SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q/A
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-3632
INTERSTATE POWER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 42-0329500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, P.O. Box 769, Dubuque, Iowa 52004-0769
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 319-582-5421
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
Shares Outstanding
August 1, 1996
Common Stock Par Value $3.50 Per Share 9,597,400 Shares
INTERSTATE POWER COMPANY
Form 10-Q
Table of Contents
Part I - Financial Information
Item 1. Statements of Income - Three Months Ended 1
Statements of Income - Six Months Ended 2
Balance Sheets - Assets 3
Balance Sheets - Capitalization and Liabilities 4
Statements of Cash Flows 5
Summarized Financial Information 6
Notes to Financial Statements 6
Item 2. Management's Discussion and Analysis 7
Part II - Other Information
Item 1. Legal Proceedings 14
Item 2. Changes in Securities 14
Item 3. Defaults Upon Senior Securities 14
Item 4. Submission of Matters to a Vote of Security Holders 14
Item 5. Other Information 14
Item 6. Exhibits and Reports on Form 8-K 15
INTERSTATE POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Three Months
Ended June 30
1996 1995
(In Thousands)
OPERATING REVENUES:
Electric $ 67,021 $ 65,085
Gas 9,277 6,969
76,298 72,054
OPERATING EXPENSES:
Operation:
Fuel for electric generation 14,167 15,778
Power purchased 16,787 15,061
Cost of gas sold 5,112 3,874
Other operating expenses 13,706 6,943
Maintenance 4,740 3,802
Depreciation 7,599 7,261
Income taxes:
Federal currently payable 993 2,051
State currently payable 304 620
Deferred taxes-net 1,410 1,801
Investment tax credit amortization (257) (257)
Property and other taxes 4,088 4,240
Total operating expenses 68,649 61,174
OPERATING INCOME 7,649 10,880
OTHER INCOME AND DEDUCTIONS 236 (2,836)
INCOME BEFORE INTEREST CHARGES 7,885 8,044
INTEREST CHARGES:
Long-term debt 3,647 3,703
Other interest charges 369 593
Allowance for borrowed funds used during construction (58) (117)
Total interest charges 3,958 4,179
NET INCOME 3,927 3,865
PREFERRED AND PREFERENCE STOCK DIVIDENDS 616 614
NET INCOME AVAILABLE FOR COMMON STOCK $ 3,311 $ 3,251
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,568 9,564
EARNINGS PER COMMON SHARE OUTSTANDING $ .34 $ .34
DIVIDENDS PAID PER COMMON SHARE $ .52 $ .52
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
STATEMENTS OF INCOME
(Unaudited)
Six Months
Ended June 30
1996 1995
(In Thousands)
OPERATING REVENUES:
Electric $132,936 $128,887
Gas 30,411 25,932
163,347 154,819
OPERATING EXPENSES:
Operation:
Fuel for electric generation 28,941 32,618
Power purchased 30,980 27,163
Cost of gas sold 16,585 13,831
Other operating expenses 25,418 18,974
Maintenance 8,433 7,242
Depreciation 15,175 14,487
Income taxes:
Federal currently payable 4,954 5,039
State currently payable 1,490 1,513
Deferred taxes-net 2,457 3,026
Investment tax credit amortization (514) (514)
Property and other taxes 8,638 8,745
Total operating expenses 142,557 132,124
OPERATING INCOME 20,790 22,695
OTHER INCOME AND DEDUCTIONS 713 (2,677)
INCOME BEFORE INTEREST CHARGES 21,503 20,018
INTEREST CHARGES:
Long-term debt 7,293 7,514
Other interest charges 844 1,081
Allowance for borrowed funds used during construction (102) (199)
Total interest charges 8,035 8,396
NET INCOME 13,468 11,622
PREFERRED AND PREFERENCE STOCK DIVIDENDS 1,231 1,228
NET INCOME AVAILABLE FOR COMMON STOCK $ 12,237 $ 10,394
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,566 9,564
EARNINGS PER COMMON SHARE OUTSTANDING $ 1.28 $ 1.08
DIVIDENDS PAID PER COMMON SHARE $ 1.04 $ 1.04
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)
June 30 Dec. 31 June 30
1996 1995 1995
(In Thousands)
UTILITY PLANT (at original cost) $912,840 $901,212 $889,535
Less accumulated provision for depreciation 416,090 402,685 390,739
Utility plant - net 496,750 498,527 498,796
OTHER PROPERTY AND INVESTMENTS 460 555 546
CURRENT ASSETS:
Cash and cash equivalents 1,324 1,537 1,301
Accounts receivable less reserve 27,298 27,797 24,684
Inventories - at average cost:
Fuel 13,926 19,332 18,858
