SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[ X ] QUARTERLY REPORT PERSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE QUARTERLY
PERIOD ENDED September 30, 1994
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission file number 1-3553
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(Exact name of registrant as specified in its charter)
Indiana 35-0672570
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(Address of principal executive offices)
(812) 465-5300
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has
filed all reports required to be filed by Section 13 or 15(d)
of the Securities Exchange Act of 1934 during the preceding 12
months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days.
Yes [X] No [ ]
Indicate the number of shares outstanding of each of the
issuer's classes of common stock, as of the close of the
period covered by this report.
Common Stock, without par value - 15,754,826 Shares
Outstanding at September 30, 1994
<PAGE>
<PAGE> 2 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1994 1993 1994 1993
(in thousands except per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUES
Electric $73,290 $75,935 $202,416 $199,832
Gas 3,916 6,948 53,771 52,755
Total operating revenues 77,206 82,883 256,187 252,587
OPERATING EXPENSES
Operation:
Fuel for electric generation 21,850 23,890 66,174 61,804
Purchased electric energy 663 1,495 4,048 8,111
Cost of gas sold 336 4,899 31,885 33,975
Other 10,544 9,472 32,866 28,243
Total operation 33,393 39,756 134,973 132,133
Maintenance 6,869 5,629 20,939 18,337
Depreciation and amortization 9,435 9,255 28,306 27,948
Federal and state income taxes 7,148 7,659 17,448 17,704
Property and other taxes 3,067 3,144 9,693 10,219
Total operating expenses 59,912 65,443 211,359 206,341
OPERATING INCOME 17,294 17,440 44,828 46,246
Other Income:
Allowance for other funds
used during construction 782 1,158 3,176 2,067
Interest 186 243 518 932
Other, net 797 386 2,143 1,503
_______ _______ ________ ________
1,765 1,787 5,837 4,502
INCOME BEFORE INTEREST CHARGES 19,059 19,227 50,665 50,748
Interest Charges:
Interest on long-term debt 4,658 4,624 13,947 14,018
Amortization of premium, discount,
and expense on debt 298 182 658 535
Other interest 402 206 863 486
Allowance for borrowed funds
used during construction (436) (551) (1,607) (962)
_______ _______ ________ ________
4,922 4,461 13,861 14,077
NET INCOME 14,137 14,766 36,804 36,671
Preferred Stock Dividends 276 276 829 829
NET INCOME APPLICABLE TO
COMMON STOCK $13,861 $14,490 $ 35,975 $ 35,842
AVERAGE COMMON SHARES OUTSTANDING 15,755 15,755 15,755 15,755
EARNINGS PER SHARE OF COMMON
STOCK $0.88 $0.92 $2.28 $2.27
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE> 3 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 36,804 $ 36,671
Adjustments to reconcile net income to net cash
provided by operating activities:
Depreciation and amortization 28,306 27,948
Deferred income taxes and investment
tax credits, net 2,179 5,294
Allowance for other funds used during
construction (3,176) (2,067)
Change in assets and liabilities:
Receivables, net 1,665 (1,523)
Inventories (1,429) 9,041
Coal contract settlement 4,209 (15,157)
Accounts payable (9,184) (11,131)
Accrued taxes (1,143) 3,058
Refunds from gas suppliers 1,265 1,586
Refunds to customers 6,530 (559)
Accrued coal liability 9,997 6,617
Other assets and liabilities 4,317 5,354
Net cash provided by operating activities 80,340 65,132
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (58,429) (39,641)
Demand side management program expenditures (5,085) (3,715)
Investments in leveraged leases - (2,769)
Purchases of investments (6,593) (4,697)
Sales of investments 6,556 5,355
Investments in partnerships (3,470) (2,503)
Change in nonutility property (2,831) (524)
Other 982 563
Net cash used in investing activities (68,870) (47,931)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds - 155,000
Dividends paid (20,275) (19,793)
Reduction in preferred stock and long-term debt (105) (104,500)
Change in environmental improvement funds
held by Trustee 11,143 (30,469)
Change in notes payable 10,328 13,890
Other - (5,716)
