<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-Q
X Quarterly Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the quarterly period ended March 31, 1995
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
incorporation or organization) Identification No.)
5265 Hohman Avenue, Hammond, Indiana 46320-1775
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219)
853-5200
Indicate by check mark whether the registrant (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities
Exchange Act of 1934 during the preceding 12 months (or for such shorter
period that the registrant was required to file such reports), and (2)
has been subject to such filing requirements for the past 90 days.
X
Yes _________ No __________
As of April 30, 1995, 63,615,273 common shares were outstanding.
<PAGE>
NIPSCO INDUSTRIES, INC.
PART I. FINANCIAL INFORMATION
Report Of Independent Public Accountants
To The Board of Directors of
NIPSCO Industries, Inc.:
We have audited the accompanying consolidated balance sheet of
NIPSCO Industries, Inc. (an Indiana corporation) and subsidiaries as of
March 31, 1995, and December 31, 1994, and the related consolidated
statements of income, common shareholders' equity and cash flows for
the three and twelve month periods ended March 31, 1995, and 1994.
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 March 31,
1995, and December 31, 1994, and the results of their operations and
their cash flows for the three and twelve month periods ended March 31,
1995, and 1994, in conformity with generally accepted accounting
principles.
As discussed in Notes 6 and 8 to the consolidated financial
statements, effective January 1, 1993, NIPSCO Industries, Inc. and
subsidiaries changed their methods of accounting for income taxes and
postretirement benefits other than pensions.
Arthur Andersen LLP
Chicago, Illinois
April 26, 1995
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
March 31, December 31,
ASSETS 1995 1994
=========== ===========
(Dollars in thousands)
<S> <C> <C>
Utility Plant, at original cost
(including construction work in
progress of $228,889 and $221,830,
respectively) (Note 2):
Electric $ 3,886,700 $ 3,858,118
Gas 1,269,669 1,258,801
Common 322,505 316,120
___________ ___________
5,478,874 5,433,039
Less - Accumulated provision
for depreciation and
amortization 2,248,239 2,202,082
___________ ___________
Total utility plant 3,230,635 3,230,957
___________ ___________
Other Property and Investments:
Other property, at cost, less
accumulated provision for
depreciation 127,058 126,632
Investments, at equity 27,337 27,023
Investments, at cost 17,363 10,355
Other investments 13,482 13,328
Total other property
and investments 185,240 177,338
___________ ___________
Current Assets:
Cash and cash equivalents 36,157 40,441
Accounts receivable, less reserve of
$5,512 and $4,899, respectively
(Note 2) 117,253 86,299
Fuel adjustment clause (Note 2) 367 1,614
Gas cost adjustment clause (Note 2) - 25,972
Materials and supplies, at average
cost 69,747 66,397
Electric production fuel, at average
cost 24,935 18,347
Natural gas in storage, at last-in,
first-out cost (Note 2) 22,028 77,794
Prepayments and other 12,647 11,081
___________ ___________
Total current assets 283,134 327,945
___________ ___________
Other Assets:
Regulatory assets (Note 2) 196,012 195,449
Deferred charges and other
noncurrent assets 15,716 15,449
___________ ___________
Total other assets 211,728 210,898
___________ ___________
$ 3,910,737 $ 3,947,138
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Balance Sheet
March 31, December 31,
CAPITALIZATION AND LIABILITIES 1995 1994
=========== ===========
(Dollars in thousands)
<S> <C> <C>
Capitalization:
Common shareholders' equity
(See accompanying statement) $ 1,134,786 $ 1,107,848
Cumulative preferred stocks (Note 10) -
Northern Indiana Public Service Company:
Series without mandatory redemption
provisions (Note 11) 83,694 86,389
Series with mandatory redemption
provisions (Note 12) 66,057 66,057
NIPSCO Industries Inc.:
Series with mandatory redemption
provisions (Note 12) 35,000 35,000
Long-term debt excluding amounts due
within one year (Note 16) 1,183,925 1,180,338
___________ ___________
Total capitalization 2,503,462 2,475,632
___________ ___________
Current Liabilities:
Obligations due within one year -
Northern Indiana Public Service Company:
Commercial paper 69,900 156,500
First mortgage bonds -
Series N, 4-5/8% - due May 15, 1995 22,436 22,436
Notes payable -
Issued at interest rates between 6.15%
and 6.20% with a weighted average
interest rate of 6.18% and various
maturities between April 3, 1995
and May 8, 1995 28,400 92,700
NIPSCO Capital Markets Inc.:
Commercial paper 3,200 49,600
Notes payable -
Issued at interest rates of 6.26% and
6.28% with a weighted average interest
rate of 6.26% and a maturity of
April 10, 1995 14,400 12,700
Elm Energy and Recycling (UK), Ltd.
Term loan facility 3,376 3,262
Standby loan facility 811 -
NDC Douglas Properties, Inc.
Notes payable 1,149 1,013
___________ ___________
183,672 338,211
___________ ___________
Other current liabilities -
Accounts payable 145,961 158,712
Sinking funds due within one year
(Notes 12 and 16) 1,328 2,578
Dividends declared on common and
preferred stocks 27,148 27,077
Customer deposits 9,364 9,291
Taxes accrued 98,472 43,625
Gas cost adjustment clause (Note 2) 21,346 -
Interest accrued 16,789 10,561
Other accruals 71,972 54,419
___________ ___________
392,380 306,263
___________ ___________
Total current liabilities 576,052 644,474
___________ ___________
Other:
Deferred income taxes (Note 6) 582,347 581,866
Deferred investment tax credits, being
amortized over life of related property
(Note 6) 121,313 123,181
Deferred credits 47,026 44,171
Accrued liability for postretirement
benefits (Note 8) 53,852 48,548
Regulatory income tax liability (Note 6) 16,843 18,599
Other noncurrent liabilities 9,842 10,667
___________ ___________
Total other 831,223 827,032
___________ ___________
Commitments and Contingencies
(Notes 3, 4, 5, 18 and 19) $ 3,910,737 $ 3,947,138
=========== ===========
<FN>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Income
Three Months Twelve Months
Ended March 31, Ended March 31,
____________________ _______________________
1995 1994 1995 1994
========= ========= ========== ==========
(Dollars in thousands)
<S> <C> <C> <C> <C>
Operating Revenues:
(Notes 2, 4 and 21)
Gas $ 284,910 $ 318,580 $ 648,239 $ 743,175
Electric 237,588 246,971 985,109 978,601
_________ _________ _________ _________
522,498 565,551 1,633,348 1,721,776
_________ _________ _________ _________
Cost of Energy: (Note 2)
Gas costs 172,299 198,305 377,431 450,228
Fuel for electric
generation 53,785 63,144 237,775 248,058
Power purchased 10,964 9,102 34,365 24,066
_________ _________ _________ _________
237,048 270,551 649,571 722,352
_________ _________ _________ _________
Operating Margin 285,450 295,000 983,777 999,424
_________ _________ _________ _________
Operating Expenses and
Taxes (except income):
Operation 70,801 76,450 282,117 289,001
Maintenance (Note 2) 21,453 20,313 81,310 82,596
Depreciation and
amortization (Note 2) 49,117 47,645 195,755 188,506
Taxes (except income) 20,432 20,834 71,825 72,225
_________ _________ _________ _________
161,803 165,242 631,007 632,328
_________ _________ _________ _________
Operating Income Before
Utility Income Taxes 123,647 129,758 352,770 367,096
_________ _________ _________ _________
Utility Income Taxes
(Note 6) 37,574 37,802 97,504 99,730
_________ _________ _________ _________
Operating Income 86,073 91,956 255,266 267,366
_________ _________ _________ _________
Other Income (Deductions)
(Note 2) (831) (1,066) 2,451 (2,272)
_________ _________ _________ _________
Income Before Interest
and Other Charges 85,242 90,890 257,717 265,094
_________ _________ _________ _________
Interest and Other Charges:
Interest on long-term
debt 19,661 21,149 76,804 81,589
Other interest 3,820 1,966 13,504 8,963
Allowance for borrowed
funds used during
construction (Note 2) (1,940) (727) (5,587) (1,969)
Amortization of premium,
reacquisition premium,
discount and expense
on debt, net 1,045 892 4,050 3,596
Dividend requirements on
preferred stocks of
subsidiary 2,325 2,569 9,669 10,292
_________ _________ _________ _________
24,911 25,849 98,440 102,471
_________ _________ _________ _________
Net Income 60,331 65,041 159,277 162,623
Dividend requirements on
preferred shares 766 766 3,063 3,063
_________ _________ _________ _________
Balance available for
common shareholders $ 59,565 $ 64,275 $ 156,214 $ 159,560
========= ========= ========= =========
Average common shares
outstanding 64,103,491 65,621,433 64,445,752 66,120,693
Earnings per average
common share $ 0.92 $ 0.97 $ 2.42 $ 2.42
========= ========= ========= =========
Dividends declared per
common share $ 0.39 $ 0.36 $ 1.50 $ 1.38
========= ========= ========= =========
<FN>
The accompanying notes to consolidated financial statements are an
integral part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Common Shareholders' Equity
Dollars in Thousands
__________________________________________________
Additional
Common Paid-in Retained
Three Months Ended Total Shares Capital Earnings
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $ 1,094,672 $ 870,930 $ 27,631 $ 380,888
Net income 65,041 65,041
Dividends:
Preferred shares (766) (766)
Common shares (23,539) (23,539)
Treasury shares acquired (14,273)
Issued:
Employee stock purchase
