x
|
QUARTERLY
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
[_]
|
TRANSITION
REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934
|
VECTREN
UTILITY HOLDINGS, INC.
|
INDIANA
|
35-2104850
|
|
(State
or other jurisdiction of incorporation or organization)
|
(IRS
Employer Identification No.)
|
One
Vectren Square, Evansville, Indiana,
47708
|
812-491-4000
|
Common Stock- Without
Par Value
|
10
|
July 31,
2008
|
Class
|
Number
of Shares
|
Date
|
AFUDC: allowance
for funds used during construction
|
MMBTU: millions
of British thermal units
|
APB: Accounting
Principles Board
|
MW: megawatts
|
EITF: Emerging
Issues Task Force
|
MWh
/ GWh: megawatt hours / thousands of megawatt hours (gigawatt
hours)
|
FASB: Financial
Accounting Standards Board
|
OCC: Ohio
Office of the Consumer Counselor
|
FERC: Federal
Energy Regulatory Commission
|
OUCC: Indiana
Office of the Utility Consumer Counselor
|
IDEM: Indiana
Department of Environmental Management
|
PUCO: Public
Utilities Commission of Ohio
|
IURC: Indiana
Utility Regulatory Commission
|
SFAS: Statement
of Financial Accounting Standards
|
MCF
/ BCF: thousands / billions of cubic feet
|
USEPA: United
States Environmental Protection Agency
|
MDth
/ MMDth: thousands / millions of dekatherms
|
Throughput: combined
gas sales and gas transportation
volumes
|
Mailing
Address:
One
Vectren Square
Evansville,
Indiana 47708
|
Phone
Number:
(812)
491-4000
|
Investor
Relations Contact:
Steven
M. Schein
Vice
President, Investor Relations
sschein@vectren.com
|
Item
Number
|
Page
Number
|
|
PART
I. FINANCIAL INFORMATION
|
||
1
|
Financial
Statements (Unaudited)
|
|
Vectren
Utility Holdings, Inc. and Subsidiary Companies
|
||
2
|
||
3
|
||
4
|
||
PART
II. OTHER INFORMATION
|
||
1
|
||
1A
|
||
6
|
||
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
ASSETS
|
||||||||
Current
Assets
|
||||||||
Cash
& cash equivalents
|
$ | 8.2 | $ | 11.7 | ||||
Accounts
receivable - less reserves of $5.0 &
|
||||||||
$2.7,
respectively
|
102.3 | 137.1 | ||||||
Receivables
due from other Vectren companies
|
0.4 | 17.9 | ||||||
Accrued
unbilled revenues
|
38.9 | 140.6 | ||||||
Inventories
|
113.3 | 134.9 | ||||||
Recoverable
fuel & natural gas costs
|
17.7 | - | ||||||
Prepayments
& other current assets
|
76.8 | 93.3 | ||||||
Total
current assets
|
357.6 | 535.5 | ||||||
Utility
Plant
|
||||||||
Original
cost
|
4,169.9 | 4,062.9 | ||||||
Less: accumulated
depreciation & amortization
|
1,569.3 | 1,523.2 | ||||||
Net
utility plant
|
2,600.6 | 2,539.7 | ||||||
Investments
in unconsolidated affiliates
|
0.2 | 0.2 | ||||||
Other
investments
|
25.7 | 24.7 | ||||||
Nonutility
property - net
|
178.5 | 176.2 | ||||||
Goodwill
|
205.0 | 205.0 | ||||||
Regulatory
assets
|
145.3 | 151.7 | ||||||
Other
assets
|
8.8 | 10.7 | ||||||
TOTAL
ASSETS
|
$ | 3,521.7 | $ | 3,643.7 |
June
30,
|
December
31,
|
|||||||
2008
|
2007
|
|||||||
LIABILITIES &
SHAREHOLDER'S EQUITY
|
||||||||
Current
Liabilities
|
||||||||
Accounts
payable
|
$ | 102.9 | $ | 138.7 | ||||
Accounts
payable to affiliated companies
|
68.1 | 66.9 | ||||||
Payables to
other Vectren companies
|
24.2 | 34.2 | ||||||
Refundable fuel
& natural gas costs
|
12.7 | 27.2 | ||||||
Accrued
liabilities
|
161.1 | 138.9 | ||||||
Short-term
borrowings
|
46.2 | 385.9 | ||||||
Total
current liabilities
|
415.2 | 791.8 | ||||||
Long-Term
Debt - Net of Current Maturities &
|
||||||||
Debt
Subject to Tender
|
1,146.2 | 1,062.6 | ||||||
Deferred
Income Taxes & Other Liabilities
|
||||||||
Deferred income
taxes
|
304.4 | 286.9 | ||||||
Regulatory
liabilities
|
310.7 | 307.2 | ||||||
Deferred
credits & other liabilities
|
104.9 | 104.8 | ||||||
Total
deferred credits & other liabilities
|
720.0 | 698.9 | ||||||
Commitments
& Contingencies (Notes 10 - 12)
|
||||||||
Common
Shareholder's Equity
|
||||||||
Common
