UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
X QUARTERLY REPORT PURSUANT TO SECTION 13 or 15(d)
OF THE SECURITIES EXCHANGE ACT of 1934
For the quarterly period ended June 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:
SIGCORP, Inc.: Common stock, no par value,
23,630,568 shares
outstanding at June 30, 1997
Southern Indiana Gas and
Electric Company: Common stock, no par value,
15,754,826 shares
outstanding
and held by SIGCORP, Inc. at
June 30, 1997
<TABLE>
<CAPTION>
SIGCORP, Inc.
AND
SOUTHERN INDIANA GAS AND ELECTRIC COMPANY
FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1997
TABLE OF CONTENTS
<S> <C> <C> <C>
Page No.
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 20
Item 5: Other information 20
Item 6: Exhibits and Reports on Form 8-K 20
Signatures 21
</TABLE>
<PAGE> 2
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Three Months Six Months
Ended Ended
June 30, June 30,
1997 1996 1997 1996
<S> <C> <C> <C> <C>
(in thousands except per share
data)
OPERATING REVENUES:
Electric $62,222 $65,803 $127,099 $132,668
Gas 13,177 17,623 47,034 57,234
Total operating revenues 75,399 83,426 174,133 189,902
OPERATING EXPENSES:
Fuel for electric generation 15,028 17,885 29,751 36,663
Purchased electric energy 3,111 2,771 5,039 4,031
Cost of gas sold 6,270 11,392 31,272 42,163
Other 14,796 12,594 28,046 25,929
Maintenance 7,719 7,720 13,943 13,908
Depreciation and amortization 10,029 9,708 20,058 19,415
Federal and state income taxes 3,819 4,644 11,035 11,159
Property and other taxes 3,166 3,481 6,478 7,072
Total operating expenses 63,938 70,195 145,622 160,340
OPERATING INCOME 11,461 13,231 28,511 29,562
OTHER INCOME:
Allowance for other funds
used during construction 160 2 261 (2)
Interest 659 427 1,298 728
Other, net (349) 649 511 2,893
Total other income 470 1,078 2,070 3,619
INCOME BEFORE INTEREST
AND OTHER CHARGES 11,931 14,309 30,581 33,181
INTEREST AND OTHER CHARGES:
Interest on long-term debt 4,515 4,648 9,027 9,327
Amortization of premium,
discount, and expense on debt 168 186 336 354
Other interest 823 468 1,505 1,010
Allowance for borrowed funds
used during construction (112) (104) (212) (167)
Preferred dividend requirements
of subsidiary 274 274 548 548
Total interest and
other charges 5,668 5,472 11,204 11,072
NET INCOME $ 6,263 $ 8,837 $ 19,377 $ 22,109
AVERAGE COMMON SHARES OUTSTANDING 23,631 23,631 23,631 23,631
EARNINGS PER SHARE OF COMMON STOCK $0.27 $0.37 $0.82 $0.94
<FN>
The accompanying Notes to Consolidated Financial Statements are an
integral part of these statements.
</FN>
</TABLE>
<PAGE> 3
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $19,377 $22,109
Adjustments to reconcile net income
to net cash provided by operating activities:
Depreciation and amortization 20,058 19,415
Preferred dividend requirements
of subsidiary 548 548
Deferred income taxes and investment
tax credits, net (1,279) 650
Allowance for other funds used
during construction (261) 2
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) 20,877 4,171
Inventories 2,962 5,365
Coal contract settlement - 7,792
Accounts payable (10,051) (14,411)
Accrued taxes (2,900) 2,281
Refunds from gas suppliers (351) (1,690)
Refunds to customers 2,848 (4,061)
Other assets and liabilities 1,130 (1,205)
Net cash provided by operating activities 52,958 40,966
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (19,845) (14,332)
Demand side management program expenditures (1,270) (1,835)
Purchases of investments (323) -
Sales of investments 160 600
Investments in partnerships 648 545
Change in nonutility property (1,891) (9,816)
Other 187 1,168
Net cash used in investing activities (22,334) (23,670)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (15,491) (14,177)
Change in environmental improvement
funds held by trustee (139) (104)
Payments on partnership obligations (2,277) (2,787)
Change in notes payable (12,673) (3,318)
Other 1,216 264
Net cash used in financing activities (29,364) (20,122)
NET DECREASE IN CASH AND CASH EQUIVALENTS 1,260 (2,826)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 9,192 9,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD $10,452 $ 7,008
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 4
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
Utility Plant, at original cost:
Electric $1,059,530 $1,047,717
Gas 133,828 131,796
1,193,358 1,179,513
Less - accumulated provision
for depreciation 540,266 524,104
653,092 655,409
