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 Quarterly Period Ended September 30, 1998
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 1-3672.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-0211380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
607 East Adams Street, Springfield, Illinois 62739
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (217) 523-3600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X . No .
------- -------
Shares outstanding of each of registrant's classes of common stock as of
October 31, 1998:
Common Stock, no par value, held by Ameren Corporation (parent company of
Registrant) - 25,452,373
Central Illinois Public Service Company
Index
Page No.
Part I Financial Information (Unaudited)
Management's Discussion and Analysis 2
Balance Sheet
- September 30, 1998 and December 31, 1997 8
Statement of Income
- Three months, nine months and 12 months ended
September 30, 1998 and 1997 9
Statement of Cash Flows
- Nine months ended September 30, 1998 and 1997 10
Notes to Financial Statements 11
Part II Other Information 12
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a
subsidiary of Ameren Corporation (Ameren), a holding company, registered under
the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union
Electric Company (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to form
Ameren, with AmerenUE and CIPSCO's subsidiaries, the Registrant and CIPSCO
Investment Company (CIC), becoming wholly-owned subsidiaries of Ameren (the
Merger).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 11, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 1997 Form 10-K.
RESULTS OF OPERATIONS
Earnings
Third quarter 1998 earnings of $39 million increased $7 million from 1997's
third quarter earnings. Earnings for the nine months ended September 30, 1998
increased $12 million from the year-ago period to $68 million. Earnings for the
12 months ended September 30, 1998 were $47 million, a $19 million decrease from
the preceding 12-month period. Excluding the extraordinary charge recorded in
the fourth quarter of 1997 to write off the generation-related regulatory assets
and liabilities of the Registrant's Illinois retail electric business, earnings
for the 12-month period ended September 30, 1998 were $72 million.
Earnings fluctuated due to many conditions, the primary ones being: weather
variations, sales growth, fluctuating operating costs, the write-off of
generation-related regulatory assets and liabilities, merger-related costs and
targeted separation plan expense. The significant items affecting revenues,
costs and earnings during the three-month, nine-month and 12-month periods ended
September 30, 1998, and 1997 are detailed below.
Electric Operations
Electric Operating Revenues Variations for periods ended September 30, 1998
from comparable prior-year periods
- --------------------------------------------- ---------------- --------------- -----------------
(Millions of Dollars) Three Months Nine Months Twelve Months
- --------------------------------------------- ---------------- --------------- -----------------
Effect of abnormal weather $ 16 $ 23 $ 22
Growth and other 5 21 41
Interchange sales 1 (10) (32)
- --------------------------------------------- ---------------- --------------- -----------------
$ 22 $ 34 $ 31
- --------------------------------------------- ---------------- --------------- -----------------
Electric revenues for the three months and nine months ended September 30, 1998,
increased $22 million and $34 million, respectively, compared to the year-ago
periods primarily due to warmer summer weather and growth in the service
territory. Weather-sensitive residential and commercial sales increased 13
percent and 10 percent, respectively, for the three months ended September 30,
1998, versus the prior year periods and 9 percent and 7 percent, respectively,
for the nine months ended September 30, 1998, compared to the year-ago periods.
Industrial sales increased 5 percent and 6 percent, respectively, for the three
months and nine months ended September 30, 1998, versus the prior year periods.
Electric revenues for the 12 months ended September 30, 1998, increased $31
million from the prior 12-month period due to an increase in native sales
resulting primarily from warmer weather and a strong local economy, partially
offset by lower interchange sales caused by decreased sales opportunities.
Residential sales increased 7 percent, and commercial and industrial sales both
increased 5 percent for the 12 months ended September 30, 1998, versus the prior
year period.
-2-
Fuel and Purchased Power
Variations for periods ended September 30, 1998
from comparable prior-year periods
- --------------------------------------------- ------------------- --------------- -----------------
(Millions of Dollars) Three Months Nine Months Twelve Months
- --------------------------------------------- ------------------- --------------- -----------------
Fuel:
Variation in generation $ 1 $ (14) $ (15)
Price (2) 1 -
Generation efficiencies and other (1) (1) -
Purchased power variation 7 19 14
- --------------------------------------------- ------------------- --------------- -----------------
$ 5 $ 5 $ (1)
- --------------------------------------------- ------------------- --------------- -----------------
The increase in fuel and purchased power costs for the three months ended
September 30, 1998, versus the comparable prior year quarter was primarily the
result of higher sales volume.
