SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 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 0-4117-1
IES UTILITIES INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0331370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IES Tower, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (319) 398-4411
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, as of the latest practicable
date.
Class Outstanding at July 31, 1995
Common Stock, $2.50 par value 13,370,788 shares
IES UTILITIES INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Consolidated Financial Statements.
Consolidated Balance Sheets -
June 30, 1995 and December 31, 1994 3 - 4
Consolidated Statements of Income -
Three, Six and Twelve Months Ended
June 30, 1995 and 1994 5
Consolidated Statements of Cash Flows -
Three, Six and Twelve Months Ended
June 30, 1995 and 1994 6
Notes to Consolidated Financial Statements 7 - 16
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition. 17 - 35
Part II. Other Information. 36 - 38
Signatures. 39
<PAGE>
PART 1. - FINANCIAL INFORMATION
ITEM 1. - CONSOLIDATED FINANCIAL STATEMENTS
CONSOLIDATED BALANCE SHEETS
June 30,
1995 December 31,
ASSETS (Unaudited) 1994
(in thousands)
Property, plant and equipment, at original cost:
Utility -
Plant in service -
Electric $ 1,833,223 $ 1,798,059
Gas 160,007 158,115
Other 109,422 86,005
2,102,652 2,042,179
Less - Accumulated depreciation 925,984 880,888
1,176,668 1,161,291
Leased nuclear fuel, net of amortization 46,522 49,731
Construction work in progress 70,049 73,339
1,293,239 1,284,361
Other 3,315 1,824
1,296,554 1,286,185
Current assets:
Cash and temporary cash investments 1,481 2,135
Accounts receivable -
Customer, less reserve 8,423 12,051
Other 6,847 9,763
Income tax refunds receivable 6,402 3,450
Production fuel, at average cost 16,774 13,988
Materials and supplies, at average cost 27,139 26,699
Adjustment clause balances 0 1,433
Regulatory assets 24,018 20,145
Prepayments and other 10,991 19,630
102,075 109,294
Investments:
Nuclear decommissioning trust funds 39,971 33,779
Cash surrender value of life insurance policies 3,183 2,915
Other 1,560 1,085
44,714 37,779
Other assets:
Regulatory assets 196,777 192,955
Deferred charges and other 16,613 19,155
213,390 212,110
$ 1,656,733 $ 1,645,368
CONSOLIDATED BALANCE SHEETS (CONTINUED)
June 30,
1995 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1994
(in thousands)
Capitalization:
Common stock - par value $2.50 per share -
authorized 24,000,000 shares; 13,370,788
shares outstanding $ 33,427 $ 33,427
Paid-in surplus 279,042 279,042
Retained earnings ($18,209,000 restricted
as to payment of cash dividends) 190,928 197,158
Total common equity 503,397 509,627
Cumulative preferred stock - par value $50
per share - authorized 466,406 shares;
366,406 shares outstanding 18,320 18,320
Long-term debt 430,363 380,404
952,080 908,351
Current liabilities:
Notes payable to associated companies 5,781 18,495
Short-term borrowings 87,000 37,000
Capital lease obligations 18,267 14,385
Maturities and sinking funds 50,140 100,140
Accounts payable 46,589 70,354
Accrued interest 8,934 9,438
Accrued taxes 44,120 47,188
Accumulated refueling outage provision 2,236 15,196
Adjustment clause balances 477 0
Provision for rate refund liability 10,207 0
Environmental liabilities 5,400 5,428
Other 18,345 18,324
297,496 335,948
Long-term liabilities:
Capital lease obligations 28,256 35,346
Environmental liabilities 39,668 37,853
Other 48,042 46,724
115,966 119,923
Deferred credits:
Accumulated deferred income taxes 252,735 241,345
Accumulated deferred investment tax credits 38,456 39,801
291,191 281,146
Commitments and contingencies (Note 5)
$ 1,656,733 $ 1,645,368
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the For the For the
Three Months Ended Six Months Ended Twelve Months Ended
June 30 June 30 June 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Electric $ 133,048 $ 123,071 $ 249,626 $ 246,989 $ 539,964 $ 548,578
Gas 21,852 23,164 75,027 88,297 125,762 153,474
Other 2,771 1,784 5,858 4,746 10,118 9,026
157,671 148,019 330,511 340,032 675,844 711,078
Operating expenses:
Fuel for production 20,304 16,304 39,746 38,649 87,050 83,082
Purchased power 17,130 17,225 33,444 30,827 71,412 84,997
Gas purchased for resale 13,454 14,882 51,587 63,998 82,929 108,336
Other operating expenses 32,644 30,971 67,056 61,952 137,385 125,491
Maintenance 10,611 13,300 22,290 24,195 47,637 48,020
Depreciation and amortization 20,728 19,160 41,317 38,320 78,313 72,409
Taxes other than income taxes 12,356 11,400 24,731 23,066 44,215 43,885
127,227 123,242 280,171 281,007 548,941 566,220
Operating income 30,444 24,777 50,340 59,025 126,903 144,858
Interest expense and other:
Interest expense 11,731 10,232 22,190 20,760 43,001 40,790
Allowance for funds used during
construction -785 -1,000 -1,900 -1,877 -3,934 -2,951
Miscellaneous, net 588 21 595 -246 -406 330
11,534 9,253 20,885 18,637 38,661 38,169
Income before income taxes 18,910 15,524 29,455 40,388 88,242 106,689
Income taxes:
Current 4,959 4,534 2,975 14,207 27,143 26,709
Deferred 3,556 2,397 10,597 3,305 9,527 17,518
Amortization of investment
tax credits -672 -662 -1,345 -1,323 -2,668 -4,792
7,843 6,269 12,227 16,189 34,002 39,435
Net income 11,067 9,255 17,228 24,199 54,240 67,254
Preferred dividend requirements 229 229 457 457 914 914
Net income available for
common stock $ 10,838 $ 9,026 $ 16,771 $ 23,742 $ 53,326 $ 66,340
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Six For the Twelve
Months Ended Months Ended Months Ended
June 30 June 30 June 30
1995 1994 1995 1994 1995 1994
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 11,067 $ 9,255 $ 17,228 $ 24,199 $ 54,240 $ 67,254
Adjustments to reconcile net income to net cash
flows from operating activities -
Depreciation and amortization 20,728 19,160 41,317 38,320 78,313 72,409
Principal payments under capital
lease obligations 3,311 4,078 5,867 8,505 13,608 13,102
Deferred taxes and investment tax credits 2,884 1,735 9,252 1,982 6,859 12,726
Refueling outage provision -4,432 2,914 -12,960 6,051 -6,475 -3,472
Allowance for equity funds used during
construction -78 -612 -360 -1,153 -1,506 -1,737
Other 1,605 669 2,680 1,328 4,664 2,758
Other changes in assets and liabilities -
Accounts receivable 4,419 9,062 4,545 12,714 2,226 -250
Production fuel, materials and supplies -2,879 107 -2,931 2,881 -5,409 2,032
Accounts payable -14,178 -3,287 -18,959 -8,586 10,071 2,906
Accrued taxes -12,237 -2,081 -6,020 463 573 -6,279
