December 22, 1994
Office of Applications and Report Services
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We are transmitting herewith Indiana Gas Company, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
September 30, 1994, pursuant to the requirements of Section
13 of the Securities Exchange Act of 1934.
The $250.00 filing fee was transmitted via FEDWIRE on
December 21, 1994.
Sincerely,
/s/Kathleen S. Morris
Kathleen S. Morris
KSM:rs
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC. 20549
FORM 10-K
(Mark One)
[X]ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1994
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to
_______________
Commission File Number 1-6494
INDIANA GAS COMPANY, INC.
(Exact name of Registrant as specified in its charter)
INDIANA 35-0793669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1630 North Meridian Street, Indianapolis, Indiana 46202
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code 317-926-3351
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange on
Title of each class which registered
None None
Securities registered pursuant to Section 12(g) of the Act:
None
(Title of Class)
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
Registrant's classes of common stock, as of the latest
practicable date.
Common Stock-Without par value 9,080,770 November 30, 1994
Class Number of shares Date
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K ( 229.405 of this
chapter) is not contained herein, and will not be contained,
to the best of the Registrant's knowledge, in definitive
proxy or information statements incorporated by reference in
Part III of this Form 10-K or any amendment to this Form 10-K
[NA].
Table of Contents
Page
Part I
Business
Property
Legal Proceedings
Submission of Matters to a Vote of Security Holders
Executive Officers of the Company
Part II
Market for the Registrant's Common Equity and Related
Stockholder Matters
Selected Financial Data
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Financial Statements and Supplementary Data
Changes in and Disagreements with Accountants
Part III
Directors and Executive Officers of the Registrant
Executive Compensation
Securities Ownership of Certain Beneficial Owners and
Management
Certain Relationships and Related Transactions
Part IV
Exhibits, Financial Statements Schedules, and Reports on
Form 8-K
Part I
Item 1. Business
(a) General Development of the Business.
Indiana Gas Company, Inc. (company) is an
operating public utility engaged in the business of
providing gas utility service in the state of
Indiana. It was incorporated under the laws of the
state of Indiana on July 16, 1945. All of the
outstanding shares of common stock of the company
are owned by Indiana Energy, Inc. (Indiana Energy),
which is a public holding company.
All of the outstanding capital stock of
Terre Haute Gas Corporation (Terre Haute) and
Richmond Gas Corporation (Richmond) was acquired
by Indiana Energy on July 31, 1990. Both
companies were operating public utilities engaged
in the business of providing gas distribution
services in Indiana. On January 21, 1991, the
company acquired from Indiana Energy all the
outstanding capital stock of Terre Haute and
Richmond. While these companies technically
exist as separate corporate entities, their
business operations have been combined with
Indiana Gas' operations and the companies do
business under the name of Indiana Gas.
(c) Narrative Description of the Business.
At September 30, 1994, Indiana Gas supplied
gas to about 442,000 customers in 281 communities
in 48 of the 92 counties in the state of Indiana.
The service area has a population of
approximately 2 million and contains diversified
manufacturing and agriculture-related
enterprises. The principal industries served
include automotive parts and accessories, feed,
flour and grain processing, metal castings,
aluminum products, gypsum products, electrical
equipment, metal specialties and glass.
The largest communities served include
Muncie, Anderson, Lafayette-West Lafayette,
Bloomington, Terre Haute, Marion, New Albany,
Columbus, Jeffersonville, New Castle and
Richmond. Indiana Gas does not serve in
Indianapolis, although its general office is
located in that city.
For the fiscal year ended September 30,
1994, residential customers provided 59 percent
of revenues, commercial 25 percent and industrial
16 percent. At such date, approximately 98
percent of Indiana Gas' customers used gas for
space heating, and space heating revenues from
these customers for the fiscal year were 79
percent of total operating revenues. Sales of
gas are seasonal and strongly affected by
variations in weather conditions. During the
fiscal year ended September 30, 1994, Indiana Gas
added approximately 10,400 residential and
commercial customers.
Indiana Gas sells gas directly to
residential, commercial and industrial customers
at approved rates. Indiana Gas also transports
gas through its pipelines at approved rates to
commercial and industrial customers which have
purchased gas directly from producers or through
brokers and marketers. The total volumes of gas
provided to both sales and transportation
customers is referred to as throughput.
Gas transported on behalf of end-use
customers in fiscal 1994 represented 26 percent
(30,125 MDth) of throughput compared to 11
percent (12,307 MDth) in 1993 and 13 percent
(13,438 MDth) in 1992. Although revenues are
lower, rates for transportation generally provide
the same margins as would have been earned had
the gas been sold under normal sales tariffs.
As a result of a series of FERC orders,
including Order No. 636, Indiana Gas now
purchases all of its natural gas from producers,
brokers and marketers on both short-term and
medium-term contracts. Indiana Gas also has
contracts with pipelines for storage and
transportation of natural gas.
Rates for gas services purchased from
interstate pipeline suppliers are governed by
tariffs which are subject to adjustment and
approval by the Federal Energy Regulatory
Commission (FERC) in accordance with the Natural
Gas Act. Prices for gas purchased from gas
producers and marketers are determined by market
conditions. Indiana Gas' rates and charges,
terms of service, accounting matters, issuance of
securities, and other operational matters are
regulated by the Indiana Utility Regulatory
Commission (IURC).
Adjustments to Indiana Gas' rates and
charges related to the cost of gas are made
through gas cost adjustment (GCA) procedures
established by Indiana law and administered by
the IURC. The IURC has applied the statute
authorizing the GCA procedures to reduce rates
when necessary so as to limit net operating
income, after adjusting to normal weather, to the
level provided in the last general rate order.
On October 26, 1994, the IURC approved a
stipulation and settlement agreement which
provided, among other things, an increase in
Indiana Gas' authorized utility operating income
from $47.1 million to $51.1 million beginning in
fiscal 1995. (See Item 7, 1995 Settlement
Agreement.)
Information regarding environmental matters
affecting the company is incorporated herein by
reference to Item 7, Environmental Matters.
Indiana Gas had 1,129 full-time employees and 25
part-time employees as of September 30, 1994.
Item 2. Property
The properties of Indiana Gas are used for
the purchase, production, storage and
distribution of gas and are located primarily
within the state of Indiana. As of September 30,
1994, such properties included approximately
9,798 miles of distribution mains; 458,576
meters; seven reservoirs currently being used for
the underground storage of purchased gas with
approximately 108,354 acres of land held under
storage easements; 10,671,831 Dth of gas in
company-owned underground storage with a daily
deliverability of 138,860 Dth; 20,617,050 Dth of
gas in contract storage with a daily
deliverability of 234,618 Dth; and five liquefied
petroleum (propane) air-gas manufacturing plants
with a total daily capacity of 36,700 Dth of gas.
Indiana Gas' capital expenditures during the
fiscal year ended September 30, 1994, amounted to
$57.1 million.
Item 3. Legal Proceedings
None
Item 4. Submission of Matters to a Vote of Security
Holders
No matter was submitted during the fourth
quarter of the fiscal year ended September 30,
1994, to a vote of security holders.
Item 4a. Executive Officers of the Company
As of September 30, 1994, the following
individuals were Executive Officers of the
company:
Family
Relation- Office or Date Elected
Name Age ship Position Held Or Appointed(1)
Lawrence A. Ferger 60 None President and Chief
Executive Officer July 1, 1987
Paul T. Baker 54 None Senior Vice President
and Chief Operating
Officer Aug. 1, 1991
Senior Vice President -
Gas Supply and
Customer Services July 1, 1987
Niel C. Ellerbrook 45 None Senior Vice President and
Chief Financial Officer July 1, 1987
Anthony E. Ard 53 None Vice President -
Corporate Affairs Jan. 11, 1993
Vice President and
Secretary Sep. 30, 1988
Carl L. Chapman 39 None Vice President -
Planning July 1, 1987
(1) Each of the officers has served continuously since the dates indicated.
Part II
Item 5. Market for the Registrant's Common Equity and
Related Stockholder Matters
All of the outstanding shares of Indiana Gas'
common stock are owned by Indiana Energy, Inc., and
are not traded.
During fiscal 1994, the company paid aggregate
dividends of $5.8 million, $5.8 million, $5.8
million and $6.0 million in the first, second, third
and fourth quarters, respectively.
During fiscal 1993, the company paid aggregate
dividends of $5.1 million, $5.1 million, $5.1
million and $5.8 million in the first, second, third
and fourth quarters, respectively. (See Item 8,
Note 5.)
Item 6. Selected Financial Data
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
(Thousands)
Year Ended September 30 1994 1993 1992 1991 1990(1)
Operating revenues $475,297 $499,278 $411,260 $389,550 $353,078
Margin 194,309 185,725 160,333 153,037 142,821
Operating expenses 146,466 141,452 122,206 117,421 111,326
Operating income 47,843 44,273 38,127 35,616 31,495
Interest and other - net 13,247 15,739 12,384 12,330 9,238
Net income 34,596 28,534 25,743 23,286 22,257
Dividends on preferred stock - 285 1,710 1,710 1,710
Earnings available for
common stock $ 34,596 $ 28,249 $ 24,033 $ 21,576 $ 20,547
Common shareholder's equity $260,295 $249,099 $202,833 $187,651 $217,704
Redeemable preferred
shareholder's equity - - 20,000 20,000 20,000
Long-term debt (2) 156,851 184,901 149,901 163,775 106,100
$417,146 $434,000 $372,734 $371,426 $343,804
Total throughput 116,285 111,354 101,985 97,503 90,219
Annual heating degree days
as a percent of normal 102% 99% 90% 87% 95%
Customers served at end
of period 441,765 431,334 420,665 411,855 402,875
Total Assets at Year-End $649,982 $621,658 $567,779 $515,468 $493,898
(1) Restated to reflect the acquisition of Terre Haute and Richmond effective
July 31, 1990.
(2) Includes current maturities; excludes sinking fund requirements.
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
Earnings
Earnings available for common stock increased to $34.6
million in 1994 from $28.2 million in 1993. The
increase reflects weather that was 4 percent colder
than last year, additional residential and commercial
customers and a decrease in operation and maintenance
expenses. Earnings available for common stock
increased to $28.2 million in 1993 from $24.0 million
in 1992. This increase was due to implementation of
the October 1992 general rate increase and weather that
was 9 percent colder than the previous year, partially
offset by increased operation and maintenance expenses.
