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
March 31, 1999 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 March 31, 1999
----- -----------------------------
Common (Without Par Value) 85,714,614 Shares
IPALCO ENTERPRISES, INC. AND SUBSIDIARIES
INDEX
Page No.
-------
PART I. FINANCIAL INFORMATION
- ------- ---------------------
Statements of Consolidated Income -
Three Months Ended March 31, 1999 and 1998 2
Consolidated Balance Sheets - March 31, 1999 and
December 31, 1998 3
Statements of Consolidated Cash Flows -
Three Months Ended March 31, 1999 and 1998 4
Notes to Consolidated Financial Statements 5-7
Management's Discussion and Analysis of
Financial Condition and Results of Operations 8-16
PART II. OTHER INFORMATION 17-18
- -------- -----------------
<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
March 31
1999 1998
------------- -------------
UTILITY OPERATING REVENUES:
<S> <C> <C>
Electric $ 189,612 $ 178,909
Steam 11,219 11,412
------------- -------------
Total operating revenues 200,831 190,321
------------- -------------
UTILITY OPERATING EXPENSES:
Operation:
Fuel 45,914 41,040
Other 30,758 34,921
Power purchased 661 1,007
Purchased steam 1,695 1,890
Maintenance 22,980 19,740
Depreciation and amortization 26,579 25,285
Taxes other than income taxes 8,936 8,822
Income taxes - net 20,057 17,474
------------- -------------
Total operating expenses 157,580 150,179
------------- -------------
UTILITY OPERATING INCOME 43,251 40,142
------------- -------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 351 265
Other - net (128) (426)
Income taxes - net 2,056 2,852
------------- -------------
Total other income - net 2,279 2,691
------------- -------------
INCOME BEFORE INTEREST AND OTHER CHARGES 45,530 42,833
------------- -------------
INTEREST AND OTHER CHARGES:
Interest 15,351 16,991
Allowance for borrowed funds used during construction (221) (204)
Preferred dividend requirements of subsidiary 803 709
------------- -------------
Total interest and other charges - net 15,933 17,496
------------- -------------
NET INCOME $ 29,597 $ 25,337
============= =============
BASIC EARNINGS PER SHARE (Note 2) $ 0.34 $ 0.28
============= =============
DILUTED EARNINGS PER SHARE (Note 2) $ 0.34 $ 0.28
============= =============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Consolidated Balance Sheets
(In Thousands)
(Unaudited)
<CAPTION>
ASSETS March 31 December 31
------ 1999 1998
-------------- --------------
UTILITY PLANT:
<S> <C> <C>
Utility plant in service $ 2,863,579 $ 2,859,899
Less accumulated depreciation 1,227,301 1,202,356
-------------- --------------
Utility plant in service - net 1,636,278 1,657,543
Construction work in progress 91,884 80,198
Property held for future use 10,718 10,719
-------------- --------------
Utility plant - net 1,738,880 1,748,460
-------------- --------------
OTHER ASSETS:
Nonutility property - at cost, less accumulated depreciation 71,077 71,834
Other investments 13,197 12,234
-------------- --------------
Other assets - net 84,274 84,068
-------------- --------------
CURRENT ASSETS:
Cash and cash equivalents 12,311 9,075
Accounts receivable and unbilled revenue
(less allowance for doubtful accounts
1999, $1,433 and 1998, $1,212) 38,671 39,702
Fuel - at average cost 38,857 39,147
Materials and supplies - at average cost 47,457 48,624
Tax refund receivable 7,251 9,647
Prepayments and other current assets 4,725 4,863
-------------- --------------
Total current assets 149,272 151,058
-------------- --------------
DEFERRED DEBITS:
Regulatory assets 115,514 116,801
Miscellaneous 18,400 18,558
-------------- --------------
Total deferred debits 133,914 135,359
-------------- --------------
TOTAL $ 2,106,340 $ 2,118,945
============== ==============
CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common shareholders' equity:
Common stock $ 441,089 $ 434,681
Unearned compensation - restricted stock awards (4,713) (5,384)
Premium on 4% cumulative preferred stock 649 649
Retained earnings 629,681 612,941
Treasury stock, at cost (557,178) (468,696)
-------------- --------------
Total common shareholders' equity 509,528 574,191
Cumulative preferred stock of subsidiary 59,135 59,135
Long-term debt (less current maturities and
sinking fund requirements) 871,374 907,974
-------------- --------------
Total capitalization 1,440,037 1,541,300
-------------- --------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper 11,684 25,200
Current maturities and sinking fund requirements 89,625 1,425
Accounts payable and accrued expenses 64,452 71,835
Dividends payable 13,898 13,392
Taxes accrued 46,615 20,723
Interest accrued 10,681 14,376
Other current liabilities 13,691 13,731
-------------- --------------
Total current liabilities 250,646 160,682
-------------- --------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 321,591 318,327
Unamortized investment tax credit 41,301 41,993
Accrued postretirement benefits 9,024 10,768
Accrued pension benefits 39,267 39,953
Miscellaneous 4,474 5,922
-------------- --------------
Total deferred credits and other long-term liabilities 415,657 416,963
-------------- --------------
COMMITMENTS AND CONTINGENCIES
TOTAL $ 2,106,340 $ 2,118,945
============== ==============
See notes to consolidated financial statements.
</TABLE>
<PAGE>
<TABLE>
IPALCO ENTERPRISES, INC. and SUBSIDIARIES
Statements of Consolidated Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1999 1998
-------------- --------------
CASH FLOWS FROM OPERATIONS:
<S> <C> <C>
Net income $ 29,597 $ 25,337
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 27,189 25,856
Amortization of regulatory assets 2,580 2,591
Deferred income taxes and investment tax credit adjustments - net 1,070 465
Allowance for funds used during construction (572) (469)
Change in certain assets and liabilities:
Accounts receivable 1,031 8,976
Fuel, materials and supplies 1,457 1,465
Accounts payable and accrued expenses (7,383) (10,785)
Taxes accrued 25,892 21,724
Accrued pension benefits (686) 466
Other - net (4,270) (4,810)
-------------- --------------
Net cash provided by operating activities 75,905 70,816
-------------- --------------
CASH FLOWS FROM INVESTING:
Construction expenditures - utility (15,319) (13,297)
Construction expenditures - nonutility (32) (210)
Other (1,656) (5,426)
-------------- --------------
Net cash used in investing activities (17,007) (18,933)
-------------- --------------
CASH FLOWS FROM FINANCING:
Issuance of long-term debt 90,600 -
Issuance of preferred stock - 50,000
Retirement of long-term debt (39,000) (41,000)
Short-term debt - net (13,516) (25,700)
Common dividends paid (12,346) (11,162)
Issuance of common stock related to incentive compensation plans 8,531 3,180
Reacquired common stock (88,482) -
Other (1,449) 2,444
-------------- --------------
Net cash used in financing activities (55,662) (22,238)
-------------- --------------
Net increase in cash and cash equivalents 3,236 29,645
Cash and cash equivalents at beginning of period 9,075 17,293
-------------- --------------
Cash and cash equivalents at end of period $ 12,311 $ 46,938
============== ==============
- -----------------------------------------------------------------------------------------------------------
Supplemental disclosures of cash flow information:
Cash paid (received) during the period for:
Interest (net of amount capitalized) $ 18,435 $ 20,489
============== ==============
Income taxes $ (4,896) $ (2,652)
============== ==============
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.
These financial statements and notes should be read in conjunction with
the audited consolidated financial statements included in Enterprises'
1998 Annual Report on Form 10-K.
2. CAPITAL STOCK
Common Stock
Shares Amount
------ ------
Balance at December 31, 1998 88,863,026 $434,681,738
Exercise of stock options 442,318 8,530,061
Decrease from compensation plans (61,374) (2,123,347)
------------
Balance at March 31, 1999 $441,088,452
============
Less shares reacquired by Treasury (3,529,356)
------------
Shares issued and outstanding at
March 31, 1999 85,714,614
============
On February 23, 1999, the IPALCO Board of Director authorized a
two-for-one stock split of IPALCO's common stock issuable to
shareholders at the close of business on March 5, 1999. All references
to share amounts of common stock and per share information reflect the
stock split.
