SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-K
X ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2000
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from ______ to _______
Commission Registrant, State of Incorporation; IRS Employer
File Number Address and Telephone Number Identification No.
- ----------- ----------------------------------- ------------------
1-6494 Indiana Gas Company, Inc. 35-0793669
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Registrant Title of each class on which registered
----------- ------------------- --------------------
None None None
Securities registered pursuant to Section 12(g) of the Act:
None
--------------------------------------------------------------
Indicate by check mark whether the Registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the
Securities Exchange Act of 1934 during the preceding 12 months
(or for such shorter period that the registrant was required to
file such reports), and (2) have been subject to such filing
requirements for the past 90 days: Yes X No
Indicate the number shares outstanding of each of the
Registrant's classes of common stock, as of the latest
practicable date.
Common Stock-
Without Par Value 482.41561 March 21, 2001
- ------------------ ------------------ --------------
Class Number of shares Date
Indicate by check mark if disclosure of delinquent filers
pursuant to Item 405 of Regulation S-K is not contained herein,
and will not be contained, to the best of Registrant's knowledge,
in definitive proxy or information statements incorporated by
reference in Part III of this Form 10-K or any amendment to this
Form 10-K. X.
Documents Incorporated by Reference
Certain information in Vectren Corporation's definitive Proxy
Statement for the 2001 Annual Meeting of Stockholders, which was
filed with the Securities and Exchange Commission on March 16,
2001, is incorporated by reference in Part III of this Form 10-K.
Information in the company's Current Report on Form 8-K which was
filed with the Securities and Exchange Commission on March 29,
2001, regarding gas cost adjustment proceedings, is incorporated
by reference in Part II of this Form 10-K.
Table of Contents
Item Page
Number Number
Part I
1 Business 2
2 Properties 4
3 Legal Proceedings 4
4 Submission of Matters to Vote of Security Holders 5
Part II
5 Market for Registrant's Common Equity 5
and Related Security Holder Matters 6
6 Selected Financial Data
7 Management's Discussion and Analysis
of Financial Condition and Results of 7
Operations
Qualitative and Quantitative Disclosures of
7A
Market Risks 13
8 Financial Statements and Supplementary Data 14
9 Change in and Disagreements with Accountants on
Accounting and Financial Disclosure 33
Part III
10 Directors and Executive Officers of
the Registrants 34
11 Executive Compensation 35
12 Security Ownership of Certain Beneficial
Owners and Management 37
13 Certain Relationships and Related
Transactions 38
Part IV
14 Exhibits, Financial Statement Schedules and
Reports on Form 8-K 38
Signatures 41
2
Part I
ITEM 1. BUSINESS
Indiana Gas Company, Inc. (Indiana Gas) is an operating public
utility incorporated July 16,1945 under laws of the state of
Indiana and is a wholly owned subsidiary of Vectren Corporation
(Vectren). Indiana Gas provides transportation, distribution and
sale of natural gas to a diversified base of customers in 311
communities in 49 of Indiana's 92 counties.
Vectren was organized on June 10, 1999 solely for the purpose of
effecting the merger of Indiana Energy, Inc. (Indiana Energy),
Indiana Gas' former parent company, and SIGCORP, Inc. (SIGCORP).
On March 31, 2000, the merger of Indiana Energy with SIGCORP and
into Vectren was consummated with a tax-free exchange of shares
that has been accounted for as a pooling-of-interests. Prior to
March 31, 2000, all of the outstanding shares of common stock of
Indiana Gas were owned by Indiana Energy. Vectren has a
December 31 fiscal year end. In order to report Indiana Gas'
financial operations on a consistent basis with Vectren
Corporation, Indiana Gas changed its year end from September 30
to December 31. The merger did not affect Indiana Gas' debt
securities.
Acquisition of Gas Distribution Assets of the Dayton Power and
Light Company
On December 15, 1999, Indiana Energy, now Vectren, announced that
the board of directors had approved a definitive agreement under
which the company would acquire the natural gas distribution
assets of The Dayton Power and Light Company, which would add
310,000 gas distribution customers in 16 counties in west central
Ohio. On October 31, 2000, Vectren completed the approximate $465
million acquisition. Vectren acquired the natural gas
distribution assets as a tenancy in common through two wholly
owned subsidiaries. Vectren Energy Delivery of Ohio, Inc. (VEDO)
holds a 53 percent undivided ownership interest in the assets,
and Indiana Gas holds a 47 percent undivided ownership interest
in the assets. VEDO is the operator of the assets, operations of
which are herein referred to as "the Ohio operations." Vectren
Utility Holdings, Inc. (VUHI), Vectren's intermediate holding
company for its operating public utilities, including Indiana
Gas, established a $435 million commercial paper program to fund
the majority of the acquisition. Indiana Gas' investment in the
Ohio operations of approximately $218 million was funded with a
combination of short-term borrowings from VUHI and Indiana Gas'
commercial paper program.
Overview
During 2000, Indiana Gas supplied gas to 524,427 customers,
including 476,073 residential, 47,359 commercial and 995 contract
in 311 communities in 49 of the 92 counties in the state of
Indiana.
The service area has a population of approximately 2 million and
contains diversified manufacturing and agriculture-related
enterprises. The principal industries served include automotive
parts and accessories, feed, flour and grain processing, metal
castings, aluminum products, gypsum products, electrical
equipment, metal specialties and glass.
The largest communities served include Muncie, Anderson,
Lafayette-West Lafayette, Bloomington, Terre Haute, Marion, New
Albany, Columbus, Jeffersonville, New Castle and Richmond.
3
Revenues
For the year ended December 31, 2000, revenues were approximately
$598.1 million of which residential customers provided 65
percent, small commercial 24 percent and contract 11 percent.
During the year ended December 31, 2000, Indiana Gas added
approximately 11,000 residential and commercial customers.
Indiana Gas receives gas revenues by selling gas directly to
residential and commercial customers at approved rates or by
transporting gas through its pipelines at approved rates to
contract customers that have purchased gas directly from other
producers, brokers or marketers. Total volume of gas provided to
both sales and transportation customers (throughput) was 126,960
MDth for the year ended December 31, 2000. Transported gas
represented 49 percent of total throughput. Rates for
transporting gas provide for the same margins generally earned by
selling gas under applicable sales tariffs.
The sale of gas is seasonal and strongly affected by variations
in weather conditions. To mitigate seasonal demand, Indiana Gas
owns and operates five underground gas storage fields, four
liquefied petroleum (propane) air-gas manufacturing plants and
maintains contract storage. Natural gas purchased from suppliers
is injected into storage during periods of light demand which are
typically periods of lower prices. The injected gas is then
available to supplement contracted volumes during periods of peak
requirements. Approximately 169,000 Dth of gas per day can be
withdrawn from storage during peak demand periods.
Gas Purchases
Effective April 1, 1996, Indiana Gas purchases all of its natural
gas and winter delivery service from ProLiance Energy, LLC
(ProLiance). ProLiance is a 50 percent owned non-regulated
energy marketing affiliate of Vectren. Indiana Gas purchased
68,230 MDth volumes of gas at an average cost of $5.77 per MDth.
(See Note 14 in Indiana Gas' financial statements included in
Item 8 Financial Statements and Supplementary Data regarding
transactions with ProLiance).
Regulatory Matters
Indiana Gas' rates and charges, terms of service, accounting
matters, issuance of securities, and certain other operational
matters are regulated by the Indiana Utility Regulatory
Commission (IURC).
Adjustments to rates and charges related to the cost of gas
charged are made through gas cost adjustment (GCA) procedures
established by Indiana law and administered by the IURC. GCA
procedures involve scheduled quarterly filings and IURC hearings
to establish the amount of price adjustments for a designated
future quarter. The procedures also provide for inclusion in
later quarters of any variances between estimated and actual
costs of gas sold in a given quarter. This reconciliation
process with regard to changes in the cost of gas sold closely
matches revenues to expenses. The IURC has also applied the
statute authorizing the GCA procedures to reduce rates when
necessary so as to limit net operating income to the level
authorized in its last general rate order. An earnings test
operates in conjunction with GCA procedures. Recovery of gas
costs is not allowed to the extent that total operating income
for a 60-month period, including the twelve-month period provided
in the gas cost adjustment filing, exceeds the total operating
income authorized by the IURC. For the period 1998 through 2000,
the earnings test has not affected the company's ability to
recover gas costs, and the company does not anticipate the
earnings test will restrict the recovery of gas costs in the near
future. (See the Rate and Regulatory Matters section of
Management's Discussion and Analysis of Financial Condition and
Results of Operations in Item 7 regarding a $3.8 million
disallowance of gas costs.)
4
Indiana Gas' rate structures does not include a weather
normalization-type clause whereby it would be authorized to
recover the gross margin on sales established in its last general
rate case, regardless of actual weather patterns.
Environmental Matters
See Note 12 of Indiana Gas' financial statements in Item 8
Financial Statements and Supplementary Data regarding
manufactured gas plants.
Competition
The utility industry has been undergoing dramatic structural
change for several years, resulting in increasing competitive
pressures faced by gas utility companies. Increased competition
may create greater risks to the stability of utility earnings
generally and may in the future reduce our earnings from retail
electric and gas sales. Ohio regulation provides for choice of
commodity for all gas customers. Indiana has not adopted any
regulation requiring gas choice except for large volume
customers.
Personnel
As of December 31, 2000, Indiana Gas had 669 employees.
The labor agreement between Indiana Gas, Local Union 1393 of the
International Brotherhood of Electrical Workers and Local Unions
7441 and 12213, United Steelworkers of America, went into effect
November 27, 1998 for a five year term expiring on December 1,
2003. The agreement contains a 4 percent wage increase in 1998
and 3 percent wage increases each year thereafter during the term
of the agreement in addition to increased performance incentives,
a new sick pay provision and a simplified pension benefit
formula.
ITEM 2. PROPERTIES
Indiana Gas owns and operates five gas storage fields located in
Indiana covering 71,484 acres of land with an estimated ready
delivery from storage capability of 8.0 million Dth of gas with
daily delivery capabilities of 134,160 Dth. Indiana Gas also
maintains 186,578 Dth of gas in contract storage with a daily
deliverability of 3,563 Dth and three liquefied petroleum
(propane) air-gas manufacturing plants with a total daily
capacity of 31,000 Dth of gas.
Indiana Gas' gas delivery system includes 11,336 miles of
distribution and transmission mains.
ITEM 3. LEGAL PROCEEDINGS
Indiana Gas is involved in various legal proceedings arising in
the normal course of business. In the opinion of management, with
the exception of matters described in Note14 of its financial
statements included in Item 8 Financial Statements and
Supplementary Data regarding transactions with ProLiance, there
are no legal proceedings pending that are material to its
financial position or results of operations.
5
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
No matters were submitted during the fourth quarter to a vote of
security holders.
Part II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
Market Price
All of the outstanding shares of Indiana Gas' common stock are
owned by Vectren at December 31, 2000. Indiana Gas' common stock
is not publicly traded.
As of December 31, 2000, there are no outstanding options or
warrants to purchase Indiana Gas common stock or securities
convertible into Indiana Gas' common stock. Additionally,
Indiana Gas has no plans to publicly offer any of its common
stock.
Dividends
Dividends on our shares of common stock are payable at the
discretion of the board of directors out of legally available
funds. Future payments of dividends, and the amounts of these
dividends, will depend on financial condition, results of
operations, capital requirements and other factors.
During 2000, the company paid dividends to Vectren of $5.7
million, $6.6 million, $7.3 million and $6.7 million in the
first, second, third and fourth quarters, respectively.
During 1999, the company paid dividends to Vectren of $7.0
million, $7.0 million, $7.3 million and $5.7 million in the
first, second, third and fourth quarters, respectively.
6
ITEM 6. SELECTED FINANCIAL DATA
The following table presents selected financial information. The
information should be read in conjunction with the financial
statements of Indiana Gas. The financial information as of
December 31, 2000, 1999 and 1998 and for the years ended December
31, 2000, 1999, 1998 and 1997 are derived from Indiana Gas'
audited financial statements. The financial information as of
December 31, 1997 and 1996 and for the year ended December 31,
1996 are derived from Indiana Gas' internal unaudited financial
statements as Indiana Gas' fiscal year end was September 30 prior
to the merger. Indiana Gas' 2000 net income reflects two months
of results from the Ohio operations.
Year Ended December 31
(in thousands) 2000(1,2) 1999 1998
--------- ------- -------
Operating Revenues $ 598,113 $ 431,361 $ 420,459
Operating Income $ 31,215 $ 45,701 $ 42,001
Net Income $ 11,209 $ 29,742 $ 26,825
Total Assets $ 1,143,672 $ 739,870 $ 686,757
Long-Term Obligations $ 281,109 $ 211,849 $ 191,964
Common Shareholder's Equity $ 233,494 $ 248,622 $ 245,880
Year Ended December 31
(in thousands) 1997(3) 1996
-------- ---------
Operating Revenues $ 528,058 $ 548,766
Operating Income $ 29,579 $ 51,159
Net Income $ 13,648 $ 36,121
Total Assets $ 698,889 $ 750,928
Long-Term Obligations $ 165,000 $ 139,733
Common Shareholder's Equity $ 246,406 $ 291,453
(1) Merger and integration related costs incurred for the year
ended December 31, 2000 totaled $16.8 million. These costs
relate primarily to transaction costs, severance and other
merger and acquisition integration 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 financial statements. As a result of the
shortened useful lives, additional fees were incurred by
Indiana Gas during 2000, resulting in an increase in
operation and maintenance expense of $11.4 million for the
year ended December 31, 2000.
