-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: keymaster@town.hall.org Originator-Key-Asymmetric: MFkwCgYEVQgBAQICAgADSwAwSAJBALeWW4xDV4i7+b6+UyPn5RtObb1cJ7VkACDq pKb9/DClgTKIm08lCfoilvi9Wl4SODbR1+1waHhiGmeZO8OdgLUCAwEAAQ== MIC-Info: RSA-MD5,RSA, O3EU7YJAXJUs8mPdERxM+EheJMLJ7XfoM3h1vViI6vdCByOcKkIiacX6pKVnwv6G 7RpAxDNaM/u9vFFOIB5YZg== 0000092195-94-000011.txt : 19941116 0000092195-94-000011.hdr.sgml : 19941116 ACCESSION NUMBER: 0000092195-94-000011 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19940930 FILED AS OF DATE: 19941114 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN INDIANA GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000092195 STANDARD INDUSTRIAL CLASSIFICATION: 4931 IRS NUMBER: 350672570 STATE OF INCORPORATION: IN FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 001-03553 FILM NUMBER: 94558913 BUSINESS ADDRESS: STREET 1: 20 NW FOURTH ST CITY: EVANSVILLE STATE: IN ZIP: 47741-0001 BUSINESS PHONE: 8124655300 10-Q 1 SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q (Mark One) [ X ] QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED September 30, 1994 [ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 Commission file number 1-3553 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (Exact name of registrant as specified in its charter) Indiana 35-0672570 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 20 N. W. Fourth Street Evansville, Indiana 47741-0001 (Address of principal executive offices) (812) 465-5300 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the close of the period covered by this report. Common Stock, without par value - 15,754,826 Shares Outstanding at September 30, 1994 2 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended September 30, September 30, 1994 1993 1994 1993 (in thousands except per share data) OPERATING REVENUES Electric $73,290 $75,935 $202,416 $199,832 Gas 3,916 6,948 53,771 52,755 Total operating revenues 77,206 82,883 256,187 252,587 OPERATING EXPENSES Operation: Fuel for electric generation 21,850 23,890 66,174 61,804 Purchased electric energy 663 1,495 4,048 8,111 Cost of gas sold 336 4,899 31,885 33,975 Other 10,544 9,472 32,866 28,243 Total operation 33,393 39,756 134,973 132,133 Maintenance 6,869 5,629 20,939 18,337 Depreciation and amortization 9,435 9,255 28,306 27,948 Federal and state income taxes 7,148 7,659 17,448 17,704 Property and other taxes 3,067 3,144 9,693 10,219 Total operating expenses 59,912 65,443 211,359 206,341 OPERATING INCOME 17,294 17,440 44,828 46,246 Other Income: Allowance for other funds used during construction 782 1,158 3,176 2,067 Interest 186 243 518 932 Other, net 797 386 2,143 1,503 _______ _______ ________ ________ 1,765 1,787 5,837 4,502 INCOME BEFORE INTEREST CHARGES 19,059 19,227 50,665 50,748 Interest Charges: Interest on long-term debt 4,658 4,624 13,947 14,018 Amortization of premium, discount, and expense on debt 298 182 658 535 Other interest 402 206 863 486 Allowance for borrowed funds used during construction (436) (551) (1,607) (962) _______ _______ ________ ________ 4,922 4,461 13,861 14,077 NET INCOME 14,137 14,766 36,804 36,671 Preferred Stock Dividends 276 276 829 829 NET INCOME APPLICABLE TO COMMON STOCK $13,861 $14,490 $ 35,975 $ 35,842 AVERAGE COMMON SHARES OUTSTANDING 15,755 15,755 15,755 15,755 EARNINGS PER SHARE OF COMMON STOCK $0.88 $0.92 $2.28 $2.27 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1994 1993 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 36,804 $ 36,671 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 28,306 27,948 Deferred income taxes and investment tax credits, net 2,179 5,294 Allowance for other funds used during construction (3,176) (2,067) Change in assets and liabilities: Receivables, net 1,665 (1,523) Inventories (1,429) 9,041 Coal contract settlement 4,209 (15,157) Accounts payable (9,184) (11,131) Accrued taxes (1,143) 3,058 Refunds from gas suppliers 1,265 1,586 Refunds to customers 6,530 (559) Accrued coal liability 9,997 6,617 Other assets and liabilities 4,317 5,354 Net cash provided by operating activities 80,340 65,132 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (58,429) (39,641) Demand side management program expenditures (5,085) (3,715) Investments in leveraged leases - (2,769) Purchases of investments (6,593) (4,697) Sales of investments 6,556 5,355 Investments in partnerships (3,470) (2,503) Change in nonutility property (2,831) (524) Other 982 563 Net cash used in investing activities (68,870) (47,931) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds - 155,000 Dividends paid (20,275) (19,793) Reduction in preferred stock and long-term debt (105) (104,500) Change in environmental improvement funds held by Trustee 11,143 (30,469) Change in notes payable 10,328 13,890 Other - (5,716) Net cash provided by financing activities 1,091 8,412 NET INCREASE IN CASH AND CASH EQUIVALENTS 12,561 25,613 CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 14,732 3,556 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 27,293 $ 29,169 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1994 1993 (in thousands) ASSETS Utility Plant, at original cost: Electric $889,121 $879,476 Gas 110,177 107,864 ________ ________ 999,298 987,340 Less - Accumulated provision for depreciation 449,943 424,086 ________ ________ 549,355 563,254 Construction work in progress 118,831 72,615 Net Utility Plant 668,186 635,869 Other Investments and Property: Investments in leveraged leases 34,895 34,924 Investments in partnerships 23,844 25,023 Environmental improvement funds held by Trustee 11,470 22,613 Nonutility property and other 10,829 7,997 ________ ________ 81,038 90,557 Current Assets: Cash and cash equivalents 8,547 5,983 Restricted cash 18,746 8,749 Temporary investments, at cost which approximates market 6,577 6,540 Receivables, less allowance of $180 and $166, respectively 26,876 28,541 Inventories 39,619 38,190 Other current assets 942 3,048 ________ ________ 101,307 91,051 Deferred Charges: Coal contract settlement 9,086 13,295 Unamortized premium on reacquired debt 6,741 7,100 Postretirement benefits obligation other than pensions 7,461 4,125 Demand side management program 12,496 7,411 Other deferred charges 13,742 11,433 ________ ________ 49,526 43,364 $900,057 $860,841 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1994 1993 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES Common Stock $102,798 $102,798 Retained Earnings 220,978 204,449 ________ ________ 323,776 307,247 Less Treasury Stock, at cost 24,540 24,540 Common Shareholders' Equity 299,236 282,707 Cumulative Nonredeemable Preferred Stock 11,090 11,090 Cumulative Redeemable Preferred Stock 7,500 7,500 Cumulative Special Preferred Stock 1,015 1,015 Long-Term Debt, net of current maturities 271,355 261,100 Long-Term Partnership Obligations, net of current maturities 9,507 12,881 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 599,703 576,293 Current Liabilities: Current Portion of Adjustable Rate Bonds Subject to Tender 31,500 41,475 Current Maturities of Long-Term Debt, Interim Financing and Long-Term Partnership Obligations: Maturing long-term debt 686 763 Notes payable 21,100 11,040 Partnership obligations 3,374 3,849 Total current maturities of long-term debt, interim financing, and long-term partnership obligations 25,160 15,652 Other Current Liabilities: Accounts payable 24,755 33,939 Dividends payable 104 135 Accrued taxes 6,798 7,941 Accrued interest 7,564 4,517 Refunds to customers 10,679 3,398 Accrued coal liability 18,746 8,749 Other accrued liabilities 10,616 10,125 Total other current liabilities 79,262 68,804 Total current liabilities 135,922 125,931 Deferred Credits and Other: Accumulated deferred income taxes 122,767 117,267 Accumulated deferred investment tax credits, being amortized over lives of property 25,151 26,549 Regulatory liability 5,274 7,197 Postretirement benefits obligation other than pensions 7,461 4,125 Other 3,779 3,479 ________ ________ 164,432 158,617 $900,057 $860,841 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION
September 30, December 31, 1994 1993 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 16,865,003 shares $102,798 $102,798 Retained Earnings, $2,209,642 restricted as to payment of cash dividends on common stock 220,978 204,449 323,776 307,247 Less Treasury Stock, at cost, 1,110,177 shares 24,540 24,540 ________ ________ 299,236 282,707 PREFERRED STOCK: Cumulative, $100 par value, authorized 800,000 shares issuable, in series Nonredeemable 4.8% Series, outstanding 85,895 shares, callable at $110 per share 8,590 8,590 4.75% Series, outstanding 25,000 shares, callable at $101 per share 2,500 2,500 ________ ________ 11,090 11,090 Redeemable 6.50% Series, outstanding 75,000 shares, redeemable at $100 per share December 1, 2002 7,500 7,500 SPECIAL PREFERRED STOCK Cumulative, no par value, authorized 5,000,000 shares, issuable in series: 8-1/2% series, outstanding 10,150 shares, redeemable at $100 per share 1,015 1,015 LONG-TERM DEBT, NET OF CURRENT MATURITIES First mortgage bonds 264,615 254,740 Notes payable 7,602 7,263 Unamortized debt premium and discount, net (862) (903) 271,355 261,100 LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT MATURITIES 9,507 12,881 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE 2015, Series A, presently 4.60% - 9,975 2015, Series B, presently 3.50% 31,500 31,500 ________ ________ 31,500 41,475 Total capitalization, including bonds subject to tender $631,203 $617,768 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Nine Months Ended September 30, 1994 1993 (in thousands) Balance Beginning of Period $204,449 $191,255 Net Income 36,804 36,671 ________ ________ 241,253 227,926 Preferred stock dividends 829 829 Common stock dividends ($1.2375 share in 1994 and $1.2075 per share in 1993) 19,446 18,964 ________ ________ 20,275 19,793 Balance End of Period (See Consolidated Statements of Capitalization for restriction) $220,978 $208,133 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