Net cash provided by financing activities 1,091 8,412
NET INCREASE IN CASH
AND CASH EQUIVALENTS 12,561 25,613
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 14,732 3,556
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 27,293 $ 29,169
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</TABLE>
<PAGE> 4 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant, at original cost:
Electric $889,121 $879,476
Gas 110,177 107,864
________ ________
999,298 987,340
Less - Accumulated provision for depreciation 449,943 424,086
________ ________
549,355 563,254
Construction work in progress 118,831 72,615
Net Utility Plant 668,186 635,869
Other Investments and Property:
Investments in leveraged leases 34,895 34,924
Investments in partnerships 23,844 25,023
Environmental improvement funds held by Trustee 11,470 22,613
Nonutility property and other 10,829 7,997
________ ________
81,038 90,557
Current Assets:
Cash and cash equivalents 8,547 5,983
Restricted cash 18,746 8,749
Temporary investments, at cost which
approximates market 6,577 6,540
Receivables, less allowance of $180
and $166, respectively 26,876 28,541
Inventories 39,619 38,190
Other current assets 942 3,048
________ ________
101,307 91,051
Deferred Charges:
Coal contract settlement 9,086 13,295
Unamortized premium on reacquired debt 6,741 7,100
Postretirement benefits obligation other
than pensions 7,461 4,125
Demand side management program 12,496 7,411
Other deferred charges 13,742 11,433
________ ________
49,526 43,364
$900,057 $860,841
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE> 5 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
Common Stock $102,798 $102,798
Retained Earnings 220,978 204,449
________ ________
323,776 307,247
Less Treasury Stock, at cost 24,540 24,540
Common Shareholders' Equity 299,236 282,707
Cumulative Nonredeemable Preferred Stock 11,090 11,090
Cumulative Redeemable Preferred Stock 7,500 7,500
Cumulative Special Preferred Stock 1,015 1,015
Long-Term Debt, net of current maturities 271,355 261,100
Long-Term Partnership Obligations, net of
current maturities 9,507 12,881
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 599,703 576,293
Current Liabilities:
Current Portion of Adjustable Rate Bonds
Subject to Tender 31,500 41,475
Current Maturities of Long-Term Debt,
Interim Financing and Long-Term
Partnership Obligations:
Maturing long-term debt 686 763
Notes payable 21,100 11,040
Partnership obligations 3,374 3,849
Total current maturities of long-term
debt, interim financing, and long-term
partnership obligations 25,160 15,652
Other Current Liabilities:
Accounts payable 24,755 33,939
Dividends payable 104 135
Accrued taxes 6,798 7,941
Accrued interest 7,564 4,517
Refunds to customers 10,679 3,398
Accrued coal liability 18,746 8,749
Other accrued liabilities 10,616 10,125
Total other current liabilities 79,262 68,804
Total current liabilities 135,922 125,931
Deferred Credits and Other:
Accumulated deferred income taxes 122,767 117,267
Accumulated deferred investment tax credits,
being amortized over lives of property 25,151 26,549
Regulatory liability 5,274 7,197
Postretirement benefits obligation other
than pensions 7,461 4,125
Other 3,779 3,479
________ ________
164,432 158,617
$900,057 $860,841
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</TABLE>
<PAGE> 6 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
September 30, December 31,
1994 1993
(in thousands)
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 16,865,003 shares $102,798 $102,798
Retained Earnings, $2,209,642 restricted as
to payment of cash dividends on common stock 220,978 204,449
323,776 307,247
Less Treasury Stock, at cost, 1,110,177 shares 24,540 24,540
________ ________
299,236 282,707
PREFERRED STOCK:
Cumulative, $100 par value, authorized
800,000 shares issuable, in series
Nonredeemable
4.8% Series, outstanding 85,895 shares,
callable at $110 per share 8,590 8,590
4.75% Series, outstanding 25,000 shares,
callable at $101 per share 2,500 2,500
________ ________
11,090 11,090
Redeemable
6.50% Series, outstanding 75,000 shares,
redeemable at $100 per share
December 1, 2002 7,500 7,500
SPECIAL PREFERRED STOCK
