August 13, 1996
Securities and Exchange Commission
Operations Center
6432 General Green Way
Alexandria, VA 22312-2413
Gentlemen:
We are transmitting herewith Indiana Gas Company,
Inc.'s Quarterly Report on Form 10-Q for the quarter
ended June 30, 1996, pursuant to the requirements of
Section 13 of the Securities Exchange Act of 1934.
Very truly yours,
/s/Kathleen S. Morris
Kathleen S. Morris
KSM:rs
Enclosures (8)
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1996
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-6494
INDIANA GAS COMPANY, INC.
(Exact name of registrant as specified in its charter)
INDIANA 35-0793669
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1630 North Meridian Street, Indianapolis, Indiana 46202
(Address of principal executive offices) (Zip Code)
317-926-3351
(Registrant's telephone number, including area code)
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
registrant was required to file such reports), and (2) has
been subject to such filing requirements for the past 90
days.
Yes X No
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the latest
practicable date.
Common Stock - Without par value 9,080,770 July 31, 1996
Class Number of shares Date
TABLE OF CONTENTS
Page
Numbers
Part I - Financial Information
Consolidated Balance Sheets
at June 30, 1996, and 1995
and September 30, 1995
Consolidated Statements of Income
Three Months Ended June 30, 1996 and 1995,
Nine Months Ended June 30, 1996 and 1995,
and Twelve Months Ended June 30, 1996 and 1995
Consolidated Statements of Cash Flows
Nine Months Ended June 30, 1996 `and 1995,
and Twelve Months Ended June 30, 1996 and 1995
Notes to Consolidated Financial Statements
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Part II - Other Information
Item 1 - Legal Proceedings
Item 6 - Exhibits and Reports on Form 8-K
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
ASSETS
(Thousands - Unaudited)
June 30 September 30
1996 1995 1995
<S> <C> <C> <C>
UTILITY PLANT:
Original cost $904,479 $858,570 $872,287
Less - accumulated depreciation
and amortization 339,651 311,445 316,991
564,828 547,125 555,296
NONUTILITY PLANT - NET 327 387 188
CURRENT ASSETS:
Cash and cash equivalents 36,249 27,620 20
Accounts receivable, less reserves of
$1,511, $1,184 and $1,662 respectively 32,543 15,917 13,403
Accrued unbilled revenues 6,929 5,445 6,405
Materials and supplies - at average cost 4,187 3,956 3,890
Liquefied petroleum gas - at average cost 509 877 883
Gas in underground storage - at last-in,
first-out cost 20,029 43,978 59,394
Prepayments and other 526 596 144
100,972 98,389 84,139
DEFERRED CHARGES:
Unamortized debt discount and expense 6,712 6,915 6,800
Other 9,365 9,608 9,510
16,077 16,523 16,310
$682,204 $662,424 $655,933
</TABLE>
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED BALANCE SHEETS
SHAREHOLDER'S EQUITY AND LIABILITIES
(Thousands - Unaudited)
June 30 September 30
1996 1995 1995
<S> <C> <C> <C>
CAPITALIZATION:
Common stock and paid-in capital $142,995 $142,995 $142,995
Retained earnings 151,440 135,567 125,159
Total common shareholder's equity 294,435 278,562 268,154
Long-term debt 174,743 173,693 173,693
469,178 452,255 441,847
CURRENT LIABILITIES:
Maturities and sinking fund requirements
of long-term debt 18,950 - -
Notes payable - - 2,225
Accounts payable 45,969 45,334 59,713
Refundable gas costs 6,522 17,571 4,883
Customer deposits and advance payments 3,572 10,512 20,870
Accrued taxes 14,471 19,683 7,928
Accrued interest 5,204 4,463 2,803
Other current liabilities 21,547 21,317 21,560
116,235 118,880 119,982
DEFERRED CREDITS:
Deferred income taxes 66,362 62,097 65,096
Unamortized investment tax credit 11,407 12,337 12,103
Customer advances for construction 1,382 1,253 1,297
Regulatory income tax liability 3,797 4,787 3,797
Other 13,843 10,815 11,811
96,791 91,289 94,104
COMMITMENTS AND CONTINGENCIES
(See Notes 8 & 9) - - -
$682,204 $662,424 $655,933
</TABLE>
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands - Unaudited)
Three Months Nine Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
OPERATING REVENUES $ 91,211 $ 83,081 $ 468,073 $ 346,611
COST OF GAS 52,464 43,705 285,678 188,765
MARGIN 38,747 39,376 182,395 157,846
OPERATING EXPENSES:
Other operation and maintenance 19,986 18,252 61,694 55,702
Depreciation and amortization 8,391 7,881 24,739 23,274
Income taxes 1,063 2,378 27,061 21,582
Taxes other than income taxes 3,444 3,065 13,104 10,228
32,884 31,576 126,598 110,786
OPERATING INCOME 5,863 7,800 55,797 47,060
OTHER INCOME - NET 436 464 1,279 953
INCOME BEFORE INTEREST
AND OTHER CHARGES 6,299 8,264 57,076 48,013
INTEREST 4,040 3,937 12,120 11,760
OTHER (14) - (75) (14)
4,026 3,937 12,045 11,746
NET INCOME $ 2,273 $ 4,327 $ 45,031 $ 36,267
</TABLE>
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF INCOME
(Thousands - Unaudited)
Twelve Months
Ended June 30
1996 1995
<S> <C> <C>
OPERATING REVENUES $ 525,272 $ 396,517
COST OF GAS 315,408 212,800
MARGIN 209,864 183,717
OPERATING EXPENSES
Other operation and maintenance 81,600 75,328
Depreciation and amortization 32,730 30,797
Income taxes 24,695 18,449
Taxes other than income taxes 15,914 13,315
154,939 137,889
OPERATING INCOME 54,925 45,828
OTHER INCOME - NET 1,749 1,324
INCOME BEFORE INTEREST
AND OTHER CHARGES 56,674 47,152
INTEREST 15,890 15,629
OTHER (89) (30)
15,801 15,599
NET INCOME $ 40,873 $ 31,553
</TABLE>
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Thousands - Unaudited)
Nine Months Twelve Months
Ended June 30 Ended June 30
1996 1995 1996 1995
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net income $ 45,031 $ 36,267 $ 40,873 $ 31,553
Adjustments to reconcile net income to cash
provided from operating activities -
Depreciation and amortization 24,879 23,414 32,917 30,984
Deferred income taxes 1,266 2,210 3,050 3,553
Investment tax credit (697) (697) (930) (930)
25,448 24,927 35,037 33,607
Changes in assets and liabilities -
Receivables - net (19,664) 2,080 (18,110) 15,964
Inventories 39,442 20,545 24,086 (4,846)
Accounts payable, customer deposits,
advance payments and other current liabilities (31,055) 15,706 (6,075) 22,594
Accrued taxes and interest 8,944 1,040 (4,471) (13,777)
Recoverable/refundable gas costs 1,639 (14,024) (11,049) (15,024)
Prepayments (382) (352) 70 117
Other - net 3,533 11,695 5,367 13,597
Total adjustments 27,905 61,617 24,855 52,232
Net cash flow from operations 72,936 97,884 65,728 83,785
CASH FLOWS REQUIRED FOR
FINANCING ACTIVITIES:
Sale of long-term debt 20,000 20,000 20,000 20,000
Reduction in long-term debt - (3,158) - (21,208)
Net change in short-term borrowings (2,225) (30,550) - -
Dividends (18,750) (18,000) (25,000) (24,000)
Net cash flow required for financing activities (975) (31,708) (5,000) (25,208)
CASH FLOWS REQUIRED FOR INVESTING ACTIVITIES:
Capital expenditures (35,732) (38,576) (52,099) (54,371)
Net cash flow required for investing activities (35,732) (38,576) (52,099) (54,371)
NET INCREASE IN CASH 36,229 27,600 8,629 4,206
CASH AND CASH EQUIVALENTS AT BEGINNING OF
PERIOD 20 20 27,620 23,414
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 36,249 $ 27,620 $ 36,249 $ 27,620
</TABLE>
Indiana Gas Company, Inc. and Subsidiary Companies
Notes to Consolidated Financial Statements
1. Financial Statements.
Indiana Gas Company, Inc. and its subsidiaries, Terre
Haute Gas Corporation (Terre Haute) and Richmond Gas
Corporation (Richmond) which are doing business as
Indiana Gas Company, Inc. (Indiana Gas), provide natural
gas and transportation services to a diversified base of
customers in 281 communities in 48 of Indiana's 92
counties.
