<PAGE> 1
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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.
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UNITED CITIES GAS COMPANY AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1995
Table of Contents
<TABLE>
<CAPTION>
Item Page
Number PART I -- FINANCIAL INFORMATION Number
------
<S> <C> <C>
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
</TABLE>
2
<PAGE> 3
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
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
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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
======= ======= ======== ======== ======== ========
</TABLE>
3
<PAGE> 4
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ ------------------ -------------------
(Unaudited, in thousands) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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 -
======= ======= ======= ======= ======= =======
</TABLE>
4
<PAGE> 5
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1995 1994
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
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
======== ========
</TABLE>
5
<PAGE> 6
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands, except share amounts) 1995 1994
---------------- -------------------
Common Stock Equity: (Unaudited)
<S> <C> <C> <C> <C>
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%
======== ===== ======== =====
</TABLE>
6
<PAGE> 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
<PAGE> 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
<PAGE> 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:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
------------------ ----------------- -------------------
(Unaudited, in thousands) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
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
======= ======= ======== ======== ======== ========
</TABLE>
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
<PAGE> 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
<TABLE>
<CAPTION>
THREE MONTHS ENDED NINE MONTHS ENDED TWELVE MONTHS ENDED
------------------ ----------------- -------------------
(UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- -----
<S> <C> <C> <C> <C> <C> <C>
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%)
======= ======= ======== ======== ======== ========
</TABLE>
*Based on system weighted average. Data for 1995 is preliminary.
**Not meaningful for third quarter.
10
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 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
<PAGE> 1
Exhibit 12.01
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED
<TABLE>
<CAPTION>
(Unaudited, in thousands, except ratio amounts)
9-30-95 12-31-94 12-31-93 12-31-92 12-31-91 12-31-90
------- --------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
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
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
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.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> SEP-30-1995
<BOOK-VALUE> PRO-FORMA
<TOTAL-NET-UTILITY-PLANT> 279,818
<OTHER-PROPERTY-AND-INVEST> 49,758
<TOTAL-CURRENT-ASSETS> 67,179
<TOTAL-DEFERRED-CHARGES> 20,913
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 417,668
<COMMON> 100,387
<CAPITAL-SURPLUS-PAID-IN> 22,462
<RETAINED-EARNINGS> 17,622
<TOTAL-COMMON-STOCKHOLDERS-EQ> 140,471
0
0
<LONG-TERM-DEBT-NET> 137,088
<SHORT-TERM-NOTES> 36,548
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,757
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 94,804
<TOT-CAPITALIZATION-AND-LIAB> 417,668
<GROSS-OPERATING-REVENUE> 180,500
<INCOME-TAX-EXPENSE> 79
<OTHER-OPERATING-EXPENSES> 170,179
<TOTAL-OPERATING-EXPENSES> 170,258
<OPERATING-INCOME-LOSS> 10,242
<OTHER-INCOME-NET> 2,622
<INCOME-BEFORE-INTEREST-EXPEN> 12,864
<TOTAL-INTEREST-EXPENSE> 10,415
<NET-INCOME> 2,449
0
<EARNINGS-AVAILABLE-FOR-COMM> 2,449
<COMMON-STOCK-DIVIDENDS> 8,771
<TOTAL-INTEREST-ON-BONDS> 8,997
<CASH-FLOW-OPERATIONS> 29,062
<EPS-PRIMARY> .21
<EPS-DILUTED> .21
</TABLE>
