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, 1995
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, 1995
Common Stock Par Value $3.50 Per Share 9,564,287 Shares
INTERSTATE POWER COMPANY
Form 10-Q
Table of Contents
Part I - Financial Information
Item 1. Statements of Income - Three Months Ended 1
Balance Sheets - Assets 2
Balance Sheets - Capitalization and Liabilities 3
Statements of Cash Flows 4
Summarized Financial Information 5
Notes to Financial Statements 5
Item 2. Management's Discussion and Analysis 6
Part II - Other Information
Item 1. Legal Proceedings 10
Item 2. Changes in Securities 10
Item 3. Defaults Upon Senior Securities 10
Item 4. Submission of Matters to a Vote of Security Holders 10
Item 5. Other Information 11
Item 6. Exhibits and Reports on Form 8-K 11
INTERSTATE POWER COMPANY
STATEMENTS OF INCOME
Three Months
Ended March 31
1995 1994
(In Thousands)
OPERATING REVENUES:
Electric $ 63,803 $ 62,375
Gas 18,962 23,200
82,765 85,575
OPERATING EXPENSES:
Operation:
Fuel for electric generation 16,840 15,594
Power purchased 12,102 11,553
Cost of gas sold 9,957 13,011
Other operating expenses 12,031 12,206
Maintenance 3,440 3,528
Depreciation 7,226 6,861
Income taxes:
Federal currently payable 2,988 3,506
State currently payable 893 1,040
Deferred taxes-net 1,225 1,171
Investment tax credit amortization (257) (257)
Property and other taxes 4,505 4,311
Total operating expenses 70,950 72,524
OPERATING INCOME 11,815 13,051
OTHER INCOME AND DEDUCTIONS:
Allowance for equity funds used during construction 0 7
Interest income 56 46
Miscellaneous 214 177
Income taxes (111) (92)
Total other income and deductions 159 138
INCOME BEFORE INTEREST CHARGES 11,974 13,189
INTEREST CHARGES:
Long-term debt 3,811 3,843
Other interest charges 488 122
Allowance for borrowed funds used during construction (82) (27)
Total interest charges 4,217 3,938
NET INCOME 7,757 9,251
PREFERRED STOCK DIVIDENDS 614 613
NET INCOME AVAILABLE FOR COMMON STOCK $ 7,143 $ 8,638
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING 9,564 9,401
EARNINGS PER COMMON SHARE OUTSTANDING $ .74 $ .91
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
1995 1994
(In Thousands)
UTILITY PLANT (at original cost) $883,429 $879,897
Less accumulated provision for depreciation 385,194 379,216
Utility plant - net 498,235 500,681
OTHER PROPERTY AND INVESTMENTS 477 522
CURRENT ASSETS:
Cash and cash equivalents 1,664 1,537
Accounts receivable less reserve 24,993 22,350
Inventories - at average cost:
Fuel 15,523 24,220
Materials and supplies 5,424 5,208
Prepaid income tax 7,070 6,197
Other prepayments and current assets 6,664 5,954
Total current assets 61,338 65,466
DEFERRED DEBITS:
Regulatory assets for deferred income taxes 27,686 27,469
Deferred energy efficiency costs 18,203 16,961
Other 17,475 17,746
Total deferred debits 63,364 62,176
TOTAL $623,414 $628,845
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
1995 1994
CAPITALIZATION:
Common stock, par value $3.50 per share;
Authorized - 30,000,000 shares; issued
and outstanding - 9,564,287 in 1995
and 9,564,287 in 1994 $ 33,475 $ 33,475
Additional paid-in capital 103,127 103,137
Retained earnings 58,063 55,893
Total common equity 194,665 192,505
Preferred stock, par value $50 per share 34,777 34,752
Total stockholders' equity 229,442 227,257
Long-term debt 189,050 189,032
Total capitalization 418,492 416,289
CURRENT LIABILITIES:
Commercial paper payable 22,100 35,600
Long-term debt maturing within one year 14,000 14,000
Accounts payable 11,179 14,133
Payroll, interest and taxes accrued 25,103 19,342
Other 13,676 12,147
Total current liabilities 86,058 95,222
DEFERRED CREDITS AND OTHER NON-CURRENT LIABILITIES:
Accumulated deferred income taxes 89,723 88,176
Accumulated deferred investment tax credits 18,812 19,069
Other 10,329 10,089
Total deferred credits and other non-current
liabilities 118,864 117,334
TOTAL $623,414 $628,845
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
1995 1994
(In Thousands)
RECONCILIATION OF NET INCOME TO CASH FLOWS
FROM OPERATING ACTIVITIES:
Net income $ 7,757 $ 9,251
Adjustment for non-cash items:
Depreciation 7,226 6,861
Deferred income taxes 1,331 1,109
Investment tax credit amortization (257) (257)