The interim condensed consolidated financial statements
included in this report have been prepared by Indiana
Gas, without audit, as provided in the rules and
regulations of the Securities and Exchange Commission.
Certain information and footnote disclosures normally
included in financial statements prepared in accordance
with generally accepted accounting principles have been
omitted as provided in such rules and regulations.
Indiana Gas believes that the information in this report
reflects all adjustments necessary to fairly state the
results of the interim periods reported, that all such
adjustments are of a normally recurring nature, and the
disclosures are adequate to make the information
presented not misleading. These interim financial
statements should be read in conjunction with the
financial statements and the notes thereto included in
Indiana Gas' latest annual report on Form 10-K.
Because of the seasonal nature of Indiana Gas' gas
distribution operations, the results shown on a
quarterly basis are not necessarily indicative of annual
results.
2. Cash Flow Information.
For the purposes of the Consolidated Statements of Cash
Flows, Indiana Gas 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:
Nine Months Ended Twelve Months Ended
June 30 June 30
Thousands 1996 1995 1996 1995
Interest (net of
amount capitalized) $ 8,995 $ 8,891 $14,146 $14,754
Income taxes $20,756 $16,326 $30,636 $24,326
3. Revenues.
To more closely match revenues and expenses, revenues
are recorded for all gas delivered to customers but not
billed at the end of the accounting period.
4. Gas in Underground Storage.
Based on the cost of purchased gas during June 1996, the
cost of replacing the current portion of gas in
underground storage exceeded last-in, first-out cost at
June 30, 1996, by approximately $5,008,000.
5. Refundable or Recoverable Gas Costs.
The cost of gas purchased and refunds from suppliers,
which differ from amounts recovered through rates, are
deferred and are being recovered or refunded in
accordance with procedures approved by the Indiana
Utility Regulatory Commission (IURC).
6. 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 Income-Net" and
"Other" on the Consolidated Statements of Income. An
annual AFUDC rate of 7.5 percent was used for all
periods reported.
The table below reflects the total AFUDC capitalized and
the portion of which was computed on borrowed and equity
funds for all periods reported.
<TABLE>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30 June 30 June 30
<S> <C> <C> <C> <C> <C> <C>
Thousands 1996 1995 1996 1995 1996 1995
AFUDC-Borrowed Funds $ 60 $ 46 $215 $154 $276 $217
AFUDC-Equity Funds 49 38 176 126 226 177
Total AFUDC Capitalized $109 $ 84 $391 $280 $502 $394
</TABLE>
7. Long-Term Debt.
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes,
Series E (Notes) as follows: $5 million of 6.69% Notes
due June 10, 2013, $5 million of 6.69% Notes due
December 21, 2015, and $10 million of 6.69% Notes due
December 29, 2015. On July 15, 1996, Indiana Gas used
those net proceeds to redeem its remaining first
mortgage bonds, $19 million of 9 3/8% Series M First
Mortgage Bonds.
8. Affiliate Transactions.
Indiana Energy Services, Inc. (IES), an indirect wholly-
owned subsidiary of Indiana Energy (Indiana Gas'
parent), provided natural gas and related services to
Indiana Gas from January 1, 1996 to March 31, 1996.
Indiana Gas' purchases from IES for the three months
ended March 31, 1996 totalled $102.7 million. Effective
April 1, 1996, ProLiance Energy, LLC (ProLiance) assumed
the business of IES and is now the supplier of gas and
related services to Indiana Gas (see ProLiance Energy,
LLC in Management's Discussion and Analysis of Results
of Operations and Financial Condition). Indiana Gas'
purchases from ProLiance for the three months ended June
30, 1996, totalled $60.8 million. System supply gas is
provided to Indiana Gas with the commodity priced at
market index. The sales of gas and provision of other
services to Indiana Gas by Indiana Energy's marketing
affiliates are subject to regulatory review through the
quarterly gas cost adjustment proceeding currently
pending before the IURC. In addition, another
proceeding has been initiated by a small group of
Indiana Gas' and Citizens Gas' large-volume customers
who contend that the gas service contracts between
ProLiance and Indiana Gas and Citizens Gas should be
disapproved by the IURC or, alternatively, that the IURC
should regulate the operations of ProLiance. As of June
30, 1996, the two proceedings were each set for a final
hearing to occur in October 1996. While the outcome of
these proceedings cannot be predicted, management does
not expect this matter to have a material impact on
Indiana Gas' financial position or results of
operations.
Indiana Gas also participates in a centralized cash
management program with its parent, affiliated companies
and banks which permits funding of checks as they are
presented.
Amounts due affiliated companies, as well as checks
written but not cashed are reflected in Accounts Payable
on the Consolidated Balance Sheet. Amounts owed to
affiliates totaled $36.7 million and $11.9 million at
June 30, 1996 and 1995, respectively.
9. Environmental Costs.
In the past, Indiana Gas and others, including
former affiliates, and/or previous landowners,
operated facilities for the manufacturing of gas
and storage of manufactured gas. These facilities
are no longer in operation and have not been
operated for many years. In the manufacture and
storage of such gas, various byproducts were
produced, some of which may still be present at the
sites where these manufactured gas plants and
storage facilities were located. Management
believes, and the IURC has found that, those
operations were conducted in accordance with the
then-applicable industry standards. However, 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 a regulatory threshold
at these sites.
Indiana Gas has identified the existence, location
and certain general characteristics of 26 gas
manufacturing and storage sites. Removal activities
have been conducted at two sites and a remedial
investigation/feasibility study (RI/FS) is nearing
completion at one of the sites under an agreed
order between Indiana Gas and the Indiana
Department of Environmental Management. Indiana Gas
and others are assessing, on a site-by-site basis,
whether any of the remaining 24 sites require
remediation, to what extent it is required and the
estimated cost. Preliminary assessments (PAs) have
been completed on all but one of the sites. Site
investigations (SIs) have been completed at 20
sites and supplemental site investigations (SSIs)
have been conducted at 15 sites. Based upon the
site work completed to date, Indiana Gas believes
that a level of contamination that may require some
level of remedial activity may be present at a
number of the 24 sites. Indiana Gas is currently
conducting groundwater monitoring at many of the
sites. Indiana Gas has not begun an RI/FS at
additional sites, but expects to conduct further
investigation and evaluation in the future.
Based upon the work performed to date, Indiana Gas
has accrued remediation and related costs for the
two sites where remedial activities are taking
place. PA/SI, SSI and groundwater monitoring costs
have been accrued for the remaining sites where
appropriate. Estimated RI/FS costs and the costs of
certain remedial actions that may likely be
required have also been accrued. Costs associated
with environmental remedial activities are accrued
when such costs are probable and reasonably
estimable. Indiana Gas does not believe it can
provide an estimate of the reasonably possible
total remediation costs for any site prior to
completion of an RI/FS and the development of some
sense of the timing for implementation of the
potential remedial alternatives, to the extent such
remediation is required. Accordingly, the total
costs which may be incurred in connection with the
remediation of all sites, to the extent remediation
is necessary, cannot be determined at this time.
Indiana Gas has been pursuing recovery from three
separate sources for the costs it has incurred and
expects to incur relating to the 26 sites. Those
sources are insurance carriers, potentially
responsible parties (PRPs) and recovery through
rates from retail gas customers. On April 14, 1995,
Indiana Gas filed suit against a number of
insurance carriers for payment of claims for
investigation and clean-up costs already incurred,
as well as for a determination that those carriers
are obligated to pay these costs in the future.
Presently, that suit is set for trial to begin
October 21, 1996, in the United States District
Court for the Northern District of Indiana in Fort
Wayne, Indiana. Indiana Gas has obtained cash
settlements from some of the defendant insurance
carriers and, as a result, those carriers have been
dismissed from the suit.
Indiana Gas has also completed the process of
identifying PRPs for each site. PRPs include two
financially viable utilities, PSI Energy, Inc.
(PSI) and Northern Indiana Public Service Company
(NIPSCO). PSI has been identified as a PRP at 19 of
the sites. Indiana Gas has been negotiating with
PSI to determine PSI's share of responsibility,
although no agreement has been reached between the
parties. With the help of outside counsel, Indiana
Gas has prepared estimates of PSI's and other PRP's
share of environmental liabilities which may exist
at each of the sites based on equitable principles
derived from case law or applied by parties in
achieving settlements. NIPSCO has been identified
as an additional PRP at five of these 19 sites. On
September 27, 1995, Indiana Gas reached an
agreement with NIPSCO which provides for a
coordination of efforts and a sharing of
investigation and clean-up costs incurred and to be
incurred at the five sites in which they both have
an interest. The cost sharing estimates of PSI and
other PRPs, and the NIPSCO agreement, have been
utilized by Indiana Gas to record a receivable from
PRPs for their share of the liability for work
performed by Indiana Gas to date, as well as to
accrue Indiana Gas' proportionate share of the
estimated cost related to work not yet performed.
