SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
QUARTERLY REPORT UNDER SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
(Mark one)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 0-4117-1
IES UTILITIES INC.
(Exact name of registrant as specified in its charter)
Iowa 42-0331370
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
IE Tower, Cedar Rapids, Iowa 52401
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (319) 398-4411
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes X No
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Class Outstanding at July 31, 1994
Common Stock, $2.50 par value 13,370,788 shares
<PAGE>
IES UTILITIES INC.
INDEX
Page No.
Part I. Financial Information.
Item 1. Financial Statements.
Balance Sheets -
June 30, 1994 and December 31, 1993 3 - 4
Statements of Income -
Three, Six and Twelve Months Ended
June 30, 1994 and 1993 5
Statements of Cash Flows -
Three, Six and Twelve Months Ended
June 30, 1994 and 1993 6
Notes to Financial Statements 7 - 16
Item 2. Management's Discussion and Analysis of the
Results of Operations and Financial Condition. 17 - 27
Part II. Other Information. 28 - 30
Signatures. 31
<PAGE>
<TABLE>
PART 1. - FINANCIAL INFORMATION
ITEM 1. - FINANCIAL STATEMENTS
BALANCE SHEETS
<CAPTION>
June 30,
1994 December 31,
ASSETS (Unaudited) 1993
(in thousands)
<S> <C> <C>
Utility plant, at original cost:
Plant in service -
Electric $ 1,732,430 $ 1,707,278
Gas 152,933 147,956
Other 76,889 75,845
1,962,252 1,931,079
Less - Accumulated depreciation 850,897 813,312
1,111,355 1,117,767
Leased nuclear fuel, net of amortization 43,600 51,681
Construction work in progress 57,110 41,937
1,212,065 1,211,385
Current assets:
Cash and temporary cash investments 691 18,313
Accounts receivable -
Customer, less reserve 11,992 22,679
Other 8,503 10,330
Income tax refunds receivable 11,963 8,767
Production fuel, at average cost 11,583 14,338
Materials and supplies, at average cost 26,479 26,861
Regulatory assets 15,194 13,319
Prepayments and other 21,559 31,502
107,964 146,109
Other assets:
Regulatory assets 169,046 143,080
Nuclear decommissioning trust funds 31,373 28,059
Other investments 3,624 2,821
Deferred charges and other 15,418 15,524
219,461 189,484
$ 1,539,490 $ 1,546,978
<PAGE>
BALANCE SHEETS (CONTINUED)
<CAPTION>
June 30,
1994 December 31,
CAPITALIZATION AND LIABILITIES (Unaudited) 1993
(in thousands)
<S> <C> <C>
Capitalization:
Common stock - par value $2.50 per share - authorized
24,000,000 shares; 13,370,788 shares outstanding $ 33,427 $ 33,427
Paid-in surplus 279,042 279,042
Retained earnings ($18,209,000 restricted as to
payment of cash dividends) 190,603 188,862
Total common equity 503,072 501,331
Cumulative preferred stock - par value $50 per
share - authorized 466,406 shares; 366,406 shares
outstanding 18,320 18,320
Long-term debt 430,225 480,074
951,617 999,725
Current liabilities:
Notes payable to associated companies 14,266
Short-term borrowings 3,000 24,000
Capital lease obligations 13,508 15,345
Sinking funds and maturities 50,224 224
Accounts payable 36,653 47,179
Dividends payable 229 5,229
Accrued interest 9,464 9,438
Accrued taxes 43,422 39,763
Accumulated refueling outage provision 8,711 2,660
Adjustment clause balances 3,076 5,149
Provision for rate refund liability 31 8,670
Other 20,964 22,369
203,548 180,026
Long-term liabilities:
Capital lease obligations 30,092 36,336
Liability under National Energy Policy Act of 1992 12,065 11,984
Environmental liabilities 19,519 9,130
Other 34,579 29,866
96,255 87,316
Deferred credits:
Accumulated deferred income taxes 246,946 237,464
Accumulated deferred investment tax credits 41,124 42,447
288,070 279,911
Commitments and contingencies (Note 7)
$ 1,539,490 $ 1,546,978
The accompanying Notes to Financial Statememts are an integral part of
these statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF INCOME (UNAUDITED)
<CAPTION>
For the Three For the Six For the Twelve
Months Ended Months Ended Months Ended
June 30 June 30 June 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Operating revenues:
Electric $ 123,071 $ 122,306 $ 246,989 $ 248,933 $ 548,578 $ 485,558
Gas 23,164 24,806 88,297 89,141 153,474 159,451
Steam 1,784 1,807 4,746 4,630 9,026 8,621
148,019 148,919 340,032 342,704 711,078 653,630
Operating expenses:
Fuel for production 16,304 18,727 38,649 43,268 83,082 78,271
Purchased power 17,225 17,171 30,827 39,280 84,997 73,195
Gas purchased for resale 14,882 16,555 63,998 64,784 108,336 115,113
Other operating expenses 30,971 31,890 61,952 59,671 125,491 119,164
Maintenance 13,300 12,016 24,195 22,394 48,020 44,234
Depreciation and amortization 19,160 17,796 38,320 35,318 72,409 67,338
Property taxes 10,011 8,900 20,188 17,799 38,815 33,387
Federal and state income taxes:
Current 5,117 6,243 15,247 15,024 28,584 37,193
Deferred 2,586 897 3,683 1,667 17,926 (4,117)
Amortization of investment
tax credits (662) (696) (1,323) (1,391) (4,792) (2,780)
Miscellaneous taxes 1,389 1,341 2,878 2,693 5,070 4,973
130,283 130,840 298,614 300,507 607,938 565,971
Operating income 17,736 18,079 41,418 42,197 103,140 87,659
Other income and deductions:
Allowance for equity funds
used during construction 612 125 1,153 240 1,737 1,308
Miscellaneous, net 751 1,400 1,664 1,957 1,955 3,446
1,363 1,525 2,817 2,197 3,692 4,754
Interest:
Long-term debt 9,487 8,429 18,977 17,538 36,365 35,754
Other 745 1,053 1,783 2,601 4,425 4,837
Allowance for debt funds
used during construction (388) (369) (724) (659) (1,212) (1,356)
9,844 9,113 20,036 19,480 39,578 39,235
Net income 9,255 10,491 24,199 24,914 67,254 53,178
Preferred and preference
dividend requirements 229 229 457 457 914 1,183
Net income available for
common stock $ 9,026 $ 10,262 $ 23,742 $ 24,457 $ 66,340 $ 51,995
The accompanying Notes to Financial Statements are an integral
part of these statements.
</TABLE>
<PAGE>
<TABLE>
STATEMENTS OF CASH FLOWS (UNAUDITED)
<CAPTION>
For the Three For the Six For the Twelve
Months Ended Months Ended Months Ended
June 30 June 30 June 30
1994 1993 1994 1993 1994 1993
(in thousands)
<S> <C> <C> <C> <C> <C> <C>
Cash flows from operating activities:
Net income $ 9,255 $ 10,491 $ 24,199 $ 24,914 $ 67,254 $ 53,178
Adjustments to reconcile net income to
net cash flows from operating activities -
Depreciation and amortization 19,160 17,796 38,320 35,318 72,409 67,338
Principal payments under capital lease obligations 4,078 3,415 8,505 6,833 13,102 12,687
Deferred taxes and investment tax credits 1,736 (177) 1,982 (212) 12,726 (7,062)
Amortization of deferred charges 276 215 544 413 1,080 1,145
Refueling outage provision 2,914 1,639 6,051 4,634 (3,472) 10,409
Allowance for equity funds used during construction (612) (125) (1,153) (240) (1,737) (1,308)
Other 276 292 551 579 1,328 385
Other changes in assets and liabilities -
Accounts receivable 9,062 13,545 12,714 4,648 (250) (9,248)
Sale of utility accounts receivable (200) 21,000 (200) 13,790 (3,500) 21,500
Production fuel (302) (1,113) 2,755 5,984 1,851 8,834
Accounts payable (3,287) (9,425) (8,586) (10,213) 2,906 (1,661)
Accrued taxes (2,081) (3,160) 463 (4,349) (6,279) 1,141
Provision for rate refunds (9,054) (4,290) (8,639) (4,189) (6,542) (7,598)
Adjustment clause balances (6,797) (3,745) (2,073) 7,750 (3,457) (1,342)
Gas in storage (1,132) (3,121) 8,958 8,858 (2,209) (1,805)
Deferred energy efficiency costs (3,772) (2,717) (7,171) (3,902) (13,016) (8,944)
Other 1,869 1,577 1,501 2,611 6,321 4,209
Net cash flows from operating activities 21,389 42,097 78,721 93,227 138,515 141,858
Cash flows from financing activities:
Dividends declared on common stock (15,000) (5,700) (22,000) (15,700) (37,600) (24,190)
Dividends declared on preferred and preference stock (229) (229) (457) (457) (914) (1,183)
Dividends payable (5,000) 229
Equity infusion from parent company 50,000 50,000
Proceeds from issuance of long-term debt 119,400 31,000
Sinking fund requirements and reductions in
long-term debt and preferred and preference stock (224) (60,224) (224) (60,224) (19,624) (96,048)
Net change in short-term borrowings 17,266 52,288 (6,734) (14,312) (60,982) 74,823
Principal payments under capital lease obligations (4,427) (3,418) (8,147) (6,985) (12,439) (12,976)
Other (557)
Net cash flows from financing activities (2,614) (17,283) (42,562) (47,678) (12,159) 21,098
Cash flows from investing activities:
Construction and acquisition expenditures (29,342) (25,292) (48,334) (42,168) (119,378) (157,022)
Nuclear decommissioning trust funds (1,384) (1,384) (2,767) (2,767) (5,532) (5,532)
Other (98) 1,874 (2,680) (719) (2,393) (1,274)
Net cash flows from investing activities (30,824) (24,802) (53,781) (45,654) (127,303) (163,828)
Net increase (decrease) in cash and
temporary cash investments (12,049) 12 (17,622) (105) (947) (872)
Cash and temporary cash investments
at beginning of period 12,740 1,626 18,313 1,743 1,638 2,510
Cash and temporary cash investments
at end of period $ 691 $ 1,638 $ 691 $ 1,638 $ 691 $ 1,638
Supplemental cash flow information:
Cash paid during the period for -
Interest $ 13,354 $ 11,920 $ 21,948 $ 21,523 $ 39,686 $ 41,571
Income taxes $ 18,659 $ 17,501 $ 18,619 $ 21,283 $ 37,409 $ 39,306
Noncash investing and financing activities -
Capital lease obligations incurred $ 227 $ 2,903 $ 424 $ 13,398 $ 1,632 $ 12,850
The accompanying Notes to Financial Statements are an integral
part of these statements.
</TABLE>
<PAGE>
NOTES TO FINANCIAL STATEMENTS (UNAUDITED)
June 30, 1994
(1) GENERAL:
The interim Financial Statements have been prepared by IES Utilities
Inc. (the Company), without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. The Company is a wholly-owned
subsidiary of IES Industries Inc. (Industries) and was formed as a result of
the merger of Industries' former wholly-owned utility subsidiaries, Iowa
Electric Light and Power Company (IE) and Iowa Southern Utilities Company
(IS), effective December 31, 1993. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or omitted
pursuant to such rules and regulations, although the Company believes that the
disclosures are adequate to make the information presented not misleading. In
the opinion of the Company, the Financial Statements include all adjustments,
which are normal and recurring in nature, necessary for the fair presentation
of the results of operations and financial position. Certain prior period
amounts have been reclassified on a basis consistent with the 1994
presentation.
