<PAGE> 1
Information contained herein is subject to completion or amendment. A
registration statement relating to these securities has been filed with the
Securities and Exchange Commission. This prospectus shall not constitute an
offer to sell or the solicitation of an offer to buy nor shall there be any
sale of these securities in any State in which such offer, solicitation
or sale would be unlawful prior to registration or qualification under
the securities laws of any such State.
FILED PURSUANT TO RULE 424B3
(RELATED TO PROSPECTUS DATED MAY 31, 1995)
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS SUPPLEMENT DATED MAY 31, 1995
(TO PROSPECTUS DATED MAY 31, 1995)
1,200,000 SHARES
(UNITED CITIES GAS COMPANY LOGO)
COMMON STOCK
------------------------
The Common Stock of the Company is traded on the Nasdaq National Market
("Nasdaq"). On May 30, 1995, the closing price per share of Common Stock, as
reported by Nasdaq, was $15 3/4. See "Common Stock Dividends and Price Ranges."
------------------------
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS SUPPLEMENT
OR THE PROSPECTUS TO WHICH IT RELATES. ANY REPRESENTATION TO
THE CONTRARY IS A CRIMINAL OFFENSE.
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
Underwriting
Price to Discounts and Proceeds to
Public Commissions(1) Company(2)
- -------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
Per Share............................... $ $ $
- -------------------------------------------------------------------------------------------------
Total................................... $ $ $
- -------------------------------------------------------------------------------------------------
Total Assuming Full Exercise of Over-
Allotment Option(3)................... $ $ $
- -------------------------------------------------------------------------------------------------
- -------------------------------------------------------------------------------------------------
</TABLE>
(1) See "Underwriting."
(2) Before deducting expenses estimated at $60,000, which are payable by the
Company.
(3) Assuming exercise in full of the 45-day option granted by the Company to the
Underwriters to purchase up to 180,000 additional shares of Common Stock
solely to cover over-allotments. See "Underwriting."
------------------------
The shares of Common Stock are offered by the Underwriters, subject to
prior sale, when, as and if delivered to and accepted by the Underwriters, and
subject to their right to reject orders in whole or in part. It is expected that
delivery of the Common Stock will be made in New York City on or about
, 1995.
------------------------
PAINEWEBBER INCORPORATED
EDWARD D. JONES & CO.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
THE DATE OF THIS PROSPECTUS SUPPLEMENT IS , 1995.
<PAGE> 2
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE OF THE COMMON STOCK OF
THE COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN
MARKET. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
IN CONNECTION WITH THIS OFFERING, CERTAIN UNDERWRITERS AND SELLING GROUP
MEMBERS MAY ENGAGE IN PASSIVE MARKET MAKING TRANSACTIONS IN THE COMMON STOCK ON
NASDAQ IN ACCORDANCE WITH RULE 10B-6A UNDER THE SECURITIES EXCHANGE ACT OF 1934.
SEE "UNDERWRITING."
S-2
<PAGE> 3
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information appearing elsewhere in this Prospectus Supplement, the accompanying
Prospectus and in the documents incorporated therein by reference. Unless
otherwise indicated, the information in this Prospectus Supplement assumes that
the Underwriters' over-allotment option will not be exercised. See
"Underwriting."
THE COMPANY
United Cities Gas Company (the "Company") and its subsidiaries are engaged
in the distribution of natural gas for residential, commercial and industrial
use in Tennessee, Kansas, Georgia, Illinois, Virginia, Missouri, Iowa and South
Carolina, the distribution of propane in Tennessee, Virginia and North Carolina
and the operation of natural gas storage facilities in Kansas and Kentucky. The
Company and its subsidiaries also engage in other energy-related activities.
THE OFFERING
Common Stock Offered by the Company.............................1,200,000 shares
Common Stock to be Outstanding after the
Offering.......................................................12,317,920 shares
Use of Proceeds.............To repay short-term indebtedness incurred to finance
capital improvements and provide working capital
Nasdaq Symbol...............................................................UCIT
1995 Closing Price Range (through May 30, 1995)....................$15 - $16 1/4
Closing Sale Price (May 30, 1995)........................................$15 3/4
Book Value Per Share (March 31, 1995).....................................$12.15
Current Indicated Annual Dividend Rate.....................................$1.02
SUMMARY CONSOLIDATED FINANCIAL AND OTHER INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
<TABLE>
<CAPTION>
TWELVE MONTHS ENDED
----------------------------------
DECEMBER 31,
MARCH 31, 1994
1995 ------------
-----------
(UNAUDITED)
<S> <C> <C>
INCOME STATEMENT:
Operating revenues -- utility............................... $ 262,798 $280,984
Operating revenues -- non-utility........................... 43,018 45,511
Common stock earnings....................................... 11,184 12,093
Common stock earnings per share............................. 1.07 1.16
OTHER INFORMATION (UNAUDITED):
Total natural gas through-put (MCF)(a)...................... 68,251 67,178
Weather data -- percent colder (warmer) than normal......... (14.7)% (10.2)%
</TABLE>
<TABLE>
<CAPTION>
MARCH 31, 1995
-----------------------------------------
OUTSTANDING AS ADJUSTED(B)
------------------ ------------------
(UNAUDITED)
<S> <C> <C> <C> <C>
CAPITALIZATION:
Short-term notes payable to banks................... $ 18,061 $ --
======== ========
Long-term debt (excluding current maturities)....... $141,829 52.1% $141,829 48.9%
Common stock equity................................. 130,298 47.9 148,382 51.1
-------- ----- -------- -----
Total capitalization (excluding short-term
notes payable to banks)................... $272,127 100.0% $290,211 100.0%
======== ===== ======== =====
</TABLE>
- ---------------
(a) Despite warmer weather during the twelve months ended March 31, 1995
compared to the twelve months ended December 31, 1994, total natural gas
through-put increased primarily as a result of an increase in transported
volumes to industrial customers, a lower margin business.
