EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratios)
Year Ended December 31
2002 2001(1) 2000(1) 1999 1998
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Earnings:
Net income (2) $ 93,649 $ 39,716 $ 53,512 $ 76,511 $ 70,367
Income taxes 44,642 18,389 35,006 43,161 39,093
Equity in losses of equity investee 1,859 462 - - -
Fixed Charges (See Below) 67,715 72,106 48,047 39,240 38,582
Less: Preferred stock dividend 32 758 1,017 1,078 1,095
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Total adjusted earnings $ 207,833 $ 129,915 $ 135,548 $ 157,834 $ 146,947
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Fixed charges:
Total interest expense $ 66,141 $ 70,142 $ 46,124 $ 36,790 $ 36,670
Interest component of rents 1,542 1,206 906 1,372 817
Preferred stock dividend 32 758 1,017 1,078 1,095
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Total fixed charges $ 67,715 $ 72,106 $ 48,047 $ 39,240 $ 38,582
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Ratio of earnings to fixed charges 3.1 1.8 2.8 4.0 3.8
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(1) Merger and integration related costs and restructuring costs incurred for
the years ended December 31, 2001 and 2000 totaled $17.8 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 for the years ended December 31, 2001 and 2000, these
additional fees increased operation and maintenance $9.6 million and $11.4
million, respectively.
In total, merger and integration related costs and restructuring costs
incurred for the years ended December 31, 2001 and 2000 were $27.4 million
($17.0 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 year ended December 31, 2001 was 2.2 and
for the year ended December 31, 2000 was 3.7.
(2) Net income, as defined, is before preferred stock dividend requirement of
subsidiary and cumulative effect of change in accounting principle.