SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 1994
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission File Number 1-3632
INTERSTATE POWER COMPANY
(Exact name of registrant as specified in its charter)
DELAWARE 42-0329500
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1000 Main Street, P.O. Box 769, Dubuque, Iowa 52004-0769
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 319-582-5421
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
Indicate the number of shares outstanding of each of the issuer's
classes of common stock.
Shares Outstanding
May 1, 1994
Common Stock Par Value $3.50 Per Share 9,442,139 Shares
INTERSTATE POWER COMPANY
STATEMENTS OF INCOME
Three Months
Ended March 31
1994 1993
(In Thousands)
OPERATING REVENUES:
Electric $ 62,375 $ 62,682
Gas 23,200 22,307
85,575 84,989
OPERATING EXPENSES:
Operation:
Fuel for electric generation 15,594 14,833
Power purchased 11,553 12,779
Cost of gas sold 13,011 12,727
Other operating expenses 12,206 12,303
Maintenance 3,528 4,002
Depreciation 6,861 6,647
Income taxes:
Federal currently payable 3,506 3,827
State currently payable 1,040 1,184
Deferred taxes-net 1,171 154
Investment tax credit amortization (257) (257)
Property and other taxes 4,311 4,373
Total operating expenses 72,524 72,572
OPERATING INCOME 13,051 12,417
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during construction 7 4
Interest income 46 97
Miscellaneous 177 (70)
Income taxes (92) (11)
Total other income and deductions 138 20
INCOME BEFORE INTEREST CHARGES 13,189 12,437
INTEREST CHARGES:
Long-term debt 3,843 3,917
Other interest charges 122 152
Allowance for borrowed funds used during construction (27) (21)
Total interest charges 3,938 4,048
NET INCOME 9,251 8,389
PREFERRED AND PREFERENCE STOCK DIVIDENDS 613 729
NET INCOME AVAILABLE FOR COMMON STOCK $ 8,638 $ 7,660
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,401 9,298
EARNINGS PER COMMON SHARE OUTSTANDING $ .91 $ .82
DIVIDENDS PAID PER COMMON SHARE $ .52 $ .52
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
ASSETS
Mar. 31 Dec. 31
1994 1993
(In Thousands)
UTILITY PLANT (at original cost) $851,239 $846,294
Less accumulated provision for depreciation 364,579 358,330
Utility plant - net 486,660 487,964
OTHER PROPERTY AND INVESTMENTS 709 825
CURRENT ASSETS:
Cash and cash equivalents 1,872 3,083
Accounts receivable less reserve 27,627 26,060
Inventories - at average cost:
Fuel 9,703 22,985
Materials and supplies 5,227 4,720
Prepaid income tax 7,932 7,994
Other prepayments and current assets 8,293 5,298
Total current assets 60,654 70,140
DEFERRED DEBITS:
Regulatory assets for deferred income taxes 27,243 27,026
Deferred energy efficiency costs 10,443 9,666
Other 9,593 8,740
Total deferred debits 47,279 45,432
TOTAL $595,302 $604,361
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
BALANCE SHEETS
CAPITALIZATION AND LIABILITIES
Mar. 31 Dec. 31
1994 1993
(In Thousands)
CAPITALIZATION:
Common stock, par value $3.50 per share;
Authorized - 30,000,000 shares; issued
and outstanding - 9,435,925 in 1994
and 9,389,841 in 1993 $ 33,026 $ 32,865
Additional paid-in capital 100,676 99,547
Retained earnings 61,147 57,397
Total common equity 194,849 189,809
Preferred stock, par value $50 per share 34,679 34,656
Total stockholders' equity 229,528 224,465
Long-term debt 203,188 203,170
Total capitalization 432,716 427,635
CURRENT LIABILITIES:
Commercial paper payable 2,500 20,100
Accounts payable 10,093 11,733
Payroll, interest and taxes accrued 26,810 21,857
Other 9,607 10,933
Total current liabilities 49,010 64,623
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Accumulated deferred income taxes 83,764 82,438
Accumulated deferred investment tax credits 19,840 20,097
Other 9,972 9,568
Total deferred credits and other non-current
liabilities 113,576 112,103
TOTAL $595,302 $604,361
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
STATEMENTS OF CASH FLOWS
Three Months
Ended March 31
1994 1993
(In Thousands)
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES:
Net income $ 9,251 $ 8,389
Adjustment for non-cash items:
Depreciation 6,861 6,647
Deferred income taxes 1,109 657
Investment tax credit amortization (257) (257)
Allowance for equity funds used during construction (7) (4)
Deferred pension cost 23 0
Changes in assets and liabilities:
Accounts receivable - net (1,567) (1,756)
Fuel 13,404 9,321
Materials and supplies (507) (355)
Accounts payable and other current liabilities (2,289) 1,457
Accrued and prepaid taxes 2,496 1,607
Interest accrued 1,707 (342)
Other prepayments and current assets (3,005) (1,882)
Rate refund payable 0 (4,062)
Deferred energy conservation costs (777) (582)
Other operating activities 3 567
Cash flows from operating activities 26,445 19,405