Provision for rate refunds 2,207 -9,085 10,207 -8,670 10,207 -6,573
Adjustment clause balances -2,325 -6,797 1,910 -2,073 -2,599 -3,457
Gas in storage 1,948 -1,132 9,324 8,958 2,285 -2,209
Other -1,493 1,358 4,922 1,139 7,810 5,717
Net cash flows from operating activities 10,547 25,344 66,022 86,058 174,867 154,927
Cash flows from financing activities:
Dividends declared on common stock -10,000 -15,000 -23,000 -22,000 -53,000 -37,600
Dividends declared on preferred stock -229 -229 -457 -457 -914 -914
Dividends payable 0 0 0 -5,000 0 0
Proceeds from issuance of long-term debt 0 0 50,000 0 50,000 119,400
Reductions in long-term debt -140 -224 -50,140 -224 -50,140 -19,624
Net change in short-term borrowings 49,237 17,266 37,286 -6,734 75,515 -60,982
Principal payments under capital lease obligations -2,556 -4,427 -6,218 -8,147 -14,375 -12,439
Sale of utility accounts receivable -8,000 -200 2,000 -200 3,000 -3,500
Net cash flows from financing activities 28,312 -2,814 9,471 -42,762 10,086 -15,659
Cash flows from investing activities:
Construction and acquisition expenditures -31,756 -29,342 -59,972 -48,334 -159,741 -119,378
Nuclear decommissioning trust funds -1,383 -1,383 -2,766 -2,766 -5,532 -5,532
Deferred energy efficiency costs -4,441 -3,772 -7,978 -7,171 -16,964 -13,016
Other -2,288 -82 -5,431 -2,647 -1,926 -2,289
Net cash flows from investing activities -39,868 -34,579 -76,147 -60,918 -184,163 -140,215
Net increase (decrease) in cash and temporary
cash investments -1,009 -12,049 -654 -17,622 790 -947
Cash and temporary cash investments at
beginning of period 2,490 12,740 2,135 18,313 691 1,638
Cash and temporary cash investments at
end of period $ 1,481 $ 691 $ 1,481 $ 691 $ 1,481 $ 691
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 13,819 $ 12,807 $ 22,073 $ 20,786 $ 41,132 $ 37,596
Income taxes $ 8,533 $ 18,659 $ 11,383 $ 18,619 $ 29,256 $ 37,409
Noncash investing and financing activities -
Capital lease obligations incurred $ 1,542 $ 227 $ 2,658 $ 424 $ 16,531 $ 1,632
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1995
(1) GENERAL:
The interim Consolidated Financial Statements have been
prepared by IES Utilities Inc. (Utilities) and its
consolidated subsidiary (collectively the Company), without
audit, pursuant to the rules and regulations of the Securities
and Exchange Commission. Utilities is a wholly-owned
subsidiary of IES Industries Inc. (Industries). Utilities'
wholly-owned subsidiary is IES Ventures Inc. (Ventures), which
is a holding company for unregulated investments. 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
believes that the disclosures are adequate to make the
information presented not misleading. In the opinion of the
Company, the Consolidated Financial Statements include all
adjustments, which are normal and recurring in nature,
necessary for the fair presentation of the results of
operations and financial position. Certain prior period
amounts have been reclassified on a basis consistent with the
1995 presentation.
It is suggested that these Consolidated Financial
Statements be read in conjunction with the Consolidated
Financial Statements and the notes thereto included in the
Company's Form 10-K for the year ended December 31, 1994. The
accounting and financial policies relative to the following
items have been described in those notes and have been omitted
herein because they have not changed materially through the
date of this report:
Summary of significant accounting policies
Acquisition of Iowa service territory of Union Electric Company (UE)
Leases
Utility accounts receivable (other than discussed in Note 3)
Income taxes
Benefit plans
Preferred and preference stock
Debt (other than discussed in Note 4)
Estimated fair value of financial instruments
Commitments and contingencies (other than discussed in Note 5)
Jointly-owned electric utility plant
Segments of business
(2) RATE MATTERS:
(a) 1995 Gas Rate Case -
On August 4, 1995, Utilities applied to the Iowa
Utilities Board (IUB) for an annual increase in gas rates of
$8.8 million, or 6.2%. An interim increase of $8.6 million
was requested. The interim rate increase, the amount of which
will be set by the IUB, will become effective within 90 days
of the filing and will be collected subject to refund.
Utilities expects that the final rate level will not be
determined until the second quarter of 1996.
(b) 1994 Electric Rate Case -
In 1994, Utilities applied to the IUB for an increase in
retail electric rates of approximately $26 million annually,
or 5.2%. Utilities' proposal included approximately
$12 million in annual revenue requirement related to increased
recovery levels of depreciation expense and nuclear
decommissioning expense at the Duane Arnold Energy Center
(DAEC), Utilities' nuclear generating facility.
The Office of Consumer Advocate (OCA) filed a petition in
connection with this proceeding to reduce the rates for retail
electric service by approximately $27 million, or 5.5%.
Intervenors, which primarily represent individual or groups of
customers, also submitted filings in October 1994, generally
objecting to particular elements of the price increase and
Utilities' price design proposals.
In May 1995, the IUB issued an order requiring an annual
reduction in retail electric revenues of $15.8 million. While
minor movement toward pricing consistency between the
different pricing zones will result, the proposals to increase
recovery levels of nuclear depreciation expense and nuclear
decommissioning expense were rejected. The Board also ruled
against Utilities on issues of recovery for the full purchase
prices of Union Electric's Iowa service territory and smaller,
low-cost, used generating plants, even though customers are
currently benefiting from the acquisitions.
Utilities and several intervenors filed applications for
rehearing with the IUB requesting rehearing on various issues
in the order and Utilities was granted rehearing on two of the
smaller issues. The IUB denied rehearing on all other issues,
including the intervenors' issues. The IUB issued its Order
Granting Rehearing in Part and Denying Rehearing in Part on
June 30, 1995, which made minor adjustments to its original
decision resulting in a revised annual retail rate reduction
of approximately $14.4 million. No petitions were filed with
the Iowa district court by any of the parties to the case.
Utilities has recorded a pre-tax reserve for rate refund,
including interest, of $10.2 million at June 30, 1995.