Construction work in progress 28,402 25,849
Net utility plant 681,494 681,258
Other Investments and Property:
Investments in leveraged leases 42,600 42,887
Investments in partnerships 23,238 23,983
Environmental improvement funds
held by trustee 3,969 3,830
Nonutility property and other 24,634 22,743
Total other investments and property 94,441 93,443
Current Assets:
Cash and cash equivalents 10,452 9,191
Temporary investments, at market 737 565
Receivables, less allowance of $530
and $215, respectively 31,627 36,469
Accrued unbilled revenues 18,709 34,744
Inventories 28,279 31,241
Other current assets 9,400 16,310
Total current assets 99,204 128,520
Deferred Charges:
Unamortized premium on reacquired debt 5,423 5,663
Postretirement benefits other than pensions 6,680 7,819
Demand side management program 24,328 23,359
Other deferred charges 13,454 12,591
Total deferred charges 49,885 49,432
TOTAL $ 925,024 $ 952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 5
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 258,014 252,626
Total common shareholders' equity 336,272 330,884
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 238,979 261,629
Long-Term Partnership Obligations,
net of current maturities 4,191 4,563
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 598,956 616,590
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 37,000 38,750
Partnership obligations 371 2,276
Total current maturities of
long-term debt, interim financing
and long-term partnership obligations 50,066 41,685
Other Current Liabilities:
Accounts payable 23,549 33,600
Dividends payable 103 123
Accrued taxes 4,823 7,723
Accrued interest 5,036 4,585
Refunds to customers 5,220 2,722
Other accrued liabilities 16,558 31,138
Total other current liabilities 55,289 79,891
Total current liabilities 136,855 153,076
Deferred Credits and Other:
Accumulated deferred income taxes 147,610 147,070
Accumulated deferred investment tax
credits, being amortized over
lives of property 20,990 21,706
Regulatory income tax liability 511 1,614
Postretirement benefits other than pensions 12,262 10,084
Other 7,840 2,513
Total deferred credits and other 189,213 182,987
TOTAL $925,024 $952,653
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 6
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
June 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 shares $ 78,258 $ 78,258
Retained Earnings, $2,194,121 restricted as
to payment of cash dividends on common stock 258,014 252,626
336,272 330,884
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 238,715 251,115
Notes payable 1,000 11,273
Unamortized debt premium and discount, net (736) (759)
Total long-term debt 238,979 261,629
LONG-TERM PARTNERSHIP OBLIGATIONS,
NET OF CURRENT MATURITIES 4,191 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 $630,456 $648,090
<FN>
The accompanying Notes to Consolidated Financial Statements are
an integral part of these statements.
</FN>
</TABLE>
<PAGE> 7
<TABLE>
SIGCORP, Inc.
<CAPTION>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
Balance Beginning of Period $252,626 $236,617
Net Income 19,377 22,109
272,003 258,726
Common Stock Dividends ($0.590 per share
in 1997 and $0.576 per share in 1996) 13,989 13,627
BALANCE END OF PERIOD (See Consolidated
Statements of Capitalization for restriction) $258,014 $245,099
<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
<CAPTION>
CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Six Months Ended
June 30, June 30,
1997 1996 1997 1996
(in thousands except per share
amounts)
<S> <C> <C> <C> <C>
OPERATING REVENUES:
Electric $62,222 $65,803 $127,099 $132,668
Gas 13,177 17,623 47,033 57,234
Total operating revenues 75,399 83,426 174,133 189,902
OPERATING EXPENSES:
Fuel for electric generation 15,028 17,885 29,751 36,663
Purchased electric energy 3,110 2,771 5,039 4,031
Cost of gas sold 6,270 11,392 31,272 42,163
Other operation expenses 14,797 12,569 28,046 25,905
Maintenance 7,719 7,720 13,943 13,908
Depreciation and amortization 10,029 9,708 20,058 19,415
Federal and state income taxes 3,819 4,644 11,035 11,159
Property and other taxes 3,166 3,481 6,478 7,072
Total operating expenses 63,938 70,170 145,622 160,316
OPERATING INCOME 11,461 13,256 28,511 29,586
OTHER INCOME:
Allowance for other funds used
during construction 160 2 261 (2)
Interest 115 196 248 307
Other, net (23) (82) 643 1,351
Total other income 252 116 1,152 1,656
INCOME BEFORE INTEREST
