-----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, BnaSc56f3kLUuTa7D6GhyIYBt4at4N15p/CMEkYJJul3SDATyk/rGQzyK8z+AmRW tiXoFhXzGmXvX32bQYdrtg== 0000860520-97-000020.txt : 19971117 0000860520-97-000020.hdr.sgml : 19971117 ACCESSION NUMBER: 0000860520-97-000020 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-10628 FILM NUMBER: 97721019 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: SEC FILE NUMBER: 000-20455 FILM NUMBER: 97721020 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, 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 October 31, 1997 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Common stock, no par value, 25,452,373 shares outstanding and held by CIPSCO INCORPORATED at October 31, 1997 CIPSCO INCORPORATED AND CENTRAL ILLINOIS PUBLIC SERVICE COMPANY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 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 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 September 30, 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 September 30, 1997 and 1996 (in thousands except per share amounts) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, __________________ __________________ 1997 1996 1997 1996 ________ ________ ________ ________ Operating Revenues: Electric . . . . . . . . . . . . $210,400 $218,978 $539,415 $560,188 Gas. . . . . . . . . . . . . . . 15,749 15,921 101,174 101,280 Investment . . . . . . . . . . . 3,025 2,382 8,846 7,464 ________ ________ ________ ________ Total operating revenues. . . 229,174 237,281 649,435 668,932 ________ ________ ________ ________ Operating Expenses: Fuel for electric generation . . 57,502 58,574 162,397 165,288 Purchased power. . . . . . . . . 4,690 14,803 16,239 39,734 Gas costs. . . . . . . . . . . . 7,947 7,546 62,941 60,227 Other operation. . . . . . . . . 43,131 38,279 121,215 107,487 Maintenance. . . . . . . . . . . 15,796 12,034 48,058 43,005 Depreciation and amortization. . 21,631 21,680 67,341 64,810 Taxes other than income taxes. . 14,665 14,121 43,832 43,505 ________ ________ ________ ________ Total operating expenses. . . 165,362 167,037 522,023 524,056 ________ ________ ________ ________ Operating Income . . . . . . . . . 63,812 70,244 127,412 144,876 ________ ________ ________ ________ Interest and Other Charges: Interest on long-term debt of subsidiary . . . . . . . . . . 9,757 8,279 26,139 24,839 Other interest charges . . . . . 837 2,110 2,322 3,037 Allowance for funds used during construction . . . . . . . . . (539) (271) (865) (446) Preferred stock dividends of subsidiary . . . . . . . . . . 940 931 2,782 2,794 Miscellaneous, net . . . . . . . 236 1,811 488 2,874 ________ ________ ________ ________ Total interest and other charges . 11,231 12,860 30,866 33,098 ________ ________ ________ ________ Income Before Income Taxes . . . . 52,581 57,384 96,546 111,778 ________ ________ ________ ________ Income Taxes . . . . . . . . . . . 18,734 21,966 34,898 43,260 ________ ________ ________ ________ Net Income . . . . . . . . . . . . $ 33,847 $ 35,418 $ 61,648 $ 68,518 ======== ======== ======== ======== Average Shares of Common Stock Outstanding . . . . . . . . . . . 34,070 34,070 34,070 34,070 Earnings per Average Share of Common Stock . . . . . . . . . . $ .99 $ 1.04 $ 1.81 $ 2.01
The accompanying condensed notes to financial statements are an integral part of these statements. CIPSCO INCORPORATED AND SUBSIDIARIES Consolidated Balance Sheets September 30,1997 and December 31, 1996 (in thousands) September 30, December 31, 1997 1996 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric................................ $2,290,092 $2,244,571 Gas..................................... 248,083 242,664 __________ __________ 2,538,175 2,487,235 Less-Accumulated depreciation........... 1,116,899 1,099,261 __________ __________ 1,421,276 1,387,974 Construction work in progress........... 58,921 70,150 __________ __________ 1,480,197 1,458,124 __________ __________ Current Assets: Cash.................................... 2,833 2,287 Temporary investments, at cost which approximates market.................... 933 3,983 Accounts receivable, net................ 73,168 74,693 Accrued unbilled revenues............... 23,131 30,126 Materials and supplies, at average cost. 35,785 38,806 Fuel for electric generation, at average cost........................... 20,215 21,610 Gas stored underground, at average cost. 13,204 13,361 Prepayments............................. 10,888 14,403 Other current assets.................... 8,286 7,704 __________ __________ 188,443 206,973 __________ __________ Regulatory Assets......................... 127,837 64,754 __________ __________ Investments and Other Assets: Marketable securities................... 51,414 51,293 Leveraged leases and energy investments. 64,594 62,017 Other................................... 28,295 28,495 __________ __________ 144,303 141,805 __________ __________ $1,940,780 $1,871,656 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholders' equity............. $ 669,837 $ 661,594 Preferred stock of subsidiary........... 80,000 80,000 Long-term debt of subsidiary............ 570,433 421,227 __________ __________ 1,320,270 1,162,821 __________ __________ Current Liabilities: Long-term debt of subsidiary due within one year........................ - 58,000 Short-term borrowings................... 36,358 57,768 Accounts payable........................ 40,240 62,774 Accrued wages........................... 11,110 10,294 Accrued taxes........................... 22,613 13,692 Accrued interest........................ 10,954 8,432 Other................................... 53,835 49,302 __________ __________ 175,110 260,262 __________ __________ Deferred Credits: Accumulated deferred income taxes....... 