December 20, 1995
Office of Applications and Report Services
Securities and Exchange Commission
Washington, D.C. 20549
Gentlemen:
We are transmitting herewith Indiana Energy, Inc.'s
Annual Report on Form 10-K for the fiscal year ended
September 30, 1995, pursuant to the requirements of Section
13 of the Securities Exchange Act of 1934.
The $250.00 filing fee was transmitted via FEDWIRE on
December 19, 1995.
Sincerely,
/s/Kathleen S. Morris
Kathleen S. Morris
KSM:rs
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended September 30, 1995
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 No. 1-9091
INDIANA ENERGY, INC.
(Exact name of Registrant as specified in its charter)
INDIANA 35-1654378
(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
Indiana Energy, Inc.
Common Stock - Without Par Value New York Stock Exchange
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
As of November 30, 1995, the aggregate market value of Common
Stock held by nonaffiliates was $464,322,238.
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 22,531,405 November 30, 1995
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]
DOCUMENTS INCORPORATED BY REFERENCE
List hereunder the following documents if incorporated by
reference and the Part of the Form 10-K into which the
document is incorporated.
PART III - Definitive Proxy Statement for Annual
Meeting of Shareholders to be held on January 26,
1996, electronically filed with the Commission on
December 7, 1995, is incorporated by reference
into Part III of this report.
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
Stockholders 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 Energy, Inc. (Indiana Energy or the company) is
a publicly owned holding company with subsidiaries in the
natural gas distribution business and related services. It
was incorporated under the laws of the state of Indiana on
October 24, 1985, and has seven direct and indirect
subsidiaries.
Indiana Gas Company, Inc. (Indiana Gas), the principal
subsidiary and business entity of the holding company, is an
operating public utility engaged in the business of
providing gas utility service in the state of Indiana.
All of the outstanding capital stock of Terre Haute Gas
Corporation (Terre Haute) and Richmond Gas Corporation
(Richmond) was acquired by Indiana Energy on July 31, 1990.
Both companies were operating public utilities engaged in
the business of providing gas distribution services in
Indiana. On January 21, 1991, Indiana Gas acquired from
Indiana Energy all the outstanding capital stock of Terre
Haute and Richmond. While these companies technically exist
as separate corporate entities, their business operations
have been combined with Indiana Gas' operations and the
companies do business under the name of Indiana Gas.
Indiana Energy has a wholly-owned subsidiary, IEI
Investments, Inc., which was formed to group the operations
and financing of nonregulated businesses and segregate them
from the regulated businesses. IEI Investments has two
subsidiaries, IGC Energy, Inc., and Energy Realty, Inc. On
December 29, 1992, IGC Energy, Inc. sold its majority
interest in EnTrade Corporation to Tenneco Gas. EnTrade was
a natural gas marketing and related services company with
industrial and utility customers primarily in the eastern
and midwestern United States. On November 1, 1994, IGC
Energy formed a natural gas marketing subsidiary, Indiana
Energy Services, Inc. (IES), which provides natural gas
services to large-volume industrial and commercial
customers, as well as to small local distribution companies
and other natural gas marketing companies. IES provides its
customers with gas supply, pipeline transportation services
and gas management services including nomination services,
balancing services and load forecasting. IGC Energy also
has an investment in Loggins, Inc., a distributor of
flexible gas pipe and of products for distributing and using
natural gas. The other subsidiary of IEI Investments is
Energy Realty, Inc., a real estate company that owns a
warehouse facility which is leased to Indiana Gas. Energy
Realty also is a limited partner in two affordable housing
complexes.
(c) Narrative Description of the Business.
At September 30, 1995, Indiana Gas supplied gas to
about 455,000 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, 1995,
residential customers provided 60 percent of revenues,
commercial 20 percent and industrial 20 percent. At such
date, approximately 98 percent of Indiana Gas' customers
used gas for space heating, and space heating revenues from
these customers for the fiscal year were 80 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, 1995, Indiana Gas added
approximately 11,300 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 1995 represented 30 percent (33,312 MDth) of
throughput compared to 26 percent (30,125 MDth) in 1994 and
11 percent (12,307 MDth) in 1993. Although revenues are
lower, rates for transportation generally provide the same
margins as would have been earned had the gas been sold
under normal sales tariffs.
As a result of a series of FERC orders, including Order
No. 636, Indiana Gas now purchases all of its natural gas
from producers, brokers and marketers on both short-term and
medium-term contracts. Indiana Gas also has contracts with
pipelines for storage and transportation of natural gas.
Rates for gas services purchased from interstate
pipeline suppliers are governed by tariffs which are subject
to adjustment and approval by the Federal Energy Regulatory
Commission (FERC) in accordance with the Natural Gas Act.
Prices for gas purchased from gas producers and marketers
are determined by market conditions. Indiana Gas' rates and
charges, terms of service, accounting matters, issuance of
securities, and other operational matters are regulated by
the Indiana Utility Regulatory Commission (IURC).
Adjustments to Indiana Gas' rates and charges related
to the cost of gas are made through gas cost adjustment
(GCA) procedures established by Indiana law and administered
by the IURC. The IURC has applied the statute authorizing
the GCA procedures to reduce rates when necessary so as to
limit utility operating income, after adjusting to normal
weather, to the level authorized in the last general rate
order. On November 9, 1995, the IURC approved a settlement
agreement which provided, among other things, an increase in
Indiana Gas' authorized utility operating income from $51.1
million to $54.2 million beginning in fiscal 1996. (See
Item 7, 1996 Settlement Agreement.)
Information regarding environmental matters affecting
the company is incorporated herein by reference to Item 7,
Environmental Matters.
Indiana Gas had 1,084 full-time employees and 36 part-
time employees as of September 30, 1995.
Item 2. Property
Indiana Energy owns no properties.
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, 1995, such properties included approximately
10,164 miles of distribution mains; 467,540 meters; seven
reservoirs currently being used for the underground storage
of purchased gas with approximately 107,074 acres of land
held under storage easements; 9,478,039 Dth of gas in
company-owned underground storage with a daily
deliverability of 138,860 Dth; 19,953,511 Dth of gas in
contract storage with a daily deliverability of 235,170 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, 1995, amounted to $54.9 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, 1995, to a vote of
security holders.
Item 4a.Executive Officers of the Company
As of September 30, 1995, 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 61 None Indiana Energy, Inc.
President and Chief
Executive Officer July 1, 1987
Indiana Gas Company,Inc.
President and Chief
Executive Officer July 1, 1987
IEI Investments, Inc.
President and Chief
Executive Officer July 1, 1987
Niel C. Ellerbrook 46 None Indiana Energy, Inc.
Vice President and
Treasurer and Chief
Financial Officer Oct. 25, 1985
Indiana Gas Company,Inc.
Senior Vice President and
Chief Financial Officer July 1, 1987
IEI Investments, Inc.
Vice President and
Treasurer May 5, 1986
Paul T. Baker 54 None Indiana Gas Company, Inc.
Senior Vice President
and Chief Operating
Officer Aug. 1, 1991
Senior Vice President -
Gas Supply and
Customer Services July 1, 1987
Anthony E. Ard 54 None Indiana Gas Company, Inc.
Senior Vice President
of Corporate Affairs Jan. 9, 1995
Vice President -
Corporate Affairs Jan. 11, 1993
Vice President and
Secretary Sep. 30, 1988
Carl L. Chapman 40 None Indiana Energy, Inc.
Assistant Treasurer Jan. 9, 1989
Indiana Gas Company, Inc.
Senior Vice President
of Corporate Development Jan. 9, 1995
Vice President-Planning July 1, 1987
(1) Each of the officers has served continuously since the dates indicated.
Part II
Item 5. Market for the Registrant's Common Equity and Related
Stockholder Matters
The common stock of the company is listed on the New
York Stock Exchange. The ranges of high and low sales prices
reported in the New York Stock Exchange composite tape and
dividends paid on these shares for fiscal 1994 and 1995 are
shown in the following table:
Fiscal Year 1994 High Low Dividend
First Quarter $23 5/8 $19 1/2 $.25 1/2
Second Quarter $23 1/4 $ 19 $.25 1/2
Third Quarter $20 7/8 $ 18 $.25 1/2
Fourth Quarter $20 1/8 $18 3/8 $.26 1/2
Fiscal Year 1995 High Low Dividend
First Quarter $21 7/8 $17 1/2 $.26 1/2
Second Quarter $20 5/8 $17 3/4 $.26 1/2
Third Quarter $20 3/4 $17 5/8 $.26 1/2
Fourth Quarter $ 22 $18 1/2 $.27 1/2
Cash dividends on common stock are considered quarterly
by the board of directors and historically have been paid on
March 1, June 1, September 1 and December 1 of each year. At
the end of fiscal 1995, there were 10,855 individual and
institutional investors who were shareholders of record.