In total, merger and integration related costs incurred for
the year ended December 31,2000 were $28.2 million ($19.5
million after tax).
(2) At December 31, 2000, Indiana Gas is not in compliance with
the total indebtedness to capitalization ratio contained in
its back up credit facility for its commercial paper
program. The non-compliance resulted from the indebtedness
incurred to purchase its ownership interest in the Ohio
operations. A waiver on the Indiana Gas facility has been
obtained to waive the non-compliance through and including
March 31, 2001. Vectren will provide an equity investment
in Indiana Gas to bring Indiana Gas into compliance. No
amount is outstanding under the back up facility.
(3) During 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.
7
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
Results of Operations
Net income was $11.2 million for the year ended December 31, 2000. Net
income before merger and integration costs of $30.7 million ($19.5
million after tax), including $11.4 million of additional operations
and maintenance expenses related to the shortened useful lives of
certain information systems to be retired in 2001 (see merger and
integration costs below), was $29.8 million for the year ended
December 31, 2000, as compared to net income of $29.7 million and
$26.8 million for 1999 and 1998, respectively.
Margin (Operating Revenues Less Cost of Gas)
Gas margin increased $3.1 million to $207.6 million, or 2 percent,
compared to the twelve-month period in 1999. The increase reflects 7
percent (8.1 MMDth) greater throughput (combined sales and
transportation) due to much colder temperatures during the fourth
quarter of 2000 than during the fourth quarter of 1999. Although
temperatures were 4 percent warmer than normal, temperatures during
2000 were 11 percent colder than 1999 temperatures. Additionally,
Indiana Gas increased its customer base by 2 percent during 2000.
These favorable impacts caused residential and commercial sales to
rise 7 percent and 10 percent, respectively.
In 1999, utility margin was $204.5 million, as compared to $188.6
million for the prior year. The 1999 increase is primarily
attributable to weather being 8 percent colder than the previous year,
and the addition of new residential and commercial customers.
Total cost of gas sold was $390.5 million in 2000, $226.8 million in
1999 and $231.9 million in 1998. Total cost of gas sold increased
$163.7 million, or 72 percent, for the year ended December 31, 2000
compared to 1999, primarily due to significantly higher average per
unit purchased gas costs. The total average cost per Dth of gas
purchased was $5.77 in 2000, compared to $3.01 in 1999. The price
changes are due primarily to changing commodity costs in the
marketplace. Decreases in the average per unit cost of gas sold in
1999 as compared to 1998 more than offset the impact of the increased
throughput, causing an overall decrease in costs of gas sold in 1999
compared to 1998.
Indiana Gas' rates for transportation generally provide the same
margins as are earned on the sale of gas under its sales tariffs.
Approximately one-half of total system throughput represents gas used
for space heating and is affected by weather.
Operating Expenses
Indiana Gas operation and maintenance expense increased $8.0 million,
or 9 percent, for the year ended December 31, 2000, compared to 1999.
The increase is primarily attributable to increased fees from a wholly
owned subsidiary of Vectren to reflect the shortened useful lives of
certain information systems in use by Indiana Gas (see merger and
integration costs below).
Operations and maintenance expenses increased $5.9 million, or 7
percent, for 1999 as compared to 1998. This increase is primarily due
to expenses associated with new customer information and work
management systems and rental expense related to buildings previously
owned.
8
Depreciation and amortization increased $2.1 million, or 6 percent,
and $1.8 million, or 5 percent, for the years ended December 31, 2000
and 1999, respectively. The increases reflect depreciation of normal
additions of utility plant.
Federal and state income taxes declined $9.5 million in 2000, compared
to 1999 due primarily to $28.9 million lower pre-tax earnings,
partially offset by a higher effective tax rate resulting from the non-
deductibility of certain merger costs. Federal and state income taxes
increased $2.7 million, or 19 percent during 1999 compared to 1998 due
primarily to higher pre-tax income in 1999.
Taxes other than income taxes for 2000 were comparable to 1999 and
increased in 1999 compared to 1998 by approximately $1.8 million due
to higher property tax expense.
Merger and Integration Costs
Merger and integration costs incurred for the year ended December 31,
2000 totaled $16.8 million. These costs relate primarily to
transaction costs, severance, and other merger and integration
activities such as signage and vehicle identification changes.
Vectren expects to realize net merger savings of nearly $200 million
over the next ten years from the elimination of duplicate corporate
and administrative programs and greater efficiencies in operations,
business processes and purchasing. The continued merger integration
activities will be substantially completed in 2001. Merger costs are
reflected in the financial statements of the operating subsidiaries in
which merger savings are expected to be realized.
As a result of merger integration activities, Vectren management has
identified certain information systems which 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 financial statements. As a result of the shortened useful
lives, additional fees were incurred by Indiana Gas during 2000,
resulting in an increase in operation and maintenance expense of $11.4
million.
In total, merger and integration costs were $28.2 million, or $19.5
million after tax, in 2000.
Equity in Earnings of Unconsolidated Investments
As described in Note 2 of the financial statements included in Item 8
Financial Statements and Supplementary Data, Indiana Gas has a 47
percent undivided interest in the Ohio operations acquired by Vectren
on October 31, 2000. Equity in earnings of unconsolidated investments
represents Indiana Gas' portion of the Ohio operations' net income
since acquisition.
Interest Expense
Interest expense for the twelve month period in 2000 increased $5.4
million, or 32 percent, compared to 1999. The increase was due
primarily to increased working capital requirements resulting from
higher natural gas prices, interest related to financing the
acquisition of the Ohio operations, and higher average interest rates
on utility debt and short-term borrowings. Interest expense for 1999
increased $1.2 million, or 7 percent, compared to 1998 due to
increased average debt outstanding during the year and higher interest
rates.
9
Rate and Regulatory Matters
Commodity prices for natural gas purchases during the last six months
of 2000 unexpectedly increased significantly, primarily due to the
expectation of a colder winter, which led to increased demand and
tighter supplies. Indiana Gas is allowed full recovery of such
charges in purchased gas costs from their retail customers through
commission-approved gas cost adjustment mechanisms, and margin on gas
sales should not be impacted. In 2001, Indiana Gas may experience
higher working capital requirements, increased expenses, including
unrecoverable interest costs and uncollectibles, and possibly some
level of price sensitive reduction in volumes sold.
On October 11, 2000, Indiana Gas filed for approval of its regular
quarterly GCA. In early December, the IURC issued an interim order
approving the request by Indiana Gas for a GCA factor for December
2000. On January 4, 2001, the IURC approved the January and February
2001 GCA as filed. The order also addressed the claim by the OUCC
that a portion of the requested GCA be disallowed because Indiana Gas
should have entered into additional commitments for this winter's gas
supply in late 1999 and early 2000. In procuring gas supply for this
winter, Indiana Gas followed the gas procurement practices that it had
employed over the last several years. In response to the claim by the
OUCC, the IURC found that there should be a $3.8 million disallowance
related to gas procurement for the winter season. As a result,
Indiana Gas recognized a pre-tax charge of $3.8 million in December
2000. Both Indiana Gas and the OUCC have appealed this ruling. The
Citizens Action Coalition of Indiana, Inc., a not for profit consumer
advocate, has also filed with the IURC a petition to intervene and a
notice of appeal of the order.
In March 2001, Vectren, Indiana Gas and SIGECO reached agreement with
the Indiana Office of Utility Consumer Counselor (OUCC) and The
Citizens Action Coalition of Indiana, Inc. (CAC) regarding the IURC
Order.
As part of the agreement, among other things, the companies agreed to
contribute additional funds to the state of Indiana's Low Income
Heating Assistance Program in 2001 and to credit $3.3 million of the
$3.8 million disallowed amount to Indiana Gas customers' April 2001
utility bills in exchange for both the OUCC and the CAC dropping their
appeals of the IURC Order.
For further information on the agreement refer to Indiana Gas' Current
Report on Form 8-K dated March 29, 2001.
Environmental Matters
See Note 12 of Indiana Gas' financial statements in Item 8 Financial
Statements and Supplementary Data regarding manufactured gas plants.
New Accounting Standard
In June 1998, the Financial Accounting Standards Board issued SFAS No.
133 "Accounting for Derivative Instruments and hedging Activities"
(SFAS 133), which requires that every derivative instrument be
recorded on the balance sheet as an asset or liability measured at its
fair value and that changes in the derivative's fair value be
recognized currently in earnings unless specific hedge accounting
criteria are met.
SFAS 133, as amended, is effective for fiscal years beginning after
June 15, 2000 and must be applied to derivative instruments and
certain derivative instruments embedded in hybrid contracts that were
issued, acquired or substantively modified after December 31, 1998.
Indiana Gas has completed the process of identifying all derivative
instruments, determining fair market
10
values of these derivatives, designating and documenting hedge
relationships, and evaluating the effectiveness of those hedge
relationships. As a result of the successful completion of this
process, Indiana Gas adopted SFAS 133 as of January 1, 2001.
SFAS 133 requires that as of the date of initial adoption, the
difference between the fair market value of derivative instruments
recorded on the balance sheet and the previous carrying amount of
those derivatives be reported in net income or other comprehensive
income, as appropriate, as the cumulative effect of a change in
accounting principle in accordance with APB 20, "Accounting Changes."
As of the date of adoption, Indiana Gas was not engaged in any
financial instruments affected by this statement; therefore, there was
no impact on adoption.
Liquidity and Capital Resources
Indiana Gas' capitalization objectives are 40-55 percent permanent
capitalization. This objective may have varied, and will vary, from
time to time, depending on particular business opportunities and
seasonal factors that affect the company's operation. Indiana Gas'
common equity component was 45 percent and 54 percent of its total
capitalization, including current maturities of long-term debt, at
December 31, 2000 and 1999, respectively.
Short-term cash working capital is required primarily to finance
customer accounts receivable, unbilled utility revenues resulting from
cycle billing, gas in underground storage, prepaid gas delivery
services, capital expenditures and investments until permanently
financed. Short-term borrowings tend to be greatest during the summer
when revenues are lowest and gas storage facilities are being
refilled. During 2000, however, short-term borrowings related to
working capital requirements were greatest during the last six months
of the year due to the higher natural gas costs and the investment in
the Ohio operations.
Cash Flow from Operations
Cash from operations decreased during 2000 as compared to 1999 by
approximately $74.3 million. The decrease is primarily attributable
to merger and integration costs causing lower net income, increased
recoverable natural gas costs and increased working capital
requirements resulting from higher natural gas costs. The decrease in
1999 cash flow from operations as compared to 1998 of approximately
$28.9 million is primarily attributable to fluctuations in prepaid gas
delivery services and other changes in working capital accounts.
Capital Expenditures and Other Investing Activities
Cash required for investing activities of $275.8 million for the year
ended December 31, 2000 include, among other things, approximately
$218 million required for the investment in the Ohio operations and
$62.4 million of capital expenditures. This is an increase of $213.4
million over prior year due primarily to the investment in the Ohio
operations.
Cash required for investing activities in 1999 increased $16.7 million
over 1998 requirements due primarily to additional expenditures for
normal replacements and improvements of gas utility systems.
Additionally, capital expenditures for 1998 were offset by the sale of
an office building for proceeds of $9.2 million.
New construction and normal system maintenance and improvements needed
to provide service to a growing customer base will continue to require
substantial expenditures. Capital expenditures for the five year
period 2001 - 2005 are as follows:
In millions 2001 2002 2003 2004 2005 Total
----- ----- ----- ----- ----- -----
Capital expenditures $47.7 $46.6 $47.5 $47.7 $49.0 $238.5
11
Financing Activities
Cash flow from financing activities of $313.7 million for the year
ended December 31, 2000 includes $340.8 million of additional net
borrowings offset by $26.3 million of dividends on shares of common
stock. This is an increase of $287.3 million over prior year due
primarily to funding the investment in the Ohio operations and
increased working capital requirements. Indiana Gas' investment in the
Ohio operations of approximately $218 million was funded with a
combination of short-term borrowings from VUHI and Indiana Gas'
commercial paper program. These short-term borrowings will be
replaced over time with permanent financing.
Cash flow from financing activities in 1999 increased $47.3 million
compared to 1998. The change is primarily the result of increased
short-term borrowings.
In December 2000, Indiana Gas filed a prospectus with the SEC with
respect to the issuance of $70 million in debt securities. On
December 28, 2000, $20 million of 15-Year Insured Quarterly (IQ) Notes
bearing interest at a rate of 7.15 percent per year and $50 million of
30-Year IQ Notes bearing interest at a rate of 7.45 percent per year
were issued. The 15-Year IQ Notes will mature on December 15, 2015,
and 30-Year IQ Notes will mature on December 16, 2030, unless, in each
case, redeemed prior to that date. Indiana Gas will have the option
to redeem the 15-Year IQ Notes, in whole or in part, from time to time
on or after December 15, 2004. Indiana Gas will have the option to
redeem the 30-Year IQ Notes in whole or in part, from time to time on
or after December 15, 2005. The net proceeds of the debt issuance
were used to repay outstanding commercial paper.