The receivable from PRPs of $3.5 million is
reflected in Accounts Receivable on the
Consolidated Balance Sheet at June 30, 1996.
In January 1992, Indiana Gas filed a petition with
the IURC seeking regulatory authority for, among
other matters, recovery through rates of all costs
Indiana Gas incurs in complying with federal, state
and local environmental regulations in connection
with past gas manufacturing activities. On May 3,
1995, the IURC concluded that the costs incurred by
Indiana Gas to investigate and, if necessary, clean-
up former manufactured gas plant sites are not
utility operating expenses necessary for the
provision of utility service and, therefore, are
not recoverable as operating expenses from utility
customers. The decision was contrary to rulings in
other states where utility regulatory commissions
have issued orders on the subject. The precedent
cited by the IURC was a ruling related to a
cancelled nuclear power plant which, unlike
manufactured gas plants, never provided service to
the public. Management believes applying the
nuclear power plant decision to Indiana Gas' case
was an incorrect application of the law and has
appealed the decision to the Indiana Court of
Appeals. The briefing in the appeal has been
concluded, and the case is now before the Court of
Appeals awaiting a decision. The Commission did
indicate that during Indiana Gas' next rate case it
would be appropriate to quantify the effect of the
investigation and clean-up activities as part of
the business risk to be considered by the
Commission in establishing the overall rate of
return to be allowed.
Indiana Gas has recorded $13.0 million for its
share of environmental costs to date. As a result
of its pursuit of recovery of costs from PRPs and
insurance carriers, Indiana Gas has secured
settlements from insurers of approximately $13.5
million. Amounts recovered in excess of its share
of costs to date have been deferred. The May 3,
1995, order of the IURC has had no immediate impact
on Indiana Gas' earnings since settlements with
insurers exceed Indiana Gas' share of environmental
liability recorded to date.
The impact on Indiana Gas' financial position and
results of operations of complying with federal,
state and local environmental regulations related
to former manufactured gas plant sites is
contingent upon several uncertainties. These
include the costs of any compliance activities
which may occur and the timing of the actions
taken, the impact of joint and several liability
upon the magnitude of the contingency, the outcome
of proceedings which challenge the IURC ruling on
recovery of costs from customers, as well as any
additional recoveries of environmental and related
costs from insurance carriers. Although there can
be no assurance of success, to the extent possible
Indiana Gas will continue to manage the
manufactured gas plant remediation program so that
amounts received from insurance carriers and PRPs
will be sufficient to fund all such costs.
10. Regulatory Assets and Liabilities.
Indiana Gas is subject to 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 revenue to
Indiana Gas associated with certain 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. Regulatory assets and liabilities reflected in
the Consolidated Balance Sheets as of June 30 (in
thousands) relate to the following:
<TABLE>
1996 1995
<S> <C> <C>
Regulatory Assets:
Postretirement Benefits Other Than Pensions $ 6,732 $ 7,444
Unamortized Debt Discount and Expense 6,712 6,915
Deferred Acquisition Costs 725 746
Rate Case Costs 109 443
$14,278 $15,548
Regulatory Liabilities:
Gas Costs Due to Customers, Net $ 6,522 $17,571
Amounts Due to Customers - Income Taxes, Net 3,797 4,787
Pension Costs 1,348 585
$11,667 $22,943
</TABLE>
It is Indiana Gas' policy to continually assess the
recoverability of costs recognized as regulatory assets
and the ability to continue to account for its
activities in accordance with SFAS 71, based on the
criteria set forth in SFAS 71. Based on current
regulation, Indiana Gas believes that its use of
regulatory 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 would be required. In addition, Indiana Gas
would be required to determine any impairment to the
carrying costs of deregulated plant and inventory
assets.
11. Reclassifications.
Certain reclassifications have been made to the prior
periods' financial statements to conform to the current
year presentation. These reclassifications have no
impact on net income previously reported.
Indiana Gas Company, Inc. and Subsidiary Companies
Management's Discussion and Analysis of Results of
Operations and Financial Condition
Results of Operations
Earnings
Net income for the three-, nine- and twelve-month
periods ended June 30, 1996, when compared to the same
periods one year ago are listed below. The decrease in
earnings for the three-month period is primarily
attributable to higher operation and maintenance expenses,
as well as lower margin. The increases in earnings for
the nine- and twelve-month periods reflect significantly
colder weather than last year, offset somewhat by higher
operation and maintenance expenses.
Periods Ended June 30 1996 1995
(Millions)
Three Months $ 2.3 $ 4.3
Nine Months $45.0 $36.3
Twelve Months $40.9 $31.6
The following discussion highlights the factors
contributing to these results.
Margin (Revenues Less Cost of Gas)
Margin for the quarter ended June 30, 1996, decreased
$.6 million compared to the same period last year. While
the current quarter's margin increased due to cooler
weather, the prior year's margin was higher due to the
recovery of gas costs which had been recognized as
expenses in earlier periods.
Margin for the nine-month period ended June 30, 1996,
increased $24.5 million compared to the same period last
year. The increase reflects weather 25 percent colder
than the same period last year and 8 percent colder than
normal.
Margin for the twelve-month period ended June 30,
1996, increased $26.1 million compared to the same period
last year. The increase reflects weather 26 percent
colder than the same period last year and 8 percent colder
than normal.
Additional residential and commercial customers, as
well as rate recovery (beginning May 1995) of
postretirement benefit costs recognized in accordance with
Statement of Financial Accounting Standards No. 106,
Employers' Accounting for Postretirement Benefits Other
Than Pensions (SFAS 106) also increased margins for all
periods reported.
Total system throughput (combined sales and
transportation) increased 8 percent (1.7 MMDth) for the
third quarter of fiscal 1996, 19 percent (17.6 MMDth) for
the nine-month period and 17 percent (18.6 MMDth) for the
twelve-month period ended June 30, 1996, compared to the
same periods last year. The increases for all periods are
due primarily to increases in residential and commercial
space heating sales caused by colder weather.
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.
Total average cost per unit of gas purchased increased
to $3.31 for the three-month period ended June 30, 1996,
compared to $2.43 for the same period one year ago. For
the nine-month period, cost of gas per unit increased to
$3.18 in the current period compared to $2.61 for the same
period last year. For the twelve-month period, cost of
gas per unit increased to $3.00 in the current period
compared to $2.58 for the same period last year. The
increases are due primarily to higher commodity costs
associated with increased demand for gas during the colder
winter this fiscal year.
Adjustments to Indiana Gas' rates and charges related
to the cost of gas are made through gas cost adjustment
(GCA) procedures established by Indiana law and
administered by the Indiana Utility Regulatory Commission
(IURC). The GCA passes through increases and decreases in
the cost of gas to Indiana Gas' customers dollar for
dollar.
Operating Expenses
Operation and maintenance expenses increased $1.7
million for the third quarter of fiscal 1996, $6.0 million
for the nine-month period and $6.3 million for the twelve-
month period ended June 30, 1996, when compared to the
same periods one year ago. The increases are primarily
attributable to higher performance-based compensation, the
recognition (beginning May 1995) of postretirement benefit
costs in accordance with SFAS 106, as well as the intense
cost control measures in place during the prior periods
due to very warm weather.
Depreciation and amortization expense increased for
the three-, nine- and twelve-month periods ended June 30,
1996, when compared to the same periods one year ago as
the result of additions to utility plant to serve new
customers and to maintain dependable service to existing
customers.
Federal and state income taxes decreased for the three-
month period ended June 30, 1996, when compared to the
same period one year ago due to lower taxable income. The
increases for the nine- and twelve-month periods reflect
higher taxable income during those periods.
Taxes other than income taxes increased for the three-
, nine- and twelve-month periods ended June 30, 1996, when
compared to the same periods one year ago due primarily to
higher gross receipts tax expense resulting from increased
revenue, and higher property tax expense.
Interest Expense
Interest expense increased for the three-, nine- and
twelve-month periods ended June 30, 1996, when compared to
the same periods one year ago due to an increase in
average debt outstanding slightly offset by a decrease in
interest rates.
