===========================================================
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15 (d) of the
Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
For the fiscal year ended December 31, 1999
<TABLE>
<CAPTION>
Commission Registrant, State of Incorporation, IRS Employer
File Number Address and Telephone Number Identification No.
<S> <C> <C>
1-11603 SIGCORP, Inc. 35-1940620
(An Indiana corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
1-3553 Southern Indiana Gas and
Electric Company 35-0672570
(An Indiana Corporation)
20 N. W. Fourth Street
Evansville, Indiana 47741-0001
(812) 465-5300
</TABLE>
===========================================================
<PAGE> 2
Explanatory Note:
Filing of the audited financial statements of SIGCORP, Inc.
and Southern Indiana Gas and Electric Company for the fiscal
year ended December 31, 1999
SIGCORP, Inc. (SIGCORP) and Southern Indiana Gas and
Electric Company (SIGECO) will file their combined Annual
Report on Form 10-K (Form 10-K) for the year ended December
31, 1999 in late March 2000. SIGECO intends to complete
several financing activities by March 1, 2000: the repricing
of two series of pollution control bonds and the refunding
of a third series of pollution control bonds. Because the
financing activities will occur before the filing of the
Form 10-K, the audited financial statements of SIGCORP and
SIGECO for the fiscal year ended December 31, 1999 are being
filed under Form 8-K.
<PAGE> 3
<TABLE>
<CAPTION>
<S> <C> <C>
Item 7. Financial Statements and Exhibits
Page
Number
Financial Statements
SIGCORP
Report of Independent Public Accountants 4
Consolidated Statements of Income for the years
ended December 31, 1999, 1998 and 1997 6
Consolidated Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 7
Consolidated Balance Sheets - December 31, 1999 and
1998. 8
Consolidated Statements of Capitalization -
December 31, 1999 and 1998 10
Consolidated Statements of Common Shareholders'
Equity
for the years ended December 31, 1999, 1998 and
1997 11
SIGECO
Report of Independent Public Accountants 12
Statements of Income for the years
ended December 31, 1999, 1998 and 1997 14
Statements of Cash Flows for the years
ended December 31, 1999, 1998 and 1997 15
Balance Sheets - December 31, 1999 and 1998 16
Statements of Capitalization -
December 31, 1999 and 1998 18
Statements of Common Shareholder's Equity for the
years ended December 31, 1999, 1998 and 1997 19
SIGCORP and SIGECO
Notes to Consolidated Financial Statements 20
<PAGE> 4
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SIGCORP, Inc.:
We have audited the consolidated balance sheets and
consolidated statements of capitalization of SIGCORP, Inc.
(an Indiana corporation) and subsidiaries as of December 31,
1999 and 1998, and the related consolidated statements of
income, common shareholders' equity and cash flows for each
of the three years in the period ended December 31, 1999.
These financial statements are the responsibility of
SIGCORP, Inc.'s management. Our responsibility is to
express an opinion on these 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 SIGCORP, Inc. as of December 31,
1999 and 1998, and the results of their operations and their
cash flows for each of the three years in the period ended
December 31, 1999, in conformity with generally accepted
accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 28, 2000
<PAGE> 5
SIGCORP, Inc. and
Subsidiaries
<PAGE> 6
</TABLE>
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF INCOME
Year Ended December 31 (in thousands
except for per share amounts) 1999 1998 1997
<S> <C> <C> <C>
OPERATING REVENUES:
Electric utility $ 307,569 $ 297,865 $ 272,545
Gas utility 68,212 66,801 85,561
Energy services and other 228,710 192,445 75,131
Total operating revenues 604,491 557,111 433,237
OPERATING EXPENSES:
Fuel for electric generation 66,305 65,222 62,630
Purchased electric energy 20,791 20,762 13,985
Cost of gas sold 39,612 39,627 54,060
Cost of energy services and other 223,887 187,742 73,668
Other operation expenses 71,823 64,430 60,726
Maintenance 34,661 37,553 29,224
Depreciation and amortization 45,340 42,733 40,373
Property and other taxes 13,260 12,963 12,989
Total operating expenses 515,679 471,032 347,655
OPERATING INCOME 88,812 86,079 85,582
INTEREST AND OTHER CHARGES:
Interest expense on long-term debt 18,722 19,977 19,797
Interest expense on short-term debt 5,245 3,313 1,519
Amortization of premium, discount
and expense on debt 487 690 671
Allowance for funds used during
construction (2,803) (1,392) (1,378)
Preferred dividend requirements of
subsidiary 1,078 1,095 1,097
Interest income (4,495) (5,488) (3,003)
Other, net (7,197) (6,602) (3,122)
Total interest and other charges 11,037 11,593 15,581
INCOME BEFORE INCOME TAXES 77,775 74,486 70,001
Federal and state income taxes 25,718 24,010 23,861
NET INCOME $ 52,057 $ 50,476 $ 46,140
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631
BASIC EARNINGS PER SHARE OF COMMON
STOCK $ 2.20 $ 2.14 $ 1.95
DILUTED EARNINGS PER SHARE OF COMMON
STOCK $ 2.19 $ 2.12 $ 1.95
</FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 7
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 52,057 $ 50,476 $ 46,140
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 45,340 42,733 40,373
Preferred dividend requirements of
subsidiary 1,078 1,095 1,097
Deferred income taxes and
investment 8,637 (3,684) (3,899)
tax credits, net
Allowance for other funds used
during construction 296 - (581)
Change in assets and liabilities:
Receivables, net (including
accrued
unbilled revenues) (15,385) (11,608) (19,497)
Inventories 2,115 (12,421) (4,306)
Accounts payable 7,407 5,650 14,141
Accrued taxes 5,137 (1,005) (1,855)
Refunds to customers and from
gas suppliers 3,219 1,001 (1,566)
Other assets and liabilities (2,861) 9,322 8,103
Net cash provided by operating
activities 107,040 81,559 78,150
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of
allowance for
other funds used during construction) (60,676) (55,313) (65,501) )
Demand side management program
expenditures (252) (1,182) (2,340)
Investments in leveraged leases (49,734) 6,961 -
Purchases of investments (389) (1,940) (423)
Sales of investments 183 80 264
Investments in partnerships and other (3,340) (11,419) 3,166
corporations
Change in nonutility property (5,504) (279) (5,572)
Change in notes receivable (11,899) 1,033 (5,592)
Other (1,368) (2,176) (1,181)
Net cash used in investing
activities (132,979) (64,235) (77,179)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds retired (55,000) (14,000) (295)
First mortgage bonds issued 80,000 - -
Dividends paid (32,380) (30,188) (30,482) )
Reduction in preferred stock (116) (116) -
Change in environmental improvement
funds held by trustee 3,304 (198) (272)
Payments on partnership obligations (1,513) (2,205) (2,276)
Change in notes payable 37,479 28,578 26,980
Other 2,297 27 2,010
Net cash (used) provided by in
financing activities 34,071 (18,102) (4,335)
NET INCREASE (DECREASE) IN CASH AND
CASH EQUIVALENTS 8,132 (778) (3,364)
CASH AND CASH EQUIVALENTS AT BEGINNING
OF PERIOD 5,049 5,827 9,191
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 13,181 $ 5,049 $ 5,827
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 8
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
ASSETS
UTILITY PLANT, at original cost:
Electric $ 1,160,216 $ 1,141,870
Gas 156,918 150,136
1,317,134 1,292,006
Less accumulated provision for depreciation 623,611 593,901
693,523 698,105
Construction work in progress 45,393 24,306
Net utility plant 738,916 722,411
OTHER INVESTMENTS AND PROPERTY:
Investments in leveraged leases 85,737 36,003
Investments in partnerships and other
corporations 35,729 32,389
Environmental improvement funds held by
trustee 996 4,300
Notes receivable 32,271 20,372
Nonutility property and other, net 20,405 14,901
Total other investments and property 175,138 107,965
CURRENT ASSETS:
Cash and cash equivalents 13,181 5,049
Temporary investments, at market 903 793
Receivables, less allowance of $2,210 and
$2,204, respectively 83,073 65,829
Accrued unbilled revenues 18,736 20,595
Inventories 43,060 45,351
Current regulatory assets 7,921 9,527
Other current assets 9,068 3,777
Total current assets 175,942 150,921
OTHER ASSETS:
Unamortized premium on reacquired debt 3,937 4,226
Postretirement benefits other than pensions - 985
Demand side management programs 25,298 25,046
Allowance inventory 2,269 2,093
Deferred charges 22,642 15,871
Total other assets 54,146 48,221
TOTAL $ 1,144,142 $ 1,029,518
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 9