342,837 341,373 Investment tax credits.................. 46,384 48,885 Regulatory liabilities, net............. 56,179 58,315 __________ __________ 445,400 448,573 __________ __________ $1,940,780 $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 September 30, 1997 and 1996 (in thousands) (unaudited) Nine Months Ended September 30, _________________________ 1997 1996 __________ __________ Operating Activities: Net income............................. $ 61,648 $ 68,518 Adjustments to reconcile net income to net cash provided (used in): Depreciation and amortization........ 67,341 64,810 Allowance for equity funds used during construction (AFUDC)......... (381) (196) Deferred income taxes, net........... 1,464 5,324 Investment tax credit amortization... (2,501) (2,512) Coal contract restructuring charge... (71,795) - Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues........... 8,520 (9,980) Fuel for electric generation......... 1,395 8,411 Other inventories.................... 3,178 (4,026) Prepayments.......................... 3,515 1,357 Other assets......................... (382) (5,370) Accounts payable and other liabilities......................... (18,001) (3,606) Accrued wages, taxes and interest.... 12,259 2,086 Other.................................. (1,598) 65 __________ __________ Net cash provided by (used in) operating activities................ 64,662 124,881 __________ __________ Investing Activities: Utility construction expenditures, excluding AFUDC....................... (78,970) (67,760) Allowance for borrowed funds used during construction................... (484) (250) Changes in temporary investments....... 3,050 (156) Long-term marketable securities........ (121) (3,285) Long-term leveraged leases and energy investments........................... (2,577) (1,997) __________ __________ Net cash used in investing activities.......................... (79,102) (73,448) __________ __________ Financing Activities: Common stock dividends paid............ (53,830) (52,808) Proceeds from issuance of long-term debt of subsidiary.................... 152,000 - Repayment of long-term debt of subsidiary............................ (61,000) - Repayment of short-term borrowings..... (21,410) 6,070 Issuance expense, discount and premium. (774) (12) __________ __________ Net cash provided by (used in) financing activities................ 14,986 (46,750) __________ __________ Net increase (decrease) in cash........ 546 4,683 Cash at beginning of period............ 2,287 1,088 __________ __________ Cash at end of period.................. $ 2,833 $ 5,771 ========== ========== Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized. $ 24,814 $ 26,935 Income taxes......................... $ 24,220 $ 35,685
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, 1997 and 1996 (in thousands) (unaudited) Three Months Ended Nine Months Ended September 30, September 30, __________________ __________________ 1997 1996 1997 1996 ________ ________ ________ ________ Operating Revenues: Electric. . . . . . . . . . . . $210,405 $218,982 $539,432 $560,205 Gas . . . . . . . . . . . . . . 15,750 15,922 101,177 101,283 ________ ________ ________ ________ Total operating revenues . . 226,155 234,904 640,609 661,488 ________ ________ ________ ________ Operating Expenses: Fuel for electric generation. . 57,502 58,574 162,397 165,288 Purchased power . . . . . . . . 4,690 14,803 16,239 39,734 Gas costs . . . . . . . . . . . 7,947 7,546 62,941 60,227 Other operation . . . . . . . . 42,792 37,998 120,222 106,540 Maintenance . . . . . . . . . . 15,795 12,033 48,056 43,002 Depreciation and amortization . 21,517 21,593 66,988 64,468 Taxes other than income taxes . 14,647 14,114 43,798 43,485 Income taxes: Current . . . . . . . . . . . 15,127 19,082 35,694 44,568 Deferred, net . . . . . . . . 4,049 4,716 (389) 968 Deferred investment tax credits, net . . . . . . . . (834) (837) (2,501) (2,511) ________ ________ ________ ________ Total operating expenses . . 183,232 189,622 553,445 565,769 ________ ________ ________ ________ Operating Income. . . . . . . . . 42,923 45,282 87,164 95,719 ________ ________ ________ ________ Other Income and Deductions: Allowance for equity funds used during construction . . . 237 119 381 196 Nonoperating income taxes . . . (53) 1,581 (392) 1,243 Miscellaneous, net. . . . . . . (70) (1,781) (240) (2,781) ________ ________ ________ ________ Total other income and deductions. . . . . . . . . 114 (81) (251) (1,342) ________ ________ ________ ________ Income Before Interest Charges. . 43,037 45,201 86,913 94,377 ________ ________ ________ ________ Interest Charges: Interest on long-term debt. . . 9,757 8,279 26,139 24,839 Other interest charges. . . . . 826 2,114 2,306 3,041 Allowance for borrowed funds used during construction . . . (302) (152) (484) (250) ________ ________ ________ ________ Total interest charges. . . 10,281 10,241 27,961 27,630 ________ ________ ________ ________ Net Income. . . . . . . . . . . . 32,756 34,960 58,952 66,747 Preferred Stock Dividends . . . . 940 931 2,782 2,795 ________ ________ ________ ________ Earnings for Common Stock . . . . $ 31,816 $ 34,029 $ 56,170 $ 63,952 ======== ======== ======== ========
