Edgar Filing: VECTREN UTILITY HOLDINGS INC

vuhi_10q.htm

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q

(Mark One)

x	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2010

[_]	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: 1-16739

VECTREN UTILITY HOLDINGS, INC.

(Exact name of registrant as specified in its charter)

INDIANA		35-2104850
(State or other jurisdiction of incorporation or organization)		(IRS Employer Identification No.)

One Vectren Square, Evansville, IN 47708

(Address of principal executive offices)

(Zip Code)

812-491-4000

(Registrant's telephone number, including area code)

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. xYes □ No

Indicate by check mark whether the registrant has submitted electronically and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted pursuant to Rule 405 of Regulation S-T during the preceding 12 months (or for such shorter period that the registrant was required to submit and post such files).

□ Yes □ No

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Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, or a smaller reporting company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company” in Rule 12b-2 of the Exchange Act. (Check one):

Large accelerated filer o Accelerated filero

Non-accelerated filer x (Do not check if a smaller reporting company) Smaller reporting companyo

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).

□ Yes xNo

Indicate the number of shares outstanding of each of the issuer's classes of common stock, as of the latest practicable date.

Common Stock- Without Par Value	10	October 31, 2010
Class	Number of Shares	Date

Access to Information

Vectren Corporation makes available all SEC filings and recent annual reports, including those of its wholly owned subsidiaries, free of charge through its website at www.vectren.com as soon as reasonably practicable after electronically filing or furnishing the reports to the SEC, or by request, directed to Investor Relations at the mailing address, phone number, or email address that follows:

Mailing Address:

One Vectren Square

Evansville, Indiana 47708

Phone Number:

(812) 491-4000

Investor Relations Contact:

Robert L. Goocher

Treasurer and Vice President, Investor Relations

rgoocher@vectren.com

Definitions

AFUDC: allowance for funds used during construction	MMBTU: millions of British thermal units
FASB: Financial Accounting Standards Board	MW: megawatts
FERC: Federal Energy Regulatory Commission	MWh / GWh: megawatt hours / thousands of megawatt hours (gigawatt hours)
IDEM: Indiana Department of Environmental Management	OCC: Ohio Office of the Consumer Counselor
IURC: Indiana Utility Regulatory Commission	OUCC: Indiana Office of the Utility Consumer Counselor
MCF / BCF: thousands / billions of cubic feet	PUCO: Public Utilities Commission of Ohio
MDth / MMDth: thousands / millions of dekatherms	USEPA: United States Environmental Protection Agency
MISO: Midwest Independent System Operator	Throughput: combined gas sales and gas transportation volumes

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Table of Contents

Item Number		Page Number
	PART I. FINANCIAL INFORMATION
1	Financial Statements (Unaudited)
	Vectren Utility Holdings, Inc. and Subsidiary Companies
	Consolidated Condensed Balance Sheets	4-5
	Consolidated Condensed Statements of Income	6
	Consolidated Condensed Statements of Cash Flows	7
	Notes to Unaudited Consolidated Condensed Financial Statements	8
2	Management’s Discussion and Analysis of Financial Condition and Results of Operations	23
3	Quantitative and Qualitative Disclosures About Market Risk	36
4	Controls and Procedures	36

	PART II. OTHER INFORMATION
1	Legal Proceedings	36
1A	Risk Factors	36
6	Exhibits	37
	Signatures	37

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PART I. FINANCIAL INFORMATION

ITEM 1. FINANCIAL STATEMENTS

VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited – In millions)

	September 30,		December 31,
	2010		2009

ASSETS

Current Assets
Cash & cash equivalents	$	4.8	$	6.2
Accounts receivable - less reserves of $2.9 & $4.0, respectively		64.7		108.1
Receivables due from other Vectren companies		1.0		0.7
Accrued unbilled revenues		29.7		115.4
Inventories		136.5		127.9
Recoverable fuel & natural gas costs		12.5		-
Prepayments & other current assets		84.4		69.2
Total current assets		333.6		427.5

