-----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, UlrykTke3IZ/HqN469kWswJ2UWQ8T2XHfFJkK7J+drOfNrQB3Uz/SZp/+C3CTut8 amtuhiAKtyyxJ7N1ljfpNw== 0000018654-96-000014.txt : 19961118 0000018654-96-000014.hdr.sgml : 19961118 ACCESSION NUMBER: 0000018654-96-000014 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 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: 96665374 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: 96665375 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 September 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 October 31, 1996 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Common stock, no par value, 25,452,373 shares outstanding and held by CIPSCO INCORPORATED at October 31, 1996 CIPSCO INCORPORATED AND CENTRAL ILLINOIS PUBLIC SERVICE COMPANY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 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 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 September 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 September 30, 1996 and 1995 (in thousands except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, _______________________ _______________________ 1996 1995 1996 1995 ________ ________ ________ ________ Operating Revenues: Electric....................................... $218,978 $228,198 $560,188 $544,886 Gas............................................ 15,921 13,234 101,280 87,523 Investment..................................... 2,382 2,431 7,464 5,860 ________ ________ ________ ________ Total operating revenues.................... 237,281 243,863 668,932 638,269 ________ ________ ________ ________ Operating Expenses: Fuel for electric generation................... 58,574 53,373 165,288 144,228 Purchased power................................ 14,803 18,981 39,734 45,219 Gas costs...................................... 7,546 5,253 60,227 48,322 Other operation................................ 38,279 37,361 107,487 113,897 Maintenance.................................... 12,034 16,018 43,005 46,690 Depreciation and amortization.................. 21,680 21,005 64,810 62,280 Taxes other than income taxes.................. 14,121 14,783 43,505 43,133 ________ ________ ________ ________ Total operating expenses.................... 167,037 166,774 524,056 503,769 ________ ________ ________ ________ Operating Income................................. 70,244 77,089 144,876 134,500 ________ ________ ________ ________ Interest and Other Charges: Interest on long-term debt of subsidiary....... 8,279 8,285 24,839 24,583 Other interest charges......................... 2,110 214 3,037 574 Allowance for funds used during construction... (271) (240) (446) (649) Preferred stock dividends of subsidiary........ 931 957 2,794 2,896 Miscellaneous, net............................. 1,811 (579) 2,874 (1,915) ________ ________ ________ ________ Total interest and other charges................. 12,860 8,637 33,098 25,489 ________ ________ ________ ________ Income Before Income Taxes....................... 57,384 68,452 111,778 109,011 _________ ________ ________ ________ Income Taxes..................................... 21,966 26,721 43,260 41,826 ________ ________ ________ ________ Net Income....................................... $ 35,418 $ 41,731 $ 68,518 $ 67,185 ======== ======== ======== ======== Average Shares of Common Stock Outstanding....... 34,070 34,070 34,070 34,070 Earnings per Average Share of Common Stock....... $ 1.04 $ 1.22 $ 2.01 $ 1.97 The accompanying condensed notes to financial statements are an integral part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets September 30,1996 and December 31, 1995 (in thousands) September 30, December 31, 1996 1995 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric..................................................... $2,355,551 $2,296,402 Gas.......................................................... 236,594 229,118 __________ __________ 2,592,145 2,525,520 Less-Accumulated depreciation................................ 1,184,008 1,132,355 __________ __________ 1,408,137 1,393,165 Construction work in progress................................ 61,546 72,490 __________ __________ 1,469,683 1,465,655 __________ __________ Current Assets: Cash......................................................... 5,771 1,088 Temporary investments, at cost which approximates market..... 7,303 7,147 Accounts receivable, net..................................... 82,812 65,267 Accrued unbilled revenues.................................... 19,669 27,234 Materials and supplies, at average cost...................... 39,827 40,246 Fuel for electric generation, at average cost................ 34,223 42,634 Gas stored underground, at average cost...................... 14,219 9,774 Prepayments.................................................. 9,292 10,649 Other current assets......................................... 8,195 8,197 __________ __________ 221,311 212,236 __________ __________ Investments and Other Assets: Marketable securities........................................ 49,697 45,967 Leveraged leases and energy investments...................... 61,111 59,114 Other........................................................ 50,311 44,939 __________ __________ 161,119 150,020 __________ __________ $1,852,113 $1,827,911 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity.................................. $ 667,790 $ 651,532 Preferred stock of subsidiary................................ 80,000 80,000 Long-term debt of subsidiary................................. 421,152 478,926 __________ __________ 1,168,942 1,210,458 __________ __________ Current Liabilities: Long-term debt of subsidiary due within one year............. 58,000 - Short-term borrowings........................................ 53,991 47,921 Accounts payable............................................. 42,851 60,603 Accrued wages................................................ 10,727 9,335 Accrued taxes................................................ 12,700 11,266 Accrued interest............................................. 8,785 9,525 Other........................................................ 47,411 33,265 __________ __________ 234,465 171,915 __________ __________ Deferred Credits: Accumulated deferred income taxes............................ 332,042 325,181 Investment tax credits....................................... 49,722 52,234 Regulatory liabilities, net.................................. 66,942 68,123 __________ __________ 448,706 445,538 __________ __________ $1,852,113 $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 September 30, 1996 and 1995 (in thousands) (unaudited) Nine Months Ended September 30, _________________________ 1996 1995 __________ __________ Operating Activities: Net income......................................................... $ 68,518 $ 67,185 Adjustments to reconcile net income to net cash provided: Depreciation and amortization.................................... 