AND OTHER CHARGES 11,713 13,372 29,663 31,242
INTEREST AND OTHER CHARGES
Interest on long-term debt 4,515 4,648 9,027 9,327
Amortization of premium, discount,
and expense on debt 168 186 336 354
Other interest 251 337 635 748
Allowance for borrowed funds
used during construction (112) (104) (212) (167)
Total interest and other charges 4,822 5,067 9,786 10,262
NET INCOME 6,891 8,305 19,877 20,980
Preferred dividend 274 274 548 548
EARNINGS APPLICABLE TO COMMON STOCK $ 6,617 $ 8,031 $ 19,329 $ 20,432
<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
<CAPTION>
CONSOLIDATED STATEMENTS OF CASH FLOWS
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES
Net Income $19,877 $20,980
Adjustments to reconcile net income to net
cash provided by operating activities:
Depreciation and amortization 20,058 19,415
Deferred income taxes and investment
tax credits, net (1,478) 577
Allowance for other funds used
during construction (261) 2
Change in assets and liabilities:
Receivables, net (including accrued
unbilled revenues) 20,237 4,923
Inventories 2,981 5,384
Coal contract settlement - 7,792
Accounts payable (10,062) (16,027)
Accrued taxes (3,169) 2,303
Refunds from gas suppliers (351) (1,690)
Refunds to customers 2,848 (4,061)
Other assets and liabilities 2,752 (1,000)
Net cash provided by operating activities 53,432 38,598
CASH FLOWS FROM INVESTING ACTIVITIES
Construction expenditures (net of allowance for
other funds used during construction) (19,845) (14,332)
Demand side management program expenditures (1,270) (1,835)
Change in nonutility property 1 1
Other (188) 51
Net cash used in investing activities (21,302) (16,115)
CASH FLOWS FROM FINANCING ACTIVITIES
Dividends paid (15,491) (14,177)
Change in environmental improvement
funds held by trustee (139) (104)
Change in notes payable (16,368) (6,500)
Contribution of nonregulated
subsidiaries to parent - (12,145)
Other 263 270
Net cash used in financing activities (31,735) (32,656)
NET INCREASE (DECREASE) IN CASH
AND CASH EQUIVALENTS 395 (10,173)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 3,127 9,834
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 3,522 $ (339)
<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 COMPANY
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
ASSETS
Utility plant, at original cost:
Electric $1,059,530 $1,047,717
Gas 133,828 131,796
1,193,358 1,179,513
Less accumulated provision for depreciation 540,266 524,104
653,092 655,409
Construction work in progress 28,402 25,849
Net utility plant 681,494 681,258
Other Investments and Property:
Environmental improvement funds
held by trustee 3,969 3,830
Nonutility property and other 1,553 1,552
Total other investments and property 5,522 5,382
Current Assets:
Cash and cash equivalents 3,522 3,127
Receivables, less allowance of $530
and $215, respectively 26,667 32,491
Accrued unbilled revenues 18,709 34,744
Inventories 28,209 31,190
Other current assets 7,865 15,304
Total current assets 84,972 116,856
Deferred Charges:
Unamortized premium on reacquired debt 5,423 5,663
Postretirement benefits other than pensions 6,680 7,818
Demand side management program 24,328 23,359
Other deferred charges 12,516 11,989
Total deferred charges 48,947 48,829
TOTAL $ 820,935 $ 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
<CAPTION>
CONSOLIDATED BALANCE SHEETS
June 30, December 31,
1997 1996
(in thousands)
<S> <C> <C>
SHAREHOLDERS' EQUITY AND LIABILITIES
CAPITALIZATION:
Common Stock $ 78,258 $ 78,258
Retained Earnings 218,075 213,688
Total common shareholders' equity 296,333 291,946
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 238,979 251,355
Total capitalization, excluding bonds
subject to tender (see Consolidated
Statements of Capitalization) 554,826 562,815
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 2,000 32,400
Notes payable to associated company 14,032 -
Total current maturities of long-term
debt and interim financing 28,727 32,695
Other Current Liabilities:
Accounts payable 17,276 27,338
Dividends payable 103 123
Accrued taxes 5,544 8,713
Accrued interest 4,565 4,572
Refunds to customers 5,220 2,722
Other accrued liabilities 14,858 29,650
Total other current liabilities 47,566 73,118
Total current liabilities 107,793 137,313
Deferred Credits and Other:
Accumulated deferred income taxes 116,713 116,373
Accumulated deferred investment tax credits,
being amortized over lives of property 20,990 21,706