Utility Plant
Original cost		4,737.4		4,601.4
Less: accumulated depreciation & amortization		1,808.7		1,722.6
Net utility plant		2,928.7		2,878.8

Investments in unconsolidated affiliates		0.2		0.2
Other investments		29.8		31.4
Nonutility property - net		169.7		171.8
Goodwill - net		205.0		205.0
Regulatory assets		101.9		104.1
Other assets		5.0		4.3
TOTAL ASSETS	$	3,773.9	$	3,823.1

The accompanying notes are an integral part of these consolidated financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED BALANCE SHEETS

(Unaudited – In millions)

	September 30,		December 31,
	2010		2009

LIABILITIES & SHAREHOLDER'S EQUITY

Current Liabilities
Accounts payable	$	83.2	$	133.1
Accounts payable to affiliated companies		22.4		54.1
Payables to other Vectren companies		25.2		53.6
Refundable fuel & natural gas costs		-		22.3
Accrued liabilities		129.0		131.4
Short-term borrowings		26.0		16.4
Long-term debt subject to tender		-		51.3
Total current liabilities		285.8		462.2

Long-Term Debt - Net of Current Maturities & Debt Subject to Tender		1,304.8		1,254.8

Deferred Income Taxes & Other Liabilities
Deferred income taxes		453.0		418.0
Regulatory liabilities		331.6		322.2
Deferred credits & other liabilities		88.7		91.2
Total deferred credits & other liabilities		873.3		831.4

Commitments & Contingencies (Notes 10 - 12)

Common Shareholder's Equity
Common stock (no par value)		774.6		769.9
Retained earnings		535.3		504.7
Accumulated other comprehensive income		0.1		0.1
Total common shareholder's equity		1,310.0		1,274.7

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,773.9	$	3,823.1

The accompanying notes are an integral part of these consolidated financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF INCOME

(Unaudited – In millions)


	Three Months				Nine Months
	Ended September 30,				Ended September 30,
	2010		2009		2010		2009
OPERATING REVENUES
Gas utility	$	101.8	$	93.4	$	692.8	$	759.9
Electric utility		173.2		143.0		469.1		400.7
Other		0.4		0.4		1.2		1.2
Total operating revenues		275.4		236.8		1,163.1		1,161.8

OPERATING EXPENSES
Cost of gas sold		32.4		28.0		371.7		440.6
Cost of fuel & purchased power		64.5		50.1		180.3		147.4
Other operating		70.5		69.9		223.3		227.9
Depreciation & amortization		47.2		45.9		140.5		134.8
Taxes other than income taxes		11.2		10.8		45.1		46.2
Total operating expenses		225.8		204.7		960.9		996.9

OPERATING INCOME		49.6		32.1		202.2		164.9

OTHER INCOME - NET		0.9		2.1		3.9		6.1

INTEREST EXPENSE		20.4		20.2		61.0		58.9

INCOME BEFORE INCOME TAXES		30.1		14.0		145.1		112.1

INCOME TAXES		11.4		5.3		54.8		40.6

NET INCOME	$	18.7	$	8.7	$	90.3	$	71.5

The accompanying notes are an integral part of these consolidated financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited – In millions)