Item 6. Selected Financial Data
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
(Thousands)
Year Ended September 30 1995 1994 1993(3) 1992 1991
Utility operating revenues $403,810 $475,297 $499,278 $411,260 $389,550
Margin 185,315 194,309 185,725 160,333 153,037
Utility operating expenses 139,127 146,466 141,452 122,206 117,421
Utility operating income 46,188 47,843 44,273 38,127 35,616
Interest and other 14,079 13,247 15,739 12,384 12,330
Utility income 32,109 34,596 28,534 25,743 23,286
Nonutility income (loss) 847 (155) 6,329 (64) 1,475
Preferred dividend requirement
of subsidiary - - 285 1,710 1,710
Net income $ 32,956 $ 34,441 $ 34,578 $ 23,969 $ 23,051
Earnings per average share
of common stock (1) $ 1.46 $ 1.53 $ 1.62 $ 1.16 $ 1.12
Dividends per share of
common stock (1) $ 1.07 $ 1.03 $.99 1/2 $.95 2/3 $.91 2/3
Common shareholders' equity $280,715 $271,245 $258,647 $212,310 $206,026
Redeemable preferred
shareholders' equity - - - 20,000 20,000
Long-term debt (2) 176,563 158,979 184,901 150,311 164,635
$457,278 $430,224 $443,548 $382,621 $390,661
Total throughput (MDth) 109,508 116,285 111,354 101,985 97,503
Annual heating degree days as
a percent of normal 87% 102% 99% 90% 87%
Utility customers served -
average 454,817 443,498 433,000 422,997 414,358
Total Assets at Year-End $663,397 $656,645 $631,280 $627,719 $556,008
(1)Adjusted to reflect the three-for-two stock split October 1, 1993.
(2)Includes current maturities, excludes sinking fund requirements.
(3)Reflects the sale by IGC Energy, Inc. of its interest in EnTrade Corporation
on December 29, 1992.
Item 7. Management's Discussion and Analysis of Results
of Operations and Financial Condition
Results of Operations
The majority of Indiana Energy, Inc.'s (the company)
consolidated earnings are from the operations of its gas
distribution subsidiary, Indiana Gas Company, Inc. Nonutility
income includes IGC Energy, Inc., Energy Realty, Inc. and
Indiana Energy Services, Inc., indirect wholly-owned
subsidiaries of Indiana Energy. Also included in nonutility
income is EnTrade Corporation's operations through December
29, 1992, and the fiscal 1993 gain on the sale of EnTrade.
Though Indiana Energy will continue to consider nonutility
opportunities for investment, its principal business is
expected to continue to be gas distribution. The following
discussion of operating results relates primarily to the
operations of Indiana Gas.
Earnings
Net income decreased in fiscal 1995 when compared to fiscal
1994 due to weather that was 15 percent warmer than last year.
This decrease was partially offset by lower operation and
maintenance expenses, as well as the addition of new
residential and commercial customers.
While net income for fiscal 1994 was approximately the same as
fiscal 1993, utility income increased 21 percent ($6.1
million) when compared to the previous year. The increase
reflected weather that was 4 percent colder than the previous
year, the addition of new residential and commercial customers
and a decrease in operation and maintenance expenses. Net
income for fiscal 1993 included the net gain on the sale of
EnTrade of $7.1 million, or 33 cents per average share.
Utility income, net income and earnings per average share
of common stock for the last three fiscal years are summarized
below:
1995 1994 1993
Utility income (millions of dollars) $32.1 $34.6 $28.5
Net income (millions of dollars) $33.0 $34.4 $34.6
Earnings per average share of common stock $1.46 $1.53 $1.62
Dividends
On July 28, 1995, the board of directors of the company
increased the quarterly dividend on common stock to 27 1/2
cents per share from 26 1/2 cents per share. This resulted in
total dividends paid in 1995 of $1.07 compared to $1.03 in
1994. This is the 23rd consecutive year that the company's
dividends paid on common stock increased over the previous
year.
Margin (Revenues Less Cost of Gas)
In 1995, margin decreased 5 percent ($9 million) when compared
to 1994. The decrease reflects weather that was 15 percent
warmer than last year and 13 percent warmer than normal,
offset somewhat by the addition of new residential and
commercial customers.
In 1994, margin increased 5 percent ($8.6 million) when
compared to 1993. The increase reflected weather that was 4
percent colder than the previous year and 2 percent colder
than normal, as well as the addition of new residential and
commercial customers.
In 1995, total system throughput (combined sales and
transportation) decreased 6 percent (6.8 MMDth) when
compared to last year. In 1994, throughput increased 4 percent
(4.9 MMDth) when compared to 1993. 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) decreased to $2.53 in 1995 from $2.89 in
1994. The decrease is due primarily to lower commodity costs
associated with decreased demand for gas during the very warm
winter this fiscal year.
Total average cost per dekatherm of gas purchased for 1994 was
about the same as 1993. Increased fixed costs per dekatherm
associated with pipeline rate cases and the restructuring
prescribed by Federal Energy Regulatory Commission (FERC)
Order No. 636 were offset by lower commodity costs.
Operating Expenses
Operation and maintenance expenses decreased approximately
$6.4 million in 1995 when compared to 1994. The decrease is
primarily attributable to lower expenses for labor and related
benefits, distribution mains and services, advertising and
outside services. The declining operation and maintenance
expenses reflect management's efforts to control costs in
response to very warm weather.
Operation and maintenance expenses decreased approximately
$2.3 million in 1994 when compared to 1993. The decrease was
primarily attributable to labor and related costs which were
lower than the levels in 1993 when additional operation and
maintenance projects were in progress.
Depreciation and amortization expense increased in 1995 and
1994 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 decreased in 1995 due to lower
taxable utility income. Federal and state income taxes
increased in 1994 due to higher taxable utility income.
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. Taxes other than income taxes increased
in 1994 as the result of increased property tax expense, due
to higher property tax rates and higher assessed values, and
as the result of higher gross receipts tax expense.
Interest Expense
Interest expense decreased in 1995 due to a decrease in
average debt outstanding, slightly offset by an increase in
interest rates. Interest expense decreased in 1994 due to
slightly lower interest rates.
Sale of EnTrade
On December 29, 1992, IGC Energy sold its interest in EnTrade,
a marketer of gas supplies to industrial and utility
customers, for approximately $13.9 million. The transaction
resulted in a net gain after tax of $7.1 million, or 33 cents
per average common share, and was included in nonutility
income in fiscal 1993.
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 (see
Indiana Legislative Matters).
1996 Settlement Agreement
As provided in the previous year's settlement agreement among
Indiana Gas, the Office of Utility Consumer Counselor (OUCC)
and a group of large-volume users, the OUCC performed an
investigation during fiscal 1995 to consider an increase to
Indiana Gas' authorized utility operating income. These
parties then entered a series of negotiations designed to
increase Indiana Gas' opportunity to earn on its recent
capital investments while avoiding the necessity of a general
rate filing. As a result of these negotiations, the IURC
approved on November 9, 1995, a settlement agreement which
provided, among other things, for the following: (1) an
increase in Indiana Gas' authorized utility operating income
from $51.1 million to $54.2 million beginning in fiscal 1996;
(2) with certain specified exceptions, Indiana Gas may not
file a petition to increase its base rates until November 15,
1996; and (3) an agreement to a number of operational and
other service enhancements for large-volume customers.
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. The order is being appealed.
The IURC order has had no immediate impact on Indiana Gas'
earnings since settlements with insurers of $11.9 million
exceed Indiana Gas' share of environmental liability recorded
to date. For further information regarding the status of
investigation and remediation of the sites, PRPs, financial
reporting and ratemaking, see Item 8, Note 9.
Federal Energy Regulatory Commission Matters
In accordance with FERC Order No. 636, Indiana Gas' pipeline
service providers have made a number of filings to restructure
services. Indiana Gas' pipeline service providers are seeking
from customers, including Indiana Gas, recovery of certain
costs related to the transition to restructured services.
On April 12, 1995, Indiana Gas received an order from the IURC
allowing full recovery through the quarterly GCA process of
all FERC Order No. 636 transition costs, including those
transition costs previously deferred. Indiana Gas has
estimated and recorded total transition costs of approximately
$12 million.
Postretirement Benefits Other Than Pensions
Effective October 1, 1993, Indiana Gas adopted Statement of
Financial Accounting Standards No. 106, Employers' Accounting
for Postretirement Benefits Other Than Pensions (SFAS 106).
SFAS 106 requires accounting for the costs of postretirement
health care and life insurance benefits on the accrual basis.