Other Operating Matters
ProLiance Energy, LLC
On March 15, 1996, IGC Energy, Inc., an indirect
wholly-owned subsidiary of Indiana Energy (Indiana Gas'
parent), and Citizens By-Products Coal Company, a
wholly-owned subsidiary of Citizens Gas and Coke
Utility (Citizens Gas), formed a jointly- and equally-
owned limited liability corporation to provide natural
gas supply and related services. The new entity,
ProLiance Energy, LLC (ProLiance), began providing
services to Indiana Gas and Citizens Gas effective
April 1, 1996. ProLiance will also market its products
and services to other gas utilities and customers in
Indiana and surrounding states. ProLiance has assumed
the business of Indiana Energy Services, Inc. (IES),
Indiana Energy's gas marketing affiliate, which had
provided similar services to other customers and from
January 1, 1996, to March 31, 1996, to Indiana Gas.
System supply gas is provided to Indiana Gas with the
commodity priced at market index.
The sale of gas and provision of other services to
Indiana Gas by Indiana Energy's marketing affiliates
are subject to regulatory review through the quarterly
gas cost adjustment proceeding currently pending before
the IURC. In addition, another proceeding has been
initiated by a small group of Indiana Gas' and Citizens
Gas' large-volume customers who contend that the gas
service contracts between ProLiance and Indiana Gas and
Citizens Gas should be disapproved by the IURC or,
alternatively, that the IURC should regulate the
operations of ProLiance. As of June 30, 1996, the two
proceedings were each set for a final hearing to occur
in October 1996. While the outcome of these
proceedings cannot be predicted, management does not
expect this matter to have a material impact on Indiana
Gas' financial position or results of operations.
1996 Settlement Agreement
As provided in the previous year's settlement
agreement among Indiana Gas, the Office of Utility
Consumer Counselor (OUCC) and a group of large-volume
users, the OUCC performed an investigation during
fiscal 1995 to consider an increase to Indiana Gas'
authorized utility operating income. These parties then
entered a series of negotiations designed to increase
Indiana Gas' opportunity to earn on its recent capital
investments while avoiding the necessity of a general
rate filing. As a result of these negotiations, the
IURC approved on November 9, 1995, a settlement
agreement which provided, among other things, for the
following: (1) an increase in Indiana Gas' authorized
utility operating income (weather normalized) from
$51.1 million to $54.2 million beginning in fiscal
1996; (2) with certain specified exceptions, Indiana
Gas may not file a petition to increase its base rates
until November 15, 1996; and (3) an agreement to a
number of operational and other service enhancements
for large-volume customers.
Environmental Matters
Indiana Gas is currently conducting environmental
investigations and work at certain sites that were the
locations of former manufactured gas plants. It is
seeking to recover the costs of the investigations and
work from insurance carriers, other potentially
responsible parties (PRPs) and customers. On May 3,
1995, Indiana Gas received an order from the IURC in
which the Commission concluded that the costs incurred
by Indiana Gas to investigate and, if necessary, clean-
up former manufactured gas plant sites are not utility
operating expenses necessary for the provision of
service and, therefore, are not recoverable as
operating expenses from utility customers. The order is
being appealed. The IURC order has had no immediate
impact on Indiana Gas' earnings since settlements with
insurers of $13.5 million exceed Indiana Gas' share of
environmental liability recorded to date of $13.0
million. For further information regarding the status
of investigation and remediation of the sites, PRPs,
recovery from insurers, financial reporting and
ratemaking, see Note 9.
Indiana Legislative Matters
On April 26, 1995, the Indiana General Assembly
enacted legislation which provides new flexibility to
the IURC for future regulation of Indiana utilities and
modifies the application of the earnings test.
The new law recognizes that competition is
increasing in the provision of energy services and that
flexibility in the regulation of energy services
providers is essential to the well-being of the state,
its economy and its citizens. Under the law, an energy
utility can present to the IURC a broad range of
proposals from performance-based ratemaking to complete
deregulation of a utility's operations. The law gives
the IURC the authority to adopt alternative regulatory
practices, procedures, and mechanisms and establish
rates and charges that are in the public interest, and
will enhance or maintain the value of the energy
utility's retail energy services or property. It also
provides authority for the IURC to establish rates and
charges based on market or average prices that use
performance-based rewards or penalties, or which are
designed to promote efficiency in the rendering of
retail energy services.
The IURC applies the Indiana statute authorizing
the GCA procedures to reduce rates when necessary so as
to limit utility operating income to the level
authorized in the last general rate order. On a
quarterly basis, this earnings test is performed by
comparing Indiana Gas' authorized utility operating
income to its actual utility operating income (weather
normalized) for the previous 12 months. In the past,
one-fourth of the amounts over the authorized utility
operating income would be refundable to Indiana Gas'
customers each quarter. The new law revises the
earnings test to provide that no refund be paid to the
extent a utility has not earned its authorized utility
operating income over the previous 60 months (or during
the period since the utility's last rate order, if
longer). The revised test provides Indiana Gas a
greater opportunity to earn its authorized utility
operating income over the long term.
Liquidity and Capital Resources
New construction to provide service to a growing
customer base and normal system maintenance and
improvements will continue to require substantial capital
expenditures. For the twelve months ended June 30, 1996,
Indiana Gas' capital expenditures totaled $52.1 million.
Of this amount, 98 percent was provided by funds generated
internally (net income less dividends plus charges to net
income not requiring funds). Capital expenditures for
fiscal 1996 were estimated at $58.8 million of which $35.7
million have been expended during the nine-month period
ended June 30, 1996.
Indiana Gas' goal is to fund internally approximately
75 percent of its construction program. Capitalization
objectives for Indiana Gas are 55-65 percent common equity
and 35-45 percent long-term debt. This will help Indiana
Gas to maintain its high creditworthiness. The long-term
debt of Indiana Gas is currently rated Aa3 by Moody's
Investors Service and AA- by Standard & Poor's Corporation.
Indiana Gas' ratio of earnings to fixed charges was 4.9 for
the twelve months ended June 30, 1996 (see Exhibit 12).
During December 1995, Indiana Gas issued $20 million in
aggregate principal amount of its Medium-Term Notes, Series
E (Notes) as follows: $5 million of 6.69% Notes due June
10, 2013, $5 million of 6.69% Notes due December 21, 2015,
and $10 million of 6.69% Notes due December 29, 2015.
Indiana Gas plans to issue an additional $15 million of
the Notes by the end of fiscal 1997. On July 15, 1996,
Indiana Gas used the net proceeds from the December
issuances to redeem its remaining first mortgage bonds, $19
million of 9 3/8% Series M First Mortgage Bonds.
The nature of Indiana Gas' business creates large short-
term cash working capital requirements primarily to finance
customer accounts receivable, unbilled utility revenues
resulting from cycle billing, gas in underground storage
and construction expenditures until permanently financed.
Short-term borrowings tend to be greatest during the
heating season when accounts receivable and unbilled
utility revenues are at their highest. Depending on cost,
commercial paper or bank lines of credit are used as
sources of short-term financing. Indiana Gas' commercial
paper is rated P-1 by Moody's and A-1+ by Standard &
Poor's. Long-term financial strength and flexibility
require maintaining throughput volumes, controlling costs
and, if absolutely necessary, securing timely increases in
rates to recover costs and provide a fair and reasonable
return to shareholders.
Part II - Other Information
Item 1. Legal Proceedings
See Note 9 of the Notes to Consolidated Financial
Statements for litigation matters involving insurance
carriers pertaining to Indiana Gas' former manufactured
gas plants and storage facilities.
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibits
3-A Code of By-Laws as amended April 26,
1996, filed herewith.
12 Computation of Ratio of Earnings to
Fixed Charges, filed herewith.
27 Financial Data Schedule, filed
herewith.
(b) No Current Reports on Form 8-K were filed
during the quarter ended June 30, 1996.
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
thereunto duly authorized.
INDIANA GAS COMPANY, INC.
Registrant
Dated August 13, 1996 /s/Niel C. Ellerbrook
Niel C. Ellerbrook
Senior Vice President and
Chief Financial Officer
Dated August 13, 1996 /s/Jerome A. Benkert
Jerome A. Benkert
Vice President and Controller
CODE OF BY-LAWS
OF
INDIANA GAS COMPANY, INC.
