FORM 10-Q
SECURlTlES AND EXCHANGE COMMlSSlON
WASHINGTON, D. C. 20549
Quarterly Report Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
For the quarterly period ended
June 30, 1998 Commission File Number 1-8644
IPALCO ENTERPRISES, INC.
(Exact name of Registrant as specified in its charter)
Indiana 35-1575582
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) 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
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 the
filing requirements for at least 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 June 30, 1998
----- ----------------------------
Common (Without Par Value) 44,921,232 shares
<PAGE>
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
-----------------------------------------
INDEX
-----
Page No.
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PART I. FINANCIAL INFORMATION
- ------- ---------------------
Statements of Consolidated Income - Three Months Ended and
Six Months Ended June 30, 1998 and 1997 2
Consolidated Balance Sheets - June 30, 1998 and
December 31, 1997 3
Statements of Consolidated Cash Flows -
Six Months Ended June 30, 1998 and 1997 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-12
PART II. OTHER INFORMATION 13-15
- -------- -----------------
<PAGE>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Income
(In Thousands Except Per Share Amounts)
(Unaudited)
<CAPTION>
Three Months Ended Six Months Ended
June 30 June 30
1998 1997 1998 1997
------------- -------------- -------------- --------------
<S> <C> <C> <C> <C>
UTILITY OPERATING REVENUES:
Electric $ 198,539 $ 175,388 $ 377,448 $ 359,054
Steam 8,167 8,389 19,579 20,022
------------- -------------- -------------- --------------
Total operating revenues 206,706 183,777 397,027 379,076
------------- -------------- -------------- --------------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 43,209 37,506 84,249 79,122
Other 38,425 35,622 73,346 68,255
Power purchased 2,842 1,131 3,849 5,290
Purchased steam 1,226 1,684 3,116 3,903
Maintenance 15,295 17,613 35,035 33,311
Depreciation and amortization 25,378 26,504 50,663 52,244
Taxes other than income taxes 8,636 8,127 17,458 17,000
Income taxes - net 22,497 16,498 39,971 36,325
------------- -------------- -------------- --------------
Total operating expenses 157,508 144,685 307,687 295,450
------------- -------------- -------------- --------------
UTILITY OPERATING INCOME 49,198 39,092 89,340 83,626
------------- -------------- -------------- --------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 260 1,124 525 2,281
Other - net 1,148 (1,577) 722 (2,774)
Income taxes - net 1,818 3,184 4,670 3,919
------------- -------------- -------------- --------------
Total other income - net 3,226 2,731 5,917 3,426
------------- -------------- -------------- --------------
ME BEFORE INTEREST AND OTHER CHARGES 52,424 41,823 95,257 87,052
------------- -------------- -------------- --------------
INTEREST AND OTHER CHARGES:
Interest 16,316 17,064 33,307 28,696
Allowance for borrowed funds used during construction (192) (226) (396) (472)
Preferred stock transactions 491 796 1,200 1,591
------------- -------------- -------------- --------------
Total interest and other charges - net 16,615 17,634 34,111 29,815
------------- -------------- -------------- --------------
ME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE 35,809 24,189 61,146 57,237
CUMULATIVE EFFECT OF ACCOUNTING CHANGE -
NET OF TAXES (Note 4) - - - 18,347
------------- -------------- -------------- --------------
NET INCOME $ 35,809 $ 24,189 $ 61,146 $ 75,584
============= ============== ============== ==============
BASIC EARNINGS PER SHARE (Note 2)
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 0.80 $ 0.53 $ 1.36 $ 1.11
CUMULATIVE EFFECT OF ACCOUNTING CHANGE (Note 4) - - - 0.36
------------- -------------- -------------- --------------
NET INCOME $ 0.80 $ 0.53 $ 1.36 $ 1.47
============= ============== ============== ==============
DILUTED EARNINGS PER SHARE (Note 2)
INCOME BEFORE CUMULATIVE EFFECT
OF ACCOUNTING CHANGE $ 0.79 $ 0.53 $ 1.34 $ 1.11
CUMULATVE EFFECT OF ACCOUNTING CHANGE (Note 4) - - - 0.36
------------- -------------- -------------- --------------
NET INCOME $ 0.79 $ 0.53 $ 1.34 $ 1.47
============= ============== ============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
June 30 December 31
ASSETS 1998 1997
------
-------------- -------------
<S> <C> <C>
UTILITY PLANT:
Utility plant in service $ 2,823,722 $ 2,800,446
Less accumulated depreciation 1,161,523 1,121,317
-------------- -------------
Utility plant in service - net 1,662,199 1,679,129
Construction work in progress 77,987 77,030
Property held for future use 10,224 10,224
-------------- -------------
Utility plant - net 1,750,410 1,766,383
-------------- -------------
OTHER ASSETS:
Nonutility property - at cost, less accumulated 73,592 72,865
depreciation
Other investments 11,355 13,023
-------------- -------------
Other assets - net 84,947 85,888
-------------- -------------
CURRENT ASSETS:
Cash and cash equivalents 30,780 17,293
Accounts receivable and unbilled revenue
(less allowance for doubtful accounts
1998, $1,105 and 1997, $1,202) 38,739 47,033
Fuel - at average cost 29,543 35,257
Materials and supplies - at average cost 49,905 48,416
Prepayments and other current assets 4,404 9,100
-------------- -------------
Total current assets 153,371 157,099
-------------- -------------
DEFERRED DEBITS:
Regulatory assets 122,402 126,784
Miscellaneous 18,048 19,404
-------------- -------------
Total deferred debits 140,450 146,188
-------------- -------------
TOTAL $ 2,129,178 $ 2,155,558
============== =============
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common shareholders' equity:
Common stock $ 406,951 $ 395,851
Unearned compensation - restricted stock awards (6,165) 1,209
Premium on 4% cumulative preferred stock 649 649
Retained earnings 568,679 532,730
Treasury stock, at cost (403,629) (403,101)
-------------- -------------
Total common shareholders' equity 566,485 527,338
Cumulative preferred stock of subsidiary (Note 2) 59,135 9,135
Long-term debt (less current maturities and
sinking fund requirements) 946,073 1,032,846
-------------- -------------
Total capitalization 1,571,693 1,569,319
-------------- -------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper 8,000 33,700
Current maturities and sinking fund requirements 894 3,094
Accounts payable and accrued expenses 53,234 66,105
Dividends payable 13,435 11,523
Taxes accrued 36,720 22,126
Interest accrued 14,932 15,493
Other current liabilities 11,020 12,555
-------------- -------------
Total current liabilities 138,235 164,596
-------------- -------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 316,512 314,869
Unamortized investment tax credit 43,388 44,783
Accrued postretirement benefits 13,936 17,144
Accrued pension benefits 40,814 39,821
Miscellaneous 4,600 5,026
-------------- -------------
Total deferred credits and other long-term liabilities 419,250 421,643
-------------- -------------
COMMITMENTS AND CONTINGENCIES
TOTAL $ 2,129,178 $ 2,155,558
============== =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
(In Thousands)
(Unaudited)
<CAPTION>
Six Months Ended
June 30
1998 1997
-------------- --------------
<S> <C> <C>
CASH FLOWS FROM OPERATIONS:
Net income $ 61,146 $ 75,584
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 51,666 52,146
Amortization of regulatory assets 5,184 7,825
Deferred income taxes and investment tax credit adjustments - net (1,395) 11,360
Allowance for funds used during construction (921) (2,753)
Cumulative effect of accounting change - before taxes - (29,915)
Change in certain assets and liabilities:
Accounts receivable - excluding cumulative effect of accounting 8,294 6,741
change
Fuel, materials and supplies 4,225 4,651
Accounts payable and accrued expenses (12,871) (5,139)
Taxes accrued 14,594 (138)
Accrued pension benefits 993 2,165
