0000950144-95-002254.txt : 19950815 0000950144-95-002254.hdr.sgml : 19950815 ACCESSION NUMBER: 0000950144-95-002254 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950630 FILED AS OF DATE: 19950814 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: UNITED CITIES GAS CO CENTRAL INDEX KEY: 0000101105 STANDARD INDUSTRIAL CLASSIFICATION: NATURAL GAS DISTRIBUTION [4924] IRS NUMBER: 361801540 STATE OF INCORPORATION: IL FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: 1934 Act SEC FILE NUMBER: 000-01284 FILM NUMBER: 95562068 BUSINESS ADDRESS: STREET 1: 5300 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 BUSINESS PHONE: 6153730104 MAIL ADDRESS: STREET 1: 5300 MARYLAND WAY CITY: BRENTWOOD STATE: TN ZIP: 37027 FORMER COMPANY: FORMER CONFORMED NAME: SOUTHEASTERN ILLINOIS GAS CO DATE OF NAME CHANGE: 19670829 10-Q 1 UNITED CITIES GAS COMPANY 10-Q 6-30-95 1 ================================================================================ 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 June 30, 1995. 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 0-1284-2 UNITED CITIES GAS COMPANY -------------------------------------------------------------------------------- (Exact name of registrant as specified in its charter) Illinois and Virginia 36-1801540 -------------------------------------------------------------------------------- (State or other jurisdiction of (IRS Employer incorporation or organization) Identification Number) 5300 Maryland Way, Brentwood, TN 37027 -------------------------------------------------------------------------------- (Address of principal (Zip Code) executive offices) (615) 373-5310 -------------------------------------------------------------------------------- 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 preceeding 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. [X] Yes [ ] No At July 31, 1995, 12,571,187 shares of the common stock of the Registrant were outstanding. ================================================================================ 2 UNITED CITIES GAS COMPANY AND SUBSIDIARIES QUARTERLY REPORT ON FORM 10-Q FOR THE QUARTER ENDED JUNE 30, 1995 TABLE OF CONTENTS
ITEM PAGE NUMBER PART I -- FINANCIAL INFORMATION NUMBER ------ ------ 1 Financial Statements: Consolidated Statements of Income (Unaudited) for the Three, Six and Twelve Months Ended June 30, 1995 and June 30, 1994. 3 Consolidated Statements of Cash Flows (Unaudited) for the Three, Six and Twelve Months Ended June 30, 1995 and June 30, 1994 4 Consolidated Balance Sheets at June 30, 1995 (Unaudited) and 5 December 31, 1994. Consolidated Statements of Capitalization at June 30, 1995 (Unaudited) and December 31, 1994. 6 Notes to Consolidated Financial Statements. 7 2 Management's Discussion and Analysis of Financial Condition and Results of Operations. 8 PART II -- OTHER INFORMATION 1 Legal Proceedings. 12 4 Submission of Matters to a Vote of Security Holders. 12 6 Exhibits and Reports on Form 8-K. 12 List of Exhibits. 13 Signature 14
3 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED JUNE 30, JUNE 30, JUNE 30, ------------------ ---------------- ------------------- (Unaudited, in thousands, except per share amounts) 1995 1994 1995 1994 1995 1994 ---- ----- ---- ---- ---- ---- UTILITY OPERATING REVENUES.................................... $42,246 $48,352 $148,252 $172,543 $256,693 $294,646 Natural gas cost........................................... 24,023 30,033 85,945 110,035 148,879 186,375 ------- ------- -------- -------- -------- -------- UTILITY OPERATING MARGIN...................................... 18,223 18,319 62,307 62,508 107,814 108,271 ------- ------- -------- -------- -------- -------- UTILITY OTHER OPERATING EXPENSES: Operations and maintenance................................. 14,524 14,754 29,764 29,644 57,423 57,522 Depreciation and amortization.............................. 3,708 3,506 7,372 6,934 14,371 13,621 Federal and state income taxes............................. (2,430) (2,333) 4,448 4,907 3,416 3,227 Other taxes................................................ 2,978 2,498 6,397 5,557 11,579 10,448 ------- ------- -------- -------- -------- -------- Total other operating expenses........................... 18,780 18,425 47,981 47,042 86,789 84,818 ------- ------- -------- -------- -------- -------- UTILITY OPERATING INCOME (LOSS)............................... (557) (106) 14,326 15,466 21,025 23,453 UTILITY OTHER INCOME (LOSS), NET.............................. 215 (49) 173 (125) 37 232 ------- ------- -------- -------- -------- -------- (342) (155) 14,499 15,341 21,062 23,685 ------- ------- -------- -------- -------- -------- UTILITY INTEREST CHARGES: Interest on long-term debt................................. 2,980 3,073 6,017 6,217 12,149 12,567 Other interest charges..................................... 490 216 1,191 490 2,438 2,337 ------- ------- -------- -------- -------- -------- Total interest charges................................... 3,470 3,289 7,208 6,707 14,587 14,904 ------- ------- -------- -------- -------- -------- UTILITY INCOME (LOSS)......................................... (3,812) (3,444) 7,291 8,634 6,475 8,781 ------- ------- -------- -------- -------- -------- OTHER INCOME (LOSS): Operations of UCG Energy Corporation- Revenues................................................ 4,444 5,984 16,827 19,726 35,485 40,465 Operating expenses...................................... (4,015) (5,100) (12,777) (14,603) (26,834) (30,639) Interest expense........................................ (283) (201) (521) (386) (909) (996) Depreciation and amortization........................... (1,007) (865) (1,991) (1,752) (3,819) (3,590) Other income, net....................................... 372 178 1,313 328 1,659 688 Federal and state income taxes.......................... 185 2 (1,082) (1,257) (2,119) (2,359) ------- ------- -------- -------- -------- -------- (304) (2) 1,769 2,056 3,463 3,569 ------- ------- -------- -------- -------- -------- Operations of United Cities Gas Storage Company- Revenues................................................ 1,145 1,741 3,028 4,757 5,398 8,805 Operating expenses...................................... (527) (1,205) (1,840) (3,715) (3,076) (6,611) Interest expense........................................ (275) (237) (506) (488) (966) (979) Depreciation............................................ (92) (92) (184) (183) (368) (364) Federal and state income taxes.......................... (97) (81) (193) (145) (384) (358) ------- ------- -------- -------- -------- -------- 154 126 305 226 604 493 ------- ------- -------- -------- -------- -------- COMMON STOCK EARNINGS (LOSS).................................. $(3,962) $(3,320) $ 9,365 $ 10,916 $ 10,542 $ 12,843 ======= ======= ======== ======== ======== ======== COMMON STOCK EARNINGS (LOSS) PER SHARE........................ $ (0.35) $ (0.32) $ 0.86 $ 1.05 $ 0.99 $ 1.25 ======= ======= ======== ======== ======== ======== AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................... 11,197 10,369 10,937 10,350 10,700 10,309 ======= ======= ======== ======== ======== ======== COMMON STOCK DIVIDENDS PER SHARE.............................. $ 0.255 $ 0.25 $ 0.51 $ 0.50 $ 1.015 $ 0.995 ======= ======= ======== ======== ======== ========
3 4 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
THREE MONTHS ENDED SIX MONTHS ENDED JUNE 30, JUNE 30, ------------------ ----------------- (Unaudited, in thousands) 1995 1994 1995 1994 ---- ---- ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Common stock earnings (loss).................................... $ (3,962) $ (3,320) $ 9,365 $ 10,916 -------- -------- -------- -------- Adjustments to reconcile common stock earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization................................. 4,807 4,463 9,547 8,869 Deferred taxes................................................ 7 (72) 13 (144) Investment tax credits, net................................... (91) (93) (182) (185) Investment income from Woodward Marketing, L.L.C.............. (155) - (729) - Changes in current assets and current liabilities: Receivables................................................. 20,073 27,121 27,111 30,650 Materials and supplies...................................... (124) (471) (363) (399) Gas in storage.............................................. (7,293) (10,644) 8,445 5,013 Gas costs to be billed in the future........................ (1,901) (1,997) 2,823 (3,069) Prepayments and other....................................... (1,391) (845) (326) 117 Accounts payable............................................ (845) (5,622) (8,903) (14,224) Customer deposits and advance payments...................... 6 575 (3,208) (3,352) Accrued interest............................................ (2,542) (2,574) (339) (1,187) Supplier refunds due customers.............................. (1,487) (2,787) 4,135 2,800 Accrued taxes............................................... (4,902) (4,258) 428 3,110 Other, net.................................................. (627) (824) (1,926) 521 -------- -------- -------- -------- Total adjustments......................................... 3,535 1,972 36,526 28,520 -------- -------- -------- -------- Net cash provided by (used in) operating activities..... (427) (1,348) 45,891 39,436 -------- -------- -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property - utility................................. (8,085) (6,692) (17,798) (14,026) Additions to property - non-utility............................. (1,219) (851) (2,367) (1,446) Investment in Woodward Marketing, L.L.C., net................... (1,433) - (1,433) - -------- -------- -------- -------- Net cash used in investing activities................... (10,737) (7,543) (21,598) (15,472) -------- -------- -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings - net..................................... (5,109) 10,620 (33,236) (12,243) Proceeds from issuance of common stock.......................... 20,400 273 21,710 625 Long-term debt retirements...................................... (835) (1,127) (5,333) (5,678) Dividends paid.................................................. (2,391) (2,284) (4,758) (4,564) -------- -------- -------- -------- Net cash provided by (used in) financing activities..... 12,065 7,482 (21,617) (21,860) -------- -------- -------- -------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS.......... 901 (1,409) 2,676 2,104 CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.............. 4,519 4,311 2,744 798 -------- -------- -------- -------- CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.................... $ 5,420 $ 2,902 $ 5,420 $ 2,902 ======== ======== ======== ======== CASH PAID DURING THE PERIOD FOR: Interest, net of amounts capitalized............................ $ 6,570 $ 6,301 $ 8,574 $ 8,768 ======== ======== ======== ======== Income taxes.................................................... $ 2,901 $ 2,499 $ 5,069 $ 2,862 ======== ======== ======== ======== NONCASH INVESTING AND FINANCING ACTIVITIES: Dividends reinvested............................................ $ 444 $ 308 $ 804 $ 611 ======== ======== ======== ======== Debt incurred to acquire assets of Harrell Propane, Inc......... - - $ 1,250 - ======== ======== ======== ======== Common stock issued in investment in Woodward Marketing, L.L.C.. $ 5,000 - $ 5,000 - ======== ======== ======== ======== TWELVE MONTHS ENDED JUNE 30, ------------------- (Unaudited, in thousands) 1995 1994 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Common stock earnings (loss).................................... $ 10,542 $ 12,843 -------- -------- Adjustments to reconcile common stock earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization................................. 18,558 17,575 Deferred taxes................................................ 1,458 485 Investment tax credits, net................................... (367) (372) Investment income from Woodward Marketing, L.L.C.............. (729) - Changes in current assets and current liabilities: Receivables................................................. 3,493 (411) Materials and supplies...................................... 229 175 Gas in storage.............................................. 2,964 (10,799) Gas costs to be billed in the future........................ (2,019) (5,074) Prepayments and other....................................... 564 527 Accounts payable............................................ (3,116) 7,384 Customer deposits and advance payments...................... 2,334 1,365 Accrued interest............................................ (264) (399) Supplier refunds due customers.............................. 2,562 (4,035) Accrued taxes............................................... (193) 63 Other, net.................................................. (2,038) (2,899) -------- -------- Total adjustments......................................... 23,436 3,585 -------- -------- Net cash provided by (used in) operating activities..... 33,978 16,428 -------- -------- CASH FLOWS FROM INVESTING ACTIVITIES: Additions to property - utility................................. (34,660) (28,227) Additions to property - non-utility............................. (5,149) (2,892) Investment in Woodward Marketing, L.L.C., net................... (1,433) - -------- -------- Net cash used in investing activities................... (41,242) (31,119) -------- -------- CASH FLOWS FROM FINANCING ACTIVITIES: Short-term borrowings - net..................................... 2,332 10,620 Proceeds from issuance of common stock.......................... 24,347 1,496 Long-term debt retirements...................................... (7,488) (6,770) Dividends paid.................................................. (9,409) (9,067) -------- -------- Net cash provided by (used in) financing activities..... 9,782 (3,721) -------- -------- NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS.......... 2,518 (18,412) CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.............. 2,902 21,314 -------- -------- CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.................... $ 5,420 $ 2,902 ======== ======== CASH PAID DURING THE PERIOD FOR: Interest, net of amounts capitalized............................ $ 16,726 $ 17,278 ======== ======== Income taxes.................................................... $ 5,927 $ 7,779 ======== ======== NONCASH INVESTING AND FINANCING ACTIVITIES: Dividends reinvested............................................ $ 1,447 $ 1,190 ======== ======== Debt incurred to acquire assets of Harrell Propane, Inc......... $ 1,250 - ======== ======== Common stock issued in investment in Woodward Marketing, L.L.C.. $ 5,000 - ======== ========
4 5 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
JUNE 30, DECEMBER 31, (In thousands) 1995 1994 ---- ---- ASSETS (UNAUDITED) UTILITY PLANT: Plant in service, at cost................................ $420,220 $403,121 Less-accumulated depreciation.......................... 146,262 139,715 -------- -------- 273,958 263,406 -------- -------- NON-UTILITY PROPERTY: Property, plant, and equipment........................... 74,384 71,222 Less-accumulated depreciation.......................... 23,894 22,272 -------- -------- 50,490 48,950 -------- -------- CURRENT ASSETS: Cash and temporary investments........................... 5,420 2,744 Receivables, less allowance for uncollectible accounts of $1,070 in 1995 and $1,017 in 1994................... 16,219 43,330 Materials and supplies................................... 5,543 5,180 Gas in storage........................................... 18,006 26,451 Gas costs to be billed in the future..................... 13,134 15,957 Prepayments and other.................................... 2,372 2,046 -------- -------- 60,694 95,708 -------- -------- DEFERRED CHARGES: Unamortized debt discount and expense, net............... 2,649 2,694 Investment in Woodward Marketing, L.L.C. ................ 7,162 - Non-compete agreements, net.............................. 3,703 3,697 Deferred system improvement costs, net................... 1,119 1,425 Other deferred charges................................... 7,430 5,320 -------- -------- 22,063 13,136 -------- -------- $407,205 $421,200 ======== ======== CAPITALIZATION AND LIABILITIES CAPITALIZATION: Common stock equity...................................... $149,345 $118,028 Long-term debt........................................... 137,637 144,344 -------- -------- 286,982 262,372 -------- -------- CURRENT LIABILITIES: Current portion of long-term obligations................. 8,692 6,068 Notes payable............................................ 12,952 46,188 Accounts payable for gas costs........................... 17,210 26,185 Other accounts payable................................... 3,060 2,988 Accrued taxes............................................ 6,803 6,375 Customer deposits and advance payments................... 10,965 14,173 Accrued interest......................................... 3,006 3,345 Supplier refunds due customers........................... 9,576 5,441 Other.................................................... 8,658 8,993 -------- -------- 80,922 119,756 -------- -------- DEFERRED CREDITS: Accumulated deferred income tax.......................... 24,715 24,572 Deferred investment tax credits.......................... 4,463 4,645 Income taxes due customers............................... 6,185 6,329 Other.................................................... 3,938 3,526 -------- -------- 39,301 39,072 -------- -------- $407,205 $421,200 ======== ========
5 6 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION
JUNE 30, DECEMBER 31, (In thousands, except share amounts) 1995 1994 ----------------- ---------------- COMMON STOCK EQUITY: (UNAUDITED) Common stock without par value, authorized 40,000,000 shares, outstanding 12,548,476 in 1995 and 10,613,441 in 1994..................................... $ 99,136 $ 71,622 Capital surplus................................................... 22,462 22,462 Retained earnings................................................. 27,747 23,944 -------- -------- Total common stock equity....................................... 149,345 52.0% 118,028 45.0% -------- ----- -------- ----- LONG-TERM DEBT: First mortgage bonds ............................................. 125,000 129,000 Senior secured storage term notes, 8.67%, due in installments through 2007...................................... 10,191 10,436 Rental property adjustable rate term notes due in installments through 1999...................................... 6,267 6,839 Other long-term obligations due in installments through 2013...... 4,871 4,137 -------- -------- 146,329 150,412 Less-current requirements..................................... 8,692 6,068 -------- -------- Total long-term debt, excluding amounts due within one year... 137,637 48.0% 144,344 55.0% -------- ----- -------- ----- TOTAL CAPITALIZATION.................................................. $286,982 100.0% $262,372 100.0% ======== ===== ======== =====
6 7 UNITED CITIES GAS COMPANY AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS The accompanying unaudited financial statements reflect all adjustments (which are of a normal recurring nature) that are, in the opinion of management, necessary for a fair statement of the results for the interim periods presented. Certain information and footnote disclosures normally included in financial statements prepared in accordance with generally accepted accounting principles have been condensed or omitted pursuant to SEC rules and regulations. The statements should be read in conjunction with the Summary of Significant Accounting Policies and Notes to Consolidated Financial Statements included in the Company's annual report for the year ended December 31, 1994. The Company's business is seasonal in nature resulting in greater earnings during the winter months. The results of operations for the three month and six month periods ended June 30, 1995 are not necessarily indicative of the results to be expected for the full year. In June, 1995, the Company entered into a $1,787,000 agreement with Union Electric Company (Union Electric) whereby Union Electric agreed to assume responsibility for the Company's continuing investigation and environmental response action obligations as outlined in the feasibility study related to a former manufactured gas plant site in Keokuk, Iowa. At June 30, 1995, the Company had $1,430,000 accrued for its remaining liability related to the agreement. This amount is to be paid annually over a four year period beginning July 1, 1996. The Company has deferred the accrued amount and expects approval for recovery in its next rate proceeding in Iowa. The Company owns former manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any information which suggests that these sites give rise to a present health or environmental risk as a result of the manufactured gas process or that any response action will be necessary. However, the Company has accrued and deferred for recovery $750,000 associated with the preliminary survey and invasive study of these sites. Management expects that expenditures related to response action at any environmental site will be recovered through rates or insurance, or shared among other potentially responsible parties. Therefore, the costs of responding to these sites are not expected to materially affect the results of operations, financial condition or cash flows of the Company. During the first quarter of 1995, UCG Energy purchased a 45% interest in certain contracts related to the gas marketing business of Woodward Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired interest, the shareholders of WMI received $5,000,000 in the Company's common stock and $750,000 in cash in