AS AMENDED AND RESTATED
IN FULL ON JULY 1, 1987
AS FURTHER AMENDED OCTOBER 27, 1989
AS FURTHER AMENDED AUGUST 31, 1990
AS FURTHER AMENDED JULY 26, 1991
AS FURTHER AMENDED SEPTEMBER 24, 1993
AS FURTHER AMENDED FEBRUARY 25, 1994
AS FURTHER AMENDED JULY 28, 1995
AS FURTHER AMENDED APRIL 26, 1996
ARTICLE I
OFFICES
SECTION 1. PRINCIPAL OFFICE. The principal office
(the "Principal Office") of INDIANA GAS COMPANY, INC. (the
"Corporation") shall be at the registered office of the
Corporation, or such other place as shall be determined by
resolution of the Board of Directors of the Corporation
(the "Board").
SECTION 2. OTHER OFFICES. The Corporation may have
such other offices at such other places within or without
the State of Indiana as the Board may from time to time
designate, or as the business of the Corporation may
require.
ARTICLE II
SEAL
SECTION 1. CORPORATE SEAL. The corporate seal of
the Corporation (the "Seal") shall be circular in form and
shall have inscribed thereon the words "INDIANA GAS
COMPANY, INC. -- CORPORATE SEAL -- INDIANA." Use of the
Seal or an impression thereof shall not be required, and
shall not affect the validity of any instrument
whatsoever.
ARTICLE III
SHAREHOLDERS' MEETINGS
SECTION 1. PLACE OF MEETING. Every meeting of the
shareholders of the Corporation (the "Shareholders") shall
be held at the Principal Office, unless a different place
is specified in the notice or waiver of notice of such
meeting or by resolution of the Board or the Shareholders,
in which event such meeting may be held at the place so
specified, either within or without the State of Indiana.
SECTION 2. ANNUAL MEETING. The annual meeting of
the Shareholders (the "Annual Meeting") shall be held each
year at 9:00 o'clock A.M. on the last Friday in January,
or such other time or date determined by resolution of the
board, for the purpose of electing directors of the
Corporation ("Directors") and for the transaction of such
other business as may legally come before the Annual
Meeting. If for any reason the Annual Meeting shall not
be held at the date and time specified or fixed as herein
provided, the business to be transacted at such Annual
Meeting may be transacted at any special meeting of the
Shareholders (a "Special Meeting") called for that
purpose.
SECTION 3. NOTICE OF ANNUAL MEETING. Written or
printed notice of the Annual Meeting, stating the date,
time and place thereof, shall be delivered or mailed by
the Secretary or an Assistant Secretary to each
Shareholder of record entitled to notice of such Meeting,
at such address as appears on the records of the
Corporation, at least ten and not more than sixty days
before the date of such Meeting.
SECTION 4. SPECIAL MEETINGS. Special Meetings, for
any purpose or purposes (unless otherwise prescribed by
law), may be called by the Board or the President, and
shall be called by the President or any Vice President at
(a) the request in writing of a majority of the Board, or
(b) at the written demand, delivered to the Secretary, of
Shareholders holding of record not less than a majority of
the voting power of all the shares of the Company
("Shares") issued and outstanding and entitled by the
Amended and Restated Articles of Incorporation of the
Company, as the same may, from time to time, be amended
(the "Articles"), to vote on the business proposed to be
transacted thereat; provided however that, for purposes of
calculating such majority, only shares which have been
beneficially owned or held of record by the holders
thereof for at least three (3) years shall be included.
All requests or demands for Special Meetings shall state
the purpose or purposes thereof, and the business
transacted at such Meeting shall be confined to the
purposes stated in the call and matters germane thereto.
SECTION 5. NOTICE OF SPECIAL MEETINGS. Written or
printed notice of all Special Meetings, stating the date,
time, place and purpose or purposes thereof, shall be
delivered or mailed by the Secretary or the President or
the Vice President calling the Meeting to each Shareholder
of record entitled to notice of such Meeting, at such
address as appears on the records of the Corporation, at
least ten and not more than sixty days before the date of
such Meeting. Notice of any Special Meeting called at the
written demand of Shareholders shall be delivered or
mailed within sixty days of the Secretary's receipt of
such demand.
SECTION 6. WAIVER OF NOTICE OF MEETINGS. Notice of
any Annual or Special Meeting (a "Meeting") may be waived
in writing by any Shareholder, before or after the date
and time of the Meeting specified in the notice thereof,
by a written waiver delivered to the Corporation for
inclusion in the minutes or filing with the corporate
records. A Shareholder's attendance at any Meeting in
person or by proxy shall constitute a waiver of (a) notice
of such Meeting, unless the Shareholder at the beginning
of the Meeting objects to the holding of or the
transaction of business at the Meeting, and (b)
consideration at such Meeting of any business that is not
within the purpose or purposes described in the Meeting
notice, unless the Shareholder objects to considering the
matter when it is presented.
SECTION 7. QUORUM. At any Meeting, the holders of a
majority of the voting power of Shares issued and
outstanding and entitled to vote at such Meeting,
represented in person or by proxy, shall constitute a
quorum for the election of Directors or for the
transaction of other business, unless otherwise provided
by law, the Articles or this Code of By-Laws, as the same
may, from time to time, be amended (these "By-Laws"). If,
however, a quorum shall not be present or represented at
any Meeting, the Shareholders entitled to vote thereat,
present in person or represented by proxy, shall have
power to adjourn the Meeting from time to time, without
notice other than announcement at the Meeting of the date,
time and place of the adjourned Meeting, unless the date
of the adjourned Meeting requires that the Board fix a new
record date (the "Record Date") therefor, in which case
notice of the adjourned Meeting shall be given. At such
adjourned Meeting, if a quorum shall be present or
represented, any business may be transacted that might
have been transacted at the Meeting as originally
scheduled.
SECTION 8. VOTING. At each Meeting, every
Shareholder entitled to vote shall have one vote for each
Share standing in his name on the books of the Corporation
as of the Record Date fixed by the Board for such Meeting,
except as otherwise provided by law or the Articles, and
except that no Share shall be voted at any Meeting upon
which any installment is due and unpaid. Voting for
Directors and, upon the demand of any Shareholder, voting
upon any question properly before a Meeting, shall be by
ballot. A plurality vote shall be necessary to elect any
Director, and on all other matters, the action or a
question shall be approved if the number of votes cast
thereon in favor of the action or question exceeds the
number of votes cast opposing the action or question,
except as otherwise provided by law or the Articles.
SECTION 9. SHAREHOLDER LIST. The Secretary shall
prepare before each Meeting a complete list of the
Shareholders entitled to notice of such Meeting, arranged
in alphabetical order by class of Shares (and each series
within a class), and showing the address of, and the
number of Shares entitled to vote held by, each
Shareholder (the "Shareholder List"). Beginning five
business days before the Meeting and continuing throughout
the Meeting, the Shareholder List shall be on file at the
Principal Office or at a place identified in the Meeting
notice in the city where the Meeting will be held, and
shall be available for inspection by any Shareholder
entitled to vote at the Meeting. On written demand, made
in good faith and for a proper purpose and describing with
reasonable particularity the Shareholder's purpose, and if
the Shareholder List is directly connected with the
Shareholder's purpose, a Shareholder (or such
Shareholder's agent or attorney authorized in writing)
shall be entitled to inspect and to copy the Shareholder
List, during regular business hours and at the
Shareholder's expense, during the period the Shareholder
List is available for inspection. The original stock
register or transfer book (the "Stock Book"), or a
duplicate thereof kept in the State of Indiana, shall be
the only evidence as to who are the Shareholders entitled
to examine the Shareholder List, or to notice of or to
vote at any Meeting.
SECTION 10. PROXIES. A Shareholder may vote either
in person or by proxy executed in writing by the
Shareholder or a duly authorized attorney-in-fact. No
proxy shall be valid after eleven months from the date of
its execution, unless a longer time is expressly provided
therein.
