UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
_______________________
FORM 8-K/A
AMENDMENT NO. 1 TO
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
_______________________
Date of Report
(Date of earliest
event reported): January 1, 2002
Commission Name of Registrant, State of Incorporation, IRS Employer
File Number Address of Principal Executive Offices and Telephone Number Identification Number
- ----------- ----------------------------------------------------------- ---------------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
222 West Washington Avenue
Madison, Wisconsin 53703
Telephone (608) 252-3311
0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319) 398-4411
IES Utilities Inc.
------------------
(Former name of Interstate Power and Light Company)
This combined Form 8-K/A is separately filed by Alliant Energy Corporation
and Interstate Power and Light Company.
The undersigned registrants hereby amend Item 7 of their Current
Report on Form 8-K dated January 1, 2002 to provide in its entirety as
follows:
Item 7. Financial Statements and Exhibits.
- ------ ---------------------------------
(a) Financial Statements of the Business Acquired.
---------------------------------------------
Historical financial statements of IPC required by this Item 7 are
as follows:
Index to Financial Statements
Page Number
-----------
Report of Independent Public Accountants 3
Statement of Income for the Year Ended December 31, 2000 4
Balance Sheet as of December 31, 2000 5
Statement of Cash Flows for the Year Ended December 31, 2000 7
Statement of Capitalization as of December 31, 2000 8
Statement of Changes in Common Equity for the Year Ended December 31, 2000 9
Notes to Financial Statements 10
Consolidated Statements of Income (Unaudited) for the Nine Months Ended
September 30, 2001 and 2000 20
Consolidated Balance Sheet (Unaudited) as of September 30, 2001 21
Consolidated Statements of Cash Flows (Unaudited) for the Nine Months Ended
September 30, 2001 and 2000 23
Notes to Consolidated Financial Statements (Unaudited) 24
2
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareowners of Interstate Power Company:
We have audited the accompanying balance sheet and
statement of capitalization of Interstate Power Company
(a Delaware corporation) as of December 31, 2000, and the
related statement of income, cash flows and changes in common
equity for the period ended December 31, 2000. These
financial statements are the responsibility of the
Company's management. Our responsibility is to express an
opinion on these financial statements based on our audit.
We conducted our audit in accordance with auditing
standards generally accepted in the United States. Those
standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial
statements are free of material misstatement. An audit
includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles used
and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We
believe that our audit provides a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial
position of Interstate Power Company as of December 31,
2000, and the results of its operations and its cash
flows for the period ended December 31, 2000, in conformity
with accounting principles generally accepted in the United
States.
/s/ ARTHUR ANDERSEN LLP
- -----------------------
ARTHUR ANDERSEN LLP
Milwaukee, Wisconsin
January 29, 2001
(except with respect to the matters discussed in
Note 1(a) as to which the date is January 1, 2002)
3
INTERSTATE POWER COMPANY
STATEMENT OF INCOME
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
Operating revenues:
Electric utility $304,386
Gas utility 53,615
------------------
358,001
------------------
- ---------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 57,049
Purchased power 64,304
Cost of gas sold 35,251
Other operation and maintenance 92,693
Depreciation and amortization 35,407
Taxes other than income taxes 16,475
------------------
301,179
------------------
- ---------------------------------------------------------------------------------------------------
Operating income 56,822
------------------
- ---------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 16,272
Allowance for funds used during construction (824)
Miscellaneous, net (2,300)
------------------
13,148
------------------
- ---------------------------------------------------------------------------------------------------
Income before income taxes 43,674
------------------
- ---------------------------------------------------------------------------------------------------
Income taxes 14,970
------------------
- ---------------------------------------------------------------------------------------------------
Net income 28,704
------------------
- ---------------------------------------------------------------------------------------------------
Preferred dividend requirements 2,489
------------------
- ---------------------------------------------------------------------------------------------------
Earnings available for common stock $26,215
==================
- ---------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement.
4
INTERSTATE POWER COMPANY
BALANCE SHEET
DECEMBER 31, 2000
(in thousands)
ASSETS
- ---------------------------------------------------------------------------------------------------
Property, plant and equipment:
Utility -
Plant in service -
Electric $941,400
Gas 78,984
Common 14,374
------------------
1,034,758
Less - Accumulated depreciation 523,057
------------------
511,701
Construction work in progress 13,371
------------------
525,072
Other property, plant and equipment 276
------------------
525,348
------------------
- ---------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 2,871
Accounts receivable:
Customer, less allowance for doubtful accounts of $356 50,658
Associated companies 1,758
Other 1,955
Income tax refunds receivable 5,161
Production fuel, at average cost 16,349
Materials and supplies, at average cost 5,973
Gas stored underground, at average cost 5,210
Adjustment clause balances 3,670
Regulatory assets 10,803
Prepayments and other 2,422
------------------
106,830
------------------
- ---------------------------------------------------------------------------------------------------
Investments 7,193
------------------
- ---------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 50,704
Deferred charges and other 15,672
------------------
66,376
------------------
- ---------------------------------------------------------------------------------------------------
Total assets $705,747
==================
- ---------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement.
5
INTERSTATE POWER COMPANY
BALANCE SHEET (Continued)
DECEMBER 31, 2000
(in thousands)
CAPITALIZATION AND LIABILITIES
- ---------------------------------------------------------------------------------------------------
Capitalization (See Statement of Capitalization):
Common stock $34,221
Additional paid-in capital 108,690
Retained earnings 86,058
------------------
Total common equity 228,969
Cumulative preferred stock, not mandatorily redeemable 10,819
Cumulative preferred stock, mandatorily redeemable 24,687
Long-term debt 170,401
------------------
434,876
------------------
- ---------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable to associated companies 68,218
Accounts payable 22,717
Accounts payable to associated companies 12,236
Accrued interest 2,666
Accrued taxes 13,934
Other 9,643
------------------
129,414
------------------
- ---------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 93,548
Accumulated deferred investment tax credits 12,829
Environmental liabilities 14,380
Pension and other benefit obligations 8,191
Other 12,509
------------------
141,457
------------------
- ---------------------------------------------------------------------------------------------------
Total capitalization and liabilities $705,747
==================
- ---------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement.
6
INTERSTATE POWER COMPANY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2000
(in thousands)
- ------------------------------------------------------------------------------------------------------------
Cash flows from operating activities:
Net income $28,704
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 35,407
Amortization of deferred energy efficiency expenditures 11,290
Deferred tax benefits and investment tax credits (1,233)
Other 754
Other changes in assets and liabilities:
Accounts receivable (15,769)
Gas stored underground (2,145)
Accounts payable 11,963
Benefit obligations and other (12,213)
-----------------
Net cash flows from operating activities 56,758
-----------------
- ------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends declared (21,706)
Preferred stock dividends (2,489)
Net change in short-term borrowings 29,020
Other 59
-----------------
Net cash flows from financing activities 4,884
-----------------
- ------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (50,637)
Other (11,679)
-----------------
Net cash flows used for investing activities (62,316)
-----------------
- ------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (674)
-----------------
- ------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 3,545
-----------------
- ------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $2,871
=================
- ------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $13,362
=================
Income taxes $21,999
=================
- ------------------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement.