plan 305 158
Long-term incentive plan 420 (39)
Other 603 (23)
___________ ___________ ___________ ___________
Balance, March 31, 1994 $ 1,122,463 $ 870,930 $ 27,750 $ 421,601
=========== =========== =========== ===========
<CAPTION>
Dollars in Thousands Shares
_____________________________________ ___________
Currency
Three Months Ended Treasury Unearned Translation Common
(continued) Shares Compensation Adjustment Shares
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, January 1, 1994 $ (180,212) $ (1,684) $ (2,881) 73,892,109
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (14,273)
Issued:
Employee stock purchase
plan 147
Long-term incentive plan 412 47
Other 123 503
___________ ___________ ___________ ___________
Balance, March 31, 1994 $ (193,926) $ (1,514) $ (2,378) 73,892,109
=========== =========== =========== ===========
<CAPTION>
Shares
___________
Three Months Ended Treasury
(continued) Shares
======================== ===========
<S> <C>
Balance, January 1, 1994 (8,063,271)
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (466,344)
Issued:
Employee stock purchase
plan 9,286
Long-term incentive plan 14,289
Other
___________
Balance, March 31, 1994 (8,506,040)
===========
<CAPTION>
Dollars in Thousands
__________________________________________________
Additional
Three Months Ended Common Paid-in Retained
(continued) Total Shares Capital Earnings
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ 1,107,848 $ 870,930 $ 29,657 $ 446,928
Net income 60,331 60,331
Dividends:
Preferred shares (766) (766)
Common shares (25,146) (25,146)
Treasury shares acquired (10,448)
Issued:
Employee stock purchase
plan 305 142
Long-term incentive plan 1,262 1,631
Other 1,400 376 (171)
___________ ___________ ___________ ___________
Balance, March 31, 1995 $ 1,134,786 $ 870,930 $ 31,806 $ 481,176
=========== =========== =========== ===========
<CAPTION>
Dollars in Thousands Shares
_____________________________________ ___________
Currency
Three Months Ended Treasury Unearned Translation Common
(continued) Shares Compensation Adjustment Shares
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, January 1, 1995 $ (237,193) $ (970) $ (1,504) 73,892,109
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (10,448)
Issued:
Employee stock purchase
plan 163
Long-term incentive plan 7,256 (7,625)
Other 573 622
___________ ___________ ___________ ___________
Balance, March 31, 1995 $ (240,222) $ (8,022) $ (882) 73,892,109
=========== =========== =========== ===========
<CAPTION>
Shares
___________
Three Months Ended Treasury
(concluded) Shares
======================== ===========
<S> <C>
Balance, January 1, 1995 (9,986,720)
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (333,999)
Issued:
Employee stock purchase
plan 10,231
Long-term incentive plan 290,250
Other
___________
Balance, March 31, 1995 (10,020,238)
===========
<CAPTION>
Dollars in Thousands
__________________________________________________
Additional
Common Paid-in Retained
Twelve Months Ended Total Shares Capital Earnings
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, April 1, 1993 $ 1,098,821 $ 870,930 $ 27,432 $ 352,844
Net income 162,623 162,623
Dividends:
Preferred shares (3,063) (3,063)
Common shares (90,945) (90,945)
Treasury shares acquired (49,857)
Issued:
Employee stock purchase
plan 574 296
Long-term incentive plan 3,880 24
Other 430 (2) 142
___________ ___________ ___________ ___________
Balance, March 31, 1994 $ 1,122,463 $ 870,930 $ 27,750 $ 421,601
___________ ___________ ___________ ___________
<CAPTION>
Dollars in Thousands Shares
_____________________________________ ___________
Currency
Twelve Months Ended Treasury Unearned Translation Common
(continued) Shares Compensation Adjustment Shares
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Balance, April 1, 1993 $ (148,249) $ (2,261) $ (1,875) 73,892,109
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (49,857)
Issued:
Employee stock purchase
plan 278
Long-term incentive plan 3,902 (46)
Other 793 (503)
___________ ___________ ___________ ___________
Balance, March 31, 1994 $ (193,926) $ (1,514) $ (2,378) 73,892,109
___________ ___________ ___________ ___________
<CAPTION>
Shares
___________
Twelve Months Ended Treasury
(continued) Shares
======================== ===========
<S> <C>
Balance, April 1, 1993 (7,100,036)
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (1,597,183)
Issued:
Employee stock purchase
plan 17,540
Long-term incentive plan 173,639
Other
___________
Balance, March 31, 1994 (8,506,040)
___________
<CAPTION>
Dollars in Thousands
__________________________________________________
Additional
Twelve Months Ended Common Paid-in Retained
(concluded) Total Shares Capital Earnings
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Net income $ 159,277 $ $ $ 159,277
Dividends:
Preferred shares (3,063) (3,063)
Common shares (96,410) (96,410)
Treasury shares acquired (54,892)
Issued:
Employee stock purchase
plan 598 277
Long-term incentive plan 2,291 1,701
Other 4,522 2,078 (229)
___________ ___________ ___________ ___________
Balance, March 31, 1995 $ 1,134,786 $ 870,930 $ 31,806 $ 481,176
=========== =========== =========== ===========
<CAPTION>
Dollars in Thousands Shares
_____________________________________ ___________
Currency
Twelve Months Ended Treasury Unearned Translation Common
(concluded) Shares Compensation Adjustment Shares
======================== =========== =========== =========== ===========
<S> <C> <C> <C> <C>
Net income $ $ $
Dividends:
Preferred shares
Common shares
Treasury shares acquired (54,892)
Issued:
Employee stock purchase
plan 321
Long-term incentive plan 8,275 (7,685)
Other 1,177 1,496
___________ ___________ ___________ ___________
Balance, March 31, 1995 $ (240,222) $ (8,022) $ (882) 73,892,109
=========== =========== =========== ===========
<CAPTION>
Shares
___________
Twelve Months Ended Treasury
(concluded) Shares
======================== ===========
<S> <C>
Net income
Dividends:
Preferred shares
Common shares
Treasury shares acquired (1,870,241)
Issued:
Employee stock purchase
plan 20,193
Long-term incentive plan 335,850
Other
___________
Balance, March 31, 1995 (10,020,238)
===========
<FN>
The accompanying notes to consolidated financial statements are an integral
part of this statement.
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
Consolidated Statement of Cash Flows
Three Months Twelve Months
Ended March 31, Ended March 31,
________________________ ___________________________
1995 1994 1995 1994
=========== =========== =========== ===========
(Dollars in thousands)
<S> <C> <C> <C> <C>
Cash flows from
operating activities:
Net income $ 60,331 $ 65,041 $ 159,277 $ 162,623
Adjustments to
reconcile net income
to net cash:
Depreciation and
amortization 49,117 47,645 195,755 188,506
Deferred federal
and state
operating income
taxes, net (17,057) (15,068) (13,477) (1,582)
Deferred investment
tax credits, net (1,868) (962) (7,405) (6,558)
Change in certain
assets and
liabilities* -
Accounts
receivable,
net (30,954) (36,746) 34,622 (21,164)
Electric
production
fuel (6,588) (1,920) (1,482) 17,251
Materials and
supplies (3,350) (362) (2,265) 5,770
Natural gas in
storage 55,766 44,741 (3,899) (5,809)
Accounts payable (12,751) 9,534 (56,365) 40,368
Taxes accrued 70,915 44,806 7,205 1,642
Fuel adjustment
clause 1,247 (2,837) 8,910 (4,316)
Gas cost
adjustment
clause 47,318 35,659 18,514 20,139
Other accruals 17,645 10,776 6,212 (10,619)
Other, net 13,047 16,669 16,632 7,056
___________ ___________ ___________ ___________
Net cash
provided by
operating
activities 242,818 216,976 362,234 393,307
___________ ___________ ___________ ___________
Cash flows provided by
(used in) investing
activities:
Utility construction
expenditures (49,939) (52,822) (197,703) (199,233)
Acquisition and
construction
expenditures
related to
Crossroads Pipeline
Company (214) (1,067) (1,106) (25,428)
Return of capital from
equity investments 0 0 8,000 32,435
Other, net (8,036) 195 (27,798) (38,708)
___________ ___________ ___________ ___________
Net cash used
in investing
activities (58,189) (53,694) (218,607) (230,934)
___________ ___________ ___________ ___________
Cash flows provided by
(used in) financing
activities:
Issuance of
long-term debt 4,351 20,395 206,531 488,664
Issuance of
short-term debt 270,861 87,401 1,204,237 1,106,507
Net change in
commercial paper (93,000) (42,895) 81,100 8,000
Retirement of
long-term debt (864) (5,042) (214,394) (382,070)
Retirement of
short-term debt (332,400) (147,401) (1,275,389) (1,215,358)
Retirement of
preferred stock (3,570) 0 (13,765) (2,010)
Issuance of common
shares 1,396 685 2,771 4,671
Acquisition of
treasury shares (10,448) (14,273) (54,892) (49,857)
Cash dividends paid
on common shares (25,146) (23,676) (95,048) (90,225)
Cash dividends paid
on preferred
shares (766) (766) (3,063) (3,063)
Other, net 673 - 592 (1,487)
___________ ___________ ___________ ___________
Net cash
used in
financing
activities (188,913) (125,572) (161,320) (136,228)
___________ ___________ ___________ ___________
Net increase (decrease)
in cash and cash
equivalents (4,284) 37,710 (17,693) 26,145
Cash and cash
equivalents at
beginning of period 40,441 16,140 53,850 27,705
___________ ___________ ___________ ___________
Cash and cash
equivalents at end
of period $ 36,157 $ 53,850 $ 36,157 $ 53,850
=========== =========== =========== ===========
<FN>
*Net of effects from purchase of Northern Indiana Fuel and Light
Company, Inc.
