-----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, IAFJmOiplphksU3A8GjH3FhiuiOKfqLqigM90WOraFTxjyIMN33V9bTLqLfT+cCi R8ZEQp1XHeHKysaD0NUhqQ== 0000107832-02-000033.txt : 20020424 0000107832-02-000033.hdr.sgml : 20020424 ACCESSION NUMBER: 0000107832-02-000033 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 20020418 ITEM INFORMATION: Other events ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 20020424 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 SEC ACT: 1934 Act SEC FILE NUMBER: 001-04117 FILM NUMBER: 02619856 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 8-K 1 ipl8k0402.txt 8-K UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 _______________________ FORM 8-K CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 _______________________ Date of Report (Date of earliest event reported): April 18, 2002 Interstate Power and Light Company ------------------------------------------------------ (Exact name of registrant as specified in its charter) Iowa 0-4117-1 42-0331370 - --------------- ---------------- ----------------- (State or other (Commission File (IRS Employer jurisdiction of Number) Identification No.) incorporation) Alliant Energy Tower, Cedar Rapids, Iowa 52401 ------------------------------------------------------------ (Address of principal executive offices, including zip code) (319) 786-4411 ------------------------------- (Registrant's telephone number) Item 5. Other Events. - ------ ------------ On January 1, 2002, Interstate Power and Light Company ("IP&L") (formerly known as IES Utilities Inc.), an Iowa corporation the common stock of which is wholly-owned by Alliant Energy Corporation, consummated its previously announced merger (the "Merger") with Interstate Power Company ("IPC"), a Delaware corporation the common stock of which is also wholly-owned by Alliant Energy Corporation. IP&L is hereby filing: (1) audited financial statements of IPC as of and for the year ended December 31, 2001; and (2) unaudited pro forma financial statements of IP&L as of and for the year ended December 31, 2001 that reflect the Merger. A copy of such financial statements are filed as Exhibits 99.1 and 99.2, respectively, and are incorporated by reference herein. Item 7. Financial Statements and Exhibits. - ------ --------------------------------- (a) Not applicable. (b) Not applicable. (c) Exhibits. The following exhibits are being filed herewith: -------- (99.1) Audited Financial Statements of IPC as of and for the Year Ended December 31, 2001. (99.2) Unaudited Pro Forma Financial Statements of IP&L as of and for the Year Ended December 31, 2001. (99.3) IP&L Letter to the SEC Regarding Independent Public Accountants 2 SIGNATURES ---------- Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. INTERSTATE POWER AND LIGHT COMPANY
Date: April 24, 2002 By: /s/ John E. Kratchmer --------------------- John E. Kratchmer Corporate Controller and Chief Accounting Officer
3 INTERSTATE POWER AND LIGHT COMPANY Exhibit Index to Current Report on Form 8-K Dated April 18, 2002 Exhibit Number - ------ (99.1) Audited Financial Statements of IPC as of and for the Year Ended December 31, 2001. (99.2) Unaudited Pro Forma Financial Statements of IP&L as of and for the Year Ended December 31, 2001. (99.3) IP&L Letter to the SEC Regarding Independent Public Accountants 4 EX-99 3 ipl8k0402exhibit99pt1.txt EXHIBIT 99.1 EXHIBIT 99.1 Index to Financial Statements
Page Number ----------- Interstate Power and Light Company - ---------------------------------- Report of Independent Public Accountants 2 Consolidated Statement of Income for the Year Ended December 31, 2001 3 Consolidated Balance Sheet as of December 31, 2001 4 Consolidated Statement of Cash Flows for the Year Ended December 31, 2001 6 Consolidated Statement of Capitalization as of December 31, 2001 7 Consolidated Statement of Changes in Common Equity for the Year Ended December 31, 2001 8 Notes to Consolidated Financial Statements 9
1 Report Of Independent Public Accountants To the Shareowners of Interstate Power and Light Company: We have audited the accompanying balance sheet and statement of capitalization of Interstate Power Company (a Delaware corporation, merged with IES Utilities Inc. on January 1, 2002, which subsequently changed its name to Interstate Power and Light Company) as of December 31, 2001 and the related statement of income, cash flows, and changes in common equity for the year then ended. 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, 2001, and the results of their operations and their cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. /s/ ARTHUR ANDERSEN LLP - ----------------------- ARTHUR ANDERSEN LLP Milwaukee, Wisconsin January 25, 2002 2
INTERSTATE POWER COMPANY CONSOLIDATED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands) Operating revenues: Electric utility $302,180 Gas utility 60,745 ------------------ 362,925 ------------------ - --------------------------------------------------------------------------------------------------- Operating expenses: Electric production fuels 56,730 Purchased power 58,272 Cost of gas sold 42,341 Other operation and maintenance 91,170 Depreciation and amortization 37,998 Taxes other than income taxes 18,078 ------------------ 304,589 ------------------ - --------------------------------------------------------------------------------------------------- Operating income 58,336 ------------------ - --------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 15,863 Allowance for funds used during construction (757) Miscellaneous, net (607) ------------------ 14,499 ------------------ - --------------------------------------------------------------------------------------------------- Income before income taxes 43,837 ------------------ - --------------------------------------------------------------------------------------------------- Income taxes 16,675 ------------------ - --------------------------------------------------------------------------------------------------- Net income 27,162 ------------------ - --------------------------------------------------------------------------------------------------- Preferred dividend requirements 2,496 ------------------ - --------------------------------------------------------------------------------------------------- Earnings available for common stock $24,666 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY CONSOLIDATED BALANCE SHEET DECEMBER 31, 2001 (in thousands) ASSETS - --------------------------------------------------------------------------------------------------- Property, plant and equipment: Electric plant in service $975,668 Gas plant in service 82,435 Other plant in service 16,819 Accumulated depreciation (556,183) ------------------ Net plant 518,739 Construction work in progress 23,978 Other, net 268 ------------------ 542,985 ------------------ - --------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 1,663 Accounts receivable: Customer, less allowance for doubtful accounts of $276 3,717 Associated companies 2,074 Other 5,194 Production fuel, at average cost 19,609 Materials and supplies, at average cost 4,898 Gas stored underground, at average cost 2,753 Regulatory assets 4,644 Prepayments and other 4,133 ------------------ 48,685 ------------------ - --------------------------------------------------------------------------------------------------- Investments 6,794 ------------------ - --------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 37,996 Deferred charges and other 21,306 ------------------ 59,302 ------------------ - --------------------------------------------------------------------------------------------------- Total assets $657,766 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY CONSOLIDATED BALANCE SHEET (Continued) DECEMBER 31, 2001 (in thousands) CAPITALIZATION AND LIABILITIES - --------------------------------------------------------------------------------------------------- Capitalization (See Consolidated Statement of Capitalization): Common stock $34,221 Additional paid-in capital 108,628 Retained earnings 89,018 Accumulated other comprehensive loss (2,131) ------------------ Total common equity 229,736 Cumulative preferred stock, not mandatorily redeemable 10,819 Cumulative preferred stock, mandatorily redeemable 24,850 Long-term debt 165,596 ------------------ 431,001 ------------------ - --------------------------------------------------------------------------------------------------- Current liabilities: Notes payable to associated companies 39,986 Accounts payable 15,134 Accounts payable to associated companies 12,637 Accrued interest 2,536 Accrued taxes 17,367 Other 6,995 ------------------ 94,655 ------------------ - --------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 77,189 Accumulated deferred investment tax credits 11,793 Environmental liabilities 13,856 Pension and other benefit obligations 16,296 Other 12,976 ------------------ 132,110 ------------------ - --------------------------------------------------------------------------------------------------- Total capitalization and liabilities $657,766 ================== - --------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY CONSOLIDATED STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands) - ------------------------------------------------------------------------------------------------------------ Cash flows from operating activities: Net income $27,162 Adjustments to reconcile net income to net cash flows from operating activities: Depreciation and amortization 37,998 Amortization of deferred energy efficiency expenditures 7,795 Deferred tax benefits and investment tax credits (3,801) Other 808 Other changes in assets and liabilities: Accounts receivable 43,386 Accounts payable (9,385) Accrued taxes 3,433 Adjustment clause balances 1,696 Benefit obligations and other 7,879 ----------------- Net cash flows from operating activities 116,971 ----------------- - ------------------------------------------------------------------------------------------------------------ Cash flows used for financing activities: Common stock dividends declared (21,706) Preferred stock dividends (2,496) Reductions in long-term debt (5,000) Net change in short-term borrowings (28,232) Other (181) ----------------- Net cash flows used for financing activities (57,615) ----------------- - ------------------------------------------------------------------------------------------------------------ Cash flows used for investing activities: Utility construction expenditures (56,021) Other (4,543) ----------------- Net cash flows used for investing activities (60,564) ----------------- - ------------------------------------------------------------------------------------------------------------ Net decrease in cash and temporary cash investments (1,208) ----------------- - ------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at beginning of period 2,871 ----------------- - ------------------------------------------------------------------------------------------------------------ Cash and temporary cash investments at end of period $1,663 ================= - ------------------------------------------------------------------------------------------------------------ Supplemental cash flows information: Cash paid during the period for: Interest $13,945 ================= Income taxes $18,934 ================= - ------------------------------------------------------------------------------------------------------------ The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY CONSOLIDATED STATEMENT OF CAPITALIZATION DECEMBER 31, 2001 (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 108,628 Retained earnings 89,018 Accumulated other comprehensive loss (2,131) ------------------- 229,736 ------------------- - ---------------------------------------------------------------------------------------------------- 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% $50 / share 27,250 ------------------- 38,069 Less: unamortized expenses (2,400) ------------------- 35,669 ------------------- * 2,000,000 authorized shares in total - ---------------------------------------------------------------------------------------------------- Long-term debt: First Mortgage Bonds: 8% series, due 2007 25,000 8-5/8% series, due 2021, partially retired in 2001 20,000 7-5/8% series, due 2023 94,000 ------------------- 139,000 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 ------------------- 168,150 ------------------- Less: Unamortized debt discount, net (2,554) ------------------- 165,596 ------------------- - ---------------------------------------------------------------------------------------------------- Total capitalization $431,001 =================== - ---------------------------------------------------------------------------------------------------- The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
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INTERSTATE POWER COMPANY CONSOLIDATED STATEMENT OF CHANGES IN COMMON EQUITY FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands) Accumulated Additional Other Total Common Paid-In Retained Comprehensive Common Stock Capital Earnings Loss Equity ------------ ------------- ------------- --------------- ------------ Beginning balance $34,221 $108,690 $86,058 $ - $228,969 Comprehensive income: Earnings available for common stock 24,666 24,666 Other comprehensive loss: Minimum pension liability adjustment, net of tax of ($1,469) (2,131) (2,131) ------------ Total comprehensive income 22,535 Common stock dividends (21,706) (21,706) Common stock issued (62) (62) ------------ ------------- ------------- --------------- ------------ Ending balance $34,221 $108,628 $89,018 ($2,131) $229,736 ============ ============= ============= =============== ============ The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
8 INTERSTATE POWER COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) General - The consolidated financial statements include the accounts of Interstate Power Company (IPC) and its consolidated subsidiary. IPC is a primary subsidiary of Alliant Energy Corporation (Alliant Energy) and 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 January 1, 2002, IPC merged with and into IES Utilities Inc. (IESU) and IESU changed its name to Interstate Power and Light Company (IP&L). Given that the merger had not yet been consummated at the end of 2001, the financial statements and notes included hereto are those of IPC on a stand-alone basis and the historical information focuses primarily on IPC. The portions that are prospective in nature generally reflect a discussion of IP&L operations on a post-merger basis. The consolidated financial statements are prepared in conformity with accounting principles generally accepted in the United States (U.S.), 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 consolidated 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 under the Public Utility Holding Company Act of 1935 (PUHCA), 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 Consolidated Statement of Income at the time they are reflected in rates. At December 31, 2001, regulatory assets were comprised of the following items (in millions): Tax-related (Note 1(d)) $19.6 Environmental liabilities (Note 10(d)) 14.0 Energy efficiency program costs 4.6 Other 4.4 ------ $42.6 ====== If a portion of IPC's operations become 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 accounting principles generally accepted in the U.S. 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. (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 consolidated financial statements. Deferred taxes are recorded using currently enacted tax rates. 9 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 Consolidated Balance Sheet and the Consolidated 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 2001, 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, administrative costs and allowance for funds used during construction (AFUDC). In 2001, the aggregate gross AFUDC recovery rate, computed in accordance with the prescribed FERC formula, was 4.4%. Other property, plant and equipment is recorded at original cost. Upon retirement or sale of 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 Consolidated 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 retail 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 Consolidated Statement of Income. The cumulative effects are reflected on the Consolidated 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. The fair value of all derivatives are recorded as assets or liabilities on the Consolidated 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 in hedge relationships, are recognized in earnings immediately. IPC has commodity purchase and sales contracts that have been designated, and qualify for, the normal purchase and sale exception in SFAS 138, "Accounting for Certain Derivative Instruments and Certain Hedging Activities - an Amendment of SFAS 133." Based on this designation, these contracts are not accounted for as derivative instruments. 10 IPC is exposed to losses related to financial instruments in the event of counterparties' non-performance. IPC has established controls to determine and monitor the creditworthiness of counterparties in order to mitigate its exposure to counterparty credit risk. IPC has replaced certain Enron Corporation contracts by entering into contracts with credit-worthy counterparties where deemed necessary. IPC is not aware of any material exposure to counterparty credit risk. Refer to Note 9 for further discussion of IPC's derivative financial instruments. (2) LEASES IPC's operating lease rental expenses for 2001 were $2.3 million. At December 31, 2001, IPC's future minimum lease payments were as follows (in thousands):