Margins (Revenues Less Cost of Gas)
In 1994, margins increased 5 percent ($8.6 million)
when compared to 1993. The increase reflects weather
that was 4 percent colder than last year and 2 percent
colder than normal, as well as additional residential
and commercial customers.
In 1993, margins increased 16 percent ($25.4 million)
when compared to 1992. The increase reflects a general
rate increase implemented in October 1992, volume
increases driven by additional customers and weather 9
percent colder than the previous year but 1 percent
warmer than normal.
Total system throughput (combined sales and
transportation) increased 4 percent (4.9 MMDth) in 1994
compared to 1993 and increased 9 percent (9.4 MMDth) in
1993 compared to 1992. Indiana Gas' rates for
transportation generally provide the same margins as
are earned on the sale of gas under its sales tariffs.
Approximately one-half of total system throughput
represents gas used for space heating and is affected
by weather.
Total average cost per dekatherm of gas purchased
(average commodity and demand) remained about the same
for 1994 as compared to 1993. Increased fixed costs per
dekatherm associated with pipeline rate cases and the
restructuring prescribed by Federal Energy Regulatory
Commission (FERC) Order No. 636 were offset by lower
commodity costs (see Federal Energy Regulatory
Commission Matters).
Total average cost per dekatherm of gas purchased
increased to $2.90 in 1993 from $2.65 in 1992. The
increase can be attributed to higher commodity costs in
1993 than in the previous year, slightly offset by
increased purchases from producers and marketers.
Operating Expenses
Operation and maintenance expenses decreased
approximately $2.3 million in 1994 when compared to
1993. The decrease is primarily attributable to labor
and related costs which are lower than the levels in
1993 when additional operation and maintenance projects
were in progress.
Operation and maintenance expenses increased
approximately $13.4 million in 1993 compared to 1992.
During 1992 and 1991, Indiana Gas intensified cost
containment programs and also postponed a number of non-
critical operating and maintenance projects in an
effort to partially offset the impact of very warm
weather during those years. With the colder weather of
1993 and the general rate increase came the necessary
financial resources to significantly increase the
expenditures on operations and maintenance, including
those projects previously deferred. Increased
throughput volumes and revenues, better financial
results and higher levels of operation and maintenance
activity resulted in cost increases for labor and
related benefits, including performance-based
compensation, services, materials and supplies,
advertising, collection costs and bad debt expenses.
Depreciation and amortization expense increased in 1994
and 1993 as the result of additions to utility plant to
serve new customers and to maintain dependable service
to existing customers.
Federal and state income taxes increased in 1994 and
1993 due to higher taxable income and an increase in
the federal tax rate resulting from the Omnibus Budget
Reconciliation Act of 1993 (see Income Taxes).
Taxes other than income taxes increased in 1994 and
1993 as the result of increased property tax expense,
due to higher property tax rates and higher assessed
values, and as the result of higher gross receipts tax
expenses.
Interest Expense
Interest expense decreased in 1994 due to slightly
lower interest rates. Interest expense increased in
1993 as the result of increases in average debt
outstanding slightly offset by decreases in interest
rates.
Other Operating Matters
Gas Cost Adjustment
Adjustments to Indiana Gas' rates and charges related
to the cost of gas are made through gas cost adjustment
(GCA) procedures established by Indiana law and
administered by the Indiana Utility Regulatory
Commission (IURC). The GCA passes through increases and
decreases in cost of gas to Indiana Gas' customers
dollar for dollar.
In addition, the IURC has applied the statute
authorizing the GCA procedures to reduce rates when
necessary so as to limit utility operating income,
after adjusting to normal weather, to the level
provided in the last general rate order.
1995 Settlement Agreement
During 1994, Indiana Gas, the Office of Utility
Consumer Counselor (OUCC) and a group of large-volume
users entered a series of negotiations designed to
increase Indiana Gas' opportunity to earn on its recent
capital investments while avoiding the necessity of a
general rate filing. As a result of these negotiations,
the IURC approved on October 26, 1994, a stipulation
and settlement agreement which provided, among other
things, for the following: (1) an increase in Indiana
Gas' authorized utility operating income from $47.1
million to $51.1 million beginning in fiscal 1995; (2)
with certain specified exceptions, Indiana Gas may not
file a petition to increase its base rates until
September 1, 1995; and (3) an agreement to a number of
operational and other service enhancements for large-
volume customers.
Furthermore, as part of the agreement, the OUCC agreed
to perform another investigation during fiscal year
1995 to consider an additional increase to Indiana Gas'
authorized utility operating income.
Environmental Matters
In the past, Indiana Gas and others, including its
predecessors, former affiliates and/or previous
landowners, operated facilities for the manufacturing
of gas and storage of manufactured gas. These
facilities are no longer in operation and have not been
operated for many years. In the manufacture and storage
of such gas, various byproducts were produced, some of
which may still be present at the sites where these
manufactured gas plants and storage facilities were
located. While management believes those operations
were conducted in accordance with the then-applicable
industry standards, under currently applicable
environmental laws and regulations, Indiana Gas, and
the others, may now be required to take remedial action
if certain materials are found at these sites.
Indiana Gas has identified the existence, location and
certain general characteristics of 26 gas manufacturing
and storage sites. Various stages of investigation and
remediation activities are under way at these sites.
Indiana Gas has deferred all environmental costs
previously paid or accrued. These costs are
approximately $12 million (including assessment,
remediation and related costs) as of September 30,
1994.
The impact of complying with federal, state and local
environmental regulations related to former
manufactured gas plant sites on Indiana Gas' financial
position and results of operations is contingent upon
several uncertainties. These include the cost of
compliance, the impact of joint and several liability
upon the magnitude of the contingency, the ratemaking
treatment authorized for these items by the IURC, as
well as the recovery of environmental and related costs
from insurance carriers.
Indiana Gas believes it will be successful in
recovering the costs which it has incurred and may
incur through rates, from other potentially responsible
parties and from insurance carriers. However, there can
be no assurance as to the amount or timing of any such
recoveries.
For further information regarding the status of
investigation and remediation of the sites, financial
reporting, ratemaking and other potentially responsible
parties, see Item 8, Note 10.
Federal Energy Regulatory Commission Matters
In accordance with FERC Order No. 636, Indiana Gas'
pipeline service providers have made a number of
filings to restructure services. On May 1, 1993,
Panhandle Eastern Pipe Line Company implemented a
restructured services tariff. Texas Eastern
Transmission Corporation's restructured tariff was
implemented June 1, 1993. Indiana Gas' remaining
pipeline service providers implemented restructured
services on November 1, 1993. Indiana Gas' pipeline
service providers have begun to seek from customers,
including Indiana Gas, recovery of certain costs
related to the transition to restructured services.
Those costs will include certain gas supply realignment
costs and are not currently expected to exceed $10
million.
In a recent order involving another gas utility in
Indiana, the IURC determined that FERC Order No. 636
transition costs are recoverable as gas costs through
the quarterly GCA process. Given this determination,
Indiana Gas expects that transition costs it is
assessed by its pipeline suppliers will be recovered
through the quarterly GCA process.
Indiana Gas continues to monitor developments
concerning these and other pipeline issues, to
participate in related negotiations and to represent
its interest in pipeline matters before FERC.
Postretirement Benefits Other Than Pensions
Effective October 1, 1993, Indiana Gas adopted
Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106). SFAS 106 requires accounting
for the costs of postretirement health care and life
insurance benefits on the accrual basis. This means the
costs of benefits paid in the future are recognized
during the years that an employee provides service to
Indiana Gas rather than the "pay-as-you-go" (cash)
basis (see Item 8, Note 7).
In January 1992, Indiana Gas filed a petition with the
IURC seeking regulatory authority for, among other
matters, rate recovery of implementation of SFAS 106.
Through a generic order issued on December 30, 1992,
Indiana Gas received authority from the IURC to employ
deferred accounting for these costs. This authorization
will extend until the IURC rules upon Indiana Gas'
pending request to adopt SFAS 106 for ratemaking
purposes. Indiana Gas' order is not expected until
later in calendar 1994, however, recent orders for
other public utilities regulated by the IURC have
authorized SFAS 106 to be adopted for ratemaking
purposes.
Postemployment Benefits
In November 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for
Postemployment Benefits (SFAS 112). The statement will
be adopted by Indiana Gas effective October 1, 1994.
SFAS 112 requires employers to adopt accrual accounting
for workers' compensation, disability, severance pay
and other benefits provided to former or inactive
employees after employment but before retirement.
Adoption of the statement will not materially affect
Indiana Gas' financial position or results of
operations.
Income Taxes
A federal corporate tax rate of 35 percent, resulting
from the Omnibus Budget Reconciliation Act of 1993, was
in effect for all of the company's fiscal year of 1994
as compared to a weighted average federal corporate tax
rate of 34.75 percent in 1993. The federal corporate
tax rate in effect for fiscal 1992 was 34 percent.
Effective October 1, 1993, Indiana Gas adopted
Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109). Indiana Gas
previously used the deferred method of accounting for
income taxes as prescribed by Accounting Principles
Bulletin Opinion No. 11. SFAS 109 requires the use of
the liability method, which effectively results in a
reduction in previously provided deferred income taxes
to reflect the current statutory corporate tax rate.
Due to the effects of regulation, Indiana Gas is not
permitted to recognize the effect of a tax rate change
as income but is required to reduce tariff rates to
return the "excess" deferred income taxes to ratepayers
over the remaining life of the properties that give
rise to the taxes. Therefore, the cumulative effect of
a change in accounting principle upon the initial
application of SFAS 109 resulted in no impact on
earnings.
Liquidity and Capital Resources
New construction to provide service to a growing
customer base and normal system maintenance and
improvements will continue to require substantial
capital expenditures. Indiana Gas' goal is to
internally fund approximately 75 percent of its capital
expenditure program. This will help Indiana Gas to
maintain its high creditworthiness. The long-term debt
of Indiana Gas is currently rated Aa3 by Moody's
Investors Service and AA- by Standard & Poor's
Corporation and Duff & Phelps.
Total capital required to fund both capital
expenditures and refinancing requirements for 1993 and
1994, along with estimated amounts for 1995 through
1997, are as follows:
Thousands 1993 1994 1995 1996 1997
Capital expenditures $57,000 $57,100 $54,700 $56,600 $61,600
Refinancing requirements 20,000 28,100 200 200 200
$77,000 $85,200 $54,900 $56,800 $61,800
In 1994, 75 percent of Indiana Gas' capital
expenditures was provided by funds generated internally
(net income less dividends plus charges to net income
not requiring funds). In 1993, 62 percent of capital
expenditures was provided by funds generated
internally. This percentage was lower than the target
as a result of completing significant upgrades to the
gas distribution system to allow for greater operating
flexibility in the FERC Order 636 environment.