The accompanying condensed notes to financial statements are an integral part of these statements. CENTRAL ILLINOIS PUBLIC SERVICE COMPANY Balance Sheets September 30, 1997 and December 31, 1996 (in thousands) September 30, December 31, 1997 1996 _____________ ____________ (unaudited) ASSETS Utility Plant, at original cost: Electric................................. $2,290,092 $2,244,571 Gas...................................... 248,083 242,664 __________ __________ 2,538,175 2,487,235 Less-Accumulated depreciation............ 1,116,899 1,099,261 __________ __________ 1,421,276 1,387,974 Construction work in progress............ 58,921 70,150 __________ __________ 1,480,197 1,458,124 __________ __________ Current Assets: Cash..................................... 2,532 2,261 Accounts receivable, net................. 73,227 74,761 Accrued unbilled revenues................ 23,131 30,126 Materials and supplies, at average cost.. 35,785 38,806 Fuel for electric generation, at average cost............................ 20,215 21,610 Gas stored underground, at average cost.. 13,204 13,361 Prepayments.............................. 10,788 14,323 Other current assets..................... 8,286 7,704 __________ __________ 187,168 202,952 __________ __________ Regulatory Assets.......................... 127,837 64,754 __________ __________ Other Assets............................... 27,167 27,488 __________ __________ $1,822,369 $1,753,318 ========== ========== CAPITALIZATION AND LIABILITIES Capitalization: Common shareholder's equity.............. $ 594,520 $ 581,224 Preferred stock.......................... 80,000 80,000 Long-term debt........................... 570,433 421,228 __________ __________ 1,244,953 1,082,452 __________ __________ Current Liabilities: Long-term debt due within one year....... - 58,000 Short-term borrowings.................... 33,558 57,768 Accounts payable......................... 39,517 62,243 Accrued wages............................ 11,110 10,279 Accrued taxes............................ 23,028 13,943 Accrued interest......................... 10,954 8,432 Other.................................... 53,836 49,301 __________ __________ 172,003 259,966 __________ __________ Deferred Credits: Accumulated deferred income taxes........ 302,850 303,700 Investment tax credits................... 46,384 48,885 Regulatory liabilities, net.............. 56,179 58,315 __________ __________ 405,413 410,900 __________ __________ $1,822,369 $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 September 30, 1997 and 1996 (in thousands) (unaudited) Nine Months Ended September 30, _______________________ 1997 1996 __________ __________ Operating Activities: Net income.............................. $ 58,952 $ 66,747 Adjustments to reconcile net income to net cash provided (used in): Depreciation and amortization......... 66,988 64,468 Allowance for equity funds used during construction (AFUDC).......... (381) (196) Deferred income taxes, net............ (850) 968 Investment tax credit amortization.... (2,501) (2,512) Coal contract restructuring charge.... (71,795) - Cash flows impacted by changes in assets and liabilities: Accounts receivable, net and accrued unbilled revenues.................... 8,529 (9,748) Fuel for electric generation.......... 1,395 8,411 Other inventories..................... 3,178 (4,026) Prepayments........................... 3,535 1,070 Other assets.......................... (261) (5,086) Accounts payable and other liabilities.......................... (18,191) (4,338) Accrued wages, taxes and interest..... 12,439 3,542 Other................................... (1,246) 407 _________ _________ Net cash provided by (used in) operating activities................. 59,791 119,707 _________ _________ Investing Activities: Construction expenditures, excluding AFUDC.................................. (78,970) (67,760) Allowance for borrowed funds used during construction.................... (484) (250) _________ _________ Net cash used in investing activities. (79,454) (68,010) _________ _________ Financing Activities: Proceeds from issuance of long-term debt .................................. 152,000 - Repayment of long-term debt............. (61,000) - Repayment of short-term borrowings...... (24,210) 6,070 Dividends paid: Preferred stock....................... (2,782) (2,795) Common stock.......................... (43,300) (50,250) Issuance expense, discount and premium.. (774) (12) _________ _________ Net cash provided by (used in) financing activities................. 19,934 (46,987) _________ _________ Net increase (decrease) in cash......... 271 4,710 Cash at beginning of period............. 2,261 1,006 _________ _________ Cash at end of period................... $ 2,532 $ 5,716 ========= ========= Supplemental Disclosures of Cash Flow Information: Cash paid during the period for: Interest, net of amounts capitalized.. $ 24,814 $ 26,935 Income taxes.......................... $ 24,659 $ 38,052
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, 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. 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 September 30, 1997, $51.8 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 $14.2 million at September 30, 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. The Illinois commission also has instituted a reconciliation proceeding to review CIPS' environmental activities in 1996. Amounts found to have been incorrectly included under the riders would be subject to refund. On June 30, 1997, CIPS and the Staff of the Illinois Commerce Commission submitted a stipulation with regard to all matters at issue in the reconciliation proceeding related to environmental activities in 1993, 1994 and 1995. Under the stipulation, as of December 31, 1995, the aggregate amount of (i) revenues received under the riders, insurance proceeds (and related interest) exceeded (ii) rider-related costs (and related carrying cost) by approximately $4,111,000. If the stipulation is approved by the Commission, this amount would be applied to cover a portion of future remediation costs. Also, if the stipulation is approved, insurance proceeds in the amount of $3,226,250 (and related interest) would be applied to cover non-rider related costs incurred by CIPS. During 1997, the accumulated balance of recoverable environmental remediation cost exceeded the balance of available insurance proceeds and rider revenue. CIPS, therefore, began to again collect revenue under the riders on November 1, 1997. 