<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For Quarterly Period Ended March 31, 1999
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For The Transition Period From to
Commission file number 1-3672.
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 37-0211380
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
607 East Adams Street, Springfield, Illinois 62739
(Address of principal executive offices and Zip Code)
Registrant's telephone number,
including area code: (217) 523-3600
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X. No .
Shares outstanding of each of registrant's classes of common stock as of April
30, 1999: Common Stock, no par value, held by Ameren Corporation (parent
company of Registrant) - 25,452,373
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Central Illinois Public Service Company
Index
Page No.
Part I Financial Information (Unaudited)
Quantitative and Qualitative Disclosure
About Market Risk 6
Management's Discussion and Analysis 2
Balance Sheet
- March 31, 1999 and December 31, 1998 8
Statement of Income
- Three months and 12 months ended
March 31, 1999 and 1998 9
Statement of Cash Flows
- Three months ended March 31, 1999 and 1998 10
Notes to Financial Statements 11
Part II Other Information 13
<PAGE>
PART I. FINANCIAL INFORMATION (UNAUDITED)
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATIONS
OVERVIEW
Central Illinois Public Service Company (AmerenCIPS or the Registrant) is a
subsidiary of Ameren Corporation (Ameren), a holding company registered under
the Public Utility Holding Company Act of 1935 (PUHCA). In December 1997, Union
Electric Company (AmerenUE) and CIPSCO Incorporated (CIPSCO) combined to form
Ameren, with AmerenUE and CIPSCO's subsidiaries, the Registrant and CIPSCO
Investment Company (CIC), becoming wholly-owned subsidiaries of Ameren (the
Merger).
The following discussion and analysis should be read in conjunction with the
Notes to Financial Statements beginning on page 11, and the Management's
Discussion and Analysis of Financial Condition and Results of Operations (MD&A),
the Audited Financial Statements and the Notes to Financial Statements appearing
in the Registrant's 1998 Form 10-K.
RESULTS OF OPERATIONS
Earnings
First quarter 1999 earnings of $13 million increased $2 million from 1998's
first quarter earnings. Earnings for the 12 months ended March 31, 1999 were $79
million, a $46 million increase from the preceding 12-month period. Excluding
the extraordinary charge recorded in the fourth quarter of 1997 to write off the
generation-related regulatory assets and liabilities of the Registrant's retail
electric business, earnings for the 12-month period ended March 31, 1998 were
$57 million.
Earnings fluctuated due to many conditions, primarily: weather variations,
electric rate reductions, competitive market forces, sales growth, fluctuating
operating costs, merger-related expenses, changes in interest expense, changes
in income and property taxes, a charge for a targeted employee separation plan
and an extraordinary charge, as noted above.
The significant items affecting revenues, costs and earnings during the
three-month and 12-month periods ended March 31, 1999 and 1998 are detailed
below.
Electric Operations
Electric Operating Revenues Variations for periods ended March 31, 1999
from comparable prior-year periods
- --------------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- --------------------------------------------------------------------------------
Rate variations $ (3) $ (8)
Effect of abnormal weather - 18
Growth and other 1 10
Interchange sales 8 18
- --------------------------------------------------------------------------------
$ 6 $ 38
- --------------------------------------------------------------------------------
The $6 million increase in first quarter electric revenues compared to the
year-ago quarter was primarily driven by increased interchange sales due to
strong marketing efforts and greater interchange opportunities. The 2 percent
increase in residential sales was offset by a 2 percent decrease in commercial
sales for the three months ended March 31, 1999, versus the prior year period.
Industrial sales decreased 1 percent for the three months ended March 31, 1999,
versus the prior year period. Interchange sales increased 66 percent for the
first quarter of 1999 compared to the year-ago quarter. This increase was
partially offset by a residential rate decrease (see Note 5 under Notes to
Financial Statements for further information).
Electric revenues for the 12 months ended March 31, 1999, increased $38 million
compared to the prior 12-month period. The increase in revenues was primarily
driven by warm weather, a strong regional economy, and increased interchange
sales due to increased interchange opportunities. Weather-sensitive residential
and commercial sales
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increased 7 percent and 4 percent, respectively, while industrial and
interchange sales grew 3 percent and 15 percent, respectively, for the 12 months
ended March 31, 1999, versus the prior year period. These increases were
partially offset by a residential rate decrease (see Note 5 under to Notes to
Financial Statements for further information).