Capitalization objectives for Indiana Gas are 55-65
percent common equity and preferred stock and 35-45
percent long-term debt. Indiana Gas' common equity
component was 62 percent of total capitalization at
September 30, 1994.
In 1994, externally funded capital expenditures and the
redemptions discussed below were financed primarily
through short-term debt and changes in working capital.
No significant permanent financing was done during the
year.
On October 15, 1993, $10 million of 9.30% medium-term
notes were redeemed.
On September 15, 1994, $10 million of 6.80% Notes,
Series C, were redeemed.
During September 1994, $8.05 million of the outstanding
9 3/8% Series M, First Mortgage Bonds were retired.
Indiana Gas received an order on August 17, 1994, from
the IURC for authorization to issue up to $125 million
in the aggregate in the form of debt securities and
common stock or a combination thereof. Indiana Gas
intends to implement a medium-term note program during
fiscal 1995.
The nature of Indiana Gas' business creates large short-
term cash working capital requirements primarily to
finance customer accounts receivable, unbilled utility
revenues resulting from cycle billing, gas in
underground storage and capital expenditures until
permanently financed. Short-term borrowings tend to be
greatest during the heating season when accounts
receivable and unbilled utility revenues are at their
highest. Depending on cost, commercial paper or bank
lines of credit are used as sources of short-term
financing. Indiana Gas' commercial paper is rated P-1
by Moody's and A-1+ by Standard & Poor's. Long-term
financial strength and flexibility require maintaining
throughput volumes, controlling costs and, if
absolutely necessary, securing timely increases in
rates to recover costs and provide a fair and
reasonable return to shareholders.
Item 8. Financial Statements and Supplementary Data
Management's Responsibility for Financial Statements
The management of the company is responsible for the
preparation of the consolidated financial statements and
the related financial data contained in this report. The
financial statements are prepared in conformity with
generally accepted accounting principles and follow
accounting policies and principles applicable to
regulated public utilities.
The integrity and objectivity of the data in this
report, including required estimates and judgements, are
the responsibility of management. Management maintains a
system of internal controls and utilizes an internal
auditing program to provide reasonable assurance of
compliance with company policies and procedures and the
safeguard of assets.
The board of directors pursues its responsibility for
these financial statements through its audit committee,
which meets periodically with management, the internal
auditors and the independent auditors, to assure that
each is carrying out its responsibilities. Both the
internal auditors and the independent auditors meet with
the audit committee, with and without management
representatives present, to discuss the scope and
results of their audits, their comments on the adequacy
of internal accounting controls and the quality of
financial reporting.
/s/Niel C. Ellerbrook
Niel C. Ellerbrook
Senior Vice President and
Chief Financial Officer
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Indiana
Gas Company, Inc.:
We have audited the accompanying consolidated balance
sheets and schedules of long-term debt of Indiana Gas
Company, Inc. (an Indiana corporation and wholly-owned
subsidiary of Indiana Energy, Inc.) and subsidiary
companies as of September 30, 1994 and 1993, and the
related consolidated statements of income, common
shareholder's equity and cash flows for each of the
three years in the period ended September 30, 1994.
These financial statements are the responsibility of the
company's management. Our responsibility is to express
an opinion on these financial statements based on our
audits.
We conducted our audits in accordance with generally
accepted auditing standards. Those standards require
that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are
free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements. An
audit also includes assessing the accounting principles
used and significant estimates made by management, as
well as evaluating the overall financial statement
presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to
above present fairly, in all material respects, the
financial position of Indiana Gas Company, Inc. and
subsidiary companies, as of September 30, 1994, and
1993, and the results of their operations and their cash
flows for each of the three years in the period ended
September 30, 1994, in conformity with generally
accepted accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 28, 1994
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands)
Year Ended September 30
1994 1993 1992
OPERATING REVENUES $ 475,297 $ 499,278 $ 411,260
COST OF GAS 280,988 313,553 250,927
MARGIN 194,309 185,725 160,333
OPERATING EXPENSES:
Other operation and maintenance 81,982 84,302 70,866
Depreciation and amortization 29,177 26,806 25,136
Income taxes 19,467 15,816 13,892
Taxes other than income taxes 15,840 14,528 12,312
146,466 141,452 122,206
OPERATING INCOME 47,843 44,273 38,127
OTHER INCOME - NET 2,629 579 1,893
INCOME BEFORE INTEREST AND OTHER 50,472 44,852 40,020
INTEREST AND OTHER CHARGES:
Interest on long-term debt 14,798 15,304 13,885
Interest on notes payable 493 447 222
Allowance for borrowed funds used
during construction (355) (579) (481)
Other interest 746 889 449
Other amortization 194 257 202
15,876 16,318 14,277
NET INCOME 34,596 28,534 25,743
DIVIDENDS ON PREFERRED STOCK - 285 1,710
EARNINGS AVAILABLE FOR COMMON STOCK $ 34,596 $ 28,249 $ 24,033
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands)
Year Ended September 30
1994 1993 1992
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 34,596 $ 28,534 $ 25,743
Adjustments to reconcile net income to cash
provided from operating activities -
Depreciation and amortization 29,371 27,063 25,338
Deferred income taxes 3,273 2,931 2,073
Investment tax credit (930) (1,007) (929)
31,714 28,987 26,482
Changes in assets and liabilities -
Receivables - net 4,121 (2,849) (1,401)
Inventories (5,093) (10,638) (19,188)
Accounts payable, customer deposits, advance
payments and other current liabilities (7,052) 10,676 9,645
Accrued taxes and interest (11,815) 10,410 5,506
Refundable/recoverable gas costs 39,048 (17,123) 6,805
Other - net 2,771 (4,000) (1,385)
Total adjustments 53,694 15,463 26,464
Net cash flows from operations 88,290 43,997 52,207
CASH FLOWS FROM (REQUIRED FOR) FINANCING ACTIVITIES:
Issuance of common stock - 40,000 10,000
Redemption of preferred stock - (20,932) -
Sale of long-term debt - 35,000 -
Reduction in long-term debt (28,050) - (14,094)
Net change in short-term borrowings 20,298 (19,986) 28,088
Dividends (23,400) (21,336) (20,561)
Net cash flows from (required for) financing activities (31,152) 12,746 3,433
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (57,138) (56,945) (59,060)
Net cash flows required for investing activities (57,138) (56,945) (59,060)
NET DECREASE IN CASH - (202) (3,420)
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 222 3,642
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20 $ 20 $ 222
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands)
September 30
1994 1993
UTILITY PLANT:
Original cost $824,839 $773,174
Less - accumulated depreciation and amortization 291,823 267,629
533,016 505,545
NONUTILITY PLANT - NET 393 234
CURRENT ASSETS:
Cash and cash equivalents 20 20
Accounts receivable, less reserves of
$1,238 and $2,055 respectively 14,251 14,231
Accrued unbilled revenues 6,607 10,748
Materials and supplies - at average cost 3,663 3,710
Liquefied petroleum gas - at average cost 940 1,019
Gas in underground storage - at last-in,
first-out cost 64,753 59,534
Recoverable gas costs - 7,453
Prepayments and other 244 296
90,478 97,011
DEFERRED CHARGES:
Unamortized debt discount and expense 6,755 6,614
Environmental costs (see Note 10) 11,925 9,045
Other 7,415 3,209
26,095 18,868
$649,982 $621,658
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
SHAREHOLDER'S EQUITY AND LIABILITIES
(Thousands)
September 30
1994 1993
CAPITALIZATION:
Common stock and paid-in capital $142,995 $142,995
Retained earnings 117,300 106,104
Total common shareholder's equity 260,295 249,099
Long-term debt (see schedule) 156,851 164,901
417,146 414,000
CURRENT LIABILITIES:
Maturities and sinking fund requirements
of long-term debt - 20,000
Notes payable 30,550 10,252
Accounts payable 34,808 41,602
Refundable gas costs 31,595 -
Customer deposits and advance payments 12,594 13,466
Accrued taxes 20,291 31,579
Accrued interest 2,815 3,342
Other current liabilities 14,055 13,441
146,708 133,682
DEFERRED CREDITS:
Deferred income taxes (see Note 11) 59,887 56,911
Unamortized investment tax credit 13,033 13,963
Regulatory liability (see Note 11) 4,787 -
Customer advances for construction 1,162 998
Other 7,259 2,104
86,128 73,976
COMMITMENTS AND CONTINGENCIES (see Notes 9 and 10) - -
$649,982 $621,658
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDER'S EQUITY
(Thousands except shares)
COMMON STOCK AND
PAID-IN CAPITAL RETAINED
SHARES AMOUNT EARNINGS TOTAL
BALANCE AT SEPTEMBER 30, 1991 7,320,827 $ 92,995 $ 94,656 $187,651
Net Income 25,743 25,743
8.55% Cumulative Preferred Stock
Dividends (1,710) (1,710)
Common Stock Dividends
($2.52 per share) (18,851) (18,851)
Common Stock Issuances
to Indiana Energy, Inc. 357,910 10,000 10,000
BALANCE AT SEPTEMBER 30, 1992 7,678,737 102,995 99,838 202,833
Net Income 28,534 28,534
8.55% Cumulative Preferred Stock
Dividends (285) (285)
Common Stock Dividends
($2.66 per share) (21,051) (21,051)
Common Stock Issuances
to Indiana Energy, Inc. 1,402,033 40,000 40,000
Premium on Redemption
of Preferred Stock (932) (932)
BALANCE AT SEPTEMBER 30, 1993 9,080,770 142,995 106,104 249,099
Net Income 34,596 34,596
Common Stock Dividends
($2.58 per share) (23,400) (23,400)
BALANCE AT SEPTEMBER 30, 1994 9,080,770 $142,995 $ 117,300 $260,295
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED SCHEDULES OF LONG-TERM DEBT
(Thousands)
September 30
1994 1993
LONG-TERM DEBT:
First Mortgage Bonds
9 3/8% Series M, due July 15, 2016 $ 21,950 $ 30,000
Unsecured Notes Payable
9.30%, due October 15, 1993 - 10,000
6.80% Series C, due September 15, 1994 - 10,000
6 5/8% Series D, due December 1, 1997 35,000 35,000
8.90%, due July 15, 1999 10,000 10,000
9 3/8%, due January 15, 2021 25,000 25,000
9 1/8% Series A, due February 15, 2021 40,000 40,000
8 1/2% Series B Debentures, due September 15, 2021 24,901 24,901
134,901 154,901
156,851 184,901
Less - Maturities and sinking fund requirements - 20,000
$156,851 $164,901
The accompanying notes are an integral part of these statements.