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (5,778) (6,540)
Allowance for borrowed funds used during construction (27) (21)
Other (60) (240)
Cash flows from investing activities (5,865) (6,801)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 1,299 0
Retirement of long-term debt (3) (3)
Dividends on common, preferred and preference stock (5,487) (5,564)
Sale of commercial paper - net (17,600) (7,800)
Cash flows from financing activities (21,791) (13,367)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $(1,211) $ (763)
CASH AND CASH EQUIVALENTS:
Beginning of period $ 3,083 $ 2,306
End of period $ 1 872 $ 1,543
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,118 $ 4,520
Income taxes $ 90 $ 1,536
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
Summarized Financial Information
The March 31, 1994 financial statements included herein have been prepared by
the company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. The accounting policies followed by the
company are set forth in Note 1 to the company's financial statements in the
1993 Form 10-K. It is suggested that these condensed financial statements be
read in conjunction with the financial statements and the notes thereto
included in the company's Form 10-K for the year ended December 31, 1993.
In the opinion of the company, the financial statements reflect all
adjustments, consisting only of normal recurring accruals, necessary to
fairly state the results of operations.
Notes to Financial Statements
On August 4, 1993 the company refiled an application with the Iowa Utilities
Board for an increase in electric rates in an annual amount of $11.5 million.
Increased interim rates in an annual amount of $11.0 million were placed in
effect on October 28, 1993. The interim rate increase totalling $4.3 million
to date is being collected subject to refund upon final determination by the
Board. A decision on the final rate increase is anticipated by the end of
the second quarter of 1994.
INTERSTATE POWER COMPANY
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
EARNINGS PER SHARE for the first quarter of 1994 were $0.91 compared to $0.82
for the corresponding period in 1993. The increase in earnings is primarily
attributable to improved gas margins and reduced maintenance expense.
Three Months Ended March 31
ELECTRIC SALES (Mwh) 1994 1993 % Change
Residential 279,483 269,120 3.9
Commercial 194,323 207,331 (6.3)
Large Power & Light 713,782 668,980 6.7
Sales for Resale 81,972 62,561 31.0
Other 16,200 16,209 (0.1)
Total Electric Sales 1,285,760 1,224,201 5.0
The increase in residential electric sales is primarily a result of colder
temperatures in January and February of this year. Aggregate commercial and
large power & light sales increased 3.6%. The reduction in commercial sales
is mainly due to the switch from a commercial tariff to a large power & light
tariff by approximately 164 customers. Sales for resale increased 31.0%
primarily due to sales to other utilities during extremely cold weather in
January 1994.
ELECTRIC REVENUES for the first quarter of 1994 decreased 0.5% compared to
the same period of 1993. Although the company implemented an $11.0 million
annual Iowa electric rate increase in the fourth quarter of 1993, the impact
of the rate increase was offset by the effect of seasonal electric tariffs
implemented in August 1993. The seasonal tariffs provide for higher rates
during the four summer cooling season months, and lower rates during the
remainder of the year. While the seasonal tariffs are not expected to have a
significant impact on total annual revenues, they do affect the comparability
of quarterly revenue between 1994 and 1993. In Iowa, the company's fuel
adjustment clause requires any margin on kilowatt-hour sales to other
utilities to be returned to customers, therefore the increase noted above did
not increase electric margins.
The future level of kilowatt-hour sales will depend upon weather conditions,
customer conservation efforts and the overall economy of the company's
service area. Sales to industrial customers are also affected by the
national economy. Also, issues facing the electric utility industry in
general, such as deregulation, transmission access, increased competition and
retention of large industrial customers could affect kilowatt-hour sales.
Three Months Ended March 31
GAS DELIVERIES (MMcf) 1994 1993 % Change
Residential 2,552 2,391 6.7
Commercial 1,435 1,391 3.2
Industrial 577 521 10.7
Other 4 17
Total Gas Sales 4,568 4,320 5.7
Gas Transportation 5,920 6,163 (3.9)
Total Gas Deliveries 10,488 10,483 0.0
The increase in residential and commercial gas sales is mainly a result of
colder temperatures in 1994. Overall industrial deliveries (retail and
transportation) were down 2.9% compared to 1993.
