UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PERSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended September 30, 1997
OR
TRANSITION REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from _________ to _________
<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>
Indicate by check mark whether the Registrants (1) have 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 Registrants were required
to file such reports), and (2) have been subject to such
filing requirements for the past 90 days.
Yes X . No .
Indicate the number of shares outstanding of each of the
Registrants' classes of common stock, as of the latest
practicable date:
<TABLE>
<CAPTION>
<S> <C> <C>
SIGCORP, Inc.: Common stock, no par value, 23,630,568 shares
outstanding at September 30, 1997
Southern Indiana Gas and
Electric Company: Common stock, no par value, 15,754,826 shares
outstanding and held by
SIGCORP, Inc.
at September 30, 1997
</TABLE>
<PAGE>
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FORM 10-Q FOR THE QUARTER ENDED SEPTEMBER 30, 1997
<TABLE>
<CAPTION>
TABLE OF CONTENTS
Page No.
<S> <C> <C> <C>
PART I. FINANCIAL INFORMATION:
Item 1: Financial Statements
SIGCORP, Inc.
Consolidated Statements of Income 2
Consolidated Statements of Cash Flows 3
Consolidated Balance Sheets 4-5
Consolidated Statements of Capitalization 6
Consolidated Statements of Retained Earnings 7
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
Statements of Income 8
Statements of Cash Flows 9
Balance Sheets 10-11
Statements of Capitalization 12
Statements of Retained Earnings 13
NOTES TO FINANCIAL STATEMENTS OF SIGCORP, Inc.
AND SOUTHERN INDIANA GAS AND ELECTRIC COMPANY 14-15
Item 2: Management's Discussion and Analysis of Results
of Operations and Financial Condition 16-19
SIGCORP, Inc. And Southern Indiana Gas
and Electric Company
Part II. OTHER INFORMATION
Item 4: Submission of Matters to a Vote of
Security Holders 21
Item 5: Other information 21
Item 6: Exhibits and Reports on Form 8-K 21
Signatures 22
</TABLE>
<PAGE> 2
<TABLE> SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(in thousands except per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $84,169 $79,889 $211,267 $212,557
Gas 9,189 11,206 56,223 68,440
Total operating revenues 93,358 91,095 267,490 280,997
OPERATING EXPENSES:
Fuel for electric generation 17,952 20,852 47,703 57,515
Purchased electric energy 6,846 2,075 11,886 6,107
Cost of gas sold 2,824 4,465 34,096 46,628
Other 12,395 13,894 40,440 39,823
Maintenance 5,536 6,911 19,479 20,819
Depreciation and amortization 10,029 9,709 30,087 29,125
Federal and state income taxes 11,340 9,161 22,374 20,320
Property and other taxes 2,748 3,511 9,226 10,582
Total operating expenses 69,670 70,578 215,291 230,919
OPERATING INCOME 23,688 20,517 52,199 50,078
OTHER INCOME:
Allowance for other funds used
during construction 169 - 430 -
Interest 763 464 2,061 1,192
Other, net 1,129 375 1,640 3,267
Total other income 2,061 839 4,131 4,459
INCOME BEFORE INTEREST
AND OTHER CHARGES 25,749 21,356 56,330 54,537
INTEREST AND OTHER CHARGES:
Interest on long-term debt 4,482 4,593 13,509 13,920
Amortization of premium,
discount, and expense on debt 168 168 503 522
Other interest 1,111 504 2,616 1,514
Allowance for borrowed funds
used during construction (233) (131) (445) (299)
Preferred dividend requirements
of subsidiary 274 274 823 823
Total interest and other
charges 5,802 5,408 17,006 16,480
NET INCOME $19,947 $15,948 $ 39,324 $ 38,057
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631 23,631
EARNINGS PER SHARE OF COMMON STOCK $0.84 $0.67 $1.66 $1.61
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</FN>
</TABLE>
<PAGE> 3
<TABLE> SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 39,324 $ 38,057
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 30,087 29,125
Preferred dividend requirements
of subsidiary 823 823
Deferred income taxes and investment
tax credits, net (1,903) 1,178
Allowance for other funds used
during construction (430) -
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) 16,482 (2,106)
Inventories (2,167) (2,420)
Coal contract settlement - 12,928
Accounts payable (13,894) (18,795)
Accrued taxes (318) 7,056
Refunds from gas suppliers (301) (1,603)
Refunds to customers 5,703 (3,921)
Other assets and liabilities (3,209) (2,884)
Net cash provided by operating activities 70,197 57,438
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (39,950) (23,382)
Demand side management program expenditures (2,003) (2,326)
