UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1997
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; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
___________ ___________________________________ __________________
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Indicate by check mark whether the Registrants (1) have filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
Registrants were required to file such reports), and (2) have been subject
to such filing requirements for the past 90 days.
Yes X No
_____ _____
Indicate the number of shares outstanding of each of the issuers' classes
of common stock, as of the latest practicable date:
CIPSCO INCORPORATED Common stock, no par value, 34,069,542 shares
outstanding April 30, 1997
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Common stock, no par value, 25,452,373
shares outstanding and held by
CIPSCO INCORPORATED at April 30, 1997
CIPSCO INCORPORATED
AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1997
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIPSCO INCORPORATED
Consolidated Statements of Income
Consolidated Balance Sheets
Consolidated Statements of Cash Flows
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income
Balance Sheets
Statements of Cash Flows
CONDENSED NOTES TO FINANCIAL STATEMENTS of
CIPSCO Incorporated and Central Illinois
Public Service Company
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations for CIPSCO Incorporated and
Central Illinois Public Service Company
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
Item 4. Submission of Matters to a Vote of Security Holders
Item 5. Other Information
Item 6. Exhibits and Reports on Form 8-K
Signatures
Exhibit Index
Exhibit 12
The unaudited interim financial statements presented herein include the
consolidated statements of CIPSCO Incorporated and Subsidiaries ("Company")
as well as separate financial statements for Central Illinois Public
Service Company ("CIPS"). The unaudited statements have been prepared by
the Company and CIPS, respectively, pursuant to the rules and regulations
of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been
condensed or omitted pursuant to such rules and regulations, although the
Company and CIPS believe the disclosures are adequate to make the
information presented not misleading. Both the Company's consolidated
financial statements and the CIPS financial statements should be read in
conjunction with the financial statements and notes thereto included in the
combined Annual Report on Form 10-K of CIPSCO Incorporated and CIPS for the
year ended December 31, 1996.
In the opinion of the Company and CIPS, their respective interim financial
statements filed as part of this Form 10-Q reflect all adjustments
necessary to present fairly the results for the respective periods. Due to
the effect of weather and other factors which are characteristic of CIPS'
utility operations, financial results for the periods ended March 31, 1997
and 1996 are not necessarily indicative of trends for any twelve-month
period.
This financial and other information is not given in connection with any
sale or offer to buy any security.
Note: Information included herein which relates solely to CIPSCO
Incorporated is provided solely by CIPSCO Incorporated and not by
Central Illinois Public Service Company and shall be deemed not
included in the Quarterly Report on Form 10-Q of Central Illinois
Public Service Company.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
For the Periods Ended March 31, 1997 and 1996
(in thousands except per share amounts)
(unaudited)
Three Months Ended
March 31,
______________________
1997 1996
________ ________
Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . . . . $160,862 $171,288
Gas. . . . . . . . . . . . . . . . . . . . . . . . 61,138 64,418
Investment . . . . . . . . . . . . . . . . . . . . 3,343 2,173
________ ________
Total operating revenues. . . . . . . . . . . . 225,343 237,879
________ ________
Operating Expenses:
Fuel for electric generation . . . . . . . . . . . 52,679 56,148
Purchased power. . . . . . . . . . . . . . . . . . 4,934 13,121
Gas costs. . . . . . . . . . . . . . . . . . . . . 40,330 41,197
Other operation. . . . . . . . . . . . . . . . . . 39,902 34,635
Maintenance. . . . . . . . . . . . . . . . . . . . 14,871 11,436
Depreciation and amortization. . . . . . . . . . . 22,610 20,913
Taxes other than income taxes. . . . . . . . . . . 16,068 16,013
________ ________
Total operating expenses. . . . . . . . . . . . 191,394 193,463
________ ________
Operating Income . . . . . . . . . . . . . . . . . . 33,949 44,416
________ ________
Interest and Other Charges:
Interest on long-term debt of subsidiary . . . . . 7,801 8,279
Other interest charges . . . . . . . . . . . . . . 629 443
Allowance for funds used during construction . . . (492) (26)
Preferred stock dividends of subsidiary. . . . . . 913 939
Miscellaneous, net . . . . . . . . . . . . . . . . 71 203
________ ________
Total interest and other charges . . . . . . . . . . 8,922 9,838
________ ________
Income Before Income Taxes . . . . . . . . . . . . . 25,027 34,578
_________ ________
Income Taxes . . . . . . . . . . . . . . . . . . . . 9,476 13,460
________ ________
Net Income . . . . . . . . . . . . . . . . . . . . . $ 15,551 $ 21,118
======== ========
Average Shares of Common Stock Outstanding . . . . . 34,070 34,070
Earnings per Average Share of Common Stock . . . . . $ .46 $ .62
The accompanying condensed notes to financial statements are an integral
part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
March 31,1997 and December 31, 1996
(in thousands)
March 31, December 31,
1997 1996
_____________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric................................. $2,259,660 $2,244,571
Gas...................................... 244,269 242,664
__________ __________
2,503,929 2,487,235
Less-Accumulated depreciation............ 1,107,047 1,099,261
__________ __________
1,396,882 1,387,974
Construction work in progress............ 58,506 70,150
__________ __________
1,455,388 1,458,124
__________ __________
Current Assets:
Cash..................................... 4,874 2,287
Temporary investments, at cost which
approximates market..................... 2,775 3,983
Accounts receivable, net................. 69,952 74,693
Accrued unbilled revenues................ 21,320 30,126
Materials and supplies, at average cost.. 39,177 38,806
Fuel for electric generation, at
average cost............................ 27,006 21,610
Gas stored underground, at average cost.. 7,992 13,361
Prepayments.............................. 13,040 14,403
Other current assets..................... 8,263 7,704
__________ __________
194,399 206,973
__________ __________
Regulatory Assets.......................... 134,380 64,754
__________ __________
Investments and Other Assets:
Marketable securities.................... 52,912 51,293
Leveraged leases and energy investments.. 62,918 62,017
Other.................................... 29,743 28,495
__________ __________
145,573 141,805
__________ __________
$1,929,740 $1,871,656
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity.............. $ 659,404 $ 661,594
Preferred stock of subsidiary............ 80,000 80,000
Long-term debt of subsidiary............. 493,303 421,227
__________ __________
1,232,707 1,162,821
__________ __________
Current Liabilities:
Long-term debt of subsidiary due
within one year............. 58,000 58,000
Short-term borrowings.................... 41,025 57,768
Accounts payable......................... 49,116 62,774
Accrued wages............................ 11,485 10,294
Accrued taxes............................ 23,503 13,692
Accrued interest......................... 9,202 8,432
Other.................................... 54,166 49,302
__________ __________
246,497 260,262
__________ __________
Deferred Credits:
Accumulated deferred income taxes........ 341,792 341,373
Investment tax credits................... 48,052 48,885
Regulatory liabilities, net.............. 60,692 58,315
__________ __________
450,536 448,573
__________ __________
$1,929,740 $1,871,656
========== ==========
The accompanying condensed notes to financial statements are an integral
part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Periods Ended March 31, 1997 and 1996
(in thousands)
(unaudited)
Three Months Ended
March 31,
__________________________
1997 1996
__________ __________
Operating Activities:
Net income.............................. $ 15,551 $ 21,118
Adjustments to reconcile net income to
net cash provided (used in):
Depreciation and amortization......... 22,610 20,913
Allowance for equity funds used
during construction (AFUDC).......... (217) (11)
Deferred income taxes, net............ 419 561
Investment tax credit amortization.... (833) (837)
Cash flows impacted by changes in assets..
