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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 September 30, 2002
------------------
or
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15 (d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from _______ to _______
Commission Name of Registrant, State of Incorporation, IRS Employer
File Number Address of Principal Executive Offices and Telephone Number Identification Number
- ----------- ----------------------------------------------------------- ---------------------
1-9894 ALLIANT ENERGY CORPORATION 39-1380265
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
0-4117-1 INTERSTATE POWER AND LIGHT COMPANY 42-0331370
(an Iowa corporation)
Alliant Energy Tower
Cedar Rapids, Iowa 52401
Telephone (319)786-4411
0-337 WISCONSIN POWER AND LIGHT COMPANY 39-0714890
(a Wisconsin corporation)
4902 N. Biltmore Lane
Madison, Wisconsin 53718
Telephone (608)458-3311
This combined Form 10-Q is separately filed by Alliant Energy Corporation,
Interstate Power and Light Company and Wisconsin Power and Light Company.
Information contained in the quarterly report relating to Interstate Power
and Light Company and Wisconsin Power and Light Company is filed by such
registrant on its own behalf. Each of Interstate Power and Light Company and
Wisconsin Power and Light Company makes no representation as to information
relating to registrants other than itself.
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 by check mark whether the registrants are accelerated filers (as
defined in Rule 12b-2 of the Exchange Act).
Alliant Energy Corporation Yes [ X ] No [ ]
Interstate Power and Light Company Yes [ ] No [ X ]
Wisconsin Power and Light Company Yes [ ] No [ X ]
Number of shares outstanding of each class of common stock as of October 31,
2002:
Alliant Energy Corporation Common stock, $0.01 par value, 91,689,529 shares outstanding
Interstate Power and Light Company Common stock, $2.50 par value, 13,370,788 shares outstanding (all of which
are owned beneficially and of record by Alliant Energy Corporation)
Wisconsin Power and Light Company Common stock, $5 par value, 13,236,601 shares outstanding (all of which are
owned beneficially and of record by Alliant Energy Corporation)
TABLE OF CONTENTS
Page
----
Part I. Financial Information 4
Item 1. Consolidated Financial Statements 4
Alliant Energy Corporation:
---------------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2002 and 2001 4
Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 5
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 7
Notes to Consolidated Financial Statements 8
Interstate Power and Light Company:
-----------------------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2002 and 2001 17
Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 18
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 20
Notes to Consolidated Financial Statements 21
Wisconsin Power and Light Company:
----------------------------------
Consolidated Statements of Income for the Three and Nine Months Ended
September 30, 2002 and 2001 23
Consolidated Balance Sheets as of September 30, 2002 and December 31, 2001 24
Consolidated Statements of Cash Flows for the Nine Months Ended
September 30, 2002 and 2001 26
Notes to Consolidated Financial Statements 27
Item 2. Management's Discussion and Analysis of Financial Condition and
Results of Operations 29
Item 3. Quantitative and Qualitative Disclosures About Market Risk 47
Item 4. Controls and Procedures 47
Part II. Other Information 47
Item 1. Legal Proceedings 47
Item 6. Exhibits and Reports on Form 8-K 48
Signatures 49
Certifications 50
2
DEFINITIONS
Certain abbreviations or acronyms used in the text and notes of this combined
Form 10-Q are defined below:
Abbreviation or Acronym Definition
- ----------------------- ----------
Alliant Energy.............................. Alliant Energy Corporation
ATC......................................... American Transmission Company LLC
Capstone.................................... Capstone Turbine Corporation
Cargill..................................... Cargill Incorporated
Cargill-Alliant............................. Cargill-Alliant, LLC
Corporate Services.......................... Alliant Energy Corporate Services, Inc.
DAEC........................................ Duane Arnold Energy Center
Dth......................................... Dekatherm
EBITDA...................................... Earnings Before Interest, Taxes, Depreciation and Amortization
EITF........................................ Emerging Issues Task Force
EITF Issue No. 02-3......................... Issues Related to Accounting for Contracts Involved in Energy
Trading and Risk Management Activities
Enermetrix.................................. Enermetrix, Inc.
EPA......................................... U.S. Environmental Protection Agency
EPS......................................... Earnings Per Average Common Share
FASB........................................ Financial Accounting Standards Board
FERC........................................ Federal Energy Regulatory Commission
GAAP........................................ Accounting Principles Generally Accepted in the U.S.
ICC......................................... Illinois Commerce Commission
IESU........................................ IES Utilities Inc.
IPC......................................... Interstate Power Company
IP&L........................................ Interstate Power and Light Company
IRS......................................... Internal Revenue Service
ISO......................................... Independent System Operator
IUB......................................... Iowa Utilities Board
KV.......................................... Kilovolt
McLeod...................................... McLeodUSA Incorporated
Moody's..................................... Moody's Investors Service
MD&A........................................ Management's Discussion and Analysis of Financial Condition and
Results of Operations
MPUC........................................ Minnesota Public Utilities Commission
MW.......................................... Megawatt
MWh......................................... Megawatt-hour
PSCW........................................ Public Service Commission of Wisconsin
PUHCA....................................... Public Utility Holding Company Act of 1935
Resources................................... Alliant Energy Resources, Inc.
SEC......................................... Securities and Exchange Commission
SFAS........................................ Statement of Financial Accounting Standards
SFAS 115.................................... Accounting for Certain Investments in Debt and Equity Securities
SFAS 133.................................... Accounting for Derivative Instruments and Hedging Activities
SmartEnergy................................. SmartEnergy, Inc.
Synfuel..................................... Alliant Energy Synfuel LLC
Southern Hydro.............................. Southern Hydro Partnership
TBD......................................... To Be Determined
TRANSLink................................... TRANSLink Transmission Company LLC
U.S. ....................................... United States
Whiting..................................... Whiting Petroleum Corporation
WP&L........................................ Wisconsin Power and Light Company
WUHCA....................................... Wisconsin Utility Holding Company Act
3
PART I. FINANCIAL INFORMATION
ITEM 1. CONSOLIDATED FINANCIAL STATEMENTS
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
- --------------------------------------------------------------------------------------------------------------------------------
(in thousands, except per share amounts)
Operating revenues:
Electric utility $546,885 $519,851 $1,330,297 $1,367,281
Gas utility 44,594 42,979 238,201 396,229
Non-regulated and other 169,940 103,435 444,373 367,309
------------- -------------- -------------- --------------
761,419 666,265 2,012,871 2,130,819
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 92,501 94,894 230,259 248,040
Purchased power 124,194 108,177 287,212 318,024
Cost of utility gas sold 26,917 23,660 149,392 303,984
Other operation and maintenance 255,624 194,663 722,062 629,845
Depreciation, depletion and amortization 88,131 85,502 260,440 256,278
Taxes other than income taxes 29,352 25,643 86,542 83,628
------------- -------------- -------------- --------------
616,719 532,539 1,735,907 1,839,799
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Operating income 144,700 133,726 276,964 291,020
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 50,997 46,169 148,826 143,500
Equity (income) loss from unconsolidated investments 13,086 (22,528) (3,699) (46,381)
Allowance for funds used during construction (1,941) (3,373) (5,291) (8,845)
Preferred dividend requirements of subsidiaries 1,602 1,680 4,966 5,040
Impairment of available-for-sale securities of McLeodUSA Inc. - - 27,218 -
Miscellaneous, net 15,906 8,518 16,480 3,412
------------- -------------- -------------- --------------
79,650 30,466 188,500 96,726
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 65,050 103,260 88,464 194,294
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Income taxes 20,320 33,929 27,676 65,175
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Income before cumulative effect of a change in
accounting principle, net of tax 44,730 69,331 60,788 129,119
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Cumulative effect of a change in accounting
principle, net of tax - - - (12,868)
------------- -------------- -------------- --------------
- --------------------------------------------------------------------------------------------------------------------------------
Net income $44,730 $69,331 $60,788 $116,251
============= ============== ============== ==============
- --------------------------------------------------------------------------------------------------------------------------------
Average number of common shares outstanding (diluted) 91,258 79,350 90,622 79,241
============= ============== ============== ==============
- --------------------------------------------------------------------------------------------------------------------------------
Earnings per average common share (basic and diluted):
Income before cumulative effect of a change
in accounting principle $0.49 $0.87 $0.67 $1.63
Cumulative effect of a change in accounting principle - - - (0.16)
------------- -------------- -------------- --------------
Net income $0.49 $0.87 $0.67 $1.47
============= ============== ============== ==============
- --------------------------------------------------------------------------------------------------------------------------------
Dividends declared per common share $0.50 $0.50 $1.50 $1.50
============= ============== ============== ==============
- --------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
ASSETS 2002 2001
- ----------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Utility:
Electric plant in service $5,306,832 $5,123,781
Gas plant in service 617,298 597,494
Other plant in service 542,515 517,938
Accumulated depreciation (3,558,804) (3,374,867)
---------------- ----------------
Net plant 2,907,841 2,864,346
Construction work in progress 156,238 111,069
Nuclear fuel, net of amortization 51,419 54,811
Other, net 9,348 7,383
---------------- ----------------
Total utility 3,124,846 3,037,609
---------------- ----------------
Non-regulated and other, net:
Investments:
Whiting 409,791 283,031
Affordable housing, transportation and other 203,342 194,212
International 234,750 157,766
Non-regulated generation 137,151 60,411
Integrated Services 78,704 79,202
Corporate Services and other 73,157 50,566
---------------- ----------------
Total non-regulated and other 1,136,895 825,188
---------------- ----------------
4,261,741 3,862,797
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------
Current assets:
Cash and temporary cash investments 85,805 86,618
Restricted cash 30,534 43,726
Accounts receivable:
Customer, less allowance for doubtful accounts
of $13,185 and $8,598, respectively 101,910 66,192
Unbilled utility revenues 29,982 71,388
Other, less allowance for doubtful accounts
of $495 and $319, respectively 79,173 73,855
Income tax refunds receivable 95,682 29,474
Production fuel, at average cost 66,332 54,707
Materials and supplies, at average cost 52,895 54,401
Gas stored underground, at average cost 65,747 57,114
Other 101,815 89,367
---------------- ----------------
709,875 626,842
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------
Investments:
Investments in unconsolidated foreign entities 338,606 572,555
Nuclear decommissioning trust funds 334,434 332,953
Investment in ATC and other 222,619 249,013
---------------- ----------------
895,659 1,154,521
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 333,656 241,973
Deferred charges and other 559,295 361,549
---------------- ----------------
892,951 603,522
---------------- ----------------
- ----------------------------------------------------------------------------------------------------------
Total assets $6,760,226 $6,247,682
================ ================
- ----------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5
ALLIANT ENERGY CORPORATION
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
September 30, December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $0.01 par value - authorized 200,000,000 shares;
outstanding 91,594,567 and 89,682,334 shares, respectively $916 $897
Additional paid-in capital 1,284,947 1,239,793
Retained earnings 757,825 832,293
Accumulated other comprehensive loss (266,716) (152,434)
Shares in deferred compensation trust - 226,616 and 71,958 shares
at an average cost of $29.58 and $30.68 per share, respectively (6,703) (2,208)
-------------------- --------------------
Total common equity 1,770,269 1,918,341
-------------------- --------------------
Cumulative preferred stock of subsidiaries, net 59,963 113,953
Long-term debt (excluding current portion) 2,612,037 2,457,941
-------------------- --------------------
4,442,269 4,490,235
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 61,181 10,506
Variable rate demand bonds 55,100 55,100
Commercial paper 298,945 68,389
Other short-term borrowings 125,147 84,318
Accounts payable 208,455 245,480
Accrued interest 47,577 35,713
Accrued taxes 158,465 90,413
Other 186,567 149,818
-------------------- --------------------
1,141,437 739,737
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 688,326 632,472
Accumulated deferred investment tax credits 55,707 59,398
Pension and other benefit obligations 100,404 96,496
Environmental liabilities 56,794 49,144
Other 233,054 136,822
-------------------- --------------------
1,134,285 974,332
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Minority interest 42,235 43,378
-------------------- --------------------
- ---------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $6,760,226 $6,247,682
==================== ====================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6
ALLIANT ENERGY CORPORATION
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2002 2001
- ----------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $60,788 $116,251
Adjustments to reconcile net income to net cash flows
from operating activities:
Depreciation, depletion and amortization 260,440 256,278
Amortization of nuclear fuel 15,492 13,344
Amortization of deferred energy efficiency expenditures 14,722 26,880
Deferred tax benefits and investment tax credits (5,227) (13,978)
(Gains) losses on dispositions of assets, net 1,449 (7,013)
Equity income from unconsolidated investments, net (3,699) (46,381)
Distributions from equity method investments 16,563 15,242
Impairment of available-for-sale securities of McLeodUSA Inc. 27,218 -
Other non-cash valuation charges 33,479 29,041
Cumulative effect of a change in accounting principle, net of tax - 12,868
Other (8,209) (15,812)
Other changes in assets and liabilities:
Accounts receivable 370 160,910
Income tax refunds receivable (66,208) (4,881)
Gas stored underground (8,633) (19,733)
Accounts payable (30,859) (38,291)
Accrued taxes 68,052 23,317
Other changes in working capital 35,403 (31,480)
------------------- -------------------
Net cash flows from operating activities 411,141 476,562
------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
Cash flows from financing activities:
Common stock dividends (135,256) (118,503)
Proceeds from issuance of common stock 45,410 11,403
Redemption of preferred stock of subsidiary (56,389) -
Net change in Resources' credit facility 207,085 248,500
Proceeds from issuance of other long-term debt 32,859 205,392
Reductions in other long-term debt (26,958) (146,678)
Net change in other short-term borrowings 176,737 (136,713)
Other (13,295) (39,773)
------------------- -------------------
Net cash flows from financing activities 230,193 23,628
------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Non-regulated businesses (359,821) (376,067)
Regulated domestic utilities (276,692) (230,127)
Corporate Services and other (26,871) (24,140)
Nuclear decommissioning trust funds (19,879) (19,879)
Proceeds from formation of ATC and other asset dispositions 22,473 110,534
Other 18,643 (16,384)
------------------- -------------------
Net cash flows used for investing activities (642,147) (556,063)
------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
Net decrease in cash and temporary cash investments (813) (55,873)
------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 86,618 148,415
------------------- -------------------
- ----------------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $85,805 $92,542
=================== ===================
- ----------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $134,640 $142,900
=================== ===================
Income taxes, net of refunds $4,576 $56,673
=================== ===================
Noncash investing and financing activities:
Capital lease obligations incurred and other $11,635 $19,759
=================== ===================
- ----------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7
ALLIANT ENERGY CORPORATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
1. The interim consolidated financial statements included herein have been
prepared by Alliant Energy, without audit, pursuant to the rules and
regulations of the SEC. Accordingly, certain information and footnote
disclosures normally included in financial statements prepared in
accordance with GAAP have been condensed or omitted, although management
believes that the disclosures are adequate to make the information
presented not misleading. The consolidated financial statements include
Alliant Energy and its consolidated subsidiaries (including IP&L, WP&L,
Resources and Corporate Services). These financial statements should be
read in conjunction with the financial statements and the notes thereto
included in Alliant Energy's, IP&L's and WP&L's latest Annual Report on
Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2002 and 2001, (b) the consolidated financial position at
September 30, 2002 and December 31, 2001, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2002 and
2001, have been made. Because of the seasonal nature of Alliant Energy's
utility operations, results for the three and nine months ended September
30, 2002 are not necessarily indicative of results that may be expected
for the year ending December 31, 2002.
2. Alliant Energy's comprehensive loss, and the components of other
comprehensive loss, net of taxes, for the three and nine months ended
September 30 were as follows (in thousands):
Three Months Nine Months
---------------------------- -----------------------------
2002 2001 2002 2001
------------ ------------ ------------ -------------
Net income $44,730 $69,331 $60,788 $116,251
Other comprehensive loss:
Unrealized gains (losses) on securities:
Unrealized holding losses arising during
period, net of tax (1) (1,995) (105,306) (12,155) (335,391)
Less: reclassification adjustment for gains (losses)
included in net income, net of tax (2) (3,423) 12 (23,146) 12
------------ ------------ ------------ -------------
Net unrealized gains (losses) on securities 1,428 (105,318) 10,991 (335,403)
------------ ------------ ------------ -------------
Foreign currency translation adjustments (77,178) (45,503) (120,563) (114,233)
------------ ------------ ------------ -------------
Unrealized gains (losses) on derivatives
qualified as hedges:
Unrealized holding gains (losses) arising during
period, net of tax (1,659) 2,456 (1,725) 1,968
Less: reclassification adjustment for gains (losses)
included in net income, net of tax (421) (457) 2,985 (4,239)
------------ ------------ ------------ -------------
Net unrealized gains (losses) on qualifying derivatives (1,238) 2,913 (4,710) 6,207
------------ ------------ ------------ -------------
Other comprehensive loss (76,988) (147,908) (114,282) (443,429)
------------ ------------ ------------ -------------
Comprehensive loss ($32,258) ($78,577) ($53,494) ($327,178)
============ ============ ============ =============
(1) Primarily due to quarterly adjustments to the estimated fair value of
Alliant Energy's investments in McLeod (refer to Note 8 for additional
information) and Capstone.