Allowance for equity funds used during construction (0) (7)
Deferred pension cost 0 23
Changes in assets and liabilities:
Accounts receivable - net (2,643) (1,567)
Fuel 8,700 13,404
Materials and supplies (217) (507)
Accounts payable and other current liabilities (1,501) (2,289)
Accrued and prepaid taxes 2,868 2,496
Interest accrued 1,669 1,707
Other prepayments and current assets (710) (3,005)
Deferred energy conservation costs (1,242) (777)
Regulatory Assets 578 (458)
Other operating activities 627 461
Cash flows from operating activities 24,186 26,445
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to utility plant (4,792) (5,778)
Allowance for borrowed funds used during construction (82) (27)
Other (110) (60)
Cash flows from investing activities (4,984) (5,865)
CASH FLOWS FROM FINANCING ACTIVITIES:
Issuance of common stock 0 1,299
Retirement of long-term debt (3) (3)
Dividends on common and preferred stock (5,572) (5,487)
Sale of commercial paper - net (13,500) (17,600)
Cash flows from financing activities (19,075) (21,791)
NET INCREASE(DECREASE) IN CASH AND CASH EQUIVALENTS: $ 127 $(1,211)
CASH AND CASH EQUIVALENTS:
Beginning of period $ 1,537 $ 3,083
End of period $ 1,664 $ 1,872
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
Cash paid during the period for:
Interest (net of amount capitalized) $ 2,445 $ 2,118
Income taxes $ 0 $ 90
The accompanying Notes to Financial Statements are an integral part of these
statements.
INTERSTATE POWER COMPANY
Summarized Financial Information
The March 31, 1995 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
1994 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, 1994.
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
In March 1995 the company filed an application with the Iowa Utilities Board
for an increase in electric rates in an annual amount of approximately $13.1
million. The application includes a request for increased interim rates in
an annual amount of $9.6 million. The Board has until June 29, 1995 to rule
on the level and effective date of the requested interim rate increase. Any
interim rate increase will be collected subject to refund upon final
determination by the Board.
On May 1, 1995 the company filed an application with the Minnesota Public
Utilities Commission for an increase in gas rates in an annual amount of $2.4
million. A decision on the final rate increase is expected in March 1996.
INTERSTATE POWER COMPANY
PART I - FINANCIAL INFORMATION
Item 2. Management's Discussion and Analysis
The company's results of operations and financial condition are affected by
numerous factors, including weather, sales, and the amount of changes in
customer rates. The dividend of $2.08 per share annually and $0.52 per
quarter has been maintained, however, the Board of Directors will be
monitoring future dividends and the current level cannot be assured.
EARNINGS PER SHARE for the first quarter of 1995 were $0.74 compared to $0.91
for the corresponding period in 1994. Gas sales and electric sales to
residential and commercial customers were down in the first quarter of 1995,
primarily because of mild weather.
The ELECTRIC MARGIN (revenue less cost of fuel and purchased power) for the
first quarter of 1995 was $34.9 million compared to $35.2 million for the
first quarter of 1994. The decrease is primarily a result of lower sales to
residential and commercial customers. The reduction in interchange sales did
not significantly affect the electric margin nor net income, as the margin on
such sales allocable to the Iowa jurisdiction is flowed back to customers
through the fuel clause adjustment.
Three Months Ended March 31
ELECTRIC SALES (Mwh) 1995 1994 % Change
Residential 268,769 279,483 (3.8)
Commercial 187,415 194,323 (3.6)
Large Power & Light 768,701 713,782 7.7
Interchange 4,973 18,690 (73.4)
Sales for Resale 64,049 63,282 1.2
Other 15,384 16,200 (5.0)
Total Electric Sales 1,309,291 1,285,760 1.8
The decrease in residential and commercial electric sales is primarily a
result of milder weather this year. Large power & light sales increased 7.7%
due to favorable economic conditions. The decrease in interchange sales to
other utilities was primarily due to unusually high sales during extremely
cold weather in January 1994.