SECTION 11. NOTICE OF SHAREHOLDER BUSINESS. At any
meeting of the shareholders, only such business may be
conducted as shall have been properly brought before the
meeting, and as shall have been determined to be lawful
and appropriate for consideration by shareholders at the
meeting. To be properly brought before a meeting,
business must be (a) specified in the notice of meeting
given in accordance with Section 3 or 5 of this Article
III, (b) otherwise properly brought before the meeting by
or at the direction of the board of directors or the chief
executive officer, or (c) otherwise properly brought
before the meeting by a shareholder. For business to be
properly brought before a meeting by a shareholder
pursuant to clause (c) above, the shareholder must have
given timely notice thereof in writing to the secretary of
the Company. To be timely, a shareholder's notice must be
delivered to, or mailed and received at, the principal
office of the Company, not less than fifty days nor more
than ninety days prior to the meeting; provided, however,
that in the event that less than sixty days' notice of the
date of the meeting is given to shareholders, notice by
the shareholder to be timely must be so received not later
than the close of business on the tenth day following the
day on which such notice of the date of the meeting was
given. A shareholder's notice to the secretary shall set
forth as to each matter the shareholder proposes to bring
before the meeting (a) a brief description of the business
desired to be brought before the meeting, (b) the name and
address, as they appear on the Company's stock records, of
the shareholder proposing such business, (c) the class and
number of shares of the Company which are beneficially
owned by the shareholder, and (d) any interest of the
shareholder in such business. Notwithstanding anything in
these by-laws to the contrary, no business shall be
conducted at a meeting except in accordance with the
procedures set forth in this Section 11. The person
presiding at the meeting shall, if the facts warrant,
determine and declare to the meeting that business was not
properly brought before the meeting in accordance with the
by-laws, or that business was not lawful or appropriate
for consideration by shareholders at the meeting, and if
he should so determine, he shall so declare to the meeting
and any such business shall not be transacted.
SECTION 12. NOTICE OF SHAREHOLDER NOMINEES.
Nominations of persons for election to the board of
directors of the Company may be made at any meeting of
shareholders by or at the direction of the board of
directors or by any shareholder of the Company entitled to
vote for the election of directors at the meeting.
Shareholder nominations shall be made pursuant to timely
notice given in writing to the secretary of the Company in
accordance with Section 11 of this Article III. Such
shareholder's notice shall set forth, in addition to the
information required by Section 11, as to each person whom
the shareholder proposes to nominate for election or re-
election as a director, (i) the name, age, business
address and residence address of such person, (ii) the
principal occupation or employment of such person, (iii)
the class and number of shares of the Company which are
beneficially owned by such person, (iv) any other
information relating to such person that is required to be
disclosed in solicitation of proxies for election of
directors, or is otherwise required, in each case pursuant
to Regulation 14A under the Securities Exchange Act of
1934, as amended (including, without limitation, such
person's written consent to being named in the proxy
statement as a nominee and to serving as a director, if
elected), and (v) the qualifications of the nominee to
serve as a director of the Company. No shareholder
nomination shall be effective unless made in accordance
with the procedures set forth in this Section 12. The
person presiding at the meeting shall, if the facts
warrant, determine and declare to the meeting that a
shareholder nomination was not made in accordance with the
by-laws, and if he should so determine, he shall so
declare to the meeting and the defective nomination shall
be disregarded.
ARTICLE IV
BOARD OF DIRECTORS
SECTION 1. NUMBER. The business and affairs of the
Corporation shall be managed by a Board of twelve (12)
Directors, divided into three classes as provided in the
Articles. The Board may elect or appoint, from among its
members, a Chairman of the Board (the "Chairman"), who
need not be an Officer or employee of the Corporation.
The Chairman shall preside at all Shareholders Meetings
and Board Meetings and shall have such other powers and
perform such other duties as are incident to such position
and as may be assigned by the Board.
SECTION 2. VACANCIES AND REMOVAL. Any vacancy
occurring in the Board shall be filled as provided in the
Articles. Shareholders shall be notified of any increase
in the number of Directors and the name, principal
occupation and other pertinent information about any
Director elected by the Board to fill any vacancy. Any
Director, or the entire Board, may be removed from office
only as provided in the Articles.
SECTION 3. POWERS AND DUTIES. In addition to the
powers and duties expressly conferred upon it by law, the
Articles or these By-Laws, the Board may exercise all such
powers of the Corporation and do all such lawful acts and
things as are not inconsistent with the law, the Articles
or these By-Laws.
SECTION 4. ANNUAL BOARD MEETING. Unless otherwise
determined by the Board, the Board shall meet each year
immediately after the Annual Meeting, at the place where
such Meeting has been held, for the purpose of
organization, election of Officers of the Corporation (the
"Officers") and consideration of any other business that
may properly be brought before such annual meeting of the
Board (the "Annual Board Meeting"). No notice shall be
necessary for the holding of the Annual Board Meeting. If
the Annual Board Meeting is not held as above provided,
the election of Officers may be held at any subsequent
duly constituted meeting of the Board (a "Board Meeting").
SECTION 5. REGULAR BOARD MEETINGS. Regular meetings
of the Board ("Regular Board Meetings") may be held at
stated times or from time to time, and at such place,
either within or without the State of Indiana, as the
Board may determine, without call and without notice.
SECTION 6. SPECIAL BOARD MEETINGS. Special meetings
of the Board ("Special Board Meetings") may be called at
any time or from time to time, and shall be called on the
written request of at least two Directors, by the Chairman
or the President, by causing the Secretary or any
Assistant Secretary to give to each Director, either
personally or by mail, telephone, telegraph, teletype or
other form of wire or wireless communication at least two
days' notice of the date, time and place of such Meeting.
Special Board Meetings shall be held at the Principal
Office or at such other place, within or without the State
of Indiana, as shall be specified in the respective
notices or waivers of notice thereof.
SECTION 7. WAIVER OF NOTICE AND ASSENT. A Director
may waive notice of any Board Meeting before or after the
date and time of the Board Meeting stated in the notice by
a written waiver signed by the Director and filed with the
minutes or corporate records. A Director's attendance at
or participation in a Board Meeting shall constitute a
waiver of notice of such Meeting and assent to any
corporate action taken at such Meeting, unless (a) the
Director at the beginning of such Meeting (or promptly
upon his arrival) objects to holding of or transacting
business at the Meeting and does not thereafter vote for
or assent to action taken at the Meeting; (b) the
Director's dissent or abstention from the action taken is
entered in the minutes of such Meeting; or (c) the
Director delivers written notice of his dissent or
abstention to the presiding Director at such Meeting
before its adjournment, or to the Secretary immediately
after its adjournment. The right of dissent or abstention
is not available to a Director who votes in favor of the
action taken.
SECTION 8. QUORUM. At all Board Meetings, a
majority of the number of Directors designated for the
full Board (the "Full Board") shall be necessary to
constitute a quorum for the transaction of any business,
except (a) that for the purpose of filling of vacancies a
majority of Directors then in office shall constitute a
quorum, and (b) that a lesser number may adjourn the
Meeting from time to time until a quorum is present. The
act of a majority of the Board present at a Meeting at
which a quorum is present shall be the act of the Board,
unless the act of a greater number is required by law, the
Articles or these By-Laws.
SECTION 9. AUDIT AND OTHER COMMITTEES OF THE BOARD.
The Board shall, by resolution adopted by a majority of
the Full Board, designate an Audit Committee comprised of
two or more Directors, which shall have such authority and
exercise such duties as shall be provided by resolution of
the Board. The Board may, by resolution adopted by such
majority, also designate other regular or special
committees of the Board ("Committees"), in each case
comprised of two or more Directors and to have such powers
and exercise such duties as shall be provided by
resolution of the Board.
SECTION 10. RESIGNATIONS. Any Director may resign
at any time by giving written notice to the Board, the
Chairman, the President or the Secretary. Any such
resignation shall take effect when delivered unless the
notice specifies a later effective date. Unless otherwise
specified in the notice, the acceptance of such
resignation shall not be necessary to make it effective.
ARTICLE V
OFFICERS
SECTION 1. OFFICERS. The Officers shall be the
President, one or more Vice Presidents, the Secretary and
the Treasurer, and may include one or more Assistant
Secretaries, one or more Assistant Treasurers, a
Controller and one or more Assistant Controllers. Any two
or more offices may be held by the same person. The Board
may from time to time elect or appoint such other Officers
as it shall deem necessary, who shall exercise such powers
and perform such duties as may be prescribed from time to
time by these By-Laws or, in the absence of a provision in
these By-Laws in respect thereto, as may be prescribed
from time to time by the Board.
SECTION 2. ELECTION OF OFFICERS. The Officers shall
be elected by the Board at the Annual Board Meeting and
shall hold office for one year or until their respective
successors shall have been duly elected and shall have
qualified; provided, however, that the Board may at any
time elect one or more persons to new or different offices
and/or change the title, designation and duties and
responsibilities of any of the Officers consistent with
the law, the Articles and these By-Laws.
SECTION 3. VACANCIES; REMOVAL. Any vacancy among
the Officers may be filled for the unexpired term by the
Board. Any Officer may be removed at any time by the
affirmative vote of a majority of the Full Board.
