-----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, M33YVEIrLVuBp7JiDNneyKeZUzRiV/WQRd9azXL1LxGMskbTBb0IQGpE9lq4Qg5b 8Pq9XMTvEkf/7nrxwtlwOA== 0000092195-97-000024.txt : 19971117 0000092195-97-000024.hdr.sgml : 19971117 ACCESSION NUMBER: 0000092195-97-000024 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 2 CONFORMED PERIOD OF REPORT: 19970930 FILED AS OF DATE: 19971114 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: SEC FILE NUMBER: 001-03553 FILM NUMBER: 97721614 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, 1997 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; State of Incorporation; IRS Employer File Number Address; and Telephone Number Identification 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 Company 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, 23,630,568 shares outstanding at September 30, 1997 Southern Indiana Gas and Electric Company: Common stock, no par value, 15,754,826 shares outstanding and held by SIGCORP, Inc. at September 30, 1997
SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
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 Results of Operations and Financial Condition 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 21 Item 5: Other information 21 Item 6: Exhibits and Reports on Form 8-K 21 Signatures 22
2 SIGCORP, Inc. CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 (in thousands except per share data) OPERATING REVENUES: Electric $84,169 $79,889 $211,267 $212,557 Gas 9,189 11,206 56,223 68,440 Total operating revenues 93,358 91,095 267,490 280,997 OPERATING EXPENSES: Fuel for electric generation 17,952 20,852 47,703 57,515 Purchased electric energy 6,846 2,075 11,886 6,107 Cost of gas sold 2,824 4,465 34,096 46,628 Other 12,395 13,894 40,440 39,823 Maintenance 5,536 6,911 19,479 20,819 Depreciation and amortization 10,029 9,709 30,087 29,125 Federal and state income taxes 11,340 9,161 22,374 20,320 Property and other taxes 2,748 3,511 9,226 10,582 Total operating expenses 69,670 70,578 215,291 230,919 OPERATING INCOME 23,688 20,517 52,199 50,078 OTHER INCOME: Allowance for other funds used during construction 169 - 430 - Interest 763 464 2,061 1,192 Other, net 1,129 375 1,640 3,267 Total other income 2,061 839 4,131 4,459 INCOME BEFORE INTEREST AND OTHER CHARGES 25,749 21,356 56,330 54,537 INTEREST AND OTHER CHARGES: Interest on long-term debt 4,482 4,593 13,509 13,920 Amortization of premium, discount, and expense on debt 168 168 503 522 Other interest 1,111 504 2,616 1,514 Allowance for borrowed funds used during construction (233) (131) (445) (299) Preferred dividend requirements of subsidiary 274 274 823 823 Total interest and other charges 5,802 5,408 17,006 16,480 NET INCOME $19,947 $15,948 $ 39,324 $ 38,057 AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631 23,631 EARNINGS PER SHARE OF COMMON STOCK $0.84 $0.67 $1.66 $1.61 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
3 SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 1996 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 39,324 $ 38,057 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,087 29,125 Preferred dividend requirements of subsidiary 823 823 Deferred income taxes and investment tax credits, net (1,903) 1,178 Allowance for other funds used during construction (430) - Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) 16,482 (2,106) Inventories (2,167) (2,420) Coal contract settlement - 12,928 Accounts payable (13,894) (18,795) Accrued taxes (318) 7,056 Refunds from gas suppliers (301) (1,603) Refunds to customers 5,703 (3,921) Other assets and liabilities (3,209) (2,884) Net cash provided by operating activities 70,197 57,438 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (39,950) (23,382) Demand side management program expenditures (2,003) (2,326) Purchases of investments (323) - Sales of investments 160 700 Investments in partnerships (80) 596 Change in nonutility property (5,145) (6,887) Other 207 1,156 Net cash used in investing activities (47,134) (30,143) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds - (8,000) Dividends paid (23,237) (21,264) Change in environmental improvement funds held by trustee (158) (153) Payments on partnership obligations (2,276) (2,786) Change in notes payable 1,793 2,290 Other 1,844 395 Net cash used in financing activities (22,034) (29,518) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 1,029 (2,223) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,191 9,834 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,220 $ 7,611 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