The accompanying notes to consolidated financial statements are an
integral part of this statement.
</TABLE>
<PAGE>
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) HOLDING COMPANY STRUCTURE: NIPSCO Industries, Inc. (Industries) is an
Indiana corporation serving as the holding company for a number of
subsidiaries, including three public utility operating companies: Northern
Indiana Public Service Company (Northern Indiana), Kokomo Gas and Fuel Company
(Kokomo Gas) and Northern Indiana Fuel and Light Company, Inc. (NIFL).
Industries' major non-utility subsidiaries include NIPSCO Development
Company, Inc. (Development), NIPSCO Energy Services, Inc. (Services), and
NIPSCO Capital Markets, Inc. (Capital Markets).
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
PRINCIPLES OF CONSOLIDATION. The consolidated financial statements
include the accounts of Industries, its utility subsidiaries Northern Indiana,
Kokomo Gas, NIFL and Crossroads Pipeline Company, a wholly owned subsidiary
of Services (Utilities), and all non-utility subsidiaries. Investments for
which Industries has at least a 20% interest and certain joint ventures are
accounted for under the equity method of accounting. Investments with less
than a 20% interest are accounted for under the cost method of accounting.
The operating results of all non-utility subsidiaries are included in "Other
Income (Deductions)" in the Consolidated Statement of Income. 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% and 4.1%, for the three and
twelve month periods ended March 31, 1995, respectively, and 4.0% for the
three and twelve month periods ended March 31, 1994. The depreciation rates
for electric and gas properties were 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
three and twelve month periods ended March 31, 1995, and March 31, 1994.
NIFL provides depreciation on the original cost of utility plant in
service using straight-line rates that averaged approximately 2.75% for the
three and twelve month periods ended March 31, 1995, and March 31, 1994.
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 for repairs of transportation and service equipment
which 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. NIPSCO Fuel Company, Inc., a
wholly-owned subsidiary of Services 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 March 31, 1995, 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 periods reported for income taxes and interest
was as follows:
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31, Ended March 31,
___________________ ____________________
1995 1994 1995 1994
======== ======= ========= =======
(Dollars in thousands)
<S> <C> <C> <C> <C>
Income taxes $ 0 $ 2,435 $ 119,050 $ 92,248
Interest, net of amounts
capitalized $ 15,909 $ 11,356 $ 87,291 $ 82,870
</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 Indiana
Utility Regulatory Commission (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 Note 4, Rate Matters
(Take-or-Pay Pipeline Gas Costs) and (FERC Order No. 636) for a discussion of
take-or-pay charges and gas transition cost charges.
NATURAL GAS IN STORAGE. Based on the average cost of gas purchased
in March, 1995, and December, 1994, the estimated replacement cost of gas in
storage (current and non-current) at March 31, 1995, and December 31, 1994,
exceeded the stated LIFO cost by approximately $38 million, respectively.
REGULATORY ASSETS. The Utilities' operations are subject to the
regulation of the Commission and the Federal Energy Regulatory Commission
(FERC). Accordingly, the Utilities' accounting policies are subject to the
provisions of Statement of Financial Accounting Standards (SFAS) No. 71
"Accounting for the Effects of Certain Types of Regulation". The regulatory
assets below represent probable future revenue to the Utilities associated
with certain incurred costs as these costs are recovered through the rate
making process. Regulatory assets were comprised of the following items, and
were reflected in the Consolidated Balance Sheet as follows:
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
============= =============
(Dollars in thousands)
<S> <C> <C>
Unamortized reacquisition
premium on debt (Note 16) $ 53,461 $ 54,265
Unamortized R.M. Schahfer Unit 17
and Unit 18 carrying charges
and deferred depreciation (See below) 78,144 79,198
Bailly scrubber carrying charges
and deferred depreciation (See below) 8,852 7,864
Deferral of SFAS No. 106 expense
not recovered (Note 8) 47,372 43,939
FERC Order No. 636
transition costs (Note 4) 43,265 56,153
____________ _____________
231,094 241,419
____________ _____________
Less: Current portion of regulatory assets 35,082 45,970
____________ _____________
$ 196,012 $ 195,449
============= =============
</TABLE>
In March, 1995, the Financial Accounting Standards Board issued SFAS No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of." This statement imposes stricter criteria for
retention of regulatory assets by requiring that such assets be probable of
future recovery at each balance sheet date. Northern Indiana anticipates
adopting this standard on January 1, 1996, and does not expect that adoption
will have a material impact on its financial position or results
of operations based on the current regulatory structure in which Northern
Indiana operates.
CARRYING CHARGES AND DEFERRED DEPRECIATION. Upon completion of R. M.
Schahfer 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.
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, 1993, a pretax rate of 3.7% for all construction was
being used; effective January 1, 1994, the rate increased to 5.0% and
effective January 1, 1995, the rate increased to 7.0%.
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. Deferred income taxes are recognized as costs in the
rate making process by the commissions having jurisdiction over the rates
charged by the Utilities. Deferred income taxes are provided as a 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. These taxes are reversed by a debit or
credit to deferred income tax expense as the temporary differences reverse.
Investment tax credits have been deferred and are being amortized to income
over the life of the related property.
(3) 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
former 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 challenging the assessment in the United States Tax Court.
The matter was tried on May 31 and June 1, 1994, and briefing was completed
September 30, 1994. Northern Indiana estimates that the IRS' claim
approximates $47 million of principal and interest at March 31, 1995.
Northern Indiana's management and general counsel believe Northern Indiana
will be successful in establishing that no tax withholding was required for
the period.
(4) RATE MATTERS:
TAKE-OR-PAY PIPELINE GAS COSTS. The 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 $194.1 million of take-or-pay costs and interest from
their customers through March 31, 1995. As of March 31, 1995, an additional
$6.1 million was scheduled to be billed to the Utilities and recovered from
customers over a period of one to four years.
FERC ORDER NO. 636. On April 8, 1992, the FERC issued Order No. 636
which required 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 allows them to meet the needs
of their customers. Customers of the pipelines, such as the Utilities, are
expected to benefit from enhanced access to competitively priced gas supplies
as well as from more flexible transportation services. Pipelines are seeking
to recover from their customers certain transition costs associated with
restructuring under the Order No. 636 regulation. Any such recovery is
subject to established review procedures at the FERC. Also, mandated changes
in pipeline rate design could increase the cost of firm transportation service
on interstate pipelines. All interstate pipelines are now operating under
Order No. 636 regulation.
The Utilities' pipeline suppliers have made certain filings with the
FERC for the collection of their respective transition costs. The Utilities
expect that the total transition costs from all suppliers will approximate
$139 million. However, the ultimate level of costs will depend on future
events, including the market price of natural gas. Approximately $67 million
of such costs have been recorded, a portion of which has been paid to the
pipeline suppliers, subject to refund. On November 2, 1994, the Commission
issued an order which approved the recovery of these FERC-allowed transition
costs on a volumetric basis from Northern Indiana's sales and transportation
customers (which is consistent with what the Commission authorized for the
recovery of take-or-pay pipeline gas costs). Certain industrial customers
have appealed the November 2, 1994, order to the Indiana Court of Appeals.
Regulatory assets, in amounts corresponding to the costs recorded, have been
recorded to reflect the ultimate recovery of these costs.
(5) ENVIRONMENTAL MATTERS: Because of major investments made in modern
environmental control facilities and the use of low sulfur coal, all of
Northern Indiana's electric production facilities now comply with the sulfur
dioxide limitations contained in acid deposition provisions of the Clean Air
Act Amendments of 1990 (CAAA). 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 limitations on emissions
of nitrogen oxides and hazardous air pollutants, which may require significant
capital expenditures for control of these emissions. Northern Indiana is
evaluating a nitrogen oxide control program to meet future requirements.
Northern Indiana cannot predict the costs of complying with CAAA requirements,
but Northern Indiana believes that any such mandated costs would be
recoverable through the rate making process.
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 received notices from the Environmental Protection
Agency (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, analysis and
remediation. 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 all of the remedial costs at
these sites are not determinable, Northern Indiana's analysis indicates its
share of such costs with other PRPs should not have a significant impact on
its financial position or the results of future operations.
The Utilities have instituted a program to investigate former
manufactured gas plants where one of them is the current or former owner. The
Utilities have identified twenty-seven of these sites and made visual
inspections of these sites. The Utilities have conducted initial samplings at
eight sites. Follow-up investigations have been conducted at three sites and
potential remedial measures are being evaluated. The Utilities will continue
their program to assess sites during 1995. During the follow-up investigation
of the former manufactured gas plant in Elkhart, Indiana, Northern Indiana
noted the presence of hydrocarbons in the Elkhart River. Northern Indiana
reported this finding to the Indiana Department of Environmental Management
(IDEM) and the EPA. Northern Indiana is evaluating this site to determine
what remedial measures, if any, may be needed.
Northern Indiana was notified by the 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 has remediated part of the Fort Wayne
site. The remainder of the site is being evaluated to determine what further
remedial measures, if any, may be needed.
