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SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
X Annual Report Pursuant to Section 13 or 15(d)
of the Securities Exchange Act of 1934
For the fiscal year ended December 31, 1998
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 1-4125
NORTHERN INDIANA PUBLIC SERVICE COMPANY
(Exact name of registrant as specified in its charter)
Indiana 35-0552990
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
5265 Hohman Avenue, Hammond, Indiana 46320-1775
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (219) 853-5200
Securities registered pursuant to Section 12(b) of the Act:
Name of each exchange
Title of each class on which registered
--------------------- ---------------------
Series A Cumulative Preferred - No Par Value New York
4-1/4% Cumulative Preferred - $100 Par Value American
Securities registered pursuant to Section 12(g) of the Act:
Cumulative Preferred Stock - $100 Par Value
(4-1/2%, 4.22%, 4.88%, 7.44% and 7.50% Series)
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, (2) has been subject
to such filing requirements for the past 90 days.
Yes X No
-------- --------
Indicate by check mark if disclosure of delinquent filers pursuant
to Item 405 of Regulation S-K is not contained herein, and will not
be contained, to the best of registrant's knowledge, in definitive proxy
or information statements incorporated by reference in Part III of this
Form 10-K or any amendment to this Form 10-K. (X)
As of February 26, 1999, 73,282,258 shares of the registrant's
Common Shares, no par value, were issued and outstanding, all held
beneficially and of record by NIPSCO Industries, Inc.
DOCUMENTS INCORPORATED BY REFERENCE
None
NORTHERN INDIANA PUBLIC SERVICE COMPANY
Form 10-K
Table of Contents
Page
====
PART I
Item 1 Business 2
2 Properties 7
3 Legal Proceedings 8
4 Submission of Matters to a Vote
of Security Holders 8
PART II
Item 5 Market for the Registrant's Common
Equity and Related Shareholder Matters 8
6 Selected Financial Data 9
7 Management's Discussion and Analysis of
Financial Condition and Results of Operation 9
8 Financial Statements and Supplementary Data 17
9 Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 51
PART III
Item 10 Directors and Executive Officers of
the Registrant 51
11 Executive Compensation 54
12 Security Ownership of Certain Beneficial
Owners and Management 62
13 Certain Relationships and Related Transactions 62
PART IV
Item 14 Exhibits, Financial Statement Schedules 62
and Reports on Form 8-K
SIGNATURES 65
NORTHERN INDIANA PUBLIC SERVICE COMPANY
Part I
ITEM 1. BUSINESS.
Northern Indiana Public Service Company (Northern Indiana) is a public
utility operating company, incorporated in Indiana on August 2, 1912 that
supplies natural gas and electric energy to the public. It operates in 30
counties in the northern part of Indiana, serving an area of about 12,000
square miles with a population of approximately 2.2 million. At December 31,
1998, Northern Indiana served approximately 671,200 customers with gas and
approximately 420,900 customers with electricity.
See "Segments of Business" in the Notes to Consolidated Financial
Statements regarding financial information about industry segments.
HOLDING COMPANY STRUCTURE. Effective March 3, 1988, Northern Indiana
became a subsidiary of NIPSCO Industries, Inc., an Indiana corporation
(Industries).
ELECTRIC OPERATIONS. Northern Indiana owns and operates four coal-fired
electric generating stations with net capabilities of 3,179,000 kilowatts (kw),
two hydroelectric generating plants with net capabilities of 10,000 kw and
four gas-fired combustion turbine generating units with net capabilities of
203,000 kw, for a total system net capability of 3,392,000 kw. During the year
ended December 31, 1998, Northern Indiana generated 93.3% and purchased 6.7% of
its electric requirements.
Northern Indiana's 1998 electric control area peak load (the highest
level of electrical utility usage in the control area) of 3,100,160 kv was
set on July 21, 1998. Northern Indiana's electric control area includes
Northern Indiana, Wabash Valley Power Association, Inc. (WVPA) and Indiana
Municipal Power Agency (IMPA). Northern Indiana's all-time electric control
area peak load of 3,161,200 kw was set on July 14, 1995. Northern Indiana's
1998 internal peak load, which excludes WVPA and IMPA, of 2,810,530 kw was set
on June 29, 1998. Northern Indiana's all-time internal peak load of 2,888,450
kw was set on August 6, 1996.
Northern Indiana's electric system is interconnected with the systems
of Ameren Services Corporation (formerly Central Illinois Public Service
Company), American Electric Power, ComEd, Cinergy Services, Inc. and Consumers
Energy. Electric energy is purchased from, sold to, or exchanged with various
other utilities and power marketers under Northern Indiana's power sales and
open access transmission tariffs.
Northern Indiana provides WVPA with transmission and distribution service,
operating reserve requirements and capacity deficiency service and provides
IMPA with transmission service, operating reserve requirements and capacity
deficiency service, in Northern Indiana's control area. Northern Indiana also
engages in sales and services under interconnection agreements with WVPA and
IMPA.
WVPA provides service to 12 Rural Electric Membership Corporations
(REMC's) located in Northern Indiana's control area. IMPA provides service to
the municipal electric system of the city of Rensselaer located in Northern
Indiana's control area.
Northern Indiana and WVPA have executed a supplemental agreement for unit
peaking capacity and energy. Unit peaking capacity is the capacity used to
serve peak demand from a specific peaking generating unit. Pursuant to this
agreement, which runs through December, 2001, WVPA purchases 90,000 kw of
capacity per month.
Northern Indiana serves the Town of Argos as a full requirement customer
and provides network integration service to seven other municipal wholesale
customers.
Northern Indiana is a member of the East Central Area Reliability
Coordination Agreement (ECAR). ECAR is one of nine regional electric
reliability councils established to coordinate planning and operations of
member electric utilites regionally and nationally.
FUEL SUPPLY. The generating units of Northern Indiana are located at
Bailly, Mitchell, Michigan City and Schahfer Generating Stations. Northern
Indiana's 13 steam generating units have a net capability of 3,179,000 kw.
Coal is the primary source of fuel for all units, except for three, which
utilize natural gas. In addition, Northern Indiana's four combustion turbine
generating units with a net capability to 203,000 kw are fired by gas. Fuel
requirements for Northern Indiana's generation for 1998 were supplied as
follows:
Coal 97.5%
Natural gas 2.5%
In 1998, Northern Indiana used approximately 8.8 million tons of coal
at its generating stations. Northern Indiana has established a normal level
of coal stock that is expected to provide adequate fuel supply during the year
under all conditions.
Annual coal requirements for Northern Indiana's electric generating
units through 2002 are estimated to range from 9.7 million tons to 10.2
million tons, depending from year to year upon anticipated sales levels,
scheduled maintenance and other variables. These requirements are being met
or will be met in part under long-term contracts as follows:
MILLION TONS/YEAR SULFUR CONTENT EXPIRATION
================= ============== ==========
1.3 (a) Low 2001
1.25 Low 1999
1.6 (b) Low 2002
0.864(c) Low 2002
1.0 (d) Low 2001
0.5 (e) Low 2000
1.0 (f) High 2002
0.75 (g) High 2001
0.375 High 1999
(a) 1.5 million tons in 1999, 0.4 million tons in 2001.
(b) Tentative new contract, 0.7 million tons in 1999, plus or minus 10%
2000, 2001 and 2002, option years in 2001 and 2002, Northern Indiana can
terminate 12/31/2000.
(c) 0.432 million tons in 1999.
(d) Plus or minus 20%, 1.2 million tons in 1999.
(e) Option year in 2000, seller can terminate 12/31/1999.
(f) Plus or minus 25%, 1.37 million tons in 1999. Plus or minus 25%, 1.0
million tons thereafter. Option years in 2001 and 2002, Northern Indiana
can terminate 12/31/2000 or 12/31/2001.
(g) 0.5 million tons in 1999.
The average cost of coal consumed in 1998 was $26.83 per ton, or 1.50
cents per kilowatt-hour (kwh) generated as compared to $27.42 per ton, or
1.54 cents per kwh generated in 1997.
COAL RESERVES. Included in the previous table of coal contracts is a
coal mining contract with Cyprus Shoshone Coal Corporation (Cyprus) under
which Cyprus is mining Northern Indiana's coal reserves in the Cyprus mine
through the year 2001. The costs of such reserves are being recovered through
the rate-making process as such coal reserves are used to produce electricity.
FUEL ADJUSTMENT CLAUSE. Northern Indiana adjusts metered electric rates
through operation of a fuel adjustment clause to reflect changes in fuel costs.
See "Summary of Significant Accounting Policies-Fuel Adjustment Clause" in the
Notes to Consolidated Financial Statements.
GAS OPERATIONS. Northern Indiana supplies natural gas of about 1,000
British thermal units (Btu) per cubic foot. In a 24-hour period ended
December 22, 1998, Northern Indiana's 1998 maximum day send-out (the maximum
amount of gas delivered through Northern Indiana's distribution system to its
end customers) was 1.4 million dekatherms (dth). Northern Indiana's total
gas send-out for 1998 was 288.6 million dth, compared to 292.6 million dth in
1997.
Agreements have been negotiated with natural gas suppliers to replace
former pipeline supplier contracts pursuant to the requirements of Federal
Energy Regulatory Commission (FERC) Order No. 636 (see "FERC Order No. 636" in
the Notes to Consolidated Financial Statements). Northern Indiana also has
agreements which allow for the purchase of gas either from gas marketers or
producers.
Northern Indiana has firm transportation agreements with pipelines, which
allow Northern Indiana to move its gas through the pipelines' transmission
systems. In 1998, all of the gas supplied by Northern Indiana was transported
by ANR Pipeline Company (ANR), Crossroads Pipeline Company (Crossroads) - a
subsidiary of Industries, Midwestern Gas Transmission Company (Midwestern),
Natural Gas Pipeline Company of America (Natural), Panhandle Eastern Pipe Line
Company (Panhandle), Tennessee Gas Pipeline Company (Tennessee) and Trunkline
Gas Company (Trunkline). The transportation rates of Crossroads and the
transportation and storage rates of ANR, Midwestern, Natural, Panhandle,
Tennessee and Trunkline to Northern Indiana are subject to change in
accordance with rate proceedings filed with the Federal Energy Regulatory
Commission (FERC).
Approximately 84% of Northern Indiana's 1998 gas supply was purchased on
the spot market, generally on less than 30-day agreements. The average price
per dth (including FERC Order No. 636 transition charges) in 1998 was $2.49,
compared to $3.18 in 1997, and the average cost of purchased gas, after
adjustment for transition charges billed to transport customers, was $2.48 per
dth, as compared to $3.08 per dth in 1997.
Northern Indiana has a curtailment plan (a plan which outlines service
to be curtailed in the event of limited gas supply) that has been approved by
the Indiana Utility Regulatory Commission (Commission). There were no firm sales
curtailments in 1998 and none are expected during 1999.
Northern Indiana operates an underground gas storage field at Royal
Center, Indiana, which currently has a storage capacity of 6.75 million dth.
Withdrawals have been made in the 1998-1999 winter of up to 94,308 dth per
day. In addition, Northern Indiana has several gas storage service
agreements which make possible the withdrawal of substantial quantities of
gas from other storage facilities. All of the storage agreements have
limitations on the volume and timing of daily withdrawals. These contracts
provide in the aggregate for approximately 29.6 million dth of annual stored
volume and allow for approximately 661,000 dth of maximum daily withdrawal.
Northern Indiana has a liquefied natural gas plant in LaPorte County
which is designed for peak shaving (the process of supplementing gas supply
during periods of high demand) and has the following capacities: maximum
storage of 4 million dth; maximum liquefaction rate (gas to liquid), 20,000
dth per day; maximum vaporization rate (output to distribution system),
300,000 dth per day.
GAS COST ADJUSTMENT CLAUSE. Metered gas sales are adjusted to reflect
the cost of purchased gas, contracted gas storage and storage transportation
charges. See "Summary of Significant Accounting Policies-Gas Cost Adjustment
Clause" in the Notes to Consolidated Financial Statements.
REGULATION. Northern Indiana is subject to regulation by the Commission
as to rates, service, accounts, issuance of securities, and in other respects.
See "FERC Order No. 636" in the Notes to Consolidated Financial Statements. It
is also subject to limited regulation by local public authorities.
In 1998, about 7% of Northern Indiana's electric revenues were derived
from electric service it furnished at wholesale in interstate commerce to
other utility companies, power marketers, municipalities and WVPA (see "Item 1.
Business-Electric Operations" regarding WVPA). Northern Indiana's wholesale
rates and operations are subject to the jurisdiction of the FERC. FERC
jurisdiction does not extend to the issuance of securities by Northern Indiana,
which are regulated by the Commission. The FERC on October 21, 1954, declared
Northern Indiana exempt from the provisions of the Natural Gas Act.
RATE MATTERS. For a description of Northern Indiana's Alternative
Regulatory Plan (ARP) see "Competition and Regulatory Changes" below.
COMPETITION AND REGULATORY CHANGES -
The regulatory frameworks applicable to Northern Indiana, at both state
and federal levels, are in the midst of a period of fundamental change. These
changes have and will continue to impact the operation, structure and
profitability of Northern Indiana. Northern Indiana's management has taken
steps to make the company more competitive and profitable in this changing
environment, including converting some of its generating units to allow use of
lower cost, low sulfur coal, providing its gas customers with increased
customer choice for new products and services throughout Northern Indiana's
service territory.
THE ELECTRIC INDUSTRY. At the Federal level, FERC issued Order No. 888-A
in 1996 which required all public utilities owning, controlling, or operating
transmission lines to file non-discriminatory open access tariffs and offer
wholesale electricity suppliers and marketers the same transmission service
they provide themselves. In 1997, FERC approved Northern Indiana's open-access
transmission tariff. Although wholesale customers currently represent a
small portion of Northern Indiana's electricity sales, Northern Indiana intends
to continue its efforts to retain and add wholesale customers by offering
competitive rates and also intends to expand the customer base for which it
provides transmission services.
At the state level, Northern Indiana announced in 1997 that if consensus
could be reached regarding electric utility restructuring legislation, Northern
Indiana would support a restructuring bill during the 1999 session of the
Indiana General Assembly. During 1998, Northern Indiana held discussions with
other investor-owned utilities in Indiana regarding the technical and economic
aspects of possible legislation leading to greater customer choice. A
consensus was not reached. Therefore, Northern Indiana does not anticipate that
it will be supporting any legislation regarding electric restructuring during
the 1999 session of the Indiana General Assembly. However, during 1999,
Northern Indiana anticipates continued discussions with all segments of the
Indiana electric industry in an attempt to reach a consensus on electric
restructuring legislation for introduction during the 2000 Session of the
Indiana General Assembly.
THE GAS INDUSTRY. At the Federal level, gas industry deregulation began
in the mid 1980's when FERC required interstate pipelines to provide
nondiscriminatory transportation services pursuant to unbundled rates. This
regulatory change permitted large industrial and commercial customers to
purchase their gas supplies either from Northern Indiana or directly from
competing producers and marketers which would then use Northern Indiana's
facilities to transport the gas. More recently, the focus of deregulation in
the gas industry has shifted to the states.
At the state level, the Commission approved in 1997 Northern Indiana's
ARP which implemented new rates and services that included, among other
things, unbundling of services for additional customer classes, (primarily
residential and commercial users), negotiated services and prices, a gas cost
incentive mechanism and a price protection program. The gas cost incentive
mechanism allows Northern Indiana to share any cost savings or cost increases
with its customers based on a comparison of Northern Indiana's actual gas supply
portfolio costs to a market based benchmark price. Phase I of Northern
Indiana's Customer Choice Pilot Program will end on March 31, 1999. This pilot
program offered a limited number of residential and commercial customers within
the South Bend metropolitan area the right to choose alternative gas suppliers.
Phase II of Northern Indiana's Customer Choice Pilot Program will commence
April 1, 1999 and continue for a one-year period. During this phase, Northern
Indiana plans to offer customer choice to a significantly expanded eligible
customer base throughout its gas service territory. The Commission order allows
Industries' natural gas marketing subsidiary to participate as a supplier of
choice to Northern Indiana customers. In addition, as Northern Indiana has
allowed residential and commercial customers to designate alternative gas
suppliers, it has also offered new services to all classes of customers
including, but not limited to, price protection, negotiated sales and services,
gas lending and parking, and new storage services.
To date, Northern Indiana's system has not been materially affected
by competition, and management does not foresee substantial adverse effects
in the near future unless the current regulatory structure is substantially
altered. Northern Indiana believes the steps it is taking to deal with
increased competition has had and will continue to have significant, positive
effects in the next few years.
EMPLOYEE RELATIONS. Northern Indiana had 3,215 employees at
December 31, 1998. Approximately 71% of Northern Indiana's employees
(physical and clerical workers) are represented by two local unions of the
United Steelworkers of America, AFL-CIO-CLC.
ENVIRONMENTAL MATTERS. The operations of Northern Indiana are subject
to extensive and evolving federal, state and local environmental laws and
regulations intended to protect the public health and the environment. Such
environmental laws and regulations affect Northern Indiana's operations as
they relate to impacts on air, water and land.
Refer to "Environmental Matters" in Notes to Consolidated Financial
Statements for more information regarding certain environmental issues.
Northern Indiana's total capital expenditures from January 1, 1994,
through December 31, 1998 for pollution control facilities were approximately
$123 million and were financed in part by the sale of Northern Indiana's
Pollution Control Notes and Bonds-Jasper County. Northern Indiana anticipates
expenditures of approximately $45 million for pollution control equipment in
the 1999-2003 period which includes anticipated expenditures of $18 million in
1999 and $12 million in 2000.
YEAR 2000. For a discussion of year 2000 see Management's Discussion and
Analysis of Financial Condition and Results of Operations-Year 2000.
FORWARD LOOKING STATEMENTS. This report contains forward looking
statements within the meaning of the securities laws. See Management's
Discussion and Analysis of Financial Condition and Results of Operations-
Forward Looking Statements.
ITEM 2. PROPERTIES.
The physical properties of Northern Indiana are located in the State
of Indiana.
ELECTRIC. Northern Indiana owns and operates four coal fired electric
generating stations with net capabilities of 3,179,000 kw, two hydroelectric
generating plants with net capabilities of 10,000 kw, and four gas fired
combustion turbine generating units with net capabilities of 203,000 kw, for
a total system net capability of 3,392,000 kw.