	Nine Months Ended September 30,
	2010			2009
CASH FLOWS FROM OPERATING ACTIVITIES
Net income	$	90.3		$	71.5
Adjustments to reconcile net income to cash from operating activities:
Depreciation & amortization		140.5			134.8
Deferred income taxes & investment tax credits		31.8			51.3
Expense portion of pension & postretirement periodic benefit cost		3.1			3.1
Provision for uncollectible accounts		12.9			14.7
Other non-cash charges - net		10.0			7.3
Changes in working capital accounts:
Accounts receivable, including to Vectren companies & accrued unbilled revenue		115.9			219.6
Inventories		(8.6	)		(29.4	)
Recoverable/refundable fuel & natural gas costs		(34.8	)		33.1
Prepayments & other current assets		(14.9	)		38.9
Accounts payable, including to Vectren companies & affiliated companies		(111.4	)		(191.7	)
Accrued liabilities		0.2			(25.5	)
Changes in noncurrent assets		(9.3	)		(5.1	)
Changes in noncurrent liabilities		(18.4	)		(38.7	)
Net cash flows from operating activities		207.3			283.9
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Additional capital contribution from Parent		4.6			5.5
Proceeds from long-term debt		-			161.1
Requirements for:
Dividends to Parent		(59.8	)		(61.9	)
Retirement of long-term debt		(1.6	)		(2.5	)
Net change in short-term borrowings		9.6			(191.9	)
Net cash flows from financing activities		(47.2	)		(89.7	)
CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from other investing activities		3.0			0.2
Requirements for:
Capital expenditures, excluding AFUDC equity		(163.4	)		(231.9	)
Other investing activities		(1.1	)		(0.8	)
Net cash flows from investing activities		(161.5	)		(232.5	)
Net change in cash & cash equivalents		(1.4	)		(38.3	)
Cash & cash equivalents at beginning of period		6.2			52.5
Cash & cash equivalents at end of period	$	4.8		$	14.2

The accompanying notes are an integral part of these consolidated financial statements.

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VECTREN UTILITY HOLDINGS, INC. AND SUBSIDIARY COMPANIES

NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS

(UNAUDITED)

1.	Organization & Nature of Operations

Vectren Utility Holdings, Inc. (the Company or Utility Holdings), an Indiana corporation, was formed on March 31, 2000, to serve as the intermediate holding company for Vectren Corporation’s (Vectren) three operating public utilities: Indiana Gas Company, Inc. (Indiana Gas or Vectren North), Southern Indiana Gas and Electric Company (SIGECO or Vectren South), and the Ohio operations (VEDO or Vectren Ohio). Utility Holdings also has other assets that provide information technology and other services to the three utilities. Vectren, an Indiana corporation, is an energy holding company headquartered in Evansville, Indiana, and was organized on June 10, 1999. Both Vectren and Utility Holdings are holding companies as defined by the Energy Policy Act of 2005 (Energy Act).

Indiana Gas provides energy delivery services to over 560,000 natural gas customers located in central and southern Indiana. SIGECO provides energy delivery services to over 141,000 electric customers and approximately 110,000 gas customers located near Evansville in southwestern Indiana. SIGECO also owns and operates electric generation assets to serve its electric customers and optimizes those assets in the wholesale power market. Indiana Gas and SIGECO generally do business as Vectren Energy Delivery of Indiana. The Ohio operations provide energy delivery services to approximately 310,000 natural gas customers located near Dayton in west central Ohio. The Ohio operations are owned as a tenancy in common by Vectren Energy Delivery of Ohio, Inc. (VEDO), a wholly owned subsidiary of Utility Holdings (53 percent ownership), and Indiana Gas (47 percent ownership). The Ohio operations generally do business as Vectren Energy Delivery of Ohio.

2.	Basis of Presentation

The interim consolidated condensed financial statements included in this report have been prepared by the Company, without audit, as provided in the rules and regulations of the Securities and Exchange Commission and include a review of subsequent events through the date the financial statements were issued. Certain information and note disclosures normally included in financial statements prepared in accordance with accounting principles generally accepted in the United States have been omitted as provided in such rules and regulations. The information in this report reflects all adjustments which are, in the opinion of management, necessary to fairly state the interim periods presented, inclusive of adjustments that are normal and recurring in nature. These consolidated condensed financial statements and related notes should be read in conjunction with the Company’s audited annual consolidated financial statements for the year ended December 31, 2009, filed with the Securities and Exchange Commission on March 5, 2010, on Form 10-K. Because of the seasonal nature of the Company’s utility operations, the results shown on a quarterly basis are not necessarily indicative of annual results.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates.

