UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 2003
--------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
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)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)786-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
This combined Form 10-Q is separately filed by Alliant Energy Corporation,
Interstate Power and Light Company and Wisconsin Power and Light Company.
Information contained in the Form 10-Q relating to Interstate Power and Light
Company and Wisconsin Power and Light Company is filed by such registrant on
its own behalf. Each of Interstate Power and Light Company and Wisconsin
Power and Light Company makes no representation as to information relating to
registrants other than itself.
Indicate by check mark whether the registrants (1) have 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
registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days. Yes [ X ] No [ ]
Indicate by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).
Alliant Energy Corporation Yes [ X ] No [ ]
Interstate Power and Light Company Yes [ ] No [ X ]
Wisconsin Power and Light Company Yes [ ] No [ X ]
Number of shares outstanding of each class of common stock as of April 30, 2003:
Alliant Energy Corporation Common stock, $0.01 par value, 92,778,682 shares outstanding
Interstate Power and Light Company Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which
are owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Light Company Common stock, $5 par value, 13,236,601 shares outstanding (all of which are
owned beneficially and of record by Alliant Energy Corporation)
TABLE OF CONTENTS
Page
----
Part I. Financial Information 3
Item 1. Consolidated Financial Statements 3
Alliant Energy Corporation:
---------------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2003 and 2002 3
Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 4
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002 6
Notes to Consolidated Financial Statements 7
Interstate Power and Light Company:
-----------------------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2003 and 2002 17
Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 18
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002 20
Notes to Consolidated Financial Statements 21
Wisconsin Power and Light Company:
----------------------------------
Consolidated Statements of Income for the Three Months Ended
March 31, 2003 and 2002 22
Consolidated Balance Sheets as of March 31, 2003 and December 31, 2002 23
Consolidated Statements of Cash Flows for the Three Months Ended
March 31, 2003 and 2002 25
Notes to Consolidated Financial Statements 26
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 27
Item 3. Quantitative and Qualitative Disclosures About Market Risk 38
Item 4. Controls and Procedures 38
Part II. Other Information 38
Item 1. Legal Proceedings 38
Item 6. Exhibits and Reports on Form 8-K 39
Signatures 40
Certifications 41
1
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this combined Form 10-Q are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
Alliant Energy.............................. Alliant Energy Corporation
ARO......................................... Asset Retirement Obligation
ATC......................................... American Transmission Company LLC
Capstone.................................... Capstone Turbine Corporation
Cargill-Alliant............................. Cargill-Alliant, LLC
Corporate Services.......................... Alliant Energy Corporate Services, Inc.
DAEC........................................ Duane Arnold Energy Center
Dth......................................... Dekatherm
EBITDA...................................... Earnings Before Interest, Taxes, Depreciation and Amortization
EITF........................................ Emerging Issues Task Force
EITF Issue 02-3............................. Issues Related to Accounting for Contracts Involved in Energy
Trading and Risk Management Activities
EITF Issue 98-10............................ Accounting for Contracts Involved in Energy Trading and Risk
Management Activities
Enermetrix.................................. Enermetrix, Inc.
EPS......................................... Earnings Per Average Common Share
FASB........................................ Financial Accounting Standards Board
FIN......................................... FASB Interpretation No.
FIN 46...................................... Consolidation of Variable Interest Entities
GAAP........................................ Accounting Principles Generally Accepted in the U.S.
IP&L........................................ Interstate Power and Light Company
IRS......................................... Internal Revenue Service
IUB......................................... Iowa Utilities Board
Kewaunee.................................... Kewaunee Nuclear Power Plant
McLeod...................................... McLeodUSA Incorporated
MD&A........................................ Management's Discussion and Analysis of Financial Condition and
Results of Operations
MW.......................................... Megawatt
MWh......................................... Megawatt-hour
NG Energy................................... NG Energy Trading, LLC
PSCW........................................ Public Service Commission of Wisconsin
PUHCA....................................... Public Utility Holding Company Act of 1935
Resources................................... Alliant Energy Resources, Inc.
SEC......................................... Securities and Exchange Commission
SFAS........................................ Statement of Financial Accounting Standards
SFAS 115.................................... Accounting for Certain Investments in Debt and Equity Securities
SFAS 133.................................... Accounting for Derivative Instruments and Hedging Activities
SFAS 143.................................... Accounting for Asset Retirement Obligations
SmartEnergy................................. SmartEnergy, Inc.
South Beloit................................ South Beloit Water, Gas and Electric Company
Southern Hydro.............................. Southern Hydro Partnership
Synfuel..................................... Alliant Energy Synfuel LLC
TBD......................................... To Be Determined
U.S. ....................................... United States of America
Whiting..................................... Whiting Petroleum Corporation
WP&L........................................ Wisconsin Power and Light Company
2
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- -------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $443,025 $370,762
Gas utility 257,881 128,241
Non-regulated and other 194,884 72,433
-------------------- --------------------
895,790 571,436
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 72,415 62,610
Purchased power 129,315 72,337
Cost of utility gas sold 188,325 83,756
Other operation and maintenance 315,646 185,399
Depreciation and amortization 81,972 75,682
Taxes other than income taxes 26,076 27,788
-------------------- --------------------
813,749 507,572
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Operating income 82,041 63,864
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 55,514 44,487
Interest income from loans to discontinued operations, net (3,254) (3,366)
Equity (income) loss from unconsolidated investments 4,254 (3,213)
Allowance for funds used during construction (3,861) (1,654)
Preferred dividend requirements of subsidiaries 4,158 1,682
Impairment of available-for-sale securities of McLeodUSA Inc. - 21,174
Miscellaneous, net 2,415 9,604
-------------------- --------------------
59,226 68,714
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 22,815 (4,850)
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income taxes 8,176 2,941
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from continuing operations 14,639 (7,791)
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income (loss) from discontinued operations, net of tax (Note 8) (9,134) 17,534
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of changes in accounting principles, net of tax 5,505 9,743
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax (5,983) -
-------------------- --------------------
- -------------------------------------------------------------------------------------------------------------------------------
Net income (loss) ($478) $9,743
==================== ====================
- -------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding (diluted) 92,538 90,054
==================== ====================
- -------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted):
Income (loss) from continuing operations $0.16 ($0.09)
Income (loss) from discontinued operations (0.10) 0.20
Cumulative effect of changes in accounting principles (0.07) -
-------------------- --------------------
Net income (loss) ($0.01) $0.11
==================== ====================
- -------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $0.25 $0.50
==================== ====================
- -------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
ASSETS 2003 2002
- --------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility:
Electric plant in service $5,481,700 $5,295,381
Gas plant in service 620,639 613,122
Other plant in service 543,102 530,456
Accumulated depreciation (3,388,047) (3,573,407)
---------------- ----------------
Net plant 3,257,394 2,865,552
Construction work in progress 324,695 263,096
Other, net 67,088 68,340
---------------- ----------------
Total utility 3,649,177 3,196,988
---------------- ----------------
Non-regulated and other, net:
Non-regulated generation 209,882 156,699
International 170,309 171,179
Integrated Services 70,852 73,983
Investments 53,846 54,303
Corporate Services and other 72,371 75,282
---------------- ----------------
Total non-regulated and other 577,260 531,446
---------------- ----------------
4,226,437 3,728,434
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 65,735 62,859
Restricted cash 9,247 9,610
Accounts receivable:
Customer, less allowance for doubtful accounts of $4,439 and $4,364 114,984 69,413
Unbilled utility revenues 54,711 50,624
Other, less allowance for doubtful accounts of $948 and $845 68,646 60,107
Income tax refunds receivable 119,598 97,469
Production fuel, at average cost 53,866 63,126
Materials and supplies, at average cost 66,398 58,603
Gas stored underground, at average cost 7,467 62,797
Regulatory assets 70,171 46,076
Assets of discontinued operations (Note 8) 1,016,482 969,291
Other 60,001 74,314
---------------- ----------------
1,707,306 1,624,289
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------
Investments:
Investments in unconsolidated foreign entities 390,302 373,816
Nuclear decommissioning trust funds 348,861 344,892
Investment in ATC and other 222,166 217,992
---------------- ----------------
961,329 936,700
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 429,721 302,365
Deferred charges and other 389,450 409,607
---------------- ----------------
819,171 711,972
---------------- ----------------
- --------------------------------------------------------------------------------------------------------------
Total assets $7,714,243 $7,001,395
================ ================
- --------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
March 31, December 31,
CAPITALIZATION AND LIABILITIES 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $0.01 par value - authorized 200,000,000 shares;
outstanding 92,733,802 and 92,304,220 shares $927 $923
Additional paid-in capital 1,301,298 1,293,919
Retained earnings 734,676 758,187
Accumulated other comprehensive loss (181,930) (209,943)
Shares in deferred compensation trust - 251,410 and 239,467 shares
at an average cost of $28.21 and $28.80 per share (7,091) (6,896)
-------------------- --------------------
Total common equity 1,847,880 1,836,190
-------------------- --------------------
Cumulative preferred stock of subsidiaries, net 205,063 205,063
Long-term debt (excluding current portion) 2,659,878 2,609,803
-------------------- --------------------
4,712,821 4,651,056
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 56,435 46,591
Variable rate demand bonds 55,100 55,100
Commercial paper 167,000 195,500
Other short-term borrowings 261,837 113,721
Accounts payable 310,418 282,855
Accrued taxes 102,042 105,521
Liabilities of discontinued operations (Note 8) 161,073 138,251
Other 210,487 184,771
-------------------- --------------------
1,324,392 1,122,310
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 639,061 630,625
Accumulated deferred investment tax credits 53,093 54,375
Asset retirement obligations (Note 11) 440,856 -
Pension and other benefit obligations 189,842 181,010
Environmental liabilities 45,753 48,730
Other 257,973 269,864
-------------------- --------------------
1,626,578 1,184,604
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Minority interest 50,452 43,425
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $7,714,243 $7,001,395
==================== ====================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- ---------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income (loss) ($478) $9,743
Adjustments to reconcile net income (loss) to net cash flows from operating activities:
(Income) loss from discontinued operations, net of tax 9,134 (17,534)
Depreciation and amortization 81,972 75,682
Other amortizations 16,510 10,923
Deferred tax expense (benefit) and investment tax (credits) 10,830 (19,025)
Equity loss (income) from unconsolidated investments, net 4,254 (3,213)
Distributions from equity method investments 2,969 4,227
Non-cash valuation charges 266 37,286
Cumulative effect of changes in accounting principles, net of tax 5,983 -
Other (9,288) (7,749)
Other changes in assets and liabilities:
Accounts receivable (58,197) 16,652
Income tax refunds receivable (22,129) (8,774)
Gas stored underground 55,330 29,559
Accounts payable 44,791 (33,855)
Accrued taxes (3,479) 15,112
Other 28,175 36,939
------------------ -----------------
Net cash flows from operating activities 166,643 145,973
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (23,033) (44,851)
Proceeds from issuance of common stock 6,854 14,285
Net change in Resources' credit facility - 85,115
Proceeds from issuance of other long-term debt 60,000 -
Reductions in other long-term debt (670) (13,530)
Net change in commercial paper and other short-term borrowings 119,616 (23,768)
Net change in loans to discontinued operations (17,501) (25,672)
Other (14,629) (565)
------------------ -----------------
Net cash flows from (used for) financing activities 130,637 (8,986)
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Non-regulated businesses (180,286) (77,875)
Regulated domestic utilities (103,432) (66,832)
Corporate Services and other (1,007) (10,382)
Nuclear decommissioning trust funds (3,455) (15,437)
Other (6,224) 13,246
------------------ -----------------
Net cash flows used for investing activities (294,404) (157,280)
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 2,876 (20,293)
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 62,859 67,886
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $65,735 $47,593
================== =================
- ---------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid (received) during the period for:
Interest $40,167 $34,939
================== =================
Income taxes, net of refunds ($3,517) $1,716
================== =================
Noncash investing and financing activities:
Capital lease obligations incurred $2,131 $448
================== =================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein have been
prepared by Alliant Energy, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with GAAP 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
Alliant Energy and its consolidated subsidiaries (including IP&L, WP&L,
Resources and Corporate Services). These financial statements should be
read in conjunction with the financial statements and the notes thereto
included in Alliant Energy's, IP&L's and WP&L's latest Annual Report on
Form 10-K.