(2) The three- and nine-month 2002 earnings include after-tax losses of
$0/$16.5 million and $2.6/$5.8 million related to asset valuation
charges for Alliant Energy's McLeod (available-for-sale securities)
and Capstone investments, respectively.
8
3. Certain financial information relating to Alliant Energy's significant
business segments is presented below. Intersegment revenues were not
material to Alliant Energy's operations. Details related to Alliant
Energy's results of operations are discussed in MD&A, including certain
SFAS 133 valuation income/charges and various asset valuation charges.
Regulated Domestic Utilities Non-regulated Businesses Alliant
--------------------------------------------- ------------------------------ Energy
Electric Gas Other Total Whiting Other Total Other Consolidated
-----------------------------------------------------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2002
- -------------------------------------
Operating revenues $546,885 $44,594 $9,070 $600,549 $35,514 $127,180 $162,694 ($1,824) $761,419
Operating income (loss) 141,159 (11,183) 2,016 131,992 9,114 3,875 12,989 (281) 144,700
Net income (loss) 62,631 5,896 (31,825) (25,929) 8,028 44,730
Three Months Ended September 30, 2001
- -------------------------------------
Operating revenues $519,851 $42,979 $8,883 $571,713 $30,594 $65,437 $96,031 ($1,479) $666,265
Operating income (loss) 132,753 (6,092) 2,474 129,135 8,741 (4,010) 4,731 (140) 133,726
Net income (loss) 69,514 5,128 (2,511) 2,617 (2,800) 69,331
Nine Months Ended September 30, 2002
- ------------------------------------
Operating revenues $1,330,297 $238,201 $27,138 $1,595,636 $88,138 $334,169 $422,307 ($5,072) $2,012,871
Operating income (loss) 249,507 1,462 6,072 257,041 15,230 5,178 20,408 (485) 276,964
Net income (loss) 116,538 10,508 (65,284) (54,776) (974) 60,788
Nine Months Ended September 30, 2001
- ------------------------------------
Operating revenues $1,367,281 $396,229 $28,297 $1,791,807 $109,725 $233,106 $342,831 ($3,819) $2,130,819
Operating income (loss) 249,036 8,292 4,955 262,283 43,718 (15,527) 28,191 546 291,020
Cumulative effect of a change in
accounting principle, net of tax -- -- (12,868) (12,868) -- (12,868)
Net income (loss) 124,907 29,631 (32,021) (2,390) (6,266) 116,251
4. The provisions for income taxes are based on the estimated annual
effective tax rate, which differs from the federal statutory rate of 35%
principally due to state income taxes, the impact of foreign income and
associated taxes, tax credits, effects of utility rate making and certain
non-deductible expenses.
5. Alliant Energy continues to utilize derivative instruments to manage its
exposures to various market risks as described in Alliant Energy's, IP&L's
and WP&L's Annual Report on Form 10-K for the year ended December 31,
2001. The following information supplements, and should be read in
conjunction with, Note 10(a) in Alliant Energy's "Notes to Consolidated
Financial Statements" in the Form 10-K for the year ended December 31,
2001.
For the nine months ended September 30, 2002, losses of $0.2 million were
recognized in connection with hedge ineffectiveness in accordance with
SFAS 133. At September 30, 2002, the maximum length of time over which
Alliant Energy hedged its exposure to the variability in future cash flows
for forecasted transactions was ten months and Alliant Energy estimates
that losses of $3.7 million will be reclassified from accumulated other
comprehensive loss into earnings within the twelve months between October
1, 2002 and September 30, 2003 as the hedged transactions affect
earnings.
9
6. A reconciliation of the weighted average common shares outstanding used in
the basic and diluted earnings per share calculation for the three and
nine months ended September 30 was as follows:
Three Months Nine Months
------------------------------- -------------------------------
2002 2001 2002 2001
------------- -------------- ------------- -------------
Weighted average common shares outstanding:
Basic earnings per share calculation 91,182,359 79,240,093 90,538,884 79,107,304
Effect of dilutive securities 75,915 109,964 82,901 133,965
Diluted earnings per share calculation 91,258,274 79,350,057 90,621,785 79,241,269
Options to purchase shares of common stock were excluded from the
calculation of diluted earnings per share as the exercise prices were
greater than the average market price for the three and nine months ended
September 30 as follows:
Three Months Nine Months
------------------------------- -------------------------------
2002 2001 2002 2001
------------- -------------- ------------- -------------
Options to purchase shares of common stock 3,852,247 1,921,997 3,171,259 1,368,801
Average exercise price $29.48 $30.82 $29.75 $31.20
7. Alliant Energy adopted SFAS 142, "Goodwill and Other Intangible Assets,"
as of January 1, 2002, which resulted in goodwill no longer being subject
to amortization. At September 30, 2002, Alliant Energy had $73 million
and $171 million of net goodwill and other intangible assets,
respectively, related to various consolidated investments. Such amounts
are included in "Deferred charges and other" on Alliant Energy's
Consolidated Balance Sheets. Alliant Energy also has $8 million of net
goodwill included in "Investments in unconsolidated foreign entities" on
Alliant Energy's Consolidated Balance Sheets related to various equity
method investments. Had SFAS 142 been adopted January 1, 2001, for the
three and nine months ended September 30, 2001, net income would have
increased $0.9 million and $2.8 million, respectively, and basic and
diluted EPS would have increased $0.01 and $0.04 per share, respectively.
8. On January 31, 2002, McLeod filed a pre-negotiated plan of reorganization
in a Chapter 11 bankruptcy proceeding and the trading of McLeod's common
stock was suspended by Nasdaq. Subsequently, Alliant Energy discontinued
accounting for its investment in McLeod under the provisions of SFAS 115
and adjusted its cost basis to the last quoted market price on January 30,
2002. Alliant Energy's cost basis in its available-for-sale securities
was reduced from $28 million at December 31, 2001 to a new cost basis of
$7 million at January 31, 2002. As a result, the cumulative unrealized
pre-tax loss of $21 million (including an unrealized pre-tax loss of $8
million accumulated from January 1, 2002 to January 30, 2002) associated
with its previously classified available-for-sale securities was
reclassified to earnings in the first quarter of 2002. Alliant Energy's
McLeod shares designated as trading securities at December 31, 2001 were
also adjusted in the first quarter of 2002 to a new cost basis of $3
million at January 31, 2002 resulting in a pre-tax charge to earnings in
the first quarter of 2002 of $3 million.
In June 2002, Alliant Energy received from McLeod under its plan of
reorganization an initial distribution of approximately 3.3 million shares
of new common stock of McLeod. Alliant Energy classified 0.9 million and
2.4 million shares of the initial distribution it received as trading and
available-for-sale securities, respectively. With the receipt of the new
McLeod common shares and the resumption of trading on Nasdaq of McLeod's
common stock in the second quarter of 2002, Alliant Energy resumed
accounting for its McLeod investment under SFAS 115 and adjusted its cost
basis to the quoted market price on the date the shares were received.
Alliant Energy's cost basis in the available-for-sale securities was
reduced in the second quarter of 2002 from $7 million at January 31, 2002
to a new cost basis of $1 million. Alliant Energy's McLeod shares
designated as trading securities at January 30, 2002 were initially
adjusted in the second quarter of 2002 to a new cost basis of $1 million.
The pre-tax charges to earnings recorded in the second quarter of 2002
associated with the resumption of SFAS 115 accounting were $6 million and
$2 million for the available-for-sale and trading securities, respectively.
10
9. Alliant Energy has a loan receivable (including accrued interest income)
from a Mexican development company in connection with development of a
resort community in Mexico. In accordance with SFAS 118, "Accounting by
Creditors for Impairment of a Loan - Income Recognition and Disclosures -
an Amendment of FASB Statement No. 114," Alliant Energy recorded a
valuation allowance on this loan in the second quarter of 2002. The
recorded investment in the loan at September 30, 2002 and December 31,
2001 was as follows (in millions):
September 30, 2002 December 31, 2001
------------------------- ----------------------
Gross loan receivable $48 $41
Less: Valuation allowance 7 --
------------------------- ----------------------
Net loan receivable $41 $41
========================= ======================
Subsequent to establishing the valuation allowance, Alliant Energy has
ceased accruing interest income on the loan until the applicable
contractual amounts to be paid on the loan become probable.
10. Alliant Energy has fully and unconditionally guaranteed the payment of
principal and interest on various debt securities issued by Resources and,
as a result, is required to present condensed consolidating financial
statements. No other Alliant Energy subsidiaries are guarantors of
Resources' debt securities. Alliant Energy's condensed consolidating
financial statements are as follows:
11
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Three Months Ended September 30, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
-----------------------------------------------------------------------------
Three Months Ended September 30, 2002 (in thousands)
- -------------------------------------
Operating revenues:
Electric utility $- $- $546,885 $- $546,885
Gas utility - - 44,594 - 44,594
Non-regulated and other - 162,694 91,791 (84,545) 169,940
-----------------------------------------------------------------------------
- 162,694 683,270 (84,545) 761,419
-----------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 92,501 - 92,501
Purchased power - - 124,194 - 124,194
Cost of utility gas sold - - 26,917 - 26,917
Other operation and maintenance 648 123,848 213,680 (82,552) 255,624
Depreciation, depletion and amortization - 21,497 66,634 - 88,131
Taxes other than income taxes - 4,360 26,921 (1,929) 29,352
-----------------------------------------------------------------------------
648 149,705 550,847 (84,481) 616,719
-----------------------------------------------------------------------------
Operating income (loss) (648) 12,989 132,423 (64) 144,700
-----------------------------------------------------------------------------
Interest expense and other:
Interest expense 875 23,645 28,093 (1,616) 50,997
Equity (income) loss from unconsolidated investments (1,490) 19,160 (4,584) - 13,086
Allowance for funds used during construction - - (1,941) - (1,941)
Preferred dividend requirements of subsidiaries - - 1,602 - 1,602
Miscellaneous, net (36,282) 17,277 (3,468) 38,379 15,906
-----------------------------------------------------------------------------
(36,897) 60,082 19,702 36,763 79,650
-----------------------------------------------------------------------------
Income (loss) before income taxes 36,249 (47,093) 112,721 (36,827) 65,050
-----------------------------------------------------------------------------
Income tax expense (benefit) (8,481) (21,199) 50,064 (64) 20,320
-----------------------------------------------------------------------------
Net income (loss) $44,730 ($25,894) $62,657 ($36,763) $44,730
=============================================================================
Three Months Ended September 30, 2001
- -------------------------------------
Operating revenues:
Electric utility $- $- $519,851 $- $519,851
Gas utility - - 42,979 - 42,979
Non-regulated and other - 96,031 82,432 (75,028) 103,435
-----------------------------------------------------------------------------
- 96,031 645,262 (75,028) 666,265
-----------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 94,894 - 94,894
Purchased power - - 108,177 - 108,177
Cost of utility gas sold - - 23,660 - 23,660
Other operation and maintenance 589 71,650 195,369 (72,945) 194,663
Depreciation, depletion and amortization - 16,148 69,354 - 85,502
Taxes other than income taxes - 3,502 24,081 (1,940) 25,643
-----------------------------------------------------------------------------
589 91,300 515,535 (74,885) 532,539
-----------------------------------------------------------------------------
Operating income (loss) (589) 4,731 129,727 (143) 133,726
-----------------------------------------------------------------------------
Interest expense and other:
Interest expense 2,658 16,508 28,607 (1,604) 46,169
Equity income from unconsolidated investments (2,964) (17,038) (2,526) - (22,528)
Allowance for funds used during construction - - (3,373) - (3,373)
Preferred dividend requirements of subsidiaries - - 1,680 - 1,680
Miscellaneous, net (71,032) 12,475 (4,754) 71,829 8,518
-----------------------------------------------------------------------------
(71,338) 11,945 19,634 70,225 30,466
-----------------------------------------------------------------------------
Income (loss) before income taxes 70,749 (7,214) 110,093 (70,368) 103,260
-----------------------------------------------------------------------------
Income tax expense (benefit) 1,418 (7,905) 40,559 (143) 33,929
-----------------------------------------------------------------------------
Net income (loss) $69,331 $691 $69,534 ($70,225) $69,331
=============================================================================
12
Alliant Energy Corporation Condensed Consolidating Statements of Income for the Nine Months Ended September 30, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
Nine Months Ended September 30, 2002 (in thousands)
- ------------------------------------
Operating revenues:
Electric utility $- $- $1,330,297 $- $1,330,297
Gas utility - - 238,201 - 238,201
Non-regulated and other - 422,307 251,700 (229,634) 444,373
---------------------------------------------------------------------
- 422,307 1,820,198 (229,634) 2,012,871
---------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 230,259 - 230,259
Purchased power - - 287,212 - 287,212
Cost of utility gas sold - - 149,392 - 149,392
Other operation and maintenance 1,579 331,097 613,575 (224,189) 722,062
Depreciation, depletion and amortization - 58,817 201,623 - 260,440
Taxes other than income taxes - 11,985 79,886 (5,329) 86,542
---------------------------------------------------------------------
1,579 401,899 1,561,947 (229,518) 1,735,907
---------------------------------------------------------------------
Operating income (loss) (1,579) 20,408 258,251 (116) 276,964
---------------------------------------------------------------------
Interest expense and other:
Interest expense 2,606 67,459 83,424 (4,663) 148,826
Equity (income) loss from unconsolidated investments (941) 9,797 (12,555) - (3,699)
Allowance for funds used during construction - - (5,291) - (5,291)
Preferred dividend requirements of subsidiaries - - 4,966 - 4,966
Impairment of available-for-sale securities of McLeodUSA Inc. - 27,218 - - 27,218
Miscellaneous, net (63,831) 25,537 (12,101) 66,875 16,480
---------------------------------------------------------------------
(62,166) 130,011 58,443 62,212 188,500
---------------------------------------------------------------------
Income (loss) before income taxes 60,587 (109,603) 199,808 (62,328) 88,464
---------------------------------------------------------------------
Income tax expense (benefit) (201) (55,218) 83,211 (116) 27,676
---------------------------------------------------------------------
Net income (loss) $60,788 ($54,385) $116,597 ($62,212) $60,788
=====================================================================
Nine Months Ended September 30, 2001
- ------------------------------------
Operating revenues:
Electric utility $- $- $1,367,281 $- $1,367,281
Gas utility - - 396,229 - 396,229
Non-regulated and other - 342,831 220,959 (196,481) 367,309
---------------------------------------------------------------------
- 342,831 1,984,469 (196,481) 2,130,819
---------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels - - 248,040 - 248,040
Purchased power - - 318,024 - 318,024
Cost of utility gas sold - - 303,984 - 303,984
Other operation and maintenance 893 254,233 564,541 (189,822) 629,845
Depreciation, depletion and amortization - 48,266 208,012 - 256,278
Taxes other than income taxes - 12,141 77,963 (6,476) 83,628
---------------------------------------------------------------------
893 314,640 1,720,564 (196,298) 1,839,799
---------------------------------------------------------------------
Operating income (loss) (893) 28,191 263,905 (183) 291,020
---------------------------------------------------------------------
Interest expense and other:
Interest expense 10,513 51,822 89,903 (8,738) 143,500
Equity income from unconsolidated investments (8,058) (27,305) (11,018) - (46,381)
Allowance for funds used during construction - - (8,845) - (8,845)
Preferred dividend requirements of subsidiaries - - 5,040 - 5,040
Miscellaneous, net (121,430) 12,764 (14,010) 126,088 3,412
---------------------------------------------------------------------
(118,975) 37,281 61,070 117,350 96,726
---------------------------------------------------------------------
Income (loss) before income taxes 118,082 (9,090) 202,835 (117,533) 194,294
---------------------------------------------------------------------
Income tax expense (benefit) 1,831 (14,331) 77,858 (183) 65,175
---------------------------------------------------------------------
Income (loss) before cumulative effect of a change in
accounting principle, net of tax 116,251 5,241 124,977 (117,350) 129,119
---------------------------------------------------------------------
Cumulative effect of a change in accounting principle,
net of tax - (12,868) - - (12,868)
---------------------------------------------------------------------
Net income (loss) $116,251 ($7,627) $124,977 ($117,350) $116,251
=====================================================================
13
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of September 30, 2002
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
ASSETS Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------------
Property, plant and equipment: (in thousands)
Utility:
Electric plant in service $- $- $5,306,832 $- $5,306,832
Other plant in service - - 1,159,813 - 1,159,813
Accumulated depreciation - - (3,558,804) - (3,558,804)
Construction work in progress - - 156,238 - 156,238
Nuclear fuel, net of amortization - - 51,419 - 51,419
Other, net - - 9,348 - 9,348
-------------------------------------------------------------------------
Total utility - - 3,124,846 - 3,124,846
-------------------------------------------------------------------------
Non-regulated and other, net:
Whiting - 409,791 - - 409,791
International - 234,750 - - 234,750
Non-regulated generation - 137,151 - - 137,151
Other - 282,931 72,383 (111) 355,203
-------------------------------------------------------------------------
Total non-regulated and other - 1,064,623 72,383 (111) 1,136,895
-------------------------------------------------------------------------
- 1,064,623 3,197,229 (111) 4,261,741
-------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 6,002 83,268 6,412 - 95,682
Other 152,077 299,799 368,351 (206,034) 614,193
-------------------------------------------------------------------------
158,079 383,067 374,763 (206,034) 709,875
-------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,705,025 - - (1,705,025) -