64,810 62,280 Allowance for equity funds used during construction (AFUDC)...... (196) (599) Deferred income taxes, net....................................... 5,324 9,133 Investment tax credit amortization............................... (2,512) (2,521) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues........... (9,980) 2,809 Fuel for electric generation..................................... 8,411 (9,753) Other inventories................................................ (4,026) 1,841 Prepayments...................................................... 1,357 (2,505) Other assets..................................................... (5,370) (9,715) Accounts payable and other liabilities........................... (3,606) 14,656 Accrued wages, taxes and interest................................ 2,086 11,473 Other.............................................................. 65 (6,340) __________ __________ Net cash provided by operating activities........................ 124,881 137,944 __________ __________ Investing Activities: Utility construction expenditures, excluding AFUDC................. (67,760) (66,243) Allowance for borrowed funds used during construction.............. (250) (49) Changes in temporary investments................................... (156) 18 Long-term marketable securities.................................... (3,285) (662) Long-term leveraged leases and energy investments.................. (1,997) (8,274) __________ __________ Net cash used in investing activities............................ (73,448) (75,210) __________ __________ Financing Activities: Common stock dividends paid........................................ (52,808) (51,786) Proceeds from issuance of long-term debt of subsidiary............. - 20,000 Repayment of long-term debt of subsidiary.......................... - (16,000) Proceeds from issuance of (repayment of) short-term borrowings..... 6,070 (14,985) Issuance expense, discount and premium............................. (12) (230) __________ __________ Net cash used in financing activities............................ (46,750) (63,001) __________ __________ Net increase (decrease) in cash.................................... 4,683 (267) Cash at beginning of period........................................ 1,088 1,963 __________ __________ Cash at end of period.............................................. $ 5,771 $ 1,696 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized............................. $ 26,935 $ 24,245 Income taxes..................................................... $ 35,685 $ 23,432 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 September 30, 1996 and 1995 (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, __________________ __________________ 1996 1995 1996 1995 ________ ________ ________ ________ Operating Revenues: Electric....................................... $218,982 $228,213 $560,205 $544,914 Gas............................................ 15,922 13,236 101,283 87,528 ________ ________ ________ ________ Total operating revenues.................... 234,904 241,449 661,488 632,442 ________ ________ ________ ________ Operating Expenses: Fuel for electric generation................... 58,574 53,373 165,288 144,228 Purchased power................................ 14,803 18,981 39,734 45,219 Gas costs...................................... 7,546 5,253 60,227 48,322 Other operation................................ 37,998 37,050 106,540 112,897 Maintenance.................................... 12,033 16,017 43,002 46,689 Depreciation and amortization.................. 21,593 20,780 64,468 61,814 Taxes other than income taxes.................. 14,114 14,782 43,485 43,107 Income taxes: Current...................................... 19,082 21,701 44,568 38,305 Deferred, net................................ 4,716 5,125 968 4,413 Deferred investment tax credits, net......... (837) (840) (2,511) (2,521) ________ ________ ________ ________ Total operating expenses.................... 189,622 192,222 565,769 542,473 ________ ________ ________ ________ Operating Income................................. 45,282 49,227 95,719 89,969 ________ ________ ________ ________ Other Income and Deductions: Allowance for equity funds used during construction................................... 119 222 196 599 Nonoperating income taxes...................... 1,581 (279) 1,243 (1,099) Miscellaneous, net............................. (1,781) 625 (2,781) 2,325 ________ ________ ________ ________ Total other income and deductions........... (81) 568 (1,342) 1,825 ________ ________ ________ ________ Income Before Interest Charges................... 45,201 49,795 94,377 91,794 ________ ________ ________ ________ Interest Charges: Interest on long-term debt..................... 8,279 8,285 24,839 24,583 Other interest charges......................... 2,114 203 3,041 540 Allowance for borrowed funds used during construction................................... (152) (18) (250) (49) ________ ________ ________ ________ Total interest charges..................... 10,241 8,470 27,630 25,074 ________ ________ ________ ________ Net Income....................................... 34,960 41,325 66,747 66,720 Preferred Stock Dividends........................ 931 957 2,795 2,896 ________ ________ ________ ________ Earnings for Common Stock........................ $ 34,029 $ 40,368 $ 63,952 $ 63,824 ======== ======== ======== ======== The accompanying condensed notes to financial statements are an integral part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Balance Sheets September 30, 1996 and December 31, 1995 (in thousands) September 30, December 31, 1996 1995 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric..................................................... $2,355,551 $2,296,402 Gas.......................................................... 236,594 229,118 __________ __________ 2,592,145 2,525,520 Less-Accumulated depreciation................................ 1,184,008 1,132,355 __________ __________ 1,408,137 1,393,165 Construction work in progress................................ 61,546 72,490 __________ __________ 1,469,683 1,465,655 __________ __________ Current Assets: Cash......................................................... 5,716 1,006 Accounts receivable, net..................................... 82,887 65,574 Accrued unbilled revenues.................................... 19,669 27,234 Materials and supplies, at average cost...................... 39,827 40,246 Fuel for electric generation, at average cost................ 34,223 42,634 Gas stored underground, at average cost...................... 14,219 9,774 Prepayments.................................................. 