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, 1997 Commission File Number 1-3132-2
INDIANAPOLIS POWER & LIGHT COMPANY
(Exact name of Registrant as specified in its charter)
Indiana 35-0413620
(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
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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, 1997
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Common (Without Par Value) 17,206,630 Shares
1
INDIANAPOLIS POWER & LIGHT COMPANY
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INDEX
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Page No.
PART I. FINANCIAL INFORMATION
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Statements of Income -
Three Months Ended March 31, 1997 and 1996 2
Balance Sheets - March 31, 1997 and
December 31, 1996 3
Statements of Cash Flows -
Three Months Ended March 31, 1997 and 1996 4
Notes to Financial Statements 5
Management's Discussion and Analysis of
Financial Condition and Results of Operations 6-8
PART II. OTHER INFORMATION 9-11
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2
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Income
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1997 1996
---------------- -----------------
OPERATING REVENUES:
Electric $ 188,516 $ 183,938
Steam 11,770 12,508
---------------- -----------------
Total operating revenues 200,286 196,446
---------------- -----------------
OPERATING EXPENSES:
Operation:
Fuel 41,616 44,423
Other 32,633 32,957
Power purchased 4,159 4,730
Purchased steam 2,219 2,152
Maintenance 15,698 13,814
Depreciation and amortization 25,740 23,706
Taxes other than income taxes 8,932 8,961
Income taxes - net 21,696 20,859
---------------- -----------------
Total operating expenses 152,693 151,602
---------------- -----------------
OPERATING INCOME 47,593 44,844
---------------- -----------------
OTHER INCOME AND (DEDUCTIONS):
Allowance for equity funds used during construction 1,157 1,851
Other - net (411) (514)
Income taxes - net 162 186
---------------- -----------------
Total other income - net 908 1,523
---------------- -----------------
INCOME BEFORE INTEREST CHARGES 48,501 46,367
---------------- -----------------
INTEREST CHARGES:
Interest 10,921 12,212
Allowance for borrowed funds used during construction (246) (1,725)
---------------- -----------------
Total interest charges 10,675 10,487
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NET INCOME 37,826 35,880
PREFERRED DIVIDEND REQUIREMENTS 795 795
---------------- -----------------
INCOME APPLICABLE TO COMMON STOCK $ 37,031 $ 35,085
================ =================
See notes to financial statements.
3
INDIANAPOLIS POWER & LIGHT COMPANY
Balance Sheets
(In Thousands)
(Unaudited)
March 31 December 31
1997 1996
----------------- ----------------
ASSETS
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UTILITY PLANT:
Utility plant in service $ 2,767,068 $ 2,763,305
Less accumulated depreciation 1,070,125 1,048,492
----------------- ----------------
Utility plant in service - net 1,696,943 1,714,813
Construction work in progress 71,031 63,243
Property held for future use 9,913 9,913
----------------- ----------------
Utility plant - net 1,777,887 1,787,969
----------------- ----------------
OTHER PROPERTY -
At cost, less accumulated depreciation 5,973 5,799
----------------- ----------------
CURRENT ASSETS:
Cash and cash equivalents 29,283 8,840
Accounts receivable (less allowance for doubtful
accounts 1997, $1,212 and 1996, $907) 5,647 7,892
Fuel - at average cost 22,662 30,121
Materials and supplies - at average cost 52,911 52,027
Prepayments and other current assets 5,264 9,612
----------------- ----------------
Total current assets 115,767 108,492
----------------- ----------------
DEFERRED DEBITS:
Regulatory assets 132,135 137,974
Miscellaneous 12,667 12,166
----------------- ----------------
Total deferred debits 144,802 150,140
----------------- ----------------
TOTAL $ 2,044,429 $ 2,052,400
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CAPITALIZATION AND LIABILITIES
------------------------------
CAPITALIZATION:
Common shareholder's equity:
Common stock $ 324,537 $ 324,537
Premium on 4% cumulative preferred stock 1,363 1,363
Retained earnings 479,120 456,349
----------------- ----------------
Total common shareholder's equity 805,020 782,249
Cumulative preferred stock 51,898 51,898
Long-term debt (less current maturities
and sinking fund requirements) 627,803 627,791
----------------- ----------------
Total capitalization 1,484,721 1,461,938
----------------- ----------------
CURRENT LIABILITIES:
Notes payable - banks and commercial paper - 34,000
Current maturities and sinking fund requirements 11,250 11,250
Accounts payable and accrued expenses 46,636 56,537
Dividends payable 15,066 21,910
Taxes accrued 47,854 19,621
Interest accrued 9,751 13,301
Other current liabilities 14,148 14,519
----------------- ----------------
Total current liabilities 144,705 171,138
----------------- ----------------
DEFERRED CREDITS AND OTHER LONG-TERM LIABILITIES:
Accumulated deferred income taxes - net 303,297 304,854
Unamortized investment tax credit 46,998 47,722
Accrued postretirement benefits 21,980 23,635
Accrued pension benefits 38,113 37,283
Miscellaneous 4,615 5,830
----------------- ----------------
Total deferred credits and other long-term liabilities 415,003 419,324
----------------- ----------------
COMMITMENTS AND CONTINGENCIES (NOTE 4)
TOTAL $ 2,044,429 $ 2,052,400
================= ================
See notes to financial statements.
