December 19, 1996
Securities and Exchange Commission
Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
We are transmitting herewith Indiana Gas Company,
Inc.'s Annual Report on Form 10-K for the year ended
September 30, 1996, pursuant to the requirements of Section
13 of the Securities Exchange Act of 1934.
Very truly yours,
Douglas S. Schmidt
DSS:rs
Enclosure
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, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _______________ to _______________
Commission 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, 1996
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.[X]
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. (Indiana Gas or the
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.
(c) Narrative Description of the Business.
During fiscal 1996, Indiana Gas supplied gas
to about 465,000 residential, commercial and
industrial 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,
1996, residential customers provided 60 percent
of revenues, commercial 21 percent and industrial
19 percent. At such date, approximately 99
percent of Indiana Gas' customers used gas for
space heating, and space heating revenues from
these customers for the fiscal year were 81
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, 1996, Indiana Gas
added approximately 10,300 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 1996 represented 27 percent
(34,165 MDth) of throughput compared to 30
percent (33,312 MDth) in 1995 and 26 percent
(30,125 MDth) in 1994. 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.
Effective April 1, 1996, Indiana Gas
purchases all of its natural gas from ProLiance
Energy, LLC, a gas marketing affiliate of Indiana
Energy (see Item 7, ProLiance Energy, LLC).
Indiana Gas has separate contracts with pipelines
for storage of natural gas.
Prices for gas and related services
purchased are determined primarily by market
conditions and rates established by the Federal
Energy Regulatory Commission. 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 authorized in the last general rate order.
The earnings test provides that no refund be paid
to the extent a utility has not earned its
authorized utility operating income over the
previous 60 months (or during the period since
the utility's last rate order, if longer). On
November 9, 1995, the IURC approved a settlement
agreement among Indiana Gas, the Office of the
Utility Consumer Counselor and a group of large-
volume users which provided for authorized
utility operating income (weather normalized) of
$54.2 million for Indiana Gas beginning in fiscal
1996.
Information regarding environmental matters
affecting the company is incorporated herein by
reference to Item 7, Environmental Matters.
Indiana Gas had 1,067 full-time employees and 37
part-time employees as of September 30, 1996.
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,
1996, such properties included approximately
10,300 miles of distribution mains; 480,673
meters; seven reservoirs currently being used for
the underground storage of purchased gas with
approximately 107,074 acres of land held under
storage easements; 9,937,010 Dth of gas in
company-owned underground storage with a daily
deliverability of 144,860 Dth; 12,165,382 Dth of
gas in contract storage with a daily
deliverability of 163,813 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, 1996, amounted to
$66.4 million.
Item 3. Legal Proceedings
See Item 8, Note 9 for litigation matters
involving insurance carriers pertaining to
Indiana Gas' former manufactured gas plants and
storage facilities.
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,
1996, to a vote of security holders.
Item 4a. Executive Officers of the Company
As of September 30, 1996, 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 62 None Chairman,
President and
Chief Executive Officer Jan. 26, 1996
President and Chief
Executive Officer July 1, 1987
Paul T. Baker 56 None Senior Vice President
and Chief Operating
Officer Aug. 1, 1991
Niel C. Ellerbrook 47 None Senior Vice President and
Chief Financial Officer July 1, 1987
Anthony E. Ard 55 None Senior Vice President of
Corporate Affairs Jan. 9, 1995
Vice President -
Corporate Affairs Jan. 11, 1993
Vice President and
Secretary Sep. 30, 1988
Timothy M. Hewitt 46 None Vice President of
Operations and Engineering Jan. 9, 1995
Vice President of Sales
and Field Operations Jan. 14, 1991
(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 1996, the company paid aggregate
dividends of $6.3 million, $6.3 million, $6.3
million and $6.5 million in the first, second, third
and fourth quarters, respectively.
During fiscal 1995, the company paid aggregate
dividends of $6.0 million, $6.0 million, $6.0
million and $6.3 million in the first, second, third
and fourth quarters, respectively.
Item 6. Selected Financial Data
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
(Thousands)
Year Ended September 30 1996 1995 1994 1993 1992
Operating revenues $530,594 $403,810 $475,297 $499,278 $411,260
Margin 210,463 185,315 194,309 185,725 160,333
Operating expenses 156,910 139,127 146,466 141,452 122,206
Operating income 53,553 46,188 47,843 44,273 38,127
Interest and other - net 14,923 14,079 13,247 15,739 12,384
Net income 38,630 32,109 34,596 28,534 25,743
Dividends on preferred
stock - - - 285 1,710
Earnings available for
common stock $ 38,630 $ 32,109 $ 34,596 $ 28,249 $ 24,033
Ratio of earnings to fixed
charges 4.6 4.1 4.1 3.5 3.5
Common shareholder's equity $281,534 $268,154 $260,295 $249,099 $202,833
Redeemable preferred
shareholder's equity - - - - 20,000
Long-term debt (1) 174,733 173,693 156,851 184,901 149,901
$456,267 $441,847 $417,146 $434,000 $372,734
Total throughput 126,742 109,508 116,285 111,354 101,985
Annual heating degree days
as a percent of normal 108% 87% 102% 99% 90%
Utility customers served -
average 465,166 454,817 443,498 433,000 422,997
Total Assets at Year-End $672,907 $655,933 $649,982 $621,658 $567,779
(1)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
Net income increased to $38.6 million in fiscal 1996 from
$32.1 million in fiscal 1995 primarily as a result of
weather that was 25 percent colder than last year, as well
as the addition of new residential and commercial customers.
This increase was offset somewhat by higher operation and
maintenance expenses.
Net income decreased to $32.1 million in fiscal 1995 from
$34.6 million in fiscal 1994 due to weather that was 15
percent warmer than the prior year. This decrease was
partially offset by lower operation and maintenance
expenses, as well as the addition of new residential and
commercial customers.
Margin (Revenues Less Cost of Gas)
In 1996, margin increased 14 percent ($25.1 million) when
compared to 1995. The increase is primarily attributable to
weather that was 25 percent colder than last year and 8
percent colder than normal. Additional residential and
commercial customers, as well as rate recovery (beginning
May 1995) of postretirement benefit costs recognized in
accordance with Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions (SFAS 106), also contributed to the
increase.
In 1995, margin decreased 5 percent ($9.0 million) when
compared to 1994. The decrease reflected weather that was
15 percent warmer than the prior year and 13 percent warmer
than normal, offset somewhat by the addition of new
residential and commercial customers.
In 1996, total system throughput (combined sales and
transportation) increased 16 percent (17.2 MMDth) when
compared to last year. In 1995, throughput decreased 6
percent (6.8 MMDth) when compared to 1994. 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) was $3.14 in 1996, $2.53 in 1995 and
$2.89 in 1994. The price swings are due primarily to
changing commodity costs associated with the impacts on
customer demand during the very warm winter in 1995 and the
colder winter this fiscal year.