3.	Subsidiary Guarantor and Consolidating Information

The Company’s three operating utility companies, SIGECO, Indiana Gas, and VEDO are guarantors of Utility Holdings’ $350 million in short-term credit facilities, of which approximately $26 million were outstanding at September 30, 2010, and Utility Holdings’ $919 million unsecured senior notes outstanding at September 30, 2010. The guarantees are full and unconditional and joint and several, and Utility Holdings has no subsidiaries other than the subsidiary guarantors, which are 100 percent owned. However, Utility Holdings does have operations other than those of the subsidiary guarantors. Pursuant to Item 3-10 of Regulation S-X, disclosure of the results of operations and balance sheets of the subsidiary guarantors separate from the parent company’s operations is required. Following are consolidating financial statements including information on the combined operations of the subsidiary guarantors separate from the other operations of the parent company. Pursuant to a tax sharing agreement with Vectren, consolidating tax effects are recorded at the parent (Utility Holdings) level. All other income taxes are calculated on a separate return basis.

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Condensed Consolidating Balance Sheet as of September 30, 2010 (in millions):


ASSETS	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Assets
Cash & cash equivalents	$	3.9	$	0.9	$	-		$	4.8
Accounts receivable - less reserves		64.3		0.4		-			64.7
Intercompany receivables		50.5		130.5		(181.0	)		-
Receivables due from other Vectren companies		-		1.0		-			1.0
Accrued unbilled revenues		29.7		-		-			29.7
Inventories		136.0		0.5		-			136.5
Recoverable fuel & natural gas costs		12.5		-		-			12.5
Prepayments & other current assets		74.6		18.4		(8.6	)		84.4
Total current assets		371.5		151.7		(189.6	)		333.6
Utility Plant
Original cost		4,737.4		-		-			4,737.4
Less: accumulated depreciation & amortization		1,808.7		-		-			1,808.7
Net utility plant		2,928.7		-		-			2,928.7
Investments in consolidated subsidiaries		-		1,227.3		(1,227.3	)		-
Notes receivable from consolidated subsidiaries		-		768.8		(768.8	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		24.6		5.2		-			29.8
Nonutility property - net		3.8		165.9		-			169.7
Goodwill - net		205.0		-		-			205.0
Regulatory assets		78.4		23.5		-			101.9
Other assets		19.4		1.9		(16.3	)		5.0
TOTAL ASSETS	$	3,631.6	$	2,344.3	$	(2,202.0	)	$	3,773.9


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Liabilities
Accounts payable	$	78.7	$	4.5	$	-		$	83.2
Accounts payable to affiliated companies		22.4		-		-			22.4
Intercompany payables		12.0		-		(12.0	)		-
Payables to other Vectren companies		25.2		-		-			25.2
Refundable fuel & natural gas costs		-		-		-			-
Accrued liabilities		110.5		27.1		(8.6	)		129.0
Short-term borrowings		-		26.0		-			26.0
Intercompany short-term borrowings		118.5		50.5		(169.0	)		-
Long-term debt subject to tender		-		-		-			-
Total current liabilities		367.3		108.1		(189.6	)		285.8
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		387.0		917.8		-			1,304.8
Long-term debt due to VUHI		768.8		-		(768.8	)		-
Total long-term debt - net		1,155.8		917.8		(768.8	)		1,304.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes		449.4		3.6		-			453.0
Regulatory liabilities		328.1		3.5		-			331.6
Deferred credits & other liabilities		103.7		1.3		(16.3	)		88.7
Total deferred credits & other liabilities		881.2		8.4		(16.3	)		873.3
Common Shareholder's Equity
Common stock (no par value)		787.8		774.6		(787.8	)		774.6
Retained earnings		439.4		535.3		(439.4	)		535.3
Accumulated other comprehensive income		0.1		0.1		(0.1	)		0.1
Total common shareholder's equity		1,227.3		1,310.0		(1,227.3	)		1,310.0