4
INDIANAPOLIS POWER & LIGHT COMPANY
Statements of Cash Flows
(In Thousands)
(Unaudited)
Three Months Ended
March 31
1997 1996
---------------- ----------------
CASH FLOWS FROM OPERATIONS:
Net income $ 37,826 $ 35,880
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 24,368 22,342
Amortization of regulatory assets 3,913 4,234
Deferred income taxes and investment tax credit adjustments - net (497) (728)
Allowance for funds used during construction (1,403) (3,576)
Change in certain assets and liabilities:
Accounts receivable 2,245 2,148
Fuel, materials and supplies 6,575 (613)
Accounts payable (9,901) (12,022)
Taxes accrued 28,233 26,661
Accrued pension benefits 830 1,317
Other - net (1,407) (3,541)
---------------- ----------------
Net cash provided by operating activities 90,782 72,102
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CASH FLOWS FROM INVESTING:
Construction expenditures (13,390) (22,996)
Other (1,087) (3,086)
---------------- ----------------
Net cash used in investing activities (14,477) (26,082)
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CASH FLOWS FROM FINANCING:
Short-term debt - net (34,000) (14,522)
Dividends paid (21,898) (21,244)
Other 36 (111)
---------------- ----------------
Net cash used in financing activities (55,862) (35,877)
---------------- ----------------
Net increase in cash and cash equivalents 20,443 10,143
Cash and cash equivalents at beginning of period 8,840 9,985
---------------- ----------------
Cash and cash equivalents at end of period $ 29,283 $ 20,128
================ ================
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Supplemental disclosures of cash flow information: Cash paid during the period
for:
Interest (net of amount capitalized) $ 13,988 $ 12,883
================ ================
Income taxes $ (2,607) $ 1,625
================ ================
See notes to financial statements.
5
INDIANAPOLIS POWER & LIGHT COMPANY
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NOTES TO FINANCIAL STATEMENTS
-----------------------------
1. Indianapolis Power & Light Company is a subsidiary of IPALCO
Enterprises, Inc.
2. 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, 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 financial statements included in IPL's 1996 Annual Report on
Form 10-K.
3. SALE OF ACCOUNTS RECEIVABLE
In late December 1996, IPL entered into an agreement to sell, on a
revolving basis, undivided interests in certain of its accounts
receivable, including accounts receivable for KWH delivered but not
billed, up to an aggregate maximum at any one time of $50 million.
Accounts receivable on the Balance Sheets are net of the $50 million
interest sold under the IPL agreement. The gross amount of receivables
sold was $55.6 million, of which $5.6 million was replaced with a
receivable from the purchasing party.
4. COMMITMENTS AND CONTINGENCIES (See Item 1. Legal Proceedings of
Part II -- Other Information)
6
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
LIQUIDITY AND CAPITAL RESOURCES
Overview
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The Board of Directors of Indianapolis Power & Light Company (IPL) on
February 25, 1997, declared a quarterly dividend on common stock of $14,259,505.
