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NIPSCO Industries, Inc.
FORM 10-K
1993
<PAGE>
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1993
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to
Commission file number 1-9779
NIPSCO INDUSTRIES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
INDIANA 35-1719974
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER IDENTIFICATION NO.)
INCORPORATION OR ORGANIZATION)
5265 HOHMAN AVENUE
HAMMOND, INDIANA 46320
(ADDRESS OF PRINCIPAL EXECUTIVE (ZIP CODE)
OFFICES)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE 219-853-5200
SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
<TABLE>
<CAPTION>
NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
------------------- ---------------------
<C> <C>
COMMON NEW YORK AND CHICAGO
PREFERRED SHARE PURCHASE RIGHTS NEW YORK AND CHICAGO
</TABLE>
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
NONE
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS, AND (2) HAS BEEN SUBJECT TO SUCH FILING
REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
INDICATE BY CHECK MARK IF DISCLOSURE OF DELINQUENT FILERS PURSUANT TO ITEM
405 OF REGULATION S-K IS NOT CONTAINED HEREIN, AND WILL NOT BE CONTAINED, TO
THE BEST OF REGISTRANT'S KNOWLEDGE, IN DEFINITIVE PROXY OR INFORMATION
STATEMENTS INCORPORATED BY REFERENCE IN PART III OF THIS FORM 10-K OR ANY
AMENDMENT TO THIS FORM 10-K. [X]
AS OF FEBRUARY 28, 1994 65,507,643 COMMON SHARES (NOT INCLUDING 8,384,466
SHARES HELD IN TREASURY), WERE OUTSTANDING. THE AGGREGATE MARKET VALUE OF THE
COMMON SHARES (BASED UPON THE FEBRUARY 28, 1994 CLOSING PRICE OF $30 1/4 ON THE
NEW YORK STOCK EXCHANGE) HELD BY NONAFFILIATES WAS APPROXIMATELY
$1,973,615,000.
DOCUMENTS INCORPORATED BY REFERENCE
1993 NIPSCO INDUSTRIES, INC. ANNUAL REPORT TO SHAREHOLDERS INCORPORATED FOR
PARTS I, II AND IV OF THE FORM 10-K, AND PORTIONS OF THE REGISTRANT'S NOTICE OF
ANNUAL MEETING AND PROXY STATEMENT DATED MARCH 11, 1994 FOR ANNUAL MEETING TO
BE HELD APRIL 13, 1994 FOR PART III OF THE FORM 10-K.
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<PAGE>
PART 1
ITEM 1. BUSINESS
NIPSCO INDUSTRIES, INC. AND ITS SUBSIDIARIES. NIPSCO Industries, Inc.
(Industries) was incorporated in Indiana on September 22, 1987, as a wholly-
owned subsidiary of Northern Indiana Public Service Company (Northern Indiana).
Industries became the parent of Northern Indiana on March 3, 1988, after the
shareholders of Northern Indiana approved the formation of a holding company in
December, 1987. Northern Indiana's outstanding common shares were exchanged on
a share-for-share basis with common shares of Industries effective March 3,
1988. The other securities of Northern Indiana, including its First Mortgage
Bonds, pollution control notes and bonds, other debt securities and each series
of preferred stock, were not changed by the restructuring and continue to be
outstanding obligations and securities of Northern Indiana. Northern Indiana is
a public utility operating company supplying electricity and gas to the public
in the northern third of Indiana.
At December 31, 1993, Industries had five direct, wholly-owned subsidiaries
in addition to Northern Indiana, which are all Indiana corporations: NIPSCO
Development Company, Inc. (Development), NIPSCO Energy Services, Inc.
(Services), NIPSCO Capital Markets, Inc. (Capital Markets), Kokomo Gas and Fuel
Company (Kokomo Gas) and Northern Indiana Fuel and Light Company, Inc. (NIFL).
Northern Indiana, Industries' largest and dominant subsidiary, is a public
utility operating company, incorporated in Indiana on August 2, 1912, engaged
in supplying natural gas and electric energy to the public. It operates in 30
counties in the northern part of Indiana, serving an area of about 12,000
square miles with a population of approximately 2,188,000. At December 31,
1993, Northern Indiana serves approximately 622,500 customers with gas and
approximately 395,100 with electricity.
Northern Indiana has two subsidiaries, Shore Line Shops, Inc. (Shore Line)
and NIPSCO Exploration Company, Inc. (Exploration). Shore Line undertakes the
purchase and sale of transferred employees' residences on behalf of Northern
Indiana. Exploration has investment interests, which are subject to Indiana
Utility Regulatory Commission (Commission) rate treatment, in off-shore Gulf of
Mexico oil and gas leases.
Kokomo Gas is a public utility operating company incorporated in Indiana in
1917, engaged in supplying natural gas to the public. It operates in the city
of Kokomo, Indiana and the surrounding area in 6 counties having a population
of approximately 100,000, and serves approximately 31,000 customers at December
31, 1993. The Kokomo Gas service territory is contiguous to Northern Indiana's
gas service territory.
On March 31, 1993, Industries acquired NIFL, a natural gas utility
headquartered in Auburn, Indiana, that serves approximately 28,700 customers at
December 31, 1993, in the northeast corner of the state, contiguous to Northern
Indiana's service territory. Industries issued 1,112,862 common shares and
$26,311 cash in exchange for all of the common shares of NIFL.
Development makes various investments, including real estate. Services
coordinates the energy-related diversification ventures and has four wholly-
owned subsidiaries: NIPSCO Fuel Company, Inc. (Fuel) which makes investments in
gas and oil exploration and development ventures; NIPSCO Energy Trading Corp.
(NETCO) which is engaged in gas and other energy brokering businesses; NI-TEX,
Inc. (NI-TEX) which is an intrastate natural gas transmission and supply
company and Crossroads Pipeline Company (Crossroads), a natural gas
transmission company. Capital Markets handles financing for ventures of
Industries and its subsidiaries other than Northern Indiana.
1
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Development is a 95% shareholder in Elm Energy and Recycling (UK) Ltd. (Elm
Energy), which was formed to develop, own and operate a waste-to-energy
generating plant in Wolverhampton, England. The 30 megawatt tire-fueled
generating station is expected to use about 8-10 million automobile and truck
tires a year and began operations in late 1993.
The majority of the "Business" discussion of this report relates to Northern
Indiana, Kokomo Gas, NIFL and Crossroads (Utilities). See "Selected
Supplemental Information--Gas Statistics and Electric Statistics" in the 1993
Annual Report to Shareholders, which information is incorporated by reference,
(see Exhibit 13) regarding classes of customers served.
BUSINESS OF THE COMPANY.
ELECTRIC OPERATIONS. Northern Indiana owns and operates four coal fired
electric generating stations with net capability of 3,179,000 kilowatts (kw).
Northern Indiana also owns and operates two hydroelectric generating plants
with rated net capability of 10,000 kw, and four gas fired combustion turbine
generating units with net capability of 203,000 kw. During the year ended
December 31, 1993, Northern Indiana generated 92% and purchased 8% of its
electric energy requirements.
Northern Indiana's 1993 electric control area peak of 2,953,600 kw, which
includes Wabash Valley Power Association, Inc. (WVPA) and Indiana Municipal
Power Agency (IMPA) for which Northern Indiana controls interchange operation,
was set on August 27, 1993. The 1993 peak established a new all-time peak,
exceeding the old peak of 2,738,550 kw established on September 6, 1990. The
electric system 1993 peak internal load, which excludes WVPA and IMPA, was
2,736,100 kw on August 27, 1993. This also established a new internal peak for
Northern Indiana.
Northern Indiana's electric system is interconnected with that of Indiana
Michigan Power Company, Commonwealth Edison Company, PSI Energy, Inc.,
Consumers Power Company, WVPA, IMPA, and Central Illinois Public Service
Company. Electric energy is purchased from, sold to, or exchanged with these
and other utilities.
Northern Indiana provides WVPA with transmission and distribution service,
operating reserve requirements and capacity deficiency service, and provides
IMPA with transmission, operating reserve requirements and capacity deficiency
service, in Northern Indiana's control area. Northern Indiana also engages in
sales and services under the interconnection agreements with WVPA and IMPA.
WVPA provides service to twelve Rural Electric Membership Corporations
(REMC's) located in Northern Indiana's control area. IMPA provides service to
the municipal electric system of the city of Rensselaer located in Northern
Indiana's control area.
Northern Indiana and WVPA executed a supplemental agreement in 1990 which
provides WVPA with intermediate-term capacity and energy service, and unit
peaking capacity and energy service. Under the unit peaking capacity and energy
service, WVPA purchased 90,000 kw per month beginning January, 1992, which
purchases will extend through December 2001.
Northern Indiana has full requirements agreements with each of its eight
municipal wholesale customers. These full requirements contracts became
effective October 1, 1987, and extend through January 31, 1998.
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Northern Indiana is a member of the East Central Area Reliability
Coordination Agreement (ECAR). ECAR is one of nine regional electric
reliability councils established to coordinate planning and operations of
member companies regionally and nationally.
FUEL SUPPLY. The generating units of Northern Indiana are located at Bailly,
Mitchell, Michigan City and Schahfer Generating Stations. Thirteen steam
generating units have a net capability of 3,179,000 kw. Coal is the primary
source of fuel for all units, except for three, which utilize natural gas. In
addition, Northern Indiana's four combustion turbine generating units with a
net capability of 203,000 kw are fired by gas. Fuel requirements for Northern
Indiana's generation for 1993 were supplied as follows:
<TABLE>
<S> <C>
Coal................................................................ 97.3%
Natural Gas......................................................... 2.7%
</TABLE>
In 1993, Northern Indiana used approximately 7.1 million tons of coal at its
generating stations. Northern Indiana has established a normal level of coal
stock which provides adequate fuel supply during the year under all conditions.
Annual coal requirements for Northern Indiana's electric generating units
through 1998 are estimated to range from 7.1 million tons to 8.5 million tons,
depending from year to year upon anticipated sales levels, scheduled
maintenance and other variables. These requirements are being or will be met in
part under long-term contracts as follows:
<TABLE>
<CAPTION>
MILLION
TONS/YEAR SULFUR CONTENT EXPIRATION
--------- -------------- ----------
<S> <C> <C>
0.75 Low 1994
1.0 High 1998
Requirements(a) High 1998
1.3 Low 2001
</TABLE>
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(a) Contract calls for requirements up to 1.0 million tons.
The average cost of coal consumed in 1993 was $32.90 per ton or 16.65 mills
per kilowatt-hour (kwh) generated as compared to $33.66 per ton or 16.82 mills
per kwh generated in 1992. Northern Indiana's forecasts indicate that its coal
costs will remain at the current level or be slightly lower over the next two
years.
COAL RESERVES. Included in the previous table of coal contracts is a coal
mining contract with Cyprus Shoshone Coal Corporation (Cyprus) under which
Cyprus is mining Northern Indiana's coal reserves in the Cyprus mine through
the year 2001. The costs of the reserves are being recovered through the rate
making process as the coal is burned to produce electricity.
FUEL ADJUSTMENT CLAUSE. See "Fuel Adjustment Clause" in the Notes to
Consolidated Financial Statements in the 1993 Annual Report to Shareholders,
which note is incorporated herein by reference (see Exhibit 13).
GAS OPERATIONS. Northern Indiana supplies natural gas of about 1,000 Btu per
cubic foot. In a 24-hour period ending February 18, 1993, Northern Indiana's
1993 maximum day sendout was 1,444,714 dekatherms (dth). The maximum day's
sendout of gas to date in 1994, is preliminarily estimated to be 1,775,227 dth
during the 24-hour period ending at noon, January 19, 1994.
In 1993, most of the gas supplied by Northern Indiana was purchased from
Natural Gas Pipeline Company of America (Natural), Midwestern Gas Transmission
Company (Midwestern), Panhandle Eastern Pipe Line Company (Panhandle),
Trunkline Gas Company (Trunkline), ANR Pipeline Company (ANR) and various
producers under separate service agreements with each of these suppliers.
Approximately 28% of Northern Indiana's 1993 gas supply was purchased on the
spot market, generally on a 30-day agreement.
3
<PAGE>
The average price per dth (including take-or-pay charges) in 1993 decreased
from $3.32 to $3.25, and the average cost of purchased gas, after adjustment
for take-or-pay charges billed to transport customers, was $3.21 per dth as
compared to $3.16 per dth in 1992.
The wholesale rates of Natural, Midwestern, Panhandle, Trunkline and ANR to
Northern Indiana are subject to change either in accordance with purchased gas
adjustment procedures established by the Federal Energy Regulatory Commission
(FERC), or in rate proceedings filed with the FERC, or both.
Northern Indiana has had service agreements with the pipeline suppliers which
provide for daily purchases of natural gas in specified quantities. New
agreements have been negotiated with the natural gas suppliers to replace
former pipeline supplier contracts pursuant to the requirements of FERC Order
No. 636 (See "Rate Matters--FERC Order No. 636" in the Notes to Consolidated
Financial Statements in the 1993 Annual Report to Shareholders, which note is
incorporated herein by reference, see Exhibit 13.) Northern Indiana also has
firm transportation agreements with the pipelines, which allow Northern Indiana
to move third party gas through a pipeline's transmission system. Northern
Indiana also has producer agreements which allow for the purchase of gas either
from gas marketers or directly from companies that drill and process gas for
commercial use.
Northern Indiana has a curtailment plan approved by the Commission. Effective
on August 11, 1981, the plan allows unrestricted gas sales by Northern Indiana.
In 1993, Northern Indiana added 8,971 new gas customers. There were no firm
sales curtailments in 1993 and none are expected during 1994.
Northern Indiana has in operation an underground gas storage field at Royal
Center, Indiana, which currently has a storage capacity of 6.75 million dth.
Withdrawals have been made in the 1993-94 winter of up to 73,586 dth per day.
In addition, Northern Indiana and NI-TEX have several gas storage service
agreements which make possible the withdrawal of substantial quantities of gas
from other storage facilities. All of the storage agreements have limitations
on daily withdrawal volumes and the timing thereof. These contracts provide in
the aggregate for approximately 32,287,004 dth of annual stored volume, and
allow for approximately 637,529 dth of maximum daily withdrawal.
Northern Indiana has a liquefied natural gas plant in LaPorte County which is
designed for peak shaving and has the following capacities: maximum storage of
4,000,000 dth; maximum liquefaction rate (gas to liquid), 20,000 dth per day;
maximum vaporization rate (output to distribution system), 400,000 dth per day.
GAS EXPLORATION. Northern Indiana has participated in successful gas
exploration projects which have produced additional gas supplies.
NIPSCO Exploration Company, Inc., a wholly-owned subsidiary of Northern
Indiana, was formed in 1973. As of December 31, 1993, Northern Indiana had a
remaining investment of $1,400,000 in the subsidiary for two projects. The
first project is participation by Exploration with others in the acquisition of
interests in leases sold by the Department of Interior in the Gulf of Mexico.
Exploration originally invested $7.6 million, of $16.8 million authorized by
the Commission, in this project and has an interest in several tracts. The
second project is participation by Exploration in an off-shore oil and gas
development venture with Natural, Chevron U.S.A., Inc. and other distribution
customers of Natural. This venture also involves exploring and developing oil
and gas leases in the Gulf of Mexico. Exploration was authorized to invest $15
million in this project and has invested $8.4 million.
4
<PAGE>
KOKOMO GAS. Kokomo Gas' total gas send-out for 1993 was 8,122,208 dth,
compared to 7,586,788 dth for 1992. Total transportation volumes handled for
industrial customers in 1993 were 1,785,329 dth, compared to 1,675,546 dth in
1992. Kokomo Gas purchased gas on the spot market from a number of suppliers
including NI-TEX, a subsidiary of Services, to satisfy some of its system
requirements; the balance was purchased from Panhandle. Spot market purchases
accounted for 99% of total system requirements in 1993. The wholesale rates of
Panhandle to Kokomo Gas are subject to change either in accordance with
purchased gas adjustment procedures established by the FERC, in rate
proceedings filed with the FERC, or both.
NIFL. NIFL's total gas send-out for 1993 was 7,881,513 dth. Total
transportation volumes handled for industrial customers in 1993 were 3,227,853
dth. NIFL purchased gas on the spot market from a number of suppliers including
NI-TEX, a subsidiary of Services, to satisfy some of its system requirements;
the balance was purchased from ANR and Panhandle. Spot market purchases
accounted for 50% of total system requirements in 1993. The wholesale rates of
ANR and Panhandle to NIFL are subject to change either in accordance with
purchased gas adjustment procedures established by the FERC, in rate
proceedings filed with the FERC, or both.
GAS COST ADJUSTMENT CLAUSE. See "Gas Cost Adjustment Clause" in the Notes to
Consolidated Financial Statements in the 1993 Annual Report to Shareholders,
which note is incorporated herein by reference (see Exhibit 13).
TAKE-OR-PAY PIPELINE GAS COSTS. See "Take-or-Pay Pipeline Gas Costs" in the
Notes to Consolidated Financial Statements in the 1993 Annual Report to
Shareholders, which note is incorporated herein by reference (see Exhibit 13).
FERC ORDER NO. 636. See "FERC Order No. 636" in the Notes to Consolidated
Financial Statements in the 1993 Annual Report to Shareholders, which note is
incorporated herein by reference (see Exhibit 13).
BUSINESS OF OTHER SUBSIDIARIES
CAPITAL MARKETS. Capital Markets was formed in 1989 to serve as the funding
agent for ventures of Industries and its subsidiaries other than Northern
Indiana. Capital Markets has a $150 million revolving Credit Agreement, which
provides short-term financing flexibility to Industries and also serves as the
back up instrument for a commercial paper program. As of December 31, 1993,
there were no borrowings outstanding under this agreement. Capital Markets also
has $50 million of money market lines of credit. As of December 31, 1993, there
were no borrowings under these lines of credit. As of December 31, 1993 Capital
Markets had $47.0 million in commercial paper outstanding, having a weighted
average interest rate of 3.48%.
The obligations of Capital Markets are subject to a Support Agreement between
Industries and Capital Markets, under which Industries has committed to make
payments of interest and principal on Capital Markets' securities in the event
of a failure to pay by Capital Markets. Restrictions in the Support Agreement
prohibit recourse on the part of Capital Markets' investors against the stock
and assets of Northern Indiana which are owned by Industries. Under the terms
of the Support Agreement, in addition to the cash flow of cash dividends paid
to Industries by any of its consolidated subsidiaries, the assets of
Industries, other than the stock and assets of Northern Indiana, are available
as recourse to holders of Capital Markets' securities. The carrying value of
those assets, other than Northern Indiana, reflected in the consolidated
financial statements of Industries, is approximately $299.1 million at December
31, 1993.
DEVELOPMENT. Development looks for partnerships with customers on energy
projects, seeks environmental project opportunities and coordinates the real
estate diversification of Industries.
5
<PAGE>
Development is a 95% shareholder in Elm Energy and Recycling (UK) Ltd. (Elm
Energy), which was formed to develop, own and operate a waste-to-energy
generating plant in Wolverhampton, England. The 30 megawatt tire-fueled
generating station is expected to use about 8-10 million automobile and truck
tires a year and began operations in late 1993.
In conjunction with EER, Ltd., Development is evaluating similar tires-to-
energy projects in Scotland and Belgium.
In 1993, Development, through its various real estate partnerships, completed
three multiple-family residential housing communities in Hammond, Fort Wayne
and Mishawaka, while similar joint projects are being considered in Portage,
East Chicago and other communities in Northern Indiana's service territories.
These projects are part of a commitment by Development to provide high-quality,
energy efficient, affordable housing to the residents of a variety of
geographic and economic regions served by Northern Indiana.
Harbor Coal Company (Harbor Coal), a wholly-owned subsidiary of Development,
has invested in a partnership to finance, construct, own and operate a $65
million pulverized coal injection facility which began commercial operation in
August, 1993. The facility receives raw coal, pulverizes it and delivers it to
Inland Steel Company blast furnaces for use in the operation of their blast
furnaces. Harbor Coal is a 50% partner in the project with an Inland Steel
affiliate. Industries has guaranteed the payment and performance of the
partnership's obligations under a sale and leaseback of a 50% undivided
interest in the facility.
Development is also evaluating potential partnerships with Northern Indiana
customers for using waste gases from steelmaking and other processes for power
generation. Low BTU blast furnace gases and other fuels, in amounts which could
fuel up to 250 megawatts of new generation, are produced at industries served
by Northern Indiana.
SERVICES. Services coordinates energy-related diversification and has four
wholly-owned subsidiaries:
NETCO. NETCO provides natural gas brokering and transportation management
services to customers within Northern Indiana's service territory. During the
last quarter of 1993, NETCO expanded its transportation management services to
include imbalance exchange services for its customers. Operating revenues for
the year totalled $1.9 million.
NI-TEX. NI-TEX is an intrastate natural gas transmission and supply company
providing gas sales, transportation and storage services. NI-TEX continues to
provide flexible city gate gas supply to Northern Indiana, Kokomo Gas and NIFL
under term contracts. NI-TEX, through joint ventures with industry partners,
also owns natural gas transmission and storage facilities located in Texas. Its
Laredo-Nueces pipeline affiliate transported 16.2 million dth of natural gas in
1993. Its Coastline Gas Storage Company affiliate operates a salt dome gas
storage facility with a Phase I operating capacity of 2.9 billion cubic feet,
and provides contract storage services to Northern Indiana and other third
parties. Phase II, which is projected to increase total storage capacity to 5.3
billion cubic feet, is expected to be completed during the fourth quarter of
1995. Operating income from NI-TEX sales arrangements, combined with joint
venture earnings, totalled $3.0 million for the year.
FUEL. Fuel is an oil and gas exploration and production company with
activities concentrated in the mid-continent region of the United States and
offshore in the Gulf of Mexico. As of December 31, 1993, $35.8 million has been
invested in exploration and development projects. Fuel's share of estimated
proved reserves at year-end totalled 1.2 million barrels of oil and 23.8
million dth of natural gas.
6
<PAGE>
CROSSROADS. In April 1993, NI purchased a 20-inch crude-oil pipeline that
extends from the Illinois-Indiana state line east 202 miles to Cygnet, Ohio.
The Crossroads line has been converted from oil to natural gas and was approved
by the Commission as an intrastate pipeline. The line provides: (1) access to
major gas supplies in the United States; (2) enhanced ability to negotiate for
gas supplies at the most competitive price; (3) a northern hub in the Midwest
gas market; and (4) increased reliability for customers in extreme weather
conditions such as those occurring in January 1994.
TRIUMPH NATURAL GAS, INC. (TRIUMPH). Services also owns a 51 percent interest
in Triumph, a Dallas-based full service natural gas marketing company. Triumph
specializes in the purchase, transportation and sale of natural gas to utility,
industrial and commercial customers in the upper midwest region of the United
States, as well as supply and transportation management services to Northern
Indiana. Triumph also owns interests in gas gathering facilities in Oklahoma.
In December 1993, Services entered into a Letter of Intent with Eastex Energy
Inc. (Eastex) to sell its entire ownership interest in NETCO and its 51 percent
ownership interest in Triumph in exchange for a combination of Eastex common
and preferred stock, representing an equity ownership of approximately 25
percent. Eastex is a nationwide natural gas merchant specializing in purchase,
gathering, transportation, storage and sale of natural gas, and related
services. On March 4, 1994, Services entered into a definitive agreement with
Eastex for the sale and exchange of its ownership interests in NETCO and
Triumph, subject to certain conditions precedent to closing. Services was
unable to meet the conditions precedent to closing and, as a result, the
definitive agreement will expire March 31, 1994.
REGULATION
Holding Company Act. Industries is exempt from registration with the
Securities and Exchange Commission (the "SEC") as a "registered holding
company" under the Public Utility Holding Company Act of 1935, as amended (the
"Holding Company Act"). Prior approval of the SEC under the Holding Company Act
is, however, required if Industries proposes to acquire, directly or
indirectly, additional utility securities. There may also be limits on the
extent to which Industries and its non-utility subsidiaries can enter into
businesses which are not "functionally related" to the electric and gas
businesses without raising questions about Industries' exempt status under the
Holding Company Act. SEC guidelines established in prior decisions of the SEC
require Industries to remain engaged primarily and predominantly in the
electric and gas businesses and to limit the size of its activities outside of
such businesses relative to Industries as a whole.
Industries has no present intention of becoming a registered holding company
subject to regulation by the SEC under the Holding Company Act.
Indiana Utility Regulatory Commission. Northern Indiana and Industries have
been advised by their counsel that Industries will not be subject to regulation
by the Commission as long as it is not a public utility. Under existing law,
Industries and its non-utility subsidiaries are subject to Commission
regulation with respect to transactions and contracts with the Utilities, and
are subject to certain reporting and information access requirements under
Indiana law.
The Utilities are subject to regulation by the Commission as to rates,
service, accounts, issuance of securities, and in other respects. See "Rate
Matters" in the Notes to Consolidated Financial Statements in the 1993 Annual
Report to Shareholders, which note is incorporated herein by reference (see
Exhibit 13). The Utilities are also subject to limited regulation by local
public authorities.
7
<PAGE>
Federal Energy Regulatory Commission. Industries is not regulated by the
FERC, but any subsidiary, including Northern Indiana, that engages in FERC
jurisdictional sales or activities will continue to be subject to such
regulation.
Northern Indiana's restructuring under Industries was approved by a February
29, 1988 order of the FERC. The FERC's February 29, 1988 order is conditioned
upon the FERC's continuing authority to examine the books and records of
Industries and its subsidiaries, upon further order of the FERC, and to make
such supplemental orders, for good cause, as it may find necessary or
appropriate regarding the restructuring.
In 1993, about 3% of Northern Indiana's electric revenues were derived from
electric service it furnished at wholesale in interstate commerce to other
utility companies, municipalities and WVPA (see Item 1. Business--Electric
Operations regarding WVPA). Northern Indiana's wholesale rates and operations
are subject to the jurisdiction of the FERC. The jurisdiction of the FERC does
not extend to the issuance of securities by Northern Indiana since it is a
public utility organized and operating in the State of Indiana, under the laws
of which its security issues are regulated by the Commission. The FERC on
October 21, 1954, declared Northern Indiana exempt from the provisions of the
Natural Gas Act. Kokomo Gas, NIFL and Crossroads are also exempt from the
provisions of the Natural Gas Act.