Fuel and Purchased Power
Variations for periods ended March 31, 1999
from comparable prior-year periods
- --------------------------------------------------------------------------------
(Millions of Dollars) Three Months Twelve Months
- --------------------------------------------------------------------------------
Fuel:
Variation in generation $ 12 $ 6
Price (5) (8)
Generation efficiencies and other (4) (13)
Purchased power variation 2 14
- --------------------------------------------------------------------------------
$ 5 $ (1)
- --------------------------------------------------------------------------------
Fuel and purchased power costs for the first quarter of 1999 versus the
comparable prior-year quarter increased $5 million primarily due to increased
sales volume, partially offset by lower fuel prices and generation efficiencies.
The relatively flat fuel and purchased power costs for the 12 months ended March
31, 1999 versus the prior-year period were the result of increased generation
and purchased power, driven by higher kilowatthour sales, offset by lower fuel
prices and generation efficiencies.
Gas Operations
Gas revenues for the quarter ended March 31, 1999, increased $2 million compared
to the year-ago quarter primarily due to an annual $9 million Illinois gas rate
increase effective February 1999. This rate increase was partially offset by a
decrease in industrial sales and a decrease in off-system sales of gas to
others. Gas revenues for the 12-month period ended March 31, 1999, decreased $13
million compared to the same year-ago period primarily due to a decline in
sales.
Gas costs for the quarter ended March 31, 1999 remained relatively flat as
decreases in sales were offset by increases in gas prices. Gas costs for the 12
months ended March 31, 1999 decreased $19 million compared to the year-ago
period primarily due to lower sales.
Other Operating Expenses
Other operating expense variations reflected recurring factors such as growth,
inflation, labor and benefit increases.
Other operations expenses remained flat for the first quarter of 1999 compared
to the first quarter of 1998, while increasing $17 million for the 12-month
period ended March 31, 1999 compared to the same year-ago period. This increase
was primarily due to the charge for the targeted separation plan and increases
in information system-related costs.
Maintenance expenses for the quarter ended March 31, 1999, increased $4 million
from the comparable year-ago period due to increased scheduled fossil power
plant maintenance.
Other Taxes
Other taxes decreased primarily due to a decrease in gross receipt taxes. This
decrease results from the restructuring of the Illinois public utility tax
whereby gross receipt taxes are no longer recorded as electric revenue and gross
receipt tax expense.
Taxes
Income taxes charged to operating expenses for the three months and 12 months
ended March 31, 1999, increased $2 million and $18 million, respectively, due
primarily to higher pretax income.
Balance Sheet
Changes in accounts and wages payable, taxes accrued, other accruals and other
current assets result from the timing of various payments to taxing authorities
and suppliers.
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LIQUIDITY AND CAPITAL RESOURCES
Cash provided by operating activities totaled $50 million for the quarter ended
March 31, 1999, compared to $31 million during the same 1998 period.
Cash flows used in investing activities were $22 million and $15 million for the
three months ended March 31, 1999 and 1998, respectively. Construction
expenditures for the quarter ended March 31, 1999 for constructing new or
improving existing facilities were $22 million. Capital requirements for the
remainder of 1999 are expected to be principally for construction expenditures.
Cash flows used in financing activities were $38 million for the three months
ended March 31, 1999, compared to $34 million during the same 1998 period. The
Registrant's principal financing activities for the quarter included the
redemption of $20 million of debt and the payment of dividends.
The Registrant plans to continue utilizing short-term debt to support normal
operations and other temporary requirements. The Registrant is authorized by the
Securities and Exchange Commission under PUHCA to have up to $250 million of
short-term unsecured debt instruments outstanding at any one time. Short-term
borrowings consist of bank loans (maturities generally on an overnight basis)
and commercial paper (maturities generally within 10 to 45 days). At March 31,
1999, the Registrant had committed bank lines of credit aggregating $80 million
(of which $80 million were unused and $48 million were available at such date)
which make available interim financing at various rates of interest based on
LIBOR, the bank certificate of deposit rate or other options. The lines of
credit are renewable annually at various dates throughout the year. At March 31,
1999, the Registrant had $32 million of short-term borrowings.
Also, Ameren has a bank credit agreement due 2003, which permits the borrowing
of up to $200 million on a long-term basis. This credit agreement is available
to Ameren and its subsidiaries, including the Registrant. As of March 31, 1999,
$180 million was available for the Registrant's use.
RATE MATTERS
In March 1999, AmerenCIPS filed a delivery service tariff with the Illinois
Commerce Commission (ICC) to comply with the requirements of the Electric
Service Customer Choice and Rate Relief Law of 1997. This tariff would be used
by electric customers who choose to purchase their power from an alternate
supplier. The ICC has until September 1, 1999 to render a decision.
See Note 5 under Notes to Financial Statements for further discussion of Rate
Matters.
ELECTRIC INDUSTRY RESTRUCTURING
In December 1997, the Governor of Illinois signed the Electric Service Customer
Choice and Rate Relief Law of 1997 (the Law) providing for electric utility
restructuring in Illinois. This legislation introduces competition into the
supply of electric energy in Illinois.
