SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8-K
_______________________
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): January 16, 2001
VECTREN CORPORATION
(Exact Name of Registrant as Specified in Its Charter)
INDIANA
(State or Other Jurisdiction of Incorporation)
1-15467 35-2086905
(Commission File Number) (IRS Employer Identification No.)
20 N.W. Fourth Street
Evansville, Indiana 47741
(Address of Principal Executive Offices)(Zip Code)
Registrant's Telephone Number, Including Area Code: (812) 465-5300
<PAGE>
Item 7. Financial Statements and Exhibits.
On October 31, 2000, Vectren Corporation (the Company) completed the
acquisition of the natural gas distribution assets from The Dayton Power and
Light Company, a wholly owned subsidiary of DPL, Inc. The business will operate
under the name Vectren Energy Delivery of Ohio, Inc. (VEDO). Under the
acquisition structure, Indiana Gas Company, Inc., a wholly owned subsidiary of
the Company, holds a 47 percent undivided ownership interest and VEDO has a 53
percent undivided ownership interest. (Refer to the Company's Form 8-K filed
November 15, 2000 and Form 10-Q filed November 14, 2000 for further discussion.)
The following statements and exhibits are included:
(a) Audited financial statements of The Dayton Power & Light Company's
natural gas retail distribution business for the year ended December 31, 1999
and unaudited interim financial statements of same as of September 30, 2000 and
for the nine month periods ended September 30, 2000 and 1999.
(b) Pro forma financial statements of Vectren Corporation for the year
ended December 31, 1999 and as of September 30, 2000 and for the nine months
ended September 30, 2000.
(c) The following exhibits are filed as part of this report:
Exhibit 23 - Consent of PricewaterhouseCoopers LLP
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VECTREN CORPORATION
(Registrant)
Dated: January 16, 2001 By: /s/ M. Susan Hardwick
-----------------------------
M. Susan Hardwick
Vice President and Controller
<PAGE>
Index
Pages
Audited Financial Statements
Report of Independent Accountants 1
Statement of Income for the Year Ended December 31, 1999 2
Statement of Cash Flows for the Year Ended December 31, 1999 3
Balance Sheet as of December 31, 1999 4
Statement of Owner's Net Investment for the
Year Ended December 31, 1999 5
Notes to Financial Statements 6-9
Unaudited Interim Financial Statements
Interim Statement of Income for the nine-month periods ended
September 30, 2000 and 1999 10
Interim Statement of Cash Flows for the nine-month periods ended
September 30, 2000 and 1999 11
Interim Balance Sheet as of September 30, 2000 12
Notes to Interim Financial Statements 13-14
<PAGE>
Report of Independent Accountants
To the Board of Directors and Shareholder of
The Dayton Power & Light Company
In our opinion, the accompanying balance sheet and the related statements of
income, of cash flows and of owner's net investment present fairly, in all
material respects, the financial position of The Dayton Power & Light Company's
natural gas retail distribution business (the Gas Business) at December 31,
1999, and the results of its operations and its cash flows for the year then
ended in conformity with accounting principles generally accepted in the United
States of America. These financial statements are the responsibility of the Gas
Business's management; our responsibility is to express an opinion on these
financial statements based on our audit. We conducted our audit of these
statements in accordance with auditing standards generally accepted in the
United States of America, which 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, assessing
the accounting principles used and significant estimates made by management, and
evaluating the overall financial statement presentation. We believe that our
audit provides a reasonable basis for our opinion.