Provisions under which certain of Indiana Gas' Series E notes were
issued entitle the holders of $25.0 million of these notes to put the
debt back to Indiana Gas at face value at certain specified dates
before maturity beginning in 2000. Long-term debt subject to the put
provisions during the five years following 2000 (in millions) is $0 in
2001, $6.5 in 2002, $0 in 2003, $3.5 in 2004 and $10.0 in 2005. During
2000, put provisions on $5.0 million of the notes were not exercised.
Indiana Gas' credit rating on outstanding debt at December 31, 2000
was A/A2 . Indiana Gas' commercial paper retains an A-1/P-1 rating.
At December 31, 2000, Indiana Gas had $155 million of short-term
borrowing capacity for use in its operations, of which approximately
$20 million was available.
At December 31, 2000, Indiana Gas is not in compliance with the total
indebtedness to capitalization ratio contained in its back up credit
facility for its commercial paper program. The non-compliance
resulted from the indebtedness incurred to purchase its ownership
interest in the Ohio operations. A waiver on the Indiana Gas facility
has been obtained to waive the non-compliance through and including
March 31, 2001. Vectren will make an equity investment in Indiana
Gas to bring Indiana Gas back into compliance. No amount is
outstanding under the back up facility.
Maturities and sinking fund requirements on long-term debt subject to
mandatory redemption during the five years following 2000 are (in
millions): $0 in 2001, $0 in 2002, $15.0 in 2003 and $15.0 in 2004,
and $0 in 2005.
Forward Looking Information
A "safe harbor" for forwarding-looking statements is provided by the
Private Securities Litigation Reform Act of 1995 (Reform Act of 1995).
The Reform Act of 1995 was adopted to encourage such forward-looking
statements without the threat of litigation, provided those statements
are identified as forward-looking and are accompanied by meaningful
cautionary statements identifying important factors that could cause
the actual results to differ materially from those projected in the
statement. Certain matters described in Management's Discussion and
Analysis of Results of Operations and Financial Condition, including,
but not limited to Vectren's realization of net merger savings and
ProLiance, are forward-looking statements. Such statements are based
on management's beliefs, as well as assumptions made by and
information currently available to management. When used in this
filing, the words "believe," "anticipate," "endeavor," "estimate,"
"expect," "objective," "projection," "forecast," "goal," and similar
expressions are intended to identify forward-looking statements. In
addition to any assumptions and other factors referred to specifically
in connection with such forward-looking statements, factors that could
cause Indiana Gas' actual results to differ materially from those
contemplated in any forward-looking statements included, among others,
the following:
* Factors affecting utility operations such as unusual weather
conditions; catastrophic weather-related damage; unusual
maintenance or repairs; unanticipated changes to gas supply
costs, or availability due to higher demand, shortages,
transportation problems or other developments; environmental
or pipeline incidents; transmission or distribution
incidents; unanticipated changes to energy supply costs, or
availability due to demand, shortages, transmission problems
or other developments; or gas pipeline system constraints.
* Increased competition in the energy environment including
effects of industry restructuring and unbundling.
* Regulatory factors such as unanticipated changes in rate-
setting policies or procedures, recovery of investments and
costs made under traditional regulation, and the frequency
and timing of rate increases.
* Financial or regulatory accounting principles or policies
imposed by the Financial Accounting Standards Board, the
Securities and Exchange Commission, the Federal Energy
Regulatory Commission, state public utility commissions,
state entities which regulate natural gas transmission,
gathering and processing, and similar entities with
regulatory oversight.
* Economic conditions including inflation rates and monetary
fluctuations.
* Changing market conditions and a variety of other factors
associated with physical energy and financial trading
activities including, but not limited to, price, basis,
credit, liquidity, volatility, capacity, interest rate, and
warranty risks.
* Availability or cost of capital, resulting from changes in
Indiana Gas interest rates, and securities ratings or market
perceptions of the utility industry and energy-related
industries.
* Employee workforce factors including changes in key
executives, collective bargaining agreements with union
employees, or work stoppages.
* Legal and regulatory delays and other obstacles associated
with mergers, acquisitions, and investments in joint
ventures.
* Costs and other effects of legal and administrative
proceedings, settlements, investigations, claims, and other
matters, including, but not limited to, those described in
Management's Discussion and Analysis of Results of Operations
and Financial Condition.
13
* Changes in federal, state or local legislature requirements,
such as changes in tax laws or rates, environmental laws and
regulations.
Indiana Gas undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of changes in actual
results, changes in assumptions, or other factors affecting such
statements.
ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES OF MARKET
RISK
Indiana Gas is exposed to market risks associated with interest rates
and counterparty risk. The company employs a variety of risk
management policies to monitor and control these risks. The company
does not presently utilize financial instruments for trading or
speculative purposes.
Interest Rate Risk
Indiana Gas attempts to mitigate its exposure to interest rate
fluctuations through management of its short-term borrowings. An
internal guideline to manage short-term interest rate exposure has
been established. This guideline targets a maximum of 25 percent of
the company's total debt portfolio to consist of adjustable rate bonds
with a maturity of less than one year, short-term notes and commercial
paper. However, there may be times during the business cycle that the
guideline may be exceeded. At December 31, 2000, Indiana Gas' short-
term debt including amounts owed to affiliated companies, represented
56 percent of the company's total debt portfolio, due primarily to
financing Indiana Gas' ownership interest in the $465 million
acquisition of the Ohio operations initially with short-term debt and
increased working capital requirements resulting from higher purchased
gas costs and increased customer consumption. The short-term debt and
commercial paper utilized for acquisition of the Ohio operations will
be replaced over time with permanent financing (see Liquidity and
Capital Resources).
Counterparty Credit Risk
Indiana Gas is also exposed to counterparty credit risk when a
supplier defaults upon a contract to deliver natural gas. To mitigate
risk, procedures to determine and monitor the creditworthiness of
counterparties have been established.
14
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
INDIANA GAS COMPANY, INC.
BALANCE SHEETS
(Thousands)
December 31,
ASSETS 2000 1999
--------- ----------
Utility Plant:
Original cost $1,056,945 $1,005,304
Less - accumulated depreciation 434,845 407,887
---------- ----------
Net utility plant 622,100 597,417
---------- ----------
Current Assets:
Cash and cash equivalents 300 353
Accounts receivable, less reserves of
$2,063 and $1,739, respectively 81,225 37,058
Accounts receivable from affiliated
company 11,774 3,021
Accrued unbilled revenues 69,444 36,634
Inventories 12,004 13,535
Prepaid gas delivery service 34,849 20,937
Recoverable natural gas costs 38,096 -
Prepayments and other current assets 32,012 12,354
--------- ---------
Total current assets 279,704 123,892
--------- ---------
Investment in Unconsolidated Affiliate 220,802 -
--------- ---------
Other Assets:
Regulatory assets 18,578 15,739
Other 2,488 2,822
---------- ----------
Total other assets 21,066 18,561
TOTAL ASSETS $1,143,672 $ 739,870
========== ==========
The accompanying notes are an integral part of these
financial statements.
INDIANA GAS COMPANY, INC.
BALANCE SHEETS
(Thousands)
SHAREHOLDER'S EQUITY AND LIABILITIES December 31,
2000 1999
--------- ---------
Capitalization:
Common stock and paid-in capital $ 142,995 $ 142,995
Retained earnings 90,499 105,627
---------- ----------
Total common shareholder's equity 233,494 248,622
---------- ----------
Long-term debt, net of current maturities 281,109 211,849
---------- ----------
Total capitalization 514,603 460,471
---------- ----------
Commitments and Contingencies
Current Liabilities:
Notes payable to affiliated company 218,200 -
Notes payable 134,724 82,172
Interest payable to affiliated company 2,340 -
Accounts payable 102,268 30,745
Accounts payable to affiliated company 18,329 6,366
Refunds to customers and customer
deposits 3,953 22,021
Accrued taxes 25,054 16,208
Accrued interest 4,215 5,252
Deferred income taxes 4,227 -
Other current liabilities 14,504 12,697
---------- ----------
Total current liabilities 527,814 175,461
---------- ----------
Deferred Credits and Other Liabilities:
Deferred income taxes 54,807 61,061
Accrued postretirement benefits other
than pensions 29,938 28,474
Unamortized investment tax credit 7,222 8,152
Other 9,288 6,251
---------- ----------
Total deferred credits and other
liabilities 101,255 103,938
---------- ----------
TOTAL SHAREHOLDER'S EQUITY AND LIABILITIES $1,143,672 $ 739,870
========== ==========
The accompanying notes are an integral part of these
financial statements.
16
INDIANA GAS COMPANY, INC.
STATEMENTS OF INCOME
(Thousands)
Year Ended
December 31
----------------------------
2000 1999 1998
-------- -------- --------
OPERATING REVENUES $598,113 $431,361 $420,459
COST OF GAS 390,474 226,817 231,889
-------- -------- --------
Total margin 207,639 204,544 188,570
-------- -------- --------
OPERATING EXPENSES:
Operation and maintenance 99,810 91,829 85,871
Merger and integration costs 16,846 - -
Depreciation and amortization 36,659 34,585 32,758
Income tax expense 7,251 16,734 14,058
Taxes other than income taxes 15,858 15,695 13,882
-------- -------- --------
Total operating expenses 176,424 158,843 146,569
-------- -------- --------
OPERATING INCOME 31,215 45,701 42,001
OTHER INCOME:
Equity in earnings of
unconsolidated affiliate 2,721 - -
Other - net (318) 1,010 626
-------- -------- --------
Total other income 2,403 1,010 626
-------- -------- --------
INCOME BEFORE INTEREST 32,727 46,711 42,627
INTEREST EXPENSE 22,409 16,969 15,802
-------- -------- --------
NET INCOME $ 11,209 $ 29,742 $ 26,825
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
17
INDIANA GAS COMPANY, INC.
STATEMENTS OF CASH FLOWS
(Thousands)
Year Ended
December 31,
2000 1999 1998
---------- -------- --------
CASH FLOWS FROM (REQUIRED FOR)
OPERATING ACTIVITIES:
Net Income $ 11,209 $ 29,742 $ 26,825
Adjustments to reconcile net income
to cash provided from operating
activities -
Depreciation and amortization 36,659 34,585 32,758
Deferred income taxes and
Investment tax credits 13,682 (1,412) 262
Undistributed earnings of
Unconsolidated affiliate (2,721) - -
Loss (gain) on sale or
Retirement of assets - - (1,219)
Allowance for other funds used
During construction (595) (443) (341)
Changes in assets and liabilities -
Receivables - net (including
Unbilled revenues) (85,730) (4,447) 30,073
Inventories 1,531 5,708 (1,193)
Accounts payable, refunds to
Customers, customer deposits,
Advance payments and other
Current liabilities 67,224 (8,646) (24,277)
Accrued taxes and interest (5,560) 6,866 (7,610)
Recoverable/refundable gas costs (38,096) (4,139) 4,010
Prepayments and other current
assets (19,658) (3,585) (1,072)
Prepaid gas delivery service (13,912) (20,937) -
Accrued postretirement benefits
Other than pensions 1,464 2,590 2,140
Regulatory assets (2,839) (1,308)
Other - net (596) 1,814 4,916
---------- -------- --------
Total adjustments (49,147) 6,646 38,447
Net cash flows from (required --------- -------- --------
for) operating activities (37,938) 36,388 65,272
---------- -------- --------
CASH FLOWS (REQUIRED FOR)
FINANCING ACTIVITIES:
Retirement of long-term debt (740) (10,115) 60,000
Proceeds from long-term debt 70,000 30,000 (33,036)
Net change in short-term
borrowings 270,752 33,497 (20,325)
Dividends on common stock (26,337) (27,000) (27,500)
---------- -------- --------
Net cash flows (required for)
from financing activities 313,675 26,382 (20,861)
---------- -------- --------
CASH FLOWS (REQUIRED FOR) INVESTING
ACTIVITIES:
Capital expenditures (62,409) (62,437) (54,979)
Investment in Ohio operations (218,081) - -
Proceeds from sale of assets - - 9,204
Other 4,700 - -
---------- -------- --------
Net cash flows required for
investing activities (275,790) (62,437) (45,775)
---------- -------- --------
Net increase (decrease) in cash (53) 333 (1,364)
Cash and cash equivalents at
beginning of period 353 20 1,384
---------- -------- --------
Cash and cash equivalents at end of
period $ 300 $ 353 $ 20
========== ======== ========
The accompanying notes are an integral part of these
financial statements.
INDIANA GAS COMPANY, INC.
STATEMENTS OF RETAINED EARNINGS
(Thousands)
December 31
2000 1999 1998
-------- -------- --------
Balance Beginning of Period $105,627 $102,885 $103,411
Net Income 11,209 29,742 26,825
-------- -------- --------
116,836 132,627 130,236
Common Stock Dividends 26,337 27,000 27,500
-------- -------- --------
Other - - 149
Balance End of Period $ 90,499 $105,627 $102,885
======== ======== ========
The accompanying notes are an integral part of these
financial statements.
