-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, K+fBQE7fn69+NXsBm+PV8gGEXO4YL9UDbZspAla71WLo2hKTy/25sOLWa/e7P9Mg h3p+OE8We/E6JNCpJpV6Mw== 0000092195-96-000013.txt : 19961118 0000092195-96-000013.hdr.sgml : 19961118 ACCESSION NUMBER: 0000092195-96-000013 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19960930 FILED AS OF DATE: 19961114 SROS: NYSE FILER: COMPANY DATA: COMPANY CONFORMED NAME: SOUTHERN INDIANA GAS & ELECTRIC CO CENTRAL INDEX KEY: 0000092195 STANDARD INDUSTRIAL CLASSIFICATION: ELECTRIC & OTHER SERVICES COMBINED [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: 96665734 BUSINESS ADDRESS: STREET 1: 20 NW FOURTH ST CITY: EVANSVILLE STATE: IN ZIP: 47741-0001 BUSINESS PHONE: 8124655300 10-Q 1 UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 Form 10-Q X QUARTERLY REPORT PERSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT of 1934 For the quarterly period ended September 30, 1996 OR TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from _____________ to _____________ Commission Registrant; IRS Employer File Number State of Incorporation; Identification Address; and Telephone Number No. 1-11603 SIGCORP, Inc. 35-1940620 (An Indiana Corporation) 20 N. W. Fourth Street Evansville, Indiana 47741-0001 (812) 465-5300 1-3553 Southern Indiana Gas and Electric Co. 35-0672570 (An Indiana Corporation) 20 N. W. Fourth Street Evansville, Indiana 47741-0001 (812) 465-5300 Indicate by check mark whether the Registrants (1) have 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 Registrants were required to file such reports), and (2) have been subject to such filing requirements for the past 90 days. Yes X . No_____. Indicate the number of shares outstanding of each of the Registrants' classes of common stock, as of the latest practicable date: SIGCORP, Inc.: Common stock, no par value, 15,754,826 shares outstanding at September 30, 1996 Southern Indiana Gas and Electric Company: Common stock, no par value, 15,754,826 shares outstanding and held by SIGCORP, Inc. at September 30, 1996 1 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1996
TABLE OF CONTENTS Page No. PART I. FINANCIAL INFORMATION: Item 1: Financial Statements SIGCORP, Inc. Consolidated Statements of Income 2 Consolidated Statements of Cash Flows 3 Consolidated Balance Sheets 4-5 Consolidated Statements of Capitalization 6 Consolidated Statements of Retained Earnings 7 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY Statements of Income 8 Statements of Cash Flows 9 Balance Sheets 10-11 Statements of Capitalization 12 Statements of Retained Earnings 13 NOTES TO FINANCIAL STATEMENTS OF SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY 14-15 Item 2: Management's Discussion and Analysis of Financial Condition and Results of Operations 16-19 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY Part II. OTHER INFORMATION Item 4: Submission of Matters to a Vote of Security Holders 20 Item 5: Other information 20 Item 6: Exhibits and Reports on Form 8-K 20 Signatures 21 /TABLE 2
SIGCORP, Inc. CONSOLIDATED STATEMENTS OF INCOME Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (in thousands except per share data) OPERATING REVENUES Electric $79,889 $83,734 $212,557 $210,392 Gas 11,206 5,693 68,440 43,319 Total operating revenues 91,095 89,427 280,997 253,711 OPERATING EXPENSES Operation: Fuel for electric generation 20,852 23,548 57,515 61,539 Purchased electric energy 2,075 2,799 6,107 8,072 Cost of gas sold 4,465 1,219 46,628 24,766 Other 13,894 13,640 39,823 37,057 Total operation 41,286 41,206 150,073 131,434 Maintenance 6,911 7,126 20,819 21,477 Depreciation and amortization 9,709 9,331 29,125 29,990 Federal and state income taxes 9,161 8,648 20,320 15,561 Property and other taxes 3,511 3,405 10,582 10,274 Total operating expenses 70,578 69,716 230,919 208,736 OPERATING INCOME 20,517 19,711 50,078 44,975 Other Income: Allowance for other funds used during construction - 137 - 345 Interest 464 403 1,192 828 Other, net 375 1,252 3,267 3,527 Total other income 839 1,792 4,459 4,700 INCOME BEFORE INTEREST AND OTHER CHARGES 21,356 21,503 54,537 49,675 Interest and Other Charges: Interest on long-term debt 4,593 4,799 13,920 14,109 Amortization of premium, discount, and expense on debt 168 168 522 525 Other interest 504 608 1,514 1,334 Allowance for borrowed funds used during construction (131) (159) (299) (572) Preferred dividend requirements of subsidiary 274 274 823 825 5,408 5,690 16,480 16,221 INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 15,948 15,813 38,057 33,454 CUMULATIVE EFFECT AT JANUARY 1, 1995 OF ADOPTING THE UNBILLED REVENUES METHOD OF ACCOUNTING - NET OF INCOME TAXES - - - 6,293 NET INCOME $15,948 $15,813 $ 38,057 $ 39,747 AVERAGE COMMON SHARES OUTSTANDING 15,755 15,755 15,755 15,755 EARNINGS PER