-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, L+YWtXfqkGccZ07AYVSxIWxnCngQ+iq+A97CII219hnr4irPhFfpQAIFi5uE+kCl 3IyGX6jCS7BeEX5jYz5F2A== 0000018654-96-000011.txt : 19960816 0000018654-96-000011.hdr.sgml : 19960816 ACCESSION NUMBER: 0000018654-96-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: CIPSCO INC CENTRAL INDEX KEY: 0000860520 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 371260920 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-10628 FILM NUMBER: 96614187 BUSINESS ADDRESS: STREET 1: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 BUSINESS PHONE: 2175233600 MAIL ADDRESS: STREET 1: 607 E ADAMS STREET CITY: SPRINGFIELD STATE: IL ZIP: 62739 FILER: COMPANY DATA: COMPANY CONFORMED NAME: CENTRAL ILLINOIS PUBLIC SERVICE CO CENTRAL INDEX KEY: 0000018654 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 370211380 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-20455 FILM NUMBER: 96614188 BUSINESS ADDRESS: STREET 1: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 BUSINESS PHONE: 2175233600 MAIL ADDRESS: STREET 1: CENTRAL ILLINOIS PUBLIC SERVICE CO STREET 2: 607 E ADAMS ST CITY: SPRINGFIELD STATE: IL ZIP: 62739 10-Q 1 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, 1996 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ........ to ........ Commission Registrant; State of Incorporation; I.R.S. Employer File Number Address; and Telephone Number Identification No. ___________ ___________________________________ __________________ 1-10628 CIPSCO INCORPORATED 37-1260920 (An Illinois Corporation) 607 East Adams Street Springfield, Illinois 62739 217-523-3600 1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380 (An Illinois Corporation) 607 East Adams Street Springfield, Illinois 62739 217-523-3600 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 the number of shares outstanding of each of the issuers' classes of common stock, as of the latest practicable date: CIPSCO INCORPORATED Common stock, no par value, 34,069,542 shares outstanding July 31, 1996 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Common stock, no par value, 25,452,373 shares outstanding and held by CIPSCO INCORPORATED at July 31, 1996 CIPSCO INCORPORATED AND CENTRAL ILLINOIS PUBLIC SERVICE COMPANY FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 CONTENTS Page No. PART I. FINANCIAL INFORMATION Item 1. Financial Statements CIPSCO INCORPORATED Consolidated Statements of Income Consolidated Balance Sheets Consolidated Statements of Cash Flows CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Statements of Income Balance Sheets Statements of Cash Flows CONDENSED NOTES TO FINANCIAL STATEMENTS of CIPSCO Incorporated and Central Illinois Public Service Company Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations for CIPSCO Incorporated and Central Illinois Public Service Company PART II. OTHER INFORMATION Item 1. Legal Proceedings Item 5. Other Information Item 6. Exhibits and Reports on Form 8-K Signatures Exhibit Index Exhibit 12 The unaudited interim financial statements presented herein include the consolidated statements of CIPSCO Incorporated and Subsidiaries ("Company") as well as separate financial statements for Central Illinois Public Service Company ("CIPS"). The unaudited statements have been prepared by the Company and CIPS, respectively, pursuant to the rules and regulations of the Securities and Exchange Commission. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company and CIPS believe the disclosures are adequate to make the information presented not misleading. Both the Company's consolidated financial statements and the CIPS financial statements should be read in conjunction with the financial statements and notes thereto included in the combined Annual Report on Form 10-K of CIPSCO Incorporated and CIPS for the year ended December 31, 1995. In the opinion of the Company and CIPS, their respective interim financial statements filed as part of this Form 10-Q reflect all adjustments necessary to present fairly the results for the respective periods. Due to the effect of weather and other factors which are characteristic of CIPS' utility operations, financial results for the periods ended June 30, 1996 and 1995 are not necessarily indicative of trends for any twelve-month period. This financial and other information is not given in connection with any sale or offer to buy any security. Part I. FINANCIAL INFORMATION Item 1. Financial Statements. CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Statements of Income For the Periods Ended June 30, 1996 and 1995 (in thousands except per share amounts) (unaudited) Three Months Ended Six Months Ended June 30, June 30, _______________________ __________________ 1996 1995 1996 1995 ________ ________ ________ ________ Operating Revenues: Electric.......................... $169,922 $163,500 $341,210 $316,688 Gas............................... 20,941 18,603 85,359 74,290 Investment........................ 2,909 1,841 5,082 3,428 ________ ________ ________ _______ Total operating revenues....... 193,772 183,944 431,651 394,406 ________ ________ ________ _______ Operating Expenses: Fuel for electric generation...... 50,567 39,977 106,715 90,856 Purchased power................... 11,810 19,132 24,931 26,238 Gas costs......................... 11,484 8,937 52,681 43,069 Other operation................... 34,572 35,012 69,207 76,536 Maintenance....................... 19,535 18,467 30,971 30,672 Depreciation and amortization..... 22,217 20,674 43,130 41,275 Taxes other than income taxes..... 13,371 12,587 29,384 28,349 ________ ________ ________ ________ Total operating expenses....... 163,556 154,786 357,019 336,995 ________ ________ ________ ________ Operating Income.................... 30,216 29,158 74,632 57,411 ________ ________ ________ ________ Interest and Other Charges: Interest on long-term debt of subsidiary........................ 8,281 8,160 16,560 16,298 Other interest charges............ 484 (39) 927 360 Allowance for funds used during construction...................... (150) (223) (175) (408) Preferred stock dividends of subsidiary........................ 925 971 1,864 1,939 Miscellaneous, net................ 860 (1,022) 1,062 (1,337) ________ ________ ________ ________ Total interest and other charges............................. 10,400 7,847 20,238 16,852 ________ ________ ________ ________ Income Before Income Taxes.......... 19,816 21,311 54,394 40,559 _________ ________ ________ ________ Income Taxes........................ 7,834 8,425 21,294 15,105 ________ ________ ________ ________ Net Income.......................... $ 11,982 $ 12,886 $ 33,100 $ 25,454 ======== ======== ======== ======== Average Shares of Common Stock Outstanding......................... 34,070 34,070 34,070 34,070 Earnings per Average Share of Common Stock........................ $ .35 $ .38 $ .97 $ .75 The accompanying condensed notes to financial statements are an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets June 30,1996 and December 31, 1995 (in thousands) June 30, December 31, 1996 1995 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric..................................................... $2,342,630 $2,296,402 Gas.......................................................... 233,403 229,118 __________ __________ 2,576,033 2,525,520 Less-Accumulated depreciation................................ 1,165,985 1,132,355 __________ __________ 1,410,048 1,393,165 Construction work in progress................................ 51,974 72,490 __________ __________ 1,462,022 1,465,655 __________ __________ Current Assets: Cash......................................................... 2,697 1,088 Temporary investments, at cost which approximates market....................................................... 8,787 7,147 Accounts receivable, net..................................... 78,623 65,267 Accrued unbilled revenues.................................... 23,752 27,234 Materials and supplies, at average cost...................... 40,281 40,246 Fuel for electric generation, at average cost................ 34,012 42,634 Gas stored underground, at average cost...................... 7,091 9,774 Prepayments.................................................. 9,402 10,649 Other current assets......................................... 8,251 8,197 __________ __________ 212,896 212,236 __________ __________ Investments and Other Assets: Marketable securities........................................ 48,878 45,967 Leveraged leases and energy investments...................... 60,243 59,114 Other........................................................ 48,302 44,939 __________ __________ 157,423 150,020 __________ __________ $1,832,341 $1,827,911 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity.................................. $ 649,947 $ 651,532 Preferred stock of subsidiary................................ 80,000 80,000 Long-term debt of subsidiary................................. 464,077 478,926 __________ __________ 1,194,024 1,210,458 __________ __________ Current Liabilities: Long-term debt of subsidiary due within one year............. 15,000 - Short-term borrowings........................................ 38,482 47,921 Accounts payable............................................. 52,109 60,603 Accrued wages................................................ 10,358 9,335 Accrued taxes................................................ 