-----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, IT4adYyatRUBn8nRerZjQmqNarwcfUurGEDMD+puvTQR4s6dyFJsbWAixb9/i1wT y4vnorm0+kRfJ99le+/+iw== 0000860520-97-000012.txt : 19970515 0000860520-97-000012.hdr.sgml : 19970515 ACCESSION NUMBER: 0000860520-97-000012 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970331 FILED AS OF DATE: 19970514 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: 97605854 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: 97605855 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 March 31, 1997 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 April 30, 1997 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Common stock, no par value, 25,452,373 shares outstanding and held by CIPSCO INCORPORATED at April 30, 1997 CIPSCO INCORPORATED AND CENTRAL ILLINOIS PUBLIC SERVICE COMPANY FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997 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 4. Submission of Matters to a Vote of Security Holders 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, 1996. 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 March 31, 1997 and 1996 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. Note: Information included herein which relates solely to CIPSCO Incorporated is provided solely by CIPSCO Incorporated and not by Central Illinois Public Service Company and shall be deemed not included in the Quarterly Report on Form 10-Q of Central Illinois Public Service Company. Part I. FINANCIAL INFORMATION Item 1. Financial Statements. CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Statements of Income For the Periods Ended March 31, 1997 and 1996 (in thousands except per share amounts) (unaudited) Three Months Ended March 31, ______________________ 1997 1996 ________ ________ Operating Revenues: Electric . . . . . . . . . . . . . . . . . . . . . $160,862 $171,288 Gas. . . . . . . . . . . . . . . . . . . . . . . . 61,138 64,418 Investment . . . . . . . . . . . . . . . . . . . . 3,343 2,173 ________ ________ Total operating revenues. . . . . . . . . . . . 225,343 237,879 ________ ________ Operating Expenses: Fuel for electric generation . . . . . . . . . . . 52,679 56,148 Purchased power. . . . . . . . . . . . . . . . . . 4,934 13,121 Gas costs. . . . . . . . . . . . . . . . . . . . . 40,330 41,197 Other operation. . . . . . . . . . . . . . . . . . 39,902 34,635 Maintenance. . . . . . . . . . . . . . . . . . . . 14,871 11,436 Depreciation and amortization. . . . . . . . . . . 22,610 20,913 Taxes other than income taxes. . . . . . . . . . . 16,068 16,013 ________ ________ Total operating expenses. . . . . . . . . . . . 191,394 193,463 ________ ________ Operating Income . . . . . . . . . . . . . . . . . . 33,949 44,416 ________ ________ Interest and Other Charges: Interest on long-term debt of subsidiary . . . . . 7,801 8,279 Other interest charges . . . . . . . . . . . . . . 629 443 Allowance for funds used during construction . . . (492) (26) Preferred stock dividends of subsidiary. . . . . . 913 939 Miscellaneous, net . . . . . . . . . . . . . . . . 71 203 ________ ________ Total interest and other charges . . . . . . . . . . 8,922 9,838 ________ ________ Income Before Income Taxes . . . . . . . . . . . . . 25,027 34,578 _________ ________ Income Taxes . . . . . . . . . . . . . . . . . . . . 9,476 13,460 ________ ________ Net Income . . . . . . . . . . . . . . . . . . . . . $ 15,551 $ 21,118 ======== ======== Average Shares of Common Stock Outstanding . . . . . 34,070 34,070 Earnings per Average Share of Common Stock . . . . . $ .46 $ .62 The accompanying condensed notes to financial statements are an integral part of these statements. CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets March 31,1997 and December 31, 1996 (in thousands) March 31, December 31, 1997 1996 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric................................. $2,259,660 $2,244,571 Gas...................................... 244,269 242,664 __________ __________ 2,503,929 2,487,235 Less-Accumulated depreciation............ 1,107,047 1,099,261 __________ __________ 1,396,882 1,387,974 Construction work in progress............ 58,506 70,150 __________ __________ 1,455,388 1,458,124 __________ __________ Current Assets: Cash..................................... 4,874 2,287 Temporary investments, at cost which approximates market..................... 2,775 3,983 Accounts receivable, net................. 69,952 74,693 Accrued unbilled revenues................ 21,320 30,126 Materials and supplies, at average cost.. 39,177 38,806 Fuel for electric generation, at average cost............................ 27,006 21,610 Gas stored underground, at average cost.. 7,992 13,361 Prepayments.............................. 13,040 14,403 Other current assets..................... 8,263 7,704 __________ __________ 194,399 206,973 __________ __________ Regulatory Assets.......................... 134,380 64,754 __________ __________ Investments and Other Assets: Marketable securities.................... 52,912 51,293 Leveraged leases and energy investments.. 62,918 62,017 Other.................................... 29,743 28,495 __________ __________ 145,573 141,805 __________ __________ $1,929,740 $1,871,656 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity.............. $ 659,404 $ 661,594 Preferred stock of subsidiary............ 80,000 80,000 Long-term debt of subsidiary............. 493,303 421,227 __________ __________ 1,232,707 1,162,821 __________ __________ Current Liabilities: Long-term debt of subsidiary due within one year............. 58,000 58,000 Short-term borrowings.................... 41,025 57,768 Accounts payable......................... 49,116 62,774 Accrued wages............................ 11,485 10,294 Accrued taxes............................ 23,503 13,692 Accrued interest......................... 9,202 8,432 Other.................................... 54,166 49,302 __________ __________ 246,497 260,262 __________ __________ Deferred Credits: Accumulated deferred income taxes........ 341,792 341,373 Investment tax credits................... 48,052 48,885 Regulatory liabilities, net.............. 60,692 58,315 __________ __________ 450,536 448,573 __________ __________ $1,929,740 $1,871,656 ========== ========== 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 March 31, 1997 and 1996 (in thousands) (unaudited) Three Months Ended March 31, __________________________ 1997 1996 __________ __________ Operating Activities: Net income.............................. $ 15,551 $ 21,118 Adjustments to reconcile net income to net cash provided (used in): Depreciation and amortization......... 22,610 20,913 Allowance for equity funds used during construction (AFUDC).......... (217) (11) Deferred income taxes, net............ 419 561 Investment tax credit amortization.... (833) (837) Cash flows impacted by changes in assets.. and liabilities: Accounts receivable, net and accrued unbilled revenues.................... 