9,198 10,268 Other current assets......................................... 8,197 8,226 __________ __________ 213,936 204,962 __________ __________ Other Assets................................................... 49,303 44,188 __________ __________ $1,732,922 $1,714,805 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity.................................. $ 584,224 $ 570,419 Preferred stock.............................................. 80,000 80,000 Long-term debt............................................... 421,152 478,926 __________ __________ 1,085,376 1,129,345 __________ __________ Current Liabilities: Long-term debt due within one year........................... 58,000 - Short-term borrowings........................................ 53,991 47,921 Accounts payable............................................. 42,304 60,791 Accrued wages................................................ 10,727 9,320 Accrued taxes................................................ 14,030 11,155 Accrued interest............................................. 8,785 9,525 Other........................................................ 47,413 33,264 __________ __________ 235,250 171,976 __________ __________ Deferred Credits: Accumulated deferred income taxes............................ 295,632 293,127 Investment tax credits....................................... 49,722 52,234 Regulatory liabilities, net.................................. 66,942 68,123 __________ __________ 412,296 413,484 __________ __________ $1,732,922 $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 September 30, 1996 and 1995 (in thousands) (unaudited) Nine Months Ended September 30, _______________________ 1996 1995 __________ __________ Operating Activities: Net income...................................................... $ 66,747 $ 66,720 Adjustments to reconcile net income to net cash provided: Depreciation and amortization................................. 64,468 61,814 Allowance for equity funds used during construction (AFUDC)... (196) (599) Deferred income taxes, net.................................... 968 4,413 Investment tax credit amortization............................ (2,512) (2,521) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues........ (9,748) 2,387 Fuel for electric generation.................................. 8,411 (9,753) Other inventories............................................. (4,026) 1,841 Prepayments................................................... 1,070 (2,494) Other assets.................................................. (5,086) (7,697) Accounts payable and other liabilities........................ (4,338) 14,229 Accrued wages, taxes and interest............................. 3,542 11,490 Other........................................................... 407 (5,874) _________ _________ Net cash provided by operating activities..................... 119,707 133,956 _________ _________ Investing Activities: Construction expenditures, excluding AFUDC...................... (67,760) (66,243) Allowance for borrowed funds used during construction........... (250) (49) Changes in temporary investments................................ - (701) _________ _________ Net cash used in investing activities......................... (68,010) (66,993) --------- --------- Financing Activities: Proceeds from issuance of long-term debt........................ - 20,000 Repayment of long-term debt..................................... - (16,000) Proceeds from issuance of (repayment of) short-term borrowings.. 6,070 (14,985) Dividends paid: Preferred stock............................................... (2,795) (2,896) Common stock.................................................. (50,250) (52,500) Issuance expense, discount and premium.......................... (12) (230) _________ _________ Net cash used in financing activities......................... (46,987) (66,611) _________ _________ Net increase (decrease) in cash................................. 4,710 352 Cash at beginning of period..................................... 1,006 1,320 _________ _________ Cash at end of period........................................... $ 5,716 $ 1,672 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized.......................... $ 26,935 $ 24,245 Income taxes.................................................. $ 38,052 $ 27,622 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 SEPTEMBER 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. Prior year amounts have been reclassified on a basis consistent with the September 30, 1996 presentation. 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 September 30, 1996, $47.9 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 $10.4 million at September 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 each transmission-owning public utility, 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. On July 9, 1996, CIPS filed open access tariffs under Rule 888 for transmission service. Also, in conjunction with the application at the FERC regarding the merger of CIPSCO and Union Electric Company ("UE") (see Part II Item 5. Other Information), CIPS and UE jointly filed single- system open access tariffs with FERC. Because these tariffs were filed under provisions of the rulemaking prior to the issuance of Order 888, these tariffs will be revised by November 15, 1996 to comply with the final rule in Order 888, but will only become effective upon completion of the merger. 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 has applied for a waiver from the requirements of Order 889 pending consummation of the merger. CLEAN AIR ACT - CIPS' current compliance strategy to meet the requirements of the Clean Air Act Amendments of 1990 (Amendments) is to rely primarily on switching to a lower sulfur coal at its generating units rather than increased scrubbing and use of higher sulfur coal at its Newton Unit 1. The estimated capital costs of compliance are included in the CIPS 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 it is proposed to be modified (the "Contract Modification") CIPS (1) would make a $70 million payment, plus interest from November 1, 1996, to Cyprus Amax not later than February 17, 1997, (2) would be able to purchase at market prices low-sulfur, out-of-state coal (which may be procured from Cyprus Amax, its affiliates or other providers) in substitution for the high-sulfur Illinois coal CIPS is currently obligated to purchase from Cyprus Amax, and (3) would receive options for future purchases of low-sulfur, out-of-state coal from Cyprus Amax or its affiliates in 1997, 1998 and 1999 at set negotiated prices. 