SHARE OF COMMON STOCK BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $1.01 $1.00 $2.42 $2.12 CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - - 0.40 TOTAL EARNINGS PER SHARE OF COMMON STOCK $1.01 $1.00 $2.42 $2.52 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 1996 1995 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 38,057 $ 39,747 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,125 29,990 Preferred dividend requirements of subsidiary 823 825 Deferred income taxes and investment tax credits, net 1,178 4,499 Cumulative effect of accounting change - (6,293) Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) (2,106) (18,105) Inventories (2,420) 6,474 Coal contract settlement 12,928 (9,358) Accounts payable (18,795) (10,948) Accrued taxes 7,056 5,726 Refunds from gas suppliers (1,603) 2,722 Refunds to customers (3,921) (6,300) Accrued coal liability - (22,018) Other assets and liabilities (2,884) 4,922 Net cash provided by operating activities 57,438 21,883 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (23,382) (26,701) Demand side management program expenditures (2,826) (4,908) Sales of investments 700 4,107 Change in nonutility property (6,887) (1,036) Other 2,252 105 Net cash used in investing activities (30,143) (28,433) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds (8,000) (300) Dividends paid (21,264) (20,793) Change in environmental improvement funds held by trustee (153) 6,638 Payments on partnership obligations (2,786) 1,670 Change in notes payable 2,290 (3,256) Other 395 373 Net cash used in financing activities (29,518) (15,668) NET DECREASE IN CASH AND CASH EQUIVALENTS (2,223) (22,218) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,834 28,060 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,611 $ 5,842 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS September 30, December 31, 1996 1995 (in thousands) ASSETS Utility Plant, at original cost: Electric $1,039,975 $1,030,890 Gas 127,301 125,053 Total utility plant, at original cost 1,167,276 1,155,943 Less - accumulated provision for depreciation 516,735 490,326 650,541 665,617 Construction work in progress 23,151 13,750 Net utility plant 673,692 679,367 Other Investments and Property: Investments in leveraged leases 35,170 35,609 Investments in partnerships 23,934 25,308 Environmental improvement funds held by trustee 3,795 3,642 Nonutility property and other 18,492 11,605 Total other investments and property 81,391 76,164 Current Assets: Cash and cash equivalents 7,611 9,834 Temporary investments, at market 440 1,148 Receivables, less allowance of $289 and $138, respectively 34,050 35,392 Accrued unbilled revenues 22,099 18,651 Inventories 37,382 34,962 Coal contract settlement - 12,928 Other current assets 19,203 4,795 Total current assets 120,785 117,710 Deferred Charges: Unamortized premium on reacquired debt 5,783 6,142 Postretirement benefits other than pensions 9,438 9,574 Demand side management program 23,163 20,337 Other deferred charges 12,102 14,687 Total deferred charges 50,486 50,740 $ 926,354 $ 923,981 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS September 30, December 31, 1996 1995 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES Common Stock $ 78,258 $ 78,258 Retained Earnings 254,233 236,617 Common shareholders' equity 332,491 314,875 Cumulative Nonredeemable Preferred Stock of Subsidiary 11,090 11,090 Cumulative Redeemable Preferred Stock of Subsidiary 7,500 7,500 Cumulative Special Preferred Stock of Subsidiary 924 924 Long-Term Debt, net of current maturities 257,694 257,440 Long-Term Partnership Obligations, net of current maturities 4,580 6,839 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 614,279 598,668 Current Liabilities: Current Portion of Adjustable Rate Bonds Subject to Tender 31,500 31,500 Current Maturities of Long-Term Debt, Interim Financing and Long-Term Partnership Obligations: Maturing long-term debt 919 9,906 Notes payable 33,557 30,500 Partnership obligations 2,259 2,786 Total current maturities of long-term debt, interim financing and long-term partnership obligations 36,735 43,192 Other Current Liabilities: Accounts payable 19,201 37,996 Dividends payable 123 123 Accrued taxes 15,877 8,821 Accrued interest 7,527 4,577 Refunds to customers 3,372 8,896 Other accrued liabilities 22,793 17,689 Total other current liabilities 68,893 78,102 Total current liabilities 137,128 152,794 Deferred Credits and Other: Accumulated deferred income taxes 136,233 132,793 Accumulated deferred investment tax credits, being amortized over lives of property 22,067 23,146 Regulatory income tax liability 1,794 2,977 Postretirement benefits other than pensions 12,302 9,056 Other 2,551 4,547 Total deferred credits and other 174,947 172,519 $926,354 $923,981 