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 three months ended March 31,
2003 and 2002, (b) the consolidated financial position at March 31, 2003
and Dec. 31, 2002, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2003 and 2002, have been made. Because
of the seasonal nature of Alliant Energy's utility operations, results for
the three months ended March 31, 2003 are not necessarily indicative of
results that may be expected for the year ending Dec. 31, 2003. Certain
prior period amounts have been reclassified on a basis consistent with the
current period presentation.
2. Alliant Energy's comprehensive income, and the components of other
comprehensive income, net of taxes, for the three months ended March 31
were as follows (in thousands):
2003 2002
---------------- ---------------
Net income (loss) ($478) $9,743
Unrealized holding losses on securities, net of tax (957) (5,350)
Less: reclassification adjustment for losses included
in net income (loss), net of tax (1) -- (16,185)
---------------- ---------------
Net unrealized gains (losses) on securities (957) 10,835
---------------- ---------------
Foreign currency translation adjustments, net of tax 28,232 6,872
---------------- ---------------
Unrealized holding gains (losses) on derivatives, net of tax (5,274) 565
Less: reclassification adjustment for gains (losses) included
in net income (loss), net of tax (6,012) 4,057
---------------- ---------------
Net unrealized gains (losses) on qualifying derivatives 738 (3,492)
---------------- ---------------
Other comprehensive income 28,013 14,215
---------------- ---------------
Comprehensive income $27,535 $23,958
================ ===============
(1) The 2002 earnings include after-tax losses of $12.9 million and $3.2
million related to asset valuation charges for Alliant Energy's McLeod
(available-for-sale securities) and Capstone investments, respectively.
7
3. Certain financial information relating to Alliant Energy's significant
business segments is presented below. Intersegment revenues were not
material to Alliant Energy's operations.
Regulated Domestic Utilities Non-regulated Businesses Alliant
---------------------------------------- --------------------------------- Energy
Electric Gas Other Total International Other Total Other Consolidated
--------------------------------------------------------------------------------------------------
(in thousands)
Three Months Ended March 31, 2003
- ---------------------------------
Operating revenues $443,025 $257,881 $10,859 $711,765 $28,471 $157,082 $185,553 ($1,528) $895,790
Operating income 36,754 35,054 1,450 73,258 5,783 2,659 8,442 341 82,041
Income (loss) from continuing
operations 30,971 (8,386) (2,285) (10,671) (5,661) 14,639
Income (loss) from discontinued
operations, net of tax -- 4,366 (13,500) (9,134) -- (9,134)
Cumulative effect of changes in
accounting principles, net of tax -- -- (5,983) (5,983) -- (5,983)
Net income (loss) 30,971 (4,020) (21,768) (25,788) (5,661) (478)
Three Months Ended March 31, 2002
- ---------------------------------
Operating revenues $370,762 $128,241 $9,340 $508,343 $25,731 $38,731 $64,462 ($1,369) $571,436
Operating income (loss) 46,407 13,428 2,459 62,294 2,450 (696) 1,754 (184) 63,864
Income (loss) from continuing
operations 26,977 (8,194) (24,441) (32,635) (2,133) (7,791)
Income from discontinued
operations, net of tax -- 16,685 849 17,534 -- 17,534
Net income (loss) 26,977 8,491 (23,592) (15,101) (2,133) 9,743
4. The provisions for income taxes for earnings from continuing operations
are based on the estimated annual effective tax rate, which differs from
the federal statutory rate of 35% principally due to state income taxes,
the impact of foreign income and associated taxes, tax credits, effects of
utility rate making and certain non-deductible expenses.
5. Alliant Energy utilizes derivative instruments to manage its exposures to
various market risks as described in Alliant Energy's, IP&L's and WP&L's
Annual Report on Form 10-K for the year ended Dec. 31, 2002. The
following information supplements, and should be read in conjunction with,
Note 10(a) in Alliant Energy's "Notes to Consolidated Financial
Statements" in the Form 10-K for the year ended Dec. 31, 2002.
For the three months ended March 31, 2003, no income or loss was
recognized in connection with hedge ineffectiveness in accordance with
SFAS 133. At March 31, 2003, the maximum length of time over which
Alliant Energy hedged its exposure to the variability in future cash flows
for forecasted transactions was 15 months (four months for discontinued
operations) and Alliant Energy estimates that losses of $4.3 million
(including losses of $3.9 million for discontinued operations) will be
reclassified from accumulated other comprehensive loss into earnings
within the twelve months between April 1, 2003 and March 31, 2004 as the
hedged transactions affect earnings.
6. A reconciliation of the weighted average common shares outstanding used in
the basic and diluted earnings per share calculation for the three months
ended March 31 was as follows:
2003 2002
------------- --------------
Weighted average common shares outstanding:
Basic earnings per share calculation 92,511,062 89,964,212
Effect of dilutive securities 27,312 89,812
------------- --------------
Diluted earnings per share calculation 92,538,374 90,054,024
============= ==============
8
Options to purchase shares of common stock were excluded from the
calculation of diluted earnings per share as the exercise prices were
greater than the average market price for the three months ended March 31
as follows:
2003 2002
------------- --------------
Options to purchase shares of common stock 4,799,336 1,831,088
Average exercise price $26.95 $30.86
The effect on net income (loss) and EPS if Alliant Energy had applied the
fair value recognition provisions of SFAS 123, "Accounting for Stock-Based
Compensation," to the stock options issued under its two stock-based
incentive compensation plans for the three months ended March 31 was as
follows (in thousands):
2003 2002
------------- -------------
Net income (loss), as reported ($478) $9,743
Less: stock-based compensation expense, net of tax 891 644
------------- -------------
Pro forma net income (loss) ($1,369) $9,099
============= =============
EPS (basic and diluted):
As reported ($0.01) $0.11
Pro forma ($0.01) $0.10
7. On Jan. 31, 2002, McLeod filed a pre-negotiated plan of reorganization in a
Chapter 11 bankruptcy proceeding and the trading of McLeod's common stock
was suspended by Nasdaq. Consequently, Alliant Energy discontinued
accounting for its investment in McLeod under the provisions of SFAS 115
and reduced the cost basis of its investments to the last quoted market
price on Jan. 30, 2002. In June 2002, Alliant Energy received from McLeod
under its plan of reorganization an initial distribution of approximately
3.3 million shares of new common stock and classified 0.9 million and 2.4
million shares as trading and available-for-sale securities,
respectively. With the receipt of the new McLeod common shares and the
resumption of trading on Nasdaq, Alliant Energy resumed accounting for its
McLeod investments under SFAS 115 and adjusted its cost basis to the
quoted market price on the date the shares were received. As a result of
these events, Alliant Energy recognized pre-tax impairment charges in 2002
for available-for-sale securities totaling $27.2 million ($21.2 million
recognized in the first quarter of 2002 and $6.0 million recognized in the
second quarter of 2002).
8. Alliant Energy announced in November 2002 its commitment to pursue
the sale of, or other exit strategies for, certain non-regulated
businesses in 2003. Alliant Energy has applied the provisions of SFAS
144, "Accounting for the Impairment or Disposal of Long-Lived Assets," to
certain of its assets which were held for sale. SFAS 144 requires that a
long-lived asset classified as held for sale be measured at the lower of
its carrying amount or fair value, less costs to sell, and to cease
depreciation, depletion and amortization. At Dec. 31, 2002, Alliant
Energy's oil and gas (Whiting), Australian (including Southern Hydro) and
affordable housing businesses were classified as held for sale. In
January 2003, Alliant Energy also decided to sell SmartEnergy and, as a
result, at March 31, 2003, such business has also been classified as held
for sale. Alliant Energy completed the sale of its Australian business in
late April. Alliant Energy previously indicated its intent to complete
the remaining dispositions by year-end. The operating results for these
businesses have been separately classified and reported as discontinued
operations in Alliant Energy's Consolidated Financial Statements. A
summary of the components of discontinued operations in Alliant Energy's
Consolidated Statements of Income for the three months ended March 31 was
as follows (in thousands):
2003 2002
------------------ ------------------
Operating revenues $66,909 $40,133
Operating expenses 41,987 41,564
Interest expense (income) and other 31,493 (21,651)
------------------ ------------------
Income (loss) before income taxes (6,571) 20,220
Income taxes 2,563 2,686
------------------ ------------------
Income (loss) from discontinued operations, net of tax ($9,134) $17,534
================== ==================
9
"Interest expense (income) and other" in the first quarter of 2003
included pre-tax valuation adjustments of approximately $35 million to
reflect updated estimates of the market value, less selling costs, of the
$1 billion of assets classified as assets held for sale. Alliant Energy's
Australian business enters into electricity derivative contracts that have
not been designated as hedges (as defined by SFAS 133) to manage the
electricity commodity price risk associated with anticipated sales into
the spot market. Approximately $15 million and $28 million of pre-tax
income included in "Interest expense (income) and other" in the first
quarters of 2003 and 2002, respectively, in the previous table was related
to the change in the fair value of these electricity derivative
contracts.
A summary of the components of assets and liabilities of discontinued
operations on Alliant Energy's Consolidated Balance Sheets was as follows
(in thousands):
March 31, 2003 Dec. 31, 2002
------------------ -----------------
Assets of discontinued operations:
Property, plant and equipment, net $642,723 $644,910
Current assets 143,426 113,866
Investments 6,741 6,824
Deferred charges and other 223,592 203,691
------------------ -----------------
Total assets of discontinued operations $1,016,482 $969,291
================== =================
Liabilities of discontinued operations:
Current liabilities $78,628 $73,343
Other long-term liabilities and deferred credits 82,344 64,784
Minority interest 101 124
------------------ -----------------
Total liabilities of discontinued operations 161,073 138,251
------------------ -----------------
Net assets of discontinued operations $855,409 $831,040
================== =================
A summary of the components of cash flows for discontinued operations for
the three months ended March 31 was as follows (in thousands):
2003 2002
---------------- ---------------
Net cash flows from operating activities $9,932 $9,402
Net cash flows from financing activities 8,987 53,580
Net cash flows used for investing activities (2,554) (53,356)
---------------- ---------------
Net increase in cash and temporary cash investments 16,365 9,626
Cash and temporary cash investments at beginning of period 16,043 5,775
---------------- ---------------
Cash and temporary cash investments at end of period $32,408 $15,401
================ ===============
Supplemental cash flows information:
Cash paid (received) during the period for:
Interest $7,071 $1,189
================ ===============
Income taxes, net of refunds $2,498 ($22)
================ ===============
9. Alliant Energy is in the process of evaluating the potential impacts of
FIN 46 with respect to its off-balance sheet entities that it utilizes for
its synthetic lease financings and utility accounts receivable sales
program. As of March 31, 2003 and Dec. 31, 2002, Alliant Energy's utility
subsidiaries had sold $227 million ($91 million and $136 million for IP&L
and WP&L, respectively) and $202 million ($86 million and $116 million for
IP&L and WP&L, respectively) of accounts receivables, respectively.
10
10. In accordance with the provisions of FIN 45, "Guarantor's Accounting and
Disclosure Requirements for Guarantees, Including Indirect Guarantees of
Indebtedness to Others," at March 31, 2003 and Dec. 31, 2002, Alliant
Energy had a guarantee outstanding to support an unconsolidated affiliate
and third-party financing arrangement of approximately $4 million that is
not included on Alliant Energy's Consolidated Balance Sheets. The
guarantee expires in December 2007, the maturity date of the underlying
debt. Alliant Energy has also guaranteed the residual value of its
synthetic leases totaling $76 million in the aggregate that is not included
on Alliant Energy's Consolidated Balance Sheets. The guarantees extend
through the maturity of each respective underlying lease, the latest of
which is April 2015.
11. Alliant Energy adopted SFAS 143 on Jan. 1, 2003, which provides
accounting and disclosure requirements for retirement obligations
associated with long-lived assets (AROs). SFAS 143 requires that
when an asset is placed in service the present value of retirement
costs for which Alliant Energy has a legal obligation must be
recorded as liabilities with an equivalent amount added to the asset
cost. The liability is accreted to its present value each period and the
capitalized cost is depreciated over the useful life of the related
asset. Upon settlement of the liability, an entity settles the obligation
for its recorded amount or incurs a gain or loss.