Northern Indiana and Indiana Gas Company, Inc. (Indiana Gas) have each
notified the other about five former manufactured gas plants at which both
companies or their predecessors were former owners or operators. Northern
Indiana is discussing various matters with Indiana Gas, including past and
future steps to further investigate or remediate these sites and potential
cost allocation for this activity. One of these sites was the Lafayette site
which Indiana Gas had previously notified Northern Indiana was being
investigated and remediated pursuant to an administrative order with IDEM.
Northern Indiana also notified PSI Energy, Inc. that it was a former owner or
operator of seven former manufactured gas plants at which Northern Indiana had
conducted or was planning investigation or remediation activities.
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.
(6) INCOME TAXES. Effective January 1, 1993, Industries adopted 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.
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
Consolidated Balance Sheet at March 31, 1995, and December 31, 1994, reflects
a net regulatory income tax liability of $16.8 million and $18.6 million,
respectively. 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.
The components of the net deferred income tax liability at March 31,
1995, and December 31, 1994, are as follows:
<TABLE>
<CAPTION>
March 31, 1995 December 31, 1994
=============== ==================
(Dollars in thousands)
<S> <C> <C>
Deferred tax liabilities -
Accelerated depreciation
and other property differences $ 694,473 $ 691,319
AFUDC-equity 41,890 42,447
Adjustment clauses - 10,596
Take-or-pay gas costs 1,887 2,045
Other regulatory assets 22,671 22,125
Reacquisition premium on debt 20,278 20,580
Deferred tax assets -
Deferred investment tax credits (45,995) (46,703)
Removal costs (108,596) (105,671)
Adjustment clauses (7,056) -
FERC Order No. 636 transition costs (4,703) (5,461)
Other postretirement benefits (24,672) (22,712)
Regulatory income tax liability (6,388) (7,054)
Other, net (18,096) (20,231)
___________ ___________
565,693 581,280
Less: Deferred income taxes related to
current assets and liabilities (16,654) (586)
___________ ___________
Deferred income taxes - noncurrent $ 582,347 $ 581,866
=========== ===========
</TABLE>
Federal and state income taxes as set forth in the Consolidated
Statement of Income are comprised of the following:
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31, Ended March 31,
____________________ ____________________
1995 1994 1995 1994
========= ========= ========= =========
(Dollars in thousands)
<S> <C> <C> <C> <C>
Current income taxes -
Federal $ 49,378 $ 46,797 $ 102,902 $ 93,925
State 7,121 7,035 15,484 13,945
_________ _________ _________ _________
56,499 53,832 118,386 107,870
_________ _________ _________ _________
Deferred income taxes, net-
Federal and State-
Accelerated depreciation and
other property differences 2,012 3,277 7,063 13,630
Removal costs (2,851) (2,809) (12,135) (8,644)
Adjustment clauses (10,946) (13,838) (14,133) (6,555)
FERC Order No. 636
transition costs (5,447) - 5,946 -
Take-or-pay gas costs (160) (1,106) (1,243) (6,431)
Reacquisition premium on debt (307) (258) 2,738 2,827
Other 642 (334) (1,713) 3,591
_________ _________ _________ _________
(17,057) (15,068) (13,477) (1,582)
_________ _________ _________ _________
Deferred investment tax credits,
net (1,868) (962) (7,405) (6,558)
_________ _________ _________ _________
Total utility operating income
taxes 37,574 37,802 97,504 99,730
Income tax applicable to non-
operating activities and income
of non-utility subsidiaries (2,056) (1,677) (16,712) (5,699)
_________ _________ _________ _________
Total income taxes $ 35,518 $ 36,125 $ 80,792 $ 94,031
========= ========= ========= =========
</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>
Three Months Twelve Months
Ended March 31, Ended March 31,
___________________ ____________________
1995 1994 1995 1994
======== ========= ========= =========
(Dollars in thousands)
<S> <C> <C> <C> <C>
Net Income $ 60,331 $ 65,041 $ 159,277 $ 162,623
Add-Income taxes 35,518 36,125 80,792 94,031
Dividend requirements on
preferred stocks of subsidiary 2,325 2,569 9,669 10,292
________ _________ _________ _________
Income before preferred dividend
requirements of subsidiary and
income taxes $ 98,174 $ 103,735 $ 249,738 $ 266,946
======== ========= ========= =========
Amount derived by multiplying
pretax income by the statutory
rate $ 34,361 $ 36,307 $ 87,409 $ 94,376
Reconciling items multiplied by
the statutory rate:
Book depreciation over related
tax depreciation 1,004 967 4,081 3,881
Amortization of deferred
investment tax credits (1,868) (1,928) (7,406) (7,524)
State income taxes, net of
federal income tax benefit 3,185 3,377 8,643 8,734
Fair market value of property
donated in excess of book
value - - (7,753) -
Reversal of deferred taxes
provided at rates in excess
of the current federal income
tax rate (1,360) (1,298) (5,869) (4,997)
Other, net 196 (1,300) 1,687 (439)
________ _________ _________ _________
Total income taxes $ 35,518 $ 36,125 $ 80,792 $ 94,031
======== ========= ========= =========
</TABLE>
(7) Pension Plans. Industries and its subsidiaries have three
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 January 1, 1995, and 1994 are as follows:
<TABLE>
<CAPTION>
1995 1994
========= =========
(Dollars in thousands)
<S> <C> <C>
Vested benefit obligation $ 449,043 $ 481,755
Nonvested benefit 97,138 86,373
_________ _________
Accumulated benefit obligation $ 546,181 $ 568,128
========= =========
Projected benefit obligation for service
rendered to date $ 613,094 $ 657,068
Plan assets at fair market value 571,624 605,379
_________ _________
Projected benefit obligation in excess of plan
assets 41,470 51,689
Unrecognized transition obligation at January 1,
being recognized over 17 years (48,906) (54,055)
Unrecognized prior service cost (29,847) (31,464)
Unrecognized gains 47,788 51,154
_________ _________
Accrued pension costs $ 10,505 $ 17,324
========= =========
</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
8.75% and 7.50% and rates of increase in compensation levels of 5.5% were used
to determine the accumulated benefit obligation and projected benefit
obligation at January 1, 1995, and 1994, respectively. The decrease in the
accumulated benefit obligation as of January 1, 1995, is mainly caused by the
increase in the discount rate to 8.75% and was partially offset by changes in
other plan assumptions.
The following items are the components of provisions for pensions for
the three months ended March 31, 1995, and March 31, 1994:
<TABLE>
<CAPTION>
March 31, March 31,
1995 1994
========== ==========
(Dollars in thousands)
<S> <C> <C>
Service costs $ 3,299 $ 3,627
Interest costs 13,338 12,050
Estimated return on plan assets (12,864) (11,931)
Amortization of transition obligation 1,355 1,347
Other net amortization and deferral 659 621
__________ __________
$ 5,787 $ 5,714
========== ==========
</TABLE>
Assumptions used in the valuation and determination of 1995 and 1994
pension expenses were as follows:
<TABLE>
<CAPTION>
1995 1994
======= =======
<S> <C> <C>
Discount rate 8.75% 7.50%
Rate of increase in compensation levels 5.50% 5.50%
Expected long-term rate of return on assets 9.00% 8.25%
</TABLE>
The plans' assets are invested primarily in common stocks, bonds and
notes.
Industries recorded provisions for pension costs as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1995 1994
========== ==========
(Dollars in thousands)
<S> <C> <C>
Three months ended $ 5,787 $ 5,714
Twelve months ended $ 21,307 $ 22,944
</TABLE>
(8) 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 insurance plans 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.
Effective January 1, 1993, Industries adopted SFAS No. 106, "Employers'
Accounting for Postretirement Benefits Other Than Pensions," which establishes
accounting and reporting standards for such postretirement benefits. This
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 January 1, 1995, and January 1, 1994.
<TABLE>
<CAPTION>
January 1, January 1,
1995 1994
========== ==========
(Dollars in thousands)
<S> <C> <C>
Retirees $ 96,676 $ 89,650
Fully eligible active plan participants 20,008 30,501
Other active plan participants 105,991 150,215
_________ _________
Accumulated postretirement benefit obligation 222,675 270,366
Unrecognized transition obligation at January 1,
being recognized over 20 years (208,681) (220,274)
Unrecognized actuarial gain (loss) 45,496 (20,737)
_________ _________
Accrued liability for postretirement benefits $ 59,490 $ 29,355
========= =========
</TABLE>
A discount rate of 8.75% and a pre-Medicare medical trend rate of 11%
declining to a long-term rate of 7% and a discount rate of 7.5% and a
pre-Medicare medical trend rate of 12% declining to a long-term rate of 7%
were used to determine the accumulated postretirement benefit obligation at
January 1, 1995, and 1994, respectively.
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 benefits costs for the three and twelve
months ended March 31, 1995, and March 31, 1994, include the following
components:
<TABLE>
<CAPTION>
Three Months Twelve Months
Ended March 31, Ended March 31,
________________ ________________
1995 1994 1995 1994
======= ======= ======= =======
(Dollars in thousands)
<S> <C> <C> <C> <C>
Service costs $ 1,526 $ 2,045 $ 7,753 $ 7,207
Interest costs 4,745 4,962 19,728 18,654
Amortization of transition
obligation over 20 years 2,899 2,882 11,610 11,596
Amortization of unrecognized
actuarial (gain) (541) 0 (541) 0
_______ _______ _______ _______
$ 8,629 $ 9,889 $38,550 $37,457
======= ======= ======= =======
</TABLE>
The net periodic postretirement benefit costs for 1995 were determined
assuming a 8.75% discount rate, a 5% rate of compensation increase and a
pre-Medicare medical trend rate of 11% 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 January 1, 1995, by approximately $32.0 million and increase the
aggregate of the service and interest cost components of plan costs by
approximately $1.2 million for the three months ended March 31, 1995. Amounts
disclosed above could be changed significantly in the future by changes in
health care costs, work force demographics, interest rates or plan changes.