and liabilities:
Accounts receivable, net and accrued
unbilled revenues.................... 13,547 (8,303)
Fuel for electric generation.......... (5,396) 13,306
Other inventories..................... 4,998 4,616
Prepayments........................... 1,363 1,587
Other assets.......................... (1,807) (321)
Accounts payable and other liabilities (8,794) 134
Accrued wages, taxes and interest..... 11,772 15,174
Coal contract restructuring charge...... (71,795) -
Other................................... 4,478 2,491
__________ __________
Net cash provided by (used in)
operating activities................. (14,104) 70,428
__________ __________
Investing Activities:
Utility construction expenditures,
excluding AFUDC........................ (19,059) (14,754)
Allowance for borrowed funds used
during construction.................... (275) (15)
Changes in temporary investments........ 1,208 1,246
Long-term marketable securities......... (1,619) (977)
Long-term leveraged leases and energy
investments............................ (901) (710)
__________ __________
Net cash used in investing activities. (20,646) (15,210)
__________ __________
Financing Activities:
Common stock dividends paid............. (17,716) (17,375)
Proceeds from issuance of long-term
debt of subsidiary..................... 72,000 -
Proceeds from issuance of (repayment)
of short-term borrowings............... (16,743) (36,926)
Issuance expense, discount and premium.. (204) (3)
__________ __________
Net cash provided by (used in)
financing activities................. 37,337 (54,304)
__________ __________
Net increase (decrease) in cash......... 2,587 914
Cash at beginning of period............. 2,287 1,088
__________ __________
Cash at end of period................... $ 4,874 $ 2,002
========== ==========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized.. $ 7,692 $ 9,122
Income taxes.......................... $ 2,200 $ 325
The accompanying condensed notes to financial statements are an integral
part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income
For the Periods Ended March 31, 1997 and 1996
(in thousands)
(unaudited)
Three Months Ended
March 31,
_____________________
1997 1996
________ ________
Operating Revenues:
Electric . . . . . . . . . . . . . . . . . . . . $160,868 $171,295
Gas. . . . . . . . . . . . . . . . . . . . . . . 61,139 64,419
________ ________
Total operating revenues. . . . . . . . . . . 222,007 235,714
________ ________
Operating Expenses:
Fuel for electric generation. . . . . . . . . . . 52,679 56,148
Purchased power . . . . . . . . . . . . . . . . . 4,934 13,121
Gas costs . . . . . . . . . . . . . . . . . . . . 40,330 41,197
Other operation . . . . . . . . . . . . . . . . . 39,551 34,291
Maintenance . . . . . . . . . . . . . . . . . . . 14,870 11,435
Depreciation and amortization . . . . . . . . . . 22,491 20,785
Taxes other than income taxes . . . . . . . . . . 16,061 16,008
Income taxes:
Current . . . . . . . . . . . . . . . . . . . . 12,520 16,590
Deferred, net . . . . . . . . . . . . . . . . . (3,123) (2,782)
Deferred investment tax credits, net. . . . . . (834) (837)
________ ________
Total operating expenses . . . . . . . . . . . 199,479 205,956
________ ________
Operating Income . . . . . . . . . . . . . . . . . 22,528 29,758
________ ________
Other Income and Deductions:
Allowance for equity funds used during
construction . . . . . . . . . . . . . . . . . . . 217 11
Nonoperating income taxes. . . . . . . . . . . . . (200) (298)
Miscellaneous, net . . . . . . . . . . . . . . . . (25) (172)
________ ________
Total other income and deductions . . . . . . . (8) (459)
________ ________
Income Before Interest Charges . . . . . . . . . . . 22,520 29,299
________ ________
Interest Charges:
Interest on long-term debt . . . . . . . . . . . . 7,801 8,279
Other interest charges . . . . . . . . . . . . . . 628 443
Allowance for borrowed funds used during
construction . . . . . . . . . . . . . . . . . . . (275) (14)
________ ________
Total interest charges . . . . . . . . . . . . 8,154 8,708
________ ________
Net Income . . . . . . . . . . . . . . . . . . . . . 14,366 20,591
Preferred Stock Dividends. . . . . . . . . . . . . . 913 938
________ ________
Earnings for Common Stock. . . . . . . . . . . . . . $ 13,453 $ 19,653
======== ========
The accompanying condensed notes to financial statements are an integral
part of these statements.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Balance Sheets
March 31, 1997 and December 31, 1996
(in thousands)
March 31, December 31,
1997 1996
_____________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric................................ $2,259,660 $2,244,571
Gas..................................... 244,269 242,664
__________ __________
2,503,929 2,487,235
Less-Accumulated depreciation........... 1,107,047 1,099,261
__________ __________
1,396,882 1,387,974
Construction work in progress........... 58,506 70,150
__________ __________
1,455,388 1,458,124
__________ __________
Current Assets:
Cash.................................... 4,718 2,261
Accounts receivable, net................ 70,013 74,761
Accrued unbilled revenues............... 21,320 30,126
Materials and supplies, at average cost. 39,177 38,806
Fuel for electric generation, at
average cost........................... 27,006 21,610
Gas stored underground, at average cost. 7,992 13,361
Prepayments............................. 12,988 14,323
Other current assets.................... 8,263 7,704
__________ __________
191,477 202,952
__________ __________
Regulatory Assets......................... 134,380 64,754
__________ __________
Other Assets.............................. 28,517 27,488
__________ __________
$1,809,762 $1,753,318
========== ==========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity............. $ 577,153 $ 581,224
Preferred stock......................... 80,000 80,000
Long-term debt.......................... 493,303 421,228
__________ __________
1,150,456 1,082,452
__________ __________
Current Liabilities:
Long-term debt due within one year...... 58,000 58,000
Short-term borrowings................... 41,025 57,768
Accounts payable........................ 48,502 62,243
Accrued wages........................... 11,485 10,279
Accrued taxes........................... 27,382 13,943
Accrued interest........................ 9,202 8,432
Other................................... 54,166 49,301
__________ __________
249,762 259,966
__________ __________
Deferred Credits:
Accumulated deferred income taxes....... 300,800 303,700
Investment tax credits.................. 48,052 48,885
Regulatory liabilities, net............. 60,692 58,315
__________ __________
409,544 410,900
__________ __________
$1,809,762 $1,753,318
========== ==========
The accompanying condensed notes to financial statements are an integral
part of these statements.
Central Illinois Public Service Company
Statements of Cash Flows
For the Periods Ended March 31, 1997 and 1996
(in thousands)
(unaudited)
Three Months Ended
March 31,
_______________________
1997 1996
__________ __________
Operating Activities:
Net income................................ $ 14,366 $ 20,591
Adjustments to reconcile net income
to net cash provided (used in):
Depreciation and amortization........... 22,491 20,785
Allowance for equity funds used during
construction (AFUDC)................... (217) (11)
Deferred income taxes, net.............. (2,900) (2,782)
Investment tax credit amortization...... (833) (837)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues...................... 13,554 (8,153)
Fuel for electric generation............ (5,396) 13,306
Other inventories....................... 4,998 4,616
Prepayments............................. 1,335 1,252
Other assets............................ (1,588) 49
Accounts payable and other liabilities.. (8,876) (716)
Accrued wages, taxes and interest....... 15,415 19,383
Coal contract restructuring charge........ (71,795) -
Other..................................... 4,621 2,631
_________ _________
Net cash provided by (used in)
operating activities................... (14,825) 70,114
_________ _________
Investing Activities:
Construction expenditures, excluding AFUDC (19,059) (14,754)
Allowance for borrowed funds used during..
construction............................. (275) (14)
_________ _________
Net cash used in investing activities... (19,334) (14,768)
_________ _________
Financing Activities:
Proceeds from issuance of long-term debt.. 72,000 -
Proceeds from issuance of (repayment)
of short-term borrowings................. (16,743) (36,926)
Dividends paid:
Preferred stock......................... (937) (952)
Common stock............................ (17,500) (16,500)
Issuance expense, discount and premium.... (204) (3)
_________ _________
Net cash provided by (used in)
financing activities................... 36,616 (54,381)
_________ _________
Net increase (decrease) in cash........... 2,457 965
Cash at beginning of period............... 2,261 1,006
_________ _________
Cash at end of period..................... $ 4,718 $ 1,971
========= =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized.... $ 7,692 $ 9,122
Income taxes............................ $ 1,183 $ 204
The accompanying condensed notes to financial statements are an integral
part of these statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1997
(unaudited)
Note 1. GENERAL
________________
The consolidated financial statements presented herein include the accounts
of CIPSCO INCORPORATED (CIPSCO), CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(CIPS), and CIPSCO INVESTMENT COMPANY AND SUBSIDIARIES (CIC). CIPSCO and
Subsidiaries are referred to as the "Company." CIPSCO has two first-tier
subsidiaries: CIC, an investment subsidiary, and CIPS, an electric and gas
public utility.
