $269,278 Operating income (loss) 33,497 (655) 1,323 34,165 Earnings available for common stock 14,948 Six Months Ended June 30, 2003 ------------------------------ Operating revenues $465,045 $167,342 $17,746 $650,133 Operating income 67,101 12,182 2,971 82,254 Earnings available for common stock 26,359 Six Months Ended June 30, 2002 ------------------------------ Operating revenues $425,269 $107,254 $15,550 $548,073 Operating income 61,395 7,525 3,396 72,316 Earnings available for common stock 26,968
10. IP&L utilizes several synthetic leases to finance certain utility railcars that were not included on IP&L's Consolidated Balance Sheets. IP&L has guaranteed the residual value of its synthetic leases totaling $6.8 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease, the latest of which is January 2009. 22
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Six Months Ended June 30, Ended June 30, 2003 2002 2003 2002 ------------------------------------------------------------------------------------------------------------------------------ (in thousands) Operating revenues: Electric utility $209,392 $186,384 $422,088 $358,143 Gas utility 35,727 29,854 166,931 86,353 Water 1,400 1,228 2,777 2,518 --------------- --------------- --------------- --------------- 246,519 217,466 591,796 447,014 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Electric production fuels 34,102 31,787 72,316 62,056 Purchased power 50,615 54,435 135,938 98,612 Cost of gas sold 22,522 16,509 119,076 53,905 Other operation and maintenance 71,837 51,489 138,820 102,729 Depreciation and amortization 28,150 27,060 59,195 60,433 Taxes other than income taxes 6,723 7,596 15,368 16,546 --------------- --------------- --------------- --------------- 213,949 188,876 540,713 394,281 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Operating income 32,570 28,590 51,083 52,733 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Interest expense and other: Interest expense 10,509 9,952 20,215 20,148 Interest income (1,886) 882 (3,741) (5,663) Equity income from unconsolidated investments (5,664) (3,486) (9,780) (7,873) Allowance for funds used during construction (1,056) (259) (2,373) (933) Miscellaneous, net (1,304) 1,785 872 2,189 --------------- --------------- --------------- --------------- 599 8,874 5,193 7,868 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 31,971 19,716 45,890 44,865 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Income taxes 12,118 6,927 15,922 16,331 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Net income 19,853 12,789 29,968 28,534 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Preferred dividend requirements 828 828 1,656 1,656 --------------- --------------- --------------- --------------- ------------------------------------------------------------------------------------------------------------------------------ Earnings available for common stock $19,025 $11,961 $28,312 $26,878 =============== =============== =============== =============== ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) June 30, December 31, ASSETS 2003 2002 -------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Electric plant in service $1,932,096 $1,843,834 Gas plant in service 293,776 286,652 Water plant in service 33,747 33,062 Other plant in service 252,227 242,329 Accumulated depreciation (1,315,025) (1,410,036) ---------------- --------------- Net plant 1,196,821 995,841 Construction work in progress 90,467 96,746 Other, net 17,741 17,811 ---------------- --------------- 1,305,029 1,110,398 ---------------- --------------- -------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 75 8,577 Accounts receivable: Customer, less allowance for doubtful accounts of $1,571 and $1,770 1,880 7,977 Associated companies 32,299 21,484 Other, less allowance for doubtful accounts of $414 and $458 18,973 18,191 Production fuel, at average cost 13,285 18,980 Materials and supplies, at average cost 24,863 22,133 Gas stored underground, at average cost 17,795 16,679 Regulatory assets 26,732 27,999 Prepaid gross receipts tax 27,864 27,388 Other 8,852 8,599 ---------------- --------------- 172,618 178,007 ---------------- --------------- -------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 233,139 223,734 Investment in ATC and other 136,565 133,043 ---------------- --------------- 369,704 356,777 ---------------- --------------- -------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 94,772 102,674 Deferred charges and other 204,424 236,741 ---------------- --------------- 299,196 339,415 ---------------- --------------- -------------------------------------------------------------------------------------------------------------- Total assets $2,146,547 $1,984,597 ================ =============== -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued) June 30, December 31, CAPITALIZATION AND LIABILITIES 2003 2002 ----------------------------------------------------------------------------------------------------------------- (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 325,603 325,603 Retained earnings 396,624 399,302 Accumulated other comprehensive loss (24,425) (24,108) ---------------- ---------------- Total common equity 763,985 766,980 ---------------- ---------------- Cumulative preferred stock 59,963 59,963 Long-term debt (excluding current portion) 406,271 468,208 ---------------- ---------------- 1,230,219 1,295,151 ---------------- ---------------- ----------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities 62,000 - Variable rate demand bonds 55,100 55,100 Commercial paper 74,500 60,000 Accounts payable 53,601 90,869 Accounts payable to associated companies 57,671 43,276 Accrued taxes 9,338 19,353 Regulatory liabilities 13,530 16,938 Other 30,871 29,064 ---------------- ---------------- 356,611 314,600 ---------------- ---------------- ----------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 198,938 191,894 Accumulated deferred investment tax credits 22,437 23,241 Asset retirement obligations 181,188 - Pension and other benefit obligations 61,999 58,921 Customer advances 34,690 36,555 Other 60,465 64,235 ---------------- ---------------- 559,717 374,846 ---------------- ---------------- ----------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $2,146,547 $1,984,597 ================ ================ ----------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Six Months Ended June 30, 2003 2002 -------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $29,968 $28,534 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 59,195 60,433 Amortization of nuclear fuel 2,414 2,880 Amortization of deferred energy efficiency expenditures 20,221 7,181 Deferred tax expense (benefit) and investment tax (credits) 6,224 (5,631) Equity income from unconsolidated investments, net (9,780) (7,873) Distributions from equity method investments 6,069 7,482 Other (5,189) (5,779) Other changes in assets and liabilities: Accounts receivable (5,500) 18,951 Gas stored underground (1,116) 7,120 Accounts payable (6,617) (2,916) Accrued taxes (10,015) 17,420 Other (2,429) 17,002 ------------------ ------------------ Net cash flows from operating activities 83,445 144,804 ------------------ ------------------ -------------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends (30,990) (29,562) Preferred stock dividends (1,656) (1,656) Net change in short-term borrowings 14,500 (25,215) Other (3,012) 785 ------------------ ------------------ Net cash flows used for financing activities (21,158) (55,648) ------------------ ------------------ -------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (73,600) (69,031) Nuclear decommissioning trust funds (1,438) (14,654) Other 4,249 (5,481) ------------------ ------------------ Net cash flows used for investing activities (70,789) (89,166) ------------------ ------------------ -------------------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (8,502) (10) ------------------ ------------------ -------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 8,577 307 ------------------ ------------------ -------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $75 $297 ================== ================== -------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $20,180 $19,668 ================== ================== Income taxes, net of refunds $24,267 $4,396 ================== ================== -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
26 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 GAAP 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 direct 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 and six months ended June 30, 2003 and 2002, (b) the consolidated financial position at June 30, 2003 and Dec. 31, 2002, and (c) the consolidated statement of cash flows for the six months ended June, 2003 and 2002, have been made. Because of the seasonal nature of WP&L's operations, results for the three and six months ended June 30, 2003 are not necessarily indicative of results that may be expected for the year ending Dec. 31, 2003. Certain prior period amounts have been reclassified on a basis consistent with the current period presentation. 2. WP&L's comprehensive income, and the components of other comprehensive loss, net of taxes, for the three and six months ended June 30 were as follows (in thousands):
Three Months Six Months ----------------------------- ---------------------------- 2003 2002 2003 2002 ------------- ------------- ------------- ------------- Earnings available for common stock $19,025 $11,961 $28,312 $26,878 Unrealized holding losses on qualifying derivatives, net of tax -- (521) (5,914) (299) Less: reclassification adjustment for gains (losses) included in earnings available for common stock, net of tax -- -- (5,597) 4,287 ------------- ------------- ------------- ------------- Net unrealized losses on qualifying derivatives -- (521) (317) (4,586) ------------- ------------- ------------- ------------- Other comprehensive loss -- (521) (317) (4,586) ------------- ------------- ------------- ------------- Comprehensive income $19,025 $11,440 $27,995 $22,292 ============= ============= ============= =============
27 3. Certain financial information relating to WP&L's significant business segments is presented below. Gas revenues included $5 million for both the three months ended June 30, 2003 and 2002, and $22 million and $8 million for the six months ended June 30, 2003 and 2002, respectively, for sales to the electric segment. All other intersegment revenues were not material to WP&L's operations.