7
INTERSTATE POWER COMPANY
STATEMENT OF CAPITALIZATION
DECEMBER 31, 2000
(in thousands, except share amounts)
Common equity:
Common stock - $3.50 par value - authorized 30,000,000 shares;
9,777,432 shares outstanding $34,221
Additional paid-in capital 108,690
Retained earnings 86,058
-------------------
228,969
-------------------
- ----------------------------------------------------------------------------------------------------
Cumulative preferred stock:
Par/Stated Authorized Shares Mandatory
Value Shares Outstanding Series Redemption
----- ------ ----------- ------ ----------
$50 * 216,381 4.36% - 7.76% No 10,819
$50 * 545,000 6.40% Yes ** 27,250
-------------------
38,069
Less: unamortized expenses (2,563)
-------------------
35,506
-------------------
* 2,000,000 authorized shares in total
** $53.20 mandatory redemption price
- ----------------------------------------------------------------------------------------------------
Long-term debt:
First Mortgage Bonds:
8% series, due 2007 25,000
8-5/8% series, due 2021 25,000
7-5/8% series, due 2023 94,000
-------------------
144,000
Pollution Control Revenue Bonds:
5.75%, due 2003 1,000
6.25%, due 2009 1,000
6.30%, due 2010 5,600
6.35%, due 2012 5,650
Variable/fixed rate series 1998 (4.30% through 2003), due 2005 to 2008 4,950
Variable/fixed rate series 1999 (4.05% through 2004), due 2010 3,250
Variable/fixed rate series 1999 (4.20% through 2004), due 2013 7,700
-------------------
29,150
-------------------
173,150
-------------------
Less:
Unamortized debt premium and (discount), net (2,749)
-------------------
170,401
-------------------
- ----------------------------------------------------------------------------------------------------
Total capitalization $434,876
===================
- ----------------------------------------------------------------------------------------------------
The accompanying Notes to Financial Statements are an integral part of this statement.
8
INTERSTATE POWER COMPANY
STATEMENT OF CHANGES IN COMMON EQUITY
Accumulated
Additional Other Total
Common Paid-In Retained Comprehensive Common
Stock Capital Earnings Income (Loss) Equity
- ------------------------------------------------------------------------------------------------------------------------------------
(in thousands)
2000:
Beginning balance $34,221 $108,748 $81,549 $ - $224,518
Comprehensive income:
Earnings available for common stock 26,215 26,215
Other comprehensive income (loss):
Unrealized gains (losses) on derivatives qualified as hedges:
Unrealized holding gains arising during period due to
cumulative effect of a change in accounting principle,
net of tax of $2 3 3
Other unrealized holding losses arising during period,
net of tax of $2 (3) (3)
-------------- -----------
Net unrealized gains (losses) on qualifying derivatives - -
-------------- -----------
Total comprehensive income 26,215
Common stock dividends (21,706) (21,706)
Common stock issued (58) (58)
------------ ------------- ------------ -------------- -----------
Ending balance $34,221 $108,690 $86,058 $ - $228,969
============ ============= ============ ============== ===========
The accompanying Notes to Financial Statements are an integral part of this statement.
9
INTERSTATE POWER COMPANY
------------------------
NOTES TO FINANCIAL STATEMENTS
-----------------------------
(1) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
(a) General - The financial statements include the accounts of Interstate
Power Company (IPC), which is a subsidiary of Alliant Energy Corporation
(Alliant Energy). IPC is engaged principally in the generation,
transmission, distribution and sale of electric energy and the purchase,
distribution, transportation and sale of natural gas in Iowa, Minnesota and
Illinois.
On March 15, 2000, the boards of directors of IESU and IPC approved a merger
agreement (as amended on November 29, 2000) for IPC to merge with and into
IESU (the "Agreement"). The merger of IPC with and into IESU was approved by
their respective shareowners in April 2001 and by the SEC in October 2001.
The merger was effective January 1, 2002 and IESU changed its name to
Interstate Power and Light Company. Each share of IPC common
stock outstanding was cancelled without payment and each share of IPC
preferred stock outstanding was cancelled and converted into the right to
receive one share of a new class of IESU Class A preferred stock with
substantially identical designations, rights and preferences as the
previously outstanding IPC preferred stock. IPC and IESU were both
wholly-owned operating subsidiaries of Alliant Energy. As such, the
transaction was accounted for as a common control merger.
The financial statements are prepared in conformity with accounting
principles generally accepted in the United States, which give recognition to
the rate making and accounting practices of the Federal Energy Regulatory
Commission (FERC) and state commissions having regulatory jurisdiction.
The preparation of the financial statements requires management to make
estimates and assumptions that affect: a) the reported amounts of assets and
liabilities and the disclosure of contingent assets and liabilities at the
date of the financial statements; and b) the reported amounts of revenues and
expenses during the reporting period. Actual results could differ from those
estimates.
(b) Regulation - IPC is subject to regulation by FERC, the Iowa
Utilities Board (IUB), the Minnesota Public Utilities Commission (MPUC) and
the Illinois Commerce Commission.
(c) Regulatory Assets - IPC is subject to the provisions of Statement of
Financial Accounting Standards (SFAS) 71, "Accounting for the Effects of
Certain Types of Regulation," which provides that rate-regulated public
utilities record certain costs and credits allowed in the rate making process
in different periods than for non-regulated entities. These are deferred as
regulatory assets or accrued as regulatory liabilities and are recognized in
the Statement of Income at the time they are reflected in rates. At December
31, 2000, regulatory assets of $61.5 million were comprised of the following
items (in millions):
Tax-related (Note 1(d)) $31.9
Environmental liabilities (Note 11(d)) 14.7
Energy efficiency program costs 9.2
Other 5.7
------
$61.5
======
If a portion of IPC's operations becomes no longer subject to the provisions
of SFAS 71 as a result of competitive restructuring or otherwise, a
write-down of related regulatory assets would be required, unless some form
of transition cost recovery is established by the appropriate regulatory body
that would meet the requirements under generally accepted accounting
principles for continued accounting as regulatory assets during such recovery
period. In addition, IPC would be required to determine any impairment of
other assets and write-down such assets to their fair value.
10
(d) Income Taxes - IPC follows the liability method of accounting for
deferred income taxes, which requires the establishment of deferred tax
assets and liabilities, as appropriate, for all temporary differences between
the tax basis of assets and liabilities and the amounts reported in the
financial statements. Deferred taxes are recorded using currently enacted
tax rates.
Except as noted below, income tax expense includes provisions for deferred
taxes to reflect the tax effects of temporary differences between the time
when certain costs are recorded in the accounts and when they are deducted
for tax return purposes. As temporary differences reverse, the related
accumulated deferred income taxes are reversed to income. Investment tax
credits have been deferred and are subsequently credited to income over the
average lives of the related property.
Consistent with Iowa rate making practices, deferred tax expense is not
recorded for certain temporary differences (primarily related to utility
property, plant and equipment). As the deferred taxes become payable (over
periods exceeding 30 years for some generating plant differences) they are
recovered through rates. Accordingly, IPC has recorded deferred tax
liabilities and regulatory assets for certain temporary differences, as
identified in Note 1(c).
Alliant Energy files a consolidated federal income tax return. Under the
terms of an agreement between Alliant Energy and its subsidiaries (including
IPC), the subsidiaries calculate their respective federal income tax
provisions and make payments to or receive payments from Alliant Energy as if
they were separate taxable entities.
(e) Temporary Cash Investments - Temporary cash investments are stated at
cost, which approximates market value, and are considered cash equivalents
for the Balance Sheet and the Statement of Cash Flows. These investments
consist of short-term liquid investments that have maturities of less than 90
days from the date of acquisition.
(f) Depreciation of Utility Property, Plant and Equipment - IPC uses the
straight-line depreciation method as approved by its regulatory commissions.
In 2000, the average rates of depreciation for electric and gas properties,
consistent with current rate making practices, were 3.5% and 3.6%,
respectively.
(g) Property, Plant and Equipment - Utility plant is recorded at original
cost, which includes overhead and administrative costs and allowance for
funds used during construction (AFUDC). In 2000, the aggregate gross AFUDC
recovery rate, computed in accordance with the prescribed regulatory formula,
was 6.5%.