4 SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 (in thousands) ASSETS Utility Plant, at original cost: Electric $1,069,580 $1,047,717 Gas 135,616 131,796 1,205,196 1,179,513 Less - accumulated provision for depreciation 549,252 524,104 655,944 655,409 Construction work in progress 35,894 25,849 Net utility plant 691,838 681,258 Other Investments and Property: Investments in leveraged leases 42,580 42,887 Investments in partnerships 23,867 23,983 Environmental improvement funds held by trustee 3,988 3,830 Nonutility property and other 27,888 22,743 Total other investments and property 98,323 93,443 Current Assets: Cash and cash equivalents 10,220 9,191 Temporary investments, at market 738 565 Receivables, less allowance of $143 and $215, respectively 33,456 36,469 Accrued unbilled revenues 21,275 34,744 Inventories 33,408 31,241 Other current assets 7,992 16,310 Total current assets 107,089 128,520 Deferred Charges: Unamortized premium on reacquired debt 5,303 5,663 Postretirement benefits other than pensions 6,110 7,819 Demand side management program 25,021 23,359 Other deferred charges 15,737 12,591 Total deferred charges 52,171 49,432 TOTAL $ 949,421 $ 952,653 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
5 SIGCORP, Inc. CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES CAPITALIZATION: Common Stock $ 78,258 $ 78,258 Retained Earnings 270,990 252,626 Total common shareholders' equity 349,248 330,884 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 238,990 261,629 Long-Term Partnership Obligations, net of current maturities 4,192 4,563 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 611,944 616,590 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 12,695 659 Notes payable 51,462 38,750 Partnership obligations 371 2,276 Total current maturities of long-term debt, interim financing and long-term partnership obligations 64,528 41,685 Other Current Liabilities: Accounts payable 19,706 33,600 Dividends payable 123 123 Accrued taxes 7,405 7,723 Accrued interest 8,140 4,585 Refunds to customers 8,123 2,722 Other accrued liabilities 6,921 31,138 Total other current liabilities 50,418 79,891 Total current liabilities 146,446 153,076 Deferred Credits and Other: Accumulated deferred income taxes 147,855 147,070 Accumulated deferred investment tax credits, being amortized over lives of property 20,632 21,706 Regulatory income tax liability - 1,614 Postretirement benefits other than pensions 13,327 10,084 Other 9,217 2,513 Total deferred credits and other 191,031 182,987 TOTAL $949,421 $952,653 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
6 SIGCORP, Inc. CONSOLIDATED STATEMENTS OF CAPITALIZATION
September 30, December 31, 1997 1996 (in thousands) COMMON SHAREHOLDERS' EQUITY Common Stock, without par value, authorized 50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258 Retained Earnings, $2,194,121 restricted as to payment of cash dividends on common stock 270,990 252,626 Total common shareholders' equity 349,248 330,884 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 preferred stock of subsidiary 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 238,714 251,115 Notes payable 1,000 11,273 Unamortized debt premium and discount, net (724) (759) Total long-term debt 238,990 261,629 LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT MATURITIES 4,192 4,563 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE 2015, Series B, presently 4.05% 31,500 31,500 TOTAL CAPITALIZATION, including bonds subject to tender $643,444 $648,090 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
7 SIGCORP, Inc. CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Nine Months Ended September 30, 1997 1996 (in thousands) Balance Beginning of Period $252,626 $236,617 Net Income 39,324 38,057 291,950 274,674 Common Stock Dividends ($0.885 per share in 1997 and $0.865 per share in 1996) 20,960 20,441 BALANCE END OF PERIOD (See Consolidated Statements of Capitalization for restriction) $270,990 $254,233 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
