UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 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, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Transition period from ........ to ........
Commission Registrant; State of Incorporation; IRS Employer
File Number Address; and Telephone Number Identification No.
1-8946 CILCORP Inc. 37-1169387
(An Illinois Corporation)
300 Hamilton Blvd, Suite 300
Peoria, Illinois 61602
(309) 675-8810
1-2732 CENTRAL ILLINOIS LIGHT COMPANY 37-0211050
(An Illinois Corporation)
300 Liberty Street
Peoria, Illinois 61602
(309) 675-8810
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 the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
CILCORP Inc. Common stock, no par value,
shares outstanding at April 28, 1995 13,072,351
CENTRAL ILLINOIS LIGHT COMPANY
Common stock, no par value,
shares outstanding and privately
held by CILCORP Inc. at April 28, 1995 13,563,871
CILCORP INC.
AND
CENTRAL ILLINOIS LIGHT COMPANY
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995
INDEX
PART I. FINANCIAL INFORMATION
Page No.
Item 1: Financial Statements
CILCORP INC.
Consolidated Balance Sheets 3-4
Consolidated Statements of Income 5
Consolidated Statements of Cash Flows 6-7
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets 8-9
Consolidated Statements of Income 10
Consolidated Statements of Cash Flows 11-12
Notes to Consolidated Financial Statements
CILCORP Inc. and Central Illinois Light Company 13-15
Item 2: Management's Discussion and Analysis of Financial
Condition and Results of Operations
CILCORP Inc. and Central Illinois Light Company 16-24
PART II. OTHER INFORMATION
Item 1: Legal Proceedings 25
Item 4: Submission of Matters to a Vote of Security Holders 26
Item 5: Other Information 26-28
Item 6: Exhibits and Reports on Form 8-K 28
Signatures 29-30
CILCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
1995 1994
ASSETS (Unaudited)
Current assets:
Cash and temporary cash investments $ 1,327 $ 1,604
Receivables, less reserves of $2,632 and $2,291 65,866 55,779
Accrued unbilled revenue 34,444 40,474
Fuel, at average cost 15,416 14,765
Materials and supplies, at average cost 16,513 16,731
Gas in underground storage, at average cost 6,073 17,484
Prepayments and other 12,722 12,402
---------- ----------
Total current assets 152,361 159,239
---------- ----------
Investments and other property:
Investment in leveraged leases 122,554 120,961
Cash surrender value of company-owned life
insurance, net of related policy loans of
$28,831 2,093 1,637
Other investments 3,415 3,790
---------- ----------
Total investments and other property 128,062 126,388
---------- ----------
Property, plant and equipment:
Utility plant, at original cost
Electric 1,098,737 1,092,382
Gas 360,917 355,270
---------- ----------
1,459,654 1,447,652
Less - accumulated provision for depreciation 663,422 653,571
---------- ----------
796,232 794,081
Construction work in progress 70,658 71,105
Plant acquisition adjustments, being amortized
to 1999 3,177 3,355
Other, net of depreciation 23,551 23,152
---------- ----------
Total property, plant and equipment 893,618 891,693
---------- ----------
Other assets:
Prepaid pension expense 13,044 13,423
Cost in excess of net assets of acquired
businesses, net of accumulated amortization of
$3,765 and $3,589 24,372 24,548
Other 20,771 23,093
---------- ----------
Total other assets 58,187 61,064
---------- ----------
Total assets $1,232,228 $1,238,384
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these Balance Sheets.
CILCORP INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands)
LIABILITIES AND STOCKHOLDERS' EQUITY March 31, December 31,
1995 1994
(Unaudited)
Current liabilities:
Current portion of long-term debt $ 19,195 $ 21,200
Notes payable 45,600 29,400
Accounts payable 36,001 51,952
Accrued taxes 14,986 7,729
Accrued interest 4,757 9,024
Purchased gas adjustment over-recoveries 3,752 2,142
Other 18,347 16,557
---------- ----------
Total current liabilities 142,638 138,004
---------- ----------
Long-term debt 310,694 326,695
---------- ----------
Deferred credits and other liabilities:
Deferred income taxes 246,796 246,815
Net regulatory liability of regulated subsidiary 58,923 59,997
Deferred investment tax credit 25,754 26,178
Customers' advances for construction and other 31,866 29,860
--------- ----------
Total deferred credits 363,339 362,850
Preferred stock of subsidiary 66,120 66,120
Stockholders' equity:
Common stock, no par value; authorized
50,000,000 shares - outstanding 13,071,488 and
13,035,756 shares 169,253 167,987
Retained earnings 180,184 176,728
---------- ----------
Total stockholders' equity 349,437 344,715
---------- ----------
Total liabilities and stockholders' equity $1,232,228 $1,238,384
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these Balance Sheets.
CILCORP INC. AND SUBSIDIARIES
Consolidated Statements of Income
(In thousands)*
(Unaudited)
Three Months Ended
March 31,
1995 1994
Revenue:
Electric $74,345 $ 73,707
Gas 58,882 71,679
Environmental and engineering
services 34,674 29,384
Other businesses 2,686 2,666
------- --------
Total 170,587 177,436
Operating expenses:
Fuel for generation and
purchased power 27,543 27,912
Gas purchased for resale 29,107 42,946
Other operations and maintenance 59,918 57,054
Depreciation and amortization 15,816 15,472
Taxes, other than income taxes 11,119 11,220
------- --------
Total 143,503 154,604
Fixed charges and other:
Interest expense 7,456 6,516
Preferred stock dividends
of subsidiary 835 703
Allowance for funds used during
construction (231) (91)
Other 191 127
------- -------
Total 8,251 7,255
------- -------
Income before income taxes 18,833 15,577
Income taxes 7,360 5,876
------- -------
Net income available for
common stockholders $11,473 $ 9,701
======= =======
Average common shares outstanding 13,045 13,004
Net income per common share $ .88 $ .75
Dividends per common share $ .615 $ .615
*Except per share amounts
<FN>
The accompanying Notes to the Consolidated Financial Statements
are an integral part of these statements.