Fuel and purchased power costs for the nine months ended September 30, 1998,
versus the prior year increased due to increased power purchases resulting from
higher sales volume, partially offset by lower generation.
The decrease in fuel and purchased power costs for the 12 months ended September
30, 1998, versus the year-ago period was driven mainly by a decrease in
interchange sales, partially offset by an increase in purchased power due to an
increase in native load sales.
While unprecedented prices for power purchases occurred in the marketplace
during the last week of June 1998, the Registrant was able to effectively manage
its power costs in the face of soaring wholesale electricity prices. Overall,
the abnormally high prices for power purchases in June had little impact on the
Registrant's financial results for the periods presented.
Gas Operations
Gas revenues for the nine months and 12 months ended September 30, 1998,
decreased $9 million and $13 million, respectively, due to lower sales resulting
from milder winter weather and lower gas costs reflected in the purchased gas
adjustment clause.
Gas costs for the nine months and 12 months ended September 30, 1998, decreased
$10 million and $11 million, respectively, compared to the year-ago period. The
decreases in gas costs for these periods were primarily due to lower sales
volume.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation and labor increases in addition to a one-time charge for the targeted
separation plan as described below.
In March 1998, Ameren announced plans to reduce its other operating expenses,
including plans to eliminate approximately 400 employee positions by mid-1999
through a hiring freeze and a targeted separation plan (the TSP). In July 1998,
Ameren offered separation packages to employees whose positions were to be
eliminated through the TSP. In the third quarter of 1998, the Registrant
recorded a one-time, pretax charge of $7 million (which reduced earnings $4
million) representing its share of costs incurred to implement the TSP. The
Registrant expects that the hiring freeze and TSP will reduce its operating
expenses by approximately $4 million in 1998 and $7 million annually thereafter.
Other operations expenses increased $9 million, $14 million and $15 million for
the three months, nine months and 12 months ended September 30, 1998, compared
to the same year-ago period primarily due to the TSP and increases in
information system related costs and injuries and damages expense.
Maintenance expenses for the nine months and 12 months ended September 30, 1998,
increased $2 million and $11 million, respectively, from the comparable prior
year period due to increased scheduled fossil power plant maintenance.
-3-
Depreciation and amortization expense for the three-month, nine-month and
12-month periods ended September 30, 1998, decreased $2 million, $7 million and
$8 million, respectively, versus the comparable 1997 periods primarily due to
the fourth quarter 1997 write-off of generation related regulatory assets and
liabilities of the Registrant's retail electric business.
Taxes
Income taxes charged to operating expenses for the three months and nine months
ended September 30, 1998, increased $6 million and $7 million, respectively,
versus the year-ago period due primarily to higher pretax income in 1998.
Income taxes charged to operating expenses for the 12 months ended September 30,
1998, increased $3 million versus the year-ago period due primarily to higher
pretax income before the extraordinary charge in 1998.
Balance Sheet
Changes in accounts and wages payable, taxes accrued, other accruals and other
current assets result from the timing of various payments to taxing authorities
and suppliers.
LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $120 million for the nine months
ended September 30, 1998, compared to cash provided by operating activities of
$59 million during the same 1997 period.
Cash flows used in investing activities totaled $46 million and $79 million for
the nine months ended September 30, 1998 and September 30 1997, respectively.
Construction expenditures for the nine months ended September 30, 1998 for
constructing new or improving existing facilities and complying with the Clean
Air Act were $47 million. Capital requirements for the remainder of 1998 are
expected to be principally for construction expenditures.
Cash flows used in financing activities were $67 million for the nine months
ended September 30, 1998, compared to cash provided by financing activities of
$21 million during the same 1997 period. The Registrant's principal financing
activities for the nine months ended September 30, 1998 included a debt issuance
of $10 million, the redemption of debt of $21 million and the payment of
dividends.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission under PUHCA to have up to $250 million of
short-term unsecured debt instruments outstanding at any one time. Short-term
borrowings consist of bank loans (maturities generally on an overnight basis)
and commercial paper (maturities generally within 10 to 45 days). At September
30, 1998, the Registrant had committed bank lines of credit aggregating $80
million (of which $80 million were unused and $26 million were available at such
date) which make available interim financing at various rates of interest based
on LIBOR, the bank certificate of deposit rate or other options. The lines of
credit are renewable annually at various dates throughout the year. At September
30, 1998, the Registrant had $54 million of short-term borrowings.