SECTION 4. DELEGATION OF DUTIES. In the case of the
absence, disability, death, resignation or removal from
office of any Officer, or for any other reason that the
Board shall deem sufficient, the Board may delegate, for
the time being, any or all of the powers or duties of such
Officer to any other Officer or to any Director.
SECTION 5. PRESIDENT. The President shall be a
Director and, subject to the control of the Board, shall
have general charge of and supervision and authority over
the business and affairs of the Corporation, and shall
have such other powers and perform such other duties as
are incident to this office and as may be assigned to him
by the Board. In the case of the absence or disability of
the Chairman or if no Chairman shall be elected or
appointed by the Board, the President shall preside at all
Shareholders' Meetings and Board Meetings.
SECTION 6. VICE PRESIDENTS. Each of the Vice
Presidents shall have such powers and perform such duties
as may be prescribed for him by the Board or delegated to
him by the President. In the case of the absence,
disability, death, resignation or removal from office of
the President, the powers and duties of the President
shall, for the time being, devolve upon and be exercised
by the Executive Vice President, if there be one, and if
not, then by such one of the Vice Presidents as the Board
or the President may designate, or, if there be but one
Vice President, then upon such Vice President; and he
shall thereupon, during such period, exercise and perform
all of the powers and duties of the President, except as
may be otherwise provided by the Board.
SECTION 7. SECRETARY. The Secretary shall have the
custody and care of the Seal, records, minutes and the
Stock Book of the Corporation; shall attend all
Shareholders' Meetings and Board Meetings, and duly record
and keep the minutes of their proceedings in a book or
books to be kept for that purpose; shall give or cause to
be given notice of all Shareholders' Meetings and Board
Meetings when such notice shall be required; shall file
and take charge of all papers and documents belonging to
the Corporation; and shall have such other powers and
perform such other duties as are incident to the office of
secretary of a business corporation, subject at all times
to the direction and control of the Board and the
President.
SECTION 8. ASSISTANT SECRETARIES. Each of the
Assistant Secretaries shall assist the Secretary in his
duties and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Secretary, his powers and duties shall, for
the time being, devolve upon such one of the Assistant
Secretaries as the Board, the President or the Secretary
may designate, or, if there be but one Assistant
Secretary, then upon such Assistant Secretary; and he
shall thereupon, during such period, exercise and perform
all of the powers and duties of the Secretary, except as
may be otherwise provided by the Board.
SECTION 9. TREASURER. The Treasurer shall have
control over all records of the Corporation pertaining to
moneys and securities belonging to the Corporation; shall
have charge of, and be responsible for, the collection,
receipt, custody and disbursements of funds of the
Corporation; shall have the custody of all securities
belonging to the Corporation; shall keep full and accurate
accounts of receipts and disbursements in books belonging
to the Corporation; and shall disburse the funds of the
Corporation as may be ordered by the Board, taking proper
receipts or making proper vouchers for such disbursements
and preserving the same at all times during his term of
office. When necessary or proper, he shall endorse on
behalf of the Corporation all checks, notes or other
obligations payable to the Corporation or coming into his
possession for or on behalf of the Corporation, and shall
deposit the funds arising therefrom, together with all
other funds and valuable effects of the Corporation coming
into his possession, in the name and the credit of the
Corporation in such depositories as the Board from time to
time shall direct, or in the absence of such action by the
Board, as may be determined by the President or any Vice
President. If the Board has not elected a Controller or
an Assistant Controller, or in the absence or disability
of the Controller and each Assistant Controller or if, for
any reason, a vacancy shall occur in such offices, then
during such period the Treasurer shall have, exercise and
perform all of the powers and duties of the Controller.
The Treasurer shall also have such other powers and
perform such other duties as are incident to the office of
treasurer of a business corporation, subject at all times
to the direction and control of the Board and the
President.
If required by the Board, the Treasurer shall give
the Corporation a bond, in such an amount and with such
surety or sureties as may be ordered by the Board, for the
faithful performance of the duties of his office and for
the restoration to the Corporation, in case of his death,
resignation, retirement or removal from office, of all
books, papers, vouchers, money and other property of
whatever kind in his possession or under his control
belonging to the Corporation.
SECTION 10. ASSISTANT TREASURERS. Each of the
Assistant Treasurers shall assist the Treasurer in his
duties, and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Treasurer, his powers and duties shall, for
the time being, devolve upon such one of the Assistant
Treasurers as the Board, the President or the Treasurer
may designate, or, if there be but one Assistant
Treasurer, then upon such Assistant Treasurer; and he
shall thereupon, during such period, exercise and perform
all the powers and duties of the Treasurer except as may
be otherwise provided by the Board. If required by the
Board, each Assistant Treasurer shall likewise give the
Corporation a bond, in such amount and with such surety or
sureties as may be ordered by the Board, for the same
purposes as the bond that may be required to be given by
the Treasurer.
SECTION 11. CONTROLLER. The Controller shall have
direct control over all accounting records of the
Corporation pertaining to moneys, properties, materials
and supplies, including the bookkeeping and accounting
departments; shall have direct supervision over the
accounting records in all other departments pertaining to
moneys, properties, materials and supplies; shall render
to the President and the Board, at Regular Board Meetings
or whenever the same shall be required, an account of all
his transactions as Controller and of the financial
condition of the Corporation; and shall have such other
powers and perform such other duties as are incident to
the office of controller of a business corporation,
subject at all times to the direction and control of the
Board and the President.
SECTION 12. ASSISTANT CONTROLLERS. Each of the
Assistant Controllers shall assist the Controller in his
duties, and shall have such other powers and perform such
other duties as may be prescribed for him by the Board or
delegated to him by the President. In case of the
absence, disability, death, resignation or removal from
office of the Controller, his powers and duties shall, for
the time being, devolve upon such one of the Assistant
Controllers as the Board, the President or the Controller
may designate, or, if there be but one Assistant
Controller, then upon such Assistant Controller; and he
shall thereupon, during such period, exercise and perform
all the powers and duties of the Controller, except as may
be otherwise provided by the Board.
ARTICLE VI
CERTIFICATES FOR SHARES
SECTION 1. CERTIFICATES. Certificates for Shares
("Certificates") shall be in such form, consistent with
law and the Articles, as shall be approved by the Board.
Certificates for each class, or series within a class, of
Shares, shall be numbered consecutively as issued. Each
Certificate shall state the name of the Corporation and
that it is organized under the laws of the State of
Indiana; the name of the registered holder; the number and
class and the designation of the series, if any, of the
Shares represented thereby; and a summary of the
designations, relative rights, preferences and limitations
applicable to such class and, if applicable, the
variations in rights, preferences and limitations
determined for each series and the authority of the Board
to determine such variations for future series; provided,
however, that such summary may be omitted if the
Certificate states conspicuously on its front or back that
the Corporation will furnish the Shareholder such
information upon written request and without charge. Each
Certificate shall be signed (either manually or in
facsimile) by (i) the President or a Vice President and
(ii) the Secretary or an Assistant Secretary, or by any
two or more Officers that may be designated by the Board,
and may have affixed thereto the Seal, which may be a
facsimile, engraved or printed.
SECTION 2. RECORD OF CERTIFICATES. Shares shall be
entered in the Stock Book as they are issued, and shall be
transferable on the Stock Book by the holder thereof in
person, or by his attorney duly authorized thereto in
writing, upon the surrender of the outstanding Certificate
therefor properly endorsed.
SECTION 3. LOST OR DESTROYED CERTIFICATES. Any
person claiming a Certificate to be lost or destroyed
shall make affidavit or affirmation of that fact and, if
the Board or the President shall so require, shall give
the Corporation and/or the transfer agents and registrars,
if they shall so require, a bond of indemnity, in form and
with one or more sureties satisfactory to the Board or the
President and/or the transfer agents and registrars, in
such amount as the Board or the President may direct
and/or the transfer agents and registrars may require,
whereupon a new Certificate may be issued of the same
tenor and for the same number of Shares as the one alleged
to be lost or destroyed.
SECTION 4. SHAREHOLDER ADDRESSES. Every Shareholder
shall furnish the Secretary with an address to which
notices of Meetings and all other notices may be served
upon him or mailed to him, and in default thereof notices
may be addressed to him at his last known address or at
the Principal Office.
ARTICLE VII
CORPORATE BOOKS AND RECORDS
SECTION 1. PLACES OF KEEPING. Except as otherwise
provided by law, the Articles or these By-Laws, the books
and records of the Corporation (including the "Corporate
Records," as defined in the Articles) may be kept at such
place or places, within or without the State of Indiana,
as the Board may from time to time by resolution determine
or, in the absence of such determination by the Board, as
shall be determined by the President.
