0000052485-95-000013.txt : 19950815 0000052485-95-000013.hdr.sgml : 19950815 ACCESSION NUMBER: 0000052485-95-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 3 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: IES UTILITIES INC CENTRAL INDEX KEY: 0000052485 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 420331370 STATE OF INCORPORATION: IA FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-04117 FILM NUMBER: 95562809 BUSINESS ADDRESS: STREET 1: 200 FIRST STREET SE CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193984411 FORMER COMPANY: FORMER CONFORMED NAME: IOWA ELECTRIC LIGHT & POWER CO DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: IOWA RAILWAY & LIGHT CORP DATE OF NAME CHANGE: 19670629 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 FORM 10-Q QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 (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, 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 0-4117-1 IES UTILITIES INC. (Exact name of registrant as specified in its charter) Iowa 42-0331370 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) IES Tower, Cedar Rapids, Iowa 52401 (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (319) 398-4411 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, as of the latest practicable date. Class Outstanding at July 31, 1995 Common Stock, $2.50 par value 13,370,788 shares IES UTILITIES INC. INDEX Page No. Part I. Financial Information. Item 1. Consolidated Financial Statements. Consolidated Balance Sheets - June 30, 1995 and December 31, 1994 3 - 4 Consolidated Statements of Income - Three, Six and Twelve Months Ended June 30, 1995 and 1994 5 Consolidated Statements of Cash Flows - Three, Six and Twelve Months Ended June 30, 1995 and 1994 6 Notes to Consolidated Financial Statements 7 - 16 Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition. 17 - 35 Part II. Other Information. 36 - 38 Signatures. 39 PART 1. - FINANCIAL INFORMATION ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED BALANCE SHEETS June 30, 1995 December 31, ASSETS (Unaudited) 1994 (in thousands) Property, plant and equipment, at original cost: Utility - Plant in service - Electric $ 1,833,223 $ 1,798,059 Gas 160,007 158,115 Other 109,422 86,005 2,102,652 2,042,179 Less - Accumulated depreciation 925,984 880,888 1,176,668 1,161,291 Leased nuclear fuel, net of amortization 46,522 49,731 Construction work in progress 70,049 73,339 1,293,239 1,284,361 Other 3,315 1,824 1,296,554 1,286,185 Current assets: Cash and temporary cash investments 1,481 2,135 Accounts receivable - Customer, less reserve 8,423 12,051 Other 6,847 9,763 Income tax refunds receivable 6,402 3,450 Production fuel, at average cost 16,774 13,988 Materials and supplies, at average cost 27,139 26,699 Adjustment clause balances 0 1,433 Regulatory assets 24,018 20,145 Prepayments and other 10,991 19,630 102,075 109,294 Investments: Nuclear decommissioning trust funds 39,971 33,779 Cash surrender value of life insurance policies 3,183 2,915 Other 1,560 1,085 44,714 37,779 Other assets: Regulatory assets 196,777 192,955 Deferred charges and other 16,613 19,155 213,390 212,110 $ 1,656,733 $ 1,645,368 CONSOLIDATED BALANCE SHEETS (CONTINUED) June 30, 1995 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 1994 (in thousands) Capitalization: Common stock - par value $2.50 per share - authorized 24,000,000 shares; 13,370,788 shares outstanding $ 33,427 $ 33,427 Paid-in surplus 279,042 279,042 Retained earnings ($18,209,000 restricted as to payment of cash dividends) 190,928 197,158 Total common equity 503,397 509,627 Cumulative preferred stock - par value $50 per share - authorized 466,406 shares; 366,406 shares outstanding 18,320 18,320 Long-term debt 430,363 380,404 952,080 908,351 Current liabilities: Notes payable to associated companies 5,781 18,495 Short-term borrowings 87,000 37,000 Capital lease obligations 18,267 14,385 Maturities and sinking funds 50,140 100,140 Accounts payable 46,589 70,354 Accrued interest 8,934 9,438 Accrued taxes 44,120 47,188 Accumulated refueling outage provision 2,236 15,196 Adjustment clause balances 477 0 Provision for rate refund liability 10,207 0 Environmental liabilities 5,400 5,428 Other 18,345 18,324 297,496 335,948 Long-term liabilities: Capital lease obligations 28,256 35,346 Environmental liabilities 39,668 37,853 Other 48,042 46,724 115,966 119,923 Deferred credits: Accumulated deferred income taxes 252,735 241,345 Accumulated deferred investment tax credits 38,456 39,801 291,191 281,146 Commitments and contingencies (Note 5) $ 1,656,733 $ 1,645,368 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the For the For the Three Months Ended Six Months Ended Twelve Months Ended June 30 June 30 June 30 1995 1994 1995 1994 1995 1994 (in thousands) Operating revenues: Electric $ 133,048 $ 123,071 $ 249,626 $ 246,989 $ 539,964 $ 548,578 Gas 21,852 23,164 75,027 88,297 125,762 153,474 Other 2,771 1,784 5,858 4,746 10,118 9,026 157,671 148,019 330,511 340,032 675,844 711,078 Operating expenses: Fuel for production 20,304 16,304 39,746 38,649 87,050 83,082 Purchased power 17,130 17,225 33,444 30,827 71,412 84,997 Gas purchased for resale 13,454 14,882 51,587 63,998 82,929 108,336 Other operating expenses 32,644 30,971 67,056 61,952 137,385 125,491 Maintenance 10,611 13,300 22,290 24,195 47,637 48,020 Depreciation and amortization 20,728 19,160 41,317 38,320 78,313 72,409 Taxes other than income taxes 12,356 11,400 24,731 23,066 44,215 43,885 127,227 123,242 280,171 281,007 548,941 566,220 Operating income 30,444 24,777 50,340 59,025 126,903 144,858 Interest expense and other: Interest expense 11,731 10,232 22,190 20,760 43,001 40,790 Allowance for funds used during construction -785 -1,000 -1,900 -1,877 -3,934 -2,951 Miscellaneous, net 588 21 595 -246 -406 330 11,534 9,253 20,885 18,637 38,661 38,169 Income before income taxes 18,910 15,524 29,455 40,388 88,242 106,689 Income taxes: Current 4,959 4,534 2,975 14,207 27,143 26,709 Deferred 3,556 2,397 10,597 3,305 9,527 17,518 Amortization of investment tax credits -672 -662 -1,345 -1,323 -2,668 -4,792 7,843 6,269 12,227 16,189 34,002 39,435 Net income 11,067 9,255 17,228 24,199 54,240 67,254 Preferred dividend requirements 229 229 457 457 914 914 Net income available for common stock $ 10,838 $ 9,026 $ 16,771 $ 23,742 $ 53,326 $ 66,340 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three For the Six For the Twelve Months Ended Months Ended Months Ended June 30 June 30 June 30 1995 1994 1995 1994 1995 1994 (in thousands) Cash flows from operating activities: Net income $ 11,067 $ 9,255 $ 17,228 $ 24,199 $ 54,240 $ 67,254 Adjustments to reconcile net income to net cash flows from operating activities - Depreciation and amortization 20,728 19,160 41,317 38,320 78,313 72,409 Principal payments under capital lease obligations 3,311 4,078 5,867 8,505 13,608 13,102 Deferred taxes and investment tax credits 2,884 1,735 9,252 1,982 6,859 12,726 Refueling outage provision -4,432 2,914 -12,960 6,051 -6,475 -3,472 Allowance for equity funds used during construction -78 -612 -360 -1,153 -1,506 -1,737 Other 1,605 669 2,680 1,328 4,664 2,758 Other changes in assets and liabilities - Accounts receivable 4,419 9,062 4,545 12,714 2,226 -250 Production fuel, materials and supplies -2,879 107 -2,931 2,881 -5,409 2,032 Accounts payable -14,178 -3,287 -18,959 -8,586 10,071 2,906 Accrued taxes -12,237 -2,081 -6,020 463 573 -6,279 Provision for rate refunds 2,207 -9,085 10,207 -8,670 10,207 -6,573 Adjustment clause balances -2,325 -6,797 1,910 -2,073 -2,599 -3,457 Gas in storage 1,948 -1,132 9,324 8,958 2,285 -2,209 Other -1,493 1,358 4,922 1,139 7,810 5,717 Net cash flows from operating activities 10,547 25,344 66,022 86,058 174,867 154,927 Cash flows from financing activities: Dividends declared on common stock -10,000 -15,000 -23,000 -22,000 -53,000 -37,600 Dividends declared on preferred stock -229 -229 -457 -457 -914 -914 Dividends payable 0 0 0 -5,000 0 0 Proceeds from issuance of long-term debt 0 0 50,000 0 50,000 119,400 Reductions in long-term debt -140 -224 -50,140 -224 -50,140 -19,624 Net change in short-term borrowings 49,237 17,266 37,286 -6,734 75,515 -60,982 Principal payments under capital lease obligations -2,556 -4,427 -6,218 -8,147 -14,375 -12,439 Sale of utility accounts receivable -8,000 -200 2,000 -200 3,000 -3,500 Net cash flows from financing activities 28,312 -2,814 9,471 -42,762 10,086 -15,659 Cash flows from investing activities: Construction and acquisition expenditures -31,756 -29,342 -59,972 -48,334 -159,741 -119,378 Nuclear decommissioning trust funds -1,383 -1,383 -2,766 -2,766 -5,532 -5,532 Deferred energy efficiency costs -4,441 -3,772 -7,978 -7,171 -16,964 -13,016 Other -2,288 -82 -5,431 -2,647 -1,926 -2,289 Net cash flows from investing activities -39,868 -34,579 -76,147 -60,918 -184,163 -140,215 Net increase (decrease) in cash and temporary cash investments -1,009 -12,049 -654 -17,622 790 -947 Cash and temporary cash investments at beginning of period 2,490 12,740 2,135 18,313 691 1,638 Cash and temporary cash investments at end of period $ 1,481 $ 691 $ 1,481 $ 691 $ 1,481 $ 691 Supplemental cash flow information: Cash paid during the period for - Interest $ 13,819 $ 12,807 $ 22,073 $ 20,786 $ 41,132 $ 37,596 Income taxes $ 8,533 $ 18,659 $ 11,383 $ 18,619 $ 29,256 $ 37,409 Noncash investing and financing activities - Capital lease obligations incurred $ 1,542 $ 227 $ 2,658 $ 424 $ 16,531 $ 1,632 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) June 30, 1995 (1) GENERAL: The interim Consolidated Financial Statements have been prepared by IES Utilities Inc. (Utilities) and its consolidated subsidiary (collectively the Company), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission. Utilities is a wholly-owned subsidiary of IES Industries Inc. (Industries). Utilities' wholly-owned subsidiary is IES Ventures Inc. (Ventures), which is a holding company for unregulated investments. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to such rules and regulations, although the Company believes that the disclosures are adequate to make the information presented not misleading. In the opinion of the Company, the Consolidated Financial Statements include all adjustments, which are normal and recurring in nature, necessary for the fair presentation of the results of operations and financial position. Certain prior period amounts have been reclassified on a basis consistent with the 1995 presentation. It is suggested that these Consolidated Financial Statements be read in conjunction with the Consolidated Financial Statements and the notes thereto included in the Company's Form 10-K for the year ended December 31, 1994. The accounting and financial policies relative to the following items have been described in those notes and have been omitted herein because they have not changed materially through the date of this report: Summary of significant accounting policies Acquisition of Iowa service territory of Union Electric Company (UE) Leases Utility accounts receivable (other than discussed in Note 3) Income taxes Benefit plans Preferred and preference stock Debt (other than discussed in Note 4) Estimated fair value of financial instruments Commitments and contingencies (other than discussed in Note 5) Jointly-owned electric utility plant Segments of business (2) RATE MATTERS: (a) 1995 Gas Rate Case - On August 4, 1995, Utilities applied to the Iowa Utilities Board (IUB) for an annual increase in gas rates of $8.8 million, or 6.2%. An interim increase of $8.6 million was requested. The interim rate increase, the amount of which will be set by the IUB, will become effective within 90 days of the filing and will be collected subject to refund. Utilities expects that the final rate level will not be determined until the second quarter of 1996. (b) 1994 Electric Rate Case - In 1994, Utilities applied to the IUB for an increase in retail electric rates of approximately $26 million annually, or 5.2%. Utilities' proposal included approximately $12 million in annual revenue requirement related to increased recovery levels of depreciation expense and nuclear decommissioning expense at the Duane Arnold Energy Center (DAEC), Utilities' nuclear generating facility. The Office of Consumer Advocate (OCA) filed a petition in connection with this proceeding to reduce the rates for retail electric service by approximately $27 million, or 5.5%. Intervenors, which primarily represent individual or groups of customers, also submitted filings in October 1994, generally objecting to particular elements of the price increase and Utilities' price design proposals. In May 1995, the IUB issued an order requiring an annual reduction in retail electric revenues of $15.8 million. While minor movement toward pricing consistency between the different pricing zones will result, the proposals to increase recovery levels of nuclear depreciation expense and nuclear decommissioning expense were rejected. The Board also ruled against Utilities on issues of recovery for the full purchase prices of Union Electric's Iowa service territory and smaller, low-cost, used generating plants, even though customers are currently benefiting from the acquisitions. Utilities and several intervenors filed applications for rehearing with the IUB requesting rehearing on various issues in the order and Utilities was granted rehearing on two of the smaller issues. The IUB denied rehearing on all other issues, including the intervenors' issues. The IUB issued its Order Granting Rehearing in Part and Denying Rehearing in Part on June 30, 1995, which made minor adjustments to its original decision resulting in a revised annual retail rate reduction of approximately $14.4 million. No petitions were filed with the Iowa district court by any of the parties to the case. Utilities has recorded a pre-tax reserve for rate refund, including interest, of $10.2 million at June 30, 1995. Utilities is awaiting approval from the IUB on its compliance tariff filing and continues to fully reserve for the refund and, accordingly, there will be no further effect on 1995 electric revenues and net income when the refund is made. Refunds to customers will be calculated from October 22, 1994, the date of the OCA revenue reduction filing. (c) 1994 Energy Efficiency Cost Recovery Filing - The IUB has adopted rules that mandate Utilities to spend 2% of electric and 1.5% of gas gross retail operating revenues for energy efficiency programs. Under provisions of the IUB rules, Utilities applied in August 1994 to the IUB for recovery of approximately $23 million and $13 million for the electric and gas programs, respectively, related to costs incurred through 1993 for such programs. The $36 million total for the electric and gas programs is comprised of $21 million of direct expenditures and carrying