Notes to Consolidated Financial Statements
Indiana Gas Company, Inc. and Subsidiary Companies
1. Summary of Significant Accounting Practices
A. Consolidation
Indiana Gas Company, Inc. (Indiana Gas) and its
subsidiaries, Terre Haute Gas Corporation (Terre
Haute) and Richmond Gas Corporation (Richmond) which
are doing business as Indiana Gas Company, Inc.
(company), provide natural gas and transportation
services to a diversified base of customers in 281
communities in 48 of Indiana's 92 counties.
B. Utility Plant and Depreciation
Except as described below, utility plant is stated at
the original cost and includes allocations of payroll-
related costs and administrative and general
expenses, as well as an allowance for the cost of
funds used during construction. When a depreciable
unit of property is retired, the cost is credited to
utility plant and charged to accumulated depreciation
together with the cost of removal, less any salvage.
No gain or loss is recognized upon normal retirement.
Provisions for depreciation of utility property are
determined by applying straight-line rates to the
original cost of the various classifications of
property. The average depreciation rate was
approximately 4.1 percent for 1994, 1993 and 1992.
Cost in excess of underlying book value of acquired
gas distribution companies is reflected as a
component of utility plant and is being amortized
primarily over 40 years.
C. Unamortized Debt Discount and Expense
As part of an August 17, 1994, order from the Indiana
Utility Regulatory Commission (IURC), Indiana Gas
received authority to amortize over a 15-year period
the debt discount and expense related to new debt
issues and future premiums paid for debt reacquired
in connection with refinancing. Debt discount and
expense for issues in place prior to this order are
being amortized over the lives of the related issues.
Premiums paid prior to this order for debt reacquired
in connection with refinancing are being amortized
over the life of the refunding issue. Gains or losses
realized from reacquisition of debt for sinking fund
purposes are included in "Other Income - Net" on the
Consolidated Statements of Income.
D. Cash Flow Information
For the purposes of the Consolidated Statements of
Cash Flows, the company considers cash investments
with an original maturity of three months or less to
be cash equivalents. Cash paid during the periods
reported for interest and income taxes were as
follows:
Thousands 1994 1993 1992
Interest (net of amount capitalized) $15,192 $13,994 $13,637
Income taxes $23,880 $11,739 $ 7,317
E. Revenues
To more closely match revenues and expenses, Indiana
Gas records revenues for all gas delivered to
customers but not billed at the end of the accounting
period.
F. Gas in Underground Storage
Based on the cost of purchased gas during September
1994, the cost of replacing the current portion of
gas in underground storage was less than last-in,
first-out cost at September 30, 1994, by
approximately $7,164,000.
G. Refundable or Recoverable Gas Cost
The cost of gas purchased and refunds from suppliers,
which differ from amounts recovered through rates,
are deferred and are being recovered or refunded in
accordance with procedures approved by the IURC.
H. Allowance For Funds Used During Construction
An allowance for funds used during construction
(AFUDC), which represents the cost of borrowed and
equity funds used for construction purposes, is
charged to construction work in progress during the
period of construction and the equity portion is
included in "Other Income - Net" on the Consolidated
Statements of Income. The portion related to borrowed
funds is included in "Interest and Other Charges".
An annual AFUDC rate of 7.5 percent was used in 1994
and 1993, however, in 1992 the rate was 10 percent
due primarily to higher interest rates.
The table below reflects the total AFUDC capitalized
and the portion of which was computed on borrowed and
equity funds for all periods reported.
Thousands 1994 1993 1992
AFUDC - borrowed funds $ 355 $ 579 $ 481
AFUDC - equity funds 290 486 617
Total AFUDC capitalized $ 645 $ 1,065 $1,098
I. Capital Expenditures
Indiana Gas' utility capital expenditure requirements
for 1994 were $57.1 million and are estimated to be
about $54.7 million for 1995. Capital expenditure
programs are funded by internally generated funds,
short-term borrowings and permanent financing.
J. Reclassifications
Certain reclassifications have been made in the
company's financial statements of prior years to
conform to the current year presentation. These
reclassifications have no impact on previously
reported net income.
2. Fair Value of Financial Instruments
The estimated fair values of Indiana Gas' financial
instruments were as follows:
September 30, 1994 September 30, 1993
Carrying Fair Carrying Fair
Thousands Amount Value Amount Value
Cash and cash equivalents $ 20 $ 20 $ 20 $ 20
Notes payable $ 30,550 $ 30,550 $ 10,252 $ 10,252
Long-term debt (includes amounts
due within one year) $156,851 $160,612 $184,901 $212,500
Certain methods and assumptions must be used to
estimate the fair value of financial instruments.
Because of the short maturity of cash and cash
equivalents and notes payable, the carrying amounts
approximate fair values for these financial
instruments. The fair value of the company's long-
term debt was estimated based on the quoted market
prices for the same or similar issues or on the
current rates offered to the company for debt of the
same remaining maturities.
Under current regulatory treatment, call premiums on
reacquisition of long-term debt are generally
recovered in customer rates over the life of the
refunding issue or over a 15-year period (see Note
1C). Accordingly, any reacquisition would not be
expected to have a material effect on the company's
financial position or results of operations.
3. Short-Term Borrowings
Indiana Gas has board of director approval to borrow
up to $100 million under bank lines of credit.
Indiana Gas has available committed lines of credit
up to $60 million with approximately $31 million
outstanding at September 30, 1994. These lines of
credit are renewable annually and require fees based
on the amounts of the lines. In addition, Indiana Gas
has available uncommitted lines of credit with
similar arrangements which allow it to borrow up to
its board approved amount. Notes payable to banks
bore interest at rates negotiated with the bank at
the time of borrowing.
Bank loans outstanding during the reported periods
were as follows:
Thousands 1994 1993 1992
Outstanding at year end $30,550 $10,252 $30,238
Weighted average interest rates at year end 4.9% 3.6% 3.5%
Weighted average interest rates during the year 3.3% 3.6% 4.2%
Weighted average total outstanding during the year $14,891 $12,533 $ 8,594
Maximum total outstanding during the year $56,500 $77,379 $30,238
4. Long-Term Debt
During the year the following activity took place
with respect to long-term debt.
On October 15, 1993, $10 million of 9.30% medium-term
notes were redeemed.
On September 15, 1994, $10 million of 6.80% Notes,
Series C, were redeemed.
During September 1994, $8.05 million of the
outstanding 9 3/8% Series M, First Mortgage Bonds
were retired. A premium of $641,000 was paid for
this retirement and will be amortized over a 15-year
period.
Consolidated maturities and sinking fund requirements
on long-term debt subject to mandatory redemption
during the five years following 1994 are none for
1995 and 1996, $1,100,000 in 1997, $36,100,000 in
1998 and $11,100,000 in 1999.
5. Common Stock
Indiana Gas has authorized 16 million shares of no
par value common stock.
Dividends on the common stock of Indiana Gas are
payable out of the unreserved and unrestricted
retained earnings of Indiana Gas. There are certain
provisions in the Indiana Gas Indenture, under which
the first mortgage bonds of Indiana Gas have been
created and issued, restricting the payment of
dividends on the Indiana Gas common stock. Such
restrictions could affect Indiana Gas' ability to pay
dividends on its common stock. None of the retained
earnings of Indiana Gas are presently subject to any
such restrictions.
6. Cumulative Preferred Stock
On December 1, 1992, Indiana Gas redeemed all 200,000
shares of its issued and outstanding 8.55% Cumulative
Preferred Stock at $104.66 per share with accrued
dividends. The redemption premium of $932,000 was
charged to retained earnings. Indiana Gas has
authorized and unissued shares of preferred stock of
4.2 million.
7. Retirement Plans and Other Postretirement Benefits
Effective October 1, 1994, Indiana Gas merged its
retirement savings plan for bargaining employees into
its retirement savings plan for non-bargaining
employees. The primary objective for this action is
to reduce the level of resources required to
administer two plans. The combined retirement savings
plan is a defined contribution plan which is
qualified under sections 401(a) and 401(k) of the
Internal Revenue Code. Under the terms of the
retirement savings plan, eligible participants may
direct a specified percentage of their compensation
to be invested in shares of Indiana Energy's common
stock, a fixed income fund, an equity fund or a
balanced fund. Participants in the retirement savings
plan have, subject to prescribed limitations,
matching company contributions made to the plan on
their behalf, plus a year-end lump sum company
contribution. During 1994, 1993 and 1992, Indiana Gas
made contributions of $2,386,000, $2,270,000 and
$2,072,000, respectively.
Indiana Gas also has two non-contributory defined
benefit retirement plans that cover all employees
meeting certain minimum age and service requirements.
Benefits are determined by a formula based on the
employee's base earnings (highest five consecutive
years out of the last 10 consecutive years prior to
actual retirement date), years of participation in
the plan and the employee's age at retirement.
Indiana Gas has an unfunded supplemental retirement
plan for certain management employees. Benefits are
determined by a formula based on 65 percent of the
participant's average monthly earnings, less benefits
received under the company's pension and savings
plans and the participant's primary Social Security
benefits.
The Indiana Gas defined benefit retirement plan
assets are under custody of trustees and consist of
actively managed stock and bond portfolios, as well
as short-term investments. It is Indiana Gas' funding
policy to maintain the pension plans on an
actuarially sound basis. Under this policy, funding
was $1,110,000 in 1994, $1,223,000 in 1993, and
$1,666,000 in 1992. As permitted by the Statement of
Financial Accounting Standards No. 71, Accounting for
the Effects of Certain Types of Regulation, the
company recognizes pension expense based on funding
as allowed for ratemaking purposes.
The calculation of pension expense follows:
Thousands 1994 1993 1992
Pension benefits earned during the period $1,436 $1,366 $1,258
Interest accrued on projected pension benefit
obligation 4,752 4,713 4,543
Actual return on pension plan assets 9 (3,563) (6,152)
Net amortization and deferral (6,056) (2,392) 369
SFAS 87 pension expense 141 124 18
Adjustment to reflect amount included in rates 492 1,877 3,640
Total pension expense $ 633 $2,001 $3,658
</table
The following table reconciles the plans' SFAS 87
funded status at September 30 with amounts recorded
in the company's financial statements. Certain assets
and obligations of the plans are deferred and
recognized in the financial statements in subsequent
periods.