On December 30, 1992, the Commission authorized the accrual method
of accounting for postretirement benefits for rate making purposes and
authorized 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. The Commission stated that a deferral period of four years or less
would be rebuttably presumed to be reasonable and 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. Northern Indiana expects to request recovery of such
costs within that period. 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, Northern Indiana
believes 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. Northern Indiana is deferring 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, Northern Indiana believes SFAS
No. 106 will not have a material effect on future results of operations.
(9) POSTEMPLOYMENT BENEFITS. Effective January 1, 1994, Industries adopted
SFAS No. 112, "Employers' Accounting for Postemployment Benefits," which
requires Industries to accrue the estimated cost of benefits provided to
former or inactive employees after employment but before retirement. Adoption
of SFAS No. 112 did not have a material impact on financial position or
results of operations.
(10) AUTHORIZED CLASSES OF CUMULATIVE PREFERRED AND PREFERENCE STOCKS:
Industries -
20,000,000 shares - Preferred - without par value
Effective March 2, 1990, 2,000,000 shares of Industries' Series A Junior
Participating Preferred Shares were reserved for issuance pursuant to the
Share Purchase Rights Plan described in Note 14, Common Shares.
Northern Indiana -
2,400,000 shares - Cumulative Preferred - $100 par value
3,000,000 shares - Cumulative Preferred - no par value
2,000,000 shares - Cumulative Preference - $50 par value (none
outstanding)
3,000,000 shares - Cumulative Preference - no par value (none
issued)
Note 11 sets forth the preferred stocks which are redeemable solely at
the option of the issuer, and Note 12 sets forth the preferred stocks which
are subject to mandatory redemption requirements or whose redemption is
outside the control of the issuer.
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.
(11) PREFERRED STOCKS, REDEEMABLE SOLELY AT THE OPTION OF THE ISSUER,
OUTSTANDING AT MARCH 31, 1995, AND DECEMBER 31, 1994 (SEE NOTE 10):
<TABLE>
<CAPTION>
Redemption
Price at
March 31, December 31, March 31,
1995 1994 1995
======== =========== ==========
(Dollars in thousands)
<S> <C> <C> <C>
Northern Indiana Public Service Company
Cumulative preferred stock - $100 par
value -
4-1/4% series - 209,216 and
211,266 shares outstanding,
respectively $ 20,922 $ 21,127 $ 101.20
4-1/2% series - 79,996 shares
outstanding 8,000 8,000 100.00
4.22% series - 106,200 shares
outstanding 10,620 10,620 101.60
4.88% series - 100,000 shares
outstanding 10,000 10,000 102.00
7.44% series - 41,900 shares
outstanding 4,190 4,190 101.00
7.50% series - 34,842 shares
outstanding 3,484 3,484 101.00
Premium on preferred stock 254 254
Cumulative preferred stock -
no par value -
Adjustable rate (6.00% at March 31,
1995),
Series A (stated value $50 per
share) - 524,485 and 574,285 shares
outstanding, respectively 26,224 28,714 50.00
_________ _________
$ 83,694 $ 86,389
========= =========
</TABLE>
During the period April 1, 1993, to March 31, 1995, there were no
issuances of the above preferred stocks.
The foregoing preferred stocks are redeemable in whole or in part at
any time upon 30 days notice at the option of Northern Indiana at the
redemption prices shown, except that the redemption price for the Adjustable
Rate Preferred will be reduced periodically in the future.
(12) REDEEMABLE PREFERRED STOCKS OUTSTANDING AT MARCH 31, 1995, AND DECEMBER
31, 1994 (SEE NOTE 10):
<TABLE>
<CAPTION>
March 31, December 31,
1995 1994
========== =============
(Dollars in thousands)
<S> <C> <C>
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 - 100,000 shares outstanding,
excluding sinking fund payments due within
one year $ 10,000 $ 10,000
7-3/4% series - 55,568 shares outstanding,
excluding sinking fund payments due within
one year 5,557 5,557
8.35% series - 75,000 shares outstanding,
excluding sinking fund payments due within
one year 7,500 7,500
Cumulative preferred stock - no par value -
6.50% series - 430,000 shares outstanding 43,000 43,000
________ ________
66,057 66,057
________ ________
NIPSCO Industries, Inc.:
Cumulative preferred shares - without par
value - 8.75% series (stated value - $100
per share), 350,000 shares outstanding 35,000 35,000
________ ________
$101,057 $101,057
======== ========
</TABLE>
The redemption prices at March 31, 1995, 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
and Industries are as follows:
<TABLE>
<CAPTION>
Series Redemption Price Per Share Annual Sinking Fund Provisions
====== ========================== ==============================
<S> <C> <C>
Northern Indiana Public Service Company:
Cumulative preferred stock - $100 par value -
8.85% $102.22, reduced periodically 12,500 shares on or
before April 1.
8.35% $104.43, 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% $104.76, reduced periodically 2,777 shares on or
before December 1;
noncumulative option
to double amount each
year.
Cumulative preferred stock - no par value -
6.50% $100.00 on October 14, 2002 430,000 shares on
October 14, 2002.
NIPSCO Industries, Inc.:
Cumulative preferred shares - without par value -
8.75% $100.00 on January 14, 1996 350,000 shares on
January 14, 1996.
</TABLE>
Sinking fund requirements with respect to redeemable preferred stocks
outstanding at March 31, 1995, for each of the twelve month periods subsequent
to March 31, 1996, are as follows:
<TABLE>
<CAPTION>
Twelve Months Ended March 31:*
===================================================
<S> <C>
1997 $ 1,827,700
1998 $ 1,827,700
1999 $ 1,827,700
2000 $ 1,827,700
<FN>
* Table does not reflect redemptions made after March 31, 1995.
</TABLE>
(13) 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 March 31, 1995,
Northern Indiana had approximately $161.7 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.
(14) 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.
COMMON SHARE REPURCHASES. The Board of Directors of Industries has
authorized the repurchase of approximately 14.6 million common shares in
addition to those required in connection with the acquisitions of Kokomo Gas
and NIFL. At March 31, 1995, Industries had purchased approximately 14.2
million shares at an average price of $22.96 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 3.3 million additional
common shares may be repurchased under the Board's authorization.
(15) LONG-TERM INCENTIVE PLAN: Industries' Long-Term Incentive Plan (the
1988 Plan) for key management employees, which was approved by shareholders on
April 13, 1988, provides for the issuance of up to 2.5 million of Industries'
common shares to key employees through 1998. At March 31, 1995, there were
255,961 shares reserved for future awards under the 1988 Plan. On April 13,
1994, shareholders adopted Industries' 1994 Long-Term Incentive Plan (1994
Plan). It is similar to the 1988 plan and provides an additional 2.5 million
common shares available for issuance to key employees through 2004. No awards
have been issued under the 1994 Plan. The 1988 Plan and 1994 Plan permit 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 March 31, 1995.
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. Restrictions on the shares awarded during 1990 and 1991 lapse five
years from date of grant and vest subject to specific share price appreciation
conditions. Restrictions on shares awarded in 1995 vest five years from date
of grant and will vest subject to specific earnings per share and stock
appreciation goals. If a participant's employment is terminated other than by
reason of death, disability or retirement, restricted shares are forfeited.
There were 400,500 and 150,500 restricted shares outstanding at March 31,
1995, and December 31, 1994, respectively.
Changes in outstanding shares under option and SARs for three and
twelve month periods ended March 31, 1995, and 1994, are as follows:
<TABLE>
<CAPTION>
Nonqualified Stock Options
_______________________________________________
Three Months Ended Option Option
March 31, 1995 Price 1994 Price
================== ======================== ========================
<S> <C> <C> <C> <C>
Balance beginning
of period 1,097,550 $10.94-$33.19 890,800 $10.94-$33.19
Granted 5,000 $30.31-$30.31 0
Exercised (40,250) $10.94-$26.06 (18,250) $10.94-$26.06
Cancelled (2,600) $28.75-$33.19 (8,300) $33.19
_________ ________
Balance end of
period 1,059,700 $10.94-$33.19 864,250 $10.94-$33.19
========= =======
Shares exercisable 765,900 $10.94-$33.19 584,050 $10.94-$26.06
<CAPTION>
Nonqualified Stock Options
With SARs
______________________________________________
Three Months Ended Option Option
March 31, 1995 Price 1994 Price
================== ===================== =====================
<S> <C> <C> <C> <C>
Balance beginning
of period 9,900 $10.94 9,900 $10.94
Granted 0 0
Exercised 0 0
Cancelled 0 0
_______ _______
Balance end of
period 9,900 $10.94 9,900 $10.94
======= =======
Shares exercisable 9,900 $10.94 9,900 $10.94
<CAPTION>
Nonqualified Stock Options
_______________________________________________
Twelve Months Ended Option Option
March 31, 1995 Price 1994 Price
================== ===================== =====================
<S> <C> <C> <C> <C>
Balance beginning
of period 864,250 $10.94-$33.19 762,850 $10.94-$26.06
Granted 299,650 $28.75-$30.31 288,500 $33.19
Exercised (83,850) $10.94-$26.06 (174,600) $10.94-$26.06
Cancelled (20,350) $28.75-$33.19 (12,500) $26.06-$33.19
_________ ________
Balance end of
period 1,059,700 $10.94-$33.19 864,250 $10.94-$33.19
========= ========
Shares exercisable 765,900 $10.94-$33.19 584,050 $10.94-$26.06
<CAPTION>
Nonqualified Stock Options
With SARs
______________________________________________
Twelve Months Ended Option Option
March 31, 1995 Price 1994 Price
================== ===================== =====================
<S> <C> <C> <C> <C>
Balance beginning
of period 9,900 $10.94 11,500 $10.94
Granted 0 0
Exercised 0 0
Cancelled 0 (1,600) $10.94
_______ _______
Balance end of
period 9,900 $10.94 9,900 $10.94
======= =======
Shares exercisable 9,900 $10.94 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 April 12, 1995, 27,750 shares were issued under the Plan.
