SECURITIES AND EXCHANGE COMMISSION Washington, D.C. 20549 ________________________ FORM 8-K _______________________ CURRENT REPORT Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934 Date of Report (Date of earliest event reported): January 16, 2001 VECTREN CORPORATION (Exact Name of Registrant as Specified in Its Charter) INDIANA (State or Other Jurisdiction of Incorporation) 1-15467 35-2086905 (Commission File Number) (IRS Employer Identification No.) 20 N.W. Fourth Street Evansville, Indiana 47741 (Address of Principal Executive Offices)(Zip Code) Registrant's Telephone Number, Including Area Code: (812) 465-5300 Item 7. Financial Statements and Exhibits. On October 31, 2000, Vectren Corporation (the Company) completed the acquisition of the natural gas distribution assets from The Dayton Power and Light Company, a wholly owned subsidiary of DPL, Inc. The business will operate under the name Vectren Energy Delivery of Ohio, Inc. (VEDO). Under the acquisition structure, Indiana Gas Company, Inc., a wholly owned subsidiary of the Company, holds a 47 percent undivided ownership interest and VEDO has a 53 percent undivided ownership interest. (Refer to the Company's Form 8-K filed November 15, 2000 and Form 10-Q filed November 14, 2000 for further discussion.) The following statements and exhibits are included: (a) Audited financial statements of The Dayton Power & Light Company's natural gas retail distribution business for the year ended December 31, 1999 and unaudited interim financial statements of same as of September 30, 2000 and for the nine month periods ended September 30, 2000 and 1999. (b) Pro forma financial statements of Vectren Corporation for the year ended December 31, 1999 and as of September 30, 2000 and for the nine months ended September 30, 2000. (c) The following exhibits are filed as part of this report: Exhibit 23 - Consent of PricewaterhouseCoopers LLP SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned hereunto duly authorized. VECTREN CORPORATION (Registrant) Dated: January 16, 2001 By: /s/ M. Susan Hardwick ----------------------------- M. Susan Hardwick Vice President and Controller Index Pages Audited Financial Statements Report of Independent Accountants 1 Statement of Income for the Year Ended December 31, 1999 2 Statement of Cash Flows for the Year Ended December 31, 1999 3 Balance Sheet as of December 31, 1999 4 Statement of Owner's Net Investment for the Year Ended December 31, 1999 5 Notes to Financial Statements 6-9 Unaudited Interim Financial Statements Interim Statement of Income for the nine-month periods ended September 30, 2000 and 1999 10 Interim Statement of Cash Flows for the nine-month periods ended September 30, 2000 and 1999 11 Interim Balance Sheet as of September 30, 2000 12 Notes to Interim Financial Statements 13-14 Report of Independent Accountants To the Board of Directors and Shareholder of The Dayton Power & Light Company In our opinion, the accompanying balance sheet and the related statements of income, of cash flows and of owner's net investment present fairly, in all material respects, the financial position of The Dayton Power & Light Company's natural gas retail distribution business (the Gas Business) at December 31, 1999, and the results of its operations and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. These financial statements are the responsibility of the Gas Business's management; our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit of these statements in accordance with auditing standards generally accepted in the United States of America, which 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, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. PricewaterhouseCoopers LLP Dayton, Ohio December 15, 2000 The Dayton Power & Light Company Natural Gas Retail Distribution Business Statement of Income For the Year Ended December 31, 1999 (In Thousands) Revenues Revenues from external customers $ 214,979 Related party revenues 3,887 ---------- Total revenues 218,866 ---------- Expenses Gas purchased for resale 129,916 Gas purchased for related parties 1,386 Operation and maintenance 29,180 Depreciation and amortization 8,117 General taxes 23,070 ---------- Total expenses 191,669 ---------- Income before income taxes 27,197 Income taxes 9,204 ---------- Net income $ 17,993 ---------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Statement of Cash Flows For the Year Ended December 31, 1999 (In Thousands) Operating activities Net income $ 17,993 Adjustments: Depreciation and amortization 8,117 Deferred income taxes 7,824 Accounts receivable 8,921 Inventories 6,400 Accounts payable 2,484 Accrued taxes (4,389) Accrued purchased gas (5,473) Other deferred credits 2,992 Other (5,304) ---------------- Net cash provided by operating activities 