Other - net (18) 213
-------------- --------------
Net cash provided by operating activities 130,897 122,740
-------------- --------------
CASH FLOWS FROM INVESTING:
Construction expenditures - utility (32,525) (30,569)
Construction expenditures - nonutility (1,882) (1,187)
Other 2,505 (9,637)
-------------- --------------
Net cash used in investing activities (31,902) (41,393)
-------------- --------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt - 451,000
Retirement of long-term debt (89,000) (61,250)
Short-term debt - net (25,700) (40,000)
Common dividends paid (23,516) (35,363)
Issuance of preferred stock (Note 2) 50,000 -
Issuance of common stock related to incentive compensation plans 3,852 1,794
Reacquired common stock (528) (401,262)
Other (616) (531)
-------------- --------------
Net cash used in financing activities (85,508) (85,612)
-------------- --------------
Net increase in cash and cash equivalents 13,487 (4,265)
Cash and cash equivalents at beginning of period 17,293 19,317
-------------- --------------
Cash and cash equivalents at end of period $ 30,780 $ 15,052
============== ==============
- ----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest (net of amount capitalized) $ 32,769 $ 25,622
============== ==============
Income taxes $ 17,085 $ 29,089
============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
-----------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
------------------------------------------
1. GENERAL
IPALCO Enterprises, Inc. (IPALCO) owns all of the outstanding common
stock of its subsidiaries (collectively referred to as Enterprises). The
consolidated financial statements include the accounts of IPALCO, its
utility subsidiary, Indianapolis Power & Light Company (IPL) and its
unregulated subsidiary, Mid-America Capital Resources, Inc.
(Mid-America). Mid-America is the parent company of nonutility
energy-related businesses.
The preparation of financial statements in conformity with generally
accepted accounting principles requires that management make certain
estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the
date of the financial statements. The reported amounts of revenues and
expenses during the reporting period may also be affected by the
estimates and assumptions management is required to make. Actual results
may differ from those estimates.
In the opinion of management these statements reflect all adjustments,
consisting of only normal recurring accruals, including elimination of
all significant intercompany balances and transactions, which are
necessary to a fair statement of the results for the interim periods
covered by such statements. Due to the seasonal nature of the electric
utility business, the annual results are not generated evenly by quarter
during the year. Certain amounts from prior year financial statements
have been reclassified to conform to the current year presentation.
Certain amounts have been restated due to the change to the unbilled
revenue method of accounting (see note 4). These financial statements
and notes should be read in conjunction with the audited consolidated
financial statements included in Enterprises' 1997 Annual Report on Form
10-K.
2. CAPITAL STOCK
Common Stock
Shares Amount
Balance at December 31, 1997 44,649,844 $395,851,016
Compensation plans 174,992 7,437,935
Exercise of stock options 113,223 3,852,313
Restricted stock canceled (4,543) (190,397)
---------- ------------
Balance at June 30, 1998 $406,950,867
============
Less shares reacquired by Treasury (12,284)
----------
Shares issued and outstanding
at June 30, 1998 44,921,232
==========
The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share computations in accordance
with Statement of Financial Accounting Standard (SFAS) No. 128:
<PAGE>
<TABLE>
<CAPTION>
For the Period Ended June 30,
-----------------------------
Three Months Ended Six Months Ended
1998 1997 1998 1997
-------------------- -------------------
(In thousands)
<S> <C> <C> <C> <C>
Weighted average common shares 44,924 45,507 44,881 51,272
Dilutive effect of stock options 675 216 674 191
-------- -------- -------- --------
Weighted average common
and incremental shares 45,599 45,723 45,555 51,463
======== ======== ======== ========
</TABLE>
Preferred Stock
On January 13, 1998, Indianapolis Power & Light Company issued $50
million of cumulative preferred stock with a rate of 5.65%. 500,000
shares were issued at $100 par value each. The stock will be redeemable
at par value, subject to certain restrictions, in whole or in part, at
any time on or after January 1, 2008, at the option of IPL.
3. LONG-TERM DEBT
IPALCO's Revolving Credit Facility was issued in April 1997 in the
amount of $401 million. The proceeds were used to purchase, through a
self-tender offer, shares of IPALCO's outstanding common capital stock.
During the first six months of 1998, IPALCO reduced the debt amount by a
net of $89 million resulting in a debt balance under the Revolving
Credit Facility of $234 million as of June 30, 1998. On July 15, 1998,
IPALCO repaid the remaining $234 million due through the issuance of
$230 million in commercial paper and a cash payment of $4 million. This
transaction is not reflected in the Consolidated Financial Statements
for the period ending June 30, 1998.
4. CUMULATIVE EFFECT OF ACCOUNTING CHANGE
Effective January 1, 1997, IPL adopted the unbilled revenue method of
accounting for all electric and steam sales to more closely match
revenues with expenses. Under this method, IPL accrues revenues for all
electric and steam energy delivered to customers during the period,
whether billed or not. Previously IPL recognized these revenues only as
customers were billed, with the service rendered after monthly meter
reading dates through the end of a calendar month recognized as revenues
in the following month. The cumulative effect of accounting change, net
of taxes, was a one-time increase of $18.3 million ($0.32 per share),
reported as a separate component of net income in the restated first
quarter earnings of 1997. The change had the effect of increasing income
before cumulative effect of accounting change in the first six months of
1997 by less than $0.1 million. The results of 1997 were restated for
the accounting change.
5. COMPREHENSIVE INCOME
On January 1, 1998, IPALCO adopted SFAS No. 130, "Comprehensive Income,"
which requires that changes in the amounts of certain items, including
foreign currency translation adjustments and gains and losses on certain
securities be shown in the financial statements. It has been determined
that IPALCO has no amounts that require classification under
comprehensive income.
<PAGE>
6. STOCK-BASED COMPENSATION
A summary of options issued under IPALCO's stock option plans is as
follows:
<TABLE>
<CAPTION>
Weighted Average Range of Option Number of
Price per Share Price per Share Shares
---------------- --------------- ---------
<S> <C> <C> <C>
Outstanding, December 31, 1997................ 28.27 16.8317 - 31.375 2,045,338
Issued..................................... 42.26 40.69 - 43.34 126,000
Exercised.................................. 29.08 16.8317 - 31.375 (113,223)
---------
Outstanding, June 30, 1998.................... 29.08 16.8317 - 43.34 2,058,115
=========
</TABLE>
Accounting Principles Board (APB) Opinion No. 25, "Accounting for Stock
Issued to Employees," and related interpretations in accounting for the
stock based plan have been applied by IPALCO. No compensation cost has
been recognized for the plans because the stock options price is equal
to fair value at the grant date. Had compensation cost for the plans
been determined based on the fair value at the grant dates for awards
under the plans consistent with the method of SFAS No. 123, "Accounting
for Stock-Based Compensation," IPALCO's net income for the six months
ended June 30, 1998, would have decreased from $61.1 million ($1.34 per
share) to the pro forma amount of $60.8 million ($1.33 per share).