(16) LONG-TERM DEBT: At March 31, 1995, and December 31, 1994, Industries'
long-term debt, excluding amounts due within one year, issued and not retired
or cancelled was as follows:
<TABLE>
<CAPTION>
Amount Outstanding
_____________________________
March 31, December 31,
1995 1994
=========== ===========
(Dollars in thousands)
<S> <C> <C>
Northern Indiana Public Service Company
First mortgage bonds -
Series O, 6-3/8%, due September 1, 1997 $ 25,747 $ 25,747
Series P, 6-7/8%, due October 1, 1998 14,509 14,509
Series T, 7-1/2%, due April 1, 2002 40,543 40,543
Series U, 8-1/8%, due July 15, 2003 55,239 55,239
Series Z, 8-1/8%, due August 15, 2007 39,559 39,569
Series NN, 7.10%, due July 1, 2017 55,000 55,000
___________ ___________
Total 230,597 230,607
___________ ___________
Pollution control notes and bonds -
Series A Note -
City of Michigan City,
5.70% due October 1, 2003 20,750 20,750
Series 1988 Bonds - Jasper County -
Series A, B and C
4.11% weighted average at
March 31, 1995, due November 1, 2016 130,000 130,000
Series 1988 Bonds - Jasper County -
Series D 4.14% weighted average at
March 31, 1995, due November 1, 2007 24,000 24,000
Series 1994 Bonds - Jasper County -
Series A - 4.50% weighted average at
March 31, 1995, due August 1, 2010 10,000 10,000
Series 1994 Bonds - Jasper County -
Series B - 4.50% weighted average at
March 31, 1995, due June 1, 2013 18,000 18,000
Series 1994 Bonds - Jasper County -
Series C - 4.50% weighted average at
March 31, 1995, due April 1, 2019 41,000 41,000
___________ ___________
Total 243,750 243,750
___________ ___________
Medium-term notes -
Issued at interest rates between 4.94%
and 7.64% with a weighted average interest
rate of 6.47% and various maturities between
July 25, 1996 and January 19, 2024 594,750 594,750
___________ ___________
Unamortized premium and discount on
long-term debt, net (3,657) (3,756)
___________ ___________
Total long-term debt of
Northern Indiana Public
Service Company 1,065,440 1,065,351
___________ ___________
NIPSCO Capital Markets, Inc.
Medium-term note - 9.95% - due June 10, 1996 7,500 7,500
Unamortized discount (8) (9)
Zero coupon notes - $7.57%, $72,500 at
maturity, due December 1, 1997 59,472 58,373
___________ ___________
Total long-term debt of NIPSCO
Capital Markets, Inc. 66,964 65,864
___________ ___________
NIPSCO Development Company, Inc.
Lake Erie Land Company - Notes Payable -
Interest rates between 9.00% and 10.00%
with a weighted average interest rate
of 9.41% and various maturities between
July 5, 1996 and June 30, 1998 3,103 3,155
Elm Energy and Recycling (UK), Ltd.
Term Loan Facility - 6.79% - due
December 31, 2004 37,858 34,606
Metals Technology Corporation - Notes Payable -
Mortgage note, 9.50% - due
September 25, 2005 98 98
NDC Douglas Properties, Inc.
Notes Payable -
Interest rates of 6.72% and 7.94% with
a weighted average interest rate of 7.57%
and maturities through January 1, 2005 10,462 11,264
____________ ____________
Total long-term debt of NIPSCO
Development Company,Inc. 51,521 49,123
____________ ____________
Total long-term debt, excluding
amounts due in one year $ 1,183,925 $ 1,180,338
============ ============
</TABLE>
The sinking fund requirements of long-term debt outstanding at March
31, 1995, (including the maturity of Northern Indiana's first mortgage bonds:
Series O, 6-3/8%, due September 1, 1997; Series P, 6-7/8%, due October 1,
1998; Northern Indiana's medium-term notes due from April 6, 1998 to March 24,
2000; Capital Markets' 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; and NDC Douglas Properties, Inc. notes payable
due December 22, 1999), for each of the twelve month periods subsequent to
March 31, 1996, are as follows:
<TABLE>
<CAPTION>
Twelve Months Ended March 31,
=============================
<S> <C>
1997 $ 97,123,358
1998 147,059,687
1999 58,326,302
2000 15,044,297
</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 March 4, 1994, the Commission authorized Northern Indiana to issue
up to $289,275,000 of its Medium-Term Notes, Series D, due from 1 year to 30
years, for purposes of refinancing certain first mortgage bonds and paying
short-term debt used to pay at maturity medium-term notes due in January and
April, 1994. On May 23, 1994, Northern Indiana exercised its option to redeem
all the outstanding First Mortgage Bonds, Series S, Y and AA aggregating
$125.5 million, through the use of working capital and the proceeds of
short-term debt. A total of $120.0 million of the Medium-Term
Notes, Series D, were issued to complete the permanent refinancing of
those first mortgage bonds. As of March 31, 1995, an additional $169,275,000
of Medium-term Notes, Series D, can be issued in the future.
On August 25, 1994, Jasper County, Indiana issued Pollution Control
Refunding Revenue Bonds, Series 1994 (Northern Indiana Public Service Company
Project) (the "Series 1994 Bonds"), including $10 million of Series 1994A
Bonds, due August 1, 2010; $18 million of Series 1994B Bonds, due June 1,
2013; and $41 million of Series 1994C Bonds, due April 1, 2019. The proceeds
of these issuances were loaned to Northern Indiana under similar terms. The
initial interest rate on Series 1994 Bonds was 3.10%, which resets daily. The
proceeds of the Series 1994A and Series 1994C were used to retire on October
15, 1994, $10 million of Series MM First Mortgage Bonds, 7-1/2%, due October
15, 2004 and $41 million of Series LL First Mortgage Bonds, 7-1/2%, due
October 15, 2014. The proceeds of the Series 1994B Bonds were used to retire
the $18 million Series 1978 Notes, 6.70%, on August 25, 1994. The Series 1994
Bonds are secured by Letters of Credit from Union Bank of Switzerland.
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 $343.6
million at March 31, 1995.
(17) SHORT-TERM BORROWINGS: Northern Indiana has a $250 million revolving
Credit Agreement with several banks which terminates August 19, 1997, unless
extended by its terms. As of March 31, 1995, 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, 1995, which are expected to be
renewed for the subsequent twelve month period. 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 March 31, 1995, 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 $273.5 million of money market lines of
credit. As of March 31, 1995, $28.4 million of borrowings were outstanding
under these lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At
March 31, 1995, there were no borrowings outstanding under this facility.
Northern Indiana uses commercial paper to fund short-term working
capital requirements. As of March 31, 1995, Northern Indiana had $69.9
million in commercial paper outstanding, having a weighted average interest
rate of 6.13%.
Capital Markets has a $150 million revolving Credit Agreement which
will terminate August 19, 1997, 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 March 31, 1995,
there were no borrowings outstanding under this agreement.
Capital Markets also has $105 million of money market lines of credit.
As of March 31, 1995, $14.4 million of borrowings were outstanding under
these lines of credit.
As of March 31, 1995, Capital Markets had $43.2 million in commercial
paper outstanding, having a weighted average interest rate of 6.20%.
(18) 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 $3.1 million.
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 March 31, 1995:
<TABLE>
<CAPTION>
Twelve Months Ended March 31,
============================================
(Dollars in thousands)
<S> <C>
1996 $ 4,893
1997 3,901
1998 3,469
1999 2,286
2000 1,773
Later years 22,412
________
Total minimum payments required $ 38,734
========
</TABLE>
The consolidated financial statements include rental expense for all
operating leases as follows:
<TABLE>
<CAPTION>
March 31, March 31,
1995 1994
========== ==========
(Dollars in thousands)
<S> <C> <C>
Three months ended $ 1,828 $ 1,857
Twelve months ended $ 7,861 $ 7,379
</TABLE>
(19) COMMITMENTS: Northern Indiana estimates that approximately $774
million will be expended for construction purposes for the period from January
1, 1995, to December 31, 1999. 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 approximating $20 million. The scrubber project 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 20-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 for use in the operation
of its 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.
(20) 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: The fair value of 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>
March 31, 1995 December 31, 1994
_______________________ ______________________
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
========== =========== ========== ==========
(Dollars in thousands)
<S> <C> <C> <C> <C>
Cash and cash equivalents $ 36,157 $ 36,157 $ 40,441 $ 40,441
Investments $ 30,845 $ 31,717 $ 23,863 $ 24,612
Long-term debt
(including current
portion) $1,189,210 $1,152,199 $1,207,936 $1,102,019
Preferred stock $ 185,329 $ 159,441 $ 189,274 $ 156,591
</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.