Electric Gas Other Total -------------------------------------------------------- (in thousands) Three Months Ended June 30, 2003 -------------------------------- Operating revenues $209,392 $35,727 $1,400 $246,519 Operating income (loss) 35,928 (3,604) 246 32,570 Earnings available for common stock 19,025 Three Months Ended June 30, 2002 -------------------------------- Operating revenues $186,384 $29,854 $1,228 $217,466 Operating income (loss) 28,444 (128) 274 28,590 Earnings available for common stock 11,961 Six Months Ended June 30, 2003 ------------------------------ Operating revenues $422,088 $166,931 $2,777 $591,796 Operating income 34,652 16,007 424 51,083 Earnings available for common stock 28,312 Six Months Ended June 30, 2002 ------------------------------ Operating revenues $358,143 $86,353 $2,518 $447,014 Operating income 46,953 5,120 660 52,733 Earnings available for common stock 26,878
10. WP&L utilizes several synthetic leases to finance certain utility railcars and a utility radio dispatch system that were not included on WP&L's Consolidated Balance Sheets. WP&L has guaranteed the residual value of its synthetic leases totaling $14.3 million in the aggregate. The guarantees extend through the maturity of each respective underlying lease, the latest of which is April 2015. 14. Earnings (losses) on WP&L's nuclear decommissioning trust funds of $1.8 million and ($1.1) million for the three months ended June 30, 2003 and 2002, respectively, and $3.5 million and $5.3 million for the six months ended June 30, 2003 and 2002, respectively, are included in "Interest income" in WP&L's Consolidated Statements of Income. A corresponding offset is recorded in "Depreciation and amortization" expense. 28 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 Current Report on Form 8-K, dated June 4, 2003, and IP&L's and WP&L's latest Annual Report on Form 10-K. FORWARD-LOOKING STATEMENTS Statements contained in this report 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: weather effects on sales and revenues; economic and political conditions in Alliant Energy's domestic and international service territories; federal, state and international regulatory or governmental actions, including the ability to obtain adequate and timely rate relief to allow for, among other things, the recovery of operating costs and the earning of reasonable rates of return, as well as the payment of expected levels of dividends; Alliant Energy's ability to complete proposed asset divestitures at expected values and on expected timelines; unanticipated construction and acquisition expenditures; issues related to the supply of purchased electricity and price thereof, including the ability to recover purchased-power and fuel costs through rates; risks related to the operations of Alliant Energy's nuclear facilities; costs associated with Alliant Energy's environmental remediation efforts and with environmental compliance generally; developments that adversely impact Alliant Energy's ability to implement its strategic plan; improved results from Alliant Energy's Brazil investments, the ability of Alliant Energy's Brazil investments to refinance certain debt outstanding and no material adverse changes in the rates allowed by the Brazilian regulators; improved performance by Alliant Energy's other non-regulated businesses as a whole; no material permanent declines in the fair market value of, or expected cash flows from, Alliant Energy's investments; continued access to the capital markets; Alliant Energy's ability to continue cost controls and operational efficiencies; Alliant Energy's ability to identify and successfully complete proposed acquisitions and development projects; access to technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; inflation rates; and factors listed in "Other Matters - Other Future Considerations." Alliant Energy assumes no obligation, and disclaims any duty, to update the forward-looking statements in this report. STRATEGIC ACTIONS Alliant Energy continues to make significant progress relating to implementing the plan it outlined in November 2002 to strengthen its financial profile. An update on such progress follows. o Asset sales and related debt reduction - o In April 2003, Alliant Energy completed the sale of its Australian assets to New Zealand-based Meridian. In July 2003, Alliant Energy completed the sales of its affordable housing and SmartEnergy businesses. o In July 2003, Whiting Petroleum Holdings, Inc. (a company formed to be a holding company for Whiting) filed a registration statement with the SEC relating to an IPO of its common stock. All of the shares of common stock to be sold in the proposed IPO will be offered by Alliant Energy. Alliant Energy currently intends to sell 51% or more of its interest in Whiting later in 2003 in the proposed IPO and currently plans to divest its remaining interest in Whiting by June 30, 2004, subject to market conditions. o If the proposed Whiting IPO is successfully executed, Alliant Energy would no longer consolidate its investment in Whiting. Whiting had $185 million of debt outstanding as of June 30, 2003. As a result, Whiting's debt would no longer be reported on Alliant Energy's balance sheet after the proposed IPO. In addition, Alliant Energy expects to use proceeds from the proposed IPO for debt reduction as well as some or all of the proceeds received from the divestiture of the remainder of its Whiting 29 business. The amount of proceeds ultimately received from Alliant Energy's divestiture of its Whiting business, and the timing of the completion of the transactions, is subject to a variety of factors, including the transaction structures used to exit this business. o Alliant Energy is in the process of selling some or all of its utility water business and has entered into an agreement in principle for the sale of its water utility serving the Beloit area at a sale price of $21 million, subject to contingencies including regulatory approvals and financing. Alliant Energy also continues the pursuit of the sale of its water utilities serving the Ripon and South Beloit areas. o As a result of the above completed and proposed asset sales, Alliant Energy expects to achieve aggregate debt reductions in excess of $800 million with a significant majority, if not all, expected to occur in 2003 with any remainder in 2004. Debt reductions realized to-date as a result of the asset sales are as follows (in millions): o Australia $320 o Affordable housing and SmartEnergy 110 (in July/August 2003) ----- o Total $430 ===== o Alliant Energy also expects to generate debt reductions of approximately $40 million in the coming months as a result of incremental tax benefits realized from the asset sales it has completed thus far. o Alliant Energy also continues to divest other less material assets and will continue reviewing other ways to narrow its strategic focus and business platforms. The proceeds realized from such asset sales are also expected to be available for debt reduction. o Alliant Energy may be required to pay premiums in connection with a portion of its debt reductions, which could result in charges to its earnings from continuing operations. o Common equity offering - in July 2003, Alliant Energy completed a public offering of 17.25 million shares of its common stock at a price per share to the public of $19.25. The net proceeds of approximately $318 million were used to make capital contributions of $200 million and approximately $118 million to WP&L and IP&L, respectively, in support of their respective domestic utility generation and reliability initiatives. The WP&L contribution satisfies an April 2003 PSCW order that required an equity infusion of $200 million by Alliant Energy into WP&L by July 2003, thus no customer refund is necessary. Consistent with the terms of the Alliant Energy short-term credit facility, the amount of borrowing capability under the facility was reduced by $18 million following the completion of the common equity offering. o Common stock dividend - Alliant Energy reduced its targeted annual common stock dividend from $2.00 per share to $1.00 per share effective with the dividend declared and paid in the first quarter of 2003. o Anticipated construction and acquisition expenditures for 2002 and 2003 - Alliant Energy reduced such aggregate expenditures by approximately $400 million from the plan that existed earlier in 2002. o Cost control - Alliant Energy is implementing additional cost control measures through its new Six Sigma program, its enterprise resource planning system that was placed in service in October 2002 and by a heightened focus on operating its domestic utility business in a manner that aligns operating expenses with the revenues granted in various rate filings. As a result of the progress noted above and the fact that Alliant Energy's cost control initiatives are expected to be an ongoing part of its business and, hence, will never be fully completed, Alliant Energy has now successfully executed all of its strategic actions announced in November 2002 other than the divestiture of its Whiting business. RATES AND REGULATORY MATTERS A summary of the regulatory environment is included in Alliant Energy's Current Report on Form 8-K dated June 4, 2003, and the Form 10-K filed by IP&L and WP&L for the year ended Dec. 31, 2002. Set forth below are several recent developments relating to the regulatory environment. 30 Alliant Energy's merger-related price freezes expired in April 2002 in all of its primary domestic utility jurisdictions and it has been addressing the recovery of its utility cost increases through numerous rate filings. Details of these rate cases are as follows (dollars in millions):