Operating Expenses
Operation and maintenance expenses increased approximately
$8.5 million in 1996 when compared to 1995. The increase is
primarily attributable to higher performance-based
compensation and the recognition (beginning May 1995) of
postretirement benefit costs in accordance with SFAS 106.
In addition, the increased margin resulting from the very
cold weather allowed for the acceleration of certain
projects that will help maintain and strengthen the
distribution system.
Operation and maintenance expenses decreased approximately
$6.4 million in 1995 when compared to 1994. The decrease
was primarily attributable to lower expenses for labor and
related benefits, distribution mains and services,
advertising and outside services. The declining operation
and maintenance expenses reflected management's efforts to
control costs in response to very warm weather.
Depreciation and amortization expense increased in 1996 and
1995 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 1996, while
decreasing in 1995, due to changes in taxable income.
Taxes other than income taxes increased in 1996 due to
higher property tax expense and higher gross receipts tax
expense resulting from increased revenue. Taxes other than
income taxes decreased in 1995 due to lower gross receipts
tax expense resulting from decreased revenue. Property tax
expense for 1995 remained approximately the same as compared
to 1994.
Interest Expense
Interest expense increased in 1996 due to an increase in
average debt outstanding, slightly offset by a decrease in
interest rates. Interest expense decreased in 1995 due to a
decrease in average debt outstanding, slightly offset by an
increase 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 the 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 authorized in the last general rate
order. The earnings test provides that no refund be paid to
the extent a utility has not earned its authorized utility
operating income over the previous 60 months (or during the
period since the utility's last rate order, if longer). On
November 9, 1995, the IURC approved a settlement agreement
among Indiana Gas, the Office of Utility Consumer Counselor
and a group of large-volume users which provided for
authorized utility operating income (weather normalized) of
$54.2 million for Indiana Gas beginning in fiscal 1996.
ProLiance Energy, LLC
On March 15, 1996, IGC Energy, Inc., an indirect wholly
owned subsidiary of Indiana Energy (Indiana Gas' parent),
and Citizens By-Products Coal Company, a wholly owned
subsidiary of Citizens Gas and Coke Utility (Citizens Gas),
formed a jointly and equally owned limited liability company
to provide natural gas supply and related marketing
services. The new entity, ProLiance Energy, LLC
(ProLiance), began providing services to Indiana Gas and
Citizens Gas effective April 1, 1996. ProLiance also
provides products and services to other gas utilities and
customers in Indiana and surrounding states. ProLiance has
assumed the business of Indiana Energy Services, Inc.,
Indiana Energy's gas marketing affiliate, which had provided
similar services to other customers and from January 1,
1996, to March 31, 1996, to Indiana Gas.
The sale of gas and provision of other services to Indiana
Gas by Indiana Energy's marketing affiliates are subject to
regulatory review through the quarterly gas cost adjustment
proceeding currently pending before the IURC.
Two proceedings which may affect the formation, operation or
earnings of ProLiance are currently pending before the IURC.
The first proceeding was initiated by a small group of
Indiana Gas' and Citizens Gas' large-volume customers who
contend that the gas service contracts between ProLiance and
Indiana Gas and Citizens Gas should be disapproved by the
IURC or, alternatively, that the IURC should regulate the
operations of ProLiance. On September 27, 1996, the IURC
issued a partial decision in that proceeding and found that
ProLiance is not subject to regulation as a public utility.
The IURC did confirm that it will continue to monitor gas
costs incurred by Indiana Gas. Hearings on the remaining
issues were concluded on October 9, 1996. A decision from
the IURC is expected during the first half of calendar 1997.
The second proceeding involves the quarterly gas cost
adjustment applications of Indiana Gas and Citizens Gas
wherein these utilities are proposing to recover the costs
they have and will incur under their gas supply and related
agreements with ProLiance. This proceeding will consider
whether the recovery of those costs is consistent with
Indiana law governing gas cost recovery. The hearing on the
second proceeding has not yet been scheduled.
While the outcome of these proceedings cannot be predicted,
management does not expect this matter to have a material
impact on Indiana Gas' financial position or results of
operations.
Indiana Legislative Matters
On April 26, 1995, the Indiana General Assembly enacted
legislation which provides new flexibility to the IURC for
future regulation of Indiana utilities. The new law
recognizes that competition is increasing in the provision
of energy services and that flexibility in the regulation of
energy services providers is essential to the well-being of
the state, its economy and its citizens. Under the law, an
energy utility can present to the IURC a broad range of
proposals from performance-based ratemaking to complete
deregulation of a utility's operations. The law gives the
IURC the authority to adopt alternative regulatory
practices, procedures and mechanisms and establish rates and
charges that are in the public interest, and will enhance or
maintain the value of the energy utility's retail energy
services or property. It also provides authority for the
IURC to establish rates and charges based on market or
average prices that use performance-based rewards or
penalties, or which are designed to promote efficiency in
the rendering of retail energy services.
Environmental Matters
Indiana Gas is currently conducting environmental
investigations and work at certain sites that were the
locations of former manufactured gas plants. It is seeking
to recover the costs of the investigations and work from
insurance carriers, other potentially responsible parties
(PRPs) and customers.
On May 3, 1995, Indiana Gas received an order from the IURC
in which the Commission concluded that the costs incurred by
Indiana Gas to investigate and, if necessary, clean-up
former manufactured gas plant sites are not utility
operating expenses necessary for the provision of service
and, therefore, are not recoverable as operating expenses
from utility customers. This order has been appealed.
On April 14, 1995, Indiana Gas filed suit in the United
States District Court for the Northern District of Indiana,
Fort Wayne Division, against a number of insurance carriers
for payment of claims for investigation and clean-up costs
already incurred, as well as for a determination that the
carriers are obligated to pay these costs in the future. On
October 2, 1996, the Court granted several motions filed by
defendant insurance carriers for summary judgment on a
number of issues relating to the insurers' obligations to
Indiana Gas under insurance policies issued by these
carriers. For example, the Court held that because the
placement of residuals on the ground at the sites was done
intentionally, there was no "fortuitous accident" and
therefore no "occurrence" subject to coverage under the
relevant policies. Since the management of Indiana Gas
believes that a number of the Court's rulings are contrary
to Indiana law, it intends to appeal all adverse rulings to
the United States Court of Appeals for the Seventh Circuit.
However, if these rulings are not reversed on appeal, they
would effectively eliminate coverage under most of the
policies at issue. There can be no assurance as to whether
Indiana Gas will prevail on this appeal. As of September
30, 1996, Indiana Gas has obtained cash settlements from
some insurance carriers in an aggregate amount in excess of
$13.5 million.