Three Months Ended March 31
GAS REVENUES (000's) 1994 1993 % Change
Residential $13,403 $12,746 5.2
Commercial 6,875 6,675 3.0
Industrial 2,231 2,084 7.1
Other 47 83
Total Gas Sales Revenues 22,556 21,588 4.5
Gas Transportation 644 719 (10.4)
Total Gas Revenues $23,200 $22,307 4.0
The increase in residential and commercial revenues is primarily a result of
increased sales due to colder temperatures. Revenue from retail industrial
sales increased mainly as a result of the increased sales. Although
transportation volumes decreased 3.9%, revenue from transported volumes
decreased 10.4%. This reduction in revenue resulted from the rates placed
into effect in Iowa during the first quarter of 1993 which provided for lower
commodity rates on transported volumes.
THE COST OF GAS SOLD increased 2.2% during the first quarter of 1994 compared
to the same period in 1993. The increase in gas costs is mainly a result of
the 5.7% increase in sales as discussed above. A decline in the unit cost of
gas purchased partially offset the impact of the increased volumes.
There have been no significant developments concerning FERC Order 636
transition costs since the company's discussion of this matter in the 1993
Annual Report to Stockholders.
PURCHASED POWER EXPENSE decreased $1.2 million, or 9.6%, during the first
quarter of 1994 compared to 1993. This decrease is primarily a result of the
15.5% decrease in Kwh's purchased. Capacity charges included in purchased
power expense were $5.8 million for both the first quarter of 1994 and the
first quarter of 1993.
FUEL FOR ELECTRIC GENERATION increased $2.6 million, or 18.8%, in the first
quarter of 1994 compared to the same period in 1993. This increase resulted
from a 14.1% increase in kilowatt-hours generated by the company.
FUEL INVENTORIES declined from $22.9 million to $9.7 million during the
first quarter of 1994. This is due to a normal seasonal variation and the
planned draw down of the M. L. Kapp Power Plant inventory to facilitate
reconstruction of the coal pile facilities.
MAINTENANCE EXPENSE decreased 11.8% during the first quarter of 1994 compared
to the same period in 1993. Maintenance expense for the first quarter of
1993 reflected turbine inspections, which are scheduled for 5 year intervals,
at the Fox Lake and M. L. Kapp Power Plants. In addition, several
maintenance projects scheduled for the first quarter of 1994 have been
rescheduled for later in the year.
FEDERAL AND STATE INCOME TAXES increased appproximately $0.6 million during
the first quarter of 1994 compared to the first quarter of 1993. The
increase is mainly due to higher income and the increase from 34% to 35% in
the federal income tax rate. Recovery of additional income tax expense as a
result of the tax rate change is pending in the Iowa electric rate case.
PROPERTY AND OTHER TAXES decreased slightly during the first quarter of 1994
compared to the same period in 1993. The reduction in property taxes is
primarily attributable to a reduced Iowa property assessed valuation.
INTEREST ON LONG-TERM DEBT decreased approximately $74,000 during the first
quarter of 1994 compared to the same period in 1993. This decrease is
primarily due to the second quarter 1993 replacement of high interest rate
issues with lower interest rate issues.
INTEREST ON SHORT-TERM BORROWINGS was $91,000 for the first quarter of 1994
compared to $53,000 for the first quarter of 1993. The average outstanding
balance of short-term borrowings during the first quarter of 1994 was $10.8
million compared to $5.8 million during the first quarter of 1993. Interest
rates for the first quarter of 1994 averaged 3.34% compared to 3.63% in 1993.
OTHER INCOME for the first quarter of 1994 includes $127,000 of energy
efficiency carrying costs and curtailment credits compared to $62,000 for the
same period in 1993. The increase is primarily due to an increase in the
total amount of deferred energy efficiency costs ($10.4 million at March 31,
1994 compared to $5.2 million at March 31, 1993).
AVERAGE TEMPORARY INVESTMENTS during the first quarter of 1994 were $4.2
million compared to $6.2 million in 1993. The average interest
rate was 2.96% in the first quarter of 1994 compared to 3.03% in 1993.
CONSTRUCTION EXPENDITURES during the first quarter of 1994 totaled $5.8
million compared to $6.5 million for the same period in 1993. Major 1994
construction projects include the installation of low nox burners at the
company's M. L. Kapp generating station, reconstruction of a transmission
line, and the development of a supervisory control and data acquisition
system. Construction work in progress as of March 31, 1994 totalled $6.2
million compared to $5.5 million at March 31, 1993. The 1994 construction
program is estimated to be $46 million.