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series,
outstanding 10,150 shares,
redeemable at $100 per share 1,015 1,015
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 264,615 254,740
Notes payable 7,602 7,263
Unamortized debt premium and discount, net (862) (903)
271,355 261,100
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 9,507 12,881
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION CONTROL
BONDS SUBJECT TO TENDER, DUE
2015, Series A, presently 4.60% - 9,975
2015, Series B, presently 3.50% 31,500 31,500
________ ________
31,500 41,475
Total capitalization, including bonds
subject to tender $631,203 $617,768
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE> 7 SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1994 1993
(in thousands)
<S> <C> <C>
Balance Beginning of Period $204,449 $191,255
Net Income 36,804 36,671
________ ________
241,253 227,926
Preferred stock dividends 829 829
Common stock dividends ($1.2375 share in 1994
and $1.2075 per share in 1993) 19,446 18,964
________ ________
20,275 19,793
Balance End of Period (See Consolidated
Statements of Capitalization for restriction) $220,978 $208,133
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</TABLE>
<PAGE> 8
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. GENERAL
It is suggested that these consolidated financial
statements be read in conjunction with the consolidated
financial statements and the notes thereto included in the
Company's 1993 Annual Report to Shareholders.
The 1994 consolidated statements are on the basis of
interim figures and are subject to audit and adjustments.
These financial statements include the accounts of Southern
Indiana Gas and Electric Company and its wholly-owned
subsidiaries, Southern Indiana Properties, Inc., Lincoln
Natural Gas Company, Inc., Energy Systems Group, Inc. (Energy)
and Southern Indiana Minerals, Inc. (SIMI), and include all
adjustments which are in the opinion of management, necessary
for a fair statement of the financial position and results of
operations for the nine months ended September 30, 1994.
Energy and SIMI were incorporated during the second quarter of
1994. Because of seasonal and other factors, the earnings for
the nine months ending September 30, 1994 should not be taken
as an indication for all or any part of the balance of 1994.
2. UTILITY PLANT
Utility plant is stated at the historical original cost
of construction. Such cost includes payroll-related costs
such as taxes, pensions and other fringe benefits, general and
administrative costs, and an allowance for the cost of funds
used during construction (AFUDC), which represents the
estimated debt and equity cost of funds capitalized as a cost
of construction. While capitalized AFUDC does not represent
a current source of cash, it does represent a basis for future
cash revenues through depreciation and return allowances. The
weighted average AFUDC rates (before income taxes) used by the
Company for the nine months ending September 30, 1994 and
1993 were 9.4% and 10.5%, respectively.
3. CASH FLOW INFORMATION
For the purposes of the Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, the Company considers
all highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
The Company, for the nine months ended September 30, 1994
and 1993 paid interest (net of amounts capitalized) of
$10,155,000 and $11,228,000, respectively, and income taxes of
$12,103,000 and $7,258,000, respectively. Additionally the
Company is involved in several partnerships which are
partially financed by partnership obligations amounting to
$12,881,000 and $16,730,000 at September 30, 1994 and
December 31, 1993, respectively.
4. LONG-TERM DEBT
On May 1, 1994, the interest rate on $31,500,000 of
Adjustable Rate Pollution control bonds was changed from 2.70%
to 3.50%. The new interest rate, 3.50% will be fixed through
April 30, 1995. For financial statement presentation the
$31,500,000 of Adjustable Rate Pollution Control bonds are
shown as a current liability.
On July 1, 1994, the interest rate on $9,975,000 of
Adjustable Rate Pollution Control Bonds was changed from 5.75%
to 4.60%. The new interest rate, 4.60%, will be fixed through
June 30, 1997.