One of the major provisions of the Law includes the phasing-in through 2002 of
retail direct access, which allows customers to choose their electric supplier.
The phase-in of retail direct access begins on October 1, 1999, with large
commercial and industrial customers principally comprising the initial group.
The customers in this group represent approximately 24 percent of the
Registrant's total sales. Retail direct access will be offered to the remaining
commercial and industrial customers December 31, 2000, and access will be
offered to residential customers May 1, 2002.
YEAR 2000 ISSUE
The Year 2000 Issue relates to how dates are stored and used in computer
systems, applications, and embedded systems. As the century date change occurs,
certain date-sensitive systems need to be able to recognize the year as 2000 and
not as 1900. This inability to recognize and properly treat the year as 2000 may
cause these systems to process critical financial and operational information
incorrectly. The Registrant's primary concern is the potential for any
interruption in providing electric and gas service to customers, as well as the
potential inability to process
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critical financial and operational information on a timely basis, including
billing its customers, if appropriate steps are not taken to address this issue.
Management has developed a Year 2000 plan (Plan) covering Ameren, including
AmerenCIPS, and Ameren's Board of Directors has been briefed about the Year 2000
Issue and how it may affect the Registrant.
Ameren's Plan to resolve the Year 2000 Issue involves three phases: assessment,
planning, and implementation/ testing. Implementation of the Plan is directly
supervised by each area's responsible Vice President. A Year 2000 Project
Director coordinates the implementation of the Plan among functional teams who
are addressing issues specific to a particular area, such as nuclear and
non-nuclear generation facilities, energy management systems, gas distribution,
etc. Ameren has also engaged certain outside consultants, technicians and other
external resources to aid in formulating and implementing the Plan.
Ameren has completed its assessment phase, which included analyzing
date-sensitive electronic hardware, software applications and embedded systems
and has developed a compliance plan to address issues that were identified. Many
of the major corporate computer systems at Ameren are relatively new and
therefore are either Year 2000 compliant or only require minor modifications.
Also, several of the operating hardware and embedded systems (i.e.,
microprocessor chips) use analog rather than digital technology and thus are
unaffected by the two-digit date issue. In addition, Ameren has contacted
hundreds of vendors and suppliers to verify compliance.
Ameren has also completed its planning phase. Items that have been identified
for remediation have been prioritized into groups based on their significance to
Ameren's operations. The implementation/testing phase for all
components/applications is approximately 70 percent complete as of March 31,
1999. Ameren expects to complete remediation of its significant
components/applications by the end of the third quarter 1999.
With respect to third parties, for areas that interface directly with
significant vendors, Ameren has inventoried vendors and major suppliers and is
currently assessing their Year 2000 readiness through surveys, websites and
personal contact. Ameren plans to follow up with major suppliers and vendors and
verify Year 2000 compliance, where appropriate. Ameren has also queried its
health insurance providers. To date, Ameren is not aware of any problems that
would materially impact its financial condition, results of operations or
liquidity. However, neither Ameren nor the Registrant has the means of ensuring
that these parties will be Year 2000 compliant. The inability of those parties
to complete their Year 2000 resolution process could materially impact Ameren
and the Registrant.
Ameren is also addressing the impact of electric power grid problems that may
occur outside of its own electric system. Ameren has started Year 2000 electric
power grid impact planning through the system's various electric interconnection
affiliations and is working with the Mid-American Interchange Network (MAIN) to
begin planning Year 2000 operational preparedness and restoration scenarios. As
of April 1, 1999 (the latest information available), MAIN was finished with its
assessment and planning phases and 74 percent complete with its implementation/
testing phase. In addition, Ameren provides monthly status reports to the North
American Electric Reliability Council (NERC) to assist them in assessing Year
2000 readiness of the regional electric grid. As of April 1, 1999 (the latest
information available), NERC was 99 percent complete with its assessment phase,
95 percent complete with its planning phase and 75 percent complete with its
implementation/testing phase. The Registrant participated in a Year 2000 drill
conducted by NERC in April 1999. The drill focused on the testing of the backup
systems of voice and data communications needed to operate the electric power
grids in the event of a partial communication loss. The results of the drill at
Ameren were successful. Additional drills are planned. Through the Electric
Power Research Institute (EPRI), an industry-wide effort has been established to
deal with Year 2000 problems affecting digital systems and equipment used by the
nation's electric power companies. Under this effort, participating utilities
are working together to assess specific vendors' system problems and test plans.
The assessment will be shared by the industry as a whole to facilitate Year 2000
problem solving.