8 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended September 30, September 30, 1997 1996 1997 1996 (in thousands except per share data) OPERATING REVENUES: Electric $84,167 $79,889 $211,267 $212,557 Gas 9,190 11,206 56,223 68,440 Total operating revenues 93,357 91,095 267,490 280,997 OPERATING EXPENSES: Fuel for electric generation 17,952 20,852 47,703 57,515 Purchased electric energy 6,847 2,075 11,886 6,107 Cost of gas sold 2,824 4,465 34,096 46,628 Other 12,358 13,894 40,405 39,823 Maintenance 5,536 6,911 19,479 20,819 Depreciation and amortization 10,029 9,709 30,087 29,125 Federal and state income taxes 11,340 9,161 22,374 20,320 Property and other taxes 2,748 3,511 9,226 10,582 Total operating expenses 69,634 70,578 215,256 230,919 OPERATING INCOME 23,723 20,517 52,234 50,078 OTHER INCOME: Allowance for other funds used during construction 169 - 430 - Interest 158 80 406 387 Other, net 1,000 22 1,643 1,395 Total other income 1,327 102 2,479 1,782 INCOME BEFORE INTEREST CHARGES 25,050 20,619 54,713 51,860 INTEREST AND OTHER CHARGES: Interest on long-term debt 4,482 4,593 13,509 13,920 Amortization of premium, discount, and expense on debt 167 168 503 522 Other interest 429 347 1,064 1,095 Allowance for borrowed funds used during construction 657 (131) 445 (299) Total interest and other charges 5,735 4,977 15,521 15,238 NET INCOME 19,315 15,642 39,192 36,622 Preferred dividend 275 274 823 823 EARNINGS APPLICABLE TO COMMON STOCK $19,040 $15,368 $ 38,369 $ 35,799 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
9 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CASH FLOWS
Nine Months Ended September 30, 1997 1996 (in thousands) CASH FLOWS FROM OPERATING ACTIVITIES Net Income $ 39,192 $ 36,622 Adjustments to reconcile net income to net cash provided by operating activities: Depreciation and amortization 30,087 29,125 Deferred income taxes and investment tax credits, net (2,177) 905 Allowance for other funds used during construction (430) - Change in assets and liabilities: Receivables, net (including accrued unbilled revenues) 18,759 (2,381) Inventories (2,117) (2,378) Coal contract settlement - 12,928 Accounts payable (14,863) (17,929) Accrued taxes (351) 5,647 Refunds from gas suppliers (301) (1,603) Refunds to customers 5,702 (3,921) Other assets and liabilities (4,651) (2,245) Net cash provided by operating activities 68,850 54,770 CASH FLOWS FROM INVESTING ACTIVITIES Construction expenditures (net of allowance for other funds used during construction) (39,950) (23,382) Demand side management program expenditures (2,003) (2,826) Change in nonutility property - 648 Other (285) (69) Net cash used in investing activities (42,238) (25,629) CASH FLOWS FROM FINANCING ACTIVITIES First mortgage bonds - (8,000) Dividends paid (23,236) (21,264) Change in environmental improvement funds held by trustee (158) - Change in notes payable 967 2,500 Contribution of nonregulated subsidiaries to parent - (12,145) Other 390 248 Net cash used in financing activities (22,037) (38,661) NET DECREASE IN CASH AND CASH EQUIVALENTS 4,575 (9,520) CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,127 9,834 CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,702 $ 314 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
10 SOUTHERN INDIANA GAS AND ELECTRIC CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 (in thousands) ASSETS Utility Plant, at original cost: Electric $1,069,580 $1,047,717 Gas 135,616 131,796 1,205,196 1,179,513 Less - accumulated provision for depreciation 549,252 524,104 655,944 655,409 Construction work in progress 35,894 25,849 Net utility plant 691,838 681,258 Other Investments and Property: Environmental improvement funds held by Trustee 3,988 3,830 Nonutility property and other 1,552 1,552 Total other investments and property 5,540 5,382 Current Assets: Cash and cash equivalents 7,702 3,127 Receivables, less allowance of $143 and $215, respectively 27,201 32,491 Accrued unbilled revenues 21,275 34,744 Inventories 33,307 31,190 Other current assets 7,827 15,304 Total current assets 97,312 116,856 Deferred Charges: Unamortized premium on reacquired debt 5,303 5,663 Postretirement benefits obligation other than pensions 6,110 7,818 Demand side management program 25,021 23,359 Other deferred charges 14,758 11,989 Total deferred charges 51,192 48,829 TOTAL $ 845,882 $ 852,325 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
11 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED BALANCE SHEETS