It is suggested that these Financial Statements be read in conjunction
with the Financial Statements and the notes thereto included in the Company's
Form 10-K for the year ended December 31, 1993. The accounting and financial
policies relative to the following items have been described in those notes
and have been omitted herein because they have not changed materially through
the date of this report:
General
Summary of significant accounting policies (other than discussed in Note
2)
Acquisition of Iowa service territory of Union Electric Company
Leases (other than discussed in Note 6)
Income taxes
Benefit plans (other than discussed in Note 2(a))
Preferred and preference stock
Debt (other than discussed in Note 5)
Estimated fair value of financial instruments (other than discussed in
Note 2(b))
Commitments
Jointly-owned electric utility plant
Segments of business
(2) NEW ACCOUNTING STANDARDS:
(a) Accounting for Postemployment Benefits -
On January 1, 1994, the Company adopted the provisions of Statement of
Financial Accounting Standards (SFAS) 112, "Employers' Accounting for
Postemployment Benefits," and its adoption did not have a material effect on
the Company's financial position or results of operations. This statement
requires that benefits offered to former or inactive employees after
termination of employment, but before retirement, be accrued over the service
lives of the employees if all of the following conditions are met: 1) the
obligation relates to services already performed; 2) the employees' rights
vest; 3) the payments are probable; and 4) the amounts are reasonably
determinable. Otherwise, such obligations are to be recognized at the time
they become probable and reasonably determinable. Prior to 1994, the Company
had generally accounted for these obligations as they were paid.
(b) Accounting for Certain Investments in Debt and Equity Securities -
On January 1, 1994, the Company adopted SFAS 115, "Accounting for
Certain Investments in Debt and Equity Securities." This standard, which
applies to the Company's nuclear decommissioning trust funds at June 30, 1994,
requires that unrealized gains and losses on such investments be included in
the reported balance of such investments. At June 30, 1994, the balance of
the "Nuclear decommissioning trust funds" as shown in the Balance Sheets
included $0.1 million of unrealized losses on the investments held in the
trust funds. The reserve for decommissioning costs, included in "Accumulated
depreciation" in the Balance Sheets was adjusted by a corresponding amount,
and there was no effect on net income from adopting this standard.
(3) RATE MATTERS:
(a) 1991 Electric Rate Case -
In October 1991, IE applied to the Iowa Utilities Board (IUB) for an
increase in retail electric rates of $18.9 million annually, or 6.0%. The IUB
approved an interim rate increase of $15.6 million, annually, which became
effective in December 1991, subject to refund.
In December 1992, the IUB issued its "Order On Rehearing," which
affirmed its original decision approving an annual electric rate increase of
$7.9 million. IE appealed one issue in the IUB's Order to the Iowa District
Court (Court) and, in December 1993, the Court issued its decision upholding
the IUB's Order. As a result of the Court's decision, the Company completed a
refund of $9.2 million, including interest, in the second quarter of 1994.
There was no effect on electric revenues or net income when the refund was
made because the Company had been reserving for the effect of the refund.
(b) 1994 Electric Rate Case -
On July 8, 1994, the Company applied to the IUB for an increase in
retail electric rates of approximately $21 million annually, or 4.3%. The
Company's proposal includes approximately $19 million in annual revenue
requirement related to increased recovery levels of depreciation expense,
nuclear decommissioning expense and post-employment benefit costs. To the
extent these proposals are approved by the IUB, corresponding increases in
expense would be recorded and there would be no effect on net income. Any
increase approved by the IUB is not expected to be effective before May 1995;
no interim increase was requested.
Included in the requested increase is a proposal to increase the annual
recovery of anticipated costs to decommission the Duane Arnold Energy Center
(DAEC), the Company's nuclear generating plant, to approximately $12 million
annually, from the current level of $5.5 million. Decommissioning expense is
included in "Depreciation and amortization" in the Statements of Income and
the cumulative amount is included in "Accumulated depreciation" in the Balance
Sheets to the extent recovered through rates. The proposal is based on the
following assumptions: 1) cost to decommission the DAEC of $252.7 million in
1993 dollars, based on the Nuclear Regulatory Commission (NRC) minimum formula
(which exceeds the amount in the current site-specific study); 2) inflation of
5.56% annually to the year 2014, when decommissioning is expected to begin; 3)
the prompt dismantling and removal method of decommissioning; 4) monthly
funding of all future collections into external trust funds and funded on a
tax-qualified basis to the extent possible; 5) an average after-tax return of
5.88% for all external investments; and 6) a collection method that levelizes
the recovery through rates, in real terms, through 2014. Current levels of
rate recovery: 1) do not recognize estimated future inflation for the entire
period prior to commencement of the decommissioning process; 2) assume that
decommissioning begins in 2010; and 3) provide recovery on a straight-line
basis without considering the effects of inflation. Earnings on the external
trust funds are recorded as interest income and a corresponding interest
expense payable to the funds is recorded. The earnings accumulate in the
external trust fund balances and in accumulated depreciation.
(4) UTILITY ACCOUNTS RECEIVABLE:
The Company has entered into an agreement, which expires in 1999, with a
financial institution to sell, with limited recourse, an undivided fractional
interest of up to $65 million in its pool of utility accounts receivable. At
June 30, 1994, $53 million was sold under the agreement.
(5) SHORT-TERM DEBT:
At June 30, 1994, the Company had bank lines of credit aggregating $67.7
million of which $7.7 million was being used to support pollution control
obligations and $3 million to support commercial paper. Commitment fees are
paid to maintain these lines and there are no conditions which restrict the
unused lines of credit. In addition to the above, the Company has an
uncommitted credit facility with a financial institution whereby it can borrow
up to $40 million. Rates are set at the time of borrowing and no fees are
paid to maintain this facility. At June 30, 1994, there were no outstanding
borrowings under this facility. The Company also has a letter of credit in
the amount of $3.4 million supporting its variable rate pollution control
obligations.
(6) OFFICE LEASE GUARANTY:
The Company entered into a five-year lease agreement, effective
July 1, 1994, as lessee for its corporate general office in Cedar Rapids,
Iowa. The lessor is a trust (IES Utilities Trust, not affiliated with the
Company) formed by various financial institutions. The term of the lease is
five years, with two one-year extensions available at the Company's option.
The Company had previously been leasing the building from a different lessor.
Pursuant to its Guaranty, if the Company defaults on its obligations under the
lease, the Company will be required to pay all debt service payments related
to the debt incurred by the lessor for purchase of the building, all amounts
payable with respect to the equity contributions (including a return on the
contributions) made to the trust by the financial institutions, and other
payments associated with the lease transaction. The aggregate amount of the
potential payments with respect to the Guaranty is approximately $20 million.
(7) CONTINGENCIES:
(a) Nuclear Insurance Programs -
The Price-Anderson Amendments Act of 1988 (1988 Act) provides the
Company with the benefit of $9.158 billion of public liability coverage
consisting of $200 million of insurance and $8.958 billion of potential
retroactive assessments from the owners of nuclear power plants. Based upon
its ownership of the DAEC, under the 1988 Act, the Company could be assessed a
maximum of $79 million per nuclear incident, with a maximum of $10 million per
year (of which the Company's 70% ownership portion would be $55 million and $7
million, respectively) if losses relating to the incidents exceeded $200
million. These limits are subject to adjustments for inflation in future
years.
The Company is a member of Nuclear Electric Insurance Limited (NEIL),
which provides insurance coverage for the cost of certain property losses at
nuclear generating stations and for the cost of replacement power during
certain outages. Companies insured through NEIL are subject to retroactive
premium adjustments if losses exceed accumulated reserve funds. NEIL's
accumulated reserve funds are currently sufficient to cover its exposure in
the event of a single incident under the property damage or replacement power
coverages. However, the Company could be assessed annually a maximum of $8.5
million for certain property losses and $1 million for replacement power if
NEIL's losses relating to accidents exceeded its accumulated reserve funds.
The Company is not aware of any losses that it believes are likely to result
in an assessment.
(b) Environmental Liabilities -
At June 30, 1994, the Company's Balance Sheets reflect approximately
$24 million (including $4.3 million as current) of liabilities for
investigation and remediation of environmental issues. The recorded amount
represents the Company's estimate of the minimum aggregate amount that will be
incurred for investigation and remediation of the environmental issues, which
amount is substantially related to clean-up costs associated with certain
former manufactured gas plant (FMGP) sites. In April 1994, the Company
received updated investigation reports on a number of sites, which, at some
sites, indicated a greater volume of contaminated material needing treatment,
and a greater volume of substances requiring higher cost incineration, than
was anticipated in prior estimates. Prior estimates were based on
investigations conducted at what were expected to be representative sites. It
is possible that future cost estimates will be greater than the current
estimates as further investigations are conducted and as additional facts
become known. The Company has not initiated the investigation on two of the
27 sites for which it has been identified as a Potentially Responsible Party
(PRP), but intends to do so, and is continuing work on sites requiring
remediation.
The Company has been named as a PRP for the FMGP sites by either the
Iowa Department of Natural Resources (IDNR) or the United States Environmental
Protection Agency (EPA). The Company is working pursuant to the requirements
of the IDNR and EPA to investigate, mitigate, prevent and remediate, where
necessary, damage to property, including damage to natural resources, at and
around the 27 sites in order to protect public health and the environment.
Such investigations are expected to be completed by 1999 and site-specific
remediations are anticipated to be completed within three years after the
completion of the investigations of each site. The Company may be required to
monitor these sites for a number of years upon completion of remediation.
Such monitoring costs are not included in the estimates above.
The Company is investigating the possibility of obtaining monies through
insurance coverage and third party cost sharing for FMGP investigation and
clean-up costs. The amount of shared costs, if any, can not be reasonably
determined and, accordingly, no potential sharing has been recorded at
June 30, 1994. Regulatory assets of approximately $24 million have been
recorded in the Balance Sheets, which reflect the future recovery that is
being provided through rates. Considering the recorded reserves for
environmental liabilities and the past rate treatment allowed by the IUB,
management believes that the clean-up costs incurred for these FMGP sites will
not have a material adverse effect on the Company's financial position or
results of operations.
(c) Clean Air Act -
The Clean Air Act Amendments Act of 1990 (Act) requires emission
reductions of sulfur dioxide and nitrogen oxides to achieve reductions of
atmospheric chemicals believed to cause acid rain. The provisions of the Act
will be implemented in two phases with Phase I affecting two of the Company's
units beginning in 1995 and Phase II affecting all units beginning in the year
2000.
The Company expects to meet the requirements of the Act by switching to
lower sulfur fuels and through capital expenditures primarily related to fuel
burning equipment and boiler modifications. The Company estimates capital
expenditures at approximately $28 million, including $5 million in 1994, in
order to meet these requirements of the Act.
(d) National Energy Policy Act of 1992 -
The National Energy Policy Act of 1992 requires owners of nuclear power
plants to pay a special assessment into a "Uranium Enrichment Decontamination
and Decommissioning Fund." The assessment is based upon prior nuclear fuel
purchases and, for the DAEC, averages $1.4 million annually through 2007, of
which the Company's 70% share is $1.0 million. The Company is recovering the
costs associated with this assessment through its electric fuel adjustment
clauses over the period the costs are assessed. The Company's 70% share of
the future assessment, $12.9 million payable through 2007, has been recorded
as a liability in the Balance Sheets, including $0.8 million included in
"Current liabilities - Other," with a related regulatory asset for the
unrecovered amount.
