<PAGE>
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Fiscal Year ended December 31, 1994
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
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class so registered on which registered
CILCORP Inc. Common stock, no par value New York and Chicago
CILCO Preferred Stock, Cumulative
$100 par, 4 1/2% series New York
Securities registered pursuant to Section 12(g) of the Act: None
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 if disclosure of delinquent filers pursuant to
Item 405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
At March 10, 1995, the aggregate market value of the voting stock of
CILCORP Inc. (CILCORP) held by nonaffiliates was approximately $453
million. On that date, 13,035,756 common shares (no par value) were
outstanding.
At March 10, 1995, the aggregate market value of the voting stock of
Central Illinois Light Company (CILCO) held by nonaffiliates was
approximately $57 million. The voting stock of CILCO consists of its
common and preferred stock. On that date, 13,563,871 shares of CILCO's
common stock, no par value, were issued and outstanding and privately
held, beneficially and of record, by CILCORP Inc.
DOCUMENTS INCORPORATED BY REFERENCE
CILCORP Inc.'s Proxy Statement dated March 13, 1995, in connection with
its Annual Meeting to be held on April 25, 1995, is incorporated into
Part I and Part III hereof.
Central Illinois Light Company's Proxy Statement dated March 28, 1995,
in connection with its Annual Meeting to be held on April 25, 1995, is
incorporated into Part I and Part III hereof.
CILCORP Inc.'s Annual Report to Shareholders for the year ended December
31, 1994 -- Management's Discussion and Analysis of Financial Condition
and Results of Operations is incorporated herein by reference into Part
II Item 7.
CILCORP Inc.'s Annual Report to Shareholders for the year ended December
31, 1994 -- Financial Statements, Notes to the Financial Statements and
Supplementary Data is incorporated herein by reference into Part II Item
8.
<PAGE>
CILCORP INC.
and
Central Illinois Light Company
1994 Form 10-K Annual Report
This combined Form 10-K is separately filed by CILCORP Inc. and Central
Illinois Light Company (CILCO). Information herein relating to each
individual registrant is filed by such registrant on its own behalf.
Accordingly, except for its subsidiaries, CILCO makes no representation
as to information relating to any other subsidiary of CILCORP Inc.
Table of Contents
Page
Glossary 5-6
Part I
Item 1. Business
The Company and its Subsidiaries 7-8
Business of CILCO 8-9
Electric Service 9-10
Gas Service 10
Regulation 10-11
Electric Fuel and Purchased Gas
Adjustment Clauses 11
Fuel Supply - Coal 11
Natural Gas Supply 12-13
Financing and Capital Expenditures Programs 13
Environmental Matters 14
Significant Customer 14
Franchises 14
Competition 14-15
Employees 15
Business of ESE 15-17
Customers 17
Regulation of ESE's Clients 18-19
Regulation of ESE 19-20
Competition 20
Subcontractors 20
Government Contracts 20
Patents and Trademark Protection 20-21
Potential Liabilities and Insurance 21-22
Employees 22
Other Businesses 22
CIM/CLM 22
Holding Company 22-23
CVI 23
Employees 23
Item 2. Properties 23-24
Item 3. Legal Proceedings 24-25
Item 4. Submission of Matters to a Vote of Security Holders 25
Executive Officers of the Registrant 25-26
Part II
Item 5. Market for the Registrant's Common Equity
and Related Stockholder Matters 27
Item 6. Selected Financial Data 28
Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operations 28
Item 8. Index - Financial Statements, Supplementary Data
and Exhibits 29
Item 9. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 52
Part III
Item 10. Directors and Executive Officers of the Registrants 52
Item 11. Executive Compensation 52-53
Item 12. Security Ownership of Certain Beneficial
Owners and Management 53
Item 13. Certain Relationships and Related Transactions 53
Part IV
Item 14. Exhibits, Financial Statement Schedules, and
Reports on Form 8-K 54-58
<PAGE>
GLOSSARY OF TERMS
When used herein, the following terms will have the meanings
indicated.
AFUDC -- Allowance for Funds Used During Construction
BTU -- British Thermal Unit. The quantity of heat required to raise
temperature of one pound of water one degree Fahrenheit.
BCF -- Billion cubic feet
Caterpillar -- Caterpillar Inc., CILCO's largest industrial customer
CECO -- CILCO Energy Corporation; a wholly-owned subsidiary of CILCO
CEDCO -- CILCO Exploration and Development Company; a wholly-owned
subsidiary of CILCO
CERCLA -- Comprehensive Environmental Response Compensation and
Liability Act
CESI -- CILCORP Energy Services Inc.
CILCO -- Central Illinois Light Company
CIM -- CILCORP Investment Management Inc.
CIPS -- Central Illinois Public Service Company
CLM -- CILCORP Lease Management Inc.
Company -- CILCORP Inc.
Cooling Degree Days -- The measure of the degree of warm weather
experienced, based on the extent to which
average of high and low temperatures for a day
falls above 65 degrees Fahrenheit (annual
degree days above historic average indicate
warmer than average temperatures); historic
average provided by U.S. Weather Bureau for 30-
year period.
CVI -- CILCORP Ventures Inc.
DSM -- Demand Side Management. The process of helping customers
control how they use energy resources.
EMF -- Electric and magnetic fields
EPA -- Environmental Protection Agency (Federal)
ESE -- Environmental Science & Engineering, Inc.
FAC -- Fuel Adjustment Clause
FASB -- Financial Accounting Standards Board
FERC -- Federal Energy Regulatory Commission
Heating Degree Days -- The measure of the degree of cold weather
experienced, based on the extent to which
average of high and low temperatures for a day
falls below 65 degrees Fahrenheit (annual
degree days above historic average indicate
cooler than average temperatures); historic
average provided by U.S. Weather Bureau for 30-
year period.
ICC -- Illinois Commerce Commission
IEPA -- Illinois Environmental Protection Agency
IPCB -- Illinois Pollution Control Board
KW -- Kilowatt, a thousand watts
KWH -- Kilowatt-hour, one thousand watts used for one hour (unit of
work)
LCP -- Least Cost Energy Plan, a long-term resource acquisition
strategy that balances both supply and demand-side resource
options to provide the best value at the least cost to
customers.
MAIN -- Mid-America Interconnected Network. One of nine regions that
make up the National Electric Reliability Council. Its
purpose is to ensure the Midwest region will meet its load
responsibility.
MCF -- One thousand cubic feet
MMCF -- One million cubic feet
MW -- Megawatt, a million watts
MWG -- Midwest Grain Products, Inc.
NEPA -- National Energy Policy Act.
PCBs -- Polychlorinated biphenyls
PGA -- Purchased Gas Adjustment
RCRA -- Resource Conservation and Recovery Act. This act deals with
solid waste pollution control.
SFAS -- Statement of Financial Accounting Standards
Therm -- Unit of measurement for natural gas; a therm is equal to one
hundred cubic feet (volume) or 100,000 BTUs (energy).
<PAGE>
PART I
Item 1. Business
THE COMPANY AND ITS SUBSIDIARIES
CILCORP Inc. (CILCORP or the Company) was incorporated as a holding
company in the state of Illinois in 1985. The financial condition and
operating results of CILCORP primarily reflect the operations of Central
Illinois Light Company (CILCO), the Company's principal business
subsidiary. The Company's other core business subsidiary is
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 itself, are collectively referred to herein
as Other Businesses.
The Company owns 100% of the common stock of CILCO. CILCO is engaged in
the generation, transmission, distribution and sale of electric energy
in an area of approximately 3,700 square miles in central and east-
central Illinois, and the purchase, distribution, transportation and
sale of natural gas in an area of approximately 4,500 square miles in
central and east-central Illinois.
ESE, a wholly-owned subsidiary, was formed in February 1990 to conduct
the environmental consulting and analytical services businesses acquired
from Hunter Environmental Services, Inc. (Hunter) during that year. ESE
provides engineering and environmental consulting, analysis and
laboratory services to a variety of governmental and private customers.
ESE has nine wholly-owned subsidiaries: Keck Instruments, Inc., which
manufactures geophysical instruments used in environmental applications;
Chemrox, Inc., which has reduced its presence in the ethylene oxide and
chlorofluorocarbon control-equipment market by maintaining only a
minimal staff, primarily to concentrate on warranty work; Keck
Consulting Services, Inc., which is inactive; ESE Biosciences, Inc.,
whose on-site biological treatment of contaminated soil and groundwater
is now performed by ESE; ESE Architectural Services, Inc., which
provides architecture and design services; National Professional
Casualty Co., which provides professional liability insurance to ESE;
ESE International Ltd., which provides engineering and consulting
services in foreign countries; ESE Michigan, Inc. which formerly
conducted business as ESE Environmental Science and Engineering, Inc.,
provides the same services as its parent, ESE; and, Savannah Resources
Inc., which acquired land that will be remediated and sold.
CIM, a wholly-owned subsidiary, manages the Company's investment
portfolio. CIM manages seven leveraged lease investments through three
wholly-owned subsidiaries: CILCORP Lease Management Inc. which was
formed in 1985, and CIM Leasing Inc. and CIM Air Leasing Inc., which
were both formed in 1993. CIM's other wholly-owned subsidiary is CIM
Energy Investments Inc., which was formed in 1989 to invest in non-
regulated, independent power production facilities (see Other
Businesses).
CVI, a wholly-owned subsidiary, is a venture capital company which
pursues investment opportunities in new ventures and the expansion of
existing ventures in environmental services, biotechnology and health
care. CVI has an 80% interest in Agricultural Research and Development
Corporation and one wholly-owned subsidiary, CILCORP Energy Services,
Inc. (CESI). CESI's primary business is the sale of carbon monoxide
detectors to utilities for resale to their customers.
CILCORP Development Services Inc. (CDS) was organized to construct a
steam production plant in Pekin, Illinois, which, following necessary
regulatory approvals, was to be owned and operated by CILCO. CILCO now
owns and operates this facility. CDS was dissolved voluntarily on
December 28, 1994.
The following table summarizes the relative contribution of each
business group to consolidated assets, revenue and net income for the
year ended December 31, 1994.
<TABLE>
<CAPTION>
(In thousands)
Assets Revenue Net Income
<S> <C> <C> <C>
CILCO $1,019,109 $461,370 $29,507
ESE 93,464 132,799 1,824
Other Businesses 125,811 10,970 1,255
---------- -------- -------
$1,238,384 $605,139 $32,586
========== ======== =======
</TABLE>
CILCORP is an intrastate exempt holding company under the Public Utility
Holding Company Act of 1935 (PUHCA). In 1989, the Securities and
Exchange Commission (SEC) issued proposed rules, which, if adopted,
would require CILCORP to apply for a formal exemptive order from the SEC
or come within one of the proposed safe harbors by either seeking
passage of Illinois legislation permitting diversification or reducing
its interest in non-utility businesses to less than 10% of consolidated
assets. The SEC has not taken any public action towards adopting final
diversification rules since the proposed rules were issued. On November
3, 1994, the SEC issued a concept release soliciting comments on
modernization of utility regulation under the PUHCA. This is part of a
continuing effort by the SEC to evaluate the regulatory structure of the
utility industry. Both regulatory and legislative changes are possible
but cannot be predicted at this time. On February 6, 1995, the Company
joined with several other companies in commenting on the concept
release.
BUSINESS OF CILCO
CILCO was incorporated under the laws of Illinois in 1913. CILCO's
principal business is the generation, transmission, distribution and
sale of electric energy in an area of approximately 3,700 square miles
in central and east-central Illinois, and the purchase, distribution,
transportation and sale of natural gas in an area of approximately 4,500
square miles in central and east-central Illinois.
In addition to its principal business, CILCO has two wholly-owned
subsidiaries, CILCO Exploration and Development Company (CEDCO) and
CILCO Energy Corporation (CECO). CEDCO was formed to engage in the
exploration and development of gas, oil, coal and other mineral
resources. CECO was formed to research and develop new sources of
energy, including the conversion of coal and other minerals into gas.
The operations of these subsidiaries are not currently significant.
CILCO is continuing to experience, in varying degrees, the impact of
developments common to the electric and gas utility industries. These
include uncertainties as to the future demand for electricity and
natural gas, structural and competitive changes in the markets for these
commodities, the high cost of compliance with environmental and safety
laws and regulations and uncertainties in regulatory and political
processes. At the same time, CILCO has sought to provide reliable
service at reasonable rates for its customers and a fair return for its
investors.
ELECTRIC SERVICE
CILCO furnishes electric service to retail customers in 138 Illinois
communities (including Peoria, East Peoria, Pekin, Lincoln and Morton).
At December 31, 1994, CILCO had approximately 192,000 retail electric
customers.
In 1994, 68% of CILCO's total operating revenue was derived from the
sale of electricity. Approximately 38% of electric revenue resulted
from residential sales, 30% from commercial sales, 28% from industrial
sales, 3% from sales for resale and 1% from other sales. Electric
sales, particularly residential and commercial sales during the summer
months, fluctuate based on weather conditions.
The electric operating revenues of CILCO were derived from the following
sources:
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Residential $120,314 $119,709 $108,562
Commercial 94,867 90,594 86,747
Industrial 86,804 85,384 82,122
Sales for resale 8,182 4,522 8,433
Street lighting and public
authorities 2,123 2,062 2,034
Other revenue 795 853 915
-------- -------- --------
Total electric revenue $313,085 $303,124 $288,813
======== ======== ========
</TABLE>
CILCO owns and operates two coal-fired base load generating plants and
two natural gas combustion turbine-generators which are used for peaking
service. A 21 megawatt (MW) cogeneration plant at Midwest Grain
Products, Inc. (MWG) is scheduled to begin generating electricity in
June 1995 (see Item 2. Properties-CILCO). CILCO set a new all-time
system peak demand of 1,137 MW on July 5, 1994, surpassing the previous
all-time system peak demand of 1,120 MW set on August 16, 1988.
The system peak demand for 1995 is estimated to be 1,142 MW with a
reserve margin of approximately 15.8%. The reserve margin takes into
account 70 MW of firm purchased power from Central Illinois Public
Service Company (CIPS) and 91 MW of interruptible industrial load and
other related Demand Side Management (DSM) programs. The system peak
demand includes 10 MW of firm power to be provided to the City of
Springfield (City Water, Light and Power Department). CILCO's reserve
margin complies with planning reserve margin requirements established by
the Mid-America Interconnected Network (MAIN), of which CILCO is a
member.
Studies conducted by CILCO indicate that it has sufficient base load
generating capacity and purchased capacity to provide an adequate and
reliable supply of electricity to satisfy base load demand through the
end of the century. To help meet anticipated increases in peak demand
and maintain adequate reserve margins, CILCO entered into a firm,
wholesale bulk power agreement to purchase capacity from CIPS. The
agreement, which expires in 1998, was approved by the Illinois Commerce
Commission (ICC) in 1990 as part of CILCO's electric least cost energy
plan. In 1992, CILCO filed an updated electric least cost energy plan
with the ICC which anticipates CILCO will experience shortages of peak
generating capacity ranging from 100 MW in 1998 up to 130 MW by 2001.
In 1993, the ICC approved another firm, wholesale power purchase
agreement between CIPS and CILCO to meet this shortfall (see CILCO's
Note 8, Item 8. Financial Statements and Supplementary Data).
In December 1993, CILCORP announced an agreement with MWG, one of
CILCO's largest customers, to develop a gas-fired cogeneration plant.
In May 1994, the ICC approved the facility as a least-cost alternative.
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. Installation of the 21 MW turbine
generator and auxiliary equipment will be completed in mid-1995, with an
expected available summer generating capacity of 16 MW.
CILCO is interconnected with CIPS, Commonwealth Edison Company, Illinois
Power and the City Water, Light and Power Department to provide for the
interchange of electric energy on an emergency and mutual help basis.
GAS SERVICE
CILCO provides gas service to customers in 129 Illinois communities
(including Peoria, East Peoria, Pekin, Lincoln and Springfield). At
December 31, 1994, CILCO had approximately 198,000 gas customers,
including 567 industrial and commercial gas transportation customers
that purchase gas directly from suppliers for transportation through
CILCO's system.
In 1994, 32% of CILCO's total operating revenue was derived from the
sale or transportation of natural gas. Approximately 67% of gas revenue
resulted from residential sales, 22% from commercial sales, 3% from
industrial sales, 7% from transportation and 1% from other sales. Gas
sales, particularly residential and commercial sales during the winter
months, fluctuate based on weather conditions.
The gas operating revenues of CILCO were derived from the following
sources:
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Residential $ 99,567 $104,348 $ 99,096
Commercial 32,553 32,396 30,767
Industrial 4,219 3,013 3,793
Transportation of gas 10,124 10,134 10,541
Other revenue 1,822 863 729
-------- -------- --------
Total gas revenue $148,285 $150,754 $144,926
======== ======== ========
</TABLE>
CILCO's all-time maximum daily send-out of 443,167 thousand cubic feet
(MCF) occurred on January 15, 1972. The 1994 peak day send-out of
405,438 MCF occurred on January 18, 1994. CILCO has been able to meet
all of its existing customer requirements during the 1994-1995 heating
season. CILCO believes that its present and planned supplies of gas
will continue to be sufficient to serve all of its existing customer
requirements during the 1995-1996 heating season.
REGULATION
CILCO is a public utility under the laws of the State of Illinois and is
subject to the jurisdiction of the ICC. The ICC has general power of
supervision and regulation with respect to services and facilities,
rates and charges, classification of accounts, valuations of property,
determination of depreciation rates, construction, contracts with any
affiliated interest, the issuance of stock and evidences of indebtedness
and various other matters. With respect to certain electric matters,
CILCO is subject to regulation by the Federal Energy Regulatory
Commission (FERC). CILCO is exempt from the provisions of the Natural
Gas Act, but is affected by orders, rules and regulations issued by the
FERC with respect to certain gas matters.
The Illinois statute governing public utilities requires the ICC to
review and adopt electric least cost energy plans (LCP) for public
utilities. In general, CILCO's LCP consists of customer demand
forecasts and the projected resources that CILCO will rely upon to meet
that demand. The planning horizon is 20 years, and the LCP is reviewed
by the ICC every three years. CILCO filed its most recent LCP on
July 1, 1992; the LCP was approved by the ICC on June 23, 1993. CILCO's
next LCP is scheduled for filing on July 1, 1995. The ICC may not issue
a certificate of convenience and necessity for any new construction
project unless the ICC has determined that the proposed construction is
consistent with CILCO's most recently approved LCP, as updated. The law
requires that the LCP incorporate economical cogeneration, renewable
resources and DSM programs, to the fullest extent possible, as resources
for meeting the future energy service needs of CILCO's customers.
CILCO's most recent electric LCP contains several DSM programs,
including existing residential and commercial heat pump programs and
commercial audit programs. It also includes pilot programs whose
objective is to verify the cost effectiveness of electric DSM in CILCO's
service territory. Based upon a preliminary assessment, electric DSM
programs are projected to reduce CILCO's peak demand by 146 MW over the
20 year planning horizon. These projections may change depending on the
results of pilot programs currently in progress or scheduled to begin in
the next few years. Current pilot programs for electric service
include: new interruptible rates, residential air conditioner cycling,
natural gas air conditioning, energy audits, high efficiency air
conditioning, motor efficiency and new construction energy efficiency
incentives. Three additional pilot programs are currently under
development: high efficiency interior lighting, high efficiency
refrigeration equipment and thermal storage incentives. In 1994, the
total cost of the pilot and full-scale programs, excluding interruptible
rates, was approximately $360,000.
The National Energy Policy Act of 1992 (NEPA) encourages competition
by allowing utilities and non-utilities to form non-regulated
generation subsidiaries to supply additional electric demand without
being restricted by the Public Utility Holding Company Act of 1935.
The FERC may order access to utility transmission systems by third-
party energy producers on a case-by-case basis and may also order
electric utilities to enlarge their transmission systems to transport
(wheel) power, subject to certain conditions. NEPA specifically bans
federally-mandated wheeling of power for retail customers, but several
state public utility regulatory commissions are adopting pilot
programs to initiate retail wheeling. Various Illinois trade
associations are currently studying retail wheeling implications.
CILCO is presently involved with a statewide task force to examine
electric utility regulation and competition. The results of this
study will be provided to the ICC and the Illinois legislature for
educational and planning purposes.
ELECTRIC FUEL AND PURCHASED GAS ADJUSTMENT CLAUSES
CILCO's tariffs provide for adjustments to its electric rates through
the fuel adjustment clause (FAC) to reflect increases or decreases in
the cost of fuel used in its generating stations. The transportation
costs of coal are not currently included in the FAC, and are normally
addressed in general ratemaking proceedings. However, by statute
effective as of August 27, 1991, any Illinois utility purchasing coal
under any contract that was in effect on August 27, 1991, shall,
whenever the utility requests, but not later than the conclusion of the
utility's next general electric rate proceeding, begin recovering the
transportation costs of that coal through the utility's FAC.
CILCO's tariffs also provide for adjustments to its gas rates through
the purchased gas adjustment clause (PGA) to reflect increases or
decreases in the cost of natural gas purchased for sale to customers.
FUEL SUPPLY - COAL
Substantially all of CILCO's electric generation capacity is coal-fired,
including 100% of its current base load capacity. Approximately
2.4 million tons of coal were burned during 1994. Existing coal
contracts with suppliers in central Illinois, eastern Kentucky and West
Virginia are expected to supply about 72% of the 1995 requirements.
Coal will be purchased on the spot market during the year to meet
remaining annual fuel requirements.
During the years 1994, 1993 and 1992, the average cost per ton of coal
burned, including transportation, was $39.22, $40.30 and $40.13,
respectively. The cost of coal burned per million BTU's was $1.71,
$1.75 and $1.73, respectively (see Electric Fuel and Purchased Gas
Adjustment Clauses).
CILCO has several contracts for the purchase of low-sulfur coal burned
at E. D. Edwards Station. The contracts are normally 12 to 36 months in
length. CILCO negotiated a one-year agreement with a coal supplier to
replace a contract which expired in 1994.
All low-sulfur coal contracts contain provisions which allow CILCO to
terminate the contracts with no monetary penalties if any new
governmental or environmental regulations are enacted which restrict the
burning of these coals. Furthermore, these contracts contain provisions
that permit adjustment of the annual contract quantity in the event of
an economic downturn.
CILCO has a long-term contract with Freeman United Coal Mining Company
(Freeman) for the purchase of high-sulfur, Illinois coal used
predominantly at the Duck Creek Station. The contract gives CILCO the
flexibility to purchase between 500,000 and 1,000,000 tons annually.
Under the terms of the contract, CILCO's obligation to purchase coal
could be extended through 2010; however, Freeman has the option of
terminating the contract after 1997. The contract requires CILCO to pay
all variable coal production costs on tons purchased and certain fixed
costs not affected by the volume purchased.
NATURAL GAS SUPPLY
During 1994, CILCO continued to maintain a widely diversified and
flexible natural gas supply portfolio. This portfolio is structured
around firm and interruptible gas transportation service provided by
five interconnecting interstate pipeline suppliers and firm and
interruptible gas purchase arrangements of varying terms made directly
with approximately 35 gas suppliers. Gas purchased was also injected
into and withdrawn from CILCO's two natural gas storage fields and the
storage fields of various suppliers via contracted storage services.
The supply portfolio continues to provide reliable supplies at
prevailing market prices. CILCO believes that its present and planned
supply of gas will continue to be sufficient to serve all of its present
and projected firm customer requirements at prevailing market prices.
During 1994, CILCO purchased approximately 26,100,000 MCF of natural gas
at a cost of approximately $70.8 million, or an average cost of $2.71
per MCF. The average cost per MCF of natural gas purchased was $2.66 in
1993 and $2.86 in 1992.
In orders entered on March 9, 1994, and on September 21, 1994, the ICC
confirmed the right of Illinois gas utilities to recover 100% of
pipeline transition costs resulting from FERC Order 636. CILCO
estimates that it could ultimately be billed up to $3 million, excluding
interest, for pipeline transition costs. While CILCO cannot at this
time determine the outcome of a court appeal of the September 21, 1994,
ICC order regarding allocation of transition costs, management believes
that, based on existing law and the ICC order, any transition charges or
other billings by the pipelines to CILCO as a result of Order 636 will
be recoverable from customers through CILCO's gas rates.
For a discussion of other gas issues, refer to the caption "Gas Pipeline
Supplier Transition Costs" of Item 7. Management's Discussion and
Analysis of Financial Condition and Results of Operations on page 21 of
CILCORP's 1994 Annual Report to Shareholders which is incorporated
herein by reference.
FINANCING AND CAPITAL EXPENDITURES PROGRAMS
CILCO's ongoing capital expenditures program is designed to maintain
reliable electric and gas service and to meet the anticipated demands of
its customers. Capital expenditures for 1995 are estimated to be
$69 million, including Allowance for Funds Used During Construction of
approximately $362,000, and pollution control expenditures of $3
million. Expenditures include $41 million for the electric business,
$20 million for the gas business and $8 million for general and
miscellaneous purposes. Electric expenditures include $13 million for
additions and modifications to generating facilities and $28 million for
distribution system additions and improvements. Gas expenditures are
primarily for necessary additions, replacements and improvements to
existing facilities. Anticipated gas and electric capital expenditures
for 1996-1999 are $267 million.
CILCO expects to finance its 1995 capital expenditures with funds
provided by operating activities and the issuance of approximately
$20 million of medium-term notes. CILCO obtained ICC approval in October
1994, to issue $65 million of secured medium-term notes and not more
than $25 million of pollution control bonds. For further discussion of
the approved financing refer to the caption "Capital Resources and
Liquidity -- CILCO" of Item 7. Management's Discussion and Analysis of
Financial Condition and Results of Operation on page 19 of CILCORP's
1994 Annual Report to Shareholders which is incorporated herein by
reference. CILCO had $23.4 million of short-term commercial paper
outstanding at December 31, 1994, and expects to issue short-term
commercial paper throughout 1995. At December 31, 1994, CILCO had bank
lines of credit aggregating $30.4 million, all of which were unused.
CILCO expects these bank lines will remain unused through 1995.
ENVIRONMENTAL MATTERS
On April 26, 1994, the United States Environmental Protection Agency
(EPA) issued a Notice of Violation (NOV) to CILCO. The NOV states that
opacity emission limit violations occurred throughout 1993 at E. D.
Edwards Station for two coal-fired boilers. The NOV was issued pursuant
to Section 113(a)(1) of the Clean Air Act. On May 24, 1994, a
conference was held with EPA representatives to discuss the NOV. CILCO
provided additional information in support of its position that the
emissions did not exceed acceptable opacity limits. CILCO received a
draft consent order from the EPA on November 3, 1994, and submitted a
revised draft order to the EPA on January 12, 1995. A final order was
signed on February 22, 1995, which requires CILCO to report opacity
exceedances and burner tuning efforts through 1998, but no fine was
imposed.
For additional information refer to the caption "Environmental Matters"
of Item 7. Management's Discussion and Analysis of Financial Condition
and Results of Operations on page 20 of CILCORP's 1994 Annual Report to
Shareholders which is incorporated herein by reference.
SIGNIFICANT CUSTOMER
Caterpillar Inc. is CILCO's largest industrial customer. Aggregate gas
and electric revenues from sales to Caterpillar were 9.4%, 9.1% and 9.3%
of CILCO's total operating revenue for 1994, 1993 and 1992,
respectively. See CILCO's Consolidated Statements of Segments of
Business under Item 8. Financial Statements and Supplementary Data. On
June 20, 1994, Caterpillar employees represented by the United Auto
Workers Union began a strike at 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
effect, if any, a continued strike at Caterpillar will have on CILCO's
future revenues or earnings.
FRANCHISES
CILCO negotiates franchise agreements which authorize it to provide
utility services to the communities in its service area. The franchises
are for various terms, usually 25 to 50 years. Based on past
experience, CILCO anticipates that as franchises expire new franchises
will be granted in the normal course of business.
COMPETITION
CILCO, as a regulated public utility, has an obligation to provide
service to retail customers within its defined service territory; thus,
CILCO is not currently in competition with other public utilities for
retail electric or gas customers in these areas. However, electricity
and natural gas compete with other forms of energy available to
customers. For example, within the City of Springfield, CILCO's natural
gas business competes with the City's municipal electric system to
provide customer energy needs.
During 1994, CILCO continued to transport gas purchased by commercial
and industrial customers directly from producers and marketers. In
1994, approximately $10.1 million of revenue was generated from
transportation services provided to 567 customers. Transportation
arrangements have made it practical for certain industrial customers to
continue to use gas instead of switching to alternate fuels. The amount
of gas transported in the future will depend on a number of factors
including regulatory and legislative action, the relative cost of gas
purchased on the spot market compared to the cost of gas provided by
CILCO and the cost of alternate fuels, and the feasibility of customers
bypassing the CILCO system.
Refer to the caption "CILCO Electric Operations" of Item 7. Management's
Discussion and Analysis of Financial Condition and Results of Operations
on page 22 of CILCORP's 1994 Annual Report to Shareholders, incorporated
herein by reference, for a discussion of competitive trends which may
affect CILCO's electric operations.
EMPLOYEES
The number of full-time and part-time employees at December 31, 1994,
was 1,575, excluding CILCO employees assigned to the Other Businesses.
Of these, 225 power plant employees were represented by Local 8 of the
International Brotherhood of Firemen and Oilers, and 506 gas and elec-
tric department employees were represented by Local 51 of the
International Brotherhood of Electrical Workers. Both union contracts
expire June 30, 1995.
BUSINESS OF ESE
ESE is an environmental consulting and engineering firm with additional
capabilities in laboratory analysis and equipment manufacturing. ESE's
services are intended to address the growing concern over the quality of
the environment, the promulgation of numerous complex federal, state and
local environmental regulations and enforcement efforts in support of
environmental laws. As such, ESE's business is affected by the
existence and enforcement of various federal and state statutes and
regulations dealing with the environment and the use, control, disposal
and clean-up of hazardous wastes (see Regulation of ESE's Clients
herein). ESE provides a full-service approach to business, industrial
and governmental clients, commencing with problem identification and
analysis, continuing through regulatory negotiation and engineering, and
concluding with the preparation and implementation of a remediation plan
or final design and construction.
ESE has a wide range of clients in business, industry and government,
including federal agencies, local and state governments, institutional,
commercial and industrial firms and professional service firms. ESE
employs environmental, chemical, geotechnical, civil, mechanical,
electrical, structural, transportation and process engineers;
geologists; hydrogeologists; chemists; biologists; toxicologists;
meteorologists; industrial hygienists; architects; and, surveyors. ESE
has a nationwide network of offices with its corporate office in Peoria,
Illinois. Presently, ESE has three major laboratories located in
Englewood, Colorado; Gainesville, Florida; and Peoria, Illinois.
Through a wholly-owned subsidiary, Resources, Inc., ESE acquires land
that is environmentally impaired, remediates and then sells this
property.
ESE provides services in the following areas:
Air Quality Services: ESE provides ambient air monitoring, source
testing, permitting and licensing emissions inventories; planning and
compliance strategies; dispersion modeling; data management; indoor air
quality; and, engineering design/installation.
Analytical Services: ESE provides comprehensive chemical analysis,
field sampling services, and interpretation for environmental,
wastewater and air pollution chemistry, industrial hygiene and
treatability studies. These services include hazardous waste
analysis/characterization for inorganics/organics; trace environmental
analysis for toxics in water, sediments and tissue; acid rain analysis;
analytical methods research and development; priority pollutant
analysis; radiochemical analysis (including radon testing); asbestos
identification and quantification; drinking water characterization;
industrial hygiene analysis; and, chemical data information management.
Services are provided to industry, agriculture, commercial firms,
consulting engineers and federal, state and local governmental agencies.
Asbestos Management/Industrial Hygiene/Lead-Based Paint Services: ESE
provides on-site consultation and facility surveys to identify potential
asbestos, industrial hygiene, radon and lead-based paint problems.
ESE's industrial hygiene staff collects bulk samples of suspect
materials, monitors buildings for contamination, and also provides
construction management/contract administration services, renovation and
restoration services (post-abatement) and health and safety training
courses.
Civil Engineering: ESE performs a variety of civil engineering services
including highway, street and bridge planning and design, hydrological
hydraulic studies and drainage design, structural analysis and design
foundation engineering, computer-aided drafting and design services and
subdivision design and surveying.
Construction Management: ESE provides turnkey design and construction
services and construction observation services on transportation and
site development projects and infrastructure projects. Actual
construction services are subcontracted.
Environmental Assessment and Toxicology Services: ESE conducts field
and laboratory studies involving chemical migration and transport,
aquatic toxicology and bioassay, ecological and human health risk
assessments, site selection and certification, development of regional
impact studies and environmental impact statements.
Environmental Audit Service: ESE performs operational audits for
clients in industry to verify an operating facility's compliance status
with regulatory requirements, identifies potential liabilities
associated with past waste management practices and identifies methods
for minimizing future waste generation. ESE also performs transactional
audits which focus on the transfer of potential liabilities in real
estate or business transactions.
Environmental Engineering Services: ESE provides environmental
engineering services which include applied research and development,
water and waste characterization, treatability and disposal studies,
process and concept design of treatment and disposal facilities, design
of drinking water treatment and distribution facilities, design of
wastewater/industrial waste treatment and collection facilities,
technical and economic feasibility evaluations, contract operation and
maintenance of water and wastewater treatment facilities, pursuit of
permit approval for water and solid waste-oriented activities and design
of solid waste landfills and recycling facilities.
Facilities Engineering and Planning Services: ESE provides services for
new building projects, remodeling or additions, and investigations and
evaluations of building deficiencies. ESE designs heating, ventilating,
air conditioning, plumbing and fire prevention systems for new or
existing structures, and designs electrical systems for industrial
operations, municipal facilities, health care institutions and
commercial buildings. ESE also has experience designing large
industrial parks, major highways, wastewater treatment plants and
certain types of military installations.
Hydrogeology: ESE performs subsurface investigations and evaluations
for both geological and engineering studies. Service areas include
hydrogeologic investigations, geophysical studies, soils and materials
testing, aquifer evaluation, well inventories and consumptive use
analysis, saltwater intrusion investigations, leakage-recharge
investigations, well field studies, groundwater pollution
investigations, groundwater supply permitting and groundwater modeling.
Manufacture of Equipment: Through its wholly-owned subsidiary, Keck
Instruments, Inc., ESE designs, assembles, and markets instrumentation
for measuring, monitoring, detecting and sampling groundwater as well as
instruments for mineral exploration and detection, analysis and
subsurface mapping.
Remediation: ESE develops, designs and implements remediation plans at
contaminated sites. ESE has developed and patented the above-ground
fixed-film bioreactor under the registered trademark PetroClean
bioremediation system, which treats contaminated soil and groundwater in
place without excavating and removing affected soil. ESE also provides
remediation services for contaminated soil and groundwater using a
variety of other technologies.
Storage Tank Management Service: ESE provides services for managing
environmental issues related to underground and above-ground storage
tanks. Key service areas range from pre-planning to assessment and
closure of problem sites including site assessments, analytical
services, remediation and risk assessment. ESE's tank management
programs include tank removal, retrofitting, replacement and conversion
of underground systems to above-ground storage.
Surface Water Resources Service: ESE offers characterizations of the
freshwater, estuarine, and oceanic environments; environmental impact
assessments; site selection studies; licensing and permitting studies;
field surveys and monitoring; numerical/physical modeling; technical
analyses; and hydrologic and hydraulic engineering services including
stormwater drainage analysis, floodplain management and receiving water
quality evaluations.
CUSTOMERS
ESE sells its products and services to governmental agencies and public
and private companies. Approximately 42% of ESE's revenue for 1994 was
generated by services performed for federal, state and local
governmental agencies. No single customer accounted for more than 5% of
ESE's gross revenues for the year ended December 31, 1994, as compared
to 10% for the year ended December 31, 1993.
In 1994, approximately 81% of ESE's revenue was generated from
environmental consulting and engineering services, 18% from laboratory
services and 1% from manufactured equipment sales.
REGULATION OF ESE'S CLIENTS
The level and nature of ESE's business activity is largely dependent
upon government statutes and regulations relating to the environment.
Significant legislation includes the following:
Clean Air Act of 1970 (CAA): Provisions of the CAA, as amended in 1977
and 1990, authorize the EPA to set maximum acceptable contaminant levels
in the ambient air, to control emissions of certain toxic materials, and
to ensure compliance with air quality standards. The Clean Air Act
Amendments of 1990 discussed in CILCORP's 1994 Annual Report to
Shareholders under the caption "Environmental Matters" of Item 7.
Management's Discussion and Analysis of Financial Condition and Results
of Operations on page 20, incorporated herein by reference, will create
additional regulation for air toxic emissions, acid rain and attainment
of air quality standards.
Clean Water Act of 1972, as amended in 1987 (CWA): CWA requires every
state to set water quality standards for each significant body of water
within its boundaries and to ensure attainment and/or maintenance of
those standards. These standards and limitations are enforced in large
part under a nationwide permit program known as the National Pollutant
Discharge Elimination System (NPDES). CWA's reauthorization by Congress
is anticipated in 1995 or 1996.
Comprehensive Environmental Response, Compensation and Liability Act of
1980 (Superfund or CERCLA): CERCLA is the most significant federal
statute addressing practices involving hazardous substances and imposing
liability for cleaning up contamination in soil and groundwater. This
legislation has four basic provisions: (i) creation of an information
gathering and analysis program which enables federal and state
governments to identify abandoned waste sites and to set priorities for
investigation and response; (ii) granting of federal authority to
respond to hazardous waste emergencies and to clean up hazardous waste
sites; (iii) imposition of liability on persons responsible for disposal
of hazardous substances that may be released into the environment; and
(iv) creation of a federally managed trust fund to pay for the cleanup
of waste sites where a "potentially responsible party" cannot be
identified or where a threat to the environment requires immediate
response. In October 1986, the Superfund Amendments and Reauthorization
Act (SARA) was passed as a five-year extension of the Superfund program.
Title III of SARA, also known as the Emergency Planning and Community
Right-to-Know Act of 1986, established a reporting and notification
system for companies dealing with hazardous chemicals. The Superfund
program was reauthorized in 1990 and was extended without change until
September 30, 1994. CERCLA's reauthorization should occur in 1995 or
1996.
Federal Insecticide, Fungicide and Rodenticide Act (FIFRA): FIFRA
regulates the use and manufacture of pesticides and related chemicals.
National Environmental Policy Act of 1970 (NEPA): NEPA requires an
analysis of the environmental impact of any major federal action,
including the issuance of federal environmental permits for industrial
facilities which may significantly affect the quality of the
environment.
National Pollutant Discharge Elimination System (NPDES) Stormwater
Permitting Regulations of 1990: The intent of these regulations, passed
in November 1990, is to control pollution from stormwater discharges
associated with industrial activity and municipal storm sewer systems.
Occupational Safety and Health Act of 1970 (OSHA): Health and safety at
the workplace are regulated under OSHA. OSHA provides for permissible
exposure levels for certain hazardous substances, including asbestos,
and also establishes an enforcement mechanism for these and other health
and safety standards.
Resource Conservation and Recovery Act of 1976 (RCRA): While Superfund
seeks to remedy the damage caused by inactive or abandoned waste sites,
RCRA imposes comprehensive regulation of the management of hazardous
waste at active facilities. RCRA and the regulations thereunder
establish a comprehensive "cradle to grave" regulatory program
applicable to hazardous waste and impose requirements for performance
testing and recordkeeping for any person generating, transporting,
treating, storing, or disposing of more than the specified minimum
levels of hazardous waste. In November 1984, RCRA was amended by the
Hazardous and Solid Waste Amendments, which extend RCRA to most
industrial and commercial activities in the nation. In addition, RCRA
requires that underground storage tanks be identified and inspected, and
those found to be leaking must be cleaned up. RCRA's reauthorization by
Congress is anticipated in 1995 or 1996.
Safe Drinking Water Act, as amended in 1986 (SDWA): The SDWA affects
numerous public water supplies. Under this Act, the EPA must establish
primary drinking water standards.
State and Local Regulations: In addition to federal statutes and
regulations, numerous state and local statutes and regulations relating
to environmental risks impose additional environmental standards on
ESE's customers.
Toxic Substances Control Act of 1976 (TSCA): TSCA authorizes the EPA to
gather information relating to the risks posed by chemicals and to
regulate the use and disposal of asbestos and polychlorinated biphenyls.
Some of the activities and risks covered by these statutes and
regulations, and which ESE assists its customers in addressing, include:
- clean-up and remediation of contaminated soil and groundwater;
- identification, inspection and clean-up of leaking underground
storage tanks;
- the management and disposal of asbestos, polychlorinated biphenyls
and other toxic substances;
- ambient air quality and the control of emissions into the
atmosphere;
- compliance with water quality standards, including those related to
drinking water; and,
- occupational safety and health in the workplace.
REGULATION OF ESE
The environmental statutes and regulations described above primarily
affect ESE's clients, and thus have a significant impact on the volume
of ESE's business activity and specific types of services that ESE
provides to its clients. These environmental statutes and regulations
also govern the manner in which ESE performs services for its clients.
ESE must comply with specific worker protection requirements and other
health and safety standards. These standards include taking steps to
limit exposure to asbestos and chemical substances in the workplace.
ESE also must comply with regulations pertaining to the disposal of
certain hazardous chemicals and substances pursuant to guidelines
established under federal and state law. Among those substances are
chemicals used in ESE's laboratory processes as well as materials
removed from the properties and facilities of its clients. Disposal
costs for these materials, and legal compliance costs generally for ESE,
have risen steadily in recent years and are expected to continue to
increase.
Management believes that the degree of enforcement of environmental
regulations at the federal, state and local level will continue to
affect the levels of business of ESE and its clients.
COMPETITION
The market for ESE's consulting services is highly competitive, and ESE
is subject to competition with respect to all of the services it
provides. ESE competes primarily on the basis of quality of service,
expertise and, to a lesser extent, price. ESE's competitors range from
small local firms to major national companies. No single entity
currently dominates the environmental consulting and engineering
services marketplace.
In February 1990, the Company paid Hunter $2 million for a five-year
non-compete agreement. Under the terms of this agreement, Hunter agreed
not to compete in the environmental consulting businesses conducted by
the companies acquired by CILCORP. Hunter also agreed not to solicit
employees or customers of the acquired businesses or represent itself as
being engaged in the businesses conducted by these companies.
SUBCONTRACTORS
Because of the nature of the projects in which ESE is involved, ESE
often subcontracts a portion of its projects to other contractors in
order to utilize their expertise, equipment and experience in areas
where ESE may lack the ability to complete the entire project. For
example, because ESE does not perform underground storage tank removal
or have the necessary equipment to perform drilling services in all
parts of the country, such work may be subcontracted to local
contractors. In addition, contracts which ESE has with federal, state
and local governmental agencies may require, as a matter of law, that on
a particular job ESE hire a certain percentage of minority-owned
subcontractors.
GOVERNMENT CONTRACTS
Many of ESE's contracts with governmental agencies are cost-plus, based
on a combination of labor cost, overhead cost and allowable fee.
Overhead rates are estimated at the time of contract negotiations.
Following the completion of a contract, actual overhead is determined
and the difference is reimbursed to the government or paid to ESE within
the limits of the contract. Although ESE enjoys a good working
relationship with the governmental agencies for which it performs these
services, these contracts may be subject to renegotiation of profits or
termination at the election of the government agency.
PATENTS AND TRADEMARK PROTECTION
ESE has applied for or been assigned certain patents or patent rights.
ESE believes that its technical expertise, field experience,
understanding of regulatory requirements and implementation of
technological advances will continue to provide opportunities for ideas
to develop which may lead to patents; however, research and development
is not currently significant to ESE's operations.
POTENTIAL LIABILITIES AND INSURANCE
ESE is exposed to risk of financial loss during its normal course of
business in a variety of ways typically associated with an environmental
and engineering consulting business, including: work-related injury or
illness of employees or third parties; damage to property in ESE's
control during the course of a project; damage to ESE's property; repair
or rectification costs resulting from failure to detect, analyze, or
measure pollutants, asbestos or other toxic substances; repair or
rectification costs due to faulty design, workmanship, or liability
resulting from ESE's construction or design activities; failure to
perform or delay in project completion; and claims by third parties for
alleged pollution or contamination damage. Also, ESE assumes contingent
liabilities arising out of its need to exercise care in the selection
and supervision of subcontractors on various projects. Since ESE
derives revenues from work involving hazardous materials, toxic wastes
and pollutants, potential losses may surface many years after a project
is completed.
These risks, along with enforcement of environmental regulations and
increasing public awareness regarding environmental issues and
responsibilities, make it mandatory that ESE maintain a sound risk
management and insurance program.
ESE carries professional liability insurance which covers design errors
and omissions resulting from its typical operations. This policy is
extended to include pollution liability losses. Clients may also be
named as additional insured parties for specific projects. The current
policy, effective April 1, 1994, has a limit of $8 million, with the
first $3 million of coverage provided by ESE's wholly-owned captive
insurance subsidiary, National Professional Casualty Co. (Captive) and
the next $5 million of coverage provided by a non-affiliated company.
Captive is capitalized by the combination of an ESE letter of credit and
cash. Captive does not transfer risk and is not reinsured; CILCORP does
not provide credit support to Captive. The policies cover activities in
which ESE is typically involved. Accordingly, in the event of a serious
spill or loss resulting from a design error or omission, ESE faces
potential liability for the self-insured retention portion of a claim,
as well as any amounts in excess of $8 million. ESE's professional and
pollution liability insurance coverage has a standard term of one year.
ESE expects to renew these policies annually in the normal course of
business. The professional liability insurance policies include
standard industry exclusions for: dishonesty, discrimination,
warranties and guarantees, punitive damages, intentional non-compliance
with government regulations or statutes, nuclear energy, war and bodily
injury from the specification, installation, transportation, storage or
disposal of asbestos.
ESE also carries insurance policies covering worker's compensation,
general liability and auto and property damage claims. The worker's
compensation policy provides statutory average limits. It is a loss
sensitive program under which insurance premiums vary according to
actual claims paid. General liability and auto policies provide full
insurance coverage with minor deductible amounts. Also, performance and
payment bonds may be provided for specific projects if required by
clients. To supplement its insurance policies, ESE attempts with its
clients to limit and/or transfer its risk contractually.
ESE believes it operates in a safe manner and purchases insurance to
protect against loss and maintain competitiveness in the marketplace;
however, its entire potential liability may not be covered by insurance.
Also, the total cost of a potential claim could exceed ESE's policy
limits.
EMPLOYEES
At December 31, 1994, ESE employed 1,330 full-time, part-time and on-
call employees, many of whom have advanced degrees in a variety of
technical disciplines. ESE believes its relations with its employees
are good. No ESE employees are represented by a labor union.
OTHER BUSINESSES
CIM/CLM
The investment portfolio of CIM at December 31, 1994, and December 31,
1993, is shown in the following table:
<TABLE>
<CAPTION>
Type of Investment
At December 31, 1994 1993
(In thousands)
<S> <C> <C>
Equity in leveraged leases $120,961 $114,803
Cash and temporary cash
investments 76 291
Investment in Energy Investors Fund 1,691 4,116
Other 101 48,204
-------- --------
Total $122,829 $167,414
======== ========
</TABLE>
At December 31, 1994, CIM had equity investments in seven leveraged
leases through its wholly-owned subsidiaries, CILCORP Lease Management
Inc. (CLM), CIM Air Leasing Inc. and CIM Leasing Inc. CIM made two new
leveraged lease investments in 1993. The increase during 1994 in equity
in leveraged leases reflects earnings on those investments. According
to the terms of some of the lease agreements, under certain
circumstances, subsidiaries of CIM may be obligated to incur additional
non-recourse debt to finance the cost of certain alterations, additions,
or improvements required by the lessee.
CIM, through its wholly-owned subsidiary CIM Energy Investments Inc.,
has a net investment of $1.7 million in the Energy Investors Fund,
L.P.(Fund), representing a 3.13% interest in the Fund at December 31,
1994. The Fund invests in non-regulated, non-utility facilities for the
production of electricity or thermal energy. The equity method of
accounting is used for the investment.
HOLDING COMPANY
From December 1993 through March 1994, the Company issued a total of
126,475 shares of common stock through the CILCO Employees' Savings Plan
(ESP) and the CILCORP Automatic Reinvestment and Stock Purchase Plan
(DRIP). These shares were issued at an average price of $37.08 per
share for total proceeds of $4.7 million (refer to the caption "Capital
Resources and Liquidity" of Item 7. Management's Discussion and Analysis
of Financial Condition and Results of Operations on page 19 of CILCORP's
1994 Annual Report to Shareholders which is incorporated herein by
reference.) In March 1994, the Company suspended issuing stock through
the ESP and DRIP. Depending on market conditions, the Company may issue
additional shares of common stock through these plans or through a
conventional stock offering.
CVI
In 1994, CVI invested an additional $159,000 in Peoria Medical Research
Corporation doing business as HEALTH ADVANCE INSTITUTE - Medical
Research Centers (HEALTH ADVANCE INSTITUTE). HEALTH ADVANCE INSTITUTE'S
objective is to create a clinical research organization which will be
paid by pharmaceutical firms to administer clinical trials for new
products. CVI invested $500,000 in 1994 in a newly-formed, wholly-owned
subsidiary called CILCORP Energy Services Inc. (CESI). CESI's primary
business is the sale of carbon monoxide detectors to utilities for
resale to their customers.
EMPLOYEES
At December 31, 1994, there were 36 full-time CILCO employees assigned
to CILCORP, CVI and CIM.