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,631.6	$	2,344.3	$	(2,202.0	)	$	3,773.9

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Condensed Consolidating Balance Sheet as of December 31, 2009 (in millions):


ASSETS	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Assets
Cash & cash equivalents	$	5.6	$	0.6		-		$	6.2
Accounts receivable - less reserves		108.1		-		-			108.1
Intercompany receivables		68.2		132.7		(200.9	)		-
Receivables due from other Vectren companies		0.7		-		-			0.7
Accrued unbilled revenues		115.4		-		-			115.4
Inventories		124.6		3.3		-			127.9
Prepayments & other current assets		63.4		16.4		(10.6	)		69.2
Total current assets		486.0		153.0		(211.5	)		427.5
Utility Plant
Original cost		4,601.4		-		-			4,601.4
Less: accumulated depreciation & amortization		1,722.6		-		-			1,722.6
Net utility plant		2,878.8		-		-			2,878.8
Investments in consolidated subsidiaries		-		1,190.3		(1,190.3	)		-
Notes receivable from consolidated subsidiaries		-		770.4		(770.4	)		-
Investments in unconsolidated affiliates		0.2		-		-			0.2
Other investments		26.0		5.4		-			31.4
Nonutility property - net		4.1		167.7		-			171.8
Goodwill - net		205.0		-		-			205.0
Regulatory assets		79.6		24.5		-			104.1
Other assets		15.2		-		(10.9	)		4.3
TOTAL ASSETS	$	3,694.9	$	2,311.3	$	(2,183.1	)	$	3,823.1


LIABILITIES & SHAREHOLDER'S EQUITY	Subsidiary		Parent
	Guarantors		Company		Eliminations			Consolidated
Current Liabilities
Accounts payable	$	127.5	$	5.6	$	-		$	133.1
Accounts payable to affiliated companies		54.1		-		-			54.1
Intercompany payables		18.2		-		(18.2	)		-
Payables to other Vectren companies		53.6		-		-			53.6
Refundable fuel & natural gas costs		22.3		-		-			22.3
Accrued liabilities		120.8		21.2		(10.6	)		131.4
Short-term borrowings		-		16.4		-			16.4
Intercompany short-term borrowings		113.8		68.9		(182.7	)		-
Long-term debt subject to tender		51.3		-		-			51.3
Total current liabilities		561.6		112.1		(211.5	)		462.2
Long-Term Debt
Long-term debt - net of current maturities &
debt subject to tender		335.6		919.2		-			1,254.8
Long-term debt due to VUHI		770.4		-		(770.4	)		-
Total long-term debt - net		1,106.0		919.2		(770.4	)		1,254.8
Deferred Income Taxes & Other Liabilities
Deferred income taxes		417.8		0.2		-			418.0
Regulatory liabilities		318.2		4.0		-			322.2
Deferred credits & other liabilities		101.0		1.1		(10.9	)		91.2
Total deferred credits & other liabilities		837.0		5.3		(10.9	)		831.4
Common Shareholder's Equity
Common stock (no par value)		783.1		769.9		(783.1	)		769.9
Retained earnings		407.1		504.7		(407.1	)		504.7
Accumulated other comprehensive income		0.1		0.1		(0.1	)		0.1
Total common shareholder's equity		1,190.3		1,274.7		(1,190.3	)		1,274.7

