EXHIBIT 99.2
NIPSCO Industries, Inc. and Subsidiaries
INDEX
Page
----
Condensed Financial Information of NIPSCO Industries, Inc. and Subsidiaries.
--Schedule I--Condensed Balance Sheet............................................................. 1
--Schedule I--Condensed Statement of Income....................................................... 2
--Schedule I--Condensed Statement of Cash Flows................................................... 3
--Notes to Condensed Financial Statements......................................................... 4
EXHIBIT 99.2
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
December 31,
---------------------------------
1997 1996
---------------------------------
(Dollars in Thousands)
ASSETS
------
Property:
Property in service................................................................. $ 2,625 $ 2,620
Construction work in progress....................................................... 5,147 76
Less: accumulated depreciation...................................................... 713 541
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Total property................................................................. 7,059 2,155
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Investments (principally investments in wholly-owned subsidiaries).................. 1,407,789 1,097,173
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Current Assets:
Cash and cash equivalents........................................................... 6,172 455
Amounts receivable from subsidiaries................................................ 85,056 75,508
Prepayments......................................................................... 21,971 3,647
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Total current assets........................................................... 113,199 79,610
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Other (principally notes receivable from associated companies)........................... 323,672 303,373
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$1,851,719 $1,482,311
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shares....................................................................... $ 870,930 $870,930
Additional paid-in capital.......................................................... 89,768 32,868
Retained earnings................................................................... 667,790 591,370
Less: Treasury shares.............................................................. 363,943 392,995
Other............................................................................ (1,813) 1,532
Currency translation adjustment................................................. 1,570 140
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Total capitalization........................................................... 1,264,788 1,100,501
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Current Liabilities:
Dividends declared on common and preferred stock.................................... 29,535 27,053
Amounts payable to subsidiaries..................................................... 31,818 30,340
Other............................................................................... 2,589 5,085
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Total current liabilities..................................................... 63,942 62,478
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Other (principally notes payable to associated companies)................................ 522,989 319,332
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Commitments and Contingencies (Note 3):
$1,851,719 $1,482,311
========== ==========
The accompanying notes to condensed financial statements are an integral part of
this statement.
1
EXHIBIT 99.2
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF INCOME
Year Ended December 31,
------------------------------------------
1997 1996 1995
------------ ------------ ------------
Equity in net earnings of subsidiaries.............................. $ 202,680 $ 185,106 $ 180,827
------------ ------------ ------------
Other income (deductions):
Administrative and general expense............................. (12,117) (10,167) (9,854)
Interest income................................................ 27,272 21,443 15,575
Interest expense............................................... (37,652) (20,604) (12,274)
Other, net..................................................... (143) 1,543 (663)
------------ ------------ ------------
(22,640) (7,785) (7,216)
------------ ------------ ------------
Net income before income taxes...................................... 180,040 177,321 173,611
Income taxes........................................................ (10,809) 587 (1,854)
------------ ------------ ------------
Net income.......................................................... 190,849 176,734 175,465
Dividend requirements on preferred shares........................... -- 119 3,063
------------ ------------ ------------
Balance available for common shareholders........................... $ 190,849 $ 176,615 $ 172,402
============ ============ ============
Average common shares outstanding--basic*........................... 123,849,126 122,381,500 126,562,354
Basic earnings per average common share*............................ $ 1.54 $ 1.44 $ 1.36
============ ============ ============
Diluted earnings per average common share*.......................... $ 1.53 $ 1.43 $ 1.35
============ ============ ============
*Amounts restated to reflect two-for-one stock split payable February 20, 1998,
to shareholders of record at the close of business on January 30, 1998.
The accompanying notes to condensed financial statements are an integral part of
this statement.
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EXHIBIT 99.2
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Year Ended December 31,
--------------------------------------------
1997 1996 1995
--------- --------- ----------
(Dollars in Thousands)
Net cash provided by operating activities........................ $ 147,712 $ 183,867 $ 184,300
--------- --------- ----------
Cash flows provided by (used in) investing activities:
Acquisition of IWC Resources, net of cash acquired (288,932) -- --
Acquisition of minority interest................................. (5,641) -- --
Capital expenditures............................................. (5,000) (22) (100)
Sale of property................................................. (5) 83 935
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Net cash provided by (used in) investing activities.... (299,578) 61 835
--------- --------- ----------
Cash flows provided by (used in) financing activities:
Issuance of common shares................................... 218,566 5,716 7,389
Increase in notes payable to subsidiaries................... 205,396 133,298 41,211
Increase (decrease) in note receivable from subsidiaries.... (21,709) (82,740) (58,479)
Redemption of cumulative preferred shares with mandatory
redemption provisions..................................... -- (35,000) --
Cash dividends paid on common shares........................ (111,593) (103,190) (99,043)
Cash dividends paid on preferred shares..................... -- (766) (3,063)
Acquisition of treasury shares.............................. (133,077) (105,498) (69,183)
--------- --------- ----------
Net cash provided by (used in) financing activities.... 157,583 (188,180) (181,168)
--------- --------- ----------
Net increase (decrease) in cash and cash equivalents............. 5,717 (4,252) 3,967
Cash and cash equivalents at beginning of year................... 455 4,707 740
--------- --------- ----------
Cash and cash equivalents at end of year......................... $ 6,172 $ 455 $ 4,707
========= ========= ==========
The accompanying notes to condensed financial statements are an integral part of
this statement.