(b) Adjusted to reflect the receipt and application of the net proceeds from the
sale of the shares of Common Stock offered hereby estimated at $18,084,000,
after deducting expenses. See "Use of Proceeds."
S-3
<PAGE> 4
THE COMPANY
The Company's predominant business is the distribution of natural gas. As
of December 31, 1994, the Company supplied natural gas service to approximately
301,000 customers. In addition to its business of natural gas distribution, the
Company sells and installs gas appliances and performs certain appliance service
work. The Company's natural gas business accounted for approximately 65% of the
Company's consolidated net income in 1994.
The Company has two wholly-owned subsidiaries. One subsidiary, UCG Energy
Corporation ("UCG Energy"), is a broker procuring natural gas for the Company,
certain of the Company's industrial customers, local distribution companies and
others, and is engaged in exploration and production activities. In addition,
UCG Energy leases appliances, real estate, equipment and vehicles to the Company
and others.
UCG Energy has two wholly-owned subsidiaries, United Cities Propane Gas of
Tennessee, Inc. and UCG Leasing, Inc. United Cities Propane Gas of Tennessee,
Inc. is engaged in the retail distribution of propane (LP) gas. As of December
31, 1994, the propane operation served approximately 22,000 customers in
Tennessee, Virginia and North Carolina. UCG Leasing, Inc. leases vehicles,
equipment and real estate to the Company. UCG Energy and its subsidiaries
together accounted for approximately 31% of the Company's consolidated net
income in 1994.
The Company's other subsidiary, United Cities Gas Storage Company ("UCG
Storage"), was formed in 1989 to provide natural gas storage services. A natural
gas storage field was purchased in Kentucky to supplement natural gas used by
the Company's customers in Tennessee and Illinois. In addition, natural gas
storage fields located in Kansas and included in the Company's 1989 acquisition
of Union Gas System, Inc. were sold to UCG Storage. These fields are used to
supplement natural gas used by the Company's Kansas customers. UCG Storage
accounted for approximately 4% of the Company's consolidated net income in 1994.
During the first quarter of 1995, UCG Energy acquired a 45% equity interest
in the natural gas marketing business of Woodward Marketing, Inc. Located in
Houston, Texas, Woodward Marketing is primarily engaged in the sale and
management of gas supply for utilities and industries in the Southeast and
Midwest. UCG Energy's participation in this segment of the natural gas business
is part of the Company's strategy to assure its customers a competitively priced
gas supply. The Company believes that its alliance with Woodward Marketing will
enhance UCG Energy's prospects to produce income.
The nature of the Company's business is highly seasonal and weather
sensitive. During 1994, approximately 71% of the Company's natural gas utility
revenues were attributable to gas sold in the first and fourth quarters. In
order to moderate the impact of weather on the financial results of the utility
operation, the Company sought and received approval from the state public
utility commissions of Tennessee and Georgia to implement Weather Normalization
Adjustments ("WNAs"). The WNAs are in effect during the heating season and allow
the Company to increase the base rate portion of bills when weather is warmer
than normal and decrease the base rate portion of bills when weather is colder
than normal. The Company also seeks to minimize the quarterly variations in
sales volumes and earnings through sales to less weather-sensitive industrial
customers and through the diversified activities of its unregulated
subsidiaries.
USE OF PROCEEDS
The net proceeds from the sale of the shares of Common Stock offered
hereby, estimated to be approximately $18.1 million after deducting expenses,
will be used to repay short-term indebtedness incurred to finance capital
improvements and provide working capital. At April 30, 1995, the weighted
average annual interest rate of such indebtedness was 6.9%.
S-4
<PAGE> 5
COMMON STOCK DIVIDENDS AND PRICE RANGES
The Company has paid regular quarterly cash dividends on its Common Stock
since 1955. See "Selected Consolidated Financial and Other Data" for the
dividends declared per share of Common Stock in each of the periods covered
thereby.
It is the present intention of the Board of Directors to continue to
declare and pay dividends quarterly on the Common Stock of the Company, subject
to future economic conditions, earnings and cash requirements of the Company. At
its meeting held April 28, 1995, the Board of Directors of the Company declared
a quarterly dividend on the Common Stock of $.255 per share, payable on June 15,
1995 to shareholders of record on May 31, 1995. Holders of shares of Common
Stock offered hereby will not be entitled to receive such dividend. See
"Description of Capital Stock -- Restriction on Dividends" in the accompanying
Prospectus for a summary of certain dividend limitation provisions.
