SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
__________________________________
FORM 8-K
__________________________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report: February 25, 1997
Date of Event (or earliest event) being reported: February 25, 1997
IPALCO ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
Indiana 1-8644 35-1575582
(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
One Monument Circle, Indianapolis, Indiana 46204
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (317) 261-8261
<PAGE>
Item 5. Other Event
IPALCO Enterprises, Inc. issued the following press release on
February 25, 1997 which is attached hereto as Exhibit 1, relating to the
announcement of a self tender offer for 12,000,000 shares of its
outstanding common stock. Also attached hereto as Exhibit 2 are summary
unaudited pro forma consolidated financial information. The pro forma
adjustments assume the issuance of $410 million of additional long-term
debt, the acquisition of 12,000,000 shares of IPALCO Enterprises, Inc.
Common Stock at $34.00 per share, the payment of related debt issuance
and stock reacquisition costs and first year's interest and debt
amortization expense.
Item 7. Financial Statements and Exhibits.
(c) Exhibits.
99.1. Press Release
99.2. Summary Unaudited Pro Forma Consolidated Financial
Information
SIGNATURE
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 hereunto duly authorized.
Dated: February 25, 1997
IPALCO ENTERPRISES, INC.
By /s/ Bryan G. Tabler
Name: Bryan G. Tabler
Title: Vice President, Secretary
and General Counsel
EXHIBIT 1
Media: Marni Lemons
317-261-8219
email: [email protected]
Investor: Jennifer Kent
317-261-8259
email: [email protected]
Stephen J. Plunkett
317-261-8013
IPALCO Board Approves New Financial Strategy
--Will Repurchase 12 Million Shares of Common Stock
and Reduce Quarterly Dividend--
- --Shareholders Will Have the Option to Sell Shares at a Premium--
- --Action Will Have No Effect on Indianapolis Power & Light Customers--
INDIANAPOLIS, February 25, 1997 -- IPALCO Enterprises, Inc., (NYSE:IPL)
announced today that its Board of Directors approved a new financial
strategy designed to maximize shareholder value and position IPALCO for an
increasingly competitive business environment.
The plan includes:
* A recapitalization of IPALCO to employ a higher degree of leverage in
its capital structure while the electric utility industry is in a
transition period between regulation and competition. The leveraged
recapitalization will be accomplished through a self tender offer to
purchase up to 12 million shares, or 21 percent, of IPALCO's
outstanding common stock. The tender, which is scheduled to commence on
February 28, 1997, will be effected through a "Dutch auction" at a
price of not less than $29.00 nor more than $34.00 per share. The
potential $410 million transaction will be financed with a 5-year bank
debt facility. The recapitalization is being effected by the parent
company, IPALCO Enterprises, Inc., and will not affect the
capitalization of Indianapolis Power & Light Company, its wholly owned
subsidiary.
* A reduction in the quarterly dividend to $0.25 per share ($1.00
annually) from the previous $0.37 per share ($1.48 annually), effective
with the payment of the next quarterly dividend. That dividend is
payable on April 15, 1997 to shareholders of record on March 21, 1997,
regardless of whether or when such shares are tendered. Future dividend
action will be guided by, among other factors, a policy of paying out
45 to 50 percent of the prior year's earnings.
* A target consolidated debt-to-capital ratio of 45 percent which IPALCO
believes can be achieved within the next five years.
(more)
<PAGE>
(first add)
John R. Hodowal, IPALCO Chairman and President, said: "Eighteen months ago
IPALCO embraced a strategy of pushing for genuine effective competition in
the electric utility industry. Since then we have worked not only to
influence the national debate over how competition in our industry should be
achieved, but also to transform IPALCO from a regulated to a competitive
enterprise. Our new financial strategy represents another important step in
that progression. With our strong cash flow, IPALCO intends to create
additional shareholder value and provide the financial resources to implement
our growth strategy.
"By purchasing common stock at a premium to its recent market value we will
accelerate and increase the cash received by our shareholders. In fact, the
payment of cash through a $410 million repurchase equals nearly five years of
dividends based on the previous dividend rate. Reducing the dividend rate
improves the Company's financial flexibility going forward. A dividend payout
ratio of 45 to 50 percent of prior year earnings is more consistent with
companies operating today in a competitive environment compared to the
traditional utility payout ratio of 70% or more," he said.
