-----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, SBG85Jfqi+Oxtcv8UZO2yPsQOWWnj9I0n1x6a/1btJ0BGUkn7xZqy44jTeYWy8nL 9wZ0AwyBAyssN4+EbsCEaw== 0000051720-96-000014.txt : 19960816 0000051720-96-000014.hdr.sgml : 19960816 ACCESSION NUMBER: 0000051720-96-000014 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960630 FILED AS OF DATE: 19960814 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-03632 FILM NUMBER: 96612188 BUSINESS ADDRESS: STREET 1: 1000 MAIN ST STREET 2: PO BOX 769 CITY: DUBUQUE STATE: IA ZIP: 52004-0769 BUSINESS PHONE: 3195825421 MAIL ADDRESS: STREET 1: 1000 MAIN ST STREET 2: PO BOX 769 CITY: DUBUQUE STATE: IA ZIP: 52001 10-Q/A 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q/A (Mark One) (X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 1996 OR ( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from to Commission 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 August 1, 1996 Common Stock Par Value $3.50 Per Share 9,597,400 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 - Six 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 14 Item 2. Changes in Securities 14 Item 3. Defaults Upon Senior Securities 14 Item 4. Submission of Matters to a Vote of Security Holders 14 Item 5. Other Information 14 Item 6. Exhibits and Reports on Form 8-K 15 INTERSTATE POWER COMPANY STATEMENTS OF INCOME (Unaudited) Three Months Ended June 30 1996 1995 (In Thousands) OPERATING REVENUES: Electric $ 67,021 $ 65,085 Gas 9,277 6,969 76,298 72,054 OPERATING EXPENSES: Operation: Fuel for electric generation 14,167 15,778 Power purchased 16,787 15,061 Cost of gas sold 5,112 3,874 Other operating expenses 13,706 6,943 Maintenance 4,740 3,802 Depreciation 7,599 7,261 Income taxes: Federal currently payable 993 2,051 State currently payable 304 620 Deferred taxes-net 1,410 1,801 Investment tax credit amortization (257) (257) Property and other taxes 4,088 4,240 Total operating expenses 68,649 61,174 OPERATING INCOME 7,649 10,880 OTHER INCOME AND DEDUCTIONS 236 (2,836) INCOME BEFORE INTEREST CHARGES 7,885 8,044 INTEREST CHARGES: Long-term debt 3,647 3,703 Other interest charges 369 593 Allowance for borrowed funds used during construction (58) (117) Total interest charges 3,958 4,179 NET INCOME 3,927 3,865 PREFERRED AND PREFERENCE STOCK DIVIDENDS 616 614 NET INCOME AVAILABLE FOR COMMON STOCK $ 3,311 $ 3,251 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,568 9,564 EARNINGS PER COMMON SHARE OUTSTANDING $ .34 $ .34 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 (Unaudited) Six Months Ended June 30 1996 1995 (In Thousands) OPERATING REVENUES: Electric $132,936 $128,887 Gas 30,411 25,932 163,347 154,819 OPERATING EXPENSES: Operation: Fuel for electric generation 28,941 32,618 Power purchased 30,980 27,163 Cost of gas sold 16,585 13,831 Other operating expenses 25,418 18,974 Maintenance 8,433 7,242 Depreciation 15,175 14,487 Income taxes: Federal currently payable 4,954 5,039 State currently payable 1,490 1,513 Deferred taxes-net 2,457 3,026 Investment tax credit amortization (514) (514) Property and other taxes 8,638 8,745 Total operating expenses 142,557 132,124 OPERATING INCOME 20,790 22,695 OTHER INCOME AND DEDUCTIONS 713 (2,677) INCOME BEFORE INTEREST CHARGES 21,503 20,018 INTEREST CHARGES: Long-term debt 7,293 7,514 Other interest charges 844 1,081 Allowance for borrowed funds used during construction (102) (199) Total interest charges 8,035 8,396 NET INCOME 13,468 11,622 PREFERRED AND PREFERENCE STOCK DIVIDENDS 1,231 1,228 NET INCOME AVAILABLE FOR COMMON STOCK $ 12,237 $ 10,394 AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,566 9,564 EARNINGS PER COMMON SHARE OUTSTANDING $ 1.28 $ 1.08 DIVIDENDS PAID PER COMMON SHARE $ 1.04 $ 1.04 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY BALANCE SHEETS ASSETS (Unaudited) June 30 Dec. 31 June 30 1996 1995 1995 (In Thousands) UTILITY PLANT (at original cost) $912,840 $901,212 $889,535 Less accumulated provision for depreciation 416,090 402,685 390,739 Utility plant - net 496,750 498,527 498,796 OTHER