Item 2. Properties
CILCO
CILCO owns and operates two steam-electric generating plants and two
combustion turbine-generators. These facilities had an available summer
capability of 1,136 MW in 1994. In December 1993, CILCORP announced an
agreement with MWG to develop a gas-fired cogeneration plant. The
cogeneration plant at MWG began producing steam heat at that facility in
December 1994. Installation of the 21 MW turbine-generator will be
completed by mid-1995. The turbine generator will have an expected
available summer capability of 16 MW. (See Electric Service under Item
1. Business.)
The major generating facilities of CILCO (representing 96.0% of CILCO's
available summer generating capability projected for 1995), all of which
are fueled with coal, are as follows:
<TABLE>
<CAPTION>
Available Summer
Capability (MW)
Station & Unit Installed Actual 1994
<S> <C> <C>
Duck Creek
Unit 1 1976 366
E. D. Edwards
Unit 1 1960 117
Unit 2 1968 262
Unit 3 1972 361
</TABLE>
CILCO's transmission system includes approximately 285 circuit miles
operating at 138,000 volts, 48 circuit miles operating at 345,000 volts
and 14 principal substations with an installed capacity of 3,364,200
kilovolt-amperes.
The electric distribution system includes approximately 6,212 miles of
overhead pole and tower lines and 1,941 miles of underground
distribution cables. The distribution system also includes 105
substations with an installed capacity of 2,003,485 kilovolt-amperes.
The gas system includes approximately 3,425 miles of transmission and
distribution mains.
CILCO has an underground gas storage facility located about ten miles
southwest of Peoria near Glasford, Illinois. The facility has a present
recoverable capacity of approximately 4.5 billion cubic feet (BCF). An
additional storage facility near Lincoln, Illinois, has a present
recoverable capacity of approximately 5.2 BCF.
ESE
ESE owns approximately 55 acres of land in Gainesville, Florida,
containing 110,000 square feet of offices, laboratory and other space.
In Peoria, Illinois, ESE owns approximately 27,000 square feet of
offices, laboratory and other space and leases approximately 21,000
square feet of additional space for offices. ESE and its subsidiaries
lease additional facilities for offices, laboratories and warehouse
space in 29 cities throughout the United States. ESE believes its
facilities are suitable and adequate for its current businesses and does
not expect to make any material acquisitions of real property in the
near future. However, in 1995 ESE plans to spend $1.9 million to expand
its Gainesville, Florida, laboratory by approximately 8,000 square feet.
Item 3. Legal Proceedings
Reference is made to the captions "Environmental Matters" and "Gas
Pipeline Supplier Transition Costs" of Item 7. Management's Discussion
and Analysis of Financial Condition and Results of Operations of
CILCORP's 1994 Annual Report to Shareholders incorporated herein by
reference, for certain pending legal proceedings and/or proceedings
known to be contemplated by governmental authorities. Reference is also
made to Note 9 - Rate Matters, included herein. Pursuant to CILCO's By-
Laws, CILCO has advanced legal and other expenses actually and
reasonably incurred by employees, and former employees, in connection
with the investigation of CILCO's Springfield gas operations described
in Note 9 - Rate Matters.
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. 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 the caption "Environmental
Matters" of Item 7. Management's Discussion and Analysis of Financial
Condition and Results of Operations on page 20 of CILCORP's 1994 Annual
Report to Shareholders which is incorporated herein by reference.
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
In June 1994, CILCORP, ESE and the lessor of a building in Shelton,
Connecticut, concluded settlement negotiations which released ESE from
future lease obligations and litigation related to that lease.
At the request of the South Carolina Department of Health and
Environmental Control, the U.S. Department of Justice (DOJ) 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 DOJ referred this matter to
the Attorney General of South Carolina for disposition as a civil
matter. Management does not believe that this matter will have a
material adverse impact on the Company's financial position or results
of operations.
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, or (iii) reserves for potential losses.
Item 4. Submission of Matters to a Vote of Security Holders
CILCORP
There were no matters submitted to a vote of security holders during the
fourth quarter of 1994.
CILCO
There were no matters submitted to a vote of security holders during the
fourth quarter of 1994.
Executive Officers of CILCORP
Age at Positions Held During Initial
Name 3/31/95 Past Five Years Effective Date(2)
R. O. Viets 51 President and Chief
Executive Officer February 1, 1988
J. G. Sahn(1) 48 Vice President, General March 1, 1994
Counsel and Secretary
Vice President
and General Counsel February 1, 1989
R. J. Sprowls 37 Treasurer and
Assistant Secretary October 1, 1990
Treasurer - CILCO February 1, 1988
T. D. Hutchinson 40 Controller February 1, 1988
Notes:
(1) M. J. Murray served as Secretary and Assistant Treasurer from
January 22, 1985, until February 28, 1994, when he retired and
was replaced as Secretary by J. G. Sahn.
(2) The term of each executive officer extends to the organization
meeting of CILCORP's Board of Directors following the next annual
election of Directors.
Executive Officers of CILCO
Age as of Positions Held During Initial
Name 3/31/95 Past Five Years(1) Effective Date(2)
R. W. Slone 59 Chairman of the Board,
President and Chief
Executive Officer April 23, 1991
President and Chief
Executive Officer February 1, 1988(3)
T. S. Kurtz 47 Vice President November 1, 1988(4)
T. S. Romanowski 45 Vice President October 1, 1986(4)
W. M. Shay 42 Vice President January 1, 1993(4)(5)
J. F. Vergon 47 Vice President October 1, 1986(4)(5)
W. R. Dodds 40 Treasurer and Manager
of Treasury Department October 1, 1990
Controller and Manager
of Accounting February 1, 1988
R. L. Beetschen 49 Controller and Manager
of Accounting October 1, 1990
Supervisor - General
Accounting May 1, 1988
J. G. Sahn 48 Secretary March 1, 1993
Notes:
(1) The officers listed have been employed by CILCO in executive or
management positions for more than five years except Mr. Shay and
Mr. Sahn. Mr. Shay was Vice President and Chief Financial Officer
of CILCO's parent, CILCORP Inc., from August 15, 1988, through
December 31, 1992. Mr. Sahn also serves as Vice President and
General Counsel of CILCORP Inc., a position he has held since
February 1, 1989. He was elected Secretary and Assistant
Treasurer of CILCORP effective March 1, 1994.
(2) The term of each executive officer extends to the organization
meeting of CILCO's Board of Directors following the next annual
election of Directors.
(3) R. W. Slone will retire from CILCO effective April 1, 1995. He
will be replaced by R. O. Viets as Chairman and Chief Executive
Officer. Mr. Viets was previously Chairman of the Board of CILCO
and also serves as President and Chief Executive Officer of
CILCORP Inc.
(4) T. S. Kurtz, T. S. Romanowski, W. M. Shay and J. F. Vergon head the
Electric Production Group, the Finance and Administrative Services
Group, the Electric Operations Group and the Gas Operations Group,
respectively. T. S. Romanowski also serves as CILCO's Principal
Financial Officer. J. F. Vergon also serves as Chairman of the
Board, President and Chief Executive Officer of CILCORP Investment
Management Inc.
(5) Effective April 1, 1995, Mr. Shay and Mr. Vergon will become Group
Presidents of Electric Operations and Gas Operations, respectively.
PART II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
CILCORP
The Company's common stock is listed on the New York and Chicago Stock
Exchanges (ticker symbol CER). At December 31, 1994, there were 15,095
holders of record of the Company's common stock. The following table
sets forth, for the periods indicated, the dividends per share of common
stock and the high and low prices of the common stock as reported in New
York Stock Exchange Composite Transactions.
<TABLE>
<CAPTION>
Quarter
1993 First Second Third Fourth
<S> <C> <C> <C> <C>
Price Range
High $43 3/8 $43 3/8 $43 3/4 $43
Low $39 $40 3/8 $41 5/8 $35 3/4
Dividends Paid $ .615 $ .615 $ .615 $ .615
1994
Price Range
High $37 1/2 $34 7/8 $31 $32 1/2
Low $33 $28 7/8 $28 3/4 $29 1/4
Dividends Paid $ .615 $ .615 $ .615 $ .615
</TABLE>
The number of common shareholders of record as of March 10, 1995, was
14,954.
CILCO
CILCO's common stock is not traded on any market. As of March 10, 1995,
13,563,871 shares of CILCO's Common Stock, no par value, were issued,
and outstanding and privately held, beneficially and of record, by
CILCORP Inc.
CILCO's requirement for retained earnings before common stock dividends
may be paid as described in Note 5 of CILCO's Notes to Financial
Statements contained in Item 8. Financial Statements and Supplementary
Data.
Item 6. Selected Financial Data
<TABLE>
CILCORP INC.
Selected Financial Data
<CAPTION>
For the Years Ended December 31,
1994 1993 1992 1991 1990 1989
(In thousands except per share amounts)
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 605,139 $ 584,511 $ 581,225 $ 590,165 $ 542,847 $ 463,062
Net income available
for common
stockholders 32,586 33,583 32,097 39,656 34,504 48,399
Earnings per share 2.50 2.60 2.48 3.14 2.69 3.58
Total assets 1,238,384 1,198,440 1,184,916 1,147,978 1,155,254 1,136,140
Long-term debt 326,695 325,711 307,628 324,998 298,217 301,114
Dividends declared
per common share 2.46 2.46 2.46 2.46 2.46 2.46
</TABLE>
<TABLE>
Central Illinois Light Company
Selected Financial Data
<CAPTION>
For the Years Ended December 31,
1994 1993 1992 1991 1990 1989
(In thousands)
<S> <C> <C> <C> <C> <C> <C>
Revenue $ 461,370 $453,878 $433,739 $454,602 $432,961 $426,302
Net income available
for common
stockholders 29,507 33,635 31,195 39,790 36,525 39,989
Total assets 1,019,109 988,325 965,691 942,634 928,304 947,465
Long-term debt 278,359 278,321 257,361 268,006 268,051 268,095
Ratio of earnings to
fixed charges 3.01 3.20 3.12 3.74 3.55 3.71
</TABLE>
Item 7. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The information under the heading Management's Discussion and Analysis
of Financial Condition and Results of Operations on pages 18 through 27
of CILCORP's 1994 Annual Report to Shareholders is incorporated herein
by reference.
Item 8.: Financial Statements and Supplementary Data
The financial statements on pages 29 through 44 and Management's
Report to the Stockholders of CILCORP Inc. on page 28 of CILCORP's
1994 Annual Report to Shareholders are incorporated herein by
reference.
Index to Financial Statements:
CILCORP Page
Report of Independent Public Accountants on
Schedules 30
CILCO
Management's Report 31
Report of Independent Public Accountants 32
Consolidated Statements of Income 33
Consolidated Balance Sheets 34-35
Consolidated Statements of Cash Flows 36-37
Consolidated Statements of Retained Earnings 38
Statements of Segments of Business 39-40
Notes to Consolidated Financial Statements 41-52
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To CILCORP Inc.:
We have audited in accordance with generally accepted auditing
standards, the consolidated financial statements included in CILCORP
Inc.'s Annual Report to Shareholders incorporated by reference in this
Form 10-K, and have issued our report thereon dated February 3, 1995.
Our audits were made for the purpose of forming an opinion on those
statements taken as a whole. The financial statement schedules listed
in Item 14(a)2 are the responsibility of the Company's management and
are presented for purposes of complying with the Securities and Exchange
Commission's rules and are not part of the basic financial statements.
These schedules have been subjected to the auditing procedures applied
in the audits of the basic financial statements and, in our opinion,
fairly state in all material respects the financial data required to be
set forth therein in relation to the basic financial statements taken as
a whole.
Our report on the financial statements includes an explanatory paragraph
with respect to the change in the method of accounting for income taxes,
effective January 1, 1993, as discussed in Note 2 to the financial
statements.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 3, 1995
<PAGE>
MANAGEMENT'S REPORT
The accompanying financial statements and notes for CILCO and its
consolidated subsidiaries have been prepared by management in accordance
with generally accepted accounting principles. Estimates and judgments
used in developing these statements are the responsibility of
management. Financial data presented throughout this report is
consistent with these statements.
CILCO maintains a system of internal accounting controls which
management believes is adequate to provide reasonable assurance as to
the integrity of accounting records and the protection of assets. Such
controls include established policies and procedures, a program of
internal audit and the careful selection and training of qualified
personnel.
The financial statements have been audited by CILCO's independent public
accountants, Arthur Andersen LLP. Their audit was conducted in
accordance with generally accepted auditing standards and included an
assessment of selected internal accounting controls only to determine
the scope of their audit procedures. The report of the independent
public accountants is contained in this Form 10-K annual report.
The Audit Committee of the CILCORP Inc. Board of Directors, consisting
solely of outside directors, meets periodically with the independent
public accountants, internal auditors and management to review
accounting, auditing, internal accounting control and financial
reporting matters. The independent public accountants have direct
access to the Audit Committee. The Audit Committee meets separately
with the independent public accountants.
R. W. Slone
R. W. Slone
Chairman of the Board,
President and Chief
Executive Officer
T. S. Romanowski
T. S. Romanowski
Vice President and Chief
Financial Officer
R. L. Beetschen
R. L. Beetschen
Controller and Manager of
Accounting
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To Central Illinois Light Company:
We have audited the accompanying consolidated balance sheets of Central
Illinois Light Company (an Illinois corporation) and subsidiaries as of
December 31, 1994 and 1993, and the related consolidated statements of
income, cash flows, segments of business, and retained earnings for each
of the three years in the period ended December 31, 1994. These
financial statements and the schedules referred to below are the
responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedules based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a
test basis, evidence supporting the amounts and disclosures in the
financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as
evaluating the overall financial statement presentation. We believe
that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Central
Illinois Light Company and subsidiaries as of December 31, 1994 and
1993, and the results of their operations and their cash flows for each
of the three years in the period ended December 31, 1994, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the basic
financial statements taken as a whole. The financial statement
schedules listed in Item 14(a)2 are presented for purposes of complying
with the Securities and Exchange Commission's rules and are not a
required part of the basic financial statements. These financial
statement schedules have been subjected to the auditing procedures
applied in our audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data
required to be set forth therein in relation to the basic financial
statements taken as a whole.
As explained in Note 2 to the Financial Statements, effective January 1,
1993, the Company changed its method of accounting for income taxes.
ARTHUR ANDERSEN LLP
Chicago, Illinois
February 3, 1995
<PAGE>
Central Illinois Light Company
Consolidated Statements of Income
<TABLE>
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating Revenues:
Electric $313,085 $303,124 $288,813
Gas 148,285 150,754 144,926
-------- -------- --------
Total Operating Revenues 461,370 453,878 433,739
-------- -------- --------
Operating Expenses:
Cost of Fuel 97,184 92,112 94,133
Cost of Gas 78,696 79,022 77,123
Purchased Power 9,433 8,754 4,295
Other Operation Expenses 81,143 77,125 71,692
Maintenance 28,174 30,648 28,561
Depreciation and Amortization 54,349 53,023 51,395
Income Taxes 21,489 22,226 19,829
State and Local Taxes on Revenue 20,450 19,417 17,823
Other Taxes 11,945 11,364 11,288
-------- -------- --------
Total Operating Expenses 402,863 393,691 376,139
-------- -------- --------
Operating Income 58,507 60,187 57,600
-------- -------- --------
Other Income and Deductions:
Cost of Equity Funds Capitalized 530 (23) 122
Company-owned Life Insurance, Net (667) (516) (142)
Disallowed Plant Cost (7,523) -- --
Income Tax Reduction for Disallowed Plant Cost 2,982 -- --
Other, Net (1,051) 262 1,626
-------- -------- --------
Total Other Income and (Deductions) (5,729) (277) 1,606
-------- -------- --------
Income Before Interest Expenses 52,778 59,910 59,206
-------- -------- --------
Interest Expenses:
Interest on Long-term Debt 19,221 19,753 20,747
Cost of Borrowed Funds Capitalized (510) (222) (215)
Other 1,580 2,701 3,038
-------- -------- --------
Total Interest Expenses 20,291 22,232 23,570
-------- -------- --------
Net Income 32,487 37,678 35,636
-------- -------- -------
Dividends on Preferred Stock 2,980 4,043 4,441
-------- -------- --------
Net Income Available for Common Stock $ 29,507 $ 33,635 $ 31,195
======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Assets
<CAPTION>
As of December 31, 1994 1993
(In thousands)
<S> <C> <C>
Utility Plant, At Original Cost:
Electric $1,092,382 $1,068,818
Gas 355,270 348,541
---------- ----------
1,447,652 1,417,359
Less - Accumulated Provision for Depreciation 653,571 618,912
---------- ----------
794,081 798,447
Construction Work in Progress 71,105 31,896
Plant Acquisition Adjustments, Net of
Amortization 3,355 4,068
---------- ----------
Total Utility Plant 868,541 834,411
---------- ----------
Other Property and Investments:
Cash Surrender Value of Company-owned Life
Insurance (Net of Related Policy Loans of
$28,831 in 1994 and $24,923 in 1993) 1,637 1,263
Other 1,041 1,056
---------- ----------
Total Other Property and Investments 2,678 2,319
---------- ----------
Current Assets:
Cash and Temporary Cash Investments 629 594
Receivables, Less Reserves of $600 and $585 30,543 34,197
Accrued Unbilled Revenue 22,340 25,111
Fuel, at Average Cost 14,765 8,323
Materials and Supplies, at Average Cost 16,731 16,674
Gas in Underground Storage, at Average Cost 17,484 24,548
Prepaid Taxes 2,103 856
Other 7,217 8,657
---------- ----------
Total Current Assets 111,812 118,960
---------- ----------
Deferred Debits:
Unamortized Loss on Reacquired Debt 6,486 6,950
Unamortized Debt Expense 2,212 2,185
Prepaid Pension Cost 13,312 13,953
Other 14,068 9,547
---------- ----------
Total Deferred Debits 36,078 32,635
---------- ----------
Total Assets $1,019,109 $ 988,325
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these Balance Sheets.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Balance Sheets
Capitalization and Liabilities
<CAPTION>
As of December 31, 1994 1993
(In thousands)
<S> <C> <C>
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 122,125 108,645
---------- ----------
Total Common Shareholder's Equity 307,786 294,306
Preferred Stock Without Mandatory Redemption 44,120 44,120
Preferred Stock With Mandatory Redemption 22,000 22,000
Long-term Debt 278,359 278,321
---------- ----------
Total Capitalization 652,265 638,747
---------- ----------
Current Liabilities:
Notes Payable 23,400 12,400
Accounts Payable 47,536 40,971
Accrued Taxes 6,387 6,083
Accrued Interest 8,477 8,616
PGA Over-Recoveries 2,142 3,029
Level Payment Plan 4,155 2,944
Other 6,809 5,941
---------- ----------
Total Current Liabilities 98,906 79,984
---------- ----------
Deferred Liabilities and Credits:
Accumulated Deferred Income Taxes 151,856 144,969
Regulatory Liability, Net 59,997 69,477
Investment Tax Credits 26,178 27,871
Capital Lease Obligation 2,665 2,954
Other 27,242 24,323
---------- ----------
Total Deferred Liabilities and Credits 267,938 269,594
---------- ----------
Total Capitalization and Liabilities $1,019,109 $ 988,325
========== ==========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these Balance Sheets.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Statements of Cash Flows
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Preferred Dividends $ 32,487 $ 37,678 $ 35,636
Adjustments to Reconcile Net Income to Net Cash
Provided by Operating Activities:
Disallowed Plant Costs 7,522 -- --
Income Tax Reduction for Disallowed Plant
Costs (2,982) -- --
Depreciation and Amortization 55,062 53,734 52,108
Deferred Taxes, Investment Tax Credits and
Regulatory Liability, Net (2,006) (1,512) (4,157)
Decrease (Increase) in Accounts Receivable 3,654 1,513 (232)
Decrease (Increase) in Fuel, Materials and
Supplies, and Gas in Underground Storage 565 (5,609) (2,591)
Decrease (Increase) in Unbilled Revenue 2,771 (320) (2,336)
Increase in Accounts Payable 6,565 6,098 5,716
Increase in Accrued Taxes and Interest 867 3,304 476
Capital Lease Payments 478 478 --
Decrease (Increase) in Other Current Assets 193 (272) 1,237
Increase (Decrease) in Other Current Liabilities 1,192 (6,398) 3,016
(Increase) Decrease in Other Non-Current
Assets (1,631) 3,050 314
Increase in Other Non-Current Liabilities 2,319 81 5,493
-------- -------- --------
Net Cash Provided by Operating Activities 107,056 91,825 94,680
-------- -------- --------
Cash Flows from Investing Activities:
Capital Expenditures (90,873) (72,580) (61,701)
Cost of Equity Funds Capitalized (530) 23 (122)
Other (7,308) 2,581 (5,113)
-------- -------- --------
Net Cash Used in Investing Activities (98,711) (69,976) (66,936)
-------- -------- --------
Cash Flows from Financing Activities:
Common Dividends Paid (16,027) (15,878) (31,787)
Preferred Dividends Paid (2,980) (4,043) (4,441)
Long-Term Debt Issued 175 107,269 133,001
Preferred Stock Issued -- 46,006 --
Long-Term Debt Retired -- (97,756) (140,318)
Preferred Stock Retired -- (46,051) --
Payments on Capital Lease Obligation (478) (478) --
(Decrease) Increase in Short-Term Borrowing 11,000 (12,100) 13,000
-------- -------- --------
Net Cash Used in Financing Activities (8,310) (23,031) (30,545)
-------- -------- --------
Net Increase (Decrease) in Cash and Temporary
Cash Investments 35 (1,182) (2,801)
Cash and Temporary Cash Investments at Beginning
of Year 594 1,776 4,577
-------- -------- --------
Cash and Temporary Cash Investments at
December 31, $ 629 $ 594 $ 1,776
======== ======= =======
<PAGE>
Supplemental Disclosures of Cash Flow
Information
Cash Paid During the Period for:
Interest (Net of Cost of Borrowed Funds
Capitalized) $20,809 $20,271 $20,690
Income Taxes 24,155 13,198 23,838
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Consolidated Statement of Retained Earnings
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Balance Beginning of Year $108,645 $ 92,433 $ 93,025
Add:
Net Income 32,487 37,678 35,636
-------- -------- --------
Total $141,132 $130,111 $128,661
-------- -------- --------
Deduct:
Cash Dividends Declared
Preferred Stock
$100 Par Value
4 1/2% Series 501 501 501
4.64% Series 371 371 371
5.85% Series 1,287 725 --
7.56% Series -- 668 1,285
7.72% Series -- 686 1,042
8.28% Series -- 817 1,242
Auction Rate Series (rate at
December 31, 1994 was 4.72%) 821 275 --
Common Stock, No Par Value 16,027 15,878 31,787
-------- -------- --------
Total Dividends Declared 19,007 19,921 36,228
-------- -------- --------
Capital Stock Expense -- 720 --
Excess of stated value over purchase
price of 135,000 shares 7.72%
Series preferred stock and
150,000 shares 8.28% Series
preferred stock retired in 1993 -- 825 --
-------- -------- --------
19,007 21,466 36,228
-------- --------- --------
Balance End of Year $122,125 $108,645 $ 92,433
======== ======== ========
<FN>
The accompanying Notes to the Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE>
<TABLE>
Central Illinois Light Company
Statements of Segments of Business
<CAPTION>
Operating Information
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Electric Operations:
Revenue $313,085 $303,124 $288,813
Expenses 263,462 253,995 243,734
-------- -------- --------
Operating Income 49,623 49,129 45,079
Income Taxes 19,925 17,542 15,747
-------- -------- --------
Operating Income Before
Income Taxes $ 69,548 $ 66,671 $ 60,826
======== ======== ========
Depreciation and
Amortization $ 39,130 $ 38,337 $ 37,465
Capital Expenditures $ 66,537 $ 41,880 $ 41,821
Gas Operations:
Revenue $148,285 $150,754 $144,926
Expenses 139,401 139,696 132,405
-------- -------- --------
Operating Income 8,884 11,058 12,521
Income Taxes 1,564 4,684 4,082
-------- -------- --------
Operating Income Before
Income Taxes $ 10,448 $ 15,742 $ 16,603
======== ======== ========
Depreciation and
Amortization $ 15,219 $ 14,686 $ 13,930
Capital Expenditures $ 24,867 $ 30,677 $ 20,001
</TABLE>
<TABLE>
Major Customer
<CAPTION>
For the Years
Ended December 31, 1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Caterpillar Inc.
Electric Revenue $41,422 13.2% $39,831 13.1% $38,428 13.3%
Gas Revenue 1,719 1.2% 1,581 1.0% 1,847 1.3%
------- ----- ------- ----- ------- -----
Total $43,141 9.4% $41,412 9.1% $40,275 9.3%
======= ===== ======= ===== ======= =====
</TABLE>
<PAGE>
<TABLE>
Identifiable Assets
<CAPTION>
As of December 31, 1994 1993 1992
<S> <C> <C> <C>
Electric $ 718,431 $684,618 $684,968
Gas 260,070 259,462 226,579
Other Utility Assets* 40,608 44,245 47,578
---------- -------- --------
Total Utility Assets $1,019,109 $988,325 $959,125
========== ======== ========
<FN>
*Other investments, miscellaneous accounts receivable, prepaid assets,
deferred pension costs and unamortized debt, discount and expense.
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
CENTRAL ILLINOIS LIGHT COMPANY
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements of CILCO include the accounts
of CILCO and its subsidiaries, CILCO Exploration and Development
Company and CILCO Energy Corporation. CILCO is a subsidiary of
CILCORP Inc. Prior year amounts have been reclassified on a basis
consistent with the 1994 presentation.
REGULATION
CILCO is a public utility subject to regulation by the Illinois
Commerce Commission and the Federal Energy Regulatory Commission with
respect to accounting matters, and maintains its accounts in
accordance with the Uniform System of Accounts prescribed by these
agencies.
As a regulated public utility, CILCO is subject to the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation." Regulatory assets
represent the probable future revenues to CILCO resulting from the
ratemaking action of regulatory agencies. Net regulatory liabilities
are approximately $60 million (see Note 2). At December 31, 1994, and
1993, the regulatory assets included on the Consolidated Balance
Sheets were as follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments $ 3,682 $ 5,716
Coal tar remediation cost - estimated
current 300 263
Gas transition costs 1,171 574
------- -------
Current costs included in
prepayments and other 5,153 6,553
------- -------
Included in other assets:
Coal tar remediation cost, net of
recoveries 4,993 4,305
Gas transition costs 2,781 2,780
Unamortized loss on reacquired debt 6,486 6,950
------- -------
Future costs included in other assets 14,260 14,035
------- -------
Total regulatory assets $19,413 $20,588
======= =======
</TABLE>
OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric and gas revenues include service provided but unbilled at
year end. Substantially all electric rates and gas system sales rates
of CILCO include a fuel adjustment clause and a purchased gas
adjustment clause, respectively. These clauses provide for the
recovery of changes in electric fuel costs, excluding coal
transportation, and changes in the cost of gas on a current basis in
billings to customers. CILCO adjusts the cost of fuel and cost of gas
to recognize over or under recoveries of allowable costs. The
cumulative effects are deferred on the Balance Sheets as a current
asset or current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to customers.
CONCENTRATION OF CREDIT RISK
CILCO, as a public utility, must provide service to customers within
its defined service territory and may not discontinue service to
residential customers when certain weather conditions exist. CILCO
continually reviews customers' credit worthiness and requests deposits
or refunds deposits based on that review. At December 31, 1994, CILCO
had net receivables of $30.5 million, of which approximately $5.1
million was due from its major industrial customers.
TRANSACTIONS WITH AFFILIATES
CILCO, which is a subsidiary of CILCORP, incurs certain corporate
expenses such as legal, shareholder and accounting fees on behalf of
CILCORP and its other subsidiaries. These expenses are billed monthly
to CILCORP and its other subsidiaries based on specific identification
of costs except for shareholder-related costs which are based on the
relative equity percentages of CILCORP and its subsidiary
corporations. A return on CILCO assets used by CILCORP and its other
subsidiaries is also calculated and billed monthly. Total billings
to CILCORP and its other subsidiaries amounted to $2.4 million, $2.3
million and $3.3 million in 1994, 1993 and 1992, respectively.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION (AFUDC)
The allowance, representing the cost of equity and borrowed funds used
to finance construction, is capitalized as a component of the cost of
utility plant. The amount of the allowance varies depending on the
rate used and the size and length of the construction program. The
Uniform System of Accounts defines AFUDC, a non-cash item, as the net
cost for the period of construction of borrowed funds used for
construction purposes and a reasonable rate upon other funds when so
used. On the income statement, the cost of borrowed funds capitalized
is reported as a reduction of total interest expense and the cost of
equity funds capitalized is reported as other income. In accordance
with the FERC formula, the composite AFUDC rates used in 1994, 1993
and 1992 were 8.0%, 3.5% and 5.7%, respectively.
DEPRECIATION AND MAINTENANCE
Provisions for depreciation of utility property for financial
reporting purposes are based on straight-line composite rates. The
annual provisions for utility plant depreciation, expressed as a
percentage of average depreciable utility property, were as follows:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Electric 3.8% 3.8% 3.8%
Gas 4.6% 4.6% 4.6%
</TABLE>
Utility maintenance and repair costs are charged directly to expense.
Renewals of units of property are charged to the utility plant
account, and the original cost of depreciable property replaced or
retired, together with the removal cost less salvage, is charged to
the accumulated provision for depreciation.
INCOME TAXES
CILCO follows a policy of comprehensive interperiod income tax
allocation. Investment tax credits related to utility property have
been deferred and are being amortized over the estimated useful lives
of the related property. CILCORP and its subsidiaries file a
consolidated federal income tax return. Income taxes are allocated to
the individual companies based on their respective taxable income or
loss.
CONSOLIDATED STATEMENTS OF CASH FLOWS
CILCO considers all highly liquid debt instruments purchased with a
maturity of three months or less to be cash equivalents for purposes
of the Consolidated Statements of Cash Flows.
CILCO-OWNED LIFE INSURANCE POLICIES
The following amounts related to CILCO-owned life insurance
contracts, issued by one major insurance company, are recorded on the
Consolidated Balance Sheets:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $30,468 $26,186
Borrowings against contracts (28,831) (24,923)
------- -------
Net investment $ 1,637 $ 1,263
======= =======
</TABLE>
Interest expense related to borrowings against CILCO-owned life
insurance, included in CILCO-owned Life Insurance, Net on the
Consolidated Statements of Income, was $2 million, $1.4 million and
$.9 million for 1994, 1993 and 1992, respectively.
NOTE 2 - INCOME TAXES
CILCO adopted Statement of Financial Accounting Standards No. 109,
"Accounting for Income Taxes" (SFAS 109), on January 1, 1993. SFAS
109 requires the use of the liability method to account for income
taxes. Under the liability method, deferred income taxes are
recognized at currently enacted income tax rates to reflect the tax
effect of temporary differences between the financial reporting basis
and the tax basis of assets and liabilities. Temporary differences
occur because the income tax law either requires or permits certain
items to be reported on CILCO's income tax return in a different year
than they are reported in the financial statements. Adoption of SFAS
109 did not have a material impact on CILCO's financial position,
results of operations or cash flows; however, the adoption of SFAS 109
required reclassification of accumulated deferred income taxes on
CILCO's Balance Sheet. CILCO established a regulatory liability to
account for the net effect of expected future regulatory actions
related to unamortized investment tax credits, income tax liabilities
initially recorded at tax rates in excess of current rates, the equity
component of Allowance for Funds Used During Construction and other
items for which deferred taxes had not previously been provided. The
temporary differences related to the consolidated net deferred income
tax liability at December 31, 1994, December 31, 1993 and January 1,
1993, were as follows:
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993 Jan. 1, 1993
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Property, including
allowance for funds used
during construction $212,308 $213,056 $212,891
Other 11,105 11,835 8,302
Deferred tax assets:
Other (11,560) (10,446) (6,931)
Net regulatory liability (59,997) (69,477) (74,321)
-------- -------- --------
Deferred income taxes $151,856 $144,968 $139,941
======== ======== ========
</TABLE>
Of the $6,888,000 increase in the net deferred income tax liability at
December 31, 1994, from December 31, 1993, $2,592,000 is due to
current year deferred federal and state income tax expense. The
remainder is attributable to the decrease in the net regulatory
deferred tax liability which is principally due to changes in
temporary differences for which deferred taxes were not previously
provided.
<TABLE>
Income tax expenses were as follows:
<CAPTION>
Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Current income taxes
Federal $18,912 $18,510 $19,254
State 4,165 4,860 4,363
------- ------- -------
Total operating current
taxes 23,077 23,370 23,617
------- ------- -------
Deferred operating income
taxes, net
Depreciation and
amortization (1,905) (1,786) (1,243)
Repair allowance 648 168 (431)
Borrowed component of AFUDC (249) 76 (70)
Capitalized overhead costs (794) (888) (867)
Removal costs 2,176 2,471 2,238
Call premiums 401 2,623 --
Gas take-or-pay settlements (1,244) 1,413 (1,679)
Gas storage field 408 (2,856) 12
Taxable salvage 1,229 573 194
Coal tar remediation costs 253 120 (952)
Other (819) 1,364 704
------- ------- -------
Total operating deferred
income taxes 104 550 (2,094)
------- ------- -------
Investment tax credit
amortization (1,693) (1,694) (1,694)
------- ------- -------
Total operating
income taxes 21,488 22,226 19,829
------- ------- -------
Income tax reduction for
disallowed plant costs (2,982) -- --
Other net (1,339) (1,859) (2,106)
------- ------- -------
Total income taxes $17,167 $20,367 $17,723
======= ======= =======
<FN>
Total deferred income taxes, net, includes deferred state income taxes
of $752,000, $332,000 and $435,000 for 1994, 1993 and 1992,
respectively.
</TABLE>
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Effective income tax rate 36.8% 37.7% 36.2%
----- ----- -----
Equity component of AFUDC not subject to
taxation .4 -- .1
Depreciation differences for which
deferred taxes have not been provided (1.4) (1.0) (.9)
Amortization of investment tax credit 3.6 3.1 3.5
CILCO-owned life insurance 1.0 .6 .5
State income taxes (6.0) (6.2) (6.3)
Civil fine (.7) -- --
Other differences 1.3 .8 .9
----- ---- ----
Total (1.8) (2.7) (2.2)
----- ---- ----
Statutory federal income tax rate 35.0% 35.0% 34.0%
===== ==== ====
</TABLE>
NOTE 3 - POSTEMPLOYMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
On January 1, 1994, CILCO adopted Statement of Financial Accounting
Standards No. 112, "Employer's Accounting for Postemployment Benefits"
(SFAS 112). This standard requires accrual of benefits other than pensions
or health care provided to former or inactive employees. CILCO recorded a
liability of approximately $1.5 million of which $1 million represents the
cumulative effect of applying SFAS 112. Of the $1.5 million, $.4 million
has been capitalized.
PENSION BENEFITS
Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company, are covered by trusteed, non-contributory defined
benefit pension plans. Benefits under these qualified plans reflect the
employee's years of service, age at retirement and maximum total
compensation for any consecutive sixty-month period prior to retirement.
CILCO also has an unfunded nonqualified plan for certain employees.
<TABLE>
Pension costs for the past three years were charged as follows:
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating expenses $2,465 $1,841 $1,995
Utility plant and other 1,189 925 721
------ ------ ------
Net pension costs $3,654 $2,766 $2,716
====== ====== ======
</TABLE>
Provisions for pension expense are determined under the rules
prescribed by Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" (SFAS 87), including the use of
the projected unit credit actuarial cost method. SFAS 87 requires
employers to recognize an additional minimum liability on the Balance
Sheets for plans in which the accumulated benefit obligation exceeds
the fair value of plan assets.
<TABLE>
Information on the plans' funded status, on an aggregate basis
follows:
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Components of net periodic pension costs:
Cost of pension benefits earned by employees $ 5,589 $ 4,401
Interest cost on projected benefit obligation 14,422 13,611
Actual return on plan assets 1,237 (22,053)
Net amortization and deferral (17,594) 6,807
-------- --------
Net pension costs $ 3,654 $ 2,766
======== ========
Actuarial present value of accumulated benefit
obligation:
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $146,875 $157,570
Non-vested benefits - employees' rights to
receive benefits contingent upon continued
employment 11,258 7,793
-------- --------
Net benefit obligation $158,133 $165,363
======== ========
Funded status of plans:
Pension assets and obligations
Pension assets at fair market value $192,427 $200,337
Projected benefit obligation at present value (190,440) (209,416)
Unrecognized transition asset (7,842) (8,765)
Unrecognized prior service cost 11,179 11,687
Unrecognized net loss 7,199 20,110
Adjustment to recognize minimum liability (111) --
-------- --------
Net prepaid pension costs recorded on Balance
Sheets $ 12,412 $ 13,953
======== ========
<FN>
The 1994 prepaid pension costs on the Balance Sheets consist of $13.3
million recorded as prepaid pension expense and $.9 million recorded in
other deferred credits.
</TABLE>
<TABLE>
<CAPTION>
Rates used for calculations:
<S> <C> <C>
Discount rate 8.00% 7.00%
Expected rate of salary increase 4.50% 5.00%
Expected long-term rate of return 8.50% 8.50%
</TABLE>
POSTEMPLOYMENT HEALTH CARE BENEFITS
Provisions for postemployment benefits expenses are determined under
the rules of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106).
Substantially all of CILCO's full-time employees, including those
assigned to the Holding Company, are currently covered by a trusteed,
non-contributory defined benefit postemployment health care plan. The
plan pays stated percentages of most necessary medical expenses
incurred by retirees, after subtracting payments by Medicare or other
providers and after a stated deductible has been met. Participants
become eligible for the benefits if they retire from CILCO after
reaching age 55 with 10 or more years of service.
<TABLE>
Postemployment health care benefit costs were charged as follows:
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating expenses $5,253 $5,767 $6,127
Utility plant and other 1,913 2,060 2,098
------ ------ ------
Net postemployment health care
benefit costs $7,166 $7,827 $8,225
====== ====== ======
</TABLE>
<TABLE>
Information on the plans' funded status, on an aggregate basis follows:
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Components of net postemployment health care
benefit costs:
Service cost - benefits attributed
to service during the period $ 1,496 $ 1,194
Actual return on plan assets 133 (1,732)
Interest cost on accumulated
postemployment health care
benefit obligation 4,469 4,873
Amortization of transition
obligation over 18.6 years 2,858 2,858
Other net amortization and deferral (1,790) 634
------- -------
Net postemployment health care
benefit costs $ 7,166 $ 7,827
======= =======
Accumulated postemployment health care
benefit obligation:
Retirees $30,849 $44,340
Other fully eligible participants 10,859 12,409
Other active participants 20,046 19,823
-------- -------
Total accumulated postemployment
health care benefit obligation 61,754 76,572
Less:
Unrecognized actuarial (gain) loss (3,046) 13,093
Unrecognized transition obligation 41,730 44,588
Plan assets at fair value 22,929 18,748
------- -------
Accrued postemployment health
care benefit cost liability $ 141 $ 143
======= =======
</TABLE>
For measurement purposes, a health care cost trend rate of 9% annually
was assumed for 1994; the rate was assumed to decrease to 8% for 1995,
then decrease gradually to 6% by 2020 and remain at that level
thereafter.
Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postemployment benefit obligation at
December 31, 1994, by $2.9 million and the aggregate of the service
and interest cost components of net postemployment health care cost
for 1994 by $265,000. The discount rate used in determining the
accumulated postemployment benefit obligation at December 31, 1994,
was 8% and at December 31, 1993, was 7%. The weighted average
expected return on assets net of taxes was 8.1%, where taxes are
assumed to decrease return by 0.4%.
NOTE 4 - SHORT-TERM DEBT
CILCO had arrangements for bank lines of credit totaling $30.4 million
at December 31, 1994, all of which were unused. These lines of credit
consisted of $7 million maintained by compensating balances and $23.4
million maintained by commitment fees ranging from 1/16 to 2/16 of 1%
per annum in lieu of balances. The compensating bank balance
arrangements provide that CILCO maintain bank deposits to average
annually 3% to 5% of the line, such balances being available to CILCO
for operating purposes and as compensation to the bank for other bank
services. These bank lines of credit also support CILCO's issuance of
commercial paper. Short-term borrowings consisted of commercial paper
totaling $23.4 million and $12.4 million at December 31, 1994 and
1993, respectively.
NOTE 5 - RETAINED EARNINGS
CILCO's Articles of Incorporation provide that no dividends shall be
paid on the common stock if, at the time of declaration, the balance
of retained earnings does not equal at least two times the annual
dividend requirement on all outstanding shares of preferred stock.
The amount of retained earnings so required at December 31, 1994, was
$6.7 million.
NOTE 6 - PREFERRED STOCK
<TABLE>
<CAPTION>
At December 31, 1994 1993
(In thousands)
<S> <C> <C>
Preferred stock, cumulative
$100 par value, authorized 1,500,000 shares
Without mandatory redemption
4.50% series - 111,264 shares $11,126 $11,126
4.64% series - 79,940 shares 7,994 7,994
Class A, no par value, authorized
3,500,000 shares
Flexible auction rate - 250,000
shares (a) 25,000 25,000
With mandatory redemption
5.85% series - 220,000 shares 22,000 22,000
------- -------
Total preferred stock $66,120 $66,120
======= =======
<FN>
(a) Dividend rates at December 31, 1994 and 1993, were 4.72% and 2.62%,
respectively.
</TABLE>
All classes of preferred stock are entitled to receive cumulative
dividends and rank equally as to dividends and assets, according to their
respective terms.
The total annual dividend requirement for preferred stock outstanding at
December 31, 1994, is $3.3 million, assuming a continuation of the
auction dividend rate at December 31, 1994, for the flexible auction rate
series.
PREFERRED STOCK WITHOUT MANDATORY REDEMPTION
The call provisions of preferred stock redeemable at CILCO's option
outstanding at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Series Callable Price Per Share (plus accrued dividends)
<S> <C>
4.50% $110
4.64% $102
Flexible auction rate $100
</TABLE>
PREFERRED STOCK WITH MANDATORY REDEMPTION
CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share. A mandatory redemption fund must be established on July 1, 2003.
The fund will provide for the redemption of 11,000 shares for $1.1 million
on July 1 of each year through July 1, 2007. On July 1, 2008, the
remaining 165,000 shares will be retired for $16.5 million.
PREFERENCE STOCK, CUMULATIVE
No Par Value, Authorized 2,000,000 shares, of which none have been issued.
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 1993
(In thousands)
<S> <C> <C>
First Mortgage Bonds
5 1/8% series due 1996 $ 16,000 $ 16,000
5 1/2% series due 1997 20,000 20,000
7 1/2% series due 2007 50,000 50,000
8 1/5% series due 2022 65,000 65,000
Medium-Term Notes
5.7% series due 1998 10,650 10,650
6.4% series due 2000 30,000 30,000
6.82% series due 2003 25,350 25,350
7.8% series due 2023 10,000 10,000
Pollution Control Refunding Bonds
6.5% series F due 2010 5,000 5,000
6.2% series G due 2012 1,000 1,000
6.5% series E due 2018 14,200 14,200
5.9% series H due 2023 32,000 32,000
-------- --------
279,200 279,200
Unamortized premium and discount on
long-term debt, net (841) (879)
-------- --------
Total long-term debt $278,359 $278,321
======== ========
</TABLE>
CILCO's first mortgage bonds are secured by a lien on substantially
all of its property and franchises. Unamortized borrowing expense,
premium and discount on outstanding long-term debt are being
amortized over the lives of the respective issues.
Scheduled maturities of long-term debt for 1996-1999 are $16 million,
$20 million, $10.6 million and $0, respectively.
The 1995 maturities of long-term borrowings have been classified as
current liabilities.
NOTE 8 - COMMITMENTS & CONTINGENCIES
CILCO's 1995 capital expenditures for utility plant are estimated to
be $69 million, in connection with which CILCO has normal and
customary purchase commitments at December 31, 1994.
CILCO's policy is to act as a self-insurer for certain insurable
risks resulting from employee health and life insurance programs.
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 CIPS's capacity from June 1998 through May 2002.
At CILCO's request, purchases may be increased to a maximum of 150 MW
during the contract period, provided CIPS has the additional capacity
available.
For a discussion of former gas manufacturing sites, refer to the
caption "Environmental Matters" of Item 7 of Management's Discussion
and Analysis of Financial Condition and Results of Operations on page
20 of CILCORP's 1994 Annual Report which is incorporated herein by
reference.
NOTE 9 - RATE MATTERS
In December 1994, the Illinois Commerce Commission (ICC) issued a
rate order designed to grant CILCO a $10.6 million, or 6.7% annual
increase in gas base rate revenues. The order represents
approximately 75% of CILCO's original rate increase request filed in
January 1994. The new rates, designed to yield an 11.82% return on
common equity and a 9.24% return on rate base, were effective the
week of December 12, 1994. The ICC denied requests for rehearing
which had been filed by CILCO and other parties. No party has
appealed the ICC order, and the time for appeal has expired.
As a part of its rate order, the ICC disallowed approximately $7.5
million of CILCO's $24 million investment in the Springfield,
Illinois, cast iron main renewal project. To reflect the
disallowance, CILCO recorded a pre-tax charge of approximately $7.5
million ($4.5 million after-tax) against 1994 earnings.
In mid-1992, after a significant number of leaks were detected in
CILCO's Springfield cast iron gas distribution system, CILCO began a
detailed examination of its Springfield gas distribution system and
related operating practices and procedures. CILCO thereafter began
an aggressive program to renew its Springfield gas cast iron main
system. This project was substantially completed by September 30,
1993.
The ICC staff began an informal review of CILCO's Springfield gas
operations and record-keeping practices in September 1992.
Subsequently, the U.S. Department of Transportation (DOT) and the
U.S. Department of Justice (DOJ) began conducting investigations of
CILCO which were also focused principally on CILCO's Springfield gas
operations and its record-keeping practices.
On September 16, 1994, CILCO entered into a federal court civil
consent decree with the DOJ which concluded the DOT and DOJ
investigations of CILCO. As a part of the settlement with the DOJ,
CILCO accepted adjustments recommended by the ICC staff which
resulted in a net disallowance from CILCO's gas rate base of
approximately $4.6 million of the cost of the Springfield cast iron
main renewal project. This charge is part of the $7.5 million
disallowance included in the December 1994 rate order. In addition
to the rate base disallowance, CILCO agreed to pay an $844,000 civil
fine to the United States and agreed to reimburse the ICC, the DOT
and the DOJ $156,000 for the costs of their investigations. CILCO
also agreed to underwrite the reasonable expense of an outside
expert, to be selected by the ICC, to examine its gas operations
manuals and systems to ensure they are in compliance with all
applicable statutes and regulations. CILCO estimates the cost of the
audit will be $350,000. Management expects the audit to conclude by
the end of 1995.
The DOJ agreed not to seek any additional civil or criminal penalties
from CILCO or the Company. The ICC staff also agreed not to seek any
additional enforcement penalties from CILCO or the Company. CILCO
agreed to continue to cooperate with the DOJ in its investigation and
prosecution of any individuals who may be responsible for willful
violations of any applicable statute or regulation.
For a discussion of other gas and electric rate matters refer to
information under the heading Management's Discussion and Analysis of
Financial Condition and Results of Operations of CILCORP's 1994
Annual Report to Shareholders, which is incorporated herein by
reference.
NOTE 10 - LEASES
CILCO leases certain equipment, buildings and other facilities under
capital and operating leases. Minimum future rental payments under
non-cancelable capital and operating leases having remaining terms in
excess of one year as of December 31, 1994, are $21 million in total.
Payments due during the years ending December 31, 1995, through
December 31, 1999, are $5.3 million, $3.5 million, $2.9 million, $2.8
million and $2.7 million, respectively.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly operating results are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of CILCO's
operating results for the periods indicated. The results of
operations for each of the fiscal quarters are not necessarily
comparable to, or indicative of, the results of an entire year due to
the seasonal nature of CILCO's business.
<TABLE>
<CAPTION>
For the Three Months Ended March 31, June 30, September 30, December 31,
<S> <C> <C> <C> <C>
(In thousands)
1994
Operating revenue $145,386 $101,505 $108,142 $106,337
Operating income 16,007 12,204 18,227 12,069
Net income 10,615 7,057 8,986 5,829
1993
Operating revenue $133,234 $ 94,184 $109,800 $116,660
Operating income 16,978 11,358 19,855 11,996
Net income 11,303 5,862 14,052 6,461
</TABLE>
Item 9. Changes in and Disagreements with Accountants on Accounting and
Financial Disclosure
CILCORP
Not applicable.
CILCO
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
CILCORP
The information required by Item 10 relating to directors is set forth
in the Company's definitive proxy statement for its 1995 Annual Meeting
of Stockholders filed with the Commission pursuant to Regulation 14A.
Such information is incorporated herein by reference to the material
appearing under the caption "Election of Directors" of such proxy
statement. Information required by Item 10 relating to executive
officers of the Company is set forth under a separate caption in Part I
hereof.
CILCO
The information required by Item 10 relating to directors is set forth
in CILCO's definitive proxy statement for its 1995 Annual Meeting of
Stockholders filed with the Commission pursuant to Regulation 14A. Such
information is incorporated herein by reference to the material
appearing under the caption "Election of Directors" of such proxy
statement. Information required by Item 10 relating to executive
officers of CILCO is set forth under a separate caption in Part I
hereof.
Item 11. Executive Compensation
CILCORP
The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.
CILCO
CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 11 is
incorporated herein by reference to the material appearing under the
caption "Executive Compensation" of such proxy statement.
Item 12. Security Ownership of Certain Beneficial Owners and
Management
CILCORP
The Company has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.
CILCO
CILCO has filed with the Commission a definitive proxy statement
pursuant to Regulation 14A. The information required by Item 12 is
incorporated herein by reference to the material appearing under the
caption "Voting Securities and Principal Holders" of such proxy
statement.