The scope of SFAS 143 as it relates to Alliant Energy primarily includes
decommissioning costs for DAEC and Kewaunee. It also applies to a smaller
extent to several other regulated and non-regulated assets including, but
not limited to, active ash landfills, water intake facilities, underground
storage tanks, groundwater wells, transmission and distribution equipment,
easements, leases and the dismantlement of certain hydro facilities.
Other than DAEC and Kewaunee, Alliant Energy's current AROs are not
significant.
Alliant Energy recorded the following balance sheet entries in the first
quarter of 2003 related to SFAS 143 (in millions):
Adoption on Accretion and
Jan. 1, 2003 Depreciation Total
-------------- ---------------- -------------
Assets:
Electric plant in service - IP&L $34 $-- $34
Electric plant in service - WP&L 24 -- 24
Utility accumulated depreciation - IP&L 100 -- 100
Utility accumulated depreciation - WP&L 148 -- 148
Other assets - regulatory assets - IP&L 124 5 129
Other assets - regulatory assets - WP&L 3 3 6
-------------
Total assets $441
=============
Liabilities:
AROs - IP&L $258 $5 $263
AROs - WP&L 175 3 178
-------------
Total liabilities $441
=============
As it relates to regulated operations, Alliant Energy believes it is
probable that any differences between expenses under SFAS 143 and expenses
recovered currently in rates will be recoverable in future rates, and is
deferring such expenses as a regulatory asset.
Upon adoption of SFAS 143, Alliant Energy also recognized a $3.9 million
impact as a cumulative effect of a change in accounting principle at its
oil and gas business (which is reported as an asset held for sale and a
discontinued operation at March 31, 2003).
IP&L and WP&L have previously recognized removal costs as a component of
depreciation expense and accumulated depreciation for other non-nuclear
assets that do not have associated legal retirement obligations with
regulatory rate recovery. As of Jan. 1, 2003, IP&L and WP&L estimate that
they have approximately $275 million and $140 million, respectively, of
such regulatory liabilities recorded in "Accumulated depreciation" on
their Consolidated Balance Sheets.
11
If SFAS 143 had been adopted as of Jan. 1, 2000, IP&L and WP&L would have
recorded ARO SFAS 143 liabilities of $258 million and $175 million at Dec.
31, 2002, $241 million and $161 million at Dec. 31, 2001 and $225 million
and $147 million at Dec. 31, 2000, respectively.
12. Alliant Energy's natural gas trading business, NG Energy, is impacted by
EITF Issue 02-3, which requires that all sales of energy and the related
cost of energy purchased under contracts that meet the definition of
energy trading contracts and that are derivatives under SFAS 133, must be
reflected on a net basis in the income statement for all periods
presented. Under the guidance of EITF Issue 98-10, Alliant Energy had
reported its energy trading contracts and related gas in storage at fair
market value, and reported related revenues and expenses on a gross basis
in the income statement. EITF Issue 02-3 rescinded EITF Issue 98-10 on a
prospective basis. Accordingly, any new contracts entered into after Oct.
25, 2002 have been reported on a historical cost basis rather than at fair
market value unless the contract meets the definition of a derivative
under SFAS 133. Alliant Energy adopted EITF Issue 02-3 on Jan. 1, 2003
for all contracts that were in place and storage gas acquired prior to
Oct. 25, 2002, and reclassified prior period trading contracts on a net
basis in the income statement. The impact of transitioning from reporting
inventory and existing contracts that were not derivatives under SFAS 133
at fair value to historical cost resulted in a cumulative effect charge of
$2.1 million (net of a deferred tax benefit of $1.4 million) in the first
quarter of 2003.
13. In April 2003, Alliant Energy completed the sale of its Australian
assets (including Southern Hydro) to New Zealand-based Meridian Energy
Limited. The sale price was approximately $365 million. This sale
provided for the repayment of approximately $150 million in debt in
Australia. On an after-tax basis, the sale resulted in net cash proceeds
to Alliant Energy of approximately $170 million and provides Alliant
Energy with approximately $320 million available for debt reduction.
14. Alliant Energy has fully and unconditionally guaranteed the payment of
principal and interest on various debt securities issued by Resources and,
as a result, is required to present condensed consolidating financial
statements. No Alliant Energy subsidiaries are guarantors of Resources'
debt securities. Alliant Energy's condensed consolidating financial
statements are as follows:
12
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Three Months Ended March 31, 2003 and 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------
Three Months Ended March 31, 2003 (in thousands)
- ---------------------------------
Operating revenues:
Electric utility $- $- $443,025 $- $443,025
Gas utility - - 257,881 - 257,881
Non-regulated and other - 185,553 98,186 (88,855) 194,884
------------------------------------------------------------------
- 185,553 799,092 (88,855) 895,790
------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 72,431 (16) 72,415
Purchased power - - 129,315 - 129,315
Cost of utility gas sold - - 188,325 - 188,325
Other operation and maintenance 312 167,263 224,932 (76,861) 315,646
Depreciation and amortization 8 8,119 77,710 (3,865) 81,972
Taxes other than income taxes 3 1,729 26,274 (1,930) 26,076
------------------------------------------------------------------
323 177,111 718,987 (82,672) 813,749
------------------------------------------------------------------
Operating income (loss) (323) 8,442 80,105 (6,183) 82,041
------------------------------------------------------------------
Interest expense and other:
Interest expense 3,900 26,850 27,528 (2,764) 55,514
Interest income from loans to discontinued operations, net - (3,254) - - (3,254)
Equity (income) loss from unconsolidated investments - 8,475 (4,221) - 4,254
Allowance for funds used during construction - - (3,908) 47 (3,861)
Preferred dividend requirements of subsidiaries - - 4,158 - 4,158
Miscellaneous, net (7,910) 2,924 5,515 1,886 2,415
------------------------------------------------------------------
(4,010) 34,995 29,072 (831) 59,226
------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 3,687 (26,553) 51,033 (5,352) 22,815
------------------------------------------------------------------
Income tax expense (benefit) 4,165 (15,882) 20,032 (139) 8,176
------------------------------------------------------------------
Income (loss) from continuing operations (478) (10,671) 31,001 (5,213) 14,639
------------------------------------------------------------------
Loss from discontinued operations, net of tax - (9,134) - - (9,134)
------------------------------------------------------------------
Income (loss) before cumulative effect of changes in
accounting principles, net of tax (478) (19,805) 31,001 (5,213) 5,505
------------------------------------------------------------------
Cumulative effect of changes in accounting principles, net of tax - (5,983) - - (5,983)
------------------------------------------------------------------
Net income (loss) ($478) ($25,788) $31,001 ($5,213) ($478)
==================================================================
Three Months Ended March 31, 2002
- ---------------------------------
Operating revenues:
Electric utility $- $- $370,762 $- $370,762
Gas utility - - 128,241 - 128,241
Non-regulated and other - 64,462 76,299 (68,328) 72,433
------------------------------------------------------------------
- 64,462 575,302 (68,328) 571,436
------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 62,610 - 62,610
Purchased power - - 72,337 - 72,337
Cost of utility gas sold - - 83,756 - 83,756
Other operation and maintenance 508 54,820 196,274 (66,203) 185,399
Depreciation and amortization - 5,966 69,716 - 75,682
Taxes other than income taxes - 1,922 27,954 (2,088) 27,788
------------------------------------------------------------------
508 62,708 512,647 (68,291) 507,572
------------------------------------------------------------------
Operating income (loss) (508) 1,754 62,655 (37) 63,864
------------------------------------------------------------------
Interest expense and other:
Interest expense 758 17,706 27,543 (1,520) 44,487
Interest income from loans to discontinued operations, net - (3,366) - - (3,366)
Equity (income) loss from unconsolidated investments 229 1,052 (4,494) - (3,213)
Allowance for funds used during construction - - (1,654) - (1,654)
Preferred dividend requirements of subsidiaries - - 1,682 - 1,682
Impairment of available-for-sale securities of McLeodUSA Inc. - 21,174 - - 21,174
Miscellaneous, net (12,758) 16,068 (7,272) 13,566 9,604
------------------------------------------------------------------
(11,771) 52,634 15,805 12,046 68,714
------------------------------------------------------------------
Income (loss) from continuing operations before income taxes 11,263 (50,880) 46,850 (12,083) (4,850)
------------------------------------------------------------------
Income tax expense (benefit) 1,520 (18,394) 19,852 (37) 2,941
------------------------------------------------------------------
Income (loss) from continuing operations 9,743 (32,486) 26,998 (12,046) (7,791)
------------------------------------------------------------------
Income from discontinued operations, net of tax - 17,534 - - 17,534
------------------------------------------------------------------
Net income (loss) $9,743 ($14,952) $26,998 ($12,046) $9,743
==================================================================
13
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of March 31, 2003
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
ASSETS Company Resources Subsidiaries Adjustments Energy
----------------------------------------------------------------------------------
Property, plant and equipment: (in thousands)
Utility:
Electric plant in service $- $- $5,481,700 $- $5,481,700
Other plant in service - - 1,163,741 - 1,163,741
Accumulated depreciation - - (3,388,047) - (3,388,047)
Construction work in progress - - 324,695 - 324,695
Other, net - - 67,088 - 67,088
----------------------------------------------------------------------------------
Total utility - - 3,649,177 - 3,649,177
----------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 209,882 - - 209,882
Other - 294,870 72,619 (111) 367,378
----------------------------------------------------------------------------------
Total non-regulated and other - 504,752 72,619 (111) 577,260
----------------------------------------------------------------------------------
- 504,752 3,721,796 (111) 4,226,437
----------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 2,322 57,883 5,530 - 65,735
Accounts receivable, net 6,838 97,494 324,317 (190,308) 238,341
Gas stored underground, at average cost - 568 6,899 - 7,467
Regulatory assets - - 70,171 - 70,171
Assets of discontinued operations - 1,016,482 - - 1,016,482
Other 326,774 137,740 148,589 (303,993) 309,110
----------------------------------------------------------------------------------
335,934 1,310,167 555,506 (494,301) 1,707,306
----------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,813,469 - 10 (1,813,479) -
Other 11,823 449,209 500,297 - 961,329
----------------------------------------------------------------------------------
1,825,292 449,209 500,307 (1,813,479) 961,329
----------------------------------------------------------------------------------
Other assets:
Regulatory assets - - 429,721 - 429,721
Deferred charges and other 414 129,857 290,471 (31,292) 389,450
----------------------------------------------------------------------------------
414 129,857 720,192 (31,292) 819,171
----------------------------------------------------------------------------------
Total assets $2,161,640 $2,393,985 $5,497,801 ($2,339,183) $7,714,243
==================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $1,302,225 $232,743 $906,203 ($1,138,946) $1,302,225
Retained earnings 734,676 89,051 767,517 (856,568) 734,676
Accumulated other comprehensive loss (181,930) (138,618) (43,312) 181,930 (181,930)
Shares in deferred compensation trust (7,091) - - - (7,091)
----------------------------------------------------------------------------------
Total common equity 1,847,880 183,176 1,630,408 (1,813,584) 1,847,880
----------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063
Long-term debt (excluding current portion) 24,000 1,340,172 1,295,706 - 2,659,878
----------------------------------------------------------------------------------
1,871,880 1,523,348 3,131,177 (1,813,584) 4,712,821
----------------------------------------------------------------------------------
Current liabilities:
Other short-term borrowings 235,000 259,523 71,307 (303,993) 261,837
Accrued taxes 12,362 20,663 69,017 - 102,042
Liabilities of discontinued operations - 161,073 - - 161,073
Other 38,912 197,329 753,507 (190,308) 799,440
----------------------------------------------------------------------------------
286,274 638,588 893,831 (494,301) 1,324,392
----------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Asset retirement obligations - - 440,856 - 440,856
Other 3,486 181,597 1,031,937 (31,298) 1,185,722
----------------------------------------------------------------------------------
3,486 181,597 1,472,793 (31,298) 1,626,578
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Minority interest - 50,452 - - 50,452
----------------------------------------------------------------------------------
Total capitalization and liabilities $2,161,640 $2,393,985 $5,497,801 ($2,339,183) $7,714,243
==================================================================================
14
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2002
Alliant Energy Other Consolidated
ASSETS Parent Alliant Energy Consolidating Alliant
Property, plant and equipment: Company Resources Subsidiaries Adjustments Energy
----------------------------------------------------------------------------------
Utility: (in thousands)
Electric plant in service $- $- $5,295,381 $- $5,295,381
Other plant in service - - 1,143,578 - 1,143,578
Accumulated depreciation - - (3,573,407) - (3,573,407)
Construction work in progress - - 263,096 - 263,096
Other, net - - 68,340 - 68,340
----------------------------------------------------------------------------------
Total utility - - 3,196,988 - 3,196,988
----------------------------------------------------------------------------------
Non-regulated and other, net:
Non-regulated generation - 156,699 - - 156,699
Other - 299,355 75,503 (111) 374,747
----------------------------------------------------------------------------------
Total non-regulated and other - 456,054 75,503 (111) 531,446
----------------------------------------------------------------------------------
- 456,054 3,272,491 (111) 3,728,434