13,547 (8,303) Fuel for electric generation.......... (5,396) 13,306 Other inventories..................... 4,998 4,616 Prepayments........................... 1,363 1,587 Other assets.......................... (1,807) (321) Accounts payable and other liabilities (8,794) 134 Accrued wages, taxes and interest..... 11,772 15,174 Coal contract restructuring charge...... (71,795) - Other................................... 4,478 2,491 __________ __________ Net cash provided by (used in) operating activities................. (14,104) 70,428 __________ __________ Investing Activities: Utility construction expenditures, excluding AFUDC........................ (19,059) (14,754) Allowance for borrowed funds used during construction.................... (275) (15) Changes in temporary investments........ 1,208 1,246 Long-term marketable securities......... (1,619) (977) Long-term leveraged leases and energy investments............................ (901) (710) __________ __________ Net cash used in investing activities. (20,646) (15,210) __________ __________ Financing Activities: Common stock dividends paid............. (17,716) (17,375) Proceeds from issuance of long-term debt of subsidiary..................... 72,000 - Proceeds from issuance of (repayment) of short-term borrowings............... (16,743) (36,926) Issuance expense, discount and premium.. (204) (3) __________ __________ Net cash provided by (used in) financing activities................. 37,337 (54,304) __________ __________ Net increase (decrease) in cash......... 2,587 914 Cash at beginning of period............. 2,287 1,088 __________ __________ Cash at end of period................... $ 4,874 $ 2,002 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized.. $ 7,692 $ 9,122 Income taxes.......................... $ 2,200 $ 325 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 March 31, 1997 and 1996 (in thousands) (unaudited) Three Months Ended March 31, _____________________ 1997 1996 ________ ________ Operating Revenues: Electric . . . . . . . . . . . . . . . . . . . . $160,868 $171,295 Gas. . . . . . . . . . . . . . . . . . . . . . . 61,139 64,419 ________ ________ Total operating revenues. . . . . . . . . . . 222,007 235,714 ________ ________ Operating Expenses: Fuel for electric generation. . . . . . . . . . . 52,679 56,148 Purchased power . . . . . . . . . . . . . . . . . 4,934 13,121 Gas costs . . . . . . . . . . . . . . . . . . . . 40,330 41,197 Other operation . . . . . . . . . . . . . . . . . 39,551 34,291 Maintenance . . . . . . . . . . . . . . . . . . . 14,870 11,435 Depreciation and amortization . . . . . . . . . . 22,491 20,785 Taxes other than income taxes . . . . . . . . . . 16,061 16,008 Income taxes: Current . . . . . . . . . . . . . . . . . . . . 12,520 16,590 Deferred, net . . . . . . . . . . . . . . . . . (3,123) (2,782) Deferred investment tax credits, net. . . . . . (834) (837) ________ ________ Total operating expenses . . . . . . . . . . . 199,479 205,956 ________ ________ Operating Income . . . . . . . . . . . . . . . . . 22,528 29,758 ________ ________ Other Income and Deductions: Allowance for equity funds used during construction . . . . . . . . . . . . . . . . . . . 217 11 Nonoperating income taxes. . . . . . . . . . . . . (200) (298) Miscellaneous, net . . . . . . . . . . . . . . . . (25) (172) ________ ________ Total other income and deductions . . . . . . . (8) (459) ________ ________ Income Before Interest Charges . . . . . . . . . . . 22,520 29,299 ________ ________ Interest Charges: Interest on long-term debt . . . . . . . . . . . . 7,801 8,279 Other interest charges . . . . . . . . . . . . . . 628 443 Allowance for borrowed funds used during construction . . . . . . . . . . . . . . . . . . . (275) (14) ________ ________ Total interest charges . . . . . . . . . . . . 8,154 8,708 ________ ________ Net Income . . . . . . . . . . . . . . . . . . . . . 14,366 20,591 Preferred Stock Dividends. . . . . . . . . . . . . . 913 938 ________ ________ Earnings for Common Stock. . . . . . . . . . . . . . $ 13,453 $ 19,653 ======== ======== The accompanying condensed notes to financial statements are an integral part of these statements. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Balance Sheets March 31, 1997 and December 31, 1996 (in thousands) March 31, December 31, 1997 1996 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric................................ $2,259,660 $2,244,571 Gas..................................... 244,269 242,664 __________ __________ 2,503,929 2,487,235 Less-Accumulated depreciation........... 1,107,047 1,099,261 __________ __________ 1,396,882 1,387,974 Construction work in progress........... 58,506 70,150 __________ __________ 1,455,388 1,458,124 __________ __________ Current Assets: Cash.................................... 4,718 2,261 Accounts receivable, net................ 70,013 74,761 Accrued unbilled revenues............... 21,320 30,126 Materials and supplies, at average cost. 39,177 38,806 Fuel for electric generation, at average cost........................... 27,006 21,610 Gas stored underground, at average cost. 7,992 13,361 Prepayments............................. 12,988 14,323 Other current assets.................... 8,263 7,704 __________ __________ 191,477 202,952 __________ __________ Regulatory Assets......................... 134,380 64,754 __________ __________ Other Assets.............................. 28,517 27,488 __________ __________ $1,809,762 $1,753,318 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity............. $ 577,153 $ 581,224 Preferred stock......................... 80,000 80,000 Long-term debt.......................... 493,303 421,228 __________ __________ 1,150,456 1,082,452 __________ __________ Current Liabilities: Long-term debt due within one year...... 58,000 58,000 Short-term borrowings................... 41,025 57,768 Accounts payable........................ 48,502 62,243 Accrued wages........................... 11,485 10,279 Accrued taxes........................... 27,382 13,943 Accrued interest........................ 9,202 8,432 Other................................... 54,166 49,301 __________ __________ 249,762 259,966 __________ __________ Deferred Credits: Accumulated deferred income taxes....... 300,800 303,700 Investment tax credits.................. 48,052 48,885 Regulatory liabilities, net............. 60,692 58,315 __________ __________ 409,544 410,900 __________ __________ $1,809,762 $1,753,318 ========== ========== 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 March 31, 1997 and 1996 (in thousands) (unaudited) Three Months Ended March 31, _______________________ 1997 1996 __________ __________ Operating Activities: Net income................................ $ 14,366 $ 20,591 Adjustments to reconcile net income to net cash provided (used in): Depreciation and amortization........... 