14,677 11,266 Accrued interest............................................. 9,459 9,525 Other........................................................ 52,725 33,265 __________ __________ 192,810 171,915 __________ __________ Deferred Credits: Accumulated deferred income taxes........................................................ 326,341 325,181 Investment tax credits....................................... 50,560 52,234 Regulatory liabilities, net.................................. 68,606 68,123 __________ __________ 445,507 445,538 __________ __________ $1,832,341 $1,827,911 ========== ========== The accompanying condensed notes to financial statements are an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Statements of Cash Flows For the Periods Ended June 30, 1996 and 1995 (in thousands) (unaudited) Six Months Ended June 30, _________________________ 1996 1995 __________ __________ Operating Activities: Net income................................................... $ 33,100 $ 25,454 Adjustments to reconcile net income to net cash provided: Depreciation and amortization.............................. 43,130 41,275 Allowance for equity funds used during construction (AFUDC).................................................... (77) (377) Deferred income taxes, net................................. 95 2,619 Investment tax credit amortization......................... (1,674) (1,681) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues..... (9,874) 20,825 Fuel for electric generation............................... 8,622 (15,798) Other inventories.......................................... 2,648 3,172 Prepayments................................................ 1,247 (1,792) Other assets............................................... (3,417) (823) Accounts payable and other................................. 10,966 8,228 Accrued wages, taxes and interest.......................... 4,368 5,931 Other........................................................ 559 (4,078) __________ __________ Net cash provided by operating activities.................. 89,693 82,955 __________ __________ Investing Activities: Utility construction expenditures, excluding AFUDC........... (38,208) (42,162) Allowance for borrowed funds used during construction........ (98) (31) Changes in temporary investments............................. (1,640) (8,241) Long-term marketable securities.............................. (2,466) (62) Long-term leveraged leases and energy investments............ (1,129) (1,064) __________ __________ Net cash used in investing activities...................... (43,541) (51,560) __________ __________ Financing Activities: Common stock dividends paid.................................. (35,092) (34,410) Proceeds from issuance of long-term debt of subsidiary....... - 20,000 Repayment of long-term debt of subsidiary.................... _ (15,000) Proceeds from issuance of (repayment of) short-term borrowings................................................... (9,439) (2,192) Issuance expense, discount and premium....................... (12) (142) __________ __________ Net cash used in financing activities...................... (44,543) (31,744) __________ __________ Net increase (decrease) in cash.............................. 1,609 (349) Cash at beginning of period.................................. 1,088 1,963 __________ __________ Cash at end of period........................................ $ 2,697 $ 1,614 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized....................... $ 16,273 $ 15,497 Income taxes............................................... $ 22,802 $ 15,128 The accompanying condensed notes to financial statements are an integral part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Statements of Income For the Periods Ended June 30, 1996 and 1995 (in thousands) (unaudited) Three Months Ended Six Months Ended June 30, June 30, _______________________ _______________________ 1996 1995 1996 1995 ________ ________ ________ ________ Operating Revenues: Electric....................................... $169,929 $163,506 $341,224 $316,701 Gas............................................ 20,942 18,604 85,361 74,292 ________ ________ ________ ________ Total operating revenues.................... 190,871 182,110 426,585 390,993 ________ ________ ________ ________ Operating Expenses: Fuel for electric generation................... 50,567 39,977 106,715 90,856 Purchased power................................ 11,810 19,132 24,931 26,238 Gas costs...................................... 11,484 8,937 52,681 43,069 Other operation................................ 34,250 34,708 68,541 75,844 Maintenance.................................... 19,534 18,467 30,969 30,672 Depreciation and amortization.................. 22,090 20,554 42,876 41,034 Taxes other than income taxes.................. 13,363 12,575 29,371 28,326 Income taxes: Current...................................... 8,896 7,097 25,486 16,604 Deferred, net................................ (966) 1,630 (3,748) (712) Deferred investment tax credits, net......... (837) (840) (1,674) (1,681) ________ ________ ________ ________ Total operating expenses.................... 170,191 162,237 376,148 350,250 ________ ________ ________ ________ Operating Income................................. 20,680 19,873 50,437 40,743 ________ ________ ________ ________ Other Income and Deductions: Allowance for equity funds used during construction................................... 66 206 77 377 Nonoperating income taxes...................... (40) (553) (338) (820) Miscellaneous, net............................. (829) 1,185 (1,000) 1,699 ________ ________ ________ ________ Total other income and deductions........... (803) 838 (1,261) 1,256 ________ ________ ________ ________ Income Before Interest Charges................... 19,877 20,711 49,176 41,999 ________ ________ ________ ________ Interest Charges: Interest on long-term debt..................... 8,281 8,160 16,560 16,298 Other interest charges......................... 484 (56) 927 337 Allowance for borrowed funds used during construction................................... (84) (17) (98) (31) ________ ________ ________ ________ Total interest charges..................... 8,681 8,087 17,389 16,604 ________ ________ ________ ________ Net Income....................................... 11,196 12,624 31,787 25,395 Preferred Stock Dividends........................ 925 971 1,864 1,939 ________ ________ ________ ________ Earnings for Common Stock........................ $ 10,271 $ 11,653 $ 29,923 $ 23,456 ======== ======== ======== ======== The accompanying condensed notes to financial statements are an integral part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Balance Sheets June 30, 1996 and December 31, 1995 (in thousands) June 30, December 31, 1996 1995 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric..................................................... $2,342,630 $2,296,402 Gas.......................................................... 233,403 229,118 __________ __________ 2,576,033 2,525,520 Less-Accumulated depreciation................................ 1,165,985 1,132,355 __________ __________ 1,410,048 1,393,165 Construction work in progress................................ 51,974 72,490 __________ __________ 1,462,022 1,465,655 __________ __________ Current Assets: Cash......................................................... 2,650 1,006 Accounts receivable, net..................................... 78,805 65,574 Accrued unbilled revenues.................................... 23,752 27,234 Materials and supplies, at average cost...................... 40,281 40,246 Fuel for electric generation, at average cost................ 34,012 42,634 Gas stored underground, at average cost...................... 7,091 9,774 Prepayments.................................................. 8,302 10,268 Other current assets......................................... 8,253 8,226 __________ __________ 203,146 204,962 __________ __________ Other Assets................................................... 47,293 44,188 __________ __________ $1,712,461 $1,714,805 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity.................................. $ 566,304 $ 570,419 Preferred stock.............................................. 80,000 80,000 Long-term debt............................................... 464,077 478,926 __________ __________ 1,110,381 1,129,345 __________ __________ Current Liabilities: Long-term debt due within one year........................... 15,000 - Short-term borrowings........................................ 38,482 47,921 Accounts payable............................................. 51,412 60,791 Accrued wages................................................ 10,358 9,320 Accrued taxes................................................ 15,033 11,155 Accrued interest............................................. 9,459 9,525 Other........................................................ 52,726 33,264 __________ __________ 192,470 171,976 __________ __________ Deferred Credits: Accumulated deferred income taxes............................ 290,444 293,127 Investment tax credits....................................... 50,560 52,234 Regulatory liabilities, net.................................. 68,606 68,123 __________ __________ 409,610 413,484 __________ __________ $1,712,461 $1,714,805 ========== ========== The accompanying condensed notes to financial statements are an integral part of these statements.