Utilities is awaiting approval from the IUB on its compliance
tariff filing and continues to fully reserve for the refund
and, accordingly, there will be no further effect on 1995
electric revenues and net income when the refund is made.
Refunds to customers will be calculated from October 22, 1994,
the date of the OCA revenue reduction filing.
(c) 1994 Energy Efficiency Cost Recovery Filing -
The IUB has adopted rules that mandate Utilities to spend
2% of electric and 1.5% of gas gross retail operating revenues
for energy efficiency programs. Under provisions of the IUB
rules, Utilities applied in August 1994 to the IUB for
recovery of approximately $23 million and $13 million for the
electric and gas programs, respectively, related to costs
incurred through 1993 for such programs. The $36 million
total for the electric and gas programs is comprised of
$21 million of direct expenditures and carrying costs
(recorded as a "Regulatory asset" in the Consolidated Balance
Sheets, including $5.4 million as current), $7 million for a
return on the expenditures over the recovery period and
$8 million for a reward based on a sharing of the benefits of
such programs.
In April 1995, the IUB issued its Final Decision and
Order concerning Utilities' energy efficiency expenditures,
which allows Utilities to recover its direct expenditures,
carrying costs, and a return on its expenditures, as well as a
reward of approximately $4 million for a total allowed
recovery of approximately $32 million.
In May 1995, the OCA and an intervenor filed applications
for rehearing with the IUB concerning the amount of the reward
granted by the IUB. Since the identical issue is pending
before the court in another utility's proceeding, the OCA, the
intervenor and Utilities have agreed to be bound by the
ultimate decision in the other utility's court proceeding.
Utilities believes that the chances of the reward amount being
materially reduced are remote. Recovery of energy efficiency
costs will be over a four-year period and began on June 1,
1995. The portion of the recoveries relating to the contested
reward amount are being collected subject to refund.
(3) UTILITY ACCOUNTS RECEIVABLE:
Utilities has entered into an agreement, which expires in
1999, with a financial institution to sell, with limited
recourse, an undivided fractional interest of up to
$65 million in its pool of utility accounts receivable. At
June 30, 1995, $56 million was sold under the agreement.
(4) DEBT:
(a) Long-Term Debt -
In March 1995, Utilities repaid at maturity $50 million
of Series W, 9.75% First Mortgage Bonds and, in a separate
transaction, issued $50 million of Collateral Trust Bonds,
7.65%, due 2000.
(b) Short-Term Debt -
At June 30, 1995, the Company had bank lines of credit
aggregating $87.7 million, of which $77 million was being used
to support commercial paper (weighted average interest rate of
6.02%) and $7.7 million to support certain pollution control
obligations. Commitment fees are paid to maintain these lines
and there are no conditions which restrict the unused lines of
credit. In addition to the above, Utilities has an
uncommitted credit facility with a financial institution
whereby it can borrow up to $40 million. Rates are set at the
time of borrowing and no fees are paid to maintain this
facility. At June 30, 1995, there was $10 million borrowed
under this facility (weighted average interest rate of 6.08%).
At June 30, 1995, Utilities also had a letter of credit in the
amount of $3.4 million supporting two of its variable rate
pollution control obligations.
(5) CONTINGENCIES:
(a) Environmental Liabilities -
The Company has recorded environmental liabilities of
approximately $45 million, including $5.4 million as current
liabilities, in its Consolidated Balance Sheets at June 30,
1995. The significant items are discussed below.
Former Manufactured Gas Plant (FMGP) Sites
Utilities has been named as a Potentially Responsible
Party (PRP) by various federal and state environmental
agencies for 28 FMGP sites, but believes it is not responsible
for two of these sites. There are also six other sites for
which it may be designated as a PRP in the future. Utilities
is working pursuant to the requirements of the various
agencies to investigate, mitigate, prevent and remediate,
where necessary, damage to property, including damage to
natural resources, at and around the sites in order to protect
public health and the environment. Utilities believes it has
completed the remediation of five sites although it is in the
process of obtaining final approval from the applicable
environmental agencies on this issue for each site. Utilities
is in various stages of the investigation and/or remediation
processes for 19 sites and expects to begin the investigation
process in 1995 or 1996 for the other sites.
Utilities has recorded environmental liabilities related
to the FMGP sites of approximately $33 million (including
$4.6 million as current liabilities) at June 30, 1995. These
amounts are based upon Utilities' best current estimate of the
amount to be incurred for investigation and remediation costs
for those sites where the investigation process has been or is
substantially completed, and the minimum of the estimated cost
range for those sites where the investigation is in its
earlier stages or has not started. It is possible that future
cost estimates will be greater than the current estimates as
the investigation process proceeds and as additional facts
become known. Utilities may be required to monitor these sites
for a number of years upon completion of remediation, as is
the case with several of the sites for which remediation has
been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation, and monitoring costs from
its insurance carriers and is investigating the potential for
third party cost sharing for FMGP investigation and clean-up
costs. The amount of shared costs, if any, cannot be
reasonably determined and, accordingly, no potential sharing
has been recorded at June 30, 1995. Regulatory assets of
approximately $33 million, which reflect the future recovery
that is being provided through Utilities' rates, have been
recorded in the Consolidated Balance Sheets. Considering the
rate treatment allowed by the IUB, management believes that
the clean-up costs incurred by Utilities for these FMGP sites
will not have a material adverse effect on its financial
position or results of operations.
(b) Clean Air Act -
The Clean Air Act Amendments of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in
two phases with Phase I affecting two of Utilities' units
beginning in 1995 and Phase II affecting all units beginning
in the year 2000. Utilities is in the process of completing
the modifications necessary to meet the Phase I requirements
and has installed continuous emission monitors on all affected
units as required by the Act.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital
expenditures primarily related to fuel burning equipment and
boiler modifications. Utilities estimates capital expenditures
of approximately $22.5 million, including $4.4 million in
1995, in order to meet the requirements of the Act.
(c) Federal Energy Regulatory Commission (FERC) Order
No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992, which
substantially changed how Utilities manages its gas supply.
As a result of Order 636, Utilities has enhanced access to
competitively priced gas supply and more flexible
transportation services, however, Utilities is required to pay
certain transition costs incurred and billed by its pipeline
suppliers.
Utilities' three pipeline suppliers have made filings
with the FERC to collect their respective known transition
costs, and additional filings are expected. At June 30, 1995,
Utilities has recorded a liability of $5.8 million for those
transition costs that have been incurred by the pipelines to
date, including $2.3 million expected to be billed through
June 1996. Utilities is currently recovering the transition
costs from its customers through its Purchased Gas Adjustment
Clauses as such costs are billed by the pipelines. The
ultimate level of costs to be billed to Utilities depends on
the pipelines' filings with the FERC and other future events,
including the market price of natural gas, and could
approximate $10 million more than the amount recorded.