Materials and supplies 5,955 5,509 6,101
Prepaid pension cost 5,425 3,870 4,990
Prepaid income tax 6,804 6,690 6,407
Other prepayments and current assets 514 614 1,577
Total current assets 61,246 65,349 63,918
DEFERRED DEBITS:
Regulatory assets 11,263 11,889 15,109
Regulatory assets for deferred income taxes 27,993 27,813 27,902
Deferred energy efficiency costs 26,058 23,139 19,674
Unamortized debt expense 5,813 5,915 6,016
Other 883 1,129 1,641
Total deferred debits 72,010 69,885 70,342
TOTAL $630,466 $634,316 $633,602
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)
June 30 Dec. 31 June 30
1996 1995 1995
(In Thousands)
CAPITALIZATION:
Common stock, par value $3.50 per share;
Authorized - 30,000,000 shares; issued
and outstanding - 9,595,028 in 1996
and 9,564,287 in 1995 $ 33,583 $ 33,475 $ 33,475
Additional paid-in capital 103,970 103,145 103,118
Retained earnings 63,440 61,150 56,340
Total common equity 200,993 197,770 192,933
Preferred stock, par value $50 per share 34,909 34,855 34,802
Total stockholders' equity 235,902 232,625 227,735
Long-term debt 171,918 188,880 189,068
Total capitalization 407,820 421,505 416,803
CURRENT LIABILITIES:
Commercial paper payable 29,700 39,300 46,750
Long-term debt maturing within one year 17,000 0 0
Accounts payable 15,309 11,868 11,005
Dividends payable - preferred stock 599 599 599
Payrolls accrued 3,153 2,846 2,872
Taxes accrued 15,145 16,758 15,423
Interest accrued 2,824 2,819 2,827
FERC Order 636 transition costs 2,600 3,200 4,100
Other 2,924 4,756 4,550
Total current liabilities 89,254 82,146 88,126
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Accumulated deferred income taxes 98,269 95,518 91,462
Accumulated deferred investment tax credits 17,527 18,041 18,555
Deferred pension cost 4,900 4,900 4,827
Accrued postretirement benefit cost 2,792 2,792 2,945
Environmental clean-up costs 6,834 6,860 8,352
Other 3,070 2,554 2,532
Total deferred credits and other non-current
liabilities 133,392 130,665 128,673
TOTAL $630,466 $634,316 $633,602
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months
Ended June 30
1996 1995
(In Thousands)
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES:
Net income $13,468 $11,622
Adjustment for non-cash items:
Depreciation 15,175 14,487
Deferred income taxes 2,571 2,853
Investment tax credit amortization (514) (514)
Allowance for equity funds used during construction (3) (0)
Changes in assets and liabilities:
Accounts receivable - net 499 (2,335)
Fuel 5,412 5,367
Materials and supplies (446) (893)
Accounts payable and other current liabilities 1,971 (2,393)
Accrued and prepaid taxes (1,726) 1,242
Interest accrued 5 (103)
Other prepayments and current assets (1,456) (613)
Rate refund payable (256) 0
Deferred energy conservation costs (2,919) (2,713)
Regulatory assets 420 63
Other operating activities 1,207 876
Cash flows from operating activities 33,408 26,946
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (13,624) (12,642)
Allowance for borrowed funds used during construction (102) (199)
Other (99) (341)
Cash flows from investing activities (13,825) (13,182)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 953 0
Retirement of long-term debt (5) (14,006)
Dividends on common, preferred and preference stock (11,144) (11,144)
Sale of commercial paper - net (9,600) 11,150
Cash flows from financing activities (19,796) (14,000)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $ (213) $ (236)
CASH AND CASH EQUIVALENTS:
Beginning of period $ 1,537 $ 1,537
End of period $ 1,324 $ 1,301
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 7,804 $ 8,460
Income taxes $ 7,911 $ 3,073
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
Summarized Financial Information
The June 30, 1996 financial statements included herein have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The accounting policies followed by the
company are set forth in Note 1 to the company's financial statements in the
1995 Form 10-K/A. It is suggested that these condensed financial statements
be read in conjunction with the financial statements and the notes thereto
included in the company's Form 10-K/A for the year ended December 31, 1995.