stock (no par value)
|
763.0 | 638.2 | ||||||
Retained
earnings
|
477.1 | 451.9 | ||||||
Accumulated
other comprehensive income
|
0.2 | 0.3 | ||||||
Total
common shareholder's equity
|
1,240.3 | 1,090.4 | ||||||
TOTAL
LIABILITIES & SHAREHOLDER'S EQUITY
|
$ | 3,521.7 | $ | 3,643.7 |
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
2008
|
2007
|
2008
|
2007
|
|||||||||||||
OPERATING
REVENUES
|
||||||||||||||||
Gas
utility
|
$ | 224.9 | $ | 191.9 | $ | 858.5 | $ | 776.0 | ||||||||
Electric
utility
|
127.2 | 109.9 | 254.4 | 218.0 | ||||||||||||
Other
|
0.6 | 0.5 | 1.2 | 0.9 | ||||||||||||
Total
operating revenues
|
352.7 | 302.3 | 1,114.1 | 994.9 | ||||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of gas
|
143.8 | 114.6 | 605.8 | 539.1 | ||||||||||||
Cost
of fuel & purchased power
|
48.5 | 38.4 | 94.5 | 79.0 | ||||||||||||
Other
operating
|
74.5 | 65.6 | 148.5 | 132.8 | ||||||||||||
Depreciation
& amortization
|
40.9 | 39.8 | 81.6 | 79.0 | ||||||||||||
Taxes
other than income taxes
|
13.9 | 14.1 | 40.1 | 38.3 | ||||||||||||
Total
operating expenses
|
321.6 | 272.5 | 970.5 | 868.2 | ||||||||||||
OPERATING
INCOME
|
31.1 | 29.8 | 143.6 | 126.7 | ||||||||||||
OTHER
INCOME - NET
|
2.2 | 2.2 | 4.2 | 4.9 | ||||||||||||
INTEREST
EXPENSE
|
19.1 | 18.6 | 39.9 | 38.0 | ||||||||||||
INCOME
BEFORE INCOME TAXES
|
14.2 | 13.4 | 107.9 | 93.6 | ||||||||||||
INCOME
TAXES
|
5.4 | 5.4 | 41.1 | 34.7 | ||||||||||||
NET
INCOME
|
$ | 8.8 | $ | 8.0 | $ | 66.8 | $ | 58.9 |
Six
Months Ended June 30,
|
||||||||
2008
|
2007
|
|||||||
CASH
FLOWS FROM OPERATING ACTIVITIES
|
||||||||
Net
income
|
$ | 66.8 | $ | 58.9 | ||||
Adjustments to reconcile net income to cash from operating
activities:
|
||||||||
Depreciation
& amortization
|
81.6 | 79.0 | ||||||
Deferred income
taxes & investment tax credits
|
17.9 | (2.2 | ) | |||||
Expense
portion of pension & postretirement periodic benefit
cost
|
1.3 | 2.1 | ||||||
Provision for
uncollectible acccounts
|
8.0 | 8.2 | ||||||
Other
non-cash charges - net
|
5.5 | 1.8 | ||||||
Changes
in working capital accounts:
|
||||||||
Accounts receivable, including to Vectren companies
|
||||||||
& accrued unbilled
revenue
|
146.0 | 113.1 | ||||||
Inventories
|
20.7 | 31.2 | ||||||
Recoverable/refundable fuel & natural gas costs
|
(32.3 | ) | 6.9 | |||||
Prepayments & other current assets
|
15.4 | 16.0 | ||||||
Accounts payable, including to Vectren companies
|
||||||||
& affiliated companies
|
(40.5 | ) | (101.1 | ) | ||||
Accrued liabilities
|
28.8 | 7.4 | ||||||
Changes in noncurrent assets
|
4.9 | (9.6 | ) | |||||
Changes in noncurrent liabilities
|
(6.6 | ) | (5.7 | ) | ||||
Net
cash flows from operating activities
|
317.5 | 206.0 | ||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
||||||||
Proceeds
from:
|
||||||||
Capital
contribution from Vectren
|
124.9 | - | ||||||
Long
term debt, net of issuance costs
|
171.1 | - | ||||||
Requirements
for:
|
||||||||
Dividends
to parent
|
(41.6 | ) | (38.3 | ) | ||||
Retirement
of long-term debt, including premiums paid
|
(103.3 | ) | - | |||||
Net
change in short-term borrowings
|
(339.7 | ) | (55.1 | ) | ||||
Net
cash flows from financing activities
|
(188.6 | ) | (93.4 | ) | ||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
||||||||
Proceeds
from other investing activities
|
0.4 | 0.1 | ||||||
Requirements
for:
|
||||||||
Capital
expenditures, excluding AFUDC equity
|
(132.0 | ) | (137.9 | ) | ||||
Other
investing activities
|
(0.8 | ) | - | |||||
Net
cash flows from investing activities
|
(132.4 | ) | (137.8 | ) | ||||
Net
change in cash & cash equivalents
|
(3.5 | ) | (25.2 | ) | ||||
Cash
& cash equivalents at beginning of period
|
11.7 | 28.5 | ||||||
Cash
& cash equivalents at end of period
|
$ | 8.2 | $ | 3.3 |
1.
|
Organization
and Nature of Operations
|
2.
|
Basis
of Presentation
|
3.