In the first quarter of 1993 the company adopted Statement of Financial
Accounting Standards (SFAS) 106, "EMPLOYER'S ACCOUNTING FOR POSTRETIREMENT
BENEFITS OTHER THAN PENSIONS". Under the provisions of SFAS 106, the
estimated future cost of providing postretirement benefits will be accrued
during the employees' service periods. The company is deferring the SFAS 106
costs in other jurisdictions until rate cases are filed to recover the costs.
The Iowa Utilities Board has allowed the company to recover SFAS 106 costs in
its Iowa gas rates effective May 1993 and Iowa electric rates effective
October 1993.
The status of the municipal wholesale customer Complaint and Request for
Investigation and Hearing with FERC remains the same as discussed in the 1993
Annual Report to the Stockholders, and hearings are scheduled to begin in
August 1994.
The Iowa Utilities Board on May 2, 1994 issued its final order on the
company's request to recover deferred energy efficiency costs. The company
was granted recovery over a four-year period of energy efficiency costs
incurred through December 31, 1992.
In the first quarter of 1994 the Minnesota Environmental Protection Agency
designated the company as a Potentially Responsible Party for former
manufactured gas plant sites in New Ulm, Owatonna, and Austin, Minnesota.
To-date, no investigative procedures have been undertaken. Investigative
procedures are currently underway at sites in Savanna, Illinois and Clinton,
Iowa. The results from the tests will not be available to the company until
the second or third quarter of 1994. There has been no change during the
first quarter of 1994 in the status of the former manufactured gas plant
sites in: Mason City, Iowa; Galena, Illinois; Albert Lea and Rochester,
Minnesota. In the first quarter of 1993, the company accrued $1.1 million for
additional remediation costs at the Rochester site. The company did not
accrue any additional liability for environmental costs in the first quarter
of 1994, as it believes that the aggregate provision of $5.6 million at March
31, 1994 is adequate to cover the remaining investigative costs for sites
that have been identified and the estimated remediation costs for those sites
at which an investigative study has been completed.
INTERSTATE POWER COMPANY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1993 Form 10-K Item 3 for certain pending
legal proceedings and proceedings. Reference is also made to the
Management Discussion and Analysis included herein. Other than
these items, there are no material pending legal proceedings, or
proceedings known to be contemplated by governmental authorities,
other than ordinary routine litigation incidental to the business,
to which the company is a party or of which any of the company's
property is the subject.
ITEM 2. CHANGES IN SECURITIES
The rights of holders of registered securities have not been
materially modified, limited or qualified.
ITEM 3. DEFAULTS UPON SENIOR SECURITIES
No defaults upon senior securities.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
(a) THE DATE OF THE MEETING AND WHETHER IT WAS AN ANNUAL OR SPECIAL
MEETING.
On May 3, 1994 the Annual Stockholders Meeting was held.
(b) IF THE MEETING INVOLVED THE ELECTION OF DIRECTORS, THE NAME OF EACH
DIRECTOR ELECTED AT THE MEETING AND THE NAME OF EACH OTHER DIRECTOR
WHOSE TERM OF OFFICE AS A DIRECTOR CONTINUED AFTER THE MEETING.
The three Class III members of the Board of Directors were re-
elected, to hold office for terms as follows:
Alan B. Arends term expiring in 1997
Nicholas J. Schrup term expiring in 1997
Wayne H. Stoppelmoor term expiring in 1997
Following are the Class I and II members of the Board of Directors
whose terms continued after the meeting:
Alfred D. Cordes term expiring in 1995
Joyce L. Hanes term expiring in 1995
James E. Byrns term expiring in 1996
Gerald L. Kopischke term expiring in 1996
(c) A BRIEF DESCRIPTION OF EACH OTHER MATTER VOTED UPON AT THE MEETING
AND STATE THE NUMBER OF VOTES CAST FOR, AGAINST OR WITHHELD, AS
WELL AS THE NUMBER OF ABSTENTIONS AND BROKER NON-VOTES, AS TO EACH
SUCH MATTER, INCLUDING A SEPARATE TABULATION WITH RESPECT TO EACH
NOMINEE FOR OFFICE.
The election of three Class III directors, Alan B. Arends,
Nicholas J. Schrup and Wayne H. Stoppelmoor, to hold office for a
term of three years expiring at the annual meeting of stockholders
of the company to be held in 1997.
