-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, PQJVxfwZanO3cIbX74OEn/J8Xsv1dtiECctiIgzhnzjlcDe3LEXcVlQNmO5E4Nnf uo2podeRymnHmRJ4GXD9mA== 0000950144-95-003065.txt : 19951118 0000950144-95-003065.hdr.sgml : 19951118 ACCESSION NUMBER: 0000950144-95-003065 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 4 CONFORMED PERIOD OF REPORT: 19950930 FILED AS OF DATE: 19951109 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: 95589041 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 CO. 10-Q 09-30-95 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 September 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 0-1284-3 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 October 31, 1995, 12,665,489 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 September 30, 1995 Table of Contents
Item Page Number PART I -- FINANCIAL INFORMATION Number ------ 1 Financial Statements: Consolidated Statements of Income (Unaudited) for the Three, Nine and Twelve Months Ended September 30, 1995 and September 30, 1994. 3 Consolidated Statements of Cash Flows (Unaudited) for the Three, Nine and Twelve Months Ended September 30, 1995 and 4 September 30, 1994. Consolidated Balance Sheets at September 30, 1995 (Unaudited) and 5 December 31, 1994. Consolidated Statements of Capitalization at September 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. 9 PART II -- OTHER INFORMATION 1 Legal Proceedings. 14 5 Other Information. 14 6 Exhibits and Reports on Form 8-K. 14 List of Exhibits. 15 Signature 16
2 3 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF INCOME
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------ ----------------- ------------------- (Unaudited, in thousands, except per share amounts) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Utility Operating Revenues.............................. $32,248 $34,143 $180,500 $206,686 $254,798 $296,951 Natural gas cost..................................... 18,066 20,167 104,011 130,202 146,777 187,947 ------- ------- -------- -------- -------- -------- Utility Operating Margin................................ 14,182 13,976 76,489 76,484 108,021 109,004 ------- ------- -------- -------- -------- -------- Utility Other Operating Expenses: Operations and maintenance........................... 16,139 13,790 45,903 43,434 59,773 57,167 Depreciation and amortization........................ 3,765 3,568 11,137 10,502 14,569 13,878 Federal and state income taxes....................... (4,369) (3,744) 79 1,163 2,790 3,472 Other taxes.......................................... 2,731 2,503 9,128 8,060 11,807 10,694 ------- ------- -------- -------- -------- -------- Total other operating expenses..................... 18,266 16,117 66,247 63,159 88,939 85,211 ------- ------- -------- -------- -------- -------- Utility Operating Income (Loss)......................... (4,084) (2,141) 10,242 13,325 19,082 23,793 Utility Other Income (Loss), Net........................ 298 (52) 471 (177) 385 27 ------- ------- -------- -------- -------- -------- (3,786) (2,193) 10,713 13,148 19,467 23,820 ------- ------- -------- -------- -------- -------- Utility Interest Charges: Interest on long-term debt........................... 2,980 3,066 8,997 9,283 12,063 12,458 Other interest charges............................... 227 478 1,418 968 2,187 2,607 ------- ------- -------- -------- -------- -------- Total interest charges............................. 3,207 3,544 10,415 10,251 14,250 15,065 ------- ------- -------- -------- -------- -------- Utility Income (Loss)................................... (6,993) (5,737) 298 2,897 5,217 8,755 ------- ------- -------- -------- -------- -------- Other Income (Loss): Operations of UCG Energy Corporation- Revenues.......................................... 6,135 8,284 22,962 28,010 33,335 39,527 Operating expenses................................ (4,926) (6,732) (17,703) (21,335) (25,028) (29,785) Interest expense.................................. (380) (184) (901) (570) (1,103) (966) Depreciation and amortization..................... (1,269) (893) (3,260) (2,645) (4,195) (3,578) Other income, net................................. 259 167 1,572 495 1,751 674 Federal and state income taxes.................... 68 (243) (1,014) (1,500) (1,808) (2,326) ------- ------- -------- -------- -------- -------- (113) 399 1,656 2,455 2,952 3,546 ------- ------- -------- -------- -------- -------- Operations of United Cities Gas Storage Company- Revenues.......................................... 1,800 1,073 4,828 5,830 6,125 8,388 Operating expenses................................ (1,170) (544) (3,010) (4,259) (3,702) (6,216) Interest expense.................................. (228) (228) (734) (716) (966) (961) Depreciation...................................... (92) (91) (276) (274) (368) (365) Federal and state income taxes.................... (120) (82) (313) (227) (422) (343) ------- ------- -------- -------- -------- -------- 190 128 495 354 667 503 ------- ------- -------- -------- -------- -------- Common Stock Earnings (Loss)............................ $(6,916) $(5,210) $ 2,449 $ 5,706 $ 8,836 $ 12,804 ======= ======= ======== ======== ======== ======== Common Stock Earnings (Loss) Per Share.................. $ (0.55) $ (0.50) $ 0.21 $ 0.55 $ 0.79 $ 1.24 ======= ======= ======== ======== ======== ======== Average Number of Common Shares Outstanding............. 12,585 10,407 11,492 10,370 11,249 10,349 ======= ======= ======== ======== ======== ======== Common Stock Dividends Per Share........................ $ 0.255 $ 0.25 $ 0.765 $ 0.75 $ 1.02 $ 1.00 ======= ======= ======== ======== ======== ========
3 4 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended Nine Months Ended Twelve Months Ended September 30, September 30, September 30, ------------------ ------------------ ------------------- (Unaudited, in thousands) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Cash Flows from Operating Activities: Common stock earnings (loss)..................................... $(6,916) $(5,210) $ 2,449 $ 5,706 $ 8,836 $12,804 ------- ------- ------- ------- ------- ------- Adjustments to reconcile common stock earnings (loss) to net cash provided by (used in) operating activities: Depreciation and amortization.................................. 5,126 4,552 14,673 13,421 19,132 17,821 Deferred taxes................................................. 6 (72) 19 (216) 1,536 605 Investment tax credits, net.................................... (91) (92) (273) (277) (366) (371) Investment income from Woodward Marketing, L.L.C............... (53) - (802) - (802) - Changes in current assets and current liabilities: Receivables.................................................. 2,204 2,596 28,733 33,246 2,519 (2,398) Materials and supplies....................................... 86 308 (277) (91) 7 558 Gas in storage............................................... (7,107) (9,031) 1,338 (4,018) 4,888 (11,792) Gas costs to be billed in the future......................... (4,792) (2,459) (1,969) (5,528) (4,352) (4,924) Prepayments and other........................................ (226) (12) (552) 105 350 (143) Accounts payable............................................. (1,021) (4,714) (9,924) (18,938) 577 1,888 Customer deposits and advance payments....................... 2,048 4,064 (1,160) 712 318 2,659 Accrued interest............................................. 2,669 2,538 2,330 1,351 (133) (95) Supplier refunds due customers............................... (685) (1,684) 3,450 1,116 3,561 (2,412) Accrued taxes................................................ (6,132) (2,786) (5,704) 324 (3,539) 2,615 Other, net................................................... (1,344) (951) (3,269) (430) (2,430) (1,546) ------- ------- ------- ------- ------- ------- Total adjustments.......................................... (9,312) (7,743) 26,613 20,777 21,266 2,465 ------- ------- ------- ------- ------- ------- Net cash provided by (used in) operating activities...... (16,228) (12,953) 29,062 26,483 30,102 15,269 ------- ------- ------- ------- ------- ------- Cash Flows from Investing Activities: Additions to property - utility.................................. (8,553) (8,590) (26,351) (22,616) (34,623) (29,698) Additions to property - non-utility.............................. (305) (1,193) (2,672) (2,639) (4,261) (3,404) Investment in Woodward Marketing, L.L.C., net.................... - - (832) - (832) - ------- ------- ------- ------- ------- ------- Net cash used in investing activities.................... (8,858) (9,783) (29,855) (25,255) (39,716) (33,102) ------- ------- ------- ------- ------- ------- Cash Flows from Financing Activities: Short-term borrowings - net...................................... 23,596 24,209 (9,640) 11,966 1,719 31,239 Proceeds from issuance of common stock........................... 