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 $17 million. An administrative law judge of the NLRB has ruled that the lockout was unlawful. On July 23, 1996, CIPS 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 September 30, 1997 and December 31, 1996 relate to the following: Description September 30, December 31, 1997 1996 _____________ ____________ (in thousands) Regulatory Assets: Coal contract restructuring charge $ 65,641 $ - Undepreciated plant costs 36,703 40,876 Deferred environmental remediation costs 14,163 11,174 Unamortized costs related to reacquired debt 11,316 12,208 Take-or-Pay costs 14 496 ________ ________ Total Regulatory Assets $127,837 $ 64,754 ======== ======== Regulatory Liabilities: SFAS 109 - Income Taxes, net $ 54,821 $ 57,957 Clean Air Act allowances, net 1,358 358 ________ ________ Total Regulatory Liabilities, Net $ 56,179 $ 58,315 ======== ======== 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 strict 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 such case, a determination would also have to be made regarding the impairment and writedown of certain other 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. On August 11, 1997 the FERC approved the recovery of the restructuring charge through the wholesale FAC effective May 8, 1997. 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 CIPSCO and Union Electric Company ("UE") 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. Stockholders at both companies approved the merger on December 20, 1995. The Missouri Public Service Commission approved the merger on February 21, 1997. The Illinois Commerce Commission (Illinois commission) approved the merger in an order (the ICC Order) entered September 10, 1997. The ICC Order provides that CIPS and UE must file a rate case or alternative regulatory plan within six months after closing the merger which will reflect an appropriate sharing of net merger savings between shareholders and ratepayers. An intervenor in the Illinois commission proceeding filed an application for rehearing of the ICC Order with the Illinois Commission which was denied. The intervenor has until mid-November to appeal the ICC Order to the Illinois Appellate Court. The intervenor also filed an action against the ICC and others in the Circuit Court, Tenth Judicial Circuit, Tazewell County, Illinois (Case No. 97-CH-62) related to the ICC Order. The filing of these pleadings does not affect the finality of the ICC Order and the ICC Order grants the parties full authority under Illinois law to consummate the merger. The Federal Energy Regulatory Commission (FERC) approved the merger on October 15, 1997. The FERC ruled that the conditions included in the Initial Decision, issued by the Administrative Law Judge, relating to issues associated with certain power and transmission service agreements with other utilities are not necessary and that competition would not be harmed. On October 16, 1997, the U.S. Nuclear Regulatory Commission issued an order indicating that it had reviewed and found acceptable UE's request for transfer of the license for Callaway Plant from present ownership to Ameren Corporation at the time of the merger. Approval still is needed from the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935. The merger is expected to be completed by year-end 1997. On May 18, 1997, the waiting period established by the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, expired without action by the Federal Trade Commission and the Department of Justice, thus clearing the merger from federal antitrust review. 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. See, however, "National Ambient Air Quality Standards" below. 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 amounts paid in the coal contract restructuring discussed in Note 4 of Condensed Notes to Financial Statements herein. CIPS has remaining authority through December 31, 1998 from the Illinois commission to incur up to $51 million in long-term debt. At September 30, 1997, remaining authority under registration statements filed with the Securities and Exchange Commission was $75 million. Common stock dividends paid for the twelve months ended September 30, 1997, resulted in a payout ratio of 98% of the Company's earnings to common shareholders. Common stock dividends paid to the Company's common shareholders equalled 63% 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 nine-month periods ended September 30, 1997 and 1996 are as follows: Nine Months Ended September 30, _________________________ (in thousands) The Company: 1997 1996 _________ _________ Common Shareholders' Equity Net income $ 61,648 $ 68,518 Common stock dividends paid (53,830) (52,808) Other 425 548 ________ ________ Change in Shareholders' Equity $ 8,243 $ 16,258 ======== ======== Nine Months Ended September 30, _________________________ (in thousands) CIPS: 1997 1996 _________ _________ Common Shareholder's Equity Earnings for common stock $ 56,170 $ 63,952 Common stock dividends paid (43,300) (50,250) Other 426 103 ________ ________ Change in Shareholder's Equity $ 13,296 $ 13,805 ======== ======== OVERVIEW The Company's earnings per share were $.99 for the third quarter and $1.81 for the nine months ended September 30, 1997, compared to earnings of $1.04 and $2.01 for the same periods in 1996. The decrease in earnings reflects higher costs in 1997 related to business restructuring, system conversions and timing of power station maintenance projects. 