----------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 4 47,236 15,619 - 62,859
Accounts receivable, net 9,034 78,590 284,151 (191,631) 180,144
Gas stored underground, at average cost - 26,668 36,129 - 62,797
Regulatory assets - - 46,076 - 46,076
Assets of discontinued operations - 969,291 - - 969,291
Other 263,598 124,594 159,694 (244,764) 303,122
----------------------------------------------------------------------------------
272,636 1,246,379 541,669 (436,395) 1,624,289
----------------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,817,341 - 10 (1,817,351) -
Other 11,660 430,173 494,867 - 936,700
----------------------------------------------------------------------------------
1,829,001 430,173 494,877 (1,817,351) 936,700
----------------------------------------------------------------------------------
Other assets:
Regulatory assets - - 302,365 - 302,365
Deferred charges and other - 127,834 309,356 (27,583) 409,607
----------------------------------------------------------------------------------
- 127,834 611,721 (27,583) 711,972
----------------------------------------------------------------------------------
Total assets $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
==================================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $1,294,842 $232,743 $906,261 ($1,139,004) $1,294,842
Retained earnings 758,187 114,838 773,556 (888,394) 758,187
Accumulated other comprehensive loss (209,943) (166,947) (42,996) 209,943 (209,943)
Shares in deferred compensation trust (6,896) - - - (6,896)
----------------------------------------------------------------------------------
Total common equity 1,836,190 180,634 1,636,821 (1,817,455) 1,836,190
----------------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 205,063 - 205,063
Long-term debt (excluding current portion) 24,000 1,290,205 1,295,598 - 2,609,803
----------------------------------------------------------------------------------
1,860,190 1,470,839 3,137,482 (1,817,455) 4,651,056
----------------------------------------------------------------------------------
Current liabilities:
Other short-term borrowings 85,000 194,482 79,003 (244,764) 113,721
Accrued taxes 9,743 13,655 82,123 - 105,521
Liabilities of discontinued operations - 138,251 - - 138,251
Other 143,453 218,443 594,552 (191,631) 764,817
----------------------------------------------------------------------------------
238,196 564,831 755,678 (436,395) 1,122,310
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Other long-term liabilities and deferred credits 3,251 181,345 1,027,598 (27,590) 1,184,604
----------------------------------------------------------------------------------
----------------------------------------------------------------------------------
Minority interest - 43,425 - - 43,425
----------------------------------------------------------------------------------
Total capitalization and liabilities $2,101,637 $2,260,440 $4,920,758 ($2,281,440) $7,001,395
==================================================================================
15
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Three Months Ended March 31, 2003 and 2002
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------
Three Months Ended March 31, 2003 (in thousands)
- ---------------------------------
Net cash flows from (used for) operating activities ($1,864) ($20,575) $198,454 ($9,372) $166,643
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (23,033) - (37,039) 37,039 (23,033)
Proceeds from issuance of other long-term debt - 60,000 - - 60,000
Net change in commercial paper and other short-term borrowings (9,729) 65,040 64,305 - 119,616
Net change in loans to discontinued operations - (17,501) - - (17,501)
Other 5,143 (3,688) (14,118) 4,218 (8,445)
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (27,619) 103,851 13,148 41,257 130,637
-----------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Non-regulated businesses - (180,286) - - (180,286)
Regulated domestic utilities - - (212,279) 108,847 (103,432)
Corporate Services and other - - (1,007) - (1,007)
Other 31,801 107,657 (8,405) (140,732) (9,679)
-----------------------------------------------------------------
Net cash flows from (used for) investing activities 31,801 (72,629) (221,691) (31,885) (294,404)
-----------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 2,318 10,647 (10,089) - 2,876
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 4 47,236 15,619 - 62,859
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $2,322 $57,883 $5,530 $- $65,735
=================================================================
Supplemental cash flows information:
Cash paid (received) during the period for:
Interest $3,223 $9,621 $27,323 $- $40,167
=================================================================
Income taxes, net of refunds ($3,902) ($7,278) $7,663 $- ($3,517)
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $2,131 $- $2,131
=================================================================
Three Months Ended March 31, 2002
- ---------------------------------
Net cash flows from (used for) operating activities $11,687 ($710) $148,724 ($13,728) $145,973
-----------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (44,851) - (34,673) 34,673 (44,851)
Net change in Resources' credit facility - 85,115 - - 85,115
Net change in commercial paper and other short-term borrowings (7,593) (2,603) (15,511) 1,939 (23,768)
Net change in loans to discontinued operations - (25,672) - - (25,672)
Other 14,329 (13,731) (1,582) 1,174 190
-----------------------------------------------------------------
Net cash flows from (used for) financing activities (38,115) 43,109 (51,766) 37,786 (8,986)
-----------------------------------------------------------------
Cash flows from (used for) investing activities:
Construction and acquisition expenditures:
Non-regulated businesses - (77,875) - - (77,875)
Regulated domestic utilities - - (66,832) - (66,832)
Corporate Services and other - - (10,382) - (10,382)
Other 22,103 19,345 (21,520) (22,119) (2,191)
-----------------------------------------------------------------
Net cash flows from (used for) investing activities 22,103 (58,530) (98,734) (22,119) (157,280)
-----------------------------------------------------------------
Net decrease in cash and temporary cash investments (4,325) (16,131) (1,776) 1,939 (20,293)
-----------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,381 60,237 3,207 (1,939) 67,886
-----------------------------------------------------------------
Cash and temporary cash investments at end of period $2,056 $44,106 $1,431 $- $47,593
=================================================================
Supplemental cash flows information:
Cash paid (received) during the period for:
Interest $243 $7,873 $26,823 $- $34,939
=================================================================
Income taxes, net of refunds $- ($25) $1,741 $- $1,716
=================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $448 $- $448
=================================================================
16
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $230,329 $199,003
Gas utility 126,677 71,742
Steam 9,482 8,050
-------------------- --------------------
366,488 278,795
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 34,201 32,342
Purchased power 45,056 28,159
Cost of gas sold 91,771 46,360
Other operation and maintenance 84,587 80,656
Depreciation and amortization 40,427 36,211
Taxes other than income taxes 15,700 16,916
-------------------- --------------------
311,742 240,644
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Operating income 54,746 38,151
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 17,044 16,274
Allowance for funds used during construction (2,544) (980)
Miscellaneous, net (800) (428)
-------------------- --------------------
13,700 14,866
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Income before income taxes 41,046 23,285
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Income taxes 16,089 10,410
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Net income 24,957 12,875
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 3,330 855
-------------------- --------------------
- --------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $21,627 $12,020
==================== ====================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
17
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
ASSETS 2003 2002
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $3,572,531 $3,451,547
Gas plant in service 330,254 326,470
Steam plant in service 59,737 59,737
Other plant in service 200,507 195,328
Accumulated depreciation (2,096,140) (2,163,371)
------------------ -----------------
Net plant 2,066,889 1,869,711
Construction work in progress 245,770 166,350
Other, net 49,710 50,529
------------------ -----------------
2,362,369 2,086,590
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 1,577 6,076
Accounts receivable:
Customer, less allowance for doubtful accounts of $917 and $894 63,977 42,647
Associated companies 37,180 79,105
Other, less allowance for doubtful accounts of $295 and $388 27,012 27,898
Production fuel, at average cost 32,958 36,852
Materials and supplies, at average cost 33,309 28,821
Gas stored underground, at average cost 4,269 19,450
Regulatory assets 42,402 18,077
Prepayments and other 12,664 13,941
------------------ -----------------
255,348 272,867
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 123,501 121,158
Other 13,507 13,492
------------------ -----------------
137,008 134,650
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 328,294 199,691
Deferred charges and other 40,615 44,608
------------------ -----------------
368,909 244,299
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Total assets $3,123,634 $2,738,406
================== =================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
18
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
March 31, December 31,
CAPITALIZATION AND LIABILITIES 2003 2002
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $2.50 par value - authorized 24,000,000
shares; 13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 477,617 477,701
Retained earnings 374,511 374,428
Accumulated other comprehensive loss (18,887) (18,887)
------------------ ------------------
Total common equity 866,668 866,669
------------------ ------------------
Cumulative preferred stock 145,100 145,100
Long-term debt (excluding current portion) 827,467 827,389
------------------ ------------------
1,839,235 1,839,158
------------------ ------------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 5,080 5,080
Commercial paper 75,500 -
Accounts payable 108,252 83,126
Accounts payable to associated companies 60,205 41,537
Accrued interest 13,719 14,628
Accrued taxes 61,185 62,135
Accumulated refueling outage provision 10,934 13,845
Other 46,396 40,946
------------------ ------------------
381,271 261,297
------------------ ------------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 319,277 313,308
Accumulated deferred investment tax credits 30,255 31,135
Asset retirement obligations 262,752 -
Pension and other benefit obligations 93,144 88,449
Regulatory liabilities 74,831 78,995
Environmental liabilities 39,717 39,849
Other 83,152 86,215
------------------ ------------------
903,128 637,951
------------------ ------------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $3,123,634 $2,738,406
================== ==================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
19
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- -------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $24,957 $12,875
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 40,427 36,211
Amortization of leased nuclear fuel 2,965 3,615
Amortization of deferred energy efficiency expenditures 926 983
Deferred tax expense (benefit) and investment tax (credits) 4,890 (2,180)
Refueling outage provision (2,912) 2,005
Other (652) 272
Other changes in assets and liabilities:
Accounts receivable 21,481 17,640
Gas stored underground 15,181 13,888
Accounts payable 36,593 (9,793)
Adjustment clause balances (22,306) (8,345)
Other 8,326 8,798
------------------- -----------------
Net cash flows from operating activities 129,876 75,969
------------------- -----------------
- -------------------------------------------------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (21,544) (20,086)
Preferred stock dividends (3,330) (855)
Net change in short-term borrowings 75,500 (8,801)
Principal payments under capital lease obligations (3,969) (3,516)
Other 8,261 3,104
------------------- -----------------
Net cash flows from (used for) financing activities 54,918 (30,154)
------------------- -----------------
- -------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (181,015) (38,260)
Nuclear decommissioning trust funds (2,736) (1,502)
Other (5,542) (6,058)
------------------- -----------------
Net cash flows used for investing activities (189,293) (45,820)
------------------- -----------------
- -------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (4,499) (5)
------------------- -----------------
- -------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,076 87
------------------- -----------------
- -------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $1,577 $82
=================== =================
- -------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid (received) during the period for:
Interest $16,742 $16,044
=================== =================
Income taxes, net of refunds ($7,390) $ -
=================== =================
Noncash investing and financing activities:
Capital lease obligations incurred $2,131 $448
=================== =================
- -------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
INTERSTATE POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to IP&L.
1. The interim consolidated financial statements included herein have been
prepared by IP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP
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 IP&L and its
consolidated subsidiaries. IP&L is a direct subsidiary of Alliant
Energy. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in IP&L's latest
Annual Report on Form 10-K.
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 three months ended March 31,
2003 and 2002, (b) the consolidated financial position at March 31, 2003
and Dec. 31, 2002, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2003 and 2002, have been made. Because
of the seasonal nature of IP&L's operations, results for the three months
ended March 31, 2003 are not necessarily indicative of results that may be
expected for the year ending Dec. 31, 2003. Certain prior period amounts
have been reclassified on a basis consistent with the current period
presentation.
2. For the three months ended March 31, 2003 and 2002, IP&L had no other
comprehensive income, thus IP&L's comprehensive income was equal to its
earnings available for common stock for both periods.