CILCORP INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income before preferred dividends $ 12,308 $ 10,405
-------- --------
Adjustments to reconcile net income to net cash
provided by operating activities:
Non-cash lease & investment income (1,550) (1,810)
Depreciation and amortization 15,816 15,472
Deferred income taxes, investment tax credit and
regulatory liability of subsidiary, net (1,517) 324
Changes in operating assets and liabilities:
Increase in accounts receivable and accrued
unbilled revenue (4,057) (589)
Decrease in inventories 10,978 15,786
Decrease in accounts payable (15,951) (14,863)
Increase in accrued taxes 7,257 6,946
(Increase) decrease in other assets 2,703 (205)
Increase (decrease) in other liabilities 1,152 (189)
-------- --------
Total adjustments 14,831 20,872
-------- --------
Net cash provided by operating activities 27,139 31,277
-------- --------
Cash flows from investing activities:
Additions to plant (16,790) (12,416)
Proceeds from sale of long-term investments 500 --
Other (1,740) (757)
-------- -------
Net cash used in investing activities (18,030) (13,173)
-------- -------
Cash flows from financing activities:
Net increase (decrease) in short-term debt 16,200 (12,200)
Repayment of long-term debt (18,000) --
Common dividends paid (8,017) (8,012)
Preferred dividends paid (835) (703)
Proceeds from issuance of stock 1,266 2,325
-------- --------
Net cash used in financing activities (9,386) (18,590)
------- -------
Net increase (decrease) in cash and temporary cash
investments (277) (486)
Cash and temporary cash investments at beginning
of year 1,604 1,440
------- -------
Cash and temporary cash investments at end of
quarter $ 1,327 $ 954
======= ========
Supplemental disclosures of cash flow information:
Cash paid during the period for:
Interest $ 11,082 $ 11,083
Income Taxes $ 1,179 $ 73
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
ASSETS 1995 1994
(Unaudited)
Utility plant, at original cost:
Electric $1,098,737 $1,092,382
Gas 360,917 355,270
---------- ----------
1,459,654 1,447,652
Less - accumulated provision for depreciation 663,422 653,571
---------- ----------
796,232 794,081
Construction work in progress 70,658 71,105
Plant acquisition adjustments, net of
amortization 3,177 3,355
---------- ----------
Total utility plant 870,067 868,541
---------- ----------
Other property and investments:
Cash surrender value of company-owned life
insurance (net of related policy loans of
$28,831) 2,093 1,637
Other 1,038 1,041
---------- ----------
Total other property and investments 3,131 2,678
---------- ----------
Current assets:
Cash and temporary cash investments 610 629
Receivables, less reserves of $835 and $600 35,058 30,543
Accrued unbilled revenue 16,803 22,340
Fuel, at average cost 15,416 14,765
Materials and supplies, at average cost 16,513 16,731
Gas in underground storage, at average cost 6,073 17,484
Prepaid taxes 286 2,103
Other 8,006 7,217
---------- ----------
Total current assets 98,765 111,812
---------- ----------
Deferred debits:
Unamortized loss on reacquired debt 6,372 6,486
Unamortized debt expense 2,204 2,212
Prepaid pension cost 13,044 13,423
Other 11,325 13,957
---------- ----------
Total deferred debits 32,945 36,078
---------- ----------
Total assets $1,004,908 $1,019,109
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these Balance Sheets.
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Balance Sheets
(In thousands)
March 31, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994
(Unaudited)
Capitalization:
Common shareholder's equity:
Common stock, no par value; authorized
20,000,000 shares; outstanding 13,563,871
shares $ 185,661 $ 185,661
Retained earnings 125,355 122,125
---------- ----------
Total common shareholder's equity 311,016 307,786
Preferred stock without mandatory redemption 44,120 44,120
Preferred stock with mandatory redemption 22,000 22,000
Long-term debt 262,369 278,359
---------- ----------
Total capitalization 639,505 652,265
---------- ----------
Current liabilities:
Current maturities of long-term debt 16,000 --
Notes payable 20,600 23,400
Accounts payable 31,639 47,536
Accrued taxes 11,132 6,387
Accrued interest 4,792 8,477
Purchased gas adjustment over-recoveries 3,752 2,142
Level payment plan 2,372 4,155
Other 7,023 6,809
---------- ----------
Total current liabilities 97,310 98,906
---------- ----------
Deferred liabilities and credits:
Accumulated deferred income taxes 151,845 151,856
Regulatory liability, net 58,923 59,997
Investment tax credits 25,754 26,178
Capital lease obligation 2,590 2,665
Other 28,981 27,242
---------- ----------
Total deferred liabilities and credits 268,093 267,938
---------- ----------
Total capitalization and liabilities $1,004,908 $1,019,109
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these Balance Sheets.