IPALCO's net income and earnings per share for the similar period in
1997 would have decreased from $75.6 million ($1.47 per share) to the
pro forma amount of $72.1 million ($1.40 per share). IPALCO estimated
the SFAS No. 123 fair value by utilizing the binomial options pricing
model with the following assumptions: dividend yields of 2.54% to 6.88%,
risk-free rates of 6.38% to 6.88%, volatility of 12% to 13% and expected
lives of 5 years. Earnings per share amounts presented in this paragraph
are diluted.
On January 27, 1998, the Board of Directors amended the Long-Term
Performance and Restricted Stock Incentive Plan as the Long Term
Performance and Restricted Stock Incentive Plan (As Amended and Restated
effective January 1, 1998) also referred to as the 1998 Plan. Pursuant
to the 1998 Plan, an additional 900,000 shares of common stock of IPALCO
have been authorized and reserved for issuance, for a total of 1.5
million shares. Initial awards of 112,691 shares of restricted common
stock were made to participating employees on January 27, 1998. These
initial grants were made subject to shareholder approval of the 1998
Plan, which approval was received on April 15, 1998. Awards are made on
established targets for the participants to reflect the participant's
actual base salary. The shares remain restricted and non-transferable
throughout each three-year performance period, vesting in one-third
increments in each of the three years following the end of the
performance period. At the end of a performance period, awards are
subject to adjustment to reflect Enterprises' performance compared to
companies in the S&P 500 Index with regard to cumulative total return to
shareholders during the three-year performance period. Depending on
Enterprises' performance, final awards may range from 400% of the
initial awards to zero.
7. NEW ACCOUNTING STANDARD
Statement of Financial Standards No. 133, "Accounting for Derivative
Instruments and Hedging Activities", was issued in June 1998 and is
effective for all fiscal quarters of all fiscal years beginning after
June 15, 1999. This statement establishes accounting and reporting
standards for derivative instruments and for hedging activities. It
requires that an entity recognizes all derivatives as either assets or
liabilities in the statement of financial condition and measures those
instruments at fair value. If certain conditions are met, a derivative
may be specifically designated as a fair value hedge, a cash flow hedge,
or a hedge of a foreign currency exposure. The accounting for changes in
the fair value of a derivative (that is, gains and losses) depends of
the intended use of the derivative and the resulting designation.
Management has not yet quantified the effect of the new standard on the
consolidated financial statements.
<PAGE>
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
SAFE HARBOR STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION REFORM ACT OF 1995
In connection with the safe harbor provisions of the Private Securities
Litigation Reform Act of 1995 (the Reform Act), IPALCO Enterprises, Inc. and
subsidiaries (collectively, Enterprises) is hereby filing cautionary statements
identifying important factors that could cause Enterprises' actual results to
differ materially from those projected in forward-looking statements of
Enterprises. This Form 10-Q, and particularly Management's Discussion and
Analysis, contains forward-looking statements. The Reform Act defines
forward-looking statements as statements that express an expectation or belief
and contain a projection, plan or assumption with regard to, among other things,
future revenues, income, earnings per share or capital structure. Such
statements of future events or performance are not guarantees of future
performance and involve estimates, assumptions, and uncertainties and are
qualified in their entirety by reference to, and are accompanied by, the
following important factors that could cause Enterprises' actual results to
differ materially from those contained in forward-looking statements made by or
on behalf of Enterprises. The words "anticipate," "believe," "estimate,"
"expect," "forecast," "project," "objective" and similar expressions are
intended to identify forward-looking statements.
Some important factors that could cause Enterprises' actual results or
outcomes to differ materially from those discussed in the forward-looking
statements include, but are not limited to, fluctuations in customer growth and
demand, weather, fuel and purchased power 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 electric supply in a
timely manner can significantly impact IPL's financial performance. The timing
of deregulation and competition, product development and introductions of
technology changes are also important potential factors. Most of these factors
impact Enterprises through its wholly-owned subsidiary, IPL.
All such factors are difficult to predict, contain uncertainties which
may materially affect actual results and are beyond the control of Enterprises.
LIQUIDITY AND CAPITAL RESOURCES
Material changes in the consolidated financial condition and results of
operations of IPALCO Enterprises, Inc. (Enterprises), except where noted, are
attributed to the operations of Indianapolis Power & Light Company (IPL).
Consequently, the following discussion is centered on IPL.
Overview
- --------
The Board of Directors of Enterprises on May 25, 1998, declared a
quarterly dividend on common stock of 27.5 cents per share compared to 25 cents
per share declared in the second quarter of 1997. The dividend was paid July 15,
1998, to shareholders of record June 19, 1998.
IPL's capital requirements are primarily related to construction
expenditures needed to meet customers' needs for electricity and steam, for
environmental compliance and for the implementation of an integrated information
system. Enterprises' construction expenditures (excluding allowance for funds
used during construction) totaled $20.9 million during the second quarter of
1998, representing a $2.7 million increase from the comparable period in 1997.
Internally generated cash provided by operations was used for construction
expenditures during the second quarter of 1998. Enterprises' construction
expenditures (excluding allowance for funds used during construction) totaled
$34.4 million during the first six months ended June 30, 1998, representing a
$2.7 million increase from the comparable period in 1997. Internally generated
cash provided by operations was used for construction expenditures during the
first six months of 1998.
The three-year construction program has not changed from that
previously reported in IPALCO's 1997 Form 10-K report. (See "Future Performance"
in Item 7 of Management's Discussion and Analysis of Financial Condition and
Results of Operations in IPALCO's 1997 Form 10-K report for further discussion).
IPALCO's Revolving Credit Facility was issued in April 1997 in the
amount of $401 million. The proceeds were used to purchase, through a
self-tender offer, shares of IPALCO's outstanding common capital stock. During
the first six months of 1998, IPALCO reduced the debt amount by a net of $89
million resulting in a debt balance under the Revolving Credit Facility of $234
million as of June 30, 1998. On July 15, 1998, IPALCO repaid the remaining $234
million due through the issuance of $230 million in commercial paper and a cash
payment of $4 million. This transaction is not reflected in the Consolidated
Financial Statements for the period ending June 30, 1998.
IPALCO is continuing to perform analyses of its systems and is working
with suppliers and service organizations in order to determine the impact of
year 2000 issues and make appropriate preparations. Management is unable to
predict at this time the full impact year 2000 issues will have on IPALCO's
operations or future financial condition. Management presently estimates that
the total cost of testing and required changes to systems owned or controlled
by IPALCO to allow for year 2000 issues will be approximately $4 million.