In the opinion of the company, the financial statements reflect all
adjustments, consisting only of normal recurring accruals, necessary to
fairly state the results of operations.
INTERSTATE POWER COMPANY
PART I - FINANCIAL INFORMATION
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
The company's results of operations and financial condition are affected by
numerous factors, including weather, sales, and the amount of changes in
customer rates. The dividend of $2.08 per share annually and $0.52 per
quarter has been maintained.
COMPARISON OF THE QUARTERS ENDED JUNE 30, 1996 AND 1995
EARNINGS PER SHARE were $0.34 for the second quarter of 1996 and the same for
the second quarter of 1995. Net income for the second quarter of both years
was $3.9 million.
The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the
second quarter of 1996 was $36.1 million compared to $34.2 million for the
second quarter of 1995. The increase in the electric margin resulted mainly
from a $6.6 million annual electric rate increase in Iowa which became
effective June 29, 1995.
Three Months Ended June 30
ELECTRIC SALES (Mwh) 1996 1995 % Change
Residential 228,791 227,309 0.7
Commercial 164,200 166,222 (1.2)
Industrial 796,341 812,426 (2.0)
Interchange 93,899 13,083 N/A
Sales for Resale 45,857 58,377 (21.4)
Other 13,713 13,938 (1.6)
Total Electric Sales 1,342,801 1,291,355 4.0
Residential sales remained almost identical to 1995. We experienced greater
than normal sales in May due to electric heating while air conditioning sales
during June were down due to cooler than normal temperatures. The higher
interchange sales reflected the increased power marketing activities
resulting in long-distance transmission of electric power, a trend which is
expected to continue. The decrease in sales for resale was due to
termination of a contract by a municipal customer effective April 30, 1996.
Three Months Ended June 30
ELECTRIC REVENUES (000's) 1996 1995 % Change
Residential $17,922 $17,470 2.6
Commercial 11,556 11,395 1.4
Industrial 31,499 31,271 0.7
Interchange 1,334 256 N/A
Sales for Resale 2,036 2,467 (17.5)
Other 2,674 2,225 20.2
Total Electric Revenues $67,021 $65,084 3.0
The increase in residential, commercial and industrial electric revenues for
the second quarter of 1996 compared to 1995 was mainly due to the Iowa
electric rate increase effective June 29, 1995. Although interchange
revenues increased this quarter, neither the electric margin or net income
were affected, as the margin on interchange sales applicable to the Iowa
jurisdiction is flowed back to customers through the fuel adjustment clause.
The decrease in resale revenues relates to the reduced sales discussed above.
The GAS MARGIN (revenue less purchased gas) for the second quarter of 1996
was $4.2 million compared to $3.1 million for the same period in 1995.
Factors in the improved gas margin included the increased temperature
sensitive sales to residential and commercial customers, and rate increases
in the Iowa and Minnesota gas jurisdictions. Interim Iowa gas rates in an
annual amount of $1.3 million were implemented October 20, 1995, while
interim Minnesota gas rates in an annual amount of $1.5 million were
implemented June 30, 1995.
The COST OF GAS SOLD increased $1.2 million, or 32.0%, during the second
quarter of 1996 compared to the same period in 1995 primarily due to the
increase in sales. Also, 1995 gas costs were lower due to a pipeline rate
refund in June 1995 and favorable prices resulting from a mild 1994-1995
heating season.
Three Months Ended June 30
GAS DELIVERIES (MMcf) 1996 1995 % Change
Residential 929 823 12.9
Commercial 525 465 12.9
Industrial 225 209 7.7
Other 11 21 N/A
Total Gas Sales 1,690 1,518 11.3
Gas Transportation 6,309 6,437 (2.0)
Total Gas Deliveries 7,999 7,955 0.6
The increase in residential and commercial gas sales was primarily a result
of more heating sales during the second quarter of 1996. The decrease in
transportation was mainly attributable to reduced deliveries to three major
industrial customers.