19
Indiana Gas Company, Inc.
Notes to Financial Statements
1. Organization and Nature of Operations
Indiana Gas Company, Inc. (Indiana Gas) provides natural gas and
transportation services to a diversified base of customers in 311
communities in 49 of Indiana's 92 counties. It was incorporated
under the laws of the state of Indiana on July 16, 1945.
Vectren Corporation (Vectren), Indiana Gas' parent company, was
organized on June 10, 1999 solely for the purpose of effecting
the merger of Indiana Energy, Inc. (Indiana Energy), Indiana Gas'
former parent company, and SIGCORP, Inc. (SIGCORP). On March 31,
2000, the merger of Indiana Energy with SIGCORP and into Vectren
was consummated with a tax-free exchange of shares that has been
accounted for as a pooling-of-interests. The merger did not
affect Indiana Gas' debt securities.
Prior to the merger, all of the outstanding shares of common
stock of Indiana Gas were owned by Indiana Energy. Subsequent to
the merger, all outstanding shares of common stock are owned by
Vectren. Vectren is a public utility holding company.
2. Acquisition of the Gas Distribution Assets of The Dayton
Power and Light Company
On October 31, 2000, Vectren acquired the natural gas
distribution assets of The Dayton Power and Light Company (DP&L)
for approximately $465 million as a tenancy in common through two
separate wholly owned subsidiaries. Vectren Energy Delivery of
Ohio, Inc. (VEDO) holds a 53 percent undivided ownership interest
in the assets, and Indiana Gas holds a 47 percent undivided
ownership interest. VEDO is the operator of the assets,
operations of which are referred to as "the Ohio operations."
Indiana Gas' ownership is accounted for on the equity method in
accordance with Accounting Principles Board (APB) Opinion No. 18.
Its ownership interest is included in investment in
unconsolidated affiliate in the Balance Sheets, and its interest
in the results of operations is included in equity in earnings of
unconsolidated affiliate.
Vectren Utility Holdings, Inc. (VUHI) is the intermediate holding
company for Vectren's operating public utilities, including
Indiana Gas. VUHI established a $435 million commercial paper
program to fund the majority of the acquisition. Indiana Gas'
investment in the acquisition of approximately $218 million was
funded with a combination of short-term borrowings from VUHI and
Indiana Gas' commercial paper program.
The following table depicts unaudited summarized financial
information as to assets and liabilities of the Ohio operations
as of December 31, 2000 and its results of operations for the two
months then ended.
As of December 31, 2000:
Current assets $ 180,109
Noncurrent assets 392,795
Current liabilities 104,538
Noncurrent liabilities 491
For the two months ended December 31, 2000:
Revenues $ 111,356
Total margin 28,193
Operating income 6,813
Net income 5,790
20
3. Merger and Integration Costs
Merger and integration costs incurred for the year ended December
31, 2000 totaled $16.8 million. These costs relate primarily to
transaction costs, severance and other merger and integration
activities such as signage and vehicle identification changes.
At March 31, 2000, Indiana Gas accrued $13.4 million of merger
and integration costs, and the accrual remaining for such costs
at December 31, 2000 is $1.3 million. In addition, during 2000,
an additional $3.4 million of merger and integration costs were
charged directly to expense. The merger integration activities
will be substantially completed in 2001.
As a result of merger integration activities, Vectren management
has identified certain information systems which 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 financial statements. As a result of
the shortened useful lives, additional fees were incurred by
Indiana Gas during 2000, resulting in an increase in operation
and maintenance expense of $11.4 million.
4. Summary of Significant Accounting Policies
A. Utility Plant and Depreciation
Except as described below, utility plant is stated at historical
cost and includes allocations of payroll-related costs and
administrative and general expenses, as well as an allowance for
the cost of funds used during construction. Upon normal
retirement of a depreciable unit of property, the cost is
credited to utility plant and charged to accumulated depreciation
together with the cost of removal, less any salvage. No gain or
loss is recognized upon normal retirement.
Provisions for depreciation of utility property are determined by
applying straight-line rates to the original cost of the various
classifications of property. The average depreciation rate was
3.9 percent for 2000, 3.5 percent for 1999, 3.5 percent for 1998.
B. Reclassifications
Certain reclassifications have been made to the prior years'
financial statements to conform to the current year presentation.
These reclassifications have no impact on net income previously
reported.
C. Cash Flow Information
For the purposes of the Statements of Cash Flows, the company
considers cash investments with an original maturity of three
months or less to be cash equivalents. Cash paid during the
periods reported for interest and income taxes were as follows:
Thousands 2000 1999 1998
- --------- ------- ------- -------
Interest (net of amount capitalized) $22,903 $16,463 $15,356
Income taxes 23,188 21,921 25,717
D. Revenues
To more closely match revenues and expenses, Indiana Gas records
revenues for all gas delivered to customers but not billed at the
end of the accounting period.
E. Earnings Per Share
Historical earnings per share are not presented as Vectren holds
the common shares of Indiana Gas.
21
F. Gas in Underground Storage
Gas in underground storage at December 31, 2000, was $10.9
million compared to $11.6 million at December 31, 1999.
Based on the average cost of gas purchased during December, the
cost of replacing the current portion of gas in underground
storage exceeded LIFO cost at December 31, 2000 and 1999 by
approximately $29 million and $12 million, respectively.
G. Refundable or Recoverable Gas Cost
All metered gas rates contain a gas cost adjustment clause, which
allows for adjustment in charges for changes in the cost of
purchased gas. Indiana Gas records any adjustment clause under-
or-overrecovery each month in revenues. A corresponding asset or
liability is recorded until such time as the under-or-
overrecovery is billed or refunded to utility customers. The
cost of gas sold is charged to operating expense as delivered to
customers.
H. Allowance For Funds Used During Construction
An allowance for funds used during construction (AFUDC), which
represents the cost of borrowed and equity funds used for
construction purposes, is charged to construction work in
progress during the period of construction and included in other
- - net on the Statements of Income.
The table below reflects the total AFUDC capitalized and the
portion of which was computed on borrowed and equity funds for
all periods reported.
Year Ended
December 31,
In thousands 2000 1999 1998
------- ------ ------
AFUDC - borrowed funds $ 487 $ 362 $ 303
AFUDC - equity funds 595 443 341
------- ------ ------
Total AFUDC capitalized $ 1,082 $ 805 $ 644
======= ====== ======
I. Income Taxes
The liability method of accounting is used for income taxes under
which deferred income taxes are recognized, at currently enacted
income tax rates, to reflect the tax effect of temporary
differences between the book and tax bases of assets and
liabilities. Deferred investment tax credits are being amortized
over the life of the related asset.
J. Use of Estimates
The preparation of financial statements in conformity with
accounting principles generally accepted in the United States
requires management to make estimates and assumptions that affect
the reported amounts 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 results could differ from
those estimates.
K. Regulatory Assets and Liabilities
Indiana Gas is subject to regulation by the Indiana Utility
Regulatory Commission (IURC). The accounting policies of Indiana
Gas give recognition to the ratemaking and accounting practices
of these agencies and to accounting principles generally accepted
in the United States, including the provisions of Statement of
Financial Accounting Standards No. 71 "Accounting for the Effects
of Certain Types of Regulation" (SFAS 71). Regulatory assets
represent probable future revenues associated with certain
incurred costs, which will be recovered from customers through
the ratemaking process. Regulatory liabilities represent
probable future reductions in revenues associated with amounts
that are to be credited to customers through the ratemaking
process.
22
The following regulatory assets and liabilities are reflected in
the financial statements:
At December 31,
In thousands 2000 1999
-------- --------
Regulatory Assets:
Unamortized debt discount and expenses $ 13,855 $ 11,906
Regulatory income tax asset 4,723 2,741
Other - 1,092
-------- --------
Regulatory assets in other assets 18,578 15,739
Recoverable natural gas costs 38,096 -
-------- --------
Total regulatory assets $ 56,674 $ 15,739
======== ========
Regulatory Liabilities:
Refundable gas costs - $ 10,204
======== ========
Indiana Gas was authorized as part of an August 17, 1994
financing order from the IURC to amortize over a 15-year period
the debt discount and expense related to new debt issues and
future debt issues and future premiums paid for debt reacquired
in connection with refinancing. Debt discount and expense for
issues in place prior to this order are being amortized over the
lives of the related issues. Premiums paid prior to this order
for debt reacquired in connection with refinancing are being
amortized over the life of the refunding issue.
As of December 31, 2000, all of Indiana Gas' $56.7 million of
total regulatory assets are reflected in rates charged to
customers, but are not currently earning a return. These assets
will be recovered over varying periods: $38.1 million of gas
costs, over 12 months; $4.7 million of regulatory income tax
asset, over approximately 30 years; and $13.8 million of
unamortized debt discount and expense to be recovered as
discussed above.
Indiana Gas' policy is to continually assess the recoverability
of costs recognized as regulatory assets and the ability to
continue to account for their activities in accordance with SFAS
71, based on the criteria set forth in SFAS 71. Based on current
regulation, Indiana Gas believes such accounting is appropriate.
If all or part of Indiana Gas' operations cease to meet the
criteria of SFAS 71, a write-off of related regulatory assets and
liabilities could be required. In addition, Indiana Gas would be
required to determine any impairment to the carrying costs of
deregulated plant and inventory assets.
L. New Accounting Pronouncement
In June 1998, the Financial Accounting Standards Board issued
SFAS No. 133 "Accounting for Derivative Instruments and Hedging
Activities" (SFAS 133), which requires that every derivative
instrument be recorded on the balance sheet as an asset or
liability measured at its fair value and that changes in the
derivative's fair value be recognized currently in earnings
unless specific hedge accounting criteria are met.
SFAS 133, as amended, is effective for fiscal years beginning
after June 15, 2000, and must be applied to derivative
instruments and certain derivative instruments embedded in hybrid
contracts that were issued, acquired or substantively modified
after December 31, 1998. Indiana Gas adopted SFAS 133 as of
January 1, 2001.
SFAS 133 requires that as of the date of initial adoption, the
difference between the fair market value of derivative
instruments recorded on the balance sheet and the previous
carrying amount of those derivatives be reported in net income or
other comprehensive income, as appropriate, as the cumulative
effect of a change in accounting principle in accordance with APB
20, "Accounting Changes."
As of the date of adoption, Indiana Gas was not engaged in any
financial instruments affected by this statement; therefore,
there was no impact at adoption.
23
5. Capital Stock
Authorized Preferred Stock
Indiana Gas has 4 million shares of authorized and unissued
preferred stock.
Indiana Gas does not have stock-based compensation plans separate
from Vectren. Indiana Gas' employees, officers and directors
participate in Vectren's stock-based compensation plans that
provide for awards of restricted stock and stock options to
purchase Vectren common stock at prices equal to the fair value
of the underlying shares at the date of grant. Consistent with
Vectren, Indiana Gas accounts for participation in these plans in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees" and related
interpretations in measuring compensation costs for its stock
options and discloses pro forma net income as if compensation
costs had been determined consistent with the SFAS No. 123,
"Accounting for Stock-based Compensation."
Had compensation cost for stock options been determined
consistent with SFAS No. 123 "Accounting for Stock-based
Compensation," net income would not have been materially
different than reported net income.
6. Long-Term Debt
Notes payable outstanding and classified as long-term are as
follows:
At December 31 2000 1999
Notes Payable due:
2003, Series F, 5.75% $ 15,000 $ 15,000
2004, Series F, 6.36% 15,000 15,000
2007, Series E, 6.54% 6,500 6,500
2013, Series E, 6.69% 5,000 5,000
2015, Series E, 7.15% 5,000 5,000
2015, Insured Quarterly Notes, 7.15% 20,000 -
2015, Series E, 6.69% 5,000 5,000
2015, Series E, 6.69% 10,000 10,000
2021, Private Placement, 9.375% 25,000 25,000
2021, Series A, 9.125% 7,000 7,000
2025, Series E, 6.31% 5,000 5,000
2025, Series E, 6.53% 10,000 10,000
2027, Series E, 6.42% 5,000 5,000
2027, Series E, 6.68% 3,500 3,500
2027, Series F, 6.34% 20,000 20,000
2028, Series F, 6.75% 14,109 14,849
2028, Series F, 6.36% 10,000 10,000
2028, Series F, 6.55% 20,000 20,000
2029, Series G, 7.08% 30,000 30,000
2030, Insured Quarterly Notes, 7.45% 50,000 -
------- -------
Total long-term debt outstanding $ 281,109 $ 211,849
======= =======
Consolidated maturities and sinking fund requirements on long-
term debt subject to mandatory redemption during the five years
following 2000 are (in millions): $0 in 2001, $0 in 2002, $15.0
in 2003 and $15.0 in 2004 and $0 in 2005.
On October 5, 1999, Indiana Gas issued $30 million in principal
amount of Series G Medium-term Notes and on December 28, 2000
filed a prospectus with the Securities and Exchange Commission
24
with respect to the issuance of $70 million in debt securities.
Indiana Gas will have the option to redeem the notes prior to
their maturity dates. The 15-Year IQ Notes may be redeemed, in
whole or in part, from time to time on or after December 15,
2004. Indiana Gas will have the option to redeem the 30-Year IQ
Notes in whole or in part, from time to time on or after December
15, 2005. The net proceeds of the $70 million debt issuance were
used to repay outstanding commercial paper utilized for general
corporate purposes.
