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 quarterly period ended September 30, 2002
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________________ to ______________________
Commission file number 1-6494
INDIANA GAS COMPANY, INC.
---------------------------
(Exact name of registrant as specified in its charter)
INDIANA 35-0793669
- -------------------------------------- -------------------------------
(State or other jurisdiction of (I.R.S. Employer Identification
incorporation or organization) No.)
20 N.W. Fourth Street, Evansville, Indiana 47708
------------------------------------------------
(Address of principal executive offices and Zip Code)
(812) 491-4000
--------------
(Registrant's telephone number, including area code)
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate the number of shares outstanding of each of the issuer's classes of
common stock, as of the latest practicable date.
Common Stock -Without par value 690.00001 November 1, 2002
- ---------------------------------- ---------------- ------------------
Class Number of shares Date
As of November 1, 2002, all shares outstanding of the Registrant's classes of
common stock were held by Vectren Corporation through its wholly owned
subsidiary, Vectren Utility Holdings, Inc.
Table of Contents
Item Page
Number Number
Part I. Financial Information
1 Financial Statements (Unaudited)
Condensed Balance Sheets.......................................... 1-2
Condensed Statements of Income.................................... 3
Condensed Statements of Cash Flows................................ 4
Notes to Condensed Unaudited Financial Statements................. 5-9
2 Management's Discussion and Analysis
of Results of Operations and Financial Condition.................. 10-16
3 Qualitative and Quantitative Disclosures About Market Risk........... 16
4 Controls and Procedures.............................................. 17
Part II. Other Information
1 Legal Proceedings.................................................... 18
6 Exhibits and Reports on Form 8-K..................................... 18
Signatures........................................................... 19
Certifications....................................................... 20-22
Definitions
As discussed in this Form 10-Q, the abbreviations
AFUDC means allowance for funds used during construction
APB means Accounting Principles Board
FASB means Financial Accounting Standards Board
IDEM means Indiana Department of Environmental Management
IURC means Indiana Utility Regulatory Commission
MMDth means millions of dekatherms
MMBTU means millions of British thermal units
PUCO means Public Utilities Commission of Ohio
Throughput means combined gas sales and gas transportation volumes
PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS (UNAUDITED)
INDIANA GAS COMPANY, INC.
CONDENSED BALANCE SHEETS
(Unaudited - In thousands)
September 30, December 31,
2002 2001
------------ -----------
ASSETS
Utility Plant
Original cost $1,129,278 $1,094,349
Less: Accumulated depreciation & amortization 481,837 458,310
---------- ----------
Net utility plant 647,441 636,039
---------- ----------
Current Assets
Cash & cash equivalents 3,482 294
Accounts receivable-less reserves of $2,627 &
$987, respectively 17,778 49,788
Receivables from other Vectren companies 6,409 15,874
Accrued unbilled revenues 5,771 38,557
Inventories 10,652 15,341
Recoverable natural gas costs 30,820 34,497
Prepayments & other current assets 45,177 34,445
---------- ----------
Total current assets 120,089 188,796
---------- ----------
Investment in the Ohio operations 227,082 223,624
Other investments 3,014 1,734
Non-utility property-net 265 303
Regulatory assets 19,781 14,720
Other assets 13,140 9,652
---------- ----------
TOTAL ASSETS $1,030,812 $1,074,868
========== ==========
The accompanying notes are an integral part of these condensed financial
statements.
INDIANA GAS COMPANY, INC.
CONDENSED BALANCE SHEETS
(Unaudited - In thousands)
September 30, December 31,
2002 2001
------------ -----------
LIABILITIES & SHAREHOLDER'S EQUITY
Capitalization
Common shareholder's equity
Common stock (no par value) $ 242,995 $ 242,995
Retained earnings 67,056 75,927
Accumulated other comprehensive income (2,382) (2,382)
----------- -----------
Total common shareholder's equity 307,669 316,540
----------- -----------
Long-term debt-net of debt subject to tender
& current maturities 251,002 260,972
Long-term debt due to VUHI 147,270 147,270
----------- -----------
Total capitalization 705,941 724,782
----------- -----------
Commitments & Contingencies (Notes 5-8)
Current Liabilities
Accounts payable 41,187 25,642
Accounts payable to affiliated companies 19,834 21,337
Payables to other Vectren companies 13,073 9,755
Accrued liabilities 29,043 42,757
Short-term borrowings due to VUHI 97,912 134,298
Long-term debt subject to tender - 11,500
Current maturities of long-term debt 16,250 1,250
----------- -----------
Total current liabilities 217,299 246,539
----------- -----------
Deferred Income Taxes & Other Liabilities
Deferred income taxes 58,679 50,970
Deferred credits & other liabilities 48,893 52,577
----------- -----------
Total deferred income taxes & other liabilities 107,572 103,547
----------- -----------
TOTAL LIABILITIES & SHAREHOLDER'S EQUITY $ 1,030,812 $ 1,074,868
=========== ===========
The accompanying notes are an integral part of these
condensed financial statements.
INDIANA GAS COMPANY, INC.
CONDENSED STATEMENTS OF INCOME
(Unaudited - In thousands)
Three Months Ended Nine Months Ended
September 30, September 30,
---------------------- ---------------------
2002 2001 2002 2001
--------- --------- --------- ---------
OPERATING REVENUES $ 57,544 $ 58,122 $ 339,052 $ 437,200
COST OF GAS 29,648 27,375 201,877 293,995
--------- --------- --------- ---------
GAS OPERATING MARGIN 27,896 30,747 137,175 143,205
--------- --------- --------- ---------
OPERATING EXPENSES
Other operating 17,756 22,390 57,454 76,280
Merger & integration costs - 275 - 576
Restructuring costs - 553 - 5,909
Depreciation & amortization 10,124 9,670 30,281 29,292
Income taxes (4,212) (4,120) 4,128 (3,217)
Taxes other than income taxes 3,470 2,938 11,781 12,621
--------- --------- --------- ---------
Total operating expenses 27,138 31,706 103,644 121,461
--------- --------- --------- ---------
OPERATING INCOME (LOSS) 758 (959) 33,531 21,744
OTHER INCOME
Equity in earnings of the Ohio
operations-net of tax (2,249) (2,435) 3,458 (762)
Other-net 26 435 628 (485)
--------- --------- --------- ---------
Total other income (2,223) (2,000) 4,086 (1,247)
--------- --------- --------- ---------
Interest expense 8,115 7,387 24,147 27,279
--------- --------- --------- ---------
NET INCOME (LOSS) $ (9,580) $ (10,346) $ 13,470 $ (6,782)
========= ========= ========= =========
The accompanying notes are an integral part of these condensed financial
statements
INDIANA GAS COMPANY, INC.
