SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED March 31, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3553
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Indiana 35-0672570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(Address of principal executive offices)
(812) 465-5300
(Registrant's telephone number, including area code)
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
issuer's classes of common stock, as of the close of the
period covered by this report.
Common Stock, without par value - 15,705,427 Shares
Outstanding at March 31, 1994
2
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended
March 31,
1994 1993
(in thousands except per share data)
OPERATING REVENUES
Electric $68,642 $62,810
Gas 35,651 30,426
Total operating revenues 104,293 93,236
OPERATING EXPENSES
Operation:
Fuel for electric generation 24,672 18,244
Purchased electric energy 1,284 3,966
Cost of gas sold 24,822 20,651
Other 10,582 8,914
Total operation 61,360 51,775
Maintenance 5,208 5,892
Depreciation and amortization 9,430 9,341
Federal and state income taxes 7,272 6,212
Property and other taxes 3,791 3,847
Total operating expenses 87,061 77,067
OPERATING INCOME 17,232 16,169
Other Income:
Allowance for other funds used
during construction 1,149 255
Interest 186 133
Other, net 588 717
_______ _______
1,923 1,105
INCOME BEFORE INTEREST CHARGES 19,155 17,274
Interest Charges:
Interest on long-term debt 4,624 4,387
Amortization of premium, discount,
and expense on debt 175 95
Other interest 240 177
Allowance for borrowed funds used
during construction (556) (118)
_______ _______
4,483 4,541
NET INCOME 14,672 12,733
Preferred Stock Dividends 276 276
NET INCOME APPLICABLE TO COMMON STOCK $14,396 $12,457
AVERAGE COMMON SHARES OUTSTANDING 15,705 15,705
EARNINGS PER SHARE OF COMMON STOCK $0.92 $0.79
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
3
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended
March 31,
1994 1993
(in thousands)
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $14,672 $12,733
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 9,430 9,341
Deferred income taxes and investment
tax credits, net (43) (219)
Allowance for other funds used during
construction (1,149) (255)
Change in assets and liabilities:
Receivables, net (2,518) (5,696)
Inventories 7,060 12,191
Coal contract settlement 1,814 -
Accounts payable (7,652) (13,232)
Accrued taxes 6,443 7,893
Refunds from gas suppliers - 1,573
Refunds to customers 2,067 1,326
Accrued coal liability 3,033 -
Other 8,086 5,255
Net cash provided by operating activities 41,243 30,910
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (17,009) (9,946)
Demand side management program expenditures (1,290) (1,075)
Purchases of investments (501) (1,771)
Sales of investments 1,569 2,720
Investments in partnerships (2,905) (2,518)
Change in nonutility property (760) 11
Other 301 258
Net cash used in investing activities (20,595) (12,321)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (6,755) (6,598)
Change in environmental improvement funds
held by Trustee 3,634 -
Change in notes payable (4,445) (5,119)
Net cash used in financing activities (7,566) (11,717)
NET INCREASE IN CASH
AND CASH EQUIVALENTS 13,082 6,872
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,505 3,328
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $27,587 $10,200
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
4
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1994 1993
(in thousands)
ASSETS
Utility Plant, at original cost:
Electric $882,095 $879,476
Gas 107,586 107,100
________ ________
989,681 986,576
Less - Accumulated provision for
depreciation 432,891 423,730
________ ________
556,790 562,846
Construction work in progress 87,098 72,615
Net Utility Plant 643,888 635,461
Other Investments and Property:
Investments in leveraged leases 34,511 34,924
Investments in partnerships 24,323 25,023
Environmental improvement funds held
by Trustee 18,980 22,613
Nonutility property and other 8,758 7,997
________ ________
86,572 90,557
Current Assets:
Cash and cash equivalents 15,805 5,756
Restricted cash 11,782 8,749
Temporary investments, at cost which
approximates market 5,472 6,540
Receivables, less allowance of $307 and $166,
respectively 30,877 28,360
Inventories 31,130 38,189
Other current assets 2,445 3,047
________ ________
97,511 90,641
Deferred Charges:
Coal contract settlement 11,481 13,295
Unamortized premium on reacquired debt 6,980 7,100
Postretirement benefits other than pensions 5,237 4,125
Demand side management program 8,701 7,411
Other deferred charges 12,083 11,433
________ ________
44,482 43,364
$872,453 $860,023
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
5
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
March 31, December 31,
1994 1993
(in thousands)
SHAREHOLDERS' EQUITY AND LIABILITIES
Common Stock $102,691 $102,691
Retained Earnings 211,975 204,058
________ ________
314,666 306,749
Less Treasury Stock, at cost 24,540 24,540
Common Shareholders' Equity 290,126 282,209
Cumulative Nonredeemable Preferred Stock 11,090 11,090
Cumulative Redeemable Preferred Stock 7,500 7,500
Cumulative Special Preferred Stock 1,015 1,015