RATE MATTERS. For information regarding Northern Indiana's gas rates, and
the Utilities' take-or-pay pipeline gas costs and potential gas transition
costs, see "Rate Matters" and "FERC Order No. 636" in the Notes to Consolidated
Financial Statements in the 1993 Annual Report to Shareholders, which notes are
incorporated herein by reference (see Exhibit 13).
CONSTRUCTION BUDGET. The Utilities 1994-98 construction budget (including
allowance for funds used during construction) is estimated at approximately
$748 million, including $178 million in 1994, $160 million in 1995, $137
million in 1996, $132 million in 1997 and $141 million in 1998. The Utilities
construction estimates include adjustments for anticipated inflation. No new
electric generating units are planned in the 1994-98 budget. Northern Indiana
does not have, and has no plans to construct, a nuclear generating unit.
COMPETITION. In municipalities where Northern Indiana renders electric
service to the general public as a public utility, no other utility renders
electric or gas service, except in Angola, DeMotte, Rome City, Wanatah and
Waterloo. In certain municipalities where electric service is supplied by
Northern Indiana, NIFL provides competing gas utility service. In localities
where Northern Indiana renders gas service only, it competes with electric
utilities, municipal or private, for the business for which they render
alternative electric service.
Kokomo Gas and NIFL service territories are contiguous to Northern Indiana's
gas service territory, but Northern Indiana, Kokomo Gas and NIFL do not compete
for any of the same customers. Kokomo Gas and NIFL compete with other electric
utilities serving customers in their respective service territories.
All electric service territories within the State of Indiana are assigned to
the existing suppliers, and boundaries of new territories outside existing
municipalities are assigned to the utility having the nearest existing electric
distribution lines. Only existing municipal electric utilities may expand their
service areas and then only into areas that have been annexed by the
municipality, subject to the approval of the Commission and certain other
conditions. Northern Indiana makes no representation as to the possible effect
upon its business of present or future competition by private or municipal
utilities or governmental agencies, instrumentalities or authorities within the
territory now served.
8
<PAGE>
Northern Indiana is also subject to competition for gas sales to industrial
customers through their ability, under Northern Indiana's rate provisions, to
make their own purchases of gas and have Northern Indiana transport the gas to
the customers. During 1993, gas transportation represented 59% of Northern
Indiana's total gas sendout.
Indiana law requires Commission approval before a gas customer of a utility
may bypass the utility and make other arrangements for gas service. Any entity
which transports gas from outside Indiana for direct sale or delivery to itself
or other end-users within the state will be considered a public utility and
must obtain a necessity certificate from the Commission in order to engage in
such activities.
EMPLOYEE RELATIONS. Northern Indiana had 4,417 employees at December 31,
1993. Approximately 65% of the Company's employees (physical and clerical
workers) are represented by two local unions of the United Steelworkers of
America, AFL-CIO-CLC. Effective June 1, 1993, the bargaining unit employees
ratified new four-year agreements which continue until June 1, 1997. The new
agreements provide for base wage increases of two percent in 1993, three
percent in 1994 and 1995, and three and one-half percent in 1996. Additional
economic provisions include an early signing bonus of four percent and a
variable compensation plan linked to improvements in productivity. Certain
officers of Northern Indiana are also officers of Industries. Industries
currently has 30 employees in its diversified operations.
Kokomo Gas had 75 full-time employees at December 31, 1993. Of these, 55
employees are represented by the Oil, Chemical and Atomic Workers International
Union, AFL-CIO. New collective bargaining agreements covering these employees
were negotiated in early 1992 and will expire February 15, 1995.
NIFL had 80 full-time employees at December 31, 1993.
ENVIRONMENTAL MATTERS. Northern Indiana is subject to regulation with regard
to environmental matters by various federal, state and local authorities.
Northern Indiana cannot forecast the effect of all such regulation upon its
generating, transmission and other facilities, or its operations. Northern
Indiana intends to comply with all applicable governmental requirements but
also intends to contest any it deems to be unreasonable or impossible of
compliance or otherwise invalid or contrary to the public interest.
The application of federal and state restrictions to protect the environment,
including but not limited to those hereinafter described, involves or may
involve review, certification or issuance of permits by various federal, state
and local authorities. Such restrictions, particularly in regard to emissions
into the air and water, and disposal of solid wastes, may limit or prevent
operations, or substantially increase the cost of operation of Northern
Indiana's facilities, and may also require substantial investments above the
amounts presently estimated for proposed new projects and may delay or prevent
authorization and completion of the projects.
Northern Indiana's total capital expenditures from January 1, 1989, through
December 31, 1993, for pollution control facilities were approximately $75
million, which have been financed in part by the sale of Pollution Control
Notes and Bonds--Jasper County. Northern Indiana anticipates expenditures of
approximately $40 million for pollution control equipment in the 1994-98 period
which includes anticipated expenditures of $8 million for the year 1994 and $8
million for the year 1995.
Air. The Indiana Department of Environmental Management (IDEM) Office of Air
Management has submitted to the U.S. Environmental Protection Agency (EPA) a
State Implementation Plan (SIP) in accordance with the requirements of the
Clean Air Act Amendments of 1977. As part of the sulfur dioxide SIP, the IDEM
adopted a short-term compliance methodology that could make compliance with the
applicable standards more difficult from time to time. The result could be the
potential increase in costs of fuel incurred by Northern Indiana.
9
<PAGE>
Attainment-Nonattainment. Under the Clean Air Act Amendments of 1977, the
State has identified various areas which are in compliance with the National
Ambient Air Quality Standards (NAAQS) (attainment areas), and those that are
not (nonattainment areas), with respect to sulfur dioxide, particulate matter
and other pollutants. Portions of Lake, Porter and LaPorte Counties in which
Northern Indiana operates electric generating facilities remain designated as
nonattainment for sulfur dioxide. The control plans for each county are being
implemented. Any reductions required by Northern Indiana have been made and no
increased costs are anticipated for compliance.
Lake County, Indiana, is designated as a nonattainment area for particulate
or PM-10. The State of Indiana promulgated a new PM-10 SIP rule, which became
effective on June 11, 1993. The regulations require reduced opacity and mass
emissions limits at Dean H. Mitchell Station as well as the establishment of a
fugitive dust control and continuous compliance plans. Northern Indiana
invested $2.8 million to rebuild the Unit 5 electrostatic precipitator during
1993 to help meet the new PM-10 emission limits. The cost of compliance with
the fugitive dust control requirements in the PM-10 rules cannot be firmly
established at this time, but is expected to require minimal additional cost
beyond those incurred for fugitive dust control measures historically
undertaken at the Mitchell Generating Station. Porter County has been
determined to have an unclassified status for PM-10. According to state
requirements, the area will be monitored for PM-10 impacts to determine the
appropriate classification with respect to the NAAQS. All other counties where
Northern Indiana operates electric production facilities have an unclassified
status for PM-10.
Under Title I of the Clean Air Act Amendments of 1990 (CAAA) Lake and Porter
Counties are classified as severe nonattainment areas for ozone. Passage of the
CAAA results in new provisions applicable to mobile and stationary sources in
Lake and Porter Counties. Transportation control measures required by the
Employee Commute Options (ECO) rules will affect seven Northern Indiana
facilities by late 1996. These measures will include plans to reduce the number
of vehicles used by employees during their daily commutes to work and programs
that promote the use of alternative fuel vehicles. Control measures requiring
reduction of emissions of nitrogen oxides from the Mitchell and Bailly
Generating Stations as a consequence of the Lake Michigan Ozone Control Program
have yet to be determined. Northern Indiana is proactively undertaking efforts
to evaluate potential least-cost methods to reduce emissions of nitrogen oxides
from the generating stations. Northern Indiana cannot determine the cost impact
of the future provisions.
Acid Rain. Title IV of the CAAA addresses the acid rain issue by targeting
large sources of sulfur dioxide and nitrogen oxides for significant reductions.
The core acid rain rules for sulfur dioxide were promulgated by the EPA January
11, 1993. According to the regulations, Bailly Units 7 and 8 and Michigan City
Unit 12 will be required to reduce their sulfur dioxide emissions below 2.5
pounds per million British thermal units (lbs/mmBtu) by January 1, 1995. These
units, along with the remainder of Northern Indiana's coal-fired units, will
require sulfur dioxide reductions below 1.2 lbs/mmBtu by January 1, 2000.
Presently, all of Northern Indiana's eleven coal-fired generating units
except Unit 12 utilize low sulfur fuel or flue gas desulfurization units to
control sulfur dioxide emissions below the 1.2 lbs/mmBtu level.
The EPA approved Northern Indiana's Acid Rain permits for the Bailly and
Michigan City Generating Stations on August 31, 1993. The Phase I Acid Rain
permits for the stations are effective from January 1, 1995 through December
31, 1999. One component of the permit is the Phase I extension plan for Bailly.
Northern Indiana was eligible for and received the extension because of the
construction and operation of the Bailly scrubber. This extension plan
allocates additional allowances above the basic allowances applicable to Bailly
and Michigan City Generating Stations.
10
<PAGE>
Northern Indiana has successfully tested the use of low sulfur coal at Unit
12 and expects that unit to be able to meet the limits with low sulfur coal.
Northern Indiana estimates that total costs of compliance with the CAAA sulfur
dioxide regulations will impact electric rates by less than 5% in the future.
Additional Air Issues. The CAAA contain provisions that could lead to strict
limitations on emissions of nitrogen oxides and "air toxics," which may require
significant capital expenditures for control of these emissions. Northern
Indiana cannot predict the costs of complying with them, but Northern Indiana
believes that any such mandated costs would be recoverable through the rate
making process.
The EPA has promulgated a permit program to meet the requirements of Title V
of the CAAA. The IDEM, on November 3, 1993, proposed an Air Operating permit
program to meet the requirements of Title V to the Air Pollution Control Board.
The program contains fee increases which will be charged when the program is
promulgated during the first half of 1994.
Water. The Clean Water Act, as amended, subjects point source dischargers to
technology and water quality based controls through the National Pollution
Discharge Elimination System (NPDES) permit program. Northern Indiana is
required to have NPDES permits for discharges from its generating stations into
the waters of the United States. The IDEM Office of Water Management has issued
renewal NPDES permits effective as follows: Schahfer Station, November 1, 1993;
Mitchell Station, November 1, 1993 and Michigan City Generating Station,
November 1, 1993. The renewed Bailly Station NPDES permit is expected to be
issued in the early portion of 1994. Northern Indiana received NPDES permit
modifications for intermittent chemical treatment of the main discharge at the
Mitchell and Michigan City Stations for zebra mussel control. Bailly Station
utilizes thermal treatment in its water systems to control zebra mussels.
Schahfer Station has not presently experienced operational impacts due to zebra
mussels. Rather, Schahfer Station has experienced equipment problems due to an
asiatic clam infestation. Alternate forms of control are being investigated by
Northern Indiana in an effort to prevent any impact on plant operations
relating to these infestations, while also minimizing the environmental impact
of the controls.
Superfund Sites. Northern Indiana has received notices from the EPA that it
is a "potentially responsible party" (PRP) under the Comprehensive
Environmental Response Compensation and Liability Act (CERCLA) and the
Superfund Amendment and Reauthorization Act (SARA) and may be required to share
in the cost of cleanup of several waste disposal sites identified by the EPA.
The sites are in various stages of investigation and analysis to determine the
amount of remedial costs necessary to clean up the sites. At each of the sites
Northern Indiana is one of several PRP's, and it is expected that remedial
costs, as provided under CERCLA and SARA, will be shared among them. At some
sites Northern Indiana and/or the other named PRP's are presently working with
the EPA to clean up the site and avoid the imposition of fines or added costs.
While remedial costs at these sites are not presently determinable, Northern
Indiana's preliminary analysis indicates its share of such costs should not
have a significant impact on the results of future operations.
Manufactured Gas Plant Sites. Northern Indiana was notified by IDEM of the
release of a petroleum substance into the St. Mary's River in Fort Wayne,
Indiana, from the site of a former manufactured gas plant formerly owned by
Northern Indiana. In cooperation with IDEM, Northern Indiana has taken steps to
investigate and contain the substance. Northern Indiana is continuing to
monitor and investigate the site to determine what further remedial action, if
any, is required to be taken by it.
Northern Indiana was notified by Indiana Gas Company, Inc. (Indiana Gas) that
the site of a former manufactured gas plant in Lafayette, Indiana, believed to
have been formerly owned by
11
<PAGE>
Northern Indiana, was being investigated and partially remediated by Indiana
Gas pursuant to an administrative order issued by IDEM. Northern Indiana is
investigating its potential liability and evaluating appropriate action.
Northern Indiana has commenced a voluntary program of investigating its
former manufactured gas plant sites in order to determine what, if any,
remediation of any potential remaining waste materials may be required. Since
this program is in its early stages, it is not possible at this time to
estimate what, if any, remediation costs may be incurred.
Electric And Magnetic Fields. The possibility that exposure to electric and
magnetic fields emanating from power lines, household appliances and other
electric sources may result in adverse health effects has been the subject of
increased public, governmental and media attention. A considerable amount of
scientific research has been conducted on this topic without definitive
results. Research is continuing to resolve scientific uncertainties.
----------------
The Utilities have an ongoing program to remain aware of laws and regulations
involved with hazardous waste. It is the Utilities' intent to continue to
evaluate their facilities and properties with respect to these rules and
identify any sites that would require corrective action.
It is not possible to predict the scope, enforceability or financial impact
of other environmental regulations or standards which may be established in the
future.
ITEM 2. PROPERTIES.
The physical properties of the Utilities are located in the State of Indiana.
Crossroads owns a 202-mile natural gas pipeline running from northwest Indiana
to Cygnet, Ohio. Only the Indiana portion of the line is presently in service
as an intrastate gas pipeline.
The only significant properties owned by other subsidiaries of Industries
are: the Southlake Complex, a 325,000 square foot office building in
Merrillville, Indiana, leased to Northern Indiana and owned by Development; a
36-mile intrastate natural gas pipeline, located in southern Texas and half-
owned by NI-TEX, Inc.; a golf course and surrounding residential development in
Chesterton, Indiana, owned by Lake Erie Land Company (a subsidiary of
Development); a waste-to-energy generating plant in Wolverhampton, England
owned by Elm Energy; and commercial real estate joint ventures, half-owned by
KOGAF Enterprises, located in Kokomo, Indiana.
ELECTRIC. Northern Indiana owns and operates four electric generating
stations, with generating units using fossil fuels, with net capability of
3,179,000 kw. Northern Indiana also owns and operates two hydroelectric
generating plants with rated net capability of 10,000 kw, and four gas fired
combustion turbine generating units with net capability of 203,000 kw, an
aggregate of 3,392,000 kw.
Northern Indiana has 290 substations with an aggregate transformer capacity
of 22,449,000 kva. Its transmission system with voltages from 34,500 to 345,000
consists of approximately 3,050 circuit miles of line, of which 2,073 miles are
on wood poles, 823 miles are on steel towers, 133 miles are on steel poles, 19
miles are on concrete poles and 2 miles are in underground conduits. The
electric distribution system extends into 21 counties and consists of
approximately 7,669 circuit miles of overhead and approximately 1,108 cable
miles of underground primary distribution lines operating at various voltages
from 2,400 to 12,500 volts. Of approximately 306,097 poles on which Northern
Indiana has transmission and distribution circuits, about 49,502 poles are
owned by other utilities. Northern Indiana has distribution transformers having
an aggregate capacity of approximately 10,597,576 kva and 425,031 electric
watt-hour meters.
12
<PAGE>
GAS. Northern Indiana has an underground storage field at Royal Center and a
liquefied natural gas plant in LaPorte County both described under "Item 1.
Business--Gas Operations." Northern Indiana has approximately 12,266 miles of
gas mains.
Kokomo Gas has a liquified natural gas plant in Howard County which has the
following capacities: maximum storage of 400,000 mcf; maximum liquefaction rate
(gas to liquid), 2,850 mcf per day; maximum vaporization rate (output to
distribution system), 30,000 mcf per day. Kokomo Gas also has a gas holder with
a storage capacity of 12,000 mcf. Kokomo Gas has approximately 709 miles of gas
mains.
NIFL has approximately 732 miles of gas mains.
OTHER PROPERTIES. Northern Indiana owns offices and service buildings,
salesrooms, garages, repair shops, motor vehicles, construction equipment and
tools, and office furniture and equipment, and also leases offices in various
localities. It also owns miscellaneous parcels of real estate not now used in
utility operations.
PENDING DONATION OF PROPERTY. Northern Indiana announced during 1991 the
planned donation of approximately 2,150 acres of land, including 60 miles of
lake and river frontage, to the Indiana Natural Resources Foundation. The
property frames and includes the resort areas of Lake Shafer and Lake Freeman
in White and Carroll Counties, near the cities of Monticello and Delphi in
central Indiana. Northern Indiana acquired the property in 1944 as part of the
purchase of dams and two small hydroelectric plants and has maintained the area
since that time. Northern Indiana is continuing to pursue the donation of this
property to ensure the land is managed to enhance its preservation and
recreational value. The dams and hydroelectric plants will be retained for
Northern Indiana operations.
CHARACTER OF OWNERSHIP. The properties of Northern Indiana are subject to the
lien of its First Mortgage Indenture. The principal offices and properties are
held in fee and are free from other encumbrances, subject to minor exceptions,
none of which is of such a nature as substantially to impair the usefulness to
Northern Indiana of such properties. Many of the offices in the various
communities served are occupied by Northern Indiana under leases. All
properties are subject to liens for taxes, assessments and undetermined charges
(if any) incidental to construction, which it is Northern Indiana's practice
regularly to pay, as and when due, unless contested in good faith. In general,
the electric and gas lines and mains are located on land not owned in fee but
are covered by necessary consents of various governmental authorities or by
appropriate rights obtained from owners of private property. These consents and
rights are deemed adequate for the purposes for which they are being used.
Northern Indiana does not, however, generally have specific easements from the
owners of the property adjacent to public highways over, upon or under which
its electric and gas lines are located. At the time each of the principal
properties was purchased a title search was made. In general, no examination
of titles as to rights-of-way for electric and gas lines and mains was made,
other than examination, in certain cases, to verify the grantors' ownership and
the lien status thereof.
ITEM 3. LEGAL PROCEEDINGS.
Industries and Northern Indiana are parties to various pending proceedings,
including suits and claims against it for personal injury, death and property
damage, but, in the opinion of their counsel, the nature of such proceedings
and suits, and the amounts involved, do not depart from the routine litigation
and proceedings incident to the kind of business conducted by Northern Indiana,
except as set forth above under "Item 1. Business--subcaption Environmental
Matters," and as described under the captions "Pending Tax Matter" and
"Environmental Matters" in the
13
<PAGE>
Notes to Consolidated Financial Statements in the 1993 Annual Report to
Shareholders, which notes are incorporated herein by reference (see Exhibit
13). No other proceedings against Industries, Northern Indiana or their
subsidiaries are contemplated by governmental authorities to the knowledge of
Industries.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None.
SUPPLEMENTAL ITEM--EXECUTIVE OFFICERS OF THE REGISTRANT.
<TABLE>
<CAPTION>
DATE OF ASSUMING
NAME AGE OFFICE PRESENT POSITION
---- --- ------ ----------------
<S> <C> <C> <C>
Gary L. Neale 54 Chairman, President, Chief March 1, 1993
Executive Officer and Director
Stephen P. Adik 50 Executive Vice President, Chief January 1, 1994
Financial Officer and
Treasurer
Patrick J. Mulchay 52 Executive Vice President, Chief January 1, 1994
Operating Officer, Electric
Jeffrey W. Yundt 48 Executive Vice President, Chief January 1, 1994
Operating Officer, Gas
Owen C. Johnson 47 Vice President, Human January 1, 1994
Resources
David A. Kelly 55 Vice President, Real January 1, 1994
Estate and Taxes
Jerry M. Springer 61 Controller September 22, 1987
Dennis E. Senchak 48 Assistant Treasurer January 1, 1994
Nina M. Rausch 50 Secretary July 1, 1992
</TABLE>
Throughout the past five years, each of the executive officers of Industries
has been continuously active in the business of Industries or Northern Indiana
except as follows: Prior to August 15, 1989, Gary L. Neale was Chairman,
President and Chief Executive Officer of Planmetrics, Inc., a consulting and
computer software firm; prior to July 30, 1990, Owen C. Johnson was Senior Vice
President, Administration of LIT America, Inc. and prior to December 31, 1991,
David A. Kelly was Partner, Tax Division of Arthur Andersen & Co.
14
<PAGE>
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SECURITY HOLDER
MATTERS.
Industries' common shares are listed and traded on both the New York and
Chicago stock exchanges. The table below indicates the high and low sales
price of Industries' common shares, on the composite tape, during the periods
indicated.
<TABLE>
<CAPTION>
1993 1992
------------- -------------
HIGH LOW HIGH LOW
------ ------ ------ ------
<S> <C> <C> <C> <C>
First Quarter...... 30 1/4 26 1/8 26 3/8 22 1/2
Second Quarter..... 32 7/8 29 1/8 25 1/8 22 5/8
Third Quarter...... 34 7/8 31 5/8 26 5/8 25
Fourth Quarter..... 34 1/4 30 1/2 26 1/2 24 7/8
</TABLE>
As of February 28, 1994, Industries had 40,793 common shareholders of record.
The policy of the Board of Directors has been to declare dividends on a
quarterly basis payable on or about the 20th day of February, May, August and
November. Industries paid quarterly common dividends of $0.31 per share during
1992; and quarterly common dividends of $0.33 per share during 1993. At its
December 20, 1993 meeting Industries' Board of Directors increased the
quarterly common dividend to $0.36 per share, payable February 18, 1994.
Holders of Industries' common shares will be entitled to receive dividends
when, as and if declared by the Board of Directors out of funds legally
available therefor. Although the Board of Directors of Industries currently
intends to consider the payment of regular quarterly cash dividends on common
shares, the timing and amount of future dividends will depend on the earnings
of Northern Indiana and other subsidiaries, their financial condition, cash
requirements, any restrictions in financing agreements and other factors deemed
relevant by the Board of Directors. During the next few years, it is expected
that the great majority of earnings available for distribution of dividends
will depend upon dividends paid to Industries by Northern Indiana.
The following limitations on payment of dividends and issuance of preferred
stock applies to Northern Indiana:
When any bonds are outstanding under its First Mortgage Indenture, Northern
Indiana may not pay cash dividends on its stock (other than preferred or
preference stock) or purchase or retire common shares, except out of earned
surplus or net profits computed as required under the provisions of the
maintenance and renewal fund. At December 31, 1993, Northern Indiana had
approximately $144.1 million of retained earnings (earned surplus) available
for the payment of dividends. Future common share dividends by Northern Indiana
will depend upon adequate retained earnings, adequate future earnings and the
absence of adverse developments.
So long as any shares of Northern Indiana's cumulative preferred stock are
outstanding, no cash dividends shall be paid on its common shares in excess of
75% of the net income available therefor for the preceding calendar year unless
the aggregate of the capital applicable to stocks subordinate as to assets and
dividends to the cumulative preferred stock plus the surplus, after giving
effect to such dividends, would equal or exceed 25% of the sum of all
obligations evidenced by bonds, notes, debentures or other securities, plus the
total capital and surplus. At December 31, 1993, the sum of the capital
applicable to stocks subordinate to the cumulative preferred stock plus the
surplus was equal to 41% of the total capitalization including surplus.
In connection with the foregoing discussion, see "Common Share Dividend" in
the Notes to Consolidated Financial Statements in the 1993 Annual Report to
Shareholders, which note is incorporated herein by reference (See Exhibit 13).
15
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
------------------------------------------------------
1993 1992 1991 1990 1989
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Operating revenues
(000's)................ $1,677,872 $1,582,356 $1,535,161 $1,520,995 $1,559,565
Net income (000's)...... $ 156,140 $ 136,648 $ 133,388 $ 125,361 $ 72,112(a)
Earnings per average
common share .......... $2.31 $2.00 $1.94 $1.81 $1.00(a)
Total assets (000's).... $3,912,324 $3,807,941 $3,647,557 $3,625,181 $3,657,718
Long-term obligations
and redeemable pre-
ferred stock (000's)... $1,295,962 $1,160,122 $1,157,686 $1,260,040 $1,328,069
Cash dividends declared
per common share....... $1.35 $1.26 $1.18 $1.07 $0.89
</TABLE>
- --------
(a) Earnings per share were reduced by $0.72 due to the $82.0 million refund,
less associated tax benefits of $30.3 million, related to the Bailly N1
generating unit.
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS.
Information regarding results of operations, liquidity and capital resources
and environmental matters is reported in the 1993 Annual Report to Shareholders
under "Management's Discussion and Analysis of Financial Condition and Results
of Operations," which information is incorporated herein by reference (see
Exhibit 13).
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
The following Consolidated Financial Statements and Supplementary Data are
included in the 1993 Annual Report to Shareholders and are hereby incorporated
by reference and made a part of this report (see Exhibit 13).
<TABLE>
<CAPTION>
<S> <C>
(1) Consolidated Financial Statements--
Consolidated Statement of Income for the years ended December 31,
1993, 1992 and 1991
Consolidated Balance Sheet at December 31, 1993 and 1992
Consolidated Statement of Capitalization at December 31, 1993 and
1992
Consolidated Statement of Long-term Debt at December 31, 1993 and
1992
Consolidated Statement of Cash Flows for the years ended December
31, 1993, 1992 and 1991
Consolidated Statement of Common Shareholders' Equity for the
years ended December 31, 1993, 1992 and 1991
Notes to Consolidated Financial Statements
Report of Independent Public Accountants (includes an explanatory
paragraph referring to changes in the methods of accounting for
postretirement benefits other than pensions and income taxes)
(2) Supplementary Data--
Selected Supplemental Information
</TABLE>
ITEM 9. CHANGES IN AND DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURE.
Not applicable.
16
<PAGE>
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT.
Information regarding executive officers is included as a supplemental item
at the end of Item 4 of Part I of this Form 10-K.
Information regarding directors is included at pages 2-5 in the Notice of
Annual Meeting and Proxy Statement dated March 11, 1994, for Annual Meeting to
be held April 13, 1994, which information is incorporated herein by reference.
ITEM 11. EXECUTIVE COMPENSATION.