Votes cast were as follows:
For Against Abstain
Alan B. Arends 7,617,103 119,248 20,886
Nicholas J. Schrup 7,636,436 99,859 20,886
Wayne H. Stoppelmoor 7,648,064 88,232 20,886
ITEM 5. OTHER INFORMATION
On March 11, 1993, the company filed a shelf registration with the
Securities and Exchange Commission for $125 million of First
Mortgage Bonds and 745,000 shares of $50 par value Preferred Stock.
On May 26, 1993 the company issued $94 million of 7 5/8% Series
First Mortgage Bonds due in 2023. The proceeds from the sale of
the bonds were used to retire higher cost series bonds due in 1999,
2001, 2002 and 2008. Also, on May 26, 1993 the company issued
545,000 shares of 6.40% Preferred Stock. The proceeds from the
issuance of the stock were used to redeem higher cost series
Preferred and Preference Stock.
Below is set forth the ratio of earnings to fixed charges for each
of the years in the period 1989 through 1993 and for the 12 months
ended March 31, 1994:
December 31, 1989 3.69
December 31, 1990 3.84
December 31, 1991 3.77
December 31, 1992 2.69
December 31, 1993 2.68
March 31, 1994 2.78
Below is set forth the ratio of earnings to fixed charges and
Preferred Stock dividends for each of the years in the period 1989
through 1993 and for the 12 months ended March 31, 1994:
December 31, 1989 3.03
December 31, 1990 3.11
December 31, 1991 3.13
December 31, 1992 2.28
December 31, 1993 2.21
March 31, 1994 2.27
See Exhibit EX-12 for the computation of the above ratios.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits filed as a part of this report:
EX-12 Computation of Ratio of Earnings to Fixed Charges
and Computation of Ratio of Earnings to Fixed Charges
and Preferred Dividennds.
(b) No reports were filed on Form 8-K.
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.
Interstate Power Company
(Registrant)
Date May 6, 1994 W. C. Troy /s/
W. C. Troy, Controller
(Duly Authorized Officer and
Principal Accounting Officer)
EX-12
Computation of Ratio of Earnings to Fixed Charges
Twelve Months Ended
Dec.31 Dec.31 Dec.31 Dec.31 Dec.31 Mar.31
1989 1990 1991 1992 1993 1994
(Thousands of Dollars)
Fixed Charges:
Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166 16,092
Other interest 2,301 860 1,605 586 596 565
Interest component of rents
charged to operating expenses 274 262 232 214 183 177
Total Fixed Charges $ 17,626 16,035 16,957 17,092 16,945 16,834
Earnings:
Net income $ 28,627 27,026 29,510 19,217 18,987 19,849
Income taxes 18,726 18,527 17,382 9,698 9,464 10,095
Fixed charges 17,626 16,035 16,957 17,092 16,945 16,834
Total Earnings $ 64,979 61,588 63,849 46,007 45,396 46,778
Earnings/Fixed Charges 3.69x 3.84x 3.77x 2.69x 2.68x 2.78x
Computation of Ratio of Earnings to Fixed Charges & Preferred Dividends
Twelve Months Ended
Dec.31 Dec.31 Dec.31 Dec.31 Dec.31 Mar.31
1989 1990 1991 1992 1993 1994
Fixed Charges & (Thousands of Dollars)
Preferred Dividends:
Interest on long-term debt $ 15,051 14,913 15,120 16,292 16,166 16,092
Other interest 2,301 860 1,605 586 596 565
Interest component of rents
charged to operating expenses 274 262 232 214 183 177
Total Fixed Charges $ 17,626 16,035 16,957 17,092 16,945 16,834
Preferred Dividends (a) 3,851 3,785 3,438 3,104 3,604 3,797
Total Fixed Charges &
Preferred Dividends $ 21,477 19,820 20,395 20,196 20,549 20,631
Earnings:
Net income $ 28,627 27,026 29,510 19,217 18,987 19,849
Income taxes 18,726 18,527 17,382 9,698 9,464 10,095
Fixed charges 17,626 16,035 16,957 17,092 16,945 16,834
Total Earnings $ 64,979 61,588 63,849 46,007 45,396 46,778
Earnings/Fixed Charges
& Preferred Dividends 3.03x 3.11x 3.13x 2.28x 2.21x 2.27x
(a) Preferred dividends, as defined (not including preference dividends),
have been adjusted by multiplying the requirement by the ratio that
income before income taxes bears to net income. Such ratios were
as follows: 165% in 1989, 169% in 1990, 159% in 1991, 151% in 1992,
150% in 1993 and 151% in 1994.