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CAPITALIZATION September 30, December 31, 1996 1995 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 15,754,826 $ 78,258 $ 78,258 Retained Earnings, $2,194,121 restricted as to payment of cash dividends on common stock 254,233 236,617 332,491 314,875 PREFERRED STOCK OF SUBSIDIARY 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 Total Nonredeemable 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 OF SUBSIDIARY Cumulative, no par value, authorized 5,000,000 shares, issuable in series: 8-1/2% series, outstanding 9,237 shares redeemable at $100 per share 924 924 LONG-TERM DEBT, NET OF CURRENT MATURITIES First mortgage bonds 252,410 251,410 Notes payable 6,055 6,836 Unamortized debt premium and discount, net (771) (806) 257,694 257,440 LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT MATURITIES 4,580 6,839 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE 2015, Series B, presently 4.0% 31,500 31,500 Total capitalization, including bonds subject to tender $645,779 $630,168 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SIGCORP, Inc. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS Nine Months Ended September 30, 1996 1995 (in thousands) Balance Beginning of Period $236,617 $218,424 Net Income 38,057 39,747 274,674 258,171 Common Stock Dividends ($1.2975 per share in 1996 and $1.2675 per share in 1995) 20,441 19,968 Balance End of Period (See Consolidated Statements of Capitalization for restriction) $254,233 $238,203 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF INCOME Three Months Ended Nine Months Ended September 30, September 30, 1996 1995 1996 1995 (in thousands except per share data) OPERATING REVENUES Electric $79,889 $83,734 $212,557 $210,392 Gas 11,206 5,693 68,440 43,319 Total operating revenues 91,095 89,427 280,997 253,711 OPERATING EXPENSES Operation: Fuel for electric generation 20,852 23,548 57,515 61,539 Purchased electric energy 2,075 2,799 6,107 8,072 Cost of gas sold 4,465 1,219 46,628 24,766 Other 13,894 13,640 39,823 37,057 Total operation 41,286 41,206 150,073 131,434 Maintenance 6,911 7,126 20,819 21,477 Depreciation and amortization 9,709 9,331 29,125 29,990 Federal and state income taxes 9,161 8,648 20,320 15,561 Property and other taxes 3,511 3,405 10,582 10,274 Total operating expenses 70,578 69,716 230,919 208,736 OPERATING INCOME 20,517 19,711 50,078 44,975 Other Income: Allowance for other funds used during construction - 37 - 345 Interest 80 403 387 828 Other, net 22 1,252 1,395 3,527 Total operating income 102 1,792 1,782 4,700 INCOME BEFORE INTEREST CHARGES 20,619 21,503 51,860 49,675 Interest and Other Charges: Interest on long-term debt 4,593 4,799 13,920 14,109 Amortization of premium, discount and expense on debt 168 168 522 525 Other interest 347 608 1,095 1,334 Allowance for borrowed funds used during construction (131) (159) (299) (572) Total interest and other 4,977 5,416 15,238 15,396 NET INCOME BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE 15,642 16,087 36,622 34,279 CUMULATIVE EFFECT AT JANUARY 1, 1995 OF ADOPTING THE UNBILLED REVENUES METHOD OF ACCOUNTING - NET OF INCOME TAXES - - - 6,293 NET INCOME 15,642 16,087 36,622 40,572 Preferred dividend 274 274 823 825 EARNINGS APPLICABLE TO COMMON STOCK $15,368 $15,813 $ 35,799 $ 39,747 AVERAGE COMMON SHARES OUTSTANDING 15,755 15,755 15,755 15,755 EARNINGS PER SHARE OF COMMON STOCK BEFORE CUMULATIVE EFFECT OF ACCOUNTING CHANGE $0.98 $1.00 $2.27 $2.12 CUMULATIVE EFFECT OF ACCOUNTING CHANGE - - - 0.40 TOTAL EARNINGS PER SHARE OF COMMON STOCK $0.98 $1.00 $2.27 $2.52 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF CASH FLOWS Nine Months Ended September 30, 1996 1995 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 36,622 $ 40,572 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 29,125 29,990 Deferred income taxes and investment tax credits, net 905 4,499 Cumulative effect of accounting change - (6,293) Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) (2,381) (18,105) Inventories (2,378) 6,474 Coal contract settlement 12,928 (9,358) Accounts payable (17,929) (10,948) Accrued taxes 5,647 5,726 Refunds from gas suppliers (1,603) 2,722 Refunds to customers (3,921) (6,300) Accrued coal liability - (22,018) Other assets and liabilities (2,245) 4,922 Net cash provided by operating activities 54,770 21,883 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (23,382) (26,701) Demand side management program expenditures (2,826) (4,908) Sales of investments - 4,107 Change in nonutility property 648 (1,036) Other (69) 105 Net cash used in investing activities (25,629) (28,433) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds (8,000) (300) Dividends paid (21,264) (20,793) Reduction in preferred stock and long-term debt - 6,638 