Present Less: value of net amount minimum representing capital lease 2002 2003 2004 2005 2006 Thereafter Total interest payments ----------- ----------- --------- -------- ------- ------------ ----------- ------------- --------------- Operating leases $1,764.9 $1,519.3 $629.4 $10.8 $7.5 $135.0 $4,066.9 N/A N/A Capital leases 14.1 14.1 14.1 14.1 4.8 -- 61.2 5.3 55.9
(3) UTILITY ACCOUNTS RECEIVABLE Utility customer accounts receivable, including unbilled revenues, arise primarily from the sale of electricity and natural gas. At December 31, 2001, IPC was serving a diversified base of residential, commercial and industrial customers and did not have any significant concentrations of credit risk. Alliant Energy's utility subsidiaries participate in a combined accounts receivable sale program whereby IP&L and Wisconsin Power and Light Company (WP&L) may sell up to a combined maximum amount of $250 million (there are no individual limits) of their respective accounts receivable to a third-party financial institution on a limited recourse basis through wholly-owned and consolidated special purpose entities. Alliant Energy Corporate Services, Inc. (Corporate Services) acts as a collection agent for the buyer and receives a fee for collection services that approximates fair value. The agreement expires in April 2004 and is subject to annual renewal or renegotiation for a longer period thereafter. Under terms of the agreement, the third-party financial institution purchases the receivables initially for the face amount. On a monthly basis, this sales price is adjusted, resulting in payments to the third-party financial institution of an amount that varies based on interest rates and length of time the sold receivables remain outstanding. Collections on sold receivables are used to purchase additional receivables from the utility subsidiaries. At December 31, 2001, IPC had sold $30 million of receivables. In 2001, IPC received approximately $230 million in aggregate proceeds from the sale of accounts receivable and paid fees associated with these sales of $0.6 million. IPC uses proceeds from the sale of accounts receivable and unbilled revenues to maintain flexibility in its capital structure, take advantage of favorable short-term rates and finance a portion of its long-term cash needs. IPC accounts for the sale of accounts receivable to the third-party financial institution as sales under SFAS 140, "Accounting for Transfers and Servicing of Financial Assets and Extinguishments of Liabilities." Retained receivables are available to the third-party financial institution to pay any fees or expenses due it, and to absorb all credit losses incurred on any of the sold receivables. 11 (4) INCOME TAXES The components of income taxes for IPC for 2001 were as follows (in millions): Current tax expense: Federal $17.5 State 3.0 Deferred tax benefit: Federal (2.1) State (0.7) Amortization of investment tax credits (1.0) -------- $16.7 ======== The overall effective income tax rate shown in the following table for 2001 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 3.5 Effect of rate making on property related differences 3.1 Amortization of investment tax credits (2.4) Adjustment of prior period taxes (0.9) Other items, net (0.3) ------------- Overall effective income tax rate 38.0% ============= The accumulated deferred income tax liabilities included on the Consolidated Balance Sheet at December 31, 2001 arise from the following temporary differences (in millions): Property related $64.8 Other 12.4 -------- $77.2 ======== (5) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS Substantially all of IPC's employees are covered by two non-contributory defined benefit pension plans. 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 regularly and the life insurance plans are non-contributory. The weighted-average assumptions at the measurement date of September 30, 2001, were as follows: Qualified Other Pension Postretirement Benefits Benefits -------------- ---------------- Discount rate 7.25% 7.25% 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 12% Ultimate trend rate N/A 5% 12 The components of IPC's qualified pension benefits and other postretirement benefits costs for 2001 were as follows (in thousands): Qualified Other Pension Postretirement Benefits Benefits ------------- ---------------- Service cost $1,033 $529 Interest cost 2,491 2,856 Expected return on plan assets (2,856) (1,432) Amortization of: Transition obligation 154 827 Prior service cost 223 (224) Actuarial loss (gain) -- (91) ----------- ------------- $1,045 $2,465 =========== ============= 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 bargaining unit pension plan that is sponsored by IPC. The benefit obligations and assets associated with IPC's non-bargaining employees who are participants in other Alliant Energy plans are reported in Alliant Energy's consolidated financial statements and are not reported above. The pension benefit cost for IPC's non-bargaining employees who are now participants in other Alliant Energy plans was $0.4 million for 2001. In addition, Corporate Services provides services to IPC. The allocated pension benefit costs associated with these services was $0.6 million for 2001. The other postretirement benefit cost shown above (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 $0.2 million for 2001. 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 2001, holding all other assumptions constant, would have the following effects (in thousands):