On March 15, 1999, IPALCO completed its common stock repurchase plan that
began in 1998. IPALCO repurchased in the open market and in privately
negotiated transactions 6 million shares or 6.6% of its outstanding
stock for a total cost of $154 million.
The following is a reconciliation of the weighted average common shares
for the basic and diluted earnings per share computations:
For the Quarter Ended March 31,
-------------------------------
1999 1998
---- ----
(In thousands)
Weighted average common shares 87,218 89,678
Dilutive effect of stock options 897 1,344
------ ------
Weighted average common
and incremental shares 88,115 91,022
====== ======
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 stock. During
1998, IPALCO repaid the Revolver with a commercial paper facility. The
Revolver currently has no outstanding balance but is available for
future borrowings. During the first quarter of 1999, IPALCO increased
the outstanding balance of commercial paper from $197 million at
December 31, 1998, to $248.6 million at March 31, 1999. The proceeds
from the increased debt were used to complete IPALCO's most recent
common stock repurchase program. Current maturities of commercial paper
was $88.2 million at March 31, 1999.
4. STOCK-BASED COMPENSATION
<TABLE>
A summary of options issued under IPALCO's stock option plans is as
follows:
<CAPTION>
Weighted Average Range of Option Number of
Price per Share Price per Share Shares
- ------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
Outstanding, December 31, 1998................ 14.80 8.416 - 21.67 2,618,298
Exercised.................................. 14.85 9.374 - 20.345 (442,318)
---------
Outstanding, March 31, 1999................... 14.78 8.416 - 21.67 2,175,980
=========
</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 option 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 three months
ended March 31, 1999 and 1998 would not have changed. IPALCO estimated
the SFAS No. 123 fair value by utilizing the binomial options pricing
model with the following assumptions: dividend yields of 2.5% to 6.9%,
risk-free rates of 6.4% to 6.9%, volatility of 12% to 13% and expected
lives of 5 years.
IPALCO has a Long-Term Performance and Restricted Stock Incentive Plan.
On January 4, 1999, an additional 15,572 shares were issued to reflect
the addition of new participants. During the first quarter of 1999,
76,946 shares of restricted stock were canceled in order to pay taxes on
behalf of participants or as a result of a participant electing to
receive cash in lieu of stock.
5. SEGMENT REPORTING
Enterprises has two business segments (electric and "all other"). Steam
operations of IPL and all subsidiaries other than IPL were combined in
the "all other" category. Pretax operating income for the electric
segment was $60.8 million and $54.6 million and for the "all other"
segment was $3.2 million, and $3.6 million for the first quarter ended
March 31, 1999, and 1998, respectively. Steam operations of IPL are
included in the caption UTILITY OPERATING INCOME. All other operating
components of all other subsidiaries other than IPL are included in the
caption "Other-net". The cost of property and plant, excluding
construction in progress and property held for future use, is as follows:
March 31
1999 1998
- -------------------------------------------------------------------------
(In Thousands)
Electric plant in service.......... $ 2,756,094 $ 2,707,869
All other.......................... 196,831 192,308
----------- -----------
Subtotal.................... $ 2,952,925 $ 2,900,177
=========== ===========
6. 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.
(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,
Enterprises' ability to have available an appropriate amount of production
capacity in a timely manner can significantly impact Enterprises' financial
performance. The timing of deregulation and competition, product development and
introductions of technology changes are also important potential factors. Most
of these factors affect Enterprises through its wholly-owned subsidiary,
Indianapolis Power & Light Company (IPL).
All such factors are difficult to predict, contain uncertainties which
may materially affect actual results and are beyond the control of Enterprises.
Enterprises' ability to predict results or effects of issues related to
the Year 2000 is inherently uncertain, and is subject to factors that may cause
actual results to differ materially from those projected. Factors that could
affect the actual results include the possibility that contingency plans or
remediation efforts will not operate as intended; Enterprises' failure to timely
or completely identify all software, hardware or embedded chip devices requiring
remediation; unexpected costs; and the uncertainty associated with the impact of
Year 2000 issues on the utility industry and on Enterprises' customers, vendors
and others with whom it does business. See "Year 2000" for information about
Enterprises' efforts.
LIQUIDITY AND CAPITAL RESOURCES
Material changes in the consolidated financial condition and results of
operations of Enterprises, except where noted, are attributed to the operations
of IPL. Consequently, the following discussion is centered on IPL.
Overview
- --------
The Board of Directors of Enterprises on February 23, 1999, declared a
quarterly dividend on common stock of 15 cents per share compared to 13.75 cents
per share declared in the first quarter of 1998. The dividend was paid April 15,
1999, to shareholders of record March 30, 1999.
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 $15.4 million during the first quarter ended
March 31, 1999, representing a $1.8 million increase from the comparable period
in 1998. Internally generated cash provided by operations was used for
construction expenditures during the first quarter of 1999.
The three-year construction program has not changed from that
previously reported in IPALCO's 1998 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 1998 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 stock. During 1998,
IPALCO repaid the Revolver with a commercial paper facility. The Revolver
currently has no outstanding balance but is available for future borrowings.
During the first quarter of 1999, IPALCO increased the outstanding balance of
commercial paper from $197.0 million at December 31, 1998, to $248.6 million at
March 31, 1999. The proceeds from the increased debt were used to complete
IPALCO's most recent common stock repurchase program. Current maturities of
commercial paper was $88.2 million at March 31, 1999.
OTHER
Market Risk Sensitive Instruments and Positions
- -----------------------------------------------
The primary market risk to which Enterprises is exposed is interest rate
risk. Enterprises uses long-term debt as a primary source of capital in its
business. A portion of this debt has an interest component that resets on a
periodic basis to reflect current market conditions. The following table
presents the principal cash repayments and related weighted average interest
rates by maturity date for Enterprises' long-term fixed-rate debt and its other
types of long-term debt at March 31, 1999:
<TABLE>
<CAPTION>
Maturity Schedule
Period Ending March 31
Fair
(Dollars in Millions) 2000 2001 2002 2003 2004 Thereafter Total Value
- -----------------------------------------------------------------------------------------------------------
Long-term debt
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Fixed rate $1.4 $2.4 $3.3 $3.4 $83.8 $459.7 $554.0 $584.3
Average rate 7.9% 7.9% 7.9% 7.9% 6.1% 7.0% 6.9%
Variable - - - - - $159.3 $159.3 $159.3
Average rate - - - - - 4.0% 4.0%
Recapitalization debt $88.2 $80.2 $80.2 - - - $248.6 $248.6
Average rate 6.7% 6.7% 6.7% - - - 6.7%
</TABLE>
To manage Enterprises' exposure to fluctuations in interest rates and to
lower funding costs, Enterprises constantly evaluates the use of, and has
entered into, interest rate swaps. Under these swaps, Enterprises or its
subsidiaries agree with counterparties to exchange, at specified intervals, the
difference between fixed-rate and floating-rate interest amounts calculated on
an agreed notional amount. This interest differential paid or received is
recognized in the consolidated statements of income as a component of interest
expense.
At March 31, 1999, IPALCO had an interest rate swap agreement outstanding
with a notional amount of $225 million, of which the notional amount decreases
$25 million each quarter. Enterprises has agreed to pay a fixed rate of 6.3575%
and receive a floating rate based on applicable LIBOR.
At March 31, 1999, IPL had an interest rate swap agreement with a
notional amount of $40 million, which expires in January 2023. IPL pays interest
at a fixed rate of 5.21% to a swap counter party and receives a variable rate
based on the tax-exempt weekly rate.