TOTAL LIABILITIES & SHAREHOLDER'S EQUITY	$	3,694.9	$	2,311.3	$	(2,183.1	)	$	3,823.1

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Condensed Consolidating Statement of Income for the three months ended September 30, 2010 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	101.8	$	-	$	-			101.8
Electric utility		173.2		-		-			173.2
Other		-		11.1		(10.7	)		0.4
Total operating revenues		275.0		11.1		(10.7	)		275.4
OPERATING EXPENSES
Cost of gas		32.4		-		-			32.4
Cost of fuel & purchased power		64.5		-		-			64.5
Other operating		81.1		-		(10.6	)		70.5
Depreciation & amortization		40.3		6.7		0.2			47.2
Taxes other than income taxes		10.8		0.4		-			11.2
Total operating expenses		229.1		7.1		(10.4	)		225.8
OPERATING INCOME		45.9		4.0		(0.3	)		49.6
OTHER INCOME - NET
Equity in earnings of consolidated companies		-		16.8		(16.8	)		-
Other income – net		0.6		12.7		(12.4	)		0.9
Total other income - net		0.6		29.5		(29.2	)		0.9
Interest expense		18.9		14.2		(12.7	)		20.4
INCOME BEFORE INCOME TAXES		27.6		19.3		(16.8	)		30.1
Income taxes		10.8		0.6		-			11.4
NET INCOME	$	16.8	$	18.7	$	(16.8	)	$	18.7

Condensed Consolidating Statement of Income for the three months ended September 30, 2009 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	93.4	$	-	$	-			93.4
Electric utility		143.0		-		-			143.0
Other		-		10.7		(10.3	)		0.4
Total operating revenues		236.4		10.7		(10.3	)		236.8
OPERATING EXPENSES
Cost of gas sold		28.0		-		-			28.0
Cost of fuel & purchased power		50.1		-		-			50.1
Other operating		80.1		-		(10.2	)		69.9
Depreciation & amortization		39.1		6.7		0.1			45.9
Taxes other than income taxes		10.4		0.4		-			10.8
Total operating expenses		207.7		7.1		(10.1	)		204.7
OPERATING INCOME		28.7		3.6		(0.2	)		32.1
OTHER INCOME
Equity in earnings of consolidated companies		-		7.8		(7.8	)		-
Other income – net		1.7		12.9		(12.5	)		2.1
Total other income		1.7		20.7		(20.3	)		2.1
Interest expense		18.6		14.3		(12.7	)		20.2
INCOME BEFORE INCOME TAXES		11.8		10.0		(7.8	)		14.0
Income taxes		4.0		1.3		-			5.3
NET INCOME	$	7.8	$	8.7	$	(7.8	)	$	8.7

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Condensed Consolidating Statement of Income for the nine months ended September 30, 2010 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	692.8	$	-	$	-			692.8
Electric utility		469.1		-		-			469.1
Other		-		33.3		(32.1	)		1.2
Total operating revenues		1,161.9		33.3		(32.1	)		1,163.1
OPERATING EXPENSES
Cost of gas		371.7		-		-			371.7
Cost of fuel & purchased power		180.3		-		-			180.3
Other operating		255.2		-		(31.9	)		223.3
Depreciation & amortization		120.2		20.0		0.3			140.5
Taxes other than income taxes		43.9		1.1		0.1			45.1
Total operating expenses		971.3		21.1		(31.5	)		960.9
OPERATING INCOME		190.6		12.2		(0.6	)		202.2
OTHER INCOME - NET
Equity in earnings of consolidated companies		-		83.4		(83.4	)		-
Other income – net		3.0		38.3		(37.4	)		3.9
Total other income - net		3.0		121.7		(120.8	)		3.9
Interest expense		56.3		42.7		(38.0	)		61.0
INCOME BEFORE INCOME TAXES		137.3		91.2		(83.4	)		145.1
Income taxes		53.9		0.9		-			54.8
NET INCOME	$	83.4	$	90.3	$	(83.4	)	$	90.3

Condensed Consolidating Statement of Income for the nine months ended September 30, 2009 (in millions):