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, 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. Third Quarter Nine Months Ended September 30, Ended September 30, ___________________ ___________________ (in thousands) 1997 1996 1997 1996 ________ ________ ________ ________ CIPS Electric operating margin $140,607 $138,162 $341,981 $336,086 Gas operating margin 7,287 7,857 32,977 35,508 Other deductions and interest expenses (115,138) (111,059) (316,006) (304,847) CIPS preferred stock dividends (940) (931) (2,782) (2,795) ________ ________ ________ ________ Total earnings for common stock 31,816 34,029 56,170 63,952 ________ ________ ________ ________ NON-UTILITY Investment revenues 2,858 2,350 8,593 7,366 Other deductions and expenses (827) (961) (3,115) (2,800) ________ ________ ________ ________ Total non-utility net income 2,031 1,389 5,478 4,566 ________ ________ ________ ________ Consolidated net income $ 33,847 $ 35,418 $ 61,648 $ 68,518 ======== ======== ======== ======== RESULTS OF OPERATIONS The results of operations of the Company and CIPS for the three months and nine months ended September 30, 1997, compared to the same periods in 1996 are presented below. The Company Net Income (in thousands) Earnings Per Share _______________________ _______________________ Three Months Nine Months Three Months Nine Months ____________ ___________ ____________ ___________ 1997 $33,847 $61,648 $ .99 $1.81 1996 35,418 68,518 1.04 2.01 _______ _______ _____ _____ Increase (Decrease) $(1,571) $(6,870) $(.05) $(.20) ======= ======= ===== ===== Percent Increase (Decrease) (4)% (10)% (5)% (10)% CIPS Earnings for Common Stock (in thousands) __________________________ Three Months Nine Months ____________ ___________ 1997 $31,816 $56,170 1996 34,029 63,952 _______ _______ Increase (Decrease) $(2,213) $(7,782) ======= ======= Percent Increase (Decrease) (7)% (12)% 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 1997 compared to the third quarter of 1996 reflecting a decrease in economy and emergency interchange revenues and KWH sales. Economy and emergency interchange revenues and KWH sales declined in 1997 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. Retail KWH sales increased 3%, due to a 7% increase in cooling degree days in the third quarter of 1997. Power supply agreement revenues for the third quarter of 1997 were essentially unchanged with those of the third quarter 1996, however KWH sales increased 42% due to increased sales of energy resulting from pricing adjustments to two agreements. Electric revenues decreased 4% in the first nine months of 1997 compared to the same period of 1996 reflecting fewer KWH sales due to milder weather conditions in 1997 and a decline in economy and emergency interchange sales over the same period in 1996 due to accounting for certain interchange transactions as transmission service, as discussed above. KWH sales to retail customers declined 1% due primarily to the milder temperatures in 1997. Power supply agreement revenues for the nine months ended September 30, 1997, are 9% above those of the same period in 1996 due to increased energy sales related to these agreements. Sales to cooperatives and municipals declined in the nine months ended September 30, 1997 compared to the same period in 1996 due primarily to unfavorable weather conditions in 1997. 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 $ 1,935 3 % 24,538 3 % $ (2,266) (1)% (49,351) (2)% Commercial 2,204 4 32,905 5 2,662 2 36,754 2 Industrial (933) (3) 17,249 3 (4,113) (5) (31,523) (2) Public Authorities (103) (4) (1,481) (3) 259 3 3,784 3 Miscellaneous 406 15 - - 595 8 - - ________ _______ ________ _________ Total Retail $ 3,509 2 % 73,211 3 % $ (2,863) (1)% (40,336) (1)% Power Supply Agreements $ 3 - % 169,139 42 % $ 4,689 9 % 446,990 41 % Interchange Sales (economy/ emergency) (12,903)(49) (533,239)(45) (24,399)(39) (1,012,795) - Transmission Service 1,209 - - - 3,466 - - - Cooperatives and Municipals (396) (6) (13,306)(10) (1,666) (9) (34,035) (8) ________ _______ ________ _________ Total Sales for Resale $(12,087)(23)% (377,406)(22)% $(17,910)(13)% (599,840) (14)% ________ _______ ________ _________ Total $ (8,578) (4)% (304,195) (8)% $(20,773) (4)% (640,176) (6)% ======== ======== ======== ======== Gas revenues decreased 1% in the third quarter of 1997 compared to the same period in 1996 due principally to a decline in residential and commercial sales. Residential and commercial gas revenues declined 11% and 33%, respectively, for the third quarter of 1997 and 6% and 12% in the first nine months of 1997 over the same periods in 1996 due principally to milder weather in 1997. Industrial revenues increased 26% and 12%, respectively, in the third quarter and the first nine months of 1997, and gas transportation revenues declined 19% in the third quarter of 1997 and 18% for the first nine months of 1997 reflecting an increase in industrial 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 continued to 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) ______________________________ ______________________________ Third Quarter Nine Months ______________________________ _____________ ________________ Revenue Rev % Therms Therms Revenue Rev % Therms Therms % % ________ _____ ______ ______ _______ _____ _______ _____ Residential $ (978) (11)% (230) (2)% $ (4,243) (6)% (13,743) (12)% Commercial (1,056) (33) (1,264) (30) (2,643) (12) (6,675) (17) Industrial 494 26 3,350 80 956 12 4,791 22 Sales for Resale 1,643 - 7,408 - 6,716 - 29,857 - Transportation (275) (19) (413) (2) (928) (18) (4,626) (5) Miscellaneous - - - - 36 11 - - ________ ______ ________ ______ Total $ (172) (1)% 8,851 20 % $ (106) - % 9,604 4 % ======== ====== ======== ====== Investment revenues increased 27% in the third quarter of 1997 and 19% for the first nine months of 1997 compared to the same periods in 1996 due principally to market gains in 