Year 2000
- ---------
Enterprises is potentially subject to operational problems associated
with the inability of various computer hardware, software and devices containing
embedded chips to properly process the year change from 1999 to 2000. Such
problems could conceivably affect Enterprises' ability to deliver electricity,
steam or chilled water to its customers, as well as Enterprises' internal
operations such as billing or payroll functions. Further, Year 2000 problems
experienced by other entities, over which Enterprises has no control, such as
certain suppliers or other electric utilities with which Enterprises is
interconnected, could adversely affect Enterprises' operations.
In 1997, Enterprises established a Year 2000 Committee. Enterprises
currently manages the Year 2000 project through two employee committees, the
Compliance Testing Committee and the Contingency Planning Committee, each headed
by corporate officers. Each of those committees reports to a Year 2000 Steering
Committee composed of officers. The Year 2000 Steering Committee reports to the
Office of the Chairman, who reports to the Board of Directors. Enterprises has a
formal Year 2000 Plan approved by the Board of Directors.
The Indiana Utility Regulatory Commission has ordered all Indiana public
utilities, including Enterprises, to "use their best efforts to identify their
mission critical operations and conduct an inventory of all electronic devices
that may be affected by date processing logic, assess the status of these
devices, take steps to correct problems in the devices and test the devices to
determine compliance" in order to be "Year 2000 ready."
The Compliance Testing Committee is engaged in inventorying, reviewing,
analyzing, correcting and testing computer-related systems and embedded chip
devices. The Contingency Planning Committee is in the process of assessing
various operating scenarios associated with potential Year 2000 problems and
formulating plans by which to operate Enterprises in the event of such problems.
Both the Compliance Testing Committee and the Contingency Planning Committee are
concentrating first on systems critical to the continuity of Enterprises'
business. Non-critical systems have lower priorities in terms of committee
efforts.
Enterprises is participating in an Electric Power Research Institute
program on the Year 2000 issue, as well as the North American Electric
Reliability Council (NERC) system readiness assessments.
Enterprises' Year 2000 Plan includes attention to its generating
facilities, energy management systems, telecommunications systems, substation
control and protection systems, transmission and distribution systems, business
information systems, financial systems and business partners. It includes
efforts such as assessing Year 2000 risks to computer hardware, software and
embedded systems; identifying options and solutions; evaluating solutions;
repairing, upgrading and replacing systems; testing systems; and contingency
planning.
State of Readiness
A. Identification and Assessment
The Compliance Testing Committee is coordinating and reviewing the
enterprise-wide use of information technology and assessing potential Year 2000
problems. That effort involves making an inventory of applications and systems
and evaluating exposures associated with, for example, vendor-provided software
and hardware, Enterprises-developed software, and various devices containing
embedded chips. The Committee is also in contact with vendors to determine
product compliance and vendors' timeframes for compliance. Computer systems
being reviewed include hardware, machine microcode and firmware, operating
systems, generic applications software, billing software, communications
software and financial software.
The Compliance Testing Committee continues to assess computer systems and
embedded chip devices related to Enterprises':
Electricity generating stations and plants producing steam and/or chilled
water; Energy management systems; Substation controls, system protection,
and transmission and distribution systems; Telecommunications systems; and
Business information systems.
The identification, inventory and assessment phases for critical systems
are now complete. The Compliance Testing Committee continues to be vigilant for
issues that may come to light and is also working on non-critical systems.
B. Remediation and Testing
The Compliance Testing Committee is coordinating, modifying or replacing
legacy systems which may not be Year 2000 compliant. Enterprises is in the
process of replacing most of its key financial software applications. Although
that project was not specifically initiated as a Year 2000 effort, it will
coincidentally result in replacement of non-compliant software.
The Compliance Testing Committee is also engaged in establishing and
operating appropriate testing environments to determine, to the extent possible,
the Year 2000 compliance of existing systems and/or devices and the compliance
of replacement or upgraded systems and devices. Enterprises may employ one or
more of the following techniques: component tests, simulations, outside testing,
vendor verifications or upgrades or change-outs. Some devices or systems, such
as satellite communication links, may not be susceptible to testing, in which
cases Enterprises must rely on the service providers' verifications.
Enterprises has inquired of its suppliers and vendors of software,
computer-related equipment, devices and services about Year 2000 compliance.
Some provided the requested information and/or assurances and some did not.
Enterprises' operations could be adversely affected by Year 2000-related
failures of other companies, such as telecommunication providers, that supply
Enterprises with mission-critical services. Similarly, Year 2000 failures of
other utilities with which Enterprises is interconnected could adversely affect
Enterprises' ability to deliver services to its customers.
Enterprises currently expects to complete the remediation and testing
phases for critical systems by the end of the second quarter 1999 and estimates
that it is now approximately 80% complete. Enterprises is operating its major
electricity generating units with clocks set in year 2000. Enterprises also
participated in a national NERC drill, testing utilities' ability to operate
facilities without normal communication services. No major problems were
encountered.
Costs to Address Enterprises' Year 2000 Issues
Not including the cost of replacing Enterprises' business software, a
project not initiated specifically for Year 2000 reasons but which will provide
Year 2000 benefits through replacing non-compliant software, Enterprises
currently estimates that its costs of the phases of identification, assessment,
remediation and testing may be approximately $4 million which Enterprises
believes is not material to its results of operations, liquidity and financial
condition. Of that figure, Enterprises has currently expended approximately $2
million. A substantial proportion of the costs of remediation are associated
with functional areas of Enterprises other than Information Services.
Enterprises currently estimates that its cost of contingency planning efforts
may be approximately $1.5 million.
Risks of Enterprises' Year 2000 Issues
In light of the numerous computer-related systems and embedded chip
devices present in business and production equipment used by a utility, and the
interdependent nature of control systems, a large number of potential Year 2000
failure scenarios exist, potentially involving Enterprises' internal functions
(such as billing), as well as its chilled water, steam and electricity
generation and distribution functions. Consequences could conceivably range from
essentially no operational problems to a massive disruption of chilled water,
steam and electric service lasting for a significant period of time. Further,
since Enterprises does not stand alone but is electrically interconnected with
other utilities across a substantial portion of the nation, even if Enterprises
experiences no significant Year 2000 problems associated with its own equipment,
its ability to deliver electricity could be adversely affected by Year 2000
failures experienced by other interconnected utilities. The probability of such
failures is believed to be small. Enterprises currently expects to experience at
least some, hopefully minor, problems associated with Year 2000. Some
conceivable, though unlikely, Year 2000 failure scenarios could be material to
Enterprises' results of operations.
There are both external and internal risks associated with Year 2000 that
could affect Enterprises' chilled water, steam and electricity generation,
transmission and distribution operations. Potential internal risk factors
include, but are not limited to, increased risk of generator trips, inability to
start or restart generators, increased risk of transmission facility trips, loss
of energy management systems, loss of Company-owned voice/data communications,
system protection (relay) failures resulting in cascading outages or facility
damage, failure of load-shedding controls to operate properly, failure of load
management systems to operate properly, loss of or incorrect critical operating
data, failure of environmental control systems, loss of distribution systems or
failure of voltage control devices to operate properly. Occurrences of those
internal problems, alone or in combination, could result in varying effects on
Enterprises' operations. Concerns over these occurrences are minimal based on
testing results that indicate no Year 2000-related problems with key generation
and transmission control systems. Enterprises' major generating units' control
systems have been tested for critical dates and are already operating in the
year 2000.
External risk factors include, but are not limited to, loss of customer
load, uncharacteristic load patterns, loss of leased communication facilities,
failure of delivery systems to maintain supplies of fuel and severe or cold
weather. Occurrences of various of those events, alone or in combination, could
result in varying effects on Enterprises.
Enterprises had previously reported a risk of unavailability of skilled
labor, in light of the December 13, 1999, expiration of the collective
bargaining agreement between IPL and the International Brotherhood of Electrical
Workers. That risk has been ameliorated through negotiation of an arrangement
between IPL and the IBEW under which union members will be available to work to
help respond to Year 2000 problems.