Three Months Ended June 30
GAS REVENUES $ (000's) 1996 1995 % Change
Residential $ 5,267 $ 4,004 31.5
Commercial 2,461 1,765 39.4
Industrial 853 516 65.3
Other 60 54 N/A
Total Gas Sales Revenues 8,641 6,339 36.2
Gas Transportation 636 630 1.0
Total Gas Revenues $ 9,277 $ 6,969 33.1
The increase in revenues was primarily due to increased residential and
commercial sales in the second quarter of 1996 compared to 1995 and to rate
increases in the Iowa and Minnesota gas jurisdictions. Interim Iowa and
Minnesota gas rate increases contributed $251,000 and $231,000, respectively,
during the second quarter of 1996. Second quarter of 1995 revenues reflected
a $0.8 million pipeline rate refund which was passed through to customers in
June 1995.
ACCOUNTS RECEIVABLE were $27.3 million at June 30, 1996 compared to $24.7
million at June 30, 1995. The increase was mainly due to increased gas sales
which resulted in higher revenues, and the electric and gas rate increases
implemented in 1995.
FUEL FOR ELECTRIC GENERATION decreased $1.6 million, or 10.2%, during the
second quarter of 1996 compared to the same period in 1995. The decrease was
due to a 6.7% reduction in kilowatt-hours generated by the company. The cost
of gas used for generation decreased $0.8 million compared to last year.
Also, the cost of coal decreased $0.5 million compared to last year as a
result of the company entering into new coal supply agreements in 1995.
PURCHASED POWER EXPENSE increased $1.7 million, or 11.5%, during the second
quarter of 1996 compared to 1995. This increase was primarily a result of
the 20.4% increase in Kwh's. Capacity charges included in purchased power
expense were $7.0 million for both the second quarter of 1996 and the second
quarter of 1995. During the second quarter of 1996, the company realized
revenues of $68,000 and transmission service expenses of $79,000 under the
intra-pool transmission service fee requirement of the MAPP Agreement which
was effective May 1, 1995. Second quarter of 1995 revenues and transmission
service expenses were $17,000 and $12,000, respectively.
OTHER OPERATING EXPENSE, excluding accounting entries complying with the
Minnesota Public Utilities Commission (MPUC) deferred accounting order,
increased $1.4 million for the second quarter of 1996 compared to 1995. The
increase included approximately $0.3 million of air emission fees, $0.3
million in legal fees for manufactured gas plant insurance recovery and $0.2
million of FASB 106 costs incurred for the Minnesota jurisdiction. Reserve
for injuries and damages expense increased approximately $0.2 million due to
an unusual reduction in the second quarter of 1995 resulting from
reevaluation of potential liability. Also contributing to the increase were
merger related expenses of approximately $0.1 million in the second quarter
of 1996. See ITEM 5, OTHER INFORMATION, for details concerning the merger.
The reduction in other operating expense in 1995 and the increase in
miscellaneous other deductions in 1995 was primarily attributable to
accounting entries made upon receipt of an order issued on April 13, 1995, by
the Minnesota Public Utilities Commission (MPUC). The MPUC order granted the
company permission to accumulate post-July 11, 1994 environmental clean-up
expenditures related to the Albert Lea and Rochester coal tar sites in a
deferred debit account. A rate order, issued on February 29, 1996, granted
the company permission to seek recovery from gas customers in a rate
proceeding. On August 1, 1996, the Office of the Attorney General and the
Department of Public Service filed a joint appeal of the Commission's
February 29, 1996, order to the Minnesota Court of Appeals.
MAINTENANCE EXPENSE increased $0.9 million during the second quarter of 1996
compared to the same period in 1995. The second quarter 1996 expense
increase included approximately $0.8 million for scheduled maintenance at
three of the companies steam generating stations. In addition, 1995 costs
were down as a result of a reduction in contract maintenance.
DEPRECIATION EXPENSE increased by $0.3 million or 4.7% for the second quarter
of 1996 compared to the second quarter of 1995. This was primarily due to
increased investment in utility plant and increased depreciation rates
approved by the MPUC in September 1995. On July 9, 1996, the company filed
an application with the MPUC for approval to change depreciation rates in
1996. The MPUC is expected to issue an order in the third quarter of 1996.
Total INCOME TAX EXPENSE increased approximately $0.4 million during the
second quarter of 1996 compared to the second quarter of 1995. The increase
was mainly due to higher income before taxes. The company is currently under
audit by the IRS for the years 1992, 1993, and 1994.