PROPERTY AND INVESTMENTS 460 555 546 CURRENT ASSETS: Cash and cash equivalents 1,324 1,537 1,301 Accounts receivable less reserve 27,298 27,797 24,684 Inventories - at average cost: Fuel 13,926 19,332 18,858 Materials and supplies 5,955 5,509 6,101 Prepaid pension cost 5,425 3,870 4,990 Prepaid income tax 6,804 6,690 6,407 Other prepayments and current assets 514 614 1,577 Total current assets 61,246 65,349 63,918 DEFERRED DEBITS: Regulatory assets 11,263 11,889 15,109 Regulatory assets for deferred income taxes 27,993 27,813 27,902 Deferred energy efficiency costs 26,058 23,139 19,674 Unamortized debt expense 5,813 5,915 6,016 Other 883 1,129 1,641 Total deferred debits 72,010 69,885 70,342 TOTAL $630,466 $634,316 $633,602 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY BALANCE SHEETS CAPITALIZATION AND LIABILITIES (Unaudited) June 30 Dec. 31 June 30 1996 1995 1995 (In Thousands) CAPITALIZATION: Common stock, par value $3.50 per share; Authorized - 30,000,000 shares; issued and outstanding - 9,595,028 in 1996 and 9,564,287 in 1995 $ 33,583 $ 33,475 $ 33,475 Additional paid-in capital 103,970 103,145 103,118 Retained earnings 63,440 61,150 56,340 Total common equity 200,993 197,770 192,933 Preferred stock, par value $50 per share 34,909 34,855 34,802 Total stockholders' equity 235,902 232,625 227,735 Long-term debt 171,918 188,880 189,068 Total capitalization 407,820 421,505 416,803 CURRENT LIABILITIES: Commercial paper payable 29,700 39,300 46,750 Long-term debt maturing within one year 17,000 0 0 Accounts payable 15,309 11,868 11,005 Dividends payable - preferred stock 599 599 599 Payrolls accrued 3,153 2,846 2,872 Taxes accrued 15,145 16,758 15,423 Interest accrued 2,824 2,819 2,827 FERC Order 636 transition costs 2,600 3,200 4,100 Other 2,924 4,756 4,550 Total current liabilities 89,254 82,146 88,126 DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES: Accumulated deferred income taxes 98,269 95,518 91,462 Accumulated deferred investment tax credits 17,527 18,041 18,555 Deferred pension cost 4,900 4,900 4,827 Accrued postretirement benefit cost 2,792 2,792 2,945 Environmental clean-up costs 6,834 6,860 8,352 Other 3,070 2,554 2,532 Total deferred credits and other non-current liabilities 133,392 130,665 128,673 TOTAL $630,466 $634,316 $633,602 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY STATEMENTS OF CASH FLOWS (Unaudited) Six Months Ended June 30 1996 1995 (In Thousands) RECONCILIATION OF NET INCOME TO CASH FLOWS FROM OPERATING ACTIVITIES: Net income $13,468 $11,622 Adjustment for non-cash items: Depreciation 15,175 14,487 Deferred income taxes 2,571 2,853 Investment tax credit amortization (514) (514) Allowance for equity funds used during construction (3) (0) Changes in assets and liabilities: Accounts receivable - net 499 (2,335) Fuel 5,412 5,367 Materials and supplies (446) (893) Accounts payable and other current liabilities 1,971 (2,393) Accrued and prepaid taxes (1,726) 1,242 Interest accrued 5 (103) Other prepayments and current assets (1,456) (613) Rate refund payable (256) 0 Deferred energy conservation costs (2,919) (2,713) Regulatory assets 420 63 Other operating activities 1,207 876 Cash flows from operating activities 33,408 26,946 CASH FLOWS FROM INVESTING ACTIVITIES: Additions to utility plant (13,624) (12,642) Allowance for borrowed funds used during construction (102) (199) Other (99) (341) Cash flows from investing activities (13,825) (13,182) CASH FLOWS FROM FINANCING ACTIVITIES: Issuance of common stock 953 0 Retirement of long-term debt (5) (14,006) Dividends on common, preferred and preference stock (11,144) (11,144) Sale of commercial paper - net (9,600) 11,150 Cash flows from financing activities (19,796) (14,000) NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $ (213) $ (236) CASH AND CASH EQUIVALENTS: Beginning of period $ 1,537 $ 1,537 End of period $ 1,324 $ 1,301 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Cash paid during the period for: Interest (net of amount capitalized) $ 7,804 $ 8,460 Income taxes $ 7,911 $ 3,073 The accompanying Notes to Financial Statements are an integral part of these statements. INTERSTATE POWER COMPANY Summarized Financial Information The June 30, 1996 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 1995 Form 10-K/A. 