September 30, December 31, 1997 1996 (in thousands) SHAREHOLDERS' EQUITY AND LIABILITIES CAPITALIZATION: Common Stock $ 78,258 $ 78,258 Retained Earnings 229,644 213,688 Total common shareholders' equity 307,902 291,946 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 238,990 251,355 Total capitalization, excluding bonds subject to tender (see Consolidated Statements of Capitalization) 566,406 562,815 Current Liabilities: Current Portion of Adjustable Rate Bonds Subject to Tender 31,500 31,500 Current Maturities of Long-Term Debt, Interim Financing: Maturing long-term debt 12,695 295 Notes payable 15,686 32,400 Notes payable to associated company 17,677 - Total current maturities of long-term debt and interim financing 46,058 32,695 Other Current Liabilities: Accounts payable 12,475 27,338 Dividends payable 123 123 Accrued taxes 8,362 8,713 Accrued interest 7,661 4,572 Refunds to customers 8,123 2,722 Other accrued liabilities 5,115 29,650 Total other current liabilities 41,859 73,118 Total current liabilities 119,417 137,313 Deferred Credits and Other: Accumulated deferred income taxes 116,883 116,373 Accumulated deferred investment tax credits, being amortized over lives of property 20,632 21,706 Regulatory income tax liability - 1,613 Postretirement benefits other than pensions 13,327 10,084 Other 9,217 2,421 Total deferred credits and other 160,059 152,197 TOTAL $845,882 $852,325 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
12 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF CAPITALIZATION September 30,December 31, 1997 1996 (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, $2,194,121 restricted as to payment of cash dividends on common stock 229,644 213,688 Total common shareholders' equity 307,902 291,946 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 preferred stock of subsidiary 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 238,714 251,114 Notes payable 1,000 1,000 Unamortized debt premium and discount, net (724) (759) Total long-term debt 238,990 251,355 CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL BONDS SUBJECT TO TENDER, DUE: 2015, Series B, presently 4.05% 31,500 31,500 TOTAL CAPITALIZATION, including bonds subject to tender $597,906 $594,315 The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.
13 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Nine Months Ended September 30, 1997 1996 (in thousands) Balance Beginning of Period $213,688 $236,617 Net Income 39,192 36,622 252,880 273,239 Dividend to Parent of Nonregulated Subsidiaries - 37,418 Preferred Stock Dividends 823 823 Common Stock Dividends 22,413 20,441 23,236 58,682 BALANCE END OF PERIOD (See Consolidated Statements of Capitalization for restriction) $229,644 $214,557 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 CONSOLIDATED FINANCIAL STATEMENTS 1. Organization SIGCORP, Inc. (SIGCORP) is a holding company incorporated October 19, 1994 under the laws of the state of Indiana. SIGCORP has nine wholly-owned subsidiaries: Southern Indiana Gas and Electric Company (SIGECO), a gas and electric utility, and eight nonregulated subsidiaries. Effective January 1, 1996, the new holding company, SIGCORP, Inc. (SIGCORP), 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., Southern Indiana Minerals, Inc., Southern Indiana Properties, Inc. and ComSource, Inc. Because of the significance of SIGECO, the operating results of all 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. General It is suggested that these consolidated financial statements be read in conjunction with the consolidated financial statements and the notes thereto included in SIGCORP's 1996 Annual Report to Shareholders. The consolidated statements include the accounts of SIGCORP, Inc. and its wholly-owned subsidiaries, Southern Indiana Gas and Electric Company (SIGECO), Southern Indiana Properties, Inc. (SIPI), Energy Systems Group, Inc. (ESGI), Southern Indiana Minerals, Inc. (SIMI), ComSource, Inc. (ComSource), SIGCORP Energy Services, Inc. (Energy), SIGCORP Capital, Inc. (Capital), SIGCORP Communications, Inc. (Communications), and SIGCORP Fuels, Inc. (Fuels) 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, 1997 should not be taken as an indication of the results for all or any part of the balance of 1997. 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, 1997 and 1996 paid interest (net of amounts capitalized) of $12,127,000 and $12,185,000, respectively, and income taxes of $19,791,000 and $8,736,000, respectively. Additionally, SIGCORP is involved in several partnerships which are partially financed by partnership obligations amounting to $4,192,000 and $6,839,000 at September 30, 1997 and December 31, 1996, respectively. SIGECO, for the nine months ended September 30, 1997 and 1996 paid interest (net of amounts capitalized) of $11,040,000 and $11,783,000, respectively, and income taxes of $20,427,000 and $12,021,000 respectively. The following decreases for 1996 in SIGECO's assets and liabilities were caused by dividending the nonregulated subsidiaries to SIGCORP and are noncash in nature. Deferred income taxes (29,783,000) Investments in Leveraged Leases (35,609,000) Investments in Partnerships (25,307,000) Partnership obligations (9,625,000) Other, net (3,771,000) 15 4. Long-Term Debt On May 1, 1997, the interest rate on $31,500,000 of Adjustable Rate Pollution Control bonds was changed from 4.0% to 4.05%. The new interest rate, 4.05%, will be fixed through April 30, 1998. For financial statement presentation the $31,500,000 of Adjustable Rate Pollution Control bonds are shown as a current liability. 