Central Illinois Public Service Company Statements of Cash Flows For the Periods Ended June 30, 1996 and 1995 (in thousands) (unaudited) Six Months Ended June 30, _________________________ 1996 1995 __________ __________ Operating Activities: Net income................................................... $ 31,787 $ 25,395 Adjustments to reconcile net income to net cash provided: Depreciation and amortization.............................. 42,876 41,034 Allowance for equity funds used during construction (AFUDC).................................................... (77) (377) Deferred income taxes, net................................. (3,748) (712) Investment tax credit amortization......................... (1,674) (1,681) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues..... (9,749) 20,827 Fuel for electric generation............................... 8,622 (15,798) Other inventories.......................................... 2,648 3,172 Prepayments................................................ 1,966 (1,195) Other assets............................................... (3,132) (2,527) Accounts payable and other liabilities..................... 10,083 7,611 Accrued wages, taxes and interest.......................... 4,850 4,734 Other........................................................ 813 (3,837) _________ _________ Net cash provided by operating activities.................. 85,265 76,646 _________ _________ Investing Activities: Construction expenditures, excluding AFUDC................... (38,208) (42,162) Allowance for borrowed funds used during construction........ (98) (31) _________ _________ Net cash used in investing activities...................... (38,306) (42,193) Financing Activities: Proceeds from issuance of long-term debt..................... - 20,000 Repayment of long-term debt.................................. - (15,000) Repayment of short-term borrowings........................... (9,439) (2,192) Dividends paid: Preferred stock............................................ (1,864) (1,939) Common stock............................................... (34,000) (35,000) Issuance expense, discount and premium....................... (12) (142) _________ _________ Net cash used in financing activities...................... (45,315) (34,273) _________ _________ Net increase (decrease) in cash.............................. 1,644 180 Cash at beginning of period.................................. 1,006 1,320 _________ _________ Cash at end of period........................................ $ 2,650 $ 1,500 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized....................... $ 16,273 $ 15,497 Income taxes............................................... $ 25,238 $ 18,829 The accompanying condensed notes to financial statements are an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES CENTRAL ILLINOIS PUBLIC SERVICE COMPANY CONDENSED NOTES TO FINANCIAL STATEMENTS JUNE 30, 1996 (unaudited) Note 1. GENERAL ________________ The consolidated financial statements presented herein include the accounts of CIPSCO INCORPORATED (CIPSCO), CENTRAL ILLINOIS PUBLIC SERVICE COMPANY (CIPS), and CIPSCO INVESTMENT COMPANY AND SUBSIDIARIES (CIC). CIPSCO and Subsidiaries are referred to as the "Company." CIPSCO has two first-tier subsidiaries: CIC, an investment subsidiary, and CIPS, an electric and gas public utility. The financial statements of CIPS, a subsidiary of CIPSCO, include only the accounts of CIPS. Note 2. COMMITMENTS AND CONTINGENCIES ______________________________________ ENVIRONMENTAL REMEDIATION COSTS - CIPS has identified 13 former manufactured gas plant sites (environmental remediation sites) which contain potentially harmful materials. In 1990, one site was added to the United States Environmental Protection Agency (USEPA) Superfund list. CIPS is implementing an approved long-term remedial plan for the site. Costs and associated legal expenses related to studies and remediation work have been incurred at other sites. Over the past several years, CIPS has received cash settlements from certain of its insurance carriers arising from litigation instituted by CIPS (which is now concluded) seeking indemnification for, among other things, costs incurred by CIPS in connection with the sites. Effective with April 1993 billings to customers, CIPS began recovery of clean-up costs associated with the sites through environmental adjustment clause riders approved by the Illinois Commerce Commission (the "Illinois commission"). As required by the Illinois commission, the riders provided for (1) recovery of cleanup costs from ratepayers (with a credit or offset to the extent such recovered cleanup costs are reimbursed from insurance carriers or other parties) and (2) a prudence review (including determination of what constitutes recoverable environmental cleanup costs and the amount of such expenditures). The Illinois Supreme Court has ruled that cleanup costs are recoverable in rates and that use of a rider mechanism to recover such costs is appropriate. Through December 31, 1993, CIPS collected $2.9 million under the riders. No amounts have been collected under the riders since January 1994. The estimated incurred costs relating to studies and remediation at the 13 sites and associated legal expenses are being accrued and deferred pursuant to the Illinois commission's orders rather than expensed currently, pending recovery through rates or from other parties. Through June 30, 1996, $47.8 million had been deferred representing costs incurred and estimates of costs of completing studies at various sites and estimates of future remediation costs to be incurred at the Superfund and other sites. The total of the costs deferred, net of recoveries from insurers and through the rate riders described above, was $10.2 million at June 30, 1996. The Illinois commission has initiated reconciliation proceedings to review CIPS' environmental remediation activities for 1993, 1994 and 1995, and to determine whether the revenues collected under the riders in 1993 were consistent with the amount of remediation costs prudently incurred. Amounts found to have been incorrectly included under the riders would be subject to refund. Management believes that any costs incurred in connection with the sites that are not recovered from others will be recovered through the environmental rate riders. Accordingly, management believes that costs incurred in connection with these sites will not have a material adverse effect on financial position, results of operations, or liquidity of the Company or CIPS. FERC ORDERS 888 and 889 - On April 24, 1996, the Federal Energy Regulatory Commission ("FERC") issued orders 888 and 889 related to its "mega-NOPR" rulemaking. Citing a goal of enhancing competition in the wholesale market for generation sales, Order 888 requires transmission-owning public utilities, such as CIPS, to provide transmission access and service to others in a manner similar and comparable to that which the utility has by virtue of transmission ownership. In its Order 888, the FERC adopted a single pro forma tariff for use by the utility and its transmission customers in obtaining transmission service. Order 888 also provides for the recovery of stranded costs at the wholesale level, based on a revenues lost calculation, which result from the transition to an open access business environment. In conjunction with the application at the FERC regarding the merger of CIPSCO and Union Electric Company ("UE") (see Item 5. Other Information), CIPS and UE have filed open access tariffs in compliance with FERC policy. Because these tariffs were filed under provisions of the rulemaking prior to the issuance of Order 888, these tariffs will be revised to comply with the final rule in Order 888. The compliance tariffs for CIPS and UE will only become effective upon completion of the merger. In the meantime, CIPS filed an open access tariff under Rule 888 for transmission service. Order 889 sets forth the standards of conduct and information requirements that must be put in place and observed by transmission-owning public utilities doing business under the open access rule. These include the establishment by each utility of an "open access same-time information system", or OASIS. This system will provide all information, on a real time basis, for the utility and its customers to apply for and obtain transmission service. Using OASIS, the utility must obtain transmission service for its own use in the same manner its customer will obtain service, thus assuring mitigation of market power through control of transmission facilities. CIPS is preparing to implement the requirements of Order 889. CLEAN AIR ACT - CIPS' current compliance strategy to meet Phases I and II of the Clean Air Act Amendments of 1990 (Amendments) is to rely primarily on switching to a lower sulfur coal at some of its units. CIPS does not currently expect to rely on increased scrubbing at its Newton Unit 1. The estimated capital costs of compliance are included in the five-year construction forecast. On June 20, 1996 CIPS and Amax Coal Sales Company, a Cyprus Amax Minerals Company ("Cyprus Amax"), a coal supplier