SECTION 2. STOCK BOOK. The Corporation shall keep
at the Principal Office the original Stock Book or a
duplicate thereof, or, in case the Corporation employs a
stock registrar or transfer agent within or without the
State of Indiana, another record of the Shareholders in a
form that permits preparation of a list of the names and
addresses of all the Shareholders, in alphabetical order
by class of Shares, stating the number and class of Shares
held by each Shareholder (the "Record of Shareholders").
SECTION 3. INSPECTION OF CORPORATE RECORDS. Any
Shareholder (or the Shareholder's agent or attorney
authorized in writing) shall be entitled to inspect and
copy at his expense, after giving the Corporation at least
five business days written notice of his demand to do so,
the following Corporate Records: (1) the Articles; (2)
these By-Laws; (3) minutes of all Shareholders' Meetings
and records of all actions taken by the Shareholders
without a meeting (collectively, "Shareholders Minutes")
for the prior three years; (4) all written communications
by the Corporation to the Shareholders including the
financial statements furnished by the Corporation to the
Shareholders for the prior three years; (5) a list of the
names and business addresses of the current Directors and
the current Officers; and (6) the most recent Annual
Report of the Corporation as filed with the Secretary of
State of Indiana. Any Shareholder (or the Shareholder's
agent or attorney authorized in writing) shall also be
entitled to inspect and copy at his expense, after giving
the Corporation at least five business days written notice
of his demand to do so, the following Corporate Records,
if his demand is made in good faith and for a proper
purpose and describes with reasonable particularity his
purpose and the records he desires to inspect, and the
records are directly connected with his purpose: (1) to
the extent not subject to inspection under the previous
sentence, Shareholders Minutes, excerpts from minutes of
Board Meetings and of Committee meetings, and records of
any actions taken by the Board or any Committee without a
meeting; (2) appropriate accounting records of the
Corporation; and (3) the Record of Shareholders.
SECTION 4. RECORD DATE. The Board may, in its
discretion, fix in advance a Record Date not more than
seventy days before the date (a) of any Shareholders'
Meeting, (b) for the payment of any dividend or the making
of any other distribution, (c) for the allotment of
rights, or (d) when any change or conversion or exchange
of Shares shall go into effect. If the Board fixes a
Record Date, then only Shareholders who are Shareholders
of record on such Record Date shall be entitled (a) to
notice of and/or to vote at any such Meeting, (b) to
receive any such dividend or other distribution, (c) to
receive any such allotment of rights, or (d) to exercise
the rights in respect of any such change, conversion or
exchange of Shares, as the case may be, notwithstanding
any transfer of Shares on the Stock Book after such Record
Date.
SECTION 5. TRANSFER AGENTS; REGISTRARS. The Board
may appoint one or more transfer agents and registrars for
its Shares and may require all Certificates to bear the
signature either of a transfer agent or of a registrar, or
both.
ARTICLE VIII
CHECKS, DRAFTS, DEEDS AND SHARES OF STOCK
SECTION 1. CHECKS, DRAFTS, NOTES, ETC. All checks,
drafts, notes or orders for the payment of money of the
Corporation shall, unless otherwise directed by the Board
or otherwise required by law, be signed by one or more
Officers as authorized in writing by the President. In
addition, the President may authorize any one or more
employees of the Corporation ("Employees") to sign checks,
drafts and orders for the payment of money not to exceed
specific maximum amounts as designated in writing by the
President for any one check, draft or order. When so
authorized by the President, the signature of any such
Officer or Employee may be a facsimile signature.
SECTION 2. DEEDS, NOTES, BONDS, MORTGAGES,
CONTRACTS, ETC. All deeds, notes, bonds and mortgages
made by the Corporation, and all other written contracts
and agreements, other than those executed in the ordinary
course of corporate business, to which the Corporation
shall be a party, shall be executed in its name by the
President, a Vice President or any other Officer so
authorized by the Board and, when necessary or required,
the Secretary or an Assistant Secretary shall attest the
execution thereof. All written contracts and agreements
into which the Corporation enters in the ordinary course
of corporate business shall be executed by any Officer or
by any other Employee designated by the President or a
Vice President to execute such contracts and agreements.
SECTION 3. SALE OR TRANSFER OF STOCK. Subject
always to the further orders and directions of the Board,
any share of stock issued by any corporation and owned by
the Corporation (including reacquired Shares of the
Corporation) may, for sale or transfer, be endorsed in the
name of the Corporation by the President or a Vice
President, and said endorsement shall be duly attested by
the Secretary or an Assistant Secretary either with or
without affixing thereto the Seal.
SECTION 4. VOTING OF STOCK OF OTHER CORPORATIONS.
Subject always to the further orders and directions of the
Board, any share of stock issued by any other corporation
and owned or controlled by the Corporation (an "Investment
Share") may be voted at any shareholders' meeting of such
other corporation by the President or by a Vice President.
Whenever, in the judgment of the President, it is
desirable for the Corporation to execute a proxy or give a
shareholder's consent in respect of any Investment Share,
such proxy or consent shall be executed in the name of the
Corporation, by the President or a Vice President, and,
when necessary or required, shall be attested by the
Secretary or an Assistant Secretary either with or without
affixing thereto the Seal. Any person or persons
designated in the manner above stated as the proxy or
proxies of the Corporation shall have full right, power
and authority to vote an Investment Share the same as such
Investment Share might be voted by the Corporation.
ARTICLE IX
FISCAL YEAR
SECTION 1. FISCAL YEAR. The Corporation's fiscal
year shall begin on October 1 of each year and end on
September 30 of the following year.
ARTICLE X
AMENDMENTS
SECTION 1. AMENDMENTS. These By-Laws may be
altered, amended or repealed, in whole or in part, and new
By-Laws may be adopted, at any Board Meeting by the
affirmative vote of a majority of the Full Board.
<TABLE>
INDIANA GAS COMPANY, INC.
AND SUBSIDIARY COMPANIES
COMPUTATION OF RATIO OF EARNINGS TO FIXED CHARGES
(In Thousands, Except Ratios)
Twelve Mos.
Ended Fiscal Year Ended September 30
6/30/96 1995 1994 1993 1992 1991
<S> <C> <C> <C> <C> <C> <C>
Earnings:
Net income $40,873 $32,109 $34,596 $28,534 $25,743 $23,286
Adjustments:
Income taxes 24,442 18,630 17,977 16,030 12,800 11,665
Fixed charges (see below) 16,827 16,395 16,986 17,556 15,642 15,482
Total adjusted earnings $82,142 $67,134 $69,559 $62,120 $54,185 $50,433
Fixed charges:
Total interest expense $15,890 $15,530 $16,037 $16,640 $14,556 $14,411
Interest component of rents 937 865 949 916 1,086 1,071
Total fixed charges $16,827 $16,395 $16,986 $17,556 $15,642 $15,482
Ratio of earnings to fixed charges 4.9 4.1 4.1 3.5 3.5 3.3
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from Indiana Gas
Company, Inc.'s consolidated financial statements as of June 30, 1996, and for
the nine months then ended and is qualified in its entirety by reference to such
financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> SEP-30-1996
<PERIOD-END> JUN-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 564,828
<OTHER-PROPERTY-AND-INVEST> 327
<TOTAL-CURRENT-ASSETS> 100,972
<TOTAL-DEFERRED-CHARGES> 16,077
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 682,204
<COMMON> 142,995
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 151,440
<TOTAL-COMMON-STOCKHOLDERS-EQ> 294,435
0
0
<LONG-TERM-DEBT-NET> 174,743
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 18,950
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 194,076
<TOT-CAPITALIZATION-AND-LIAB> 682,204
<GROSS-OPERATING-REVENUE> 468,073
<INCOME-TAX-EXPENSE> 27,061
<OTHER-OPERATING-EXPENSES> 385,215
<TOTAL-OPERATING-EXPENSES> 412,276
<OPERATING-INCOME-LOSS> 55,797
<OTHER-INCOME-NET> 1,354
<INCOME-BEFORE-INTEREST-EXPEN> 57,151
<TOTAL-INTEREST-EXPENSE> 12,120
<NET-INCOME> 45,031
0
<EARNINGS-AVAILABLE-FOR-COMM> 45,031
<COMMON-STOCK-DIVIDENDS> 18,750
<TOTAL-INTEREST-ON-BONDS> 11,340
<CASH-FLOW-OPERATIONS> 72,936
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