<PAGE>
RESULTS OF OPERATIONS
Comparison of Second Quarter and Six Months Ended June 30, 1998
---------------------------------------------------------------
with Second Quarter and Six Months Ended June 30, 1997
------------------------------------------------------
Diluted earnings per share during the second quarter of 1998 were
$0.79, or $0.26 above the $0.53 attained in the comparable 1997 period. Diluted
earnings per share during the six months ended June 30, 1998, were $1.34, or
$0.13 below the $1.47 attained in the comparable 1997 period. Net income for the
first six months of 1997 included a one-time positive after-tax increase of
$18.3 million ($0.36 per share) See "Cumulative Effect of Accounting Change"
below. Also, weighted average, diluted shares for the six months ended June 30,
1998, were 45.6 million compared to 51.5 million for the similar period in 1997
due to IPALCO's repurchase of 12.5 million common shares in April 1997. The
following discussion highlights the factors contributing to the second quarter
and six months ended results.
Operating Revenues
- ------------------
Operating revenues during the second quarter and six months ended of
1998 increased from the comparable 1997 periods by $22.9 million and $18.0
million, respectively. The increases in revenues resulted from the following:
<TABLE>
<CAPTION>
Increase (Decrease) from Comparable Period
------------------------------------------
June 30, 1998
-------------
Three Months Ended Six Months Ended
------------------ ----------------
(Millions of Dollars)
Electric:
<S> <C> <C>
Change in retail KWH sales - net of fuel 10.8 4.6
Fuel revenue (0.4) 0.2
Wholesale revenue 11.0 11.7
DSM Tracker revenue 0.4 0.8
Steam revenue (0.2) (0.4)
Other revenue 1.3 1.1
-------- --------
Total change in operating revenues $ 22.9 $ 18.0
======== ========
</TABLE>
The second quarter increase in retail KWH sales compared to the same
period in 1997 was due in part to warmer weather. Cooling degree days increased
91% during the second quarter compared to the same period in 1997. The six
months ended increase was due in part to a 99% increase in cooling degree days
partially offset by a decrease of 23% in heating degree days compared to the
same period last year. Economic growth in IPL's service territory also
contributed to the increase in sales for both the second quarter and six months
ended. The changes in fuel revenues in 1998 from the prior year reflect changes
in total fuel costs billed to customers. The increased wholesale sales during
the second quarter and six months ended of 1998, as compared to the same periods
in 1997, reflect increased wholesale marketing efforts and energy requirements
of other utilities.
Operating Expenses
- ------------------
Fuel expenses in the second quarter and six months ended of 1998
increased by $5.7 million and $5.1 million, respectively compared to the same
periods during 1997. The primary reason for both variances from the prior
periods was a result of increased total KWH sales.
Other expenses in the second quarter and six months ended of 1998
increased by $2.8 million and $5.1 million, respectively. The second quarter and
six month ended increases primarily resulted from expenses related to a hospital
chilled water project of $2.0 million. Also contributing to the six months ended
increase was increased electric distribution expense as well as increased
administrative and general expense.
Power purchased expenses in the second quarter and six months ended of
1998 increased by $1.7 million and decreased by $1.4 million, respectively. The
increase during the second quarter resulted from increased KWH purchases while
being partially offset by decreased demand charges. The six months ended
decrease resulted primarily from decreased demand charges.
Maintenance expenses decreased $2.3 million in the second quarter while
increasing $1.7 million for the six months ended of 1998 compared to the similar
periods in 1997. The decrease in the second quarter reflects the timing of costs
for plant maintenance. Due to the mild weather, overhaul maintenance was
advanced to the first quarter in 1998, compared to the more conventional timing
of performing overhaul maintenance in the second quarter. The increase for the
six months ended period resulted primarily from the overhaul of unit 6 at the
Pritchard plant as well as increased boiler and electric plant maintenance at
the Petersburg plant.
Income taxes - net, increased $6.0 million and $3.6 million in the
second quarter and six months ended periods, respectively due to an increase in
pretax operating income.
As a result of the foregoing, utility operating income increased 25.9%
during the second quarter of 1998 from the comparable 1997 period, to $49.2
million. Utility operating income during the six months ended of 1998 increased
6.8% from the comparable 1997 period, to $89.3 million.
Other Income and Deductions
- ---------------------------
Allowance for equity funds used during construction decreased $.9
million and $1.8 million in the second quarter and six months ended periods,
respectively compared to the same periods last year. In August 1997, the
amortization of deferred carrying charges on a plant asset ended resulting in
this decrease.
Other - net, which includes the pretax operating and investment income
from operations other than IPL, as well as non-operating income from IPL,
increased $2.7 million and $3.5 million in the second quarter and six months
ended, respectively. The second quarter and six months increases were due in
part to decreased non-operating expenses at IPL and decreased pretax losses,
excluding interest, at Mid-America of $1.0 million.
Interest and Other Charges
- --------------------------
Interest expense decreased $.7 million during the second quarter of
1998 while increasing $4.6 million for the six months ended of 1998 compared to
the same periods in 1997. The decrease in the second quarter is a result of the
decreased debt balance in the second quarter of 1998 compared to 1997 on
IPALCO's recapitalization debt facility. This decrease was partially offset by
increased interest expense at Mid-America for a $50 million long-term note
issued in June 1997. The six months ended variance was primarily a result of
interest on the recapitalization debt facility of IPALCO that was issued in
April 1997. There was no interest associated with this debt during the first
quarter of 1997. Also contributing to the six months ended variance was
increased long-term interest expense at Mid-America, partially offset by
decreased interest expense at IPL.
Cumulative Effect of Accounting Change
- --------------------------------------
A cumulative effect of accounting change in the amount of $18.3
million, net of taxes, was effectively recorded during the first quarter of
1997. Effective January 1, 1997, IPL adopted the unbilled revenues method of
accounting for electricity and steam delivered during the period. Revenues are
accrued for services provided but unbilled at the end of each month.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- ------- -----------------
In February 1998, Region V of the U.S. Environmental Protection Agency
issued to Cleveland Energy Resources a Notice of Violation (NOV) under the Clean
Air Act. (Cleveland Thermal Energy Corporation conducts business under the name
Cleveland Energy Resources.) The NOV alleged that particulate matter emissions
from four of Cleveland's five boilers exceeded applicable limits on five dates
during the period 1993 through 1996, and that the opacity limit was exceeded on
one date in 1997 based on a visible emission reading. The alleged violations
during the period 1993 through 1996 were .01-.02 lb/MMBtu above the applicable
limit, and the visible emission rating was not statistically significant at
1.7-2.7% opacity above the applicable limit. Representatives of Cleveland met
with the Agency on March 16, 1998, and July 22, 1998, in an attempt to resolve
the matter. Additional stack testing is scheduled for the fall of 1998. If
Cleveland were adjudged to have violated applicable emission limits, it could be
subject to maximum penalties of $27,500 per day of violation. While the results
of this proceeding cannot be predicted with certainty, management, based on
advice of counsel, believes that the final outcome will not have a material
adverse effect on the consolidated financial statements.