PricewaterhouseCoopers LLP
Dayton, Ohio
December 15, 2000
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Statement of Income
For the Year Ended December 31, 1999
(In Thousands)
Revenues
Revenues from external customers $ 214,979
Related party revenues 3,887
----------
Total revenues 218,866
----------
Expenses
Gas purchased for resale 129,916
Gas purchased for related parties 1,386
Operation and maintenance 29,180
Depreciation and amortization 8,117
General taxes 23,070
----------
Total expenses 191,669
----------
Income before income taxes 27,197
Income taxes 9,204
----------
Net income $ 17,993
----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Statement of Cash Flows
For the Year Ended December 31, 1999
(In Thousands)
Operating activities
Net income $ 17,993
Adjustments:
Depreciation and amortization 8,117
Deferred income taxes 7,824
Accounts receivable 8,921
Inventories 6,400
Accounts payable 2,484
Accrued taxes (4,389)
Accrued purchased gas (5,473)
Other deferred credits 2,992
Other (5,304)
----------------
Net cash provided by operating activities 39,565
----------------
Investing activities
Capital expenditures (9,587)
----------------
Financing activities
Net cash reverted to The Dayton Power & Light Company (29,978)
----------------
Cash and temporary cash investments
Net change -
Balance at beginning of year -
----------------
Balance at end of year $ -
----------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Balance Sheet
As of December 31, 1999
(In Thousands)
Assets
Property:
Gas property $ 330,760
Accumulated depreciation and amortization (142,413)
---------
Net property 188,347
---------
Current assets:
Cash and temporary cash investments -
Accounts receivable, less provision for uncollectible
accounts of $780 42,629
Inventories, at average cost 41,954
Taxes applicable to subsequent years 18,391
Other 19,630
---------
Total current assets 122,604
---------
Other assets 4,036
---------
Total assets $ 314,987
---------
Capitalization and liabilities
Capitalization:
Owner's net investment in
Natural Gas Retail Distribution Business $ 196,478
---------
Current assets:
Accounts payable 22,669
Accrued taxes 25,788
Accrued purchased gas 15,743
Customer construction advances 6,563
Deferred taxes 8,027
Other 2,242
---------
Total current liabilities 81,032
---------
Deferred credits and other:
Deferred taxes 12,163
Income taxes refundable through future revenues 4,444
Unamortized investment tax credit 3,198
Insurance and claims costs 1,121
Other 16,551
---------
Total deferred credits and other 37,477
---------
Total capitalization and liabilities $ 314,987
---------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Statement of Owner's Net Investment
For the Year Ended December 31, 1999
(In Thousands)
Owner's net investment in Natural Gas Retail Distribution
Business at December 31, 1998 $ 208,463
Add: Net income 17,993
Less: Cash reverted to The Dayton Power & Light Company (29,978)
---------
Owner's net investment in Natural Gas Retail Distribution Business
at December 31, 1999 $ 196,478
----------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Notes to Financial Statements
December 31, 1999
(In Thousands)
1. Basis of Presentation
On October 31, 2000, The Dayton Power & Light Company (DP&L), a
subsidiary of DPL Inc., sold its natural gas retail distribution
business (the Gas Business) to Vectren Energy Delivery of Ohio, Inc.
and Indiana Gas Company, Inc. pursuant to the terms of an asset
purchase agreement dated December 14, 1999. Prior to the sale, the Gas
Business operated as a division of DP&L. The Gas Business sells natural
gas to residential, commercial, industrial and governmental customers
in a 6,000 square mile area of West Central Ohio and provides natural
gas to over 300,000 customers in 16 counties.
The accompanying financial statements are presented on a carve-out
basis and include the historical operations of the Gas Business. The
assets and liabilities of the Gas Business have been reflected in these
financial statements at DP&L's historical cost. The financial
information in these financial statements does not include certain
expenses and adjustments that may have been incurred had the Gas
Business been a separate, independent company, and may not necessarily
be indicative of results that would have occurred had the Gas Business
been a separate, independent company during the periods presented or of
the future results of the Gas Business. The accompanying financial
statements have been prepared on a historical basis and do not reflect
any effects related to the sale of the Gas Business. For the year ended
December 31, 1999, the net income of the Gas Business was equal to its
comprehensive income.
2. Summary of Significant Accounting Policies
The policies utilized by the Gas Business in the preparation of the
financial statements conform to generally accepted accounting
principles and require management to make estimates and assumptions
that affect the reported amount 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 amounts could differ from these
estimates and assumptions. All allocations of costs and estimates
included in the accompanying financial statements are based on
assumptions that management believes are reasonable under the
circumstances. However, these allocations and estimates are not
necessarily indicative of the costs and expenses that would have
resulted if the Gas Business had been operating as a separate entity.
All charges and allocations of costs for facilities, functions and
services performed by DP&L, which are discussed in more detail in Note
4, have been charged to owner's net investment by the Gas Business in
the period in which the cost was recorded in the financial statements.
General taxes included in the Income Statement represent expenses for
taxes other than income taxes, such as property, use and employee
related taxes.
Revenues
Revenues include amounts charged to customers through gas recovery
clauses, which are adjusted periodically for changes in such costs.
Related costs that are recoverable or refundable in future periods are
deferred along with the related income tax effects. Also included in
revenues are amounts charged to customers through a surcharge for
recovery of arrearages from certain eligible low-income households. The
Gas Business records revenue for services provided but not yet billed
to more closely match revenues with expenses.
Property, Maintenance and Depreciation
Property is shown at its original cost. Cost includes direct labor and
material and allocable overhead costs. When a unit of property is
retired, the original cost of that property plus the cost of removal
less any salvage value is charged to accumulated depreciation.