costs (recorded as a "Regulatory asset" in the Consolidated Balance Sheets, including $5.4 million as current), $7 million for a return on the expenditures over the recovery period and $8 million for a reward based on a sharing of the benefits of such programs. In April 1995, the IUB issued its Final Decision and Order concerning Utilities' energy efficiency expenditures, which allows Utilities to recover its direct expenditures, carrying costs, and a return on its expenditures, as well as a reward of approximately $4 million for a total allowed recovery of approximately $32 million. In May 1995, the OCA and an intervenor filed applications for rehearing with the IUB concerning the amount of the reward granted by the IUB. Since the identical issue is pending before the court in another utility's proceeding, the OCA, the intervenor and Utilities have agreed to be bound by the ultimate decision in the other utility's court proceeding. Utilities believes that the chances of the reward amount being materially reduced are remote. Recovery of energy efficiency costs will be over a four-year period and began on June 1, 1995. The portion of the recoveries relating to the contested reward amount are being collected subject to refund. (3) UTILITY ACCOUNTS RECEIVABLE: Utilities has entered into an agreement, which expires in 1999, with a financial institution to sell, with limited recourse, an undivided fractional interest of up to $65 million in its pool of utility accounts receivable. At June 30, 1995, $56 million was sold under the agreement. (4) DEBT: (a) Long-Term Debt - In March 1995, Utilities repaid at maturity $50 million of Series W, 9.75% First Mortgage Bonds and, in a separate transaction, issued $50 million of Collateral Trust Bonds, 7.65%, due 2000. (b) Short-Term Debt - At June 30, 1995, the Company had bank lines of credit aggregating $87.7 million, of which $77 million was being used to support commercial paper (weighted average interest rate of 6.02%) and $7.7 million to support certain pollution control obligations. Commitment fees are paid to maintain these lines and there are no conditions which restrict the unused lines of credit. In addition to the above, Utilities has an uncommitted credit facility with a financial institution whereby it can borrow up to $40 million. Rates are set at the time of borrowing and no fees are paid to maintain this facility. At June 30, 1995, there was $10 million borrowed under this facility (weighted average interest rate of 6.08%). At June 30, 1995, Utilities also had a letter of credit in the amount of $3.4 million supporting two of its variable rate pollution control obligations. (5) CONTINGENCIES: (a) Environmental Liabilities - The Company has recorded environmental liabilities of approximately $45 million, including $5.4 million as current liabilities, in its Consolidated Balance Sheets at June 30, 1995. The significant items are discussed below. Former Manufactured Gas Plant (FMGP) Sites Utilities has been named as a Potentially Responsible Party (PRP) by various federal and state environmental agencies for 28 FMGP sites, but believes it is not responsible for two of these sites. There are also six other sites for which it may be designated as a PRP in the future. Utilities is working pursuant to the requirements of the various agencies to investigate, mitigate, prevent and remediate, where necessary, damage to property, including damage to natural resources, at and around the sites in order to protect public health and the environment. Utilities believes it has completed the remediation of five sites although it is in the process of obtaining final approval from the applicable environmental agencies on this issue for each site. Utilities is in various stages of the investigation and/or remediation processes for 19 sites and expects to begin the investigation process in 1995 or 1996 for the other sites. Utilities has recorded environmental liabilities related to the FMGP sites of approximately $33 million (including $4.6 million as current liabilities) at June 30, 1995. These amounts are based upon Utilities' best current estimate of the amount to be incurred for investigation and remediation costs for those sites where the investigation process has been or is substantially completed, and the minimum of the estimated cost range for those sites where the investigation is in its earlier stages or has not started. It is possible that future cost estimates will be greater than the current estimates as the investigation process proceeds and as additional facts become known. Utilities may be required to monitor these sites for a number of years upon completion of remediation, as is the case with several of the sites for which remediation has been completed. Utilities has begun pursuing coverage for investigation, mitigation, prevention, remediation, and monitoring costs from its insurance carriers and is investigating the potential for third party cost sharing for FMGP investigation and clean-up costs. The amount of shared costs, if any, cannot be reasonably determined and, accordingly, no potential sharing has been recorded at June 30, 1995. Regulatory assets of approximately $33 million, which reflect the future recovery that is being provided through Utilities' rates, have been recorded in the Consolidated Balance Sheets. Considering the rate treatment allowed by the IUB, management believes that the clean-up costs incurred by Utilities for these FMGP sites will not have a material adverse effect on its financial position or results of operations. (b) Clean Air Act - The Clean Air Act Amendments of 1990 (Act) requires emission reductions of sulfur dioxide and nitrogen oxides to achieve reductions of atmospheric chemicals believed to cause acid rain. The provisions of the Act will be implemented in two phases with Phase I affecting two of Utilities' units beginning in 1995 and Phase II affecting all units beginning in the year 2000. Utilities is in the process of completing the modifications necessary to meet the Phase I requirements and has installed continuous emission monitors on all affected units as required by the Act. Utilities expects to meet the requirements of Phase II by switching to lower sulfur fuels and through capital expenditures primarily related to fuel burning equipment and boiler modifications. Utilities estimates capital expenditures of approximately $22.5 million, including $4.4 million in 1995, in order to meet the requirements of the Act. (c) Federal Energy Regulatory Commission (FERC) Order No. 636 - The FERC issued Order No. 636 (Order 636) in 1992, which substantially changed how Utilities manages its gas supply. As a result of Order 636, Utilities has enhanced access to competitively priced gas supply and more flexible transportation services, however, Utilities is required to pay certain transition costs incurred and billed by its pipeline suppliers. Utilities' three pipeline suppliers have made filings with the FERC to collect their respective known transition costs, and additional filings are expected. At June 30, 1995, Utilities has recorded a liability of $5.8 million for those transition costs that have been incurred by the pipelines to date, including $2.3 million expected to be billed through June 1996. Utilities is currently recovering the transition costs from its customers through its Purchased Gas Adjustment Clauses as such costs are billed by