Investments in unconsolidated foreign entities - 338,606 - - 338,606
Other 11,270 63,185 482,608 (10) 557,053
-------------------------------------------------------------------------
1,716,295 401,791 482,608 (1,705,035) 895,659
-------------------------------------------------------------------------
Other assets:
Regulatory assets - - 333,656 - 333,656
Deferred charges and other 1,377 307,038 278,200 (27,320) 559,295
-------------------------------------------------------------------------
1,377 307,038 611,856 (27,320) 892,951
-------------------------------------------------------------------------
Total assets $1,875,751 $2,156,519 $4,666,456 ($1,938,500) $6,760,226
=========================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $1,285,863 $232,743 $856,760 ($1,089,503) $1,285,863
Retained earnings 757,825 121,059 761,294 (882,353) 757,825
Accumulated other comprehensive loss (266,716) (249,958) (16,758) 266,716 (266,716)
Shares in deferred compensation trust (6,703) - - - (6,703)
-------------------------------------------------------------------------
Total common equity 1,770,269 103,844 1,601,296 (1,705,140) 1,770,269
-------------------------------------------------------------------------
Cumulative preferred stock of subsidiary, net - - 59,963 - 59,963
Long-term debt (excluding current portion) 24,000 1,262,223 1,325,814 - 2,612,037
-------------------------------------------------------------------------
1,794,269 1,366,067 2,987,073 (1,705,140) 4,442,269
-------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 58,501 2,680 - 61,181
Commercial paper 76,750 140,695 81,500 - 298,945
Other short-term borrowings - 125,147 141,785 (141,785) 125,147
Accrued interest 2,787 23,091 21,699 - 47,577
Accrued taxes - 19,167 139,298 - 158,465
Other 1,086 133,560 379,726 (64,250) 450,122
-------------------------------------------------------------------------
80,623 500,161 766,688 (206,035) 1,141,437
-------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (5,785) 194,876 499,235 - 688,326
Other 6,644 53,180 413,460 (27,325) 445,959
-------------------------------------------------------------------------
859 248,056 912,695 (27,325) 1,134,285
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Minority interest - 42,235 - - 42,235
-------------------------------------------------------------------------
Total capitalization and liabilities $1,875,751 $2,156,519 $4,666,456 ($1,938,500) $6,760,226
=========================================================================
14
Alliant Energy Corporation Condensed Consolidating Balance Sheet as of December 31, 2001
Alliant Energy Other Consolidated
Parent Alliant Energy Consolidating Alliant
ASSETS Company Resources Subsidiaries Adjustments Energy
-------------------------------------------------------------------------
Property, plant and equipment: (in thousands)
Utility:
Electric plant in service $- $- $5,123,781 $- $5,123,781
Other plant in service - - 1,115,432 - 1,115,432
Accumulated depreciation - - (3,374,867) - (3,374,867)
Construction work in progress - - 111,069 - 111,069
Nuclear fuel, net of amortization - - 54,811 - 54,811
Other, net - - 7,383 - 7,383
-------------------------------------------------------------------------
Total utility - - 3,037,609 - 3,037,609
-------------------------------------------------------------------------
Non-regulated and other, net:
Whiting - 283,031 - - 283,031
International - 157,766 - - 157,766
Non-regulated generation - 60,411 - - 60,411
Other - 275,077 49,014 (111) 323,980
-------------------------------------------------------------------------
Total non-regulated and other - 776,285 49,014 (111) 825,188
-------------------------------------------------------------------------
- 776,285 3,086,623 (111) 3,862,797
-------------------------------------------------------------------------
Current assets:
Income tax refunds receivable 7,552 15,511 6,411 - 29,474
Other 184,623 272,152 399,723 (259,130) 597,368
-------------------------------------------------------------------------
192,175 287,663 406,134 (259,130) 626,842
-------------------------------------------------------------------------
Investments:
Consolidated subsidiaries 1,793,737 - - (1,793,737) -
Investments in unconsolidated foreign entities - 572,555 - - 572,555
Other 32,814 71,237 477,929 (14) 581,966
-------------------------------------------------------------------------
1,826,551 643,792 477,929 (1,793,751) 1,154,521
-------------------------------------------------------------------------
Other assets:
Regulatory assets - - 241,973 - 241,973
Deferred charges and other - 124,737 236,812 - 361,549
-------------------------------------------------------------------------
- 124,737 478,785 - 603,522
-------------------------------------------------------------------------
Total assets $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682
=========================================================================
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock and additional paid-in capital $1,240,690 $232,743 $789,002 ($1,021,745) $1,240,690
Retained earnings 832,293 175,443 749,102 (924,545) 832,293
Accumulated other comprehensive loss (152,434) (140,137) (12,297) 152,434 (152,434)
Shares in deferred compensation trust (2,208) - - - (2,208)
-------------------------------------------------------------------------
Total common equity 1,918,341 268,049 1,525,807 (1,793,856) 1,918,341
-------------------------------------------------------------------------
Cumulative preferred stock of subsidiaries, net - - 113,953 - 113,953
Long-term debt (excluding current portion) 24,000 1,105,792 1,328,149 - 2,457,941
-------------------------------------------------------------------------
1,942,341 1,373,841 2,967,909 (1,793,856) 4,490,235
-------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds - 9,946 560 - 10,506
Commercial paper 68,389 - - - 68,389
Other short-term borrowings - 84,318 - - 84,318
Accrued interest 2,100 10,022 23,591 - 35,713
Accrued taxes - 13,026 77,387 - 90,413
Other 2,374 99,797 607,357 (259,130) 450,398
-------------------------------------------------------------------------
72,863 217,109 708,895 (259,130) 739,737
-------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income tax expense (benefit) (4,033) 177,116 459,389 - 632,472
Other 7,555 21,033 313,278 (6) 341,860
-------------------------------------------------------------------------
3,522 198,149 772,667 (6) 974,332
-------------------------------------------------------------------------
-------------------------------------------------------------------------
Minority interest - 43,378 - - 43,378
-------------------------------------------------------------------------
Total capitalization and liabilities $2,018,726 $1,832,477 $4,449,471 ($2,052,992) $6,247,682
=========================================================================
15
Alliant Energy Corporation Condensed Consolidating Statements of Cash Flows for the Nine Months Ended September 30, 2002 and 2001
Alliant Energy Other Alliant Consolidated
Parent Energy Consolidating Alliant
Company Resources Subsidiaries Adjustments Energy
---------------------------------------------------------------------
Nine Months Ended September 30, 2002 (in thousands)
- ------------------------------------
Net cash flows from operating activities $62,040 $27,225 $387,116 ($65,240) $411,141
---------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (135,256) - (104,404) 104,404 (135,256)
Proceeds from issuance of common stock 45,410 - - - 45,410
Redemption of preferred stock of subsidiary - - (56,389) - (56,389)
Net change in Resources' credit facility - 207,085 - - 207,085
Net change in other short-term borrowings 35,335 86,876 54,526 - 176,737
Other (213) 7,122 52,750 (67,053) (7,394)
---------------------------------------------------------------------
Net cash flows from (used for) financing activities (54,724) 301,083 (53,517) 37,351 230,193
---------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Non-regulated businesses - (359,821) - - (359,821)
Regulated domestic utilities - - (276,692) - (276,692)
Corporate Services and other - - (26,871) - (26,871)
Other (10,482) 22,470 (20,579) 29,828 21,237
---------------------------------------------------------------------
Net cash flows used for investing activities (10,482) (337,351) (324,142) 29,828 (642,147)
---------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments (3,166) (9,043) 9,457 1,939 (813)
---------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 6,381 66,012 16,164 (1,939) 86,618
---------------------------------------------------------------------
Cash and temporary cash investments at end of period $3,215 $56,969 $25,621 $- $85,805
=====================================================================
Supplemental cash flows information:
Cash paid during the period for:
Interest $1,920 $54,213 $78,507 $- $134,640
=====================================================================
Income taxes, net of refunds $- $125 $4,451 $- $4,576
=====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred $- $- $11,635 $- $11,635
=====================================================================
Nine Months Ended September 30, 2001
- ------------------------------------
Net cash flows from operating activities $56,850 $107,219 $437,602 ($125,109) $476,562
---------------------------------------------------------------------
Cash flows from (used for) financing activities:
Common stock dividends (118,503) - (105,595) 105,595 (118,503)
Proceeds from issuance of common stock 11,403 - - - 11,403
Net change in Resources' credit facility - 248,500 - - 248,500
Net change in other short-term borrowings (92,465) (44,248) - - (136,713)
Other 163,424 (45,550) (103,864) 4,931 18,941
---------------------------------------------------------------------
Net cash flows from (used for) financing activities (36,141) 158,702 (209,459) 110,526 23,628
---------------------------------------------------------------------
Cash flows used for investing activities:
Construction and acquisition expenditures:
Non-regulated businesses - (376,067) - - (376,067)
Regulated domestic utilities - - (230,127) - (230,127)
Corporate Services and other - - (24,140) - (24,140)
Other (14,615) 38,095 36,208 14,583 74,271
---------------------------------------------------------------------
Net cash flows used for investing activities (14,615) (337,972) (218,059) 14,583 (556,063)
---------------------------------------------------------------------
Net increase (decrease) in cash and temporary cash investments 6,094 (72,051) 10,084 - (55,873)
---------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 574 133,957 13,884 - 148,415
---------------------------------------------------------------------
Cash and temporary cash investments at end of period $6,668 $61,906 $23,968 $- $92,542
=====================================================================
Supplemental cash flows information:
Cash paid (refunded) during the period for:
Interest $10,270 $46,987 $85,643 $- $142,900
=====================================================================
Income taxes, net of refunds $1,702 ($10,131) $65,102 $- $56,673
=====================================================================
Noncash investing and financing activities:
Capital lease obligations incurred and other $- $- $19,759 $- $19,759
=====================================================================
16
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
- -----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $322,422 $312,389 $747,691 $791,131
Gas utility 21,494 23,628 128,748 226,641
Steam 7,631 7,445 23,181 24,478
--------------- --------------- --------------- ---------------
351,547 343,462 899,620 1,042,250
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric and steam production fuels 52,104 60,285 127,806 150,164
Purchased power 54,950 46,112 120,171 152,793
Cost of gas sold 11,698 13,467 80,268 171,714
Other operation and maintenance 83,353 79,605 244,046 244,524
Depreciation and amortization 36,751 36,802 109,303 110,614
Taxes other than income taxes 16,138 14,282 49,157 46,768
--------------- --------------- --------------- ---------------
254,994 250,553 730,751 876,577
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Operating income 96,553 92,909 168,869 165,673
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 17,127 16,732 50,119 51,312
Allowance for funds used during construction (1,249) (1,959) (3,666) (4,991)
Miscellaneous, net (3,169) (1,255) (6,868) (6,007)
--------------- --------------- --------------- ---------------
12,709 13,518 39,585 40,314
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Income before income taxes 83,844 79,391 129,284 125,359
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Income taxes 38,810 28,085 55,574 46,212
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Net income 45,034 51,306 73,710 79,147
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 775 853 2,483 2,557
--------------- --------------- --------------- ---------------
- -----------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $44,259 $50,453 $71,227 $76,590
=============== =============== =============== ===============
- -----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
17
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
ASSETS 2002 2001
- ------------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $3,449,532 $3,344,188
Gas plant in service 325,427 316,613
Steam plant in service 59,746 59,452
Other plant in service 197,099 182,868
Accumulated depreciation (2,150,054) (2,046,756)
------------------ -----------------
Net plant 1,881,750 1,856,365
Construction work in progress 108,193 73,241
Leased nuclear fuel, net of amortization 38,230 37,407
Other, net 8,556 6,703
------------------ -----------------
2,036,729 1,973,716
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Current assets:
Cash 16,132 8,962
Accounts receivable:
Customer, less allowance for doubtful accounts
of $1,797 and $1,564, respectively 29,982 19,950
Associated companies 2,333 4,718
Other, less allowance for doubtful accounts
of $332 and $319, respectively 20,936 25,497
Production fuel, at average cost 41,224 32,083
Materials and supplies, at average cost 29,358 29,121
Gas stored underground, at average cost 21,560 18,447
Regulatory assets 12,239 12,495
Prepayments and other 13,063 11,472
------------------ -----------------
186,827 162,745
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 117,511 117,159
Other 15,027 15,157
------------------ -----------------
132,538 132,316
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 215,808 132,109
Deferred charges and other 29,709 31,103
------------------ -----------------
245,517 163,212
------------------ -----------------
- ------------------------------------------------------------------------------------------------------------------
Total assets $2,601,611 $2,431,989
================== =================
- ------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
18
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
September 30, December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- --------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $2.50 par value - authorized 24,000,000
shares; 13,370,788 shares outstanding $33,427 $33,427
Additional paid-in capital 478,199 422,461
Retained earnings 379,175 368,203
Accumulated other comprehensive loss (2,131) (2,131)
------------------ -----------------
Total common equity 888,670 821,960
------------------ -----------------
Cumulative preferred stock, not mandatorily redeemable - 29,139
Cumulative preferred stock, mandatorily redeemable - 24,850
Long-term debt (excluding current portion) 857,637 860,068
------------------ -----------------
1,746,307 1,736,017
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Current liabilities:
Current maturities and sinking funds 2,680 560
Capital lease obligations 13,286 15,292
Notes payable to associated companies 51,121 38,047
Accounts payable 40,920 55,249
Accounts payable to associated companies 33,135 38,255
Accrued interest 13,675 14,715
Accrued taxes 104,951 70,747
Other 34,662 36,424
------------------ -----------------
294,430 269,289
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 316,649 268,010
Accumulated deferred investment tax credits 32,049 34,491
Pension and other benefit obligations 46,470 40,573
Environmental liabilities 43,365 38,206
Capital lease obligations 24,991 22,171
Other 97,350 23,232
------------------ -----------------
560,874 426,683
------------------ -----------------
- --------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $2,601,611 $2,431,989
================== =================
- --------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
19
INTERSTATE POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2002 2001
- ---------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $73,710 $79,147
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 109,303 110,614
Amortization of leased nuclear fuel 10,812 9,186
Amortization of deferred energy efficiency expenditures 2,977 16,109
Deferred tax benefits and investment tax credits (5,367) (10,698)
Refueling outage provision 6,165 (5,819)
Other 800 195
Other changes in assets and liabilities:
Accounts receivable (3,086) 109,809
Accounts payable (15,418) (42,482)
Accrued taxes 34,204 26,824
Adjustment clause balances (6,264) 23,882
Manufactured gas plants insurance refunds - (21,541)
Other changes in working capital 36,610 (5,921)
------------------ ------------------
Net cash flows from operating activities 244,446 289,305
------------------ ------------------
- ---------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (60,255) (60,256)
Preferred stock dividends (2,483) (2,557)
Capital contribution from parent 60,000 -
Redemption of preferred stock (56,389) -
Proceeds from issuance of long-term debt - 200,000
Reductions in long-term debt (560) (89,110)
Net change in short-term borrowings 13,074 (169,313)
Principal payments under capital lease obligations (11,053) (6,198)
Other (2,690) 9,594
------------------ ------------------
Net cash flows used for financing activities (60,356) (117,840)
------------------ ------------------
- ---------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (167,142) (128,092)
Nuclear decommissioning trust funds (4,506) (4,506)
Other (5,272) (5,503)
------------------ ------------------
Net cash flows used for investing activities (176,920) (138,101)
------------------ ------------------
- ---------------------------------------------------------------------------------------------------------
Net increase in cash and temporary cash investments 7,170 33,364
------------------ ------------------
- ---------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at beginning of period 8,962 9,626
------------------ ------------------
- ---------------------------------------------------------------------------------------------------------
Cash and temporary cash investments at end of period $16,132 $42,990
================== ==================
- ---------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $48,196 $51,015
================== ==================
Income taxes, net of refunds $ - $30,585
================== ==================
Noncash investing and financing activities:
Capital lease obligations incurred and other $11,635 $19,759
================== ==================
- ---------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
20
INTERSTATE POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to IP&L.