Purchases of investments (323) -
Sales of investments 160 700
Investments in partnerships (80) 596
Change in nonutility property (5,145) (6,887)
Other 207 1,156
Net cash used in investing activities (47,134) (30,143)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds - (8,000)
Dividends paid (23,237) (21,264)
Change in environmental improvement
funds held by trustee (158) (153)
Payments on partnership obligations (2,276) (2,786)
Change in notes payable 1,793 2,290
Other 1,844 395
Net cash used in financing activities (22,034) (29,518)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 1,029 (2,223)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,191 9,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 10,220 $ 7,611
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.<FN>
</TABLE>
<PAGE> 4
<TABLE>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant, at original cost:
Electric $1,069,580 $1,047,717
Gas 135,616 131,796
1,205,196 1,179,513
Less - accumulated provision
for depreciation 549,252 524,104
655,944 655,409
Construction work in progress 35,894 25,849
Net utility plant 691,838 681,258
Other Investments and Property:
Investments in leveraged leases 42,580 42,887
Investments in partnerships 23,867 23,983
Environmental improvement funds
held by trustee 3,988 3,830
Nonutility property and other 27,888 22,743
Total other investments and property 98,323 93,443
Current Assets:
Cash and cash equivalents 10,220 9,191
Temporary investments, at market 738 565
Receivables, less allowance of $143
and $215, respectively 33,456 36,469
Accrued unbilled revenues 21,275 34,744
Inventories 33,408 31,241
Other current assets 7,992 16,310
Total current assets 107,089 128,520
Deferred Charges:
Unamortized premium on reacquired debt 5,303 5,663
Postretirement benefits other than pensions 6,110 7,819
Demand side management program 25,021 23,359
Other deferred charges 15,737 12,591
Total deferred charges 52,171 49,432
TOTAL $ 949,421 $ 952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</FN>
</TABLE>
<PAGE> 5
<TABLE>
SIGCORP, Inc.
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 270,990 252,626
Total common shareholders' equity 349,248 330,884
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 924 924
Long-Term Debt, net of current maturities 238,990 261,629
Long-Term Partnership Obligations,
net of current maturities 4,192 4,563
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 611,944 616,590
Current Liabilities:
Current Portion of Adjustable Rate
Bonds Subject to Tender 31,500 31,500
Current Maturities of Long-Term Debt,
Interim Financing and Long-Term
Partnership Obligations:
Maturing long-term debt 12,695 659
Notes payable 51,462 38,750
Partnership obligations 371 2,276
Total current maturities of long-term
debt, interim financing and
long-term partnership obligations 64,528 41,685
Other Current Liabilities:
Accounts payable 19,706 33,600
Dividends payable 123 123
Accrued taxes 7,405 7,723
Accrued interest 8,140 4,585
Refunds to customers 8,123 2,722
Other accrued liabilities 6,921 31,138
Total other current liabilities 50,418 79,891
Total current liabilities 146,446 153,076
Deferred Credits and Other:
Accumulated deferred income taxes 147,855 147,070
Accumulated deferred investment tax
credits, being amortized over
lives of property 20,632 21,706
Regulatory income tax liability - 1,614
Postretirement benefits other
than pensions 13,327 10,084
Other 9,217 2,513
Total deferred credits and other 191,031 182,987
TOTAL $949,421 $952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</FN>
</TABLE>
<PAGE> 6
<TABLE>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<CAPTION>
September 30, December 31,
1997 1996
(in thousands)
<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, $2,194,121 restricted as
to payment of cash dividends on common stock 270,990 252,626
Total common shareholders' equity 349,248 330,884
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 9,237 shares
redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 238,714 251,115
Notes payable 1,000 11,273
Unamortized debt premium and discount, net (724) (759)
Total long-term debt 238,990 261,629
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 4,192 4,563
CURRENT PORTION OF ADJUSTABLE
RATE POLLUTION CONTROL
BONDS SUBJECT TO TENDER, DUE
2015, Series B, presently 4.05% 31,500 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $643,444 $648,090
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements. </FN>
</TABLE>
<PAGE> 7
<TABLE>
SIGCORP, Inc.