"Moreover, with our solid underlying earnings prospects, combined with the
effect of reduced shares outstanding, IPALCO is positioned to achieve strong
growth in earnings per share in 1997. This will be further enhanced in 1998
and beyond as our cash flow enables the transaction debt to be repaid and
interest expense to decline.
"By targeting a constant payout ratio, dividend growth in 1998 and subsequent
years is positioned to be equally strong," he said.
While recognizing that the Company's dividend action was a break with its
historical pattern of increases, Hodowal noted several significant
shareholder advantages to receiving cash through a stock purchase
rather than exclusively through dividends.
"We are positioning IPALCO's stock for market value growth and slightly less
income orientation than in the past. This recognizes that for most individual
investors, current laws tax capital gains at rates lower than dividend
income," Hodowal said.
"We believe the price range established for our tender offer will allow those
shareholders who desire a more income-oriented investment to exit their
investment in IPALCO on favorable terms. However, we believe that
shareholders who choose not to tender their shares also will benefit from
this transaction. They will own a 26.7 percent greater interest in a highly
competitive company with a stronger earnings per share growth rate," he said.
(more)
<PAGE>
(second add)
Hodowal also elaborated on the Company's target debt-to-capital ratio: "We
believe that in a competitive environment a consolidated debt-to-total
capital ratio of 45 percent is appropriate. However, given the expectation
that effective competition will not occur until competitive transition
periods have expired, it makes sense to employ more leverage today to
distribute cash to shareholders.
"We are confident that by the time effective competition becomes a reality,
we will have achieved our target debt-to-capital ratio," he said.
John Brehm, IPALCO's Vice President and Treasurer, summarized the goals of
the financial strategy by saying that they "will provide IPALCO with
sufficient funds to replace existing assets and undertake investments in new
growth, while maintaining a prudent balance between debt and equity in our
capital structure. This action also will preserve the financial flexibility
necessary to accommodate unexpected future cash needs."
Hodowal added: "Our financial strategy commits IPALCO to a course of action
that is consistent with both our long-term business plan and the best
interest of our shareholders. The increased use of debt is a tangible
expression of the Board's and management's confidence in the Company and
provides greater assurance to shareholders that strategic undertakings will
be value-enhancing."
Under the terms of the self tender offer that is scheduled to commence on
Friday, February 28, 1997, the Company will offer to purchase up to 12
million shares at a price of not less than $29.00, nor more than $34.00 per
share. IPALCO has been advised that officers and directors will not
participate in the tender offer.
Shareholders who wish to participate must decide how many shares they will
tender, if any, and the price within the stated range at which they will
offer their shares for purchase. The offer, the proration period and
withdrawal rights will expire at 12:00 Midnight, Eastern Standard Time on
March 27, 1997, unless the offer is extended by the Company.
Following the expiration of the offer, IPALCO will set the final share price
for the tendered shares which will be the lowest price within the stated
range that will permit IPALCO to purchase 12 million shares, or such lesser
number as is tendered. All shareholders whose shares are purchased will
receive the same price per share. All shares properly tendered at or below
the final purchase price will be purchased at the final purchase price,
subject to the conditions of the offer, including the terms of the proration.
(more)
<PAGE>
(third add)
The Dealer Manager for the offer is Dillon, Read & Co. Inc. The Information
Agent is D.F. King & Co., Inc. Copies of the Offer to Purchase and related
materials, dated February 28, 1997, will be sent to all IPALCO shareholders.
The terms of the offer and procedures for tendering are explained in detail
in these materials. Shareholders are urged to carefully read these materials
prior to making any decision with respect to the offer. Additional copies of
these materials may be obtained from the Information Agent by calling
1-800-848-2998.
IPALCO Enterprises, Inc. is a multi-state energy company providing a variety
of energy related products and services. Its principal subsidiary,
Indianapolis Power & Light Company, provides retail electric service to
approximately 410,000 commercial, industrial and residential customers in
Indianapolis and other parts of Central Indiana.