Enterprises' insurance policies, including policies for liability and
property damage, currently expire, are up for renewal or have anniversary dates
during 1999. Enterprises currently expects that, in line with a general trend in
the insurance industry, some insurance policies purchased or renewed during 1999
may exclude certain elements of damage potentially flowing from Year 2000
events. Similarly, in light of the unprecedented nature of the Year 2000
phenomenon, it is not clear whether policy language concerning coverage and
policy defenses will be interpreted to cover or bar claims, if any, arising out
of Year 2000 events.
In light of the many adverse conditions that could happen to Enterprises
associated with Year 2000, along with the speculation that some or many of them
may not happen, it is extremely difficult to hypothesize a most reasonably
likely worst case Year 2000 scenario with any degree of certainty. With that in
mind, Enterprises currently believes the most reasonably likely worst case
scenario would be an isolated partial reduction in generating unit capacity due
to minor systems failures with no interruption of power to Enterprises'
customers. Enterprises does not believe that the worst case scenario will occur
and, should it occur, Enterprises believes that the consequences of that
scenario, with regard to either costs of repair or lost revenues, are not likely
to have a material effect on Enterprises' results of operations, liquidity and
financial condition.
Enterprises' Contingency Plans
The Contingency Planning Committee is engaged in reviewing hypothetical
scenarios involving various Year 2000 system or device failures and preparing
plans by which to operate Enterprises in the event those failures occur.
Enterprises' contingency planning efforts are not yet complete, but are underway
within the scope of an overall outline. Enterprises' contingency planning
involves the phases of plan development, testing, execution and recovery after
Year 2000 events. As with compliance testing, contingency planning touches
essentially every area of Enterprises' operations, as well as interactions with
interconnected utilities, customers, critical vendors and emergency and other
governmental authorities.
The planning phase attempts to identify and evaluate potential impacts on
business operations, life, property, and the environment; develop emergency
plans including establishing procedures for mitigation of failures and evaluate
contingency planning being done on systems that interface with Enterprises'
systems; identify dates of action for various contingencies; establish
responsibility and authority for various response efforts; and establish and
perform a training program with respect to responding to contingencies,
including practicing and testing the contingency plans and coordinating the
efforts with governmental functions.
Contingency planning includes consideration of potential interruptions in
the supply chain or transportation of critical fuel, water, chemicals, material
supplies etc., and acquisition of appropriate extra supplies, as well as
potential failures of or other problems associated with the interconnected
electricity grid. Similarly, consideration may be given to cooperative
arrangements with other utilities in the event that Year 2000 problems impact
the supply of skilled labor to effect remediation actions. Enterprises' existing
disaster recovery plans have formed bases for some Year 2000 contingency plans.
In the testing phase, various drills will be conducted to test the plan's
effectiveness. Modifications will be made where testing indicates a need. In the
execution phase, Enterprises will operate its contingency plans in response to
events actually occurring.
After Year 2000 events, if any, Enterprises will execute its post-event
contingency plans as required. It will test its system functions, review the
results, restore and restart systems, and notify appropriate authorities of the
resolution of problems.
<PAGE>
RESULTS OF OPERATIONS
Comparison of Quarters Ended March 31, 1999 and March 31, 1998
--------------------------------------------------------------
Diluted earnings per share during the first quarter of 1999 was $.34,
or $.06 above the $.28 attained in the comparable 1998 period. Weighted average,
diluted shares for the 1999 first quarter were 88.1 million compared to 91.0
million for the same period in 1998 due to IPALCO's repurchase of 6 million
common shares between December 1998 and March 1999. The following discussion
highlights the factors contributing to the first quarter results.
Operating Revenues
- ------------------
Operating revenues during the first quarter of 1999 increased $10.5
million from the comparable 1998 period. The increase in revenues resulted from
the following:
Increase (Decrease)
from Comparable Period
Three Months Ended March 31
---------------------------
(Millions of Dollars)
Electric:
Change in retail KWH sales - net of fuel $ 7.6
Fuel revenue 0.7
Wholesale revenue 2.7
DSM tracker revenue 0.1
Steam revenue (0.2)
Other revenue (0.4)
--------
Total change in operating revenues $ 10.5
========
The first quarter increase in retail KWH sales compared to the same
period in 1998 was due to colder weather. Heating degree days increased 19%
during the first quarter compared to the same period in 1998. The changes in
fuel revenues in 1999 from the prior year reflect changes in total fuel costs
billed to customers. The increased wholesale sales during the first quarter of
1999, as compared to the same period in 1998, reflect increased wholesale
marketing efforts and energy requirements of other utilities.
Operating Expenses
- ------------------
Fuel costs increased $4.9 million in the first quarter of 1999 compared
to the same period last year. This increase was primarily due to increased total
KWH sales.
Other operating expenses decreased by $4.2 million in the first quarter
of 1999 compared to the same period in 1998. This decrease was due primarily to
increased sales of emission allowances of $3.4 million which reduces operating
expenses. Also contributing to the variance was decreased administrative and
general expenses and other miscellaneous expenses.
Maintenance expenses increased $3.2 million in the first quarter of
1999 compared to the same period in 1998. The increase reflects the costs
associated with the overhaul of unit 1 at the Petersburg plant as well as
increased electric distribution expenses.
Income taxes - net, increased $2.6 million in the first quarter of 1999
compared to the same period in 1998 due to an increase in pretax operating
income.
As a result of the foregoing, utility operating income increased 7.7%
from the comparable 1998 period, to $43.3 million.
Other Income and Deductions
- ---------------------------
Other - net, which includes the pretax operating and investment income
from operations other than IPL, as well as non-operating income from IPL,
increased $0.3 million. This increase was primarily due to increased
miscellaneous non-operating revenues at IPL.
Interest and Other Charges
- --------------------------
Interest expense decreased $1.6 million in the first quarter of 1999
compared to the same period in 1998. This decrease is a result of the reduction
of the principal amount on the recapitalization debt facility of IPALCO issued
in April 1997.
<PAGE>
PART II - OTHER INFORMATION
- ---------------------------
Item 1. Legal Proceedings
- ------- -----------------
None
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, as amended.
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 4-28-98.)
11.1 Computation of Per Share Earnings.
21.1* Subsidiaries of the Registrant. (Exhibit 21.1 to the Form 10-K dated
12-31-97.)
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
A Form 8-K was filed on February 23, 1999, reporting
Item 5, Other Events, to report a two-for-one stock
split.
<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: May 14, 1999 /s/ John R. Brehm
--------------------- -----------------------------
John R. Brehm
Vice President and Treasurer
Date: May 14, 1999 /s/ Stephen J. Plunkett
--------------------- -----------------------------
Stephen J. Plunkett
Controller
EXHIBIT 3.2
BY-LAWS
OF
IPALCO ENTERPRISES, INC.
----------------
As Amended and Restated
April 29, 1986,
And Further Amended
November 13, 1989,
June 26, 1990,
June 29, 1993,
April 26, 1994,
February 27, 1996,
February 25, 1997,
January 26, 1999,
February 23, 1999, and
April 27, 1999
----------------
BY-LAWS
OF
IPALCO ENTERPRISES, INC.
--------------
As Amended and Restated
April 29, 1986,
And Further Amended
November 13, 1989,
June 26, 1990,
June 29, 1993,
April 26, 1994,
February 27, 1996,
February 25, 1997,
January 26, 1999,
February 23, 1999, and
April 27, 1999
--------------
ARTICLE I.
Offices
SECTION 1. Principal Office. The principal office of
the Corporation shall be in the City of Indianapolis,
County of Marion, State of Indiana.
SECTION 2. Other Offices. The Corporation may also
have an office in the City of Chicago, Illinois, and in
the City of New York, New York, and also offices at such
other places as the Board of Directors may from time to
time appoint or the business of the Corporation may
require.
ARTICLE II.
Shareholders Meetings
SECTION 1. Place of Meeting. Meetings of the
shareholders of the Corporation shall be held at such
place within or without the State of Indiana as may be
specified from time to time in the respective notices,
waivers of notice thereof, or by resolution of the Board
of Directors or the shareholders.
