-----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, QXrGfF7JeW+mKA450+sJtdm60WLqER6bW382Q4tDKlVI0eJNm504RUaKysg5ksLw FSBzkj3/a03ZgsrKbCvKKQ== 0000051720-95-000022.txt : 19951119 0000051720-95-000022.hdr.sgml : 19951119 ACCESSION NUMBER: 0000051720-95-000022 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951114 SROS: CSX SROS: NYSE SROS: PSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE POWER CO CENTRAL INDEX KEY: 0000051720 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [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: 95591968 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, 1995 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, 1995 Common Stock Par Value $3.50 Per Share 9,564,287 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 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 1995 1994 (In Thousands) OPERATING REVENUES: Electric $ 82,159 $ 75,502 Gas 4,181 4,306 86,340 79,808 OPERATING EXPENSES: Operation: Fuel for electric generation 15,735 16,575 Power purchased 16,447 16,884 Cost of gas sold 3,789 4,597 Other operating expenses 12,753 12,839 Maintenance 3,587 4,264 Depreciation 7,586 6,858 Income taxes: Federal currently payable 4,755 911 State currently payable 1,428 278 Deferred taxes-net 2,072 2,518 Investment tax credit amortization (257) (257) Property and other taxes 3,162 3,734 Total operating expenses 71,057 69,201 OPERATING INCOME 15,283 10,607 OTHER INCOME AND DEDUCTIONS 641 771 INCOME BEFORE INTEREST CHARGES 15,924 11,378 INTEREST CHARGES: Long-term debt 3,649 3,906 Other interest charges 631 699 Allowance for borrowed funds used during construction (87) (94) Total interest charges 4,193 4,511 NET INCOME 11,731 6,867 PREFERRED AND PREFERENCE STOCK DIVIDENDS 615 614 NET INCOME AVAILABLE FOR COMMON STOCK $ 11,116 $ 6,253 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,564 9,505 EARNINGS PER COMMON SHARE OUTSTANDING $ 1.16 $ .65 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 1995 1994 (In Thousands) OPERATING REVENUES: Electric $211,046 $201,788 Gas 30,112 35,458 241,158 237,246 OPERATING EXPENSES: Operation: Fuel for electric generation 48,353 48,388 Power purchased 43,610 44,628 Cost of gas sold 17,620 23,226 Other operating expenses 31,727 37,636 Maintenance 10,830 12,874 Depreciation 22,072 20,522 Income taxes: Federal currently payable 9,794 3,145 State currently payable 2,940 950 Deferred taxes-net 5,098 5,291 Investment tax credit amortization (771) (771) Property and other taxes 11,907 12,239 Total operating expenses 203,180 208,128 OPERATING INCOME 37,978 29,118 OTHER INCOME AND DEDUCTIONS (2,037) 1,089 INCOME BEFORE INTEREST CHARGES 35,941 30,207 INTEREST CHARGES: Long-term debt 11,163 11,592 Other interest charges 1,712 1,329 Allowance for borrowed funds used during construction (287) (187) Total interest charges 12,588 12,734 NET INCOME 23,353 17,473 PREFERRED AND PREFERENCE STOCK DIVIDENDS 1,843 1,840 NET INCOME AVAILABLE FOR COMMON STOCK $ 21,510 $ 15,633 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,564 9,452 EARNINGS PER COMMON SHARE OUTSTANDING $ 2.24 $ 1.65 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 1995 1994 (In Thousands) UTILITY PLANT (at original cost) $895,707 $879,897 Less accumulated provision for depreciation 397,664 379,216 Utility plant - net 498,043 500,681 OTHER PROPERTY AND INVESTMENTS 487 522 CURRENT ASSETS: Cash and cash equivalents 1,561 1,537 Accounts receivable less reserve 26,001 22,350 Inventories - at average cost: Fuel 22,140 24,220 Materials and supplies 5,624 5,208 Prepaid income tax 6,104 6,197 Other prepayments and current assets 6,188 5,954 Total current assets 67,618 65,466 DEFERRED DEBITS: Regulatory assets for deferred income taxes 28,119 27,469 Deferred energy efficiency costs 21,949 16,961 Other 22,048 17,746 Total deferred debits 72,116 62,176 TOTAL $638,264 $628,845 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 1995 1994 (In Thousands) CAPITALIZATION: Common stock, par value $3.50 per share; Authorized - 30,000,000 shares; issued and outstanding - 9,564,287 in 1995 and 9,564,287 in 1994 $ 33,475 $ 33,475 Additional paid-in capital 103,108 103,137 Retained earnings 62,483 55,893 Total common equity 199,066 192,505 Preferred stock, par value $50 per share 34,828 34,752 Total stockholders' equity 233,894 227,257 Long-term debt 189,087 189,032 Total capitalization 422,981 416,289 CURRENT LIABILITIES: Commercial paper payable 41,200 35,600 Long-term debt maturing within one year 0 14,000 Accounts payable 11,742 14,133 Payroll, interest and taxes accrued 21,789 19,342 Other 12,430 12,147 Total current liabilities 87,161 95,222 DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES: Accumulated deferred income taxes 93,830 88,176 Accumulated deferred investment tax credits 18,298 19,069 Other 15,994 10,089 Total deferred credits and other non-current liabilities 128,122 117,334 TOTAL $638,264 $628,845 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 1995 1994 (In Thousands) RECONCILIATION OF NET INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES: Net income $23,353 $17,473 Adjustment for non-cash items: Depreciation 22,072 20,522 Deferred income taxes 5,005 4,382 Investment tax credit amortization (771) (771) Allowance for equity funds used during construction 0 (144) Deferred pension cost 0 23 Changes in assets and liabilities: Accounts receivable - net (3,651) 1,378 Fuel 2,089 553 Materials and supplies (416) (1,243) Accounts payable and other current liabilities (2,076) 4,288 Accrued and prepaid taxes 950 (4,810) Interest accrued 1,386 1,401 Other prepayments and current assets (235) (2,123) Rate refund payable 0 3,329 Deferred energy conservation costs (4,988) (5,657) Regulatory assets 761 (956) Other operating activities 2,473 3,485 Cash flows from operating activities 45,952 41,130 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (20,361) (29,104) Allowance for borrowed funds used during construction (287) (187) Other 443 (918) Cash flows from investing activities (20,205) (30,209) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 0 3,934 Issuance of long-term debt 0 13,250 Retirement of long-term debt (14,008) (13,259) Debt and stock discount and financing expenses 0 (355) Dividends on common, preferred and preference stock (17,315) (16,539) Sale of commercial paper - net 5,600 900 Cash flows from financing activities (25,723) (12,069) NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $ 24 $(1,148) CASH AND CASH EQUIVALENTS: Beginning of period $ 1,537 $ 3,083 End of period $ 1,561 $ 1,935 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $11,012 $10,885 Income taxes $ 7,622 $ 7,578 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY Summarized Financial Information The September 30, 1995 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 1994 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, 1994. 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. 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, 1995 AND 1994 EARNINGS PER SHARE for the third quarter of 1995 were $1.16 compared to $0.65 for the third quarter of 1994. Net income for the third quarter of 1995 was $11.7 million, compared to $6.9 million for the third quarter of 1994. Major contributors to the improved earnings were increased electric sales to air conditioning customers and an interim Iowa electric rate increase. The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the third quarter of 1995 was $50.0 million compared to $42.0 million for the third quarter of 1994. The increase in the electric margin resulted mainly from higher residential, commercial and industrial sales. In addition, the Iowa electric rate increase which became effective June 29, 1995, contributed $2.2 million. Three Months Ended September 30 ELECTRIC SALES (Mwh) 1995 1994 % Change Residential 334,129 269,080 24.2 Commercial 201,907 187,554 7.7 Industrial 855,054 810,558 5.5 Interchange 4,149 166,241 N/A Sales for Resale 69,959 65,962 6.1 Other 14,286 14,291 (0.0) Total Electric Sales 1,479,484 1,513,686 (2.3) The increase in residential electric sales was primarily due to warmer temperatures during the air conditioning season. The increased sales to commercial, industrial and resale customers were attributable to more air conditioning load and the strength of the economy. Interchange sales were unusually high in 1994 due to energy sales to other utilities. Three Months Ended September 30 ELECTRIC REVENUES (000's) 1995 1994 % Change Residential $26,143 $21,203 23.3 Commercial 14,619 13,709 6.6 Industrial 35,558 33,995 4.6 Interchange 131 2,033 N/A Sales for Resale 3,166 2,880 9.9 Other 2,542 1,682 51.1 Total Electric Revenues $82,159 $75,502 8.8 Residential electric revenues for the third quarter of 1995 increased $4.9 million, or 23.3%, compared to the third quarter of 1994. The largest share of the residential electric revenue increase was due to additional air conditioning load. Other factors in the increased residential electric revenue were $0.8 million of interim Iowa electric rate increase, Iowa demand side management cost recovery effective October 1994, and changes in the level of the fuel adjustment clause. The increase in commercial and industrial revenues was primarily attributable to the increased sales discussed above. Interchange revenues in 1994 were unusually high due to non-recurring energy sales. During the third quarter of 1994, the company collected Iowa electric revenue at interim rates which were higher than the June 1995 Iowa Utilities Board order. Accordingly, other electric revenue for the third quarter of 1994 reflects a $0.8 million charge for the estimated Iowa electric rate overcollection, for which actual refund was made in the fourth quarter of 1994. Third quarter 1994 revenues by customer class are affected by approximately the same amount. The GAS MARGIN (revenue less purchased gas) for the third quarter of 1995 was $0.4 million compared to a loss of $0.3 million during the third quarter of 1994. Among the factors contributing to the improved gas margin were the interim Minnesota gas rate increase effective June 30, 1995, reduced purchased