Information regarding executive compensation is included at pages 11-17 in
the Notice of Annual Meeting and Proxy Statement dated March 11, 1994, for
Annual Meeting to be held April 13, 1994, which information is incorporated
herein by reference.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information regarding security ownership of certain beneficial owners and
management is included at pages 6-7 in the Notice of Annual Meeting and Proxy
Statement dated March 11, 1994, for Annual Meeting to be held April 13, 1994,
which information is incorporated herein by reference.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
None.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES, AND REPORTS ON FORM 8-K.
(a) (1) The Financial Statements filed herewith as a part of this report on
Form 10-K are listed on the Index to Financial Statements under Item 8 on page
16.
(2) The following is a list of the Financial Statement Schedules filed
herewith as part of this report on Form 10-K:
<TABLE>
<CAPTION>
SCHEDULE PAGE OF
NUMBER DESCRIPTION 1993 10-K
-------- ----------- ---------
<C> <S> <C>
III Condensed Financial Information of Registrant.. 18, 19, 20 & 21
V Utility Plant and Other Property at Original
Cost........................................... 22, 23 & 24
VI Accumulated Depreciation and Amortization...... 25, 26 & 27
VIII Valuation and Qualifying Accounts.............. 28, 29 & 30
IX Short-Term Borrowings.......................... 31
X Supplementary Income Statement Information..... 32
</TABLE>
(3)
Exhibits--
The exhibits filed herewith as a part of this report on Form 10-K
are listed on the Exhibit Index included on pages 35-37. Each
management contract or compensatory plan or arrangement of
Industries listed on the Exhibit Index is separately identified by
an asterisk.
(b) Reports on Form 8-K:
None.
17
<PAGE>
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
BALANCE SHEET
<TABLE>
<CAPTION>
DECEMBER 31,
---------------------
1993 1992
---------- ----------
(DOLLARS IN
THOUSANDS)
ASSETS
- ------
<S> <C> <C>
Property:
Property in service.......................................... $ 2,464 $ 2,428
Construction work in progress................................ 97 30
Less: accumulated depreciation............................... 266 256
---------- ----------
Total property........................................... 2,295 2,202
---------- ----------
Investments (principally investments in wholly-owned subsidiar-
ies).......................................................... 1,080,460 1,059,671
---------- ----------
Current Assets:
Cash and cash equivalents.................................... 2,371 1,581
Amounts receivable from subsidiaries......................... 60,809 47,297
Prepayments.................................................. 2,781 2,758
---------- ----------
Total current assets..................................... 65,961 51,636
---------- ----------
Other (principally notes receivable--associated companies)..... 135,947 109,599
---------- ----------
$1,284,663 $1,223,108
========== ==========
<CAPTION>
CAPITALIZATION AND LIABILITIES
- ------------------------------
<S> <C> <C>
Capitalization:
Common shares................................................ $ 870,930 $ 870,930
Cumulative preferred shares with mandatory redemption
provisions.................................................. 35,000 35,000
Additional paid-in capital................................... 27,631 20,775
Retained earnings............................................ 380,888 317,195
Less: Treasury shares........................................ 180,212 168,990
Unearned compensation...................................... 1,684 3,034
Currency translation adjustment............................ 2,881 2,346
---------- ----------
Total capitalization..................................... 1,129,672 1,069,530
---------- ----------
Current Liabilities:
Dividends declared on common and preferred stock............. 24,345 22,375
Other........................................................ 16,434 15,443
---------- ----------
Total current liabilities................................ 40,779 37,818
---------- ----------
Other (principally notes payable to associated companies)...... 114,212 115,760
---------- ----------
Commitments and Contingencies (Note 3):
$1,284,663 $1,223,108
========== ==========
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of this statement.
18
<PAGE>
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENTS OF INCOME
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------------
1993 1992 1991
---------- ---------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Equity in net earnings of subsidiaries...... $ 158,222 $ 141,115 $ 135,531
---------- ---------- ----------
Other income (deductions):
Administrative and general expense........ (6,031) (4,469) (3,350)
Interest income........................... 9,576 5,345 5,959
Interest expense.......................... (9,339) (7,919) (6,235)
Other, net................................ 203 (75) (920)
---------- ---------- ----------
(5,591) (7,118) (4,546)
---------- ---------- ----------
Net income before income taxes.............. 152,631 133,997 130,985
Income taxes................................ (3,509) (2,651) (2,403)
---------- ---------- ----------
Net income.................................. 156,140 136,648 133,388
Dividend requirements on preferred shares... 3,063 3,063 3,063
---------- ---------- ----------
Balance available for common shareholders... $ 153,077 $ 133,585 $ 130,325
========== ========== ==========
Average common shares outstanding........... 66,136,396 66,715,941 67,035,495
Earnings per average common share........... $ 2.31 $ 2.00 $ 1.94
========== ========== ==========
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of this statement.
19
<PAGE>
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
STATEMENT OF CASH FLOWS
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1993 1992 1991
-------- -------- --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C>
Net cash provided by operating activities........ $153,788 $133,392 $147,263
-------- -------- --------
Cash flows used in investing activities:
Purchase of Kokomo Gas and Fuel Co., net of
cash acquired................................. -- (43,752) --
Purchase of Northern Indiana Fuel and Light
Company, Inc., net of cash acquired........... (30,137) -- --
Capital expenditures........................... (103) (418) (1,738)
-------- -------- --------
Net cash used in investing activities........ (30,240) (44,170) (1,738)
-------- -------- --------
Cash flows provided by (used in) financing activ-
ities:
Issuance of common shares...................... 36,364 53,911 10,453
Increase (decrease) in notes payable to subsid-
iaries........................................ (703) 67,031 (14,478)
Increase in notes receivable from subsidiaries. (26,412) (53,768) (20,732)
Cash dividends paid on common shares........... (88,214) (83,379) (77,832)
Cash dividends paid on preferred shares........ (3,063) (3,063) (2,690)
Acquisition of treasury shares................. (40,730) (76,281) (55,606)
Other.......................................... -- (1,467) (1,191)
-------- -------- --------
Net cash used in financing activities........ (122,758) (97,016) (162,076)
-------- -------- --------
Net increase (decrease) in cash and cash equiva-
lents........................................... 790 (7,794) (16,551)
Cash and cash equivalents at beginning of year... 1,581 9,375 25,926
-------- -------- --------
Cash and cash equivalents at end of year......... $ 2,371 $ 1,581 $ 9,375
======== ======== ========
</TABLE>
The accompanying notes to condensed financial statements are an integral part
of this statement.
20
<PAGE>
NIPSCO INDUSTRIES, INC. AND SUBSIDIARIES
SCHEDULE III
CONDENSED FINANCIAL INFORMATION OF REGISTRANT
NOTES TO CONDENSED FINANCIAL STATEMENTS
1. DIVIDENDS FROM SUBSIDIARIES
Cash dividends paid to NIPSCO Industries, Inc. (Industries) by its
consolidated subsidiaries were (in thousands of dollars): $155,224, $138,676
and $155,813 in 1993, 1992 and 1991, respectively.
2. SUPPORT AGREEMENT
The obligations of NIPSCO Capital Markets, Inc. (Capital Markets) are subject
to a Support Agreement between Industries and Capital Markets, under which
Industries has committed to make payments of interest and principal on Capital
Markets' securities in the event of a failure to pay by Capital Markets.
Restrictions in the Support Agreement prohibit recourse on the part of Capital
Markets' investors against the stock and assets of Northern Indiana Public
Service Company (Northern Indiana) which are owned by Industries. Under the
terms of the Support Agreement, in addition to the cash flow of cash dividends
paid to Industries by any of its consolidated subsidiaries, the assets of
Industries, other than the stock and assets of Northern Indiana, are available
as recourse to holders of Capital Markets' securities. The carrying value of
those assets other than Northern Indiana, reflected in the consolidated
financial statements of Industries, is approximately $299.1 million at December
31, 1993.
3. CONTINGENCIES
No proceedings against Industries or any of its subsidiaries other than
Northern Indiana are pending or contemplated to the knowledge of Industries.
The Company is a party to various pending proceedings, including suits and
claims against it for personal injury, death and property damage, but, in the
opinion of counsel for Northern Indiana, the nature of such proceedings and
suits, and the amounts involved, do not depart from the routine litigation and
proceedings incident to the kind of business conducted by Northern Indiana.
4. CHANGES IN ACCOUNTING PRINCIPLES
Effective January 1, 1993, Industries adopted Statement of Financial
Accounting Standards No. 106 "Employers' Accounting for Postretirement Benefits
Other Than Pensions," and Statement of Financial Accounting Standards No. 109
"Accounting for Income Taxes". The adoption of these standards did not have a
significant impact on the condensed financial statements.
- --------
See also Notes to Consolidated Financial Statements in the 1993 Annual Report
to Shareholders, which are incorporated herein by reference. (See Exhibit 13).
21
<PAGE>
SCHEDULE V
NIPSCO INDUSTRIES, INC.
SCHEDULE V--UTILITY PLANT AND OTHER PROPERTY AT ORIGINAL COST
TWELVE MONTHS ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------------ ----------------- ----------- ------- -------------
ADDITIONS AT COST
-----------------
NORTHERN
INDIANA
FUEL AND
LIGHT RETIREMENTS
BALANCE COMPANY, AT ORIGINAL OTHER BALANCE
CLASSIFICATION OF PROPERTY JAN. 1, 1993 INC.(A) OTHER COST CHANGES DEC. 31, 1993
- -------------------------- ------------ -------- -------- ----------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric Utility Plant
In Service--
Intangible........... $ 1 $ -- $ -- $ -- $-- $ 1
Production........... 2,094,900 -- 58,972 (14,647) -- 2,139,225
Transmission......... 522,698 -- 35,517 (2,572) -- 555,643
Distribution......... 596,079 -- 48,490 (3,687) -- 640,882
General.............. 80,549 -- 5,396 (861) (5) 85,079
Property Held for Fu-
ture Use.............. 4,741 -- -- -- -- 4,741
Completed Construction
not Classified........ 256,099 -- (53,871) -- -- 202,228
Construction Work in
Progress.............. 72,176 -- 6,490 -- -- 78,666
Coal Reserves.......... 71,551 -- -- -- -- 71,551
---------- ------- -------- -------- ---- ----------
Total Electric...... 3,698,794 -- 100,994 (21,767) (5) 3,778,016
---------- ------- -------- -------- ---- ----------
Gas Utility Plant
In Service--
Intangible........... 27 65 169 -- -- 261
Production........... 19 293 -- (19) -- 293
Storage.............. 111,934 -- 2,576 (1,057) -- 113,453
Transmission......... 132,760 1,070 5,114 (35) -- 138,909
Distribution......... 670,776 32,080 49,826 (2,637) (82) 749,963
General.............. 66,011 1,755 8,030 (1,658) 87 74,225
Property Held for Fu-
ture Use.............. 151 -- -- -- -- 151
Completed Construction
not Classified........ 65,022 -- (19,250) -- -- 45,772
Construction Work in
Progress.............. 18,859 -- 25,855 -- -- 44,714
Gas Stored Under-
ground................ 8,491 -- 53 -- -- 8,544
Plant Acquisition Ad-
justment.............. 22,417 17,476 -- -- -- 39,893
---------- ------- -------- -------- ---- ----------
Total Gas........... 1,096,467 52,739 72,373 (b) (5,406) 5 1,216,178
---------- ------- -------- -------- ---- ----------
Common Utility Plant
In Service--
Intangible........... 734 -- 2,749 -- -- 3,483
Land and Structures.. 78,339 -- 2,500 (112) -- 80,727
General Equipment.... 64,953 -- 15,766 (778) 1 79,942
Property Held for Fu-
ture Use.............. 28 -- -- -- -- 28
Completed Construction
not Classified........ 61,038 -- (2,230) -- -- 58,808
Construction Work in
Progress.............. 53,193 -- 13,061 -- -- 66,254
---------- ------- -------- -------- ---- ----------
Total Common........ 258,285 -- 31,846 (890) 1 289,242
---------- ------- -------- -------- ---- ----------
Total Utility
Plant.............. $5,053,546 $52,739 $205,213 (b) $(28,063) $ 1 $5,283,436
========== ======= ======== ======== ==== ==========
Other Property........... $ 119,309 $ 453 $ 32,460 $ (558) $-- $ 151,664
========== ======= ======== ======== ==== ==========
</TABLE>
NOTES:
(a) Northern Indiana Fuel and Light Company, Inc. purchased on March 31, 1993.
(b) Includes acquisition and construction expenditures related to Crossroads
Pipeline Company of $24,361,000.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
22
<PAGE>
SCHEDULE V
NIPSCO INDUSTRIES, INC.
SCHEDULE V--UTILITY PLANT AND OTHER PROPERTY AT ORIGINAL COST
TWELVE MONTHS ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------------ ---------------- ----------- -------- -------------
ADDITIONS AT
COST
----------------
KOKOMO
GAS AND RETIREMENTS
BALANCE FUEL AT ORIGINAL OTHER BALANCE
CLASSIFICATION OF PROPERTY JAN. 1, 1992 CO.(A) OTHER COST CHANGES DEC. 31, 1992
- -------------------------- ------------ ------- -------- ----------- -------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric Utility Plant
In Service--
Intangible........... $ 1 $ -- $ -- $ -- $ -- $ 1
Production........... 2,104,992 -- -- (10,092) -- 2,094,900
Transmission......... 525,960 -- -- (3,262) -- 522,698
Distribution......... 600,638 -- (259) (4,300) -- 596,079
General.............. 80,639 -- -- (90) -- 80,549
Property Held for Fu-
ture Use.............. 4,741 -- -- -- -- 4,741
Completed Construction
not Classified........ 144,743 -- 111,356 -- -- 256,099
Construction Work in
Progress.............. 65,372 -- (14,878) -- 21,682 72,176
Coal Reserves.......... 71,551 -- -- -- -- 71,551
---------- ------- -------- -------- -------- ----------
Total Electric...... 3,598,637 -- 96,219 (17,744) 21,682 (b) 3,698,794
---------- ------- -------- -------- -------- ----------
Gas Utility Plant
In Service--
Intangible........... 21 6 -- -- -- 27
Production........... -- 19 -- -- -- 19
Storage.............. 104,977 7,272 -- (315) -- 111,934
Transmission......... 131,965 940 -- (145) -- 132,760
Distribution......... 641,715 29,240 1,477 (1,656) -- 670,776
General.............. 62,786 3,299 223 (297) -- 66,011
Property Held for Fu-
ture Use.............. 151 -- -- -- -- 151
Completed Construction
not Classified........ 35,311 -- 29,711 -- -- 65,022
Construction Work in
Progress.............. 13,963 -- 4,896 -- -- 18,859
Gas Stored Under-
ground................ 8,371 -- 120 -- -- 8,491
Plant Acquisition Ad-
justment.............. -- 22,417 -- -- -- 22,417
---------- ------- -------- -------- -------- ----------
Total Gas........... 999,260 63,193 36,427 (2,413) -- 1,096,467
---------- ------- -------- -------- -------- ----------
Common Utility Plant
In Service--
Intangible........... 734 -- -- -- -- 734
Land and Structures.. 88,194 -- -- (230) (9,625) 78,339
General Equipment.... 65,548 -- -- (595) -- 64,953
Property Held for Fu-
ture Use.............. 28 -- -- -- -- 28
Completed Construction
not Classified........ 47,595 -- 13,443 -- -- 61,038
Construction Work in
Progress.............. 28,692 -- 26,240 -- (1,739) 53,193
---------- ------- -------- -------- -------- ----------
Total Common........ 230,791 -- 39,683 (825) (11,364)(c) 258,285
---------- ------- -------- -------- -------- ----------
Total Utility
Plant.............. $4,828,688 $63,193 $172,329 $(20,982) $ 10,318 $5,053,546
========== ======= ======== ======== ======== ==========
Other Property........... $ 57,492 $ 1,434 $ 49,019 $ -- $ 11,364 (c) $ 119,309
========== ======= ======== ======== ======== ==========
</TABLE>
NOTES:
(a) Kokomo Gas and Fuel Company purchased on February 10, 1992.
(b) Reconstruction costs associated with Bailly Generating Station pipe
collapse, net of insurance recoveries.
(c) Office building transferred to non-utility property.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
23
<PAGE>
SCHEDULE V
NIPSCO INDUSTRIES, INC.
SCHEDULE V--UTILITY PLANT AND OTHER PROPERTY AT ORIGINAL COST
TWELVE MONTHS ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------------ --------- ---------- ------- -------------
RETIREMENT
AT
BALANCE ADDITIONS ORIGINAL OTHER BALANCE
CLASSIFICATION OF PROPERTY JAN. 1, 1991 AT COST COST CHANGES DEC. 31, 1991
- -------------------------- ------------ --------- ---------- ------- -------------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Utility Plant:
Electric Utility Plant
In Service--
Intangible........... $ 1 $ -- $ -- $-- $ 1
Production........... 2,078,580 29,650 (3,238) -- 2,104,992
Transmission......... 521,222 6,640 (1,902) -- 525,960
Distribution......... 571,296 32,157 (2,815) -- 600,638
General.............. 77,174 4,381 (916) -- 80,639
Property Held for Fu-
ture Use.............. 3,771 970 -- -- 4,741
Completed Construction
not Classified........ 144,586 157 -- -- 144,743
Construction Work in
Progress.............. 40,714 24,658 -- -- 65,372
Coal Reserves.......... 71,551 -- -- -- 71,551
---------- -------- -------- ---- ----------
Total Electric...... 3,508,895 98,613 (8,871) -- 3,598,637
---------- -------- -------- ---- ----------
Gas Utility Plant
In Service--
Intangible........... 21 -- -- -- 21
Storage.............. 101,947 3,068 (38) -- 104,977
Transmission......... 124,918 7,212 (165) -- 131,965
Distribution......... 614,012 29,599 (1,896) -- 641,715
General.............. 56,410 7,257 (881) -- 62,786
Property Held for Fu-
ture Use.............. 151 -- -- -- 151
Completed Construction
not Classified........ 43,503 (8,192) -- -- 35,311
Construction Work in
Progress.............. 18,182 (4,219) -- -- 13,963
Gas Stored Under-
ground--Non-current... 8,248 123 -- -- 8,371
---------- -------- -------- ---- ----------
Total Gas........... 967,392 34,848 (2,980) -- 999,260
---------- -------- -------- ---- ----------
Common Utility Plant
In Service--
Intangible........... 127 607 -- -- 734
Land and Structures.. 87,398 920 (124) -- 88,194
General Equipment.... 62,485 3,618 (555) -- 65,548
Property Held for Fu-
ture Use.............. 28 -- -- -- 28
Completed Construction
not Classified........ 36,124 11,471 -- -- 47,595
Construction Work in
Progress.............. 9,811 18,881 -- -- 28,692
---------- -------- -------- ---- ----------
Total Common........ 195,973 35,497 (679) -- 230,791
---------- -------- -------- ---- ----------
Total Utility
Plant.............. $4,672,260 $168,958 $(12,530) $-- $4,828,688
========== ======== ======== ==== ==========
Other Property........... $ 42,574 $ 14,918 $ -- $-- $ 57,492
========== ======== ======== ==== ==========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
24
<PAGE>
SCHEDULE VI
NIPSCO INDUSTRIES, INC.
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
TWELVE MONTHS ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ---------- ----------------- ----------- ------- ----------
ADDITIONS CHARGED
TO COSTS AND
EXPENSES
-----------------
NORTHERN
INDIANA
FUEL AND OTHER
BALANCE LIGHT CHANGES BALANCE
JAN. 1, COMPANY, OTHER RETIREMENTS (NOTE DEC. 31,
DESCRIPTION 1993 INC.(A) (NOTE A) (NOTE B) C) 1993
----------- ---------- -------- -------- ----------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric............... $1,369,516 $ -- $125,315 $(29,285) $ 7,713 $1,473,259
Gas.................... 455,351 12,105 52,714 (8,119) 1,871 513,922
Common................. 55,030 -- 7,792 (1,270) 1,818 63,370
Retirement work in
progress.............. (3,279) -- -- 4,949 -- 1,670
---------- ------- -------- -------- ------- ----------
Total Utility Plant.. $1,876,618 $12,105 $185,821 $(33,725) $11,402 $2,052,221
========== ======= ======== ======== ======= ==========
Other Property.......... $ 22,839 $ 158 $ 4,730 $ (247) $ -- $ 27,480
========== ======= ======== ======== ======= ==========
Note A:
Depreciation and amortization per consolidated statement of income...... $ 187,000
Add: Bailly Generating Station deferred depreciation.................. 2,336
Amortization of utility plant acquisition adjustment............. 702
Less: Amortization of Schahfer Generating Station Unit 17 and 18 car-
rying charges and deferred depreciation............................ 4,217
----------
$ 185,821
==========
Note B:
Retirements credited to Utility Plant................................... $ (28,063)
Less: Retirements charged to other accounts........................... (14)
----------
Retirements charged to Accumulated Depreciation and Amortization........ (28,049)
Add: Cost of removal less salvage..................................... (10,625)
Fluctuation in retirement work in progress....................... 4,949
----------
$ (33,725)
==========
Note C:
Additions:
Charged to clearing accounts.......................................... $ 5,801
Depletion expense of coal reserves.................................... 5,601
----------
$ 11,402
==========
</TABLE>
- --------
(a) Northern Indiana Fuel and Light Company, Inc. purchased on March 31, 1993.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
25
<PAGE>
SCHEDULE VI
NIPSCO INDUSTRIES, INC.
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
TWELVE MONTHS ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ---------- ---------------- ----------- ------- ----------
ADDITIONS
CHARGED TO COSTS
AND EXPENSES
----------------
KOKOMO OTHER
BALANCE GAS & CHANGES BALANCE
JAN. 1, FUEL OTHER RETIREMENTS (NOTE DEC. 31,
DESCRIPTION 1992 CO. (A) (NOTE A) (NOTE B) C) 1992
----------- ---------- ------- -------- ----------- ------- ----------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Utility Plant:
Electric............... $1,260,685 $ -- $122,878 $(22,441) $ 8,394 $1,369,516
Gas.................... 387,463 20,018 49,233 (3,341) 1,978 455,351
Common................. 49,897 -- 6,591 (1,176) (282) 55,030
Retirement work in
progress.............. (4,818) -- -- 1,539 -- (3,279)
---------- ------- -------- -------- ------- ----------
Total Utility Plant.. $1,693,227 $20,018 $178,702 $(25,419) $10,090 $1,876,618
========== ======= ======== ======== ======= ==========
Other Property.......... $ 17,733 $ 504 $ 3,017 $ -- $ 1,585 $ 22,839
========== ======= ======== ======== ======= ==========
Note A:
Depreciation and amortization per consolidated statement of income..... $ 182,717
Add: Bailly Generating Station deferred depreciation................. 202
Less: Amortization of Schahfer Generating Station Unit 17 and 18 car-
rying charges and deferred depreciation............................. 4,217
----------
$ 178,702
==========
Note B:
Retirements credited to Utility Plant.................................. $ (20,982)
Less: Retirements charged to other accounts.......................... --
----------
Retirements charged to Accumulated Depreciation and Amortization....... (20,982)
Add: Cost of removal less salvage.................................... (5,976)
Fluctuation in retirement work in progress...................... 1,539
----------
$ (25,419)
==========
Note C:
Additions:
Charged to clearing accounts......................................... $ 5,847
Depletion expense of coal reserves................................... 5,747
Accumulated provision for depreciation of utility plant transferred
to accumulated provision for depreciation of non-utility property... (1,585)
Other................................................................ 81
----------
$ 10,090
==========
</TABLE>
- --------
(a) Kokomo Gas and Fuel Company purchased on February 10, 1992.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
26
<PAGE>
SCHEDULE VI
NIPSCO INDUSTRIES, INC.
SCHEDULE VI--ACCUMULATED DEPRECIATION AND AMORTIZATION
TWELVE MONTHS ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
------ ------------ ---------- ----------- ------- -------------
ADDITIONS
CHARGED TO OTHER
COSTS AND CHANGES
BALANCE EXPENSES RETIREMENTS (NOTE BALANCE
DESCRIPTION JAN. 1, 1991 (NOTE A) (NOTE B) C) DEC. 31, 1991
----------- ------------ ---------- ----------- ------- -------------
(DOLLARS IN THOUSANDS)
Utility Plant:
<S> <C> <C> <C> <C> <C>
Electric.............. $1,143,359 $119,225 $(11,700) $ 9,801 $1,260,685
Gas................... 343,257 46,240 (4,318) 2,284 387,463
Common................ 43,736 6,039 (882) 1,004 49,897
Retirement work in
progress............... (3,420) -- (1,398) -- (4,818)
---------- -------- -------- ------- ----------
$1,526,932 $171,504 $(18,298) $13,089 $1,693,227
========== ======== ======== ======= ==========
Other Property.......... $ 16,022 $ 1,711 $ -- $ -- $ 17,733
========== ======== ======== ======= ==========
Note A:
Depreciation and amortization per consolidated statement of in-
come.............................................................. $ 175,721
Less: Amortization of Schahfer Generating Station Unit 17 and 18
carrying charges and deferred depreciation...................... 4,217
----------
$ 171,504
==========
Note B:
Retirements credited to Utility Plant.............................. $ (12,530)
Less: Retirements charged to other accounts...................... --
----------
Retirements charged to Accumulated Depreciation and Amortization... (12,530)
Add: Cost of removal less salvage................................ (4,370)
Fluctuation in retirement work in progress.................. (1,398)
----------
$ (18,298)
==========
Note C:
Additions:
Charged to clearing accounts..................................... $ 6,018
Depletion expense of coal reserves............................... 6,222
Other............................................................ 849
----------
$ 13,089
==========
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
27
<PAGE>
SCHEDULE VIII
NIPSCO INDUSTRIES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------- --------------------------- ------------ --------
ADDITIONS
---------------------------
NORTHERN
INDIANA DEDUCTIONS
FUEL AND CHARGED FOR PURPOSES
BALANCE LIGHT TO CHARGED FOR WHICH BALANCE
JAN. 1, COMPANY, COSTS AND TO OTHER RESERVES DEC. 31,
DESCRIPTION 1993 INC.(A) EXPENSES ACCOUNTS WERE CREATED 1993
----------- ------- -------- --------- -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Reserves Deducted in
Consolidated Balance
Sheet from Assets to
Which They Apply:
Reserve for accounts
receivables........... $5,121 $ 93 $5,254 $-- $5,613 $4,855
Reserve for invest-
ments, at equity...... $1,200 $-- $2,300 $-- $1,000 $2,500
Reserve for invest-
ments, at cost........ $ -- $-- $2,500 $-- $ -- $2,500
Reserves Classified Un-
der Reserve Section of
Consolidated Balance
Sheet:
Injuries and damages
reserve............... $4,367 $-- $4,450 $-- $4,823 $3,994
Miscellaneous operating
reserves.............. $4,424 $-- $1,502 $-- $ 521 $5,405
</TABLE>
(a) Northern Indiana Fuel and Light Company, Inc. purchased on March 31, 1993.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
28
<PAGE>
SCHEDULE VIII
NIPSCO INDUSTRIES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------- ------------------------------ ------------ --------
ADDITIONS
------------------------------ DEDUCTIONS
CHARGED FOR PURPOSES
BALANCE KOKOMO GAS TO CHARGED FOR WHICH BALANCE
JAN. 1, AND COSTS AND TO OTHER RESERVES DEC. 31,
DESCRIPTION 1992 FUEL CO.(A) EXPENSES ACCOUNTS WERE CREATED 1992
----------- ------- ----------- --------- -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Reserves Deducted in
Consolidated Balance
Sheet from Assets to
Which They Apply:
Reserve for accounts
receivables........... $3,387 $ 175 $7,315 $-- $5,756 $5,121
Reserve for invest-
ments, at equity...... $1,200 $ -- $ -- $-- $ -- $1,200
Reserves Classified Un-
der Reserve Section of
Consolidated Balance
Sheet:
Injuries and damages
reserve............... $4,008 $ -- $2,975 $-- $2,616 $4,367
Miscellaneous operating
reserves.............. $4,132 $1,319 $1,146 $-- $2,173 $4,424
</TABLE>
(a) Kokomo Gas and Fuel Company purchased on February 10, 1992.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
29
<PAGE>
SCHEDULE VIII
NIPSCO INDUSTRIES, INC.