Other property, plant and equipment is recorded at original cost. Upon
retirement or sale of other property and equipment, the cost and related
accumulated depreciation are removed from the accounts and any gain or loss
is included in "Miscellaneous, net" in the Statement of Income. Ordinary
retirements of utility plant, including removal costs less salvage value, are
charged to accumulated depreciation upon removal from utility plant accounts
and no gain or loss is recognized.
(h) Operating Revenues - IPC accrues revenues for services rendered but
unbilled at month-end.
(i) Utility Fuel Cost Recovery - IPC's tariffs provide for subsequent
adjustments to its electric and natural gas rates for changes in the cost of
fuel, purchased energy and natural gas purchased for resale. Changes in the
under/over collection of these costs are reflected in "Electric production
fuels" and "Cost of gas sold" in the Statement of Income. The cumulative
effects are reflected on the Balance Sheet as a current asset or current
liability, pending automatic reflection in future billings to customers.
Purchased-power capacity costs are not recovered from electric customers
through energy adjustment clauses. Recovery of these costs must be addressed
in base rates in a formal rate proceeding.
(j) Derivative Financial Instruments - IPC uses derivative financial
instruments to hedge exposures to fluctuations in certain commodity prices.
IPC does not use such instruments for speculative purposes. In accordance
with SFAS 133, "Accounting for Derivative Instruments and Hedging
Activities," as amended by SFAS 138, "Accounting for Certain Derivative
Instruments and Certain Hedging Activities - an Amendment of SFAS 133," the
fair value of all derivatives are recorded as assets or liabilities on the
Balance Sheet and gains and losses related to derivatives that are designated
as, and qualify as hedges, are recognized in earnings when the underlying
hedged item or physical transaction is recognized in income. Gains and
losses related to derivatives that do not qualify for, or are not designated
11
in hedge relationships, are recognized in earnings immediately. IPC has
commodity purchase and sales contracts for both capacity and energy that have
been designated, and qualify for, the normal purchase and sale exception in
SFAS 138. Based on this designation, these contracts are not accounted for
as derivative instruments. Refer to Note 10 for further discussion of IPC's
derivative financial instruments.
(2) APRIL 1998 ALLIANT ENERGY CORPORATION MERGER
In association with the 1998 merger between IPC, IES Industries Inc. and WPL
Holdings, Inc., Alliant Energy entered into a three-year consulting
agreement, which expires in the second quarter of 2001, with Wayne
Stoppelmoor, the Chief Executive Officer of IPC prior to the consummation of
the merger. Under the terms of the consulting agreement, Mr. Stoppelmoor,
who was also Vice Chairman of Alliant Energy's Board of Directors until April
2000, received a fee of $200,000 in 2000 for his services.
(3) LEASES
IPC's operating lease rental expense for 2000 was $2.0 million. IPC's future
minimum lease payments by year are as follows (in thousands):
Capital Operating
Year Leases Leases
- ------------------------- --------- ----------
2001 $14.1 $2,020.3
2002 14.1 1,313.4
2003 14.1 1,203.4
2004 14.1 319.4
2005 14.2 7.5
Thereafter 4.7 75.0
--------- ----------
75.3 $4,939.0
==========
Less: Amount representing interest 7.8
---------
Present value of net minimum
capital lease payments $67.5
=========
(4) UTILITY ACCOUNTS RECEIVABLE
Utility customer accounts receivable, including unbilled revenues, arise
primarily from the sale of electricity and natural gas. At December 31,
2000, IPC was serving a diversified base of residential, commercial and
industrial customers and did not have any significant concentrations of
credit risk.
(5) INCOME TAXES
The components of federal and state income taxes for IPC for the year ended
December 31, 2000 were as follows (in millions):
Current tax expense $16.2
Deferred tax expense (0.2)
Amortization of investment tax credits (1.0)
----------
$15.0
==========
The overall effective income tax rate shown below for the year ended December
31, 2000 was computed by dividing total income tax expense by income before
income taxes.
Statutory federal income tax rate 35.0%
State income taxes, net of federal benefits 5.4
Effect of rate making on property related differences 1.7
Amortization of investment tax credits (2.4)
Adjustment of prior period taxes (4.7)
Other items, net (0.7)
--------
Overall effective income tax rate 34.3%
========
12
The accumulated deferred income tax (assets) and liabilities included on the
Balance Sheet at December 31, 2000 arise from the following temporary
differences (in millions):
Property related $104.6
Investment tax credit related (9.0)
Other (2.1)
---------
$93.5
=========
(6) PENSION PLANS AND OTHER POSTRETIREMENT BENEFITS
IPC has two non-contributory defined benefit pension plans that cover
substantially all of its employees. Benefits are based on the employees'
years of service and compensation. IPC also provides certain postretirement
health care and life benefits to eligible retirees. In general, the health
care plans are contributory with participants' contributions adjusted
annually and the life insurance plans are non-contributory.
The weighted-average assumptions as of the measurement date of September 30,
2000 were as follows:
Qualified Other
Pension Postretirement
Benefits Benefits
------------- ---------------
Discount rate 8% 8%
Expected return on plan assets 9% 9%
Rate of compensation increase 3.5% N/A
Medical cost trend on covered charges:
Initial trend rate N/A 9%
Ultimate trend rate N/A 5%
The components of IPC's qualified pension benefits and other postretirement
benefits costs for 2000 were as follows (in thousands):
Qualified Other
Pension Postretirement
Benefits Benefits
------------- --------------
Service cost $1,059 $690
Interest cost 2,251 2,701
Expected return on plan assets (2,661) (1,226)
Amortization of:
Transition obligation 154 998
Prior service cost 164 (224)
Actuarial gain -- (229)
------------- --------------
Total $967 $2,710
============= ==============
The pension benefit cost shown above (and in the following tables)
represents only the pension benefit cost for bargaining unit employees of IPC
covered under the IPC Retirement Income Plan sponsored by IPC. The pension
benefit cost for IPC's non-bargaining employees who are now participants in
other Alliant Energy plans was $0.7 million for 2000. In addition, Alliant
Energy Corporate Services, Inc. (Corporate Services) provides services to
IPC. The allocated pension benefit cost associated with these services was
$0.6 million for 2000. The other postretirement benefit cost shown
previously for 2000 (and in the following tables) represents the other
postretirement benefit cost for all IPC employees. The allocated other
postretirement benefit cost associated with Corporate Services for IPC was
$0.1 million for 2000.
The assumed medical trend rates are critical assumptions in determining the
service and interest cost and accumulated postretirement benefit obligation
related to postretirement benefit costs. A one percent change in the medical
trend rates for 2000, holding all other assumptions constant, would have the
following effects (in thousands):
1 Percent 1 Percent
Increase Decrease
---------- ----------
Effect on total of service and interest cost components $500 ($400)
Effect on postretirement benefit obligation $3,100 ($2,800)
13
A reconciliation of the funded status of IPC's plans to the amounts
recognized on IPC's Balance Sheet at December 31, 2000 was as follows (in
thousands):
Qualified Pension Other Postretirement
Benefits Benefits
-------------------- ----------------------
Change in benefit obligation:
Net benefit obligation at beginning of year $28,057 $36,270
Service cost 1,059 690
Interest cost 2,251 2,701
Plan amendments 1,247 (3,170)
Actuarial loss (gain) (1,780) 2,674
Gross benefits paid (490) (2,645)
-------------------- ----------------------
Net benefit obligation at end of year 30,344 36,520
-------------------- ----------------------
Change in plan assets:
Fair value of plan assets at beginning of year 29,772 20,087
Actual return on plan assets 2,689 1,096
Employer contributions -- 4,745
Gross benefits paid (490) (2,645)
-------------------- ----------------------
Fair value of plan assets at end of year 31,971 23,283
-------------------- ----------------------
Funded status at end of year 1,627 (13,237)
Unrecognized net actuarial gain (2,075) (2,062)
Unrecognized prior service cost 2,391 (672)
Unrecognized net transition obligation 319 9,919
-------------------- ----------------------
Net amount recognized at end of year $2,262 ($6,052)
==================== ======================
Amounts recognized on the
Balance Sheet consist of:
Prepaid benefit cost $2,262 $654
Accrued benefit cost -- (6,706)
-------------------- ----------------------
Net amount recognized at measurement date 2,262 (6,052)
-------------------- ----------------------
Contributions paid after 9/30 and prior to 12/31 -- 771
-------------------- ----------------------
Net amount recognized at 12/31 $2,262 ($5,281)
==================== ======================
Alliant Energy sponsors several non-qualified pension plans which cover
certain current and former officers. The pension expense allocated to IPC
for these plans was $0.9 million in 2000.