Maintenance costs and replacements of minor items of property are
charged to expense. Depreciation expense is calculated using the
straight-line method which depreciates the cost of property over its
estimated useful life. Depreciation rates utilized by the Gas Business
during the year ended December 31, 1999 averaged approximately three
percent.
3. Regulatory Matters
The Gas Business applies the provision of the FASB Statement No. 71,
"Accounting for the Effects of Certain Types of Regulation". This
accounting standard provides for the deferral of costs authorized for
future recovery by regulators. As of December 31, 1999, $14,669 and
$3,290 of regulatory assets are included in other current assets and
other assets, respectively, on the Balance Sheet.
4. Related Party Activities
Cash Management
DP&L uses a centralized cash management system. Cash deposits from the
Gas Business are transferred to DP&L on a daily basis, and DP&L funds
the Gas Business disbursements as required. No interest has been
charged or credited to transactions with the Gas Business.
Shared Services
DP&L provides certain general and administrative services to the Gas
Business including finance, legal, information systems, benefits,
advertising, customer services and facilities. The costs of these
shared services (excluding employee benefits which are discussed below)
are included in the Income Statement of the Gas Business generally
based on the Gas Business's revenues, customers, employees or
properties in relation to total DPL Inc. revenues, customers, employees
or properties, as applicable. Management believes these methods of cost
allocation are reasonable. Such costs during the year ended December
31, 1999 totaled approximately $10,900.
Employee Benefits
DP&L provides certain employee benefits to the Gas Business including
health care, dental care, life insurance, long-term disability, pension
plans, and savings plans. The costs of these benefits are included in
the Income Statement of the Gas Business based on labor utilization,
which management believes to be reasonable. Such costs during the year
ended December 31, 1999 totaled approximately $1,500.
Insurance and Claims Costs
The Gas Business receives certain property and liability, business
interruption, and other risk insurance coverage from an affiliate
subsidiary of DPL Inc. Costs charged to the Gas Business for this
insurance coverage are based on the Gas Business' properties in
relation to total DPL, Inc. properties, which management believes to be
reasonable. The Gas Business incurred approximately $600 of insurance
premium and claims costs in 1999, which are reflected in the Income
Statement.
5. Income Taxes
U.S. income tax payments, refunds, credits, provision and deferred tax
components have been allocated to the Gas Business in accordance with
DP&L's tax allocation policy. Such policy allocates tax components
included in the consolidated income tax return of DPL Inc. to the Gas
Business to the extent such components were generated by or related to
the Gas Business. Such allocation results in income tax expense that
would have resulted if the Gas Business was a stand-alone entity.
<PAGE>
The provision for income taxes of the Gas Business consisted of the
following for the year ended December 31, 1999:
Computation of Tax Expense
Federal income tax (a) $ 9,519
Increase (decreases) in tax from -
Depreciation 149
Investment tax credit amortized (81)
Other, net (383)
----------
Total tax expense $ 9,204
----------
(a) The statutory rate of 35 percent
was applied to pre-tax income.
Components of Tax Expense
Taxes currently payable $ 1,380
Deferred taxes -
Depreciation and amortization 1,374
Fuel and gas costs 1,406
Insurance and claims costs 48
Other 5,077
Deferred investment tax credit, net (81)
----------
Total tax expense $ 9,204
----------
Components of Deferred Tax Assets and Liabilities
Noncurrent liabilities
Depreciation/property basis $ 20,519
Income taxes recoverable (1,556)
Investment tax credit (1,119)
Other (5,681)
----------
Net noncurrent deferred tax liabilities 12,163
-----------
Net current deferred tax liabilities 8,027
-----------
Total net deferred tax liabilities $ 20,190
-----------
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Interim Statement of Income
For the Nine Month Periods Ended
September 30, 2000 and 1999
Unaudited
(In Thousands)
For the Nine Months Ended
September 30, September 30,
2000 1999
Revenues
Revenues from external customers $ 165,862 $ 147,216
Related party revenues 1,834 3,593
---------------- --------------
Total revenues 167,696 150,809
---------------- --------------
Expenses
Gas purchased for resale 104,701 85,531
Gas purchased for related parties 927 1,325
Operation and maintenance 17,058 16,071
Depreciation and amortization 6,615 5,622
General taxes 15,408 17,275
---------------- --------------
Total expenses 144,709 125,824
---------------- --------------
Income before income taxes 22,987 24,985
Income taxes 7,832 8,386
---------------- --------------
Net income $ 15,155 $ 16,599