Item 13. Certain Relationships and Related Transactions
CILCORP
CILCORP Inc. (CILCORP or Company), a holding company, is the parent of
its direct subsidiaries Central Illinois Light Company (CILCO), CILCORP
Investment Management Inc., CILCORP Ventures Inc. and Environmental
Science & Engineering, Inc. (ESE). In the course of business, the
Company carries on certain relations with affiliated companies such as
shared facilities, utilization of employees and other business
transactions. Central Illinois Light Company is reimbursed at cost by
the Company and the other subsidiaries for any services it provides.
ESE and the Holding Company entered into an agreement to consolidate
ESE's outstanding debt. Under this agreement, ESE can draw on a $15
million revolving line of credit which expires May 2, 1996. At December
31, 1994, ESE had $5.6 million borrowed from CILCORP under this
agreement. ESE also borrowed $20 million from the Holding Company on a
term credit basis with the principal due May 2, 1998.
At December 31, 1994, CILCORP guaranteed $21 million of outstanding debt
of CILCORP Lease Management Inc. CILCORP receives a fee for the
guarantee.
CIM has guaranteed the performance of CIM Leasing Inc. and CIM Air
Leasing Inc. with respect to certain obligations arising from the
leveraged lease investments held by these subsidiaries.
CILCO
Certain members of the Board of Directors of CILCORP Inc. are also
members of the Board of Directors of CILCO and the Secretary of CILCO is
also Vice President, General Counsel and Secretary of CILCORP Inc.
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form
8-K
CILCORP
Page in
Annual Report to
Shareholders
(a) 1. Financial Statements
The following statements are included in
Exhibit 13 of this filing and are incorporated
herein by reference from CILCORP Inc.'s 1994
Annual Report:
Management's Report 28
Report of Independent Public Accountants 28
Consolidated Statements of Income for the three
years ended December 31, 1994 29
Consolidated Balance Sheets as of
December 31, 1994, and December 31, 1993 30-31
Consolidated Statements of Segments of Business for
the three years ended December 31, 1994 32-33
Consolidated Statements of Cash Flows for the three
years ended December 31, 1994 34
Consolidated Statements of Common Stockholders' Equity
for the three years ended December 31, 1994 35
Notes to the Consolidated Financial Statements 36-44
(a) 2. Financial Statement Schedules
The following schedules are included herein: Page No.
Form 10-K
Schedule II - Valuation and Qualifying Accounts
and Reserves for the three years
ended December 31, 1994 59
Schedule XIII -Investment in Leveraged Leases at
December 31, 1994 61
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements
or notes thereto.
(a) 3. Exhibits
*(3) Articles of Incorporation (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-8946, as Exhibit
3)).
(3)a By-laws as amended effective August 20, 1993.
***(4) Instruments defining the rights of security holders, including
indentures
*(10) CILCO Executive Deferral Plan as amended through February 22,
1994. (Designated in Form 10-K for the year ended December 31,
1993, File No. 1-8946, as Exhibit (10)).
*(10)a Executive Deferral Plan II (Designated in Form 10-K for the
year ended December 31, 1989, File No. 1-8946, as Exhibit
(10)b).
(10)b CILCORP Economic Value Added Incentive Compensation Plan
(Adopted February 29, 1989 & Revised January 29, 1991.)
(10)c CILCORP Compensation Protection Plan. (Adopted June 28, 1994.)
*(10)d CILCO Benefit Replacement Plan (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-8946, as Exhibit
(10)e).
*(10)e CILCORP Deferred Compensation Stock Plan (Designated in Form
10-K for the year ended December 31, 1991, File No. 1-8946, as
Exhibit (10)f).
*(10)f Shareholder Return Incentive Compensation Plan (included as
part of Company's definitive proxy in 1993 Annual Meeting of
Stockholders, filed with the Commission on March 26, 1993.)
(12) Computation of Ratio of Earnings to Combined Fixed Charges and
Preferred Stock Dividends
Page No.
Form 10-K
(13) Annual Report to Security Holders 66
(24) Consent of Arthur Andersen LLP 67
(25) Power of Attorney
(27) CILCORP Inc. Consolidated Financial Data Schedule
(b) 3. Reports on Form 8-K
Form 8-K was filed on December 12, 1994, to disclose the
issuance by the ICC of a rate order designed to grant CILCO a
$10.6 million, or 6.7%, annual increase in gas base rate
revenues.
* These exhibits have been previously filed with the Securities and
Exchange Commission (SEC) as exhibits to registration statements or
to other filings of CILCORP or CILCO with the SEC and are
incorporated herein as exhibits by reference. The file number and
exhibit number of each such exhibit (where applicable) are stated in
the description of such exhibit.
*** Pursuant to Paragraph (b)(4)(iii)(A) of Item 601 of Regulation S-K,
the Company has not filed as an exhibit to this Form 10-K any
instrument with respect to long-term debt as the total amount of
securities authorized thereunder does not exceed 10 percent of the
total assets of the Company and its subsidiaries on a consolidated
basis, but hereby agrees to furnish to the SEC on request any such
instruments.
CILCO
Page No.
Form 10-K
(a) 1. Financial Statements
The following are included herein:
Management's Report 31
Report of Independent Public Accountants 32
Consolidated Statements of Income for the three years
ended December 31, 1994 33
Consolidated Balance Sheets as of December 31, 1994 and
December 31, 1994 34-35
Consolidated Statements of Cash Flows for the three
years ended December 31, 1994 36-37
Consolidated Statements of Retained Earnings for the
three years ended December 31, 1994 38
Consolidated Statements of Segments of Business for
the three years ended December 31, 1994 39-40
Notes to the Consolidated Financial Statements 41-52
(a) 2. Financial Statement Schedules
The following schedule is included herein:
Schedule II - Valuation and Qualifying Accounts and
Reserves for the three years ended
December 31, 1994 60
Other schedules are omitted because of the absence of
conditions under which they are required or because the
required information is given in the financial statements
or notes thereto.
(a) 3. Exhibits
(3) Articles of Incorporation as amended July 26, 1993.
(3)a Bylaws as amended effective April 26, 1994.
*(4) Indenture of Mortgage and Deed of Trust between Illinois Power
Company and Bankers Trust Company, as Trustee, dated as of
April 1, 1933, Supplemental Indenture between the same parties
dated as of June 30, 1933, Supplemental Indenture between the
Company and Bankers Trust Company, as Trustee, dated as of
July 1, 1933 and Supplemental Indenture between the same
parties dated as of January 1, 1935, securing First Mortgage
Bonds, and indentures supplemental to the foregoing through
November 1, 1994. (Designated in Registration No. 2-1937 as
Exhibit B-1, in Registration No. 2-2093 as Exhibit B-1(a), in
Form 8-K for April 1940, File No. 1-2732-2, as Exhibit A, in
Form 8-K for December 1949, File No. 1-2732-2, as Exhibit A,
in Form 8-K for December 1951, File No. 1-2732, as Exhibit A,
in Form 8-K for July 1957, File No. 1-2732, as Exhibit A, in
Form 8-K for July 1958, File No. 1-2732, as Exhibit A, in Form
8-K for March 1960, File No. 1-2732, as Exhibit A, in Form 8-K
for September 1961, File No. 1-2732, as Exhibit B, in Form 8-K
for March 1963, File No. 1-2732, as Exhibit A, in Form 8-K for
February 1966, File No. 1-2732, as Exhibit A, in Form 8-K for
March 1967, File No. 1-2732, as Exhibit A, in Form 8-K for
August 1970, File No. 1-2732, as Exhibit A, in Form 8-K for
September 1971, File No. 1-2732, as Exhibit A, in Form 8-K for
September 1972, File No. 1-2732, as Exhibit A, in Form 8-K for
April 1974, File No. 1-2732, as Exhibit 2(b), in Form 8-K for
June 1974, File No. 1-2732, as Exhibit A, in Form 8-K for
March 1975, File No. 1-2732, as Exhibit A, in Form 8-K for May
1976, File No. 1-2732, as Exhibit A, in Form 10-Q for the
quarter ended June 30, 1978, File No. 1-2732, as Exhibit 2, in
Form 10-K for the year ended December 31, 1982, File No. 1-
2732, as Exhibit (4)(b), in Form 8-K dated January 30, 1992,
File No. 1-2732, as Exhibit (4) in Form 8-K dated January 29,
1993, File No. 1-2732, as Exhibit (4) and in Form 8-K dated
December 2, 1994, File No. 1-2732, as Exhibit (4).)
*(4)a Supplemental Indenture dated November 1, 1994. (Designated in
Form 8-K dated November 1, 1994, File No. 1-2732, as Exhibit
(4).)
*(10) CILCO Executive Deferral Plan as amended February 22, 1994.
(Designated in Form 10-K for the year ended December 31, 1993,
File No. 1-2732, as Exhibit (10).)
*(10)a Executive Deferral Plan II. (Designated in Form 10-K for the
year ended December 31, 1989, File No. 1-2732, as Exhibit
(10)b.)
*(10)b CILCO Compensation Protection Plan. (Designated in Form 10-K
for the year ended December 31, 1990, File No. 1-2732, as
Exhibit (10)c.)
*(10)c CILCO Deferred Compensation Stock Plan. (Designated in Form
10-K for the year ended December 31, 1990, File No. 1-2732, as
Exhibit (10)d.)
*(10)d CILCO Economic Value Added Incentive Compensation Plan.
(Designated in Form 10-K for the year ended December 31, 1990,
File No. 1-2732, as Exhibit (10)e.)
*(10)e Benefit Replacement Plan. (Designated in Form 10-K for the
year ended December 31, 1991, File No. 1-2732, as Exhibit
(10)f.)
*(10)f Shareholder Return Incentive Compensation Plan (included as
part of CILCORP Inc.'s definitive proxy in 1993 Annual Meeting
of Stockholders, filed with the Commission on March 26, 1993.)
(12) Computation of Ratio of Earnings to Fixed Charges
(25) Power of Attorney
(27) Central Illinois Light Company Financial Data Schedule
(b) 3. Reports on Form 8-K
A Form 8-K was filed on December 2, 1994, to disclose a Form
of Distribution Agreement and Supplemental Indenture dated as
of November 1, 1994.
A Form 8-K was filed on December 12, 1994, to disclose the
issuance by the ICC of a rate order designed to grant CILCO a
$10.6 million, or 6.7%, annual increase in gas base rate
revenues.
*These exhibits have been previously filed with the Securities and
Exchange Commission (SEC) as exhibits to registration statements or to
other filings of CILCO with the SEC and are incorporated herein as
exhibits by reference. The file number and exhibit number of each such
exhibit (where applicable) are stated in the description of such
exhibit.
<PAGE>
SCHEDULE II
<TABLE>
CILCORP INC. AND SUBSIDIARY COMPANIES
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
(Thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged Charged Balance at
Beginning to to Other End of
Description of Period Income Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $2,255 $2,617 -- $2,581 $2,291
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,321 915 -- 636 2,600
Year ended December 31, 1993
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $1,943 2,760 -- 2,448 $2,255
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,869 1,209 -- 757 2,321
Year ended December 31, 1992
Accumulated Provisions
Deduct from Assets -
Doubtful Accounts $1,934 2,390 -- 2,381 $1,943
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,284 2,237 -- 1,652 $1,869
</TABLE>
<PAGE>
SCHEDULE II
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Valuation and Qualifying Accounts and Reserves
Years Ended December 31, 1994, 1993 and 1992
(Thousands of dollars)
<CAPTION>
Column A Column B Column C Column D Column E
Additions
Balance at Charged Charged Balance at
Beginning to to Other End of
Description of Period Income Accounts Deductions Period
<S> <C> <C> <C> <C> <C>
Year ended December 31, 1994
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $ 585 $1,494 -- $1,479 $ 600
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 2,321 915 -- 636 2,600
Year ended December 31, 1993
Accumulated Provisions
Deducted from Assets -
Doubtful Accounts $ 799 1,079 -- 1,293 $ 585
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,869 1,209 -- 757 2,321
Year ended December 31, 1992
Accumulated Provisions
Deduct from Assets -
Doubtful Accounts $ 928 957 -- 1,086 $ 799
Accumulated Provisions
Not Deducted from Assets -
Injuries and Damages 1,284 2,237 -- 1,652 $1,869
</TABLE>
<PAGE>
SCHEDULE XIII
<TABLE>
CILCORP INC. AND SUBSIDIARY COMPANIES
Investment in Leveraged Leases
Year Ended December 31, 1994
(Thousands of dollars)
<CAPTION>
Cost Amount
Leveraged leases of each carried on
lease(A) Balance Sheet(B)
<S> <C> <C>
Office buildings $23,130 $ 46,787
Warehouses 11,746 19,633
Mining equipment 10,244 16,180
Generating station 14,957 22,312
Passenger railway equipment 3,805 4,438
Cargo aircraft 9,583 11,611
-------- --------
Totals $73,465 $120,961
======== ========
<FN>
(A) This value is the original cost of the leveraged lease net of
original nonrecourse debt.
(B) The amount carried on the balance sheet includes current rents
receivable and estimated residual value, net of unearned and
deferred income and nonrecourse debt.
</TABLE>
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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.
CILCORP INC.
March 13, 1995 By R. O. Viets
R. O. Viets
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
(i) and (ii) Principal executive officer, director and principal
financial officer:
R. O. Viets
R. O. Viets President, Chief March 13, 1995
Executive Officer
and Director
(iii) Controller
T. D. Hutchinson
T. D. Hutchinson Controller March 13, 1995
(iv) A majority of the Directors
(including the director named above):
M. Alexis* Director March 13, 1995
J. R. Brazil* Director March 13, 1995
W. Bunn III* Director March 13, 1995
D. E. Connor* Director March 13, 1995
H. J. Holland* Director March 13, 1995
H. S. Peacock* Director March 13, 1995
R. W. Slone* Director March 13, 1995
K. E. Smith* Director March 13, 1995
R. M. Ullman* Director March 13, 1995
M. M. Yeomans* Director March 13, 1995
R. O. Viets
R. O. Viets Director March 13, 1995
*By
R. O. Viets
R. O. Viets
Attorney-in-fact
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) 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 LIGHT COMPANY
March 13, 1995 By R. W. Slone
R. W. Slone
Chairman of the Board,
President and Chief
Executive Officer
Pursuant to the requirements of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
registrant and in the capacities and on the dates indicated.
Signature Title Date
(i) Principal executive officer and director:
R. W. Slone
R. W. Slone Chairman of the Board, March 13, 1995
President, Chief
Executive Officer
and Director
(ii) Principal financial officer:
T. S. Romanowski
T. S. Romanowski Vice President March 13, 1995
(iii) Controller
R. L. Beetschen
R. L. Beetschen Controller and March 13, 1995
Manager of Accounting
(iv) A majority of the Directors
(including the director named above):
M. Alexis* Director March 13, 1995
J. R. Brazil* Director March 13, 1995
W. Bunn III* Director March 13, 1995
D. E. Connor* Director March 13, 1995
W. M. Shay* Director March 13, 1995
K. E. Smith* Director March 13, 1995
R. N. Ullman* Director March 13, 1995
J. F. Vergon* Director March 13, 1995
M. M. Yeomans* Director March 13, 1995
R. W. Slone
R. W. Slone Director March 13, 1995
*By
R. W. Slone
R. W. Slone
Attorney-in-fact
<PAGE>
EXHIBIT (12)
<TABLE>
CILCORP INC. AND SUBSIDIARIES
Computation of Ratio of Earnings to Combined Fixed
Charges and Preferred Stock Dividends
<CAPTION>
Twelve Months Ended 1994 1993 1992 1991 1990
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income $32,586 $33,583 $32,097 $ 39,656 $34,504
Income Taxes 18,180 18,069 20,810 29,676 24,344
Interest 26,341 27,363 29,205 28,661 27,934
Preferred Dividends 2,980 4,043 4,441 4,441 4,441
Convertible Preferred Dividends -- -- -- 828 1,839
------- ------- -------- ------- --------
Total Earnings, as Defined $80,087 $83,058 $86,553 $103,262 $93,062
======= ======= ======== ======= ========
Fixed charges, as Defined:
Interest Expense 24,313 25,929 28,275 27,791 27,066
Interest Expense on COLI 2,028 1,434 930 870 868
Tax Effected Preferred Dividends 4,939 6,701 7,249 8,601 10,251
------- ------- ------- ------- -------
Total Fixed Charges, as Defined $31,280 $34,064 $36,454 $37,262 $38,185
======= ======= ======= ======= =======
Ratio of Earnings to Fixed Charges 2.6 2.4 2.4 2.8 2.4
==== ==== ==== ==== ====
</TABLE>
EXHIBIT (12)
<TABLE>
CENTRAL ILLINOIS LIGHT COMPANY
Computation of Ratio of Earnings
to Fixed Charges
<CAPTION>
Twelve Months Ended 1994 1993 1992 1991 1990
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C>
Earnings, as Defined:
Net Income $32,487 $37,678 $35,636 $44,231 $40,966
Income Taxes 17,168 20,368 17,723 22,329 20,500
Fixed Charges, as Below 24,693 26,335 25,130 24,295 24,095
------- ------- ------- ------- -------
Total Earnings, as Defined $74,348 $84,381 $78,489 $90,855 $85,561
======= ======= ======= ======= =======
Fixed Charges, as Defined:
Interest on COLI $ 2,028 $ 1,434 $ 930 $ 870 $ 868
Interest on Short-term Debt 292 592 180 -- --
Interest on Long-term Debt 19,221 19,753 20,747 21,285 21,399
Amortization of Debt Discount
& Expense, Premium and
Reacquired Loss 665 624 410 96 97
Miscellaneous Interest
Expense 623 1,485 2,448 1,591 1,320
Interest Portion of Rentals 1,864 2,447 415 453 411
------- ------- ------- ------- -------
Total Fixed Charges, as
Defined $24,693 $26,335 $25,130 $24,295 $24,095
======= ======= ======= ======= =======
Ratio of earnings to Fixed
Charges 3.01 3.20 3.12 3.74 3.55
==== ==== ==== ==== ====
</TABLE>
<PAGE>
NOTICE
This copy of CILCORP Inc.'s and Central Illinois Light
Company's Form 10-K does not include our 1994 Consolidated
Annual Report. If you have not received our 1994
Consolidated Annual Report and would like one, please let us
know.
Telephone:
In Peoria 675-8808
Elsewhere in Illinois 1-800-322-3569
Outside Illinois 1-800-622-5514
TDD 1-309-675-8892
Or you can write to us at:
Investor Relations Department
CILCORP Inc.
300 Hamilton Blvd.
Suite 300
Peoria, IL 61602-1238
<PAGE>
EXHIBIT 24
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation by
reference of our reports, dated February 3, 1995, included herein or
incorporated by reference in this Form 10-K, into CILCORP Inc.'s previously
filed Registration Statements File No. 33-45318, 33-51315 and 33-51241.
ARTHUR ANDERSEN LLP
Chicago, Illinois
March 8, 1995
<PAGE>
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
CILCORP Inc. EVA-BASED INCENTIVE COMPENSATION PLAN adopted by the
Board of Directors of CILCORP Inc. on 28 February 1989 and revised this 29th
day of January 1991.
ARTICLE I
Statement of Purpose
1.1 The purpose of the PLAN is to provide an incentive to officers and
employees of CILCORP Inc. to increase and maintain shareholder value by
rewarding the achievement of this objective.
ARTICLE II
Definitions
Unless the context provides a different meaning, whenever used in
this PLAN, the following terms shall have the following meanings:
2.1 "Award" means the amount of money credited annually to the award bank of
each Participant in accordance with the terms and conditions of the PLAN.
2.2 "Bank" means the account maintained for each PLAN Participant which
includes the award(s) credited annually to the Participant plus interest
earned thereon.
2.3 "Board" means the Board of Directors of the Company.
2.4 "Capital" means, except where specifically noted on a Schedule attached
hereto pertaining to each Participating Unit, the following components of
Capital for each Participating Unit of the Company:
Current Assets
Less: Non-interest bearing current liabilities
Plus: Long Term Assets
Less: Construction in Progress (CWIP) Accumulated Depreciation
Plus: Adjustments (if they exist)
LIFO Reserve
Present Value of Noncapitalized Leasesa
Cumulative Amortization of Goodwill
Cumulative FAS-90 Writedown
Less: Deferred Expenses & Payments
Notes:
a. Minimum lease commitments discounted at long-term borrowing
rate
2.5 "Capital Asset Pricing Model" or "CAPM" is a method for calculation of
the cost of capital of a participating unit.
2.6 "Committee" means the Compensation Committee of the Board of Directors of
the Company or such other committee to which the Board has delegated the
responsibility for administering the PLAN.
2.7 "Company" means CILCORP Inc.
2.8 "Cost of Capital" or "C*" means the weighted average of the (after tax)
cost of debt, common equity and preferred equity for the year in question.
The Capital Asset Pricing Model (CAPM) is used to estimate equity costs. Cost
of capital is calculated on a quarterly basis. The Schedules attached hereto
set forth the methodology for calculation of the Cost of Capital for each
Participating Unit of the Company. Cost of Capital is the same as "required
return."
2.9 "Discretionary Award" has the meaning given at Paragraph 5.3 hereof.
2.10 "Economic value added" or "EVA" is an amount equal to the difference
between the return management actually earns on Capital and Cost of Capital.
It is calculated as follows:
EVA = (return earned - Cost of Capital) x Capital
2.11 "Employee" means a person who is employed by the Company.
2.12 "Established Award" has the meaning given at Paragraph 5.2 hereof.
2.13 "Improvement Award" means a percent of each year's increase in EVA.
2.14 "Maintenance Award" means a percent of a moving three-year average of
the level of EVA.
2.15 "Net operating profit after tax" or "NOPAT" means the adjusted cash
earnings attributable to the capital employed in the Participating Unit for
the Plan year to date. The components of NOPAT are as follows:
Operating Revenues
Less: Operating Expensesa
Depreciation Expenses
Sales, General and Administrative Expenses
Non-Operating Incomea
Cash Taxes on Operating Profitsb
Plus: Goodwill Amortization Expense
Plus: Increases in:
LIFO Reserve
Deferred Sales & Credits
Less: Increases in:
Deferred Expenses & Debits
Notes:
a. Non-operating revenues, expenses, and income will not ordinarily
exist. Only extremely unusual items should be classed as non-oper
ating .
b. "Cash Taxes on Operating Profits" is calculated as follows:
Book Tax Provision
Less: Increase in deferred taxesc
Increase in deferred ITC's
Tax at appropriate rate on any non-operating incomed
Plus: Tax saved on interest expensee
Sub-Notes:
c. Except for CILCO
d. See footnote above
e. Calculate as:
(Interest Expensef) x (Marginal Tax Rate)
Sub-Sub-Note:
f. Include implicit interest expense on non-capitalized leases:
(PV of Non-capitalized leases) x (capitalization rate)
2.16 "Participant" means an employee who is participating in the PLAN.
2.17 "Participating Unit" or "Unit" means the Company and each subsidiary or
business unit of the Company whose results are determined by the Committee to
be included in the PLAN.
2.18 "PLAN" means the CILCORP EVA-BASED INCENTIVE COMPENSATION PLAN, as set
forth herein.
2.19 "Plan Year" shall be the period from 1 October through 30 September.
2.20 "Prime interest rate" means the month-end prime rate charged by the First
National Bank of Chicago in Chicago, Illinois.
2.21 "Required return" means Cost of Capital or C*.
2.22 "Return on capital" or "R" or "Return" means NOPAT divided by beginning
Capital balances for each of the four quarters contained within the Plan Year.
2.23 "Total Performance Award" means the aggregate of the Award in any PLAN
year for EVA improvement, EVA Maintenance and the Award based upon the value
of the Leveraged lease portfolio and any change therein.
ARTICLE III
Participation
3.1 Participants. The Participants will include those employees who most
directly affect value creation. A list of Participants shall be established
as soon as possible after commencement of each PLAN year.
3.2 Change in Participants. The addition or deletion of Participants shall
be made upon the request of the Chief Executive Officer (CEO) of the Company
subject to approval by the Committee. The Award Bank of each additional
Participant shall be primed in the manner set forth at Paragraph 4.4 hereof.
The addition or deletion of a Participant during any PLAN year may require an
amendment to the Established Award allocation as described herein at Article
V. Notice of any such amendment shall be given to each Participant whose
allocable share of the Established Award is thereby changed.
3.3 Partial Participation. In any PLAN year the CEO may include Partial
Participant(s) who share only in the Discretionary Award. Partial Partici
pants may be added or deleted at the discretion of the CEO of the Company
without notice to other PLAN participants. No Award Bank shall be established
for Partial Participants. Awards to Partial Participants shall be paid in
cash.
ARTICLE IV
Awards
4.1 Use of EVA. The Total Performance Award shall be based upon the sum of
the EVA calculated for each participating unit including the Company. EVA is
reduced by bonuses paid by operating units other than the Company. It is not
reduced by award payments to PLAN Participants or partial-Participants.
4.2 Calculation of EVA. The calculation of awards requires a separate
calculation of EVA for each Participating Unit. Two performance results are
calculated for each Participating Unit. These include the following:
a. Improvement in EVA
b. Three-year average of EVA
A percentage of each is added to the incentive award pool. The percentages
are specified at Schedules A through C attached hereto. In any PLAN year in
which the Company maintains a leveraged lease portfolio, the calculation of
EVA shall also include a calculation pertaining to the change in EVA attribut
ed to said leveraged lease portfolio. (See Appendix I to Schedule C hereof.)
4.3 Total Performance Award Components. The total performance award in any
Plan year is determined based upon the sum of EVA measurements for improving
performance and for maintaining value.
4.3.1. EVA Improvement. The EVA target for each year is the EVA from
the previous year. The percent, specified on the Schedules attached
hereto, of each year's change in EVA is credited to the Total Performance
Award. In the event of a decrease in EVA, a negative percent is calcu-
lated and the Total Performance Award is decreased accordingly.
4.3.2. EVA Maintenance. The moving three-year average of the level of
EVA is calculated and the percent, specified on the Schedules attached
hereto of the three-year average EVA, is added to or subtracted from the
Total Performance Award.
4.4 Priming the Award Bank. To allow full incentives to be paid to an
employee in his or her first year of full participation in the PLAN, each such
Award Bank shall be primed with an amount sufficiently large that, if an
average award is earned, an average payment can be made. This amount shall be
equal to twice the targeted bonus percentage of base salary. In that the
amounts used to prime the Award Banks have not been earned by the Partici
pants, no interest is earned on said amounts. The loan is amortized evenly
over a five year period commencing in the third year of the PLAN. The loan
shall be repaid without interest.
4.5 Adjustments to EVA. In order that the calculation of EVA will be fair
during each separate year of the PLAN, adjustments will be made in the
calculation of EVA where certain one-time events, acquisitions or dives
titures would otherwise significantly distort the award calculations.
4.5.1. One Time Events. In the event assets are sold, it is possible
for EVA to increase or decrease sharply when gains or losses are
realized. Although EVA in the year of such event is calculated
to include the event, the target for the following years' EVA
Improvement Award will exclude the event. The Maintenance Award
in all years will include the event. Determination of what
constitutes a one-time event will be made by the Committee.
4.5.2. Acquisitions and Divestitures. In the event of acquisitions or
divestitures, the EVA calculated for the operating results of an
acquired or divested entity is added to or subtracted from, as
the case may be, the ongoing calculations. The full price paid
for the acquisition (including good will) is the capital base for
the acquired company. A partial adjustment is made for transac
tions which occur during the year. One time gains from divesti
tures are treated as discussed at Paragraph 4.5.1 above.
In the event of an acquisition of a company whose earnings are
expected to increase substantially (e.g., a company with a high
P/E ratio), EVA may be negative at first and thereby discourage
otherwise prudent acquisitions. In such cases, the Capital of
the acquisition may be divided in two parts. The first, which
will be used for the award calculation, is an amount equal to an
amount sufficient to allow the acquisition to exactly earn its
Cost of Capital in the first year. The remainder of the purchase
price is placed in a reserve account which is increased each year
at an interest rate equal to the Acquisition's Cost of Capital.
The reserve is amortized into the Capital base of the acquisition
over a period of time equal to the earnings growth period. If
the reserve amount is negative, no adjustment is made.
4.5.3. Changes In Calculation of NOPAT, Capital or C*. To the extent
the PLAN may be amended from time to time and such amendments
result in changes in the manner of calculating NOPAT, Capital or
C*, the calculation of EVA for previous years included in deter
mining EVA Improvement (Paragraph 4.3.1 hereof) and EVA mainte
nance (Paragraph 4.3.2 hereof) shall be modified in a manner
consistent with the calculation of EVA for the then current PLAN
year.
4.5.4. Aggregate Awards. EVA is calculated annually for each Partici
pating Unit as soon as possible after conclusion of each PLAN
year. The Total Performance Award is the aggregate of the award
for improvement of EVA and for maintenance of EVA and for any
change in the value of the leveraged lease portfolio.
4.5.5. Award Allocation Cap. Unless the Committee approves an alloca
tion of awards in any PLAN year in which the Total Performance
Award equals more than 200% of the aggregate base salaries, no
allocation of awards in excess of 200% of aggregate base salaries
shall be paid to Participants during the PLAN year. Failure of
the Committee to approve a Total Performance Award in excess of
200% of salaries may, at the Committee's discretion, result in
allocation of a portion of such excess, deferral of all or a
portion of the allocation of any such excess until the next PLAN
year or forfeiture of said excess amount.
ARTICLE V
Allocation of Award
5.1 Annual Allocation. The Total Performance Award is allocated annually
among Participants. Except as provided at Paragraph 3.3 regarding Partial
Participants, each Participant's award is credited to the Award Bank main
tained for each Participant. Such crediting will occur as soon as possible
after conclusion of each PLAN year. Although an Award Bank may, as a result
of negative EVA, have a deficit, no PLAN Participant shall be required, at any
time, to reimburse his/her Award Bank.
5.2 Established Award. Except in the event of an amendment as provided at
Paragraph 3.2 herein and further as provided at Paragraph 5.4 hereof, in each
PLAN year, the Committee, upon recommendation by the CEO, shall pre-determine
an allocation to PLAN Participants such that 80% of the Total Performance
Award will be allocated. This is the Established Award. Each Participant
will be notified of his/her allocable share of the Established Award as soon
as possible after commencement of the PLAN year.
5.3 Discretionary Award. The Discretionary Award is the remaining 20% of the
Total Performance Award. It will be utilized to reward outstanding perfor
mance for one or more Participants or partial Participants. The Discretionary
Award shall be allocated by the CEO of the Company, with the approval of the
Committee at the conclusion of each PLAN year, provided that the allocation to
the CEO of the Company of a Discretionary Award shall be at the same percent
age as his/her allocable share of the Established Award for the PLAN year.
<PAGE>
The Committee may, in their discretion, increase or decrease the Discretionary
Award to the CEO which increase or decrease shall not alter the Discretionary
Awards determined by the CEO for other Participants and partial Participants.
5.4 Committee Adjustment or Suspension of Plan. In any PLAN year in which
the CEO fails to recommend the allocation of the Established Award (paragraph
5.2 hereof), the Plan shall be suspended, except that the Plan shall not be
suspended in the event the Committee in their discretion, either apply the
allocation percentages from the previous PLAN year or establish new allocation
percentages for the PLAN year.
5.5 Annual Review. Prior to the payment of the Awards in any PLAN year, the
calculation of such Awards shall be reviewed by an independent party selected
by the Audit Committee of the Board. The report of the independent party
shall be delivered to the Committee as soon as possible after allocation of
the Total Performance Award has been calculated.
ARTICLE VI
Payment of Awards
6.1 Reporting Status of the Plan. A report of the current status of the Plan
shall be provided to Participants within 45 days after the close of each
calendar quarter.
6.2 Award Banks. All allocations from the PLAN shall be credited to an
individual Award Bank for each PLAN Participant. The Award Bank shall include
the Award plus interest earned thereon less any payments therefrom. Award
Banks are not secured by the Company and are 100 percent at risk. The Award
Bank balance increases in the event of an Award and decreases if the Award is
negative. Following the crediting of the Award for the prior year, one-third
of the Award Bank balance of each Participant who has a positive Bank balance
shall be distributed in cash to the Participant. No distribution shall be
made in the event of a negative Bank balance. Although an Award Bank may, as
a result of negative EVA or otherwise, have a deficit, no Plan Participant
shall be required, except in the event of an overpayment, to reimburse his/her
Award Bank.
6.3 Interest. Except as provided at (Paragraph 4.4) regarding loans to prime
Award Banks, the amounts in the Award Banks will be credited monthly with
interest at the prime interest rate. Negative bank balances will not earn or
accrue interest.
6.4 Deferral of Payment. Amounts not paid from the Award Bank as specified
hereinabove will be deferred and maintained in individual Award Banks for each
Participant.
6.5 Accelerated Payment. Notwithstanding any other provisions of the PLAN to
the contrary, upon the occurrence of a successful tender offer, where the
purchase is by a person, or by a group as defined in Section 14 (d)(2) of the
Securities Exchange Act of 1934, of 40% or more of the voting stock of the
Company and subject to approval by the Committee, all Participants may receive
immediate distribution of the entire amount in their Award Banks less any
amounts used to prime an Award Bank as provided herein at Paragraph 4.4. Each
Bank balance shall be payable upon demand from the Participant, with interest
to the date of distribution.
ARTICLE VII
Termination
7.1 Termination by the Company.
7.1.1. Termination of Plan. The PLAN may be terminated by the Board at
any time and for any reason or no reason. Payment of Award Banks
shall proceed as specified hereinabove at Paragraph 6.5 for
accelerated payment.
7.1.2. Committee Action. Upon recommendation by the CEO and with or
without cause, any Participant may be terminated by the Committee
from participation in the PLAN whether or not the Participant
continues to be an employee. In such event, the Participant
shall have no further right to any distribution from his/her
Award Bank except that, at the discretion of the Committee,
he/she may be granted a pro-rata allocation for the PLAN year in
which he/she ceases to be a Participant and may be granted a full
or partial distribution of his/her Bank balance.
7.1.3. Sale of the Company. In the event a Participant ceases to be an
employee because of a sale or transfer of the business of the
Company to a person or entity not controlled, directly or indi
rectly, by the Company or a sale, lease, exchange or transfer of
all or substantially all the assets of the Company, the Partici
pant shall receive a distribution of the entire balance of
his/her Bank at the time when distributions are made in the year
following the year that he/she ceases to be an employee less any
amounts used to prime the Award Bank (paragraph 4.4).
7.2 Termination by the Participant.
7.2.1. Death or Disability. Termination of participation in the PLAN
results from death or disability of the Participant. Disability
will be determined in accordance with other benefit provisions of
the Company which define "disability." The entire Award Bank,
less any amounts used to prime the Award Bank (paragraph 4.4),
shall be distributed to the Participant or his/her legal repre
sentative when distributions are made in the year following the
PLAN year in which the Participant died or became disabled.
7.2.2. Retirement. A Participant who retires from the employment of the
Company, as retirement shall, from time to time, be defined by
the Company for purposes of awarding pension and other similar
benefits, shall continue to receive distribution from his/her
Award Bank as though he/she had continued to be an employee for a
period of two (2) Plan years following the Plan year in which
he/she retires. The distributions to such a retired Participant
shall be the entire balance of his/her Award Bank less an amount
used to prime the Award Bank (paragraph 4.84). The amount used to
prime the Award Bank shall be deducted from the Participant's
Award Bank on the first day of the EVA Plan Year following the
date of retirement.
7.2.3. Voluntary Quit. A Participant who voluntarily terminates employ
ment with the Company other than to retire shall be deemed to
have forfeited the balance in his/her Award Bank. However, at
the recommendation of the CEO and upon approval by the Committee,
the Participant may be granted a pro-rata allocation for the PLAN
year in which his/her employment terminates and may be granted
full or partial distribution of his/her Award Bank.
ARTICLE VIII
Forfeiture
8.1 Voluntary Quit. In the event a Participant voluntarily terminates
employment with the Company and thereby forfeits all or a portion of his/her
Award Bank, the balance remaining in the Award Bank shall be distributed or
deleted and the Award Bank terminated.
8.2 Non-Allocation of Award. In the event of a suspension of the PLAN in any
PLAN year, as provided herein at Paragraph 5.4, the Total Performance Award
for the subject PLAN year shall be deemed forfeited and no portion thereof
shall be allocated to Participants. Any such forfeiture shall not affect the
calculation of EVA in any subsequent year.
ARTICLE IX
Limitations
9.1 No Continued Employment. Nothing contained herein shall provide any
employee with any right to continued employment or in any way abridge the
rights of the Company and its Participating Units to determine the terms and
conditions of employment and whether to terminate employment of any employee.
9.2 No Vested Rights. Except as otherwise provided herein, no employee or
other person shall have any claim of right (legal, equitable, or otherwise) to
any award, allocation, or distribution or any right, title, or vested interest
in any amounts in his/her Award Bank and no officer or employee of the Company
or any Participating Unit or any other person shall have any authority to make
representations or agreements to the contrary. No interest conferred herein
to a Participant shall be assignable or subject to claim by a Participant's
creditors.
9.3 Not Part of Other Benefits. The benefits provided in this PLAN shall not
be deemed a part of any other benefit provided by the Company to its employ
ees. The Company assumes no obligation to PLAN Participants except as speci
fied herein. This is a complete statement, along with the Schedules and
Appendices attached hereto, of the terms and conditions of the PLAN.
ARTICLE X
Authority
10.1 Committee Authority. Except as otherwise expressly provided herein, full
power and authority to interpret and administer this PLAN shall be vested in
the Committee.
10.2 Board of Directors Authority. The Board shall be ultimately responsible
for administration of the PLAN. References made herein to the 'Committee'
assume that the Board of Directors has created a committee of its membership
to administer the PLAN. In the event a Committee is not so designated, the
Board shall administer the PLAN. The Board or its Committee, as appropriate,
shall work with the CEO of the Company in all aspects of the administration of
the PLAN.
10.3 Annual Review. The PLAN shall be reviewed at least annually by the Audit
Committee of the Board. It shall report its findings to the Board. The
report prepared annually in accordance with the provisions of Paragraph 5.5
shall be provided to the Audit Committee.
ARTICLE XI
Notice
11.1 Any notice to be given pursuant to the provisions of the PLAN shall be in
writing and directed to the appropriate recipient thereof at his/her business
address or office location.
ARTICLE XII
Effective Date
12.1 This Revised PLAN shall be effective as of 1 October 1990.
ARTICLE XIII
Amendments
13.1 This PLAN may be amended, suspended or terminated at any time at the sole
discretion of the Board upon the recommendation of the Committee. Provided,
however, that no such change in the PLAN shall be effective to eliminate or
diminish the distribution of any Award that has been allocated to the Bank of
a Participant prior to the date of such amendment, suspension or termination.
Notice of any such amendment, suspension or termination shall be given prompt
ly to each Participant.
ARTICLE XIV
Applicable Law
14.1 This PLAN shall be construed in accordance with the laws of the State of
Illinois.
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
Schedule A: CILCORP and all non-regulated Participating Units except CILCORP
Investment Management Inc. (CIM).
I. Components of Capital:
(As defined in PLAN)
II. Cost of Capital (C*):
Calculate C* using Method A or B described at Exhibit 1 to the
Plan
III. Components of NOPAT:
(As defined in PLAN)
IV. Award Payment Percentages:
EVA Improvement 5.0% of EVA allocated to Total Performance
Award
EVA Maintenance 2.5% of EVA allocated to Total Performance
Award 1]
1] To be calculated using three-year average of EVA
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
Schedule B: CILCO and all regulated Participating Units
I. Components of Capital:
Components of Capital are as defined in the PLAN except that "De
ferred Taxes" are deducted therefrom.
II. Cost of Capital (C*):
Calculate C* using Method B described at Exhibit 1 to the PLAN.
III. Components of NOPAT:
Components of NOPAT are as defined in the PLAN except that the
"Increase in deferred taxes" is not deducted from "cash taxes or
operating profits."
IV. Award Payment Percentages:
EVA Improvement 2.5% of EVA allocated to Total Performance Award
EVA Maintenance 7.5% of EVA allocated to Total Performance Award
1]
1] To be calculated using three-year average of EVA
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
Schedule C: CILCORP Investment Management Inc. (CIM)
I. Components of Capital (excludes all leveraged lease portfolio items:
(As defined in PLAN)
II. Cost of Capital (C*): C* calculation differs for the leverage
lease and general investment portfolios.
1. Investment portfolio: Calculate C* using the PLAN year average
of the cost of capital for each class of investment weighted by
its proportion to the total portfolio. Investment classes and
their respective capital cost rates are as follows:
Investment Class Capital Cost Rates
Short term government bonds STGB rate
Cash, MM, CP STGB rate + 0%
Long term government bonds LTGB rate
Common stock LTGB rate + 4.5%
Preferred Stock & Municipals STGB + 0.75%
Investment Grade Debt LTGB + 1.0%
High Yield Debt LTGB + 2.5%
Note: abbreviations are explained in the Glossary at Exhibit 1
to the Plan
2. Lease Portfolio
a. Residual value cash flow
The cost of capital for residual cash flows shall be calculated
as follows:
Cost of Equity = (Beta x 4.5%) + (20 year govt. bond
rate)
Cost of Capital = Cost of Equity x (Equity/Total Capital)
+ Cost of Debt x (1 - tax rate) x
(Debt/Total Capital)
In calculating the cost of capital for the residual value, the
cost of debt and the capitalization ratios should be typical
for companies in the same industry as the leased asset, and not
the specific cost and ratios of the lessee. Similarly, the
beta should be that of the industry of the leased asset.
b. For all other cash flows (tax deferrals, P & I payments,
initial cost, etc.) C* shall be calculated as follows:
Cost of Capital = Lessee's Debt Rate x (CILCORP's Equity
Investment/Total Investment in Transaction)
+ Non-recourse Debt Rate x (1 - tax rate) x
(Non-recourse Debt Balance/Total Invest)
+ Recourse Debt Rate x (1 - tax rate) x
(Recourse Debt Bal./Total investment)
In all cases, the debt rates used are current market debt
rates.
III. Components of NOPAT (excludes all cash flow, tax deferrals, direct
increases to investment, etc. from leveraged leases):
(As defined in PLAN)
IV. Award Payment Percentages:
EVA Improvement 5.0% of EVA allocated to Total Performance Award
EVA Maintenance 2.5% of EVA allocated to Total Performance Award
1]
Note: A separate calculation of EVA for the CIM leveraged lease portfolio
is to be made for each PLAN year. Said calculation shall be made in
the manner set forth at Appendix I to this Schedule C.
1] To be calculated using three-year average of EVA
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
Appendix I to Schedule C: Calculation of EVA for CIM Leveraged Lease
Portfolio
Note: A separate calculation of value is made for the leveraged lease
portfolio because the method of calculation of EVA, otherwise
expressed in the Plan, fails to accurately account for the leases
and their patterns of cash flow. The beginning point for all leases
owned by the Company on the effective date of the Plan shall be at
"booked residual value."
Calculation of EVA for Each Leveraged Lease:
I. Original Calculation:
A. Upon the effective date of the lease, all cash flows except
those pertaining to the residual value of the asset (initial
purchase price, tax deferrals, net principal and interest
payments, etc.) are discounted at the rate specified at Sched
ule C, Paragraph II.2.b.
B. All cash flows from the booked amount of the asset's residual
value are discounted at the rate specified at Schedule C,
paragraph II.2.a.
C. The results from A and B (above) are added to determine total
net present value and 2.5% thereof is added to the Total
Performance Award.
II. Change-In-Value Calculation
Changes in the estimated value of each lease caused by tax rate
changes, by changes in the estimate of the lease asset's residual
value, and by any difference between actual value and estimated
value realized upon termination of each lease are calculated in each
year that these events occur. 2.5% of the change in these values is
added to (or subtracted from) the Total Performance Award in the
year that they are calculated.
A. Upon reappraisal, the change in value of the lease will be
calculated as the difference between 80% of the previous
appraised residual value and 80% of the new appraised residual
value discounted to the then current year using a then current
discount rate (see Schedule C, paragraph II.2.a.). If the new
appraisal is the first reappraisal, the full booked residual
value will be used instead of 80% of the previous appraised
residual value in the calculation.
B. If the lease is terminated, the change in value of the lease
will be the realization from the termination, less 80% of the
previous appraised residual value discounted to the current
year using a then current discount rate, less all cash flows
except those from the residual value discounted to the current
year using a then current discount rate. (see Schedule C,
Paragraph II.2.b.)
C. If tax rates change, discount rates for the residual value and
for the other lease cash flows are calculated using then
current interest rates and both the previous tax rates and the
new tax rates. All cash flows from the lease (including those
from the disposal of the lease) are recalculated using the new
tax rates. The difference between the present value of the
previous cash flow and residual value discounted to the then
current year using the previous discount rates, and the present
value of the new cash flows and residual value discounted using
the new discount rates is calculated. 2.5% of this difference
is added to (or subtracted from) the Total Performance Award.
Note: The re-valuation of each lease for the purpose of determining the
estimate of the residual value thereof shall be made in accordance
with a schedule submitted, from time to time, by the CEO to the
Audit Committee.
CILCORP INC.
EVA-BASED INCENTIVE COMPENSATION PLAN
(REVISED)
Exhibit 1: Cost of Capital (C*) - Methods of Calculation, Glossary of
Terms and Recommended Sources of Data
Calculation Method A: (to be used when Beta is known)
C* = weighted average of the following components:
Cost of debt = (current borrowing rate) (1-t)
Cost of equity = [Quarterly avg. B) x 4.56%] + Quarterly
avg. LTGB
Cost of preferred = Quarterly avg. yield on preferred
Calculation Method B: (to be used when Beta is unknown, usually because the
entity is not publicly traded)
Calculation Method B is the same as Method A except that Beta is deter
mined using an appropriate peer group of companies.
Note: For new acquisitions, calculate C* using Method A if Beta is known.
If Beta is unknown, Method B is used. For both methods, the D/C
ratio is adjusted to reflect an estimate which neither improves nor
detracts from the Company's overall credit i.e. D/C should be the
Participating Units targeted capital structure. For calculation of
the weighted cost of capital for utility subsidiaries deferred taxes
shall not be considered a component of common equity.
Glossary: Avg = Average
Beta = Beta Coefficient
CP = Commercial Paper
D/C = Debt/Capital
LTGB = Long term government bond rate (30 years)
MM = Money Market
STGB = Short term government bond rate (1 year)
t = Marginal tax rate
YTD = Plan Year-to-date
Sources: The following sources are recommended for Cost of Capital
calculations:
1. LTGB rate available from Federal Reserve Bulletin, Salomon
Bros., Moody's Bond Record etc.
2. Beta calculated by the Company using methodology provided
by ALCAR.
3. Current borrowing rate and YTD yield available from
current rating.
4. Debt, equity and preferred percents taken against capital,
as defined.
<PAGE>
CILCORP INC.
COMPENSATION PROTECTION PLAN
APPROVED BY THE BOARD OF DIRECTORS JUNE 28, 1994
I. PURPOSE AND OBJECTIVE
This Plan provides compensation protection benefits to "Eligible Employ
ees" (as defined herein) in order to ease the financial burden associated
with being involuntarily and permanently terminated by CILCORP Inc.
(CILCORP) or a successor thereof as a result of a "Change in Control" (as
defined herein) or a sale of CILCORP.
II. BENEFITS
A. Salary Continuation Allowance
Upon the occurrence of a "Covered Termination" (as defined herein),
an "Eligible Employee" shall receive a "Salary Continuation Allow
ance" expressed in terms of weeks of "Base Salary" ( as defined
herein) as follows:
Years of Continuous Weeks of Base Salary
Service Completed
Less than 4 years 38
4 years but less than 6 41
6 years but less than 8 44
8 years but less than 10 47
10 years but less than 12 50
12 years but less than 14 53
14 years but less than 15 56
15 years but less than 16 59
16 years but less than 17 62
17 years but less than 18 65
18 years but less than 19 68
19 years but less than 20 71
20 years but less than 21 74
21 years but less than 22 77
22 years but less than 23 80
23 years but less than 24 83
24 years but less than 25 86
25 years but less than 26 89
26 years but less than 27 92
27 years but less than 28 95
28 years but less than 29 98
29 years but less than 30 101
30 years or more 104
provided that the President and all Vice Presidents of the Company
shall, regardless of Years of Continuous Service Completed, receive
a Salary Continuation Allowance as if each such President and Vice
President had 30 years or more of continuous service.
B. Employee Benefit Coverage Allowance
In addition to the aforementioned Salary Continuation Allowance and
during the period of receipt thereof, an Eligible Employee shall
receive a continuation of "Employee Benefit Coverage" (as defined
herein).
III. PROCEDURE
The Salary Continuation Allowance (Section II, A hereof) and the Employee
Benefit Coverage Allowance (Section II, B hereof) (together, the "Bene
fits") shall be paid (or made available) during the "Weeks of Base
Salary" specified at paragraph A thereof. The Salary Continuation
Allowance shall be paid in installments in the same manner and according
to the same schedule as existed at the time of termination of employment
or, in the event of a Change in Control, the salary in effect immediately
prior to the Change in Control, whichever is greater. Except as other
wise specified herein, all such payments shall be subject to customary
payroll tax withholding and excise tax withholding, if any. To the
extent that Benefits provided hereunder shall result in liability of the
employee for the payment of excise taxes pursuant to Section 280G of the
Internal Revenue Code of 1986, as amended (or any successor provision
thereof), the Company shall reimburse the employee, to the extent such
reimbursement can be accurately calculated, for any such excise tax
actually paid by the employee through withholding or otherwise.
Notwithstanding the foregoing, and subject to the provisions of Section
V., the Board of Directors may, in its complete discretion, adopt an
alternative procedure for payment which accelerates payment of Benefits
to an Eligible Employee. Any such accelerated payments shall be at their
full, undiscounted value.