(21) 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
basic steel industry accounted for 4% of gas revenue (including transportation
services) and 25% of electric revenue for the twelve months ended March 31,
1995, as compared to 2% and 24%, respectively, for the twelve months ended
March 31, 1994.
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
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. NIPSCO Fuel
Company, Inc. (Fuel), NI-TEX Inc. (NI-TEX), NIPSCO Energy Trading Corp.
(NETCO) and Crossroads Pipeline Company (Crossroads) are direct subsidiaries
of Services. The following discussion, except where noted, is attributable to
the utility operations of Northern Indiana, Kokomo Gas, NIFL and Crossroads
(the Utilities).
REVENUES -
Total operating revenues for the twelve months ended March 31, 1995,
decreased $88.4 million as compared to the twelve months ended March 31, 1994.
Gas revenues decreased $94.9 million and electric revenues increased $6.5
million.
The decrease in gas revenues was largely attributable to decreased
sales to residential and commercial customers due to milder weather, partially
offset by increased deliveries of gas transported to others and decreased
purchase gas cost per dekatherm (dth). 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 had approximately 697,400 gas customers at March 31, 1995.
The increase in electric revenues for the twelve months ended March
31, 1995, was mainly due to increased sales to industrial customers and was
partially offset by lower fuel cost per kilowatt-hour (kwh) and decreased
sales to wholesale customers. At March 31, 1995, Northern Indiana
had approximately 402,000 electric customers.
Total operating revenue for the three months ended March 31, 1995,
decreased $43.1 million as compared to the three months ended March 31, 1994.
Gas revenues decreased $33.7 million and electric revenues decreased
$9.4 million as compared to the same period in 1994. The decrease in gas
revenues was mainly due to warmer weather. The decrease in electric revenue
for the three months ended March 31, 1995, was mainly due to warmer weather
and transitional rate adjustments to industrial customers signing new
five-yearr contracts, partially offset by increased commercial and industrial
sales.
The basic steel industry accounted for 38% of natural gas delivered
(including volumes transported) and 40% of electric sales during the twelve
months ended March 31, 1995.
The components of the variations in gas and electric revenues are
shown in the following tables:
<TABLE>
<CAPTION>
Variations from Prior Periods
________________________________
March 31, 1995
Compared to
March 31, 1994
Three Months Twelve Months
============= =============
(Dollars in thousands)
<S> <C> <C>
Gas Revenue -
Pass through of net changes
in purchased gas costs, gas storage
and storage transportation costs $ (26,361) $ (52,713)
Take-or-pay costs and
transition costs 20,321 30,256
Changes in sales levels (28,095) (75,066)
Gas transport levels 465 2,587
___________ ____________
Gas Revenue Change $ (33,670) $ (94,936)
___________ ____________
Electric Revenue -
Pass through of net changes
in fuel costs $ (8,255) $ (7,828)
Changes in sales levels (1,128) 14,336
___________ ____________
Electric Revenue Change $ (9,383) $ 6,508
___________ ____________
Total Revenue Change $ (43,053) $ (88,428)
=========== ============
<FN>
See Note 4 to the consolidated financial statements (Rate Matters),
regarding gas take-or-pay and FERC Order No. 636 transition costs.
</TABLE>
GAS COSTS -
The Utilities' gas costs decreased $72.8 million for the twelve month
period ended March 31, 1995, due to decreased purchases due to lower sales
and lower gas costs per dth. The average cost for the Utilities purchased
gas for the three and twelve month periods ended March 31, 1995, after
adjustment for take-or-pay charges billed to transport customers, was $2.95
and $2.89 per dth, respectively, as compared to $3.10 and $3.23 per dth for
the same periods in 1994.
FUEL AND PURCHASED POWER -
The cost of fuel for electric generation decreased for the three and
twelve month periods ended March 31, 1995, compared to 1994 periods, mainly
as the result of decreased production.
Power purchased increased $1.9 and $10.3 million for the three and
twelve month periods ended March 31, 1995, respectively. Power
purchased increased mainly for the twelve months ended March 31, 1995, due
to purchases required to replace R. M. Schahfer Generating Station Unit
15 generation from February 1 to July 5, 1994, while this unit was down on
an extended outage as part of the Powder River Basin coal conversion project.
OPERATING MARGINS -
Operating margins decreased $15.6 million for the twelve months ended
March 31, 1995, from the same period a year ago. The operating margin from
gas deliveries decreased $22.1 million, due to decreased sales to residential
and commercial customers as a result of milder weather this year compared to
the twelve month period ended March 31, 1994. The operating margins from
electric sales increased $6.5 million, due to increased sales to industrial
customers,partially offset by decreased sales to wholesale customers.
Operating margins decreased $9.6 million for the three months ended
March 31, 1995, from the same period a year ago. Gas operating
margin decreased $7.7 million due to warmer weather. Operating margins
on electric sales decreased $1.9 million due to warmer weather and
transitional rate adjustments to industrial customers signing new five
year contracts, partially offset by increased commercial and industrial sales.
OPERATING EXPENSES AND TAXES -
Operation expenses decreased $5.6 and $6.9 million for the three and
twelve month periods ended March 31, 1995, respectively. Operation expenses
decreased for the twelve month period mainly due to decreased employee related
and environmental costs.
Maintenance expenses increased $1.1 million for the three month period
ended March 31, 1995, mainly as a result of a higher level of overall
maintenance activity at the electric production facilities.
Depreciation and amortization expense increased for the three
and twelve month periods ended March 31, 1995, as a result of net plant
additions.
Utility income taxes decreased for the three and twelve month periods
ended March 31, 1995, as a result of decreased pre-tax income.
The after tax effects of the Northern Indiana land donation to the
Shafer and Freeman Lakes Environmental Conservation Corporation are included
in "Other Income (Deductions)" for the twelve month period ended
March 31, 1995. The operating results of all non-utility subsidiaries are
included in "Other Income (Deduction)."
Interest charges (net) decreased for the three and twelve month
periods ended March 31, 1995, reflecting Northern Indiana's continued
refinancing to reduce interest rates on long-term debt outstanding and
deferred carrying charges on FERC Order No. 636 transition costs.
See Notes to Consolidated Financial Statements (Summary of Significant
Accounting Policies) for a discussion of Carrying Charges and Deferred
Depreciation and Allowance for Funds Used During Construction. Also, see
Notes 4, 6, 8 and 9 for a discussion of FERC Order No. 636, Income Taxes,
Postretirement Benefits, and Postemployment Benefits, respectively.
NET INCOME -
Industries' net income for the twelve month period ended March 31,
1995, was $159.3 million compared to $162.6 million for the twelve month
period ended March 31, 1994.
Net income for the three months ended March 31, 1995, was $60.3
million compared to $65.0 million for the three months ended March 31, 1994.
ENVIRONMENTAL MATTERS -
Because of major investments made in modern environmental control
facilities and the use of low sulfur coal, all of Northern Indiana's electric
production facilities now comply with the sulfur dioxide limitations contained
in acid deposition provisions of the Clean Air Act Amendments of 1990 (CAAA).
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 limitations on
emissions of nitrogen oxides and hazardous air pollutants, which may require
significant capital expenditures for control of these emissions. Northern
Indiana is evaluating a nitrogen oxide control program to meet future
requirements. Northern Indiana cannot predict the costs of complying with
CAAA requirements, but Northern Indiana believes that any such mandated costs
would be recoverable through the rate making process.
The Utilities have an ongoing program to remain aware of the 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 received notices from the Environmental
Protection Agency (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,
analysis, and remediation. 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 all of the remedial
costs at these sites are not determinable, Northern Indiana's analysis
indicates its share of such costs with other PRPs should not have a
significant impact on its financial position or the results of future
operations.
The Utilities have instituted a program to investigate former
manufactured gas plants where one of them is the current or former owner. The
Utilities have identified twenty-seven of these sites and made visual
inspections of these sites. The Utilities have conducted initial samplings at
eight sites. Follow-up investigations have been conducted at three sites and
potential remedial measures are being evaluated. The Utilities will continue
their program to assess sites during 1995. During the follow-up investigation
of the former manufactured gas plant in Elkhart, Indiana, Northern Indiana
noted the presence of hydrocarbons in the Elkhart River. Northern Indiana
reported this finding to the Indiana Department of Environmental Management
(IDEM) and the EPA. Northern Indiana is evaluating this site to determine
what remedial measurers, if any, may be needed.
Northern Indiana was notified by the 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 has remediated part of the Fort Wayne
site. The remainder of the site is being evaluated to determine what further
remedial measures, if any, may be needed.
Northern Indiana and Indiana Gas Company, Inc. (Indiana Gas) have
each notified the other about five former manufactured gas plants at which
both companies or their predecessors were former owners or operators.
Northern Indiana is discussing various matters with Indiana Gas, including
past and future steps to further investigate or remediate these sites and
potential cost allocation for this activity. One of these sites was the
Lafayette site which Indiana Gas had previously notified Northern Indiana was
being investigated and remediated pursuant to an administrative order with
IDEM. Northern Indiana also notified PSI Energy, Inc. that it was a former
owner or operator of seven former manufactured gas plants at which Northern
Indiana had conducted or was planning investigation or remediation activities.
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.