---------------- --------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Interim Statement of Cash Flows
For the Nine-Month Periods Ended
September 30, 2000 and 1999
Unaudited
(In Thousands)
For the Nine Months Ended
Sepember 30, September 30,
2000 1999
Operating activities
Net income $ 15,155 $ 16,599
Adjustments:
Depreciation and amortization 6,615 5,622
Deferred income taxes 2,194 10,517
Accounts receivable 28,863 35,566
Inventories (2,129) 5,904
Accounts payable (15,832) (15,268)
Accrued taxes (10,515) (19,031)
Accrued purchased gas (13,499) (16,053)
Other deferred credits (1,317) 23
Other 24,198 8,395
---------- -------------
Net cash provided by
operating activities 33,733 32,274
---------- -------------
Investment activities
Capital expenditures (6,835) (7,190)
---------- -------------
Financing activities
Net cash reverted to The Dayton Power
& Light Company (26,898) (25,084)
---------- -------------
Cash and Temporary Cash Investments
Net change - -
Balance at beginning of year - -
---------- -------------
Balance at end of period $ - $ -
---------- -------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Interim Balance Sheet
As of September 30, 2000
Unaudited
(In Thousands)
Assets
Property:
Gas property $ 337,595
Accumulated depreciation and amortization (149,028)
------------
Net property 188,567
------------
Current assets:
Cash and temporary cash investments -
Accounts receivable, less provision for uncollectible
accounts of $193 13,766
Inventories, at average cost 44,083
Taxes applicable to subsequent years 2,905
Other 9,360
------------
Total current assets 70,114
------------
Other assets 4,611
------------
Total assets $ 263,292
------------
Capitalization and liabilities
Capitalization:
Net investment in Natural Gas Retail Distribution Business $ 184,735
------------
Current assets:
Accounts payable 6,837
Accrued taxes 15,273
Accrued purchased gas 2,244
Customer construction advances 5,959
Deferred taxes 9,847
Other 1,768
------------
Total current liabilities 41,928
------------
Deferred credits and other:
Deferred taxes 15,373
Unamortized investment tax credit 3,137
Income taxes refundable through future revenues 1,703
Insurance and claims costs 1,030
Other 15,386
------------
Total deferred credits and other 36,629
------------
Total capitalization and liabilities $ 263,292
------------
The accompanying notes are an integral part of the financial statements.
<PAGE>
The Dayton Power & Light Company
Natural Gas Retail Distribution Business
Notes to Financial Statements
September 30, 2000
(In Thousands)
1. Basis of Presentation
On October 31, 2000, The Dayton Power & Light Company (DP&L), a
subsidiary of DPL Inc., sold its natural gas retail distribution
business (the Gas Business) to Vectren Energy Delivery of Ohio, Inc.
and Indiana Gas Company, Inc. pursuant to the terms of an asset
purchase agreement dated December 14, 1999. Prior to the sale, the Gas
Business operated as a division of DP&L. The Gas Business sells natural
gas to residential, commercial, industrial and governmental customers
in a 6,000 square mile area of West Central Ohio and provides natural
gas to over 300,000 customers in 16 counties.
The accompanying unaudited interim financial statements are presented
on a carve-out basis and include the historical operations of the Gas
Business. The assets and liabilities of the Gas Business have been
reflected in these financial statements at DP&L's historical cost. The
financial information in these interim financial statements does not
include certain expenses and adjustments that would have been incurred
had the Gas Business been a separate, independent company, and may not
necessarily be indicative of results that would have occurred had the
Gas Business been a separate, independent company during the periods
presented or of future results of the Gas Business. The accompanying
unaudited interim financial statements have been prepared on a
historical basis and do not reflect any effects related to the sale of
the Gas Business. For all periods presented on the accompanying interim
income statement, the net income of the Gas Business was equal to its
comprehensive income.
These unaudited interim financial statements reflect all adjustments
that, in the opinion of management, are necessary to provide a fair
presentation of the financial position, results of operations and cash
flows for the dates and periods covered. In the opinion of management,
all such adjustments are of a normal recurring nature. Interim period
results are not necessarily indicative of results of operations or cash
flows for a full-year period. These unaudited interim financial
statements should be read in conjunction with the audited financial
statements of the Gas Business for the year ended December 31, 1999.
All charges and allocations of costs for facilities, function and
services performed by DP&L, which are discussed in more detail in Note
2, have been charged to owner's net investment by the Gas Business in
the period in which the cost was recorded in the financial statements.