gas adjustment reconciliation expense, capacity release credits, recovery of demand side management costs, and sales to one of the company's generating stations. Increased 1995 gas line losses partially offset the above factors. The COST OF GAS SOLD decreased $0.8 million, or 17.6%, during the third quarter of 1995 compared to the same period of 1994. The decrease was primarily a result of a 25.3% lower unit cost. Three Months Ended September 30 GAS DELIVERIES (MMcf) 1995 1994 % Change Residential 283 285 (0.7) Commercial 180 182 (1.1) Industrial 142 258 (45.0) Other 88 6 N/A Total Gas Sales 693 731 (5.2) Gas Transportation 6,372 5,987 6.4 Total Gas Deliveries 7,065 6,718 5.2 Three Months Ended September 30 GAS REVENUES $ (000's) 1995 1994 % Change Residential $ 1,961 $ 2,057 (4.7) Commercial 787 821 (4.1) Industrial 464 821 (43.5) Other 321 33 N/A Total Gas Sales Revenues 3,533 3,732 (5.3) Gas Transportation 648 574 12.9 Total Gas Revenues $ 4,181 $ 4,306 (2.9) Although kilowatt-hours generated by the company increased 5.6%, FUEL FOR ELECTRIC GENERATION decreased $0.8 million, or 5.1%, during the third quarter of 1995 compared to the same period in 1994. The cost per ton of coal, which is the fuel source for approximately 93% of the company's generation, was down 1.5%. The cost per Mcf of natural gas, representing approximately 7% of generation, decreased 13.6%. The quantity of Kwh's purchased decreased 12.0% while PURCHASED POWER EXPENSE decreased $0.4 million, or 2.6%, during the third quarter of 1995 compared to 1994. The third quarter of 1994 unit price was low due to the non-recurring interchange transactions. MAINTENANCE EXPENSE decreased $0.7 million, or 15.9%, during the third quarter of 1995 compared to the same period in 1994. This was primarily due to increased emphasis on construction projects rather than maintenance. In addition, the third quarter of 1994 included approximately $0.2 million of power plant furnace and boiler maintenance. DEPRECIATION EXPENSE increased $0.7 million, or 10.6%, for the third quarter of 1995 compared to the third quarter of 1994. This was primarily due to increased investment in utility plant and increased depreciation rates approved in both the fourth quarter of 1994 and the third quarter of 1995. OTHER INTEREST EXPENSE decreased $68,000 for the third quarter of 1995 compared to the same period of 1994. The third quarter of 1994 included interest for IRS audit settlements and interest on the Iowa electric rate refund. Interest on commercial paper was $591,000 for the third quarter of 1995 compared to $186,000 for the third quarter of 1994. The average outstanding balance of short-term borrowings during the third quarter of 1995 was $39.0 million compared to $27.8 million during the third quarter of 1994. Interest rates for the third quarter of 1995 averaged 5.9% compared to 4.6% in 1994. AVERAGE TEMPORARY INVESTMENTS during the third quarter of 1995 were $1.1 million compared to $2.2 million in 1994. The average interest rate was 5.6% in the third quarter of 1995 compared to 4.3% in 1994. FUEL INVENTORIES were $22.1 million at September 30, 1995, compared to $18.9 million at June 30, 1995, and $22.7 million at September 30, 1994. The increase from the last quarter was primarily attributable to normal seasonal build-up of coal inventory during the summer shipping season. CONSTRUCTION EXPENDITURES during the third quarter of 1995 were $7.8 million compared to $11.3 million in 1994. There were no major individual construction projects during the third quarter of 1995. Construction work in progress as of September 30, 1995 totaled $5.5 million compared to $12.2 million at September 30, 1994. The 1995 construction program is currently estimated to be $25 million. COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1995 AND 1994 EARNINGS PER SHARE for the nine months ended September 30, 1995 were $2.24 compared to $1.65 for the corresponding period in 1994. The increase in earnings was mainly due to the higher third quarter 1995 earnings as discussed above. The year-to-date ELECTRIC MARGIN increased to $119.1 million in 1995 from $108.8 million in 1994. The major portion of the increased margin is due to increased sales to residential, commercial, industrial and resale customers during the third quarter of 1995. The decreased interchange sales had minimal impact on the electric margin, as the profit applicable to the Iowa jurisdiction is flowed back to customers through the fuel adjustment clause. Total ELECTRIC SALES during the nine months ended September 30, 1995 were approximately the same as a year ago. The increase in sales to residential, commercial and industrial customers was 7.4%, 1.1% and 5.5%, respectively, mainly due to increased residential air conditioning load during the third quarter of 1995. Interchange sales decreased 89.7% from 1994 due to unusually high non-recurring energy sales in 1994. ELECTRIC REVENUES increased 4.6% during the nine months ended September 30, 1995 compared to the same period in 1994 mainly due to air conditioning load, the interim