May, 1995, and may, if certain earnings targets are met, receive an additional payment of $1,000,000 to be paid over a five year period. In exchange for its own gas marketing contracts and the acquired 45% interest in the WMI gas marketing contracts, UCG Energy received a 45% interest in a newly formed limited liability company, Woodward Marketing, L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its remaining 55% interest in the WMI gas marketing contracts. In addition, in May, 1995, the Company paid a net $683,000 for the Company's share of certain assets and paid-in-capital of WMLLC. WMLLC will provide gas marketing services to industrial customers, municipalities and local distribution companies. UCG Energy utilized equity accounting, effective January 1, 1995, for the acquisition. On April 6, 1995, the Company signed a letter of intent to acquire all the outstanding common stock of Monarch Gas Company (Monarch). The acquisition will be accounted for as a pooling of interests whereby the number of shares of the Company's common stock issued will be calculated based on the book value of Monarch versus the book value of the Company at December 31, 1994. In addition, the Company will enter into a $250,000, five year non-compete agreement with the owners of Monarch. Monarch serves approximately 3,000 customers in small communities adjacent to the Company's Vandalia, Illinois operation. The Company will not restate prior years' consolidated financial statements due to immateriality. In March, 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996, and does not expect that adoption will have a material impact on the results of operations, financial condition or cash flows of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as a result of a change in regulation. Effective May 22, 1995, United Cities Propane Gas of Tennessee, Inc., a subsidiary of UCG Energy, purchased all of the propane transportation assets of Transpro South, Inc., a common carrier corporation, for approximately $218,000. In addition, the subsidiary entered into a ten year non-compete agreement with the prior owner for $6,000. Certain reclassifications were made conforming prior year's financial statements with 1995 financial statement presentation. 7 8 UNITED CITIES GAS COMPANY AND SUBSIDIARIES Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS. Overview The Company's 1995 second quarter common stock loss was $3,962,000 compared to the second quarter 1994 loss of $3,320,000. The loss per common share was $.35 on an additional 828,000 average number of shares outstanding, compared to the loss of $.32 for the comparable period in 1994. The common stock earnings for the first six months of 1995 were $9,365,000 compared to $10,916,000 in 1994. Common stock earnings per share decreased from $1.05 in 1994 to $.86 in 1995 on an additional 587,000 average number of shares outstanding. Common stock earnings for the twelve month period ended June 30, 1995 were $10,542,000 compared to $12,843,000 for the twelve month period ended June 30, 1994. Common stock earnings per share decreased from $1.25 in the twelve month period in 1994 to $.99 in the twelve month period in 1995. Average shares outstanding increased by 391,000 for the twelve month period ended June 30, 1995. The following table summarizes certain information regarding the operation of each segment of the Company's business for the periods ended June 30:
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED ------------------ ---------------- ------------------- (UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Utility................................ $42,246 $48,352 $148,252 $172,543 $256,693 $294,646 ------- ------- -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division................... 1,825 1,651 10,843 11,082 20,548 20,368 Rental Division.................... 1,586 1,614 3,117 3,258 6,309 6,577 Utility Services Division.......... 1,033 2,719 2,867 5,386 8,628 13,520 ------- ------- -------- -------- -------- -------- Total UCG Energy Corporation..... 4,444 5,984 16,827 19,726 35,485 40,465 United Cities Gas Storage Company.... 1,145 1,741 3,028 4,757 5,398 8,805 ------- ------- -------- -------- -------- -------- Total Subsidiaries............... 5,589 7,725 19,855 24,483 40,883 49,270 ------- ------- -------- -------- -------- -------- Total Revenues......................... $47,835 $56,077 $168,107 $197,026 $297,576 $343,916 ======= ======= ======== ======== ======== ======== COMMON STOCK EARNINGS: Utility................................ $(3,812) $(3,444) $ 7,291 $ 8,634 $ 6,475 $ 8,781 ------- ------- -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division................... (791) (695) 395 698 819 1,083 Rental Division.................... 425 506 859 1,021 1,863 1,810 Utility Services Division.......... 62 187 515 337 781 676 ------- ------- -------- -------- -------- -------- Total UCG Energy Corporation..... (304) (2) 1,769 2,056 3,463 3,569 United Cities Gas Storage Company.... 154 126 305 226 604 493 ------- ------- -------- -------- -------- -------- Total Subsidiaries............... (150) 124 2,074 2,282 4,067 4,062 ------- ------- -------- -------- -------- -------- Total Common Stock Earnings............ $(3,962) $(3,320) $ 9,365 $ 10,916 $ 10,542 $ 12,843 ======= ======= ======== ======== ======== ========
OPERATING RESULTS-UTILITY The utility loss increased by $368,000 for the second quarter and utility earnings decreased $1,343,000 and $2,306,000, respectively, for the six and twelve month periods in 1995 from the comparable 1994 periods due predominantly to the factors mentioned below: The operating margin decreased from $18,319,000 in the second quarter of 1994 to $18,223,000 in 1995. The operating margin for the six month period ended June 30, 1995 was $62,307,000 compared to $62,508,000 for the same period in 1994, and the margin decreased $457,000 to $107,814,000 for the twelve months ended June 30, 1995. The decrease in margin in the six and twelve month periods can primarily be attributed to the warmer weather in the periods ended June 30, 1995 as compared to the previous year periods. However, the negative impact of the warmer weather was lessened by the weather normalization adjustments (WNAs) in Tennessee and Georgia, an increased number of natural gas customers, the Palmyra, Missouri acquisition in March, 1994 and the rate increase effective February, 1995 in South Carolina. In the six and twelve month periods ended June 30, 1995, $2,328,000 and $3,852,000, respectively, in additional revenues were generated by the WNAs. In comparison, the WNAs generated additional revenues of $526,000 and $313,000 for the six and twelve month periods ended June 30, 1994. 8 9 ITEM 2. CONTINUED Operations and maintenance expenses other than natural gas cost for the current year periods varied only slightly from the previous year periods. Increases in payroll related expenses during the periods were primarily offset by a reduction in medical expenses. Depreciation and amortization expense and other taxes, which includes property taxes, increased in all periods primarily due to additional plant in service. Interest expense increased $181,000 and $501,000 in the three and six month periods ended June 30, 1995 as compared to the same periods in 1994 primarily due to interest on increased short-term debt outstanding, offset slightly by the retirement of long-term debt. Interest expense decreased $317,000 in the twelve month period primarily due to the retirement of long-term debt and because of the 1993 assessment of interest related to the settlement of the Internal Revenue Service Audit for the years 1986 through 1990, partially offset by interest on increased short-term debt outstanding during the period. The table below reflects operating revenues, gas sales volumes and weather data for the periods ended June 30:
OPERATING STATISTICS-UTILITY THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED ------------------ ---------------- ------------------- (UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- OPERATING REVENUES: Residential.......................... $16,424 $18,048 $ 71,090 $ 82,732 $117,877 $138,268 Commercial........................... 9,786 11,473 39,023 46,528 65,871 77,272 Industrial........................... 12,832 16,761 30,358 38,466 60,961 70,093 Transportation....................... 2,625 1,684 6,224 3,336 10,095 6,612 Other Revenues....................... 579 386 1,557 1,481 1,889 2,401 ------- ------- -------- -------- -------- -------- Total Operating Revenues.......... $42,246 $48,352 $148,252 $172,543 $256,693 $294,646 ======= ======= ======== ======== ======== ======== GAS SALES (MCF): Residential.......................... 2,645 2,585 13,011 13,553 20,810 22,828 Commercial........................... 2,144 2,120 8,389 8,560 13,944 14,634 Industrial- Firm............................... 1,691 1,861 4,122 4,536 7,720 8,010 Interruptible...................... 2,430 2,569 5,354 5,426 10,930 11,104 ------- ------- -------- -------- -------- -------- 8,910 9,135 30,876 32,075 53,404 56,576 ======= ======= ======== ======== ======== ======== Transported Volumes (Mcf).............. 4,092 3,244 8,806 5,911 15,470 11,628 ======= ======= ======== ======== ======== ======== WEATHER DATA-COLDER (WARMER) THAN NORMAL*......................... (3.7%) (7.4%) (10.7%) (3.8%) (14.4%) - ======= ======= ======== ======== ======== ========