CONDENSED STATEMENTS OF CASH FLOWS
(Unaudited - In thousands)
Nine Months Ended
September 30,
----------------------
2002 2001
--------- ---------
NET CASH FLOWS FROM OPERATING ACTIVITIES $ 100,062 $ 55,136
--------- ---------
CASH FLOWS (REQUIRED FOR) FINANCING ACTIVITIES
Proceeds from additional capital contribution - 100,000
Requirements for:
Dividends on common stock (22,341) (22,647)
Retirement of long-term debt (6,470) (7,322)
Net change in short-term borrowings due to VUHI (36,386) (89,548)
--------- ---------
NET CASH FLOWS (REQUIRED FOR) FINANCING ACTIVITIES (65,197) (19,517)
--------- ---------
CASH FLOWS (REQUIRED FOR) INVESTING ACTIVITIES
Capital expenditures (30,183) (35,899)
Other investments (1,494) -
--------- ---------
NET CASH FLOWS (REQUIRED FOR) INVESTING ACTIVITIES (31,677) (35,899)
--------- ---------
Net increase in cash & cash equivalents 3,188 (280)
Cash & cash equivalents at beginning of period 294 300
--------- ---------
Cash & cash equivalents at end of period $ 3,482 $ 20
========= =========
The accompanying notes are an integral part of these condensed financial
statements.
INDIANA GAS COMPANY, INC.
NOTES TO CONDENSED FINANCIAL STATEMENTS
(UNAUDITED)
1. Organization and Nature of Operations
Overview
Indiana Gas Company, Inc. (the Company or Indiana Gas), an Indiana corporation,
provides natural gas distribution and transportation services to a diversified
customer base in 311 communities in 49 of Indiana's 92 counties. Indiana Gas is
a direct, wholly owned subsidiary of Vectren Utility Holdings, Inc. (VUHI). VUHI
is a direct, wholly owned subsidiary of Vectren Corporation (Vectren).
Vectren was organized on June 10, 1999 solely for the purpose of effecting the
merger of Indiana Energy, Inc. (Indiana Energy) and SIGCORP, Inc. (SIGCORP). On
March 31, 2000, the merger of Indiana Energy with SIGCORP and into Vectren was
consummated with a tax-free exchange of shares and has been accounted for as a
pooling-of-interests in accordance with APB Opinion No. 16 "Business
Combinations."
Vectren's wholly owned subsidiary, VUHI, serves as the intermediate holding
company for its three operating public utilities: Indiana Gas, formerly a wholly
owned subsidiary of Indiana Energy, Inc., Southern Indiana Gas and Electric
Company (SIGECO), formerly a wholly owned subsidiary of SIGCORP, Inc., and the
Ohio operations. Both Vectren and VUHI are exempt from registration pursuant to
Section 3(a)(1) and 3(c) of the Public Utility Holding Company Act of 1935.
Investment in the Gas Distribution Assets of The Dayton Power and Light Company
On October 31, 2000, Vectren acquired the natural gas distribution assets of The
Dayton Power and Light Company (DP&L) for approximately $465 million as a
tenancy in common through two separate wholly owned subsidiaries. Vectren Energy
Delivery of Ohio, Inc. (VEDO) holds a 53% undivided ownership interest in the
assets, and Indiana Gas holds a 47% undivided ownership interest. VEDO is the
operator of the assets, and these assets are referred to as "the Ohio
operations." Indiana Gas' ownership is accounted for on the equity method in
accordance with APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." Its ownership interest is included in investment
in the Ohio operations, and its interest in the results of operations is
included in equity in earnings of the Ohio operations. The Ohio operations are a
significant subsidiary of Indiana Gas that provide natural gas distribution and
transportation services to Dayton, Ohio, and 87 other communities in 17 counties
in west central Ohio.
2. Basis of Presentation
The interim condensed financial statements included in this report have been
prepared by the Company, without audit, as provided in the rules and regulations
of the Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with accounting principles generally accepted in the United States have been
omitted as provided in such rules and regulations. The Company believes that the
information in this report reflects all adjustments necessary to fairly state
the results of the interim periods reported. These condensed financial
statements and related notes should be read in conjunction with the Company's
audited annual financial statements for the year ended December 31, 2001 filed
on Form 10-K. Because of the seasonal nature of the Company's operations, the
results shown on a quarterly basis are not necessarily indicative of annual
results.
The preparation of financial statements in conformity with accounting principles
generally accepted in the United States 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 statements
and the reported amounts of revenues and expenses during the reporting periods.
Actual results could differ from those estimates.
Certain reclassifications have been made to prior period condensed financial
statements to conform with the current year classification. These
reclassifications have no impact on previously reported net income.
3. Investment in the Ohio Operations
Unaudited summarized financial information of the Ohio operations for the three
and nine months ended September 30, 2002 and 2001 is presented below.
Three Months Ended Nine Months Ended
September 30, September 30,
------------- -------------
In thousands 2002 2001 2002 2001
------ ------ ------ ------
Operating revenues $ 23,146 $ 28,423 $ 191,308 $ 262,731
Gas operating margin 9,548 10,577 66,399 58,549
Operating income (loss) (4,750) (3,590) 7,703 (756)
Net income (loss) (4,785) (5,180) 7,358 (1,621)
Interest costs arising from financing arrangements utilized to purchase the Ohio
operations are not reflected in the above summarized financial information. Had
the financing arrangements of Indiana Gas and VEDO used to facilitate the
acquisition been pushed down to the Ohio operations, the net loss would have
been $6.9 million for both the three months ended September 30, 2002 and 2001.
For the nine months ended September 30, 2002, net income would have been $0.5
million. For the nine months ended September 30, 2001, the net loss would have
been $11.3 million.