1997. OPERATING EXPENSES __________________ Fuel for electric generation declined 2% in the third quarter and first nine months of 1997 compared with the same periods in 1996 due to a decline in average cost of coal consumed. Purchased power costs declined 68% for the third 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 third quarter 1997 compared to the third quarter 1996. Purchased power costs declined 59% for the nine months ended September 30, 1997 compared to the same period ended September 30, 1996 for the same reasons as in the third quarter as discussed above. Gas costs increased 5% for the third quarter and for the nine months ended September 30, 1997 when compared to the same periods in 1996 due principally to increased therms purchased for resale to wholesale customers. Other operation expenses increased 13% in the third quarter and in the first nine months of 1997 compared to the same periods in 1996 due primarily to increases in business restructuring costs, system conversion costs, and outside consulting expenses. Maintenance expenses increased 31% for the third quarter of 1997 compared to the same period of 1996 because more maintenance was scheduled at the power stations. Maintenance expenses increased 12% for the first nine months of 1997 over the same period in 1996 due to two scheduled power plant maintenance projects in 1997 and only one scheduled in 1996. Depreciation and amortization expense was essentially unchanged in the third quarter of 1997. Depreciation and amortization expensed increased 4% for the first nine months of 1997 when compared to the same periods in 1996 due to normal plant additions. Interest and other charges declined 13% in the third quarter and 7% for the first nine months of 1997 compared to the same periods in 1996 due principally to fewer merger transaction costs in 1997. BALANCE SHEET _____________ Significant changes in the balance sheet accounts at September 30, 1997 compared to balances at December 31, 1996 are: Cash and Temporary Investments declined 40% as cash was needed for investing and financing activities. Prepayments declined 24% due to insurance and federal income taxes incurred. Regulatory assets increased 97% 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. See Note 4 of Condensed Notes to Financial Statements. LABOR NEGOTIATIONS __________________ CIPS has negotiated and reached labor agreements with three separate employee groups consisting of (i) four clerical employees at its Newton power station (contract extends through June 30, 1999), (ii) six clerical employees at its Coffeen power station (contract extends through February 28, 2001) and (iii) 16 production and technical employees at a Springfield, Illinois operations facility (contract extends through June 30, 1999). 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, 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. A revised legislative proposal passed in the Illinois Senate on October 30, 1997 and a vote in the House of Representatives is expected by mid-November 1997. Upon approval by the House of Representatives, the Governor's approval would be required. The Senate bill includes a 5% residential rate decrease effective August 1, 1998 for those utilities (including CIPS) with a residential rate lower than the Midwest group utility average, with potential additional rate decreases in 2000 and 2002 (capped at 5% each) to the extent that rates exceed the Midwest utility average at that time. In addition, retail choice will be offered to customers (non-residential customers will have this option in 1999 and 2000; residential customers will have this option in 2002). The potential negative consequences of utility deregulation include the impairment and write-down of certain assets, including regulatory assets, lower revenues and reduced profit margins. Although the Company is unable to predict the overall impact of utility deregulation on future financial position, results of operations, or liquidity of the Company, management believes this legislation would provide needed flexibility for the Company to competitively enter the unregulated environment by reducing regulatory oversight and by providing the opportunity to recover transition costs, among other provisions. NATIONAL AMBIENT AIR QUALITY STANDARDS ______________________________________ The U.S. Environmental Protection Agency issued final rules on July 18, 1997 revising the National Ambient Air Quality Standards for ozone and particulate matter. The revised standards would require significant reductions in sulfur dioxide and nitrogen oxide emissions from coal-fired boilers beginning in 2004. Because of the magnitude of these additional reductions (50 percent beyond that already required by the Phase II acid rain control provisions of the 1990 Clean Air Act Amendments which become effective January 1, 2000), CIPS could be required to incur substantial capital costs to meet future compliance obligations for its coal-fired boilers and could have significantly higher operating and maintenance expenditures associated with compliance. The amount of necessary capital expenditures or increases in operating and maintenance expense cannot be determined at this time, but could have a significant impact on construction expenditures, financing requirements and operating results. 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 UE, (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, (iv) anticipated deregulation legislation, and (v) the impact of future compliance with National Ambient Air Quality Standards. 