22,491 20,785 Allowance for equity funds used during construction (AFUDC)................... (217) (11) Deferred income taxes, net.............. (2,900) (2,782) Investment tax credit amortization...... (833) (837) Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues...................... 13,554 (8,153) Fuel for electric generation............ (5,396) 13,306 Other inventories....................... 4,998 4,616 Prepayments............................. 1,335 1,252 Other assets............................ (1,588) 49 Accounts payable and other liabilities.. (8,876) (716) Accrued wages, taxes and interest....... 15,415 19,383 Coal contract restructuring charge........ (71,795) - Other..................................... 4,621 2,631 _________ _________ Net cash provided by (used in) operating activities................... (14,825) 70,114 _________ _________ Investing Activities: Construction expenditures, excluding AFUDC (19,059) (14,754) Allowance for borrowed funds used during.. construction............................. (275) (14) _________ _________ Net cash used in investing activities... (19,334) (14,768) _________ _________ Financing Activities: Proceeds from issuance of long-term debt.. 72,000 - Proceeds from issuance of (repayment) of short-term borrowings................. (16,743) (36,926) Dividends paid: Preferred stock......................... (937) (952) Common stock............................ (17,500) (16,500) Issuance expense, discount and premium.... (204) (3) _________ _________ Net cash provided by (used in) financing activities................... 36,616 (54,381) _________ _________ Net increase (decrease) in cash........... 2,457 965 Cash at beginning of period............... 2,261 1,006 _________ _________ Cash at end of period..................... $ 4,718 $ 1,971 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized.... $ 7,692 $ 9,122 Income taxes............................ $ 1,183 $ 204 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 MARCH 31, 1997 (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. Certain items previously reported for periods prior to 1997 have been reclassified to conform with the current-period presentation. Note 2. COMMITMENTS AND CONTINGENCIES ______________________________________ ENVIRONMENTAL REMEDIATION COSTS - CIPS has identified 13 sites where it and certain of its predecessors and other affiliates previously operated facilities that manufactured gas from coal. This manufacturing produced various potentially harmful by-products which may remain on some of the sites. One site was added to the United States Environmental Protection Agency Superfund list in 1990. A ground water pump-and-treat remediation program being conducted at the site has received applicable approvals. CIPS has received cash settlements from certain of its insurance carriers for, among other things, costs incurred by CIPS in connection with the manufactured gas plant sites. In addition, in 1993, CIPS collected $2.9 million for such costs under environmental adjustment clause rate riders (riders) approved by the Illinois Commerce Commission (the "Illinois commission"). Costs relating to studies and remediation at the 13 sites and associated legal and litigation expenses are being accrued and deferred rather than expensed currently. This is being done pending recovery through rates or from other parties. Through March 31, 1997, $50.0 million had been deferred representing costs incurred and the estimates for costs of completing studies at various sites and an estimate 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 $12.4 million at March 31, 1997. The Illinois commission has instituted a reconciliation proceeding to review CIPS' environmental remediation activities in 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. This proceeding is expected to indicate what incurred or accrued costs are appropriate to defer for future rider recovery and how insurance recoveries should be allocated to such environmental costs. 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. LABOR ISSUES - The International Union of Operating Engineers Local 148 and the International Brotherhood of Electrical Workers Local 702 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. 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 $16 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 the issues will not have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. CIPS successfully negotiated renewed contracts with both unions in 1996 which extend through June 30, 1999. 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 MATTERS ___________________________ The operations of CIPS are subject to the regulation of the Illinois commission and the Federal Energy Regulatory Commission ("FERC") . Accordingly, its accounting policies are subject to the provisions of Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for Effects of Certain Types of Regulation." Regulatory assets represent probable future revenue to CIPS associated with certain costs which will be recovered from customers through the ratemaking process. Regulatory liabilities represent probable future reductions in revenues associated with amounts that are to be credited to customers through the ratemaking process. Regulatory assets and liabilities reflected in the Consolidated Balance Sheets as of March 31, 1997 relate to the following: Description Amount ___________ ______ (in thousands) Regulatory Assets: Coal contract restructuring charge $ 69,824 Undepreciated plant costs 39,705 Unamortized costs related to reacquired debt 11,910 Deferred environmental remediation costs 12,445 Take-or-Pay costs 496 ___________ Regulatory Assets $ 134,380 =========== Regulatory Liabilities: SFAS 109 - Income Taxes, net $ 57,551 Clean Air Act allowances, net 3,141 ___________ Regulatory Liabilities, Net $ 60,692 =========== SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for Long-lived Assets to be Disposed Of" amends SFAS No. 71 and imposes a stricter criteria for retention of regulatory assets by requiring that such assets be probable of recovery through future revenues at each balance sheet date. The Company continually assesses the recoverability of its regulatory assets, and if all, or a separable portion of CIPS' operations becomes no longer subject to the provisions of SFAS No. 71, a write off of all or a portion of the related regulatory assets and liabilities may be required. In addition, a determination would have to be made regarding the impairment and writedown of certain assets. Note 4. COAL CONTRACT RESTRUCTURING _____________________________________ In 1996 CIPS and a major coal supplier for Newton and Grand Tower power stations restructured a long-term coal contract. Under the restructuring, CIPS paid the supplier a $70 million restructuring charge (plus interest from November 1, 1996) in the first quarter of 1997; is purchasing at market prices low-sulfur, out-of-state coal through the supplier (in substitution for the high-sulfur Illinois coal CIPS was obligated to purchase under the original