the pipelines. The ultimate level of costs to be billed to Utilities depends on the pipelines' filings with the FERC and other future events, including the market price of natural gas, and could approximate $10 million more than the amount recorded. However, Utilities believes any transition costs billed by its pipeline suppliers would be recovered from its customers, based upon regulatory treatment of these costs currently and similar past costs by the IUB. Accordingly, regulatory assets, in amounts corresponding to the recorded liabilities, have been recorded to reflect the anticipated recovery. (d) Nuclear Insurance Programs - The Price-Anderson Amendments Act of 1988 (1988 Act) provides Utilities with the benefit of $8.9 billion of public liability coverage consisting of $200 million of insurance and $8.7 billion of potential retroactive assessments from the owners of nuclear power plants. Based upon its ownership of the DAEC, under the 1988 Act, Utilities could be assessed a maximum of $79.3 million per nuclear incident, with a maximum of $10 million per year (of which Utilities' 70% ownership portion would be approximately $55 million and $7 million, respectively) if losses relating to the incidents exceeded $200 million. These limits are subject to adjustments for inflation in future years. Utilities is a member of Nuclear Mutual Limited (NML) and Nuclear Electric Insurance Limited (NEIL), which provide insurance coverage for the cost of certain property losses at nuclear generating stations and for the cost of replacement power during certain outages. Companies insured through NML and NEIL are subject to retroactive premium adjustments if losses exceed accumulated reserve funds. NML and NEIL's accumulated reserve funds are currently sufficient to more than cover its exposure in the event of a single incident under the primary and excess property damage or replacement power coverages. However, Utilities could be assessed annually a maximum of $4.4 million under NML, $8.5 million for NEIL property and $0.7 million for NEIL replacement power if losses relating to accidents exceeded the accumulated reserve funds. Utilities is not aware of any losses that it believes are likely to result in an assessment. ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION The following discussion analyzes significant changes in the components of net income and financial condition from the prior periods for IES Utilities Inc. (Utilities) and its consolidated subsidiary (collectively the Company). Utilities' wholly-owned subsidiary is IES Ventures Inc., which is a holding company for unregulated investments. RESULTS OF OPERATIONS The Company's net income available for common stock increased or (decreased) $1.8 million, ($7.0) million and ($13.0) million during the three, six and twelve month periods, respectively, ended June 30, 1995. The 1995 earnings are significantly affected by the recording of a pre-tax reserve for rate refund, including interest, of $10.2 million ($8.0 million in the first quarter and $2.2 million in the second quarter) by Utilities as a result of the Iowa Utilities Board's (IUB) order in Utilities' recent electric rate case. See Note 2(b) of the Notes to Consolidated Financial Statements for a further discussion of the electric rate case. The Company's operating income increased or (decreased) $5.7 million, ($8.7) million and ($18.0) million during the three, six and twelve month periods, respectively. Reasons for the changes in the results of operations are explained further in the following discussion. ELECTRIC REVENUES Electric revenues and Kwh sales for Utilities increased or (decreased) for the periods ended June 30, 1995, as compared with the prior periods, as follows: Three Six Twelve Months Months Months ($ in millions) Electric revenues $ 10.0 $ 2.6 $ (8.6) Electric sales (excluding off-system sales): Residential and Rural 7.9% 0.3% (1.9%) Commercial 2.2 1.2 1.6 Industrial 11.4 7.6 10.1 Total 6.8% 2.8% 3.7% The Kwh sales for the quarter benefited significantly from an annual true-up adjustment to unbilled sales recorded in the second quarter of 1995 and were also favorably impacted by warmer than normal weather. On June 21, 1995, Utilities set a new energy peak usage record with a peak of 1,796 megawatts (this record was subsequently broken during July 1995). The Kwh sales for the six and twelve month periods also benefited from the unbilled sales adjustment, although to a lesser degree than the three month period, but were unfavorably impacted by milder than normal weather. Under normal weather conditions, total sales (excluding off-system sales) would have increased 5.7%, 3.6% and 4.8% for the three, six and twelve month periods, respectively. The growth in industrial sales continues to reflect the underlying strength of the economy as industrial expansions in Utilities' service territory continue. Utilities' electric tariffs include energy adjustment clauses (EAC) that are designed to currently recover the costs of fuel and the energy portion of purchased power billings to customers. Electric revenues include a pre-tax reserve for rate refund ($8.0 million and $1.7 million recorded in the first and second quarters of 1995, respectively) recorded by Utilities as a result of the IUB order. Approximately $3.5 million of the reserve recorded in the first quarter relates to revenues collected in the fourth quarter of 1994. See Note 2(b) of the Notes to Consolidated Financial Statements for a further discussion of the electric rate case. The three and six month revenue increases were due to higher fuel costs collected through the EAC, the unbilled revenue adjustment and the increased sales (excluding off-system sales). These items were partially offset by lower off- system sales and the rate refund reserve. The twelve month decrease is due to lower off-system sales, the rate reserve and the effects of the mix of sales between lower margin industrial customers and higher margin residential and rural customers. These items were partially offset by the increased sales (excluding off-system sales), the recovery of fuel costs through the EAC and the unbilled revenue adjustment. GAS REVENUES Utilities' gas revenues decreased ($1.3) million, ($13.3) million and ($27.7) million during the three, six and twelve month periods, respectively. Utilities' gas sales in therms increased or (decreased) for the periods ended June 30, 1995, as compared with the prior periods, as follows: Three Six Twelve Months Months Months Residential 4.4% (6.2%) (9.8%) Commercial 0.4 (5.7) (9.3) Industrial (33.8) (27.9) (17.9) Sales to consumers (3.3) (8.3) (10.8) Transported volumes 20.7 32.4 28.2 Total 4.7% (0.7%) (2.8%) Under normal weather conditions, sales to consumers would have decreased (15.2%), (4.1%) and (5.2%) during the three, six and twelve month periods, respectively. Utilities' gas tariffs include purchased gas adjustment clauses (PGA) that are designed to currently recover the cost of gas sold. Utilities' gas revenues decreased during all periods primarily because of lower gas costs recovered through the PGA and lower sales to consumers. The decreased gas cost recoveries are due to lower gas prices as well as a shift in the sales mix between industrial sales and transported volumes; Utilities does not purchase the gas for the transported volumes. On August 4, 1995, Utilities applied to the IUB for an annual increase in gas rates