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,
---------------------
ASSETS 1998 1997
------ ---------- ----------
(Dollars in
Thousands)
Property:
Property in service.......................................... $ 2,681 $ 2,625
Work in progress............................................. 12,599 5,147
Less: accumulated depreciation............................... 927 713
---------- ----------
Total property........................................... 14,353 7,059
---------- ----------
Investments (principally investments in wholly-owned
subsidiaries)............................................... 1,410,999 1,407,789
---------- ----------
Current Assets:
Cash and cash equivalents.................................... 10,165 6,172
Amounts receivable from subsidiaries......................... 76,676 85,056
Prepayments.................................................. 27,637 21,971
---------- ----------
Total current assets..................................... 114,478 113,199
---------- ----------
Other (principally notes receivable from associated companies). 355,117 323,672
---------- ----------
$1,894,947 $1,851,719
========== ==========
CAPITALIZATION AND LIABILITIES
------------------------------
Capitalization:
Common shares................................................ $ 870,930 $ 870,930
Additional paid-in capital................................... 94,181 89,768
Retained earnings............................................ 744,309 667,790
Other...................................................... 1,856 1,813
Less: Treasury shares........................................ 559,027 363,943
Currency translation adjustment............................ 2,541 1,570
---------- ----------
Total capitalization..................................... 1,149,708 1,264,788
Current Liabilities:
Dividends declared on common and preferred stock............. 29,970 29,535
Amounts payable to subsidiaries.............................. 13,041 31,818
Other........................................................ 1,723 2,589
---------- ----------
Total current liabilities................................ 44,734 63,942
---------- ----------
Other (principally notes receivable to associated companies)... 700,505 522,989
---------- ----------
Commitments and Contingencies (Note 3)
$1,894,947 $1,851,719
========== ==========
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,
----------------------------------------
1998 1997 1996
------------ ------------ ------------
(Dollars in Thousands except per share
amounts)
Equity in net earnings of
subsidiaries........................ $ 211,525 $ 202,680 $ 185,106
------------ ------------ ------------
Other income (deductions):
Administrative and general expense. (14,196) (12,117) (10,167)
Interest income.................... 31,874 27,272 21,443
Interest expense................... (48,444) (37,652) (20,604)
Other, net......................... 1,012 (143) 1,543
------------ ------------ ------------
(29,754) (22,640) (7,785)
------------ ------------ ------------
Net income before income taxes....... 181,771 180,040 177,321
Income taxes......................... 12,115 (10,809) 587
------------ ------------ ------------
Net income........................... 193,886 190,849 176,734
Dividend requirements on preferred
shares.............................. -- -- 119
------------ ------------ ------------
Balance available for common
shareholders........................ $ 193,886 $ 190,849 $ 176,615
============ ============ ============
Average common shares outstanding-
basic............................... 120,778,077 123,849,126 122,381,500
Basic earnings per average common
share............................... $ 1.60 $ 1.54 $ 1.44
============ ============ ============
Diluted earnings per average common
share............................... $ 1.59 $ 1.53 $ 1.43
============ ============ ============
The accompanying notes to condensed financial statements are an integral part
of this statement.