|
Subsidiary
Guarantor and Consolidating
Information
|
ASSETS
|
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
Current
Assets
|
||||||||||||||||
Cash
& cash equivalents
|
$ | 5.4 | $ | 2.8 | $ | - | $ | 8.2 | ||||||||
Accounts
receivable - less reserves
|
102.2 | 0.1 | - | 102.3 | ||||||||||||
Receivables
due from other Vectren companies
|
26.0 | 98.6 | (124.2 | ) | 0.4 | |||||||||||
Accrued
unbilled revenues
|
38.9 | - | - | 38.9 | ||||||||||||
Inventories
|
113.2 | 0.1 | - | 113.3 | ||||||||||||
Recoverable
fuel & natural gas costs
|
17.7 | - | - | 17.7 | ||||||||||||
Prepayments
& other current assets
|
74.8 | 9.6 | (7.6 | ) | 76.8 | |||||||||||
Total
current assets
|
378.2 | 111.2 | (131.8 | ) | 357.6 | |||||||||||
Utility
Plant
|
||||||||||||||||
Original
cost
|
4,169.9 | - | - | 4,169.9 | ||||||||||||
Less: accumulated
depreciation & amortization
|
1,569.3 | - | - | 1,569.3 | ||||||||||||
Net
utility plant
|
2,600.6 | - | - | 2,600.6 | ||||||||||||
Investments
in consolidated subsidiaries
|
- | 1,165.0 | (1,165.0 | ) | - | |||||||||||
Notes
receivable from consolidated subsidiaries
|
- | 700.2 | (700.2 | ) | - | |||||||||||
Investments
in unconsolidated affiliates
|
0.2 | - | - | 0.2 | ||||||||||||
Other
investments
|
20.0 | 5.7 | - | 25.7 | ||||||||||||
Nonutility
property - net
|
4.4 | 174.1 | - | 178.5 | ||||||||||||
Goodwill
|
205.0 | - | - | 205.0 | ||||||||||||
Regulatory
assets
|
119.5 | 25.8 | - | 145.3 | ||||||||||||
Other
assets
|
12.3 | 0.3 | (3.8 | ) | 8.8 | |||||||||||
TOTAL
ASSETS
|
$ | 3,340.2 | $ | 2,182.3 | $ | (2,000.8 | ) | $ | 3,521.7 | |||||||
LIABILITIES &
SHAREHOLDER'S EQUITY
|
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
Current
Liabilities
|
||||||||||||||||
Accounts
payable
|
$ | 97.8 | $ | 5.1 | $ | - | $ | 102.9 | ||||||||
Accounts
payable to affiliated companies
|
68.1 | - | - | 68.1 | ||||||||||||
Payables
to other Vectren companies
|
39.7 | - | (15.5 | ) | 24.2 | |||||||||||
Refundable
fuel & natural gas costs
|
12.7 | - | - | 12.7 | ||||||||||||
Accrued
liabilities
|
156.5 | 12.2 | (7.6 | ) | 161.1 | |||||||||||
Short-term
borrowings
|
0.6 | 45.6 | - | 46.2 | ||||||||||||
Short-term
borrowings from
|
||||||||||||||||
other
Vectren companies
|
82.9 | 25.8 | (108.7 | ) | - | |||||||||||
Total
current liabilities
|
458.3 | 88.7 | (131.8 | ) | 415.2 | |||||||||||
Long-Term
Debt
|
||||||||||||||||
Long-term
debt - net of current maturities &
|
||||||||||||||||
debt
subject to tender
|
323.0 | 823.2 | - | 1,146.2 | ||||||||||||
Long-term
debt due to Utility Holdings
|
700.2 | - | (700.2 | ) | - | |||||||||||
Total
long-term debt - net
|
1,023.2 | 823.2 | (700.2 | ) | 1,146.2 | |||||||||||
Deferred
Income Taxes & Other Liabilities
|
||||||||||||||||
Deferred
income taxes
|
286.3 | 18.1 | - | 304.4 | ||||||||||||
Regulatory
liabilities
|
305.6 | 5.1 | - | 310.7 | ||||||||||||
Deferred
credits & other liabilities
|
101.8 | 6.9 | (3.8 | ) | 104.9 | |||||||||||
Total
deferred credits & other liabilities
|
693.7 | 30.1 | (3.8 | ) | 720.0 | |||||||||||
Common
Shareholder's Equity
|
||||||||||||||||
Common
stock (no par value)
|
776.3 | 763.0 | (776.3 | ) | 763.0 | |||||||||||
Retained
earnings
|
388.5 | 477.1 | (388.5 | ) | 477.1 | |||||||||||
Accumulated
other comprehensive income
|
0.2 | 0.2 | (0.2 | ) | 0.2 | |||||||||||
Total
common shareholder's equity
|
1,165.0 | 1,240.3 | (1,165.0 | ) | 1,240.3 | |||||||||||
TOTAL
LIABILITIES & SHAREHOLDER'S EQUITY
|
$ | 3,340.2 | $ | 2,182.3 | $ | (2,000.8 | ) | $ | 3,521.7 |
ASSETS
|
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
Current
Assets
|
||||||||||||||||
Cash
& cash equivalents
|
$ | 6.5 | $ | 5.2 | $ | - | $ | 11.7 | ||||||||
Accounts
receivable - less reserves
|
136.3 | 0.8 | - | 137.1 | ||||||||||||
Receivables
due from other Vectren companies
|
0.1 | 276.6 | (258.8 | ) | 17.9 | |||||||||||
Accrued
unbilled revenues
|
140.6 | - | - | 140.6 | ||||||||||||
Inventories
|
133.8 | 1.1 | - | 134.9 | ||||||||||||
Recoverable
fuel & natural gas costs
|
- | - | - | - | ||||||||||||
Prepayments
& other current assets