1. The interim consolidated financial statements included herein have been
prepared by IP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP
have been condensed or omitted, although management believes that the
disclosures are adequate to make the information presented not
misleading. The merger of IPC with and into IESU was effective January 1,
2002 and IESU changed its name to IP&L. These statements are prepared on
the basis of accounting as a common control merger and reflect the
combination of IESU and IPC, both direct subsidiaries of Alliant Energy.
IP&L is a direct subsidiary of Alliant Energy. These financial statements
should be read in conjunction with IP&L's pro forma combined financial
statements and notes thereto included in IP&L's Current Report on Form 8-K
dated January 1, 2002, as amended by IP&L's Current Report on Form 8-K/A.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2002 and 2001, (b) the consolidated financial position at
September 30, 2002 and December 31, 2001, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2002 and
2001, have been made. Because of the seasonal nature of IP&L's
operations, results for the three and nine months ended September 30, 2002
are not necessarily indicative of results that may be expected for the
year ending December 31, 2002.
2. IP&L's comprehensive income, and the components of other comprehensive
income, net of taxes, for the three and nine months ended September 30
were as follows (in thousands):
Three Months Nine Months
----------------------------- -----------------------------
2002 2001 2002 2001
-------------- ------------- ------------- -------------
Earnings available for common stock $44,259 $50,453 $71,227 $76,590
Other comprehensive income:
Reclassification adjustment for losses included
in earnings available for common stock related
to derivatives qualified as hedges, net of tax -- -- -- 18
-------------- ------------- ------------- -------------
Other comprehensive income -- -- -- 18
-------------- ------------- ------------- -------------
Comprehensive income $44,259 $50,453 $71,227 $76,608
============== ============= ============= =============
21
3. Certain financial information relating to IP&L's significant business
segments is presented below. Intersegment revenues were not material to
IP&L's operations.
Electric Gas Other Total
-------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2002
-------------------------------------
Operating revenues $322,422 $21,494 $7,631 $351,547
Operating income (loss) 99,795 (4,796) 1,554 96,553
Earnings available for common stock 44,259
Three Months Ended September 30, 2001
-------------------------------------
Operating revenues $312,389 $23,628 $7,445 $343,462
Operating income (loss) 93,953 (3,000) 1,956 92,909
Earnings available for common stock 50,453
Nine Months Ended September 30, 2002
------------------------------------
Operating revenues $747,691 $128,748 $23,181 $899,620
Operating income 161,190 2,729 4,950 168,869
Earnings available for common stock 71,227
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $791,131 $226,641 $24,478 $1,042,250
Operating income 153,400 8,389 3,884 165,673
Earnings available for common stock 76,590
22
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF INCOME (UNAUDITED)
For the Three Months For the Nine Months
Ended September 30, Ended September 30,
2002 2001 2002 2001
- ------------------------------------------------------------------------------------------------------------------------------
(in thousands)
Operating revenues:
Electric utility $224,463 $207,462 $582,606 $576,150
Gas utility 23,100 19,351 109,453 169,588
Water 1,439 1,437 3,957 3,818
--------------- --------------- --------------- ---------------
249,002 228,250 696,016 749,556
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Operating expenses:
Electric production fuels 40,397 34,609 102,453 97,876
Purchased power 69,244 62,065 167,041 165,231
Cost of gas sold 15,219 10,193 69,124 132,270
Other operation and maintenance 49,968 44,745 151,507 135,452
Depreciation and amortization 29,882 32,552 92,320 97,398
Taxes other than income taxes 8,853 7,860 25,399 24,719
--------------- --------------- --------------- ---------------
213,563 192,024 607,844 652,946
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Operating income 35,439 36,226 88,172 96,610
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Interest expense and other:
Interest expense 9,881 11,013 30,029 33,539
Equity income from unconsolidated investments (4,514) (2,472) (12,387) (10,819)
Allowance for funds used during construction (692) (1,414) (1,625) (3,854)
Miscellaneous, net 423 (3,087) (3,051) (4,391)
--------------- --------------- --------------- ---------------
5,098 4,040 12,966 14,475
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Income before income taxes 30,341 32,186 75,206 82,135
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Income taxes 11,191 12,332 27,522 31,464
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Net income 19,150 19,854 47,684 50,671
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Preferred dividend requirements 827 827 2,483 2,483
--------------- --------------- --------------- ---------------
- ------------------------------------------------------------------------------------------------------------------------------
Earnings available for common stock $18,323 $19,027 $45,201 $48,188
=============== =============== =============== ===============
- ------------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
23
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED)
September 30, December 31,
ASSETS 2002 2001
- ---------------------------------------------------------------------------------------------------------------
(in thousands)
Property, plant and equipment:
Electric plant in service $1,857,300 $1,779,593
Gas plant in service 291,871 280,881
Water plant in service 33,362 32,497
Other plant in service 252,309 243,121
Accumulated depreciation (1,408,750) (1,328,111)
----------------- ------------------
Net plant 1,026,092 1,007,981
Construction work in progress 48,045 37,828
Nuclear fuel, net of amortization 13,189 17,404
Other, net 791 681
----------------- ------------------
1,088,117 1,063,894
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Current assets:
Cash 5,221 4,389
Accounts receivable:
Customer, less allowance for doubtful accounts
of $1,625 and $1,543, respectively - 33,190
Associated companies 696 3,676
Other, less allowance for doubtful accounts
of $162 and $-, respectively 23,781 16,571
Production fuel, at average cost 17,123 17,314
Materials and supplies, at average cost 20,315 20,669
Gas stored underground, at average cost 20,490 22,187
Prepaid gross receipts tax 20,112 25,673
Other 9,731 13,018
----------------- ------------------
117,469 156,687
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Investments:
Nuclear decommissioning trust funds 216,923 215,794
Investment in ATC and other 130,074 127,941
----------------- ------------------
346,997 343,735
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Other assets:
Regulatory assets 117,848 109,864
Deferred charges and other 227,072 205,702
----------------- ------------------
344,920 315,566
----------------- ------------------
- ---------------------------------------------------------------------------------------------------------------
Total assets $1,897,503 $1,879,882
================= ==================
- ---------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
24
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED BALANCE SHEETS (UNAUDITED) (Continued)
September 30, December 31,
CAPITALIZATION AND LIABILITIES 2002 2001
- ---------------------------------------------------------------------------------------------------------------------
(in thousands, except share amounts)
Capitalization:
Common stock - $5 par value - authorized 18,000,000 shares;
13,236,601 shares outstanding $66,183 $66,183
Additional paid-in capital 275,603 264,603
Retained earnings 382,384 381,333
Accumulated other comprehensive loss (14,627) (10,167)
------------------ -----------------
Total common equity 709,543 701,952
------------------ -----------------
Cumulative preferred stock 59,963 59,963
Long-term debt (excluding current portion) 468,176 468,083
------------------ -----------------
1,237,682 1,229,998
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Current liabilities:
Variable rate demand bonds 55,100 55,100
Commercial paper 81,500 -
Notes payable to associated companies - 90,816
Accounts payable 71,644 98,173
Accounts payable to associated companies 26,626 36,678
Accrued taxes 27,083 2,057
Other 54,857 33,162
------------------ -----------------
316,810 315,986
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Other long-term liabilities and deferred credits:
Accumulated deferred income taxes 199,717 206,245
Accumulated deferred investment tax credits 23,657 24,907
Customer advances 34,591 34,178
Pension and other benefit obligations 18,433 18,175
Other 66,613 50,393
------------------ -----------------
343,011 333,898
------------------ -----------------
- ---------------------------------------------------------------------------------------------------------------------
Total capitalization and liabilities $1,897,503 $1,879,882
================== =================
- ---------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
25
WISCONSIN POWER AND LIGHT COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED)
For the Nine Months Ended September 30,
2002 2001
- ----------------------------------------------------------------------------------------------------------------------------
(in thousands)
Cash flows from operating activities:
Net income $47,684 $50,671
Adjustments to reconcile net income to net cash
flows from operating activities:
Depreciation and amortization 92,320 97,398
Amortization of nuclear fuel 4,680 4,158
Amortization of deferred energy efficiency expenditures 11,745 10,771
Deferred tax benefits and investment tax credits (2,215) (9,235)
Equity income from unconsolidated investments, net (12,387) (10,819)
Distributions from equity method investments 10,481 5,670
Other (5,891) (9,583)
Other changes in assets and liabilities:
Accounts receivable 28,960 44,523
Gas stored underground 1,697 (9,974)
Accounts payable (34,446) (34,445)
Accrued taxes 25,026 6,072
Other changes in working capital 951 (3,457)
-------------------- --------------------
Net cash flows from operating activities 168,605 141,750
-------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows used for financing activities:
Common stock dividends (44,150) (45,340)
Preferred stock dividends (2,483) (2,483)
Capital contribution from parent 11,000 -
Reductions in long-term debt - (47,000)
Net change in short-term borrowings (9,316) 17,813
Other - (2,725)
-------------------- --------------------
Net cash flows used for financing activities (44,949) (79,735)
-------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash flows used for investing activities:
Utility construction expenditures (109,550) (102,035)
Nuclear decommissioning trust funds (15,373) (15,373)
Proceeds from formation of ATC - 74,643
Other 2,099 (13,111)
-------------------- --------------------
Net cash flows used for investing activities (122,824) (55,876)
-------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------
Net increase in cash 832 6,139
-------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash at beginning of period 4,389 2,584
-------------------- --------------------
- ----------------------------------------------------------------------------------------------------------------------------
Cash at end of period $5,221 $8,723
==================== ====================
- ----------------------------------------------------------------------------------------------------------------------------
Supplemental cash flows information:
Cash paid during the period for:
Interest $30,312 $34,627
==================== ====================
Income taxes, net of refunds $4,396 $32,792
==================== ====================
- ----------------------------------------------------------------------------------------------------------------------------
The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
26
WISCONSIN POWER AND LIGHT COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED)
Except as modified below, the Alliant Energy Notes to Consolidated
Financial Statements are incorporated by reference insofar as they relate
to WP&L.
1. The interim consolidated financial statements included herein have been
prepared by WP&L, without audit, pursuant to the rules and regulations of
the SEC. Accordingly, certain information and footnote disclosures
normally included in financial statements prepared in accordance with GAAP
have been condensed or omitted, although management believes that the
disclosures are adequate to make the information presented not
misleading. The consolidated financial statements include WP&L and its
consolidated subsidiaries. WP&L is a direct subsidiary of Alliant
Energy. These financial statements should be read in conjunction with the
financial statements and the notes thereto included in WP&L's latest
Annual Report on Form 10-K.
In the opinion of management, all adjustments, which are normal and
recurring in nature, necessary for a fair presentation of (a) the
consolidated results of operations for the three and nine months ended
September 30, 2002 and 2001, (b) the consolidated financial position at
September 30, 2002 and December 31, 2001, and (c) the consolidated
statement of cash flows for the nine months ended September 30, 2002 and
2001, have been made. Because of the seasonal nature of WP&L's
operations, results for the three and nine months ended September 30, 2002
are not necessarily indicative of results that may be expected for the
year ending December 31, 2002.
2. WP&L's comprehensive income, and the components of other comprehensive
income (loss), net of taxes, for the three and nine months ended September
30 were as follows (in thousands):
Three Months Nine Months
----------------------------- ----------------------------
2002 2001 2002 2001
------------- ------------- ------------- -------------
Earnings available for common stock $18,323 $19,027 $45,201 $48,188
Other comprehensive income (loss):
Unrealized gains (losses) on derivatives qualified as
hedges:
Unrealized holding gains (losses) arising during
period, net of tax 126 3,756 (173) 5,557
Less: reclassification adjustment for gains
(losses) included in earnings available
for common stock, net of tax -- (456) 4,287 (4,222)
------------- ------------- ------------- -------------
Net unrealized gains (losses) on qualifying derivatives 126 4,212 (4,460) 9,779
------------- ------------- ------------- -------------
Other comprehensive income (loss) 126 4,212 (4,460) 9,779
------------- ------------- ------------- -------------
Comprehensive income $18,449 $23,239 $40,741 $57,967
============= ============= ============= =============
27
3. Certain financial information relating to WP&L's significant business
segments is presented below. Intersegment revenues were not material to
WP&L's operations.
Electric Gas Other Total
--------------------------------------------------------
(in thousands)
Three Months Ended September 30, 2002
-------------------------------------
Operating revenues $224,463 $23,100 $1,439 $249,002
Operating income (loss) 41,364 (6,387) 462 35,439
Earnings available for common stock 18,323
Three Months Ended September 30, 2001
-------------------------------------
Operating revenues $207,462 $19,351 $1,437 $228,250
Operating income (loss) 38,800 (3,092) 518 36,226
Earnings available for common stock 19,027
Nine Months Ended September 30, 2002
------------------------------------
Operating revenues $582,606 $109,453 $3,957 $696,016
Operating income (loss) 88,317 (1,267) 1,122 88,172
Earnings available for common stock 45,201
Nine Months Ended September 30, 2001
------------------------------------
Operating revenues $576,150 $169,588 $3,818 $749,556
Operating income (loss) 95,636 (97) 1,071 96,610
Earnings available for common stock 48,188
28
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
The primary first tier subsidiaries of Alliant Energy include: IP&L, WP&L,
Resources and Corporate Services. Among various other regulatory
constraints, Alliant Energy is operating as a registered public utility
holding company subject to the limitations imposed by PUHCA. This MD&A
includes information relating to Alliant Energy, IP&L and WP&L (as well as
Resources and Corporate Services). Where appropriate, information relating
to a specific entity has been segregated and labeled as such. The following
discussion and analysis should be read in conjunction with the Consolidated
Financial Statements and Notes to Consolidated Financial Statements included
in this report as well as the financial statements, notes and MD&A included
in Alliant Energy's, IP&L's and WP&L's latest Annual Report on Form 10-K.
FORWARD-LOOKING STATEMENTS
Statements contained in this report (including MD&A) that are not of
historical fact are forward-looking statements intended to qualify for the
safe harbors from liability established by the Private Securities Litigation
Reform Act of 1995. Such forward-looking statements are subject to risks and
uncertainties that could cause actual results to differ materially from those
expressed in, or implied by, such statements. Some, but not all, of the
risks and uncertainties include: factors listed in "Other Matters - Other
Future Considerations" and in "Future Earnings Outlook;" weather effects on
sales and revenues; general economic and political conditions in Alliant
Energy's domestic service territories; federal, state and international
regulatory or governmental actions, including issues associated with the
deregulation of the domestic utility industry, the ability to obtain adequate
and timely rate relief and the payment of dividends; unanticipated
construction and acquisition expenditures; issues related to stranded costs
and the recovery thereof; unanticipated issues related to the supply of
purchased electricity and price thereof; unexpected issues related to the
operations of Alliant Energy's nuclear facilities; unanticipated costs
associated with certain environmental remediation efforts being undertaken by
Alliant Energy and with environmental compliance generally; unanticipated
developments that adversely impact Alliant Energy's ability to implement its
strategic plan, especially as it relates to international investments;
Alliant Energy's ability to identify and successfully complete proposed asset
divestitures, acquisitions and development projects; improved results from
Alliant Energy's Brazil investments and no material adverse changes in the
rates allowed by the Brazilian regulators; unanticipated shifts in earnings
at Whiting; enhanced performance by Alliant Energy's other non-regulated
businesses as a whole; no material permanent declines in the fair market
value of, or expected cash flows from, Alliant Energy's investments;
continued access to the capital markets to execute Alliant Energy's strategic
plan; access to technological developments; employee workforce factors,
including changes in key executives, collective bargaining agreements or work
stoppages; political, legal, economic and exchange rate conditions in foreign
countries Alliant Energy has investments in; and changes in the rate of
inflation. Alliant Energy assumes no obligation, and disclaims any duty, to
update the forward-looking statements in this report.
UTILITY INDUSTRY REVIEW
A summary of the regulatory environment is included in the Form 10-K filed by
Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Set
forth below are several recent developments relating to the regulatory
environment.
Overview - In September 2001, IP&L and five other electric utility companies
- --------
filed an application with FERC to create TRANSLink, a for-profit,
transmission-only company. In April 2002, FERC conditionally approved the
formation of TRANSLink and TRANSLink's participation in the Midwest ISO. In
June 2002, TRANSLink Development Co. LLC was formed to oversee the start-up
activities for TRANSLink. Current plans call for IP&L to contribute
transmission assets of 69 KV and greater, which have an estimated net book
value of approximately $244 million, to TRANSLink in exchange for a yet to be
determined combination of a corresponding ownership interest in TRANSLink and
cash. IP&L will be filing for the necessary state approvals in the fourth
quarter of 2002. TRANSLink is currently expected to be operational in the
third quarter of 2003 and will be the transmission network provider to
approximately 6.9 million customers in 14 states.