This means the costs of benefits paid in the future are
recognized during the years that an employee provides service
to Indiana Gas rather than the "pay-as-you-go" (cash) basis
(see Item 8, Note 7).
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 SFAS 106. Amounts accrued prior to the order
have been 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.
Income Taxes
Effective October 1, 1993, Indiana Gas adopted Statement of
Financial Accounting Standards No. 109, Accounting for Income
Taxes (SFAS 109). Indiana Gas previously used the deferred
method of accounting for income taxes as prescribed by
Accounting Principles Bulletin Opinion No. 11. SFAS 109
requires the use of the liability method, which effectively
results in a reduction in previously provided deferred income
taxes to reflect the current statutory corporate tax rate.
Due to the effects of regulation, Indiana Gas is not permitted
to recognize the effect of a tax rate change as income but is
required to reduce tariff rates to return the "excess"
deferred income taxes to ratepayers over the remaining life of
the properties that give rise to the taxes. Therefore, the
cumulative effect of a change in accounting principle upon the
initial application of SFAS 109 resulted in no impact on
earnings.
Indiana Legislative Matters
On April 26, 1995, the Indiana General Assembly enacted Senate
Enrolled Act No. 637, which provides new flexibility to the
IURC for future regulation of Indiana utilities and modifies
the application of the earnings test.
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 to 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.
The IURC applies the Indiana statute authorizing the GCA
procedures to reduce rates when necessary so as to limit
utility operating income to the level authorized in the last
general rate order. On a quarterly basis, this earnings test
is performed by comparing Indiana Gas' authorized utility
operating income to its actual utility operating income
(weather normalized) for the previous 12 months. In the past,
one-fourth of the amounts over the authorized utility
operating income would be refundable to Indiana Gas' customers
each quarter. The new law revises the earnings test to provide
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). The revised test provides Indiana Gas a
greater opportunity to earn its authorized utility operating
income over the long term.
New Accounting Standard
In March 1995, the Financial Accounting Standards Board 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 anticipates adopting this standard on
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 this industry.
Liquidity and Capital Resources
New construction to provide service to a growing customer base
and normal system maintenance and improvements will continue
to require substantial capital expenditures. Indiana Gas' goal
is to internally fund approximately 75 percent of its capital
expenditure program. This will help Indiana Gas to maintain
its high creditworthiness. The long-term debt of Indiana Gas
is currently rated Aa3 by Moody's Investors Service and AA- by
Standard & Poor's Corporation.
Total capital required to fund both capital expenditures and
refinancing requirements for 1994 and 1995, along with
estimated amounts for 1996 through 1998, are as follows:
THOUSANDS 1994 1995 1996 1997 1998
Capital expenditures $57,100 $54,900 $58,800 $60,500 $61,800
Refinancing requirements
(including nonutility) 28,100 3,200 300 1,200 36,200
$85,200 $58,100 $59,100 $61,700 $98,000
In 1995, 77 percent of Indiana Gas' capital expenditures was
provided by funds generated internally (utility income less
dividends plus charges to utility income not requiring funds).
In 1994, 75 percent of capital expenditures was provided by
funds generated internally. External funds required for the
1995 construction program were obtained primarily through
Indiana Gas' medium-term note program as discussed below.
Capitalization objectives for Indiana Gas are 55-65 percent
common equity and preferred stock and 35-45 percent long-term
debt. Consolidated capitalization ratios are generally
expected to be similar to those of Indiana Gas, but may vary
from time to time, depending on particular business
opportunities. The company's common equity component was 61
percent of total capitalization at September 30, 1995.
On October 28, 1994, $3 million of the outstanding 9 3/8 %
Series M, First Mortgage Bonds were retired.
On April 5, 1995, Indiana Gas filed with the Securities and
Exchange Commission (SEC) a prospectus supplement for the
offering of its Medium-Term Notes, Series E (Notes) with an
aggregate principal amount of up to $55 million. The Notes
were registered under the existing shelf registration
statement filed November 20, 1992, with the SEC with respect
to the issuance of up to $90 million in aggregate principal
amount of debt securities ($35 million was previously
withdrawn from this shelf as a result of the December 9, 1992,
issuance of 6 5/8 %, Series D Notes). Indiana Gas plans to
issue the Notes from time to time through 1997. The Notes,
when issued, will be due not less than nine months and not
more than 40 years from the date of issue, and will bear
interest at a fixed or variable rate as negotiated between the
purchaser and Indiana Gas. The net proceeds from the sale of
the Notes will be used to finance, in part, the refunding of
long-term debt, Indiana Gas' continuing construction program
and for other corporate purposes. During June 1995, $20
million in aggregate principal amount of the Notes were issued
as follows: $5 million of 7.15% Notes due March 15, 2015; $5
million of 6.31% Notes due June 10, 2025; and $10 million of
6.53% Notes due June 27, 2025.
On July 28, 1995, Indiana Energy's board of directors
authorized Indiana Energy to repurchase up to 700,000 shares
of its outstanding common stock. The repurchases will be made
over time in open-market transactions.
The nature of Indiana Gas' business creates large short-term
cash working capital requirements primarily to finance
customer accounts receivable, unbilled utility revenues
resulting from cycle billing, gas in underground storage and
capital expenditures until permanently financed. Short-term
borrowings tend to be greatest during the heating season when
accounts receivable and unbilled utility revenues are at their
highest. Depending on cost, commercial paper or bank lines of
credit are used as sources of short-term financing. Indiana
Gas' commercial paper is rated P-1 by Moody's and A-1+ by
Standard & Poor's. Long-term financial strength and
flexibility require maintaining throughput volumes,
controlling costs and, if absolutely necessary, securing
timely increases in rates to recover costs and provide a fair
and reasonable return to shareholders.
Item 8.Financial Statements and Supplementary Data
Management's Responsibility for Financial Statements
The management of the company is responsible for the
preparation of the consolidated financial statements and the
related financial data contained in this report. The financial
statements are prepared in conformity with generally accepted
accounting principles and follow accounting policies and
principles applicable to regulated public utilities.
The integrity and objectivity of the data in this report,
including required estimates and judgements, are the
responsibility of management. Management maintains a system of
internal controls and utilizes an internal auditing program to
provide reasonable assurance of compliance with company
policies and procedures and the safeguard of assets.
The board of directors pursues its responsibility for these
financial statements through its audit committee, which meets
periodically with management, the internal auditors and the
independent auditors, to assure that each is carrying out its
responsibilities. Both the internal auditors and the
independent auditors meet with the audit committee, with and
without management representatives present, to discuss the
scope and results of their audits, their comments on the
adequacy of internal accounting controls and the quality of
financial reporting.
/s/Niel C. Ellerbrook
Niel C. Ellerbrook
Vice President and
Treasurer
and Chief Financial
Officer
Report of Independent Public Accountants
To the Shareholders and Board of Directors of Indiana Energy,
Inc.:
We have audited the accompanying consolidated balance sheets
and schedules of long-term debt of Indiana Energy, Inc. (an
Indiana corporation) and subsidiary companies as of September
30, 1995, and 1994, and the related consolidated statements of
income, common shareholders' equity and cash flows for each of
the three years in the period ended September 30, 1995. 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 Energy, Inc. and subsidiary companies, as
of September 30, 1995, and 1994, and the results of their
operations and their cash flows for each of the three years in
the period ended September 30, 1995, in conformity with
generally accepted accounting principles.
/s/Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana
October 26, 1995
Indiana Energy, Inc. And Subsidiary Companies
Consolidated Statements of Income
Year Ended September 30
(Thousands except per share amounts) 1995 1994 1993
UTILITY INCOME
Utility operating revenues $403,810 $475,297 $499,278
Cost of gas 218,495 280,988 313,553
Margin 185,315 194,309 185,725
Utility operating expenses
Other operation and maintenance 75,608 81,982 84,302
Depreciation and amortization 31,265 29,177 26,806
Income taxes 19,216 19,467 15,816
Taxes other than income taxes 13,038 15,840 14,528
139,127 146,466 141,452
Utility operating income 46,188 47,843 44,273
Interest expense 15,530 16,037 16,640
Other (1,451) (2,790) (901)
14,079 13,247 15,739
Utility income 32,109 34,596 28,534
NONUTILITY OPERATIONS
Net EnTrade operations - - (341)
Gain on sale of EnTrade - - 11,863
Income tax on sale of EnTrade - - (4,745)
Other - net 847 (155) (448)
Nonutility income (loss) 847 (155) 6,329
Income before preferred dividends 32,956 34,441 34,863
Preferred dividend requirement of
subsidiary - - 285
Net income $ 32,956 $ 34,441 $ 34,578
Average common shares outstanding 22,560 22,554 21,376
Earnings per average share of common
stock $ 1.46 $ 1.53 $ 1.62
The accompanying notes are an integral part of these statements.
