-----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, OgYXRivrV7w3PsVbVdEqD3ex9o4AGUh8oKzFwvfuLPBUJ2LmdcISYX//8OCJx8i8 dOjT5JR6ffMg666R1lo2nw== 0000107832-02-000008.txt : 20020414 0000107832-02-000008.hdr.sgml : 20020414 ACCESSION NUMBER: 0000107832-02-000008 CONFORMED SUBMISSION TYPE: 10-Q/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20010930 FILED AS OF DATE: 20020130 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INTERSTATE POWER & LIGHT CO 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/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04117 FILM NUMBER: 02521389 BUSINESS ADDRESS: STREET 1: 200 FIRST ST SE STREET 2: ALLIANT ENERGY TOWER CITY: CEDAR RAPIDS STATE: IA ZIP: 52401 BUSINESS PHONE: 3193984411 FORMER COMPANY: FORMER CONFORMED NAME: IES UTILITIES INC DATE OF NAME CHANGE: 19940107 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 FILER: COMPANY DATA: COMPANY CONFORMED NAME: ALLIANT ENERGY CORP CENTRAL INDEX KEY: 0000352541 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 391380265 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09894 FILM NUMBER: 02521390 BUSINESS ADDRESS: STREET 1: 222 WEST WASHNGTON AVENUE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523110 MAIL ADDRESS: STREET 1: P O BOX 2568 CITY: MADISON STATE: WI ZIP: 53701-2568 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE ENERGY CORP DATE OF NAME CHANGE: 19980427 FORMER COMPANY: FORMER CONFORMED NAME: WPL HOLDINGS INC DATE OF NAME CHANGE: 19920703 FILER: COMPANY DATA: COMPANY CONFORMED NAME: WISCONSIN POWER & LIGHT CO CENTRAL INDEX KEY: 0000107832 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [4931] IRS NUMBER: 390714890 STATE OF INCORPORATION: WI FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q/A SEC ACT: 1934 Act SEC FILE NUMBER: 000-00337 FILM NUMBER: 02521391 BUSINESS ADDRESS: STREET 1: 222 W WASHINGTON AVE CITY: MADISON STATE: WI ZIP: 53703 BUSINESS PHONE: 6082523311 10-Q/A 1 sept10qa2001.txt 10-Q/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q/A AMENDMENT NO.1 TO [X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended September 30, 2001 ------------------ or [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _______ to _______
Commission Name of Registrant, State of Incorporation, IRS Employer File Number Address of Principal Executive Offices and Telephone Number Identification Number - ----------- ----------------------------------------------------------- --------------------- 1-9894 ALLIANT ENERGY CORPORATION 39-1380265 (a Wisconsin corporation) 222 West Washington Avenue Madison, Wisconsin 53703 Telephone (608)252-3311 0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370 (an Iowa corporation) Alliant Energy Tower Cedar Rapids, Iowa 52401 Telephone (319)398-4411 IES Utilities Inc. ------------------ (Former name of Interstate Power and Light Company) 0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890 (a Wisconsin corporation) 222 West Washington Avenue Madison, Wisconsin 53703 Telephone (608)252-3311
Indicate by check mark whether the registrants (1) have filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X No ------- ------- This combined Form 10-Q/A is separately filed by Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company. Information contained in the quarterly report relating to Interstate Power and Light Company and Wisconsin Power and Light Company is filed by such registrant on its own behalf. Each of Interstate Power and Light Company and Wisconsin Power and Light Company makes no representation as to information relating to registrants other than itself. Number of shares outstanding of each class of common stock as of October 31, 2001:
Alliant Energy Corporation Common stock, $.01 par value, 79,522,785 shares outstanding Interstate Power and Light Company Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation) Wisconsin Power and Light Company Common stock, $5 par value, 13,236,601 shares outstanding (all of which are owned beneficially and of record by Alliant Energy Corporation)
Alliant Energy's previously reported results for the three and nine months ended September 30, 2001 were based on the assumption that Southern Hydro's electricity derivatives qualified for hedge accounting. Southern Hydro is a foreign affiliate of Alliant Energy accounted for under the equity method of accounting. Alliant Energy prepared its quarterly financial statements during 2001 based on the independently prepared financial statements of Southern Hydro, which treated these derivatives as qualifying for hedge accounting under SFAS 133. Upon a further review of the accounting for such derivatives by Alliant Energy during the fourth quarter, it was determined the derivatives did not qualify for hedge accounting and that gains and losses attributable to changes in the fair value of these derivatives should have been recognized in Alliant Energy's earnings in the first three quarters of 2001. As required by U.S. generally accepted accounting principles, all 2001 financial statements of Alliant Energy presented herein have been restated to reflect this change. Alliant Energy's net income in 2000 and retained earnings as of January 1, 2000 were not impacted. The undersigned registrants hereby amend Items 1, 2 and 3 of Part I of their combined Quarterly Report on Form 10-Q for the quarterly period ended September 30, 2001 to provide in their entirety as follows:
DEFINITIONS Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q/A are defined below: Abbreviation or Acronym Definition - ----------------------- ---------- Alliant Energy...................................... Alliant Energy Corporation ATC................................................. American Transmission Company, LLC Capstone............................................ Capstone Turbine Corporation Cargill-Alliant..................................... Cargill-Alliant, L.L.C. Corporate Services.................................. Alliant Energy Corporate Services, Inc. DAEC................................................ Duane Arnold Energy Center Dth................................................. Dekatherm EAC................................................. Energy Adjustment Clause FASB................................................ Financial Accounting Standards Board FERC................................................ Federal Energy Regulatory Commission IESU................................................ IES Utilities Inc. IPC................................................. Interstate Power Company IUB................................................. Iowa Utilities Board Kewaunee............................................ Kewaunee Nuclear Power Plant MAIN................................................ Mid-America Interconnected Network, Inc. MAPP................................................ Mid-Continent Area Power Pool McLeod.............................................. McLeodUSA Incorporated MD&A................................................ Management's Discussion and Analysis of Financial Condition and Results of Operations MW.................................................. Megawatt MWh................................................. Megawatt-Hour NRC................................................. Nuclear Regulatory Commission OCA................................................. Office of Consumer Advocate PGA................................................. Purchased Gas Adjustment PSCW................................................ Public Service Commission of Wisconsin PUHCA............................................... Public Utility Holding Company Act of 1935 Resources........................................... Alliant Energy Resources, Inc. SEC................................................. Securities and Exchange Commission SFAS................................................ Statement of Financial Accounting Standards SFAS 133............................................ Accounting for Derivative Instruments and Hedging Activities South Beloit........................................ South Beloit Water, Gas & Electric Company Southern Hydro...................................... Southern Hydro Partnership STB................................................. U.S. Surface Transportation Board TRANSLink........................................... TRANSLink Transmission Co. LLC Union Pacific....................................... Union Pacific Railroad U.S. ............................................... United States Whiting............................................. Whiting Petroleum Corporation WP&L................................................ Wisconsin Power and Light Company
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PART I. FINANCIAL INFORMATION ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2001 2001 Restated Restated (See Note 9) 2000 (See Note 9) 2000 - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands, except per share amounts) Operating revenues: Electric utility $519,851 $480,763 $1,367,281 $1,248,228 Gas utility 42,979 41,369 396,229 226,156 Non-regulated and other 103,435 81,060 367,309 226,755 ------------- ------------- -------------- ------------- 666,265 603,192 2,130,819 1,701,139 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Electric and steam production fuels 94,894 80,605 248,040 213,990 Purchased power 108,177 85,553 318,024 222,690 Cost of utility gas sold 23,660 22,660 303,984 136,642 Other operation and maintenance 194,663 168,522 629,845 526,562 Depreciation and amortization 85,502 79,625 256,278 233,506 Taxes other than income taxes 25,643 26,206 83,628 79,171 ------------- ------------- -------------- ------------- 532,539 463,171 1,839,799 1,412,561 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Operating income 133,726 140,021 291,020 288,578 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Interest expense and other: Interest expense 46,169 45,040 143,500 127,452 Equity income from unconsolidated investments (22,528) (9,890) (46,381) (12,598) Allowance for funds used during construction (3,373) (2,186) (8,845) (6,825) Preferred dividend requirements of subsidiaries 1,680 1,679 5,040 5,035 Gain on reclassification of investments - (321,349) - (321,349) Gain on sale of McLeodUSA Inc. stock - - - (10,206) Miscellaneous, net 8,518 (8,216) 3,412 (27,948) ------------- ------------- -------------- ------------- 30,466 (294,922) 96,726 (246,439) ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 103,260 434,943 194,294 535,017 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Income taxes 33,929 175,403 65,175 213,879 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Income before cumulative effect of a change in accounting principle, net of tax 69,331 259,540 129,119 321,138 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Cumulative effect of a change in accounting principle, net of tax - 16,708 (12,868) 16,708 ------------- ------------- -------------- ------------- - ------------------------------------------------------------------------------------------------------------------------------------ Net income $69,331 $276,248 $116,251 $337,846 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Average number of common shares outstanding - basic 79,240 79,004 79,107 79,001 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Earnings per average common share - basic: Income before cumulative effect of a change in accounting principle $0.87 $3.29 $1.63 $4.07 Cumulative effect of a change in accounting principle - 0.21 (0.16) 0.21 ------------- ------------- -------------- ------------- Net income $0.87 $3.50 $1.47 $4.28 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Average number of common shares outstanding - diluted 79,350 79,160 79,241 79,202 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Earnings per average common share - diluted: Income before cumulative effect of a change in accounting principle $0.87 $3.28 $1.63 $4.06 Cumulative effect of a change in accounting principle - 0.21 (0.16) 0.21 ------------- ------------- -------------- ------------- Net income $0.87 $3.49 $1.47 $4.27 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ Dividends declared per common share $0.50 $0.50 $1.50 $1.50 ============= ============= ============== ============= - ------------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS September 30, 2001 (Unaudited) Restated December 31, ASSETS (See Note 9) 2000 - ---------------------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $5,005,456 $5,203,069 Gas 589,134 574,390 Other 507,042 474,116 ------------------ ------------------ 6,101,632 6,251,575 Less - Accumulated depreciation 3,340,599 3,296,546 ------------------ ------------------ 2,761,033 2,955,029 Construction work in progress 178,534 130,856 Nuclear fuel, net of amortization 58,532 61,935 ------------------ ------------------ 2,998,099 3,147,820 Other property, plant and equipment, net of accumulated depreciation and amortization of $205,654 and $209,072, respectively 808,640 571,487 ------------------ ------------------ 3,806,739 3,719,307 ------------------ ------------------ - ---------------------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 92,542 148,415 Restricted cash 49,951 3,512 Accounts receivable: Customer, less allowance for doubtful accounts of $6,591 and $3,762, respectively 44,417 122,895 Unbilled utility revenues 47,556 124,515 Other, less allowance for doubtful accounts of $800 and $484, respectively 40,356 45,829 Production fuel, at average cost 46,882 46,627 Materials and supplies, at average cost 58,208 55,930 Gas stored underground, at average cost 61,092 41,359 Prepaid gross receipts tax 18,609 23,088 Regulatory assets 14,879 29,348 Other 74,517 69,463 ------------------ ------------------ 549,009 710,981 ------------------ ------------------ - ---------------------------------------------------------------------------------------------------------------------------- Investments: Investment in available-for-sale securities of McLeodUSA Inc. 31,121 569,951 Investment in trading securities of McLeodUSA Inc. 12,039 220,912 Investments in unconsolidated foreign entities 531,813 507,655 Nuclear decommissioning trust funds 316,546 307,940 Other 221,549 132,203 ------------------ ------------------ 1,113,068 1,738,661 ------------------ ------------------ - ---------------------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 278,917 270,779 Deferred charges and other 306,992 294,038 ------------------ ------------------ 585,909 564,817 ------------------ ------------------ - ---------------------------------------------------------------------------------------------------------------------------- Total assets $6,054,725 $6,733,766 ================== ================== - ---------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED BALANCE SHEETS (Continued) September 30, 2001 (Unaudited) Restated December 31, CAPITALIZATION AND LIABILITIES (See Note 9) 2000 - ------------------------------------------------------------------------------------------------------------------ (in thousands, except share amounts) Capitalization: Common stock - $0.01 par value - authorized 200,000,000 shares; outstanding 79,420,078 and 79,010,114 shares, respectively $794 $790 Additional paid-in capital 961,659 947,504 Retained earnings 815,910 818,162 Accumulated other comprehensive income (loss) (171,562) 271,867 Shares in deferred compensation trust - 69,466 and 28,825 shares at an average cost of $30.75 and $29.52 per share, respectively (2,136) (851) ------------------ ------------------ Total common equity 1,604,665 2,037,472 ------------------ ------------------ Cumulative preferred stock of subsidiaries, net 113,912 113,790 Long-term debt (excluding current portion) 2,206,782 1,910,116 ------------------ ------------------ 3,925,359 4,061,378 ------------------ ------------------ - ------------------------------------------------------------------------------------------------------------------ Current liabilities: Current maturities and sinking funds 10,696 92,477 Variable rate demand bonds 55,100 55,100 Commercial paper 310,420 283,885 Notes payable 50,030 50,067 Other short-term borrowings 99,202 110,783 Accounts payable 252,163 296,959 Accrued taxes 110,801 87,484 Other 167,444 177,580 ------------------ ------------------ 1,055,856 1,154,335 ------------------ ------------------ - ------------------------------------------------------------------------------------------------------------------ Other long-term liabilities and deferred credits: Accumulated deferred income taxes 684,782 931,675 Accumulated deferred investment tax credits 60,336 67,364 Pension and other benefit obligations 69,823 65,399 Environmental liabilities 62,532 64,532 Derivative liability 2,093 181,925 Other 193,944 207,158 ------------------ ------------------ 1,073,510 1,518,053 ------------------ ------------------ - ------------------------------------------------------------------------------------------------------------------ Total capitalization and liabilities $6,054,725 $6,733,766 ================== ================== - ------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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ALLIANT ENERGY CORPORATION CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2001 Restated (See Note 9) 2000 - -------------------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $116,251 $337,846 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 256,278 233,506 Amortization of nuclear fuel 13,344 13,907 