In addressing the Year 2000 Issue, Ameren will incur internal labor costs as
well as external consulting and other expenses related to infrastructure
enhancements necessary to prepare for the new century. Ameren estimates that its
external costs (consulting fees and related costs) for addressing the Year 2000
Issue will range from $10 million to $15 million. As of March 31, 1999, Ameren
has expended approximately $5 million. Ameren's plans to complete Year 2000
modifications are based on management's best estimates, which are derived
utilizing numerous assumptions of future events including the continued
availability of certain resources, and other factors. However, there can be no
guarantee that these estimates will be achieved and actual results could differ
materially from those plans. Specific factors that might cause such material
differences include, but are not limited to, the availability and cost of
personnel trained in this area, the ability to locate and correct all relevant
computer codes, and similar uncertainties.
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Ameren believes that, with appropriate modifications to existing computer
systems/components, updates by vendors and trading partners, and conversion to
new software and hardware in the ordinary course of business, the Year 2000
Issue will not pose significant operational problems for the Registrant.
However, if such conversions are not completed in a proper and timely manner by
all affected parties, the Year 2000 Issue could result in material adverse
operational and financial consequences to the Registrant, and there can be no
assurance that Ameren's efforts, or those of vendors and trading partners,
interconnection affiliates, NERC or EPRI to address the Year 2000 Issue will be
successful. Ameren is in the process of developing contingency plans to address
potential risks, including risks of vendor/trading partners noncompliance, as
well as noncompliance of any of the Registrant's material operating systems. The
first operational contingency plan addressing power grid issues was completed in
March, 1999. Based on the findings of the Year 2000 drill, minor modifications
to the plan are being developed, with an expected completion date by the end of
the second quarter 1999. Contingency plans related to the business areas are
also expected to be completed by the end of the second quarter 1999. At this
time, the Registrant is unable to predict the ultimate impact, if any, of the
Year 2000 Issue on the Registrant's financial condition, results of operations
or liquidity; however, the impact could be material.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Market risk represents the risk of changes in value of a financial instrument,
derivative or non-derivative, caused by fluctuations in interest rates and
equity prices. The following discussion of the Registrant's risk management
activities includes "forward-looking" statements that involve risks and
uncertainties. Actual results could differ materially from those projected in
the "forward-looking" statements. The Registrant handles market risks in
accordance with established policies, which may include entering into various
derivative transactions. In the normal course of business, the Registrant also
faces risks that are either non-financial or non-quantifiable. Such risks
principally include credit risk and legal risk and are not represented in the
following analysis.
Interest Rate Risk
The Registrant is exposed to market risk through changes in interest rates
through its issuance of both long-term and short-term variable-rate debt,
fixed-rate debt, commercial paper and auction market preferred stock. The
Registrant manages its interest rate exposure by controlling the amount of these
instruments it holds within its total capitalization portfolio and by monitoring
the effects of market changes in interest rates.
If interest rates increase 1 percent in 2000 as compared to 1999, the
Registrant's interest expense would increase and net income would decrease by
approximately $1 million. This amount has been determined using the assumptions
that the Regustrant's outstanding variable rate debt, commercial paper and
auction market preferred stock as of March 31, 1999, continued to be outstanding
throughout 2000, and that the average interest rates for these instruments
increased 1 percent over 1999. The model does not consider the effects of the
reduced level of overall economic activity that would exist in such an
environment. In the event of a significant change in interest rates, management
would likely take actions to further mitigate its exposure to this market risk.
However, due to the uncertainty of the specific actions that would be taken and
their possible effects, the sensitivity analysis assumes no change in the
Registrant's financial structure.
Commodity Price Risk
The Registrant is exposed to changes in market prices for natural gas and fuel
and purchased power. With regard to its natural gas utility business, the
Registrant's exposure to changing market prices is in large part mitigated by
the fact that the Registrant has a Purchased Gas Adjustment Clause (PGA) in
place. The PGA allows the Registrant to pass on to its customers its prudently
incurred costs of natural gas.
Since the Registrant does not have a provision similar to the PGA for its
electric operations, the Registrant has entered into several long-term contracts
with various suppliers to purchase coal to manage its exposure to fuel prices.
With regard to the Registrant's exposure to commodity risk for purchased power,
Ameren has established a subsidiary, AmerenEnergy, Inc., whose primary
responsibility includes managing market risks associated with the changing
market prices for purchased power for the Registrant.
AmerenEnergy utilizes several techniques to mitigate its market risk for
purchased power, including utilizing derivative financial instruments. A
derivative is a contract whose value is dependent on or derived from the value
of some underlying asset. The derivative financial instruments that AmerenEnergy
is allowed to utilize (which include
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forward contracts and futures contracts) are dictated by a risk management
policy, which has been reviewed with the Auditing Committee of Ameren's Board of
Directors. Compliance with the risk management policy is the responsibility of a
risk management steering committee, consisting of Ameren officers and an
independent risk management officer at AmerenEnergy.