1 Percent Increase 1 Percent Decrease ------------------- --------------------- Effect on total of service and interest cost components $300 ($300) Effect on postretirement benefit obligation $4,000 ($3,600)
13 A reconciliation of the funded status of IPC's plans to the amounts recognized on IPC's Consolidated Balance Sheet at December 31, 2001 was as follows (in thousands):
Qualified Other Pension Postretirement Benefits Benefits ------------ ---------------- Change in benefit obligation: Net benefit obligation at beginning of year $30,344 $36,520 Service cost 1,033 529 Interest cost 2,491 2,856 Actuarial loss 4,081 9,163 Gross benefits paid (615) (3,273) ------------ ---------------- Net benefit obligation at end of year 37,334 45,795 ------------ ---------------- Change in plan assets: Fair value of plan assets at beginning of year 31,971 23,283 Actual return on plan assets (2,281) 541 Employer contributions -- 2,605 Gross benefits paid (615) (3,273) ------------ ---------------- Fair value of plan assets at end of year 29,075 23,156 ------------ ---------------- Funded status at end of year (8,259) (22,639) Unrecognized net actuarial loss 7,143 8,083 Unrecognized prior service cost 2,167 (448) Unrecognized net transition obligation 165 9,092 ------------ ---------------- Net amount recognized at end of year $1,216 ($5,912) ============ ================ Amounts recognized on the Consolidated Balance Sheet consist of: Prepaid benefit cost $1,216 $774 Accrued benefit cost -- (6,686) Additional minimum liability (2,593) -- Intangible asset 2,332 -- Accumulated other comprehensive loss 261 -- ------------ ---------------- Net amount recognized at measurement date 1,216 (5,912) ------------ ---------------- Contributions paid after 9/30 and prior to 12/31 -- 611 ------------ ---------------- Net amount recognized at 12/31 $1,216 ($5,301) ============ ================
Alliant Energy sponsors several non-qualified pension plans that cover certain current and former key employees. The pension expense allocated to IPC for these plans was $0.8 million in 2001. IPC has various life insurance policies that cover certain key employees and directors. At December 31, 2001, the cash surrender value of these investments was $2 million. 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 $0.6 million in 2001. (6) COMMON AND PREFERRED STOCK (a) Common Stock - IP&L 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, IP&L's ability to pay common stock dividends is restricted based on requirements associated with sinking funds. 14 (b) Preferred Stock - IP&L has outstanding 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, IP&L is required to redeem annually $1.4 million, or 27,250 shares of the preferred stock. The carrying value of IPC's cumulative preferred stock at December 31, 2001 was $36 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at December 31, 2001 was $38 million. (7) DEBT (a) Short-Term Debt - IPC participates in a utility money pool with IESU and WP&L, that is funded, as needed, through the issuance of commercial paper by Alliant Energy. Interest expense and other fees are allocated based on borrowed amounts. Information regarding IPC's short-term debt for 2001 was as follows (dollars in millions): At year end: Money pool borrowings $40.0 Interest rate on money pool borrowings 2.37% For the year ended: Average amount of short-term debt (based on daily outstanding balances) $43.5 Average interest rate on short-term debt 4.71% (b) Long-Term Debt - IPC's First Mortgage Bonds are secured by substantially all of its utility plant. IPC's debt maturities for 2002 to 2006 are $0, $1 million, $0, $2.7 million and $0, respectively. The carrying value of IPC's long-term debt at December 31, 2001 was $166 million. The fair market value, based upon the market yield of similar securities and quoted market prices, at December 31, 2001 was $173 million. (8) 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. (9) DERIVATIVE FINANCIAL INSTRUMENTS (a) Accounting for Derivative Instruments and Hedging Activities - IPC records derivative instruments at fair value on the balance sheet as assets or liabilities and changes in the derivatives' fair values in earnings unless specific hedge accounting criteria are met. IPC's derivatives that were not designated in hedge relationships during 2001 included gas swaps and electricity price collars. Electricity price collars were used to manage utility energy costs during supply/demand imbalances. Due to the dollar-for-dollar fuel recovery mechanism in Iowa, changes in the fair value of these instruments are recorded in regulatory assets/liabilities. (b) Weather Derivatives - Alliant Energy (on behalf of its utility subsidiaries) uses weather derivatives to reduce the impact of weather volatility on its natural gas sales volumes. In 2001, Alliant Energy entered into non-exchange traded options based on heating degree days in which Alliant Energy receives payment from the counterparty if actual heating degree days are less than the strike price in the contract. Alliant Energy paid premiums to enter into these contracts, which are amortized to expense over the contract period. Alliant Energy has used the intrinsic value method to account for these weather derivatives. (10) COMMITMENTS AND CONTINGENCIES (a) Construction and Acquisition Program - IP&L currently anticipates 2002 construction and acquisition expenditures will be approximately $242 million. During 2003-2006, IP&L currently anticipates to spend approximately $1.2 billion for construction and acquisition expenditures. These amounts do not include any potential capital expenditures IP&L may make for its Power Iowa domestic generation program given the uncertainty of such investments, including if IP&L would own the generating plants or purchase the power from plants that were owned by an independent entity. 