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/A for the year ended December 31, 1995. 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. COMPARISON OF THE QUARTERS ENDED JUNE 30, 1996 AND 1995 EARNINGS PER SHARE were $0.34 for the second quarter of 1996 and the same for the second quarter of 1995. Net income for the second quarter of both years was $3.9 million. The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the second quarter of 1996 was $36.1 million compared to $34.2 million for the second quarter of 1995. The increase in the electric margin resulted mainly from a $6.6 million annual electric rate increase in Iowa which became effective June 29, 1995. Three Months Ended June 30 ELECTRIC SALES (Mwh) 1996 1995 % Change Residential 228,791 227,309 0.7 Commercial 164,200 166,222 (1.2) Industrial 796,341 812,426 (2.0) Interchange 93,899 13,083 N/A Sales for Resale 45,857 58,377 (21.4) Other 13,713 13,938 (1.6) Total Electric Sales 1,342,801 1,291,355 4.0 Residential sales remained almost identical to 1995. We experienced greater than normal sales in May due to electric heating while air conditioning sales during June were down due to cooler than normal temperatures. The higher interchange sales reflected the increased power marketing activities resulting in long-distance transmission of electric power, a trend which is expected to continue. The decrease in sales for resale was due to termination of a contract by a municipal customer effective April 30, 1996. Three Months Ended June 30 ELECTRIC REVENUES (000's) 1996 1995 % Change Residential $17,922 $17,470 2.6 Commercial 11,556 11,395 1.4 Industrial 31,499 31,271 0.7 Interchange 1,334 256 N/A Sales for Resale 2,036 2,467 (17.5) Other 2,674 2,225 20.2 Total Electric Revenues $67,021 $65,084 3.0 The increase in residential, commercial and industrial electric revenues for the second quarter of 1996 compared to 1995 was mainly due to the Iowa electric rate increase effective June 29, 1995. Although interchange revenues increased this quarter, neither the electric margin or net income were affected, as the margin on interchange sales applicable to the Iowa jurisdiction is flowed back to customers through the fuel adjustment clause. The decrease in resale revenues relates to the reduced sales discussed above. The GAS MARGIN (revenue less purchased gas) for the second quarter of 1996 was $4.2 million compared to $3.1 million for the same period in 1995. Factors in the improved gas margin included the increased temperature sensitive sales to residential and commercial customers, and rate increases in the Iowa and Minnesota gas jurisdictions. Interim Iowa gas rates in an annual amount of $1.3 million were implemented October 20, 1995, while interim Minnesota gas rates in an annual amount of $1.5 million were implemented June 30, 1995. The COST OF GAS SOLD increased $1.2 million, or 32.0%, during the second quarter of 1996 compared to the same period in 1995 primarily due to the increase in sales. Also, 1995 gas costs were lower due to a pipeline rate refund in June 1995 and favorable prices resulting from a mild 1994-1995 heating season. Three Months Ended June 30 GAS DELIVERIES (MMcf) 1996 1995 % Change Residential 929 823 12.9 Commercial 525 465 12.9 Industrial 225 209 7.7 Other 11 21 N/A Total Gas Sales 1,690 1,518 11.3 Gas Transportation 6,309 6,437 (2.0) Total Gas Deliveries 7,999 7,955 0.6 The increase in residential and commercial gas sales was primarily a result of more heating sales during the second quarter of 1996. The decrease in transportation was mainly attributable to reduced deliveries to three major industrial customers. Three Months Ended June 30 GAS REVENUES $ (000's) 1996 1995 % Change Residential $ 5,267 $ 4,004 31.5 Commercial 2,461 1,765 39.4 Industrial 853 516 65.3 Other 60 54 N/A Total