The Court's rulings will have no immediate impact on
earnings since Indiana Gas has previously recorded all costs
which it presently expects to incur in connection with
remediation activities. It is possible that future events
may require additional remediation activities which are not
presently foreseen.
For further information regarding the status of
investigation and remediation of the sites, PRPs, recovery
from insurers, litigation, financial reporting and
ratemaking, see Item 8, Note 9.
Postretirement Benefits Other Than Pensions
On May 3, 1995, the IURC issued an order authorizing Indiana
Gas to recover the costs related to postretirement benefits
other than pensions under the accrual method of accounting
consistent with Statement of Financial Accounting Standards
No. 106, Employers' Accounting for Postretirement Benefits
Other Than Pensions (SFAS 106). Amounts accrued prior to the
order were deferred as allowed by the IURC. While this
order is consistent with the IURC's rulings for other
utilities within the state of Indiana and with the
ratemaking treatment of the majority of regulatory
jurisdictions outside of Indiana, the Office of Utility
Consumer Counselor is appealing the order. A decision on
the appeal by the Indiana Court of Appeals is expected early
in calendar 1997.
New Accounting Standards
In March 1995, the Financial Accounting Standards Board
(FASB) issued Statement of Financial Accounting Standards
No. 121, Accounting for the Impairment of Long-Lived Assets
and Long-Lived Assets to be Disposed Of. This statement
imposes stricter criteria for regulatory assets by requiring
that such assets be probable of future recovery at each
balance sheet date. Indiana Gas will adopt this standard
effective October 1, 1996, and does not expect that the
adoption will have a material impact on its financial
position or results of operations based on the current
regulatory structure in which it operates. This conclusion
may change in the future as competitive factors influence
pricing in the industry.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Pursuant to this new standard, companies are
encouraged, but not required, to adopt a fair value method
of accounting for employee stock-based transactions.
Indiana Gas does not expect this standard to have a material
impact on its financial position or results of operations.
Liquidity and Capital Resources
New construction, normal system maintenance and
improvements, and information technology investments to
provide service to a growing customer base 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. Indiana
Gas' ratio of earnings to fixed charges was 4.6 for 1996
(see Exhibit 12).
Total capital required to fund both capital expenditures and
refinancing requirements for 1995 and 1996, along with
estimated amounts for 1997 through 1999, are as follows:
THOUSANDS 1995 1996 1997 1998 1999
Capital expenditures $ 54,900 $ 66,000 $ 70,000 $ 71,000 $ 65,000
Refinancing requirements 3,200 19,000 - 35,000 10,000
$ 58,100 $ 85,000 $ 70,000 $106,000 $ 75,000
In 1996, 70 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 1995, 77 percent of capital expenditures was provided by
funds generated internally. External funds required for the
1996 construction program were obtained primarily through
short-term borrowings.
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, 1996.
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes, Series
E (Notes) as follows: $5 million of 6.69% Notes due
June 10, 2013; $5 million of 6.69% Notes due December 21,
2015; and $10 million of 6.69% Notes due December 29, 2015.
Indiana Gas plans to issue an additional $15 million of the
Notes by the end of fiscal 1997. On July 15, 1996, Indiana
Gas used the net proceeds from the December issuances to
redeem its remaining first mortgage bonds, $19 million of 9
3/8% Series M First Mortgage Bonds.
Short-term cash working capital is required 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. Indiana Gas' commercial
paper is rated P-1 by Moody's and A-1+ by Standard & Poor's.
Recently, bank lines of credit have been the primary source
of short-term financing. 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.
Forward-Looking Information
Certain matters discussed in Management's Discussion and
Analysis are forward-looking. These forward-looking
discussions reflect the company's current best estimates
regarding future operations. Since these are only
estimates, actual results could be materially different.
Several factors, some of which are outside of the company's
control and cannot be accurately and conclusively predicted,
may materially affect estimates of future operations. Such
factors include the effect of weather on gas consumption,
particularly in the residential market, the effect of
general economic conditions on gas consumption, particularly
in industrial and commercial markets, the direction and pace
of change in state and federal regulation on both the gas
and electric industries, and the effects of competition on
markets where prices and providers have been regulated.
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, 1996, and 1995, 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, 1996. 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, 1996, and 1995, and the
results of their operations and their cash flows for each of
the three years in the period ended September 30, 1996, in
conformity with generally accepted accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 25, 1996
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands)
Year Ended September 30
1996 1995 1994
OPERATING REVENUES $ 530,594 $ 403,810 $ 475,297
COST OF GAS 320,131 218,495 280,988
MARGIN 210,463 185,315 194,309
OPERATING EXPENSES:
Other operation and maintenance 84,136 75,608 81,982
Depreciation and amortization 33,232 31,265 29,177
Income taxes 23,174 19,216 19,467
Taxes other than income taxes 16,368 13,038 15,840
156,910 139,127 146,466
OPERATING INCOME 53,553 46,188 47,843
OTHER INCOME - NET 888 1,423 2,629
INCOME BEFORE INTEREST AND OTHER 54,441 47,611 50,472
INTEREST AND OTHER CHARGES:
Interest on long-term debt 14,882 13,474 14,798
Interest on notes payable 337 971 493
Allowance for borrowed funds used
during construction (283) (215) (355)
Other interest 688 1,085 746
Other amortization 187 187 194
15,811 15,502 15,876
NET INCOME $ 38,630 $ 32,109 $ 34,596
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
1996 1995 1994
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 38,630 $ 32,109 $ 34,596
Adjustments to reconcile net income to cash
provided from operating activities -
Depreciation and amortization 33,419 31,452 29,371
Deferred income taxes 804 3,994 3,273
Investment tax credit (930) (930) (930)
33,293 34,516 31,714
Changes in assets and liabilities -
Receivables - net (3,818) 3,634 1,537
Inventories 19,966 5,189 (5,093)
Accounts payable, customer deposits, advance
payments and other current liabilities (13,658) 40,686 (7,052)
Accrued taxes and interest (4,020) (12,375) (11,815)
Refundable/recoverable gas costs (7,593) (26,712) 39,048
Other - net 5,780 13,629 5,355
Total adjustments 29,950 58,567 53,694
Net cash flows from operations 68,580 90,676 88,290
CASH FLOWS REQUIRED FOR FINANCING ACTIVITIES:
Sale of long-term debt 20,000 20,000 -
Reduction in long-term debt (18,960) (3,158) (28,050)
Net change in short-term borrowings 22,011 (28,325) 20,298
Dividends (25,250) (24,250) (23,400)
Net cash flows required for financing activities (2,199) (35,733) (31,152)
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (66,381) (54,943) (57,138)
Net cash flows required for investing activities (66,381) (54,943) (57,138)
NET INCREASE (DECREASE) IN CASH - - -
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 20 20
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 20 $ 20 $ 20
The accompanying notes are an integral part of these statements.