Amortization of deferred energy efficiency expenditures 16,109 19,065 Deferred tax expense (benefits) and investment tax credits (13,978) 117,229 Gains on dispositions of assets, net (7,013) (18,390) Gain on reclassification of investments - (321,349) Cumulative effect of a change in accounting principle, net of tax 12,868 (16,708) Equity income from unconsolidated investments, net (46,381) (12,598) Other 28,471 10,568 Other changes in assets and liabilities: Accounts receivable 160,910 (11,137) Gas stored underground (19,733) (22,782) Accounts payable (38,291) (6,474) Accrued taxes 23,317 40,484 Benefit obligations and other (25,590) 3,725 -------------------- --------------------- Net cash flows from operating activities 476,562 366,892 -------------------- --------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash flows from financing activities: Common stock dividends declared (118,503) (118,475) Proceeds from issuance of common stock 11,403 817 Net change in Resources' credit facility 248,500 51,652 Proceeds from issuance of exchangeable senior notes - 402,500 Proceeds from issuance of other long-term debt 205,392 118,649 Reductions in other long-term debt (146,678) (63,282) Net change in other short-term borrowings (136,713) (28,550) Other (39,773) (24,112) -------------------- --------------------- Net cash flows from financing activities 23,628 339,199 -------------------- --------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Construction and acquisition expenditures: Utility operations (254,267) (212,440) Non-regulated businesses and other (376,067) (564,568) Nuclear decommissioning trust funds (19,879) (19,879) Proceeds from formation of ATC and other asset dispositions 110,534 69,355 Other (16,384) (20,959) -------------------- --------------------- Net cash flows used for investing activities (556,063) (748,491) -------------------- --------------------- - -------------------------------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (55,873) (42,400) -------------------- --------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 148,415 113,669 -------------------- --------------------- - -------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $92,542 $71,269 ==================== ===================== - -------------------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $142,900 $111,202 ==================== ===================== Income taxes $56,673 $61,298 ==================== ===================== Noncash investing and financing activities: Capital lease obligations incurred and other $19,759 $338 ==================== ===================== - -------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6 ALLIANT ENERGY CORPORATION NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The interim consolidated financial statements included herein have been prepared by Alliant Energy, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include Alliant Energy and its consolidated subsidiaries (including IESU, WP&L, IPC, Resources and Corporate Services). These financial statements should be read in conjunction with the financial statements and the notes thereto included in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three and nine months ended September 30, 2001 and 2000, (b) the consolidated financial position at September 30, 2001 and December 31, 2000, and (c) the consolidated statement of cash flows for the nine months ended September 30, 2001 and 2000, have been made. Because of the seasonal nature of Alliant Energy's utility operations, results for the three and nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. 2. Alliant Energy's comprehensive income (loss), and the components of other comprehensive loss, net of taxes, for the three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months -------------------------------- ----------------------------- 2001 2000 2001 2000 ------------- --------------- -------------- ------------ Net income $69,331 $276,248 $116,251 $337,846 Other comprehensive loss: Unrealized losses on securities: Unrealized holding losses arising during (105,306) (63,414) period, net of tax (1) (132,251) (335,391) Less: adjustment for gain on reclassification of investments included in net income, net of tax (2) -- 187,296 -- 187,296 Less: reclassification adjustment for other gains included in net income, net of tax 12 238 12 6,566 ------------- --------------- -------------- ------------ Net unrealized losses on securities (105,318) (319,785) (335,403) (257,276) ------------- --------------- -------------- ------------ Foreign currency translation adjustments (45,503) (22,335) (114,233) (40,553) ------------- --------------- -------------- ------------ Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding losses arising during period due to cumulative effect of a change in accounting principle, net of tax -- (6,582) -- (6,582) Other unrealized holding gains (losses) arising during period, net of tax 2,456 (177) 1,968 (177) Less: reclassification adjustment for losses included in net income, net of tax (457) (3,535) (4,239) (3,535) ------------- --------------- -------------- ------------ Net unrealized gains (losses) on qualifying derivatives 2,913 (3,224) 6,207 (3,224) ------------- --------------- -------------- ------------ Other comprehensive loss (147,908) (345,344) (443,429) (301,053) ------------- --------------- -------------- ------------ Comprehensive income (loss) ($78,577) ($69,096) ($327,178) $36,793 ============= =============== ============== ============
(1) Primarily due to quarterly adjustments to the estimated fair value of Alliant Energy's investments in available-for-sale securities of McLeod and Capstone. (2) With the adoption of SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," on July 1, 2000, Alliant Energy recorded pre-tax net income of $321 million in the third quarter of 2000, 7 relating to the unrealized appreciation in value of the 15.6 million shares of its McLeod stock holdings that it reclassified from available-for-sale to trading securities. 3. Various differences exist between segment reporting information for the non-regulated businesses and Resources' information in Alliant Energy's condensed consolidating financial statements in Note 10 due to Alliant Energy's investment in Cargill-Alliant being recorded on Alliant Energy's parent-only books for legal reporting, but included with the non-regulated businesses information for segment reporting (Alliant Energy considers this business as part of its non-regulated businesses for management reporting). The "Net income (loss)" line item was impacted. The "Net income (loss)" line item is not allocated to the electric and gas segments for management reporting purposes and therefore is included in "Other Regulated Domestic Utilities." Intersegment revenues were not material to Alliant Energy's operations. Certain financial information relating to Alliant Energy's significant business segments is as follows:
Regulated Domestic Utilities Non- Alliant ------------------------------------------------ regulated Energy Electric Gas Other Total Businesses Other Consolidated --------------------------------------------------------------------------------------- (in thousands) Three Months Ended September 30, 2001 ------------------------------------- Operating revenues $519,851 $42,979 $8,883 $571,713 $96,031 ($1,479) $666,265 Operating income (loss) 132,753 (6,092) 2,474 129,135 4,731 (140) 133,726 Net income (loss) 69,514 69,514 2,617 (2,800) 69,331 Three Months Ended September 30, 2000 ------------------------------------- Operating revenues $480,763 $41,369 $8,507 $530,639 $73,255 ($702) $603,192 Operating income (loss) 143,962 (2,938) 1,613 142,637 (2,704) 88 140,021 Net income (loss) 68,378 68,378 208,038 (168) 276,248 Nine Months Ended September 30, 2001 ------------------------------------ Operating revenues $1,367,281 $396,229 $28,297 $1,791,807 $342,831 ($3,819) $2,130,819 Operating income 249,036 8,292 4,955 262,283 28,191 546 291,020 Income (loss) before cumulative effect of a change in accounting principle, net of tax 124,907 124,907 10,478 (6,266) 129,119 Cumulative effect of a change in accounting principle, net of tax -- -- (12,868) -- (12,868) Net income (loss) 124,907 124,907 (2,390) (6,266) 116,251 Nine Months Ended September 30, 2000 ------------------------------------ Operating revenues $1,248,228 $226,156 $24,085 $1,498,469 $204,559 ($1,889) $1,701,139 Operating income (loss) 268,834 11,167 4,133 284,134 4,490 (46) 288,578 Net income (loss) 127,487 127,487 213,898 (3,539) 337,846
Resources' (i.e., the non-regulated businesses) assets decreased $537 million during the first nine months of 2001, primarily due to the decrease in market value of its investment in McLeod, which was partially offset by additional non-regulated investments during 2001. Non-regulated net income (loss) for the three and nine months ended September 30, 2001 included: 1) after-tax non-cash SFAS 133 valuation income of $10.4 million and $2.7 million, respectively, relating to Resources' equity method investment in Southern Hydro; and 2) after-tax charges to net income of $12.6 million and $19.6 million, respectively, for non-cash valuation adjustments related to Alliant Energy's obligation under certain 30-year exchangeable senior notes. Refer to Notes 6 and 9 for additional information on Southern Hydro. Net income for the three and nine months ended September 30, 2000 included $204 million (primarily all at Alliant Energy's non-regulated businesses) relating to Alliant Energy's adoption of a new accounting pronouncement, SFAS 133, on July 1, 2000. 8 4. The provisions for income taxes are based on the estimated annual effective tax rate, which differs from the federal statutory rate of 35 percent principally due to state income taxes, the impact of foreign income and associated taxes, tax credits, effects of utility rate making and certain non-deductible expenses. 5. In January 2001, Resources acquired a stake in another Brazilian electric utility. As of September 30, 2001, the total investment in this Brazilian electric utility was approximately $93 million, of which approximately $60 million was paid in January 2001 and the remainder is expected to be paid by the end of the first quarter of 2002. This investment is accounted for under the equity method of accounting. WP&L, including South Beloit, transferred its transmission assets with no gain or loss (approximate net book value of $186 million) to ATC on January 1, 2001. In the second quarter of 2001, WP&L received cash of $75 million and at September 30, 2001, had a $106 million equity investment in ATC, with an ownership percentage of approximately 26.5 percent. WP&L accounts for its investment in ATC under the equity method. 6. Alliant Energy continues to utilize derivative instruments to manage its exposures to various market risks as described in Alliant Energy's, IESU's and WP&L's Annual Report on Form 10-K for the year ended December 31, 2000. The following information supplements, and should be read in conjunction with, Note 10(a) in Alliant Energy's "Notes to Consolidated Financial Statements" in the 2000 Annual Report on Form 10-K. For the nine months ended September 30, 2001, income of $2.1 million was recognized relating to the amount of hedge ineffectiveness in accordance with SFAS 133. As of September 30, 2001, the maximum length of time over which Alliant Energy is hedging its exposure to the variability in future cash flows for forecasted transactions is six months and Alliant Energy estimates that income of $5.1 million will be reclassified from accumulated other comprehensive income into earnings within the twelve months between October 1, 2001 and September 30, 2002 as the hedged transactions affect earnings. Included in "Miscellaneous, net" in Alliant Energy's Consolidated Statements of Income for the nine months ended September 30, 2001 was expense of $208.9 million related to the change in value of the McLeod trading securities, partially offset by income of $179.8 million related to the change in value of the derivative component of the exchangeable senior notes. Southern Hydro, a foreign affiliate of Alliant Energy accounted for under the equity method of accounting, enters into electricity derivative contracts which have not been designated in hedge relationships, in order to manage the electricity commodity price risk associated with anticipated sales into the spot market. Beginning in 2001, these instruments were recorded at their fair value as a component of "Investments in unconsolidated foreign entities" on the Consolidated Balance Sheets and changes in fair value were recorded as a component of "Equity income from unconsolidated investments" in the Consolidated Statements of Income. 7. In March 2001, IESU issued $200 million of senior unsecured debentures at a fixed interest rate of 6-3/4%, due 2011. IESU used the net proceeds to repay short- and long-term debt. 9 8. A reconciliation of the weighted average common shares outstanding used in the basic and diluted earnings per share calculation for the three and nine months ended September 30 was as follows:
Three Months Nine Months ------------------------------- ------------------------------- 2001 2000 2001 2000 ------------- -------------- ------------- ------------- Weighted average common shares outstanding: Basic earnings per share calculation 79,240,093 79,003,569 79,107,304 79,000,683 Effect of dilutive securities 109,964 156,164 133,965 201,033 Diluted earnings per share calculation 79,350,057 79,159,733 79,241,269 79,201,716
For the nine months ended September 30, 2001 and 2000, 1,368,801 and 1,644,377 options, respectively, to purchase shares of common stock, with an average exercise price of $31.20 and $30.15, respectively, were excluded from the calculation of diluted earnings per share as the exercise prices were greater than the average market price. 9. Southern Hydro owns and operates hydroelectric generation facilities in the state of Victoria in Australia. These generation facilities operate as peaking units. Under the rules of the Australian market, Southern Hydro must sell all of its production into a spot market in which the price changes every five minutes and is set on the average of each half hour. Electricity prices in this market can and have been very volatile. In order to manage the electricity commodity price risk associated with anticipated sales into the spot market, Southern Hydro has entered into a variety of electricity derivative contracts with terms of up to five years. The value of these derivative instruments can change significantly as a result of changes in forward electricity prices. These instruments do not qualify for hedge accounting under SFAS 133. Accordingly, per U.S. generally accepted accounting principles, changes in the fair value of these derivatives, which are non-cash valuation adjustments, must be reported in Southern Hydro's earnings. Alliant Energy's share of the cumulative effect of Southern Hydro's adoption of SFAS 133 at January 1, 2001 was a charge of $12.9 million. For the three and nine months ended September 30, 2001, Alliant Energy's share of the change in fair value of these instruments increased net income by $10.4 million and $15.6 million, respectively, and has been reflected in the Consolidated Statements of Income as increases of $16.0 million and $24.0 million, respectively, in "Equity income from unconsolidated investments" and increases of $5.6 million and $8.4 million, respectively, in "Income taxes." Alliant Energy's previously reported results for the three and nine months ended September 30, 2001 were based on the assumption that Southern Hydro's electricity derivatives qualified for hedge accounting. Alliant Energy prepared its quarterly financial statements during 2001 based on the independently prepared financial statements of Southern Hydro, which treated these derivatives as qualifying for hedge accounting under SFAS 133. Upon a further review of the accounting for such derivatives by Alliant Energy during the fourth quarter, it was determined the derivatives did not qualify for hedge accounting and that gains and losses attributable to changes in the fair value of these derivatives should have been recognized in Alliant Energy's earnings in the first three quarters of 2001. As required by U.S. generally accepted accounting principles, all 2001 financial statements of Alliant Energy presented herein have been restated to reflect this change. Alliant Energy's net income in 2000 and retained earnings as of January 1, 2000 were not impacted. Details regarding the changes for Alliant Energy were as follows (dollars in thousands): 10
For the Three Months For the Nine Months Ended September 30, 2001 Ended September 30, 2001 --------------------------- ----------------------------- As Originally As Originally Reported Restated Reported Restated --------------- ----------- ---------------- ------------ Consolidated Statement of Income - -------------------------------- Interest expense and other: Equity income from unconsolidated investments ($11,688) ($22,528) ($30,766) ($46,381) Total interest expense and other 41,306 30,466 112,341 96,726 Income before income taxes 92,420 103,260 178,679 194,294 Income taxes 30,135 33,929 59,709 65,175 Income before cumulative effect of a change in accounting principle, net of tax 62,285 69,331 118,970 129,119 Cumulative effect of a change in accounting principle, net of tax -- -- -- (12,868) Net income 62,285 69,331 118,970 116,251 Earnings per average common share - basic: Income before cumulative effect of a change in accounting principle $0.79 $0.87 $1.50 $1.63 Cumulative effect of a change in accounting principle -- -- -- ($0.16) Net income $0.79 $0.87 $1.50 $1.47 Earnings per average common share - diluted: Income before cumulative effect of a change in accounting principle $0.78 $0.87 $1.50 $1.63 Cumulative effect of a change in accounting principle -- -- -- ($0.16) Net income $0.78 $0.87 $1.50 $1.47