The financial statements of CIPS, a subsidiary of CIPSCO, include only the
accounts of CIPS. Certain items previously reported for periods prior to
1997 have been reclassified to conform with the current-period
presentation.
Note 2. COMMITMENTS AND CONTINGENCIES
______________________________________
ENVIRONMENTAL REMEDIATION COSTS - CIPS has identified 13 sites where it and
certain of its predecessors and other affiliates previously operated
facilities that manufactured gas from coal. This manufacturing produced
various potentially harmful by-products which may remain on some of the
sites. One site was added to the United States Environmental Protection
Agency Superfund list in 1990. A ground water pump-and-treat remediation
program being conducted at the site has received applicable approvals.
CIPS has received cash settlements from certain of its insurance carriers
for, among other things, costs incurred by CIPS in connection with the
manufactured gas plant sites. In addition, in 1993, CIPS collected $2.9
million for such costs under environmental adjustment clause rate riders
(riders) approved by the Illinois Commerce Commission (the "Illinois
commission").
Costs relating to studies and remediation at the 13 sites and associated
legal and litigation expenses are being accrued and deferred rather than
expensed currently. This is being done pending recovery through rates or
from other parties. Through March 31, 1997, $50.0 million had been
deferred representing costs incurred and the estimates for costs of
completing studies at various sites and an estimate of future remediation
costs to be incurred at the Superfund and other sites. The total of the
costs deferred, net of recoveries from insurers and through the rate riders
described above, was $12.4 million at March 31, 1997.
The Illinois commission has instituted a reconciliation proceeding to
review CIPS' environmental remediation activities in 1993, 1994 and 1995
and to determine whether the revenues collected under the riders in 1993
were consistent with the amount of remediation costs prudently incurred.
Amounts found to have been incorrectly included under the riders would be
subject to refund. This proceeding is expected to indicate what incurred
or accrued costs are appropriate to defer for future rider recovery and how
insurance recoveries should be allocated to such environmental costs.
Management believes that any costs incurred in connection with the sites
that are not recovered from others will be recovered through the
environmental rate riders. Accordingly, management believes that costs
incurred in connection with these sites will not have a material adverse
effect on financial position, results of operations, or liquidity of the
Company or CIPS.
LABOR ISSUES - The International Union of Operating Engineers Local 148 and
the International Brotherhood of Electrical Workers Local 702 filed unfair
labor practice charges with the National Labor Relations Board (NLRB)
relating to the legality of the lockout by CIPS of both unions during 1993.
The Peoria Regional Office of the NLRB has issued complaints against CIPS
concerning its lockout. Both unions seek, among other things, back pay and
other benefits for the period of the lockout. CIPS estimates the amount of
back pay and other benefits for both unions to be less than $16 million.
An administrative law judge of the NLRB has ruled that the lockout was
unlawful. On July 23, 1996, the Company appealed to the NLRB. Management
believes the lockout was both lawful and reasonable and that the final
resolution of the issues will not have a material adverse effect on
financial position, results of operations or liquidity of the Company or
CIPS. CIPS successfully negotiated renewed contracts with both unions in
1996 which extend through June 30, 1999.
OTHER ISSUES - CIPS is involved in other legal and administrative
proceedings before various courts and agencies with respect to rates,
taxes, gas and electric fuel cost reconciliations, service area disputes,
environmental torts and other matters. Although unable to predict the
outcome of these matters, management believes that appropriate liabilities
have been established and that final disposition of these actions will not
have a material adverse effect on financial position, results of operations
or liquidity of the Company or CIPS.
Note 3. REGULATORY MATTERS
___________________________
The operations of CIPS are subject to the regulation of the Illinois
commission and the Federal Energy Regulatory Commission ("FERC") .
Accordingly, its accounting policies are subject to the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71, "Accounting for
Effects of Certain Types of Regulation." Regulatory assets represent
probable future revenue to CIPS associated with certain costs which will be
recovered from customers through the ratemaking process. Regulatory
liabilities represent probable future reductions in revenues associated with
amounts that are to be credited to customers through the ratemaking process.
Regulatory assets and liabilities reflected in the Consolidated Balance
Sheets as of March 31, 1997 relate to the following:
Description Amount
___________ ______
(in thousands)
Regulatory Assets:
Coal contract restructuring charge $ 69,824
Undepreciated plant costs 39,705
Unamortized costs related to reacquired debt 11,910
Deferred environmental remediation costs 12,445
Take-or-Pay costs 496
___________
Regulatory Assets $ 134,380
===========
Regulatory Liabilities:
SFAS 109 - Income Taxes, net $ 57,551
Clean Air Act allowances, net 3,141
___________
Regulatory Liabilities, Net $ 60,692
===========
SFAS No. 121, "Accounting for the Impairment of Long-lived Assets and for
Long-lived Assets to be Disposed Of" amends SFAS No. 71 and imposes a
stricter criteria for retention of regulatory assets by requiring that such
assets be probable of recovery through future revenues at each balance
sheet date. The Company continually assesses the recoverability of its
regulatory assets, and if all, or a separable portion of CIPS' operations
becomes no longer subject to the provisions of SFAS No. 71, a write off of
all or a portion of the related regulatory assets and liabilities may be
required. In addition, a determination would have to be made regarding the
impairment and writedown of certain assets.
Note 4. COAL CONTRACT RESTRUCTURING
_____________________________________
In 1996 CIPS and a major coal supplier for Newton and Grand Tower power
stations restructured a long-term coal contract. Under the restructuring,
CIPS paid the supplier a $70 million restructuring charge (plus interest
from November 1, 1996) in the first quarter of 1997; is purchasing at
market prices low-sulfur, out-of-state coal through the supplier (in
substitution for the high-sulfur Illinois coal CIPS was obligated to
purchase under the original contract); and obtained options for future
purchases of low-sulfur, out-of-state coal from the supplier in 1997
through 1999 at set negotiated prices.
By switching to low-sulfur coal, CIPS was able to discontinue operating the
Newton Unit 1 scrubber. The benefits of the restructuring include lower
cost coal, avoidance of significant capital expenditures to renovate the
scrubber, and elimination of scrubber operating and maintenance costs
(offset by scrubber costs of removal). The net benefits of the
restructuring are expected to exceed $100 million dollars over the next 10
years.
In December 1996, CIPS obtained an order of the Illinois commission
approving the switch to out-of-state coal, recovery of the restructuring
charge plus associated carrying costs through the fuel adjustment clause
(FAC) over six years, and continued recovery in rates of the undepreciated
scrubber investment plus costs of removal. On February 28, 1997, a group
of industrial customers (who also intervened in the proceeding before the
Illinois commission) filed an appeal of the order with the Illinois Third
District Appellate Court. The industrial customers have asked the court to
reverse or remand that part of the order authorizing CIPS to recover the
restructuring charge through the FAC.
The Company believes the Illinois commission order in this matter is lawful
and proper, will vigorously defend its position, and believes that the
order will be upheld. If the industrial customers should prevail, CIPS may
be required to cease FAC recovery of the restructuring charge, and could be
required to refund any portion of the restructuring charge that had been
collected through the FAC. In such an event, CIPS could initiate a rate
filing seeking new base rates designed to recover the restructuring charge.
The Company believes that recovery of the restructuring charge is
probable, and the related regulatory assets recorded in the matter are in
compliance with SFAS No. 71 as amended by SFAS No. 121 (See Note 3 to
Condensed Notes to Financial Statements).
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations
The Company and Union Electric Company entered into a Merger Agreement
dated August 11, 1995. Information concerning the agreement is included in
Part II, Item 5. Other Information of this report. CIPSCO's and Union
Electric Company's proposed merger is awaiting certain regulatory and
governmental approvals and is expected to be completed by year-end 1997.