Provisions under which certain of Indiana Gas' Series E notes
were issued entitle the holders of $25.0 million of these notes
to put the debt back to Indiana Gas at face value at certain
specified dates before maturity beginning in 2000. Long-term
debt subject to the put provisions during the five years
following 2000 (in millions) is $0 in 2001, $6.5 in 2002, $0 in
2003, $3.5 in 2004 and $10.0 in 2005. During 2000, put provisions
on $5.0 million of the notes were not exercised.
7. Short-Term Borrowings
At December 31, 2000, Indiana Gas has approximately $155 million
of short-term borrowing capacity, of which approximately $20
million is available for operations. See the table below for
outstanding balances and interest rates.
At December 31 (in thousands) 2000 1999
-------- -------
Commercial paper outstanding $134,724 $82,172
Weighted average interest rates at year end
on commercial paper 6.6% 6.3%
Weighted average interest rates during
the year:
Bank loans 7.1% -
Commercial paper 6.1% 5.5%
Weighted average total outstanding during
the year $ 99,257 $38,068
At December 31, 2000, Indiana Gas was not in compliance with the
total indebtedness to capitalization ratio contained in its back
up credit facility for its commercial paper program. The non-
compliance resulted from the indebtedness incurred to purchase
its ownership interest in the Ohio operations. A waiver has been
obtained from the banks on the Indiana Gas facility to waive the
non-compliance through and including March 31, 2001. Vectren
will provide an equity investment in Indiana Gas to bring Indiana
Gas back into compliance. No amount is outstanding under the
back up credit facility.
See Note 14 Affiliate Transactions for further information on
short-term borrowings due to an affiliated company.
25
8. Income Taxes
Vectren and subsidiary companies file a consolidated federal
income tax return. Indiana Gas' current and deferred tax expense
is computed on a separate company basis. The components of
income tax expense for Indiana Gas were as follows:
Year Ended December 31
(in thousands) 2000 1999 1998
--------- ------- -------
Current:
Federal $(6,288) $15,600 $11,828
State (143) 2,546 1,968
--------- ------- -------
Total current taxes (6,431) 18,146 13,796
--------- ------- -------
Deferred:
Federal 13,460 (484) 1,067
State 1,152 2 125
--------- ------- -------
Total deferred taxes 14,612 (482) 1,192
--------- ------- -------
Amortization of investment tax (930) (930) (930)
credits
Income tax expense $ 7,251 $16,734 $14,058
========= ======= =======
A reconciliation of the statutory rate to the effective income
tax rate is as follows:
Year Ended December 31 2000 1999 1998
------ ----- ------
Statutory federal and state rate 37.9% 37.9% 37.9%
Nondeductible merger costs 11.1 - -
Amortization of investment tax
credit (5.3) (2.0) (2.3)
All other, net (2.4) 0.1 (1.2)
------ ----- ------
Effective tax rate 41.3% 36.0% 34.4%
====== ===== ======
Significant components of Indiana Gas' net deferred tax liability
as of December 31, 2000 and 1999 are as follows:
At December 31 (in thousands) 2000 1999
-------- --------
Deferred tax liabilities:
Depreciation and cost recovery timing
differences $ 72,038 $ 65,493
Deferred fuel costs, net 12,127 -
Regulatory assets recoverable through
future rates 3,890 4,391
Deferred tax assets:
LIFO inventory (7,900) -
Regulatory liabilities to be settled
through future rates (14,639) (8,823)
Other (6,482) -
-------- --------
Net deferred tax liability $ 59,034 $ 61,061
======== ========
9. Retirement Plans and Other Postretirement Benefits
Prior to July 1, 2000, SIGECO and Indiana Energy had separate
retirement and other postretirement benefit plans. Effective
July 1, 2000, the SIGECO and Indiana Energy pension plans and
retirement savings plans for employees not covered by a
collective bargaining unit were merged. The pension plans and
retirement savings plans described above became Vectren plans.
As a result, the respective plan assets and plan obligations were
transferred to Vectren.
26
Indiana Gas has defined benefit pension and other postretirement
benefit plans which cover eligible full-time regular employees.
All of the plans are non-contributory with the exception of the
health care plan which contains cost-sharing provisions whereby
employees retiring after January 1, 1996, are required to make
contributions to the plan when increases in Indiana Gas' health
care costs exceed the general rate of inflation, as measured by
the Consumer Price Index (CPI). The non-pension plans include
plans for health care and life insurance through a combination of
self-insured and fully insured plans.
The IURC has authorized Indiana Gas to recover the costs related
to postretirement benefits other than pensions under the accrual
method of accounting consistent with Statement of Financial
Accounting Standards No. 106, Employers' Accounting for
Postretirement Benefits Other Than Pensions. Amounts accrued
prior to that authorization were deferred as allowed by the IURC
and amortized over a 60-month period.
The detailed disclosures of benefit components that follow are
based on actuarial valuations performed for the years ended
December 31, 2000, 1999 and 1998 using a measurement date as of
September 30, 2000. In management's opinion, disclosures from
revised actuarial valuations would not differ materially from
those presented below.
Net periodic benefit cost
consisted of the following
components: Pension Benefits
Year Ended December 31
(in thousands) 2000 1999 1998
-------- -------- --------
Service cost $ 671 $ 1,617 $ 1,133
Interest cost 2,373 4,887 4,504
Expected return on plan assets (3,671) (7,310) (6,393)
Amortization of prior service 24 - -
cost
Amortization of transitional (384) (316) (316)
obligation (asset)
Recognized actuarial gain (96) 108 (19)
-------- -------- --------
Net periodic benefit cost $(1,083) $(1,014) $(1,091)
======== ======== ========
Net periodic benefit cost
consisted of the following
components: Other Benefits
Year Ended December 31
(in thousands) 2000 1999 1998
-------- -------- --------
Service cost $ 639 $ 738 $ 608
Interest cost 3,946 3,098 3,075
Expected return on plan assets - - -
Amortization of prior service
cost - - -
Amortization of transitional
obligation (asset) 2,444 1,955 1,955
Recognized actuarial gain (657) (149) 1,354
-------- -------- --------
Net periodic benefit cost $ 6,372 $ 5,642 $6,992
========= ========= ========
A reconciliation of the plan's benefit obligations, fair value of
plan assets, funded status and amounts recognized in the Balance
Sheets follows:
Benefit obligation: Pension Benefits Other Benefits
At December 31 (in thousands) 2000 1999 2000 1999
-------- --------- --------- -------
Benefit obligation at
beginning of year $ 69,281 $ 76,708 $ 43,020 $47,501
Service cost - benefits
earned 839 1,617 639 738
during the year
Interest cost on projected
benefit obligation 2,966 4,887 3,946 3,098
Transfers (37,078) - - -
Benefits paid (2,925) (4,715) (4,303) (2,944)
Actuarial (gain) loss 3,037 (9,216) 6,334 (5,373)
-------- -------- -------- -------
Benefit obligation at end of
year $ 36,120 $ 69,281 $ 49,636 $43,020
======== ========= ======== =======
Fair value of Plan Assets Pension Benefits Other Benefits
At December 31 (in thousands) 2000 1999 2000 1999
-------- --------- -------- -------
Plan assets at fair value at
beginning of year $101,211 $ 97,628 $ - $ -
Actual return on plan assets 5,653 8,179 - -
Transfers (54,885) - - -
Employer contributions - 119 4,303 2,944
Benefits paid (2,925) (4,715) (4,303) (2,944)
-------- -------- -------- -------
Fair value of plan assets at
end of year $ 49,054 $101,211 $ - $ -
======== ======== ======== =======
30
Funded Status Pension Benefits Other Benefits
At December 31
(in thousands) 2000 1999 2000 1999
------- -------- --------- ---------
Funded status $12,934 $31,930 $(49,636) $(43,020)
Unrecognized transitional
obligation (asset) (671) (882) 24,931 27,375
Unrecognized service cost 255 374 - -
Unrecognized net (gain) loss
and other (7,788) (25,965) (5,233) (12,829)
------- ------- --------- ---------
Net amount recognized $ 4,730 $ 5,457 $(29,938) $(28,474)
======= ======= ========= =========
Weighted-average assumptions used in the accounting for these
plans were as follows:
Year Ended December 31,
Pension Benefits Other Benefits
---------------- -------------
2000 1999 2000 1999
------- ------ ------ -----
Discount rate 7.75% 7.50% 7.75% 7.50%
Expected return on plan 8.50% 9.00% N/A N/A
assets
Rate of compensation increase 5.00% 5.00% N/A N/A
CPI rate N/A N/A 7.00% 3.50%
As of December 31, 2000, the health care cost trend is 7 percent
declining to 5 percent in 2004 and remaining level thereafter.
The accrued health care cost trend rate for 2001 is 7 percent.
The estimated cost of these future benefits could be
significantly affected by future changes in health care costs,
work force demographics, interest rates or plan changes.
A 1 percent change in the assumed health care cost trend for
postretirement health care plan would have the following effects:
In thousands 1% Increase 1% Decrease
----------- ------------
Effect on the aggregate of the
service and interest cost
components $ 34 $ (31)
Effect on the postretirement
benefit obligation 738 (648)
31
10. Fair Value of Financial Instruments
The estimated fair values of the company's financial instruments
were as follows:
December 31, 2000 December 31, 1999
Carrying Fair Carrying Fair
In thousands Amount Value Amount Value
-------- -------- --------- ---------
Notes payable $134,724 $134,724 $ 82,172 $82,172
Notes payable to affiliated
company 218,200 218,200 - -
Long-term debt (includes
amounts due within one
year) 281,109 309,401 211,849 188,976
Certain methods and assumptions must be used to estimate the fair
value of financial instruments. Because of the short maturity of
notes payable and notes payable to affiliated company, the
carrying amounts approximate fair values for these financial
instruments. The fair value of Indiana Gas' long-term debt was
estimated based on the quoted market prices for the same or
similar issues or on the current rates offered for debt of the
same remaining maturities.
Under current regulatory treatment, call premiums on
reacquisition of long-term debt are generally recovered in
customer rates over the life of the refunding issue or over a 15-
year period (see Note 4J ). Accordingly, any reacquisition would
not be expected to have a material effect on Indiana Gas'
financial position or results of operations.
The market price used to value these transactions reflects
management's best estimate of market prices considering various
factors, including published prices for certain delivery
locations, time value and volatility factors underlying the
commitments.
11. Commitments
Lease commitments, in millions, are $1.0 in 2001, $1.5 in 2002,
$1.6 in 2003, $1.7 in 2004, $1.8 in 2005 and $7.6 in total for
all later years. There are no leases that extend beyond 2036.
Indiana Gas has storage and supply contracts that extend up to 6
years. Total lease expense, in millions, was approximately $1.0
in 2000, $2.0 in 1999 and $1.0 in 1998.
Indiana Gas is party to various legal proceedings arising in the
normal course of business. In the opinion of management, with
the exception of matters described in Note 14 regarding
transactions with ProLiance Energy, LLC, there are no legal
proceedings pending against the company that are likely to be
material on the company's financial position or results of
operations.
12. Environmental Matters
In the past, Indiana Gas and others operated facilities for the
manufacture of gas. Given the availability of natural gas
transported by pipelines, these facilities have not been operated
for many years. Under currently applicable environmental laws
and regulations, Indiana Gas and the others may now be required
to take remedial action if certain byproducts are found above the
regulatory thresholds at these sites.
Indiana Gas has identified the existence, location and certain
general characteristics of 26 gas manufacturing and storage sites
for which it may have some remedial responsibility. Indiana Gas
has completed a remedial investigation/feasibility study (RI/FS)
at one of the sites under an agreed order between Indiana Gas and
IDEM, and a Record of Decision was issued by IDEM in January
2000. Although Indiana Gas has not begun an RI/FS at additional
sites, Indiana Gas has submitted several of the sites to IDEM's
Voluntary Remediation Program (VRP) and is currently conducting
some level of remedial activities including groundwater
monitoring at certain sites where deemed appropriate and will
continue remedial activities at the sites as appropriate and
necessary.
Indiana Gas has accrued the estimated costs for further
investigation, remediation, groundwater monitoring and related
costs for the sites. While the total costs that may be incurred
in connection with addressing these sites cannot be determined at
this time, Indiana Gas has accrued costs that it reasonably
expects to incur.
29
Indiana Gas has recovered these estimated accrued costs from
insurance carriers and other potentially responsible parties
(PRPs). Indiana Gas has PRP agreements in place for 19 of the 26
sites, which serve to limit Indiana Gas' share of response costs
at these 19 sites to between 20 and 50 percent. For these sites,
Indiana Gas has accrued only its proportionate share of the
estimated response costs.
With respect to insurance coverage, as of December 31, 2000,
Indiana Gas has received and recorded settlements from all known
insurance carriers in an aggregate amount of approximately $20.3
million.
Environmental matters related to manufactured gas plants have had
no material impact on earnings since costs recorded to date
approximate PRP and insurance settlement recoveries. While
Indiana Gas has recorded all costs which it presently expects to
incur in connection with activities at these sites, it is
possible that future events may require some level of additional
remedial activities which are not presently foreseen.