September 30, 2001 ---------------------------------- As Originally Reported Restated ----------------- ---------------- Consolidated Balance Sheet - -------------------------- ASSETS Investments: Investments in unconsolidated foreign entities $526,099 $531,813 Total investments 1,107,354 1,113,068 Total assets 6,049,011 6,054,725
11
September 30, 2001 ---------------------------------- As Originally Reported Restated ----------------- ---------------- Consolidated Balance Sheet (continued) - -------------------------------------- CAPITALIZATION AND LIABILITIES Capitalization: Retained earnings $818,629 $815,910 Accumulated other comprehensive income (loss) (177,187) (171,562) Total common equity 1,601,759 1,604,665 Total capitalization 3,922,453 3,925,359 Other long-term liabilities and deferred credits: Accumulated deferred income taxes 681,974 684,782 Total other long-term liabilities and deferred credits 1,070,702 1,073,510 Total capitalization and liabilities 6,049,011 6,054,725
For the Nine Months Ended September 30, 2001 ----------------------------------- As Originally Reported Restated ----------------- ----------------- Consolidated Statement of Cash Flows - ------------------------------------ Cash flows from operating activities: Net income $118,970 $116,251 Adjustments to reconcile net income to net cash flows from operating activities: Deferred tax benefits and investment tax credits (19,444) (13,978) Cumulative effect of a change in accounting principle, net of tax -- 12,868 Equity income from unconsolidated investments, net (30,766) (46,381)
10. Alliant Energy has fully and unconditionally guaranteed the payment of principal and interest on various debt issued by Resources and, as a result, is required to present condensed consolidating financial statements. No other Alliant Energy subsidiaries are guarantors of Resources' debt issuances. Alliant Energy's condensed consolidating financial statements are as follows: 12
Alliant Energy Corporation Condensed Consolidating Statements of Income Three Months Ended September 30, 2001 and 2000 (in thousands) Other Consolidated Alliant Energy Alliant Energy Consolidating Alliant Parent Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- Three Months Ended September 30, 2001 - ------------------------------------- Operating revenues: Electric utility $- $- $519,851 $- $519,851 Gas utility - - 42,979 - 42,979 Non-regulated and other - 96,031 82,432 (75,028) 103,435 ------------------------------------------------------------------- - 96,031 645,262 (75,028) 666,265 ------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 94,894 - 94,894 Purchased power - - 108,177 - 108,177 Cost of utility gas sold - - 23,660 - 23,660 Other operation and maintenance 589 71,650 195,369 (72,945) 194,663 Depreciation and amortization - 16,148 69,354 - 85,502 Taxes other than income taxes - 3,502 24,081 (1,940) 25,643 ------------------------------------------------------------------- 589 91,300 515,535 (74,885) 532,539 ------------------------------------------------------------------- Operating income (loss) (589) 4,731 129,727 (143) 133,726 ------------------------------------------------------------------- Interest expense and other: Interest expense 2,658 16,508 28,607 (1,604) 46,169 Equity income from unconsolidated investments (2,964) (17,038) (2,526) - (22,528) Allowance for funds used during construction - - (3,373) - (3,373) Preferred dividend requirements of subsidiaries - - 1,680 - 1,680 Miscellaneous, net (71,032) 12,475 (4,754) 71,829 8,518 ------------------------------------------------------------------- (71,338) 11,945 19,634 70,225 30,466 ------------------------------------------------------------------- Income (loss) before income taxes 70,749 (7,214) 110,093 (70,368) 103,260 ------------------------------------------------------------------- Income tax expense (benefit) 1,418 (7,905) 40,559 (143) 33,929 ------------------------------------------------------------------- Net income (loss) $69,331 $691 $69,534 ($70,225) $69,331 =================================================================== Three Months Ended September 30, 2000 - ------------------------------------- Operating revenues: Electric utility $- $- $480,763 $- $480,763 Gas utility - - 41,369 - 41,369 Non-regulated and other - 73,255 72,214 (64,409) 81,060 ------------------------------------------------------------------- - 73,255 594,346 (64,409) 603,192 ------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 80,605 - 80,605 Purchased power - - 85,553 - 85,553 Cost of utility gas sold - - 22,660 - 22,660 Other operation and maintenance 182 61,022 170,222 (62,904) 168,522 Depreciation and amortization - 11,425 68,200 - 79,625 Taxes other than income taxes - 3,512 23,869 (1,175) 26,206 ------------------------------------------------------------------- 182 75,959 451,109 (64,079) 463,171 ------------------------------------------------------------------- Operating income (loss) (182) (2,704) 143,237 (330) 140,021 ------------------------------------------------------------------- Interest expense and other: Interest expense 4,672 14,754 30,421 (4,807) 45,040 Equity income from unconsolidated investments (7,322) (2,534) (34) - (9,890) Allowance for funds used during construction - - (2,186) - (2,186) Preferred dividend requirements of subsidiaries - - 1,679 - 1,679 Gain on reclassification of investments - (321,349) - - (321,349) Miscellaneous, net (275,031) (5,800) (3,843) 276,458 (8,216) ------------------------------------------------------------------- (277,681) (314,929) 26,037 271,651 (294,922) ------------------------------------------------------------------- Income (loss) before income taxes 277,499 312,225 117,200 (271,981) 434,943 ------------------------------------------------------------------- Income tax expense (benefit) 1,251 125,619 48,863 (330) 175,403 ------------------------------------------------------------------- Income (loss) before cumulative effect of a change in accounting principle, net of tax 276,248 186,606 68,337 (271,651) 259,540 ------------------------------------------------------------------- Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708 ------------------------------------------------------------------- Net income (loss) $276,248 $203,279 $68,372 ($271,651) $276,248 ===================================================================
13
Alliant Energy Corporation Condensed Consolidating Statements of Income Nine Months Ended September 30, 2001 and 2000 (in thousands) Other Consolidated Alliant Energy Alliant Energy Consolidating Alliant Parent Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- Nine Months Ended September 30, 2001 - ------------------------------------ Operating revenues: Electric utility $- $- $1,367,281 $- $1,367,281 Gas utility - - 396,229 - 396,229 Non-regulated and other - 342,831 220,959 (196,481) 367,309 ------------------------------------------------------------------- - 342,831 1,984,469 (196,481) 2,130,819 ------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 248,040 - 248,040 Purchased power - - 318,024 - 318,024 Cost of utility gas sold - - 303,984 - 303,984 Other operation and maintenance 893 254,233 564,541 (189,822) 629,845 Depreciation and amortization - 48,266 208,012 - 256,278 Taxes other than income taxes - 12,141 77,963 (6,476) 83,628 ------------------------------------------------------------------- 893 314,640 1,720,564 (196,298) 1,839,799 ------------------------------------------------------------------- Operating income (loss) (893) 28,191 263,905 (183) 291,020 ------------------------------------------------------------------- Interest expense and other: Interest expense 10,513 51,822 89,903 (8,738) 143,500 Equity income from unconsolidated investments (8,058) (27,305) (11,018) - (46,381) Allowance for funds used during construction - - (8,845) - (8,845) Preferred dividend requirements of subsidiaries - - 5,040 - 5,040 Miscellaneous, net (121,430) 12,764 (14,010) 126,088 3,412 ------------------------------------------------------------------- (118,975) 37,281 61,070 117,350 96,726 ------------------------------------------------------------------- Income (loss) before income taxes 118,082 (9,090) 202,835 (117,533) 194,294 ------------------------------------------------------------------- Income tax expense (benefit) 1,831 (14,331) 77,858 (183) 65,175 ------------------------------------------------------------------- Income (loss) before cumulative effect of a change in accounting principle, net of tax 116,251 5,241 124,977 (117,350) 129,119 ------------------------------------------------------------------- Cumulative effect of a change in accounting principle, net of tax - (12,868) - - (12,868) ------------------------------------------------------------------- Net income (loss) $116,251 ($7,627) $124,977 ($117,350) $116,251 =================================================================== Nine Months Ended September 30, 2000 - ------------------------------------ Operating revenues: Electric utility $- $- $1,248,228 $- $1,248,228 Gas utility - - 226,156 - 226,156 Non-regulated and other - 204,559 203,381 (181,185) 226,755 ------------------------------------------------------------------- - 204,559 1,677,765 (181,185) 1,701,139 ------------------------------------------------------------------- Operating expenses: Electric and steam production fuels - - 213,990 - 213,990 Purchased power - - 222,690 - 222,690 Cost of utility gas sold - - 136,642 - 136,642 Other operation and maintenance 596 160,907 540,147 (175,088) 526,562 Depreciation and amortization - 29,260 204,246 - 233,506 Taxes other than income taxes - 9,902 74,419 (5,150) 79,171 ------------------------------------------------------------------- 596 200,069 1,392,134 (180,238) 1,412,561 ------------------------------------------------------------------- Operating income (loss) (596) 4,490 285,631 (947) 288,578 ------------------------------------------------------------------- Interest expense and other: Interest expense 12,164 38,221 90,408 (13,341) 127,452 Equity income from unconsolidated investments (9,922) (2,354) (322) - (12,598) Allowance for funds used during construction - - (6,825) - (6,825) Preferred dividend requirements of subsidiaries - - 5,035 - 5,035 Gain on reclassification adjustment - (321,349) - - (321,349) Gain on sale of McLeodUSA Inc. stock - (10,206) - . - (10,206) Miscellaneous, net (344,528) (11,094) (20,595) 348,269 (27,948) ------------------------------------------------------------------- (342,286) (306,782) 67,701 334,928 (246,439) ------------------------------------------------------------------- Income (loss) before income taxes 341,690 311,272 217,930 (335,875) 535,017 ------------------------------------------------------------------- Income tax expense (benefit) 3,844 120,496 90,486 (947) 213,879 ------------------------------------------------------------------- Income (loss) before cumulative effect of a change in accounting principle, net of tax 337,846 190,776 127,444 (334,928) 321,138 ------------------------------------------------------------------- Cumulative effect of a change in accounting principle, net of tax - 16,673 35 - 16,708 ------------------------------------------------------------------- Net income (loss) $337,846 $207,449 $127,479 ($334,928) $337,846 ===================================================================
14
Alliant Energy Corporation Condensed Consolidating Balance Sheet As of September 30, 2001 (in thousands) Alliant Other Energy Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- ASSETS Property, plant and equipment: Utility - Plant in service - Electric $- $- $5,005,456 $- $5,005,456 Other - - 1,096,176 - 1,096,176 ------------------------------------------------------------------- - - 6,101,632 - 6,101,632 Less - Accumulated depreciation - - 3,340,599 - 3,340,599 Construction work in progress - - 178,534 - 178,534 Nuclear fuel, net of amortization - - 58,532 - 58,532 Other property, plant and equipment, net - 767,328 41,423 (111) 808,640 ------------------------------------------------------------------- - 767,328 3,039,522 (111) 3,806,739 ------------------------------------------------------------------- Current assets: Cash and temporary cash investments 6,668 61,906 23,968 - 92,542 Restricted cash - 48,895 1,056 - 49,951 Accounts receivable, net 53,106 92,463 116,531 (129,771) 132,329 Income tax refunds receivable 3,169 18,786 665 - 22,620 Production fuel, at average cost - 2,828 44,054 - 46,882 Materials and supplies, at average cost - 5,912 52,296 - 58,208 Gas stored underground, at average cost - 17,079 44,013 - 61,092 Regulatory assets - - 14,879 - 14,879 Derivative asset - 250 10,389 - 10,639 Other 52,503 29,982 86,326 (108,944) 59,867 ------------------------------------------------------------------- 115,446 278,101 394,177 (238,715) 549,009 ------------------------------------------------------------------- Investments: Consolidated subsidiaries 1,725,161 - - (1,725,161) - Investment in available-for-sale securities of McLeodUSA Inc. - 31,121 - - 31,121 Investment in trading securities of McLeodUSA Inc. - 12,039 - - 12,039 Other 33,298 584,941 451,682 (13) 1,069,908 ------------------------------------------------------------------- 1,758,459 628,101 451,682 (1,725,174) 1,113,068 ------------------------------------------------------------------- ------------------------------------------------------------------- Deferred charges and other - 101,974 483,935 - 585,909 ------------------------------------------------------------------- Total assets $1,873,905 $1,775,504 $4,369,316 ($1,964,000) $6,054,725 =================================================================== CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $962,453 $232,743 $753,442 ($986,185) $962,453 Retained earnings 815,910 166,385 744,271 (910,656) 815,910 Accumulated other comprehensive income (loss) (171,562) (176,633) 5,071 171,562 (171,562) Shares in deferred compensation trust (2,136) - - - (2,136) ------------------------------------------------------------------- Total common equity 1,604,665 222,495 1,502,784 (1,725,279) 1,604,665 ------------------------------------------------------------------- Cumulative preferred stock of subsidiaries, net - - 113,912 - 113,912 Long-term debt (excluding current portion) 24,000 854,749 1,328,033 - 2,206,782 ------------------------------------------------------------------- 1,628,665 1,077,244 2,944,729 (1,725,279) 3,925,359 ------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds - 10,136 560 - 10,696 Other short-term borrowings - 99,202 - - 99,202 Accrued taxes - 12,313 98,488 - 110,801 Derivative liability - - 1,373 - 1,373 Other 243,116 310,762 518,621 (238,715) 833,784 ------------------------------------------------------------------- 243,116 432,413 619,042 (238,715) 1,055,856 ------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income tax expense (benefit) (5,728) 180,987 509,523 - 684,782 Minority interest - 50,850 - - 50,850 Derivative liability - 2,093 - - 2,093 Other 7,852 31,917 296,022 (6) 335,785 ------------------------------------------------------------------- 2,124 265,847 805,545 (6) 1,073,510 ------------------------------------------------------------------- Total capitalization and liabilities $1,873,905 $1,775,504 $4,369,316 ($1,964,000) $6,054,725 ===================================================================
15