	Subsidiary		Parent		Eliminations &
	Guarantors		Company		Reclassifications			Consolidated
OPERATING REVENUES
Gas utility	$	759.9	$	-	$	-		$	759.9
Electric utility		400.7		-		-			400.7
Other		-		32.1		(30.9	)		1.2
Total operating revenues		1,160.6		32.1		(30.9	)		1,161.8
OPERATING EXPENSES
Cost of gas sold		440.6		-		-			440.6
Cost of fuel & purchased power		147.4		-		-			147.4
Other operating		258.3		-		(30.4	)		227.9
Depreciation & amortization		115.0		19.8		-			134.8
Taxes other than income taxes		45.2		1.0		-			46.2
Total operating expenses		1,006.5		20.8		(30.4	)		996.9
OPERATING INCOME		154.1		11.3		(0.5	)		164.9
OTHER INCOME (EXPENSE)
Equity in earnings of consolidated companies		-		65.8		(65.8	)		-
Other income – net		5.2		38.1		(37.2	)		6.1
Total other income		5.2		103.9		(103.0	)		6.1
Interest expense		54.9		41.7		(37.7	)		58.9
INCOME BEFORE INCOME TAXES		104.4		73.5		(65.8	)		112.1
Income taxes		38.6		2.0		-			40.6
NET INCOME	$	65.8	$	71.5	$	(65.8	)	$	71.5

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Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2010 (in millions):


	Subsidiary			Parent
	Guarantors			Company			Eliminations			Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES	$	166.5		$	40.8		$	-		$	207.3

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Additional capital contribution from Parent		4.6			4.6			(4.6	)		4.6
Requirements for:
Dividends to Parent		(51.1	)		(59.8	)		51.1			(59.8	)
Retirement of long-term debt		(1.6	)		(1.6	)		1.6			(1.6	)
Net change in intercompany short-term borrowings		4.6			(18.4	)		13.8			-
Net change in short-term borrowings		-			9.6			-			9.6
Net cash flows from financing activities		(43.5	)		(65.6	)		61.9			(47.2	)

CASH FLOWS FROM INVESTING ACTIVITIES
Proceeds from:
Consolidated subsidiary distributions		-			51.1			(51.1	)		-
Other investing activities		2.8			0.2			-			3.0
Requirements for:
Capital expenditures, excluding AFUDC equity		(144.8	)		(18.6	)		-			(163.4	)
Consolidated subsidiary investments		-			(4.6	)		4.6			-
Other investing activities		(1.1	)		-			-			(1.1	)
Net change in long-term intercompany notes receivable		-			1.6			(1.6	)		-
Net change in short-term intercompany notes receivable		18.4			(4.6	)		(13.8	)		-
Net cash flows from investing activities		(124.7	)		25.1			(61.9	)		(161.5	)
Net change in cash & cash equivalents		(1.7	)		0.3			-			(1.4	)
Cash & cash equivalents at beginning of period		5.6			0.6			-			6.2
Cash & cash equivalents at end of period	$	3.9		$	0.9		$	-		$	4.8

Condensed Consolidating Statement of Cash Flows for the nine months ended September 30, 2009 (in millions):


	Subsidiary			Parent
	Guarantors			Company			Eliminations			Consolidated

NET CASH FLOWS FROM OPERATING ACTIVITIES	$	280.6		$	3.3		$	-		$	283.9

CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from:
Additional capital contribution from parent		5.5			5.5			(5.5	)		5.5
Long-term debt		136.2			99.5			(74.6	)		161.1
Requirements for:
Dividends to parent		(61.9	)		(61.9	)		61.9			(61.9	)
Retirement of long-term debt		(2.5	)		(2.5	)		2.5			(2.5	)
Net change in intercompany short-term borrowings		(186.5	)		(44.0	)		230.5			-
Net change in short-term borrowings		(0.4	)		(191.5	)		-			(191.9	)
Net cash flows from financing activities		(109.6	)		(194.9	)		214.8			(89.7	)

CASH FLOWS FROM INVESTING ACTIVITIES