IV. DESIGNATION OF ELIGIBLE EMPLOYEES
"Eligible Employees" shall include the President and all Vice Presidents
of the Company. It may also include any other highly compensated, key
employees of the Company's management staff who may be designated, from
time to time, by the Board of Directors.
V. AMENDMENT OF PLAN
This Plan may be terminated or amended from time to time by the Board of
Directors. However, no termination, amendment or change to this Plan
which would have the effect of reducing Benefits hereunder, which would
rescind an alternative procedure for accelerated payment previously
adopted or which would otherwise have an adverse effect on the determina
tion of Benefits hereunder shall be made after a Change in Control
occurs, and this Plan shall be, and the Company shall require this Plan
to be, a continuing obligation of the surviving entity resulting from any
Change in Control. Eligible Employees shall be given written notice of
any such termination, amendment or change within a reasonable time after
any such action is taken.
VI. DEFINITIONS
Terms used herein shall have their ordinary meanings except as noted
below:
"Affiliate" means any company controlled by, controlling or under common
control with CILCORP.
"Base Salary" means the annual base pay rate in effect during the month
immediately preceding termination or, in the case of a Change in Control,
the annual base pay rate in effect during the month immediately prior to
a Change in Control (whichever is greater).
"Benefits" means benefits as defined in Section II A and Section II B of
this Plan.
"Board of Directors" means the Board of Directors of CILCORP Inc.
"Change in Control" means the occurrence of any of the following:
(1) the sale or transfer of the business of the Company to a person
or entity not controlled, directly or indirectly, by the Company, whether
such sale of the business of the Company, as the case may be, is effected
through the (a) sale, directly or indirectly, of the voting stock of the
Company, (b) merger or consolidation of the Company, (c) sale, lease,
exchange or transfer of all or substantially all of the assets of the
Company or (d) a combination of the foregoing;
(2) a merger or consolidation of the Company with one or more
corporations, as a result of which the Company is not the surviving
corporation or pursuant to which substantially all shares of the Compa
ny's common stock are converted into cash, securities or other property;
(3) the acquisition of beneficial ownership, directly or indirectly,
of more than 30 percent of the voting power of the outstanding stock of
the Company by any "person" (as such term is used in Section 13(d) of the
Securities Exchange Act of 1934, as amended, and as in effect on the date
of adoption of the Plan) coupled with or followed by the failure of
Continuing Directors (as defined herein) to constitute a majority of the
board of directors of the Company; or
provided, however, that the term "Change in Control" shall not apply to
any merger, consolidation, internal reorganization, or recapitalization
of the Company initiated voluntarily by the Company in which Continuing
Directors constitute a majority of the members of the Board of Directors
of the Company or any successor thereto and the holders of the Company's
common stock immediately prior to the merger have the same proportionate
ownership of common stock of the surviving corporation after the merger.
"CILCORP" means CILCORP Inc., an Illinois corporation, and any successor
thereto.
"Company" means CILCORP.
"Continuing Director" means any member of the board of directors of the
Company, while such person is a member of such board of directors, who
was a member of such board of directors prior to the date of adoption of
this Plan. A "Continuing Director" also means any person who subsequent
ly becomes a member of the board of directors of the Company, while such
person is a member of such board of directors, if such person's nomina
tion for election or election to such board of directors is recommended
or approved by resolution of a majority of the Continuing Directors.
"Continuous Service" means employment by one or more of the Company or
any of its Affiliates, or any combination of them, on a full or part-time
basis, without interruption, except for leave authorized by the Board of
Directors.
"Covered Termination" occurs when an Eligible Employee:
1. Is terminated within two years after a Change in Control for
a reason other than Unacceptable Performance, death, or
disability.
2. Terminates his/her employment for "Good Reason" (as defined
herein) within two years following Change in Control.
"Employee Benefit Coverage" means comprehensive hospital and medical
expense, dental, life insurance, disability insurance, accidental death
and dismemberment insurance and other benefits in effect either at the
time of the Change in Control or at the time of termination of the
Eligible Employee, whichever is more beneficial to the Eligible Employee,
to the extent that the plan documents and applicable law permit the
continuation of such benefits. In the event such benefits cannot be
continued, the Company or its successor shall otherwise arrange for
continuation or purchase comparable benefits for the Eligible Employee.
The taxability to the employee of a continuation of such benefits or the
non-deductibility to the Company shall not be deemed to prevent a contin
uation of such benefits for an Eligible Employee. Such coverage does not
include the travel accident insurance, Executive Deferral Plan, tuition
reimbursement plan, pension plan, bonus plan, Employees' Savings Plan,
matching gift plan, Company sponsored physical examinations and member
ship dues.
"Good Reason" shall be deemed to exist when, for reasons not related to
Unacceptable Performance, an Eligible Employee experiences (1) a reduc
tion in Base Salary; (2) elimination or significant reduction of basic
benefit plans (medical, basic life, dental or salary continuation, etc.)
without an equitable substitute; (3) a reduction of duties, responsibili
ty or authority; or (4) involuntary transfer to a new business location.
"Unacceptable Performance" means an Eligible Employee's failure to
perform his job duties as established by objective and measurable stan
dards, or engaging in serious misconduct or neglect in the discharge of
his/her duties (including, without limitation, any violation of the
provisions of the Company's Employee Handbook, the CILCORP Inc. Code of
Conduct, or any statutory or common law duty to the Company, any affili
ate or subsidiary thereof, or a successor thereto). After having been
given specific written notice of his/her Unacceptable Performance and
having been afforded a reasonable opportunity to cure any such Unaccept
able Performance.
VII. MISCELLANEOUS
A. Waiver of Rights
Receipt of the Benefits provided herein by an Eligible Employee
shall constitute a waiver by said employee of all claims or causes
of action which he/she may have against the Company pertaining to
this Plan.
B. Not a Contract of Employment
Neither this Plan nor any of its provisions shall be deemed a
contract of employment or terms thereof, and either party may
terminate the employment relationship at any time and without notice
provided that the Benefits specified herein shall be available for
an Eligible Employee upon occurrence of the events identified
herein.
C. Effect of Re-Employment
Re-employment of an Eligible Employee shall not reduce the Benefits
provided herein except:
1. Employee Benefit Coverage shall be secondary to any benefits
actually provided under a subsequent employer's plan; and
2. In the event the employee is re-employed at any time during the
payment of Benefits pursuant to Section II.A. of this Plan by
the Company or a majority-owned subsidiary or by the successor
to the Company or a majority-owned subsidiary at compensation
equal to or greater than the Benefits provided herein at
Section II.A., then the payment of such Benefits shall cease
during such period of re-employment provided, however, that
such Employee may again become eligible for Benefits in the
event of Covered Termination.
D. Additional Benefit
The Benefits provided herein are in addition to and not in lieu of
any other benefits provided by the Company. The provisions hereof
shall not be deemed to limit an employee's entitlement to continuing
benefits pursuant to any pension plan, savings plan, deferred
compensation plan or post-retirement benefits in which the employee
participated prior to a covered termination.
E. Legal Fees and Expenses
In the event an Eligible Employee retains legal counsel to enforce
the terms and conditions hereof subsequent to a "Change in Control,"
the Company shall reimburse such employee for all reasonable attor
ney fees and expenses thereby incurred by such employee.
F. Governing Law and Plan Interpretation
To the extent not preempted by the laws of the United States, this
Plan shall be construed in accordance with the laws of the State of
Illinois. The Board of Directors of the Company or its designee
have full authority and discretion to make, amend, interpret and
enforce all appropriate rules and regulations for the administration
of the Plan and to decide or resolve any and all questions arising
under the Plan including the interpretation of any provision of the
Plan and the calculation of benefits thereunder as may arise in
connection with the Plan.
<PAGE>
[DESCRIPTION] POWER OF ATTORNEY FOR CILCO & CILCORP '94 10-K'S
January 30, 1995
Mr. R. W. Slone
Mr. T. S. Romanowski
300 Liberty Street
Peoria, Illinois 61602
Mr. J. H. Byington, Jr.
Mr. D. P. Falck
One Battery Park Plaza
New York, New York 10004-1490
Gentlemen:
We hereby make, constitute and appoint each of you and any one of you our true
and lawful attorney for each of us and in each of our names, places or steads,
both in our individual capacities as directors and/or that of officers of
Central Illinois Light Company to sign and cause to be filed with the
Securities and Exchange Commission Central Illinois Light Company's annual
report on Form 10-K for the fiscal year ended December 31, 1994 and any
appropriate amendment or amendments to said report and any necessary exhibits.
The undersigned, Central Illinois Light Company, also authorizes you and any
one of you to sign said annual report and any amendment or amendments thereto
on its behalf as attorney-in-fact for its respective officers, and to file the
same as aforesaid together with any exhibits.
Very truly yours,
CENTRAL ILLINOIS LIGHT COMPANY
By /s/ R. W. Slone
R. W. Slone, Chairman,
President and Chief
Executive Officer
Power of attorney related to execution and filing of Central Illinois Light
Company 1994 annual report on Form 10-K.
/s/ M. Alexis /s/ R. W. Slone
M. Alexis R. W. Slone
/s/ J. R. Brazil /s/ K. E. Smith
J. R. Brazil K. E. Smith
/s/ W. Bunn III /s/ R. N. Ullman
W. Bunn III R. N. Ullman
/s/ D. E. Connor /s/ J. F. Vergon
D. E. Connor J. F. Vergon
/s/ W. M. Shay /s/ M. M. Yeomans
W. M. Shay M. M. Yeomans
/s/ R. L. Beetschen /s/ T. S. Romanowski
R. L. Beetschen T. S. Romanowski
<PAGE>
EXHIBIT (25)
Extract from Minutes of Meeting of the Board of Directors of
Central Illinois Light Company
held January 30, 1995
Upon motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED: That for the purpose of executing and completing
Central Illinois Light Company's annual report on Form 10-K for the
fiscal year ended December 31, 1994 to be filed with the Securities and
Exchange Commission, and of remedying any deficiencies with respect
thereto by appropriate amendment or amendments, this Company, its
officers and members of its Board of Directors are authorized to give
their several powers of attorney to R. W. Slone, T. S. Romanowski, J. H.
Byington, Jr. and D. P. Falck, or any one of them, in such form as the
officers of the Company may determine and as counsel may advise.
* * * * * * * * * * *
I, John G. Sahn, Secretary of Central Illinois Light Company, do
hereby certify that the foregoing is a true and correct copy of a resolution
duly and regularly adopted at meeting of the Board of Directors of Central
Illinois Light Company, duly held January 30, 1995, at which a quorum was in
attendance and voting throughout, and that said resolution has not since been
rescinded, but is still in full force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 14th day of March, 1995.
/s/ John G. Sahn
John G. Sahn
Secretary
(S E A L)
<PAGE>
January 31, 1995
Mr. R. O. Viets
Mr. J. G. Sahn
300 Hamilton Boulevard, Suite 300
Peoria, Illinois 61602
Mr. J. H. Byington, Jr.
Mr. D. P. Falck
One Battery Park Plaza
New York, New York 10004-1490
Gentlemen:
We hereby make, constitute and appoint each of you and any one of you our true
and lawful attorney for each of us and in each of our names, places or steads,
both in our individual capacities as directors and/or that of officers of
CILCORP Inc., to sign and cause to be filed with the Securities and Exchange
Commission CILCORP Inc.'s annual report on Form 10-K for the fiscal year ended
December 31, 1994 and any appropriate amendment or amendments to said report
and any necessary exhibits.
The undersigned, CILCORP Inc., also authorizes you and any one of you to sign
said annual report and any amendment or amendments thereto on its behalf as
attorney-in-fact for its respective officers, and to file the same as
aforesaid together with any exhibits.
Very truly yours,
CILCORP Inc.
By /s/ R. O. Viets
R. O. Viets, President
Power of attorney related to execution and filing of CILCORP Inc. 1994 annual
report on Form 10-K.
/s/ M. Alexis /s/ R. W. Slone
M. Alexis R. W. Slone
/s/ J. R. Brazil /s/ K. E. Smith
J. R. Brazil K. E. Smith
/s/ W. Bunn III /s/ R. N. Ullman
W. Bunn III R. N. Ullman
/s/ D. E. Connor /s/ R. O. Viets
D. E. Connor R. O. Viets
/s/ H. J. Holland /s/ M. M. Yeomans
H. J. Holland M. M. Yeomans
/s/ H. S. Peacock /s/ T. D. Hutchinson
H. S. Peacock T. D. Hutchinson
<PAGE>
EXHIBIT (25)
Extract from Minutes of Meeting of the Board of Directors of
CILCORP Inc.
held January 31, 1995
Upon motion duly made and seconded, the following resolution was
unanimously adopted:
RESOLVED: That for the purpose of executing and completing
CILCORP Inc.'s annual report on Form 10-K for the fiscal year ended
December 31, 1994 to be filed with the Securities and Exchange
Commission, and of remedying any deficiencies with respect thereto by
appropriate amendment or amendments, this Company, its officers and
members of its Board of Directors are authorized to give their several
powers of attorney to R. O. Viets, J. G. Sahn, J. H. Byington, Jr. and
D. P. Falck, or any one of them, in such form as the officers of the
Company determine and as counsel may advise.
* * * * * * * * * * *
I, John G. Sahn, Secretary of CILCORP Inc., do hereby certify that
the foregoing is a true and correct copy of a resolution duly and regularly
adopted at meeting of the Board of Directors of CILCORP Inc., duly held
January 31, 1995, at which a quorum was in attendance and voting throughout,
and that said resolution has not since been rescinded, but is still in full
force and effect.
IN WITNESS WHEREOF, I have hereunto set my hand and affixed the seal
of the Company this 14th day of March, 1995.
/s/ John G. Sahn
John G. Sahn
Secretary
(S E A L)
<PAGE>
[DESCRIPTION] CILCO EXHIBIT (3) - ARTICLES OF INCORPORATION AS AMENDED
CENTRAL ILLINOIS LIGHT COMPANY
(Organized April 11, 1913)
ARTICLES OF INCORPORATION
Composite
As Amended From Time to Time to and Including the Amendment Filed
in the Office of the Secretary of State of Illinois on July 26, 1993
ARTICLE 1. The name of such corporation is Central Illinois Light Company.
ARTICLE 2. The object for which it is formed is to manufacture or generate
and sell and distribute light, heat and power to the public in the form of
gas, electricity, steam, hot water, or other agency, in the City of Peoria,
County of Peoria, State of Illinois, and other cities, towns and villages in
said State.
ARTICLE 3. The aggregate number of shares which the Company is authorized to
issue is 27,000,000 divided into four (4) classes. The designation of each
class, the number of shares of each class (and the par value, if any, of the
shares of each class, or a statement that the shares of any class are without
par value), are as follows:
Class Series No. of Shares Par Value Per Share
Common None 20,000,000 No par value
Preferred 4 1/2% 111,264 $100
Preferred 4.64% 79,940 $100
Preferred Undesignated 1,308,796 $100
Class A 5.85% 220,000 No par value
Preferred
Class A Flexible Auction 250,000 No par value
Preferred Rate
Class A Undesignated 3,030,000 No par value
Preferred
Preference Undesignated 2,000,000 No par value
27,000,000
Shares of Common Stock without par value may be issued for such
consideration as may be fixed from time to time by the Board of Directors and
the entire amount of the consideration received for any such shares so issued
shall be stated capital.
The preferences, qualifications, limitations, restrictions and the
special or relative rights in respect of the shares of each class, the
provisions, if any, for the division into and issue in series of shares of
August 27, 1993
each class, the designation of each series authorized by the Articles of
Incorporation, the variations in the relative rights and preferences as
between the different series of any class insofar as the same are to be fixed
in the Articles of Incorporation, and the statement of the authority vested in
the Board of Directors to establish series of any class and fix and determine
the variations in the relative rights and preferences as between series of any
class, are as follows:
PREFERRED STOCK
Provision for Division Into and Issue in Series of Preferred
Stock and Grant of Authority to Board of Directors
The shares of the Preferred Stock may be divided into and
issued in series. Each series shall be designated so as to distinguish the
shares thereof from the shares of all other series and classes and all shares
of the Preferred Stock irrespective of series shall be identical except as to
the following relative rights and preferences in respect of any or all of
which there may be variations between different series and authority is hereby
expressly vested in the Board of Directors, to the extent that series are not
established by the Articles of Incorporation and the variations and the
relative rights and preferences as between series fixed and determined
therein, to establish series and to fix and determine the following relative
rights and preferences of the shares thereof in accordance with the provisions
of the Business Corporation Act of Illinois applicable thereto:
(a) The rate of dividend;
(b) The price at which shares may be redeemed, such
price to be not less than $100.00 nor more than
$115.00 per share, plus accrued dividends to
the date of redemption;
(c) The amount payable upon shares in event of
involuntary liquidation, which amount shall not
be less than $100.00 per share nor more than
$115.00 per share, plus accrued dividends;
(d) The amount payable upon shares in event of
voluntary liquidation, which amount shall not
be less than $100.00 per share nor more than
$115.00 per share, plus accrued dividends.
The Board of Directors is hereby authorized to issue and sell
all the authorized and unissued shares of Preferred Stock as shares of any
series which shall have been duly established, and in the event that the
Company shall acquire, by purchase or redemption or otherwise, any issued
shares of its Preferred Stock of any series, the Board of Directors may resell
or convert and sell, in their discretion, any shares so acquired as shares of
the same or of any other series of Preferred Stock which shall have been duly
established.
Series of Preferred Stock Established by
Articles of Incorporation
Without limitation of the foregoing authority conferred upon
the Board of Directors, there is hereby established a series of Preferred
Stock designated as 4 1/2% Preferred Stock. The relative rights and
preferences of the shares of said series in those respects in which the shares
thereof may vary from the shares of other series, shall be as follows:
(a) The rate of dividend shall be 4 1/2%;
(b) The price at which shares may be redeemed shall
be $110.00 per share, plus accrued dividends to
the date of redemption;
(c) The amount payable in event of involuntary
liquidation shall be $100.00 per share, plus
accrued dividends;
(d) The amount payable in event of voluntary
liquidation shall be $105.00 per share, plus
accrued dividends.
Series of Preferred Stock Established by
the Board of Directors
Pursuant to the foregoing authority conferred upon the Board of
Directors, 80,000 of the authorized but unissued shares of Preferred Stock of
the Company shall be established as a series of Preferred Stock which is
hereby designated 4.64% Preferred Stock, and the relative rights and
preferences of the shares of said series in those respects in which the shares
thereof may vary from the shares of other series, shall be as follows:
(a) The rate of dividend shall be 4.64%;
(b) The price at which shares may be redeemed shall
be $106.00 per share if the date of redemption
is on or prior to July 1, 1961, $104.00 per
share if the date of redemption is after
July 1, 1961 and on or prior to July 1, 1966
and $102.00 per share if the date of redemption
is after July 1, 1966 plus accrued dividends in
each case to the date of redemption;
(c) The amount payable in event of involuntary
liquidation shall be $100.00 per share, plus
accrued dividends;
(d) The amount payable in event of voluntary
liquidation shall be $100.00 per share, plus
accrued dividends.
General Provisions
The following provisions shall apply to all the Preferred Stock
irrespective of series:
(1) The holders of the Preferred Stock of each series shall be
entitled to receive dividends, payable quarterly on the first days of January,
April, July and October of each year, when and as declared by the Board of
Directors, at the rates determined for the respective series, from the first
day of the current dividend period within which such stock shall have been
originally issued except that, as to any share of Preferred Stock originally
issued subsequent to December 31, 1973, from the date upon which such share
shall have been originally issued, before any dividends shall be declared or
paid upon or set apart for the Common Stock or any other class of stock of the
Company not having preference over the Preferred Stock as to payment of
dividends. Such dividends shall be cumulative so that if for any dividend
period or periods dividends shall not have been paid or declared and set apart
for payment upon all outstanding Preferred Stock at the rates determined for
the respective series, the deficiency shall be fully paid, or declared and set
apart for payment, before any dividends shall be declared or paid upon the
Common Stock or any other class of stock of the Company not having preference
over the Preferred Stock as to payment of dividends. Dividends shall not be
declared and set apart for payment, or paid, on the Preferred Stock of any one
series, for any dividend period, unless dividends have been or are
contemporaneously declared and set apart for payment or paid on the Preferred
Stock of all series for all dividend periods terminating on the same or an
earlier date.
(2) When full cumulative dividends as aforesaid upon the Preferred
Stock of all series then outstanding for all past dividend periods and for the
current dividend period shall have been paid or declared and set apart for
payment, the Board of Directors may, subject to the provisions of the laws of
the State of Illinois and of the Articles of Incorporation, declare dividends
on the Common Stock or any other class of stock over which the Preferred Stock
has a preference as to payment of dividends, and no holders of any series of
the Preferred Stock as such shall be entitled to share therein; provided,
however, that no dividends shall be paid on Common Stock or on any other class
of stock over which the Preferred Stock has preference as to payment of
dividends or as to assets, either out of paid-in surplus or any surplus
created by a reduction of stated capital or capital stock, or if, at the time
of declaration thereof there shall not remain to the credit of earned surplus
account, (after deducting therefrom the amount of such dividends), an amount
at least equal to two times the annual dividend requirements on all then
outstanding shares of the Preferred Stock and of all other classes of stock
over which the Preferred Stock does not have preference as to the payment of
dividends or as to assets.
(3) Upon any dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary, the holders of Preferred Stock of each
series, without any preference of the shares of any series of Preferred Stock
over the shares of any other series of Preferred Stock, shall be entitled to
receive out of the assets of the Company, whether capital, surplus or other,
before any distribution of the assets to be distributed shall be made to the
holders of Common Stock or of any other class of stock not having preference
as to assets over the Preferred Stock, the amount determined to be payable on
the shares of such series in the event of voluntary or involuntary
liquidation, as the case may be. After payment to the holders of the Preferred
Stock of the full preferential amounts hereinbefore provided for, the holders
of the Preferred Stock as such shall have no right or claim to any of the
remaining assets of the Company, either upon any distribution of such assets
or upon dissolution, liquidation or winding up, and the remaining assets to be
distributed, if any, upon a distribution of such assets or upon dissolution,
liquidation or winding up, may be distributed, subject to the provisions of
the laws of the State of Illinois and the Articles of Incorporation, among the
holders of the Common Stock or of any other class of stock over which the
Preferred Stock has preference as to assets. Without limiting the right of the
Company to distribute its assets or to dissolve, liquidate or wind up in
connection with any sale, merger or consolidation, the sale of all the
property of the Company to, or the merger or consolidation of the Company into
or with any other corporation shall not be deemed to be a distribution of
assets or a dissolution, liquidation or winding up for the purposes of this
paragraph.
(4) At the option of the Board of Directors of the Company, the
Company may redeem any series of Preferred Stock determined to be redeemable,
or any part of any series, at any time at the redemption price determined for
such series; provided, however, that not less than thirty nor more than sixty
days previous to the date fixed for redemption a notice of the time and place
thereof shall be given to the holders of record of the Preferred Stock so to
be redeemed, by mail or publication, in such manner as may be prescribed by
the Bylaws of the Company or by resolution of the Board of Directors; and,
provided, further, that in every case of redemption of less than all of the
outstanding shares of any one series of Preferred Stock, the shares of such
series to be redeemed shall be chosen by lot in such manner as may be
prescribed by resolution of the Board of Directors. At any time after notice
of redemption has been given in the manner prescribed by the Bylaws of the
Company or by resolution of the Board of Directors to the holders of stock so
to be redeemed, the Company may deposit, or may cause its nominee to deposit,
the aggregate redemption price with some bank or trust company named in such
notice, payable on the date fixed for redemption as aforesaid and in the
amounts aforesaid to the respective orders of the holders of the shares so to
be redeemed, on endorsement to the Company or its nominee, or otherwise, as
may be required, and upon surrender of the certificates for such shares. Upon
the deposit of said money as aforesaid, or, if no such deposit is made, upon
said redemption date (unless the Company defaults in making payment of the
redemption price as set forth in such notice), such holders shall cease to be
shareholders with respect to said shares, and from and after the making of
said deposit, or, if no such deposit is made, after the redemption date (the
Company not having defaulted in making payment of the redemption price as set
forth in such notice), the said holders shall have no interest in or claim
against the Company or its nominee with respect to said shares, but shall be
entitled only to receive said moneys on the date fixed for redemption as
aforesaid from said bank or trust company, or if no such deposit is made, from
the Company, without interest thereon, upon endorsement, if required, and
surrender of the certificates as aforesaid.
If such deposit shall be made by a nominee of the Company as
aforesaid, such nominee shall upon such deposit become the owner of the shares
with respect to which such deposit was made and certificates of stock may be
issued to such nominee in evidence of such ownership.
In case the holder of any such Preferred Stock shall not,
within six years after said deposit, claim the amount deposited as above
stated for the redemption thereof, the Depositary shall upon demand pay over
to the Company such amounts so deposited and the Depositary shall thereupon be
relieved from all responsibility to the holder thereof.
Nothing herein contained shall limit any legal right of the
Company to purchase any shares of the Preferred Stock.
(5) At all meetings of the shareholders of the Company, the holders
of the Preferred Stock shall be entitled to one vote for each share of such
Preferred Stock held by them respectively.
(6) So long as any shares of the Preferred Stock are outstanding,
no amendment to the Articles of Incorporation shall be adopted without the
affirmative vote of the holders of at least 66-2/3% of the shares of Preferred
Stock outstanding at the time of the adoption of such amendment, which would
either (a) create any class of shares preferred as to dividends or assets over
the Preferred Stock, or (b) change the designations, preferences,
qualifications, limitations, restrictions or other special or relative rights
of the then outstanding Preferred Stock; provided, however, that nothing in
this paragraph contained shall authorize the adoption of any amendment of the
Articles of Incorporation by the vote of the holders of a less number of
shares of Preferred Stock, or of any other class of stock, or of all classes
of stock, than is required for the adoption of such amendment by the laws of
the State of Illinois at that time applicable thereto.
(7) So long as any shares of the Preferred Stock shall be
outstanding, the Company shall not issue or assume any evidences of
indebtedness maturing more than twelve months from the date of issue or
assumption in an amount at any one time outstanding exceeding 15% of the
aggregate, at the time of such issue or assumption, of the stated capital
represented by the outstanding shares of Preferred Stock and any other class
of stock over which the Preferred Stock has a preference as to dividends or
assets and of the surplus of the Company (paid-in, earned, and other, if any),
unless (i) such evidences of indebtedness are either (a) bonds issued under
the Mortgage and Deed of Trust to Bankers Trust Company, New York, as Trustee,
dated as of April 1, 1933, assumed by the Company, or (b) bonds or other
evidences of indebtedness issued under another mortgage and deed of trust on
substantially all the mortgageable property of the Company, under which
mortgage and deed of trust bonds or other evidences of indebtedness have been
issued, upon the basis, directly or indirectly, of the refunding of bonds
issued under said Mortgage and Deed of Trust, dated as of April 1, 1933 and
permitting the issuance of additional bonds or evidences of indebtedness upon
the basis directly or indirectly, of the refunding of the remainder thereof,
if any, or (c) indebtedness secured by the pledge of bonds or evidences of
indebtedness issued under said Mortgage and Deed of Trust, dated as of
April 1, 1933, or such other mortgage and deed of trust, to an equal principal
amount of such bonds or such evidences of indebtedness pledged, or (ii) the
issue and assumption of said evidence of indebtedness has been submitted to
the vote of the shareholders of the Company at any annual or special meeting
thereof, has been approved at such meeting by the affirmative vote of the
holders of a majority of the outstanding shares of the Company, irrespective
of class, and has not been voted against at such meeting by the holders of
33-1/3% or more of the outstanding shares of Preferred Stock.
(8) So long as any shares of Preferred Stock shall be outstanding
(a) No shares of Preferred Stock or of any
other class of stock over which the
Preferred Stock does not have
preference as to the payment of
dividends and as to assets, shall be
issued, sold or otherwise disposed of
unless the net income of the Company
available for the payment of dividends
for a period of twelve consecutive
calendar months within the fifteen
calendar months immediately preceding
the issuance, sale or disposition of
such stock is at least equal to 2 1/2
times the annual dividend requirements
of all outstanding shares of Preferred
Stock and of all other classes of
stock over which the Preferred Stock
does not have preference as to the
payment of dividends and as to assets,
including the shares proposed to be
issued;
(b) After the Company has issued 131,464
shares of Preferred Stock, no
additional shares of Preferred Stock
shall be issued unless prior thereto,
the total of the stated capital of the
Company represented by shares of stock
over which the Preferred Stock has a
preference as to the payment of
dividends and as to assets, shall have
been increased over the stated capital
represented by the Common Stock on
March 31, 1936 by an amount at least
equal to the aggregate par value of
the additional shares of Preferred
Stock proposed to be issued.
(9) The term "accrued dividends" shall be deemed to mean in respect
of any share of the Preferred Stock of any series, as of any given date, the
amount, if any, by which the product of the rate of dividend per annum,
determined upon the shares of such series, multiplied by the number of years
and any fractional part of a year which shall have elapsed from the date after
which dividends on such stock became cumulative to such given date, exceeds
the total dividends actually paid on such stock and the dividends declared and
set apart for payment. Accumulations of dividends shall not bear interest.
The term "outstanding", whenever used herein with respect to
shares of Preferred Stock or of any other class of stock which are by their
terms redeemable, shall not include any such shares which have been called for
redemption in accordance with the provisions applicable thereto, of which call
for redemption notice shall have been given as required by such provisions,
and for the redemption of which a sum of money sufficient to pay the amount
payable on such redemption shall have been deposited with a bank or trust
company, irrevocably in trust for such purpose.
CLASS A PREFERRED STOCK
Provision for Division Into and Issue in Series of Class A Preferred
Stock and Grant of Authority to Board of Directors
The shares of the Class A Preferred Stock may be divided into
and issued in series. Each series shall be designated so as to distinguish the
shares thereof from the shares of all other series and classes and all shares
of the Class A Preferred Stock irrespective of series shall be identical
except as to the following relative rights and preferences in respect of any
or all of which there may be variations between different series and authority
is hereby expressly vested in the Board of Directors, to the extent that
series are not established by the Articles of Incorporation and the variations
and the relative rights and preferences as between series fixed and determined
therein, to establish series and to fix and determine the following relative
rights and preferences of the shares thereof in accordance with the provisions
of the Business Corporation Act of Illinois applicable thereto:
(a) The rate of dividend;
(b) The price at and the terms and conditions on
which shares may be redeemed;
(c) The amount payable upon shares in event of
involuntary liquidation;
(d) The amount payable upon shares in event of
voluntary liquidation;
(e) Sinking fund provisions for the redemption or
purchase of shares (the term "sinking fund", as
used herein, including any analogous fund,
however designated).
The Board of Directors is hereby authorized to issue and sell
all the authorized and unissued shares of Class A Preferred Stock as shares of
any series which shall have been duly established, and in the event that the
Company shall acquire, by purchase or redemption or otherwise, any issued
shares of its Class A Preferred Stock of any series, the Board of Directors
may resell or convert and sell, in their discretion, any shares so acquired as
shares of the same or of any other series of Class A Preferred Stock which
shall have been duly established.
Shares of any series of Class A Preferred Stock, without par
value, may be issued for such consideration, not less than the aggregate
preferential amount payable upon such shares in the event of involuntary
liquidation, as may be fixed by the Board of Directors prior to the time of
such issuance and, except as otherwise determined by the Board of Directors in
accordance with the provisions of the Business Corporation Act of Illinois
applicable thereto, the entire amount of such consideration shall be stated
capital.
The General Provisions heretofore set forth in this Article 3
following the heading, "Preferred Stock" shall be applicable in all respects
to the Class A Preferred Stock and any reference therein to "Preferred Stock"
shall in each instance include, within the meaning of that term, the Class A
Preferred Stock. In applying said General Provisions, the reference in
paragraph (b) thereof to "aggregate par value" shall, in the case of the
Class A Preferred Stock, be deemed to refer to the aggregate amount payable in
event of involuntary liquidation upon the additional shares of Class A
Preferred Stock proposed to be issued.
In addition to the requirement concerning the declaration of
dividends on the Common Stock or any class of stock over which the Preferred
Stock and the Class A Preferred Stock have preference as to payment of
dividends, which are contained in paragraph (2) under the General Provisions
referred to in the preceding paragraph, it shall also be a condition to the
declaration of dividends on the Common Stock or any class of stock over which
the Preferred Stock and the Class A Preferred Stock have preference as to
payment of dividends, by the Board of Directors as contemplated in said
paragraph (2) that all amounts required to be paid or set aside for any
sinking fund for the retirement of Class A Preferred Stock of any series, with
respect to all preceding sinking fund dates, shall have been paid or set
aside.
Series of Class A Preferred Stock Established by
the Board of Directors
Pursuant to the foregoing authority conferred upon the Board of
Directors, 220,000 of the authorized but unissued shares of Class A Preferred
Stock of the Company shall be established as a series of Class A Preferred
Stock which is hereby designated 5.85% Class A Preferred Stock, and the
relative rights and preferences of the shares of said series in those respects
in which the shares thereof may vary from the shares of other series, shall be
as follows:
(a) The rate of dividend shall be $5.85 per annum.
(b) The shares will not be redeemable prior to
July 1, 2003. On and after July 1, 2003, the
shares will be redeemable at the option of the
Company, in whole or in part, at a price of
$100 per share plus accrued dividends to the
date of redemption.
(c) The amount payable in event of involuntary
liquidation shall be $100 per share, plus
accrued dividends.
(d) The amount payable in event of voluntary
liquidation shall be $100 per share, plus
accrued dividends.
(e) The 5.85% Class A Preferred Stock will be
entitled to a sinking fund as follows: 11,000
shares of such stock shall be redeemed on
July 1, 2003 and on each July 1 thereafter to
and including July 1, 2007, and 165,000 shares
of such stock shall be redeemed on July 1,
2008, in each case at $100 per share, plus
accrued dividends to the redemption date. This
sinking fund requirement may be satisfied in
whole or in part by crediting against such
requirement shares of such stock redeemed by
the Company at its option, purchased by the
Company in the open market or acquired by the
Company otherwise than through the sinking
fund.
Series of Class A Preferred Stock Established by
the Board of Directors
Pursuant to the foregoing authority conferred upon the Board of
Directors, 250,000 of the authorized but unissued shares of Class A preferred
stock of the Company shall be established as a series of Class A preferred
stock which is hereby designated Flexible Auction Rate Preferred Stock,
without par value, and that the relative rights and preferences of the shares
of said series in those respects in which shares thereof may vary from the
shares of other series, shall be as follows:
Definitions. As used herein, the following terms shall have the
following meanings, unless the context otherwise requires. To the extent
definitions contain procedures or specifications concerning the determination
of time periods, rates or other matters, such procedures and specifications
shall be applicable to the shares of the Flexible Auction Rate Preferred
Stock, without par value, as fully as if set forth independently from such
definitions.
(i) "60-day 'AA' Composite Commercial Paper Rate", on any date,
shall mean (i) the interest equivalent of the 60-day rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or
"Aa" by Moody's or the equivalent of either or both of such ratings by such
agencies or another rating agency, as such 60-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York on the
Business Day immediately preceding such date or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then the
arithmetic average of the interest equivalent of the 60-day rate on commercial
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by the Commercial Paper Dealers, to the Auction Agent for the close
of business on the Business Day immediately preceding such date. If any
Commercial Paper Dealer does not quote a rate required to determine the 60-day
"AA" Composite Commercial Paper Rate, the 60-day "AA" Composite Commercial
Paper Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining Commercial Paper Dealer and any Substitute
Commercial Paper Dealer or Dealers selected by the Company to provide such
rate or rates not being supplied by any Commercial Paper Dealer or Dealers, as
the case may be, or, if the Company does not select any such Substitute
Commercial Paper Dealer or Dealers, by the remaining Commercial Paper Dealer.
If the number of Dividend Period Days in a Short-Term Dividend Period shall be
(i) fewer than 70 days, such rate shall be the interest equivalent of the
60-day rate on such commercial paper, (ii) 70 or more days but fewer than 85
days, such rate shall be the arithmetic average of the interest equivalent of
the 60-day and 90-day rates on such commercial paper, and (iii) 85 or more
days but fewer than 3 months, such rate shall be the interest equivalent of
the 90-day rate on such commercial paper. For the purpose of this definition,
any arithmetic average shall be rounded to the nearest one-thousandth (.001)
of one percent (or, if there is no nearest one-thousandth (.001) of one
percent, to the next highest one-thousandth (.001) of one percent), and
"interest equivalent" means the equivalent yield on a 360-day basis of a
discount-basis security to an interest-bearing security.
(ii) "90-day 'AA' Composite Commercial Paper Rate", on any date,
shall mean (i) the interest equivalent of the 90-day rate on commercial paper
placed on behalf of issuers whose corporate bonds are rated "AA" by S&P or
"Aa" by Moody's or the equivalent of either or both of such ratings by such
agencies or another rating agency, as such 90-day rate is made available on a
discount basis or otherwise by the Federal Reserve Bank of New York on the
Business Day immediately preceding such date or (ii) in the event that the
Federal Reserve Bank of New York does not make available such a rate, then the
arithmetic average of the interest equivalent of the 90-day rate on commercial
paper placed on behalf of such issuers, as quoted on a discount basis or
otherwise by the Commercial Paper Dealers, to the Auction Agent for the close
of business on the Business Day immediately preceding such date. If any
Commercial Paper Dealer does not quote a rate required to determine the 90-day
"AA" Composite Commercial Paper Rate, the 90-day "AA" Composite Commercial
Paper Rate shall be determined on the basis of the quotation or quotations
furnished by the remaining Commercial Paper Dealer and any Substitute
Commercial Paper Dealer or Dealers selected by the Company to provide such
rate or rates not being supplied by any Commercial Paper Dealer or Dealers, as
the case may be, or, if the Company does not select any such Substitute
Commercial Paper Dealer or Dealers, by the remaining Commercial Paper Dealer.
For the purpose of this definition, any arithmetic average shall be rounded to
the nearest one-thousandth (.001) of one percent (or, if there is no nearest
one-thousandth (.001) of one percent, to the next highest one-thousandth
(.001) of one percent), and "interest equivalent" means the equivalent yield
on a 360-day basis of a discount-basis security to an interest-bearing
security.
(iii) "Affiliate" shall mean any Person known to the Auction Agent to
be controlled by, in control of or under common control with the Company.
(iv) "Agent Member" shall mean the member of or participant in the
Securities Depository that will act on behalf of a Bidder and is identified as
such in such Bidder's Master Purchaser's Letter.
(v) "Applicable 'AA' Composite Commercial Paper Rate", for any
Multiple Quarterly Dividend Period or Long-Term Dividend Period, on any date,
shall mean in the case of any Multiple Quarterly Dividend Period or Long-Term
Dividend Period having a term (i) more than 49 days but fewer than 120 days,
the interest equivalent of the 90-day rate, (ii) 120 days or more but fewer
than 148 days, the arithmetic average of the interest equivalent of the 90-day
and 180-day rates, (iii) 148 days or more but fewer than 210 days, the
interest equivalent of the 180-day rate, (iv) 210 days or more but fewer than
238 days, the arithmetic average of the interest equivalent of the 180-day and
270-day rates, and (v) 238 or more days but less than one year, the interest
equivalent of the 270-day rate, on commercial paper placed on behalf of
issuers whose corporate bonds are rated "AA" by S&P or "Aa" by Moody's, or the
equivalent of either or both of such ratings by such agencies or such rating
by another rating agency, as made available on a discount basis or otherwise
by the Federal Reserve Bank of New York for the Business Day immediately
preceding such date or in the event that the Federal Reserve Bank of New York
does not make available any such rate, then the arithmetic average of such
rates, as quoted on a discount basis or otherwise by the Commercial Paper
Dealers to the Auction Agent for the close of business on the Business Day
next preceding such date. If any Commercial Paper Dealer does not quote a rate
required to determine the Applicable "AA" Composite Commercial Paper Rate, the
Applicable "AA" Composite Commercial Paper Rate shall be determined on the
basis of the quotation or quotations furnished by the remaining Commercial
Paper Dealer and any Substitute Commercial Paper Dealer or Dealers selected by
the Company to provide such rate or rates not being supplied by any Commercial
Paper Dealer or Dealers, as the case may be, or, if the Company does not
select any such Substitute Commercial Paper Dealer or Dealers, by the
remaining Commercial Paper Dealer. For the purpose of this definition, any
arithmetic average shall be rounded to the nearest one-thousandth (.001) of
one percent (or, if there is no nearest one-thousandth (.001) of one percent,
to the next highest one-thousandth (.001) of one percent) and "interest
equivalent" means the equivalent yield on a 360-day basis of a discount-basis
security to an interest-bearing security.
(vi) "Applicable Rate" shall mean dividend rate per annum applicable
to the shares of Flexible Preferred during a Dividend Period. If an Auction is
not held on an Auction Date for any reason (other than because of the
discontinuation of Auctions that results in the Applicable Rate becoming the
Default Rate or because of the prior call for redemption of all shares of
Flexible Preferred then outstanding), except in certain limited circumstances
discussed under paragraph (f) of the definition of Auction Procedures, the
dividend rate for the next succeeding Dividend Period shall be the Maximum
Applicable Rate for a Quarterly Dividend Period or, if the next succeeding
Dividend Period is a Seven-Day Dividend Period, a Short-Term Dividend Period,
determined as of such Auction Date.
(vii) "Applicable Treasury Rate", on any date, with respect to
Flexible Preferred with a Multiple Quarterly Dividend Period or a Long-Term
Dividend Period of one year or more, means the interest equivalent of the rate
for direct obligations of the United States Treasury having an original
maturity which is equal to, or next lower than, the length of such Multiple
Quarterly Dividend Period or Long-Term Dividend Period, as the case may be, or
thirty years, in the case of a Perpetual Dividend Period, as published weekly
by the Federal Reserve Board in "Federal Reserve Statistical Release
H.15(519)--Selected Interest Rates", or any successor publication by the
Federal Reserve Board, within five Business Days preceding such date. In the
event that the Federal Reserve Board does not publish such weekly per annum
interest rate, or if such release is not yet available, the Applicable
Treasury Rate will be the arithmetic average of the secondary market bid rates
as of approximately 3:30 PM, New York City time, on the Business Day next
preceding such date, of Kidder, Peabody & Co. Incorporated and Smith Barney,
Harris Upham & Co. Incorporated or, in lieu of either thereof, their
respective affiliates or successors (the "U.S. Government Securities Dealers")
obtained by the Auction Agent (or in lieu thereof, the Company) for the issue
of direct obligations of the United States Treasury, in an aggregate principal
amount of at least $1,000,000 with a remaining maturity equal to, or next
lower than, the length of such Multiple Quarterly Dividend Period or Long-Term
Dividend Period, as the case may be, or thirty years, in the case of a
Perpetual Dividend Period. If any U.S. Government Securities Dealer does not
quote a rate required to determine the Applicable Treasury Rate, the
Applicable Treasury Rate shall be determined on the basis of the quotation or
quotations furnished by the remaining U.S. Government Securities Dealer or any
Substitute U.S. Government Securities Dealer or Dealers selected by the
Company to provide such rate or rates not being supplied by any U.S.
Government Securities Dealer or Dealers, as the case may be, or, if the
Company does not select any such Substitute U.S. Government Securities Dealer
or Dealers, by the remaining U.S. Government Securities Dealer; provided, that
in the event the Company is unable to cause such quotations to be furnished to
the Auction Agent (or, if applicable, to the Company) by such sources, the
Company may cause the Applicable Treasury Rate to be furnished to the Auction
Agent (or, if applicable, to the Company) by such alternative source or
sources as the Company in good faith deems to be reliable. For the purpose of
this definition, (i) any arithmetic average shall be rounded to the nearest
one-thousandth (.001) of one percent (or, if there is no nearest
one-thousandth (.001) of one percent, to the next highest one-thousandth
(.001) of one percent), (ii) the "interest equivalent" means the equivalent
yield on a 360-day basis of a discount-basis security to an interest-bearing
security and (iii) "Substitute U.S. Government Securities Dealer" means any
dealer in United States Treasury obligations, the principal office of which is
located in New York City, that is a nationally recognized leading dealer in
the market for United States Treasury obligations, provided that no such
dealer may be a U.S. Government Securities Dealer or any affiliate of the
Company.
(viii) "Articles" shall mean the Articles of Incorporation of the
Company, as amended.
(ix) "Auction" shall mean the periodic implementation of the Auction
Procedures.
(x) "Auction Agent" shall mean Bankers Trust Company (together with
any successor bank or trust company or other entity entering into an Auction
Agent Agreement with the Company).
(xi) "Auction Agent Agreement" shall mean an agreement entered into
by the Company with a bank or trust company or other entity which will
provide, among other things, that such bank or trust company or other entity
will follow the Auction Procedures for the purposes of determining the
Applicable Rate.
(xii) "Auction Date" shall mean the Business Day immediately
preceding the first day of each Dividend Period which commences after the
initial Dividend Period and, in connection with an Auction with respect to a
Quarterly Dividend Period or a Multiple Quarterly Dividend Period that was
cancelled because of an event or events not within the control of the Company
and not directly involving the Company or its properties, the first Business
Day following the date of such cancelled Auction that the Auction Agent
determines an Auction can be held.
(xiii) "Auction Procedures" shall mean the following procedures
pursuant to which the Applicable Rate is determined:
(a) The headings of the various subdivisions below are for
convenience of reference only and shall not affect the interpretation of
any of the provisions hereof.
(b) Orders by Existing Holders and Potential Holders.
(i) Prior to the Submission Deadline on each Auction
Date:
(A) each Existing Holder may submit to a
Broker-Dealer information as to:
(1) the number of Outstanding shares, if any,
of Flexible Preferred held by such Existing Holder which such Existing
Holder desires to continue to hold without regard to the Applicable Rate
for the next succeeding Dividend Period;
(2) the number of Outstanding shares, if any,
of Flexible Preferred that such Existing Holder desires to sell, provided
that the Applicable Rate for the next succeeding Dividend Period shall be
less than the rate per annum specified by such Existing Holder; and/or
(3) the number of Outstanding shares, if any,
of Flexible Preferred held by such Existing Holder which such Existing
Holder offers to sell without regard to the Applicable Rate for the next
succeeding Dividend Period; and
(B) each Broker-Dealer, using a list of Potential
Holders that shall be maintained by such Broker-Dealer in good faith for
the purpose of conducting a competitive Auction, shall contact Potential
Holders, including Persons that are not Existing Holders, on such list to
determine the number of shares, if any, of Flexible Preferred that each
such Potential Holder offers to purchase, provided that the Applicable
Rate for the next succeeding Dividend Period shall not be less than the
rate per annum specified by such Potential Holder.
For the purposes hereof, the communication to a Broker-Dealer
of the information referred to in this paragraph (b)(i) is hereinafter
referred to as an "Order" and each Existing Holder and each Potential
Holder placing an Order is hereinafter referred to as a "Bidder"; an
Order containing the information referred to in clause (A)(1) of this
paragraph (b)(i) is hereinafter referred to as a "Hold Order"; an Order
containing the information referred to in clause (A)(2) or (B) of this
paragraph (b)(i) is hereinafter referred to as a "Bid"; and an Order
containing the information referred to in clause (A)(3) of this paragraph
(b)(i) is hereinafter referred to as a "Sell Order". Each Order by an
Existing Holder or a Potential Holder must specify the number of shares
of Flexible Preferred subject to such Order in whole Units. Any Order
that specifies a number of shares other than in whole Units will not be
accepted by the Auction Agent and will not be considered a Submitted
Order for purposes of the Auction.
(ii) (A) A Bid by an Existing Holder shall constitute an
irrevocable offer to sell:
(1) the number of Outstanding shares of
Flexible Preferred specified in such Bid if the Applicable Rate
determined on such Auction Date shall be less than the rate per annum
specified in such Bid;
(2) the number of Outstanding shares of
Flexible Preferred specified in such Bid or a lesser number of
Outstanding shares of Flexible Preferred to be determined as set forth in
paragraph (e)(i)(D) if the Applicable Rate determined on such Auction
Date shall be equal to the rate per annum specified in such Bid; or
(3) the number of Outstanding shares of
Flexible Preferred specified in such Bid or a lesser number of
Outstanding shares of Flexible Preferred to be determined as set forth
in paragraph (e)(ii)(C) if the rate per annum specified in such Bid
shall be higher than the Maximum Applicable Rate and Sufficient
Clearing Bids do not exist.
(B) A Sell Order by an Existing Holder shall
constitute an irrevocable offer to sell:
(1) the number of Outstanding shares of
Flexible Preferred specified in such Sell Order if Sufficient Clearing
Bids do exist; or
(2) the number of Outstanding shares of
Flexible Preferred specified in such Sell Order or a lesser number of
Outstanding shares of Flexible Preferred to be determined as set forth in
paragraph (e)(ii)(C) if Sufficient Clearing Bids do not exist.
(C) A Bid by a Potential Holder shall constitute an
irrevocable offer to purchase:
(1) the number of Outstanding shares of
Flexible Preferred specified in such Bid if the Applicable Rate
determined on such Auction Date shall be higher than the rate per
annum specified in such Bid; or
(2) the number of Outstanding shares of
Flexible Preferred specified in such Bid or a lesser number of
Outstanding shares of Flexible Preferred to be determined as set forth in
paragraph (e)(i)(E) if the Applicable Rate determined on such Auction
Date shall be equal to the rate per annum specified in such Bid.
(c) Submission of Orders by Broker-Dealers to Auction Agent.