contract); and obtained options for future purchases of low-sulfur, out-of-state coal from the supplier in 1997 through 1999 at set negotiated prices. By switching to low-sulfur coal, CIPS was able to discontinue operating the Newton Unit 1 scrubber. The benefits of the restructuring include lower cost coal, avoidance of significant capital expenditures to renovate the scrubber, and elimination of scrubber operating and maintenance costs (offset by scrubber costs of removal). The net benefits of the restructuring are expected to exceed $100 million dollars over the next 10 years. In December 1996, CIPS obtained an order of the Illinois commission approving the switch to out-of-state coal, recovery of the restructuring charge plus associated carrying costs through the fuel adjustment clause (FAC) over six years, and continued recovery in rates of the undepreciated scrubber investment plus costs of removal. On February 28, 1997, a group of industrial customers (who also intervened in the proceeding before the Illinois commission) filed an appeal of the order with the Illinois Third District Appellate Court. The industrial customers have asked the court to reverse or remand that part of the order authorizing CIPS to recover the restructuring charge through the FAC. The Company believes the Illinois commission order in this matter is lawful and proper, will vigorously defend its position, and believes that the order will be upheld. If the industrial customers should prevail, CIPS may be required to cease FAC recovery of the restructuring charge, and could be required to refund any portion of the restructuring charge that had been collected through the FAC. In such an event, CIPS could initiate a rate filing seeking new base rates designed to recover the restructuring charge. The Company believes that recovery of the restructuring charge is probable, and the related regulatory assets recorded in the matter are in compliance with SFAS No. 71 as amended by SFAS No. 121 (See Note 3 to Condensed Notes to Financial Statements). 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. Information concerning the agreement is included in Part II, Item 5. Other Information of this report. CIPSCO's and Union Electric Company's proposed merger is awaiting certain regulatory and governmental approvals and is expected to be completed by year-end 1997. Stockholders at both companies approved the merger on December 20, 1995, and the Missouri Public Service Commission approved the merger on February 21, 1997. The Illinois Commerce Commission (Illinois commission), the Federal Energy Regulatory Commission (FERC) and various other federal agencies are expected to issue decisions on the merger later this year. On April 30 ,1997, the presiding administrative law judge in the FERC case issued an initial decision finding that, subject to certain conditions, the merger between CIPSCO and Union Electric Company is in the public interest and should be approved. The conditions concern certain power and transmission service agreements with other utilities. A final order from the FERC is expected later this year. 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 1997-2001 period will be about $482 million. The projected 5-year amounts include up to $28 million for environmental compliance, including compliance with regulations under the Clean Air Act Amendments of 1990. Capital requirements for the 1997-2001 period are expected to be met primarily through internally generated funds. In addition to funds required to refinance maturing short-term and long-term borrowings, external financing requirements are expected to total about $175 million for the 1997-2001 period which include amounts for projected construction expenditures and the coal contract restructuring payment. CIPS currently has authority from the Illinois commission to issue or incur up to $200 million of first mortgage bonds, medium-term notes and bank borrowings through December 31, 1998. As of March 31, 1997, a total of $75 million of such authority is utilized. Registration statements covering $200 million of first mortgage bonds and medium-term notes have been filed with the Securities and Exchange Commission. As of March 31, 1997, securities totaling $45 million have been issued under the authority granted in these registration statements. Common stock dividends paid for the twelve months ended March 31, 1997, resulted in a payout ratio of 95% of the Company's earnings to common shareholders. Common stock dividends paid to the Company's common shareholders equalled 80% of net cash provided by operating activities for the same period. FINANCIAL CONDITION Financial condition and changes in total Shareholder Equity of the Company and CIPS for the three-month periods ended March 31, 1997 and 1996 are as follows: Three Months Ended March 31, _________________________ (in thousands) The Company: 1997 1996 _________ _________ Common Shareholders' Equity Net income $ 15,551 $ 21,118 Common stock dividends paid (17,716) (17,375) Other (25) 431 ________ ________ Change in Shareholders' Equity $ (2,190) $ 4,174 ======== ======== Three Months Ended March 31, _________________________ (in thousands) CIPS: 1997 1996 _________ _________ Common Shareholder's Equity Earnings for common stock $ 13,453 $ 19,653 Common stock dividends paid (17,500) (16,500) Other (24) (14) ________ ________ Change in Shareholder's Equity $ (4,071) $ 3,139 ======== ======== OVERVIEW The Company's earnings per share were $.46 for the quarter ended March 31, 1997, compared to $.62 per share earned during the same period in 1996. The decrease reflects lower sales to residential customers due to milder weather in the first quarter of 1997 compared to 1996; unusual costs including business restructuring, system conversions and two planned maintenance outages at power stations. The following table summarizes the components of consolidated net income and CIPS earnings for common stock for the three months ended March 31, 1997 and 1996 (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. First Quarter Ended March 31, ____________________________ (in thousands) 1997 1996 ________ ________ CIPS Electric operating margin $ 97,425 $ 95,974 Gas operating margin 17,368 19,699 Other deductions and interest expenses (100,427) (95,082) CIPS preferred stock dividends (913) (938) ________ ________ Total earnings for common stock 13,453 19,653 ________ ________ NON-UTILITY Investment revenues 3,294 2,141 Other deductions and expenses (1,196) (676) ________ ________ Total non-utility net income 2,098 1,465 ________ ________ Consolidated net income $ 15,551 $ 21,118 ======== ======== RESULTS OF OPERATIONS The results of operations of the Company and CIPS for the three months ended March 31, 1997, compared to the same period in 1996 are presented below. The Company Net Income (in thousands) Earnings Per Share ______________ __________________ Three Months Three Months ____________ ____________ 1997 $15,551 $ .46 1996 21,118 .62 _______ _____ Decrease $(5,567) $(.16) Percent Decrease (26)% (26)% CIPS Earnings for Common Stock (in thousands) _________________________ Three Months ____________ 1997 $13,453 1996 19,653 _______ Decrease $(6,200) ======= Percent Decrease (32)% 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 6% in the first quarter of 1997 compared to the first quarter of 1996 reflecting a decline in KWH sales due principally to milder weather conditions in 1997. KWH sales decreased 8%, due to a 12% reduction in heating degree days in the first quarter of 1997. Power supply agreement revenues for the first quarter of 1997 improved 10% over the first quarter 1996 due to increased sales of energy resulting from pricing adjustments to two agreements. Economy and emergency interchange sales decreased 37% in the first quarter of 1997 over the same period in 1996 due to accounting for certain interchange transactions as transmission service, in compliance with FERC Order No. 888 on open transmission access, rather than as purchase and resale transactions as was done in 1996 prior to FERC Order No. 888 being effective. 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) ___________________________________________ First Quarter ___________________________________________ Revenue Rev % KWH KWH % _______ _____ _________ _____ Residential $ (2,948) (5)% (41,675) (5)% Commercial (813) (2) 2,118 - Industrial (1,452) (5) (12,184) (2) Public Authorities and Other 320 6 5,488 14 ________ _______ Total Retail $ (4,893) (4)% (46,253) (2)% Power Supply Agreements $ 1,826 10 % 112,064 30 % Interchange Sales (economy/emergency) (7,044) (37) (358,555) (38) Cooperatives and Municipals (315) (5) (5,414) (4) ________ _______ Total Sales for Resale $ (5,526) (13)% (251,905) (17)% ________ _______ Total $(10,426) (6)% (298,158) (8)% ======== ======== Gas revenues declined 5% in the first quarter of 1997 compared to the same period in 1996 due principally to lower therm sales caused by milder weather in 1997. Residential and commercial gas revenues declined 7% and 9%, respectively, for the first quarter of 1997 compared to 1996. Industrial revenues increased 5%, primarily attributable to higher purchased gas costs which flow through to revenues through the Purchased Gas Adjustment clause (PGA). Gas transportation revenues declined 21% in the first quarter of 1997 reflecting an increase in customers buying from the CIPS system rather than buying off system and paying CIPS to transport customer owned gas. In addition to traditional sales to end users, CIPS sells gas to others for resale. Sales for resale in 1997 partially offset the above mentioned declines, whereas such sales were minimal in 1996. 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) ___________________________________________ First Quarter ___________________________________________ Revenue Rev % Therms Therms % _______ _____ ______ ______ Residential $ (3,137) (7)% (12,446) (15)% Commercial (1,305) (9) (4,775) (17) Industrial 202 5 (360) (3) Sales for Resale 1,411 - 4,236 - Transportation (493) (21) (1,031) (3) Miscellaneous 42 25 - - ________ ______ Total $ (3,280) (5)% (14,376) (9)% ======== ====== Investment revenues increased 54% in the first quarter of 1997 compared to the first quarter of 1996 due to market gains in 1997 and an adjustment made in 1996 to reflect a change in accounting to market valuation. OPERATING EXPENSES __________________ Fuel for electric generation declined 6% in the first quarter of 1997 compared to the same period in 1996 even though generation was 4% higher in 1997. The decline corresponds to differences in the deferred costs of fuel as adjusted in the fuel adjustment clause between periods. Purchased power costs declined 62% for the first quarter of 1997 compared with the same period in 1996 reflecting decreases in purchases made for resale to interchange economy and emergency customers. Beginning in 1997, certain interchange sales which were previously recorded as purchased power sold for resale are now accounted for as transmission service revenue in accordance with FERC Order No. 888 involving open access to transmission lines. Therefore, purchased power and interchange economy and emergency sales both declined in the first quarter 1997 compared to the first quarter 1996. Gas costs declined 2% for the first quarter of 1997 when compared to the same period in 1996 due to an 11% weather related decrease in gas requirements for the CIPS system, partially offset by higher average cost per therm for purchased gas. Other operation expenses increased 15% in the first quarter of 1997 compared to the same period in 1996 due primarily to increases in business restructuring costs, system conversion costs, outside consulting expenses, and employee welfare expenses. Maintenance expenses increased 30% for the first quarter of 1997 compared to the same period of 1996 because two scheduled power plant maintenance projects occurred in the first quarter of 1997 and only one project occurred in the first quarter of 1996. Depreciation and amortization expense increased 8% in the first quarter of 1997 when compared to 1996 due to normal plant additions. Interest and other charges decreased 9% in the first quarter of 1997 compared to the first quarter of 1996 primarily due to higher allowances for funds used during construction due to higher construction activity, lower interest on long-term debt, and fewer merger transaction costs. BALANCE SHEET _____________ Significant changes in the balance sheet accounts at March 31, 1997 compared to balances at December 31, 1996 are: Gas stored underground, at average cost, declined 40% during the three months due to normal winter heating season withdrawal of stored gas prior to the summer replenishment of the underground storage. Regulatory assets increased 108% primarily due to the coal contract restructuring charge which is reflected as a regulatory asset in connection with the coal contract restructuring completed in the first quarter of 1997. Short-term borrowings declined 29% due to changes in cash flow. Accrued taxes increased 72% due to increases in federal income taxes payable. LABOR NEGOTIATIONS __________________ CIPS is negotiating with three separate employee groups consisting of (i) four clerical employees at its Newton power station, (ii) six clerical employees at its Coffeen power station and (iii) 16 production and technical employees at a Springfield, Illinois operations facility. These groups have been certified by the NLRB to be represented by labor organizations. While these groups will be represented by union locals which currently represent other CIPS employees, existing labor contracts do not cover these three groups. Although CIPS expects to reach a final agreement with all three bargaining units, until such agreements are reached, a strike, work stoppage, work slowdown, or similar action involving such employees, and other collective bargaining unit