However, Utilities believes any transition costs billed by its
pipeline suppliers would be recovered from its customers,
based upon regulatory treatment of these costs currently and
similar past costs by the IUB. Accordingly, regulatory
assets, in amounts corresponding to the recorded liabilities,
have been recorded to reflect the anticipated recovery.
(d) Nuclear Insurance Programs -
The Price-Anderson Amendments Act of 1988 (1988 Act)
provides Utilities with the benefit of $8.9 billion of public
liability coverage consisting of $200 million of insurance and
$8.7 billion of potential retroactive assessments from the
owners of nuclear power plants. Based upon its ownership of
the DAEC, under the 1988 Act, Utilities could be assessed a
maximum of $79.3 million per nuclear incident, with a maximum
of $10 million per year (of which Utilities' 70% ownership
portion would be approximately $55 million and $7 million,
respectively) if losses relating to the incidents exceeded
$200 million. These limits are subject to adjustments for
inflation in future years.
Utilities is a member of Nuclear Mutual Limited (NML) and
Nuclear Electric Insurance Limited (NEIL), which provide
insurance coverage for the cost of certain property losses at
nuclear generating stations and for the cost of replacement
power during certain outages. Companies insured through NML
and NEIL are subject to retroactive premium adjustments if
losses exceed accumulated reserve funds. NML and NEIL's
accumulated reserve funds are currently sufficient to more
than cover its exposure in the event of a single incident
under the primary and excess property damage or replacement
power coverages. However, Utilities could be assessed
annually a maximum of $4.4 million under NML, $8.5 million for
NEIL property and $0.7 million for NEIL replacement power if
losses relating to accidents exceeded the accumulated reserve
funds. Utilities is not aware of any losses that it believes
are likely to result in an assessment.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in
the components of net income and financial condition from the
prior periods for IES Utilities Inc. (Utilities) and its
consolidated subsidiary (collectively the Company).
Utilities' wholly-owned subsidiary is IES Ventures Inc., which
is a holding company for unregulated investments.
RESULTS OF OPERATIONS
The Company's net income available for common stock
increased or (decreased) $1.8 million, ($7.0) million and
($13.0) million during the three, six and twelve month
periods, respectively, ended June 30, 1995. The 1995 earnings
are significantly affected by the recording of a pre-tax
reserve for rate refund, including interest, of $10.2 million
($8.0 million in the first quarter and $2.2 million in the
second quarter) by Utilities as a result of the Iowa Utilities
Board's (IUB) order in Utilities' recent electric rate case.
See Note 2(b) of the Notes to Consolidated Financial
Statements for a further discussion of the electric rate case.
The Company's operating income increased or (decreased)
$5.7 million, ($8.7) million and ($18.0) million during the
three, six and twelve month periods, respectively. Reasons
for the changes in the results of operations are explained
further in the following discussion.
ELECTRIC REVENUES
Electric revenues and Kwh sales for Utilities increased
or (decreased) for the periods ended June 30, 1995, as
compared with the prior periods, as follows:
Three Six Twelve
Months Months Months
($ in millions)
Electric revenues $ 10.0 $ 2.6 $ (8.6)
Electric sales (excluding off-system sales):
Residential and Rural 7.9% 0.3% (1.9%)
Commercial 2.2 1.2 1.6
Industrial 11.4 7.6 10.1
Total 6.8% 2.8% 3.7%
The Kwh sales for the quarter benefited significantly
from an annual true-up adjustment to unbilled sales recorded
in the second quarter of 1995 and were also favorably
impacted by warmer
than normal weather. On June 21, 1995, Utilities set a new
energy peak usage record with a peak of 1,796 megawatts (this
record was subsequently broken during July 1995). The Kwh
sales for the six and twelve month periods also benefited
from the unbilled sales adjustment, although to a lesser degree
than the three month period, but were unfavorably impacted by
milder than normal weather. Under normal weather conditions,
total sales (excluding off-system sales) would have increased
5.7%, 3.6% and 4.8% for the three, six and twelve month
periods, respectively. The growth in industrial sales
continues to reflect the underlying strength of the economy as
industrial expansions in Utilities' service territory
continue.
Utilities' electric tariffs include energy adjustment
clauses (EAC) that are designed to currently recover the costs
of fuel and the energy portion of purchased power billings to
customers.
Electric revenues include a pre-tax reserve for rate
refund ($8.0 million and $1.7 million recorded in the first
and second quarters of 1995, respectively) recorded by
Utilities as a result of the IUB order. Approximately $3.5
million of the reserve recorded in the first quarter relates
to revenues collected in the fourth quarter of 1994. See Note
2(b) of the Notes to Consolidated Financial Statements for a
further discussion of the electric rate case.
The three and six month revenue increases were due to
higher fuel costs collected through the EAC, the unbilled
revenue adjustment and the increased sales (excluding
off-system sales). These items were partially offset by lower off-
system sales and the rate refund reserve. The twelve month
decrease is due to lower off-system sales, the rate reserve
and the effects of the mix of sales between lower margin
industrial customers and higher margin residential and rural
customers. These items were partially offset by the increased
sales (excluding off-system sales), the recovery of fuel costs
through the EAC and the unbilled revenue adjustment.
GAS REVENUES
Utilities' gas revenues decreased ($1.3) million,
($13.3) million and ($27.7) million during the three, six and
twelve month periods, respectively. Utilities' gas sales in
therms increased or (decreased) for the periods ended June 30,
1995, as compared with the prior periods, as follows:
Three Six Twelve
Months Months Months
Residential 4.4% (6.2%) (9.8%)
Commercial 0.4 (5.7) (9.3)
Industrial (33.8) (27.9) (17.9)
Sales to consumers (3.3) (8.3) (10.8)
Transported volumes 20.7 32.4 28.2
Total 4.7% (0.7%) (2.8%)
Under normal weather conditions, sales to consumers would
have decreased (15.2%), (4.1%) and (5.2%) during the three,
six and twelve month periods, respectively.
Utilities' gas tariffs include purchased gas adjustment
clauses (PGA) that are designed to currently recover the cost
of gas sold. Utilities' gas revenues decreased during all
periods primarily because of lower gas costs recovered
through the PGA and lower sales to consumers. The decreased
gas cost recoveries are due to lower gas prices as well as a
shift in the sales mix between industrial sales and
transported volumes; Utilities does not purchase the gas for
the transported volumes.
On August 4, 1995, Utilities applied to the IUB for an
annual increase in gas rates of $8.8 million, or 6.2%. See
Note 2(a) of the Notes to Consolidated Financial Statements
for a further discussion.