8 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. GENERAL It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in the Company's 1993 Annual Report to Shareholders. The 1994 consolidated statements are on the basis of interim figures and are subject to audit and adjustments. These financial statements include the accounts of Southern Indiana Gas and Electric Company and its wholly-owned subsidiaries, Southern Indiana Properties, Inc., Lincoln Natural Gas Company, Inc., Energy Systems Group, Inc. (Energy) and Southern Indiana Minerals, Inc. (SIMI), and include all adjustments which are in the opinion of management, necessary for a fair statement of the financial position and results of operations for the nine months ended September 30, 1994. Energy and SIMI were incorporated during the second quarter of 1994. Because of seasonal and other factors, the earnings for the nine months ending September 30, 1994 should not be taken as an indication for all or any part of the balance of 1994. 2. UTILITY PLANT Utility plant is stated at the historical original cost of construction. Such cost includes payroll-related costs such as taxes, pensions and other fringe benefits, general and administrative costs, and an allowance for the cost of funds used during construction (AFUDC), which represents the estimated debt and equity cost of funds capitalized as a cost of construction. While capitalized AFUDC does not represent a current source of cash, it does represent a basis for future cash revenues through depreciation and return allowances. The weighted average AFUDC rates (before income taxes) used by the Company for the nine months ending September 30, 1994 and 1993 were 9.4% and 10.5%, respectively. 3. CASH FLOW INFORMATION For the purposes of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, the Company considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. The Company, for the nine months ended September 30, 1994 and 1993 paid interest (net of amounts capitalized) of $10,155,000 and $11,228,000, respectively, and income taxes of $12,103,000 and $7,258,000, respectively. Additionally the Company is involved in several partnerships which are partially financed by partnership obligations amounting to $12,881,000 and $16,730,000 at September 30, 1994 and December 31, 1993, respectively. 4. LONG-TERM DEBT On May 1, 1994, the interest rate on $31,500,000 of Adjustable Rate Pollution control bonds was changed from 2.70% to 3.50%. The new interest rate, 3.50% will be fixed through April 30, 1995. For financial statement presentation the $31,500,000 of Adjustable Rate Pollution Control bonds are shown as a current liability. On July 1, 1994, the interest rate on $9,975,000 of Adjustable Rate Pollution Control Bonds was changed from 5.75% to 4.60%. The new interest rate, 4.60%, will be fixed through June 30, 1997. 9 5. ACQUISITION OF LINCOLN On June 30, 1994, the Company completed its acquisition of Lincoln Natural Gas Company, Inc. (Lincoln), a small gas distribution company with approximately 1,300 customers contiguous to the eastern boundary of the Company's gas service territory. The Company issued 49,399 of common stock for all the common stock of Lincoln. This transaction was accounted for as a pooling of interests; therefore, prior financial statements have been restated to reflect this merger. Revenues and net income included in the Company's Consolidated Statements of Income are as follows:
3 months 3 months 9 months 9 months ended ended ended ended Sept.30, Sept.30, Sept.30, Sept.30, 1994 1993 1994 1993 (in thousands) Operating revenues: Sigeco $77,103 $ 82,778 $255,516 $251,954 Lincoln 103 105 671 633 $77,206 $82,883 $256,187 $252,587 Net income: Sigeco $14,164 $14,816 $36,865 $36,742 Lincoln (27) (50) (61) (71) $14,137 $14,766 $36,804 $36,671
10 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION OPERATING REVENUES Electric revenues declined 3% during the third quarter compared to the same period in 1993. The primary reason for the decline was a 10% decrease in the average per unit cost of fuel for generation and purchased power recovered from retail customers during the current quarter. Changes in the cost of fuel for electric generation and purchased power are passed on to customers through commission approved fuel cost adjustments. Sales to system customers rose approximately 3% during the period due to continued stronger industrial sales, however, nonsystem sales declined 30% due to fewer sales to Alcoa Generating Corporation (AGC) resulting from the shutdown of a potline at Alcoa's Warrick Operations plant in July 1993. (Electricity for the five potlines remaining in service is supplied by AGC-owned