A significant number of IPC employees also participate in defined
contribution pension plans (401(k) plans). IPC's contributions to the plans,
which are based on the participants' level of contribution, were $0.5 million
in 2000.
(7) COMMON AND PREFERRED STOCK
(a) Common Stock - IPC has common stock dividend restrictions based on its
respective bond indentures and articles of incorporation, and restrictions on
the payment of common stock dividends commonly found with preferred stock.
In addition, IPC's ability to pay common stock dividends is restricted based
on requirements associated with sinking funds.
(b) Preferred Stock - In 1993, IPC issued 545,000 shares of 6.40%, $50 par
value preferred stock with a final redemption date of May 1, 2022. Under the
provisions of the mandatory sinking fund, beginning in 2003, IPC is required
to redeem annually $1.4 million, or 27,250 shares of the preferred stock.
14
The carrying value of IPC's cumulative preferred stock at December 31, 2000
was $36 million. The fair market value, based upon the market yield of
similar securities and quoted market prices, at December 31, 2000 was $33
million.
(8) DEBT
(a) Short-Term Debt - IPC participates in a utility money pool with
Wisconsin Power and Light Company (WP&L) and IES Utilities Inc. (IESU),
subsidiaries of Alliant Energy, that is funded, as needed,
through the issuance of commercial paper by Alliant Energy.
Interest expense and other fees are allocated based on borrowing
amounts. Information regarding IPC's short-term debt for 2000 is as follows
(dollars in millions):
As of year end:
Money pool borrowings $68.2
Interest rate on money pool borrowings 6.56%
For the year ended:
Average amount of short-term debt
(based on daily outstanding balances) $42.4
Average interest rate on short-term debt 6.51%
(b) Long-Term Debt - IPC's First Mortgage Bonds are secured by substantially
all of IPC's utility plant. Debt maturities for 2001 to 2005 are $0 million,
$0 million, $1.0 million, $0 million and $2.7 million, respectively.
Depending upon market conditions, it is currently anticipated that a majority
of the maturing debt will be refinanced with the issuance of long-term
securities.
The carrying value of IPC's long-term debt at December 31, 2000 was $170
million. The fair market value, based upon the market yield of similar
securities and quoted market prices, at December 31, 2000 was $176 million.
(9) ESTIMATED FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of IPC's current assets and current liabilities
approximates fair value because of the short maturity of such financial
instruments. Since IPC is subject to regulation, any gains or losses related
to the difference between the carrying amount and the fair value of its
financial instruments may not be realized by IPC's parent.
(10) DERIVATIVE FINANCIAL INSTRUMENTS
IPC adopted SFAS 133 as of July 1, 2000. SFAS 133 requires that every
derivative instrument be recorded on the balance sheet as an asset or
liability measured at its fair value and that changes in the derivative's
fair value be recognized currently in earnings unless specific hedge
accounting criteria are met.
SFAS 133 requires that as of the date of initial adoption, the difference
between the fair value of derivative instruments recorded on the balance
sheet and the previous carrying amount of those derivatives be reported in
net income or other comprehensive income, as appropriate, as the cumulative
effect of a change in accounting principle in accordance with Accounting
Principles Board Opinion 20, "Accounting Changes." In the third quarter of
2000, the impact of IPC adopting SFAS 133 as of July 1, 2000 did not affect
net income before the cumulative effect of a change in accounting principle.
A limited number of IPC's fixed price commodity contracts are defined as
derivatives under SFAS 133. The fair values of these derivative instruments
have been recorded as assets and liabilities on the balance sheet and in the
transition adjustment in accordance with the transition provisions of SFAS
133. Changes in the fair values of these instruments subsequent to July 1,
2000, to the extent that the derivatives are designated in cash flow hedging
relationships and are effective at mitigating the underlying commodity risk,
are recorded in other comprehensive income. At the date the underlying
transaction occurs, the amounts accumulated in other comprehensive income are
reported in the Statement of Income. To the extent that the hedges are not
effective, the ineffective portion of the changes in fair value is recorded
directly in earnings.
15
IPC's financial statement impact of recording the various SFAS 133
transactions at July 1, 2000 was as follows (in thousands):
Financial Statement Account Financial Statement Amount Increased
- ------------------------------------------------------------ ---------------------- ---------------------
Other assets Balance sheet $5.8
Other liabilities Balance sheet 2.4
Cumulative effect of a change in accounting principle
(other comprehensive income) Balance sheet 3.4
During 2000, $3,390 of net income included in the cumulative effect of a
change in accounting principle component of accumulated other comprehensive
income was reclassified into earnings, resulting in a remaining balance of $0
at December 31, 2000.
IPC's primary market risk exposures are associated with commodity prices.
IPC has risk management policies to monitor and assist in controlling these
market risks and uses derivative instruments to manage some of the
exposures. During 2000, IPC held derivative instruments designated as cash
flow hedging instruments and other derivatives. The cash flow hedging
instruments were comprised of coal purchase and sales contracts which were
used to manage the price of anticipated coal purchases and sales. IPC did
not have any cash flow hedging instruments outstanding at December 31, 2000.
For the year ended December 31, 2000, there was no gain or loss recognized in
earnings representing the amount of hedge ineffectiveness. IPC did not
exclude any components of the derivative instruments' gain or loss from the
assessment of hedge effectiveness and there were no reclasses into earnings
as a result of the discontinuance of hedges.
IPC's derivatives that have not been designated in hedge relationships
include electricity price collars, used to manage energy costs during
supply/demand imbalances. During 2000, these derivatives were recorded at
their fair market value as derivative assets, derivative liabilities and
regulatory assets on the Balance Sheet.
(11) COMMITMENTS AND CONTINGENCIES
(a) Construction and Acquisition Program - IPC anticipates 2001 utility
construction and acquisition expenditures will be approximately $59 million.
During 2002-2005, IPC expects to spend approximately $239 million for utility
construction and acquisition expenditures.
(b) Purchased-Power and Transmission, Coal and Natural Gas Contracts -
Corporate Services has entered into purchased-power and transmission, coal,
and natural gas supply, transportation and storage contracts as agent for
IPC, WP&L and IESU. The natural gas supply commitments are all index-based.
Based on the System Coordination and Operating Agreement, Alliant Energy
annually allocates purchased-power contracts to the individual utilities.