*Based on system weighted average. Data for 1995 is preliminary. OPERATING RESULTS-NON-UTILITY Revenues of UCG Energy Corporation (UCG Energy) decreased $1,540,000, $2,899,000 and $4,980,000 from the second quarter, six and twelve month periods ended June 30, 1994, respectively. The propane division's revenues increased moderately from the second quarter in 1994 due to increased jobbing and service revenues as a result of increased appliance sales. The propane division's revenues decreased in the six month period due to decreased propane volumes sold as a result of warmer than normal weather, but increased in the twelve month period as a result of a change in the billing date of the facility fee from June, 1994 to October, 1994, partially offset by decreased propane volumes sold due to warmer than normal weather. The utility services division's revenues decreased in the second quarter, six and twelve month periods from 1994 primarily due to decreased gas brokerage sales to certain industrial customers and others, and secondarily, the discontinuance of the distribution of energy-related products. The rental division had a moderate decrease in revenues in all periods due to lower rental rates on certain rental units in service. Expenses of UCG Energy, including cost of sales, decreased $1,085,000, $1,826,000 and $3,805,000 from the second quarter, six and twelve month periods ended June 30, 1994. Expenses increased in all periods in the propane division due to added general and administrative expenses associated with the acquisitions of Transpro South, Inc., Harrell Propane, Inc., and Hurley's Propane Gas. Expenses of the utility services division decreased in all periods as a result of decreased gas brokerage sales to certain industrial customers and others as well as the discontinuance of the distribution of energy-related products. Expenses of the rental division varied only slightly in all periods from the previous year. 9 10 ITEM 2. CONTINUED Other income, net of UCG Energy increased $194,000, $985,000 and $971,000 from the second quarter, six and twelve month periods ended June 30, 1994, respectively, primarily as a result of investment income from Woodward Marketing, L.L.C. in the utility services division of $155,000 in the second quarter and $729,000 in the six and twelve month periods. UCG Energy's net loss increased $302,000 and net income decreased $287,000 and $106,000 from the second quarter, six and twelve month periods ended June 30, 1994. The increased loss in the second quarter is principally due to decreased sales in the utility services division as mentioned above and secondarily, to increased expenses in the propane division, partially offset by increased jobbing and service revenues. The decrease in the six and twelve month periods is the result of decreased sales in the propane division partially offset by the investment income from Woodward Marketing, L.L.C. in both periods and the change in the billing date of the facility fee reflected in the twelve month periods. Effective May 22, 1995, United Cities Propane Gas of Tennessee, Inc., a subsidiary of UCG Energy, purchased all of the propane transportation assets of Transpro South, Inc., a common carrier corporation, for approximately $218,000. In addition, the subsidiary entered into a ten year non-compete agreement with the prior owner for $6,000. FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Total cash used in operations for the three month period ended June 30, 1995 was $427,000. Total cash provided by operations for the six and twelve month periods ended June 30, 1995 was $45,891,000 and $33,978,000, respectively. Changes in accounts receivable, gas in storage and accounts payable are primarily a result of the seasonal nature of the Company's business. There were no other changes in significant balance sheet accounts which had a material effect on the cash flows of the Company. The financing activities during the periods include the June, 1995 issuance of 1,380,000 shares of commom stock in a public stock offering with net proceeds from the sale amounting to approximately $19,000,000 as of June 30, 1995. The net proceeds were used to repay short-term debt and fund the Company's construction program. The financing activities also reflect the retirement of long-term debt, dividend payments, the issuance of stock through the Company's various stock purchase plans and the net activity of short-term borrowings. The Company has authorized as of June 30, 1995, specific purchases and construction projects amounting to $19,718,000 of its 1995 utility capital budget of $36,868,000 and $3,713,000 of its non-utility capital budget of $4,855,000. Total capital expenditures for 1996, 1997 and 1998 are anticipated to be approximately $28,400,000, $30,400,000 and $31,000,000, respectively. In addition to its ongoing construction program, the Company is constructing a twenty-eight mile main which will connect two of its fastest growing distribution systems located in Middle Tennessee and is designed to provide the Company's current customers with the lowest possible priced gas through increased gas supply flexibility. Included in the 1995 utility capital budget stated above is $5,000,000 related to this project. In June, 1995, the Company entered into a $1,787,000 agreement with Union Electric Company (Union Electric) whereby Union Electric agreed to assume responsibility for the Company's continuing investigation and environmental response action obligations as outlined in the feasibility study related to a former manufactured gas plant site in Keokuk, Iowa. At June 30, 1995, the Company had $1,430,000 accrued for its remaining liability related to the agreement. This amount is to be paid annually over a four year period beginning July 1, 1996. The Company has deferred the accrued amount and expects approval for recovery in its next rate proceeding in Iowa. The Company owns former manufactured gas plant sites in Johnson City and Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any information which suggests that these sites give rise to a present health or environmental risk as a result of the manufactured gas process or that any response action will be necessary. However, the Company has accrued and deferred for recovery $750,000 associated with the preliminary survey and invasive study of these sites. Management expects that expenditures related to response action at any environmental site will be recovered through rates or insurance, or shared among other potentially responsible parties. Therefore, the costs of responding to these sites are not expected to materially affect the results of operations, financial condition or cash flows of the Company. 10 11 ITEM 2. CONTINUED During the first quarter of 1995, UCG Energy purchased a 45% interest in certain contracts related to the gas marketing business of Woodward Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired interest, the shareholders of WMI received $5,000,000 in the Company's common stock and $750,000 in cash in May, 1995, and may, if certain earnings targets are met, receive an additional payment of $1,000,000 to be paid over a five year period. In exchange for its own gas marketing contracts and the acquired 45% interest in the WMI gas marketing contracts, UCG Energy received a 45% interest in a newly formed limited liability company, Woodward Marketing, L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its remaining 55% interest in the WMI gas marketing contracts. In addition, in May, 1995, the Company paid a net $683,000 for the Company's share of certain assets and paid-in-capital of WMLLC. WMLLC will provide gas marketing services to industrial customers, municipalities and local distribution companies. UCG Energy utilized equity accounting, effective January 1, 1995, for the acquisition. On April 6, 1995, the Company signed a letter of intent to acquire all the outstanding common stock of Monarch Gas Company (Monarch). The acquisition will be accounted for as a pooling of interests whereby the number of shares of the Company's common stock issued will be calculated based on the book value of Monarch versus the book value of the Company at December 31, 1994. In addition, the Company will enter into a $250,000, five-year non-compete agreement with the owners of Monarch. Monarch serves approximately 3,000 customers in small communities adjacent to the Company's Vandalia, Illinois operation. The Company will not restate prior years' consolidated financial statements due to immateriality. In March, 1995, the Financial Accounting Standards Board issued Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria for regulatory assets by requiring that such assets be probable of future recovery at each balance sheet date. The Company anticipates adopting this standard on January 1, 1996, and does not expect that adoption will have a material impact on the results of operations, financial condition or cash flows of the Company based on the current regulatory structure in which the Company operates. This conclusion may change in the future as a result of a change in regulation. On April 28, 1995, the Company filed to increase rates on an annual basis by $810,000 in the state of Virginia. The proposed rate increase will become effective in late September, 1995. The increase will be subject to refund pending the final order which is expected in the second quarter of 1996. On May 15, 1995, the Company filed to increase rates on an annual basis by $3,950,000 in the state of Tennessee. The Company expects that any increase granted will be effective by mid-November 1995. In an election held on April 7, 1995, 96 employees in Columbus, Georgia voted not to be represented by a union. The Company believes its short-term lines of credit are sufficient to meet anticipated short-term requirements. At June 30, 1995, the Company had $84,000,000 in short-term lines of credit, including master and banker's acceptance notes, bearing interest primarily at the lesser of prime or a negotiated rate during the term of each borrowing. At June 30, 1995, $12,952,000 was outstanding under these arrangements. 11 12 UNITED CITIES GAS COMPANY AND SUBSIDIARIES PART II. OTHER INFORMATION FOR THE SIX MONTHS ENDED JUNE 30, 1995 ITEM 1. LEGAL PROCEEDINGS. See December 31, 1994 Form 10-K and Part I of this filing. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS. The annual meeting of Shareholders was held April 28, 1995. The meeting involved the election of directors. The matters voted upon were as follows: Proposal 1. The shareholders approved the nomination of Dwight C. Baum, Dennis L. Newberry, and Timothy W. Triplett to serve the Company as directors for a three-year term. Dale A. Keasling was elected to serve as a director for a one-year term. Directors of the Company who are continuing their term are Vincent J. Lewis, Stirton Oman, Jr., Thomas J. Garland, Gene C. Koonce and George C. Woodruff, Jr. Proposal 2. The shareholders approved a Non-Employee Director Stock Plan. (See copy of plan filed with this report as Exhibit 10.01.) Proposal 3. The shareholders approved an amendment to the Company's Articles of Incorporation to (i) delete the provisions for Cumulative Preferred Stock and 11-1/2% Cumulative Convertible Preference Stock and (ii) create a class of Preferred Stock. (See Amended Articles of Incorporation of the Company filed with this report as Exhibit 3.01.) The results of the voting for each proposal were as follows:
FOR AGAINST WITHHELD NON-VOTE --- ------- -------- -------- Proposal 1. Baum 8,745,990 - 332,975 1 Keasling 8,754,255 - 324,710 1 Newberry 8,761,121 - 317,845 - Triplett 8,757,383 321,582 1 Proposal 2. 8,147,233 597,368 334,364 1 Proposal 3. 6,036,062 670,459 2,372,443 2