generation.) Additionally, per unit average revenue from nonsystem sales declined approximately 10% on lower energy rates and demand level requirements. Although the Company's base retail electric rates have increased overall about 3% since October 1993 (see discussion under "Rate and Regulatory Matters"), the impact of those adjustments were more than offset by the change in sales mix - a 6% decrease in residential sales and a 13% increase in industrial sales. Greater sales to system and nonsystem customers, both up 3%, caused a slight rise in electric revenues for the nine months ending September 30, 1994. Stronger sales to the industrial and commercial sectors throughout the year led to the increase in system sales. Despite a decline in sales to AGC resulting from the shutdown of the potline in July 1993, nonsystem sales were greater due primarily to the requirements of one nonassociated utility during the first quarter of 1994. The impact of a change in mix of sales to nonsystem customers (the decline of sales to AGC and increase in sales to other nonsystem customers) and the recovery of lower fuel and purchased power costs from all electric customers partially offset the higher electric revenues related to increased sales volume. The changes in electric revenue are shown below:
Revenue (Decrease) Increase From Corresponding Period in 1993 Three Months Nine Months Ended 9-30-94 Ended 9-30-94 Change in sales volume $ 600 $ 5,600 Fuel and purchased power recovery (2,200) (600) Change in average rates on sales to nonassociated utilities (600) (2,400) Change in retail rates and sales mix (350) (100) Other (95) 84 $ (2,645) $ 2,584 Increase in system sales (MWh) 34,964 102,421 (Decrease) increase in nonsystem sales (MWh) (56,103) 21,730
11 During the current quarter, gas revenue was down $3 million (44%) chiefly due to the recovery of substantially lower average unit costs of gas sold. The change in cost of gas sold, which is passed on to customers through commission approved gas cost adjustments, was due to a 30% drop in the average purchase price of gas and due to the impact of strorage field activity on the pricing of gas delivered to customers during the current period. In addition, gas sales decreased 10% during the third quarter of 1994 due to fewer requirements of the Company's industrial customers. The first step of the Company's two-step base gas rate adjustment, approximately 4% overall on an annual basis, was effective August 1, 1993. The second step of the rate adjustment, also approximately 4% overall, was effective August 1, 1994. These base rate increases and a change in sales mix partially offset the revenue decreases related to recovery of lower gas costs and to fewer sales. Gas revenues rose only slightly, about 2%, during the nine months ended September 30, 1994 compared to 1993, despite the impact of the first and second steps of the base rate increase. Gas sales declined 3% due to increased transportation activity of certain large customers; total throughput was relatively unchanged. As discussed, average unit costs of gas sold during the third quarter dropped substantially, offsetting the impact on revenues of higher gas costs incurred during the first six months of 1994. The changes in gas revenues are shown below:
Revenue (Decrease) Increase From Corresponding Period in 1993 Three Months Nine Months Ended 9-30-94 Ended 9-30-94 (in thousands) Change in sales volume $ (400) $(1,700) Cost of gas recovery (3,400) (400) Change in rates and sales mix 600 2,700 Other 168 416 $(3,032) $1,016 (Decrease) in total throughput (MDth) (111) (70) OPERATING EXPENSES Fuel for electric generation declined approximately 9% during the third quarter of 1994, due entirely to a comparable decline in per unit fuel costs, but rose $4.4 million (7%) for the nine month period, reflecting an 11% increase in generation. During the first three months of 1993, the Company purchased substantially greater amounts of electric energy from other utilities because one of the Company's generating units was undergoing a routine maintenance outage, a second unit was undergoing a large capital improvement project and because market prices were favorable, leading to a 50% decline in expenditures for such purchases during the nine month period ended September 30, 1994. Due to the drop in purchased gas prices, the impact of storage field activity and fewer sales, cost of gas sold was down 93% during the third quarter of 1994. Cost of gas sold declined 6% during the nine month period in 1994. Other operation expenses, up 11% and 16% for the three month and nine month periods, respectively, reflected additional production plant operation expenses, increased legal and 12 consulting costs related to the Company's ongoing efforts to renegotiate the contract with its major coal supplier, greater employee-related benefit costs, expenses associated with an accelerated program