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Statements of Income
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Operating revenues:
Electric $ 74,345 $ 73,707
Gas 58,882 71,679
-------- --------
Total operating revenues 133,227 145,386
-------- --------
Operating expenses:
Cost of fuel 24,760 26,052
Cost of gas 29,107 42,946
Purchased power 2,784 1,860
Other operation and maintenance 27,315 28,731
Depreciation and amortization 14,146 13,752
Income taxes 7,515 6,175
Other taxes 9,717 9,863
-------- --------
Total operating expenses 115,344 129,379
-------- --------
Operating income 17,883 16,007
-------- --------
Other income and deductions:
Cost of equity funds capitalized -- 23
Company-owned life insurance, net (191) (127)
Other, net (16) (40)
-------- --------
Total other income and (deductions) (207) (144)
-------- --------
Income before interest expenses 17,676 15,863
-------- --------
Interest expenses:
Interest on long-term debt 4,808 4,796
Cost of borrowed funds capitalized (231) (68)
Other 1,017 520
-------- --------
Total interest expenses 5,594 5,248
-------- --------
Net income 12,082 10,615
-------- --------
Dividends on preferred stock 835 703
-------- --------
Net income available for common stock $ 11,247 $ 9,912
======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
CENTRAL ILLINOIS LIGHT COMPANY
Consolidated Statements of Cash Flows
(In thousands)
(Unaudited)
Three Months Ended
March 31,
1995 1994
Cash flows from operating activities:
Net income before preferred dividends $ 12,082 $ 10,615
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 14,324 13,931
Deferred taxes, investment tax credits and
regulatory liability, net (1,509) (932)
Increase in accounts receivable (4,515) (7,612)
Decrease in fuel, materials and supplies,
and gas in underground storage 10,978 15,787
Decrease in unbilled revenue 5,537 7,163
Decrease in accounts payable (15,897) (13,054)
Increase in accrued taxes and interest 1,060 1,127
Capital lease payments 120 119
Decrease in other current assets 5,633 689
Increase in other current liabilities 41 840
(Increase) decrease in other non-current assets (1,055) 742
Increase in other non-current liabilities 1,939 1,366
-------- --------
Net cash provided by operating activities 28,738 30,781
-------- --------
Cash flows from investing activities:
Capital expenditures (15,150) (9,737)
Cost of equity funds capitalized -- (23)
Other (1,801) (1,369)
-------- --------
Net cash used in investing activities (16,951) (11,129)
-------- --------
Cash flows from financing activities:
Common dividends paid (8,017) (8,010)
Preferred dividends paid (835) (703)
Long-term debt issued (34) --
Payments on capital lease obligation (120) (119)
Decrease in short-term borrowing (2,800) (11,400)
-------- --------
Net cash used in financing activities (11,806) (20,232)
-------- --------
Net decrease in cash and temporary
cash investments (19) (580)
Cash and temporary cash investments at beginning
of year 629 594
-------- --------
Cash and temporary cash investments at March 31 $ 610 $ 14
======== ========
Supplemental disclosures of cash flow
information:
Cash paid during the period for:
Interest (net of cost of borrowed funds
capitalized) $ 8,903 $ 9,334
Income taxes 1,479 2,271
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
CILCORP INC. AND CENTRAL ILLINOIS LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
NOTE 1. Introduction
The consolidated financial statements include the accounts of CILCORP
Inc. (CILCORP or Company), Central Illinois Light Company (CILCO),
Environmental Science & Engineering, Inc. (ESE) and CILCORP's other
subsidiaries after elimination of significant intercompany transactions.
CILCORP owns 100% of the common stock of CILCO. The consolidated
financial statements of CILCO include the accounts of CILCO and its
subsidiaries, CILCO Exploration and Development Company and CILCO Energy
Corporation.
The accompanying unaudited consolidated financial statements have been
prepared according to the rules and regulations of the Securities and
Exchange Commission. Although CILCORP believes the disclosures are
adequate to make the information presented not misleading, these
consolidated financial statements should be read with the consolidated
financial statements and related notes forming a part of the Company's
1994 Annual Report on Form 10-K.
In the Company's opinion, the consolidated financial statements
furnished reflect all normal and recurring adjustments necessary for a
fair presentation of the results of operations for the periods
presented. Operating results for interim periods are not necessarily
indicative of operating results to be expected for the year or of the
Company's future financial condition.
NOTE 2. Gas Pipeline Supplier Transition Costs
In 1992, the Federal Energy Regulatory Commission (FERC) issued Orders
636, 636A and 636B (collectively Order 636). Order 636 substantially
restructured the relationship between gas pipelines and distribution
companies, such as CILCO, for the sale, transportation and storage of
natural gas. These services, which traditionally had been "bundled"
by interstate pipeline companies, are now individually arranged by
CILCO. CILCO believes it is well-positioned to ensure the continued
acquisition of adequate and reliable gas supplies despite the
regulatory changes.
Order 636 also permitted pipeline suppliers to recover from gas
distribution companies prudently incurred transition costs attributed
to compliance with Order 636. As of March 31, 1995, pipeline
suppliers have billed CILCO, subject to refund, approximately $1.7
million of transition costs, including interest. These charges have
been, or will be, recovered from CILCO's customers through its
purchased gas adjustment clause (PGA). The PGA allows CILCO to adjust
customer billings to reflect changes in the cost of natural gas.
Presently, CILCO cannot determine its actual allocation of suppliers'
transition costs but believes that it could ultimately be billed an
additional $2.1 million, excluding interest. During 1994, the
Illinois Commerce Commission (ICC) affirmed the right of Illinois gas
distribution companies to recover pipeline transition costs from their
customers; therefore, management does not expect Order 636 to
materially impact CILCO's financial position or results of operations.
Under FERC Order 500, and subsequent Orders 528 and 528A, interstate
gas pipelines may bill gas distribution utilities for take-or-pay
(TOP) charges, including interest. The last payment for TOP charges
to the gas pipelines was made in October 1994. All TOP charges have
been recovered from CILCO's gas customers except for approximately
$185,000 which will be recovered in 1995.