Long-Term Debt, net of current maturities 261,700 261,100
Long-Term Partnership Obligations, net of
current maturities 9,507 12,881
Total capitalization, excluding bonds subject
to tender (see Consolidated Statements
of Capitalization) 580,938 575,795
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 41,475 41,475
Current Maturities of Long-Term Debt,
Interim Financing, and
Long-Term Partnership Obligations:
Maturing long-term debt 737 763
Notes payable 6,000 11,000
Partnership obligations 3,959 3,849
Total current maturities of long-term
debt, interim financing, and
long-term partnership obligations 10,696 15,612
Other Current Liabilities:
Accounts payable 26,100 33,753
Dividends payable 135 135
Accrued taxes 14,374 7,931
Accrued interest 7,419 4,517
Refunds to customers 5,465 3,398
Accrued coal liability 11,782 8,749
Other accrued liabilities 14,889 10,041
Total other current liabilities 80,164 68,524
Total current liabilities 132,335 125,611
DEFERRED CREDITS AND OTHER:
Accumulated deferred income taxes 118,331 117,267
Accumulated deferred investment tax credits,
being amortized over lives of property 26,083 26,549
Regulatory income tax liability 6,556 7,197
Postretirement benefits other than pensions 5,237 4,125
Other 2,973 3,479
________ ________
159,180 158,617
$872,453 $860,023
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
6
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
March 31, December 31,
1994 1993
(in thousands)
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 16,815,604 shares $102,691 $102,691
Retained Earnings, $2,209,642 restricted as
to payment of cash dividends on common stock 211,975 204,058
________ ________
314,666 306,749
Less Treasury Stock, at cost, 1,110,177 shares 24,540 24,540
________ ________
290,126 282,209
PREFERRED STOCK:
Cumulative, $100 par value, authorized 800,000
shares issuable, in series
Nonredeemable
4.8% Series, outstanding 85,895 shares
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares
callable at $101 per share 2,500 2,500
________ ________
11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 redeem-
able at $100 per share December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series,
outstanding 10,150 shares
redeemable at $100 per share 1,015 1,015
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 254,740 254,740
Notes payable 7,843 7,263
Unamortized debt premium and discount, net (883) (903)
________ ________
261,700 261,100
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 9,507 12,881
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL
BONDS SUBJECT TO TENDER, DUE
2015, Series A, presently 5.75% 9,975 9,975
2015, Series B, presently 2.7% 31,500 31,500
________ ________
41,475 41,475
Total capitalization, including bonds
subject to tender $622,413 $617,270
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
7
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Three Months Ended
March 31,
1994 1993
(in thousands)
Balance Beginning of Period $204,058 $190,796
Net Income 14,672 12,733
________ ________
218,730 203,529
Preferred stock dividends 276 276
Common stock dividends ($0.4125 per share in 1994 and
$0.4025 per share in 1993) 6,479 6,322
________ ________
6,755 6,598
Balance End of Period (See Consolidated
Statements of Capitalization for restriction) $211,975 $196,931
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
8
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. General
It is suggested that these consolidated financial statements
be read in conjunction with the consolidated financial
statements and the notes thereto included in the Company's
1993 Annual Report to Shareholders.
The 1994 consolidated statements are on the basis of interim
figures and are subject to audit and adjustments. These
financial statements include the accounts of Southern
Indiana Gas and Electric Company and its wholly-owned
subsidiary, Southern Indiana Properties, Inc., and include
all adjustments which are in the opinion of management,
necessary for a fair statement of the financial position and
results of operations for the three months ended March 31,
1994. Because of seasonal and other factors, the earnings
for the three months ending March 31, 1994 should not be
taken as an indication for all or any part of the balance of
1994.
2. Utility Plant
Utility plant is stated at the historical original cost of
construction. Such cost includes payroll-related costs such
as taxes, pensions and other fringe benefits, general and
administrative costs, and an allowance for the cost of funds
used during construction (AFUDC), which represents the
estimated debt and equity cost of funds capitalized as a
cost of construction. While capitalized AFUDC does not
represent a current source of cash, it does represent a
basis for future cash revenues through depreciation and
return allowances. The weighted average AFUDC rates (before
income taxes) used by the Company for the three months
ending March 31, 1994 and 1993 were 9.6% and 10.5%,
respectively.
3. Cash Flow Information
For the purposes of the Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, the Company considers
all highly liquid debt instruments purchased with an
original maturity of three months or less to be cash
equivalents.