of relocating gas customer meters outside of customer premises to aid in future operating efficiencies, and increases in various other operating expenses. During the current quarter, a typically low maintenance period, maintenance expenditures were up 22% over the same period last year, reflecting expenditures to dredge one of the Company's fly ash disposal areas and to perform other maintenance projects. Maintenance expenditures increased about 14% during the nine months of 1994, chiefly due to the Company performing a scheduled major turbine generator maintenance overhaul on Unit 2 at the Culley Generating Station during the second quarter, which was coordinated with the construction of the Company's new sulfur dioxide "scrubber" at the generation station. No comparable major maintenance projects were performed during the first nine months of 1993. In addition, maintenance repairs of one of the Company's gas-fired peaking units and the maintenance projects performed during the third quarter contributed to the higher maintenance expense in 1994. OTHER INCOME AND INTEREST CHARGES Other income was unchanged during the third quarter when compared to the same period in 1993. Greater income from the Company's nonregulated operations offset a decline in allowance for equity funds used during construction. Allowance for equity funds used during construction declined because the Company began recovering through electric rates, effective June 29, 1994, the financing costs on its investment in the Culley scrubber under the second step of its electric base rate increase. (See "Rate and Regulatory Matters".) Other income during the three quarters of 1994 was 30% greater than in 1993 due to increased allowance for equity funds used during construction, primarily from the construction of the Company's new scrubber (see "Clean Air Act" in Item 7. of Management's Discussion and Analysis of Results of Operations and Financial Condition in the Company's 1993 Form 10-K report for further discussion), and due to the stronger third quarter results from nonutility activities. During both reporting periods, interest charges were relatively unchanged as compared to the same periods in 1993. Interest on long term-debt was stable, representing an embedded cost of about 6.6%. EARNINGS A 6% decline in residential electric sales due to cooler weather, a 30% decline in wholesale sales and higher nonfuel operations and maintenance expenditures, were the primary reasons for a four cent (approximately 4%) decrease in earnings per share for the third quarter compared to the same period in 1993. Improved unit margins on sales of gas and electricity due to the related rate adjustments helped mitigate the decline in earnings. For the first nine months of 1994, earnings per share were $2.28 compared to $2.27 for the same period in 1993. Despite greater gas and electric sales due to cooler weather during the first quarter of 1994 and improved gas and electric margins resulting from recent rate adjustments, operating income declined slightly due to an anticipated increase in nonfuel operating expenses and to the cooler than normal weather experienced during the third quarter of 1994. Greater allowance for funds used during construction, resulting primarily from the construction of the Company's new sulfur dioxide scrubber at Culley, helped to offset some of the effects of lower operating income. RATE AND REGULATORY MATTERS On May 24, 1993, the Company petitioned the IURC for an adjustment in its base electric retail rates representing the first step in the recovery of the financing costs on the Company's new sulfur dioxide scrubber. On September 15, 1993, the IURC granted the Company's request for a 1% revenue increase, approximately $1.8 million on an annual basis, which 13 took effect October 1, 1993. The Company petitioned the IURC on March 1, 1994 for recovery of financing costs related to the scrubber construction costs incurred from April 1, 1993 through January 31, 1994, and was granted a 2.33% increase in base electric retail rates (the second step), effective June 29, 1994. On December 22, 1993, the Company petitioned the IURC for the third of the three planned general electric rate increases. The final adjustment is necessary to cover financing costs related to the balance of the project construction expenditures, costs related to the operation of the scrubber and certain nonscrubber-related costs. The Company filed its case-in-chief on May 16, 1994 supporting a $12.4 million, 5.7% retail rate increase. On October 1, 1994, the Office of the Utility Consumer Counselor (UCC) filed its case-in-chief. Although the UCC has not yet performed a cost of service allocation to rate classes, the estimated impact of its recommendation is a $2-2.5 million, 1% decrease in retail revenues. The major differences between the Company's case and the UCC's case are the requested rate of