-----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, Urf7HU65Jqe3QE7WxfdKkVn7ug3zZnilPPgB4taTDBcchJQwwTDljJSz5eHIdTqe o9mYLY0YfXz1NNbE6x4YTw== 0000107832-02-000025.txt : 20020414 0000107832-02-000025.hdr.sgml : 20020414 ACCESSION NUMBER: 0000107832-02-000025 CONFORMED SUBMISSION TYPE: 8-K/A PUBLIC DOCUMENT COUNT: 1 CONFORMED PERIOD OF REPORT: 20020101 ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020220 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-04117 FILM NUMBER: 02554368 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 RAILWAY & LIGHT CORP DATE OF NAME CHANGE: 19670629 FORMER COMPANY: FORMER CONFORMED NAME: IOWA ELECTRIC LIGHT & POWER CO DATE OF NAME CHANGE: 19920703 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: 8-K/A SEC ACT: 1934 Act SEC FILE NUMBER: 001-09894 FILM NUMBER: 02554369 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: WPL HOLDINGS INC DATE OF NAME CHANGE: 19920703 FORMER COMPANY: FORMER CONFORMED NAME: INTERSTATE ENERGY CORP DATE OF NAME CHANGE: 19980427 8-K/A 1 form8kafeb2002.txt 8-K/A UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 8-K/A AMENDMENT NO. 1 TO CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 _______________________ Date of Report (Date of earliest event reported): January 1, 2002
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)
This combined Form 8-K/A is separately filed by Alliant Energy Corporation and Interstate Power and Light Company. The undersigned registrants hereby amend Item 7 of their Current Report on Form 8-K dated January 1, 2002 to provide in its entirety as follows: Item 7. Financial Statements and Exhibits. - ------ --------------------------------- (a) Financial Statements of the Business Acquired. --------------------------------------------- Historical financial statements of IPC required by this Item 7 are as follows:
Index to Financial Statements Page Number ----------- Report of Independent Public Accountants 3 Statement of Income for the Year Ended December 31, 2000 4 Balance Sheet as of December 31, 2000 5 Statement of Cash Flows for the Year Ended December 31, 2000 7 Statement of Capitalization as of December 31, 2000 8 Statement of Changes in Common Equity for the Year Ended December 31, 2000 9 Notes to Financial Statements 10 Consolidated Statements of Income (Unaudited) for the Nine Months Ended September 30, 2001 and 2000 20 Consolidated Balance Sheet (Unaudited) as of September 30, 2001 21 Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended September 30, 2001 and 2000 23 Notes to Consolidated Financial Statements (Unaudited) 24
2 REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS To the Shareowners of Interstate Power Company: We have audited the accompanying balance sheet and statement of capitalization of Interstate Power Company (a Delaware corporation) as of December 31, 2000, and the related statement of income, cash flows and changes in common equity for the period ended December 31, 2000. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Interstate Power Company as of December 31, 2000, and the results of its operations and its cash flows for the period ended December 31, 2000, in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP - ----------------------- ARTHUR ANDERSEN LLP Milwaukee, Wisconsin January 29, 2001 (except with respect to the matters discussed in Note 1(a) as to which the date is January 1, 2002) 3
INTERSTATE POWER COMPANY STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2000 (in thousands) Operating revenues: Electric utility $304,386 Gas utility 53,615 ------------------ 358,001 ------------------ - --------------------------------------------------------------------------------------------------- Operating expenses: Electric production fuels 57,049 Purchased power 64,304 Cost of gas sold 35,251 Other operation and maintenance 92,693 Depreciation and amortization 35,407 Taxes other than income taxes 16,475 ------------------ 301,179 ------------------ - --------------------------------------------------------------------------------------------------- Operating income 56,822 ------------------ - --------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 16,272 Allowance for funds used during construction (824) Miscellaneous, net (2,300) ------------------ 13,148 ------------------ - --------------------------------------------------------------------------------------------------- Income before income taxes 43,674 ------------------ - --------------------------------------------------------------------------------------------------- Income taxes 14,970 ------------------ - --------------------------------------------------------------------------------------------------- Net income 28,704 ------------------ - --------------------------------------------------------------------------------------------------- Preferred dividend requirements 2,489 ------------------ - --------------------------------------------------------------------------------------------------- Earnings available for common stock $26,215 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY BALANCE SHEET DECEMBER 31, 2000 (in thousands) ASSETS - --------------------------------------------------------------------------------------------------- Property, plant and equipment: Utility - Plant in service - Electric $941,400 Gas 78,984 Common 14,374 ------------------ 1,034,758 Less - Accumulated depreciation 523,057 ------------------ 511,701 Construction work in progress 13,371 ------------------ 525,072 Other property, plant and equipment 276 ------------------ 525,348 ------------------ - --------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 2,871 Accounts receivable: Customer, less allowance for doubtful accounts of $356 50,658 Associated companies 1,758 Other 1,955 Income tax refunds receivable 5,161 Production fuel, at average cost 16,349 Materials and supplies, at average cost 5,973 Gas stored underground, at average cost 5,210 Adjustment clause balances 3,670 Regulatory assets 10,803 Prepayments and other 2,422 ------------------ 106,830 ------------------ - --------------------------------------------------------------------------------------------------- Investments 7,193 ------------------ - --------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 50,704 Deferred charges and other 15,672 ------------------ 66,376 ------------------ - --------------------------------------------------------------------------------------------------- Total assets $705,747 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY BALANCE SHEET (Continued) DECEMBER 31, 2000 (in thousands) CAPITALIZATION AND LIABILITIES - --------------------------------------------------------------------------------------------------- Capitalization (See Statement of Capitalization): Common stock $34,221 Additional paid-in capital 108,690 Retained earnings 86,058 ------------------ Total common equity 228,969 Cumulative preferred stock, not mandatorily redeemable 10,819 Cumulative preferred stock, mandatorily redeemable 24,687 Long-term debt 170,401 ------------------ 434,876 ------------------ - --------------------------------------------------------------------------------------------------- Current liabilities: Notes payable to associated companies 68,218 Accounts payable 22,717 Accounts payable to associated companies 12,236 Accrued interest 2,666 Accrued taxes 13,934 Other 9,643 ------------------ 129,414 ------------------ - --------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 93,548 Accumulated deferred investment tax credits 12,829 Environmental liabilities 14,380 Pension and other benefit obligations 8,191 Other 12,509 ------------------ 141,457 ------------------ - --------------------------------------------------------------------------------------------------- Total capitalization and liabilities $705,747 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2000 (in thousands) - ------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $28,704 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 35,407 Amortization of deferred energy efficiency expenditures 11,290 Deferred tax benefits and investment tax credits (1,233) Other 754 Other changes in assets and liabilities: Accounts receivable (15,769) Gas stored underground (2,145) Accounts payable 11,963 Benefit obligations and other (12,213) ----------------- Net cash flows from operating activities 56,758 ----------------- - ------------------------------------------------------------------------------------------------------------ Cash flows from financing activities: Common stock dividends declared (21,706) Preferred stock dividends (2,489) Net change in short-term borrowings 29,020 Other 59 ----------------- Net cash flows from financing activities 4,884 ----------------- - ------------------------------------------------------------------------------------------------------------ Cash flows used for investing activities: Utility construction expenditures (50,637) Other (11,679) ----------------- Net cash flows used for investing activities (62,316) ----------------- - ------------------------------------------------------------------------------------------------------------ Net decrease in cash and temporary cash investments (674) ----------------- - ------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 3,545 ----------------- - ------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at end of period $2,871 ================= - ------------------------------------------------------------------------------------------------------------ Supplemental cash flows information: Cash paid during the period for: Interest $13,362 ================= Income taxes $21,999 ================= - ------------------------------------------------------------------------------------------------------------ The accompanying Notes to Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY STATEMENT OF CAPITALIZATION DECEMBER 31, 2000 (in thousands, except share amounts) Common equity: Common stock - $3.50 par value - authorized 30,000,000 shares; 9,777,432 shares outstanding $34,221 Additional paid-in capital 108,690 Retained earnings 86,058 ------------------- 228,969 ------------------- - ---------------------------------------------------------------------------------------------------- Cumulative preferred stock: Par/Stated Authorized Shares Mandatory Value Shares Outstanding Series Redemption ----- ------ ----------- ------ ---------- $50 * 216,381 4.36% - 7.76% No 10,819 $50 * 545,000 6.40% Yes ** 27,250 ------------------- 38,069 Less: unamortized expenses (2,563) ------------------- 35,506 ------------------- * 2,000,000 authorized shares in total ** $53.20 mandatory redemption price - ---------------------------------------------------------------------------------------------------- Long-term debt: First Mortgage Bonds: 8% series, due 2007 25,000 8-5/8% series, due 2021 25,000 7-5/8% series, due 2023 94,000 ------------------- 144,000 Pollution Control Revenue Bonds: 5.75%, due 2003 1,000 6.25%, due 2009 1,000 6.30%, due 2010 5,600 6.35%, due 2012 5,650 Variable/fixed rate series 1998 (4.30% through 2003), due 2005 to 2008 4,950 Variable/fixed rate series 1999 (4.05% through 2004), due 2010 3,250 Variable/fixed rate series 1999 (4.20% through 2004), due 2013 7,700 ------------------- 29,150 ------------------- 173,150 ------------------- Less: Unamortized debt premium and (discount), net (2,749) ------------------- 170,401 ------------------- - ---------------------------------------------------------------------------------------------------- Total capitalization $434,876 =================== - ---------------------------------------------------------------------------------------------------- The accompanying Notes to Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY STATEMENT OF CHANGES IN COMMON EQUITY Accumulated Additional Other Total Common Paid-In Retained Comprehensive Common Stock Capital Earnings Income (Loss) Equity - ------------------------------------------------------------------------------------------------------------------------------------ (in thousands) 2000: Beginning balance $34,221 $108,748 $81,549 $ - $224,518 Comprehensive income: Earnings available for common stock 26,215 26,215 Other comprehensive income (loss): Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding gains arising during period due to cumulative effect of a change in accounting principle, net of tax of $2 3 3 Other unrealized holding losses arising during period, net of tax of $2 (3) (3) -------------- ----------- Net unrealized gains (losses) on qualifying derivatives - - -------------- ----------- Total comprehensive income 26,215 Common stock dividends (21,706) (21,706) Common stock issued (58) (58) ------------ ------------- ------------ -------------- ----------- Ending balance $34,221 $108,690 $86,058 $ - $228,969 ============ ============= ============ ============== =========== The accompanying Notes to Financial Statements are an integral part of this statement.
9 INTERSTATE POWER COMPANY ------------------------ NOTES TO FINANCIAL STATEMENTS ----------------------------- (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General - The financial statements include the accounts of Interstate Power Company (IPC), which is a subsidiary of Alliant Energy Corporation (Alliant Energy). IPC is engaged principally in the generation, transmission, distribution and sale of electric energy and the purchase, distribution, transportation and sale of natural gas in Iowa, Minnesota and Illinois. On March 15, 2000, the boards of directors of IESU and IPC approved a merger agreement (as amended on November 29, 2000) for IPC to merge with and into IESU (the "Agreement"). 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. Each share of IPC common stock outstanding was cancelled without payment and each share of IPC preferred stock outstanding was cancelled and converted into the right to receive one share of a new class of IESU Class A preferred stock with substantially identical designations, rights and preferences as the previously outstanding IPC preferred stock. IPC and IESU were both wholly-owned operating subsidiaries of Alliant Energy. As such, the transaction was accounted for as a common control merger. The financial statements are prepared in conformity with accounting principles generally accepted in the United States, which give recognition to the rate making and accounting practices of the Federal Energy Regulatory Commission (FERC) and state commissions having regulatory jurisdiction. The preparation of the financial statements requires management to make estimates and assumptions that affect: a) the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements; and b) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (b) Regulation - IPC is subject to regulation by FERC, the Iowa Utilities Board (IUB), the Minnesota Public Utilities Commission (MPUC) and the Illinois Commerce Commission. (c) Regulatory Assets - IPC is subject to the provisions of Statement of Financial Accounting Standards (SFAS) 71, "Accounting for the Effects of Certain Types of Regulation," which 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 Statement of Income at the time they are reflected in rates. At December 31, 2000, regulatory assets of $61.5 million were comprised of the following items (in millions): Tax-related (Note 1(d)) $31.9 Environmental liabilities (Note 11(d)) 14.7 Energy efficiency program costs 9.2 Other 5.7 ------ $61.5 ====== If a portion of IPC's operations becomes no longer subject to the provisions of SFAS 71 as a result of competitive restructuring or otherwise, a write-down of related regulatory assets would be required, unless some form of transition cost recovery is established by the appropriate regulatory body that would meet the requirements under generally accepted accounting principles for continued accounting as regulatory assets during such recovery period. In addition, IPC would be required to determine any impairment of other assets and write-down such assets to their fair value. 10 (d) Income Taxes - IPC follows the liability method of accounting for deferred income taxes, which requires the establishment of deferred tax assets and liabilities, as appropriate, for all temporary differences between the tax basis of assets and liabilities and the amounts reported in the financial statements. Deferred taxes are recorded using currently enacted tax rates. Except as noted below, income tax expense includes provisions for deferred taxes to reflect the tax effects of temporary differences between the time when certain costs are recorded in the accounts and when they are deducted for tax return purposes. As temporary differences reverse, the related accumulated deferred income taxes are reversed to income. Investment tax credits have been deferred and are subsequently credited to income over the average lives of the related property. Consistent with Iowa rate making practices, deferred tax expense is not recorded for certain temporary differences (primarily related to utility property, plant and equipment). As the deferred taxes become payable (over periods exceeding 30 years for some generating plant differences) they are recovered through rates. Accordingly, IPC has recorded deferred tax liabilities and regulatory assets for certain temporary differences, as identified in Note 1(c). Alliant Energy files a consolidated federal income tax return. Under the terms of an agreement between Alliant Energy and its subsidiaries (including IPC), the subsidiaries calculate their respective federal income tax provisions and make payments to or receive payments from Alliant Energy as if they were separate taxable entities. (e) Temporary Cash Investments - Temporary cash investments are stated at cost, which approximates market value, and are considered cash equivalents for the Balance Sheet and the Statement of Cash Flows. These