Such process considers factors such as resource mix, load growth and resource
availability. Refer to Note 15 for additional information. In addition,
Corporate Services has entered into various coal contracts as agent for IPC,
WP&L and IESU. Contract quantities are allocated to specific plants at the
individual utilities based on various factors including projected heat input
requirements, combustion compatibility and efficiency. However, for 2001,
2002 and 2003, system-wide contracts of $21.3 million (5.1 million tons),
$1.7 million (0.5 million tons) and $1.7 million (0.5 million tons),
respectively, have not yet been allocated to the individual utilities due to
the need for additional analysis of combustion compatibility and efficiency.
Corporate Services expects to supplement its coal and natural gas supplies
with spot market purchases as needed. The minimum commitments directly
assigned to IPC were as follows (dollars and dekatherms (Dths) in millions;
megawatt-hours (MWhs) and tons in thousands):
16
Natural gas supply,
Purchased-power and Coal (including transportation and
transmission transportation) storage contracts
------------------------ ----------------------- --------------------------
Dollars MWhs Dollars Tons Dollars Dths
---------- ---------- ---------- ---------- ------------ ----------
2001 $13.8 62 $8.3 2,165 $16.3 28
2002 5.0 61 4.8 1,824 5.2 19
2003 3.1 61 4.2 1,706 2.8 14
2004 -- -- 1.3 533 -- --
2005 -- -- 1.3 533 -- --
(c) Information Technology Services - Corporate Services has an agreement,
expiring in 2004, with Electronic Data Systems Corporation (EDS) for
information technology services. IPC's anticipated operating and capital
expenditures under the agreement for 2001 are estimated to total
approximately $0.6 million. Future costs under the agreement are variable
and are dependent upon IPC's level of usage of technological services from
EDS.
(d) Environmental Liabilities - As of December 31, 2000, IPC had recorded
environmental liabilities and regulatory assets for manufactured gas plant
(MGP) sites of $15.5 million and $14.7 million, respectively. IPC has
current or previous ownership interests in 9 MGP sites previously associated
with the production of gas for which it may be liable for investigation,
remediation and monitoring costs relating to the sites. IPC has received
letters from state environmental agencies requiring no further action at one
site. IPC is working pursuant to the requirements of various federal and
state agencies to investigate, mitigate, prevent and remediate, where
necessary, the environmental impacts to property, including natural
resources, at and around the sites in order to protect public health and the
environment.
IPC records environmental liabilities based upon periodic studies, most
recently updated in the third quarter of 2000, related to the MGP sites.
Such amounts are based on the best current estimate of the remaining amount
to be incurred for investigation, remediation and monitoring costs for those
sites where the investigation process has been or is substantially completed,
and the minimum of the estimated cost range for those sites where the
investigation is in its earlier stages. It is possible that future cost
estimates will be greater than current estimates as the investigation process
proceeds and as additional facts become known. The amounts recognized as
liabilities are reduced for expenditures made and are adjusted as further
information develops or circumstances change. Costs of future expenditures
for environmental remediation obligations are not discounted to their fair
value. Management currently estimates the range of remaining costs to be
incurred for the investigation, remediation and monitoring of all IPC sites
to be approximately $11 million to $20 million.
The MPUC allows the deferral of MGP-related costs applicable to the Minnesota
sites and IPC has been successful in obtaining approval to recover such costs
in rates in Minnesota. The IUB has permitted utilities to recover prudently
incurred costs. Regulatory assets have been recorded by IPC which reflect
the probable future rate recovery, where applicable. Considering the current
rate treatment, and assuming no material change therein, IPC believes that
the clean-up costs incurred for these MGP sites will not have a material
adverse effect on its financial condition or results of operations.
IPC has settled with all but one of its insurance carriers regarding
reimbursement for its MGP-related costs. Insurance recoveries of $5.3 million
were available as of December 31, 2000. Pursuant to its applicable rate
making treatment, IPC has recorded its recoveries in "Other long-term
liabilities and deferred credits."
(e) Legal Proceedings - IPC is involved in legal and administrative
proceedings before various courts and agencies with respect to matters
arising in the ordinary course of business. Although unable to predict the
outcome of these matters, IPC believes that appropriate reserves have been
established and final disposition of these actions will not have a material
adverse effect on its financial condition or results of operations.
17
(12) JOINTLY-OWNED ELECTRIC UTILITY PLANT
Under joint ownership agreements with other Iowa utilities, IPC has undivided
ownership interests in jointly-owned electric generating stations and related
transmission facilities. Each of the respective owners is responsible for
the financing of its portion of the construction costs. Kilowatt-hour
generation and operating expenses are divided on the same basis as ownership
with each owner reflecting its respective costs in its Statement of Income.
Information relative to IPC's ownership interest in these facilities at
December 31, 2000 was as follows (dollars in millions):
Accumulated Construction
Fuel Ownership Plant in Provision for Work-In-
Type Interest % Service Depreciation Progress
- ----------------------------------------------------------------------------------------
Neal Unit 4 Coal 21.5 $83.5 $53.9 $--
Louisa Unit 1 Coal 4.0 24.7 13.2 --
------------------------------------------
$108.2 $67.1 $--
==========================================
(13) SEGMENTS OF BUSINESS
IPC is a regulated domestic utility, serving customers in Iowa, Minnesota and
Illinois, and is broken down into three segments: a) electric operations; b)
gas operations; and c) other, which includes the unallocated portions of the
utility business. Various line items in the following tables are not
allocated to the electric and gas segments for management reporting purposes
and therefore are included in "Other." Intersegment revenues were not
material to IPC's operations and there was no single customer whose revenues
exceeded 10 percent or more of IPC's revenues. Certain financial information
relating to IPC's significant business segments for 2000 was as follows
(in millions):
Electric Gas Other Total
-----------------------------------------------------
Operating revenues $304.4 $53.6 $-- $358.0
Depreciation and amortization expense 32.7 2.7 -- 35.4
Operating income 53.6 3.2 -- 56.8
Interest expense, net of AFUDC 15.4 15.4
Miscellaneous, net (2.3) (2.3)
Income tax expense 15.0 15.0
Net income 28.7 28.7
Preferred dividends 2.5 2.5
Earnings available for common stock 26.2 26.2
Total assets 590.3 88.7 26.7 705.7
Construction and acquisition expenditures 45.7 4.9 -- 50.6
(14) SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
Quarter Ended
------------------------------------------------------------------------
March 31 June 30 September 30 December 31
----------------- --------------- ----------------- ------------------
(in millions)
2000
- ----
Operating revenues $81.0 $80.1 $100.1 $96.8
Operating income 8.5 9.5 29.8 9.0
Net income 2.8 3.9 15.1 6.9
Earnings available for common stock 2.1 3.3 14.5 6.3
18
(15) RELATED PARTY ISSUES
In association with the 1998 merger that resulted in the formation of Alliant
Energy, IPC, IESU and WP&L entered into a System Coordination and Operating
Agreement which became effective with the merger. The agreement, which has
been approved by FERC, provides a contractual basis for coordinated planning,
construction, operation and maintenance of the interconnected electric
generation and transmission systems of the three utility companies. In
addition, the agreement allows the interconnected system to be operated as a
single entity with off-system capacity sales and purchases made to market
excess system capability or to meet system capability deficiencies. Such
sales and purchases are allocated among the three utility companies based on
procedures included in the agreement. The sales amounts allocated to IPC
were $26.3 million for 2000. The purchases allocated to IPC were $64.2
million for 2000. The procedures were approved by both FERC and all state
regulatory bodies having jurisdiction over these sales. Under the agreement,
IPC, IESU and WP&L are fully reimbursed for any generation expense incurred
to support the sale to an affiliate or to a non-affiliate. Any margins on
sales to non-affiliates are distributed to the three utilities in proportion
to each utility's share of electric production at the time of sale.