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EXHIBIT 99.2
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. Dividends from Subsidiaries
Cash dividends paid to NIPSCO Industries, Inc. (Industries) by its
consolidated subsidiaries were (in thousands of dollars): $188,175, $184,750 and
$183,475 in 1997, 1996, and 1995, respectively.
2. Support Agreement
The obligations of NIPSCO Capital Markets, Inc. (Capital Markets) are
subject to a Support Agreement between Industries and Capital Markets, under
which Industries has committed to make payments of interest and principal on
Capital Markets' securities in the event of a failure to pay by Capital Markets.
Restrictions in the Support Agreement prohibit recourse on the part of Capital
Markets' investors against the stock and assets of Northern Indiana Public
Service Company (Northern Indiana) which are owned by Industries. Under the
terms of the Support Agreement, in addition to the cash flow of cash dividends
paid to Industries by any of its consolidated subsidiaries, the assets of
Industries, other than the stock and assets of Northern Indiana, are available
as recourse to holders of Capital Markets' securities. The carrying value of the
assets of Industries, other than the stock and assets of Northern Indiana,
reflected in the consolidated financial statements of Industries, was
approximately $1.3 billion at December 31, 1997.
3. Contingencies
Industries and its subsidiaries are parties to various pending proceedings,
including suits and claims against them for personal injury, death, and property
damage. Such proceedings and suits, and the amounts involved, are routine
litigation and proceedings for the kinds of businesses conducted by Industries
and its subsidiaries.
4. Changes in Accounting Principles
At December 31, 1997, Industries adopted Statement of Financial Accounting
Standards (SFAS) No. 128 "Earnings per Share." As a result of adopting SFAS No.
128, previously reported earnings per share information has been restated. The
effect of this accounting change on previously reported earnings per share data
is insignificant.
The net income, preferred dividends and shares used to compute basic and diluted
earnings per share is presented in the following table:
1997 1996 1995
- ---------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands, except per share amounts)
Basic
Weighted Average Number of Shares:
Average Common Shares Outstanding 123,849,126 122,381,500 126,562,354
=========== =========== ===========
Net Income to be Used to Compute Basic Earnings per Share:
Net Income $190,849 $176,734 $175,465
Dividend requirements on Preferred Shares -- 119 3,063
Balance Available for Common Shareholders $190,849 $176,615 $172,402
======== ======== ========
Basic Earning per Common Share $ 1.54 $ 1.44 $ 1.36
======== ======== ========
Diluted
Weighted Average Number of Shares
Average Common Shares Outstanding 123,849,126 122,381,500 126,562,354
Dilutive effective for Nonqualified Stock Options 374,344 323,367 238,286
------- ------- -------
Weighted Average Shares a 124,223,470 122,704,867 126,800,640
=========== =========== ===========
Net Income to be Used to Compute Diluted Earnings per Share
Net Income $190,849 $176,734 $175,465
Dividend requirements on Preferred Shares -- 119 3,063
Balance Available for common Shareholders $190,849 $176,615 $172,402
======== ======== ========
Diluted Earnings per Common Share $ 1.53 $ 1.43 $ 1.35
======== ======== ========
5. STOCK SPLIT
On December 16, 1997, the Board of Directors authorized a two-for-one split
of Industries' common stock. Shareholders will receive one additional common
share for each common share held. The stock split will be payable February
20, 1998, to shareholders of record at the close of business on January 30,
1998. All references to number of shares reported for the period including
per share amounts and stock option data of Industries' common stock have
been restated to reflect the two-for-one stock split. The common share cash
dividend to be paid February 20, 1998 is payable on pre-split common shares.
6. PURCHASE OF IWC RESOURCES CORPORATION
On March 25, 1997, Industries acquired all the outstanding common stock of
IWCR for $290.5 million. Industries financed this transaction with debt of
approximately $83.0 million and issuance of approximately 10.6 million
Industries' common shares. Industries accounted for the acquisition as a
purchase. The purchase price was allocated to the assets and liabilities
acquired based on their fair values.
7. PURCHASE OF BAY STATE GAS COMPANY
On December 18, 1997, Industries and Bay State Gas Company (Bay State)
signed a definitive merger agreement under which Industries will acquire all
of the common stock of Bay State in a stock-for-stock transaction valued at
$40 per Bay State share. The transaction is valued at approximately $780
million ($540 million equity and $240 million in debt and preferred stock).
Bay State shareholders will have the option of taking up to 50 percent of
the total purchase price in cash. Consummation of the merger is subject to
certain closing conditions, including the approval by the shareholders of
Bay State as well as the Securities and Exchange Commission, FERC and state
regulatory agencies in Massachusetts, New Hampshire and Maine. The
transaction is expected to be completed in late 1998.
Bay State, one of the largest natural gas utilities in New England, provides
natural gas distribution service to more than 300,000 customers in
Massachusetts, New Hampshire and Maine. The combined company will be one of
the 10 largest natural gas distribution systems in the nation, servicing
more than 1 million gas customers. In addition, Industries and Bay State
anticipate entering into a joint marketing agreement early in 1998 that will
expand the operations of Bay State's non-regulated energy service companies.
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