(e) Federal Energy Regulatory Commission (FERC) Order No. 636 -
The FERC issued Order No. 636 (Order 636) in 1992. Order 636, as
modified on rehearing: 1) requires the Company's pipeline suppliers to
unbundle their services so that gas supplies are obtained separately from
transportation service, and transportation and storage services are operated
and billed as separate and distinct services; 2) requires the pipeline
suppliers to offer "no notice" transportation service under which firm
transporters (such as the Company) can receive delivery of gas up to their
contractual capacity level on any day without prior scheduling; 3) allows
pipelines to abandon long-term (one year or more) transportation service
provided to a customer under an expiring contract whenever the customer fails
to match the highest rate and longest term (up to 20 years) offered to the
pipeline by other customers for the particular capacity; and 4) provides for a
mechanism under which pipelines can recover prudently incurred transition
costs associated with the restructuring process. The Company may benefit from
enhanced access to competitively priced gas supply and more flexible
transportation services as a result of Order 636. However, the Company will
be required to pay certain transition costs incurred and billed by its
pipeline suppliers as Order 636 is implemented.
The Company's three pipeline suppliers have filed tariffs with the FERC
implementing Order 636 and the pipelines have also made filings with the FERC
to begin collecting their respective transition costs. The Company began
paying the transition costs in November 1993, and, at June 30, 1994, has
recorded a liability of $5.1 million for such transition costs that have been
incurred by the pipelines to date, including $2.3 million expected to be
billed through June 1995. While the magnitude of the total transition costs
to be charged to the Company cannot yet be determined, the Company believes
any transition costs the FERC would allow the pipelines to collect would be
recovered from its customers, based upon past regulatory treatment of similar
costs by the IUB. Accordingly, regulatory assets, in amounts corresponding to
the liabilities, have been recorded to reflect the anticipated recovery.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS
OF THE RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The following discussion analyzes significant changes in the components
of net income and financial condition from the prior periods for IES Utilities
Inc. (the Company).
RESULTS OF OPERATIONS
The Company's net income available for common stock as compared to the
same periods last year decreased $1.2 million and $0.7 million for the three
and six month periods, respectively, and increased $14.3 million during the
twelve month period ended June 30, 1994. The Company's operating income
decreased $0.3 million and $0.8 million for the three and six month periods,
respectively, and increased $15.5 million during the twelve month period.
Reasons for the changes in the results of operations are explained in the
following discussion.
ELECTRIC REVENUES
Electric revenues and Kwh sales (before off-system sales) increased or
(decreased) for the periods ended June 30, 1994, compared with prior periods,
as follows:
Revenues Kwh Sales
(millions)
Three months $ 0.8 2.7%
Six months $ (1.9) 4.0%
Twelve months $ 63.0 13.3%
After adjusting for the effects of weather, sales increased 0.1%, 2.5%
and 11.6% for the three, six and twelve month periods, respectively. The
underlying growth in the Company's service territory is reflected in increases
in commercial and industrial sales for all periods. The increase for the
twelve month period also reflects the acquisition of the Iowa service
territory from Union Electric Company (UE) on December 31, 1992, for the full
1994 period, but for only one-half of the 1993 period. Excluding the effects
of the sales to the former UE customers, sales for the twelve month period
increased 7.1%.
The Company's electric tariffs include energy adjustment clauses (EAC)
that are designed to currently recover the costs of fuel and the energy
portion of purchased power billings to customers.
The revenue increase for the three month period was primarily the result
of the Kwh sales increase and higher off-system sales to other utilities,
substantially offset by lower fuel costs recovered through the EAC and lower
average revenue per Kwh, in part related to the sales mix among customer
classes.
The revenue decrease for the six month period was primarily related to
lower fuel costs recovered through the EAC, lower off-system sales to other
utilities and lower average revenue per Kwh, partially offset by the increase
in Kwh sales.
The revenue increase for the twelve month period was substantially
because of the increase in Kwh sales, largely related to the acquisition of
the UE territory, increased off-system sales to other utilities and higher
recoveries of fuel costs through the EAC. These effects were partially offset
by lower average revenue per Kwh primarily caused by the mix of sales among
customer classes, as increased sales to lower margin industrial customers
comprised a significant portion of the sales increase.
GAS REVENUES
Gas revenues decreased $1.6 million, $0.8 million and $6.0 million for
the three, six and twelve month periods ended June 30, 1994, respectively.
The Company's gas tariffs include purchased gas adjustment clauses (PGA) that
are designed to currently recover the cost of gas sold. The reduction in gas
revenues for all periods was attributable to lower gas costs recovered through
the PGA and lower dekatherm sales to ultimate consumers. Sales to ultimate
consumers decreased 4.5%, 4.3% and 4.9% for the three, six and twelve month
periods, respectively. Including transported volumes, sales increased 6.9%
for the three month period, and decreased 0.6% and 1.5% for the six and twelve
month periods, respectively. After adjusting for the effects of weather,
sales (including transported volumes) increased 15.6% and 1.0% for the three
and six month periods, respectively, and were flat for the twelve month
period.
OPERATING EXPENSES
Fuel for production decreased $2.4 million and $4.6 million during the
three and six month periods, respectively, primarily because of larger under
collections of fuel costs through the EAC in 1994; such under collections are
recorded as reductions to fuel for production expenses. This decrease was
partially offset by the effect of increased Kwh generation during the periods.
Fuel for production increased $4.8 million during the twelve month period
primarily because of increased Kwh generation at the Company's fossil-fueled
generating stations, partially offset by lower generation at the Company's
nuclear generating plant, the Duane Arnold Energy Center (DAEC). The lower
generation at the DAEC was because of a refueling outage in the 1994 period.
Purchased power increased $0.1 million and $11.8 million during the
three and twelve month periods, respectively, primarily because of increased
energy purchases related to increased Kwh sales, partially offset by decreased
capacity charges. The decreased capacity charges were attributable to the
expiration, in April 1993, of the Muscatine purchase power agreement, net of
higher capacity costs relating to contracts associated with the acquisition of
the UE territory. Purchased power decreased $8.5 million during the six month
period primarily because of a $7 million decrease in capacity charges relating
to the expiration of the purchase power agreement with the City of Muscatine.
Lower energy purchases, primarily because of lower off-system sales to other
utilities and increased generation, also contributed to the reduction in
purchased power costs during this period.
Gas purchased for resale decreased $1.7 million, $0.8 million and
$6.8 million for the three, six and twelve month periods, respectively. The
decrease for all periods is primarily due to lower dekatherm sales, partially
offset by higher natural gas prices.
Other operating expenses decreased $0.9 million for the three month
period and increased $2.3 million and $6.3 million for the six and twelve
month periods, respectively. The decrease for the three month period is
primarily due to lower electric transmission and distribution costs, partially
offset by higher labor and benefit costs. The increases for the six and
twelve month periods are primarily attributable to increased labor and benefit
costs and higher information systems costs, partially offset by lower electric
transmission and distribution costs and, for the twelve month period, lower
costs at the DAEC.
Maintenance expenditures increased $1.3 million, $1.8 million and
$3.8 million during the three, six and twelve month periods, respectively.
The increases for all periods were primarily related to increased maintenance
activities at the Company's generating stations and increased electric
transmission and distribution expenditures.
Depreciation and amortization increased during all periods primarily
because of increases in utility plant in service. Depreciation and
amortization expenses for both years include a provision for decommissioning
the DAEC ($5.5 million annually), which is collected through rates.
The staff of the Securities and Exchange Commission (SEC) has questioned
certain of the current accounting practices regarding the recognition,
measurement and classification of decommissioning costs for nuclear generating
stations in the financial statements of electric utilities. In response to
these questions, the Financial Accounting Standards Board has agreed to review
the accounting for removal costs, including decommissioning. If such current
electric utility industry accounting practices are changed, annual provisions
for decommissioning could increase, the estimated cost for decommissioning
could be recorded as a liability rather than as accumulated depreciation, and
the liability for the entire expected cost to decommission the DAEC may be
required to be recorded currently. If such changes are required, the Company
believes that there would not be an adverse effect on its financial position
or results of operations based on current rate making practices. See Note 3
of the Notes to Financial Statements for a further discussion of
decommissioning.
Property taxes increased $1.1 million, $2.4 million and $5.4 million
during the three, six and twelve month periods, respectively. These increases
are primarily because of increases in assessed property values. The
acquisition of the UE service territory also contributed to the twelve month
increase.
The increase in income taxes for all periods is, in part, because of the
effect of certain temporary differences for which the Company did not record
deferred taxes pursuant to rate making practices. Increased pre-tax income
for the six and twelve month periods and the effect of a 1% increase in the
Federal statutory income tax rate in the twelve month period also contributed
to the increase for those periods.
LIQUIDITY AND CAPITAL RESOURCES
The Company's capital requirements are primarily attributable to its
construction programs and debt maturities and sinking fund requirements. Cash
flows from operating activities for the twelve months ended June 30, 1994,
were approximately $139 million. These funds were primarily used for
construction and acquisition expenditures.
It is anticipated that the Company's future capital requirements will be
met by both cash flows from operations and external financing. The level of
cash flows from operations is partially dependent upon economic conditions,
legislative activities, environmental matters and timely rate relief. See
Note 3 and Note 7 of the Notes to Financial Statements for a discussion of the
Company's rate cases and contingencies. Access to the long-term and
short-term capital and credit markets is necessary for obtaining funds
externally.
The Company's liquidity and capital resources will be affected by
environmental and legislative issues, including the ultimate disposition of
remediation issues surrounding the former manufactured gas plant (FMGP) issue,
the Clean Air Act as amended, the National Energy Policy Act of 1992, and
Federal Energy Regulatory Commission (FERC) Order 636, as discussed in Note 7
of the Notes to Financial Statements. Consistent with rate making principles,
management believes that the costs incurred for the above matters will not
have a material adverse effect on the financial position or results of
operations of the Company.
The Iowa Utilities Board (IUB) has adopted rules which mandate the
Company to spend 2% of electric and 1.5% of gas gross retail operating
revenues for energy efficiency programs. Energy efficiency costs in excess of
the amount in the most recent electric and gas rate cases are being recorded
as regulatory assets. At June 30, 1994, the Company had $25.7 million of such
costs recorded as regulatory assets. Under this mandate, the Company will
make its initial filing for recovery of these costs in mid-August 1994, but
does not expect to begin recovering the costs until 1995.
CONSTRUCTION AND ACQUISITION PROGRAM
The Company's construction and acquisition program anticipates
expenditures of $150 million for 1994, of which approximately 44% represents
expenditures for electric transmission and distribution facilities, 18%
represents fossil-fueled generation expenditures and 10% represents nuclear
generation expenditures. The Company had construction and acquisition
expenditures of approximately $48 million for the six months ended
June 30, 1994. Substantial commitments have been made in connection with the
remaining anticipated expenditures.
The Company's levels of construction and acquisition expenditures are
projected to be $149 million in 1995, $144 million in 1996, $149 million in
1997, and $160 million in 1998. It is estimated that approximately 80% of
construction expenditures will be provided by cash from operating activities
(after payment of dividends) for the five year period 1994-1998.