On March 4, 1994, the Commission authorized Northern Indiana to issue
up to $289,275,000 of its Medium-Term Notes, Series D, due from 1 year to 30
years, for purposes of refinancing certain first mortgage bonds and paying
short-term debt used to pay at maturity medium-term notes due in January and
April, 1994. On May 23, 1994, Northern Indiana exercised its option to redeem
all the outstanding First Mortgage Bonds, Series S, Y and AA aggregating
$125.5 million, through the use of working capital and the proceeds of
short-term debt. A total of $120.0 million of the Medium-Term Notes,
Series D, were issued to complete the permanent refinancing of those
first mortgage bonds. As of March 31, 1995, an additional $169,275,000 of
Medium-term Notes, Series D, can be issued in the future.
On August 25, 1994, Jasper County, Indiana issued Pollution Control
Refunding Revenue Bonds, Series 1994 (Northern Indiana Public Service Company
Project) (the "Series 1994 Bonds"), including $10 million of Series 1994A
Bonds, due August 1, 2010; $18 million of Series 1994B Bonds, due June 1,
2013; and $41 million of Series 1994C Bonds, due April 1, 2019. The proceeds
of these issuances were loaned to Northern Indiana under similar terms. The
initial interest rate on Series 1994 Bonds was 3.10%, which resets daily. The
proceeds of the Series 1994A and Series 1994C were used to retire on October
15, 1994, $10 million of Series MM First Mortgage Bonds, 7-1/2%, due October
15, 2004 and $41 million of Series LL First Mortgage Bonds, 7-1/2%, due
October 15, 2014. The proceeds of the Series 1994B Bonds were used to retire
the $18 million Series 1978 Notes, 6.70%, on August 25, 1994. The Series 1994
Bonds are secured by Letters of Credit from Union Bank of Switzerland.
Capital Markets has a $150 million revolving Credit Agreement which
terminates August 19, 1997, 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
March 31, 1995, there were no borrowings outstanding under this agreement.
Capital Markets also has $105 million of money market lines of credit.
As of March 31, 1995, $14.4 million of borrowings were outstanding under these
lines of credit.
As of March 31, 1995, Capital Markets had $43.2 million in commercial
paper outstanding, having a weighted average interest rate of 6.20%.
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 $343.6
million at March 31, 1995.
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 March 31,
1995, Northern Indiana had $69.9 million in commercial paper outstanding,
having a weighted average interest rate of 6.13%.
Northern Indiana has a $250 million revolving Credit Agreement with
several banks which terminates August 19, 1997, unless extended by its terms.
As of March 31, 1995, 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, 1995, which are expected to be renewed for the subsequent
twelve month period. 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 March 31, 1995, 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 $273.5 million of money market lines of
credit. As of March 31, 1995, $28.4 million of borrowings were outstanding
under these lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At
March 31, 1995, there were no borrowings outstanding under this facility.
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 or electric base rate
increases in the near future.
COMPETITION
The Energy Policy Act of 1992 (Energy Act) allows FERC to order
electric utilities to grant access to transmission systems by third party
power producers. The Energy Act specifically prohibits federally mandated
wheeling of power for retail customers. That authority lies with the
individual states, several of which are considering opening the transmission
network to retail customers. The Energy Act will stimulate greater competition
in the wholesale electric markets. This competition will create opportunities
to compete for new customers and revenues, as well as increase the risk of
the loss of customers. Although wholesale customers represent a relatively
small portion of Northern Indiana's sales (4% for 1994), Northern Indiana
will continue its efforts to retain and add customers by offering competitive
rates. Competitive forces have also begun to influence retail pricing in the
industry. In some instances, industrial customers, threatening to pursue
cogeneration, self-generation, retail wheeling, or relocation to other service
territories, have obtained price concessions from utilities.
Operating in a competitive environment will place added pressures on
utility profit margins and credit quality. Increasing competition in the
electric utility industry has already led the credit rating agencies to apply
more stringent guidelines in making credit rating determinations.
Northern Indiana's management has taken steps to make the company more
competitive and profitable in the changing utility environment, including
partnering on energy projects with major industrial customers and conversions
of some of its generating units to allow use of lower cost low sulfur coal.
FERC Order No. 636 effective in late 1993 shifted primary
responsibility for gas acquisition, transportation and peak days' supply from
pipelines to local gas distribution companies, such as the Utilities.
Although pipelines continue to transport gas, they no longer provide sale
service. The Utilities believe they have taken appropriate steps to insure the
continued acquisition of adequate gas supplies at reasonable prices.
The mix of gas revenues from retail sales, interruptible retail sales,
firm transportation service, and interruptible transportation services, has
changed significantly over the past several years. The deregulation of the
gas industry, since the mid-1980's, allows large industrial and commercial
customers to purchase their gas supplies directly from producers and use the
Utilities' facilities to transport the gas. Transportation customers pay the
Utilities only for transporting their gas from the pipeline to the customers'
premises.
To date, the Utilities' system has not been materially affected by
competition, and management does not foresee substantial adverse effect in
the near future, unless the current regulatory structure is substantially
altered. Northern Indiana believes the steps it is taking to deal with
increased competition will have significant, positive effects in the next few
years.
<PAGE>
ITEM 1. LEGAL PROCEEDINGS.
Industries and Northern Indiana are parties to various legal or
administrative proceedings before courts and agencies with respect to matters
occurring in the ordinary course of business. Although management of
Industries cannot predict the ultimate outcome of these matters,it believes
the final disposition of these matters will not have a material adverse effect
on the financial position or results of operations of Industries.
Information regarding various matters involving federal and state
environmental laws and regulations and a pending tax matter is included in
Notes 5 and 3, respectively, of Industries' financial statements under Part I,
Item 1 of this Report on Form 10-Q.
Item 2. Changes in Securities.
None
Item 3. Defaults upon Senior Securities.
None
Item 4. Submission of Matters to a Vote of Security Holders.
On April 12, 1995, at the Annual Meeting of Shareholders of
the registrant, shareholders of the registrant elected Steven C. Beering,
Ernestine M. Raclin and Denis E. Ribordy as directors to serve until the 1998
Annual Meeting of Shareholders. Directors whose terms of office as director
continue after the 1995 Annual Meeting of Shareholders are Ian M. Rolland,
Edmund A. Schroer and John W. Thompson, whose terms expire at the 1996 Annual
Meeting of Shareholders, and Arthur J. Decio, Gary L. Neale and Robert J.
Welsh, Jr., whose terms expire at the 1997 Annual Meeting of Shareholders.
There were no abstentions and no broker non-votes for any of the
nominees for directors. The number of votes cast for, or withheld, for each
nominee for director was as follows:
<TABLE>
<CAPTION>
Votes Votes
Received Withheld
========== ==========
<S> <C> <C>
Steven C. Beering 53,516,169 691,484
Ernestine M. Raclin 53,528,974 678,679
Denis E. Ribordy 53,537,053 670,600
</TABLE>
Item 5. Other Information.
None
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits.
Exhibit 23-Consent of Arthur Andersen LLP
(b) Reports on Form 8-K.
None
<PAGE>
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
NIPSCO Industries, Inc.
(Registrant)
/s/Jerry M. Springer
___________________________
Jerry M. Springer,
Controller
and Chief Accounting Officer
Date May 11, 1995
<PAGE>
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the incorporation of
our report included in this Form 10-Q into Industries' previously filed Form
S-8 Registration Statement, No. 33-3019; Form S-8 Registration Statement, No.
33-30619; and Form S-8 Registration Statement, No. 33-30621.
/s/_______________________
Arthur Andersen & Co.
Chicago, Illinois
May 11, 1995
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
This schedule contains summary financial information extracted from the
financial statements of NIPSCO Industries, Inc. for the three months
ended March 31, 1995, and is qualified in its entirety by reference to
such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> MAR-31-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 3,230,635
<OTHER-PROPERTY-AND-INVEST> 185,240
<TOTAL-CURRENT-ASSETS> 283,134
<TOTAL-DEFERRED-CHARGES> 15,716
<OTHER-ASSETS> 196,012
<TOTAL-ASSETS> 3,910,737
<COMMON> 630,708
<CAPITAL-SURPLUS-PAID-IN> 23,784
<RETAINED-EARNINGS> 480,294
<TOTAL-COMMON-STOCKHOLDERS-EQ> 1,134,786
101,057
83,694
<LONG-TERM-DEBT-NET> 449,940
<SHORT-TERM-NOTES> 43,611
<LONG-TERM-NOTES-PAYABLE> 733,985
<COMMERCIAL-PAPER-OBLIGATIONS> 113,100
<LONG-TERM-DEBT-CURRENT-PORT> 27,849
578
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<OTHER-ITEMS-CAPITAL-AND-LIAB> 1,222,137
<TOT-CAPITALIZATION-AND-LIAB> 3,910,737
<GROSS-OPERATING-REVENUE> 522,498
<INCOME-TAX-EXPENSE> 37,574
<OTHER-OPERATING-EXPENSES> 398,851
<TOTAL-OPERATING-EXPENSES> 436,425
<OPERATING-INCOME-LOSS> 86,073
<OTHER-INCOME-NET> (831)
<INCOME-BEFORE-INTEREST-EXPEN> 85,242
<TOTAL-INTEREST-EXPENSE> 24,911
<NET-INCOME> 60,331
766
<EARNINGS-AVAILABLE-FOR-COMM> 59,565
<COMMON-STOCK-DIVIDENDS> 25,146
<TOTAL-INTEREST-ON-BONDS> 0
<CASH-FLOW-OPERATIONS> 244,493
<EPS-PRIMARY> 0.92
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</TABLE>