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands)
September 30
1996 1995
UTILITY PLANT:
Original cost $931,092 $872,287
Less - accumulated depreciation and amortization 344,268 316,991
586,824 555,296
NONUTILITY PLANT - NET 33 188
CURRENT ASSETS:
Cash and cash equivalents 20 20
Accounts receivable, less reserves of
$1,853 and $1,662 respectively 15,468 13,403
Accrued unbilled revenues 8,158 6,405
Materials and supplies - at average cost 4,611 3,890
Liquefied petroleum gas - at average cost 507 883
Gas in underground storage - at last-in,
first-out cost 39,083 59,394
Recoverable gas costs 2,710 -
Prepayments and other 43 144
70,600 84,139
DEFERRED CHARGES:
Unamortized debt discount and expense 7,477 6,800
Other 7,973 9,510
15,450 16,310
$672,907 $655,933
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
1996 1995
CAPITALIZATION:
Common stock and paid-in capital $142,995 $142,995
Retained earnings 138,539 125,159
Total common shareholder's equity 281,534 268,154
Long-term debt (see schedule) 174,733 173,693
456,267 441,847
CURRENT LIABILITIES:
Notes payable 24,236 2,225
Accounts payable 49,402 59,713
Refundable gas costs - 4,883
Customer deposits and advance payments 14,256 20,870
Accrued taxes 4,206 7,928
Accrued interest 2,505 2,803
Other current liabilities 24,827 21,560
119,432 119,982
DEFERRED CREDITS:
Deferred income taxes 66,862 65,096
Unamortized investment tax credit 11,173 12,103
Regulatory income tax liability 2,835 3,797
Customer advances for construction 1,434 1,297
Other 14,904 11,811
97,208 94,104
COMMITMENTS AND CONTINGENCIES (see Notes 8, 9 and 11) - -
$672,907 $655,933
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, 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
Net Income 32,109 32,109
Common Stock Dividends
($2.67 per share) (24,250) (24,250)
BALANCE AT SEPTEMBER 30, 1995 9,080,770 142,995 125,159 268,154
Net Income 38,630 38,630
Common Stock Dividends
($2.78 per share) (25,250) (25,250)
BALANCE AT SEPTEMBER 30, 1996 9,080,770 $142,995 $ 138,539 $281,534
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
1996 1995
LONG-TERM DEBT:
First Mortgage Bonds
9 3/8% Series M, called and due July 15, 1996 $ - $ 18,950
Unsecured Notes Payable
6 5/8% Series D, due December 1, 1997 35,000 35,000
8.90%, due July 15, 1999 10,000 10,000
6.69%, Series E, due June 10, 2013 5,000 -
7.15%, Series E, due March 15, 2015 5,000 5,000
6.69%, Series E, due December 21, 2015 5,000 -
6.69%, Series E, due December 29, 2015 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 24,733 24,743
6.31%, Series E, due June 10, 2025 5,000 5,000
6.53%, Series E, due June 27, 2025 10,000 10,000
174,733 154,743
Less - Maturities and sinking fund requirements - -
$174,733 $173,693
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. and its subsidiaries (Indiana Gas or
the 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 all periods reported.
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
Indiana Gas was authorized as part of an August 17, 1994, order
from the Indiana Utility Regulatory Commission (IURC) 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.
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 1996 1995 1994
Interest (net of amount capitalized) $ 15,203 $ 14,042 $ 15,192
Income taxes $ 29,451 $ 26,206 $ 23,880
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
Gas in underground storage as of September 30, 1996, was $39.1
million compared to $59.4 million at September 30, 1995. This
decrease, which had no impact on Indiana Gas' results of
operations, resulted from a reduction in Indiana Gas' contract
storage requirements due to its gas supply arrangements with
ProLiance (see Note 11).
Based on the cost of purchased gas during September 1996, the
cost of replacing the current portion of gas in underground
storage exceeded last-in, first-out cost at September 30, 1996,
by approximately $3,414,000.
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 for all periods reported.
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 1996 1995 1994
AFUDC - borrowed funds $ 283 $ 215 $ 355
AFUDC - equity funds 232 176 290
Total AFUDC capitalized $ 515 $ 391 $ 645
I. 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.
J. Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets
and liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2. Regulatory Assets and Liabilities
Indiana Gas is subject to the provisions of Statement of
Financial Accounting Standards No. 71, Accounting for the
Effects of Certain Types of Regulation (SFAS 71). Regulatory
assets represent probable future revenue to Indiana Gas
associated with certain costs which will be recovered from
customers through the ratemaking process. Regulatory
liabilities represent probable future reductions in revenues
associated with amounts that are to be credited to customers
through the ratemaking process. Regulatory assets and
liabilities reflected in the Consolidated Balance Sheets as of
September 30 (in thousands) relate to the following:
REGULATORY ASSETS 1996 1995
Postretirement benefits other than pensions $ 6,283 $ 7,720
Unamortized debt discount and expense 7,477 6,800
Gas costs due from customers, net 2,710 -
Deferred acquisition costs 719 740
Rate case costs 79 203
$17,268 $ 15,463
REGULATORY LIABILITIES
Gas costs due to customers, net $ - $ 4,883
Amounts due to customers - income taxes, net 2,835 3,797
Pension costs 2,040 1,348
$ 4,875 $ 10,028
It is Indiana Gas' policy to continually assess the
recoverability of costs recognized as regulatory assets and the
ability to continue to account for its activities in accordance
with SFAS 71, based on the criteria set forth in SFAS 71.
Based on current regulation, Indiana Gas believes that its use
of regulatory accounting is appropriate. If all or part of
Indiana Gas' operations cease to meet the criteria of SFAS 71,
a write-off of related regulatory assets and liabilities would
be required. In addition, Indiana Gas would be required to
determine any impairment to the carrying costs of deregulated
plant and inventory assets.
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 $55 million with approximately
$24 million outstanding at September 30, 1996. 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 1996 1995 1994
Outstanding at year end $24,236 $ 2,225 $30,550
Weighted average interest rates
at year end 5.4% 6.1% 4.9%
Weighted average interest rates
during the year 5.7% 5.7% 3.3%
Weighted average total outstanding
during the year $ 5,930 $16,578 $14,891
Maximum total outstanding
during the year $28,150 $50,000 $56,500
4. Long-Term Debt
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes, Series E
(Notes) as follows: $5 million of 6.69% Notes due June 10,
2013; $5 million of 6.69% Notes due December 21, 2015; and $10
million of 6.69% Notes due December 29, 2015. On July 15,
1996, Indiana Gas used those net proceeds to redeem its
remaining first mortgage bonds, $19 million of 9 3/8% Series M
First Mortgage Bonds.