investments consist of short-term liquid investments that have maturities of less than 90 days from the date of acquisition. (f) Depreciation of Utility Property, Plant and Equipment - IPC uses the straight-line depreciation method as approved by its regulatory commissions. In 2000, the average rates of depreciation for electric and gas properties, consistent with current rate making practices, were 3.5% and 3.6%, respectively. (g) Property, Plant and Equipment - Utility plant is recorded at original cost, which includes overhead and administrative costs and allowance for funds used during construction (AFUDC). In 2000, the aggregate gross AFUDC recovery rate, computed in accordance with the prescribed regulatory formula, was 6.5%. Other property, plant and equipment is recorded at original cost. Upon retirement or sale of other property and equipment, the cost and related accumulated depreciation are removed from the accounts and any gain or loss is included in "Miscellaneous, net" in the Statement of Income. Ordinary retirements of utility plant, including removal costs less salvage value, are charged to accumulated depreciation upon removal from utility plant accounts and no gain or loss is recognized. (h) Operating Revenues - IPC accrues revenues for services rendered but unbilled at month-end. (i) Utility Fuel Cost Recovery - IPC's tariffs provide for subsequent adjustments to its electric and natural gas rates for changes in the cost of fuel, purchased energy and natural gas purchased for resale. Changes in the under/over collection of these costs are reflected in "Electric production fuels" and "Cost of gas sold" in the Statement of Income. The cumulative effects are reflected on the Balance Sheet as a current asset or current liability, pending automatic reflection in future billings to customers. Purchased-power capacity costs are not recovered from electric customers through energy adjustment clauses. Recovery of these costs must be addressed in base rates in a formal rate proceeding. (j) Derivative Financial Instruments - IPC uses derivative financial instruments to hedge exposures to fluctuations in certain commodity prices. IPC does not use such instruments for speculative purposes. In accordance with SFAS 133, "Accounting for Derivative Instruments and Hedging Activities," as amended by SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of SFAS 133," the fair value of all derivatives are recorded as assets or liabilities on the Balance Sheet and gains and losses related to derivatives that are designated as, and qualify as hedges, are recognized in earnings when the underlying hedged item or physical transaction is recognized in income. Gains and losses related to derivatives that do not qualify for, or are not designated 11 in hedge relationships, are recognized in earnings immediately. IPC has commodity purchase and sales contracts for both capacity and energy that have been designated, and qualify for, the normal purchase and sale exception in SFAS 138. Based on this designation, these contracts are not accounted for as derivative instruments. Refer to Note 10 for further discussion of IPC's derivative financial instruments. (2) APRIL 1998 ALLIANT ENERGY CORPORATION MERGER In association with the 1998 merger between IPC, IES Industries Inc. and WPL Holdings, Inc., Alliant Energy entered into a three-year consulting agreement, which expires in the second quarter of 2001, with Wayne Stoppelmoor, the Chief Executive Officer of IPC prior to the consummation of the merger. Under the terms of the consulting agreement, Mr. Stoppelmoor, who was also Vice Chairman of Alliant Energy's Board of Directors until April 2000, received a fee of $200,000 in 2000 for his services. (3) LEASES IPC's operating lease rental expense for 2000 was $2.0 million. IPC's future minimum lease payments by year are as follows (in thousands): Capital Operating Year Leases Leases - ------------------------- --------- ---------- 2001 $14.1 $2,020.3 2002 14.1 1,313.4 2003 14.1 1,203.4 2004 14.1 319.4 2005 14.2 7.5 Thereafter 4.7 75.0 --------- ---------- 75.3 $4,939.0 ========== Less: Amount representing interest 7.8 --------- Present value of net minimum capital lease payments $67.5 ========= (4) UTILITY ACCOUNTS RECEIVABLE Utility customer accounts receivable, including unbilled revenues, arise primarily from the sale of electricity and natural gas. At December 31, 2000, IPC was serving a diversified base of residential, commercial and industrial customers and did not have any significant concentrations of credit risk. (5) INCOME TAXES The components of federal and state income taxes for IPC for the year ended December 31, 2000 were as follows (in millions): Current tax expense $16.2 Deferred tax expense (0.2) Amortization of investment tax credits (1.0) ---------- $15.0 ========== The overall effective income tax rate shown below for the year ended December 31, 2000 was computed by dividing total income tax expense by income before income taxes. Statutory federal income tax rate 35.0% State income taxes, net of federal benefits 5.4 Effect of rate making on property related differences 1.7 Amortization of investment tax credits (2.4) Adjustment of prior period taxes (4.7) Other items, net (0.7) -------- Overall effective income tax rate 34.3% ======== 12 The accumulated deferred income tax (assets) and liabilities included on the Balance Sheet at December 31, 2000 arise from the following temporary differences (in millions): Property related $104.6 Investment tax credit related (9.0) Other (2.1) --------- $93.5 ========= (6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS IPC has two non-contributory defined benefit pension plans that cover substantially all of its employees. Benefits are based on the employees' years of service and compensation. IPC also provides certain postretirement health care and life benefits to eligible retirees. In general, the health care plans are contributory with participants' contributions adjusted annually and the life insurance plans are non-contributory. The weighted-average assumptions as of the measurement date of September 30, 2000 were as follows: Qualified Other Pension Postretirement Benefits Benefits ------------- --------------- Discount rate 8% 8% Expected return on plan assets 9% 9% Rate of compensation increase 3.5% N/A Medical cost trend on covered charges: Initial trend rate N/A 9% Ultimate trend rate N/A 5% The components of IPC's qualified pension benefits and other postretirement benefits costs for 2000 were as follows (in thousands): Qualified Other Pension Postretirement Benefits Benefits ------------- -------------- Service cost $1,059 $690 Interest cost 2,251 2,701 Expected return on plan assets (2,661) (1,226) Amortization of: Transition obligation 154 998 Prior service cost 164 (224) Actuarial gain -- (229) ------------- -------------- Total $967 $2,710 ============= ============== The pension benefit cost shown above (and in the following tables) represents only the pension benefit cost for bargaining unit employees of IPC covered under the IPC Retirement Income Plan sponsored by IPC. The pension benefit cost for IPC's non-bargaining employees who are now participants in other Alliant Energy plans was $0.7 million for 2000. In addition, Alliant Energy Corporate Services, Inc. (Corporate Services) provides services to IPC. The allocated pension benefit cost associated with these services was $0.6 million for 2000. The other postretirement benefit cost shown previously for 2000 (and in the following tables) represents the other postretirement benefit cost for all IPC employees. The allocated other postretirement benefit cost associated with Corporate Services for IPC was $0.1 million for 2000. The assumed medical trend rates are critical assumptions in determining the service and interest cost and accumulated postretirement benefit obligation related to postretirement benefit costs. A one percent change in the medical trend rates for 2000, holding all other assumptions constant, would have the following effects (in thousands): 1 Percent 1 Percent Increase Decrease ---------- ---------- Effect on total of service and interest cost components $500 ($400) Effect on postretirement benefit obligation $3,100 ($2,800) 13 A reconciliation of the funded status of IPC's plans to the amounts recognized on IPC's Balance Sheet at December 31, 2000 was as follows (in thousands):