Stockholders at both companies approved the merger on December 20, 1995,
and the Missouri Public Service Commission approved the merger on February
21, 1997. The Illinois Commerce Commission (Illinois commission), the
Federal Energy Regulatory Commission (FERC) and various other federal
agencies are expected to issue decisions on the merger later this year. On
April 30 ,1997, the presiding administrative law judge in the FERC case
issued an initial decision finding that, subject to certain conditions, the
merger between CIPSCO and Union Electric Company is in the public interest
and should be approved. The conditions concern certain power and
transmission service agreements with other utilities. A final order from
the FERC is expected later this year.
The following discussion and analysis of financial condition and results of
operations is for CIPSCO Incorporated and Subsidiaries ("Company") unless
otherwise stated.
THE OUTLOOK
CIPS currently estimates that its total construction expenditures for the
1997-2001 period will be about $482 million. The projected 5-year amounts
include up to $28 million for environmental compliance, including
compliance with regulations under the Clean Air Act Amendments of 1990.
Capital requirements for the 1997-2001 period are expected to be met
primarily through internally generated funds. In addition to funds
required to refinance maturing short-term and long-term borrowings,
external financing requirements are expected to total about $175 million
for the 1997-2001 period which include amounts for projected construction
expenditures and the coal contract restructuring payment.
CIPS currently has authority from the Illinois commission to issue or incur
up to $200 million of first mortgage bonds, medium-term notes and bank
borrowings through December 31, 1998. As of March 31, 1997, a total of $75
million of such authority is utilized. Registration statements covering
$200 million of first mortgage bonds and medium-term notes have been filed
with the Securities and Exchange Commission. As of March 31, 1997,
securities totaling $45 million have been issued under the authority
granted in these registration statements.
Common stock dividends paid for the twelve months ended March 31, 1997,
resulted in a payout ratio of 95% of the Company's earnings to common
shareholders. Common stock dividends paid to the Company's common
shareholders equalled 80% of net cash provided by operating activities for
the same period.
FINANCIAL CONDITION
Financial condition and changes in total Shareholder Equity of the Company
and CIPS for the three-month periods ended March 31, 1997 and 1996 are as
follows:
Three Months Ended
March 31,
_________________________
(in thousands)
The Company: 1997 1996
_________ _________
Common Shareholders' Equity
Net income $ 15,551 $ 21,118
Common stock dividends paid (17,716) (17,375)
Other (25) 431
________ ________
Change in Shareholders' Equity $ (2,190) $ 4,174
======== ========
Three Months Ended
March 31,
_________________________
(in thousands)
CIPS: 1997 1996
_________ _________
Common Shareholder's Equity
Earnings for common stock $ 13,453 $ 19,653
Common stock dividends paid (17,500) (16,500)
Other (24) (14)
________ ________
Change in Shareholder's Equity $ (4,071) $ 3,139
======== ========
OVERVIEW
The Company's earnings per share were $.46 for the quarter ended March 31,
1997, compared to $.62 per share earned during the same period in 1996.
The decrease reflects lower sales to residential customers due to milder
weather in the first quarter of 1997 compared to 1996; unusual costs
including business restructuring, system conversions and two planned
maintenance outages at power stations.
The following table summarizes the components of consolidated net income
and CIPS earnings for common stock for the three months ended March 31,
1997 and 1996 (see Results of Operations for further discussion). In this
table, electric operating margin equals electric operating revenues less
revenue taxes, fuel for electric generation and purchased power. Gas
operating margin equals gas operating revenues less revenue taxes and gas
costs.
First Quarter
Ended March 31,
____________________________
(in thousands)
1997 1996
________ ________
CIPS
Electric operating
margin $ 97,425 $ 95,974
Gas operating margin 17,368 19,699
Other deductions and
interest expenses (100,427) (95,082)
CIPS preferred stock
dividends (913) (938)
________ ________
Total earnings
for common stock 13,453 19,653
________ ________
NON-UTILITY
Investment revenues 3,294 2,141
Other deductions
and expenses (1,196) (676)
________ ________
Total non-utility
net income 2,098 1,465
________ ________
Consolidated net income $ 15,551 $ 21,118
======== ========
RESULTS OF OPERATIONS
The results of operations of the Company and CIPS for the three months
ended March 31, 1997, compared to the same period in 1996 are presented
below.
The Company
Net Income
(in thousands) Earnings Per Share
______________ __________________
Three Months Three Months
____________ ____________
1997 $15,551 $ .46
1996 21,118 .62
_______ _____
Decrease $(5,567) $(.16)
Percent Decrease (26)% (26)%
CIPS
Earnings for Common Stock
(in thousands)
_________________________
Three Months
____________
1997 $13,453
1996 19,653
_______
Decrease $(6,200)
=======
Percent Decrease (32)%
OPERATING REVENUES
The changes in electric and gas revenues described below are for the
Company. The only differences between changes in electric and gas
operating revenues for the Company and for CIPS are intercompany revenues
that are eliminated in the consolidated financial statements. These
intercompany amounts are immaterial.
Electric revenues declined 6% in the first quarter of 1997 compared to the
first quarter of 1996 reflecting a decline in KWH sales due principally to
milder weather conditions in 1997. KWH sales decreased 8%, due to a 12%
reduction in heating degree days in the first quarter of 1997. Power
supply agreement revenues for the first quarter of 1997 improved 10% over
the first quarter 1996 due to increased sales of energy resulting from
pricing adjustments to two agreements. Economy and emergency interchange
sales decreased 37% in the first quarter of 1997 over the same period in
1996 due to accounting for certain interchange transactions as transmission
service, in compliance with FERC Order No. 888 on open transmission access,
rather than as purchase and resale transactions as was done in 1996 prior
to FERC Order No. 888 being effective.
The changes in electric revenue and KWH sales are shown below:
CHANGES IN ELECTRIC REVENUE AND
KILOWATTHOUR SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
___________________________________________
First Quarter
___________________________________________
Revenue Rev % KWH KWH %
_______ _____ _________ _____
Residential $ (2,948) (5)% (41,675) (5)%
Commercial (813) (2) 2,118 -
Industrial (1,452) (5) (12,184) (2)
Public Authorities
and Other 320 6 5,488 14
________ _______
Total Retail $ (4,893) (4)% (46,253) (2)%
Power Supply
Agreements $ 1,826 10 % 112,064 30 %
Interchange Sales
(economy/emergency) (7,044) (37) (358,555) (38)
Cooperatives and
Municipals (315) (5) (5,414) (4)
________ _______
Total Sales for
Resale $ (5,526) (13)% (251,905) (17)%
________ _______
Total $(10,426) (6)% (298,158) (8)%
======== ========
Gas revenues declined 5% in the first quarter of 1997 compared to the same
period in 1996 due principally to lower therm sales caused by milder
weather in 1997. Residential and commercial gas revenues declined 7% and
9%, respectively, for the first quarter of 1997 compared to 1996.
Industrial revenues increased 5%, primarily attributable to higher
purchased gas costs which flow through to revenues through the Purchased
Gas Adjustment clause (PGA). Gas transportation revenues declined 21% in
the first quarter of 1997 reflecting an increase in customers buying from
the CIPS system rather than buying off system and paying CIPS to transport
customer owned gas. In addition to traditional sales to end users, CIPS
sells gas to others for resale. Sales for resale in 1997 partially offset
the above mentioned declines, whereas such sales were minimal in 1996.
The changes in gas revenues and therm sales are shown below.
CHANGES IN GAS REVENUE AND THERM SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
___________________________________________
First Quarter
___________________________________________
Revenue Rev % Therms Therms
%
_______ _____ ______ ______
Residential $ (3,137) (7)% (12,446) (15)%
Commercial (1,305) (9) (4,775) (17)
Industrial 202 5 (360) (3)
Sales for Resale 1,411 - 4,236 -
Transportation (493) (21) (1,031) (3)
Miscellaneous 42 25 - -
________ ______
Total $ (3,280) (5)% (14,376) (9)%
======== ======
Investment revenues increased 54% in the first quarter of 1997 compared to
the first quarter of 1996 due to market gains in 1997 and an adjustment
made in 1996 to reflect a change in accounting to market valuation.