of $8.8 million, or 6.2%. See Note 2(a) of the Notes to Consolidated Financial Statements for a further discussion. OPERATING EXPENSES Fuel for production increased $4.0 million, $1.1 million and $4.0 million during the three, six and twelve month periods, respectively. The three and six month increases are due to higher fuel cost recoveries through the EAC, which are included in fuel for production, partially offset by a decrease in the amount of Kwh generation. The Duane Arnold Energy Center (DAEC), Utilities' nuclear generating facility, was down from late February 1995 through late April 1995 for a scheduled refueling outage. There was no such refueling outage in 1994. Generation at the Company's fossil-fueled generating stations was also lower during the three month period in 1995 due to outages at two stations. The twelve month increase is primarily due to higher fuel cost recoveries through the EAC, although a slight increase in the amount of Kwh generation also contributed to the increase. Purchased power increased or (decreased) ($0.1) million, $2.6 million and ($13.6) million during the three, six and twelve month periods, respectively. The six month increase is due to increased energy purchases, resulting from the decrease in generation, which were partially offset by lower capacity costs. The twelve month decrease is primarily due to lower energy purchases, although lower capacity costs also contributed to the decrease. Gas purchased for resale decreased ($1.4) million, ($12.4) million and ($25.4) million during the three, six and twelve month periods, respectively, primarily due to lower sales to consumers and lower natural gas prices. Other operating expenses increased $1.7 million, $5.1 million and $11.9 million during the three, six and twelve month periods, respectively. Increases in labor and benefits costs, former manufactured gas plant (FMGP) clean-up costs and information technology costs contributed to the increases for all three periods. The three and six month increases were partially offset by lower nuclear operating costs at Utilities while higher nuclear operating costs contributed to the increase during the twelve month period. Maintenance expenses decreased ($2.7) million, ($1.9) million and ($0.4) million during the three, six and twelve month periods, respectively, primarily due to decreased expenditures at the DAEC and Utilities' fossil-fueled generating stations. Increased labor costs for all periods partially offset such decreases. Depreciation and amortization increased $1.6 million, $3.0 million and $5.9 million during the three, six and twelve month periods primarily because of increases in utility plant in service. Depreciation and amortization expenses for all periods reflect an annual amount of $5.5 million for the DAEC decommissioning provision, which is collected through rates. (The annual recovery level will be increased to $6.0 million once the final rates from Utilities' recent electric rate case are implemented later this year). The staff of the Securities and Exchange Commission (SEC) has questioned certain of the current accounting practices of the electric utility industry regarding the recognition, measurement and classification of decommissioning costs for nuclear generating stations in the financial statements of electric utilities. In response to these questions, the Financial Accounting Standards Board (FASB) has agreed to review the accounting for removal costs, including decommissioning. If current electric utility industry accounting practices for such decommissioning are changed: (1) annual provisions for decommissioning could increase, (2) the estimated cost for decommissioning could be recorded as a liability rather than as accumulated depreciation, and (3) trust fund income from the external decommissioning trusts could be reported as investment income rather than as a reduction to decommissioning expense. If such changes are required, Utilities believes that there would not be an adverse effect on its financial position or results of operations based on current rate making practices; the Company cannot predict future rate making practices. INTEREST EXPENSE AND OTHER Interest expense increased $1.5 million, $1.4 million and $2.2 million during the three, six and twelve month periods, respectively. The three and six month increases are primarily due to an increase in the average amount of short-term debt outstanding and interest related to Utilities' rate reserve. The twelve month increase is primarily because of an increase in the average amount of short-term and long-term debt outstanding. Income taxes increased or (decreased) $1.6 million, ($4.0) million and ($5.4) million during the three, six and twelve month periods, respectively. The three month increase is consistent with the change in income before income taxes. The decreases for the six and twelve month periods are due to a decrease in pre-tax income partially offset by a higher effective income tax rate resulting from the effect of property related temporary differences for which deferred income taxes have not been provided under current rate making principles, which are now becoming payable and are being recovered from ratepayers. LIQUIDITY AND CAPITAL RESOURCES The Company's capital requirements are primarily attributable to Utilities' construction programs, debt maturities and sinking fund requirements. The Company's pre- tax ratio of earnings to fixed charges was 3.05 and 3.62 for the twelve months ended June 30, 1995 and June 30, 1994, respectively. Cash flows from operating activities for the twelve months ending June 30, 1995, were $175 million. The Company anticipates that future capital requirements will be met by cash generated from operations and external financing. The level of cash generated from operations is partially dependent upon economic conditions, legislative activities, environmental matters and timely rate relief for Utilities. (See Notes 2 and 5 of the Notes to Consolidated Financial Statements). Access to the long-term and short-term capital and credit markets is necessary for obtaining funds externally. Utilities' debt ratings are as follows: Moody's Standard & Poor's Long-term debt A2 A Short-term debt P1 A1 As a result of the IUB's final order in Utilities' recent electric rate case, Utilities will be required to reduce its retail electric rates by an annual impact of $14.4 million. (See Note 2(b) of the Notes to Consolidated Financial Statements for a further discussion). In reaction to the rate reduction, Moody's downgraded Utilities' long-term debt rating to A2 from A1 on June 1, 1995. The new rating remains in the upper levels of Moody's nine-tier rating system which ranges from Aaa down to C. The Company's liquidity and capital resources will be affected by environmental and legislative issues, including the ultimate disposition of remediation issues surrounding the Company's environmental liabilities, the Clean Air Act as amended and FERC Order 636, as discussed in Note 5 of the Notes to Consolidated Financial Statements. Consistent with rate making principles of the IUB, management believes that the costs incurred for the above matters will not have a material adverse effect on the financial position or results of operations of the Company. The IUB has adopted rules which require Utilities to spend 2% of electric and 1.5% of gas gross retail operating revenues annually for