SECTION 2. Annual Meeting. The annual meeting of
shareholders shall be held on the third Wednesday of
April of each year at the hour of 11:00 o'clock A.M.,
unless such day shall be a legal holiday, in which event
the meeting shall be held on the next succeeding business
day at the same hour, or unless the Board of Directors
shall by resolution set another date for such meeting
within ninety days of the third Wednesday of April, in
which event the meeting shall be held on the date and at
the time specified in such resolution.
(As Amended February 25, 1997)
SECTION 3. Special Meetings. Special meetings of the
shareholders for any purpose or purposes may be called by
the Chairman of the Board, the President or by a majority
of the Board of Directors. Business transacted at any
such meeting shall be confined to the objects stated in
the call and matters germane thereto.
(As Amended June 29, 1993)
SECTION 4. Notice of Meetings; Waiver. Written or
printed notice, stating the place, day and hour of the
annual and/or special meetings of the shareholders, and
in case of a special meeting, the purpose or purposes for
which the meeting is called, shall be delivered or mailed
by the Secretary, or by the officer or persons entitled
to call the meeting, to each shareholder of record
entitled by the Amended Articles of Incorporation
(hereinafter referred to as the "Amended Articles") and
by law to vote at such meeting, at such address as
appears upon the records of the Corporation, at least ten
(10) days before the date of the meeting.
Notice of any shareholders meeting may be waived in
writing by any shareholder, if the waiver sets forth in
reasonable detail the purposes for which the meeting is
called and the time and place thereof. Attendance at any
meeting, in person or by proxy, shall constitute a waiver
of notice of such meeting.
(As Amended June 29, 1993)
SECTION 5. Quorum. The holders of a majority of the
shares issued and outstanding and then entitled to vote,
present in person or represented by proxy, shall be
requisite and sufficient to constitute a quorum at all
meetings of the shareholders for the transaction of
business, except as otherwise provided by law, by the
Amended Articles, or by these By-Laws. If, however, such
majority shall not be present or represented at any
meeting of the shareholders, the shareholders present in
person or by proxy shall have power to adjourn the
meeting from time to time without notice, other than
announcement at the meeting, until a quorum shall attend,
when any business may be transacted which might have been
transacted at the meeting as originally called.
SECTION 6. Voting. At each meeting of the
shareholders, every shareholder entitled to vote may vote
in person or by proxy appointed by an instrument in
writing subscribed by such shareholder or by his duly
authorized attorney and delivered to the Secretary of the
meeting. Each shareholder shall have one vote for each
share of common stock registered in his name at the time
of the closing of the transfer books or taking the record
for said meeting. The vote for directors, and, upon the
demand of any shareholder, the vote upon any question
before the meeting, shall be by ballot. All elections
shall be had by plurality vote and all other questions
shall be decided by a majority vote, except as otherwise
provided by law, by the Amended Articles or by these By-
Laws.
SECTION 7. New Business. At an annual meeting of
shareholders only such new business shall be conducted,
and only such proposals shall be acted upon, as shall
have been properly brought before the annual meeting. For
any new business proposed by the Board of Directors to be
properly brought before the annual meeting, such new
business shall be approved by the Board of Directors and
shall be stated in writing and filed with the Secretary
of the Corporation at least five (5) business days before
the date of the annual meeting, and all business so
approved, stated and filed shall be considered at the
annual meeting. Any shareholder may make any other
proposal at the annual meeting, but unless properly
brought before the annual meeting, such proposal shall
not be acted upon at the annual meeting. For a proposal
to be properly brought before an annual meeting by a
shareholder, the shareholder must have given timely
notice thereof in writing to the Secretary of the
Corporation. To be timely, a shareholder's notice must be
delivered to or mailed and received at the principal
executive offices of the Corporation not less than 75
days nor more than 100 days prior to the annual meeting;
provided, however, that if less than 40 days' notice or
prior public disclosure of the date of the annual meeting
is given or made, notice by the shareholder to be timely
must be so delivered or received not later than the close
of business on the 10th calendar day following the
earlier of (1) the day on which such notice of the date
of the annual meeting was mailed or (2) the day on which
such public disclosure was made. A shareholder's notice
to the Secretary of the Corporation shall set forth as to
each matter the shareholder proposes to bring before the
annual meeting and the reasons for conducting such
business at the annual meeting (a) a brief description of
the proposal desired to be brought before the annual
meeting and the reasons for conducting such business at
the annual meeting, (b) the name and address, as they
appear on the Corporation's books, of the shareholder
proposing such business and any other shareholders known
by such shareholder to be supporting such proposal, (c)
the class and/or series and number of shares that are
beneficially owned by the shareholder on the date of such
shareholder notice and by any other shareholders known by
such shareholder to be supporting such proposal on the
date of such shareholder notice, and (d) any financial
interest of the shareholder and any supporting
shareholders in such proposal.
The Board of Directors may reject any shareholder
proposal not made in accordance with the terms of this
Section 7. Alternatively, if the Board of Directors fails
to consider the validity of any shareholder proposal, the
presiding officer of the annual meeting shall, if the
facts warrant, determine and declare at the annual
meeting that the shareholder proposal was not made in
accordance with the terms of this Section and, if he
should so determine, he shall so declare at the annual
meeting and any such business or proposal not properly
brought before the annual meeting shall not be acted upon
at the annual meeting. This provision shall not prevent
the consideration and approval or disapproval at the
annual meeting of reports of officers, directors and
committees of the Board of Directors, but, in connection
with such reports, no new business shall be acted upon at
such annual meeting unless stated, filed and received as
herein provided.
(As Amended January 26, 1999)
ARTICLE III.
Directors
SECTION 1. Number and Term. The number of directors
of this Corporation shall be fifteen (15). Such directors
shall be elected for such terms as may be specified in
the Amended Articles.
(As Amended February 23, 1999)
SECTION 2. Powers and Duties. In addition to the
powers and duties expressly conferred upon it either by
law, by the Amended Articles, or by these By-Laws, the
Board of Directors may exercise all such powers of the
Corporation as are conferred upon the Corporation by law
and by the Amended Articles, and do all such lawful acts
and things as are not inconsistent with the law or the
Amended Articles.
Subject to the provisions of law and the Amended
Articles, the Board of Directors shall have absolute
discretion in the declaration of dividends and in fixing
the date for the declaration and payment of dividends.
SECTION 3. Annual and Regular Meetings; Notice. The
annual meeting of the Board of Directors shall be held on
the last Tuesday of the month in which the annual meeting
of shareholders is held. Other regular meetings of the
Board of Directors shall be held on the last Tuesday of
the month in the months of January, February, April,
July, October, November and December. If the day fixed
pursuant to this Section for the annual or any regular
meeting shall be a legal holiday, then such annual or
regular meeting shall be held on the next succeeding
business day.
The annual meeting and all regular meetings of the
Board of Directors shall be held immediately following
the Board of Directors meeting of Indianapolis Power &
Light Company, or if there is no such meeting, at 1:30
P.M., at the principal office of the Corporation, unless
notice of a different time and/or place is given with
respect to any such meeting at least seven days prior
thereto by mail or three days prior thereto by telegraph.
No notice of the annual or any regular meeting of the
Board of Directors shall be required unless such meeting
is to be held at a time and/or place other than the
principal office of the Corporation.
(As Amended April 27, 1999)
SECTION 4. Special Meetings. Special meetings of the
Board of Directors may be called by the Chairman of the
Board, the President, or by two-thirds (2/3) of the
directors on two days' notice by mail or by one day's
notice by telephone or telegraph to each director, which
notice shall state the time, place and purpose of the
holding of such meetings. Any special meeting of the
Board of Directors may be held either within or without
the State of Indiana.
SECTION 5. Quorum. At all meetings of the Board of
Directors a majority of the directors shall be necessary
and sufficient to constitute a quorum for the transaction
of business, and the affirmative vote of a majority of
the directors present shall be the act of the Board of
Directors, except as otherwise may be provided
specifically by statute, by the Amended Articles or by
these By-Laws. If at any meeting of the Board of
Directors there shall be less than a quorum present, a
majority of those directors present may adjourn the
meeting to another day and thereupon the Secretary shall
mail, telephone, or telegraph to each director, notice of
the time and place of the holding of such adjourned
meeting. At any such adjourned meeting at which there is
a quorum present, any business may be transacted which
might have been transacted at the meeting as originally
scheduled or called.