Capital expenditure, investment and financing plans are subject to
continual review and change. The capital expenditure and investment programs
may be revised significantly as a result of many considerations including
changes in economic conditions, variations in actual sales and load growth
compared to forecasts, requirements of environmental, nuclear and other
regulatory authorities, acquisition opportunities, the availability of
alternate energy and purchased power sources, the ability to obtain adequate
and timely rate relief, escalations in construction costs and conservation and
energy efficiency programs.
LONG-TERM FINANCING
Other than periodic sinking fund requirements, which the Company intends
to meet by pledging additional property, approximately $124 million of
long-term debt has scheduled maturities prior to December 31, 1998. The
Company intends to refinance the majority of the debt maturities with
long-term debt.
The Indentures pursuant to which the Company issues First Mortgage Bonds
constitute direct first mortgage liens upon substantially all tangible public
utility property and contain covenants that restrict the amount of additional
bonds that may be issued. At June 30, 1994, such restrictions would have
allowed the Company to issue $276 million of additional First Mortgage Bonds.
The Company has received authority from the FERC to issue $250 million of
First Mortgage Bonds and is currently authorized by the SEC to issue
$50 million of long-term debt under an existing registration statement.
The Company's Articles of Incorporation authorize and limit the
aggregate amount of additional shares of Cumulative Preferred Stock and
Cumulative Preference Stock which may be issued. At June 30, 1994, the
Company could have issued 700,000 shares of Cumulative Preference Stock, $100
par value, and 100,000 additional shares of Cumulative Preferred Stock, $50
par value.
The Company's capitalization ratios at June 30, were as follows:
1994 1993
Long-term debt 48% 44%
Preferred stock 2 2
Common equity 50 54
100% 100%
The 1994 ratios include $50 million of long-term debt that is due
in less than one year because it is the Company's intention to
refinance the debt with long-term issues. The 1993 common equity
ratio was temporarily high because the Company had not yet issued
long-term debt to replace other recently redeemed long-term debt.
SHORT-TERM FINANCING
For interim financing, the Company is authorized by the FERC to issue,
through 1994, up to $125 million of short-term notes. This availability of
short-term financing provides flexibility in the issuance of long-term
securities. At June 30, 1994, the Company had $3.0 million of commercial
paper and $14.3 million of notes payable to associated companies outstanding.
The Company has an agreement, which expires in 1999, with a financial
institution to sell, with limited recourse, an undivided fractional interest
of $65 million in its pool of utility accounts receivable. At June 30, 1994,
$53 million had been sold under the agreement.
At June 30, 1994, the Company had bank lines of credit aggregating $67.7
million, of which $7.7 million was being used to support pollution control
obligations and $3.0 million to support commercial paper. Commitment fees are
paid to maintain these lines and there are no conditions which restrict the
unused lines of credit. In addition to the above, the Company has an
uncommitted credit facility with a financial institution whereby it can borrow
up to $40 million. The Company also has a letter of credit in the amount of
$3.4 million supporting its variable rate pollution control obligations.
ENVIRONMENTAL MATTERS
At June 30, 1994, the Company's Balance Sheets reflect approximately
$24 million of liabilities for investigation and remediation of environmental
issues. The recorded amount represents the Company's estimate of the minimum
aggregate amount that will be incurred for investigation and remediation of
the environmental issues, which amount is substantially related to clean-up
costs associated with certain former manufactured gas plant (FMGP) sites. In
April 1994, the Company received updated investigation reports on a number of
sites, which, at some sites, indicated a greater volume of contaminated
material needing treatment, and a greater volume of substances requiring
higher cost incineration, than was anticipated in prior estimates. Prior
estimates were based on investigations conducted at what were expected to be
representative sites. It is possible that future cost estimates will be
greater than the current estimates as further investigations are conducted and
as additional facts become known. The Company has not initiated the
investigation on two of the 27 sites for which it has been identified as a
Potentially Responsible Party (PRP), but intends to do so, and is continuing
work on sites requiring remediation.
Considering the recorded reserves for environmental liabilities and the
past rate treatment allowed by the IUB, management believes that the clean-up
costs incurred for these FMGP sites will not have a material adverse effect on
its financial position or results of operations.
Refer to Note 7 of the Notes to Financial Statements for information
relating to potential environmental liabilities associated with certain FMGP
sites.
The Low-Level Radioactive Waste Policy Amendments Act of 1985 (Act),
which mandated that each state must take responsibility for the storage of
low-level radioactive waste produced within its borders, will have an impact
on disposal practices for low-level radioactive waste over the next several
years. The State of Iowa has joined the Midwest Interstate Low-Level
Radioactive Waste Compact Commission (Midwest Compact Commission), which is
planning a storage facility to be located in Ohio to store waste generated by
the six states in the Midwest Compact Commission. At June 30, 1994, the
Company has prepaid costs of approximately $1 million (included in "Current
assets - Prepayments and other" in the Balance Sheets) to the Midwest Compact
Commission for the building of such a facility. Due to the legal and
political uncertainties, the Company cannot estimate the future payments, if
any, that will be made to the Midwest Compact Commission.
The Company and the other members of the Midwest Compact Commission
shipped their low-level wastes to waste management facilities in Barnwell,
South Carolina, Hanford, Washington and/or Beatty, Nevada through
June 30, 1994. Currently, the Company is storing its low-level radioactive
waste generated at the DAEC on-site until new disposal arrangements are
finalized among the Midwest Compact Commission members. On-site storage
capability currently exists for low-level radioactive waste expected to be
generated through the DAEC's license life under normal operating conditions.
In February 1993, the Nuclear Regulatory Commission (NRC) proposed a
rule that would not permit on-site storage of low-level radioactive waste
after January 1, 1996, unless the generator of such waste can document that it
has exhausted other reasonable waste management options. The Company is
currently investigating its options for the disposal of its low-level
radioactive waste.
<PAGE>
PART II. - OTHER INFORMATION
Item 1. Legal Proceedings.
Reference is made to Notes 3 and 7 of the Notes to Financial Statements
for a discussion of rate matters and environmental matters, respectively.
Item 2. Changes in the Rights of the Company's Security Holders.
None.
Item 3. Default Upon Senior Securities.
None.
Item 4. Results of Votes of Security Holders.
(a) The Company held its annual Meeting of Shareholders on
May 17, 1994.
(b) The following matter was voted upon at the Annual Meeting of
Shareholders:
The election of nominees for Directors who will serve for a
one-year term or until their respective successors shall be duly
elected. The nominees, all of whom were elected, were as follows:
C.R.S. Anderson, J. Wayne Bevis, Dr. George Daly, Blake O. Fisher,
Jr., G. Sharp Lannom, IV, Lee Liu, Robert D. Ray, David Q. Reed,
Henry Royer, Robert W. Schlutz, and Anthony R. Weiler.
IES Industries Inc., the sole shareholder of the Company, voted
all 13,370,788 shares for the election of the above nominees.
Item 5. Other Information.
a) The Company has calculated the ratio of earnings to fixed charges
pursuant to Item 503 of Regulation S-K of the Securities and
Exchange Commission as follows:
For the twelve months ended:
June 30, 1994 3.39
December 31, 1993 3.41
December 31, 1992 2.49
December 31, 1991 2.64
December 31, 1990 2.65
December 31, 1989 2.82
b) Effective August 2, 1994, Mr. Jack R. Newman, President of the law
firm of Newman, Bouknight, & Edgar, P.C. was elected to serve on
the Company's Board of Directors.
For the twelve months ended June 30, 1994, the Company incurred
$596,483 for legal services with Mr. Newman's firm.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits -
* 3(a) Bylaws of Registrant, as amended May 17, 1994.
10(a) Receivables Purchase and Sale Agreement dated as of
June 30, 1989, as Amended and Restated as of
April 15, 1994, among IES Utilities Inc. (as Seller)
and CIESCO L.P. (as the Investor) and Citicorp North
America, Inc. (as Agent). (Filed as Exhibit 10(a) to
the Company's Form 10-Q for the quarter ended
March 31, 1994).
*10(b) Guaranty (IES Utilities Trust No. 1994-A) from IES
Utilities Inc., dated as of June 29, 1994.
*12 Ratio of Earnings to Fixed Charges.
* Exhibits designated by an asterisk are filed herewith.
(b) Reports on Form 8-K -
None.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
IES UTILITIES INC.
(Registrant)
Date August 10, 1994 By /s/ Dr. Robert J. Latham
(Signature)
Dr. Robert J. Latham
Senior Vice President, Finance
and Corporate Affairs, & Treasurer
By /s/ Richard A. Gabbianelli
(Signature)
Richard A. Gabbianelli
Controller & Chief Accounting Officer
EXHIBIT 3(a)
BYLAWS AS AMENDED
OF
IES UTILITIES INC.
(Amended Through May 17, 1994)
ARTICLE I
OFFICES
SECTION 1.1. PRINCIPAL OFFICE. - The principal office shall be
established and maintained in the ie: Tower, 200 First Street, S.E., in the
City of Cedar Rapids, in the County of Linn, in the State of Iowa.
SECTION 1.2. OTHER OFFICES. - The Corporation may have other offices,
either within or without the State of Iowa, at such place or places as the
Board of Directors may from time to time appoint or the business of the
Corporation may require. The registered office of the Corporation required by
the Iowa Business Corporation Act to be maintained in the State of Iowa may
be, but need not be identical with the principal office in the State of Iowa,
and the address of the registered office may be changed from time to time by
the Board of Directors.
ARTICLE II
SHAREHOLDERS
SECTION 2.1. ANNUAL MEETING. - The annual meeting of shareholders for
the election of directors and the transaction of other business shall be held,
in each year, on the third Tuesday in May at three o'clock in the afternoon
unless such day is a holiday, in which event the annual meeting will be held
at such time on the next succeeding business day.
SECTION 2.2. PLACE OF SHAREHOLDERS' MEETING. - The annual meeting or
any special meeting of shareholders shall be held at the principal office of
the Corporation or any place, within the State of Iowa, as shall be designated
by the Board of Directors and stated in the notice of the meeting.
SECTION 2.3. SPECIAL MEETINGS. - Special meetings of the shareholders
may be called by the Chairman of the Board, the President, the Board of
Directors, or the holders of not less than ten percent of all the shares
entitled to vote at the meeting.
SECTION 2.4. NOTICE OF MEETINGS. - WAIVER. - Written or printed notice,
stating the place, day and hour of the meeting and, in case of a special
meeting, the purpose or purposes for which the meeting is called, shall be
delivered not less than ten nor more than sixty days before the date of the
meeting, either personally or by mail, by or at the direction of the Board of
Directors, to each shareholder of record entitled to vote at such meeting. If
mailed, such notice shall be deemed to be delivered when deposited in the
United States mail addressed to the shareholder at the address appearing on
the stock transfer books of the Corporation, with postage thereon prepaid.
SECTION 2.5. CLOSING OF TRANSFER BOOKS; FIXING OF RECORD DATE. - For
the purpose of determining shareholders entitled to notice of, or to vote at,
any special meeting of shareholders, or any adjournment thereof, or
shareholders entitled to receive payment of any dividend, or in order to make
a determination of shareholders for any other proper purpose, the Board of
Directors of the Corporation may provide that the stock transfer books shall
be closed for a stated period but not to exceed, in any case, 60 days. If the
stock transfer books shall be closed for the purpose of determining share-
holders entitled to notice of or to vote at a meeting of shareholders, such
books shall be closed for at least 10 days immediately preceding such meeting.