The dividend was paid by IPL to IPALCO Enterprises, Inc. in April, 1997.
IPL's capital requirements are primarily related to construction
expenditures needed to meet customers' needs for electricity and steam, as well
as expenditures for compliance with the federal Clean Air Act. Construction
expenditures (excluding allowance for funds used during construction) totaled
$13.4 million during the first quarter ended March, 1997, representing a $9.6
million decrease from the comparable period in 1996. This decrease is primarily
due to reduced construction spending in the first quarter of 1997 compared
to 1996 for the scrubbers at IPL's Petersburg Generating Station as this
construction project was completed in June 1996. Internally generated cash
provided by IPL's operations was used for construction expenditures during the
first quarter of 1997.
The three-year construction program has not changed from that
previously reported in IPL's 1996 Form 10-K report. (See "Future Performance" in
Item 7 of Management's Discussion and Analysis of Financial Condition and
Results of Operations in IPL's 1996 Form 10-K report for further discussion).
Rate Relief
The Indiana Utility Regulatory Commission approved a two-step rate
increase for IPL electric retail customers in August 1995. The step 1 increase
was effective September 1, 1995, and the step 2 increase became effective July
1, 1996.
RESULTS OF OPERATIONS
Comparison of Quarters Ended March 31, 1997 and March 31, 1996
--------------------------------------------------------------
Income applicable to common stock increased during the first quarter of
1997 compared to the first quarter of 1996 by $1.9 million. The following
discussion highlights the factors contributing to this increase.
Operating Revenues
- ------------------
Operating revenues during the first quarter of 1997 increased $3.8
million from the comparable 1996 period. The increase in revenues resulted from
the following:
7
Increase (Decrease)
from Comparable Period
----------------------
Three Months Ended
------------------
(Millions of Dollars)
Increase in base electric rates $ 6.8
Changes in Kilowatt-hour (KWH) sales - net of fuel (2.5)
Fuel revenues (2.8)
Steam revenues (0.7)
Sales for resale 2.1
Other revenues 0.9
--------
Total change in operating revenues $ 3.8
========
The increase in base rate electric revenues are the result of new
tariffs effective July 1, 1996, designed to produce $25-million additional
annual revenues. The first quarter decrease in retail KWH sales compared to the
same period in 1996 was due to milder weather. Heating degree days decreased 12%
during the first quarter compared to the same period in 1996. The changes in
fuel revenues in 1997 from the prior year reflect changes in total fuel costs
billed customers. The increased wholesale sales during the first quarter of
1997, as compared to the same period in 1996, reflect energy requirements of
other utilities and increased wholesale marketing efforts.
Operating Expenses
- ------------------
Fuel expenses in the first quarter of 1997 decreased $2.8 million due
to a $2.1 million decrease in deferred fuel and a $1.6 million decrease in unit
prices, partially offset by a $0.9 million increase in consumption compared to
the same period last year.
Power purchased decreased by $0.6 million in the first quarter compared
to the same period in 1996 primarily due to decreased purchases of firm-peaking
energy.
Maintenance expenses increased $1.9 million in the first quarter of
1997 compared to the same period in 1996. The increase reflects increased boiler
and electric plant maintenance at the Petersburg plant of $1.0 million,
increased electric and boiler plant maintenance at Pritchard of $0.3 million,
increased transmission expense of $0.3 million and other miscellaneous expenses
which increased by $0.3 million.
Depreciation and amortization expense in the first quarter of 1997
increased from the same period a year ago by $2.0 million. This increase
resulted from an increase in the depreciable utility plant balances.
As a result of the foregoing, utility operating income increased 6.1%
from the comparable 1996 period, to $47.6 million.
Other Income and Deductions
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Allowance for equity funds used during construction decreased by $0.7
million in the first quarter of 1997 compared to the same period last year. The
decrease was primarily due to scrubbers at the Petersburg plant being placed in
service in June 1996.
Other - net increased by $0.1 million in the first quarter of 1997
compared to the first quarter of 1996. The increase was primarily due to
increased revenues from contract work.
8
Interest Charges
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Interest expense decreased $1.3 million in the first quarter of 1997
compared to the same period in 1996. This decrease is a result of the redemption
of two first mortgage bond series during 1996($50 million 9 5/8% and $15 million
5 1/8%).