39,565 ---------------- Investing activities Capital expenditures (9,587) ---------------- Financing activities Net cash reverted to The Dayton Power & Light Company (29,978) ---------------- Cash and temporary cash investments Net change - Balance at beginning of year - ---------------- Balance at end of year $ - ---------------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Balance Sheet As of December 31, 1999 (In Thousands) Assets Property: Gas property $ 330,760 Accumulated depreciation and amortization (142,413) --------- Net property 188,347 --------- Current assets: Cash and temporary cash investments - Accounts receivable, less provision for uncollectible accounts of $780 42,629 Inventories, at average cost 41,954 Taxes applicable to subsequent years 18,391 Other 19,630 --------- Total current assets 122,604 --------- Other assets 4,036 --------- Total assets $ 314,987 --------- Capitalization and liabilities Capitalization: Owner's net investment in Natural Gas Retail Distribution Business $ 196,478 --------- Current assets: Accounts payable 22,669 Accrued taxes 25,788 Accrued purchased gas 15,743 Customer construction advances 6,563 Deferred taxes 8,027 Other 2,242 --------- Total current liabilities 81,032 --------- Deferred credits and other: Deferred taxes 12,163 Income taxes refundable through future revenues 4,444 Unamortized investment tax credit 3,198 Insurance and claims costs 1,121 Other 16,551 --------- Total deferred credits and other 37,477 --------- Total capitalization and liabilities $ 314,987 --------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Statement of Owner's Net Investment For the Year Ended December 31, 1999 (In Thousands) Owner's net investment in Natural Gas Retail Distribution Business at December 31, 1998 $ 208,463 Add: Net income 17,993 Less: Cash reverted to The Dayton Power & Light Company (29,978) --------- Owner's net investment in Natural Gas Retail Distribution Business at December 31, 1999 $ 196,478 ---------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Notes to Financial Statements December 31, 1999 (In Thousands) 1. Basis of Presentation On October 31, 2000, The Dayton Power & Light Company (DP&L), a subsidiary of DPL Inc., sold its natural gas retail distribution business (the Gas Business) to Vectren Energy Delivery of Ohio, Inc. and Indiana Gas Company, Inc. pursuant to the terms of an asset purchase agreement dated December 14, 1999. Prior to the sale, the Gas Business operated as a division of DP&L. The Gas Business sells natural gas to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio and provides natural gas to over 300,000 customers in 16 counties. The accompanying financial statements are presented on a carve-out basis and include the historical operations of the Gas Business. The assets and liabilities of the Gas Business have been reflected in these financial statements at DP&L's historical cost. The financial information in these financial statements does not include certain expenses and adjustments that may have been incurred had the Gas Business been a separate, independent company, and may not necessarily be indicative of results that would have occurred had the Gas Business been a separate, independent company during the periods presented or of the future results of the Gas Business. The accompanying financial statements have been prepared on a historical basis and do not reflect any effects related to the sale of the Gas Business. For the year ended December 31, 1999, the net income of the Gas Business was equal to its comprehensive income. 2. Summary of Significant Accounting Policies The policies utilized by the Gas Business in the preparation of the financial statements conform to generally accepted accounting principles and require management to make estimates and assumptions that affect the reported amount 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 amounts could differ from these estimates and assumptions. All allocations of costs and estimates included in the accompanying financial statements are based on assumptions that management believes are reasonable under the circumstances. However, these allocations and estimates are not necessarily indicative of the costs and expenses that would have resulted if the Gas Business had been operating as a separate entity. All charges and allocations of costs for facilities, functions and services performed by DP&L, which are discussed in more detail in Note 4, have been charged to owner's net investment by the Gas Business in the period in which the cost was recorded in the financial statements. General taxes included in the Income Statement represent expenses for taxes other than income taxes, such as property, use and employee related taxes. Revenues Revenues include amounts charged