Qualified Pension Other Postretirement Benefits Benefits -------------------- ---------------------- Change in benefit obligation: Net benefit obligation at beginning of year $28,057 $36,270 Service cost 1,059 690 Interest cost 2,251 2,701 Plan amendments 1,247 (3,170) Actuarial loss (gain) (1,780) 2,674 Gross benefits paid (490) (2,645) -------------------- ---------------------- Net benefit obligation at end of year 30,344 36,520 -------------------- ---------------------- Change in plan assets: Fair value of plan assets at beginning of year 29,772 20,087 Actual return on plan assets 2,689 1,096 Employer contributions -- 4,745 Gross benefits paid (490) (2,645) -------------------- ---------------------- Fair value of plan assets at end of year 31,971 23,283 -------------------- ---------------------- Funded status at end of year 1,627 (13,237) Unrecognized net actuarial gain (2,075) (2,062) Unrecognized prior service cost 2,391 (672) Unrecognized net transition obligation 319 9,919 -------------------- ---------------------- Net amount recognized at end of year $2,262 ($6,052) ==================== ====================== Amounts recognized on the Balance Sheet consist of: Prepaid benefit cost $2,262 $654 Accrued benefit cost -- (6,706) -------------------- ---------------------- Net amount recognized at measurement date 2,262 (6,052) -------------------- ---------------------- Contributions paid after 9/30 and prior to 12/31 -- 771 -------------------- ---------------------- Net amount recognized at 12/31 $2,262 ($5,281) ==================== ======================
Alliant Energy sponsors several non-qualified pension plans which cover certain current and former officers. The pension expense allocated to IPC for these plans was $0.9 million in 2000. A significant number of IPC employees also participate in defined contribution pension plans (401(k) plans). IPC's contributions to the plans, which are based on the participants' level of contribution, were $0.5 million in 2000. (7) COMMON AND PREFERRED STOCK (a) Common Stock - IPC has common stock dividend restrictions based on its respective bond indentures and articles of incorporation, and restrictions on the payment of common stock dividends commonly found with preferred stock. In addition, IPC's ability to pay common stock dividends is restricted based on requirements associated with sinking funds. (b) Preferred Stock - In 1993, IPC issued 545,000 shares of 6.40%, $50 par value preferred stock with a final redemption date of May 1, 2022. Under the provisions of the mandatory sinking fund, beginning in 2003, IPC is required to redeem annually $1.4 million, or 27,250 shares of the preferred stock. 14 The carrying value of IPC's cumulative preferred stock at December 31, 2000 was $36 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at December 31, 2000 was $33 million. (8) DEBT (a) Short-Term Debt - IPC participates in a utility money pool with Wisconsin Power and Light Company (WP&L) and IES Utilities Inc. (IESU), subsidiaries of Alliant Energy, that is funded, as needed, through the issuance of commercial paper by Alliant Energy. Interest expense and other fees are allocated based on borrowing amounts. Information regarding IPC's short-term debt for 2000 is as follows (dollars in millions): As of year end: Money pool borrowings $68.2 Interest rate on money pool borrowings 6.56% For the year ended: Average amount of short-term debt (based on daily outstanding balances) $42.4 Average interest rate on short-term debt 6.51% (b) Long-Term Debt - IPC's First Mortgage Bonds are secured by substantially all of IPC's utility plant. Debt maturities for 2001 to 2005 are $0 million, $0 million, $1.0 million, $0 million and $2.7 million, respectively. Depending upon market conditions, it is currently anticipated that a majority of the maturing debt will be refinanced with the issuance of long-term securities. The carrying value of IPC's long-term debt at December 31, 2000 was $170 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at December 31, 2000 was $176 million. (9) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS The carrying amount of IPC's current assets and current liabilities approximates fair value because of the short maturity of such financial instruments. Since IPC is subject to regulation, any gains or losses related to the difference between the carrying amount and the fair value of its financial instruments may not be realized by IPC's parent. (10) DERIVATIVE FINANCIAL INSTRUMENTS IPC adopted SFAS 133 as of July 1, 2000. SFAS 133 requires that every derivative instrument be recorded on the balance sheet as an asset or liability measured at its fair value and that changes in the derivative's fair value be recognized currently in earnings unless specific hedge accounting criteria are met. SFAS 133 requires that as of the date of initial adoption, the difference between the fair value of derivative instruments recorded on the balance sheet and the previous carrying amount of those derivatives be reported in net income or other comprehensive income, as appropriate, as the cumulative effect of a change in accounting principle in accordance with Accounting Principles Board Opinion 20, "Accounting Changes." In the third quarter of 2000, the impact of IPC adopting SFAS 133 as of July 1, 2000 did not affect net income before the cumulative effect of a change in accounting principle. A limited number of IPC's fixed price commodity contracts are defined as derivatives under SFAS 133. The fair values of these derivative instruments have been recorded as assets and liabilities on the balance sheet and in the transition adjustment in accordance with the transition provisions of SFAS 133. Changes in the fair values of these instruments subsequent to July 1, 2000, to the extent that the derivatives are designated in cash flow hedging relationships and are effective at mitigating the underlying commodity risk, are recorded in other comprehensive income. At the date the underlying transaction occurs, the amounts accumulated in other comprehensive income are reported in the Statement of Income. To the extent that the hedges are not effective, the ineffective portion of the changes in fair value is recorded directly in earnings. 15 IPC's financial statement impact of recording the various SFAS 133 transactions at July 1, 2000 was as follows (in thousands):
Financial Statement Account Financial Statement Amount Increased - ------------------------------------------------------------ ---------------------- --------------------- Other assets Balance sheet $5.8 Other liabilities Balance sheet 2.4 Cumulative effect of a change in accounting principle (other comprehensive income) Balance sheet 3.4
During 2000, $3,390 of net income included in the cumulative effect of a change in accounting principle component of accumulated other comprehensive income was reclassified into earnings, resulting in a remaining balance of $0 at December 31, 2000. IPC's primary market risk exposures are associated with commodity prices. IPC has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. During 2000, IPC held derivative instruments designated as cash flow hedging instruments and other derivatives. The cash flow hedging instruments were comprised of coal purchase and sales contracts which were used to manage the price of anticipated coal purchases and sales. IPC did not have any cash flow hedging instruments outstanding at December 31, 2000. For the year ended December 31, 2000, there was no gain or loss recognized in earnings representing the amount of hedge ineffectiveness. IPC did not exclude any components of the derivative instruments' gain or loss from the assessment of hedge effectiveness and there were no reclasses into earnings as a result of the discontinuance of hedges. IPC's derivatives that have not been designated in hedge relationships include electricity price collars, used to manage energy costs during supply/demand imbalances. During 2000, these derivatives were recorded at their fair market value as derivative assets, derivative liabilities and regulatory assets on the Balance Sheet. (11) COMMITMENTS AND CONTINGENCIES (a) Construction and Acquisition Program - IPC anticipates 2001 utility construction and acquisition expenditures will be approximately $59 million. During 2002-2005, IPC expects to spend approximately $239 million for utility construction and acquisition expenditures. (b) Purchased-Power and Transmission, Coal and Natural Gas Contracts - Corporate Services has entered into purchased-power and transmission, coal, and natural gas supply, transportation and storage contracts as agent for IPC, WP&L and IESU. The natural gas supply commitments are all index-based. Based on the System Coordination and Operating Agreement, Alliant Energy annually allocates purchased-power contracts to the individual utilities. Such process considers factors such as resource mix, load growth and resource availability. Refer to Note 15 for additional information. In addition, Corporate Services has entered into various coal contracts as agent for IPC, WP&L and IESU. Contract quantities are allocated to specific plants at the individual utilities based on various factors including projected heat input requirements, combustion compatibility and efficiency. However, for 2001, 2002 and 2003, system-wide contracts of $21.3 million (5.1 million tons), $1.7 million (0.5 million tons) and $1.7 million (0.5 million tons), respectively, have not yet been allocated to the individual utilities due to the need for additional analysis of combustion compatibility and efficiency. Corporate Services expects to supplement its coal and natural gas supplies with spot market purchases as needed. The minimum commitments directly assigned to IPC were as follows (dollars and dekatherms (Dths) in millions; megawatt-hours (MWhs) and tons in thousands): 16