Expected Return Interim Interim Final Final Final on Utility Filing Increase Increase Effective Increase Effective Effective Common Case Type Date Requested Granted (1) Date Granted (1) Date Date Equity Notes ------------------ -------- -------- ----------- ------------ ---------- ------------ ---------- ---------- ---------- ------- WP&L: 2002 retail E/G/W 8/01 $104 $49 4/02 $82 9/02 N/A 12.3% 2003 retail E/G/W 5/02 123 -- N/A 81 4/03 N/A 12% (2) 2004 retail E/G/W 3/03 87 TBD TBD TBD TBD 1/04 TBD Wholesale E 2/02 6 6 4/02 3 1/03 N/A N/A Wholesale E 3/03 5 5 7/03 TBD TBD 10/03 N/A (3) IP&L retail - IA E 3/02 82 15 7/02 26 5/03 N/A 11.15% IP&L retail - IA G 7/02 20 17 10/02 13 TBD 8/03 11.05% (4) IP&L retail - MN E 5/03 5 2 7/03 TBD TBD 4/04 TBD ----------- ------------ ------------ Total $432 $94 $205 =========== ============ ============
(1) Interim rate relief is implemented, subject to refund, pending determination of final rates. The final rate relief granted replaces the amount of interim rate relief granted. (2) A party to the case representing selected commercial and industrial electric customers has filed an appeal to the judicial system to have the decision in this case remanded back to the PSCW for further consideration on issues of revenue increase amount and rate design. WP&L believes it is unlikely that the final outcome of this appeal will result in any changes to revenues or net income. (3) WP&L has a rate change moratorium agreement with a wholesale customer group that expired in July 2003. The requested rates went into effect in July 2003, subject to refund. Settlement discussions are currently underway. (4) Since the final increase is lower than the interim relief granted in October 2002, a refund plan was filed with the IUB in July 2003. IP&L is reserving all amounts related to the anticipated refund. A significant portion of the rate increases included in the previous table reflect the recovery of increased costs incurred by IP&L and WP&L, or costs they expect to incur, thus the increase in revenues related to these rate increases are not expected to result in a corresponding increase in income. IP&L announced in April 2003 that it will not file for an Iowa electric rate increase in 2003, based on 2002 test year information, due to the fact that the rate increase requested would have been modest and to ensure the case that IP&L expects to file in 2004 would not be delayed awaiting a decision on a case that would have been filed in 2003. The case IP&L expects to file in 2004 will include costs associated with the $400 million 500-MW combined cycle natural gas plant currently under construction in Iowa. IP&L, WP&L and South Beloit are currently in the process of determining what other rate case filings may be made in 2003. WP&L's retail electric rates are based on annual forecasted fuel and purchased-power costs. In June 2003, WP&L received approval from the PSCW to refund approximately $8 million to its retail electric customers due to overcollection of past fuel and purchased-power costs. The refund was completed in July 2003 and the impact of such refund had no material impact on WP&L's results of operations given reserves for such refund that it had previously recorded. In 2002, IP&L filed with the IRS for a change in method of accounting for tax purposes for 1987 through 2001 that would allow a current deduction related to mixed service costs. Such costs had previously been capitalized and depreciated for tax purposes over the appropriate tax lives. This change would create a significant current tax benefit that has not been reflected in IP&L's results of operations pending a decision from the IUB on the required rate making treatment of the benefit. In its April 2003 order, the IUB approved IP&L's proposed accounting treatment to defer the tax savings resulting from the change of accounting method until the IRS audit on this issue is complete. The rate making impact will be addressed once the issue is resolved with the IRS, which is expected to occur in 2004. There would be no material negative impact on IP&L's results of operations or financial position should the IRS reject IP&L's proposal. 31 In June 2003, the IUB dismissed, without prejudice, IP&L's plan to contribute and transfer transmission assets of 69 KV and greater to TRANSLink, a for-profit, transmission-only company. However, the IUB encouraged the participating companies to revise and refile their reorganization applications. IP&L is currently evaluating its options with respect to TRANSLink. IP&L and WP&L are members of the Midwest ISO, which is in the process of restructuring the bulk power market in its domain. Such restructuring could have an impact on the costs associated with Alliant Energy serving its utility customers' energy requirements. Given the anticipated regulatory treatment of any potential cost differences, Alliant Energy does not currently expect the ultimate outcome will have a material impact on its results of operations or financial condition. Legislation is currently pending in the U.S. Congress that would repeal PUHCA. However, it is uncertain when or whether such legislation will be enacted. 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 - Second Quarter Results - Alliant Energy's net income (loss) and --------------------------------- EPS for the second quarter were as follows (dollars in millions; totals may not foot due to rounding):
2003 2002 --------------------------- ----------------------------- Earnings (loss) from continuing operations: Net Income EPS Net Income EPS --------------- ----------- --------------- -------------- Utility $22.6 $0.25 $26.9 $0.30 Non-regulated (Resources) (2.2) (0.02) (25.5) (0.28) Alliant Energy parent and other (primarily taxes, interest and administrative and general) (8.7) (0.10) (6.9) (0.08) --------------- ----------- --------------- -------------- Total earnings (loss) from continuing operations 11.7 0.13 (5.5) (0.06) Earnings from discontinued operations: Operating results 5.8 0.06 6.0 0.07 Gain on sale of discontinued operations 40.7 0.44 -- -- Non-cash valuation and other accounting adjustments: Southern Hydro SFAS 133 income (loss) (0.1) -- 5.8 0.06 Discontinuing depreciation, depletion and amortization of assets held for sale 6.9 0.07 -- -- Valuation adjustments and selling costs (32.9) (0.35) -- -- --------------- ----------- --------------- -------------- Total earnings from discontinued operations 20.4 0.22 11.8 0.13 --------------- ----------- --------------- -------------- Net income $32.2 $0.35 $6.3 $0.07 =============== =========== =============== ==============
The lower utility earnings from continuing operations were largely due to milder weather conditions in the second quarter of 2003 compared to the same period in 2002. The positive impact on electric utility margin of several rate increases implemented in the last twelve months was largely offset by higher utility operating expenses and a higher utility effective income tax rate. The significant improvement in non-regulated results from continuing operations was primarily due to a $0.19 per share increase in the results from Alliant Energy's International business unit and $0.11 per share of asset valuation charges recorded in the second quarter of 2002. Alliant Energy recorded an after-tax gain on the sale of its Australian business of $41 million in the second quarter of 2003. In addition, the second quarter of 2003 results reflect after-tax charges of $33 million for valuation adjustments to reflect updated estimates of the market value of the $634 million of assets Alliant Energy classified as assets held for sale as of June 30, 2003 as well as selling costs related to the asset divestitures. 32 Domestic Electric Utility Margins - Electric margins and MWh sales for --------------------------------- Alliant Energy for the three months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $145,265 $135,032 8% 1,499 1,643 (9%) Commercial 98,659 90,209 9% 1,335 1,339 -- Industrial 147,121 134,314 10% 3,096 3,153 (2%) ---------------------------- ------------------------- Total from ultimate customers 391,045 359,555 9% 5,930 6,135 (3%) Sales for resale 40,581 38,970 4% 1,223 1,219 -- Other 12,482 14,125 (12%) 43 42 2% ---------------------------- ------------------------- Total revenues/sales 444,108 412,650 8% 7,196 7,396 (3%) ========================= Electric production fuels expense 82,033 70,980 16% Purchased-power expense 88,053 91,496 (4%) ---------------------------- Margin $274,022 $250,174 10% ============================
Electric margins and MWh sales for Alliant Energy for the six months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold ---------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change ---------------------------------------- ----------------------------------- Residential $311,413 $272,279 14% 3,569 3,516 2% Commercial 190,788 168,001 14% 2,723 2,635 3% Industrial 267,406 242,394 10% 5,990 5,999 -- ----------------------------- ------------------------ Total from ultimate customers 769,607 682,674 13% 12,282 12,150 1% Sales for resale 91,822 75,380 22% 2,555 2,422 5% Other 25,704 25,358 1% 94 86 9% ----------------------------- ------------------------ Total revenues/sales 887,133 783,412 13% 14,931 14,658 2% ======================== Electric production fuels expense 147,893 129,741 14% Purchased-power expense 218,432 163,833 33% ----------------------------- Margin $520,808 $489,838 6% =============================
