EXHIBIT 12
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratios)
Twelve
Months Ended Year Ended December 31,
September 30, -----------------------------------------------
2001(1) 2000(1) 1999 1998 1997 (2) 1996
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Net income (3) $ 52,961 $ 53,417 $ 76,511 $ 70,367 $ 59,011 $ 78,962
Income taxes 28,457 34,924 43,161 39,093 35,072 45,672
Fixed charges (see below) 70,818 47,995 39,195 38,582 39,795 40,161
Less: Preferred stock dividend 963 1,017 1,078 1,095 1,097 1,097
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Total adjusted earnings $ 151,273 $ 135,319 $ 157,789 $ 146,947 $ 132,781 $ 163,698
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Total interest expense $ 68,949 $ 46,072 $ 36,790 $ 36,670 $ 37,509 $ 37,672
Interest component of rents 906 906 1,327 817 1,189 1,392
Preferred stock dividend 963 1,017 1,078 1,095 1,097 1,097
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Total fixed charges $ 70,818 $ 47,995 $ 39,195 $ 38,582 $ 39,795 $ 40,161
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2.1 2.8 4.0 3.8 3.3 4.1
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(1) Merger and integration related costs and restructuring costs incurred for
the twelve months ended September 30, 2001 and for the year ended December
31, 2000 totaled $16.7 million and $32.7 million, respectively. These costs
relate primarily to transaction costs, severance, elimination of duplicate
facilities, and other merger, integration and restructuring activities.
As a result of merger integration activities, management has identified
certain information systems that are expected to be retired in 2001.
Accordingly, the useful lives of these assets have been shortened to
reflect this decision. These information system assets are owned by a
wholly owned subsidiary of Vectren and the fees allocated by the subsidiary
for the use of these systems by Indiana Gas are reflected in operation and
maintenance expenses in the accompanying condensed financial statements. As
a result of the shortened useful lives, additional fees were incurred by
Indiana Gas. For the twelve months ended September 30, 2001 and for the
year ended December 31, 2000, these additional fees increased operation and
maintenance $13.0 million and $11.4 million, respectively.
In total, merger and integration related costs and restructuring costs
incurred for the twelve months ended September 30, 2001 and for the year
ended December 31, 2000 were $29.7 million ($18.4 million after tax) and
$44.1 million ($31.6 million after tax), respectively. Before merger and
integration and restructuring charges, the Company's ratio of earnings to
fixed charges for the twelve months ended September 30, 2001 was 2.4 and
for the year ended December 31, 2000 was 3.5.
(2) 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. The Company's ratio of earnings to fixed charges
before the 1997 Indiana Gas restructuring costs was 4.0.
(3) Net income, as defined, is before preferred stock dividend requirement of
subsidiary and cumulative effect of change in accounting principle.