(i) Each Broker-Dealer shall submit in writing to the
Auction Agent prior to the Submission Deadline on each Auction Date all
Orders obtained by such Broker-Dealer and shall specify with respect to
each Order:
(A) the name of the Bidder placing such Order;
(B) the aggregate number of shares of Flexible
Preferred that are subject of such Order;
(C) to the extent that such Bidder is an Existing
Holder;
(1) the number of shares, if any, of Flexible
Preferred subject to any Hold Order placed by such Existing Holder;
(2) the number of shares, if any, of Flexible
Preferred subject to any Bid placed by such Existing Holder and the rate
specified in such Bid; and
(3) the number of shares, if any, of Flexible
Preferred subject to any Sell Order placed by such Existing Holder; and
(D) to the extent that such Bidder is a Potential
Holder, the rate and the number of shares of Flexible Preferred specified
in such Potential Holder's Bid.
(ii) If any rate specified on any Bid contains more than
three figures to the right of the decimal point, the Auction Agent shall
round such rate up to the next higher one thousandth (.001) of one
percent.
(iii) If any Order or Orders covering all of the
Outstanding shares of Flexible Preferred held by an Existing Holder is
not submitted to the Auction Agent prior to the Submission Deadline, the
Auction Agent shall deem a Hold Order to have been submitted on behalf of
such Existing Holder covering the number of Outstanding shares of
Flexible Preferred held by such Existing Holder and not subject to Orders
submitted to the Auction Agent.
(iv) If one or more Orders covering in the aggregate more
than the number of Outstanding shares of Flexible Preferred held by an
Existing Holder are submitted to the Auction Agent, such Orders shall be
considered valid as follows and in the following order of priority:
(A) Any Hold Order submitted on behalf of such
Existing Holder shall be considered valid up to and including the number
of Outstanding shares of Flexible Preferred held by such Existing Holder;
provided that if more than one Hold Order is submitted on behalf of such
Existing Holder and the number of shares of Flexible Preferred subject to
such Hold Orders exceeds the number of Outstanding shares of Flexible
Preferred held by such Existing Holder, the number of shares of Flexible
Preferred subject to such Hold Orders shall be reduced pro rata in whole
Units so that such Hold Orders shall cover the number of Outstanding
shares of Flexible Preferred held by such Existing Holder.
(B) Any Bid shall be considered valid to the extent
and in the order of priority specified in this clause (B):
(1) any Bid shall be considered valid up to and
including the excess (the "Bid Excess") of the number of Outstanding
shares of Flexible Preferred held by such Existing Holder over the number
of shares of Flexible Preferred subject to Hold Orders referred to in
paragraph (c)(iv)(A); and
(2) subject to clause (1) above, if more than
one Bid with the same rate is submitted on behalf of such Existing Holder
and the number of Outstanding shares of Flexible Preferred subject to
such Bids is greater than the Bid Excess, the number of shares of
Flexible Preferred subject to such Bids shall be reduced pro rata in
whole Units so that such Bids shall cover the number of shares of
Flexible Preferred equal to the Bid Excess; and
(3) subject to clause (1) above, if more than
one Bid with different rates is submitted on behalf of such Existing
Holder, such Bids shall be considered valid in the ascending order of
their respective rates up to and including the Bid Excess, provided
that, in any event, the number, if any, of Outstanding shares subject to
Bids not valid under this clause (B) shall be treated as the subject of a
Bid by a Potential Holder.
(C) Any Sell Order shall be considered valid to the
extent and in the order of priority specified in this clause (C):
(1) any Sell Order shall be considered valid up
to and including the excess (the "Sell Excess") of the number of
Outstanding shares of Flexible Preferred held by such Existing Holder
over the number of shares of Flexible Preferred, subject to Hold Orders
referred to in paragraph (c)(iv)(A) and Bids referred to in paragraph
(c)(iv)(B); and
(2) subject to clause (1) above, if more than
one Sell Order is submitted on behalf of such Existing Holder and the
number of Outstanding shares of Flexible Preferred subject to such
Sell Orders is greater than the Sell Excess, the number of shares of
Flexible Preferred subject to such Sell Orders shall be reduced pro rata
in whole Units so that such Sell Orders shall cover the number of shares
of Flexible Preferred equal to the Sell Excess.
(v) If more than one Bid is submitted on behalf of any
Potential Holder, each Bid submitted shall be a separate Bid with the
rate and number of shares of Flexible Preferred therein specified.
(vi) Each Order by an Existing Holder or a Potential
Holder must specify numbers of shares subject to such Order in whole
Units. Any Order that specifies a number of shares other than in whole
Units will not be accepted and will not be considered a Submitted Order
for purposes of an Auction.
(d) Determination of Sufficient Clearing Bids, Winning Bid
Rate and Applicable Rate.
(i) Not earlier than the Submission Deadline on each
Auction Date, the Auction Agent shall assemble all Orders submitted or
deemed submitted to it by the Broker-Dealers (each such Order as
submitted or deemed submitted by a Broker-Dealer being hereinafter
referred to individually as a "Submitted Hold Order", a "Submitted Bid"
or a "Submitted Sell Order", as the case may be, or as a "Submitted
Order") and shall determine:
(A) the excess of the total number of Outstanding
shares of Flexible Preferred over the number of Outstanding shares of
Flexible Preferred that are the subject of Submitted Hold Orders (such
excess being hereinafter referred to as the "Available Flexible
Preferred");
(B) from the Submitted Orders whether the number of
Outstanding shares of Flexible Preferred that are the subject of
Submitted Bids by Potential Holders specifying one or more rates equal to
or lower than the Maximum Applicable Rate exceeds or is equal to the sum
of:
(x) the number of Outstanding shares of
Flexible Preferred that are the subject of Submitted
Bids by Existing Holders specifying one or more rates
higher than the Maximum Applicable Rate; and
(y) the number of Outstanding shares of
Flexible Preferred that are subject to Submitted Sell
Orders
(if such excess or such equality exists (other than
because the number of shares of Flexible Preferred in
clauses (x) and (y) is each zero because all of the
Outstanding shares of Flexible Preferred are the
subject of Submitted Hold Orders), such Submitted
Bids by Potential Holders being hereinafter referred
to collectively as "Sufficient Clearing Bids"); and
(C) If Sufficient Clearing Bids exist, the lowest
rate specified in the Submitted Bids (the "Winning Bid Rate") which if
the Auction Agent accepted:
(1) each Submitted Bid from Existing Holders
specifying such lowest rate and all other Submitted Bids from Existing
Holders specifying rates lower than such lowest rate; and
(2) each Submitted Bid from Potential Holders
specifying such lowest rate and all other Submitted Bids from Potential
Holders specifying rates lower than such lowest rate would result in such
Existing Holders described in subclause (1) continuing to hold an
aggregate number of Outstanding shares of Flexible Preferred that, when
added to the number of Outstanding shares of Flexible Preferred to be
purchased by such Potential Holders described in subclause (2), would
equal not less than the Available Flexible Preferred.
(ii) Promptly after the Auction Agent has made the
determinations pursuant to paragraph (d)(i), the Auction Agent shall
advise the Company of the Maximum Applicable Rate and, based on such
determinations, the Applicable Rate for the related Dividend Period as
follows:
(A) if Sufficient Clearing Bids exist, that the
Applicable Rate for such Dividend Period shall be equal to the Winning
Bid Rate so determined;
(B) if Sufficient Clearing Bids do not exist (other
than because all of the Outstanding shares of Flexible Preferred are the
subject of Submitted Hold Orders), then (a) if the Company has not given
a Notice of Adjustment of Dividend Period with respect to the next
succeeding Dividend Period or has given a Notice of Revocation with
respect thereto, that such next succeeding Dividend Period will be a
Quarterly Dividend Period, unless the existing Dividend Period is a
Short-Term Period or a Long-Term Dividend Period, in either of such cases
the succeeding Dividend Period will be a Short-Term Dividend Period, and
that the Applicable Rate for the applicable Dividend Period will be the
Maximum Applicable Rate on the Auction Date for a Quarterly Dividend
Period or a Short-Term Dividend Period, as applicable, and (b) if the
Company has given a Notice of Adjustment of Dividend Period with respect
to the next succeeding Dividend Period and has not given a Notice of
Revocation with respect thereto, that such next succeeding Dividend
Period will, notwithstanding such Notice of Adjustment of Dividend
Period, be a Quarterly Dividend Period, unless the existing Dividend
Period is a Short-Term Dividend Period or a Long-Term Dividend Period, in
either of such cases the succeeding Dividend Period will be a Seven-Day
Dividend Period, all Bids and Sell Orders will be rejected and that the
Applicable Rate for the applicable Dividend Period will be the greater of
(1) the Maximum Applicable Rate on the Auction Date for a Quarterly
Dividend Period or a Short-Term Dividend Period, as applicable, and
(2) the dividend rate in effect for the Dividend Period during which such
Auction occurred; if Sufficient Clearing Bids have not been made,
Existing Holders that have submitted Sell Orders will not be able to sell
in the Auction all, and may not be able to sell in the Auction any,
shares which are the subject of such submitted Sell Orders;
(C) if all of the Outstanding shares of Flexible
Preferred are the subject of Submitted Hold Orders, that the Applicable
Rate for the next succeeding Dividend Period shall (1) in the case of a
Short-Term Dividend Period, be equal to 59% of the 60-day "AA" Composite
Commercial Paper Rate in effect on such Auction Date, (2) in the case of
a Quarterly Dividend Period, be equal to 59% of the 90-day "AA" Composite
Commercial Paper Rate in effect on such Auction Date and (3) in the case
of a Multiple Quarterly Dividend Period or a Long-Term Dividend Period,
59% of the Reference Rate in effect on such Auction Date, subject in each
case to a maximum of 25% per annum.
(e) Acceptance and Rejection of Submitted Bids and Submitted
Sell Orders and Allocations of Shares. Existing Holders shall continue
to hold shares of Flexible Preferred that are the subject of Submitted
Hold Orders and, based on the determinations made pursuant to
paragraph (d)(i), the Submitted Bids and Submitted Sell Orders shall be
accepted or rejected and the Auction Agent shall take such other action
as set forth below:
(i) If Sufficient Clearing Bids have been made, subject
to the provisions of paragraph (e)(iii), Submitted Bids and Submitted
Sell Orders shall be accepted or rejected in the following order of
priority and all other Submitted Bids shall be rejected:
(A) the Submitted Sell Orders of Existing Holders
shall be accepted and the Submitted Bid of each of the Existing Holders
specifying any rate that is higher than the Winning Bid Rate shall be
accepted, thus requiring each such Existing Holder to sell the shares of
Flexible Preferred that are the subject of such Submitted Sell Order or
Submitted Bid;
(B) the Submitted Bid of each of the Existing
Holders specifying any rate that is lower than the Winning Bid Rate shall
be rejected, thus entitling each such Existing Holder to continue to hold
the shares of Flexible Preferred that are the subject of such Submitted
Bid;
(C) the Submitted Bid of each of the Potential
Holders specifying any rate that is lower than the Winning Bid Rate shall
be accepted, thus requiring each such Potential Holder to purchase the
number of shares of Flexible Preferred subject to such Submitted Bid;
(D) the Submitted Bid of each of the Existing
Holders specifying a rate that is equal to the Winning Bid Rate shall be
rejected, thus entitling each such Existing Holder to continue to hold
the shares of Flexible Preferred that are the subject of such Submitted
Bid, unless the number of Outstanding shares of Flexible Preferred
subject to all such Submitted Bids shall be greater than the number of
shares of Flexible Preferred ("Remaining Shares") equal to the excess of
the Available Flexible Preferred over the number of shares of Flexible
Preferred subject to Submitted Bids described in paragraphs (e)(i)(B) and
(e)(i)(C), in which event the Submitted Bids of each such Existing Holder
shall be accepted, and each such Existing Holder shall be required to
sell shares of Flexible Preferred, but only in an amount equal to the
difference between (1) the number of Outstanding shares of Flexible
Preferred then held by such Existing Holder subject to such Submitted Bid
and (2) the number of shares of Flexible Preferred obtained by
multiplying (x) the number of Remaining Shares by (y) a fraction, the
numerator of which shall be the number of Outstanding shares of Flexible
Preferred held by such Existing Holder subject to such Submitted Bid and
the denominator of which shall be the sum of the number of Outstanding
shares of Flexible Preferred subject to such Submitted Bids made by all
such Existing Holders that specified a rate equal to the Winning Bid
Rate; and
(E) the Submitted Bid of each of the Potential
Holders specifying a rate that is equal to the Winning Bid Rate shall be
accepted, but only in an amount equal to the number of shares of Flexible
Preferred obtained by multiplying the difference between the Available
Flexible Preferred and the number of shares of Flexible Preferred subject
to Submitted Bids described in paragraphs (e)(i)(B), (e)(i)(C) and
(e)(i)(D) by a fraction, the numerator of which shall be the number of
Outstanding shares of Flexible Preferred held by such Potential Holder
subject to such Submitted Bid and the denominator of which shall be the
sum of the number of Outstanding shares of Flexible Preferred subject to
such Submitted Bids made by all such Potential Holders that specified a
rate equal to the Winning Bid Rate.
(ii) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding shares of Flexible Preferred are
subject to Submitted Hold Orders) in an Auction relating to a Quarterly
Dividend Period, subject to the provisions of paragraphs (e)(iii) and
(e)(iv), Submitted Orders shall be accepted or rejected as follows in the
following order of priority and all other Submitted Bids shall be
rejected:
(A) the Submitted Bid of each Existing Holder
specifying any rate that is equal to or lower than the Maximum Applicable
Rate shall be rejected, thus entitling such Existing Holder to continue
to hold the shares of Flexible Preferred that are the subject of such
Submitted Bid;
(B) the Submitted Bid of each Potential Holder
specifying any rate that is equal to or lower than the Maximum Applicable
Rate shall be accepted, thus requiring such Potential Holder to purchase
the shares of Flexible Preferred that are the subject of such Submitted
Bid; and
(C) the Submitted Bids of each Existing Holder
specifying any rate that is higher than the Maximum Applicable Rate shall
be accepted and the Submitted Sell Orders of each Existing Holder shall
be accepted, in both cases only in an amount equal to the difference
between (1) the number of outstanding shares of Flexible Preferred then
held by such Existing Holder subject to such Submitted Bid or Submitted
Sell Order and (2) the number of shares of Flexible Preferred obtained by
multiplying (x) the difference between the Available Flexible Preferred
and the aggregate number of shares of Flexible Preferred subject to
Submitted Bids described in paragraphs (e)(ii)(A) and (e)(ii)(B) by (y) a
fraction, the numerator of which shall be the number of Outstanding
shares of Flexible Preferred held by such Existing Holder subject to such
Submitted Bid or Submitted Sell Order and the denominator of which shall
be the number of Outstanding shares of Flexible Preferred subject to all
such Submitted Bids and Submitted Sell Orders.
(iii) If, as a result of the procedures described in
paragraph (e)(i) or (e)(ii), any Existing Holder would be entitled or
required to sell, or any Potential Holder would be entitled or required
to purchase on any Auction Date, shares of Flexible Preferred other than
in whole Units, the Auction Agent shall, in such manner as, in its sole
discretion, it shall determine, (x) round up or down the number of shares
of Flexible Preferred to be sold or purchased by any Existing Holder or
Potential Holder on such Auction Date so that the number of shares sold
or purchased by each Existing Holder or Potential Holder on such Auction
Date shall be in whole Units of Flexible Preferred and (y) allocate such
whole Units for purchase among Potential Holders even if such allocation
results in one or more of such Potential Holders purchasing no shares of
Flexible Preferred.
(iv) If Sufficient Clearing Bids have not been made (other
than because all of the Outstanding shares of Flexible Preferred are
subject to Submitted Hold Orders) in an Auction relating to a Short-Term
Dividend Period, a Multiple Quarterly Dividend Period or a Long-Term
Dividend Period, all Submitted Bids and all Submitted Sell Orders shall
be rejected, thus requiring each Existing Holder to continue to hold the
shares of Flexible Preferred held by such Existing Holder immediately
prior to such Auction and the next succeeding Dividend Period will be, in
the case of an Auction relating to a Multiple Quarterly Dividend Period,
a Quarterly Dividend Period, and, in the case of an Auction relating to a
Short-Term Dividend Period or a Long-Term Dividend Period, a Seven-Day
Dividend Period.
(v) If all of the Outstanding shares of Flexible
Preferred are the subject of Submitted Hold Orders, all Submitted Bids
shall be rejected.
(vi) Based on the results of each Auction, the Auction
Agent shall determine the aggregate number of shares of Flexible
Preferred to be purchased and the aggregate number of shares of Flexible
Preferred to be sold by Potential Holders and Existing Holders on whose
behalf each Broker-Dealer submitted Bids or Sell Orders, and, with
respect to each Broker-Dealer, to the extent that such aggregate number
of shares to be purchased and such aggregate number of shares to be sold
differ, determine to which other Broker-Dealer or Broker-Dealers acting
for one or more purchasers such Broker-Dealer shall deliver, or from
which other Broker-Dealer or Broker-Dealers acting for one or more
sellers such Broker-Dealer shall receive, as the case may be, shares of
Flexible Preferred.
(f) Cancelled Auctions. Notwithstanding anything contained
herein to the contrary, if an Auction with respect to a Quarterly
Dividend Period or a Multiple Quarterly Dividend Period is cancelled
because of an event or events not within the control of the Company and
not directly involving the Company or its properties, an Auction will be
held on the first Business Day following the date of such cancelled
Auction that the Auction Agent determines an Auction can be held. The
Applicable Rate for the Dividend Period commencing on the Quarterly
Dividend Payment Date on or immediately prior to the rescheduled Auction
will be the Applicable Rate resulting from such Auction. Unless Existing
Holders who sell Units at the rescheduled Auction make arrangements with
their Agent Member to assure that they will receive unpaid dividends that
accrued prior to the rescheduled Auction, such Existing Holders will not
be entitled to receive dividends on such Units on the Quarterly Dividend
Payment Date following such Auction.
(g) Miscellaneous. An Existing Holder (A) may sell, transfer
or otherwise dispose of shares of Flexible Preferred only in whole Units
and only pursuant to a Bid or Sell Order in accordance with the
procedures described above to or through a Broker-Dealer or to a Person
that has delivered a signed copy of a Master Purchaser's Letter to the
Auction Agent, provided that in the case of all transfers other than
pursuant to Auctions such Existing Holder, its Broker-Dealer or its Agent
Member advises the Auction Agent of such transfer, and (B) shall have the
beneficial ownership of the shares of Flexible Preferred held by it
maintained in book-entry form by the Securities Depository in the account
of its Agent Member, which in turn will maintain records of such Existing
Holder's beneficial ownership. The Company and its Affiliates shall not
submit any Order in any Auction except as set forth in the next sentence.
Any Broker-Dealer that is an Affiliate of the Company may submit Orders
in Auctions but only if such Orders are not for its own account, except
that if such affiliated Broker-Dealer holds shares of Flexible Preferred
for its own account, it must submit a Sell Order in the next Auction with
respect to such shares of Flexible Preferred.
If Sufficient Clearing Bids have been made, or all outstanding
shares of Flexible Preferred are subject to Submitted Hold Orders, with
respect to an Auction held during a Seven-Day Dividend Period, the next
succeeding Dividend Period will be a Short-Term Dividend Period,
otherwise the next succeeding Dividend Period will be a Seven-Day
Dividend Period.
(xiv) "Available Flexible Preferred" shall have the meaning specified
in paragraph (d)(i)(A) of the definition of Auction Procedures.
(xv) "Bid" shall have the meaning specified in paragraph (b)(i) of
the definition of Auction Procedures.
(xvi) "Bidder" shall have the meaning specified in paragraph (b)(i)
of the definition of Auction Procedures.
(xvii) "Bid Excess" shall have the meaning specified in paragraph
(c)(iv)(B)(1) of the definition of Auction Procedures.
(xviii) "Broker-Dealer" shall mean any broker-dealer or other entity
permitted by law to perform the functions required of a Broker-Dealer in
connection with the Auction Procedures that has been selected by the Company
to perform such functions and has entered into a Broker-Dealer Agreement with
the Auction Agent that remains effective.
(xix) "Broker-Dealer Agreement" shall mean an agreement between the
Auction Agent and a Broker-Dealer pursuant to which such Broker-Dealer agrees
to follow the Auction Procedures.
(xx) "Business Day" shall mean a day on which the New York Stock
Exchange is open for trading and which is not a day on which banking
institutions in New York City are authorized or required by law or executive
order to close.
(xxi) "Commercial Paper Dealers" shall mean Kidder, Peabody & Co.
Incorporated and Smith Barney, Harris Upham & Co. Incorporated and their
respective successors or affiliates.
(xxii) "Default Rate" shall have the meaning specified in the second
paragraph of paragraph (a) following these definitions.
(xxiii) "Dividend Payment Date" shall mean each date that dividends on
shares of Flexible Preferred are payable. Such dates shall be (a) the first
days of January, April, July and October with respect to Quarterly Dividend
Periods and Multiple Quarterly Dividend Periods, (b) each seventh Wednesday
following the preceding Dividend Payment Date with respect to Short-Term
Dividend Periods, (c) the Business Day next succeeding the last day of the
Dividend Period, and if payable prior to that date, on a selected day of the
second, third or fourth month (as specified in the related Notice of
Adjustment of Dividend Period) after the commencement of the Dividend Period,
and quarterly thereafter on the same day of each succeeding third month, with
respect to Long-Term Dividend Periods and (d) on the seventh day following the
Business Day next succeeding the date of the Auction giving rise to the
Seven-Day Dividend Period with respect to Seven-Day Dividend Periods.
(xxiv) "Dividend Period" shall mean the initial Dividend Period (date
of initial issuance to September 30, 1993), a Quarterly Dividend Period, a
Multiple Quarterly Dividend Period, a Short-Term Dividend Period, a Long-Term
Dividend Period or a Seven-Day Dividend Period.
If an Auction is not held on an Auction Date for any reason (other
than because of the discontinuation of Auctions due to a failure to pay
dividends or the redemption price when due or the prior call for redemption of
all shares of Flexible Preferred then outstanding), whether or not a Notice of
Adjustment of Dividend Period has been given with respect thereto, the related
Dividend Period will be a Quarterly Dividend Period unless the existing
Dividend Period is a Short-Term Period or a Long-Term Dividend Period, in
either of such cases, the related Dividend Period will be a Seven-Day Dividend
Period.
If the Company does not give a Notice of Adjustment of Dividend
Period with respect to a next succeeding Dividend Period, or gives a Notice of
Revocation with respect thereto, such next succeeding Dividend Period will be
a Quarterly Dividend Period, unless the existing Dividend Period is a
Short-Term Dividend Period or a Long-Term Dividend Period, in either of such
cases, the next succeeding Dividend Period shall be a Short-Term Dividend
Period. In addition, in the event the Company has given a Notice of Adjustment
of Dividend Period with respect to a next succeeding Dividend Period, but
Sufficient Clearing Bids are not made in the related Auction (other than
because all shares of Flexible Preferred are the subject of Submitted Hold
Orders), such next succeeding Dividend Period will, notwithstanding such
Notice of Adjustment of Dividend Period, be a Quarterly Dividend Period,
unless the existing Dividend Period is a Short-Term Dividend Period or a
Long-Term Dividend Period, in either of such cases and in the case of the
failure to receive Sufficient Clearing Bids (other than because all shares of
Flexible Preferred are the subject of Submitted Hold Orders) relating to a
Short-Term Dividend Period, the next succeeding Dividend Period shall be a
Seven-Day Dividend Period and the Company may not again give a Notice of
Adjustment of Dividend Period that specifies a term which is a Multiple
Quarterly Dividend Period or Long-Term Dividend Period (and any such notice
shall be null and void) until Sufficient Clearing Bids have theretofore been
made (or all shares were the subject of Submitted Hold Orders) in an Auction
with respect to a Quarterly Dividend Period or a Short-Term Dividend Period,
as the case may be.
Notwithstanding the foregoing, if the Dividend Payment Date with
respect to any Dividend Period (other than a Seven-Day Dividend Period) is a
day that would result in the number of days in such Dividend Period not being
at least equal to the then current Minimum Holding Period, then such Dividend
Period shall be extended to a date that results in the number of days included
in such Dividend Period being at least equal to the Minimum Holding Period and
dividends payable on the final Dividend Payment Date of such Dividend Period
shall be payable, (i) in respect of a Quarterly Dividend Period or a Multiple
Quarterly Dividend Period, on the first Quarterly Dividend Payment Date next
succeeding such date, and (ii) in respect of a Short-Term Dividend Period or a
Long-Term Dividend Period, on the first day following such date that is next
succeeded by a Business Day.
In addition, notwithstanding the foregoing, in the event of a change
in law altering the Minimum Holding Period, the Board of Directors may adjust
the period of time between Dividend Payment Dates in connection with
Short-Term Dividend Period so as to adjust uniformly the number of days (such
number of days, without giving effect to the adjustments referred to above,
being referred to herein as "Dividend Period Days") in between successive
Dividend Payment Dates commencing after the date of such change in law to
equal or exceed the then current Minimum Holding Period, provided that the
number of Dividend Period Days shall not exceed by more than nine days the
length of such then current Minimum Holding Period and shall be evenly
divisible by seven, and the maximum number of Dividend Period Days, as
adjusted pursuant to these provisions, shall in no event exceed 98 days. Upon
any such change in the number of Dividend Period Days as a result of a change
in law, the Company will give notice of such change to all Existing Holders of
Flexible Preferred.
Although any particular Dividend Payment Date may not occur on the
originally scheduled Dividend Payment Date because of the foregoing
adjustments or because such originally scheduled Dividend Payment Date is not
a Business Day, each succeeding Dividend Payment Date shall be, subject to
such adjustments, the date determined as set forth in this definition of
Dividend Payment Date as if each preceding Dividend Payment Date had occurred
on the respective originally scheduled Dividend Payment Date.
(xxv) "Dividend Period Days" shall have the meaning specified in the
penultimate paragraph under the definition of Dividend Period.
(xxvi) "Dividend Quarter" shall mean the period from the preceding
Dividend Payment Date to the next Dividend Payment Date during a Multiple
Quarterly Dividend Period or a Long-Term Dividend Period in the case where
such Dividend Payment Dates are on the same date of the month and the next
Dividend Payment Date is in the third calendar month after the preceding
Dividend Payment Date.
(xxvii) "Enabling Event" shall mean the designation by the Company of a
Short-Term Dividend Period after such amendments to the Articles as are
necessary to accommodate the payment of dividends on the Flexible Preferred on
a basis other than quarterly have been duly adopted by the Company's
shareholders and the Company has provided the Auction Agent and the
Broker-Dealers with copies of such amendments to the Articles, together with
an opinion of counsel, satisfactory to the Auction Agent and the
Broker-Dealers, to the effect that such amendments have been duly adopted and
filed with the Secretary of State of the State of Illinois and that the
Company's designation of a Dividend Period other than a Quarterly Dividend
Period or a Multiple Quarterly Dividend Period with respect to the Flexible
Preferred will not conflict with or violate the Articles or the laws of
Illinois.
(xxviii) "Existing Holder" shall mean a person who has signed a Master
Purchaser's Letter and is listed as the beneficial owner of shares of Flexible
Preferred in the records of the Auction Agent.
(xxix) "Flexible Preferred" shall mean the shares of Flexible Auction
Rate Class A Preferred Stock, without par value, subject to an Auction on any
Auction Date.
(xxx) "Hold Order" shall have the meaning specified in paragraph
(b)(i) of the definition of Auction Procedures.
(xxxi) "Long-Term Dividend Period" shall mean a period greater than 49
days and either not exceeding 25 years or without end, which (unless it is
without end) contains a number of days evenly divisible by 7. Each Long-Term
Dividend Period shall commence on a Dividend Payment Date and end, unless it
is a Perpetual Dividend Period, on the day next preceding a Dividend Payment
Date.
(xxxii) "Master Purchaser's Letter" shall mean a letter addressed to
the Company, the Auction Agent, a Broker-Dealer and others in which a Person
agrees, among other things, to offer to purchase, purchase, offer to sell
and/or sell shares of Flexible Preferred pursuant to the Auction Procedures.
(xxxiii) "Maximum Applicable Rate" on any date shall mean the lesser of
25% per annum and (a) in the case of a Quarterly Dividend Period, a per annum
rate equal to the product of the 90-day "AA" Composite Commercial Paper Rate
in effect on such date multiplied by the Rate Multiple in effect on such date,
(b) in the case of a Short-Term Dividend Period, a per annum rate equal to the
product of the 60-day "AA" Composite Commercial Paper Rate in effect on such
date multiplied by the Rate Multiple in effect on such date or (c) in the case
of a Multiple Quarterly Dividend Period or a Long-Term Dividend Period, a per
annum rate equal to the product of the Reference Rate in effect on such date
multiplied by the Rate Multiple in effect on such date.
(xxxiv) "Minimum Holding Period" shall mean the minimum holding period
under the federal tax laws of the United States required for corporate
taxpayers to be entitled to claim a deduction with respect to dividends on
preferred stock received by them.
(xxxv) "Moody's" shall mean Moody's Investors Service, Inc. or its
successor.
(xxxvi) "Multiple Quarterly Dividend Period" shall mean a period
greater than 3 months and either not exceeding 25 years or without end, which
(unless it is without end) contains a number of months evenly divisible by 3.
Each Multiple Quarterly Dividend Period shall commence on a Quarterly Dividend
Payment Date and end, unless it is a Perpetual Dividend Period, on the day
next preceding a Quarterly Dividend Payment Date.
(xxxvii) "No Call Period" shall have the meaning specified in the
definition of Notice of Adjustment of Dividend Period.
(xxxviii) "Notice of Adjustment of Dividend Period" shall mean a written
notice by the Company to the Auction Agent and the Securities Depository
(which may be revoked by a Notice of Revocation) given not less than 10 nor
more than 20 days prior to an Auction Date specifying the term of the next
succeeding Dividend Period will be a Multiple Quarterly Dividend Period, a
Long-Term Dividend Period or the initial Short-Term Dividend Period. For any
Auction occurring after the initial Auction, the Company may not give a Notice
of Adjustment of Dividend Period (and any such notice shall be null and void)
unless Sufficient Clearing Bids were made (or all shares of the Flexible
Preferred were subject to Hold Orders) in the last occurring Auction, and full
cumulative dividends on shares of the Flexible Preferred, whether or not
earned or declared payable prior to such Auction Date have been paid in full.
Each Notice of Adjustment of Dividend Period shall state (i) the term thereof
if not a Perpetual Dividend Period, (ii) the length of the period, beginning
on the first day of a Multiple Quarterly Dividend Period or Long-Term Dividend
Period, as the case may be, during which the shares will not be redeemable at
the option of the Company (a "No-Call Period"), subject to any Special
Redemption or Sinking Fund Redemption stated to be applicable during such
No-Call Period as described in clause (vi) or (vii) below; (iii) the premium
per share, if any, that the Company will pay as part of the redemption price
if shares of Flexible Preferred are redeemed by the Company otherwise than
pursuant to a Special Redemption or a Sinking Fund Redemption (the "Redemption
Premium"), provided that no such Redemption Premium will be stated in a Notice
of Adjustment of Dividend Period unless duly authorized by the Board of
Directors and provided, further, that any Redemption Premium may be specified
by the Company to decline over time to not less than 0% in the applicable
Notice of Adjustment of Dividend Period; (iv) the terms, if any, on which the
Applicable Rate for a Multiple Quarterly Dividend Period or Long-Term Dividend
Period, as the case may be, will be adjusted upon the occurrence of specified
events relating to the U.S. federal income tax consequences of the receipt of
dividends on the Flexible Preferred, which terms shall be specified in the
applicable Notice of Adjustment of Dividend Period; (v) the applicable
Broker-Dealer fee for such Auction; (vi) whether or not the Flexible Preferred
will be subject to a Special Redemption at the option of the Company during a
Multiple Quarterly Dividend Period or Long-Term Dividend Period, as the case
may be, and, if so, the applicable Triggering Rate, or the formula or other
basis for determining the applicable Triggering Rate for such Special
Redemption; and (vii) whether or not the Flexible Preferred will be subject to
Sinking Fund Redemption during a Multiple Quarterly Dividend Period or
Long-Term Dividend Period, as the case may be, and the period or periods
within which, and the terms and conditions upon which, the Flexible Preferred
will be redeemed, in whole or in part, pursuant to a Sinking Fund Redemption
obligation, provided that no Sinking Fund Redemption obligation will be stated
in a Notice of Adjustment of Dividend Period unless duly authorized by the
Board of Directors.
If in a Notice of Adjustment of Dividend Period the Company has
specified that the next succeeding Dividend Period will be an initial
Short-Term Dividend Period, such initial Short-Term Dividend Period will end
on a Tuesday specified in such Notice of Adjustment of Dividend Period which
will be no earlier than the 46th day and no later than the eighth Tuesday
following the last day of the preceding Dividend Period (subject to adjustment
for a change in the Minimum Holding Period). Once the Company has exercised
its option to specify an initial Short-Term Dividend Period, each succeeding
Dividend Period shall be either a Short-Term Dividend Period, a Long-Term
Dividend Period or a Seven-Day Dividend Period.
If in a Notice of Adjustment of Dividend Period the Company has
specified a Perpetual Dividend Period and Sufficient Clearing Bids are made in
the Auction relating to such designation (or all shares of Flexible Preferred
are the subject of Submitted Hold Orders); (i) such Perpetual Dividend Period
will be the last Dividend Period, (ii) such Auction will be the final Auction
with respect to the Flexible Preferred, (iii) the services of the Auction
Agent (except in its capacities as dividend disbursement agent, redemption
agent, registrar and transfer agent) and of the Broker-Dealers will end;
(iv) transferability of the shares of Flexible Preferred will not be
restricted to persons who have executed Master Purchaser's Letters; (v) Master
Purchaser's Letters will no longer be required with respect to shares of
Flexible Preferred; (vi) there will be no adjustment to the dividend rate
following the commencement of such Perpetual Dividend Period for payment
failures or otherwise; and (vii) if so stated in the Notice of Adjustment of
Dividend Period, shares of Flexible Preferred will no longer be required to be
transferred in Units during such Perpetual Dividend Period.
(xxxix) "Notice of Revocation" shall mean a telephonic notice given by
the Company to the Auction Agent, the Broker-Dealers and the Security
Depository at or prior to 10 AM on the related Auction Date, and promptly
confirmed in writing, that the Company has revoked the Notice of Adjustment of
Dividend Period previously given by it with respect to such Auction Date.
(xl) "Order" shall have the meaning specified in paragraph (b)(i) in
the definition of Auction Procedures.
(xli) "Outstanding" shall mean, as of any date, shares of Flexible
Preferred theretofore issued by the Company except, without duplication,
(A) any shares of Flexible Preferred theretofore cancelled or delivered to the
Auction Agent for cancellation, or redeemed by the Company or as to which a
notice of redemption shall have been given by the Company, (B) any shares of
Flexible Preferred as to which the Company or any Affiliate thereof (other
than an Affiliate which is a Broker-Dealer) shall be an Existing Holder and
(C) any shares of Flexible Preferred represented by any certificate in lieu of
which a new certificate has been executed and delivered by the Company.
(xlii) "Perpetual Dividend Period" shall mean a Multiple Quarterly
Dividend Period or a Long-Term Dividend Period without end.
(xliii) "Person" shall mean and include an individual, a partnership, a
corporation, a trust, an unincorporated association, a joint venture or other
entity or a government or any agency or political subdivision thereof.
(xliv) "Post-Enabling Event" shall mean the failure of an Auction
related to a Short-Term Dividend Period or a Long-Term Dividend Period because
Sufficient Clearing Bids do not exist (other than because all of the
outstanding shares of Flexible Preferred are the subject of Submitted Hold
Orders) or an Auction is not held on an Auction Date for any reason (other
than because of a discontinuation of Auctions that results in the Applicable
Rate becoming the Default Rate).
(xlv) "Potential Holder" shall mean any Person, including any
Existing Holder, (A) who shall have executed a Master Purchaser's Letter and
(B) who may be interested in acquiring shares of Flexible Preferred (or, in
the case of an Existing Holder, additional shares of Flexible Preferred).
(xlvi) "Quarterly Dividend Payment Date" shall mean the first days of
January, April, July and October.
(xlvii) "Quarterly Dividend Period" shall mean a period of 3 months.
Each Quarterly Dividend Period shall commence on a Quarterly Dividend Payment
Date and end on the day next preceding the next succeeding Quarterly Dividend
Payment Date.
(xlviii) "Rate Multiple" shall mean the percentage, determined as set
forth below, based on the prevailing rating of the Flexible Preferred in
effect at the close of business on the Business Day preceding the applicable
Auction Date (each Rate Multiple appearing in the below table opposite a
prevailing rating being referred to as the "Original Rate Multiple" for such
prevailing rating):
Rate
Prevailing Ratings Multiple
AA/aa or Above 125%
A/a 150%
BBB/baa 200%
Below BBB/baa 250%
Notwithstanding the foregoing, with respect to any Auction Date, (i) the
Company may, by telephonic and written notice to the Auction Agent by 10 AM
New York City time, on such Auction Date, increase the Rate Multiple to be in
effect on such Auction Date, such increased Rate Multiple to remain in effect
thereafter unless and until the Company gives notice, as provided in
clauses (i) and (ii) of this paragraph, to the Auction Agent and, if required,
the Broker-Dealers of a subsequent change to such Rate Multiple, and (ii) the
Company may, by telephonic and written notice to the Auction Agent and the
Broker-Dealers delivered not less than 10 days prior to any Auction Date,
decrease the Rate Multiple to be in effect on such Auction Date (but in no
event to a Rate Multiple for any prevailing rating which is less than the
Original Rate Multiple for such prevailing rating), such decreased Rate
Multiple to remain in effect thereafter unless and until the Company gives
notice, as provided in clauses (i) and (ii) of this paragraph, to the Auction
Agent and if required, the Broker-Dealers of a subsequent change to such Rate
Multiple; provided that in each case there has been delivered to the Company
and the Auction Agent an opinion of counsel to the Company to the effect that
the use of such higher or lower, as the case may be, Rate Multiple will not
adversely affect the tax treatment of the Flexible Preferred.
For purposes of this definition, the "prevailing rating" of Flexible
Preferred shall be (i) AA/aa or Above, if the Flexible Preferred has a rating
of AA- or better by S&P and aa3 or better by Moody's or the equivalent of both
of such ratings by such agencies or a substitute rating agency or agencies
selected as provided below, (ii) if not AA/aa or Above, then A/a, if the
Flexible Preferred has a rating of A- or better by S&P and a3 or better by
Moody's or the equivalent of both of such ratings by such agencies or a
substitute rating agency or agencies selected as provided below, (iii) if not
AA/aa or Above or A/a, then BBB/baa, if the Flexible Preferred has a rating of
BBB- or better by S&P and baa3 or better by Moody's or the equivalent of both
of such ratings by such agencies or a substitute rating agency or agencies
selected as provided below, and (iv) if not AA/aa or Above, A/a or BBB/baa,
then Below BBB/baa. Accordingly, for purposes of the foregoing, the
"prevailing rating" of the Flexible Preferred will be based upon the lower of
the two ratings provided by S&P and Moody's or a substitute rating agency or
agencies. The Company shall take all reasonable action necessary to enable S&P
and Moody's to provide a rating for the Flexible Preferred. If either or both
of S&P or Moody's shall not make such a rating available, the Company shall
select a nationally recognized statistical rating organization (as that term
is used in the rules and regulations of the Commission under the Securities
Exchange Act of 1934, as amended) or two nationally recognized statistical
rating organizations to act as substitute rating agency or substitute rating
agencies, as the case may be.
(xlix) "Reference Rate" shall mean for Multiple Quarterly Dividend
Periods and Long-Term Dividend Periods having a term (i) fewer than 270 days,
the Applicable "AA" Composite Commercial Paper Rate, (ii) 270 days or more and
less than one year, the higher of the 270-day Applicable "AA" Composite
Commercial Paper Rate and the one-year Applicable Treasury Rate and (iii) one
year or more, the Applicable Treasury Rate.
(l) "S&P" shall mean Standard & Poor's Corporation or its
successor.
(li) "Securities Depository" shall mean The Depository Trust Company
and its successors and assigns or any other securities depository selected by
the Company which agrees to follow the procedures required to be followed by
such securities depository in connection with shares of Flexible Preferred.
(lii) "Sell Excess" shall have the meaning specified in paragraph
(c)(iv)(C)(1) of the definition of Auction Procedures.
(liii) "Sell Order" shall have the meaning specified in paragraph
(b)(i) of the definition of Auction Procedure.
(liv) "Seven-Day Dividend Period" shall mean a period of 7 days. Each
Seven-Day Dividend Period shall commence on a Dividend Payment Date and end on
the day next preceding a Dividend Payment Date.
(lv) "Short-Term Dividend Period" shall mean a period of 49 days or,
in the event the Minimum Holding Period shall exceed 49 days, a period
designated by the Company which is not greater than the lesser of (a) the
length of the Minimum Holding Period plus 9 days and (b) 98 days, which
contains a number of days evenly divisible by 7. Each Short-Term Dividend
Period shall commence on a Dividend Payment Date and end on the day next
preceding a Dividend Payment Date.
(lvi) "Sinking Fund Redemption" shall have the meaning specified in
paragraph (e) following these definitions.
(lvii) "Special Redemption" shall have the meaning specified in
paragraph (b) following these definitions.
(lviii) "Submission Deadline" shall mean 1 PM, New York City time, on
any Auction Date or such other time on any Auction Date by which
Broker-Dealers are required to submit Orders to the Auction Agent as specified
by the Auction Agent from time to time.
(lix) "Submitted Bid" shall have the meaning specified in paragraph
(d)(i) of the definition of Auction Procedures.
(lx) "Submitted Hold Order" shall have the meaning specified in
paragraph (d)(i) of the definition of Auction Procedures.
(lxi) "Submitted Order" shall have the meaning specified in paragraph
(d)(i) of the definition of Auction Procedures.
(lxii) "Submitted Sell Order" shall have the meaning specified in
paragraph (d)(i) of the definition of Auction Procedures.
(lxiii) "Substitute Commercial Paper Dealer" shall mean any commercial
paper dealer (other than the Commercial Paper Dealers), the principal office
of which is located in New York City, that is a nationally recognized leading
dealer in the domestic commercial paper market, provided that no such dealer
may be an affiliate of the Company.
(lxiv) "Sufficient Clearing Bids" shall have the meaning specified in
paragraph (d)(i)(B) of the definition of Auction Procedures.
(lxv) "Triggering Rate" shall have the meaning specified in paragraph
(b) following these definitions.
(lxvi) "Unit" shall mean a unit of Flexible Preferred consisting of
1,000 shares of Flexible Preferred.
(lxvii) "Winning Bid Rate" shall have the meaning specified in
paragraph (d)(i)(C) of the definition of Auction Procedures.
[End of Definitions]
(a) The rate of dividend shall be 2.45% per annum
until September 30, 1993. Thereafter the rate
of dividend for each subsequent Dividend Period
(which shall be a Quarterly Dividend Period
prior to the Enabling Event and a Short-Term
Dividend Period after the Enabling Event,
unless a Notice of Adjustment of Dividend
Period has been given which has not been
revoked by a Notice of Revocation or a
Post-Enabling Event has occurred, in which
case, the Dividend Period shall be as specified
in such Notice of Adjustment of Dividend Period
or a Seven-Day Dividend Period if a
Post-Enabling Event has occurred), except as
provided in the next succeeding paragraph,
shall be the rate that the Auction Agent
advises the Company is the Applicable Rate for
such Dividend Period resulting from the
implementation of the Auction Procedures.
Except during a Perpetual Dividend Period, in
the event of the failure by the Company to pay
to the Auction Agent by 12 Noon, New York
City time, (i) on the Business Day next
preceding any Dividend Payment Date, the full
amount of any dividend (whether or not earned
or declared) to be paid on such Dividend
Payment Date on any share or (ii) on the
Business Day next preceding any redemption
date, the full redemption price to be paid on
such redemption date for any share after a
notice of redemption has been (or should have
been) given, and any such failure shall not
have been cured within three Business Days
thereafter by payment to the Auction Agent, by
12 Noon, New York City time, on such third
Business Day, of the full amount of all such
dividends or the full amount of the aggregate
redemption price for the shares that have been
(or should have been) called for redemption,
plus accrued and unpaid dividends from the date
of redemption to the date of such cure, as the
case may be, then until such time as the full
amount due shall have been paid to the Auction
Agent, (a) Auctions will be discontinued and
(b) the Applicable Rate for each Dividend
Period, or, in the case of a Multiple Quarterly
Dividend Period or a Long-Term Dividend Period,
each Dividend Quarter, commencing on or after
any such Dividend Payment Date (or redemption
date, as the case may be) shall be equal to the
Default Rate for such Dividend Period or
Dividend Quarter. The foregoing shall continue
until, at least one Business Day prior to a
Dividend Payment Date, the full amount of any
dividends (whether or not earned or declared)
payable on each Dividend Payment Date prior to
such Dividend Payment Date, and the full amount
of any redemption price then or theretofore due
shall have been paid to the Auction Agent, and
thereupon, (a) Auctions shall resume on the
terms stated herein and (b) with respect to a
Multiple Quarterly Dividend Period or a
Long-Term Dividend Period, dividend payments
shall resume at the Applicable Rate established
by the Auction with respect to such Multiple
Quarterly Dividend Period or Long-Term Dividend
Period, as the case may be. With respect to any
such failure, the "Default Rate" will be the
higher of 250% of the 90-day "AA" Composite
Commercial Paper Rate determined as of the date
of such failure (unless such failure occurs
during a Short-Term Dividend Period or a
Long-Term Dividend Period, in either of such
cases 250% of the 60-day "AA" Composite
Commercial Paper Rate determined as of the date
of such failure) and (i) if the Company has
failed timely to pay dividends in respect of a
Quarterly Dividend Period, Multiple Quarterly
Dividend Period, Short-Term Dividend Period,
Long-Term Dividend Period, or Seven-Day
Dividend Period, the dividend rate in effect
for the Quarterly Dividend Period, Multiple
Quarterly Dividend Period, Short-Term Dividend
Period, Long-Term Dividend Period or Seven-Day
Dividend Period, as the case may be, in respect
of which such failure occurred or (ii) if the
Company has failed timely to pay the redemption
price of shares called for redemption, the
dividend rate in effect for the Dividend Period
in which the applicable redemption was to have
occurred; but in no event higher than 25% per
annum.
Notwithstanding the occurrence of any payment
failure described in the preceding paragraph,
the dividend rate with respect to a Perpetual
Dividend Period will not change.
The amount of dividends per share of the
Flexible Preferred payable for each Quarterly
Dividend Period and for each Dividend Quarter
during any Multiple Quarterly Dividend Period
or Long-Term Dividend Period shall be computed
by multiplying the Applicable Rate for such
Quarterly Dividend Period, Multiple Quarterly
Dividend Period or Long-Term Dividend Period,
as applicable, by $100 per share ($100,000 per
Unit) and dividing the amount so obtained by 4.
The amount of dividends per share of the
Flexible Preferred payable for the initial
Dividend Period and each Short-Term Dividend
Period, Seven-Day Dividend Period and each
Dividend Period during a Long-Term Dividend
Period (other than a Dividend Quarter) shall be
computed by multiplying the Applicable Rate for
each such Dividend Period by a fraction, the
numerator of which shall be the number of days
in the Dividend Period that such share was
outstanding and the denominator of which shall
be 360 and multiplying the amount so obtained
by $100 per share ($100,000 per Unit).
Each dividend, other than with respect to a
Perpetual Dividend Period (for which the Board
of Directors may establish a different record
date) shall be payable to the holder or holders
of record of the Flexible Preferred as of the
close of business on the Business Day
immediately preceding the applicable Dividend
Payment Date. Dividends in arrears for any past
Dividend Period (and for any past Dividend
Quarter during a Multiple Quarterly Dividend
Period or a Long-Term Dividend Period) may be
declared and paid at any time, on a regular
Dividend Payment Date or otherwise, to the
holder or holders of record of the Flexible
Preferred as of the applicable record date
fixed by the Board of Directors, which shall
not be more than 15 days prior to the date
fixed for the payment of such dividends. Any
dividend payment made on shares of Flexible
Preferred shall first be credited against the
dividends accrued with respect to the earliest
Dividend Period (or, if applicable, the
earliest Dividend Quarter) for which dividends
have not been paid.
(b) At the option of the Company, shares of
Flexible Preferred may be redeemed out of funds
legally available therefor, in whole or in
part, in whole Units only, (i) with respect to
a Quarterly Dividend Period, a Short-Term
Dividend Period or a Seven-Day Dividend Period,
on any Dividend Payment Date and (ii) with
respect to a Multiple Quarterly Dividend Period
or a Long-Term Dividend Period, on any Dividend
Payment Date on or after the expiration of any
applicable No-Call Period specified by the
Company in the related Notice of Adjustment of
Dividend Period, in each case at a redemption
price equal to the sum of (a) $100,000 per Unit
($100 per share), (b) accrued and unpaid
dividends on the shares subject to redemption
to the date fixed for redemption and (c) with
respect to Multiple Quarterly Dividend Periods
or Long-Term Dividend Periods, the Redemption
Premium, if any, in effect on the date of
redemption.