A joint settlement proposal (LNG settlement) before the FERC among
Trunkline LNG Company, Panhandle Eastern Pipeline Company and others,
including CILCO, became effective in September 1992. The settlement
allows the pipelines to recover certain costs related to liquefied
natural gas projects. Through March 1995, gas pipelines have billed
CILCO approximately $2.6 million in charges related to the LNG
settlement and approximately $2.3 million has been recovered from
CILCO's customers through the PGA. CILCO believes that it could
ultimately be billed an additional $2.5 million by the pipelines.
CILCO has recorded a regulatory asset and corresponding liability of
$5.1 million on the Balance Sheets as of March 31, 1995, representing
the minimum amount of the estimated range of costs which CILCO expects
to incur related to transition costs, TOP charges and the LNG
settlement. The current portion of this regulatory asset and
corresponding liability is $1.8 million.
NOTE 3. Contingencies
Neither CILCORP, CILCO, nor any of their affiliates has been
identified as a potentially responsible party (PRP) under federal or
state environmental laws.
CILCO continues to investigate and/or monitor four former gas
manufacturing plant sites (Sites A, B, C and D) located within CILCO's
present gas service territory. The purpose of these studies is to
determine if waste materials, principally coal tar, are present,
whether such waste materials constitute an environmental or health
risk and if CILCO is responsible for the remediation of any remaining
waste materials at those sites. CILCO previously operated plants at
three of the four sites (Sites A, B and C) and currently owns two
(Sites A and B). In cooperation with the Illinois Environmental
Protection Agency, CILCO completed remedial action in 1991 at Site A,
at a cost of $3.3 million. In 1994, CILCO investigated Site B to
define the extent of waste materials on site. A risk assessment for
Site B is currently being developed, which will be followed by a
feasibility study of remedial alternatives in 1995. Through March
1995, CILCO paid approximately $700,000 to outside parties to
investigate and/or test Sites A and B. CILCO has not yet formulated a
remediation plan for Site C. Until more detailed site specific
testing has been completed, CILCO cannot determine the ultimate extent
or cost of any remediation of Site C. CILCO does not currently own
Site D and has not yet determined the extent, if any, of its
remediation responsibility for this site.
CILCO expects to spend approximately $300,000 for site monitoring,
legal fees and feasibility studies in 1995. A $4.6 million liability
and a corresponding regulatory asset are recorded on the Balance
Sheets representing the minimum amount of coal tar investigation and
remediation costs CILCO expects to incur. Coal tar remediation costs
incurred through March 1995 have been deferred on the Balance Sheets,
net of amounts recovered from customers.
Through March 31, 1995, CILCO has recovered approximately $3.9 million
in coal tar remediation costs from its customers through a gas rate
rider approved by the ICC. Currently, that rider allows recovery over
five years, without carrying costs, of prudently incurred coal tar
remediation expenses paid to outside vendors. The primary purpose of
the five-year recovery period was to effect a sharing of coal tar
remediation costs between Illinois utilities and their customers.
However, on April 20, 1995, the Illinois Supreme Court held that
Illinois utilities are entitled to recover prudently incurred coal tar
remediation costs without any sharing, including any sharing effected
by recovery over an extended period without carrying costs. Requests
for rehearing of the Court's decision must be filed by May 11, 1995.
CILCO cannot predict whether a request for rehearing will be filed, or
whether rehearing would be granted by the Court if requested.
However, based upon the Court's opinion issued on April 20, 1995,
management continues to believe that the cost of coal tar remediation
will not have a material adverse effect on CILCO's financial position
or results of operations.
NOTE 4. Commitments
In August 1990, CILCO entered into a firm, wholesale power purchase
agreement with Central Illinois Public Service Company (CIPS). This
agreement, which expires in 1998, provides for an initial purchase of 30
megawatts (MW) of capacity, increasing to 90 MW in 1997. CILCO can
increase purchases to a maximum of 100 MW during the contract period,
provided CIPS then has the additional capacity available. In November
1992, CILCO entered into a limited-term power agreement to purchase 100
MW of capacity from CIPS during the time period June 1998 through May
2002.
In March 1995, CILCO and CIPS renegotiated the November 1992 limited-
term power agreement. This agreement, which now expires in May 2009,
provides for CILCO to purchase 150 MW of CIPS' capacity from June 1998
through May 2002, and 50 MW from June 2002 through May 2009. This
renegotiated agreement is subject to the ICC's final approval of CILCO's
1995 electric least cost energy plan, which has been revised to include
the terms of this bulk power purchase agreement.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
CILCORP Inc. (the Company) is the parent of two core operating
businesses, Central Illinois Light Company (CILCO) and Environmental
Science & Engineering, Inc. (ESE). The Company also has two other
first-tier subsidiaries, CILCORP Investment Management Inc. (CIM), and
CILCORP Ventures Inc. (CVI), whose operations, combined with those of
the holding company (Holding Company) itself, are collectively referred
to herein as Other Businesses.
CILCO, the primary business subsidiary, is an electric and gas utility
serving customers in central and east central Illinois. CILCO's
financial condition and results of operations are currently the
principal factors affecting the Company's financial condition and
results of operations.
ESE is a national environmental consulting and engineering firm serving
governmental, industrial and commercial customers.
CIM invests in a diversified portfolio of long-term financial
investments which currently includes leveraged leases and energy-related
interests.
CVI invests in new ventures and the expansion of existing ventures in
environmental services, energy, biotechnology and health care.
Capital Resources & Liquidity
Declaration of dividends is at the discretion of the Board of Directors.
The Company's ability to declare and pay dividends is contingent upon
its receipt of dividend payments from its subsidiaries, business
conditions, earnings and the financial condition of the Company. The
Company believes that internal and external sources of capital which
are, or are expected to be, available to the Holding Company and its
subsidiaries will be adequate to meet the Company's capital expenditures
program, pay interest and dividends, meet working capital needs and
retire debt as it matures.