Indiana Energy, Inc. And Subsidiary Companies
Consolidated Statements of Cash Flows
Year Ended September 30
(Thousands) 1995 1994 1993
Cash Flows from Operating Activities
Net income $32,956 $34,441 $34,578
Adjustments to reconcile net income to cash
provided from operating activities
Gain on sale of EnTrade - - (11,863)
Depreciation and amortization 31,485 29,404 27,386
Deferred income taxes 3,994 3,273 2,931
Investment tax credit (930) (930) (1,007)
Undistributed earnings of
unconsolidated affiliates (237) (81) (94)
34,312 31,666 17,353
Changes in assets and liabilities net of effects
from the sale of EnTrade
Receivables - net 3,244 1,478 (33,997)
Inventories 5,189 (5,093) (10,638)
Accounts payable, customer deposits, advance
payments and other current liabilities 39,396 (17,374) 49,607
Accrued taxes and interest (12,637) (11,782) 11,064
Recoverable/refundable gas costs (26,712) 39,048 (17,123)
Other - net 14,167 6,763 (5,191)
Total adjustments 56,959 44,706 11,075
Net cash flows from operations 89,915 79,147 45,653
Cash Flows from (Required For) Financing Activities
Issuance of common stock - net - (95) 33,460
Redemption of preferred stock of subsidiary - - (20,932)
Sale of long-term debt 20,812 2,128 35,000
Reduction in long-term debt (3,228) (28,050) (721)
Net change in short-term borrowings (28,325) 24,098 (19,986)
Dividends on common stock (24,019) (23,086) (21,050)
Net cash flows from (required for) financing
activities (34,760) (25,005) 5,771
Cash Flows Required for Investing Activities
Capital expenditures (54,943) (57,138) (56,945)
Net change in nonutility plant and other investments
net of effects from the sale of EnTrade (212) (2,172) (4,099)
Cash of subsidiary sold - - (4,936)
Sale of Tenneco stock - - 13,864
Net cash flows required for investing activities (55,155) (59,310) (52,116)
Net increase (decrease) in cash - (5,168) (692)
Cash and cash equivalents at beginning of period 20 5,188 5,880
Cash and cash equivalents at end of period $ 20 $ 20 $ 5,188
The accompanying notes are an integral part of these statements.
Indiana Energy, Inc. And Subsidiary Companies
Consolidated Balance Sheets
(Thousands)
September 30 1995 1994
ASSETS
UTILITY PLANT
Original cost $872,287 $824,839
Less - accumulated depreciation and amortization 316,991 291,823
555,296 533,016
NONUTILITY PLANT AND OTHER INVESTMENTS-NET 7,117 6,905
CURRENT ASSETS
Cash and cash equivalents 20 20
Accounts receivable, less reserves of $1,662 and $1,238,
respectively 13,793 16,835
Accrued unbilled revenues 6,405 6,607
Materials and supplies - at average cost 3,890 3,663
Liquefied petroleum gas - at average cost 883 940
Gas in underground storage - at last-in, first-out cost 59,394 64,753
Prepayments and other 151 244
84,536 93,062
DEFERRED CHARGES
Unamortized debt discount and expense 6,922 6,892
Environmental costs - 9,341
Other 9,526 7,429
16,448 23,662
$663,397 $656,645
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION
Common stock (no par value) - authorized 64,000,000 shares -
issued and outstanding 22,561,605 and 22,556,942 shares,
respectively $145,872 $145,777
Less unearned compensation - restricted stock grants 824 1,262
145,048 144,515
Retained earnings 135,667 126,730
Total common shareholders' equity 280,715 271,245
Long-term debt (see schedule) 176,296 158,766
457,011 430,011
CURRENT LIABILITIES
Maturities and sinking fund requirements of long-term debt 267 213
Notes payable 6,025 34,350
Accounts payable 48,071 24,465
Refundable gas costs 4,883 31,595
Customer deposits and advance payments 20,870 12,594
Accrued taxes 7,668 20,291
Accrued interest 2,834 2,848
Other current liabilities 21,664 14,150
112,282 140,506
DEFERRED CREDITS
Deferred income taxes 65,096 59,887
Unamortized investment tax credit 12,103 13,033
Regulatory income tax liability 3,797 4,787
Other 13,108 8,421
94,104 86,128
COMMITMENTS AND CONTINGENCIES (See Notes 8 & 9) - -
$663,397 $656,645
The accompanying notes are an integral part of these statements.
Indiana Energy, Inc. And Subsidiary Companies
Consolidated Statements of Common Shareholders' Equity
COMMON STOCK
RESTRICTED
STOCK RETAINED
(Thousands except shares) SHARES AMOUNT GRANTS EARNINGS TOTAL
BALANCE AT SEPTEMBER 30, 1992 20,768,628 $108,665 $(487) $104,132 $212,310
Net Income 34,578 34,578
Common stock dividends ($.995 per share) (21,050) (21,050)
Issuance of common stock 1,581,900 32,561 32,561
Common stock issuance expense (1,258) (1,258)
Premium on redemption of preferred stock (932) (932)
Dividend reinvestment and stock purchase plan 104,562 2,157 2,157
Common stock issuances for Executives' and
Directors' stock plans net of amortization 4,826 93 188 281
BALANCE AT SEPTEMBER 30, 1993 22,459,916 143,476 (299) 115,470 258,647
Net Income 34,441 34,441
Common stock dividends ($1.03 per share) (23,086) (23,086)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 97,502 2,301 (963) 1,338
Other (476) (95) (95)
BALANCE AT SEPTEMBER 30, 1994 22,556,942 145,777 (1,262) 126,730 271,245
Net Income 32,956 32,956
Common stock dividends ($1.07 per share) (24,019) (24,019)
Common stock issuances for Executives' and
Directors' stock plans net of amortization 4,663 95 438 533
BALANCE AT SEPTEMBER 30, 1995 22,561,605 $145,872 $(824) $135,667 $280,715
The accompanying notes are an integral part of these statements.
Indiana Energy, Inc. And Subsidiary Companies
Consolidated Schedules of Long-Term Debt
(Thousands)
September 30 1995 1994
FIRST MORTGAGE BONDS - UTILITY
9 3/8% Series M, due July 15, 2016 $18,950 $ 21,950
UNSECURED NOTES PAYABLE - UTILITY
6 5/8% Series D, due December 1, 1997 35,000 35,000
8.90%, due July 15, 1999 10,000 10,000
7.15% Series E, due March 15, 2015 5,000 -
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 24,743 24,901
6.31% Series E, due June 10, 2025 5,000 -
6.53% Series E, due June 27, 2025 10,000 -
154,743 134,901
UNSECURED NOTES PAYABLE - NONUTILITY
Variable rate term loan, due May 10, 2004 2,058 2,128
Noninterest bearing note, due August 1, 2005 812 -
2,870 2,128
176,563 158,979
Less maturities and sinking fund requirements 267 213
$176,296 $158,766
The accompanying notes are an integral part of these statements.
Notes to Consolidated Financial Statements
1. Summary of Significant Accounting Practices
A. Consolidation
The consolidated financial statements include the accounts
of Indiana Energy, Inc. (the company) and its wholly and
majority-owned subsidiaries, after elimination of
intercompany transactions. The consolidated financial
statements separate the regulated utilities, which consist
of Indiana Gas Company, Inc., Terre Haute Gas Corporation
and Richmond Gas Corporation, from nonutility operations.
These regulated utilities, which are doing business as
Indiana Gas, provide natural gas and transportation
services to a diversified base of customers in 281
communities in 48 of Indiana's 92 counties. The nonutility
income includes EnTrade Corporation's operations through
December 29, 1992, as well as the fiscal 1993 gain on the
sale of EnTrade (see Note 2). IGC Energy, Inc., Energy
Realty, Inc. and Indiana Energy Services, Inc., indirect
wholly-owned subsidiaries of Indiana Energy, are also
included in nonutility income.
Investments in limited partnerships and in the common stock
of less than majority-owned affiliates are accounted for on
the equity method.
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. Gains or
losses realized from reacquisition of debt for sinking fund
purposes are included in "Other" on the Consolidated
Statements of Income.
D. Cash Flow Information
For the purposes of the Consolidated Statements of Cash
Flows, the company considers cash investments with an
original maturity of three months or less to be cash
equivalents. Cash paid during the periods reported for
interest and income taxes were as follows:
THOUSANDS 1995 1994 1993
Interest (net of amount capitalized) $14,438 $15,310 $14,006
Income taxes $26,206 $23,880 $11,943
During fiscal 1993, IGC Energy sold its interest in EnTrade
for approximately $13.9 million of Tenneco Inc. common
stock, which was subsequently sold for approximately the
same amount (see Note 2). There were no other significant
non-cash activities.