Consolidated maturities and sinking fund requirements on long-
term debt subject to mandatory redemption during the five years
following 1996 are none in 1997, $35,000,000 in 1998,
$10,000,000 in 1999 and none in 2000 and 2001.
5. Fair Value of Financial Instruments
The estimated fair values of the company's financial
instruments were as follows:
September 30, 1996 September 30, 1995
Carrying Fair Carrying Fair
THOUSANDS Amount Value Amount Value
Cash and cash equivalents $ 20 $ 20 $ 20 $ 20
Notes payable $ 24,236 $ 24,236 $ 2,225 $ 2,225
Long-term debt (includes
amounts due within one year) $174,733 $178,880 $173,693 $183,395
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.
6. Capital Stock
Indiana Gas has 16 million shares of authorized no par value
common stock.
Indiana Gas also has 4.2 million shares of authorized and
unissued preferred stock.
7. Retirement Plans and Other Postretirement Benefits
Indiana Gas has a defined contribution retirement savings 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 or various investment funds.
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 1996, 1995 and 1994, Indiana Gas made
contributions of $2,445,000, $2,335,000 and $2,386,000,
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, 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
$464,000 in 1996, $143,000 in 1995 and $1,110,000 in 1994. 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 is as follows:
THOUSANDS 1996 1995 1994
Pension benefits earned during the period $ 1,174 $ 1,086 $ 1,436
Interest accrued on projected pension
benefit obligation 4,730 4,554 4,752
Actual return on pension plan assets (10,244) (9,632) 9
Net amortization and deferral 3,909 3,880 (6,056)
SFAS 87 pension expense (431) (112) 141
Adjustment to reflect amount included
in rates 725 818 492
Total pension expense $ 294 $ 706 $ 633
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 1996 1995
Actuarial present value of pension benefits:
Vested benefits $ 54,637 $ 52,734
Nonvested benefits 159 200
Effect of future salary increases 8,167 7,455
Projected pension benefit obligation 62,963 60,389
Plan assets at fair value 75,748 69,423
Plan assets in excess of projected
pension benefit obligation at September 30 12,785 9,034
Unrecognized adjusted prior service costs 1,966 2,051
Unrecognized net assets at date of initial application (1,776) (2,084)
Unrecognized net (gain) loss (9,984) (6,971)
Adjustment required to recognize minimum liability (1,309) (1,275)
Adjustment to reflect amount included in rates (2,040) (1,348)
Prepaid (accrued) pension cost at September 30 $ (358) $ (593)
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. The average rate of increase
in future compensation levels used ranged from 5 to 5.5
percent. These rates were used for all years reported. 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. The
plan also contains cost-sharing provisions (added in fiscal
1995) whereby employees retiring after January 1, 1996, are
required to make contributions to the plan when increases in
Indiana Gas' health care costs exceed the general rate of
inflation, as measured by the Consumer Price Index (CPI).
These postretirement benefits are principally self-insured.
Currently, Indiana Gas does not fund this postretirement plan.
On May 3, 1995, the IURC issued an order authorizing Indiana
Gas to recover the costs related to postretirement benefits
other than pensions under the accrual method of accounting
consistent with Statement of Financial Accounting Standards No.
106, Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106). Amounts accrued prior to the order
were deferred as allowed by the IURC. During 1996, Indiana Gas
reduced the amount previously deferred. While this order is
consistent with the IURC's rulings for other utilities within
the state of Indiana and with the ratemaking treatment of the
majority of regulatory jurisdictions outside of Indiana, the
Office of Utility Consumer Counselor is appealing the order. A
decision on the appeal by the Indiana Court of Appeals is
expected early in calendar 1997.
Postretirement benefit cost, including in 1996 the impact of
rate recovery and the cost-sharing provisions, consisted of the
following components:
THOUSANDS 1996 1995 1994
Service cost - benefits attributed to service
during the period $ 806 $ 1,423 $ 1,490
Interest cost on accumulated postretirement
obligation 3,264 4,186 3,915
Amortization of transition obligation 2,280 2,772 2,772
Amortization of net (gain) loss (351) - -
SFAS 106 postretirement benefit cost 5,999 8,381 8,177
Adjustment to reflect amount included in rates 1,329 (4,543) (5,436)
Postretirement benefit cost $ 7,328 $ 3,838 $ 2,741
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, 1996, and 1995:
THOUSANDS 1996 1995
Accumulated postretirement benefit obligation:
Retirees and dependents $ 27,903 $ 25,064
Other fully eligible participants 7,194 6,561
Other active participants 9,973 10,627
Total accumulated postretirement benefit obligation 45,070 42,252
Fair value of plan assets - -
Accumulated postretirement benefit obligation
in excess of plan assets (45,070) (42,252)
Unrecognized net (gain) loss (8,599) (10,192)
Unrecognized transition obligation 38,765 41,045
Accrued postretirement benefit
cost at September 30 $(14,904) $(11,399)
The assumed health care cost trend rate for medical gross
eligible charges used in measuring the accumulated
postretirement benefit obligation as of September 30, 1996, was
8.4 percent for fiscal 1997. This rate is assumed to decrease
gradually through fiscal 2003 to 5.5 percent and remain at that
level thereafter. The assumed CPI rate, relating to the plan's
cost sharing provisions for retirees, was 3.5 percent. A 1-
percent increase in the assumed health care cost trend rates
for each future year produces approximately a $1.4-million
increase in the accumulated postretirement benefit obligation
as of September 30, 1996, and approximately a $155,000 increase
in the annual aggregate of the service and interest cost
components of postretirement benefit cost. The weighted-
average discount rate used in determining the accumulated
postretirement benefit obligation was 8 percent.
8. Commitments
Estimated capital expenditures for 1997 are $70 million. Total
lease expense was $2,863,000 in 1996, $2,811,000 in 1995 and
$2,595,000 in 1994.
Lease commitments are $1,478,000 in 1997, $1,016,000 in 1998,
$534,000 in 1999, $424,000 in 2000, $360,000 in 2001 and
$47,000 in total for all later years. Included in these
amounts is an operating lease between Indiana Gas and Energy
Realty, Inc., an indirect wholly owned subsidiary of Indiana
Energy, 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 seven years.
9. Environmental Costs
In the past, Indiana Gas and others, including 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. Management
believes, and the IURC has found that, those operations were
conducted in accordance with the then-applicable industry
standards. However, under currently applicable environmental
laws and regulations, Indiana Gas, and the others, may now be
required to take remedial action if certain byproducts are
found above a regulatory threshold at these sites.