# # #
Statements contained in this Press Release regarding the future earnings
prospects, growth in earnings per share, dividend growth and debt-to-capital
ratio of IPALCO Enterprises, Inc. ("IPALCO") are not historical facts and
are forward-looking statements made pursuant to the safe harbor provisions
of the Private Securities Litigation Reform Act of 1995. Each of these
items is dependent on the earnings of IPALCO. Some of the most important
factors which will impact IPALCO's earnings, and could cause actual results
to differ materially from those discussed in the forward looking statements,
primarily through its wholly-owned subsidiary, Indianapolis Power & Light
Company ("IPL"), include, but are not limited to, fluctuations in customer
growth and demand, weather, fuel costs and availability, regulatory action,
federal and state legislation, interest rates, labor strikes, maintenance
and capital expenditures and local economic conditions. In addition, IPL's
ability to have available an appropriate amount of production capacity in a
timely manner can significantly impact IPL's financial performance. The
timing of deregulation and competition, product development and
introductions, and technology changes are also important potential factors.
EXHIBIT 2
SUMMARY UNAUDITED PRO FORMA
CONSOLIDATED FINANCIAL INFORMATION
The following Summary Unaudited Pro Forma Consolidated Balance Sheet and
Summary Unaudited Pro Forma Statement of Consolidated Income have been
prepared based on the Company's consolidated balance sheet as of December 31,
1996 and the related statement of consolidated income for the year then
ended. The pro forma adjustments assume the issuance of $410 million of
additional long-term debt by IPALCO Enterprises, Inc. (the "Holding
Company"), the acquisition by the Holding Company of 12,000,000 shares of
Common Stock at $34.00 per share, the payment of related debt issuance and
stock reacquisition costs and first year's interest and debt amortization
expense.
<PAGE>
<TABLE>
SUMMARY UNAUDITED PRO FORMA CONSOLIDATED
BALANCE SHEETS AS OF DECEMBER 31, 1996
(In thousands except ratios and per share amounts)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Assets:
- ------
Utility Plant-Net $1,787,969 $1,787,969
Other Assets-Net 113,661 113,661
Current Assets:
Cash and Cash Equivalents 19,317 $410,000 (1a)
(408,000)(2b)
(2,000)(3c) 19,317
Other Current Assets 104,382 104,382
Deferred Debits 157,740 1,000 (3b) 158,740
---------- -------- -----------
Total Assets $2,183,069 $1,000 $2,184,069
========== ======== ===========
Capitalization and Liabilities:
- ------------------------------
Capitalization:
Common Stock $389,966 $0 $389,966
Premium on 4% Preferred Stock 1,363 1,363
Retained Earnings 466,397 466,397
Treasury Stock ($1,000) (3a)
(408,000) (2a) (409,000)
----------- --------- ---------
Total Common Shareholders' Equity 857,726 (409,000) 448,726
Preferred Stock 51,898 51,898
Long-Term Debt 662,591 328,000 (1b) 990,591
----------- -------- ---------
Total Capitalization 1,572,215 (81,000) 1,491,215
----------- -------- ---------
Current Liabilities:
Notes Payable 46,000 46,000
Current Maturities 11,250 82,000 (1c) 93,250
Other 135,466 135,466
----------- ------- ---------
Total Current Liabilities 192,716 82,000 274,716
Deferred Credits and Other 418,138 418,138
----------- ------- ----------
Total Capitalization and Liabilities $2,183,069 $1,000 $2,184,069
=========== ======= ==========
Capitalization Ratios:(10)
Common Shareholders' Equity 54.17% 28.32%
Preferred Stock 3.28% 3.28%
Long-Term Debt 42.55% 68.40%
------- -------
Total Capitalization 100.00% 100.00%
======= =======
</TABLE>
<PAGE>
<TABLE>
SUMMARY UNAUDITED PRO FORMA
STATEMENT OF CONSOLIDATED INCOME
FOR THE TWELVE MONTHS ENDED DECEMBER 31, 1996
(In thousands except ratios and per share amounts)
<CAPTION>
Pro Forma
Historical Adjustments Pro Forma
---------- ----------- ---------
<S> <C> <C> <C>
Utility Operating Revenues $762,503 $762,503