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 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 September 30, 1997 gives effect to the Merger as if it had occurred at September 30, 1997. The unaudited pro forma combined condensed statements of income for the nine- month periods ended September 30, 1997 and 1996, and the twelve- month period ended September 30, 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 nine-month periods ended September 30, 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 SEPTEMBER 30, 1997 (Thousands of Dollars) As Reported (Note 1) Pro Forma ________________________ Adjustments Pro Forma UE CIPSCO (Notes 2, 8) Combined ___________ ___________ ____________ ___________ ASSETS Property and plant Electric $ 8,818,445 $ 2,290,092 $ 379,353 $11,487,890 Gas 194,454 248,083 - 442,537 Other 35,960 - - 35,960 ___________ ___________ ____________ ___________ 9,048,859 2,538,175 379,353 11,966,387 Less accumulated depreciation and amortization 3,829,996 1,116,899 281,375 5,228,270 ___________ ___________ ____________ ___________ 5,218,863 1,421,276 97,978 6,738,117 Construction work in progress: Nuclear fuel in process 108,882 - - 108,882 Other 68,232 58,921 1,708 128,861 ___________ ___________ ____________ ___________ Total property and plant, net 5,395,977 1,480,197 99,686 6,975,860 Regulatory assets: Deferred income taxes (Note 5) 656,248 39,534 - 695,782 Other 167,896 127,874 - 295,770 ___________ ___________ ____________ ___________ Total regulatory assets 824,144 167,408 - 991,552 Other assets: Nuclear decommissioning trust fund 119,333 - - 119,333 Unamortized debt expense 10,066 3,637 542 14,245 Investments in nonregulated activities - 116,008 - 116,008 Other 26,937 24,658 (4,533) 47,062 ___________ ___________ ____________ ___________ Total other assets 156,336 144,303 (3,991) 296,648 Current assets: Cash and temporary investments 27,657 3,766 27,602 59,025 Accounts receivable, net 242,756 49,731 19,741 312,228 Unbilled revenue 61,011 23,131 - 84,142 Materials and supplies, at average cost - Fossil fuel 52,741 33,419 6,214 92,374 Other 97,346 35,785 4,477 137,608 Other 50,491 42,611 3,303 96,405 ___________ ___________ ____________ ___________ Total current assets 532,002 188,443 61,337 781,782 ___________ ___________ ____________ ___________ Total Assets $ 6,908,459 $ 1,980,351 $ 157,032 $ 9,045,842 =========== =========== ============ =========== CAPITAL AND LIABILITIES Capitalization: Common stock (Note 2) $ 510,619 $ 356,812 $ (866,059) $ 1,372 Other stockholders' equity (Note 2) 1,927,283 313,025 866,059 3,106,367 ___________ ___________ ____________ ___________ Total common stockholders' equity 2,437,902 669,837 - 3,107,739 Preferred stock of subsidiary 155,197 80,000 - 235,197 Long-term debt 1,806,752 570,433 115,556 2,492,741 ___________ ___________ ____________ ___________ Total capitalization 4,399,851 1,320,270 115,556 5,835,677 Minority interest in consolidated subsidiary - - 3,534 3,534 Accumulated deferred income taxes 1,298,879 342,837 (6,427) 1,635,289 Accumulated deferred investment tax credits 155,715 46,384 - 202,099 Regulatory liability 189,862 95,750 - 285,612 Accumulated provision for nuclear decommissioning 124,351 - - 124,351 Other deferred credits and liabilities 178,419 41,026 3,681 223,126 Current liabilities: Current maturity of long-term debt 28,749 - 14,444 43,193 Short-term debt 7,000 36,358 - 43,358 Accounts payable 74,814 40,240 20,698 135,752 Wages payable 37,386 11,110 - 48,496 Taxes accrued 262,369 22,613 - 284,982 Interest accrued 55,296 10,954 2,830 69,080 Other 95,768 12,809 2,716 111,293 ___________ ___________ ____________ ___________ Total current liabilities 561,382 134,084 40,688 736,154 ___________ ___________ ____________ ___________ Total Capital and Liabilities $ 6,908,459 $ 1,980,351 $ 157,032 $ 9,045,842 =========== =========== ============ ===========
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, 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 $ 1,744,488 $ 539,415 $ 137,789 $ 2,421,692 Gas 66,725 101,174 - 167,899 Other 353 8,846 572 9,771 ____________ ___________ __________ ____________ Total operating revenues 1,811,566 649,435 138,361 2,599,362 OPERATING EXPENSES: Operations Fuel and purchased power 382,272 178,636 77,389 638,297 Gas Costs 43,968 62,941 - 106,909 Other 299,278 121,215 13,574 434,067 ____________ ___________ __________ ____________ 725,518 362,792 90,963 1,179,273 Maintenance 158,877 48,058 12,860 219,795 Depreciation and amortization 185,151 67,341 11,116 263,608 Income taxes (Note 6) 187,023 34,898 5,814 227,735 Other taxes 166,680 43,832 1,393 211,905 ____________ ___________ __________ ____________ Total operating expenses 1,423,249 556,921 122,146 2,102,316 OPERATING INCOME 388,317 92,514 16,215 497,046 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 3,014 381 - 3,395 Minority interest in consolidated subsidiary - - (3,772) (3,772) Miscellaneous, net (5,950) (488) (4,931) (11,369) ____________ ___________ __________ ____________ Total other income and deductions, net (2,936) (107) (8,703) (11,746) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 385,381 92,407 7,512 485,300 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 105,289 28,461 7,512 141,262 Allowance for borrowed funds used during construction (4,959) (484) - (5,443) Preferred dividends of subsidiaries (Note 7) 6,613 2,782 - 9,395 ____________ ___________ __________ ____________ Net interest charges and preferred dividends 106,943 30,759 7,512 145,214 NET INCOME $ 278,438 $ 61,648 $ - $ 340,086 ============ =========== ========== ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.73 $1.81 $2.48 ===== ===== ===== 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, 1996 (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 $ 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 6) 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 7) 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 TWELVE MONTHS ENDED