Electric margin increased $23.8 million, or 10%, and $31.0 million, or 6%, for the three- and six-month periods, respectively, primarily related to the impact of various rate increases implemented in the second half of 2002 and the first six months of 2003, including increased revenues to recover a significant portion of increased operating expenses, and increased sales resulting from continued modest retail customer growth. The three-month increase was partially offset by milder weather conditions in the second quarter of 2003 compared to the same period in 2002. The six-month increase was partially offset by higher purchased-power and fuel costs at WP&L, which are being recovered with new rates effective in April 2003. Under PSCW rules, WP&L can seek emergency rate increases if its annual purchased-power and fuel costs are more than 3% higher than the estimated costs used to establish rates. In April 2003, WP&L implemented seasonal electric rates that result in higher rates for the period from June 1 through September 30 and lower rates in all other periods. As a result, total annual revenues are not expected to be impacted significantly, however, it is expected that going forward, each year's second and third quarter revenues will be higher and first and fourth quarter revenues will be lower. Such seasonal rates will impact this year to last year quarterly revenues through the first quarter of 2004. 33 Gas Utility Margins - Gas margins and Dth sales for Alliant Energy for the ------------------- three months ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $43,277 $34,991 24% 4,100 4,731 (13%) Commercial 21,794 16,956 29% 2,650 2,903 (9%) Industrial 5,422 4,076 33% 824 882 (7%) Transportation/other 5,899 9,343 (37%) 9,880 10,339 (4%) ---------------------------- ------------------------- Total revenues/sales 76,392 65,366 17% 17,454 18,855 (7%) ========================= Cost of utility gas sold 49,744 38,719 28% ---------------------------- Margin $26,648 $26,647 -- ============================
Gas margins and Dth sales for Alliant Energy for the six months ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2003 2002 Change 2003 2002 Change --------------------------------------- ------------------------------------ Residential $192,221 $111,577 72% 20,043 18,150 10% Commercial 98,316 54,952 79% 11,915 10,733 11% Industrial 17,494 10,117 73% 2,489 2,351 6% Transportation/other 26,242 16,961 55% 24,612 23,153 6% ---------------------------- -------------------------- Total revenues/sales 334,273 193,607 73% 59,059 54,387 9% ========================== Cost of utility gas sold 238,069 122,475 94% ---------------------------- Margin $96,204 $71,132 35% ============================
Gas revenues and cost of utility gas sold increased significantly for the six-month period due to the large increase in natural gas prices from the first half of 2002. Due to Alliant Energy's rate recovery mechanisms for gas costs, these increases alone had little impact on gas margin. Gas margin increased $25.1 million, or 35%, for the six-month period, primarily due to various rate increases, increased sales, which were largely due to more favorable weather conditions and continued modest retail customer growth, and improved performance related to WP&L's performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners). Refer to "Rates and Regulatory Matters" for discussion of various electric and gas rate filings. Non-regulated and Other Revenues - Details regarding Alliant Energy's -------------------------------- non-regulated and other revenues for the three and six months ended June 30 were as follows (in thousands):
Three Months Six Months ------------------------------ ------------------------------- 2003 2002 2003 2002 --------------- ------------- --------------- ------------- Integrated Services $79,169 $28,757 $226,922 $61,295 International 26,671 23,693 55,142 49,424 Investments 6,921 6,668 12,942 12,620 Other (includes eliminations) 13,031 7,326 25,670 15,538 --------------- ------------- --------------- ------------- $125,792 $66,444 $320,676 $138,877 =============== ============= =============== =============
The increased Integrated Services revenues for both periods were primarily due to increased gas revenues at Alliant Energy's natural gas marketing business, NG Energy, largely due to higher natural gas prices and volumes, and increased revenues at Alliant Energy's environmental consulting business. The increased Other revenues for both periods was primarily due to Resources' purchase of a 309-MW natural-gas fired power plant in Wisconsin in February 2003. Refer to Note 12 of Alliant Energy's "Notes to Consolidated Financial Statements" for further discussion of NG Energy. 34 Other Operating Expenses - Other operation and maintenance expenses for the ------------------------ three and six months ended June 30 were as follows (in thousands):
Three Months Six Months ------------------------------ ------------------------------ 2003 2002 2003 2002 -------------- ------------- ------------- ------------- Utility $158,570 $131,526 $310,139 $263,422 Integrated Services 78,269 26,561 217,464 54,515 International 19,407 20,073 39,169 40,418 Investments 4,464 3,794 8,201 7,508 Other (includes eliminations) 4,845 982 7,537 2,605 -------------- ------------- ------------- ------------- $265,555 $182,936 $582,510 $368,468 ============== ============= ============= =============
The utility increase for both periods was primarily due to increases in the amortization of deferred costs that are now being recovered in rates, the impact of a planned refueling outage at Kewaunee in the second quarter of 2003 and higher uncollectible customer accounts, employee benefits and insurance expenses. The three-month increase was partially offset by lower fossil generation expenses, largely due to the timing of plant maintenance activities. A significant portion of these cost increases are being recovered as a result of the rate increases implemented in 2002 and 2003. Refer to "Rates and Regulatory Matters" for additional information. The Integrated Services and Other increases were largely driven by the same factors impacting the revenue variances. Depreciation and amortization expense increased $7.4 million and $11.5 million for the three- and six-month periods, respectively, primarily due to acquisitions at the non-regulated businesses, higher contributions to IP&L's nuclear decommissioning trust fund and utility property additions. Taxes other than income taxes decreased $4.4 million and $6.1 million for the three- and six-month periods, respectively, largely due to decreased property taxes. Refer to "IP&L Results of Operations" for further discussion. Interest Expense and Other - Interest expense increased $10.2 million and -------------------------- $21.2 million for the three- and six-month periods, respectively, primarily due to higher average borrowing rates at Resources due to an increase in the mix of long-term versus short-term debt outstanding and additional debt outstanding at IP&L and the parent company. Equity income (loss) from Alliant Energy's unconsolidated investments for the three and six months ended June 30 was as follows (in thousands):
Three Months Six Months ---------------------------- ----------------------------- 2003 2002 2003 2002 ------------- ------------- -------------- ------------- ATC $3,962 $3,061 $7,856 $7,174 New Zealand 1,615 144 2,452 662 Brazil 6,825 (7,230) 2,239 (8,924) China* 269 157 594 475 Synfuel (began operations 5/02) (5,181) (2,999) (10,075) (2,999) Other 1,747 58 1,917 16 ------------- ------------- -------------- ------------- $9,237 ($6,809) $4,983 ($3,596) ============= ============= ============== =============
* Majority of investments are accounted for under the consolidation method. Equity income from unconsolidated investments increased $16.0 million and $8.6 million for the three- and six-month periods, respectively. The increased earnings for Brazil for both periods was primarily due to: foreign currency transaction gains (losses) of $2.5 million and ($3.6) million recorded in the second quarter of 2003 and 2002, respectively, related to $39 million in debt at one of the Brazilian operating companies; a 4.3% increase in electricity sales in the second quarter of 2003, compared to the same period in 2002; rate increases implemented at four of the Brazilian operating companies in the first half of 2003; a second quarter 2002 charge of $3.1 million related to the recovery in Brazil of the impacts of rationing; and other prior costs; these items were partially offset by higher interest expense at the Brazilian companies. In the second quarter of 2002, Synfuel, a direct subsidiary of Resources, purchased an equity interest in a synthetic fuel processing facility which generates operating losses at its fuel processing facility, which are more than offset by tax credits and the tax 35 benefit of the losses the project generates. All tax benefits are included in "Income taxes" in Alliant Energy's Consolidated Statements of Income. Refer to "Other Matters - Other Future Considerations" for further discussion of the tax credits associated with the Synfuel investment. AFUDC increased $2.9 million and $5.1 million for the three- and six-month periods, respectively, primarily due to increased construction expenditures at IP&L related to the $400 million generating facility it is constructing in Iowa under its Power Iowa program. Preferred dividend requirements of subsidiaries increased $2.3 million and $4.8 million for the three- and six-month periods, respectively, due to an increase in the principal amount of preferred stock outstanding at IP&L and a higher dividend rate. Refer to Note 7 of Alliant Energy's "Notes to Consolidated Financial Statements" for discussion of the asset valuation charge recorded by Alliant Energy in the first quarter of 2002 related to its McLeod available-for-sale securities. Miscellaneous, net income increased $14.7 million and $21.9 million for the three- and six-month periods, respectively, primarily due to the recording of pre-tax asset valuation charges in 2002 