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
(in thousands)
<S> <C> <C>
Balance Beginning of Period $252,626 $236,617
Net Income 39,324 38,057
291,950 274,674
Common Stock Dividends ($0.885 per share
in 1997 and $0.865 per share in 1996) 20,960 20,441
BALANCE END OF PERIOD (See Consolidated
Statements of Capitalization for
restriction) $270,990 $254,233
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements. </FN>
</TABLE>
<PAGE> 8
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF INCOME
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1997 1996 1997 1996
(in thousands except per share data)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $84,167 $79,889 $211,267 $212,557
Gas 9,190 11,206 56,223 68,440
Total operating revenues 93,357 91,095 267,490 280,997
OPERATING EXPENSES:
Fuel for electric generation 17,952 20,852 47,703 57,515
Purchased electric energy 6,847 2,075 11,886 6,107
Cost of gas sold 2,824 4,465 34,096 46,628
Other 12,358 13,894 40,405 39,823
Maintenance 5,536 6,911 19,479 20,819
Depreciation and amortization 10,029 9,709 30,087 29,125
Federal and state income taxes 11,340 9,161 22,374 20,320
Property and other taxes 2,748 3,511 9,226 10,582
Total operating expenses 69,634 70,578 215,256 230,919
OPERATING INCOME 23,723 20,517 52,234 50,078
OTHER INCOME:
Allowance for other funds used
during construction 169 - 430 -
Interest 158 80 406 387
Other, net 1,000 22 1,643 1,395
Total other income 1,327 102 2,479 1,782
INCOME BEFORE INTEREST CHARGES 25,050 20,619 54,713 51,860
INTEREST AND OTHER CHARGES:
Interest on long-term debt 4,482 4,593 13,509 13,920
Amortization of premium,
discount, and expense on debt 167 168 503 522
Other interest 429 347 1,064 1,095
Allowance for borrowed funds
used during construction 657 (131) 445 (299)
Total interest and
other charges 5,735 4,977 15,521 15,238
NET INCOME 19,315 15,642 39,192 36,622
Preferred dividend 275 274 823 823
EARNINGS APPLICABLE TO
COMMON STOCK $19,040 $15,368 $ 38,369 $ 35,799
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements. </FN>
</TABLE>
<PAGE> 9
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CASH FLOWS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $ 39,192 $ 36,622
Adjustments to reconcile net income to
net cash provided by operating activities:
Depreciation and amortization 30,087 29,125
Deferred income taxes and investment
tax credits, net (2,177) 905
Allowance for other funds used
during construction (430) -
Change in assets and liabilities:
Receivables, net (including
accrued unbilled revenues) 18,759 (2,381)
Inventories (2,117) (2,378)
Coal contract settlement - 12,928
Accounts payable (14,863) (17,929)
Accrued taxes (351) 5,647
Refunds from gas suppliers (301) (1,603)
Refunds to customers 5,702 (3,921)
Other assets and liabilities (4,651) (2,245)
Net cash provided by operating activities 68,850 54,770
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (39,950) (23,382)
Demand side management program expenditures (2,003) (2,826)
Change in nonutility property - 648
Other (285) (69)
Net cash used in investing activities (42,238) (25,629)
CASH FLOWS FROM FINANCING ACTIVITIES
First mortgage bonds - (8,000)
Dividends paid (23,236) (21,264)
Change in environmental improvement
funds held by trustee (158) -
Change in notes payable 967 2,500
Contribution of nonregulated
subsidiaries to parent - (12,145)
Other 390 248
Net cash used in financing activities (22,037) (38,661)
NET DECREASE IN CASH AND CASH EQUIVALENTS 4,575 (9,520)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 3,127 9,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 7,702 $ 314
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.</FN>
</TABLE>
<PAGE> 10
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant, at original cost:
Electric $1,069,580 $1,047,717
Gas 135,616 131,796
1,205,196 1,179,513
Less - accumulated provision
for depreciation 549,252 524,104
655,944 655,409
Construction work in progress 35,894 25,849
Net utility plant 691,838 681,258
Other Investments and Property:
Environmental improvement funds
held by Trustee 3,988 3,830