SECTION 6. Resignations. Any director of the
Corporation may resign at any time by giving written
notice to the Board of Directors or to the Chairman of
the Board, the President or the Secretary of the
Corporation. Any such resignation shall take effect at
the time specified therein, or if the time is not
specified, upon receipt thereof. Unless otherwise
specified in the notice, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 7. Vacancies. Except as otherwise provided
in the Amended Articles, any vacancy occurring in the
Board of Directors caused by resignation, death or other
incapacity, or increase in the number of directors may be
filled by a majority vote of the remaining members of the
Board, until the next annual or special meeting of the
shareholders or, at the discretion of the Board of
Directors, such vacancy may be filled by vote of the
shareholders at a special meeting called for that
purpose. Shareholders shall be notified of any increase
in the number of directors in the next mailing sent to
shareholders following any such increase.
SECTION 8. Nominations of Directors. The Executive
Committee of the Board of Directors of the Corporation
shall serve as the nominating committee for the
nomination of directors of the Corporation. In case a
person is to be elected to the Board by the Board of
Directors because of a vacancy existing on the Board,
nomination shall be made only by the Executive Committee
pursuant to the affirmative vote of the majority of its
entire membership. The Executive Committee shall also
make nominations for directors to be elected by the
shareholders of the Corporation at an annual meeting of
shareholders as provided in the remainder of this Section
8.
Only persons nominated in accordance with the
procedures set forth in this Section 8 shall be eligible
for election as directors at an annual meeting. The
Executive Committee shall select the management nominees
for election as directors. Except in the case of a
nominee substituted as a result of the death, incapacity,
disqualification or other inability to serve of a
management nominee, the Executive Committee shall deliver
written nominations to the Secretary of the Corporation
at least fifty (50) days prior to the date of the annual
meeting. Management nominees substituted as a result of
the death, incapacity, disqualification or other
inability to serve of a management nominee shall be
delivered to the Secretary of the Corporation as promptly
as practicable. At the request of the Executive
Committee, any person nominated by that Committee for
election as a director at an annual meeting shall furnish
to the Secretary of the Corporation that information,
described below, required to be set forth in a
shareholder's notice of nomination which pertains to the
nominee. Provided the Executive Committee selects the
management nominees, no nominations for directors except
those made by the Executive Committee shall be voted upon
at the annual meeting unless other nominations by
shareholders are made in accordance with the provisions
of this Section 8. Ballots bearing the names of all the
persons nominated for election as directors at an annual
meeting in accordance with the procedures set forth in
this Section 8 by the Executive Committee and by
shareholders shall be provided for use at the annual
meeting. However, except in the case of a management
nominee substituted as a result of the death, incapacity,
disqualification or other inability to serve of a
management nominee, if the Executive Committee shall fail
or refuse to nominate a slate of directors at least fifty
(50) days prior to the date of the annual meeting,
nominations for directors may be made at the annual
meeting by any shareholder entitled to vote and shall be
voted upon. No person shall be elected as a director of
the Corporation unless nominated in accordance with the
terms set forth in this Section 8.
Nominations of individuals for election to the Board
of Directors of the Corporation at an annual meeting of
shareholders may be made by any shareholder of the
Corporation entitled to vote for the election of
directors at that meeting who complies with the
procedures set forth in this Section 8. Such nominations,
other than those made by the Executive Committee, shall
be made pursuant to timely notice in writing to the
Secretary of the Corporation as set forth in this Section
8. To be timely, a shareholder's notice shall be
delivered to or mailed and received at the principal
executive offices of the Corporation not less than 60
days nor more than 90 days prior to the date of each
annual meeting; provided, however, that if less than 60
days' notice or prior public disclosure of the date of
the annual meeting is given or made, notice by the
shareholder to be timely must be so delivered or received
not later than the close of business on the 10th calendar
day following the earlier of (1) the day on which such
notice of the date of the annual meeting was mailed or
(2) the day on which such public disclosure was made.
Such shareholder's notice shall set forth (a) as to each
person whom the shareholder proposes to nominate for
election or re-election as a director (i) the name, age,
business address and residence address of such person,
(ii) the principal occupation or employment of such
person, (iii) the class and/or series and number of
shares that are beneficially owned by such person on the
date of such shareholder notice and (iv) any other
information relating to such person that is required to
be disclosed in solicitations of proxies with respect to
nominees for election as directors, pursuant to
Regulation 14A under the Securities Exchange Act of 1934,
as amended, and (b) as to the shareholder giving the
notice (i) the name and address, as they appear on the
Corporation's books, of such shareholder and any other
shareholders known by such shareholder to be supporting
such nominee(s) and (ii) the class and/or series and
number of shares that are beneficially owned by such
shareholder on the date of such shareholder notice and by
any other shareholders known by such shareholder to be
supporting such nominee(s) on the date of such
shareholder notice.
The Board of Directors may reject any nomination by
a shareholder not made in accordance with the terms of
this Section 8. Alternatively, if the Board of Directors
fails to consider the validity of any nominations by a
shareholder, the presiding officer of the annual meeting
shall, if the facts warrant, determine and declare at the
annual meeting that a nomination was not made in
accordance with the terms of this Section 8, and, if he
should so determine, he shall so declare at the annual
meeting and the defective nomination shall be
disregarded.
(As added June 26, 1990)
ARTICLE IV.
Committees Of The Board Of Directors
SECTION 1. Executive Committee.
Number and Powers. The Board of Directors shall
create an Executive Committee consisting of the Chairman
of the Board and the President, as ex officio members,
and two or more directors who shall be elected by a
majority of the whole Board of Directors, from time to
time, to hold office until the next annual meeting of the
Board of Directors and until their respective successors
are duly elected and qualified. The Board of Directors
shall designate the Chairman of such Committee.
The Executive Committee shall have and exercise
(except as otherwise provided by law or by the Board of
Directors and except when the Board of Directors shall be
in session) such powers and rights of the full Board of
Directors in the management of the business and affairs
of the Corporation as may be lawful, and it shall have
power to authorize the seal of the Corporation to be
affixed to all papers which may require it.
Meetings and Notice. Meetings of the Executive
Committee may be held either at the office of the
Corporation in the City of Indianapolis, Indiana, or at
such other places as the Executive Committee or Chairman
thereof shall from time to time designate. Such meetings
may be called by or at the request of the Chairman or any
member of the Executive Committee by giving at least
twenty-four (24) hours' advance notice to each member of
the Executive Committee. Such notice may be given
personally or by telephone or telegraph.
Quorum. A majority of the Executive Committee shall
constitute a quorum for the transaction of business, and
the affirmative vote of such majority shall be necessary
to the determination of any question.
Compensation. The members of the Executive
Committee, other than ex officio members, shall be
entitled to receive such compensation as may be
determined from time to time by the Board of Directors.
Minutes. Minutes of the meeting of the Executive
Committee shall be kept and read at the next meeting of
the Board of Directors.
Vacancies. Vacancies occurring in the Executive
Committee shall be filled by the Board of Directors at
any meeting of said Board.
SECTION 2. Audit Committee. The Board of Directors,
by a majority vote of the whole Board of Directors, may
designate three (3) or more members of such Board who
shall not be officers of the Corporation or its
subsidiaries, to constitute an Audit Committee. Members
of such Committee shall serve for terms of one (1) year
and until their successors are duly elected and
qualified. Such Committee shall have and exercise such
authority as shall be specified in the resolution of the
Board of Directors appointing such Committee. The
Chairman of such Audit Committee shall be designated by
the Board of Directors.
SECTION 3. Compensation Committee. The Board of
Directors, by a vote of a majority of the whole Board of
Directors, may designate three (3) or more members of
such Board, who are not officers of the Corporation or
its subsidiaries, to constitute a Compensation Committee.