Change in notes payable 2,500 1,670 Contribution of nonregulated subsidiaries to parent (12,145) (3,256) Other 248 373 Net cash used in financing activities (38,661) (15,668) NET DECREASE IN CASH AND CASH EQUIVALENTS (9,520) (22,218) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,834 28,060 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 314 $ 5,842 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC BALANCE SHEETS September 30, December 31, 1996 1995 (in thousands) ASSETS Utility Plant, at original cost: Electric $1,039,975 $1,030,890 Gas 127,301 125,053 1,167,276 1,155,943 Less - accumulated provision for depreciation 516,735 490,326 650,541 665,617 Construction work in progress 23,151 13,750 Net utility plant 673,692 679,367 Other Investments and Property: Investments in leveraged leases - 35,609 Investments in partnerships - 25,308 Environmental improvement funds held by Trustee 3,795 3,642 Nonutility property and other 1,552 11,605 Total other investments and property 5,347 76,164 Current Assets: Cash and cash equivalents 314 9,834 Temporary investments, at market - 1,148 Receivables, less allowance of $289 and $138, respectively 29,389 35,392 Accrued unbilled revenues 22,099 18,651 Inventories 37,340 34,962 Coal contract settlement - 12,928 Other current assets 18,419 4,795 Total Other assets 107,561 117,710 Deferred Charges: Unamortized premium on reacquired debt 5,783 6,142 Postretirement benefits obligation other than pensions 9,438 9,574 Demand side management program 23,163 20,337 Other deferred charges 11,604 14,687 Total deferred charges 49,988 50,740 $ 836,588 $ 923,981 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY BALANCE SHEETS September 30, December 31, 1996 1995 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES Common Stock $ 78,258 $ 78,258 Retained Earnings 214,557 236,617 Common shareholders' equity 292,815 314,875 Cumulative Nonredeemable Preferred Stock 11,090 11,090 Cumulative Redeemable Preferred Stock 7,500 7,500 Cumulative Special Preferred Stock 924 924 Long-Term Debt, net of current maturities 251,639 257,440 Long-Term Partnership Obligations, net of current maturities - 6,839 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 563,968 598,668 Current Liabilities: Current Portion of Adjustable Rate Bonds Subject to Tender 31,500 31,500 Current Maturities of Long-Term Debt, Interim Financing and Long-Term Partnership Obligations: Maturing long-term debt - 9,906 Notes payable 33,000 30,500 Partnership obligations - 2,786 Total current maturities of long-term debt, interim financing and long-term partnership obligations 33,000 43,192 Other Current Liabilities: Accounts payable 14,291 37,996 Dividends payable 123 123 Accrued taxes 16,042 8,821 Accrued interest 7,510 4,577 Refunds to customers 3,372 8,896 Other accrued liabilities 21,890 17,689 Total other current liabilities 63,228 78,102 Total current liabilities 127,728 152,794 Deferred Credits and Other: Accumulated deferred income taxes 106,179 132,793 Accumulated deferred investment tax credits, being amortized over lives of property 22,067 23,146 Regulatory income tax liability 1,794 2,977 Postretirement benefits other than pensions 12,302 9,056 Other 2,550 4,547 Total deferred credits and other 144,892 172,519 $836,588 $923,981 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF CAPITALIZATION September 30, December 31, 1996 1995 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 15,754,826 shares $ 78,258 $ 78,258 Retained Earnings, $2,194,12 restricted as to payment of cash dividends on common stock 214,557 236,617 292,815 314,875 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 Total nonredeemable 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 9,237 shares, redeemable at $100 per share 924 924 LONG-TERM DEBT, NET OF CURRENT MATURITIES First mortgage bonds 251,410 251,410 Notes payable 1,000 6,836 Unamortized debt premium and discount, net (771) (806) 251,639 257,440 LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT MATURITIES - 6,839 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE: 2015, Series B, presently 4.0% 31,500 31,500 Total capitalization, including bonds subject to tender $595,468 $630,168 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
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SOUTHERN INDIANA GAS AND ELECTRIC COMPANY STATEMENTS OF RETAINED EARNINGS Nine Months Ended September 30, 1996 1995 (in thousands) Balance Beginning of Period $236,617 $218,424 Net Income 36,622 40,572 273,239 258,996 Dividend Nonregulated Subsidiaries to Parent 37,418 - Preferred Stock Dividends 823 825 Common Stock Dividends ($1.2975 per share in 1996 and $1.2675 per share in 1995) 20,441 19,968 58,682 20,793 Balance End of Period (See Consolidated Statements of Capitalization for restriction) $214,557 $238,203 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
