SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 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
November 1, 1996
Common Stock Par Value $3.50 Per Share 9,635,422 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 - Nine Months Ended 2
Balance Sheets - Assets 3
Balance Sheets - Capitalization and Liabilities 4
Statements of Cash Flows 5
Summarized Financial Information 6
Item 2. Management's Discussion and Analysis 7
Part II - Other Information
Item 1. Legal Proceedings 13
Item 2. Changes in Securities 13
Item 3. Defaults Upon Senior Securities 13
Item 4. Submission of Matters to a Vote of Security Holders 13
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 September 30
1996 1995
(In Thousands)
OPERATING REVENUES:
Electric $ 79,291 $ 82,159
Gas 4,191 4,181
83,482 86,340
OPERATING EXPENSES:
Operation:
Fuel for electric generation 14,344 15,735
Power purchased 16,483 16,447
Cost of gas sold 3,958 3,789
Other operating expenses 14,597 12,753
Maintenance 3,961 3,587
Depreciation 8,061 7,586
Income taxes:
Federal currently payable 3,536 4,755
State currently payable 1,070 1,428
Deferred taxes-net 1,544 2,072
Investment tax credit amortization (257) (257)
Property and other taxes 3,423 3,162
Total operating expenses 70,720 71,057
OPERATING INCOME 12,762 15,283
OTHER INCOME AND DEDUCTIONS 1,046 641
INCOME BEFORE INTEREST CHARGES 13,808 15,924
INTEREST CHARGES:
Long-term debt 3,647 3,649
Other interest charges 410 631
Allowance for borrowed funds used during construction (70) (87)
Total interest charges 3,987 4,193
NET INCOME 9,821 11,731
PREFERRED AND PREFERENCE STOCK DIVIDENDS 616 615
NET INCOME AVAILABLE FOR COMMON STOCK $ 9,205 $ 11,116
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,602 9,564
EARNINGS PER COMMON SHARE OUTSTANDING $ .95 $ 1.16
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)
Nine Months
Ended September 30
1996 1995
(In Thousands)
OPERATING REVENUES:
Electric $212,227 $211,046
Gas 34,602 30,112
246,829 241,158
OPERATING EXPENSES:
Operation:
Fuel for electric generation 43,285 48,353
Power purchased 47,462 43,610
Cost of gas sold 20,543 17,620
Other operating expenses 40,016 31,727
Maintenance 12,394 10,830
Depreciation 23,236 22,072
Income taxes:
Federal currently payable 8,490 9,794
State currently payable 2,560 2,940
Deferred taxes-net 4,001 5,098
Investment tax credit amortization (771) (771)
Property and other taxes 12,061 11,907
Total operating expenses 213,277 203,180
OPERATING INCOME 33,552 37,978
OTHER INCOME AND DEDUCTIONS 1,759 (2,037)
INCOME BEFORE INTEREST CHARGES 35,311 35,941
INTEREST CHARGES:
Long-term debt 10,940 11,163
Other interest charges 1,254 1,712
Allowance for borrowed funds used during construction (172) (287)
Total interest charges 12,022 12,588
NET INCOME 23,289 23,353
PREFERRED AND PREFERENCE STOCK DIVIDENDS 1,847 1,843
NET INCOME AVAILABLE FOR COMMON STOCK $ 21,442 $ 21,510
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,578 9,564
EARNINGS PER COMMON SHARE OUTSTANDING $ 2.23 $ 2.24
DIVIDENDS PAID PER COMMON SHARE $ 1.56 $ 1.56
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
ASSETS
(Unaudited)
Sept.30 Dec. 31
1996 1995
(In Thousands)
UTILITY PLANT (at original cost) $920,302 $901,212
Less accumulated provision for depreciation 422,734 402,685
Utility plant - net 497,568 498,527
OTHER PROPERTY AND INVESTMENTS 453 555
CURRENT ASSETS:
Cash and cash equivalents 2,439 1,537
Accounts receivable less reserve 25,583 27,797
Inventories - at average cost:
Fuel 18,387 19,332
Materials and supplies 5,751 5,509
Prepaid pension cost 4,675 3,870
Prepaid income tax 6,839 6,690
Other prepayments and current assets 1 690 614
Total current assets 65,364 65,349
DEFERRED DEBITS:
Regulatory assets 10,864 11,889
Regulatory assets for deferred income taxes 28,083 27,813
Deferred energy efficiency costs 28,387 23,139
Unamortized debt expense 5,762 5,915
Other 75 1,129
Total deferred debits 73,171 69,885
TOTAL $636,556 $634,316
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
(Unaudited)
Sept.30 Dec. 31
1996 1995
(In Thousands)
CAPITALIZATION:
Common stock, par value $3.50 per share;
Authorized - 30,000,000 shares; issued
