-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, l5acx74zqlJEcy3Di6y1nJGJIrETinOKZimnvtORRsie22LnOhzk7XOQrEKrixnC ikDNFnnFSAPS3NkAIXdIUw== 0000051720-94-000025.txt : 19941116 0000051720-94-000025.hdr.sgml : 19941116 ACCESSION NUMBER: 0000051720-94-000025 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: MSE SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE POWER CO CENTRAL INDEX KEY: 0000051720 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 420329500 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03632 FILM NUMBER: 94559880 BUSINESS ADDRESS: STREET 1: 1000 MAIN ST STREET 2: PO BOX 769 CITY: DUBUQUE STATE: IA ZIP: 52004-0769 BUSINESS PHONE: 3195825421 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 1994 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission File Number 1-3632 INTERSTATE POWER COMPANY (Exact name of registrant as specified in its charter) DELAWARE 42-0329500 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 1000 Main Street, P.O. Box 769, Dubuque, Iowa 52004-0769 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code 319-582-5421 Indicate by check mark whether the registrant (1) has 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 registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No Indicate the number of shares outstanding of each of the issuer's classes of common stock. Shares Outstanding November 1, 1994 Common Stock Par Value $3.50 Per Share 9,558,219 Shares INTERSTATE POWER COMPANY Form 10-Q Table of Contents Part I - Financial Information Item 1. Statements of Income - Three Months Ended 1 Statements of Income - Nine Months Ended 2 Balance Sheets - Assets 3 Balance Sheets - Capitalization and Liabilities 4 Statements of Cash Flows 5 Summarized Financial Information 6 Notes to Financial Statements 6 Item 2. Management's Discussion and Analysis 7 Part II - Other Information Item 1. Legal Proceedings 13 Item 2. Changes in Securities 13 Item 3. Defaults Upon Senior Securities 13 Item 4. Submission of Matters to a Vote of Security Holders 13 Item 5. Other Information 13 Item 6. Exhibits and Reports on Form 8-K 14 INTERSTATE POWER COMPANY STATEMENTS OF INCOME Three Months Ended September 30 1994 1993 (In Thousands) OPERATING REVENUES: Electric $ 75,502 $ 70,400 Gas 4,306 6,848 79,808 77,248 OPERATING EXPENSES: Operation: Fuel for electric generation 16,575 16,240 Power purchased 16,884 15,514 Cost of gas sold 4,597 7,910 Other operating expenses 12,839 13,814 Maintenance 4,264 3,825 Depreciation 6,858 6,679 Income taxes: Federal currently payable 911 1,505 State currently payable 278 423 Deferred taxes-net 2,518 354 Investment tax credit amortization (257) (257) Property and other taxes 3,734 4,152 Total operating expenses 69,201 70,159 OPERATING INCOME 10,607 7,089 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 57 20 Interest income 310 62 Miscellaneous 903 507 Income taxes (499) (237) Total other income and deductions 771 352 INCOME BEFORE INTEREST CHARGES 11,378 7,441 INTEREST CHARGES: Long-term debt 3,906 3,845 Other interest charges 699 114 Allowance for borrowed funds used during construction (94) (37) Total interest charges 4,511 3,922 NET INCOME 6,867 3,519 PREFERRED AND PREFERENCE STOCK DIVIDENDS 614 612 NET INCOME AVAILABLE FOR COMMON STOCK $ 6,253 $ 2,907 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,505 9,311 EARNINGS PER COMMON SHARE OUTSTANDING $ .65 $ .31 DIVIDENDS PAID PER COMMON SHARE $ .52 $ .52 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY STATEMENTS OF INCOME Nine Months Ended September 30 1994 1993 (In Thousands) OPERATING REVENUES: Electric $201,788 $192,931 Gas 35,458 39,413 237,246 232,344 OPERATING EXPENSES: Operation: Fuel for electric generation 48,388 46,400 Power purchased 44,628 41,520 Cost of gas sold 23,226 27,560 Other operating expenses 37,636 37,948 Maintenance 12,874 12,439 Depreciation 20,522 19,990 Income taxes: Federal currently payable 3,145 4,207 State currently payable 950 1,265 Deferred taxes-net 5,291 2,757 Investment tax credit amortization (771) (771) Property and other taxes 12,239 13,192 Total operating expenses 208,128 206,507 OPERATING INCOME 29,118 25,837 OTHER INCOME AND DEDUCTIONS: Allowance for equity funds used during construction 144 43 Interest income 412 514 Miscellaneous 1,192 503 Income taxes (659) (418) Total other income and deductions 1,089 642 INCOME BEFORE INTEREST CHARGES 30,207 26,479 INTEREST CHARGES: Long-term debt 11,592 12,321 Other interest charges 1,329 355 Allowance for borrowed funds used during construction (187) (85) Total interest charges 12,734 12,591 NET INCOME 