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 315,028 292,717
Accumulated Other Comprehensive Income (Loss) (78) (12)
Total common shareholders' equity 393,208 370,963
Cumulative Nonredeemable Preferred Stock of
Subsidiary 11,090 11,090
Cumulative Redeemable Preferred Stock of
Subsidiary 7,500 7,500
Cumulative Special Preferred Stock of
Subsidiary 692 808
Long-Term Debt, net of current maturities 273,282 204,771
Long-Term Partnership Obligations, net of
current maturities 249 781
Total capitalization, excluding bonds
subject to
tender (see Consolidated Statements of
Capitalization) 686,021 595,913
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds
Subject to Tender 53,700 53,700
Current Maturities of Long-Term Debt, Interim
Financing
and Long-Term Partnership Obligations:
Maturing long-term debt - 45,000
Notes payable 108,566 69,508
Partnership obligations 596 1,577
Total current maturities of long-term
debt, interim financing
and long-term partnership obligations 109,162 116,085
Other Current Liabilities:
Accounts payable 60,798 53,391
Dividends payable 117 120
Accrued taxes 10,000 4,863
Accrued interest 6,823 5,140
Refunds to customers 5,375 2,156
Other accrued liabilities 25,758 21,320
Total other current liabilities 108,871 86,990
Total current liabilities 271,733 256,775
OTHER LIABILITIES:
Accumulated deferred income taxes 154,459 144,032
Accumulated deferred investment tax
credits, being
amortized over lives of property 17,372 18,802
Postretirement benefits other than pensions 12,041 11,337
Other 2,516 2,659
Total other liabilities 186,388 176,830
TOTAL $ 1,144,142 $ 1,029,518
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 10
<TABLE>
<CAPTION>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
At December 31 (in thousands except for per share
amounts) 1999 1998
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 23,630,568 $ 78,258 $ 78,258
Retained Earnings, $2,155 restricted as
to payment of cash dividends on common stock 315,028 292,717
Accumulated Other Comprehensive Income (78) (12)
Total common shareholders' equity 393,208 370,963
PREFERRED STOCK OF SUBSIDIARY
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
Total nonredeemable preferred stock of
subsidiary 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 OF SUBSIDIARY
Cumulative, no par value, authorized 5,000,000
shares, issuable in series: 8-1/2% series,
outstanding 6,917 and
8,077 shares, respectively, redeemable at $100
per share 692 808
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 239,915 169,915
Notes payable 36,000 36,009
Unamortized debt premium and discount, net (2,633) (1,153)
Total long-term debt 273,282 204,771
LONG-TERM PARTNERSHIP OBLIGATIONS, NET OF CURRENT
MATURITIES 249 781
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.00% 31,500 31,500
2030, Series C, presently 3.05% 22,200 22,200
53,700 53,700
TOTAL CAPITALIZATION, including bonds subject to
tender $ 739,721 $ 649,613
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 11
<TABLE>
<CAPTION>
CONSOLIDATED STATEMENTS OF COMMON SHAREHOLDERS' EQUITY
Accumulated
Other
Common Retained Compre-
hensive
(in thousands ) Total Stock Earnings Income
(Loss)
<S> <C> <C> <C> <C>
Balances, December 31, 1996 $ 330,924 $ 78,258 $ 252,626 $40
Net Income 46,140 - 46,140 -
Unrealized Gain on
Securitie s (net of tax) 37 - - 37
Comprehensive Income 46,177 - 46,140 37
Common Stock Dividends
($1.15 per share) (27,938) - (27,938) -
Balances, December 31, 1997 349,163 78,258 270,828 77
Net Income 50,476 - 50,476 -
Unrealized (Loss) on
Securities (net of tax) (89) - - (89)
Comprehensive Income 50,387 - 50,476 (89)
Common Stock Dividends
($1.21 per share) (28,587) - (28,587) -
Other (429) - (429) -
Balances, December 31, 1998 370,534 78,258 292,288 (12)
Net Income 52,057 - 52,057 -
Unrealized (Loss) on
Securities (net of tax) (66) - - (66)
Comprehensive Income 51,991 - 52,057 (66)
Common Stock Dividends
($1.24 per share) (29,224) - (29,224) -
Other (93) - (93) -
Balances, December 31, 1999 $ 393,208 $ 78,258 $ 315,028 ($78)
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 12
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO SOUTHERN INDIANA GAS AND ELECTRIC COMPANY:
We have audited the balance sheets and statements of
capitalization of SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
(an Indiana corporation) as of December 31, 1999 and 1998,
and the related statements of income, retained earnings and
cash flows for each of the three years in the period ended
December 31, 1999. These financial statements are the
responsibility of Southern Indiana Gas and Electric
Company's management. Our responsibility is to express an
opinion on these 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 financial statements referred to
above present fairly, in all material respects, the
financial position of Southern Indiana Gas and Electric
Company as of December 31, 1999 and 1998, and the results of
their operations and their cash flows for each of the three
years in the period ended December 31, 1999, in conformity
with generally accepted accounting principles.
ARTHUR ANDERSEN LLP
Chicago, Illinois
January 28, 2000
<PAGE> 13
Southern Indiana Gas
And Electric Company
<PAGE> 14
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
STATEMENTS OF INCOME
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
OPERATING REVENUES:
Electric $ 307,569 $ 297,865 $ 272,545
Gas 68,212 66,801 85,561
Total operating revenues 375,781 364,666 358,106
OPERATING EXPENSES:
Fuel for electric generation 72,155 68,849 62,630
Purchased electric energy 20,791 20,762 13,985
Cost of gas sold 39,612 39,627 54,060
Other operation expenses 61,108 56,001 55,611
Maintenance 34,550 37,398 29,086
Depreciation and amortization 44,867 42,401 40,191
Federal and state income taxes 26,427 25,035 27,259
Property and other taxes 12,845 12,591 12,828
Total operating expenses 312,354 302,664 295,650
OPERATING INCOME 63,426 62,002 62,456
OTHER INCOME:
Allowance for other funds used during
construction 296 (73) 581
Interest 363 340 541
Other, net (58) 488 1,448
Total other income 601 755 2,570
INCOME BEFORE INTEREST AND OTHER
CHARGES 64,027 62,757 65,026
INTEREST AND OTHER CHARGES:
Interest on long-term debt 16,121 17,376 18,020
Interest on short-term debt 3,158 2,614 1,769
Amortization of premium, discount, 487 690 671
and expense on debt
Allowance for borrowed funds used
during construction (2,507) (1,465) (797)
Total interest and other charges 17,259 19,215 19,663
NET INCOME 46,768 43,542 45,363
Preferred stock dividend 1,078 1,095 1,097
NET INCOME APPLICABLE TO COMMON STOCK $ 45,690 $ 42,447 $ 44,266
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 15
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC
COMPANY
STATEMENTS OF CASH FLOWS
Year Ended December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net income $ 46,768 $ 43,542 $ 45,363
Adjustments to reconcile net income
to net cash
provided by operating activities:
Depreciation and amortization 44,867 42,401 40,191
Deferred income taxes and
investment 3,401 2,207 (4,951)
tax credits, net
Allowance for other funds used
during construction 296 - (581)
Change in assets and liabilities:
Receivables, net (including
accrued unbilled revenues) (5,184) 5,152 (3,261)
Inventories 5,200 (12,587) (3,407)
Accounts payable 433 1,061 (272)
Accrued taxes 3,636 (1,153) (2,788)
Refunds to customers and from
gas suppliers 3,219 1,001 (1,566)
Other assets and liabilities 7,986 7,492 7,950
Net cash provided by operating
activities 110,622 89,116 76,678
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of
allowance for
other funds used during construction) (60,676) (55,314) (65,501)
Demand side management program
expenditures (252) (1,182) (2,340)
Change in nonutility property (50) (25) -
Other (990) (1,894) (456)
Net cash used in investing (61,968) (58,415) (68,297)
activities
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds retired (55,000) (14,000) (295) )
First mortgage bonds issued 80,000 - -
Dividends paid (32,380) (30,187) (30,482)
Reduction in preferred stock (116) (116) -
Change in environmental improvement
funds held by trustee 3,304 (198) (272)
Change in notes payable (44,379) 13,588 20,129
Other (146) (390) 526
Net cash used in financing (48,717) (31,303) (10,394)
activities
NET DECREASE IN CASH AND CASH
EQUIVALENTS (63) (602) (2,013)
CASH AND CASH EQUIVALENTS AT BEGINNING 512 1,114 3,127
OF PERIOD
CASH AND CASH EQUIVALENTS AT END OF
PERIOD $ 449 $ 512 $ 1,114
<FN>
The accompanying Notes to Consolidated Financial Statements are an integral
part of these statements.
