UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended March 31, 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 Registrant; State of Incorporation; I.R.S. Employer
File Number Address; and Telephone Number Identification No.
1-10628 CIPSCO INCORPORATED 37-1260920
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
1-3672 CENTRAL ILLINOIS PUBLIC SERVICE COMPANY 37-0211380
(An Illinois Corporation)
607 East Adams Street
Springfield, Illinois 62739
217-523-3600
Indicate by check mark whether the Registrants (1) have filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the Registrants were required to
file such reports), and (2) have been subject to such filing
requirements for the past 90 days.
Yes X No
_______ _______
Indicate the number of shares outstanding of each of the issuers'
classes of common stock, as of the latest practicable date:
CIPSCO INCORPORATED Common stock, no par value, 34,069,542
shares outstanding at April 30, 1995
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Common stock no par value, 25,452,373
shares outstanding and held by
CIPSCO INCORPORATED at April 30, 1995
-1- <PAGE>
CIPSCO INCORPORATED
AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
FORM 10-Q FOR THE QUARTER ENDED MARCH 31, 1995
CONTENTS
Page No.
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
CIPSCO INCORPORATED
Consolidated Statements of Income 4
Consolidated Balance Sheets 6
Consolidated Statements of Cash Flows 8
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income 10
Balance Sheets 12
Statements of Cash Flows 14
CONDENSED NOTES TO FINANCIAL STATEMENTS of
CIPSCO Incorporated and Central Illinois
Public Service Company 16 - 20
Item 2. Management's Discussion and Analysis of
Financial Condition and Results of
Operations
CIPSCO Incorporated and Central Illinois
Public Service Company 20 - 25
PART II. OTHER INFORMATION
Item 5. Other Information 26 - 27
Item 6. Exhibits and Reports on Form 8-K 27
Signatures 28 - 29
Exhibit Index 30
Exhibit 12 Ratio of Earnings to Fixed Charges
and Ratio of Earnings to Fixed
Charges plus Preferred Stock Dividend
Requirements Before Income Taxes (CIPS) 31
Exhibit 27 Financial Data Schedule for CIPSCO -
Financial Data Schedule for CIPS -
-2-<PAGE>
The unaudited interim financial statements presented herein
include the consolidated statements of CIPSCO Incorporated and
Subsidiaries ("Company") as well as separate financial statements
for Central Illinois Public Service Company ("CIPS"). The
unaudited statements have been prepared by the Company and CIPS,
respectively, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements
prepared in accordance with generally accepted accounting
principles have been condensed or omitted pursuant to such rules
and regulations, although the Company and CIPS believe the
disclosures are adequate to make the information presented not
misleading. Both the Company's consolidated financial statements
and the CIPS financial statements should be read in conjunction
with the financial statements and notes thereto included in the
combined Annual Report on Form 10-K of CIPSCO Incorporated and
CIPS for the year ended December 31, 1994.
In the opinion of the Company and CIPS, their respective interim
financial statements filed as part of this Form 10-Q reflect all
adjustments necessary to present fairly the results for the
respective periods. Due to the effect of weather and other
factors which are characteristic of CIPS' utility operations,
financial results for the periods ended March 31, 1995 and 1994
are not necessarily indicative of trends for any twelve-month
period.
This financial and other information is not given in connection
with any sale or offer to buy any security.
-3-<PAGE>
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements.
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Income
For the Periods Ended March 31, 1995 and 1994
(in thousands except per share amounts)
(unaudited)
Three Months Ended
March 31,
___________________
1995 1994
_________ _________
Operating Revenues:
Electric......................... $153,188 $159,332
Gas.............................. 55,687 64,094
Investment....................... 1,587 2,196
________ ________
Total operating revenues...... 210,462 225,622
________ ________
Operating Expenses:
Fuel for electric generation..... 50,878 53,679
Purchased power.................. 7,106 9,949
Gas costs........................ 34,131 42,602
Other operation.................. 41,526 37,864
Maintenance...................... 12,205 14,595
Depreciation and amortization.... 20,601 20,412
Taxes other than income taxes.... 15,763 16,230
________ ________
Total operating expenses...... 182,210 195,331
________ ________
Operating Income................... 28,252 30,291
________ ________
Interest and Other Charges:
Interest on long-term debt of
subsidiary....................... 8,138 8,351
Other interest charges........... 399 (20)
Allowance for funds used during
construction..................... (186) (23)
Preferred stock dividends of
subsidiary....................... 968 828
Miscellaneous, net............... (315) (1,119)
________ ________
Total interest and other
charges....................... 9,004 8,017
________ ________
-4-<PAGE>
Income Before Income Taxes......... 19,248 22,274
________ ________
Income Taxes....................... 6,680 8,515
________ ________
Net Income......................... $ 12,568 $ 13,759
======== ========
Average Shares of Common Stock
Outstanding........................ 34,070 34,108
Earnings per Average Share of
Common Stock....................... $ .37 $ .40
The accompanying condensed notes to financial statements are an integral
part of these statements.