4. Impact of Recently Issued Accounting Guidance
SFAS 142
In July 2001, the FASB issued SFAS No. 142, "Goodwill and Other Intangible
Assets" (SFAS 142). The Company adopted the provisions of SFAS 142, as required
on January 1, 2002. SFAS 142 changed the accounting for goodwill from an
amortization approach to an impairment-only approach. Thus, amortization of
goodwill that is not included as an allowable cost for rate-making purposes
ceased upon adoption of this statement. Goodwill is to be tested for impairment
at a reporting unit level at least annually.
SFAS 142 also required the initial impairment review of all goodwill within six
months of the adoption date. The impairment review consisted of a comparison of
the fair value of a reporting unit to its carrying amount. If the fair value of
a reporting unit is less than its carrying amount, an impairment loss would be
recognized. Results of the initial impairment review were to be treated as a
change in accounting principle in accordance with APB Opinion No. 20 "Accounting
Changes." An impairment loss recognized as a result of an impairment test
occurring after the initial impairment review is to be reported as a part of
operations. SFAS 142 also changed certain aspects of accounting for other
intangible assets; however, the Company does not have any significant other
intangible assets.
A component of equity in earnings of the Ohio operations was amortization of
goodwill. As required by SFAS 142, amortization of goodwill relating to the
Company's investment in the Ohio operations, which approximated $2.3 million per
year, ceased on January 1, 2002. The initial impairment review performed within
six months of the adoption of SFAS 142 was completed and resulted in no
impairment.
SFAS 144
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 develops one accounting
model for all impaired long-lived assets and long-lived assets to be disposed
of. SFAS 144 replaces the existing authoritative guidance in FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and certain aspects of APB Opinion No. 30, "Reporting
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business."
This new accounting model retains the framework of SFAS 121 and requires that
those impaired long-lived assets and long-lived assets to be disposed of be
measured at the lower of carrying amount or fair value (less cost to sell for
assets to be disposed of), whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations are no longer
measured at net realizable value or include amounts for operating losses that
have not yet occurred.
SFAS 144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction.
The adoption of SFAS 144 on January 1, 2002 did not materially impact
operations.
SFAS 143
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143). SFAS 143 requires entities to record the fair value of
a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years
beginning after June 15, 2002, with earlier application encouraged. The Company
is currently evaluating the impact that SFAS 143 will have on its operations.
5. Transactions with Other Vectren Companies
Support Services & Purchases
Vectren and certain subsidiaries of Vectren have provided corporate, general and
administrative services to the Company including legal, finance, tax, risk
management and human resources. The costs have been allocated to the Company
using various allocators, primarily number of employees, number of customers
and/or revenues. Management believes that the allocation methodology is
reasonable and approximates the costs that would have been incurred had the
Company secured those services on a stand-alone basis. For the three months
ended September 30, 2002 and 2001, amounts billed by other wholly owned
subsidiaries of Vectren to the Company were $13.8 million and $14.3 million,
respectively. For the nine months ended September 30, 2002 and 2001, amounts
billed by other wholly owned subsidiaries of Vectren to the Company were $41.9
million and $50.8 million, respectively.
Cash Management & Borrowing Arrangements
The Company participates in a centralized cash management program with Vectren,
other wholly owned subsidiaries, and banks which permits funding of checks as
they are presented.
Guarantees of Parent Company Debt
Vectren's three operating utility companies, Indiana Gas, VEDO, and SIGECO are
guarantors of VUHI's $325 million commercial paper program, of which $168.5
million is outstanding at September 30, 2002 and VUHI's $350.0 million unsecured
senior notes outstanding at September 30, 2002. These guarantees are full and
unconditional and joint and several. VUHI has no significant independent assets
or operations other than the assets and operations of these operating utility
companies.
6. Transactions with Vectren Affiliates
ProLiance Energy, LLC (ProLiance), a nonregulated, energy marketing affiliate of
Vectren and Citizens Gas and Coke Utility (Citizens Gas), began providing
natural gas and related services to Indiana Gas, Citizens Gas, and others in
April 1996. ProLiance also provides services to the Ohio operations and began
providing service to SIGECO in 2002. ProLiance's primary business is optimizing
the gas portfolios of utilities and providing services to large end use
customers.
Regulatory Matters
The sale of gas and provision of other services to Indiana Gas and SIGECO by
ProLiance is subject to regulatory review through the quarterly gas cost
adjustment (GCA) process administered by the IURC. The sale of gas and provision
of other services to the Ohio operations by ProLiance is subject to regulatory
review through the quarterly gas cost recovery (GCR) process administered by the
PUCO.
Specific to the sale of gas and provision of other services to Indiana Gas by
ProLiance, on September 12, 1997, the IURC issued a decision finding the gas
supply and portfolio administration agreements between ProLiance and Indiana Gas
and ProLiance and Citizens Gas to be consistent with the public interest and
that ProLiance is not subject to regulation by the IURC as a public utility. The
IURC's decision reflected the significant gas cost savings to customers obtained
through ProLiance's services and suggested that all material provisions of the
agreements between ProLiance and the utilities were reasonable. Nevertheless,
with respect to the pricing of gas commodity purchased from ProLiance, the price
paid by ProLiance to the utilities for the prospect of using pipeline
entitlements if and when they are not required to serve the utilities' firm
customers, and the pricing of fees paid by the utilities to ProLiance for
portfolio administration services, the IURC concluded that additional review in
the GCA process would be appropriate and directed that these matters be
considered further in the pending, consolidated GCA proceeding involving Indiana
Gas and Citizens Gas.
In 2001, the IURC commenced processing the GCA proceeding regarding the three
pricing issues. The IURC indicated that it would consider the prospective
relationship of ProLiance with the utilities in this proceeding. On June 4,
2002, Indiana Gas and Citizens Gas, together with the Office of Utility Consumer
Counselor and other consumer parties, entered into and filed with the IURC a
settlement setting forth the terms for resolution of all pending regulatory
issues related to ProLiance. On July 23, 2002, the IURC approved the settlement
filed by the parties. The GCA proceeding has been concluded and new supply
agreements between Indiana Gas, SIGECO, Citizens Gas, and ProLiance have been
approved and extended through March 31, 2007. As a result of the settlements,
Indiana Gas will refund amounts to customers. The Company expects refunds to be
made in December 2002. A subsidiary of Vectren's nonregulated operations has
indemnified Indiana Gas for the amount of the refund as well as any other
amounts incurred as a result of the settlement. Accordingly, the refund has no
effect on operating margin or net income.
