Although second-quarter earnings were low for Merrill-ville-based NiSource Inc., the company’s overall financial picture looks strong, officials reported Thursday.

The company reported an income of $7.9 million, or 3 cents per share, for its second quarter, ending June 30. But those figures, compared to $35.5 million one year ago, reflect the expenses associated with an outsourcing agreement with IBM that is expected to gross the company a savings of $530 million over the next 10 years.

Before charges in the amount of $31.2 million were paid out as part of the IBM agreement, the company’s net income was $39 million, or 15 cents per share. This was good news to the company, which reported a net profit of $34.6 million a year ago.

Although another $40 million to $45 million in charges associated with the IBM agreement — including severance payments, consulting fees and the replacement of obsolete software — are expected to be paid throughout the remainder of the year, profits are still expected to climb in the next quarter.

While the company declined to speculate on earnings for next quarter, an unusually warm July will likely lead to record sales for the month.

“The company is very weather dependent,” said Kris Falzone, vice president of corporate communications for NiSource.

And, because of the heat, “It’s a pretty robust market for power right now,” Falzone said, adding that June was 23 percent warmer than average, and 37 percent warmer than June 2004. July, the start of the third quarter, saw temperatures not seen in six years.

The agreement with IBM meant the elimination of 445 positions with another 572 people transferring to IBM. Falzone said most of the employees offered positions with IBM have already made the move, eliminating them from the company’s payroll.

The transition will continue through the end of 2006. Meanwhile, those manning the positions on the chopping block will slowly be phased out between now and the end of next year.

Another factor the company hopes will improve its bottom line is the refinancing of Columbia Energy Group, which NiSource acquired in 2000.

Falzone said its not a done deal yet, but the company is hoping to take advantage of the current low interest rates to refinance $1.1 billion of Columbia’s debt.

NiSource President and CEO Robert Skaggs is referring to 2005 as a “base year, from which we will build a platform for long-term, sustainable growth.

“These important milestones are part of our four-point plan for growth and underscore NiSource’s commitment to deliver on our business plan for 2005 and 2006,” Skaggs said in a released statement.