-5-<PAGE>
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1995 and December 31, 1994
(in thousands)
March 31, December 31,
1995 1994
___________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric.......................... $2,265,783 $2,264,930
Gas............................... 221,441 220,347
__________ __________
2,487,224 2,485,277
Less-Accumulated depreciation..... 1,088,048 1,077,533
__________ __________
1,399,176 1,407,744
Construction work in progress..... 34,658 31,816
__________ __________
1,433,834 1,439,560
__________ __________
Current Assets:
Cash.............................. 881 1,963
Temporary investments, at cost
which approximates market......... 21,708 5,875
Accounts receivable, net.......... 56,563 67,579
Accrued unbilled revenues......... 18,052 30,484
Materials and supplies, at average
cost.............................. 40,849 39,817
Fuel for electric generation, at
average cost...................... 34,185 30,305
Gas stored underground, at average
cost.............................. 7,557 13,167
Prepayments....................... 12,246 10,925
__________ __________
192,041 200,115
__________ __________
Investments and Other Assets:
Investment in marketable
securities........................ 48,029 43,929
Investment in leveraged leases.... 50,947 49,933
Other............................. 44,761 43,820
__________ __________
143,737 137,682
__________ __________
$1,769,612 $1,777,357
========== ==========
-6-<PAGE>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholders' equity....... $ 644,721 $ 649,230
Unrealized investment losses,
net............................... (677) (1,617)
Preferred stock of subsidiary..... 80,000 80,000
Long-term debt of subsidiary...... 459,695 459,619
__________ __________
1,183,739 1,187,232
__________ __________
Current Liabilities:
Long-term debt of subsidiary due
within one year................... 15,000 15,000
Short-term borrowings............. - 14,985
Accounts payable.................. 46,553 54,021
Accrued wages..................... 12,981 9,833
Accrued taxes..................... 20,532 12,629
Accrued interest.................. 8,451 9,408
Other............................. 42,922 31,488
__________ __________
146,439 147,364
__________ __________
Deferred Credits:
Accumulated deferred income taxes. 312,412 313,072
Investment tax credits............ 54,755 55,595
Regulatory liabilities, net....... 72,267 74,094
__________ __________
439,434 442,761
__________ __________
$1,769,612 $1,777,357
========== ==========
The accompanying condensed notes to financial statements are an
integral part of these statements.
-7-<PAGE>
CIPSCO INCORPORATED AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Periods Ended March 31, 1995 and 1994
(in thousands)
(unaudited)
Three Months Ended
March 31,
______________________
1995 1994
__________ __________
Operating Activities:
Net income.............................. $ 12,568 $ 13,759
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization......... 20,601 20,412
Allowance for equity funds used during
construction (AFUDC).................. (171) (16)
Deferred income taxes, net............ (1,376) 3,330
Investment tax credit amortization.... (840) (842)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues..................... 23,448 1,453
Fuel for electric generation.......... (3,880) 4,558
Other inventories..................... 4,578 6,549
Prepayments........................... (1,321) 245
Other assets.......................... (941) 3,743
Accounts payable and other............ 3,966 343
Accrued wages, taxes and interest..... 10,094 5,484
Other................................... (1,105) (434)
_________ _________
Net cash provided by operating
activities............................ 65,621 58,584
_________ _________
Investing Activities:
Utility construction expenditures,
excluding AFUDC......................... (14,648) (12,677)
Allowance for borrowed funds used
during construction..................... (14) (7)
Change in temporary investments......... (15,833) (31,472)
Long-term investment in marketable
securities.............................. (3,160) (707)
Long-term investment in leveraged
leases.................................. (1,014) (985)
_________ _________
Net cash used in investing activities. (34,669) (45,848)
_________ _________
-8-<PAGE>
Financing Activities:
Common stock dividends paid............. (17,035) (16,713)
Repayment of short-term borrowings...... (14,985) -
Issuance expense, discount and premium.. (14) 25
_________ _________
Net cash used in financing activities. (32,034) (16,688)
_________ _________
Net decrease in cash.................... (1,082) (3,952)
Cash at beginning of period............. 1,963 4,630
_________ _________
Cash at end of period................... $ 881 $ 678
========= =========
Supplemental Disclosures of Cash Flow
Information
Cash paid during the period for:
Interest, net of amounts capitalized.. $ 8,681 $ 8,195
Income taxes.......................... 2,700 3,475
The accompanying condensed notes to financial statements are an
integral part of these statements.
-9-<PAGE>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Statements of Income
For the Periods Ended March 31, 1995 and 1994
(in thousands)
(unaudited)
Three Months Ended
March 31,
__________________
1995 1994
________ ________
Operating Revenues:
Electric......................... $153,195 $159,341
Gas.............................. 55,688 64,095
________ ________
Total operating revenues...... 208,883 223,436
________ ________
Operating Expenses:
Fuel for electric generation..... 50,878 53,679
Purchased power.................. 7,106 9,949
Gas costs........................ 34,131 42,602
Other operation.................. 41,138 37,482
Maintenance...................... 12,204 14,593
Depreciation and amortization.... 20,481 20,307
Taxes other than income taxes.... 15,751 16,216
Income taxes:
Current........................ 9,507 8,410
Deferred, net.................. (2,342) 375
Deferred investment tax
credits, net................... (840) (842)
________ ________
Total operating expenses...... 188,014 202,771
________ ________
Operating Income................... 20,869 20,665
________ ________
Other Income and Deductions:
Allowance for equity funds used
during construction.............. 171 16
Nonoperating income taxes........ (267) (314)
Miscellaneous, net............... 515 1,332
________ ________
Total other income and
deductions.................... 419 1,034
________ ________
-10-<PAGE>
Income Before Interest Charges..... 21,288 21,699
________ ________
Interest Charges:
Interest on long-term debt....... 8,138 8,351
Other interest charges........... 393 (17)
Allowance for borrowed funds used
during construction.............. (14) (7)
________ ________
Total interest charges....... 8,517 8,327
________ ________
Net Income......................... 12,771 13,372
Preferred Stock Dividends.......... 968 828
________ ________
Earnings for Common Stock.......... $ 11,803 $ 12,544
======== ========
The accompanying condensed notes to financial statements are an integral
part of these statements.