Transactions with ProLiance
Purchases from ProLiance for resale and for injections into storage for the
three months ended September 30, 2002 and 2001 totaled $58.9 million and $53.9
million, respectively; and for the nine months ended September 30, 2002 and 2001
totaled $202.5 million and $305.1 million, respectively. Amounts owed to
ProLiance at September 30, 2002 and December 31, 2001 for those purchases were
$19.5 million and $20.4 million, respectively, and are included in accounts
payable to affiliated companies. Amounts charged by ProLiance for gas supply
services are established by supply agreements with the utility.
7. Commitments & Contingencies
The Company is party to various legal and regulatory proceedings arising in the
normal course of business. In the opinion of management there are no legal
proceedings pending against the Company that are likely to have a material
adverse effect on its financial position or results of operations. See Note 6
regarding ProLiance Energy, LLC and Note 8 regarding environmental matters.
8. Environmental Matters
In the past, the Company and others operated facilities for the manufacture of
gas. Given the availability of natural gas transported by pipelines, these
facilities have not been operated for many years. Under currently applicable
environmental laws and regulations, the Company and others may now be required
to take remedial action if certain byproducts are found above the regulatory
thresholds at these sites.
The Company has identified the existence, location and certain general
characteristics of 26 gas manufacturing and storage sites for which it may have
some remedial responsibility. The Company has completed a remedial
investigation/feasibility study (RI/FS) at one of the sites under an agreed
order between the Company and the IDEM, and a Record of Decision was issued by
the IDEM in January 2000. Although the Company has not begun an RI/FS at
additional sites, the Company has submitted several of the sites to the IDEM's
Voluntary Remediation Program and is currently conducting some level of remedial
activities including groundwater monitoring at certain sites where deemed
appropriate and will continue remedial activities at the sites as appropriate
and necessary.
In conjunction with data compiled by expert consultants, the Company has accrued
the estimated costs for further investigation, remediation, groundwater
monitoring and related costs for the sites. While the total costs that may be
incurred in connection with addressing these sites cannot be determined at this
time, the Company has recorded costs that it reasonably expects to incur
totaling approximately $20.4 million.
The estimated accrued costs are limited to the Company's proportionate share of
the remediation efforts. Indiana Gas has arrangements in place for 19 of the 26
sites with other potentially responsible parties (PRP), which serve to limit the
Company's share of response costs at these 19 sites to between 20% and 50%.
With respect to insurance coverage, the Company has received and recorded
settlements from all known insurance carriers in an aggregate amount
approximating $20.4 million.
Environmental matters related to manufactured gas plants have had no material
impact on earnings since costs recorded to date approximate PRP and insurance
settlement recoveries. While the Company has recorded all costs which it
presently expects to incur in connection with activities at these sites, it is
possible that future events may require some level of additional remedial
activities which are not presently foreseen.
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND
FINANCIAL CONDITION
Description of the Business
Indiana Gas Company, Inc. (the Company or Indiana Gas), an Indiana corporation,
provides natural gas distribution and transportation services to a diversified
customer base in 311 communities in 49 of Indiana's 92 counties. Indiana Gas is
a direct, wholly owned subsidiary of Vectren Utility Holdings, Inc. (VUHI). VUHI
is a direct, wholly owned subsidiary of Vectren Corporation (Vectren).
Vectren was organized on June 10, 1999 solely for the purpose of effecting the
merger of Indiana Energy, Inc. (Indiana Energy) and SIGCORP, Inc. (SIGCORP). On
March 31, 2000, the merger of Indiana Energy with SIGCORP and into Vectren was
consummated with a tax-free exchange of shares and has been accounted for as a
pooling-of-interests in accordance with APB Opinion No. 16 "Business
Combinations."
Vectren's wholly owned subsidiary, VUHI, serves as the intermediate holding
company for its three operating public utilities: Indiana Gas, formerly a wholly
owned subsidiary of Indiana Energy, Inc., Southern Indiana Gas and Electric
Company (SIGECO), formerly a wholly owned subsidiary of SIGCORP, Inc., and the
Ohio operations. Both Vectren and VUHI are exempt from registration pursuant to
Section 3(a)(1) and 3(c) of the Public Utility Holding Company Act of 1935.
Investment in the Gas Distribution Assets of The Dayton Power and Light Company
On October 31, 2000, Vectren acquired the natural gas distribution assets of The
Dayton Power and Light Company (DP&L) for approximately $465 million as a
tenancy in common through two separate wholly owned subsidiaries. Vectren Energy
Delivery of Ohio, Inc. (VEDO) holds a 53% undivided ownership interest in the
assets, and Indiana Gas holds a 47% undivided ownership interest. VEDO is the
operator of the assets, and these assets are referred to as "the Ohio
operations." Indiana Gas' ownership is accounted for on the equity method in
accordance with APB Opinion No. 18, "The Equity Method of Accounting for
Investments in Common Stock." Its ownership interest is included in investment
in the Ohio operations, and its interest in the results of operations is
included in equity in earnings of the Ohio operations. The Ohio operations are a
significant subsidiary of Indiana Gas that provide natural gas distribution and
transportation services to Dayton, Ohio, and 87 other communities in 17 counties
in west central Ohio.
Results of Operations
Three Months Ended Nine Months Ended
September 30, September 30,
-------------------- -------------------
In thousands 2002 2001 2002 2001
-------- -------- -------- --------
Net income (loss), as reported $ (9,580) $(10,346) $ 13,470 $ (6,782)
Merger, integration, & other costs-net of tax - 1,867 - 5,447
Restructuring costs-net of tax - 343 - 3,668
-------- -------- -------- --------
Net income (loss) before nonrecurring items $ (9,580) $ (8,136) $ 13,470 $ 2,333
======== ======== ======== ========
Net Income (Loss)
For the three months ended September 30, 2002, the net loss decreased $0.8
million and for the nine-month period net income increased $20.3 million due
primarily to improved margins and lower operations and maintenance costs. During
2002, the Company experienced a reduction in costs incurred in 2001 due to
higher gas costs, merger synergies, and the completion of merger and
restructuring activities and related costs. These favorable impacts were offset
somewhat by the effects of warm weather during the heating season.