As of March 31, 1999, the fair value of derivative financial instruments exposed
to commodity price risk was immaterial. The Registrant expects an increase in
the derivative financial instruments used to manage risk in 1999 due to expected
growth at AmerenEnergy.
SAFE HARBOR STATEMENT
Statements made in this Form 10-Q which are not based on historical facts, are
forward-looking and, accordingly, involve risks and uncertainties that could
cause actual results to differ materially from those discussed. Although such
forward-looking statements have been made in good faith and are based on
reasonable assumptions, there is no assurance that the expected results will be
achieved. These statements include (without limitation) statements as to future
expectations, beliefs, plans, strategies, objectives, events, conditions,
financial performance and the Year 2000 Issue. In connection with the "Safe
Harbor" provisions of the Private Securities Litigation Reform Act of 1995, the
Registrant is providing this cautionary statement to identify important factors
that could cause actual results to differ materially from those anticipated.
Factors include, but are not limited to, the effects of regulatory actions;
changes in laws and other governmental actions; competition; future market
prices for fuel and purchased power, electricity, and natural gas, including the
use of financial instruments; average rates for electricity in the Midwest;
business and economic conditions; interest rates; weather conditions; fuel
prices and availability; generation plant performance; monetary and fiscal
policies; future wages and employee benefits costs; and legal and administrative
proceedings.
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
BALANCE SHEET
UNAUDITED
(Thousands of Dollars, Except Shares)
<TABLE>
<CAPTION>
March 31, December 31,
ASSETS 1999 1998
- ------ ------------ -----------
<S> <C> <C>
Property and plant, at original cost:
Electric $2,385,393 $2,381,682
Gas 261,569 259,656
---------- ----------
2,646,962 2,641,338
Less accumulated depreciation and amortization 1,210,593 1,192,108
---------- ----------
1,436,369 1,449,230
Construction work in progress 29,988 16,220
---------- ----------
Total property and plant, net 1,466,357 1,465,450
Other assets 30,976 31,904
Current assets:
Cash and cash equivalents -- 10,180
Accounts receivable - trade (less allowance for doubtful
accounts of $2,361 and $1,714, respectively) 60,374 44,494
Unbilled revenue 43,767 53,120
Other accounts and notes receivable 15,237 16,486
Materials and supplies, at average cost -
Fossil fuel 42,579 50,791
Other 35,602 36,047
Other 7,282 8,214
---------- ----------
Total current assets 204,841 219,332
Regulatory assets:
Deferred income taxes 23,978 24,797
Other 22,314 22,914
---------- ----------
Total regulatory assets 46,292 47,711
---------- ----------
Total Assets $1,748,466 $1,764,397
========== ==========
CAPITAL AND LIABILITIES
Capitalization:
Common stock, no par value, authorized 45,000,000 shares -
outstanding 25,452,373 shares $ 120,033 $ 120,033
Retained earnings 451,798 455,337
---------- ----------
Total common stockholder's equity 571,831 575,370
Preferred stock not subject to mandatory redemption 80,000 80,000
Long-term debt 523,502 528,446
---------- ----------
Total capitalization 1,175,333 1,183,816
Current liabilities:
Current maturity of long-term debt 60,000 60,000
Short-term debt 31,700 46,700
Accounts and wages payable 56,919 61,609
Accumulated deferred income taxes 21,695 21,386
Taxes accrued 22,842 13,201
Other 37,571 34,454
---------- ----------
Total current liabilities 230,727 237,350
---------- ----------
Accumulated deferred income taxes 229,420 234,119
Accumulated deferred investment tax credits 34,036 34,657
Regulatory liability 38,217 39,621
Other deferred credits and liabilities 40,733 34,834
---------- ----------
Total Capital and Liabilities $1,748,466 $1,764,397
========== ==========
</TABLE>
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF INCOME
UNAUDITED
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended Twelve Months Ended
March 31, March 31,
------------------------ ----------------------
1999 1998 1999 1998
---- ---- ---- ----
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $ 155,240 $ 149,271 $ 727,887 $ 690,235
Gas 52,532 50,244 127,794 140,663
--------- --------- --------- ---------
Total operating revenues 207,772 199,515 855,681 830,898
OPERATING EXPENSES:
Operations
Fuel and purchased power 55,690 51,082 234,693 235,725
Gas 33,250 32,225 70,375 89,121
Other 40,398 41,294 178,581 161,944
--------- --------- --------- ---------
129,338 124,601 483,649 486,790