2. Related Party Activities
Cash Management
DP&L uses a centralized cash management system. Cash deposits from the
Gas Business are transferred to DP&L on a daily basis and DP&L funds
the Gas Business disbursements as required. No interest has been
charged or credited to transactions with the Gas Business.
Shared Services
DP&L provides certain general and administrative services to the Gas
Business including finance, legal, information systems, benefits,
advertising, customer services and facilities. The costs of these
shared services (excluding employee benefits which are discussed below)
are included in the Income Statement of the Gas Business generally
based on the Gas Business' revenues, customers, employees or properties
in relation to total DPL Inc. revenues, customers, employees or
properties, as applicable. Management believes these methods of cost
allocation are reasonable. Such costs during the nine-month periods
ended September 30, 2000 and 1999 totaled approximately $5,640 and
$4,280, respectively.
Employee Benefits
DP&L provides certain employee benefits to the Gas Business including
health care, dental care, life insurance, long-term disability, pension
plans and savings plans. The costs of these benefits are included in
the Income Statement of the Gas Business based on labor utilization,
which management believes to be reasonable. Such costs during the
nine-month periods ended September 30, 2000 and 1999 totaled
approximately $660 and $1,050, respectively.
Insurance and Claims Costs
The Gas Business receives certain property and liability, business
interruption, and other risk insurance coverage from an affiliate
subsidiary of DPL Inc. Costs charged to the Gas Business for this
insurance coverage are based on the Gas Business' properties in
relation to total DPL, Inc. properties, which management believes to be
reasonable. Costs related to this insurance coverage during the
nine-month periods ended September 30, 2000 and 1999 totaled
approximately $460 and $600, respectively.
<PAGE>
Vectren Corporation And Subsidiary Companies
Index
--------------------------------------------------------------------------------
Unaudited Pro Forma Combined Financial Statements Page
Introduction 1
Unaudited Pro Forma Combined Balance Sheet as of September 30, 2000 2
Unaudited Pro Forma Combined Statement of Income for the Year Ended
December 31, 1999 3
Unaudited Pro Forma Combined Statement of Income for the Nine Months 4
Ended September 30, 2000
Notes to Pro Forma Financial Statements 5
<PAGE>
Vectren Corporation and Subsidiary Companies
Pro Forma Financial Information
The accompanying financial statements present the unaudited pro forma balance
sheet as of September 30, 2000 and the unaudited pro forma statement of income
for the nine months ended September 30, 2000 and for the year ended December 31,
1999.
On October 31, 2000, Vectren Corporation (Vectren) completed its acquisition of
the natural gas distribution assets of The Dayton Power and Light Company
(Acquisition) for approximately $465 million pursuant to an Asset Purchase
Agreement dated December 14, 1999. Vectren acquired the gas utility assets as a
tenancy in common through two separate wholly-owned subsidiaries. Operations
will be conducted under the name Vectren Energy Delivery of Ohio (VEDO). Under
the acquisition structure, Indiana Gas Company, Inc., one of Vectren's operating
public utilities, holds a 47 percent undivided ownership interest and VEDO has a
53 percent undivided ownership interest.
The unaudited pro forma balance sheet as of September 30, 2000 is presented as
if the Acquisition had occurred on September 30, 2000. The pro forma statement
of income for the nine month period ended September 30, 2000 and for the year
ended December 31, 1999 are presented as if the Acquisition had occurred at
January 1, 1999.
Preparation of the pro forma financial information was based on assumptions
deemed appropriate by management. The pro forma information is unaudited and is
not necessarily indicative of the results which actually would have occurred if
the transaction had been consummated at the beginning of the period presented,
nor does it purport to represent the future financial position and results of
operations for future periods. The pro forma information should be read in
conjunction with the audited consolidated financial statements of Vectren filed
on Form 8-K for the year ended December 31, 1999 and the unaudited financial
statements of Vectren filed on Form 10-Q for the quarter ended September 30,
2000.