17,473 13,888 PREFERRED AND PREFERENCE STOCK DIVIDENDS 1,840 2,248 NET INCOME AVAILABLE FOR COMMON STOCK $ 15,633 $ 11,640 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,452 9,302 EARNINGS PER COMMON SHARE OUTSTANDING $ 1.65 $ 1.25 DIVIDENDS PAID PER COMMON SHARE $ 1.56 $ 1.56 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY BALANCE SHEETS ASSETS Sept. 30 Dec. 31 1994 1993 (In Thousands) UTILITY PLANT (at original cost) $872,073 $846,294 Less accumulated provision for depreciation 374,934 358,330 Utility plant - net 497,139 487,964 OTHER PROPERTY AND INVESTMENTS 528 825 CURRENT ASSETS: Cash and cash equivalents 1,935 3,083 Accounts receivable less reserve 24,682 26,060 Inventories - at average cost: Fuel 22,677 22,985 Materials and supplies 5,963 4,720 Prepaid income tax 7,085 7,994 Other prepayments and current assets 7,420 5,298 Total current assets 69,762 70,140 DEFERRED DEBITS: Regulatory assets for deferred income taxes 27,676 27,026 Deferred energy efficiency costs 15,323 9,666 Other 8,579 8,740 Total deferred debits 51,578 45,432 TOTAL $619,007 $604,361 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY BALANCE SHEETS CAPITALIZATION AND LIABILITIES Sept. 30 Dec. 31 1994 1993 (In Thousands) CAPITALIZATION: Common stock, par value $3.50 per share; Authorized - 30,000,000 shares; issued and outstanding - 9,550,165 in 1994 and 9,389,841 in 1993 $ 33,425 $ 32,865 Additional paid-in capital 102,892 99,547 Retained earnings 58,287 57,397 Total common equity 194,604 189,809 Preferred stock, par value $50 per share 34,727 34,656 Total stockholders' equity 229,331 224,465 Long-term debt 189,240 203,170 Total capitalization 418,571 427,635 CURRENT LIABILITIES: Commercial paper payable 21,000 20,100 Long-term debt maturing within one year 14,000 0 Accounts payable 16,867 11,733 Rate refund payable 3,329 0 Payroll, interest and taxes accrued 17,994 21,857 Other 9,757 10,933 Total current liabilities 82,947 64,623 DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES: Accumulated deferred income taxes 87,470 82,438 Accumulated deferred investment tax credits 19,326 20,097 Other 10,693 9,568 Total deferred credits and other non-current liabilities 117,489 112,103 TOTAL $619,007 $604,361 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY STATEMENTS OF CASH FLOWS Nine Months Ended Sept. 30 1994 1993 (In Thousands) RECONCILIATION OF NET INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES: Net income $17,473 $13,888 Adjustment for non-cash items: Depreciation 20,522 19,990 Deferred income taxes 4,382 3,999 Investment tax credit amortization (771) (771) Allowance for equity funds used during construction (144) (43) Deferred pension cost 23 0 Changes in assets and liabilities: Accounts receivable - net 1,378 539 Fuel 553 2,109 Materials and supplies (1,243) (416) Accounts payable and other current liabilities 4,288 6,802 Accrued and prepaid taxes (4,810) (4,627) Interest accrued 1,401 631 Other prepayments and current assets (2,123) (161) Rate refund payable 3,329 (4,064) Deferred energy conservation costs (5,657) (3,804) Other operating activities 2,529 1,735 Cash flows from operating activities 41,130 35,807 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (29,104) (22,947) Allowance for borrowed funds used during construction (187) (85) Other (918) (95) Cash flows from investing activities (30,209) (23,127) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 3,934 1,471 Issuance of long-term debt 13,250 94,000 Retirement of long-term debt (13,259) (88,556) Issuance of preferred stock 0 27,250 Redemption of preferred and preference stock 0 (25,474) Debt and stock discount and financing expenses (355) (8,716) Dividends on common, preferred and preference stock (16,539) (16,868) Sale of commercial paper - net 900 3,950 Other 0 (15) Cash flows from financing activities (12,069) (12,958) NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $(1,148) $ (278) CASH AND CASH EQUIVALENTS: Beginning of period $ 3,083 $ 2,306 End of period $ 1,935 $ 2,028 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $10,885 $11,922 Income taxes $ 7,578 $ 6,783 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY Summarized Financial Information The September 30, 1994 financial statements included herein have been prepared by the company, without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. The accounting policies followed by the company are set forth in Note 1 to the company's financial statements in the 1993 Form 10-K. It is suggested that these condensed financial statements be read in conjunction with the financial statements