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits-See list of Exhibits on page 13 hereof. (b) Reports on Form 8-K. None 12 13 UNITED CITIES GAS COMPANY AND SUBSIDIARIES LIST OF EXHIBITS 3.01 Amended Articles of Incorporation of Company as Amended April 28, 1995 10.01 Non-Employee Director Stock Plan 27 Financial Data Schedule (SEC use only) 13 14 UNITED CITIES GAS COMPANY AND SUBSIDIARIES SIGNATURE Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this Report to be signed on its behalf by the undersigned thereunto duly authorized. UNITED CITIES GAS COMPANY /s/ ADRIENNE H. BRANDON ------------------------------------ ADRIENNE H. BRANDON Vice President and Controller On behalf of the Registrant Date: August 11, 1995 14 EX-3.01 2 AMENDED ARTICLES OF INCORPORATION 1 EXHIBIT 3.01 As Amended Through April 28, 1995 UNITED CITIES GAS COMPANY AMENDED ARTICLES OF INCORPORATION (A Public Service Company Incorporated under the Laws of Illinois and Virginia) ARTICLE ONE The name of the corporation is: United Cities Gas Company. ARTICLE TWO The address of its present registered office in the State of Illinois is 33 North LaSalle Street, in the City of Chicago 60602, County of Cook, and the name of its Registered Agent at said address is: United States Corporation Company. The address of its present registered office in the Commonwealth of Virginia is 707 E. Main Street, Richmond, Virginia 23212, and the name of its Registered Agent is Richard D. Gary, who is a resident of Virginia, whose business address is the same as the address of the registered office, and who is a member of the Virginia State Bar. ARTICLE THREE The duration of the corporation is perpetual. ARTICLE FOUR The purpose or purposes for which the corporation is organized are, as a public service company, to manufacture, buy, distribute and sell natural and/or artificial gas for light, heat, power, refrigeration and other purposes for which the same may now or at any time hereafter be used, and also to sell the by-products and residual products therefrom, and to construct or in any manner acquire and to maintain, operate, mortgage, sell and in any manner dispose of works, equipment, appliances and facilities therefor or for use in connection therewith; to construct, lay, purchase or in any manner acquire and to maintain and operate, and to sell, encumber or in any manner dispose of pipe lines and gas mains for the sale, distribution and transportation of natural and/or artificial gas for the purposes 2 aforesaid in, over, through or under any streets, alleys, roads, highways, or other public places, and in, over, through or under any private or public property. ARTICLE FIVE Paragraph 1: The aggregate number of shares which the corporation is authorized to issue is 40,200,000, divided into two classes consisting of 200,000 shares designated as Preferred Stock, without par value, issuable in series as hereinafter provided, (hereinafter referred to as the "Preferred Stock"), and 40,000,000 shares designated as Common Stock, without par value (hereinafter referred to as the "Common Stock"). Paragraph 2: The preferences, qualifications, limitations, restrictions, and the special or relative rights in respect of the shares of each class hereinabove designated shall be as follows: SECTION 1. Issuance of Preferred in Series. The Preferred Stock may be divided into and issued from time to time as shares of one or more series, each series to be appropriately designated by a distinguishing number, letter, or title prior to the issue of any shares thereof. The Preferred Stock of all series shall be of the same class and of equal rank and shall be identical except as to the terms that may be fixed by the Board of Directors as hereinafter in this Section 1 provided. All shares of each series shall be alike in every particular. Before any shares of Preferred Stock of any series shall be issued, the Board of Directors shall fix and is hereby expressly empowered to fix, in the manner provided by law, the following relative rights and preferences, in respect of any or all of which there may be variations between different series: (i) The designation of such series and the number of shares which shall constitute such series, which number may, unless the authorized number of shares of such series shall be limited, be increased or decreased (but not below the number of shares thereof, if any, then outstanding) from time to time by like action of the Board of Directors; (ii) The rate of dividend; (iii) The price at and the terms and conditions on which shares may be redeemed; (iv) The amount payable on shares of such series in the event of any voluntary liquidation, dissolution or winding up of the affairs of the corporation; (v) The amount payable on shares of such series in the event of any involuntary liquidation, dissolution or winding up of the affairs of the corporation; (vi) Any sinking fund provisions for the redemption or purchase of shares; 2 3 (vii) The terms and conditions on which shares may be converted, if the shares of any series are issued with the privilege of conversion; (viii) Any special voting rights providing for the required approval of a specified proportion of the shares of any series for any specified corporate action; so far as not inconsistent with the provisions of this Article Five applicable to all series of Preferred Stock. Shares of Preferred Stock shall be issued only as full-paid and nonassessable shares. All or any shares of any series of Preferred Stock at any time redeemed, purchased or acquired by the corporation shall be canceled in accordance with law and shall not be reissued as shares of the same series, but shall become authorized and unissued shares of Preferred stock undesignated as to series. SECTION 2. Dividends. Out of any source lawfully available for the payment of dividends, as and when declared by the Board of Directors, the holders of Preferred Stock of each series shall be entitled to receive dividends at, but not exceeding, the maximum dividend rate fixed for such series and expressed in the certificates therefore, payable at the times fixed for such series and expressed in the certificates therefore, and accruing from the date of original issue of each share of such stock, before any dividends shall be declared or paid or set apart for payment on Common Stock and before any sum shall be paid or set apart for the purchase or redemption of any Preferred Stock. After full dividends on Preferred Stock for all past dividend periods and for the then current dividend period shall have been declared and paid, or set apart for payment, then, and not otherwise, dividends may be declared and paid out of any remaining source lawfully available for the payment thereof upon the Common Stock, share and share alike, to the exclusion of the holders of Preferred Stock. SECTION 3. Liquidation, Dissolution or Winding Up. In the event of any voluntary liquidation, dissolution or winding up of the affairs of the corporation, the holders of the Preferred Stock of each series shall be entitled to receive in cash for each share thereof the amount fixed for the respective series as herein provided, with an amount equal to any accrued and unpaid dividends thereon to the date fixed for such payment, before any distribution of the assets shall be made to the holders of Common Stock. After such payment shall have been made in full to the 3 4 holders of the outstanding Preferred Stock or funds necessary for such payment shall have been set aside by the corporation in trust for the account of the holders of the outstanding Preferred Stock so as to be and continue available therefor, the remaining assets of the corporation shall be divided and distributed among the holders of the Common Stock ratably, share and share alike. If, upon such liquidation, dissolution or winding-up, the assets of the corporation distributable aforesaid among the holders of the Preferred Stock shall be insufficient to permit the payment to them of said amount, the entire assets shall be distributed ratably according to their respective interest among the holders of the Preferred Stock. A consolidation or merger of the corporation or any purchase or redemption of the stock of the corporation or any purchase or redemption of stock of the corporation of any class shall not be regarded as a liquidation, dissolution or winding up of the affairs of the corporation within the meaning of this Section 3. SECTION 4. Common Stock. Subject to the foregoing provisions of this Article Five, such dividends (payable in cash, stock or otherwise) as may be determined by the Board of Directors may be declared and paid out of funds legally available therefore upon the Common Stock of the corporation from time to time. In the event of any voluntary or involuntary liquidation, dissolution or winding up of the affairs of the corporation, after payment to the holders of Preferred Stock of the amounts to which they are entitled as hereinbefore provided, the holders of the Common Stock shall be entitled to share ratably in all assets then remaining subject to distribution to the shareholders. SECTION 5. No Pre-Emptive Rights. No holder of any shares of the capital stock of the corporation shall be entitled as of right to purchase or subscribe for any unissued stock of any class or any additional shares of any class to be issued by reason of any increase of the authorized capital stock of this corporation of any class, or bonds, certificates of indebtedness, debentures or other securities convertible into stock of this corporation of any class, or bonds, certificates of indebtedness debentures or other securities convertible into stock of this corporation or carrying any right to purchase stock of any class, but any such unissued stock or such additional authorized issue of any stock or of other securities convertible into stock, or carrying any right to purchase stock, may be issued and disposed of pursuant to resolution of the Board of Directors to such persons, firms, corporations or associations and upon such terms as may be deemed advisable by the Board of Directors in the exercise of its discretion. 