15 (b) Purchased-Power, Coal and Natural Gas Contracts - Alliant Energy, through its subsidiaries (Corporate Services, IESU, WP&L and IPC), has entered into purchased-power, coal and natural gas supply, transportation and storage contracts. 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 14 for additional information. Coal contract quantities are directly assigned to specific plants at the individual utilities based on various factors including projected heat input requirements, combustion compatibility and efficiency. However, for 2002-2006, system-wide contracts of $48.1 million (7.2 million tons), $50.0 million (7.6 million tons), $31.4 million (3.9 million tons), $22.8 million (2.7 million tons) and $8.2 million (0.9 million tons), respectively, have not yet been directly assigned to the individual utilities since the specific needs of each utility is not yet known. The natural gas supply commitments are all indexed-based. Alliant Energy expects to supplement its coal and natural gas supplies with spot market purchases as needed. The table includes commitments for "take or pay" contracts which result in dollar commitments with no associated megawatt-hours (MWhs), tons, or dekatherms (Dths). At December 31, 2001, IPC's minimum commitments are as follows (dollars and Dths in millions; MWhs and tons in thousands):
Purchased-power Coal Natural gas ------------------------ ----------------------- -------------------------- Dollars MWhs Dollars Tons Dollars Dths ---------- ---------- ---------- ---------- ------------ ---------- 2002 $5.0 62 $7.5 722 $9.3 0.9 2003 3.1 61 6.4 616 4.4 -- 2004 -- -- 2.0 212 0.5 -- 2005 -- -- 2.0 203 -- -- 2006 -- -- -- -- -- --
(c) 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. (d) Environmental Liabilities - At December 31, 2001, IPC had recorded environmental liabilities and regulatory assets for manufactured gas plant (MGP) sites of $15 million and $14 million, respectively. IPC has current or previous ownership interests in nine 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 2001, 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's sites to be approximately $11 million to $19 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. 16 Settlement has been reached with all IPC's insurance carriers regarding reimbursement for its MGP-related costs. Insurance recoveries of $4.7 million were available at December 31, 2001. Pursuant to its applicable rate making treatment, IPC has recorded its recoveries in "Other long-term liabilities and deferred credits." (11) JOINTLY-OWNED ELECTRIC UTILITY PLANT Under joint ownership agreements with other Iowa utilities, IPC has undivided ownership interests in jointly-owned electric generating stations. IPC also has joint ownership agreements related to 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 Consolidated Statements of Income. Information relative to IPC's ownership interest in these facilities at December 31, 2001 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 $84.5 $56.8 $0.3 Louisa Unit 1 Coal 4.0 24.9 14.1 -- ------------------------------------------------ $109.4 $70.9 $0.3 ================================================
(12) 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 2001 was as follows (in millions):
Electric Gas Other Total ----------------------------------------------------- Operating revenues $302.2 $60.7 $-- $362.9 Depreciation and amortization 35.0 3.0 -- 38.0 Operating income 55.2 3.1 -- 58.3 Interest expense, net of AFUDC 15.1 15.1 Miscellaneous, net (0.7) (0.7) Income tax expense 16.7 16.7 Net income 27.2 27.2 Preferred dividends 2.5 2.5 Earnings available for common stock 24.7 24.7 Total assets 561.1 72.1 24.6 657.8 Construction and acquisition expenditures 51.9 4.1 -- 56.0
17 (13) SELECTED CONSOLIDATED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended (a) ------------------------------------------------------------------------ March 31 June 30 September 30 December 31 ----------------- --------------- ----------------- ------------------ (in millions) 2001 - ---- Operating revenues $103.4 $79.7 $99.0 $80.9 Operating income 9.2 10.3 28.0 10.9 Net income 3.0 4.0 14.0 6.2 Earnings available for common stock 2.4 3.4 13.4 5.5
(a) Summation of the individual quarters may not equal annual totals due to rounding. (14) RELATED PARTY ISSUES IPC, IESU and WP&L have entered into a System Coordination and Operating Agreement. 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. In 2001, the sales amounts and purchases allocated to IPC were $14.4 million and $59.4 million, respectively. 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 the sale. Pursuant to a service agreement approved by the SEC under PUHCA, 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 $49.1 million for 2001 and consisted primarily of employee compensation, benefits and fees associated with various professional services. At December 31, 2001, IPC had an intercompany payable to Corporate Services of $12.5 million. (15) SUBSEQUENT EVENT 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 IP&L. 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 following illustrates the impact of the merger if it had occurred as of January 1, 2001 (in thousands): 2001 ---------- Operating revenues $1,316,250 Earnings available for common stock 94,656 18 EX-99 4 ipl8k0402exhibit99pt2.txt EXHIBIT 99.2 EXHIBIT 99.2 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.