Three Months Ended March 31
ELECTRIC REVENUES (000'S) 1995 1994 % Change
Residential 19,185 19,556 (1.9)
Commercial 11,760 11,992 (1.9)
Large Power & Light 28,235 25,724 9.8
Interchange 106 578 (81.7)
Sales for Resale 2,188 2,158 1.4
Other 2,329 2,367 (1.6)
Total Electric Revenues 63,803 62,375 2.3
The increase in revenues for the first quarter of 1995 is primarily due to
the increased large power & light sales. In addition, the company received
IUB approval to collect $6.7 million of demand side management (DSM) costs
over a 4-year period effective October 1994. These factors were partially
offset by the reduced interchange sales and a $0.9 million first quarter of
1994 overcollection of interim Iowa electric rates.
The GAS MARGIN (revenue less purchased gas) for the first quarter of 1995 was
$9.0 million compared to $10.2 million for the same period in 1994. The
decrease was primarily attributable to lower residential and commercial
sales. The COST OF GAS SOLD decreased $3.1 million, or 23.5%, during the
first quarter of 1995 compared to the same period in 1994 primarily due to a
12.8% decrease in volumes sold and a 13.7% reduction in the unit cost of gas.
The reduction in cost is attributable to favorable gas prices as a result of
mild heating season temperatures.
Three Months Ended March 31
GAS DELIVERIES (MMcf) 1995 1994 % Change
Residential 2,231 2,552 (12.6)
Commercial 1,275 1,435 (11.1)
Industrial 467 577 (19.1)
Other 11 4
Total Gas Sales 3,984 4,568 (12.8)
Gas Transportation 6,616 5,920 11.8
Total Gas Deliveries 10,600 10,488 1.1
The decrease in residential and commercial gas sales is mainly a result of
milder temperatures in 1995. The overall increase of 1.1% is primarily due
to the increase in transportation volumes delivered to industrial customers.
Three Months Ended March 31
GAS REVENUES (000's) 1995 1994 % Change
Residential $11,053 $13,403 (17.5)
Commercial 5,657 6,875 (17.7)
Industrial 1,587 2,231 (28.9)
Other 59 47
Total Gas Sales Revenues 18,356 22,556 (18.6)
Gas Transportation 607 644 ( 5.7)
Total Gas Revenues $18,963 $23,200 (18.3)
The decrease in residential and commercial revenues is primarily a result of
decreased sales due to milder temperatures. Revenue from retail industrial
sales decreased mainly as a result of the decreased sales. Transportation
revenues for the first quarter of 1994 included $61,000 of take-or-pay
revenues received from an industrial customer.
There have been no significant developments concerning FERC Order 636
transition costs since the company's discussion of this matter in the 1994
Annual Report to Stockholders.
FUEL FOR ELECTRIC GENERATION increased $1.2 million, or 8.0%, in the first
quarter of 1995 compared to the same period in 1994. This increase resulted
from a 3.4% increase in kilowatt-hours generated by the company and an energy
clause adjustment of $1.7 million.
PURCHASED POWER EXPENSE increased $0.5 million, or 4.8%, during the first
quarter of 1995 compared to 1994. This increase is primarily a result of the
7.2% increase in Kwh's purchased. Capacity charges included in purchased
power expense were $5.8 million for both the first quarter of 1995 and the
first quarter of 1994.
DEPRECIATION EXPENSE increased by $0.4 million or 5.3%. This is primarily
due to increased investment in utility plant and increased depreciation rates
implemented in the fourth quarter of 1994.
Total INCOME TAX EXPENSE decreased appproximately $0.6 million during the
first quarter of 1995 compared to the first quarter of 1994. The decrease is
mainly due to lower income.
PROPERTY AND OTHER TAXES increased 4.5% during the first quarter of 1995
compared to the same period in 1994. The increase is primarily attributable
to higher assessed valuations in the State of Iowa.
OTHER INCOME for the first quarter of 1995 includes $253,000 of energy
efficiency carrying costs and curtailment credits compared to $127,000 for
the same period in 1994. The increase is primarily due to an increase in the
total amount of deferred energy efficiency costs ($13.9 million at March 31,
1995 compared to $10.4 million at March 31, 1994) and to an increase in the
carrying cost rate.