In lieu of closing the stock transfer books, the Board of Directors may fix in
advance a date as the record date for any such determination of shareholders,
such date in any case to be not more than 60 days, and in case of a meeting of
shareholders not less than 10 days, prior to the date on which the particular
action, requiring such determination of shareholders, is to be taken. If the
stock transfer books are not closed and no record date is fixed for the
determination of shareholders, or shareholders entitled to receive payment of
a dividend, the date on which notice of the meeting is mailed or the date on
which the resolution of the Board of Directors declaring such dividend is
adopted, as the case may be, shall be the record date for such determination
of shareholders. When a determination of shareholders entitled to vote at any
meeting of shareholders has been made as provided in this section, such
determination shall apply to any adjournment thereof.
SECTION 2.6. VOTING RECORD. - The officer or agent having charge of the
stock transfer books for shares of the Corporation shall make, at least 10
days prior to each meeting of shareholders, a complete record of the
shareholders entitled to vote at such meeting, or any adjournment thereof,
arranged in alphabetical order with the address of and the number of shares
held by each, which record shall be kept on file at the registered office of
the Corporation and shall be subject to inspection by any shareholder at any
time during usual business hours for a period of 10 days prior to such
meeting. Such record shall also be produced and kept open at the time and
place of the meeting and shall be subject to the inspection of any shareholder
during the whole time of the meeting. The original stock transfer book shall
be prima facie evidence of the identity of the shareholders entitled to
examine such record or transfer books or to vote at any meeting of
shareholders.
SECTION 2.7. QUORUM. - A majority of the outstanding shares of the
Corporation entitled to vote, represented in person or by proxy, shall
constitute a quorum at a meeting of shareholders. If less than a majority of
the outstanding shares are represented at a meeting, a majority of the shares
so represented may adjourn the meeting from time to time without further
notice. At such adjourned meeting at which a quorum shall be present or
represented, any business may be transacted which might have been transacted
at the meeting as originally notified. The shareholders present at a duly
organized meeting may continue to transact business until adjournment only if
a quorum is represented throughout.
SECTION 2.8. CONDUCT OF MEETING. - Meetings of the shareholders shall
be presided over by one of the following officers in the order of seniority if
present and acting - the Chairman of the Board, the President, the Secretary,
or if none of the foregoing is in office and present and acting, by a
chairperson to be chosen by the shareholders. The Secretary of the
Corporation, or if absent, an Assistant Secretary, shall act as secretary of
the meeting, but if neither the Secretary nor an Assistant Secretary is
present, or if the Secretary is presiding over the meeting and the Assistant
Secretary is not present, the Chairman of the meeting shall appoint a
secretary of the meeting.
SECTION 2.9. PROXIES. - At all meetings of shareholders, a shareholder
may vote by proxy executed in writing by the shareholder or by a duly
authorized attorney-in-fact. Such proxy shall be filed with the Secretary of
the Corporation before or at the time of the meeting. No proxy shall be valid
after eleven months from the date of its execution, unless otherwise provided
in the proxy.
SECTION 2.10. VOTING OF SHARES. - Each outstanding share entitled to
vote shall be entitled to one vote upon each matter submitted to a vote at a
meeting of shareholders.
SECTION 2.11 VOTING OF SHARES BY CERTAIN HOLDERS. - Shares standing in
the name of another corporation may be voted by such officer, agent or proxy
as the Bylaws of such corporation may prescribe, or, in the absence of such
provision, as the Board of Directors of such corporation may determine.
Shares held by an administrator, executor, guardian or conservator may
be voted by such person, either in person or by proxy, without a transfer of
such shares into that person's name. Shares standing in the name of a trustee
may be voted by such trustee, either in person or by proxy, without a transfer
of such shares into the trustee's name. The Corporation may request evidence
of such fiduciary status with respect to the vote, consent, waiver, or proxy
appointment.
Shares standing in the name of a receiver or trustee in bankruptcy may
be voted by such receiver or trustee, and shares held by or under the control
of a receiver may be voted by such receiver without the transfer of the shares
into such person's name if authority so to do be contained in an appropriate
order of the court by which such receiver was appointed.
A pledgee, beneficial owner, or attorney-in-fact of the shares held in
the name of a shareholder shall be entitled to vote such shares. The
Corporation may request evidence of such signatory's authority to sign for the
shareholder with respect to the vote, consent, waiver, or proxy appointment.
Neither treasury shares nor shares held by another corporation, if a
majority of the shares entitled to vote for the election of Directors of such
other corporation is held by the Corporation, shall be voted at any meeting or
counted in determining the total number of outstanding shares at any given
time.
ARTICLE III
BOARD OF DIRECTORS
SECTION 3.1. GENERAL POWERS. - The business and affairs of the
Corporation shall be managed by its Board of Directors.
SECTION 3.2. NUMBER, TENURE, QUALIFICATIONS AND REMOVAL. - The number
of Directors of the Corporation shall be twelve. Each Director shall hold
office until the next annual meeting of shareholders and until the Director's
successor shall have been elected and qualified, unless removed at a meeting
called expressly for that purpose by a vote of a majority of the shares then
entitled to vote at an election of Directors. A Director may only be removed
upon a showing of cause. Directors need not be residents of the State of Iowa
or shareholders of the Corporation. Not more than three Directors shall be
officers or employees of the Corporation or its subsidiaries. No person who
has reached the age of 70 years shall be eligible for election or reelection
to the Board of Directors.
SECTION 3.3. REGULAR MEETINGS. - An annual meeting of the Board of
Directors shall be held without other notice than this Bylaw immediately
after, and at the same place as, the annual meeting of shareholders. Unless
otherwise provided by resolution of the Board of Directors, regular meetings
of the Board of Directors, additional to the annual meeting, shall be held on
the first Tuesday of February, May, and August, and on the first Wednesday of
November of each year, at the principal office or any place within or without
the State of Iowa as shall be designated by the Board of Directors without
notice other than such resolution.
SECTION 3.4. SPECIAL MEETINGS. - Special meetings of the Board of
Directors may be called by or at the request of the Chairman of the Board,
President or any two Directors. The person or persons authorized to call
special meetings of the Board of Directors may fix any place either within or
without the State of Iowa, whether in person or by telecommunications, as the
place for holding any special meeting of the Board of Directors called by
them.
SECTION 3.5. NOTICE. - Notice of any special meeting shall be given at
least three days prior to the meeting by written notice delivered personally
or mailed to each Director at the Director's business address, by telegram, or
orally by telephone. If mailed, such notice shall be deemed to be delivered
when deposited in the United States mail, so addressed, with postage prepaid.
If notice be given by telegram, such notice shall be deemed to be delivered
when the telegram is delivered to the telegraph company. Any director may
waive notice of any meeting. The attendance of a Director at a meeting shall
constitute a waiver of notice of such meeting, except where a Director attends
a meeting for the express purpose of objecting to the transaction of any busi-
ness because the meeting is not lawfully called or convened. Neither the
business to be transacted at, nor the purpose of, any regular or special
meeting of the Board of Directors need be specified in the notice or waiver of
notice of such meeting.
SECTION 3.6. QUORUM. - A majority of the number of Directors fixed by
Section 3.2 of this Article III shall constitute a quorum for the transaction
of business at any meeting of the Board of Directors, but if less than such
majority is present at a meeting, a majority of the Directors present may
adjourn the meeting from time to time without further notice.
SECTION 3.7. MANNER OF ACTING. - The act of the majority of the
Directors present at a meeting at which a quorum is present shall be the act
of the Board of Directors. A Director shall be considered present at a
meeting of the Board of Directors or of a committee designated by the Board if
the Director participates in such meeting by conference telephone or similar
communications equipment by means of which all persons participating in the
meeting can hear each other.
SECTION 3.8. INFORMAL ACTION. Any action required or permitted to be
taken at any meeting of the Directors of the Corporation or of any committee
of the Board may be taken without a meeting if a consent in writing setting
forth the action so taken shall be signed by all of the Directors or all of
the members of the committee of Directors, as the case may be. Such consent
shall have the same force and effect as a unanimous vote at a meeting and
shall be filed with the Secretary of the Corporation to be included in the
official records of the Corporation.
SECTION 3.9. PRESUMPTION OF ASSENT. - A Director of the Corporation who
is present at a meeting of the Board of Directors at which action on any
corporate matter is taken shall be presumed to have assented to the action
taken unless (a) the Director objects at the beginning of the meeting or
promptly upon arrival to the holding of or transacting business at the
meeting, (b) the Director's dissent shall be entered in the minutes of the
meeting, or (c) the Director shall file a written dissent to such action with
the person acting as the secretary of the meeting before the adjournment
thereof or shall forward such dissent by registered or certified mail to the
Secretary of the Corporation immediately after the adjournment of the meeting.
Such right to dissent shall not apply to a Director who voted in favor of such
action.
SECTION 3.10. VACANCIES. - Any vacancy occurring in the board of
Directors and any directorship to be filled by reason of an increase in the
number of Directors may be filled by the affirmative vote of a majority of the
Directors then in office, even if less than a quorum of the Board of
Directors. Notwithstanding the foregoing, during the Five Year Period (as
such term is defined in the Agreement and Plan of Merger between IE Industries
Inc. and Iowa Southern Inc. dated February 27, 1991), if any of the Company
Directors (as such term is defined in the Agreement and Plan of Merger between
IE Industries Inc. and Iowa Southern Inc. dated February 27, 1991) are
removed, resign or cease to serve, unless a majority of the remaining Company
Directors elects not to fill such vacancy or vacancies, then the vacancy or
vacancies resulting therefrom will be filled by a person selected by the Board
of Directors; provided that such person is acceptable to at least three of the
remaining Company Directors as evidenced by such Company Directors' votes or
written consents therefor. A Director so elected shall be elected for the
unexpired term of the vacant directorship or the full term of such new
directorship. Failure to attend three consecutive regular meetings of the
Board of Directors shall disqualify a Director from further service as a
Director during the year in which the third delinquency occurs and shall make
such Director ineligible for re-election, unless such failure to attend be
determined by the affirmative vote of two-thirds of the remaining Directors
holding office to be due to circumstances beyond the control of such Director.
A resignation may be tendered by any Director at any meeting of the
shareholders or of the Board of Directors, who shall at such meeting accept
the same.
SECTION 3.11. COMPENSATION. - The Directors may be paid their expenses,
if any, of attendance at each meeting of the Board of Directors and may be
paid a fixed sum for attendance at each meeting of the Board of Directors or
may receive a stated salary as Director. No such payment shall preclude any
Director from serving the Corporation in any other capacity and receiving
compensation therefor. Members of special or standing committees may be
allowed like compensation for attending committee meetings.
SECTION 3.12. EXECUTIVE COMMITTEE. - The Board of Directors shall, at
each annual meeting thereof, appoint from its number an Executive Committee of
not less than three (3) nor more than five (5) members, including the Chairman
of the Board and the Chief Executive Officer of the Corporation, to serve,
subject to the pleasure of the Board, for the year next ensuing and until
their successors are appointed by the Board. The Board of Directors at such
time shall also fix the compensation to be paid to the members of the
Executive Committee. No member of the Executive Committee shall continue to
be a member after ceasing to be a Director of the Corporation. The Board of
Directors shall have the power at any time to increase or decrease the number
of members of the Executive Committee, to fill vacancies, to change any
member, and to change the functions or terminate the Committee's existence.