CONTINGENCIES
On March 27, 1998, a jury awarded a total of $3 million to the families of four
children who contracted neuroblastoma (a rare form of cancer) following the
Registrant's 1987 clean-up of a former manufactured gas plant site in
Taylorville, Illinois. The Registrant continues to believe it has meritorious
defenses and has appealed the verdict. The Registrant believes that the final
disposition of this matter will not have a material adverse effect on its
financial position, results of operations or liquidity.
RATE MATTERS
As a result of the Electric Service Customer Choice and Rate Relief Law of 1997
(the Law) providing for electric utility restructuring in Illinois, the
Registrant filed proposals with the Illinois Commerce Commission (ICC) to
eliminate the electric fuel adjustment clause for Illinois retail customers,
thereby including a historical level of fuel costs in base rates. The ICC
approved the Registrant's filing on March 25, 1998.
-4-
In June 1998, the Registrant filed a residential rate reduction tariff with the
ICC to comply with the requirements of the Law. Under the provisions of the Law,
a rate decrease of 5 percent became effective for Illinois residential electric
customers beginning August 1, 1998. This rate decrease is expected to reduce
electric revenues approximately $5 million in 1998 and $11 million annually
thereafter, based on estimated sales levels and assuming normal weather
conditions.
Also in June 1998, the Registrant filed a request with the ICC to increase rates
$15 million annually for natural gas service. In October 1998, the ICC staff
filed testimony that recommended an increase in natural gas service rates of
$6 million. The ICC has until May 1999 to render a decision.
See Note 6 under Notes to Financial Statements for further discussion of Rate
Matters.
ENVIRONMENTAL ISSUES
In July 1997, the United States Environmental Protection Agency (EPA) issued
final regulations revising the National Ambient Air Quality Standards for ozone
and particulate matter. At that time, specific emission control requirements
were still being developed. In September 1998, the EPA issued a final rule
pertaining to nitrogen oxide emissions, which will require significant
additional reductions in emissions from coal-fired boilers. Illinois (where all
of the Registrant's coal-fired power plant boilers are located) is included in
the area targeted for nitrogen oxide emissions reductions as part of the EPA's
regional control program. Reduction requirements in nitrogen oxide emissions
from the Registrant's coal-fired boilers will exceed 75 percent from 1990 levels
by the year 2003. Because of the magnitude of these additional reductions, the
Registrant will be required to incur significantly higher capital costs to meet
future compliance obligations for its coal-fired boilers or to purchase power
from other sources, either of which could have significantly higher operating
expenses associated with compliance. The significant nitrogen oxide emissions
reductions already achieved on several of the Registrant's coal-fired power
plants will help to reduce the costs of compliance with this regulation.
It is not yet possible to determine the exact magnitude of the nitrogen oxide
emission reductions required on the Registrant's power plants because each State
has up to one year to develop a plan to comply with the EPA rule. However,
preliminary analysis of the regulations indicate that selective catalytic
reduction technology will be required for some of the Registrant's units, as
well as other additional controls.
The full details of these requirements are under study by the Registrant.
Currently, the Registrant estimates that its additional capital expenditures to
comply with these regulations could range from $125-$175 million over the period
from 1999 to 2002. Associated operations and maintenance expenditures could
increase $5-$8 million annually, beginning in 2003. The Registrant will explore
alternatives to comply with these new regulations in order to minimize, to the
extent possible, its capital costs and operating expenses. At this time, the
Registrant is unable to predict the ultimate impact of these revised air quality
standards on its future financial condition, results of operations or liquidity.
YEAR 2000 ISSUE
The Year 2000 Issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change occurs,
certain date-sensitive systems need to be able to recognize the year as 2000 and
not as 1900. This inability to recognize or properly treat the year as 2000 may
cause these systems to process critical financial and operational information
incorrectly. The Registrant's primary concern is the potential for any
interruption in providing electric and gas service to customers, as well as the
potential to be unable to process critical financial and operational information
on a timely basis, including billing its customers, if appropriate steps are not
taken to address this issue.