On August 18, 1997, Region V of the U. S. Environmental Protection
Agency issued to IPL a Notice of Violation (NOV) under the Clean Air Act. The
NOV alleged that particulate matter emissions from IPL's Perry K Units 11 and 12
exceeded applicable limits on three dates in 1995, that particulate matter
emissions from Perry K Units 15 and 16 exceeded applicable limits on a single
date in each of 1994 and 1995, and that sulfur dioxide emissions exceeded the
applicable limit on four days in the first quarter of 1997. IPL disagrees with
the Agency's interpretations of the applicable rules and believes that the Perry
K Plant has been in compliance with applicable limits. Representatives of IPL
met with the Agency on several occasions in 1997 and 1998, in an attempt to
resolve the matter and have subsequently provided the Agency with additional
information on the operation of the Plant. IPL believes that it has reached
agreement with the Agency on the terms of an Administrative Order that will
resolve the matter without penalty. The Agency has not yet formally issued the
order, however. If IPL were adjudged to have violated applicable emission
limits, it could be subject to maximum penalties of $27,500 per day of
violation. While the results of this proceeding cannot be predicted with
certainty, management, based upon the advice of counsel, believes that the final
outcome will not have a material adverse effect on the consolidated financial
statements.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
The Annual Meeting of shareholders of IPALCO Enterprises, Inc. was held
on April 15, 1998. At the Annual Meeting, approval of the IPALCO Enterprises,
Inc. Long-Term Performance and Restricted Stock Incentive Plan (as amended and
restated effective January 1, 1998) occurred. The vote was 36,047,997 in favor
and 2,069,935 against, with 961,051 abstaining.
At the same meeting, the following four directors in Class III were
elected to terms of three years which expire in April 2001. Each director
received the following number of votes as shown opposite his name:
Director Votes for Votes Withheld
-------- --------- --------------
Robert A. Borns 37,793,021 1,285,962
Otto N. Frenzel III 38,378,042 700,941
Andre B. Lacy 38,419,267 659,716
L. Ben Lytle 37,592,482 1,486,501
<PAGE>
Item 6. Exhibits and Reports on Form 8-K
- ------- --------------------------------
(a) Exhibits. Copies of documents listed below which are
identified with an asterisk (*) are incorporated herein by
reference and made a part hereof. The management contracts or
compensatory plans are marked with a double asterisk (**)
after the description of the contract or plan.
3.1* Articles of Incorporation of IPALCO Enterprises, Inc., as amended.
(Exhibit 3.1 to the Form 10-Q dated 6-30-97.)
3.2* Bylaws of IPALCO Enterprises, Inc. (Exhibit 3.2 to the Form 10-Q
dated 3-31-98).
4.1* IPALCO Enterprises, Inc. IPALCO PowerInvest Dividend Reinvestment
and Direct Stock Purchase Plan. (Exhibit 4.1 to the Form 10-Q
dated 9-30-96.)
4.2* IPALCO Enterprises, Inc. and First Chicago Trust Company of New York
(Rights Agreement as amended and restated). (Exhibit B to the Form
8-K dated 4-29-98.)
10.1 Form of Termination Benefits Agreement together with schedule of
parties to, and dates of, the Termination Benefits Agreements. **
11.1 Computation of Per Share Earnings.
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
IPALCO filed a Form 8-K on April 28, 1998, to file
the amended and restated Rights Agreement between
IPALCO Enterprises, Inc. and First Chicago Trust
Company of New York.
<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.
IPALCO ENTERPRISES, INC.
------------------------
(Registrant)
Date: August 7, 1998 /s/ John R. Brehm
-------------- ---------------------------
John R. Brehm
Vice President and Treasurer
Date: August 7, 1998 /s/ Stephen J. Plunkett
-------------- ----------------------------
Stephen J. Plunkett
Controller
EXHIBIT 10.1
FORM OF
TERMINATION BENEFITS AGREEMENT
AS AMENDED AND RESTATED, EFFECTIVE JANUARY 1, 1993
[See Schedule A attached hereto for a list of parties to,
and dates of, the Termination Benefits Agreements]
This Agreement, dated as of January 1, 1993, by and
among IPALCO ENTERPRISES, INC., an Indiana corporation
having its principal executive offices at 25 Monument
Circle, Indianapolis, Indiana 46204 ("IPALCO"),
INDIANAPOLIS POWER & LIGHT COMPANY, an Indiana
corporation having its principal executive offices at 25
Monument Circle, Indianapolis, Indiana 46204 ("IPL")
(both IPALCO and IPL being collectively referred to
herein as the "Company"), and , an Indiana resident
whose mailing address is (the "Executive").
R E C I T A L S
The following facts are true:
A. The Executive is serving the Company as a key
executive officer, and is expected to continue to make a
major contribution to the profitability, growth, and
financial strength of the Company.
B. The Company considers the continued services of
the Executive to be in the best interests of the Company
and its shareholders, and desires to assure itself of the
availability of such continued services in the future on
an objective and impartial basis and without distraction
or conflict of interest in the event of an attempt to
obtain control of the Company.
C. The Executive is willing to remain in the employ
of the Company upon the understanding that the Company
will provide him with income security upon the terms and
subject to the conditions contained herein if his
employment is terminated by the Company without cause or
if he voluntarily terminates his employment for good
reason.
D. If the Company and Executive entered into one or
more Termination Benefits Agreements prior to this
Agreement (the "Prior Termination Benefits Agreements"),
this Agreement is intended to supersede and replace the
Prior Termination Benefits Agreements.
A G R E E M E N T
In consideration of the premises and the mutual
covenants and agreements hereinafter set forth, the
Company and the Executive agree as follows:
1. Undertaking. The Company agrees to pay to the
Executive the termination benefits specified in paragraph
2 hereof if (a) control of IPALCO is acquired (as defined
in paragraph 3(a) hereof) during the term of this
Agreement (as described in paragraph 5 hereof) and (b)
within three (3) years after the acquisition of control
occurs (i) the Company terminates the employment of the
Executive for any reason other than Cause (as defined in
paragraph 3(b) hereof), death, the Executive's attainment
of age sixty-five (65) or total and permanent disability,
or (ii) the Executive voluntarily terminates his
employment for Good Reason (as defined in paragraph 3(c)
hereof).
2. Termination Benefits. If the Executive is
entitled to termination benefits pursuant to paragraph 1
hereof, the Company agrees to pay to the Executive as
termination benefits in a lump-sum payment within five
(5) calendar days of the termination of the Executive's
employment an amount to be computed by multiplying (i)
the Executive's average annual compensation (as defined
in Section 280G of the Internal Revenue Code of 1986, as
amended (the "Code")) payable by the Company which was
includable in the gross income of the Executive for the
most recent five (5) calendar years ending coincident
with or immediately before the date on which control of
the Company is acquired (or such portion of such period
during which the Executive was an employee of the
Company), by (ii) two hundred ninety-nine and ninety-nine
one hundredths percent (299.99%). For purposes of this
Agreement, employment and compensation paid by any direct
or indirect subsidiary of the Company will be deemed to
be employment and compensation paid by the Company.