Indiana Gas has identified the existence, location and certain
general characteristics of 26 gas manufacturing and storage
sites. Removal activities have been conducted at two sites and
a remedial investigation/feasibility study (RI/FS) is nearing
completion at one of the sites under an agreed order between
Indiana Gas and the Indiana Department of Environmental
Management. Indiana Gas and others are 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. Preliminary assessments (PAs) have been completed on all
but one of the sites. Site investigations (SIs) have been
completed at 20 sites and supplemental site investigations
(SSIs) have been conducted at 15 sites. Based upon the site
work completed to date, Indiana Gas believes that a level of
contamination that may require some level of remedial activity
may be present at a number of the 24 sites. Although Indiana
Gas has not begun an RI/FS at additional sites, Indiana Gas is
currently conducting groundwater monitoring at certain sites
where deemed appropriate and will continue its evaluation of
many of the sites.
Based upon the work performed to date, Indiana Gas has accrued
remediation and related costs for the two sites where remedial
activities are taking place. PA/SI, SSI and groundwater
monitoring costs have been accrued for the remaining sites
where appropriate. Estimated RI/FS costs and the costs of
certain remedial actions that may likely be required have also
been accrued. Costs associated with environmental remedial
activities are accrued 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 an RI/FS
and the development of some sense of the timing for
implementation of the potential remedial alternatives, to the
extent such remediation is required. Accordingly, the total
costs which may be incurred in connection with the remediation
of all sites, to the extent remediation is necessary, cannot be
determined at this time.
Indiana Gas has been pursuing recovery from three separate
sources for the costs it has incurred and expects to incur
relating to the 26 sites. Those sources are insurance
carriers, potentially responsible parties (PRPs) and recovery
through rates from retail gas customers.
On April 14, 1995, Indiana Gas filed suit in the United States
District Court for the Northern District of Indiana, Fort Wayne
Division, against a number of insurance carriers for payment of
claims for investigation and clean-up costs already incurred,
as well as for a determination that the carriers are obligated
to pay these costs in the future. On October 2, 1996, the
Court granted several motions filed by defendant insurance
carriers for summary judgment on a number of issues relating to
the insurers' obligations to Indiana Gas under insurance
policies issued by these carriers. For example, the Court
held that because the placement of residuals on the ground at
the sites was done intentionally, there was no "fortuitous
accident" and therefore no "occurrence" subject to coverage
under the relevant policies. The Court also ruled adversely to
Indiana Gas with respect to, among other issues, applicability
of the pollution exclusion in policies containing this
exclusion, the application of an injury-in-fact trigger under
the policies at issue and the existence of a justiciable
controversy with respect to sites for which no claim has been
asserted against Indiana Gas. Since the management of Indiana
Gas believes that a number of these rulings are contrary to
Indiana law, it intends to appeal all adverse rulings to the
United States Court of Appeals for the Seventh Circuit.
However, if these rulings are not reversed on appeal, they
would effectively eliminate coverage under most of the policies
at issue. There can be no assurance as to whether Indiana Gas
will prevail on this appeal. As of September 30, 1996,
Indiana Gas has obtained cash settlements from some insurance
carriers in an aggregate amount in excess of $13.5 million.
Indiana Gas has also completed the process of identifying PRPs
for each site. PRPs include two financially viable utilities,
PSI Energy, Inc. (PSI) and Northern Indiana Public Service
Company (NIPSCO). PSI has been identified as a PRP at 19 of
the sites. Indiana Gas has been negotiating with PSI to
determine PSI's share of responsibility, although no agreement
has been reached between the parties. With the help of outside
counsel, Indiana Gas has prepared estimates of PSI's and other
PRP's share of environmental liabilities which may exist at
each of the sites based on equitable principles derived from
case law or applied by parties in achieving settlements.
NIPSCO has been identified as an additional PRP at five of
these 19 sites. On September 27, 1995, Indiana Gas reached an
agreement with NIPSCO which provides for coordination of
efforts and sharing of investigation and clean-up costs
incurred and to be incurred at the five sites in which they
both have an interest. The cost sharing estimates of PSI and
other PRPs, and the NIPSCO agreement, have been utilized by
Indiana Gas to record a receivable from PRPs for their share of
the liability for work performed by Indiana Gas to date, as
well as to accrue Indiana Gas' proportionate share of the
estimated cost related to work not yet performed. The
outstanding receivable from PRPs of $1.5 million is reflected
in Accounts Receivable on the Consolidated Balance Sheet at
September 30, 1996.
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 May 3,
1995, the IURC concluded that the costs incurred by Indiana Gas
to investigate and, if necessary, clean-up former manufactured
gas plant sites are not utility operating expenses necessary
for the provision of utility service and, therefore, are not
recoverable as operating expenses from utility customers. The
decision was contrary to rulings in other states where utility
regulatory commissions have issued orders on the subject. The
precedent cited by the IURC was a ruling related to a cancelled
nuclear power plant which, unlike manufactured gas plants,
never provided service to the public. Management believes
applying the nuclear power plant decision to Indiana Gas' case
was an incorrect application of the law and has appealed the
decision to the Indiana Court of Appeals. The Commission did
indicate that during Indiana Gas' next rate case it would be
appropriate to quantify the effect of the investigation and
clean-up activities as part of the business risk to be
considered by the Commission in establishing the allowed
overall rate of return.
As of September 30, 1996, Indiana Gas has recorded in aggregate
$14.5 million, which represents all environmental costs which
it presently expects to incur in connection with remediation
activities. Presently, these environmental costs have had no
material impact on Indiana Gas' earnings.
The impact on Indiana Gas' financial position and results of
operations of complying with federal, state and local
environmental regulations related to former manufactured gas
plant sites is contingent upon several uncertainties. These
include the costs of any compliance activities which may occur
and the timing of the actions taken, the impact of joint and
several liability upon the magnitude of the contingency, the
outcome of proceedings which challenge the IURC ruling on
recovery of costs from customers, as well as the outcome of the
appeal of the summary judgment rulings issued in favor of the
insurers in the insurance litigation described above. Although
Indiana Gas will endeavor to manage the manufactured gas plant
remediation program so that any amounts received will be
sufficient to fund environmental costs, there can be no
assurance that in the future, environmental costs will not
exceed related recoveries.