4 5 SECTION 6. Voting Rights. Each outstanding share, regardless of class, shall be entitled to one vote on each matter submitted to a vote at a meeting of shareholders. In all elections for directors every stockholder shall have the right to vote, in person or by proxy, for the number of shares owned by him, for as many persons as there are directors to be elected or to cumulate said shares, and give one candidate as many votes as the number of directors multiplied by the number of his shares shall equal, or to distribute them on the same principle among as many candidates as he shall think fit. ARTICLE SIX The total number of Directors which constitutes the Board of Directors shall be fixed by the by-laws. The Board of Directors shall be divided into three classes: Class I, Class II and Class III, which shall be as nearly equal in number as possible. Each Director shall serve for a term ending on the date of the third annual meeting of shareholders following the annual meeting at which such Director was elected; provided, however, that each initial Director in Class I shall hold office until the annual meeting of shareholders in 1986; each initial Director in Class II shall hold office until the annual meeting of shareholders in 1987; and each initial Director in Class III shall hold office until the annual meeting of shareholders in 1988. At least three Directors shall be elected in each year. In the event of any increase or decrease in the authorized number of Directors, (1) each Director then serving as such shall nevertheless continue as a Director of the class of which he is a member until the expiration of his current term, or his earlier resignation, removal from office or death, and (2) the newly created or eliminated directorships resulting from such increase or decrease shall be apportioned by the Board of Directors among the three classes of Directors so as to maintain such classes as nearly equal as possible. At all meetings of the Board of Directors a majority of Directors shall be necessary and sufficient to constitute a quorum for the transaction of business, and the act of a majority of the Directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by these Articles of Incorporation and except that any sale, lease, exchange, transfer or other disposition (in one transaction or a series of transactions occurring within a twelve-month period) of any assets of the corporation or any subsidiary of the corporation having an aggregate book value greater than ten percent (10%) of the book value of all the assets of the corporation shall require the affirmative vote of at least 66-2/3% of the number of the entire Board of Directors as designated in the by-laws. 5 6 ARTICLE SEVEN Section 1. Vote Required for Certain Business Combinations. A. Higher Vote for Certain Business Combinations. In addition to any affirmative vote required by law or these Articles of Incorporation, and except as otherwise expressly provided in Section 2 of this Article Seven: (i) any merger or consolidation of the corporation or any Subsidiary (as hereinafter defined) with (a) any Interested Shareholder (as hereinafter defined) or (b) any other corporation (whether or not itself an Interested Shareholder) which is, or after such merger or consolidation would be, an Affiliate (as hereinafter defined) of an Interested Shareholder; or (ii) any sale, lease, exchange, mortgage, pledge, transfer or other disposition (in one transaction or a series of transactions) to or with any Interested Shareholder or any Affiliate of any Interested Shareholder of a major part of the assets of the corporation or any Subsidiary; or (iii) the issuance or transfer by the corporation or any Subsidiary of any securities of the corporation or any Subsidiary to any Interested Shareholder or any Affiliate of any Interested Shareholder in exchange for cash, securities or other property; or (iv) the adoption of any plan or proposal for the liquidation or dissolution of the corporation proposed by or on behalf of an Interested Shareholder or any Affiliate of any Interested Shareholder; or (v) any reclassification of securities (including any reverse stock split), or recapitalization of the corporation, or any merger or consolidation of the corporation with any of its Subsidiaries or any other transaction (whether or not with or into or otherwise involving an Interested Shareholder) which has the effect, directly or indirectly, of increasing the proportionate share of the outstanding shares of any class of equity or convertible securities of the corporation or any Subsidiary which is directly or indirectly owned by any Interested Shareholder or any Affiliate of any Interested Shareholder; shall require the affirmative vote of the holders of at least 80% of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors (the "Voting Stock"), voting together as a single class. Such affirmative vote 6 7 shall be required notwithstanding the fact that no vote may be required, or that a lesser percentage may be specified, by law or in any agreement with any national securities exchange or otherwise. B. Definition of "Business Combination." The term "Business Combination" as used in this Article Seven shall mean any transaction which is referred to in any one or more of clauses (i) through (v) of paragraph A of this Section 1. Section 2. When Higher Vote is Not Required. The provisions of Section 1 of this Article Seven shall not be applicable to any particular Business Combination, and such Business Combination shall require only such affirmative vote as is required by law and any other provision of these Articles of Incorporation, if all of the conditions specified in either of the following paragraphs A and B are met: A. Approval by Disinterested Directors. The Business Combination shall have been approved by all of the Disinterested Directors (as hereinafter defined). B. Price and Procedure Requirements. All of the following conditions shall have been met: (i) The aggregate amount of the cash and the Fair Market Value (as hereinafter defined) as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of common stock in such Business Combination shall be at least equal to the higher of the following: (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of common stock acquired by it (1) within the two-year period immediately prior to the first public announcement of the proposal of the Business Combination (the "Announcement Date") or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) the Fair Market Value per share of common stock on the Announcement Date or on the date on which the Interested Shareholder became an Interested Shareholder (such latter date is referred to in this Article Seven as the "Determination Date"), whichever is higher; and (c) (if applicable) the price per share equal to the Fair Market Value per share of common stock determined pursuant to the immediately preceding clause (b), multiplied by the ratio of (x) the highest 7 8 per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by or on behalf of the Interested Shareholder for any shares acquired by it within the two-year period immediately prior to the Announcement Date to (y) the Fair Market Value per share of common stock on the first day in such two-year period on which the Interested Shareholder acquired beneficial ownership of any share of common stock. (ii) The aggregate amount of the cash and the Fair Market Value as of the date of the consummation of the Business Combination of consideration other than cash to be received per share by holders of shares of any other class of outstanding Voting Stock shall be at least equal to the highest of the following (it being intended that the requirements of this paragraph B(ii) shall be required to be met with respect to every class of outstanding Voting Stock, whether or not the Interested Shareholder has previously acquired any shares of a particular class of Voting Stock): (a) (if applicable) the highest per share price (including any brokerage commissions, transfer taxes and soliciting dealers' fees) paid by the Interested Shareholder for any shares of such class of Voting Stock acquired by it (1) within the two-year period immediately prior to the Announcement Date or (2) in the transaction in which it became an Interested Shareholder, whichever is higher; (b) (if applicable) the highest preferential amount per share to which the holders of shares of such class of Voting Stock are entitled in the event of any voluntary or involuntary liquidation, dissolution or winding up of the corporation; and (c) the Fair Market Value per share of such class of Voting Stock on the Announcement Date or on the Determination Date, whichever is higher. (iii) The consideration to be received by holders of a particular class of outstanding Voting Stock (including Common Stock) shall be in cash or in the same form as the Interested Shareholder has previously paid for shares of such class of Voting Stock. If the Interested Shareholder has paid for shares of any class of Voting Stock with varying forms of consideration, the form of consideration for such class of Voting Stock shall be either cash or the form used to acquire the largest number of shares of such class of Voting Stock previously acquired by it. The price determined in accordance with paragraphs B(i) and B(ii) of this 8 9 Section 2 shall be subject to appropriate adjustment in the event of any stock dividend, stock split, combination of shares or similar event. (iv) After such Interested Shareholder has become an Interested Shareholder and prior to the consummation of such Business Combination: (a) except as approved by all of the Disinterested Directors, there shall have been no failure to declare and pay at the regular date therefor any full quarterly dividends (whether or not cumulative) on the outstanding preferred stock; (b) there shall have been (1) no reduction in the annual rate of dividends paid on the common stock (except as necessary to reflect any subdivision of the common stock), except as approved by all of the Disinterested Directors, and (2) an increase in such annual rate of dividends as necessary to reflect any reclassification (including any reverse stock split), recapitalization, reorganization or any similar transaction which has the effect of reducing the number of outstanding shares of the common stock, unless the failure so to increase such annual rate is approved by all of the Disinterested Directors; and (c) such Interested Shareholder shall have not become the beneficial owner of any additional shares of Voting Stock except as part of the transaction which results in such Interested Shareholder becoming an Interested Shareholder. (v) After such Interested Shareholder has become an Interested Shareholder, such Interested Shareholder shall not have received the benefit, directly or indirectly (except proportionately as a shareholder), of any loans, advances, guarantees, pledges or other financial assistance or any tax credits or other tax advantages provided by the corporation, whether in anticipation of or in connection with such Business Combination or otherwise. (vi) A proxy or information statement describing the proposed Business Combination and complying with the requirements of the Securities Exchange Act of 1934 and the rules and regulations thereunder (or any subsequent provisions replacing such Act, rules or regulations) shall be mailed to shareholders of the corporation at least 30 days prior to the consummation of such Business Combination (whether or not such proxy or information statement is required to be mailed pursuant to such Act or subsequent provisions). Section 3. Certain Definitions. For the purposes of this Article Seven: A. A "person" shall mean any individual, firm, corporation or other entity. 