Maintenance 17,407 13,835 75,114 74,617
Depreciation and amortization 20,740 18,822 76,241 80,335
Income taxes 5,979 4,348 47,400 29,446
Other taxes 9,599 16,177 50,256 58,011
--------- --------- --------- ---------
Total operating expenses 183,063 177,783 732,660 729,199
OPERATING INCOME 24,709 21,732 123,021 101,699
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during
construction (6) 46 (36) 612
Miscellaneous, net 356 354 (953) (3,221)
--------- --------- --------- ---------
Total other income and deductions 350 400 (989) (2,609)
INCOME BEFORE INTEREST CHARGES 25,059 22,132 122,032 99,090
INTEREST CHARGES:
Interest 10,815 10,432 40,422 38,794
Allowance for borrowed funds used during construction (71) (418) (734) (929)
--------- --------- --------- ---------
Net interest charges 10,744 10,014 39,688 37,865
INCOME BEFORE EXTRAORDINARY CHARGE 14,315 12,118 82,344 61,225
--------- --------- --------- ---------
EXTRAORDINARY CHARGE (NET OF
INCOME TAXES) -- -- -- (24,853)
--------- --------- --------- ---------
NET INCOME 14,315 12,118 82,344 36,372
--------- --------- --------- ---------
PREFERRED STOCK DIVIDENDS 968 984 3,729 3,786
--------- --------- --------- ---------
NET INCOME AFTER PREFERRED
STOCK DIVIDENDS $ 13,347 $ 11,134 $ 78,615 $ 32,586
========= ========= ========= =========
</TABLE>
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
STATEMENT OF CASH FLOWS
UNAUDITED
(Thousands of Dollars)
<TABLE>
<CAPTION>
Three Months Ended
March 31,
1999 1998
<S> <C> <C>
Cash Flows From Operating:
Net income $ 14,315 $ 12,118
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 20,740 18,822
Allowance for funds used during construction (65) (464)
Deferred income taxes, net (4,975) (4,497)
Deferred investment tax credits, net (621) (834)
Changes in assets and liabilities:
Receivables, net (5,278) 21,184
Materials and supplies 8,657 (7,116)
Accounts and wages payable (4,690) (34,191)
Taxes accrued 9,641 9,509
Other, net 12,187 16,086
-------- --------
Net cash provided by operating activities 49,911 30,617
Cash Flows From Investing:
Construction expenditures (22,075) (15,273)
Allowance for funds used during construction 65 464
-------- --------
Net cash used in investing activities (22,010) (14,809)
Cash Flows From Financing:
Dividends on common stock (17,155) (17,155)
Dividends on preferred stock (926) (1,125)
Redemptions -
Short-term debt (15,000) (15,466)
Long-term debt (5,000) (10,000)
Issuances -
Long-term debt -- 10,000
-------- --------
Net cash used in financing activities (38,081) (33,746)
Net increase in cash and cash equivalents (10,180) (17,938)
Cash and cash equivalents at beginning of year 10,180 28,140
-------- --------
Cash and cash equivalents at end of period $ -- $ 10,202
======== ========
Cash paid during the periods:
Interest (net of amount capitalized) $ 8,750 $ 10,086
Income taxes, net $ 754 $ 867
</TABLE>
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CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
March 31, 1999
Note 1 - Central Illinois Public Service Company (AmerenCIPS or the Registrant)
is a wholly-owned subsidiary of Ameren Corporation (Ameren), which is the parent
company of two utility operating companies, the Registrant and Union Electric
Company (AmerenUE). Ameren is a registered holding company under the Public
Utility Holding Company Act of 1935 (PUHCA) formed in December 1997 upon the
merger of CIPSCO Incorporated (the Registrant's former parent) and AmerenUE (the
Merger). Both Ameren Corporation and its subsidiaries are subject to the
regulatory provisions of the PUHCA. The operating companies are engaged
principally in the generation, transmission, distribution and sale of electric
energy and the purchase, distribution, transportation and sale of natural gas in
the states of Illinois and Missouri. Contracts among the companies--dealing with
jointly-owned generating facilities, interconnecting transmission lines, and the
exchange of electric power--are regulated by the Federal Energy Regulatory
Commission (FERC) or the Securities and Exchange Commission (SEC).
Administrative support services are provided to the Registrant by a separate
Ameren subsidiary, Ameren Services Company. The Registrant serves 400,000
electric and 175,000 gas customers in a 20,000 square-mile region of central and
southern Illinois.
The Registrant also has a 20% interest in Electric Energy, Inc. (EEI), which is
accounted for under the equity method of accounting. EEI owns and operates an
electric generating and transmission facility in Illinois that supplies electric
power primarily to a uranium enrichment plant located in Paducah, Kentucky.