employees, could occur. CIPS believes that the continuation of any one or more of such events for a limited period would not have a material adverse effect on financial position, results of operations or liquidity of the Company or CIPS. LEGISLATIVE MATTERS ___________________ As reported in Management's Discussion and Analysis of Financial Condition and Results of Operations in the 1996 Form 10-K of the Company and CIPS under the caption "Regulation and Competition", various groups have made proposals for utility deregulation legislation in Illinois. During 1997, structured negotiations had been underway with state legislators, various interest groups and utilities, including CIPS, for the purpose of developing a comprehensive deregulation bill that would have general support. The various groups stopped these discussions in mid-May, 1997 without reaching consensus on many of the major issues concerning deregulation. Legislative leaders are expected to draft deregulation bills to be introduced prior to the end of the current legislative session this summer. CIPS will continue to take an active part in the deregulation debate. ACCOUNTING MATTERS __________________ In February 1997 the Financial Accounting Standards Board issued SFAS No. 128, "Earnings per Share". This statement establishes standards for computing and presenting earnings per share. SFAS No. 128 is effective for financial statements issued for periods ending after December 15, 1997, and is not expected to have a material effect on the Company's financial position or results of operations upon adoption. FORWARD LOOKING STATEMENTS __________________________ This report includes forward looking statements within the meaning of the Private Securities Litigation Reform Act of 1995. All statements made herein which are not based on historical facts are forward looking and, accordingly, involve risks and uncertainties that could cause actual results to differ materially from those discussed. Such forward looking statements include those under Management's Discussion and Analysis relating to (i) the timing of regulatory approvals and consummation of the merger with Union Electric Company, (ii) amounts of future construction expenditures, sources of funds to meet capital requirements and financing requirements, (iii) the expected outcome of negotiations with collective bargaining units regarding new labor contracts, and (iv) anticipated deregulation legislation. Such statements are based on management's belief, judgment and analysis as well as assumptions made by and information available to management at the date hereof. In addition to assumptions and cautionary factors referred to specifically in this report in connection with such forward looking statements, factors that could cause actual results to differ materially from those contemplated by the forward looking statements include (i) the speed and the nature of increased competition and deregulation in the electric and gas utility industry, (ii) economic or weather conditions affecting future sales and margins, (iii) changing energy prices, (iv) availability and cost of capital, (v) unanticipated or adverse decisions in regulatory proceedings or litigation, (vi) changes in laws and other governmental actions, and (vii) other matters detailed in Exhibit 99.03, cautionary statements, to the 1996 Annual Report on Form 10-K of the Company and CIPS, incorporated herein by reference. PART II. OTHER INFORMATION Item 1. Legal Proceedings. In December 1995, CIPS filed a declaratory judgment action in the United States District Court for the Central District of Illinois seeking a determination of its rights and obligations under a coal supply agreement with Atlas Minerals which expired December 31, 1995. The Company's position is that it has fully complied with the agreement and has no further obligations after December 31, 1995. Atlas Minerals asserts that CIPS is obligated to purchase more than 400,000 additional tons of coal notwithstanding termination of the contract. In addition to a declaration of rights and obligations under the agreement, CIPS is seeking over $5 million in damages. Atlas Minerals has counter claimed for over $8 million in lost profits and various consequential damages. Summary judgment motions by both parties are pending. A jury trial is currently scheduled for May or June, 1997. CIPS cannot predict the outcome of such a trial, but believes that its legal positions are well-founded and supported by clear and substantial evidence. Item 4. Submission of Matters to a Vote of Security Holders. (a) The Annual Meetings of Shareholders of CIPS and CIPSCO Incorporated were held on April 23, 1997. (b) All nominees who were proposed as directors by the Board of Directors were elected and there were no other nominees proposed. The results of the votes cast for directors of CIPS and CIPSCO Incorporated are as follows: CIPS Without Directors With Authority Authority* Clifford L. Greenwalt 25,821,890 6,299 John L. Heath 25,821,873 6,299 Robert W. Jackson 25,821,929 6,299 Gordon R. Lohman 25,821,943 6,299 Richard A. Lumpkin 25,821,941 6,299 Hanne M. Merriman 25,821,850 6,299 Thomas L. Shade 25,821,915 6,299 James W. Wogsland 25,821,904 6,299 CIPSCO Without Directors With Authority Authority* Clifford L. Greenwalt 29,060,955 471,611 John L. Heath 29,204,732 468,353 Robert W. Jackson 29,124,147 468,567 Gordon R. Lohman 29,146,430 470,888 Richard A. Lumpkin 29,153,065 469,853 Hanne M. Merriman 29,175,154 468,753 Thomas L. Shade 29,143,334 468,567 James W. Wogsland 29,023,930 469,788 * Calculated on the basis of cumulative voting. (c) Appointment of independent public accountants was approved by the following vote. Shares Shares Shares For Against Abstaining 29,005,214 239,431 356,027 Item 5. Other Information. 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 March 31, 1997 gives effect to the Merger as if it had occurred at March 31, 1997. The unaudited pro forma combined condensed statements of income for the three- month periods ended March 31, 1997 and 1996, and the twelve-month period ended March 31, 1997 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 three-month periods ended March 31, 1997 and 1996 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 MARCH 31, 1997 (Thousands of Dollars) As Reported (Note 1) Pro Forma ________________________ Adjustments Pro Forma UE CIPSCO (Notes 2, 8) Combined ___________ __________ ____________ ___________ ASSETS Property and plant Electric $ 8,701,243 $ 2,259,660 $ 376,802 $11,337,705 Gas 188,075 244,269 - 432,344 Other 35,971 - - 35,971 ___________ ___________ ___________ ___________ 8,925,289 2,503,929 376,802 11,806,020 Less accumulated depreciation and amortization 3,715,215 1,107,047 272,373 5,094,635 ___________ ___________ ___________ ___________ 5,210,074 1,396,882 104,429 6,711,385 Construction work in progress: Nuclear fuel in process 99,928 - - 99,928 Other 80,725 58,506 1,736 140,967 ___________ ___________ ___________ ___________ Total property and plant, net 5,390,727 1,455,388 106,165 6,952,280 Regulatory assets: Deferred income taxes (Note 5) 674,547 40,497 - 715,044 Other 175,095 134,380 - 309,475 ___________ ___________ ___________ ___________ Total regulatory assets 849,642 174,877 - 1,024,519 Other assets: Unamortized debt expense 10,446 3,073 575 14,094 Nuclear decommissioning trust fund 100,366 - - 100,366 Investments in nonregulated activities - 115,830 - 115,830 Other 29,126 26,670 (3,269) 52,527 ___________ ___________ ___________ ___________ Total other assets 139,938 145,573 (2,694) 282,817 Current assets: Cash and temporary investments 14,010 7,649 18,651 40,310 Accounts receivable, net 183,233 69,952 20,472 273,657 Unbilled revenue 45,862 21,320 - 67,182 Materials and supplies, at average cost - Fossil fuel 53,938 34,998 4,878 93,814 Other 95,992 39,177 4,572 139,741 Other 42,647 21,303 3,677 67,627 ___________ ___________ ___________ ___________ Total current assets 435,682 194,399 52,250 682,331 ___________ ___________ ___________ ___________ Total Assets $ 6,815,989 $ 1,970,237 $ 155,721 $ 8,941,947 =========== =========== =========== =========== CAPITAL AND LIABILITIES Capitalization: Common stock (Note 2) $ 510,619 $ 356,812 $(866,059) $ 1,372 Other stockholders' equity (Note 2) 1,807,969 302,592 866,059 2,976,620 ___________ ___________ ___________ ___________ Total common stockholders' equity 2,318,588 659,404 - 2,977,992 Preferred stock of subsidiary 155,197 80,000 - 235,197 Long-term debt 1,960,449 493,303 115,556 2,569,308 ___________ ___________ ___________ ___________ Total capitalization 4,434,234 1,232,707 115,556 5,782,497 Minority interest in consolidated subsidiary - - 3,534 3,534 Accumulated deferred income taxes 1,317,792 341,792 (6,695) 1,652,889 Accumulated deferred investment tax credits 158,799 48,052 - 206,851 Regulatory liability 196,590 101,189 - 297,779 Accumulated provision for nuclear decommissioning 102,039 - - 102,039 Other deferred credits and liabilities 158,119 37,564 4,945 200,628 Current liabilities: Current maturity of long-term debt 37,631 58,000 14,444 110,075 Short-term debt 33,900 41,025 - 74,925 Accounts payable 69,169 49,116 18,296 136,581 Wages payable 35,323 11,485 - 46,808 Taxes accrued 131,369 23,503 - 154,872 Interest accrued 55,254 9,202 2,852 67,308 Other 85,770 16,602 2,789 105,161 ___________ ___________ ___________ ___________ Total current liabilities 448,416 208,933 38,381 695,730 ___________ ___________ ___________ ___________ Total Capital and Liabilities $ 6,815,989 $ 1,970,237 $ 155,721 $ 8,941,947 =========== =========== =========== =========== See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial Statements. AMEREN CORPORATION UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENTS OF INCOME THREE MONTHS ENDED MARCH 31, 1997 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined ____________ ___________ ____________ ____________ OPERATING REVENUES: Electric $ 440,967 $ 160,862 $ 48,269 $ 650,098 Gas 46,110 61,138 - 107,248 Other 181 3,343 108 3,632 ____________ ___________ __________ ____________ Total operating revenues 487,258 225,343 48,377 760,978 OPERATING EXPENSES: Operations Fuel and purchased power 116,191 57,613 28,836 202,640 Gas Costs 27,508 40,330 - 67,838 Other 9 5,478 39,902 4,352 139,732 ____________ ___________ __________ ____________ 239,177 137,845 33,188 410,210 Maintenance 49,198 14,871 3,470 67,539 Depreciation and amortization 61,444 22,610 3,773 87,827 Income taxes (Note 6) 21,335 9,476 2,033 32,844 Other taxes 50,517 16,068 512 67,097 ____________ ___________ __________ ____________ Total operating expenses 421,671 200,870 42,976 665,517 OPERATING INCOME 65,587 24,473 5,401 95,461 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 877 217 - 1,094 Minority interest in consolidated subsidiary - - (1,248) (1,248) Miscellaneous, net (1,081) (71) (1,692) (2,844) ____________ ___________ __________ ____________ Total other income and deductions, net (204) 146 (2,940) (2,998) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 65,383 24,619 2,461 92,463 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 35,180 8,430 2,461 46,071 Allowance for borrowed funds used during construction (1,427) (275) - (1,702) Preferred dividends of subsidiaries (Note 7) 2,204 913 - 3,117 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 35,957 9,068 2,461 47,486 NET INCOME $ 29,426 $ 15,551 $ - $ 44,977 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $ .29 $ .46 $ .33 ===== ===== ===== 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 THREE MONTHS ENDED MARCH 31, 1996 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Note 1,3,9) (Notes 1,3) (Notes 2,8) Combined _____________ _____________ ____________ ___________ OPERATING REVENUES: Electric $ 450,865 $ 171,288 $ 44,975 $ 667,128 Gas 44,548 64,418 - 108,966 Other 157 2,173 104 2,434 _____________ _____________ ____________ ___________ Total operating revenues 495,570 237,879 45,079 778,528 OPERATING EXPENSES: Operations Fuel and purchased power 124,264 69,269 24,876 218,409 Gas costs 24,325 41,197 - 65,522 Other 89,804 34,635 4,431 128,870 ____________ _____________ ____________ ___________ 238,393 145,101 29,307 412,801 Maintenance 48,634 11,436 3,815 63,885 Depreciation and amortization 59,585 20,913 3,776 84,274 Income taxes (Note 6) 28,221 13,460 1,946 43,627 Other taxes 50,983 16,013 552 67,548 ____________ _____________ ____________ ___________ Total operating expenses 425,816 206,923 39,396 672,135 OPERATING INCOME 69,754 30,956 5,683 106,393 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 1,702 11 - 1,713 Minority interest in consolidated subsidiary - - (1,192) (1,192) Miscellaneous, net 895 (203) (1,851) (1,159) ____________ _____________ ____________ ___________ Total other income and deductions, net 2,597 (192) (3,043) (638) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 72,351 30,764 2,640 105,755 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 33,858 8,722 2,640 45,220 Allowance for borrowed funds used during construction (1,647) (15) - (1,662) Preferred dividends of subsidiaries (Note 7) 3,312 939 - 4,251 ____________ _____________ ____________ ___________ Net interest charges and preferred dividends 35,523 9,646 2,640 47,809 NET INCOME $ 36,828 $ 21,118 $ - $ 57,946 ============ ============= ============ =========== EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $ .36 $ .62 $ .42 ===== ===== ===== 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 MARCH 31, 1997 (Thousands of Dollars Except Shares and Per Share Amounts) UE CIPSCO Pro Forma (As Reported) (As Reported) Adjustments Pro Forma (Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined _____________ ______________ ____________ ___________ OPERATING REVENUES: Electric $ 2,150,917 $ 720,386 $ 178,820 $ 3,050,123 Gas 100,626 152,068 - 252,694 Other 509 11,724 1,110 13,343 _____________ ______________ ____________ ___________ Total operating