return on equity, the recovery of the cost of postretirement benefits other than pensions, the fair value of ratebase investment, the appropriate depreciation rates and the appropriate level of operation and maintenance expenses to be included in cost of service. A final rate order is anticipated in early 1995. Although the Company cannot predict what action the IURC may take with respect to this proposed rate increase, based on historical IURC practice, the Company anticipates that the third step adjustment granted will be closer to the Company's request than to the UCC's recommendation. ENVIRONMENTAL MATTERS The Company has completed its investigation and preliminary assessments of four sites once owned and operated by the Company, its predecessors, previous landowners, or former affiliates of the Company and utilized for the manufacture of gas. (See "Environmental Matters" in Item 7. of Management's Discussion and Analysis of Operations and Financial Condition in the Company's 1993 Form 10-K report for further discussion.) Although the results of its preliminary assessments of the sites indicate no contamination is present and no clean up will be required, the Company has elected to conduct comprehensive testing of the sites to provide conclusive evidence that no such contamination exists. During the fourth quarter of 1993 the Company expensed $.5 million for the anticipated cost of performing the preliminary site investigations and the comprehensive testing of all four sites. No additional costs for testing are anticipated at this time. LIQUIDITY AND CAPITAL RESOURCES The Company's demand for capital is primarily related to its construction of utility plant and equipment necessary to meet customers' electric and gas energy needs, as well as environmental compliance requirements. Expenditures for the Company's demand side management programs (see following discussion) are presently expected to continue to increase and become a significant use of capital. Construction expenditures (excluding allowance for other funds used during construction) and demand side management program expenditures incurred during the quarter totaled $18.6 million of which 85% were funded with internally generated cash. For the nine month period, these expenditures totaled $63.5 million and were 68% funded with internally generated cash. The Company anticipates continued financial stability and achievement of its financial objectives during the remainder of 1994 and is presently faced with no liquidity problems. The Company estimates that construction expenditures for the five year period 1994-1998 will total approximately $270 million. Included in this amount is about $44 million to comply by 1995 with the Clean Air Act Amendments of 1990. Also included as part of the 1994-1998 construction program is approximately $49 million of expenditures to develop and implement demand side management programs. (See "Clean Air Act" and "Demand Side Management" in Item 7. of Management's Discussion and Analysis of Results of Operations and Financial Condition in the Company's 1993 Form 10-K report for further discussion of these issues.) Although the Company expects the majority of the construction requirements to be provided by internally generated funds, external financing requirements of about $50 million are anticipated for redemption of debt securities and other long-term obligations. 14 PART TWO - OTHER INFORMATION Item 6. Exhibits and Reports on Form 8-K (a) Exhibit 27 - Financial Data Schedule (b) The Company was not required to file a report on Form 8-K during the third quarter of 1994. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. SOUTHERN INDIANA GAS AND ELECTRIC COMPANY (Registrant) S. M. Kerney S. M. Kerney Controller Date: November 10, 1994 15 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY INDEX
Page No. Part I - Financial Information: Consolidated Statements of Income for the Three Months and Nine Months ended September 30, 1994 and 1993 2 Consolidated Balance Sheets at September 30, 1994 and December 31, 1993 3-4 Consolidated Statements of Cash Flows for the Nine Months ended September 30, 1994 and 1993 5 Consolidated Statements of Capitalization at September 30, 1994 and December 31, 1993 6 Consolidated Statements of Retained Earnings for the Nine Months ended September 30, 1994 and 1993 7 Notes to Consolidated Financial Statements 8-9 Management's Discussion and Analysis of Financial Condition and Results of Operations 10-13 Part II - Other Information 14 Signature 14
EX-27 2
OPUR1 (IN THOUSANDS, EXCEPT PER SHARE AMOUNTS) 9-MOS DEC-31-1994 SEP-30-1994 PER-BOOK 668,186 81,038 101,307 49,526 0 900,057 78,258 0 220,978 299,236 0 19,605 280,862 0 21,100 0 35,560 0 0 0 243,694 900,057 256,187 17,448 193,911 211,359 44,828 5,837 50,665 13,861 36,804 829 35,975 19,446 18,632 80,340 $2.28 $2.28
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