-11-<PAGE>
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
Balance Sheets
March 31, 1995 and December 31, 1994
(in thousands)
March 31, December 31,
1995 1994
___________ ____________
(unaudited)
ASSETS
Utility Plant, at original cost:
Electric......................... $2,265,783 $2,264,930
Gas.............................. 221,441 220,347
__________ __________
2,487,224 2,485,277
Less-Accumulated depreciation.... 1,088,048 1,077,533
__________ __________
1,399,176 1,407,744
Construction work in progress.... 34,658 31,816
__________ __________
1,433,834 1,439,560
__________ __________
Current Assets:
Cash............................. 676 1,320
Temporary investments, at cost
which approximates market........ 20,708 2,593
Accounts receivable, net......... 56,686 67,686
Accrued unbilled revenues........ 18,052 30,484
Materials and supplies, at average
cost............................. 40,849 39,817
Fuel for electric generation, at
average cost..................... 34,185 30,305
Gas stored underground, at average
cost............................. 7,557 13,167
Prepayments...................... 12,196 10,839
__________ __________
190,909 196,211
__________ __________
Other Assets....................... 43,849 42,879
__________ __________
$1,668,592 $1,678,650
========== ==========
-12-<PAGE>
CAPITALIZATION AND LIABILITIES
Capitalization:
Common shareholder's equity...... $ 569,006 $ 574,745
Preferred stock.................. 80,000 80,000
Long-term debt................... 459,695 459,619
__________ __________
1,108,701 1,114,364
__________ __________
Current Liabilities:
Long-term debt due within one
year............................. 15,000 15,000
Short-term borrowings............ - 14,985
Accounts payable................. 46,286 53,900
Accrued wages.................... 12,981 9,833
Accrued taxes.................... 21,835 12,963
Accrued interest................. 8,451 9,408
Other............................ 42,921 31,488
__________ __________
147,474 147,577
__________ __________
Deferred Credits:
Accumulated deferred income
taxes............................ 285,395 287,020
Investment tax credits........... 54,755 55,595
Regulatory liability, net........ 72,267 74,094
__________ __________
412,417 416,709
__________ __________
$1,668,592 $1,678,650
========== ==========
The accompanying condensed notes to financial statements are an
integral part of these statements.
-13-<PAGE>
Central Illinois Public Service Company
Statements of Cash Flows
For the Periods Ended March 31, 1995 and 1994
(in thousands)
(unaudited)
Three Months Ended
March 31,
______________________
1995 1994
__________ __________
Operating Activities:
Net income.............................. $ 12,771 $ 13,372
Adjustments to reconcile net income
to net cash provided:
Depreciation and amortization......... 20,481 20,307
Allowance for equity funds used during
construction (AFUDC).................. (171) (16)
Deferred income taxes, net............ (2,342) 1,806
Income tax credit amortization........ (840) (842)
Cash flows impacted by changes in assets
and liabilities:
Accounts receivable, net and accrued
unbilled revenues..................... 23,432 1,457
Fuel for electric generation.......... (3,880) 4,558
Other inventories..................... 4,578 6,549
Prepayments........................... (1,357) (27)
Other assets.......................... (970) 3,641
Accounts payable and other............ 3,819 (144)
Accrued wages, taxes and interest..... 11,063 6,544
Other................................... (984) (330)
_________ _________
Net cash provided by operating
activities............................ 65,600 56,875
_________ _________
Investing Activities:
Construction expenditures, excluding
AFUDC................................... (14,648) (12,677)
Allowance for borrowed funds used during
construction............................ (14) (7)
Changes in temporary investments........ (18,115) (29,871)
_________ _________
Net cash used in investing activities. (32,777) (42,555)
_________ _________
-14-<PAGE>
Financing Activities:
Repayment of short-term borrowings...... (14,985) -
Dividends paid:
Preferred stock....................... (968) (828)
Common stock.......................... (17,500) (17,000)
Issuance expense, discount and premium.. (14) 25
_________ _________
Net cash used in financing activities. (33,467) (17,803)
_________ _________
Net (decrease) in cash.................. (644) (3,483)
Cash at beginning of period............. 1,320 4,038
_________ _________
Cash at end of period................... $ 676 $ 555
========= =========
Supplemental Disclosures of Cash Flow
Information:
Cash paid during the period for:
Interest, net of amounts capitalized.. $ 8,681 $ 8,195
Income taxes.......................... 2,608 4,050
The accompanying condensed notes to financial statements are an
integral part of these statements.
-15-<PAGE>
CIPSCO INCORPORATED AND SUBSIDIARIES
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
CONDENSED NOTES TO FINANCIAL STATEMENTS
MARCH 31, 1995
(unaudited)
Note 1. GENERAL
________________
The consolidated financial statements presented herein include
the accounts of CIPSCO INCORPORATED (CIPSCO), CENTRAL ILLINOIS
PUBLIC SERVICE COMPANY (CIPS), and CIPSCO INVESTMENT COMPANY AND
SUBSIDIARIES (CIC). CIPSCO and Subsidiaries are referred to as
the "Company." CIPSCO has two first-tier subsidiaries: CIC, an
investment subsidiary, and CIPS, an electric and gas public
utility.
The financial statements of CIPS, a subsidiary of CIPSCO, include
only the accounts of CIPS.
Note 2. COMMITMENTS AND CONTINGENCIES
______________________________________
ENVIRONMENTAL REMEDIATION COSTS - CIPS and certain of its
predecessors and other affiliates operated facilities in the past
for manufacturing gas from coal. In connection with
manufacturing gas, various by-products were produced, some of
which remain on sites where the facilities were located. CIPS
has identified 13 of these former manufactured gas plant sites
(environmental remediation sites) which contain potentially
harmful materials. Under directives from the Illinois
Environmental Protection Agency (IEPA), CIPS has incurred costs
and associated legal expenses related to the investigation and
remediation of the sites.