3. Definitions.
(a) As used in this Agreement, the
"acquisition of control" means:
(i) The acquisition by any individual,
entity or group (within the meaning of
Section 13(d)(3) or 14(d)(2) of the
Securities Exchange Act of 1934, as amended
(the "Exchange Act")) (a "Person") of
beneficial ownership (within the meaning of
Rule 13d-3 promulgated under the Exchange
Act) of twenty percent (20%) or more of
either (A) the then outstanding shares of
common stock of IPALCO (the "Outstanding
IPALCO Common Stock") or (B) the combined
voting power of the then outstanding voting
securities of IPALCO entitled to vote
generally in the election of directors (the
"Outstanding IPALCO Voting Securities");
provided, however, that the following
acquisitions shall not constitute an
acquisition of control: (A) any acquisition
directly from IPALCO (excluding an
acquisition by virtue of the exercise of a
conversion privilege), (B) any acquisition
by IPALCO, (C) any acquisition by any
employee benefit plan (or related trust)
sponsored or maintained by IPALCO, IPL or
any corporation controlled by IPALCO or (D)
any acquisition by any corporation pursuant
to a reorganization, merger or
consolidation, if, following such
reorganization, merger or consolidation, the
conditions described in clauses (A), (B) and
(C) of subsection (iii) of this paragraph
3(a) are satisfied;
(ii) Individuals who, as of the date
hereof, constitute the Board of Directors of
IPALCO (the "Incumbent Board") cease for any
reason to constitute at least a majority of
the Board of Directors of IPALCO (the
"Board"); provided, however, that any
individual becoming a director subsequent to
the date hereof whose election, or
nomination for election by IPALCO's
shareholders, was approved by a vote of at
least a majority of the directors then
comprising the Incumbent Board shall be
considered as though such individual were a
member of the Incumbent Board, but
excluding, for this purpose, any such
individual whose initial assumption of
office occurs as a result of either an
actual or threatened election contest (as
such terms are used in Rule 14a-11 of
Regulation 14A promulgated under the
Exchange Act) or other actual or threatened
solicitation of proxies or consents by or on
behalf of a Person other than the Board; or
(iii) Approval by the shareholders of
IPALCO of a reorganization, merger or
consolidation, in each case, unless,
following such reorganization, merger or
consolidation, (A) more than sixty percent
(60%) of, respectively, the then outstanding
shares of common stock of the corporation
resulting from such reorganization, merger
or consolidation and the combined voting
power of the then outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such reorganization,
merger or consolidation in substantially the
same proportions as their ownership,
immediately prior to such reorganization,
merger or consolidation, of the Outstanding
IPALCO Stock and Outstanding IPALCO Voting
Securities, as the case may be, (B) no
Person (excluding IPALCO, any employee
benefit plan or related trust of IPALCO, IPL
or such corporation resulting from such
reorganization, merger or consolidation and
any Person beneficially owning, immediately
prior to such reorganization, merger or
consolidation and any Person beneficially
owning, immediately prior to such
reorganization, merger or consolidation,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding Voting Securities, as
the case may be) beneficially owns, directly
or indirectly, twenty percent (20%) or more
of, respectively, the then outstanding
shares of common stock of the corporation
resulting from such reorganization, merger
or consolidation or the combined voting
power of the then outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
and (C) at least a majority of the members
of the board of directors of the corporation
resulting from such reorganization, merger
or consolidation were members of the
Incumbent Board at the time of the execution
of the initial agreement providing for such
reorganization, merger or consolidation;
(iv) Approval by the shareholders of
IPALCO of (A) a complete liquidation or
dissolution of IPALCO or (B) the sale or
other disposition of all or substantially
all of the assets of IPALCO, other than to a
corporation, with respect to which following
such sale or other disposition (1) more than
sixty percent (60%) of, respectively, the
then outstanding shares of common stock of
such corporation and the combined voting
power of the then outstanding voting
securities of such corporation entitled to
vote generally in the election of directors
is then beneficially owned, directly or
indirectly, by all or substantially all of
the individuals and entities who were the
beneficial owners, respectively, of the
Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities
immediately prior to such sale or other
disposition in substantially the same
proportion as their ownership, immediately
prior to such sale or other disposition, of
the Outstanding IPALCO Common Stock and
Outstanding IPALCO Voting Securities, as the
case may be, (2) no Person (excluding IPALCO
and any employee benefit plan or related
trust of IPALCO, IPL or such corporation and
any Person beneficially owning, immediately
prior to such sale or other disposition,
directly or indirectly, twenty percent (20%)
or more of the Outstanding IPALCO Common
Stock or Outstanding IPALCO Voting
Securities, as the case may be) beneficially
owns, directly or indirectly, twenty percent
(20%) or more of, respectively, the then
outstanding shares of common stock of such
corporation and the combined voting power of
the then outstanding voting securities of
such corporation entitled to vote generally
in the election of directors and (3) at
least a majority of the members of the board
of directors of such corporation were
members of the Incumbent Board at the time
of the execution of the initial agreement or
action of the Board providing for such sale
or other disposition of assets of IPALCO; or
(v) The closing, as defined in the
documents relating to, or as evidenced by a
certificate of any state or federal
governmental authority in connection with, a
transaction approval of which by the
shareholders of IPALCO would constitute an
"acquisition of control" under subsection
(iii) or (iv) of this section 3(a) of this
Agreement.
Notwithstanding anything contained in this
Agreement to the contrary, if the Executive's
employment is terminated before an "acquisition
of control" as defined in this section 3(a) and
the Executive reasonably demonstrates that such
termination (i) was at the request of a third
party who has indicated an intention or taken
steps reasonably calculated to effect an
"acquisition of control" and who effectuates an
"acquisition of control" (a "Third Party") or
(ii) otherwise occurred in connection with, or in
anticipation of, an "acquisition of control"
which actually occurs, then for all purposes of
this Agreement, the date of an "acquisition of
control" with respect to the Executive shall mean
the date immediately prior to the date of such
termination of the Executive's employment.
(b) As used in this Agreement, the term
"Cause" means fraud, dishonesty, theft of
corporate assets, or other gross misconduct by
the Executive. Notwithstanding the foregoing,
the Executive shall not be deemed to have been
terminated for cause unless and until there shall
have been delivered to him a copy of a resolution
duly adopted by the affirmative vote of not less
than a majority of the entire membership of the
Board at a meeting of the Board called and held
for the purpose (after reasonable notice to him
and an opportunity for him, together with his
counsel, to be heard before the Board), finding
that in the good faith opinion of the Board the
Executive was guilty of conduct set forth above
in the first sentence of the subsection and
specifying the particulars thereof in detail.