758 385 22,468 1,010 24,720 1,520 Long-term debt retirements....................................... (484) (1,476) (5,817) (7,154) (6,496) (7,399) Dividends paid................................................... (2,716) (2,289) (7,474) (6,853) (9,836) (9,128) ------- ------- ------- ------- ------- ------- Net cash provided by (used in) financing activities...... 21,154 20,829 (463) (1,031) 10,107 16,232 ------- ------- ------- ------- ------- ------- Net Increase (Decrease) in Cash and Temporary Investments...................................... (3,932) (1,907) (1,256) 197 493 (1,601) Cash and Temporary Investments at Beginning of Period............................................ 5,420 2,902 2,744 798 995 2,596 ------- ------- ------- ------- ------- ------- Cash and Temporary Investments at End of Period.................... $ 1,488 $ 995 $ 1,488 $ 995 $ 1,488 $ 995 ======= ======= ======= ======= ======= ======= Cash Paid During the Period for: Interest, net of amounts capitalized............................. $ 1,147 $ 1,418 $ 9,721 $10,186 $16,481 $17,063 ======= ======= ======= ======= ======= ======= Income taxes..................................................... $ 2,452 $ 154 $ 7,521 $ 3,016 $ 8,225 $ 3,630 ======= ======= ======= ======= ======= ======= Noncash Investing and Financing Activities: Dividends reinvested............................................. $ 493 $ 312 $ 1,297 $ 923 $ 1,628 $ 1,219 ======= ======= ======= ======= ======= ======= Debt incurred to acquire assets of Harrell Propane, Inc.......... - - $ 1,250 - $ 1,250 - ======= ======= ======= ======= ======= ======= Common stock issued in investment in Woodward Marketing, L.L.C... - - $ 5,000 - $ 5,000 - ======= ======= ======= ======= ======= =======
4 5 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS
September 30, December 31, (In thousands) 1995 1994 ------------- ------------ ASSETS (Unaudited) Utility Plant: Plant in service, at cost.................................. $430,954 $403,121 Less-accumulated depreciation............................ 151,136 139,715 -------- -------- 279,818 263,406 -------- -------- Non-Utility Property: Property, plant, and equipment............................. 72,806 71,222 Less-accumulated depreciation............................ 23,048 22,272 -------- -------- 49,758 48,950 -------- -------- Current Assets: Cash and temporary investments............................. 1,488 2,744 Receivables, less allowance for uncollectible accounts of $1,029 in 1995 and $1,017 in 1994..................... 14,597 43,330 Materials and supplies..................................... 5,457 5,180 Gas in storage............................................. 25,113 26,451 Gas costs to be billed in the future....................... 17,926 15,957 Prepayments and other...................................... 2,598 2,046 -------- -------- 67,179 95,708 -------- -------- Deferred Charges: Unamortized debt discount and expense, net................. 2,773 2,694 Investment in Woodward Marketing, L.L.C. .................. 6,372 - Non-compete agreements, net................................ 3,423 3,697 Deferred system improvement costs, net..................... 966 1,425 Other deferred charges..................................... 7,379 5,320 -------- -------- 20,913 13,136 -------- -------- $417,668 $421,200 ======== ======== CAPITALIZATION AND LIABILITIES Capitalization: Common stock equity........................................ $140,471 $118,028 Long-term debt............................................. 137,088 144,344 -------- -------- 277,559 262,372 -------- -------- Current Liabilities: Current portion of long-term obligations................... 8,757 6,068 Notes payable.............................................. 36,548 46,188 Accounts payable for gas costs............................. 16,076 26,185 Other accounts payable..................................... 3,173 2,988 Accrued taxes.............................................. 671 6,375 Customer deposits and advance payments..................... 13,013 14,173 Accrued interest........................................... 5,675 3,345 Supplier refunds due customers............................. 8,891 5,441 Other...................................................... 8,089 8,993 -------- -------- 100,893 119,756 -------- -------- Deferred Credits: Accumulated deferred income tax............................ 24,817 24,572 Deferred investment tax credits............................ 4,372 4,645 Income taxes due customers................................. 6,113 6,329 Other...................................................... 3,914 3,526 -------- -------- 39,216 39,072 -------- -------- $417,668 $421,200 ======== ========
5 6 UNITED CITIES GAS COMPANY AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CAPITALIZATION
September 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 12,641,629 in 1995 and 10,613,441 in 1994..................................... $100,387 $ 71,622 Capital surplus................................................... 22,462 22,462 Retained earnings................................................. 17,622 23,944 -------- -------- Total common stock equity....................................... 140,471 50.6% 118,028 45.0% -------- ----- -------- ----- Long-Term Debt: First mortgage bonds ............................................. 125,000 129,000 Senior secured storage term notes, 7.45%, due in installments through 2007...................................... 10,063 10,436 Rental property adjustable rate term notes due in installments through 1999...................................... 5,981 6,839 Other long-term obligations due in installments through 2013...... 4,801 4,137 -------- -------- 145,845 150,412 Less-current requirements..................................... 8,757 6,068 -------- -------- Total long-term debt, excluding amounts due within one year... 137,088 49.4% 144,344 55.0% -------- ----- -------- ----- Total Capitalization.................................................. $277,559 100.0% $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 and nine month periods ended September 30, 1995 are not necessarily indicative of the results to be expected for the full year. In the third quarter of 1995, the Company announced a consolidation plan under which five of the Company's local operations in its Virginia/East Tennessee Division were consolidated into two new operating centers. As a result of the plan implementation, costs of approximately $900,000 ($550,000 after income taxes) related to early retirement and severance programs and employee relocation expenses were recorded in September, 1995. In June, 1995, the Company entered into an agreement to pay $1,787,000 to 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 September 30, 1995, the Company had $1,430,000 accrued for its remaining liability related to the agreement. This amount is to be paid in equal annual payments 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 (320,512 shares) and $832,000 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. 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. 7 8 Effective May 22, 1995, United Cities Propane Gas of Tennessee, Inc. (UCPT), 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. In October, 1995, UCPT signed a letter of intent to purchase all of the propane assets of Duncan Gas Service for $4,337,000. In addition, UCPT will enter into a ten year non-compete agreement for $250,000. This acquisition will add approximately 2,000 customers in the Johnson City, Tennessee area. Certain reclassifications were made conforming prior year's financial statements with 1995 financial statement presentation. 8 9 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 third quarter common stock loss was $6,916,000 compared to the third quarter 1994 loss of $5,210,000. The loss per common share was $.55 on an additional 2,178,000 average number of shares outstanding, compared to the loss of $.50 for the comparable period in 1994. The common stock earnings for the first nine months of 1995 were $2,449,000 compared to $5,706,000 in 1994. Common stock earnings per share decreased from $.55 in 1994 to $.21 in 1995 on an additional 1,122,000 average number of shares outstanding. Common stock earnings for the twelve month period ended September 30, 1995 were $8,836,000 compared to $12,804,000 for the twelve month period ended September 30, 1994. Common stock earnings per share decreased from $1.24 in the twelve month period in 1994 to $.79 in the twelve month period in 1995. Average shares outstanding increased by 900,000 for the twelve month period ended September 30, 1995. The following table summarizes certain information regarding the operation of each segment of the Company's business for the periods ended September 30:
Three Months Ended Nine Months Ended Twelve Months Ended ------------------ ----------------- ------------------- (Unaudited, in thousands) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ---- Operating Revenues: Utility................................. $32,248 $34,143 $180,500 $206,686 $254,798 $296,951 ------- ------- -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division.................... 3,997 3,776 14,840 14,858 20,769 20,719 Rental Division..................... 1,554 1,568 4,671 4,826 6,294 6,494 Utility Services Division........... 584 2,940 3,451 8,326 6,272 12,314 ------- ------- -------- -------- -------- -------- Total UCG Energy Corporation...... 6,135 8,284 22,962 28,010 33,335 39,527 United Cities Gas Storage Company..... 1,800 1,073 4,828 5,830 6,125 8,388 ------- ------- -------- -------- -------- -------- Total Subsidiaries................ 7,935 9,357 27,790 33,840 39,460 47,915 ------- ------- -------- -------- -------- -------- Total Revenues.......................... $40,183 $43,500 $208,290 $240,526 $294,258 $344,866 ======= ======= ======== ======== ======== ======== Common Stock Earnings (Loss): Utility................................. $(6,993) $(5,737) $ 298 $ 2,897 $ 5,217 $ 8,755 ------- ------- -------- -------- -------- -------- Subsidiaries: UCG Energy Corporation- Propane Division.................... (476) (250) (81) 448 593 1,026 Rental Division..................... 376 500 1,235 1,521 1,739 1,840 Utility Services Division........... (13) 149 502 486 620 680 ------- ------- -------- -------- -------- -------- Total UCG Energy Corporation...... (113) 399 1,656 2,455 2,952 3,546 United Cities Gas Storage Company..... 190 128 495 354 667 503 ------- ------- -------- -------- -------- -------- Total Subsidiaries................ 77 527 2,151 2,809 3,619 4,049 ------- ------- -------- -------- -------- -------- Total Common Stock Earnings (Loss)...... $(6,916) $(5,210) $ 2,449 $ 5,706 $ 8,836 $ 12,804 ======= ======= ======== ======== ======== ========
Operating Results-Utility The utility loss increased by $1,256,000 for the third quarter and utility earnings decreased $2,599,000 and $3,538,000, respectively, for the nine and twelve month periods in 1995 from the comparable 1994 periods due predominantly to the factors mentioned below: The operating margin for the 1995 third quarter increased $206,000 over the same period in 1994. The operating margin for the nine month period ended September 30, 1995, varied only slightly from the same previous year period and decreased $983,000 to $108,021,000 for the twelve month period. The increase in margin for the third quarter was primarily a result of the rate increases effective February, 1995 in South Carolina and September, 1995 in Kansas and an increased number of natural gas customers. The negative effect of the warmer weather in the nine and twelve month periods ended September 30, 1995, as compared to the previous year periods, was offset in the nine month period and 9 10 ITEM 2. CONTINUED lessened in the twelve month period 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 increases in South Carolina and Kansas. In the nine and twelve month periods ended September 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 nine and twelve month periods ended September 30, 1994. Operations and maintenance expenses increased $2,349,000, $2,469,000 and $2,606,000, respectively, for the quarter, nine and twelve month periods primarily as a result of increased payroll related expenses. In addition, operation and maintenance expenses for all periods included approximately $900,000 of costs related to the Company's consolidation plan implemented in the third quarter of 1995. (See discussion in "Financial Condition, Liquidity and Capital Resources" included in this Form 10-Q.) Depreciation and amortization expense and other taxes, which includes property taxes, increased in all periods primarily due to additional plant in service. Other Income, Net increased in all periods primarily as a result of a $171,000 credit recorded in September, 1995, for the capitalization of the equity portion of the allowance for funds used during construction (AFUDC) of the twenty-eight mile main in Middle Tennessee. In addition, as allowed by certain regulatory commissions in the states in which the Company operates, Other Income, Net increased in all periods as a result of an increased amount of pipeline capacity release and other revenues retained by the Company. Interest expense decreased in the third quarter of 1995 as compared to the same period in 1994 primarily due to a $349,000 credit recorded in September, 1995 for the capitalization of the debt portion of the AFUDC of the twenty-eight mile main in Middle Tennessee. Interest expense increased in the nine month period primarily due to interest on increased short-term debt outstanding during the period, somewhat offset by the AFUDC adjustment and by the retirement of long-term debt. Interest expense decreased in the twelve month period primarily due to the AFUDC adjustment, the retirement of long-term debt and because of the assessment of interest related to the settlement of the Internal Revenue Service Audit for the years 1986 through 1990 which was expensed in the fourth quarter of 1993, 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 September 30: OPERATING STATISTICS-UTILITY
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED ------------------ ----------------- ------------------- (UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994 ---- ---- ---- ---- ---- ----- OPERATING REVENUES: Residential........................... $10,219 $10,574 $81,309 $93,306 $117,522 $138,908 Commercial............................ 7,524 7,901 46,547 54,429 65,495 78,093 Industrial............................ 10,966 14,264 41,324 52,730 57,663 71,158 Transportation........................ 3,010 1,389 9,234 4,725 11,716 6,507 Other Revenues........................ 529 15 2,086 1,496 2,402 2,285 ------- ------- -------- -------- -------- -------- Total Operating Revenues........... $32,248 $34,143 $180,500 $206,686 $254,798 $296,951 ======= ======= ======== ======== ======== ======== GAS SALES (MCF): Residential........................... 1,274 1,318 14,285 14,871 20,766 22,876 Commercial............................ 1,633 1,547 10,021 10,107 14,030 14,770 Industrial- Firm................................ 1,214 1,607 5,336 6,143 7,327 8,283 Interruptible....................... 2,261 2,602 7,615 8,028 10,588 11,083 ------- ------- -------- -------- -------- -------- 6,382 7,074 37,257 39,149 52,711 57,012 ======= ======= ======== ======== ======== ======== Transported Volumes (Mcf)............... 4,465 2,902 13,272 8,813 17,034 11,844 ======= ======= ======== ======== ======== ======== WEATHER DATA-COLDER (WARMER) THAN NORMAL*.......................... ** ** (9.5%) (3.5%) (13.9%) (.7%) ======= ======= ======== ======== ======== ========
*Based on system weighted average. Data for 1995 is preliminary. **Not meaningful for third quarter. 10 11 ITEM 2. CONTINUED OPERATING RESULTS-NON-UTILITY Revenues of UCG Energy Corporation (UCG Energy) decreased $2,149,000, $5,048,000 and $6,192,000 from the third quarter, nine and twelve month periods ended September 30, 1994, respectively. The propane division's revenues changed moderately in all periods from 1994. The propane division's revenues increased in the third quarter due to an increase in wholesale propane volumes sold and increased transport revenues, a result of the acquisition of Transpro South, Inc. in May, 1995. Revenues decreased in the nine month period because of fewer retail propane volumes sold as a result of warmer than normal weather, partially offset by increased wholesale and transport revenues as well as increased jobbing and service revenues. The propane division's revenues increased in the twelve month period due to a change in the billing date of the facility fee from June, 1994 to October, 1994 and increased jobbing and service revenues, partially offset by decreased retail propane volumes sold due to warmer than normal weather. The utility services division's revenues decreased from the third quarter, nine and twelve month periods ended September, 1994 due to a combination of decreased gas brokerage sales to certain industrial customers and others primarily because of the transfer of certain gas brokerage contracts to Woodward Marketing, L.L.C. (WMLLC) and 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 and a reduced number of rental units in service. Operating expenses of UCG Energy, including cost of sales, decreased $1,806,000, $3,632,000 and $4,757,000 from the third quarter, nine and twelve month periods ended September 30, 1994, respectively. Expenses increased in all periods in the propane division due to increases in general and administrative expenses as well as added 