for CIPS' Newton Power Station Unit 1, executed a letter of intent which contemplates that the parties will enter into a modification of their existing contract. Under the contract as modified, CIPS would make a $70 million prepayment to Cyprus Amax (scheduled for November 1996) for future deliveries, and would be able to substitute low-sulfur, out-of-state coal (which may be procured from Cyprus Amax, its affiliates or other providers) for the high-sulfur Illinois coal CIPS is currently obligated to purchase from Cyprus Amax. CIPS would also receive options for future purchases of low-sulfur, out-of-state coal from Cyprus Amax or its affiliates in 1997, 1998 and 1999 (the "Contract Modification"). Effectiveness of the Contract Modification is subject to execution of definitive agreements by the parties. In addition, CIPS and Cyprus Amax have agreed that for the remainder of 1996, CIPS will cease taking delivery of high-sulfur coal under the existing contract and will make certain alternate low-sulfur, out-of-state coal purchases from Cyprus Amax or its affiliates. By switching to low-sulfur coal, CIPS will avoid the need for substantial rennovation to the Newton Unit 1 scrubber. Under the letter of intent, CIPS would not be required to proceed with the Contract Modification if CIPS determines that the regulatory treatment of the transaction is unsatisfactory. On July 17, 1996, CIPS filed an Application (Docket 96-0345) seeking a review by the Illinois commission of certain matters related to the Contract Modification, including recovery of the $70 million prepayment (and associated carrying charges) in rates over a six-year period, the purchases of out-of-state coal, continued recovery in rates of the investment in and return on the scrubber and seeking approval of CIPS' proposed accounting treatment for the transaction. CIPS cannot predict what action the Illinois commission will take in this matter. If the Illinois commission grants substantially all the relief requested, then this transaction will not have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. LABOR ISSUES - The International Union of Operating Engineers Local 148 and the International Brotherhood of Electrical Workers Local 702 have both filed unfair labor practice charges with the National Labor Relations Board (NLRB) relating to the legality of the lockout by CIPS of both unions during 1993. The Peoria Regional Office of the NLRB has issued complaints against CIPS concerning its lockout of both unions. Both unions seek, among other things, back pay and other benefits for the period of the lockout. CIPS estimates the amount of back pay and other benefits for both unions to be less than $15 million. An administrative law judge of the NLRB has ruled that the lockout of both unions was unlawful. On July 23, 1996, the Company appealed to the NLRB. Management believes the lockout was both lawful and reasonable and that the final resolution of the disputes will not have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. OTHER ISSUES - CIPS is involved in other legal and administrative proceedings before various courts and agencies with respect to rates, taxes, gas and electric fuel cost reconciliations, service area disputes, environmental torts and other matters. Although unable to predict the outcome of these matters, management believes that appropriate liabilities have been established and that final disposition of these actions will not have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. Note 3. REGULATORY ASSETS AND LIABILITIES __________________________________________ Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for Effects of Certain Types of Regulation," applies to regulated entities whose rates are designed to recover the cost of providing service to customers through the ratemaking process. SFAS No. 71 allows certain costs that would normally be reflected in net income to be deferred on the balance sheet as regulatory assets. These costs are then amortized as the related amounts are reflected in rates. Under current accounting pronouncements, if a loss with respect to such an asset becomes probable, any unamortized balance, net of tax, would reduce net income. (See Note 4.) The Company continually reviews regulatory assets and liabilities. As shown below, the Company is in a net regulatory liability position at June 30, 1996, and currently believes that there would be no material adverse impact on results of operations, financial position or liquidity if the Company or CIPS were to discontinue application of SFAS No. 71. The components of regulatory assets and liabilities at June 30, 1996 are: Description Amount ___________ ______ (in thousands) Regulatory Assets: Deferred environmental remediation costs $ 10,230 Take-or-Pay costs 966 Unamortized costs related to reacquired debt 12,802 ________ Total Regulatory Assets - in Other Assets on Balance Sheet $ 23,998 ======== Regulatory Liabilities: Clean Air Act allowances, net $ 2,372 SFAS 109 - Income Taxes, net 66,234 ________ Total Regulatory Liabilities, Net $ 68,606 ======== Regulatory Liabilities Net of Regulatory Assets $ 44,608 ======== Note 4. SFAS NO. 121 _____________________ Statement of Financial Accounting Standards (SFAS) No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of," effective January 1, 1996, established accounting standards for the impairment of long-lived assets. SFAS No. 121 also required that regulatory assets which are no longer probable of recovery through future revenue to be charged to earnings. The adoption of SFAS No. 121 has had no impact and is not expected to have an impact on the financial position, results of operations or liquidity of the Company or CIPS. Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations The Company and Union Electric Company entered into a Merger Agreement dated August 11, 1995 (the "Merger Agreement"). Information concerning the agreement is included in Part II, Item 5. Other Information of this report. On July 12, 1996, a joint agreement was filed with the Missouri Public Service Commission that recommends approval of the merger between the Company and Union Electric Company. Union Electric Company, the Missouri Public Service Commission staff, the office of the Public Counsel, several customer groups and others signed the agreement. The following discussion and analysis of financial condition and results of operations is for CIPSCO Incorporated and Subsidiaries ("Company") unless otherwise stated. THE OUTLOOK CIPS currently estimates that its total construction expenditures for the 1996-2000 period will be about $510 million. Projected external financing requirements for the 1996-2000 period are expected to be $258 million which includes $133 million for scheduled debt retirements and up to $125 million (less than $100 million in 1996) to fund the construction program and certain other capital requirements. Other capital requirements includes the $70 million prepayment related to the proposed coal contract modification with Cyprus Amax discussed in Note 2 to the Notes to Condensed Financial Statements of this report under "Clean Air Act." Remaining capital requirements for the 1996-2000 period are expected to be met through internally generated funds. The estimated construction expenditures and other capital requirements as well as anticipated financing plans take into account the current strategy for compliance with the Clean Air Act, as amended, and the proposed coal contract modification. In 1995 CIPS issued $20 million First Mortgage Bonds, Medium-Term Note Series 1995-1, 6.49%, due June 1, 2005. The proceeds of this issue together with other funds were used for general corporate purposes and to replace funds used to retire maturing debt. CIPS has an effective shelf registration statement on file with the Securities and Exchange Commission which permits the issuance of an aggregate of up to $29 million of first mortgage bonds, medium-term notes and/or preferred stock. For the first six months of 1996, CIPS' total capital requirements were provided from internal sources. Common stock dividends paid for the twelve months ended June 30, 1996, resulted in a payout ratio of 88% of the Company's earnings to common shareholders. Common stock dividends paid to the Company's common shareholders equalled 45% of net cash provided by operating activities for the same period. In connection with consummation of the merger contemplated by the Merger Agreement, it is expected that the Company will incur $9.3 million of transaction costs. Through June 30, 1996, these transaction costs totalled $6.2 million. The Company expects that these costs for 1996 will approximate $4.7 million (not tax deductible) or 14 cents per share. FINANCIAL CONDITION Financial condition and changes in total Shareholder Equity of the Company and CIPS for the six-month periods ended June 30, 1996 and 1995 are as follows: Six Months Ended June 30, _________________________ (in thousands) The Company: 1996 1995 _________ _________ Common Shareholders' Equity Net income $ 33,100 $ 25,454 Common stock dividends paid (35,092) (34,410) Other 407 1,710 ________ ________ Change in Shareholders' Equity $ (1,585) $ (7,246) ======== ======== Six Months Ended June 30, _________________________ (in thousands) CIPS: 1996 1995 _________ _________ Common Shareholder's Equity Earnings for common stock $ 29,923 $ 23,456 Common stock dividends paid (34,000) (35,000) Other (38) (68) ________ ________ Change in Shareholder's Equity $ (4,115) $(11,612) ======== ======== OVERVIEW The Company's earnings per share were $.35 for the quarter ended June 30, 1996, compared to $.38 per share earned during the same period in 1995. The decrease primarily reflects increased costs due to timing of scheduled power plant maintenance and expenses related to CIPSCO's pending merger with Union Electric Company. The Company's earnings per share were $.97 for the six months ended June 30, 1996, compared to $.75 per share earned during the same period in 1995. The increase primarily reflects higher sales due to weather and lower expenses in 1996. The 1995 expenses for the six months include $.10 per share for the voluntary workforce reduction program recorded in February 1995. The following table summarizes the components of consolidated net income and CIPS earnings for common stock for the three months and six month periods ended June 30, 1996 and 1995 (see Results of Operations for further discussion). In this table, electric operating margin equals electric operating revenues less revenue taxes, fuel for electric generation and purchased power. Gas operating margin equals gas operating revenues less revenue taxes and gas costs. Second Quarter Six Months Ended Ended June 30, June 30, __________________ ___________________ 1996 1995 1996 1995 ________ ________ ________ ________ CIPS Electric operating margin $101,948 $ 99,236 $197,924 $188,449 Gas operating margin 7,952 8,506 27,651 26,618 Other deductions and interest expenses (98,704) (95,118) (193,788) (189,672) CIPS preferred stock dividends (925) (971) (1,864) (1,939) ________ ________ ________ ________ Total earnings for common stock 10,271 11,653 29,923 23,456 ________ ________ ________ ________ NON-UTILITY Investment revenues 2,875 1,676 5,015 3,059 Other deductions and expenses (1,164) (443) (1,838) (1,061) ________ ________ ________ ________ Total non-utility net income 1,711 1,233 3,177 1,998 ________ ________ ________ ________ Consolidated net income $ 11,982 $ 12,886 $ 33,100 $ 25,454 ======== ======== ======== ======== RESULTS OF OPERATIONS The results of operations of the Company and CIPS for the three months and six months ended June 30, 1996, compared to the same periods in 1995 are presented below. The Company Net Income (in thousands) Earnings Per Share ________________________ ________________________ Three Months Six Months Three Months Six Months ____________ __________ ____________ __________ 1996 $11,982 $33,100 $ .35 $ .97 1995 12,886 25,454 .38 .75 _______ _______ _____ _____ Increase (Decrease) $ (904) $ 7,646 $(.03) $ .22 Percent Increase (Decrease) (7)% 30% (8)% 29% CIPS Earnings for Common Stock (in thousands) __________________________ Three Months Six Months ____________ __________ 1996 $10,271 $29,923 1995 11,653 23,456 _______ _______ Increase (Decrease) $(1,382) $ 6,467 ======= ======= Percent Increase (Decrease) (12)% 28 % OPERATING REVENUES The changes in electric and gas revenues described below are for the Company. The only differences between changes in electric and gas operating revenues for the Company and for CIPS are intercompany revenues that are eliminated in the consolidated financial statements. These intercompany amounts are immaterial. Electric revenues increased 4% in the second quarter of 1996 compared to the second quarter of 1995 reflecting higher retail KWH sales due principally to weather conditions in 1996. KWH sales to residential and commercial customers increased 10% and 5%, respectively, due to the higher heating and cooling degree days in the second quarter of 1996. Industrial electric sales increased 3% in the second quarter of 1996 compared to the same quarter in 1995 due to economic growth in the service territory. Public authorities and other revenues increased 11% in the second quarter of 1996 compared to the same period of 1995 due to an increase in gains on disposition of clean air emission credits which are included in revenues, but returned to customers through the fuel adjustment clause. Power supply agreement revenues for the second quarter of 1996 are 7% above those of the second quarter 1995 due to increased capacity and transportation revenues related to these agreements. Economy and emergency interchange sales decreased 31% in the second quarter of 1996 over the same period in 1995 due to unfavorable market conditions in the interchange marketplace. Sales to cooperatives and municipals increased in the second quarter of 1996 compared to the same quarter in 1995 due primarily to weather conditions in 1996. One cooperative, Soyland Power Cooperative, with whom CIPS has a power supply apreement for up to 102 megawatts through 1999, is experiencing financial difficulties. These sales are recorded under Power Supply Agreements. As of June 30, 1996, Soyland was current in the payment of all of its obligations to CIPS. Electric revenues increased 8% in the first six months of 1996 compared to the same period of 1995 reflecting higher KWH sales due principally to weather conditions in 1996. KWH sales to residential and commercial customers increased 9% and 5%, respectively, due to the weather while industrial electric sales, which are less weather sensitive, had 2% growth. Public authorities and other revenues increased 3% in the first six months of 1996 compared to the same period of 1995 due to timing of miscellaneous revenues, which are included in this category. Power supply agreement revenues for the six months ended June 30, 1996, are 4% above those of the same period in 1995 due to increased capacity and transportation revenues related to these agreements. Economy and emergency interchange sales increased 5% in the first six months of 1996 over the same period in 1995 due to favorable market conditions in the interchange marketplace. Sales to cooperatives and municipals increased in the six months ended June 30, 1996 compared to the same period in 1995 due primarily to favorable weather conditions in 1996. The changes in electric revenue and KWH sales are shown below: CHANGES IN ELECTRIC REVENUE AND KILOWATTHOUR SALES INCREASE (DECREASE) FROM PRIOR YEAR (in thousands) ______________________________________ ________________________________ Second Quarter Six Months ______________________________________ ________________________________ Revenue Rev % KWH KWH % Revenue Rev % KWH KWH % ________ _____ _________ _____ ________ _____ _________ _____ Residential $ 3,955 8 % 53,266 10 % $ 7,255 7 % 116,401 9 % Commercial 1,878 4 29,864 5 4,570 6 67,278 5 Industrial 1,662 6 19,182 3 1,869 3 21,894 2 Public Authorities and Other 460 11 1,041 3 321 3 (3,732) (4) ________ _______ ________ _______ Total Retail $ 7,955 6 % 103,353 6 % $ 14,015 6 % 201,841 5 % Power Supply Agreements $ 1,068 7 % 18,780 6 % $ 1,463 4 % 13,207 2 % Interchange Sales (economy/emergency) (3,049) (16) (360,443) (31) 8,033 29 76,642 5 Cooperatives and Municipals 448 9 6,329 5 1,011 10 16,581 7 ________ _______ ________ _______ Total Sales for Resale $ (1,533) (4)% (335,334) (21) % $ 10,507 15 % 106,430 4 % ________ _______ ________ _______ Total $ 6,422 4 % (231,981) (7) % $ 24,522 8 % 308,271 5 % ======== ======== ======== =======
Gas revenues increased 13% in the second quarter and 15% in the first six months of 1996 compared to the same periods in 1995 due to colder weather in 1996 and higher purchased gas costs which flow through to revenues through the Purchased Gas Adjustment Clause (PGA). Residential gas revenues improved 11% for the second quarter and 13% for the first six months of 1996 compared to 1995 due to colder weather in 1996. The commercial and industrial gas revenue improved 19% and 27%, respectively, in the second quarter and 18% and 38% in the first six months of 1996 over the same periods in 1995 due to both the increase in purchased gas costs discussed above, and to more customers buying from CIPS in 1996 rather than transporting their own gas. Gas transportation revenues declined 4% in the second quarter but remained about the same in the first six months of 1996 even though therms transported declined 2% over the same periods in 1995. The transportation revenue remains about the same in 1996 even though sales decreased because curtailment fines and penalties were charged to interruptible gas customers in 1996 who used more gas than contractually allowed. The changes in gas revenues and therm sales are shown below. CHANGES IN GAS REVENUE AND THERM SALES INCREASE (DECREASE) FROM PRIOR YEAR (in thousands) _________________________________________ _________________________________________ Second Quarter Six Months _________________________________________ _________________________________________ Revenue Rev % Therms Therms Revenue Rev % Therms Therms % % ________ _____ ______ ______ _______ _____ ______ ______ Residential $ 1,258 11 % 1,919 11 % $ 6,569 13 % 14,485 17 % Commercial 656 19 892 16 2,835 18 5,952 20 Industrial 458 27 198 4 1,644 38 4,780 37 Transportation (66) (4) (471) (2) (2) - (1,219) (2) Miscellaneous 32 33 - - 23 (9) - - ________ ______ ________ ______ Total $ 2,338 13 % 2,538 4 % $ 11,069 15 % 23,998 12 % ======== ====== ======== ======