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 over the term of the Contract Modification and thereafter CIPS will avoid the need for substantial renovation 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 authorization to recover the $70 million payment (and associated carrying charges) in rates over a six-year period, approval of a switch to out-of-state coal from Illinois coal as required by Illinois statutes, recognition of a regulatory asset in the amount of $44 million relating to the scrubber and the estimated cost of removing the scrubber from service, and approval of CIPS' proposed accounting treatment for the transaction. CIPS cannot predict what action the Illinois commission will take in this matter. An order is expected in December 1996. 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 the lockout. 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 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 this matter 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 September 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 September 30, 1996 are: Description Amount ___________ ______ (in thousands) Regulatory Assets: Deferred environmental remediation costs $ 10,411 Take-or-Pay costs 731 Unamortized costs related to reacquired debt 12,505 ________ Total Regulatory Assets - in Other Assets on Balance Sheet $ 23,647 ======== Regulatory Liabilities: Clean Air Act allowances, net $ 1,365 SFAS 109 - Income Taxes, net 65,577 ________ Total Regulatory Liabilities, Net $ 66,942 ======== Regulatory Liabilities Net of Regulatory Assets $ 43,295 ======== 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"). The Merger Agreement was approved by shareholders of both parties in December 1995. Consummation of the merger contemplated by the Merger Agreement is conditioned on, among other things, receipt of regulatory and governmental approvals, including approval of the Illinois commission, the Missouri Public Service Commission (MPSC), FERC, the Nuclear Regulatory Commission and the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935. The Company cannot predict when all necessary approvals will be obtained but expects the merger to be consummated by the end of 1997. On July 12, 1996, a joint agreement was filed with the MPSC that recommends approval of the merger. Union Electric Company, the MPSC staff, the office of Public Counsel, several customer groups and others signed the agreement. On September 25, 1996, the MPSC ordered that additional information be filed in November 1996 in connection with the merger proceeding. The MPSC is expected to issue a decision on the merger in early 1997. On November 7, 1996, a Hearing Examiner for the Illinois commission issued a proposed order recommending that the merger be approved subject to certain conditions, including (i) that each of CIPS and Union Electric be required to file a rate case or alternative regulation plan within one year following the closing of the merger, (ii) that the ratemaking treatment of merger costs and savings be determined in the rate case or alternative regulation proceeding and (iii) that the proposed transfer to CIPS of Union Electric's existing Illinois electric and gas distribution business and facilities be denied, but that the joint dispatch agreement be approved. CIPSCO cannot predict what action the Illinois commission will take in the matter; however, an order from the Illinois commission is expected by the end of 1996. On October 16, 1996, the FERC set the merger for hearing, ordering the administrative law judge to issue an initial order no later than April 30, 1997. The FERC is expected to issue a decision on the merger by the end of 1997. Certain pro forma financial information is included in Part II, Item 5. Other Information of this report. 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, including the $70 million payment 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 described in Note 2 of Condensed Notes to Financial Statements. 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 and has received approval from the Illinois commission to issue, through December 31, 1998, up to $200 million of long- term indebtedness outstanding at any time. For the first nine months of 1996, CIPS' total capital requirements were provided from internal sources. Common stock dividends paid for the twelve months ended September 30, 1996, resulted in a payout ratio of 96% of the Company's earnings to common shareholders. Common stock dividends paid to the Company's common shareholders equalled 52% 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 $10.3 million of transaction costs. Through September 30, 1996, these transaction costs totalled $6.7 million. The Company expects that these costs (which are not tax deductible) will approximate $2 million or 5 cents per share in 1996 and $3.8 million or 11 cents per share in 1997. FINANCIAL CONDITION Financial condition and changes in total Shareholder Equity of the Company and CIPS for the nine-month periods ended September 30, 1996 and 1995 are as follows: Nine Months Ended September 30, _________________________ (in thousands) The Company: 1996 1995 _________ _________ Common Shareholders' Equity Net income $ 68,518 $ 67,185 Common stock dividends paid (52,808) (51,786) Other 548 (85) ________ ________ Change in Shareholders' Equity $ 16,258 $ 15,314 ======== ======== Nine Months Ended September 30, _________________________ (in thousands) CIPS: 1996 1995 _________ _________ Common Shareholder's Equity Earnings for common stock $ 63,952 $ 63,824 Common stock dividends paid (50,250) (52,500) Other 103 (86) ________ ________ Change in Shareholder's Equity $ 13,805 $ 11,238 ======== ======== OVERVIEW The Company's earnings per share were $1.04 for the quarter ended September 30, 1996, compared to $1.22 per share earned during the same period in 1995. The decrease primarily reflects lower kilowatthour sales to residential and commercial customers due to milder weather in the 1996 period. The Company's earnings per share were $2.01 for the nine months ended September 30, 1996, compared to $1.97 per share earned during the same period in 1995. The increase reflects modestly higher sales to CIPS customers, market gains in non-utility investments and lower other operation and maintenance expenses in 1996. The 1995 expenses for the nine 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 nine month periods ended September 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. Third Quarter Nine Months Ended Ended September 30, September 30, __________________ ___________________ 1996 1995 1996 1995 ________ ________ ________ ________ CIPS Electric operating margin $138,162 $147,944 $336,086 $336,393 Gas operating margin 7,857 7,471 35,508 34,089 Other deductions and interest expenses (111,059) (114,090) (304,847) (303,762) CIPS preferred stock dividends (931) (957) (2,795) (2,896) ________ ________ ________ ________ Total earnings for common stock 34,029 40,368 63,952 63,824 ________ ________ ________ ________ NON-UTILITY Investment revenues 2,350 2,381 7,366 5,440 Other deductions and expenses (961) (1,018) (2,800) (2,079) ________ ________ ________ ________ Total non-utility net income 1,389 1,363 4,566 3,361 ________ ________ ________ ________ Consolidated net income $ 35,418 $ 41,731 $ 68,518 $ 67,185 ======== ======== ======== ======== RESULTS OF OPERATIONS The results of operations of the Company and CIPS for the three months and nine months ended September 30, 1996, compared to the same periods in 1995 are presented below. The Company Net Income (in thousands) Earnings Per Share ________________________ ________________________ Three Months Nine Months Three Months Nine Months ____________ ___________ ____________ ___________ 1996 $35,418 $68,518 $1.04 $2.01 1995 41,731 67,185 1.22 1.97 _______ _______ _____ _____ Increase (Decrease) $(6,313) $ 1,333 $(.18) $ .04 Percent Increase (Decrease) (15)% 2% (15)% 2% CIPS Earnings for Common Stock (in thousands) ___________________________ Three Months Nine Months ____________ ___________ 1996 $34,029 $63,952 1995 40,368 63,824 _______ _______ Increase (Decrease) $(6,339) $ 128 ======= ======= Percent Increase (Decrease) (16)% - % 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 declined 4% in the third quarter of 1996 compared to the third quarter of 1995 reflecting a decline in retail KWH sales due principally to milder weather conditions in 1996. KWH sales to residential and commercial customers decreased 13% and 4%, respectively, due to fewer cooling degree days in the third quarter of 1996. Industrial electric sales were slightly higher in the third quarter of 1996 compared to the same quarter in 1995. Power supply agreement revenues for the third quarter of 1996 were 1% below those of the third quarter of 1995 due to a decline in transportation revenues related to these agreements. Economy and emergency interchange sales increased 7% in the third quarter of 1996 over the same period in 1995 due to more favorable market conditions in the interchange marketplace. Sales to cooperatives and municipals declined in the third quarter of 1996 compared to the same quarter in 1995 due primarily to milder weather in 1996. One cooperative, Soyland Power Cooperative, with whom CIPS has a power supply agreement for up to 102 megawatts through 1999, is experiencing financial difficulties. These sales are recorded under Power Supply Agreements. As of September 30, 1996, Soyland was current in the payment of all of its obligations to CIPS. Electric revenues increased 3% in the first nine months of 1996 compared to the same period of 1995 reflecting higher KWH sales due principally to weather conditions in 1996. KWH sales to retail customers increased 1%, while wholesale sales were up 2%. Power supply agreement revenues for the nine months ended September 30, 1996, were 3% above those of the same period in 1995 due to increased transportation revenues related to these agreements. Economy and emergency interchange sales increased 6% in the first nine 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 nine months ended September 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) ______________________________________ ___________________________________ Third Quarter Nine Months ______________________________________ ___________________________________ Revenue Rev % KWH KWH % Revenue Rev % KWH KWH % ________ _____ _________ _____ _______ _____ _______ _____ Residential $ (9,511) (11)% (113,858) (13)% $ (2,257) (1)% 2,543 - % Commercial (1,112) (2) (26,395) (4) 3,458 3 40,885 2 Industrial (824) (2) 2,375 - 1,045 1 24,269 1 Public Authorities and Other (280) (5) 776 2 43 - (2,956) (2) ________ _______ ________ _______ Total Retail $(11,727) (7)% (137,102) (6)% $ 2,289 1 % 64,741 1 % Power Supply Agreements $ (109) (1)% (78,877) (16)% $ 1,354 3 % (65,671) (6)% Interchange Sales (economy/emergency) 2,881 12 80,939 7 10,913 21 157,581 6 Cooperatives and Municipals (265) (4) (8,866) (6) 746 4 7,714 2 ________ _______ ________ _______ Total Sales for Resale $ 2,507 5% (6,804) - % $ 13,013 11 % 99,624 2 % ________ _______ ________ _______ Total $ (9,220) (4)% (143,906) (4) % $ 15,302 3 % 164,365 2 % ======== ======== ======== =======
Gas revenues increased 20% in the third quarter and 16% in the first nine months of 1996 compared to the same periods in 1995. This was primarily due to higher purchased gas costs which flow through to revenues through the Purchased Gas Adjustment Clause (PGA). In addition, colder weather in 1996 caused therm sales to increase in the weather sensitive classes where residential gas revenues improved 24% for the third quarter and 15% for the first nine months of 1996 compared to 1995 due to colder weather in 1996 and higher gas costs. The commercial and industrial gas revenue improved 28% and 16%, respectively, in the third quarter and 19% and 32% in the first nine months of 1996 over the same periods in 1995 due to both the increase in gas costs and to more customers buying from CIPS in 1996 rather than transporting their own gas. Gas transportation revenues declined 6% in the third quarter and 2% in the first nine months of 1996 reflecting the increase in customers buying gas from the CIPS system. 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) _______________________________________ _____________________________________ Third Quarter Nine Months _______________________________________ _____________________________________ Revenue Rev % Therms Therms Revenue Rev % Therms Therms % % ________ _____ ______ ______ ________ _____ ______ ______ Residential $ 1,816 24 % 761 8 % $ 8,385 15 % 15,245 16 % Commercial 701 28 239 6 3,536 19 6,191 19 Industrial 266 16 (1,789) (30) 1,908 32 2,992 16 Transportation (100) (6) (10,018) (28) (101) (2) (11,237) (11) Miscellaneous 4 11 - - 29 10 - - ________ ______ ________ ______ Total $ 2,687 20 % (10,807) (20)% $ 13,757 16 % 13,191 5 % ======== ====== ======== ======