</FN>
</TABLE>
<PAGE> 16
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
BALANCE SHEETS
At December 31 (in thousands) 1999 1998
<S> <C> <C>
UTILITY PLANT, at original cost:
Electric $ 1,160,216 $ 1,141,870
Gas 156,918 150,136
1,317,134 1,292,006
Less accumulated provision for
depreciation 623,611 593,901
693,523 698,105
Construction work in progress 45,393 24,306
Net utility plant 738,916 722,411
OTHER INVESTMENTS AND PROPERTY:
Environmental improvement funds held by
trustee 996 4,300
Notes receivable 1,159 -
Nonutility property and other 1,627 1,577
Total other investments and property 3,782 5,877
CURRENT ASSETS:
Cash and cash equivalents 449 512
Receivables, less allowance of $2,138
and $2,156, respectively 34,738 28,854
Accrued unbilled revenues 18,736 20,595
Inventories 39,190 44,566
Current regulatory assets 7,921 9,527
Other current assets 2,970 2,776
Total current assets 104,004 106,830
OTHER ASSETS:
Unamortized premium on reacquired debt 3,937 4,226
Postretirement benefits other than
pensions - 985
Demand side management programs 25,298 25,046
Allowance inventory 2,269 2,093
Deferred charges 16,553 14,444
Total other assets 48,057 46,794
TOTAL $ 894,759 $ 881,912
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 17
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
At December 31 (in thousands) 1999 1998
<S> <C> <C>
SHAREHOLDER'S EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 256,312 241,924
Total common shareholder's equity 334,570 320,182
Cumulative Nonredeemable Preferred Stock of
Subsidiary 11,090 11,090
Cumulative Redeemable Preferred Stock of
Subsidiary 7,500 7,500
Cumulative Special Preferred Stock of Subsidiary 692 808
Long-Term Debt, net of current maturities 238,282 169,762
Total capitalization, excluding bonds subject
to
tender (see Statements of Capitalization) 592,134 509,342
CURRENT LIABILITIES:
Current Portion of Adjustable Rate Bonds Subject
to Tender 53,700 53,700
Current Maturities of Long-Term Debt and
Interim Financing:
Maturing long-term debt - 45,000
Notes payable 22,880 50,759
Notes payable to Associated Company - 14,930
Total current maturities of long-term debt
and interim financing 22,880 110,689
Other Current Liabilities:
Accounts payable 28,560 28,127
Dividends payable 117 120
Accrued taxes 8,408 4,772
Accrued interest 6,012 4,676
Refunds to customers 5,375 2,156
Other accrued liabilities 22,706 18,544
Total other current liabilities 71,178 58,395
Total current liabilities 147,758 222,784
OTHER LIABILITIES:
Accumulated deferred income taxes 122,977 118,147
Accumulated deferred investment tax credits,
being
amortized over lives of property 17,372 18,801
Postretirement benefits other than pensions 12,041 11,337
Other 2,477 1,501
Other liabilities 154,867 149,786
TOTAL $ 894,759 $ 881,912
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 18
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF CAPITALIZATION
At December 31 (dollars in thousands) 1999 1998
<S> <C> <C>
COMMON SHAREHOLDER'S EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 15,754,826 $ 78,258 $ 78,258
Retained Earnings, $2,155 restricted as
to payment of cash dividends on common stock 256,312 241,924
Total common shareholder's equity 334,570 320,182
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
Total nonredeemable preferred stock 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 6,917 and
8,077 shares, respectively, redeemable at $100
per share 692 808
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 239,915 169,915
Notes payable 1,000 1,000
Unamortized debt premium and discount, net (2,633) (1,153)
Total long-term debt 238,282 169,762
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE
2025, Series A, presently 3.00% 31,500 31,500
2030, Series C, presently 3.05% 22,200 22,200
53,700 53,700
TOTAL CAPITALIZATION, including bonds subject $ 645,834 $ 563,042
to tender
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 19
<TABLE>
<CAPTION>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
STATEMENTS OF RETAINED EARNINGS
At December 31 (dollars in thousands) 1999 1998
<S> <C> <C>
Balance Beginning of Period $ 241,924 $ 228,570
Net Income 46,768 43,542
288,692 272,112
Preferred Stock Dividends 1,078 1,095
Common Stock Dividends 31,302 29,093
32,380 30,188
Balance End of Period (See Consolidated
Statements of Capitalization for
restriction) $ 256,312 $ 241,924
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 20
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
SIGCORP AND SIGECO
PRINCIPLES OF CONSOLIDATION SIGCORP, Inc. (SIGCORP), an
Indiana holding company, has 11 wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), a gas
and electric utility which accounts for over 80% of
SIGCORP's net income for the twelve months ended December
31, 1999, and ten nonregulated subsidiaries.
On June 14, 1999, SIGCORP announced an agreement to merge
with Indiana Energy, Inc. (IEI) in an all-stock pooling
transaction through which a new holding company, Vectren
Corporation, would be formed. In a tax-free exchange,
SIGCORP shareholders would receive one and one-third shares
of Vectren stock for each share of SIGCORP stock, while IEI
shares would be exchanged on a one-for-one basis. SIGCORP
and IEI are proceeding to obtain the necessary regulatory
approvals and completion of the merger is expected by the
end of the first quarter of 2000. Transaction and related
costs incurred by SIGCORP through December 31, 1999 were
$5,506,000 and have been deferred.
SIGECO, which has no subsidiaries, is a regulated gas and
electric utility is engaged principally in the production,
purchase, transmission, distribution and sale of electricity
and the delivery of natural gas. SIGECO serves 126,605
electric customers in the city of Evansville and 74 other
communities and serves 109,388 gas customers in the city of
Evansville and 64 other communities.
Energy Systems Group, Inc. (ESGI) has a one-third ownership
in Energy Systems Group, LLC, an energy-related performance
contracting firm serving industrial and commercial
customers. Southern Indiana Minerals, Inc. (SIMI) processes
and markets coal combustion by-products. Southern Indiana
Properties, Inc. (SIPI) invests in leveraged leases of real
estate and equipment, real estate partnerships and joint
ventures, and private placement subordinated debt
instruments. Cash balances are invested in marketable
securities. SIGCORP Energy Services, Inc. (Energy) was
established to market energy and related services and is
currently providing natural gas, pipeline management,
storage service and other natural gas-related services to
SIGECO, other utilities and endusers. SIGCORP Capital, Inc.
(Capital) is the primary financing vehicle for SIGCORP's
nonregulated subsidiaries. SIGCORP Fuels, Inc. (Fuels) was
formed to provide coal and related services to SIGECO and
other customers. SIGCORP Power Marketing, Inc. (Power), not
yet active, was formed to procure electric power supplies
for SIGECO and other customers, and will market SIGECO's
excess electric generation capacity. SIGCORP Communications
Services (Communications) was formed to undertake
telecommunications-related strategic initiatives. SIGCORP
Environmental Services, Inc. (Environmental Services) holds
SIGCORP's investment in Air Quality Services, a joint
venture created to provide air quality monitoring and
testing services to industry and utilities. SIGECO Advanced
Communications, Inc. (Advanced Communications) holds
SIGCORP's investment in SIGECOM, LLC and Utilicom Networks,
Inc. (Utilicom). SIGECOM, LLC, is a joint venture between
Advanced Communications and Utilicom to provide and market
enhanced communications services over a high capacity fiber
optic network in a multi-state area encompassing SIGECO's
service territory. Effective June 30, 1998, ComSource,
Inc., a former subsidiary of SIGCORP, was merged into
Advanced Communications. All significant intercompany
transactions are eliminated.
USE OF ESTIMATES The preparation of financial statements in
conformity with generally accepted accounting principles
requires management to make estimates and assumptions that
affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date
of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual
results could differ from those estimates.
REGULATION The Indiana Utility Regulatory Commission (IURC)
has jurisdiction over all investor-owned gas and electric
utilities in Indiana. The Federal Energy Regulatory
Commission (FERC) has jurisdiction over those investor-owned
utilities that make wholesale energy sales. These agencies
regulate SIGECO's utility business operations, rates,
accounts, depreciation allowances, services, security issues
and the sale and acquisition of properties. The financial
statements of SIGCORP and SIGECO are based on generally
accepted accounting principles, which give recognition to
the ratemaking and accounting practices of these agencies.
REGULATORY ASSETS SIGECO is subject to the provisions of
Statement of Financial Accounting Standards (SFAS) No. 71,
"Accounting for the Effects of Certain Types of Regulation."
Regulatory assets represent probable future revenues to
SIGECO associated with certain incurred costs which will be
recovered from customers through the ratemaking process.