|
87.3 | 10.5 | (4.5 | ) | 93.3 | |||||||||||
Total
current assets
|
504.6 | 294.2 | (263.3 | ) | 535.5 | |||||||||||
Utility
Plant
|
||||||||||||||||
Original
cost
|
4,062.9 | - | - | 4,062.9 | ||||||||||||
Less: accumulated
depreciation & amortization
|
1,523.2 | - | - | 1,523.2 | ||||||||||||
Net
utility plant
|
2,539.7 | - | - | 2,539.7 | ||||||||||||
Investments
in consolidated subsidiaries
|
- | 1,147.0 | (1,147.0 | ) | - | |||||||||||
Notes
receivable from consolidated subsidiaries
|
- | 589.4 | (589.4 | ) | - | |||||||||||
Investments
in unconsolidated affiliates
|
0.2 | - | - | 0.2 | ||||||||||||
Other
investments
|
18.9 | 5.8 | - | 24.7 | ||||||||||||
Nonutility
property - net
|
4.8 | 171.4 | - | 176.2 | ||||||||||||
Goodwill
- net
|
205.0 | - | - | 205.0 | ||||||||||||
Regulatory
assets
|
130.3 | 21.4 | - | 151.7 | ||||||||||||
Other
assets
|
14.8 | 0.5 | (4.6 | ) | 10.7 | |||||||||||
TOTAL
ASSETS
|
$ | 3,418.3 | $ | 2,229.7 | $ | (2,004.3 | ) | $ | 3,643.7 | |||||||
LIABILITIES &
SHAREHOLDER'S EQUITY
|
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
Current
Liabilities
|
||||||||||||||||
Accounts
payable
|
$ | 132.6 | $ | 6.1 | $ | - | $ | 138.7 | ||||||||
Accounts
payable to affiliated companies
|
66.9 | - | - | 66.9 | ||||||||||||
Payables
to other Vectren companies
|
49.6 | 0.1 | (15.5 | ) | 34.2 | |||||||||||
Refundable
fuel & natural gas costs
|
27.2 | - | - | 27.2 | ||||||||||||
Accrued
liabilities
|
123.4 | 20.0 | (4.5 | ) | 138.9 | |||||||||||
Short-term
borrowings
|
- | 385.9 | - | 385.9 | ||||||||||||
Short-term
borrowings from
|
||||||||||||||||
other
Vectren companies
|
243.3 | - | (243.3 | ) | - | |||||||||||
Current
maturities of long-term debt
|
- | - | - | - | ||||||||||||
Long-term
debt subject to tender
|
- | - | - | - | ||||||||||||
Total
current liabilities
|
643.0 | 412.1 | (263.3 | ) | 791.8 | |||||||||||
Long-Term
Debt
|
||||||||||||||||
Long-term
debt - net of current maturities &
|
||||||||||||||||
debt
subject to tender
|
364.2 | 698.4 | - | 1,062.6 | ||||||||||||
Long-term
debt due to VUHI
|
589.4 | - | (589.4 | ) | - | |||||||||||
Total
long-term debt - net
|
953.6 | 698.4 | (589.4 | ) | 1,062.6 | |||||||||||
Deferred
Income Taxes & Other Liabilities
|
||||||||||||||||
Deferred
income taxes
|
270.0 | 16.9 | - | 286.9 | ||||||||||||
Regulatory
liabilities
|
301.8 | 5.4 | - | 307.2 | ||||||||||||
Deferred
credits & other liabilities
|
102.9 | 6.5 | (4.6 | ) | 104.8 | |||||||||||
Total
deferred credits & other liabilities
|
674.7 | 28.8 | (4.6 | ) | 698.9 | |||||||||||
Cumulative,
Redeemable Preferred Stock of a Subsidiary
|
- | - | - | - | ||||||||||||
Common
Shareholder's Equity
|
||||||||||||||||
Common
stock (no par value)
|
776.3 | 638.2 | (776.3 | ) | 638.2 | |||||||||||
Retained
earnings
|
370.4 | 451.9 | (370.4 | ) | 451.9 | |||||||||||
Accumulated
other comprehensive income
|
0.3 | 0.3 | (0.3 | ) | 0.3 | |||||||||||
Total
common shareholder's equity
|
1,147.0 | 1,090.4 | (1,147.0 | ) | 1,090.4 | |||||||||||
TOTAL
LIABILITIES & SHAREHOLDER'S EQUITY
|
$ | 3,418.3 | $ | 2,229.7 | $ | (2,004.3 | ) | $ | 3,643.7 |
Subsidiary
|
Parent
|
Eliminations
&
|
||||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
OPERATING
REVENUES
|
||||||||||||||||
Gas
utility
|
$ | 224.9 | $ | - | $ | - | 224.9 | |||||||||
Electric
utility
|
127.2 | - | - | 127.2 | ||||||||||||
Other
|
- | $ | 11.7 | (11.1 | ) | 0.6 | ||||||||||
Total
operating revenues
|
352.1 | 11.7 | (11.1 | ) | 352.7 | |||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of gas
|
143.8 | - | - | 143.8 | ||||||||||||
Cost
of fuel & purchased power
|
48.5 | - | - | 48.5 | ||||||||||||
Other
operating
|
86.4 | (1.0 | ) | (10.9 | ) | 74.5 | ||||||||||
Depreciation
& amortization
|
35.4 | 5.4 | 0.1 | 40.9 | ||||||||||||
Taxes
other than income taxes
|
13.6 | 0.3 | - | 13.9 | ||||||||||||
Total
operating expenses
|
327.7 | 4.7 | (10.8 | ) | 321.6 | |||||||||||
OPERATING
INCOME
|
24.4 | 7.0 | (0.3 | ) | 31.1 | |||||||||||
OTHER
INCOME (EXPENSE) - NET
|
||||||||||||||||
Equity
in earnings of consolidated companies