SCHEDULE VIII--VALUATION AND QUALIFYING ACCOUNTS
TWELVE MONTHS ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E
------ ------- ------------------ ------------ --------
ADDITIONS
------------------ DEDUCTIONS
CHARGED FOR PURPOSES
BALANCE TO CHARGED FOR WHICH BALANCE
JAN. 1, COSTS AND TO OTHER RESERVES DEC. 31,
DESCRIPTION 1991 EXPENSES ACCOUNTS WERE CREATED 1991
----------- ------- --------- -------- ------------ --------
(DOLLARS IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Reserves Deducted in Consoli-
dated Balance Sheet from As-
sets to Which They Apply:
Reserve for accounts receiv-
ables...................... $3,944 $5,950 $ -- $6,507 $3,387
Reserve for investments, at
equity..................... $ -- $1,200 $ -- $ -- $1,200
Reserves Classified Under Re-
serve Section of Consoli-
dated Balance Sheet:
Injuries and damages re-
serve...................... $3,317 $4,375 $ -- $3,684 $4,008
Miscellaneous operating re-
serves..................... $2,882 $1,302 $ -- $ 52 $4,132
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
30
<PAGE>
SCHEDULE IX
NIPSCO INDUSTRIES, INC.
SCHEDULE IX--SHORT-TERM BORROWINGS
TWELVE MONTHS ENDED DECEMBER 31, 1993, 1992 AND 1991
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
COL. A COL. B COL. C COL. D COL. E COL. F
- ------------------- --------- ----------- ----------- ----------- -------------
WEIGHTED MAXIMUM AVERAGE WEIGHTED
AVERAGE AMOUNT AMOUNT AVERAGE
CATEGORY OF AGGREGATE BALANCE INTEREST OUTSTANDING OUTSTANDING INTEREST
SHORT- AT END OF RATE AT END DURING THE DURING THE RATE DURING
TERM BORROWINGS(1) PERIOD OF PERIOD PERIOD PERIOD(2) THE PERIOD(3)
- --------------------- --------- ----------- ----------- ----------- -------------
(DOLLARS IN THOUSANDS)
YEAR 1993
- ---------
<S> <C> <C> <C> <C> <C>
Commercial paper... $ 74,895 3.50% $157,800 $ 46,265 3.48%
Bank notes......... $110,000 3.78% $386,301 $194,840 3.85%
<CAPTION>
YEAR 1992
- ---------
<S> <C> <C> <C> <C> <C>
Commercial paper... $ 76,500 4.15% $111,260 $ 74,913 4.08%
Bank notes......... $243,701 4.09% $346,401 $190,926 4.22%
<CAPTION>
YEAR 1991
- ---------
<S> <C> <C> <C> <C> <C>
Commercial paper... $ 97,540 5.40% $140,115 $ 62,634 6.37%
Bank notes......... $122,800 5.48% $129,800 $ 36,869 5.93%
</TABLE>
NOTE:
(1) Commercial paper is generally issued for short-term working capital
requirements. Individual issues of commercial paper generally remain
outstanding for less than thirty days. Bank notes represent borrowing
under Credit Agreements and Lines of Credit with a consortium of local,
domestic and international banks.
(2) The average amount of short-term borrowing is determined by a weighted
monthly average based on number of days outstanding.
(3) The weighted average interest rates, except for commercial paper,
represent the actual fixed rates applicable during the time period the
borrowings were outstanding. The commercial paper interest rate was
determined by dividing the aggregate annualized commercial paper interest
expense by the actual aggregate principal outstanding during the period.
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
31
<PAGE>
SCHEDULE X
NIPSCO INDUSTRIES, INC.
SCHEDULE X--SUPPLEMENTARY INCOME STATEMENT INFORMATION
TWELVE MONTHS ENDED DECEMBER 31, 1993, 1992 AND 1991
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
The amounts of maintenance and repairs and depreciation which are charged to
expenses, other than those set forth in the Consolidated Statement of Income,
or are charged to other accounts, are not significant. Advertising is not
considered to be significant, and Northern Indiana pays no royalties.
Provisions for taxes, other than payroll and income taxes, are summarized as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
------- ------- -------
(Dollars in Thousands)
<S> <C> <C> <C>
Real estate and personal property............ $37,059 $35,611 $32,514
Indiana gross income......................... 20,218 18,921 18,259
Other........................................ 1,909 2,893 3,255
------- ------- -------
$59,186 $57,425 $54,028
------- ------- -------
------- ------- -------
</TABLE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
32
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Board of Directors of
NIPSCO Industries, Inc.:
We have audited, in accordance with generally accepted auditing standards,
the consolidated financial statements included in NIPSCO Industries, Inc.'s
annual report to shareholders for the year ended December 31, 1993,
incorporated by reference in this Form 10-K, and have issued our report thereon
dated January 26, 1994. Our audits were made for the purpose of forming an
opinion on those consolidated financial statements taken as a whole. The
schedules listed on Page 17, Item 14(a)(2) are the responsibility of NIPSCO
Industries, Inc.'s management and are presented for purposes of complying with
the Securities and Exchange Commission's rules and are not part of the basic
financial statements. These schedules have been subjected to the auditing
procedures applied in the audits of the basic financial statements and, in our
opinion, fairly state in all material respects the financial data required to
be set forth therein in relation to the basic financial statements taken as a
whole.
As discussed in the notes to consolidated financial statements, effective
January 1, 1993, NIPSCO Industries, Inc. and subsidiaries changed their methods
of accounting for postretirement benefits other than pensions and income taxes.
Arthur Andersen & Co.
Chicago, Illinois
January 26, 1994
33
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED, THEREUNTO DULY AUTHORIZED.
NIPSCO Industries, Inc.
(Registrant)
March 28, 1994 /s/ Gary L. Neale
Date_______________________________ By_________________________________
Gary L. Neale, Its Chairman and
President
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES AND ON THE DATES INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE DATE
--------- ----- ----
<S> <C> <C>
/s/ Gary L. Neale Chairman, President, Principal
- ------------------------------------ Executive Officer and
Gary L. Neale Director
/s/ Stephen P. Adik Executive Vice President and
- ------------------------------------ Principal Financial Officer
Stephen P. Adik
/s/ Jerry M. Springer Controller and Principal
- ------------------------------------ Accounting Officer
Jerry M. Springer
/s/ Steven C. Beering Director
- ------------------------------------
Steven C. Beering
/s/ Arthur J. Decio Director
- ------------------------------------
Arthur J. Decio
/s/ Ernestine M. Raclin Director
- ------------------------------------
Ernestine M. Raclin March 28, 1994
/s/ Denis E. Ribordy Director
- ------------------------------------
Denis E. Ribordy
/s/ Ian M. Rolland Director
- ------------------------------------
Ian M. Rolland
/s/ Edmund A. Schroer Director
- ------------------------------------
Edmund A. Schroer
/s/ John W. Thompson Director
- ------------------------------------
John W. Thompson
/s/ Robert J. Welsh, Jr. Director
- ------------------------------------
Robert J. Welsh, Jr.
</TABLE>
34
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF ITEM PAGE
-------- ------------------- ------------
<C> <S> <C>
(3.(i)) Articles of Incorporation of September 22, 1987, and all Articles of
Amendment thereto (incorporated by reference to Exhibit 1 to the
NIPSCO Industries, Inc. Current Report on Form 8-K dated March 25,
1992).
(3.(ii)) Amended By-laws effective May 25, 1993 (incorporated by reference to
Exhibit (3)(ii) to the NIPSCO Industries, Inc. Form 8-K dated July
13, 1993).
(4.1) Indenture dated August 1, 1939 between Registrant and Trustees (in-
corporated by reference to Exhibit 7 to Northern Indiana Public
Service Company ("Northern Indiana") Registration Statement (Regis-
tration No. 2-5178)).
(4.2) Third Supplemental Indenture dated August 1, 1943 (incorporated by
reference to Exhibit 7-C to Northern Indiana Registration Statement
(Registration No. 2-5178)).
(4.3) Fifteenth Supplemental Indenture dated April 15, 1963 (incorporated by
reference to Exhibit 2.03 to Northern Indiana Registration Statement
(Registration No. 2-21125)).
(4.4) Seventeenth Supplemental Indenture dated May 15, 1965 (incorporated by
reference to Exhibit 1 to Northern Indiana Current Report on Form 8-K
dated June 8, 1965).
(4.5) Eighteenth Supplemental Indenture dated September 1, 1967 (incorpo-
rated by reference to Exhibit 1 to Northern Indiana Current Report on
Form 8-K dated October 9, 1967).
(4.6) Nineteenth Supplemental Indenture dated October 1, 1968 (incorporated
by reference to Exhibit 1 to Northern Indiana Current Report on Form
8-K dated November 8, 1968).
(4.7) Twenty-second Supplemental Indenture dated May 1, 1971 (incorporated
by reference to Exhibit 1 to Northern Indiana Current Report on Form
8-K dated June 8, 1971).
(4.8) Twenty-third Supplemental Indenture dated March 31, 1972 (incorporated
by reference to Exhibit 2 to Northern Indiana Current Report on Form
8-K dated May 5, 1972).
(4.9) Twenty-fourth Supplemental Indenture dated July 15, 1973 (incorporated
by reference to Exhibit 1 to Northern Indiana Current Report on Form
8-K dated August 7, 1973).
(4.10) Twenty-eighth Supplemental Indenture dated October 15, 1976 (incorpo-
rated by reference to Exhibit 1 to Northern Indiana Current Report on
Form 8-K dated November 8, 1976).
(4.11) Twenty-ninth Supplemental Indenture dated August 15, 1977 (incorpo-
rated by reference to Exhibit 1 to Northern Indiana Current Report on
Quarterly Report on Form 10-Q for the quarter ended September 30,
1977).
(4.12) Thirtieth Supplemental Indenture dated November 1, 1977 (incorporated
by reference to Exhibit 1 to Northern Indiana Annual Report on Form
10-K for year ended December 31, 1977).
</TABLE>
35
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF ITEM PAGE
------- ------------------- ------------
<C> <S> <C>
(4.13) Thirty-third Supplemental Indenture dated June 1, 1980 (incorporated
by reference to Exhibit 1 to Northern Indiana Quarterly Report on
Form 10-Q for the quarter ended June 30, 1980).
(4.14) Fortieth Supplemental Indenture dated July 1, 1989 (incorporated by
reference to Exhibit 3 to Northern Indiana Current Report on Form 8-K
dated March 14, 1990).
(4.15) Forty-first Supplemental Indenture dated July 1, 1991 (incorporated by
reference to Exhibit 1 to Northern Indiana Current Report on Form 8-K
dated March 25, 1992).
(4.16) Indenture, dated as of March 1, 1988, between Northern Indiana and
Manufacturers Hanover Trust Company, as Trustee (incorporated by
reference to Exhibit 4 to Northern Indiana Registration Statement
(Registration No. 33-44193)).
(4.17) First Supplemental Indenture dated December 1, 1991, between Northern
Indiana and Manufacturers Hanover Trust Company, as Trustee (incor-
porated by reference to Exhibit 4.1 to Northern Indiana Registration
Statement (Registration No. 33-63870)).
(4.18) Memorandum of Agreement with City of Michigan City, Indiana (incorpo-
rated by reference to Exhibit 7 to Northern Indiana Registration
Statement (Registration No. 2-48531)).
(4.19) Loan Agreement dated November 1, 1978 with Jasper County, Indiana
(incorporated by reference to Exhibit 1 to Northern Indiana Annual
Report on Form 10-K for year ended December 31, 1978).
(4.20) Financing Agreement No. 1 dated November 1, 1988 with Jasper County,
Indiana regarding $37,000,000 Series 1988A Pollution Control Re-
funding Revenue Bonds. Identical financing agreements between Regis-
trant and Jasper County provide for the issuance of $47,000,000 Se-
ries 1988B, $46,000,000 Series 1988C and $24,000,000 Series 1988D
Pollution Control Refunding Revenue Bonds (incorporated by reference
to Exhibit 8 to Northern Indiana Current Report on Form 8-K dated
March 16, 1989).
(4.21) Financing Agreement dated July 1, 1989, with Jasper County, Indiana
regarding $41,000,000 Series 1989A Collateralized Pollution Control
Refunding Revenue Bonds. An identical financing agreement between
Registrant and Jasper County provides for the issuance of $10,000,000
Series 1989B Collateralized Pollution Control Refunding Revenue Bonds
(incorporated by reference to Exhibit 2 to Northern Indiana Current
Report on Form 8-K dated March 25, 1992).
(4.22) Financing Agreement dated July 1, 1991, with Jasper County, Indiana
regarding $55,000,000 Series 1991 Collateralized Pollution Control
Refunding Revenue Bonds (incorporated by reference to Exhibit 3 to
Northern Indiana Current Report on Form 8-K dated March 25, 1992).
(4.23) Rights Agreement between Registrant and Harris Trust and Savings Bank,
dated February 27, 1990 (incorporated by reference to Exhibit 4.1 to
the NIPSCO Industries, Inc. Current Report on Form 8-K dated March 7,
1990).
</TABLE>
36
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIALLY
EXHIBIT NUMBERED
NUMBER DESCRIPTION OF ITEM PAGE
------- ------------------- ------------
<C> <S> <C>
(10.1) Supplemental Life Insurance Plan effective January 1, 1991 (incorpo-
rated by reference to Exhibit 2 to the NIPSCO Industries, Inc. Cur-
rent Report on Form 8-K dated March 25, 1992).*
(10.2) Executive Deferred Compensation Plan effective December 1, 1990 (in-
corporated by reference to Exhibit 3 to the NIPSCO Industries, Inc.
Current Report on Form 8-K dated March 25, 1992).*
(10.3) Form of Change in Control and Termination Agreements (incorporated by
reference to Exhibit 4 to the NIPSCO Industries, Inc. Current Report
on Form 8-K dated March 25, 1992).*
(10.4) Nonemployee Director Stock Incentive Plan effective February 1, 1992
(incorporated by reference to Exhibit 5 to the NIPSCO Industries,
Inc. Current Report on Form 8-K dated March 25, 1992).*
(10.5) NIPSCO Industries, Inc. Long-Term Incentive Plan (incorporated by ref-
erence to Exhibit 6 to the NIPSCO Industries, Inc. Current Report on
Form 8-K dated March 25, 1992).*
(10.6) Amended and Restated Pension Plan Provisions effective January 1, 1989
(incorporated by reference to Exhibit 17 to Northern Indiana Current
Report on Form 8-K dated March 25, 1992).*
(11) Computation of Per Share Earnings.
(13) 1993 Annual Report to Shareholders for pages 26-53.
(21) List of Subsidiaries.
(23) Consent of Arthur Andersen & Co.
(99) Amended Articles of Incorporation of Northern Indiana Public Service
Company (incorporated by reference to Exhibit 1 to the Northern Indi-
ana Current Report of Form 8-K dated May 5, 1982).
</TABLE>
- --------
*Management contract or compensatory plan arrangement of NIPSCO Industries,
Inc.
37
<PAGE>
EXHIBIT 11
NIPSCO INDUSTRIES, INC.
COMPUTATION OF PER SHARE EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1993
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY
PRIMARY DILUTED
---------- ----------
<S> <C> <C>
Weighted Average Number of Shares
Average Common Shares Outstanding at 12/31/93.... 66,136,396 66,136,396
Dilutive Effect for Nonqualified Stock Options at
12/31/93........................................ 173,417 193,693
---------- ----------
Weighted Average Shares at 12/31/93.............. 66,309,813 66,330,089
========== ==========
Net Income to be Used to Compute
Earnings Per Average Common Share
(DOLLARS IN
THOUSANDS)
Net Income....................................... $ 156,140 $ 156,140
Dividend Requirements on Preferred Shares........ 3,063 3,063
---------- ----------
Balance Available for Common Shareholders........ $ 153,077 $ 153,077
========== ==========
Earnings Per Average Common Share.................. $ 2.31(a) $ 2.31(a)
========== ==========
</TABLE>
Note:
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 11
NIPSCO INDUSTRIES, INC.
COMPUTATION OF PER SHARE EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1992
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY
PRIMARY DILUTED
---------- ----------
<S> <C> <C>
Weighted Average Number of Shares
Average Common Shares Outstanding at 12/31/92.... 66,715,941 66,715,941
Dilutive Effect for Nonqualified Stock Options at
12/31/92........................................ 115,467 144,072
---------- ----------
Weighted Average Shares at 12/31/92.............. 66,831,408 66,860,013
========== ==========
Net Income to be Used to Compute
Earnings Per Average Common Share
(DOLLARS IN
THOUSANDS)
Net Income....................................... $ 136,648 $ 136,648
Dividend Requirements on Preferred Shares........ 3,063 3,063
---------- ----------
Balance Available for Common Shareholders........ $ 133,585 $ 133,585
========== ==========
Earnings Per Average Common Share.................. $ 1.99(a) $ 1.99(a)
========== ==========
</TABLE>
Note:
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 11
NIPSCO INDUSTRIES, INC.
COMPUTATION OF PER SHARE EARNINGS
TWELVE MONTHS ENDED DECEMBER 31, 1991
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
FULLY
PRIMARY DILUTED
---------- ----------
<S> <C> <C>
Weighted Average Number of Shares
Average Common Shares Outstanding at 12/31/91 Be-
fore Conversion................................. 67,035,495 67,035,495
Common Shares Reserved for Conversion of 4 1/4%
Convertible Debentures at 12/31/91.............. -- 219,359
Dilutive Effect for Nonqualified Stock Options at
12/31/91........................................ 157,939 174,969
---------- ----------
Weighted Average Shares at 12/31/91.............. 67,193,434 67,429,823
========== ==========
Net Income to be Used to Compute
Earnings Per Average Common Share
(DOLLARS IN
THOUSANDS)
Net Income....................................... $ 133,388 $ 133,388
Plus: Interest Expense--Net of Income Tax Ef-
fect............................................ -- 115
---------- ----------
Net Income....................................... 133,388 133,503
Dividend Requirements on Preferred Shares........ 3,063 3,063
---------- ----------
Balance Available for Common Shareholders........ $ 130,325 $ 130,440
========== ==========
Earnings Per Average Common Share.................. $ 1.93(a) $ 1.93(a)
========== ==========
</TABLE>
Note:
(a) This calculation is submitted in accordance with Regulation S-K item
601(b)(11) although not required by footnote 2 to paragraph 14 of APB
Opinion No. 15 because it results in dilution of less than 3%.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
EXHIBIT 13
1993 FINANCIAL REVIEW
Management's Discussion and Analysis of Financial Condition and Results of
Operations
HOLDING COMPANY
NIPSCO Industries, Inc. (Industries), an Indiana corporation, became a holding
company on March 3, 1988. Northern Indiana Public Service Company (Northern
Indiana), Northern Indiana Fuel and Light Company, Inc. (NIFL), Kokomo Gas and
Fuel Company (Kokomo Gas), NIPSCO Development Company, Inc. (Development),
NIPSCO Energy Services, Inc. (Services), and NIPSCO Capital Markets, Inc.
(Capital Markets) are subsidiaries of Industries. The following discussion,
except where noted, is attributable to the utility operations of Northern
Indiana, Kokomo Gas, NIFL and Crossroads Pipeline Company (Utilities).
NET INCOME
For 1993, net income of Industries increased to $156.1 million, or earnings of
$2.31 per average common share, compared to $136.6 million, or earnings of $2.00
per average common share, for 1992. In 1991, net income was $133.4 million, or
earnings of $1.94 per average common share.
See Notes to Consolidated Financial Statements for Segments of Business
regarding the revenue and utility operating income derived from the delivery of
gas and electricity.
REVENUES
Operating revenues increased $95.5 million, or 6.0%, from 1992. Operating
revenues in 1992 increased $47.2 million, or 3.1%, from 1991.
During 1993, gas deliveries in dekatherms (dth), which include transportation
services, increased 9.8%. The increase in gas deliveries was largely
attributable to increased deliveries to residential, commercial and
transportation customers and the addition of 27,500 customers acquired through
the purchase of NIFL in March, 1993. The Utilities had approximately 682,200 gas
customers at December 31, 1993. During 1992, gas deliveries increased 8.9%,
mainly due to the addition of 30,000 customers acquired through the purchase of
Kokomo Gas in February, 1992, and increased deliveries to residential,
commercial and industrial customers.
Gas revenues were $714.2 million in 1993, an increase of $48.0 million from
1992. The increase in gas revenues was mainly due to increased sales to
residential and commercial customers due to the colder weather this year, and
the inclusion of NIFL, and was partially offset by decreased transportation
revenue per dth delivered due to lower take-or-pay costs. Gas revenues were
$666.2 million in 1992, an increase of $64.3 million from 1991. The increase in
gas revenues was mainly due to the inclusion of Kokomo customers, increased
sales to residential and commercial customers due to the colder heating season
and higher gas costs per dth and was partially offset by the replacement of
sales with transportation service and lower revenue per dth transported. The
large commercial and industrial customers continued to utilize transportation
services provided by the Utilities. Gas transportation customers purchase much
of their gas directly from producers and marketers and then pay a transportation
fee to have their gas delivered over the Utilities' systems. The Utilities
transported 167.9, 149.5 and 135.9 million dth in 1993, 1992 and 1991,
respectively.
In 1993, sales of electricity in kilowatt-hours (kwh) increased 5.1% over 1992
mainly due to higher sales to residential and commercial customers due to warmer
weather in the second and third quarters and increased industrial demands.
Northern Indiana had approximately 395,100 electric customers at December 31,
1993. In 1992, sales of electricity in kwh increased 5.5% over 1991 mainly due
to higher sales to industrial and wholesale customers partially offset by
decreased sales to residential and commercial customers due to the significantly
cooler summer of 1992 compared to 1991.
In 1993, electric revenues were $963.7 million, an increase of $47.5 million
from 1992. The increase in electric revenue was mainly due to higher sales to
residential and commercial customers due to warmer weather in the second and
third quarters and increased industrial demands. In 1992, electric revenues were
$916.2 million, a decrease of $17.1 million from 1991. The decrease in electric
revenue was mainly due to reduced fuel costs per kwh. Decreased revenues due to
lower sales to residential and commercial customers due to the much cooler
summer weather were offset by increased sales to industrial and wholesale
customers.
The components of the changes in gas and electric revenues are shown in the
following tables:
<TABLE>
<CAPTION>
Year 1993 Year 1992
Compared to Compared to
Year 1992 Year 1991
----------- -----------
(Dollars in millions)
<S> <C> <C>
Gas Revenue
Rate changes....................................... $ _ $ 0.6
Pass through of net changes in purchased gas costs,
gas storage and storage transportation costs..... 27.1 28.6
Take-or-pay costs.................................. (27.0) (11.8)
Changes in sales levels............................ 19.3 15.0
Gas transported.................................... 2.9 1.8
Kokomo and NIFL acquisitions....................... 25.7 30.1
------ ------
Gas Revenue Change................................... $ 48.0 $ 64.3
------ ------
</TABLE>
26
<PAGE>
<TABLE>
<CAPTION>
Year 1993 Year 1992
Compared to Compared to
Year 1992 Year 1991
----------- -----------
(Dollars in millions)
<S> <C> <C>
Electric Revenue
Pass through of net changes in fuel costs.......... $(10.4) $(17.6)
Changes in sales levels............................ 57.9 0.5
------ ------
Electric Revenue Change.............................. $ 47.5 $(17.1)
------ ------
Total Revenue Change............................... $ 95.5 $ 47.2
====== ======
</TABLE>
- ----------------
See Rate Matters in Notes to Consolidated Financial Statements regarding
changes in gas rates and gas take-or-pay costs.
The basic steel industry accounted for 39% of natural gas delivered (including
volumes transported) and 39% of electric sales during 1993.
The Utilities' rate schedules for gas and electric service to their customers
contain electric rate adjustment clauses for changes in the cost of fuel and
firm purchases of electric energy and gas rate adjustment clauses to reflect
changes in the cost of gas purchased and contracted gas storage and storage
transportation costs. (See Fuel Adjustment Clause and Gas Cost Adjustment Clause
under Summary of Significant Accounting Policies in Notes to Consolidated
Financial Statements.)
PURCHASED GAS
The Utilities purchased gas costs increased $20.0 million (5.3%) in 1993 due
to increased purchases resulting from the colder weather of 1993, and the
inclusion of $16.1 million of purchased gas costs related to NIFL. The average
cost for the Utilities purchased gas in 1993, after adjustment for take-or-pay
charges billed to transport customers, was $3.23 per dth as compared to $3.16
per dth in 1992. Purchased gas costs increased $40.4 million (11.9%) in 1992,
due to $19 million of purchased gas costs related to Kokomo Gas and increased
costs per dth. The average cost for the Utilities purchased gas in 1992, after
adjustment for take-or-pay charges billed to transport customers, was $3.16 per
dth as compared to $2.93 per dth in 1991.