The Company
Short-term borrowing capability is available to the Company for
additional cash requirements. CILCORP's Board of Directors has
authorized it to borrow up to $50 million on a short-term basis. On
March 31, 1995, CILCORP had committed bank lines of credit of $50
million, of which $25 million was outstanding.
During March and April 1995, the Company issued 36,595 shares of common
stock at an average price of $35.48 per share through the CILCORP Inc.
Automatic Reinvestment and Stock Purchase Plan (DRIP). Depending on
market conditions, the Company may issue additional shares of common
stock through the DRIP, the CILCO Employees' Savings Plan or through a
conventional stock offering. The proceeds from newly issued stock have
been, and will continue to be, used to retire CILCORP short-term debt,
to meet working capital and capital expenditure requirements at CILCO
and for other corporate purposes.
At March 31, 1995, the Company had issued $48 million of medium-term
notes under its $75 million medium-term note program. The Company may
issue additional notes during 1995 through 1997 under this program to
retire maturing debt and to provide funds for other corporate purposes.
CILCO
Capital expenditures totaled $15 million for the three months ended March 31,
1995. Capital expenditures are anticipated to be approximately $54 million
for the remainder of 1995, including $3.3 million to replace CILCO's Customer
Information System and $1.1 million to complete the installation of electric
generating equipment for the cogeneration plant at Midwest Grain Products,
Inc. (MWG). The plant, which began providing steam heat to MWG's Pekin,
Illinois, facility on December 16, 1994, will also generate electricity for
distribution to CILCO's customers. The plant is scheduled to begin
generating electricity in June 1995. CILCO anticipates the total cost of the
project to be approximately $18.2 million. Capital expenditures for the
years 1996 and 1997 are estimated to be $72 million and $67 million,
respectively.
During 1995, CILCO plans to issue approximately $20 million of secured
medium-term notes to finance capital expenditures. CILCO plans to issue $36
million of secured medium-term notes to retire outstanding long-term debt as
it matures in 1996 and 1997. In addition, $25 million of pollution control
bonds are expected to be issued in 1996 and in later years to finance
pollution control facilities, including new solid waste disposal facilities
at CILCO's Duck Creek generating station. CILCO intends to finance the
remainder of its 1995 and 1996 capital expenditures with funds provided by
operations and capital provided by CILCORP.
At March 31, 1995, CILCO had bank lines of credit aggregating $30 million
which are used to support CILCO's issuance of commercial paper. CILCO had
$20.6 million of commercial paper outstanding at March 31, 1995, and expects
to issue commercial paper periodically throughout the remainder of 1995.
ESE
For the quarter ended March 31, 1995, ESE's expenditures for capital
additions and improvements were approximately $1.6 million. Capital
expenditures for the remainder of 1995 are expected to be approximately
$2.5 million.
At March 31, 1995, ESE had borrowed $27.1 million from the Holding
Company, an increase of $1.5 million from December 31, 1994. ESE has a
$7.75 million bank line of credit, of which $4.4 million was outstanding
at March 31, 1995, to collateralize performance bonds issued in
connection with ESE projects. ESE expects to finance its capital
expenditures and working capital needs during 1995 with a combination of
funds generated internally and periodic short-term borrowings from the
Holding Company.
CIM
During the first quarter of 1995, CIM refinanced $18 million of maturing
bank debt with funds borrowed from the Holding Company. At March 31,
1995, CIM had outstanding debt of $28.1 million, consisting of $25.1
million borrowed from the Holding Company and $3 million borrowed from
banks. CIM expects to finance new investments and working capital needs
during 1995 with a combination of funds generated internally and
periodic short-term borrowings from the Holding Company.
Results Of Operations
Overview
The following table summarizes net income of CILCO, ESE and Other
Businesses for the three months ended March 31, 1995 and 1994.
Three Months Ended
March 31,
1995 1994
(In thousands)
(Unaudited)
Core businesses:
CILCO
Electric operating income $ 9,065 $ 8,543
Gas operating income 8,818 7,464
------- -------
Total utility operating income 17,883 16,007
Utility other income and deductions (5,801) (5,392)
Preferred stock dividends of CILCO (835) (703)
------- -------
Total utility net income 11,247 9,912
ESE
ESE net income (loss) 377 (349)
------- -------
Total core business income 11,624 9,563
Other businesses:
Other businesses net income (loss) (151) 138
------- -------
Consolidated net income available
to common shareholders $11,473 $ 9,701
======= =======
CILCO Electric Operations
The following table summarizes the components of CILCO electric
operating income for the three months ended March 31, 1995 and 1994:
Three Months Ended
Components of Electric March 31,
Operating Income 1995 1994
(In thousands)
Revenue:
Electric retail $72,933 $70,005
Sales for resale 1,412 3,702
------- -------
Total revenue 74,345 73,707
------- -------
Cost of sales:
Cost of fuel 24,760 26,052
Purchased power expense 2,784 1,860
Revenue taxes 3,429 3,061
------- -------
Total cost of sales 30,973 30,973
------- -------
Gross margin 43,372 42,734
------- -------
Operating expenses:
Other operation and maintenance 19,082 19,685
Depreciation and amortization 10,213 9,888
Income and other taxes 5,012 4,618
------- -------
Total operating expenses 34,307 34,191
------- -------
Electric operating income $ 9,065 $ 8,543
======= =======
Electric gross margin and retail sales volumes increased 2% for the
three months ended March 31, 1995, compared to the same period in 1994.