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. Other income, net of UCG Energy increased $92,000, $1,077,000 and $1,077,000 from the third quarter, nine and twelve month periods ended September 30, 1994, respectively, primarily as a result of investment income from WMLLC in the utility services division of $53,000 in the third quarter and $802,000 in the nine and twelve month periods. UCG Energy's net income decreased $512,000, $799,000 and $594,000 from the third quarter, nine and twelve month periods ended September 30, 1994, respectively. The decrease from the third quarter was due to a combination of decreased sales in the utility services division as mentioned above and increased expenses in the propane division, partially offset by increased wholesale propane and jobbing and service revenues. Contributing to the decrease in net income was an increase in depreciation and amortization expense related to the amortization of the investment in WMLLC and an increase in interest expense related to the financing of that investment. The decrease from the nine month period was the combined result of decreased retail propane sales, increased operating expenses, increased depreciation expense due to the acquisitions mentioned above and increased interest expense on short term borrowings in the propane division and decreased sales in the utility services division partially offset by investment income from WMLLC. Contributing to the decrease in net income was an increase in depreciation and amortization expense related to the amortization of the investment in WMLLC and an increase in interest expense related to the financing of that investment. The decrease from the twelve month period was due to decreased propane sales due to warmer than normal weather, increases in operating expenses, and increased depreciation expense, all partially offset by the change in the billing date of the facility fee in the propane division. Contributing to the decrease in net income was decreased sales in the utility services division, partially offset by investment income from WMLLC, and an increase in depreciation and amortization expense related to the amortization of the investment in WMLLC and an increase in interest expense related to the financing of that investment. 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. United Cities Gas Storage Company had net income for the three, nine and twelve month periods of $190,000, $495,000 and $667,000, respectively, as compared to $128,000, $354,000 and $503,000 for the same periods in 1994. The revenues of the subsidiary were primarily derived from natural gas storage services and natural gas provided to United Cities Gas Company. 11 12 ITEM 2. CONTINUED FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES Total cash used in operations for the three month period ended September 30, 1995, was $16,228,000. Total cash provided by operations for the nine and twelve month periods ended September 30, 1995, was $29,062,000 and $30,102,000, respectively. Changes in accounts receivable, gas in storage and accounts payable were 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 nine and twelve month periods included the June, 1995 issuance of 1,380,000 shares of common stock in a public stock offering with net proceeds from the sale amounting to approximately $18,900,000 as of September 30, 1995. The net proceeds were used to repay short-term debt and fund the Company's construction program. The financing activities in all periods also reflected 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 September 30, 1995, specific purchases and construction projects amounting to $27,059,000 of its 1995 utility capital budget of $36,868,000 and $4,182,000 of its non-utility capital budget of $4,855,000. Total capital expenditures for 1996, 1997 and 1998 are anticipated to be approximately $33,000,000 in each year. In the third quarter of 1995 the Company completed construction of a twenty-eight mile main which now connects 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 authorized amount stated above is $5,694,000 related to this project. In the third quarter of 1995, the Company announced a consolidation plan under which five of the Company's local operations in its Virginia/East Tennessee Division were consolidated into two new operating centers. As a result of the plan implementation, costs of approximately $900,000 ($550,000 after income taxes) related to early retirement and severance programs and employee relocation expenses were recorded in September, 1995. The Company expects a reduction in annual expenses of approximately $1,000,000 before income taxes as a result of this change. In June, 1995, the Company entered into an agreement to pay $1,787,000 to 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 September 30, 1995, the Company had $1,430,000 accrued for its remaining liability related to the agreement. This amount is to be paid in equal annual payments 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 (320,512 shares) and $832,000 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. 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. 12 13 ITEM 2. CONTINUED 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 October, 1995, United Cities Propane Gas of Tennessee, Inc., a subsidiary of UCG Energy, signed a letter of intent to purchase all of the propane assets of Duncan Gas Service for $4,337,000. In addition, the subsidiary will enter into a ten year non-compete agreement for $250,000. This acquisition will add approximately 2,000 customers in the Johnson City, Tennessee area. 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 became 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. Effective September 1, 1995, the Company received an annual rate increase of $2,700,000 in the state of Kansas. The Company had filed on January 27, 1995, to increase rates by $4,230,000 on an annual basis. Effective October 14, 1995, the Company received an annual rate increase of $903,000 in the state of Missouri. The Company had filed on November 8, 1994, to increase rates by $1,100,000 on an annual basis. Effective mid-November, 1995, the Company received an annual rate increase of $2,227,000 in the state of Tennessee. The Company had filed on May 15, 1995, to increase rates by $3,951,000 on an annual basis. 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 September 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 September 30, 1995, $36,548,000 was outstanding under these arrangements. 13 14 UNITED CITIES GAS COMPANY AND SUBSIDIARIES Part II. Other Information ITEM 1. LEGAL PROCEEDINGS. See December 31, 1994 Form 10-K and Part I of this filing. ITEM 5. OTHER INFORMATION. The Board of Directors of the Company met on October 28, 1995, and appointed Jerry H. Ballengee to serve as a director of the Company until the shareholders' annual meeting in 1996. (See Amended By-Laws of the Company filed with this report as Exhibit 3.01). ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K. (a) Exhibits-See list of Exhibits on page 15 hereof. (b) Reports on Form 8-K. None 14 15 UNITED CITIES GAS COMPANY AND SUBSIDIARIES LIST OF EXHIBITS 3.01 Amended By-Laws of Company as Amended October 28, 1995. 12.01 Computation of Ratio of Consolidated Earnings to Fixed Charges. 27 Financial Data Schedule (for SEC use only). 15 16 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: November 7, 1995 16 EX-3.01 2 BY-LAWS 1 EXHIBIT 3.01 AS RESTATED OCTOBER 28, 1995 BY-LAWS OF UNITED CITIES GAS COMPANY OFFICES 1. The principal office shall be in the City of Brentwood, County of Williamson, State of Tennessee. 2. The corporation may also have offices at such other places as the board of directors may from time to time appoint or the business of the corporation may require. SEAL 3. The corporation seal shall have inscribed thereon the name of the corporation, the year of its organization and the words "Corporate Seal, Illinois." Said seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced. 4. Except as otherwise provided herein, meetings of the shareholders may be held at such place, either within or without the State of Illinois, as may be designated by the board of directors and stated in the notice of the meeting. 5. The Annual Meeting of shareholders shall be held on the last Friday of April in each year if not a legal holiday, and, if a legal holiday, then on the next secular day following, at ten-thirty o'clock a.m., when they shall elect, by a plurality vote, by ballot, a board of directors, and transact such other business as may properly be brought before the meeting. 