Northern Indiana has 291 substations with an aggregate transformer
capacity of 23,131,300 kilovolts (kva). Its transmission system with
voltages from 34,500 to 345,000 consists of 3,058 circuit miles of line. The
electric distribution system extends into 21 counties and consists of 7,814
circuit miles of overhead and 1,497 cable miles of underground primary
distribution lines operating at various voltages from 2,400 to 12,500 volts.
Northern Indiana has distribution transformers having an aggregate capacity of
11,156,320 kva and 445,117 electric watt-hour meters.
GAS. Northern Indiana has an underground storage field at Royal Center
and a liquefied natural gas plant in LaPorte County all of which are described
under "Item 1. Business-Gas Operations". Northern Indiana has 13,586 miles of
gas mains.
CHARACTER OF OWNERSHIP. The properties of Northern Indiana are subject
to the lien of its First Mortgage Indenture. The principal properties are held
in fee and are free from other encumbrances, subject to minor exceptions, none
of which are of such a nature as to impair substantially the usefulness of such
properties. All properties are subject to liens for taxes, assessments and
undetermined charges (if any) incidental to construction, which it is Northern
Indiana's practice regularly to pay, as and when due, unless contested in good
faith. In general, the electric and gas lines and mains are located on land not
owned in fee but are covered by necessary consents of various governmental
authorities or by appropriate rights obtained from owners of private property.
Northern Indiana does not, however, generally have specific easements from the
owners of the property adjacent to public highways over, upon, or under which
its electric and gas lines are located. At the time each of the principal
properties was purchased a title search was made. In general, no examination
of titles as to rights-of-way for electric and gas lines and mains was made,
other than examination, in certain cases, to verify the grantors' ownership and
the lien status thereof.
ITEM 3. LEGAL PROCEEDINGS.
Northern Indiana is a party to various pending proceedings, including
suits and claims against it for personal injury, death and property damage.
Such proceedings and suits and the amounts involved are routine for the kind
of business conducted by Northern Indiana, except as set forth above under
"Environmental Matters," in the Notes to Consolidated Financial Statements.
To the knowledge of Northern Indiana no other material legal proceedings against
Northern Indiana or its subsidiaries are contemplated by governmental
authorities or other parties.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
None
PART II
ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED SHAREHOLDER
MATTERS.
Northern Indiana's common shares are wholly-owned by Industries.
The following limitations on payment of dividends and issuance of
preferred stock apply to Northern Indiana:
When any bonds are outstanding under its First Mortgage Indenture,
Northern Indiana may not pay cash dividends on its stock (other than
preferred or preference stock) or purchase or retire common shares, except
out of earned surplus or net profits computed as required under the
provisions of the maintenance and renewal fund. At December 31, 1998,
Northern Indiana had approximately $146.1 million of retained earnings
(earned surplus) available for the payment of dividends. Future common
share dividends by Northern Indiana will depend upon adequate retained
earnings, adequate future earnings and the absence of adverse developments.
So long as any shares of Northern Indiana's cumulative preferred stock
are outstanding, no cash dividends shall be paid on its common shares in
excess of 75% of the net income available therefor for the preceding
calendar year unless the aggregate of the capital applicable to stocks
subordinate as to assets and dividends to the cumulative preferred stock
plus the surplus, after giving effect to such dividends, would equal or
exceed 25% of the sum of all obligations evidenced by bonds, notes,
debentures or other securities, plus the total capital and surplus. At
December 31, 1998, the sum of the capital applicable to stocks subordinate
to the cumulative preferred stock plus the surplus was equal to 43% of the
total capitalization including surplus.
In connection with the foregoing discussion, see "Common Share
Dividend" in the Notes to Consolidated Financial Statements.
ITEM 6. SELECTED FINANCIAL DATA.
Year Ended December 31,
(Dollars in thousands)
1998 1997 1996 1995 1994
========== ========== ========== ========== ==========
Operating revenues $1,648,603 $1,752,382 $1,754,105 $1,664,278 $1,613,995
Net income $ 220,180 $ 196,620 $ 197,310 $ 194,321 $ 179,903
Total assets $3,651,949 $3,674,914 $3,774,280 $3,606,199 $3,624,311
Long-term
obligations and
redeemable
preferred stock $1,134,394 $1,138,337 $1,053,254 $1,122,392 $1,131,408
Cash dividends
declared on
common shares $ 212,000 $ 187,775 $ 187,450 $ 185,725 $ 168,815
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
NET INCOME. For 1998, net income of Northern Indiana increased to
$220.2 million, compared to $196.6 million for 1997. In 1996, net income
was $197.3 million.
See Notes to Consolidated Financial Statements for Segments of
Business regarding the revenue and utility operating income derived from
the delivery of gas and electricity.
OPERATING REVENUES. In 1998, operating revenues decreased $103.8
million, or 5.9%, from 1997. Operating revenues in 1997 decreased $1.7 million,
or 0.1%, from 1996.
Gas revenues were $572.5 million in 1998, a decrease of $162.8 million
from 1997. The decrease in gas revenues was mainly due to decreased deliveries
to residential and commercial customers, decreased gas costs per dekatherms
(dth) and decreased gas transition costs. During 1998, gas deliveries in dth,
which include transportation services, decreased 1.4%. Gas deliveries to
residential and commercial customers decreased 20.6% and 23.2%, respectively,
reflecting heating degree-days 21.3% lower than 1997. This decrease in
deliveries was partially offset by increased deliveries to industrial customers
of 4.2% and sales to other utilities. Northern Indiana had approximately
671,200 gas customers at December 31, 1998.
Gas revenues were $735.3 million in 1997, an increase of $3.4 million from
1996. The increase in gas revenues was mainly due to increased gas costs per
dth and increased deliveries of gas transported for others, partially offset by
decreased sales to residential and commercial customers and decreased gas
transition costs. During 1997, gas deliveries in dth, which include
transportation services, increased 2.2% over 1996. Gas deliveries to
residential and commercial customers decreased 4.7% and 1.2%, respectively, due
to a warmer heating season than 1996. Gas transportation services increased
3.4% mainly due to increased deliveries of gas transported for industrial
customers. The large commercial and industrial customers continue to utilize
transportation services provided by Northern Indiana. Gas transportation
customers purchase much of their gas directly from producers and marketers and
then pay a transportation fee to have their gas delivered over Northern
Indiana's system. Northern Indiana transported 173.2, 160.4 and 155.2 million
dth for others in 1998, 1997 and 1996, respectively.
In 1998, electric revenues were $1.076 billion, an increase of $59.0
million from 1997. Sales of electricity in kilowatt-hours (kwh) increased
6.7% from 1997. The increase in electric revenues was mainly due to
increased sales to residential and commercial customers (increases of 7.8% and
6.3% in kwh, respectively), reflecting a significantly warmer summer in 1998.
Wholesale power transactions also increased significantly in a rapidly
developing market. The increases were partially offset by a 2.0% kwh reduction
in sales to industrial customers, reflecting a full year of operations at two
cogeneration projects located at major industrial customers' facilities. At
December 31, 1998, Northern Indiana had 420,900 electric customers.
In 1997, electric revenues were $1.017 billion, an decrease of $5.1
million from 1996. The decrease in electric revenues was mainly due to
decreased sales to industrial customers, partially offset by increased sales to
residential and commercial customers and increased revenues related to wholesale
transactions. Industrial sales decreased during the period as a result of the
two cogeneration projects located at major industrial customers' facilities
coming on line during the period.
The basic steel industry accounted for 42% of natural gas delivered
(including volumes transported) and 29% of electric sales during 1998.
The components of the changes in gas and electric operating revenues
are shown in the following tables:
Year 1998 Year 1997
Compared To Compared To
Year 1997 Year 1996
============ ============
(Dollars in millions)
Gas Revenue Changes
Pass through of net changes in
purchased gas costs, gas storage
and storage transportation costs $ (63.0) $ 8.7
Gas transition costs (21.7) (4.4)
Changes in sales levels (84.9) (2.8)
Gas transported 6.8 1.9
------------ ------------
Total Gas Revenue Change $ (162.8) $ 3.4
------------ ------------
Electric Revenue Changes
Pass through of net changes
in fuel costs $ (5.5) $ 4.0
Changes in sales levels 55.1 (12.8)
Changes in transmission
service revenues 9.4 3.7
------------ ------------
Total Electric Revenue Change $ 59.0 $ (5.1)
------------ ------------
Total Operating Revenue Change $ (103.8) $ (1.7)
============ ============
See "Summary of Significant Accounting Policies- Gas Cost Adjustment
Clause" in the Notes to the Consolidated Financial Statements for a discussion
of the gas cost incentive mechanism. In addition, see "FERC Order No. 636" in
the Notes to Consolidated Financial Statements regarding Federal Energy
Regulatory Commission (FERC) Order No. 636 transition costs.
GAS COSTS. Gas costs decreased $131.4 million (29.0%) in 1998 due to
decreased gas purchases, decreased gas transition costs and decreased gas costs
per dth. The average cost for purchased gas in 1998, after adjustment for gas
transition costs billed to transport customers, was $2.48 per dth as compared to
$3.08 per dth in 1997. Gas costs increased $8.3 million (1.9%) in 1997 due to
increased gas costs per dth, which were partially offset by decreased gas
transition costs. The average cost for purchased gas in 1997, after adjustment
for gas transition costs billed to transport customers, was $3.08 per dth as
compared to $3.02 per dth in 1996.
FUEL AND PURCHASED POWER. Cost of fuel for electric generation in
1998 increased mainly as a result of increased production. The average cost
per kwh generated decreased 2.7% from 1997 to 1.50 cents per kwh. The cost of
fuel for electric generation in 1997 increased mainly as a result of increased
production. The average cost per kwh generated decreased 2.3% from 1996 to
1.54 cents per kwh.
Power purchased increased $4.7 million in 1998 as a result of
increased bulk power purchases. Power purchased decreased $16.5 million in
1997 as a result of decreased bulk power purchases.
OPERATING MARGINS. Operating margins increased $10.8 million in 1998
to $1.035 billion. The gas operating margin decreased $31.4 million in 1998
due to decreased deliveries to residential and commercial customers reflecting
the warmer heating season, partially offset by increased sales to wholesale
customers and increased deliveries of gas transported for others. Operating
margin from electric sales increased $42.2 million due to increased sales to
residential and commercial customers, reflecting a significantly warmer summer
in 1998 than in 1997, and increased wholesale transactions, partially offset by
decreased sales to industrial customers. Operating margins increased $1.1
million in 1997 to $1.024 billion. The gas operating margin decreased $4.9
million in 1997 due to decreased sales to residential and commercial customers
reflecting milder weather, partially offset by increased sales to wholesale
customers and increased deliveries of gas transported for others. Operating
margin from electric sales increased $6.0 million in 1997 due to increased sales
to residential and commercial customers, and increased wholesale transactions,
partially offset by decreased sales to industrial customers.
OPERATING EXPENSES AND TAXES. Operating expenses and taxes (except
income) in 1998 decreased 3.3% from 1997 to $612.0 million and in 1997
decreased 0.1% from 1996 to $632.9 million.
Operation expenses decreased $23.4 million in 1998 over 1997 due to
decreased employee related costs of $11.7 million, decreased sales and
marketing activities of $5.7 million and decreased electric production
operating costs of $4.3 million. Operation expenses decreased $11.8 million
in 1997 over 1996 due to reduced pension costs, reduced environmental costs
of $4.2 million and reduced pollution control facility costs of $4.1 million.
Maintenance expenses decreased $3.6 million in 1998 from 1997 mainly
reflecting decreased maintenance activity for electric production and
distribution facilities. Maintenance expenses remained relatively unchanged in
1997 from 1996.
Depreciation and amortization expenses increased $5.5 million in 1998
from 1997 resulting from plant additions. Depreciation and amortization
expenses increased $11.5 million in 1997 from 1996 resulting from plant
additions.
Utility income taxes increased $10.7 million in 1998 from 1997, increased
$1.0 million in 1997 from 1996, in each period mainly as a result of increased
pre-tax income.
Other Income (Deductions) remained relatively unchanged in 1998 from 1997.
Other Income (Deductions) decreased $3.9 million in 1997 from 1996 mainly as a
result of the sale of Crescent Dunes Lakeshore property to the National Park
Service in 1996.
Interest charges decreased $2.5 million and $2.6 million in 1998 and 1997,
respectively. The 1998 and 1997 decreases reflect decreased short-term
borrowing during the year.
See Notes to Consolidated Financial Statements for a discussion of
accounting policies and transactions impacting this analysis.
ENVIRONMENTAL MATTERS. The operations of Northern Indiana are subject
to extensive and evolving federal, state and local environmental laws and
regulations intended to protect the public health and the environment. Such
environmental laws and regulations affect Northern Indiana's operations as
they relate to impacts on air, water and land.
Refer to "Environmental Matters" in Notes to Consolidated Financial
Statements for more information regarding certain environmental issues.
LIQUIDITY AND CAPITAL RESOURCES. Cash flow from operations has provided
sufficient liquidity to meet current operating requirements. Because of the
seasonal nature of the utility business and the construction program, Northern
Indiana makes use of commercial paper intermittently as short-term financing.
As of December 31, 1998 and December 31, 1997, Northern Indiana had $85.6
million and $71.5 million in commercial paper outstanding, respectively. At
December 31, 1998, the weighted average interest rate of commercial paper
outstanding was 5.62%.
In September 1998, Northern Indiana entered into a five-year $100
million revolving credit agreement and a 364-day $100 million revolving credit
agreement with several banks. These agreements terminate on September 23, 2003
and September 23, 1999, respectively. The 364-day agreement may be extended at
expiration for additional periods of 364-days upon the request of Northern
Indiana and agreement by the banks. Under these agreements, Northern Indiana
may borrow funds at a floating rate of interest or, at Northern Indiana's
request under certain circumstances, a fixed rate of interest for a short
term period. These agreements provide financing flexibility to Northern Indiana
and may be used to support the issuance of commercial paper. At December 31,
1998, there were no borrowings outstanding under either of these agreements.
Concurrently with entering into such agreements, Northern Indiana terminated its
then existing revolving credit agreement which would otherwise have terminated
on August 19, 1999.
In addition, Northern Indiana has $14.2 million in lines of credit which
run to May 31, 1999. The credit pricing of each of the lines varies from either
the lending banks' commercial prime or market rates. Northern Indiana has
agreed to compensate the participating banks with arrangements that vary from no
commitment fees to a combination of fees which are mutually satisfactory to both
parties. As of December 31, 1998, there were no borrowings under these lines of
credit. The lines of credit are also available to support the issuance of
commercial paper.
Northern Indiana also has $273.5 million of money market lines of credit.
As of December 31, 1998, there was $40.5 million of borrowings outstanding
under these lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At
December 31, 1998, there were no borrowings outstanding under this facility.
Construction expenditures by Northern Indiana for 1998, 1997 and 1996
were approximately $182 million, $174 million, and $198 million, respectively.
Northern Indiana's total utility plant investment on December 31, 1998, was
$5.8 billion. During recent years, Northern Indiana has been able to finance
its construction program with internally generated funds and expects to be able
to meet future commitments through such funds.
Northern Indiana does not anticipate the need to file for retail gas and
electric base rate increases in the near future.
MARKET RISK SENSITIVE INSTRUMENTS AND POSITIONS. The primary market
risks to which Northern Indiana is exposed and in connection with which
Northern Indiana uses market risk sensitive instruments are commodity price
risk and interest rate risk.
Although Northern Indiana is subject to commodity price risk as part of
its traditional operations, the current regulatory framework within which
Northern Indiana operates allows for full collection of fuel and gas costs in
rates. Consequently, there is limited commodity price risk after
consideration of the related rate-making. However, as the utility industry
deregulates, Northern Indiana will be providing services without the benefit
of the traditional rate-making and will therefore be more exposed to commodity
price risk.
Northern Indiana utilizes commodity futures and option contracts to
minimize the impact of price changes to a small portion of its gas supply
portfolio. The Commission issued an order approving the inclusion of any gains
or losses associated with the use of derivative financial and commodity
instruments into Northern Indiana's gas cost adjustment clause.
Because the commodities covered by Northern Indiana's derivative
financial and commodity instruments are substantially the same commodities that
Northern Indiana buys and sells in the physical market, no special correlation
studies other than monitoring the degree of convergence between the derivative
and cash markets are deemed necessary.
Due to the provisions of the gas cost adjustment clause and the fuel
adjustment clause, movements in the natural gas and electric market prices
would not significantly impact net income.
Northern Indiana utilizes long-term debt as a primary source of capital
in its business. A significant portion of Northern Indiana's long-term debt
consists of medium-term notes. In addition, Northern Indiana utilize longer
term fixed price debt instruments which have been and will be refinanced
at lower interest rates if Northern Indiana deems it to be economical. Refer
to Consolidated Statement of Long term Debt for detailed information related to
Northern Indiana's long-term debt outstanding and "Fair Value of Financial
Instruments" in Notes to Consolidated Financial Statements for current market
valuation of long-term debt. Refer to "Summary of Significant Accounting
Policies-Hedging Activities" in Notes to Consolidated Financial Statements for
further discussion of Northern Indiana's hedging policies.
YEAR 2000 -
RISKS. Year 2000 issues address the ability of electronic processing
equipment to process date sensitive information and to recognize the last two
digits of a date as occurring in or after the year 2000. Any failure in one
of Northern Indiana's systems may result in material operational and financial
risks. Possible scenarios include a system failure in one of Northern
Indiana's generating plants, an operating disruption or delay in transmission
or distribution, or an inability to interconnect with the systems of other
utilities. In addition, while Northern Indiana currently anticipates that
its own mission-critical systems will be year 2000 compliant in a timely
fashion, it cannot guarantee the compliance of systems operated by other
companies upon which it depends. For example, the ability of an electric
company to provide electricity to its customers depends upon a regional
electric transmission grid, which connects the systems of neighboring
utilities to support the reliability of electric power within the region. If
one company's system is not year 2000 compliant, then such a failure will
affect the reliability of all providers within the grid, including Northern
Indiana. Similarly, Northern Indiana's gas operations depend on natural gas
pipelines that it does not own or control, and any non-compliance by a company
owning or controlling those pipelines may affect Northern Indiana's ability to
provide gas to its customers. Failure to achieve year 2000 readiness could
have a material adverse effect on Northern Indiana's results of operations,
financial position and cash flows.