14 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY NOTES TO FINANCIAL STATEMENTS 1. Organization SIGCORP, Inc. (SIGCORP) is a holding company incorporated under the laws of the state of Indiana. SIGCORP has five wholly-owned subsidiaries: Southern Indiana Gas and Electric Company (SIGECO), a gas and electric utility, and four nonregulated subsidiaries. On December 20, 1994, SIGECO's Board of Directors authorized the steps required for a corporate reorganization in which a holding company would become the parent of SIGECO. SIGECO's shareholders approved the reorganization at SIGECO's March 28, 1995 annual meeting, and approval by the Federal Energy Regulatory Commission and the Securities and Exchange Commission was granted November 7, 1995 and December 14, 1995, respectively. Effective January 1, 1996, the new holding company became the parent of SIGECO which accounts for over 90% of SIGCORP's net income, and four of SIGECO's former wholly- owned nonregulated subsidiaries: Energy Systems Group, Inc. (ESGI), Southern Indiana Minerals, Inc. (SIMI), Southern Indiana Properties, Inc. (SIPI) and ComSource, Inc. (ComSource). Because of the significance of SIGECO, the operating results of the nonregulated subsidiaries are included in Other Income in the consolidated financial statements of SIGCORP. All of the shares of SIGECO's common stock were exchanged on a one-for-one basis for shares of SIGCORP, while all of SIGECO's debt securities and all of its outstanding shares of preferred stock remain securities of SIGECO and are unaffected. 2. Presentation of Financial Statements It is suggested that these consolidated unaudited financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in SIGCORP's 1995 Annual Report to Shareholders. These financial statements include the accounts of SIGCORP, Inc. and its subsidiaries, as well as separate financial statements for SIGECO and include all adjustments which are in the opinion of management, necessary for a fair statement of the financial position and results of operations. Because of seasonal and other factors, the earnings for the nine months ending September 30, 1996 should not be taken as an indication of the results for all or any part of the balance of 1996. 3. Cash Flow Information For the purposes of the Consolidated Balance Sheets and Consolidated Statements of Cash Flows, SIGCORP considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents. SIGCORP, for the nine months ended September 30, 1996 and 1995 paid interest (net of amounts capitalized) of $12,185,000 and $11,767,000, respectively, and income taxes of $8,736,000 and $6,840,000, respectively. Additionally, SIGCORP is involved in several partnerships which are partially financed by partnership obligations amounting to $6,839,000 and $9,625,000 at September 30, 1996 and December 31, 1995, respectively. SIGECO, for the nine months ended September 30, 1996 and 1995 paid interest (net of amounts capitalized) of $ 11,783,000 and $11,255,000, respectively, and income taxes of $12,021,000 and $6,822,000, respectively. 15 The following decreases in SIGECO's assets and liabilities were caused by dividending the nonregulated subsidiaries to SIGCORP and are noncash in nature. Deferred income taxes (29,783) Investments in Leveraged Leases (35,609) Investments in Partnerships (25,307) Partnership obligations (9,625) Other, net (3,771) 4.Long-Term Debt On May 1, 1996, the interest rate on $31,500,000 of Adjustable Rate Pollution control bonds was changed from 4.60% to 4%. The new interest rate, 4%, will be fixed through April 30, 1997. For financial statement presentation the $31,500,000 of Adjustable Rate Pollution Control bonds are shown as a current liability. 5.Operating Revenues - Accounting Change SIGECO previously recognized electric and gas revenues when customers were billed on a cycle billing basis. The utility service rendered after monthly meter reading dates through the end of a calendar month (unbilled revenues) became a part of operating revenues in the following month. To more closely match revenues with expenses, effective January 1, 1995, SIGECO changed its method of accounting to accrue the amount of revenue for sales unbilled at the end of each month. The cumulative effect of the change on prior years as of January 1, 1995, net of income taxes, was $6.3 million ($.40 per share), and was included in net income for the first quarter of 1995. 