and the notes thereto included in the company's Form 10-K for the year ended December 31, 1993. In the opinion of the company, the financial statements reflect all adjustments, consisting only of normal recurring accruals, necessary to fairly state the results of operations. Notes to Financial Statements In August 1993 the company filed an application with the Iowa Utilities Board for an increase in electric rates in an annual amount of $11.5 million. Increased interim rates in an annual amount of $11.0 million were placed in effect in November 1993, subject to refund. A Board order issued June 3, 1994 allowed an annual increase of $7.4 million. Revenues collected in excess of the Board's ordered level and interest in the amount of $3.1 million plus interest of $0.2 million have been reserved and were refunded in October 1994. In July 1994 the company filed an application with the Federal Energy Regulatory Commission (FERC) for an increase in firm electric wholesale rates in an annual amount of $1.4 million. On August 3, 1994, in accord with a tentative settlement of a wholesale customer complaint, the company withdrew the rate request. The proposed settlement also provides for the company to pay the wholesale customers a cash settlement of $0.3 million, and that the company will not file another firm wholesale rate case with an effective date prior to February 28, 1996. The wholesale customer complaint, which was initially filed in November 1992, alleged that the company had been imprudent by entering into certain long-term coal contracts, a transloading agreement, and a rail transportation agreement and sought recovery of approximately $4 million. The FERC is expected to rule on the proposed settlement in the fourth quarter of 1994. If the FERC approves the tentative settlement, the proposed $0.3 million cash payment will be recorded as an expense. INTERSTATE POWER COMPANY PART I - FINANCIAL INFORMATION Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS The company's results of operations and financial condition are affected by numerous factors, including weather, sales, and the amount of changes in customer rates. The dividend of $2.08 per share annually and $0.52 per quarter has been maintained, however, the Board of Directors will be monitoring future dividends and the current level cannot be assured. COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1994 AND 1993 EARNINGS PER SHARE for the third quarter of 1994 were $0.65 compared to $0.31 for the corresponding period in 1993. The improved third quarter 1994 earnings reflect the Iowa electric rate increase implemented in November 1993 and the full impact of seasonal rates implemented in mid-July 1993. These factors were offset by reduced air conditioning load due to milder temperatures in July and August of 1994. In addition, third quarter 1993 earnings were depressed by a $2.4 million accrual for clean-up expense at the former manufactured gas plant site in Rochester, Minnesota. The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the third quarter of 1994 was $42.0 million compared to $38.6 million for the third quarter of 1993. A $7.4 million Iowa electric rate increase effective in November 1993 and the full impact of seasonal rates contributed to the improved margin. Purchase power expense in 1994 included charges applicable to an additional 10 MW of capacity purchased for the period May through October 1994. Total capacity charges included in purchased power expense for the third quarter of 1994 were $7.6 million compared to $7.3 million in 1993. Three Months Ended September 30 ELECTRIC SALES (Mwh) 1994 1993 % Change Residential 269,080 275,095 (2.2) Commercial 187,554 201,958 (7.1) Large Power & Light 810,558 772,975 4.9 Interchange 166,241 36,274 358.3 Sales for Resale 65,962 62,814 5.0 Other 14,291 15,053 (5.1) Total Electric Sales 1,513,686 1,364,169 11.0 The decline in residential electric sales was primarily due to mild weather during the air conditioning season. The reduction in commercial sales was mainly due to mild temperatures, demand side management/conservation efforts, and the switch from a commercial tariff to a large power & light tariff by approximately 200 customers. Aggregate commercial and large power & light sales increased 2.4%. The increased interchange sales resulted from economy sales to other utilities. Three Months Ended September 30 ELECTRIC REVENUES (000's) 1994 1993 % Change Residential 21,203 20,243 4.7 Commercial 13,709 13,656 0.4 Large Power & Light 33,995 30,513 11.4 Interchange 2,033 898 126.4 Sales for Resale 2,880 2,597 10.9 