and outstanding - 9,632,892 in 1996
and 9,564,287 in 1995 $ 33,715 $ 33,475
Additional paid-in capital 104,972 103,145
Retained earnings 67,653 61,150
Total common equity 206,340 197,770
Preferred stock, par value $50 per share 34,937 34,855
Total stockholders' equity 241,277 232,625
Long-term debt 171,937 188,880
Total capitalization 413,214 421,505
CURRENT LIABILITIES:
Commercial paper payable 29,100 39,300
Long-term debt maturing within one year 17,000 0
Accounts payable 13,820 11,868
Payrolls accrued 3,037 2,846
Taxes accrued 13,864 16,758
Interest accrued 4,311 2,819
FERC Order 636 transition costs 2,400 3,200
Other 4,227 5,355
Total current liabilities 87,759 82,146
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Accumulated deferred income taxes 99,939 95,518
Accumulated deferred investment tax credits 17,270 18,041
Deferred pension cost 4,900 4,900
Accrued postretirement benefit cost 2,849 2,792
Environmental clean-up costs 6,834 6,860
Other 3,791 2,554
Total deferred credits and other non-current
liabilities 135,583 130,665
TOTAL $636,556 $634,316
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months
Ended Sept. 30
1996 1995
(In Thousands)
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES:
Net income $23,289 $23,353
Adjustment for non-cash items:
Depreciation 23,236 22,072
Deferred income taxes 4,151 5,005
Investment tax credit amortization (771) (771)
Allowance for equity funds used during construction (6) 0
Changes in assets and liabilities:
Accounts receivable - net 2,214 (3,651)
Fuel 954 2,089
Materials and supplies (242) (416)
Accounts payable and other current liabilities 910 (2,076)
Accrued and prepaid taxes (3,043) 950
Interest accrued 1,492 1,386
Other prepayments and current assets (1,880) (235)
Rate refund payable (256) 0
Deferred energy conservation costs (5,248) (4,988)
Regulatory assets 729 761
Other operating activities 3,198 2,473
Cash flows from operating activities 48,727 45,952
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (22,475) (20,361)
Allowance for borrowed funds used during construction (172) (287)
Other (342) 435
Cash flows from investing activities (22,989) (20,213)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 2,098 0
Retirement of long-term debt 0 (14,000)
Dividends on common, preferred and preference stock (16,734) (17,315)
Sale of commercial paper - net (10,200) 5,600
Cash flows from financing activities (24,836) (25,715)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $ 902 $ 24
CASH AND CASH EQUIVALENTS:
Beginning of period $ 1,537 $ 1,537
End of period $ 2,439 $ 1,561
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $10,206 $11,012
Income taxes $12,779 $ 7,622
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
Summarized Financial Information
The September 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 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 changes in customer rates.
COMPARISON OF THE QUARTERS ENDED SEPTEMBER 30, 1996 AND 1995
EARNINGS PER SHARE for the third quarter of 1996 were $0.95 compared to $1.16
for the third quarter of 1995. Net income for the third quarter of 1996 was
$9.8 million, compared to $11.7 million for the third quarter of 1995. As
discussed below, reduced residential electric sales are the primary reason
for the decreased earnings.
The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the
third quarter of 1996 was $48.5 million compared to $50.0 million for the
third quarter of 1995. The decrease is primarily a result of lower sales to
residential and commercial customers.
Three Months Ended September 30
ELECTRIC SALES (Mwh) 1996 1995 % Change
Residential 286,191 334,129 (14.3)
Commercial 190,307 201,907 (5.7)
Industrial 849,002 855,054 (0.7)
Other 14,272 14,286 (0.1)
Subtotal 1,339,772 1,405,376 (4.7)
Interchange 75,670 4,149 N/A
Sales for Resale 47,919 69,959 (31.5)
Total Electric Sales 1,463,361 1,479,484 (1.1)
The decline in residential and commercial sales was primarily due to mild
weather during the air conditioning season. The average monthly residential
consumption during the summer dropped to 695 Kwh's from 806 Kwh's in 1995.