OPERATIONS __________ Fuel for electric generation increased 26% in the second quarter and 17% in the first six months of 1996 compared to the same periods in 1995. The increases correspond to increased generation of 22% and 16% respectively, due to higher retail sales levels in the second quarter and in the first six months of 1996. Purchased power costs declined 38% for the second quarter and 5% for the first six months ended June 30, 1996 compared with the same periods in 1995 reflecting decreases in marketable purchases made for resale to interchange economy and emergency customers and increased generation as described above. Gas costs increased 28% for the second quarter and 22% for the first six months of 1996 when compared to the same periods in 1995 due to increased gas requirements for the CIPS system and because of a higher average cost per therm for purchased gas. Other operation expenses declined 1% in the second quarter due to declines in administrative and general expenses between periods. Other operation expenses declined 10% in the first six months of 1996 compared to 1995 primarily due to a $6.3 million charge in February 1995 relating to the cost of a workforce reduction program and lower medical and benefit costs in 1996. Maintenance expenses increased 6% for the second quarter of 1996 and 1% for the first six months of 1996 compared to the same periods of 1995 due primarily to the scheduled timing of power plant maintenance projects between periods. Depreciation and amortization expense increased 7% in the second quarter and 4% for the first six months of 1996 when compared to 1995 due to normal plant additions. Taxes other than income taxes increased 6% in the second quarter and 4% in the first six months of 1996 when compared to 1995 due to higher revenue taxes from increased sales. These revenue taxes are collected from customers in gas and electric revenues. Significant changes in the balance sheet accounts at June 30, 1996 compared to balances at December 31, 1995 are: Fuel for electric generation, at average cost, decreased 20% for the first six months of 1996 due to increased generation usage and lower purchases of compliance coal at one station. Gas stored underground, at average cost, decreased 27% during the first six months due to high demands on the system and utilization of the stored gas to meet the customer demands. Short-term borrowings declined 20% in the first six months of 1996 reflecting an improved cash position. Accrued taxes increased 30% reflecting the liability due on federal and state income taxes due to higher pretax income for the six months ended June 30, 1996. Other liabilities increased 58% for the first six months of 1996 due primarily to overrecovered PGA revenues to be refunded to customers and postretirement medical costs accrued monthly during the period but not funded until year-end. PART II. OTHER INFORMATION Item 1. Legal Proceedings (1) On August 2, 1996, the Company received notice that the Illinois Attorney General had filed a complaint with the Illinois Pollution Control Board alleging various violations of wastewater discharge permit conditions at the Hutsonville Power Station. The complaint seeks monetary penalties and the award of attorney fees. The Company, the Illinois Environmental Protection Agency, and the Attorney General are continuing to work on a plan to resolve these issues. While the Company cannot predict the final outcome of these efforts, it does not believe that the final resolution will have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. (2) Reference is made to Item 3. Legal Proceedings on Page 25 in the CIPSCO and CIPS combined 1995 Annual Report on Form 10-K (the "1995 Form 10-K") for information regarding the complaint filed in the matter of the CIPS Taylorville gas plant site. On April 17, 1996, the Seventh Judicial Circuit Court, Sangamon County, Illinois granted approval of the petition by CIPS requesting transfer of this case to the Circuit Court for the Fourth Judical Circuit, Christian County, Illinois. Item 5. Other Information (1) Reference is made to the first full paragraph under Item 1. Business - Competition -- Electric Business on page 10 in the 1995 Form 10-K for information regarding economic development rates and special contracts with certain customers. The Illinois General Assembly has passed a bill which authorizes the Illinois commission to approve utility rate schedules that enable the utility to provide service to customers under contracts that are treated as proprietary and confidential by the Illinois commission. The Governor is expected to approve this legislation. (2) Reference is made to the third full paragraph under Item 1. Business - Competition -- Electric Business on page 11 in the 1995 Form 10-K for information regarding proposed "open access" programs filed with the Illinois commission by two neighboring electric utilities. On March 18, 1996, CIPS filed a petition with the Illinois commission seeking authorization to participate in the approved experimental "open access" programs as a potential supplier. CIPS is awaiting approval from the Illinois commission. (3) Reference is made to the last paragraph under Item 1. Business - Employees on page 23 in the 1995 Form 10-K for information regarding the workforce of CIPS and contracts with those employees represented by labor unions. Management completed negotiations with IUOE-148, the labor union which represents approximately 450 employees, resulting in a new three-year contract ratified by union membership to be effective through June 30, 1999. Also, management completed negotiations with IBEW-702, the labor union which represents approximately 900 employees. A tentative agreement was reached which is subject to ratification by the labor union membership. (4) AMEREN CORPORATION -- Unaudited Pro Forma Combined Condensed Financial Information of CIPSCO and Union Electric Company. On August 11, 1995, CIPSCO and Union Electric Company ("UE") entered into an Agreement and Plan of Merger, which was subsequently approved by the shareholders of both parties. The merger ("Merger") is further conditioned on, among other things, receipt of regulatory and govern- mental approvals; is expected to be consummated in early 1997; and will result in a newly formed holding company, Ameren Corporation. The following unaudited pro forma financial information combines the historical balance sheets and statements of income of CIPSCO and Union Electric, including their respective subsidiaries, after giving effect to the Merger. The unaudited pro forma combined condensed balance sheet at June 30, 1996 gives effect to the Merger as if it had occurred at June 30, 1996. The unaudited pro forma combined condensed statements of income for the six-month periods ended June 30, 1996 and 1995, and the twelve-month period ended June 30, 1996 give effect to the Merger as if it had occurred at the beginning of the periods presented. These statements are prepared on the basis of accounting for the Merger as a pooling of interests and are based on the assumptions set forth in the notes thereto. In addition, the pro forma financial information does not give effect to the expected synergies of the transaction. The following pro forma financial information has been prepared from, and should be read in conjunction with, the historical financial state- ments and related notes thereto of CIPSCO and Union Electric. The following information is not necessarily indicative of the financial position or operating results that would have occurred had the Merger been consummated on the date, or at the beginning of the periods, for which the Merger is being given effect nor is it necessarily indicative of future operating results or financial position. In addition, due to the effect of weather on sales and other factors which are character- istic of public utility operations, financial results for the six-month periods ended June 30, 1996 and 1995 are not necessarily indicative of trends for any twelve-month period. AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT JUNE 30, 1996 (Thousands of Dollars) As Reported (Note 1) Pro Forma ___________________________ Adjustments Pro Forma UE CIPSCO (Notes 2, 9) Combined ___________ __________ ____________ ___________ ASSETS Property and plant Electric $ 8,622,939 $ 2,342,630 $ 374,741 $11,340,310 Gas 178,845 233,403 - 412,248 Other 34,763 - - 34,763 ___________ ___________ ___________ ___________ 8,836,547 2,576,033 374,741 11,787,321 Less accumulated depreciation and amortization 3,613,616 1,165,985 260,354 5,039,955 ___________ ___________ ___________ ___________ 5,222,931 1,410,048 114,387 6,747,366 Construction work in progress: Nuclear fuel in process 148,706 - - 148,706 Other 127,445 51,974 2,886 182,305 ___________ ___________ ___________ ___________ Total property and plant, net 5,499,082 1,462,022 117,273 7,078,377 Regulatory asset - deferred income taxes (Note 6) 701,612 43,339 - 744,951 Other assets: Unamortized debt expense 42,335 15,781 624 58,740 Nuclear decommissioning trust fund 81,778 - - 81,778 Investments in nonregulated activities - 109,121 - 109,121 Other 24,325 32,521 (3,284) 53,562 ___________ ___________ ___________ __________ Total other assets 148,438 157,423 (2,660) 303,201 Current assets: Cash and temporary investments 15,970 11,484 2,889 30,343 Accounts receivable, net 196,568 78,623 20,164 295,355 Unbilled revenue 122,837 23,752 - 146,589 Materials and supplies, at average cost - Fossil fuel 54,830 41,103 6,817 102,750 Other 96,311 40,281 4,707 141,299 Other 29,515 17,653 3,467 50,635 ___________ ___________ ___________ __________ Total current assets 516,031 212,896 38,044 766,971 ___________ ____________ ___________ ___________ Total Assets $ 6,865,163 $ 1,875,680 $ 152,657 $ 8,893,500 =========== =========== =========== =========== CAPITAL AND LIABILITIES Capitalization: Common stock (Note 2) $ 510,619 $ 356,812 $ (866,059) $ 1,372 Other stockholders' equity (Note 2) 1,778,385 293,135 866,059 2,937,579 ___________ ___________ ___________ ___________ Total common stockholders' equity 2,289,004 649,947 - 2,938,951 Preferred stock of subsidiary 219,121 80,000 - 299,121 Long-term debt 1,825,208 464,077 130,000 2,419,285 ___________ ___________ ___________ ___________ Total capitalization 4,333,333 1,194,024 130,000 5,657,357 Minority interest in consolidated subsidiary - - 3,534 3,534 Accumulated deferred income taxes 1,325,046 326,341 (6,937) 1,644,450 Accumulated deferred investment tax credits 163,430 50,560 - 213,990 Regulatory liability 210,160 111,945 - 322,105 Accumulated provision for nuclear decommissioning 83,451 - - 83,451 Other deferred credits and liabilities 152,541 - 4,753 157,294 Current liabilities: Current maturity of long-term debt 76,599 15,000 - 91,599 Short-term debt 70,000 38,482 - 108,482 Accounts payable 108,665 52,109 17,925 178,699 Wages payable 33,599 10,358 - 43,957 Taxes accrued 141,162 14,677 69 155,908 Interest accrued 45,033 9,459 420 54,912 Other 122,144 52,725 2,893 177,762 ___________ ___________ ___________ ___________ Total current liabilities 597,202 192,810 21,307 811,319 ___________ ___________ ___________ ___________ Total Capital and Liabilities $ 6,865,163 $ 1,875,680 $ 152,657 $ 8,893,500 =========== =========== =========== =========== See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1996 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Notes 1,4,10) (Notes 1,4,7) (Notes 2,9) Combined _____________ _____________ ____________ ____________ OPERATING REVENUES: Electric $ 910,234 $ 341,210 $ 96,703 $ 1,348,147 Gas 58,478 85,359 - 143,837 Other 259 5,082 789 6,130 ____________ ___________ __________ ____________ Total operating revenues 968,971 431,651 97,492 1,498,114 OPERATING EXPENSES: Operations Fuel and purchased power 176,978 131,646 54,864 363,488 Gas Costs 34,571 52,681 - 87,252 Other 186,203 69,207 9,396 264,806 ____________ ___________ __________ ____________ 397,752 253,534 64,260 715,546 Maintenance 110,462 30,971 9,232 150,665 Depreciation and amortization 119,285 43,130 7,601 170,016 Income taxes (Note 7) 72,865 21,294 4,048 98,207 Other taxes 103,207 29,384 1,028 133,619 ____________ ___________ __________ ____________ Total operating expenses 803,571 378,313 86,169 1,268,053 OPERATING INCOME 165,400 53,338 11,323 230,061 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 3,823 77 - 3,900 Minority interest in consolidated subsidiary - - (2,482) (2,482) Miscellaneous, net (1,586) (1,062) (3,719) (6,367) ____________ ___________ ___________ ____________ Total other income and deductions, net 2,237 (985) (6,201) (4,949) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 167,637 52,353 5,122 225,112 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 67,528 17,487 5,122 90,137 Allowance for borrowed funds used during construction (3,978) (98) - (4,076) Preferred dividends of subsidiaries (Note 8) 6,625 1,864 - 8,489 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 70,175 19,253 5,122 94,550 NET INCOME $ 97,462 $ 33,100 $ - $ 130,562 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $0.95 $0.97 $0.95 ===== ===== ===== AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462 ============ =========== ========== ============ See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME SIX MONTHS ENDED JUNE 30, 1995 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Note 1) (Notes 1,3,7) (Notes 2,9) Combined _____________ _____________ ____________ ____________ OPERATING REVENUES: Electric $ 908,829 $ 316,688 $ 91,488 $ 1,317,005 Gas 51,614 74,290 - 125,904 Other 247 3,428 143 3,818 ____________ ___________ __________ ____________ Total operating revenues 960,690 394,406 91,631 1,446,727 OPERATING EXPENSES: Operations Fuel and purchased power 170,079 117,094 48,169 335,342 Gas costs 28,216 43,069 - 71,285 Other 183,940 76,536 10,011 270,487 ____________ ___________ __________ ____________ 382,235 236,699 58,180 677,114 Maintenance 111,088 30,672 9,471 151,231 Depreciation and amortization 115,778 41,275 8,050 165,103 Income taxes (Note 7) 74,070 15,105 4,209 93,384 Other taxes 103,053 28,349 1,030 137,432 ____________ ___________ __________ ____________ Total operating expenses 786,224 352,100 80,940 1,219,264 OPERATING INCOME 174,466 42,306 10,691 227,463 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 2,908 377 - 3,285 Minority interest in consolidated subsidiary - - (2,164) (2,164) Miscellaneous, net 1,533 1,337 (3,314) (444) ____________ ___________ __________ ____________ Total other income and deductions, net 4,441 1,714 (5,478) 677 INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 178,907 44,020 5,213 228,140 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 67,988 16,658 5,213 89,859 Allowance for borrowed funds used during construction (3,340) (31) - (3,371) Preferred dividends of subsidiaries (Note 8) 6,626 1,939 - 8,565 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 71,274 18,566 5,213 95,053 NET INCOME $ 107,633 $ 25,454 $ - $ 133,087 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $1.05 $0.75 $0.97 ===== ===== ===== AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462 ============ =========== ========== ============ See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME TWELVE MONTHS ENDED JUNE 30, 1996 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Notes 1,4,10) (Notes 1,3,4,7) (Notes 2,9) Combined _____________ _______________ ____________ ____________ OPERATING REVENUES: Electric $ 2,015,858 $ 728,006 $ 187,754 $ 2,931,618 Gas 94,678 140,676 - 235,354 Other 452 10,825 1,000 12,277 ____________ ___________ __________ ____________ Total operating revenues 2,110,988 879,507 188,754 3,179,249 OPERATING EXPENSES: Operations Fuel and purchased power 372,057 262,778 104,201 739,036 Gas costs 57,607 83,667 - 141,274 Other 370,133 148,039 18,533 536,705 ____________ __________ ___________ ____________ 799,797 494,484 122,734 1,417,015 Maintenance 220,982 68,295 17,702 306,979 Depreciation and amortization 236,745 85,118 15,299 337,162 Income taxes (Note 7) 208,336 51,961 7,696 267,993 Other taxes 212,299 57,647 1,909 271,855 ____________ ___________ __________ ____________ Total operating expenses 1,678,159 757,505 165,340 2,601,004 OPERATING INCOME 432,829 122,002 23,414 578,245 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 7,742 589 - 8,331 Minority interest in consolidated subsidiary - - (4,876) (4,876) Miscellaneous, net (9,099) (4,697) (8,313) (22,109) ____________ ___________ __________ ____________ Total other income and deductions, net (1,357) (4,108) (13,189) (18,654) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 431,472 117,894 10,225 559,591 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 134,282 34,598 10,225 179,105 Allowance for borrowed funds used during construction (6,744) (140) - (6,884) Preferred dividends of subsidiaries (Note 8) 13,249 3,775 - 17,024 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 140,787 38,233 10,225 189,245 NET INCOME $ 290,685 $ 79,661 $ - $ 370,346 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.85 $2.34 $2.70 ===== ===== ===== AVERAGE COMMON SHARES OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462 ============ =========== ========== ============ See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