related to Alliant Energy's investments in Enermetrix (Q1 $8.5 million); Energy Technologies (Q1 $5.0 million); and a loan receivable from a Mexican development company in connection with development of a resort community in Mexico (Q2 $6.9 million). Also contributing to the increase for both periods were improvements in the pre-tax, non-cash SFAS 133 valuation adjustments related to the derivative component of Alliant Energy's exchangeable senior notes and McLeod trading securities. Income Taxes - The effective income tax rates were 28.4% and 29.4% for the ------------ three- and six-month periods ended June 30, 2003, respectively, while the effective rates for the same periods in 2002 were not meaningful given the insignificant amount of pre-tax loss from continuing operations in such periods. The effective tax rate for both periods was lower than the statutory federal income tax rate of 35% largely due to the impact of tax credits, which were partially offset by property-related temporary differences for which deferred taxes are not provided pursuant to rate making principles, and the impact of state taxes. Income from Discontinued Operations - Income from discontinued operations ----------------------------------- increased $8.6 million and decreased $18.1 million for the three- and six-month periods, respectively. The three-month increase was discussed earlier in "Overview - Second Quarter Results." The six-month decrease was primarily due to the recording of after-tax valuation adjustments in 2003 of $59 million to reflect updated estimates of the market value, less selling costs, of Alliant Energy's assets classified as held for sale and lower non-cash SFAS 133 income in 2003 related to the valuation of electricity derivatives at Southern Hydro. These items were partially offset by the after-tax gain on the sale of Alliant Energy's Australian business of $41 million recorded in the second quarter of 2003, impact of discontinuing depreciation, depletion and amortization of Alliant Energy's assets held for sale in 2003 and higher oil and gas prices at Whiting. Refer to Note 8 of Alliant Energy's "Notes to Consolidated Financial Statements" for further discussion of Alliant Energy's discontinued operations. Cumulative Effect of Changes in Accounting Principles - In the first quarter ----------------------------------------------------- of 2003, Alliant Energy recorded after-tax charges of $4 million and $2 million for the cumulative effect of changes in accounting principles related to the adoption on Jan. 1, 2003 of SFAS 143 and EITF Issue 02-3 within its oil and gas and Integrated Services businesses, respectively. The oil and gas business has been classified as held for sale. Refer to Notes 11 and 12 of Alliant Energy's "Notes to Consolidated Financial Statements" for further information. 36 IP&L RESULTS OF OPERATIONS Overview - Second Quarter Results - Earnings available for common stock --------------------------------- decreased $10.2 million, primarily due to increased operating expenses, preferred dividend requirements and a higher effective income tax rate. Electric Utility Margins - Electric margins and MWh sales for IP&L for the ------------------------ three months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $74,629 $76,432 (2%) 767 897 (14%) Commercial 57,326 54,191 6% 819 810 1% Industrial 86,819 80,467 8% 1,933 2,008 (4%) ----------------------------- ------------------------ Total from ultimate customers 218,774 211,090 4% 3,519 3,715 (5%) Sales for resale 8,081 8,400 (4%) 288 350 (18%) Other 7,861 6,776 16% 25 26 (4%) ----------------------------- ------------------------ Total revenues/sales 234,716 226,266 4% 3,832 4,091 (6%) ======================== Electric production fuels expense 47,931 39,194 22% Purchased-power expense 37,438 37,062 1% ----------------------------- Margin $149,347 $150,010 -- =============================
Electric margins and MWh sales for IP&L for the six months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $164,329 $152,397 8% 1,923 1,919 -- Commercial 111,595 100,272 11% 1,677 1,598 5% Industrial 156,042 143,334 9% 3,779 3,842 (2%) ----------------------------- ------------------------- Total from ultimate customers 431,966 396,003 9% 7,379 7,359 -- Sales for resale 18,415 16,398 12% 591 658 (10%) Other 14,664 12,868 14% 52 54 (4%) ----------------------------- ------------------------- Total revenues/sales 465,045 425,269 9% 8,022 8,071 (1%) ========================= Electric production fuels expense 75,577 67,685 12% Purchased-power expense 82,494 65,221 26% ----------------------------- Margin $306,974 $292,363 5% =============================
Electric margin decreased $0.7 million and increased $14.6 million, or 5%, for the three- and six-month periods, respectively. The three-month decrease was primarily due to lower sales volumes due to milder weather conditions in the second quarter of 2003 compared to the same period in 2002 and lower industrial sales. These items were largely offset by the impact of retail rate increases implemented in 2002 and 2003, including increased revenues to recover a significant portion of IP&L's increased operating expenses, lower purchased-power capacity costs and increased sales resulting from continued modest retail customer growth. The six-month increase was primarily due to the impact of retail rate increases implemented in 2002 and 2003, increased sales resulting from continued modest retail customer growth and lower-purchased-power capacity costs. 37 Gas Utility Margins - Gas margins and Dth sales for IP&L for the three months ------------------- ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $24,636 $20,517 20% 2,325 2,706 (14%) Commercial 11,428 9,499 20% 1,380 1,553 (11%) Industrial 4,144 3,116 33% 678 685 (1%) Transportation/other 457 2,380 (81%) 6,546 6,347 3% ----------------------------- ------------------------ Total revenues/sales 40,665 35,512 15% 10,929 11,291 (3%) ======================== Cost of gas sold 27,222 22,210 23% ----------------------------- Margin $13,443 $13,302 1% =============================
Gas margins and Dth sales for IP&L for the six months ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $102,846 $64,377 60% 11,770 10,644 11% Commercial 50,057 31,002 61% 6,644 6,049 10% Industrial 11,199 6,583 70% 1,768 1,569 13% Transportation/other 3,240 5,292 (39%) 14,889 14,273 4% ---------------------------- -------------------------- Total revenues/sales 167,342 107,254 56% 35,071 32,535 8% ========================== Cost of gas sold 118,993 68,570 74% ---------------------------- Margin $48,349 $38,684 25% ============================
Gas revenues and cost of gas sold increased significantly for the six-month period due to the large increase in natural gas prices from the first half of 2002. Such increases alone had no impact on IP&L's gas margin given its rate recovery mechanism for gas costs. Gas margin increased $0.1 million, or 1%, and $9.7 million, or 25%, for the three- and six-month periods, respectively, primarily due to the impact of the retail rate increase effective in October 2002. The three-month increase was largely offset by the decreased sales. Increased sales, primarily due to more favorable weather conditions in the first quarter of 2003 compared to the same period in 2002, also contributed to the six-month increase. Refer to "Rates and Regulatory Matters" for discussion of IP&L's electric and gas rate filings. Other Operating Expenses - Other operation and maintenance expenses increased ------------------------ $4.9 million and $8.9 million for the three- and six-month periods, respectively, primarily due to increased employee benefits, uncollectible customer accounts and insurance expenses, partially offset by decreased electric transmission and distribution expenses. Depreciation and amortization expense increased $4.6 million and $8.9 million for the three- and six-month periods, respectively, primarily due to increased amortization of software, increased contributions to the nuclear decommissioning trust fund and property additions. Taxes other than income taxes decreased $3.7 million and $4.9 million for the three- and six-month periods, respectively, largely due to decreased property taxes, primarily related to an April 2003 property tax settlement. 38 IP&L appealed to the Iowa State Board of Tax Review, an agency of the State of Iowa, regarding assessments of Iowa property tax made by the Director of the Iowa Department of Revenue and Finance. The appeals involved assessments for the years 1994 through 1998 and sought reduction of the assessments reflecting the true value of IP&L's operating property. In April 2003, IP&L settled this matter with the Iowa Department of Revenue and Finance. IP&L expects to realize reductions in property tax expense of $7.7 million, $5.1 million, $3.6 million and $2.1 million in 2003, 2004, 2005, and 2006 and thereafter, respectively, in comparison to what property tax expense would have been without the settlement. The impact of the settlement on ratepayers will be addressed in future ratemaking proceedings. Interest Expense and Other - AFUDC increased $2.1 million and $3.6 million -------------------------- for the three- and six-month periods, respectively, due to increased construction expenditures related to the $400 million generating facility being constructed in Iowa under IP&L's Power Iowa program. Miscellaneous, net income decreased $3.9 million and $3.5 million for the three- and six-month periods, respectively, primarily due to lower income from sales of non-commodity products and services. Income Taxes - The effective income tax rates were 40.8% and 39.6% for the ------------ three- and six-month periods ended June 30, 2003, respectively, compared with 28.7% and 