OPERATING EXPENSES
__________________
Fuel for electric generation declined 6% in the first quarter of 1997
compared to the same period in 1996 even though generation was 4% higher in
1997. The decline corresponds to differences in the deferred costs of fuel
as adjusted in the fuel adjustment clause between periods.
Purchased power costs declined 62% for the first quarter of 1997 compared
with the same period in 1996 reflecting decreases in purchases made for
resale to interchange economy and emergency customers. Beginning in 1997,
certain interchange sales which were previously recorded as purchased power
sold for resale are now accounted for as transmission service revenue in
accordance with FERC Order No. 888 involving open access to transmission
lines. Therefore, purchased power and interchange economy and emergency
sales both declined in the first quarter 1997 compared to the first quarter
1996.
Gas costs declined 2% for the first quarter of 1997 when compared to the
same period in 1996 due to an 11% weather related decrease in gas
requirements for the CIPS system, partially offset by higher average cost
per therm for purchased gas.
Other operation expenses increased 15% in the first quarter of 1997
compared to the same period in 1996 due primarily to increases in business
restructuring costs, system conversion costs, outside consulting expenses,
and employee welfare expenses.
Maintenance expenses increased 30% for the first quarter of 1997 compared
to the same period of 1996 because two scheduled power plant maintenance
projects occurred in the first quarter of 1997 and only one project
occurred in the first quarter of 1996.
Depreciation and amortization expense increased 8% in the first quarter of
1997 when compared to 1996 due to normal plant additions.
Interest and other charges decreased 9% in the first quarter of 1997
compared to the first quarter of 1996 primarily due to higher allowances
for funds used during construction due to higher construction activity,
lower interest on long-term debt, and fewer merger transaction costs.
BALANCE SHEET
_____________
Significant changes in the balance sheet accounts at March 31, 1997
compared to balances at December 31, 1996 are:
Gas stored underground, at average cost, declined 40% during the three
months due to normal winter heating season withdrawal of stored gas prior
to the summer replenishment of the underground storage.
Regulatory assets increased 108% primarily due to the coal contract
restructuring charge which is reflected as a regulatory asset in connection
with the coal contract restructuring completed in the first quarter of
1997.
Short-term borrowings declined 29% due to changes in cash flow.
Accrued taxes increased 72% due to increases in federal income taxes
payable.
LABOR NEGOTIATIONS
__________________
CIPS is negotiating with three separate employee groups consisting of (i)
four clerical employees at its Newton power station, (ii) six clerical
employees at its Coffeen power station and (iii) 16 production and
technical employees at a Springfield, Illinois operations facility. These
groups have been certified by the NLRB to be represented by labor
organizations. While these groups will be represented by union locals
which currently represent other CIPS employees, existing labor contracts do
not cover these three groups. Although CIPS expects to reach a final
agreement with all three bargaining units, until such agreements are
reached, a strike, work stoppage, work slowdown, or similar action
involving such employees, and other collective bargaining unit employees,
could occur. CIPS believes that the continuation of any one or more of
such events for a limited period would not have a material adverse effect
on financial position, results of operations or liquidity of the Company or
CIPS.
LEGISLATIVE MATTERS
___________________
As reported in Management's Discussion and Analysis of Financial Condition
and Results of Operations in the 1996 Form 10-K of the Company and CIPS under
the caption "Regulation and Competition", various groups have made proposals
for utility deregulation legislation in Illinois. During 1997, structured
negotiations had been underway with state legislators, various interest groups
and utilities, including CIPS, for the purpose of developing a comprehensive
deregulation bill that would have general support. The various groups stopped
these discussions in mid-May, 1997 without reaching consensus on many of the
major issues concerning deregulation. Legislative leaders are expected to
draft deregulation bills to be introduced prior to the end of the current
legislative session this summer. CIPS will continue to take an active part in
the deregulation debate.
ACCOUNTING MATTERS
__________________
In February 1997 the Financial Accounting Standards Board issued SFAS No. 128,
"Earnings per Share". This statement establishes standards for computing and
presenting earnings per share. SFAS No. 128 is effective for financial
statements issued for periods ending after December 15, 1997, and is not
expected to have a material effect on the Company's financial position or
results of operations upon adoption.
FORWARD LOOKING STATEMENTS
__________________________
This report includes forward looking statements within the meaning of the
Private Securities Litigation Reform Act of 1995. All statements made
herein which are not based on historical facts are forward looking and,
accordingly, involve risks and uncertainties that could cause actual
results to differ materially from those discussed. Such forward looking
statements include those under Management's Discussion and Analysis
relating to (i) the timing of regulatory approvals and consummation of the
merger with Union Electric Company, (ii) amounts of future construction
expenditures, sources of funds to meet capital requirements and financing
requirements, (iii) the expected outcome of negotiations with collective
bargaining units regarding new labor contracts, and (iv) anticipated
deregulation legislation. Such statements are based on management's belief,
judgment and analysis as well as assumptions made by and information
available to management at the date hereof. In addition to assumptions and
cautionary factors referred to specifically in this report in connection
with such forward looking statements, factors that could cause actual results
to differ materially from those contemplated by the forward looking
statements include (i) the speed and the nature of increased competition and
deregulation in the electric and gas utility industry, (ii) economic or
weather conditions affecting future sales and margins, (iii) changing energy
prices, (iv) availability and cost of capital, (v) unanticipated or adverse
decisions in regulatory proceedings or litigation, (vi) changes in laws and
other governmental actions, and (vii) other matters detailed in Exhibit
99.03, cautionary statements, to the 1996 Annual Report on Form 10-K of the
Company and CIPS, incorporated herein by reference.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings.
In December 1995, CIPS filed a declaratory judgment action in the
United States District Court for the Central District of Illinois
seeking a determination of its rights and obligations under a coal
supply agreement with Atlas Minerals which expired December 31, 1995.
The Company's position is that it has fully complied with the
agreement and has no further obligations after December 31,
1995. Atlas Minerals asserts that CIPS is obligated to purchase more
than 400,000 additional tons of coal notwithstanding termination of
the contract. In addition to a declaration of rights and obligations
under the agreement, CIPS is seeking over $5 million in damages.
Atlas Minerals has counter claimed for over $8 million in lost
profits and various consequential damages. Summary judgment motions
by both parties are pending. A jury trial is currently scheduled
for May or June, 1997. CIPS cannot predict the outcome of such a
trial, but believes that its legal positions are well-founded and
supported by clear and substantial evidence.
Item 4. Submission of Matters to a Vote of Security Holders.
(a) The Annual Meetings of Shareholders of CIPS and CIPSCO
Incorporated were held on April 23, 1997.
(b) All nominees who were proposed as directors by the Board of
Directors were elected and there were no other nominees
proposed. The results of the votes cast for directors of CIPS
and CIPSCO Incorporated are as follows:
CIPS
Without
Directors With Authority Authority*
Clifford L. Greenwalt 25,821,890 6,299
John L. Heath 25,821,873 6,299
Robert W. Jackson 25,821,929 6,299
Gordon R. Lohman 25,821,943 6,299
Richard A. Lumpkin 25,821,941 6,299
Hanne M. Merriman 25,821,850 6,299
Thomas L. Shade 25,821,915 6,299
James W. Wogsland 25,821,904 6,299
CIPSCO
Without
Directors With Authority Authority*
Clifford L. Greenwalt 29,060,955 471,611
John L. Heath 29,204,732 468,353
Robert W. Jackson 29,124,147 468,567
Gordon R. Lohman 29,146,430 470,888
Richard A. Lumpkin 29,153,065 469,853
Hanne M. Merriman 29,175,154 468,753
Thomas L. Shade 29,143,334 468,567
James W. Wogsland 29,023,930 469,788
* Calculated on the basis of cumulative voting.
(c) Appointment of independent public accountants was approved by the
following vote.
Shares Shares
Shares For Against Abstaining
29,005,214 239,431 356,027
Item 5. Other Information.
AMEREN CORPORATION -- Unaudited Pro Forma Combined Condensed
Financial Information of CIPSCO and Union Electric Company.