13. Rate and Regulatory Matters
Commodity prices for natural gas purchases during the last six
months of 2000 increased, primarily due to the expectation of a
colder winter, which led to increased demand and tighter
supplies. Indiana Gas is typically allowed full recovery of such
charges in purchased gas costs from its retail customers through
a commission-approved gas cost adjustment. On October 11, 2000,
Indiana Gas filed for approval of its quarterly gas cost
adjustment (GCA). In early December, the IURC issued an interim
order approving the request by Indiana Gas for a GCA factor for
December 2000. On January 4, 2001, the IURC approved the January
and February 2001 GCA as filed. The order also addressed the
claim by the OUCC that a portion of the requested GCA be
disallowed because Indiana Gas should have entered into
additional commitments for this winter's gas supply in late 1999
and early 2000. In procuring gas supply for this winter, Indiana
Gas followed the gas procurement practices that it had employed
over the last several years. In response to the claim by the
OUCC, the IURC found that there should be a $3.8 million
disallowance related to gas procurement for the winter season.
As a result, Indiana Gas recognized a pre-tax charge of $3.8
million in December 2000. Both Indiana Gas and the OUCC have
appealed this ruling. The Citizens Action Coalition of Indiana,
Inc. (CAC), a not for profit consumer advocate, also has filed
with the IURC a petition to intervene and a notice of appeal of
the order.
14. Affiliate Transactions
Vectren and certain subsidiaries of Vectren have provided certain
corporate general and administrative services to Indiana Gas
including legal, finance, tax, risk management and employee
benefits. A portion of the related costs has been allocated to
the company based on the proportion of corporate expense related
to Indiana Gas. Indiana Gas was charged with corporate costs in
the amount of $33.3 million, $31.4 million and $25.9 million for
the years ended December 31, 2000, 1999 and 1998, respectively.
ProLiance Energy LLC, a 50 percent owned, non-regulated, energy
marketing affiliate of Vectren, provides natural gas supply and
related services to Indiana Gas. Indiana Gas' purchases from
ProLiance for resale and for injections into storage for the
years ended December 31, 2000, 1999 and 1998, totaled $401.4
million, $240.7 million and $232.2 million, respectively.
ProLiance began providing natural gas and related services to
Indiana Gas, Citizens Gas and Coke Utility (Citizens Gas) and
others effective April 1, 1996. The sale of gas and provision of
other services to Indiana Gas by ProLiance is subject to
regulatory review through the quarterly gas cost adjustment (GCA)
process administered by the IURC.
On September 12, 1997, the IURC issued a decision finding the gas
supply and portfolio administration agreements between ProLiance
and Indiana Gas and ProLiance and Citizens Gas to be consistent
with the public interest. The IURC's decision reflected the
significant gas cost savings to customers obtained through
30
ProLiance's services and suggested that all material provisions
of the agreements between ProLiance and the utilities are
reasonable. Nevertheless, with respect to the pricing of gas
commodity purchased from ProLiance and two other pricing terms,
the IURC concluded that additional review in the GCA process
would be appropriate and directed that these matters be
considered further in the pending, consolidated GCA proceeding
involving Indiana Gas and Citizens Gas. The IURC has not yet
established a schedule for conducting these additional
proceedings. Through a series of appeals, the order was finally
considered by the Indiana Supreme Court.
On September 22, 2000, the Indiana Supreme Court issued a
decision affirming the IURC's decision on ProLiance in all
respects.
In August 1998, Indiana Gas, Citizens Gas and ProLiance each
received a Civil Investigative Demand (CID) from the United
States Department of Justice requesting information relating to
Indiana Gas' and Citizens Gas' relationship with and the
activities of ProLiance. The Department of Justice issued the
CID to gather information regarding ProLiance's formation and
operations, and to determine if trade or commerce has been
restrained. Indiana Gas has provided all information requested
and management continues to believe that there are no significant
issues in this matter. Indiana Gas continues to record gas costs
in accordance with the terms of the ProLiance contract.
CIGMA, LLC, owned jointly and equally by a wholly owned
subsidiary of Vectren and Citizens By-Products Coal Company, a
wholly owned subsidiary of Citizens Gas, provides materials
acquisition and related services that are used by Indiana Gas and
others. Indiana Gas' purchases of these services during the
years ended December 31, 2000, 1999 and 1998 totaled $17.2
million, $17.3 million and $15.9 million, respectively.
Reliant Services, LLC , owned jointly and equally by a wholly
owned subsidiary of Vectren and Cinergy Corp., provides utility
locating, meter reading and construction services to Indiana Gas
and others. Amounts paid by Indiana Gas for purchases of these
services totaled $3.7 million and $2.9 million for years ended
December 31, 2000 and 1999, respectively. Purchases in 1998 were
not significant.
Amounts owed to affiliates totaled $238.8 million and $6.4
million at December 31, 2000 and1999, respectively. The increase
in amounts owed to affiliates results from Indiana Gas borrowing
approximately $218 million from VUHI for Indiana Gas' investment
in the Ohio operations. Short-term borrowings from VUHI bear
interest at 6.99 percent at December 31, 2000.
Amounts due from affiliates totaled $11.8 million and $3.0
million at December 31, 2000 and 1999, respectively.
15. Quarterly Financial Data (Unaudited) (1)
Summarized quarterly financial data for 2000 and 1999 are as
follows:
2000
In thousands Q1 Q2 Q3 Q4
- ------------ --------- ------- ------- --------
Operating revenues $171,618 $86,303 $75,417 $264,775
Operating income
(loss) (2) 13,494 1,111 (1,848) 18,458
Net income (loss) (2) 8,831 (3,497) (6,720) 11,704
1999
In thousands Q1 Q2 Q3 Q4
- --------------- --------- ------- ------- --------
Operating revenues $161,484 $72,131 $60,499 $137,247
Operating income (loss) 27,876 4,183 (2,086) 15,728
Net income (loss) 23,998 639 (5,791) 10,896
(1) Information in any one quarterly period is not indicative of
annual results due to seasonal variations common to the
utility industry.
(2) Includes merger and integration charges. See Note 3.
31
Management's Responsibility for Financial Statements
The management of Indiana Gas Company, Inc. (Indiana Gas) is
responsible for the preparation of the financial statements and
the related financial data contained in this report. The
financial statements are prepared in conformity with accounting
principles generally accepted in the United States and follow
accounting policies and principles applicable to regulated public
utilities.
The integrity and objectivity of the data in this report,
including required estimates and judgments, is the responsibility
of management. Management maintains a system of internal control
and utilizes an internal auditing program to provide reasonable
assurance of compliance with company policies and procedures and
the safeguard of assets.
The board of directors of Indiana Gas' parent company, Vectren
Corporation, pursues its responsibility for these financial
statements through its audit committee, which meets periodically
with management, the internal auditors and the independent
auditors, to assure that each is carrying out its
responsibilities. Both the internal auditors and the independent
auditors meet with the audit committee of Vectren's board of
directors, with and without management representatives present,
to discuss the scope and results of their audits, their comments
on the adequacy of internal accounting control and the quality of
financial reporting.
/s/ Timothy M. Hewitt
Timothy M. Hewitt
President
32
Report of Independent Public Accountants
To the Shareholder and Board of Directors of Indiana Gas Company,
Inc.:
We have audited the accompanying balance sheets of Indiana Gas
Company, Inc. (an Indiana corporation) as of December 31, 2000
and 1999, and the related statements of income, retained earnings
and cash flows for each of the three years in the period ended
December 31, 2000. These financial statements and the schedule
referred to below are the responsibility of the company's
management. Our responsibility is to express an opinion on these
financial statements and the schedule based on our audits.
We conducted our audits in accordance with auditing standards
generally accepted in the United States. Those standards 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. An audit also includes assessing the accounting
principles used and significant estimates made by management, as
well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above
present fairly, in all material respects, the financial position
of Indiana Gas Company, Inc. as of December 31, 2000 and 1999,
and the results of its operations and its cash flows for each of
the three years in the period ended December 31, 2000, in
conformity with accounting principles generally accepted in the
United States.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed
under Item 14(a) (2) is presented for the purpose of complying
with the Securities and Exchange Commission's rules and is not
part of the basic financial statements. The schedule has been
subjected to the auditing procedures applied in the audits of the
basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth
therein in relation to the basic financial statements taken as a
whole.
/s/ Arthur Andersen LLP
Arthur Andersen LLP
Indianapolis, Indiana,
January 24, 2001.
33
ITEM 9. CHANGE IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE
None.
34
Part III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
Directors
Niel C. Ellerbrook, age 51, has been a director of Indiana Gas
since 1991. Mr. Ellerbrook has been a director of Indiana Energy
or Vectren since 1991. Mr. Ellerbrook is Chairman of the Board
and Chief Executive Officer of Vectren, having served in that
capacity since March 2000. Prior to that time and since October
1997, Mr. Ellerbrook served as President and Chief Operating
Officer of Indiana Energy. From January through October 1997,
Mr. Ellerbrook served as Executive Vice President, Treasurer and
Chief Financial Officer of Indiana Energy; and prior to that time
and since 1986, Vice President, Treasurer and Chief Financial
Officer. He is also a director of Fifth Third Bank, Indiana, and
Deaconess Hospital of Evansville, Indiana.
Andrew E. Goebel, age 53, has been a director of Indiana Gas
since March 31, 2000. Mr. Goebel has also been a director of
SIGCORP or Vectren since 1997. Mr. Goebel is President and Chief
Operating Officer of Vectren, having served in that capacity
since March 2000. Prior to that time and since April 1999, Mr.
Goebel was President and Chief Operating Officer of SIGCORP.
From September 1997 through April 1999, Mr. Goebel served as
Executive Vice President of SIGCORP; and prior to that time and
since 1996, he served as Secretary and Treasurer of SIGCORP. He
is also a director of Old National Bancorp.
J. Gordon Hurst, age 57, has been a director of Indiana Gas since
March 31, 2000. Mr. Hurst was elected Executive Vice President
of Vectren on March 31, 2000. Prior to March 31, 2000 and since
1966, Mr. Hurst has served in various positions with SIGECO.
From 1997 to 2000, he was Executive Vice President and Chief
Operating Officer; from 1992 to 1997, he was Senior Vice
President and General Manager of Operations. Mr. Hurst has
served as Vice President of Power and Gas Operations, Vice
President of Gas and Warrick Operations, and Vice President of
SIGECO. He has also served as Director of Gas Operations,
Director of Power Production, and Director of Electrical
Engineering.
Jerome A. Benkert, Jr., age 42, has been a director and an
executive officer, serving as Executive Vice President and Chief
Financial Officer, of Indiana Gas since March 31, 2000. Mr.
Benkert was elected as Executive Vice President and Chief
Financial Officer of Vectren on March 31, 2000. Prior to March
31, 2000 and since October 1, 1997, he was Executive Vice
President and Chief Operating Officer of Indiana Energy's
administrative services company. Mr. Benkert has served as
Controller and Vice President of Indiana Gas and Indiana Energy
from April 1, 1996 to October 1, 1997, and as controller from
October 1, 1993 to April 1, 1996.
Ronald E. Christian, age 42, has been a director and an executive
officer, serving as Senior Vice President, General Counsel and
Secretary, of Indiana Gas since March 31, 2000. Mr. Christian
was elected Senior Vice President, General Counsel, and Corporate
Secretary of the Vectren on March 31, 2000. Prior to March 31,
2000 and since July 1999, Mr. Christian was Vice President and
General Counsel of Indiana Energy. From June 1998 to July 1999,
Mr. Christian was the Vice President, General Counsel and
Secretary of Michigan Consolidated Gas Company in Detroit,
Michigan. Prior to that, from 1993 through June 1998, he was the
General Counsel and Secretary of Indiana Energy, Indiana Gas and
Indiana Energy Investments, Inc.
Other Executive Officer
Timothy M. Hewitt, age 50, has been an executive officer, serving
as President, of Indiana Gas since March 31, 2000. Prior to
March 31, 2000 and since January 9, 1995, he was Vice President
of Operations and Engineering for Indiana Gas. Mr. Hewitt also
was Vice President of Sales and Field Operations from January 14,
1991 to January 9, 1995.
ITEM 11. EXECUTIVE COMPENSATION
The information required to be shown for Item 11, Executive
Compensation, is incorporated by reference, with the exception of
the Compensation Committee Report and Performance Graph, from the
Proxy Statement of the registrant's parent company, Vectren
Corporation. That report was prepared and filed electronically
with the Securities and Exchange Commission on March 16, 2001,
and is attached to this filing as Exhibit 99.1. As a wholly
owned subsidiary, Indiana Gas pays its portion of Vectren's
executive compensation arrangements and plans through allocations
of Vectren's total executive compensation expense which is
reasonably related to Indiana Gas' operations.
The following tables set forth compensation allocated to Indiana
Gas' President. No other executive officer's compensation, after
considering allocations to Indiana Gas, exceeded $100,000. The
tables include a Summary Compensation Table (Table 1) and a table
showing the Long-Term Incentive Plan Awards in Last Fiscal Year
(Table 2).