Notwithstanding any applicable No-Call Period,
in the event that in any Notice of Adjustment
of Dividend Period specifying a Multiple
Quarterly Dividend Period or a Long-Term
Dividend Period, the Company elects that a
Special Redemption provision will be
applicable, then, if Sufficient Clearing Bids
are made in an Auction relating to such
Multiple Quarterly Dividend Period or Long-Term
Dividend Period, as the case may be, but the
Applicable Rate for such Multiple Quarterly
Dividend Period or Long-Term Dividend Period,
as the case may be, equals or exceeds any rate
(the "Triggering Rate") specified in, or
determinable from a formula or description
contained in, such Notice of Adjustment of
Dividend Period on the date of determination of
such Applicable Rate, the Company may, as its
option, redeem (a "Special Redemption") the
Flexible Preferred in whole but not in part, at
a redemption price equal to $100,000 per Unit
($100 per share) plus accrued and unpaid
dividends to the date fixed for redemption, on
any date during the 10-day period commencing on
the day which is 46 days (or in the event of a
change in law lengthening the Minimum Holding
Period, the first day after the expiration of
such Minimum Holding Period) following the
first day of such Multiple Quarterly Dividend
Period or Long-Term Dividend Period, as the
case may be. Notice of exercise of such option
must be given within two Business Days after
the date of the Auction establishing such
Applicable Rate by written or telephonic notice
to the Auction Agent and the Securities
Depository.
If the Company shall duly give notice of
redemption, and the Company shall have
deposited a sum sufficient to redeem the shares
of Flexible Preferred as to which notice of
redemption has been given in trust with the
Auction Agent, with irrevocable instructions
and authority to pay the redemption price to
the holders thereof, or if no such deposit is
made, then upon such date fixed for redemption
(unless the Company shall default in making
payment of the redemption price), all rights of
holders with respect to the shares so called
for redemption shall cease and terminate,
except the right of the holders of such shares
to receive the redemption price thereof, but
without interest, and such shares shall no
longer be deemed to be outstanding for any
purpose. The Company shall be entitled to
receive, from time to time, the interest, if
any, earned on such money deposited with the
Auction Agent, and the holders of any shares so
redeemed shall have no claim to any such
interest. Any funds so deposited which are
unclaimed at the end of six years from such
redemption date shall, at the request of the
Company, be repaid to the Company, after which
the Auction Agent shall be relieved of all
responsibility to the holders of the shares of
Flexible Preferred so called for redemption and
such holders shall look only to the Company for
payment thereof.
So long as shares of Flexible Preferred are
held for record by the nominee of the
Securities Depository, the redemption price for
such shares will (unless the Company shall
default in making payment of the redemption
price) be paid to the Securities Depository on
the redemption date.
If shares of Flexible Preferred are called for
redemption by the Company, unless the Company
shall default in making payment of the
redemption price, the dividend rate for such
shares until the commencement of the next
Dividend Period and for each subsequent Period
until the redemption date shall be the
Applicable Rate in effect on the date the
notice of redemption is given.
(c) The amount payable in event of involuntary
liquidation shall be $100 per share ($100,000
per Unit), plus accrued dividends.
(d) The amount payable in event of voluntary
liquidation shall be $100 per share ($100,000
per Unit), plus accrued dividends.
(e) In the event that in any Notice of Adjustment
of Dividend Period specifying a Multiple
Quarterly or a Long-Term Dividend Period, the
Company elects that Sinking Fund Redemption
provisions will be applicable to the Flexible
Preferred, then, during such Multiple Quarterly
Dividend Period or Long-Term Dividend Period,
as the case may be, the Company will redeem (a
"Sinking Fund Redemption"), out of funds
legally available therefor, on each Dividend
Payment Date specified in such Notice of
Adjustment of Dividend Period, the number or
percentage of shares of Flexible Preferred (in
whole Units only, unless a Perpetual Dividend
Period) set forth in such Notice of Adjustment
of Dividend Period, at a redemption price equal
to the sum of (a) $100,000 per Unit ($100 per
share) and (b) accrued and unpaid dividends on
the shares subject to redemption of the date
fixed for redemption. If so provided in the
Notice of Adjustment of Dividend Period, the
Company may, at its option, on such Dividend
Payment Date, redeem (also a "Sinking Fund
Redemption") such additional number or
percentage of shares (in whole Units only,
unless a Perpetual Dividend Period) as may be
specified in such Notice of Adjustment of
Dividend Period at such redemption price. The
right to make such additional sinking fund
redemption in each period will, unless
otherwise specified in such Notice of
Adjustment of Dividend Period, be
noncumulative. If so specified in the Notice of
Adjustment of Dividend Period, any mandatory
Sinking Fund Redemption requirement will be
subject to decrease, at the election of the
Company, by the application thereto (at
$100,000 per Unit or $100 per share) of any
Flexible Preferred theretofore purchased,
redeemed or otherwise acquired (other than
through the mandatory Sinking Fund Redemption
requirement) which have not previously been
applied in reduction of any mandatory Sinking
Fund Redemption requirement.
PREFERENCE STOCK
Provision for Division Into and Issue in Series of Preference Stock and
Grant of Authority to Board of Directors
The shares of the Preference Stock may be divided into and issued in
series. Each series shall be designated so as to distinguish the shares
thereof from the shares of all other series and classes and all shares of the
Preference Stock irrespective of series shall be identical except as to the
following relative rights and preferences in respect of any or all of which
there may be variations between different series and authority is hereby
expressly vested in the Board of Directors to the extent that series are not
established by the Articles of Incorporation and the variations and the
relative rights and preferences as between series fixed and determined
therein, to establish series and to fix and determine the following relative
rights and preferences of the shares thereof in accordance with the provisions
of the Business Corporation Act of Illinois applicable thereto:
(a) The rate of dividend;
(b) The price at and the terms and conditions on
which shares may be redeemed;
(c) The amount payable upon shares in event of
involuntary liquidation;
(d) The amount payable upon shares in event of
voluntary liquidation;
(e) Sinking fund provisions for the redemption or
purchase of shares (the term "sinking fund" as
used herein, including any analogous fund,
however designated);
(f) The terms and conditions on which shares may be
converted, if the shares of any series are
issued with the privilege of conversion.
The Board of Directors is hereby authorized to issue and sell all
the authorized and unissued shares of Preference Stock as shares of any series
which shall have been duly established, and in the event that the Company
shall acquire, by purchase or redemption or otherwise, any issued shares of
its Preference Stock of any series, the Board of Directors may resell or
convert and sell, in their discretion, any shares so acquired as shares of the
same or of any other series of Preference Stock which shall have been duly
established.
Shares of any series of Preference Stock, without par value, may be
issued for such consideration, not less than the aggregate preferential amount
payable upon such shares in the event of involuntary liquidation, as may be
fixed by the Board of Directors prior to the time of such issuance and, except
as otherwise determined by the Board of Directors in accordance with the
provisions of the Business Corporation Act of Illinois applicable thereto, the
entire amount of such consideration shall be stated capital.
General Provisions
The following provisions shall apply to all shares of the
Preference Stock irrespective of series:
(A) The shares of Preference Stock shall be subordinate to the
Preferred Stock and the Class A Preferred Stock but in preference to the
Common Stock as to the payment of dividends. The holders of the Preference
Stock of each series shall be entitled to receive dividends payable quarterly
on the first day of January, April, July and October of each year, when and as
declared by the Board of Directors, at such rates as shall be determined for
the respective series, from the date upon which such shares shall have been
originally issued, before any dividends shall be declared or paid upon or set
apart for the Common Stock or any other stock of the Company not having
preference over the Preference Stock as to payment of dividends. Such
dividends shall be cumulative so that if for any dividend period or periods
dividends shall not have been paid or declared and set apart for payment upon
all outstanding Preference Stock at the rates determined for the respective
series, the deficiency shall be fully paid, or declared and set apart for
payment, before any dividends shall be declared or paid upon the Common Stock
or any other stock of the Company not having preference over the Preference
Stock as to payment of dividends. Dividends shall not be declared and set
apart for payment, or paid, on the Preference Stock of any one series, for any
dividend period, unless dividends have been or are contemporaneously declared
and set apart for payment or paid on the Preference Stock of all series for
all dividend periods terminating on the same or an earlier date.
(B) When full cumulative dividends as aforesaid upon the Preference
Stock of all series then outstanding for all past dividend periods and for the
current dividend periods shall have been paid or declared and set apart for
payment, the Board of Directors may declare dividends on the Common Stock or
any other stock over which the Preference Stock has a preference as to payment
of dividends, and no holders of any series of Preference Stock as such shall
be entitled to share therein.
(C) The shares of Preference Stock shall be subordinate to the
Preferred Stock and the Class A Preferred Stock but in preference to the
Common Stock upon any dissolution, liquidation or winding up of the Company,
whether voluntary or involuntary. Upon any such dissolution, liquidation or
winding up of the Company, whether voluntary or involuntary, the holders of
Preference Stock of each series, without any preference of the shares of any
series of Preference Stock over the shares of any other series of Preference
Stock, shall be entitled to receive out of the assets of the Company, whether
capital, surplus or other, before any distribution of the assets to be
distributed shall be made to the holders of Common Stock or of any other stock
not having preference as to assets over the Preference Stock, the amount
determined to be payable on the shares of such series in the event of
voluntary or involuntary liquidation, as the case may be. In case the assets
shall not be sufficient to pay in full the amounts determined to be payable on
all the shares of Preference Stock in the event of voluntary or involuntary
liquidation, as the case may be, then the assets available for such payment
shall be distributed ratably among the holders of the Preference Stock of all
series in accordance with the amounts determined to be payable on the shares
of each series, in the event of voluntary or involuntary liquidation, as the
case may be, in proportion to the full preferential amounts to which they are
respectively entitled. After payment to the holders of the Preference Stock of
the full preferential amounts hereinbefore provided for, the holders of the
Preference Stock as such shall have no right or claim to any of the remaining
assets of the Company, either upon any distribution of such assets or upon
dissolution, liquidation or winding up, and the remaining assets to be
distributed, if any, upon a distribution of such assets or upon dissolution,
liquidation or winding up, may be distributed, subject to the laws of the
State of Illinois and the Articles of Incorporation, among the holders of the
Common Stock or of any other stock over which the Preference Stock has
preference as to assets. Without limiting the right of the Company to
distribute its assets or to dissolve, liquidate or wind up in connection with
any sale, merger, or consolidation, the sale of all the property of the
Company to, or the merger or consolidation of the Company into or with any
other corporation shall not be deemed to be a distribution of assets or a
dissolution, liquidation or winding up for the purposes of this paragraph.
(D) At the option of the Board of Directors of the Company, the
Company may redeem any series of Preference Stock determined to be redeemable,
or any part of any series, at any time at the redemption price determined for
such series; provided, however, that not less than thirty nor more than sixty
days previous to the date fixed for redemption a notice of the time and place
thereof shall be given to the holders of record of the Preference Stock so to
be redeemed, by mail or publication, in such manner as may be prescribed by
the Bylaws of the Company or by resolution of the Board of Directors; and,
provided further, that in every case of redemption of less than all of the
outstanding shares of any one series of Preference Stock, the shares of such
series to be redeemed shall be chosen by lot in such manner as may be
prescribed by resolution of the Board of Directors. At any time after notice
of redemption has been given in the manner prescribed by the Bylaws of the
Company or by resolution of the Board of Directors to the holders of stock so
to be redeemed, the Company may deposit or may cause its nominee to deposit,
the aggregate redemption price with some bank or trust company named in such
notice, payable on the date fixed for redemption as aforesaid and in the
amounts aforesaid to the respective orders of the holders of the shares so to
be redeemed, on endorsement to the Company or its nominee or otherwise, as may
be required, and upon surrender of the certificates for such shares. Upon the
deposit of said money as aforesaid, or if no such deposit is made, upon said
redemption date (unless the Company defaults in making payment of the
redemption price as set forth in such notice), such holders shall cease to be
shareholders with respect to said shares and from and after the making of said
deposit, or if no such deposit is made, after the redemption date (the Company
not having defaulted in making payment of the redemption price as set forth in
such notice), the said holders shall have no interest in or claim against the
Company or its nominee with respect to said shares, but shall be entitled only
to receive said moneys on the date fixed for redemption as aforesaid from said
bank or trust company, or if no such deposit is made, from the Company,
without interest thereon, upon endorsement (if required) and surrender of the
certificates as aforesaid.
If such deposit shall be made by a nominee of the Company as
aforesaid, such nominee shall upon such deposit become the owner of the shares
with respect to which such deposit was made and certificates of stock may be
issued to such nominee in evidence of such ownership.
In case the holder of any such Preference Stock shall not,
within six years after said deposit, claim the amount deposited as above
stated for the redemption thereof, the Depositary shall upon demand pay over
to the Company such amounts so deposited and the Depositary shall thereupon be
relieved from all responsibility to the holder thereof.
Nothing herein contained shall limit any legal right of the
Company to purchase any shares of the Preference Stock.
(E) At all meetings of the shareholders of the Company, the holders
of the Preference Stock shall be entitled to one vote for each share of such
Preference Stock held by them respectively.
(F) So long as any shares of the Preference Stock are outstanding,
no amendment to the Articles of Incorporation shall be adopted without the
affirmative vote of the holders of at least 66-2/3% of the shares of
Preference Stock outstanding at the time of the adoption of such amendment,
which would either (a) create any class of shares preferred as to dividends or
assets over the Preference Stock, or (b) change the designations, preferences,
qualifications, limitations, restrictions or other special or relative rights
of the then outstanding Preference Stocks, provided however, that nothing in
this paragraph contained shall authorize the adoption of any amendment of the
Articles of Incorporation by the vote of the holders of a less number of
shares of Preference Stock, or of any other class of stock, or of all classes
of stock, than is required for the adoption of such amendment by the laws of
the State of Illinois at that time applicable thereto.
COMMON STOCK
There shall be a class of stock of the Company designated Common
Stock and each share of Common Stock shall be equal to every other share of
said stock in every respect.
At all meetings of the shareholders of the Company the holders of
the Common stock shall be entitled to one vote for each share of such Common
Stock held by them respectively.
Limitation of Preemptive Rights of Holders of
Preferred, Class A Preferred, Preference and Common Stock
No holder of the shares of the capital stock of any class of the
Company shall have any preemptive or preferential right of subscription for or
to purchase any shares of any class of the capital stock of the Company,
whether now or hereafter authorized, or any bonds, debentures or other
obligations or rights or options convertible into or exchangeable for or
entitling the holder or owner to subscribe for or purchase any shares of the
capital stock of the Company, other than such right or rights, if any, and at
such price as the Board of Directors in its discretion, from time to time may
determine, and the Board of Directors may issue such shares of stock, bonds,
debentures, obligations, rights or options without offering the same in whole
or in part to the shareholders of the Company. Should the Board of Directors
as to any portion of the shares of the Company, whether now or hereafter
authorized, or any such bonds, debentures, obligations, rights or options,
offer the same to the shareholders, such offer shall not constitute a waiver
or release of the right of the Board of Directors subsequently to dispose of
other portions thereof without so offering the same to the shareholders.
ARTICLE 4. (Deleted)
ARTICLE 5. (Deleted)
ARTICLE 6. The location of the principal office is the City of Peoria,
County of Peoria, and State of Illinois.
ARTICLE 7. The duration of the corporation shall be perpetual.
ARTICLE 8. The number of the members of the Board of Directors shall be
fixed by the Bylaws of the corporation and shall not be less than three.
Except to the extent otherwise provided by law, vacancies in the Board of
Directors arising between meetings of shareholders, by reason of an increase
in the number of directors or otherwise, may be filled by a majority of
directors then in office and any director so selected shall serve until the
next annual meeting of shareholders. A majority of the outstanding shares
represented in person or by proxy shall constitute a quorum at a meeting of
shareholders; provided however, that at any such meeting a lower percentage
(but not less than one-third) of the outstanding shares shall constitute a
quorum, if, prior to such meeting, such lower percentage has been determined
as sufficient for such purpose by the vote in person or by proxy of a majority
of the outstanding shares at any annual meeting of shareholders or at any
special meeting thereof called for that purpose and such determination has not
been modified or revoked by a subsequent determination of shareholders
similarly voted.
<PAGE>
[DESCRIPTION] EXHIBIT (3)a - CILCO BYLAWS
BYLAWS
of
CENTRAL ILLINOIS LIGHT COMPANY
As Amended Effective April 26, 1994
ARTICLE I: LOCATION OF OFFICES
Section 1 - Principal Office: The principal office of the Company shall
be in the City of Peoria, Illinois, at such place as the Board of
Directors may designate.
Section 2 - Other Offices: The Company may have and maintain such other
offices as the Board of Directors may deem expedient.
ARTICLE II: CORPORATE SEAL
Section 1 - The Company shall have a corporate seal with the name of the
Company described about a circle and the words "Incorporated 1913
Illinois" within such circle.
ARTICLE III: FISCAL YEAR
Section 1 - The fiscal year of the Company shall begin with the first day
of January and end with the thirty-first day of December of each year.
ARTICLE IV: SHAREHOLDERS' MEETINGS
Section 1 - Annual Meeting: The annual meeting of the shareholders shall
be held at the principal office of the Company on the fourth Tuesday of
April in each year if not a legal holiday, and if a legal holiday, then
on the next day following which is not a legal holiday nor a Saturday or
a Sunday. Such annual meeting shall commence at a time determined by the
Board of Directors specified in a notice of such annual meeting sent to
shareholders, which shall not be earlier than 9:00 AM, nor later than
3:00 PM, local time at the place of the meeting.
Section 2 - Special Meetings: Unless otherwise provided by law, special
meetings of the shareholders may be called by the Board of Directors, by
the Chairman of the Board, by the President, by the Secretary under the
written direction of a majority of the Directors, or by shareholders
holding not less than one-fifth of the total capital stock. Such meetings
shall be held at the principal office of the Company, or if the Board of
Directors or the Chairman of the Board or the President shall designate
another place, then at such other place as may be so designated.
Section 3 - Notices: Written notice of either annual or special meetings
shall be mailed at least ten days prior to the meeting, or in the case of
a merger, consolidation, share exchange, dissolution or sale, lease or
exchange of assets at least twenty days prior to the meeting, to each
shareholder at his last known address as the same appears on the stock
books of the Company. Such notice shall specify the time and place of
holding the meeting and shall further specify the dates for closing and
opening the stock transfer books of the Company, provided the Board of
Directors shall have ordered them closed.
Notices of special meetings shall further specify the purpose
for which the meeting is called and no other business shall be transacted
at such special meeting.
No notice of a special meeting shall be necessary provided
every shareholder shall have signed a written waiver of such notice or
shall be present or represented by proxy at the meeting.
No notice of the holding of an adjourned meeting shall be
necessary.
Section 4 - Quorum: The holders of a majority of the stock of the
Company issued and outstanding shall constitute a quorum for the
transaction of business at any meeting but a less number may convene and
adjourn.
Section 5 - Voting: Shareholders may vote at all meetings in person or
by proxy.
At all meetings, each share of stock shall be entitled to one
vote on all questions and a majority of the votes cast at any such
meeting shall be sufficient for the adoption or rejection of any question
presented, unless otherwise provided by law.
In the election of Directors, each shareholder shall have the
right to cast as many votes in the aggregate as shall equal the number of
shares of stock held by such shareholder, multiplied by the number of
Directors to be then elected, and each shareholder may cast the whole
number of votes for one candidate or distribute them among two or more
candidates.
ARTICLE V: DIRECTORS
Section 1 - Number: The Board of Directors of this Company shall consist
of ten members.
Section 2 - Election: The Directors shall be elected annually at the
annual meeting of the shareholders, provided that in the event of failure
to hold such meeting or to hold said election thereat, it may be held at
any special meeting of shareholders called for that purpose.
Unless sooner terminated by any other provision hereof, the
term of any director shall automatically expire at the first annual
meeting of the shareholders following his or her attainment of the age of
67. Provided, however, that the term of any director serving in such
capacity and over the age of 60 on August 20, 1993 shall automatically
expire at the first annual meeting of the shareholders following his or
her attainment of the age of 70. No Director who is an officer or
full-time employee of the Company, except the Chief Executive Officer,
shall be re-elected to the Board after retirement. The Chief Executive
Officer may be re-elected as a Director for one full term after
retirement.
The Chief Executive Officer may appoint inspectors or judges
for such election who shall pass upon the validity of all proxies,
receive and count the votes cast, and make a report thereof to the
shareholders' meeting.
Section 3 - Term of Office: The Directors shall hold office from the
date of their election until the next succeeding annual meeting or until
their successors are elected and shall qualify.
Section 4 - Vacancies: Any vacancy occurring in the Board of Directors
and any directorship to be filled by reason of an increase in the number
of Directors shall be filled in the manner provided by the laws of
Illinois then in effect.
Section 5 - Fees: Directors shall be reimbursed for expenses, if any,
incurred in attending meetings of the Board of Directors and in otherwise
performing duties of such Directors. Directors' fees shall be fixed by
the Board of Directors, provided that any Director who receives
compensation from the Company as an officer or full-time employee shall
not receive Director's fees.
Section 6 - Executive or Other Committees: The Board of Directors may
authorize appointment of an Executive Committee or other committees of
the Board as the Board of Directors determines to be desirable, and may
fix the number of members and designate the chairman of each such
committee. The powers, terms of office, and method of filing vacancies
shall be as defined in the resolution or resolutions of the Board of
Directors relating to the authorization of such committees. Each such
committee shall make a written report or recommendation following its
meetings or keep minutes of all of its meetings.
ARTICLE VI: DIRECTORS' MEETINGS
Section 1 - Regular Meetings: Regular meetings of the Board of Directors
shall be held at the principal office of the Company or at such other
place or places, within or without the State of Illinois, at such time
and day as the Board of Directors may designate.
Section 2 - Special Meetings: Unless otherwise provided by law, special
meetings of the Board of Directors may be held at any time, at the
principal office of the Company or elsewhere, within or without the
state.
The Secretary or Assistant Secretary shall call a special
meeting whenever so requested by the Chairman of the Board, the
President, a Vice President, or by three Directors.
Section 3 - Organization Meeting: As soon as possible after their
election, the Board of Directors shall meet and organize and they may
also transact such other business as may be presented, provided the same
shall receive the affirmative votes of a majority of the constituent
membership of the Board.
Section 4 - Notice: No notice shall be required for a regular meeting.
No notice shall be required for an "Organization Meeting," if
held on the same day as the shareholders' meeting at which the Directors
were elected.
No notice of the holding of an adjourned meeting shall be
necessary.
A reasonable notice of special meetings, in writing or
otherwise, shall be given to each Director or sent to his residence or
place of business.
Notice of special meeting shall specify the time and place of
holding the meeting and, unless otherwise stated, any and all business
may be transacted at such special meeting.
Notice of any meeting may be waived in writing.
Section 5 - Quorum: At all meetings of the Board of Directors, a
majority shall constitute a quorum, but a less number may convene and
adjourn.
Section 6 - Voting: All questions coming before any meeting of the Board
of Directors for action shall be decided by a majority vote of the
Directors present at said meeting, unless otherwise provided by law or by
these Bylaws.
ARTICLE VII: OFFICERS
Section 1 - General: The principal officers of the Company shall be
elected by the Board of Directors. They shall include a President, one
or more Vice Presidents, one or more of whom may be designated as
Executive or Senior Vice President, one or more Assistant Vice
Presidents, a Secretary and a Treasurer, and may include a Chairman of
the Board. The Board of Directors may appoint or remove such other
officers and agents of the Company as it may deem proper or may delegate
such authority to the Chief Executive Officer. The Chief Executive
Officer of the Company shall be the President or Chairman of the Board,
as designated by the Board of Directors. In the event that a Chairman of
the Board has not been elected, the President shall be the Chief
Executive Officer.
Section 2 - Qualifications: The Chairman of the Board, if one is
elected, and the President shall be chosen from among the Board of
Directors.
Section 3 - Election: The principal officers shall be elected annually
at the organization meeting of the Directors, provided that any such
officers not elected at such meeting may be elected at any succeeding
meeting of the Directors.
Section 4 - Term of Office: The principal officers shall hold office
from the date of their election until the next succeeding organization
meeting of Directors or until their successors are elected and shall
qualify, provided that the Directors shall at all times have the power to
remove any officer, when in their judgment such removal may be to the
best interests of the Company.
Section 5 - Vacancies: Any vacancy or vacancies among the officers,
arising from any cause, shall be filled by the Directors as provided
above.
Section 6 - Compensation: The compensation of the principal officers
shall be fixed by the Board of Directors. The compensation of other
officers shall, in the absence of any action by the Board of Directors,
be fixed by the Chief Executive Officer.
Section 7 - Combining Offices: Except to the extent otherwise provided
by law, any two or more of such offices may be held by the same person
but no officer shall execute, acknowledge, or verify any instrument in
more than one capacity if such instrument is required by law or by the
Bylaws to be executed, acknowledged, or verified by any two or more
officers.
ARTICLE VIII: AGENTS
Section 1 - Depositories: The funds of the Company, from any source,
shall be deposited in the name of the Company with such depositories as
may be designated by the Board of Directors.
ARTICLE IX: POWERS AND DUTIES
Section 1 - Directors: The Board of Directors shall have and exercise
all power and authority in the government of the affairs of the Company
except where specifically excepted by law or by these Bylaws.
Section 2 - Chairman of the Board: The Chairman of the Board, if one is
elected, shall preside at all meetings of the shareholders and the Board
of Directors. He shall do and perform all acts and things incident to
the position of Chairman of the Board and such other duties as may be
assigned to him by the Board of Directors.
Section 3 - President: The President shall have the general control and
management of the business and affairs of the Company, subject, however,
to the supervision of the Board of Directors. He shall perform and do
all acts and things incident to the position of President and such other
duties as may be assigned to him by the Board of Directors. In the
absence or disability of the Chairman of the Board, or if a Chairman of
the Board has not been elected, he shall have and exercise all of the
powers and duties of that office.
He shall appoint such agents and employees as he may deem necessary
for the proper conduct of the business of the Company and shall prescribe
their duties and fix their compensation, provided that the Board of
Directors shall at all times have the power to remove any agent or
employee, when, in their judgment, such removal may be to the best
interest of the Company.
Section 4 - Vice Presidents: The Vice Presidents shall perform such of
the duties of the President and such other duties on behalf of the
Company as may be respectively assigned to them by the Board of
Directors, or the Chief Executive Officer. In the absence or disability
of the President or in the case of his death, resignation, or removal
from office, the powers and duties of the President shall temporarily
pass to such one of the Vice Presidents as the Board of Directors shall
have designated or shall designate, and the Vice President so designated
shall have and exercise all the powers and duties of the President during
such absence or disability or until the vacancy in the office of
President shall be filled.
Section 5 - Assistant Vice Presidents: The Assistant Vice Presidents
shall perform such of the duties of the Vice Presidents and such other
duties on behalf of the Company as may be respectively assigned to them
by the Board of Directors, the Chief Executive Officer or a Vice
President who would otherwise perform such duties.
Section 6 - Secretary: Subject to the supervision of the Board of
Directors and the Chief Executive Officer, the Secretary shall have the
custody of the corporate seal and records of the Company and shall
prepare and file all reports required by law to be made to any and all
public authorities and officials.
He shall act as Secretary at meetings of the shareholders and
Directors and shall be responsible for keeping and recording the minutes
of all meetings in a suitable minute book and shall attend to publishing,
giving, and serving all official notices of the Company. He shall be
responsible for keeping the capital stock records.
He shall perform such other duties as may be assigned to him by
the Board of Directors and the Chief Executive Officer.
Section 7 - Treasurer: Subject to the supervision of the Board of
Directors and Chief Executive Officer, the Treasurer shall have the
custody of all funds and securities of the Company and charge of the
collection of amounts due the Company.
He shall disburse the funds of the Company only upon receipt of
properly authorized vouchers and shall keep a record of all receipts and
disbursements of funds by him.
He shall have authority to give receipts for moneys paid to the
Company and to endorse checks, drafts, and warrants in the name of the
Company.
He shall perform such other duties as may be assigned to him by
the Board of Directors and Chief Executive Officer.
Section 8 - Other Officers and Agents: The powers and duties of such
other officers and agents shall be prescribed by the Board of Directors
or the Chief Executive Officer.
ARTICLE X: STOCK
Section 1 - Stock Certificates: The shares of stock of the Company shall
be represented by certificates signed by the President or a Vice
President and the Secretary or an Assistant Secretary and sealed with the
seal of the Company. Such seal may be a facsimile. Where such
certificate is countersigned by a Transfer Agent other than the Company
itself or an employee of the Company, or by a Transfer Clerk and
registered by a Registrar, the signatures of the President or Vice
President and the Secretary or Assistant Secretary upon such certificate
may be facsimiles engraved or printed. In case any officer who has
signed or whose facsimile signature has been placed upon such certificate
shall have ceased to be such officer before such certificate is issued,
it may be issued by the Company with the same effect as if such officer
had not ceased to be such at the date of its issue.
Section 2 - Stock Transfer Books: The stock shall be transferable on the
stock transfer books of the Company in person or by proxy duly
authorized, and upon surrender and cancellation of the old certificates
therefor.
Section 3 - Replacing Certificates: In case of the loss or destruction
of any certificate of stock and the submission of proper proof thereof by
the owner, a new certificate may be issued in lieu thereof under such
regulations and restrictions as the Board of Directors may prescribe.
ARTICLE XI: DIVIDENDS
Section 1 - The Directors may declare, from the net profits or surplus of
the Company, dividends upon its capital stock, payable at such times and
for such amounts as they may determine in conformity with the Articles of
Incorporation of the Company, as amended, and the laws of the State of
Illinois.
ARTICLE XII: AUTHORIZED SIGNATURES
Section 1 - All checks, drafts, and other negotiable instruments issued
by the Company shall be made in the name of the Company and shall be
signed by such officer or officers of the Company, or by such other
person or persons as the Board of Directors may designate. To the extent
authorized by the Board of Directors, facsimile signatures may be used.
<PAGE>
ARTICLE XIII: FIDELITY BONDS
Section 1 - The officers and employees of the Company shall, in the
discretion of the President, give bonds for the faithful discharge of
their respective duties, in such form and for such amounts as may be
directed by the President.
ARTICLE XIV: AMENDMENTS
Section 1 - The Bylaws of the Company may be altered, amended, or
repealed by either the shareholders or the Board of Directors.
ARTICLE XV: INDEMNIFICATION
Section 1 - The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal,
administrative or investigative (other than an action by or in the right
of the Company) by reason of the fact that he or she is or was a
director, officer, employee or agent of the Company, or who is or was
serving at the request of the Company as a director, officer, employee or
agent of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees), judgments,
fines and amounts paid in settlement actually and reasonably incurred by
such person in connection with such action, suit or proceeding, if such
person acted in good faith and in a manner he or she reasonably believed
to be in, or not opposed to, the best interests of the Company, and, with
respect to any criminal action or proceeding, had no reasonable cause to
believe his or her conduct was unlawful. The termination of any action,
suit or proceeding by judgment, order, settlement, conviction, or upon a
plea of nolo contendere or its equivalent, shall not, of itself, create a
presumption that the person did not act in good faith and in a manner
which he or she reasonably believed to be in or not opposed to the best
interests of the Company or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
Section 2 - The Company shall indemnify any person who was or is a party
or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the Company to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the Company, or is or was serving
at the request of the Company as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other
enterprise, against expenses (including attorneys' fees) actually and
reasonably incurred by such person in connection with the defense or
settlement of such action or suit, if such person acted in good faith and
in a manner he or she reasonably believed to be in, or not opposed to,
the best interests of the Company, provided that no indemnification shall
be made in respect of any claim, issue or matter as to which such person
shall have been adjudged to be liable for negligence or misconduct in the
performance of his or her duty to the Company, unless, and only to the
extent that the court in which such action or suit was brought shall
determine upon application that, despite the adjudication of liability,
but in view of all circumstances of the case, such person is fairly and
reasonably entitled to indemnity for such expenses as the court shall
deem proper.
Section 3 - To the extent that a director, officer, employee or agent of
the Company has been successful, on the merits or otherwise, in the
defense of any action, suit or proceeding referred to in Sections l and 2
of this Article, or in defense of any claim, issue or matter therein,
such person shall be indemnified against expenses (including attorneys'
fees) actually and reasonably incurred by such person in connection
therewith.
Section 4 - Any indemnification under Sections l and 2 of this Article
(unless ordered by a court) shall be made by the Company only as
authorized in the specific case, upon a determination that
indemnification of the director, officer, employee or agent is proper in
the circumstances because he or she has met the applicable standard of
conduct set forth in Section l or 2 of this Article. Such determination
shall be made (a) by the Board of Directors by a majority vote of a
quorum consisting of directors who were not parties to such action, suit
or proceeding, or (b) if such a quorum is not obtainable, or even if
obtainable, if a quorum of disinterested directors so directs, by
independent legal counsel in a written opinion, or (c) by the
shareholders.
Section 5 - Expenses incurred in defending a civil or criminal action,
suit or proceeding may be paid by the Company in advance of the final
disposition of such action, suit or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking
by or on behalf of the director, officer, employee or agent to repay such
amount, unless it shall ultimately be determined that he or she is
entitled to be indemnified by the Company as authorized in this Article.
Section 6 - The indemnification provided by this Article shall not be
deemed exclusive of any other rights to which those seeking
indemnification may be entitled under any by-law, agreement, vote of
shareholders or disinterested directors, or otherwise, both as to action
in his or her official capacity and as to action in another capacity
while holding such office, and shall continue as to a person who has
ceased to be a director, officer, employee or agent, and shall inure to
the benefit of the heirs, executors and administrators of such a person.
Section 7 - The Company shall have power to purchase and maintain
insurance on behalf of any person who is or was a director, officer,
employee or agent of the Company, or is or was serving at the request of
the Company as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise,
against any liability asserted against such person and incurred by such
person in any such capacity, or arising out of his or her status as such,
whether or not the Company would have the power to indemnify such person
against such liability under the provisions of this Article.
Section 8 - If the Company has paid indemnity or has advanced expenses
to a director, officer, employee or agent, the Company shall report the
indemnification or advance in writing to the shareholders with or before
the notice of the next shareholders' meeting.
Section 9 - For purposes of this Article, references to "the Company"
shall include, in addition to the surviving Company, any merging Company
(including any Company having merged with a merging Company) absorbed in
a merger which, if its separate existence had continued, would have had
the power and authority to indemnify its directors, officers and
employees or agents, so that any person who was a director, officer,
employee or agent of such merging Company, or was serving at the request
of such merging Company as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other
enterprise, shall stand in the same position under the provisions of this
Article with respect to the surviving Company as such person would have
with respect to such merging Company if its separate existence had
continued.
Section 10 - For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines"
shall include any excise taxes assessed on a person with respect to an
employee benefit plan; and references to "serving at the request of the
Company" shall include any service as a director, officer, employee or
agent of the Company which imposes duties on, or involves services by
such director, officer, employee, or agent with respect to an employee
benefit plan, its participants, or beneficiaries. A person who acted in
good faith and in a manner he or she reasonably believed to be in the
best interest of the participants and beneficiaries of an employee
benefit plan shall be deemed to have acted in a manner "not opposed to
the best interests of the Company" as referred to in this Article.
<PAGE>
[DESCRIPTION] EX-(3)a - BY-LAWS OF CILCORP
BY-LAWS
of
CILCORP Inc.
(As Amended Effective August 20, 1993)
ARTICLE I
OFFICES
The corporation shall continuously maintain in the State of Illinois
a registered office and a registered agent whose business office is identical
with such registered office, and may have other offices within or without the
State.
ARTICLE II
SHAREHOLDERS
SECTION l. ANNUAL MEETING. An annual meeting of the shareholders
shall be held on the fourth Tuesday of April in each year commencing in 1986,
such meeting to be held at such time as determined by the Board of Directors
and specified in the notice of such annual meeting for the purpose of electing
directors and for the transaction of such other business as may come before
the meeting. If the day fixed for the annual meeting shall be a legal holi
day, such meeting shall be held on the next succeeding business day.
SECTION 2. SPECIAL MEETINGS. Special meetings of the shareholders
may be called by the Chief Executive Officer, by the Board of Directors, or by
the holders of not less than one-fifth of all the outstanding shares entitled
to vote on the matter for which the meeting is called, for the purpose or
purposes stated in the call of the meeting.
SECTION 3. PLACE OF MEETING. The Board of Directors may designate
any place as the place of meeting for any annual meeting or for any special
meeting called by the Board of Directors. If no designation is made, or if a
special meeting be otherwise called, the place of meeting shall be at the
principal office of the corporation in the City of Peoria, Illinois.
SECTION 4. NOTICE OF MEETINGS. Written notice stating the place,
date and hour of the meeting, and in the case of a special meeting, the
purpose or purposes for which the meeting is called, shall be delivered not
less than ten nor more than sixty days before the date of the meeting, or in
the case of a merger, consolidation, share exchange, dissolution or sale,
lease or exchange of assets, not less than twenty nor more than sixty days
before the meeting, either personally or by mail, by or at the direction of
the President, or the Secretary, or the officer or persons calling the meet
ing, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail, addressed to the shareholder at his or her address as it
appears on the records of the corporation, with postage thereon prepaid. When
a meeting is adjourned to another time or place, notice need not be given of
the adjourned meeting if the time and place thereof are announced at the
meeting at which the adjournment is taken.
SECTION 5. FIXING OF RECORD DATE. For the purpose of determining
the shareholders entitled to notice of or to vote at any meeting of sharehold
ers, or to receive payment of any dividend, or for the purpose of determining
shareholders for any other proper purpose, the Board of Directors may fix in
advance a record date which shall not be more than sixty days and, for a
meeting of shareholders, not less than ten days, or in the case of a merger,
consolidation, share exchange, dissolution or sale, lease or exchange of
assets, not less than twenty days, before the date of such meeting. If no
record date is fixed, the record date for the determination of shareholders
entitled to notice of or to vote at a meeting of shareholders shall be the
date on which notice of the meeting is mailed, and the record date for the
determination of shareholders for any other purpose shall be the date on which
the Board of Directors adopts the resolution relating thereto. A determina
tion of shareholders of record entitled to notice of or to vote at a meeting
of shareholders shall apply to any adjournment of the meeting.
SECTION 6. VOTING LISTS. The officer or agent having charge of the
transfer books for shares of the corporation shall make, within twenty days
after the record date for a meeting of shareholders or ten days before such
meeting, whichever is earlier, a complete list of the shareholders entitled to
vote at such meeting, arranged in alphabetical order, with the address of and
the number of shares held by each, which list, for a period of ten days prior
to such meeting, shall be kept on file at the registered office of the corpo
ration and shall be subject to inspection by any shareholder, and to copying
at the shareholder's expense, for any purpose germane to the meeting, at any
time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and may be inspected by any share
holder during the whole time of the meeting. The original share ledger or
transfer book, or a duplicate thereof kept in this State, shall be prima facie
evidence as to who are the shareholders entitled to examine such list or share
ledger or transfer book or to vote at any meeting of shareholders.
SECTION 7. QUORUM. A majority of the outstanding shares of the
corporation entitled to vote on a matter, represented in person or by proxy,
shall constitute a quorum for consideration of such matter at a meeting of
shareholders; provided, that if less than a majority of the outstanding shares
entitled to vote on a matter are represented at said meeting, a majority of
the shares so represented may adjourn the meeting as to that matter at any
time without further notice. If a quorum is present, the affirmative vote of
the majority of the shares represented at the meeting and entitled to vote on
a matter shall be the act of the shareholders, unless the vote of a greater
number or voting by classes is required by the Business Corporation Act of
1983, or the Articles of Incorporation. At any adjourned meeting at which a
quorum shall be present, any business may be transacted which might have been
transacted at the original meeting. Withdrawal of shareholders from any
meeting shall not cause failure of a duly constituted quorum at that meeting.
SECTION 8. PROXIES. Each shareholder entitled to vote at a meeting
of shareholders or to express consent or assent to corporate action in writing
without a meeting may authorize another person or persons to act for him by
proxy, but no such proxy shall be valid after eleven months from the date
thereof, unless otherwise provided in the proxy.
SECTION 9. VOTING OF SHARES. Each outstanding share shall be
entitled to one vote upon each matter submitted to a vote at a meeting of
shareholders.
SECTION 10. VOTING OF SHARES BY CERTAIN HOLDERS. Shares registered
in the name of another corporation, domestic or foreign, may be voted by any
officer, agent, proxy or other legal representative authorized to vote such
shares under the law of incorporation of such corporation.
Shares registered in the name of a deceased person, a minor ward or
person under legal disability, may be voted by his or her administrator,
executor or court appointed guardian, either in person or by proxy, without a
transfer of such shares into the name of such administrator, executor or court
appointed guardian. Shares standing in the name of a trustee may be voted by
him or her, either in person or by proxy.
Shares registered in the name of a receiver may be voted by such
receiver, and shares held by or under the control of a receiver may be voted
by such receiver without the transfer thereof into his or her name if authori
ty so to do is contained in an appropriate order of the court by which such
receiver was appointed.
A shareholder whose shares are pledged shall be entitled to vote
such shares until the shares have been transferred into the name of the
pledgee, and thereafter the pledgee shall be entitled to vote the shares so
transferred.
Shares of the corporation held by it in a fiduciary capacity may be
voted and shall be counted in determining the total number of outstanding
shares entitled to vote at any given time.
SECTION 11. INSPECTORS. At any meeting of shareholders, the
chairman of the meeting may, or upon the request of any shareholder shall,
appoint one or more persons as inspectors for such meeting.
Such inspectors shall ascertain and report the number of shares
represented at the meeting, based upon their determination of the validity and
effect of proxies; count all votes and report the results; and do such other
acts as are proper to conduct the election and voting with impartiality and
fairness to all the shareholders.
Each report of an inspector shall be in writing and signed by him or
her or by a majority of them if there be more than one inspector acting at
such meeting. If there is more than one inspector, the report of a majority
shall be the report of the inspectors. The report of the inspector or inspec
tors on the number of shares represented at the meeting and the results of the
voting shall be prima facie evidence thereof.
SECTION 12. VOTING BY BALLOT. Voting on any question or in any
election may be by voice unless the chairman of the meeting shall order or any
shareholder entitled to vote shall demand that voting be by ballot.
ARTICLE III
DIRECTORS
SECTION l. GENERAL POWERS. The business and affairs of the corpo
ration shall be managed by or under the direction of its Board of Directors.
SECTION 2. NUMBER, TENURE AND QUALIFICATIONS. The number of direc
tors of the corporation shall be eleven.
Directors need not be residents of Illinois or shareholders of the
corporation. Unless sooner terminated by any other provision hereof, the term
of any director shall automatically expire at the first annual meeting of the
shareholders following his or her attainment of the age of 67. Provided,
however, that the term of any director serving in such capacity and over the
age of 60 on August 20, 1993 shall automatically expire at the first annual
meeting of the shareholders following his or her attainment of the age of 70.
Notwithstanding any other provision hereof, the term of any director who is an
officer or other full time employee of the corporation shall automatically
expire at the first annual meeting of the shareholders following his or her
retirement from employment by the corporation unless such retiree was the
Chief Executive Officer of the corporation at the time of retirement, in which
case his or her term as a director (unless such term otherwise sooner termi
nates) shall automatically terminate at the second annual meeting of share
holders following his or her retirement. Any such retiree shall not thereafter
be eligible to stand for election to the Board of Directors, except that any
such retiree who was the Chief Executive of the corporation at the time of
retirement and whose term expires at the annual meeting of shareholders next
following his or her retirement shall be eligible to stand for election to a
single, additional term of one year, which one-year term shall commence at the
annual meeting of shareholders next following the retirement of such Chief
Executive Officer. If a vacancy occurs in the Board of Directors prior to the
end of what would have been a three-year term but for the provisions of this
paragraph, the vacancy shall be filled for the balance of said three-year term
in accordance with the provisions of Section 9 of this Article.
SECTION 3. REGULAR MEETINGS. A regular meeting of the Board of
Directors shall be held without other notice than this By-law, immediately
after the annual meeting of shareholders. The Board of Directors may provide,
by resolution, the time and place for the holding of additional regular
meetings without other notice than such resolution.
SECTION 4. SPECIAL MEETINGS. Special meetings of the Board of
Directors may be called by or at the request of the Chief Executive Officer or
any two directors. The person or persons authorized to call special meetings
of the Board of Directors may fix any place as the place for holding any
special meeting of the Board of Directors called by them.
SECTION 5. NOTICE. Notice of any special meeting shall be given by
written notice to each director at his business address. If mailed, such
notice shall be given at least seven days prior to the meeting, and shall be
deemed to be delivered when deposited in the United States mail so addressed,
with postage thereon prepaid. If notice be given by telegram, or overnight
delivery service, such notice shall be given at least three days prior to the
meeting and shall be deemed to be delivered when, in the case of a telegram,
it is delivered to the telegraph company, or in the case of overnight delivery
service, it is delivered to the carrier. The attendance of a director at any
meeting shall constitute a waiver of notice of such meeting, except where a
director attends a meeting for the express purpose of objecting to the trans
action of any business because the meeting is not lawfully called or convened.
Neither the business to be transacted at, nor the purpose of, any regular or
special meeting of the Board of Directors need be specified in the notice or
waiver of notice of such meeting.
SECTION 6. QUORUM. A majority of the number of directors fixed by
these By-laws shall constitute a quorum for the transaction of business at any
meeting of the Board of Directors, provided that if less than a majority of
such number of directors are present at said meeting, a majority of the
directors present may adjourn the meeting at any time without further notice.
The presence of a director who is directly or indirectly a party to a transac
tion to be acted upon by the Board of Directors, or who is otherwise not
disinterested, may be counted in determining whether a quorum is present, but
the vote of such director may not be counted when the Board of Directors or a
committee of the Board takes action on the transaction.
SECTION 7. MANNER OF ACTING. The act of the majority of the
directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors, unless the act of a greater number is required by
these By-laws or the Articles of Incorporation. Members of the Board of
Directors or of any committee of the Board may participate in and act at a
meeting through the use of a conference telephone or other communication
equipment by means of which all persons participating in the meeting can hear
each other. Participation in such meeting shall constitute attendance and
presence in person at the meeting of the person or persons so participating.
SECTION 8. RESIGNATIONS. A director may resign at any time by
giving written notice to the Board of Directors, its chairman, or to the
President or Secretary of the corporation. A resignation is effective when
the notice is given unless the notice specifies a future date.
SECTION 9. VACANCIES. Any vacancy occurring in the Board of
Directors, including any vacancy occurring by reason of an increase in the
number of directors, shall be filled by election at an annual meeting or at a
special meeting of shareholders called for that purpose, provided that the
Board of Directors may fill by appointment any such vacancy occurring between
meetings of the shareholders. A director appointed by the Board of Directors
pursuant to this Section to fill a vacancy shall serve until the next meeting
of shareholders at which directors are to be elected. A director elected by
the shareholders to fill a vacancy shall hold office for the balance of the
term for which he or she was elected.
SECTION 10. ACTION WITHOUT A MEETING. Any action required to be
taken at a meeting of the Board of Directors, or any other action which may be
taken at a meeting of the Board of Directors or a committee thereof, may be
taken without a meeting if a consent in writing, setting forth the action so
taken, shall be signed by all the directors entitled to vote with respect to
the subject matter thereof, or by all the members of such committee, as the
case may be. The consent shall be evidenced by one or more written approvals,
each of which sets forth the action taken and bears the signature of one or
more directors. All such approvals shall be delivered to the Secretary to be
filed in the corporate records. The action taken shall be effective when all
the directors have approved the consent unless the consent specifies a
different effective date. Any such consent signed by all the directors or all
the members of a committee shall have the same effect as a unanimous vote, and
may be stated as such in any document filed with the Secretary of State of
Illinois or with anyone else.
SECTION 11. COMPENSATION. The Board of Directors, by the
affirmative vote of a majority of directors then in office, and irrespective
of any personal interest of any of its members, shall have authority to
establish reasonable compensation of all directors for services to the
corporation as directors, officers or otherwise. The directors shall be paid
their expenses, if any, of attendance at each meeting of the Board. No such
payment previously mentioned in this Section shall preclude any director from
serving the corporation in any other capacity and receiving compensation
therefor.
SECTION 12. REMOVAL OF DIRECTORS. If the notice of a meeting of
shareholders shall state that a purpose of the meeting is to vote upon the
removal of one or more directors named in the notice, then one or more of such
directors may be removed at such meeting by the affirmative vote of the
holders of a majority of the outstanding shares then entitled to vote at an
election of directors. Only the named director or directors may be removed at
such meeting and directors may only be removed for cause.
SECTION 13. PRESUMPTION OF ASSENT. A director of the corporation
who is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be conclusively presumed to have assented to
the action taken unless his or her dissent is entered in the minutes of the
meeting or unless he or she (a) files his or her written dissent to such
action with the person acting as the Secretary of the meeting before the
adjournment thereof, or (b) forwards such dissent by registered or certified
mail to the Secretary of the corporation immediately after the adjournment of
the meeting. Such right to dissent does not apply to a director who voted in
favor of such action.
SECTION 14. COMMITTEES. A majority of the directors may create one
or more committees and appoint members of the Board to serve on the committee
or committees. Each committee shall have two or more members, who serve at the
pleasure of the Board. Each committee, to the extent specified by the Board of
Directors, may exercise the authority of the Board of Directors in the
management of the corporation, except as otherwise provided by law. Vacancies
in the membership of the committee shall be filled by the Board of Directors
at a regular or special meeting of the Board of Directors. Each committee
shall render a report of its proceedings to the Board when required. Unless
the resolution of appointment by the Board of Directors requires a greater
number, a majority of any committee shall constitute a quorum, and a majority
of a quorum shall be necessary for committee action. A committee may act by
unanimous consent in writing without a meeting and, subject to the provisions
of these By-laws or action of the Board of Directors, the committee by
majority vote of its members shall determine the time and place of meetings
and the notice required therefor.