Natural gas supply, Purchased-power and Coal (including transportation and transmission transportation) storage contracts ------------------------ ----------------------- -------------------------- Dollars MWhs Dollars Tons Dollars Dths ---------- ---------- ---------- ---------- ------------ ---------- 2001 $13.8 62 $8.3 2,165 $16.3 28 2002 5.0 61 4.8 1,824 5.2 19 2003 3.1 61 4.2 1,706 2.8 14 2004 -- -- 1.3 533 -- -- 2005 -- -- 1.3 533 -- --
(c) Information Technology Services - Corporate Services has an agreement, expiring in 2004, with Electronic Data Systems Corporation (EDS) for information technology services. IPC's anticipated operating and capital expenditures under the agreement for 2001 are estimated to total approximately $0.6 million. Future costs under the agreement are variable and are dependent upon IPC's level of usage of technological services from EDS. (d) Environmental Liabilities - As of December 31, 2000, IPC had recorded environmental liabilities and regulatory assets for manufactured gas plant (MGP) sites of $15.5 million and $14.7 million, respectively. IPC has current or previous ownership interests in 9 MGP sites previously associated with the production of gas for which it may be liable for investigation, remediation and monitoring costs relating to the sites. IPC has received letters from state environmental agencies requiring no further action at one site. IPC is working pursuant to the requirements of various federal and state agencies to investigate, mitigate, prevent and remediate, where necessary, the environmental impacts to property, including natural resources, at and around the sites in order to protect public health and the environment. IPC records environmental liabilities based upon periodic studies, most recently updated in the third quarter of 2000, related to the MGP sites. Such amounts are based on the best current estimate of the remaining amount to be incurred for investigation, remediation and monitoring costs for those sites where the investigation process has been or is substantially completed, and the minimum of the estimated cost range for those sites where the investigation is in its earlier stages. It is possible that future cost estimates will be greater than current estimates as the investigation process proceeds and as additional facts become known. The amounts recognized as liabilities are reduced for expenditures made and are adjusted as further information develops or circumstances change. Costs of future expenditures for environmental remediation obligations are not discounted to their fair value. Management currently estimates the range of remaining costs to be incurred for the investigation, remediation and monitoring of all IPC sites to be approximately $11 million to $20 million. The MPUC allows the deferral of MGP-related costs applicable to the Minnesota sites and IPC has been successful in obtaining approval to recover such costs in rates in Minnesota. The IUB has permitted utilities to recover prudently incurred costs. Regulatory assets have been recorded by IPC which reflect the probable future rate recovery, where applicable. Considering the current rate treatment, and assuming no material change therein, IPC believes that the clean-up costs incurred for these MGP sites will not have a material adverse effect on its financial condition or results of operations. IPC has settled with all but one of its insurance carriers regarding reimbursement for its MGP-related costs. Insurance recoveries of $5.3 million were available as of December 31, 2000. Pursuant to its applicable rate making treatment, IPC has recorded its recoveries in "Other long-term liabilities and deferred credits." (e) Legal Proceedings - IPC is involved in legal and administrative proceedings before various courts and agencies with respect to matters arising in the ordinary course of business. Although unable to predict the outcome of these matters, IPC believes that appropriate reserves have been established and final disposition of these actions will not have a material adverse effect on its financial condition or results of operations. 17 (12) JOINTLY-OWNED ELECTRIC UTILITY PLANT Under joint ownership agreements with other Iowa utilities, IPC has undivided ownership interests in jointly-owned electric generating stations and related transmission facilities. Each of the respective owners is responsible for the financing of its portion of the construction costs. Kilowatt-hour generation and operating expenses are divided on the same basis as ownership with each owner reflecting its respective costs in its Statement of Income. Information relative to IPC's ownership interest in these facilities at December 31, 2000 was as follows (dollars in millions):
Accumulated Construction Fuel Ownership Plant in Provision for Work-In- Type Interest % Service Depreciation Progress - ---------------------------------------------------------------------------------------- Neal Unit 4 Coal 21.5 $83.5 $53.9 $-- Louisa Unit 1 Coal 4.0 24.7 13.2 -- ------------------------------------------ $108.2 $67.1 $-- ==========================================
(13) SEGMENTS OF BUSINESS IPC is a regulated domestic utility, serving customers in Iowa, Minnesota and Illinois, and is broken down into three segments: a) electric operations; b) gas operations; and c) other, which includes the unallocated portions of the utility business. Various line items in the following tables are not allocated to the electric and gas segments for management reporting purposes and therefore are included in "Other." Intersegment revenues were not material to IPC's operations and there was no single customer whose revenues exceeded 10 percent or more of IPC's revenues. Certain financial information relating to IPC's significant business segments for 2000 was as follows (in millions):
Electric Gas Other Total ----------------------------------------------------- Operating revenues $304.4 $53.6 $-- $358.0 Depreciation and amortization expense 32.7 2.7 -- 35.4 Operating income 53.6 3.2 -- 56.8 Interest expense, net of AFUDC 15.4 15.4 Miscellaneous, net (2.3) (2.3) Income tax expense 15.0 15.0 Net income 28.7 28.7 Preferred dividends 2.5 2.5 Earnings available for common stock 26.2 26.2 Total assets 590.3 88.7 26.7 705.7 Construction and acquisition expenditures 45.7 4.9 -- 50.6
(14) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended ------------------------------------------------------------------------ March 31 June 30 September 30 December 31 ----------------- --------------- ----------------- ------------------ (in millions) 2000 - ---- Operating revenues $81.0 $80.1 $100.1 $96.8 Operating income 8.5 9.5 29.8 9.0 Net income 2.8 3.9 15.1 6.9 Earnings available for common stock 2.1 3.3 14.5 6.3
18 (15) RELATED PARTY ISSUES In association with the 1998 merger that resulted in the formation of Alliant Energy, IPC, IESU and WP&L entered into a System Coordination and Operating Agreement which became effective with the merger. The agreement, which has been approved by FERC, provides a contractual basis for coordinated planning, construction, operation and maintenance of the interconnected electric generation and transmission systems of the three utility companies. In addition, the agreement allows the interconnected system to be operated as a single entity with off-system capacity sales and purchases made to market excess system capability or to meet system capability deficiencies. Such sales and purchases are allocated among the three utility companies based on procedures included in the agreement. The sales amounts allocated to IPC were $26.3 million for 2000. The purchases allocated to IPC were $64.2 million for 2000. The procedures were approved by both FERC and all state regulatory bodies having jurisdiction over these sales. Under the agreement, IPC, IESU and WP&L are fully reimbursed for any generation expense incurred to support the sale to an affiliate or to a non-affiliate. Any margins on sales to non-affiliates are distributed to the three utilities in proportion to each utility's share of electric production at the time of sale. Pursuant to a service agreement approved by the Securities and Exchange Commission under the Public Utility Holding Company Act of 1935, IPC receives various administrative and general services from an affiliate, Corporate Services. These services are billed to IPC at cost based on payroll and other expenses incurred by Corporate Services for the benefit of IPC. These costs totaled $46.8 million for 2000, and consisted primarily of employee compensation, benefits and fees associated with various professional services. At December 31, 2000, IPC had an intercompany payable to Corporate Services of $11.6 million. 19