Pursuant to a service agreement approved by the Securities and Exchange
Commission under the Public Utility Holding Company Act of 1935, IPC receives
various administrative and general services from an affiliate, Corporate
Services. These services are billed to IPC at cost based on payroll and
other expenses incurred by Corporate Services for the benefit of IPC. These
costs totaled $46.8 million for 2000, and consisted primarily of employee
compensation, benefits and fees associated with various professional
services. At December 31, 2000, IPC had an intercompany payable to Corporate
Services of $11.6 million.
19
INTERSTATE POWER COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Nine Months Ended September 30,
2001 2000
- --------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $233,156 $232,719
Gas utility 48,898 28,419
-------------------- -------------------
282,054 261,138
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 43,455 41,851
Purchased power 45,352 50,107
Cost of gas sold 35,013 16,953
Other operation and maintenance 69,033 66,594
Depreciation and amortization 28,097 26,060
Taxes other than income taxes 13,647 11,795
-------------------- -------------------
234,597 213,360
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Operating income 47,457 47,778
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 12,232 11,996
Allowance for funds used during construction (619) (694)
Miscellaneous, net 412 (1,202)
-------------------- -------------------
12,025 10,100
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Income before income taxes 35,432 37,678
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Income taxes 14,423 15,910
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Net income 21,009 21,768
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 1,871 1,866
-------------------- -------------------
- --------------------------------------------------------------------------------------------------------------
Earnings available for common stock $19,138 $19,902
==================== ===================
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
INTERSTATE POWER COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED)
SEPTEMBER 30, 2001
(in thousands)
ASSETS
- --------------------------------------------------------------------------------------------------------------
Property, plant and equipment:
Utility -
Plant in service -
Electric $964,222
Gas 80,876
Common 15,571
------------------
1,060,669
Less - Accumulated depreciation 549,803
------------------
510,866
Construction work in progress 18,880
------------------
529,746
Other property, plant and equipment, net of accumulated
depreciation and amortization of $102 179
------------------
529,925
------------------
- --------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 2,293
Accounts receivable:
Customer, less allowance for doubtful accounts of $522 7,603
Associated companies 1,522
Other 2,079
Production fuel, at average cost 18,615
Materials and supplies, at average cost 5,882
Gas stored underground, at average cost 3,687
Regulatory assets 4,016
Prepayments and other 5,079
------------------
50,776
------------------
- --------------------------------------------------------------------------------------------------------------
Investments 6,762
------------------
- --------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 50,342
Deferred charges and other 14,995
------------------
65,337
------------------
- --------------------------------------------------------------------------------------------------------------
Total assets $652,800
==================
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
21
INTERSTATE POWER COMPANY
CONSOLIDATED BALANCE SHEET (UNAUDITED) (Continued)
SEPTEMBER 30, 2001
(in thousands, except share amounts)
CAPITALIZATION AND LIABILITIES
- -----------------------------------------------------------------------------------------------------------
Capitalization:
Common stock - $3.50 par value - authorized 30,000,000
shares; 9,777,432 shares outstanding $34,221
Additional paid-in capital 108,644
Retained earnings 88,916
------------------
Total common equity 231,781
Cumulative preferred stock, not mandatorily redeemable 10,819
Cumulative preferred stock, mandatorily redeemable 24,810
Long-term debt 165,574
------------------
432,984
------------------
- -----------------------------------------------------------------------------------------------------------
Current liabilities:
Notes payable to associated companies 23,996
Accounts payable 15,169
Accounts payable to associated companies 11,901
Accrued taxes 19,843
Other 10,275
------------------
81,184
------------------
- -----------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 92,186
Accumulated deferred investment tax credits 12,052
Environmental liabilities 13,856
Pension and other benefit obligations 9,336
Other 11,202
------------------
138,632
------------------
- -----------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $652,800
==================
- -----------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of this statement.
22
INTERSTATE POWER COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2001 2000
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $21,009 $21,768
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation and amortization 28,097 26,060
Amortization of deferred energy efficiency expenditures 6,872 8,454
Deferred tax benefits and investment tax credits (2,261) (3,822)
Other 726 615
Other changes in assets and liabilities:
Accounts receivable 43,167 500
Production fuel (2,266) (7,410)
Gas stored underground 1,523 (2,436)
Accounts payable (6,438) 2,047
Accrued taxes 5,909 6,675
Benefit obligations and other 6,935 (3,061)
------------------- --------------------
Net cash flows from operating activities 103,273 49,390
------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends declared (16,280) (16,280)
Preferred stock dividends (1,871) (1,866)
Reductions in long-term debt (5,000) -
Net change in short-term borrowings (44,222) 8,199
Other (207) (564)
------------------- --------------------
Net cash flows used for financing activities (67,580) (10,511)
------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (33,310) (34,796)
Other (2,961) (6,169)
------------------- --------------------
Net cash flows used for investing activities (36,271) (40,965)
------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (578) (2,086)
------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 2,871 3,545
------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $2,293 $1,459
=================== ====================
- ---------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $9,514 $9,068
=================== ====================
Income taxes $6,198 $8,170
=================== ====================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23
INTERSTATE POWER COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included
herein have been prepared by Interstate Power Company (IPC),
without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission (SEC). Accordingly,
certain information and footnote disclosures normally included
in financial statements prepared in accordance with United States
generally accepted accounting principles have been condensed or omitted,
although management believes that the disclosures are adequate
to make the information presented not misleading. The consolidated
financial statements include IPC and its consolidated
subsidiary related to its sale of accounts receivable program. IPC is a
subsidiary of Alliant Energy Corporation.
In the opinion of management, all adjustments, which are
normal and recurring in nature, necessary for a fair
presentation of (a) the consolidated results of operations for
the nine months ended September 30, 2001 and 2000, (b) the
consolidated financial position at September 30, 2001, and (c)
the consolidated statements of cash flows for the nine months
ended September 30, 2001 and 2000, have been made. Because of
the seasonal nature of IPC's operations, results for the nine
months ended September 30, 2001 are not necessarily indicative
of results that may be expected for the year ending December
31, 2001.
2. IPC's comprehensive income, and the components of other
comprehensive income, net of taxes, for the nine months ended
September 30 were as follows (in thousands):
2001 2000
----------- -----------
Earnings available for common stock $19,138 $19,902
Other comprehensive income:
Unrealized gains (losses) on derivatives qualified as
hedges:
Unrealized holding gains arising during period
due to cumulative effect of a change in
accounting principle, net of tax -- 3
Other unrealized holding losses arising during
period, net of tax -- (3)
----------- -----------
Net unrealized gains on qualifying derivatives -- --
----------- -----------
Other comprehensive income -- --
----------- -----------
Comprehensive income $19,138 $19,902
=========== ===========
3. Certain financial information relating to IPC's significant
business segments is presented below. Intersegment revenues were not
material to IPC's operations.
Electric Gas Total
------------------------------------------
(in thousands)
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $233,156 $48,898 $282,054
Operating income 44,653 2,804 47,457
Earnings available for common stock 19,138
Nine Months Ended September 30, 2000
------------------------------------
Operating revenues $232,719 $28,419 $261,138
Operating income 47,186 592 47,778
Earnings available for common stock 19,902
24
4. The provisions for income taxes are based on the estimated
annual effective tax rate, which differs from the federal
statutory rate of 35% principally due to state income taxes,
tax credits, effects of utility rate making and certain
non-deductible expenses.
5. IPC's primary market risk exposures are associated with
commodity prices. IPC has risk management policies to monitor
and assist in controlling these market risks and uses
derivative instruments to manage some of the exposures.