|
- | 5.0 | (5.0 | ) | - | |||||||||||
Other
income (expense) – net
|
1.7 | 12.5 | (12.0 | ) | 2.2 | |||||||||||
Total
other income (expense) - net
|
1.7 | 17.5 | (17.0 | ) | 2.2 | |||||||||||
Interest
expense
|
17.7 | 13.7 | (12.3 | ) | 19.1 | |||||||||||
INCOME
BEFORE INCOME TAXES
|
8.4 | 10.8 | (5.0 | ) | 14.2 | |||||||||||
Income
taxes
|
3.4 | 2.0 | - | 5.4 | ||||||||||||
NET
INCOME
|
$ | 5.0 | $ | 8.8 | $ | (5.0 | ) | $ | 8.8 |
Subsidiary
|
Parent
|
Eliminations
&
|
||||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
OPERATING
REVENUES
|
||||||||||||||||
Gas
utility
|
$ | 191.9 | $ | - | $ | - | $ | 191.9 | ||||||||
Electric
utility
|
109.9 | - | - | 109.9 | ||||||||||||
Other
|
- | 10.5 | (10.0 | ) | 0.5 | |||||||||||
Total
operating revenues
|
301.8 | 10.5 | (10.0 | ) | 302.3 | |||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of gas
|
114.6 | - | - | 114.6 | ||||||||||||
Cost
of fuel & purchased power
|
38.4 | - | - | 38.4 | ||||||||||||
Other
operating
|
74.9 | - | (9.3 | ) | 65.6 | |||||||||||
Depreciation
& amortization
|
34.1 | 5.7 | - | 39.8 | ||||||||||||
Taxes
other than income taxes
|
13.8 | 0.3 | - | 14.1 | ||||||||||||
Total
operating expenses
|
275.8 | 6.0 | (9.3 | ) | 272.5 | |||||||||||
OPERATING
INCOME
|
26.0 | 4.5 | (0.7 | ) | 29.8 | |||||||||||
OTHER
INCOME (EXPENSE) - NET
|
||||||||||||||||
Equity
in earnings of consolidated companies
|
- | 6.8 | (6.8 | ) | - | |||||||||||
Other
income (expense) – net
|
1.8 | 10.6 | (10.2 | ) | 2.2 | |||||||||||
Total
other income (expense) - net
|
1.8 | 17.4 | (17.0 | ) | 2.2 | |||||||||||
Interest
expense
|
16.3 | 13.2 | (10.9 | ) | 18.6 | |||||||||||
INCOME
BEFORE INCOME TAXES
|
11.5 | 8.7 | (6.8 | ) | 13.4 | |||||||||||
Income
taxes
|
4.7 | 0.7 | - | 5.4 | ||||||||||||
NET
INCOME
|
$ | 6.8 | $ | 8.0 | $ | (6.8 | ) | $ | 8.0 |
Subsidiary
|
Parent
|
Eliminations
&
|
||||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
OPERATING
REVENUES
|
||||||||||||||||
Gas
utility
|
$ | 858.5 | $ | - | $ | - | $ | 858.5 | ||||||||
Electric
utility
|
254.4 | - | - | 254.4 | ||||||||||||
Other
|
- | 23.4 | (22.2 | ) | 1.2 | |||||||||||
Total
operating revenues
|
1,112.9 | 23.4 | (22.2 | ) | 1,114.1 | |||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of gas
|
605.8 | - | - | 605.8 | ||||||||||||
Cost
of fuel & purchased power
|
94.5 | - | - | 94.5 | ||||||||||||
Other
operating
|
171.1 | (1.0 | ) | (21.6 | ) | 148.5 | ||||||||||
Depreciation
& amortization
|
70.6 | 10.8 | 0.2 | 81.6 | ||||||||||||
Taxes
other than income taxes
|
39.4 | 0.6 | 0.1 | 40.1 | ||||||||||||
Total
operating expenses
|
981.4 | 10.4 | (21.3 | ) | 970.5 | |||||||||||
OPERATING
INCOME
|
131.5 | 13.0 | (0.9 | ) | 143.6 | |||||||||||
OTHER
INCOME (EXPENSE) - NET
|
||||||||||||||||
Equity
in earnings of consolidated companies
|
- | 59.8 | (59.8 | ) | - | |||||||||||
Other
income (expense) – net
|
2.8 | 24.6 | (23.2 | ) | 4.2 | |||||||||||
Total
other income (expense) - net
|
2.8 | 84.4 | (83.0 | ) | 4.2 | |||||||||||
Interest
expense
|
35.8 | 28.2 | (24.1 | ) | 39.9 | |||||||||||
INCOME
BEFORE INCOME TAXES
|
98.5 | 69.2 | (59.8 | ) | 107.9 | |||||||||||
Income
taxes
|
38.7 | 2.4 | - | 41.1 | ||||||||||||
NET
INCOME
|
$ | 59.8 | $ | 66.8 | $ | (59.8 | ) | $ | 66.8 |
Subsidiary
|
Parent
|
Eliminations
&
|
||||||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
|||||||||||||
OPERATING
REVENUES
|
||||||||||||||||
Gas
utility
|
$ | 776.0 | $ | - | $ | - | $ | 776.0 | ||||||||
Electric
utility
|
218.0 | - | - | 218.0 | ||||||||||||
Other
|
- | 20.2 | (19.3 | ) | 0.9 | |||||||||||
Total
operating revenues
|
994.0 | 20.2 | (19.3 | ) | 994.9 | |||||||||||
OPERATING
EXPENSES
|
||||||||||||||||
Cost
of gas
|
539.1 | - | - | 539.1 | ||||||||||||
Cost
of fuel & purchased power
|
79.0 | - | - | 79.0 | ||||||||||||
Other
operating
|
149.8 | - | (17.0 | ) | 132.8 | |||||||||||
Depreciation
& amortization
|
67.4 | 11.6 | - | 79.0 | ||||||||||||
Taxes
other than income taxes
|
37.7 | 0.6 | - | 38.3 | ||||||||||||
Total
operating expenses
|
873.0 | 12.2 | (17.0 | ) | 868.2 | |||||||||||