One site was added to the United States Environmental Protection
Agency (USEPA) Superfund list on August 30, 1990. On September
30, 1992 the IEPA, in consultation with the USEPA, decided that
the long-term remedial plan for this site should consist of a
ground-water pump-and-treat program. The IEPA and CIPS entered
into an agreement, which received required court approval on
March 14, 1994, for CIPS to carry out the remedial action with
the IEPA providing oversight. It is not known at this time what
specific remedial action will be required at the other 12 sites.
In 1987, CIPS filed a lawsuit against a number of insurance
carriers seeking full indemnification for all costs in connection
with certain environmental sites. As of the date of this filing,
except for a circuit court verdict entered in favor of CIPS
involving the coverage under one environmental impairment
liability policy, lawsuits against all other insurance carriers
have either been settled or dismissed. On August 26, 1994, the
-16-<PAGE>
Illinois Appellate Court reversed the aforementioned circuit
court ruling on the basis that no claim was made against CIPS
during the policy coverage period. The Illinois Supreme Court
has denied the Company's petition for leave to appeal the
Appellate Court's decision. CIPS has filed a request to
reconsider the decision.
The estimated incurred costs relating to studies and remediation
at these 13 sites and associated legal expenses are being accrued
and deferred rather than expensed currently, pending recovery
through rates, from insurance carriers or other parties. At
March 31, 1995, $39.5 million has been deferred representing
costs incurred and estimates for costs of completing studies at
various sites and an estimate of remediation costs at the
Superfund site. The total of the costs deferred, net of
recoveries from insurers and through rate riders described below,
was $2.1 million at March 31, 1995.
In 1992, the Illinois Commerce Commission (the "Illinois
commission") issued an Order (the "Generic Order") in its
consolidated generic proceeding regarding appropriate ratemaking
treatment of cleanup costs incurred by Illinois utilities with
respect to environmental remediation sites. The Generic Order
indicates that allowed cleanup costs may include prudently
incurred costs of investigation, assessment and cleanup of
environmental remediation sites, as well as litigation costs,
including those involved in insurance recovery claims. The
Generic Order authorizes utilities, including CIPS, to propose a
mechanism to recover cleanup costs which is consistent with the
provisions of the order. Such a mechanism must, among other
things, provide for (1) recovery of cleanup costs over a five-
year period, excluding carrying costs associated with the
unrecovered balance of cleanup costs from the time that the
recovery mechanism becomes effective; (2) a return to ratepayers
over a five-year amortization period of any reimbursement of
cleanup costs received from insurance carriers or other parties;
and (3) a prudence review of each utility's expenditures. The
Generic Order was upheld on appeal by the Third District Illinois
Appellate Court. That decision held that a rate rider mechanism
is an appropriate means for utilities to recover cleanup costs.
On April 6, 1994, the Illinois Supreme Court granted an
intervenor's Petition for Leave to Appeal. The intervenor
maintains that recovery of cleanup costs should not be allowed
and that use of a rider mechanism for cost recovery is unlawful.
CIPS and other utilities opposed the arguments of the intervenor
and argued that the Illinois commission's decision to deny
recovery of carrying costs associated with the unrecovered
balance of cleanup costs should be reversed. On April 20, 1995,
the Illinois Supreme Court issued an opinion which rejected the
argument of the intervenor and held that (i) clean-up costs are
recoverable in rates; and (ii) use of a rider mechanism for
recovery of such costs is appropriate. The Court also held that
the evidence in the generic proceeding did not support the
Illinois commission's decision to deny recovery of carrying costs
associated with the unrecovered balance of clean-up costs.
Accordingly, the Supreme Court reversed the Generic Order of the
-17-<PAGE>
Illinois commission with regard to the recovery of carrying costs
and remanded the case to the Illinois commission for further
proceedings consistent with the Court's opinion. Management
cannot predict whether the intervenor or the Illinois commission
will seek rehearing of the Supreme Court's decision.
On March 26, 1993, the Illinois commission approved CIPS'
proposed environmental cost-recovery rate riders, effective with
April 1993 billings to customers. Known as the electric
environmental adjustment clause and the gas environmental
adjustment clause, the riders are designed to enable CIPS to
recover from its customers costs associated with cleanup of the
environmental remediation sites, along with associated legal
expenses, over a five year period on terms consistent with the
Generic Order. The environmental adjustment clause riders
provide for an annual review of amounts recovered through the
riders. Amounts found to have been incorrectly included would be
subject to refund. Through December 31, 1993, CIPS had collected
$2.9 million from its customers pursuant to the riders. Pursuant
to monthly filings made by CIPS under the riders, no additional
amounts have been collected from customers under the riders since
January 1994. On April 6, 1994, the Illinois commission
initiated a reconciliation proceeding to review CIPS'
environmental remediation activities and determine whether the
revenues collected by the riders in 1993 is consistent with the
amount of remediation costs prudently incurred. CIPS has filed
testimony and provided data to the Illinois commission regarding
the reconciliation proceeding. A status hearing is scheduled for
May 1995. On April 12, 1995, the Illinois commission issued an
Order initiating the reconciliation proceedings for the year
1994.
The total costs to be incurred for the cleanup of these sites or
the possible recovery from insurance carriers and other parties
cannot be estimated. Management believes that any costs incurred
in connection with the sites that are not recovered from
insurance carriers or other parties will be recovered through
utility rates. Accordingly, management believes that costs
incurred in connection with these sites will not have a material
adverse effect on the financial position or results of operations
of the Company or CIPS.