Gas Sales Revenues 8,641 6,339 36.2 Gas Transportation 636 630 1.0 Total Gas Revenues $ 9,277 $ 6,969 33.1 The increase in revenues was primarily due to increased residential and commercial sales in the second quarter of 1996 compared to 1995 and to rate increases in the Iowa and Minnesota gas jurisdictions. Interim Iowa and Minnesota gas rate increases contributed $251,000 and $231,000, respectively, during the second quarter of 1996. Second quarter of 1995 revenues reflected a $0.8 million pipeline rate refund which was passed through to customers in June 1995. ACCOUNTS RECEIVABLE were $27.3 million at June 30, 1996 compared to $24.7 million at June 30, 1995. The increase was mainly due to increased gas sales which resulted in higher revenues, and the electric and gas rate increases implemented in 1995. FUEL FOR ELECTRIC GENERATION decreased $1.6 million, or 10.2%, during the second quarter of 1996 compared to the same period in 1995. The decrease was due to a 6.7% reduction in kilowatt-hours generated by the company. The cost of gas used for generation decreased $0.8 million compared to last year. Also, the cost of coal decreased $0.5 million compared to last year as a result of the company entering into new coal supply agreements in 1995. PURCHASED POWER EXPENSE increased $1.7 million, or 11.5%, during the second quarter of 1996 compared to 1995. This increase was primarily a result of the 20.4% increase in Kwh's. Capacity charges included in purchased power expense were $7.0 million for both the second quarter of 1996 and the second quarter of 1995. During the second quarter of 1996, the company realized revenues of $68,000 and transmission service expenses of $79,000 under the intra-pool transmission service fee requirement of the MAPP Agreement which was effective May 1, 1995. Second quarter of 1995 revenues and transmission service expenses were $17,000 and $12,000, respectively. OTHER OPERATING EXPENSE, excluding accounting entries complying with the Minnesota Public Utilities Commission (MPUC) deferred accounting order, increased $1.4 million for the second quarter of 1996 compared to 1995. The increase included approximately $0.3 million of air emission fees, $0.3 million in legal fees for manufactured gas plant insurance recovery and $0.2 million of FASB 106 costs incurred for the Minnesota jurisdiction. Reserve for injuries and damages expense increased approximately $0.2 million due to an unusual reduction in the second quarter of 1995 resulting from reevaluation of potential liability. Also contributing to the increase were merger related expenses of approximately $0.1 million in the second quarter of 1996. See ITEM 5, OTHER INFORMATION, for details concerning the merger. The reduction in other operating expense in 1995 and the increase in miscellaneous other deductions in 1995 was primarily attributable to accounting entries made upon receipt of an order issued on April 13, 1995, by the Minnesota Public Utilities Commission (MPUC). The MPUC order granted the company permission to accumulate post-July 11, 1994 environmental clean-up expenditures related to the Albert Lea and Rochester coal tar sites in a deferred debit account. A rate order, issued on February 29, 1996, granted the company permission to seek recovery from gas customers in a rate proceeding. On August 1, 1996, the Office of the Attorney General and the Department of Public Service filed a joint appeal of the Commission's February 29, 1996, order to the Minnesota Court of Appeals. MAINTENANCE EXPENSE increased $0.9 million during the second quarter of 1996 compared to the same period in 1995. The second quarter 1996 expense increase included approximately $0.8 million for scheduled maintenance at three of the companies steam generating stations. In addition, 1995 costs were down as a result of a reduction in contract maintenance. DEPRECIATION EXPENSE increased by $0.3 million or 4.7% for the second quarter of 1996 compared to the second quarter of 1995. This was primarily due to increased investment in utility