to customers through gas recovery clauses, which are adjusted periodically for changes in such costs. Related costs that are recoverable or refundable in future periods are deferred along with the related income tax effects. Also included in revenues are amounts charged to customers through a surcharge for recovery of arrearages from certain eligible low-income households. The Gas Business records revenue for services provided but not yet billed to more closely match revenues with expenses. Property, Maintenance and Depreciation Property is shown at its original cost. Cost includes direct labor and material and allocable overhead costs. When a unit of property is retired, the original cost of that property plus the cost of removal less any salvage value is charged to accumulated depreciation. Maintenance costs and replacements of minor items of property are charged to expense. Depreciation expense is calculated using the straight-line method which depreciates the cost of property over its estimated useful life. Depreciation rates utilized by the Gas Business during the year ended December 31, 1999 averaged approximately three percent. 3. Regulatory Matters The Gas Business applies the provision of the FASB Statement No. 71, "Accounting for the Effects of Certain Types of Regulation". This accounting standard provides for the deferral of costs authorized for future recovery by regulators. As of December 31, 1999, $14,669 and $3,290 of regulatory assets are included in other current assets and other assets, respectively, on the Balance Sheet. 4. Related Party Activities Cash Management DP&L uses a centralized cash management system. Cash deposits from the Gas Business are transferred to DP&L on a daily basis, and DP&L funds the Gas Business disbursements as required. No interest has been charged or credited to transactions with the Gas Business. Shared Services DP&L provides certain general and administrative services to the Gas Business including finance, legal, information systems, benefits, advertising, customer services and facilities. The costs of these shared services (excluding employee benefits which are discussed below) are included in the Income Statement of the Gas Business generally based on the Gas Business's revenues, customers, employees or properties in relation to total DPL Inc. revenues, customers, employees or properties, as applicable. Management believes these methods of cost allocation are reasonable. Such costs during the year ended December 31, 1999 totaled approximately $10,900. Employee Benefits DP&L provides certain employee benefits to the Gas Business including health care, dental care, life insurance, long-term disability, pension plans, and savings plans. The costs of these benefits are included in the Income Statement of the Gas Business based on labor utilization, which management believes to be reasonable. Such costs during the year ended December 31, 1999 totaled approximately $1,500. Insurance and Claims Costs The Gas Business receives certain property and liability, business interruption, and other risk insurance coverage from an affiliate subsidiary of DPL Inc. Costs charged to the Gas Business for this insurance coverage are based on the Gas Business' properties in relation to total DPL, Inc. properties, which management believes to be reasonable. The Gas Business incurred approximately $600 of insurance premium and claims costs in 1999, which are reflected in the Income Statement. 5. Income Taxes U.S. income tax payments, refunds, credits, provision and deferred tax components have been allocated to the Gas Business in accordance with DP&L's tax allocation policy. Such policy allocates tax components included in the consolidated income tax return of DPL Inc. to the Gas Business to the extent such components were generated by or related to the Gas Business. Such allocation results in income tax expense that would have resulted if the Gas Business was a stand-alone entity. The provision for income taxes of the Gas Business consisted of the following for the year ended December 31, 1999: Computation of Tax Expense Federal income tax (a) $ 9,519 Increase (decreases) in tax from - Depreciation 149 Investment tax credit amortized (81) Other, net (383) ---------- Total tax expense $ 9,204 ---------- (a) The statutory rate of 35 percent was applied to pre-tax income. Components of Tax Expense Taxes currently payable $ 1,380 Deferred taxes - Depreciation and amortization 1,374 Fuel and gas costs 1,406 Insurance and claims costs 48 Other 5,077 Deferred investment tax credit, net (81) ---------- Total tax expense $ 9,204 ---------- Components of Deferred Tax Assets and Liabilities Noncurrent liabilities Depreciation/property basis $ 20,519 Income taxes recoverable (1,556) Investment tax credit (1,119) Other (5,681) ---------- Net noncurrent deferred tax liabilities 12,163 ----------- Net current deferred tax liabilities 8,027 ----------- Total net deferred tax liabilities $ 20,190 ----------- The Dayton Power & Light Company Natural Gas Retail Distribution Business Interim Statement of Income For the Nine Month Periods Ended September 30, 2000 and 1999 Unaudited (In Thousands) For the Nine Months Ended September 30, September 30, 2000 1999 Revenues Revenues from external customers $ 165,862 $ 147,216 Related party revenues 1,834 3,593 ---------------- -------------- Total revenues 167,696 150,809 ---------------- -------------- Expenses Gas purchased for resale 104,701 85,531 Gas purchased for related parties 927 1,325 Operation and maintenance 17,058 16,071 Depreciation and amortization 6,615 5,622 General taxes 15,408 17,275 ---------------- -------------- Total expenses 144,709 125,824 ---------------- -------------- Income before income taxes 22,987 24,985 Income taxes 7,832 8,386 ---------------- -------------- Net income $ 15,155 $ 16,599 ---------------- -------------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Interim Statement of Cash Flows For the Nine-Month Periods Ended September 30, 2000 and 1999 Unaudited (In Thousands) For the Nine Months Ended Sepember 30, September 30, 2000 1999 Operating activities Net income $ 15,155 $ 16,599 Adjustments: Depreciation and amortization 6,615 5,622 Deferred income taxes 2,194 10,517 Accounts receivable 28,863 35,566 Inventories (2,129) 5,904 Accounts payable (15,832) (15,268) Accrued taxes (10,515) (19,031) Accrued purchased gas (13,499) (16,053) Other deferred credits (1,317) 23 Other 24,198 8,395 ---------- ------------- Net cash provided by operating activities 33,733 32,274 ---------- ------------- Investment activities Capital expenditures (6,835) (7,190) ---------- ------------- Financing activities Net cash reverted to The Dayton Power & Light Company (26,898) (25,084) ---------- ------------- Cash and Temporary Cash Investments Net change - - Balance at beginning of year - - ---------- ------------- Balance at end of period $ - $ - ---------- ------------- The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Interim Balance Sheet As of September 30, 2000 Unaudited (In Thousands) Assets Property: Gas property $ 337,595 Accumulated depreciation and amortization (149,028) ------------ Net property 188,567 ------------ Current assets: Cash and temporary cash investments - Accounts receivable, less provision for uncollectible accounts of $193 13,766 Inventories, at average cost 44,083 Taxes applicable to subsequent years 2,905 Other 9,360 ------------ Total current assets 70,114 ------------ Other assets 4,611 ------------ Total assets $ 263,292 ------------ Capitalization and liabilities Capitalization: Net investment in Natural Gas Retail Distribution Business $ 184,735 ------------ Current assets: Accounts payable 6,837 Accrued taxes 15,273 Accrued purchased gas 2,244 Customer construction advances 5,959 Deferred taxes 9,847 Other 1,768 ------------ Total current liabilities 41,928 ------------ Deferred credits and other: Deferred taxes 15,373 Unamortized investment tax credit 3,137 Income taxes refundable through future revenues 1,703 Insurance and claims costs 1,030 Other 15,386 ------------ Total deferred credits and other 36,629 ------------ Total capitalization and liabilities $ 263,292 ------------ The accompanying notes are an integral part of the financial statements. The Dayton Power & Light Company Natural Gas Retail Distribution Business Notes to Financial Statements September 30, 2000 (In Thousands) 1. Basis of Presentation On October 31, 2000, The Dayton Power & Light Company (DP&L), a subsidiary of DPL Inc., sold its natural gas retail distribution business (the Gas Business) to Vectren Energy Delivery of Ohio, Inc. and Indiana Gas Company, Inc. pursuant to the terms of an asset purchase agreement dated December 14, 1999. Prior to the sale, the Gas Business operated as a division of DP&L. The Gas Business sells natural gas to residential, commercial, industrial and governmental customers in a 6,000 square mile area of West Central Ohio and provides natural gas to over 300,000 customers in 16 counties. The accompanying unaudited interim financial statements are presented on a carve-out basis and include the historical operations of the Gas Business. The assets and liabilities of the Gas Business have been reflected in these financial statements at DP&L's historical cost. The financial information in these interim financial statements does not include certain expenses and adjustments that would have been incurred had the Gas Business been a separate, independent company, and may not necessarily be indicative of results that would have occurred had