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET December 31, 2001 (in thousands) Pro Forma Adjustments Pro Forma IESU IPC (See Note 1) Combined ----------------------------------------------------------------- ASSETS Property, plant and equipment: Electric plant in service $2,368,520 $975,668 $- $3,344,188 Gas plant in service 234,178 82,435 - 316,613 Steam plant in service 59,452 - - 59,452 Other plant in service 166,049 16,819 - 182,868 Accumulated depreciation (1,490,573) (556,183) - (2,046,756) ----------------------------------------------------------------- Net plant 1,337,626 518,739 - 1,856,365 Construction work in progress 49,263 23,978 - 73,241 Leased nuclear fuel, net of amortization 37,407 - - 37,407 Other, net 6,435 268 - 6,703 ----------------------------------------------------------------- 1,430,731 542,985 - 1,973,716 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Current assets: Cash and temporary cash investments 7,299 1,663 - 8,962 Temporary cash investments with associated companies 1,939 - (1,939) - Accounts receivable: Customer, net 16,233 3,717 - 19,950 Associated companies 2,803 2,074 (159) 4,718 Other, net 20,303 5,194 - 25,497 Income tax refunds receivable 6,412 - - 6,412 Production fuel, at average cost 12,474 19,609 - 32,083 Materials and supplies, at average cost 24,223 4,898 - 29,121 Gas stored underground, at average cost 15,694 2,753 - 18,447 Regulatory assets 7,851 4,644 - 12,495 Prepayments and other 2,901 4,133 (1,974) 5,060 ----------------------------------------------------------------- 118,132 48,685 (4,072) 162,745 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Investments: Nuclear decommissioning trust funds 117,159 - - 117,159 Other 8,363 6,794 - 15,157 ----------------------------------------------------------------- 125,522 6,794 - 132,316 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Other assets: Regulatory assets 94,113 37,996 - 132,109 Deferred charges and other 9,797 21,306 - 31,103 ----------------------------------------------------------------- 103,910 59,302 - 163,212 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Total assets $1,778,295 $657,766 ($4,072) $2,431,989 ================================================================= - ---------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED BALANCE SHEET (Continued) December 31, 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 279,612 108,628 34,221 422,461 Retained earnings 279,185 89,018 - 368,203 Accumulated other comprehensive loss - (2,131) - (2,131) ----------------------------------------------------------------- Total common equity 592,224 229,736 - 821,960 Cumulative preferred stock, not mandatorily redeemable 18,320 10,819 - 29,139 Cumulative preferred stock, mandatorily redeemable - 24,850 - 24,850 Long-term debt (excluding current portion) 694,472 165,596 - 860,068 ----------------------------------------------------------------- 1,305,016 431,001 - 1,736,017 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Current liabilities: Current maturities and sinking funds 560 - - 560 Capital lease obligations 15,278 14 - 15,292 Notes payable to associated companies - 39,986 (1,939) 38,047 Accounts payable 40,115 15,134 - 55,249 Accounts payable to associated companies 25,777 12,637 (159) 38,255 Accrued interest 12,179 2,536 - 14,715 Accrued taxes 53,380 17,367 - 70,747 Other 31,417 6,981 (1,974) 36,424 ----------------------------------------------------------------- 178,706 94,655 (4,072) 269,289 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Other long-term liabilities and deferred credits: Accumulated deferred income taxes 190,821 77,189 - 268,010 Accumulated deferred investment tax credits 22,698 11,793 - 34,491 Environmental liabilities 24,350 13,856 - 38,206 Pension and other benefit obligations 24,277 16,296 - 40,573 Capital lease obligations 22,129 42 - 22,171 Other 10,298 12,934 - 23,232 ----------------------------------------------------------------- 294,573 132,110 - 426,683 ----------------------------------------------------------------- - ---------------------------------------------------------------------------------------------------------------------------- Total capitalization and liabilities $1,778,295 $657,766 ($4,072) $2,431,989 ================================================================= - ---------------------------------------------------------------------------------------------------------------------------- The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