10. 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
Statements of Income, were as follows:
THOUSANDS 1996 1995 1994
Current:
Federal $19,587 $13,367 $13,333
State 3,107 2,199 2,299
22,694 15,566 15,632
Deferred:
Federal 709 3,652 2,987
State 95 342 286
804 3,994 3,273
Amortization of investment tax credits (930) (930) (930)
Income tax expense $22,568 $18,630 $17,975
Effective income tax rates were 36.88 percent, 36.72 percent
and 34.22 percent of pretax income for 1996, 1995 and 1994,
respectively. This compares with a combined federal and state
income tax statutory rate of 37.93 percent for all years
reported. Individual components of these rate differences are
not significant except investment tax credit which amounted to
(1.5%) in 1996 and (1.8%) in 1995 and 1994.
As required by the IURC, Indiana Gas uses a normalized method
of accounting for deferred income taxes. 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 over the lives of
the related assets. The provisions for the deferred tax
effects relating to the excess of tax-over-book depreciation
amounted to $3,474,000 in 1996, $4,031,000 in 1995 and
$2,852,000 in 1994.
Significant components of Indiana Gas' net deferred tax
liability as of September 30, 1996, and 1995 are as follows:
THOUSANDS 1996 1995
Deferred tax liabilities:
Accelerated depreciation $48,009 $45,902
Property basis differences 17,690 18,560
Acquisition adjustment 6,475 6,664
Other (7,406) (4,791)
Deferred tax assets:
Deferred investment tax credit (4,237) (4,590)
Regulatory income tax liability (1,075) (1,440)
Less deferred income taxes related
to current assets and liabilities 7,406 4,791
Balance as of September 30 $66,862 $65,096
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.
11. Affiliate Transactions
Indiana Energy Services, Inc. (IES), an indirect wholly owned
subsidiary of Indiana Energy (Indiana Gas' parent), provided
natural gas and related services to Indiana Gas from January 1,
1996, to March 31, 1996. Indiana Gas' purchases from IES for
the three months ended March 31, 1996, totalled $102.7 million.
On March 15, 1996, IGC Energy, Inc., an indirect wholly owned
subsidiary of Indiana Energy, and Citizens By-Products Coal
Company, a wholly owned subsidiary of Citizens Gas and Coke
Utility, formed a jointly and equally owned limited liability
company to provide natural gas supply and related marketing
services. The new entity, ProLiance Energy, LLC (ProLiance),
assumed the business of IES effective April 1, 1996, and is now
the supplier of gas and related services to Indiana Gas.
Indiana Gas' purchases from ProLiance during 1996 totalled
$117.9 million.
The sale of gas and provision of other services to Indiana Gas
by Indiana Energy's marketing affiliates are subject to
regulatory review through the quarterly gas cost adjustment
proceeding currently pending before the IURC.
Two proceedings which may affect the formation, operation or
earnings of ProLiance are currently pending before the IURC.
The first proceeding was initiated by a small group of Indiana
Gas' and Citizens Gas' large-volume customers who contend that
the gas service contracts between ProLiance and Indiana Gas and
Citizens Gas should be disapproved by the IURC or,
alternatively, that the IURC should regulate the operations of
ProLiance. On September 27, 1996, the IURC issued a partial
decision in that proceeding and found that ProLiance is not
subject to regulation as a public utility. The IURC did
confirm that it will continue to monitor gas costs incurred by
Indiana Gas. Hearings on the remaining issues were concluded
on October 9, 1996. A decision from the IURC is expected
during the first half of calendar 1997.
The second proceeding involves the quarterly gas cost
adjustment applications of Indiana Gas and Citizens Gas wherein
these utilities are proposing to recover the costs they have
and will incur under their gas supply and related agreements
with ProLiance. This proceeding will consider whether the
recovery of those costs is consistent with Indiana law
governing gas cost recovery. The hearing on the second
proceeding has not yet been scheduled.
While the outcome of these proceedings cannot be predicted,
management does not expect this matter to have a material
impact on Indiana Gas' financial position or results of
operations.
Indiana Gas also participates in a centralized cash management
program with its parent, affiliated companies and banks which
permits funding of checks as they are presented.
Amounts due affiliated companies, as well as checks written but
not cashed are reflected in Accounts Payable on the
Consolidated Balance Sheet. Amounts owed to affiliates totaled
$35.5 million and $12.5 million at September 30, 1996 and 1995,
respectively.
12. New Accounting Standards
In March 1995, the Financial Accounting Standards Board (FASB)
issued Statement of Financial Accounting Standards No. 121,
Accounting for the Impairment of Long-Lived Assets and Long-
Lived Assets to be Disposed Of. This statement imposes
stricter criteria for regulatory assets by requiring that such
assets be probable of future recovery at each balance sheet
date. Indiana Gas will adopt this standard effective October
1, 1996, and does not expect that the adoption will have a
material impact on its financial position or results of
operations based on the current regulatory structure in which
it operates. This conclusion may change in the future as
competitive factors influence pricing in the industry.
In October 1995, the FASB issued Statement of Financial
Accounting Standards No. 123, Accounting for Stock-Based
Compensation. Pursuant to this new standard, companies are
encouraged, but not required, to adopt a fair value method of
accounting for employee stock-based transactions. Indiana Gas
does not expect this standard to have a material impact on its
financial position or results of operations.
13. Summarized Financial Data (Unaudited)
Summarized quarterly financial data (in thousands of dollars)
for 1996 and 1995 are as follows:
1996: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
Operating revenues $154,309 $222,553 $ 91,211 $ 62,521
Operating income (loss) 22,654 27,280 5,863 (2,244)
Net income (loss) 18,928 23,830 2,273 (6,401)
1995: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
Operating revenues $113,062 $150,468 $ 83,081 $ 57,199
Operating income (loss) 14,593 24,667 7,800 (872)
Net income (loss) 10,779 21,161 4,327 (4,158)
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 6, 1996. 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 6, 1996. 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, 1996, 1995 and 1994, as it relates to
only Indiana Gas.
1996 1995 1994
Lawrence A. Ferger $512,580 $460,979 $444,898
Paul T. Baker 327,217 298,770 285,360
Niel C. Ellerbrook 238,213 215,314 208,999
Anthony E. Ard 171,448 159,667 159,489
Timothy M. Hewitt 168,065 156,452 151,136
Carl L. Chapman 152,135 145,811 142,736
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 6, 1996. 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 6, 1996. 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 - 1996,
1995 and 1994 Item 8
Consolidated Statements of Cash Flows - 1996,
1995 and 1994 Item 8
Consolidated Balance Sheets at September 30,
1996 and 1995 Item 8
Consolidated Statements of Common Shareholder's
Equity - 1996, 1995 and 1994 Item 8
Consolidated Schedules of Long-Term Debt
as of September 30, 1996 and 1995 Item 8
Notes to Financial Statements Item 8
(a)-2 Financial Statement Schedules
Report of Independent Public Accountants on Schedules
Schedule II. Valuation and Qualifying
Accounts - 1996, 1995 and 1994
(a)-3 Exhibits
See Exhibit Index
(b) Reports on Form 8-K
On October 18, 1996, Indiana Gas filed a Current
Report on Form 8-K which disclosed among other matters, the
granting of certain summary judgment motions filed by
defendant insurance carriers in the insurance coverage
litigation pending in federal district court with respect to
environmental costs incurred and expected to be incurred by
Indiana Gas at certain manufactured gas plant and storage
facility sites.