the Gas Business been a separate, independent company during the periods presented or of future results of the Gas Business. The accompanying unaudited interim financial statements have been prepared on a historical basis and do not reflect any effects related to the sale of the Gas Business. For all periods presented on the accompanying interim income statement, the net income of the Gas Business was equal to its comprehensive income. These unaudited interim financial statements reflect all adjustments that, in the opinion of management, are necessary to provide a fair presentation of the financial position, results of operations and cash flows for the dates and periods covered. In the opinion of management, all such adjustments are of a normal recurring nature. Interim period results are not necessarily indicative of results of operations or cash flows for a full-year period. These unaudited interim financial statements should be read in conjunction with the audited financial statements of the Gas Business for the year ended December 31, 1999. All charges and allocations of costs for facilities, function and services performed by DP&L, which are discussed in more detail in Note 2, have been charged to owner's net investment by the Gas Business in the period in which the cost was recorded in the financial statements. 2. Related Party Activities Cash Management DP&L uses a centralized cash management system. Cash deposits from the Gas Business are transferred to DP&L on a daily basis and DP&L funds the Gas Business disbursements as required. No interest has been charged or credited to transactions with the Gas Business. Shared Services DP&L provides certain general and administrative services to the Gas Business including finance, legal, information systems, benefits, advertising, customer services and facilities. The costs of these shared services (excluding employee benefits which are discussed below) are included in the Income Statement of the Gas Business generally based on the Gas Business' revenues, customers, employees or properties in relation to total DPL Inc. revenues, customers, employees or properties, as applicable. Management believes these methods of cost allocation are reasonable. Such costs during the nine-month periods ended September 30, 2000 and 1999 totaled approximately $5,640 and $4,280, respectively. Employee Benefits DP&L provides certain employee benefits to the Gas Business including health care, dental care, life insurance, long-term disability, pension plans and savings plans. The costs of these benefits are included in the Income Statement of the Gas Business based on labor utilization, which management believes to be reasonable. Such costs during the nine-month periods ended September 30, 2000 and 1999 totaled approximately $660 and $1,050, respectively. Insurance and Claims Costs The Gas Business receives certain property and liability, business interruption, and other risk insurance coverage from an affiliate subsidiary of DPL Inc. Costs charged to the Gas Business for this insurance coverage are based on the Gas Business' properties in relation to total DPL, Inc. properties, which management believes to be reasonable. Costs related to this insurance coverage during the nine-month periods ended September 30, 2000 and 1999 totaled approximately $460 and $600, respectively. Vectren Corporation And Subsidiary Companies Index - -------------------------------------------------------------------------------- Unaudited Pro Forma Combined Financial Statements Page Introduction 1 Unaudited Pro Forma Combined Balance Sheet as of September 30, 2000 2 Unaudited Pro Forma Combined Statement of Income for the Year Ended December 31, 1999 3 Unaudited Pro Forma Combined Statement of Income for the Nine Months 4 Ended September 30, 2000 Notes to Pro Forma Financial Statements 5 Vectren Corporation and Subsidiary Companies Pro Forma Financial Information The accompanying financial statements present the unaudited pro forma balance sheet as of September 30, 2000 and the unaudited pro forma statement of income for the nine months ended September 30, 2000 and for the year ended December 31, 1999. On October 31, 2000, Vectren Corporation (Vectren) completed its acquisition of the natural gas distribution assets of The Dayton Power and Light Company (Acquisition) for approximately $465 million pursuant to an Asset Purchase Agreement dated December 14, 1999. Vectren acquired the gas utility assets as a tenancy in common through two separate wholly-owned subsidiaries. Operations will be conducted under the name Vectren Energy Delivery of Ohio (VEDO). Under the acquisition structure, Indiana Gas Company, Inc., one of Vectren's operating public utilities, holds a 47 percent undivided ownership interest and VEDO has a 53 