During the nine months ended September 30, 2001, IPC held
derivative instruments that were not designated in hedge
relationships. During the nine months ended September 30,
2000, IPC held derivative instruments designated as cash flow
hedging instruments and other derivatives. The cash flow
hedging instruments were comprised of coal purchase and sales
contracts which were used to manage the price of anticipated
coal purchases and sales.
For the nine months ended September 30, 2000, there was no
gain or loss recognized in earnings representing the amount of
hedge ineffectiveness. IPC did not exclude any components of
the derivative instruments' gain or loss from the assessment
of hedge effectiveness and there were no reclasses into
earnings as a result of the discontinuance of hedges.
IPC's derivatives that have not been designated in hedge
relationships include electricity price collars, used to
manage energy costs during supply/demand imbalances. During
the nine months ended September 30, 2001, these
derivatives were recorded at their fair market value as
derivative assets, derivative liabilities and regulatory
assets on the Balance Sheet.
6. The merger of IPC with and into IES Utilities Inc. was approved by their
respective shareowners in April 2001 and by the SEC in October 2001.
The merger was effective January 1, 2002 and IESU changed its name to
Interstate Power and Light Company. The following illustrates the
impact of the merger if it had occurred as of January 1, 2000 (in
thousands):
For the Nine Months
Ended September 30,
2001 2000
------------ ----------
Operating revenues $1,042,250 $886,137
Earnings available for common stock 76,590 79,233
25
(b) Pro Forma Financial Information.
-------------------------------
Pro forma financial information required by this Item 7 is as
follows:
INTERSTATE POWER AND LIGHT COMPANY
UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
The unaudited pro forma combined financial statements for the surviving
company, Interstate Power and Light Company (IP&L), combine the historical
consolidated balance sheets and statements of income of IES Utilities Inc.
(IESU) and Interstate Power Company (IPC) as adjusted by various balance
sheet pro forma adjustments identified in Note 1. Pro forma income statement
adjustments were not required. We have included all material adjustments
known to us at this time which impact the reporting periods shown.
These pro forma combined financial statements set forth the restated combined
financial data that will be presented for future comparative financial data
for the merged company. These statements are prepared on the basis of
accounting for the merger as a common control merger and are based on the
assumptions set forth in the notes hereto.
The following information is not necessarily indicative of the financial
position or operating results that would have occurred had the merger been
consummated on the date, or at the beginning of the periods, for which the
merger is being given effect nor is it necessarily indicative of future
operating results or financial position.
26
INTERSTATE POWER AND LIGHT COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
September 30, 2001
(in thousands)
Pro Forma
Adjustments Pro Forma
IESU IPC (See Note 1) Combined
--------------------------------------------------------------------------
ASSETS
Property, plant and equipment:
Utility -
Plant in service -
Electric $2,294,947 $964,222 $- $3,259,169
Gas 228,993 80,876 - 309,869
Steam 59,554 - - 59,554
Common 163,903 15,571 - 179,474
--------------------------------------------------------------------------
2,747,397 1,060,669 - 3,808,066
Less - Accumulated depreciation 1,470,701 549,803 - 2,020,504
--------------------------------------------------------------------------
1,276,696 510,866 - 1,787,562
Construction work in progress 97,974 18,880 - 116,854
Leased nuclear fuel, net 40,732 - - 40,732
--------------------------------------------------------------------------
1,415,402 529,746 - 1,945,148
Other property, plant and equipment, net 5,894 179 - 6,073
--------------------------------------------------------------------------
1,421,296 529,925 - 1,951,221
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 7,916 2,293 - 10,209
Temporary cash investments with associated companies 56,777 - (23,996) 32,781
Accounts receivable:
Customer, net - 7,603 - 7,603
Associated companies 1,932 1,522 (168) 3,286
Other, net 6,028 2,079 - 8,107
Production fuel, at average cost 10,356 18,615 - 28,971
Materials and supplies, at average cost 24,612 5,882 - 30,494
Gas stored underground, at average cost 16,477 3,687 - 20,164
Regulatory assets 6,851 4,016 - 10,867
Prepayments and other 3,181 5,079 (3,153) 5,107
--------------------------------------------------------------------------
134,130 50,776 (27,317) 157,589
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 114,852 - - 114,852
Other 6,281 6,762 - 13,043
--------------------------------------------------------------------------
121,133 6,762 - 127,895
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 115,849 50,342 - 166,191
Deferred charges and other 15,496 14,995 - 30,491
--------------------------------------------------------------------------
131,345 65,337 - 196,682
--------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------------
Total assets $1,807,904 $652,800 ($27,317) $2,433,387
==========================================================================
- ----------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
27
INTERSTATE POWER AND LIGHT COMPANY
UNAUDITED PRO FORMA COMBINED BALANCE SHEET (Continued)
September 30, 2001
(in thousands)
Pro Forma
Adjustments Pro Forma
IESU IPC (See Note 1) Combined
-----------------------------------------------------------------
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock $33,427 $34,221 ($34,221) $33,427
Additional paid-in capital 279,042 108,644 34,221 421,907
Retained earnings 281,305 88,916 - 370,221
-----------------------------------------------------------------
Total common equity 593,774 231,781 - 825,555
Cumulative preferred stock, not mandatorily redeemable 18,320 10,819 - 29,139
Cumulative preferred stock, mandatorily redeemable - 24,810 - 24,810
Long-term debt (excluding current portion) 694,407 165,574 - 859,981
-----------------------------------------------------------------
1,306,501 432,984 - 1,739,485
-----------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 560 - - 560
Capital lease obligations 15,060 14 - 15,074
Notes payable to associated companies - 23,996 (23,996) -
Accounts payable 32,225 15,169 - 47,394
Accounts payable to associated companies 24,340 11,901 (168) 36,073
Accrued taxes 68,984 19,843 - 88,827
Other 35,662 10,261 (3,153) 42,770
-----------------------------------------------------------------
176,831 81,184 (27,317) 230,698
-----------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 212,684 92,186 - 304,870
Accumulated deferred investment tax credits 22,954 12,052 - 35,006
Environmental liabilities 27,597 13,856 - 41,453
Pension and other benefit obligations 24,596 9,336 - 33,932
Capital lease obligations 25,672 45 - 25,717
Other 11,069 11,157 - 22,226
-----------------------------------------------------------------
324,572 138,632 - 463,204
-----------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,807,904 $652,800 ($27,317) $2,433,387
=================================================================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Unaudited Pro Forma Combined Balance Sheet are an integral part of this statement.
28
INTERSTATE POWER AND LIGHT COMPANY
NOTES TO UNAUDITED PRO FORMA COMBINED BALANCE SHEET
AS OF SEPTEMBER 30, 2001
1. Pro Forma Adjustments
Merged
Company
Common Inter- Adjustment
Stock Company Clause Utility Total
Adjustment Transactions Balances Money Pool Pro Forma
(Note 1 (a)) (Note 1 (b)) (Note 1 (c)) (Note 1(d)) Adjustments
-------------- -------------- -------------- ------------- -------------
(in thousands)
ASSETS
Current assets:
Temporary cash investments with associated
companies $- $- $- ($23,996) ($23,996)
Accounts receivable from associated companies - (168) - - (168)
Prepayments and other - - (3,153) - (3,153)
-------------- -------------- -------------- ------------- -------------
Total current assets - (168) (3,153) (23,996) (27,317)
-------------- -------------- -------------- ------------- -------------
Total assets $- ($168) ($3,153) ($23,996) ($27,317)
============== ============== ============== ============= =============
CAPITALIZATION AND LIABILITIES
Capitalization:
Common equity:
Common stock ($34,221) $- $- $- ($34,221)
Additional paid-in capital 34,221 - - - 34,221
-------------- -------------- -------------- ------------- -------------
Total common equity - - - - -
-------------- -------------- -------------- ------------- -------------
Current liabilities:
Notes payable to associated companies - - - (23,996) (23,996)
Accounts payable to associated companies - (168) - - (168)
Other - - (3,153) - (3,153)
-------------- -------------- -------------- ------------- -------------
Total current liabilities - (168) (3,153) (23,996) (27,317)
-------------- -------------- -------------- ------------- -------------
Total capitalization and liabilities $- ($168) ($3,153) ($23,996) ($27,317)
============== ============== ============== ============= =============
(a) Merged Company Common Stock Adjustment
As provided in the Merger Agreement, all issued and outstanding shares of IPC
common stock will be dissolved upon consummation of the merger. The pro
forma adjustment to common equity restates the common stock account to equal
the $2.50 par value of IESU's 13,370,788 shares of common stock and
reclassifies the excess to additional paid-in capital.