Northern Indiana is continuing its program to address risks associated
with the year 2000. Northern Indiana's year 2000 program focuses on both its
information technology (IT) and non-IT systems, and Northern Indiana has been
making substantial progress in preparing these systems for proper functioning
in the year 2000.
STATE OF READINESS. Northern Indiana's year 2000 program consists of
four phases: inventory (identifying systems potentially affected by the year
2000), assessment (testing identified systems), remediation (correcting or
replacing non-compliant systems) and validation (evaluating and testing
remediated systems to confirm compliance). By second quarter 1997, Northern
Indiana had completed the inventory and assessment phases for all of its
mission-critical IT systems. Northern Indiana also has completed the
remediation and validation phases for four of its six major IT components.
The remediation and validation phases for the remaining two components are
expected to be completed within the next few months, so that Northern Indiana
expects to conclude the year 2000 program for its mission-critical systems by
first quarter of 1999. Northern Indiana has completed the inventory and
assessment phases for all of its non-IT mission critical systems. Northern
Indiana has scheduled remediation (including replacement) and validation for
its non-IT mission critical systems throughout 1999. Northern Indiana expects
to substantially complete its mission-critical year 2000 efforts by June 30,
1999, and to conclude the year 2000 program in the fourth quarter 1999.
Because Northern Indiana depends on outside suppliers and vendors with
similar year 2000 issues, Northern Indiana is assessing the ability of those
suppliers and vendors to provide it with an uninterrupted supply of goods and
services. Northern Indiana has contacted its critical vendors and suppliers
in order to investigate their year 2000 efforts. In addition, Northern
Indiana is working with electricity and gas industry groups such as North
American Electric Reliability Council, Electric Power Research Institute, and
the American Gas Association to discuss and evaluate the potential impact of
year 2000 problems upon the electric grid systems and pipeline networks that
interconnect within each of those industries.
COSTS. Northern Indiana currently estimates that the total cost of its
year 2000 program will be between $13 million and $19 million. These costs
have been, and will continue to be, funded from operations. Costs related to
the maintenance or modification of Northern Indiana's existing systems are
expensed as incurred. Costs related to the acquisition of replacement systems
are capitalized in accordance with Northern Indiana's accounting policies.
Northern Indiana does not anticipate these costs to have a material impact
on its results of operations.
CONTINGENCY PLANS. Northern Indiana currently is in the process of
structuring its contingency plans to address the possibility that any mission-
critical system upon which it depends, including those controlled by outside
parties, will be non-compliant. This includes identifying alternative
suppliers and vendors, conducting staff training and developing communication
plans. In addition, Northern Indiana is evaluating its ability to maintain or
restore service in the event of a power failure or operating disruption or
delay, and its limited ability to mitigate the effects of a network failure by
isolating its own network from the non-compliant segments of the greater
network. Northern Indiana expects to complete these contingency plans by
second quarter 1999; however, the contingency plans will be under review during
the third and fourth quarters of 1999.
COMPETITION AND REGULATORY CHANGES -
The regulatory frameworks applicable to Northern Indiana, at both state
and federal levels, are in the midst of a period of fundamental change. These
changes have and will continue to impact the operation, structure and
profitability of Northern Indiana. Northern Indiana's management has taken
steps to make the company more competitive and profitable in this changing
environment, including converting some of its generating units to allow use of
lower cost, low sulfur coal, providing its gas customers with increased
customer choice for new products and services throughout Northern Indiana's
service territory.
THE ELECTRIC INDUSTRY. At the Federal level, FERC issued Order No. 888-A
in 1996 which required all public utilities owning, controlling, or operating
transmission lines to file non-discriminatory open access tariffs and offer
wholesale electricity suppliers and marketers the same transmission service
they provide themselves. In 1997, FERC approved Northern Indiana's open-access
transmission tariff. Although wholesale customers currently represent a
small portion of Northern Indiana's electricity sales, Northern Indiana intends
to continue its efforts to retain and add wholesale customers by offering
competitive rates and also intends to expand the customer base for which it
provides transmission services.
At the state level, Northern Indiana announced in 1997 that if consensus
could be reached regarding electric utility restructuring legislation, Northern
Indiana would support a restructuring bill during the 1999 session of the
Indiana General Assembly. During 1998, Northern Indiana held discussions with
other investor-owned utilities in Indiana regarding the technical and economic
aspects of possible legislation leading to greater customer choice. A
consensus was not reached. Therefore, Northern Indiana does not anticipate that
it will be supporting any legislation regarding electric restructuring during
the 1999 session of the Indiana General Assembly. However, during 1999,
Northern Indiana anticipates continued discussions with all segments of the
Indiana electric industry in an attempt to reach a consensus on electric
restructuring legislation for introduction during the 2000 Session of the
Indiana General Assembly.
THE GAS INDUSTRY. At the Federal level, gas industry deregulation began
in the mid 1980's when FERC required interstate pipelines to provide
nondiscriminatory transportation services pursuant to unbundled rates. This
regulatory change permitted large industrial and commercial customers to
purchase their gas supplies either from Northern Indiana or directly from
competing producers and marketers which would then use Northern Indiana's
facilities to transport the gas. More recently, the focus of deregulation in
the gas industry has shifted to the states.
At the state level, the Indiana Utility Regulatory Commission
(Commission) approved in 1997 Northern Indiana's Alternative Regulatory Plan
(ARP) which implemented new rates and services that included, among other
things, unbundling of services for additional customer classes, (primarily
residential and commercial users), negotiated services and prices, a gas cost
incentive mechanism and a price protection program. The gas cost incentive
mechanism allows Northern Indiana to share any cost savings or cost increases
with its customers based on a comparison of Northern Indiana's actual gas supply
portfolio costs to a market based benchmark price. Phase I of Northern
Indiana's Customer Choice Pilot Program will end on March 31, 1999. This pilot
program offered a limited number of residential and commercial customers within
the South Bend metropolitan area the right to choose alternative gas suppliers.
Phase II of Northern Indiana's Customer Choice Pilot Program will commence
April 1, 1999 and continue for a one-year period. During this phase, Northern
Indiana plans to offer customer choice to a significantly expanded eligible
customer base throughout its gas service territory. The Commission order allows
Industries' natural gas marketing subsidiary to participate as a supplier of
choice to Northern Indiana customers. In addition, as Northern Indiana has
allowed residential and commercial customers to designate alternative gas
suppliers, it has also offered new services to all classes of customers
including, but not limited to, price protection, negotiated sales and services,
gas lending and parking, and new storage services.
To date, Northern Indiana's system has not been materially affected
by competition, and management does not foresee substantial adverse effects
in the near future unless the current regulatory structure is substantially
altered. Northern Indiana believes the steps it is taking to deal with
increased competition has had and will continue to have significant, positive
effects in the next few years.
IMPACT OF ACCOUNTING STANDARDS. Refer to "Summary of Significant
Accounting Policies-Impact of Accounting Standards" in the Notes to
Consolidated Financial Statements for information regarding impact of
accounting standard issue not yet adopted.
FORWARD LOOKING STATEMENTS. This report contains forward looking
statements within the meaning of the securities laws. Forward looking
statements include terms such as "may," "will," "expect," "believe," "plan"
and other similar terms. Northern Indiana cautions that, while it believes
such statements to be based on reasonable assumptions and makes such statements
in good faith, there can be no assurance that the actual results will not differ
materially from such assumptions or that the expectations set forth in the
forward looking statements derived from such assumptions will be realized.
Investors should be aware of important factors that could have a material
impact on future results. These factors include, but are not limited to,
weather, the federal and state regulatory environment, year 2000 issues, the
economic climate, regional, commercial, industrial and residential growth in
the service territories served by Northern Indiana, customers' usage patterns
and preferences, the speed and degree to which competition enters the utility
industry, the timing and extent of changes in commodity prices, changing
conditions in the capital and equity markets and other uncertainties, all of
which are difficult to predict, and many of which are beyond the control of
Northern Indiana.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Pages
=========
Report of Independent Public Accountants 18
Consolidated Statement of Income for the years
ended December 31, 1998, 1997, and 1996 18-20
Consolidated Balance Sheet - December 31, 1998
and 1997 20-22
Consolidated Statement of Capitalization -
December 31, 1998 and 1997 22-23
Consolidated Statement of Long-term Debt -
December 31, 1998 and 1997 23-24
Consolidated Statement of Cash Flows for the
years ended December 31, 1998, 1997, and 1996 24-26
Consolidated Statement of Retained Earnings for
the years ended December 31, 1998, 1997, and 1996 26-27
Notes to Consolidated Financial Statements 27-51
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
TO THE BOARD OF DIRECTORS OF
NORTHERN INDIANA PUBLIC SERVICE COMPANY:
We have audited the accompanying consolidated balance sheet and
consolidated statements of capitalization and long-term debt of Northern
Indiana Public Service Company (an Indiana corporation and a wholly-owned
subsidiary of NIPSCO Industries, Inc.) and subsidiaries as of December 31,
1998 and 1997, and the related consolidated statements of income, retained
earnings and cash flows for each of the three years in the period ended
December 31, 1998. These consolidated financial statements and the schedule
referred to below are the responsibility of the Company's management. Our
responsibility is to express an opinion on these consolidated financial
statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted
auditing standards. Those standards require that we plan and perform the
audit to obtain reasonable assurance about whether the financial statements
are free of material misstatement. An audit includes examining, on a test
basis, evidence supporting the amounts and disclosures in the financial
statements. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audits provide
a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to
above present fairly, in all material respects, the financial position of
Northern Indiana Public Service Company and subsidiaries as of December 31,
1998 and 1997, and the results of their operations and their cash flows for
each of the three years in the period ended December 31, 1998, in conformity
with generally accepted accounting principles.
Our audits were made for the purpose of forming an opinion on the
basic financial statements taken as a whole. The schedule listed on page 62,
Item 14(a)(2) is presented for purposes of complying with the Securities and
Exchange Commission's rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audits of the basic financial statements and, in our opinion, fairly states
in all material respects the financial data required to be set forth therein
in relation to the basic financial statements taken as a whole.
/s/ Arthur Andersen LLP
Chicago, Illinois
February 5, 1999
CONSOLIDATED STATEMENT OF INCOME
YEAR ENDED DECEMBER 31, 1998 1997 1996
========== ========== ==========
(Dollars in thousands)
Operating Revenues:
(Notes 2, 3 and 20)
Gas $ 572,485 $ 735,299 $ 731,874
Electric 1,076,118 1,017,083 1,022,231
---------- ---------- ----------
1,648,603 1,752,382 1,754,105
---------- ---------- ----------
Cost of Energy: (Note 2)
Gas costs 321,033 452,436 444,141
Fuel for electric generation 250,649 238,548 233,215
Power purchased 41,990 37,274 53,751
---------- ---------- ----------
613,672 728,258 731,107
---------- ---------- ----------
Operating Margin 1,034,931 1,024,124 1,022,998
---------- ---------- ----------
Operating Expenses and
Taxes (except income):
Operation 245,920 269,275 281,066
Maintenance (Note 2) 65,302 68,853 68,729
Depreciation and
amortization (Note 2) 228,547 223,025 211,545
Taxes (except income) 72,227 71,752 72,069
---------- ---------- ----------
611,996 632,905 633,409
---------- ---------- ----------
Operating Income Before
Utility Income Taxes 422,935 391,219 389,589
---------- ---------- ----------
Utility Income Taxes (Note 5) 120,786 110,099 109,051
---------- ---------- ----------
Operating Income 302,149 281,120 280,538
---------- ---------- ----------
Other Income (Deductions) (3,589) (3,659) 240
---------- ---------- ----------
Interest:
Interest on long-term debt 69,672 69,427 68,798
Other interest 5,087 7,574 11,225
Allowance for borrowed funds used
during construction and carrying
charges (Note 2) (563) (354) (805)
Amortization of premium, reacquisition
premium, discount and expense on
debt, net 4,184 4,194 4,250
---------- ---------- ----------
78,380 80,841 83,468
---------- ---------- ----------
Net Income 220,180 196,620 197,310
Dividend requirements on
preferred stocks 8,335 8,539 8,712
---------- ---------- ----------
Balance available
for common shares $ 211,845 $ 188,081 $ 188,598
========== ========== ==========
Common dividends declared $ 212,000 $ 187,775 $ 187,450
========== ========== ==========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 1997
=========== ===========
(Dollars in thousands)
ASSETS
UTILITY PLANT, at original cost (including
construction work in progress of
$149,426 and $140,534, respectively)
(Note 2):
Electric $ 4,154,060 $ 4,066,568
Gas 1,272,483 1,223,693
Common 364,822 351,350
----------- -----------
5,791,365 5,641,611
Less - Accumulated provision for
depreciation and amortization 2,804,720 2,613,352
----------- -----------
Total Utility Plant 2,986,645 3,028,259
----------- -----------
OTHER PROPERTY AND INVESTMENTS 519 1,215
----------- -----------
CURRENT ASSETS:
Cash and cash equivalents 19,541 9,800
Accounts receivable, less reserve of
$4,458 and $4,524, respectively (Note 2) 104,445 101,188
Fuel adjustment clause (Note 2) 0 2,679
Gas cost adjustment clause (Note 2) 44,044 86,520
Materials and supplies, at average cost 51,554 53,666
Electric production fuel, at average cost 32,402 18,837
Natural gas in storage, at last-in,
first-out cost (Note 2) 50,859 45,880
Prepayments and other 31,056 23,128
----------- -----------
Total Current Assets 333,901 341,698
----------- -----------
OTHER ASSETS:
Regulatory assets (Note 2) 203,722 205,965
Prepayments and other (Note 6) 127,162 97,777
----------- -----------
Total Other Assets 330,884 303,742
----------- -----------
$ 3,651,949 $ 3,674,914
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED BALANCE SHEET
DECEMBER 31, 1998 1997
=========== ===========
(Dollars in thousands)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common shareholder's equity $ 1,018,150 $ 1,018,303
Preferred stocks (Note 8) -
Series without mandatory
redemption provisions (Note 9) 81,116 81,123
Series with mandatory
redemption provisions (Note 10) 56,435 58,841
Long-term debt, excluding amounts due
within one year (Note 14) 1,077,959 1,079,496
----------- -----------
Total capitalization 2,233,660 2,237,763
----------- -----------
CURRENT LIABILITIES:
Current portion of long-term debt 2,000 51,009
(Note 15)
Short-term borrowings (Note 16) 126,100 119,000
Accounts payable 142,414 127,742
Dividends declared on common and
preferred stocks 63,101 56,198
Customer deposits 20,178 20,236
Taxes accrued 88,401 88,852
Interest accrued 9,118 7,646
Fuel adjustment clause 6,279 0
Accrued employment costs 44,223 51,095
Other accruals 28,546 34,051
----------- -----------
Total current liabilities 530,360 555,829
----------- -----------
OTHER:
Deferred income taxes (Note 5) 608,935 602,936
Deferred investment tax credits, being
amortized over life of related property
(Note 5) 92,693 99,853
Deferred credits 48,084 53,323
Accrued liability for postretirement
benefits (Note 7) 127,115 115,177
Other noncurrent liabilities 11,102 10,033
----------- -----------
Total other 887,929 881,322
----------- -----------
COMMITMENTS AND CONTINGENCIES:
(Notes 3, 4, 5, 17 and 18)
$ 3,651,949 $ 3,674,914
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED STATEMENT OF CAPITALIZATION
DECEMBER 31, 1998 1997
=========== ===========
(Dollars in thousands)
COMMON SHAREHOLDER'S EQUITY:
Common shares - without par
value - authorized 75,000,000
shares - issued and outstanding
73,282,258 shares $ 859,488 $ 859,488
Additional paid-in capital 12,524 12,522
Retained earnings 146,138 146,293
----------- -----------
Total common shareholder's
equity 1,018,150 45.6% 1,018,303 45.5%
----------- -----------
PREFERRED STOCKS, WHICH ARE
REDEEMABLE SOLELY AT OPTION
OF NORTHERN INDIANA:
Cumulative preferred stock -
$100 par value -
4-1/4% series - 209,051 and
209,118 shares outstanding,
respectively 20,905 20,912
4-1/2% series - 79,996
shares outstanding 8,000 8,000
4.22% series - 106,198
shares outstanding 10,620 10,620
4.88% series - 100,000
shares outstanding 10,000 10,000
7.44% series - 41,890
shares outstanding 4,189 4,189
7.50% series - 34,842
shares outstanding 3,484 3,484
Premium on preferred stock 254 254
Cumulative preferred stock -
no par value -
Adjustable Rate (6.00% at
December 31, 1998) -
Series A (stated value -
$50 per share), 473,285
shares outstanding 23,664 23,664
----------- -----------
81,116 3.6% 81,123 3.6%
----------- -----------
REDEEMABLE PREFERRED STOCKS,
SUBJECT TO MANDATORY REDEMPTION
REQUIREMENTS OR WHOSE
REDEMPTION IS OUTSIDE THE
CONTROL OF NORTHERN INDIANA:
Cumulative preferred stock -
$100 par value -
8.85% series - 50,000 and
62,500 shares outstanding,
respectively 5,000 6,250
7-3/4% series - 33,352 and
38,906 shares outstanding,
respectively 3,335 3,891
8.35% series - 51,000 and
57,000 shares outstanding,
respectively 5,100 5,700
Cumulative preferred stock -
no par value -
6.50% series - 430,000
shares outstanding 43,000 43,000
----------- -----------
56,435 2.5% 58,841 2.7%
----------- -----------
LONG-TERM DEBT 1,077,959 48.3% 1,079,496 48.2%
----------- ------ ----------- ------
Total capitalization $ 2,233,660 100.0% $ 2,237,763 100.0%
=========== ====== =========== ======
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED STATEMENT OF LONG-TERM DEBT
DECEMBER 31, 1998 1997
=========== ===========
(Dollars in thousands)
FIRST MORTGAGE BONDS -
Series T, 7-1/2%, due April 1, 2002 $ 39,000 $ 39,500
Series NN, 7.10%, due July 1, 2017 55,000 55,000