OTHER INCOME, excluding accounting entries complying with the MPUC deferred
accounting order, included $0.4 million of energy efficiency carrying costs
and curtailment credits compared to $0.3 million for the same period in 1995.
The increase was primarily due to an increase in the total amount of demand
side management (DSM) costs ($26.1 million at June 30, 1996 compared to $19.7
million at June 30, 1995). The 1990, 1991 and 1992 DSM costs are being
recovered over a four year period beginning in October 1994. The company
filed an application with the Iowa Utilities Board (IUB) on April 30, 1996
for recovery of the 1993, 1994 and 1995 DSM costs. The application seeks
recovery of an annual amount of $7.3 million over a four year period. The
IUB is expected to issue a final order by October 31, 1996.
OTHER INTEREST EXPENSE decreased approximately $224,000 for the second
quarter of 1996 compared to the same period of 1995 primarily due to interest
on short-term borrowings. The average outstanding balance of short-term
borrowings during the second quarter of 1996 was $24.7 million compared to
$35.3 million during the second quarter of 1995. Interest rates for the
second quarter of 1996 averaged 5.43% compared to 6.07% in 1995.
AVERAGE TEMPORARY INVESTMENTS during the second quarter of 1996 were $1.9
million compared to $1.4 million in 1995. The average interest rate was
5.25% in the second quarter of 1996 compared to 5.85% in 1995.
FUEL INVENTORIES were $13.9 million at June 30, 1996, compared to $11.9
million at March 31, 1996 and $18.9 million at June 30, 1995. The increase
from the last quarter was primarily attributable to normal seasonal build-up
of coal inventory during the summer shipping season. The decrease from last
year was mainly a result of a long-range plan to reduce inventory levels at
the M.L. Kapp generating station.
CONSTRUCTION EXPENDITURES during the second quarter of 1996 totaled $8.9
million compared to $7.8 million in 1995. Major projects included the
installation of a substation transformer and breaker, construction of a 69 KV
switch station, fan rotor replacement at a generating station, and relocation
and rebuilding of a 69 KV transmission line. Construction work in progress
as of June 30, 1996 totaled $6.3 million compared to $5.9 million at June 30,
1995. The 1996 and 1997 construction programs are estimated to be $32
million and $36 million, respectively.
COMPARISON OF THE SIX MONTHS ENDED JUNE 30, 1996 AND 1995
EARNINGS PER SHARE for the six months ended June 30, 1996 were $1.28 compared
to $1.08 for the corresponding period in 1995. The increase in earnings was
mainly due to the higher first quarter 1996 earnings of $0.93 per share
compared to $0.74 for the corresponding period in 1995. Major contributors
to the increased first quarter earnings were increased electric and gas sales
due to colder weather, and rate increases in the Iowa electric, Iowa gas and
Minnesota gas jurisdictions. Other specific items already addressed in the
second quarter review also are applicable to the six month review.
The year-to-date ELECTRIC MARGIN increased to $73.0 million in 1996 from
$69.1 million in 1995. The higher 1996 margin was primarily attributable to
a $6.6 million annual electric rate increase in Iowa which became effective
June 29, 1995. An electric rate increase in Minnesota will not become
effective until August 1996.
ELECTRIC SALES during the six months ended June 30, 1996 were 3.8% higher
than the same period a year ago. The increase was primarily attributable to
residential sales which increased 2.8%. Also, higher interchange sales year-
to-date reflected the increased power marketing activities as discussed
above.
ELECTRIC REVENUES increased 3.1% during the six months ended June 30, 1996
compared to the same period of 1995. The increased revenues were primarily
due to the Iowa $6.6 million electric rate increase effective June 29, 1995.
The increase also reflected the increased residential sales and interchange
transactions.
The year-to-date GAS MARGIN has increased from $12.1 million in 1995 to $13.8
million in 1996 due mainly to increased residential and commercial sales, and
rate increases in the Iowa and Minnesota gas jurisdictions. Interim gas
rates for Iowa in an annual amount of $1.3 million were implemented October
20, 1995 while interim gas rates for Minnesota in an annual amount of $1.5
million were implemented June 30, 1995.