3. Certain financial information relating to IP&L's significant business
segments is presented below. Intersegment revenues were not material
to IP&L's operations.
Electric Gas Other Total
-------------------------------------------------------
(in thousands)
Three Months Ended March 31, 2003
---------------------------------
Operating revenues $230,329 $126,677 $9,482 $366,488
Operating income 38,030 15,443 1,273 54,746
Earnings available for common stock 21,627
Three Months Ended March 31, 2002
---------------------------------
Operating revenues $199,003 $71,742 $8,050 $278,795
Operating income 27,898 8,180 2,073 38,151
Earnings available for common stock 12,020
4. IP&L utilizes synthetic leases to finance certain utility railcars that
were not included on IP&L's Consolidated Balance Sheets. IP&L has
guaranteed the residual value of its synthetic leases totaling $6.8
million in the aggregate. The guarantees extend through the maturity of
each respective underlying lease, the latest of which is January 2009.
21
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $212,696 $171,759
Gas utility 131,204 56,499
Water 1,377 1,290
-------------------- --------------------
345,277 229,548
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 38,214 30,269
Purchased power 84,259 44,177
Cost of gas sold 96,554 37,396
Other operation and maintenance 65,673 51,107
Depreciation and amortization 33,419 33,506
Taxes other than income taxes 8,645 8,950
-------------------- --------------------
326,764 205,405
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Operating income 18,513 24,143
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 9,706 10,196
Interest income (1,855) (6,545)
Equity income from unconsolidated investments (4,116) (4,387)
Allowance for funds used during construction (1,317) (674)
Miscellaneous, net 2,176 404
-------------------- --------------------
4,594 (1,006)
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Income before income taxes 13,919 25,149
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Income taxes 3,804 9,404
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Net income 10,115 15,745
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 828 828
-------------------- --------------------
- -----------------------------------------------------------------------------------------------------------------
Earnings available for common stock $9,287 $14,917
==================== ====================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
22
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
March 31, December 31,
ASSETS 2003 2002
- -----------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $1,909,169 $1,843,834
Gas plant in service 290,385 286,652
Water plant in service 33,447 33,062
Other plant in service 249,411 242,329
Accumulated depreciation (1,291,907) (1,410,036)
----------------- -----------------
Net plant 1,190,505 995,841
Construction work in progress 78,925 96,746
Other, net 17,379 17,811
----------------- -----------------
1,286,809 1,110,398
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 1,074 8,577
Accounts receivable:
Customer, less allowance for doubtful accounts of $1,686 and $1,770 15,224 7,977
Associated companies 37,938 21,484
Other, less allowance for doubtful accounts of $653 and $458 25,517 18,191
Production fuel, at average cost 16,413 18,980
Materials and supplies, at average cost 25,723 22,133
Gas stored underground, at average cost 2,630 16,679
Regulatory assets 27,769 27,999
Prepaid gross receipts tax 20,541 27,388
Other 4,351 8,599
----------------- -----------------
177,180 178,007
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 225,360 223,734
Investment in ATC and other 134,226 133,043
----------------- -----------------
359,586 356,777
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 101,427 102,674
Deferred charges and other 222,234 236,741
----------------- -----------------
323,661 339,415
----------------- -----------------
- -----------------------------------------------------------------------------------------------------------------
Total assets $2,147,236 $1,984,597
================= =================
- -----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
March 31, December 31,
CAPITALIZATION AND LIABILITIES 2003 2002
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 325,603 325,603
Retained earnings 393,093 399,302
Accumulated other comprehensive loss (24,425) (24,108)
------------------ -----------------
Total common equity 760,454 766,980
------------------ -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 468,240 468,208
------------------ -----------------
1,288,657 1,295,151
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Variable rate demand bonds 55,100 55,100
Commercial paper 56,500 60,000
Accounts payable 87,871 90,869
Accounts payable to associated companies 54,603 43,276
Accrued taxes 5,816 19,353
Regulatory liabilities 17,300 16,938
Other 29,593 29,064
------------------ -----------------
306,783 314,600
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 194,251 191,894
Accumulated deferred investment tax credits 22,839 23,241
Asset retirement obligations 178,104 -
Pension and other benefit obligations 60,575 58,921
Customer advances 35,416 36,555
Other 60,611 64,235
------------------ -----------------
551,796 374,846
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $2,147,236 $1,984,597
================== =================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Three Months Ended March 31,
2003 2002
- --------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $10,115 $15,745
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 33,419 33,506
Amortization of nuclear fuel 1,525 1,481
Amortization of deferred energy efficiency expenditures 9,434 3,590
Deferred tax expense (benefit) and investment tax (credits) 2,315 (4,033)
Equity income from unconsolidated investments, net (4,116) (4,387)
Distributions from equity method investments 2,744 4,227
Other (2,634) (6,808)
Other changes in assets and liabilities:
Accounts receivable (31,027) 12,791
Gas stored underground 14,049 12,812
Prepaid gross receipts tax 6,847 6,418
Accounts payable 27,157 (23,081)
Accrued taxes (13,537) 11,356
Other 161 27,240
------------------- -------------------
Net cash flows from operating activities 56,452 90,857
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (15,496) (14,588)
Preferred stock dividends (828) (828)
Net change in short-term borrowings (3,500) (34,592)
Other (9,025) 2,369
------------------- -------------------
Net cash flows used for financing activities (28,849) (47,639)
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (31,264) (28,572)
Nuclear decommissioning trust funds (719) (13,935)
Other (3,123) (711)
------------------- -------------------
Net cash flows used for investing activities (35,106) (43,218)
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (7,503) -
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 8,577 307
------------------- -------------------
- --------------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $1,074 $307
=================== ===================
- --------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $10,581 $10,780
=================== ===================
Income taxes, net of refunds $16,274 $1,701
=================== ===================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to WP&L.
1. The interim consolidated financial statements included herein have been
prepared by WP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP
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 WP&L and its
consolidated subsidiaries. WP&L is a direct subsidiary of Alliant
Energy. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in WP&L's latest
Annual Report on Form 10-K.
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 three months ended March 31,
2003 and 2002, (b) the consolidated financial position at March 31, 2003
and Dec. 31, 2002, and (c) the consolidated statement of cash flows for
the three months ended March 31, 2003 and 2002, have been made. Because
of the seasonal nature of WP&L's operations, results for the three months
ended March 31, 2003 are not necessarily indicative of results that may be
expected for the year ending Dec. 31, 2003. Certain prior period amounts
have been reclassified on a basis consistent with the current period
presentation.
2. WP&L's comprehensive income, and the components of other comprehensive
loss, net of taxes, for the three months ended March 31 were as follows
(in thousands):
2003 2002
------------ ---------------
Earnings available for common stock $9,287 $14,917
Unrealized holding gains (losses) on derivatives, net of tax (5,914) 222
Less: reclassification adjustment for gains (losses) included
in earnings available for common stock, net of tax (5,597) 4,287
------------ ---------------
Net unrealized losses on qualifying derivatives (317) (4,065)
------------ ---------------
Other comprehensive loss (317) (4,065)
------------ ---------------
Comprehensive income $8,970 $10,852
============ ===============
3. Certain financial information relating to WP&L's significant business
segments is presented below. For the three months ended March 31, 2003,
gas revenues included $17 million for sales to the electric segment. All
other intersegment revenues were not material to WP&L's operations.
Electric Gas Other Total
--------------------------------------------------------
(in thousands)
Three Months Ended March 31, 2003
---------------------------------
Operating revenues $212,696 $131,204 $1,377 $345,277
Operating income (loss) (1,276) 19,611 178 18,513
Earnings available for common stock 9,287
Three Months Ended March 31, 2002
---------------------------------
Operating revenues $171,759 $56,499 $1,290 $229,548
Operating income 18,509 5,248 386 24,143
Earnings available for common stock 14,917
4. WP&L utilizes synthetic leases to finance certain utility railcars and a
utility radio dispatch system that were not included on WP&L's
Consolidated Balance Sheets. WP&L has guaranteed the residual value of
its synthetic leases totaling $14.3 million in the aggregate. The
guarantees extend through the maturity of each respective underlying
lease, the latest of which is April 2015.
26
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L,
Resources and Corporate Services. Among various other regulatory
constraints, Alliant Energy is operating as a registered public utility
holding company subject to the limitations imposed by PUHCA. This MD&A
includes information relating to Alliant Energy, IP&L and WP&L (as well as
Resources and Corporate Services). Where appropriate, information relating
to a specific entity has been segregated and labeled as such. The following
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included
in this report as well as the financial statements, notes and MD&A included
in Alliant Energy's, IP&L's and WP&L's latest Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements contained in this report that are not of historical fact are
forward-looking statements intended to qualify for the safe harbors from
liability established by the Private Securities Litigation Reform Act of
1995. Such forward-looking statements are subject to risks and uncertainties
that could cause actual results to differ materially from those expressed in,
or implied by, such statements. Some, but not all, of the risks and
uncertainties include: factors listed in "Other Matters - Other Future
Considerations;" weather effects on sales and revenues; economic and
political conditions in Alliant Energy's domestic and international service
territories; federal, state and international regulatory or governmental
actions, including the ability to obtain adequate and timely rate relief,
including recovery of operating costs and earning reasonable rates of return,
and to pay expected levels of dividends; Alliant Energy's ability to complete
proposed asset divestitures at expected values and on expected timelines;
unanticipated construction and acquisition expenditures; issues related to
the supply of purchased electricity and price thereof, including the ability
to recover purchased-power and fuel costs through rates; risks related to the
operations of Alliant Energy's nuclear facilities; costs associated with
Alliant Energy's environmental remediation efforts and with environmental
compliance generally; developments that adversely impact Alliant Energy's
ability to implement its strategic plan; improved results from Alliant
Energy's Brazil investments, the ability of Alliant Energy's Brazil
investments to refinance certain debt outstanding and no material adverse
changes in the rates allowed by the Brazilian regulators; improved
performance by Alliant Energy's other non-regulated businesses as a whole; no
material permanent declines in the fair market value of, or expected cash
flows from, Alliant Energy's investments; continued access to the capital
markets; Alliant Energy's ability to continue cost controls and operational
efficiencies; Alliant Energy's ability to identify and successfully complete
proposed acquisitions and development projects; access to technological
developments; employee workforce factors, including changes in key
executives, collective bargaining agreements or work stoppages; and changes
in the rate of inflation. Alliant Energy assumes no obligation, and
disclaims any duty, to update the forward-looking statements in this report.
STRATEGIC ACTIONS
Alliant Energy has taken several steps to implement the plan it outlined in
November 2002 to strengthen its financial profile:
o In April 2003, Alliant Energy completed the sale of its Australian assets
to New Zealand-based Meridian Energy Limited. The sale price was
approximately $365 million. While Alliant Energy is still in the process
of finalizing the calculation of the gain realized on the sale, it
currently estimates it will realize an after-tax gain of approximately
$40 million in the second quarter of 2003 on the sale of its Australian
assets. This sale provided for the repayment of approximately $150 million
in debt in Australia. On an after-tax basis, the sale resulted in
net cash proceeds to Alliant Energy of approximately $170 million
and provides Alliant Energy with approximately $320 million available
for debt reduction. This is the first major step in meeting
Alliant Energy's up to $800 million to $1 billion debt reduction plan to
be completed through the divestiture of certain businesses. The amount of
proceeds ultimately received from these divestitures, and the timing of
the completion of the transactions, are subject to a variety of factors,
including the transaction structures Alliant Energy utilizes to exit these
businesses.
27
o Alliant Energy is making progress on the divestitures of its affordable
housing, oil and gas and SmartEnergy businesses.
o Alliant Energy's plan also includes a $200 to $300 million equity offering
that is expected to be completed in the second half of 2003, dependent on
market conditions. In April 2003, Alliant Energy filed a shelf
registration statement with the SEC covering up to $400 million of
securities for Alliant Energy and Resources. The net proceeds from any
Alliant Energy offerings will be used to make capital contributions to its
domestic utility subsidiaries, which may use these capital contributions
for financing the development and construction of new generation
(including Alliant Energy's Power Iowa initiative) and distribution
facilities, funding additional working capital, financing other capital
expenditures and other general corporate purposes. Alliant Energy may also
use the net proceeds from any offering to repay debt.
o Another component of Alliant Energy's plan is strict cost controls which
includes utilizing a Six Sigma program to identify a host of projects that
will result in more efficient operations. Alliant Energy is in the early
stages of this project.