----------- -----------
Total 94,000 94,500
----------- -----------
POLLUTION CONTROL NOTES AND BONDS -
Series A Note -
City of Michigan City, 5.70% due
October 1, 2003 16,500 18,000
Series 1988 Bonds - Jasper County -
Series A, B and C - 3.05% weighted
average at December 31, 1998, due
November 1, 2016 130,000 130,000
Series 1988 Bonds - Jasper County -
Series D - 3.13% weighted average at
December 31, 1998, due November 1, 2007 24,000 24,000
Series 1994 Bonds - Jasper County -
Series A - 5.15% at December 31, 1998
due August 1, 2010 10,000 10,000
Series 1994 Bonds - Jasper County -
Series B - 5.15% at December 31, 1998,
due June 1, 2013 18,000 18,000
Series 1994 Bonds - Jasper County -
Series C - 5.15% at December 31, 1998,
due April 1, 2019 41,000 41,000
----------- -----------
Total 239,500 241,000
----------- -----------
MEDIUM-TERM NOTES -
Interest rates between 6.10% and 7.69%
with a weighted average interest rate of
7.00% and various maturities between
March 20, 2000 and August 4, 2027 748,025 748,025
----------- -----------
UNAMORTIZED PREMIUM AND DISCOUNT
ON LONG-TERM DEBT, NET (3,566) (4,029)
----------- -----------
Total long-term debt, excluding
amounts due in one year $ 1,077,959 $ 1,079,496
=========== ===========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED DECEMBER 31, 1998 1997 1996
=========== =========== ===========
(Dollars in thousands)
CASH FLOWS FROM
OPERATING ACTIVITIES:
Net income $ 220,180 $ 196,620 $ 197,310
ADJUSTMENTS TO RECONCILE
NET INCOME TO NET CASH:
Depreciation and amortization 228,547 223,025 211,545
Deferred federal and state
operating income taxes, net (32,574) (8,414) 26,117
Deferred investment tax
credits, net (7,160) (7,205) (7,327)
Advance contract payment 1,900 1,900 (17,100)
Change in certain assets and
liabilities -
Accounts receivable, net (4,194) 10,678 (15,790)
Electric production fuel (13,565) 7,646 (12,225)
Materials and supplies 2,112 3,130 7,028
Natural gas in storage (4,979) 4,529 3,004
Accounts payable 16,247 (51,273) 35,517
Taxes accrued 24,119 21,488 14,628
Fuel adjustment clause 8,958 6,470 1,152
Gas cost adjustment clause 42,476 11,647 (94,054)
Accrued employment costs (6,872) 10,180 (4,856)
Other accruals (5,505) 6,117 (14,488)
Other, net (11,380) 21,799 6,962
----------- ----------- -----------
Net cash provided by
operating activities 458,310 458,337 337,423
----------- ----------- -----------
CASH FLOWS PROVIDED BY (USED IN)
INVESTING ACTIVITIES:
Construction expenditures (182,123) (174,231) (198,223)
Other, net (7,195) (3,191) 22,102
----------- ----------- -----------
Net cash used in investing
activities (189,318) (177,422) (176,121)
----------- ----------- -----------
CASH FLOWS PROVIDED BY
(USED IN) FINANCING
ACTIVITIES:
Issuance of long-term debt 500 139,000 0
Issuance of short-term debt 622,200 534,430 1,172,150
Net change in commercial paper 14,100 (122,405) 149,105
Retirement of long-term debt (51,509) (67,247) (80,000)
Retirement of short-term debt (629,200) (565,930) (1,211,950)
Retirement of preferred stock (2,413) (2,408) (2,604)
Cash dividends paid on
common shares (205,000) (185,775) (182,950)
Cash dividends paid on
preferred shares (8,392) (8,556) (8,766)
Other, net 463 (503) 514
----------- ----------- -----------
Net cash used in
financing activities (259,251) (279,394) (164,501)
----------- ----------- -----------
NET INCREASE (DECREASE) IN
CASH AND CASH EQUIVALENTS 9,741 1,521 (3,199)
CASH AND CASH EQUIVALENTS AT
BEGINNING OF PERIOD 9,800 8,279 11,478
----------- ----------- -----------
CASH AND CASH EQUIVALENTS AT
END OF PERIOD $ 19,541 $ 9,800 $ 8,279
=========== =========== ===========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
CONSOLIDATED STATEMENT OF RETAINED EARNINGS
YEAR ENDED DECEMBER 31, 1998 1997 1996
========= ========= =========
(Dollars in thousands)
BALANCE AT BEGINNING OF PERIOD $ 146,293 $ 145,987 $ 144,839
ADD:
NET INCOME 220,180 196,620 197,310
--------- --------- ---------
366,473 342,607 342,149
--------- --------- ---------
LESS:
DIVIDENDS:
Cumulative Preferred stock -
4-1/4% series 889 889 889
4-1/2% series 360 360 360
4.22% series 448 448 448
4.88% series 488 488 488
7.44% series 312 312 312
7.50% series 261 261 261
8.85% series 571 682 793
7-3/4% series 319 362 395
8.35% series 472 522 572
6.50% series 2,795 2,795 2,795
Adjustable Rate, series A 1,420 1,420 1,399
Common shares 212,000 187,775 187,450
--------- --------- ---------
220,335 196,314 196,162
--------- --------- ---------
BALANCE AT END OF PERIOD $ 146,138 $ 146,293 $ 145,987
========= ========= =========
The accompanying notes to consolidated financial statements are an
integral part of this statement.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(1) HOLDING COMPANY STRUCTURE: NIPSCO Industries, Inc. (Industries) was
incorporated in Indiana on September 22, 1987 and became the parent of
Northern Indiana Public Service Company (Northern Indiana) on March 3, 1988.
Northern Indiana is a public utility operating company supplying electricity
and gas to the public in the northern third of Indiana.
(2) SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
BASIS OF PRESENTATION. The consolidated financial statements include
the accounts of Northern Indiana and its two subsidiaries, Shore Line Shops,
Inc. and NIPSCO Exploration Company, Inc. All significant intercompany
items have been eliminated in consolidation. Certain reclassifications were
made to conform the prior years' financial statements to the current
presentation.
USE OF ESTIMATES. The preparation of financial statements in conformity
with generally accepted accounting principles requires management to make
estimates and assumptions that affect the reported amounts of assets and
liabilities at the date of the financial statements and the reported amounts
of revenues and expenses during the reporting period. Actual results could
differ from those estimates.
OPERATING REVENUES. Revenues are recorded based on estimated service
rendered, but are billed to customers monthly on a cycle basis.
DEPRECIATION AND MAINTENANCE. Northern Indiana provides depreciation
on a straight-line method over the remaining service lives of the electric,
gas and common properties. The approximate weighted average remaining lives
for major components of electric and gas plant are as follows:
Electric:
--------
Electric generation plant 24 years
Transmission plant 26 years
Distribution plant 25 years
Other electric plant 24 years
Gas:
----
Gas storage plant 18 years
Transmission plant 34 years
Distribution plant 27 years
Other gas plant 24 years
The depreciation provision for electric utility plant, as a percentage
of the original cost, was 3.7% for 1998, 3.6% for 1997 and 3.7% for 1996.
The depreciation provision for gas utility plant, as a percentage
of the original cost, was 5.4% for 1998 and 1997, and 5.3% for 1996.
Northern Indiana follows the practice of charging maintenance and
repairs, including the cost of removal of minor items of property, to
maintenance expense accounts, except for repairs of transportation and service
equipment which are charged to clearing accounts and redistributed to
operating expense and other accounts. When property which represents a
retirement unit is replaced or removed, the cost of such property is credited
to utility plant, and such cost, together with the cost of removal less salvage,
is charged to the accumulated provision for depreciation.
AMORTIZATION OF SOFTWARE COSTS. Northern Indiana has capitalized
software relating to various technology functions. At the date of installation,
Northern Indiana estimates that the specific software will have a useful life
between five and ten years. The Federal Energy Regulatory Commission (FERC)
prescribes certain amortization periods, and Northern Indiana's management has
determined that, on average, these are reasonable useful life estimates for the
portfolio of capitalized software. Northern Indiana includes these amortization
estimates, based on useful life, in its quarterly filings with the Indiana
Utility Regulatory Commission (Commission)
COAL RESERVES. Northern Indiana has a long-term mining contract to
mine its coal reserves through the year 2001. The costs of such reserves are
being recovered through the rate-making process as such coal reserves are used
to produce electricity.
POWER PURCHASED. Power purchases and net interchange power with other
electric utilities under interconnection agreements and wholesale power
purchases are included in Cost of Energy under the caption "Power purchased."
ACCOUNTS RECEIVABLE. At December 31, 1998, Northern Indiana had sold
$100 million of its accounts receivable under a sales agreement which expires
May 31, 2002. The December 31, 1998 and 1997 accounts receivable balances
include approximately $11.6 million and $5.4 million respectively, due from
associated companies.
COMPREHENSIVE INCOME. Northern Indiana adopted SFAS No. 130, "Reporting
Comprehensive Income" effective January 1, 1998. This statement established
standards for reporting and display of comprehensive income and its components
in a financial statement that is displayed with the same prominence as other
financial statements. The adoption of SFAS No. 130 did not impact Northern
Indiana's consolidated financial statements for the periods presented.
STATEMENT OF CASH FLOWS. For purposes of the Consolidated Statement
of Cash Flows, Northern Indiana considers temporary cash investments with an
original maturity of three months or less to be cash equivalents.
Cash paid during the periods reported for income taxes and interest
was as follows:
1998 1997 1996
======== ======== ========
(Dollars in thousands)
Income taxes $135,145 $104,809 $ 73,631
Interest, net of amounts capitalized $ 71,645 $ 75,085 $ 78,268
FUEL ADJUSTMENT CLAUSE. All metered electric rates contain a provision
for adjustment in charges for electric energy to reflect increases and
decreases in the cost of fuel and the fuel cost of purchased power through
operation of a fuel adjustment clause. As prescribed by order of the
Commission applicable to metered retail rates, the adjustment factor has been
calculated based on the estimated cost of fuel and the fuel cost of purchased
power in a future three-month period. If two statutory requirements relating
to expense and return levels are satisfied, any under-recovery or over-recovery
caused by variances between estimated and actual cost in a given three-month
period will be included in a future filing. Northern Indiana records any
under-recovery or over-recovery as a current asset or current liability until
such time as it is billed or refunded to its customers. The fuel adjustment
factor is subject to a quarterly hearing by the Commission and remains in
effect for a three-month period.
GAS COST ADJUSTMENT CLAUSE. All metered gas sales rates contain an
adjustment factor which reflects the increases and decreases in the cost of
purchased gas, contracted gas storage and storage transportation charges.
The gas cost adjustment factor is subject to a quarterly hearing by the
Commission and remains in effect for a three-month period. If the statutory
requirement relating to the level of return is satisfied, any under-recovery
or over-recovery caused by variances between estimated and actual cost in a
given three-month period will be included in a future filing. Northern
Indiana records any under-recovery or over-recovery as a current asset or
current liability until such time it is billed or refunded to its customers.
Northern Indiana's gas cost adjustment factor includes a gas cost incentive
mechanism (GCIM) which allows Northern Indiana to share any cost savings or
cost increases with customers based on a comparison of Northern Indiana's actual
gas supply portfolio cost to a market-based benchmark price. See Note 3,
FERC Order No. 636 for a discussion of gas transition cost charges.
NATURAL GAS IN STORAGE. Natural gas in storage is valued using the
last-in, first-out (LIFO) inventory methodology. Based on the average cost of
gas purchased in December 1998 and 1997 the estimated replacement cost of
gas in storage (current and non-current) at December 31, 1998 and 1997
exceeded the stated LIFO cost by approximately $34 million and $42 million,
respectively.
AFFILIATED COMPANY TRANSACTIONS. Pursuant to agreement, effective
July 1, 1996, Northern Indiana receives executive, financial, gas supply,
sales and marketing, and administrative and general services from an
affiliate, NIPSCO Industries Management Services Company (NIMSC), a
wholly-owned subsidiary of Industries.
The costs of these services are charged to Northern Indiana based on
payroll and expenses incurred by NIMSC's employees for the benefit of
Northern Indiana. These costs which totaled $21.4 million for the year 1998,
$28.8 million for the year 1997 and $17.4 million for the six-month period
ended December 31, 1996, consist primarily of employee compensation and
benefits.
Northern Indiana purchased natural gas and transportation services
from affiliated companies in the amount of $20.8 million, $10.2 million and
$17.3 million, representing 6.8%, 2.2% and 4.1% of Northern Indiana's total gas
costs for years 1998, 1997 and 1996, respectively.
Northern Indiana subleases a portion of office facilities to affiliated
companies for a monthly fee, which includes operating expenses, based on
space utilization.
HEDGING ACTIVITIES. Northern Indiana uses commodity futures and option
contracts to hedge the impact of natural gas price fluctuations related to its
business activities. Gains and losses on these commodity-based derivative
financial instruments are deferred and recognized in income concurrent with
the related purchases and sales of natural gas.
As of December 31, 1998, Northern Indiana had open futures and option
contracts representing hedges of natural gas sales of 2.6 billion cubic feet
(Bcf) and natural gas purchases of 2.3 Bcf. The net deferred gain on these
commodity-based derivative financial instruments as of December 31, 1998 was
not material.
IMPACT OF ACCOUNTING STANDARDS. During June 1998, the Financial
Accounting Standards Board (FASB) issued Statement of Financial Accounting
Standards (SFAS) No. 133 "Accounting for Derivative Instruments and Hedging
Activities." This statement standardizes the accounting for derivative
instruments, including certain derivative instruments embedded in other
contracts, by requiring that a company recognize those items as assets or
liabilities in the balance sheet and measure them at fair value. This
Statement generally provides for matching of the timing of gain or loss
recognition of derivatives instruments designated as a hedge with the
recognition of changes in the fair value of the hedged asset or liability
through earnings. This Statement also provides that the effective portion
of a hedging instrument's gain or loss on a forecasted transaction be
initially reported in other comprehensive income and subsequently reclassified
into earnings when the hedged forecasted transaction affects earnings.
Northern Indiana expects to adopt this Statement on January 1, 2000, and is
currently assessing the impact of adoption on its financial position and
results of operations.
In December 1998, the Emerging Issues Task Force reached consensus on
Issue No. 98-10, "Accounting for Contracts Involved in Energy Trading and Risk
Management Activities" (EITF Issue 98-10). EITF Issue 98-10 requires energy
trading contracts to be recorded at fair value on the balance sheet, with the
changes in fair value included in earnings. Northern Indiana adopted EITF
Issue 98-10 on January 1, 1999 and the adoption did not have a significant
impact on its financial position or results of operations
In March 1998, the American Institute of Certified Public Accountants
(AICPA) issued Statement of Position (SOP) 98-1, "Accounting for the Costs of
Computer Software Developed or Obtained for Internal Use." This SOP provides
guidance for the capitalization of certain costs related to computer software
developed or obtained for internal use. Northern Indiana adopted SOP 98-1 on
January 1, 1999 and the adoption did not have a significant impact on its
financial position or results of operations.
REGULATORY ASSETS. Northern Indiana's operations are subject to the
regulation of the Commission and FERC. Accordingly, Northern Indiana's
accounting policies are subject to the provisions of SFAS No. 71, "Accounting
for the Effects of Certain Types of Regulation." Northern Indiana monitors
changes in market and regulatory conditions and the resulting impact of such
changes in order to continue to apply the provisions of SFAS No. 71 to some or
all of its operations. As of December 31, 1998 and December 31, 1997, the
regulatory assets identified below represent probable future revenue to Northern
Indiana associated with certain incurred costs as these costs are recovered
through the rate-making process. If a portion of Northern Indiana's operations
becomes no longer subject to the provisions of SFAS No. 71, a write-off of
certain regulatory assets might be required, unless some form of transition cost
recovery is established by the appropriate regulatory body which would meet the
requirements under generally accepted accounting principles for continued
accounting as regulatory assets during such recovery period. Regulatory assets
were comprised of the following items:
December 31, December 31,
1998 1997
============= =============
(Dollars in thousands)
Unamortized reacquisition premium on
debt (Note 14) $ 42,962 $ 46,426
Unamortized R. M. Schahfer Unit 17 and
Unit 18 carrying charges
and deferred depreciation (See below) 62,329 66,546
Bailly scrubber carrying charges and
deferred depreciation (See below) 8,945 9,880
Deferral of SFAS No. 106 expense not
recovered (Note 8) 78,367 83,965
FERC Order No. 636 transition costs (Note 4) 22,093 28,744
Regulatory income tax asset, net (Note 6) 21,635 9,664
------------- -------------
236,331 245,225
------------- -------------
Less: Current portion of regulatory assets 32,609 39,260
------------- -------------
$ 203,722 $ 205,965
============= =============
CARRYING CHARGES AND DEFERRED DEPRECIATION. Upon completion of R. M.
Schahfer Units 17 and 18, Northern Indiana capitalized the carrying charges
and deferred depreciation in accordance with orders of the Commission until
the cost of each unit was allowed in rates. Such carrying charges and
deferred depreciation are being amortized over the remaining life of each
unit.
Northern Indiana has capitalized carrying charges and deferred
depreciation and certain operating expenses relating to its scrubber service
agreement for its Bailly Generating Station in accordance with an order of
the Commission. The accumulated balance of the deferred costs and related
carrying charges is being amortized over the remaining life of the scrubber
service agreement.
ALLOWANCE FOR FUNDS USED DURING CONSTRUCTION. Allowance for funds
used during construction (AFUDC) is charged to construction work in progress
during the period of construction and represents the net cost of borrowed
funds used for construction purposes and a reasonable rate upon other (equity)
funds. Under established regulatory rate practices, after the construction
project is placed in service, Northern Indiana is permitted to include in the
rates charged for utility services (a) a fair return on and (b) depreciation
of such AFUDC included in plant in service.
At January 1, 1996 a pretax rate of 5.5% for all construction was
being used; effective January 1, 1997 the rate remained at 5.5%; and effective
January 1, 1998, the rate increased to 5.75%.
INCOME TAXES. Deferred income taxes are recognized as costs in the
rate-making process by the commissions having jurisdiction over the rates
charged by Northern Indiana. Deferred income taxes are provided as a result
of provisions in the income tax law that either require or permit certain
items to be reported on the income tax return in a different period than they
are reported in the financial statements. These taxes are reversed by a debit
or credit to deferred income tax expense as the temporary differences reverse.