E. Revenues
To more closely match revenues and expenses, Indiana Gas
records revenues for all gas delivered to customers but not
billed at the end of the accounting period.
F. Gas in Underground Storage
Based on the cost of purchased gas during September 1995,
the cost of replacing the current portion of gas in
underground storage was less than last-in, first-out cost
at September 30, 1995, by approximately $286,000.
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 included
in "Other" on the Consolidated Statements of Income. 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 1995 1994 1993
AFUDC - borrowed funds $215 $355 $ 579
AFUDC - equity funds 176 290 486
Total AFUDC capitalized $391 $645 $1,065
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. Sale of EnTrade
On December 29, 1992, IGC Energy sold its interest in
EnTrade, a marketer of gas supplies to industrial and
utility customers, for approximately $13.9 million. The
transaction resulted in a net gain after tax of $7.1
million, or 33 cents per average share, and has been
included in nonutility income in fiscal 1993. EnTrade's net
operations through the date of sale are reflected
separately on the income statement for all periods
reported.
Pro forma operating results for Indiana Energy, assuming
the sale of EnTrade occurred as of the beginning of 1993,
are shown in the following table.
THOUSANDS (Except Per Share Data) 1993
Utility income $28,534
Nonutility income (loss) $ (448)
Net income $27,801
Earnings per average share of common stock $ 1.30
3. Fair Value of Financial Instruments
The estimated fair values of the company's financial
instruments were as follows:
September 30, 1995 September 30, 1994
Carrying Fair Carrying Fair
THOUSANDS Amount Value Amount Value
Cash and cash equivalents $ 20 $ 20 $ 20 $ 20
Notes payable $ 6,025 $ 6,025 $ 34,350 $ 34,350
Long-term debt (includes amounts
due within one year) $176,563 $186,265 $158,979 $162,570
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.
4. 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 $2 million outstanding at September 30, 1995.
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 1995 1994 1993
Outstanding at year end $ 2,225 $30,550 $10,252
Weighted average interest rates at year end 6.1% 4.9% 3.6%
Weighted average interest rates during the year 5.7% 3.3% 3.6%
Weighted average total outstanding during the year $16,578 $14,891 $12,533
Maximum total outstanding during the year $50,000 $56,500 $77,379
In addition, Energy Realty had a $3.8-million bank loan outstanding at
year end related to the purchase of a warehouse facility that is leased
to Indiana Gas.
5. Long-Term Debt
During the year, the following activity took place with
respect to long-term debt.
On October 28, 1994, $3 million of the outstanding 9 3/8%
Series M, First Mortgage Bonds were retired.
During June 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes, Series
E (Notes) as follows: $5 million of 7.15% Notes due March
15, 2015; $5 million of 6.31% Notes due June 10, 2025; and
$10 million of 6.53% Notes due June 27, 2025. The net
proceeds from the sale of the Notes will be used to
finance, in part, the refunding of long-term debt, Indiana
Gas' continuing construction program and for other
corporate purposes.
Consolidated maturities and sinking fund requirements on
long-term debt subject to mandatory redemption during the
five years following 1995 are $267,000 in 1996, $1,220,000
in 1997, $36,225,000 in 1998, $11,230,000 in 1999 and
$1,236,000 in 2000.
6. Capital Stock
On July 28, 1995, Indiana Energy's board of directors
authorized Indiana Energy to repurchase up to 700,000
shares of its outstanding common stock. The repurchases
will be made over time in open-market transactions.
Common stock dividends of the company may be reinvested
under a Dividend Reinvestment and Stock Purchase Plan.
Common shares purchased in connection with the plan are
currently being acquired through the open market.
The company has an Executive Restricted Stock Plan for the
principal officers of the company and its subsidiary
companies. Shares issued are original issue shares of the
company, carry transferability restrictions and are subject
to forfeiture provisions according to the terms of the
plan.
The company also has a Directors' Restricted Stock Plan
through which non-employee directors receive one-third of
their combined compensation (exclusive of attendance fees)
as directors of the company and Indiana Gas in shares of
the company's common stock subject to certain restrictions
on transferability. They may also elect to receive the
remaining two-thirds of their combined compensation
(exclusive of attendance fees) in cash or in shares of the
company's common stock which are not subject to
restrictions on transferability other than those imposed by
federal and state laws.
Additionally, under the terms of Indiana Gas' retirement
savings plan (see Note 7), eligible participants may direct
a specified percentage of their compensation to be invested
in shares of the company's common stock.
At September 30, 1995, the shares of the company's common
stock reserved for issuance under each of those plans were
as follows:
Dividend Reinvestment and Stock Purchase Plan 566,737
Executive Restricted Stock Plan 375,026
Directors' Restricted Stock Plan 55,046
Indiana Gas Retirement Savings Plan 877,190
Dividends on the common stock of Indiana Gas are payable
out of the unreserved and unrestricted retained earnings of
Indiana Gas. There are certain provisions in the Indiana
Gas Indenture, under which the first mortgage bonds of
Indiana Gas have been created and issued, restricting the
payment of dividends on the Indiana Gas common stock. Such
restrictions could affect the company's ability to pay
dividends on its common stock. None of the retained
earnings of Indiana Gas are presently subject to any such
restrictions.
On July 25, 1986, the board of directors of the company
declared a dividend distribution of one common share
purchase right for each outstanding share of common stock
of the company. The distribution was made to shareholders
of record August 11, 1986. In addition, one right has been
and will be distributed for each share issued following
August 11, 1986. Each right entitles the registered holder
to purchase from the company one share of common stock at a
price of $35 per share, subject to certain adjustments
described in the rights agreement. The rights become
exercisable only when a person or group acquires beneficial
ownership of 20 percent or more of the company's common
stock or announces a tender or exchange offer for 30
percent or more of the company's common stock.
If this happens, each holder of a right, except the
acquiring group or person, will have the right to receive,
upon exercise, that number of shares of the company's
common stock having a market value of two times the
exercise price if:
1. any person or group becomes the beneficial owner of 30
percent or more of the company's common stock;
2. a 20 percent or more acquiring person engages in one of
a number of self-dealing transactions specified in the rights
agreement; or
3. the company were acquired in a merger in which the
company were the surviving corporation and its common stock
were not changed or exchanged.
In addition, if the company is involved in a merger or
other business combination transaction, in which more than
50 percent of its assets or earning power is sold, each
holder of a right will have the right to receive, upon
exercise at the current exercise price of the right, that
number of shares of common stock of the acquiring company
having a market value of two-times the exercise price of
the right. The company may redeem the rights in whole, but
not in part, at a price of $.017 per right at any time
prior to the time an acquiring person has acquired a 20
percent beneficial ownership of the company's outstanding
common stock. Unless extended, the rights will expire on
August 11, 1996.
Indiana Gas and Indiana Energy have authorized and unissued
shares of preferred stock of 4.2 million and 4 million,
respectively. On December 1, 1992, Indiana Gas redeemed all
200,000 shares of its issued and outstanding 8.55%
Cumulative Preferred Stock at $104.66 per share with
accrued dividends. The redemption premium of $932,000 was
charged to retained earnings.
7. Retirement Plans and Other Postretirement Benefits
Effective October 1, 1994, Indiana Gas merged its
retirement savings plan for bargaining employees into its
retirement savings plan for non-bargaining employees. The
primary objective for this action is to reduce the level of
resources required to administer two plans. The combined
retirement savings plan is a defined contribution plan
which is qualified under sections 401(a) and 401(k) of the
Internal Revenue Code. Under the terms of the retirement
savings plan, eligible participants may direct a specified
percentage of their compensation to be invested in shares
of the company'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 1995, 1994 and 1993, Indiana
Gas made contributions of $2,335,000, $2,386,000 and
$2,270,000, respectively.
Indiana Gas also has two non-contributory defined benefit
retirement plans that cover all employees meeting certain
minimum age and service requirements. Benefits are
determined by a formula based on the employee's base
earnings (highest five consecutive years out of the last 10
consecutive years prior to actual retirement date), years
of participation in the plan and the employee's age at
retirement.
Indiana Gas has an unfunded supplemental retirement plan
for certain management employees. Benefits are determined
by a formula based on 65 percent of the participant's
average monthly earnings, less benefits received under the
company's pension and savings plans and the participant's
primary Social Security benefits.