Iowa electric rate increase and recovery of demand side management costs. GAS DELIVERIES increased 3.2% during the nine months ended September 30, 1995 compared to the same period in 1994. Residential and commercial sales decreased 6.5% and 5.7%, respectively, primarily due to warmer weather during the first quarter of 1995. While industrial sales were down, the 8.1% increase in transportation deliveries resulted in an overall increase of 5.3% in industrial sales and transportation compared to 1994. The 15.1% reduction in GAS REVENUES during the nine months ended September 30, 1995 compared to the same period in 1994 was primarily due to decreased sales and a $0.8 million pipeline rate refund which was passed through to customers in June 1995. The year-to-date GAS MARGIN was $12.5 million in 1995 compared to $12.2 million in 1994. The increase resulted mainly from those factors affecting the third quarter 1995 gas margin as discussed above. OTHER ITEMS On November 11, 1995, Interstate Power Company, IES Industries Inc., and WPL Holdings, Inc. announced the signing of a merger agreement providing for the combination of the three companies. The resulting holding company will be known as Interstate Energy Corporation. The transaction will be structured as a tax-free, stock-for-stock merger. In the merger, holders of Interstate Power Company common stock will receive 1.11 shares of WPL Holdings common stock for each share of Interstate Power Company stock they own on the effective date of the merger. Holders of IES Industries Inc. common stock will receive .98 shares of WPL Holdings common stock for each share of IES Industries Inc. common stock they own and owners of WPL Holdings common stock will retain the number of shares of common stock they own on the effective date. After the combination, WPL Holdings will change its name to Interstate Energy Corporation. Wisconsin Power and Light Company, IES Utilities, and Interstate Power Company will continue to operate under those names as the principal subsidiaries of Interstate Energy Corporation. The merger is subject to approval by the shareholders of all three companies, the utility commissions in Illinois, Iowa, Minnesota and Wisconsin, the Securities and Exchange Commission, the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission. The merger is also subject to the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. It is a condition of closing that the parties receive an opinion of counsel to the effect that the exchange of stock qualifies as a tax-free transaction, and obtain appropriate accountant assurances that the transaction will be accounted for as a pooling of interests. Proxy materials will be filed with the Securities and Exchange Commission in the near future. Based on optimal times for the required regulatory approvals, the merger is expected to be completed by early 1997. Interstate Energy Corporation will hold approximately $4 billion in assets and have operating revenues of nearly $2 billion. Interstate Energy Corporation will rank 34th in the nation among utility holding companies, based on 1994 revenues. In 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. As of June 30, 1995, the company has deferred approximately $1.8 million of SFAS 106 costs applicable to its Minnesota jurisdictions pending settlement of the current rate cases. In March 1995 the company filed an application with the Iowa Utilities Board for an increase in electric rates in an annual amount of $13.1 million. Increased interim rates in an annual amount of $7.1 million were placed in effect in June 1995, subject to refund upon final determination. A tentative settlement (which must be approved by the Board) has been reached with other parties to the rate case. The tentative settlement would provide for an increase of $6.6 million per year, and would require the company to refund approximately $0.2 million of revenues collected subject to refund. Pending Board action, no provision for a refund has been recorded. In May 1995 the company filed an application with the Minnesota Public Utilities Commission for an increase in gas rates in an annual amount of $2.4 million. Increased interim rates in an annual amount of $1.5 million were placed in effect in June 1995, subject to refund upon final determination. A decision on the final rate increase is expected by March 1996. In June 1995 the company filed an application with the Minnesota Public Utilities Commission for an increase in electric rates in an annual amount of $4.6 million. The company did not request an interim rate increase. A decision on the final rate increase is anticipated by the second quarter of 1996. In August 1995 the company filed an application with the Iowa Utilities Board for an increase in gas rates in an annual amount of $2.2 million. Increased interim rates in an annual amount of $1.3 million were placed in effect in October 1995, subject to refund upon final determination. A decision on the final rate increase is expected by June 1996. The company's liability for coal tar waste at former manufactured gas plant sites was discussed in the 1994 Annual Report to Stockholders. The status through September 1995 of the former manufactured gas plant sites remains substantially unchanged, except that: 1. In April 1995 the company received a deferral accounting order from the Minnesota Public Utilities Commission. The accounting order allows the company to seek recovery of certain investigation and remediation costs for the Albert Lea and Rochester sites. An additional request for deferred accounting for the three other sites in Minnesota was filed in June 1995. 