percent undivided ownership interest. The unaudited pro forma balance sheet as of September 30, 2000 is presented as if the Acquisition had occurred on September 30, 2000. The pro forma statement of income for the nine month period ended September 30, 2000 and for the year ended December 31, 1999 are presented as if the Acquisition had occurred at January 1, 1999. Preparation of the pro forma financial information was based on assumptions deemed appropriate by management. The pro forma information is unaudited and is not necessarily indicative of the results which actually would have occurred if the transaction had been consummated at the beginning of the period presented, nor does it purport to represent the future financial position and results of operations for future periods. The pro forma information should be read in conjunction with the audited consolidated financial statements of Vectren filed on Form 8-K for the year ended December 31, 1999 and the unaudited financial statements of Vectren filed on Form 10-Q for the quarter ended September 30, 2000. VECTREN CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET As Of September 30, 2000 (In Thousands) Proforma Adjustments -------------------- Vectren Dayton Vectren Historical Acquisition (2a) Pro Forma ---------- ------------- ---------- ASSETS Current Assets: Cash and cash equivalents $19,009 $ (2,482) (2c) $ 16,527 Temporary investments 826 - 826 Accounts receivable, net 134,821 11,634 146,455 Accrued unbilled revenues 21,058 - 21,058 Inventories 47,897 54,199 102,096 Prepaid gas delivery service 46,788 - 46,788 Recoverable fuel and natural gas costs 30,680 8,156 38,836 Prepayments and other current assets 31,376 13,621 44,997 ---------- ------------- ---------- Total current assets 332,455 85,128 417,583 ---------- ------------- ---------- Utility Plant: Original cost 2,419,568 334,804 2,754,372 Less: accumulated depreciation and amortization 1,069,471 145,939 1,215,410 ---------- ------------- ---------- Net utility plant 1,350,097 188,865 1,538,962 ---------- ------------- ---------- Other Investments: Investments in leveraged leases 91,253 - 91,253 Investments in partnerships and other corporations 80,873 - 80,873 Notes receivable 62,384 - 62,384 Other 2,008 - 2,008 ---------- ------------- ---------- Total other investments 236,518 - 236,518 ---------- ------------- ---------- Nonutility property, net of accumulated depreciation 89,530 1,605 91,135 Other Assets: Goodwill - 199,600 (2b) 199,600 Deferred charges 20,578 (3,336)(2c) 17,242 Unamortized debt costs 14,970 - 14,970 Demand side management programs 25,686 - 25,686 Other 3,134 - 3,134 ---------- ------------- ---------- Total other assets 64,368 196,264 260,632 ---------- ------------- ---------- TOTAL ASSETS $2,072,968 $ 471,862 $2,544,830 ========== ============== ========== The accompanying notes are an integral part of these pro forma combined financial statements. VECTREN CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED BALANCE SHEET As Of September 30, 2000 (In Thousands) Proforma Adjustments -------------------- Vectren Dayton Vectren Historical Acquisition (2a) Pro Forma ---------- --------------- ---------- LIABILITIES AND SHAREHOLDERS' EQUITY Current Liabilities: Current maturities of adjustable rate bonds subject to $ 53,700 $ - $ 53,700 tender Current maturities of long-term debt and other obligations 258 - 258 Short-term borrowings 310,545 463,981 (2d) 774,526 Accounts payable 99,964 - 99,964 Refunds to customers and customer deposits 13,556 7,881 21,437 Accrued taxes 14,344 - 14,344 Accrued interest 12,617 - 12,617 Accrued purchase gas 15,076 - 15,076 Other current liabilities 50,506 - 50,506 ---------- --------------- ---------- Total current liabilities 570,566 471,862 1,042,428 ---------- --------------- ---------- Deferred Credits and Other Liabilities: Deferred income taxes 203,219 - 203,219 Accrued postretirement benefits other than pensions 44,675 - 44,675 Unamortized investment tax credits 23,756 - 23,756 Other 18,111 - 18,111 ---------- --------------- ---------- Total deferred credits and other liabilities 289,761 - 289,761 ---------- --------------- ---------- Commitments and Contingencies Minority interest in subsidiary 1,900 - 1,900 Capitalization: Long-term debt and other obligations, net of current maturities 484,074 - 484,074 Preferred stock of subsidiary: Redeemable 8,076 - 8,076 Nonredeemable 8,889 - 8,889 ---------- --------------- ---------- Total preferred stock 16,965 - 16,965 ---------- --------------- ---------- Common stock (no par value) - issued and outstanding 61,219 213,742 - 213,742 Retained earnings 495,886 - 495,886 Accumulated other comprehensive income 74 - 74 ---------- --------------- ---------- Total common shareholders' equity 709,702 - 709,702 ---------- --------------- ---------- Total capitalization 1,210,741 - 1,210,741 ---------- --------------- ---------- TOTAL LIABILITIES AND SHAREHOLDERS' EQUITY $2,072,968 $471,862 $2,544,830 ========== =============== ========== The accompanying notes are an integral part of these pro forma combined financial statements. VECTREN CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For The Year Ended December 31, 1999 (In Thousands) Pro forma Adjustments --------------------- Vectren Dayton Acquisition Vectren Historical Historical Adjustments Pro forma ------------- ----------- ----------- ---------- OPERATING REVENUES: Gas utility $ 499,573 $ 218,866 $ - $ 718,439 Electric utility 307,569 - - 307,569 Energy services and other 261,275 - - 261,275 ------------- ----------- ----------- ---------- Total operating revenues 1,068,417 218,866 - 1,287,283 ------------- ----------- ----------- ---------- OPERATING EXPENSES: Cost of gas sold 266,429 131,302 - 397,731 Fuel for electric generation 66,305 - - 66,305 Purchased electric energy 20,791 - - 20,791 Cost of energy services and other 247,590 - - 247,590 Other operating 189,622 29,180 - 218,802 Depreciation and amortization 86,998 8,117 4,990 (3a) 100,105 Taxes other than income taxes 29,910 23,070 - 52,980 ------------- ----------- ----------- ---------- Total operating expenses 907,645 191,669 4,990 1,104,304 ------------- ----------- ----------- ---------- OPERATING INCOME (LOSS) 160,772 27,197 (4,990) 182,979 OTHER INCOME: Equity in earnings of unconsolidated investments 11,642 - - 11,642 Other - net 8,902 - - 8,902 ------------- ----------- ----------- ---------- Total other income 20,544 - - 20,544 ------------- ----------- ----------- ---------- INTEREST EXPENSE 42,862 - 27,839 (3b) 70,701 ------------- ----------- ----------- ---------- INCOME (LOSS) BEFORE PREFERRED DIVIDENDS AND INCOME TAXES 138,454 27,197 (32,829) 132,822 PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 1,078 - - 1,078 ------------- ----------- ----------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 137,376 27,197 (32,829) 131,744 45,708 9,204 (11,490) (3c) 43,422 INCOME TAXES (BENEFIT) ------------- ----------- ----------- ---------- NET INCOME (LOSS) BEFORE MINORITY INTEREST 91,668 17,993 (21,339) 88,322 MINORITY INTEREST IN SUBSIDIARY 920 - - 920 ------------- ----------- ----------- ---------- NET INCOME (LOSS) $ 90,748 $ 17,993 $ (21,339) $ 87,402 ============= =========== ============ ========== AVERAGE COMMON SHARES OUTSTANDING 61,306 61,306 61,306 61,306 DILUTED COMMON SHARES OUTSTANDING 61,430 61,430 61,430 61,430 BASIC EARNINGS PER AVERAGE SHARE OF COMMON STOCK $ 1.48 $ .29 $ (.35) $ 1.43 DILUTED EARNINGS PER SHARE OF COMMON STOCK $ 1.48 $ .29 $ (.35) $ 1.42 The accompanying notes are an integral part of these pro forma combined financial statements. VECTREN CORPORATION AND SUBSIDIARY COMPANIES UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME For Nine Months Ended September 30, 2000 (In Thousands) Pro forma Adjustments --------------------- Vectren Dayton Acquisition Vectren Historical Historical Adjustments Pro forma ------------ ---------- ----------- ---------- OPERATING REVENUES: Gas utility $ 391,486 $ 167,696 $ - $ 559,182 Electric utility 249,215 - - 249,215 Energy services and other 300,074 - - 300,074 ------------ ---------- ----------- ---------- Total operating revenues 940,775 167,696 - 1,108,471 ------------ ---------- ----------- ---------- OPERATING EXPENSES: Cost of gas sold 229,373 105,628 - 335,001 Fuel for electric generation 51,722 - - 51,722 Purchased electric energy 25,085 - - 25,085 Cost of energy services and other 285,856 - - 285,856 Other operating 142,620 17,058 - 159,678 Merger costs 31,306 - - 31,306 Depreciation and amortization 75,008 6,615 3,742 (3a) 85,365 Taxes other than income taxes 22,170 15,408 - 37,578 ------------ ---------- ----------- ---------- Total operating expenses 863,140 144,709 3,742 1,011,591 ------------ ---------- ----------- ---------- OPERATING INCOME (LOSS) 77,635 22,987 (3,742) 96,880 OTHER INCOME: Equity in earnings of unconsolidated investments 16,950 - - 16,950 Other - net 14,497 - - 14,497 ------------ ---------- ----------- ---------- Total other income 31,447 - - 31,447 ------------ ---------- ----------- ---------- INTEREST EXPENSE 37,940 - 20,879 (3b) 58,819 ------------ ---------- ----------- ---------- INCOME (LOSS) BEFORE PREFERRED DIVIDENDS AND INCOME TAXES 71,142 22,987 (24,621) 69,508 PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 776 - - 776 ------------ ---------- ----------- ---------- INCOME (LOSS) BEFORE INCOME TAXES 70,366 22,987 (24,621) 68,732 INCOME TAXES (BENEFIT) 23,527 7,832 (8,617) (3c) 22,742 ------------ ---------- ----------- ---------- NET INCOME (LOSS) BEFORE MINORITY INTEREST 46,839 