Generally accepted accounting principles for rate regulated
companies also require that regulatory assets which are no
longer probable of recovery through future revenues, at the
balance sheet date, be charged to earnings. The following
regulatory assets are reflected in the financial statements:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Regulatory Assets:
Demand side management program costs $ 25,900 $ 25,648
Postretirement benefits other than
pensions <F1> 1,234 3,263
Unamortized premium on reacquired debt 4,416 4,705
Regulatory study costs 21 107
Fuel and gas costs <F1> 5,585 5,931
37,156 39,654
Less current amounts 7,921 9,527
Total long-term regulatory assets $ 29,235 $ 30,127
<FN>
<F1> Refer to the individual paragraphs in this Note for discussion of
specific regulatory assets. See Income Taxes for regulatory assets and
liabilities related to income taxes.
</FN>
</TABLE>
As of December 31, 1999, the recovery of $15,762,000 of
SIGECO's total regulatory assets is reflected in rates
charged to customers. The remaining $21,373,000 of
regulatory assets, which are not yet included in rates,
represent SIGECO's demand side management (DSM) costs
incurred after 1993. When SIGECO files its next electric
rate case, these costs will be included in rate base and
earn a return; amortization of these costs over a period
anticipated to be 15 years will be recovered through rates
as a cost of operations. Of the $15,762,000 of regulatory
assets currently reflected in rates, a total of $8,943,000
is earning a return: $4,527,000 of pre-1994 DSM costs and
$4,416,000 of unamortized premium on reacquired debt. The
remaining recovery periods for the DSM costs and premium on
reacquired debt are 10.5 years and 19 years, respectively.
The remaining $6,819,000 of regulatory assets included in
rates but not earning a return are being recovered over
varying periods: $1,234,000 of deferred postretirement
benefit costs, over 1 year; $3,869,000 of fuel costs, over 3
months; and $1,716,000 of gas costs, over 12 months.
If all or a separable portion of SIGECO's operations becomes
no longer subject to the provisions of SFAS No. 71, a write
off of related regulatory assets would be required, unless
some form of transition cost recovery continues through
rates established and collected for SIGECO's remaining
regulated operations that would meet the requirements under
generally accepted accounting principles for continued
accounting as regulatory assets during such recovery period.
In addition, SIGECO would be required to determine any
impairment to the carrying costs of deregulated plant and
inventory assets.
CONCENTRATION OF CREDIT RISK SIGECO's customer receivables
from gas and electric sales and gas transportation services
are primarily derived from a diversified base of
residential, commercial and industrial customers located in
a southwestern region of Indiana. SIGECO continually
reviews customers' creditworthiness and requests deposits or
refunds deposits based on that review. SIGECO also sells
electricity to wholesale marketers which increases its
exposure to potential credit losses. Energy's customer
receivables from gas sales and transportation services are
primarily derived from a diversified base of commercial and
industrial customers located in the midwestern region of the
United States. Energy investigates the creditworthiness of
its potential customers. See Note 2 for a discussion of
receivables related to SIPI's leveraged lease investments.
UTILITY PLANT Utility plant is stated at the historical
original cost of construction. The cost of repairs and
minor renewals is charged to maintenance expense as
incurred. Property unit replacements are capitalized and
the depreciation reserve is charged with the cost, less net
salvage, of units retired.
DEPRECIATION Depreciation of utility property is provided
using the straight-line method over the estimated service
lives of the depreciable plant. Provisions for
depreciation, expressed as an annual percentage of the cost
of average depreciable plant in service, were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
<S> <C> <C> <C>
Electric 3.5% 3.4% 3.4%
Gas 3.3% 3.3% 3.2%
</TABLE>
INCOME TAXES SIGCORP and SIGECO utilizes the liability
method of accounting for income taxes, providing deferred
taxes on temporary differences. Investment tax credits have
been deferred and are amortized through credits to income
over the lives of the related property.
The components of the net deferred income tax liability are
as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and cost recovery timing
differences $ 120,306 $ 117,866
Deferred fuel costs, net 2,427 3,446
Leveraged leases 30,700 25,330
Regulatory assets recoverable through
future rates 26,128 26,048
Deferred Tax Assets:
Unbilled revenue (417) (1,394)
Regulatory liabilities to be settled
through future rates (20,388) (22,993)
Other, net (4,297) (4,271)
Net deferred income tax liability $ 154,459 $ 144,032
</TABLE>
The $10,427,000 increase in net deferred income tax
liability is due to: accelerated tax depreciation in
excess of book $1,064,000; unseasonably warm weather
at year end reducing unbilled revenue $977,000;
investment in two leveraged leases during year
$5,370,000; reduction of liability to customers
due to fuel clauses $1,019,000; amortization of
investment tax credit $1,430,000; reduction of
deferred tax asset regulatory liability due
to investment tax credit amortization and
accelerated tax depreciation in excess of book
$2,605,000.
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Deferred Tax Liabilities:
Depreciation and cost recovery timing $ 120,307 $ 117,765
differences
Deferred fuel costs, net 2,427 3,446
Regulatory assets recoverable through future 26,128 26,048
rates
Deferred Tax Assets:
Unbilled revenue (417) (1,394)
Regulatory liabilities to be settled through (20,388) (22,993)
future rates
Other, net (5,080) (4,725)
Net deferred income tax liability $ 122,977 $ 118,147
</TABLE>
The $4,830,000 increase in net deferred income tax liability
is due to: accelerated tax depreciation in excess of book
$837,000; unseasonably warm weather at year end reducing
unbilled revenue $977,000; reduction of liability to
customers due to fuel clauses $1,019,000; amortization of
investment tax credit $1,430,000; reduction of deferred tax
asset regulatory liability due to investment tax credit
amortization and accelerated tax depreciation in excess of
book $2,605,000.
The components of current and deferred income tax expense
are as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 ( in thousands) 1999 1998 1997
<S> <C> <C> <C>
Current
Federal $ 14,573 $ 18,984 $ 24,387
State 2,431 2,859 3,961
Deferred, net
Federal 8,722 3,558 (2,858)
State 1,422 56 (172)
Investment tax credit, net (1,430) (1,447) (1,457)
Total income tax expense $ 25,718 $ 24,010 $ 23,861
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric
CompanyYear Ended December 31 ( in 1999 1998 1997
thousands)
<S> <C> <C> <C>
Current
Federal $ 19,836 $ 19,521 $ 28,403
State 3,195 2,849 4,265
Deferred, net
Federal 4,080 3,270 (3,673)
State 746 842 (278)
Investment tax credit, net (1,430) (1,447) (1,458)
Total income tax expense $ 26,427 $ 25,035 $ 27,259
</TABLE>
A reconciliation of the statutory tax rates to effective
income tax rate is as follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 1999 1997 1996
<S> <C> <C> <C>
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds (.1) - (0.3)
used during construction
Book depreciation over related tax 1.6 1.7 1.8
depreciation - nondeferred
Amortization of deferred investment tax (1.8) (1.9) (2.1)
credit
Low-income housing credit (3.5) (3.8) (4.0)
Preferred dividend requirements of 0.5 0.6 0.6
subsidiary
Excess deferred tax (1.5) (2.8) (1.2)
Other, net - 0.5 1.4
Effective tax rate 33.1% 32.2% 34.1%
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
Year Ended December 31 1999 1998 1997
<S> <C> <C> <C>
Statutory federal and state rate 37.9% 37.9% 37.9%
Equity portion of allowance for funds - - (0.3)
used during construction
Book depreciation over related tax 1.7 1.7 1.8
depreciation - nondeferred
Amortization of deferred investment tax (1.9) (2.1) (2.1)
credit
Other, net (1.1) (.4) 0.2
Effective tax rate 36.6% 37.1% 37.5%
</TABLE>
PENSION BENEFITS SIGECO has trusteed, noncontributory
defined benefit plans which cover eligible full-time regular
employees. The plans provide retirement benefits based on
years of service and the employee's highest 60 consecutive
months' compensation during the last 120 months of
employment. The funding policy of SIGECO is to contribute
amounts to the plans equal to at least the minimum funding
requirements of the Employee Retirement Income Security Act
of 1974 (ERISA) but not in excess of the maximum deductible
for federal income tax purposes. The plans' assets as of
December 31, 1999 consist of investments in interest-bearing
obligations and common stocks.