OPERATING
INCOME
|
121.0 | 8.0 | (2.3 | ) | 126.7 | |||||||||||
OTHER
INCOME (EXPENSE) - NET
|
||||||||||||||||
Equity
in earnings of consolidated companies
|
- | 55.5 | (55.5 | ) | - | |||||||||||
Other
income (expense) – net
|
2.8 | 21.4 | (19.3 | ) | 4.9 | |||||||||||
Total
other income (expense) - net
|
2.8 | 76.9 | (74.8 | ) | 4.9 | |||||||||||
Interest
expense
|
32.9 | 26.7 | (21.6 | ) | 38.0 | |||||||||||
INCOME
BEFORE INCOME TAXES
|
90.9 | 58.2 | (55.5 | ) | 93.6 | |||||||||||
Income
taxes
|
35.4 | (0.7 | ) | - | 34.7 | |||||||||||
NET
INCOME
|
$ | 55.5 | $ | 58.9 | $ | (55.5 | ) | $ | 58.9 |
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
||||||||||
NET
CASH FLOWS FROM OPERATING ACTIVITIES
|
$ 251.5
|
$ 66.0
|
$ -
|
$ 317.5
|
|||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||||||||
Proceeds
from:
|
|||||||||||||
Capital
contribution from Vectren
|
-
|
124.9
|
-
|
124.9
|
|||||||||
Long-term
debt, net of issuance costs
|
171.1
|
111.1
|
(111.1)
|
171.1
|
|||||||||
Requirements
for:
|
|||||||||||||
Dividends
to parent
|
(41.6)
|
(41.6)
|
41.6
|
(41.6)
|
|||||||||
Retirement
of long-term debt, including premiums paid
|
(103.3)
|
(0.3)
|
0.3
|
(103.3)
|
|||||||||
Net
change in short-term borrowings, including to other
|
|||||||||||||
Vectren
companies
|
(159.7)
|
(314.5)
|
134.5
|
(339.7)
|
|||||||||
Net
cash flows from financing activities
|
(133.5)
|
(120.4)
|
65.3
|
(188.6)
|
|||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||||||||
Proceeds
from
|
|||||||||||||
Consolidated
subsidiary distributions
|
-
|
41.6
|
(41.6)
|
-
|
|||||||||
Other
investing activities
|
0.3
|
0.1
|
-
|
0.4
|
|||||||||
Requirements
for:
|
|||||||||||||
Capital
expenditures, excluding AFUDC equity
|
(118.6)
|
(13.4)
|
-
|
(132.0)
|
|||||||||
Other
investing activities
|
(0.8)
|
-
|
-
|
(0.8)
|
|||||||||
Net
change in notes receivable to other Vectren companies
|
-
|
23.7
|
(23.7)
|
-
|
|||||||||
Net
cash flows from investing activities
|
(119.1)
|
52.0
|
(65.3)
|
(132.4)
|
|||||||||
Net
change in cash & cash equivalents
|
(1.1)
|
(2.4)
|
-
|
(3.5)
|
|||||||||
Cash
& cash equivalents at beginning of period
|
6.5
|
5.2
|
-
|
11.7
|
|||||||||
Cash
& cash equivalents at end of period
|
$ 5.4
|
|
$ 2.8
|
$ -
|
$ 8.2
|
Subsidiary
|
Parent
|
Eliminations
&
|
|||||||||||
Guarantors
|
Company
|
Reclassifications
|
Consolidated
|
||||||||||
NET
CASH FLOWS FROM OPERATING ACTIVITIES
|
$ 170.5
|
$ 35.5
|
$ -
|
$ 206.0
|
|||||||||
CASH
FLOWS FROM FINANCING ACTIVITIES
|
|||||||||||||
Requirements
for:
|
|||||||||||||
Dividends
to parent
|
(38.3)
|
(38.3)
|
38.3
|
(38.3)
|
|||||||||
Net
change in short-term borrowings
|
(13.1)
|
(32.7)
|
(9.3)
|
(55.1)
|
|||||||||
Net
cash flows from financing activities
|
(51.4)
|
(71.0)
|
29.0
|
(93.4)
|
|||||||||
CASH
FLOWS FROM INVESTING ACTIVITIES
|
|||||||||||||
Proceeds
from consolidated subsidiary distributions
|
-
|
38.3
|
(38.3)
|
-
|
|||||||||
Proceeds
from other investing activities
|
-
|
0.1
|
-
|
0.1
|
|||||||||
Requirements
for:
|
|||||||||||||
Capital
expenditures, excluding AFUDC equity
|
(122.0)
|
(15.9)
|
-
|
(137.9)
|
|||||||||
Net
change in notes receivable to other Vectren companies
|
-
|
(9.3)
|
9.3
|
-
|
|||||||||
Net
cash flows from investing activities
|
(122.0)
|
13.2
|
(29.0)
|
(137.8)
|
|||||||||
Net
decrease in cash & cash equivalents
|
(2.9)
|
(22.3)
|
(25.2)
|
||||||||||
Cash
& cash equivalents at beginning of period
|
5.7
|
22.8
|
28.5
|
||||||||||
Cash
& cash equivalents at end of period
|
$ 2.8
|
$ 0.5
|
$ -
|
$ 3.3
|
4.
|
Excise
and Utility Receipts Taxes
|
5.
|
Comprehensive
Income
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Net
income
|
8.8 | 8.0 | 66.8 | 58.9 | ||||||||||||
Cash
flow hedges
|
||||||||||||||||
Reclassifications
to net income
|
(0.1 | ) | (0.2 | ) | (0.3 | ) | (0.6 | ) | ||||||||
Income
tax benefit
|
- | 0.1 | 0.1 | 0.2 | ||||||||||||
Total
comprehensive income
|
$ | 8.7 | $ | 7.9 | $ | 66.6 | $ | 58.5 |
6.
|
Transactions
with Other Vectren Companies
|
7.
|
Transactions
with ProLiance Holdings, LLC
|
8.