TABLE 1 (1)
SUMMARY COMPENSATION TABLE
(a) (b) (c) (d) (e)
--------------------------------
Annual Compensation
Name and Principal Year Salary Bonus Other
Position at Indiana ($) ($) (2) Compensation
Gas ($) (3)
-------- --------- -----------
Timothy M. Hewitt 2000 75,499 52,126 1,296
President 1999 154,846 56,297 6,038
1998 150,077 54,853 7,041
(a) (b) (g) (h) (i)
--------------------------------
Long-term Compensation Payouts
Name and Principal Year Options LTIP Other
Position at Indiana (# shares) Payouts Compensation
Gas (4) ($) (5) ($) (6)
---------- ------- -----------
-
Timothy M. Hewitt 2000 0 69,923 36,096
President 1999 0 78,662 24,525
1998 0 0 22,819
(1) Amounts in this table and corresponding footnotes
represent Indiana Gas' allocated portion of the
executive's total Vectren compensation.
(2) The amounts shown in this column are payments under
Indiana Energy's Annual Management Incentive Plan. Bonus
payments shown in 1998 are attributable to Indiana
Energy's performance for the 1997 fiscal year and the
bonus shown in 1999 is attributable to Indiana Energy's
performance for the 1999 fiscal year. The bonus earned
for the 1998 fiscal year is shown in the supplementary
table.
The amounts earned in the period beginning April 1, 2000
and ending December 31, 2000 under the Vectren Corporation
At-Risk Incentive Plan have not been determined and
approved for distribution by the Vectren's Compensation
Committee.
(3) The amounts shown in this column are dividends paid on
restricted shares issued under the Indiana Energy
Executive Restricted Stock Plan. Note that Vectren
adopted the Stock Plan on March 31, 2000.
(4) The shares shown in this column have been restated to
reflect the conversion ratio of 1.333 described above in
Section titled "Voting Securities" in Vectren's Proxy
which was filed with the Securities and Exchange
Commission on March 16, 2001 and is attached to this
filing as Exhibit 99.1.
(5) The amounts shown in this column represent the value of
shares issued under the Stock Plan and for which
restrictions were lifted in each year. At the time of the
merger, Indiana Energy executives had restricted stock
performance grants relating to open performance
measurement periods. (Under normal circumstances, at the
close of each performance cycle, Indiana Energy's Total
Shareholder Return would have been compared to a peer
group and the number of restricted shares granted would
have been adjusted in accordance with the plan.) The
Board concluded that it would be difficult, if not
inappropriate, to use Vectren's performance to make
adjustments to the prior grants. Based upon the frequency
of past performance grants, the Board awarded 75% of the
present value of the potential performance grants. The
value of these grants is included in the 2000 row. Grants
related to this closing cycle are: Mr. Hewitt- 2,086
shares, $41,397 ($17,387 allocated to Indiana Gas). The
balance of the value in the 2000 row reflects stock from
other grant cycles for which restrictions were lifted in
2000 coincident with the consummation of the merger.
(6) The amount shown in this column represents several
compensation elements.
a) Change-in-Control Walk-Away Provisions - Several
Indiana Energy officers had change-in-control
agreements at the time of the merger. These
agreements contained "walk-away" provisions that would
have allowed officers to exercise their agreements
anytime within a thirteen-month period following the
close of the Vectren merger. The Board felt it was
important to maintain the continuity of the officer
group through the merger process and asked that all
change-in-control agreements be terminated at the
close of the merger and new agreements be put in
place. Recognizing the value of the walk-away
provision, the Board felt that officers should be
compensated for losing the right to exercise the
provision. A settlement equal to 25% of the officers'
annual base salary was made. The officer discussed in
this section received this settlement: Mr. Hewitt --
$19,425. This amount was paid in 2000.
b) The balance of this column reflects Vectren
contributions to the retirement savings plan (Hewitt:
2000 -- $4,140, 1999 -- $10,716, 1998 -- $12,925), the
dollar value of insurance premiums paid by, or on
behalf of, the Company and its subsidiaries with
respect to split-dollar life insurance for the benefit
of executive officers (Hewitt: 2000 -- $3,226, 1999 --
$7,674, 1998 -- $7,702), credits for flexible spending
accounts, wellness, and perfect attendance (Hewitt:
2000 -- $63, 1999 -- $486, 1998 -- $100), deferred
compensation contributions to restore employer
contributions to the Company Retirement Savings Plan
(Hewitt: 2000 -- $236, 1998 -- $175), reimbursement
for taxable expenses (Hewitt: 2000 -- $7,369, 1999 --
$2,999, 1998 -- $1,497), reimbursement for club dues
(Hewitt: 2000 -- $93, 1999 -- $420, 1998 - $420), and
dividends from Vectren stock held in the deferred
compensation plan (Hewitt: 2000-- $1,544, 1999 --
$2,230).
TABLE 2(1)
LONG-TERM INCENTIVE PLAN AWARDS IN LAST FISCAL YEAR
Estimated Future Payouts
Under Non-Stock Price-Based
Plans
(a) (b) (c) (d) (e) (f)
Performance
Number of or Other
Shares; Periods
Units or Until Threshold Target Maximum
Other Maturation Number Number of Number of
Rights or Payout of Shares Shares Shares
(1) (2) (3) (4) (5)
--------- ---------- --------- -------- ---------
T.M. Hewitt 6,047 0 0 6,047 12,094
(1) Amounts in this table represent the executive's total
long-term incentive plan awards and are not allocated.
This column shows the restricted shares awarded during
fiscal year 2000 under the Stock Plan. The market value
of the shares on the dates of the grants is determined
according to a formula in the Stock Plan based on an
average price over a period of time preceding the grant.
Dividends are paid directly to the holders of the stock.
(2) For the grant authorized on October 1, 2000, the
measurement period for each third of the grant will
commence on October 1, 2000, and conclude on December 31,
2002, 2003, and 2004. Upon conclusion of each
measurement period and subsequent adjustment to the
number of shares contingently granted, an additional 1
year employment restriction is imposed. The granting of
additional shares, if any, and the application of
forfeiture provisions depends upon certain measurements
of Vectren's total return to shareholders in comparison
to the total return to shareholders of a predetermined
group of comparable companies.
(4) The initial grant shares, which are the same as the total
number of shares in column (b), are also set forth in
column (3), are subject to forfeiture. If Vectren's
performance compared to the peer group during this
measurement period places it in the bottom quartile, the
executive officers will forfeit all of the shares granted
for this period.
(5) The initial grant shares, which are the same as the total
number of shares in column (b), are presented in this
column. If Vectren's performance compared to the peer
group during this measurement period places it in the
middle two quartiles, these shares will vest.
(6) Under the Stock Plan, if Vectren's performance compared
to the peer group during the initial measuring period
places it in the top quartile, an additional performance
grant equal to the original grant will be made. In that
event, the shares shown in column (e) will be doubled.
37
ITEM 12. SECURITIES OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
Security ownership of certain beneficial owners
As of December 31, 2000, each of the following stockholder was
known to management to be the beneficial owner of more than five
percent of the outstanding shares of any class of voting
securities as set forth below.
T Amount and Nature Percent
itle of Name and Address of of Beneficial of Class
Class Beneficial Owner Ownership
- --------- ------------------- ---------------- -----------
Common Vectren Corporation 482.41561 Shares 100 percent
20 NW 4th Street Registered Owner
Evansville, IN
47741
Security ownership of management
The following table sets forth the number of shares of Vectren
common stock beneficially owned by Indiana Gas' directors and
president and all directors and the executive officer as a group,
as of December 31, 2000. Except as otherwise indicated, each
individual has sole voting and investment power with respect to
the shares listed below.
Directors
Name of Beneficial Owner Shares Owned
Beneficially
(1)
** Niel C. Ellerbrook 71,837 (2) (4)
** Andrew E. Goebel 147,350 (2) (3) (4) (5)
* J. Gordon Hurst 108,576 (2) (3) (4) (5)
* Jerome A. Benkert, Jr. 15,656 (2) (4)
* Ronald E. Christian 16,329 (2) (6)
* Also an executive officer of the company
** Also a director of Vectren Corporation
Executive Officer
Name of Beneficial Owner Shares Owned Beneficially (1)
Timothy M. Hewitt 18,158
All Directors and Executive Officers as a Group (6 Persons)
Shares Owned Beneficially Percent of Class
377,906 0.62 percent
(1) No director or executive officer owned beneficially as of
December 31, 2000, more than 5 percent of common stock of
Vectren.
(2) Does not include derivative securities held under
Vectren's Non-Qualified Deferred Compensation Plan.
These derivative securities are in the form of phantom
stock units which are valued as if they were Vectren
common stock. The amounts shown for the following
individuals include the following amounts of phantom
units:
38
Name of Individuals or Identity of Group Phantom
Stock Units
Niel C. Ellerbrook 48,515
Andrew E. Goebel 4,530
Jerome A. Benkert, Jr. 14,811
J. Gordon Hurst 726
Ronald E. Christian 24,792
Timothy M. Hewitt 8,724
All Directors and Executive Officers as a 102,098
Group (6 Persons)
(3) Includes shares held by spouse or jointly with spouse.
(4) Includes shares granted to executives under the Company's
Executive Restricted Stock Plan, which are subject to
certain transferability restrictions and forfeiture
provisions.
(5) Includes shares which the named individual has the right
to acquire under the SIGCORP, Inc. Stock Option Plan.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Refer to Note 14 in Indiana Gas' financial statements included in
Item 8 Financial Statements and Supplementary Data for
transactions with Vectren and Vectren affiliates.
Part IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON
FORM 8-K
(a) (1) Financial Statements
Financial statements filed as part of this Form 10-K are included
under Part II, Item 8.
(a)(2) Financial Statement Schedules:
PAGES IN FORM 10-K
------------------
Report of Independent Accountants 32
For the years ended December 31, 2000,
1999 and 1998: Schedule II -- Valuation 39
and Qualifying Accounts
All other schedules are omitted as the required information is
inapplicable or the information is presented in the Financial
Statements or related notes.
39
SCHEDULE II
Indiana Gas Company, Inc.
VALUATION AND QUALIFYING ACCOUNTS AND RESERVES
Column A Column B Column C
Additions
Balance Charged Charged
Beginning to to Other
Description of Year Expenses Accounts
---------- --------- ---------
(in thousands)
VALUATION AND QUALIFYING
ACCOUNTS:
Year 2000 - Accumulated $ 1,739 $ 5,405 $ -
Provision for uncollectible
Accounts
Year 1999 - Accumulated
Provision for uncollectible
Accounts $ 1,749 $ 2,819 $ -
Year 1998 - Accumulated
Provision for uncollectible
Accounts $ 2,104 $ 3,408 $ -
OTHER RESERVES:
Year 2000 - Reserve for $ - $ 13,400 $ -
Merger and integration
costs
Year 2000 - Reserve for $ 500 $ 500 $ -
Injuries and damages
Year 1999 - Reserve for
Injuries and damages $ 500 $ - $ -
Year 1998 - Reserve for
Injuries and damages $ - $ 500 $ -
Column A Column D Column E
Deductions Balance
from End of
Description Reserves, Net Year
-------------- ---------
(in thousands)
VALUATION AND QUALIFYING
ACCOUNTS:
Year 2000 - Accumulated $ 5,081 $ 2,063
Provision for uncollectible
Accounts
Year 1999 - Accumulated
Provision for uncollectible
Accounts $ 2,829 $ 1,739
Year 1998 - Accumulated
Provision for uncollectible
Accounts $ 3,763 $ 1,749
OTHER RESERVES:
Year 2000 - Reserve for $ 12,107 $ 1,293
Merger and integration costs
Year 2000 - Reserve for $ 200 $ 800
Injuries and damages
Year 1999 - Reserve for
Injuries and damages $ - $ 500
Year 1998 - Reserve for
Injuries and damages $ - $ 500
(a)(3) EXHIBITS
Exhibits for the company are listed in the Index to Exhibits
beginning on page 42
(b) REPORTS ON FORM 8-K
On October 31, 2000, Indiana Gas filed a Current Report on Form 8-
K with respect to Vectren Corporation's completion of the
approximate $465 million acquisition of the natural gas
distribution assets from The Dayton Power and Light Company, a
wholly owned subsidiary of DPL, Inc. Indiana Gas holds a 47
percent interest in the acquired assets. Items reported include:
Item 5. Other Events
Item 7. Exhibits
99-1 Press Release - Vectren Corporation Completes
Acquisition of DPL's Natural Gas Distribution
Business
99-2 Cautionary Statement for Purposes of the "Safe
Harbor" Provisions of the Private Securities
Litigation Reform Act of 1995
On December 15, 2000, Indiana Gas filed a Current Report on Form
8-K with respect to providing an update on potential impact of
Increased Gas Costs and Gas Cost Adjustment Proceedings. Items
reported include:
Item 5. Other Events
On December 27, 2000, Indiana Gas filed a Current Report on Form
8-K with respect to the issuance of an aggregate principal amount
of $70 million Insured Quarterly Notes.
Item 5. Other Events
Item 7. Exhibits.
Exhibit 1 - Purchase Agreement, dated December 21,
2000, between Indiana Gas Company, Inc. and Edward D.
Jones & Co., L.P.