A 2% increase in commercial sales and a 9% increase in industrial sales
offset a 5% decrease in residential sales. Commercial sales were higher
primarily due to an increased number of commercial customers and the
change in industrial sales resulted mainly from higher demand by several large
industrial customers. The decrease in residential sales was primarily
due to milder winter weather. Heating degree days were 9% lower for the
quarter ended March 31, 1995, compared to the same period in 1994.
CILCO's largest customer is Caterpillar Inc. On June 20, 1994,
Caterpillar employees, represented by the United Auto Workers Union,
began a strike at certain Caterpillar facilities in CILCO's service
territory. To date, the strike has not had an adverse effect on CILCO's
sales to Caterpillar. CILCO's management cannot predict what, if any,
impact a continued strike at Caterpillar will have on CILCO's future
revenues or earnings.
The overall level of business activity in CILCO's service territory and
weather conditions are expected to continue to be the primary factors
affecting electric sales in the near term. CILCO's electric sales may
be affected in the long-term by increased competition in the electric
utility industry (see Part II. Item 5: Electric Competition).
Sales for resale decreased during the first quarter of 1995, due to
lower demand for electricity from neighboring utilities. Sales for
resale vary based on the energy requirements of neighboring utilities,
CILCO's available capacity for bulk power sales and the price of power
available for sale. CILCO expects competition to continue to increase
in the sales for resale and purchased power market.
Substantially all of CILCO's electric generating capacity is coal-fired.
The cost of fuel decreased 5% in the first quarter of 1995, compared to
the same period in 1994, due to decreased electric generation and lower
prices.
Purchased power increased for the three months ended March 31, 1995,
compared to the same period in 1994 due to readily available and
reasonably priced wholesale energy. Purchased power expense varies
based on CILCO's need for energy and the price of power available for
purchase. CILCO makes use of purchased power when it is economical to
do so and when required during maintenance outages at CILCO plants.
Costs and savings realized from the purchase of power are passed through
to CILCO's customers via the fuel adjustment clause (FAC). The FAC
allows CILCO to pass increases or decreases in the cost of fuel through
to customers.
Other operation and maintenance expenses decreased 3% for the three
months ended March 31, 1995, compared to the corresponding period in
1994, primarily due to decreased employee benefit costs and power plant
maintenance.
Depreciation and amortization expense increased slightly, reflecting
additions and replacements of utility plant at costs in excess of the
original cost of the property retired.
Income and other tax expense increased mainly from higher pre-tax
operating income.
CILCO Gas Operations
The following table summarizes the components of CILCO gas operating
income for the three months ended March 31, 1995 and 1994:
Three Months Ended
Components of Gas Operating Income March 31,
1995 1994
(In thousands)
Revenue:
Sale of gas $56,168 $68,409
Transportation services 2,714 3,270
------- -------
Total revenue 58,882 71,679
------- -------
Cost of sales:
Cost of gas 29,107 42,946
Revenue taxes 3,114 3,695
------- -------
Total cost of sales 32,221 46,641
------- -------
Gross margin 26,661 25,038
------- -------
Operating expenses:
Other operation and maintenance 8,233 9,046
Depreciation and amortization 3,933 3,864
Income and other taxes 5,677 4,664
------- -------
Total operating expenses 17,843 17,574
------- -------
Gas operating income $ 8,818 $ 7,464
======= =======
Gas gross margin increased 7% for the quarter ended March 31, 1995,
compared to the same period in 1994, primarily due to the December 1994
rate order that increased overall gas base rates 6.7%. For additional
rate information refer to Note 9 - Rate Matters in the Company's 1994
Annual Report on Form 10-K. Residential sales decreased 10% and
commercial sales decreased 3% for the first quarter of 1995. Heating
degree days were 9% lower than the same period in 1994. The overall
level of business activity in CILCO's service territory and weather
conditions are expected to continue to be the primary factors affecting
gas sales.
Revenue from gas transportation services decreased 17% and sales volumes
decreased 12% for the quarter ended March 31, 1995, compared to the same
period in 1994. Revenue declined primarily due to decreased purchases
of gas by industrial transportation customers from suppliers other than
CILCO and the fact that there are fewer transportation customers. There
were 380 transportation customers at March 31, 1995, compared to 666
customers at the end of the same quarter in 1994. As a result of
CILCO's new gas tariffs, CILCO's system rates are more competitive with
transportation rates and various transportation customers have resumed
purchasing gas from CILCO.
The cost of gas decreased 32% for the quarter ended March 31, 1995,
compared to the same quarter of 1994. This reduction was principally
due to decreased sales and lower natural gas prices from CILCO's
suppliers. The lower natural gas prices, which partially contributed to
the 19% decrease in gas retail revenue, were passed through to CILCO's
gas customers via the PGA. The PGA is the mechanism used to pass
increases or decreases in the cost of natural gas through to customers.
Other operation and maintenance expenses decreased 9% for the three
months ended March 31, 1995, compared to the corresponding period in
1994, due to decreased costs for employee benefits and gas distribution
system maintenance.
Depreciation and amortization expense increased slightly reflecting
additions and replacements of utility plant at costs in excess of the
original cost of the property retired.
Income and other taxes expense increased for the quarter ended March 31,
1995, primarily due to higher pre-tax operating income.
CILCO Other Income and Deductions and Interest Expense
The following table summarizes other income and deductions and
interest expense for the three months ended March 31, 1995 and 1994:
Three Months Ended
Components of Other Income and March 31,
Deductions and Interest Expense 1995 1994
(In thousands)
Net interest expense $(5,814) $(5,069)
Income taxes 565 279
Other (552) (602)
------- -------
Other income (deductions) $(5,801) $(5,392)
======= =======
Interest expense increased primarily as a result of a higher outstanding
notes payable balance during 1995.