(c) As used in this Agreement, the term
"Good Reason" means, without the Executive's
written consent, (i) a demotion in the
Executive's status, position or responsibilities
which, in his reasonable judgment, does not
represent a promotion from his status, position
or responsibilities as in effect immediately
prior to the change in control; (ii) the
assignment to the Executive of any duties or
responsibilities which, in his reasonable
judgment, are inconsistent with such status,
position or responsibilities; or any removal of
the Executive from or failure to reappoint or
reelect him to any of such positions, except in
connection with the termination of his employment
for total and permanent disability, death or
Cause or by him other than for Good Reason; (iii)
a reduction by the Company in the Executive's
base salary as in effect on the date hereof or as
the same may be increased from time to time
during the term of this Agreement or the
Company's failure to increase (within twelve (12)
months of the Executive's last increase in base
salary) the Executive's base salary after a
change in control in an amount which at least
equals, on a percentage basis, the average
percentage increase in base salary for all
executive and senior officers of the Company
effected in the preceding twelve (12) months;
(iv) the relocation of the principal executive
offices of IPALCO or IPL, whichever entity on
behalf of which the Executive performs a
principal function of that entity as part of his
employment services, to a location outside the
Indianapolis, Indiana metropolitan area or the
Company's requiring him to be based at any place
other than the location at which he performed his
duties prior to a change in control, except for
required travel on the Company's business to an
extent substantially consistent with his business
travel obligations at the time of a change in
control; (v) the failure by the Company to
continue in effect any incentive, bonus or other
compensation plan in which the Executive
participates, including but not limited to the
Company's stock option and restricted stock
plans, unless an equitable arrangement (embodied
in an ongoing substitute or alternative plan),
with which he has consented, has been made with
respect to such plan in connection with the
change in control, or the failure by the Company
to continue his participation therein, or any
action by the Company which would directly or
indirectly materially reduce his participation
therein; (vi) the failure by the Company to
continue to provide the Executive with benefits
substantially similar to those enjoyed by him or
to which he was entitled under any of the
Company's pension, profit sharing, life
insurance, medical, dental, health and accident,
or disability plans in which he was participating
at the time of a change in control, the taking of
any action by the Company which would directly or
indirectly materially reduce any of such benefits
or deprive him of any material fringe benefit
enjoyed by him or to which he was entitled at the
time of the change in control, or the failure by
the Company to provide him with the number of
paid vacation and sick leave days to which he is
entitled on the basis of years of service with
the Company in accordance with the Company's
normal vacation policy in effect on the date
hereof; (vii) the failure of the Company to
obtain a satisfactory agreement from any
successor or assign of the Company to assume and
agree to perform this Agreement; (viii) any
purported termination of the Executive's
employment which is not effected pursuant to a
Notice of Termination satisfying the requirements
of paragraph 4(c) hereof (and, if applicable,
paragraph 3(b) hereof); and for purposes of this
Agreement, no such purported termination shall be
effective; or (ix) any request by the Company
that the Executive participate in an unlawful act
or take any action constituting a breach of the
Executive's professional standard of conduct.
Notwithstanding anything in this paragraph
3(c) to the contrary, the Executive's right to
terminate his employment pursuant to this
paragraph 3(c) shall not be affected by his
incapacity due to physical or mental illness.
4. Additional Provisions.
(a) Enforcement of Agreement. The Company
is aware that upon the occurrence of a change in
control the Board of Directors or a shareholder
of the Company may then cause or attempt to cause
the Company to refuse to comply with its
obligations under this Agreement, or may cause or
attempt to cause the Company to institute, or may
institute, litigation seeking to have this
Agreement declared unenforceable, or may take or
attempt to take other action to deny the
Executive the benefits intended under this
Agreement. In these circumstances, the purpose
of this Agreement could be frustrated. It is the
intent of the Company that the Executive not be
required to incur the expenses associated with
the enforcement of his rights under this
Agreement by litigation or other legal action,
nor be bound to negotiate any settlement of his
rights hereunder, because the cost and expense of
such legal action or settlement would
substantially detract from the benefits intended
to be extended to the Executive hereunder.
Accordingly, if following a change in control it
should appear to the Executive that the Company
has failed to comply with any of its obligations
under this Agreement or in the event that the
Company or any other person takes any action to
declare this Agreement void or unenforceable, or
institutes any litigation or other legal action
designed to deny, diminish or to recover from the
Executive the benefits entitled to be provided to
the Executive hereunder and that the Executive
has complied with all of his obligations under
this Agreement, the Company irrevocably
authorizes the Executive from time to time to
retain counsel of his choice, at the expense of
the Company as provided in this paragraph 4(a),
to represent the Executive in connection with the
initiation or defense of any litigation or other
legal action, whether such action is by or
against the Company or any director, officer,
shareholder, or other person affiliated with the
Company, in any jurisdiction. Notwithstanding
any existing or prior attorney-client
relationship between the Company and such
counsel, the Company irrevocably consents to the
Executive entering into an attorney-client
relationship with such counsel, and in that
connection the Company and the Executive agree
that a confidential relationship shall exist
between the Executive and such counsel. The
reasonable fees and expenses of counsel selected
from time to time by the Executive as hereinabove
provided shall be paid or reimbursed to the
Executive by the Company on a regular, periodic
basis upon presentation by the Executive of a
statement or statements prepared by such counsel
in accordance with its customary practices, up to
a maximum aggregate amount of $500,000. Any
legal expenses incurred by the Company by reason
of any dispute between the parties as to
enforceability of or the terms contained in this
Agreement, notwithstanding the outcome of any
such dispute, shall be the sole responsibility of
the Company, and the Company shall not take any
action to seek reimbursement from the Executive
for such expenses.
(b) Severance Pay; No Duty to Mitigate.
The amounts payable to the Executive under this
Agreement shall not be treated as damages but as
severance compensation to which the Executive is
entitled by reason of termination of his
employment in the circumstances contemplated by
this Agreement. The Company shall not be
entitled to set off against the amounts payable
to the Executive any amounts earned by the
Executive in other employment after termination
of his employment with the Company, or any
amounts which might have been earned by the
Executive in other employment had he sought such
other employment.
(c) Notice of Termination. Any purported
termination by the Company or by the Executive
shall be communicated by written Notice of
Termination to the other party hereto in
accordance with paragraph 4(k) hereof. For
purposes of this Agreement, a "Notice of
Termination" shall mean a notice which shall
indicate the specific termination provision in
this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances
claimed to provide a basis for termination of his
employment under the provision so indicated. For
purposes of this Agreement, no such purported
termination shall be effective without such
Notice of Termination.
(d) Internal Revenue Code. Anything in
this Agreement to the contrary notwithstanding,
in the event that Deloitte & Touche determines
that any payment by the Company to or for the
benefit of the Executive pursuant to the terms of
this Agreement would be nondeductible by the
Company for federal income tax purposes because
of Section 280G of the Code, then the amount
payable to or for the benefit of the Executive
pursuant to this Agreement shall be reduced (but
not below zero) to the maximum amount payable
without causing the payment to be nondeductible
by the Company because of Section 280G of the
Code. Such determination by Deloitte & Touche
shall be conclusive and binding upon the parties.
(e) Assignment. This Agreement shall inure
to the benefit of and be binding upon the parties
hereto and their respective executors,
administrators, heirs, personal representatives,
successors, and assigns, but neither this
Agreement nor any right hereunder may be assigned
or transferred by either party hereto, any
beneficiary, or any other person, nor be subject
to alienation, anticipation, sale, pledge,
encumbrance, execution, levy, or other legal
process of any kind against the Executive, his
beneficiary or any other person. Notwithstanding
the foregoing, the Company will assign this
Agreement to any corporation or other business
entity succeeding to substantially all of the
business and assets of the Company by merger,
consolidation, sale of assets, or otherwise and
shall obtain the assumption of this Agreement by
such successor.