revenues 2,252,052 884,178 179,930 3,316,160 OPERATING EXPENSES: Operations Fuel and purchased power 504,758 262,558 97,207 864,523 Gas costs 67,731 95,360 - 163,091 Other 384,781 151,855 18,225 554,861 _____________ ______________ ____________ ___________ 957,270 509,773 115,432 1,582,475 Maintenance 224,195 64,896 16,765 305,856 Depreciation and amortization 243,158 89,094 15,663 347,915 Income taxes (Note 6) 190,483 45,574 8,320 244,377 Other taxes 212,799 57,873 1,738 272,410 _____________ ______________ ____________ ___________ Total operating expenses 1,827,905 767,210 157,918 2,753,033 OPERATING INCOME 424,147 116,968 22,012 563,127 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 5,667 584 - 6,251 Minority interest in consolidated subsidiary - - (4,762) (4,762) Miscellaneous, net (6,269) (2,652) (7,243) (16,164) ____________ ______________ ____________ ___________ Total other income and deductions, net (602) (2,068) (12,005) (14,675) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 423,545 114,900 10,007 548,452 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 133,966 37,460 10,007 181,433 Allowance for borrowed funds used during construction (6,787) (744) - (7,531) Preferred dividends of subsidiaries (Note 7) 12,141 3,695 - 15,836 ____________ ______________ ____________ ___________ Net interest charges and preferred dividends 139,320 40,411 10,007 189,738 NET INCOME $ 284,225 $ 74,489 $ - $ 358,714 ============ ============== ============ =========== EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.78 $2.19 $2.61 ===== ===== ===== 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 5, 6 and 7). 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. 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 three months and twelve months ended March 31, 1997 included merger-related costs of $2.0 million and $9.0 million, net of income taxes, for Union Electric, and $0.3 million and $4.6 million, net of income taxes, for CIPSCO, respectively. Net income for the three months ended March 31, 1996 included merger-related costs of $0.9 million, net of income taxes, for Union Electric, and $0.7 million, net of income taxes, for CIPSCO. 4. 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. 5. CIPSCO's regulatory asset related to deferred income taxes was reclassified from the regulatory liability account balance to conform to this reporting presentation. 6. CIPSCO's income taxes are reflected as operating expenses to conform to this reporting presentation. 7. 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. 8. Pro forma adjustments were 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 were eliminated. 9. Net income for the three and twelve months ended March 31, 1997, included credits for Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $12.0 million and $45.8 million, respectively. Net income for the three months ended March 31, 1996, included a credit to Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $13.5 million. 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: Registrant CIPSCO and CIPS Date of Report Item Reported March 20, 1997 Item 5. Other Events. Reports information regarding negotiations with three employee groups represented by labor organizations. Registrant CIPS Date of Report Item Reported March 25, 1997 Item 7. Financial Statements, Pro Forma Financial Information and Exhibits. Contains certain exhibits filed in connection with the Registration Statements of CIPS (Registration Nos. 33-56063 and 333-18473) which became effective November 21, 1994 and March 14, 1997, respectively. 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: May 14, 1997 /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: May 14, 1997 /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 MARCH 31, 1997 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, March 31, ________________________________________________ 1997 1996 1995 1994 1993 1992 ________ ________ ________ ________ ________ ________ Net income......$ 71,167 $ 77,393 $ 70,631 $ 81,913 $ 84,011 $ 72,601 Add--Federal and state income taxes: Current........ 49,777 53,847 41,276 38,097 50,441 6,110 Deferred(net) (3,146) (2,805) 5,627 13,190 1,674 33,998 Investment tax credit amortization.. (3,345) (3,349) (3,361) (3,367) (3,366) (3,336) Income tax applicable to nonoperating activities.... (505) (407) 941 603 631 2,989 ________ ________ ________ ________ ________ ________ 42,781 47,286 44,483 48,523 49,380 39,761 ________ ________ ________ ________ ________ ________ Net income before income taxes........... 113,948 124,679 115,114 130,436 133,391 112,362 ________ ________ ________ ________ ________ ________ Add--Fixed charges Interest on long-term debt......... 30,928 31,409 31,168 31,164 32,823 35,534 Interest on provision for revenue refunds..... - - - - _ (803) Other interest 4,821 4,636 853 358 479 392 Amortization of net debt premium and discount.. 1,712 1,709 1,703 1,678 1,598 863 ________ ________ ________ ________ ________ ________ 37,461 37,754 33,724 33,200 34,900 35,986 ________ ________ ________ ________ ________ ________ Earnings as defined....... $151,409 $162,433 $148,838 $163,636 $168,291 $148,348 ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges....... 4.04 4.30 4.41 4.93 4.82 4.12 Earnings required for preferred dividends: Preferred stock dividends.. $ 3,695 $ 3,721 $ 3,850 $ 3,510 $ 3,718 $ 4,549 Adjustment to pre-tax basis*...... 2,221 2,273 2,425 2,079 2,185 2,491 ________ ________ ________ ________ ________ ________ $ 5,916 $ 5,994 $ 6,275 $ 5,589 $ 5,903 $ 7,040 ________ ________ ________ ________ ________ ________ Fixed charges plus preferred stock dividend requirements... $ 43,377 $ 43,748 $ 39,999 $ 38,789 $ 40,803 $ 43,026 ======== ======== ======== ======== ======== ======== Ratio of earnings to fixed charges plus preferred stock dividend requirements...... 3.49 3.71 3.72 4.22 4.12 3.45 * 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 { Net income } required for preferred dividends - 35 - EX-27.1 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. 0000860520 CIPSCO Inc. 1,000 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 PER-BOOK 1,455,388 115,830 194,399 134,380 29,743 1,929,740 356,812 0 302,592 659,404 0 80,000 493,303 0 0 41,025 58,000 0 0 0 598,008 1,929,740 225,343 9,476 191,394 200,870 24,473 (71) 24,402 7,938 16,464 913 15,551 17,716 0 (14,104) .46 .46 INCLUDES INCOME TAX EXPENSE. NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
EX-27.2 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. 0000018654 CIPS 1,000 3-MOS DEC-31-1996 JAN-01-1997 MAR-31-1997 PER-BOOK 1,455,388 0 191,477 134,380 28,517 1,809,762 121,283 0 455,870 577,153 0 80,000 493,303 0 0 41,025 58,000 0 0 0 560,281 1,809,762 222,007 8,763 190,916 199,679 22,328 192 22,520 8,154 14,366 913 13,453 17,500 0 (14,825) 0 0 INCLUDES INCOME TAX EXPENSE. INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES.
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