16 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION Effective January 1, 1996, a new holding company, SIGCORP, Inc. (SIGCORP) became the parent of Southern Indiana Gas and Electric Company (SIGECO), a regulated gas and electric utility which accounts for over 90% of SIGCORP's net income, and four of SIGECO's former wholly- owned nonregulated subsidiaries. Because of the significance of SIGECO, the operating results of SIGCORP's nonregulated subsidiaries are included in Other Income in the consolidated financial statements of SIGCORP. Consolidated operating revenues and operating expenses of SIGCORP consist entirely of the operating revenues and operating expenses of SIGECO; material changes in the consolidated financial condition and operating results of SIGCORP are due primarily to the operations of SIGECO. The following discussion and analysis of results of operations and financial condition is for SIGCORP unless otherwise stated. Earnings per share were $1.01 for the recent three month period compared to earnings of $1.00 per share for the third quarter of 1995; earnings per share for the first nine months of 1996 were $2.42 versus earnings of $2.12 per share before the cumulative effect of an accounting change for the same period in 1995. Net income for the nine month period ending September 30, 1995 included a one-time favorable adjustment, net of tax, of $6.3 million or $.40 per share in recognition of the impact of SIGECO's change to the unbilled revenue method of accounting (see Note 5 of Notes To Financial Statements). OPERATING REVENUES Electric revenues were $3.8 million (5%) lower during the third quarter of 1996 compared to the same period a year ago due primarily to a less favorable retail sales mix, fewer wholesale sales and lower per unit fuel costs reflected in revenues. Although retail sales overall were down less than 1% due to greater industrial and commercial sales related to continued increased economic activity in SIGECO's service territory, much milder summer temperatures resulted in a 9% decrease in sales to residential and commercial customers. Cooling degree days in SIGECO's service territory, a measure of relative temperatures, were down 39% from the third quarter of 1995, and 18% below the 30-year average for the same period. Wholesale sales, which typically have lower per unit margins than retail sales, declined 19% during the current quarter due to lower sales to Alcoa Generating Corporation (AGC) than during the third quarter of 1995 when a major maintenance outage continued on one of AGC's generating units. The recovery of lower per unit fuel costs which resulted in a $.5 million decline in electric revenues and changes in rates to wholesale customers contributed to the decrease in electric revenues. Changes in the cost of fuel are passed on to customers through commission approved fuel cost adjustments. During the nine month period ending September 30, 1996, electric revenues were up $2.2 million (1%) compared to the first three quarters of 1995, chiefly due to increased sales to retail electric customers and to higher base retail rates. Retail sales rose 5% reflecting colder winter temperatures during the first four months of 1996 than during the comparable period in 1995 and continued commercial and industrial growth in SIGECO's service territory. Wholesale sales for the nine month period in 1996 were lower due to fewer sales to AGC during the second and third quarters. Electric revenues increased $2.3 million during the current nine month period due to the third step of SIGECO's electric rate increase effective June 27, 1995, which raised retail rates approximately 2.05% overall. A 5% decrease in per unit fuel and purchased power costs recovered from customers resulted in a $2.9 million decrease in electric revenues. The changes in electric revenue are shown at the top of page 17: 17
Revenue Increase (Decrease) From Corresponding Period in 1995 Three Months Nine Months Ended 9-30-96 Ended 9-30-96 (in thousands) Change in sales volume $ (3,000) $ 3,500 Effect of rate adjustments in sales to retail customers - 2,300 Fuel and purchased power recovery (500) (2,900) Other (345) (735) $ (3,845) $ 2,165 (Decrease)increase in retail sales (MWh) (10,512) 152,629 (Decrease) in wholesale sales (MWh) (72,937) (210,372)
Increased sales to all customer classes and the recovery of higher per unit gas costs were the primary reasons for the $5.5 million (97%) increase in gas revenues during the three months ended September 30, 1996. The greater gas sales reflected the continued economic growth in SIGECO's service territory. Average unit costs of gas sold, which are recovered from customers through commission approved gas cost adjustments, were higher than those during the same period in 1995 due to continued higher spot market prices during the 1996 period. Additionally, SIGECO's recently approved adjustment to base retail natural gas rates, effective July 15, 1996, contributed to the revenue increase. The approved gas rate adjustment is about 8% overall. A change in sales mix