Allowance for borrowed funds used during construction for the first
quarter ended decreased from the comparable period in 1996 by $1.5 million. This
decrease was due primarily to the scrubbers at the Petersburg plant being placed
in service in June 1996.
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PART II - OTHER INFORMATION
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Item 1. Legal Proceedings
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None.
Item 6. Exhibits and Reports on Form 8-K
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(a) Exhibits. Copies of documents listed below which are identified
with an asterisk (*) are incorporated herein by reference and made a
part hereof. 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 Indianapolis Power & Light Company, as
amended. (Form 10-Q for quarter ended 3-31-91.)
3.2 Bylaws of Indianapolis Power & Light Company, as amended.
4.1* Mortgage and Deed of Trust, dated as of May 1, 1940, between
Indianapolis Power & Light Company and American National Bank and Trust
Company of Chicago, Trustee, as supplemented and modified by 42
Supplemental Indentures.
Exhibits D in File No. 2-4396; B-1 in File No. 2-6210; 7-C File No.
2-7944; 7-D in File No. 2-72944; 7-E in File No. 2-8106; 7-F in
File No. 2-8749; 7-G in File No. 2-8749; 4-Q in File No. 2-10052; 2-I
in File No. 2-12488; 2-J in File No. 2-13903; 2-K in File No. 2-22553;
2-L in File No. 2-24581; 2-M in File No. 2-26156; 4-D in File No.
2-26884; 2-D in File No. 2-38332; Exhibit A to Form 8-K for October
1970; Exhibit 2-F in File No. 2-47162; 2-F in File No. 2-50260; 2-G in
File No. 2-50260; 2-F in File No. 2-53541; 2E in File No. 2-55154; 2E
in File No. 2-60819; 2F in File No. 2-60819; 2-G in File No. 2-60819;
Exhibit A to Form 10-Q for the quarter ended 9-30-78 File No. 1-3132;
13-4 in File No. 2-73213; Exhibit 4 in File No. 2-93092.
Twenty-eighth, Twenty-ninth and Thirtieth Supplemental Indentures.
(Form 10-K dated for the year ended December 31, 1985.)
4.2* Thirty-First Supplemental Indenture dated as of October 1, 1986.
(Form 10-K for year ended 12-31-86.)
4.3* Thirty-Second Supplemental Indenture dated as of June 1, 1989.
(Form 10-K for year ended 12-31- 89.)
4.4* Thirty-Third Supplemental Indenture dated as of August 1, 1989.
(Form 10-K for year ended 12-31-89.)
4.5* Thirty-Fourth Supplemental Indenture dated as of October 15, 1991.
(Form 10-K for year ended 12-31-91.)
4.6* Thirty-Fifth Supplemental Indenture dated as of August 1, 1992.
(Form 10-K for year ended 12-31-92.)
4.7* Thirty-Sixth Supplemental Indenture dated as of April 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
10
4.8* Thirty-Seventh Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.9* Thirty-Eighth Supplemental Indenture dated as of October 1, 1993.
(Form 10-Q for quarter ended 9-30-93.)
4.10* Thirty-Ninth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.11* Fortieth Supplemental Indenture dated as of February 1, 1994.
(Form 8-K, dated 1-25-94.)
4.12* Forty-First Supplemental Indenture dated as of January 15, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-94.)
4.13* Forty-Second Supplemental Indenture dated as of October 1, 1995.
(Exhibit 4.12 to the Form 10-K dated 12-31-95.)
10.1 Employment agreement between Indianapolis Power & Light Company and
Ramon L. Humke dated January 1, 1997. **
21.1* Subsidiaries of the Registrant. (Exhibit 21.1 to the Form 10-K dated
12-31-96.)
27.1 Financial Data Schedule.
(b) Reports on Form 8-K.
None.
11
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.
INDIANAPOLIS POWER & LIGHT COMPANY
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(Registrant)
Date: May 14, 1997 /s/ John R. Brehm
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John R. Brehm
Senior Vice President
Finance and Information Services
Date: May 14, 1997 /s/ Stephen J. Plunkett
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Stephen J. Plunkett
Controller