New Accounting Principles
SFAS 142
In July 2001, the Financial Accounting Standards Board (FASB) issued SFAS No.
142, "Goodwill and Other Intangible Assets" (SFAS 142). The Company adopted the
provisions of SFAS 142, as required on January 1, 2002. SFAS 142 changed the
accounting for goodwill from an amortization approach to an impairment-only
approach. Thus, amortization of goodwill that is not included as an allowable
cost for rate-making purposes ceased upon adoption of this statement. Goodwill
is to be tested for impairment at a reporting unit level at least annually.
SFAS 142 also required the initial impairment review of all goodwill within six
months of the adoption date. The impairment review consisted of a comparison of
the fair value of a reporting unit to its carrying amount. If the fair value of
a reporting unit is less than its carrying amount, an impairment loss would be
recognized. Results of the initial impairment review were to be treated as a
change in accounting principle in accordance with APB Opinion No. 20 "Accounting
Changes." An impairment loss recognized as a result of an impairment test
occurring after the initial impairment review is to be reported as a part of
operations. SFAS 142 also changed certain aspects of accounting for other
intangible assets; however, the Company does not have any significant other
intangible assets.
A component of equity in earnings of the Ohio operations was amortization of
goodwill. As required by SFAS 142, amortization of goodwill relating to the
Company's investment in the Ohio operations, which approximated $2.3 million per
year, ceased on January 1, 2002. The initial impairment review performed within
six months of the adoption of SFAS 142 was completed and resulted in no
impairment.
SFAS 144
In October 2001, the FASB issued SFAS No. 144, "Accounting for the Impairment or
Disposal of Long-Lived Assets" (SFAS 144). SFAS 144 develops one accounting
model for all impaired long-lived assets and long-lived assets to be disposed
of. SFAS 144 replaces the existing authoritative guidance in FASB Statement No.
121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived
Assets to Be Disposed Of" and certain aspects of APB Opinion No. 30, "Reporting
Results of Operations-Reporting the Effects of Disposal of a Segment of a
Business."
This new accounting model retains the framework of SFAS 121 and requires that
those impaired long-lived assets and long-lived assets to be disposed of be
measured at the lower of carrying amount or fair value (less cost to sell for
assets to be disposed of), whether reported in continuing operations or in
discontinued operations. Therefore, discontinued operations are no longer
measured at net realizable value or include amounts for operating losses that
have not yet occurred.
SFAS 144 also broadens the reporting of discontinued operations to include all
components of an entity with operations that can be distinguished from the rest
of the entity and that will be eliminated from the ongoing operations of the
entity in a disposal transaction.
The adoption of SFAS 144 on January 1, 2002 did not materially impact
operations.
SFAS 143
In July 2001, the FASB issued SFAS No. 143, "Accounting for Asset Retirement
Obligations" (SFAS 143). SFAS 143 requires entities to record the fair value of
a liability for an asset retirement obligation in the period in which it is
incurred. When the liability is initially recorded, the entity capitalizes a
cost by increasing the carrying amount of the related long-lived asset. Over
time, the liability is accreted to its present value, and the capitalized cost
is depreciated over the useful life of the related asset. Upon settlement of the
liability, an entity either settles the obligation for its recorded amount or
incurs a gain or loss upon settlement. SFAS 143 is effective for fiscal years
beginning after June 15, 2002, with earlier application encouraged. The Company
is currently evaluating the impact that SFAS 143 will have on its operations.
Significant Fluctuations
Gas Operating Margin
Gas operating margin decreased $2.9 million, or 9%, for the three months ended
September 30, 2002 and $6.0 million, or 4%, for the nine months ended September
30, 2002 when compared to the prior year. The decrease is primarily due to
warmer weather, especially during the heating season, fluctuations in
unaccounted for gas, and customer conservation.
Operating Expenses
Other Operating
Other operating expenses decreased $4.6 million, or 21%, for the three months
ended September 30, 2002 and $18.8 million, or 25%, for the nine months ended
September 30, 2002 compared to the prior year. The decrease results from lower
charges for the use of corporate assets related to those assets which had useful
lives shortened as a result of the merger, merger synergies, and less
uncollectible accounts expense. Uncollectible accounts expense in 2001 was
higher due to increased customer account balances as a result of the
extraordinarily high gas costs experienced in 2001.
Income Tax Expense
Federal and state income taxes increased $7.3 million for the nine months ended
September 30, 2002, compared to the prior year. The increase results from
primarily higher pre-tax earnings.
Other Income (Expense)
Equity in Earnings of the Ohio Operations
The Company has a 47% undivided interest in the Ohio operations. Equity in
earnings of the Ohio operations represents the Company's portion of the Ohio
operations' net income. The increase is attributable to the return of lower gas
prices and increased revenues from rate recovery riders for excise taxes and
Percentage of Income Payment Plan customers.
Other - Net
Other - net increased $1.1 million for the nine months ended September 30, 2002
compared to 2001. In 2001, contributions were made to low income heating
assistance programs to assist customers with their increased utility bills
reflecting higher gas costs.
Interest Expense
Interest expense decreased $3.1 million for the nine months ended September 30,
2002, when compared to the prior year. The decrease is due to lower interest
rates on adjustable rate debt and lower outstanding debt balances. The reduced
debt outstanding is due primarily to decreased working capital requirements
resulting from a return to lower gas prices.
Environmental Matters
In the past, the Company and others operated facilities for the manufacture of
gas. Given the availability of natural gas transported by pipelines, these
facilities have not been operated for many years. Under currently applicable
environmental laws and regulations, the Company and others may now be required
to take remedial action if certain byproducts are found above the regulatory
thresholds at these sites.
The Company has identified the existence, location and certain general
characteristics of 26 gas manufacturing and storage sites for which it may have
some remedial responsibility. The Company has completed a remedial
investigation/feasibility study (RI/FS) at one of the sites under an agreed
order between the Company and the IDEM, and a Record of Decision was issued by
the IDEM in January 2000. Although the Company has not begun an RI/FS at
additional sites, the Company has submitted several of the sites to the IDEM's
Voluntary Remediation Program and is currently conducting some level of remedial
activities including groundwater monitoring at certain sites where deemed
appropriate and will continue remedial activities at the sites as appropriate
and necessary.
