EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratios)
Twelve
Months Ended
June 30, Year Ended December 31
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2001(1) 2000(1) 1999 1998 1997(2) 1996
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Earnings:
Net income $ 9,439 $11,209 $29,742 $26,825 $13,648 $36,121
Income taxes 2,715 7,251 16,734 14,058 7,813 21,637
Fixed charges (see below) 32,673 22,740 17,691 16,133 17,782 17,154
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Total adjusted earnings $44,827 $41,200 $64,167 $57,016 $39,243 $74,912
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Fixed charges:
Total interest expense $32,342 $22,409 $16,969 $15,802 $17,049 $16,200
Interest component of rents 331 331 722 331 733 954
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Total fixed charges $32,673 $22,740 $17,691 $16,133 $17,782 $17,154
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Ratio of earnings to fixed charges 1.4 1.8 3.6 3.5 2.2 4.4
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(1) Merger and integration related costs and restructuring costs incurred for
the twelve months ended June 30, 2001 and for the year ended December 31,
2000 totaled $7.3 million and $16.8 million, respectively. These costs
relate primarily to transaction costs, severance, elimination of duplicate
facilities, and other merger, integration and restructuring activities.
As a result of merger integration activities, management has identified
certain information systems that are expected to be retired in 2001.
Accordingly, the useful lives of these assets have been shortened to
reflect this decision. These information system assets are owned by a
wholly owned subsidiary of Vectren and the fees allocated by the subsidiary
for the use of these systems by Indiana Gas are reflected in operation and
maintenance expenses in the accompanying condensed financial statements. As
a result of the shortened useful lives, additional fees were incurred by
Indiana Gas. For the twelve months ended June 30, 2001 and for the year
ended December 31, 2000, these additional fees increased operation and
maintenance $13.6 million and $11.4 million, respectively.
In total, merger and integration related costs incurred for the twelve
months ended June 30, 2001 and for the year ended December 31, 2000 were
$20.8 million ($12.9 million after tax) and $28.2 million ($19.5 million
after tax), respectively. Before merger and integration and restructuring
charges, Indiana Gas' ratio of earnings to fixed charges for the twelve
months ended June 30, 2001 was 1.8 and for the year ended December 31, 2000
was 2.7.
(2) The Indiana Gas Board of Directors authorized management to undertake the
actions necessary and appropriate to restructure Indiana Gas 'operations
and recognize a resulting restructuring charge of $39.5 million ($24.5
million after tax) which included estimated costs related to involuntary
workforce reductions. Indiana Gas' ratio of earnings to fixed charges for
1997 before restructuring costs was 4.4.