Regulatory income tax liability 511 1,613
Postretirement benefits other than pensions 12,262 10,084
Other 7,840 2,421
Total deferred credits and other 158,316 152,197
TOTAL $820,935 $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
<CAPTION>
CONSOLIDATED STATEMENTS OF CAPITALIZATION
June 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 218,075 213,688
Total common shareholders' equity 296,333 291,946
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 238,715 251,114
Notes payable 1,000 1,000
Unamortized debt premium and discount, net (736) (759)
Total long-term debt 238,979 251,355
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 $586,326 $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
<CAPTION>
CONSOLIDATED STATEMENTS OF RETAINED EARNINGS
Six Months Ended
June 30,
1997 1996
(in thousands)
<S> <C> <C>
Balance Beginning of Period $213,688 $236,617
Net Income 19,877 20,980
233,565 257,597
Dividend to Parent of Nonregulated Subsidiaries - 37,418
Preferred Stock Dividends 548 548
Common Stock Dividends 14,942 13,629
15,490 51,595
BALANCE END OF PERIOD (See Consolidated
Statements of Capitalization for restriction) $218,075 $206,002
<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 remained 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) and
SIGCORP Capital, Inc. (Capital) 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 six months ending June 30, 1997 should not
be taken as an indication 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 six months ended June 30, 1997 and 1996
paid interest (net of amounts capitalized) of $9,870,000 and
$10,191,000, respectively, and income taxes of $10,148,000
and $6,834,000, respectively. Additionally, SIGCORP is
involved in several partnerships which are partially
financed by partnership obligations amounting to $4,562,000
and $6,839,000 at June 30, 1997 and December 31, 1996,
respectively.
SIGECO, for the six months ended June 30, 1997 and 1996
paid interest (net of amounts capitalized of $9,458,000 and
$9,943,000, respectively, and income taxes of $10,145,000
and $9,295,000, 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)
Investments in Leveraged Leases (35,609)
Investments in Partnerships (25,307)
Partnership obligations (9,625)
Other, net (3,771)
<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 $.27 for the recent three month
period compared to earnings of $.37 per share for the second
quarter of 1996. For the six month period ending June 30,
1997, earnings per share were $.82 versus $.94 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 $3.6 million (5%) lower during
the second quarter of 1997 compared to the same period a
year ago due primarily to lower per unit fuel costs
reflected in revenues and a less favorable sales mix.
Changes in the cost of fuel are passed on to customers
through commission approved fuel cost adjustments. A
substantial increase in wholesale sales led to a 6% increase
in total electric sales over sales during the three month
period ended June 30, 1996, while sales to residential and
commercial customers declined 17% and 4%, respectively, due
to much cooler than normal weather. During the current
quarter, cooling degree days in SIGECO's service area were
40% lower than the second quarter of 1996 and 36% below
normal. Industrial sales rose 6% on increased manufacturing
activity. Wholesale electric sales, which typically have
lower per unit margins than retail sales, increased 33%
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.
Higher per unit wholesale sales margins partially offset the
decrease in revenues related to lower unit fuel costs and
changes in the retail sales mix.
For the six month period ending June 30, 1997, electric
revenues declined $5.6 million (4%) due to lower unit fuel
costs reflected in revenues during the first and second
quarters and a 9% decline in residential sales due to
significantly fewer sales during the second quarter of 1997.
Other retail sales were relatively unchanged for the six
month period compared to the same period in 1996. A 30%
increase in wholesale electric sales resulting from greater
sales to other utilities and power marketers throughout the
current six month period resulted in 5% increase in total
electric sales. The increased sales to wholesale customers
and higher per unit margins on those sales partially offset
the decrease in revenues related to the lower fuel costs and
less favorable fuel mix.