energy efficiency programs. Energy efficiency costs in excess of the amount in the most recent electric and gas rate cases are being recorded as regulatory assets by Utilities. At June 30, 1995, Utilities had $42 million of such costs recorded as regulatory assets. On June 1, 1995, Utilities began its recovery of those costs incurred through 1993. See Note 2(c) of the Notes to Consolidated Financial Statements for a further discussion. CONSTRUCTION AND ACQUISITION PROGRAM The Company's construction and acquisition program anticipates expenditures of approximately $163 million for 1995, of which approximately 32% represents expenditures for electric transmission and distribution facilities, 23% represents fossil-fueled generation expenditures, 15% represents expenditures for steam distribution plant and 9% represents nuclear generation expenditures. The remaining 21% represents miscellaneous electric, gas and general expenditures. In addition to the $163 million, Utilities anticipates expenditures of $13 million in connection with mandated energy efficiency programs. Substantial commitments have been made in connection with all such expenditures. The Company had construction and acquisition expenditures of approximately $60 million for the six months ended June 30, 1995. Utilities is currently reviewing its construction and acquisition program with the objective of reducing the anticipated 1995 expenditures by approximately $13 million. The Company's levels of construction and acquisition expenditures are projected to be $167 million in 1996, $146 million in 1997, $170 million in 1998 and $182 million in 1999. It is estimated that approximately 80% of construction and acquisition expenditures will be provided by cash from operating activities (after payment of dividends) for the five- year period 1995-1999. Capital expenditure and investment and financing plans are subject to continual review and change. The capital expenditure and investment programs may be revised significantly as a result of many considerations including changes in economic conditions, variations in actual sales and load growth compared to forecasts, requirements of environmental, nuclear and other regulatory authorities, acquisition opportunities, the availability of alternate energy and purchased power sources, the ability to obtain adequate and timely rate relief, escalations in construction costs and conservation and energy efficiency programs. LONG-TERM FINANCING Other than Utilities' periodic sinking fund requirements, which Utilities intends to meet by pledging additional property, approximately $124 million of long-term debt will mature prior to December 31, 1999. The Company intends to refinance the majority of the debt maturities with long-term securities. In March 1995, Utilities repaid at maturity $50 million of Series W, 9.75% First Mortgage Bonds and, in a separate transaction, issued $50 million of Collateral Trust Bonds, 7.65%, due 2000. Utilities has entered into an Indenture of Mortgage and Deed of Trust dated September 1, 1993 (New Mortgage). The New Mortgage provides for, among other things, the issuance of Collateral Trust Bonds upon the basis of First Mortgage Bonds being issued by Utilities. The lien of the New Mortgage is subordinate to the lien of Utilities' first mortgages until such time as all bonds issued under the first mortgages have been retired and such mortgages satisfied. Accordingly, to the extent that Utilities issues Collateral Trust Bonds on the basis of First Mortgage Bonds, it must comply with the requirements for the issuance of First Mortgage Bonds under Utilities' first mortgages. Under the terms of the New Mortgage, Utilities has covenanted not to issue any additional First Mortgage Bonds under its first mortgages except to provide the basis for issuance of Collateral Trust Bonds. The Indentures pursuant to which Utilities issues First Mortgage Bonds constitute direct first mortgage liens upon substantially all tangible public utility property and contain covenants which restrict the amount of additional bonds which may be issued. At June 30, 1995, such restrictions would have allowed Utilities to issue $330 million of additional First Mortgage Bonds. Utilities has received authority from the FERC to issue $250 million of long-term debt, of which $50 million was used in March 1995 to issue Collateral Trust Bonds. Utilities expects to replace First Mortgage Bonds Series X, that matures in October 1995, with other long-term securities. The Articles of Incorporation of Utilities authorize and limit the aggregate amount of additional shares of Cumulative Preferred Stock and Cumulative Preference Stock that may be issued. At June 30, 1995, Utilities could have issued an additional 700,000 shares of Cumulative Preference Stock but no additional shares of Cumulative Preferred Stock. The Company's capitalization ratios at June 30, were as follows: 1995 1994 Long-term debt 48% 48% Preferred stock 2 2 Common equity 50 50 100% 100% The 1995 and 1994 ratios each include $50 million of long-term debt due in less than one year because it was the Company's intention to refinance the debt with long-term securities. SHORT-TERM FINANCING For interim financing, Utilities is authorized by the FERC to issue, through 1996, up to $200 million of short-term notes. In addition to providing for ongoing working capital needs, this availability of short-term financing provides Utilities flexibility in the issuance of long-term securities. At June 30, 1995, Utilities had outstanding short-term borrowings of $92.8 million, including $5.8 million of notes payable to associated companies. Utilities has an agreement, which expires in 1999, with a financial institution to sell, with limited recourse, an undivided fractional interest of up to $65 million in its pool of utility accounts receivable. At June 30, 1995, Utilities had sold $56 million under the agreement. At June 30, 1995, the Company had bank lines of credit aggregating $87.7 million, of which $77 million was being used to support commercial paper (weighted average interest rate of 6.02%) and $7.7 million to support certain pollution control obligations. Commitment fees are paid to maintain these lines and there are no conditions which restrict the unused lines of credit. In addition to the above, Utilities has an uncommitted credit facility with a financial institution whereby it can borrow up to $40 million. Rates are set at the time of borrowing and no fees are paid to maintain this facility. At June 30, 1995, there was $10 million borrowed under this facility (weighted average interest rate of 6.08%). At June 30, 1995, Utilities also had a letter of credit in the amount of $3.4 million supporting two of its variable rate pollution control obligations. ENVIRONMENTAL MATTERS Utilities has been named as a Potentially Responsible Party (PRP) by various federal and state environmental agencies for 28 FMGP sites, but believes it is not responsible for two of these sites. There are also six other sites for which it may be designated as a PRP in the future. Utilities is working pursuant to the requirements of the various agencies to investigate, mitigate, prevent and remediate, where necessary, damage to property, including damage to natural resources, at and around the sites in order to protect public health and the environment. Utilities believes it has completed the remediation of five sites