Investment tax credits have been deferred and are being amortized to income
over the life of the related property.
(3) FERC ORDER NO. 636: Since December 1993, Northern Indiana has paid
approximately $138.2 million of interstate pipeline transition costs to
pipeline suppliers to reflect the impact of FERC Order No. 636. Northern
Indiana expects that additional transition costs will not be significant. The
Commission has approved the recovery of these FERC-allowed transition costs on
a volumetric basis from sales and transportation customers. Regulatory
assets, in amounts corresponding to the costs recorded but not yet collected,
have been recorded to reflect the ultimate recovery of these costs.
(4) ENVIRONMENTAL MATTERS:
GENERAL. The operations of Northern Indiana are subject to extensive and
evolving federal, state, and local environmental laws and regulations intended
to protect the public health and the environment. Such environmental laws
and regulations affect Northern Indiana's operations as they relate to impacts
on air, water and land.
SUPERFUND. Because Northern Indiana is a "potentially responsible party"
(PRP), under Comprehensive Environmental Response, Compensation and Liability
Act (CERCLA), at several waste disposal sites as well as at former manufactured-
gas plant sites which it, or its corporate predecessors, owned and operated, it
may be required to share in the costs of clean up of such sites. Northern
Indiana instituted a program to investigate former manufactured-gas plant sites
where it is the current or former owner which investigation has identified
twenty -four of these sites. Initial sampling has been conducted at seventeen
sites. Follow-up investigations have been conducted at eleven sites and
remedial measures have been selected at five sites. Northern Indiana intends
to continue to evaluate its facilities and properties with respect to
environmental laws and regulations and take any required corrective action.
In an effort to recover a portion of the remediation costs to be incurred
at he manufactured gas plants, Northern Indiana approached various companies
that provided insurance coverage which Northern Indiana believed covered costs
costs related to actions taken and to be taken at former manufactured-gas plant
sites. Northern Indiana has filed claims in Indiana state court against various
insurance companies, seeking coverage for costs associated with several
manufactured-gas plant sites and damages for alleged misconduct by some of the
insurance companies. Northern Indiana has received cash settlements from
several insurance companies. Additionally, Northern Indiana has settled other
actions against other companies relating to cost sharing and management of the
investigation and remediation of several former manufactured-gas plant sites at
which Northern Indiana and such companies or their predecessors were operators
or owners.
As of December 31, 1998, Northern Indiana has recorded a reserve of
$19 million to cover probable corrective actions. Northern Indiana's ultimate
liability in connection with those sites will depend upon many factors,
including the volume of material contributed to the site, the number of other
PRP's and their financial viability, and the extent of corrective actions
required. Based upon investigations and management's understanding of current
environmental laws and regulations, Northern Indiana believes that any
corrective actions required, after consideration of insurance coverages and
contributions from other PRP's, will not have a significant impact on its
financial position or results of operations.
CLEAN AIR ACT. The Clean Air Act Amendments of 1990 (CAAA) impose limits
to control acid rain on the emission of sulfur dioxide and nitrogen oxides (NOx)
which become fully effective in 2000. All of Northern Indiana's facilities
are already in compliance with the sulfur dioxide limits. Northern Indiana
has already taken most of the steps necessary to meet the nitrogen oxide limits.
The CAAA also contain other provisions that could lead to limitations on
emissions of hazardous air pollutants and other air pollutants (including
NOx as discussed below), which may require significant capital expenditures for
control of these emissions. Until specific rules have been issued that affect
Northern Indiana's facilities, Northern Indiana cannot predict what these
requirements will be or the costs of complying with these potential
requirements.
NITROGEN OXIDES. During 1998, the Environmental Protection Agency (EPA)
issued a final rulemaking, the NOx State Implementation Plan (SIP) call,
requiring certain states, including Indiana, to reduce NOx levels from
industrial and utility boilers to lower regional transport of ozone under the
non-attainment provisions of the CAAA. According to the rule, the State of
Indiana has until September 1999 to issue regulations implementing the control
program. The State of Indiana, as well as some other states, filed a legal
challenge in December 1998 to the EPA NOx SIP call rule. Lawsuits have also
been filed against the rule by various groups, including industry, labor,
cities and towns and chambers of commerce. Northern Indiana will participate
in the legal challenge as a member of a utility industry group. Any resulting
NOx emission limitations could be more restrictive than those imposed on
electric utilities under the Acid Rain NOx reduction program described above.
Northern Indiana is evaluating the EPA's final rule and any potential
requirements that could result from the final rule as implemented by the State
of Indiana. Northern Indiana believes that the costs relating to compliance
with the new standards may be substantial, but such costs are dependent upon the
outcome of the current litigation and the ultimate control program agreed to
by the targeted states and the EPA. Northern Indiana will continue to closely
monitor developments in this area.
The EPA issued final rules revising the National Ambient Air Quality
Standards for ozone and particulate matter in July 1997. The revised
standards could require additional reductions in sulfur dioxide, particulate
matter and NOx emissions from coal-fired boilers (including Northern Indiana's
generating stations) beyond measures discussed above. Certain implementation
proposals, which are not yet final, would target coal-fired utilities in the
Midwest and South, including Indiana, for more substantial reductions than
other areas and other sources of emissions. Final implementation methods will
be set by the EPA as well as state regulatory authorities. Northern Indiana
believes that the costs relating to compliance with the new standards may be
substantial but are dependent upon the ultimate control program agreed to by the
targeted states and the EPA. Northern Indiana will continue to closely monitor
developments in this area and anticipates the exact nature of the impact of the
new standards on its operations will not be known for some time.
CARBON DIOXIDE. Initiatives are being discussed both in the United States
and worldwide to reduce so-called "greenhouse gases" such as carbon dioxide and
other by-products of burning fossil fuels. Reduction of such emissions could
result in significant capital outlays or operating expenses to Northern Indiana.
CLEAN WATER ACT AND RELATED MATTERS. Northern Indiana's wastewater and
water operations are subject to pollution control and water quality control
regulations, including those issued by the EPA and the State of Indiana.
Under the Federal Clean Water Act and Indiana's regulations, Northern
Indiana must obtain National Discharge Elimination System (NPDES) permits for
water discharges from various water discharges from various facilities,
including electric generating and water treatment stations. These facilities
either have permits for their water discharge or they have applied for
renewals of any expiring permits. These permits continue in effect pending
review of the current applications.
(5) INCOME TAXES: Northern Indiana uses the liability method of accounting
for income taxes under which deferred income taxes are recognized, at
currently enacted income tax rates, to reflect the tax effect of temporary
differences between the financial statement and tax bases of assets and
liabilities.
To the extent certain deferred income taxes are recoverable or payable
through future rates, regulatory assets and liabilities have been established.
Regulatory assets are primarily attributable to undepreciated AFUDC-equity and
the cumulative net amount of other income tax timing differences for which
deferred taxes had not been provided in the past, when regulators did not
recognize such taxes as costs in the rate-making process. Regulatory
liabilities are primarily attributable to Northern Indiana's obligation to
credit to ratepayers deferred income taxes provided at rates higher than the
current federal income tax rate currently being credited to ratepayers using
the average rate assumption method and unamortized deferred investment tax
credits.
Northern Indiana joins in the filing of consolidated tax returns with
Industries and currently pays to Industries its separate return tax liability
as defined in the Tax Sharing Agreement between Industries and its
subsidiaries.
The components of the net deferred income tax liability at December 31,
1998 and 1997 are as follows:
1998 1997
=========== ===========
(Dollars in thousands)
Deferred tax liabilities -
Accelerated depreciation
and other property differences $ 748,189 $ 729,153
AFUDC-equity 33,029 35,282
Adjustment clauses 14,322 33,829
Other regulatory assets 29,721 31,844
Reacquisition premium on debt 16,293 17,607
Deferred tax assets -
Deferred investment tax credits (35,154) (37,869)
Removal costs (157,728) (144,111)
Other postretirement/postemployment
benefits (48,208) (43,680)
Other, net (2,112) (5,132)
----------- -----------
598,352 616,923
Less: Deferred income taxes related to
current assets and liabilities (10,583) 13,987
----------- -----------
Deferred income taxes - noncurrent $ 608,935 $ 602,936
=========== ===========
Federal and state income taxes as set forth in the Consolidated
Statement of Income are comprised of the following:
1998 1997 1996
========= ========= =========
(Dollars in thousands)
Current income taxes -
Federal $ 140,364 $ 108,902 $ 77,947
State 20,156 16,816 12,314
--------- --------- ---------
160,520 125,718 90,261
--------- --------- ---------
Deferred income taxes, net -
Federal (30,290) (7,998) 23,817
State (2,284) (416) 2,300
--------- --------- ---------
(32,574) (8,414) 26,117
--------- --------- ---------
Deferred investment tax credits, net (7,160) (7,205) (7,327)
--------- --------- ---------
Total utility income taxes 120,786 110,099 109,051
Income tax applicable to non-operating
activities and income of subsidiaries (1,937) (3,536) (936)
--------- --------- ---------
Total income taxes $ 118,849 $ 106,563 $ 108,115
========= ========= =========
A reconciliation of total tax expense to an amount computed by applying
the statutory federal income tax rate to pretax income is as follows:
1998 1997 1996
========= ========= =========
(Dollars in thousands)
Net income $ 220,180 $ 196,620 $ 197,310
Add - Income taxes 118,849 106,563 108,115
--------- --------- ---------
Net Income before income taxes $ 339,029 $ 303,183 $ 305,425
========= ========= =========
Amount derived by multiplying pretax
income by statutory rate $ 118,660 $ 106,114 $ 106,899
Reconciling items multiplied by the
statutory rate:
Book depreciation over related tax
depreciation 3,992 4,072 4,621
Amortization of deferred investment tax
credits (7,160) (7,205) (7,327)
State income taxes, net of federal income
tax benefit 10,817 10,247 10,240
Reversal of deferred taxes provided at
rates in excess of the current federal
income tax rate (4,384) (6,151) (6,644)
Other, net (3,076) (514) 326
--------- --------- ---------
Total income taxes $ 118,849 $ 106,563 $ 108,115
========= ========= =========
(6) PENSION PLAN: Industries has a noncontributory, defined benefit
retirement plan covering substantially all employees of Northern Indiana.
Benefits under the plan reflect the employees' compensation, years of service
and age at retirement.
The change in the benefit obligation for 1998 and 1997 is as follows:
1998 1997
========= =========
(Dollars in thousands)
Benefit obligation at beginning $ 843,049 $ 732,870
of year (January 1,)
Service cost 15,347 13,325
Interest cost 58,336 55,920
Plan amendments 14,655 25,096
Actuarial loss 37,248 67,975
Benefits paid (54,362) (52,137)
--------- ---------
Benefit obligation at end of
the year (December 31,) $ 914,273 $ 843,049
========= =========
The change in the fair value of the plan's assets for years 1998 and
1997 is as follows:
1998 1997
========= =========
(Dollars in thousands)
Fair value of plan assets at $ 896,950 $ 782,162
beginning of year January 1,)
Actual return on plan's assets 82,547 122,537
Employer contributions 33,300 44,388
Benefits paid (54,362) (52,137)
--------- ---------
Plan assets at fair value at
end of the year (December 31,) $ 958,435 $ 896,950
========= =========
The plan's assets are invested primarily in common stocks, bonds and
notes.
The plan's funded status as of December 31, 1998 and December 31, 1997 is
as follows:
1998 1997
========= =========
(Dollars in thousands)
Plan assets in excess of $ 44,162 $ 53,901
benefit obligation
Unrecognized net actuarial loss (16,162) (51,191)
Unrecognized prior service cost 55,761 45,502
Unrecognized transition amount
being recognized over
seventeen years 27,442 32,930
--------- ---------
Prepaid pension costs $ 111,203 $ 81,142
========= =========
The benefit obligation is the present value of future pension benefit
payments and is based on the plan benefit formula which considers expected
future salary increases. Discount rates of 7.0% and rates of increase in
compensation levels of 4.5% were used to determine the benefit obligations at
December 31, 1998 and 1997.
The long-term portion of prepaid pension cost amounts for 1998 and 1997
are included in "Prepayments and other" in the Consolidate Balance Sheet.
The following items are the components of provisions for pensions for
the years ended December 31, 1998, 1997 and 1996:
1998 1997 1996
========= ========= =========
(Dollars in thousands)
Service costs $ 15,347 $ 13,325 $ 15,877
Interest costs 58,337 55,921 52,788
Expected return on plan assets (80,329) (70,482) (62,844)
Amortization of transition obligation 5,488 5,488 5,488
Amortization of prior service cost 4,397 3,329 2,455
--------- --------- ---------
$ 3,240 $ 7,581 $ 13,764
========= ========= =========
Assumptions used in the valuation and determination of 1998, 1997 and
1996 pension expense were as follows:
1998 1997 1996
====== ====== ======
Discount rate 7.00% 7.75% 7.25%
Rate of increase in compensation levels 4.50% 5.50% 5.50%
Expected long-term rate of return on assets 9.00% 9.00% 9.00%
(7) POSTRETIREMENT BENEFITS: Northern Indiana provides certain health care
and life insurance benefits for retired employees. Substantially all of
Northern Indiana's employees may become eligible for those benefits if they
reach retirement age while working for Northern Indiana. The expected cost of
such benefits is accrued during the employees' years of service.
Northern Indiana's rate-making had historically included the cost of
providing these benefits based on the related insurance premiums. On
December 30, 1992, the Commission authorized the accrual method of accounting
for postretirement benefits for rate-making purposes consistent with SFAS No.
106 "Employers' Accounting for Postretirement Benefits Other Than Pensions,"
and authorized the deferral of the differences between the net periodic
postretirement benefit costs and the insurance premiums paid for such benefits
as a regulatory asset. On June 11, 1997, the Commission issued an order
approving the inclusion of accrual-based postretirement benefit costs in the
rate-making process to be effective February 1, 1997 for electric rates and
March 1, 1997 for gas rates. These costs include an amortization of the
existing regulatory asset consistent with the remaining amortization period for
the transition obligation. Northern Indiana discontinued its cost deferral and
began amortizing its regulatory asset concurrent with these dates.
The following table sets forth the change in the plan's accumulated
postretirement benefit obligation (APBO)as of December 31, 1998 and 1997:
1998 1997
========= =========
(Dollars in thousands)
Accumulated postretirement $ 195,003 $ 194,937
benefit obligation at
beginning of year (January 1,)
Service cost 3,314 3,068
Interest cost 13,685 14,523
Plan amendments 0 4,015
Actuarial (gain)loss 6,260 (12,534)
Benefits paid (11,183) (9,006)
--------- ---------
Accumulated postretirement
benefit obligation at
end of the year (December 31,) $ 207,079 $ 195,003
========= =========
The change in the fair value of the plan assets for the years 1998 and
1997 is as follows:
1998 1997
========= =========
(Dollars in thousands)
Fair value of plan assets at $ 2,400 $ 0
beginning of year (January 1,)
Actual return on plan assets 1,103 0
Employer contributions 9,301 11,406
Participant contributions 1,282 0
Benefits paid (11,183) (9,006)
--------- ---------
Plan assets at fair value at
end of the year (December 31,) $ 2,903 $ 2,400
========= =========
Following is the funded status for postretirement benefits as of
December 31, 1998 and 1997:
1998 1997
========= =========
(Dollars in thousands)
Funded status $(204,176) $(192,603)
Unrecognized net actuarial gain (90,700) (99,262)
Unrecognized prior service cost 3,458 3,737
Unrecognized transition amount
being recognized over
twenty years 150,466 161,214
--------- ---------
Accrued liability for
postretirement benefits $(140,952) $(126,914)
========= =========
A discount rate of 7%, a pre-Medicare medical trend rate of 7% declining
to a long-term rate of 5%; a discount rate of 7%, and a pre-Medicare medical
trend rate of 8% declining to a long-term rate of 5%, were used to determine
the APBO at December 31, 1998 and 1997, respectively.
Net periodic postretirement benefit costs, before consideration of the
rate-making discussed above, for the years ended December 31, 1998, 1997 and
1996 include the following components:
1998 1997 1996
========= ========= =========
(Dollars in thousands)
Service costs $ 3,314 $ 3,068 $ 5,853
Interest costs 13,685 14,523 17,973
Expected return on plan assets (216) 0 0
Amortization of transition obligation
over twenty years 10,748 10,747 11,348
Amortization of prior service cost 279 279 0
Amortization of actuarial gain (5,786) (5,778) (497)
--------- --------- ---------
$ 22,024 $ 22,839 $ 34,677
========= ========= =========
Assumptions used in the determination of 1998, 1997 and 1996 net periodic
postretirement costs were as follows:
1998 1997 1996
====== ====== ======
Discount rate 7.00% 7.75% 7.25%
Rate of increase in compensation increase 4.50% 5.50% 5.00%
Assumed annual rate of increase in health
care benefits 8.00% 8.00% 9.00%
Assumed ultimate trend rate 5.00% 6.00% 6.00%
The effect of a 1% increase in the assumed health care cost trend
rates for each future year would increase the APBO at December 31, 1998 by
approximately $25.8 million, and increase the aggregate of the service and
interest cost components of plan costs by approximately $2.4 million for the
year ended December 31, 1998. The effect of a 1% decrease in the assumed
health care cost trend rates for each future year would decrease the APBO at
December 31, 1998, by approximately $20.0 million, and decrease the aggregate
of the service and interest cost components of plan costs by approximately $1.9
million for the year ended December 31, 1998. Amounts disclosed above could be
changed significantly in the future by changes in health care costs, work force
demographics, interest rates, or plan changes.
(8) AUTHORIZED CLASSES OF CUMULATIVE PREFERRED AND PREFERENCE STOCKS OF
NORTHERN INDIANA:
2,400,000 shares - Cumulative Preferred - $100 par value
3,000,000 shares - Cumulative Preferred - no par value
2,000,000 shares - Cumulative Preference - $50 par value
(none outstanding)
3,000,000 shares - Cumulative Preference - no par value
(none issued)
Note 9 sets forth the preferred stocks which are redeemable solely at
the option of Northern Indiana and Note 10 sets forth the preferred stocks
which are subject to mandatory redemption requirements or whose redemption is
outside the control of Northern Indiana.