Change in benefit obligation:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Benefit obligation at beginning of year $ 79,743 $ 72,914
Service cost - benefits earned during the year 3,020 2,639
Interest cost on projected benefit obligation 5,637 5,020
Plan amendments 33 2,220
Benefits paid (3,286) (3,176)
Actuarial (gain) loss (3,445) 126
Benefit obligation at end of year $ 81,702 $ 79,743
</TABLE>
Change in plan assets:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Plan assets at fair value at beginning of year $ 83,337 $ 76,587
Actual return on plan assets 6,000 9,926
Benefits paid (3,286) (3,176)
Fair value of plan assets at end of year $ 86,051 $ 83,337
</TABLE>
Reconciliation of funded status:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Excess of plan assets over projected benefit $ 4,349 $ 3,594
obligation
Remaining unrecognized transitional asset (1,398) (1,815)
Unrecognized service cost 3,180 3,455
Unrecognized net gain (14,490) (11,864)
Accrued pension benefit liability $ (8,359) $ (6,630)
</TABLE>
Components of net periodic pension benefit cost:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Service cost $ 3,020 $ 2,639
Interest cost 5,637 5,020
Expected return on plan assets (6,517) (5,985)
Amortization of prior service cost 307 178
Amortization of transitional asset (418) (418)
Recognized actuarial gain (300) (47)
Net periodic benefit cost $ 1,729 $ 1,387
</TABLE>
The projected benefit obligation at December 31, 1999 and
1998 was determined using an assumed discount rate of 7.5%
and 7.0%, respectively. For both periods, the long-term
rate of compensation increases was assumed to be 5.0%, and
the long-term rate of return on plan assets was assumed to
be 8.0%. The transitional asset is being amortized over
approximately 15, 18 and 14 years for the Salaried, Hourly
and Hoosier plans, respectively.
On January 1, 1999 SIGECO amended its pension plans by
increasing the "monthly earnings multiplier" applied to all
credited years of service in the plans' benefit formulas.
These amendments increased unrecognized prior service costs.
In addition to the trusteed pension plans discussed above,
SIGECO provides supplemental pension benefits to certain
current and former officers under nonqualified and nonfunded
plans. The accrued pension liability for these plans at
December 31, 1999 and 1998 was $4,648,000 and $3,820,000,
respectively. Service cost related to these benefits for
the year ended December 31, 1999 was approximately
$1,000,000.
POSTRETIREMENT BENEFITS OTHER THAN PENSIONS SIGECO provides
certain postretirement health care and life insurance
benefits for retired employees and their dependents through
a combination of self-insured and fully-insured plans. In
1998, SIGECO amended these benefits for salaried employees
aged 49 years and younger to require retiree contributions
towards the related health care insurance costs. SFAS No.
106, "Employers' Accounting for Postretirement Benefits
Other Than Pensions," requires the expected cost of these
benefits be recognized during the employees' years of
service. As authorized by the IURC, SIGECO deferred as a
regulatory asset the additional SFAS No. 106 costs accrued
over the costs of benefits actually paid after date of
adoption, but prior to inclusion in rates. Subsequently,
the IURC authorized SIGECO to include in rates SFAS No. 106
costs and to recover the amounts previously deferred over a
60-month period.
Change in benefit obligation:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Benefit obligation at beginning of year $ 25,529 $ 30,924
Service cost - benefits earned during the period 620 578
Interest cost on accumulated benefit obligation 1,707 1,664
Actuarial gain (2,287) (4,201)
Benefits paid net of participant contributions (661) (1,024)
Plan amendments - (2,412)
Benefit obligation at end of year $ 24,908 $ 25,529
</TABLE>
The net periodic cost determined under the standard includes
the amortization of the discounted present value of the
obligation at the adoption date over a 20-year period.
Change in plan assets:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Plan assets at fair value at beginning of year $ 9,511 $ 7,336
Actual return on plan assets 1,434 1,031
Employer contribution 1,425 2,168
Benefits paid net of participant contributions (661) (1,024)
Fair value of plan assets at end of year $ 11,709 $ 9,511
</TABLE>
Reconciliation of funded status:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Excess of projected benefit obligation over plan $ (13,199) $ (16,018)
assets
Unrecognized actuarial gain (15,885) (13,671)
Unrecognized transition obligation 17,043 18,353
Accrued postretirement benefit liability $ (12,041) $ (11,336)
</TABLE>
Components of net periodic other postretirement benefit
cost:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands) 1999 1998
<S> <C> <C>
Service cost $ 620 $ 578
Interest cost 1,707 1,664
Expected return on plan assets (751) (577)
Amortization of transitional obligation 1,311 1,311
Recognized actuarial gain (757) (743)
Net periodic benefit cost $ 2,130 $ 2,233
</TABLE>
The assumptions used to develop the accumulated
postretirement benefit obligation at December 31, 1999 and
1998 included discount rates of 7.5% and 7.0%, respectively.
As of December 31, 1999 the health care cost trend rate is
8.0% declining to 4.5% in 2006. The accrued health care cost
trend rate for 2000 is 7.0%. The estimated cost of these
future benefits could be significantly affected by future
changes in health care costs, work force demographics,
interest rates or plan changes. A 1.0% increase in the
assumed health care cost trend rate each year would increase
the aggregate service and interest costs for 1999 by
$382,000 and the accumulated postretirement benefit
obligation by $3,606,000. A 1.0% decrease in the assumed
health care cost trend rate each year would decrease the
aggregate service and interest costs for 1999 by $307,000
and the accumulated postretirement benefit obligation by
$2,952,000.
On July 1, 1998, SIGECO amended its postretirement benefit
plans to change benefits for existing employees under fifty
years of age and new employees to a graduated benefit rate.
SIGECO has adopted Voluntary Employee Beneficiary
Association (VEBA) Trust Agreements for the funding of
postretirement health benefits for retirees and their
eligible dependents and beneficiaries. Annual funding is
discretionary and is based on the projected cost over time
of benefits to be provided to covered persons consistent
with acceptable actuarial methods. To the extent these
postretirement benefits are funded, the benefits will not be
shown as a liability on SIGECO's financial statements.
CASH FLOW INFORMATION For balance sheet and cash flow
purposes, SIGCORP and SIGECO consider all highly liquid debt
instruments purchased with an original maturity of three
months or less to be cash equivalents.
During 1999, 1998 and 1997, SIGCORP paid interest (net of
amounts capitalized) of $19,777,000, $21,900,000 and
$19,888,000, respectively, and income taxes of $19,990,000,
$27,594,000 and $29,552,000, respectively. SIGCORP is
involved in several partnerships which are partially
financed by partnership obligations amounting to $845,000
and $2,358,000 at December 31, 1999 and 1998, respectively.
During 1999, 1998 and 1997, SIGECO paid interest (net of
amounts capitalized) of $15,437,000, $18,484,000 and
$18,929,000, respectively, and income taxes of $25,476,000,
$23,789,000 and $35,239,000, respectively.
INVENTORIES SIGECO accounts for inventories under the
average cost method except for gas in underground storage
which is accounted for under the last-in, first-out (LIFO)
method. Energy accounts for gas in underground storage
under the lower of cost or market method.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Fuel (coal and oil) for electric generation $ 12,824 $ 15,701
Materials and supplies 14,131 15,179
Emission allowances 4,437 5,133
Gas in underground storage - at LIFO cost 11,441 10,762
Other 2,496 669
Total inventories $ 45,329 $ 47,444
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Fuel (coal and oil) for electric generation $ 12,229 $ 15,701
Materials and supplies 13,352 15,063
Emission allowances 4,437 5,133
Gas in underground storage - at LIFO cost 11,441 10,762
Total inventories $ 41,459 $ 46,659
</TABLE>
Based on the December 1999 price of gas purchased, the cost
of replacing SIGECO's current portion of gas in underground
storage at December 31, 1999 exceeded the amount stated on a
LIFO basis by approximately $12,000,000.
OPERATING REVENUES AND FUEL COSTS SIGECO accrues an
estimate of revenues unbilled for electric and gas service
furnished from the meter reading dates to the end of each
accounting period. All metered gas rates contain a gas cost
adjustment clause which allows for adjustment in charges for
changes in the cost of purchased gas. Metered electric
rates typically contain a fuel adjustment clause which
allows for adjustment in charges for electric energy to
reflect changes in the cost of fuel and the net energy cost
of purchased power. SIGECO also collects through a
quarterly rate adjustment mechanism, the margin on electric
sales lost due to the implementation of demand side
management programs.
SIGECO records any adjustment clause under-or overrecovery
each month in revenues. A corresponding asset or liability
is recorded until such time as the under-or overrecovery is
billed or refunded to its customers. The cost of gas sold
is charged to operating expense as delivered to customers
and the cost of fuel for electric generation is charged to
operating expense when consumed.
COMPREHENSIVE INCOME Comprehensive income is a measure of
all changes in equity of an enterprise which result from
transactions or other economic events during the period
other than transactions with shareholders. This information
is reported in the Consolidated Statements of Common
Shareholders' Equity. SIGCORP's components of accumulated
other comprehensive income (loss) includes unrealized gains
(losses) on available for sale securities. SIGECO has no
elements of other comprehensive income.