On August 11, 1995, CIPSCO and Union Electric Company ("UE")
entered into an Agreement and Plan of Merger, which was
subsequently approved by the shareholders of both parties. The
merger ("Merger") is further conditioned on, among other things,
receipt of regulatory and governmental approvals, and will result
in a newly formed holding company, Ameren Corporation. The
following unaudited pro forma financial information combines the
historical balance sheets and statements of income of CIPSCO and
Union Electric, including their respective subsidiaries, after
giving effect to the Merger. The unaudited pro forma combined
condensed balance sheet at March 31, 1997 gives effect to the
Merger as if it had occurred at March 31, 1997. The unaudited
pro forma combined condensed statements of income for the three-
month periods ended March 31, 1997 and 1996, and the twelve-month
period ended March 31, 1997 give effect to the Merger as if it
had occurred at the beginning of the periods presented. These
statements are prepared on the basis of accounting for the Merger
as a pooling of interests and are based on the assumptions set
forth in the notes thereto. In addition, the pro forma financial
information does not give effect to the expected synergies of the
transaction.
The following pro forma financial information has been prepared
from, and should be read in conjunction with, the historical
financial statements and related notes thereto of CIPSCO and
Union Electric. The following information is not necessarily
indicative of the financial position or operating results that
would have occurred had the Merger been consummated on the date,
or at the beginning of the periods, for which the Merger is being
given effect nor is it necessarily indicative of future operating
results or financial position. In addition, due to the effect of
weather on sales and other factors which are characteristic of
public utility operations, financial results for the three-month
periods ended March 31, 1997 and 1996 are not necessarily
indicative of trends for any twelve-month period.
Also see Part I, Item 2., Management's Discussion and Analysis of
Financial Condition and Results of Operations.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
BALANCE SHEET
AT MARCH 31, 1997
(Thousands of Dollars)
As Reported (Note 1) Pro Forma
________________________ Adjustments Pro Forma
UE CIPSCO (Notes 2, 8) Combined
___________ __________ ____________ ___________
ASSETS
Property and plant
Electric $ 8,701,243 $ 2,259,660 $ 376,802 $11,337,705
Gas 188,075 244,269 - 432,344
Other 35,971 - - 35,971
___________ ___________ ___________ ___________
8,925,289 2,503,929 376,802 11,806,020
Less accumulated
depreciation and
amortization 3,715,215 1,107,047 272,373 5,094,635
___________ ___________ ___________ ___________
5,210,074 1,396,882 104,429 6,711,385
Construction work
in progress:
Nuclear fuel in
process 99,928 - - 99,928
Other 80,725 58,506 1,736 140,967
___________ ___________ ___________ ___________
Total property
and plant, net 5,390,727 1,455,388 106,165 6,952,280
Regulatory assets:
Deferred income taxes
(Note 5) 674,547 40,497 - 715,044
Other 175,095 134,380 - 309,475
___________ ___________ ___________ ___________
Total regulatory
assets 849,642 174,877 - 1,024,519
Other assets:
Unamortized debt expense 10,446 3,073 575 14,094
Nuclear decommissioning
trust fund 100,366 - - 100,366
Investments in
nonregulated activities - 115,830 - 115,830
Other 29,126 26,670 (3,269) 52,527
___________ ___________ ___________ ___________
Total other assets 139,938 145,573 (2,694) 282,817
Current assets:
Cash and temporary
investments 14,010 7,649 18,651 40,310
Accounts receivable, net 183,233 69,952 20,472 273,657
Unbilled revenue 45,862 21,320 - 67,182
Materials and supplies,
at average cost -
Fossil fuel 53,938 34,998 4,878 93,814
Other 95,992 39,177 4,572 139,741
Other 42,647 21,303 3,677 67,627
___________ ___________ ___________ ___________
Total current
assets 435,682 194,399 52,250 682,331
___________ ___________ ___________ ___________
Total Assets $ 6,815,989 $ 1,970,237 $ 155,721 $ 8,941,947
=========== =========== =========== ===========
CAPITAL AND LIABILITIES
Capitalization:
Common stock (Note 2) $ 510,619 $ 356,812 $(866,059) $ 1,372
Other stockholders'
equity (Note 2) 1,807,969 302,592 866,059 2,976,620
___________ ___________ ___________ ___________
Total common
stockholders'
equity 2,318,588 659,404 - 2,977,992
Preferred stock of
subsidiary 155,197 80,000 - 235,197
Long-term debt 1,960,449 493,303 115,556 2,569,308
___________ ___________ ___________ ___________
Total
capitalization 4,434,234 1,232,707 115,556 5,782,497
Minority interest in
consolidated subsidiary - - 3,534 3,534
Accumulated deferred
income taxes 1,317,792 341,792 (6,695) 1,652,889
Accumulated deferred
investment tax credits 158,799 48,052 - 206,851
Regulatory liability 196,590 101,189 - 297,779
Accumulated provision for
nuclear decommissioning 102,039 - - 102,039
Other deferred credits
and liabilities 158,119 37,564 4,945 200,628
Current liabilities:
Current maturity of
long-term debt 37,631 58,000 14,444 110,075
Short-term debt 33,900 41,025 - 74,925
Accounts payable 69,169 49,116 18,296 136,581
Wages payable 35,323 11,485 - 46,808
Taxes accrued 131,369 23,503 - 154,872
Interest accrued 55,254 9,202 2,852 67,308
Other 85,770 16,602 2,789 105,161
___________ ___________ ___________ ___________
Total current
liabilities 448,416 208,933 38,381 695,730
___________ ___________ ___________ ___________
Total Capital and
Liabilities $ 6,815,989 $ 1,970,237 $ 155,721 $ 8,941,947
=========== =========== =========== ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1997
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined
____________ ___________ ____________ ____________
OPERATING REVENUES:
Electric $ 440,967 $ 160,862 $ 48,269 $ 650,098
Gas 46,110 61,138 - 107,248
Other 181 3,343 108 3,632
____________ ___________ __________ ____________
Total operating
revenues 487,258 225,343 48,377 760,978
OPERATING EXPENSES:
Operations
Fuel and purchased
power 116,191 57,613 28,836 202,640
Gas Costs 27,508 40,330 - 67,838
Other 9 5,478 39,902 4,352 139,732
____________ ___________ __________ ____________
239,177 137,845 33,188 410,210
Maintenance 49,198 14,871 3,470 67,539
Depreciation and
amortization 61,444 22,610 3,773 87,827
Income taxes (Note 6) 21,335 9,476 2,033 32,844
Other taxes 50,517 16,068 512 67,097
____________ ___________ __________ ____________
Total operating
expenses 421,671 200,870 42,976 665,517
OPERATING INCOME 65,587 24,473 5,401 95,461
OTHER INCOME AND DEDUCTIONS:
Allowance for equity
funds used during
construction 877 217 - 1,094
Minority interest in
consolidated
subsidiary - - (1,248) (1,248)
Miscellaneous, net (1,081) (71) (1,692) (2,844)
____________ ___________ __________ ____________
Total other
income and
deductions, net (204) 146 (2,940) (2,998)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS 65,383 24,619 2,461 92,463
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest 35,180 8,430 2,461 46,071
Allowance for
borrowed funds
used during
construction (1,427) (275) - (1,702)
Preferred dividends
of subsidiaries
(Note 7) 2,204 913 - 3,117
____________ ___________ __________ ____________
Net interest
charges and
preferred
dividends 35,957 9,068 2,461 47,486
NET INCOME $ 29,426 $ 15,551 $ - $ 44,977
============ =========== ========== ============
EARNINGS PER SHARE OF
COMMON STOCK (BASED
ON AVERAGE SHARES
OUTSTANDING) $ .29 $ .46 $ .33
===== ===== =====
AVERAGE COMMON
SHARES OUTSTANDING
(Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
============ =========== ========== ============
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
THREE MONTHS ENDED MARCH 31, 1996
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Note 1,3,9) (Notes 1,3) (Notes 2,8) Combined
_____________ _____________ ____________ ___________
OPERATING REVENUES:
Electric $ 450,865 $ 171,288 $ 44,975 $ 667,128
Gas 44,548 64,418 - 108,966