The Preferred shareholders of Northern Indiana have no voting rights,
except in the event of default on the payment of four consecutive quarterly
dividends, or as required by Indiana law to authorize additional preferred
shares, or by the Articles of Incorporation in the event of certain merger
transactions.
(9) PREFERRED STOCKS, REDEEMABLE SOLELY AT OPTION OF NORTHERN INDIANA (SEE
NOTE 8):
The redemption prices at December 31, 1998 for the cumulative preferred
stock of Northern Indiana, which is redeemable solely at the option of
Northern Indiana, in whole or in part, at any time upon thirty days' notice,
are as follows:
Redemption
Price
Series Per Share
============================================= ==========
Cumulative preferred stock - $100 par value -
4-1/4% $ 101.20
4-1/2% $ 100.00
4.22% $ 101.60
4.88% $ 102.00
7.44% $ 101.00
7.50% $ 101.00
Cumulative preferred stock - no par value -
Adjustable rate (6.00% at December 31, 1998),
Series A (stated value $50 per share) $ 50.00
(10) REDEEMABLE PREFERRED STOCKS (SEE NOTE 9):
The redemption prices at December 31, 1998, as well as sinking fund
provisions, for the cumulative preferred stock subject to mandatory
redemption requirements, or whose redemption is outside the control
of Northern Indiana, are as follows:
Sinking Fund Or Mandatory
Series Redemption Price Per Share Redemption Provisions
====== ============================ ==============================
Cumulative preferred stock - $100 par value -
8.85% $100.74, reduced periodically 12,500 shares on or before
April 1.
8.35% $103.44, reduced periodically 3,000 shares on or before
July 1; increasing to 6,000
shares beginning in 2004;
noncumulative option to
double amount each year.
7-3/4% $104.06, reduced periodically 2,777 shares on or before
December 1; noncumulative
option to double amount
each year.
Cumulative preferred stock - no par value -
6.50% $100.00 on October 14, 2002 430,000 shares on
October 14, 2002.
Sinking fund requirements with respect to redeemable preferred stocks
outstanding at December 31, 1998 for each of the four years subsequent to
December 31, 1999 are as follows:
Year Ending December 31,
========================
2000 $ 1,827,700
2001 $ 1,827,700
2002 $ 1,827,700
2003 $ 1,827,700
(11) COMMON SHARE DIVIDEND: Northern Indiana's Indenture dated August 1,
1939, as amended and supplemented (Indenture), provides that it will not
declare or pay any dividends on any class of capital stock (other than
preferred or preference stock) except out of earned surplus or net profits
of Northern Indiana. At December 31, 1998, Northern Indiana had
approximately $146.1 million of retained earnings (earned surplus) available
for the payment of dividends. Future dividends will depend upon adequate
retained earnings, adequate future earnings and the absence of adverse
developments.
(12) COMMON SHARES: Effective with the exchange of common shares on March 3,
1988, all of Northern Indiana's common shares are owned by Industries.
On December 16, 1997, the Industries Board of Directors authorized a
two- for-one stock split of Industries' common shares. The stock split was paid
February 20, 1998, to shareholders of record at the close of business on
January 30, 1998. All references to number of common shares reported for the
period including per share amounts and stock option data of Industries' common
shares reflect the two-for-one stock split as if it had occurred at the
beginning of the earliest period.
(13) LONG-TERM INCENTIVE PLAN: Industries has two long-term incentive plans
for key management employees, including management of Northern Indiana,
that were approved by shareholders on April 13, 1988 (1988 Plan), and April 13,
1994 (1994 Plan), each of which provides for the issuance of up to 5.0 million
of Industries' common shares to key employees through April 1998 and April 2004,
respectively. At December 31, 1998, there were 3,244,700 shares reserved for
future awards under the 1994 Plan. The Plans permit the following types of
grants, separately or in combination: nonqualified stock options, incentive
stock options, restricted stock awards, stock appreciation rights and
performance units. No incentive stock options or performance units were
outstanding at December 31, 1998. Under the Plans, the exercise price of each
option equals the market price of Industries' common stock on the date of grant.
Each option has a maximum term of ten years and vests one year from the date of
grant.
Stock appreciation rights (SARs) may be granted only in tandem with stock
options on a one-for-one basis and are payable in cash, Industries' common
shares, or a combination thereof. There were no SARs outstanding at
December 31, 1998. Restricted stock awards are restricted as to transfer and
are subject to forfeiture for specific periods from the date of grant.
Restrictions on shares awarded in 1995 lapse five years from date of grant and
vesting is variable from 0% to 200% of the number awarded, subject to specific
earnings per share and stock appreciation goals. Restrictions on shares awarded
in 1997 and 1998 lapse two years from date of grant and vesting is variable from
0% to 100% of the number awarded, subject to specific performance goals. If a
participant's employment is terminated prior to vesting other than by reason of
death, disability or retirement, restricted shares are forfeited. There were
534,666, 542,666 and 524,000 restricted shares outstanding at December 31, 1998,
1997 and 1996, respectively.
Northern Indiana accounts for its allocable portion of these plans
under Accounting Principles Board Opinion No. 25, under which no compensation
cost has been recognized for non-qualified stock options. The compensation
cost that has been charged against net income for restricted stock awards was
$0.8 million $0.7 million and $0.9 million for the years ended December 31,
1998, 1997 and 1996, respectively. Had compensation cost for non-qualified
stock options been determined consistent with SFAS No. 123 "Accounting for
Stock-Based Compensation," Northern Indiana's net income would have been
reduced to the following pro forma amounts.
Year Ended December 31,
------------------------------
1998 1997 1996
======== ======== ========
(Dollars in thousands)
Net Income:
As reported $220,180 $196,620 $197,310
Pro forma $219,058 $195,770 $196,663
The fair value of each option granted as used to determine pro forma net
income is estimated as of the date of grant using the Black-Scholes option
pricing model with the following weighted average assumptions used for grants
in the years ended December 31, 1998, 1997 and 1996, respectively: Risk-free
interest rate of 5.70%, 6.29% and 6.39%, expected dividend yield of $0.67,
$0.87 and $0.84 per share; expected option term of five and one-quarter years
for 1998 and 1997 and five years for 1996; and expected volatility of 12.7% for
1998 and 1997 and 13.2% for 1996. The weighted average fair value of options
granted to all plan participants was $4.28, $2.66 and $2.50 for the years ended
December 31, 1998, 1997 and 1996, respectively. There were 607,000, 553,600
and 556,600 non-qualified stock options granted to all plan participants for
the years ended December 31, 1998, 1997 and 1996, respectively.
(14) LONG-TERM DEBT: The sinking fund requirements of long-term debt
outstanding at December 31, 1998 (including the maturity of first mortgage
bonds: Series T, 7-1/2%, due April 1, 2002; the medium-term notes due
from March 20, 2000 to July 8, 2003; and Pollution Control Note, Series A,
City of Michigan City 5.70%, due October 1, 2003), for each of the four years
subsequent to December 31, 1999 are as follows:
Year Ending December 31,
========================
2000 $158,000,000
2001 $ 19,000,000
2002 $ 59,000,000
2003 $130,000,000
Unamortized debt expense, premium and discount on long-term debt
applicable to outstanding bonds are being amortized over the lives of such
bonds. Reacquisition premiums are being deferred and amortized. These
premiums are not earning a return during the recovery period.
Northern Indiana's Indenture, securing the first mortgage bonds issued by
Northern Indiana, constitutes a direct first mortgage lien upon substantially
all property and franchises owned by Northern Indiana, other than expressly
excepted property.
On May 28, 1997, Northern Indiana was authorized to issue and sell up to
$217,692,000 of its Medium-Term Notes, Series E, with various maturities, for
purposes of refinancing certain first mortgage bonds and medium-term notes.
As of December 31, 1998, $139.0 million of the medium-term notes had been
issued with various interest rates and maturities. The proceeds from these
issuances were used to pay short-term debt incurred to redeem its First
Mortgage Bonds, Series N, and to pay at maturity various issues of Medium-Term
Notes, Series D.
(15) CURRENT PORTION OF LONG-TERM DEBT: At December 31, 1998 and 1997,
Northern Indiana's current portion of long-term debt due within one year was
as follows:
December 31, December 31,
1998 1997
============ ============
(Dollars in thousands)
NORTHERN INDIANA PUBLIC SERVICE COMPANY:
First mortgage bonds -
Series P, 6-7/8% - due October 1, 1998 $ 0 $ 14,509
Medium-term notes -
Interest rates of 5.83% and 5.95% with a
weighted average interest rate of 5.86%
and maturities between April 6, 1998
and April 13, 1998 0 35,000
Sinking funds due within one year 2,000 1,500
------------ ------------
Total current portion of long-term debt $ 2,000 $ 51,009
============ ============
(16) SHORT-TERM BORROWINGS: Northern Indiana makes uses of commercial paper
to fund short-term working capital requirements.
In September 1998, Northern Indiana entered into a five-year $100
million revolving credit agreement and a 364-day $100 million revolving credit
agreement with several banks. These agreements terminate on September 23, 2003
and September 23, 1999, respectively. The 364-day agreement may be extended at
expiration for additional periods of 364-days upon the request of Northern
Indiana and agreement by the banks. Under these agreements, Northern Indiana
may borrow funds at a floating rate of interest or, at Northern Indiana's
request under certain circumstances, a fixed rate of interest for a short
term period. These agreements provide financing flexibility to Northern Indiana
and may be used to support the issuance of commercial paper. At December 31,
1998, there were no borrowings outstanding under either of these agreements.
Concurrently with entering into such agreements, Northern Indiana terminated its
then existing revolving credit agreement which would otherwise have terminated
on August 19, 1999.
In addition, Northern Indiana has $14.2 million in lines of credit which
run to May 31, 1999. The credit pricing of each of the lines varies from either
the lending banks' commercial prime or market rates. Northern Indiana has
agreed to compensate the participating banks with arrangements that vary from no
commitment fees to a combination of fees which are mutually satisfactory to both
parties. As of December 31, 1998, there were no borrowings under these lines of
credit. The lines of credit are also available to support the issuance of
commercial paper.
Northern Indiana also has $273.5 million of money market lines of
credit. As of December 31, 1998 and 1997, $40.5 million and $47.5 million
of borrowings, respectively, were outstanding under these lines of credit.
Northern Indiana has a $50 million uncommitted finance facility. At
December 31, 1998 and 1997, there were no borrowings outstanding under this
facility.
At December 31, 1998 and 1997, Northern Indiana's short-term borrowings
were as follows:
December 31, December 31,
1998 1997
============ ============
(Dollars in thousands)
NORTHERN INDIANA PUBLIC SERVICE COMPANY:
Commercial paper -
Weighted average interest rate of 5.62%
at December 31, 1998 $ 85,600 $ 71,500
Notes payable -
Interest rates between 5.83%
and 5.95% with a weighted average
interest rate of 5.86% and various
maturities between April 11, 1999
January 21, 1999 40,500 47,500
------------ ------------
Total short-term borrowings $ 126,100 $ 119,000
============ ============
(17) OPERATING LEASES: On April 1, 1990, Northern Indiana entered into a
twenty-year agreement for the rental of office facilities from NIPSCO
Development Company, Inc., a subsidiary of Industries, at a current annual
rental payment of approximately $3.4 million.
The following is a schedule, by years, of future minimum rental
payments, excluding those to associated companies, required under operating
leases that have initial or remaining noncancelable lease terms in excess of
one year as of December 31, 1998:
Year Ending December 31, (Dollars in thousands)
======================== ======================
1999 $ 3,939
2000 3,286
2001 3,055
2002 3,055
2003 3,055
Later years 30,088
---------
Total minimum payments required $ 46,478
=========
The consolidated financial statements include rental expense for all
operating leases as follows:
Year Ending December 31, (Dollars in thousands)
======================== ======================
1998 $ 9,391
1997 $ 7,675
1996 $ 9,249
(18) COMMITMENTS: Northern Indiana estimates that approximately $802
million will be expended for construction purposes for the period from
January 1, 1999 to December 31, 2003. Substantial commitments have been
made by Northern Indiana in connection with this program.
Northern Indiana has entered into a service agreement with Pure Air, a
general partnership between Air Products and Chemicals, Inc. and Mitsubishi
Heavy Industries America, Inc., under which Pure Air provides scrubber
services to reduce sulfur dioxide emissions for Units 7 and 8 at Bailly
Generating Station. Services under this contract commenced on June 15,
1992, with annual charges of approximately $20 million. The agreement
provides that, assuming various performance standards are met by Pure Air,
a termination payment would be due if Northern Indiana terminates the
agreement prior to the end of the twenty-year contract period.
During 1995, Northern Indiana entered into a ten year agreement with IBM
to perform all data center, application development and maintenance, and
desktop management. Annual fees under this agreement are estimated at $20
million.
(19) FAIR VALUE OF FINANCIAL INSTRUMENTS: The following methods and
assumptions were used to estimate the fair value of each class of financial
instruments for which it is practicable to estimate that value:
Cash and cash equivalents: The carrying amount approximates fair value
because of the short maturity of those instruments.
Investments: Investments are carried at cost, which approximates
market value.
Long-term debt/Preferred stock: The fair value of long-term debt and
preferred stock is estimated based on the quoted market prices for the
same or similar issues or on the rates offered to Northern Indiana for
securities of the same remaining maturities. Certain premium costs
associated with the early settlement of long-term debt are not taken
into consideration in determining fair value.
The carrying values and estimated fair values of Northern Indiana's
financial instruments are as follows:
December 31, 1998 December 31, 1997
---------------------- ----------------------
Carrying Estimated Carrying Estimated
Amount Fair Value Amount Fair Value
========== ========== ========== ==========
(Dollars in thousands)
Cash and cash
equivalents $ 19,541 $ 19,541 $ 9,800 $ 9,800
Investments $ 251 $ 251 $ 256 $ 256
Long-term debt
(including current
portion) $1,079,959 $1,137,657 $1,130,505 $1,128,851
Preferred stock $ 139,379 $ 136,316 $ 141,792 $ 135,317
Northern Indiana is subject to regulation and gain or losses may be
included in rates over a prescribed amortization period, if in fact settled at
amounts approximating those above.
(21) CUSTOMER CONCENTRATIONS: Northern Indiana is a public utility operating
company supplying natural gas and electrical energy in the northern third of
Indiana. Although Northern Indiana has a diversified base of residential and
commercial customers, a substantial portion of its electric and gas industrial
deliveries are dependent upon the basic steel industry. The following table
shows the basic steel industry percentage of gas revenue (including
transportation services) and electric revenue for 1998, 1997 and 1996.
Basic Steel Industry 1998 1997 1996
==================== ====== ====== ======
Gas revenue percent 4 % 5 % 2 %
Electric revenue percent 17 % 20 % 22 %
(22) QUARTERLY FINANCIAL DATA:
The following data summarize certain operating results for each of the
quarters of 1998 and 1997:
1998 Quarters Ended March 31 June 30 Sept. 30 Dec. 31
========== ========== ========== ==========
(Dollars in thousands)
Operating revenues $ 458,916 $ 370,470 $ 383,285 $ 435,932
Operating expenses and taxes 372,782 310,164 311,247 352,261
---------- ---------- ---------- ----------
Operating income 86,134 60,306 72,038 83,671
Other income (deductions) (608) (1,268) (1,061) (652)
Interest charges 19,752 19,236 19,748 19,644
---------- ---------- ---------- ----------
Net income 65,774 39,802 51,229 63,375
Dividend requirements on
preferred stock 2,116 2,077 2,072 2,070
---------- ---------- ---------- ----------
Balance available for
common shares $ 63,658 $ 37,725 $ 49,157 $ 61,305
========== ========== ========== ==========
1997 Quarters Ended March 31 June 30 Sept. 30 Dec. 31
========== ========== ========== ==========
(Dollars in thousands)
Operating revenues $ 551,498 $ 352,595 $ 360,727 $ 487,562
Operating expenses and taxes 463,646 300,026 305,224 402,366
---------- ---------- ---------- ----------
Operating income 87,852 52,569 55,503 85,196
Other income (deductions) (409) (1,036) (1,041) (1,173)
Interest charges 20,111 19,805 20,463 20,462
---------- ---------- ---------- ----------
Net income 67,332 31,728 33,999 63,561
Dividend requirements on
preferred stock 2,167 2,128 2,123 2,121
---------- ---------- ---------- ----------
Balance available for
common shares $ 65,165 $ 29,600 $ 31,876 $ 61,440
========== ========== ========== ==========
(23) BUSINESS SEGMENTS: Northern Indiana adopted SFAS No. 131 "Disclosures
about Segments of an Enterprise and Related Information" during 1998. SFAS
No. 131 establishes standards for reporting information about operating
segments in financial statements and disclosures about products and services,
and geographic areas. Operating segments are defined as components of
an enterprise for which separate financial information is available and
is evaluated regularly by the chief operating decision maker in deciding how
to allocate resources and in assessing performance.
Northern Indiana's reportable operating segments include regulated gas
and electric services. Northern Indiana supplies gas and electric services to
residential, commercial and industrial customers. The other category includes
gas exploration, real estate transactions, non-utility revenues and expenses,
and other corporate assets.
Northern Indiana's reportable segments are operations that are managed
separately and meet the quantitative thresholds required by SFAS No. 131.
Revenues for each of Northern Indiana's segments are attributable to
customers in the United States.
The following tables provide information about Northern Indiana's
business segments. Northern Indiana uses income before interest and income
taxes as its primary measurement for each of the reported segments.
Adjustments have been made to the segment information to arrive at information
included in the results of operations and financial position of Northern
Indiana. The accounting policies of the operating segments are the same as
those described in Note 2, "Summary of Significant Accounting Policies."