36.9% for the same periods last year. The increases were due to increases in property-related temporary differences for which deferred taxes were not provided pursuant to rate making principles, partially offset by the impact of state taxes. Preferred Dividend Requirements - Preferred dividend requirements increased ------------------------------- $2.3 million and $4.8 million for the three- and six-month periods, respectively, due to an increase in the principal amount of preferred stock outstanding and a higher dividend rate. WP&L RESULTS OF OPERATIONS Overview - Second Quarter Results - Earnings available for common stock --------------------------------- increased $7.1 million, primarily due to higher electric margins, partially offset by increased operating expenses. Electric Utility Margins - Electric margins and MWh sales for WP&L for the ------------------------ three months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $70,636 $58,600 21% 732 746 (2%) Commercial 41,333 36,018 15% 516 530 (3%) Industrial 60,302 53,847 12% 1,163 1,145 2% ---------------------------- ------------------------- Total from ultimate customers 172,271 148,465 16% 2,411 2,421 -- Sales for resale 32,500 30,570 6% 935 870 7% Other 4,621 7,349 (37%) 18 15 20% ---------------------------- ------------------------- Total revenues/sales 209,392 186,384 12% 3,364 3,306 2% ========================= Electric production fuels expense 34,102 31,787 7% Purchased-power expense 50,615 54,435 (7%) ---------------------------- Margin $124,675 $100,162 24% ============================
39 Electric margins and MWh sales for WP&L for the six months ended June 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $147,084 $119,882 23% 1,646 1,597 3% Commercial 79,193 67,729 17% 1,046 1,037 1% Industrial 111,364 99,060 12% 2,211 2,157 3% ---------------------------- ------------------------- Total from ultimate customers 337,641 286,671 18% 4,903 4,791 2% Sales for resale 73,407 58,982 24% 1,964 1,763 11% Other 11,040 12,490 (12%) 42 32 31% ---------------------------- ------------------------- Total revenues/sales 422,088 358,143 18% 6,909 6,586 5% ========================= Electric production fuels expense 72,316 62,056 17% Purchased-power expense 135,938 98,612 38% ---------------------------- Margin $213,834 $197,475 8% ============================
Electric margin increased $24.5 million, or 24%, and $16.4 million, or 8%, for the three- and six-month periods, respectively, primarily due to the implementation of rate increases in 2002 and 2003, including increased revenues to recover a significant portion of WP&L's increased operating expenses, and increased sales resulting from continued modest retail customer growth. The three-month increase was partially offset by milder weather conditions in the second quarter of 2003 compared to the same period in 2002. The six-month increase was partially offset by higher purchased-power and fuel costs which are being recovered with new rates effective in April 2003. Under PSCW rules, WP&L can seek emergency rate increases if its annual purchased-power and fuel costs are more than 3% higher than the estimated costs used to establish rates. WP&L continued to see improvements in the economy as evidenced by the increased sales to industrial customers in both periods. In April 2003, WP&L implemented seasonal electric rates that result in higher rates for the period from June 1 through September 30 and lower rates in all other periods. As a result, total annual revenues are not expected to be impacted significantly, however, it is expected that going forward, each year's second and third quarter revenues will be higher and first and fourth quarter revenues will be lower. Such seasonal rates will impact this year to last year quarterly revenues through the first quarter of 2004. Gas Utility Margins - Gas margins and Dth sales for WP&L for the three months ------------------- ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $18,641 $14,474 29% 1,775 2,025 (12%) Commercial 10,366 7,457 39% 1,270 1,350 (6%) Industrial 1,278 960 33% 146 197 (26%) Transportation/other 5,442 6,963 (22%) 3,334 3,992 (16%) --------------------------- ------------------------ Total revenues/sales 35,727 29,854 20% 6,525 7,564 (14%) ======================== Cost of gas sold 22,522 16,509 36% --------------------------- Margin $13,205 $13,345 (1%) ===========================
40 Gas margins and Dth sales for WP&L for the six months ended June 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2003 2002 Change 2003 2002 Change --------------------------------------- ----------------------------------- Residential $89,375 $47,200 89% 8,273 7,506 10% Commercial 48,259 23,950 101% 5,271 4,684 13% Industrial 6,295 3,534 78% 721 782 (8%) Transportation/other 23,002 11,669 97% 9,723 8,880 9% ---------------------------- ------------------------- Total revenues/sales 166,931 86,353 93% 23,988 21,852 10% ========================= Cost of gas sold 119,076 53,905 121% ---------------------------- Margin $47,855 $32,448 47% ============================
Gas revenues and cost of gas sold increased significantly for the six-month period due to the large increase in natural gas prices from the first half of 2002. Due to WP&L's rate recovery mechanism for gas costs, these increases alone had little impact on gas margin. Gas margin decreased $0.1 million, or 1%, and increased $15.4 million, or 47%, for the three- and six-month periods, respectively. The three-month decrease was primarily due to decreased sales, largely offset by the implementation of rate increases in 2002 and 2003. The six-month increase was primarily due to the implementation of rate increases in 2002 and 2003, increased sales largely due to more favorable weather conditions in the first quarter of 2003 compared to the same period in 2002 and improved results from WP&L's performance-based commodity cost recovery program (benefits are shared by ratepayers and shareowners). Refer to "Rates and Regulatory Matters" for discussion of WP&L's electric and gas rate filings. Other Operating Expenses - Other operation and maintenance expenses increased ------------------------ $20.3 million and $36.1 million for the three- and six-month periods, respectively, primarily due to increases in the amortization of deferred costs that are now being recovered in rates, the impact of a planned refueling outage at Kewaunee in the second quarter of 2003, uncollectible customer accounts, employee benefits and insurance expenses. The three-month increase was partially offset by lower fossil generation expenses, largely due to the timing of plant maintenance activities. A significant portion of these cost increases are being recovered as a result of the rate increases implemented in 2002 and 2003. Depreciation and amortization expense increased $1.1 million and decreased $1.2 million for the three- and six-month periods, respectively, primarily due to changes in earnings on the nuclear decommissioning trust fund and property additions. The accounting for earnings on the nuclear decommissioning trust fund results in no net income impact. Interest income increases for earnings on the trust fund and the corresponding offset is recorded through depreciation expense. Interest Expense and Other - Interest income increased $2.8 million and -------------------------- decreased $1.9 million largely due to changes in earnings on the nuclear decommissioning trust fund. Miscellaneous, net income increased $3.1 million and $1.3 million for the three- and six-month periods, respectively, primarily due to higher income from sales of non-commodity products and services. Income Taxes - The effective income tax rates were 37.9% and 34.7% for the ------------ three- and six-month periods ended June 30, 2003, respectively, compared with 35.1% and 36.4%, respectively, for the same periods last year. 41 LIQUIDITY AND CAPITAL RESOURCES Cash Flows for the Six-Month Periods - Selected information from Alliant ------------------------------------ Energy's, IP&L's and WP&L's Consolidated Statements of Cash Flows for the six months ended June 30 was as follows (in thousands):
Alliant Energy IP&L WP&L ----------------------- ----------------------- ----------------------- Cash flows from (used for): 2003 2002 2003 2002 2003 2002 ----------- ----------- ----------- ----------- ----------- ----------- Operating activities $220,720 $262,330 $197,467 $140,492 $83,445 $144,804 Financing activities 9,356 27,601 97,103 (24,721) (21,158) (55,648) Investing activities (225,699) (307,024) (296,921) (115,777) (70,789) (89,166)