Thousands 1994 1993
Actuarial present value of pension benefits:
Vested benefits $52,127 $51,753
Nonvested benefits 248 204
Effect of future salary increases 6,751 10,478
Projected pension benefit obligation 59,126 62,435
Plan assets at fair value 64,099 67,347
Plan assets in excess of projected
pension benefit obligation at September 30 4,973 4,912
Unrecognized adjusted prior service costs 2,136 2,616
Unrecognized net assets at date of initial
application (2,393) (2,701)
Unrecognized net (gain) loss (3,007) (4,153)
Adjustment to reflect amount included in rates (1,806) (1,313)
Prepaid (accrued) pension cost at September 30 $ (97) $ (639)
The weighted-average discount rate used in
determining the actuarial present value of the SFAS
87 projected benefit obligation was 8 percent. The
expected long-term rate of return on assets was 9
percent. These rates were used for all years
reported. The average rate of increase in future
compensation levels used ranged from 5 to 5.5 percent
for 1994, and from 5.5 to 8 percent for 1993. The
average future service of plan participants used to
compute amortization of the net assets existing at
the date of initial application of SFAS 87 is
approximately 17 years.
In addition to providing pension benefits, Indiana
Gas presently provides postretirement health care and
life insurance benefits to full-time employees who
have completed 10 years of service and retire from
the company. The plan pays stated percentages of most
reasonable and necessary medical expenses incurred by
retirees, after subtracting payments by other
providers and after a stated deductible has been met.
These benefits are principally self-insured.
Currently, Indiana Gas does not fund this
postretirement plan.
Effective October 1, 1993, Indiana Gas adopted
Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits
Other Than Pensions (SFAS 106). SFAS 106 requires
accounting for the costs of postretirement health
care and life insurance benefits on the accrual
basis. This means the costs of benefits paid in the
future are recognized during the years that an
employee provides service to Indiana Gas rather than
the "pay-as-you-go" (cash) basis. Indiana Gas has
elected to amortize the unfunded transition
obligation as of October 1, 1993, of approximately
$55 million over a period of 20 years.
Net postretirement benefit cost for 1994 consisted of
the following components:
Thousands 1994
Service cost - benefits attributed to service during the period $1,490
Interest cost on accumulated postretirement obligation 3,915
Amortization of transition obligation 2,772
Net postretirement benefit cost 8,177
Amounts deferred pending rate recognition 5,436
Actual cash payments $2,741
Prior to fiscal 1994, Indiana Gas recognized
postretirement benefit costs on the pay-as-you-go
(cash) basis. Postretirement benefit costs recognized
for fiscal years 1993 and 1992 were approximately
$2,855,000 and $2,653,000, respectively.
The following table reconciles the plan's funded
status to the accrued postretirement benefit cost as
reflected on the balance sheet as of September 30,
1994:
Thousands 1994
Accumulated postretirement benefit obligation:
Retirees and dependents $28,328
Other fully eligible participants 7,323
Other active participants 18,113
Total accumulated postretirement benefit obligation 53,764
Fair value of plan assets -
Accumulated postretirement benefit obligation in
excess of plan assets (53,764)
Unrecognized net gain (4,340)
Unrecognized transition obligation 52,668
Accrued postretirement benefit cost at September 30 $(5,436)
The assumed health care cost trend rate for medical
gross eligible charges used in measuring the
accumulated postretirement benefit obligation as of
September 30, 1994, was 10.2 percent for fiscal 1995.
This rate is assumed to decrease gradually through
fiscal 2003 to 5.5 percent and remain at that level
thereafter. A 1 percent increase in the assumed
health cost trend rates for each future year produces
approximately a $6.4 million increase in the
accumulated postretirement benefit obligation as of
September 30, 1994, and approximately an $884,000
increase in the annual aggregate of the service and
interest cost components of net postretirement
benefit cost. The weighted-average discount rate used
in determining the accumulated postretirement benefit
obligation was 8 percent.
In January 1992, Indiana Gas filed a petition with
the IURC seeking regulatory authority for, among
other matters, rate recovery of implementation of
SFAS 106 relating to postretirement benefits other
than pensions. Through a generic order issued on
December 30, 1992, Indiana Gas received authority
from the IURC to employ deferred accounting for these
costs. This authorization will extend until the IURC
rules upon Indiana Gas' pending request to adopt SFAS
106 for ratemaking purposes. Indiana Gas' order is
not expected until later in calendar 1994, however,
recent orders for other public utilities regulated by
the IURC have authorized SFAS 106 to be adopted for
ratemaking purposes.
8. Postemployment Benefits
In November 1992, the Financial Accounting Standards
Board issued Statement of Financial Accounting
Standards No. 112, Employers' Accounting for
Postemployment Benefits (SFAS 112). The statement
will be adopted by Indiana Gas effective October 1,
1994. SFAS 112 requires employers to adopt accrual
accounting for workers' compensation, disability,
severance pay and other benefits provided to former
or inactive employees after employment but before
retirement. Adoption of the statement will not
materially affect Indiana Gas' financial position or
results of operations.
9. Commitments
Estimated capital expenditures for 1995 are $54.7
million. Total lease expense was $2,595,000 in 1994,
$2,846,000 in 1993 and $2,748,000 in 1992.
Lease commitments are $2,497,000 in 1995, $1,797,000
in 1996, $1,220,000 in 1997, $1,166,000 in 1998,
$515,000 in 1999 and $1,005,000 in total for all
later years. Included in these amounts is an
operating lease between Indiana Gas and Energy Realty
with payments of approximately $464,000 annually that
extends through August 1998. There are no leases that
extend beyond 2002. Indiana Gas has storage and
supply contracts that range from one month to eight
years.
10. Contingencies
A. Environmental Costs
In the past, Indiana Gas and others, including its
predecessors, former affiliates and/or previous
landowners, operated facilities for the manufacturing
of gas and storage of manufactured gas. These
facilities are no longer in operation and have not
been operated for many years. In the manufacture and
storage of such gas, various byproducts were
produced, some of which may still be present at the
sites where these manufactured gas plants and storage
facilities were located. While management believes
those operations were conducted in accordance with
the then-applicable industry standards, under
currently applicable environmental laws and
regulations, Indiana Gas, and the others, may now be
required to take remedial action if certain materials
are found at these sites.
Indiana Gas has identified the existence, location
and certain general characteristics of 26 gas
manufacturing and storage sites. Indiana Gas
conducted remediation at two sites and is nearing
completion of the remedial investigation/feasibility
study (RI/FS) at one of the sites under an agreed
order between Indiana Gas and the Indiana Department
of Environmental Management.
Indiana Gas is assessing, on a site-by-site basis,
whether any of the remaining 24 sites require
remediation, to what extent it is required and the
estimated cost of such action. Indiana Gas has
completed preliminary assessments (PAs) on the
majority of these sites and has completed site
investigations (SIs) at 15 of these sites. Based upon
the site work completed to date, Indiana Gas believes
that some level of contamination may be present at a
number of the remaining sites. Indiana Gas has not
begun an RI/FS at any of the remaining sites but
anticipates beginning more in the near future and
completing the remaining SIs.
Based upon the work performed to date, Indiana Gas
has accrued remediation and related costs for the two
sites where remediation has taken place. Indiana Gas
has accrued the PA/SI and groundwater monitoring
costs for the remaining 24 sites. Indiana Gas has
further accrued estimated RI/FS costs and the costs
of certain remedial actions at a number of the
remaining sites where, based upon available
information, these actions likely will be required.
The total costs which may be incurred in connection
with the remediation of all sites cannot be
determined at this time.
Indiana Gas has nearly completed the process of
identifying all potentially responsible parties
(PRPs) for each site. Indiana Gas, with the help of
outside counsel, has prepared estimates for its share
of environmental liabilities which may exist at each
of the sites. Indiana Gas has accrued only its
proportionate share of the estimated costs, as
described above, based on equitable principles
derived from case law or applied by parties in
achieving settlements.
Indiana Gas accrues for costs associated with
environmental remediation obligations when such costs
are probable and reasonably estimable. Indiana Gas
does not believe it can provide an estimate of the
reasonably possible total remediation costs for any
site prior to completion of the RI/FS and the
development of some sense of the timing for
implementation of the resulting potential remedial
alternatives.
Indiana Gas has notified insurance carriers of
potential claims where policies may provide coverage
for these environmental costs. Indiana Gas has not
recorded any receivables related to probable recovery
from insurance carriers at this time.
In January 1992, Indiana Gas filed a petition with
the IURC seeking regulatory authority for, among
other matters, recovery through rates of all costs
Indiana Gas incurs in complying with federal, state
and local environmental regulations in connection
with past gas manufacturing activities. On February
26, 1992, Indiana Gas received authority from the
IURC to employ deferred accounting for these costs.
This authorization will extend until the IURC rules
upon Indiana Gas' pending request to establish and
implement an ongoing ratemaking mechanism that will
be designed and intended to provide for the recovery
of these costs. An order is not expected until later
in calendar 1994. Indiana Gas has deferred all
environmental costs previously paid or accrued. These
costs are approximately $12 million (including
assessment, remediation and related costs) as of
September 30, 1994.
The impact of complying with federal, state and local
environmental regulations related to former
manufactured gas plant sites on Indiana Gas'
financial position and results of operations is
contingent upon several uncertainties. These include
the cost of compliance, the impact of joint and
several liability upon the magnitude of the
contingency, the ratemaking treatment authorized for
these items by the IURC, as well as the recovery of
environmental and related costs from insurance
carriers.
Indiana Gas believes it will be successful in
recovering the costs which it has incurred and may
incur through rates, from other potentially
responsible parties and from insurance carriers.
However, there can be no assurance as to the amount
or timing of any such recoveries.
B. Order No. 636 Transition Costs
In accordance with Federal Energy Regulatory
Commission (FERC) Order No. 636, Indiana Gas'
pipeline service providers have made a number of
filings to restructure services.
Indiana Gas' pipeline service providers have begun to
seek from customers, including Indiana Gas, recovery
of certain costs related to the transition to
restructured services. Those costs will include
certain gas supply realignment costs and are not
currently expected to exceed $10 million.