NEW ACCOUNTING PRONOUNCEMENTS In June 1998, the FASB issued
SFAS No. 133, "Accounting for Derivative Instruments and
Hedging Activities," which is effective for fiscal years
beginning after June 15, 2000, but may be adopted earlier.
The June 15, 1999 date was amended by SFAS No. 137 to June
15, 2000. SFAS No. 133 establishes accounting and reporting
standards requiring that every derivative instrument,
including certain derivative instruments embedded in other
contracts, be recorded on Consolidated Balance Sheets as
either an asset or liability measured at fair value. The
accounting for changes in the fair value of a derivative
depends on the intended use of the derivative and resulting
designation.
SFAS No. 133 requires that changes in the derivative's fair
value be recognized in the current period's earnings, unless
specific hedge accounting criteria are met. If an entity
qualifies for hedge accounting, gains and losses on
derivatives, generally, will offset the related effects of
the hedged items in the current period income statement.
SFAS No. 133 requires that formal documentation be
maintained and that the effectiveness of the hedge be
assessed quarterly.
SIGCORP and SIGECO have not yet quantified the effects of
adopting SFAS No. 133 on their financial statements and have
not determined the timing or method of their adoption of
this statement. However, adoption of SFAS No. 133 could
increase the volatility in earnings and other comprehensive
income.
NOTE 2 LEVERAGED LEASES
SIGCORP
SIPI is a lessor in several leveraged lease agreements under
which an office building, a part of a reservoir, a gas
turbine electric generating peaking unit, two heat and power
generating facilities and passenger railroad cars are leased
to third parties. In early 1998, SIPI sold its leveraged
lease in a paper mill. In 1999 SIPI entered into two new
leveraged leases in the Netherlands and Belgium. The
economic lives and lease terms vary with the leases. The
total equipment and facilities cost was approximately
$409,700,000 and $86,700,000 at December 31, 1999 and 1998,
respectively. The cost of the equipment and facilities was
partially financed by nonrecourse debt provided by lenders,
who have been granted an assignment of rentals due under the
leases and a security interest in the leased property, which
they accepted as their sole remedy in the event of default
by the lessee. Such debt amounted to approximately
$373,500,000 and $66,700,000 at December 31, 1999 and 1998,
respectively. SIGCORP's net investment in leveraged leases
at those dates was $55,037,000 and $10,673,000,
respectively, as shown:
<TABLE>
<CAPTION>
At December 31 (in thousands) 1999 1998
<S> <C> <C>
Minimum lease payments receivable $ 161,551 $ 51,443
Estimated residual value 29,073 29,073
Less unearned income 104,887 44,513
Investment in lease financing receivables and loan 85,737 36,003
Less deferred taxes arising from leveraged leases 30,700 25,330
Net investment in leveraged leases $ 55,037 $ 10,673
</TABLE>
NOTE 3 SHORT-TERM FINANCING
SIGCORP and SIGECO
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks, of which none was utilized
at December 31, 1999. Funds are also borrowed periodically
from banks on a short-term basis, made available through
lines of credit. SIGCORP has available lines of credit
totaling $149,000,000 at December 31, 1999 of which
$108,566,000 was utilized at that date.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
Notes Payable
Balance at year end $ 108,566 $ 69,508 $ 41,368
Weighted average interest rate on
year end balance 6.26% 5.86% 6.21%
Average daily amount outstanding
during the year $ 96,920 $ 38,408 $ 14,510
Weighted average interest rate on
average daily amount
outstanding during the year 5.94% 6.22% 6.08%
</TABLE<
SIGECO has trust demand note arrangements totaling
$17,000,000 with several banks of which none was utilized
at December 31, 1999. Funds are also borrowed periodically
from banks on a short-term basis, made available through
lines of credit. SIGECO has available lines of credit
totaling $49,000,000 at December 31, 1999 of which
$22,880,000 was utilized at that date
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998 1997
<S> <C> <C> <C>
Notes Payable
Balance at year end $ 22,880 $ 65,689 $ 52,529
Weighted average interest rate on 6.42% 5.77% 6.31%
year end balance
Average daily amount outstanding $ 54,576 $ 43,149 $ 19,777
during the year
Weighted average interest rate on
average daily amount
outstanding during the year 5.74% 6.28% 6.13%
</TABLE>
NOTE 4 LONG-TERM DEBT
SIGCORP and SIGECO
The annual sinking fund requirement of SIGECO's first
mortgage bonds is 1% of the greatest amount of bonds
outstanding under the Mortgage Indenture. This requirement
may be satisfied by certification to the Trustee of unfunded
property additions in the prescribed amount as provided in
the Mortgage Indenture. SIGECO intends to meet the 2000
sinking fund requirement by this means and, accordingly, the
sinking fund requirement for 2000 is excluded from current
liabilities on the balance sheet. At December 31, 1999,
$200,011,000 of SIGECO's utility plant remained unfunded
under SIGECO's Mortgage Indenture.
Several of SIGCORP's partnership investments have been
financed through obligations with such partnerships. Of the
amount of first mortgage bonds, notes payable and
partnership obligations outstanding at December 31, 1999,
the following amounts which mature in the five years
subsequent to 1999 are as follows:
<TABLE>
<CAPTION>
SIGCORP SIGECO
<S> <C> <C>
2000 $ 596,000 -
2001 249,000 -
</TABLE>
In addition, $53,700,000 of adjustable rate pollution
control series first mortgage bonds could, at the election
of the bondholder, be tendered to SIGECO in March 2000. If
SIGECO's agent is unable to remarket any bonds tendered at
that time, SIGECO would be required to obtain additional
funds for payment to bondholders. For financial statement
presentation purposes those bonds subject to tender in 2000
are shown as current liabilities.
First mortgage bonds, notes payable and partnership
obligations outstanding and classified as long-term are as
follows:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 (in thousands) 1999 1998
<S> <C> <C>
First Mortgage Bonds due:
2020, 4.40% Pollution Control Series B $ 4,640 $ 4,640
2030, 4.40% Pollution Control Series B 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8.875% 13,000 23,000
2023, 7.60% 45,000 45,000
2025, 7.625% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.55% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2029, 6.72% 80,000 -
Total first mortgage bonds $ 239,915 $ 169,915
Notes Payable:
Insurance Company, due 2012, 7.43% $ 35,000 $ 35,000
Tax Exempt, due 2003, 6.25% 1,000 1,000
Bank, due 2000, 2.90% - 9
Total notes payable $ 36,000 $ 36,009
Partnership Obligations, due 2001 through 2005, $ 249 $ 781
without interest
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 (in thousands) 1999 1998
<S> <C> <C>
First Mortgage Bonds due:
2020, 4.40% Pollution Control Series B $ 4,640 $ 4,640
2030, 4.40% Pollution Control Series B 22,000 22,000
2014, 7.25% Pollution Control Series A 22,500 22,500
2016, 8.875% 13,000 23,000
2023, 7.60% 45,000 45,000
2025, 7.625% 20,000 20,000
Adjustable Rate Pollution Control:
2015, Series A, presently 4.55% 9,975 9,975
Adjustable Rate Environmental Improvement:
2023, Series B, presently 6% 22,800 22,800
2029, 6.72% 80,000 -
Total first mortgage bonds $ 239,915 $ 169,915
Notes Payable:
Tax Exempt, due 2003, 6.25% 1,000 1,000
Total notes payable $ 1,000 $ 1,000
</TABLE>
NOTE 5 CAPITAL STOCK
SIGCORP and SIGECO
COMMON STOCK Each outstanding share of SIGCORP's common
stock contains a right which entitles registered holders to
purchase from SIGCORP one-hundredth of a share of SIGCORP's
common stock, at an initial price of $65 per share (Purchase
Price) subject to adjustment. The rights will not be
exercisable until a party acquires beneficial ownership of
10% of common shares or makes a tender offer for at least
10% of its common shares. The rights expire December 31,
2005. If not exercisable, the rights in whole may be
redeemed by SIGCORP at a price of $.01 per right at any time
prior to their expiration. If at any time after the rights
become exercisable and are not redeemed and SIGCORP is
involved in a merger or other business combination
transaction, proper provision shall be made to entitle a
holder of a right to buy common stock of the acquiring
company having a value of two times such Purchase Price.
These rights are not exercisable in the merger with IEI.