In conjunction with data compiled by expert consultants, the Company has accrued
the estimated costs for further investigation, remediation, groundwater
monitoring and related costs for the sites. While the total costs that may be
incurred in connection with addressing these sites cannot be determined at this
time, the Company has recorded costs that it reasonably expects to incur
totaling approximately $20.4 million.
The estimated accrued costs are limited to the Company's proportionate share of
the remediation efforts. Indiana Gas has arrangements in place for 19 of the 26
sites with other potentially responsible parties (PRP), which serve to limit the
Company's share of response costs at these 19 sites to between 20% and 50%.
With respect to insurance coverage, the Company has received and recorded
settlements from all known insurance carriers in an aggregate amount
approximating $20.4 million.
Environmental matters related to manufactured gas plants have had no material
impact on earnings since costs recorded to date approximate PRP and insurance
settlement recoveries. While the Company has recorded all costs which it
presently expects to incur in connection with activities at these sites, it is
possible that future events may require some level of additional remedial
activities which are not presently foreseen.
Regulatory Matters
ProLiance Energy, LLC (ProLiance), a nonregulated, energy marketing affiliate of
Vectren and Citizens Gas and Coke Utility (Citizens Gas), began providing
natural gas and related services to Indiana Gas, Citizens Gas, and others in
April 1996. ProLiance also provides services to the Ohio operations and began
providing service to SIGECO in 2002. ProLiance's primary business is optimizing
the gas portfolios of utilities and providing services to large end use
customers.
The sale of gas and provision of other services to Indiana Gas and SIGECO by
ProLiance is subject to regulatory review through the quarterly gas cost
adjustment (GCA) process administered by the IURC. The sale of gas and provision
of other services to the Ohio operations by ProLiance is subject to regulatory
review through the quarterly gas cost recovery (GCR) process administered by the
PUCO.
Specific to the sale of gas and provision of other services to Indiana Gas by
ProLiance, on September 12, 1997, the IURC issued a decision finding the gas
supply and portfolio administration agreements between ProLiance and Indiana Gas
and ProLiance and Citizens Gas to be consistent with the public interest and
that ProLiance is not subject to regulation by the IURC as a public utility. The
IURC's decision reflected the significant gas cost savings to customers obtained
through ProLiance's services and suggested that all material provisions of the
agreements between ProLiance and the utilities were reasonable. Nevertheless,
with respect to the pricing of gas commodity purchased from ProLiance, the price
paid by ProLiance to the utilities for the prospect of using pipeline
entitlements if and when they are not required to serve the utilities' firm
customers, and the pricing of fees paid by the utilities to ProLiance for
portfolio administration services, the IURC concluded that additional review in
the GCA process would be appropriate and directed that these matters be
considered further in the pending, consolidated GCA proceeding involving Indiana
Gas and Citizens Gas.
In 2001, the IURC commenced processing the GCA proceeding regarding the three
pricing issues. The IURC indicated that it would consider the prospective
relationship of ProLiance with the utilities in this proceeding. On June 4,
2002, Indiana Gas and Citizens Gas, together with the Office of Utility Consumer
Counselor and other consumer parties, entered into and filed with the IURC a
settlement setting forth the terms for resolution of all pending regulatory
issues related to ProLiance. On July 23, 2002, the IURC approved the settlement
filed by the parties. The GCA proceeding has been concluded and new supply
agreements between Indiana Gas, SIGECO, Citizens Gas, and ProLiance have been
approved and extended through March 31, 2007. As result of the settlement,
Indiana Gas will refund amounts to customers. The Company expects refunds to be
made in December 2002. A subsidiary of Vectren's nonregulated operations has
indemnified Indiana Gas for the amount of the refund as well as any other
amounts incurred as a result of the settlement. Accordingly, the refund has no
effect on operating margin or net income.
In addition to the above, the IURC order also provides that:
|X| A portion of the utilities' natural gas will be purchased through a gas
cost incentive mechanism that shares price risk and reward between the
utilities and customers;
|X| Beginning in 2004, ProLiance will provide the utilities with an interstate
pipeline transport and storage service price discount, thus providing
additional savings to customers;
|X| As ProLiance continues to provide the utilities with its supply services,
Citizens and Vectren will together annually provide an additional $2
million per year in customer benefits in 2003, 2004 and 2005; and
|X| In 2006, the utilities will conduct a competitive bidding process for
provision of gas supply services commencing in 2007. ProLiance is
authorized to participate in the competitive bidding process.
Financial Condition
The Company's equity capitalization objective is 40-55% of total capitalization.
This objective may have varied, and will vary, depending on particular business
opportunities and seasonal factors that affect the Company's operation. The
Company's equity component was 43% of total capitalization, including current
maturities of long-term debt and long-term debt subject to tender at both
September 30, 2002 and December 31, 2001.
Short-term cash working capital is required primarily to finance customer
accounts receivable, unbilled utility revenues resulting from cycle billing, gas
in underground storage, prepaid gas delivery services, capital expenditures, and
investments until permanently financed.
The Company expects the majority of its capital expenditures and debt security
redemptions to be provided by internally generated funds.
The Company's credit ratings on outstanding senior unsecured debt at September
30, 2002 are A-/A2 as rated by Standard and Poor's and Moody's, respectively. On
August 27, 2002, Moody's Investor Services issued a press release indicating
Indiana Gas' rating is under review for a possible downgrade. Moody's raised
several concerns including weaker credit and fixed charge coverage measures,
resulting from the prior integration and restructuring costs and warm winter of
2001 and 2002. The Company continues to work with Moody's to address these and
other items involving Vectren and other Vectren subsidiaries.
Cash Flow from Operations
The Company's primary source of liquidity to fund working capital requirements
has been cash generated from operations, which totaled approximately $100.1
million and $55.1 million for the nine months ended September 30, 2002 and 2001,
respectively.
Cash flow from operations increased $44.9 million during the nine months ended
September 30, 2002 compared to 2001 due to favorable changes in working capital
as a result of the return to lower gas costs and increased earnings.