Other 1,682 2,492 (32.5) Total Electric Sales 75,502 70,399 7.2 The increased electric revenues are primarily attributable to the Iowa electric rate increase, seasonal rates being in effect for the entire quarter, and to increased interchange and large power & light sales. Margins on interchange sales allocable to the Iowa jurisdiction are flowed through the fuel clause adjustment and therefore net income is not affected. The GAS MARGIN (revenue less purchased gas) for the third quarter of 1994 was $(0.3) million compared to $(1.1) million for the third quarter of 1993. The change was primarily attributable to lower purchased gas adjustment overcollection expense. The COST OF GAS SOLD decreased $3.3 million, or 41.9%, during the third quarter of 1994 compared to the same period in 1993 primarily due to a 46.4% decrease in volumes sold. Three Months Ended September 30 GAS DELIVERIES (MMcf) 1994 1993 % Change Residential 285 310 (8.1) Commercial 182 192 (5.2) Industrial 258 301 (14.3) Other 6 560 Total Gas Sales 731 1,363 (46.4) Gas Transportation 5,987 5,872 2.0 Total Gas Deliveries 6,718 7,235 (7.1) Mild temperatures in September of this year resulted in reduced residential and commercial heating sales. However, the major portion of the decrease in total gas deliveries can be attributed to natural gas burned at the company's M. L. Kapp generating station in July and August of 1993 in an effort to conserve coal during the 1993 Mississippi River flooding. Three Months Ended September 30 GAS REVENUES $ (000's) 1994 1993 % Change Residential 2,057 2,477 (17.0) Commercial 821 1,044 (21.4) Industrial 821 1,103 (25.6) Other 33 1,514 Total Gas Sales Revenues 3,732 6,138 (39.2) Gas Transportation 574 711 (19.3) Total Gas Revenues 4,306 6,849 (37.1) The decrease in residential and commercial revenues is primarily a result of decreased sales volumes and a lower purchased gas adjustment clause which reflects a decline in the cost of natural gas purchased by the company. Although industrial retail and transportation deliveries increased slightly, revenues decreased due to a lower purchased gas adjustment clause. "Other" gas revenues for the third quarter of 1993 included approximately $1.4 million of gas used at the company's M. L. Kapp generating station as discussed above. COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1994 AND 1993 EARNINGS PER SHARE for the nine months ended September 30, 1994 were $1.65 compared to $1.25 for the corresponding period in 1993. The increase in earnings was mainly due to the Iowa electric rate increase and the accrual of $3.5 million of environmental clean-up costs in the first and third quarters of 1993. The year-to-date ELECTRIC MARGIN has increased to $108.8 million in 1994 from $105.0 million in 1993 primarily due to the Iowa electric rate increase and increased large power & light sales. ELECTRIC SALES during the nine months ended September 30, 1994 were 7.1% higher than the same period a year ago. The increase was primarily attributable to interchange sales which increased 247.0% due to economy sales to other utilities. Residential sales increased 1.2%, primarily due to cooler winter season weather. The 7.0% reduction in commercial sales was mainly due to the switch by commercial customers to a large power & light tariff as discussed above. Aggregate commercial and large power & light sales increased 3.6%. ELECTRIC REVENUES increased 4.6% during the nine months ended September 30, 1994 compared to the same period of 1993. The increased revenues are a result of the increased sales and the Iowa electric rate increase which was implemented in November 1993. The year-to-date GAS MARGIN has increased to $12.2 million in 1994 from $11.9 million in 1993 mainly as a result of the Iowa gas rate increase implemented in early 1993 and a lower purchased gas adjustment overcollection expense. GAS DELIVERIES decreased 2.0% during the nine months ended September 30, 1994 compared to the same period in 1993. The major portion of the decrease in total gas deliveries is attributable to natural gas burned at the company's M. L. Kapp generating station during the third quarter of 1993. The 1.3% decrease in residential and commercial sales is primarily due to milder temperatures during the second and third quarters of this year. GAS REVENUES decreased $4.0 million, or 10.0%, during the first nine months of 1994 compared to 1993. The decreased revenues relate to the decreased sales discussed above and a lower purchased gas adjustment clause. Also contributing to the decrease in revenues this year were the higher revenues last