Item 5. Other Events
Updated environmental disclosure.
EXHIBIT INDEX
Exhibit No. Description Reference
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 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);
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);
and Officers'
Certificate pursuant
to Section 301 of the
Indenture dated as of
April 5, 1995,
(incorporated by
reference to
Exhibit 4(a) to
Indiana Gas
Company, Inc.'s
Current Report on
Form 8-K dated and
filed April 5,
1995).
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 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-F 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-G 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-H 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-I Termination Benefits Exhibit 10-I to
Agreement, dated July Indiana Energy,
29, 1994, and as Inc.'s 1996 Annual
amended and restated Report on Form 10-K.
March 15, 1996, among
Indiana Energy, Inc.,
Indiana Gas Company,
Inc. and
Carl L. Chapman.
10-J Termination Benefits Exhibit 10-J to
Agreement, dated July Indiana Energy,
29, 1994, among Inc.'s 1996 Annual
Indiana Energy, Inc., Report on Form 10-K.
Indiana Gas Company,
Inc., and Timothy M.
Hewitt.
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-M to
Compensation Deferral Indiana Energy,
Plan effective Inc.'s 1994 Annual
January 1, 1995. Report on Form 10-K.
10-M 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-N 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-O 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-P Formation Agreement Exhibit 10-C to
among Indiana Energy, Indiana Energy's
Inc., Indiana Gas Quarterly Report on
Company, Inc., IGC Form 10-Q for the
Energy, Inc., Indiana quarterly period
Energy Services, ended March 31, 1996.
Inc., Citizens Gas &
Coke Utility,
Citizens Energy
Services Corporation
and ProLiance Energy,
LLC, effective March
15, 1996.
10-Q Gas Sales and Exhibit 10-C to
Portfolio Indiana Gas'
Administration Quarterly Report on
Agreement between Form 10-Q for the
Indiana Gas quarterly period
Company, Inc. and ended March 31, 1996.
ProLiance Energy,
LLC, effective
March 15, 1996,
for services to
begin April 1,
1996.
10-R Amended appendices to Filed herewith.
the Gas Sales and
Portfolio
Administration
Agreement between
Indiana Gas Company,
Inc. and ProLiance
Energy, LLC referred
to above in Exhibit
10-Q, effective
October 1, 1996.
10-S Exhibit 10-S schedules 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. Indiana Gas has
assigned or released many of these
contracts to its affiliate,
ProLiance Energy, LLC (ProLiance),
pursuant to the Gas Sales and
Portfolio Administration Agreement
between Indiana Gas and ProLiance
referred to above in Exhibits 10-Q
and 10-R.
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-S.1 Firm Transportation Panhandle Eastern P PLT 011715 38,572 5/1/93 3/31/98 Exh. 10-B
10-S.2 Firm Transportation Panhandle Eastern P PLT 011716 51,431 5/1/93 3/31/99 Exh. 10-A
10-S.3 Firm Transportation Panhandle Eastern P PLT 011718 51,431 5/1/93 2/28/97 Exh. 10-C
10-S.4 Firm Transportation Panhandle Eastern P PLT 011721 77,144 5/1/93 3/31/97 Exh. 10-D
10-S.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-S.6 Market Area - Panhandle Eastern P PLT 011720 50,000 5/1/93 3/31/97 See Exhibit 10-P.5.
Firm Transportation
10-S.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-S.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-S.9 No Notice Service Texas Gas N0325 56,793 11/1/93 10/31/02 See Exhibit 10-P.8
10-S.10 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/98 See Exhibit 10-P.8
10-S.11 No Notice Service Texas Gas N0325 56,794 11/1/93 10/31/99 See Exhibit 10-P.8
10-S.12 Firm Storage ANR T,E & S 00087 100 29,000 3/1/73 2/28/98 1991 Form 10-K,
Exh. 10-N, File 1-6494.
10-S.13 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.
10-S.14 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-S.15 Firm Natural Gas Tenneco NGFSA 9609 20,000 11/1/95 3/31/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.20, File 1-6494.
10-S.16 Firm Natural Gas Tenneco NGFSA 9619 16,000 11/1/95 3/31/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.21, File 1-6494.
10-S.17 Firm Natural Gas Tenneco NGFSA9620 40,000 12/1/95 2/28/98 1995 Form 10-K, Exh.
Supply Gas Marketing 10-P.22, File 1-6494.
12 Computation of Ratio of Earnings
to Fixed Charges Filed herewith.
21 Subsidiaries of Indiana Gas
Company, Inc. Filed herewith.
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 22, 1997. 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 25, 1996. 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 25, 1996
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1996
(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 1995 Expenses Other Were Created Changes 1996
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 1,662 $ 3,803 $ 0 $ 3,612 $ 0 $ 1,853
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1995
(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 1994 Expenses Other Were Created Changes 1995
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 1,238 $ 3,690 $ 0 $ 3,266 $ 0 $ 1,662
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - 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 Balance at
September 30, Costs and Reserves Other September 30,
Description 1993 Expenses Other Were Created Changes 1994
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,055 $ 3,850 $ 0 $ 4,667 $ 0 $ 1,238
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 19, 1996 /s/Lawrence A. Ferger
Lawrence A. Ferger,
Chairman, 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 Chairman, President and December 19, 1996
Lawrence A. Ferger Chief Executive Officer
/s/Niel C. Ellerbrook Senior Vice President December 19, 1996
Niel C. Ellerbrook Chief Financial Officer
and Director
/s/Jerome A. Benkert Vice President and Controller December 19, 1996
Jerome A. Benkert
/s/Paul T. Baker Senior Vice President December 19, 1996
Paul T. Baker Chief Operating Officer and
Director
/s/Gerald L. Bepko Director December 19, 1996
Gerald L. Bepko
/s/Loren K. Evans Director December 19, 1996
Loren K. Evans
/s/Otto N. Frenzel III Director December 19, 1996
Otto N. Frenzel III
/s/Anton H. George Director December 19, 1996
Anton H. George
Director December 19, 1996
Don E. Marsh
/s/Fred A. Poole Director December 19, 1996
Fred A. Poole
/s/Richard P. Rechter Director December 19, 1996
Richard P. Rechter
Director December 19, 1996
James C. Shook
/s/Jean L. Wojtowicz Director December 19, 1996
Jean L. Wojtowicz