9 10 B. "Interested Shareholder" shall mean any person (other than the corporation or any Subsidiary) who or which: (i) is the beneficial owner, directly or indirectly, of more than 10% of the voting power of the outstanding Voting Stock; or (ii) is an Affiliate of the corporation and at any time within the two-year period immediately prior to the date in question was the beneficial owner, directly or indirectly, of 10% or more of the voting power of the then outstanding Voting Stock; or (iii) is an assignee of or has otherwise succeeded to any shares of Voting Stock which were at any time within the two-year period immediately prior to the date in question beneficially owned by any Interested Shareholder, if such assignment or succession shall have occurred in the course of a transaction or series of transactions not involving a public offering within the meaning of the Securities Act of 1933. C. A person shall be a "beneficial owner" of any Voting Stock: (i) which such person or any of its Affiliates or Associates (as hereinafter defined) beneficially owns, directly or indirectly; or (ii) which such person or any of its Affiliates or Associates has (a) the right to acquire (whether such right is exercisable immediately or only after the passage of time), pursuant to any agreement, arrangement or understanding or upon the exercise of conversion rights, exchange rights, warrants or options, or otherwise, or (b) the right to vote pursuant to any agreement, arrangement or understanding; or (iii) which are beneficially owned, directly or indirectly, by any other person with which such person or any of its Affiliates or Associates has any agreement, arrangement or understanding for the purpose of acquiring, holding, voting or disposing of any shares of Voting Stock. D. For the purposes of determining whether a person is an Interested Shareholder pursuant to paragraph B of this Section 3, the number of shares of Voting Stock deemed to be outstanding shall include shares deemed owned through application of paragraph B of this Section 3 but shall not include any other shares of Voting Stock which may be 10 11 issuable pursuant to any agreement, arrangement or understanding, or upon exercise of conversion rights, warrants or options, or otherwise. E. "Affiliate" or "Associate" shall have the respective meanings ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under the Securities Exchange Act of 1934, as in effect on January 1, 1985. F. "Subsidiary" means any corporation of which a majority of any class of equity security is owned, directly or indirectly, by the corporation; provided, however, that for the purposes of the definition of Interested Shareholder set forth in paragraph B of this Section 3, the term "Subsidiary" shall mean only a corporation of which a majority of each class of equity security is owned, directly or indirectly, by the corporation. G. "Disinterested Director" means any member of the Board of Directors who is unaffiliated with the Interested Shareholder and was a member of the Board of Directors prior to the time that the Interested Shareholder became an Interested Shareholder, and any successor of a Disinterested Director who is unaffiliated with the Interested Shareholder and is recommended to succeed a Disinterested Director by all of the Disinterested Directors then on the Board of Directors. H. "Fair Market Value" means: (i) in the case of stock, the highest closing sale price during the 30-day period immediately preceding the date in question of a share of such stock on the Composite Tape for New York Stock Exchange-Listed Stocks, or, if such stock is not quoted on the Composite Tape, on the New York Stock Exchange, or, if such stock is not listed on such Exchange, on the principal United States securities exchange registered under the Securities Exchange Act of 1934 on which such stock is listed, or, if such stock is not listed on any such exchange, the highest closing bid quotation with respect to a share of such stock during the 30-day period preceding the date in question on the National Association of Securities Dealers, Inc. Automated Quotations System or any system then in use, or if no such quotations are available, the fair market value on the date in question of a share of such stock as determined by the Board of Directors in good faith; and (ii) in the case of property other than cash or stock, the fair market value of such property on the date in question as determined by the Board of Directors in good faith. I. In the event of any Business Combination in which the corporation survives, the phrase "other consideration to be received" as used in paragraphs B(i) and (ii) of Section 11 12 2 of this Article Seven shall include the shares of common stock and/or the shares of any other class of outstanding Voting Stock retained by the holders of such shares. Section 4. Powers of the Board of Directors, No Effect on Board of Directors Discretion, Etc. A majority of the Directors shall have the power and duty to determine for the purposes of this Article Seven, on the basis of information known to them after reasonable inquiry, (A) whether a person is an Interested Shareholder, (B) the number of shares of Voting Stock beneficially owned by any person, (C) whether a person is an Affiliate or Associate of another, (D) whether the assets which are the subject of any Business Combination constitute a major part of the assets of the corporation or any Subsidiary. A majority of the Directors shall have the further power to interpret all of the terms and provisions of this Article Seven. The fact that any Business Combination complies with the provisions of paragraph B of Section 2 of this Article Seven shall not be construed to impose any fiduciary duty, obligation or responsibility on the Board of Directors, or any member thereof, to approve such Business Combination or recommend its adoption or approval to the shareholders of the corporation, nor shall such compliance limit, prohibit or otherwise restrict in any manner the Board of Directors, or any member thereof, with respect to evaluations of or actions and responses taken with respect to such Business Combination. Section 5. No Effect on Fiduciary Obligations of Interested Shareholders. Nothing contained in this Article Seven shall be construed to relieve any Interested Shareholder from any fiduciary obligation imposed by law. Section 6. Amendment, Repeal, Etc. Notwithstanding any other provisions of these Articles of Incorporation or the by-laws (and notwithstanding the fact that a lesser percentage may be specified by law, these Articles of Incorporation or the by-laws) the affirmative vote of the holders of 80% or more of the outstanding Voting Stock, voting together as a single class, shall be required to amend or repeal, or adopt any provisions inconsistent with this Article Seven. ARTICLE EIGHT The by-laws of the corporation may be made, altered, amended or repealed only by the affirmative vote of the holders of at least 66-2/3% of the voting power of the then outstanding capital stock of the corporation entitled to vote generally in the election of directors voting together as a single class or by the affirmative vote of 66-2/3% of the number of the entire Board of Directors as designated in the by-laws of the corporation in effect at that time. 12 13 Special meetings of the shareholders may be called only by the chairman, by the president, by the secretary, by the board of directors, in the manner prescribed in the by-laws by the holders of not less than 20% of all the outstanding shares entitled to vote on the matter for which the meeting is called or by such other officers or persons as may be provided in the by-laws. The holders of at least 70% of the voting power of the then outstanding shares of capital stock of the corporation entitled to vote generally in the election of directors shall be required to constitute a quorum for any meeting of the shareholders at which a vote upon the removal of one or more directors is to occur. Any action required by law to be taken at any annual of special meeting of the shareholders, or any other action which may be taken at a meeting of the shareholders, may be taken without a meeting and without a vote, only if a consent in writing, setting forth the action so taken, shall be signed by all of the shareholders entitled to vote with respect to the subject matter thereof. ARTICLE NINE Except where a higher approval and vote is expressly required in Article Five, Seven or Eight of these Articles of Incorporation, and except where a higher approval and vote is expressly required by any provision of applicable law which may not be superseded by a provision of the articles of incorporation, any provision of applicable law which (a) unless otherwise provided in the articles of incorporation requires the approval and affirmative vote of the holders of two-thirds or more of the outstanding shares entitled to vote on a corporate action or two-thirds or more of the outstanding shares of any class or series of shares entitled to vote as a class on a corporate action, including, but not limited to, the following corporate actions: (i) amendment to the articles of incorporation, (ii) adoption of a plan of merger, consolidation or share exchange, (iii) sale, lease, exchange or other disposition of all, or substantially all, of the corporation's properties and assets other than in the usual and regular course of the corporation's business, and (iv) dissolution of the corporation, and (b) permits the articles of incorporation to provide for a lesser approval and affirmative vote, shall only require the approval and affirmative vote of the holders of a majority of the outstanding shares entitled to vote on the corporate action, and a majority of the outstanding shares of each class or series of shares entitled to vote as a class on the corporate action. 13 EX-10.01 3 NON-EMPLOYEE DIRECTOR STOCK PLAN 1 EXHIBIT 10.01 UNITED CITIES GAS COMPANY NON-EMPLOYEE DIRECTOR STOCK PLAN 1. PURPOSE OF THE PLAN The purpose of the United Cities Gas Company Non-Employee Director Stock Plan (The "Plan") is to promote the ownership by non-employee directors of United Cities Gas Company, an Illinois and Virginia corporation (the "Company"), of shares of common stock, without par value, of the Company ("Company Common Stock"), by allowing non-employee directors of the Company to elect to receive shares of Company Common Stock in lieu of their receiving some or all of the annual cash retainer compensation which they would otherwise be entitled to receive as payment for their services rendered as directors of the Company. The Company believes that ownership of Company Common Stock by its non-employee directors aligns the interests of such non-employee directors more closely with the interests of the shareholders of the Company and that the Plan will also assist the Company in attracting and retaining highly qualified persons to serve as non-employee directors of the Company. 2. ELIGIBILITY AND SHARES ISSUED UNDER THE PLAN Any person who is serving as a director of the Company and who is not an employee of the Company or any of its subsidiaries shall be eligible to participate under the Plan (hereinafter referred to individually as an "Eligible Director" and collectively as the "Eligible Directors"). The total number of shares of Company Common Stock which may be issued under the Plan (the "Stock") shall not exceed 100,000. The shares may be authorized and unissued or issued and reacquired shares, as the Board of Directors from time to time may determine. In the event of a recapitalization, stock split, stock dividend, combination or exchange of shares, merger, consolidation, reorganization, or any other change in the capital structure or shares of the Company, the Board of Directors may make such equitable adjustments, as they may deem appropriate, in the number and class of shares authorized to be issued hereunder. 