Nonutility property and other 1,552 1,552
Total other investments and property 5,540 5,382
Current Assets:
Cash and cash equivalents 7,702 3,127
Receivables, less allowance of $143
and $215, respectively 27,201 32,491
Accrued unbilled revenues 21,275 34,744
Inventories 33,307 31,190
Other current assets 7,827 15,304
Total current assets 97,312 116,856
Deferred Charges:
Unamortized premium on reacquired debt 5,303 5,663
Postretirement benefits obligation
other than pensions 6,110 7,818
Demand side management program 25,021 23,359
Other deferred charges 14,758 11,989
Total deferred charges 51,192 48,829
TOTAL $ 845,882 $ 852,325
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements. </FN>
</TABLE>
<PAGE> 11
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED BALANCE SHEETS
<CAPTION>
September 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 229,644 213,688
Total common shareholders' equity 307,902 291,946
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 924 924
Long-Term Debt, net of current maturities 238,990 251,355
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 566,406 562,815
Current Liabilities:
Current Portion of Adjustable Rate Bonds
Subject to Tender 31,500 31,500
Current Maturities of Long-Term Debt,
Interim Financing:
Maturing long-term debt 12,695 295
Notes payable 15,686 32,400
Notes payable to associated company 17,677 -
Total current maturities of long-term
debt and interim financing 46,058 32,695
Other Current Liabilities:
Accounts payable 12,475 27,338
Dividends payable 123 123
Accrued taxes 8,362 8,713
Accrued interest 7,661 4,572
Refunds to customers 8,123 2,722
Other accrued liabilities 5,115 29,650
Total other current liabilities 41,859 73,118
Total current liabilities 119,417 137,313
Deferred Credits and Other:
Accumulated deferred income taxes 116,883 116,373
Accumulated deferred investment tax
credits, being amortized over
lives of property 20,632 21,706
Regulatory income tax liability - 1,613
Postretirement benefits other
than pensions 13,327 10,084
Other 9,217 2,421
Total deferred credits and other 160,059 152,197
TOTAL $845,882 $852,325
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements. </FN>
</TABLE>
<PAGE> 12
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF CAPITALIZATION
September 30,December 31,
1997 1996
(in thousands)
<S> <C> <C>
COMMON SHAREHOLDERS' EQUITY
Common Stock, without par value, authorized
50,000,000 shares, issued 15,754,826 shares $ 78,258 $ 78,258
Retained Earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 229,644 213,688
Total common shareholders' equity 307,902 291,946
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 9,237 shares,
redeemable at $100 per share 924 924
LONG-TERM DEBT, NET OF CURRENT MATURITIES
First mortgage bonds 238,714 251,114
Notes payable 1,000 1,000
Unamortized debt premium and discount, net (724) (759)
Total long-term debt 238,990 251,355
CURRENT PORTION OF ADJUSTABLE RATE POLLUTION
CONTROL BONDS SUBJECT TO TENDER, DUE:
2015, Series B, presently 4.05% 31,500 31,500
TOTAL CAPITALIZATION, including bonds
subject to tender $597,906 $594,315
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.</FN>
</TABLE>
<PAGE> 13
<TABLE>
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
<CAPTION>
Nine Months Ended
September 30,
1997 1996
(in thousands)
<S> <C> <C>
Balance Beginning of Period $213,688 $236,617
Net Income 39,192 36,622
252,880 273,239
Dividend to Parent of Nonregulated
Subsidiaries - 37,418
Preferred Stock Dividends 823 823
Common Stock Dividends 22,413 20,441
23,236 58,682
BALANCE END OF PERIOD (See Consolidated
Statements of Capitalization for
restriction) $229,644 $214,557
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements. </FN>
</TABLE>
<PAGE> 14
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization
SIGCORP, Inc. (SIGCORP) is a holding company
incorporated October 19, 1994 under the laws of the state of
Indiana. SIGCORP has nine wholly-owned subsidiaries:
Southern Indiana Gas and Electric Company (SIGECO), a gas
and electric utility, and eight nonregulated subsidiaries.