Members of such Committee shall serve for terms of one
(1) year and until their successors are duly elected and
qualified. Such Committee shall have and exercise such
authority as shall be specified in the resolution of this
Board of Directors appointing such Committee. A Chairman
and a Vice-Chairman of the Compensation Committee may be
designated by the Board of Directors.
SECTION 4. Committee on Strategies. The Board of
Directors, by majority vote of the whole Board of
Directors, may designate three (3) or more members of
such Board, who are not officers of the Corporation or
its subsidiaries, to constitute a Committee on
Strategies. Members of such Committee shall serve for
terms of one (1) year and until their successors are duly
elected and qualified. Such Committee shall have and
exercise such authority as shall be specified in the
resolution of this Board of Directors appointing such
Committee. A Chairman and a Vice-Chairman of the
Committee on Strategies may be designated by the Board of
Directors.
(As Added April 26, 1994)
ARTICLE V.
Officers Of The Corporation
SECTION 1. Officers. The officers of the Corporation
shall be a Chairman of the Board, a Vice-Chairman of the
Board, a President, one or more Vice Presidents, a
Secretary, a Treasurer, a Controller, and, if the Board
of Directors desires, one or more Assistant Vice
Presidents, Assistant Secretaries, Assistant Treasurers
and Assistant Controllers, who shall be elected by the
Board of Directors at its annual meeting. Any two or more
of such offices may be held by the same person, except
that the duties of the President and the Secretary, shall
not be performed by the same person. In the election of
Vice Presidents, the Board of Directors may give each
vice presidency such special designation as it may deem
appropriate. The Chairman of the Board and the President
shall be chosen from among the directors.
(As Amended November 13, 1989 to be Effective
February 1, 1990)
The Board of Directors may appoint such other
officers and agents as it shall deem necessary, who shall
have such authority and perform such duties as from time
to time shall be prescribed by the Board of Directors.
SECTION 2. Salaries. The salaries of all officers of
the Corporation shall be fixed by the Board of Directors.
No officer shall be prevented from receiving such salary
by reason of the fact he is also a director of the
Corporation.
SECTION 3. Terms; Removal. The officers of the
Corporation shall hold office for one year and until
their successors are duly elected and qualified;
provided, however, that any officer elected or appointed
by the Board of Directors may be removed at any time by
the affirmative vote of a majority of the whole Board of
Directors.
SECTION 4. Resignations. Any officer of the
Corporation may resign at any time by giving written
notice to the Board of Directors, to the Chairman of the
Board, to the President, or to the Secretary of the
Corporation. Any such resignation shall take effect at
the time specified therein, or if the time be not
specified, upon receipt thereof. Unless otherwise
specified in the notice, the acceptance of such
resignation shall not be necessary to make it effective.
SECTION 5. Vacancies. If the office of the Chairman
of the Board, the President, any Vice President, the
Secretary, the Treasurer, the Controller, any Assistant
Vice President, Assistant Secretary, Assistant Treasurer,
or Assistant Controller, or other officer or agent, is
vacant or becomes vacant by reason of death, resignation,
retirement, disqualification, removal from office or the
creation of a new office, the Board of Directors shall
elect a person to such office who shall hold office for
the unexpired term in respect of which such vacancy
occurred; provided that, in its discretion, the Board of
Directors, by vote of a majority of the whole Board, may
leave unfilled for such period as it deems appropriate
any office, except the offices of President, Secretary,
Treasurer and Controller.
SECTION 6. Duties of Officers May Be Delegated. In
case of the absence of any officer of the Corporation, or
for any other reason that the Board of Directors may deem
sufficient, the Board of Directors may delegate the power
or duties of such officer to any other officer, or to any
director for the time being.
SECTION 7. Chairman and Vice-Chairman of the Board.
The Chairman of the Board shall be the chief executive
officer of the Corporation. Subject to the control of the
Board of Directors, he shall have general charge of, and
supervision and authority over, the business and affairs
of the Corporation. He shall preside at all meetings of
the shareholders and directors. He shall have such other
duties as may be assigned to him by the Board of
Directors.
The Vice-Chairman of the Board shall assist the
Chairman of the Board in the discharge of the latter's
duties in the manner and to the extent designated by the
Board of Directors or the Chairman of the Board. In the
absence of the Chairman of the Board, the Vice-Chairman
of the Board shall preside at all meetings of
shareholders and directors. He shall perform such other
duties as are incident to his office or as are assigned
to him by the Board of Directors or the Chairman of the
Board.
(As Amended November 13, 1989 to be Effective
February 1, 1990)
SECTION 8. President. The President shall be the
chief operating officer of the Corporation. Subject to
the supervision of the Chairman of the Board and the
Board of Directors, itself, he shall have general charge
of, and supervision and authority over, the operations of
the Corporation. He shall perform such other duties as
are incident to his office or as may be assigned to him
by the Board of Directors or the Chairman of the Board.
(As Amended November 13, 1989 to be Effective
February 1, 1990)
SECTION 9. Vice-Presidents. Subject to the control
of the Board of Directors, the Chairman of the Board and
the President, the Vice Presidents and the Assistant Vice
Presidents shall have such power, and perform such
duties, as the Board of Directors, the Chairman of the
Board, or the President, from time to time shall assign
to them, and, in the case of Assistant Vice Presidents,
such powers and duties as may be assigned to them by the
respective Vice Presidents whom they assist.
SECTION 10. Secretary and Assistant Secretaries. The
Secretary shall attend all meetings of the shareholders
and Board of Directors, and shall record all votes and
other proceedings in a book to be kept for that purpose.
He shall give, or cause to be given, all required notices
of meetings of the shareholders and Board of Directors.
He shall have custody of the seal of the Corporation and
of its records (other than accounting records) and shall
perform such other duties as usually appertain to the
office of Secretary and as may be prescribed by the Board
of Directors, the Chairman of the Board or the President.
The Assistant Secretaries shall perform such other
duties as shall be delegated to them by the Board of
Directors, the Chairman of the Board, the President or
the Secretary.
SECTION 11. Treasurer and Assistant Treasurers. The
Treasurer shall have custody of the corporate funds and
securities, and shall keep full and accurate accounts of
receipts and disbursements in books of the Corporation to
be kept for that purpose. He shall deposit all moneys and
other valuable effects in the name and to the credit of
the Corporation in such depositaries as may be designated
by authority of the Board of Directors, and shall
disburse the funds of the Corporation as may be ordered
by the Board of Directors, taking proper vouchers for
such disbursements. He shall render to the Board of
Directors, whenever it may so require, an account of all
his transactions as Treasurer and of the financial
condition of the Corporation. He shall have such other
powers and duties as may be assigned to him by the Board
of Directors, the Chairman of the Board or the President.
The Assistant Treasurers shall perform such duties
as shall be delegated to them by the Board of Directors,
the Chairman of the Board, the President or the
Treasurer.
SECTION 12. Controller and Assistant Controllers.
The Controller shall be the chief accounting officer of
the Corporation. He shall keep or cause to be kept all
books of account and accounting records of the
Corporation, and shall render appropriate financial
statements to the Board of Directors and to the
shareholders. He shall perform such other duties as
usually appertain to the office of the Controller and as
may be prescribed by the Board of Directors, the Chairman
of the Board or the President.
The Assistant Controllers shall perform such other
duties as shall be delegated to them by the Board of
Directors, the Chairman of the Board, the President or
the Controller.
ARTICLE VI.
Shares
SECTION 1. Certificates. The certificates for shares
in the Corporation shall be consecutively numbered in the
order of their issue, and each certificate shall state
the name of the registered holder, the number of shares
represented thereby, the par value of each share or a
statement that such shares have no par value, whether
such shares have been fully paid and are non-assessable,
the kind and class of shares represented thereby, and a
statement or summary of the relative rights, interests,
preferences and restrictions of all classes of such
shares; provided, that if the Board of Directors so
authorizes, such statement or summary may be omitted from
the certificate if it shall be set forth upon the face or
back of the certificate that such statement, in full,
will be furnished by the Corporation to any shareholder
upon written request and without charge.