FERC ORDER 636 - During 1992, the Federal Energy Regulatory
Commission ("FERC") issued Order No. 636. This and successor
orders have resulted in substantial restructuring of the service
obligations of interstate pipeline suppliers. Order 636 provided
mechanisms for pipelines to recover transition costs associated
with the restructuring. CIPS has paid substantially all direct
transition costs associated with the pipeline restructuring and
is currently recovering all transition costs in its rates. Any
future transition costs identified and billed from pipeline
suppliers are expected to be recoverable from customers of CIPS.
FERC PROPOSES RULEMAKING TO CREATE OPEN ACCESS TRANSMISSION
SERVICE - In March 1995, the FERC issued a notice of proposed
rulemaking (NOPR) through which the FERC intends to require all
utilities subject to its jurisdiction to provide electric
-18-<PAGE>
transmission service on a non-discriminatory basis to all
interested parties. Under the NOPR as currently proposed the
"open access" tariffs which will likely result will be designed
to provide transmission access to other utility systems on a
basis comparable to the way a utility utilizes its own electric
system. The rules are designed to increase competition in bulk
power markets. CIPS cannot predict when FERC will take final
action on the NOPR or whether it will be adopted in its present
form. The utility does not anticipate that operating revenues or
expenses will change materially as a result of the NOPR.
CLEAN AIR ACT - CIPS' current compliance strategy to meet Phase I
and II of the sulfur dioxide emission reduction requirements of
the Clean Air Act Amendments of 1990 (Amendments) is to switch to
a lower sulfur coal at some of its units along with increased
scrubbing with its existing scrubber at Newton Unit 1. The
currently estimated capital costs of compliance based on the
current strategy are included in the five-year construction
forecast. The forecast has an estimate of $40 million for
environmental compliance including compliance with regulations
under the Clean Air Act. However, the five-year construction
costs may increase if studies being undertaken by CIPS indicate
that renovations to the Newton Unit 1 scrubber are required to
allow existing or additional levels of scrubbing or if such
studies indicate that CIPS should change its compliance strategy
to place more reliance on fuel switching.
In 1991, in accordance with the plan to switch some units to
lower sulfur coal, CIPS signed a long-term coal contract with an
existing supplier for lower sulfur Illinois coal. Due to the
magnitude of the supplier's capital investment, the contract
includes a graduated termination charge. In 1995, CIPS can
terminate the contract under certain conditions, and CIPS would
be required to pay approximately $41 million (plus an inflation
adjustment) in termination charges. During 1995, and each
subsequent year, the termination charge is reduced according to a
formula using tons of coal purchased. The termination charge
would not be effective if CIPS terminated the contract due to
failure of the coal to meet quality specifications provided for
in the contract.
LABOR DISPUTES - The International Union of Operating Engineers
Local 148 and the International Brotherhood of Electrical Workers
Local 702 have both filed unfair labor practice charges with the
National Labor Relations Board (NLRB) relating to the legality of
the lockout by CIPS of both unions during 1993. The Peoria
Regional Office of the NLRB has issued complaints against CIPS
concerning its lockout of both unions. Both unions seek, among
other things, back pay and other benefits for the period of the
lockout. CIPS estimates the amount of back pay and other
benefits for both unions to be less than $12 million dollars. A
hearing, before an administrative law judge of the NLRB, was
completed on April 25, 1995. Management believes the lockout was
both lawful and reasonable and that the final resolution of the
disputes will not have a material adverse effect on financial
position or results of operations of the Company or CIPS.
-19-<PAGE>
OTHER ISSUES - CIPS is involved in other legal and administrative
proceedings before various courts and agencies with respect to
rates, taxes, gas and electric fuel cost reconciliations, service
area disputes, environmental torts and other matters. Although
unable to predict the outcome of these matters, management
believes that appropriate liabilities have been established and
that final disposition of these actions will not have a material
adverse effect on financial position or results of operations of
the Company or CIPS.
Note 3. VOLUNTARY SEPARATION PROGRAM
_____________________________________
Early in 1995, the Company offered a voluntary separation program
to most of its salaried employees, which was accepted by 152
employees in February 1995. The Company recorded a $6.3 million
one-time charge in the first quarter of 1995 for separation
benefits to be provided under the program. The one-time charge
reduced first quarter 1995 earnings by 11 cents per share. The
Company estimates that the payback period resulting from reduced
operating expenses attributable to the program will be
approximately two years.
Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations
The following discussion and analysis of financial condition and
results of operations is for CIPSCO Incorporated and Subsidiaries
("Company") unless otherwise stated.
THE OUTLOOK
CIPS currently estimates that its total construction expenditures
for the 1995-1999 period will be about $449 million, including
about $7 million of allowance for funds used during construction.
In addition to funds for construction, projected capital
requirements for 1995 and for the 1996-1999 period include $123
million for scheduled debt retirements. Capital requirements for
the 1995-1999 period are expected to be met primarily through
internally generated funds. External financing to fund scheduled
debt retirements may be required. Included in the 5-year
construction forecast is an estimate of $40 million for
environmental compliance, including compliance with regulations
under the Clean Air Act Amendments of 1990. CIPS is evaluating
alternatives for reducing fuel costs and other expenses while
maintaining environmental compliance. Maintaining the current
compliance strategy, or adoption of certain alternatives in fuel
and/or environmental strategies, could result in substantial
increases in capital expenditures in the 1995-1999 period from
the amounts shown above. Additional external financing could be
required.
CIPS has an effective shelf registration statement on file with
the Securities and Exchange Commission which permits the issuance
-20-<PAGE>
of an aggregate of up to $50 million of first mortgage bonds,
medium-term notes and/or preferred stock. Proceeds will be used
to replace maturing long-term debt or for general corporate
purposes including payment of short-term debt incurred to finance
construction expenditures.