5. Common Stock On January 21, 1997, the Board of Directors of SIGCORP approved a split of SIGCORP's issued shares of common stock without par value on a three-for two basis. The stock split, effective March 27, 1997, increased SIGCORP's outstanding shares from 15,754,826 to 23,630,568. Average common shares outstanding, earnings per share of common stock and dividends paid per share for all periods presented reflect the stock split. 16 SIGCORP, Inc. AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION The holding company, SIGCORP, Inc. (SIGCORP) is 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 eight 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 $.84 for the recent three month period compared to earnings of $.67 per share for the third quarter of 1996. For the nine month period ending September 30, 1997, earnings per share were $1.66 versus $1.61 per share for the same period in 1996. Per share earnings for all periods reflect SIGCORP's three-for-two split on shares of its outstanding common stock effective March 27, 1997. (See Note 5 of the Notes to Consolidated Financial Statements for further discussion.) Operating Revenues Electric revenues were $4.3 million (5%) higher during the third quarter of 1997 compared to the same period a year ago due primarily to increased electric sales and a more favorable sales mix. These revenue increases were partially offset by lower per unit fuel costs reflected in revenues. Changes in the cost of fuel are passed on to customers through commission approved fuel cost adjustments. Although cooling degree days in SIGECO's service area were 15% below normal, which was comparable to the third quarter of 1996, total electric sales were up 19%. The sales increase was primarily attributed to a substantial increase in wholesale sales, combined with 2% and 16% greater sales to residential and commercial customers, respectively. Industrial sales declined 3% during the current quarter. Wholesale electric sales, which typically have lower per unit margins than retail sales, increased 116% during the current quarter due to a substantial increase in sales to other utilities and power marketers reflecting SIGECO's competitive rates and continuing efforts to aggressively sell its electric energy in new markets. For the nine month period ending September 30, 1997, electric revenues declined less than 1% to $211.3 million. Lower unit fuel costs reflected in revenues were offset by the effect of additional revenues, primarily from greater sales to wholesale customers. Total retail sales were unchanged from the nine month period in 1996 as a 7% increase in commercial sales from the continued strong economy in SIGECO's service territory offset a 4% decrease in residential sales resulting from the much milder weather during the second and third quarters of 1997. A 63% increase in wholesale electric sales resulting from greater sales to other utilities and power marketers throughout the current nine month period resulted in a 10% increase in total electric sales. 17 The changes in electric revenue are shown below:
Revenue Increase (Decrease) From Corresponding Period in 1996 Three Months Nine Months Ended 9-30-97 Ended 9-30-97 (in thousands) Fuel and purchased power recovery $(4,0000) $(11,300) Change in retail sales volume 2,200 (400) Sales to wholesale customers 6,500 9,800 Other (420) 610 $ 4,280 $ (1,290) Increase (decrease) in retail sales (Mwh) 42,058 (8,370) Increase in wholesale sales (Mwh) 259,697 466,488