The Indiana Gas defined benefit retirement plan assets are
under custody of trustees and consist of actively managed
stock and bond portfolios, as well as short-term
investments. It is Indiana Gas' funding policy to maintain
the pension plans on an actuarially sound basis. Under this
policy, funding was $143,000 in 1995, $1,110,000 in 1994,
and $1,223,000 in 1993. Funding decreased in 1995 as a
result of plan contributions being restricted by the full
funding limitation. 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 1995 1994 1993
Pension benefits earned during the period $1,086 $1,436 $1,366
Interest accrued on projected pension benefit obligation 4,554 4,752 4,713
Actual return on pension plan assets (9,632) 9 (3,563)
Net amortization and deferral 3,880 (6,056) (2,392)
SFAS 87 pension expense (112) 141 124
Adjustment to reflect amount included in rates 818 492 1,877
Total pension expense $ 706 $ 633 $2,001
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 1995 1994
Actuarial present value of pension benefits:
Vested benefits $52,734 $52,127
Nonvested benefits 200 248
Effect of future salary increases 7,455 6,751
Projected pension benefit obligation 60,389 59,126
Plan assets at fair value 69,423 64,099
Plan assets in excess of projected
pension benefit obligation at September 30 9,034 4,973
Unrecognized adjusted prior service costs 2,051 2,136
Unrecognized net assets at date of initial application (2,084) (2,393)
Unrecognized net (gain) loss (6,971) (3,007)
Adjustment to reflect amount included in rates (2,623) (1,806)
Prepaid (accrued) pension cost at September 30 $ (593) $ (97)
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. These benefits are principally
self-insured. Currently, Indiana Gas does not fund this
postretirement plan. During fiscal 1995, Indiana Gas
approved a plan change whereby employees retiring after
January 1, 1996, will be required to make a contribution
toward their retiree medical benefits provided by the plan.
The monthly contribution for retiree medical coverage will
be based on a comparison of the actual increase in Indiana
Gas' health care costs and the Consumer Price Index (CPI).
Cost increases that are higher than the general rate of
inflation, as measured by the CPI, will be paid for by
retirees. The impact of this plan change on the
unrecognized transition obligation as of September 30,
1995, is shown below in the table reconciling the plan's
funded status to the accrued postretirement benefit cost.
Effective October 1, 1993, Indiana Gas adopted Statement of
Financial Accounting Standards No. 106, Employers'
Accounting for Postretirement Benefits Other Than Pensions
(SFAS 106). SFAS 106 requires accounting for the costs of
postretirement health care and life insurance benefits on
the accrual basis. This means the costs of benefits paid in
the future are recognized during the years that an employee
provides service to Indiana Gas rather than the "pay-as-you-
go" (cash) basis. Indiana Gas has elected to amortize the
unfunded transition obligation as of October 1, 1993, of
approximately $55 million over a period of 20 years.
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 SFAS 106. Amounts accrued prior
to the order have been 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.
Postretirement benefit cost recognized for 1995 and 1994
consisted of the following components:
THOUSANDS 1995 1994
Service cost - benefits attributed to service during the period $1,423 $1,490
Interest cost on accumulated postretirement obligation 4,186 3,915
Amortization of transition obligation 2,772 2,772
SFAS 106 postretirement benefit cost 8,381 8,177
Adjustment to reflect amount included in rates (4,543) (5,436)
Postretirement benefit cost recognized $3,838 $2,741
Prior to fiscal 1994, Indiana Gas recognized postretirement
benefit costs on the pay-as-you-go (cash) basis.
Postretirement benefit cost recognized for fiscal year 1993
was approximately $2,855,000.
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, 1995, and 1994:
THOUSANDS 1995 1994
Accumulated postretirement benefit obligation:
Retirees and dependents $25,064 $28,328
Other fully eligible participants 6,561 7,323
Other active participants 10,627 18,113
Total accumulated postretirement benefit obligation 42,252 53,764
Fair value of plan assets - -
Accumulated postretirement benefit obligation in excess of plan assets (42,252) (53,764)
Unrecognized net (gain) loss (10,192) (4,340)
Unrecognized transition obligation 41,045 52,668
Accrued postretirement benefit cost at September 30 $(11,399) $(5,436)
The assumed health care cost trend rate for medical gross
eligible charges used in measuring the accumulated postretirement
benefit obligation as of September 30, 1995, was 9.3 percent for
fiscal 1996. 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 future retirees, was 3.5 percent. Taking
into consideration the plan's cost sharing provisions which
were in place at September 30, 1995, a 1-percent increase
in the assumed health care cost trend rates for each future
year produces approximately a $1.6-million increase in the
accumulated postretirement benefit obligation as of
September 30, 1995. A 1-percent increase in the assumed
health care cost trend rates for each future year produces
approximately an $873,000 increase in the annual aggregate
of the service and interest cost components of
postretirement benefit cost. This amount, which is based on
assumptions as of October 1, 1994, has not yet been reduced
by the impact of the plan's cost sharing provisions. The
weighted-average discount rate used in determining the
accumulated postretirement benefit obligation was 8
percent.
8. Commitments
Estimated capital expenditures for 1996 are $58.8 million.
Total lease expense was $2,811,000 in 1995, $2,595,000 in
1994 and $2,846,000 in 1993.
Lease commitments are $2,217,000 in 1996, $1,303,000 in
1997, $1,213,000 in 1998, $547,000 in 1999, $406,000 in
2000 and $682,000 in total for all later years. Included in
these amounts is an operating lease between Indiana Gas and
Energy Realty with payments of approximately $464,000
annually that extends through August 1998. There are no
leases that extend beyond 2002. Indiana Gas has storage and
supply contracts that range from one month to eight years.
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 19 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. Indiana Gas is currently conducting
groundwater monitoring at many of the sites. Indiana Gas
has not begun an RI/FS at additional sites, but expects to
conduct further investigation and evaluation in the future.
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 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 those carriers are obligated to pay
these costs in the future. Presently, that suit is set for
trial to begin October 21, 1996, in the United States
District Court for the Northern District of Indiana in Fort
Wayne, Indiana. Indiana Gas has obtained cash settlements
from some of the defendant insurance carriers and, as a
result, those carriers have been dismissed from the suit.
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 is presently in
negotiations with PSI to determine PSI's share of
responsibility. 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 a coordination of
efforts and a 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 receivable from PRPs of $3.4 million
is reflected in Accounts Receivable on the Consolidated
Balance Sheet at September 30, 1995.
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 issue
to Indiana Gas' case was an incorrect application of the
law and has appealed the decision to the Indiana Court of
Appeals. Under the schedule of the Indiana Court of
Appeals, briefing of the issues is expected to occur during
the spring of 1996. 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 overall rate of return
to be allowed.
Indiana Gas has recorded $11.4 million for its share of
environmental costs to date. As a result of its pursuit of
recovery of costs from PRPs and insurance carriers, Indiana
Gas has secured settlements from insurers of approximately
$11.9 million. Amounts recovered in excess of its share of
costs to date have been deferred. The May 3, 1995, order of
the IURC has had no immediate impact on Indiana Gas'
earnings since settlements with insurers exceed Indiana
Gas' share of environmental liability recorded to date.
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
any additional recoveries of environmental and related
costs from insurance carriers. Although there can be no
assurance of success, to the extent possible Indiana Gas
will continue to manage the manufactured gas plant
remediation program so that amounts received from insurance
carriers and PRPs will be sufficient to fund all such
costs.
10. Order No. 636 Transition Costs
In accordance with Federal Energy Regulatory Commission
(FERC) Order No. 636, Indiana Gas' pipeline service
providers have made a number of filings to restructure
services. Indiana Gas' pipeline service providers are
seeking from customers, including Indiana Gas, recovery of
certain costs related to the transition to restructured
services.
On April 12, 1995, Indiana Gas received an order from the
IURC allowing full recovery through the quarterly GCA
process of all FERC Order No. 636 transition costs,
including those transition costs previously deferred.
Indiana Gas has estimated and recorded total transition
costs of approximately $12 million.
11. Income Taxes
The components of consolidated income tax expense,
including tax on the gain on the sale of EnTrade in 1993
and amounts in "Other" on the Consolidated Statements of
Income, were as follows:
THOUSANDS 1995 1994 1993
Current:
Federal $12,193 $13,153 $16,181
State 2,077 2,285 2,576
14,270 15,438 18,757
Deferred:
Federal 3,652 2,987 2,667
State 342 286 264
3,994 3,273 2,931
Amortization of investment tax credits (930) (930) (1,007)
Consolidated income tax expense $17,334 $17,781 $20,681
Effective income tax rates were 34.47 percent, 34.08
percent and 37.23 percent of pretax income for 1995, 1994
and 1993, respectively. This compares with a combined
federal and state income tax statutory rate of 37.93
percent for 1995 and 1994 and 37.69 percent for 1993.
Individual components of these rate differences are not
significant except investment tax credit which amounted to
(1.8%) for all periods reported.