FUEL AND POWER PURCHASED
Cost of fuel for electric generation in 1993 increased mainly as a result of
increased production partially offset by decreased fuel costs per kwh produced.
The average cost per kwh generated decreased 1.0% from 1992 to 16.65 mills. The
cost of fuel for electric generation in 1992 decreased $6.0 million as a result
of lower fuel costs per kwh generated. The average cost per kwh generated
decreased 5.8% from 1991 to 16.82 mills.
Purchased power costs increased $7.2 million in 1993, as a result of increased
power purchases from other utilities. Purchased power costs increased $2.9
million in 1992, as a result of increased power purchases from other utilities.
OPERATING MARGINS
Operating margins increased $66.1 million in 1993 to $1.0 billion. The
operating margin from gas deliveries increased $28.0 million mainly due to the
increased sales to residential and commercial customers due to colder weather
during this year and the addition of 27,500 gas customers due to the purchase of
NIFL. Operating margins from electric sales increased $38.1 million mainly
reflecting increased sales to residential and commercial customers due to warmer
weather in the second and third quarters and increased industrial demands.
Operating margins increased $10.0 million in 1992 to $949.4 million. The
operating margin from gas deliveries increased $23.9 million mainly due to the
increased sales to residential and commercial customers and the addition of
30,000 gas customers due to the purchase of Kokomo Gas. Operating margins from
electric sales decreased $13.9 million due to reduced sales to residential and
commercial customers during the second and third quarters and were partially
offset by increased sales to industrial and wholesale customers.
OPERATING EXPENSES AND TAXES
Operating expenses and taxes in 1993 increased 7.1% from 1992 to $753.5
million and in 1992 increased 2.6% from 1991 to $703.2 million.
The increase in 1993 from 1992 is mainly due to a full year of the service
agreement associated with the Bailly scrubber, increased gas storage costs
reflecting changes in the Utilities' gas supply arrangements, higher employee
related expenses and the addition of operating expenses of NIFL. The increase in
1992 from 1991 was mainly due to the service agreement associated with the
Bailly scrubber, which went into service in June, 1992, increased gas storage
and transmission costs reflecting changes in the Utilities' gas supply
arrangements, higher employee related expenses and the addition of operating
expenses of Kokomo Gas. Payroll costs charged to Operations and Maintenance were
$194 million in 1993, $190 million in 1992 and $187 million in 1991.
Depreciation and amortization expenses increased $4.3 million compared to 1992
as a result of net plant additions.
Income and other tax provisions charged to operations amounted to $168.5
million in 1993, $149.9 million in 1992 and $144.5 million in 1991 and represent
10.0% of operating revenues for 1993. Taxes, except income taxes, increased
primarily due to higher property tax requirements in 1993.
27
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Continued)
The operating results of all non-utility subsidiaries are included in "Other,
net" under the caption "Other Income (Deductions)" in the Consolidated Statement
of Income (except for NIPSCO Exploration Company, Inc.'s [Exploration] net
results of operations, which are reported as a component of gas purchased for
resale, since Exploration is subject to Indiana Utility Regulatory Commission
[Commission] rate treatment). Interest on long-term debt, other interest and
amortization of debt discount and expense are reflected as a component of
"Interest and Other Charges."
Interest and other charges decreased $7.2 million and $10.2 million in 1993
and 1992, respectively. The 1993 decrease reflects Northern Indiana's reduced
interest rates on long-term debt outstanding and favorable interest rates on
short-term borrowings. The 1992 decrease reflects reduced long-term debt
outstanding and favorable interest rates on short-term borrowings. Preferred
dividend requirements of Northern Indiana decreased $1.0 million in 1992,
primarily due to the redemption of 276,800 shares of 12.55% Series Cumulative
Preferred Stock on October 15, 1992, with a portion of the proceeds from the
issue of 430,000 shares of 6.50% Series Cumulative Preferred Stock on October
13, 1992.
See Notes to Consolidated Financial Statements for a discussion of
Postretirement Benefits, Postemployment Benefits, Income Taxes, Allowance for
Funds Used During Construction, Carrying Charges and Deferred Depreciation, and
FERC Order No. 636.
ENVIRONMENTAL MATTERS
Because of major investments made in modern environmental control facilities
and the use of low sulfur coal, substantially all of Northern Indiana's
electric production facilities already comply with the future sulfur dioxide
limitations contained in acid deposition provisions of the Clean Air Act
Amendments of 1990 (CAAA), which became law on November 15, 1990.
Northern Indiana has successfully tested the use of low sulfur coal at Unit 12
at the Michigan City Generating Station, the only generating unit not in
compliance with the future sulfur dioxide limitations, and expects that unit to
be able to meet the limits with low sulfur coal. Northern Indiana estimates
that total costs of compliance with the CAAA sulfur dioxide regulations will
impact electric rates by less than 5% in the future.
The CAAA contain provisions that could lead to strict limitations on emissions
of nitrogen oxides and "air toxics," which may require significant capital
expenditures for control of these emissions. Northern Indiana cannot predict the
costs of complying with them, but Northern Indiana believes that any such
mandated costs would be recoverable through the rate making process.
The Environmental Protection Agency (EPA) has promulgated a permit program to
meet the requirements of the CAAA. This permit program, when enacted by Indiana,
will increase the fees associated with operating permits for air emissions.
Northern Indiana has received notices from the EPA that it is a "potentially
responsible party" (PRP) under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) and the Superfund Amendment and
Reauthorization Act (SARA) and may be required to share in the cost of cleanup
of several waste disposal sites identified by EPA. The sites are in various
stages of investigation and analysis to determine the amount of remedial costs
necessary to clean up the sites. At each of the sites, Northern Indiana is one
of several PRPs, and it is expected that remedial costs, as provided under
CERCLA and SARA, will be shared among them. At some sites Northern Indiana
and/or the other named PRPs are presently working with the EPA to clean up the
site and avoid the imposition of fines or added costs. While remedial costs at
these sites are not presently determinable, Northern Indiana's preliminary
analysis indicates its share of such costs should not have a significant impact
on the results of future operations.
Northern Indiana was notified by the Indiana Department of Environmental
Management (IDEM) of the release of a petroleum substance into the St. Mary's
River in Fort Wayne, Indiana, from the site of a former manufactured gas plant
formerly owned by Northern Indiana. In cooperation with IDEM, Northern Indiana
has taken steps to investigate and contain the substance. Northern Indiana is
continuing to monitor and investigate the site to determine what further
remedial action, if any, is required to be taken by it.
Northern Indiana was notified by Indiana Gas Company, Inc. (Indiana Gas) that
the site of a former manufactured gas plant in Lafayette, Indiana, believed to
have been formerly owned by Northern Indiana, was being investigated and
partially remediated by Indiana Gas pursuant to an administrative order issued
by IDEM. Northern Indiana is investigating its potential liability and
evaluating appropriate action.
The Utilities have an ongoing program to remain aware of laws and regulations
involved with hazardous waste. It is the Utilities' intent to continue to
evaluate their facilities and properties with respect to these rules and
identify any sites that would require corrective action. Northern Indiana has
commenced a voluntary program of investigating its former manufactured gas plant
sites in order to determine what, if any, remediation of any potential
28
<PAGE>
remaining waste materials may be required. Since this program is in its early
stages, it is not possible at this time to estimate what, if any, remediation
costs may be incurred.
The possibility that exposure to electric and magnetic fields emanating from
power lines, household appliances and other electric sources may result in
adverse health effects has been the subject of increased public, governmental
and media attention. A considerable amount of scientific research has been
conducted on this topic without definitive results. Research is continuing to
resolve scientific uncertainties.
LIQUIDITY AND CAPITAL RESOURCES
During the next few years, it is anticipated that the great majority of
earnings available for distribution of dividends will depend upon dividends paid
to Industries by Northern Indiana. See Notes to Consolidated Financial
Statements for a discussion of the Common Share Dividend.
Utility construction expenditures by Industries for 1993, 1992 and 1991 were
approximately $181 million, $172 million and $169 million, respectively.
Industries' total utility plant investment on December 31, 1993, was $5.3
billion.
On October 13, 1992, Northern Indiana issued and sold through an underwritten
public offering 430,000 shares of 6.50% Series Cumulative Preferred Stock for
$43 million. A portion of the proceeds was used to redeem the 12.55% Series
Cumulative Preferred Stock on October 15, 1992, with the remainder used for
general corporate purposes. The 6.50% Preferred shares are subject to mandatory
redemption in whole on October 14, 2002.
On April 5, 1993, Series V, First Mortgage Bonds, 8.90% of 2004, Series BB,
First Mortgage Bonds, 9 7/8% of 2004 and the Series KK, First Mortgage Bonds,
9 1/4% of 2016 were redeemed in total at the option of Northern Indiana.
Redemption was accomplished through the issuance of short-term debt.
In April 1993, Northern Indiana sold $125,000,000 in Medium-Term Notes, Series
B, due from 1 year to 30 years from date of issue. The proceeds from the sale of
the notes were used to repay short-term debt which was incurred to pay at
maturity certain of Northern Indiana's previously outstanding medium-term notes
and First Mortgage Bonds.
On June 2, 1993, Northern Indiana received authorization from the Commission
to issue up to $349,750,000 of Medium-Term Notes, Series C, due from 1 year to
30 years from date of issue for refinancing purposes and paying outstanding
long-term debt at maturity. A portion of the proceeds was used to repay short-
term debt which was incurred in connection with the First Mortgage Bonds
redeemed on April 5, 1993, and a portion was used for early redemption on August
2, 1993, of $88 million of Northern Indiana's medium-term notes due in 1996.
Through December 31, 1993, $329.2 million of Medium-Term Notes, Series C, have
been issued.
On December 9, 1992, Capital Markets issued $72.5 million (at maturity) of
Zero Coupon Notes, due December 1, 1997 which are not redeemable prior to
maturity. The proceeds from the sale of the notes were used to repay Capital
Markets' short-term bank borrowings. The notes are unsecured debt obligations of
Capital Markets.
Capital Markets has a $150 million revolving Credit Agreement which will
terminate October 21, 1995, unless extended by its terms. This facility provides
short-term financing flexibility at the holding company level and also serves as
the back-up instrument for a commercial paper program. As of December 31, 1993,
there were no borrowings outstanding under this agreement.
Capital Markets also has $50 million of money market lines of credit. As of
December 31, 1993, there were no borrowings outstanding under these lines of
credit.
As of December 31, 1993, Capital Markets had $47.0 million in commercial paper
outstanding, having a weighted average interest rate of 3.48%.
The obligations of Capital Markets are subject to a Support Agreement between
Industries and Capital Markets, under which Industries has committed to make
payments of interest and principal on Capital Markets securities in the event of
a failure to pay by Capital Markets. Restrictions in the Support Agreement
prohibit recourse on the part of Capital Markets' investors against the stock
and assets of Northern Indiana which are owned by Industries. Under the terms of
the Support Agreement, in addition to the cash flow of cash dividends paid to
Industries by any of its consolidated subsidiaries, the assets of Industries,
other than the stock and assets of Northern Indiana, are available as recourse
to holders of Capital Markets' securities. The carrying value of those assets
other than Northern Indiana, reflected in the consolidated financial statements
of Industries, is approximately $299.1 million at December 31, 1993.
NIFL has an unsecured revolving credit agreement with a bank for $2 million.
Borrowings bear interest at the bank's prevailing prime rate. As of December 31,
1993, there were no borrowings under this agreement.
Cash flow from operations has provided sufficient liquidity to meet current
operating requirements. Because of the seasonal nature of the utility business
and the construction program, Northern Indiana makes use of commercial paper
intermittently as short-term financing. As of December 31, 1993, Northern
Indiana had $27.9 million in commercial paper outstanding, having a weighted
average interest rate of 3.56%.
29
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF
OPERATION (Concluded)
Northern Indiana has a $250 million revolving Credit Agreement with several
banks which terminates September 21, 1996, unless extended by its terms. As of
December 31, 1993, there were no borrowings outstanding under this agreement. In
addition, Northern Indiana has $14.2 million in lines of credit which run to May
31, 1994. As of December 31, 1993, there were no borrowings under these lines of
credit. The Credit Agreement and lines of credit are also available to support
the issuances of commercial paper.
Northern Indiana also has $173.5 million of money market lines of credit. As
of December 31, 1993, $40.0 million of borrowings were outstanding under these
lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At December
31, 1993, $20.0 million of borrowings were outstanding under this facility.
On April 5, 1993, Northern Indiana executed a 364-day $50 million private
placement loan.
During recent years, Northern Indiana has been able to finance its
construction program with internally generated funds and expects to be able to
meet future commitments through such funds.
The Utilities do not expect the effects of inflation at current levels to have
a significant impact on their results of operations, ability to contain cost
increases or need to seek timely and adequate rate relief. The Utilities do not
anticipate the need to file for gas and electric base rate increases in the near
future.
(Selected Statistical Charts)
(Capitalization Ratios Chart)
<TABLE>
<CAPTION>
COMMON PREFERRED AND
LONG-TERM SHARE PREFERENCE
YEAR DEBT EQUITY STOCK TOTAL
- ---- --------- ------ ------------- -------
<S> <C> <C> <C> <C>
1984 48.9% 38.8% 12.3% 100.0%
1985 53.6% 34.8% 11.6% 100.0%
1986 55.3% 33.6% 11.1% 100.0%
1987 52.7% 36.1% 11.2% 100.0%
1988 52.0% 41.0% 7.0% 100.0%
1989 52.3% 40.8% 6.9% 100.0%
1990 49.2% 42.6% 8.2% 100.0%
1991 47.1% 44.6% 8.3% 100.0%
1992 46.0% 45.1% 8.9% 100.0%
1993 47.9% 44.0% 8.1% 100.0%
</TABLE>
(Cost of Fuel for Electric Generation Chart)
<TABLE>
<CAPTION>
YEAR (MILLS PER KWH)
---- ---------------
<S> <C>
1984 26.89
1985 27.85
1986 23.92
1987 21.02
1988 19.09
1989 18.01
1990 18.13
1991 17.86
1992 16.82
1993 16.65
</TABLE>
(Cost of Gas Purchased for Resale Chart)
<TABLE>
<CAPTION>
DOLLARS
YEAR PER DTH
---- -------
<S> <C>
1984 3.37
1985 3.42
1986 3.20
1987 2.94
1988 3.03
1989 3.21
1990 3.40
1991 3.16
1992 3.31
1993 3.27
</TABLE>
30
<PAGE>
CONSOLIDATED STATEMENT OF INCOME
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
- -------------------------------------------------------------------------------
Operating Revenues: (Dollars in thousands)
<S> <C> <C> <C>
Gas....................................... $ 714,229 $ 666,221 $ 601,920
Electric.................................. 963,643 916,135 933,241
---------- ---------- ----------
1,677,872 1,582,356 1,535,161
---------- ---------- ----------
Cost of Energy:
Gas purchased for resale.................. 399,590 379,564 339,206
Fuel for electric generation.............. 244,552 242,385 248,428
Power purchased........................... 18,225 11,028 8,151
---------- ---------- ----------
662,367 632,977 595,785
---------- ---------- ----------
Operating Margin............................ 1,015,505 949,379 939,376
---------- ---------- ----------
Operating Expenses and Taxes (except income):
Operation................................. 314,461 285,131 271,298
Maintenance............................... 83,548 85,451 93,508
Depreciation and amortization............. 187,000 182,717 175,721
Taxes (except income)..................... 71,621 69,555 65,731
---------- ---------- ----------
656,630 622,854 606,258
---------- ---------- ----------
Operating Income Before Utility Income Taxes 358,875 326,525 333,118
---------- ---------- ----------
Utility Income Taxes........................ 96,830 80,308 78,764
---------- ---------- ----------
Operating Income............................ 262,045 246,217 254,354
---------- ---------- ----------
Other Income (Deductions):
Allowance for funds, other than borrowed
funds, used during construction......... 1 30 (5)
Other, net................................ (2,071) 1,454 258
---------- ---------- ----------
(2,070) 1,484 253
---------- ---------- ----------
Income Before Interest and Other Charges.... 259,975 247,701 254,607
---------- ---------- ----------
Interest and Other Charges:
Interest on long-term debt................ 82,121 87,660 100,381
Other interest............................ 9,238 9,955 7,094
Allowance for borrowed funds used during
construction and carrying charges....... (1,447) (543) (1,346)
Amortization of premium, reacquisition
premium, discount and expense on debt,
net..................................... 3,582 3,323 3,404
Dividend requirements on preferred
stocks of subsidiary.................... 10,341 10,658 11,686
---------- ---------- ----------
103,835 111,053 121,219
---------- ---------- ----------
Net Income.................................. 156,140 136,648 133,388
Dividend requirements on preferred shares... 3,063 3,063 3,063
---------- ---------- ----------
Balance available for common shareholders... $ 153,077 $ 133,585 $ 130,325
========== ========== ==========
Average common shares outstanding........... 66,136,396 66,715,941 67,035,495
Earnings per average common share........... $2.31 $2.00 $1.94
========== ========== ==========
Dividends declared per common share......... $1.35 $1.26 $1.18
========== ========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
31
<PAGE>
CONSOLIDATED BALANCE SHEET
<TABLE>
<CAPTION>
December 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
ASSETS (Dollars in thousands)
Utility Plant, at original cost (including
construction work in progress of $189,634 and
$144,228, respectively):
Electric........................................... $3,778,016 $3,698,794
Gas................................................ 1,216,178 1,096,467
Common............................................. 289,242 258,285
---------- ----------
5,283,436 5,053,546
Less--Accumulated provision for depreciation and
amortization..................................... 2,052,221 1,876,618
---------- ----------
Total utility plant............................ 3,231,215 3,176,928
---------- ----------
Other Property and Investments:
Other property, at cost, less accumulated
provision for depreciation....................... 124,184 96,470
Investments, at equity............................. 19,142 33,479
Investments, at cost............................... 6,189 6,404
---------- ----------
Total other property and investments........... 149,515 136,353
---------- ----------
Current Assets:
Cash and cash equivalents.......................... 16,140 41,357
Accounts receivable, less reserve of $4,855 and
$5,121, respectively............................. 115,129 99,673
Fuel adjustment clause............................. 6,440 4,335
Gas cost adjustment clause......................... 35,659 45,358
Materials and supplies, at average cost............ 67,120 73,883
Electric production fuel, at average cost.......... 21,533 41,945
Natural gas in storage, at last-in, first-out cost. 62,870 36,653
Prepayments and other.............................. 11,118 12,466
---------- ----------
Total current assets........................... 336,009 355,670
---------- ----------
Deferred Charges:
Unamortized reacquisition premium on debt and debt
expenses......................................... 54,078 43,903
Unamortized R.M. Schahfer Unit 17 and Unit 18
carrying charges and deferred depreciation....... 79,198 83,415
Other.............................................. 62,309 11,672
---------- ----------
Total deferred charges......................... 195,585 138,990
---------- ----------
$3,912,324 $3,807,941
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
32
<PAGE>
<TABLE>
<CAPTION>
December 31, 1993 1992
- --------------------------------------------------------------------------------
<S> <C> <C>
CAPITALIZATION AND LIABILITIES (Dollars in thousands)
Capitalization:
Common shareholders' equity........................... $1,094,672 $1,034,530
Preferred stocks--
Northern Indiana Public Service Company:
Series without mandatory redemption provisions.... 97,753 97,917
Series with mandatory redemption provisions....... 68,462 70,668
NIPSCO Industries, Inc.:
Series with mandatory redemption provisions....... 35,000 35,000
Long-term debt, excluding amounts due within one year. 1,192,500 1,054,454
---------- ----------
Total capitalization............................ 2,488,387 2,292,569
---------- ----------
Current Liabilities:
Obligations due within one year--
Northern Indiana Public Service Company:
Commercial paper.................................. 27,895 76,500
First mortgage bonds--
Series M, 4 1/2%--due April 15, 1993............. -- 21,916
Medium-term notes--
Issued at interest rates between 9.15% and 9.50%
with a weighted average interest rate of 9.18%
and various maturities between January 14,
1994 and April 11, 1994....................... 65,000 53,000
Notes payable--
Issued at interest rates between 3.30% and 4.05%
with a weighted average interest rate of 3.78%
and various maturities between January 3, 1994
and April 4, 1994............................. 110,000 208,701
NIPSCO Capital Markets, Inc.:
Commercial paper.................................. 47,000 --
Note payable--
4.06%--due January 25, 1993..................... -- 35,000
Medium-term notes--
Issued at interest rates between 8.95% and 9.45%
with a weighted average interest rate of 9.12%
and various maturities between July 28, 1993
and September 8, 1993......................... -- 15,000
---------- ----------
249,895 410,117
---------- ----------
Other current liabilities--
Accounts payable.................................. 192,543 166,832
Sinking funds due within one year................. 7,357 4,611
Dividends declared on common and preferred stocks. 26,165 24,241
Customer deposits................................. 9,471 9,103
Taxes accrued..................................... 74,562 73,621
Interest accrued.................................. 12,253 13,991
Other accruals.................................... 45,118 39,556
---------- ----------
367,469 331,955
---------- ----------
Total current liabilities....................... 617,364 742,072
---------- ----------
Other:
Deferred income taxes................................. 576,071 586,178
Deferred investment tax credits, being amortized
over life of related property....................... 129,681 136,428
Deferred credits...................................... 37,767 41,257
Regulatory income tax liability....................... 25,371 --
Other noncurrent liabilities.......................... 37,683 9,437
---------- ----------
Total other..................................... 806,573 773,300
---------- ----------
Commitments and Contingencies (see notes)
$3,912,324 $3,807,941
========== ==========
</TABLE>
33
<PAGE>
CONSOLIDATED STATEMENT OF CAPITALIZATION
<TABLE>
<CAPTION>
December 31, 1993 1992
- ---------------------------------------------------------------------------------------------------------------------------------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Common shareholders' equity................................................................ $1,094,672 44.0% $1,034,530 45.1%
---------- ----------
Preferred Stocks, which are redeemable solely at option of issuer:
Northern Indiana Public Service Company
Cumulative preferred stock--$100 par value--
4 1/4% series--211,298 and 211,341 shares outstanding, respectively.................. 21,130 21,134
4 1/2% series--79,996 shares outstanding............................................. 8,000 8,000
4.22% series--106,200 shares outstanding............................................. 10,620 10,620
4.88% series--100,000 shares outstanding............................................. 10,000 10,000
7.44% series--41,900 shares outstanding.............................................. 4,190 4,190
7.50% series--34,842 shares outstanding.............................................. 3,484 3,484
Premium on preferred stock........................................................... 254 254
Cumulative preferred stock--no par value--
Adjustable Rate (6.00% at December 31, 1993)--
Series A (stated value--$50 per share), 801,500 and 804,700 shares outstanding,
respectively....................................................................... 40,075 40,235
---------- ----------
97,753 3.9% 97,917 4.3%
---------- ----------
Redeemable Preferred Stocks, subject to mandatory redemption requirements or whose
redemption is outside the control of issuer:
Northern Indiana Public Service Company
Cumulative preferred stock--$100 par value--
8.85% series--112,500 and 125,000 shares outstanding, respectively................... 11,250 12,500
7 3/4% series--61,122 and 66,676 shares outstanding, respectively.................... 6,112 6,668
8.35% series--81,000 and 85,000 shares outstanding, respectively..................... 8,100 8,500
Cumulative preferred stock--no par value--
6.50% series--430,000 shares outstanding............................................. 43,000 43,000
---------- ----------
68,462 2.7% 70,668 3.1%
---------- ----------
NIPSCO Industries, Inc.
Cumulative preferred shares--without par value--
8.75% series (stated value--$100 per share), 350,000 shares outstanding.............. 35,000 1.4% 35,000 1.5%
---------- ----------
Long-term debt............................................................................. 1,192,500 48.0% 1,054,454 46.0%
---------- ------ ---------- ------
Total capitalization............................................................... $2,488,387 100.0% $2,292,569 100.0%
========== ====== ========== ======
</TABLE>
The accompanying notes to consolidated financial statements are an integral part
of this statement.
34
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF LONG-TERM DEBT
December 31, 1993 1992
(Dollars in thousands)
<S> <C> <C>
Northern Indiana Public Service Company
First mortgage bonds--
Series N, 4 5/8%--due May 15, 1995............................... $ 22,436 $ 22,436
Series O, 6 3/8%--due September 1, 1997.......................... 27,507 27,507
Series P, 6 7/8%--due October 1, 1998............................ 15,671 15,671
Series S, 8 1/8%--due May 1, 2001................................ 41,000 41,485
Series T, 7 1/2%--due April 1, 2002.............................. 40,643 40,643
Series U, 8 1/8%--due July 15, 2003.............................. 55,739 55,739
Series V, 8.90%--due April 1, 2004............................... -- 56,584
Series Y, 8 3/8%--due October 15, 2006........................... 50,575 50,575
Series Z, 8 1/8%--due August 15, 2007............................ 43,069 43,069
Series AA, 8 1/2%--due November 1, 2007........................... 33,407 33,407
Series BB, 9 7/8%--due June 15, 2004.............................. -- 13,500
Series KK, 9 1/4%--due December 1, 2016........................... -- 114,500
Series LL, 7 1/2%--due October 15, 2014........................... 41,000 41,000
Series MM, 7 1/2%--due October 15, 2004........................... 10,000 10,000
Series NN, 7.10%--due July 1, 2017................................ 55,000 55,000
---------- ----------
Total......................................................... 436,047 621,116
---------- ----------
Pollution control notes and bonds--
Series A note--
City of Michigan City--5.70% due October 1, 2003................. 21,500 21,500
Series 1978 note--
County of Jasper--6.70% due November 1, 2008..................... 18,000 18,000
Series 1988 bonds--Jasper County--Series A, B and C
2.44% weighted average at December 31, 1993, due November 1, 2016 130,000 130,000
Series 1988 bonds--Jasper County--Series D
2.46% weighted average at December 31, 1993, due November 1, 2007 24,000 24,000
---------- ----------
Total......................................................... 193,500 193,500
---------- ----------
Medium-term notes--
Issued at interest rates between 5.83% and 7.64%, with a weighted
average interest rate of 6.82% and various maturities between
April 6, 1998 and August 17, 2023................................. 454,200 153,000
---------- ----------
Unamortized premium and discount on long-term debt, net.............. (4,663) (3,156)
---------- ----------
Total long-term debt of Northern Indiana Public Service Company 1,079,084 964,460
---------- ----------
NIPSCO Capital Markets, Inc.