plant and increased depreciation rates approved by the MPUC in September 1995. On July 9, 1996, the company filed an application with the MPUC for approval to change depreciation rates in 1996. The MPUC is expected to issue an order in the third quarter of 1996. Total INCOME TAX EXPENSE increased approximately $0.4 million during the second quarter of 1996 compared to the second quarter of 1995. The increase was mainly due to higher income before taxes. The company is currently under audit by the IRS for the years 1992, 1993, and 1994. OTHER INCOME, excluding accounting entries complying with the MPUC deferred accounting order, included $0.4 million of energy efficiency carrying costs and curtailment credits compared to $0.3 million for the same period in 1995. The increase was primarily due to an increase in the total amount of demand side management (DSM) costs ($26.1 million at June 30, 1996 compared to $19.7 million at June 30, 1995). The 1990, 1991 and 1992 DSM costs are being recovered over a four year period beginning in October 1994. The company filed an application with the Iowa Utilities Board (IUB) on April 30, 1996 for recovery of the 1993, 1994 and 1995 DSM costs. The application seeks recovery of an annual amount of $7.3 million over a four year period. The IUB is expected to issue a final order by October 31, 1996. OTHER INTEREST EXPENSE decreased approximately $224,000 for the second quarter of 1996 compared to the same period of 1995 primarily due to interest on short-term borrowings. The average outstanding balance of short-term borrowings during the second quarter of 1996 was $24.7 million compared to $35.3 million during the second quarter of 1995. Interest rates for the second quarter of 1996 averaged 5.43% compared to 6.07% in 1995. AVERAGE TEMPORARY INVESTMENTS during the second quarter of 1996 were $1.9 million compared to $1.4 million in 1995. The average interest rate was 5.25% in the second quarter of 1996 compared to 5.85% in 1995. FUEL INVENTORIES were $13.9 million at June 30, 1996, compared to $11.9 million at March 31, 1996 and $18.9 million at June 30, 1995. The increase from the last quarter was primarily attributable to normal seasonal build-up of coal inventory during the summer shipping season. The decrease from last year was mainly a result of a long-range plan to reduce inventory levels at the M.L. Kapp generating station. CONSTRUCTION EXPENDITURES during the second quarter of 1996 totaled $8.9 million compared to $7.8 million in 1995. Major projects included the installation of a substation transformer and breaker, construction of a 69 KV switch station, fan rotor replacement at a generating station, and relocation and rebuilding of a 69 KV transmission line. Construction work in progress as of June 30, 1996 totaled $6.3 million compared to $5.9 million at June 30, 1995. The 1996 and 1997 construction programs are estimated to be $32 million and $36 million, respectively. COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995 EARNINGS PER SHARE for the six months ended June 30, 1996 were $1.28 compared to $1.08 for the corresponding period in 1995. The increase in earnings was mainly due to the higher first quarter 1996 earnings of $0.93 per share compared to $0.74 for the corresponding period in 1995. Major contributors to the increased first quarter earnings were increased electric and gas sales due to colder weather, and rate increases in the Iowa electric, Iowa gas and Minnesota gas jurisdictions. Other specific items already addressed in the second quarter review also are applicable to the six month review. The year-to-date ELECTRIC MARGIN increased to $73.0 million in 1996 from $69.1 million in 1995. The higher 1996 margin was primarily attributable to a $6.6 million annual electric rate increase in Iowa which became effective June 29, 1995. An electric rate increase in Minnesota will not become effective until August 1996. ELECTRIC SALES during the six months ended June 30, 1996 were 3.8% higher than the same period a year ago. The increase was