Industrial sales were down mainly as a result of reduced sales to our largest
customer, a food manufacturer, and our third largest customer, a fertilizer
manufacturer. The higher interchange sales reflected the increased power
marketing activities resulting in long-distance transmission of electric
power. The decrease in sales for resale was due to termination of contracts
by two municipal customers effective April 30, 1996.
Three Months Ended September 30
ELECTRIC REVENUES (000's) 1996 1995 % Change
Residential $23,132 $26,143 (11.5)
Commercial 14,106 14,619 (3.5)
Industrial 35,803 35,558 0.7
Other 2,825 2,542 11.1
Subtotal 75,866 78,862 (3.8)
Interchange 1,084 131 N/A
Sales for Resale 2,341 3,166 (26.1)
Total Electric Revenues $79,291 $82,159 (3.5)
The decreased revenues for the third quarter of 1996 are primarily attributed
to reduced residential Mwh sales. Although interchange revenues increased
this quarter, the impact on net income was negligible as the majority of the
margin on interchange sales is returned to customers through the fuel
adjustment clause.
The GAS MARGIN (revenue less purchased gas) for the third quarter of 1996 was
$0.2 million compared to $0.4 million for the same period in 1995.
The COST OF GAS SOLD increased $169,000 during the third quarter of 1996
compared to the same period in 1995. The 1995 gas costs were lower due to
favorable prices resulting from a mild 1994-1995 heating season.
Three Months Ended September 30
GAS DELIVERIES (MMcf) 1996 1995 % Change
Residential 282 283 (0.4)
Commercial 190 180 5.6
Industrial 151 142 6.3
Other 7 88 N/A
Total Gas Sales 630 693 (9.1)
Gas Transportation 5,815 6,372 (8.7)
Total Gas Deliveries 6,445 7,065 (8.8)
Although commercial and industrial gas sales increased 5.6% and 6.3%
respectively during the third quarter of 1996 compared to 1995, overall
deliveries decreased 8.8% as a result of the 8.7% decrease in transportation
deliveries. The decrease in transportation was mainly attributable to
reduced deliveries to three major industrial customers.
Three Months Ended September 30
GAS REVENUES $ (000's) 1996 1995 % Change
Residential $ 2,083 $ 1,961 6.2
Commercial 888 787 12.8
Industrial 538 465 15.7
Other 33 319 N/A
Total Gas Sales Revenues 3,542 3,532 0.3
Gas Transportation 649 648 0.2
Total Gas Revenues $ 4,191 $ 4,180 0.3
The increase in revenues was primarily due to increased commercial and
industrial sales in the third quarter of 1996 compared to 1995 and to rate
increases in October 1995 in the Iowa gas jurisdiction. Iowa gas rate
increases contributed $48,000 during the third quarter of 1996. A Minnesota
gas rate increase was effective in June 1995.
FUEL FOR ELECTRIC GENERATION decreased $1.4 million, or 8.8%, during the
third quarter of 1996 compared to the same period in 1995. The decrease was
primarily due to an 8.2% reduction in kilowatt-hours generated by the
company. Also, the cost of coal decreased 13.2% compared to last year as a
result of the company entering into new coal supply agreements in 1995. The
cost of gas used for generation decreased $0.4 million compared to last year.
PURCHASED POWER EXPENSE increased $36,000 during the third quarter of 1996
compared to 1995. This increase was primarily a result of the 6.4% increase
in Kwh's. Capacity charges included in purchased power expense were $7.6
million for both the third quarter of 1996 and the third quarter of 1995.
During the third quarter of 1996, the company realized revenues of $132,000
and transmission service expenses of $27,000 under the intra-pool
transmission service fee requirement of the MAPP Agreement which was
effective May 1, 1995. Third quarter of 1995 revenues and transmission
service expenses were $98,000 and $19,000, respectively.
OTHER OPERATING EXPENSE increased $1.8 million during the third quarter of
1996 compared to the same period for 1995. The increase included
approximately $1.2 million of merger related expenses and $0.4 million in
legal fees for pursuing insurance claims. See ITEM 5, OTHER INFORMATION, for
details concerning the merger.