AMEREN CORPORATION NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS 1. Reclassifications have been made to certain "as reported" account balances reflected in CIPSCO's and Union Electric's financial statements to conform to this reporting presentation (See Notes 6, 7 and 8). All other financial statement presentation and accounting policy differences are immaterial and have not been adjusted in the pro forma combined condensed financial statements. 2. The pro forma combined condensed financial statements reflect the conversion of each share of Union Electric Common Stock ($5 par value) outstanding into one share of Ameren Common Stock ($.01 par value) and the conversion of each share of CIPSCO Common Stock (no par value) outstanding into 1.03 shares of Ameren Common Stock, as provided in the Merger Agreement. The pro forma combined condensed financial statements are presented as if the companies were combined during all periods included therein. 3. Net income for the six months ended June 30, 1995 includes CIPSCO's pre-tax charges of $5.8 million for a voluntary separation program. Net income for the twelve months ended June 30, 1996 includes CIPSCO's pre-tax write-off of $5.7 million of system development expenses. 4. The allocation between Union Electric and CIPSCO and their customers of the estimated cost savings resulting from the Merger, net of the costs incurred to achieve such savings, will be subject to regulatory review and approval. Transaction costs are currently estimated to be approximately $22 million (including fees for financial advisors, attorneys, accountants, consultants, filings and printing). None of these estimated cost savings have been reflected in the pro forma combined condensed financial statements. However, net income for the six months ended June 30, 1996 includes merger transaction costs and costs to achieve such savings of $4.4 million, net of income taxes, for Union Electric and $2.1 million, net of income taxes, for CIPSCO. Net income for the twelve months ended June 30, 1996 includes merger transaction costs and costs to achieve such savings of $13.2 million, net of income taxes, for Union Electric and $6.8 million, net of income taxes, for CIPSCO. 5. Intercompany transactions (including purchased and exchanged power transactions) between Union Electric and CIPSCO during the periods presented were not material and, accordingly, no pro forma adjustments were made to eliminate such transactions. 6. CIPSCO's regulatory asset related to deferred income taxes was reclassified from the regulatory liability account balance to conform to this reporting presentation. 7. CIPSCO's income taxes are reflected as operating expenses to conform to this reporting presentation. 8. Currently, the Union Electric Preferred Stock is not issued by a subsidiary; subsequent to the Merger, the Union Electric Preferred Stock will be issued by a subsidiary of Ameren. As a result, Union Electric's preferred dividend requirements have been reclassified to conform to this reporting presentation. 9. Pro forma adjustments have been made to consolidate the financial results of Electric Energy, Inc. (EEI), which will, in substance, be a 60% owned subsidiary of Ameren subsequent to the Merger. Union Electric and CIPSCO hold 40% and 20% ownership interests, respectively, in EEI and account for these investments under the equity method of accounting. All intercompany transactions between Union Electric, CIPSCO and EEI have been eliminated. 10. Net income for the six and twelve months ended June 30, 1996 includes credits for Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $45 million and $76 million, respectively. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits: Exhibit 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements Before Income Taxes for CIPS. Exhibit 27.1 Financial Data Schedule for CIPSCO (required for electronic filing only in accordance with Item 601(c)(1) of Regulation S-K). Exhibit 27.2 Financial Data Schedule for CIPS (required for electronic filing only in accordance with Item 601(c)(1) of Regulation S-K). (B) Reports on Form 8-K: Date of Report Item Reported ______________ _____________ May 20, 1996 Item 5. Other Events. Reports information regarding the ruling by an administrative law judge of the National Labor Relations Board in the matter of the labor dispute between CIPS and the International Brotherhood of Electrical Workers Local No. 702. June 20, 1996 Item 5. Other Events. Reports information regarding the intention of CIPS and Amax Coal Sales Company to enter into an agreement between the parties to modify the existing contract for coal supplied to Newton Power Station Unit 1. SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, CIPSCO Incorporated, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. CIPSCO Incorporated Date: August 13, 1996 /s/ F. J. Kinsinger _______________________________________ F. J. Kinsinger Controller (Chief Accounting Officer) SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant, Central Illinois Public Service Company, has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Central Illinois Public Service Company Date: August 13, 1996 /s/ F. J. Kinsinger _______________________________________ F. J. Kinsinger Controller (Principal Accounting Officer) CIPSCO INCORPORATED AND CENTRAL ILLINOIS PUBLIC SERVICE COMPANY EXHIBIT INDEX TO FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1996 Exhibit No. Description ___________ ___________ Exhibit 12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Fixed Charges plus Preferred Stock Dividend Requirements Before Income Taxes for CIPS. Exhibit 27.1 Financial Data Schedule for CIPSCO Exhibit 27.2 Financial Data Schedule for CIPS EX-12 2 Exhibit 12 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS BEFORE INCOME TAXES (in thousands) 12 Months Ended __________________________________________________________________________________ December 31, June 30, _____________________________________________________________ 1996 1995 1994 1993 1992 1991 _____________ ________ ________ ________ ________ ________ Net income.................................... $ 77,024 $ 70,631 $ 81,913 $ 84,011 $ 72,601 $ 75,683 Add--Federal and state income taxes: Current.................................... 50,158 41,276 38,097 50,441 6,110 36,316 Deferred (net)............................ 2,590 5,627 13,190 1,674 33,998 7,573 Investment tax credit amortization....... (3,355) (3,361) (3,367) (3,366) (3,336) (3,464) Income tax applicable to nonoperating activities............................... 459 941 603 631 2,989 2,413 _______ _______ _______ _______ _______ _______ 49,852 44,483 48,523 49,380 39,761 42,838 _______ _______ _______ _______ _______ _______ Net income before income taxes............. 126,876 115,114 130,436 133,391 112,362 118,521 _______ _______ _______ _______ _______ _______ Add--Fixed charges Interest on long-term debt............... 31,415 31,168 31,164 32,823 35,534 36,652 Interest on provision for revenue refunds - - - - (803) 4,261 Other interest............................ 1,442 853 358 479 392 1,231 Amortization of net debt premium and discount................................. 1,718 1,703 1,678 1,598 863 338 _______ _______ _______ _______ _______ ________ 34,575 33,724 33,200 34,900 35,986 42,482 _______ _______ _______ _______ _______ ________ Earnings as defined......................... $161,451 $148,838 $163,636 $168,291 $148,348 $161,003 ======= ======= ======= ======= ======= ======== Ratio of earnings to fixed charges......... 4.67 4.41 4.93 4.82 4.12 3.79 Earnings required for preferred dividends: Preferred stock dividends................... $ 3,775 $ 3,850 $ 3,510 $ 3,718 $ 4,549 $ 5,396 Adjustment to pre-tax basis.............. 2,443 2,425 2,079 2,185 2,491 3,054 _______ _______ _______ _______ _______ _______ $ 6,218 $ 6,275 $ 5,589 $ 5,903 $ 7,040 $ 8,450 _______ _______ _______ _______ _______ _______ Fixed charges plus preferred stock dividend requirements...................... $ 40,793 $ 39,999 $ 38,789 $ 40,803 $ 43,026 $ 50,932 ======= ======= ======= ======= ======= ======= Ratio of earnings to fixed charges plus preferred stock dividend requirements.... 3.96 3.72 4.22 4.12 3.45 3.16 * An additional charge equivalent to earnings required to adjust dividends on preferred stock to a pre-tax basis (See below.) { Net income before income taxes } { ______________________________ -100% } X preferred dividends = earnings required for preferred dividends { Net income }
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UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF INCOME, STATEMENT OF CASH FLOWS, BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000018654 CIPS 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 PER-BOOK 1,462,022 0 203,146 0 47,293 1,712,461 121,283 0 445,021 566,304 0 80,000 464,077 0 0 38,482 15,000 0 0 0 548,598 1,712,461 426,585 20,064 356,084 376,148 50,437 (923) 49,176 17,389 31,787 1,864 29,923 34,000 0 85,448 0 0 INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES. INCLUDES INCOME TAX EXPENSE. NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
EX-27 4
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE STATEMENT OF INCOME, STATEMENT OF CASH FLOWS, BALANCE SHEET AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 0000860520 CIPSCO Inc. 1,000 6-MOS DEC-31-1995 JAN-01-1996 JUN-30-1996 PER-BOOK 1,462,022 109,121 212,896 0 48,302 1,832,341 356,812 0 293,135 649,947 0 80,000 464,077 0 0 38,482 15,000 0 0 0 584,835 1,832,341 431,651 21,294 357,019 378,313 53,338 (1,062) 52,276 17,312 34,964 1,864 33,100 35,092 0 89,693 .97 .97 INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES. INCLUDES INCOME TAX EXPENSE. NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
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