RATES AND REGULATORY MATTERS
A summary of the regulatory environment is included in the Form 10-K filed by
Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2002. Set forth
below are several recent developments relating to the regulatory environment.
Alliant Energy's merger-related price freezes expired in April 2002 in all of
its primary domestic utility jurisdictions and it has been addressing the
recovery of its utility cost increases through numerous rate filings. WP&L
has received final orders in three of its rate cases and has two other rate
cases pending. IP&L has received a final order in its electric rate case and
an oral decision in its gas rate case. Details of these rate cases are as
follows (dollars in millions):
Expected
Interim Interim Final Final Final
Utility Filing Increase Increase Effective Increase Effective Effective
Case Type Date Requested Granted (1) Date Granted (1) Date Date Notes
- ----------------- -------- ------------- ----------- ------------ ----------- ------------ ----------- ---------------- --------
WP&L:
2002 retail E/G/W Aug. 2001 $104 $49 April 2002 $82 Sept. 2002 N/A
2003 retail E/G/W May 2002 123 -- N/A 81 April 2003 N/A (2)
2004 retail E/G/W March 2003 87 TBD TBD TBD TBD Jan. 2004 (3)
Wholesale E Feb. 2002 6 6 April 2002 3 Jan. 2003 N/A
Wholesale E March 2003 5 -- N/A TBD TBD July 2003 (4)
IP&L retail - IA E March 2002 82 15 July 2002 26 TBD June 2003 (5)
IP&L retail - IA G July 2002 20 17 Oct. 2002 13 TBD July 2003 (6)
----------- ------------ ------------
Total $427 $87 $205
=========== ============ ============
(1) Interim rate relief is implemented, subject to refund, pending
determination of final rates. The final rate relief granted replaces the
amount of interim rate relief granted.
(2) The 2003 request was updated from $101 million as announced earlier to
$123 million primarily due to updated variable fuel costs based on current
market conditions. In its April 2003 final order, the PSCW authorized a
12% return on common equity.
(3) In May 2003, the increase requested was increased from $65 million to $87
million.
(4) WP&L has a rate change moratorium agreement with a wholesale customer
group that will expire in July 2003. The requested rates are expected to
go into effect in July 2003, subject to refund.
(5) The final rate order was received in April 2003 and reflects an 11.15%
return on common equity.
(6) An oral decision was received in April 2003 for a final increase of $13
million; the final order is expected in May 2003. Since the final
increase is lower than the interim relief granted in October 2002, a
refund plan must be filed with the IUB. IP&L is reserving all amounts
related to the anticipated refund.
28
A significant portion of the rate increases included in the previous table
reflect the recovery of increased costs incurred by IP&L and WP&L, or costs
they expect to incur, thus the increase in revenues related to these rate
increases are not expected to result in a corresponding increase in income.
IP&L announced in April 2003 that it will not file for an Iowa electric rate
increase in 2003, based on 2002 test year information, due to the fact that
the case would have been modest and to ensure the case that IP&L expects to
file in 2004 would not be delayed awaiting a decision on a case that would
have been filed in 2003. The case IP&L expects to file in 2004 will include
costs associated with the $400 million 500-MW combined cycle natural gas
plant currently under construction in Iowa. IP&L, WP&L and South Beloit are
currently in the process of determining what other rate case filings may be
made in 2003.
In 2002, IP&L filed with the IRS for a change in method of accounting for tax
purposes for 1987 through 2001 that would allow a current deduction related
to mixed service costs. Such costs had previously been capitalized and
depreciated for tax purposes over the appropriate tax lives. This change
would create a significant current tax benefit which has not been reflected
in IP&L's results of operations pending a decision from the IUB on the
required rate making treatment of the benefit. In its April 2003 order, the
IUB approved IP&L's proposed accounting treatment to defer the tax savings
resulting from the change of accounting method until the IRS audit on this
issue is complete. The rate making impact will be addressed once the issue
is resolved with the IRS which is expected to happen in 2004. There would be
no material negative impact on IP&L's results of operations or financial
position should the IRS reject IP&L's proposal.
ALLIANT ENERGY RESULTS OF OPERATIONS
Unless otherwise noted, all "per share" references in the Results of
Operations section refer to earnings per diluted share.
Overview - First Quarter Results - Alliant Energy's net income (loss) and EPS
- --------------------------------
for the first quarter were as follows:
2003 2002
----------------------------- --------------------------
Net Income EPS Net Income EPS
Earnings (loss) from continuing operations: ----------------------------- --------------------------
Utility $31.0 $0.34 $27.0 $0.30
Non-regulated (Resources) (10.7) (0.12) (32.6) (0.36)
Alliant Energy parent and other (5.7) (0.06) (2.2) (0.03)
----------------------------- --------------------------
Total earnings (loss) from continuing operations 14.6 0.16 (7.8) (0.09)
Earnings (loss) from discontinued operations:
Operating results (increase largely due to higher oil/gas
prices) 4.0 0.04 (2.4) (0.02)
Non-cash valuation and other accounting adjustments:
Southern Hydro SFAS 133 income 6.8 0.07 19.9 0.22
Discontinuing depreciation, depletion and amortization
of assets held for sale 7.9 0.09 -- --
Valuation adjustments and selling costs (27.8) (0.30) -- --
----------------------------- --------------------------
Total earnings (loss) from discontinued operations (9.1) (0.10) 17.5 0.20
Cumulative effect of changes in accounting principles (6.0) (0.07) -- --
----------------------------- --------------------------
Net income (loss) ($0.5) ($0.01) $9.7 $0.11
============================= ==========================
The higher utility earnings from continuing operations were largely due to
increased gas and electric margins, which were partially offset by higher
other operating expenses. The significant improvement in non-regulated
results from continuing operations was primarily due to $0.26 per share of
asset valuation charges recorded in the first quarter of 2002. Improvements
in the results of the underlying operations of Alliant Energy's non-regulated
businesses were largely offset by higher interest expense. Alliant Energy
recorded after-tax valuation adjustments of $26 million in the first quarter
of 2003 to reflect updated estimates of the market value, less selling costs,
of the $1 billion of assets it has classified as assets held for sale.
29
Domestic Electric Utility Margins - Electric margins and MWh sales for
- ---------------------------------
Alliant Energy for the three months ended March 31 were as follows (in
thousands):
Revenues and Costs MWhs Sold
------------------------------------- ------------------------------------
2003 2002 Change 2003 2002 Change
------------------------------------- ------------------------------------
Residential $166,148 $137,247 21% 2,070 1,874 10%
Commercial 92,129 77,792 18% 1,388 1,295 7%
Industrial 120,285 108,080 11% 2,895 2,846 2%
---------------------------- ---------------------------
Total from ultimate customers 378,562 323,119 17% 6,353 6,015 6%
Sales for resale 51,241 36,410 41% 1,332 1,202 11%
Other 13,222 11,233 18% 50 44 14%
---------------------------- ---------------------------
Total revenues/sales 443,025 370,762 19% 7,735 7,261 7%
===========================
Electric production fuels expense 65,860 58,760 12%
Purchased-power expense 129,315 72,337 79%
----------------------------
Margin $247,850 $239,665 3%
============================
Electric margin increased $8.2 million, or 3%, primarily related to the
impact of various rate increases implemented in 2002 and higher sales volumes
largely due to more favorable weather conditions in the first quarter of 2003
compared to the same period in 2002 as well as continued modest retail
customer growth. Alliant Energy continued to see modest improvements in the
economy in its utility service territories as evidenced by a 2% increase in
electric sales to industrial customers in the first quarter of 2003 compared
to the same period in 2002. These items were partially offset by higher
purchased-power and fuel costs at WP&L.
WP&L does not expect the significant under recovery of purchased-power and
fuel costs it experienced in the first quarter of 2003 to continue throughout
the remainder of 2003, due to new rates effective April 2003. In addition,
under PSCW rules, WP&L can seek emergency rate increases if its annual
purchased-power and fuel costs are more than 3% higher than the estimated
costs used to establish rates. WP&L continues to monitor this issue
closely.
Gas Utility Margins - Gas margins and Dth sales for Alliant Energy for the
- -------------------
three months ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold
-------------------------------------- -------------------------------------
2003 2002 Change 2003 2002 Change
-------------------------------------- -------------------------------------
Residential $148,944 $76,586 94% 15,943 13,419 19%
Commercial 76,522 37,996 101% 9,265 7,830 18%
Industrial 12,072 6,041 100% 1,665 1,469 13%
Transportation/other 20,343 7,618 167% 14,732 12,814 15%
---------------------------- ----------------------------
Total revenues/sales 257,881 128,241 101% 41,605 35,532 17%
============================
Cost of utility gas sold 188,325 83,756 125%
----------------------------
Margin $69,556 $44,485 56%
============================
Gas revenues and cost of utility gas sold increased significantly due to the
large increase in natural gas prices from the first quarter of 2002. Due to
Alliant Energy's rate recovery mechanisms for gas costs, these increases
alone had little impact on gas margin. Gas margin increased $25.1 million,
or 56%, primarily due to various rate increases, increased sales, which were
largely due to more favorable weather conditions and continued modest retail
customer growth, and improved performance related to WP&L's performance-based
commodity cost recovery program (which are shared by ratepayers and
shareowners).
Refer to "Rates and Regulatory Matters" for discussion of various electric
and gas rate filings.
30
Non-regulated and Other Revenues - Details regarding Alliant Energy's
- --------------------------------
non-regulated and other revenues for the three months ended March 31 were as
follows (in thousands):
2003 2002
----------------- ---------------
Integrated Services $147,753 $32,538
International 28,471 25,731
Investments 6,021 5,952
Other (includes eliminations) 12,639 8,212
----------------- ---------------
$194,884 $72,433
================= ===============
The increased Integrated Services revenues were primarily due to increased
gas revenues at Alliant Energy's natural gas trading business, NG Energy,
largely due to higher natural gas prices and volumes.
Other Operating Expenses - Other operation and maintenance expenses for the
- ------------------------
three months ended March 31 were as follows (in thousands):
2003 2002
--------------- ---------------
Utility $150,260 $131,763
Integrated Services 139,195 27,954
International 19,762 20,345
Investments 3,737 3,714
Other (includes eliminations) 2,692 1,623
--------------- ---------------
$315,646 $185,399
=============== ===============
The utility increase was primarily due to increased fossil and nuclear
generation, energy conservation and employee benefits expenses. A
significant portion of these cost increases are being recovered as a result
of the rate increases implemented in 2002 and 2003. Refer to "Rates and
Regulatory Matters" for additional information. The Integrated Services
increase was largely driven by the same factors impacting the revenue
variance.
Depreciation and amortization expense increased $6.3 million primarily due to
increased software amortizations and utility property additions, partially
offset by lower earnings on WP&L's nuclear decommissioning trust fund. The
accounting for earnings on the nuclear decommissioning trust fund results in
no net income impact. Miscellaneous, net income increases for earnings on
the trust fund and the corresponding offset is recorded through depreciation
expense for WP&L.
Interest Expense and Other - Interest expense increased $11.0 million
- --------------------------
primarily due to higher average borrowing rates and additional debt
outstanding at Resources and the parent company.
Equity income (loss) from Alliant Energy's unconsolidated investments for the
three months ended March 31 was as follows (in thousands):
2003 2002
------------- -------------
ATC $3,894 $4,113
New Zealand 837 518
China* 325 318
Cargill-Alliant (sold in 2002) -- (229)
Brazil (4,586) (1,694)
Synfuel (began operations 5/02) (4,894) --
Other 170 187
------------- -------------
($4,254) $3,213
============= =============
* Majority of investments are accounted for under the consolidation method.
31
Equity income from unconsolidated investments decreased $7.5 million. The
increased loss for Brazil was primarily due to higher interest expense at
Alliant Energy's Brazilian utility investments. In the second quarter of
2002, Synfuel, a direct subsidiary of Resources, purchased an equity interest
in a synthetic fuel processing facility which generates operating losses at
its fuel processing facility, which are more than offset by tax credits and
the tax benefit of the losses the project generates. All tax benefits are
included in "Income taxes" in Alliant Energy's Consolidated Statements of
Income.