OPERATING EXPENSES
Fuel for production increased $4.0 million, $1.1 million
and $4.0 million during the three, six and twelve month
periods, respectively. The three and six month increases are
due to higher fuel cost recoveries through the EAC, which are
included in fuel for production, partially offset by a
decrease in the amount of Kwh generation. The Duane Arnold
Energy Center (DAEC), Utilities' nuclear generating facility,
was down from late February 1995 through late April 1995 for a
scheduled refueling outage. There was no such refueling
outage in 1994. Generation at the Company's fossil-fueled
generating stations was also lower during the three month
period in 1995 due to outages at two stations. The twelve
month increase is primarily due to higher fuel cost recoveries
through the EAC, although a slight increase in the amount of
Kwh generation also contributed to the increase.
Purchased power increased or (decreased) ($0.1) million,
$2.6 million and ($13.6) million during the three, six and
twelve month periods, respectively. The six month increase is
due to increased energy purchases, resulting from the decrease
in generation, which were partially offset by lower capacity
costs. The twelve month decrease is primarily due to lower
energy purchases, although lower capacity costs also
contributed to the decrease.
Gas purchased for resale decreased ($1.4) million,
($12.4) million and ($25.4) million during the three, six and
twelve month periods, respectively, primarily due to lower
sales to consumers and lower natural gas prices.
Other operating expenses increased $1.7 million, $5.1
million and $11.9 million during the three, six and twelve
month periods, respectively. Increases in labor and benefits
costs, former manufactured gas plant (FMGP) clean-up costs and
information technology costs contributed to the increases for
all three periods. The three and six month increases were
partially offset by lower nuclear operating costs at Utilities
while higher nuclear operating costs contributed to the
increase during the twelve month period.
Maintenance expenses decreased ($2.7) million, ($1.9)
million and ($0.4) million during the three, six and twelve
month periods, respectively, primarily due to decreased
expenditures at the DAEC and Utilities' fossil-fueled
generating stations. Increased labor costs for all periods
partially offset such decreases.
Depreciation and amortization increased $1.6 million,
$3.0 million and $5.9 million during the three, six and twelve
month periods primarily because of increases in utility plant
in service. Depreciation and amortization expenses for all
periods reflect an annual amount of $5.5 million for the DAEC
decommissioning provision, which is collected through rates.
(The annual recovery level will be increased to $6.0 million
once the final rates from Utilities' recent electric rate case
are implemented later this year).
The staff of the Securities and Exchange Commission (SEC)
has questioned certain of the current accounting practices of
the electric utility industry regarding the recognition,
measurement and classification of decommissioning costs for
nuclear generating stations in the financial statements of
electric utilities. In response to these questions, the
Financial Accounting Standards Board (FASB) has agreed to
review the accounting for removal costs, including
decommissioning. If current electric utility industry
accounting practices for such decommissioning are changed:
(1) annual provisions for decommissioning could increase, (2)
the estimated cost for decommissioning could be recorded as a
liability rather than as accumulated depreciation, and (3)
trust fund income from the external decommissioning trusts
could be reported as investment income rather than as a
reduction to decommissioning expense. If such changes are
required, Utilities believes that there would not be an
adverse effect on its financial position or results of
operations based on current rate making practices; the Company
cannot predict future rate making practices.
INTEREST EXPENSE AND OTHER
Interest expense increased $1.5 million, $1.4 million and
$2.2 million during the three, six and twelve month periods,
respectively. The three and six month increases are primarily
due to an increase in the average amount of short-term debt
outstanding and interest related to Utilities' rate reserve.
The twelve month increase is primarily because of an increase
in the average amount of short-term and long-term debt
outstanding.
Income taxes increased or (decreased) $1.6 million,
($4.0) million and ($5.4) million during the three, six and
twelve month periods, respectively. The three month increase
is consistent with the change in income before income
taxes. The decreases for the six and twelve month periods are
due to a
decrease in pre-tax income partially offset by a higher
effective income tax rate resulting from the effect of
property related temporary differences for which deferred
income taxes have not been provided under current rate making
principles, which are now becoming payable and are being
recovered from ratepayers.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily
attributable to Utilities' construction programs, debt
maturities and sinking fund requirements. The Company's pre-
tax ratio of earnings to fixed charges was 3.05 and 3.62 for
the twelve months ended June 30, 1995 and June 30, 1994,
respectively. Cash flows from operating activities for the
twelve months ending June 30, 1995, were $175 million.
The Company anticipates that future capital requirements
will be met by cash generated from operations and external
financing. The level of cash generated from operations is
partially dependent upon economic conditions, legislative
activities, environmental matters and timely rate relief for
Utilities. (See Notes 2 and 5 of the Notes to Consolidated
Financial Statements).
Access to the long-term and short-term capital and credit
markets is necessary for obtaining funds externally.
Utilities' debt ratings are as follows:
Moody's Standard & Poor's
Long-term debt A2 A
Short-term debt P1 A1
As a result of the IUB's final order in Utilities' recent
electric rate case, Utilities will be required to reduce its
retail electric rates by an annual impact of $14.4 million.
(See Note 2(b) of the Notes to Consolidated Financial
Statements for a further discussion). In reaction to the rate
reduction, Moody's downgraded Utilities' long-term debt rating
to A2 from A1 on June 1, 1995. The new rating remains in the
upper levels of Moody's nine-tier rating system which ranges
from Aaa down to C.
The Company's liquidity and capital resources will be
affected by environmental and legislative issues, including
the ultimate disposition of remediation issues surrounding the
Company's environmental liabilities, the Clean Air Act as
amended and FERC Order 636, as discussed in Note 5 of the
Notes to Consolidated Financial Statements. Consistent with
rate making principles of the IUB, management believes that
the costs incurred for the above matters will not have a
material adverse effect on the financial position or results
of operations of the Company.
The IUB has adopted rules which require Utilities to
spend 2% of electric and 1.5% of gas gross retail operating
revenues annually for energy efficiency programs. Energy
efficiency costs in excess of the amount in the most recent
electric and gas rate cases are being recorded as regulatory
assets by Utilities. At June 30, 1995, Utilities had
$42 million of such costs recorded as regulatory assets. On
June 1, 1995, Utilities began its recovery of those costs
incurred through 1993. See Note 2(c) of the Notes to
Consolidated Financial Statements for a further discussion.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program
anticipates expenditures of approximately $163 million for
1995, of which approximately 32% represents expenditures for
electric transmission and distribution facilities, 23%
represents fossil-fueled generation expenditures, 15%
represents expenditures for steam distribution plant and 9%
represents nuclear generation expenditures. The remaining 21%
represents miscellaneous electric, gas and general
expenditures. In addition to the $163 million, Utilities
anticipates expenditures of $13 million in connection with
mandated energy efficiency programs. Substantial commitments
have been made in connection with all such expenditures. The
Company had construction and acquisition expenditures of
approximately $60 million for the six months ended June 30,
1995. Utilities is currently reviewing its construction and
acquisition program with the objective of reducing the
anticipated 1995 expenditures by approximately $13 million.