year resulting from natural gas burned at the company's M. L. Kapp generating station as discussed above. MAINTENANCE EXPENSE increased 11.5%, or $0.4 million during the third quarter of 1994 compared to the same period in 1993. The third quarter 1994 expense included approximately $0.3 million for furnace and boiler maintenance at three of the company's steam generating stations. Maintenance expense for the first nine months of 1994 was $12.9 million compared to $12.4 for the first nine months of 1993. The company anticipates maintenance expense in the fourth quarter of 1994 to exceed fourth quarter 1993 expense. DEPRECIATION EXPENSE - The company is required by the Minnesota Public Utilities Commission to perform a comprehensive depreciation study every five years. Such a study was approved by the Minnesota Commission in October 1994. The revised depreciation rates were ordered to become effective January 1, 1994 and an additional $0.6 million will be recorded in the fourth quarter of 1994 to reflect the new rates for the first nine months of 1994. The additional book depreciation expense will not affect taxable income. Total INCOME TAX EXPENSE for the three months ending September 30, 1994 was $3.9 million, compared to $2.3 million for the same period in 1993. The higher income tax expense was primarily due to higher taxable income. The effective tax rate for the third quarter of 1993 was unusually high due to a Federal income tax rate change from 34% to 35%, retroactive to January 1, 1993. PROPERTY AND OTHER TAXES decreased approximately $0.4 million during the third quarter of 1994 compared to the same period in 1993. The decrease is primarily attributable to lower assessed valuations in the State of Iowa. OTHER INCOME for the third quarter of 1994 included $1,006,000 of energy efficiency carrying costs and curtailment credits compared to $547,000 for the same period in 1993. The increase was primarily due to increased participation by residential customers in an interruptible air-conditioning plan, and an increase in the total amount of deferred energy efficiency costs ($15.3 million at September 30, 1994 compared to $8.5 million at September 30, 1993). INTEREST INCOME for the third quarter of 1994 was $310,000 compared to $62,000 for the same period of 1993. Interest income for the third quarter of 1994 included approximately $220,000 of interest income applicable to an Iowa income tax refund for the period from 1988 through 1991. Approximately $1.3 million of interest income applicable to the Federal income tax refund will be recorded in the fourth quarter of 1994. OTHER INTEREST EXPENSE was $0.7 million for the third quarter of 1994 compared to $0.1 million for the third quarter of 1993. The increase was primarily due to interest on IRS audit settlements and to interest on the Iowa electric rate refund. AVERAGE TEMPORARY INVESTMENTS during the third quarter of 1994 were $2.2 million compared to $3.8 million in 1993. The average interest rate was 4.26% in the third quarter of 1994 compared to 2.98% in 1993. FUEL INVENTORIES were $22.7 million at September 30, 1994 compared to $15.4 million at June 30, 1994, and $18.8 million at September 30, 1993. The increase from the last quarter was primarily attributable to normal seasonal build-up of coal inventory during the summer shipping season. Fuel inventories at September 30, 1993 were unusually low due to the curtailment of deliveries during the 1993 Mississippi River flooding. CONSTRUCTION EXPENDITURES during the third quarter of 1994 totaled $11.3 million compared to $10.1 million in 1993. Major 1994 construction projects include the installation of low nitrogen oxide burners at the company's M. L. Kapp generating station, reconstruction of a transmission line, and a supervisory control and data acquisition system. Construction work in progress as of September 30, 1994 totaled $12.2 million compared to $5.5 million at September 30, 1993. The 1994 construction program is estimated to be $46 million. FIRST MORTGAGE BONDS in the amount of $14.0 million issued in 1965 at a 4 5/8% interest rate will mature on May 1, 1995. This amount is now classified as a current liability. In the first quarter of 1993 the company adopted Statement of Financial Accounting Standards (SFAS) 106, "EMPLOYER'S ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN PENSIONS". Under the provisions of SFAS 106, the estimated future cost of providing postretirement benefits will be accrued during the employees' service periods. The Iowa Utilities Board has allowed the company to recover SFAS 106 costs in its Iowa