29
In July 2002, FERC issued a notice of proposed rules intended to standardize
the wholesale electric market, which has generated significant industry
discussion. Alliant Energy believes that standardization of the wholesale
electric market is necessary, it will benefit market participants and there
may be significant changes to the proposed rules. Therefore, Alliant Energy
cannot determine the impact the final rules will have on its results of
operations or financial condition.
Rates and Regulatory Matters - Alliant Energy's merger-related price freezes
- ----------------------------
expired in April 2002 in all of its primary domestic utility jurisdictions
and it is currently addressing the recovery of its utility cost increases
through numerous rate filings. Alliant Energy recently received a final
order in one of its rate cases and currently has four other rate cases
pending. Details of these rate cases are as follows (dollars in millions):
Expected
Interim Interim Final Final Final
Utility Filing Increase Increase Effective Increase Effective Effective
Case Type Date Requested Granted (1) Date Granted Date Date Notes
- -------------- -------- ------------- ------------- ------------- ------------- ----------- ------------- ------------ ---------
WP&L:
2002 retail E/G/W Aug. 2001 $104 $49 April 2002 $82 Sept. 2002 N/A (2)
2003 retail E/G/W May 2002 101 TBD TBD TBD TBD Jan. 2003 (3)
Wholesale E Feb. 2002 6 6 April 2002 TBD TBD Jan. 2003
IP&L retail E March 2002 82 15 July 2002 TBD TBD June 2003 (4)
IP&L retail G July 2002 20 17 Oct. 2002 TBD TBD July 2003
------------- -------------
Total $313 $87
============= =============
(1) Interim rate relief is implemented subject to refund, pending
determination of final rates.
(2) In its September 2002 final order, the PSCW increased the authorized
return on common equity from 11.7% to 12.3% and it must approve the
payment of dividends by WP&L to Alliant Energy that are in excess of the
level forecasted in the rate order ($62 million), if such dividends would
reduce WP&L's average common equity ratio below 44.67% of total
capitalization.
(3) The 2003 request has been updated from $59 million as announced earlier to
reflect the final order in the 2002 retail case and updated cost
information.
(4) In accordance with rate making principles in Iowa, IP&L only requested
interim rate relief of $22 million.
In March 2002, WP&L filed with the PSCW to refund approximately $4 million to
customers based on lower than projected fuel and purchased-power costs in
2001. In addition, in March 2002, WP&L filed with and received approval from
the PSCW for a decrease in retail electric rates of approximately $19
million, effective March 23, 2002, based on lower projected 2002 fuel and
purchased-power costs. The refund amounts ultimately provided by WP&L are
subject to PSCW approval. WP&L has recorded the necessary reserves for refunds
at September 30, 2002.
The PSCW has issued new rules relating to the collection of fuel and
purchased-power costs by Wisconsin utilities, including WP&L. The new rules
and related procedures are intended, among other things, to significantly
reduce regulatory lag for the utilities and customers related to the timing
of the recovery of increased or decreased fuel and purchased-power costs.
Purchased-power capacity costs will now be included in base rates. A process
will also exist whereby the utilities can seek deferral treatment of
capacity, transmission and emergency costs between base rate cases. The new
rules are expected to be implemented for WP&L in the first quarter of 2003.
In January 2001, the IUB issued an order requiring IESU and IPC to file a
joint fuel procurement plan for the purpose of evaluating the reasonableness
of the Iowa utilities' fuel procurement contracts. In April 2002, the IUB
issued an order, which found no reason to require a refund of past fuel and
purchased-power cost collections or disallow recovery of ongoing
collections. However, the IUB indicated it will continue to examine in other
forums several issues related to purchased-power contracts, the design of the
fuel cost recovery mechanism and long-term planning practices. These issues
are being addressed in IP&L's retail electric rate case. IP&L cannot
presently predict the impact, if any, this matter may have on its financial
condition and results of operations.
30
In 2002, IP&L filed with the IRS for a change in method of accounting for tax
purposes for 1987 through 2001 that would allow a current deduction related
to mixed service costs. Such costs had previously been capitalized
and depreciated for tax purposes over the appropriate tax lives. This
change would create a significant current tax benefit which has not been
reflected in IP&L's results of operations pending a decision from the IUB on
the required rate making treatment of the benefit. There would be no
negative impact on Alliant Energy's results of operations or financial
position should the IUB and/or IRS reject IP&L's proposals.
ALLIANT ENERGY RESULTS OF OPERATIONS
Unless otherwise noted, all "per share" references in the Results of
Operations section refer to earnings per diluted share.
Overview - Third Quarter Results - Alliant Energy's EPS for the third quarter
- --------------------------------
of 2002 and 2001 were as follows:
2002 2001
--------- ----------
GAAP EPS $0.49 $0.87
Less: Non-cash SFAS 133 income (charge) related to the valuation of electricity
derivatives held by Southern Hydro (0.10) 0.13
Non-cash SFAS 133 valuation charge related to Resources' 30-year
exchangeable senior notes -- (0.16)
--------- ----------
Adjusted EPS * $0.59 $0.90
========= ==========
* Adjusted EPS is a non-GAAP measure of accounting and should be evaluated in
connection with GAAP information. Alliant Energy believes the presentation
of adjusted earnings gives investors another measure to consider, in
conjunction with the GAAP results, which could provide a meaningful
comparison of Alliant Energy's performance by eliminating limited, unique
non-cash/other charges and income that may affect comparability between
years and may impact an assessment of Alliant Energy's ongoing
performance.
The third quarter 2002 decrease in adjusted earnings was largely due to a
decrease in earnings from Alliant Energy's non-regulated businesses of $0.27
per share. Earnings from utility operations decreased $0.09 per share due to
higher operating expenses and a higher effective income tax rate, partially
offset by higher electric margins. Also contributing to the decrease in
adjusted earnings was the dilutive impact of additional common shares
outstanding in the third quarter of 2002 as compared to the same period in
2001 of $0.09 per share. Partially offsetting the decreases in adjusted
earnings were lower income tax and other expenses at the parent company of
$0.14 per share. Although the effective income tax rate for the third
quarter of 2002 compared to the same period in 2001 impacted the utility and
parent company earnings variances, on a consolidated basis the net impact was
not significant.
A breakdown of Alliant Energy's non-regulated adjusted EPS by business unit
for the three and nine months ended September 30 is as follows (the
adjustments to GAAP EPS in the previous table were all recorded at Alliant
Energy's non-regulated businesses):
Three Months Nine Months
-------------------------------------- -------------------------------------
2002* 2001 Variance 2002* 2001 Variance
--------- --------- ----------- --------- --------- -----------
Investments $0.12 $0.09 $0.03 $0.24 $0.46 ($0.22)
International (0.19) (0.06) (0.13) (0.51) (0.27) (0.24)
Integrated Services (0.01) -- (0.01) (0.15) (0.05) (0.10)
Energy Technologies (0.05) (0.01) (0.04) (0.10) (0.01) (0.09)
Mass Marketing (0.04) -- (0.04) (0.07) (0.01) (0.06)
Non-regulated Generation and Trading** (0.02) 0.01 (0.03) (0.04) 0.01 (0.05)
Other (0.02) 0.03 (0.05) (0.02) 0.05 (0.07)
--------- --------- ----------- --------- --------- -----------
Total adjusted EPS ($0.21) $0.06 ($0.27) ($0.65) $0.18 ($0.83)
========= ========= =========== ========= ========= ===========
* The 2002 EPS amounts have been computed based on the average shares
outstanding in 2001. Alliant Energy reports the dilutive impact of
increased shares outstanding as a separate earnings variance item in
MD&A.
** Alliant Energy sold its interest in its electricity-trading joint venture
earlier in 2002.
31
The higher income from the Investments business unit was due to modest
increases in income from Alliant Energy's affordable housing and oil and gas
(Whiting) businesses. The Whiting increase was due to higher sales volumes
and prices, partially offset by increased operating expenses. The lower
results from the International business unit were primarily due to losses
from Alliant Energy's Brazil investments, partially offset by improved
results from Alliant Energy's Australia (before the Southern Hydro SFAS 133
adjustments) and New Zealand investments. The increased results from
Australia and New Zealand were primarily due to higher sales volumes and
prices, and lower purchased-power costs, respectively. Losses from Alliant
Energy's Brazil investments in the third quarter of 2002 and 2001 were
($19.0) million and ($3.7) million, respectively. The lower Brazil results
were largely due to losses incurred by Alliant Energy's investment in a
gas-fired generating plant and a charge related to a regulatory order issued
in the third quarter of 2002 related to the recovery of the impacts of
rationing and other prior costs. The losses from the generating plant were
due to the impact of a significant decline in the currency rates associated
with the debt issued to finance the plant and a continued depressed wholesale
energy market. The lower results from Alliant Energy's Integrated Services
business unit were primarily due to the recording of asset valuation charges
of $0.02 per share in the third quarter of 2002. The lower results from
Alliant Energy's Energy Technologies business unit resulted from the
recording of asset valuation charges of $0.04 per share in the third quarter
of 2002 related to its portfolio of energy technology investments. The lower
results from Alliant Energy's Mass Marketing business unit were primarily due
to increases in the provisions for uncollectible accounts recorded in the
third quarter of 2002 at Alliant Energy's SmartEnergy subsidiary. The lower
results from Alliant Energy's Non-regulated Generation and Trading business
unit were due to Alliant Energy's sale of its interest in its
electricity-trading joint venture earlier this year which provided income in
the third quarter of 2001 (refer to "Liquidity and Capital Resources - Sales
of Non-strategic Assets" for additional information).
Domestic Electric Utility Operations - Electric margins and MWh sales for
- ------------------------------------
Alliant Energy for the three months ended September 30 were as follows (in
thousands):
Revenues and Costs MWhs Sold
------------------------------------- --------------------------------------
2002 2001 Change 2002 2001 Change
------------------------------------- --------------------------------------
Residential $206,797 $188,406 10% 2,346 2,186 7%
Commercial 116,606 110,576 5% 1,553 1,493 4%
Industrial 156,473 157,131 -- 3,192 3,198 --
--------------------------- ----------------------------
Total from ultimate customers 479,876 456,113 5% 7,091 6,877 3%
Sales for resale 51,206 48,530 6% 1,402 1,278 10%
Other 15,803 15,208 4% 40 39 3%
--------------------------- ----------------------------
Total revenues/sales 546,885 519,851 5% 8,533 8,194 4%
============================
Electric production fuels expense 88,452 91,256 (3%)
Purchased power expense 124,194 108,177 15%
---------------------------
Margin $334,239 $320,418 4%
===========================
32
Electric margins and MWh sales for Alliant Energy for the nine months ended
September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
------------------------------------- ------------------------------------
2002 2001 Change 2002 2001 Change
------------------------------------- ------------------------------------
Residential $479,076 $473,127 1% 5,862 5,706 3%
Commercial 284,607 291,051 (2%) 4,188 4,153 1%
Industrial 398,867 421,281 (5%) 9,191 9,398 (2%)
---------------------------- ---------------------------
Total from ultimate customers 1,162,550 1,185,459 (2%) 19,241 19,257 --
Sales for resale 126,586 143,736 (12%) 3,824 3,780 1%
Other 41,161 38,086 8% 126 126 --
---------------------------- ---------------------------
Total revenues/sales 1,330,297 1,367,281 (3%) 23,191 23,163 --
===========================
Electric production fuels expense 218,193 232,957 (6%)
Purchased power expense 287,212 318,024 (10%)
----------------------------
Margin $824,892 $816,300 1%
============================
Electric margin increased $13.8 million, or 4%, and $8.6 million, or 1%, for
the three- and nine-month periods, respectively. The three-month increase
was primarily due to the impacts of several rate increases implemented in
2002, more favorable weather conditions and continued retail customer
growth. The nine-month increase was primarily related to several rate
increases implemented in 2002, continued retail customer growth and decreased
purchased-power costs impacting margin. The nine-month increase was
partially offset by reduced energy conservation revenues (which were largely
offset by lower energy conservation expenses) and the sluggish economy in the
upper Midwest, which reduced Alliant Energy's industrial sales by 2%. Refer
to "Utility Industry Review - Rates and Regulatory Matters" for discussion of
various rate filings.
Gas Utility Operations - Gas margins and Dth sales for Alliant Energy for the
- ----------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- ------------------------------------
2002 2001 Change 2002 2001 Change
---------------------------------------- -------------------------------------
Residential $17,526 $17,097 3% 1,833 1,941 (6%)
Commercial 9,867 8,784 12% 1,655 1,459 13%
Industrial 3,576 3,972 (10%) 903 943 (4%)
Transportation/other 13,625 13,126 4% 12,062 11,890 1%
------------------------------ ----------------------------
Total revenues/sales 44,594 42,979 4% 16,453 16,233 1%
============================
Cost of utility gas sold 26,917 23,660 14%
------------------------------
Margin $17,677 $19,319 (8%)
==============================
Gas margins and Dth sales for Alliant Energy for the nine months ended
September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
---------------------------------------- -------------------------------------
Residential $129,103 $217,991 (41%) 19,983 21,166 (6%)
Commercial 64,819 114,549 (43%) 12,388 12,731 (3%)
Industrial 13,693 24,005 (43%) 3,254 3,465 (6%)
Transportation/other 30,586 39,684 (23%) 35,215 36,487 (3%)
------------------------------ ----------------------------
Total revenues/sales 238,201 396,229 (40%) 70,840 73,849 (4%)
============================
Cost of utility gas sold 149,392 303,984 (51%)
------------------------------
Margin $88,809 $92,245 (4%)
==============================
33
Gas revenues and cost of utility gas sold decreased significantly for the
nine-month period due to the large decrease in natural gas prices from the
first half of 2001. Due to Alliant Energy's rate recovery mechanisms for gas
costs, these decreases alone had little impact on gas margin. Gas margin
decreased $3.4 million, or 4%, for the nine-month period, primarily due to
reduced energy conservation revenues and the impact of lower sales resulting
from extremely mild weather in the first quarter of 2002 and the sluggish
economy. These items were partially offset by improved performance related
to WP&L's performance-based commodity cost recovery program, the
implementation of a rate increase at WP&L and increased sales from continued
retail customer growth. The reduced energy conservation revenues were
largely offset by lower energy conservation expenses. Refer to "Utility
Industry Review - Rates and Regulatory Matters" for discussion of various
rate filings.
Non-regulated and Other Revenues - Details regarding Alliant Energy's
- --------------------------------
non-regulated and other revenues and data relating to Whiting's oil and gas
operations for the three and nine months ended September 30 were as follows:
Three Months Nine Months
------------------------------- --------------------------------
Non-regulated and other revenues (in thousands): 2002 2001 2002 2001
--------------- -------------- ---------------- --------------
Integrated Services $67,909 $43,891 $170,137 $176,301
Investments:
Whiting 35,514 30,594 88,138 109,725
Other 11,754 10,944 34,107 33,520
International 36,062 16,752 97,467 32,693
Mass Marketing 12,773 -- 35,430 --
Other 5,928 1,254 19,094 15,070
--------------- -------------- ---------------- --------------
$169,940 $103,435 $444,373 $367,309
=============== ============== ================ ==============
Three Months Nine Months
------------------------------- -------------------------------
2002 2001 2002 2001
-------------- --------------- --------------- --------------
Whiting's volumes sold (in thousands):
Oil (barrels) 647 509 1,662 1,606
Gas (Dth) 5,601 5,369 15,900 14,151
Whiting's average product prices:
Oil (per barrel) $25.13 $24.48 $22.36 $24.89
Gas (per Dth) $3.29 $3.07 $2.97 $4.30
The increased Integrated Services revenues for the three-month period were
primarily due to higher natural gas sales. Whiting's ongoing acquisitions of
additional oil and gas properties had a significant impact on the increased
Whiting sales volumes. International revenues increased primarily due to the
third quarter 2001 acquisitions of additional combined heat and power
facilities in China and Alliant Energy acquiring a controlling interest in
Southern Hydro in March 2002, changing from the equity method of accounting
to the consolidation method at such time. Mass Marketing revenues were due
to the fourth quarter 2001 acquisition of a controlling interest in
SmartEnergy, an energy services company operating in competitive energy
markets.