and other factors partially offset these revenue increases. A 36% increase in gas sales and the recovery of higher unit costs of gas delivered to customers were the primary reasons for a $25.1 million (58%) increase in gas revenue during the first nine months of 1996 versus the same period in 1995. Colder winter weather during the first four months of 1996 was the primary cause of higher sales to residential and commercial customers, up 27% and 28%, respectively. Additionally, industrial sales were significantly greater, chiefly due to certain transportation customers purchasing their gas supplies from SIGECO during the first half of 1996. Average unit costs of gas sold recovered from customers during the recent nine month period were 39% greater than those during the same period in 1995, adding $9.5 million to gas revenues. The colder winter temperatures nationwide tightened spot market supplies, causing upward pressure on market prices during 1996. The changes in gas revenues are shown below:
Revenue Increase (Decrease) From Corresponding Period in 1995 Three Months Nine Months Ended 9-30-96 Ended 9-30-96 (in thousands) Change in sales volume $4,100 $15,600 Cost of gas recovery 1,600 9,500 Effect of rate adjustments in sales to retail customers 800 800 Other (987) (779) $5,513 $25,121 Increase in total throughput (MDth) 539 2,753
18 OPERATING EXPENSES Lower per unit fuel costs and fewer sales to wholesale customers resulted in $3.4 million and $6 million decreases in the cost of fuel for electric generation and purchased electric energy during the three month and nine month periods ending September 30, 1996, respectively, compared to the same periods in 1995. Cost of gas sold rose $3.2 million during the current quarter due to the increase in unit deliveries and higher per unit prices; the substantial increase in spot market prices during the first quarter of 1996 and much greater deliveries were the chief reasons for a $21.9 million increase in the cost of gas sold during the first three quarters of 1996. Other operation expenses during the current quarter were comparable to the same period in 1995; however, greater SIGECO employee benefit costs and the February 1, 1995 commercial operation of SIGECO's $103 million investment to comply with the Clean Air Act Amendments of 1990, primarily its sulfur dioxide scrubber, caused other operation expenses during the nine months ending September 30, 1996 to increase $2.8 million (7%). (See "Clean Air Act" in Item 7, Management's Discussion and Analysis of Results of Operations and Financial Condition in SIGCORP's 1995 Form 10-K report for further discussion.) In June 1995, SIGECO began expensing costs which had previously been deferred for postretirement benefits other than pensions (health care and life insurance) attributed to electric utility operations. SIGECO received approval from the Indiana Utility Regulatory Commission (IURC) to recover such costs in retail electric rates. (See item (1)(j), "Postretirement Benefits Other Than Pensions" of Notes To Consolidated Financial Statements in SIGCORP's 1995 Form 10-K report for further discussion.) In July 1996, SIGECO began expensing similar deferred postretirement benefit costs attributed to gas utility operations after receiving approval from the IURC to recover such costs in retail gas rates. Maintenance expenditures during the nine month period in 1996 declined compared to the same period in 1995 when a devastating storm struck SIGECO's electric service area on June 8, requiring $2 million in maintenance repairs and $1.5 million in capital replacements. Higher tree trimming and line clearance activity and increased routine transmission and distribution maintenance repairs during the 1996 period partially offset the impact of the decline in storm repairs. Total maintenance expenditures were relatively unchanged during the third quarter of 1996 when lower 1996 production maintenance expenditures were substantially offset by increased transmission and distribution maintenance expenditures. The impact of lower depreciation rates placed in effect in June 1995 more than offset higher depreciation expense related to the February 1995 commercial operation of the new scrubber, resulting in a 3% decline in total depreciation expense during the first nine months of 1996. The 4% increase in depreciation during the third quarter of 1996 fully reflects the impact of the new scrubber investment. Federal and state income taxes were $4.8 million greater during the first nine months of 1996 compared to the same period in 1995 due to the higher 1996 pretax operating income and to a $1.2 million decrease in income taxes resulting from the settlement of SIGECO's IRS audit during the first quarter of 1995. OTHER INCOME AND INTEREST CHARGES Other