GAS DELIVERIES increased 2.3% during the six months ended June 30, 1996
compared to the same period in 1995. While industrial sales and
transportation deliveries were down 9.5% and 0.3%, respectively, residential
sales increased 11.8% and commercial sales increased 10.8%.
The 17.3% increase in GAS REVENUES during the six months ended June 30, 1996
compared to the same period in 1995 was primarily due to the increased
residential and commercial sales as well as the gas rate increases in the
Iowa and Minnesota gas jurisdictions, as discussed above. Also, the second
quarter of 1995 reflected an $0.8 million pipeline rate refund.
MAINTENANCE EXPENSE increased $1.2 million for the six months ended June 30,
1996 compared to the six months ended June 30, 1995. As discussed above, an
increase of approximately $0.8 million of scheduled routine maintenance at
three of the companies steam generating stations occurred in the second
quarter of 1996.
Cash flow from operating activities was $33.4 million. The funds were used
primarily to pay the company's construction program, to reduce short-term
debt and to pay common and preferred dividends.
OTHER ITEMS
The company does not anticipate any public offerings for new debt or new
stock in the next two years, other than for re-establishing the Dividend
Reinvestment and Stock Purchase Plan. Effective June 20, 1996, shares
purchased on behalf of the Plan will be newly issued shares.
In 1993 the company adopted Statement of Financial Accounting Standards
(SFAS) 106, "EMPLOYER'S ACCOUNTING FOR POSTRETIREMENT BENEFITS OTHER THAN
PENSIONS". Under the provisions of SFAS 106, the estimated future cost of
providing postretirement benefits will be accrued during the employees'
service periods. The Iowa Utilities Board has allowed the company to recover
SFAS 106 costs in its Iowa gas rates effective May 1993 and Iowa electric
rates effective October 1993. The Minnesota Public Utilities Commission
(MPUC) has allowed the company to recover SFAS 106 costs under the February
29, 1996 order in the gas rate case and the April 8, 1996 order in the
electric rate case.
In May 1995, the company filed an application with the Minnesota Public
Utilities Commission for an increase in gas rates in an annual amount of $2.4
million. Increased interim rates in an annual amount of $1.5 million were
place in effect in June 1995. On February 29, 1996, the Commission issued an
order allowing an increase in gas rates of $2.1 million. The company, the
Department of Public Service and the Office of Attorney General filed for
reconsideration by the Commission. A Commission order issued July 2, 1996,
affirmed the level of increased rates at approximately $2.1 million. On
August 1, 1996, the Office of the Attorney General and the Department of
Public Service filed a joint appeal of the Commission's order to the
Minnesota Court of Appeals.
In June 1995, the company filed an application with the Minnesota Public
Utilities Commission for an increase in electric rates in an annual amount of
$4.6 million (later adjusted by the company to $3.3 million). On April 10,
1996, the Commission issued an order allowing an increase in electric rates
of $2.3 million. The company and the Department of Public Service filed for
reconsideration by the Commission. A Commission order issued June 26, 1996,
denied reconsideration. Rates reflecting the increase granted are pending
Commission approval.
In August 1995, the company filed an application with the Iowa Utilities
Board for an increase in gas rates in an annual amount of $2.2 million.
Increased interim rates in an annual amount of $1.3 million were placed in
effect in October 1995. The interim rate increase is being collected subject
to refund until final determination is made by the Board. The company and
other parties to the rate application agreed on an increase of $1.1 million
subject to approval by the Board. A Board order was issued February 21,
1996, approving the revenue requirement increase of $1.1 million. On May 31,
1996, the Board issued an order on cost-of-service and rate design issues.
The company's compliance rates and refund plan are pending Board approval.
The company's potential liability for coal tar waste at former manufactured
gas plant sites was discussed in the 1995 Annual Report to Stockholders.
With regard to the nine sites, clean-up has been completed at one site and
ground water monitoring will continue for at least one more year. At another
site, remediation has begun and should be completed in 1996. For the
remainder of the other seven sites, testing and soil sampling are continuing,
but the company is unable to determine what, if any, remediation will be
necessary until a later date. The company is continuing to actively pursue
recovery of costs from certain of its insurers. The company is unable at
this point to determine what portion, if any, of the proceeds from the
insurance companies will be refunded to its customers.