34
Other Operating Expenses - Other operation and maintenance expenses for the
- ------------------------
three and nine months ended September 30 were as follows (in thousands):
Three Months Nine Months
------------------------------ ------------------------------
2002 2001 2002 2001
------------- -------------- -------------- -------------
Utility $133,318 $124,349 $395,552 $379,976
Integrated Services 64,584 41,470 160,031 167,112
Investments:
Whiting 12,983 11,771 36,620 34,867
Other 6,504 6,613 20,480 20,711
International 21,487 14,896 68,002 31,025
Mass Marketing 16,576 -- 40,974 --
Other (includes eliminations) 172 (4,436) 403 (3,846)
------------- -------------- -------------- -------------
$255,624 $194,663 $722,062 $629,845
============= ============== ============== =============
The utility increases were primarily due to increased nuclear and fossil-fuel
generation, employee pension and other benefits and energy delivery expenses,
partially offset by reduced energy conservation expenses and lower
uncollectible account balances. Alliant Energy's remaining price freezes
(which were implemented in connection with the three-way merger in 1998)
expired in April 2002. Alliant Energy is addressing the recovery of its
utility cost increases related to ongoing investments to continue providing
safe and reliable utility service through rate filings in Wisconsin, Iowa and
with FERC (refer to "Utility Industry Review - Rates and Regulatory Matters"
for additional information). The Integrated Services, International and Mass
Marketing variances were largely driven by the same factors impacting the
revenue variances discussed previously.
Depreciation, depletion and amortization expense increased $2.6 million and
$4.2 million for the three- and nine-month periods, respectively, primarily
due to utility property additions, various non-regulated acquisitions
discussed previously and higher depletion expense at Whiting, largely due to
increased production. Such increases were partially offset by lower expenses
for the three- and nine-month periods due to: decreases of $3.4 million and
$10.1 million, respectively, from the implementation of lower depreciation
rates at IP&L on January 1, 2002, resulting from an updated depreciation
study; lower decommissioning expense based on reduced retail funding levels
at WP&L; lower earnings on WP&L's nuclear decommissioning trust fund; and the
elimination of $1.2 million and $3.6 million, respectively, of goodwill
amortization expense in compliance with new accounting rules effective in
2002. The accounting for earnings on the nuclear decommissioning trust fund
results in no net income impact. Miscellaneous, net income increases for
earnings on the trust fund and the corresponding offset is recorded as
depreciation expense for WP&L.
Taxes other than income taxes increased $3.7 million and $2.9 million for the
three- and nine-month periods, respectively, primarily due to increased
property taxes.
Interest Expense and Other - Interest expense increased $4.8 million and $5.3
- --------------------------
million for the three- and nine-month periods, respectively, primarily due to
additional debt outstanding at Resources, including the issuance of $300
million of senior notes in November 2001, to fund its strategic growth plan
and Alliant Energy acquiring a controlling interest in Southern Hydro in
March 2002. These items were partially offset by reduced levels of
short-term debt at the Alliant Energy parent company level and lower interest
rates on Alliant Energy's variable rate borrowings.
35
Equity income (loss) from Alliant Energy's unconsolidated investments for the
three and nine months ended September 30 was as follows (in thousands):
Three Months Nine Months
---------------------------- ----------------------------
2002 2001 2002 2001
------------- ------------- -------------- ------------
Australia* $-- $14,893 $20,592 $24,363
ATC 3,740 2,210 10,914 10,236
New Zealand 1,170 (1,224) 1,832 (996)
Cargill-Alliant 1,491 2,964 941 8,058
China** 355 942 830 3,333
Synfuel (4,793) -- (7,792) --
Brazil (15,142) 3,185 (24,066) 1,890
Other 93 (442) 448 (503)
------------- ------------- -------------- ------------
($13,086) $22,528 $3,699 $46,381
============= ============= ============== ============
* Alliant Energy accounted for its investment in Southern Hydro under the
equity method prior to March 2002 and under the consolidation method since
March 2002.
** Majority of investments are accounted for under the consolidation method.
Equity income from unconsolidated investments decreased $35.6 million and
$42.7 million for the three- and nine-month periods. The Australia decrease
was significantly impacted by changes in non-cash SFAS 133 valuation income
associated with electricity derivatives at Southern Hydro and the change in
accounting method for such investment. The nine-month period included a
pre-tax decrease of $2.6 million of non-cash SFAS 133 valuation income and
the third quarter of 2001 included $16.0 million of such pre-tax income. The
lower earnings at Cargill-Alliant for the nine-month period were due to fewer
weather-related trading opportunities. In the second quarter of 2002,
Synfuel, a direct subsidiary of Resources, purchased an equity interest in a
synthetic fuel processing facility. The synthetic fuel project generates
operating losses at its fuel processing facility, which are more than offset
by tax credits and the tax benefit of the losses the project generates. All
tax benefits are included in "Income taxes" in Alliant Energy's Consolidated
Statements of Income. Refer to "Overview - Third Quarter Results" for
additional discussion on the above variances.
Refer to Note 8 of Alliant Energy's "Notes to Consolidated Financial
Statements" for discussion of the asset valuation charges recorded by Alliant
Energy in the first and second quarters of 2002 related to its McLeod
available-for-sale securities.
Miscellaneous, net income decreased $7.4 million and $13.1 million for the
three- and nine-month periods, respectively, due to the recording of pre-tax
asset valuation charges related to Alliant Energy's investments in: Energy
Technologies (Q1/$5.0 million and Q3/$5.3 million); Enermetrix (Q1/$8.5
million); and a loan receivable from a Mexican development company in
connection with development of a resort community in Mexico (Q2/$6.9
million). Also contributing to the decrease were gains from asset sales
realized in 2001, lower earnings on WP&L's nuclear decommissioning trust fund
and lower interest income. These items were partially offset in the three-
and nine-month periods by lower pre-tax, non-cash SFAS 133 valuation charges
of $17.8 million and $23.9 million, respectively, related to the derivative
component of Alliant Energy's exchangeable senior notes and McLeod trading
securities. The three- and nine-month periods also included pre-tax,
non-cash SFAS 133 valuation (charges) income of ($13.4) million and $2.0
million, respectively, related to Southern Hydro's electricity derivatives
after the investment was consolidated in March 2002.
Income Taxes - The effective income tax rates were 30.5% and 29.6% for the
- ------------
three- and nine-month periods ended September 30, 2002, respectively,
compared with 32.3% and 32.7% for the same periods last year. The decrease
for both periods was primarily due to higher tax credits, partially offset by
increases in property-related temporary differences for which deferred taxes
are not provided pursuant to rate making principles.
36
Cumulative Effect of a Change in Accounting Principle - In the first quarter
- -----------------------------------------------------
of 2001, Alliant Energy recorded a charge of $12.9 million relating to the
adoption of SFAS 133 on January 1, 2001 at Southern Hydro.
IP&L RESULTS OF OPERATIONS
Overview - Third Quarter Results - Earnings available for common stock
- --------------------------------
decreased $6.2 million, primarily due to a higher effective income tax rate
and increased operating expenses, partially offset by higher electric
margins.
Electric Utility Operations - Electric margins and MWh sales for IP&L for the
- ---------------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
-------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------------------------------- -------------------------------------
Residential $125,263 $116,939 7% 1,306 1,222 7%
Commercial 76,130 72,122 6% 952 904 5%
Industrial 100,568 101,625 (1%) 1,997 2,025 (1%)
---------------------------- ----------------------------
Total from ultimate customers 301,961 290,686 4% 4,255 4,151 3%
Sales for resale 12,379 13,819 (10%) 349 327 7%
Other 8,082 7,884 3% 24 26 (8%)
---------------------------- ----------------------------
Total revenues/sales 322,422 312,389 3% 4,628 4,504 3%
============================
Electric production fuels expense 48,055 56,647 (15%)
Purchased power expense 54,950 46,112 19%
----------------------------
Margin $219,417 $209,630 5%
============================
Electric margins and MWh sales for IP&L for the nine months ended September
30 were as follows (in thousands):
Revenues and Costs MWhs Sold
-------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
-------------------------------------- -------------------------------------
Residential $277,660 $280,447 (1%) 3,225 3,133 3%
Commercial 176,402 184,467 (4%) 2,550 2,523 1%
Industrial 243,902 263,802 (8%) 5,839 5,969 (2%)
--------------------------- ---------------------------
Total from ultimate customers 697,964 728,716 (4%) 11,614 11,625 --
Sales for resale 28,777 41,153 (30%) 1,007 1,101 (9%)
Other 20,950 21,262 (1%) 78 80 (3%)
--------------------------- ---------------------------
Total revenues/sales 747,691 791,131 (5%) 12,699 12,806 (1%)
===========================
Electric production fuels expense 115,740 135,081 (14%)
Purchased power expense 120,171 152,793 (21%)
---------------------------
Margin $511,780 $503,257 2%
===========================
Electric margin increased $9.8 million, or 5%, and $8.5 million, or 2%, for
the three- and nine-month periods, respectively. The three-month increase
was primarily due to increased sales from continued retail customer growth
and more favorable weather, and the impact of an interim retail rate increase
implemented in July 2002. The nine-month increase was primarily due to
decreased purchased-power capacity costs, the impact of the interim retail
rate increase and increased sales from continued retail customer growth,
partially offset by reduced energy conservation revenues of $10.9 million and
the sluggish economy which reduced IP&L's industrial sales by 2%. The
reduced energy conservation revenues were largely offset by lower energy
conservation expenses. Refer to "Utility Industry Review - Rates and
Regulatory Matters" for discussion of IP&L's rate filings.
37
Gas Utility Operations - Gas margins and Dth sales for IP&L for the three
- ----------------------
months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------------------------------- -------------------------------------
Residential $10,044 $10,898 (8%) 1,012 1,144 (12%)
Commercial 5,322 5,413 (2%) 870 842 3%
Industrial 3,025 3,369 (10%) 795 815 (2%)
Transportation/other 3,103 3,948 (21%) 6,778 7,583 (11%)
---------------------------- ----------------------------
Total revenues/sales 21,494 23,628 (9%) 9,455 10,384 (9%)
============================
Cost of gas sold 11,698 13,467 (13%)
----------------------------
Margin $9,796 $10,161 (4%)
============================
Gas margins and Dth sales for IP&L for the nine months ended September 30
were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
---------------------------------------- -------------------------------------
Residential $74,421 $131,768 (44%) 11,656 12,791 (9%)
Commercial 36,324 67,219 (46%) 6,919 7,451 (7%)
Industrial 9,608 16,651 (42%) 2,364 2,601 (9%)
Transportation/other 8,395 11,003 (24%) 21,051 23,626 (11%)
---------------------------- ----------------------------
Total revenues/sales 128,748 226,641 (43%) 41,990 46,469 (10%)
============================
Cost of gas sold 80,268 171,714 (53%)
----------------------------
Margin $48,480 $54,927 (12%)
============================
Gas revenues and cost of gas sold decreased significantly for the nine-month
period due to the large decrease in natural gas prices from the first half of
2001. Such decreases alone had no impact on IP&L's gas margin given its rate
recovery mechanism for gas costs. Gas margin decreased $6.4 million, or 12%,
for the nine-month period primarily due to reduced energy conservation
revenues of $4.3 million and the impact of lower sales resulting from
extremely mild weather in the first quarter of 2002 and the sluggish
economy. The reduced energy conservation revenues were largely offset by
lower energy conservation expenses. Refer to "Utility Industry Review -
Rates and Regulatory Matters" for discussion of IP&L's rate filings.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$3.7 million and decreased $0.5 million for the three- and nine-month
periods, respectively. The three-month increase was primarily due to
increased nuclear and energy delivery expenses, partially offset by decreased
uncollectible customer account balances. The nine-month decrease was
primarily due to lower energy conservation expenses of $12.3 million and
decreased uncollectible customer account balances, largely offset by
increased nuclear, energy delivery and employee pension and other benefits
expenses.
Depreciation and amortization expense decreased $0.1 million and $1.3 million
for the three- and nine-month periods primarily due to $3.4 million and $10.1
million, respectively, from implementation of the lower depreciation rates on
January 1, 2002, resulting from an updated depreciation study, largely offset
by property additions.
Taxes other than income taxes increased $1.9 million and $2.4 million for
three- and nine-month periods, respectively, primarily due to increased
property taxes.
Income Taxes - The effective income tax rates were 46.3% and 43.0% for the
- ------------
three- and nine-month periods ended September 30, 2002, respectively,
compared with 35.4% and 36.9% for the same periods last year. The increases
were primarily due to increases in property related differences for which
deferred taxes are not provided pursuant to rate making principles.
38
WP&L RESULTS OF OPERATIONS
Overview - Third Quarter Results - Earnings available for common stock
- --------------------------------
decreased $0.7 million, primarily due to increased operating expenses,
largely offset by higher electric margins.
Electric Utility Operations - Electric margins and MWh sales for WP&L for the
- ---------------------------
three months ended September 30 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------- ----------------------- -------------------------------------
Residential $81,534 $71,467 14% 1,040 964 8%
Commercial 40,476 38,454 5% 601 589 2%
Industrial 55,905 55,506 1% 1,195 1,173 2%
--------------- --------------- --------------------------
Total from ultimate customers 177,915 165,427 8% 2,836 2,726 4%
Sales for resale 38,827 34,711 12% 1,054 951 11%
Other 7,721 7,324 5% 16 13 23%
--------------- --------------- --------------------------
Total revenues/sales 224,463 207,462 8% 3,906 3,690 6%
==========================
Electric production fuels expense 40,397 34,609 17%
Purchased power expense 69,244 62,065 12%
--------------- ---------------
Margin $114,822 $110,788 4%
=============== ===============
Electric margins and MWh sales for WP&L for the nine months ended September
30 were as follows (in thousands):
Revenues and Costs MWhs Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------------------------------- ------------------------- -----------
Residential $201,416 $192,680 5% 2,637 2,573 2%
Commercial 108,205 106,584 2% 1,638 1,630 --
Industrial 154,965 157,479 (2%) 3,352 3,429 (2%)
---------------------------- -------------------------
Total from ultimate customers 464,586 456,743 2% 7,627 7,632 --
Sales for resale 97,809 102,583 (5%) 2,817 2,679 5%
Other 20,211 16,824 20% 48 46 4%
---------------------------- -------------------------
Total revenues/sales 582,606 576,150 1% 10,492 10,357 1%
=========================
Electric production fuels expense 102,453 97,876 5%
Purchased power expense 167,041 165,231 1%
----------------------------
Margin $313,112 $313,043 --
============================
Electric margin increased $4.0 million, or 4%, and $0.1 million for the
three- and nine-month periods, respectively. The three- and nine-month
increases were primarily due to the implementation of various rate increases
in 2002, continued customer growth and more favorable weather. The
nine-month increase was partially offset by the sluggish economy which
reduced WP&L's industrial sales by 2%. Refer to "Utility Industry Review -
Rates and Regulatory Matters" for information on WP&L's rate filings.
39
Gas Utility Operations - Gas margins and Dth sales for WP&L for the three
- ----------------------
months ended September 30 were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------------------------------- -------------------------------------
Residential $7,482 $6,199 21% 821 797 3%
Commercial 4,545 3,371 35% 785 617 27%
Industrial 551 603 (9%) 108 128 (16%)
Transportation/other 10,522 9,178 15% 5,284 4,307 23%
---------------------------- ------------------------
Total revenues/sales 23,100 19,351 19% 6,998 5,849 20%
========================
Cost of gas sold 15,219 10,193 49%
----------------------------
Margin $7,881 $9,158 (14%)
============================
Gas margins and Dth sales for WP&L for the nine months ended September 30
were as follows (in thousands):
Revenues and Costs Dths Sold
--------------------------------------- -------------------------------------
2002 2001 Change 2002 2001 Change
--------------------------------------- -------------------------------------
Residential $54,682 $86,223 (37%) 8,327 8,375 (1%)
Commercial 28,495 47,330 (40%) 5,469 5,280 4%
Industrial 4,085 7,354 (44%) 890 864 3%
Transportation/other 22,191 28,681 (23%) 14,164 12,861 10%
---------------------------- ------------------------
Total revenues/sales 109,453 169,588 (35%) 28,850 27,380 5%
========================
Cost of gas sold 69,124 132,270 (48%)
----------------------------
Margin $40,329 $37,318 8%
============================
Gas revenues and cost of gas sold decreased significantly for the nine-month
period due to the large decrease in natural gas prices from the first half of
2001. Due to WP&L's rate recovery mechanism for gas costs, these decreases
alone had little impact on gas margin. Gas margin increased $3.0 million, or
8%, for the nine-month period, primarily due to improved performance related
to WP&L's performance-based commodity cost recovery program, the
implementation of a rate increase in 2002 and continued retail customer
growth. These items were partially offset by the impact of less favorable
weather conditions and reduced energy conservation revenues. Refer to
"Utility Industry Review - Rates and Regulatory Matters" for information on
WP&L's rate filings.