Fewer sales to all customer classes was the chief cause of a $2 million (18%) decrease in gas revenues during the quarter ended September 30, 1997. Sales to commercial and industrial customers declined 39% and 25%, respectively, when fewer SIGECO transportation customers purchased their gas supplies from SIGECO than during the third quarter of 1996. A 561,000 Dth adjustment of sales in all customer classes during the third quarter of 1997 also contributed to lower commercial and industrial gas sales and to a 75% decrease in residential sales. The adjustment was necessary to correct overstated volumes of gas delivered but unbilled during the 12-month period ended September 30, 1997. Gas revenues and gas operating income for the three month and nine month periods in 1997 were not detrimentally affected by this adjustment due to a concurrent correction of unbilled sales pricing methodology. During the nine month period ending September 30, 1997, gas revenues were $12.2 million (18%) lower versus the same period in 1996 primarily due to fewer gas sales to all customer classes and to the recovery of lower per unit gas costs during the second quarter of 1997. Milder winter temperatures during the first quarter of 1997 and fewer sales to SIGECO transportation customers led to declines in sales to residential, commercial and industrial customers of 20%, 29% and 65%, respectively, during the nine months. Conversely, increases in base retail gas rates effective July 1996 contributed approximately $5 million to 1997 revenues. The change in sales mix and increased gas transportation revenues also partially offset the decline in revenues related to fewer sales and lower gas costs. 18 The changes in gas revenues are shown below:
Revenue Increase (Decrease) From Corresponding Period in 1996 Three Months Nine Months Ended 9-30-97 Ended 9-30-97 (in thousands) Change in sales volume excluding correction $(3,600) $(18,100) Correction of unbilled sales and pricing methodology 900 900 Cost of gas recovery 300 (3,900) Effect of rate adjustments in sales to retail customers - 5,000 Change in sales mix - 2,200 Other 383 (2,178)
Operating Expenses Due to lower per unit fuel costs, total costs for fuel for electric generation and purchased electric energy increased only $1.9 million (8%) and decreased $4 million (6%), respectively, during the three month and nine month periods ending September 30, 1997, despite significantly increased electric sales in both periods. The decline in unit fuel costs reflects the completion of SIGECO's reformation of its long-term coal contracts in late 1996. Cost of gas sold declined $1.6 million (37%) and $12.5 million (27%), respectively, during the third quarter and first nine months of 1997 reflecting substantially lower average unit costs of gas delivered during the second quarter, and fewer sales in both the third quarter and nine month periods. Other operation and maintenance expenses declined $2.9 million during the third quarter of 1997 due primarily to lower electric generating plant operation and maintenance expenditures, the absence of maintenance repairs to transmission and distribution facilities caused by a third quarter 1996 wind storm, and decreases in various administrative and general expenses. For the nine month period ending September 30, 1997, total other operation and maintenance expenditures were comparable to the same period in 1996. Greater production operation expenses related to increased generation, higher customer assistance program costs and expenses related to efforts to prepare for competition were offset by decreased maintenance required on transmission and distribution facilities. Property and other taxes decreased $.8 million and $1.4 million, respectively, for the three month and nine month periods in 1997 chiefly due to a reduction in property tax expense related to the refund of contested property taxes. 19 Other Income and Interest Charges Other income during the three month period ending September 30, 1997 increased due to improved earnings from several of SIGCORP's nine nonutility subsidiaries and to higher interest income. Other income for the current nine month period declined slightly, reflecting lower earnings from one of SIGCORP's nonutility subsidiaries, Energy Systems Group, Inc. (ESGI) resulting from an absence of new performance contracts during the second quarter of 1997 and a first quarter $1 million decrease in sales to another utility of SIGECO's 1997 allotment of "bonus" sulfur dioxide emission allowances (also called "extension allowances"). The decrease in allowances sales was anticipated under an agreement with the utility to sell to it essentially all of SIGECO's allotment of "bonus" allowances for the five year period beginning 1995. Earnings Earnings per share for the third quarter of 1997 rose $.17 (25%) compared to the same period in 1996 due primarily to increased electric sales, lower nonfuel operating expenses, lower property and other taxes, and improved nonutility income. The five cent (3%) per share increase in earnings for the nine months ending September 30, 