SIGECO has a common stock option plan for its key management
employees. The option price for all stock options is at
least 100% of the fair market value of SIGCORP common stock
at the grant date. Options generally vest and become
exercisable between one and three years in equal annual
installments beginning one year after the grant date, and
generally expire in 10 years. The expiration dates for
options outstanding as of December 31, 1999, ranged from
July 13, 2005 to July 14, 2008. Stock option activity for
the past three years was as follows:
<TABLE>
<CAPTION>
At December 31 1999 1998 1997
<S> <C> <C> <C>
Outstanding at beginning of year 503,668 458,169 327,901
Granted 204,639 74,999 139,348
Exercised (9,878) (29,500) (9,080)
Outstanding at end of year 698,429 503,668 458,169
Exercisable at end of year 493,790 381,765 318,821
Reserved for future grants at end of
year - 204,639 279,638
Average Option Price - Exercised $23.36 $21.16 $18.42
- Outstanding at
end of year $24.43 $23.28 $21.58
</TABLE>
SIGCORP and SIGECO account for stock compensation in
accordance with Accounting Principles Board Opinion No. 25,
"Accounting for Stock Issued to Employees." Under
Accounting Principles Board Opinion No. 25, no compensation
cost has been recognized for stock options. Had
compensation cost for stock options been determined
consistent with SFAS No. 123 "Accounting for Stock-based
Compensation," net income would have been reduced to the
following pro forma amounts:
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 1999 1998 1997
<S> <C> <C> <C>
Net Income:
As reported $52,057 $50,476 $46,140
Pro forma 51,386 49,961 45,848
Basic Earnings Per Share:
As reported $2.20 $2.14 $1.95
Pro forma 2.17 2.11 1.94
Diluted Earnings Per Share:
As reported $2.19 $2.12 $1.95
Pro forma 2.17 2.10 1.94
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 1999 1998 1997
<S> <C> <C> <C>
Net Income:
As reported $45,690 $42,447 $44,266
Pro forma 45,019 41,932 43,974
</TABLE>
The fair value of each option granted used to determine pro
forma net income is estimated as of the date of grant using
the Black-Scholes option pricing model with the following
weighted average assumptions used for grants in the twelve
month periods ended December 31, 1999, 1998 and 1997: risk-
free interest rate of 6.46%, 4.44% and 5.75%, respectively;
expected option term of five years; expected volatilities of
34.00%, 33.16% and 36.62%, respectively; and dividend rates
of 4.46%, 3.77% and 4.46%, respectively.
EARNINGS PER SHARE The following table illustrates the
basic and diluted earnings per share calculations.
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31
(in thousands except for per share amounts)
1999 1998 1997
Per Per Per
Income Shares Share Income Shares Share Income Shares Share
Amount Amount Amount
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Basic EPS
$52,057 23,631 $2.20 $50,476 23,631 $2.14 $46,140 23,631 $1.95
Effect of dilutive securities
93 134 56
Diluted EPS
$52,057 23,724 $2.19 $50,476 23,765 $2.12 $46,140 23,687 $1.95
</TABLE>
Basic earnings per common share were computed by dividing
net income by the weighted average number of shares of
common stock outstanding during the year. Diluted earnings
per common share were determined using the treasury stock
method for dilutive stock options.
Options to purchase 74,999 shares of common stock at $32.06
per share were granted in July 1998, but were not included
in the computation of diluted earnings per share because the
exercise price was greater than the average market price of
the common shares.
CUMULATIVE PREFERRED STOCK OF SIGECO The amount payable in
the event of involuntary liquidation of each series of the
$100 par value preferred stock is $100 per share, plus
accrued dividends. This nonredeemable preferred stock is
callable at the option of SIGECO as follows: the 4.8% Series
at $110 per share, plus accrued dividends; and the 4.75%
Series at $101 per share, plus accrued dividends.
CUMULATIVE REDEEMABLE PREFERRED STOCK OF SIGECO The Series
has a dividend rate of 6.50% and is redeemable at $100 per
share on December 1, 2002. In the event of involuntary
liquidation of this series of $100 par value preferred
stock, the amount payable is $100 per share, plus accrued
dividends.
CUMULATIVE SPECIAL PREFERRED STOCK OF SIGECO The Cumulative
Special Preferred Stock contains a provision which allows
the stock to be tendered on any of its dividend payment
dates. On January 29, 1999, SIGECO repurchased 1,160 shares
of the Cumulative Special Preferred Stock at a cost of
$117,600 as a result of a tender within the provision of the
issuance.
NOTE 6 OWNERSHIP OF WARRICK UNIT 4
SIGCORP and SIGECO
SIGECO and Alcoa Generating Corporation (AGC), a subsidiary
of Aluminum Company of America, own the 270 MW Unit 4 at the
Warrick Power Plant as tenants in common. SIGECO's share of
the cost of this unit at December 31, 1999 is $37,503,000
with accumulated depreciation totaling $27,306,000. AGC and
SIGECO also share equally in the cost of operation and
output of the unit. SIGECO's share of operating costs is
included in operating expenses in the Consolidated
Statements of Income.
NOTE 7 COMMITMENTS AND CONTINGENCIES
SIGCORP and SIGECO
SIGECO presently estimates that approximately $51,991,000
will be expended for construction purposes in 2000,
including those amounts applicable to SIGECO's demand side
management (DSM) programs. Commitments for the 2000
construction program are approximately $7,149,000 at
December 31, 1999. Additionally, SIGECO has a three-year
contract with a utility-affiliated power marketer to
purchase 50 MW of electric power beginning January 2000
through December 2002.
NOTE 8 LEASE OBLIGATIONS
SIGCORP
SIMI has entered into an agreement to lease back a
previously sold manufacturing facility and related equipment
at $532,000 per year through 2010 under a noncancelable
operating lease. In December 1997, Fuels entered operating
lease agreements for mining equipment. The aggregate
future minimum rental payments required under the above
leases are as follows:
<TABLE>
<CAPTION>
Year Ended December 31 (in thousands)
<S> <C>
2000 $ 2,319
2001 2,319
2002 2,319
2003 2,145
2004 1,924
Thereafter 6,915
Total lease payments $ 17,941
</TABLE>
Total rental expense under all operating leases was
$679,863, $1,206,977 and $578,454 for the years ended
December 31, 1999, 1998 and 1997, respectively.
NOTE 9 SEGMENTS OF BUSINESS
SIGCORP AND SIGECO
SFAS No. 131 "Disclosures about Segments of an Enterprise
and Related Information" establishes standards for reporting
information about operating segments in financial statements
and disclosures about products and services and geographic
areas. Operating segments are defined as components of an
enterprise for which separate financial information is
available and is evaluated regularly by the chief operating
decision maker in deciding how to allocate resources and in
assessing performance.
SIGCORP has four reportable segments. They are SIGECO's
electric and gas utility operations, Energy Services' gas
marketing services and SIPI's investment operations. All
other subsidiary operations and corporate activities are
included in other. SIGCORP's reportable segments are
operations that are managed separately and meet the
quantitative thresholds required by SFAS No. 131. A
description of the segments' products and services is
included in Note 1 "Principles of Consolidation." The
accounting policies of the segments are those described in
Note 1. Revenues for each of SIGCORP's segments are
attributable principally to customers in the United States
except a portion of revenues for SIPI which are attributable
to customers in the Netherlands and Belgium as well.
Certain financial information relating to significant
segments of business is presented below:
<TABLE>
<CAPTION>
SIGCORP, Inc.
Year Ended December 31 (in 1999 1998 1997
thousands)
<S> <C> <C> <C>
Operating revenues:
Electric $ 307,569 $ 297,865 $272,545
Gas 68,212 66,801 85,561
Gas marketing 221,534 179,613 71,669
Investment operations 1,039 963 955
All other 26,680 28,664 2,507
Total 625,034 573,906 433,237
Interest revenue:
Electric <F1> 330 309 492
Gas <F1> 33 31 49
Gas marketing 85 71 27
Investment operations 2,863 3,702 2,305
All other 7,321 4,880 2,912
Total 10,632 8,993 5,785
Interest expense:
Electric <F1> 17,544 18,191 18,009
Gas <F1> 1,735 1,799 1,781
Gas marketing 168 155 15
Investment operations 4,051 2,749 2,242
All other 6,604 3,901 2,051
Total 30,102 26,795 24,098
Income taxes:
Electric 24,331 22,881 23,714
Gas 2,096 2,153 3,545
Gas marketing 244 339 244
Investment operations (1,052) (1,517) (2,564)
All other 99 154 (1,078)
Total 25,718 24,010 23,861
Net income:
Electric 41,820 38,342 37,861
Gas 3,870 4,106 6,404
Gas marketing 239 543 405
Investment operations 5,318 6,899 3,528
All other 810 586 (2,058)
Total 52,057 50,476 46,140
Depreciation and amortization
expense:
Electric 40,829 38,077 36,217
Gas 4,038 4,324 3,974
Gas marketing 75 36 4
Investment operations 139 189 91
All other 260 107 87
Total 45,341 42,733 40,373
Capital expenditures:
Electric 51,080 47,114 55,735
Gas 9,893 9,381 12,687
Gas marketing - - -
Investment operations - - -
All other 902 2,277 592
Total 61,875 58,772 69,014
Identifiable assets:
Electric <F2> 751,159 740,746 726,507
Gas <F2> 143,078 141,174 137,956
Gas marketing 39,545 25,905 22,372
Investment operations 154,739 87,000 94,365
All other 577,756 460,706 398,928
Total assets $1,666,277 $1,455,531 $1,380,128
<FN>
<F1> SIGECO allocates interest revenue and expense based
on the net plant ratio which is 91% electric and 9% gas.