FINANCIAL CONDITION
Financial condition and changes in total Shareholder Equity of
the Company and CIPS for the three-month periods ended March 31,
1995 and 1994 are as follows:
Three Months Ended
March 31,
________________________
(in thousands)
The Company: 1995 1994
_________ _________
Common Shareholders' Equity
Net income $ 12,568 $ 13,759
Common stock dividends paid (17,035) (16,713)
Other 898 183
________ ________
Change in Shareholders' Equity $ (3,569) $ (2,771)
======== ========
Three Months Ended
March 31,
________________________
(in thousands)
CIPS: 1995 1994
_________ _________
Common Shareholder's Equity
Earnings for common stock $ 11,803 $ 12,544
Common stock dividends paid (17,500) (17,000)
Other (42) (75)
________ ________
Change in Shareholder's Equity $ (5,739) $ (4,531)
======== ========
OVERVIEW
The Company's earnings per share were $.37 for the quarter ended
March 31, 1995, compared to $.40 per share earned during the same
period in 1994. The decrease in earnings was caused by one-time
costs associated with a voluntary separation program offered to
most salaried employees of CIPS. Excluding the impact of the
one-time charge, earnings in the first quarter would have been
$.48 per share, or $.08 cents per share higher than the first
quarter of 1994.
-21-<PAGE>
The following table summarizes the components of consolidated net income and
CIPS earnings for common stock for the three months ended March 31, 1995 and
1994 (see Results of Operations for further discussion). In this table,
electric operating margin equals electric operating revenues less revenue
taxes, fuel for electric generation and purchased power. Gas operating
margin equals gas operating revenues less revenue taxes and gas costs.
First Quarter Ended
March 31,
___________________
(in thousands)
1995 1994
________ ________
CIPS
Electric operating margin $ 89,213 $ 89,821
Gas operating margin 18,112 17,683
Other deductions and interest
expenses 94,554 94,132
CIPS preferred stock dividends 968 828
_______ _______
Total earnings for common stock 11,803 12,544
_______ _______
NON-UTILITY
Investment revenues 1,384 1,979
Other deductions and expenses 619 764
_______ _______
Total non-utility net income 765 1,215
_______ _______
Consolidated net income $ 12,568 $ 13,759
======= =======
-22-<PAGE>
RESULTS OF OPERATIONS
The results of operations of the Company and CIPS for the three months ended
March 31, 1995, compared to the same period in 1994 are presented below.
The Company
Net Income Earnings
(in thousands) Per Share
______________ ____________
Three Months Three Months
______________ ____________
1995 $12,568 $ .37
1994 13,759 .40
_______ _____
Decrease $(1,191) $(.03)
======= =====
Percent
Decrease (9%) (8%)
CIPS
Earnings for
Common Stock
(in thousands)
______________
Three Months
______________
1995 $ 11,803
1994 12,544
_______
Decrease $ (741)
=======
Percent
Decrease (6%)
OPERATING REVENUES
The changes in electric and gas revenues described below are for the
Company. The only differences between changes in electric and gas operating
revenues for the Company and for CIPS are intercompany revenues that are
eliminated in the consolidated financial statements. These intercompany
amounts are immaterial.
Electric revenues decreased 4% in the first quarter of 1995 compared to the
first quarter of 1994 reflecting a 10% decline in KWH sales due to the
milder weather, a decrease in economy and emergency interchange sales due to
changing market conditions between the periods and the fact that a portion
of a contract for the sale by CIPS of electric generating capacity expired
at year-end 1994.
-23-<PAGE>
The changes in electric revenue and KWH sales are shown below:
CHANGES IN ELECTRIC REVENUE AND KILOWATTHOUR SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
__________________________________________
First Quarter
__________________________________________
Revenue Rev % KWH KWH %
_________ _____ _________ _____
Residential $ 1,496 3 % (17,785) (2)%
Commercial 2,134 6 % 26,680 4 %
Industrial (27) - (25,127) (4)%
Public Authorities
and Other 1,636 47 % 4,450 11 %
_______ _______
Total Retail $ 5,239 4 % (11,782) (1)%
Power Supply Agreements $ (2,278) (12)% (15,293) (4)%
Interchange Sales
(economy/emergency) (8,780) (52)% (317,230) (39)%
Cooperatives and
Municipals (325) (6)% (2,733) (2)%
_______ _______
Total Sales for Resale $(11,383) (27)% (335,256) (25)%
________ _______
Total $ (6,144) (4)% (347,038) (10)%
======= ========
Gas revenues decreased 13% in the first quarter of 1995 compared to the same
period in 1994 due primarily to milder weather in 1995 and decreased sales
to all classes of customers. Gas transportation revenues decreased 5% in
the first quarter of 1995 due primarily to a 3% decrease in the number of
therms transported.
-24-<PAGE>
The changes in gas revenues and therm sales are shown below.
CHANGES IN GAS REVENUE AND THERM SALES
INCREASE (DECREASE) FROM PRIOR YEAR
(in thousands)
__________________________________________
First Quarter
__________________________________________
Therms
Revenue Rev % Therms %
_________ _____ _________ _____
Residential $(4,159) (10)% (7,968) (10)%
Commercial (1,993) (14)% (3,459) (13)%
Industrial (2,087) (44)% (5,443) (42)%
Transportation (110) (5)% (1,068) (3)%
Miscellaneous (58) (25)% - -
______ ______
Total $(8,407) (13)% (17,938) (11)%
====== ======
OPERATIONS
__________
Fuel for electric generation declined 5% for the first quarter of 1995
compared to the first quarter of 1994 because less generation was required
for fewer sales due to the milder weather in 1995 and fewer sales
opportunities to other utilities.
Purchased power decreased 29% for the first quarter ended March 31, 1995
compared with the same period in 1994 reflecting fewer purchases made for
resale to interchange economy and emergency customers.