primarily attributable to residential sales which increased 2.8%. Also, higher interchange sales year- to-date reflected the increased power marketing activities as discussed above. ELECTRIC REVENUES increased 3.1% during the six months ended June 30, 1996 compared to the same period of 1995. The increased revenues were primarily due to the Iowa $6.6 million electric rate increase effective June 29, 1995. The increase also reflected the increased residential sales and interchange transactions. The year-to-date GAS MARGIN has increased from $12.1 million in 1995 to $13.8 million in 1996 due mainly to increased residential and commercial sales, and rate increases in the Iowa and Minnesota gas jurisdictions. Interim gas rates for Iowa in an annual amount of $1.3 million were implemented October 20, 1995 while interim gas rates for Minnesota in an annual amount of $1.5 million were implemented June 30, 1995. GAS DELIVERIES increased 2.3% during the six months ended June 30, 1996 compared to the same period in 1995. While industrial sales and transportation deliveries were down 9.5% and 0.3%, respectively, residential sales increased 11.8% and commercial sales increased 10.8%. The 17.3% increase in GAS REVENUES during the six months ended June 30, 1996 compared to the same period in 1995 was primarily due to the increased residential and commercial sales as well as the gas rate increases in the Iowa and Minnesota gas jurisdictions, as discussed above. Also, the second quarter of 1995 reflected an $0.8 million pipeline rate refund. MAINTENANCE EXPENSE increased $1.2 million for the six months ended June 30, 1996 compared to the six months ended June 30, 1995. As discussed above, an increase of approximately $0.8 million of scheduled routine maintenance at three of the companies steam generating stations occurred in the second quarter of 1996. Cash flow from operating activities was $33.4 million. The funds were used primarily to pay the company's construction program, to reduce short-term debt and to pay common and preferred dividends. OTHER ITEMS The company does not anticipate any public offerings for new debt or new stock in the next two years, other than for re-establishing the Dividend Reinvestment and Stock Purchase Plan. Effective June 20, 1996, shares purchased on behalf of the Plan will be newly issued shares. 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. The Minnesota Public Utilities Commission (MPUC) has allowed the company to recover SFAS 106 costs under the February 29, 1996 order in the gas rate case and the April 8, 1996 order in the electric rate case. 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 place in effect in June 1995. On February 29, 1996, the Commission issued an order allowing an increase in gas rates of $2.1 million. The company, the Department of Public Service and the Office of Attorney General filed for reconsideration by the Commission. A Commission order issued July 2, 1996, affirmed the level of increased rates at approximately $2.1 million. On August 1, 1996, the Office of the Attorney General and the Department of Public Service filed a joint appeal of the Commission's order to the Minnesota Court of Appeals. 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 (later adjusted by the company to $3.3 million). On April 10, 1996, the Commission issued an order allowing an increase in electric rates of $2.3 million. The company and the Department of Public Service filed for reconsideration by the Commission. A Commission order issued June 26, 1996, denied reconsideration. Rates reflecting the increase granted are pending Commission approval. 