Medium-term note--9.95%--due June 10, 1996......................... 7,500 7,500
Unamortized discount............................................... (16) (31)
Zero Coupon Notes--7.57%, $72,500 at maturity, due December 1, 1997 54,191 50,306
---------- ----------
Total long-term debt of NIPSCO Capital Markets, Inc........... 61,675 57,775
---------- ----------
NIPSCO Development Company, Inc.
Lake Erie Land Company--Notes Payable--
Interest rates between 6.00% and 7.00% with a weighted average
interest rate of 6.42% and various maturities between
July 5, 1996 and June 30, 1998................................. 3,256 3,809
Elm Energy and Recycling (UK), Ltd.
Term Loan Facility--6.79%--due December 31, 2004................. 41,577 28,292
Metals Technology Corporation--Notes Payable--
Mortgage note, 6.50%--due September 25, 2005..................... 108 118
---------- ----------
Total long-term debt of NIPSCO Development Company, Inc....... 44,941 32,219
---------- ----------
Northern Indiana Fuel and Light Company, Inc.
Sinking Fund Debentures--
Series G, 9.50%,--due August 1, 2001............................. 3,000 --
Series H, 10.80%,--due August 1, 2008............................ 3,800 --
---------- ----------
Total long-term debt of Northern Indiana Fuel and Light
Company, Inc................................................ 6,800 --
---------- ----------
Total long-term debt, excluding amounts due in one year....... $1,192,500 $1,054,454
========== ==========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
35
<PAGE>
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENT OF CASH FLOWS
Year Ended December 31, 1993 1992 1991
(Dollars in thousands)
<S> <C> <C> <C>
Cash flows from operating activities:
Net income................................................... $ 156,140 $ 136,648 $ 133,388
Adjustments to reconcile net income to net cash:
Depreciation and amortization................................ 187,000 182,717 175,721
Deferred federal and state operating income taxes, net....... 2,122 14,503 6,769
Deferred investment tax credits, net......................... (7,446) (7,452) (6,295)
Change in certain assets and liabilities*--
Accounts receivable, net................................... (12,255) 18,284 (45,804)
Electric production fuel................................... 20,412 (10,861) 5,376
Materials and supplies..................................... 7,344 2,394 2,513
Natural gas in storage..................................... (24,685) 3,074 4,962
Accounts payable........................................... 23,507 (4,521) (1,670)
Taxes accrued.............................................. 541 16,593 (9,667)
Fuel adjustment clause..................................... (2,105) 6,965 (12,571)
Gas cost adjustment clause................................. 10,641 (43,565) 3,475
Other, net................................................... 11,462 3,638 (13,564)
----------- ----------- ---------
Net cash provided by operating activities................ 372,678 318,417 242,633
----------- ----------- ---------
Cash flows provided by (used in) investing activities:
Utility construction expenditures............................ (180,852) (172,329) (168,958)
Acquisition and construction expenditures related to
Crossroads Pipeline Company................................ (24,361) -- --
Purchase of Kokomo Gas and Fuel Company, net of cash acquired -- (43,752) --
Purchase of Northern Indiana Fuel and Light Company,
net of cash acquired....................................... (30,137) -- --
Return of Capital to Harbor Coal Company..................... 32,435 -- --
Other, net................................................... (53,061) (78,566) (13,658)
----------- ----------- ---------
Net cash used in investing activities.................... (255,976) (294,647) (182,616)
----------- ----------- ---------
Cash flows provided by (used in) financing activities:
Issuance of long-term debt................................... 468,269 82,456 55,000
Issuance of short-term debt.................................. 1,254,507 1,865,713 398,175
Issuance of preferred shares................................. -- 43,000 --
Net change in commercial paper............................... (1,605) (21,040) 24,036
Retirement of long-term debt................................. (377,069) (91,319) (155,408)
Retirement of short-term debt................................ (1,388,208) (1,744,812) (275,375)
Retirement of preferred stock................................ (2,170) (30,478) (5,833)
Issuance of common shares.................................... 36,364 53,911 10,453
Acquisition of treasury shares............................... (40,730) (76,281) (55,606)
Cash dividends paid on common shares......................... (88,214) (83,379) (77,832)
Cash dividends paid on preferred shares...................... (3,063) (3,063) (2,690)
Other, net................................................... -- 582 1,240
----------- ----------- ---------
Net cash used in financing activities.................... (141,919) (4,710) (83,840)
----------- ----------- ---------
Net increase (decrease) in cash and cash equivalents........... (25,217) 19,060 (23,823)
Cash and cash equivalents at beginning of period............... 41,357 22,297 46,120
----------- ----------- ---------
Cash and cash equivalents at end of period..................... $ 16,140 $ 41,357 $ 22,297
=========== =========== =========
</TABLE>
*Net of effects from purchase of Kokomo Gas and Fuel Company and Northern
Indiana Fuel and Light Company.
The accompanying notes to consolidated financial statements are an integral part
of this statement.
36
<PAGE>
CONSOLIDATED STATEMENT OF COMMON SHAREHOLDERS' EQUITY
<TABLE>
<CAPTION>
Dollars in Thousands Shares
---------------------------------------------------------------------------------------------------
Additional Unearned Currency
Common Paid-In Retained Treasury Compen- Translation Common Treasury
Total Shares Capital Earnings Shares sation Adjustment Shares Shares
========================= ========== ======== ========== ======== ======== ======== =========== ========= ==========
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Balance, January 1, 1991... $1,005,982 $860,776 $11,323 $217,636 $ (81,670) $(2,083) $ -- 73,375,371 (4,501,142)
Net income................. 133,388 133,388
Dividends:
Preferred shares......... (3,063) (3,063)
Common shares............ (78,509) (78,509)
Treasury shares acquired... (55,606) (55,606) (2,762,153)
Issued:
Employee stock purchase
plan.................... 434 434 27,280
Long-term incentive plan. 1,677 408 3,505 (2,236) 185,875
Conversion of 4 1/4%
convertible debentures.. 6,806 6,806 346,384
Other...................... 557 210 (291) 638
---------- -------- ------- -------- --------- ------- ------- ---------- ----------
Balance, December 31, 1991. $1,011,666 $867,582 $11,941 $269,161 $(133,337) $(3,681) $ -- 73,721,755 (7,050,140)
---------- -------- ------- -------- --------- ------- ------- ---------- ----------
Net income................. 136,648 136,648
Dividends:
Preferred shares......... (3,063) (3,063)
Common shares............ (84,437) (84,437)
Treasury shares acquired... (76,281) (76,281) (3,135,902)
Issued:
Employee stock purchase
plan.................... 327 327 20,614
Long-term incentive plan. 3,307 51 3,705 (449) 183,125
Kokomo Gas acquisition... 46,828 10,232 36,596 1,848,588
Conversion of 4 1/4%
convertible debentures.. 3,348 3,348 170,354
Other...................... (3,813) (1,449) (1,114) 1,096 (2,346) (44)
---------- -------- ------- -------- --------- ------- ------- ---------- ----------
Balance, December 31, 1992. $1,034,530 $870,930 $20,775 $317,195 $(168,990) $(3,034) $(2,346) 73,892,109 (8,133,759)
---------- -------- ------- -------- --------- ------- ------- ---------- ----------
Net income................. 156,140 156,140
Dividends:
Preferred shares......... (3,063) (3,063)
Common shares............ (89,384) (89,384)
Treasury shares acquired... (40,730) (40,730) (1,325,085)
Issued:
Employee stock purchase
plan.................... 433 138 295 18,561
Long-term incentive plan. 5,666 63 5,696 (93) 264,150
NIFL acquisition......... 30,172 6,655 23,517 1,112,862
Other...................... 908 1,443 (535)
---------- -------- ------- -------- --------- ------- ------- ---------- ----------
Balance, December 31, 1993. $1,094,672 $870,930 $27,631 $380,888 $(180,212) $(1,684) $(2,881) 73,892,109 (8,063,271)
========== ======== ======= ======== ========= ======= ======= ========== ==========
</TABLE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
HOLDING COMPANY STRUCTURE
NIPSCO Industries, Inc. (Industries) was incorporated in Indiana on September
22, 1987, and became the parent of Northern Indiana Public Service Company
(Northern Indiana) on March 3, 1988, after the shareholders of Northern Indiana
approved a corporate restructuring pursuant to which, Northern Indiana's
outstanding common shares were exchanged on a share-for-share basis with common
shares of Industries. The other securities of Northern Indiana, including its
First Mortgage Bonds, pollution control notes and bonds, other debt securities
and each series of preferred stock, were not changed by the restructuring and
they continue to be outstanding obligations and securities of Northern Indiana.
Northern Indiana is a public utility operating company supplying electricity and
gas to the public in the northern third of Indiana.
At December 31, 1993, Industries had five direct, wholly-owned subsidiaries in
addition to Northern Indiana, which are all Indiana corporations: NIPSCO
Development Company, Inc. (Development), NIPSCO Energy Services, Inc.
(Services), NIPSCO Capital Markets, Inc. (Capital Markets), Kokomo Gas and Fuel
Company (Kokomo Gas) and Northern Indiana Fuel and Light Company, Inc. (NIFL).
Kokomo Gas is a public utility operating company incorporated in Indiana in
1917, engaged in supplying natural gas to the public. It operates in the city of
Kokomo, Indiana and the surrounding area in 6 counties having a population of
approximately 100,000, and serves approximately 31,000 customers at December 31,
1993. The Kokomo Gas service territory is contiguous to Northern Indiana's gas
service territory.
On March 31, 1993, Industries acquired NIFL, a natural gas utility
headquartered in Auburn, Indiana, that serves approximately 28,700 customers at
December 31, 1993, in the northeast corner of the state, contiguous to Northern
Indiana's service territory. Industries issued 1,112,862 common shares and
$26,311 cash in exchange for all of the common shares of NIFL.
Development makes various investments, including real estate. Services
coordinates the energy-related diversifi-
37
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
cation ventures and has four wholly-owned subsidiaries: NIPSCO Fuel Company,
Inc. (Fuel) which makes investments in gas and oil exploration and development
ventures; NIPSCO Energy Trading Corp. (NETCO) which is engaged in gas and other
energy brokering businesses; NI-TEX, Inc. (NI-TEX) which is an intrastate
natural gas transmission and supply company and Crossroads Pipeline Company
(Crossroads), a natural gas transmission company. Capital Markets handles
financing for the non-utility ventures of Industries and subsidiaries.
In December, 1993, Industries signed a letter of intent for the sale of NETCO
and Services' 51 percent ownership in Triumph Natural Gas, Inc., to Houston
based Eastex Energy, Inc., (Eastex). The proposed transaction will have an
anticipated value in excess of $10 million. Industries would acquire a 25
percent equity ownership of Eastex through common and preferred stock.
Development is a 95% shareholder in Elm Energy and Recycling (UK) Ltd. (Elm
Energy), which was formed to develop, own and operate a waste-to-energy
generating plant in Wolverhampton, England. The 30 megawatt tire-fueled
generating station is expected to use about 8-10 million automobile and truck
tires a year and began operations in late 1993.
Northern Indiana has two subsidiaries, Shore Line Shops, Inc. (Shore Line) and
NIPSCO Exploration Company, Inc. (Exploration). Shore Line undertakes the
purchase and sale of transferred employees' residences on behalf of Northern
Indiana. Exploration has investment interests, which are subject to Indiana
Utility Regulatory Commission (Commission) rate treatment, in off-shore Gulf of
Mexico oil and gas leases.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of NIPSCO
Industries, Inc., its utility subsidiaries Northern Indiana, Kokomo Gas, NIFL
and Crossroads (Utilities), and all non-utility subsidiaries. In addition, the
consolidated financial statements of Northern Indiana include its consolidated
subsidiaries, Shore Line and Exploration. The operating results of all non-
utility subsidiaries are included in "Other, net" under the caption "Other
Income (Deductions)" in the Consolidated Statement of Income (except for
Exploration's net results of operations, which are reported as a component of
"Gas purchased for resale," since Exploration is subject to Commission rate
treatment). Interest on long-term debt, other interest and amortization of debt
discount and expense are reflected as a component of "Interest and Other
Charges." All significant intercompany items have been eliminated in
consolidation. Certain reclassifications were made to conform the prior years'
financial statements to the current presentation.
OPERATING REVENUES
Revenues are recorded based on estimated service rendered but are billed to
customers monthly on a cycle basis.
DEPRECIATION AND MAINTENANCE
Northern Indiana provides depreciation on a straight-line method over the
remaining service lives of the electric,gas and common properties. The
provisions as a percentage of the cost of depreciable utility plant were
approximately 4.0% for year 1993, 4.0% for year 1992 and 3.9% for year 1991. The
depreciation rates for electric and gas properties are 3.55% and 4.92%,
respectively.
Kokomo Gas provides depreciation on the original cost of utility plant in
service using straight-line rates that averaged approximately 3.2% for the years
1993 and 1992.
NIFL provides depreciation on the original cost of utility plant in service
using straight-line rates that averaged approximately 2.75%.
The Utilities follow the practice of charging maintenance and repairs,
including the cost of renewals of minor items of property, to maintenance
expense accounts, except that repairs of transportation and service equipment
are charged to clearing accounts and redistributed to operating expense and
other accounts. When property which represents a retirement unit is replaced or
removed, the cost of such property is credited to utility plant, and such cost,
together with the cost of removal less salvage, is charged to the accumulated
provision for depreciation.
COAL RESERVES
Northern Indiana has a long-term mining contract to mine its coal reserves
through the year 2001. The costs of these reserves are being recovered through
the rate making process as such coal reserves are used to produce electricity.
OIL AND NATURAL GAS ACCOUNTING
Fuel uses the full-cost method of accounting for its oil and natural gas
production activities. Under this method all costs incurred in the acquisition,
exploration and development of oil and natural gas properties are capitalized
and amortized on the units-of-production basis.
POWER PURCHASED
Power purchases and net interchange power with other electric utilities under
interconnection agreements are included in Cost of Energy under the caption
"Power purchased."
ACCOUNTS RECEIVABLE
At December 31, 1993, Northern Indiana had sold $100 million of certain of its
accounts receivable under a sales agreement which expires May 31, 1997.
STATEMENT OF CASH FLOWS
For the purposes of the Consolidated Statement of Cash Flows, Industries
considers temporary cash investments with an original maturity of three months
or less to be cash equivalents.
Cash paid during the years reported for income taxes and interest was as
follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Income taxes.............. $ 93,155 $ 65,532 $ 90,136
Interest, net of amounts
capitalized............. $ 88,353 $ 96,909 $104,985
</TABLE>
FUEL ADJUSTMENT CLAUSE
All metered electric rates contain a provision for adjustment in charges for
electric energy to reflect increases and decreases in the cost of fuel and the
fuel cost of purchased power through operation of a fuel adjustment clause. As
prescribed by order of the
38
<PAGE>
Commission applicable to metered retail rates, the adjustment factor has been
calculated based on the estimated cost of fuel and the fuel cost of purchased
power in a future three-month period. If two statutory requirements relating to
expense and return levels are satisfied, any under or overrecovery caused by
variances between estimated and actual cost in a given three-month period will
be included in a future filing. Northern Indiana records any under or
overrecovery as a current asset or current liability until such time as it is
billed or refunded to its customers. The fuel adjustment factor is subject to a
quarterly hearing by the Commission and remains in effect for a three-month
period.
GAS COST ADJUSTMENT CLAUSE
All metered gas rates contain an adjustment factor which reflects the cost of
purchased gas, contracted gas storage and storage transportation charges. The
Utilities record any under or overrecovery as a current asset or current
liability until such time as it is billed or refunded to their customers. The
gas cost adjustment factor for Northern Indiana is subject to a quarterly
hearing by the Commission and remains in effect for a three-month period. The
gas cost adjustment factors for Kokomo Gas and NIFL are subject to a semi-annual
hearing by the Commission and remain in effect for a six-month period. If the
statutory requirement relating to the level of return is satisfied, any under or
overrecovery caused by variances between estimated and actual cost in a given
three or six month period will be included in a future filing. See Rate Matters
(Take-or-Pay Pipeline Gas Costs) for a discussion of take-or-pay charges.
NATURAL GAS IN STORAGE
Based on the average cost of gas purchased in December, 1993 and 1992, the
estimated replacement cost of gas in storage (current and non-current) at
December 31, 1993 and 1992, exceeded the stated LIFO cost by approximately $55
million and $65 million, respectively.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION
Allowance for funds used during construction (AFUDC) is charged to
construction work in progress during the period of construction and represents
the net cost of borrowed funds used for construction purposes and a reasonable
rate upon other (equity) funds. Under established regulatory rate practices,
after the construction project is placed in service, Northern Indiana is
permitted to include in the rates charged for utility services (a) a fair
return on and (b) depreciation of such AFUDC included in plant in service.
At January 1, 1991, a pretax rate of 6.5% for all construction was being used;
effective January 1, 1992, the rate decreased to 4.0% and effective January 1,
1993, the rate decreased to 3.7%.
CARRYING CHARGES AND DEFERRED DEPRECIATION
Upon completion of each of Units 17 and 18, Northern Indiana capitalized the
carrying charges and deferred depreciation in accordance with orders of the
Commission until the cost of each unit was allowed in rates. Such carrying
charges and deferred depreciation are being amortized over the remaining life of
each unit.
Northern Indiana began capitalizing carrying charges and deferring
depreciation and certain operating expenses relating to its scrubber service
agreement upon completion of the flue gas desulfurization plant in June, 1992,
at Northern Indiana's Bailly Generating Station in accordance with an order of
the Commission. Capitalization of carrying charges and deferral of depreciation
and certain operating expenses will continue until the earlier of December 31,
1995, or the date a final order considering the costs in rates is approved by
the Commission.
FOREIGN CURRENCY TRANSLATION
Translation gains or losses are based upon the end-of-period exchange rate and
are recorded as a separate component of shareholders' equity.
INCOME TAXES
Effective January 1, 1993, Industries adopted Statement of Financial
Accounting Standards (SFAS) No. 109, "Accounting for Income Taxes," which
requires the use of the liability method of accounting for income taxes. Under
the liability method, deferred income taxes are recognized, at currently enacted
income tax rates, to reflect the tax effect of temporary differences between the
financial statement and tax bases of assets and liabilities. Such temporary
differences are the result of provisions in the income tax law that either
require or permit certain items to be reported on the income tax return in a
different period than they are reported in the financial statements.
To implement SFAS No. 109, certain adjustments were made to deferred income
taxes. To the extent such income taxes are recoverable or payable through future
rates, regulatory assets and liabilities have been recorded in the Consolidated
Balance Sheet. These adjustments include the amounts reflecting the Utilities'
obligation to credit to ratepayers deferred income taxes provided at rates
higher than the current federal tax rate which are currently being credited to
ratepayers using the average rate assumption method required by the Tax Reform
Act of 1986 and the Commission. The initial application of this statement was
reflected in the January 1, 1993, Consolidated Balance Sheet, with no impact on
results of operations or cash flow. The effect of the implementation entry on
regulated activities was to record a net decrease in deferred income taxes and
provide a net regulatory income tax liability of approximately $52 million. On
August 10, 1993, the Federal statutory income tax rate was increased to 35%, a
change of 1%, effective January 1, 1993. The impact of this change and the
change in temporary differences through December 31, 1993, has reduced the
balance of the net regulatory liability to $25 million at December 31, 1993. The
net regulatory income tax liability is derived from regulatory assets primarily
attributable to undepreciated AFUDC-equity and the cumulative net amount of
other income tax timing differences for which deferred taxes had not been
provided in the past when regulators did not recognize such taxes as costs in
the rate making process and regulatory liabilities primarily attributable to
deferred taxes provided at rates in excess of the current statutory rate, as
discussed above, and unamortized deferred investment tax credits.
39
<PAGE>
- -------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- -------------------------------------------------------------------------------
The components of the net deferred income tax liability at January 1, 1993,
and December 31, 1993, are as
follows:
<TABLE>
<CAPTION>
Jan. 1, Dec. 31,
1993 1993
--------- --------
(Dollars in thousands)
<S> <C> <C>
Deferred tax liabilities--
Accelerated depreciation and other property
differences................................... $641,209 $677,493
AFUDC-equity.................................... 46,065 44,863
Adjustment clauses.............................. 19,281 16,876
Take-or-pay gas costs........................... 10,033 4,234
Reacquisition premium on debt................... 14,020 16,844
Deferred tax assets--
Deferred investment tax credits................. (50,438) (49,174)
Removal costs................................... (82,207) (93,279)
Regulatory income tax liability................. (19,128) (9,582)
Other, net...................................... (22,441) (20,757)
-------- --------
556,394 587,518
Less: Deferred income taxes related to current
assets and liabilities.......................... 17,390 11,447
-------- --------
Deferred income taxes--noncurrent................. $539,004 $576,071
======== ========
</TABLE>
Deferred income taxes are recognized as costs in the rate making process by
the commissions having jurisdiction over the rates charged by the Utilities. The
deferred income taxes resulting from the above are reversed by a debit or credit
to deferred income tax expense as the timing differences reverse. Federal and
state income taxes as set forth in the Consolidated Statement of Income are
comprised of the following:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Current income taxes--
Federal...................................... $ 89,022 $ 61,557 $ 67,013
State........................................ 13,132 11,700 11,277
-------- -------- --------
102,154 73,257 78,290
-------- -------- --------
Deferred income taxes, net--Federal and State--
Accelerated depreciation and other property
differences................................. 13,211 11,078 16,571
Removal costs................................ (8,760) (11,352) (11,387)
Adjustment clauses........................... (2,466) 14,086 3,363
Take-or-pay gas costs........................ (5,799) (2,403) (8,749)
Minimum tax credit deferral.................. -- 9,798 7,316
Reacquisition premium on debt................ 2,824 (904) (678)
Other........................................ 3,112 (5,800) 333
-------- -------- --------
2,122 14,503 6,769
-------- -------- --------
Deferred investment tax credits, net........... (7,446) (7,452) (6,295)
-------- -------- --------
Total utility operating income taxes....... 96,830 80,308 78,764
Income tax applicable to non-operating
activities and income of non-utility
subsidiaries.................................. (5,537) (3,324) (3,241)
-------- -------- --------
Total income taxes......................... $ 91,293 $ 76,984 $ 75,523
======== ======== ========
</TABLE>
A reconciliation of total tax expense to an amount computed by applying the
statutory federal income tax rate to pretax income is as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C>
Net Income..................................... $156,140 $136,648 $133,388
Add--Income taxes.............................. 91,293 76,984 75,523
Dividend requirements on preferred stocks of
subsidiary.................................... 10,341 10,658 11,686
-------- -------- --------
Income before preferred dividend requirements
of subsidiary and income taxes................ $257,774 $224,290 $220,597
======== ======== ========
Amount derived by multiplying pretax income
by statutory rate............................. $ 90,221 $ 76,259 $ 75,003
Reconciling items multiplied by the statutory
rate:
Book depreciation over related tax
depreciation................................ 3,893 4,359 4,681
Amortization of deferred investment tax
credits..................................... (7,446) (7,452) (6,423)
State income taxes, net of federal income tax
benefit..................................... 8,568 8,006 6,910
Reversal of deferred taxes provided at rates
in excess of the current federal income
tax rate.................................... (5,080) (5,468) (5,152)
Other, net................................... 1,137 1,280 504
-------- -------- --------
Total income taxes......................... $ 91,293 $ 76,984 $ 75,523
======== ======== ========
</TABLE>
Investment tax credits have been deferred and are being amortized to income
over the life of the related property.
40
<PAGE>
PENSION PLANS
Industries and its subsidiaries have four noncontributory, defined benefit
retirement plans covering substantially all employees. Benefits under the plans
reflect the employees' compensation, years of service and age at retirement.
The plans' funded status as of December 31, 1993, and 1992, are as follows:
<TABLE>
<CAPTION>
1993 1992
-------- --------
(Dollars in thousands)
<S> <C> <C>
Vested benefit obligation............................. $481,755 $429,359
Nonvested benefit..................................... 86,373 75,815
-------- --------
Accumulated benefit obligation........................ $568,128 $505,174
======== ========
Projected benefit obligation for service rendered
to date.............................................. $657,068 $588,800
Plan assets at fair market value...................... 605,379 539,387
-------- --------
Projected benefit obligation in excess of plan assets. 51,689 49,413
Unrecognized transition obligation at December 31,
being recognized over 17 years....................... (54,055) (59,933)
Unrecognized prior service cost....................... (31,464) (23,100)
Unrecognized gains.................................... 51,154 50,033
-------- --------
Accrued pension costs................................. $ 17,324 $ 16,413
======== ========
</TABLE>
The accumulated benefit obligation is the present value of future pension
benefit payments and is based on the plan benefit formula without considering
expected future salary increases. The projected benefit obligation considers
estimated future salary increases. Discount rates of 7.50% and 7.75% and rates
of increase in compensation levels of 5.5% were used to determine the
accumulated benefit obligation and projected benefit obligation at December 31,
1993, and 1992, respectively. The reduction of the discount rate, as discussed
above, along with certain plan changes increased the accumulated benefit
obligation as of December 31, 1993, by approximately $31 million.
The following items are the components of provisions for pensions for the
years ended December 31, 1993, 1992 and 1991:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- ---------
(Dollars in thousands)
<S> <C> <C> <C>
Service costs................................ $ 13,086 $ 13,277 $ 10,607
Interest costs............................... 46,019 43,408 41,128
Actual return on plan assets................. (81,150) (41,796) (100,133)
Amortization of transition obligation........ 5,387 5,437 5,489
Other net amortization and deferral.......... 39,567 1,599 65,623
-------- -------- ---------
$ 22,909 $ 21,925 $ 22,714
======== ======== =========
</TABLE>
Assumptions used in the valuation and determination of 1993, 1992 and 1991
pension expenses were as follows:
<TABLE>
<CAPTION>
1993 1992 1991
-------- -------- ---------
<S> <C> <C> <C>
Discount rate................................ 7.75% 7.5% 8.5%
Rate of increase in compensation levels...... 5.5 6 6
Expected long-term rate of return on assets.. 8.25 8.25 8.75
</TABLE>
The plans' assets are invested primarily in common stocks, bonds, notes and
real estate investment funds.