although it is in the process of obtaining final approval from the applicable environmental agencies on this issue for each site. Utilities is in various stages of the investigation and/or remediation processes for 19 sites and expects to begin the investigation process in 1995 or 1996 for the other sites. Utilities has recorded environmental liabilities related to the FMGP sites of approximately $33 million (including $4.6 million as current liabilities) at June 30, 1995. These amounts are based upon Utilities' best current estimate of the amount to be incurred for investigation and remediation costs for those sites where the investigation process has been or is substantially completed, and the minimum of the estimated cost range for those sites where the investigation is in its earlier stages or has not started. It is possible that future cost estimates will be greater than the current estimates as the investigation process proceeds and as additional facts become known. Utilities may be required to monitor these sites for a number of years upon completion of remediation, as is the case with several of the sites for which remediation has been completed. Utilities has begun pursuing coverage for investigation, mitigation, prevention, remediation and monitoring costs from its insurance carriers and is investigating the potential for third party cost sharing for FMGP investigation and clean-up costs. The amount of shared costs, if any, cannot be reasonably determined and, accordingly, no potential sharing has been recorded at June 30, 1995. Regulatory assets of approximately $33 million, which reflect the future recovery that is being provided through Utilities' rates, have been recorded in the Consolidated Balance Sheets. Considering the rate treatment allowed by the IUB, management believes that the clean-up costs incurred by Utilities for these FMGP sites will not have a material adverse effect on its financial position or results of operations. The Clean Air Act Amendments of 1990 (Act) requires emission reductions of sulfur dioxide and nitrogen oxides to achieve reductions of atmospheric chemicals believed to cause acid rain. The provisions of the Act will be implemented in two phases with Phase I affecting two of Utilities' units beginning in 1995 and Phase II affecting all units beginning in the year 2000. Utilities is in the process of completing the modifications necessary to meet the Phase I requirements and has installed continuous emission monitors on all affected units as required by the Act. Utilities expects to meet the requirements of Phase II by switching to lower sulfur fuels and through capital expenditures primarily related to fuel burning equipment and boiler modifications. Utilities estimates capital expenditures of approximately $22.5 million, including $4.4 million in 1995, in order to meet the requirements of the Act. In January 1995, Utilities received an Administrative Compliance Order (ACO) from the United States Environmental Protection Agency (EPA) alleging noncompliance with, and requiring Utilities to satisfy, certain monitoring, reporting, and recordkeeping requirements of the Acid Rain Program at its Phase II units. On June 23, 1995, Utilities received an Administrative Penalty Order from the EPA assessing a penalty in the amount of $146,000 for the alleged noncompliance. Pursuant to Utilities' good faith efforts to cooperate and informal settlement negotiations, the EPA has informally agreed to reduce the amount of the penalty. Utilities and EPA are currently negotiating a Supplemental Environmental Project (SEP) which contemplates reducing the cash penalty payment to $25,630 and requiring Utilities to retire 589 acid rain allowances, valued at $76,570. The National Energy Policy Act of 1992 requires owners of nuclear power plants to pay a special assessment into a "Uranium Enrichment Decontamination and Decommissioning Fund." The assessment is based upon prior nuclear fuel purchases and, for the DAEC, averages $1.4 million annually through 2007, of which Utilities' 70% share is $1.0 million. Utilities is recovering the costs associated with this assessment through its electric fuel adjustment clauses over the period the costs are assessed. Utilities' 70% share of the future assessment, $12.0 million payable through 2007, has been recorded as a liability in the Consolidated Balance Sheets, including $0.8 million included in "Current liabilities - Environmental liabilities," with a related regulatory asset for the unrecovered amount. The Nuclear Waste Policy Act of 1982 assigned responsibility to the U.S. Department of Energy (DOE) to establish a facility for the ultimate disposition of high level waste and spent nuclear fuel and authorized the DOE to enter into contracts with parties for the disposal of such material beginning in January 1998. Utilities entered into such a contract and has made the agreed payments to DOE. The DOE, however, has experienced significant delays in its efforts and material acceptance is now expected to occur no earlier than 2010. Utilities has been storing spent nuclear fuel on-site since plant operations began in 1974 and has current on-site capability to store spent fuel until 2002. Utilities is aggressively reviewing options for additional spent nuclear fuel storage capability, including expanding on- site storage and pursuing other off-site storage. Utilities is also supporting legislation currently before the U.S. Congress to resolve the lack of progress by the DOE. The Low-Level Radioactive Waste Policy Amendments Act of 1985 mandated that each state must take responsibility for the storage of low-level radioactive waste produced within its borders. The State of Iowa has joined the Midwest Interstate Low-Level Radioactive Waste Compact Commission (Compact), which is planning a storage facility to be located in Ohio to store waste generated by the Compact's six member states. At June 30, 1995, Utilities has prepaid costs of approximately $1 million to the Compact for the building of such a facility. Currently, Utilities is storing its low-level radioactive waste generated at the DAEC on-site until new disposal arrangements are finalized among the Compact members. A Compact disposal facility is anticipated to be in operation in approximately ten years. On-site storage capability currently exists for low-level radioactive waste expected to be generated until the Compact facility is able to accept waste materials. In addition, the Barnwell, South Carolina disposal facility has temporarily reopened and Utilities intends to ship to Barnwell the majority of the low-level radioactive waste it has accumulated on-site, as well as waste it produces in the future as long as the Barnwell site remains open, thereby minimizing the amount of waste stored on-site. The possibility that exposure to electric and magnetic fields (EMF) emanating from power lines, household appliances and other electric sources may result in adverse health effects has been the subject of increased public, governmental, industry and media attention. A considerable amount of scientific research has been conducted on this topic without definitive results. Research is continuing in order to resolve scientific uncertainties. OTHER MATTERS The National Energy Policy Act of 1992 addresses several matters designed to promote competition in the electric wholesale power generation market, including mandated