Effective January 1, 1996, the new holding company, SIGCORP,
Inc. (SIGCORP), became the parent of SIGECO which accounts
for over 90% of SIGCORP's net income, and four of SIGECO's
former wholly-owned nonregulated subsidiaries: Energy
Systems Group, Inc., Southern Indiana Minerals, Inc.,
Southern Indiana Properties, Inc. and ComSource, Inc.
Because of the significance of SIGECO, the operating results
of all nonregulated subsidiaries are included in Other
Income in the consolidated financial statements of SIGCORP.
All of the shares of SIGECO's common stock were exchanged on
a one-for-one basis for shares of SIGCORP, while all of
SIGECO's debt securities and all of its outstanding shares
of preferred stock remain securities of SIGECO and are
unaffected.
2. General
It is suggested that these consolidated financial
statements be read in conjunction with the consolidated
financial statements and the notes thereto included in
SIGCORP's 1996 Annual Report to Shareholders.
The consolidated statements include the accounts of
SIGCORP, Inc. and its wholly-owned subsidiaries, Southern
Indiana Gas and Electric Company (SIGECO), Southern Indiana
Properties, Inc. (SIPI), Energy Systems Group, Inc. (ESGI),
Southern Indiana Minerals, Inc. (SIMI), ComSource, Inc.
(ComSource), SIGCORP Energy Services, Inc. (Energy), SIGCORP
Capital, Inc. (Capital), SIGCORP Communications, Inc.
(Communications), and SIGCORP Fuels, Inc. (Fuels) and
include all adjustments which are, in the opinion of
management, necessary for a fair statement of the financial
position and results of operations. Because of seasonal and
other factors, the earnings for the nine months ending
September 30, 1997 should not be taken as an indication of
the results for all or any part of the balance of 1997.
3. Cash Flow Information
For the purposes of the Consolidated Balance Sheets and
Consolidated Statements of Cash Flows, SIGCORP considers all
highly liquid debt instruments purchased with an original
maturity of three months or less to be cash equivalents.
SIGCORP, for the nine months ended September 30, 1997
and 1996 paid interest (net of amounts capitalized) of
$12,127,000 and $12,185,000, respectively, and income taxes
of $19,791,000 and $8,736,000, respectively. Additionally,
SIGCORP is involved in several partnerships which are
partially financed by partnership obligations amounting to
$4,192,000 and $6,839,000 at September 30, 1997 and
December 31, 1996, respectively.
SIGECO, for the nine months ended September 30, 1997 and
1996 paid interest (net of amounts capitalized) of
$11,040,000 and $11,783,000, respectively, and income taxes
of $20,427,000 and $12,021,000 respectively.
The following decreases for 1996 in SIGECO's assets and
liabilities were caused by dividending the nonregulated
subsidiaries to SIGCORP and are noncash in nature.
Deferred income taxes (29,783,000)
Investments in Leveraged Leases (35,609,000)
Investments in Partnerships (25,307,000)
Partnership obligations (9,625,000)
Other, net (3,771,000)
<PAGE> 15
4. Long-Term Debt
On May 1, 1997, the interest rate on $31,500,000 of
Adjustable Rate Pollution Control bonds was changed from
4.0% to 4.05%. The new interest rate, 4.05%, will be fixed
through April 30, 1998. For financial statement
presentation the $31,500,000 of Adjustable Rate Pollution
Control bonds are shown as a current liability.