2. In 1994, the company filed a lawsuit in Cook County, Illinois, against certain of its insurers to recover the costs of investigating and remediating, as necessary, the sites of former manufactured gas plants. Subsequently, in an April 1995 ruling, the Court dismissed the action on grounds of forum non conveniens. The company refiled the case in Iowa on June 23, 1995. 3. An agreement has been reached with Kansas City Power and Light Company regarding the responsibility for remediation of the Mason City site. Interstate Power Company will dismiss the suit and receive $1.0 million from Kansas City Power and Light Company for expenses incurred in the past. Kansas City Power and Light Company will pay for all future soil remediation costs up to a $2.6 million level. If those costs should exceed that level, the next $1.0 million will be shared 2/3 Kansas City Power and Light Company and 1/3 Interstate Power Company. If soil remediation costs should exceed the $3.6 million level, Interstate Power Company is 100% responsible. Current estimates for soil remediation range from $2.3 to $3.3 million. If ground water remediation is required, the cost will be split 50-50 between Kansas City Power and Light Company and Interstate Power Company. Actual remediation is expected to begin in 1996 and the company is assuming responsibility for the clean-up process. INTERSTATE POWER COMPANY PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the 1994 Form 10-K Item 3 for certain pending legal proceedings. 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 November 11, 1995, Interstate Power Company, IES Industries Inc., and WPL Holdings, Inc. announced the signing of a merger agreement providing for the combination of the three companies. The resulting holding company will be known as Interstate Energy Corporation. The transaction will be structured as a tax-free, stock-for-stock merger. In the merger, holders of Interstate Power Company common stock will receive 1.11 shares of WPL Holdings common stock for each share of Interstate Power Company stock they own on the effective date of the merger. Holders of IES Industries Inc. common stock will receive .98 shares of WPL Holdings common stock for each share of IES Industries Inc. common stock they own and owners of WPL Holdings common stock will retain the number of shares of common stock they own on the effective date. After the combination, WPL Holdings will change its name to Interstate Energy Corporation. Wisconsin Power and Light Company, IES Utilities, and Interstate Power Company will continue to operate under those names as the principal subsidiaries of Interstate Energy Corporation. The merger is subject to approval by the shareholders of all three companies, the utility commissions in Illinois, Iowa, Minnesota and Wisconsin, the Securities and Exchange Commission, the Federal Energy Regulatory Commission, and the Nuclear Regulatory Commission. The merger is also subject to the expiration of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act. It is a condition of closing that the parties receive an opinion of counsel to the effect that the exchange of stock qualifies as a tax-free transaction, and obtain appropriate accountant assurances that the transaction will be accounted for as a pooling of interests. Proxy materials will be filed with the Securities and Exchange Commission in the near future. Based on optimal times for the required regulatory approvals, the merger is expected to be completed by early 1997. Interstate Energy Corporation will hold approximately $4 billion in assets and have operating revenues of nearly $2 billion. Interstate Energy Corporation will rank 34th in the nation among utility holding companies, based on 1994 revenues. ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits filed as a part of this report: EX-27 Financial Data Schedule (required for electronic filing only in accordance with Item 601 (c) (1) of Regulation S-K). (b) No reports were filed on Form 8-K. SIGNATURE 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, 1995 /s/ W. C. Troy W. C. Troy, Controller (Duly Authorized Officer and Principal Accounting Officer) EX-27 2
UT 9-MOS DEC-31-1994 SEP-30-1995 PER-BOOK 498,043 487 67,618 72,116 0 638,264 33,475 103,108 62,483 199,066 24,009 10,819 189,087 0 0 41,200 0 0 107 16 173,960 638,264 241,158 17,061 186,119 203,180 37,978 (2,037) 35,941 12,588 23,353 1,843 21,510 14,920 14,691 (212) $2.24 $2.24
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