6. The holders of a majority of the shares issued and outstanding, and entitled to vote thereat, present in person, or represented by proxy, shall be requisite and shall constitute a quorum at all meetings of the shareholders for the transaction of business except as otherwise provided by law, by the Articles of Incorporation by these by-laws. If, however, such majority shall not be present or represented at any meeting of the shareholders, a majority of the shareholders entitled to vote thereat, present in person or by proxy, shall have the power to 2 adjourn the meeting from time to time, without notice other than announcement at the meeting, until the requisite amount of voting shares shall be present. At such adjourned meeting at which the requisite amount of voting shares shall be represented any business may be transacted which might have been transacted at the meeting as originally notified. 7. At each meeting of the shareholders every shareholder having the right to vote shall be entitled to vote in person or by proxy appointed by an instrument in writing subscribed by such shareholder. No proxy shall be valid after eleven months from the date of its execution unless otherwise provided in the proxy. 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 shareholder 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. Except where the books maintained by the Transfer Agent for the transfer of shares of the corporation shall have been closed or a date shall have been fixed as a record date for the determination of its shareholders entitled to vote, no shares shall be voted at any election for directors which shall have been transferred on the books maintained by said Transfer Agent within twenty days next preceding such election of directors. 8. Written notice of the annual meeting shall be mailed at least ten, or in case a merger or consolidation is to be acted upon at least twenty, but not more than forty days prior to the date thereof to each shareholder entitled to vote thereat at such address as appears on the books maintained by the Transfer Agent for the transfer of shares of the corporation. 9. The Transfer Agent of the corporation shall make, at least ten days before each meeting of shareholders, a complete list of the shareholders entitled to vote at such meeting, arranged in alphabetical order, with the address of and the number of shares held by each, which list, for a period of ten days prior to such meeting, shall be kept on file at the registered office of the corporation and shall be subject to inspection by any shareholder at any time during usual 2 3 business hours. Such list shall also be produced and kept open at the time and place of the meeting and shall be subject to the inspection of any shareholder during the whole time of the meeting. 10. Special meetings of the shareholders may be called only by the chairman, by the president, by the secretary, by the board of directors, or in the manner hereafter prescribed by the holders of not less than one-fifth of all the outstanding shares entitled to vote on the matter for which the meeting is called. At any time, upon written request of shareholders holding in the aggregate one-fifth of all the outstanding shares entitled to vote on the matter for which a meeting is called, it shall be the duty of the secretary to call a special meeting of shareholders to be held at the registered office at such time as the secretary may fix, not less than ten nor more than forty days after the receipt of said request, and if the secretary shall neglect or refuse to issue such call, shareholders making the request may do so upon no less than forty days' written notice. Such request shall state the purpose or purposes of the proposed meeting. 11. Persons authorized to call shareholders' meetings shall cause written notice of the time, place and purpose of the meeting to be given all shareholders entitled to vote at such meeting, at least ten, or in case a merger or consolidation is to be acted upon at the meeting, at least twenty but not more than forty days prior to the day named for the meeting, provided that written notice given by shareholders calling a meeting in accordance with paragraph 10 above shall be given forty days prior to the date named for the meeting. If such written notice is placed in the United States mail, postage prepaid, and addressed to a shareholder at his last known post office address, notice shall be deemed to have been given him. Notice of any shareholders' meeting may be waived by any shareholder at any time. 12. Business transacted at all special meetings shall be confined to the object stated in the call. 3 4 DIRECTORS 13. The property and business of the corporation shall be managed by its board of directors, which shall be ten (10) in number and divided into three classes, which shall be as nearly equal in number as possible, as provided in the Articles of Incorporation. The number of directors may be increased or decreased by amendment to these by-laws, provided the number of directors shall not be less than three. In case of any increase in the number of directors, the additional directors may be elected by the shareholders at any meeting, annual or special, duly called for that purpose, or by the board of directors. Except as otherwise herein provided, the directors shall be elected at the annual meeting of shareholders. Each director shall be elected to serve until his successors shall be elected and shall qualify; provided, however, that in no event shall any director who is first elected on or after February 16, 1976, be permitted to serve on or after his date of retirement, which retirement date shall be deemed to be the date of the Annual Meeting of Shareholders of the Company next following the date on which a director has attained age 70. Nominations for the election of directors may be made by the board of directors or by any shareholder entitled to vote for the election of directors. Nominations by the board of directors may be made at any time. Nominations by shareholders shall be made by notice in writing, delivered or mailed by first class United States mail, postage prepaid, to the secretary of the corporation not less than 30 days nor more than 40 days prior to any meeting of the shareholders called for the election of directors; provided, however, that if less than 30 days' notice of the meeting is given to shareholders, such written notice shall be delivered or mailed, as prescribed, to the secretary of the corporation not later than the close of the seventh day following the day on which notice of the meeting was mailed to shareholders. Each notice of nomination by a shareholder shall set forth (i) the name, age, business address and, if known, residence address of each nominee proposed in such notice, (ii) the principal occupation or employment of each such nominee and (iii) the number of share of stock of the corporation which are beneficially owned by each nominee. The chairman of the meeting may, if the facts warrant, determine and declare to 4 5 the meeting that a nomination was not made in accordance with the foregoing procedure, and if he should so determine, he shall so declare to the meeting and the defective nomination shall be disregarded. 14. The directors may hold their meetings and have one or more offices, and keep the books of the corporation in the City of Brentwood, Tennessee, or at such other places as they may from time to time determine. 15. The entire board of directors or any individual director may, at any special meeting of the shareholders called for that purpose in the manner provided by Paragraph 10 and 11 hereof, be removed from office by a vote of shareholders holding a majority of the outstanding shares entitled to a vote at an election of directors. In case the board or any one or more directors be so removed, new directors may be elected at the same meeting. Unless the entire board be removed, no individual director shall be removed in case the votes of a sufficient number of shares are cast against the resolution for his removal, which, if cumulatively voted at an election of the whole board, would be sufficient to elect one or more directors. 16. If the office of a any director or directors becomes vacant by reason of death, resignation, retirement, disqualification, removal from office, or otherwise, such vacancy or vacancies may be filled by the affirmative vote of a majority of the remaining directors. A director thus elected to fill any vacancy shall hold office until the next annual election and until a successor or successors have been duly elected, unless sooner displaced. 17. In addition to the powers and authorities by these by-laws expressly conferred upon it, the board of directors may exercise all such powers of the corporation and do all such lawful acts and things as are not by statute or by the Articles of Incorporation or by these by-laws directed or required to be exercised or done by the shareholders. 