Other 157 2,173 104 2,434
_____________ _____________ ____________ ___________
Total operating
revenues 495,570 237,879 45,079 778,528
OPERATING EXPENSES:
Operations
Fuel and purchased
power 124,264 69,269 24,876 218,409
Gas costs 24,325 41,197 - 65,522
Other 89,804 34,635 4,431 128,870
____________ _____________ ____________ ___________
238,393 145,101 29,307 412,801
Maintenance 48,634 11,436 3,815 63,885
Depreciation and
amortization 59,585 20,913 3,776 84,274
Income taxes (Note 6) 28,221 13,460 1,946 43,627
Other taxes 50,983 16,013 552 67,548
____________ _____________ ____________ ___________
Total operating
expenses 425,816 206,923 39,396 672,135
OPERATING INCOME 69,754 30,956 5,683 106,393
OTHER INCOME AND
DEDUCTIONS:
Allowance for equity
funds used during
construction 1,702 11 - 1,713
Minority interest in
consolidated
subsidiary - - (1,192) (1,192)
Miscellaneous, net 895 (203) (1,851) (1,159)
____________ _____________ ____________ ___________
Total other
income and
deductions, net 2,597 (192) (3,043) (638)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS 72,351 30,764 2,640 105,755
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest 33,858 8,722 2,640 45,220
Allowance for borrowed
funds used during
construction (1,647) (15) - (1,662)
Preferred dividends
of subsidiaries
(Note 7) 3,312 939 - 4,251
____________ _____________ ____________ ___________
Net interest
charges and
preferred
dividends 35,523 9,646 2,640 47,809
NET INCOME $ 36,828 $ 21,118 $ - $ 57,946
============ ============= ============ ===========
EARNINGS PER SHARE
OF COMMON STOCK
(BASED ON AVERAGE
SHARES OUTSTANDING) $ .36 $ .62 $ .42
===== ===== =====
AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
============ ============= ============ ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
AMEREN CORPORATION
UNAUDITED PRO FORMA COMBINED CONDENSED
STATEMENTS OF INCOME
TWELVE MONTHS ENDED MARCH 31, 1997
(Thousands of Dollars Except Shares and Per Share Amounts)
UE CIPSCO Pro Forma
(As Reported) (As Reported) Adjustments Pro Forma
(Notes 1,3,9) (Notes 1,3) (Notes 2,8) Combined
_____________ ______________ ____________ ___________
OPERATING REVENUES:
Electric $ 2,150,917 $ 720,386 $ 178,820 $ 3,050,123
Gas 100,626 152,068 - 252,694
Other 509 11,724 1,110 13,343
_____________ ______________ ____________ ___________
Total operating
revenues 2,252,052 884,178 179,930 3,316,160
OPERATING EXPENSES:
Operations
Fuel and purchased
power 504,758 262,558 97,207 864,523
Gas costs 67,731 95,360 - 163,091
Other 384,781 151,855 18,225 554,861
_____________ ______________ ____________ ___________
957,270 509,773 115,432 1,582,475
Maintenance 224,195 64,896 16,765 305,856
Depreciation and
amortization 243,158 89,094 15,663 347,915
Income taxes (Note 6) 190,483 45,574 8,320 244,377
Other taxes 212,799 57,873 1,738 272,410
_____________ ______________ ____________ ___________
Total operating
expenses 1,827,905 767,210 157,918 2,753,033
OPERATING INCOME 424,147 116,968 22,012 563,127
OTHER INCOME AND
DEDUCTIONS:
Allowance for equity
funds used during
construction 5,667 584 - 6,251
Minority interest in
consolidated
subsidiary - - (4,762) (4,762)
Miscellaneous, net (6,269) (2,652) (7,243) (16,164)
____________ ______________ ____________ ___________
Total other
income and
deductions, net (602) (2,068) (12,005) (14,675)
INCOME BEFORE INTEREST
CHARGES AND PREFERRED
DIVIDENDS 423,545 114,900 10,007 548,452
INTEREST CHARGES AND
PREFERRED DIVIDENDS:
Interest 133,966 37,460 10,007 181,433
Allowance for borrowed
funds used during
construction (6,787) (744) - (7,531)
Preferred dividends
of subsidiaries
(Note 7) 12,141 3,695 - 15,836
____________ ______________ ____________ ___________
Net interest
charges and
preferred
dividends 139,320 40,411 10,007 189,738
NET INCOME $ 284,225 $ 74,489 $ - $ 358,714
============ ============== ============ ===========
EARNINGS PER SHARE
OF COMMON STOCK
(BASED ON AVERAGE
SHARES OUTSTANDING) $2.78 $2.19 $2.61
===== ===== =====
AVERAGE COMMON SHARES
OUTSTANDING (Note 2) 102,123,834 34,069,542 1,022,086 137,215,462
============ ============== ============= ===========
See accompanying Notes to Unaudited Pro Forma Combined Condensed Financial
Statements.
AMEREN CORPORATION
NOTES TO UNAUDITED PRO FORMA COMBINED CONDENSED FINANCIAL STATEMENTS
1. Reclassifications have been made to certain "as reported" account
balances reflected in CIPSCO's and Union Electric's financial statements to
conform to this reporting presentation (See Notes 5, 6 and 7). All other
financial statement presentation and accounting policy differences are
immaterial and have not been adjusted in the pro forma combined condensed
financial statements.
2. The pro forma combined condensed financial statements reflect the
conversion of each share of Union Electric Common Stock ($5 par value)
outstanding into one share of Ameren Common Stock ($.01 par value) and the
conversion of each share of CIPSCO Common Stock (no par value) outstanding
into 1.03 shares of Ameren Common Stock, as provided in the Merger
Agreement. The pro forma combined condensed financial statements are
presented as if the companies were combined during all periods included
therein.
3. The allocation between Union Electric and CIPSCO and their customers
of the estimated cost savings resulting from the Merger, net of the costs
incurred to achieve such savings, will be subject to regulatory review and
approval. Merger-related costs (which include transaction costs and costs
to achieve such savings) are currently estimated to be approximately $73
million (including costs for financial advisors, attorneys, accountants,
consultants, filings, printing, system integration, relocation, etc.).
None of these estimated cost savings have been reflected in the pro forma
combined condensed financial statements. However, net income for the three
months and twelve months ended March 31, 1997 included merger-related costs
of $2.0 million and $9.0 million, net of income taxes, for Union Electric,
and $0.3 million and $4.6 million, net of income taxes, for CIPSCO,
respectively. Net income for the three months ended March 31, 1996
included merger-related costs of $0.9 million, net of income taxes, for
Union Electric, and $0.7 million, net of income taxes, for CIPSCO.
4. Intercompany transactions (including purchased and exchanged power
transactions) between Union Electric and CIPSCO during the periods
presented were not material and, accordingly, no pro forma adjustments were
made to eliminate such transactions.
5. CIPSCO's regulatory asset related to deferred income taxes was
reclassified from the regulatory liability account balance to conform to
this reporting presentation.
6. CIPSCO's income taxes are reflected as operating expenses to conform
to this reporting presentation.
7. Currently, the Union Electric Preferred Stock is not issued by a
subsidiary; subsequent to the Merger, the Union Electric Preferred Stock
will be issued by a subsidiary of Ameren. As a result, Union Electric's
preferred dividend requirements have been reclassified to conform to this
reporting presentation.
8. Pro forma adjustments were made to consolidate the financial results
of Electric Energy, Inc. (EEI), which will, in substance, be a 60% owned
subsidiary of Ameren subsequent to the Merger. Union Electric and CIPSCO
hold 40% and 20% ownership interests, respectively, in EEI and account for
these investments under the equity method of accounting. All intercompany
transactions between Union Electric, CIPSCO and EEI were eliminated.
9. Net income for the three and twelve months ended March 31, 1997,
included credits for Missouri electric customers which reduced revenues and
pre-tax income of Union Electric by $12.0 million and $45.8 million,
respectively. Net income for the three months ended March 31, 1996,
included a credit to Missouri electric customers which reduced revenues and
pre-tax income of Union Electric by $13.5 million.
Item 6. Exhibits and Reports on Form 8-K.