Adjust-
1998 Gas Electric Other ments Total
- ---- -------- ---------- -------- -------- ----------
(Dollars in thousands)
Operating revenues $572,485 $1,076,118 $ 0 $ 0 $1,648,603
Other income (deductions)$ 1,396 $ 549 $ (5,383) $ (151) $ (3,589)
Depreciation and
amortization $ 71,707 $ 156,840 $ 0 $ 0 $ 228,547
Income before interest
and utility income
taxes $ 59,364 $ 365,516 $ (5,554) $ 20 $ 419,346
Assets $775,305 $2,483,566 $393,078 $ 0 $3,651,949
Capital expenditures $ 58,544 $ 123,579 $ 0 $ 0 $ 182,123
Adjust-
1997 Gas Electric Other ments Total
- ---- -------- ---------- -------- -------- ----------
(Dollars in thousands)
Operating revenues $735,299 $1,017,083 $ 0 $ 0 $1,752,382
Other income (deductions)$ 823 $ 618 $ (4,695) $ (405) $ (3,659)
Depreciation and
amortization $ 69,182 $ 153,843 $ 0 $ 0 $ 223,025
Income before interest
and utility income
taxes $ 80,255 $ 312,405 $ (4,838) $ (262) $ 387,560
Assets $833,106 $2,507,905 $333,903 $ 0 $3,674,914
Capital expenditures $ 59,219 $ 115,012 $ 0 $ 0 $ 174,231
Adjust-
1996 Gas Electric Other ments Total
- ---- -------- ---------- -------- -------- ----------
(Dollars in thousands)
Operating revenues $731,874 $1,022,231 $ 0 $ 0 $1,754,105
Other income (deductions)$ 355 $ 897 $ (575) $ (437) $ 240
Depreciation and
amortization $ 65,101 $ 146,444 $ 0 $ 0 $ 211,545
Income before interest
and utility income
taxes $ 89,316 $ 301,525 $ (556) $ (456) $ 389,829
Assets $867,891 $2,575,995 $330,394 $ 0 $3,774,280
Capital expenditures $ 51,563 $ 146,660 $ 0 $ 0 $ 198,223
The following table reconciles total reportable segment income before
interest and utility income taxes to Northern Indiana's consolidated net income
for each of the years ending 1998, 1997 and 1996 is as follows:
1998 1997 1996
========= ========= =========
(Dollars in thousands)
Income before interest and utility income taxes $ 419,346 $ 387,560 $ 389,829
Interest 78,380 80,841 83,468
Utility income taxes 120,786 110,099 109,051
--------- --------- ---------
Net Income $ 220,180 $ 196,620 $ 197,310
========= ========= =========
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
EXECUTIVE OFFICERS OF THE REGISTRANT
------------------------------------
Years with
Northern
Name Age Indiana Offices Held in Past 5 Years
===================== ==== ========== ==================================
Gary L. Neale 59 9 Chairman, President and Chief
Executive Officer since March 1993.
President and Chief Operating
Officer prior thereto.
Stephen P. Adik 55 11 Executive Vice President and Chief
Financial Officer since April 1997.
Executive Vice President and Chief
Financial Officer, Finance and
Administration from April 1996 to
March 1997. Executive Vice
President and Chief Financial
Officer from April 1994 to March
1996. Senior Vice President
and General Manager, Finance and
Accounting prior thereto.
Patrick J. Mulchay 57 36 President and Chief Operating
Officer since February 1999.
Executive Vice President and Chief
Operating Officer from July 1996 to
January 1999. Executive Vice
President and Chief Operating
Officer, Electric from January
1994 to June 1996. Vice President
and General Manager, Gas Operations
prior thereto.
Jeffrey W. Yundt 53 19 Executive Vice President since July
1996. Executive Vice President
and Chief Operating Officer, Gas
from January 1994 to June 1996.
Vice President and General Manager,
Energy Distribution prior thereto.
Jerry L. Godwin 56 4 Vice President and General Manager,
Electric Supply since July 1996.
Vice President, Electric Supply
from November 1994 to June 1996.
Peggy H. Landini 46 1 Vice President, Commercial
Operations since August 1998. Vice
President, Sales and Customer
Service from April 1998 to August
1998.
Robert W. Schacht 48 26 Vice President, Distribution
Operations since July 1996. Vice
President, Gas Service and Sales
from January 1994 to June 1996.
Director, West Region prior
thereto.
Francis P. Girot, Jr. 54 21 Treasurer since March 1990.
David J. Vajda 43 21 Controller since July 1996.
Director, Strategic and Business
Planning from January 1996 to June
June 1996. Auditor prior thereto.
Nina M. Rausch 55 21 Secretary since July 1992.
Mark D. Wyckoff 36 1 Assistant Secretary since April
1998.
Throughout the past five years, each of the executive officers has been
continuously active in the business of Northern Indiana except as follows:
Prior to October 31, 1994, Jerry L. Godwin was Senior Vice President, Wholesale
Marketing and Power Supply of Public Service Company of New Mexico; prior to
April 1, 1998, Peggy H. Landini was Director, Customer Service of Louisville
Gas & Electric Company; and prior to April 8, 1998, Mark D. Wyckoff was an
officer of Industries (he continues to service that company as Vice President,
Human Resources and Assistant Secretary) and of various subsidiaries of
Industries.
The following chart gives information about incumbent directors of
Northern Indiana. All of Northern Indiana's directors are also directors of
Industries. Upon recommendation of the Nominating and Compensation Committee
of the Board of Directors has nominated for re-election as directors Ian M.
Rolland and John W. Thompson, each for a term of three years to be voted upon
at the annual meeting of common shareholders of Industries to be held April 14,
1999.
Has Been
Name, Age and Principal Occupations for Past Director
Five Years and Present Directorships Held Since
============================================ ==========
DIRECTORS WHOSE TERMS EXPIRE IN 1999
Ian M. Rolland, 65-Director of Lincoln National 1978
Corporation, Fort Wayne, Indiana, an insurance and
financial services firm and Wells Fargo & Company.
Prior to his 1998 retirement as executive officer
of Lincoln National Corporation, Mr. Rolland served
as Chairman and Chief Executive Officer.
Edmund A. Schroer, 71-Retired March 1, 1993 as Chairman, 1977
President and Chief Executive Officer of Industries and
Chairman and Chief Executive Officer of Northern Indiana.
John W. Thompson, 49-General Manager-IBM Americas of IBM 1993
Corporation, White Plains, New York. IBM is a worldwide
corporation, whose offerings include services, software
systems, products and technologies. Mr. Thompson is
also a director of Fortune Brands Inc.
DIRECTORS WHOSE TERMS EXPIRE IN 2000
Arthur J. Decio, 68-Chairman of the Board and Director 1991
of Skyline Corporation, Elkhart, Indiana, a manufacturer
of manufactured housing and recreational vehicles. Mr.
Decio is also a director of Quality Dining, Inc.
Gary L. Neale, 59-Chairman, President and Chief Executive 1991
Officer of Industries and of Northern Indiana since
March 1, 1993; prior thereto, Executive Vice President
of Industries, and President and Chief Operating Officer
of Northern Indiana. Mr. Neale is also a director of
Modine Manufacturing Company and Chicago Bridge and
Iron Company.
Robert J. Welsh, 63-Chairman and Chief Executive Officer 1988
of Welsh, Inc., Merrillville, Indiana, a marketer of
petroleum products through convenience stores and travel
centers.
DIRECTORS WHOSE TERMS EXPIRE IN 2001
Steven C. Beering, 66-President of Purdue University, 1986
West Lafayette, Indiana. Dr. Beering is also a
director of Arvin Industries, Inc., American United
Life Insurance Company, Eli Lilly and Company and
Veridian Corporation, Inc.
Denis E. Ribordy, 69-Vice Chairman of the Chicago Motor 1981
Club, Chicago, Illinois; retired President of Ribordy
Drugs, Inc., Merrillville, Indiana, a retail drugstore
chain.
Carolyn Y. Woo, 44-Gillen Dean and Siegfried Professor, 1997
College of Business Administration, University of Notre
Dame, South Bend, Indiana. Dr. Woo is also a director
of Bindley Western Industries, Inc. and AON Corporation.
ITEM 11. EXECUTIVE COMPENSATION.
SUMMARY. The following table summarizes all annual and long-term
compensation for services to Industries and its subsidiaries, including
Northern Indiana, for the years 1998, 1997 and 1996 awarded to, earned by or
paid to the Chief Executive Officer of Industries during 1998 and the four
other most highly compensated officers of Industries (Named Officers).
SUMMARY COMPENSATION TABLE
Annual Compensation (1)
-----------------------------------
Other
annual
compen-
Salary Bonus sation
Name and principal position Year ($) ($)(2) ($)(3)
=========================== ==== ======== ======== ========
Gary L. Neale, Chairman, 1998 561,250 345,000 7,073
President and Chief 1997 520,000 390,000 6,711
Executive Officer 1996 460,000 236,624 5,161
Stephen P. Adik, Senior 1998 268,750 148,500 2,202
Executive Vice President, Chief 1997 250,000 171,250 2,575
Financial Officer and Treasurer 1996 205,000 84,952 9,103
Patrick J. Mulchay, Executive 1998 225,000 148,350 1,412
Vice President, President and 1997 210,000 150,675 851
Chief Operating Officer - Northern 1996 175,000 72,520 1,614
Indiana Public Service Company
Jeffrey W. Yundt, Executive 1998 225,000 124,200 6,348
Vice President and Chief 1997 210,000 143,850 8,905
Executive Officer - Bay State 1996 175,000 75,520 1,671
Gas Company
Joseph L. Turner, Senior Vice 1998 195,000 205,838(6) 2,203
President 1997 180,000 113,675(6) 1,175
1996 160,000 182,958 5,144
Long Term Compensation
----------------------
Awards Payouts
-------------------- --------
Secur- Long-Term
ities In- All
Under- centive other
lying Plan compen-
Options/ Payouts sation
Name and principal position Year SARs(#) ($)(4) ($)(5)
=========================== ==== ======== ======== =======
Gary L. Neale, Chairman, 1998 50,000 415,251 31,704
President and Chief 1997 50,000 0 42,993
Executive Officer 1996 50,000 567 188 40,129
Stephen P. Adik, Senior 1998 20,000 207,626 5,324
Executive Vice President, Chief 1997 20,000 0 5,673
Financial Officer and Treasurer 1996 20,000 283,594 5,919
Patrick J. Mulchay, Executive 1998 20,000 0 6,666
Vice President, President and 1997 20,000 0 7,506
Chief Operating Officer - Northern 1996 20,000 283,594 7,717
Indiana Public Service Company
Jeffrey W. Yundt, Executive 1998 20,000 0 3,485
Vice President, President and 1997 20,000 0 3,693
Chief Executive Officer-Bay State 1996 20,000 283,594 3,824
Gas Company
Joseph L. Turner, Senior 1998 10,000 0 6,948
Vice President 1997 8,000 0 7,599
1996 10,000 283,594 8,100
(1) Compensation deferred at the election of Named Officer is reported
in the category and year in which such compensation was earned.
(2) All bonuses are paid pursuant to the Senior Management Incentive Plan
(Bonus Plan), except for a portion of the Bonus Plan paid to Joseph
L. Turner, which is described in Note 6. The Bonus Plan is designed
to supplement a conservative base salary with incentive bonus payments
if targeted financial performance is attained. The 1998 target
aggregate payout for the Bonus Plan for the Named Officers was
$974,825, which was more than the actual aggregate payout for the
Named Officers.
(3) In accordance with applicable Securities and Exchange Commission
rules, the amounts shown for each of the Named Officers do not
include perquisites and other personal benefits, as the aggregate
amount of such benefits is less than the lesser of $50,000 and
10% of the total salary and bonus of such Named Officer.
(4) The payouts shown are based on the value, at date of vesting, of
restricted shares awarded under Industries' 1988 and 1994 Long-Term
Incentive Plans (Incentive Plans) which vested during the years shown.
Vesting was based on meeting certain performance requirements. Total
restricted shares held (assuming 100% vesting) and aggregate market
value at December 31, 1998 (based on the average of the high and low
sale prices of the Common Shares on that date as reported in "The
Wall Street Journal") for the Named Officers were as follows: Mr.
Neale, 128,000 shares valued at $3,860,006; Messrs. Adik, Mulchay
and Yundt, 50,000 shares, each valued at $1,507,815; and Mr. Turner,
29,645 shares (includes 5,645 shares purchased pursuant to the PE
Plan described in footnote 6) valued at $893,984. Dividends on the
restricted shares were paid to the Named Officers.
(5) The Chairman, President, and Chief Executive Officer, the
Executive Vice Presidents and certain Vice Presidents of Industries
and Northern Indiana have available to them a supplemental life
insurance plan which provides split-dollar coverage of up to 3.5
times base compensation as of commencement of the plan in 1991 and
could provide life insurance coverage after retirement if there is
adequate cash value in the respective policy. "All other
Compensation" represents Industries contributions to the 401(k) Plan
and the dollar value of the benefit to the Named Officers under
the supplemental life insurance plan, as follows: Mr. Neale-$1,066
401(k) Plan, $27,411 premium value and $3,228 term insurance cost;
Mr. Adik - $1,110 401(k) Plan, $3,252 premium value and $962 term
insurance cost; Mr. Mulchay, $362 401(k) Plan, $5,269 premium value
and $1,035 term insurance cost; Mr. Yundt, $2,754 premium value and
$731 term insurance cost and Mr. Turner - $5,253 premium value and
$1,695 term insurance cost. The value of the life insurance premiums
paid by Industries in excess of term insurance cost on behalf of the
Named Officers under the supplemental life insurance plan has been
restated for all periods in accordance with the present value
interest-free loan method.
(6) Joseph L. Turner is also President of Primary Energy, Inc., a
subsidiary of Industries, and participates in the Primary Energy
Incentive Plan ("PE Plan"). The PE Plan provides for a bonus based
on meeting certain financial performance criteria of Primary Energy.
Under the PE Plan, $93,023 of Mr. Turner's bonus for 1998 was used
to purchase Common Shares of Industries on or about February 26,
1999, the date of payment of the bonus. In 1997, $41,043 of Mr.
Turner's bonus under the PE Plan was used to purchase Common shares
of Industries on or about February 27, 1998, the date of payment of
the bonus. The PE Plan provides that the Common Shares are
restricted for a period of five years, subject to continued
employment, except that they vest earlier in the event of the
employee's retirement, death or disability.
OPTION GRANTS IN 1998. The following table sets forth grants of options
to purchase Common Shares made during 1998 to the Named Officers. No stock
appreciation rights were awarded during 1998.
OPTION/SAR/GRANTS IN LAST FISCAL YEAR
Individual Grants
Number
of
Secu- Percent of
rities Total
Under- Options/
lying SARs Grant
Options/ granted to Exercise Date
SARs Employees or Base Present
Granted in Fiscal Price Expiration Value
Name (#)(1) Year (2) ($/Sh)(3) Date ($) (4)
=================== ======== ========== ========= ========== ========
Gary L. Neale 50,000 8.2% $ 29.22 08/25/08 $214,000
Stephen P. Adik 20,000 3.3% 29.22 08/25/08 85,600
Patrick J. Mulchay 20,000 3.3% 29.22 08/25/08 85,600
Jeffrey W. Yundt 20,000 3.3% 29.22 08/25/08 85,600
Joseph L. Turner 10,000 1.6% 29.22 08/25/08 42,800
(1) All options granted in 1998 are fully exercisable commencing one year
from the date of grant. Vesting may be accelerated as a result of
certain events relating to a change in control of Industries. The
exercise price and tax withholding obligation related to exercise may
be paid by delivery of already owned Common Shares or by reducing
the number of Common Shares received on exercise, subject to certain
conditions.
(2) Based on an aggregate of 607,000 options granted to all employees in
1998.
(3) All options were granted at the average of high and low sale prices
of the Common Shares as reported in "The Wall Street Journal" on the
date of grant.
(4) Grant date present value is determined using the Black-Scholes option
pricing model. The assumptions used in the Black-Scholes option pricing
model were as follows: volatility-13.09% (calculated using daily Common
Share prices for the twelve-month period preceding the date of grant);
risk-free rate of return-5.29% (the rate for a ten-year U.S. treasury);
dividend yield-$0.96; option term-ten years; vesting-100% one year
after date of grant; and an expected option term of 5.4 years. No
assumptions relating to non-transferability or risk of forfeiture were
made. Actual gains, if any, on option exercises and Common Shares are
dependent on the future performance of the Common Shares and overall
market condition. There can be no assurance that the amounts reflected
in this table will be achieved.
OPTION EXERCISE IN 1998. The following table sets forth certain
information concerning the exercise of options or stock appreciation rights
("SARs") during 1998 by each of the Named Officers and the number and value
of unexercised options and SARs at December 31, 1998.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND
FISCAL YEAR-END OPTION VALUES
Number of Securities
Shares Underlying Unexercised
Acquired Options/SARs at Fiscal
on Value Year-End (#)
Exercise Realized ----------------------------
Name (#) ($) Exercisable Unexercisable
================== ======== ========== =========== =============
Gary L. Neale 80,000 $1,266,871 260,000 50,000
Stephen P. Adik 11,200 232,400 152,000 20,000
Patrick J. Mulchay 0 0 134,000 20,000
Jeffrey W. Yundt 0 0 152,000 20,000
Joseph L. Turner 12,000 163,437 65,000 10,000
Value of Unexercised
In-the-money Options/SARs
at Fiscal Year-End($) (1)
----------------------------
Name Exercisable Unexercisable
================ =========== =============
Gary L. Neale $3,405,470 $ 46,875
Stephen P. Adik 2,352,687 18,750
Patrick J. Mulchay 1,971,662 18,750
Jeffrey W. Yundt 2,352,687 18,750
Joseph L. Turner 887,156 9,375
(1) Represents the difference between the option exercise price and
$30.16, the average of high and low sale prices of the Common Shares
on December 31, 1998, as reported in "The Wall Street Journal."
LONG-TERM INCENTIVE PLAN AWARDS IN 1998. The following table sets forth
restricted shares awarded pursuant to the Long-Term Incentive Plan during
1998 to each of the Named Officers.
LONG-TERM STOCK INCENTIVE PLANS-AWARDS IN LAST FISCAL YEAR
Number of Performance Estimated Future Payouts
Shares, or Other Under Non-Stock
Units Period Price-Based Plans
or Other Until ----------------------------
Rights Maturation Threshold Target Maximum
Name (#) or Payout (#) (#) (#)
================== ========== =========== ========= ====== =======
Gary L. Neale 20,000 2 years 0 20,000 20,000
Stephen P. Adik 10,000 2 years 0 10,000 10,000
Patrick J. Mulchay 10,000 2 years 0 10,000 10,000
Jeffrey W. Yundt 10,000 2 years 0 10,000 10,000
Joseph L. Turner 0 0 0 0 0
The restrictions on shares awarded during 1998 lapse two years from the
date of grant. The vesting of the restricted shares is variable from 0% to
100% of the number awarded, based upon meeting certain specific financial
performance objectives. There is a two-year holding period for the shares
after the restrictions lapse.