SECTION 15. NOMINATIONS OF DIRECTORS. Only persons who are nominated
in accordance with the following procedures shall be eligible for election as
directors. Nominations of persons for election to the Board of Directors of
the corporation may be made at a meeting of shareholders (a) by or at the
direction of the Board of Directors by any nominating committee or person
appointed by the Board or, (b) by any shareholder of the corporation entitled
to vote for the election of directors at the meeting who complies with the
notice procedures set forth in this Section 15. Such nominations, other than
those made by or at the direction of the Board, shall be made pursuant to
timely notice in writing to the Secretary. To be timely, a shareholder's
notice shall be delivered to, or mailed and received at, the principal
executive offices of the corporation not less than sixty (60) days prior to
the first anniversary of the date of the last annual meeting of shareholders.
Such shareholder's notice to the Secretary shall set forth (a) as to each
person whom the shareholder proposes to nominate for election or re-election
as a director, (i) the name, age, business address and residence address of
the person, (ii) the principal occupation or employment of the person,
(iii) the class and number of shares of the corporation which are beneficially
owned by the person, and (iv) such other information relating to the person
that would be required to be included in a proxy statement filed pursuant to
the proxy rules of the Securities and Exchange Commission as then in effect;
and (b) as to the shareholder giving the notice (i) the name and record
address of the shareholder, and (ii) the class and number of shares of the
corporation which are beneficially owned by the shareholder.
If the Chairman of the meeting of shareholders shall determine that
a nomination was not made in accordance with the foregoing procedure, he or
she shall so declare to the meeting and the defective nomination shall be
disregarded.
ARTICLE IV
OFFICERS
SECTION l. NUMBER. The officers of the corporation shall be a
Chairman of the Board (if one is elected by the Board of Directors), a Presi
dent, one or more Vice Presidents (the number thereof to be determined by the
Board of Directors), a Treasurer, and a Secretary to be elected by the Board
of Directors, and such Assistant Treasurers, Assistant Secretaries, Controller
or other officers as may be elected by the Board of Directors or appointed by
the Board of Directors or the Chief Executive Officer of the corporation. The
Chief Executive Officer of the corporation shall be the Chairman of the Board
or the President as designated by the Board of Directors. In the event that a
Chairman of the Board is not elected, the President shall be the Chief
Executive Officer. Any two or more offices may be held by the same person.
SECTION 2. ELECTION AND TERM OF OFFICE. The elected officers of
the corporation shall be elected annually by the Board of Directors at the
first meeting of the Board of Directors held after each annual meeting of
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as shall be convenient.
Vacancies may be filled or new offices created and filled at any meeting of
the Board of Directors. Each officer shall hold office until his or her
successor shall have been duly elected and shall have qualified or until his
or her death or until he or she shall resign or shall have been removed in the
manner hereinafter provided. Election or appointment of an officer shall not
of itself create contract rights.
SECTION 3. REMOVAL. Any elected officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
corporation would be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Any
appointed officer may be similarly removed by either the Board of Directors or
the Chief Executive Officer of the corporation.
SECTION 4. CHAIRMAN OF THE BOARD. The Chairman of the Board of
Directors shall have such duties and functions as shall be assigned or
delegated to him or her from time to time by the Board of Directors. The
chairman shall report to the Board of Directors, and shall preside at the
meetings of the shareholders and of the Board of Directors.
SECTION 5. PRESIDENT. Subject to the direction and control of the
Board of Directors, the President shall be in charge of the business of the
corporation; he or she shall see that the resolutions and directions of the
Board of Directors are carried into effect except in those instances in which
that responsibility is specifically assigned to some other person by the Board
of Directors; and, in general, he or she shall discharge all duties incident
to the office of President and such other duties as may be prescribed by the
Board of Directors from time to time. In the absence of the Chairman of the
Board, the President shall preside at all meetings of the shareholders and of
the Board of Directors. Except in those instances in which the authority to
execute is expressly delegated to another officer or agent of the corporation
or a different mode of execution is expressly prescribed by the Board of
Directors or these By-laws, the President may execute for the corporation
certificates for its shares, and any contracts, deeds, mortgages, bonds, or
other instruments which the Board of Directors has authorized to be executed,
and may accomplish such execution either under or without the seal of the
corporation and either individually or with the Secretary, any Assistant
Secretary, or any other officer thereunto authorized by the Board of
Directors, according to the requirements of the form of the instrument. The
President may vote all securities which the corporation is entitled to vote
except to the extent such authority shall be vested in a different officer or
agent of the corporation by the Board of Directors.
SECTION 6. THE VICE PRESIDENTS. Each Vice President shall assist
the President in the discharge of his or her duties, as the President may
direct, and shall perform such other duties as from time to time may be
assigned to him or her by the President or by the Board of Directors. In the
absence of the President or in the event of his or her inability or refusal to
act, the Vice President (or in the event there be more than one Vice
President, the Vice Presidents in the order designated by the Board of
Directors, or by the President if the Board of Directors has not made such a
designation, or in the absence of any designation, then in the order of
seniority of tenure as Vice President) shall perform the duties of the
President, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the President. Except in those instances in which
the authority to execute is expressly delegated to another officer or agent of
the corporation or a different mode of execution is expressly prescribed by
the Board of Directors or these By-laws, the Vice President (or each of them
if there are more than one) may execute for the corporation certificates for
its shares and any contracts, deeds, mortgages, bonds or other instruments
which the Board of Directors has authorized to be executed, and he or she may
accomplish such execution either under or without the seal of the corporation
and either individually or with the Secretary, any Assistant Secretary, or any
other officer thereunto authorized by the Board of Directors, according to the
requirements of the form of the instrument.
SECTION 7. THE TREASURER. Subject to the supervision of the Board
of Directors and Chief Executive Officer, the Treasurer shall have the custody
of all funds and securities of the corporation and charge of the collection of
amounts due the corporation. He or she shall disburse the funds of the
corporation only upon receipt of properly authorized vouchers and shall keep a
record of all receipts and disbursements of funds by him or her. He or she
shall have authority to give receipts for moneys paid to the corporation and
to endorse checks, drafts and warrants in the name of the corporation.
SECTION 8. THE SECRETARY. The Secretary shall: (a) record the
minutes of the shareholders' and the Board of Directors' meetings in one or
more books provided for that purpose; (b) see that all notices are duly given
in accordance with the provisions of these By-laws or as required by law; (c)
be custodian of the corporate records and of the seal of the corporation; (d)
keep a register of the post office address of each shareholder which shall be
furnished to the Secretary by such shareholder; (e) sign with the President or
a Vice President, or any other officer thereunto authorized by the Board of
Directors, certificates for shares of the corporation, the issue of which
shall have been authorized by the Board of Directors, and any contracts,
deeds, mortgages, bonds, or other instruments which the Board of Directors has
authorized to be executed, according to the requirements of the form of the
instrument, except when a different mode of execution is expressly prescribed
by the Board of Directors or these By-laws; (f) have general charge of the
stock transfer books of the corporation; and (g) perform all duties incident
to the office of Secretary and such other duties as from time to time may be
assigned to him or her by the President or by the Board of Directors. The
Secretary shall have the authority to certify the By-laws, resolutions of the
shareholders and Board of Directors and committees thereof, and other docu
ments of the corporation as true and correct copies thereof.
SECTION 9. ASSISTANT TREASURERS, ASSISTANT SECRETARIES, CONTROLLER,
AND OTHER OFFICERS. The Assistant Treasurers and Assistant Secretaries shall
perform such duties as shall be assigned to them by the Treasurer or the
Secretary, respectively, or by the President or the Board of Directors. The
Assistant Secretaries may sign with the President, or a Vice President, or any
other officer thereunto authorized by the Board of Directors, certificates for
shares of the corporation, the issue of which shall have been authorized by
the Board of Directors, and any contracts, deeds, mortgages, bonds, or other
instruments which the Board of Directors has authorized to be executed,
according to the requirements of the form of the instrument, except when a
different mode of execution is expressly prescribed by the Board of Directors
or these By-laws. The Assistant Treasurers shall respectively, if required by
the Board of Directors, give bonds for the faithful discharge of their duties
in such sums and with such sureties as the Board of Directors shall determine.
The Controller, if one be elected or appointed, shall be the principal
accounting officer of the corporation and as such shall have and perform all
duties normally incident to the office of principal accounting officer. The
Assistant Treasurers, the Assistant Secretaries, the Controller and any other
officers shall have and perform such other duties as may be assigned from time
to time by the Board of Directors or the Chief Executive Officer of the
corporation.
SECTION 10. SALARIES. The salaries of the officers shall be fixed
from time to time by the Board of Directors or, if authorized by the Board, by
the Chief Executive Officer of the corporation. No officer shall be prevented
from receiving any salary by reason of the fact that he or she is also a
director of the corporation.
ARTICLE V
CONTRACTS, LOANS, CHECKS AND DEPOSITS
SECTION l. CONTRACTS. The Board of Directors may authorize any
officer or officers, agent or agents, to enter into any contract or execute
and deliver any instrument in the name of and on behalf of the corporation,
and such authority may be general or confined to specific instances.
SECTION 2. LOANS. No loans shall be contracted on behalf of the
corporation and no evidences of indebtedness shall be issued in its name
unless authorized by a resolution of the Board of Directors. Such authority
may be general or confined to specific instances.
SECTION 3. CHECKS, DRAFTS, ETC. All checks, drafts or other orders
for the payment of money, notes or other evidences of indebtedness issued in
the name of the corporation, shall be signed by such officer or officers,
agent or agents of the corporation and in such manner as shall from time to
time be determined by resolution of the Board of Directors.
SECTION 4. DEPOSITS. All funds of the corporation not otherwise
employed shall be deposited from time to time to the credit of the corporation
in such banks, trust companies or other depositaries as the Board of Directors
may select.
ARTICLE VI
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION l. CERTIFICATES FOR SHARES. Certificates representing
shares of the corporation shall be signed by the President or a Vice President
or by such officer as shall be designated by resolution of the Board of
Directors and by the Secretary or an Assistant Secretary, and shall be sealed
with the seal or a facsimile of the seal of the corporation. If both of the
signatures of the officers be by facsimile, the certificate shall be manually
signed by or on behalf of a duly authorized transfer agent or clerk. Each
certificate representing shares shall be consecutively numbered or otherwise
identified, and shall also state the name of the person to whom issued, the
number and class of shares (with designation of series, if any), the date of
issue, and that the corporation is organized under Illinois law. If the
corporation is authorized and does issue shares of more than one class or of a
series within a class, the certificate shall also contain such information or
statement with respect thereto as may be required by law.
The name and address of each shareholder, the number and class of
shares held and the date on which the certificates for the shares were issued
shall be entered on the books of the corporation. The person in whose name
shares stand on the books of the corporation shall be deemed the owner thereof
for all purposes as regards the corporation.
SECTION 2. LOST CERTIFICATES. If a certificate representing shares
allegedly has been lost or destroyed, the Board of Directors may in its
discretion, except as may be required by law, direct that a new certificate be
issued upon such indemnification and other reasonable requirements as it may
impose.
SECTION 3. TRANSFERS OF SHARES. Transfers of shares of the
corporation shall be recorded on the books of the corporation and, except in
the case of a lost or destroyed certificate, shall be made only upon surrender
for cancellation of the certificate for such shares. A certificate presented
for transfer must be duly endorsed and accompanied by proper guaranty of
signature and other appropriate assurances that the endorsement is effective.
ARTICLE VII
INDEMNIFICATION
SECTION l. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative
or investigative (other than an action by or in the right of the corporation)
by reason of the fact that he or she is or was a director, officer, employee
or agent of the corporation, or who is or was serving at the request of the
corporation as a director, officer, employee or agent of another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by such person in connection with such
action, suit or proceeding, if such person acted in good faith and in a manner
he or she reasonably believed to be in, or not opposed to, the best interests
of the corporation, and, with respect to any criminal action or proceeding,
had no reasonable cause to believe his or her conduct was unlawful. The
termination of any action, suit or proceeding by judgment, order, settlement,
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
itself, create a presumption that the person did not act in good faith and in
a manner which he or she reasonably believed to be in or not opposed to the
best interests of the corporation or, with respect to any criminal action or
proceeding, had reasonable cause to believe that his or her conduct was
unlawful.
SECTION 2. The corporation shall indemnify any person who was or is
a party or is threatened to be made a party to any threatened, pending or
completed action or suit by or in the right of the corporation to procure a
judgment in its favor by reason of the fact that such person is or was a
director, officer, employee or agent of the corporation, or is or was serving
at the request of the corporation as a director, officer, employee or agent of
another corporation, partnership, joint venture, trust or other enterprise,
against expenses (including attorneys' fees) actually and reasonably incurred
by such person in connection with the defense or settlement of such action or
suit, if such person acted in good faith and in a manner he or she reasonably
believed to be in, or not opposed to, the best interests of the corporation,
provided that no indemnification shall be made in respect of any claim, issue
or matter as to which such person shall have been adjudged to be liable for
negligence or misconduct in the performance of his or her duty to the
corporation, unless, and only to the extent that the court in which such
action or suit was brought shall determine upon application that, despite the
adjudication of liability, but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses as the
court shall deem proper.
SECTION 3. To the extent that a director, officer, employee or
agent of the corporation has been successful, on the merits or otherwise, in
the defense of any action, suit or proceeding referred to in Sections l and 2
of this Article, or in defense of any claim, issue or matter therein, such
person shall be indemnified against expenses (including attorneys' fees)
actually and reasonably incurred by such person in connection therewith.
SECTION 4. Any indemnification under Sections l and 2 of this
Article (unless ordered by a court) shall be made by the corporation only as
authorized in the specific case, upon a determination that indemnification of
the director, officer, employee or agent is proper in the circumstances
because he or she has met the applicable standard of conduct set forth in
Section l or 2 of this Article. Such determination shall be made (a) by the
Board of Directors by a majority vote of a quorum consisting of directors who
were not parties to such action, suit or proceeding, or (b) if such a quorum
is not obtainable, or even if obtainable, if a quorum of disinterested direc
tors so directs, by independent legal counsel in a written opinion, or (c) by
the shareholders.
SECTION 5. Expenses incurred in defending a civil or criminal
action, suit or proceeding may be paid by the corporation in advance of the
final disposition of such action, suit or proceeding, as authorized by the
Board of Directors in the specific case, upon receipt of an undertaking by or
on behalf of the director, officer, employee or agent to repay such amount,
unless it shall ultimately be determined that he or she is entitled to be
indemnified by the corporation as authorized in this Article.
SECTION 6. The indemnification provided by this Article shall not
be deemed exclusive of any other rights to which those seeking indemnification
may be entitled under any by-law, agreement, vote of shareholders or
disinterested directors, or otherwise, both as to action in his or her
official capacity and as to action in another capacity while holding such
office, and shall continue as to a person who has ceased to be a director,
officer, employee or agent, and shall inure to the benefit of the heirs,
executors and administrators of such a person.
SECTION 7. The corporation shall have power to purchase and
maintain insurance on behalf of any person who is or was a director, officer,
employee or agent of the corporation, or is or was serving at the request of
the corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust or other enterprise, against
any liability asserted against such person and incurred by such person in any
such capacity, or arising out of his or her status as such, whether or not the
corporation would have the power to indemnify such person against such
liability under the provisions of this Article.
SECTION 8. If the corporation has paid indemnity or has advanced
expenses to a director, officer, employee or agent, the corporation shall
report the indemnification or advance in writing to the shareholders with or
before the notice of the next shareholders' meeting.
SECTION 9. For purposes of this Article, references to "the
corporation" shall include, in addition to the surviving corporation, any
merging corporation (including any corporation having merged with a merging
corporation) absorbed in a merger which, if its separate existence had
continued, would have had the power and authority to indemnify its directors,
officers and employees or agents, so that any person who was a director,
officer, employee or agent of such merging corporation, or was serving at the
request of such merging corporation as a director, officer, employee or agent
of another corporation, partnership, joint venture, trust or other enterprise,
shall stand in the same position under the provisions of this Article with
respect to the surviving corporation as such person would have with respect to
such merging corporation if its separate existence had continued.
SECTION 10. For purposes of this Article, references to "other
enterprises" shall include employee benefit plans; references to "fines" shall
include any excise taxes assessed on a person with respect to an employee
benefit plan; and references to "serving at the request of the corporation"
shall include any service as a director, officer, employee or agent of the
corporation which imposes duties on, or involves services by such director,
officer, employee, or agent with respect to an employee benefit plan, its
participants, or beneficiaries. A person who acted in good faith and in a
manner he or she reasonably believed to be in the best interest of the
participants and beneficiaries of an employee benefit plan shall be deemed to
have acted in a manner "not opposed to the best interests of the corporation"
as referred to in this Article.
ARTICLE VIII
FISCAL YEAR
The fiscal year of the corporation shall begin on the first day of
January in each year and end on the last day of December in each year.
ARTICLE IX
DISTRIBUTIONS
The Board of Directors from time to time may authorize, and the
corporation may make, distributions to its shareholders in the manner and upon
the terms and conditions provided by law and its Articles of Incorporation.
ARTICLE X
SEAL
The corporation shall have a corporate seal with the name of the
corporation and the word "Illinois" inscribed about a circle and the phrase
"Incorporated 1985" within such circle. Such seal may be used by causing it or
a facsimile thereof to be impressed or affixed or in any manner reproduced.
ARTICLE XI
WAIVER OF NOTICE
Whenever any notice is required to be given under the provisions of
these By-laws, the Articles of Incorporation or the Business Corporation Act
of 1983, a waiver thereof in writing, signed by the person or persons entitled
to such notice, whether before or after the time stated therein, shall be
deemed equivalent to the giving of such notice. Attendance at any meeting
shall constitute waiver of notice thereof unless the person at the meeting
objects to the holding of the meeting because proper notice was not given.
ARTICLE XII
AMENDMENTS
In furtherance of, and not in limitation of, the powers conferred by
statute, the Board of Directors of the Corporation is expressly authorized and
empowered to adopt, amend or repeal the By-laws (or any portion thereof) of
the Corporation. The shareholders of the Corporation are authorized and
empowered to adopt, amend or repeal the By-laws only by an affirmative vote of
75% of the shares outstanding and entitled to vote thereon. The By-laws may
contain any provisions for the regulation and management of the affairs of the
Corporation not inconsistent with law or the Articles of Incorporation.
[DESCRIPTION] EXHIBIT 13 TO 1994 CILCORP/CILCO 10K
Management's Discussion and Analysis of Financial Condition and Results of
Operations, Management's Report to the Stockholders of CILCORP Inc., Report
of Independent Public Accountants to the Stockholders of CILCORP Inc. and
Financial Statements of CILCORP Inc.'s 1994 Annual Report to Stockholders
CILCORP and Subsidiaries
The financial condition and operating results of CILCORP Inc. (the
Company) primarily reflect the operations of Central Illinois Light
Company (CILCO), the Company's principal business subsidiary. The
Company's other core business subsidiary is Environmental Science &
Engineering, Inc. (ESE). The Other Businesses segment includes the
operations of the holding company itself (Holding Company), its
investment subsidiary, CILCORP Investment Management Inc. (CIM), and
its venture capital subsidiary, CILCORP Ventures Inc. (CVI).
CILCO is a regulated public utility engaged in the generation,
transmission and distribution of electric energy and the purchase,
transportation and distribution of natural gas in Central Illinois.
ESE is an environmental consulting and engineering firm with
additional capabilities in laboratory analysis and equipment
manufacturing.
OVERVIEW
Contributions to the Company's earnings per share for the last three
calendar years are shown below:
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
CILCO $2.26 $2.60 $2.41
ESE .14 (.17) .15
Other Businesses .10 .17 (.08)
----- ----- -----
Earnings per share $2.50 $2.60 $2.48
===== ===== =====
</TABLE>
CILCO's earnings declined in 1994 primarily due to a $4.5 million after-tax
charge against income to reflect the Illinois Commerce Commission's
disallowance of a portion of CILCO's investment in renewing its Springfield,
Illinois, gas system. CILCO also paid $1 million in fines and expenses
related to a U.S. Department of Justice and U.S. Department of
Transportation review of CILCO's gas operations (See Note 9). These one-
time charges reduced earnings per share of common stock by $.42. In
addition, gas operating income was lower due to warmer than normal weather.
Heating degree days were 8% below normal in 1994 and were 8% lower than in
1993.
ESE's results improved significantly in 1994 primarily due to lower
general and administrative expenses. Other Businesses' results
declined in 1994 due to the termination payment made on a lease at an
ESE facility and other outside services costs. Also, 1993 results
reflected the favorable settlement of a federal tax dispute related to
CIM's lease portfolio.
The following table summarizes each business segment's contribution to net
income (see Results of Operations for further discussion).
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Electric operating income $49,623 $49,129 $45,079
Gas operating income 8,884 11,058 12,521
------- ------- -------
Total utility operating income 58,507 60,187 57,600
Utility interest expense and other (24,686) (26,828) (27,014)
Disallowed plant cost of
regulated subsidiary, net of tax (4,541) -- --
Environmental and engineering
services net income (loss) 1,824 (2,266) 1,938
Other businesses net income (loss) 1,482 2,490 (427)
------- ------- -------
Net income $32,586 $33,583 $32,097
======= ======= =======
</TABLE>
Return on average common equity was 9.5% in 1994 compared to 10% in
1993 and 9.5% in 1992. The ratio of common equity to total
capitalization, including short-term debt, remained stable in 1994 at
approximately 44%. The fixed charge coverage ratio increased to 2.6
in 1994 compared to 2.4 in 1993 and 1992.
Inflation may have a significant impact on the Company's future
operations, its ability to contain costs and the need for CILCO to
seek timely and adequate utility rate increases. To help protect
CILCO from the effects of inflation, substantially all electric and
gas sales rates include a fuel adjustment clause or a purchased gas
adjustment clause to provide for the recovery of changes in electric
fuel costs, excluding coal transportation, and changes in the cost of
gas. Over the past five years, the rate of inflation, as measured by
the Consumer Price Index, has ranged from 2.5% to 5.4% annually.
CAPITAL RESOURCES AND LIQUIDITY
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 during the coming year to fund the
Company's capital expenditures program, pay interest and dividends,
meet working capital needs and retire (or refinance) debt as it
matures. The Company's long-term ability to declare and pay dividends
depends upon the ability of its subsidiaries to generate cash from
their operations, future business conditions, earnings, and the
financial condition of the Company.
THE COMPANY
From December 1993 through March 1994, the Company issued 126,475
shares of common stock at an average price of $37.08 per share through
the CILCO Employees' Savings Plan (ESP) and 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 ESP, the DRIP 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.
CILCORP is currently authorized by its Board of Directors to borrow
up to $50 million on a short-term basis. At the end of 1994 and
1993, the Company had $40 million of committed bank lines and $5
million of discretionary bank lines. At December 31, 1994, $6
million of the lines were used, compared to $18.8 million of short-
term debt outstanding at December 31, 1993. The Company plans to have
$50 million of committed lines and $10 million of discretionary lines
available by the end of February 1995 through six different banks.
The Company uses a competitive bidding process for its short-term
borrowings and has arranged facilities in excess of its authorized
limit so that all of its borrowings can be competitively bid.
During December 1994, the Company issued $22 million of medium-term
notes to refinance $18 million of CILCORP Lease Management Inc.
(CLM) term debt maturing in March 1995. CLM is a wholly-owned
subsidiary of CIM. The maturing CLM debt carries prepayment
penalties, so the proceeds of the notes have been used temporarily to
reduce CILCORP short-term debt. The remaining $4 million will be used
to refinance short-term debt supporting investments at CIM.
As part of the 1992 restructuring of the Springerville Unit No. 1
lease, CLM received approximately 1.2 million shares of Tucson
Electric Power Company (TEP) common stock, and warrants to purchase
approximately 895,000 additional shares. During 1994 and 1993, CLM
sold all of the TEP stock and warrants, realizing pre-tax gains of
$1.8 million and $2 million in 1994 and 1993, respectively. The
proceeds were used to reduce CILCORP short-term debt. CIM and CLM had
minimal cash and temporary cash investments at the end of 1994 and
1993.
In July 1994, Standard & Poor's (S&P) lowered CILCORP's rating of
unsecured medium-term notes to A+ from AA-. In September 1994,
Moody's Investor Service (Moody's) lowered its rating on CILCORP's
unsecured medium-term notes to A1 from Aa3.
CILCO
In 1994, CILCO spent $91.4 million for capital additions and
improvements. These expenditures consisted primarily of replacements
and improvements to the existing electric and gas systems, including
$15.7 million for the steam boilers and related auxiliary equipment
of a cogeneration plant at Midwest Grain Products, Inc. (MWG), one of
CILCO's major gas customers. Utility capital projects were financed
during 1994 with funds from operating activities and issuance of
short-term debt. CILCO's net cash flow from operations in 1994 was
$107 million. CILCO paid $16 million in cash dividends to CILCORP
during 1994.
CILCO's short-term debt increased to $23.4 million at December 31,
1994, from $12.4 million at December 31, 1993. CILCO expects to
issue short-term commercial paper periodically during 1995, and is
currently authorized by its Board of Directors to issue up to
$66 million of short-term debt. At December 31, 1994, committed bank
lines of credit totaled $30.4 million, all of which were unused.
CILCO expects these bank lines will remain unused through 1995.
Estimated capital expenditures for 1995 and 1996 are $69 million and
$76 million, respectively. The 1995 estimate includes $13 million
for electric energy supply and transmission projects, $3 million for
gas supply and transmission projects, $45 million for electric and
gas distribution system improvements and $2.4 million to complete the
installation of the 21 megawatt electric generating equipment for the
MWG project. Anticipated total capital expenditures for 1997-1999 are
$191 million.
In October 1994, CILCO obtained Illinois Commerce Commission (ICC)
approval to issue not more than $65 million of secured medium-term
notes and not more than $25 million of pollution control bonds. In
November 1994, the Securities and Exchange Commission declared
effective a shelf registration statement for the $65 million of
secured medium-term notes. During 1995, CILCO plans to issue
approximately $20 million of the medium-term notes to finance capital
expenditures. CILCO plans to finance the remainder of its 1995 and
1996 capital expenditures with funds provided by operations. CILCO
intends to issue $36 million of secured medium-term notes to retire
outstanding long-term debt as it matures in 1996 and 1997. CILCO
expects to issue the $25 million of pollution control bonds in 1996
and later years to finance pollution control facilities, including
new solid waste disposal facilities at CILCO's Duck Creek generating
station. The timing of the issuance and use of the remaining $9
million of medium-term notes has not yet been determined.
During 1993, CILCO issued $108 million of medium-term notes and
first mortgage pollution control bonds, $22 million of preferred
stock and $25 million of flexible auction-rate preferred stock.
CILCO used the proceeds from these issuances to retire $96.4 million
of first mortgage bonds and $45.5 million of preferred stock. The
balance of the financing proceeds was used to retire short-term debt.
In 1994, annual interest expense decreased $730,000 as a result of
the bond refinancings. Also, annual preferred dividend requirements
decreased by $1.5 million between 1992 and 1994 as a result of
refinancing with a combination of lower fixed-rate and flexible
auction-rate preferred stocks.
In July 1994, S&P lowered CILCO's rating of senior secured debt to
AA- from AA and preferred stock to A+ from AA-. Moody's affirmed its
Aa2 rating of CILCO's long-term debt.
ESE
ESE spent $4.4 million for capital additions and improvements in 1994.
In addition, through a newly formed wholly-owned subsidiary, Savannah
Resources Inc., ESE spent $2.3 million to acquire land that will be
remediated and sold in 1995. ESE expects to spend $4.1 million for
capital additions and improvements in 1995, of which $1.9 million will
be for the continued construction of a mixed waste laboratory in
Gainesville, Florida.
ESE has a $15 million revolving line of credit and a $20 million term
note with the Holding Company. The revolving line of credit expires
on May 2, 1996, while principal on the term note is due on May 2,
1998. At December 31, 1994, ESE had $5.6 million outstanding on the
revolving line of credit, compared to $.9 million outstanding at
December 31, 1993. ESE also has a $7.5 million bank line of credit to
collateralize performance bonds issued in connection with ESE
projects, of which $4.5 million was used as of December 31, 1994. ESE
expects to finance its capital expenditures and working capital needs
for 1995 with a combination of funds generated internally and periodic
short-term borrowings from the Holding Company.
ENVIRONMENTAL MATTERS
CILCO's capital expenditures related to pollution control facilities
are estimated to be $3.4 million and $14 million for 1995 and 1996,
respectively.
The acid rain provisions of the Clean Air Act Amendments of 1990
(Amendments) require additional sulfur dioxide (SO2) and nitrogen
oxide (NOx) emission reductions at CILCO's generating facilities.
CILCO's facilities are exempt in Phase I of the Amendments due to
previous emission reductions, but are subject to Phase II of the
Amendments which require additional emission reductions by the year
2000.
CILCO's final compliance strategy will depend upon regulations issued
under the Amendments; therefore, CILCO cannot currently determine
definitive compliance costs and schedules. CILCO will continue to
monitor regulatory actions and develop compliance strategies to
minimize any financial impact. Under current regulatory policies,
CILCO expects to recover compliance costs associated with the
Amendments and other environmental regulations through rates charged
to customers. CILCO's present strategy includes use of an existing
SO2 scrubber and limited fuel switching to reduce SO2 emissions, and
combustion control modifications to reduce NOx emissions. CILCO's
generating units will not require additional SO2 scrubbers.
Through 1996, CILCO expects to spend $15.8 million for boiler
retrofits and emissions monitoring equipment related to the
Amendments, including $5.4 million spent in 1994 and $3.5 million in
1993. In 1993, the U. S. Environmental Protection Agency established
acid rain emission allowance reserves for power plants in Phase II.
Allowances are transferable to third parties at market prices. The
number of allowances allocated to CILCO approximates its future needs,
so CILCO expects it will buy or sell minimal amounts of allowances.
Some studies suggest that magnetic fields produced by electric
current, known as "electric and magnetic fields" or EMF, may be
associated with illness or disease. However, research conducted to
date has found no conclusive evidence that EMF has an adverse impact
on health. CILCO is participating in utility industry funded studies
on this subject. There are also claims that EMF may contribute to
losses in the market value of property near certain electric
transmission lines. CILCO will continue to monitor these issues, but
their ultimate impact cannot be predicted at this time.
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 five former gas
manufacturing plant sites (Sites A, B, C, D, and E) 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 five 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. 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 Sites D and E. CILCO has no remediation responsibility
for Site E and has not yet determined the extent, if any, of its
remediation responsibility for Site D.
In addition, CILCO paid approximately $650,000 through 1994 to outside
parties to investigate and/or test Sites A and B. CILCO expects to
spend approximately $300,000 for site monitoring, legal fees and
feasibility studies in 1995, and has recorded a regulatory asset and
corresponding liability on the Balance Sheets for this amount (see
Note 1).
CILCO has recorded a $5 million liability and a corresponding
regulatory asset on its Balance Sheets representing the minimum amount
of future coal tar investigation and remediation costs CILCO expects
to incur (see Note 1). Coal tar remediation costs incurred through
1994 have been deferred on the Balance Sheets, net of amounts
recovered from customers. CILCO is presently allowed to recover
prudently incurred coal tar remediation costs paid to outside parties
pursuant to a gas rate rider which authorizes recovery over a five-
year period. Through December 31, 1994, CILCO has recovered
approximately $3.9 million in coal tar remediation costs from its
customers.
The gas rate rider allowing recovery of remediation costs is currently
being appealed to the Illinois Supreme Court by several parties.
CILCO cannot predict the outcome of the appeal, but believes most or
all of its future coal tar remediation costs will continue to be
recoverable from customers. Therefore, although the total cost to
CILCO of any action with respect to the unremediated sites and the
possibility of recovering that cost from insurance carriers or any
PRPs cannot now be determined, management believes that such cost will
not have a material adverse effect on CILCO's financial position or
results of operations.
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 December 31, 1994, pipeline
suppliers have billed CILCO, subject to refund, for approximately $1.4
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 up to
$3 million, excluding interest. During 1994, the ICC affirmed the
right of Illinois gas distribution companies to recover pipeline
transition costs from their customers; therefore, management does not
expect that Order 636 will 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 and
other charges related to the transition to a more competitive gas
industry. Through December 1994, gas pipelines have billed CILCO
$22.2 million for take-or-pay charges and certain costs related to one
supplier's liquefied natural gas project. This amount includes $3.9
million of interest. CILCO estimates that it could ultimately be
directly billed approximately $25.6 million, excluding interest, for
these costs. CILCO is allowed by the ICC to recover these charges via
a factor incorporated into the PGA, and through December 31, 1994, has
recovered $21.1 million, including interest, from its customers.
CILCO has recorded a regulatory asset and corresponding liability of
$4 million on its Balance Sheets as of December 31, 1994, of which
$1.2 million will be due in one year (see Note 1). The remaining $2.8
million represents the minimum amount of the estimated range of such
future costs which CILCO expects to incur related to take-or-pay and
transition costs.
ACCOUNTING PRONOUNCEMENTS
In 1992, the Financial Accounting Standards Board (FASB) issued
Statement No. 112, "Employer's Accounting for Postemployment
Benefits" (SFAS 112). The FASB issued Statement No. 115 "Accounting
for Certain Investments in Debt and Equity Securities" (SFAS 115) in
1993 and Statement No. 119, "Disclosure about Derivative Financial
Instruments and Fair Value of Financial Instruments" (SFAS 119) in
1994. The Company adopted SFAS 112 on January 1, 1994 (see Note 3).
The Company also adopted SFAS 115 and SFAS 119 on January 1, 1994,
but to date, these statements have not had a material effect on the
Company's financial position, results of operations or cash flows.
During 1994, CILCO entered into a pilot program to hedge its gas
costs. The program, which includes investments in derivatives as
defined by SFAS 119, is immaterial to the Company's financial
position, results of operations and cash flows.
RESULTS OF OPERATIONS
CILCO ELECTRIC OPERATIONS
The following table summarizes electric operating revenue and expenses
by component.
<TABLE>
<CAPTION>
Components of Electric Operating Income 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Revenue:
Electric retail $304,903 $298,602 $280,380
Sales for resale 8,182 4,522 8,433
-------- -------- --------
Total revenue 313,085 303,124 288,813
-------- -------- --------
Cost of sales:
Cost of fuel 97,184 92,112 94,133
Purchased power expense 9,433 8,754 4,295
Revenue taxes 13,260 12,378 11,276
-------- -------- ---------
Total cost of sales 119,877 113,244 109,704
-------- -------- ---------
Gross margin 193,208 189,880 179,109
-------- -------- ---------
Operating expenses:
Operation and maintenance
expenses 75,806 76,287 72,212
Depreciation and amortization 39,130 38,337 37,465
Income taxes 19,925 17,542 15,747
Other taxes 8,724 8,585 8,606
-------- -------- --------
Total operating expenses 143,585 140,751 134,030
-------- -------- --------
Electric operating income $ 49,623 $ 49,129 $ 45,079
======== ======== ========
</TABLE>
Electric gross margin increased 2% in 1994, primarily due to a 3%
increase in retail kilowatt hour (kwh) sales. The ratio of gross
margin to revenue has remained relatively constant for the last three
years. Increases in the number of residential and commercial
customers, higher demand by commercial customers and warmer summer
weather contributed to the increased sales volumes. Cooling degree
days were 5% higher in 1994 than in 1993. Industrial sales volumes
increased 3% compared to 1993, due to greater demand by several of
CILCO's large industrial customers. CILCO set a new all-time system
peak demand of 1,137,000 kwh on July 5, 1994.
Electric gross margin increased 6% in 1993 from 1992, primarily due to
a 7% increase in retail kilowatt hour sales. The increase in retail
sales was partially offset by a decrease in sales for resale revenue.
Residential sales volumes increased 10%, while commercial sales
volumes increased 5%. These increases were primarily due to warmer
summer weather. Cooling degree days were 30% higher in 1993 than in
1992. Industrial sales volumes increased 6% compared to 1992 due to
greater demand by several of CILCO's large industrial customers.
Sales for resale increased in 1994 from 1993 due to greater demand
from neighboring utilities. Sales for resale vary based on CILCO's
available capacity for bulk power sales, energy requirements of
neighboring utilities and the price of power available for sale.
The National Energy Policy Act of 1992 (NEPA) encourages competition
by allowing utilities and non-utilities to form non-regulated
generation subsidiaries to supply additional electric demand without
being restricted by the Public Utility Holding Company Act of 1935.
The FERC may order access to utility transmission systems by third-
party energy producers on a case-by-case basis and may also order
electric utilities to enlarge their transmission systems to transport
(wheel) power, subject to certain conditions. NEPA specifically bans
federally-mandated wheeling of power for retail customers, but several
state public utility regulatory commissions are adopting pilot
programs to initiate retail wheeling. Various Illinois trade
associations are currently studying retail wheeling implications.
CILCO is presently involved with a statewide task force to examine
electric utility regulation and competition. The results of this
study 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. In response to this changing environment, CILCO
has entered into long-term contracts with various industrial customers
to be the exclusive provider of their electric power requirements at
prices consistent with current rates. These contracts, which
typically have terms ranging from five to eight years, accounted for
17% of CILCO's total 1994 retail kwh sales.
CILCO's largest customer is Caterpillar Inc., which represented 13% of
1994 electric revenues. On June 20, 1994, Caterpillar employees
represented by the United Auto Workers Union began a strike at
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 and gross margin may also be affected in the long-term by
increased competition in the electric utility industry.
Substantially all of CILCO's electric generation capacity is coal-
fired. The cost of fuel increased 6% in 1994 primarily due to an 8%
increase in electric generation. Sales to retail customers and other
utilities were higher than 1993 due to warmer summer weather. Lower
coal prices partially offset the effects of increased generation. The
cost per ton of coal burned, including transportation cost, decreased
3% in 1994 compared to 1993.
Purchased power expense increased in 1994 compared to 1993.
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, or when required to
meet its power requirements, such as during maintenance outages at
CILCO plants. Costs and savings realized from the purchase of power
are passed on to CILCO's customers via the fuel adjustment clause
(FAC). The FAC allows CILCO to pass increases and decreases in the
cost of fuel through to customers. CILCO expects the wholesale power
market to become increasingly competitive due to certain provisions
of NEPA.
Electric operation and maintenance expenses decreased slightly in
1994, but increased 6% in 1993 from 1992. The 1994 decreases were
primarily due to lower power plant and overhead line maintenance
expense, injury and damage claims and other post employment benefit
(OPEB) costs. The 1994 decreases were partially offset by increased
employee benefit costs, including costs resulting from the
implementation of SFAS 112 (see Note 3), development expenses of a
new customer information system and general inflationary trends.
The increase in 1993 from 1992 was primarily due to greater power
plant maintenance expenses.
The increases in depreciation and amortization expense in 1994 and
1993 reflect additions and replacements of utility plant at costs in
excess of the original cost of the property retired.
The changes in income taxes in 1994 and 1993 were primarily the result
of changes in pre-tax income. A higher federal corporate income tax
rate due to the passage of the Revenue Reconciliation Act of 1993 also
contributed to the 1993 increase (see Note 2).
CILCO GAS OPERATIONS
<TABLE>
The following table summarizes gas operating revenue and expenses by
component.
<CAPTION>
Components of Gas Operating Income 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Revenue:
Sale of gas $138,161 $140,620 $134,385
Transportation services 10,124 10,134 10,541
-------- -------- --------
Total revenue 148,285 150,754 144,926
-------- -------- --------
Cost of sales:
Cost of gas 78,696 79,022 77,123
Revenue taxes 7,190 7,039 6,547
-------- -------- --------
Total cost of sales 85,886 86,061 83,670
-------- -------- --------
Gross margin 62,399 64,693 61,256
-------- -------- --------
Operating expenses:
Operation and maintenance
expenses 33,511 31,486 28,041
Depreciation and
amortization 15,219 14,686 13,930
Income taxes 1,564 4,684 4,082
Other taxes 3,221 2,779 2,682
-------- -------- --------
Total operating expenses 53,515 53,635 48,735
-------- -------- --------
Gas operating income $ 8,884 $ 11,058 $ 12,521
======== ======== ========
</TABLE>
Gas gross margin decreased 4% in 1994, primarily due to a 4% decrease
in retail sales volumes. Residential and commercial sales volumes
decreased 7% and 1%, respectively, primarily due to milder weather
during the heating season. Increases in sales volumes by certain
classes of industrial customers partially offset the decreases in
retail sales. Heating degree days were 8% lower in 1994 than in 1993.
The cost of gas decreased in 1994. The decrease was primarily due to
decreased retail sales volumes and lower natural gas prices. On
December 12, 1994, the ICC approved an increase in CILCO's gas base
rates designed to increase CILCO's annual gas revenues by
approximately $10.6 million (see Note 9).
Gas gross margin increased 6% in 1993 from 1992, primarily due to an
8% increase in retail sales volumes. Residential and commercial sales
volumes increased 10% and 9%, respectively, primarily due to colder
weather during the heating season. Heating degree days were 11%
higher in 1993 than in 1992.
Revenue from gas transportation services decreased slightly in 1994
and 4% in 1993, while the volume of gas transported increased 8% in
1994 and decreased 11% in 1993. Revenues for 1994 declined primarily
due to decreased purchases of gas by commercial transportation
customers from suppliers other than CILCO. The revenue changes in
1994 and 1993 were not proportional to the changes in volume because
certain large volume transportation customers can negotiate lower unit
charges for service. Transportation arrangements have made it
practical for certain industrial customers to continue to use gas
instead of switching to alternate fuels. There were 567 transportation
customers in 1994 compared to 668 customers in 1993 and 635 in 1992.
As a result of CILCO's new gas rates (see Note 9), CILCO's system
rates are more competitive with transportation rates. Various
transportation customers switched back to CILCO's system in December
1994, and CILCO expects this trend to continue into 1995.
Weather conditions, the ability of large customers to purchase gas on
the open market at competitive rates, the continuing trend toward more
efficient gas appliances and overall economic conditions in CILCO's
service area will affect future gas sales.
Gas operation and maintenance expenses increased 6% in 1994 and 12% in
1993. The 1994 increases were primarily due to increased regulatory
costs associated with CILCO's recent gas rate case and higher employee
benefit costs. Implementation of SFAS 112 (see Note 3) contributed to
the increase in employee benefit costs. Decreased OPEB costs and gas
maintenance expenses partially offset the increases. Maintenance
expenses decreased as a result of the completion of repairs to the
Springfield gas distribution system in 1993 (see Note 9). Operation
and maintenance expenses are also affected by general inflationary
trends.
The increases in depreciation and amortization expenses in 1994 and
1993 reflect additions and replacements of utility plant at costs in
excess of the original cost of the property retired.
The changes in income taxes in 1994 and 1993 were primarily the result
of changes in taxable income and the effects of adjustments which
increased the 1993 tax provision. A higher federal corporate income
tax rate due to the passage of the Revenue Reconciliation Act of 1993
also contributed to the 1993 increase (see Note 2).
CILCO OTHER INCOME AND DEDUCTIONS
Utility other deductions increased substantially in 1994 from 1993.
Disallowed gas plant costs, net of related income taxes, which
resulted from the December 1994, ICC rate order, significantly
increased CILCO's other deductions (see Note 9). The civil fine and
other costs CILCO agreed to pay as a result of the U.S. Department of
Justice and the U.S. Department of Transportation investigations
also contributed to the increase in other deductions. Interest
expense decreased partially due to a settlement of an Internal
Revenue Service audit. Lower interest rates on bonds refinanced in
1993 contributed to the decrease in interest expense. The weighted-
average interest rate of long-term debt decreased to 6.89% in 1994
from 7.19% in 1993 (see Capital Resources and Liquidity).
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 will be included in other income
during 1995, 1996 and 1997.
ESE
The following table summarizes environmental and engineering services
revenue and expenses.
<TABLE>
<CAPTION>
Components of ESE Net Income (Loss) 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Environmental and engineering
services revenue $132,799 $123,162 $137,858
Direct non-labor project costs 52,896 43,627 52,531
-------- -------- --------
Net revenue 79,903 79,535 85,327
-------- -------- --------
Expenses:
Direct salaries and other costs 39,720 40,180 41,667
General & administrative 29,319 34,418 32,737
Depreciation and amortization 5,867 6,064 5,472
-------- -------- --------
Operating expenses 74,906 80,662 79,876
-------- -------- --------
Interest 1,915 1,719 2,167
-------- -------- --------
Income before income taxes 3,082 (2,846) 3,284
Income taxes 1,258 (580) 1,346
-------- -------- --------
ESE net income (loss) $ 1,824 $(2,266) $ 1,938
======== ======== ========
</TABLE>
ESE incurs substantial direct non-labor project costs from the use of
subcontractors on projects. These costs are passed directly through
to ESE's clients. As a result, a better measure of operating
performance is net revenue, which is determined by deducting such
direct non-labor project costs from gross revenues. Net revenue
remained virtually unchanged in 1994 after decreasing by 7% in 1993.
Direct salaries and other costs decreased by 1% in 1994, after
decreasing by 4% in 1993. The decreases resulted from changes in
ESE's work force to reflect the change in business volume. Because
the consulting industry is labor intensive, ESE can adjust staffing
levels appropriately to respond to changing business conditions.
ESE's earnings improved significantly in 1994 primarily due to a
reduction in general and administrative expenses. General and
administrative expenses decreased by 15%, following a 5% increase in
1993. In 1994, staffing levels were managed to reflect business
volume, resulting in decreases in salary expense, benefit costs and
hiring costs. Bad debt expense also decreased from the previous year
due to improved collection experience. During 1994, ESE was able to
renegotiate several leases which resulted in lower facilities cost.
The increase in 1993 general and administrative expenses resulted
from general inflation and higher medical benefit costs.
Depreciation expense declined by 3% in 1994, primarily due to the
expiration of capital leases and to an increase in fully depreciated
assets. Amortization expense relates to a non-compete agreement
executed in 1990, which is being amortized over its five-year
duration, and to the Cost in Excess of Net Assets of Acquired
Businesses, which is being amortized over forty years. Depreciation
expense increased in 1993 due to fixed asset additions.
Interest expense increased in 1994 after decreasing in 1993,
primarily because of increased average debt balances and higher
interest rates. The increase in income taxes is due to ESE's higher
pre-tax income.
ESE's future business activity will continue to be affected by the
level of demand for its services, which is affected by governmental
funding levels, the enforcement of various federal and state statutes
and regulations dealing with the environment and the use, control,
disposal and clean-up of hazardous wastes. The market for ESE's
services is competitive; however, no single entity currently
dominates the environmental and engineering consulting services
marketplace.
OTHER BUSINESSES
The following table summarizes Other Businesses' revenue and
expenses. Other Businesses' results include income earned and
expenses incurred at the Holding Company, CIM, CVI and non-operating
interest income of CILCO.
<TABLE>
<CAPTION>
Components of Other Businesses'
Net Income (Loss) 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Revenue:
Leveraged lease revenue $ 6,907 $ 4,280 $ 5,903
Other revenue 4,063 3,191 3,725
------- ------- -------
Total revenue 10,970 7,471 9,628
------- ------- -------
Expenses:
Operating expenses 5,527 2,637 3,814
Depreciation and amortization 214 177 148
Interest expense 3,624 3,190 3,253
Income and other taxes 123 (1,283) 2,392
Minority interest -- 260 448
------- ------- -------
Total expenses 9,488 4,981 10,055
------- ------- -------
Other businesses' net income
(loss) $ 1,482 $ 2,490 $ (427)
======= ======= =======
</TABLE>
Leveraged lease revenues in 1994 reflect a full year's revenue from
two leveraged lease investments made in late 1993. The effect of this
increase was partially offset by a decline in 1994 revenues from CIM's
other leveraged leases. Under generally accepted accounting
principles pertaining to leveraged leases, revenues decline as the
lease portfolio matures. During 1995, CIM expects leveraged lease
revenues to decline by $700,000, absent investment in new leases.
Other revenues increased in 1994 due to revenues from CILCORP Energy
Services Inc. (CESI), a newly-formed subsidiary of CVI. During 1994,
CESI had revenues of $969,000, primarily from the sale of carbon
monoxide detectors to utilities other than CILCO for resale to their
customers.
Other revenues also reflect a $1.8 million gain from the sale of
193,000 shares of Tucson Electric Power (TEP) stock and 895,000 TEP
warrants in 1994. In 1993, CIM sold one million shares of TEP stock
for a $2 million gain. Interest income on temporary cash investments,
which is included in other revenues, declined due to lower investment
balances.
Operating expenses in 1994 include CESI cost of goods sold of
$829,000. Operating expenses also increased due to higher
professional services costs and several one-time charges, including
termination of a lease at an ESE facility which it no longer plans to
use. The lease was entered into during negotiations which led to
CILCORP's 1990 acquisition of ESE.
Interest expense increased due to higher interest rates and average
debt balances.
Income and other taxes in 1993 include a $3.1 million reversal of tax
expense which had been recorded in prior years to reflect the
potential unfavorable outcome of a tax dispute between the Company and
the Internal Revenue Service (IRS) regarding the depreciable life of
the Springerville Unit No. 1 lease. Offsetting this reduction in 1993
was an additional $1.1 million of income tax expense to record the
effect of an increase in the federal income tax rate on the Company's
lease portfolio. Income tax expense in 1994 includes a reduction in
tax expense to reflect the settlement of several issues contested with
the IRS which were unrelated to CIM's lease portfolio.
In December 1993, CIM purchased the 19% minority interest in CILCORP
Lease Management, Inc. for $1.4 million.
<PAGE>
Management's Report
To the Stockholders of CILCORP Inc.:
Management has prepared the accompanying financial statements and notes
for CILCORP Inc. and its consolidated subsidiaries in accordance with
generally accepted accounting principles. Estimates and judgments used
in developing these statements are the responsibility of management.
Financial data presented throughout this report is consistent with these
statements.