(A) Exhibits:
Exhibit 12 Computation of Ratio of Earnings to
Fixed Charges and Computation of Ratio
of Earnings to Fixed Charges plus
Preferred Stock Dividend Requirements
Before Income Taxes for CIPS.
Exhibit 27.1 Financial Data Schedule for CIPSCO
(required for electronic filing only in
accordance with Item 601(c)(1) of
Regulation S-K).
Exhibit 27.2 Financial Data Schedule for CIPS
(required for electronic filing only
in accordance with Item 601(c)(1) of
Regulation S-K).
(B) Reports on Form 8-K:
Registrant CIPSCO and CIPS
Date of Report Item Reported
March 20, 1997 Item 5. Other Events.
Reports information regarding
negotiations with three employee
groups represented by labor
organizations.
Registrant CIPS
Date of Report Item Reported
March 25, 1997 Item 7. Financial Statements, Pro
Forma Financial Information and
Exhibits.
Contains certain exhibits filed in
connection with the Registration
Statements of CIPS (Registration Nos.
33-56063 and 333-18473) which became
effective November 21, 1994 and March
14, 1997, respectively.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, CIPSCO Incorporated, has duly caused this report to be signed
on its behalf by the undersigned thereunto duly authorized.
CIPSCO Incorporated
Date: May 14, 1997 /s/ F. J. Kinsinger
_______________________________________
F. J. Kinsinger
Controller
(Chief Accounting Officer)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, Central Illinois Public Service Company, has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Central Illinois Public Service Company
Date: May 14, 1997 /s/ F. J. Kinsinger
_______________________________________
F. J. Kinsinger
Controller
(Principal Accounting Officer)
CIPSCO INCORPORATED AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1997
Exhibit No. Description
___________ ___________
Exhibit 12 Computation of Ratio of Earnings to Fixed Charges and
Computation of Ratio of Earnings to Fixed Charges
plus Preferred Stock Dividend Requirements Before
Income Taxes for CIPS.
Exhibit 27.1 Financial Data Schedule for CIPSCO
Exhibit 27.2 Financial Data Schedule for CIPS
Exhibit 12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS BEFORE INCOME TAXES
(in thousands)
12 Months Ended
__________________________________________________________
December 31,
March 31, ________________________________________________
1997 1996 1995 1994 1993 1992
________ ________ ________ ________ ________ ________
Net income......$ 71,167 $ 77,393 $ 70,631 $ 81,913 $ 84,011 $ 72,601
Add--Federal and
state income
taxes:
Current........ 49,777 53,847 41,276 38,097 50,441 6,110
Deferred(net) (3,146) (2,805) 5,627 13,190 1,674 33,998
Investment tax
credit
amortization.. (3,345) (3,349) (3,361) (3,367) (3,366) (3,336)
Income tax
applicable to
nonoperating
activities.... (505) (407) 941 603 631 2,989
________ ________ ________ ________ ________ ________
42,781 47,286 44,483 48,523 49,380 39,761
________ ________ ________ ________ ________ ________
Net income
before income
taxes........... 113,948 124,679 115,114 130,436 133,391 112,362
________ ________ ________ ________ ________ ________
Add--Fixed charges
Interest on
long-term
debt......... 30,928 31,409 31,168 31,164 32,823 35,534
Interest on
provision for
revenue
refunds..... - - - - _ (803)
Other interest 4,821 4,636 853 358 479 392
Amortization of
net debt premium
and discount.. 1,712 1,709 1,703 1,678 1,598 863
________ ________ ________ ________ ________ ________
37,461 37,754 33,724 33,200 34,900 35,986
________ ________ ________ ________ ________ ________
Earnings as
defined....... $151,409 $162,433 $148,838 $163,636 $168,291 $148,348
======== ======== ======== ======== ======== ========
Ratio of earnings
to fixed
charges....... 4.04 4.30 4.41 4.93 4.82 4.12
Earnings required
for preferred
dividends:
Preferred stock
dividends.. $ 3,695 $ 3,721 $ 3,850 $ 3,510 $ 3,718 $ 4,549
Adjustment to
pre-tax
basis*...... 2,221 2,273 2,425 2,079 2,185 2,491
________ ________ ________ ________ ________ ________
$ 5,916 $ 5,994 $ 6,275 $ 5,589 $ 5,903 $ 7,040
________ ________ ________ ________ ________ ________
Fixed charges
plus preferred
stock dividend
requirements... $ 43,377 $ 43,748 $ 39,999 $ 38,789 $ 40,803 $ 43,026
======== ======== ======== ======== ======== ========
Ratio of earnings
to fixed
charges plus
preferred stock
dividend
requirements...... 3.49 3.71 3.72 4.22 4.12 3.45
* An additional charge equivalent to earnings required to adjust
dividends on preferred stock to a pre-tax basis (See below.)
{ Net income before income taxes }
{ ______________________________ -100% } X preferred dividends = earnings
{ Net income } required for preferred dividends
- 35 -
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<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>
<S> <C>
<CIK> 0000860520
<NAME> CIPSCO Inc.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,455,388
<OTHER-PROPERTY-AND-INVEST> 115,830
<TOTAL-CURRENT-ASSETS> 194,399
<TOTAL-DEFERRED-CHARGES> 134,380
<OTHER-ASSETS> 29,743
<TOTAL-ASSETS> 1,929,740
<COMMON> 356,812
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 302,592
<TOTAL-COMMON-STOCKHOLDERS-EQ> 659,404
0
80,000
<LONG-TERM-DEBT-NET> 493,303
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 41,025
<LONG-TERM-DEBT-CURRENT-PORT> 58,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 598,008
<TOT-CAPITALIZATION-AND-LIAB> 1,929,740
<GROSS-OPERATING-REVENUE> 225,343
<INCOME-TAX-EXPENSE> 9,476
<OTHER-OPERATING-EXPENSES> 191,394
<TOTAL-OPERATING-EXPENSES> 200,870<F1>
<OPERATING-INCOME-LOSS> 24,473<F1>
<OTHER-INCOME-NET> (71)
<INCOME-BEFORE-INTEREST-EXPEN> 24,402
<TOTAL-INTEREST-EXPENSE> 7,938
<NET-INCOME> 16,464<F2>
913
<EARNINGS-AVAILABLE-FOR-COMM> 15,551
<COMMON-STOCK-DIVIDENDS> 17,716
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (14,104)
<EPS-PRIMARY> .46
<EPS-DILUTED> .46
<FN>
<F1> INCLUDES INCOME TAX EXPENSE.
<F2> NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
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<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STATEMENT OF INCOME, STATEMENT OF
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</LEGEND>
<S> <C>
<CIK> 0000018654
<NAME> CIPS
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1997
<PERIOD-END> MAR-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,455,388
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 191,477
<TOTAL-DEFERRED-CHARGES> 134,380
<OTHER-ASSETS> 28,517
<TOTAL-ASSETS> 1,809,762
<COMMON> 121,283
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 455,870
<TOTAL-COMMON-STOCKHOLDERS-EQ> 577,153
0
80,000
<LONG-TERM-DEBT-NET> 493,303
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 41,025
<LONG-TERM-DEBT-CURRENT-PORT> 58,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 560,281
<TOT-CAPITALIZATION-AND-LIAB> 1,809,762
<GROSS-OPERATING-REVENUE> 222,007
<INCOME-TAX-EXPENSE> 8,763
<OTHER-OPERATING-EXPENSES> 190,916
<TOTAL-OPERATING-EXPENSES> 199,679<F1>
<OPERATING-INCOME-LOSS> 22,328
<OTHER-INCOME-NET> 192
<INCOME-BEFORE-INTEREST-EXPEN> 22,520
<TOTAL-INTEREST-EXPENSE> 8,154
<NET-INCOME> 14,366
913
<EARNINGS-AVAILABLE-FOR-COMM> 13,453
<COMMON-STOCK-DIVIDENDS> 17,500
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> (14,825)
<EPS-PRIMARY> 0<F2>
<EPS-DILUTED> 0<F2>
<FN>
<F1> INCLUDES INCOME TAX EXPENSE.
<F2> INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS AND NOTES.
</TABLE>