open access to the electric transmission system and greater encouragement of independent power production and cogeneration. On March 29, 1995, the FERC issued a Notice of Proposed Rulemaking pursuant to which FERC proposes to promote competition in the electric utility industry by requiring that each transmission owning utility must 1) implement non- discriminatory tariffs allowing open access to that utility's transmission facilities by wholesale buyers and sellers of electricity and 2) charge itself the same price for transmission and ancillary services as it charges third parties under the tariffs. Utilities filed conforming pro- forma open access transmission tariffs with the FERC on July 24, 1995. The geographic position of Utilities' transmission system could provide revenue opportunities in the open access environment. FERC would allow for recovery of certain stranded costs (i.e. assets the costs of which could be rendered otherwise unrecoverable as the result of open access) in connection with wholesale transmission. The Company cannot predict the final regulations that may be adopted. The IUB recently initiated a Notice of Inquiry (Docket No. NOI-95-1) on the subject of "Emerging Competition in the Electric Utility Industry." A one-day roundtable discussion was held to address all forms of competition in the electric utility industry and to assist the IUB in gathering information and perspectives on electric competition from all persons or entities with an interest or stake in the issues. Such discussions are not expected to produce any specific action by the IUB in the near future. The Company cannot predict the long-term consequences of these competitive issues on its results of operations or financial condition. The Company's strategy for dealing with these emerging issues includes seeking growth opportunities, continuing to offer quality customer service, on-going cost reductions and productivity enhancements. The Company recently initiated a major project to review and redesign its business processes with the primary goals being reduced operating costs, increased efficiency and enhanced customer service. In March 1995, the FASB issued SFAS No. 121, Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of. This statement defines the criteria for valuing regulatory assets. The Company does not expect the amount of regulatory assets recorded in the Consolidated Balance Sheets to be affected. The Company expects to adopt this standard on January 1, 1996, and does not expect that adoption will have a material impact on the financial position or results of operations of the Company. PART II. - OTHER INFORMATION Item 1. Legal Proceedings. Reference is made to Notes 2 and 5 of the Notes to Consolidated Financial Statements for a discussion of rate matters and environmental matters, respectively, and Item 2. Management's Discussion and Analysis of the Results of Operations and Financial Condition - Environmental Matters. Item 2. Changes in the Rights of the Company's Security Holders. None. Item 3. Default Upon Senior Securities. None. Item 4. Results of Votes of Security Holders. (a) The Company held its annual Meeting of Shareholders on May 16, 1995. (b) The following matter was voted upon at the Annual Meeting of Shareholders. The election of nominees for Directors who will serve a one-year term or until their respective successors shall be duly elected. The nominees, all of whom were elected, were as follows: C.R.S. Anderson, J. Wayne Bevis, Dr. George Daly, Blake O. Fisher, Jr., G. Sharp Lannom, IV, Lee Liu, Jack R. Newman, Robert D. Ray, David Q. Reed, Henry Royer, Robert W. Schlutz, Anthony R. Weiler. IES Industries Inc., the sole shareholder of the Company, voted all 13,370,788 shares for the election of the above nominees. Item 5. Other Information. (a) The Company has calculated the ratio of earnings to fixed charges pursuant to Item 503 of Regulation S-K of the Securities and Exchange Commission as follows: For the twelve months ended: June 30, 1995 2.88 December 31, 1994 3.18 December 31, 1993 3.41 December 31, 1992 2.49 December 31, 1991 2.64 December 31, 1990 2.65 (b) Effective August 1, 1995, Mr. Jim Hoffman joined Utilities as Executive Vice President, Customer Service and Energy Delivery. (c) Rene H. Males, Executive Vice President of Utilities, has announced his retirement and will be leaving in the latter part of September 1995. Item 6. Exhibits and Reports on Form 8-K. (a) Exhibits - 4(a) Sixty-first Supplemental Indenture, dated as of March 1, 1995, supplementing Utilities' Indenture of Mortgage and Deed of Trust, dated August 1, 1940. (Filed as Exhibit 4(a) to the Company's Form 10-Q for the quarter ended March 31, 1995). 4(b) Third Supplemental Indenture, dated as of March 1, 1995, supplementing Utilities' Indenture of Mortgage and Deed of Trust, dated September 1, 1993. (Filed as Exhibit 4(b) to the Company's Form 10-Q for the quarter ended March 31, 1995. *12 Ratio of Earning to Fixed Charges. *27 Financial Data Schedule. * Exhibits designated by an asterisk are filed herewith. (b) Reports on Form 8-K - Items Financial Date of Reported Statements Report 5, 7 None May 15, 1995 5, 7 None April 27, 1995 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. IES UTILITIES INC. (Registrant) Date August 14, 1995 By /s/ Dr. Robert J. Latham (Signature) Dr. Robert J. Latham Senior Vice President, Finance By /s/ Richard A. Gabbianelli (Signature) Richard A. Gabbianelli Controller & Chief Accounting Officer EX-12 2 EXHIBIT 12 IES UTILITIES INC. COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
Twelve Months Year Ended December 31, Ended 1990 1991 1992 1993 1994 June 30, 1995 (in thousands, except ratio of earnings to fixed charges) Net income $ 45,969 $ 47,563 $ 45,291 $ 67,970 $ 61,210 $ 54,240 Federal and state income taxes 22,364 23,494 20,723 37,963 37,966 34,002 Net income before income taxes 68,333 71,057 66,014 105,933 99,176 88,242 Interest on long-term debt 28,853 31,171 35,689 34,926 37,942 37,526 Other interest 4,704 5,595 3,939 5,243 3,630 5,475 Estimated interest component of rents 7,936 6,594 4,567 3,729 3,970 3,995 Fixed charges as defined 41,493 43,360 44,195 43,898 45,542 46,996 Earnings as defined $ 109,826 $ 114,417 $ 110,209 $ 149,831 $ 144,718 $ 135,238 Ratio of earnings to fixed charges (unaudited) 2.65 2.64 2.49 3.41 3.18 2.88 For the purposes of computation of these ratios (a) earnings have been calculated by adding fixed charges and Federal and state income taxes to net income; (b) fixed charges consist of interest (including amortization of debt expense, premium and discount) on long-term and other debt and the estimated interest component of rents.
EX-27 3
UT The schedule contains summary financial information extracted from the Consolidated Balance Sheet at June 30, 1995 and the Consolidated Statement of Income and the Consolidated Statement of Cash Flows for the six months ended June 30, 1995 and is qualified in its entirety by reference to such financial statements. 1,000 6-MOS DEC-31-1995 JUN-30-1995 PER-BOOK 1,293,239 48,029 102,075 16,613 196,777 1,656,733 33,427 279,042 190,928 503,397 0 18,320 430,363 15,781 0 77,000 50,140 0 28,256 18,267 515,209 1,656,733 330,511 12,227 280,171 280,171 50,340 1,305 51,645 22,190 17,228 457 16,771 23,000 36,051 66,022 0 0 Income tax expense is not included in Operating Expense in the Consolidated Statements of Income for IES Utilities Inc.