Gas costs declined 20% for the first quarter when compared to the same
period in 1994 primarily due to a 14% decline in gas requirements for the
CIPS system.
Other operation expenses increased 10% in the first quarter of 1995 compared
to the same period in 1994 primarily due to a $6.3 million charge recognized
in the quarter relating to the voluntary separation program. This charge
was partially offset by reduced operating expenses in the first quarter of
1995.
Maintenance expenses declined 16% in the first quarter of 1995 compared to
the first quarter of 1994 due to fewer maintenance projects scheduled in the
first quarter of 1995.
Depreciation and amortization expense increased 1% in the first quarter of
1995 when compared to 1994 due to normal plant additions.
-25-<PAGE>
PART II. OTHER INFORMATION
Item 5. Other Information
(1) Reference is made to the third paragraph under Item 1. Business -
Competition -- General on page 8 in the 1994 CIPSCO and CIPS
combined 1994 Annual Report on Form 10-K (the "1994 Form 10-K") for
information regarding the voluntary separation plan offered to
eligible employees of CIPS. Approximately 150 employees or 6% of
the total workforce elected to participate in the program. Total
expenses related to the program resulted in a pre-tax charge of
approximately $6.3 million, or 11 cents per share, which was
expensed in the first quarter of 1995.
(2) Reference is made to the third paragraph under Item 1. Business -
Rate Matters on page 13 in the 1994 Form 10-K for information
regarding Illinois commission reconciliation proceedings related to
electric fuel and purchased gas charges collected by CIPS. In
March 1995, the Illinois commission began reconciliation
proceedings for the year 1994.
(3) Reference is made to the second paragraph under Item 1. Business -
Electric Power Sales/Participation Agreements on page 16 in the
1994 Form 10-K for information regarding agreements between CIPS
and CILCO for the sale of limited term power to CILCO. On March
15, 1995, CIPS entered into an agreement for the sale of 50
megawatts of limited term power to CILCO for the period June 1998
through May 2009. This agreement is in addition to other
agreements currently in place with CILCO.
(4) Reference is made to Item 1. Business - Employees on page 22 in
the 1994 Form 10-K for information regarding employees represented
by labor unions. On April 21, 1995, CIPS received notification
from officials of both IBEW Local Union 702 and IUOE Local Union
148 that the membership of both labor unions ratified the CIPS
proposal, made April 6, 1995, to extend the current labor
agreements for a one-year period beginning July 1, 1995.
(5) In March 1995, the Federal Energy Regulatory Commission (FERC)
issued a notice of proposed rulemaking (NOPR) in Docket No.
RM95-8-000 through which the FERC intends to require all utilities
subject to its jurisdiction to provide electric transmission
service on a non-discriminatory basis to all interested parties.
Under the NOPR as currently proposed the "open access" tariffs
which will likely result will be designed to provide transmission
access to other utility systems on a basis comparable to the way
a utility utilizes its own electric system. The rules are
designed to increase competition in bulk power markets. CIPS
cannot predict when FERC will take final action on the NOPR or
whether it will be adopted in its present form.
-26-<PAGE>
(6) On October 5, 1994, the Illinois commission opened rulemaking
Docket No. 94-0403 with the intention of revising the current
purchased gas adjustment (PGA) clause mechanism which allows
Illinois utilities including CIPS to adjust the rates they charge
gas customers to reflect changes in the cost of gas purchased. The
purpose of the proceeding is to bring the PGA mechanism more in
line with how industry functions. The Citizens Utility Board
(CUB), an intervenor in this case, has proposed that demand charges
that CIPS pays to interstate pipelines and suppliers be removed
from the PGA and recovered instead through base rates. CIPS, other
utilities and the Illinois commission staff have opposed this
proposal. A proposed order in this matter is expected in June
1995. Although unable to predict the outcome of this matter,
management believes that implementation of a revised PGA mechanism
will not have a material adverse effect on financial position or
results of operations of the Company or CIPS.
(7) On March 15, 1995, the Illinois State Senate passed Senate Bill
232. This bill would allow utilities, such as CIPS, to petition
the Illinois commission for approval of alternative forms of
regulation which would differ from the traditional rate base/rate
of return regulation. Legislative action on Senate Bill 232 is
pending in the Illinois House of Representatives. In addition,
other bills in early stages of the legislative process have the
potential to accelerate the introduction of competition to the
utility industry in Illinois.
Item 6. Exhibits and Reports on Form 8-K
(A) Exhibits:
Exhibit 12 Computation of Ratio of Earnings to
Fixed Charges and Computation of
Ratio of Earnings to Fixed Charges
plus Preferred Stock Dividend
Requirements Before Income Taxes for
CIPS.
Exhibit 27 Financial Data Schedule for CIPSCO
(required for electronic filing only
in accordance with Item 601(c)(1) of
Regulation S-K). Financial Data Schedule
for CIPS (required for electronic filing
only in accordance with Item 601(c)(1) of
Regulation S-K).
(B) Reports on Form 8-K:
None
-27-<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, CIPSCO Incorporated, has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
CIPSCO Incorporated
Date: May 2, 1995 /s/ J. C. Fiaush
J. C. Fiaush
Controller
(Chief Accounting Officer)
-28-<PAGE>
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant, Central Illinois Public Service Company, has duly caused this
report to be signed on its behalf by the undersigned thereunto duly
authorized.
Central Illinois Public Service Company
Date: May 2, 1995 /s/ J. C. Fiaush
J. C. Fiaush
Controller
(Principal Accounting Officer)
-29-<PAGE>
CIPSCO INCORPORATED AND
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
EXHIBIT INDEX TO FORM 10-Q
FOR THE QUARTER ENDED MARCH 31, 1995
Exhibit No. Description
___________ ___________
12 Computation of Ratio of Earnings
to Fixed Charges and Computation of
Ratio of Earnings to Fixed Charges
plus Preferred Stock Dividend
Requirements Before Income Taxes for
CIPS.