<PAGE> 9
5. ACQUISITION OF LINCOLN
On June 30, 1994, the Company completed its acquisition
of Lincoln Natural Gas Company, Inc. (Lincoln), a small gas
distribution company with approximately 1,300 customers
contiguous to the eastern boundary of the Company's gas
service territory. The Company issued 49,399 of common stock
for all the common stock of Lincoln. This transaction was
accounted for as a pooling of interests; therefore, prior
financial statements have been restated to reflect this
merger.
Revenues and net income included in the Company's
Consolidated Statements of Income are as follows:
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C>
3 months 3 months 9 months 9 months
ended ended ended ended
Sept.30, Sept.30, Sept.30, Sept.30,
1994 1993 1994 1993
(in thousands)
Operating revenues:
Sigeco $77,103 $ 82,778 $255,516 $251,954
Lincoln 103 105 671 633
$77,206 $82,883 $256,187 $252,587
Net income:
Sigeco $14,164 $14,816 $36,865 $36,742
Lincoln (27) (50) (61) (71)
$14,137 $14,766 $36,804 $36,671
</TABLE>
<PAGE> 10
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
OPERATING REVENUES
Electric revenues declined 3% during the third quarter
compared to the same period in 1993. The primary reason for
the decline was a 10% decrease in the average per unit cost of
fuel for generation and purchased power recovered from retail
customers during the current quarter. Changes in the cost of
fuel for electric generation and purchased power are passed on
to customers through commission approved fuel cost
adjustments. Sales to system customers rose approximately 3%
during the period due to continued stronger industrial sales,
however, nonsystem sales declined 30% due to fewer sales to
Alcoa Generating Corporation (AGC) resulting from the shutdown
of a potline at Alcoa's Warrick Operations plant in July 1993.
(Electricity for the five potlines remaining in service is
supplied by AGC-owned generation.) Additionally, per unit
average revenue from nonsystem sales declined approximately
10% on lower energy rates and demand level requirements.
Although the Company's base retail electric rates have
increased overall about 3% since October 1993 (see discussion
under "Rate and Regulatory Matters"), the impact of those
adjustments were more than offset by the change in sales mix -
a 6% decrease in residential sales and a 13% increase in
industrial sales.
Greater sales to system and nonsystem customers, both up 3%,
caused a slight rise in electric revenues for the nine months
ending September 30, 1994. Stronger sales to the industrial
and commercial sectors throughout the year led to the increase
in system sales. Despite a decline in sales to AGC resulting
from the shutdown of the potline in July 1993, nonsystem sales
were greater due primarily to the requirements of one
nonassociated utility during the first quarter of 1994. The
impact of a change in mix of sales to nonsystem customers (the
decline of sales to AGC and increase in sales to other
nonsystem customers) and the recovery of lower fuel and
purchased power costs from all electric customers partially
offset the higher electric revenues related to increased sales
volume.
The changes in electric revenue are shown below:
<TABLE>
<CAPTION>
Revenue (Decrease) Increase
From Corresponding Period in 1993
Three Months Nine Months
Ended 9-30-94 Ended 9-30-94
<S> <C> <C>
Change in sales volume $ 600 $ 5,600
Fuel and purchased power recovery (2,200) (600)
Change in average rates on sales to
nonassociated utilities (600) (2,400)
Change in retail rates and sales mix (350) (100)
Other (95) 84
$ (2,645) $ 2,584
Increase in system sales (MWh) 34,964 102,421
(Decrease) increase in nonsystem
sales (MWh) (56,103) 21,730
</TABLE>
<PAGE> 11
During the current quarter, gas revenue was down $3 million
(44%) chiefly due to the recovery of substantially lower
average unit costs of gas sold. The change in cost of gas
sold, which is passed on to customers through commission
approved gas cost adjustments, was due to a 30% drop in the
average purchase price of gas and due to the impact of
strorage field activity on the pricing of gas delivered to
customers during the current period. In addition, gas sales
decreased 10% during the third quarter of 1994 due to fewer
requirements of the Company's industrial customers. The first
step of the Company's two-step base gas rate adjustment,
approximately 4% overall on an annual basis, was effective
August 1, 1993. The second step of the rate adjustment, also
approximately 4% overall, was effective August 1, 1994. These
base rate increases and a change in sales mix partially offset
the revenue decreases related to recovery of lower gas costs
and to fewer sales.