<F2> Utility plant less accumulated provision for
depreciation, inventories, receivables (less allowance),
regulatory assets and other identifiable assets.
</FN>
</TABLE>
The following is a reconciliation to the consolidated
financial statements of SIGCORP:
<TABLE>
<CAPTION>
Year Ended December 31
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating revenues:
Total revenues for segments $ 625,034 $ 573,906 $ 433,237
Elimination of intersegment
revenues (20,543) (16,795) -
Total consolidated revenues 604,491 557,111 433,237
Interest revenue:
Total interest revenue for
segments 10,632 8,993 5,785
Elimination of intersegment
interest (6,137) (3,505) (2,782)
Total consolidated interest
revenue 4,495 5,488 3,003
Interest expense:
Total interest expense for
segments 30,102 26,795 24,098
Elimination of intersegment
interest (6,135) (3,505) (2,782)
Total consolidated interest
expense 23,967 23,290 21,316
Identifiable assets:
Total assets for segments 1,666,277 1,455,531 1,380,128
Elimination of intersegment
assets (522,135) (426,013) (390,105)
Total consolidated assets $ 1,144,142 $ 1,029,518 $ 990,023
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
Year Ended December 31
(in thousands) 1999 1998 1997
<S> <C> <C> <C>
Operating revenues:
Electric $ 307,569 $ 297,865 $ 272,545
Gas 68,212 66,801 85,561
Total 375,781 364,666 358,106
Interest revenue:
Electric <F1> 330 309 492
Gas <F1> 33 31 49
Total 363 340 541
Interest expense:
Electric <F1> 17,544 18,191 18,009
Gas <F1> 1,735 1,799 1,780
Total 19,279 19,990 19,789
Identifiable assets:
Electric <F2> 751,598 740,746 18,009
Gas <F2> 143,161 141,174 1,780
Total assets $ 894,759 $ 881,920 $ 19,789
<FN>
<F1> SIGECO allocates interest revenue and expense based on the net
plant ratio which is 91% electric and 9% gas.
<F2> Utility plant less accumulated provision for depreciation,
inventories, receivables (less allowance), regulatory assets and other
identifiable assets.
</FN>
>/TABLE>
NOTE 10 DISCLOSURES ABOUT FAIR VALUE
SIGCORP and SIGECO
Except for the following financial instruments, fair value
of SIGCORP's and SIGECO's financial instruments is
equivalent to carrying value due to their short-term nature.
</TABLE>
<TABLE>
<CAPTION>
SIGCORP, Inc.
At December 31 1999 1998
(in thousands)
Carrying Estimated Carrying Estimated
Amount Fair Amount Fair
Value Value
<S> <C> <C> <C> <C>
Long-Term Debt (including
current portion) $ 326,982 $ 354,426 $ 303,471 $376,424
Partnership Obligations 845 905 2,358 3,446
(including current
portion)
Redeemable Preferred Stock 7,500 7,538 7,500 9,044
of Subsidiary
</TABLE>
<TABLE>
<CAPTION>
Southern Indiana Gas and Electric Company
At December 31 1999 1998
(in thousands)
Carrying Estimated Carrying Estimated
Amount Fair Amount Fair
Value Value
<S> <C> <C> <C> <C>
Long-Term Debt (including
current portion) $ 291,982 $ 316,535 $ 268,462 $333,456
Redeemable Preferred Stock 7,500 7,538 7,500 9,044
</TABLE>
At December 31, 1999 and 1998, respectively, the fair value
of SIGCORP's debt relating to utility operations exceeded
carrying amounts by $24,500,000 and $65,000,000.
Anticipated regulatory treatment of the excess or deficiency
of fair value over carrying amounts of SIGECO's long-term
debt, if in fact settled at amounts approximating those
above, would dictate that these amounts be used to reduce or
increase SIGECO's rates over a prescribed amortization
period. Accordingly, any settlement would not result in a
material impact on SIGECO's financial position or results of
operations.
LONG-TERM DEBT At December 31, 1999 and 1998, respectively,
the fair value of SIGCORP's long-term debt, which was
substantially related to SIGECO's operations, were based on
the current quoted market interest rate of long-term debt of
comparably rated utilities (6.46%) and (5.09%). Fair value
of SIGCORP's tax-exempt issues were valued at the tax-
effected rate of such debt (3.26%) and (4.01%),
respectively.
REDEEMABLE PREFERRED STOCK OF SIGECO At December 31, 1999
and 1998, respectively, the fair value of SIGECO's
redeemable preferred stock were based on the current quoted
market rate of long-term debt with similar characteristics,
of comparably rated utilities (6.46%) and (5.09%).
PARTNERSHIP OBLIGATIONS At December 31, 1999 and 1998,
respectively, the fair value of SIGCORP's partnership
obligations were estimated based on the current quoted
market rate of comparable debt (7.62%) and (5.09%).
NOTE 11 ENVIRONMENTAL
On November 3, 1999, the USEPA filed a lawsuit against
SIGECO. The USEPA alleges that, beginning in 1992, SIGECO
violated the Clean Air Act by: (i) making modifications to
its Culley Generating Station in Yankeetown, Indiana without
obtaining required permits; (ii) making major modifications
to the Culley Generating Station without installing the best
available emission control technology; and (iii) failing to
notify the USEPA of the modifications. In addition, the
lawsuit alleges that the modifications to the Culley
Generating Station required SIGECO to begin complying with
federal new source performance standards.
SIGECO believes it performed only proper maintenance at the
Culley Generating Station. Because proper maintenance does
not require permits, application of the best available
emission control technology, notice to the USEPA, or
compliance with new source performance standards, SIGECO
believes that the lawsuit is without merit, and intends to
defend the lawsuit vigorously.
The lawsuit seeks fines against SIGECO in the amount of
$27,500 per day per violation. The lawsuit does not specify
the number of days or violations the USEPA believes
occurred. The lawsuit also seeks a court order requiring
SIGECO to install the best available emissions technology at
the Culley Generating Station. If the USEPA is successful
in obtaining an order, SIGECO estimates that it would incur
capital costs of approximately $40 million to $50 million
complying with the order.
The USEPA has also issued an administrative notice of
violation to SIGECO making the same allegations, but
alleging that violations began in 1977.
Under applicable rules, SIGECO could be subjected to
criminal penalties if the Culley Generating Station
continues to operate without complying with the new source
performance standards and the allegations are determined by
a court to be valid. SIGECO anticipates at this time that
the plant will continue to operate while the matter is being
decided. SIGECO does not believe that it is liable for the
alleged fine in this matter, but cannot determine the
outcome of the matter with certainty. Currently, no
liability has been recorded for this matter.
NOTE 12 SUBSEQUENT EVENT
On January 28, 2000, affiliates of Blackstone Capital
Partners III, a private equity fund of The Blackstone Group
invested in class B equity units of Utilicom Holdings LLC
(Holdings) a newly formed holding company. The investment
was the first part of a commitment by Blackstone to invest
up to $100 million to fund future growth opportunities in
fiber optic networks. At the same time, Advanced
Communications exchanged 35 percent of its current 49
percent equity interest in SIGECOM LLC for $16.5 million of
convertible debt of Holdings. The debt is convertible into
class A equity units at a future date or in the event of a
public offering of stock. Simultaneous with this
transaction, Utilicom was downstreamed to Holdings and the
existing equity interest in Utilicom were converted to class
A equity units in Holdings. The investment restructuring
resulted in an immediate after tax gain to SIGCORP of
$4,900,000 in the first quarter of 2000.
<PAGE>
Pursuant to the requirements of the Securities Exchange
of 1934, the registrant has duly caused this report to be
signed on its behalf by the undersigned hereunto duly
authorized.
SIGCORP, Inc. and
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
Dated: February 28, 2000
By: /s/ S. M. Kerney
-------------------------------
S. M. Kerney, Controller
(Principal Accounting
Officer)
