01—Abstract
Summary
Summary of the 10-K filed March 26, 2003. Cited figures are marked; the original filing is the authoritative source.
Alliant Energy Corporation's 2002 Form 10-K reports consolidated operating revenues of $2.61 billiona and net income of $106.9 million, or $1.18 per diluted share, down from $2.14 per share in 2001.
Income from continuing operations fell to $76.3 millionb ($0.84 per share) from $126.2 million, reflecting $0.46 per share of valuation charges in non-regulated businesses, a net loss of $47 million from Brazil investments, and higher interest expense. Domestic utility income rose slightly, with higher electric and gas margins largely offset by higher operating expenses and a higher effective tax rate. Total assets grew to $7.0 billion at year-end 2002, and long-term obligations net were $2.78 billion.
In November 2002 the board approved five strategic actions to strengthen the balance sheet: exiting non-regulated businesses (Whiting oil and gas, Australian operations, and affordable housing), cutting the annual common dividend target from $2.00 to $1.00c per share starting in the first quarter of 2003, reducing 2002-2003 construction and acquisition spending by about $400 million, planning to raise $200 to $300 million of common equity in 2003, and adding cost controls. Management expects asset sales to strengthen liquidity by up to $800 million to $1 billion. In March 2003, the company agreed to sell its Australian investment to Meridian Energy for about $350 million, with after-tax net cash proceeds of approximately $165 million.
Credit conditions weakened during the period. Moody's downgraded Alliant Energy's commercial paper to P-3 in January 2003, and the outlook for all entities is negative from Standard & Poor's.
Financial covenants were met at December 31, 2002. The company also faces pending rate cases in Wisconsin and Iowa, a dispute with the Wisconsin DNR over Columbia Energy Center, and an ongoing lawsuit challenging Wisconsin's holding company law.
02—Key points
Key Highlights
- Net income was $106.9 million, or $1.18 per diluted share, versus $172.4 million, or $2.14 per share, in 2001; income from continuing operations was $0.84 per share.
- Operating revenues were $2.61 billion in 2002, compared with $2.62 billion in 2001.
- The board cut the targeted annual common dividend from $2.00 to $1.00 per share, effective with the first-quarter 2003 dividend.
- Five strategic actions include exiting non-regulated businesses (Whiting, Australia, affordable housing), reducing 2002-2003 capital spending by about $400 million, and planning $200 to $300 million of 2003 common equity issuance.
- The March 2003 agreement to sell the Australian business to Meridian Energy is expected to yield about $165 million of after-tax net cash proceeds, with closing expected by the end of April 2003.
- Moody's downgraded Alliant Energy's commercial paper to P-3 in January 2003, and Standard & Poor's and Moody's outlooks are negative or stable depending on the entity; the company reports compliance with its credit covenants at December 31, 2002.
- Electric margin rose to $1.10 billion in 2002, up 4% from 2001, while gas margin rose 14% to $145.0 million; valuation charges and Brazil losses weighed on non-regulated results.
03—Questions
Frequently Asked Questions
Why did earnings fall in 2002?
Income from continuing operations dropped to $0.84 per diluted share from $1.57 in 2001. The filing cites $0.46 per share of valuation charges in non-regulated businesses, a net loss of $47 million from Brazil investments, lower earnings from non-regulated businesses, and higher interest expense. Domestic utility income rose slightly, as higher electric and gas margins were largely offset by higher operating expenses and a higher effective tax rate.
Why is the dividend being cut?
The board reduced the targeted annual common stock dividend from $2.00 to $1.00 per share as part of five strategic actions designed to maintain a strong credit profile, strengthen the balance sheet, and position the company for improved long-term financial performance. The reduction takes effect with the dividend declared and paid in the first quarter of 2003.
What are the company's plans to strengthen its balance sheet?
The company plans to sell or exit Whiting, its Australian businesses, and its affordable housing business, which it expects to use to strengthen liquidity by up to $800 million to $1 billion. It also intends to cut 2002-2003 construction and acquisition expenditures by about $400 million, raise $200 to $300 million of common equity in 2003 (dependent on market conditions), and implement additional cost controls.
How did the credit rating changes affect the company?
Moody's downgraded Alliant Energy's commercial paper to P-3 in January 2003, which reduced its ability to issue commercial paper at the parent level and required more reliance on bank lines. The filing states that if credit ratings are downgraded further, borrowing costs may rise and access to capital markets may be limited. The long-term debt of Alliant Energy and its subsidiaries is not subject to repayment requirements because of rating downgrades, though certain lease agreements contain ratings triggers involving about $45 million of accelerated payments.
What regulatory and legal matters could affect future results?
The utilities have several rate cases pending, including WP&L's 2003 and 2004 retail cases and IP&L's electric and gas cases in Iowa. A federal lawsuit challenging provisions of Wisconsin's holding company law is awaiting an appeal decision expected in the second quarter of 2003. WP&L also faces a Wisconsin DNR Notice of Violation at its Columbia Energy Center, and the company is pursuing an additional potential tax refund of about $14 million, plus interest, that the government is contesting.
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