Management has developed a Year 2000 plan (Plan) covering Ameren, including
AmerenCIPS, and Ameren's Board of Directors has been briefed about the Year 2000
Issue and how it may affect the Registrant.
Ameren's Plan to resolve the Year 2000 Issue involves three phases: assessment,
planning, and implementation/testing. Implementation of the Plan is directly
supervised by each area's responsible Vice President. A Year 2000 Project
Director coordinates the implementation of the Plan among functional teams who
are addressing issues specific to a particular area, such as nuclear and
non-nuclear generation facilities, energy
-5-
management systems, etc. Ameren has also engaged certain outside consultants,
technicians and other external resources to aid in formulating and implementing
the Plan.
Ameren is approximately 95 percent complete with its assessment phase, which
included analyzing date-sensitive electronic hardware, software applications and
embedded systems and has developed a compliance plan to address issues that were
identified. Many of the major corporate computer systems at Ameren are
relatively new and therefore are either Year 2000 compliant or only require
minor modifications. Also, several of the operating hardware and embedded
systems (i.e. microprocessor chips) use analog technology instead of digital and
thus are unaffected by the two-digit date issue. In addition, Ameren has
contacted hundreds of vendors and suppliers to verify compliance. The assessment
phase is expected to be completed by the end of the first quarter 1999.
Ameren is also approximately 95 percent complete with its planning phase. Items
which have been identified for remediation have been prioritized into groups
based on their significance to company operations. The implementation/testing
phase for all components/applications is approximately 40% complete as of
September 30, 1998. Ameren expects to complete remediation of its significant
components/applications by the end of the third quarter 1999.
With respect to third parties, for areas that interface directly with
significant vendors, Ameren has inventoried vendors and major suppliers and is
currently assessing their Year 2000 readiness through surveys, websites and
personal contact. Ameren plans to follow up with major suppliers and verify Year
2000 compliance where appropriate. Ameren has queried its important suppliers
and health insurance providers. To date, Ameren is not aware of any problems
that would materially impact financial condition, results of operations or
liquidity. Neither Ameren or the Registrant has the means of ensuring that these
parties will be Year 2000 compliant. The inability of those parties to complete
their Year 2000 resolution process could materially impact Ameren and the
Registrant.
Ameren is also addressing the impact of electric power grid problems that may
occur outside of its own electric system. Ameren has started year 2000 electric
power grid impact planning through the system's various electric interconnection
affiliations, and is working with the Mid-American Interchange Network (MAIN) to
begin planning year 2000 operational preparedness and restoration scenarios. In
addition, Ameren provides monthly status reports to the North American Electric
Reliability Council (NERC) to assist them in assessing year 2000 readiness of
the regional electric grid. Through the Electric Power Research Institute
(EPRI), an industry-wide effort has been established to deal with year 2000
problems affecting digital systems and equipment used by the nation's electric
power companies. Under this effort, participating utilities are working together
to assess specific vendors' system problems and test plans. The assessment will
be shared by the industry as a whole to facilitate year 2000 problem solving.
In addressing the Year 2000 Issue, Ameren will incur internal labor costs as
well as external consulting and other expenses related to infrastructure
enhancements necessary to prepare for the new century. Ameren estimates that its
external costs (consulting fees and related costs) for addressing the Year 2000
Issue will range from $10 million to $15 million. As of September 30, 1998,
Ameren has expended approximately $2 million. Ameren's plans to complete Year
2000 modifications are based on management's best estimates, which are derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
Ameren believes that, with appropriate modifications to existing computer
systems/components, updates by vendors and trading partners, and conversion to
new software and hardware in the ordinary course of business, the Year 2000
Issue will not pose significant operational problems for the Registrant.
However, if such conversions are not completed in a proper and timely manner by
all affected parties, the Year 2000 Issue could result in material adverse
operational and financial consequences to the Registrant, and there can be no
assurance that Ameren's efforts, or those of vendors and trading partners,
interconnection affiliates, NERC or EPRI to address the Year 2000 Issue will be
successful. Ameren is in the process of developing contingency plans to address
potential risks, including risks of vendor/trading partners noncompliance, as
well as noncompliance of any of the Registrant's material operations. The first
operational contingency plan is expected to be completed by year-end. At this
time, the Registrant is unable to predict the ultimate impact of the Year 2000
Issue on the Registrant's financial condition, results of operations or
liquidity; however, the impact could be material.