|
Debt
Offering in 2008 and Transactions Involving Auction Rate
Securities
|
9.
|
Capital
Contribution from Vectren
|
10.
|
Commitments
& Contingencies
|
11.
|
Environmental
Matters
|
12.
|
Rate
& Regulatory Matters
|
13.
|
Fair
Value Measurements
|
Fair
Value at
|
||||||||||||||||||||
As
of June 30, 2008
|
December
31,
|
|||||||||||||||||||
In
millions
|
Fair
Value
|
Level
1
|
Level
2
|
Level
3
|
2007
|
|||||||||||||||
Derivative
assets/(liabilities):
|
||||||||||||||||||||
Regulated gas
supply contracts
|
$ | 0.6 | $ | 0.6 | $ | - | $ | - | $ | - | ||||||||||
Interest rate
related contracts
|
- | - | - | - | (8.9 | ) | ||||||||||||||
Other
|
- | - | - | - | 2.6 | |||||||||||||||
Included
in:
|
||||||||||||||||||||
Prepayments and
other current assets
|
$ | 0.6 | $ | 0.6 | $ | - | $ | - | $ | 2.6 | ||||||||||
Accrued
liabilities
|
- | - | - | - | 8.9 |
14.
|
Segment
Reporting
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Revenues
|
||||||||||||||||
Gas Utility Services
|
$ | 224.9 | $ | 191.9 | $ | 858.5 | $ | 776.0 | ||||||||
Electric Utility Services
|
127.2 | 109.9 | 254.4 | 218.0 | ||||||||||||
Other
Operations
|
11.7 | 10.5 | 23.4 | 20.2 | ||||||||||||
Eliminations
|
(11.1 | ) | (10.0 | ) | (22.2 | ) | (19.3 | ) | ||||||||
Consolidated
Revenues
|
$ | 352.7 | $ | 302.3 | $ | 1,114.1 | $ | 994.9 | ||||||||
Profitability
Measure - Net Income (Loss)
|
||||||||||||||||
Gas
Utility Services
|
$ | (1.9 | ) | $ | (3.4 | ) | $ | 40.4 | $ | 34.5 | ||||||
Electric
Utility Services
|
6.8 | 10.3 | 19.4 | 21.0 | ||||||||||||
Other
Operations
|
3.9 | 1.1 | 7.0 | 3.4 | ||||||||||||
Total
Net Income
|
$ | 8.8 | $ | 8.0 | $ | 66.8 | $ | 58.9 |
15.
|
Impact
of Recently Issued Accounting
Guidance
|
The
Company has in place a disclosure committee that consists of senior
management as well as financial management. The committee is
actively involved in the preparation and review of the Company’s SEC
filings.
|
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Gas
utility revenues
|
$ | 224.9 | $ | 191.9 | $ | 858.5 | $ | 776.0 | ||||||||
Cost
of gas
|
143.8 | 114.6 | 605.8 | 539.1 | ||||||||||||
Total
gas utility margin
|
$ | 81.1 | $ | 77.3 | $ | 252.7 | $ | 236.9 | ||||||||
Margin
attributed to:
|
||||||||||||||||
Residential
& commercial customers
|
$ | 65.4 | $ | 63.6 | $ | 216.3 | $ | 203.9 | ||||||||
Industrial
customers
|
11.1 | 10.0 | 27.8 | 25.7 | ||||||||||||
Other
|
4.6 | 3.7 | 8.6 | 7.3 | ||||||||||||
Sold
& transported volumes in MMDth attributed to:
|
||||||||||||||||
Residential
& commercial customers
|
12.5 | 13.9 | 70.3 | 68.7 | ||||||||||||
Industrial
customers
|
20.4 | 18.1 | 49.1 | 44.5 | ||||||||||||
Total sold & transported volumes
|
32.9 | 32.0 | 119.4 | 113.2 |
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Electric
utility revenues
|
$ | 127.2 | $ | 109.9 | $ | 254.4 | $ | 218.0 | ||||||||
Cost
of fuel & purchased power
|
48.5 | 38.4 | 94.5 | 79.0 | ||||||||||||
Total
electric utility margin
|
$ | 78.7 | $ | 71.5 | $ | 159.9 | $ | 139.0 | ||||||||
Margin
attributed to:
|
||||||||||||||||
Residential
& commercial customers
|
$ | 50.0 | $ | 43.6 | $ | 99.9 | $ | 83.4 | ||||||||
Industrial
customers
|
20.6 | 18.3 | 39.3 | 34.8 | ||||||||||||
Municipal
& other customers
|
3.0 | 5.2 | 7.5 | 10.3 | ||||||||||||
Subtotal:
retail & firm wholesale
|
$ | 73.6 | $ | 67.1 | $ | 146.7 | $ | 128.5 | ||||||||
Asset
optimization
|
$ | 5.1 | $ | 4.4 | $ | 13.2 | $ | 10.5 | ||||||||
Electric
volumes sold in GWh attributed to:
|
||||||||||||||||
Residential
& commercial customers
|
646.6 | 705.4 | 1,361.8 | 1,403.3 | ||||||||||||
Industrial
customers
|
639.8 | 676.7 | 1,240.5 | 1,303.7 | ||||||||||||
Municipal
& other
|
17.4 | 156.3 | 54.0 | 291.4 | ||||||||||||
Total
retail & firm wholesale volumes sold
|
1,303.8 | 1,538.4 | 2,656.3 | 2,998.4 |
Three
Months
|
Six
Months
|
|||||||||||||||
Ended
June 30,
|
Ended
June 30,
|
|||||||||||||||
(In
millions)
|
2008
|
2007
|
2008
|
2007
|
||||||||||||
Off-system
sales
|
$ | 3.1 | $ | 3.5 | $ | 10.3 | $ | 8.8 | ||||||||
Transmission
system sales
|
2.0 | 0.9 | 2.9 | 1.7 | ||||||||||||
Total
wholesale power marketing
|
$ | 5.1 | $ | 4.4 | $ | 13.2 | $ | 10.5 |
·
|
An
inclusive scope that involves all sectors of the economy and sources of
greenhouse gases, and recognizes early actions and investments made to
mitigate greenhouse gas emissions;
|
·
|
Provisions
for enhanced use of renewable energy sources as a supplement to base load
coal generation including effective energy conservation, demand side
management and generation efficiency
measures;
|
·
|
A
flexible market-based cap and trade approach with zero cost allowance
allocations to coal-fired electric generators. The approach
should have a properly designed economic safety valve in order to reduce
or eliminate extreme price spikes and potential price volatility. A long
lead time must be included to align nearer-term technology capabilities
and expanded generation efficiency and other enhanced renewable
strategies, ensuring that generation sources will rely less on natural gas
to meet short term carbon reduction requirements. This new
regime should allow for adequate resource and generation planning and
remove existing impediments to efficiency enhancements posed by the
current New Source Review provisions of the Clean Air
Act;
|
·
|
Inclusion
of incentives for investment in advanced clean coal technology and support
for research and development; and
|
·
|
A
strategy supporting alternative energy technologies and biofuels and
increasing the domestic supply of natural gas to reduce dependence on
foreign oil and imported natural
gas.