MAINTENANCE EXPENSE increased $0.4 million during the third quarter of 1996
compared to the same period in 1995. The third quarter 1996 expense increase
included approximately $0.2 million for scheduled maintenance at three of the
companies steam generating stations and $0.1 million for routine substation
maintenance. In addition, 1995 costs were down as a result of a delay in
certain maintenance projects and an increased emphasis on controlling costs.
DEPRECIATION EXPENSE increased by $0.5 million or 6.3% for the third quarter
of 1996 compared to the third quarter of 1995. This was primarily due to
increased investment in utility plant and increased depreciation rates
approved by the MPUC. The increased rates were implemented in September 1996
and were retroactive to January 1, 1996.
Total INCOME TAX EXPENSE was $6.6 million for the third quarter of 1996
compared to $8.4 million for the third quarter of 1995. The decrease was
mainly due to lower income before taxes. The Internal Revenue Service is
currently auditing the federal income tax filings for the years 1992, 1993,
and 1994.
OTHER INCOME included $0.5 million of supplemental income for implementing
demand side management (DSM) programs in Minnesota. Continued expenditures
for DSM increased the total deferred amounts to $28.4 million at September
30, 1996 compared to $21.9 million at September 30, 1995. The 1990, 1991 and
1992 DSM costs are being recovered over a four year period beginning in
October 1994. A settlement agreement was filed October 8, 1996 with the Iowa
Utilities Board which provides for recovery of the 1993, 1994, and 1995 DSM
costs in an annual amount of $6.5 million over a four year period. The IUB
is expected to issue a final order addressing the settlement by December 31,
1996.
OTHER INTEREST EXPENSE decreased approximately $221,000 for the third 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 third quarter of 1996 was $26.5 million compared to
$39.0 million during the third quarter of 1995. Interest rates for the third
quarter of 1996 averaged 5.45% compared to 5.94% in 1995.
AVERAGE TEMPORARY INVESTMENTS during the third quarter of 1996 were $3.2
million compared to $1.1 million in 1995. The average interest rate was
5.31% in the third quarter of 1996 compared to 5.63% in 1995.
FUEL INVENTORIES were $18.4 million at September 30, 1996, compared to $13.9
million at June 30, 1996 and $22.1 million at September 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 third quarter of 1996 totaled $8.9
million compared to $7.8 million in 1995. Major projects included the
installation of a pipeline between valve stations and three transmission line
relocation and/or rebuild projects. Construction work in progress as of
September 30, 1996 totaled $6.9 million compared to $5.5 million at
September 30, 1995. The 1996 and 1997 construction programs are estimated to
be $32 million and $36 million, respectively.
COMPARISON OF THE NINE MONTHS ENDED SEPTEMBER 30, 1996 AND 1995
EARNINGS PER SHARE were $2.23 for the nine months ended September 30, 1996
and $2.24 for the nine months ended September 30, 1995. Specific items
already addressed in the third quarter review also are applicable to the nine
month review.
The year-to-date ELECTRIC MARGIN increased to $121.5 million in 1996 from
$119.1 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 and a $2.3 million annual electric rate increase in Minnesota
which became effective April 8, 1996.
ELECTRIC SALES during the nine months ended September 30, 1996, excluding
interchange sales, were 2.5% lower than the same period a year ago. The
decrease was primarily attributable to cooler than normal temperatures
throughout the summer which led to a decrease in air conditioning sales.
ELECTRIC REVENUES increased $1.2 million during the nine months ended
September 30, 1996 compared to the same period of 1995. The increased
revenues, which were offset by cooler summer weather, were due to the Iowa
$6.6 million electric rate increase effective June 29, 1995 and the Minnesota
$2.3 million electric rate increase effective April 8, 1996. The increase
also reflected the increased interchange transactions.
The year-to-date GAS MARGIN has increased from $12.5 million in 1995 to $14.1
million in 1996 due mainly to increased residential and commercial sales, and
rate increases in the Iowa gas jurisdiction. Interim gas rates for Iowa in
an annual amount of $1.3 million were implemented October 20, 1995.
GAS DELIVERIES decreased 0.8% during the nine months ended September 30, 1996
compared to the same period in 1995. Residential and commercial sales
increased 10.7% and 10.3%, respectively, due to colder temperatures during
the heating season. Industrial sales and transportation deliveries were down
6.7% and 3.1%, respectively, mainly due to reduced transportation deliveries
to several large industrial customers.