INTERSTATE POWER AND LIGHT COMPANY NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET AS OF DECEMBER 31, 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 $- $- $- ($1,939) ($1,939) Accounts receivable from associated companies - (159) - - (159) Prepayments and other - - (1,974) - (1,974) -------------- -------------- -------------- ------------- ------------- Total current assets - (159) (1,974) (1,939) (4,072) -------------- -------------- -------------- ------------- ------------- Total assets $- ($159) ($1,974) ($1,939) ($4,072) ============== ============== ============== ============= ============= 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 - - - (1,939) (1,939) Accounts payable to associated companies - (159) - - (159) Other - - (1,974) - (1,974) -------------- -------------- -------------- ------------- ------------- Total current liabilities - (159) (1,974) (1,939) (4,072) -------------- -------------- -------------- ------------- ------------- Total capitalization and liabilities $- ($159) ($1,974) ($1,939) ($4,072) ============== ============== ============== ============= =============
(a) Merged Company Common Stock Adjustment As provided in the Merger Agreement, all issued and outstanding shares of IPC common stock were 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 December 31, 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 IESU's investments in the money pool against IPC's borrowings from the money pool.
INTERSTATE POWER AND LIGHT COMPANY UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME FOR THE YEAR ENDED DECEMBER 31, 2001 (in thousands) Pro Forma IESU IPC Combined --------------------------------------------------- Operating revenues: Electric utility $700,926 $302,180 $1,003,106 Gas utility 220,269 60,745 281,014 Steam 32,130 - 32,130 --------------------------------------------------- 953,325 362,925 1,316,250 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating expenses: Electric and steam production fuels 133,237 56,730 189,967 Purchased power 127,588 58,272 185,860 Cost of gas sold 164,747 42,341 207,088 Other operation and maintenance 231,474 91,170 322,644 Depreciation and amortization 110,496 37,998 148,494 Taxes other than income taxes 44,705 18,078 62,783 --------------------------------------------------- 812,247 304,589 1,116,836 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Operating income 141,078 58,336 199,414 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Interest expense and other: Interest expense 52,286 15,863 68,149 Allowance for funds used during construction (5,634) (757) (6,391) Miscellaneous, net (12,770) (607) (13,377) --------------------------------------------------- 33,882 14,499 48,381 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income before income taxes 107,196 43,837 151,033 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Income taxes 36,292 16,675 52,967 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Net income 70,904 27,162 98,066 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Preferred dividend requirements 914 2,496 3,410 --------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- Earnings available for common stock $69,990 $24,666 $94,656 =================================================== - -----------------------------------------------------------------------------------------------------------------
EX-99 5 ipl8k0402exhibit99pt3.txt EXHIBIT 99.3 EXHIBIT 99.3 U.S. Securities and Exchange Commission 450 Fifth Street, N.W. Judiciary Plaza Washington, D.C. 20549 Ladies and Gentlemen: In a letter dated April 18, 2002, our independent public accountants, Arthur Andersen LLP ("Andersen"), represented to us that their audit of the consolidated financial statements of Interstate Power Company (merged with IES Utilities Inc. on January 1, 2002, which subsequently changed its name to Interstate Power and Light Company) as of December 31, 2001 and for the year then ended was subject to Andersen's quality control system for the U.S. accounting and auditing practice to provide reasonable assurance that their engagement was conducted in compliance with professional standards and that there was appropriate continuity of Andersen personnel working on the audit and availability of national office consultation. Availability of personnel at foreign affiliates of Andersen is not relevant to this audit. Interstate Power and Light Company By: /s/ John E. Kratchmer --------------------- Name: John E. Kratchmer Title: Corporate Controller and Chief Accounting Officer April 18, 2002 -----END PRIVACY-ENHANCED MESSAGE-----