<PAGE>
VECTREN CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As Of September 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
Proforma Adjustments
--------------------
Vectren Dayton Vectren
Historical Acquisition (2a) Pro Forma
---------- ------------- ----------
ASSETS
Current Assets:
<S> <C> <C> <C>
Cash and cash equivalents $19,009 $ (2,482) (2c) $ 16,527
Temporary investments 826 - 826
Accounts receivable, net 134,821 11,634 146,455
Accrued unbilled revenues 21,058 - 21,058
Inventories 47,897 54,199 102,096
Prepaid gas delivery service 46,788 - 46,788
Recoverable fuel and natural gas costs 30,680 8,156 38,836
Prepayments and other current assets 31,376 13,621 44,997
---------- ------------- ----------
Total current assets 332,455 85,128 417,583
---------- ------------- ----------
Utility Plant:
Original cost 2,419,568 334,804 2,754,372
Less: accumulated depreciation and amortization 1,069,471 145,939 1,215,410
---------- ------------- ----------
Net utility plant 1,350,097 188,865 1,538,962
---------- ------------- ----------
Other Investments:
Investments in leveraged leases 91,253 - 91,253
Investments in partnerships and other corporations 80,873 - 80,873
Notes receivable 62,384 - 62,384
Other 2,008 - 2,008
---------- ------------- ----------
Total other investments 236,518 - 236,518
---------- ------------- ----------
Nonutility property, net of accumulated depreciation 89,530 1,605 91,135
Other Assets:
Goodwill - 199,600 (2b) 199,600
Deferred charges 20,578 (3,336)(2c) 17,242
Unamortized debt costs 14,970 - 14,970
Demand side management programs 25,686 - 25,686
Other 3,134 - 3,134
---------- ------------- ----------
Total other assets 64,368 196,264 260,632
---------- ------------- ----------
TOTAL ASSETS $2,072,968 $ 471,862 $2,544,830
========== ============== ==========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.
<PAGE>
VECTREN CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED BALANCE SHEET
As Of September 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
Proforma Adjustments
--------------------
Vectren Dayton Vectren
Historical Acquisition (2a) Pro Forma
---------- --------------- ----------
LIABILITIES AND SHAREHOLDERS' EQUITY
Current Liabilities:
<S> <C> <C> <C>
Current maturities of adjustable rate bonds subject to $ 53,700 $ - $ 53,700
tender
Current maturities of long-term debt and other obligations 258 - 258
Short-term borrowings 310,545 463,981 (2d) 774,526
Accounts payable 99,964 - 99,964
Refunds to customers and customer deposits 13,556 7,881 21,437
Accrued taxes 14,344 - 14,344
Accrued interest 12,617 - 12,617
Accrued purchase gas 15,076 - 15,076
Other current liabilities 50,506 - 50,506
---------- --------------- ----------
Total current liabilities 570,566 471,862 1,042,428
---------- --------------- ----------
Deferred Credits and Other Liabilities:
Deferred income taxes 203,219 - 203,219
Accrued postretirement benefits other than pensions 44,675 - 44,675
Unamortized investment tax credits 23,756 - 23,756
Other 18,111 - 18,111
---------- --------------- ----------
Total deferred credits and other liabilities 289,761 - 289,761
---------- --------------- ----------
Commitments and Contingencies
Minority interest in subsidiary 1,900 - 1,900
Capitalization:
Long-term debt and other obligations, net of current
maturities 484,074 - 484,074
Preferred stock of subsidiary:
Redeemable 8,076 - 8,076
Nonredeemable 8,889 - 8,889
---------- --------------- ----------
Total preferred stock 16,965 - 16,965
---------- --------------- ----------
Common stock (no par value) - issued and
outstanding 61,219 213,742 - 213,742
Retained earnings 495,886 - 495,886
Accumulated other comprehensive income 74 - 74
---------- --------------- ----------
Total common shareholders' equity 709,702 - 709,702
---------- --------------- ----------
Total capitalization 1,210,741 - 1,210,741
---------- --------------- ----------
TOTAL LIABILITIES AND SHAREHOLDERS'
EQUITY $2,072,968 $471,862 $2,544,830
========== =============== ==========
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.