In a recent order involving another gas utility in
Indiana, the IURC determined that FERC Order No. 636
transition costs are recoverable as gas costs through
the quarterly GCA process. Given this determination,
Indiana Gas expects that transition costs it is
assessed by its pipeline suppliers will be recovered
through the quarterly GCA process.
11. Income Taxes
Indiana Energy, Inc. and subsidiary companies file a
consolidated federal income tax return. Indiana Gas'
current and deferred tax expense is computed on a
separate company basis. The components of
consolidated income tax expense for Indiana Gas,
including amounts in "Other Income - Net" on the
Consolidated Statements of Income, were as follows:
Thousands 1994 1993 1992
Current:
Federal $13,333 $12,088 $ 9,885
State 2,299 2,018 1,773
15,632 14,106 11,658
Deferred:
Federal 2,987 2,667 1,870
State 286 264 203
3,273 2,931 2,073
Amortization of Investment Tax Credits (930) (1,007) (929)
Consolidated Income Tax Expense $17,975 $16,030 $12,802
Effective income tax rates were 34.22 percent, 35.97
percent and 33.21 percent of pretax income for 1994,
1993 and 1992, respectively. This compares with a
combined federal and state income tax statutory rate
of 37.93 percent for 1994, 37.69 percent for 1993 and
36.97 percent for 1992. Individual components of
these rate differences are not significant except
investment tax credit which amounted to (1.8%),
(2.3%) and (2.4%) in 1994, 1993, and 1992,
respectively.
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting
purposes and the amounts used for income tax
purposes. Deferred income taxes are provided for
taxes not currently payable due to, among other
things, the use of various accelerated depreciation
methods, shorter depreciable lives and the deduction
of certain construction costs for tax purposes. Taxes
deferred in prior years are being charged and income
credited as these tax effects reverse. The provisions
for the deferred tax effects relating to the excess
of tax-over-book depreciation amounted to $2,852,000
in 1994, $2,073,000 in 1993 and $1,504,000 in 1992.
Effective October 1, 1993, Indiana Gas adopted
Statement of Financial Accounting Standards No. 109,
Accounting for Income Taxes (SFAS 109). Indiana Gas
previously used the deferred method of accounting for
income taxes as prescribed by Accounting Principles
Bulletin Opinion No. 11. SFAS 109 requires the use of
the liability method, which effectively results in a
reduction in previously provided deferred income
taxes to reflect the current statutory corporate tax
rate.
Due to the effects of regulation, Indiana Gas is not
permitted to recognize the effect of a tax rate
change as income but is required to reduce tariff
rates to return the "excess" deferred income taxes to
ratepayers over the remaining life of the properties
that give rise to the taxes. Therefore, the
cumulative effect of a change in accounting principle
upon the initial application of SFAS 109 resulted in
no impact on earnings. Under SFAS 109, Indiana Gas
has recorded a net regulatory liability for
approximately $4.8 million on its balance sheet as of
September 30, 1994, related to deferred taxes.
Significant components of Indiana Gas' net deferred
tax liability as of September 30, 1994, are as
follows:
Thousands 1994
Deferred tax liabilities:
Accelerated depreciation $41,652
Property basis differences 18,140
Acquisition adjustment 6,853
Other 2,654
Deferred tax assets:
Deferred investment tax credit (4,943)
Regulatory income tax liability (1,815)
Less deferred income taxes related
to current assets and liabilities (2,654)
Balance at September 30 $59,887
Investment tax credits have been deferred and are
being credited to income over the life of the
property giving rise to the credit. The Tax Reform
Act of 1986 eliminated investment tax credits for
property acquired after January 1, 1986.
12. Summarized Financial Data (Unaudited)
Summarized quarterly financial data (in thousands of
dollars) for 1994 and 1993 are as follows:
1994: Three Months Ended Dec. 31 Mar. 31 June 30 Sep. 30
Operating revenues $151,892 $195,672 $ 77,827 $49,906
Operating income (loss) 18,894 24,630 5,551 (1,232)
Earnings (loss) available for common stock $ 15,156 $ 21,740 $ 2,414 $(4,714)
1993: Three Months Ended Dec. 31 Mar. 31 June 30 Sep. 30
Operating revenues $155,537 $178,256 $101,249 $64,236
Operating income (loss) 18,421 21,618 4,541 (307)
Earnings (loss) available for common stock $ 14,017 $ 17,608 $ 761 $(4,137)
Note: Because of the seasonal factors that significantly
affect the companies' operations, the results of
operations for interim periods within fiscal years are not
comparable.
Item 9. Changes in and Disagreements with Accountants
None.
Part III
Item 10. Directors and Executive Officers of the
Registrant
Except for the list of the executive officers, which
can be found in Part I, Item 4(a) of this report,
the information required to be shown in this part
for Item 10, Directors and Executive Officers of the
Registrant is incorporated by reference here from
the definitive proxy statement of the registrant's
parent company, Indiana Energy, Inc. That statement
was prepared according to Regulations 14A and S-K
and filed electronically with the Securities and
Exchange Commission on December 2, 1994. The
information is included in the report attached as
Exhibit 99.
Item 11. Executive Compensation
The information required to be shown in this part
for Item 11, Executive Compensation, is incorporated
by reference here from the definitive proxy
statement of the registrant's parent company,
Indiana Energy, Inc. That statement was prepared
according to Regulations 14A and S-K and filed
electronically with the Securities and Exchange
Commission on December 2, 1994. The information is
included in the report attached as Exhibit 99.
Contained in the Indiana Energy proxy statement,
Summary Compensation Table, Column C and Column D,
Salary Amounts and Bonus Amounts, are some
compensation dollars which are allocated to
subsidiaries of Indiana Energy other than Indiana
Gas. The named executives received the following
compensation, including Bonus, for the years ended
September 30, 1994, 1993 and 1992, as it relates to
only Indiana Gas.
1994 1993 1992
Lawrence A. Ferger $444,898 $411,455 $397,719
Paul T. Baker 285,360 247,197 231,926
Niel C. Ellerbrook 208,999 194,791 190,871
Anthony E. Ard 159,489 145,238 134,480
Carl L. Chapman 142,736 126,979 116,251
Item 12. Securities Ownership of Certain Beneficial
Owners and Management
The information required to be shown in this part
for Item 12, Securities Ownership of Certain
Beneficial Owners and Management, is incorporated by
reference here from the definitive proxy statement
of the registrant's parent company, Indiana Energy,
Inc. That statement was prepared according to
Regulations 14A and S-K and filed electronically
with the Securities and Exchange Commission on
December 2, 1994. The information is included in
the report attached as Exhibit 99.
Item 13. Certain Relationships and Related Transactions
The information required to be shown in this part
for Item 13, Certain Relationships and Related
Transactions is incorporated by reference here from
the definitive proxy statement of the registrant's
parent company, Indiana Energy, Inc. That statement
was prepared according to Regulations 14A and S-K
and filed electronically with the Securities and
Exchange Commission on December 2, 1994. The
information is included in the report attached as
Exhibit 99.
Part IV
Item 14. Exhibits, Financial Statement Schedules, and Reports on Form 8-K
The following documents are filed as part of this
report:
(a)-1 Financial Statements Location in 10-K
Report of Independent Public Accountants Item 8
Consolidated Statements of Income - 1994,
1993 and 1992 Item 8
Consolidated Statements of Cash Flows - 1994,
1993 and 1992 Item 8
Consolidated Balance Sheets at September 30,
1994 and 1993 Item 8
Consolidated Statements of Common Shareholder's
Equity - 1994, 1993 and 1992 Item 8
Consolidated Schedules of Long-Term Debt
as of September 30, 1994 and 1993 Item 8
Notes to Financial Statements Item 8
(a)-2 Financial Statement Schedules
Report of Independent Public Accountants on
Schedules
Schedule V. Property, Plant and Equipment -
1994, 1993 and 1992
Schedule VI. Accumulated Depreciation, Depletion
and Amortization of Property, Plant
and Equipment - 1994, 1993, 1992
Schedule VIII.Valuation and Qualifying Accounts -
1994, 1993 and 1992
Schedule X. Supplementary Income Statement
Information - 1994, 1993 and 1992
Other schedules are omitted as not applicable or the
required information is shown in the consolidated financial
statements or notes to consolidated financial statements.
(a)-3 Exhibits
See Exhibit Index
(b) Reports on Form 8-K
None filed during the fourth quarter of fiscal 1994.
EXHIBIT INDEX
Exhibit No. Description Reference
2-A Acquisition Agreement Exhibit 10-N of
dated October 26, Indiana Gas Company,
1990, between Indiana Inc.'s 1990 Annual
Gas and Indiana Report on Form 10-K.
Energy, Inc.
3-A Amended and Restated Exhibit 3-A to
Articles of Indiana Gas Company,
Incorporation. Inc.'s 1993 Annual
Report on Form 10-K.
3-B Code of By-Laws, as Filed herewith.
amended.
4-A Indenture dated as of Indiana Gas Company,
September 1, 1950, Inc.'s Registration
between Indiana Gas No. 2-77620 (pages 6-
and Merchants 8 of the Prospectus
National Bank & Trust on Form S-16
Company of contained therein),
Indianapolis (now to Registration No. 2-
National City Bank, 40825 (Exhibit Nos. 2-
Indiana), as trustee A through 2-H), to
("Trustee"), and Registration No. 2-
twelve supplemental 52734 (Exhibit No. 2-
indentures thereto. C), to Registration
No. 2-68469 (Exhibit
No. 2-J), to
Registration No. 2-
77620 (Exhibit No. 4-
0), to Registration
No. 33-1262 (Exhibit
No. 4K), to the 1985
Annual Report on Form
10-K (Exhibit 4) and
to the 1986 Annual
Report on Form 10-K
(Exhibit No. 4-D).
4-B Indenture dated Exhibit 4(a) to
February 1, 1991, Indiana Gas Company,
between Indiana Gas Inc.'s Current Report
and Continental Bank, on Form 8-K dated
National Association. February 1, 1991, and
filed February 15,
1991; First
Supplemental
Indenture thereto
dated as of February
15, 1991,
(incorporated by
reference to Exhibit
4(b) to Indiana Gas
Company, Inc.'s
Current Report on
Form 8-K dated
February 1, 1991, and
filed February 15,
1991); Second
Supplemental
Indenture thereto
dated as of September
15, 1991,
(incorporated by
reference to Exhibit
4(b) to Indiana Gas
Company, Inc.'s
Current Report on
Form 8-K dated
September 15, 1991,
and filed September
25, 1991); Third
Supplemental
Indenture thereto
dated as of September
15, 1991
(incorporated by
reference to Exhibit
4(c) to Indiana Gas
Company, Inc.'s
Current Report on
Form 8-K dated
September 15, 1991
and filed September
25, 1991); and Fourth
Supplemental
Indenture thereto
dated as of December
2, 1992,
(incorporated by
reference to Exhibit
4(b) to Indiana Gas
Company, Inc.'s
Current Report on
Form 8-K dated
December 1, 1992, and
filed December 8,
1992).