The Company, for the three months ended March 31, 1994 and
1993 paid interest (net of amounts capitalized) of
$1,406,000 and $4,188,000, respectively, and income taxes
$2,693,000 and $462,000, respectively. Additionally the
Company is involved in several partnerships which are
partially financed by partnership obligations amounting to
$13,466,000 and $16,730,000 at March 31, 1994 and December
31, 1993, respectively.
9
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING REVENUES
Electric revenue was $5.8 million greater during the
first quarter compared to the same period in 1993, primarily
due to increased electric sales. Winter temperatures, when
measured in heating degree days, were approximately 4%
cooler than the prior year and contributed to a 3% overall
increase in system sales. Sales to residential and
commercial customers rose 4% and 2%, respectively, and
municipal customer sales were up 6%. Despite a decline in
sales to Alcoa Generating Corporation related to the
decreased production at its Warrick Operations plant in July
1993, nonsystem sales increased 52%, contributing $2.1
million of the revenue increase during the quarter. The
increased sales were primarily due to the requirements of
one nonassociated utility.
Recovery of higher average fuel and purchased power
costs during the current quarter, compared to the first
quarter of 1993, led to a $1.6 million increase in related
electric revenues. Changes in the cost of fuel for electric
generation and purchased power are passed on to customers
through commission approved fuel cost adjustments.
The impact of lower average energy rates charged on
sales to nonassociated utilities was partially offset by
higher demand related revenues, resulting in slightly lower
revenues to these customers.
The changes in electric revenue are shown below:
Revenue Increased (Decrease) From
Corresponding Period in 1993
Three Months
Ended 3-31-94
(in thousands)
Change in sales volume $ 4,700
Fuel and purchased power recovery 1,600
Rate adjustments in sales to various
nonassociated utilities (700)
Other 232
________
$ 5,832
Increase in systems sales (MWh) 35,511
Increase in nonsystem sales (MWh) 154,589
Gas revenue was $5.2 million higher during the quarter
ended March 31, 1994, chiefly due to the recovery of higher
average unit costs of gas sold, which were up 16%. The
higher unit costs reflected increased spot market prices
resulting from higher nationwide demand reflecting the
general tightening of the balance between available supply
and demand after several years of excess supply. Changes in
the cost of gas sold are passed on to customers through
commission approved gas cost adjustments.
10
The cooler weather contributed to greater sales to
residential and commercial customers, up 4% and 6%,
respectively. Industrial sales declined due to several
large customers electing to purchase their gas supplies from
sources other than the Company. Total throughput increased
1%.
The first step of the Company's two-step retail base gas
rate adjustment was effective August 1, 1993, and is
approximately 4% overall on an annual basis. A second equal
adjustment will become effective August 1, 1994.
The changes in gas revenues are shown below:
Revenue Increased (Decrease) From
Corresponding Period in 1993
Three Months
Ended 3-31-94
(in thousands)
Cost of gas recovery $3,600
Change in sales volume 800
Change in rates and sales mix 800
Other 25
______
$5,225
Increase in total throughput (MDth) 140
OPERATING EXPENSES
Fuel for electric generation increased $6.4 million
(35%) during the current quarter due to a 32% increase in
generation resulting primarily from greater nonsystem sales
activity. During the first three months of 1993, the
Company purchased substantially greater amounts of electric
energy from other utilities because two of the Company's
generating units were undergoing scheduled maintenance
outages and because market prices were favorable. The cost
of purchased power declined 68% during the first quarter of
1994. Cost of gas sold was $4.2 million (20%) greater
during the first quarter due to the higher average cost of
gas delivered and to increased unit deliveries.
Other operation expenses, up 19%, reflected additional
production plant operating expenses related to the increased
generation, greater employee-related benefit costs, and
increases in various other operating expenses.
Maintenance expenditures declined 12% primarily due to
the deferral of a routine maintenance inspection of one of
the Company's generating units until the second quarter.
OTHER INCOME AND INTEREST CHARGES
Other income was greater during the reporting period due
to increased allowance for equity funds used during
construction, primarily from the construction of the
Company's new sulfur dioxide "scrubber". (See "Clean Air
Act" in Item 7. of Management's Discussion and Analysis of
Results of Operations and Financial Condition in the
Company's 1993 Form 10-K report for further discussion.)
Interest charges during the quarter were relatively
unchanged. The impact of the additional $50 million of
11
long-term debt issued during the second quarter of 1993 was
offset by increased allowance for borrowed funds used during
construction. (See "Liquidity And Capital Resources" in
Item 7. of Management's Discussion and Analysis of Results
of Operations and Financial Condition in the Company's 1993
Form 10-K report for further discussion.)