27 Financial Data Schedule for CIPSCO
Financial Data Schedule for CIPS
-30-<PAGE>
Exhibit 12
CENTRAL ILLINOIS PUBLIC SERVICE COMPANY
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
PLUS PREFERRED STOCK DIVIDEND REQUIREMENTS BEFORE INCOME TAXES
(in thousands)
<TABLE>
<CAPTION>
12 Months Ended
_______________________________________________________________
December 31,
March 31, ________________________________________________
1995 1994 1993 1992 1991 1990
_____________ ________ ________ ________ ________ ________
<S> <C> <C> <C> <C> <C> <C>
Net income. . . . . . . . . . . . . . . . . . . $ 81,312 $ 81,913 $ 84,011 $ 72,601 $ 75,683 $ 71,562
Add--Federal and state income taxes:
Current . . . . . . . . . . . . . . . . . . . 39,194 38,097 50,441 6,110 36,316 39,380
Deferred (net). . . . . . . . . . . . . . . . 10,473 13,190 1,674 33,998 7,573 (2,964)
Investment tax credit amortization. . . . . . (3,365) (3,367) (3,366) (3,336) (3,464) (3,306)
Income tax applicable to nonoperating
activities. . . . . . . . . . . . . . . . . 556 603 631 2,989 2,413 2,986
_______ _______ _______ _______ _______ _______
46,858 48,523 49,380 39,761 42,838 36,096
_______ _______ _______ _______ _______ _______
Net income before income taxes. . . . . . . . . 128,170 130,436 133,391 112,362 118,521 107,658
_______ _______ _______ _______ _______ _______
Add--Fixed charges
Interest on long-term debt. . . . . . . . . . 30,947 31,164 32,823 35,534 36,652 36,589
Interest on provision for revenue refunds . . - - - (803) 4,261 3,396
Other interest. . . . . . . . . . . . . . . . 769 358 479 392 1,231 1,070
Amortization of net debt premium and
discount. . . . . . . . . . . . . . . . . . 1,681 1,678 1,598 863 338 326
_______ _______ _______ _______ _______ ________
33,397 33,200 34,900 35,986 42,482 41,381
_______ _______ _______ _______ _______ ________
Earnings as defined . . . . . . . . . . . . . . $161,567 $163,636 $168,291 $148,348 $161,003 $149,039
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges. . . . . . . 4.84 4.93 4.82 4.12 3.79 3.60
Earnings required for preferred dividends:
Preferred stock dividends . . . . . . . . . . $ 3,650 $ 3,510 $ 3,718 $ 4,549 $ 5,396 $ 5,617
Adjustment to pre-tax basis*. . . . . . . . . 2,103 2,079 2,185 2,491 3,054 2,833
_______ _______ _______ ______ _______ _______
$ 5,753 $ 5,589 $ 5,903 $ 7,040 $ 8,450 $ 8,450
_______ _______ _______ ______ _______ _______
Fixed charges plus preferred stock
dividend requirements . . . . . . . . . . . . $ 39,150 $ 38,789 $ 40,803 $ 43,026 $ 50,932 $ 49,831
======= ======= ======= ======= ======= =======
Ratio of earnings to fixed charges plus
preferred stock dividend requirements . . . . 4.13 4.22 4.12 3.45 3.16 2.99
* An additional charge equivalent to earnings required to adjust
dividends on preferred stock to a pre-tax basis (See below.)
{ Net income before income taxes }
{ ______________________________ -100% } X preferred dividends = earnings required for preferred dividends
{ Net income }
</TABLE>
-31-<PAGE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION
EXTRACTED FROM THE STATEMENT OF INCOME, STATEMENT OF
CASH FLOWS, BALANCE SHEET AND IS QUALIFIED IN ITS
ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<CIK> 0000860520
<NAME> CIPSCO Inc.
<MULTIPLIER> 1,000
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,433,834
<OTHER-PROPERTY-AND-INVEST> 100
<TOTAL-CURRENT-ASSETS> 192,041
<TOTAL-DEFERRED-CHARGES> 0<F1>
<OTHER-ASSETS> 44,761
<TOTAL-ASSETS> 1,769,612
<COMMON> 356,812
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 287,909
<TOTAL-COMMON-STOCKHOLDERS-EQ> 644,044
0
80,000
<LONG-TERM-DEBT-NET> 459,695
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 15,000
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 570,873
<TOT-CAPITALIZATION-AND-LIAB> 1,769,612
<GROSS-OPERATING-REVENUE> 210,462
<INCOME-TAX-EXPENSE> 6,680
<OTHER-OPERATING-EXPENSES> 182,210
<TOTAL-OPERATING-EXPENSES> 188,890<F2>
<OPERATING-INCOME-LOSS> 21,572<F2>
<OTHER-INCOME-NET> 315
<INCOME-BEFORE-INTEREST-EXPEN> 21,572
<TOTAL-INTEREST-EXPENSE> 8,523
<NET-INCOME> 13,536<F3>
968
<EARNINGS-AVAILABLE-FOR-COMM> 12,568
<COMMON-STOCK-DIVIDENDS> 17,035
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 65,621
<EPS-PRIMARY> 0.37
<EPS-DILUTED> 0.37
<FN>
<F1> INFORMATION NOT NORMALLY DISCLOSED IN FINANCIAL STATEMENTS
AND NOTES.
<F2> INCLUDES INCOME TAX EXPENSE.
<F3> NET INCOME BEFORE PREFERRED STOCK DIVIDEND OF SUBSIDIARY
</TABLE>