2
EXHIBIT 99.2
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE I
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
Year Ended December 31,
-------------------------------
1998 1997 1996
--------- --------- ---------
(Dollars in Thousands)
Net cash provided by operating activities...... $ 177,487 $ 147,528 $ 183,867
--------- --------- ---------
Cash flows provided by (used in) investing
activities:
Acquisition of IWC Resources................. -- (288,932) --
Acquisition of minority interest............. -- (5,461) --
Capital expenditures......................... (7,451) (5,000) (22)
Sale of property............................. (56) (5) 83
--------- --------- ---------
Net cash provided by (used in) investing
activities................................ (7,507) (299,398) 61
--------- --------- ---------
Cash flows provided by (used in) financing
activities
Issuance of common shares.................... 10,356 218,566 5,716
Increase in notes payable to subsidiaries.... 175,012 205,396 133,298
Increase (decrease) in notes receivable from
subsidiaries................................ (30,993) (21,709) (82,740)
Redemption of cumulative preferred shares
with mandatory redemption provisions........ -- -- (35,000)
Cash dividends paid on common shares......... (116,386) (111,593) (103,190)
Cash dividends paid on preferred shares...... -- -- (766)
Acquisition of treasury shares............... (203,976) (133,073) (105,498)
--------- --------- ---------
Net cash provided by (used in) financing
activities................................ (165,987) 157,587 (188,180)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... 3,993 5,717 (4,252)
Cash and cash equivalents at beginning of year. 6,172 455 4,707
--------- --------- ---------
Cash and cash equivalents at end of year....... $ 10,165 $ 6,172 $ 455
========= ========= =========
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): $207,400, $188,175,
and $184,750 in 1998, 1997, and 1996, respectively.
2. Support Agreement
The financial 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' obligations in the event of a failure to pay by
Capital Markets. Restrictions in the Support Agreement prohibit recourse on
the part of Capital Markets' creditors 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 for the benefit of Capital
Markets' creditors. The carrying value of the assets of Industries, other than
the stock and assets of Northern Indiana as reflected in the consolidated
financial statements of Industries, was approximately $1.3 billion at December
31, 1998.
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. Earnings Per Share
Industries determines earnings per share in accordance with the provisions
of SFAS No. 128 "Earnings per Share", which requires Industries to present
basic earning per share and diluted earnings per share in place.
The net income, preferred dividends and shares used to compute basic and
diluted earnings per share is presented in the following table:
1998 1997 1996
----------- ----------- -----------
(Dollars in Thousands except Per
Share Amounts)
Basic
Weighted Average Number of Shares:
Average Common Shares Outstanding........ 120,778,077 123,849,126 122,381,500
=========== =========== ===========
Net income to be Used to Compute Basic
Earnings per Average Common Share:
Net Income............................... $ 193,886 $ 190,849 $ 176,734
Dividend requirements on Preferred
Shares.................................. -- -- 119
----------- ----------- -----------
Balance Available for Common
Shareholders............................ $ 193,886 $ 190,849 $ 176,615
=========== =========== ===========
Basic Earnings per Average Common Share.... $ 1.60 $ 1.54 $ 1.44
=========== =========== ===========
Diluted
Weighted Average Number of Shares:
Average Common Shares Outstanding........ 120,778,077 123,849,126 122,381,500
Dilutive effect for Nonqualified Stock
Options................................. 556,799 374,344 323,367
----------- ----------- -----------
Weighted Average Shares.................. 121,334,876 124,223,470 122,704,867
Net Income to be Used to Computed Diluted
Earnings per Average Common Share:
Net Income............................... $ 193,886 $ 190,849 $ 176,734
Dividend requirements on Preferred
Shares.................................. -- -- 119
----------- ----------- -----------
Balance Available for Common
Shareholders............................ $ 193,886 $ 190,849 $ 176,615
=========== =========== ===========
Diluted Earnings per Average Common Share.. $ 1.59 $ 1.53 $ 1.43
=========== =========== ===========
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5. Stock Split
On December 16, 1997, the Board of Directors authorized a two-for-one split
of Industries' common shares. The stock split was paid February 20, 1998 to
shareholders of record at the close of business on January 30, 1998. All
references to number of common shares reported, including per share amounts
and stock option data of Industries' common shares, reflect the two-for-one
stock split as if it had occurred at the beginning of the earliest period.
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 $551
million. 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
Securities and Exchange Commission, FERC and state regulatory agencies in
Massachusetts, New Hampshire and Maine. The shareholders of Bay State approved
the merger on May 27, 1998, and the state regulatory agencies in
Massachusetts, New Hampshire and Maine have also approved the merger. The
transaction is expected to be completed in early 1999.
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.
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