Alliant Energy Corporation Condensed Consolidating Balance Sheet As of December 31, 2000 (in thousands) Alliant Other Energy Alliant Consolidated Parent Energy Consolidating Alliant Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- ASSETS Property, plant and equipment: Utility - Plant in service - Electric $- $- $5,203,069 $- $5,203,069 Other - - 1,048,506 - 1,048,506 ------------------------------------------------------------------- - - 6,251,575 - 6,251,575 Less - Accumulated depreciation - - 3,296,546 - 3,296,546 Construction work in progress - - 130,856 - 130,856 Nuclear fuel, net of amortization - - 61,935 - 61,935 Other property, plant and equipment, net - 553,911 17,687 (111) 571,487 ------------------------------------------------------------------- - 553,911 3,165,507 (111) 3,719,307 ------------------------------------------------------------------- Current assets: Cash and temporary cash investments 574 133,957 13,884 - 148,415 Restricted cash - 2,866 646 - 3,512 Accounts receivable, net 2,955 113,261 274,103 (97,080) 293,239 Income tax refunds receivable 3,236 9,343 5,160 - 17,739 Production fuel, at average cost - 1,379 45,248 - 46,627 Materials and supplies, at average cost - 2,086 53,844 - 55,930 Gas stored underground, at average cost - 2,983 38,376 - 41,359 Regulatory assets - - 29,348 - 29,348 Derivative asset - 1,744 1,984 - 3,728 Other 217,392 16,222 53,035 (215,565) 71,084 ------------------------------------------------------------------- 224,157 283,841 515,628 (312,645) 710,981 ------------------------------------------------------------------- Investments: Consolidated subsidiaries 1,884,976 - - (1,884,976) - Investment in available-for-sale securities of McLeodUSA Inc. - 569,951 - - 569,951 Investment in trading securities of McLeodUSA Inc. - 220,912 - - 220,912 Other 30,511 579,803 337,484 - 947,798 ------------------------------------------------------------------- 1,915,487 1,370,666 337,484 (1,884,976) 1,738,661 ------------------------------------------------------------------- ------------------------------------------------------------------- Deferred charges and other - 104,339 460,478 - 564,817 ------------------------------------------------------------------- Total assets $2,139,644 $2,312,757 $4,479,097 ($2,197,732) $6,733,766 =================================================================== CAPITALIZATION AND LIABILITIES Capitalization: Common stock and additional paid-in capital $948,294 $232,684 $753,392 ($986,076) $948,294 Retained earnings 818,266 174,012 724,889 (899,005) 818,162 Accumulated other comprehensive income (loss) - 276,591 (4,724) - 271,867 Shares in deferred compensation trust (851) - - - (851) ------------------------------------------------------------------- Total common equity 1,765,709 683,287 1,473,557 (1,885,081) 2,037,472 ------------------------------------------------------------------- Cumulative preferred stock of subsidiaries, net - - 113,790 - 113,790 Long-term debt (excluding current portion) 24,000 731,736 1,154,380 - 1,910,116 ------------------------------------------------------------------- 1,789,709 1,415,023 2,741,727 (1,885,081) 4,061,378 ------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds - 10,917 81,560 - 92,477 Other short-term borrowings - 110,783 - - 110,783 Accrued taxes - 21,916 65,568 - 87,484 Derivative liability - 142 10,096 - 10,238 Other 347,566 102,647 715,785 (312,645) 853,353 ------------------------------------------------------------------- 347,566 246,405 873,009 (312,645) 1,154,335 ------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income tax expense (benefit) (6,415) 411,614 526,476 - 931,675 Minority interest - 23,341 - - 23,341 Derivative liability - 181,925 - - 181,925 Other 8,784 34,449 337,885 (6) 381,112 ------------------------------------------------------------------- 2,369 651,329 864,361 (6) 1,518,053 ------------------------------------------------------------------- Total capitalization and liabilities $2,139,644 $2,312,757 $4,479,097 ($2,197,732) $6,733,766 ===================================================================
16
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows Nine Months Ended September 30, 2001 and 2000 (in thousands) Other Consolidated Alliant Energy Alliant Energy Consolidating Alliant Parent Company Resources Subsidiaries Adjustments Energy ------------------------------------------------------------------- Nine Months Ended September 30, 2001 - ------------------------------------ Net cash flows from (used for) operating activities $56,850 $107,219 $437,602 ($125,109) $476,562 ------------------------------------------------------------------- Cash flows from (used for) financing activities: Common stock dividends declared (118,503) - (105,595) 105,595 (118,503) Net change in Resources' credit facility - 248,500 - - 248,500 Proceeds from issuance of other long-term debt - 5,392 200,000 - 205,392 Reductions in other long-term debt - (10,568) (136,110) - (146,678) Net change in other short-term borrowings (92,465) (44,248) - - (136,713) Other 174,827 (40,374) (167,754) 4,931 (28,370) ------------------------------------------------------------------- Net cash flows from (used for) financing activities (36,141) 158,702 (209,459) 110,526 23,628 ------------------------------------------------------------------- Cash flows from (used for) investing activities: Construction and acquisition expenditures: Utility operations - - (254,267) - (254,267) Non-regulated businesses and other - (376,067) - - (376,067) Proceeds from formation of ATC and other asset dispositions - 35,891 74,643 - 110,534 Other (14,615) 2,204 (38,435) 14,583 (36,263) ------------------------------------------------------------------- Net cash flows from (used for) investing activities (14,615) (337,972) (218,059) 14,583 (556,063) ------------------------------------------------------------------- Net increase (decrease) in cash and temporary cash investments 6,094 (72,051) 10,084 - (55,873) ------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 574 133,957 13,884 - 148,415 ------------------------------------------------------------------- Cash and temporary cash investments at end of period $6,668 $61,906 $23,968 $- $92,542 =================================================================== Supplemental cash flows information: Cash paid (refunded) during the period for: Interest $10,270 $46,987 $85,643 $- $142,900 =================================================================== Income taxes $1,702 ($10,131) $65,102 $- $56,673 =================================================================== Noncash investing and financing activities: Capital lease obligations incurred and other $- $- $19,759 $- $19,759 =================================================================== Nine Months Ended September 30, 2000 - ------------------------------------ Net cash flows from (used for) operating activities $338,501 $31,658 $336,696 ($339,963) $366,892 ------------------------------------------------------------------- Cash flows from (used for) financing activities: Common stock dividends declared (118,475) - (60,255) 60,255 (118,475) Net change in Resources' credit facility - 51,652 - - 51,652 Proceeds from issuance of exchangeable senior notes - 402,500 - - 402,500 Proceeds from issuance of other long-term debt - 18,649 100,000 - 118,649 Reductions in other long-term debt - (12,086) (51,196) - (63,282) Net change in other short-term borrowings (28,570) 20 - - (28,550) Other 54,199 (13,252) (67,882) 3,640 (23,295) ------------------------------------------------------------------- Net cash flows from (used for) financing activities (92,846) 447,483 (79,333) 63,895 339,199 ------------------------------------------------------------------- Cash flows from (used for) investing activities: Construction and acquisition expenditures: Utility operations - - (212,440) - (212,440) Non-regulated businesses and other - (556,438) (8,130) - (564,568) Proceeds from dispositions of assets 2,281 64,947 2,127 - 69,355 Other (276,112) 665 (41,459) 276,068 (40,838) ------------------------------------------------------------------- Net cash flows from (used for) investing activities (273,831) (490,826) (259,902) 276,068 (748,491) ------------------------------------------------------------------- Net decrease in cash and temporary cash investments (28,176) (11,685) (2,539) - (42,400) ------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 28,647 65,086 19,936 - 113,669 ------------------------------------------------------------------- Cash and temporary cash investments at end of period $471 $53,401 $17,397 $- $71,269 =================================================================== Supplemental cash flows information: Cash paid (refunded) during the period for: Interest $11,610 $29,525 $70,067 $- $111,202 =================================================================== Income taxes ($7,557) ($9,361) $78,216 $- $61,298 =================================================================== Noncash investing and financing activities: Capital lease obligations incurred $- $- $338 $- $338 ===================================================================
17
IES UTILITIES INC. CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $217,749 $202,899 $557,975 $496,934 Gas utility 19,314 20,893 177,743 107,767 Steam 7,445 7,126 24,478 20,298 --------------- --------------- ----------------- --------------- 244,508 230,918 760,196 624,999 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 41,785 26,806 106,709 88,440 Purchased power 30,998 28,324 107,441 59,464 Cost of gas sold 11,478 13,253 136,701 68,291 Other operation and maintenance 57,952 48,160 175,491 158,865 Depreciation and amortization 27,441 26,856 82,517 80,555 Taxes other than income taxes 9,915 11,630 33,121 35,562 --------------- --------------- ----------------- --------------- 179,569 155,029 641,980 491,177 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Operating income 64,939 75,889 118,216 133,822 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 13,045 12,613 39,080 38,208 Allowance for funds used during construction (1,793) (764) (4,372) (1,827) Miscellaneous, net (2,031) 305 (6,419) (5,861) --------------- --------------- ----------------- --------------- 9,221 12,154 28,289 30,520 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Income before income taxes 55,718 63,735 89,927 103,302 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Income taxes 18,452 26,373 31,789 43,285 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Net income 37,266 37,362 58,138 60,017 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 229 229 686 686 --------------- --------------- ----------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------- Earnings available for common stock $37,037 $37,133 $57,452 $59,331 =============== =============== ================= =============== - ------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
18
IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS September 30, 2001 December 31, ASSETS (Unaudited) 2000 - -------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $2,294,947 $2,253,695 Gas 228,993 221,949 Steam 59,554 59,416 Common 163,903 146,536 ----------------- ----------------- 2,747,397 2,681,596 Less - Accumulated depreciation 1,470,701 1,392,766 ----------------- ----------------- 1,276,696 1,288,830 Construction work in progress 97,974 58,352 Leased nuclear fuel, net of amortization 40,732 45,836 ----------------- ----------------- 1,415,402 1,393,018 Other property, plant and equipment, net of accumulated depreciation and amortization of $2,552 and $2,239, respectively 5,894 6,189 ----------------- ----------------- 1,421,296 1,399,207 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 7,916 6,755 Temporary cash investments with associated companies 56,777 - Accounts receivable: Customer, less allowance for doubtful accounts of $2,538 and $587, respectively - 54,660 Associated companies 1,932 2,696 Other, less allowance for doubtful accounts of $676 and $373, respectively 6,028 17,329 Production fuel, at average cost 10,356 11,088 Materials and supplies, at average cost 24,612 26,232 Gas stored underground, at average cost 16,477 19,290 Adjustment clause balances - 14,776 Regulatory assets 6,851 14,839 Prepayments and other 3,181 3,442 ----------------- ----------------- 134,130 171,107 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 114,852 112,172 Other 6,281 6,276 ----------------- ----------------- 121,133 118,448 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 115,849 117,574 Deferred charges and other 15,496 12,970 ----------------- ----------------- 131,345 130,544 ----------------- ----------------- - -------------------------------------------------------------------------------------------------------------- Total assets $1,807,904 $1,819,306 ================= ================= - -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
19
IES UTILITIES INC. CONSOLIDATED BALANCE SHEETS (Continued) September 30, 2001 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 2000 - -------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $2.50 par value - authorized 24,000,000 shares; 13,370,788 shares outstanding $33,427 $33,427 Additional paid-in capital 279,042 279,042 Retained earnings 281,305 267,829 Accumulated other comprehensive loss - (18) ------------------ ----------------- Total common equity 593,774 580,280 ------------------ ----------------- Cumulative preferred stock 18,320 18,320 Long-term debt (excluding current portion) 694,407 469,771 ------------------ ----------------- 1,306,501 1,068,371 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 560 81,560 Capital lease obligations 15,060 12,651 Notes payable to associated companies - 101,095 Accounts payable 32,225 65,898 Accounts payable to associated companies 24,340 30,375 Accrued taxes 68,984 48,069 Other 35,662 39,764 ------------------ ----------------- 176,831 379,412 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 212,684 224,164 Accumulated deferred investment tax credits 22,954 25,063 Environmental liabilities 27,597 29,521 Capital lease obligations 25,672 33,185 Pension and other benefit obligations 24,596 26,884 Other 11,069 32,706 ------------------ ----------------- 324,572 371,523 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,807,904 $1,819,306 ================== ================= - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
IES UTILITIES INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2001 2000 - -------------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $58,138 $60,017 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 82,517 80,555 Amortization of leased nuclear fuel 9,186 10,281 Amortization of deferred energy efficiency expenditures 9,237 10,611 Deferred tax benefits and investment tax credits (8,437) (8,656) Refueling outage provision (5,819) 7,372 Other (531) 144 Other changes in assets and liabilities: Accounts receivable 66,725 (3,622) Gas stored underground 2,813 (12,357) Accounts payable (36,127) 4,250 Accrued taxes 20,915 19,193 Adjustment clause balances 23,365 1,538 Manufactured gas plants insurance refunds (21,541) - Benefit obligations and other (14,409) 6,293 ----------------- ------------------ Net cash flows from operating activities 186,032 175,619 ----------------- ------------------ - -------------------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends declared (43,976) (43,975) Preferred stock dividends (686) (686) Proceeds from issuance of long-term debt 200,000 - Reductions in long-term debt (84,110) (51,196) Net change in short-term borrowings (101,095) 20,058 Principal payments under capital lease obligations (6,198) (8,611) Other 9,801 (229) ----------------- ------------------ Net cash flows used for financing activities (26,264) (84,639) ----------------- ------------------ - -------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (94,782) (85,123) Nuclear decommissioning trust funds (4,506) (4,506) Other (2,542) (456) ----------------- ------------------ Net cash flows used for investing activities (101,830) (90,085) ----------------- ------------------ - -------------------------------------------------------------------------------------------------------------------- Net increase in cash and temporary cash investments 57,938 895 ----------------- ------------------ - -------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 6,755 5,720 ----------------- ------------------ - -------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $64,693 $6,615 ================= ================== - -------------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $41,501 $30,912 ================= ================== Income taxes $24,387 $31,562 ================= ================== Noncash investing and financing activities - Capital lease obligations incurred and other $19,759 $338 ================= ================== - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
21 IES UTILITIES INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to IESU. 1. The interim consolidated financial statements included herein have been prepared by IESU, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. IESU is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in IESU's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three and nine months ended September 30, 2001 and 2000, (b) the consolidated financial position at September 30, 2001 and December 31, 2000, and (c) the consolidated statement of cash flows for the nine months ended September 30, 2001 and 2000, have been made. Because of the seasonal nature of IESU's operations, results for the three and nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. 2. IESU's comprehensive income, and the components of other comprehensive income, net of taxes, for the three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months ------------------------------- ------------------------------- 2001 2000 2001 2000 -------------- --------------- -------------- --------------- Earnings available for common stock $37,037 $37,133 $57,452 $59,331 Other comprehensive income: Unrealized gains on derivatives qualified as hedges: Unrealized holding gains arising during period due to cumulative effect of a change in accounting principle, net of tax -- 51 -- 51 Other unrealized holding losses arising during period, net of tax -- (43) -- (43) Reclassification adjustment for losses included in earnings available for common stock related to derivatives qualified as hedges, net of tax -- -- 18 -- -------------- --------------- -------------- --------------- Net unrealized gains on qualifying derivatives -- 8 18 8 -------------- --------------- -------------- --------------- Other comprehensive income -- 8 18 8 -------------- --------------- -------------- --------------- Comprehensive income $37,037 $37,141 $57,470 $59,339 ============== =============== ============== ===============
22 3. Certain financial information relating to IESU's significant business segments is presented below. Intersegment revenues were not material to IESU's operations.