SECTION 3.13. POWERS OF EXECUTIVE COMMITTEE. - The Executive Committee
appointed by the Board of Directors as above provided shall possess all the
power and authority of the Board of Directors when said Board is not in
session, but the Executive Committee shall not have the power to: (1) declare
dividends or distributions, (2) approve or recommend directly to the
shareholders actions required by law to be approved by shareholders, (3) fill
vacancies on the Board of Directors or designate directors for purposes of
proxy solicitation, (4) amend the Articles, (5) adopt, amend, or repeal
Bylaws, (6) approve a plan of merger not requiring shareholders approval,
(7) authorize reacquisition of shares unless pursuant to a method specified by
the Board, or (8) authorize the sale or issuance of shares or designate the
terms of a series of a class of shares, except pursuant to a method specified
by the Board, to the extent permitted by law.
SECTION 3.14. PROCEDURE: MEETINGS: QUORUM. - Regular meetings of the
Executive Committee may be held at least once in each month on such day as the
Committee shall elect and special meetings may be held at such other times as
the Chairman of the Board, the President, or any two members of the Executive
Committee may designate. Notice of special meetings of the Executive
Committee shall be given by letter, telegram, or cable delivered for transmis-
sion not later than during the second day immediately preceding the day for
such meeting or by word of mouth or telephone not later than the day
immediately preceding the date for such meeting. No such notice need state
the business to be transacted at the meeting. No notice need be given of an
adjourned meeting. The Executive Committee may fix its own rules of
procedure. It shall keep a record of its proceedings and shall report these
proceedings to the Board of Directors at the regular meeting thereof held next
after the meeting of the Executive Committee. Attendance at any meeting of
the Executive Committee at a special meeting shall constitute a waiver of
notice of such special meeting.
At its last meeting preceding the annual meeting of the Board of
Directors, the Executive Committee shall make to the Board its recommendation
of officers of the Corporation to be elected by the Board for the ensuing
year.
The Chairman of the Board shall act as Chairman at all meetings of the
Executive Committee, and if the Chairman is absent, the President shall act as
such Chairman. The Secretary of the Corporation shall act as Secretary of the
meeting. In case of the absence from any meeting of the Executive Committee
of the Chairman of the Board and the President, or the Secretary of the
Corporation, the Executive Committee shall appoint a chairman or secretary, as
the case may be, of the meeting. The Executive Committee may hold its
meetings within or without the State of Iowa, as it may from time to time by
resolution determine. A majority of the Executive Committee shall be
necessary to constitute a quorum for the transaction of any business, and the
act of a majority of the members present at a meeting at which a quorum is
present shall be the act of the Executive Committee. The members of the
Executive Committee shall act only as a committee, and the individual members
shall have no power as such.
SECTION 3.15. OTHER COMMITTEES. - The Board of Directors may appoint by
resolution adopted by a majority of the full Board of Directors from among its
members, other committees, temporary or permanent, and, to the extent
permitted by law and these Bylaws, may designate the duties, powers, and
authorities of such committees subject to the same restriction of powers as
provided in Section 3.13.
ARTICLE IV
OFFICERS
SECTION 4.1. OFFICERS. - The officers of the Corporation shall be a
Chairman of the Board, a President, a Secretary, and a Treasurer, each of whom
shall be elected by the Board of Directors. Such other officers, including
president and group executive, vice-presidents, general counsel, and assistant
officers as may be deemed necessary may be elected or appointed by the Board
of Directors. Any two or more of the offices may be held by the same person
if so decided by the Board of Directors.
SECTION 4.2. ELECTION AND TERM OF OFFICE. - The officers of the
Corporation to be elected by the Board of Directors shall be elected annually
by the Board at its annual meeting held after each annual meeting of the
shareholders. If the election of officers shall not be held at such meeting,
such election shall be held as soon thereafter as may be convenient. A
vacancy in any office for any reason may be filled by the Board of Directors
for the unexpired portion of the term.
SECTION 4.3. REMOVAL OF OFFICERS. - Any officer may be removed by the
Board of Directors whenever in its judgment the best interests of the
Corporation will be served thereby, but such removal shall be without
prejudice to the contract rights, if any, of the person so removed. Election
or appointment of an officer shall not of itself create contract rights.
SECTION 4.4. CHAIRMAN OF THE BOARD. - The Chairman of the Board shall
preside at all meetings of the Board of Directors, shall be a member of the
Executive Committee, and shall have and perform such other duties as from time
to time may be assigned to him by the Board of Directors.
SECTION 4.5. PRESIDENT. - The President shall be the Chief Executive
Officer of the Corporation and shall have general supervision of and be
accountable for the control of the Corporation's business affairs, properties
and management and otherwise shall have the general powers and duties usually
vested with the office of President of a corporation, subject, however, to the
control of the Board of Directors and the Executive Committee. The President
shall see that all resolutions and orders of the Board of Directors or the
Executive Committee are carried into effect and shall exercise such other
powers and perform such other duties as may be designated by the Board of
Directors and the Executive Committee.
SECTION 4.6. PRESIDENT AND GROUP EXECUTIVE. - A President and Group
Executive (if one or more be elected) shall have such powers and perform such
duties as the Board of Directors may from time to time prescribe or as the
Chairman of the Board or the President may from time to time delegate.
SECTION 4.7. VICE-PRESIDENTS. - A Vice President (if one or more be
elected or appointed) shall have such powers and perform such duties as the
Board of Directors may from time to time prescribe or as the Chairman of the
Board or the President may from time to time delegate.
SECTION 4.8 TREASURER. - The Treasurer shall have the custody of the
funds and securities of the Corporation. Whenever necessary or proper, the
Treasurer shall (1) endorse, on behalf of the Corporation, checks, notes or
other obligations and deposit the same to the credit of the Corporation in
such bank or banks or depositories as the Board of Directors may designate;
(2) sign receipts or vouchers for payments made to the Corporation which shall
also be signed by such other officer as may be designated by the Board of
Directors; (3) disburse the funds of the Corporation as may be ordered by the
Board, taking proper vouchers for such disbursements; and (4) render to the
Board of Directors, the Executive Committee, the Chairman of the Board and the
President at the regular meetings of the Board or Executive Committee, or
whenever any of them may require it, an account of the financial condition of
the Corporation. If required by the Board of Directors, the Treasurer shall
give the Corporation a bond with one or more sureties satisfactory to the
board, for the faithful performance of the duties of this office, and for the
restoration to the Corporation, in case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property
of whatever kind in possession or under control of the Treasurer.
SECTION 4.9. SECRETARY. - The Secretary shall record the votes and
proceedings of the Shareholders, the Board of Directors and the Executive
Committee in a book or books kept for that purpose, and shall serve notices of
and attend all meetings of the Directors, the Executive Committee and share-
holders. In the absence of the Secretary or an Assistant Secretary from any
meeting of the Board of Directors, the proceedings of such meeting shall be
recorded by such other person as may be appointed for that purpose.
The Secretary shall keep in safe custody the seal of the Corporation,
and duplicates, if any, and when requested by the Board of Directors, or when
any instrument shall have been first signed by the Chairman of the Board, the
President or a Vice President duly authorized to sign the same, or when
necessary to attest any proceedings of the shareholders or directors, shall
affix it to any instrument requiring the same, and shall attest the same. The
Secretary shall, with the Chairman of the Board or the President, sign
certificates of stock of the Corporation and affix a seal of the Corporation
or cause such seal to be imprinted or engraved thereon, subject, however, to
the provisions providing for the use of facsimile signatures on stock
certificates under certain conditions. The Secretary shall have charge of
such books and papers as properly belong to such office, or as may be commit-
ted to the Secretary's care by the Board of Directors or by the Executive
Committee, and shall perform such other duties as pertain to such office, or
as may be required by the Board of Directors, the Executive Committee or the
Chairman of the Board.
SECTION 4.10. ASSISTANT TREASURERS. - Each Assistant Treasurer (if one
or more Assistant Treasurers be elected or appointed) shall assist the
Treasurer and shall perform such other duties as the Board of Directors may
from time to time prescribe or the Chairman of the Board or the President may
from time to time delegate. At the request of the Treasurer, any Assistant
Treasurer may perform temporarily the duties of Treasurer in the case of the
Treasurer's absence or inability to act. In the case of the death of the
Treasurer, or in the case of absence or inability to act without having
designated an Assistant Treasurer to perform temporarily the duties of
Treasurer, an Assistant Treasurer shall be designated by the Chairman of the
Board or the President to perform the duties of the Treasurer. Each Assistant
Treasurer shall, if required by the Board of Directors, give the Corporation a
bond with such surety or sureties as may be ordered by the Board of Directors,
for the faithful performance of the duties of such office and for the
restoration to the Corporation, in case of death, resignation, retirement or
removal from office, of all books, papers, vouchers, money and other property
of whatever kind belonging to the Corporation in the possession or under
control of such Assistant Treasurer.
SECTION 4.11. ASSISTANT SECRETARIES. - Each Assistant Secretary (if one
or more Assistant secretaries be elected or appointed) shall assist the
Secretary and shall perform such other duties as the Board of Directors may
from time to time prescribe or the Chairman of the Board or the President may
from time to time delegate. At the request of the Secretary, any Assistant
Secretary may perform temporarily the duties of Secretary in the case of the
Secretary's absence or inability to act. In the case of the death of the
Secretary, or in the case of absence or inability to act without having
designated an Assistant Secretary to perform temporarily the duties of
Secretary, the Assistant Secretary to perform the duties of the Secretary
shall be designated by the Chairman of the Board or the President.
SECTION 4.12. GENERAL COUNSEL. - The General Counsel shall be
responsible for the management of the Legal Department in its support of all
other operations of the Corporation including management guidance to assure
responsible decisions, information for all employees concerning the legal and
judicial environment and recommended changes of law as deemed advisable. In
addition, the General Counsel shall be responsible for the coordination of
outside counsel activities in all instances as well as the prosecution of
charges against the Corporation or other judicial or regulatory activities.
This shall include full information for the management and employees of
judicial, regulatory or other administrative body rulings and their impact on
the Corporation. The duties shall include approval of all legal and
contractual documents of the Corporation, prior to their authorization, and
full support to various departments to assist in the development of these
documents. The General Counsel shall perform such other duties as may be
assigned from time to time by the Board of Directors, the Executive Committee,
the Chairman of the Board or the President.
ARTICLE V
CERTIFICATES FOR SHARES AND THEIR TRANSFER
SECTION 5.1. CERTIFICATES FOR SHARES. - Each certificate representing
shares of the Corporation shall state upon the face (a) that the Corporation
is organized under the laws of the State of Iowa, (b) the name of the person
to whom issued, (c) the number and class of shares, and the designation of the
series, if any, which such certificate represents, and (d) the par value of
each share, if any, and each such certificate shall otherwise be in such form
as shall be determined by the Board of Directors. Such certificates shall be
signed by the Chairman of the Board or the President and by the Secretary or
an Assistant Secretary and shall be sealed with the corporate seal or a
facsimile thereof. The signatures of such officers upon a certificate may be
facsimiles. If a certificate is countersigned by a transfer agent, or
registered by a registrar, the signatures of the persons signing for such
transfer agent or registrar also may be facsimiles. In case any officer or
other authorized person who has signed or whose facsimile signature has been
placed upon such certificate for the Corporation shall have ceased to be such
officer or employee or agent before such certificate is issued, it may be
issued by the Corporation with the same effect as if such person were an
officer or employee or agent at the date of its issue. Each certificate for
shares shall be consecutively numbered or otherwise identified.