3. PAYMENT PERIODS The three-month periods, January 1 to March 31, April 1 to June 30, July 1 to September 30, and October 1 to December 31, are "Payment Periods" during which Compensation (as hereinafter defined) may be deferred and deemed to have accumulated under the Plan for the acquisition of Stock. 4. COMPENSATION ELECTIONS Stock may be acquired only on the final business day in each Payment Period (a "Price Date"); provided, however, that no Stock may be acquired by an Eligible Director until a Price Date occurring on or after the second business day after the 185th day following the date the Eligible Director delivers a written election to receive Stock. Not later than May 1, 1995, an Eligible Director may, by filing a written election with the Investor Relations/Corporate 2 Communications Department of the Company (the "Department"), direct the Company to pay his or her Compensation for all Payment Periods ending on or after the date of the election in such amounts of Stock as specified by such Eligible Director. In such election an Eligible Director must elect to receive Stock equal to 25, 50, 75 or 100 percent of his or her Compensation. An Eligible Director shall be deemed to have earned one-fourth of his or her Compensation on each Price Date. As used herein, the term "Compensation" shall mean only the annual retainer fee payable to an Eligible Director, as the same may be adjusted from time to time, and shall not include any other fees or retainers payable to an Eligible Director by the Company for his or her services as a director or any portion of an Eligible Director's annual retainer fee which is treated as Deferred Compensation under the Company Directors' Deferred Compensation Plan. After May 1, 1995, any new election, which may be an initial election or an amendment to any prior election, may be made by an Eligible Director effective as of the next January 1 thereafter for Payment Periods ending after such January 1, by filing such written election with the Department prior to such January 1; provided, however, that upon any such new election, no Stock may be acquired by an Eligible Director with respect to Payment Periods following the effective date thereof until a Price Date occurring on or after the second business day after the 185th day following the date the Eligible Director delivers his new written election to receive Stock. Only full shares of Stock may be acquired. Any balance of the Compensation remaining after the Stock acquisition will be carried forward to the next Payment Period. Upon termination of a Director's participation in the Plan, any remaining balance of such Director's Compensation retained under the Plan shall be paid to the Director in cash. Once an election by an Eligible Director to receive some or all of his or her Compensation in Stock becomes effective pursuant to this Section 4, such election shall remain in effect until the earlier of (i) the termination of the Plan, (ii) a new election is effective as provided herein, or (iii) a written notice of withdrawal from the Plan is given to the Department prior to January 1 of any year to be effective for Payment Periods ending after such January 1. 5. STOCK PURCHASE PRICE The price of each share of Stock acquired pursuant to the Plan will be the lesser of (i) the average closing prices for the Company Common Stock in the NASDAQ Over-the-Counter National Market Issues report of the Midwest Edition of the Wall Street Journal, during the 30-day period prior to the Price Date applicable to the issuance of the Stock or (ii) the price so quoted on the Price Date applicable to the issuance of the Stock, or on the last preceding day quotations are available. The price for each share of Stock to be acquired with respect to a Payment Period which ends prior to the date the Eligible Director is entitled to acquire Stock as provided in Section 4 shall be the first Price Date to occur on or after the date the Eligible Director is entitled to acquire Stock as provided in Section 4. (i.e. The Price Date for all Stock to be acquired for all Payment Periods ending in 1995 for an election filed in April of 1995 would be Friday, December 29, 1995). 3 6. ISSUANCE OF STOCK Certificates for Stock acquired pursuant to the Plan will be issued and delivered as soon as practicable after such acquisition. Stock acquired under the Plan will be issued only in the name of the Eligible Director. Upon issuance, Stock will be deemed fully paid and non-assessable. 7. TERM OF THE PLAN The Board of Directors of the Company reserves the right to amend or terminate the Plan at any time provided, however, that without the approval of the Company's shareholders, no alteration or amendment may be made which would (i) increase the aggregate number of shares of Stock which may be issued under the Plan (except by operation of Section 2), (ii) change the category of Directors eligible to acquire Stock under the Plan, or (iii) materially increase the benefits to Eligible Directors under the Plan. Notwithstanding the foregoing, the Plan may not be amended more than once every six months, other than to comply with changes in the Internal Revenue Code of 1986, as amended, or the Employee Retirement Income Security Act, as amended, or the rules thereunder, if such amendment would cause the Plan not to be in compliance with Rule 16b-3 under the Securities Exchange Act of 1934. In any event, the Plan shall terminate on the earlier of (i) 10 years after the effective date of the Plan, or (ii) when all or substantially all of the Stock has been issued pursuant to the Plan. If, at any time, Stock remains available for issue but not in sufficient numbers to satisfy all then unfilled acquisition requirements such shares shall be apportioned equally among the Eligible Directors with then unfilled acquisition requirements. 8. ASSIGNMENT No right or interest of any Eligible Director or his or her beneficiary (or any person claiming through or under such Eligible Director or his or her beneficiary) in any benefit or payment under the Plan shall be assignable or transferable in any manner or be subject to alienation, anticipation, sale, pledge, encumbrance or other legal process or in any manner be liable for or subject to the debts or liabilities of such Eligible Director. 9. TERMINATION OF ELIGIBILITY When an Eligible Director ceases to be a director of the Company because of retirement, resignation, discharge, death, or for any other reason, or becomes ineligible to participate in the Plan, written notice of withdrawal will be considered as having been received from him or her prior to the close of business on the day his or her service as a director of the Company ceases, or on which he or she becomes ineligible to participate in the Plan, and any elections made for the Payment Period during which his or her service ceases or for future Payment Periods shall be deemed canceled. If an Eligible Director's Compensation is interrupted by any legal process, written notice of withdrawal from the Plan will be considered as having been received from him or her before the close of business on the day the interruption occurs. 4 10. COMPLIANCE WITH RULE 16b-3 It is the intent of the Company that the Plan comply in all respects with applicable provisions of Rule 16b-3 under the Securities Exchange Act of 1934. Accordingly, if any provision of the Plan does not comply with the requirements of said Rule 16b-3 as then applicable to any such Eligible Director, or would cause any Eligible Director to no longer be deemed a "disinterested person" within the meaning of Rule 16b-3, such provision shall be construed or deemed amended to the extent necessary to conform to such requirements with respect to such Eligible Director. In addition, the Board of Directors of the Company shall have no authority to make any amendment, alteration, suspension, discontinuation or termination of the Plan or take other action if and to the extent such authority would cause an Eligible Director's transactions under the Plan not to be exempt or any Eligible Director no longer to be deemed a "disinterested person," under Rule 16b-3 under the Securities Exchange Act of 1934. 11. ADMINISTRATION OF THE PLAN The Treasurer of the Company, James B. Ford, 5300 Maryland Way, Brentwood, TN 37027 or an alternate named by him, will administer the Plan until its termination and make such interpretations and rulings as are necessary in connection with its operations. Such administrator will not receive any compensation from the assets of the Plan. 12. GOVERNING LAW This plan shall be governed by and construed in accordance with the laws of the State of Illinois. 13. SUCCESSORS The provisions of this Plan shall bind and inure to the benefit of the Company and its successors and assigns. 14. EFFECTIVE DATE OF PLAN The Plan shall be effective as of February 28, 1995, subject to approval by the shareholders of the Company. Any elections made prior to such shareholder approval shall be contingent on such approval, and if such approval is not obtained prior to April 30, 1995, all elections made pursuant to the Plan shall be canceled. 15. REGULATORY COMPLIANCE AND LISTING The issuance or delivery of any shares of Stock may be postponed by the Company for such period as may be required to comply with any applicable requirements under the federal securities laws, any applicable listing requirements of any national securities exchange or any requirements under any other law or regulation applicable to the issuance or delivery of such shares including, without limitation, approval by all applicable regulatory commissions and the 5 Company shall not be obligated to issue or deliver any such shares if the issuance or delivery thereof shall constitute a violation of any provision of any law or any regulation of any governmental authority or any national securities exchange. 16. NO RIGHT TO CONTINUED SERVICE Nothing contained herein shall be construed to confer upon any Eligible Director the right to continue to serve as a director of the Company or in any other capacity. EX-27 4 FINANCIAL DATA SCHEDULE
UT THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE FINANCIAL STATEMENTS OF UNITED CITIES GAS COMPANY FOR THE SIX MONTHS ENDED JUNE 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 6-MOS DEC-31-1995 JAN-01-1995 JUN-30-1995 PER-BOOK 273,958 50,490 60,694 22,063 0 407,205 99,136 22,462 27,747 149,345 0 0 137,637 12,952 0 0 8,692 0 0 0 98,579 407,205 148,252 4,448 129,478 133,926 14,326 2,247 16,573 7,208 9,365 0 9,365 5,562 6,017 45,891 .86 .86