income during the current three month period reflects lower total earnings from SIGCORP's four nonutility subsidiaries due to startup costs of the newer subsidiaries, ComSource, Inc. and Southern Indiana Minerals, Inc., and due to decreased miscellaneous other income of SIGECO; other income during the first nine months of 1996 declined slightly due to decreased miscellaneous other income of SIGECO and lower allowance for other funds used during construction resulting from the completion of the scrubber. Interest and other charges were relatively unchanged during the three month and nine month periods ended September 30, 1996 compared to the same periods in 1995. EARNINGS The slight increase in earnings per share of common stock for the third quarter of 1996 of one cent (1%) over earnings of $1.00 per share during the third quarter of 1995 was primarily due to stronger retail gas sales and higher per unit sales margins resulting from an approved increase 19 in base retail gas rates, which were partially offset by fewer residential, commercial and wholesale electric sales and higher operating expenses. For the nine months ended September 30, 1996, earnings per share of common stock rose 30 cents (14%) over earnings of $2.12 per share before the 40 cent per share adjustment for the cumulative effect of the accounting change during the first nine months of 1995. The increase in earnings before the adjustment for the accounting change was primarily due to greater weather-sensitive gas and electric sales and higher per unit sales margins resulting from the increases in base electric and gas retail rates, which were partially offset by the higher operating expenses. LIQUIDITY AND CAPITAL RESOURCES SIGCORP's demand for capital is primarily related to SIGECO's construction of utility plant and equipment necessary to meet customers' electric and gas energy needs, as well as environmental compliance requirements, and expenditures for SIGECO's demand side management (DSM) programs. Construction expenditures (excluding allowance for other funds used during construction) and demand side management program expenditures incurred during the quarter and nine months ended September 30, 1996 totaled $10 million and $26.2 million, respectively. Construction and demand side management program expenditures incurred during the third quarter of 1996 were 93% funded with internally generated cash. Such expenditures incurred during the nine months ended September 30, 1996 were fully funded with internally generated cash. Cash provided from operations increased $35.6 million during the current nine month period compared to the same period in 1995 when SIGECO executed a contract buyout settlement agreement with its remaining long-term contract coal supplier. Cash used in investing and financing activities during 1996 increased $15.6 million compared to a year ago. No long-term financing activity occurred during the 1996 period. At this time, SIGCORP estimates that SIGECO's construction expenditures for the five year period 1996-2000 will total approximately $260 million, including approximately $25 million for the design and implementation of several comprehensive information systems which are necessary to better provide expanding customer service needs and to better manage SIGECO's resources, and approximately $17 million to develop and implement DSM programs. Although SIGCORP expects the majority of the construction requirements and an estimated $83 million in debt security and other long-term obligation redemptions to be provided by internally generated funds, an additional $60-70 million of external financing is anticipated to meet such requirements. OTHER MATTERS In October 1996, the SIGCORP board of directors approved the formation of two new nonregulated subsidiaries, SIGCORP Energy Marketing, Inc. and SIGCORP Capital, Inc. SIGCORP Energy Marketing, Inc. will market natural gas. SIGCORP Capital, Inc. will provide financing services for SIGCORP's nonregulated subsidiaries. 20 PART TWO - OTHER INFORMATION Item 4. Submission of Matters to a Vote of Security Holders NONE Item 5. Other Information NONE Item 6. Exhibits and Reports on Form 8-K NONE 21 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. SIGCORP, Inc (Registrant) /s/ A. E. Goebel A. E. Goebel Secretary and Treasurer Date: November 14, 1996 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY /s/ S. M. Kerney S. M. Kerney Controller Date: November 14, 1996 EX-27 2
UT 9-MOS DEC-31-1996 SEP-30-1996 PER-BOOK 673,692 5,347 107,561 49,988 0 836,588 78,258 0 214,557 292,815 0 19,514 251,639 0 33,000 0 31,500 0 0 0 208,120 836,588 280,997 20,320 210,599 230,919 50,078 1,782 51,860 15,238 36,622 823 35,799 20,442 13,920 54,770 2.27 2.27
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