<PAGE>
VECTREN CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For The Year Ended December 31, 1999
(In Thousands)
<TABLE>
<CAPTION>
Pro forma Adjustments
---------------------
Vectren Dayton Acquisition Vectren
Historical Historical Adjustments Pro forma
------------- ----------- ----------- ----------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Gas utility $ 499,573 $ 218,866 $ - $ 718,439
Electric utility 307,569 - - 307,569
Energy services and other 261,275 - - 261,275
------------- ----------- ----------- ----------
Total operating revenues 1,068,417 218,866 - 1,287,283
------------- ----------- ----------- ----------
OPERATING EXPENSES:
Cost of gas sold 266,429 131,302 - 397,731
Fuel for electric generation 66,305 - - 66,305
Purchased electric energy 20,791 - - 20,791
Cost of energy services and other 247,590 - - 247,590
Other operating 189,622 29,180 - 218,802
Depreciation and amortization 86,998 8,117 4,990 (3a) 100,105
Taxes other than income taxes 29,910 23,070 - 52,980
------------- ----------- ----------- ----------
Total operating expenses 907,645 191,669 4,990 1,104,304
------------- ----------- ----------- ----------
OPERATING INCOME (LOSS) 160,772 27,197 (4,990) 182,979
OTHER INCOME:
Equity in earnings of unconsolidated investments 11,642 - - 11,642
Other - net 8,902 - - 8,902
------------- ----------- ----------- ----------
Total other income 20,544 - - 20,544
------------- ----------- ----------- ----------
INTEREST EXPENSE 42,862 - 27,839 (3b) 70,701
------------- ----------- ----------- ----------
INCOME (LOSS) BEFORE PREFERRED DIVIDENDS AND INCOME TAXES 138,454 27,197 (32,829) 132,822
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 1,078 - - 1,078
------------- ----------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 137,376 27,197 (32,829) 131,744
45,708 9,204 (11,490) (3c) 43,422
INCOME TAXES (BENEFIT) ------------- ----------- ----------- ----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST 91,668 17,993 (21,339) 88,322
MINORITY INTEREST IN SUBSIDIARY 920 - - 920
------------- ----------- ----------- ----------
NET INCOME (LOSS) $ 90,748 $ 17,993 $ (21,339) $ 87,402
============= =========== ============ ==========
AVERAGE COMMON SHARES OUTSTANDING 61,306 61,306 61,306 61,306
DILUTED COMMON SHARES OUTSTANDING 61,430 61,430 61,430 61,430
BASIC EARNINGS PER AVERAGE SHARE OF COMMON STOCK
$ 1.48 $ .29 $ (.35) $ 1.43
DILUTED EARNINGS PER SHARE OF COMMON
STOCK $ 1.48 $ .29 $ (.35) $ 1.42
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.
<PAGE>
VECTREN CORPORATION AND SUBSIDIARY COMPANIES
UNAUDITED PRO FORMA COMBINED STATEMENT OF INCOME
For Nine Months Ended September 30, 2000
(In Thousands)
<TABLE>
<CAPTION>
Pro forma Adjustments
---------------------
Vectren Dayton Acquisition Vectren
Historical Historical Adjustments Pro forma
------------ ---------- ----------- ----------
OPERATING REVENUES:
<S> <C> <C> <C> <C>
Gas utility $ 391,486 $ 167,696 $ - $ 559,182
Electric utility 249,215 - - 249,215
Energy services and other 300,074 - - 300,074
------------ ---------- ----------- ----------
Total operating revenues 940,775 167,696 - 1,108,471
------------ ---------- ----------- ----------
OPERATING EXPENSES:
Cost of gas sold 229,373 105,628 - 335,001
Fuel for electric generation 51,722 - - 51,722
Purchased electric energy 25,085 - - 25,085
Cost of energy services and other 285,856 - - 285,856
Other operating 142,620 17,058 - 159,678
Merger costs 31,306 - - 31,306
Depreciation and amortization 75,008 6,615 3,742 (3a) 85,365
Taxes other than income taxes 22,170 15,408 - 37,578
------------ ---------- ----------- ----------
Total operating expenses 863,140 144,709 3,742 1,011,591
------------ ---------- ----------- ----------
OPERATING INCOME (LOSS) 77,635 22,987 (3,742) 96,880
OTHER INCOME:
Equity in earnings of unconsolidated investments 16,950 - - 16,950
Other - net 14,497 - - 14,497
------------ ---------- ----------- ----------
Total other income 31,447 - - 31,447
------------ ---------- ----------- ----------
INTEREST EXPENSE 37,940 - 20,879 (3b) 58,819
------------ ---------- ----------- ----------
INCOME (LOSS) BEFORE PREFERRED DIVIDENDS AND INCOME TAXES 71,142 22,987 (24,621) 69,508
PREFERRED DIVIDEND REQUIREMENT OF SUBSIDIARY 776 - - 776
------------ ---------- ----------- ----------
INCOME (LOSS) BEFORE INCOME TAXES 70,366 22,987 (24,621) 68,732
INCOME TAXES (BENEFIT) 23,527 7,832 (8,617) (3c) 22,742
------------ ---------- ----------- ----------
NET INCOME (LOSS) BEFORE MINORITY INTEREST 46,839 15,155 (16,004) 45,990
MINORITY INTEREST IN SUBSIDIARY 983 - - 983
------------ ---------- ----------- ----------
NET INCOME (LOSS) $ 45,856 $ 15,155 $ (16,004) $ 45,007
============ ========== ========== ===========
AVERAGE COMMON SHARES OUTSTANDING 61,257 61,257 61,257 61,257
DILUTED COMMON SHARES OUTSTANDING 61,332 61,332 61,332 61,332
BASIC EARNINGS PER AVERAGE SHARE OF COMMON STOCK
$ .75 $ .25 $ (.26) $ .73
DILUTED EARNINGS PER SHARE OF COMMON
STOCK $ .75 $ .25 $ (.26) $ .73
</TABLE>
The accompanying notes are an integral part of these pro forma combined
financial statements.