5 6 EXECUTIVE COMMITTEE 18. The board of directors shall by resolution or upon recommendation of the Chairman and approval of the majority of the entire Board, establish an Audit Committee and a Compensation Committee and may by resolution or resolutions, passed by a majority of the whole Board, designate one or more additional committees, each committee to consist of two or more directors, who shall serve at the pleasure of the Board. Such committees shall have any may exercise such powers permitted by law as may be directed or delegated by the board of directors from time to time. Vacancies in the membership of the committees shall be filed by the board of directors at a regular or a special meeting called for that purpose. COMPENSATION OF DIRECTORS 19. Directors who are not employees of the Company shall be paid a stated salary for their service plus a fixed sum and expenses of attendance at each regular and special meeting of the board; PROVIDED, that nothing herein contained shall be construed to preclude any director from serving the Corporation in any other capacity and receiving compensation therefor or preclude the Chairman of the Board from receiving any stated salary for his services as such. Members of special or standing committees will be allowed like compensation for attending committee meetings. The board of directors shall have the authority to fix the compensation of directors unless otherwise provided by the Articles of Incorporation. MEETINGS OF THE BOARD 20. Each newly elected board shall hold its annual meeting immediately following the annual meeting of shareholders at the place where such annual meeting of shareholders was held, and no notice of such annual meeting to the new elected directors shall be necessary in order legally to constitute the annual meeting, provided a quorum shall be present. 6 7 21. Regular meetings of the board of directors may be held at such place as a majority of the directors may from time to time appoint. Notice of such regular meeting shall be given at least five days before the meeting by mail or telegram by the chairman of the board or in his absence, by the president. Such notice need not specify the business to be transacted at such regular meeting, but shall state that the meeting to be held is a regular meeting of the board. 22. Special meetings of the board may be called by the chairman of the board, or in his absence, by the president on five (5) days' notice to each director, by mail or telegram, or notice may be waived by the directors. Special meetings shall be called by the chairman of the board or by the president or the secretary in like manner and on like notice on the written request of two directors. 23. At all meetings of the board 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 the Articles of Incorporation or by these By-laws. 24. No business shall be transacted at any special meeting of the board which shall not have been stated in the notice thereof, except upon written approval of all the directors of the corporation. OFFICERS 25. The officers of the corporation shall be elected by the directors and shall be a chairman of the board, a president, one or more vice presidents, a secretary and a treasurer. The board of directors may also appoint one or more assistant secretaries and assistant treasurers. Any two of the offices of the corporation may be held by one person except the offices of president and secretary. The board of directors may appoint one or more assistant secretaries and assistant treasurers to perform their respective duties and to have such powers of the secretary and treasurer as shall from time to time be assigned to them by the board of directors. 7 8 26. The chairman of the board and the president shall be a member of the board of directors. No other officers of the corporation need be a member of the board. No vice president who is not a director may succeed to or fill the office of the president. 27. The board may appoint such other officers and agents as it shall deem necessary, who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the board. 28. The salaries of all elected officers of the corporation shall be fixed by the board of directors. 29. The officers of the corporation shall hold office until their successors are chosen and qualify in their stead. Any officer, manager or agent elected or appointed by the board of directors may be removed at any time by the affirmative vote of a majority of the whole board of directors, whenever in their judgment the best interest of the corporation will be served thereby, such removal, however, to be without prejudice to the contract rights of the person so removed. If the office of any officer or officers becomes vacant for any reason, the vacancy shall be filled by the affirmative vote of a majority of the whole board of directors. 30. The chairman of the board shall preside at all meetings of the shareholders and the board of directors. PRESIDENT 31. The president shall be the chief executive officer of the corporation and shall have active supervision and general charge of the property, business and employees of the corporation, subject, however, to the control of the board of directors; he shall see that all resolutions and orders of the board of directors are carried into effect; he shall exercise such other powers and perform such other duties as shall be incident to the office of president or as may be required by the board of directors. In the absence or inability to act of the chairman of the board of directors, the president shall preside at all meetings of the shareholders and the board of directors and shall during such absence exercise all the powers of the chairman of the board. 8 9 32. He shall execute bonds, mortgages, and other contracts requiring the seal, under the seal of the corporation, but the authority to execute such instruments may also be vested in others as provided in Paragraph 41 of these by-laws. 33. He shall be EX OFFICIO a member of all standing committees, and shall have the general powers and duties of supervision and management usually vested in the office of president of a corporation. VICE PRESIDENTS 34. Each vice president shall have such powers and perform such duties as the board of directors may from time to time prescribe or as the chairman of the board or the president may from time to time delegate to him. At the request of the president, any vice president may, in the case of the absence or inability to act of the president, temporarily act in his place. In the case of the death of the president or in the case of his absence or inability to act where no vice president has been designated to act temporarily in his place, the board of directors shall designate one or more vice presidents to perform the duties of the president. THE SECRETARY AND ASSISTANT SECRETARIES 35. The secretary shall attend all sessions of the board and all meetings of the shareholders and record all votes and the minutes of all proceedings in a book to be kept for that purpose. He shall give, or cause to be given, notice of all meetings of the shareholders and special meetings of the board of directors, and shall perform such other duties as may be prescribed by the board of directors or president, under whose supervision he shall be. He shall keep in safe custody the seal of the corporation, and when authorized by the board, affix the same to any instrument requiring it, and when so affixed, it shall be attested by his signature or by the signature of the assistant secretary or an assistant secretary. 9 10 36. The assistant secretary, or assistant secretaries in the order of their seniority, shall, in the absence or disability of the secretary, perform the duties and exercise the powers of the secretary, and shall perform such other duties as the board of directors shall prescribe. THE TREASURER AND ASSISTANT TREASURERS 37. The treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts or receipts and disbursements in books belonging to the corporation and shall deposit all moneys, and other valuable effects in the name and to the credit of the corporation in such depositaries as may be designated by the board of directors. 38. He shall disburse the funds of the corporation as may be ordered by the board, taking proper vouchers for such disbursements, and shall render to the president and directors, at the regular meetings of the board, or whenever they may require it, an account of all his transactions as treasurer and of the financial condition of the corporation. 39. If required by the board of directors, he shall give the corporation a bond in such sum, and with such surety or sureties as shall be satisfactory to the board, for the faithful performance of the duties of his office, and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation. 