CILCORP Inc. maintains a system of internal accounting controls which
management believes is adequate to provide reasonable assurance as to
the integrity of accounting records and the protection of assets. Such
controls include established policies and procedures, a program of
internal audit and the careful selection and training of qualified
personnel.
The financial statements have been audited by CILCORP's independent
public accountants, Arthur Andersen LLP, whose appointment was ratified
by stockholders. Their audit was conducted in accordance with generally
accepted auditing standards and included an assessment of selected
internal accounting controls only to determine the scope of their audit
procedures. The report of the independent public accountants is
contained in this annual report.
The Audit Committee of the Board of Directors, consisting solely of
outside directors, meets periodically with the independent public
accountants, internal auditors and management to review accounting,
auditing, internal accounting control, and financial reporting matters.
The independent public accountants have direct access to the Audit
Committee. The Audit Committee meets separately with the independent
public accountants.
R. O. Viets
R. O. Viets
President and Chief Executive Officer
T. D. Hutchinson
T. D. Hutchinson
Controller
<PAGE>
<TABLE>
Consolidated Statements of Income
CILCORP Inc. and Subsidiaries
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands except per share amounts)
<S> <C> <C> <C>
Revenue:
Electric $313,085 $303,124 $288,813
Gas 148,285 150,754 144,926
Environmental and Engineering
Services 132,799 123,162 137,858
Other Businesses 10,970 7,471 9,628
-------- -------- --------
Total 605,139 584,511 581,225
-------- -------- ---------
Operating Expenses:
Fuel for Generation and
Purchased Power 106,617 100,866 98,428
Gas Purchased for Resale 78,696 79,022 77,123
Other Operations and Maintenance 234,323 225,135 227,111
Disallowed Plant Cost of
Regulated Subsidiary 7,522 -- --
Depreciation and Amortization 61,143 59,975 57,727
State and Local Revenue Taxes 20,485 19,466 17,874
Other Taxes 16,640 16,412 16,156
-------- -------- --------
Total 525,426 500,876 494,419
-------- -------- --------
Fixed Charges and Other:
Interest Expense 26,341 27,363 29,205
Preferred Stock Dividends
of Subsidiary 2,980 4,043 4,441
Allowance for Funds Used During
Construction (1,040) (199) (337)
Other 666 516 142
-------- -------- --------
Total 28,947 31,723 33,451
-------- -------- --------
Income Before Income Taxes 50,766 51,912 53,355
Income Taxes 18,180 18,069 20,810
-------- -------- --------
Net Income Including Minority
Interest 32,586 33,843 32,545
Minority Interest -- 260 448
-------- -------- --------
Net Income Available for
Common Stockholders $ 32,586 $ 33,583 $ 32,097
======== ======== ========
Average Common Shares
Outstanding 13,026 12,914 12,924
Net Income Per Common Share $2.50 $2.60 $2.48
======== ======== ========
Dividends Per Common Share $2.46 $2.46 $2.46
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
CILCORP Inc. and Subsidiaries
<CAPTION>
Assets (As of December 31) 1994 1993
(In thousands)
<S> <C> <C>
Current Assets:
Cash and Temporary Cash Investments $ 1,604 $ 1,440
Receivables, Less Reserves of $2,291 and $2,255 55,779 58,350
Accrued Unbilled Revenue 40,474 38,179
Fuel, at Average Cost 14,765 8,323
Materials and Supplies, at Average Cost 16,731 16,674
Gas in Underground Storage, At Average Cost 17,484 24,548
Prepayments and Other 12,402 11,153
---------- ---------
Total Current Assets 159,239 158,667
---------- ---------
Investments and Other Property:
Investment in Leveraged Leases 120,961 114,803
Other Investments 5,427 7,453
---------- ---------
Total Investments and Other Property 126,388 122,256
---------- ----------
Property, Plant and Equipment:
Utility Plant, at Original Cost
Electric 1,092,382 1,068,818
Gas 355,270 348,541
---------- ---------
1,447,652 1,417,359
Less - Accumulated Provision for Depreciation 653,571 618,912
---------- ---------
794,081 798,447
Construction Work in Progress 71,105 31,896
Plant Acquisition Adjustments,
being Amortized to 1999 3,355 4,068
Other, Net of Depreciation 23,152 24,173
---------- ----------
Total Property, Plant and Equipment 891,693 858,584
---------- ----------
Other Assets:
Prepaid Pension Expense 13,312 13,953
Cost in Excess of Net Assets of Acquired
Businesses, Net of Accumulated
Amortization of $3,589 and $2,886 24,548 25,251
Other 23,204 19,729
---------- ----------
Total Other Assets 61,064 58,933
---------- ----------
Total Assets $1,238,384 $1,198,440
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
Consolidated Balance Sheets
CILCORP Inc. and Subsidiaries
<CAPTION>
Liabilities and Stockholders' Equity (As of December 31)
1994 1993
(In thousands)
<S> <C> <C>
Current Liabilities:
Current Portion of Long-Term Debt $ 21,200 $ 193
Notes Payable 29,400 31,200
Accounts Payable 51,952 47,668
Accrued Taxes 7,729 5,666
Accrued Interest 9,024 9,632
Purchased Gas Adjustment Over-Recoveries 2,142 3,029
Other 16,557 12,915
---------- ----------
Total Current Liabilities 138,004 110,303
---------- ----------
Long-Term Debt 326,695 325,711
---------- ----------
Deferred Credits and Other Liabilities:
Deferred Income Taxes 246,815 229,897
Net Regulatory Liability of Regulated Subsidiary 59,997 69,477
Deferred Investment Tax Credit 26,178 27,871
Customers' Advances for Construction and Other 29,860 27,185
---------- ----------
Total Deferred Credits 362,850 354,430
---------- ----------
Preferred Stock of Subsidiary 66,120 66,120
---------- ----------
Stockholders' Equity: (See Statements on page 27)
Common Stock, no par value; Authorized
50,000,000 shares - Outstanding 13,035,756 and
12,971,501 shares 167,987 165,662
Retained Earnings 176,728 176,214
---------- ----------
Total Stockholders' Equity 344,715 341,876
---------- ----------
Total Liabilities and Stockholders' Equity $1,238,384 $1,198,440
========== ==========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
balance sheets.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Cash Flows
CILCORP Inc. and Subsidiaries
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Cash Flows from Operating Activities:
Net Income Before Preferred Dividends $ 35,566 $ 37,626 $ 36,538
-------- -------- --------
Adjustments to Reconcile Net Income to
Net Cash Provided by Operating
Activities:
Non-Cash Lease & Investment Income (7,121) (4,280) (7,616)
Depreciation and Amortization 61,143 59,975 57,727
Disallowed Plant Cost of Regulated
Subsidiary 7,522 -- --
Deferred Income Taxes, Investment
Tax Credit and Regulatory
Liability of Subsidiary, Net 5,745 6,354 (1,464)
Changes in Operating Assets and
Liabilities:
(Increase) Decrease in Accounts
Receivable and Accrued Unbilled
Revenue 276 9,476 (5,005)
(Increase) Decrease in Inventories 565 (5,609) (2,591)
Increase in Accounts Payable 4,284 8,067 5,394
(Increase) in Other Assets (4,509) (7,831) (1,734)
Increase (Decrease) in Other Liabilities 6,885 (6,565) 17,200
-------- -------- --------
Total Adjustments 74,790 59,587 61,911
-------- -------- --------
Net Cash Provided by Operating
Activities 110,356 97,213 98,449
-------- -------- --------
Cash Flows from Investing Activities:
Additions to Plant (95,762) (76,933) (69,111)
Purchase of Long-Term Investments and
Leveraged Lease Property (11) (13,595) (803)
Proceeds from Sale of Long-Term
Investments and Leveraged Lease
Property 4,667 3,787 11,378
Purchase of Minority Interest in
Consolidated Subsidiary -- (1,425) --
Other (6,559) 2,625 (5,673)
-------- -------- --------
Net Cash Used in Investing Activities (97,665) (85,541) (64,209)
-------- -------- --------
Cash Flows from Financing Activities:
Net Increase (Decrease) in Short-Term
Debt (1,800) 1,949 17,721
Proceeds from Issuance of Long-Term
Debt 22,000 107,269 133,334
Repayment of Long-Term Debt -- (108,781) (140,318)
Proceeds from Issuance of Preferred
Stock by Wholly-owned Subsidiary -- 46,006 --
Retirement of Preferred Stock by
Wholly-owned Subsidiary -- (46,051) --
Common Dividends Paid (32,063) (31,757) (31,788)
Preferred Dividends Paid (2,980) (4,043) (4,441)
Common Stock Issued 2,325 2,365 --
Preferred and Common Stock Issuance
Costs (9) (1,590) --
Common Stock Repurchased -- -- (1,732)
-------- -------- --------
Net Cash Used in Financing
Activities (12,527) (34,633) (27,224)
-------- -------- --------
Net Increase (Decrease) in Cash and
Temporary Cash Investments 164 (22,961) 7,016
Cash and Temporary Cash Investments
at Beginning of Year 1,440 24,401 17,385
-------- -------- --------
Cash and Temporary Cash Investments
at End of Year $ 1,604 $ 1,440 $ 24,401
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
Consolidated Statements of Stockholders' Equity
CILCORP Inc. and Subsidiaries
<CAPTION>
Common Stock Retained
Shares Amount Earnings Total
(In thousands except share amounts)
<S> <C> <C> <C> <C>
Balance at December 31, 1991 12,959,124 $165,029 $175,669 $340,698
Repurchase of Common Stock (49,843) (1,732) (1,732)
Cash Dividend Declared on
Common Stock ($2.46 per
share) (31,788) (31,788)
Net Income 32,097 32,097
---------- -------- -------- --------
Balance at December 31, 1992 12,909,281 $163,297 $175,978 $339,275
Common Stock Issued 62,220 2,365 2,365
Cash Dividend Declared on
Common Stock ($2.46 per
share) (31,757) (31,757)
Preferred and Common Stock
Issuance Costs (1,590) (1,590)
Net Income 33,583 33,583
---------- -------- -------- --------
Balance at December 31, 1993 12,971,501 $165,662 $176,214 $341,876
Common Stock Issued 64,255 2,325 2,325
Cash Dividend Declared on
Common Stock ($2.46 per
share) (32,063) (32,063)
Preferred and Common Stock
Issuance Costs (9) (9)
Net Income 32,586 32,586
---------- -------- -------- --------
Balance at December 31, 1994 13,035,756 $167,987 $176,728 $344,715
========== ======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of these
statements.
</TABLE>
<PAGE>
<TABLE>
Statements of Segments of Business
CILCORP Inc. and Subsidiaries
<CAPTION>
Operating Information For the Years Ended December 31,
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Utility Segment:
Electric Operations
Revenue $313,085 $303,124 $288,813
Expenses 263,462 253,995 243,734
-------- -------- --------
Operating Income 49,623 49,129 45,079
Income Taxes 19,925 17,542 15,747
-------- -------- --------
Operating Income Before
Income Taxes $ 69,548 $ 66,671 $ 60,826
======== ======== ========
Depreciation and Amortization $ 39,130 $ 38,337 $ 37,465
Capital Expenditures $ 66,537 $ 41,880 $ 41,821
Gas Operations
Revenue $148,285 $150,754 $144,926
Expenses 139,401 139,696 132,405
-------- -------- --------
Operating Income 8,884 11,058 12,521
Income Taxes 1,564 4,684 4,082
-------- -------- --------
Operating Income Before
Income Taxes $ 10,448 $ 15,742 $ 16,603
======== ======== ========
Depreciation and Amortization $ 15,219 $ 14,686 $ 13,930
Capital Expenditures $ 24,867 $ 30,677 $ 20,001
</TABLE>
<TABLE>
<CAPTION>
Major Customer for the Years Ended December 31,
1994 1993 1992
<S> <C> <C> <C> <C> <C> <C>
Caterpillar Inc.
Electric Revenue $41,422 13.2% $39,831 13.1% $38,428 13.3%
Gas Revenue 1,719 1.2% 1,581 1.0% 1,847 1.3%
------- ----- ------- ----- ------- -----
Total $43,141 9.4% $41,412 9.1% $40,275 9.3%
======= ===== ======= ===== ======= =====
</TABLE>
<TABLE>
<CAPTION>
Utility Identifiable Assets as of December 31,
1994 1993 1992
<S> <C> <C> <C>
Electric $ 718,431 $684,618 $684,968
Gas 260,070 259,462 226,579
Other Utility Assets* 38,505 44,245 47,578
---------- -------- --------
Total Utility Assets $1,017,006 $988,325 $959,125
========== ======== ========
<FN>
*Other investments, miscellaneous accounts receivable, prepaid assets,
deferred pension costs, and unamortized debt, discount, and expense
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
Environmental and Engineering Services Segment
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Revenue $132,799 $123,162 $137,858
Operating Expenses 127,802 124,289 132,407
-------- -------- --------
Operating Income (Loss) Before
Income Taxes $ 4,997 $(1,127) $ 5,451
======== ======== ========
Depreciation and Amortization $ 5,867 $ 6,064 $ 5,472
Capital Expenditures $ 4,358 $ 4,300 $ 6,804
</TABLE>
<TABLE>
Environmental and Engineering Services
<CAPTION>
Identifiable Assets as of December 31, 1994 1993 1992
<S> <C> <C> <C>
Property, Plant and Equipment $22,254 $23,116 $22,347
Cost in Excess of Net Assets of
Acquired Businesses, Net of
Amortization 24,548 25,251 26,551
Accounts Receivable and Unbilled
Revenue 42,199 36,637 42,681
Other Assets* 4,463 2,433 4,699
------- ------- -------
Total Environmental and
Engineering Services Assets $93,464 $87,437 $96,278
======= ======= =======
<FN>
*Non-compete agreement, real estate held for resale and other current
assets
</TABLE>
<TABLE>
Other Businesses Segment
<CAPTION>
For the Years Ended December 31, 1994 1993 1992
<S> <C> <C> <C>
Revenue $10,970 $ 7,471 $ 9,628
Expenses 9,365 6,264 7,663
------- ------- -------
Income Before Income Taxes $ 1,605 $ 1,207 $ 1,965
======= ======= =======
</TABLE>
<TABLE>
<CAPTION>
Other Businesses Identifiable
Assets as of December 31, 1994 1993 1992
<S> <C> <C> <C>
Leveraged Leases $120,961 $114,803 $ 97,133
Cash and Temporary Cash Investments 1,179 1,564 21,879
Other Assets 5,774 6,311 10,501
-------- -------- --------
Total Other Businesses Assets $127,914 $122,678 $129,513
======== ======== ========
<FN>
The accompanying Notes to Financial Statements are an integral part of
these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of CILCORP
Inc. (CILCORP or the Company), Central Illinois Light Company
(CILCO), Environmental Science & Engineering, Inc. (ESE) and
CILCORP's other subsidiaries after elimination of significant
intercompany transactions. Prior year amounts have been reclassified
on a basis consistent with the 1994 presentation.
REGULATION
CILCO is a public utility subject to regulation by the Illinois
Commerce Commission and the Federal Energy Regulatory Commission with
respect to accounting matters, and maintains its accounts in
accordance with the Uniform System of Accounts prescribed by these
agencies.
As a regulated public utility, CILCO is subject to the provisions of
Statement of Financial Accounting Standards No. 71, "Accounting for
the Effects of Certain Types of Regulation". Regulatory assets
represent the probable future revenues to CILCO resulting from the
ratemaking action of regulatory agencies. Net regulatory liabilities
are approximately $60 million (see Note 2). At December 31, 1994, and
1993, the regulatory assets included on the Consolidated Balance
Sheets were as follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Included in prepayments and other:
Fuel and gas cost adjustments $ 3,682 $ 5,716
Coal tar remediation cost - estimated current 300 263
Gas transition costs 1,171 574
------- -------
Current costs included in prepayments and other 5,153 6,553
------- -------
Included in other assets:
Coal tar remediation cost, net of recoveries 4,993 4,305
Gas transition costs 2,781 2,780
Unamortized loss on reacquired debt 6,486 6,950
------- -------
Future costs included in other assets 14,260 14,035
------- -------
Total regulatory assets $19,413 $20,588
======= =======
</TABLE>
UTILITY OPERATING REVENUES, FUEL COSTS AND COST OF GAS
Electric and gas revenues include service provided but unbilled at
year end. Substantially all electric rates and gas system sales rates
of CILCO include a fuel adjustment clause and a purchased gas
adjustment clause, respectively. These clauses provide for the
recovery of changes in electric fuel costs, excluding coal
transportation, and changes in the cost of gas on a current basis in
billings to customers. CILCO adjusts the cost of fuel and cost of gas
to recognize over or under recoveries of allowable costs. The
cumulative effects are deferred on the Balance Sheets as a current
asset or current liability (see Regulation, above) and adjusted by
refunds or collections through future billings to customers.
CONCENTRATION OF CREDIT RISK
CILCO, as a public utility, must provide service to customers within
its defined service territory and may not discontinue service to
residential customers when certain weather conditions exist. CILCO
continually reviews customers' credit worthiness and requests deposits
or refunds deposits based on that review. At December 31, 1994, CILCO
had net receivables of $30.5 million, of which approximately $5.1
million was due from its major industrial customers.
See Note 5 for a discussion of receivables related to CILCORP
Investment Management Inc.'s leveraged lease portfolio.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying amount of Cash and Temporary Cash Investments, Other
Investments, Preferred Stock with Mandatory Redemption and Notes
Payable approximates fair value. The Company's investment in Tucson
Electric Power Company stock and warrants had a carrying amount at
December 31, 1993, of approximately $266,000 and a fair market value
of $1.9 million. This investment was sold during 1994. The estimated
fair value of the Company's Long-Term Debt including current
maturities was $340 million at December 31, 1994, and $358 million at
December 31, 1993, based on current market interest rates for other
companies with comparable credit ratings, capital structures, and
size.
ENVIRONMENTAL AND ENGINEERING SERVICES REVENUES
ESE performs professional environmental and engineering consulting
services under time and material, cost-plus and fixed-price contracts.
Consulting services revenues include amounts for services provided but
unbilled at year end. Revenues from time and material and cost-plus
contracts are recognized as costs are incurred. Revenues from fixed-
price contracts are recognized under the percentage-of-completion
method.
DEPRECIATION AND MAINTENANCE
Provisions for depreciation of utility property for financial
reporting purposes are based on straight-line composite rates. The
annual provisions for utility plant depreciation, expressed as a
percentage of average depreciable utility property, were as follows:
<TABLE>
<CAPTION> 1994 1993 1992
<S> <C> <C> <C>
Electric 3.8% 3.8% 3.8%
Gas 4.6% 4.6% 4.6%
</TABLE>
Utility maintenance and repair costs are charged directly to expense.
Renewals of units of property are charged to the utility plant
account, and the original cost of depreciable property replaced or
retired, together with the removal cost less salvage, is charged to
the accumulated provision for depreciation.
Non-utility property is depreciated over estimated lives ranging from
5 to 40 years.
COST IN EXCESS OF NET ASSETS OF ACQUIRED BUSINESSES
Cost in excess of net assets of acquired businesses is being amortized
using the straight-line method over forty years. The amortization is
related to ESE and is a component of depreciation and amortization
expense on the Consolidated Statements of Income.
INCOME TAXES
The Company follows a policy of comprehensive interperiod income tax
allocation. Investment tax credits related to utility property have
been deferred and are being amortized over the estimated useful lives
of the related property. CILCORP and its subsidiaries file a
consolidated federal income tax return. Income taxes are allocated to
the individual companies based on their respective taxable income or
loss.
CONSOLIDATED STATEMENTS OF CASH FLOWS
The Company considers all highly liquid debt instruments purchased
with a maturity of three months or less to be cash equivalents for
purposes of the Consolidated Statements of Cash Flows.
Cash paid for interest and income taxes was as follows:
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Interest $27,663 $24,514 $27,425
Income taxes 13,103 14,760 16,207
</TABLE>
COMPANY-OWNED LIFE INSURANCE POLICIES
The following amounts related to company-owned life insurance
contracts, issued by one major insurance company, are included in
Other Investments.
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Cash surrender value of contracts $ 30,468 $26,186
Borrowings against contracts (28,831) (24,923)
-------- -------
Net investment $ 1,637 $ 1,263
======== =======
</TABLE>
Interest expense related to borrowings against company-owned life
insurance, included in "Other" on the Consolidated Statements of
Income, was $2 million, $1.4 million and $.9 million for 1994, 1993
and 1992, respectively.
NOTE 2 - INCOME TAXES
The Company adopted Statement of Financial Accounting Standards No.
109, "Accounting for Income Taxes" (SFAS 109), on January 1, 1993.
SFAS 109 requires the use of the liability method to account for
income taxes. Under the liability method, deferred income taxes are
recognized at currently enacted income tax rates to reflect the tax
effect of temporary differences between the financial reporting basis
and the tax basis of assets and liabilities. Temporary differences
occur because the income tax law either requires or permits certain
items to be reported on the Company's income tax return in a different
year than they are reported in the financial statements. Adoption of
SFAS 109 did not have a material impact on the Company's financial
position, results of operations or cash flows; however, the adoption
of SFAS 109 required reclassification of accumulated deferred income
taxes on CILCO's Balance Sheet. CILCO established a regulatory
liability to account for the net effect of expected future regulatory
actions related to unamortized investment tax credits, income tax
liabilities initially recorded at tax rates in excess of current
rates, the equity component of Allowance for Funds Used During
Construction and other items for which deferred taxes had not
previously been provided. The temporary differences related to the
consolidated net deferred income tax liability at December 31, 1994,
December 31, 1993 and January 1, 1993, were as follows:
<TABLE>
<CAPTION>
Dec. 31, 1994 Dec. 31, 1993 Jan., 1993
(In thousands)
<S> <C> <C> <C>
Deferred tax liabilities:
Property, including allowance for
funds used during construction $216,304 $216,897 $216,190
Leveraged leases 88,308 80,129 74,850
Other 13,760 14,427 10,586
Deferred tax assets:
Other (11,560) (12,079) (8,585)
Net regulatory liability of regulated
subsidiary (59,997) (69,477) (74,321)
-------- -------- --------
Deferred income taxes $246,815 $229,897 $218,720
======== ======== ========
<FN>
Of the $16,918,000 increase in the consolidated net deferred income
tax liability at December 31, 1994, from December 31, 1993, $5,810,000
is due to current year deferred federal and state income tax expense.
The remaining increase relates to an adjustment of deferred taxes due
to the utilization of alternative minimum tax credits and a decrease
in the net regulatory liability, principally due to changes in
temporary differences for which deferred taxes were not previously
provided.
</TABLE>
Income tax expenses were as follows:
<TABLE>
<CAPTION>
Years Ended December 31, 1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Current income taxes
Federal $11,825 $10,102 $22,153
State 2,238 3,352 4,077
------- ------- -------
Total current 14,063 13,454 26,230
------- ------- -------
Deferred income taxes, net
Property-related deferred
income taxes (1,094) (2,316) 249
Leveraged leases 8,179 5,257 (1,742)
Unbilled revenue 222 758 --
Gas take-or-pay settlements (1,244) 1,413 (1,679)
Coal tar remediation costs 253 120 (952)
Other (506) 1,077 398
------- ------- -------
Total deferred income taxes, net 5,810 6,309 (3,726)
------- ------- -------
Investment tax credit
amortization (1,693) (1,694) (1,694)
------- ------- -------
Total income tax provisions $18,180 $18,069 $20,810
======= ======= =======
<FN>
Total deferred income taxes, net, includes deferred state income taxes
of $1,801,000, $1,827,000 and $236,000 for 1994, 1993 and 1992,
respectively.
</TABLE>
The following table represents a reconciliation of the effective tax
rate with the statutory federal income tax rate.
<TABLE>
<CAPTION>
1994 1993 1992
<S> <C> <C> <C>
Statutory federal income tax 35.0% 35.0% 34.0%
----- ----- -----
Equity component of AFUDC
not subject to taxation (.4) -- (.1)
Depreciation differences for
which deferred taxes
have not been provided 1.2 1.0 .8
Amortization of investment
tax credit (3.3) (3.3) (3.2)
State income taxes 5.3 7.1 5.4
Excess of book over tax basis of
assets .5 .5 .5
Preferred dividends of
subsidiary and other
permanent differences 2.3 2.5 2.8
Dividends received deduction -- (.1) --
Tax provision adjustment (1.3) (5.3) 3.2
Civil fine .7 -- --
Other differences (4.2) (2.6) (4.4)
----- ----- -----
Total .8 (0.2) 5.0
----- ----- -----
Effective income tax rate 35.8% 34.8% 39.0%
===== ===== =====
</TABLE>
NOTE 3 - POSTEMPLOYMENT BENEFITS
POSTEMPLOYMENT BENEFITS OTHER THAN PENSIONS AND HEALTH CARE
On January 1, 1994, CILCO adopted Statement of Financial Accounting
Standards No. 112, "Employer's Accounting for Postemployment Benefits"
(SFAS 112). This standard requires accrual of benefits other than pensions
or health care provided to former or inactive employees. CILCO recorded a
liability of approximately $1.5 million of which $1 million represents the
cumulative effect of applying SFAS 112. Of the $1.5 million, $.4 million
has been capitalized. The financial effect of benefits ESE provides to
former or inactive employees is not material.
PENSION BENEFITS
Substantially all of CILCO's full-time employees, including those assigned
to the Holding Company, are covered by trusteed, non-contributory defined
benefit pension plans. Benefits under these qualified plans reflect the
employee's years of service, age at retirement and maximum total
compensation for any consecutive sixty-month period prior to retirement.
CILCO also has an unfunded nonqualified plan for certain employees.
Pension costs for the past three years were charged as follows:
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating expenses $2,465 $1,841 $1,995
Utility plant and other 1,189 925 721
------ ------ ------
Net pension costs $3,654 $2,766 $2,716
====== ====== ======
</TABLE>
Provisions for pension expense are determined under the rules
prescribed by Statement of Financial Accounting Standards No. 87,
"Employers' Accounting for Pensions" (SFAS 87), including the use of
the projected unit credit actuarial cost method. SFAS 87 requires
employers to recognize an additional minimum liability on the Balance
Sheets for plans in which the accumulated benefit obligation exceeds
the fair value of plan assets.
Information on the plans' funded status, on an aggregate basis
follows:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Components of net periodic pension costs:
Cost of pension benefits earned by employees $ 5,589 $ 4,401
Interest cost on projected benefit obligation 14,422 13,611
Actual return on plan assets 1,237 (22,053)
Net amortization and deferral (17,594) 6,807
------- -------
Net pension costs $ 3,654 $ 2,766
======= =======
Actuarial present value of accumulated benefit
obligation
Vested benefits - employees' rights to receive
benefits no longer contingent upon continued
employment $146,875 $157,570
Non-vested benefits - employees' rights to receive
benefits contingent upon continued employment 11,258 7,793
-------- --------
Net benefit obligation $158,133 $165,363
======== ========
Funded status of plans: Pension assets and
obligations
Pension assets at fair market value $192,427 $200,337
Projected benefit obligation at present value (190,440) (209,416)
Unrecognized transition asset (7,842) (8,765)
Unrecognized prior service cost 11,179 11,687
Unrecognized net loss 7,199 20,110
Adjustment to recognize minimum liability (111) --
-------- --------
Net prepaid pension costs recorded on Balance
Sheets $ 12,412 $ 13,953
======== ========
<FN>
The 1994 prepaid pension costs on the Balance Sheets consist of $13.3
million recorded as prepaid pension expense and $.9 million recorded in
other deferred credits.
Rates used for calculations:
Discount rate 8.00% 7.00%
Expected rate of salary increase 4.50% 5.00%
Expected long-term rate of return 8.50% 8.50%
</TABLE>
POSTEMPLOYMENT HEALTH CARE BENEFITS
Provisions for postemployment benefits expenses are determined under
the rules of Statement of Financial Accounting Standards No. 106,
"Employers' Accounting for Postretirement Benefits Other Than
Pensions" (SFAS 106).
Substantially all of CILCO's full-time employees, including those
assigned to the Holding Company, are currently covered by a trusteed,
non-contributory defined benefit postemployment health care plan. The
plan pays stated percentages of most necessary medical expenses
incurred by retirees, after subtracting payments by Medicare or other
providers and after a stated deductible has been met. Participants
become eligible for the benefits if they retire from CILCO after
reaching age 55 with 10 or more years of service. ESE does not
provide health care benefits to retired employees.
Postemployment health care benefit costs were charged as follows:
<TABLE>
<CAPTION>
1994 1993 1992
(In thousands)
<S> <C> <C> <C>
Operating expenses $5,253 $5,767 $6,127
Utility plant and other 1,913 2,060 2,098
------ ------ ------
Net postemployment
health care benefit costs $7,166 $7,827 $8,225
====== ====== ======
</TABLE>
<TABLE>
Information on the plans' funded status, on an aggregate basis
follows:
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Components of net postemployment health care
benefit costs:
Service cost - benefits attributed to service
during the period $ 1,496 $ 1,194
Actual return on plan assets 133 (1,732)
Interest cost on accumulated postemployment
health care benefit obligation 4,469 4,873
Amortization of transition obligation over
18.6 years 2,858 2,858
Other net amortization and deferral (1,790) 634
-------- -------
Net postemployment health care benefit costs $ 7,166 $ 7,827
======== =======
Accumulated postemployment health care
benefit obligation:
Retirees $ 30,849 $ 44,340
Other fully eligible participants 10,859 12,409
Other active participants 20,046 19,823
-------- --------
Total accumulated postemployment
health care benefit obligation 61,754 76,572
Less:
Unrecognized actuarial (gain) loss (3,046) 13,093
Unrecognized transition obligation 41,730 44,588
Plan assets at fair value 22,929 18,748
-------- --------
Accrued postemployment health
care benefit cost liability $ 141 $ 143
======== ========
</TABLE>
For measurement purposes, a health care cost trend rate of 9% annually
was assumed for 1994; the rate was assumed to decrease to 8% for 1995,
then decrease gradually to 6% by 2020 and remain at that level
thereafter.
Increasing the assumed health care cost trend rate by 1% in each year
would increase the accumulated postemployment benefit obligation at
December 31, 1994, by $2.9 million and the aggregate of the service
and interest cost components of net postemployment health care cost
for 1994 by $265,000. The discount rate used in determining the
accumulated postemployment benefit obligation at December 31, 1994,
was 8% and at December 31, 1993, was 7%. The weighted average
expected return on assets net of taxes was 8.1%, where taxes are
assumed to decrease return by 0.4%.
NOTE 4 - SHORT-TERM DEBT
Short-term debt at December 31, 1994, consisted of $6 million of
Holding Company bank borrowings and $23.4 million of CILCO commercial
paper. Short-term debt at December 31, 1993, included $12.4 million
of commercial paper and $18.8 million of other notes payable.
CILCO had arrangements for bank lines of credit totaling $30.4 million
at December 31, 1994, all of which were unused. These lines of credit
consisted of $7 million maintained by compensating balances and $23.4
million maintained by commitment fees ranging from 1/16 to 2/16 of 1%
per annum in lieu of balances. The compensating bank balance
arrangements provide that CILCO maintain bank deposits to average
annually 3% to 5% of the line, such balances being available to CILCO
for operating purposes and as compensation to the bank for other bank
services. These bank lines of credit also support CILCO's issuance of
commercial paper.
At December 31, 1994, ESE had a $7.5 million bank line of credit, of
which $4.5 million was used at year-end to collateralize performance
bonds issued in connection with ESE projects.
NOTE 5 - LEVERAGED LEASE INVESTMENTS
The Company, through subsidiaries of CILCORP Investment Management
Inc. (CIM), is a lessor in seven leveraged lease arrangements under
which mining equipment, electric production facilities, warehouses,
office buildings, passenger railway equipment and an aircraft are
leased to third parties. The economic lives and lease terms vary with
the leases. CIM's share of total equipment and facilities cost was
approximately $305 million at December 31, 1994 and 1993.
The cost of the equipment and facilities owned by CIM is partially
financed by non-recourse debt provided by lenders, who have been
granted as their sole remedy in the event of a lessee default an
assignment of rents due under the leases and a security interest in
the leased property. Such debt amounted to $223 million at
December 31, 1994, and $229 million at December 31, 1993. Leveraged
lease residual value assumptions, which are conservative in relation
to independently appraised residual values, are tested on a periodic
basis. CIM's net investment in leveraged leases at December 31, 1994,
and 1993 is shown below:
<TABLE>
<CAPTION>
1994 1993
(In thousands)
<S> <C> <C>
Minimum lease payments receivable $122,757 $122,869
Estimated residual value 94,368 94,368
Less: Unearned income 96,164 102,434
-------- --------
Investment in lease financing receivables 120,961 114,803
Less: Deferred taxes arising from
leveraged leases 88,308 80,129
------- --------
Net investment in leveraged leases $ 32,653 $ 34,674
======== ========
</TABLE>
NOTE 6 - PREFERRED STOCK
PREFERRED STOCK OF SUBSIDIARY
<TABLE>
<CAPTION>
At December 31, 1994 1993
(In thousands)
<S> <C> <C>
Preferred stock, cumulative:
$100 par value, authorized 1,500,000 shares
Without mandatory redemption
4.50% series - 111,264 shares $11,126 $11,126
4.64% series - 79,940 shares 7,994 7,994
Class A, no par value, authorized
3,500,000 shares
Flexible auction rate - 250,000
shares (a) 25,000 25,000
With mandatory redemption
5.85% series - 220,000 shares 22,000 22,000
------- -------
Total preferred stock $66,120 $66,120
======= =======
<FN>
(a) Dividend rates at December 31, 1994 and 1993,
were 4.72% and 2.62%, respectively.
</TABLE>
All classes of preferred stock are entitled to receive cumulative
dividends and rank equally as to dividends and assets, according to their
respective terms.
The total annual dividend requirement for preferred stock outstanding at
December 31, 1994, is $3.3 million, assuming a continuation of the
auction dividend rate at December 31, 1994, for the flexible auction rate
series.
PREFERRED STOCK WITHOUT MANDATORY REDEMPTION
The call provisions of preferred stock redeemable at CILCO's option
outstanding at December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Series Callable Price Per Share (plus accrued dividends)
<S> <C>
4.50% $110
4.64% $102
Flexible auction rate $100
</TABLE>
PREFERRED STOCK WITH MANDATORY REDEMPTION
CILCO's 5.85% Class A preferred stock may be redeemed in 2003 at $100 per
share. A mandatory redemption fund must be established on July 1, 2003.
The fund will provide for the redemption of 11,000 shares for $1.1 million
on July 1 of each year through July 1, 2007. On July 1, 2008, the
remaining 165,000 shares will be retired for $16.5 million.
PREFERENCE STOCK OF SUBSIDIARY, CUMULATIVE
No Par Value, Authorized 2,000,000 shares, of which none have been issued.
PREFERRED STOCK OF HOLDING COMPANY
No Par Value, Authorized 4,000,000 shares, of which none were outstanding
at December 31, 1994 and 1993.
NOTE 7 - LONG-TERM DEBT
<TABLE>
<CAPTION>
AT DECEMBER 31, 1994 1993
(In thousands)
<S> <C> <C>
CILCO first mortgage bonds
5 1/8% series due 1996 $ 16,000 $ 16,000
5 1/2% series due 1997 20,000 20,000
7 1/2% series due 2007 50,000 50,000
8 1/5% series due 2022 65,000 65,000
Medium-term notes
5.7% series due 1998 10,650 10,650
6.4% series due 2000 30,000 30,000
6.82% series due 2003 25,350 25,350
7.8% series due 2023 10,000 10,000
Pollution control refunding series F, 6.5% due 2010 5,000 5,000
Pollution control refunding series G, 6.2% due 2012 1,000 1,000
Pollution control refunding series E, 6.5% due 2018 14,200 14,200
Pollution control refunding series H, 5.9% due 2023 32,000 32,000
-------- --------
279,200 279,200
Unamortized premium and discount on
long-term debt, net (841) (879)
-------- --------
Total CILCO 278,359 278,321
-------- --------
CILCORP Lease Management Inc.
Unsecured financial institution borrowings;
interest rate of 9.55%; maturities
by year are as follows:
1995 -- 18,000
1997 3,000 3,000
-------- --------
Total CLM 3,000 21,000
-------- --------
CILCORP Inc.
Unsecured medium-term notes; varying
in term from 2 years to 8 years;
interest rates ranging from 8.25% to 9.10%. 45,000 26,000
Other 336 390
-------- --------
Total long-term debt $326,695 $325,711
======== ========
</TABLE>
The first mortgage bonds of CILCO are secured by a lien on
substantially all of its property and franchises. Unamortized
borrowing expense, premium and discount on outstanding long-term debt
are being amortized over the lives of the respective issues.
Total consolidated maturities of long-term debt for 1996-1999 are $19
million, $23 million, $22 million and $13 million, respectively.
The 1995 maturities of long-term borrowings have been classified as
current liabilities.
NOTE 8 - COMMITMENTS & CONTINGENCIES
CILCO's capital expenditures for 1995 are estimated to be $69
million, in connection with which CILCO has normal and customary
purchase commitments at December 31, 1994.
CILCO's policy is to act as a self-insurer for certain insurable
risks resulting from employee health and life insurance programs.
ESE's capital expenditures for 1995 are estimated to be $4.1 million,
in connection with which ESE has normal and customary purchase
commitments at December 31, 1994.
ESE's policy is to act as a self-insurer for certain insurable risks
resulting from employee health programs and professional liability
claims.
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 CIPS's capacity from June 1998 through May 2002.
At CILCO's request, purchases may be increased to a maximum of 150 MW
during the contract period, provided CIPS has the additional capacity
available.
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations and Environmental
Matters (regarding former gas manufacturing sites) for a discussion
of that item.
NOTE 9 - RATE MATTERS
In December 1994, the Illinois Commerce Commission (ICC) issued a
rate order designed to grant CILCO a $10.6 million, or 6.7% annual
increase in gas base rate revenues. The order represents
approximately 75% of CILCO's original rate increase request filed in
January 1994. The new rates, designed to yield an 11.82% return on
common equity and a 9.24% return on rate base, were effective the
week of December 12, 1994. The ICC denied requests for rehearing
which had been filed by CILCO and other parties. It is unknown at
this time whether any party will appeal the ICC order to the Illinois
Appellate Court.
As a part of its rate order, the ICC disallowed approximately $7.5
million of CILCO's $24 million investment in the Springfield,
Illinois, cast iron main renewal project. To reflect the
disallowance, CILCO recorded a pre-tax charge of approximately $7.5
million ($4.5 million after-tax) against 1994 earnings.
In mid-1992, after a significant number of leaks were detected in
CILCO's Springfield cast iron gas distribution system, CILCO began a
detailed examination of its Springfield gas distribution system and
related operating practices and procedures. CILCO thereafter began an
aggressive program to renew its Springfield gas cast iron main
system. This project was substantially completed by September 30,
1993.
The ICC staff began an informal review of CILCO's Springfield gas
operations and record-keeping practices in September 1992.
Subsequently, the U.S. Department of Transportation (DOT) and the
U.S. Department of Justice (DOJ) began conducting investigations of
CILCO which were also focused principally on CILCO's Springfield gas
operations and its record-keeping practices.
On September 16, 1994, CILCO entered into a federal court civil
consent decree with the DOJ which concluded the DOT and DOJ
investigations of CILCO. As a part of the settlement with the DOJ,
CILCO accepted adjustments recommended by the ICC staff which
resulted in a net disallowance from CILCO's gas rate base of
approximately $4.6 million of the cost of the Springfield cast iron
main renewal project. This charge is part of the $7.5 million
disallowance included in the December 1994, rate order. In addition
to the rate base disallowance, CILCO agreed to pay an $844,000 civil
fine to the United States and agreed to reimburse the ICC, the DOT
and the DOJ $156,000 for the costs of their investigations. CILCO
also agreed to underwrite the reasonable expense of an outside
expert, to be selected by the ICC, to examine its gas operations
manuals and systems to ensure they are in compliance with all
applicable statutes and regulations. CILCO estimates the cost of the
audit will be $350,000.
The DOJ agreed not to seek any additional civil or criminal penalties
from CILCO or the Company. The ICC staff also agreed not to seek any
additional enforcement penalties from CILCO or the Company. CILCO
agreed to continue to cooperate with the DOJ in its investigation and
prosecution of any individuals who may be responsible for willful
violations of any applicable statute or regulation.
Reference is made to Management's Discussion and Analysis of
Financial Condition and Results of Operations and Environmental
Matters for a discussion of other gas and electric rate matters.
NOTE 10 - LEASES
The Company and its subsidiaries lease certain equipment, buildings
and other facilities under capital and operating leases. Several of
the operating leases provide that the Company pay taxes, maintenance
and other occupancy costs applicable to these premises.
Minimum future rental payments under non-cancelable capital and
operating leases having remaining terms in excess of one year as of
December 31, 1994, are $25.7 million in total. Payments due during
the years ending December 31, 1995, through December 31, 1999, are
$8.5 million, $5.9 million, $4.4 million, $3.6 million and $3.3
million, respectively.
NOTE 11 - SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
The following quarterly operating results are unaudited, but, in the
opinion of management, include all adjustments (consisting of normal
recurring accruals) necessary for a fair presentation of CILCORP
Inc.'s operating results for the periods indicated. The results of
operations for each of the fiscal quarters are not necessarily
comparable to, or indicative of, the results of an entire year due to
the seasonal nature of the Company's business and other factors.
<TABLE>
<CAPTION>
For the Three Months Ended March 31, June 30, September 30, December 31,
(In thousands except per share amounts)
<S> <C> <C> <C> <C>
1994
Revenue $177,436 $137,146 $145,854 $144,703
Income before income taxes 15,577 11,469 15,158 8,562
Net income 9,701 6,940 9,570 6,375
Earnings per average
common share $.75 $.53 $.73 $.49
1993
Revenue $164,923 $125,695 $141,740 $152,153
Income before income taxes 15,401 6,965 21,270 8,276
Net income 9,334 4,008 12,645 7,596
Earnings per average
common share $.72 $.31 $.98 $.59
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS AND BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000762129
<NAME> CILCORP INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 868,541
<OTHER-PROPERTY-AND-INVEST> 149,540
<TOTAL-CURRENT-ASSETS> 159,239
<TOTAL-DEFERRED-CHARGES> 0
<OTHER-ASSETS> 61,064
<TOTAL-ASSETS> 1,238,384
<COMMON> 167,987
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 176,728
<TOTAL-COMMON-STOCKHOLDERS-EQ> 344,715
22,000
44,120
<LONG-TERM-DEBT-NET> 326,695
<SHORT-TERM-NOTES> 23,400
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 21,200
0
<CAPITAL-LEASE-OBLIGATIONS> 2,665
<LEASES-CURRENT> 288
<OTHER-ITEMS-CAPITAL-AND-LIAB> 453,301
<TOT-CAPITALIZATION-AND-LIAB> 1,238,384
<GROSS-OPERATING-REVENUE> 605,139
<INCOME-TAX-EXPENSE> 18,180
<OTHER-OPERATING-EXPENSES> (374)
<TOTAL-OPERATING-EXPENSES> 525,426
<OPERATING-INCOME-LOSS> 79,713
<OTHER-INCOME-NET> 0
<INCOME-BEFORE-INTEREST-EXPEN> 61,907
<TOTAL-INTEREST-EXPENSE> 26,341
<NET-INCOME> 35,566
2,980
<EARNINGS-AVAILABLE-FOR-COMM> 32,586
<COMMON-STOCK-DIVIDENDS> 32,063
<TOTAL-INTEREST-ON-BONDS> 19,221
<CASH-FLOW-OPERATIONS> 110,356
<EPS-PRIMARY> 2.50
<EPS-DILUTED> 2.50
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
STATEMENT OF INCOME, STATEMENT OF CASH FLOWS, BALANCE SHEET AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<CIK> 0000018651
<NAME> CENTRAL ILLINOIS LIGHT COMPANY
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1994
<PERIOD-END> DEC-31-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 868,541
<OTHER-PROPERTY-AND-INVEST> 2,678
<TOTAL-CURRENT-ASSETS> 111,812
<TOTAL-DEFERRED-CHARGES> 36,078
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 1,019,109
<COMMON> 185,661
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 122,125
<TOTAL-COMMON-STOCKHOLDERS-EQ> 307,786
22,000
44,120
<LONG-TERM-DEBT-NET> 278,359
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 23,400
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 2,665
<LEASES-CURRENT> 288
<OTHER-ITEMS-CAPITAL-AND-LIAB> 340,491
<TOT-CAPITALIZATION-AND-LIAB> 1,019,109
<GROSS-OPERATING-REVENUE> 461,370
<INCOME-TAX-EXPENSE> 17,167
<OTHER-OPERATING-EXPENSES> 381,374
<TOTAL-OPERATING-EXPENSES> 402,863
<OPERATING-INCOME-LOSS> 58,507
<OTHER-INCOME-NET> (10,051)
<INCOME-BEFORE-INTEREST-EXPEN> 52,248
<TOTAL-INTEREST-EXPENSE> 19,761
<NET-INCOME> 32,487
2,980
<EARNINGS-AVAILABLE-FOR-COMM> 29,507
<COMMON-STOCK-DIVIDENDS> 16,027
<TOTAL-INTEREST-ON-BONDS> 19,221
<CASH-FLOW-OPERATIONS> 107,056
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
[DESCRIPTION] Graph Data attached to EXHIBIT 13
Information related to the nine graphs included in the CILCORP
Inc. 1994 Annual Report in Management's Discussion and
Analysis and Financial Statements follows.
A bar graph titled "Fixed Charge Coverage (Scale: # of Times)"
depicting the following information appears in the left hand
column on page 18 of Management's Discussion and Analysis.
1990 2.4
1991 2.8
1992 2.4
1993 2.4
1994 2.6
A bar graph titled "Utility Plant Expenditures (Scale: $ Millions)"
depicting the following information appears in the right hand
column on page 19 of Management's Discussion and Analysis.
1990 50
1991 56
1992 62
1993 73
1994 91
A bar graph titled "Electric Sales (Scale: Millions of kilowatt-
hours)" depicting the following information appears in the
left hand column on page 22 of Management's Discussion
and Analysis. Each bar consists of four sections which
build one on the other.
1994 1993 1992 1991 1990
BAR 1 RESIDENTIAL 1,672 1,664 1,508 1,680 1,525
BAR 2 COMMERCIAL 1,452 1,379 1,311 1,300 1,217
CUMMULATIVE 3,124 3,043 2,819 2,980 2,742
BAR 3 INDUSTRIAL 2,303 2,238 2,119 2,202 2,237
CUMMULATIVE 5,427 5,281 4,938 5,182 4,979
BAR 4 OTHER 408 251 474 446 317
CUMMULATIVE 5,835 5,532 5,412 5,628 5,296
A bar graph titled "Cooling Degree Days Per Year Compared to
Normal" depicting the following information appears in the
right hand column on page 23 of Management's Discussion and
Analysis. A horizontal bar depicting normal cooling days
is shown at approximately 1,073 days.
1990 1,013.5
1991 1,344.0
1992 811.5
1993 1,056.0
1994 1,104.0
A bar graph titled "Gas Sales (Scale: Millions of mcf)"
depicting the following information appears in the left
hand column on page 24 of Management's Discussion and
Analysis. Each bar consists of four sections which
build one on the other.
1994 1993 1992 1991 1990
BAR 1 RESIDENTIAL 18,929 20,263 18,427 18,993 18,016
BAR 2 COMMERCIAL 6,684 6,746 6,203 6,368 5,823
CUMMULATIVE 25,613 27,009 24,630 25,361 23,839
BAR 3 INDUSTRIAL 1,186 756 960 736 928
CUMMULATIVE 26,799 27,765 25,590 26,097 24,767
BAR 4 OTHER 2 2 2 3 2
CUMMULATIVE 26,801 27,767 25,592 26,100 24,769
A bar graph titled "Heating Degree Days Per Year Compared to
Normal" depicting the following information appears in the
left hand column on page 24 of Management's Discussion
and Analysis. A horizontal bar depicting normal heating
degree days is shown at approximately 5,450 days.
1990 5,193.5
1991 5,410.5
1992 5,320.0
1993 5,882.0
1994 5,443.5
Three pie charts titled "Consolidated Assets by Segment" as
percentages of the whole by year are printed on page 30 below
the Asset portion of the Balance Sheet.
1994 1994 1993 1993 1992 1992
Electric 741,578 59.9% 714,669 59.6% 713,515 60.2%
Gas 275,428 22.3% 272,800 22.8% 245,610 20.7%
Environmental and
Engineering Ser 93,464 7.5% 87,437 7.3% 96,278 8.1%
Other 127,914 10.3% 123,534 10.3% 129,513 11.0%
Total 1,238,384 100.0% 1,198,440 100.0% 1,184,916 100.0%
Three pie charts titled "Consolidated Capitalization Including
Short-Term Debt" as percentages of the whole by year
are printed on page 31 below the Liability portion of
the Balance Sheet.
1994 1994 1993 1993 1992 1992
S-T Debt 50,600 6% 31,393 4% 46,753 6%
L-T Debt 326,695 42% 325,711 43% 307,628 41%
Preferred Stock 66,120 8% 66,120 8% 64,620 8%
Common Stock 344,713 44% 341,876 45% 340,434 45%
Total 788,128 100% 765,100 100% 759,435 100%
Three pie charts titled "Consolidated Revenue by Component" as
percentages of the whole by year is printed on page 33 below the
Statements of Segments of Business.
1994 1994 1993 1993 1992 1992
Electric 313,085 52% 303,124 52% 288,813 50%
Gas 148,285 24% 150,754 26% 144,926 25%
Environmental and
Engineering Ser 132,799 22% 123,162 21% 137,858 24%
Other 10,970 2% 7,471 1% 9,628 1%
Total 605,139 100% 584,511 100% 581,225 100%