Note 2 - Financial statement note disclosures, normally included in financial
statements prepared in conformity with generally accepted accounting principles,
have been omitted in this Form 10-Q pursuant to the Rules and Regulations of the
Securities and Exchange Commission. However, in the opinion of the Registrant,
the disclosures contained in this Form 10-Q are adequate to make the information
presented not misleading. See Notes to Financial Statements included in the 1998
Form 10-K for information relevant to the financial statements contained in this
Form 10-Q, including information as to the significant accounting policies of
the Registrant.
Note 3 - In the opinion of the Registrant the interim financial statements filed
as part of this Form 10-Q reflect all adjustments, consisting only of normal
recurring adjustments, necessary for a fair statement of the results for the
periods presented. The Registrant's financial statements were prepared to permit
the information required in the Financial Data Schedule (FDS), Exhibit 27, to be
directly extracted from the filed statements. The FDS amounts correspond to or
are calculable from the amounts reported in the financial statements or notes
thereto.
Note 4 - Due to the effect of weather on sales and other factors which are
characteristic of public utility operations, financial results for the periods
ended March 31, 1999 and 1998 are not necessarily indicative of trends for any
three-month or 12-month period.
Note 5 - In conjunction with the Electric Service Customer Choice and Rate
Relief Law of 1997, a 5 percent residential electric rate decrease for the
Registrant's electric customers was effective August 1, 1998. This rate decrease
is expected to decrease electric revenues $11 million annually, based on
estimated levels of sales and assuming normal weather conditions. The Registrant
may be subject to additional 5 percent residential electric rate decreases in
each of 2000 and 2002, to the extent its rates exceed the Midwest utility
average at that time. The Registrant's rates are currently below the Midwest
utility average.
Note 6 - Statement of Position (SOP) 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" became effective on January 1,
1999. SOP 98-1 provides guidance on accounting for the costs of computer
software developed or obtained for internal use. Under SOP 98-1, certain costs,
may be capitalized and amortized over some future period. SOP 98-1 did not have
a material impact on the Registrant's financial position or results of
operations upon adoption.
-11-
<PAGE>
The Emerging Issues Task Force of the Financial Accounting Standards Board
(EITF) Issue 98-10, "Accounting for Energy Trading and Risk Management
Activities" became effective on January 1, 1999. EITF 98-10 provides guidance on
the accounting for energy contracts entered into for the purchase or sale of
electricity, natural gas, capacity and transportation. The EITF reached a
consensus in EITF 98-10 that sales and purchase activities being performed need
to be classified as either trading or non-trading. Furthermore, transactions
that are determined to be trading activities would be recognized on the balance
sheet measured at fair value, with gains and losses included in earnings. EITF
98-10 includes factors or indicators to consider when determining if a
transaction is a trading or non-trading activity. Currently, AmerenEnergy Inc.,
an energy marketing subsidiary of Ameren, enters into contracts for the sale and
purchase of energy on behalf of AmerenCIPS. These transactions are considered
non-trading activities and are accounted for using the accrual or settlement
method, which represents industry practice. Should any of AmerenEnergy's future
activities be considered trading activities based on the indicators provided in
EITF 98-10, a change in accounting practice would be required. EITF 98-10 did
not have a material impact on the Registrant's financial position or results of
operations upon adoption.
Note 7 - Segment information for the three month and 12 month periods ended
March 31, 1999 and 1998 is as follows:
<TABLE>
<CAPTION>
- ---------------------------------------------------------------------------------------------
(in millions) Electric Gas Total
- ---------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Three months ended March 31, 1999:
Revenues $ 155 $ 53 $ 208
Operating Income (Net) 20 5 25
- ---------------------------------------------------------------------------------------------
Three months ended March 31, 1998:
Revenues $ 150 $ 50 $ 200
Operating Income (Net) 19 3 22
- ---------------------------------------------------------------------------------------------
12 months ended March 31, 1999:
Revenues $ 728 $ 128 $ 856
Operating Income (Net) 116 7 123
- ---------------------------------------------------------------------------------------------
12 months ended March 31, 1998:
Revenues $ 690 $ 141 $ 831
Operating Income (Net) 97 5 102
- ---------------------------------------------------------------------------------------------
</TABLE>
Note 8 - Certain reclassifications were made to prior-year financial statements
to conform to current-period presentation.
-12-
<PAGE>
PART II. OTHER INFORMATION
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
At the annual meeting of stockholders of the Registrant held on April
22, 1999, the following matter was presented to the meeting for a vote and the
results of such voting are as follows:
Item (1) Election of Directors.