10-A Employment Agreement Exhibit 10-A to
among Indiana Energy, Indiana Energy's 1990
Inc., Indiana Gas Annual Report on Form
Company, Inc., and 10-K.
Lawrence A. Ferger
effective January 1,
1990.
10-B Employment Agreement Exhibit 10-C to
among Indiana Energy, Indiana Energy's 1990
Inc., Indiana Gas Annual Report on Form
Company, Inc., and 10-K.
Niel C. Ellerbrook,
effective
January 1, 1990.
10-C Employment Agreement Exhibit 10-D to
between Indiana Gas Indiana Energy's 1990
Company, Inc., and Annual Report on Form
Paul T. Baker 10-K.
effective January 1,
1990.
10-D Employment Agreement Exhibit 10-E to
between Indiana Gas Indiana Energy's 1990
Company, Inc., and Annual Report on Form
Anthony E. Ard 10-K.
effective January 1,
1990.
10-E Employment Agreement Exhibit 10-F to
among Indiana Energy, Indiana Energy's 1990
Inc., Indiana Gas Annual Report on Form
Company, Inc., and 10-K.
Carl L. Chapman
effective
January 1, 1990.
10-F Termination Benefits Exhibit 10-F to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1994 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc. and Lawrence A.
Ferger.
10-G Termination Benefits Exhibit 10-G to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1994 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc. and
Paul T. Baker.
10-H Termination Benefits Exhibit 10-H to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1994 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc. and Niel C.
Ellerbrook.
10-I Termination Benefits Exhibit 10-I to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1994 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc. and
Anthony E. Ard.
10-J Termination Benefits Exhibit 10-J to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1994 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc. and
Carl L. Chapman.
10-K Executive Exhibit 10-K to
Compensation Deferral Indiana Energy,
Plan effective Inc.'s 1994 Annual
December 1, 1994. Report on Form 10-K.
10-L Directors Exhibit 10-L to
Compensation Deferral Indiana Energy,
Plan effective Inc.'s 1994 Annual
February 1, 1981. Report on Form 10-K.
10-M Directors Exhibit 10-M to
Compensation Deferral Indiana Energy,
Plan effective Inc.'s 1994 Annual
January 1, 1995. Report on Form 10-K.
10-N Executive Restricted Exhibit A to Indiana
Stock Plan effective Energy's Proxy
October 1, 1987, as Statement filed on
amended. December 4, 1987;
First Amendment to
Indiana Energy, Inc.
Executive Restricted
Stock Plan
(incorporated by
reference to Exhibit
10-A to Indiana
Energy's 1991 Annual
Report on Form 10-K).
10-O Indiana Energy, Inc. Exhibit 10-D to
Annual Management Indiana Energy's 1987
Incentive Plan Annual Report on Form
effective October 1, 10-K.
1987.
10-P Indiana Energy, Inc. Indiana Energy's
Directors' Restricted Definitive Proxy
Stock Plan, as Statement filed on
amended and restated December 6, 1991.
on October 25, 1991.
10-Q Exhibit 10-Q schedules all material
gas contracts which are in effect
between Indiana Gas Company, Inc.
and the suppliers listed. The gas
contracts within each type are
substantially identical in all
material respects and at least one
of each type of contract has been or
is filed as indicated. The schedule
details all material aspects in
which a contract may differ from the
contract filed.
Exh Days of Effective Expir.
No. Type of Contract Supplier Contract No. Wthdrwl. MDth/Day Date Date Reference
6/30/93 Form 10-
Q, File 1-6494:
10-Q.1 Firm Transportation Panhandle Eastern P PLT 011715 38,572 5/1/93 3/31/98 Exh. 10-B
10-Q.2 Firm Transportation Panhandle Eastern P PLT 011716 51,431 5/1/93 3/31/99 Exh. 10-A
10-Q.3 Firm Transportation Panhandle Eastern P PLT 011718 51,431 5/1/93 2/28/97 Exh. 10-C
10-Q.4 Firm Transportation Panhandle Eastern P PLT 011721 77,144 5/1/93 3/31/97 Exh. 10-D
10-Q.5 Market Area - Panhandle Eastern P PLT 011719 50,000 5/1/93 3/31/97 1993 Form 10-K
Firm Transportation Exhibit 10-I.5,
File 1-6494.
10-Q.6 Market Area - Panhandle Eastern P PLT 011720 50,000 5/1/93 3/31/97 See Exhibit 10-Q.5.
Firm Transportation
10-Q.7 Market Area - Texas Gas T3780 50,000 11/1/93 10/31/98 1993 Form 10-K
Firm Transportation Exhibit 10-I.7,
File 1-6494.
10-Q.8 No Notice Service Texas Gas N0420 41,687 11/1/93 10/31/98 1993 Form 10-K,
Exhibit 10-I.8,
File 1-6494.
10-Q.9 No Notice Service Texas Gas N0325 56,793 11/1/93 10/31/97 See Exhibit 10-Q.8
10-Q.10 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/98 See Exhibit 10-Q.8
10-Q.11 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/99 See Exhibit 10-Q.8
6/30/93 Form 10-
Q, File 1-6494:
10-Q.12 Firm Storage Panhandle Eastern P PLS 011713 100 50,312 5/1/93 3/31/96 Exh. 10-G
10-Q.13 Firm Storage Panhandle Eastern P PLS 012044 100 25,000 5/1/93 3/31/96 Exh. 10-E
10-Q.14 Firm Storage ANR T,E & S 00087 100 29,000 3/1/73 2/28/96 1991 Form 10-K,
Exh. 10-N, File
1-6494.
10-Q.15 Firm Storage ANR T,E & S 05787 100 100,806 4/1/92 3/31/97 1992 Form 10-K,
Exh. 10-R, File
1-6494.
6/30/93 Form
10-Q, File
1-6494:
10-Q.16 Firm Storage-Related Panhandle Eastern P PLT 011714 49,515 5/1/93 3/31/96 Exh. 10-H
Transportation
10-Q.17 Firm Storage-Related Panhandle Eastern P PLT 012045 24,604 5/1/93 3/31/96 Exh. 10-F
Transportation
10-Q.18 Firm Storage-Related ANR T,E & S 05788 100,000 4/1/92 3/31/97 1992 Form 10-K,
Transportation Exh. 10-S, File
1-6494.
10-Q.19 Firm Natural Gas Anadarko NGFSA 507 50,000 10/1/94 9/30/95 Filed herewith.
Supply
23 Consent of Independent Public
Accountants Filed herewith.
27 Financial Data Schedule Filed herewith.
99 Indiana Energy, Inc.'s (parent
company) Definitive Proxy
Statement for Annual Meeting
of Shareholders to be held on
January 9, 1995. Filed herewith.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Indiana Gas Company, Inc.:
We have audited in accordance with generally accepted
auditing standards, the consolidated financial statements
included in Item 8, in this Form 10-K, and have issued our
report thereon dated October 28, 1994. Our audit was made
for the purpose of forming an opinion on those statements
taken as a whole. The schedules listed in Item 14(a)-2 are
the responsibility of the company's management and are
presented for purposes of complying with the Securities and
Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected
to the auditing procedures applied in the audit of the basic
financial statements and, in our opinion, fairly state in
all material respects the financial data required to be set
forth therein in relation to the basic financial statements
taken as a whole.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
October 28, 1994
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1994
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Other Balance at
September 30, Additions Changes September 30,
Classification 1993 At Cost Retirements (Note 1) 1994
ORIGINAL COST:
Gas Plant in Service -
Production $ 8,144 $ 84 $ 0 $ 0 $ 8,228
Storage - Underground 29,161 9,244 585 0 37,820
Distribution 560,445 36,138 4,037 0 592,546
General 73,644 5,283 1,987 4 76,944
Total Gas Plant in Service 671,394 50,749 6,609 4 715,538
Gas in Underground Storage -
Noncurrent 11,520 737 0 0 12,257
Completed Construction Not Classified 22,042 26,463 0 0 48,505
Construction Work In Progress 29,250 (22,074) 0 0 7,176
Retirements (Estimated) (2,013) 0 (271) 0 (1,742)
Property Held Under Capital Lease 4,026 0 0 0 4,026
Property Leased to Others 772 8 0 0 780
Property Held for Future Use 444 0 0 0 444
Intangibles 8,570 1,702 0 (4) 10,268
Total Original Cost $ 746,005 $ 57,585 $ 6,338 $ 0 $ 797,252
ACQUISITION ADJUSTMENTS $ 27,169 $ 1,053 $ 635 $ 0 $ 27,587
NONUTILITY PROPERTY $ 518 $ 0 $ 93 $ 0 $ 425
Note:
(1) Represents the reclassification of certain property within "Original Cost" categories.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1993
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Other Balance at
September 30, Additions Changes September 30,
Classification 1992 At Cost Retirements (Note 1) 1993
ORIGINAL COST:
Gas Plant in Service -
Production $ 7,843 $ 2,238 $ 63 $ (1,874) $ 8,144
Storage - Underground 28,477 711 27 0 29,161
Distribution 522,051 44,213 5,744 (75) 560,445
General 70,777 6,771 3,979 75 73,644
Total Gas Plant in Service 629,148 53,933 9,813 (1,874) 671,394
Gas in Underground Storage -
Noncurrent 11,520 0 0 0 11,520
Completed Construction Not Classified 30,759 (8,717) 0 0 22,042
Construction Work In Progress 17,640 11,610 0 0 29,250
Retirements (Estimated) (2,986) 0 (973) 0 (2,013)
Property Held Under Capital Lease 4,026 0 0 0 4,026
Property Leased to Others 598 174 0 0 772
Property Held for Future Use 444 0 0 0 444
Intangibles 6,577 119 0 1,874 8,570
Total Original Cost $ 697,726 $ 57,119 $ 8,840 $ 0 $ 746,005
ACQUISITION ADJUSTMENTS $ 27,586 $ (417) $ 0 $ 0 $ 27,169
NONUTILITY PROPERTY $ 518 $ 0 $ 0 $ 0 $ 518
Note:
(1) Represents the reclassification of certain property within "Original Cost" categories.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE V - PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1992