POSTRETIREMENT BENEFITS
Industries provides certain health care and life insurance benefits for
retired employees. Substantially all of Industries employees may become eligible
for those benefits if they reach retirement age while working for Industries.
Those and similar benefits for active employees are provided through an
insurance company whose premiums are based on the benefits to active employees
and retirees paid during the year. Prior to January 1, 1993, the Utilities
recognized the cost of providing those benefits by expensing insurance premiums,
which is consistent with current rate making practices. The annual cost of
providing those benefits for retirees and/or their surviving spouses was $6.3
and $6.4 million for the years ended December 31, 1992 and 1991, respectively.
Effective January 1, 1993, Industries adopted Statement of Financial
Accounting Standards (SFAS) No. 106, "Employers' Accounting for Postretirement
Benefits Other Than Pensions," which establishes accounting and reporting
standards for such postretirement benefits. The new standard requires the
accrual of the expected cost of such benefits during the employee's years of
service. The assumptions and calculations involved in determining the accrual
closely parallel pension accounting requirements.
The following table sets forth the plans' accumulated postretirement benefit
obligation as of December 31, 1993, and January 1, 1993:
<TABLE>
<CAPTION>
DEC. 31, 1993 JAN. 1, 1993
------------- ------------
(Dollars in thousands)
<S> <C> <C>
Retirees.......................................... $ 89,650 $ 86,318
Fully eligible active plan participants........... 30,501 26,748
Other active plan participants.................... 150,215 118,802
--------- ---------
Accumulated postretirement benefit obligation..... 270,366 231,868
Unrecognized transition obligation................ (220,274) (231,868)
Unrecognized prior period loss.................... (20,737) $ --
--------- ---------
Accrued liability for postretirement health
care benefit obligation.......................... $ 29,355 $ --
========= =========
</TABLE>
41
<PAGE>
- ------------------------------------------------------------------------------
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
- ------------------------------------------------------------------------------
Discount rates of 7.5% and 8% at December 31, 1993, and January 1, 1993,
respectively, and a pre-Medicare medical trend rate of 13% declining to a long-
term rate of 7% were used to determine the accumulated postretirement benefit
obligation at December 31, 1993, and January 1, 1993.
The transition obligation at January 1, 1993, for accumulated postretirement
benefits earned and not recognized is being amortized over twenty years as
allowed by SFAS No. 106.
Net periodic postretirement benefit costs for the year ended December 31,
1993, include the following components:
<TABLE>
<CAPTION>
1993
-----------
(Dollars in
thousands)
<S> <C>
Service costs........................................ $ 6,863
Interest costs....................................... 18,224
Amortization of transition obligation over 20 years.. 11,594
-------
$36,681
=======
</TABLE>
The net periodic postretirement benefit costs were determined assuming an 8%
discount rate, a 5% rate of compensation increase and a pre-Medicare medical
trend rate of 13% in 1993 declining to a long-term rate of 7%. The effect of a
1% increase in the assumed health care cost trend rates for each future year
would increase the accumulated postretirement benefit obligation at December 31,
1993, by approximately $45 million and increase the aggregate of the service and
interest cost components of plan costs by approximately $4.8 million for the
year ended December 31, 1993. Amounts disclosed above could be changed
significantly in the future by changes in health care costs, work force
demographics, interest rates or plan changes.
Northern Indiana joined with other Indiana utilities and requested that the
Commission conduct generic hearings to approve the accrual method of accounting
for postretirement benefits for rate making purposes and to authorize the
deferral, as a regulatory asset to be recovered through future revenues, of the
net increase in cost until such time as the new accrual cost method may be
reflected in the rate making process in the next general rate proceeding.
Generic hearings were conducted by the Commission during October, 1992, and, in
an order issued on December 30, 1992, the Commission authorized the deferral
accounting requested but stated such deferral period should not exceed four
years; the Utilities expect to request recovery of such costs within that
period. The Commission also indicated each utility would have to demonstrate its
postretirement benefit costs were prudent and reasonably incurred at the time
such costs were proposed to be recovered in the rate making process. In
addition, while the Commission stated it was hopeful something less than full
accrual of such costs in rates would be possible under generally accepted
accounting principles, the Utilities believe the Commission recognizes the full
accrual of such postretirement benefits may be required in future rate
proceedings in order to avoid any negative impact on a utility's earnings. The
Utilities will defer as a regulatory asset the difference between the amount
that would have been charged to expense under pay-as-you-go accounting and the
amount accrued in accordance with the new standard. Accordingly, the Utilities
believe SFAS No. 106 will not have a material effect on future results of
operations.
POSTEMPLOYMENT BENEFITS
In November, 1992, the FASB issued SFAS No. 112, "Employers' Accounting for
Postemployment Benefits," which will require Industries to accrue the estimated
cost of benefits provided to former or inactive employees after employment but
before retirement.
Industries will adopt SFAS No. 112 on January 1, 1994 and its adoption will
not have a material impact on financial position or results of operations.
PENDING TAX MATTER
On August 1, 1991, the Internal Revenue Service (IRS) issued a notice of
deficiency for Northern Indiana's taxes for the years 1982 through 1985
($3,785,250 per year plus interest) relating to interest payments on $70 million
of 17 1/4% Notes issued in 1981 by Northern Indiana's foreign subsidiary,
Northern Indiana Public Service Finance N.V. (Finance). The IRS believes that
interest paid on the Notes should have been subject to United States tax
withholding. The Notes were redeemed in 1985 and Finance was subsequently
liquidated. On October 25, 1991, Northern Indiana filed its petition chal-
lenging the assessment in the United States Tax Court. Northern Indiana's
management and general counsel believe Northern Indiana will be successful in
establishing that no tax withholding was required for the period.
ACQUISITION OF NIFL
On March 31, 1993, Industries acquired NIFL. Industries issued 1,112,862
common shares and $26,311 cash in exchange for all of the common shares of NIFL.
The acquisition was accounted for as a purchase in accordance with Accounting
Principles Board Opinion No. 16. The excess of the total acquisition costs over
the recorded value of net assets acquired (approximately $17 million) was
recorded as a plant acquisition adjustment.
RATE MATTERS
GAS RATES
On October 26, 1988, the Commission entered its order granting a retail gas
rate increase of approximately $59.2 million (10.32%) annually to Northern
Indiana. The October 26, 1988, Commission order required Northern Indiana to
refile rates two years after the initial rate order was issued, in order to move
rates closer to the cost-of-service. The refiled rates were approved on January
7, 1991, and resulted in an increase in residential rates and lower industrial
transportation rates.
TAKE-OR-PAY PIPELINE GAS COSTS
The Federal Energy Regulatory Commission (FERC) has allowed certain interstate
pipeline suppliers to pass on to their customers a portion of costs for
contracted gas not purchased (take-or-pay), contract reformation and associated
interest charges through direct billing to their customers, including the
Utilities.
Northern Indiana records take-or-pay costs as they are billed by the
respective pipeline, and in an order dated September 28, 1988, the Commission
allowed Northern Indiana to recover these additional gas costs on a volumetric
basis from all customers, including transport customers. The Utilities have
recovered approximately $185.9 million of take-or-pay costs and interest from
their customers through December 31, 1993. As of December 31, 1993, an
additional $11.7 million was
42
<PAGE>
scheduled to be billed to the Utilities and recovered from customers over a
period of one to five years.
FERC ORDER NO. 636
On April 8, 1992, the FERC issued its Order No. 636 which requires interstate
pipelines to restructure their services. Under the Order, existing pipeline
sales services have been "unbundled" such that gas supplies are being sold
separately from interstate transportation services. The Utilities' interstate
pipeline suppliers have filed new tariffs with the FERC to implement Order No.
636, and the Utilities have contracted for a mix of transportation and storage
services which will allow them to meet the needs of their customers. Customers,
such as the Utilities, are expected to benefit from enhanced access to
competitively priced gas supplies as well as from more flexible transportation
services. On the other hand, pipelines are seeking to recover certain transition
costs associated with restructuring from their customers. Any such recovery
would be subject to a prudence hearing at the FERC. Also, mandated changes in
pipeline rate design could increase the cost of firm transportation service on
interstate pipelines. The FERC has subsequently issued Order Nos. 636-A and 636-
B in which it denied for the most part requests for rehearing of Order No. 636.
The Orders are now on court appeal.
The total magnitude of any transition costs charged to the Utilities can not
yet be determined. The Utilities believe, however, that any transition costs
which the FERC would allow the Utilities' pipeline suppliers to collect would be
recoverable by the Utilities from their customers. Northern Indiana has filed a
petition with the Commission seeking recovery of the transition costs from its
sales and transport customers on a volumetric basis.
ENVIRONMENTAL MATTERS
Because of major investments made in modern environmental control facilities
and the use of low sulfur coal, substantially all of Northern Indiana's electric
production facilities already comply with the sulfur dioxide limitations
contained in acid deposition provisions of the Clean Air Act Amendments of 1990
(CAAA), which became law on November 15, 1990.
Northern Indiana has successfully tested the use of low sulfur coal at Unit 12
at the Michigan City Generating Station, the only generating unit not in
compliance with the future sulfur dioxide limitations, and expects that unit to
be able to meet the limits with low sulfur coal. Northern Indiana estimates that
total costs of compliance with the CAAA sulfur dioxide regulations will impact
electric rates by less than 5% in the future.
The CAAA contain provisions that could lead to strict limitations on emissions
of nitrogen oxides and "air toxics," which may require significant capital
expenditures for control of these emissions. Northern Indiana cannot predict the
costs of complying with them, but Northern Indiana believes that any such
mandated costs would be recoverable through the rate making process.
The Environmental Protection Agency (EPA) has promulgated a permit program to
meet the requirements of the CAAA. This permit program, when enacted by Indiana,
will increase the fees associated with operating permits for air emissions.
Northern Indiana has received notices from the EPA that it is a "potentially
responsible party" (PRP) under the Comprehensive Environmental Response
Compensation and Liability Act (CERCLA) and the Superfund Amendment and
Reauthorization Act (SARA) and may be required to share in the cost of cleanup
of several waste disposal sites identified by the EPA. The sites are in various
stages of investigation and analysis to determine the amount of remedial costs
necessary to clean up the sites. At each of the sites, Northern Indiana is one
of several PRPs, and it is expected that remedial costs, as provided under
CERCLA and SARA, will be shared among them. At some sites Northern Indiana
and/or the other named PRPs are presently working with the EPA to clean up the
site and avoid the imposition of fines or added costs. While remedial costs at
these sites are not presently determinable, Northern Indiana's preliminary
analysis indicates its share of such costs should not have a significant impact
on the results of future operations.
Northern Indiana was notified by the Indiana Department of Environmental
Management (IDEM) of the release of a petroleum substance into the St. Mary's
River in Fort Wayne, Indiana, from the site of a former manufactured gas plant
formerly owned by Northern Indiana. In cooperation with IDEM, Northern Indiana
has taken steps to investigate and contain the substance. Northern Indiana is
continuing to monitor and investigate the site to determine what further
remedial action, if any, is required to be taken by it.
Northern Indiana was notified by Indiana Gas Company, Inc. (Indiana Gas) that
the site of a former manufactured gas plant in Lafayette, Indiana, believed to
have been formerly owned by Northern Indiana, was being investigated and
partially remediated by Indiana Gas pursuant to an administrative order issued
by IDEM. Northern Indiana is investigating its potential liability and
evaluating appropriate action.
The Utilities have an ongoing program to remain aware of laws and regulations
involved with hazardous waste. It is the Utilities' intent to continue to
evaluate their facilities and properties with respect to these rules and
identify any sites that would require corrective action. Northern Indiana has
commenced a volunatary program of investigating its former manufactured gas
plant sites in order to determine what, if any, remediation of any potential
remaining waste materials may be required. Since this program is in its early
stages, it is not possible at this time to estimate what, if any, remediation
costs may be incurred.
The possibility that exposure to electric and magnetic fields emanating from
power lines, household appliances and other electric sources may result in
adverse health effects has been the subject of increased public, governmental
and media attention. A considerable amount of scientific research has been
conducted on this topic without definitive results. Research is continuing to
resolve scientific uncertainties.
PREFERRED AND PREFERENCE STOCKS
Industries is authorized to issue 20,000,000 shares of Preferred Stock,
without par value. Effective March 2, 1990, 2,000,000 shares of the Industries'
Series A Junior Participating Preferred Shares were reserved for issuance
pursuant to the Share Purchase Rights Plan described in
43
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Common Shares. In November, 1990, Industries issued and sold 350,000 shares of
8.75% Series Cumulative Preferred Shares through a private placement for $35
million. The shares are subject to mandatory redemption in whole by Industries
on January 14, 1996.
The authorized classes of par value and no par value cumulative preferred and
preference stocks of Northern Indiana are as follows:
Cumulative Preferred--$100 par value--2,400,000 shares; Cumulative
Preferred--no par value--3,000,000 shares; Cumulative Preference--$50 par
value--2,000,000 shares (none outstanding); and Cumulative Preference--no par
value--3,000,000 shares (none issued). On October 13, 1992, Northern Indiana
issued and sold through an underwritten public offering 430,000 shares of 6.50%
Series Cumulative Preferred Stock for $43 million. The shares are subject to
mandatory redemption in whole by Northern Indiana on October 14, 2002. On
October 15, 1992, Northern Indiana redeemed all outstanding shares of the 12.55%
Series Preferred Stock at $105.94 per share.
The Preferred shareholders of Industries and Northern Indiana have no voting
rights except in the event of default on the payment of four consecutive
quarterly dividends or as required by Indiana law to authorize additional
preferred shares or by the Articles of Incorporation in the event of certain
merger transactions.
The redemption prices at December 31, 1993, for the cumulative preferred
stock, which are redeemable solely at the option of Northern Indiana, in whole
or in part, at any time upon 30 days' notice, are as follows:
<TABLE>
<CAPTION>
Series Redemption Price Per Share
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Preferred Stock--$100 par value-- 4 1/4% $101.20
4 1/2% $100.00
4.22% $101.60
4.88% $102.00
7.44% $101.00
7.50% $101.00
Cumulative Preferred Stock--no par value--Adjustable Rate
(6.00% at December 31, 1993), Series A (stated value $50 per share) $50.00
</TABLE>
The redemption prices at December 31, 1993, as well as sinking fund provisions
for the cumulative preferred stock subject to mandatory redemption requirements,
or whose redemption is outside the control of Northern Indiana, are as follows:
<TABLE>
<CAPTION>
Series Redemption Price Per Share Annual Sinking Fund Provisions
- ---------------------------------------------------------------------------------------------------------
<S> <C> <C>
Cumulative Preferred Stock--$100 par value--
8.85% $102.59, reduced periodically 12,500 shares on or before April 1.
8.35% $104.67, reduced periodically 3,000 shares on or before July 1; 6,000 shares beginning in 2004;
noncumulative option to double amount each year.
7 3/4% $104.94, reduced periodically 2,777 shares on or before December 1; noncumulative option to
double amount each year.
</TABLE>
Sinking fund requirements with respect to redeemable preferred stocks
outstanding at December 31, 1993, for each of the four years subsequent to
December 31, 1994, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
- --------------------------------------------------------------------------------
<S> <C>
1995.................................................................$ 1,827,700
1996................................................................. 36,827,700
1997................................................................. 1,827,700
1998................................................................. 1,827,700
- --------------------------------------------------------------------------------
</TABLE>
Common Share Dividend
During the next few years, Industries expects that the great majority of
earnings available for distribution of dividends will depend upon dividends paid
to Industries by Northern Indiana. Northern Indiana's Indenture provides that it
will not declare or pay any dividends on any class of capital stock (other than
preferred or preference stock) except out of earned surplus or net profits of
Northern Indiana. At December 31, 1993, Northern Indiana had approximately
$144.1 million of retained earnings (earned surplus) available for the payment
of dividends. Future dividends will depend upon adequate retained earnings,
adequate future earnings and the absence of adverse developments.
Common Shares
Industries has 200,000,000 common shares authorized without par value.
Share Purchase Rights Plan
On February 27, 1990, the Board of Directors of Industries declared a dividend
distribution of one Right for each outstanding common share of Industries to
shareholders of record on March 12, 1990. The Rights are not currently
exercisable. Each Right, when exercisable, would initially entitle the holder to
purchase from Industries one one-hundredth of a share of Series A Junior
Participating Preferred Shares, without par value, of Industries at a price of
$60 per one one-hundredth of a share. In certain circumstances, if an acquirer
obtained 25% of Industries' outstanding shares, or merged into Industries or
Industries into the acquirer, the Rights would entitle the holders to purchase
Industries' or the acquirer's common shares for one-half of the market price.
The Rights will not dilute Industries' common shares nor affect earnings per
share unless they become exercisable for common shares. The Plan was not adopted
in response to any specific attempt to acquire control of Industries.
44
<PAGE>
COMMON SHARE REPURCHASES
The Board of Directors of Industries has authorized the repurchase of up to
approximately 10.7 million common shares in addition to those required in
connection with the acquisitions of Kokomo Gas and NIFL. At December 31, 1993,
Industries had purchased 11,897,029 shares at an average price of $21.65 per
share of which 1,848,588 shares and 1,112,862 shares were reissued in connection
with the Kokomo Gas and NIFL acquisitions, respectively. Approximately 1.8
million additional common shares may be repurchased under the Board's
authorizations.
LONG-TERM INCENTIVE PLAN
Industries Long-Term Incentive Plan (the Plan) for key management employees,
which was approved by shareholders on April 13, 1988, provides for the issuance
of up to 2,500,000 of Industries' common shares to key employees through 1998.
The Plan permits the following types of grants, separately or in combination:
nonqualified stock options, incentive stock options, restricted stock awards,
stock appreciation rights and performance units. No incentive stock options or
performance units were outstanding at December 31, 1993.
The stock appreciation rights (SARs) may be exercised only in tandem with
stock options on a one-for-one basis and are payable in cash, Industries stock
or a combination thereof. Restricted stock awards are restricted as to transfer
and subject to forfeiture for specific periods from the date of grant. Restric-
tions on the shares awarded during 1990 and 1991 lapse five years from date of
grant and vest subject to specific share price appreciation condition. If a
participant's employment is terminated other than by reason of death, disability
or retirement, restricted shares are forfeited. There were 235,600 and 214,000
and 157,500 restricted shares outstanding at December 31, 1991, 1992, and 1993,
respectively.
Changes in outstanding shares under option and SARs for 1991, 1992 and 1993,
are as follows:
<TABLE>
<CAPTION>
Nonqualified Nonqualified Stock
Stock Options Options With SARs
--------------- --------------------
Option Option
YEAR ENDED DECEMBER 31, 1991 Options Price Options Price
- ---------------------------- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Balance at beginning of year...... 538,500 $10.94-$17.94 47,900 $10.94
Granted......................... 331,100 $22.94 -
Exercised....................... (88,375) $10.94-$17.94 (4,900) $10.94
Cancelled....................... (10,900) $10.94-$17.06 (4,000) $10.94
-------- -------
Balance at end of year............ 770,325 $10.94-$22.94 39,000 $10.94
======== =======
Shares exercisable................ 439,225 $10.94-$17.94 39,000 $10.94
Option Option
YEAR ENDED DECEMBER 31, 1992 Options Price Options Price
- ----------------------------- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Balance at beginning of year...... 770,325 $10.94-$22.94 39,000 $10.94
Granted......................... 293,400 $26.06 -
Exercised....................... (163,375) $10.94-$22.94 (27,500) $10.94
Cancelled....................... (31,200) $10.94-$22.94 -
--------- --------
Balance at end of year............ 869,150 $10.94-$26.06 11,500 $10.94
========= ========
Shares exercisable................ 575,750 $10.94-$22.94 11,500 $10.94
Option Option
YEAR ENDED DECEMBER 31, 1993 Options Price Options Price
- ---------------------------- ------- ------ ------- ------
<S> <C> <C> <C> <C>
Balance at beginning of year...... 869,150 $10.94-$26.06 11,500 $10.94
Granted......................... 288,500 $33.19 -
Exercised....................... (261,150) $10.94-$26.06 -
Cancelled....................... (5,700) $26.06 (1,600) $10.94
--------- -------
Balance at end of year............ 890,800 $10.94-$33.19 9,900 $10.94
========= =======
Shares exercisable................ 602,300 $10.94-$26.06 9,900 $10.94
</TABLE>
The Industries Nonemployee Director Stock Incentive Plan, which was approved
by shareholders, provides for the issuance of up to 100,000 of Industries'
common shares to nonemployee directors of Industries. The Plan provides for
awards of common shares which vest in 20% per year increments, with full vesting
after five years. The Plan also allows the award of nonqualified stock options
in the future. If a director's service on the Board is terminated for any reason
other than death or disability, any common shares not vested as of the date of
termination are forfeited. As of December 31, 1993, 22,750 shares were issued
under the Plan.
LONG-TERM DEBT
The sinking fund requirements of long-term debt outstanding at December 31,
1993 (including the maturity of Northern Indiana's first mortgage bonds: Series
N, 4 5/8%, due May 15, 1995; Series O, 6 3/8%, due September 1, 1997;
45
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Northern Indiana's medium-term notes due from April 6, 1998, to April 13, 1998:
NIPSCO Capital Market's medium-term note due June 10, 1996, and Zero Coupon
Notes due December 1, 1997; and Lake Erie Land Company's notes payable due July
5, 1996, to June 30, 1998), for each of the four years subsequent to December
31, 1994, are as follows:
<TABLE>
<CAPTION>
Year Ending December 31,
- -------------------------------------------------------------------------------
<S> <C>
1995...............................................................$ 27,757,115
1996............................................................... 17,032,951
1997............................................................... 35,170,126
1998............................................................... 115,620,126
</TABLE>
Unamortized debt expense, premium and discount on long-term debt,
applicable to outstanding bonds are being amortized over the lives of such
bonds. Reacquisition premiums are being deferred and amortized.
Northern Indiana's Indenture, dated August 1, 1939, as amended and
supplemented, securing the first mortgage bonds issued by Northern Indiana,
constitutes a direct first mortgage lien upon substantially all property and
franchises, other than expressly excepted property, owned by Northern Indiana.
On April 5, 1993, Series V, First Mortgage Bonds, 8.90% of 2004, Series BB,
First Mortgage Bonds, 9 7/8% of 2004 and the Series KK, First Mortgage Bonds, 9
1/4% of 2016 were redeemed in total at the option of Northern Indiana.
Redemption was accomplished through the issuance of short-term debt.
In April, 1993, Northern Indiana sold $125,000,000 in Medium-Term Notes,
Series B, due from 1 year to 30 years from date of issue. The proceeds from the
sale of the notes were used to repay short-term debt which was incurred to pay
at maturity certain of Northern Indiana's previously outstanding medium-term
notes and First Mortgage Bonds.
On June 2, 1993, Northern Indiana received authorization from the
Commission to issue up to $349,750,000 of Medium-Term Notes, Series C, due from
1 year to 30 years from date of issue for refinancing purposes and paying
outstanding long-term debt at maturity. A portion of the proceeds was used to
repay short-term debt which was incurred in connection with the First Mortgage
Bonds redeemed on April 5, 1993, and a portion was used for early redemption on
August 2, 1993, of $88 million of Northern Indiana's medium-term notes due in
1996. Through December 31, 1993, $329.2 million of Medium-Term Notes, Series C,
have been issued.
On December 9, 1992, Capital Markets issued $72.5 million (at maturity) of
Zero Coupon Notes, due December 1, 1997, which are not redeemable prior to
maturity. The proceeds from the sale of the notes were used to repay Capital
Markets' short-term bank borrowings. The notes are unsecured debt obligations
of Capital Markets.
The obligations of Capital Markets are subject to a Support Agreement
between Industries and Capital Markets, under which Industries has committed to
make payments of interest and principal on Capital Markets' securities in the
event of a failure to pay by Capital Markets. Restrictions in the Support
Agreement prohibit recourse on the part of Capital Markets' investors against
the stock and assets of Northern Indiana which are owned by Industries. Under
the terms of the Support Agreement, in addition to the cash flow of cash
dividends paid to Industries by any of its consolidated subsidiaries, the assets
of Industries, other than the stock and assets of Northern Indiana, are
available as recourse to holders of Capital Markets' securities. The carrying
value of those assets other than Northern Indiana, reflected in the consolidated
financial statements of Industries, is approximately $299.1 million at December
31, 1993.
SHORT-TERM BORROWINGS
Northern Indiana has a $250 million revolving Credit Agreement with several
banks which terminates September 21, 1996, unless extended by its terms. As of
December 31, 1993, there were no borrowings outstanding under this agreement. In
addition, Northern Indiana has $14.2 million in lines of credit which run to May
31, 1994. The credit pricing of each of the lines varies from either the lending
banks' commercial prime or market rates. Northern Indiana has agreed to
compensate the participating banks with arrangements that vary from no
commitment fee to a combination of fees which are mutually satisfactory to both
parties. As of December 31, 1993, there were no borrowings under these lines of
credit. The Credit Agreement and lines of credit are also available to support
the issuances of commercial paper.
Northern Indiana also has $173.5 million of money market lines of credit.
As of December 31, 1993, $40.0 million of borrowings were outstanding under
these lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At
December 31, 1993, $20.0 million of borrowings were outstanding under this
facility.
On April 5, 1993, Northern Indiana executed a 364-day $50 million private
placement loan.
Northern Indiana uses commercial paper to fund short-term working capital
requirements. As of December 31, 1993, Northern Indiana had $27.9 million in
commercial paper outstanding, having a weighted average interest rate of 3.56%.
Capital Markets has a $150 million revolving Credit Agreement which will
terminate October 21, 1995, unless extended by its terms. This facility
provides short-term financing flexibility to Industries and also serves as the
back-up instrument for a commercial paper program. As of December 31, 1993,
there were no borrowings outstanding under this agreement.
Capital Markets also has $50 million of money market lines of credit. As
of December 31, 1993, there were no borrowings outstanding under these lines of
credit.
As of December 31, 1993, Capital Markets had $47.0 million in commercial
paper outstanding, having a weighted average interest rate of 3.48%.
NIFL has an unsecured revolving credit agreement with a bank for $2
million. Borrowings bear interest at the bank's prevailing prime rate. As of
December 31, 1993, there were no borrowings under this agreement.
OPERATING LEASES
On April 1, 1990, Northern Indiana entered into a 20-year agreement for the
rental of office facilities from Development at a current annual rental payment
of approximately $3.0 million.