SEPTEMBER 30, 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 $ 2,189,241 $ 710,040 $ 183,193 $ 3,082,474 Gas 97,512 155,242 - 252,754 Other 498 11,935 707 13,140 ____________ _____________ ____________ ____________ Total operating revenues 2,287,251 877,217 183,900 3,348,368 OPERATING EXPENSES: Operations Fuel and purchased power 508,066 247,829 101,876 857,771 Gas costs 66,061 98,942 - 165,003 Other 398,670 160,314 18,557 577,541 ____________ _____________ ____________ ____________ 972,797 507,085 120,433 1,600,315 Maintenance 222,521 66,514 16,813 305,848 Depreciation and amortization 246,348 89,928 15,440 351,716 Income taxes (Note 6) 194,846 41,195 7,919 243,960 Other taxes 213,483 58,145 1,668 273,296 ____________ _____________ ____________ ____________ Total operating expenses 1,849,995 762,867 162,273 2,775,135 OPERATING INCOME 437,256 114,350 21,627 573,233 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 4,546 563 - 5,109 Minority interest in consolidated subsidiary - - (4,887) (4,887) Miscellaneous, net (9,882) (399) (6,815) (17,096) ____________ _____________ ____________ ____________ Total other income and deductions, net (5,336) 164 (11,702) (16,874) INCOME BEFORE INTEREST CHARGES AND PREFERRED DIVIDENDS 431,920 114,514 9,925 556,359 INTEREST CHARGES AND PREFERRED DIVIDENDS: Interest 137,345 38,336 9,925 185,606 Allowance for borrowed funds used during construction (6,298) (717) - (7,015) Preferred dividends of subsidiaries (Note 7) 9,925 3,708 - 13,633 ____________ _____________ ____________ ____________ Net interest charges and preferred dividends 140,972 41,327 9,925 192,224 NET INCOME $ 290,948 $ 73,187 $ - $ 364,135 ============ ============= ============ ============ EARNINGS PER SHARE OF COMMON STOCK (BASED ON AVERAGE SHARES OUTSTANDING) $2.85 $2.15 $2.65 ===== ===== ===== 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 nine months and twelve months ended September 30, 1997 included merger-related costs of $9 million and $12 million, net of income taxes, for Union Electric, and $1 million, net of income taxes, for each of the periods for CIPSCO, respectively. Net income for the nine months ended September 30, 1996 included merger-related costs of $5 million, net of income taxes, each, for Union Electric and 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 nine and twelve months ended September 30, 1997, included credits for Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $20 million and $21 million, respectively. Net income for the nine months ended September 30, 1996, included a credit to Missouri electric customers which reduced revenues and pre-tax income of Union Electric by $46 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: 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 13, 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: November 13, 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 SEPTEMBER 30, 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, September 30, ________________________________________________ 1997 1996 1995 1994 1993 1992 __________ ________ ________ ________ ________ ________ Net income.... $ 69,598 $ 77,393 $ 70,631 $ 81,913 $ 84,011 $ 72,601 Add--Federal and state income taxes: Current.... 44,973 53,847 41,276 38,097 50,441 6,110 Deferred (net)..... (4,162) (2,805) 5,627 13,190 1,674 33,998 Investment tax credit amortization.. (3,338) (3,349) (3,361) (3,367) (3,366) (3,336) Income tax applicable to nonoperating activities..... 1,228 (407) 941 603 631 2,989 _______ _______ _______ _______ _______ _______ 38,701 47,286 44,483 48,523 49,380 39,761 _______ _______ _______ _______ _______ _______ Net income before income taxes............ 108,299 124,679 115,114 130,436 133,391 112,362 _______ _______ _______ _______ _______ _______ Add--Fixed charges Interest on long-term debt.......... 32,678 31,409 31,168 31,164 32,823 35,534 Interest on provision for revenue refunds....... - - - - - (803) Other interest..... 3,901 4,636 853 358 479 392 Amortization of net debt premium and discount... 1,740 1,709 1,703 1,678 1,598 863 _______ _______ _______ _______ _______ _______ 38,319 37,754 33,724 33,200 34,900 35,986 _______ _______ _______ _______ _______ _______ Earnings as defined.......... $146,618 $162,433 $148,838 $163,636 $168,291 $148,348 ======= ======= ======= ======= ======= ======= Ratio of earnings to fixed charges.... 3.83 4.30 4.41 4.93 4.82 4.12 Earnings required for preferred dividends: Preferred stock dividends..... $ 3,708 $ 3,721 $ 3,850 $ 3,510 $ 3,718 $ 4,549 Adjustment to pre-tax basis*........ 2,062 2,273 2,425 2,079 2,185 2,491 _______ _______ _______ _______ _______ _______ $ 5,770 $ 5,994 $ 6,275 $ 5,589 $ 5,903 $ 7,040 _______ _______ _______ _______ _______ _______ Fixed charges plus preferred stock dividend requirements..... $ 44,089 $ 43,748 $ 39,999 $ 38,789 $ 40,803 $ 43,026 ======= ======= ======= ======= ======= ======= Ratio of earnings to fixed charges plus preferred stock dividend requirements..... 3.33 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 9-MOS DEC-31-1996 JAN-01-1997 SEP-30-1997 PER-BOOK 1,480,197 116,008 188,443 127,837 28,295 1,940,780 356,812 0 313,025 669,837 0 80,000 570,433 0 0 36,358 0 0 0 0 584,152 1,940,780 649,435 34,898 522,023 556,921 92,514 (488) 92,026 27,596 64,430 2,782 61,648 53,830 0 64,662 1.81 1.81 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 9-MOS DEC-31-1996 JAN-01-1997 SEP-30-1997 PER-BOOK 1,480,197 0 187,168 127,837 27,167 1,822,369 121,283 0 473,237 594,520 0 80,000 570,433 0 0 33,558 0 0 0 0 543,858 1,822,369 640,609 32,804 520,641 553,445 87,164 (251) 86,913 27,961 58,952 2,782 56,170 43,300 0 59,791 0 0 INCLUDES INCOME TAX EXPENSE. INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES.
-----END PRIVACY-ENHANCED MESSAGE-----