INTERSTATE POWER COMPANY CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED) For the Nine Months Ended September 30, 2001 2000 - -------------------------------------------------------------------------------------------------------------- (in thousands) Operating revenues: Electric utility $233,156 $232,719 Gas utility 48,898 28,419 -------------------- ------------------- 282,054 261,138 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Operating expenses: Electric production fuels 43,455 41,851 Purchased power 45,352 50,107 Cost of gas sold 35,013 16,953 Other operation and maintenance 69,033 66,594 Depreciation and amortization 28,097 26,060 Taxes other than income taxes 13,647 11,795 -------------------- ------------------- 234,597 213,360 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Operating income 47,457 47,778 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 12,232 11,996 Allowance for funds used during construction (619) (694) Miscellaneous, net 412 (1,202) -------------------- ------------------- 12,025 10,100 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Income before income taxes 35,432 37,678 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Income taxes 14,423 15,910 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Net income 21,009 21,768 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 1,871 1,866 -------------------- ------------------- - -------------------------------------------------------------------------------------------------------------- Earnings available for common stock $19,138 $19,902 ==================== =================== - -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
INTERSTATE POWER COMPANY CONSOLIDATED BALANCE SHEET (UNAUDITED) SEPTEMBER 30, 2001 (in thousands) ASSETS - -------------------------------------------------------------------------------------------------------------- Property, plant and equipment: Utility - Plant in service - Electric $964,222 Gas 80,876 Common 15,571 ------------------ 1,060,669 Less - Accumulated depreciation 549,803 ------------------ 510,866 Construction work in progress 18,880 ------------------ 529,746 Other property, plant and equipment, net of accumulated depreciation and amortization of $102 179 ------------------ 529,925 ------------------ - -------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 2,293 Accounts receivable: Customer, less allowance for doubtful accounts of $522 7,603 Associated companies 1,522 Other 2,079 Production fuel, at average cost 18,615 Materials and supplies, at average cost 5,882 Gas stored underground, at average cost 3,687 Regulatory assets 4,016 Prepayments and other 5,079 ------------------ 50,776 ------------------ - -------------------------------------------------------------------------------------------------------------- Investments 6,762 ------------------ - -------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 50,342 Deferred charges and other 14,995 ------------------ 65,337 ------------------ - -------------------------------------------------------------------------------------------------------------- Total assets $652,800 ================== - -------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
21
INTERSTATE POWER COMPANY CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued) SEPTEMBER 30, 2001 (in thousands, except share amounts) CAPITALIZATION AND LIABILITIES - ----------------------------------------------------------------------------------------------------------- Capitalization: Common stock - $3.50 par value - authorized 30,000,000 shares; 9,777,432 shares outstanding $34,221 Additional paid-in capital 108,644 Retained earnings 88,916 ------------------ Total common equity 231,781 Cumulative preferred stock, not mandatorily redeemable 10,819 Cumulative preferred stock, mandatorily redeemable 24,810 Long-term debt 165,574 ------------------ 432,984 ------------------ - ----------------------------------------------------------------------------------------------------------- Current liabilities: Notes payable to associated companies 23,996 Accounts payable 15,169 Accounts payable to associated companies 11,901 Accrued taxes 19,843 Other 10,275 ------------------ 81,184 ------------------ - ----------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 92,186 Accumulated deferred investment tax credits 12,052 Environmental liabilities 13,856 Pension and other benefit obligations 9,336 Other 11,202 ------------------ 138,632 ------------------ - ----------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $652,800 ================== - ----------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
22
INTERSTATE POWER 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 $21,009 $21,768 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 28,097 26,060 Amortization of deferred energy efficiency expenditures 6,872 8,454 Deferred tax benefits and investment tax credits (2,261) (3,822) Other 726 615 Other changes in assets and liabilities: Accounts receivable 43,167 500 Production fuel (2,266) (7,410) Gas stored underground 1,523 (2,436) Accounts payable (6,438) 2,047 Accrued taxes 5,909 6,675 Benefit obligations and other 6,935 (3,061) ------------------- -------------------- Net cash flows from operating activities 103,273 49,390 ------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Cash flows used for financing activities: Common stock dividends declared (16,280) (16,280) Preferred stock dividends (1,871) (1,866) Reductions in long-term debt (5,000) - Net change in short-term borrowings (44,222) 8,199 Other (207) (564) ------------------- -------------------- Net cash flows used for financing activities (67,580) (10,511) ------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Cash flows used for investing activities: Utility construction expenditures (33,310) (34,796) Other (2,961) (6,169) ------------------- -------------------- Net cash flows used for investing activities (36,271) (40,965) ------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Net decrease in cash and temporary cash investments (578) (2,086) ------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at beginning of period 2,871 3,545 ------------------- -------------------- - --------------------------------------------------------------------------------------------------------------------- Cash and temporary cash investments at end of period $2,293 $1,459 =================== ==================== - --------------------------------------------------------------------------------------------------------------------- Supplemental cash flows information: Cash paid during the period for: Interest $9,514 $9,068 =================== ==================== Income taxes $6,198 $8,170 =================== ==================== - --------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23 INTERSTATE POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) 1. The interim consolidated financial statements included herein have been prepared by Interstate Power Company (IPC), without audit, pursuant to the rules and regulations of the Securities and Exchange Commission (SEC). Accordingly, certain information and footnote disclosures normally included in financial statements prepared in accordance with United States 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 IPC and its consolidated subsidiary related to its sale of accounts receivable program. IPC is a subsidiary of Alliant Energy Corporation. 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 nine months ended September 30, 2001 and 2000, (b) the consolidated financial position at September 30, 2001, and (c) the consolidated statements of cash flows for the nine months ended September 30, 2001 and 2000, have been made. Because of the seasonal nature of IPC's operations, results for the nine months ended September 30, 2001 are not necessarily indicative of results that may be expected for the year ending December 31, 2001. 2. IPC's comprehensive income, and the components of other comprehensive income, net of taxes, for the nine months ended September 30 were as follows (in thousands):
2001 2000 ----------- ----------- Earnings available for common stock $19,138 $19,902 Other comprehensive income: Unrealized gains (losses) on derivatives qualified as hedges: Unrealized holding gains arising during period due to cumulative effect of a change in accounting principle, net of tax -- 3 Other unrealized holding losses arising during period, net of tax -- (3) ----------- ----------- Net unrealized gains on qualifying derivatives -- -- ----------- ----------- Other comprehensive income -- -- ----------- ----------- Comprehensive income $19,138 $19,902 =========== ===========
3. Certain financial information relating to IPC's significant business segments is presented below. Intersegment revenues were not material to IPC's operations.