ESE Operations
The following table summarizes the components of the environmental and
engineering services results for the three months ended March 31, 1995
and 1994:
Components of ESE Net Income (Loss)
1995 1994
(In thousands)
Environmental and engineering
services revenue $34,674 $29,384
Direct non-labor project costs 13,960 10,413
------- -------
Net revenue 20,714 18,971
------- -------
Expenses:
Direct salaries and other costs 10,148 9,464
General & administrative 7,808 8,059
Depreciation and amortization 1,443 1,494
------- -------
Operating expenses 19,399 19,017
------- -------
Interest expense 511 405
------- -------
Income (loss) before income taxes 804 (451)
Income taxes 427 (102)
------- -------
ESE net income (loss) $ 377 $ (349)
======= =======
ESE's results have fluctuated from quarter to quarter since its
acquisition in 1990. Such fluctuations may be expected to continue.
Factors influencing such variations include: project delays, which may
be caused by regulatory agency approvals or client considerations; the
level of subcontractor services; weather, which may limit the amount of
time ESE professionals have in the field; and the initial training of
new professionals. Accordingly, results for any one quarter are not
necessarily indicative of results for any other quarter or for the year.
ESE incurs substantial direct project costs from the use of
subcontractors on projects. These costs are passed directly through to
ESE's clients. As a result, ESE measures its operating performance on
the basis of net revenues, which are determined by deducting such direct
project costs from gross revenues.
Net revenues were 9% higher for the quarter ended March 31, 1995,
compared to the corresponding period in 1994. The increase was
primarily due to higher demand for consulting services. Additionally,
improved weather conditions in 1995 compared to 1994 generally enabled
projects to continue with fewer interruptions.
Direct and indirect salary expense increased 7% in the first quarter of
1995, compared to the corresponding period in 1994. This increase is
primarily due to wage and salary increases effective in March 1994, and
increased labor utilization during the first quarter of 1995. Due to
the labor-intensive nature of ESE's business, ESE has the ability to
adjust staffing levels to appropriately recognize changing business
conditions. ESE had 1,223 full-time-equivalent employees at March 31,
1995, compared to 1,218 at March 31, 1994.
Other Businesses Operations
The following table summarizes the components of Other Businesses'
income (loss) for the three months ended March 31, 1995 and 1994:
Components of Other Businesses'
Net Income (Loss)
Three Months Ended
March 31,
1995 1994
(In thousands)
Revenue:
Other revenue $ 2,675 $2,419
------- ------
Expenses:
Operating expenses 1,144 1,309
Depreciation and amortization 49 48
Interest expense 1,592 795
Income and other taxes 41 129
------- ------
Total expenses 2,826 2,281
------- ------
Other businesses' net income (loss) $ (151) $ 138
======= ======
Other revenues were greater during the first quarter of 1995, compared
to the first quarter of 1994, primarily due to a one-time preferred
dividend on a CVI investment and revenues generated by CILCORP Energy
Services Inc., a wholly-owned CVI subsidiary, which markets carbon
monoxide detectors to utilities for resale. These revenues were
partially offset by declining leveraged lease income. Under generally
accepted accounting principles pertaining to leveraged leases, income
declines as the lease portfolio matures.
Operating expenses decreased for the first quarter of 1995, compared to
the first quarter of 1994, primarily due to a one-time charge related to
CILCORP's termination of a lease at an ESE facility in the first quarter
of 1994. The lease was entered into during negotiations which led to
CILCORP's 1990 acquisition of ESE.
Interest expense increased in 1995 as a result of an increase in long-
term debt.
Income and other taxes were lower in the first quarter of 1995, compared
to the first quarter of 1994, primarily due to lower pre-tax income.
PART II. OTHER INFORMATION
Item 1: Legal Proceedings
Reference is made to "Environmental Matters" under "Item 1. Business"
in the Company's 1994 Annual Report on Form 10-K, and "Note 3.
Contingencies," herein, for certain pending legal proceedings and
proceedings known to be contemplated by governmental authorities.
The Company and its subsidiaries are subject to certain claims and
lawsuits in connection with work performed in the ordinary course of
their businesses. Except as otherwise disclosed or referred to in this
section, in the opinion of management, all such claims currently pending
either will not result in a material adverse effect on the financial
position and results of operations of the Company or are adequately
covered by: (i) insurance; (ii) contractual or statutory
indemnification; and/or (iii) reserves for potential losses.
CILCO
On July 6, 1994, a lawsuit was filed against CILCO in a United States
District Court by the current property owner, Vector-Springfield
Properties, Ltd., seeking damages related to alleged coal tar
contamination from a gas manufacturing plant formerly located at the
site which was owned but never operated by CILCO (Site D). The lawsuit
seeks cost recovery of more than $3 million related to coal tar
investigation expenses, operating losses and diminution of market value.
CILCO intends to vigorously defend these claims. For a further
discussion of gas manufacturing plant sites, refer to Note 3.
Contingencies. Management cannot currently determine the outcome of
this litigation, but does not believe it will have a material adverse
impact on CILCO's financial position or results of operations.
ESE
At the request of the South Carolina Department of Health and
Environmental Control, the U. S. Department of Justice initiated an
investigation into an alleged record-keeping violation at an office
operated by ESE in Greenville, South Carolina. The office was closed in
May 1993. Following its investigation, the U. S. Department of Justice
referred this matter to the Attorney General of South Carolina for
disposition as a civil matter. Management does not believe this matter
will have a material adverse impact on the Company's financial position
or results of operations.