Other Operating Expenses - Other operation and maintenance expenses increased
- ------------------------
$5.2 million and $16.1 million for the three- and nine-month periods,
respectively, primarily due to increased employee pension and other benefits
and fossil-fuel generation expenses. Also contributing to the nine-month
increase were higher nuclear generation expenses.
Depreciation and amortization expense decreased $2.7 million and $5.1 million
for the three- and nine-month periods, respectively, primarily due to lower
decommissioning expense based on reduced retail funding levels and reduced
earnings on the nuclear decommissioning trust fund, partially offset by
property additions. The accounting for earnings on the nuclear
decommissioning trust fund results in no net income impact. Miscellaneous,
net income increases for earnings on the trust fund and the corresponding
offset is recorded as depreciation expense.
Interest Expense and Other - Miscellaneous, net income decreased $3.5 million
- --------------------------
and $1.3 million for the three- and nine-month periods, respectively,
primarily due to decreased earnings on the nuclear decommissioning trust
fund.
Income Taxes - The effective income tax rates were 36.9% and 36.6% for the
- ------------
three- and nine-month periods ended September 30, 2002, respectively,
compared with 38.3% for the same periods last year.
40
LIQUIDITY AND CAPITAL RESOURCES
Current Market Conditions - Alliant Energy's financing activities related to
- -------------------------
the second half of 2002 have been undertaken against a background of
increased market concerns about general economic conditions and corporate
governance issues as well as risks associated with particular sectors of the
economy, including the utility industry. As a result of these factors,
capital markets have become more restrictive. The commercial paper market,
for example, has become more limited for many companies in terms of the amounts
of available capital and the corresponding maturities. Medium- and long-term
debt markets have become sensitive to increased credit ratings volatility and to
a heightened perception of liquidity risk in the energy sector. As a result,
investors have become more selective and have differentiated among otherwise
comparable issuers in a way that has made the financing process more
challenging. In response to these changing market conditions, Alliant Energy
is working closely with its financial advisors and others to access the
capital it needs to operate its businesses. Based on its strong cash flows
coupled with actions Alliant Energy expects to take to strengthen its balance
sheet as described below, Alliant Energy currently believes it will be able
to secure the capital it requires to implement its strategic plan.
Cash Flows for the Nine-Month Periods - Selected information from Alliant
- -------------------------------------
Energy's, IP&L's and WP&L's Consolidated Statements of Cash Flows for the
nine months ended September 30 was as follows (dollars in thousands):
Alliant Energy IP&L WP&L
-------------------------- ------------------------- -----------------------
2002 2001 2002 2001 2002 2001
------------ ------------- ------------ ------------ ----------- ----------
Cash flows from operating activities $411,141 $476,562 $244,446 $289,305 $168,605 $141,750
Cash flows from (used for) financing activities 230,193 23,628 (60,356) (117,840) (44,949) (79,735)
Cash flows used for investing activities (642,147) (556,063) (176,920) (138,101) (122,824) (55,876)
Alliant Energy's cash flows from operating activities decreased $65 million
primarily due to changes in working capital; cash flows from financing
activities increased $207 million primarily due to changes in the amount of
debt issued and retired, partially offset by the redemption of IP&L's
preferred stock in September 2002; and cash flows used for investing
activities increased $86 million primarily due to proceeds received in 2001
from the transfer of WP&L's transmission assets to ATC. IP&L's cash flows
from operating activities decreased $45 million primarily due to changes in
working capital; cash flows used for financing activities decreased $57
million primarily due to changes in the amount of debt issued and retired and
a capital contribution of $60 million by Alliant Energy in September 2002,
partially offset by the September 2002 redemption of preferred stock; and
cash flows used for investing activities increased $39 million primarily due
to increased construction and acquisition expenditures. WP&L's cash flows
from operating activities increased $27 million primarily due to changes in
working capital; cash flows used for financing activities decreased $35
million primarily due to changes in the amount of debt issued and retired and
a capital contribution of $11 million by Alliant Energy in September 2002;
and cash flows used for investing activities increased $67 million primarily
due to proceeds received from WP&L's asset transfer to ATC in 2001.
Credit Ratings and Balance Sheet - In October 2002, Moody's announced that it
- --------------------------------
had placed certain credit ratings of Alliant Energy under review for possible
downgrade. Alliant Energy has met with the rating agencies and is committed
to taking the necessary steps required to maintain strong credit ratings
(including a P-2 commercial paper rating at the Alliant Energy level) and to
strengthen its balance sheet. In connection with this commitment, Alliant
Energy is conducting a comprehensive review of possible strategic actions,
but has not yet made any decisions as to which options will be pursued. The
review will include an examination of capital expenditure budgets; the
potential sale of non-utility assets; financing options to lower debt ratios;
continued operational improvements, efficiency enhancements and strict cost
controls; and the current dividend policy. Alliant Energy expects to
disclose the results of this comprehensive review in the fourth quarter of
2002. Although Alliant Energy believes it can take actions to strengthen its
balance sheet and maintain strong credit ratings, no assurance can be given
that it will be able to maintain its existing credit ratings.
41
Debt - In June 2002, Alliant Energy received approval (through December 31,
- ----
2004) from the SEC to issue and sell up to an aggregate amount of $1 billion
of short-term debt outstanding at any one time and to guarantee borrowings by
Resources in an aggregate amount that would not exceed $700 million at any
one time in addition to its other guarantee authority. In addition, IP&L
received SEC approval to issue short-term debt in a principal amount which
would not at any one time exceed $300 million. Modification of the utility
money pool agreement in certain respects was approved by the MPUC in June
2002 and approvals from the SEC and the ICC are pending.
In July 2002, WP&L withdrew from Alliant Energy's utility money pool and, to
meet its short-term borrowing needs, began issuing its own commercial paper
(rated P-1 by Moody's) at rates similar to the money pool rates. In October
2002, IP&L began borrowing on its bank lines of credit to meet its short-term
borrowing needs.
In October 2002, Alliant Energy completed the syndication of three 364-day
revolving credit facilities totaling $915 million, available for direct
borrowing or to support commercial paper, which replaced the former
facilities that totaled $900 million in borrowing availability. The three
new facilities are a $565 million facility for Alliant Energy (at the parent
company level), reducing to $450 million by the end of 2002 (or upon the
earlier issuance of certain other debt securities), a $200 million facility
for IP&L and a $150 million facility for WP&L. The Alliant Energy credit
facility also must be reduced by up to $50 million from the proceeds of an
issuance of equity securities in excess of $300 million. These new credit
facility agreements contain various covenants, including the following:
Covenant Description Covenant September 30, 2002
- --------------------------------------- ----------------------- -----------------------
Alliant Energy:
Consolidated debt-to-capital ratio Less than 65% 61.9%
Consolidated net worth At least $1.4 billion $1.77 billion
EBITDA interest coverage ratio At least 2.5x 3.5x
IP&L debt-to-capital ratio Less than 58% 52.4%
WP&L debt-to-capital ratio Less than 58% 44.1%
The debt component of the capital ratios includes long- and short-term debt
(excluding trade payables), capital lease obligations, letters of credit and
guarantees of the foregoing and unfunded vested benefits under pension plans.
The equity component excludes accumulated other comprehensive income (loss).
Alliant Energy is also subject to a PUHCA requirement whereby Alliant Energy's
common equity balance must be at least 30% of its total consolidated
capitalization, including short-term debt. Alliant Energy's common equity ratio
as of September 30, 2002, as computed under such requirement, was 35.5%.
Resources is also a party to a $100 million credit agreement, which is
guaranteed by Alliant Energy, extending through December 20, 2002 or upon the
earlier issuance of certain other debt or equity securities. Resources
contemplates $400 to $600 million of long-term debt or other financings to
also be completed later in 2002, subject to market conditions. Proceeds from
these transactions, if completed, would be used to repay the $100 million
credit agreement and the remainder would be used to reduce other short-term
borrowings and for other corporate purposes. These transactions are intended
to enable Alliant Energy and Resources to lengthen the maturity profile of
their overall debt portfolios and take advantage of historically low interest
rates. In the event Resources is unable to complete the financings described
above on a timely basis, Alliant Energy has numerous other alternatives it
will pursue in the fourth quarter of 2002 to secure its necessary capital.
If neither Resources nor Alliant Energy are successful in securing the
necessary additional capital, this could result in a material adverse effect
on Alliant Energy's liquidity position.
42
Information regarding commercial paper and bank facility borrowings was as
follows (dollars in millions):
At September 30, 2002 At November 8, 2002
-------------------------------------- ---------------------------------------------------
Alliant Alliant
Energy Resources WP&L Energy Resources WP&L IP&L
----------- ------------- ------------ ------------ ------------ ------------ ------------
Commercial paper outstanding $76.7* $590.7** $81.5* $186.9 $196.3 $52.4 --
Weighted average maturity
of commercial paper 8 days 38 days 31 days 18 days 52 days 31 days n/a
Discount rates on commercial
paper 2.10-2.25% 2.10-2.20% 1.79-1.80% 1.95-2.30% 2.05-2.20% 1.30-1.80% n/a
Bank facility borrowings -- -- -- $125.0 -- -- $75.0
Interest rates on bank facility
borrowings n/a n/a n/a 2.66-4.25% n/a n/a 4.75%
* Included in "Commercial paper" on Alliant Energy's and WP&L's respective
Consolidated Balance Sheets.
** $450.0 million and $140.7 million included in "Long-term debt" and
"Commercial paper," respectively, on Alliant Energy's Consolidated
Balance Sheets.
At October 31, 2002, long-term debt maturities for the fourth quarter of 2002
and 2003 to 2006 were $19 million, $50 million, $105 million, $137 million
and $96 million, respectively. Depending upon market conditions, it is
currently anticipated that a majority of the maturing debt will be refinanced
with the issuance of long-term securities.
Ratings Triggers - The long-term debt of Alliant Energy and its subsidiaries
- ----------------
is not subject to any repayment requirements as a result of credit rating
downgrades or so-called "ratings triggers." However, certain lease
agreements of Alliant Energy do contain such ratings triggers. The threshold
for these triggers varies among the applicable leases. If the payments were
accelerated under all the affected leases it would result in accelerated
payments of less than $45 million. In addition, the amount of proceeds
available to IP&L and WP&L from their sale of accounts receivable program
could be reduced in the aggregate by approximately $30 million in the event
of certain credit rating downgrades at the Alliant Energy parent company
level.
Construction and Acquisition Expenditures - For the nine months ended
- -----------------------------------------
September 30, 2002, Alliant Energy's total construction and acquisition
expenditures were $663 million. Alliant Energy is currently in the process
of reviewing its anticipated construction and acquisition expenditures for
the fourth quarter of 2002, as well as 2003, in conjunction with the
comprehensive review discussed in "Credit Ratings and Balance Sheet."
Alliant Energy has not entered into contractual commitments relating to the
majority of its anticipated capital expenditures previously disclosed, thus
Alliant Energy does have discretion as to the eventual level of capital
expenditures incurred and it closely monitors and updates such estimates on
an ongoing basis based on numerous economic and other factors.
In September 2002, the IUB approved a settlement agreement establishing
advance rate making principles for the proposed 500 MW natural gas-fired
plant IP&L plans to construct in Mason City, Iowa as part of its Power Iowa
initiative. The settlement establishes, among other things, a set
depreciation period whereby IP&L is ensured of recovering the estimated $400
million cost of its investment over 28 years based on a fixed 12.23% return
on the common equity component. The plant is scheduled to be in service in
the second quarter of 2004.
Given the status of the current non-regulated generation market, Alliant
Energy's initial investments in this market will focus on facilities with
underlying long-term purchased-power agreements. While Alliant Energy
believes there are excellent acquisition opportunities in the existing
non-regulated generation market, it will continue to be patient, prudent and
diligent in its pursuit of such opportunities. Consistent with this
approach, Alliant Energy announced in July 2002 its decision to purchase a
$109 million, 309 MW, non-regulated, natural gas-fired power plant in
Wisconsin, which Resources expects to finance with a significant portion of
non-recourse debt. The entire power output of the facility is sold under
contract to Milwaukee-based WE Energies through June 2008. The transaction
is expected to close late in the fourth quarter of 2002 or early in the first
quarter of 2003.
43
Sales of Non-strategic Assets - In the third quarter of 2002, Alliant Energy
- -----------------------------
completed the sale of its 50% ownership interest in its Cargill-Alliant
electricity-trading joint venture to Cargill. The sale proceeds were
approximately $19.3 million, the book value of Alliant Energy's share of the
joint venture. As noted earlier, the comprehensive review Alliant Energy is
currently undertaking will focus on additional potential sales of
non-strategic assets, among other items. Refer to "Other Matters - Other
Future Considerations" for additional discussion on the potential impact of
future asset sales.
Preferred Stock - In September 2002, IP&L redeemed all of its then
- ---------------
outstanding shares of preferred stock at an aggregate redemption price of
$58.3 million. IP&L is currently in the process of obtaining regulatory
approval to issue new preferred stock in an aggregate amount not to exceed
$200 million.
Environmental - A summary of Alliant Energy's environmental matters is
- -------------
included in the Form 10-K filed by Alliant Energy, IP&L and WP&L for the year
ended December 31, 2001. Alliant Energy's, IP&L's and WP&L's environmental
matters have not changed materially from those reported in the 2001 Form
10-K, except as described below.
On two previous occasions and most recently in June 2002, the EPA requested
certain information relating to the historical operation of WP&L's major
coal-fired generating units in Wisconsin. WP&L has responded to all requests
and has not yet received a final response from the EPA. In some cases
involving similar EPA requests from other electric generating facilities,
penalties and additional required capital expenditures have resulted. In
addition, on a broader basis, the EPA has assessed the impact of investments
in utility generation capacity, energy efficiency and environmental
protection, as well as reviewed proposed multi-pollutant legislation, and
will be recommending clarifications and revisions to the process in the
future. Alliant Energy cannot presently predict what impact, if any, these
issues may have on its financial condition or results of operations.
However, any required remedial action resulting from these matters could be
significant.
OTHER MATTERS
Market Risk Sensitive Instruments and Positions - Alliant Energy's primary
- -----------------------------------------------
market risk exposures are associated with interest rates, commodity prices,
equity prices and currency exchange rates. Alliant Energy has risk
management policies to monitor and assist in controlling these market risks
and uses derivative instruments to manage some of the exposures. A summary
of Alliant Energy's market risks is included in the Form 10-K filed by
Alliant Energy, IP&L and WP&L for the year ended December 31, 2001. Alliant
Energy's market risks have not changed materially from those reported in the
2001 Form 10-K, except as described below.
Currency Risk - Alliant Energy has investments in various countries where the
net investments are not hedged, including Australia, Brazil, China and New
Zealand. As a result, these investments are subject to currency exchange
risk with fluctuations in currency exchange rates. At September 30, 2002,
Alliant Energy had a cumulative foreign currency translation loss of $247
million, which related to decreases in value of the Brazil real of $222
million, New Zealand dollar of $20 million and Australian dollar of $5
million in relation to the U.S. dollar. This loss is recorded in
"Accumulated other comprehensive loss" on its Consolidated Balance Sheets.
Based on Alliant Energy's investments at September 30, 2002, a 10% sustained
increase/decrease over the next 12 months in the foreign exchange rates of
Australia, Brazil, China and New Zealand would result in a corresponding
decrease/increase in the cumulative foreign currency translation loss by $54
million. Alliant Energy's equity income (loss) from its foreign investments is
also impacted by fluctuations in currency exchange rates. In addition, Alliant
Energy has currency exchange risk associated with the debt issued to finance a
thermal plant constructed by Alliant Energy and its Brazilian partners. For the
three and nine months ended September 30, 2002, Alliant Energy recorded
pre-tax charges of $4.9 million and $7.7 million, respectively, related to
its share of the foreign currency transaction losses on such debt. Based on
the loan balance and currency rates at September 30, 2002, a 10% change in
the currency rates would result in a $1.6 million after-tax increase
(decrease) in net income.
44
Accounting Pronouncements - In June 2002, the FASB issued SFAS 146,
- -------------------------
"Accounting for Costs Associated with Exit or Disposal Activities," which
addresses financial accounting and reporting for costs associated with exit
or disposal activities, and requires liabilities to be recognized when
incurred rather than when an entity commits to an exit plan as is the case
under the current accounting rules. Alliant Energy must apply the provisions
of SFAS 146 for exit and disposal activities initiated after December 31,
2002, with early application encouraged. Alliant Energy does not anticipate
SFAS 146 will have a material impact on its financial condition or results of
operations.
On October 25, 2002, the EITF reached a consensus on EITF Issue No. 02-3.