OTHER INTEREST EXPENSE increased $0.4 million primarily due to interest on
short-term borrowings. Short-term interest expense was $448,000 for the
first quarter of 1995 compared to $91,000 for the first quarter of 1994. The
average outstanding balance of short-term borrowings during the first quarter
of 1995 was $29.9 million compared to $10.8 million during the first quarter
of 1994. Interest rates for the first quarter of 1995 averaged 5.99%
compared to 3.34% in 1994.
AVERAGE TEMPORARY INVESTMENTS during the first quarter of 1995 were $1.9
million compared to $4.2 million in 1994. The average interest
rate was 5.73% in the first quarter of 1995 compared to 2.96% in 1994.
FUEL INVENTORIES increased $5.8 million during the first quarter of 1995
compared to the same period in 1994. The March 31, 1994 inventory reflected
a planned draw down of the coal pile at the M. L. Kapp Power Plant to
facilitate a construction project.
CONSTRUCTION EXPENDITURES during the first quarter of 1995 totaled $4.8
million compared to $5.8 million for the same period in 1994. Construction
work in progress as of March 31, 1995 totalled $8.4 million compared to $6.2
million at March 31, 1994. Approximately $1.2 million of the 1995
construction expenditures is attributable to waste water treatment facilities
at the company's M. L. Kapp generating station and two transmission line
rebuild projects. The 1995 construction program is estimated to be $30
million.
In 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 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. As of March 31, 1995, the company has deferred
approximately $1.9 million of SFAS 106 costs applicable to its Minnesota and
FERC jurisdictions pending the filing of rate cases to recover the costs.
In March 1995 the company filed an application with the Iowa Utilities Board
for an increase in electric rates in an annual amount of approximately $13.1
million. The appplication includes a request for increased interim rates in
an annual amount of $9.6 million. The Board has until June 29, 1995 to rule
on the level and effective date of the requested interim rate increase. Any
interim rate increase will be collected subject to refund upon final
determination by the Board.
On May 1, 1995 the company filed an application with the Minnesota Public
Utilities Commission for an increase in gas rates in an annual amount of $2.4
million. A decision on the final rate increase is expected in March 1996.
The company's potential liability for coal tar waste at former manufactured
gas plant sites was discussed in the 1994 Annual Report to Stockholders. The
status of the former manufactured gas plant sites remains substantially
unchanged, except that:
1. In April 1995 the company received a deferral accounting order from
the Minnesota Public Utilities Commission. The accounting order
allows the company to seek recovery of certain previously expensed
investigation and remediation costs in the state of Minnesota.
2. In 1994, the company filed a lawsuit in Cook County, Illinois,
Circuit Court-Chancery Division against certain of its insurers to
recover the costs of investigating and remediating, as necessary, the
sites of former manufactured gas plants. Subsequently, in an April
1995 ruling, the Chancery Division dismissed the action on grounds of
forum non conveniens. The company is evaluating its options, which
include appeal or refiling the case in another jurisdiction.
INTERSTATE POWER COMPANY
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
Reference is made to the 1994 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 2, 1995 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 two Class I members of the Board of Directors were re-elected,
to hold office for terms as follows:
Alfred D. Cordes term expiring in 1998
Joyce L. Hanes term expiring in 1998
Following are the Class II and III members of the Board of
Directors whose terms continued after the meeting:
James E. Byrns term expiring in 1996
Gerald L. Kopischke term expiring in 1996
Alan B. Arends term expiring in 1997
Nicholas J. Schrup term expiring in 1997
Wayne H. Stoppelmoor term expiring in 1997
(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 two Class I directors, Alfred D. Cordes and
Joyce L. Hanes, to hold office for a term of three years expiring
at the annual meeting of stockholders of the company to be held in
1998.
Votes cast were as follows:
For Against Abstain
Alfred D. Cordes 7,613,200 94,018 63,878
Joyce L. Hanes 7,608,901 95,528 63,878
ITEM 5. OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) No exhibits filed as a part.
(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 10, 1995 /s/ W. C. Troy
W. C. Troy, Controller
(Duly Authorized Officer and
Principal Accounting Officer)
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