Alliant Energy's cash flows from operating activities decreased $42 million primarily due to timing of Alliant Energy's refueling outages and changes in working capital; cash flows from financing activities decreased $18 million primarily due to net changes in the amount of debt issued and retired, partially offset by lower common stock dividends due to the dividend reduction implemented in the first quarter of 2003; cash flows used for investing activities decreased $81 million primarily due to proceeds received from the sale of Alliant Energy's Australian business in April 2003, partially offset by the 2003 acquisition by Resources of a natural gas-fired power plant in Wisconsin and increased construction and acquisition expenditures associated with the construction of the natural gas plant in Iowa as part of IP&L's Power Iowa program. IP&L's cash flows from operating activities increased $57 million primarily due to changes in working capital and the timing of a refueling outage at DAEC; cash flows from financing activities increased $122 million primarily due to net changes in the amount of short-term debt issued and retired; and cash flows used for investing activities increased $181 million primarily due to increased construction and acquisition expenditures associated with the construction of the Power Iowa natural gas plant. WP&L's cash flows from operating activities decreased $61 million primarily due to changes in working capital and the timing of a refueling outage at Kewaunee; and cash flows used for financing activities decreased $34 million primarily due to net changes in the amount of short-term debt issued and retired. Common Equity - Refer to "Strategic Actions" for discussion of a common ------------- equity offering completed by Alliant Energy in July 2003. Debt - Alliant Energy and its subsidiaries are party to various credit ---- facilities and other borrowing arrangements. The aggregate borrowing capacity under short-term credit agreements of Alliant Energy and its subsidiaries at June 30, 2003 was $826 million. At June 30, 2003, the unused capacity under these facilities was $486 million. The credit agreements relating to $800 million and $26 million of this borrowing capacity expire in October 2003 and over the next nine months, respectively. While Alliant Energy anticipates renewing these credit facilities prior to maturity, it cannot provide any assurance it will be able to do so. In the second quarter of 2003, Resources exercised its option to terminate its $250 million standby credit facility. Alliant Energy's, IP&L's and WP&L's credit facility agreements contain various covenants, including the following:
Covenant Description Covenant Requirement Status at June 30, 2003 ------------------------------------------ ------------------------- ------------------------- Alliant Energy: Consolidated debt-to-capital ratio * Less than 65% 58.7% Consolidated net worth * At least $1.4 billion $1.9 billion EBITDA interest coverage ratio * At least 2.5x 3.3x IP&L debt-to-capital ratio Less than 58% 51.9% WP&L debt-to-capital ratio Less than 58% 41.3%
* In compliance with the agreements, results of discontinued operations have been included in the covenant calculations. Alliant Energy is also subject to a PUHCA requirement whereby Alliant Energy's common equity balance must be at least 30% of its total consolidated capitalization, including short-term debt. Alliant Energy's common equity ratio as of June 30, 2003, as computed under such requirement, was 37.1%. 42 Information regarding commercial paper at June 30, 2003 was as follows (dollars in millions):
Alliant Energy (Parent) IP&L WP&L ------------------------ ------------------- ------------------ Commercial paper outstanding $86.0 $155.9 $74.5 Weighted average maturity of commercial paper 1 day 8 days 18 days Discount rates on commercial paper 1.75% 1.15-1.43% 1.18-1.26%
Alliant Energy had no borrowings outstanding under its bank facilities at June 30, 2003. Refer to "Strategic Actions" for information on debt reduction during 2003 related to recent steps Alliant Energy has taken to implement the plan it outlined in November 2002 to strengthen its financial profile. Off-Balance Sheet Arrangements - A summary of Alliant Energy's off-balance ------------------------------ sheet arrangements is included in Alliant Energy's Current Report on Form 8-K, dated June 4, 2003, and the Form 10-K filed by IP&L and WP&L for the year ended Dec. 31, 2002 and have not changed materially from those reported in such filings. Environmental - A summary of Alliant Energy's environmental matters is ------------- included in Alliant Energy's Current Report on Form 8-K, dated June 4, 2003, and the Form 10-K filed by IP&L and WP&L for the year ended Dec. 31, 2002 and have not changed materially from those reported in such filings. Construction and Acquisition Expenditures - In February 2003, Resources ----------------------------------------- announced the purchase of a 309-MW, non-regulated, natural gas-fired power plant in Wisconsin for $109 million, which Resources financed with a $73 million 8-year secured credit facility ($58 million of borrowings were outstanding at June 30, 2003), which is non-recourse to Alliant Energy. The entire power output of the facility is sold under contract to Milwaukee-based We Energies through June 2008. 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 Alliant Energy's Current Report on Form 8-K, dated June 4, 2003, and IP&L's and WP&L's Form 10-K for the year ended Dec. 31, 2002 and have not changed materially from those reported in such filings, except as described below. Currency Risk - Alliant Energy has investments in various countries where the net investments are not hedged, including Brazil, China, New Zealand and Canada. As a result, these investments are subject to currency exchange risk with fluctuations in currency exchange rates. At June 30, 2003, Alliant Energy had a cumulative foreign currency translation loss, net of any tax benefits realized, of $95 million, which related to decreases in value of the Brazil real of $94 million and New Zealand dollar of $1 million, all in relation to the U.S. dollar. This loss is recorded in "Accumulated other comprehensive loss" on Alliant Energy's Consolidated Balance Sheets. Based on Alliant Energy's investments at June 30, 2003, a 10% sustained increase/decrease over the next 12 months in the foreign exchange rates of Brazil, China, New Zealand and Canada would result in a corresponding increase/decrease in the cumulative foreign currency translation loss of $54 million. Alliant Energy's equity income (loss) from its foreign investments is also impacted by fluctuations in currency exchange rates. Alliant Energy also has currency exchange risk associated with approximately $39 million of debt outstanding at one of the Brazilian operating companies. For the three and six months ended June 30, 2003, Alliant Energy recorded equity income of $2.5 million and $3.0 million, respectively, and for the same periods in 2002, Alliant Energy recorded equity losses of $3.6 million and $2.8 million, respectively, related to its share of the foreign currency transaction gains/losses on such debt. Based on the loan balance and currency rates at June 30, 2003, a 10% change in the currency rates would result in a $2.9 million pre-tax increase/decrease in net income. 43 In addition, Alliant Energy has currency exchange risk associated with approximately $18 million of payables at one of its Canadian operating companies. For the three months ended June 30, 2003, Alliant Energy recorded pre-tax income of $2.1 million related to the foreign currency transaction gains/losses on such payable. Based on the payables balance and currency rates at June 30, 2003, a 10% change in the currency rates would result in a $1.8 million pre-tax increase/decrease in net income. Accounting Pronouncements - In April 2003, the FASB issued SFAS 149, ------------------------- "Amendment of SFAS 133 on Derivative Instruments and Hedging Activities," which amends and clarifies accounting for derivative instruments, including certain derivative instruments embedded in other contracts, and for hedging activities under SFAS 133. The amendments set forth in SFAS 149 improve financial reporting by requiring that contracts with comparable characteristics be accounted for similarly. SFAS 149 clarifies under what circumstances a contract with an initial net investment meets the characteristic of a derivative as discussed in SFAS 133 and when a derivative contains a financing component that warrants special reporting in the statement of cash flows, as well as amending certain other existing pronouncements. Those changes will result in more consistent reporting of contracts that are derivatives in their entirety or that contain embedded derivatives that warrant separate accounting. SFAS 149 is effective for contracts entered into or modified after June 30, 2003, except for certain implementation issues and certain provisions of forward purchase and sale contracts and for hedging relationships designated after June 30, 2003. Alliant Energy continues to evaluate the potential impacts of SFAS 149 on new contracts entered into after June 30, 2003. In May 2003, the FASB issued SFAS 150, "Accounting for Certain Financial Instruments with Characteristics of Both Liabilities and Equity," which requires an issuer to classify outstanding free-standing financial instruments within its scope as a liability on its balance sheets even though the instruments have characteristics of equity. Alliant Energy adopted SFAS 150 on July 1, 2003 with no material impact on Alliant Energy's financial condition or results of operations. Critical Accounting Policies - A summary of Alliant Energy's critical ---------------------------- accounting policies is included in Alliant Energy's Current Report on Form 8-K, dated June 4, 2003, and IP&L's and WP&L's Form 10-K for the year ended Dec. 31, 2002 and have not changed materially from those reported in such filings. 