Exhibit 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratios)
Twelve
Months Ended Year Ended December 31
June 30, --------------------------------------------------------------
2001(1) 2000(1) 1999 1998 1997 (2) 1996
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Earnings:
Net income (3) $ 56,432 $ 53,417 $ 76,511 $ 70,367 $ 59,011 $ 78,962
Income taxes 31,113 34,924 43,161 39,093 35,072 45,672
Fixed charges (see below) 65,067 47,995 39,195 38,582 39,795 40,161
Less: Preferred stock dividend 962 1,017 1,078 1,095 1,097 1,097
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Total adjusted earnings $ 151,650 $ 135,319 $ 157,789 $ 146,947 $ 132,781 $ 163,698
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Fixed charges:
Total interest expense $ 63,199 $ 46,072 $ 36,790 $ 36,670 $ 37,509 $ 37,672
Interest component of rents 906 906 1,327 817 1,189 1,392
Preferred stock dividend 962 1,017 1,078 1,095 1,097 1,097
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Total fixed charges $ 65,067 $ 47,995 $ 39,195 $ 38,582 $ 39,795 $ 40,161
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Ratio of earnings to fixed charges 2.3 2.8 4.0 3.8 3.3 4.1
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(1) Merger and integration related costs and restructuring costs incurred for
the twelve months ended June 30, 2001 and for the year ended December 31,
2000 totaled $15.1 million and $32.7 million, respectively. These costs
relate primarily to employee and executive severance, transaction costs,
and other merger, integration and restructuring activities.
As a result of merger integration activities, management has identified
certain information systems that are expected to be retired in 2001.
Accordingly, the useful lives of these assets have been shortened to
reflect this decision. These information system assets are owned by a
wholly owned subsidiary of Vectren and the fees allocated by the subsidiary
for the use of these systems by Indiana Gas are reflected in operation and
maintenance expenses in the accompanying condensed financial statements. As
a result of the shortened useful lives, additional fees were incurred by
VUHI. For the twelve months ended June 30, 2001 and for the year ended
December 31, 2000, these additional fees increased operation and
maintenance $13.6 million and $11.4 million, respectively.
In total, merger and integration related costs and restructuring costs
incurred for the twelve months ended June 30, 2001 and for the year ended
December 31, 2000 were $28.7 million ($17.8 million after tax) and $44.1
million ($31.6 million after tax), respectively. Before merger and
integration and restructuring charges, VUHI's ratio of earnings to fixed
charges for the twelve months ended June 30, 2001 was 2.4 and for the year
ended December 31, 2000 was 3.2.
(2) In 1997, the Indiana Gas Board of Directors authorized management to
undertake the actions necessary and appropriate to restructure Indiana Gas'
operations and recognize a resulting restructuring charge of $39.5 million
($24.5 million after tax) which included estimated costs related to
involuntary workforce reductions. VUHI's ratio of earnings to fixed charges
for 1997 before restructuring costs was 3.6.
(3) Net income, as defined, is before preferred stock dividend requirement of
subsidiary and cumulative effect of change in accounting principle.