46
<PAGE>
The following is a schedule, by years, of future minimum rental payments,
excluding those to associated companies, required under operating leases that
have initial or remaining noncancelable lease terms in excess of one year as of
December 31, 1993.
<TABLE>
<CAPTION>
Year Ending December 31, (Dollars in thousands)
- --------------------------------------------------------------------------------
<S> <C>
1994................................................................. $ 4,913
1995................................................................. 3,251
1996................................................................. 1,928
1997................................................................. 1,794
1998................................................................. 1,764
Later years.......................................................... 24,537
------
Total minimum payments required...................................... $38,187
-------
</TABLE>
The consolidated financial statements include rental expense for all
operating leases as follows:
<TABLE>
<CAPTION>
Year Ending December 31, (Dollars in thousands)
- --------------------------------------------------------------------------------
<S> <C>
1993................................................................. $7,251
1992................................................................. 5,182
1991................................................................. 7,199
</TABLE>
COMMITMENTS
Northern Indiana estimates that approximately $738 million will be expended
for construction purposes for the period from January 1, 1994, to December 31
1998. Substantial commitments have been made by Northern Indiana in connection
with this program.
Northern Indiana has entered into a service agreement with Pure Air, a
general partnership between Air Products and Chemicals, Inc. and Mitsubishi
Heavy Industries America, Inc., under which Pure Air will provide scrubber
services to reduce sulfur dioxide emissions for Units 7 and 8 at Bailly
Generating Station. Services under this contract commenced on June 15, 1992,
with annual charges of approximately $20 million. The scrubber will receive
$14.4 million in government funding for operating and maintenance expenses
during a three-year demonstration period. Pure Air is required to meet certain
performance standards during the demonstration period commencing with the date
above. During this period, either Northern Indiana or Pure Air can terminate
this agreement unilaterally. The agreement provides that, assuming various
performance standards are met by Pure Air, a termination payment would be due if
Northern Indiana terminates the agreement prior to the end of the twenty-year
contract period.
Harbor Coal Company (Harbor Coal), a wholly-owned subsidiary of Development,
has invested in a partnership to finance, construct, own and operate a $65
million pulverized coal injection facility which began commercial operation in
August, 1993. The facility receives raw coal, pulverizes it and delivers it to
Inland Steel Company blast furnaces for use in the operation of their blast
furnaces. Harbor Coal is a 50% partner in the project with an Inland Steel
affiliate. Industries has guaranteed the payment and performance of the
partnership's obligations under a sale and leaseback of a 50% undivided interest
in the facility.
FAIR VALUE OF FINANCIAL INSTRUMENTS
The following methods and assumptions were used to estimate the fair value of
each class of financial instruments for which it is practicable to estimate that
value:
Cash and cash equivalents: The carrying amount approximates fair value
because of the short maturity of those instruments.
Investments at cost: The fair value of some investments are estimated based
on market prices for those or similar investments.
Long-term debt/Preferred stock: The fair value of long-term debt and
preferred stock are estimated based on the quoted market prices for the same or
similar issues or on the rates offered to Industries for securities of the same
remaining maturities. Certain premium costs associated with the early
settlement of long-term debt are not taken into consideration in determining
fair value.
The carrying values and estimated fair values of Industries' financial
instruments are as follows:
<TABLE>
<CAPTION>
December 31, 1993 December 31, 1992
----------------------- -----------------------
Carrying Fair Carrying Fair
Amount Value Amount Value
---------- ---------- --------- ----------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents... $ 16,140 $ 16,140 $ 41,357 $ 41,357
Investments at cost......... 6,189 6,474 6,404 8,385
Long-term debt (including
current portion)........... 1,263,029 1,267,728 1,150,541 1,187,920
Preferred stock............. 203,043 185,368 204,958 180,400
</TABLE>
The majority of the long-term debt relates to utility operations. The
Utilities are subject to regulation and gains or losses may be included in rates
over a prescribed amortization period, if in fact settled at amounts
approximating those above.
47
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONCLUDED)
CUSTOMER CONCENTRATIONS
Northern Indiana is a public utility operating company supplying natural gas
and electrical energy in the northern third of Indiana. Although Northern
Indiana has a diversified base of residential and commercial customers, a
substantial portion of its electric and gas industrial deliveries are dependent
upon the basic steel industry. The following table shows the basic steel
industry percentage of gas revenue (including transportation services) and
electric revenue for 1993, 1992 and 1991.
<TABLE>
<CAPTION>
Basic Steel Industry 1993 1992 1991
- ---------------------------------------------------------------------------
<S> <C> <C> <C>
Gas revenue percent............................ 2% 4% 6%
Electric revenue percent....................... 24% 25% 23%
</TABLE>
QUARTERLY FINANCIAL DATA
The following data summarize certain operating results for each of the
quarters of 1993 and 1992:
<TABLE>
<CAPTION>
1993 Quarters Ended March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating revenues....................... $521,647 $348,795 $342,538 $464,892
Operating expenses and taxes............. 435,012 301,850 289,040 389,925
-------- -------- -------- --------
Operating income......................... 86,635 46,945 53,498 74,967
Other income and deductions, net......... (864) (365) 172 (1,013)
Interest and other charges............... 27,213 24,922 26,377 25,323
-------- -------- -------- --------
Net income............................... 58,558 21,658 27,293 48,631
Dividend requirements on preferred shares 766 765 766 766
-------- -------- -------- --------
Balance available for common shareholders $ 57,792 $ 20,893 $ 26,527 $ 47,865
======== ======== ======== ========
Earnings per average common share(a)..... $0.87 $0.31 $0.40 $0.72
======== ======== ======== ========
1992 Quarters Ended March 31 June 30 Sept. 30 Dec. 31
-------- -------- -------- --------
(Dollars in thousands)
Operating revenues....................... $474,017 $329,260 $316,503 $462,576
Operating expenses and taxes............. 397,926 283,827 269,440 384,946
-------- -------- -------- --------
Operating income......................... 76,091 45,433 47,063 77,630
Other income and deductions, net......... 361 935 1,246 (1,058)
Interest and other charges............... 28,205 27,799 27,548 27,501
-------- -------- -------- --------
Net income............................... 48,247 18,569 20,761 49,071
Dividend requirements on preferred shares 766 765 766 766
-------- -------- -------- --------
Balance available for common shareholders $ 47,481 $ 17,804 $ 19,995 $ 48,305
======== ======== ======== ========
Earnings per average common share(a)..... $0.70 $0.26 $0.30 $0.73
======== ======== ======== ========
</TABLE>
(a) Because of the combined mathematical effect of common shares repurchased and
issued and the cyclical nature of net income during the year, the sum of
earnings per share for any four quarterly periods may vary slightly from the
earnings per share for the equivalent twelve-month period.
48
<PAGE>
SEGMENTS OF BUSINESS
Industries' primary business is the distribution of natural gas and electrical
energy. The reportable items for the gas and electric segments for the years
1993, 1992 and 1991 are as follows:(1)
<TABLE>
<CAPTION>
1993 1992 1991
---------- ---------- ----------
<S> <C> <C> <C>
(Dollars in thousands)
Operating information--
Gas operations:
Operating revenues.................................................... $ 714,229 $ 666,221 $ 601,920
Operating expenses, excluding provision for utility income taxes...... 634,742 595,074 541,046
---------- ---------- ----------
Operating income before utility income taxes.......................... 79,487 71,147 60,874
Allowance for funds used during construction (AFUDC).................. 875 26 38
---------- ---------- ----------
Operating income before utility income taxes and including AFUDC...... 80,362 71,173 60,912
---------- ---------- ----------
Electric operations:
Operating revenues.................................................... 963,643 916,135 933,241
Operating expenses, excluding provision for utility income taxes...... 684,255 660,757 660,997
---------- ---------- ----------
Operating income before utility income taxes.......................... 279,388 255,378 272,244
Allowance for funds used during construction (AFUDC).................. 573 547 1,303
---------- ---------- ----------
Operating income before utility income taxes and including AFUDC...... 279,961 255,925 273,547
---------- ---------- ----------
Total................................................................... 360,323 327,098 334,459
Other income, net....................................................... (2,071) 1,454 258
Less--interest and other charges........................................ 105,282 111,596 122,565
Less--provision for utility income taxes................................ 96,830 80,308 78,764
---------- ---------- ----------
Net income per Consolidated Statement of Income........................... 156,140 136,648 133,388
Dividend requirements on preferred shares................................. 3,063 3,063 3,063
---------- ---------- ----------
Balance available for common shareholders................................. $ 153,077 $ 133,585 $ 130,325
========== ========== ==========
Other information--
Depreciation and amortization expense:
Electric.............................................................. $ 131,993 $ 130,811 $ 126,820
Gas................................................................... 55,007 51,906 48,901
---------- ---------- ----------
Total............................................................... $ 187,000 $ 182,717 $ 175,721
========== ========== ==========
Utility construction expenditures:
Electric.............................................................. $ 125,449 $ 126,648 $ 126,059
Gas................................................................... 55,403 45,681 42,899
---------- ---------- ----------
Total............................................................... $ 180,852 $ 172,329 $ 168,958
========== ========== ==========
Investment information--
Identifiable assets(a):
Electric.............................................................. $2,602,826 $2,644,133 $2,645,029
Gas................................................................... 900,146 818,384 735,796
---------- ---------- ----------
Total............................................................... 3,502,972 3,462,517 3,380,825
Other corporate assets.................................................. 409,352 345,424 266,732
---------- ---------- ----------
Total assets............................................................ $3,912,324 $3,807,941 $3,647,557
========== ========== ==========
</TABLE>
(a) Utility plant less accumulated provision for depreciation and amortization,
materials and supplies, electric production fuel, natural gas in storage,
fuel and gas cost adjustment clauses, unamortized R. M. Schahfer Units 17
and 18 carrying charges and deferred depreciation and gas supply exploration
investments.
(1) Kokomo Gas is not included for the year 1991, and NIFL is not included for
the years 1992 and 1991.
49
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF NIPSCO INDUSTRIES, INC.:
We have audited the accompanying consolidated balance sheet and consolidated
statements of capitalization and long-term debt of NIPSCO Industries, Inc. (an
Indiana corporation) and subsidiaries as of December 31, 1993 and 1992, and
the related consolidated statements of income, common shareholders' equity and
cash flows for each of the three years in the period ended December 31, 1993.
These consolidated financial statements are the responsibility of Industries'
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the financial position of NIPSCO
Industries, Inc. and subsidiaries as of December 31, 1993 and 1992, and the
results of their operations and their cash flows for each of the three years
in the period ended December 31, 1993, in conformity with generally accepted
accounting principles.
As discussed in the notes to consolidated financial statements, effective
January 1, 1993, Nipsco Industries, Inc. and subsidiaries changed their
methods of accounting for postretirement benefits other than pensions and
income taxes.
Chicago, Illinois
January 26, 1994 Arthur Andersen & Co.
50
<PAGE>
- --------------------------------------------------------------------------------
SELECTED SUPPLEMENTAL INFORMATION
- --------------------------------------------------------------------------------
GAS STATISTICS(1)
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues ($000's)
Residential (including home heating). $ 452,176 $ 377,600 $ 358,019
Commercial........................... 157,235 127,203 117,198
Industrial........................... 73,815 67,641 75,770
Gas transportation for others........ 32,503 40,086 46,656
Other*............................... (1,500) 53,691 4,277
----------- ----------- -----------
Total.............................. $ 714,229 $ 666,221 $ 601,920
=========== =========== ===========
Deliveries in dth (000's):
Residential (including home heating). 76,761 70,830 64,159
Commercial........................... 29,754 27,280 24,051
Industrial (including transportation) 183,739 166,161 154,828
Other................................ 793 838 484
----------- ----------- -----------
Total.............................. 291,047 265,109 243,522
=========== =========== ===========
Customers Served--End of Year:
Residential (including home heating). 626,492 592,201 554,972
Commercial........................... 51,386 48,168 45,033
Industrial (including transportation) 4,270 3,901 3,871
Other................................ 67 65 23
----------- ----------- -----------
Total.............................. 682,215 644,335 603,899
=========== =========== ===========
*Includes deferred gas cost revenue of $(10,375), $46,005 and $(3,475),
respectively.
(1)Kokomo Gas is not included in 1991 Gas Statistics and NIFL is not in
1992 and 1991 Gas Statistics.
- --------------------------------------------------------------------------------
ELECTRIC STATISTICS
Year Ended December 31, 1993 1992 1991
----------- ----------- -----------
Operating Revenues ($000's):
Residential.......................... $ 257,033 $ 240,680 $ 260,399
Commercial........................... 232,609 227,707 230,782
Industrial........................... 413,485 397,859 375,928
Street lighting...................... 8,254 8,085 8,178
Sales for resale..................... 27,730 29,697 23,663
Other**.............................. 24,532 12,107 34,291
----------- ----------- -----------
Total.............................. $ 963,643 $ 916,135 $ 933,241
=========== =========== ===========
Sales in kilowatt-hours (000's):
Residential.......................... 2,552,837 2,343,303 2,588,637
Commercial........................... 2,705,751 2,608,614 2,653,226
Industrial........................... 8,855,106 8,188,605 7,579,846
Street lighting...................... 54,741 52,609 54,511
Sales for resale..................... 912,773 1,162,005 726,557
Other................................ 83,959 77,975 76,268
----------- ----------- -----------
Total.............................. 15,165,167 14,433,111 13,679,045
=========== =========== ===========
Customers Served--End of Year:
Residential.......................... 350,964 346,356 342,403
Commercial........................... 40,634 40,101 39,985
Industrial........................... 2,686 2,695 2,248
Other................................ 828 823 821
----------- ----------- -----------
Total.............................. 395,112 389,975 385,457
=========== =========== ===========
</TABLE>
**Includes deferred fuel cost revenue of $4,813, $(6,965) and $15,136,
respectively.
51
<PAGE>
- -------------------------------------------------------------------------------
SELECTED SUPPLEMENTAL INFORMATION (CONCLUDED)
- -------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Year Ended December 31, 1993 1992 1991
----------- ----------- -----------
<S> <C> <C> <C>
Operating Revenues:
Gas ($000's)......................... $ 714,229 $ 666,221 $ 601,920
Electric ($000's).................... $ 963,643 $ 916,135 $ 933,241
----------- ----------- -----------
Total Operating Revenues
($000's).......................... $ 1,677,872 $ 1,582,356 $ 1,535,161
Operating Margin ($000's).............. $ 1,015,505 $ 949,379 $ 939,376
Operating Income ($000's).............. $ 262,045 $ 246,217 $ 254,354
Income Before Extraordinary
Items ($000's)........................ $ 156,140 $ 136,648 $ 133,388
Net Income ($000's).................... $ 156,140 $ 136,648 $ 133,388
Shares outstanding at year end......... 65,828,838 65,758,350 66,671,615
Number of common shareholders.......... 41,038 38,097 39,346
Earnings (loss) per average
common share.......................... $ 2.31 $ 2.00 $ 1.94
Return on average common equity........ 14.4% 13.1% 12.9%
Times interest earned (pre-tax)........ 3.63 3.18 2.93
Dividends paid per share............... $ 1.32 $ 1.24 $ 1.16
Dividend payout ratio.................. 57.1% 62.0% 59.8%
Market values during the year:
High................................. $ 34.875 $ 26.625 $ 27.000
Low.................................. $ 26.125 $ 22.500 $ 18.500
Close................................ $ 32.875 $ 26.500 $ 25.750
Book value of common shares............ $ 16.63 $ 15.73 $ 15.17
Market-to-book ratio at year
end................................... 197.7% 168.5% 169.7%
Total Assets ($000's).................. $ 3,912,324 $ 3,807,941 $ 3,647,557
Utility construction expenditures
($000's)(a)........................... $ 180,852 $ 172,329 $ 168,958
Capitalization:
Common shareholders' equity
($000's)............................ $ 1,094,672 $ 1,034,530 $ 1,011,666
Preferred and preference
stock:
Northern Indiana Public
Service Company:
Series without mandatory
redemption provision
($000's)........................ $ 97,753 $ 97,917 $ 98,710
Series with mandatory
redemption provisions
($000's)........................ $ 68,462 $ 70,668 $ 53,978
NIPSCO Industries, Inc.:
Series with mandatory
redemption provision
($000's)......................... $ 35,000 $ 35,000 $ 35,000
Long-term debt ($000's).............. $ 1,192,500 $ 1,054,454 $ 1,068,708
----------- ----------- -----------
Total Capitalization
($000's).......................... $ 2,488,387 $ 2,292,569 $ 2,268,062
Number of employees.................... 4,602 4,648 4,600
</TABLE>
Notes:
/a/ Including AFUDC.
/b/ Excluding Extraordinary Loss related to Bailly N1 Plant Abandonment in 1985.
/c/ Excluding Carbon County, return would have been 6.1%.
/d/ Excluding Carbon County Coal Settlement and related income taxes.
52
<PAGE>
<TABLE>
<CAPTION>
Year Ended December 31, 1990 1989 1988 1987
----------- ----------- ----------- -----------
<S> <S> <C> <C> <C>
Operating Revenues:
Gas ($000's)......................... $ 625,159 $ 677,262 $ 620,723 $ 581,130
Electric ($000's).................... $ 895,836 $ 882,303 $ 903,461 $ 870,499
----------- ----------- ----------- -----------
Total Operating Revenues
($000's).......................... $ 1,520,995 $ 1,559,565 $ 1,524,184 $ 1,451,629
Operating Margin ($000's).............. $ 902,185 $ 916,429 $ 879,825 $ 777,573
Operating Income ($000's).............. $ 247,777 $ 252,807 $ 257,923 $ 192,415
Income Before Extraordinary
Items ($000's)........................ $ 125,361 $ 72,112/f/ $ 103,449 $ 38,876
Net Income ($000's).................... $ 125,361 $ 72,112/f/ $ 103,449 $ 38,876
Shares outstanding at year end......... 68,874,229 69,369,492 73,310,210 73,243,100
Number of common shareholders.......... 41,285 43,763 47,324 50,074
Earnings (loss) per average
common share.......................... $ 1.81 $ 1.00/f/ $ 1.41 $ 0.53
Return on average common equity........ 12.7% 7.2%/f/ 10.4% 4.1%
Times interest earned (pre-tax)........ 2.81 2.02/f/ 2.38 1.65
Dividends paid per share............... $ 1.04 $ 0.84 $ 0.60 $ 0.15
Dividend payout ratio.................. 57.5% 84.0%/f/ 42.6% 28.3%
Market values during the year:
High................................. $ 19.295 $ 19.625 $ 14.125 $ 13.00
Low.................................. $ 15.750 $ 13.125 $ 8.625 $ 8.00
Close................................ $ 18.875 $ 19.375 $ 13.875 $ 8.50
Book value of common shares............ $ 14.61 $ 13.92 $ 14.03 $ 13.13
Market-to-book ratio at year
end................................... 129.2% 139.2% 98.9% 64.7%
Total Assets ($000's).................. $ 3,625,181 $ 3,657,718 $ 3,684,721 $ 3,821,690
Utility construction expenditures
($000's)(a)........................... $ 152,280 $ 150,786 $ 116,874 $ 156,750
Capitalization:
Common shareholders' equity
($000's)............................ $ 1,005,982 $ 965,437 $ 1,028,554 $ 961,562
Preferred and preference
stock:
Northern Indiana Public
Service Company:
Series without mandatory
redemption provision
($000's)........................ $ 99,374 $ 99,874 $ 99,937 $ 191,392
Series with mandatory
redemption provisions
($000's)........................ $ 59,358 $ 66,309 $ 75,189 $ 105,395
NIPSCO Industries, Inc.:
Series with mandatory
redemption provision
($000's)......................... $ 35,000 $ -- $ -- $ --
Long-term debt ($000's).............. $ 1,165,682 $ 1,261,760 $ 1,308,303 $ 1,401,326
----------- ----------- ----------- -----------
Total Capitalization
($000's).......................... $ 2,365,396 $ 2,393,380 $ 2,511,983 $ 2,659,675
Number of employees.................... 4,547 4,825 4,946 5,172
</TABLE>
<TABLE>
<CAPTION>
Year Ended December 31, 1986 1985 1984 1983
----------- ----------- ----------- -----------
<S> <C> <C> <C> <C>
Operating Revenues:
Gas ($000's)......................... $ 741,021 $ 943,855 $ 1,011,716 $ 1,021,781
Electric ($000's).................... $ 885,106 $ 964,648 $ 989,356 $ 934,579
----------- ----------- ----------- -----------
Total Operating Revenues
($000's).......................... $ 1,626,127 $ 1,908,503 $ 2,001,072 $ 1,956,360
Operating Margin ($000's).............. $ 756,712 $ 803,864 $ 854,320 $ 760,178
Operating Income ($000's).............. $ 179,896 $ 198,098 $ 236,302 $ 207,208
Income Before Extraordinary
Items ($000's)........................ $ (40,477) $ 79,085 $ 89,747 $ 107,786
Net Income ($000's).................... $ (40,477) $ (15,758) $ 89,747 $ 107,786
Shares outstanding at year end......... 73,170,788 73,045,160 69,516,560 66,724,405
Number of common shareholders.......... 56,466 74,303 86,298 91,504
Earnings (loss) per average
common share.......................... $ (0.55)/e/ $ 1.11/b/ $ 1.32 $ 1.73
Return on average common equity........ (4.2)%/c/ 7.5%/b/ 8.7% 11.2%
Times interest earned (pre-tax)........ 1.96/d/ 2.24 2.50 2.74
Dividends paid per share............... none $ 1.56 $ 1.55 $ 1.50
Dividend payout ratio.................. -- 140.5%/b/ 117.0% 86.7%
Market values during the year:
High................................. $ 13.50 $ 12.875 $ 15.125 $ 15.50
Low.................................. $ 9.375 $ 8.375 $ 11.125 $ 12.125
Close................................ $ 11.75 $ 9.875 $ 11.75 $ 14.625
Book value of common shares............ $ 12.90 $ 13.46 $ 15.03 $ 15.34
Market-to-book ratio at year
end................................... 91.1% 73.4% 78.2% 95.4%
Total Assets ($000's).................. $ 3,944,637 $ 3,833,302 $ 3,786,643 $ 3,695,965
Utility construction expenditures
($000's)(a)........................... $ 197,324 $ 279,175 $ 285,297 $ 280,196
Capitalization:
Common shareholders' equity
($000's)............................ $ 943,933 $ 983,127 $ 1,044,555 $ 1,023,366
Preferred and preference
stock:
Northern Indiana Public
Service Company:
Series without mandatory
redemption provision
($000's)........................ $ 191,392 $ 191,392 $ 191,392 $ 191,392
Series with mandatory
redemption provisions
($000's)........................ $ 122,122 $ 135,350 $ 141,500 $ 147,650
NIPSCO Industries, Inc.:
Series with mandatory
redemption provision
($000's)......................... $ -- $ -- $ -- $ --
Long-term debt ($000's).............. $ 1,552,324 $ 1,511,215 $ 1,317,948 $ 1,383,606
----------- ----------- ----------- -----------
Total Capitalization
($000's).......................... $ 2,809,771 $ 2,821,084 $ 2,695,395 $ 2,746,014
Number of employees.................... 5,695 5,774 5,886 5,943
</TABLE>
/e/Earnings per share were reduced by $1.39 due to the payment in satisfaction
of the Carbon County Coal Company contract litigation.
/f/Earnings per share were reduced by $0.72 due to the $82.0 million refund,
less associated tax benefits of $30.3 million, related to the Bailly N1
generating unit.
53
<PAGE>
GRAPHIC MATERIAL CROSS-REFERENCE PAGE
CAPITALIZATION RATIO CHART SHOWS PERCENT OF LONG-TERM DEBT, COMMON SHARE
EQUITY AND PREFERRED AND PREFERENCE STOCK FOR YEARS 1984-1993.
COST OF FUEL FOR ELECTRIC GENERATION CHART SHOWS IN MILLS PER KWH THE COST OF
FUEL FOR ELECTRIC GENERATION FOR YEARS 1984-1993.
COST OF GAS PURCHASED FOR RESALE CHART SHOWS IN DOLLARS PER DEKATHERM THE COST
OF GAS PURCHASED FOR RESALE FOR YEARS 1984-1993.
<PAGE>
EXHIBIT 21
NIPSCO INDUSTRIES, INC.
LIST OF SUBSIDIARIES AS DECEMBER 31, 1993
All subsidiaries are incorporated in Indiana, except for Elm Energy and
Recycling (UK) Ltd., which is incorporated in United Kingdom and Triumph
Natural Gas, Inc., which is incorporated in Delaware. All subsidiaries are
wholly-owned unless otherwise indicated.
Northern Indiana Public Service Company
Its subsidiaries are:
NIPSCO Exploration Company, Inc.
Shore Line Shops, Incorporated
Kokomo Gas and Fuel Company
Its subsidiary is:
KGF Trading Company
Northern Indiana Fuel and Light Company, Inc.
Its subsidiary is:
Northern Indiana Trading Company
NIPSCO Capital Markets, Inc.
NIPSCO Development Company, Inc.
Its subsidiaries are:
Analytic Systems Laboratories, Inc. (1)
Elm Energy and Recycling (UK) Ltd. (1)
G. R. Clark Corporation
Harbor Coal Company
JOF Transportation Company
KOGAF Enterprises, Inc.
Its subsidiary is:
Metals Technology Corporation (2)
Lake Erie Land Company
Its subsidiary is:
SCC Services, Inc.
NDC Douglas Properties, Inc.
NIPSCO International Power Systems Company
NIPSCO Security Services, Inc.
Process and Control Technology Corporation
RIC, Inc.
Its subsidiary is:
Cardinal Property Management, Inc.
Riverside Caloric Company
NIPSCO Energy Services, Inc.
Its subsidiaries are:
Crossroads Pipeline Company
NIPSCO Energy Trading Corp.
NIPSCO Fuel Company, Inc.
NI-TEX, Inc.
Triumph Natural Gas, Inc. (3)
- --------
(1) Majority-owned subsidiary of NIPSCO Development Company, Inc.
(2) Majority-owned subsidiary of KOGAF Enterprises, Inc.
(3) Majority-owned subsidiary of NIPSCO Energy Services, Inc.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our reports included or incorporated by reference in this Form 10-K, into
Industries' previously filed Form S-3 Registration Statement, No. 33-22569;
Form S-8 Registration Statement, No. 33-30619; and Form S-8 Registration
Statement, No. 33-30621.
Arthur Andersen & Co.
Chicago, Illinois
March 28, 1994