Refer to Note 7 of Alliant Energy's "Notes to Consolidated Financial
Statements" for discussion of the asset valuation charge recorded by Alliant
Energy in the first quarter of 2002 related to its McLeod available-for-sale
securities.
Miscellaneous, net income increased $7.2 million due to the recording in the
first quarter of 2002 of pre-tax asset valuation charges for
other-than-temporary declines in value of Alliant Energy's investments in
Enermetrix of $8.5 million and Energy Technologies of $5.0 million. These
charges were partially offset by lower earnings on WP&L's nuclear
decommissioning trust fund.
Income Taxes - The effective income tax rate for the first quarter of 2003
- ------------
was 30.3% while the effective rate for the same period in 2002 was not
meaningful given the insignificant amount of pre-tax income (loss) from
continuing operations in such period. The first quarter 2003 rate was lower
than the statutory federal income tax rate of 35% largely due to the impact
of tax credits, which was partially offset by the impact of state taxes.
Income (Loss) from Discontinued Operations - The 2003 decrease of $26.7
- ------------------------------------------
million in income from discontinued operations was largely due to the
recording of after-tax valuation adjustments of $26.1 million to reflect
updated estimates of the market value, less selling costs, of the $1 billion
of assets classified as assets held for sale. Lower non-cash SFAS 133 income
related to the valuation of electricity derivatives at Southern Hydro was
offset by the impact of discontinuing depreciation, depletion and
amortization of Alliant Energy's assets held for sale in 2003 and higher oil
and gas prices at Whiting. Refer to Note 8 of Alliant Energy's "Notes to
Consolidated Financial Statements" for further discussion of Alliant Energy's
discontinued operations.
Cumulative Effect of Changes in Accounting Principles - In the first quarter
- -----------------------------------------------------
of 2003, Alliant Energy recorded after-tax charges of $4 million and $2
million for the cumulative effect of changes in accounting principles related
to the adoption on Jan. 1, 2003 of SFAS 143 and EITF Issue 02-3 within its
oil and gas and Integrated Services businesses, respectively. The oil and
gas business has been classified as held for sale as of Dec. 31, 2002 and
March 31, 2003. Refer to Notes 11 and 12 of Alliant Energy's "Notes to
Consolidated Financial Statements" for further information.
IP&L RESULTS OF OPERATIONS
Overview - First Quarter Results - Earnings available for common stock
- --------------------------------
increased $9.6 million, primarily due to higher electric and gas margins and
a lower effective income tax rate, partially offset by increased other
operating expenses and preferred dividend requirements.
32
Electric Utility Margins - Electric margins and MWh sales for IP&L for the
- ------------------------
three months ended March 31 were as follows (in thousands):
Revenues and Costs MWhs Sold
-------------------------------------- -------------------------------------
2003 2002 Change 2003 2002 Change
-------------------------------------- -------------------------------------
Residential $89,700 $75,965 18% 1,156 1,023 13%
Commercial 54,269 46,081 18% 858 788 9%
Industrial 69,223 62,867 10% 1,847 1,834 1%
--------------------------- ---------------------------
Total from ultimate customers 213,192 184,913 15% 3,861 3,645 6%
Sales for resale 10,334 7,998 29% 303 309 (2%)
Other 6,803 6,092 12% 26 27 (4%)
--------------------------- ---------------------------
Total revenues/sales 230,329 199,003 16% 4,190 3,981 5%
===========================
Electric production fuels expense 27,646 28,492 (3%)
Purchased-power expense 45,056 28,159 60%
---------------------------
Margin $157,627 $142,352 11%
===========================
Electric margin increased $15.3 million, or 11%, primarily due to higher
sales volumes, largely due to more favorable weather conditions in the first
quarter of 2003 compared to the same period in 2002 as well as continued
modest retail customer growth, and the impact of the interim retail rate
increase effective July 2002.
Gas Utility Margins - Gas margins and Dth sales for IP&L for the three months
- -------------------
ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold
---------------------------------------- -------------------------------------
2003 2002 Change 2003 2002 Change
---------------------------------------- -------------------------------------
Residential $78,210 $43,860 78% 9,445 7,938 19%
Commercial 38,629 21,503 80% 5,264 4,496 17%
Industrial 7,055 3,467 103% 1,090 884 23%
Transportation/other 2,783 2,912 (4%) 8,343 7,926 5%
---------------------------- ----------------------------
Total revenues/sales 126,677 71,742 77% 24,142 21,244 14%
============================
Cost of gas sold 91,771 46,360 98%
----------------------------
Margin $34,906 $25,382 38%
============================
Gas revenues and cost of gas sold increased significantly due to the large
increase in natural gas prices from the first quarter of 2002. Such
increases alone had no impact on IP&L's gas margin given its rate recovery
mechanism for gas costs. Gas margin increased $9.5 million, or 38%,
primarily due to the impact of the interim retail rate increase effective
October 2002 and increased sales largely due to more favorable weather
conditions.
Refer to "Rates and Regulatory Matters" for discussion of IP&L's electric and
gas rate filings.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$3.9 million, primarily due to increased administrative and general and
fossil generation expenses, partially offset by decreased energy delivery
expenses.
Depreciation and amortization expense increased $4.2 million, primarily due
to increased amortization of software and the impact of continued property
additions.
Income Taxes - The effective income tax rates were 39.2% and 44.7% for the
- ------------
first quarter of 2003 and 2002, respectively. The decrease was primarily due
to an increase in the Alliant Energy tax benefit allocated to IP&L pursuant
to the provisions of PUHCA and decreases in property-related temporary
differences for which deferred taxes were not provided pursuant to rate
making principles.
33
Preferred Dividend Requirements - Preferred dividend requirements increased
- -------------------------------
$2.5 million due to an increase in the principal amount of preferred stock
outstanding and a higher dividend rate.
WP&L RESULTS OF OPERATIONS
Overview - First Quarter Results - Earnings available for common stock
- --------------------------------
decreased $5.6 million, primarily due to increased operation and maintenance
expenses and decreased electric margins, partially offset by higher gas
margins and a lower effective income tax rate.
Electric Utility Margins - Electric margins and MWh sales for WP&L for the
- ------------------------
three months ended March 31 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------- -------------------------------------
2003 2002 Change 2003 2002 Change
--------------------------------------- ------------------------- -----------
Residential $76,448 $61,282 25% 914 851 7%
Commercial 37,860 31,711 19% 530 507 5%
Industrial 51,062 45,213 13% 1,048 1,012 4%
---------------------------- -------------------------
Total from ultimate customers 165,370 138,206 20% 2,492 2,370 5%
Sales for resale 40,907 28,412 44% 1,029 894 15%
Other 6,419 5,141 25% 24 17 41%
---------------------------- -------------------------
Total revenues/sales 212,696 171,759 24% 3,545 3,281 8%
=========================
Electric production fuels expense 38,214 30,269 26%
Purchased-power expense 84,259 44,177 91%
----------------------------
Margin $90,223 $97,313 (7%)
============================
Electric margin decreased $7.1 million, or 7%, primarily due to higher
purchased-power and fuel costs, partially offset by the implementation of
rate increases in 2002 and higher sales volumes largely due to more favorable
weather conditions in the first quarter of 2003 compared to the same period
in 2002 as well as continued modest retail customer growth. WP&L continued
to see improvements in the economy as evidenced by a 4% increase in sales to
industrial customers in the first quarter of 2003 compared to the same period
in 2002.
WP&L does not expect the significant under recovery of purchased-power and
fuel costs it experienced in the first quarter of 2003 to continue throughout
the remainder of 2003, due to new rates effective April 2003. In addition,
under PSCW rules, WP&L can seek emergency rate increases if its annual
purchased-power and fuel costs are more than 3% higher than the estimated
costs used to establish rates. WP&L continues to monitor this issue
closely.
Gas Utility Margins - Gas margins and Dth sales for WP&L for the three months
- -------------------
ended March 31 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2003 2002 Change 2003 2002 Change
--------------------------------------- -------------------------------------
Residential $70,734 $32,726 116% 6,498 5,481 19%
Commercial 37,893 16,493 130% 4,001 3,334 20%
Industrial 5,017 2,574 95% 575 585 (2%)
Transportation/other 17,560 4,706 273% 6,389 4,888 31%
----------------------------- -------------------------
Total revenues/sales 131,204 56,499 132% 17,463 14,288 22%
=========================
Cost of gas sold 96,554 37,396 158%
-----------------------------
Margin $34,650 $19,103 81%
=============================
Gas revenues and cost of gas sold increased significantly due to the large
increase in natural gas prices from the first quarter of 2002. Due to WP&L's
rate recovery mechanism for gas costs, these increases alone had little
impact on gas margin. Gas margin increased $15.5 million, or 81%, primarily
34
due to the implementation of a rate increase in 2002, increased sales, which
were largely due to more favorable weather conditions and continued modest
retail customer growth, and improved results from WP&L's performance-based
commodity cost recovery program.
Refer to "Rates and Regulatory Matters" for discussion of WP&L's electric and
gas rate filings.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$14.6 million, primarily due to higher fossil and nuclear generation, energy
conservation and employee benefits expenses. A significant portion of these
cost increases are being recovered as a result of the rate increases
implemented in 2002.
Depreciation and amortization expense remained virtually unchanged due to
higher software amortizations, offset by decreased earnings on the nuclear
decommissioning trust fund. The accounting for earnings on the nuclear
decommissioning trust fund results in no net income impact. Interest income
increases for earnings on the trust fund and the corresponding offset is
recorded through depreciation expense.
Interest Expense and Other - Interest income decreased $4.7 million due to
- --------------------------
decreased earnings on the nuclear decommissioning trust fund.
Income Taxes - The effective income tax rates were 27.3% and 37.4% for the
- ------------
first quarter of 2003 and 2002, respectively. The decrease was primarily due
to an increase in the Alliant Energy tax benefit allocated to WP&L pursuant
to the provisions of PUHCA.
LIQUIDITY AND CAPITAL RESOURCES
Cash Flows for the Three-Month Periods - Selected information from Alliant
- --------------------------------------
Energy's, IP&L's and WP&L's Consolidated Statements of Cash Flows for the
three months ended March 31 was as follows (dollars in thousands):
Alliant Energy IP&L WP&L
----------------------- ----------------------- -----------------------
2003 2002 2003 2002 2003 2002
Cash flows from (used for): ----------- ----------- ----------- ----------- ----------- -----------
Operating activities $166,643 $145,973 $129,876 $75,969 $56,452 $90,857
Financing activities 130,637 (8,986) 54,918 (30,154) (28,849) (47,639)
Investing activities (294,404) (157,280) (189,293) (45,820) (35,106) (43,218)
Alliant Energy's cash flows from financing activities increased $140 million
primarily due to net changes in the amount of debt issued and retired and
lower common stock dividends due to the dividend reduction implemented in the
first quarter of 2003; cash flows used for investing activities increased
$137 million primarily due to the 2003 acquisition by Resources of a natural
gas-fired power plant in Wisconsin. IP&L's cash flows from operating
activities increased $54 million primarily due to changes in working capital;
cash flows from financing activities increased $85 million primarily due to
net changes in the amount of short-term debt issued and retired; and cash
flows used for investing activities increased $143 million primarily due to
increased construction and acquisition expenditures associated with the
construction of the natural gas plant currently under construction in Iowa as
part of its Power Iowa program. WP&L's cash flows from operating activities
decreased $34 million primarily due to changes in working capital.
Common Equity - In November 2002, Alliant Energy announced its intentions to
- -------------
raise approximately $200 million to $300 million of common equity in 2003,
dependent on market conditions. The PSCW has indicated it will require an
additional equity infusion of $200 million by Alliant Energy into WP&L by
July 2003. The final PSCW order issued in April 2003 includes a customer
refund provision if the timing and/or amount of the equity infusion differs
from the assumptions included in the WP&L rate case.