Electric Gas Other Total ------------------------------------------------------- (in thousands) Three Months Ended September 30, 2001 ------------------------------------- Operating revenues $217,749 $19,314 $7,445 $244,508 Operating income (loss) 66,312 (3,329) 1,956 64,939 Earnings available for common stock 37,037 37,037 Three Months Ended September 30, 2000 ------------------------------------- Operating revenues $202,899 $20,893 $7,126 $230,918 Operating income (loss) 75,638 (854) 1,105 75,889 Earnings available for common stock 37,133 37,133 Nine Months Ended September 30, 2001 ------------------------------------ Operating revenues $557,975 $177,743 $24,478 $760,196 Operating income 108,747 5,585 3,884 118,216 Earnings available for common stock 57,452 57,452 Nine Months Ended September 30, 2000 ------------------------------------ Operating revenues $496,934 $107,767 $20,298 $624,999 Operating income 126,415 4,568 2,839 133,822 Earnings available for common stock 59,331 59,331
4. The merger of IPC with and into IESU was approved by their respective shareowners in April 2001 and by the SEC in October 2001. The merger was effective January 1, 2002 and IESU changed its name to Interstate Power and Light Company. 23
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Three Months For the Nine Months Ended September 30, Ended September 30, 2001 2000 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------ (in thousands) Operating revenues: Electric utility $207,462 $183,088 $576,150 $518,575 Gas utility 19,351 15,169 169,588 89,970 Water 1,437 1,378 3,818 3,787 --------------- --------------- --------------- --------------- 228,250 199,635 749,556 612,332 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Operating expenses: Electric production fuels 34,609 33,198 97,876 83,699 Purchased power 62,065 41,299 165,231 113,119 Cost of gas sold 10,193 6,431 132,270 51,398 Other operation and maintenance 44,745 41,855 135,452 142,039 Depreciation and amortization 32,552 32,655 97,398 97,631 Taxes other than income taxes 7,860 7,285 24,719 21,913 --------------- --------------- --------------- --------------- 192,024 162,723 652,946 509,799 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Operating income 36,226 36,912 96,610 102,533 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Interest expense and other: Interest expense 11,013 11,191 33,539 33,327 Equity income from unconsolidated investments (2,472) (50) (10,819) (341) Allowance for funds used during construction (1,414) (1,154) (3,854) (4,304) Miscellaneous, net (3,087) (1,067) (4,391) (7,208) --------------- --------------- --------------- --------------- 4,040 8,920 14,475 21,474 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Income before income taxes 32,186 27,992 82,135 81,059 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Income taxes 12,332 10,445 31,464 30,343 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Income before cumulative effect of a change in accounting principle, net of tax 19,854 17,547 50,671 50,716 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Cumulative effect of a change in accounting principle, net of tax - 35 - 35 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Net income 19,854 17,582 50,671 50,751 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Preferred dividend requirements 827 827 2,483 2,483 --------------- --------------- --------------- --------------- - ------------------------------------------------------------------------------------------------------------------------------ Earnings available for common stock $19,027 $16,755 $48,188 $48,268 =============== =============== =============== =============== - ------------------------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS September 30, 2001 December 31, ASSETS (Unaudited) 2000 - --------------------------------------------------------------------------------------------------------------- (in thousands) Property, plant and equipment: Utility - Plant in service - Electric $1,746,287 $2,007,974 Gas 279,265 273,457 Water 31,059 29,869 Common 236,955 223,921 ----------------- ------------------ 2,293,566 2,535,221 Less - Accumulated depreciation 1,320,095 1,380,723 ----------------- ------------------ 973,471 1,154,498 Construction work in progress 61,680 59,133 Nuclear fuel, net of amortization 17,800 16,099 ----------------- ------------------ 1,052,951 1,229,730 Other property, plant and equipment, net of accumulated depreciation and amortization of $195 for both periods 594 369 ----------------- ------------------ 1,053,545 1,230,099 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 8,723 2,584 Accounts receivable: Customer 12,358 51,769 Associated companies 1,366 2,211 Other 9,598 13,865 Production fuel, at average cost 15,083 17,811 Materials and supplies, at average cost 21,802 21,639 Gas stored underground, at average cost 23,850 13,876 Prepaid gross receipts tax 18,609 23,088 Derivative asset 9,624 252 Other 4,152 6,145 ----------------- ------------------ 125,165 153,240 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 201,694 195,768 Other 120,181 14,362 ----------------- ------------------ 321,875 210,130 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 98,933 88,721 Deferred charges and other 188,861 174,834 ----------------- ------------------ 287,794 263,555 ----------------- ------------------ - --------------------------------------------------------------------------------------------------------------- Total assets $1,788,379 $1,857,024 ================= ================== - --------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED BALANCE SHEETS (Continued) September 30, 2001 December 31, CAPITALIZATION AND LIABILITIES (Unaudited) 2000 - -------------------------------------------------------------------------------------------------------------------- (in thousands, except share amounts) Capitalization: Common stock - $5 par value - authorized 18,000,000 shares; 13,236,601 shares outstanding $66,183 $66,183 Additional paid-in capital 229,597 229,516 Retained earnings 374,450 371,602 Accumulated other comprehensive income (loss) 5,071 (4,708) ------------------ ----------------- Total common equity 675,301 662,593 ------------------ ----------------- Cumulative preferred stock 59,963 59,963 Long-term debt (excluding current portion) 468,051 514,209 ------------------ ----------------- 1,203,315 1,236,765 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Current liabilities: Variable rate demand bonds 55,100 55,100 Notes payable to associated companies 47,057 29,244 Accounts payable 82,712 120,155 Accounts payable to associated companies 34,139 32,442 Other 33,768 36,266 ------------------ ----------------- 252,776 273,207 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 219,400 222,819 Accumulated deferred investment tax credits 25,330 29,472 Customer advances 33,776 34,815 Environmental liabilities 8,012 7,564 Other 45,770 52,382 ------------------ ----------------- 332,288 347,052 ------------------ ----------------- - -------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,788,379 $1,857,024 ================== ================= - -------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
26
WISCONSIN POWER AND LIGHT COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) For the Nine Months Ended September 30, 2001 2000 - ------------------------------------------------------------------------------------------------------------------------------- (in thousands) Cash flows from operating activities: Net income $50,671 $50,751 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 97,398 97,631 Amortization of nuclear fuel 4,158 3,626 Deferred tax benefits and investment tax credits (9,235) (9,614) Equity income from unconsolidated investments, net (10,819) (341) Other (3,913) (7,368) Other changes in assets and liabilities: Accounts receivable 44,523 8,114 Accounts payable (34,445) (13,237) Benefit obligations and other 3,412 (2,030) --------------------- --------------------- Net cash flows from operating activities 141,750 127,532 --------------------- --------------------- - ------------------------------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends (45,340) - Preferred stock dividends (2,483) (2,483) Proceeds from issuance of long-term debt - 100,000 Reductions in long-term debt (47,000) - Net change in short-term borrowings 17,813 (100,189) Other (2,725) (1,319) --------------------- --------------------- Net cash flows used for financing activities (79,735) (3,991) --------------------- --------------------- - ------------------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (102,035) (92,521) Nuclear decommissioning trust funds (15,373) (15,373) Proceeds from formation of ATC 74,643 - Other (13,111) (13,366) --------------------- --------------------- Net cash flows used for investing activities (55,876) (121,260) --------------------- --------------------- - ------------------------------------------------------------------------------------------------------------------------------- Net increase in cash and temporary cash investments 6,139 2,281 --------------------- --------------------- - ------------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 2,584 3,555 --------------------- --------------------- - ------------------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $8,723 $5,836 ===================== ===================== - ------------------------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $34,627 $30,087 ===================== ===================== Income taxes $32,792 $35,686 ===================== ===================== - ------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
27 WISCONSIN POWER AND LIGHT COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) Except as modified below, the Alliant Energy Notes to Consolidated Financial Statements are incorporated by reference insofar as they relate to WP&L. 1. The interim consolidated financial statements included herein have been prepared by WP&L, without audit, pursuant to the rules and regulations of the SEC. Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted, although management believes that the disclosures are adequate to make the information presented not misleading. The consolidated financial statements include WP&L and its consolidated subsidiaries, including WPL Transco LLC and South Beloit. WP&L is a subsidiary of Alliant Energy. These financial statements should be read in conjunction with the financial statements and the notes thereto included in WP&L's latest Annual Report on Form 10-K. In the opinion of management, all adjustments, which are normal and recurring in nature, necessary for a fair presentation of (a) the consolidated results of operations for the three and nine months ended September 30, 2001 and 2000, (b) the consolidated financial position at September 30, 2001 and December 31, 2000, and (c) the consolidated statement of cash flows for the nine months ended September 30, 2001 and 2000, have been made. Because of the seasonal nature of WP&L's operations, results for the three and nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. 2. WP&L's comprehensive income, and the components of other comprehensive income (loss), net of taxes, for the three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months ------------------------------ ------------------------------- 2001 2000 2001 2000 ------------- -------------- ------------- --------------- Earnings available for common stock $19,027 $16,755 $48,188 $48,268 Other comprehensive income (loss): Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding losses arising during period due to cumulative effect of a change in accounting principle, net of tax -- (642) -- (642) Other unrealized holding gains (losses) arising during period, net of tax 3,756 (747) 5,557 (747) Less: reclassification adjustment for losses included in earnings available for common stock, net of tax (456) (68) (4,222) (68) ------------- -------------- ------------- --------------- Net unrealized gains (losses) on qualifying derivatives 4,212 (1,321) 9,779 (1,321) ------------- -------------- ------------- --------------- Other comprehensive income (loss) 4,212 (1,321) 9,779 (1,321) ------------- -------------- ------------- --------------- Comprehensive income $23,239 $15,434 $57,967 $46,947 ============= ============== ============= ===============
28 3. Certain financial information relating to WP&L's significant business segments is presented below. Intersegment revenues were not material to WP&L's operations.