Gas revenues rose only slightly, about 2%, during the nine
months ended September 30, 1994 compared to 1993, despite the
impact of the first and second steps of the base rate
increase. Gas sales declined 3% due to increased
transportation activity of certain large customers; total
throughput was relatively unchanged. As discussed, average
unit costs of gas sold during the third quarter dropped
substantially, offsetting the impact on revenues of higher gas
costs incurred during the first six months of 1994.
The changes in gas revenues are shown below:
<TABLE>
<CAPTION>
Revenue (Decrease) Increase From
Corresponding Period in 1993
Three Months Nine Months
Ended 9-30-94 Ended 9-30-94
(in thousands)
Change in sales volume $ (400) $(1,700)
Cost of gas recovery (3,400) (400)
Change in rates and sales mix 600 2,700
Other 168 416
$(3,032) $1,016
(Decrease) in total throughput (MDth) (111) (70)
OPERATING EXPENSES
Fuel for electric generation declined approximately 9%
during the third quarter of 1994, due entirely to a comparable
decline in per unit fuel costs, but rose $4.4 million (7%) for
the nine month period, reflecting an 11% increase in
generation. During the first three months of 1993, the
Company purchased substantially greater amounts of electric
energy from other utilities because one of the Company's
generating units was undergoing a routine maintenance outage,
a second unit was undergoing a large capital improvement
project and because market prices were favorable, leading to
a 50% decline in expenditures for such purchases during the
nine month period ended September 30, 1994. Due to the drop
in purchased gas prices, the impact of storage field activity
and fewer sales, cost of gas sold was down 93% during the
third quarter of 1994. Cost of gas sold declined 6% during
the nine month period in 1994.
Other operation expenses, up 11% and 16% for the three month
and nine month periods, respectively, reflected additional
production plant operation expenses, increased legal and
<PAGE> 12
consulting costs related to the Company's ongoing efforts to
renegotiate the contract with its major coal supplier, greater
employee-related benefit costs, expenses associated with an
accelerated program of relocating gas customer meters outside
of customer premises to aid in future operating efficiencies,
and increases in various other operating expenses.
During the current quarter, a typically low maintenance
period, maintenance expenditures were up 22% over the same
period last year, reflecting expenditures to dredge one of the
Company's fly ash disposal areas and to perform other
maintenance projects. Maintenance expenditures increased
about 14% during the nine months of 1994, chiefly due to the
Company performing a scheduled major turbine generator
maintenance overhaul on Unit 2 at the Culley Generating
Station during the second quarter, which was coordinated with
the construction of the Company's new sulfur dioxide
"scrubber" at the generation station. No comparable major
maintenance projects were performed during the first nine
months of 1993. In addition, maintenance repairs of one of
the Company's gas-fired peaking units and the maintenance
projects performed during the third quarter contributed to the
higher maintenance expense in 1994.
OTHER INCOME AND INTEREST CHARGES
Other income was unchanged during the third quarter when
compared to the same period in 1993. Greater income from the
Company's nonregulated operations offset a decline in
allowance for equity funds used during construction.
Allowance for equity funds used during construction declined
because the Company began recovering through electric rates,
effective June 29, 1994, the financing costs on its investment
in the Culley scrubber under the second step of its electric
base rate increase. (See "Rate and Regulatory Matters".)
Other income during the three quarters of 1994 was 30% greater
than in 1993 due to increased allowance for equity funds used
during construction, primarily from the construction of the
Company's new scrubber (see "Clean Air Act" in Item 7. of
Management's Discussion and Analysis of Results of Operations
and Financial Condition in the Company's 1993 Form 10-K report
for further discussion), and due to the stronger third quarter
results from nonutility activities.