(f) Entire Agreement. This Agreement
contains the entire agreement between the parties
with respect to the subject matter hereof. All
representations, promises, and prior or
contemporaneous understandings among the parties
with respect to the subject matter hereof,
including any Prior Termination Benefits
Agreements, are merged into and expressed in this
Agreement, and any and all prior agreements
between the parties with respect to the subject
matter hereof are hereby cancelled.
(g) Amendment. This Agreement shall not be
amended, modified, or supplemented without the
written agreement of the parties at the time of
such amendment, modification, or supplement.
(h) Governing Law. This Agreement shall be
governed by and subject to the laws of the State
of Indiana.
(i) Severability. The invalidity or
unenforceability of any particular provision of
this Agreement shall not affect the other
provisions, and this Agreement shall be construed
in all respects as if such invalid or
unenforceable provision had not been contained
herein.
(j) Captions. The captions in this
Agreement are for convenience and identification
purposes only, are not an integral part of this
Agreement, and are not to be considered in the
interpretation of any part hereof.
(k) Notices. Except as otherwise
specifically provided in this Agreement, all
notices and other communications hereunder shall
be in writing and shall be deemed to have been
duly given if delivered in person or sent by
registered or certified mail, postage prepaid,
addressed as set forth above, or to such other
address as shall be furnished in writing by any
party to the others.
(l) Waivers. Except as otherwise
specifically provided in this Agreement, no
waiver by either party hereto of any breach by
the other party hereto of any condition or
provision of this Agreement to be performed by
such other party shall be deemed to be a valid
waiver unless such waiver is in writing or, even
if in writing, shall be deemed to be a waiver of
a subsequent breach of such condition or
provision or a waiver of a similar or dissimilar
provision or condition at the same or at any
prior or subsequent time.
(m) Gender. The use of the masculine
gender throughout this Agreement is solely for
convenience; thus, in cases where the Executive
is female, the feminine gender shall be deemed to
be used in place of the masculine gender.
5. Term of this Agreement. This Agreement shall
remain in effect until January 1, 1998 or until the
expiration of any extension thereof. The term of this
Agreement shall be automatically extended for one (1)
year periods without further action of the parties as of
January 1, 1994 and each succeeding January 1 thereafter,
unless IPALCO shall have served written notice to the
Executive prior to January 1, 1994 or prior to January 1
of each succeeding year, as the case may be, of its
intention that the Agreement shall terminate at the end
of the five (5) year period that begins with the
January 1 following the date of such written notice.
IN WITNESS WHEREOF, the parties have executed this
Agreement as of the day and year first above written.
IPALCO ENTERPRISES, INC.
By:
Attest:
INDIANAPOLIS POWER & LIGHT COMPANY
By:
Attest:
SCHEDULE A
TO
TERMINATION BENEFITS AGREEMENT
As Amended and Restated, Effective January 1, 1993
By and among IPALCO Enterprises, Inc., Mid-America
Capital Resources, Inc. and the following individuals:
Daniel L. Short
Clark L. Snyder (effective January 1, 1995)
By and among IPALCO Enterprises, Inc., Indianapolis Power
& Light Company and the following individuals:
Michael G. Banta (effective July 1, 1995)
John C. Berlier, Jr.
John R. Brehm
Max Califar
Ralph E. Canter (effective May 1, 1995)
Kevin P. Greisl (effective May 1, 1998)
Joseph A. Gustin (effective May 1, 1998)
John R. Hodowal
Ramon L. Humke (effective January 1, 1997)
David J. Kiesel (effective July 28, 1998)
Donald W. Knight
David J. McCarthy (effective January 1, 1996)
Paul S. Mannweiler (effective January 1, 1997)
Steven L. Meyer
Stephen J. Plunkett
Stephen M. Powell (effective May 1, 1998)
Edward J. Ryan (effective July 28, 1998)
Joseph A. Slash
Bryan G. Tabler (effective October 1, 1994)
William A. Tracy (effective May 1, 1998)
By and between IPALCO Enterprises, Inc. and the following
individuals:
N. Stuart Grauel
Susan Hanafee (effective May 1, 1995)
Michael P. Holstein (effective May 1, 1996)
Thomas A. Steiner (effective May 1, 1996)
<TABLE>
IPALCO ENTERPRISES, INC.
Exhibit 11.1 - Computation of Per Share Earnings
For the Quarter Ended June 30, 1998
<CAPTION>
QUARTER ENDED JUNE 30, 1998:
Basic Diluted
---------------- -------------
Weighted average number of shares
<S> <C> <C>
Average common shares outstanding at June 30, 1998 44,923,971 44,923,971
Dilutive effect for stock options at June 30, 1998 - 675,050
---------------- -------------
Adjusted weighted average shares at June 30, 1998 44,923,971 45,599,021
================ =============
Net income to be used to compute
diluted earnings per share (Dollars in
thousands)
Net income $35,809 $35,809
================ =============
Earnings Per Share $0.80 $0.79
================ =============
For the Six Months Ended June 30, 1998
SIX MONTHS ENDED JUNE 30, 1998:
Basic Diluted
---------------- -------------
Weighted average number of shares
Average common shares outstanding at June 30, 1998 44,881,438 44,881,438
Dilutive effect for stock options at June 30, 1998 - 673,481
---------------- -------------
Adjusted weighted average shares at June 30, 1998 44,881,438 45,554,919
================ =============
Net income to be used to compute
diluted earnings per share (Dollars in
thousands)
Net income $61,146 $61,146
================ =============
Earnings Per Share $1.36 $1.34
================ =============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000728391
<NAME> IPALCO ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> JUN-30-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,750,410
<OTHER-PROPERTY-AND-INVEST> 84,947
<TOTAL-CURRENT-ASSETS> 153,371
<TOTAL-DEFERRED-CHARGES> 140,450
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,129,178
<COMMON> 406,951
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 568,679
<TOTAL-COMMON-STOCKHOLDERS-EQ> 566,485
0
59,135
<LONG-TERM-DEBT-NET> 946,073
<SHORT-TERM-NOTES> 8,000
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 894
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 548,591
<TOT-CAPITALIZATION-AND-LIAB> 2,129,178
<GROSS-OPERATING-REVENUE> 397,027
<INCOME-TAX-EXPENSE> 39,971
<OTHER-OPERATING-EXPENSES> 267,716
<TOTAL-OPERATING-EXPENSES> 307,687
<OPERATING-INCOME-LOSS> 89,340
<OTHER-INCOME-NET> 5,917
<INCOME-BEFORE-INTEREST-EXPEN> 95,257
<TOTAL-INTEREST-EXPENSE> 34,111
<NET-INCOME> 61,146
1,200
<EARNINGS-AVAILABLE-FOR-COMM> 61,146
<COMMON-STOCK-DIVIDENDS> 23,516
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 130,897
<EPS-PRIMARY> 1.36
<EPS-DILUTED> 1.34
</TABLE>