-6-
ACCOUNTING MATTERS
In June 1998, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards (SFAS) 133, "Accounting for Derivative
Instruments and Hedging Activities." SFAS 133 establishes accounting and
reporting standards for derivative instruments and for hedging activities and
requires recognition of all derivatives on the balance sheet be measured at fair
value. SFAS 133 is effective for fiscal years beginning after June 15, 1999.
Earlier application is encouraged, but permitted only as of the beginning of any
fiscal quarter that begins after issuance of the standard. At this time, the
Registrant is unable to determine the impact of SFAS 133 on its financial
position or results of operations upon adoption.
In February 1998, the Financial Accounting Standards Board issued SFAS 132,
"Employers' Disclosures about Pensions and Other Postretirement Benefits." SFAS
132 revises employers' disclosures about pension and other postretirement
benefit plans. SFAS 132 is effective for fiscal years beginning after December
31, 1998, although earlier application is encouraged. SFAS 132 is not expected
to have a material impact on the Registrant's financial position or results of
operations upon adoption.
In March 1998, the Accounting Standards Executive Committee of the American
Institute of Certified Public Accountants issued Statement of Position (SOP)
98-1, "Accounting for the Costs of Computer Software Developed or Obtained for
Internal Use." SOP 98-1 provides guidance on accounting for the costs of
computer software developed or obtained for internal use. Under SOP 98-1,
certain costs, which are currently expensed by the Registrant, may be
capitalized and amortized over some future period. SOP 98-1 is effective for
fiscal years beginning after December 15, 1998, although earlier application is
encouraged. SOP 98-1 is not expected to have a material impact on the
Registrant's financial position or results of operations upon adoption.
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q which are not based on historical facts, are
forward-looking and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
forward-looking statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions,
financial performance and "Year 2000" issues. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Registrant is providing this cautionary statement to identify important factors
that could cause actual results to differ materially from those anticipated.
Factors include, but are not limited to, the effects of regulatory actions;
changes in laws and other governmental actions; competition; future market
prices for electricity; average rates for electricity in the Midwest; business
and economic conditions; weather conditions; fuel prices and availability;
generation plant performance; monetary and fiscal policies; and legal and
administrative proceedings.
-7-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
September 30, December 31,
ASSETS 1998 1997
- ------ ------------ ------------
Property and plant, at original cost:
Electric $2,362,769 $2,311,364
Gas 256,981 249,499
---------- ----------
2,619,750 2,560,863
Less accumulated depreciation and amortization 1,177,938 1,132,591
---------- ----------
1,441,812 1,428,272
Construction work in progress 27,431 59,531
---------- ----------
Total property and plant, net 1,469,243 1,487,803
---------- ----------
Other assets 30,185 30,476
Current assets:
Cash and cash equivalents 12,728 6,040
Accounts receivable - trade (less allowance for doubtful
accounts of $1,219 and $1,200, respectively) 73,374 67,495
Unbilled revenue 39,093 31,708
Other accounts and notes receivable 30,913 7,760
Materials and supplies, at average cost -
Fossil fuel 30,517 24,919
Gas stored underground 12,968 14,275
Other 34,985 32,334
Other 8,765 32,637
---------- ----------
Total current assets 243,343 217,168
---------- ----------
Regulatory assets:
Deferred income taxes 25,611 28,052
Other 20,933 25,208
---------- ----------
Total regulatory assets 46,544 53,260
---------- ----------
Total Assets $1,789,315 $1,788,707
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, no par value, authorized 45,000,000 shares -
outstanding 25,452,373 shares $ 120,033 $ 121,282
Retained earnings 466,284 451,477
---------- ----------
Total common stockholders' equity 586,317 572,759
Preferred stock not subject to mandatory redemption 80,000 80,000
Long-term debt 507,635 558,474
---------- ----------
Total capitalization 1,173,952 1,211,233
---------- ----------
Current liabilities:
Current maturity of long-term debt 60,000 9,000
Short-term debt 53,800 64,966
Accounts and wages payable 75,772 89,362
Accumulated deferred income taxes 21,065 20,285
Taxes accrued 25,055 15,869