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Balance at Other Balance at
September 30, Additions Changes September 30,
Classification 1991 At Cost Retirements (Note 1) 1992
ORIGINAL COST:
Gas Plant in Service -
Production $ 5,968 $ 1,879 $ 4 $ 0 $ 7,843
Storage - Underground 27,185 1,301 17 8 28,477
Distribution 485,958 39,692 3,592 (7) 522,051
General 64,322 11,076 4,620 (1) 70,777
Total Gas Plant in Service 583,433 53,948 8,233 0 629,148
Gas in Underground Storage -
Noncurrent 7,296 4,224 0 0 11,520
Completed Construction Not Classified 26,830 3,929 0 0 30,759
Construction Work In Progress 22,998 (5,358) 0 0 17,640
Retirements (Estimated) (5,031) 0 (2,045) 0 (2,986)
Property Held Under Capital Lease 3,324 702 0 0 4,026
Property Leased to Others 0 598 0 0 598
Property Held for Future Use 444 0 0 0 444
Intangibles 36 6,541 0 0 6,577
Total Original Cost $ 639,330 $ 64,584 $ 6,188 $ 0 $ 697,726
ACQUISITION ADJUSTMENTS $ 27,922 $ (336) $ 0 $ 0 $ 27,586
NONUTILITY PROPERTY $ 518 $ 0 $ 0 $ 0 $ 518
Note:
(1) Represents the reclassification of certain property within the "Gas Plant in Service" categories.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1994
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2) (1) (2)
Charged Property Salvage
Balance at Charged to to Other Retired at Less Balance at
September 30, Costs and Accounts Original Removal Other September 30,
Description 1993 Expenses (Note A) Cost Cost Charges 1994
Gas Plant in Service -
Production $ 4,183 $ 363 $ 0 $ 0 $ 0 $ 0 $ 4,546
Storage - Underground 16,068 1,253 0 6 2 0 17,313
Distribution 221,221 22,729 0 4,037 1,053 0 238,860
General 20,061 3,020 1,151 2,565 (852) 0 22,519
Total Gas Plant in Service 261,533 27,365 1,151 6,608 203 0 283,238
Retirement Work in Progress (855) 0 0 0 (77) 0 (778)
Retirements (Estimated) (2,013) 0 0 (270) 0 0 (1,743)
Property Held Under Capital Lease 1,576 564 0 0 0 0 2,140
Property Leased to Others 138 116 0 0 0 0 254
Property Held for Future Use 83 0 0 0 0 0 83
Intangibles 1,044 753 0 0 0 0 1,797
Total Accumulated Depreciation $ 261,506 $ 28,798 $ 1,151 $ 6,338 $ 126 $ 0 $ 284,991
Acquisition Adjustments $ 6,123 $ 709 $ 0 $ 0 $ 0 $ 0 $ 6,832
Nonutility Property $ 284 $ 9 $ 0 $ 93 $ 168 $ 0 $ 32
Notes:
(A) Represents provision charged to transportation clearing account.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1993
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2) (1) (2)
Charged Property Salvage
Balance at Charged to to Other Retired at Less Other Balance at
September 30, Costs and Accounts Original Removal Charges September 30,
Description 1992 Expenses (Note A) Cost Cost (Note B) 1993
Gas Plant in Service -
Production $ 3,966 $ 290 $ 0 $ 64 $ 9 $ 0 $ 4,183
Storage - Underground 15,114 989 0 27 8 0 16,068
Distribution 207,251 21,093 1 5,743 1,381 0 221,221
General 19,186 2,969 1,058 3,979 (1,447) (620) 20,061
Total Gas Plant in Service 245,517 25,341 1,059 9,813 (49) (620) 261,533
Retirement Work in Progress (372) 0 0 0 483 0 (855)
Retirements (Estimated) (2,986) 0 0 (973) 0 0 (2,013)
Property Held Under Capital Lease 1,012 564 0 0 0 0 1,576
Property Leased to Others 52 86 0 0 0 0 138
Property Held for Future Use 83 0 0 0 0 0 83
Intangibles 0 424 0 0 0 620 1,044
Total Accumulated Depreciation $ 243,306 $ 26,415 $ 1,059 $ 8,840 $ 434 $ 0 $ 261,506
Acquisition Adjustments $ 5,371 $ 752 $ 0 $ 0 $ 0 $ 0 $ 6,123
Nonutility Property $ 273 $ 11 $ 0 $ 0 $ 0 $ 0 $ 284
Notes:
(A) Represents provision charged to transportation clearing account.
(B) Represents the reclassification of certain property within "Accumulated Depreciation" categories.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VI - ACCUMULATED DEPRECIATION, DEPLETION AND AMORTIZATION OF PROPERTY, PLANT AND EQUIPMENT
YEAR ENDED SEPTEMBER 30, 1992
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2) (1) (2)
Charged Property Salvage
Balance at Charged to to Other Retired at Less Balance at
September 30, Costs and Accounts Original Removal Other September 30,
Description 1991 Expenses (Note A) Cost Cost Charges 1992
Gas Plant in Service -
Production $ 3,727 $ 243 $ 0 $ 4 $ 0 $ 0 $ 3,966
Storage - Underground 14,157 976 0 17 2 0 15,114
Distribution 189,296 19,761 2 3,592 (1,784) 0 207,251
General 18,909 3,103 980 4,620 (814) 0 19,186
Total Gas Plant in Service 226,089 24,083 982 8,233 (2,596) 0 245,517
Retirement Work in Progress (172) 0 0 0 200 0 (372)
Retirements (Estimated) (5,031) 0 0 (2,045) 0 0 (2,986)
Property Held Under Capital Lease 499 513 0 0 0 0 1,012
Property Leased to Others 0 52 0 0 0 0 52
Property Held for Future Use 83 0 0 0 0 0 83
Total Accumulated Depreciation $ 221,468 $ 24,648 $ 982 $ 6,188 $ (2,396) $ 0 $ 243,306
Acquisition Adjustments $ 4,614 $ 757 $ 0 $ 0 $ 0 $ 0 $ 5,371
Nonutility Property $ 259 $ 14 $ 0 $ 0 $ 0 $ 0 $ 273
Note:
(A) Represents provision charged to transportation clearing account.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1994
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Other Balance at
September 30, Costs and Reserves Changes September 30,
Description 1993 Expenses Other Were Created (Note A) 1994
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,055 $ 3,850 $ 0 $ 4,667 $ 0 $ 1,238
RESERVE SEPARATELY CLASSIFIED:
Deferred income taxes $ 56,911 $ 3,273 $ 0 $ 0 $ (297) $ 59,887
Note:
(A) Represents the implementation of Statement of Financial Accounting Standards No. 109, Accounting for Income Taxes effective
October 1, 1993.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1993
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Balance at
September 30, Costs and Reserves Other September 30,
Description 1992 Expenses Other Were Created Changes 1993
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,299 $ 2,950 $ 0 $ 3,194 $ 0 $ 2,055
RESERVE SEPARATELY CLASSIFIED:
Deferred income taxes $ 53,980 $ 2,931 $ 0 $ 0 $ 0 $ 56,911
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE VIII - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1992
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Balance at
September 30, Costs and Reserves Other September 30,
Description 1991 Expenses Other Were Created Changes 1992
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,226 $ 2,699 $ 0 $ 2,626 $ 0 $ 2,299
RESERVE SEPARATELY CLASSIFIED:
Deferred income taxes $ 51,907 $ 2,073 $ 0 $ 0 $ 0 $ 53,980
SCHEDULE X
Supplemental Income Statement Information
Years Ended September 30, 1994, 1993 and 1992
In addition to the amounts included in other operation
and maintenance and the depreciation amounts shown in the
consolidated statements of income in Item 8 of this
report Form 10-K, certain maintenance and depreciation is
charged to various clearing accounts. The amounts so
charged were not significant.
During the years presented, there were no royalties or
advertising costs of significant amount.
Maintenance amounts included in the caption "Other
operation and maintenance" and gross income taxes shown
under the caption "Taxes other than income taxes" in the
consolidated statements of income are set forth below.
Other taxes charged to income, other than payroll and
income taxes, were not significant.
Years Ended September 30
Thousands 1994 1993 1992
Maintenance $ 9,501 $14,197 $10,205
Indiana gross income taxes $ 6,267 $ 5,760 $ 4,947
EXHIBIT 21
State of Incorporation
Subsidiaries of Indiana Gas Company, Inc. (Parent) -
Richmond Gas Corporation Indiana
Terre Haute Gas Corporation Indiana
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent
to the incorporation of our reports included in this Form
10-K into Indiana Gas Company, Inc.'s previously filed
Registration Statement File No. 33-54820.
/s/Arthur Andersen LLP
ARTHUR ANDERSEN LLP
Indianapolis, Indiana
December 22, 1994
SIGNATURES
Pursuant to the requirements of the Section 13 or 15(d) 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.
INDIANA GAS COMPANY,
INC.
Dated December 22, 1994 /s/Lawrence A. Ferger
Lawrence A. Ferger, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities
and on the dates indicated.
Signature Title Date
/s/Lawrence A. Ferger President, Chief Executive December 22, 1994
Lawrence A. Ferger Officer and Director
/s/Niel C. Ellerbrook Senior Vice President December 22, 1994
Niel C. Ellerbrook Chief Financial Officer
and Director
/s/Jerome A. Benkert Controller December 22, 1994
Jerome A. Benkert
/s/Duane M. Amundson Chairman of the Board of December 22, 1994
Duane M. Amundson Directors
/s/Paul T. Baker Senior Vice President December 22, 1994
Paul T. Baker Chief Operating Officer and
Director
/s/Gerald L. Bepko Director December 22, 1994
Gerald L. Bepko
/s/Howard J. Cofield Director December 22, 1994
Howard J. Cofield
/s/Loren K. Evans Director December 22, 1994
Loren K. Evans
/s/Otto N. Frenzel III Director December 22, 1994
Otto N. Frenzel III
/s/Anton H. George Director December 22, 1994
Anton H. George
/s/Don E. Marsh Director December 22, 1994
Don E. Marsh
/s/Richard P. Rechter Director December 22, 1994
Richard P. Rechter
/s/James C. Shook Director December 22, 1994
James C. Shook