NEW ACCOUNTING STANDARD
Effective January 1, 1994, the Company adopted Statement
of Financial Accounting Standards No. 112, "Employers'
Accounting for Postemployment Benefits" which requires the
Company to accrue the estimated cost of benefits provided to
former or inactive employees after employment but before
retirement age. Postemployment benefits per the new
statement include, but are not limited to, salary
continuation, supplemental unemployment benefits, severance
benefits, disability-related benefits (including worker's
compensation), and continuation of benefits such as health
care and life insurance coverage.
The impact of the new statement did not have a material
impact on financial position or results of operations.
EARNINGS
Earnings per share of common stock for the first quarter
rose 13 cents (16%) compared to the same period in 1993.
The increase was due chiefly to the higher weather-related
system sales, the increase in nonsystem sales, and the
greater allowance for funds used during construction.
LIQUIDITY AND CAPITAL RESOURCES
The Company's demand for capital is primarily related to
its construction of utility plant and equipment necessary to
meet customers' electric and gas energy needs, as well as
environmental compliance requirements. Expenditures for the
Company's demand side management programs (see following
discussion) will continue to increase and will become a
significant use of capital. Construction expenditures
(excluding allowance for other funds used during
construction) and demand side management program
expenditures incurred during the quarter ended March 31,
1994 totaled $18.3 million. Approximately 90% of these
expenditures were funded with internally generated cash.
The Company anticipates continued financial stability and
achievement of its financial objectives during the remainder
of 1994 and is presently faced with no liquidity problems.
The Company estimates that construction expenditures for
the five year period 1994-1998 will total approximately $270
million. Included in this amount is about $44 million to
comply by 1995 with the Clean Air Act Amendments of 1990.
Also included as part of the 1994-1998 construction program
is approximately $51 million of expenditures to develop and
implement demand side management programs. (See "Clean Air
Act" and "Demand Side Management" in Item 7. of Management's
Discussion and Analysis of Results of Operations and
Financial Condition in the Company's 1993 Form 10-K report
for further discussion of these issues.) Although the
Company expects the majority of the construction
requirements and an estimated $48 million in debt security
redemptions and other long-term obligations to be provided
by internally generated funds, external financing
requirements of $50-70 million are anticipated for such
purposes.
12
PART TWO - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security
Holders
(a) The annual meeting of shareholders was held at
3:00 P.M. (CST) on March 22, 1994, with the
following actions taken:
(b) The following three individuals were re-elected as
directors of the Company for three year terms:
Ronald G. Reherman, Donald E. Smith, and
James S. Vinson.
The adoption of the Southern Indiana Gas and
Electric Company 1994 Stock Option Plan was
approved.
The appointment of Arthur Andersen & Co. as
independent auditors of the Company for 1994 was
ratified.
(c) The following table shows the voting results as to
each matter considered by the shareholders:
ITEM 1: VOTE FOR ELECTION OF DIRECTORS
Total Votes Cast: 13,225,380
NOMINEE VOTES FOR VOTES WITHHELD
_______ _________ ______________
Ronald G. Reherman 13,076,310 149,070
Donald E. Smith 13,091,767 133,613
James S. Vinson 13,018,547 206,833
ITEM 2: APPROVE ADOPTION OF STOCK OPTION PLAN
Total Votes Cast: 13,221,048
FOR AGAINST ABSTAIN
___ _______ _______
12,091,971 730,970 398,107
ITEM 3: RATIFICATION OF APPOINTMENT OF AUDITORS
Total Votes Cast: 13,221,048
FOR AGAINST ABSTAIN
___ _______ _______
12,995,059 44,746 181,243
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
13
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
SIGNATURE
Pursuant to the requirements of the Securities
Exchange Act of 1934, the registrant has duly caused this
report to be signed on its behalf by the undersigned
thereunto duly authorized.
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(Registrant)
S. M. Kerney
S. M. Kerney
Controller
Date: May 12, 1994
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
INDEX
Page No.
Part I - Financial Information:
Consolidated Statements of Income for the Three Months
ended March 31, 1994 and 1993 2
Consolidated Statements of Cash Flows for the
Three Months ended March 31, 1994 and 1993 3
Consolidated Balance Sheets at March 31, 1994 and
December 31, 1993 4-5
Consolidated Statements of Capitalization at March 31,
1994 and December 31, 1993 6
Consolidated Statements of Retained Earnings for the
Three Months ended March 31, 1994 and 1993 7
Notes to Consolidated Financial Statements 8
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 9-11
Part II - Other Information 12
Signature 13