Other 35,591 21,937
---------- ----------
Total current liabilities 271,283 221,419
---------- ----------
Accumulated deferred income taxes 234,230 237,629
Accumulated deferred investment tax credits 35,796 40,369
Regulatory liability 41,014 48,587
Other deferred credits and liabilities 33,040 29,470
---------- ----------
Total Capital and Liabilities $1,789,315 $1,788,707
========== ==========
-8-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars)
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
1998 1997 1998 1997 1998 1997
---- ---- ---- ---- ---- ----
OPERATING REVENUES:
Electric $ 230,422 $ 208,495 $ 568,866 $ 534,691 $ 734,692 $ 704,009
Gas 16,253 15,750 92,153 101,177 142,534 155,246
--------- --------- --------- --------- --------- ---------
Total operating revenues 246,675 224,245 661,019 635,868 877,226 859,255
OPERATING EXPENSES:
Operations
Fuel and purchased power 66,965 62,192 183,143 178,636 246,763 247,829
Gas 6,517 7,947 53,372 62,941 87,657 98,942
Other 51,941 42,792 134,092 120,222 174,071 159,014
--------- --------- --------- --------- --------- ---------
125,423 112,931 370,607 361,799 508,491 505,785
Maintenance 16,232 15,795 50,153 48,056 77,749 66,512
Depreciation and amortization 17,357 19,607 54,791 62,247 75,233 83,405
Income taxes 24,484 18,342 40,113 32,804 40,970 37,472
Other taxes 12,556 14,647 44,571 43,798 58,668 58,105
--------- --------- --------- --------- --------- ---------
Total operating expenses 196,052 181,322 560,235 548,704 761,111 751,279
OPERATING INCOME 50,623 42,923 100,784 87,164 116,115 107,976
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used
during construction (4) 237 45 381 447 563
Miscellaneous, net (834) (123) (545) (632) (3,713) (1,339)
--------- --------- --------- --------- --------- ---------
Total other income and deductions (838) 114 (500) (251) (3,266) (776)
INCOME BEFORE
INTEREST CHARGES 49,785 43,037 100,284 86,913 112,849 107,200
INTEREST CHARGES:
Interest 10,423 10,583 30,126 28,445 38,472 38,319
Allowance for borrowed funds
used during construction (310) (302) (981) (484) (1,283) (717)
--------- --------- --------- --------- --------- ---------
Net interest charges 10,113 10,281 29,145 27,961 37,189 37,602
INCOME BEFORE
EXTRAORDINARY CHARGE 39,672 32,756 71,139 58,952 75,660 69,598
--------- --------- --------- --------- --------- ---------
EXTRAORDINARY CHARGE
(NET OF INCOME TAXES) -- -- -- -- (24,853) --
--------- --------- --------- --------- --------- ---------
NET INCOME 39,672 32,756 71,139 58,952 50,807 69,598
PREFERRED STOCK DIVIDENDS 936 940 2,801 2,782 3,734 3,708
--------- --------- --------- --------- --------- ---------
INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 38,736 $ 31,816 $ 68,338 $ 56,170 $ 47,073 $ 65,890
========= ========= ========= ========= ========= =========
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
Nine Months Ended
September 30,
1998 1997
---- ----
Cash Flows From Operating:
Net income $ 71,139 $ 58,952
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 54,791 62,247
Allowance for funds used during construction (1,026) (865)
Deferred income taxes, net (9,760) (850)
Deferred investment tax credits, net (4,573) (2,501)
Changes in assets and liabilities:
Temporary investments 22,100 (581)
Receivables, net (36,417) 8,529
Materials and supplies (6,942) 4,573
Regulatory assets - other 4,275 (63,083)
Accounts and wages payable (13,590) (21,895)
Taxes accrued 9,186 9,085
Other, net 30,888 4,922
--------- ---------
Net cash provided by operating activities 120,071 58,533
Cash Flows From Investing:
Construction expenditures (46,911) (79,835)
Allowance for funds used during construction 1,026 865
--------- ---------
Net cash used in investing activities (45,885) (78,970)
Cash Flows From Financing:
Dividends on common stock (53,297) (43,300)
Dividends on preferred stock (3,035) (2,782)
Redemptions -
Short-term debt (11,166) (24,210)
Long-term debt (10,000) (61,000)
Issuances -
Long-term debt 10,000 152,000
--------- ---------
Net cash provided by (used in) financing activities (67,498) 20,708
Net increase in cash and cash equivalents 6,688 271
Cash and cash equivalents at beginning of year 6,040 2,261
--------- ---------
Cash and cash equivalents at end of period $ 12,728 $ 2,532
========= =========
Cash paid during the periods:
Interest (net of amount capitalized) $ 29,650 $ 24,814
Income taxes, net $ 37,940 $ 24,659
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
September 30, 1998
Note 1 - Effective December 31, 1997, following the receipt of all required
state and federal regulatory approvals, Union Electric Company (AmerenUE) and
CIPSCO Incorporated (CIPSCO) combined to form Ameren Corporation (Ameren) (the
Merger).