PENSION PLAN AND SUPPLEMENTAL EXECUTIVE RETIREMENT PLAN. The following
table shows estimated annual benefits, giving effect to Industries'
Supplemental Executive Retirement Plan (as described below), payable upon
retirement to persons in the specified remuneration and years-of-service
classifications.
PENSION PLAN TABLE
Years of service
-----------------------------------------------------
Remuneration 15 20 25 30 35
============ ========= ========= ========= ========= =========
$ 350,000 144,750 193,000 201,750 210,500 210,500
400,000 167,250 223,000 233,000 243,000 243,000
450,000 189,750 253,000 264,250 275,500 275,500
500,000 212,250 283,000 295,500 308,000 308,000
550,000 234,750 313,000 326,750 340,500 340,500
600,000 257,250 343,000 358,000 373,000 373,000
650,000 279,750 373,000 389,250 405,500 405,500
700,000 302,250 403,000 420,500 438,000 438,000
750,000 324,750 433,000 451,750 470,500 470,500
800,000 347,250 463,000 483,000 503,000 503,000
850,000 369,750 493,000 514,250 535,500 535,500
900,000 392,250 523,000 545,500 568,000 568,000
950,000 414,750 553,000 576,750 600,500 600,500
1,000,000 437,250 583,000 608,000 633,000 633,000
1,050,000 459,750 613,000 639,250 665,500 665,500
1,100,000 482,250 643,000 670,500 698,000 698,000
The credited years of service for each of the Named Officers, pursuant
to the Supplemental Plan, are as follows: Gary L. Neale - 24 years; Stephen
P. Adik - 20 years; Patrick J. Mulchay - 36 years; Jeffrey W. Yundt - 19
years; and Joseph L. Turner - 27 years.
Upon their retirement, regular employees and officers of Industries
and its subsidiaries which adopt the plan (including directors who are also
full-time officers) will be entitled to a monthly pension in accordance with
the provisions of Industries' pension plan, originally effective as of
January 1, 1945. The directors who are not and have not been officers of
Industries are not included in the pension plan. The pensions are payable out
of a trust fund established under the pension plan with The Northern Trust
Company, trustee. The trust fund consists of contributions made by Industries
and the earnings of the fund. Over a period of years the contributions are
intended to result in over-all actuarial solvency of the trust fund. The
pension plan of Industries has been determined by the Internal Revenue Service
to be qualified under Sections 401 of the Internal Revenue Code of 1986, as
amended (the "Code").
Pension benefits are determined separately for each participant. The
formula for a monthly payment for retirement at age 65 is 1.7% of average
monthly compensation multiplied by years of service (to a maximum of 30 years)
plus 0.6% of average monthly compensation multiplied by years of service over
30. Average monthly compensation is the average for the 60 consecutive
highest paid months in the employee's last 120 months of service. Covered
compensation is defined as wages reported as W-2 earnings (up to a limit set
forth in the Code and adjusted periodically) plus any salary reduction
contributions made under the 401(k) Plan, minus any portion of a bonus in
excess of 50% of base pay, and any amounts paid for unused vacation time and
vacation days carried forward from prior years. The benefits listed in the
Pension Plan table are not subject to any deduction for Social Security or
other offset amounts.
Industries also has a Supplemental Executive Retirement Plan for
officers. Participants in the Plan are selected by the Board of Directors.
Benefits from the Plan are to be paid from the general assets of Industries.
The Supplemental Plan provides the larger of (i) 60% of five-year
average pay less Primary Social Security Benefits (prorated for less than 20
years of service) and an additional 0.5% of 5-year average pay less Primary
Social Security Benefits per year for participants with between 20 and 30
years of service, or (ii) the benefit formula under the Industries' Pension
Plan. In either case, the benefit is reduced by the actual pension payable
from Industries' Pension Plan. In addition, the Supplemental Plan provides
certain disability and pre-retirement death benefits for the spouse of a
participant.
CHANGE IN CONTROL AND TERMINATION AGREEMENTS. The Board of Directors of
Industries has authorized Change in Control and Termination Agreements ("the
Agreements") with Mr. Neale and the Vice Presidents of Industries (including
each of the Named Officers) (each such person being an "executive").
Industries believes that these Agreements and related shareholder rights
protections are in the best interests of the shareholders, to insure that in
the event of extraordinary events, totally independent judgment is enhanced to
maximize shareholder value. The Agreements, which are terminable upon three
years' notice, provide for the payment of three times then current annual base
salary and target incentive bonus compensation and the continuation of certain
employee benefits for a period of 36 months ("the Severance Period"), and a
pro rata portion of the executive's targeted incentive bonus for the year of
termination. These benefits are payable if the executive terminates employment
for "Good Reason" or is terminated by the company for any reason other than
"Good Cause" within twenty-four months following certain changes in control.
Each of these Agreements also provides for payment of these benefits if the
executive voluntarily terminates employment during a specified period within the
twenty-four months following the change in control.
The executive would receive benefits from Industries that would otherwise
be earned during the Severance Period under Industries' Supplemental Plan and
qualified retirement plans. All stock options held by the executive would
become immediately exercisable upon the date of termination of employment, and
the restrictions would lapse on all restricted shares awarded to the executive.
If any penalty tax under the Code is imposed on the payment of amounts under the
contracts, Industries would increase the payment to the extent necessary to
compensate the executive for the imposition of such tax.
During the Severance Period, the executive and spouse would continue to
be covered by applicable health or welfare plans of Industries. If the
executive died during the Severance Period, all amounts payable to the
executive would be paid to a named beneficiary. No amounts would be payable
under the Agreements if the executive's employment were terminated by
Industries for Good Cause (as defined in the Agreements).
The Agreement with Mr. Neale also provides for the same severance
payments as above described in the event his employment is terminated at any
time by Industries (other than for Good Cause) or due to death or disability,
or if he voluntarily terminates employment with Good Reason (as defined in the
Agreements).
COMPENSATION OF DIRECTORS. Each director who is not receiving a salary
from Industries is paid $20,000 per year, $3,000 annually per standing
committee on which the director sits, $1,000 annually for each committee
chairmanship, $1,000 for each Board meeting attended and $750 per committee
meeting attended. Directors of Industries do not receive any additional
compensation for services as a director of any Industries subsidiary,
including Northern Indiana. Under a deferred compensation arrangement,
directors may have their fees deferred in the current year and credited to an
interest-bearing account or to a phantom stock account for payment in the
future.
Industries' Nonemployee Director Retirement Plan provides a retirement
benefit for each nonemployee director of Industries who has completed at least
five years of service on the Board. The benefit will be an amount equal to
the annual retainer for Board service in effect at the time of the director's
retirement from the Board, to be paid for the lesser of ten years or the
number of years of service as a nonemployee director of Industries.
Industries' Nonemployee Director Stock Incentive Plan provides for
grants of restricted Common Shares to nonemployee directors of Industries.
Initial grants were made in 1992, following shareholder approval of the plan,
at the level of 500 shares for each year of service as a director, and 2,000
restricted Common Shares have been granted to each nonemployee director
elected or reelected since that date. A grant of 2,000 shares will be made in
the future to each person, other than an employee of Industries, who is
elected or reelected as a director of Industries. The grants of restricted
shares vest in 20% annual increments, with full vesting five years after the
date of award. In 1998, 2,000 restricted Common Shares were granted to Drs.
Beering and Woo and Mr. Ribordy under this plan.
Industries' Nonemployee Director Restricted Stock Unit Plan, which was
adopted by the Board in December 1998 and made effective as of January 1,
1999, is a phantom stock plan that provides for grants to nonemployee directors
of restricted stock units that have a value related to Industries' Common
Shares. Each nonemployee director will receive an initial grant of 500 units
in April 1999, and subsequent grants of 500 units will be made annually to
nonemployee directors upon election or re-election to the Board. The grants
of units vest in 20% annual increments, with full vesting five years after the
date of award, and the units have no voting or stock ownership rights.
Industries has adopted a Directors' Charitable Gift Program for
nonemployee directors. Under the program, Industries makes a donation to one
or more eligible tax-exempt organizations as designated by each eligible
director. Industries contributes up to an aggregate of $125,000 for each
nonemployee directors who has served as a director of Industries for at least
five years and up to an additional $125,000 (for an overall aggregate of
$250,000) for each nonemployee director who has served ten years or more.
Organizations eligible to receive a gift under the program include charitable
organizations and educational institutions located in Indiana and educational
institutions that the director attended or for which he or she serves on its
governing board. Individual directors derive no financial benefit from the
program, as all deductions relating to the charitable donations accrue solely
to Industries. All current nonemployee directors are eligible to participate
in the program.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Not applicable.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Not applicable.
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a) (1) The Financial Statements filed herewith as part of this
report on Form 10-K are listed on the Index to Financial
Statements under Item 8 on pages 17 and 18.
(2) The following is a list of the Financial Statements
Schedule filed herewith as part of this report on Form 10-K:
Schedule Page of
Number Description 1998 10-K
========= ================================= ===========
II Valuation and Qualifying Accounts 63-65
(3) Exhibit - The exhibits filed herewith as a part of this
report on Form 10-K are listed on the Exhibit Index
included on pages 66-68.
(b) Reports on Form 8-K: None
PART IV
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 31, 1998
(Dollars in thousands)
COL.A COL.B COL.C COL.D COL.E
- -------------------- ------- -------------------- ------------ --------
Additions Deductions
-------------------- for Purposes
Balance Charged to Charged for which Balance
Jan. 1, Costs and to Other Reserves Dec. 31,
Description 1998 Expenses Accounts were Created 1998
==================== ======= ========== ======== ============ ========
Reserves Deducted
In Consolidated
Balance Sheet From
Assets To Which
They Apply:
Reserve for
accounts
receivables $ 4,524 $ 9,060 $ 0 $ 9,126 $ 4,458
Reserves Classified
Under Reserve
Section of
Consolidated
Balance Sheet:
Injuries and
damages reserve $ 5,592 $ 4,000 $ 0 $ 3,052 $ 6,540
Environmental
reserves $18,764 $ 5,203 $ 0 $ 5,189 $18,778
Miscellaneous
operating
reserves $ 3,558 $ 0 $ 0 $ 43 $ 3,515
PART IV
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 31, 1997
(Dollars in thousands)
COL.A COL.B COL.C COL.D COL.E
- -------------------- ------- -------------------- ------------ --------
Additions Deductions
-------------------- for Purposes
Balance Charged to Charged for which Balance
Jan. 1, Costs and to Other Reserves Dec. 31,
Description 1997 Expenses Accounts were Created 1997
==================== ======= ========== ======== ============ ========
Reserves Deducted
In Consolidated
Balance Sheet From
Assets To Which
They Apply:
Reserve for
accounts
receivables $ 4,568 $ 5,305 $ 0 $ 5,349 $ 4,524
Reserves Classified
Under Reserve
Section of
Consolidated
Balance Sheet:
Injuries and
damages reserve $ 4,376 $ 4,875 $ 0 $ 3,659 $ 5,592
Environmental
reserves $16,575 $ 9,064 $ 0 $ 6,875 $18,764
Miscellaneous
operating
reserves $ 4,131 $ 0 $ 0 $ 573 $ 3,558
PART IV
SCHEDULE II. VALUATION AND QUALIFYING ACCOUNTS
Twelve Months Ended December 31, 1996
(Dollars in thousands)
COL.A COL.B COL.C COL.D COL.E
- -------------------- ------- -------------------- ------------ --------
Additions Deductions
-------------------- for Purposes
Balance Charged to Charged for which Balance
Jan. 1, Costs and to Other Reserves Dec. 31,
Description 1996 Expenses Accounts were Created 1996
==================== ======= ========== ======== ============ ========
Reserves Deducted
In Consolidated
Balance Sheet From
Assets To Which
They Apply:
Reserve for
accounts
receivables $ 6,418 $ 6,580 $ 0 $ 8,430 $ 4,568
Reserves Classified
Under Reserve
Section of
Consolidated
Balance Sheet:
Injuries and
damages reserve $ 1,837 $ 4,875 $ 0 $ 2,336 $ 4,376
Environmental
reserves $ 4,800 $ 15,272 $ 0 $ 3,497 $16,575
Miscellaneous
operating
reserves $ 3,781 $ 350 $ 0 $ 0 $ 4,131
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, hereunto duly authorized.
Northern Indiana Public Service Company
(Registrant)
Date March 25, 1999 By /s/ Gary L. Neale
------------------------ --------------------------------------------
Gary L. Neale, Its Chairman and President
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of
the registrant and in the capacities and on the dates indicated.
Signature Title Date
=========================== =============================== ==============
/s/ Gary L. Neale Chairman, President, Principal
- --------------------------- Executive Officer and Director
Gary L. Neale
/s/ Stephen P. Adik Executive Vice President and
- --------------------------- Principal Financial Officer
Stephen P. Adik
/s/ David J. Vajda Controller and Principal
- --------------------------- Accounting Officer
David J. Vajda
/s/ Steven C. Beering Director
- ---------------------------
Steven C. Beering
/s/ Arthur j. Decio Director March 25, 1999
- ---------------------------
Arthur J. Decio
Director
- ---------------------------
Denis E. Ribordy
/s/ Ian M. Rolland Director
- ---------------------------
Ian M. Rolland
/s/ Edmund A. Schroer Director
- ---------------------------
Edmund A. Schroer
/s/ John W. Thompson Director
- ---------------------------
John W. Thompson
/s/ Robert J. Welsh Director
- ---------------------------
Robert J. Welsh
/s/ Carolyn Y. Woo Director
- ---------------------------
Carolyn Y. Woo
EXHIBIT INDEX
Exhibit
Number Description of Item
======== ===============================================================
(3.(I)) Amended Articles of Incorporation of April 14, 1982
(incorporated by reference to Exhibit 1 to Northern Indiana
Public Service Company (Northern Indiana) Current Report on
Form 8-K dated May 5, 1982).
(3.(ii)) By-laws effective August 27, 1996 (incorporated by reference
to Exhibit 3 to Northern Indiana Quarterly Report on Form 10-Q
for the quarter ended September 30, 1996).
(4.1) Indenture dated August 1, 1939 between Northern Indiana and
Trustees (incorporated by reference to Exhibit 7 to Northern
Indiana Registration Statement (Registration No. 2-5178)).
(4.2) Third Supplemental Indenture dated August 1, 1943
(incorporated by reference to Exhibit 7-C to Northern Indiana
Registration Statement (Registration No. 2-5178)).
(4.3) Nineteenth Supplemental Indenture dated October 1, 1968
(incorporated by reference to Exhibit 1 to Northern Indiana
Current Report on Form 8-K dated November 8, 1968).
(4.4) Twenty-third Supplemental Indenture dated March 31, 1972
(incorporated by reference to Exhibit 2 to Northern Indiana
Current Report on Form 8-K dated May 5, 1972).
(4.5) Thirty-third Supplemental Indenture dated June 1, 1980
(incorporated by reference to Exhibit 1 to Northern Indiana
Quarterly Report on Form 10-Q for the quarter ended June 30,
1980).
(4.6) Forty-first Supplemental Indenture dated July 1, 1991
(incorporated by reference to Exhibit 1 to Northern Indiana
Current Report on Form 8-K dated March 25, 1992).
(4.7) Indenture, dated as of March 1, 1988, between Northern Indiana
and Manufacturers Hanover Trust Company, as Trustee
(incorporated by reference to Exhibit 4 to Northern Indiana
Registration Statement (Registration No. 33-44193)).
(4.8) First Supplemental Indenture, dated as of December 1, 1991,
between Northern Indiana and Manufacturers Hanover Trust Company,
as Trustee (incorporated by reference to Exhibit 4.1 to Northern
Indiana Registration Statement (Registration No. 33-63870)).
(4.9) Memorandum of Agreement with City of Michigan City, Indiana
(incorporated by reference to Exhibit 7 to Northern Indiana
Registration Statement (Registration No. 2-48531)).
(4.10) Financing Agreement No. 1 dated November 1, 1988 with Jasper
County, Indiana regarding $37,000,000 Series 1988A Pollution
Control Refunding Revenue Bonds. Identical financing
agreements between Registrant and Jasper County provide for
the issuance of $47,000,000 Series 1988B, $46,000,000 Series
1988C and $24,000,000 Series 1988D Pollution Control Refunding
Revenue Bonds (incorporated by reference to Exhibit 8 to
Northern Indiana Current Report on Form 8-K dated March 16,
1989).
(4.11) Financing Agreement dated July 1, 1991, with Jasper County
Indiana regarding $55,000,000 Series 1991 Collateralized
Pollution Control Refunding Revenue Bonds (incorporated by
reference to Exhibit 3 to Northern Indiana Current Report of
Form 8-K dated March 25, 1992).
(4.12) Financing Agreement dated August 1, 1994, with Jasper County,
Indiana regarding $10,000,000 Series 1994A, $18,000,000
Series 1994B and $41,000,000 Series 1994C Pollution Control
Refunding Revenue Bonds.
(10) Amended and Restated Pension Plan Provisions effective
January 1, 1989 (incorporated by reference to Exhibit 17 to
Northern Indiana Current Report of Form 8-K dated March 25,
1992).*
(23) Consent of Arthur Andersen LLP.
(27) Financial Data Schedule.
*Management contract or compensatory plan arrangement of Northern Indiana
Public Service Company.
EX-23
2
Exhibit 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the
incorporation of our report included in this Form 10-K into Northern Indiana
Public Service Company's previously filed Form S-3 Registration Statement
No. 333-26847.
/s/ Arthur Andersen LLP
Chicago, Illinois
March 25, 1999
EX-27
3
UT
1,000
12-MOS
DEC-31-1998
JAN-01-1998
DEC-31-1998
PER-BOOK
2,986,645
519
333,901
203,722
127,162
3,651,949
859,488
12,524
146,138
1,018,150
56,435
81,116
313,434
40,500
764,525
85,600
2,000
1,828
0
0
1,288,361
3,651,949
1,648,603
120,786
1,225,668
1,346,454
302,149
(3,589)
298,560
78,380
220,180
8,335
211,845
212,000
16,546
458,310
0
0
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