The Company's levels of construction and acquisition
expenditures are projected to be $167 million in 1996,
$146 million in 1997, $170 million in 1998 and $182 million in
1999. It is estimated that approximately 80% of construction
and acquisition expenditures will be provided by cash from
operating activities (after payment of dividends) for the five-
year period 1995-1999.
Capital expenditure and investment and financing plans
are subject to continual review and change. The capital
expenditure and investment programs may be revised
significantly as a result of many considerations including
changes in economic conditions, variations in actual sales and
load growth compared to forecasts, requirements of
environmental, nuclear and other regulatory authorities,
acquisition opportunities, the availability of alternate
energy and purchased power sources, the ability to obtain
adequate and timely rate relief, escalations in construction
costs and conservation and energy efficiency programs.
LONG-TERM FINANCING
Other than Utilities' periodic sinking fund requirements,
which Utilities intends to meet by pledging additional
property, approximately $124 million of long-term debt will
mature prior to December 31, 1999. The Company intends to
refinance the majority of the debt maturities with long-term
securities.
In March 1995, Utilities repaid at maturity $50 million
of Series W, 9.75% First Mortgage Bonds and, in a separate
transaction, issued $50 million of Collateral Trust Bonds,
7.65%, due 2000.
Utilities has entered into an Indenture of Mortgage and
Deed of Trust dated September 1, 1993 (New Mortgage). The New
Mortgage provides for, among other things, the issuance of
Collateral Trust Bonds upon the basis of First Mortgage Bonds
being issued by Utilities. The lien of the New Mortgage is
subordinate to the lien of Utilities' first mortgages until
such time as all bonds issued under the first mortgages have
been retired and such mortgages satisfied. Accordingly, to the
extent that Utilities issues Collateral Trust Bonds on the
basis of First Mortgage Bonds, it must comply with the
requirements for the issuance of First Mortgage Bonds under
Utilities' first mortgages. Under the terms of the New
Mortgage, Utilities has covenanted not to issue any additional
First Mortgage Bonds under its first mortgages except to
provide the basis for issuance of Collateral Trust Bonds.
The Indentures pursuant to which Utilities issues First
Mortgage Bonds constitute direct first mortgage liens upon
substantially all tangible public utility property and contain
covenants which restrict the amount of additional bonds which
may be issued. At June 30, 1995, such restrictions would have
allowed Utilities to issue $330 million of additional First
Mortgage Bonds. Utilities has received authority from the FERC
to issue $250 million of long-term debt, of which $50 million
was used in March 1995 to issue Collateral Trust Bonds.
Utilities expects to replace First Mortgage Bonds Series X,
that matures in October 1995, with other long-term securities.
The Articles of Incorporation of Utilities authorize and
limit the aggregate amount of additional shares of Cumulative
Preferred Stock and Cumulative Preference Stock that may be
issued. At June 30, 1995, Utilities could have issued an
additional 700,000 shares of Cumulative Preference Stock but
no additional shares of Cumulative Preferred Stock.
The Company's capitalization ratios at June 30, were as
follows:
1995 1994
Long-term debt 48% 48%
Preferred stock 2 2
Common equity 50 50
100% 100%
The 1995 and 1994 ratios each include
$50 million of long-term debt due in less than
one year because it was the Company's intention
to refinance the debt with long-term securities.
SHORT-TERM FINANCING
For interim financing, Utilities is authorized by the
FERC to issue, through 1996, up to $200 million of short-term
notes. In addition to providing for ongoing working capital
needs, this availability of short-term financing provides
Utilities flexibility in the issuance of long-term securities.
At June 30, 1995, Utilities had outstanding short-term
borrowings of $92.8 million, including $5.8 million of notes
payable to associated companies.
Utilities has an agreement, which expires in 1999, with a
financial institution to sell, with limited recourse, an
undivided fractional interest of up to $65 million in its pool
of utility accounts receivable. At June 30, 1995, Utilities
had sold $56 million under the agreement.
At June 30, 1995, the Company had bank lines of credit
aggregating $87.7 million, of which $77 million was being used
to support commercial paper (weighted average interest rate of
6.02%) and $7.7 million to support certain pollution control
obligations. Commitment fees are paid to maintain these lines
and there are no conditions which restrict the unused lines of
credit. In addition to the above, Utilities has an
uncommitted credit facility with a financial institution
whereby it can borrow up to $40 million. Rates are set at the
time of borrowing and no fees are paid to maintain this
facility. At June 30, 1995, there was $10 million borrowed
under this facility (weighted average interest rate of 6.08%).
At June 30, 1995, Utilities also had a letter of credit in the
amount of $3.4 million supporting two of its variable rate
pollution control obligations.
ENVIRONMENTAL MATTERS
Utilities has been named as a Potentially Responsible
Party (PRP) by various federal and state environmental
agencies for 28 FMGP sites, but believes it is not responsible
for two of these sites. There are also six other sites for
which it may be designated as a PRP in the future. Utilities
is working pursuant to the requirements of the various
agencies to investigate, mitigate, prevent and remediate,
where necessary, damage to property, including damage to
natural resources, at and around the sites in order to protect
public health and the environment. Utilities believes it has
completed the remediation of five sites although it is in the
process of obtaining final approval from the applicable
environmental agencies on this issue for each site. Utilities
is in various stages of the investigation and/or remediation
processes for 19 sites and expects to begin the investigation
process in 1995 or 1996 for the other sites.
Utilities has recorded environmental liabilities related
to the FMGP sites of approximately $33 million (including
$4.6 million as current liabilities) at June 30, 1995. These
amounts are based upon Utilities' best current estimate of the
amount to be incurred for investigation and remediation costs
for those sites where the investigation process has been or is
substantially completed, and the minimum of the estimated cost
range for those sites where the investigation is in its
earlier stages or has not started. It is possible that future
cost estimates will be greater than the current estimates as
the investigation process proceeds and as additional facts
become known. Utilities may be required to monitor these sites
for a number of years upon completion of remediation, as is
the case with several of the sites for which remediation has
been completed.
Utilities has begun pursuing coverage for investigation,
mitigation, prevention, remediation and monitoring costs from
its insurance carriers and is investigating the potential for
third party cost sharing for FMGP investigation and clean-up
costs. The amount of shared costs, if any, cannot be
reasonably determined and, accordingly, no potential sharing
has been recorded at June 30, 1995. Regulatory assets of
approximately $33 million, which reflect the future recovery
that is being provided through Utilities' rates, have been
recorded in the Consolidated Balance Sheets. Considering the
rate treatment allowed by the IUB, management believes that
the clean-up costs incurred by Utilities for these FMGP sites
will not have a material adverse effect on its financial
position or results of operations.