Deferred income taxes reflect the net tax effect of
temporary differences between the carrying amounts of
assets and liabilities for financial reporting purposes and
the amounts used for income tax purposes. Deferred income
taxes are provided for taxes not currently payable due to,
among other things, the use of various accelerated
depreciation methods, shorter depreciable lives and the
deduction of certain construction costs for tax purposes.
Taxes deferred in prior years are being charged and income
credited as these tax effects reverse. The provisions for
the deferred tax effects relating to the excess of tax-over-
book depreciation amounted to $4,031,000 in 1995,
$2,852,000 in 1994 and $2,073,000 in 1993.
Effective October 1, 1993, Indiana Gas adopted Statement of
Financial Accounting Standards No. 109, Accounting for
Income Taxes (SFAS 109). Indiana Gas previously used the
deferred method of accounting for income taxes as
prescribed by Accounting Principles Bulletin Opinion No.
11. SFAS 109 requires the use of the liability method,
which effectively results in a reduction in previously
provided deferred income taxes to reflect the current
statutory corporate tax rate.
Due to the effects of regulation, Indiana Gas is not
permitted to recognize the effect of a tax rate change as
income but is required to reduce tariff rates to return the
"excess" deferred income taxes to ratepayers over the
remaining life of the properties that give rise to the
taxes. Therefore, the cumulative effect of a change in
accounting principle upon the initial application of SFAS
109 resulted in no impact on earnings. Under SFAS 109,
Indiana Gas has recorded a net regulatory liability for
approximately $3.8 million on its balance sheet as of
September 30, 1995, related to deferred taxes.
Significant components of Indiana Gas' net deferred tax
liability as of September 30, 1995, and 1994 are as
follows:
THOUSANDS 1995 1994
Deferred tax liabilities:
Accelerated depreciation $45,902 $41,652
Property basis differences 18,560 18,140
Acquisition adjustment 6,664 6,853
Other (4,791) 2,654
Deferred tax assets:
Deferred investment tax credit (4,590) (4,943)
Regulatory income tax liability (1,440) (1,815)
Less deferred income taxes related
to current assets and liabilities 4,791 (2,654)
Balance as of September 30 $65,096 $59,887
Investment tax credits have been deferred and are being
credited to income over the life of the property giving
rise to the credit. The Tax Reform Act of 1986 eliminated
investment tax credits for property acquired after January
1, 1986.
12. Long-Lived Assets
In March 1995, the Financial Accounting Standards Board
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 anticipates adopting this standard
on 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
this industry.
13. Summarized Financial Data (Unaudited)
Summarized quarterly financial data (in thousands of
dollars except per share amounts) for 1995 and 1994 are as
follows:
1995: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
Utility operating revenues $113,062 $150,468 $ 83,081 $ 57,199
Utility operating income (loss) 14,593 24,667 7,800 (872)
Nonutility income (loss) 95 915 (103) (60)
Net income (loss) 10,874 22,076 4,224 (4,218)
Earnings (loss) per average
share of common stock $ .48 $ .98 $ .19 $ (.19)
1994: THREE MONTHS ENDED DEC. 31 MAR. 31 JUNE 30 SEP. 30
Utility operating revenues $151,892 $195,672 $ 77,827 $ 49,906
Utility operating income (loss) 18,894 24,630 5,551 (1,232)
Nonutility income (loss) 44 (68) 21 (152)
Net income (loss) 15,200 21,672 2,435 (4,866)
Earnings (loss) per average
share of common stock $ .67 $ .96 $ .11 $ (.21)
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 registrant's definitive proxy
statement. That statement was prepared according to
Regulations 14A and S-K and filed electronically with the
Securities and Exchange Commission on December 7, 1995.
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 registrant's definitive proxy statement.
That statement was prepared according to Regulations 14A
and S-K and filed electronically with the Securities and
Exchange Commission on December 7, 1995.
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
registrant's definitive proxy statement. That statement
was prepared according to Regulations 14A and S-K and filed
electronically with the Securities and Exchange Commission
on December 7, 1995.
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 registrant's
definitive proxy statement. That statement was prepared
according to Regulations 14A and S-K and filed
electronically with the Securities and Exchange Commission
on December 7, 1995.
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 - 1995,
1994 and 1993 Item 8
Consolidated Statements of Cash Flows - 1995,
1994 and 1993 Item 8
Consolidated Balance Sheets at September 30,
1995 and 1994 Item 8
Consolidated Statements of Common Shareholders'
Equity - 1995, 1994 and 1993 Item 8
Consolidated Schedules of Long-Term Debt
as of September 30, 1995 and 1994 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 - 1995, 1994 and 1993
(a)-3 Exhibits
See Exhibit Index
(b) Reports on Form 8-K
None filed during the fourth quarter of fiscal 1995.
EXHIBIT INDEX
Exhibit No. Description Reference
2-A Amended and Restated Exhibit 2-A to
Agreement and Plan of Indiana
Reorganization, dated Energy's 1989
as of November 6, Annual Report
1989, and amended as on Form 10-K.
of December 1, 1989,
among Indiana Energy,
Inc., IEI Acquisition
Corporation and
Richmond Gas
Corporation.
2-B Second Amendment to Exhibit 2-B to
Agreement and Plan of Indiana
Reorganization among Energy's
Indiana Energy, Inc., Current Report
IEI Acquisition on Form 8-K
Corporation and dated July 31,
Richmond Gas 1990, and filed
Corporation dated as August 15,
of July 31, 1990. 1990.
2-C Amended and Restated Exhibit 2-B to
Agreement of Merger, Indiana
dated as of November Energy's 1989
6, 1989, and amended Annual Report
as of December 1, on Form 10-K.
1989, among Indiana
Energy, Inc., IEI
Acquisition
Corporation and
Richmond Gas
Corporation.
2-D Amended and Restated Exhibit 2-C to
Stock Exchange Indiana
Agreement, dated as of Energy's 1989
November 6, 1989, and Annual Report
amended as of December on Form 10-K.
1, 1989, between
Indiana Energy, Inc.
and Indiana Gas &
Chemical Corporation.
2-E Second Amendment to Exhibit 2(e) to
Stock Exchange Indiana
Agreement between Energy's
Indiana Energy, Inc. Current Report
and Indiana Gas & on Form 8-K
Chemical Corporation dated July 31,
dated as of July 31, 1990 and filed
1990. August 15,
1990.
2-F Acquisition Agreement Exhibit 10-N of
dated October 26, Indiana Gas
1990, between Indiana Company, Inc.'s
Energy and Indiana Gas 1990 Annual
Company, Inc. Report on Form
10-K.
2-G Acquisition Agreement Exhibit 1 to
dated as of December Indiana
28, 1992, between Energy's
Tennessee Gas Pipeline Current Report
Company, Tenneco on Form 8-K
Merger Company, dated December
EnTrade Corporation 29, 1992, and
and the filed January
Interestholders listed 13, 1993.
on Exhibit A thereto.
3-A Amended and Restated Exhibit 3-A to
Articles of Indiana
Incorporation. Energy's 1993
Annual Report
on Form 10-K.
3-B Code of By-Laws, as Filed herewith.
amended.
4-A Applicable provisions Exhibit 3-A to
of Indiana Energy's Indiana
Amended and Restated Energy's 1993
Articles of Annual Report
Incorporation, as on Form 10-K.
amended, as set forth
as Exhibit 3-A above.
4-B Amended and Restated Exhibit 1 to
Rights Agreement Indiana
between Indiana Energy Energy's
and Continental Bank, Amendment on
N.A. (Now First Form 8 to Form
Chicago Trust Company 8-A
of New York), as Registration
Rights Agent, dated as Statement filed
of July 30, 1986, and on April 16,
amended and restated 1990.
as of December 8,
1989.
4-C Indenture dated as of Indiana Gas
September 1, 1950, Company, Inc.'s
between Indiana Gas Registration
and Merchants National No. 2-77620
Bank & Trust Company (pages 6-8 of
of Indianapolis (now the Prospectus
National City Bank, on Form S-16
Indiana), as trustee contained
("Trustee"), and therein), to
twelve supplemental Registration
indentures thereto. No. 2-40825
(Exhibit Nos. 2-
A through 2-H),
to Registration
No. 2-52734
(Exhibit No. 2-
C), to
Registration
No. 2-68469
(Exhibit No. 2-
J), to
Registration
No. 2-77620
(Exhibit No. 4-
0), to
Registration
No. 33-1262
(Exhibit No.
4K), to the
1985 Annual
Report on Form
10-K (Exhibit
4) and to the
1986 Annual
Report on Form
10-K (Exhibit
No. 4-D).