Electric Gas Other Total -------------------------------------------------------- (in thousands) Three Months Ended September 30, 2001 ------------------------------------- Operating revenues $207,462 $19,351 $1,437 $228,250 Operating income (loss) 38,800 (3,092) 518 36,226 Earnings available for common stock 19,027 19,027 Three Months Ended September 30, 2000 ------------------------------------- Operating revenues $183,088 $15,169 $1,378 $199,635 Operating income (loss) 38,436 (2,032) 508 36,912 Earnings available for common stock 16,755 16,755 Nine Months Ended September 30, 2001 ------------------------------------ Operating revenues $576,150 $169,588 $3,818 $749,556 Operating income (loss) 95,636 (97) 1,071 96,610 Earnings available for common stock 48,188 48,188 Nine Months Ended September 30, 2000 ------------------------------------ Operating revenues $518,575 $89,970 $3,787 $612,332 Operating income 95,232 6,007 1,294 102,533 Earnings available for common stock 48,268 48,268
29 ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The primary first tier subsidiaries of Alliant Energy include: IESU, WP&L, IPC, Resources and Corporate Services. Among various other regulatory constraints, Alliant Energy is operating as a registered public utility holding company subject to the limitations imposed by PUHCA. This MD&A includes information relating to Alliant Energy, IESU and WP&L (as well as IPC, Resources and Corporate Services). Where appropriate, information relating to a specific entity has been segregated and labeled as such. The following discussion and analysis should be read in conjunction with the Consolidated Financial Statements and Notes to Consolidated Financial Statements included in this report as well as the financial statements, notes and MD&A included in Alliant Energy's, IESU's and WP&L's latest Annual Report on Form 10-K. FORWARD-LOOKING STATEMENTS Statements contained in this report (including MD&A) that are not of historical fact are forward-looking statements intended to qualify for the safe harbors from liability established by the Private Securities Litigation Reform Act of 1995. Such forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those expressed in, or implied by, such statements. Some, but not all, of the risks and uncertainties include: weather effects on sales and revenues; general economic conditions in the utility subsidiaries' service territories; federal, state and international regulatory or government actions, including issues associated with the deregulation of the domestic utility industry and the setting of rates and recovery of costs; unanticipated construction and acquisition expenditures; issues related to stranded costs and the recovery thereof; unanticipated issues related to the supply of purchased electricity and price thereof; adverse fluctuations in the price of oil and natural gas; unexpected issues related to the operations of Alliant Energy's nuclear facilities; unanticipated costs associated with certain environmental remediation efforts being undertaken by Alliant Energy; Alliant Energy's ability to successfully implement its growth strategy, including the acquisition and operation of foreign companies; unanticipated developments that adversely impact Alliant Energy's strategy to grow its non-regulated businesses; Alliant Energy's ability to identify and successfully complete acquisitions and development projects; material changes in the value of Alliant Energy's investments; technological developments; employee workforce factors, including changes in key executives, collective bargaining agreements or work stoppages; political, legal, economic and exchange rate conditions in foreign countries in which Alliant Energy has investments; and changes in the rate of inflation. UTILITY INDUSTRY REVIEW A summary of the current regulatory environment is included in the Form 10-K filed by Alliant Energy, IESU and WP&L for the year ended December 31, 2000. Set forth below are several developments relating to such regulatory environment that have occurred since the start of the current year. Overview - In September 2001, six electric utility companies, including IESU - -------- and IPC, filed an application with FERC to create TRANSLink, a for-profit, transmission-only company. A ruling is expected from FERC in the first quarter of 2002. The participants have requested that FERC expedite consideration of the application so that TRANSLink could commence operations by 2002. Current plans call for IESU and IPC to contribute their transmission assets, which have an estimated book value of $300 million, to TRANSLink in exchange for a corresponding ownership interest in TRANSLink. The TRANSLink proposal is subject to receipt of all required federal and state regulatory approvals. 30 Rates and Regulatory Matters - In 2000, the NRC raised several areas of concern - ---------------------------- with Kewaunee's operations. Addressing the concerns is expected to result in additional operating costs to WP&L in 2001 and 2002 through 2005 of approximately $7 million and $25 million, respectively. In April 2001, the PSCW approved the deferral of such incremental costs incurred after March 27, 2001. In July 2001, WP&L requested a $19 million retail electric rate increase from the PSCW to recover a portion of the costs associated with the increased Kewaunee operating costs and costs associated with the replacement of the steam generators at Kewaunee. WP&L expects that the remainder of the additional operating costs related to Kewaunee will be recovered through future base rate filings with the PSCW. The last of the price freezes impacting Alliant Energy's utility subsidiaries, which stem from the 1998 three-way merger, will expire in the second quarter of 2002. In August 2001, WP&L filed a $114 million base rate increase request with the PSCW related to its investments in reliability, customer service, technology and environmental upgrades, as well as investments in its infrastructure. In September 2001, WP&L filed a request with the PSCW to consolidate the $19 million request for increased Kewaunee operating costs with the new base rate increase request of $114 million. These filings apply to retail electric ($105 million), natural gas ($26 million) and water ($2 million) rates. Also in September 2001, WP&L filed a request with the PSCW, along with three other Wisconsin utilities, for an increase in rates of $16 million for incremental costs associated with the start-up and ongoing operations of ATC. WP&L expects that any rate increases from these filings will be effective on or around April 15, 2002. WP&L cannot provide any assurance that the PSCW will grant the requested rate increases or, if granted, that the rate increases will be at the requested levels. WP&L also plans to file a request in late November 2001 for new wholesale electric base rates. IESU and IPC are in the process of reviewing whether they will need to file electric and/or gas base rate cases with the IUB in the first half of 2002. At this time, there are no plans for filing new base rate cases in Illinois or Minnesota. In April 2001 and July 2001, the OCA requested certain financial information from IESU and IPC, respectively, related to the electric utility operations within the state of Iowa. IESU and IPC filed their responses with the OCA and cannot predict the outcomes of this process, although such data requests could lead to an effort by the OCA to seek an electric rate reduction for IESU and/or IPC in Iowa. In January 2001, the IUB issued an order requiring IESU and IPC to file a joint fuel procurement plan in May 2001 for the purpose of evaluating the reasonableness of the Iowa utilities' fuel procurement contracts. This filing was completed in May 2001 and hearings were held in early November 2001. IESU and IPC are still responding to data requests from the IUB. IESU and IPC cannot predict the outcome of this process, which could potentially result in a refund. In December 2000, WP&L requested a $73 million annual retail electric rate increase from the PSCW to cover increases in WP&L's 2001 fuel and purchased-power costs. The PSCW approved a $46 million interim increase effective February 8, 2001, which was replaced with a $58 million final increase effective June 19, 2001. The final order includes a refund provision for costs collected in rates that are in excess of actual costs incurred. Two customer groups filed an appeal to the state court, challenging certain portions of the final order. WP&L believed Union Pacific was charging an excessive rate for transporting low-sulfur coal from the Powder River Basin to the Edgewater Generating Station located in Sheboygan, Wisconsin. To contest the rate, WP&L filed a rate case with the STB and upon the expiration of the existing contract, began moving coal under a tariff rate beginning January 1, 2000. Following the STB's initial decision, WP&L, as part of a negotiated settlement, received payment from Union Pacific in November 2001 of $3.9 million, which covers the period from January 2000 through August 2001. While WP&L and Union Pacific have agreed upon future rates, both parties have filed petitions for reconsideration with the STB on certain aspects of its decision, which could impact the final amount received by WP&L. The refund amount will be reviewed by the PSCW in conjunction with WP&L's fuel adjustment clause. WP&L did not record anything related to this settlement in its results of operations for the nine months ended September 30, 2001. 31 Alliant Energy complies with the provisions of SFAS 71, "Accounting for the Effects of Certain Types of Regulation." SFAS 71 provides that rate-regulated public utilities record certain costs and credits allowed in the rate making process in different periods than for non-regulated entities. These are deferred as regulatory assets or accrued as regulatory liabilities and are recognized in the Consolidated Statements of Income at the time they are reflected in rates. If a portion of the utility's operations no longer complies with SFAS 71, a write-down of related regulatory assets and possibly other charges would be required, unless some form of transition cost recovery is established by the appropriate regulatory body that meets the requirements under generally accepted accounting principles for continued accounting as regulatory assets during such recovery period. In addition, each utility would be required to determine any impairment of other assets and write-down any impaired assets to their fair value. Alliant Energy believes its utility subsidiaries currently meet the requirements of SFAS 71. ALLIANT ENERGY RESULTS OF OPERATIONS Unless otherwise noted, all "per share" references in the Results of Operations section refer to earnings per diluted share. Overview - Third Quarter Results - Alliant Energy reported net income of - -------------------------------- $69.3 million, or $0.87 per share, for the third quarter of 2001, compared to net income of $276.2 million, or $3.49 per share, for the third quarter of 2000. Both periods included non-cash valuation adjustments related to Alliant Energy's obligation under certain 30-year exchangeable senior notes - -- charges of $0.16 per share and $0.02 per share in the third quarters of 2001 and 2000, respectively. Net income for the third quarter of 2001 also included non-cash valuation income of $10.4 million, or $0.13 per share, relating to Alliant Energy's share of the change in fair value of Southern Hydro's electricity derivative contracts. Refer to Notes 6 and 9 of Alliant Energy's "Notes to Consolidated Financial Statements" for additional information on Southern Hydro. In addition, net income for the third quarter of 2000 included $204 million of non-cash net income, or $2.58 per share, relating to Alliant Energy's adoption of SFAS 133 on July 1, 2000. Excluding such items, third quarter 2001 and 2000 earnings were $0.90 per share and $0.93 per share, respectively. The decrease in earnings as adjusted was primarily due to increased utility operating expenses, largely offset by higher electric utility margins, a lower effective income tax rate and higher earnings from Alliant Energy's non-regulated operations. Third quarter 2001 utility earnings were $69.5 million ($0.88 per share) compared to $68.4 million ($0.86 per share) for the same period in 2000. The increase was primarily due to an increase in electric margin and a lower effective income tax rate, which were virtually offset by increased operating expenses. The non-regulated businesses reported net income of $2.6 million, or $0.03 per share, in the third quarter of 2001, compared to $208.0 million, or $2.63 per share, in the third quarter of 2000. These amounts include the non-cash valuation charges and the non-cash net income relating to Alliant Energy's adoption of SFAS 133 in 2001 and 2000. Excluding these adjustments, net income was $4.8 million, or $0.06 per share, in the third quarter of 2001 compared to net income of $5.3 million, or $0.07 per share, in the third quarter of 2000. The decrease in adjusted earnings was primarily due to lower earnings from Alliant Energy's generation and trading business unit due to fewer weather-related trading opportunities in the third quarter of 2001. This was partially offset by: improved results from the Integrated Services business unit of $0.02 per share largely due to a one-time charge related to a loss on a contract in the third quarter of 2000; higher income from the Investments business unit of $0.01 per share from Alliant Energy's oil and gas operations largely due to increased sales volumes as a result of the continued acquisition of additional oil and gas producing properties; improved results from the International business unit of $0.01 per share due to increased earnings from Alliant Energy's China and Australian investments, partially offset by lower earnings from Alliant Energy's New Zealand investments; and the impact of lower interest rates on Resources' variable rate borrowings. 32 Electric Utility Operations - Electric margins and MWh sales for Alliant - --------------------------- Energy for the three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold ----------------------------------------- ---------------------------------------- 2001 2000 Change 2001 2000 Change --------------- -------------- --------- -------------- -------------- ---------- Residential $188,406 $171,160 10% 2,186 2,059 6% Commercial 110,576 102,705 8% 1,493 1,467 2% Industrial 157,131 140,647 12% 3,198 3,320 (4%) --------------- -------------- -------------- -------------- Total from ultimate customers 456,113 414,512 10% 6,877 6,846 -- Sales for resale 48,530 52,452 (7%) 1,278 1,253 2% Other 15,208 13,799 10% 39 40 (3%) --------------- -------------- -------------- -------------- Total revenues/sales 519,851 480,763 8% 8,194 8,139 1% ============== ============== Electric production fuels expense 91,256 76,432 19% Purchased power expense 108,177 85,553 26% --------------- -------------- Margin $320,418 $318,778 1% =============== ==============
Electric margins and MWh sales for Alliant Energy for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold ----------------------------------------- ---------------------------------------- 2001 2000 Change 2001 2000 Change --------------- -------------- --------- ------------- --------------- ---------- Residential $473,127 $434,100 9% 5,706 5,416 5% Commercial 291,051 264,229 10% 4,153 4,004 4% Industrial 421,281 379,400 11% 9,398 9,807 (4%) --------------- -------------- ------------- --------------- Total from ultimate customers 1,185,459 1,077,729 10% 19,257 19,227 -- Sales for resale 143,736 130,063 11% 3,780 3,618 4% Other 38,086 40,436 (6%) 126 129 (2%) --------------- -------------- ------------- --------------- Total revenues/sales 1,367,281 1,248,228 10% 23,163 22,974 1% ============= =============== Electric production fuels expense 232,957 202,145 15% Purchased power expense 318,024 222,690 43% --------------- -------------- Margin $816,300 $823,393 (1%) =============== ==============
Electric margin increased $1.6 million, or 1%, and decreased $7.1 million, or 1%, for the three- and nine-month periods, respectively. The three-month increase was primarily related to increased residential and commercial sales due to more favorable weather conditions in the third quarter of 2001 compared to the same period in 2000 and continued retail customer growth. Higher energy conservation revenues also contributed to the three-month increase. These items were partially offset by lower industrial sales. The nine-month decrease was primarily due to $10 million of income recorded in the second quarter of 2000 for a change in estimate of WP&L's utility services rendered but unbilled at month-end and lower industrial sales. These items were partially offset by the impact of customer growth and favorable weather conditions in 2001 compared to 2000, which contributed to increased sales to higher-margin residential and commercial customers. Due to the formation of ATC on January 1, 2001, electric margin for the three and nine months ended September 30, 2001 included expenses of $7 million and $21 million, respectively. Such expenses were offset by equity income, reduced other operation and maintenance expenses and lower depreciation expense, resulting in no significant net income impact due to the formation of ATC. Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial Statements" in Item 1. for additional information related to ATC. IESU's and IPC's electric tariffs include EAC's that are designed to currently recover the costs of fuel and the energy portion of purchased-power billings. Under PSCW rules, WP&L can seek emergency rate increases if the annual fuel and purchased-power costs are more than three percent higher than the estimated costs used to establish rates. Refer to "Utility Industry Review - Rates and Regulatory Matters" for discussion of an IUB fuel investigation and various WP&L rate filings. 33 Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for the - ---------------------- three months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2001 2000 Change 2001 2000 Change ------------- --------------- --------- ------------ ----------- ---------- Residential $17,097 $21,662 (21%) 1,941 2,153 (10%) Commercial 8,784 12,512 (30%) 1,459 1,761 (17%) Industrial 3,972 5,273 (25%) 943 1,009 (7%) Transportation/other 13,126 1,922 583% 11,890 9,409 26% ------------- --------------- ------------- ----------- Total revenues/sales 42,979 41,369 4% 16,233 14,332 13% ============ =========== Cost of utility gas sold 23,660 22,660 4% ------------- --------------- Margin $19,319 $18,709 3% ============= ===============
Gas margins and Dth sales for Alliant Energy for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ----------------------------------- 2001 2000 Change 2001 2000 Change ------------- ---------------- -------- ------------ ------------ --------- Residential $217,991 $133,870 63% 21,166 19,580 8% Commercial 114,549 67,548 70% 12,731 12,194 4% Industrial 24,005 15,823 52% 3,465 3,595 (4%) Transportation/other 39,684 8,915 345% 36,487 31,411 16% ------------- ---------------- ------------ ------------ Total revenues/sales 396,229 226,156 75% 73,849 66,780 11% ============ ============ Cost of utility gas sold 303,984 136,642 122% ------------- ---------------- Margin $92,245 $89,514 3% ============= ================