Item 4: Submission of Matters to a Vote of Security Holders
Shareholders cast the following votes at the Company's Annual Meeting of
Shareholders held April 25, 1995:
Votes Abstentions &
Against Broker
Votes for or Withheld Non-Votes
Elected to the Board of
Directors:
W. Bunn III 10,117,025 279,111 0
H. J. Holland 10,109,019 287,332 0
K. E. Smith 10,100,088 295,278 0
Appointment of Independent
Public Accountants 10,144,206 111,864 137,919
Amend Bylaws and/or
Articles of Incorporation
to establish a minimum
level of stock ownership
for directors 1,683,278 6,692,741 2,981,911
Item 5: Other Information
Electric Competition
The National Energy Policy Act of 1992 (NEPA) encourages competition
but specifically bans federally-mandated wheeling of power for retail
customers. However, several state public utility regulatory
commissions are investigating or adopting pilot programs to initiate
retail wheeling. At least one Illinois utility, an industrial
consumers group and the ICC have each lent their support to proposed
legislation which, to varying degrees, offers incentive regulation,
retail and wholesale wheeling in future years and changes in the ICC's
regulatory authority. These proposals have been submitted to the
Illinois legislature. The legislature's response to any of these
proposals is not known at this time.
Illinois Senate Bill 232, supported by the ICC, proposes to offer public
utilities an opportunity to develop alternative regulation and incentive
ratemaking programs by petitioning the ICC. These experimental programs
would be subject to standards established by the ICC, restricted to the
public utility's service territory and not extend beyond June 30, 2000.
A report on the results of the programs would then be delivered to the
Illinois legislature by December 31, 2000, if the legislation is enacted
as proposed.
CILCO participated in a state-wide task force to review and analyze
regulation in Illinois. This task force, which examined the status of
past and future regulation, presented eight potential competitive
scenarios with individual comments from each task force participant as
part of its study. The completed text describing this study is being
printed and will be provided to the ICC and the Illinois legislature
for educational and planning purposes.
With growing competition in the electric utility industry, CILCO's
largest customers may have increased opportunities to select their
electric supplier. On March 29, 1995, the FERC initiated a Notice of
Proposed Rulemaking (NOPR), which addresses expanded transmission
access, recovery of stranded investment due to increased competition,
information sharing and other issues related to expanded competition
in the electric utility industry. The FERC's NOPR seeks comments on
proposals concerning transaction coordination, record-keeping,
reporting, tariffs, state versus federal jurisdiction and many other
related topics. CILCO is reviewing the NOPR to determine its effect
on operations and to develop a strategy for dealing with its
provisions. CILCO will file comments with the FERC on the sections of
the NOPR that will significantly impact its business. While
management cannot currently predict the ultimate effect of the FERC's
proposed rulemaking on CILCO's business, it is expected that this
NOPR, when finalized, will significantly change the electric utility
environment in the years to come.
Management believes that CILCO has positioned itself for competition
by keeping its prices low, maintaining good customer relations and
developing the flexibility to respond directly to individual customer
requests. The Company recently reorganized as part of a strategy to
prepare for the changing utility environment (see CILCO and CILCORP
Officer Changes discussed below).
Audit Of CILCO's Gas Operations
In September 1994, as part of a settlement agreement with the U.S.
Department of Justice, CILCO agreed to underwrite the reasonable expense
of an outside expert, which was selected by the ICC, to examine its gas
operations manuals and systems to ensure they comply with all applicable
statutes and regulations. CILCO estimates the cost of the audit will be
$350,000 and expects the audit to conclude by the end of 1995. For
additional information refer to Note 9. Rate Matters in the Company's
1994 Annual Report on Form 10-K.
CILCO Sale Of R. S. Wallace Station
In 1994, CILCO entered into an option agreement to sell for $7
million the 95-acre site of the former R. S. Wallace Station, a
retired electric generating plant. On January 5, 1995, the ICC
approved the sale and the accounting treatment of the proceeds.
Various significant terms and conditions must be satisfied in order
for the sale to be completed. CILCO expects a portion of the sale
will be completed in 1995, with the remainder to be completed during
1996 and 1997. Gain on the sale would be included in other income
during 1995, 1996 and 1997.
CILCO and CILCORP Officer Changes
At a special meeting of the CILCO Board of Directors in March 1995,
four new vice presidents were elected. The moves became effective
April 1, concurrent with the retirement of R. Wayne Slone as Chairman,
President and Chief Executive Officer. The new vice presidents are:
Michael J. Bowling, Vice President - Electric Operations; Scott A.
Cisel, Vice President - Marketing & Sales; Stephen R. Corwell, Vice
President - Gas Operations; and Robert J. Sprowls, Vice President -
Strategic Services. These appointments bring the total number of vice
presidents to six, including Terrence S. Kurtz, Vice President -
Electric Production, and Thomas S. Romanowski, Vice President -
Finance. Two Group Presidents of CILCO were previously elected:
James F. Vergon - Gas Operations and William M. Shay - Electric
Operations, also effective April 1.
In addition to the CILCO officer changes, Jeffrey L. Barnett became
CILCORP Controller effective April 1, 1995 and Michael D. Austin became
CILCORP Treasurer effective April 25, 1995.
Item 6: Exhibits and Reports on Form 8-K.
(a) Exhibits
None
(b) Reports on Form 8-K
None
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CILCORP Inc.
(Registrant)
Date May 10, 1995 R. O. Viets
R. O. Viets
President and
Chief Executive Officer
Date May 10, 1995 J. L. Barnett
J. L. Barnett
Controller
SIGNATURES
Pursuant to the requirements of the Securities Act of 1934, the regis-
trant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL ILLINOIS LIGHT COMPANY
(Registrant)
Date May 10, 1995 T. S. Romanowski
T. S. Romanowski
Vice President and Chief
Financial Officer
Date May 10, 1995 R. L. Beetschen
R. L. Beetschen
Controller and Manager
of Accounting