5. Common Stock
On January 21, 1997, the Board of Directors of SIGCORP
approved a split of SIGCORP's issued shares of common stock
without par value on a three-for two basis. The stock
split, effective March 27, 1997, increased SIGCORP's
outstanding shares from 15,754,826 to 23,630,568. Average
common shares outstanding, earnings per share of common
stock and dividends paid per share for all periods presented
reflect the stock split.
<PAGE> 16
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF RESULTS OF OPERATIONS AND FINANCIAL CONDITION
The holding company, SIGCORP, Inc. (SIGCORP) is the
parent of Southern Indiana Gas and Electric Company
(SIGECO), a regulated gas and electric utility which
accounts for over 90% of SIGCORP's net income, and eight
wholly owned nonregulated subsidiaries. Because of the
significance of SIGECO, the operating results of SIGCORP's
nonregulated subsidiaries are included in Other Income in
the consolidated financial statements of SIGCORP.
Consolidated operating revenues and operating expenses of
SIGCORP consist entirely of the operating revenues and
operating expenses of SIGECO; material changes in the
consolidated financial condition and operating results of
SIGCORP are due primarily to the operations of SIGECO. The
following discussion and analysis of results of operations
and financial condition is for SIGCORP unless otherwise
stated.
Earnings per share were $.84 for the recent three month
period compared to earnings of $.67 per share for the third
quarter of 1996. For the nine month period ending September
30, 1997, earnings per share were $1.66 versus $1.61 per
share for the same period in 1996. Per share earnings for
all periods reflect SIGCORP's three-for-two split on shares
of its outstanding common stock effective March 27, 1997.
(See Note 5 of the Notes to Consolidated Financial
Statements for further discussion.)
Operating Revenues
Electric revenues were $4.3 million (5%) higher during
the third quarter of 1997 compared to the same period a year
ago due primarily to increased electric sales and a more
favorable sales mix. These revenue increases were partially
offset by lower per unit fuel costs reflected in revenues.
Changes in the cost of fuel are passed on to customers
through commission approved fuel cost adjustments. Although
cooling degree days in SIGECO's service area were 15% below
normal, which was comparable to the third quarter of 1996,
total electric sales were up 19%. The sales increase was
primarily attributed to a substantial increase in wholesale
sales, combined with 2% and 16% greater sales to residential
and commercial customers, respectively. Industrial sales
declined 3% during the current quarter. Wholesale electric
sales, which typically have lower per unit margins than
retail sales, increased 116% during the current quarter due
to a substantial increase in sales to other utilities and
power marketers reflecting SIGECO's competitive rates and
continuing efforts to aggressively sell its electric energy
in new markets.
For the nine month period ending September 30, 1997,
electric revenues declined less than 1% to $211.3 million.
Lower unit fuel costs reflected in revenues were offset by
the effect of additional revenues, primarily from greater
sales to wholesale customers. Total retail sales were
unchanged from the nine month period in 1996 as a 7%
increase in commercial sales from the continued strong
economy in SIGECO's service territory offset a 4% decrease
in residential sales resulting from the much milder weather
during the second and third quarters of 1997. A 63%
increase in wholesale electric sales resulting from greater
sales to other utilities and power marketers throughout the
current nine month period resulted in a 10% increase in
total electric sales.
<PAGE> 17
The changes in electric revenue are shown below:
<TABLE>
<CAPTION>
Revenue Increase (Decrease) From
Corresponding Period in 1996
Three Months Nine Months
Ended 9-30-97 Ended 9-30-97
(in thousands)
<S> <C> <C>
Fuel and purchased power recovery $(4,0000) $(11,300)
Change in retail sales volume 2,200 (400)
Sales to wholesale customers 6,500 9,800
Other (420) 610
$ 4,280 $ (1,290)
Increase (decrease) in retail sales (Mwh) 42,058 (8,370)
Increase in wholesale sales (Mwh) 259,697 466,488
</TABLE>
Fewer sales to all customer classes was the chief cause
of a $2 million (18%) decrease in gas revenues during the
quarter ended September 30, 1997. Sales to commercial and
industrial customers declined 39% and 25%, respectively,
when fewer SIGECO transportation customers purchased their
gas supplies from SIGECO than during the third quarter of
1996. A 561,000 Dth adjustment of sales in all customer
classes during the third quarter of 1997 also contributed to
lower commercial and industrial gas sales and to a 75%
decrease in residential sales. The adjustment was necessary
to correct overstated volumes of gas delivered but unbilled
during the 12-month period ended September 30, 1997. Gas
revenues and gas operating income for the three month and
nine month periods in 1997 were not detrimentally affected
by this adjustment due to a concurrent correction of
unbilled sales pricing methodology.