Note 2 - Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. However, in the opinion of the Registrant,
the disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading. See Notes to Financial Statements included in the 1997
Form 10-K for information relevant to the financial statements contained in this
Form 10-Q, including information as to the significant accounting policies of
the Registrant.
Note 3 - In the opinion of the Registrant the interim financial statements filed
as part of this Form 10-Q reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
periods presented. The Registrant's financial statements were prepared to permit
the information required in the Financial Data Schedule (FDS), Exhibit 27, to be
directly extracted from the filed statements. The FDS amounts correspond to or
are calculable from the amounts reported in the financial statements or notes
thereto.
Note 4 - Due to the effect of weather on sales and other factors which are
characteristic of public utility operations, financial results for the periods
ended September 30, 1998 and 1997 are not necessarily indicative of trends for
any three-month, nine-month or 12-month period.
Note 5 - On March 27, 1998, a jury awarded a total of $3 million to the families
of four children who contracted neuroblastoma (a rare form of cancer) following
the Registrant's 1987 clean-up of a former manufactured gas plant site in
Taylorville, Illinois. The Registrant continues to believe it has meritorious
defenses and has appealed the verdict. The Registrant believes that the final
disposition of this matter will not have a material adverse effect on its
financial position, results of operations or liquidity.
Note 6 - Effective August 1, 1998, the Registrant's residential electric
customers received a five percent rate reduction provided by Illinois electric
utility industry restructuring legislation. This rate reduction is expected to
reduce electric revenues approximately $5 million in 1998 and $11 million
annually thereafter, based on estimated sales levels and assuming normal weather
conditions.
Note 7 - In July 1998, Ameren offered separation packages to employees whose
positions were eliminated through a targeted separation plan. During the third
quarter of 1998, a one-time pretax charge of $7 million was recorded, which
reduced earnings $4 million, representing the Registrant's share of costs
incurred to implement the targeted separation plan.
Note 8 - Statement of Financial Accounting Standards (SFAS) No. 130, "Reporting
Comprehensive Income" became effective on January 1, 1998. SFAS 130 requires
that all items that are required to be recognized under accounting standards as
components of comprehensive income be reported in the financial statements with
the same prominence as other financial statement components. Adoption of SFAS
130 did not have a material effect on the financial position, results of
operations, liquidity or presentation of financial information of the
Registrant.
Note 9 - Certain reclassifications were made to prior-year financial statements
to conform to current-period presentation.
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PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
-----------------
Reference is made to Note 8 - Commitments and Contingencies in the
Notes to Financial Statements of the Registrant's Form 10-K for the year ended
December 31, 1997 for information regarding unfair labor practice charges filed
with the National Labor Relations Board (NLRB) by the International Union of
Operating Engineers Local 148 and the International Brotherhood of Electrical
Workers Local 702 relating to the lockout by the Registrant of both unions
during 1993. On August 27, 1998, a three member panel of the NLRB issued a
decision favorable to the Registrant. It is anticipated that the unions will
file motions for reconsideration of the decision with the NLRB.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
--------------------------------
(a) Exhibits.
Exhibit 3(ii)-By-Laws of Central Illinois Public Service Company,
as amended as of August 24, 1998.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements, 12 Months Ended
September 30, 1998.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. The Registrant filed a report on Form 8-K
dated September 24, 1998 reporting on the impact of Ameren Corporation's (parent
company of the Registrant) employee separation plan and on the effect of the
final rule issued in September 1998 by the United States Environmental
Protection Agency pertaining to nitrogen oxide emissions.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL ILLINOIS PUBLIC
SERVICE COMPANY
(Registrant)
By /s/ Warner L. Baxter
-------------------------
Warner L. Baxter
Controller
Date: November 13, 1998
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