Financing Activities
Sources & Uses of Liquidity
The Company has no short-term borrowing arrangements with third parties and
relies entirely on the short-term borrowing arrangements of VUHI for short-term
working capital needs. Borrowings outstanding at September 30, 2002 were $97.9
million. The intercompany credit line totals $325 million, but is limited to
VUHI's available capacity ($156.5 million at September 30, 2002) and is subject
to the same terms and conditions as VUHI's commercial paper program.
During the nine months ended September 30, 2002, $1.3 million of long term debt
was paid as scheduled, and put provisions totaling $5.0 million were exercised.
Other put provisions on long-term debt totaling $6.5 million expired unexercised
and have been reclassified as long-term debt.
Vectren's three operating utility companies, Indiana Gas, VEDO, and SIGECO are
guarantors of VUHI's $325 million commercial paper program, of which $168.5
million is outstanding at September 30, 2002 and VUHI's $350.0 million unsecured
senior notes outstanding at September 30, 2002. VUHI has no significant
independent assets or operations other than the assets and operations of these
operating utility companies. These guarantees are full and unconditional and
joint and several. Ratings triggers on VUHI's commercial paper backup facility
existing at December 31, 2001, were removed as the facility was renewed during
2002.
Financing Cash Flow
Cash flow required for financing activities of $65.2 million for the nine months
ended September 30, 2002 includes $36.4 million of reductions in borrowings and
$22.3 million of common stock dividends paid to VUHI. This $45.7 million
increase in cash required for financing activities when compared to the nine
months ended September 30, 2001 results from a $100.0 million capital
contribution in 2001 from VUHI to permanently finance the investment in the Ohio
operations.
Capital Expenditures & Other Investment Activities
Cash flow required for investing activities decreased during the nine months
ended September 30, 2002 compared to 2001 by $4.2 million. The decrease is
primarily due to less additions to utility plant.
Forward-Looking Information
A "safe harbor" for forward-looking statements is provided by the Private
Securities Litigation Reform Act of 1995 (Reform Act of 1995). The Reform Act of
1995 was adopted to encourage such forward-looking statements without the threat
of litigation, provided those statements are identified as forward-looking and
are accompanied by meaningful cautionary statements identifying important
factors that could cause the actual results to differ materially from those
projected in the statement. Certain matters described in Management's Discussion
and Analysis of Results of Operations and Financial Condition are
forward-looking statements. Such statements are based on management's beliefs,
as well as assumptions made by and information currently available to
management. When used in this filing, the words "believe," "anticipate,"
"endeavor," "estimate," "expect," "objective," "projection," "forecast," "goal,"
and similar expressions are intended to identify forward-looking statements. In
addition to any assumptions and other factors referred to specifically in
connection with such forward-looking statements, factors that could cause the
Company's actual results to differ materially from those contemplated in any
forward-looking statements included, among others, the following:
|X| Factors affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unusual maintenance or repairs;
unanticipated changes to gas supply costs, or availability due to higher
demand, shortages, transportation problems or other developments;
environmental or pipeline incidents; transmission or distribution
incidents; or availability due to demand, shortages, transmission problems
or other developments; or gas pipeline system constraints.
|X| Increased competition in the energy environment including effects of
industry restructuring and unbundling.
|X| Regulatory factors such as unanticipated changes in rate-setting policies
or procedures, recovery of investments and costs made under traditional
regulation, and the frequency and timing of rate increases.
|X| Financial or regulatory accounting principles or policies imposed by the
Financial Accounting Standards Board, the Securities and Exchange
Commission, the Federal Energy Regulatory Commission, state public utility
commissions, state entities which regulate natural gas transmission,
gathering and processing, and similar entities with regulatory oversight.
|X| Economic conditions including the effects of an economic downturn,
inflation rates, and monetary fluctuations.
|X| Changing market conditions and a variety of other factors associated with
physical energy and financial trading activities including, but not limited
to, price, basis, credit, liquidity, volatility, capacity, interest rate,
and warranty risks.
|X| Availability or cost of capital, resulting from changes in the Company,
including its security ratings, changes in interest rates, and/or changes
in market perceptions of the utility industry and other energy-related
industries.
|X| Employee workforce factors including changes in key executives, collective
bargaining agreements with union employees, or work stoppages.
|X| Legal and regulatory delays and other obstacles associated with mergers,
acquisitions, and investments in joint ventures.
|X| Costs and other effects of legal and administrative proceedings,
settlements, investigations, claims, and other matters, including, but not
limited to, those described in Management's Discussion and Analysis of
Results of Operations and Financial Condition.
|X| Changes in federal, state or local legislature requirements, such as
changes in tax laws or rates, environmental laws and regulations.
The Company undertakes no obligation to publicly update or revise any
forward-looking statements, whether as a result of changes in actual results,
changes in assumptions, or other factors affecting such statements.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
The information required hereunder is not significantly different from the
information as set forth in Item 7A. Quantitative and Qualitative Disclosures
About Market Risk included in the Indiana Gas Company, Inc. 2001 Form 10-K and
is therefore not presented herein.
ITEM 4. CONTROLS AND PROCEDURES
Evaluation of disclosure controls and procedures
Within 90 days prior to the filing of the report, the Company carried out an
evaluation under the supervision and with the participation of the Chief
Executive Officer and Chief Financial Officer of the effectiveness or the design
and operation of the Company's disclosure controls and procedures. Based on that
evaluation, the Chief Executive Officer and the Chief Financial Officer have
concluded that the Company's disclosure controls and procedures are effective in
bringing to their attention on timely basis material information relating to the
Company required to be disclosed by the Company in its Exchange Act reports.
Disclosure controls and procedures, as defined by the Securities Exchange Act of
1934 in Rules 13a-14(c) and 15d-14(c), are controls and other procedures of the
Company that are designed to ensure that information required to be disclosed by
the Company in the reports filed or submitted by it under the Securities and
Exchange Act of 1934 (Exchange Act) is recorded, processed, summarized, and
reported, within the time periods specified in the SEC's rules and forms.