All certificates surrendered to the Corporation for transfer shall be
cancelled and no new certificate shall be issued until the former certificate
for a like number of shares shall have been surrendered and cancelled, except
that in case of a lost, destroyed or mutilated certificate a new one may be
issued therefor upon such terms and indemnity to the Corporation as the Board
of Directors may prescribe.
SECTION 5.2. TRANSFER OF SHARES. - Transfer of shares of the
Corporation shall be made only on the stock transfer books of the Corporation
by the holder of record thereof or by such person's legal representative, who
shall furnish proper evidence of authority to transfer, or authorized
attorney, by power of attorney duly executed and filed with the Secretary of
the Corporation, and on surrender for cancellation of the certificate for
such shares.
Subject to the provisions of Section 2.11 of Article II of these Bylaws,
the person in whose name shares stand on the books of the Corporation shall be
treated by the Corporation as the owner thereof for all purposes, including
all rights deriving from such shares, and the Corporation shall not be bound
to recognize any equitable or other claim to, or interest in, such shares or
rights deriving from such shares, on the part of any other person, including
(without limitation) a purchaser, assignee or transferee of such shares, or
rights deriving from such shares, unless and until such purchaser, assignee,
transferee or other person becomes the record holder of such shares, whether
or not the Corporation shall have either actual or constructive notice of the
interest of such purchaser, assignee, transferee or other person. Except as
provided in said Section 2.11 hereof, no such purchaser, assignee, transferee
or other person shall be entitled to receive notice of the meetings of
shareholders, to vote at such meetings, to examine the complete record of the
shareholders entitled to vote at meetings, or to own, enjoy or exercise any
other property or rights deriving from such shares against the Corporation,
until such purchaser, assignee, transferee or other person has become the
record holder of such shares.
ARTICLE VI
MISCELLANEOUS PROVISIONS
SECTION 6.1. INDEMNIFICATION. - The Corporation shall indemnify its
directors, officers, employees and agents to the full extent permitted by the
Iowa Business Corporation Act, as amended from time to time. The Corporation
shall purchase and maintain insurance on behalf of any person who is or was a
director, officer, employee or agent of the Corporation, or is or was serving
at the request of the Corporation as a director, officer, employee, or agent
of another corporation, partnership, joint venture, trust, or other enterprise
against any liability asserted against and incurred by such person in any such
capacity or arising out of such person's status as such, whether or not the
Corporation would have the power to indemnify such person against such
liability under the provisions of this section.
SECTION 6.2. FISCAL YEAR. - The fiscal year of the Corporation shall be
the calendar year.
SECTION 6.3. SEAL. - The corporate seal shall be circular in form and
shall have inscribed thereon the name of the Corporation and the words
"CORPORATE SEAL IOWA". Said seal may be used by causing it or a facsimile
thereof to be impressed or affixed or reproduced or otherwise.
SECTION 6.4. CONTRACTS, CHECKS, DRAFTS, LOANS AND DEPOSITS. - All
contracts, checks, drafts or other orders for the payment of money, notes or
other evidences of indebtedness issued in the name of the Corporation, shall
be signed by such officer or officers, agent or agents of the Corporation and
in such manner as shall from time to time be determined by resolution of the
Board of Directors. The Board may authorize by resolution any officer or
officers to enter into and execute any contract or instrument of indebtedness
in the name of the Corporation; and such authority may be general or confined
to specific instances. All funds of the Corporation not otherwise employed
shall be deposited from time to time to the credit of the Corporation in such
banks or other depositories as the Board of Directors may authorize.
SECTION 6.5. DIVIDENDS. - Subject to the provisions of the Articles of
Incorporation, the Board of Directors may, at any regular or special meeting,
declare dividends upon the capital stock of the Corporation payable out of
surplus (whether earned or paid-in) or profits as and when they deem
expedient. Before declaring any dividend there may be set apart out of
surplus or profits such sum or sums as the directors from time to time in
their discretion deem proper for working capital or as a reserve fund to meet
contingencies or for such other purposes as the directors shall deem conducive
to the interests of the Corporation.
SECTION 6.6. WAIVER OF NOTICE. - Whenever any notice is required to be
given to any shareholder or Director of the Corporation under the provisions
of these Bylaws or under the provisions of the Articles of Incorporation or
under the provisions of the Iowa Business Corporation Act, a waiver thereof in
writing signed by the person or persons entitled to such notice, whether
before or after the time stated therein, shall be deemed equivalent to the
giving of such notice.
SECTION 6.7. VOTING OF SHARES OWNED BY THE CORPORATION. - Subject
always to the specific directions of the Board of Directors, any share or
shares of stock issued by any other corporation and owned or controlled by the
Corporation may be voted at any shareholders' meeting of such other
corporation by the President of the Corporation if present, or if absent by
any other officer of the Corporation who may be present. Whenever, in the
judgment of the President, or if absent, of any officer, it is desirable for
the Corporation to execute a proxy or give a shareholders' consent in respect
to any share or shares of stock issued by any other corporation and owned by
the Corporation, such proxy or consent shall be executed in the name of the
Corporation by the President or one of the officers of the Corporation and
shall be attested by the Secretary or an Assistant Secretary of the
Corporation without necessity of any authorization by the Board of Directors.
Any person or persons designated in the manner above stated as the proxy or
proxies of the Corporation shall have full right, power and authority to vote
the share or shares of stock issued by such other corporation and owned by the
Corporation in the same manner as such share or shares might be voted by the
Corporation.
SECTION 6.8. AMENDMENTS. - These Bylaws may be altered, amended or
repealed and new Bylaws may be adopted by the Board of Directors at any
regular or special meeting of the Board of Directors.
EXHIBIT 10(b)
GUARANTY
(IES Utilities Trust No. 1994-A)
from
IES UTILITIES INC.
Dated as of June 29, 1994
GUARANTY
THIS GUARANTY (IES Utilities Trust No. 1994-A), dated as of
June 29, 1994, is made by IES Utilities Inc., an Iowa corporation
(in such capacity, the "Guarantor").
W I T N E S S E T H:
WHEREAS, the Guarantor (as Lessee), First Security Bank of
Utah, National Association, as Owner Trustee, First Chicago
Leasing Corporation and CIBC Leasing Inc., as Owner Participants,
the Lenders named therein, as Lenders, and The First National
Bank of Chicago, as Arranger and Administrative Agent, have
entered into that certain Participation Agreement, dated as of
June 29, 1994 (as it may be modified, amended or restated from
time to time as and to the extent permitted thereby, the
"Participation Agreement"; and, unless otherwise defined herein
or the context hereof otherwise requires, terms which are defined
or defined by reference in the Participation Agreement (including
Appendix A thereto) shall have the same meanings when used herein
as such terms have therein); and
WHEREAS, it is a condition precedent to the Participants'
consummating the transactions to be consummated on the Closing
Date that the Guarantor execute and deliver this Guaranty; and
WHEREAS, it is in the best interests of the Guarantor that
the Overall Transaction and the Closing Date occur; and
WHEREAS, this Guaranty, and the execution, delivery and
performance hereof, have been duly authorized by all necessary
corporate action of the Guarantor; and
WHEREAS, this Guaranty is offered by the Guarantor as an
inducement to the Participants to consummate the transactions
contemplated in the Participation Agreement, which transactions,
if consummated, will be of benefit to the Guarantor;
NOW, THEREFORE, in consideration of the foregoing and for
other good and valuable consideration, the receipt of which is
hereby acknowledged by the Guarantor, the Guarantor hereby agrees
as follows:
The Guarantor hereby unconditionally guarantees the full and
prompt payment when due, whether by acceleration or otherwise,
and at all times thereafter, and the full and prompt performance,
of all of the Liabilities (as hereinafter defined), including
interest and yield on any such Liabilities whether accruing
before or after any bankruptcy or insolvency case or proceeding
involving the Guarantor or any other Person and, if interest or
yield on any portion of such obligations ceases to accrue by
operation of law by reason of the commencement of such case or
proceeding, including such interest and yield as would have
accrued on any such portion of such obligations if such case or
proceeding had not commenced, and further agrees to pay all
expenses (including attorneys' fees and legal expenses) paid or
incurred by each of the Agent, the Owner Trustee and each of the
Participants in endeavoring to collect the Liabilities, or any
part thereof, and in enforcing this Guaranty. The term
"Liabilities", as used herein, shall mean all of the following,
in each case howsoever created, arising or evidenced, whether
direct or indirect, joint or several, absolute or contingent, or
now or hereafter existing, or due or to become due: all
principal of the Notes, interest accrued thereon, the Owner
Participant Amounts, yield accrued on the Certificates and all
additional amounts and other sums at any time due and owing, and
required to be paid, to the Agent, the Owner Trustee and/or the
Participants under the terms of the Participation Agreement, the
Loan Agreement, the Assignment, the Mortgage or any other
Operative Document (including, without limitation, Section
2.15(b) of the Loan Agreement or any Make-Whole Amount);
provided, however, that the Guarantor will not be obligated to
pay and perform under this Guaranty that portion of Liabilities
constituting the principal of Series B Notes, interest accrued
thereon and amounts payable pursuant to Section 2.15(b) of the
Loan Agreement relating to the Series B Notes or the Owner
Participant Amounts, yield accrued on the Certificates and Make-
Whole Amount unless a Lease Event of Default has occurred and is
continuing.
By way of extension but not in limitation of any of its
other obligations hereunder, the Guarantor stipulates and agrees
that in the event any foreclosure proceedings are commenced and
result in the entering of a foreclosure judgment, any such
foreclosure judgment, to the extent related to the Liabilities,
shall be treated as part of the Liabilities, and the Guarantor
unconditionally guarantees the full and prompt payment of such
judgment.
The Guarantor agrees that, in the event of the dissolution,
bankruptcy or insolvency of either of the Borrower or the
Guarantor, or both, or the inability or failure of either the
Borrower or the Guarantor, or both, to pay debts as they become
due, or an assignment by the Borrower or the Guarantor, or both,
for the benefit of creditors, or the commencement of any case or
proceeding in respect of either of the Borrower or the Guarantor,
or both, under any bankruptcy, insolvency or similar laws, and if
such event shall occur at a time when any of the Liabilities may
not then be due and payable, the Guarantor will pay to the Agent
forthwith the full amount which would be payable hereunder by the
Guarantor if all Liabilities were then due and payable.
To secure all obligations of the Guarantor hereunder, the
Agent and each Participant shall have a lien upon and security
interest in (and may, without demand or notice of any kind, at
any time and from time to time when any amount shall be due and
payable by the Guarantor hereunder, appropriate and apply toward
the payment of such amount, in such order of application as the
Agent may elect in accordance with the Loan Agreement and the
Trust Agreement) any and all balances, credits, deposits,
accounts or moneys of or in the Guarantor's name now or
hereafter, for any reason or purpose whatsoever, in the
possession or control of, or in transit to, the Agent or any
Participant or any agent or bailee for the Agent or any
Participant.