INTERSTATE POWER COMPANY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1995 Form 10-K/A Item 3 for certain pending
legal proceedings. Reference is also made to the Management
Discussion and Analysis included herein. Other than these items,
there are no material pending legal proceedings, or proceedings
known to be contemplated by governmental authorities, other than
ordinary routine litigation incidental to the business, to which the
company is a party or of which any of the company's property is the
subject.
ITEM 2. CHANGES IN SECURITIES
The rights of holders of registered securities have not been
materially modified, limited or qualified.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) THE DATE OF THE MEETING AND WHETHER IT WAS AN ANNUAL OR SPECIAL
MEETING.
(b) IF THE MEETING INVOLVED THE ELECTION OF DIRECTORS, THE NAME OF EACH
DIRECTOR ELECTED AT THE MEETING AND THE NAME OF EACH OTHER DIRECTOR
WHOSE TERM OF OFFICE AS A DIRECTOR CONTINUED AFTER THE MEETING.
(c) A BRIEF DESCRIPTION OF EACH OTHER MATTER VOTED UPON AT THE MEETING
AND STATE THE NUMBER OF VOTES CAST FOR, AGAINST OR WITHHELD, AS WELL
AS THE NUMBER OF ABSTENTIONS AND BROKER NON-VOTES, AS TO EACH SUCH
MATTER, INCLUDING A SEPARATE TABULATION WITH RESPECT TO EACH NOMINEE
FOR OFFICE.
No submission of matters to a vote of security holders.
ITEM 5. OTHER INFORMATION
The company, WPL Holdings, Inc. ("WPLH") and IES Industries Inc.
("IES") have entered into an Agreement and Plan of Merger ("Merger
Agreement"), dated November 10, 1995, as amended, providing for: a)
the company becoming a wholly-owned subsidiary of WPLH and b) the
merger of IES with and into WPLH, which merger will result in the
combination of IES and WPLH as a single holding company
(collectively, the "Proposed Merger"). The holding company will be
renamed Interstate Energy Corporation ("Interstate Energy").
The Joint Proxy Statement/Prospectus of the company, WPLH and IES
was filed with the Securities and Exchange Commission on July 11,
1996. The Merger Agreement contemplated an adjustment of the IES
Ratio to 1.01 shares of Interstate Energy Common Stock from the
initial ratio of 0.98 in the event that prior to the consummation of
the transaction, McLeod, Inc., a Delaware corporation in which IES
has a significant ownership interest ("McLeod"), (a) completed a
firm commitment underwritten initial public offering of its Class A
common stock at a per share price of at least $13.00 in which McLeod
received gross proceeds of at least $75 million and (b) immediately
following the public offering the Class A common stock was
registered under Section 12 of the Exchange Act. On June 14, 1996,
McLeod completed an initial public offering of 13.8 million shares
of its Class A common stock at a price of $20 per share. The McLeod
offering satisfied the conditions of the McLeod contingency and the
IES Ratio was adjusted to 1.01.
The shareowner vote on the Proposed Merger is expected to occur at
annual meetings to be held by each of the company, WPLH and IES on
September 5, 1996. The corporate headquarters of Interstate Energy
will be in Madison, Wisconsin.
On August 4, 1996, MidAmerican Energy Company, an electric and
natural gas utility company based in Des Moines, Iowa, announced
that it had made an unsolicited bid to acquire IES in a cash and
stock transaction. The company cannot currently determine what, if
any, impact the unsolicited bid of MidAmerican may have on the
transactions contemplated by the Merger Agreement.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as a part of this report:
EX-27 Financial Data Schedule (required for electronic
filing only in accordance with Item 601 (c) (1) of
Regulation S-K).
(b) The company filed a Form 8-K with the Securities and Exchange
Commission dated May 29, 1996. This report related to an
amendment to the Agreement and Plan of Merger signed on
November 10, 1995 by the company, WPL Holdings, Inc. and IES
Industries Inc.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Interstate Power Company
(Registrant)
Date August 14, 1996 /s/ W. C. Troy
W. C. Troy, Controller
(Duly Authorized Officer and
Principal Accounting Officer)