Certificates for shares shall be in such form,
consistent with the Amended Articles, as the Board of
Directors shall approve. Such certificates shall be
signed by the President, or a Vice President, and the
Secretary, or an Assistant Secretary, and shall be sealed
with the corporate seal, which seal may be an original
impression or a facsimile thereof. The signature of the
above named officers, the registrar, and transfer agent
on the certificates for shares in the Corporation may be
an original signature or a facsimile thereof.
(As Amended February 27, 1996)
SECTION 2. Record of Shareholders. The Corporation
shall keep at its principal office a complete and
accurate list of the shareholders of each class of shares
issued and outstanding setting forth the names and
addresses of the shareholders of each class and the
number of shares held by each such shareholder.
The Corporation shall be entitled to treat the
holder of record of any share or shares as the owner in
fact thereof and accordingly shall not be bound to
recognize any equitable or other claim to or interest in
such shares on the part of any other person, whether or
not it shall have express or other notice thereof, except
as otherwise expressly provided by the laws of the State
of Indiana.
SECTION 3. Transfers of Shares. The transfer of
shares may be made on the books of the Corporation only
by the holder thereof or his duly authorized attorney and
upon surrender of the certificate representing the same,
properly endorsed and/or assigned; title to certificates
and to the shares represented thereby can be transferred
only as provided by the laws of the State of Indiana.
SECTION 4. Transfer Books; Record Date. The books
for the transfer of the shares of the Corporation may be
closed for such period, in anticipation of shareholders'
meetings, the payment of dividends or the allotment of
rights, as the Board of Directors from time to time may
determine. In lieu of providing for the closing of the
transfer books, the Board of Directors may, in its
discretion, fix a date as prescribed by the laws of the
State of Indiana, for any such meeting, payment, or
allotment as a record date for such purpose.
SECTION 5. Transfer Agents and Registrars. The Board
of Directors may appoint one or more transfer agents and
registrars for its shares or appoint qualified agents to
perform both the functions of transfer agent and
registrar. The Board of Directors may require all
certificates for shares to bear the manual signature of
either a transfer agent or of a registrar, or both.
SECTION 6. Lost or Destroyed Certificates. Any
person claiming a certificate for shares to be lost or
destroyed shall make an affidavit or affirmation of that
fact and shall give the Corporation and/or the transfer
agents and/or the registrars, if they shall so require, a
bond of indemnity, in form and with one or more sureties
satisfactory to the officers of the Corporation, and/or
the transfer agents, and/or the registrars, whereupon a
new certificate may be issued of the same tenor and for
the same number of shares as the one alleged to be lost
or destroyed; or in lieu of the foregoing procedure, such
person may proceed in accordance with the laws of the
State of Indiana.
ARTICLE VII.
Checks, Notes, Contracts, Etc.
SECTION 1. Checks; Notes. All checks, notes, drafts,
acceptances, or other demands or orders for the payment
of money of the Corporation shall be signed by such
officer or officers, or person or persons, as the Board
of Directors may from time to time designate. When so
authorized by the Board of Directors, the signatures of
such officers on any bonds, notes, debentures, or other
evidences of indebtedness may be facsimiles and such
facsimiles on such instruments shall be deemed the
equivalent of and constitute the written signatures of
such officers for all purposes including, but not limited
to, the full satisfaction of any signature requirements
of the laws of the State of Indiana on the negotiable
bonds, notes, debentures, and other evidence of
indebtedness of the Corporation.
SECTION 2. Contracts Requiring Seal. All contracts,
deeds, mortgages, leases or instruments that require the
seal of the Corporation shall be signed by the President,
or a Vice President, and by the Secretary, or an
Assistant Secretary, or by such officer or officers, or
person or persons, as the Board of Directors may by
resolution prescribe, except as provided in Section 1 of
this Article VII. Such seal may be an original impression
or an engraved or imprinted facsimile thereof.
ARTICLE VIII.
Seal
The corporate seal shall have inscribed thereon the
name of the Corporation and the word "SEAL".
ARTICLE IX.
Fiscal Year
The fiscal year shall be the calendar year.
ARTICLE X.
Miscellaneous Provisions
SECTION 1. Inspection of Books. The Board of
Directors shall determine from time to time whether, and,
if allowed, when and under what conditions and
regulations, the accounts and books of the Corporation
(except such as by statute may be specifically open to
inspection), or any of them, shall be open to the
inspection of the shareholders, and the shareholders'
rights in this respect are and shall be restricted and
limited accordingly.
SECTION 2. Notices. Whenever under the provisions of
these By-Laws notice is required to be given to any
director, officer, or shareholder, it may be given by
depositing the same with the United States Postal
Service, in a postpaid sealed wrapper, addressed to such
director, officer, or shareholder at such address as
appears on the books of the Corporation, or in default of
other address, to such director, officer or shareholder
at the General Post Office in the City of Indianapolis,
Indiana, and such notice shall be deemed to be given at
the time of such mailing.
SECTION 3. Waiver. Any director, officer or
shareholder may waive any notice required to be given
under these By-Laws either before, at, or after any
meeting, and such waiver shall be equally as effective as
the due service of notice.
ARTICLE XI.
Amendments and Repeal
SECTION 1. Amendments. These By-Laws may be altered,
amended or repealed, and new By-Laws may be made at any
annual, regular, or special meeting of the Board of
Directors by the affirmative vote of a majority of the
whole Board of Directors at the time of such action.
SECTION 2. Repeal. All By-Laws of the Corporation,
and amendments thereto, heretofore made and adopted by
the shareholders and/or the Board of Directors of the
Corporation are hereby expressly repealed.
<TABLE>
IPALCO ENTERPRISES, INC.
Exhibit 11.1 - Computation of Per Share Earnings
For the Quarter Ended March 31, 1999
<CAPTION>
QUARTER ENDED MARCH 31, 1999:
Basic Diluted
--------------- ---------------
Weighted average number of shares
<S> <C> <C>
Average common shares outstanding at March 31, 1999 87,217,579 87,217,579
Dilutive effect for stock options at March 31, 1999 - 896,931
--------------- ---------------
Adjusted weighted average shares at March 31, 1999 87,217,579 88,114,510
=============== ===============
Net income to be used to compute
diluted earnings per share (Dollars in
thousands)
Net income $29,597 $29,597
=============== ===============
Earnings Per Share $0.34 $0.34
=============== ===============
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<CIK> 0000728391
<NAME> IPALCO ENTERPRISES, INC.
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-START> JAN-01-1999
<PERIOD-END> MAR-31-1999
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,738,880
<OTHER-PROPERTY-AND-INVEST> 84,274
<TOTAL-CURRENT-ASSETS> 149,272
<TOTAL-DEFERRED-CHARGES> 133,914
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 2,106,340
<COMMON> 441,089
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 629,681
<TOTAL-COMMON-STOCKHOLDERS-EQ> 509,528
0
59,135
<LONG-TERM-DEBT-NET> 871,374
<SHORT-TERM-NOTES> 11,684
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 89,625
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 564,994
<TOT-CAPITALIZATION-AND-LIAB> 2,106,340
<GROSS-OPERATING-REVENUE> 200,831
<INCOME-TAX-EXPENSE> 20,057
<OTHER-OPERATING-EXPENSES> 137,523
<TOTAL-OPERATING-EXPENSES> 157,580
<OPERATING-INCOME-LOSS> 43,251
<OTHER-INCOME-NET> 2,279
<INCOME-BEFORE-INTEREST-EXPEN> 45,530
<TOTAL-INTEREST-EXPENSE> 15,933
<NET-INCOME> 29,597
803
<EARNINGS-AVAILABLE-FOR-COMM> 29,597
<COMMON-STOCK-DIVIDENDS> 12,346
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 75,905
<EPS-PRIMARY> .34
<EPS-DILUTED> .34
</TABLE>