Gas revenues and cost of utility gas sold increased significantly for the nine-month period due to the large increase in natural gas prices in the first and second quarters of 2001. Gas margin increased $0.6 million, or 3%, and $2.7 million, or 3%, for the three- and nine-month periods, respectively. The nine-month increase was primarily due to more favorable weather conditions in 2001 compared to 2000, partially offset by a negative impact from higher natural gas costs, as some customers either chose alternative fuel sources or used less natural gas, and losses associated with current commodity costs at WP&L, which are shared by ratepayers and shareowners. IESU's and IPC's gas tariffs include PGA clauses that are designed to currently recover the cost of utility gas sold. 34 Non-regulated and Other Revenues - Details regarding Alliant Energy's - -------------------------------- non-regulated and other revenues and data relating to Whiting's oil and gas operations for the three and nine months ended September 30 were as follows:
Three Months Nine Months ------------------------------- ------------------------------- Non-regulated and other revenues (in thousands): 2001 2000 2001 2000 -------------- --------------- --------------- -------------- Integrated Services $43,891 $32,046 $176,301 $96,428 Investments: Whiting (oil and gas) 30,594 29,412 109,725 75,212 Other 10,944 11,565 33,520 32,642 International 16,752 -- 32,693 -- Other 1,254 8,037 15,070 22,473 -------------- --------------- --------------- -------------- $103,435 $81,060 $367,309 $226,755 ============== =============== =============== ============== Whiting's volumes sold (in thousands): Oil (barrels) 509 391 1,606 1,119 Gas (thousand cubic feet) 5,369 4,523 14,151 12,414 Whiting's product prices: Oil $24.48 $28.56 $24.89 $26.58 Gas $3.07 $3.69 $4.30 $3.28
The increased Integrated Services revenues were due to acquisitions in the third and fourth quarters of 2000 of various energy services businesses and higher natural gas prices in the first and second quarters of 2001. Ongoing acquisitions of additional oil and gas properties had a significant impact on the increased Whiting sales volumes. The 2001 International revenues resulted from the December 2000 change from the equity method of accounting to the consolidation method for an investment in China. Other Operating Expenses - Other operation and maintenance expenses for the - ------------------------ three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months ------------------------------ ------------------------------ 2001 2000 2001 2000 ------------- -------------- -------------- ------------- Utility $124,349 $108,291 $379,976 $367,497 Integrated Services 41,470 39,867 167,112 101,385 Investments: Whiting (oil and gas) 11,771 9,823 34,867 26,555 Other 6,613 7,279 20,711 21,800 International 14,896 1,316 31,025 3,539 Other (includes eliminations) (4,436) 1,946 (3,846) 5,786 ------------- -------------- -------------- ------------- $194,663 $168,522 $629,845 $526,562 ============= ============== ============== =============
Other operation and maintenance expenses at the utility subsidiaries increased $16.1 million and $12.5 million for the three- and nine-month periods, respectively, primarily due to higher costs in Alliant Energy's energy delivery and generation business units (certain increases were timing differences), increased uncollectible customer account balances and costs associated with the implementation of Alliant Energy's e-business strategy. Also contributing to the three-month increase were higher operating costs at Kewaunee. Such increases were partially offset by the impact of the formation of ATC earlier in 2001, as discussed in "Electric Utility Operations." The Integrated Services increases were primarily due to the acquisitions of the various energy services businesses and the higher natural gas costs in the first and second quarters of 2001, partially offset by a one-time charge related to a loss on a contract in the third quarter of 2000. The increase at Whiting was primarily due to the increased production volumes. The International increases were primarily due to the December 2000 change in accounting method for the China investment. 35 Depreciation and amortization expense increased $5.9 million and $22.8 million for the three- and nine-month periods, respectively, primarily due to utility property additions, acquisitions at the non-regulated businesses and the December 2000 change in accounting method for the China investment. Such increases were partially offset by the impact of the formation of ATC earlier in 2001, as discussed in "Electric Utility Operations." Taxes other than income taxes increased $4.5 million for the nine-month period primarily due to increased payroll and gross receipts taxes. Interest Expense and Other - Interest expense increased $1.1 million and - -------------------------- $16.0 million for the three- and nine-month periods, respectively, primarily due to higher non-regulated borrowings to fund Alliant Energy's strategic growth initiatives, partially offset by the impact of lower interest rates on Alliant Energy's variable rate borrowings. Equity income (loss) from Alliant Energy's unconsolidated investments for the three and nine months ended September 30 was as follows (in thousands):
Three Months Nine Months ---------------------------- ---------------------------- 2001 2000 2001 2000 ------------- ------------- -------------- ------------ ATC $2,210 $-- $10,236 $-- Cargill-Alliant 2,964 7,321 8,058 9,922 Australia/New Zealand 13,669 656 23,367 2,024 China 942 194 3,333 442 Brazil 3,185 1,837 1,890 1,098 Other (442) (118) (503) (888) ------------- ------------- -------------- ------------ $22,528 $9,890 $46,381 $12,598 ============= ============= ============== ============
Equity income from unconsolidated investments increased $12.6 million and $33.8 million for the three- and nine-month periods, respectively, primarily due to the non-cash SFAS 133 valuation income from Southern Hydro, ATC beginning operations on January 1, 2001, increased earnings in China largely due to the addition of a combined heat and power facility to Alliant Energy's China portfolio in the first quarter of 2001 and non-cash income from the valuation of certain Australian energy agreements. These items were partially offset by reduced income at Alliant Energy's electricity trading joint venture due to fewer weather-related trading opportunities in the third quarter of 2001 and lower earnings from Alliant Energy's New Zealand investments due to the impact of a drought in New Zealand. In spite of the drought conditions in Brazil, Alliant Energy realized slight increases in equity earnings from its Brazilian investments in both periods. On July 1, 2000, Alliant Energy adopted SFAS 133. Related to the adoption, Alliant Energy recorded a $321.3 million gain related to the designation of a portion of Alliant Energy's McLeod holdings as "trading securities." This gain related to the unrealized appreciation in value of approximately 27% of Alliant Energy's McLeod holdings. Alliant Energy sold 450,000 shares of its investment in McLeod in the first quarter of 2000, resulting in a pre-tax gain of $10.2 million, or $0.08 per share. Miscellaneous, net income decreased $16.7 million and $31.4 million for the three- and nine-month periods largely due to higher non-cash valuation charges of $16.0 million and $27.1 million related to the net change in the value of the McLeod trading securities and the derivative component of Resources' exchangeable senior notes, respectively. Lower gains from asset sales also contributed to both decreases while income realized in 2000 from a weather hedge also impacted the nine-month comparison. The three-month decrease was partially offset by higher interest income. Income Taxes - The effective income tax rates were 32.3% and 32.7% for the - ------------ three- and nine-month periods ended September 30, 2001, compared with 40.2% and 39.6% for the same periods last year, respectively. The decrease for both periods was primarily due to the impact of the adoption of SFAS 133 in 36 the third quarter of 2000 and increased income tax benefits from Alliant Energy's China and Brazil investments. Also contributing to the nine-month decrease were higher tax credits. Cumulative Effect of a Change in Accounting Principle - In the first quarter - ----------------------------------------------------- of 2001, Alliant Energy recorded a charge of $12.9 million relating to the adoption of SFAS 133 on January 1, 2001 at Southern Hydro. IESU RESULTS OF OPERATIONS Overview - Third Quarter Results - Earnings available for common stock - -------------------------------- decreased $0.1 million for the three months ended September 30, 2001, compared with the same period in 2000, primarily due to higher other operation and maintenance expenses, offset by a lower effective income tax rate and reduced property taxes. Electric Utility Operations - Electric margins and MWh sales for IESU for the - --------------------------- three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- -------------- ---------- ----------- -------------- ---------- Residential $83,039 $78,004 6% 852 822 4% Commercial 59,245 56,326 5% 739 732 1% Industrial 59,254 55,517 7% 1,189 1,239 (4%) ------------- -------------- ------------ -------------- Total from ultimate customers 201,538 189,847 6% 2,780 2,793 -- Sales for resale 11,925 9,378 27% 273 247 11% Other 4,286 3,674 17% 10 10 -- ------------- -------------- ------------ -------------- Total revenues/sales 217,749 202,899 7% 3,063 3,050 -- ============ ============== Electric production fuels expense 38,147 22,633 69% Purchased power expense 30,998 28,324 9% ------------- -------------- Margin $148,604 $151,942 (2%) ============= ==============
Electric margins and MWh sales for IESU for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- --------------- --------- ------------- ------------- -------- Residential $199,915 $183,138 9% 2,187 2,088 5% Commercial 153,046 138,335 11% 2,073 2,008 3% Industrial 161,352 143,743 12% 3,622 3,754 (4%) ------------- --------------- ------------- ------------- Total from ultimate customers 514,313 465,216 11% 7,882 7,850 -- Sales for resale 32,312 21,875 48% 820 748 10% Other 11,350 9,843 15% 29 30 (3%) ------------- --------------- ------------- ------------- Total revenues/sales 557,975 496,934 12% 8,731 8,628 1% ============= ============= Electric production fuels expense 91,626 76,595 20% Purchased power expense 107,441 59,464 81% ------------- --------------- Margin $358,908 $360,875 (1%) ============= ===============
Electric margin decreased $3.3 million, or 2%, and $2.0 million, or 1%, for the three- and nine-month periods, respectively, primarily due to increased purchased-power capacity costs and lower industrial sales, partially offset by increased residential and commercial sales due to more favorable weather conditions in 2001 compared to 2000 and continued retail customer growth. IESU's electric tariffs include EAC's that are designed to currently recover the costs of fuel and the energy portion of purchased-power billings. Refer to "Utility Industry Review - Rates and Regulatory Matters" for discussion of an IUB fuel investigation. 37 Gas Utility Operations - Gas margins and Dth sales for IESU for the three - ---------------------- months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- ---------------- -------- ------------- ------------- -------- Residential $8,661 $10,406 (17%) 890 908 (2%) Commercial 4,562 5,788 (21%) 703 744 (6%) Industrial 2,869 3,840 (25%) 698 740 (6%) Transportation/other 3,222 859 275% 2,672 2,091 28% ------------- ---------------- ------------- ------------- Total revenues/sales 19,314 20,893 (8%) 4,963 4,483 11% ============= ============= Cost of gas sold 11,478 13,253 (13%) ------------- ---------------- Margin $7,836 $7,640 3% ============= ================
Gas margins and Dth sales for IESU for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- ---------------- -------- ------------ -------------- -------- Residential $103,141 $64,262 61% 10,016 9,011 11% Commercial 53,058 31,107 71% 5,946 5,433 9% Industrial 12,910 9,128 41% 2,073 2,122 (2%) Transportation/other 8,634 3,270 164% 8,130 7,194 13% ------------- ---------------- ------------ -------------- Total revenues/sales 177,743 107,767 65% 26,165 23,760 10% ============ ============== Cost of gas sold 136,701 68,291 100% ------------- ---------------- Margin $41,042 $39,476 4% ============= ================
Gas revenues and cost of gas sold increased significantly for the nine-month period due to the large increase in natural gas prices in the first and second quarters of 2001. Such increases had no impact on IESU's gas margin given its rate recovery mechanism for gas costs. Gas margin increased $0.2 million, or 3%, and $1.6 million, or 4%, for the three- and nine-month periods, respectively. The nine-month increase was largely due to more favorable weather conditions in the first quarter of 2001 compared with the first quarter of 2000, partially offset by a negative impact from higher natural gas costs as some customers either chose alternative fuel sources or used less natural gas. IESU's gas tariffs include PGA clauses that are designed to currently recover the cost of gas sold. Other Operating Expenses - Other operation and maintenance expenses increased - ------------------------ $9.8 million and $16.6 million for the three- and nine-month periods, respectively, primarily due to increased energy delivery and generation expenses (certain increases were timing differences), increased uncollectible customer account balances and costs associated with the implementation of Alliant Energy's e-business strategy. The nine-month increase was partially offset by reduced other administrative and general expenses and one-time fees incurred in the second quarter of 2000 associated with the transfer from the MAPP reliability region to the MAIN region. Taxes other than income taxes decreased $1.7 million and $2.4 million for the three- and nine-month periods, respectively, primarily due to reduced property taxes. Interest Expense and Other - Miscellaneous, net income increased $2.3 million - -------------------------- and $0.6 million for the three- and nine-month periods, respectively. The three-month increase was primarily due to income related to value-added products and services. Income Taxes - The effective income tax rates were 33.1% and 35.3% for the - ------------ three and nine months ended September 30, 2001, respectively, compared with 41.4% and 41.9%, respectively, for the same periods last year. The decrease 38 for both periods was due to decreases in property-related temporary differences for which deferred taxes are not provided pursuant to rate making principles. WP&L RESULTS OF OPERATIONS Overview - Third Quarter Results - Earnings available for common stock - -------------------------------- increased $2.3 million for the three months ended September 30, 2001, compared with the same period in 2000, primarily due to higher electric margins. Electric Utility Operations - Electric margins and MWh sales for WP&L for the - --------------------------- three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold ------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- -------------- -------- ------------- ------------- -------- Residential $71,467 $61,816 16% 964 872 11% Commercial 38,454 34,228 12% 589 563 5% Industrial 55,506 48,801 14% 1,173 1,201 (2%) ------------- -------------- ------------- ------------- Total from ultimate customers 165,427 144,845 14% 2,726 2,636 3% Sales for resale 34,711 32,084 8% 951 838 13% Other 7,324 6,159 19% 13 13 -- ------------- -------------- ------------- ------------- Total revenues/sales 207,462 183,088 13% 3,690 3,487 6% ============= ============= Electric production fuels expense 34,609 33,198 4% Purchased power expense 62,065 41,299 50% ------------- -------------- Margin $110,788 $108,591 2% ============= ==============
Electric margins and MWh sales for WP&L for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold ------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------ --------------- -------- ------------- ------------- -------- Residential $192,680 $173,925 11% 2,573 2,379 8% Commercial 106,584 96,163 11% 1,630 1,529 7% Industrial 157,479 142,134 11% 3,429 3,533 (3%) ------------ --------------- ------------- ------------- Total from ultimate customers 456,743 412,222 11% 7,632 7,441 3% Sales for resale 102,583 86,102 19% 2,679 2,400 12% Other 16,824 20,251 (17%) 46 48 (4%) ------------ --------------- ------------- ------------- Total revenues/sales 576,150 518,575 11% 10,357 9,889 5% ============= ============= Electric production fuels expense 97,876 83,699 17% Purchased power expense 165,231 113,119 46% ------------ --------------- Margin $313,043 $321,757 (3%) ============ ===============
Electric margin increased $2.2 million, or 2%, and decreased $8.7 million, or 3%, for the three- and nine-month periods, respectively. The three-month increase was primarily due to increased residential and commercial sales resulting from continued retail customer growth and more favorable weather conditions in the third quarter of 2001 compared to the same period in 2000. Also contributing to the three-month increase were increased energy conservation revenues. These items were partially offset by the impact of the formation of ATC and lower industrial sales. The nine-month decrease was primarily due to the impact of the formation of ATC, a second quarter 2000 change in estimate of WP&L's utility services rendered but unbilled at month-end of $10 million and lower industrial sales. These items were partially offset by increased sales to higher-margin residential and commercial customers from continued retail customer growth and more favorable weather conditions in 2001 compared to 2000. Refer to "Utility Industry Review - Rates and Regulatory Matters" for discussion of various WP&L rate filings. 39 Due to the formation of ATC on January 1, 2001, electric margin for the three and nine months ended September 30, 2001 included expenses of $7 million and $21 million, respectively. Such expenses were offset by equity income, reduced other operation and maintenance expenses and lower depreciation expense, resulting in no significant net income impact due to the formation of ATC. Refer to Note 5 of Alliant Energy's "Notes to Consolidated Financial Statements" in Item 1. for additional information related to ATC. Under PSCW rules, WP&L can seek emergency rate increases if the annual fuel and purchased-power costs are more than three percent higher than the estimated costs used to establish rates. Gas Utility Operations - Gas margins and Dth sales for WP&L for the three - ---------------------- months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change -------------- --------------- -------- ------------- ------------- -------- Residential $6,199 $8,312 (25%) 797 939 (15%) Commercial 3,371 5,604 (40%) 617 854 (28%) Industrial 603 872 (31%) 128 144 (11%) Transportation/other 9,178 381 2,309% 4,307 2,772 55% -------------- --------------- ------------- ------------- Total revenues/sales 19,351 15,169 28% 5,849 4,709 24% ============= ============= Cost of gas sold 10,193 6,431 58% -------------- --------------- Margin $9,158 $8,738 5% ============== ===============