40. The assistant treasurer, or assistant treasurers in the order of their seniority, shall, in the absence or disability of the treasurer, perform the duties and exercise the powers of the treasurer, and shall perform such other duties as the board of directors shall prescribe. DUTIES OF OFFICERS MAY BE DELEGATED 41. The board of directors, except as otherwise provided in these by-laws, may authorize any officer or officers, or agent or agents, to enter into any bond, mortgage or contract or execute and deliver any instrument in the name and on behalf of the corporation, and such authority may be general or confined to specific instances; and, unless so authorized by the board of directors or 10 11 by the provisions of these by-laws, no officer, agent or employee other than the chairman of the board of directors and the president shall have any power or authority to bind the corporation by any contract or engagement or to pledge its credit or to render it liable pecuniarily for any purpose or to any allowance. 42. In case of the absence of any officer of the corporation or for any other reason that the board may deem sufficient, the board may delegate, for the time being, the powers or duties or any of them, of such officer to any other officer, or to any director. CONSIDERATION FOR SHARES 43. Without the consent of any holder of any share of the capital stock of this corporation, the shares of stock of this corporation may be issued by it from time to time in such number or amount of shares of said stock, and for such consideration, not less than the par value thereof, in labor or services actually performed, money or property, as from time to time may be fixed and determined by the board of directors of this corporation at any annual meeting or any special meeting called for said purpose, and the right, power and authority of said board of directors from time to time so to authorize and order the issuance by this corporation of the said shares of said stock, in such number or amount of share, and for such consideration in labor, services actually performed, money or property, as from time to time said board may fix and determine, is hereby absolutely reserved to said board of directors. Payment or delivery to, or receipt by this corporation of such consideration as may be so fixed and determined by its board of directors for the issuance of any share or shares of its said stock, as hereinbefore in this Paragraph 43 provided, shall operate and be construed, deemed and held: (i) to discharge, release and satisfy fully and absolutely, all liability to this corporation and/or to its creditors now or at any time hereafter existing, of any subscriber for, and/or holder or any such share or shares so authorized to be issued in any way on account of, founded upon, or 11 12 arising out of any subscription for, and/or purchase of, and/or issuance of a certificate or certificates representing such share or shares, and (ii) to constitute such share or shares as full paid and non-assessable. CERTIFICATES REPRESENTING SHARES 44. Certificates evidencing the ownership of shares of the corporation shall bear such serial designation (which may be a combination of letters and numbers) as shall be prescribed by the board of directors and the ownership thereof shall be recorded in books maintained by the Transfer Agent for recording the transfer of shares of the corporation as they are issued. They shall state that the corporation is organized under the laws of the State of Illinois, the name of the person of whom issued, the number and class of shares, and the designation of the series, if any, which such certificate represents, the par value of each share represented by such certificate, and such authorization number as may be prescribed by an Order or Orders of the Illinois Commerce Commission. They shall be signed by the president or a vice president, and the secretary or an assistant secretary, and sealed with the seal or a facsimile seal of the corporation. In case the seal of the corporation is changed after the certificate is sealed with the seal or a facsimile of the seal of the corporation, but before it is issued, the certificate may be issued by the corporation with the same effect as if the seal had not been changed. Where such certificate is countersigned by a transfer agent other than the corporation itself or an employee of the corporation, or by a transfer clerk and registered by a registrar, the signatures of the president or vice president and the secretary or assistant secretary upon such certificate may be facsimiles, engraved or printed. In case any officer who has signed or whose facsimile signature has been placed upon such certificate shall have ceased to be such officer before such certificate is issued, it may be issued by the corporation with the same effect as if such officer had not ceased to be such at the date of its issue. 12 13 Every certificate representing shares issued by the corporation shall set forth upon the face or back of the certificate a full or summary statement of all the designations, preferences, qualifications, limitations, restrictions, and special or relative rights of the shares of each class authorized to be issued, and if the corporation is authorized to issue any preferred or special class in series, the variations in the relative rights and preferences between the shares of each such series so far as the same have been fixed and determined and the authority of the board of directors to fix and determine the relative rights and preferences of subsequent series; provided that such statement may be omitted from the certificate if it shall be set forth upon the face or back of the certificate that such statement, in full, will be furnished by the corporation to any shareholder upon request without charge. TRANSFER OF SHARES 45. Transfers of shares shall be made on the books maintained by the Transfer Agent for the transfer of shares of the corporation only upon surrender of the certificate therefor, endorsed by the person named in the certificate or by attorney lawfully constituted in writing. CLOSING OF TRANSFER BOOKS 46. The board of directors shall have power to close the stock transfer books of the corporation for a period not exceeding forty days preceding the date of any meeting of shareholders or the date for payment of any dividend or distribution, or the date for the allotment of rights, or, subject to contract rights with respect thereto, the date when any change or conversion or exchange of shares will be made or go into effect; provided, however, if the share transfer books shall be closed for the purpose of determining shareholders entitled to notice of or to vote at a meeting of shareholders, such books shall be closed for at least 10 days, or in the case of a merger or consolidation at least 20 days, immediately preceding such meeting; and provided, further, that in lieu of closing the stock transfer books as aforesaid, the board of directors may fix in advance a date at least 10, or in the case of a merger or consolidation at least 20, but not more 13 14 than 40 days preceding the date of any meeting of shareholders or the date for payment of any dividend or distribution, or the date for the allotment of rights, or, subject to contract rights with respect thereto, the date when any change or conversion of exchange of shares will be made or go into effect, as a record date for the determination of the shareholders entitled to notice of, and to vote at, any such meeting, or entitled to receive payment of any dividend, or to any such allotment of rights, or to exercise the rights in respect of any such change, conversion or exchange of shares of capital stock, and in such case only such shareholders as shall be shareholders of record on the date so fixed shall be entitled to such notice of, and to vote at, such meeting, or to receive payment of such dividend, or to receive such allotment or rights, or to exercise such rights, as the case may be, notwithstanding any transfer of any stock on the books of the corporation after any such record date fixed as aforesaid. REGISTERED SHAREHOLDERS 47. The corporation shall be entitled to treat the holder of record of any share or shares of the corporation as the holder in fact thereof and, accordingly, shall not be bound to recognize any equitable or other claim to or interest in such share on the part of any other person, whether or not it shall have express or other notice thereof, save as expressly provided by the laws of Illinois. LOST CERTIFICATES 48. Any person claiming a certificate of stock to be lost or destroyed, shall make an affidavit or affirmation of that fact and advertise the same in such manner as the board of directors may require. The owner of a lost or destroyed certificate(s), or his legal representative will give the corporation a bond, sufficient to indemnify the corporation against any claim that may be made against it on account of the alleged loss of any such certificate. A new certificate