-------- --------
Utility Operating Expenses 599,284 599,284
-------- -------
Utility Operating Income 163,219 163,219
-------- -------
Other Income and (Deductions):
IPALCO Enterprises, Inc. ("Holding Company") (1,551) $10,263 (4)
126 (5b) 8,838
Other 3,107 3,107
-------- ------- -------
Total Other Income and Deductions 1,556 10,389 11,945
-------- ------- --------
Interest and Other Charges:
Interest on Long-Term Debt 45,110 27,060 (6) 72,170
Other 2,208 333 (5a) 2,541
Preferred Dividend Requirement of IPL 3,182 3,182
-------- ------- --------
Total Interest and Other Charges-Net 50,500 27,393 77,893
-------- ------- --------
Net Income $114,275 ($17,004) $97,271
======== ======= ========
Weighted Average Common Shares Outstanding 56,924 (12,000)(7) 44,924
Earnings Per Common Share (12) $2.01 $2.17
Common Shares Outstanding 57,035 (12,000)(7) 45,035
Dividends Declared Per Share $1.48 $1.00 (8)
Book Value Per Share (14) $15.04 $9.96
Ratio of Earnings to Fixed Charges (13) 4.58x 2.98x
Interest and Dividend Coverage (11) 1.15 1.34
</TABLE>
NOTES TO SUMMARY UNAUDITED PRO FORMA CONSOLIDATED BALANCE SHEETS AND
STATEMENT OF CONSOLIDATED INCOME:
(1) Represents the (1a) proceeds of $410 million from the issuance of a
$410 million five-year bank debt facility by the Holding Company at
an assumed annual interest rate of 6.6%. The pro forma assumes (1b)
$328 million classified as long-term and (1c) current maturities of
long-term debt of $82 million.
(2) Represents the Holding Company (2a) reacquisition of 12,000,000
Shares of IPALCO Enterprises, Inc. common stock (Treasury Stock)
assumed at the maximum price of $34.00 per share for (2b) cash.
There can be no assurance that the Holding Company will repurchase
12,000,000 Shares or that the Shares will be repurchased at a
price of $34.00.
(3) Represents the payment by the Holding Company of (3a) treasury stock
acquisition costs and (3b) debt issuance expense for (3c) cash.
(4) Represents the tax benefit of the additional pro forma interest
expense calculated using IPALCO's effective income tax rate of
37.925%.
(5) Represents (5a) one year amortization of the pro forma debt issuance
expense and (5b) the related tax benefit.
(6) Represents the pro forma additional interest expense for a full year
at the Holding Company calculated at an assumed 6.6% annual fixed
rate on the bank loan proceeds of $410 million.
(7) Represents the pro forma reduction in weighted average common shares
outstanding for the year 1996 and in common shares outstanding at
December 31, 1996.
(8) Reflects the pro forma annualized dividend authorized by the IPALCO
Enterprises, Inc. Board of Directors on February 25, 1997.
(9) All ratios and per share amounts listed in the "Pro Forma" column
have been adjusted to reflect the transactions reflected in the "Pro
Forma Adjustments" column.
(10) Capitalization ratios have been calculated including the current
maturities of long-term debt.
(11) Interest and dividend coverage ratios were calculated by dividing the
sum of net income, debt interest, preferred dividends of subsidiary
less AFUDC (allowance for funds used during construction) by the sum
of debt interest, preferred dividends of subsidiary and common
dividends declared.
(12) All earnings per share data are based on the weighted average shares
outstanding during the applicable periods. The potential dilution
from the exercise of common stock options is not material.
(13) The ratios of earnings to fixed charges were calculated by dividing
the sum of pre-tax income and fixed charges by fixed charges. Fixed
charges include all interest expense (before allowance for borrowed
funds used during construction), one-third of rent expense (which
approximates the interest component of such expense) and amortization
of debt expense.
(14) Book value per share is calculated as the total shareholders' equity
divided by the number of shares outstanding at the end of the period.