Electric Gas Total ------------------------------------------ (in thousands) Nine Months Ended September 30, 2001 ------------------------------------ Operating revenues $233,156 $48,898 $282,054 Operating income 44,653 2,804 47,457 Earnings available for common stock 19,138 Nine Months Ended September 30, 2000 ------------------------------------ Operating revenues $232,719 $28,419 $261,138 Operating income 47,186 592 47,778 Earnings available for common stock 19,902
24 4. The provisions for income taxes are based on the estimated annual effective tax rate, which differs from the federal statutory rate of 35% principally due to state income taxes, tax credits, effects of utility rate making and certain non-deductible expenses. 5. IPC's primary market risk exposures are associated with commodity prices. IPC has risk management policies to monitor and assist in controlling these market risks and uses derivative instruments to manage some of the exposures. During the nine months ended September 30, 2001, IPC held derivative instruments that were not designated in hedge relationships. During the nine months ended September 30, 2000, IPC held derivative instruments designated as cash flow hedging instruments and other derivatives. The cash flow hedging instruments were comprised of coal purchase and sales contracts which were used to manage the price of anticipated coal purchases and sales. For the nine months ended September 30, 2000, there was no gain or loss recognized in earnings representing the amount of hedge ineffectiveness. IPC did not exclude any components of the derivative instruments' gain or loss from the assessment of hedge effectiveness and there were no reclasses into earnings as a result of the discontinuance of hedges. IPC's derivatives that have not been designated in hedge relationships include electricity price collars, used to manage energy costs during supply/demand imbalances. During the nine months ended September 30, 2001, these derivatives were recorded at their fair market value as derivative assets, derivative liabilities and regulatory assets on the Balance Sheet. 6. The merger of IPC with and into IES Utilities Inc. 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. The following illustrates the impact of the merger if it had occurred as of January 1, 2000 (in thousands): For the Nine Months Ended September 30, 2001 2000 ------------ ---------- Operating revenues $1,042,250 $886,137 Earnings available for common stock 76,590 79,233 25 (b) Pro Forma Financial Information. ------------------------------- Pro forma financial information required by this Item 7 is as follows: INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS The unaudited pro forma combined financial statements for the surviving company, Interstate Power and Light Company (IP&L), combine the historical consolidated balance sheets and statements of income of IES Utilities Inc. (IESU) and Interstate Power Company (IPC) as adjusted by various balance sheet pro forma adjustments identified in Note 1. Pro forma income statement adjustments were not required. We have included all material adjustments known to us at this time which impact the reporting periods shown. These pro forma combined financial statements set forth the restated combined financial data that will be presented for future comparative financial data for the merged company. These statements are prepared on the basis of accounting for the merger as a common control merger and are based on the assumptions set forth in the notes hereto. The following information is not necessarily indicative of the financial position or operating results that would have occurred had the merger been consummated on the date, or at the beginning of the periods, for which the merger is being given effect nor is it necessarily indicative of future operating results or financial position. 26
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET September 30, 2001 (in thousands) Pro Forma Adjustments Pro Forma IESU IPC (See Note 1) Combined -------------------------------------------------------------------------- ASSETS Property, plant and equipment: Utility - Plant in service - Electric $2,294,947 $964,222 $- $3,259,169 Gas 228,993 80,876 - 309,869 Steam 59,554 - - 59,554 Common 163,903 15,571 - 179,474 -------------------------------------------------------------------------- 2,747,397 1,060,669 - 3,808,066 Less - Accumulated depreciation 1,470,701 549,803 - 2,020,504 -------------------------------------------------------------------------- 1,276,696 510,866 - 1,787,562 Construction work in progress 97,974 18,880 - 116,854 Leased nuclear fuel, net 40,732 - - 40,732 -------------------------------------------------------------------------- 1,415,402 529,746 - 1,945,148 Other property, plant and equipment, net 5,894 179 - 6,073 -------------------------------------------------------------------------- 1,421,296 529,925 - 1,951,221 -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 7,916 2,293 - 10,209 Temporary cash investments with associated companies 56,777 - (23,996) 32,781 Accounts receivable: Customer, net - 7,603 - 7,603 Associated companies 1,932 1,522 (168) 3,286 Other, net 6,028 2,079 - 8,107 Production fuel, at average cost 10,356 18,615 - 28,971 Materials and supplies, at average cost 24,612 5,882 - 30,494 Gas stored underground, at average cost 16,477 3,687 - 20,164 Regulatory assets 6,851 4,016 - 10,867 Prepayments and other 3,181 5,079 (3,153) 5,107 -------------------------------------------------------------------------- 134,130 50,776 (27,317) 157,589 -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 114,852 - - 114,852 Other 6,281 6,762 - 13,043 -------------------------------------------------------------------------- 121,133 6,762 - 127,895 -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 115,849 50,342 - 166,191 Deferred charges and other 15,496 14,995 - 30,491 -------------------------------------------------------------------------- 131,345 65,337 - 196,682 -------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------------- Total assets $1,807,904 $652,800 ($27,317) $2,433,387 ========================================================================== - ---------------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
27
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET (Continued) September 30, 2001 (in thousands) Pro Forma Adjustments Pro Forma IESU IPC (See Note 1) Combined ----------------------------------------------------------------- CAPITALIZATION AND LIABILITIES Capitalization: Common stock $33,427 $34,221 ($34,221) $33,427 Additional paid-in capital 279,042 108,644 34,221 421,907 Retained earnings 281,305 88,916 - 370,221 ----------------------------------------------------------------- Total common equity 593,774 231,781 - 825,555 Cumulative preferred stock, not mandatorily redeemable 18,320 10,819 - 29,139 Cumulative preferred stock, mandatorily redeemable - 24,810 - 24,810 Long-term debt (excluding current portion) 694,407 165,574 - 859,981 ----------------------------------------------------------------- 1,306,501 432,984 - 1,739,485 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 560 - - 560 Capital lease obligations 15,060 14 - 15,074 Notes payable to associated companies - 23,996 (23,996) - Accounts payable 32,225 15,169 - 47,394 Accounts payable to associated companies 24,340 11,901 (168) 36,073 Accrued taxes 68,984 19,843 - 88,827 Other 35,662 10,261 (3,153) 42,770 ----------------------------------------------------------------- 176,831 81,184 (27,317) 230,698 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 212,684 92,186 - 304,870 Accumulated deferred investment tax credits 22,954 12,052 - 35,006 Environmental liabilities 27,597 13,856 - 41,453 Pension and other benefit obligations 24,596 9,336 - 33,932 Capital lease obligations 25,672 45 - 25,717 Other 11,069 11,157 - 22,226 ----------------------------------------------------------------- 324,572 138,632 - 463,204 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,807,904 $652,800 ($27,317) $2,433,387 ================================================================= - ---------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
28 INTERSTATE POWER AND LIGHT COMPANY NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF SEPTEMBER 30, 2001