Exhibit 4 - Form of Fifth Supplemental Indenture to the
Indenture dated as of February 1, 1991, between Indiana
Gas Company, Inc. and U.S. Bank Trust National
Association with respect to the issuance of the 15-Year
IQ Notes and the 30-Year IQ Notes.
41
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused
this report to be signed on its behalf by the undersigned,
thereunto duly authorized.
INDIANA GAS COMPANY, INC.
Dated March 28, 2001
/S/ Timothy M. Hewitt
Timothy M. Hewitt,
President
Pursuant to the requirements of the Securities and Exchange Act
of 1934, this report has been signed below by the following
persons on behalf of the Registrant and in capacities and on the
dates indicated.
Signature Title Date
Principal Executive Officer
/S/ Timothy M. Hewitt President March 28, 2001
Timothy M. Hewitt
Principal Financial Officer
/S/ Jerome A. Benkert, Jr. Executive Vice March 28, 2001
Jerome A. Benkert, Jr. President and Chief
Financial Officer
Principal Accounting Officer
/S/ M. Susan Hardwick Vice President and March 28, 2001
M. Susan Hardwick Controller
Majority of the Board of Directors
/S/ Jerome A. Benkert, Jr. Director March 28, 2001
Jerome A. Benkert, Jr.
/S/ Ronald E. Christian Director March 28, 2001
Ronald E. Christian
/S/ Niel C. Ellerbrook Director March 28, 2001
Niel C. Ellerbrook
/S/ J. Gordon Hurst Director March 28, 2001
J. Gordon Hurst
/S/ Andrew E. Goebel Director March 28, 2001
Andrew E. Goebel
42
INDEX TO EXHIBITS
EX - 2.1 Asset Purchase Agreement dated December 14,1999
between Indiana Energy, Inc. and
The Dayton Power and Light Company and Number-3CHK
with a commitment letter for a
364-Day Credit Facility dated December 16,1999.
(Filed and designated in Current Report on Form 8-K
dated December 28, 1999, File No. 1-9091, as
Exhibit 2 and 99.1.)
EX - 3.1 Amended and Restated Articles of Incorporation.
(Filed herewith.)
EX - 3.2 Amended and Restated Code of By-Laws. (Filed
herewith.)
EX - 4.1 Indenture dated February 1, 1991, between Indiana
Gas and Continental Bank, National Association.
Inc.'s. (Filed and designated in Current Report on
Form 8-K filed February 15, 1991, File No. 1-
6494.); First Supplemental Indenture thereto dated
as of February 15, 1991. (Filed and designated in
Current Report on Form 8-K filed February 15, 1991,
File No 1-6494, as Exhibit 4(b).); Second
Supplemental Indenture thereto dated as of
September 15, 1991, (Filed and designated in
Current Report on Form 8-K filed September 25,
1991, File No 1-6494, as Exhibit 4(b).); Third
supplemental Indenture thereto dated as of
September 15, 1991 (Filed and designated in Current
Report on Form 8-K filed September 25, 1991, File
No 1-6494, as Exhibit 4(c).); Fourth Supplemental
Indenture thereto dated as of December 2, 1992,
(Filed and designated in Current Report on Form 8-K
filed December 8, 1992, File No 1-6494, as Exhibit
4(b).); Fifth Supplemental Indenture thereto dated
as of December 28, 2000, (Filed and designated in
Current Report on Form 8-K filed December 27, 2000,
File No 1-6494, as Exhibit 4.)
EX - 4.2 Credit Agreement dated as of March 8, 1999 among
Indiana Gas Company, Inc., the Lenders, ABN AMRO
Bank N.V., as Syndication Agent, National City Bank
of Indiana, as Documentation Agent, and Bank One,
Indiana, N.A., as Administrative Agent. (Filed and
designated in Current Report on Form 8-K dated
January 26, 2001, File No 1-15467, as Exhibit 4.2.)
EX - 4.3 First Amendment dated as of March 7, 2000 to the
Credit Agreement dated as of March 8, 1999 among
Indiana Gas Company, Inc., certain lenders, ABN
AMRO BANK N.V., as Syndication Agent, National City
Bank of Indiana, as Documentation Agent, and Bank
One, Indiana, N.A., as Administrative Agent. (Filed
and designated in Current Report on Form 8-K dated
January 26, 2001, File No 1-15467, as Exhibit 4.3.)
EX - 4.4 Second Amendment dated as of October 31, 2000 to
the Credit Agreement dated as of March 8, 1999
among Indiana Gas Company, Inc., certain lenders,
ABN AMRO BANK N.V., as Syndication Agent, National
City Bank of Indiana, as Documentation Agent, and
Bank One, Indiana, N.A., as Administrative Agent.
(Filed and designated in Current Report on Form 8-K
dated January 26, 2001, File No 1-15467, as Exhibit
4.4.)
EX - 4.5 Exhibit 4.5 Bank One letter dated as of January 29,
2001 waiving the covenant compliance under Section
6.13 of the Indiana Gas Company, Inc. Credit
Agreement dated as of March 8, 1999. (Filed and
designated in Current Report on Form 8-K dated
January 26, 2001, File No 1-15467, as Exhibit 4.5.)
EX - 10.1 Vectren Corporation Retirement Savings Plan.
(Filed and designated in Form 10-Q for the
quarterly period ended September 30, 2000, File 1-
15467, as Exhibit 99.1.)
EX - 10.2 Vectren Corporation Combined Non-Bargaining
Retirement Plan. (Filed and designated in Form 10-Q
for the quarterly period ended September 30, 2000,
File 1-15467, as Exhibit 99.2.)
EX - 10.3 Indiana Energy, Inc. Unfunded Supplemental
Retirement Plan for a Select Group of Management
Employees as amended and restated effective
December 1, 1998. (Filed and designated in Form 10-
Q for the quarterly period ended December 31, 1998,
File 1-9091, as Exhibit 10-G.)
EX - 10.4 Indiana Energy, Inc. Nonqualified Deferred
Compensation Plan effective January 1, 1999. (Filed
and designated in Form 10-Q for the quarterly
period ended December 31, 1998, File 1-9091, as
Exhibit 10-H.)
EX - 10.5 Amendment to Indiana Energy, Inc. Executive
Restricted Stock Plan effective December 1, 1998.
(Filed and designated in Form 10-Q for the
quarterly period ended December 31, 1998, File 1-
9091, as Exhibit 10-I.)
EX - 10.6 Indiana Energy, Inc. Annual Management Incentive
Plan effective October 1, 1987. (Filed and
designated in Form 10-K for the fiscal year ended
September 30, 1987, File 1-9091, as Exhibit 10-D.)
EX - 10.7 First Amendment to the Indiana Energy, Inc. Annual
Management Incentive Plan effective October 1,
1997. (Filed and designated in Form 10-K for the
fiscal year ended September 30, 1998, File 1-9091,
as Exhibit 10-Q.)
EX - 10.8 Amendment to Indiana Energy, Inc. Directors'
Restricted Stock Plan, effective December 1, 1998.
(Filed and designated in Form 10-Q for the
quarterly period ended December 31, 1998, File 1-
9091, as Exhibit 10-J.)
EX - 10.9 Formation Agreement among Indiana Energy, Inc.,
Indiana Gas Company, Inc., IGC Energy, Inc.,
Indiana Energy Services, Inc., Citizens Gas & Coke
Utility, Citizens Energy Services Corporation and
ProLiance Energy, LLC, effective March 15, 1996.
(Filed and designated in Form 10-Q for the
quarterly period ended March 31, 1996, File 1-9091,
as Exhibit 10-C.)
EX - 10.10 Gas Sales and Portfolio Administration Agreement
between Indiana Gas Company, Inc. and ProLiance
Energy, LLC, effective March 15, 1996, for services
to begin April 1, 1996. (Filed and designated in
Form 10-Q for the quarterly period ended March 31,
1996, File 1-6494, as Exhibit 10-C.)
EX - 10.11 Amended appendices to the Gas Sales and Portfolio
Administration Agreement between Indiana Gas
Company, Inc. and ProLiance Energy, LLC effective
November 1, 1998. (Filed and designated in Form 10-
Q for the quarterly period ended March 31, 1999,
File 1-6494, as Exhibit 10-A.)
EX - 10.12 Amended appendices to the Gas Sales and Portfolio
Administration Agreement between Indiana Gas
Company, Inc. and ProLiance Energy, LLC effective
November 1, 1999. (Filed and designated in Form 10-
K for the fiscal year ended September 30, 1999,
File 1-6494, as Exhibit 10-V.)
EX - 10.13 Indiana Energy, Inc. Executive Restricted Stock
Plan as amended and restated effective October 1,
1998. (Filed and designated in Form 10-K for the
fiscal year ended September 30, 1998, File 1-9091,
as Exhibit 10-O.)
EX - 10.14 Indiana Energy, Inc. Director's Restricted Stock
Plan as amended and restated effective May 1, 1997.
(Filed and designated in Form 10-Q for the
quarterly period ended June 30, 1997, File 1-9091,
as Exhibit 10-B.)
EX - 10.15 Second Amendment to Indiana Energy, Inc. Directors
Restricted Stock Plan, renamed the Vectren
Corporation Directors Restricted Stock Plan
effective October 1, 2000. (Filed and designated in
Form 10-K for the year ended December 31, 2000,
File No. 1-15467, as Exhibit 10.34.)
EX - 10.16 Third Amendment to Indiana Energy, Inc. Directors
Restricted Stock Plan, renamed the Vectren
Corporation Directors Restricted Stock Plan
effective March 28, 2000. (Filed and designated in
Form 10-K for the year ended December 31, 2000,
File No. 1-15467, as Exhibit 10.35.)
EX - 10.17 Vectren Corporation Employment Agreement between
Vectren Corporation and Niel C. Ellerbrook dated as
of March 31, 2000. (Filed and designated in Form
10-Q for the quarterly period ended June 30, 2000,
File 1-15467, as Exhibit 99.1.)
EX - 10.18 Vectren Corporation Employment Agreement between
Vectren Corporation and Andrew E. Goebel dated as
of March 31, 2000(Filed and designated in Form 10-Q
for the quarterly period ended June 30, 2000, File
1-15467, as Exhibit 99.2.)
EX - 10.19 Vectren Corporation Employment Agreement between
Vectren Corporation and Jerome A. Benkert dated as
of March 31, 2000. (Filed and designated in Form 10-
Q for the quarterly period ended June 30, 2000,
File 1-15467, as Exhibit 99.3.)
EX - 10.20 Vectren Corporation Employment Agreement between
Vectren Corporation and Ronald E. Christian dated
as of March 31, 2000. (Filed and designated in Form
10-Q for the quarterly period ended June 30, 2000,
File 1-15467, as Exhibit 99.5.)
EX - 10.21 Vectren Corporation Employment Agreement between
Vectren Corporation and Timothy M. Hewitt dated as
of March 31, 2000. (Filed and designated in Form 10-
Q for the quarterly period ended June 30, 2000,
File 1-15467, as Exhibit 99.6.)
EX - 10.22 Vectren Corporation Employment Agreement between
Vectren Corporation and J. Gordon Hurst dated as of
March 31, 2000. (Filed and designated in Form 10-Q
for the quarterly period ended June 30, 2000, File
1-15467, as Exhibit 99.7.)
EX - 10.23 Vectren Corporation Employment Agreement between
Vectren Corporation and Richard G. Lynch dated as
of March 31, 2000. (Filed and designated in Form 10-
Q for the quarterly period ended June 30, 2000,
File 1-15467, as Exhibit 99.8.)
EX - 12 Computation of Ratio of Earnings to Fixed Charges
(Filed herewith)
EX - 99.1 Vectren Corporation Proxy Statement Pursuant to
Section 14(a) of the Securities Exchange Act of
1934, but not including the Compensation Committee
Report and Performance Graph. (Filed herewith.)
EX - 99.2 Indiana Gas Press Release regarding gas cost
adjustment proceedings filed in Current Report on 8-
K on March 29, 2001. (Filed herewith.)
EX - 99.3 Agreement and Plan of Merger dated as of June
11,1999 among Indiana Energy, Inc.,
SIGCORP, Inc. and Vectren Corporation (the ''Merger
Agreement ''). (Filed and designated in Form S-4
to (No. 333-90763) filed on November 12, 1999, File
1-15467, as Exhibit 2.)
EX - 99.4 Amendment No.1 to the Merger Agreement dated
December 14,1999 (Filed and designated in Current
Report on Form 8-K filed December 16, 1999, File 1-
09091, as Exhibit 2.)
EX - 99.5 Amended and Restated Articles of Incorporation of
Vectren Corporation effective March
31,2000. (Filed and designated in Current Report on
Form 8-K filed April 14, 2000, File No. 1-15467, as
Exhibit 4.1.)
EX - 99.6 Code of By-Laws of Vectren Corporation. (Filed and
designated in Form S-3 (No. 333-5390), filed
January 19, 2001, File No. 1-15467, as Exhibit
4.2.)
EX - 99.7 Shareholders Rights Agreement dated as of October
21, 1999 between Vectren Corporation
and Equiserve Trust Company, N.A., as Rights Agent.
(Filed and designated in Form S-4 (No. 333-90763),
filed November 12. 1999, File No 1-15467, as
Exhibit 4.)