Gas margins and Dth sales for WP&L for the nine months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold --------------------------------------- ------------------------------------ 2001 2000 Change 2001 2000 Change ------------- ---------------- -------- ------------- ------------- -------- Residential $86,223 $52,795 63% 8,375 7,926 6% Commercial 47,330 28,830 64% 5,280 5,321 (1%) Industrial 7,354 4,510 63% 864 923 (6%) Transportation/other 28,681 3,835 648% 12,861 9,613 34% ------------- ---------------- ------------- ------------- Total revenues/sales 169,588 89,970 88% 27,380 23,783 15% ============= ============= Cost of gas sold 132,270 51,398 157% ------------- ---------------- Margin $37,318 $38,572 (3%) ============= ================
Gas revenues and cost of gas sold increased significantly for the nine-month period due to the large increase in natural gas prices in the first and second quarters of 2001. Gas margin increased $0.4 million, or 5%, and decreased $1.3 million, or 3%, for the three- and nine-month periods, respectively. The nine-month decrease was primarily due to losses associated with current commodity costs, which are shared by ratepayers and shareowners, and the impact of higher natural gas costs as some customers either chose alternative fuel sources or used less natural gas, partially offset by increased natural gas sales due to more favorable weather conditions in the first quarter of 2001 compared to the first quarter of 2000. Other Operating Expenses - Other operation and maintenance expenses increased - ------------------------ $2.9 million and decreased $6.6 million for the three- and nine-month periods, respectively. The three-month increase was primarily due to increased energy delivery expenses, higher nuclear expenses and costs associated with the implementation of Alliant Energy's e-business strategy, partially offset by the impact of the formation of ATC. The nine-month decrease was primarily due to the formation of ATC and decreased fossil-plant maintenance and nuclear expenses, partially offset by higher uncollectible account balances, costs associated with the implementation of Alliant Energy's e-business strategy and increased energy delivery expenses. The lower nuclear expenses were primarily due to a planned second quarter 2000 refueling outage at Kewaunee. 40 Depreciation and amortization expense decreased $0.1 million and $0.2 million for the three- and nine-month periods, respectively, due to the impact of the formation of ATC, offset by property additions and increased earnings on the nuclear decommissioning trust fund. The accounting for earnings on the nuclear decommissioning trust fund results in no net income impact. Miscellaneous, net income increases for earnings on the trust fund and the corresponding offset is recorded as depreciation expense. Taxes other than income taxes increased $0.6 million and $2.8 million for the three- and nine-month periods, respectively, due to increased gross receipts and payroll taxes. Interest Expense and Other - Equity income from unconsolidated investments - -------------------------- increased $2.4 million and $10.5 million for the three- and nine-month periods, respectively, largely due to ATC beginning operations on January 1, 2001. Miscellaneous, net income increased $2.0 million and decreased $2.8 million for the three- and nine-month periods, respectively. The three-month increase was primarily due to increased earnings from the nuclear decommissioning trust fund. The nine-month decrease was primarily due to income realized from weather hedges in 2000, partially offset by increased earnings from the nuclear decommissioning trust fund. Income Taxes - The effective income tax rate was 38.3% for the three and nine - ------------ months ended September 30, 2001, compared with 37.3% and 37.4%, respectively, for the same periods last year. LIQUIDITY AND CAPITAL RESOURCES Cash Flows for Nine-Month Periods - Alliant Energy's cash flows from - --------------------------------- operating activities increased $110 million primarily due to changes in working capital; cash flows from financing activities decreased $316 million primarily due to net changes in the amount of debt issued and retired; and cash flows used for investing activities decreased $192 million primarily due to lower non-regulated investments. IESU's cash flows from operating activities increased $10 million primarily due to changes in working capital, partially offset by a scheduled nuclear refueling outage in the second quarter of 2001; cash flows used for financing activities decreased $58 million primarily due to net changes in the amount of debt issued and retired. WP&L's cash flows from operating activities increased $14 million primarily due to changes in working capital; cash flows used for financing activities increased $76 million primarily due to net changes in the amount of debt issued and retired and the payment of common stock dividends in 2001; and cash flows used for investing activities decreased $65 million due to proceeds received from the transfer of WP&L's transmission assets to ATC. WP&L did not declare a common stock dividend in 2000 as part of the management of its capital structure. Equity - On November 8, 2001, Alliant Energy agreed to sell in a public - ------ offering 8.5 million shares of its common stock at a price per share to the public of $28.00. In addition, the underwriters for the public offering have exercised their over-allotment option to purchase 1.275 million additional shares of common stock at the same price per share. The public offering of the shares is expected to close on November 15, 2001. Alliant Energy expects to use the approximately $263.0 million of net proceeds from the offering (including from the sale of the over-allotment shares) to repay short-term debt. Long-Term Debt - Refer to Note 7 of Alliant Energy's "Notes to Consolidated - -------------- Financial Statements" in Item 1. for discussion of long-term debt issued by IESU in March 2001. On November 9, 2001, Resources agreed to issue $300 million of 7% senior notes due 2011 in a private placement. The notes are fully and unconditionally guaranteed by Alliant Energy. The private placement of the notes is expected to close on November 15, 2001. Resources expects to use the $297.2 million of net proceeds from the private placement to repay other Resources' debt. 41 Sale of Accounts Receivable - Alliant Energy and the utility subsidiaries - --------------------------- received all necessary approvals in late March 2001 for a combined accounts receivable sale program whereby IESU, WP&L and IPC sell their respective receivables on a limited recourse basis through wholly-owned special purpose entities to an affiliated financing entity, which in turn sells the receivables to an outside investor. The new program became operational in the second quarter of 2001 and replaces the previously existing programs for IESU and WP&L. IPC did not previously have an accounts receivable sale program. The utility subsidiaries use proceeds from the sale of accounts receivable and unbilled revenues to maintain flexibility in their capital structures, take advantage of favorable short-term rates and finance a portion of their long-term cash needs. Investments - Under PUHCA, certain investments of Alliant Energy in exempt - ----------- wholesale generators and foreign utility companies are limited to 50 percent of Alliant Energy's consolidated retained earnings. In May 2001, Alliant Energy filed an application with the SEC to request, among other things, aggregate investment authority with respect to exempt wholesale generators and foreign utility companies in the amount of $1.75 billion. In October 2001, the SEC issued an order approving an increase in Alliant Energy's aggregate investment authority from 50 percent to 100 percent of consolidated retained earnings and reserved its jurisdiction over the increase to $1.75 billion until further completion of the record, which is subject to the receipt of all required state regulatory approvals. In October 2001, Alliant Energy and Resources received SEC approval for their on-going program of external financing, credit support agreements and other related proposals for the period through December 31, 2004. Construction and Acquisition Expenditures - Alliant Energy plans to invest in - ----------------------------------------- a portfolio of domestic non-regulated generation assets through acquisition, development and expansion, both inside and outside of the service territories of its utility subsidiaries. Consistent with this strategy, in October 2001, Alliant Energy announced an agreement with Panda Energy International, Inc., to jointly develop and operate a 1,100 MW natural gas combined-cycle power plant in western Michigan. Construction of the facility is expected to begin during the first quarter of 2002 and the facility is expected to become operational in 2004, assuming certain conditions are satisfied. The total cost of the project is estimated to be approximately $600 million. Alliant Energy anticipates that at least 55 percent of the project costs will be financed through non-recourse debt at the joint venture level, with the remaining portion to be provided by Alliant Energy. Alliant Energy's subsidiaries also announced their interest in developing new electric power generation capacity in Iowa and Wisconsin over the next 10 years with an estimated investment of $2.5 billion. In Iowa, IESU announced a willingness to develop up to 1,200 MW of new electric power generation over the next 10 years. In Wisconsin, WP&L announced plans to develop up to 800 MW of new electric power generation over the next 10 years. The Wisconsin plans include the addition of 500 MW of coal-fired and 100 MW of natural gas-fired generation by 2006 and an additional 200 MW of combined-cycle gas generation by 2011. Both the Iowa and Wisconsin proposals are subject to various conditions, including the receipt of applicable regulatory approval and the receipt of a reasonable return on IESU's and WP&L's investments. Including non-regulated generation projects, Alliant Energy plans to invest $2.0 billion over the next four years in various energy-related businesses that it believes offer potential for future growth while enhancing shareowner value. Alliant Energy expects these investments to include expanding its international generation and distribution assets in Australia, Brazil, China and New Zealand. Alliant Energy also plans to invest in its other domestic non-regulated businesses, including its oil and gas production operations and its integrated energy services businesses. To help ensure electric service reliability for its customers, Alliant Energy has announced a program called PowerPledge, which is designed to increase Alliant Energy's power supply, upgrade existing systems and use more renewable energy sources. Through this program, Alliant Energy's utility subsidiaries plan to invest $1.7 billion from 2002 through 2005 in utility infrastructure designed to improve reliability. 42 OTHER MATTERS Refer to Note 4 of IESU's "Notes to Consolidated Financial Statements" in Item 1. for discussion of a merger between IESU and IPC that is currently expected to be effective January 1, 2002. Market Risk Sensitive Instruments and Positions Alliant Energy's primary market risk exposures are associated with interest rates, commodity prices, equity prices and currency exchange rates. Alliant Energy has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. Alliant Energy's market risks have not changed materially from the market risks reported in the 2000 Form 10-K, except as noted below. Commodity Risk - Non-trading - Southern Hydro, a foreign affiliate of Alliant - ---------------------------- Energy accounted for under the equity method of accounting, owns and operates hydroelectric generation facilities in the state of Victoria in Australia. These generation facilities operate as peaking units. Under the rules of the Australian market, Southern Hydro must sell all of its production into a spot market in which the price changes every five minutes and is set on the average of each half hour. Electricity prices in this market can and have been very volatile. In order to manage the electricity commodity price risk associated with anticipated sales into the spot market, Southern Hydro enters into a variety of electricity derivative contracts with terms of up to five years. The value of these derivative instruments can change significantly as a result of changes in forward electricity prices. These instruments do not qualify for hedge accounting under SFAS 133. Accordingly, per U.S. generally accepted accounting principles, changes in the fair value of these derivatives, which are non-cash valuation adjustments, must be reported in Southern Hydro's earnings. Southern Hydro management believes its ownership of the physical generating facilities that are not marked-to-market, combined with the electricity derivative contracts, act as an economic hedge to volatile electricity prices, such that Southern Hydro's net economic exposure to volatile electricity prices over the next five years is managed within reasonable limits. Alliant Energy has not presented market risk data for Southern Hydro since it is accounted for as an equity method investment. Equity Price Risk - At September 30, 2001 and December 31, 2000, Alliant - ----------------- Energy had an investment in the stock of McLeod, a publicly traded telecommunications company, valued at $43 million and $791 million, respectively. In addition to the equity risk associated with the investment in McLeod, Alliant Energy also has equity risk related to the option liability embedded within Resources' exchangeable senior notes. A 10 percent increase (decrease) in the quoted market price at September 30, 2001 and December 31, 2000 would not have a significant impact on net income as any resulting increase (decrease) in the value of the option would be substantially offset by a corresponding increase (decrease) in the value of the McLeod shares classified as trading (valued at $12 million and $221 million at September 30, 2001 and December 31, 2000, respectively). At September 30, 2001 and December 31, 2000, the McLeod available-for-sale securities were valued at $31 million and $570 million, respectively. A 10 percent increase (decrease) in the quoted market price at September 30, 2001 and December 31, 2000 would have increased (decreased) the value of the investment of the available-for-sale securities by $3 million and $57 million, respectively. Currency Risk - Alliant Energy has investments in various countries where the - ------------- net investments are not hedged, including Australia, Brazil, China and New Zealand. As a result, these investments are subject to currency exchange risk with fluctuations in currency exchange rates. At September 30, 2001 and December 31, 2000, Alliant Energy had a cumulative foreign currency translation loss of $174 million and $60 million, respectively, recorded in "Accumulated other comprehensive income (loss)" on its Consolidated Balance Sheets that primarily related to decreases in value of the Brazil real, New Zealand dollar and Australian dollar in relation to the U.S. dollar. Based on Alliant Energy's investments at September 30, 2001 and December 31, 2000, a 10 percent sustained increase (decrease) over the next 12 months in the foreign exchange rates of Australia, Brazil, China and New Zealand would increase (decrease) the cumulative foreign currency translation loss by $44 million and $46 million, respectively. 43 Accounting Pronouncements In July 2001, the FASB issued SFAS 141, "Business Combinations," which requires that, among other things, all business combinations be accounted for under the purchase method for business combinations initiated after June 30, 2001. Use of the pooling-of-interests method is no longer permitted. In July 2001, the FASB issued SFAS 142, "Goodwill and Other Intangible Assets," which will result in goodwill no longer being amortized to earnings. Rather, goodwill will be subject to at least an annual assessment for impairment by applying a fair-value-based test. The amortization of goodwill existing as of June 30, 2001 ceases upon adoption of SFAS 142, which will be January 1, 2002 for Alliant Energy. Alliant Energy has not yet fully quantified the impacts of SFAS 142 on its financial condition or results of operations. In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement Obligations," which addresses financial accounting and reporting for obligations associated with the retirement of tangible long-lived assets and the associated asset retirement costs. Alliant Energy must adopt SFAS 143 no later than January 1, 2003. With regards to the decommissioning of DAEC and Kewaunee, SFAS 143 will require IESU and WP&L, respectively, to record at fair value the decommissioning liability and a corresponding asset, which will then be depreciated over the remaining expected service lives of the plants' generating units. Currently, decommissioning amounts collected in rates and the investment earnings are reported in accumulated depreciation. Alliant Energy has not yet determined what other assets may have associated retirement costs as defined by SFAS 143. Alliant Energy does not anticipate SFAS 143 will have a material impact on its financial condition or results of operations. In October 2001, the FASB issued SFAS 144, "Accounting for the Impairment or Disposal of Long-Lived Assets," which addresses financial accounting and reporting for the impairment or disposal of long-lived assets. Alliant Energy must adopt SFAS 144 no later than January 1, 2002. At the present time, Alliant Energy does not anticipate SFAS 144 will have a material impact on its financial condition or results of operations. ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Quantitative and Qualitative Disclosures About Market Risk are reported under Item 2. MD&A "Other Matters - Market Risk Sensitive Instruments and Positions." 44 SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant Energy Corporation, Interstate Power and Light Company and Wisconsin Power and Light Company have each duly caused this amendment to be signed on its behalf by the undersigned thereunto duly authorized on the 30th day of January 2002.
ALLIANT ENERGY CORPORATION - -------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- (Principal Accounting Officer and Authorized Signatory) John E. Kratchmer INTERSTATE POWER AND LIGHT COMPANY - ---------------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- (Principal Accounting Officer and Authorized Signatory) John E. Kratchmer WISCONSIN POWER AND LIGHT COMPANY - --------------------------------- Registrant By: /s/ John E. Kratchmer Corporate Controller and Chief Accounting Officer - ------------------------- (Principal Accounting Officer and Authorized Signatory) John E. Kratchmer
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