"Disclosure controls and procedures" include, without limitation, controls and
procedures designed to ensure that information required to be disclosed by the
Company in its Exchange Act reports is accumulated and communicated to the
Company's management, including its principal executive and financial officers,
as appropriate to allow timely decisions regarding required disclosure.
Changes in internal control
Since the evaluation of disclosure controls and procedures, there have been no
significant changes to the Company's internal controls and procedures or
significant changes in other factors that could significantly affect the
Company's internal controls and procedures. No material weaknesses or other
significant deficiencies in the design of internal control were noted by the
Company during the most recent disclosure control and procedure evaluation and
through the filing of this Form 10-Q.
Internal control, as defined in American Institute of Certified Public
Accountants Codification of Statements on Auditing Standards (AU ss.319), is
defined as a process, effected by an entity's board of directors, management,
and other personnel, designed to provide reasonable assurance regarding the
achievement of objectives in the following categories: (a) reliability of
financial reporting, (b) effectiveness and efficiency of operations and (c)
compliance with applicable laws and regulations.
PART II. OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
The Company is party to various legal and regulatory proceedings arising in the
normal course of business. In the opinion of management there are no legal
proceedings pending against the Company that are likely to have a material
adverse effect on the financial position or results of operations. See Note 6
regarding ProLiance Energy, LLC and Note 8 regarding environmental matters.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits
None
(b) Reports On Form 8-K During The Last Calendar Quarter
On July 23, 2002, the Company filed a Current Report on Form 8-K with respect to
the release of financial information to the investment community regarding the
Company's results of operations for the three, six and twelve month periods
ended June 30, 2002. The financial information was released to the public
through this filing.
Item 5. Other Events
Item 7. Exhibits
99.1 - Press Release - Second Quarter 2002 Vectren Corporation
Earnings
99.2 - Cautionary Statement for Purposes of the "Safe Harbor"
Provisions of the Private Securities Litigation Reform Act
of 1995
On July 25, 2002, the Company filed an amendment to current report on Form 8-K,
originally filed on April 25, 2002, with respect to the approval of an agreement
by the Indiana Utility Regulatory Commission setting forth the settlement of
numerous pending issues related to ProLiance Energy, LLC
Item 5. Other Events
Item 7. Exhibits
99-1 - Press Release - ProLiance Settlement Approved, Customers
Save Millions, Utilities Receive Certainty
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.
INDIANA GAS COMPANY, INC.
------------------------
Registrant
November 13, 2002 /s/Jerome A. Benkert, Jr.
---------------------------
Jerome A. Benkert, Jr.
Executive Vice President and
Chief Financial Officer
(Principal Financial Officer)
/s/M. Susan Hardwick
-----------------------------
M. Susan Hardwick
Vice President and Controller
(Principal Accounting Officer)
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CHIEF EXECUTIVE OFFICER CERTIFICATION
I, Niel C. Ellerbrook, certify that:
1. I have reviewed this quarterly report on Form 10-Q of Indiana Gas Company,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and
b. any fraud, whether or not material, that involves management or other
employees who have a significant role in the registrant's internal
controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Niel C. Ellerbrook
------------------------------------
Niel C. Ellerbrook
Chairman and Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
CHIEF FINANCIAL OFFICER CERTIFICATION
I, Jerome A. Benkert, Jr., certify that:
1. I have reviewed this quarterly report on Form 10-Q of Indiana Gas Company,
Inc.;
2. Based on my knowledge, this quarterly report does not contain any untrue
statement of a material fact or omit to state a material fact necessary to
make the statements made, in light of the circumstances under which such
statements were made, not misleading with respect to the period covered by
this quarterly report;
3. Based on my knowledge, the financial statements, and other financial
information included in this quarterly report, fairly present in all
material respects the financial condition, results of operations and cash
flows of the registrant as of, and for, the periods presented in this
quarterly report;
4. The registrant's other certifying officers and I are responsible for
establishing and maintaining disclosure controls and procedures (as defined
in Exchange Act Rules 13a-14 and 15d-14) for the registrant and we have:
a. designed such disclosure controls and procedures to ensure that
material information relating to the registrant, including its
consolidated subsidiaries, is made known to us by others within those
entities, particularly during the period in which this quarterly
report is being prepared;
b. evaluated the effectiveness of the registrant's disclosure controls
and procedures as of a date within 90 days prior to the filing date of
this quarterly report (the "Evaluation Date"); and
c. presented in this quarterly report our conclusions about the
effectiveness of the disclosure controls and procedures based on our
evaluation as of the Evaluation Date;
5. The registrant's other certifying officers and I have disclosed, based on
our most recent evaluation, to the registrant's auditors and the audit
committee of registrant's board of directors (or persons performing the
equivalent function):
a. all significant deficiencies in the design or operation of internal
controls which could adversely affect the registrant's ability to
record, process, summarize and report financial data and have
identified for the registrant's auditors any material weaknesses in
internal controls; and b. any fraud, whether or not material, that
involves management or other employees who have a significant role in
the registrant's internal controls; and
6. The registrant's other certifying officers and I have indicated in this
quarterly report whether or not there were significant changes in internal
controls or in other factors that could significantly affect internal
controls subsequent to the date of our most recent evaluation, including
any corrective actions with regard to significant deficiencies and material
weaknesses.
Date: November 13, 2002
/s/ Jerome A. Benkert, Jr.
----------------------------
Jerome A. Benkert, Jr.
Executive Vice President and
Chief Executive Officer
CERTIFICATION PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
CERTIFICATION
By signing below, each of the undersigned officers hereby certifies pursuant to
18 U.S.C. ss. 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act
of 2002, that, to his or her knowledge, (i) this report fully complies with the
requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934
and (ii) the information contained in this report fairly presents, in all
material respects, the financial condition and results of operations of Indiana
Gas Company, Inc..
Signed this 13th day of November, 2002.
/s/ Jerome A. Benkert, Jr. /s/ Niel C. Ellerbrook
--------------------------------- ---------------------------------
(Signature of Authorized Officer (Signature of Authorized Officer)
Jerome A. Benkert, Jr. Niel C. Ellerbrook
- ---------------------------------- ---------------------------------
(Typed Name) (Typed Name)
Executive Vice President and
Chief Financial Officer Chairman and Chief Executive Officer
- ---------------------------------- -------------------------------------
(Title) (Title)