gas rates effective May 1993 and Iowa electric rates effective October 1993. The company is deferring the SFAS 106 costs in other jurisdictions until rate cases are filed to recover the costs. In July 1994 the company filed an application with the Federal Energy Regulatory Commission (FERC) for an increase in firm electric wholesale rates in an annual amount of $1.4 million. On August 3, 1994, in accord with a tentative settlement of a wholesale customer complaint, the company withdrew the rate request. The proposed settlement also provides for the company to pay the wholesale customers a cash settlement of $0.3 million, and that the company will not file another wholesale rate case with an effective date prior to February 28, 1996. The wholesale customer complaint, which was initially filed in November 1992, alleged that the company had been imprudent by entering into certain long-term coal contracts, a transloading agreement, and a rail transportation agreement and sought recovery of approximately $4 million. The FERC is expected to rule on the proposed settlement in the fourth quarter of 1994. If the FERC approves the tentative settlement, the proposed $0.3 million cash payment will be recorded as an expense. The Iowa Utilities Board (IUB) on May 2, 1994 issued its final order on the company's request to recover deferred energy efficiency costs. The company's cost recovery rates have been approved by the IUB and the rates were placed in effect in October 1994. A total of $6.5 million, covering energy efficiency costs from July 1990 to the end of 1992 and related carrying costs, will be recovered over a four year period. Filings will be made in July 1995 to recover expenses subsequent to 1992. In the first quarter of 1994 the Minnesota Environmental Protection Agency designated the company as a Potentially Responsible Party for former manufactured gas plant sites in New Ulm, Owatonna, and Austin, Minnesota. To-date, no investigative procedures have been undertaken. Investigative procedures are currently underway at sites in Savanna, Illinois and Clinton, Iowa. The results from the tests will not be available to the company until the fourth quarter of 1994. There has been no change during 1994 in the status of the former manufactured gas plant sites in: Mason City, Iowa; Galena, Illinois; and Albert Lea, Minnesota. Remediation is in progress at the Rochester, Minnesota site. In 1993, the company accrued $1.1 million in the first quarter and $2.4 million in the third quarter for additional remediation costs at the Rochester site. During the second quarter of 1994, the company received permission from the Illinois Commerce Commission to recover environmental clean-up expenditures in Illinois from electric and gas customers through a special tariff recovery mechanism. The company did not accrue any additional liability for environmental costs in 1994, as it believes that the aggregate provision of $3.6 million at September 30, 1994 is adequate to cover the remaining investigative costs for sites that have been identified and the estimated remediation costs for those sites at which an investigative study has been completed. Recent legislation requires that the company pay air toxics fees to the State of Iowa. The fee is based on the amount of fuel burned at company-owned power plants. The 1994 payment of $0.4 million will be recorded as an expense in the fourth quarter of 1994. The company established a record peak demand for electricity on June 17, 1994 at 932,081 kilowatts. This surpassed the previous record of 927,366 kilowatts established in August 1993. INTERSTATE POWER COMPANY PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the 1993 Form 10-K Item 3 for certain pending legal proceedings and proceedings known to be contemplated by governmental authorities. Reference is also made to the Management Discussion and Analysis included herein. Other than these items, there are no material pending legal proceedings, or proceedings known to be contemplated by governmental authorities, other than ordinary routine litigation incidental to the business, to which the company is a party or of which any of the company's property is the subject. ITEM 2. CHANGES IN SECURITIES The rights of holders of registered securities have not been materially modified, limited or qualified. ITEM 3. DEFAULTS UPON SENIOR SECURITIES No defaults upon senior securities. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS (a) THE DATE OF THE MEETING AND WHETHER IT WAS AN ANNUAL OR SPECIAL MEETING. (b) IF THE MEETING INVOLVED THE ELECTION OF DIRECTORS, THE NAME OF EACH DIRECTOR ELECTED AT THE MEETING AND THE NAME OF EACH OTHER DIRECTOR WHOSE TERM OF OFFICE AS A DIRECTOR CONTINUED AFTER THE MEETING. (c) A BRIEF DESCRIPTION OF EACH OTHER MATTER VOTED UPON AT THE MEETING AND STATE THE NUMBER OF VOTES CAST FOR, AGAINST OR WITHHELD, AS WELL AS THE NUMBER OF ABSTENTIONS AND BROKER NON-VOTES, AS TO EACH SUCH MATTER, INCLUDING A SEPARATE TABULATION WITH RESPECT TO EACH NOMINEE FOR OFFICE. No submission of matters to a vote of security holders. ITEM 5. OTHER INFORMATION On March 11, 1993, the company filed a shelf registration with the Securities and Exchange Commission for $125 million of First Mortgage Bonds and 745,000 shares of $50 par value Preferred Stock. On May 26, 1993 the company issued $94 million of 7 5/8% Series First Mortgage Bonds due in 2023. The proceeds from the sale of the bonds were used to retire higher cost series bonds due in 1999, 2001, 2002 and 2008. Also, on May 26, 1993 the company issued 545,000 shares of 6.40% Preferred Stock. The proceeds from the issuance of the stock were used to redeem higher cost series Preferred and Preference Stock. INTERSTATE POWER COMPANY PART II - OTHER INFORMATION (Cont'd) Below is set forth the ratio of earnings to fixed charges for each of the years in the period 1989 through 1993 and for the 12 months ended September 30, 1994: December 31, 1989 3.69 December 31, 1990 3.84 December 31, 1991 3.77 December 31, 1992 2.69 September 30, 1994 2.95 Below is set forth the ratio of earnings to fixed charges and Preferred Stock dividends for each of the years in the period 1989 through 1993 and for the 12 months ended September 30, 1994: December 31, 1989 3.03 December 31, 1990 3.11 December 31, 1991 3.13 December 31, 1992 2.28 September 30, 1994 2.43 See Exhibit EX-12 for the computation of the above ratios. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits filed as a part of this report: EX-12 Computation of Ratio of Earnings to Fixed Charges and Computation of Ratio of Earnings to Fixed Charges and Preferred Dividends. (b) No reports were filed on Form 8-K. SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. Interstate Power Company (Registrant) Date November 14, 1994 W. C. Troy /s/ W. C. Troy, Controller (Duly Authorized Officer and Principal Accounting Officer) EX-12 2 EX-12 Computation of Ratio of Earnings to Fixed Charges Twelve Months Ended Dec.31 Dec.31 Dec.31 Dec.31 Dec.31 Sep.30 1989 1990 1991 1992 1993 1994 (Thousands of Dollars) Fixed Charges: Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166 15,437 Other interest 2,301 860 1,605 586 596 1,570 Interest component of rents charged to operating expenses 274 262 232 214 183 173 Total Fixed Charges $ 17,626 16,035 16,957 17,092 16,945 17,180 Earnings: Net income $ 28,627 27,026 29,510 19,217 18,987 22,572 Income taxes 18,726 18,527 17,382 9,698 9,464 10,861 Fixed charges 17,626 16,035 16,957 17,092 16,945 17,180 Total Earnings $ 64,979 61,588 63,849 46,007 45,396 50,613 Earnings/Fixed Charges 3.69x 3.84x 3.77x 2.69x 2.68x 2.95x Computation of Ratio of Earnings to Fixed Charges & Preferred Dividends Twelve Months Ended Dec.31 Dec.31 Dec.31 Dec.31 Dec.31 Sep.30 1989 1990 1991 1992 1993 1994 Fixed Charges & (Thousands of Dollars) Preferred Dividends: Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166 15,437 Other interest 2,301 860 1,605 586 596 1,570 Interest component of rents charged to operating expenses 274 262 232 214 183 173 Total Fixed Charges $ 17,626 16,035 16,957 17,092 16,945 17,180 Preferred Dividends (a) 3,851 3,785 3,438 3,104 3,604 3,633 Total Fixed Charges & Preferred Dividends $ 21,477 19,820 20,395 20,196 20,549 20,813 Earnings: Net income $ 28,627 27,026 29,510 19,217 18,987 22,572 Income taxes 18,726 18,527 17,382 9,698 9,464 10,861 Fixed charges 17,626 16,035 16,957 17,092 16,945 17,180 Total Earnings $ 64,979 61,588 63,849 46,007 45,396 50,613 Earnings/Fixed Charges & Preferred Dividends 3.03x 3.11x 3.13x 2.28x 2.21x 2.43x (a) Preferred dividends, as defined (not including preference dividends), have been adjusted by multiplying the requirement by the ratio that income before income taxes bears to net income. Such ratios were as follows: 165% in 1989, 169% in 1990, 159% in 1991, 151% in 1992, 150% in 1993 and 148% in 1994. EX-27 3
UT 9-MOS DEC-31-1993 SEP-30-1994 PER-BOOK 497,139 528 69,762 51,578 0 619,007 33,425 102,892 58,287 194,604 23,908 10,819 189,240 0 0 21,000 14,000 0 118 17 165,301 619,007 237,246 8,615 199,513 208,128 29,118 1,089 30,207 12,734 17,473 1,840 15,633 14,743 15,158 (1,148) $1.65 $1.65
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