Non-Voted
Name For Withheld Brokers
Paul A. Agathen................... 25,504,367 846 0
Warner L. Baxter.................. 25,504,367 846 0
Donald E. Brandt.................. 25,504,367 846 0
Charles W. Mueller................ 25,504,352 861 0
Gary L. Rainwater................. 25,504,364 849 0
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
Exhibit 12 - Computation of Ratio of Earnings to Fixed Charges
and Preferred Stock Dividend Requirements, 12 Months Ended March
31, 1999.
Exhibit 27 - Financial Data Schedule.
(b) Reports on Form 8-K. None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
CENTRAL ILLINOIS PUBLIC
SERVICE COMPANY
(Registrant)
By /s/ Warner L. Baxter
----------------------
Warner L. Baxter
Vice President and Controller
(Principal Accounting Officer)
Date: May 14, 1999
-13-
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES AND PREFERRED STOCK DIVIDENDS
<TABLE>
<CAPTION>
12 Months
Ended
Year Ended December 31, March 31,
1994 1995 1996 1997 1998 1999
Thousands of Dollars Except Ratios
<S> <C> <C> <C> <C> <C> <C>
Net Income $81,913 $70,631 $77,393 $38,620 $80,147 $82,344
Add- Extraordinary items net of tax - - - 24,853 - -
------- ------- ------- ------- ------- -------
Net Income from continuing operations 81,913 70,631 77,393 63,473 80,147 82,344
Taxes based on income 48,523 44,483 47,286 33,922 45,412 46,832
------- ------- ------- ------- ------- -------
Net income before income taxes 130,436 115,114 124,679 97,395 125,559 129,176
------- ------- ------- ------- ------- -------
Add- fixed charges:
Interest on long term debt 31,164 31,168 31,409 32,271 37,260 38,038
Other interest 358 853 4,636 2,875 1,647 1,218
Amortization of net debt premium,
discount, expenses and losses 1,678 1,703 1,709 1,643 1,132 1,166
------- ------- ------- ------- ------- -------
Total fixed charges 33,200 33,724 37,754 36,789 40,039 40,422
------- ------- ------- ------- ------- -------
Earnings available for fixed charges 163,636 148,838 162,433 134,184 165,598 169,598
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges 4.92 4.41 4.30 3.64 4.13 4.19
======= ======= ======= ======= ======= =======
Earnings required for preferred dividends:
Preferred stock dividends 3,510 3,850 3,721 3,715 3,745 3,728
Adjustment to pre-tax basis 2,079 2,425 2,273 1,985 2,122 2,131
------- ------- ------- ------- ------- -------
5,589 6,275 5,994 5,700 5,867 5,859
Fixed charges plus preferred stock dividend
requirements 38,789 39,999 43,748 42,489 45,906 46,281
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges plus
preferred stock dividend requirements 4.21 3.72 3.71 3.15 3.60 3.66
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
Exhibit 27
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
10-Q MARCH 31, 1999
FINANCIAL DATA SCHEDULE UT
PUBLIC UTILITY COMPANIES AND PUBLIC UTILITY HOLDING COMPANIES
APPENDIX E TO ITEM 601 (C) OF REGULATION S-K
(Thousands of Dollars)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,466,357
<OTHER-PROPERTY-AND-INVEST> 0
<TOTAL-CURRENT-ASSETS> 204,841
<TOTAL-DEFERRED-CHARGES> 30,976
<OTHER-ASSETS> 46,292
<TOTAL-ASSETS> 1,748,466
<COMMON> 120,033
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 451,798
<TOTAL-COMMON-STOCKHOLDERS-EQ> 571,831
0
80,000
<LONG-TERM-DEBT-NET> 523,502
<SHORT-TERM-NOTES> 31,700
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 60,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 481,433
<TOT-CAPITALIZATION-AND-LIAB> 1,748,466
<GROSS-OPERATING-REVENUE> 207,772
<INCOME-TAX-EXPENSE> 5,979
<OTHER-OPERATING-EXPENSES> 177,084
<TOTAL-OPERATING-EXPENSES> 183,063
<OPERATING-INCOME-LOSS> 24,709
<OTHER-INCOME-NET> 350
<INCOME-BEFORE-INTEREST-EXPEN> 25,059
<TOTAL-INTEREST-EXPENSE> 10,744
<NET-INCOME> 14,315
968
<EARNINGS-AVAILABLE-FOR-COMM> 13,347
<COMMON-STOCK-DIVIDENDS> 17,155
<TOTAL-INTEREST-ON-BONDS> 0 <F1>
<CASH-FLOW-OPERATIONS> 49,911
<EPS-PRIMARY> 0.00 <F2>
<EPS-DILUTED> 0.00 <F2>
<FN>
<F1> Required at fiscal year-end only.
<F2> Information not normally disclosed in financial statements and notes.
</FN>
</TABLE>