During the nine month period ending September 30, 1997,
gas revenues were $12.2 million (18%) lower versus the same
period in 1996 primarily due to fewer gas sales to all
customer classes and to the recovery of lower per unit gas
costs during the second quarter of 1997. Milder winter
temperatures during the first quarter of 1997 and fewer
sales to SIGECO transportation customers led to declines in
sales to residential, commercial and industrial customers of
20%, 29% and 65%, respectively, during the nine months.
Conversely, increases in base retail gas rates effective
July 1996 contributed approximately $5 million to 1997
revenues. The change in sales mix and increased gas
transportation revenues also partially offset the decline in
revenues related to fewer sales and lower gas costs.
<PAGE> 18
The changes in gas revenues are shown below:
<TABLE>
<CAPTION>
Revenue Increase (Decrease) From
Corresponding Period in 1996
Three Months Nine Months
Ended 9-30-97 Ended 9-30-97
(in thousands)
<S> <C> <C>
Change in sales volume excluding
correction $(3,600) $(18,100)
Correction of unbilled sales and
pricing methodology 900 900
Cost of gas recovery 300 (3,900)
Effect of rate adjustments in sales
to retail customers - 5,000
Change in sales mix - 2,200
Other 383 (2,178)
</TABLE>
Operating Expenses
Due to lower per unit fuel costs, total costs for fuel
for electric generation and purchased electric energy
increased only $1.9 million (8%) and decreased $4 million
(6%), respectively, during the three month and nine month
periods ending September 30, 1997, despite significantly
increased electric sales in both periods. The decline in
unit fuel costs reflects the completion of SIGECO's
reformation of its long-term coal contracts in late 1996.
Cost of gas sold declined $1.6 million (37%) and $12.5
million (27%), respectively, during the third quarter and
first nine months of 1997 reflecting substantially lower
average unit costs of gas delivered during the second
quarter, and fewer sales in both the third quarter and nine
month periods. Other operation and maintenance expenses
declined $2.9 million during the third quarter of 1997 due
primarily to lower electric generating plant operation and
maintenance expenditures, the absence of maintenance repairs
to transmission and distribution facilities caused by a
third quarter 1996 wind storm, and decreases in various
administrative and general expenses. For the nine month
period ending September 30, 1997, total other operation and
maintenance expenditures were comparable to the same period
in 1996. Greater production operation expenses related to
increased generation, higher customer assistance program
costs and expenses related to efforts to prepare for
competition were offset by decreased maintenance required on
transmission and distribution facilities.
Property and other taxes decreased $.8 million and $1.4
million, respectively, for the three month and nine month
periods in 1997 chiefly due to a reduction in property tax
expense related to the refund of contested property taxes.
<PAGE> 19
Other Income and Interest Charges
Other income during the three month period ending
September 30, 1997 increased due to improved earnings from
several of SIGCORP's nine nonutility subsidiaries and to
higher interest income. Other income for the current nine
month period declined slightly, reflecting lower earnings
from one of SIGCORP's nonutility subsidiaries, Energy
Systems Group, Inc. (ESGI) resulting from an absence of new
performance contracts during the second quarter of 1997 and
a first quarter $1 million decrease in sales to another
utility of SIGECO's 1997 allotment of "bonus" sulfur dioxide
emission allowances (also called "extension allowances").
The decrease in allowances sales was anticipated under an
agreement with the utility to sell to it essentially all of
SIGECO's allotment of "bonus" allowances for the five year
period beginning 1995.