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: Alliant Energy holds unconsolidated investments in certain Brazilian electric utility companies. The Brazilian utilities are negotiating with creditors to restructure and convert approximately $180 million, as converted from local currency to U.S. dollars, of short-term and long-term debt currently outstanding into new long-term debentures and other longer-term debt. In the second quarter of 2003, Standard and Poor's issued a formal rating on the debentures of 'brBBB+' with a negative outlook. The proposed refinancing has been approved by the shareowners of the Brazilian utilities. The refinancing is also subject to other approvals in the ordinary course and final closing that are currently expected to be complete in the third quarter of 2003. If the refinancing is not completed as anticipated and the Brazilian utilities are unable to extend or repay certain obligations outstanding, then the liquidity position of the Brazilian utilities may be significantly adversely affected. In such an event, Alliant Energy is not required to invest any additional capital in Brazil but it could lead to material asset valuation charges as relates to Alliant Energy's investments in its Brazilian utilities. In June 2003, the IRS announced it is reviewing the scientific validity of test procedures and results used by companies claiming tax credits for producing synthetic fuels from coal and may withdraw such credits for operations that fail to meet federal standards which require, among other things, a significant chemical change to occur in the process. Since the second quarter of 2002, Alliant Energy has been an investor in a synthetic fuel facility and continued to record these tax credits as of June 30, 2003. Alliant Energy currently estimates its tax credits for producing synthetic fuels to be approximately $23 million and $15 million for 2003 and 2002, respectively. The synthetic fuel facility Alliant Energy partially owns previously received a private letter ruling from the IRS, which states that based on the facts submitted, a significant chemical change was achieved in its process. Alliant Energy cannot predict the outcome of the latest reviews by the IRS. 44 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." ITEM 4. CONTROLS AND PROCEDURES Alliant Energy's, IP&L's and WP&L's management evaluated, with the participation of each of Alliant Energy's, IP&L's and WP&L's Chief Executive Officer, Chief Financial Officer and Disclosure Committee, the effectiveness of the design and operation of Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures as of the end of the quarter ended June 30, 2003 pursuant to the requirements of the Securities Exchange Act of 1934, as amended. Based on those evaluations, the Chief Executive Officer and the Chief Financial Officer concluded that Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures were effective as of the end of the quarter ended June 30, 2003. There was no change in Alliant Energy's, IP&L's and WP&L's internal control over financial reporting that occurred during the quarter ended June 30, 2003 that has materially affected, or is reasonably likely to materially affect, Alliant Energy's, IP&L's or WP&L's internal control over financial reporting. PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Alliant Energy On April 17, 2003, a purported class action shareowner lawsuit was filed against Alliant Energy, Erroll B. Davis, Jr., Thomas M. Walker and John E. Kratchmer in the U.S. District Court for the Western District of Wisconsin as Case No. 03-C-0191. Several substantially similar cases were subsequently filed in the same court and were consolidated into one action. The actions were allegedly brought on behalf of purchasers of Alliant Energy securities from Jan. 29, 2002 through July 18, 2002. The amended consolidated complaint alleged that the defendants made false and misleading statements in relation to Alliant Energy's expected performance of its various non-regulated businesses. On Aug. 13, 2003, the court, acting upon a motion filed by the defendants, dismissed the action without prejudice. 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. The district court ultimately dismissed the case on summary judgment grounds in May 2002. Alliant Energy and WP&L appealed the district court's decision to the 7th Circuit Court of Appeals in June 2002. In May 2003, the 7th Circuit ruled that it is unconstitutional to require public utility holding companies with Wisconsin utility subsidiaries to be incorporated in the state of Wisconsin. The remaining WUHCA provisions that Alliant Energy challenged were upheld as constitutional. Alliant Energy filed a petition for rehearing with the 7th Circuit regarding those provisions that were upheld, which was denied in July 2003. Alliant Energy is considering petitioning the U.S. Supreme Court to review the case. 45 ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS ALLIANT ENERGY At Alliant Energy's annual meeting of shareowners held on May 28, 2003, Erroll B. Davis, Jr., Robert W. Schlutz, and Wayne H. Stoppelmoor were elected as directors of Alliant Energy for terms expiring in 2006. The following sets forth certain information with respect to the election of these directors at the annual meeting. Name of Nominee Votes For Votes Withheld --------------- --------- -------------- Erroll B. Davis, Jr. 69,786,469 5,924,198 Robert W. Schlutz 71,012,428 4,698,239 Wayne H. Stoppelmoor 70,911,446 4,799,221 The following are the other directors of Alliant Energy whose terms of office continued after the 2003 annual meeting: Jack B. Evans, David A. Perdue, and Judith D. Pyle, with terms expiring in 2004; and Alan B. Arends, Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005. Effective as of the date of the annual meeting, Lee Liu and Joyce L. Hanes both retired. IP&L At IP&L's annual meeting of shareowners held on May 6, 2003, Erroll B. Davis, Jr., Robert W. Schlutz, and Wayne H. Stoppelmoor were elected as directors of IP&L for terms expiring in 2006. Alliant Energy voted all of the outstanding shares of common stock of IP&L (consisting of 13,370,788 shares) in favor of the election of these individuals. The following are the other directors of IP&L whose terms of office continued after the 2003 annual meeting: Jack B. Evans, David A. Perdue, and Judith D. Pyle, with terms expiring in 2004; and Alan B. Arends, Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005. Effective as of the date of the annual meeting, Lee Liu and Joyce L. Hanes both retired. WP&L At WP&L's annual meeting of shareowners held on June 5, 2003, Erroll B. Davis, Jr., Robert W. Schlutz, and Wayne H. Stoppelmoor were elected as directors of WP&L for terms expiring in 2006. The following sets forth certain information with respect to the election of these directors at the annual meeting. Name of Nominee Votes For Votes Withheld --------------- --------- -------------- Erroll B. Davis, Jr. 13,654,011 6,316 Robert W. Schlutz 13,655,673 4,654 Wayne H. Stoppelmoor 13,655,381 4,946 The following are the other directors of WP&L whose terms of office continued after the 2003 annual meeting: Jack B. Evans, David A. Perdue, and Judith D. Pyle, with terms expiring in 2004; and Alan B. Arends, Katharine C. Lyall, Singleton B. McAllister, and Anthony R. Weiler, with terms expiring in 2005. Effective as of the date of the annual meeting, Lee Liu and Joyce L. Hanes both retired. 46 ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits: The following Exhibits are filed herewith or incorporated by -------- reference. 10.1 Amendment No. 1 to Credit Agreement, dated as of Dec. 5, 2002, among Alliant Energy, the Lenders party thereto and Bank One, NA, as agent 10.2 Amendment No. 2 to Credit Agreement, dated as of June 27, 2003, among Alliant Energy, the Lenders party thereto and Bank One, NA, as agent 10.3 Second Amendment to Credit Agreement, dated as of June 30, 2003, by and among Whiting, Bank One, NA, as Administrative Agent and each of the Financial Institutions a party thereto (incorporated by reference to Exhibit 4.4 of Whiting Petroleum Holdings, Inc.'s Registration Statement on Form S-1 (Registration No. 333-107341)) 31.1 Certification of the Chairman, President and Chief Executive Officer (CEO) for Alliant Energy 31.2 Certification of the Executive Vice President and Chief Financial Officer (CFO) for Alliant Energy 31.3 Certification of the Chairman and CEO for IP&L 31.4 Certification of the Executive Vice President and CFO for IP&L 31.5 Certification of the Chairman and CEO for WP&L 31.6 Certification of the Executive Vice President and CFO for WP&L 32.1 Written Statement of the CEO and CFO Pursuant to 18 U.S.C. Section 1350 for Alliant Energy 32.2 Written Statement of the CEO and CFO Pursuant to 18 U.S.C. Section 1350 for IP&L 32.3 Written Statement of the CEO and CFO Pursuant to 18 U.S.C. Section 1350 for WP&L (b) Reports on Form 8-K: -------------------- Alliant Energy Alliant Energy filed a Current Report on Form 8-K, dated June 26, 2003, reporting (under Item 9) information with respect to its strategic actions, certain other recent developments and 2003 earnings guidance. Alliant Energy filed a Current Report on Form 8-K, dated June 4, 2003, reporting (under Items 5 and 7) information identical to the corresponding sections of Alliant Energy's Form 10-K Annual Report for the year ended Dec. 31, 2002, except that all such information has been updated to the extent required to report energy trading contracts on a net rather than gross basis in the income statement for all periods presented as a result of adopting EITF Issue 02-3 and the impact of separately classifying and reporting SmartEnergy as a discontinued operation and asset held for sale based on Alliant Energy's January 2003 decision to sell SmartEnergy. Alliant Energy filed a Current Report on Form 8-K, dated April 28, 2003, reporting (under Items 7 and 9 (information provided under Item 12)) that it issued a press release announcing its earnings for the quarter ended March 31, 2003 and its earnings guidance for 2003, and a copy of the script of the April 28, 2003 conference call to discuss those items. IP&L - None. WP&L - None. 47 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 14th day of August 2003.
ALLIANT ENERGY CORPORATION -------------------------- Registrant By: /s/ John E. Kratchmer Vice President-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 Vice President-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 Vice President-Controller and Chief Accounting Officer ------------------------- John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
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