This Guaranty shall in all respects be a continuing,
absolute and unconditional guaranty of payment and performance
(and not of collection), and shall remain in full force and
effect (notwithstanding, without limitation, the dissolution of
the Guarantor).
The Guarantor further agrees that, if at any time all or any
part of any payment theretofore applied to any of the Liabilities
is or must be rescinded or returned for any reason whatsoever
(including, without limitation, the insolvency, bankruptcy or
reorganization of the Borrower or the Guarantor), such
Liabilities shall, for the purposes of this Guaranty, to the
extent that such payment is or must be rescinded or returned, be
deemed to have continued in existence, notwithstanding such
application, and this Guaranty shall continue to be effective or
be reinstated, as the case may be, as to such Liabilities, all as
though such application had not been made.
The Agent on behalf of itself, the Owner Trustee and the
Participants, and the Owner Trustee and the Participants, may,
from time to time at their discretion and without notice to the
Guarantor, take any or all of the following actions: (a) retain
or obtain (i) a security interest in the Lessee's interest in the
Lease and (ii) a lien or a security interest hereafter granted by
any Person upon or in any property, in each case to secure any of
the Liabilities or any obligation hereunder; (b) retain or obtain
the primary or secondary obligation of any obligor or obligors,
in addition to the Guarantor, with respect to any of the
Liabilities; (c) extend or renew for one or more periods
(regardless of whether longer than the original period), alter or
exchange any of the Liabilities, or release or compromise any
obligation of the Guarantor hereunder or any obligation of any
nature of any other obligor (including, without limitation, the
Borrower) with respect to any of the Liabilities; (d) release or
fail to perfect its lien upon or security interest in, or impair,
surrender, release or permit any substitution or exchange for,
all or any part of any property securing any of the Liabilities
or any obligation hereunder, or extend or renew for one or more
periods (regardless of whether longer than the original period)
or release, compromise, alter or exchange any obligations of any
nature of any obligor with respect to any such property; and (e)
resort to the Guarantor for payment of any of the Liabilities,
regardless of whether the Agent or any other Person shall have
resorted to any property securing any of the Liabilities or any
obligation hereunder or shall have proceeded against any other
obligor primarily or secondarily obligated with respect to any of
the Liabilities (all of the actions referred to in this clause
(e) being hereby expressly waived by the Guarantor).
Any amounts received by the Agent, the Owner Trustee or any
Participant from whatever source on account of the Liabilities
shall be applied by it toward the payment of such of the
Liabilities, and in such order of application, as is set forth in
the Loan Agreement and the Trust Agreement. The Guarantor hereby
agrees that no payment made by or for the account of the
Guarantor pursuant to this Guaranty shall entitle the Guarantor
by subrogation, indemnification, exoneration, contribution,
reimbursement or otherwise to any payment by the Borrower or from
or out of any property of the Borrower and the Guarantor hereby
expressly waives, to the fullest extent possible, and shall not
exercise, any right or remedy against the Borrower or any
property of the Borrower by reason of any performance by the
Guarantor of this Guaranty, unless (1) no Lease Event of Default
shall have occurred and be continuing, (2) the Liabilities have
been paid and performed in full, and (3) at the time of such
payment by the Guarantor, the Guarantor is not an "insider" of
the Borrower within the meaning of Section 101(31) of the
Bankruptcy Reform Act of 1978, as now or hereafter in effect, or
any successor provision. If, and to the extent that, any such
rights or remedies against the Borrower may not be waived under
Applicable Laws and Regulations, the Guarantor (if, at the time
of such payment by the Guarantor, it is an "insider" within the
meaning of said Section 101(31), or any success or provision)
shall be deemed to have contributed any such rights to the
Borrower effective immediately upon the arising of such rights or
remedies, which contribution shall give rise to obligations of
the Borrower to the Guarantor which are subordinate in all
respects to the Owner Participant Amounts, yield accrued on the
Certificates and all other portions of the Liabilities payable to
or for the benefit of the Owner Participants, and the rights of
the Owner Participants with respect thereto.
The Guarantor hereby expressly waives: (a) notice of the
acceptance of this Guaranty; (b) notice of the existence or
creation or non-payment of all or any of the Liabilities; (c)
presentment, demand, notice of dishonor, protest, and all other
notices whatsoever; and (d) all diligence in collection or
protection of or realization upon the Liabilities or any thereof,
any obligation hereunder, or any security for or guaranty of any
of the foregoing.
Each of the Agent, the Owner Trustee and each Participant
may, from time to time, whether before or after any
discontinuance of this Guaranty, at its sole discretion and
without notice to the Guarantor, assign or transfer any or all of
its portion of the Liabilities or any interest therein; and,
notwithstanding any such assignment or transfer or any subsequent
assignment or transfer thereof, such Liabilities shall be and
remain Liabilities for the purposes of this Guaranty, and each
and every immediate and successive assignee or transferee of any
of the Liabilities or of any interest therein shall, to the
extent of such assignee's or transferee's interest in the
Liabilities, be entitled to the benefits of this Guaranty to the
same extent as if such assignee or transferee were the Agent, the
Owner Trustee or such Participant, as appropriate.
No delay in the exercise of any right or remedy shall
operate as a waiver thereof, and no single or partial exercise of
any right or remedy shall preclude other or further exercise
thereof or the exercise of any other right or remedy; nor shall
any modification or waiver of any of the provisions of this
Guaranty be binding upon the Agent, the Owner Trustee or any
Participant except as expressly set forth in a writing duly
signed and delivered on its behalf. No action permitted
hereunder shall in any way affect or impair the Agent's, the
Owner Trustee's or any Participant's rights or the Guarantor's
obligations under this Guaranty. For the purposes of this
Guaranty, Liabilities shall include all of the obligations
described in the definition thereof, notwithstanding any right or
power of the Borrower or anyone else to assert any claim or
defense as to the invalidity or unenforceability of any such
obligation, and no such claim or defense shall affect or impair
the obligations of the Guarantor hereunder. The Guarantor's
obligations under this Guaranty shall be absolute and
unconditional irrespective of any circumstance whatsoever which
might constitute a legal or equitable discharge or defense of the
Guarantor. The Guarantor hereby acknowledges that there are no
conditions to the effectiveness of this Guaranty.
This Guaranty shall be binding upon the Guarantor and upon
the Guarantor's successors and assigns; and all references herein
to the Guarantor shall be deemed to include any successor or
successors, whether immediate or remote, to such Person.
Wherever possible each provision of this Guaranty shall be
interpreted in such manner as to be effective and valid under
Applicable Laws and Regulations, but if any provision of this
Guaranty shall be prohibited by or invalid thereunder, such
provision shall be ineffective only to the extent of such
prohibition or invalidity, without invalidating the remainder of
such provision or the remaining provisions of this Guaranty.
The Guarantor: (a) submits for itself and its property in
any legal action or proceeding relating to this Guaranty, or for
recognition and enforcement of any judgment in respect thereof,
to the non-exclusive general jurisdiction of the Courts of the
State of Illinois, the courts of the United States of America for
the Northern District of Illinois, and appellate courts from any
thereof; (b) consents that any such action or proceedings may be
brought to such courts, and waives any objection that it may now
or hereafter have to the venue of any such action or proceeding
in any such court or that such action or proceeding was brought
in an inconvenient court and agrees not to plead or claim the
same; (c) agrees that service of process in any such action or
proceeding may be effected by mailing a copy thereof by
registered or certified mail (or any substantially similar form
of mail), postage prepaid, to it at its address set forth below
or at such other address of which the other parties to the
Participation Agreement shall have been notified pursuant to
Section 8.3 of the Participation Agreement; and (d) agrees that
nothing herein shall affect the right to effect service of
process in any other manner permitted by law or shall limit the
right of the Agent, the Owner Trustee or the Participants to sue
in any other jurisdiction.
All notices, demands, declarations, consents, directions,
approvals, instructions, requests and other communications
required or permitted by this Guaranty shall be in writing and
shall be deemed to have been duly given when addressed to the
appropriate Person and delivered in the manner specified in
Section 8.3 of the Participation Agreement. The initial address
for notices to the Guarantor is set forth below.
THIS GUARANTY HAS BEEN DELIVERED AT CHICAGO, ILLINOIS, AND
SHALL BE CONSTRUED IN ACCORDANCE WITH AND GOVERNED BY THE LAWS OF
THE STATE OF ILLINOIS, WITHOUT REGARD TO CONFLICT OF LAW
PRINCIPLES. THE GUARANTOR HEREBY EXPRESSLY WAIVES ANY RIGHT TO A
TRIAL BY JURY IN ANY ACTION OR PROCEEDING TO ENFORCE OR DEFEND
ANY RIGHTS UNDER THIS GUARANTY OR UNDER ANY AMENDMENT,
INSTRUMENT, DOCUMENT OR AGREEMENT DELIVERED OR WHICH MAY IN THE
FUTURE BE DELIVERED IN CONNECTION HEREWITH OR ARISING FROM ANY
RELATIONSHIP EXISTING IN CONNECTION WITH THIS GUARANTY, AND
AGREES THAT ANY SUCH ACTION OR PROCEEDING SHALL BE TRIED BEFORE A
COURT AND NOT BEFORE A JURY.
IN WITNESS WHEREOF, the Guarantor has caused this Guaranty
to be executed and delivered as of the date first above written.
IMPORTANT: READ BEFORE SIGNING: THE TERMS OF THIS
AGREEMENT SHOULD BE READ CAREFULLY BECAUSE ONLY THOSE
TERMS IN WRITING ARE ENFORCEABLE. NO OTHER TERMS OR
ORAL PROMISES NOT CONTAINED IN THIS WRITTEN CONTRACT
MAY BE LEGALLY ENFORCED. YOU MAY CHANGE THE TERMS OF
THIS AGREEMENT ONLY BY ANOTHER WRITTEN AGREEMENT.
IES UTILITIES INC.
By:______________________________
Name Printed:_________________
Title:________________________
Address:
200 First Street, S.E.
Cedar Rapids, Iowa 52401
Attention: Caroline Giddings
<TABLE>
IES UTILITIES INC.
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
<CAPTION>
Twelve Months
Year Ended December 31, Ended
June 30,
1989 1990 1991 1992 1993 1994
(in thousands, except ratio of earnings to fixed charges)
<S> <C> <C> <C> <C> <C> <C>
Net income $ 53,454 $ 45,969 $ 47,563 $ 45,291 $ 67,970 $ 67,254
Federal and state
income taxes 22,574 22,364 23,494 20,760 37,963 39,434
Net income
before income
taxes 76,028 68,333 71,057 66,051 105,933 106,688 es
Interest on long-term
debt 29,044 28,853 31,171 35,689 34,926 36,365
Other interest 3,130 4,704 5,595 3,939 5,243 4,425
Estimated interest
component of
rents 9,494 7,936 6,594 4,567 3,729 3,915
Fixed charges as
defined 41,668 41,493 43,360 44,195 43,898 44,705
Earnings as defined $ 117,696 $ 109,826 $ 114,417 $ 110,246 $ 149,831 $ 151,393
Ratio of earnings to
fixed charges
(unudited) 2.82 2.65 2.64 2.49 3.41 3.39
For purposes of computation of these ratios (a) earnings have been calculated by
adding fixed charges and Federal and state income taxes to net income; and (b)
fixed charges consist of interest (including amortization of debt expense,
premium and discount) on long-term and other debt and the estimated interest
component of rents.
</TABLE>