The Clean Air Act Amendments of 1990 (Act) requires
emission reductions of sulfur dioxide and nitrogen oxides to
achieve reductions of atmospheric chemicals believed to cause
acid rain. The provisions of the Act will be implemented in
two phases with Phase I affecting two of Utilities' units
beginning in 1995 and Phase II affecting all units beginning
in the year 2000. Utilities is in the process of completing
the modifications necessary to meet the Phase I requirements
and has installed continuous emission monitors on all affected
units as required by the Act.
Utilities expects to meet the requirements of Phase II by
switching to lower sulfur fuels and through capital
expenditures primarily related to fuel burning equipment and
boiler modifications. Utilities estimates capital
expenditures of approximately $22.5 million, including $4.4
million in 1995, in order to meet the requirements of the Act.
In January 1995, Utilities received an Administrative
Compliance Order (ACO) from the United States Environmental
Protection Agency (EPA) alleging noncompliance with, and
requiring Utilities to satisfy, certain monitoring, reporting,
and recordkeeping requirements of the Acid Rain Program at its
Phase II units. On June 23, 1995, Utilities received an
Administrative Penalty Order from the EPA assessing a penalty
in the amount of $146,000 for the alleged noncompliance.
Pursuant to Utilities' good faith efforts to cooperate and
informal settlement negotiations, the EPA has informally
agreed to reduce the amount of the penalty. Utilities and EPA
are currently negotiating a Supplemental Environmental Project
(SEP) which contemplates reducing the cash penalty payment to
$25,630 and requiring Utilities to retire 589 acid rain
allowances, valued at $76,570.
The National Energy Policy Act of 1992 requires owners of
nuclear power plants to pay a special assessment into a
"Uranium Enrichment Decontamination and Decommissioning Fund."
The assessment is based upon prior nuclear fuel purchases and,
for the DAEC, averages $1.4 million annually through 2007, of
which Utilities' 70% share is $1.0 million. Utilities is
recovering the costs associated with this assessment through
its electric fuel adjustment clauses over the period the costs
are assessed. Utilities' 70% share of the future assessment,
$12.0 million payable through 2007, has been recorded as a
liability in the Consolidated Balance Sheets, including
$0.8 million included in "Current liabilities - Environmental
liabilities," with a related regulatory asset for the
unrecovered amount.
The Nuclear Waste Policy Act of 1982 assigned
responsibility to the U.S. Department of Energy (DOE) to
establish a facility for the ultimate disposition of high
level waste and spent nuclear fuel and authorized the DOE to
enter into contracts with parties for the disposal of such
material beginning in January 1998. Utilities entered into
such a contract and has made the agreed payments to DOE. The
DOE, however, has experienced significant delays in its
efforts and material acceptance is now expected to occur no
earlier than 2010. Utilities has been storing spent nuclear
fuel on-site since plant operations began in 1974 and has
current on-site capability to store spent fuel until 2002.
Utilities is aggressively reviewing options for additional
spent nuclear fuel storage capability, including expanding on-
site storage and pursuing other off-site storage. Utilities
is also supporting legislation currently before the U.S.
Congress to resolve the lack of progress by the DOE.
The Low-Level Radioactive Waste Policy Amendments Act of
1985 mandated that each state must take responsibility for the
storage of low-level radioactive waste produced within its
borders. The State of Iowa has joined the Midwest Interstate
Low-Level Radioactive Waste Compact Commission (Compact),
which is planning a storage facility to be located in Ohio to
store waste generated by the Compact's six member states. At
June 30, 1995, Utilities has prepaid costs of approximately
$1 million to the Compact for the building of such a
facility. Currently, Utilities is storing its low-level
radioactive waste generated at the DAEC on-site until new
disposal arrangements are finalized among the Compact members.
A Compact disposal facility is anticipated to be in operation
in approximately ten years. On-site storage capability
currently exists for low-level radioactive waste expected to
be generated until the Compact facility is able to accept
waste materials. In addition, the Barnwell, South Carolina
disposal facility has temporarily reopened and Utilities
intends to ship to Barnwell the majority of the low-level
radioactive waste it has accumulated on-site, as well as waste
it produces in the future as long as the Barnwell site remains
open, thereby minimizing the amount of waste stored on-site.
The possibility that exposure to electric and magnetic
fields (EMF) emanating from power lines, household appliances
and other electric sources may result in adverse health
effects has been the subject of increased public,
governmental, industry and media attention. A considerable
amount of scientific research has been conducted on this topic
without definitive results. Research is continuing in order
to resolve scientific uncertainties.
OTHER MATTERS
The National Energy Policy Act of 1992 addresses several
matters designed to promote competition in the electric
wholesale power generation market, including mandated open
access to the electric transmission system and greater
encouragement of independent power production and
cogeneration. On March 29, 1995, the FERC issued a Notice of
Proposed Rulemaking pursuant to which FERC proposes to promote
competition in the electric utility industry by requiring that
each transmission owning utility must 1) implement non-
discriminatory tariffs allowing open access to that utility's
transmission facilities by wholesale buyers and sellers of
electricity and 2) charge itself the same price for
transmission and ancillary services as it charges third
parties under the tariffs. Utilities filed conforming pro-
forma open access transmission tariffs with the FERC on July
24, 1995. The geographic position of Utilities' transmission
system could provide revenue opportunities in the open access
environment. FERC would allow for recovery of certain
stranded costs (i.e. assets the costs of which could be
rendered otherwise unrecoverable as the result of open access)
in connection with wholesale transmission. The Company cannot
predict the final regulations that may be adopted.
The IUB recently initiated a Notice of Inquiry (Docket
No. NOI-95-1) on the subject of "Emerging Competition in the
Electric Utility Industry." A one-day roundtable discussion
was held to address all forms of competition in the electric
utility industry and to assist the IUB in gathering
information and perspectives on electric competition from all
persons or entities with an interest or stake in the issues.
Such discussions are not expected to produce any specific
action by the IUB in the near future.
The Company cannot predict the long-term consequences of
these competitive issues on its results of operations or
financial condition. The Company's strategy for dealing with
these emerging issues includes seeking growth opportunities,
continuing to offer quality customer service, on-going cost
reductions and productivity enhancements. The Company
recently initiated a major project to review and redesign its
business processes with the primary goals being reduced
operating costs, increased efficiency and enhanced customer
service.