(b) Intercompany Transactions
At September 30, 2001, intercompany receivables and payables between IESU and
IPC during the period presented were eliminated from the pro forma balance
sheet.
(c) Adjustment Clause Balances
An adjustment was needed to offset IPC's Adjustment Clause debit balance
against IESU's Adjustment Clause credit balance.
(d) Utility Money Pool
An adjustment was needed to offset IPC's borrowings from the money pool
against IESU's loans to the money pool.
29
INTERSTATE POWER AND LIGHT COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2001
(in thousands)
Pro Forma
IESU IPC Combined
---------------------------------------------------
Operating revenues:
Electric utility $557,975 $233,156 $791,131
Gas utility 177,743 48,898 226,641
Steam 24,478 - 24,478
---------------------------------------------------
760,196 282,054 1,042,250
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 106,709 43,455 150,164
Purchased power 107,441 45,352 152,793
Cost of gas sold 136,701 35,013 171,714
Other operation and maintenance 175,491 69,033 244,524
Depreciation and amortization 82,517 28,097 110,614
Taxes other than income taxes 33,121 13,647 46,768
---------------------------------------------------
641,980 234,597 876,577
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 118,216 47,457 165,673
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 39,080 12,232 51,312
Allowance for funds used during construction (4,372) (619) (4,991)
Miscellaneous, net (6,419) 412 (6,007)
---------------------------------------------------
28,289 12,025 40,314
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 89,927 35,432 125,359
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 31,789 14,423 46,212
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net income 58,138 21,009 79,147
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 686 1,871 2,557
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $57,452 $19,138 $76,590
===================================================
- -----------------------------------------------------------------------------------------------------------------
30
INTERSTATE POWER AND LIGHT COMPANY
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
FOR THE NINE MONTHS ENDED SEPTEMBER 30, 2000
(in thousands)
Pro Forma
IESU IPC Combined
---------------------------------------------------
Operating revenues:
Electric utility $496,934 $232,719 $729,653
Gas utility 107,767 28,419 136,186
Steam 20,298 - 20,298
---------------------------------------------------
624,999 261,138 886,137
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 88,440 41,851 130,291
Purchased power 59,464 50,107 109,571
Cost of gas sold 68,291 16,953 85,244
Other operation and maintenance 158,865 66,594 225,459
Depreciation and amortization 80,555 26,060 106,615
Taxes other than income taxes 35,562 11,795 47,357
---------------------------------------------------
491,177 213,360 704,537
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 133,822 47,778 181,600
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 38,208 11,996 50,204
Allowance for funds used during construction (1,827) (694) (2,521)
Miscellaneous, net (5,861) (1,202) (7,063)
---------------------------------------------------
30,520 10,100 40,620
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 103,302 37,678 140,980
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 43,285 15,910 59,195
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Net income 60,017 21,768 81,785
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 686 1,866 2,552
---------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $59,331 $19,902 $79,233
===================================================
- -----------------------------------------------------------------------------------------------------------------
31
(c) Exhibits.
--------
The exhibits incorporated by reference herein are set forth on the
attached Exhibit Index.
SIGNATURES
----------
Pursuant to the requirements of the Securities Exchange Act of
1934, Alliant Energy Corporation and Interstate Power and Light Company have
each duly caused this amendment to be signed on its behalf by the undersigned
hereunto duly authorized.
ALLIANT ENERGY CORPORATION
Date: February 20, 2002 By: /s/ John E. Kratchmer
----------------------
John E. Kratchmer
Corporate Controller and Chief Accounting Officer
INTERSTATE POWER AND LIGHT COMPANY
Date: February 20, 2002 By: /s/ John E. Kratchmer
----------------------
John E. Kratchmer
Corporate Controller and Chief Accounting Officer
32
ALLIANT ENERGY CORPORATION
INTERSTATE POWER AND LIGHT COMPANY
----------------------------------
Exhibit Index to Amendment No. 1 to Current Report on Form 8-K
Dated January 1, 2002
Exhibit
- -------
(2.1) Agreement and Plan of Merger, dated as of March 15, 2000, by
and between Interstate Power and Light Company (IPL)
(formerly IES Utilities Inc.) and IPC [Incorporated by
reference to Exhibit (2.1) to IPL's Registration Statement
on Form S-4 (Reg. No 333-53846), as amended]
(2.2) First Amendment to Agreement and Plan of Merger, dated as of
November 29, 2000, by and between IPL (formerly IES
Utilities Inc.) and IPC [Incorporated by reference to
Exhibit (2.2) to IPL's Registration Statement on Form S-4
(Reg. No 333-53846), as amended]
(3.1) Amendment to Amended and Restated Articles of Incorporation
of IPL (formerly IES Utilities Inc.) creating Class A
Preferred Stock [Incorporated by reference to Exhibit (3.1)
to Alliant Energy's and IPL's Current Report on Form 8-K,
dated January 1, 2002]
(3.2) Amendment to Amended and Restated Articles of Incorporation
of IPL (formerly IES Utilities Inc.) creating various series
of Class A Preferred Stock [Incorporated by reference to
Exhibit (3.2) to Alliant Energy's and IPL's Current Report
on Form 8-K, dated January 1, 2002]
(3.3) Amendment to Amended and Restated Articles of Incorporation
of IPL (formerly IES Utilities Inc.) changing corporate name
to Interstate Power and Light Company [Incorporated by
reference to Exhibit (3.3) to Alliant Energy's and IPL's
Current Report on Form 8-K, dated January 1, 2002]
(3.4) Amended and Restated Articles of Incorporation of IPL, as
amended [Incorporated by reference to Exhibit (3.4) to
Alliant Energy's and IPL's Current Report on Form 8-K, dated
January 1, 2002]
(4.1) The Original through the Nineteenth Supplemental Indentures
of IPL (successor-in-interest to Interstate Power Company)
to JPMorgan Chase Bank (formerly The Chase Manhattan Bank)
and James P. Freeman, as Trustees, dated January 1, 1948
securing First Mortgage Bonds [Incorporated by reference to
Exhibits 4(b) through 4(t) to IPC's Registration Statement
(Reg. No. 33-59352) dated March 11, 1993]
(4.2) Twentieth Supplemental Indenture of IPL
(successor-in-interest to Interstate Power Company) to
JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and
James P. Freeman, as Trustees, dated May 15, 1993
[Incorporated by reference to Exhibit 4(u) to IPC's
Registration Statement (Reg. No. 33-59352) dated March 11,
1993]
(4.3) Twenty-First Supplemental Indenture of IPL
(successor-in-interest to Interstate Power Company) to
JPMorgan Chase Bank (formerly The Chase Manhattan Bank) and
James P. Freeman, as Trustees, dated December 31, 2001
[Incorporated by reference to Exhibit (4.3) to Alliant
Energy's and IPL's Current Report on Form 8-K, dated January
1, 2002]
33