of the same tenor and for the same number of shares as the one alleged to be lost or destroyed, may be issued without requiring any bond, when, in the judgment of the directors it is proper so to do. 14 15 INSPECTION OF BOOKS 49. The directors shall determine from time to time whether and, if allowed, when and under what conditions and regulations the accounts and books for the corporation (except as may by statute be specifically open to inspection) or any of them shall be open to the inspection of the shareholders, and the shareholders' rights in this respect are and shall be restricted and limited accordingly. CHECKS 50. All checks or demands for money and notes of the corporation shall be signed by such officer or officers as the board of directors may from time to time designate. FISCAL YEAR 51. The fiscal year shall begin the first day of January in each year. DIVIDENDS 52. Dividends upon shares of the corporation, subject to the provisions of the Articles of Incorporation, may be declared by the board of directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of the corporation, and shall be paid only out of the surplus of the aggregate of the assets of the corporation over the aggregate of its liabilities, including in the latter the amount of its capital shares. Before payment of any dividend, there may be set aside out of any funds of the corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve fund to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the corporation, or for such other purpose as the directors shall think conductive to the interests of the corporation. 15 16 DIRECTORS' ANNUAL STATEMENT 53. The board of directors shall present at each annual meeting and when called for by vote of the shareholders at any special meeting of the shareholders, a full and clear statement of the business and condition of the corporation. NOTICES 54. Whenever under the provisions of these by-laws notice is required to be given to any director, officer or shareholder, it shall not be construed to mean any requirement for personal notice, but such notice may be given in writing, by mail, by depositing the same in the post office or letter box, in a postpaid, sealed wrapper, addressed to such shareholder, officer or director at such address as appears on the books of the corporation, or, in default of other address, to such director, officer or shareholder at the General Post Office in the City of Chicago, Illinois, and such notice shall be deemed to be given at the time when same shall be thus mailed. 55. The notice provided for in these by-laws of any general or special meeting of the shareholders, or general or special meeting of the directors, may be waived in writing by the shareholders or directors, respectively. INDEMNIFICATION OF DIRECTORS AND OFFICERS 56. Each director or officer of the corporation, each former director or officer, and any person who serves or has served at the request of the corporation as a director or officer of another corporation in which the corporation owned shares of the capital stock or of which it was a creditor, shall be indemnified by the corporation against any costs and expenses which may be imposed upon or actually and necessarily incurred by him (and for which he is not otherwise reimbursed), including the amount of any judgments or fines, in connection with the defense of any action, suit or proceeding, whether criminal or civil, in which he may be named as a party by reason of his being or having been such director or officer, or by reason of any action alleged to have been taken or omitted by him in either such capacity; provided, however, that the 16 17 corporation shall not indemnify any such person against any costs or expenses imposed upon or incurred by him in relation to matters as to which he shall be finally adjudged to be liable for negligence or misconduct in the performance of duty. In the event of a settlement of any such action, suit or proceeding prior to final adjudication, or in the event of a settlement or any claim made against any such person by reason of his being or having been such director or officer, such person shall be indemnified against any costs and expenses actually incurred by him, including any amount paid to effect such settlement, if the corporation is advised by independent counsel selected or approved by its board of directors that he acted without negligence or misconduct in the performance of duty and that such costs and expenses are not unreasonable. In the event of a criminal action, suit or proceeding, a conviction or judgment (whether based on a plea of guilty or nolo contendere or its equivalent, or after trial) shall not be deemed an adjudication that such person is liable for negligence or misconduct in the performance of duty if he acted in good faith in what he considered to be the best interests of the corporation or such other corporation or such other corporation and with no reasonable cause to believe that the action was illegal. The right of indemnification in this Paragraph 56 provided shall insure to each person referred to in the first paragraph of this Paragraph 56 whether or not he is such director or officer at the time such costs or expenses are imposed or incurred, and whether or not the claim asserted against him is based on matters which antedate the adoption of these by-laws; and in the event of his death or incapacity shall extend to his legal representatives. Each person who shall act as a director or officer of the corporation, or if any such other corporation at the request of the corporation, shall be deemed to be doing so in reliance upon such right of indemnification; and such right shall not be exclusive of any other right which he may have. None of the provisions of this Paragraph 56 shall be construed as a limitation upon the right of the corporation to exercise its general power to enter into a contract or undertaking of indemnity with a director or officer in any proper case not provided for herein. The provisions of Paragraph 56 shall be subject to any limitations contained in applicable statutory laws. 17 18 VOTING SHARE IN OTHER CORPORATIONS 57. Unless otherwise ordered by the shareholders, the chairman of the board, the president or a vice president shall have full power and authority in behalf of the corporation to attend, and to act and to vote, at any meeting of shareholders of any corporation in which this corporation may hold shares, and in connection with such meeting shall possess and may exercise in behalf of the corporation any and all rights and powers incident to the ownership of such shares, including the power to appoint proxies therefor and to execute any and all instruments for that purpose. The directors may, from time to time by resolution, direct the manner in which shares may be voted or confer these powers upon any other person or persons. AMENDMENTS 58. These by-laws may be altered or amended only in the manner prescribed by the Articles of Incorporation. * * * * * * * * * * * * * * * * * * 18 EX-12.01 3 COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS 1 Exhibit 12.01 UNITED CITIES GAS COMPANY AND SUBSIDIARIES COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES FOR THE TWELVE MONTHS ENDED
(Unaudited, in thousands, except ratio amounts) 9-30-95 12-31-94 12-31-93 12-31-92 12-31-91 12-31-90 ------- --------- -------- -------- -------- -------- Fixed Charges, as defined: Interest on long-term debt....................... $13,761 $14,026 $14,553 $12,965 $11,111 $ 9,009 Amortization of debt discount.................... 222 227 220 181 233 231 ------- ------- ------- ------- ------- ------- Total......................................... $13,983 $14,253 $14,773 $13,146 $11,344 $ 9,240 ======= ======= ======= ======= ======= ======= Earnings, as defined: Net income....................................... $ 8,836 $12,093 $12,150 $10,218 $ 7,875 $ 3,373 Taxes on income.................................. 5,218 6,503 5,681 5,171 2,564 532 Fixed charges, as above.......................... 13,983 14,253 14,773 13,146 11,344 9,240 ------- ------- ------- ------- ------- ------- Total......................................... $28,037 $32,849 $32,604 $28,535 $21,783 $13,145 ======= ======= ======= ======= ======= ======= Ratio of Consolidated Earnings to Fixed Charges..... 2.01 2.30 2.21 2.17 1.92 1.42 ======= ======= ======= ======= ======= =======
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 NINE MONTHS ENDED SEPTEMBER 30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS. 9-MOS DEC-31-1995 JAN-01-1995 SEP-30-1995 PRO-FORMA 279,818 49,758 67,179 20,913 0 417,668 100,387 22,462 17,622 140,471 0 0 137,088 36,548 0 0 8,757 0 0 0 94,804 417,668 180,500 79 170,179 170,258 10,242 2,622 12,864 10,415 2,449 0 2,449 8,771 8,997 29,062 .21 .21
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