In March 1995, the FASB issued SFAS No. 121, Accounting
for the Impairment of Long-Lived Assets and Long-Lived Assets
to be Disposed Of. This statement defines the criteria for
valuing regulatory assets. The Company does not expect the
amount of regulatory assets recorded in the Consolidated
Balance Sheets to be affected. The Company expects to adopt
this standard on January 1, 1996, and does not expect that
adoption will have a material impact on the financial position
or results of operations of the Company.
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Notes 2 and 5 of the Notes to
Consolidated Financial Statements for a discussion of rate
matters and environmental matters, respectively, and Item 2.
Management's Discussion and Analysis of the Results of
Operations and Financial Condition - Environmental Matters.
Item 2. Changes in the Rights of the Company's Security
Holders.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Results of Votes of Security Holders.
(a) The Company held its annual Meeting of Shareholders on
May 16, 1995.
(b) The following matter was voted upon at the Annual Meeting
of Shareholders.
The election of nominees for Directors who will serve a
one-year term or until their respective successors shall
be duly elected. The nominees, all of whom were elected,
were as follows:
C.R.S. Anderson, J. Wayne Bevis, Dr. George Daly, Blake
O. Fisher, Jr., G. Sharp Lannom, IV, Lee Liu, Jack R.
Newman, Robert D. Ray, David Q. Reed, Henry Royer, Robert
W. Schlutz, Anthony R. Weiler.
IES Industries Inc., the sole shareholder of the Company,
voted all 13,370,788 shares for the election of the above
nominees.
Item 5. Other Information.
(a) The Company has calculated the ratio of earnings to fixed
charges pursuant to Item 503 of Regulation S-K of the
Securities and Exchange Commission as follows:
For the twelve months ended:
June 30, 1995 2.88
December 31, 1994 3.18
December 31, 1993 3.41
December 31, 1992 2.49
December 31, 1991 2.64
December 31, 1990 2.65
(b) Effective August 1, 1995, Mr. Jim Hoffman joined
Utilities as Executive Vice President, Customer Service
and Energy Delivery.
(c) Rene H. Males, Executive Vice President of Utilities, has
announced his retirement and will be leaving in the
latter part of September 1995.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
4(a) Sixty-first Supplemental Indenture, dated as of
March 1, 1995, supplementing Utilities' Indenture of
Mortgage and Deed of Trust, dated August 1, 1940.
(Filed as Exhibit 4(a) to the Company's Form 10-Q
for the quarter ended March 31, 1995).
4(b) Third Supplemental Indenture, dated as of March 1,
1995, supplementing Utilities' Indenture of Mortgage
and Deed of Trust, dated September 1, 1993. (Filed
as Exhibit 4(b) to the Company's Form 10-Q for the
quarter ended March 31, 1995.
*12 Ratio of Earning to Fixed Charges.
*27 Financial Data Schedule.
* Exhibits designated by an asterisk are filed herewith.
(b) Reports on Form 8-K -
Items Financial Date of
Reported Statements Report
5, 7 None May 15, 1995
5, 7 None April 27, 1995
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.
IES UTILITIES INC.
(Registrant)
Date August 14, 1995 By /s/ Dr. Robert J. Latham
(Signature)
Dr. Robert J. Latham
Senior Vice President, Finance
By /s/ Richard A. Gabbianelli
(Signature)
Richard A. Gabbianelli
Controller & Chief Accounting Officer
<PAGE>
<TABLE>
EXHIBIT 12
IES UTILITIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Twelve Months
Year Ended December 31, Ended
1990 1991 1992 1993 1994 June 30, 1995
(in thousands, except ratio of earnings to fixed charges)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 45,969 $ 47,563 $ 45,291 $ 67,970 $ 61,210 $ 54,240
Federal and state
income taxes 22,364 23,494 20,723 37,963 37,966 34,002
Net income before
income taxes 68,333 71,057 66,014 105,933 99,176 88,242
Interest on long-term debt 28,853 31,171 35,689 34,926 37,942 37,526
Other interest 4,704 5,595 3,939 5,243 3,630 5,475
Estimated interest
component of rents 7,936 6,594 4,567 3,729 3,970 3,995
Fixed charges as defined 41,493 43,360 44,195 43,898 45,542 46,996
Earnings as defined $ 109,826 $ 114,417 $ 110,209 $ 149,831 $ 144,718 $ 135,238
Ratio of earnings to fixed
charges (unaudited) 2.65 2.64 2.49 3.41 3.18 2.88
For the purposes of computation of these ratios (a) earnings have been
calculated by adding fixed charges and Federal and state
income taxes to net income; (b) fixed charges consist of interest
(including amortization of debt expense, premium and discount)
on long-term and other debt and the estimated interest component of rents.
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
The schedule contains summary financial information extracted from the
Consolidated Balance Sheet at June 30, 1995 and the Consolidated Statement
of Income and the Consolidated Statement of Cash Flows for the six months
ended June 30, 1995 and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,293,239
<OTHER-PROPERTY-AND-INVEST> 48,029
<TOTAL-CURRENT-ASSETS> 102,075
<TOTAL-DEFERRED-CHARGES> 16,613
<OTHER-ASSETS> 196,777
<TOTAL-ASSETS> 1,656,733
<COMMON> 33,427
<CAPITAL-SURPLUS-PAID-IN> 279,042
<RETAINED-EARNINGS> 190,928
<TOTAL-COMMON-STOCKHOLDERS-EQ> 503,397
0
18,320
<LONG-TERM-DEBT-NET> 430,363
<SHORT-TERM-NOTES> 15,781
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 77,000
<LONG-TERM-DEBT-CURRENT-PORT> 50,140
0
<CAPITAL-LEASE-OBLIGATIONS> 28,256
<LEASES-CURRENT> 18,267
<OTHER-ITEMS-CAPITAL-AND-LIAB> 515,209
<TOT-CAPITALIZATION-AND-LIAB> 1,656,733
<GROSS-OPERATING-REVENUE> 330,511
<INCOME-TAX-EXPENSE> 12,227<F1>
<OTHER-OPERATING-EXPENSES> 280,171
<TOTAL-OPERATING-EXPENSES> 280,171<F1>
<OPERATING-INCOME-LOSS> 50,340
<OTHER-INCOME-NET> 1,305
<INCOME-BEFORE-INTEREST-EXPEN> 51,645
<TOTAL-INTEREST-EXPENSE> 22,190
<NET-INCOME> 17,228
457
<EARNINGS-AVAILABLE-FOR-COMM> 16,771
<COMMON-STOCK-DIVIDENDS> 23,000
<TOTAL-INTEREST-ON-BONDS> 36,051
<CASH-FLOW-OPERATIONS> 66,022
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
<FN>
<F1>Income tax expense is not included in Operating Expense in the Consolidated
Statements of Income for IES Utilities Inc.
</FN>
</TABLE>