During both reporting periods, interest charges were
relatively unchanged as compared to the same periods in 1993.
Interest on long term-debt was stable, representing an
embedded cost of about 6.6%.
EARNINGS
A 6% decline in residential electric sales due to cooler
weather, a 30% decline in wholesale sales and higher nonfuel
operations and maintenance expenditures, were the primary
reasons for a four cent (approximately 4%) decrease in
earnings per share for the third quarter compared to the same
period in 1993. Improved unit margins on sales of gas and
electricity due to the related rate adjustments helped
mitigate the decline in earnings.
For the first nine months of 1994, earnings per share were
$2.28 compared to $2.27 for the same period in 1993. Despite
greater gas and electric sales due to cooler weather during
the first quarter of 1994 and improved gas and electric
margins resulting from recent rate adjustments, operating
income declined slightly due to an anticipated increase in
nonfuel operating expenses and to the cooler than normal
weather experienced during the third quarter of 1994. Greater
allowance for funds used during construction, resulting
primarily from the construction of the Company's new sulfur
dioxide scrubber at Culley, helped to offset some of the
effects of lower operating income.
RATE AND REGULATORY MATTERS
On May 24, 1993, the Company petitioned the IURC for an
adjustment in its base electric retail rates representing the
first step in the recovery of the financing costs on the
Company's new sulfur dioxide scrubber. On September 15, 1993,
the IURC granted the Company's request for a 1% revenue
increase, approximately $1.8 million on an annual basis, which
<PAGE> 13
took effect October 1, 1993. The Company petitioned the IURC
on March 1, 1994 for recovery of financing costs related to
the scrubber construction costs incurred from April 1, 1993
through January 31, 1994, and was granted a 2.33% increase in
base electric retail rates (the second step), effective June
29, 1994. On December 22, 1993, the Company petitioned the
IURC for the third of the three planned general electric rate
increases. The final adjustment is necessary to cover
financing costs related to the balance of the project
construction expenditures, costs related to the operation of
the scrubber and certain nonscrubber-related costs. The
Company filed its case-in-chief on May 16, 1994 supporting a
$12.4 million, 5.7% retail rate increase. On October 1, 1994,
the Office of the Utility Consumer Counselor (UCC) filed its
case-in-chief. Although the UCC has not yet performed a cost
of service allocation to rate classes, the estimated impact of
its recommendation is a $2-2.5 million, 1% decrease in retail
revenues. The major differences between the Company's case
and the UCC's case are the requested rate of return on equity,
the recovery of the cost of postretirement benefits other than
pensions, the fair value of ratebase investment, the
appropriate depreciation rates and the appropriate level of
operation and maintenance expenses to be included in cost of
service. A final rate order is anticipated in early 1995.
Although the Company cannot predict what action the IURC may
take with respect to this proposed rate increase, based on
historical IURC practice, the Company anticipates that the
third step adjustment granted will be closer to the Company's
request than to the UCC's recommendation.
ENVIRONMENTAL MATTERS
The Company has completed its investigation and preliminary
assessments of four sites once owned and operated by the
Company, its predecessors, previous landowners, or former
affiliates of the Company and utilized for the manufacture of
gas. (See "Environmental Matters" in Item 7. of Management's
Discussion and Analysis of Operations and Financial Condition
in the Company's 1993 Form 10-K report for further
discussion.)
Although the results of its preliminary assessments of the
sites indicate no contamination is present and no clean up
will be required, the Company has elected to conduct
comprehensive testing of the sites to provide conclusive
evidence that no such contamination exists. During the fourth
quarter of 1993 the Company expensed $.5 million for the
anticipated cost of performing the preliminary site
investigations and the comprehensive testing of all four
sites. No additional costs for testing are anticipated at
this time.