OPERATIONS __________ Fuel for electric generation increased 10% in the third quarter and 15% in the first nine months of 1996 compared to the same periods in 1995. The increases correspond to increases in KWH generation of 6% and 12% respectively. Purchased power costs declined 22% for the third quarter and 12% for the first nine months ended September 30, 1996 compared with the same periods in 1995 reflecting reduced purchases for native load and decreases in market purchases made for resale to interchange economy and emergency customers. Gas costs increased 44% for the third quarter and 25% for the first nine 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 increased 2% in the third quarter of 1996 compared to the same period in 1995 due to increases in customer accounting and collection expenses between periods. Other operation expenses declined 6% in the first nine months of 1996 compared to 1995 primarily due to a $5.8 million charge in February 1995 relating to the cost of a workforce reduction program. Maintenance expenses declined 25% for the third quarter of 1996 and 8% for the first nine 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 3% in the third quarter and 4% for the first nine months of 1996 when compared to 1995 due to normal plant additions. Taxes other than income taxes declined 4% in the third quarter and increased 1% in the first nine months of 1996 when compared to 1995 due to changes in revenue taxes which fluctuate according to sales. These revenue taxes are collected from customers in gas and electric revenues. Other interest charges in the third quarter and the first nine months of 1996 includes an interest payment of $1.6 million in settlement of prior years income tax liability. Also contributing to the increase in other interest for 1996 compared to the same periods in 1995 is interest on short- term borrowings. Miscellaneous, net is less favorable in both the third quarter and first nine months of 1996 compared to the same periods in 1995 due to merger- related expenses. Significant changes in the balance sheet accounts at September 30, 1996 compared to balances at December 31, 1995 are: Gas stored underground, at average cost, increased 45% during the first nine months due to normal summer replenishment of stored gas prior to the winter heating season. Accounts payable declined 29% during the nine months principally due to lower payable balances in purchased gas, fuel and purchased power. Other current liabilities increased 43% for the first nine months of 1996 due primarily to postretirement medical costs accrued monthly but not funded until year-end. PART II. OTHER INFORMATION Item 5. Other Information (1) Reference is made to the third full paragraph under Item 1. Business - Competition -- Electric Business on page 11 in the 1995 Form 10-K and to paragraph (2) under Item 5. Other Information in Part II on page 21 of the Second Quarter 1996 Form 10-Q for information regarding proposed "open access" programs filed with the Illinois commission by two neighboring electric utilities and the approval sought by CIPS. 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 received approval from the Illinois commission on August 7, 1996. (2) Reference is made to the last paragraph under Item 1. Business - Employees on page 23 in the 1995 Form 10-K and to paragraph (3) under Item 5. Other Information in Part II on page 21 of the Second Quarter 1996 Form 10-Q for information regarding the workforce of CIPS, contracts with those employees represented by labor unions and labor negotiations. Management completed negotiations with IBEW-702, the labor union which represents approximately 900 employees, resulting in a new three-year contract ratified by union members to be effective through June 30, 1999. (3) 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 governmental approvals, 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 September 30, 1996 gives effect to the Merger as if it had occurred at September 30, 1996. The unaudited pro forma combined condensed statements of income for the nine-month periods ended September 30, 1996 and 1995, and the twelve-month period ended September 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 statements 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 characteristic of public utility operations, financial results for the nine-month periods ended September 30, 1996 and 1995 are not necessarily indicative of trends for any twelve-month period. Also see Part I, Item 2., Management's Discussion and Analysis of Financial Condition and Results of Operations. AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET AT SEPTEMBER 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 $ 8,580,945 $ 2,355,551 $ 374,452 $11,310,948 Gas 181,899 236,594 - 418,493 Other 35,959 - - 35,959 ___________ ___________ ___________ ___________ 8,798,803 2,592,145 374,452 11,765,400 Less accumulated depreciation and amortization 3,633,370 1,184,008 265,107 5,082,485 ___________ ___________ ___________ ___________ 5,165,433 1,408,137 109,345 6,682,915 Construction work in progress: Nuclear fuel in process 115,960 - - 115,960 Other 64,990 61,546 3,922 130,458 ___________ ___________ ___________ ___________ Total property and plant, net 5,346,383 1,469,683 113,267 6,929,333 Regulatory assets: Deferred income taxes (Note 6) 696,852 42,479 - 739,331 Other 181,855 12,505 - 194,360 ___________ ___________ ___________ ___________ Total regulatory assets 878,707 54,984 - 933,691 Other assets: Unamortized debt expense 10,721 2,925 608 14,254 Nuclear decommissioning trust fund 85,629 - - 85,629 Investments in nonregulated activities - 110,808 - 110,808 Other 28,272 34,881 (3,284) 59,869 ___________ ___________ ___________ ___________ Total other assets 124,622 148,614 (2,676) 270,560 Current assets: Cash and temporary investments 19,427 13,074 9,886 42,387 Accounts receivable, net 248,862 54,274 16,816 319,952 Unbilled revenue 57,595 19,669 - 77,264 Materials and supplies, at average cost - Fossil fuel 67,205 48,442 9,087 124,734 Other 99,305 39,827 4,540 143,672 Other 39,312 46,025 3,243 88,580 ___________ ___________ ___________ ___________ Total current assets 531,706 221,311 43,572 796,589 ___________ ___________ ___________ ___________ Total Assets $ 6,881,418 $ 1,894,592 $ 154,163 $ 8,930,173 =========== =========== =========== =========== CAPITAL AND LIABILITIES Capitalization: Common stock (Note 2) $ 510,619 $ 356,812 $ (866,059) $ 1,372 Other stockholders' equity (Note 2) 1,896,212 310,978 866,059 3,073,249 ___________ ___________ ___________ ___________ Total common stockholders' equity 2,406,831 667,790 - 3,074,621 Preferred stock of subsidiary 219,121 80,000 - 299,121 Long-term debt 1,727,945 421,152 130,000 2,279,097 ___________ ___________ ___________ ___________ Total capitalization 4,353,897 1,168,942 130,000 5,652,839 Minority interest in consolidated subsidiary - - 3,534 3,534 Accumulated deferred income taxes 1,322,536 332,042 (6,810) 1,647,768 Accumulated deferred investment tax credits 161,886 49,722 - 211,608 Regulatory liability 206,991 109,421 - 316,412 Accumulated provision for nuclear decommissioning 87,302 - - 87,302 Other deferred credits and liabilities 152,517 33,210 4,753 190,480 Current liabilities: Current maturity of long-term debt 76,490 58,000 - 134,490 Short-term debt - 53,991 - 53,991 Accounts payable 73,082 42,851 16,951 132,884 Wages payable 36,908 10,727 - 47,635 Taxes accrued 238,882 12,700 8 251,590 Interest accrued 53,154 8,785 2,864 64,803 Other 117,773 14,201 2,863 134,837 ___________ ___________ ___________ ___________ Total current liabilities 596,289 201,255 22,686 820,230 ___________ ___________ ___________ ___________ Total Capital and Liabilities $ 6,881,418 $ 1,894,592 $ 154,163 $ 8,930,173 =========== =========== =========== =========== See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements.
AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME NINE MONTHS ENDED SEPTEMBER 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 $ 1,716,061 $ 560,188 $ 130,034 $ 2,406,283 Gas 68,277 101,280 - 169,557 Other 341 7,464 971 8,776 ____________ ___________ __________ ____________ Total operating revenues 1,784,679 668,932 131,005 2,584,616 OPERATING EXPENSES: Operations Fuel and purchased power 387,038 205,023 68,671 660,732 Gas Costs 42,455 60,227 - 102,682 Other 279,714 107,486 13,322 400,522 ____________ ___________ __________ ____________ 709,207 372,736 81,993 1,163,936 Maintenance 159,988 43,005 13,157 216,150 Depreciation and amortization 180,101 64,810 11,341 256,252 Income taxes (Note 7) 189,546 43,260 6,128 238,934 Other taxes 166,463 43,505 1,503 211,471 ____________ ___________ __________ ____________ Total operating expenses 1,405,305 567,316 114,122 2,086,743 OPERATING INCOME 379,374 101,616 16,883 497,873 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 4,960 196 - 5,156 Minority interest in consolidated subsidiary - - (3,760) (3,760) Miscellaneous, net (361) (2,874) (5,528) (8,763) ____________ ___________ __________ ____________ Total other income and deductions, net 4,599 (2,678) (9,288) (7,367) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 383,973 98,938 7,595 490,506 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 100,589 27,876 7,595 136,060 Allowance for borrowed funds used during construction (5,669) (250) - (5,919) Preferred dividends of subsidiaries (Note 8) 9,936 2,794 - 12,730 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 104,856 30,420 7,595 142,871 NET INCOME $ 279,117 $ 68,518 $ - $ 347,635 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.73 $2.01 $2.53 ===== ===== ===== 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 NINE MONTHS ENDED SEPTEMBER 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 $ 1,718,620 $ 544,886 $ 115,808 $ 2,379,314 Gas 60,480 87,523 - 148,003 Other 318 5,860 244 6,422 ____________ ___________ __________ ____________ Total operating revenues 1,779,418 638,269 116,052 2,533,739 OPERATING EXPENSES: Operations Fuel and purchased power 385,740 189,447 51,527 626,714 Gas costs 35,051 48,322 - 83,373 Other 277,491 113,897 14,452 405,840 ____________ ___________ __________ ____________ 698,282 351,666 65,979 1,115,927 Maintenance 163,342 46,690 14,038 224,070 Depreciation and amortization 174,369 62,280 11,866 248,515 Income taxes (Note 7) 188,492 41,826 6,208 236,526 Other taxes 166,944 43,133 1,496 211,573 ____________ ___________ __________ ____________ Total operating expenses 1,391,429 545,595 99,587 2,036,611 OPERATING INCOME 387,989 92,674 16,465 497,128 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 4,758 600 - 5,358 Minority interest in consolidated subsidiary - - (3,396) (3,396) Miscellaneous, net (8,772) 1,915 (5,153) (12,010) ____________ ___________ __________ ____________ Total other income and deductions, net (4,014) 2,515 (8,549) (10,048) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 383,975 95,189 7,916 487,080 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 101,770 25,157 7,916 134,843 Allowance for borrowed funds used during construction (4,661) (49) - (4,710) Preferred dividends of subsidiaries (Note 8) 9,938 2,896 - 12,834 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 107,047 28,004 7,916 142,967 NET INCOME $ 276,928 $ 67,185 $ - $ 344,113 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.71 $1.97 $2.51 ===== ===== ===== 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 SEPTEMBER 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 $ 2,151,551 $ 718,785 $ 170,168 $ 3,040,504 Gas 95,610 143,363 - 238,973 Other 464 10,777 1,081 12,322 ____________ ___________ ____________ ____________ Total operating revenues 2,247,625 872,925 171,249 3,291,799 OPERATING EXPENSES: Operations Fuel and purchased power 506,113 263,801 88,054 857,968 Gas costs 58,655 85,959 - 144,614 Other 370,093 148,958 18,018 537,069 ____________ ___________ ____________ ____________ 934,861 498,718 106,072 1,539,651 Maintenance 218,255 64,311 17,060 299,626 Depreciation and amortization 238,969 85,792 15,222 339,983 Income taxes (Note 7) 210,595 47,206 7,778 265,579 Other taxes 211,664 56,985 1,918 270,567 ____________ ___________ ____________ ____________ Total operating expenses 1,814,344 753,012 148,050 2,715,406 OPERATING INCOME 433,281 119,913 23,199 576,393 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 7,028 486 - 7,514 Minority interest in consolidated subsidiary - - (4,921) (4,921) Miscellaneous, net 2,430 (7,088) (8,283) (12,941) ____________ ___________ ____________ ____________ Total other income and deductions, net 9,458 (6,602) (13,204) (10,348) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 442,739 113,311 9,995 566,045 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 133,559 36,489 9,995 180,043 Allowance for borrowed funds used during construction (7,114) (274) - (7,388) Preferred dividends of subsidiaries (Note 8) 13,249 3,748 - 16,997 ____________ ___________ ___________ ____________ Net interest charges and preferred dividends 139,694 39,963 9,995 189,652 NET INCOME $ 303,045 $ 73,348 $ - $ 376,393 ============ =========== =========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.97 $2.15 $2.74 ===== ===== ===== 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 twelve months ended September 30, 1996 includes CIPSCO's pre-tax write-off of $5.7 million of system development expenses. Net income for the nine months ended September 30, 1995 includes CIPSCO's pre-tax charges of $5.8 million for a voluntary separation program. 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. Merger-related costs (which include transaction costs and costs to achieve such savings) are currently estimated to be approximately $73 million (including costs for financial advisors, attorneys, accountants, consultants, filings, printing, system integration, relocation, etc.). None of these estimated cost savings have been reflected in the pro forma combined condensed financial statements. However, net income for the nine months and twelve months ended September 30, 1996 included merger-related costs of $5.3 million, net of income taxes, for Union Electric and $4.5 million and $9.3 million, net of income taxes, for CIPSCO, respectively. Net income for the nine months ended September 30, 1995 included merger-related costs of $9.0 million, net of income taxes, for Union Electric. 