The 14.9% increase in GAS REVENUES during the nine months ended September 30,
1996 compared to the same period in 1995 was due in part to the increased
residential and commercial sales. In addition, the increase reflected the
gas rate increases in Iowa and Minnesota in an annual amount of $2.6 million.
Also, 1995 revenues reflected an $0.8 million refund due to reduced gas costs
and overcollection in prior periods.
PURCHASED POWER EXPENSE increased by $3.9 million or 8.8% during the nine
months ended September 30, 1996, compared to the same period of 1995,
primarily due to the 17.2% increase in Kwh's. Capacity charges were $20.4
million for the nine months ending September 30, 1996 and 1995. During the
nine months ended September 30, 1996, the company realized revenues of
$231,000 and transmission service expenses of $150,000 under the intra-pool
transmission service fee requirement of the MAPP Agreement which was
effective May 1, 1995. Revenues and transmission service expenses for the
nine months ended September 30, 1995, were $115,000 and $31,000,
respectively.
MAINTENANCE EXPENSE increased $1.6 million for the nine months ended
September 30, 1996 compared to the nine months ended September 30, 1995. As
discussed above, an increase of approximately $1.0 million of scheduled
maintenance at three of the companies steam generating stations, which had
been delayed because of an emphasis on cost containment in 1995, occurred in
the second and third quarters of 1996.
Cash flow from operating activities was $48.7 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 are 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 after reconsideration
issued July 2, 1996, affirmed the level of increased rates at approximately
$2.1 million. Rates reflecting the increase granted were implemented in
September 1996. The Department of Public Service and the Office of Attorney
General have appealed the Commission's decision 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 were
implemented in August 1996.
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 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 were implemented in August 1996 and a refund plan is 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.
On September 5, 1996 the Annual Stockholders Meeting was held.
(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.
The two Class II members of the Board of Directors were re-elected,
to hold office for terms as follows:
James E. Byrns term expiring in 1999
Gerald L. Kopischke term expiring in 1999
Following are the Class III and I members of the Board of Directors
whose terms continued after the meeting:
Alan B. Arends term expiring in 1997
Michael R. Chase term expiring in 1997
Wayne H. Stoppelmoor term expiring in 1997
Alfred D. Cordes term expiring in 1998
Joyce L. Haynes term expiring in 1998
(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.
Agreement and Plan of Merger
Approval of the Agreement and Plan of Merger (Merger Agreement),
dated November 10, 1995, as amended, among the company, WPL
Holdings, Inc. (WPLH) and IES Industries Inc. (IES) which provides
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.
The holding company will be named Interstate Energy Corporation
("Interstate Energy").
Votes cast were as follows: For Against Abstain
6,810,128 315,349 67,774
Amendment to Restated Certificate of Incorporation
Approval of an amendment to the company's Restated Certificate of
Incorporation to provide that each share of preferred stock
outstanding from time to time will have one vote, voting together
as a class with the holders of common stock (except as otherwise
provided by law or specifically set forth in the company's Restated
Certificate of Incorporation), on all matters to come before a vote
of the company's stockholders.
Votes cast were as follows: For Against Abstain
7,085,284 318,177 65,801
Election of Directors
The election of two Class II directors, James E. Byrns and
Gerald L. Kopischke, to hold office for a term of three years
expiring at the annual meeting of stockholders of the company to be
held in 1999.
Votes cast were as follows: For Against Abstain
James E. Byrns 8,055,161 180,255 68,523
Gerald L. Kopischke 8,053,496 181,922 68,521
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 on May 22, 1996 and
on August 16, 1996, 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. The holding company will be
named Interstate Energy Corporation (Interstate Energy). The
proposed merger, which will be accounted for as a pooling of
interests, was approved by the shareholders of each company on
September 5, 1996, and is subject to approval by several federal
and state regulatory agencies. Under terms of the Merger
Agreement, the outstanding shares of WPLH's common stock will
remain unchanged and outstanding as shares of Interstate Energy.
Each outstanding share of IES common stock will be converted to
1.14 shares of Interstate Energy's common stock and each share of
the company's common stock will be converted to 1.11 shares of
Interstate Energy's common stock.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as a part of this report:
EX-3.(ii) By-Laws of Interstate Power Company as adopted
April 20, 1925 and as amended October 1, 1996.
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 August 23, 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 November 14, 1996 /s/ W. C. Troy
W.C.Troy, Controller
(Duly Authorized Officer and
Principal Accounting Officer)