LIQUIDITY AND CAPITAL RESOURCES
The Company's demand for capital is primarily related to its
construction of utility plant and equipment necessary to meet
customers' electric and gas energy needs, as well as
environmental compliance requirements. Expenditures for the
Company's demand side management programs (see following
discussion) are presently expected to continue to increase and
become a significant use of capital. Construction
expenditures (excluding allowance for other funds used during
construction) and demand side management program expenditures
incurred during the quarter totaled $18.6 million of which 85%
were funded with internally generated cash. For the nine
month period, these expenditures totaled $63.5 million and
were 68% funded with internally generated cash. The Company
anticipates continued financial stability and achievement of
its financial objectives during the remainder of 1994 and is
presently faced with no liquidity problems.
The Company estimates that construction expenditures for the
five year period 1994-1998 will total approximately $270
million. Included in this amount is about $44 million to
comply by 1995 with the Clean Air Act Amendments of 1990.
Also included as part of the 1994-1998 construction program is
approximately $49 million of expenditures to develop and
implement demand side management programs. (See "Clean Air
Act" and "Demand Side Management" in Item 7. of Management's
Discussion and Analysis of Results of Operations and Financial
Condition in the Company's 1993 Form 10-K report for further
discussion of these issues.) Although the Company expects the
majority of the construction requirements to be provided by
internally generated funds, external financing requirements of
about $50 million are anticipated for redemption of debt
securities and other long-term obligations.
<PAGE> 14
PART TWO - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
(a) Exhibit 27 - Financial Data Schedule
(b) The Company was not required to file a report on
Form 8-K during the third quarter of 1994.
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
SIGNATURE
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.
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(Registrant)
S. M. Kerney
S. M. Kerney
Controller
Date: November 10, 1994
<PAGE>15
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
INDEX
</TABLE>
<TABLE>
<CAPTION>
Page No.
<S> <C>
Part I - Financial Information:
Consolidated Statements of Income for the
Three Months and Nine Months ended
September 30, 1994 and 1993 2
Consolidated Balance Sheets at September 30, 1994
and December 31, 1993 3-4
Consolidated Statements of Cash Flows for the
Nine Months ended September 30, 1994 and 1993 5
Consolidated Statements of Capitalization at
September 30, 1994 and December 31, 1993 6
Consolidated Statements of Retained Earnings
for the Nine Months ended September 30, 1994
and 1993 7
Notes to Consolidated Financial Statements 8-9
Management's Discussion and Analysis of
Financial Condition and Results of
Operations 10-13
Part II - Other Information 14
Signature 14
</TABLE>
<TABLE> <S> <C>
<ARTICLE> OPUR1
<LEGEND>
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1994
<PERIOD-END> SEP-30-1994
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 668,186
<OTHER-PROPERTY-AND-INVEST> 81,038
<TOTAL-CURRENT-ASSETS> 101,307
<TOTAL-DEFERRED-CHARGES> 49,526
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 900,057
<COMMON> 78,258
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 220,978
<TOTAL-COMMON-STOCKHOLDERS-EQ> 299,236
0
19,605
<LONG-TERM-DEBT-NET> 280,862
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 21,100
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 35,560
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 243,694
<TOT-CAPITALIZATION-AND-LIAB> 900,057
<GROSS-OPERATING-REVENUE> 256,187
<INCOME-TAX-EXPENSE> 17,448
<OTHER-OPERATING-EXPENSES> 193,911
<TOTAL-OPERATING-EXPENSES> 211,359
<OPERATING-INCOME-LOSS> 44,828
<OTHER-INCOME-NET> 5,837
<INCOME-BEFORE-INTEREST-EXPEN> 50,665
<TOTAL-INTEREST-EXPENSE> 13,861
<NET-INCOME> 36,804
829
<EARNINGS-AVAILABLE-FOR-COMM> 35,975
<COMMON-STOCK-DIVIDENDS> 19,446
<TOTAL-INTEREST-ON-BONDS> 18,632
<CASH-FLOW-OPERATIONS> 80,340
<EPS-PRIMARY> $2.28
<EPS-DILUTED> $2.28
</TABLE>