15,155 (16,004) 45,990 MINORITY INTEREST IN SUBSIDIARY 983 - - 983 ------------ ---------- ----------- ---------- NET INCOME (LOSS) $ 45,856 $ 15,155 $ (16,004) $ 45,007 ============ ========== ========== =========== AVERAGE COMMON SHARES OUTSTANDING 61,257 61,257 61,257 61,257 DILUTED COMMON SHARES OUTSTANDING 61,332 61,332 61,332 61,332 BASIC EARNINGS PER AVERAGE SHARE OF COMMON STOCK $ .75 $ .25 $ (.26) $ .73 DILUTED EARNINGS PER SHARE OF COMMON STOCK $ .75 $ .25 $ (.26) $ .73 The accompanying notes are an integral part of these pro forma combined financial statements. VECTREN CORPORATION AND SUBSIDIARY COMPANIES NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS 1. Basis of Presentation Vectren Corporation (Vectren) is a public utility holding company whose wholly-owned subsidiary, Vectren Utility Holdings, Inc. (VUHI), is the holding company of Vectren's two operating public utilities, Indiana Gas Company, Inc. (Indiana Gas), and Southern Indiana Gas and Electric Company. On October 31, 2000, Vectren completed its acquisition of the natural gas distribution assets of The Dayton Power and Light Company (Acquisition) for approximately $465 million pursuant to an Asset Purchase Agreement dated December 14, 1999. Vectren acquired the gas utility as a tenancy in common through two separate wholly- owned subsidiaries. Operations will be conducted under the name Vectren Energy Delivery of Ohio (VEDO). Under the acquisition structure, Indiana Gas holds a 47 percent undivided ownership interest and VEDO has a 53 percent undivided ownership interest. The accompanying combined pro forma financial statements give effect to the Acquisition. The unaudited pro forma combined balance sheet as of September 30, 2000 is presented as if the Acquisition and the related debt financing had occurred on September 30, 2000. The pro forma combined statement of income for the nine month period ended September 30, 2000 and for the year ended December 31, 1999 are presented as if the Dayton Acquisition had occurred at January 1, 1999. 2. Pro Forma Adjustments to Balance Sheet (a) Determination of total purchase price: Cash purchase price $463,981 Liability assumed for customer deposits 7,881 Transaction costs 5,818 -------- Total purchase price $477,680 ======== (b) Allocation of purchase price: Cash purchase price $463,981 Transaction costs 5,818 -------- 469,799 ======== Tangible assets acquired 278,080 Liabilities assumed (7,881) --------- Net assets acquired 270,199 --------- Excess allocated to goodwill $199,600 ======== The above reflects Management's preliminary purchase price allocation based upon information currently available. The purchase price is subject to adjustment based upon finalization of the closing balance sheet in accordance with the Asset Purchase Agreement. Management believes that any such adjustment will not be material. (c) Pro forma adjustment to reclassify deferred transaction costs incurred as of September 30, 2000 of $3,336 to goodwill and to reflect the cash payment at closing of $2,482 for the remaining transaction costs. (d) A $435 million commercial paper program established by VUHI provided $434,360 of the initial Acquisition financing. Additionally, Indiana Gas provided $29,621 from its commercial paper program for total financing of $463,981. On December 28, 2000, VUHI issued a $150 million Floating Rate Note due December 27, 2001, replacing an equal amount of commercial paper. Management anticipates that the short-term financings will be replaced over time with permanent, long-term financing. Short- term Annualized borrowings Interest ----------- ---------- Commercial paper (VUHI) $284,360 $16,189 6.6425% Floating rate note (VUHI) 150,000 9,964 Commercial paper (Indiana Gas) 29,621 1,686 ---------- ---------- $463,981 $27,839 ========== ========== 3. Pro Forma Adjustments to Income Statements (a) Pro forma adjustment to reflect the amortization of goodwill of $199,600 amortized over a period of 40 years. (b) Pro forma adjustment to reflect the interest expense from the Acquisition financing based upon borrowings of $463,981 at an average interest rate of approximately 6.0 percent annum (see 2d) (c) Pro forma adjustment to reflect the income tax benefit on a combined federal and state statutory rate of 35 percent. (d) Vectren and Dayton Power and Light Company (DP&L) entered into an agreement whereby DP& L will provide transitional support to Vectren in the areas of meter reading, billing, cash receipts, collections, customer deposits, telecommunication services and other miscellaneous services for a predetermined fee. Because these fees will be no greater than the historical costs incurred by DP&L for such support services for its natural gas distribution operations, no pro forma adjustment has been reflected.