<PAGE>
VECTREN CORPORATION AND SUBSIDIARY COMPANIES
NOTES TO UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS
1. Basis of Presentation
Vectren Corporation (Vectren) is a public utility holding company whose
wholly-owned subsidiary, Vectren Utility Holdings, Inc. (VUHI), is the holding
company of Vectren's two operating public utilities, Indiana Gas Company, Inc.
(Indiana Gas), and Southern Indiana Gas and Electric Company. On October 31,
2000, Vectren completed its acquisition of the natural gas distribution assets
of The Dayton Power and Light Company (Acquisition) for approximately $465
million pursuant to an Asset Purchase Agreement dated December 14, 1999. Vectren
acquired the gas utility as a tenancy in common through two separate wholly-
owned subsidiaries. Operations will be conducted under the name Vectren Energy
Delivery of Ohio (VEDO). Under the acquisition structure, Indiana Gas holds a 47
percent undivided ownership interest and VEDO has a 53 percent undivided
ownership interest.
The accompanying combined pro forma financial statements give effect to the
Acquisition. The unaudited pro forma combined balance sheet as of September 30,
2000 is presented as if the Acquisition and the related debt financing had
occurred on September 30, 2000. The pro forma combined statement of income for
the nine month period ended September 30, 2000 and for the year ended December
31, 1999 are presented as if the Dayton Acquisition had occurred at January 1,
1999.
2. Pro Forma Adjustments to Balance Sheet
(a) Determination of total purchase price:
Cash purchase price $463,981
Liability assumed for customer deposits 7,881
Transaction costs 5,818
--------
Total purchase price $477,680
========
(b) Allocation of purchase price:
Cash purchase price $463,981
Transaction costs 5,818
--------
469,799
========
Tangible assets acquired 278,080
Liabilities assumed (7,881)
---------
Net assets acquired 270,199
---------
Excess allocated to goodwill $199,600
========
The above reflects Management's preliminary purchase price allocation based
upon information currently available. The purchase price is subject to
adjustment based upon finalization of the closing balance sheet in
accordance with the Asset Purchase Agreement. Management believes that any
such adjustment will not be material.
(c) Pro forma adjustment to reclassify deferred transaction costs incurred as
of September 30, 2000 of $3,336 to goodwill and to reflect the cash payment
at closing of $2,482 for the remaining transaction costs.
(d) A $435 million commercial paper program established by VUHI provided
$434,360 of the initial Acquisition financing. Additionally, Indiana Gas
provided $29,621 from its commercial paper program for total financing of
$463,981. On December 28, 2000, VUHI issued a $150 million Floating Rate
Note due December 27, 2001, replacing an equal amount of commercial paper.
Management anticipates that the short-term financings will be replaced over
time with permanent, long-term financing.
Short- term Annualized
borrowings Interest
----------- ----------
Commercial paper (VUHI) $284,360 $16,189
6.6425% Floating rate note (VUHI) 150,000 9,964
Commercial paper (Indiana Gas) 29,621 1,686
---------- ----------
$463,981 $27,839
========== ==========
3. Pro Forma Adjustments to Income Statements
(a) Pro forma adjustment to reflect the amortization of goodwill of
$199,600 amortized over a period of 40 years.
(b) Pro forma adjustment to reflect the interest expense from the
Acquisition financing based upon borrowings of $463,981 at an average
interest rate of approximately 6.0 percent annum (see 2d)
(c) Pro forma adjustment to reflect the income tax benefit on a combined
federal and state statutory rate of 35 percent.
(d) Vectren and Dayton Power and Light Company (DP&L) entered into an
agreement whereby DP& L will provide transitional support to Vectren
in the areas of meter reading, billing, cash receipts, collections,
customer deposits, telecommunication services and other miscellaneous
services for a predetermined fee. Because these fees will be no
greater than the historical costs incurred by DP&L for such support
services for its natural gas distribution operations, no pro forma
adjustment has been reflected.