1997 reflects substantially increased wholesale electric sales, higher per unit gas margins resulting from SIGECO's adjustment to base gas rates, increased gas transportation revenues and lower property tax expense. These increases were substantially offset by fewer gas sales resulting from milder winter temperatures and fewer sales to transportation customers, and lower nonutility income. Environmental Matters On July 18, 1997, the USEPA issued its final rule which revised the national ambient air quality standard for ozone by setting a lower concentration limit and changing measurement methods. It is anticipated that the number of ozone nonattainment counties in the US will increase significantly as determined by the concentration of nitrogen oxide (NOx) and particulate matter, key ingredients of ozone. The USEPA has stated that it will target utility coal-fired boilers for the majority of the reductions required, especially NOx emissions, because they believe this approach is the most cost effective. Northeastern states have claimed that ozone transport from Midwestern states (including Indiana) is the primary reason for their ozone concentration problems. Although this premise is challenged by others based on various air quality modeling studies including studies commissioned by the USEPA, the USEPA intends to incorporate a regional control strategy to reduce ozone transport. In October 1997, the USEPA provided each state a proposed NOx budget of allowed emissions which targets utility coal-fired boilers. Under that budget, utility NOx emissions are reduced to a rate of 0.15 lb/mmBtu from levels already imposed by Phase I and Phase II of the 1990 Clean Air Act Amendments (CAAA). There remains much uncertainty as to the extent that SIGECO would be affected by this ruling. However, if SIGECO is required to reduce its systemwide NOx emission levels to 0.15 lb/mmBtu, NOx control equipment expenditures estimated at $70 to $100 million would be required. This is in addition to expenditures previously made to bring SIGECO in compliance with the CAAA requirements. Under the current USEPA implementation schedule, the emissions reductions and required control equipment must be implemented and in place by 2004. 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 20 expenditures for SIGECO's demand side management (DSM) programs. Construction expenditures (excluding allowance for other funds used during construction) and DSM program expenditures incurred during the quarter and nine months ended September 30, 1997 totaled $20.8 million and $42 million, respectively. The third quarter expenditures were 46% funded and the expenditures for nine months were fully funded with internally generated cash. Cash provided from operations increased $12.8 million during the current nine month period compared to the same period in 1996. Cash used in investing and financing activities during 1997 increased $9.5 million compared to a year ago. No long-term financing activity occurred during the 1997 period. At this time, SIGCORP estimates that SIGECO's construction expenditures for the five year period 1997-2001 will total approximately $260 million, including approximately $25 million for the design and implementation of several comprehensive information systems which are necessary to fulfill expanding customer service needs and to better manage SIGECO's resources, and approximately $9 million to develop and implement DSM programs. SIGCORP expects the majority of the construction requirements and an estimated $70 million in debt security and other long-term obligation redemptions to be provided by internally generated funds. External financing requirements of $60-70 million are anticipated and will be used primarily to redeem long-term debt. These estimates do not reflect construction expenditures that may be required to comply with new USEPA air quality standards discussed under "Environmental Matters". 21 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 22 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, 1997 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY /s/ S. M. Kerney S. M. Kerney Controller Date: November 14, 1997 EX-27 2
UT 0000092195 SOUTHERN INDIANA GAS AND ELECTRIC CO 1,000 9-MOS DEC-31-1997 SEP-30-1997 PER-BOOK 691,838 5,540 97,312 51,192 0 845,882 78,258 0 229,644 307,902 0 19,514 238,990 0 15,686 0 61,872 0 0 0 201,918 845,882 267,490 22,375 192,881 215,256 52,234 2,479 54,713 15,521 39,192 823 38,369 22,414 13,509 68,850 0 0
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