Debt - Alliant Energy and its subsidiaries are party to various credit
- ----
facilities and other borrowing arrangements. The aggregate borrowing
capacity under short-term credit agreements of Alliant Energy and its
subsidiaries at March 31, 2003 was $845 million. At March 31, 2003, the
total amount borrowed under these facilities was $402 million leaving unused
capacity of $443 million. In addition, Resources had a $250 million standby
credit facility at March 31, 2003. Borrowing capacity under this facility
was reduced by approximately $170 million due to proceeds realized in April
2003 from Alliant Energy's sale of its Australian assets. There are no
35
borrowings currently outstanding under such facility. Alliant Energy also
had $27 million of short-term borrowings outstanding at March 31, 2003
related to various generation projects in China. Alliant Energy's, IP&L's
and WP&L's credit facility agreements contain various covenants, including
the following:
Covenant Description Covenant Requirement Status at March 31, 2003
- ------------------------------------------ ------------------------- ----------------------------
Alliant Energy:
Consolidated debt-to-capital ratio * Less than 65% 60.8%
Consolidated net worth * At least $1.4 billion $1.8 billion
EBITDA interest coverage ratio * At least 2.5x 3.5x
IP&L debt-to-capital ratio Less than 58% 50.0%
WP&L debt-to-capital ratio Less than 58% 40.9%
* In compliance with the agreements, results of discontinued operations have
been included in the covenant calculations.
Alliant Energy is also subject to a PUHCA requirement whereby Alliant
Energy's common equity balance must be at least 30% of its total consolidated
capitalization, including short-term debt. Alliant Energy's common equity
ratio as of March 31, 2003, as computed under such requirement, was 35.2%.
Information regarding commercial paper and bank facility borrowings at March
31, 2003 was as follows (dollars in millions):
Alliant Energy (Parent) IP&L WP&L
------------------------ ------------------- ------------------
Commercial paper outstanding $35.0 $75.5 $56.5
Weighted average maturity
of commercial paper 1 day 5 days 15 days
Discount rates on commercial paper 2.0% 1.45-1.60% 1.36-1.50%
Bank facility borrowings $235.0 -- --
Interest rates on bank facility borrowings 4.56-5.00% -- --
Off-Balance Sheet Arrangements - A summary of Alliant Energy's off-balance
- ------------------------------
sheet arrangements is included in the Form 10-K filed by Alliant Energy, IP&L
and WP&L for the year ended Dec. 31, 2002. Alliant Energy's off-balance
sheet arrangements have not changed materially from those reported in the
2002 Form 10-K.
Environmental - A summary of Alliant Energy's environmental matters is
- -------------
included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year
ended Dec. 31, 2002. Alliant Energy's environmental matters have not changed
materially from those reported in the 2002 Form 10-K.
Construction and Acquisition Expenditures - In February 2003, Resources
- -----------------------------------------
announced the purchase of a 309-MW, non-regulated, natural gas-fired power
plant in Wisconsin for $109 million, which Resources financed with a $73
million 8-year secured credit facility ($60 million of borrowings were
outstanding at March 31, 2003), which is non-recourse to Alliant Energy. The
entire power output of the facility is sold under contract to Milwaukee-based
We Energies through June 2008.
OTHER MATTERS
Market Risk Sensitive Instruments and Positions - Alliant Energy's primary
- -----------------------------------------------
market risk exposures are associated with interest rates, commodity prices,
equity prices and currency exchange rates. Alliant Energy has risk
management policies to monitor and assist in controlling these market risks
and uses derivative instruments to manage some of the exposures. A summary
of Alliant Energy's market risks is included in the Form 10-K filed by
Alliant Energy, IP&L and WP&L for the year ended Dec. 31, 2002. Alliant
Energy's market risks have not changed materially from those reported in the
2002 Form 10-K, except as described below.
36
Currency Risk - Alliant Energy has investments in various countries where the
net investments are not hedged, including Brazil, China and New Zealand. As
a result, these investments are subject to currency exchange risk with
fluctuations in currency exchange rates. At March 31, 2003, Alliant Energy
had a cumulative foreign currency translation loss, net of any tax benefits
realized, of $136 million, which related to decreases in value of the Brazil
real of $135 million and New Zealand dollar of $6 million and an increase in
the value of the Australian dollar of $5 million, all in relation to the U.S.
dollar. This loss is recorded in "Accumulated other comprehensive loss" on
Alliant Energy's Consolidated Balance Sheets. Based on Alliant Energy's
investments at March 31, 2003, a 10% sustained increase/decrease over the
next 12 months in the foreign exchange rates of Brazil, China and New Zealand
would result in a corresponding increase/decrease in the cumulative foreign
currency translation loss of $48 million. Alliant Energy's equity income
(loss) from its foreign investments is also impacted by fluctuations in
currency exchange rates. In addition, Alliant Energy has currency exchange
risk associated with the debt issued to finance a thermal plant constructed
by Alliant Energy and its Brazilian partners. For the three months ended
March 31, 2003, Alliant Energy recorded pre-tax income of $0.5 million
related to its share of the foreign currency transaction gains/losses on such
debt. Based on the loan balance and currency rates at March 31, 2003, a 10%
change in the currency rates would result in a $2.8 million pre-tax
increase/decrease in net income.
Accounting Pronouncements - In April 2003, the FASB issued SFAS 149,
- -------------------------
"Amendment of SFAS 133 on Derivative Instruments and Hedging Activities,"
which amends and clarifies accounting for derivative instruments, including
certain derivative instruments embedded in other contracts, and for hedging
activities under SFAS 133. The amendments set forth in SFAS 149 improve
financial reporting by requiring that contracts with comparable
characteristics be accounted for similarly. SFAS 149 clarifies under what
circumstances a contract with an initial net investment meets the
characteristic of a derivative as discussed in SFAS 133 and when a derivative
contains a financing component that warrants special reporting in the
statement of cash flows, as well as amending certain other existing
pronouncements. Those changes will result in more consistent reporting of
contracts that are derivatives in their entirety or that contain embedded
derivatives that warrant separate accounting. SFAS 149 is effective for
contracts entered into or modified after June 30, 2003, except for certain
implementation issues and certain provisions of forward purchase and sale
contracts and for hedging relationships designated after June 30, 2003.
Alliant Energy is in the process of evaluating the potential impacts of SFAS
149.
Critical Accounting Policies - A summary of Alliant Energy's critical
- ----------------------------
accounting policies is included in the Form 10-K filed by Alliant Energy,
IP&L and WP&L for the year ended Dec. 31, 2002. Alliant Energy's critical
accounting policies have not changed materially from those reported in the
2002 Form 10-K.
Other Future Considerations - In addition to items discussed earlier in MD&A,
- ---------------------------
the following items could impact Alliant Energy's future financial condition
or results of operations:
IP&L appealed to the Iowa State Board of Tax Review, an agency of the State
of Iowa, regarding assessments of Iowa property tax made by the Director of
the Iowa Department of Revenue and Finance. The appeals involved assessments
for the years 1994 through 1998 and sought reduction of the assessments
reflecting the true value of the operating property of the companies. In
April 2003, IP&L settled this matter with the Iowa Department of Revenue and
Finance. IP&L will receive a refund of $9 million for prior taxes paid. The
refund will be realized by future credits to property taxes resulting in
pre-tax reductions in property tax expense of $4.5 million, $3.0 million and
$1.5 million in 2003, 2004 and 2005, respectively. In addition, IP&L's
property tax liability on a going forward basis will be reduced by
approximately $2.1 million annually, also beginning in September 2003.
Alliant Energy holds unconsolidated investments in certain Brazilian electric
utility companies. The Brazilian utilities are negotiating with creditors to
restructure and convert up to $180 million (of which approximately $50 million
is due in June 2003), as converted from local currency to U.S. dollars, of
short-term and long-term debt currently outstanding into new long-term
debentures and other longer term debt. In April 2003, Standard and Poor's
issued a rating on the debentures of 'brBBB+' with a negative outlook.
Following completion of the negotiations, the proposed refinancing would be
subject to approval by the shareowners of the Brazilian utilities which is
expected in the near term. The refinancing is also subject to other approvals
in the ordinary course and final closing that are currently expected to be
complete in June 2003. If the refinancing is not completed as anticipated and
the Brazilian utilities are unable to extend or repay certain obligations
outstanding, then the liquidity position of the Brazilian utilities may be
37
significantly adversely affected. In such an event, Alliant Energy is not
required to invest any additional capital in Brazil but it could lead to
material asset valuation charges as relates to Alliant Energy's investments in
its Brazilian utilities.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
Item 2 MD&A "Other Matters - Market Risk Sensitive Instruments and
Positions."
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of filing this Quarterly Report on
Form 10-Q, Alliant Energy, IP&L and WP&L carried out evaluations, under the
supervision and with the participation of their management, including their
Chief Executive Officer, Chief Financial Officer and Disclosure Committee, of
the effectiveness of the design and operation of Alliant Energy's, IP&L's and
WP&L's disclosure controls and procedures pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. Based on those evaluations, the
Chief Executive Officer and the Chief Financial Officer concluded that
Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures were
effective as of the date of such evaluation.
There have been no significant changes in Alliant Energy's, IP&L's and WP&L's
internal controls, or in other factors that could significantly affect
internal controls, subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Alliant Energy
On April 17, 2003, a purported class action shareowner lawsuit was filed
against Alliant Energy, Erroll B. Davis, Jr., Thomas M. Walker and John E.
Kratchmer in the U.S. District Court for the Western District of Wisconsin as
Case No. 03-C-0191. Substantially similar cases were filed in the same court
on April 29, 2003 as Case No. 03-C-218-S and on May 14, 2003 as Case No. 03-C-
242. Alliant Energy expects that these cases and any additional similar cases
will be consolidated into one action. The actions were allegedly brought on
behalf of purchasers of Alliant Energy securities from Jan. 29, 2002 through
July 18, 2002. The complaints allege that the defendants made false and
misleading statements relating to Alliant Energy's expected performance
of its various non-regulated businesses. Alliant Energy believes these actions
are without merit and intends to defend them vigorously, but cannot predict the
outcome at this time.
IP&L
IP&L appealed to the Iowa State Board of Tax Review, an agency of the State
of Iowa, regarding assessments of Iowa property tax made by the Director of
the Iowa Department of Revenue and Finance. The appeals involved assessments
for the years 1994 through 1998 and sought reduction of the assessments
reflecting the true value of the operating property of the companies. In
April 2003, IP&L settled this matter with the Iowa Department of Revenue and
Finance. IP&L will receive a refund of $9 million for prior taxes paid. The
refund will be realized by future credits to property taxes resulting in
pre-tax reductions in property tax expense of $4.5 million, $3.0 million and
$1.5 million in 2003, 2004 and 2005, respectively. In addition, IP&L's
property tax liability on a going forward basis will be reduced by
approximately $2.1 million annually, also beginning in September 2003.
38
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following Exhibits are filed herewith or incorporated by
---------
reference.
10.1 Key Executive Employment and Severance Agreement, dated April 11,
2003, by and between Alliant Energy and each of J.E. Kratchmer and
B.A. Siehr (incorporated by reference to Exhibit 10.4 to Alliant
Energy's Form 10-Q for the quarter ended March 31, 1999)
99.1 Written Statement of the Chairman, President and Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
99.2 Written Statement of the Executive Vice President and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
99.3 Written Statement of the Chairman and Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 for IP&L
99.4 Written Statement of the Executive Vice President and Chief
Financial Officer Pursuant to 18 U.S.C. Section 1350 for IP&L
99.5 Written Statement of the Chairman and Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 for WP&L
99.6 Written Statement of the Executive Vice President and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for WP&L
(b) Reports on Form 8-K:
--------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated Feb. 4, 2003,
reporting (under Item 9) that it issued a press release announcing its
earnings for the fourth quarter and year ended Dec. 31, 2002.
IP&L - None.
WP&L - None.
39
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant
Energy Corporation, Interstate Power and Light Company and Wisconsin Power
and Light Company have each duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on the 15th day of May
2003.
ALLIANT ENERGY CORPORATION
- --------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
INTERSTATE POWER AND LIGHT COMPANY
- ----------------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
WISCONSIN POWER AND LIGHT COMPANY
- ---------------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
40
CERTIFICATIONS
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliant Energy
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman, President and
Chief Executive Officer
41
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliant Energy
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
42
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Interstate Power and
Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
43
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Interstate Power and
Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
44
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wisconsin Power and
Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
45
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wisconsin Power and
Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the effectiveness
of the disclosure controls and procedures based on our evaluation as of
the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: May 15, 2003
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
46