Alliant Energy's natural gas trading business, NG Energy Trading, LLC (NG
Energy), is impacted by Issue 02-3. Issue 02-3 requires that all sales of
energy and the related cost of energy purchased under contracts that meet the
definition of energy trading contracts under EITF Issue No. 98-10,
"Accounting for Contracts Involved in Energy Trading and Risk Management
Activities" and that are derivatives under SFAS 133 must be reflected on a
net basis in the income statement for all periods presented. Under the
existing guidance of Issue 98-10, Alliant Energy reports its energy trading
contracts and related gas in storage at fair market value, and reports
related revenues and expenses on a gross basis in the income statement.
Issue 02-3 also rescinded Issue 98-10 on a prospective basis. Accordingly,
any new contracts entered into after October 25, 2002 must be reported on a
historical cost basis rather than at fair market value unless the contract
meets the definition of a derivative under SFAS 133. Alliant Energy
currently plans to adopt Issue 02-3 effective January 1, 2003 for all
contracts that were in place and storage gas acquired prior to October 25,
2002, and will reclassify prior period trading contracts on a net basis in
the income statement at that time. The impact of transitioning from
reporting inventory and existing contracts that are not derivatives under
SFAS 133 at fair value to historical cost will be reported in net income in
the first quarter of 2003 and, if material, classified as a cumulative effect
of a change in accounting principle. Although Alliant Energy has not yet
determined the impact of adopting Issue 02-3, it does not expect the impact
will be significant due to the relatively small size of the NG Energy
business. Had Alliant Energy presented its trading activities in the income
statement on a net basis rather than a gross basis, for the three and nine
months ended September 30, 2002, "Non-regulated and other" revenues and
"Other operation and maintenance" expenses would have both decreased $37.2 and
$78.2 million, respectively, with no impact on net income. For the three and
nine months ended September 30, 2001, "Non-regulated and other" revenues and
"Other operation and maintenance" expenses would have both decreased $7.2 and
$31.2 million, respectively, with no impact on net income.
In August 2001, the FASB issued SFAS 143, "Accounting for Asset Retirement
Obligations," which addresses financial accounting and reporting for
obligations associated with the retirement of tangible long-lived assets and
the associated asset retirement costs. Alliant Energy must adopt SFAS 143 no
later than January 1, 2003. With regards to the decommissioning of DAEC and
Kewaunee, SFAS 143 will require IP&L and WP&L, respectively, to record at
fair value the decommissioning liability and a corresponding asset, which
will then be depreciated over the remaining expected service lives of the
plants' generating units. Currently, decommissioning amounts collected in
rates and the investment earnings are reported in accumulated depreciation.
Alliant Energy is currently in the process of finalizing the adoption of SFAS
143, and does not anticipate it will have a material impact on its financial
condition or results of operations.
Critical Accounting Policies - A summary of Alliant Energy's critical
- ----------------------------
accounting policies is included in the Form 10-K filed by Alliant Energy,
IP&L and WP&L for the year ended December 31, 2001. Alliant Energy's
critical accounting policies have not changed materially from those reported
in the 2001 Form 10-K.
Other Future Considerations - In addition to items discussed earlier in MD&A,
- ---------------------------
the following items could impact Alliant Energy's future financial condition
or results of operations:
WP&L has provided energy conservation services to its customers for many
years through a program called Shared Savings. In July 2002, the Wisconsin
governor vetoed legislation that would have extended the current program
beyond 2002. Alliant Energy is diligently pursuing various administrative
and regulatory solutions to ensure it realizes financial benefits related to
energy conservation programs in 2003 and beyond, similar to what it has
realized in recent years. Alliant Energy is currently unable to predict the
outcome of such efforts. Alliant Energy will also continue to explore
various other income-generating conservation alternatives to add to its
45
existing portfolio of products and services. Alliant Energy currently
expects to generate income of approximately $0.09 per diluted share from its
Wisconsin Shared Savings program in 2002.
Alliant Energy's qualified pension and other postretirement benefit expenses
for 2003 are currently expected to be approximately $18 million higher than
in 2002, although Alliant Energy has not yet finalized the plan assumptions.
The current expected increase is primarily due to unfavorable asset returns,
a reduction in the discount rate used to value plan benefit obligations and
expected increases in retiree medical costs. Alliant Energy will pursue the
possible recovery of the utility portion of these cost increases, which
represents a significant majority of the increase, in any rate filings it has
in its various jurisdictions. Alliant Energy also currently expects to
record an additional net-of-tax reduction of approximately $28 million to the
"Accumulated other comprehensive income (loss)" component of its common
equity in the fourth quarter of 2002 related to a minimum pension liability
adjustment for the qualified pension plans. Alliant Energy currently
estimates, based on the accumulated benefit obligation, that its qualified
pension plans as of September 30, 2002 were underfunded by $95 million (83%
funded). Alliant Energy's minimum funding requirement under IRS rules for
the 2002 plan year is approximately $3 million. However, Alliant Energy
elected to make a contribution of $30 million in the third quarter of 2002 to
improve the funded status of its plans.
Alliant Energy implemented a new Enterprise Resource Planning system in
October 2002 which will result in annual amortization expense of
approximately $11 million for five years. Alliant Energy is seeking rate
recovery of the utility portion of the amortized expenses which represents a
significant majority of the amortized expenses.
As part of its ongoing accounting processes and as discussed in the "Other
Matters - Critical Accounting Policies - Valuation of Assets" MD&A section of
Alliant Energy's Form 10-K for the year ended December 31, 2001, Alliant
Energy assesses the carrying amount and potential impairment of its
long-lived assets whenever events or changes in circumstances indicate that
the carrying amount may not be recoverable and/or if the loss in value is
deemed to be a permanent rather than temporary decline. Alliant Energy also
assesses the recoverability of its other assets, including equity and cost
method investments, goodwill and other assets in accordance with the relevant
accounting rules. Under the relevant accounting rules, the assessment as to
whether or not certain assets are impaired may depend upon whether management
intends to hold or sell the asset. If Alliant Energy decides to sell certain
of its assets, the decision to sell rather than to hold for long-term
investment could result in material asset valuation charges and/or
gains/losses on such sales. No such decisions to sell specific assets have
been made as of the filing date of this Form 10-Q. However, as discussed in
"Liquidity and Capital Resources - Credit Ratings and Balance Sheet," Alliant
Energy may decide as early as the fourth quarter of 2002 to sell certain of
its assets but is currently unable to predict what asset sales it will
execute or the terms of such potential sales.
FUTURE EARNINGS OUTLOOK
Alliant Energy has revised its 2002 adjusted earnings guidance to a range of
$1.25 to $1.35 per diluted share from its previous guidance of $1.35 to $1.55
primarily due to higher-than-anticipated losses from Alliant Energy's Brazil
investments and lower-than-anticipated oil and gas volumes at Whiting in the
third quarter of 2002 compared to what was assumed in the previous earnings
guidance. In addition, the $0.06 per share of asset valuation charges in the
third quarter of 2002 were not included in the previous guidance. These
items were partially offset by higher utility electric margins and a lower
effective income tax rate. The current earnings guidance does include the
$0.24 per share of asset valuation and other charges recorded in the first
nine months of 2002. Consistent with previous earnings guidance, this
guidance does not include the impact of certain non-cash SFAS 133 valuation
adjustments, asset valuation charges recorded in the first half of 2002 of
$0.18 per share related to Alliant Energy's McLeod investment, certain
gains/losses realized from any potential sales of non-strategic assets or
additional asset valuation charges that Alliant Energy may incur in the
fourth quarter of 2002.
Actions resulting from the comprehensive review Alliant Energy is undertaking
to maintain strong credit ratings and strengthen its balance sheet, as noted
in "Liquidity and Capital Resources - Credit Ratings and Balance Sheet," will
likely impact Alliant Energy's 2003 earnings. Alliant Energy will provide
updated 2003 guidance in the fourth quarter of 2002.
46
The results from Alliant Energy's Brazil investments have been very
disappointing. A number of steps have been taken to improve the operational
performance of the business, but continued slow recovery in energy sales from
the depressed sales levels resulting from the drought, currency devaluations
and continued regulatory and political uncertainties have resulted in
persistent under-performance that Alliant Energy cannot tolerate
indefinitely. Alliant Energy currently has no intentions of investing
additional capital in Brazil through the remainder of 2003. If Alliant
Energy does not see marked improvement in the performance of the business in
this timeframe, it will re-evaluate its commitment to the Brazil market.
Drivers for Alliant Energy's earnings estimates in 2002 include, but are not
limited to:
o Normal weather conditions in its domestic and international utility service
territories
o Economic development and sales growth in its utility service territories
o Continuing cost controls and operational efficiencies
o Ability of its utility subsidiaries to recover their operating costs, and to
earn a reasonable rate of return, in current and future rate proceedings
o Ability to recover its purchased-power and fuel costs, both domestically and
internationally
o Improved results of its Brazil investments and no material adverse
changes in the rates allowed by the Brazilian regulators
o Improved earnings from Whiting, including the stability of oil and gas
prices and continued successful execution of its acquisition strategy
o Improved results of its other non-regulated businesses
o No additional material permanent declines in the fair market value of, or
expected cash flows from, Alliant Energy's investments
o Other stable business conditions, including an improving economy
o Continued access to the capital markets to execute Alliant Energy's
strategic plan
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Quantitative and Qualitative Disclosures About Market Risk are reported under
Item 2 MD&A "Other Matters - Market Risk Sensitive Instruments and
Positions."
ITEM 4. CONTROLS AND PROCEDURES
Within 90 days prior to the date of filing this Quarterly Report on
Form 10-Q, Alliant Energy, IP&L and WP&L carried out evaluations, under the
supervision and with the participation of their management, including their
Chief Executive Officer, Chief Financial Officer and Disclosure Committee, of
the effectiveness of the design and operation of Alliant Energy's, IP&L's and
WP&L's disclosure controls and procedures pursuant to the requirements of the
Securities Exchange Act of 1934, as amended. Based on those evaluations, the
Chief Executive Officer and the Chief Financial Officer concluded that
Alliant Energy's, IP&L's and WP&L's disclosure controls and procedures are
effective.
There have been no significant changes in Alliant Energy's, IP&L's and WP&L's
internal controls, or in other factors that could significantly affect
internal controls, subsequent to the date of their evaluation, including any
corrective actions with regard to significant deficiencies and material
weaknesses.
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
In October 2000, Alliant Energy and WP&L filed a federal lawsuit seeking
declaratory relief regarding whether certain provisions of WUHCA are
unconstitutional as a violation of the interstate commerce and equal
protection provisions of the U.S. constitution. Alliant Energy and WP&L are
challenging the provisions of WUHCA which restrict ownership in utility
holding companies, limit the investments those companies can make and place
47
significant restrictions on companies that invest in Wisconsin utility
holding companies. Alliant Energy and WP&L also requested that the court
consider the constitutionality of issues related to the asset cap on
non-utility investments imposed by WUHCA. Alliant Energy and WP&L were
seeking only declaratory relief and not damages in the litigation. In
February 2001, the lawsuit was dismissed based on lack of allegations of
"injury in fact." Alliant Energy and WP&L filed a motion for reconsideration
with the court, which was denied in April 2001. Alliant Energy and WP&L
appealed the lower court's rulings to the 7th Circuit Court of Appeals. In
January 2002, the 7th Circuit reversed the district court's decision and
remanded the case back to the district court for hearing. In May 2002, the
district judge granted the state's motion for summary judgment and dismissed
Alliant Energy's and WP&L's case. Alliant Energy and WP&L appealed the
district court's decision to the 7th Circuit Court of Appeals in June 2002.
Briefing of the appeal has been completed, with a decision expected in the
first quarter of 2003. Alliant Energy and WP&L cannot currently predict the
outcome of this litigation.
Alliant Energy received an adverse ruling in 1999 from a U.S. district court
dealing with an income tax refund claim Alliant Energy filed relating to
capital losses disallowed under audit by the IRS. The district court also
disallowed certain related deductions allowed by the IRS to reduce a tax
refund due to Alliant Energy related to another tax issue. Alliant Energy
appealed the district court's ruling and the government appealed the decision
which led to the tax refund due to Alliant Energy. In June 2001, the U.S.
Court of Appeals for the 8th Circuit ruled in Alliant Energy's favor with
respect to both tax issues. In July 2001, the government filed a petition
for rehearing with the U.S. Court of Appeals related to the capital losses
allowed in the 8th Circuit opinion. The 8th Circuit denied the appeal in
September 2001 and remanded the case back to the district court for entry of
judgment. The federal government decided not to pursue the ruling in favor
of Alliant Energy of the U.S. Court of Appeals for the 8th Circuit with
respect to these two tax issues. As a result, Alliant Energy recorded the
applicable tax benefit and interest income in the fourth quarter of 2001
related to these events. An additional potential refund of approximately $14
million, plus interest, was also being contested by the government. However,
the district court ruled in favor of the federal government in July 2002 on
such issue. Alliant Energy has appealed the most recent district court
decision. An adverse decision on appeal would not result in Alliant Energy
recording any charges to earnings as the potential refund simply represents a
gain contingency. Subsequently, the government filed a cross appeal. An
adverse decision on the government's cross appeal, which Alliant Energy
believes is unlikely, would result in a negative impact to Alliant Energy's
earnings.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits: The following Exhibits are filed herewith.
---------
3.1 Restated Articles of Incorporation of IP&L
10.1 364-Day Credit Agreement, dated as of October 11, 2002, among
Alliant Energy, the Banks named therein and Bank One,
NA, as administrative agent and issuer of Letters of Credit
10.2 Credit Agreement, dated as of October 11, 2002, among IP&L, the
Banks named therein and Citibank, N.A., as administrative agent
10.3 Credit Agreement, dated as of October 11, 2002, among WP&L, the
Banks named therein and Citibank, N.A., as administrative agent
99.1 Written Statement of the Chairman, President and Chief Executive
Officer Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
99.2 Written Statement of the Executive Vice President and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for Alliant Energy
99.3 Written Statement of the Chairman and Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 for IP&L
48
99.4 Written Statement of the Executive Vice President and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for IP&L
99.5 Written Statement of the Chairman and Chief Executive Officer
Pursuant to 18 U.S.C. Section 1350 for WP&L
99.6 Written Statement of the Executive Vice President and Chief Financial
Officer Pursuant to 18 U.S.C. Section 1350 for WP&L
(b) Reports on Form 8-K:
--------------------
Alliant Energy
Alliant Energy filed a Current Report on Form 8-K, dated August 9, 2002,
reporting (under Items 7 and 9) that on August 9, 2002, pursuant to SEC
Order No. 4-460, Erroll B. Davis, Jr., the principal executive officer of
Alliant Energy, filed with the SEC a Statement, dated August 9, 2002, Under
Oath of Principal Executive Officer Regarding Facts and Circumstances
Relating to Exchange Act Filings, and Thomas M. Walker, the principal
financial officer of Alliant Energy, filed with the SEC a Statement, dated
August 9, 2002, Under Oath of Principal Financial Officer Regarding Facts
and Circumstances Relating to Exchange Act Filings. The officers executed
such statements in the exact form of Exhibit A to the Order.
Alliant Energy filed a Current Report on Form 8-K, dated July 18, 2002,
reporting (under Items 5 and 7) that it issued a press release announcing,
among other things, its updated 2002 adjusted earnings guidance.
IP&L - None.
WP&L - None.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, Alliant
Energy Corporation, Interstate Power and Light Company and Wisconsin Power
and Light Company have each duly caused this report to be signed on its
behalf by the undersigned thereunto duly authorized on the 14th day of
November 2002.
ALLIANT ENERGY CORPORATION
- --------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
INTERSTATE POWER AND LIGHT COMPANY
- ----------------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
WISCONSIN POWER AND LIGHT COMPANY
- ---------------------------------
Registrant
By: /s/ John E. Kratchmer Vice President-Controller and Chief Accounting Officer
- -------------------------
John E. Kratchmer (Principal Accounting Officer and Authorized Signatory)
49
CERTIFICATIONS
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliant Energy
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman, President and
Chief Executive Officer
50
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Alliant Energy
Corporation;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
51
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Interstate Power
and Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
52
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Interstate Power
and Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
53
I, Erroll B. Davis, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wisconsin Power
and Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Erroll B. Davis, Jr.
------------------------
Erroll B. Davis, Jr.
Chairman and Chief Executive Officer
54
I, Thomas M. Walker, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Wisconsin Power
and Light Company;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a) designed such disclosure controls and procedures to ensure that material
information relating to the registrant, including its consolidated
subsidiaries, is made known to us by others within those entities,
particularly during the period in which this quarterly report is being
prepared;
b) evaluated the effectiveness of the registrant's disclosure controls and
procedures as of a date within 90 days prior to the filing date of this
quarterly report (the "Evaluation Date"); and
c) presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based
on our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a) all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have identified
for the registrant's auditors any material weaknesses in internal
controls; and
b) any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 14, 2002
/s/ Thomas M. Walker
--------------------
Thomas M. Walker
Executive Vice President and
Chief Financial Officer
55