|
·
|
Focusing
Vectren’s mission statement and purpose on corporate sustainability and
the need to help customers conserve and manage energy
costs;
|
·
|
Recently
executing a 20 year contract to purchase 30MW of wind energy generated by
a wind farm in Benton County,
Indiana;
|
·
|
Implementing
the Conservation Connection initiative in the Company’s Indiana and Ohio
gas utility service territories;
|
·
|
Participation
in an electric conservation and demand side management collaborative with
the OUCC and other customer advocate
groups;
|
·
|
Evaluating
potential carbon requirements with regard to new generation, other fuel
supply sources, and future environmental compliance
plans;
|
·
|
Reducing
the Company’s carbon footprint by measures such as purchasing hybrid
vehicles, and optimizing generation
efficiencies;
|
·
|
Factors
affecting utility operations such as unusual weather conditions;
catastrophic weather-related damage; unusual maintenance or repairs;
unanticipated changes to fossil fuel costs; unanticipated changes to gas
transportation and storage costs, or availability due to higher demand,
shortages, transportation problems or other developments; environmental or
pipeline incidents; transmission or distribution incidents; unanticipated
changes to electric energy supply costs, or availability due to demand,
shortages, transmission problems or other developments; or electric
transmission or gas pipeline system
constraints.
|
·
|
Increased
competition in the energy industry, including the effects of industry
restructuring and unbundling.
|
·
|
Regulatory
factors such as unanticipated changes in rate-setting policies or
procedures, recovery of investments and costs made under traditional
regulation, and the frequency and timing of rate
increases.
|
·
|
Financial,
regulatory or accounting principles or policies imposed by the Financial
Accounting Standards Board; the Securities and Exchange Commission; the
Federal Energy Regulatory Commission; state public utility commissions;
state entities which regulate electric and natural gas transmission and
distribution, natural gas gathering and processing, electric power supply;
and similar entities with regulatory
oversight.
|
·
|
Economic
conditions including the effects of an economic downturn, inflation rates,
commodity prices, and monetary
fluctuations.
|
·
|
Increased
natural gas commodity prices and the potential impact on customer
consumption, uncollectible accounts expense, unaccounted for gas and
interest expense.
|
·
|
Changing
market conditions and a variety of other factors associated with physical
energy and financial trading activities including, but not limited to,
price, basis, credit, liquidity, volatility, capacity, interest rate, and
warranty risks.
|
·
|
Direct
or indirect effects on the Company’s business, financial condition,
liquidity and results of operations resulting from changes in credit
ratings, changes in interest rates, and/or changes in market perceptions
of the utility industry and other energy-related
industries.
|
·
|
Employee
or contractor workforce factors including changes in key executives,
collective bargaining agreements with union employees, aging workforce
issues, or work stoppages.
|
·
|
Legal
and regulatory delays and other obstacles associated with mergers,
acquisitions and investments in joint
ventures.
|
·
|
Costs,
fines, penalties and other effects of legal and administrative
proceedings, settlements, investigations, and claims, including, but not
limited to, such matters involving compliance with state and federal laws
and interpretations of these laws.
|
·
|
Changes
in or additions to federal, state or local legislative
requirements, such as changes in or additions to tax laws or rates,
environmental laws, including laws governing greenhouse gases, mandates of
sources of renewable energy, and other
regulations.
|
The
Company has in place a risk management committee that consists of senior
management as well as financial and operational management. The
committee is actively involved in identifying risks as well as reviewing
and authorizing risk mitigation
strategies.
|
1)
|
recorded,
processed, summarized and reported within the time periods specified in
the SEC’s rules and forms, and
|
|
2)
|
accumulated
and communicated to management, including the Chief Executive Officer and
Chief Financial Officer, as appropriate to allow timely decisions
regarding required disclosure.
|
|
31.2
|
August
8, 2008
|
/s/Jerome A. Benkert,
Jr.
|
||
Jerome
A. Benkert, Jr.
|
|||
Executive
Vice President and
|
|||
Chief
Financial Officer
|
|||
(Principal
Financial Officer)
|
|||
/s/M. Susan
Hardwick
|
|||
M.
Susan Hardwick
|
|||
Vice
President, Controller and
Assistant Treasurer
|
|||
(Principal
Accounting Officer)
|