<PAGE> 17
The changes in electric revenue are shown below:
<TABLE>
<CAPTION>
Revenue Increase (Decrease) From
Corresponding Period in 1996
Three Months Six Months
Ended 6-30-97 Ended 6-30-97
(in thousands)
<S> <C> <C>
Fuel and purchased power recovery $ (2,800) $ 6,700)
Change in sales volume 700 1,200
Other (sales mix, etc.) (1,481) (69)
$ (3,581) $ (5,569)
(Decrease) in retail sales (Mwh) (25,041) (44,073)
Increase in wholesale sales (Mwh) 116,830 200,436
</TABLE>
Recovery in revenues of substantially lower per unit
gas costs and fewer sales to industrial customers were the
chief causes of a $4.4 million (25%) decrease in gas
revenues during the quarter ended June 30, 1997. Changes in
the cost of natural gas are passed on to customers through
commission approved gas cost adjustments. Sales to
industrial customers were 68% lower when fewer SIGECO
transportation customers purchased their gas supplies from
SIGECO than during the second quarter of 1996. An increase
in base retail gas rates effective July 1996 and increased
gas transportation revenues, due to more of these customers
purchasing their own gas, partially offset the decline in
revenues related to fewer sales and recovery of lower gas
costs.
During the six month period ending June 30, 1997, gas
revenues were $10.2 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 led to
declines in sales to residential and commercial customers of
14.2% and 19.2%, respectively, during the six months. Sales
to industrial customers decreased 67% and commercial sales
were also affected when fewer SIGECO transportation
customers purchased their gas supplies from SIGECO than
during the first six months of 1996. Conversely, increases
in base retail gas rates effective July 1996 contributed
approximately $5.0 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.
The changes in gas revenues are shown below:
<TABLE>
<CAPTION>
Revenue Increase (Decrease) From
Corresponding Period in 1996
Three Months Six Months
Ended 6-30-97 Ended 6-30-97
(in thousands)
<S> <C> <C>
Change in sales volume $(3,200) $(14,500)
Cost of gas recovery (4,600) (4,200)
Effect of rate adjustments in sales
to retail customers 1,800 5,000
Change in sales mix 500 2,200
Other 1,054 1,300
$(4,446) $(10,200)
Increase (decrease) in total sales and
transportation throughput (Mdth) 317 (1,549)
</TABLE>
<PAGE> 18
Operating Expenses
Due to lower per unit fuel costs, total costs for fuel
for electric generation and purchased electric energy
decreased $2.5 million (12%) and $5.9 million (15%),
respectively, during the three month and six month periods
ending June 30, 1997, despite increased electric sales in
both periods. The decline in unit fuel costs reflect the
completion of SIGECO's reformation of its long-term coal
contracts in late 1996. Cost of gas sold declined $5.1
million (45%) and $10.9 million (26%) during the second
quarter and first six months of 1997, respectively,
reflecting substantially lower average unit costs of gas
delivered during the second quarter, and fewer sales in both
the second quarter and six month periods. Other operation
and maintenance expenses rose $2.2 million for both
reporting periods in 1997 due primarily to increased
generation of electricity, higher employee benefit and
customer assistance program costs, and expenses related to
efforts to prepare for competition in the industry.
Other Income and Interest Charges
Other income during the three month period ending June
30, 1997 declined primarily due to lower earnings from one
of SIGCORP's eight nonutility subsidiaries, Energy Systems
Group, Inc. (ESGI), resulting from an absence of new
performance contracts. The $1.5 million decrease in other
income for the current six month period reflects the lower
earnings of ESGI during the second quarter 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.
Interest and other charges were relatively unchanged
during both reporting periods in 1997 compared to the same
periods in 1996.
Earnings
Earnings per share for the second quarter of 1997
declined $.10 (27%) compared to the same period in 1996 due
to fewer electric sales to weather sensitive customers,
higher nonfuel operating expenses and lower nonutility
income. Increased sales of electricity to wholesale
customers, higher per unit gas margins resulting primarily
from SIGECO's adjustment to base retail gas rates, and
greater gas transportation revenues partially offset the
unfavorable impacts on earnings. The $.12 (13%) per share
decrease in earnings during the first six months of 1997 was
substantially due to the decline in earnings during the
second quarter of 1997 and to milder winter temperatures
during the first quarter of 1997 unfavorably impacting gas
sales.
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
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 six months
ended June 30, 1997 totaled $11.6 million and $21.1 million,
respectively, and were fully funded with internally
generated cash. Cash provided from operations increased
$12.0 million during the current six month period compared
to the same period in 1996. Cash used in investing and
financing activities during 1997 increased $7.9 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 better provide 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
<PAGE> 19
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.
<PAGE> 20
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> 21
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: August 13, 1997
SOUTHERN INDIANA GAS AND
ELECTRIC COMPANY
/s/ S. M. Kerney
S. M. Kerney
Controller
Date: August 13, 1997
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<NAME> SIGCORP INC
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