Earnings
Earnings per share for the third quarter of 1997 rose
$.17 (25%) compared to the same period in 1996 due primarily
to increased electric sales, lower nonfuel operating
expenses, lower property and other taxes, and improved
nonutility income. The five cent (3%) per share increase in
earnings for the nine months ending September 30, 1997
reflects substantially increased wholesale electric sales,
higher per unit gas margins resulting from SIGECO's
adjustment to base gas rates, increased gas transportation
revenues and lower property tax expense. These increases
were substantially offset by fewer gas sales resulting from
milder winter temperatures and fewer sales to transportation
customers, and lower nonutility income.
Environmental Matters
On July 18, 1997, the USEPA issued its final rule which
revised the national ambient air quality standard for ozone
by setting a lower concentration limit and changing
measurement methods. It is anticipated that the number of
ozone nonattainment counties in the US will increase
significantly as determined by the concentration of nitrogen
oxide (NOx) and particulate matter, key ingredients of
ozone. The USEPA has stated that it will target utility
coal-fired boilers for the majority of the reductions
required, especially NOx emissions, because they believe
this approach is the most cost effective. Northeastern
states have claimed that ozone transport from Midwestern
states (including Indiana) is the primary reason for their
ozone concentration problems. Although this premise is
challenged by others based on various air quality modeling
studies including studies commissioned by the USEPA, the
USEPA intends to incorporate a regional control strategy to
reduce ozone transport. In October 1997, the USEPA provided
each state a proposed NOx budget of allowed emissions which
targets utility coal-fired boilers. Under that budget,
utility NOx emissions are reduced to a rate of 0.15 lb/mmBtu
from levels already imposed by Phase I and Phase II of the
1990 Clean Air Act Amendments (CAAA). There remains much
uncertainty as to the extent that SIGECO would be affected
by this ruling. However, if SIGECO is required to reduce
its systemwide NOx emission levels to 0.15 lb/mmBtu, NOx
control equipment expenditures estimated at $70 to $100
million would be required. This is in addition to
expenditures previously made to bring SIGECO in compliance
with the CAAA requirements. Under the current USEPA
implementation schedule, the emissions reductions and
required control equipment must be implemented and in place
by 2004.
Liquidity and Capital Resources
SIGCORP's demand for capital is primarily related to
SIGECO's construction of utility plant and equipment
necessary to meet customers' electric and gas energy needs,
as well as environmental compliance requirements, and
<PAGE> 20
expenditures for SIGECO's demand side management (DSM)
programs. Construction expenditures (excluding allowance
for other funds used during construction) and DSM program
expenditures incurred during the quarter and nine months
ended September 30, 1997 totaled $20.8 million and $42
million, respectively. The third quarter expenditures were
46% funded and the expenditures for nine months were fully
funded with internally generated cash. Cash provided from
operations increased $12.8 million during the current nine
month period compared to the same period in 1996. Cash used
in investing and financing activities during 1997 increased
$9.5 million compared to a year ago. No long-term financing
activity occurred during the 1997 period.
At this time, SIGCORP estimates that SIGECO's
construction expenditures for the five year period 1997-2001
will total approximately $260 million, including
approximately $25 million for the design and implementation
of several comprehensive information systems which are
necessary to fulfill expanding customer service needs and to
better manage SIGECO's resources, and approximately $9
million to develop and implement DSM programs. SIGCORP
expects the majority of the construction requirements and an
estimated $70 million in debt security and other long-term
obligation redemptions to be provided by internally
generated funds. External financing requirements of $60-70
million are anticipated and will be used primarily to redeem
long-term debt. These estimates do not reflect construction
expenditures that may be required to comply with new USEPA
air quality standards discussed under "Environmental
Matters".
<PAGE> 21
PART TWO - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of
Security Holders
NONE
Item 5. Other Information
NONE
Item 6. Exhibits and Reports on Form 8-K
NONE
<PAGE> 22
SIGNATURES
Pursuant to the requirements of the Securities Exchange
Act of 1934, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
SIGCORP, Inc
(Registrant)
/s/ A. E. Goebel
A. E. Goebel
Secretary and Treasurer
Date: November 14, 1997
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
/s/ S. M. Kerney
S. M. Kerney
Controller
Date: November 14, 1997
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<NAME> SIGCORP INC
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