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. The interim rate increase is being collected subject to refund until final determination is made by the Board. The company and other parties to the rate application agreed on an increase of $1.1 million subject to approval by the Board. A Board order was issued February 21, 1996, approving the revenue requirement increase of $1.1 million. On May 31, 1996, the Board issued an order on cost-of-service and rate design issues. The company's compliance rates and refund plan are pending Board approval. The company's potential liability for coal tar waste at former manufactured gas plant sites was discussed in the 1995 Annual Report to Stockholders. With regard to the nine sites, clean-up has been completed at one site and ground water monitoring will continue for at least one more year. At another site, remediation has begun and should be completed in 1996. For the remainder of the other seven sites, testing and soil sampling are continuing, but the company is unable to determine what, if any, remediation will be necessary until a later date. The company is continuing to actively pursue recovery of costs from certain of its insurers. The company is unable at this point to determine what portion, if any, of the proceeds from the insurance companies will be refunded to its customers. INTERSTATE POWER COMPANY PART II - OTHER INFORMATION ITEM 1. LEGAL PROCEEDINGS Reference is made to the 1995 Form 10-K/A 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 The company, WPL Holdings, Inc. ("WPLH") and IES Industries Inc. ("IES") have entered into an Agreement and Plan of Merger ("Merger Agreement"), dated November 10, 1995, as amended, providing for: a) the company becoming a wholly-owned subsidiary of WPLH and b) the merger of IES with and into WPLH, which merger will result in the combination of IES and WPLH as a single holding company (collectively, the "Proposed Merger"). The holding company will be renamed Interstate Energy Corporation ("Interstate Energy"). The Joint Proxy Statement/Prospectus of the company, WPLH and IES was filed with the Securities and Exchange Commission on July 11, 1996. The Merger Agreement contemplated an adjustment of the IES Ratio to 1.01 shares of Interstate Energy Common Stock from the initial ratio of 0.98 in the event that prior to the consummation of the transaction, McLeod, Inc., a Delaware corporation in which IES has a significant ownership interest ("McLeod"), (a) completed a firm commitment underwritten initial public offering of its Class A common stock at a per share price of at least $13.00 in which McLeod received gross proceeds of at least $75 million and (b) immediately following the public offering the Class A common stock was registered under Section 12 of the Exchange Act. On June 14, 1996, McLeod completed an initial public offering of 13.8 million shares of its Class A common stock at a price of $20 per share. The McLeod offering satisfied the conditions of the McLeod contingency and the IES Ratio was adjusted to 1.01. The shareowner vote on the Proposed Merger is expected to occur at annual meetings to be held by each of the company, WPLH and IES on September 5, 1996. The corporate headquarters of Interstate Energy will be in Madison, Wisconsin. On August 4, 1996, MidAmerican Energy Company, an electric and natural gas utility company based in Des Moines, Iowa, announced that it had made an unsolicited bid to acquire IES in a cash and stock transaction. The company cannot currently determine what, if any, impact the unsolicited bid of MidAmerican may have on the transactions contemplated by the Merger Agreement. 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) The company filed a Form 8-K with the Securities and Exchange Commission dated May 29, 1996. This report related to an amendment to the Agreement and Plan of Merger signed on November 10, 1995 by the company, WPL Holdings, Inc. and IES Industries Inc. 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 August 14, 1996 /s/ W. C. Troy W. C. Troy, Controller (Duly Authorized Officer and Principal Accounting Officer) EX-27 2
UT 6-MOS DEC-31-1995 JUN-30-1996 PER-BOOK 496,750 460 61246 72010 0 630,466 33,583 103,970 63,440 200,993 24,090 10,819 171,918 0 0 29,700 17,000 0 100 14 175,832 630,466 163,347 8,387 134,170 142,557 20,790 713 21,503 8,035 13,468 1,231 12,237 9,947 14,304 (213) $1.28 $1.28
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