1. Pro Forma Adjustments Merged Company Common Inter- Adjustment Stock Company Clause Utility Total Adjustment Transactions Balances Money Pool Pro Forma (Note 1 (a)) (Note 1 (b)) (Note 1 (c)) (Note 1(d)) Adjustments -------------- -------------- -------------- ------------- ------------- (in thousands) ASSETS Current assets: Temporary cash investments with associated companies $- $- $- ($23,996) ($23,996) Accounts receivable from associated companies - (168) - - (168) Prepayments and other - - (3,153) - (3,153) -------------- -------------- -------------- ------------- ------------- Total current assets - (168) (3,153) (23,996) (27,317) -------------- -------------- -------------- ------------- ------------- Total assets $- ($168) ($3,153) ($23,996) ($27,317) ============== ============== ============== ============= ============= CAPITALIZATION AND LIABILITIES Capitalization: Common equity: Common stock ($34,221) $- $- $- ($34,221) Additional paid-in capital 34,221 - - - 34,221 -------------- -------------- -------------- ------------- ------------- Total common equity - - - - - -------------- -------------- -------------- ------------- ------------- Current liabilities: Notes payable to associated companies - - - (23,996) (23,996) Accounts payable to associated companies - (168) - - (168) Other - - (3,153) - (3,153) -------------- -------------- -------------- ------------- ------------- Total current liabilities - (168) (3,153) (23,996) (27,317) -------------- -------------- -------------- ------------- ------------- Total capitalization and liabilities $- ($168) ($3,153) ($23,996) ($27,317) ============== ============== ============== ============= =============
(a) Merged Company Common Stock Adjustment As provided in the Merger Agreement, all issued and outstanding shares of IPC common stock will be dissolved upon consummation of the merger. The pro forma adjustment to common equity restates the common stock account to equal the $2.50 par value of IESU's 13,370,788 shares of common stock and reclassifies the excess to additional paid-in capital. (b) Intercompany Transactions At September 30, 2001, intercompany receivables and payables between IESU and IPC during the period presented were eliminated from the pro forma balance sheet. (c) Adjustment Clause Balances An adjustment was needed to offset IPC's Adjustment Clause debit balance against IESU's Adjustment Clause credit balance. (d) Utility Money Pool An adjustment was needed to offset IPC's borrowings from the money pool against IESU's loans to the money pool. 29
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001 (in thousands) Pro Forma IESU IPC Combined --------------------------------------------------- Operating revenues: Electric utility $557,975 $233,156 $791,131 Gas utility 177,743 48,898 226,641 Steam 24,478 - 24,478 --------------------------------------------------- 760,196 282,054 1,042,250 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 106,709 43,455 150,164 Purchased power 107,441 45,352 152,793 Cost of gas sold 136,701 35,013 171,714 Other operation and maintenance 175,491 69,033 244,524 Depreciation and amortization 82,517 28,097 110,614 Taxes other than income taxes 33,121 13,647 46,768 --------------------------------------------------- 641,980 234,597 876,577 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating income 118,216 47,457 165,673 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 39,080 12,232 51,312 Allowance for funds used during construction (4,372) (619) (4,991) Miscellaneous, net (6,419) 412 (6,007) --------------------------------------------------- 28,289 12,025 40,314 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income before income taxes 89,927 35,432 125,359 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income taxes 31,789 14,423 46,212 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Net income 58,138 21,009 79,147 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 686 1,871 2,557 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Earnings available for common stock $57,452 $19,138 $76,590 =================================================== - -----------------------------------------------------------------------------------------------------------------
30
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000 (in thousands) Pro Forma IESU IPC Combined --------------------------------------------------- Operating revenues: Electric utility $496,934 $232,719 $729,653 Gas utility 107,767 28,419 136,186 Steam 20,298 - 20,298 --------------------------------------------------- 624,999 261,138 886,137 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 88,440 41,851 130,291 Purchased power 59,464 50,107 109,571 Cost of gas sold 68,291 16,953 85,244 Other operation and maintenance 158,865 66,594 225,459 Depreciation and amortization 80,555 26,060 106,615 Taxes other than income taxes 35,562 11,795 47,357 --------------------------------------------------- 491,177 213,360 704,537 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating income 133,822 47,778 181,600 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 38,208 11,996 50,204 Allowance for funds used during construction (1,827) (694) (2,521) Miscellaneous, net (5,861) (1,202) (7,063) --------------------------------------------------- 30,520 10,100 40,620 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income before income taxes 103,302 37,678 140,980 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income taxes 43,285 15,910 59,195 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Net income 60,017 21,768 81,785 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 686 1,866 2,552 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Earnings available for common stock $59,331 $19,902 $79,233 =================================================== - -----------------------------------------------------------------------------------------------------------------
31 (c) Exhibits. -------- The exhibits incorporated by reference herein are set forth on the attached Exhibit Index. SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant Energy Corporation and Interstate Power and Light Company have each duly caused this amendment to be signed on its behalf by the undersigned hereunto duly authorized.
ALLIANT ENERGY CORPORATION Date: February 20, 2002 By: /s/ John E. Kratchmer ---------------------- John E. Kratchmer Corporate Controller and Chief Accounting Officer INTERSTATE POWER AND LIGHT COMPANY Date: February 20, 2002 By: /s/ John E. Kratchmer ---------------------- John E. Kratchmer Corporate Controller and Chief Accounting Officer
32 ALLIANT ENERGY CORPORATION INTERSTATE POWER AND LIGHT COMPANY ---------------------------------- Exhibit Index to Amendment No. 1 to Current Report on Form 8-K Dated January 1, 2002 Exhibit - ------- (2.1) Agreement and Plan of Merger, dated as of March 15, 2000, by and between Interstate Power and Light Company (IPL) (formerly IES Utilities Inc.) and IPC [Incorporated by reference to Exhibit (2.1) to IPL's Registration Statement on Form S-4 (Reg. No 333-53846), as amended] (2.2) First Amendment to Agreement and Plan of Merger, dated as of November 29, 2000, by and between IPL (formerly IES Utilities Inc.) and IPC [Incorporated by reference to Exhibit (2.2) to IPL's Registration Statement on Form S-4 (Reg. No 333-53846), as amended] (3.1) Amendment to Amended and Restated Articles of Incorporation of IPL (formerly IES Utilities Inc.) creating Class A Preferred Stock [Incorporated by reference to Exhibit (3.1) to Alliant Energy's and IPL's Current Report on Form 8-K, dated January 1, 2002] (3.2) Amendment to Amended and Restated Articles of Incorporation of IPL (formerly IES Utilities Inc.) creating various series of Class A Preferred Stock [Incorporated by reference to Exhibit (3.2) to Alliant Energy's and IPL's Current Report on Form 8-K, dated January 1, 2002] (3.3) Amendment to Amended and Restated Articles of Incorporation of IPL (formerly IES Utilities Inc.) changing corporate name to Interstate Power and Light Company [Incorporated by reference to Exhibit (3.3) to Alliant Energy's and IPL's Current Report on Form 8-K, dated January 1, 2002] (3.4) Amended and Restated Articles of Incorporation of IPL, as amended [Incorporated by reference to Exhibit (3.4) to Alliant Energy's and IPL's Current Report on Form 8-K, dated January 1, 2002] (4.1) The Original through the Nineteenth Supplemental Indentures of IPL (successor-in-interest to Interstate Power Company) to JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and James P. Freeman, as Trustees, dated January 1, 1948 securing First Mortgage Bonds [Incorporated by reference to Exhibits 4(b) through 4(t) to IPC's Registration Statement (Reg. No. 33-59352) dated March 11, 1993] (4.2) Twentieth Supplemental Indenture of IPL (successor-in-interest to Interstate Power Company) to JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and James P. Freeman, as Trustees, dated May 15, 1993 [Incorporated by reference to Exhibit 4(u) to IPC's Registration Statement (Reg. No. 33-59352) dated March 11, 1993] (4.3) Twenty-First Supplemental Indenture of IPL (successor-in-interest to Interstate Power Company) to JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and James P. Freeman, as Trustees, dated December 31, 2001 [Incorporated by reference to Exhibit (4.3) to Alliant Energy's and IPL's Current Report on Form 8-K, dated January 1, 2002] 33 -----END PRIVACY-ENHANCED MESSAGE-----