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 nine months ended September 30, 1995 includes a credit to Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $30 million. Net income for the nine and twelve months ended September 30, 1996 includes credits for Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $45 million. Item 6. Exhibits and Reports on Form 8-K (A) Exhibits: Exhibit 10 Amendment No. 2 to Form of Excess Benefit Plan (Filed electronically) 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: None. 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: November 14, 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: November 14, 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 SEPTEMBER 30, 1996 Exhibit No. Description ___________ ___________ Exhibit 10 Amendment No. 2 to Form of Excess Benefit Plan 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, September 30, ____________________________________________________________ 1996 1995 1994 1993 1992 1991 _____________ ________ ________ ________ ________ ________ Net income..................................... $ 70,658 $ 70,631 $ 81,913 $ 84,011 $ 72,601 $ 75,683 Add--Federal and state income taxes: Current....................................... 47,539 41,276 38,097 50,441 6,110 36,316 Deferred (net)............................... 2,181 5,627 13,190 1,674 33,998 7,573 Investment tax credit amortization.......... (3,352) (3,361) (3,367) (3,366) (3,336) (3,464) Income tax applicable to nonoperating activities................................ (1,401) 941 603 631 2,989 2,413 _______ _______ ________ ________ ________ ________ 44,967 44,483 48,523 49,380 39,761 42,838 _______ _______ ________ ________ ________ ________ Net income before income taxes.............. 115,625 115,114 130,436 133,391 112,362 118,521 _______ _______ ________ ________ ________ ________ Add--Fixed charges Interest on long-term debt................. 31,409 31,168 31,164 32,823 35,534 36,652 Interest on provision for revenue refunds.. - - - - (803) 4,261 Other interest............................... 3,354 853 358 479 392 1,231 Amortization of net debt premium and discount.................................. 1,718 1,703 1,678 1,598 863 338 _______ _______ ________ ________ ________ ________ 36,481 33,724 33,200 34,900 35,986 42,482 _______ _______ ________ ________ ________ ________ Earnings as defined.......................... $152,106 $148,838 $163,636 $168,291 $148,348 $161,003 ======= ======= ======== ======== ======== ======== Ratio of earnings to fixed charges.......... 4.17 4.41 4.93 4.82 4.12 3.79 Earnings required for preferred dividends: Preferred stock dividends..................... $ 3,748 $ 3,850 $ 3,510 $ 3,718 $ 4,549 $ 5,396 Adjustment to pre-tax basis*............... 2,385 2,425 2,079 2,185 2,491 3,054 _______ _______ ________ ________ ________ ________ $ 6,133 $ 6,275 $ 5,589 $ 5,903 $ 7,040 $ 8,450 _______ _______ ________ ________ ________ ________ Fixed charges plus preferred stock dividend requirements........................ $ 42,614 $ 39,999 $ 38,789 $ 40,803 $ 43,026 $ 50,932 ======= ======= ======== ======== ======== ======== Ratio of earnings to fixed charges plus preferred stock dividend requirements...... 3.57 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 }
- 34 - EX-27 3
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 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 PER-BOOK 1,469,683 0 213,936 0 49,303 1,732,922 121,282 0 462,942 584,224 0 80,000 421,152 0 0 53,991 58,000 0 0 0 535,555 1,732,922 661,488 41,782 522,744 565,769 95,719 (1,538) 94,377 27,630 66,747 2,795 63,952 50,250 0 119,707 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 9-MOS DEC-31-1995 JAN-01-1996 SEP-30-1996 PER-BOOK 1,469,683 110,808 221,311 0 50,311 1,852,113 356,812 0 310,978 667,790 0 80,000 421,152 0 0 53,991 58,000 0 0 0 571,180 1,852,113 668,932 43,260 524,056 567,316 101,616 (2,874) 98,742 27,430 71,312 2,794 68,518 52,808 0 124,881 2.01 2.01 INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES. INCLUDES INCOME TAX EXPENSE. NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
EX-10 5 Exhibit 10 Amendment No. 2 to Central Illinois Public Service Company Excess Benefit Plan (As Amended And Restated Effective As of April 1, 1995) The Central Illinois Public Service Company Excess Benefit Plan (As Amended And Restated Effective As of April 1, 1995), as heretofore amended (the "Plan"), is hereby further amended, effective as of July 1, 1996, in the following respects: 1. By deleting the last sentence of the second paragraph of the introduction to the Plan and inserting in lieu thereof the following: "The purpose of the Excess Benefit Plan is (i) to restore benefit payments which would be paid under the Basic Plan except for limitations imposed by Sections 401(a)(17) and 415 of the Code and (ii) to provide certain additional payments to which eligible participants are entitled by reason of a Management Continuity Agreement with an Employer." 2. By deleting Article I of the Plan and inserting in lieu thereof the following: "Article I Restored Benefits Subject to the provisions of Article II hereof, a participant in the Basic Plan who (i) is entitled to a reduced benefit under the Basic Plan on account of either or both of the limitations of Section 401(a)(17) or Section 415 of the Code and/or (ii) would be entitled to an additional benefit under the Basic Plan by reason of additional service credits granted pursuant to the last sentence of Section 5(a)(ii) of a "Management Continuity Agreement" with an Employer, shall be entitled to a monthly benefit under the Excess Benefit Plan in the amount of the excess, if any, of (a) over (b), where: (a) equals the amount of monthly benefit which would have been paid to such participant under the Basic Plan if benefit payments under the Basic Plan were made without regard to the limitations imposed by Sections 401(a)(17) and 415 of the Code and were determined by including as Credited Service under the Basic Plan the additional service credits, if any, granted to or in respect of such participant by reason of the operation the aforesaid provision of the Management Continuity Agreement, and (b) equals the amount of monthly benefit which is paid to such participant under the Basic Plan." 3. By deleting the parenthetical phrase in Article II.B.1. of the Plan and inserting in lieu thereof the following: "(other than those contained in the Basic Plan relating to the limitations of Sections 401(a)(17) and 415 of the Code or as otherwise provided in the Excess Benefit Plan)". IN WITNESS WHEREOF, Central Illinois Public Service Company has executed this instrument this 1st day of October, 1996, effective as of July 1, 1996. Central Illinois Public Service Company By /s/ W. A. Koertner ____________________________________ Vice President Corporate Seal Attest: /s/ Mary Ellen Brown _______________________ Assistant Secretary -----END PRIVACY-ENHANCED MESSAGE-----