4-D Indenture dated Exhibit 4(a) to
February 1, 1991, Indiana Gas
between Indiana Gas Company, Inc.'s
and Continental Bank, Current Report
National Association. on Form 8-K
dated 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
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
Inc., Indiana Gas Energy's 1990
Company, Inc., and Annual Report
Lawrence A. Ferger on Form 10-K.
effective January 1,
1990.
10-B Employment Agreement Exhibit 10-C to
among Indiana Energy, Indiana
Inc., Indiana Gas Energy's 1990
Company, Inc., and Annual Report
Niel C. Ellerbrook, on Form 10-K.
effective January 1,
1990.
10-C Employment Agreement Exhibit 10-D to
between Indiana Gas Indiana
Company, Inc., and Energy's 1990
Paul T. Baker Annual Report
effective January 1, on Form 10-K.
1990.
10-D Employment Agreement Exhibit 10-E to
between Indiana Gas Indiana
Company, Inc., and Energy's 1990
Anthony E. Ard Annual Report
effective January 1, on Form 10-K.
1990.
10-E Employment Agreement Exhibit 10-F to
among Indiana Energy, Indiana
Inc., Indiana Gas Energy's 1990
Company, Inc., and Annual Report
Carl L. Chapman on Form 10-K.
effective January 1,
1990.
10-F Termination Benefits Exhibit 10-F to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and Lawrence A.
Ferger.
10-G Termination Benefits Exhibit 10-G to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Paul T. Baker.
10-H Termination Benefits Exhibit 10-H to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Niel C. Ellerbrook.
10-I Termination Benefits Exhibit 10-I to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Anthony E. Ard.
10-J Termination Benefits Exhibit 10-J to
Agreement, dated July Indiana
29, 1994, among Energy's 1994
Indiana Energy, Inc., Annual Report
Indiana Gas Company, on Form 10-K.
Inc. and
Carl L. Chapman.
10-K Executive Compensation Exhibit 10-K to
Deferral Plan Indiana
effective December 1, Energy's 1994
1994. Annual Report
on Form 10-K.
10-L Directors Compensation Exhibit 10-M to
Deferral Plan Indiana
effective January 1, Energy's 1994
1995. Annual Report
on Form 10-K.
10-M Executive Restricted Exhibit A to
Stock Plan effective Indiana
October 1, 1987, as Energy's Proxy
amended. Statement filed
on 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
Incentive Plan Energy's 1987
effective October 1, Annual Report
1987. on Form 10-K.
10-O Indiana Energy, Inc. Indiana
Directors' Restricted Energy's
Stock Plan, as amended Definitive
and restated on Proxy Statement
October 25, 1991. filed on
December 6,
1991.
10-P Exhibit 10-P schedules all material gas
contracts which are in effect between
Indiana Gas Company, Inc. and the suppliers
listed. The gas contracts within each type
are substantially identical in all material
respects and at least one of each type of
contract has been or is filed as indicated.
The schedule details all material aspects in
which a contract may differ from the
contract filed.
Exh. Days of Effective Expir.
No. Type of Contract Supplier Contract No. Wthdrwl. MDth/Day Date Date Reference
6/30/93 Form 10Q,
File 1-6494:
10-P.1 Firm Transportation Panhandle Eastern P PLT 011715 38,572 5/1/93 3/31/98 Exh. 10-B
10-P.2 Firm Transportation Panhandle Eastern P PLT 011716 51,431 5/1/93 3/31/99 Exh. 10-A
10-P.3 Firm Transportation Panhandle Eastern P PLT 011718 51,431 5/1/93 2/28/97 Exh. 10-C
10-P.4 Firm Transporation Panhandle Eastern P PLT 011721 77,144 5/1/93 3/31/97 Exh. 10-D
10-P.5 Market Area - Panhandle Eastern P PLT 011719 50,000 5/1/93 3/31/97 1993 Form 10K, Exh.
Firm Transportation 10-I.5, File 1-6494.
10-P.6 Market Area - Panhandle Eastern P PLT 011720 50,000 5/1/93 3/31/97 See Exhibit 10-P.5
Firm Transporation
10-P.7 Market Area - Texas Gas T3780 50,000 11/1/93 10/31/98 1993 Form 10K, Exh.
Firm Transporation 10-I.7, File 1-6494.
10-P.8 No Notice Service Texas Gas N0420 41,687 11/1/93 10/31/98 1993 Form 10K, Exh.
10-I.8, File 1-6494.
10-P.9 No Notice Service Texas Gas N0325 56,793 11/1/93 10/31/97 See Exhibit 10-P.8
10-P.10 No Notice Serivce Texas Gas N0325 56,794 11/1/93 10/31/98 See Exhibit 10-P.8
10-P.11 No Notice Serivce Texas Gas N0325 56,794 11/1/93 10/31/99 See Exhibit 10-P.8
6/30/93 Form 10Q,
File 1-6494:
10-P.12 Firm Storage Panhandle Eastern PLS 011713 100 50,312 5/1/93 3/31/96 Exh. 10-G
10-P.13 Firm Storage Panhandle Eastern PLS 012044 100 25,000 5/1/93 3/31/96 Exh. 10-E
10-P.14 Firm Storage ANR T,E & S 00087 100 29,000 3/1/73 2/28/96 1991 Form 10K, Exh.
10-N, File 1-6494.
10-P.15 Firm Storage ANR T,E & S 05787 100 100,806 4/1/92 3/31/97 1992 Form 10K, Exh.
10-R, File 1-6494.
6/30/93 Form 10Q,
File 1-6494:
10-P.16 Firm Storage-Related Panhandle Eastern P PLT 011714 49,515 5/1/93 3/31/96 Exh. 10-H
Transporation
10-P.17 Firm Storage-Related Panhandle Eastern P PLT 012045 24,604 5/1/93 3/31/96 Exh. 10-F
Transporation
10-P.18 Firm Storage-Related ANR T,E & S 05788 100,000 4/1/92 3/31/97 1992 Form 10K, Exh.
Transportation 10-S, File 1-6494.
10-P.19 Firm Natural Gas Anadarko NGFSA 9602 50,000 12/1/95 2/29/96 1995 Form 10-K, Exh.
Supply 10-P.19,File 1-6494.
10-P.20 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-P.21 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-P.22 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.
21 Subsidiaries of Indiana Energy, Inc. Filed herewith.
23 Consent of Independent Public Accountants Filed herewith.
27 Financial Data Schedule Filed herewith.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS ON SCHEDULES
To Indiana Energy, 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 26, 1995. 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 26, 1995
INDIANA ENERGY, 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 ENERGY, 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
INDIANA ENERGY, INC.
AND SUBSIDIARY COMPANIES
SCHEDULE II - VALUATION AND QUALIFYING ACCOUNTS
YEAR ENDED SEPTEMBER 30, 1993
(Thousands)
Col. A Col. B Col. C Col. D Col. E Col. F
Additions Deductions
(1) (2)
For Purposes
Balance at Charged to For Which Other Balance at
September 30, Costs and Reserves Changes September 30,
Description 1992 Expenses Other Were Created (Note A) 1993
RESERVE DEDUCTED FROM APPLICABLE ASSETS:
Reserve for uncollectible accounts $ 2,680 $ 3,578 $ 0 $ 3,324 $ (879) $ 2,055
Note:
(A) Represents the sale by IGC Energy, Inc. of its interest in EnTrade Corporation on December 29, 1992.
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 ENERGY, INC.
Dated December 20, 1995 /s/Lawrence A. Ferger
Lawrence A. Ferger, President
and Chief Executive Officer
Pursuant to the requirements of the Securities Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in the capacities and
on the dates indicated.
Signature Title Date
/s/Lawrence A. Ferger President, Chief Executive December 20, 1995
Lawrence A. Ferger Officer and Director
/s/Niel C. Ellerbrook Vice President and Treasurer December 20, 1995
Niel C. Ellerbrook Chief Financial Officer and Director
/s/Jerome A. Benkert Controller December 20, 1995
Jerome A. Benkert
/s/Duane M. Amundson Chairman of the Board of December 20, 1995
Duane M. Amundson Directors
/s/Paul T. Baker Senior Vice President December 20, 1995
Paul T. Baker Chief Operating Officer and
Director
/s/Gerald L. Bepko Director December 20, 1995
Gerald L. Bepko
/s/Loren K. Evans Director December 20, 1995
Loren K. Evans
/s/Otto N. Frenzel III Director December 20, 1995
Otto N. Frenzel III
/s/Anton H. George Director December 20, 1995
Anton H. George
/s/Don E. Marsh Director December 20, 1995
Don E. Marsh
/s/Richard P. Rechter Director December 20, 1995
Richard P. Rechter
/s/James C. Shook Director December 20, 1995
James C. Shook