The Company's Common Stock is traded on Nasdaq under the symbol UCIT. The
high and low closing sales prices compiled from quotations supplied by the
Nasdaq National Market Statistical Report, for the periods indicated, were as
follows:
<TABLE>
<CAPTION>
1ST QUARTER 2ND QUARTER 3RD QUARTER 4TH QUARTER
----------- ----------- ----------- -----------
YEAR HIGH LOW HIGH LOW HIGH LOW HIGH LOW
--------------------------------- ---- --- ---- --- ---- --- ---- ---
<S> <C> <C> <C> <C> <C> <C> <C> <C>
1993............................. 17 1/4 16 18 1/4 17 1/4 20 1/2 17 20 1/4 17 1/8
1994............................. 18 3/4 16 17 1/4 15 1/2 17 3/4 15 1/2 17 1/4 15 7/16
1995 (through May 30)............ 16 1/4 15 1/4 16 1/4 15
</TABLE>
On May 30, 1995, the closing sale price per share as reported by Nasdaq was
$15 3/4.
As of March 31, 1995, the book value per share was $12.15.
As of March 20, 1995, there were 7,366 holders of record of the Common
Stock of the Company.
SELECTED CONSOLIDATED FINANCIAL AND OTHER DATA
<TABLE>
<CAPTION>
FOR THE YEARS ENDED DECEMBER 31,
----------------------------------------------------
1994 1993 1992 1991 1990
-------- -------- -------- -------- --------
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS AND CUSTOMERS)
<S> <C> <C> <C> <C> <C>
Operating revenues -- utility............... $280,984 $287,507 $265,460 $239,155 $224,593
Operating revenues -- non-utility........... $ 45,511 $ 47,746 $ 40,155 $ 33,443 $ 34,257
Common stock earnings....................... $ 12,093 $ 12,120 $ 10,104 $ 7,741 $ 3,211
Common stock earnings per share............. $ 1.16 $ 1.19 $ 1.07 $ 0.97 $ 0.44
Total assets................................ $421,200 $401,520 $370,150 $368,283 $338,167
Long-term debt (excluding current
maturities)............................... $144,344 $151,843 $157,734 $127,430 $ 96,521
Redeemable preferred and preference stock... -- -- -- $ 1,352 $ 1,483
Cash dividends declared per common share.... $ 1.005 $ 0.985 $ 0.965 $ 0.93 $ 0.92
Total customers (at December 31)............ 322,851 313,788 302,781 295,729 297,855
Total natural gas through-put (MCF)......... 67,178 68,543 62,713 59,109 55,278
Weather data -- percent colder (warmer) than
normal.................................... (10.2)% 2.8% (7.8)% (12.8)% (20.4)%
</TABLE>
S-5
<PAGE> 6
UNDERWRITING
The Underwriters named below, for whom PaineWebber Incorporated, Edward D.
Jones & Co. and Legg Mason Wood Walker, Incorporated are acting as
Representatives, have severally agreed, subject to the terms and conditions of
the Underwriting Agreement, to purchase from the Company the respective number
of shares set forth opposite their names in the table below:
<TABLE>
<CAPTION>
NUMBER OF
NAMES SHARES
-------------------------------------------------------------------------- ---------
<S> <C>
PaineWebber Incorporated..................................................
Edward D. Jones & Co......................................................
Legg Mason Wood Walker, Incorporated......................................
---------
Total........................................................... 1,200,000
=========
</TABLE>
The Underwriting Agreement provides that the several Underwriters are
required to take and pay for all of the shares of the Common Stock offered
hereby, if any are taken. The obligations of the Underwriters are subject to
certain conditions precedent.
The Company has been advised by the Representatives of the several
Underwriters, that the Underwriters propose to offer the shares of Common Stock
to the public initially at the offering price set forth on the cover page of
this Prospectus Supplement and to certain dealers at such price less a
concession not in excess of $ per share, and that the Underwriters and
such dealers may reallow a discount not in excess of $ per share to
other dealers. The public offering price and the concessions and discounts to
dealers may be changed by the Representatives.
The Company has agreed to indemnify the Underwriters against certain
liabilities, including liabilities under the Securities Act of 1933, or to
contribute to payments the Underwriters may be required to make in respect
thereof.
The Company has granted an option to the Underwriters, exercisable during
the forty-five day period after the date of the initial public offering of the
shares of Common Stock offered hereby, to purchase up to an additional 180,000
shares of Common Stock at the public offering price less the underwriting
discount. The Underwriters may exercise such option only to cover any
over-allotments in the sale of the Common Stock.
The Company has agreed not to offer, sell, contract to sell or otherwise
dispose of any Common Stock of the Company or any security convertible into or
exchangeable for such Common Stock for a period of 90 days after the date of
this Prospectus Supplement without the prior written consent of the
Representatives, except for the issuance of Common Stock pursuant to (i) the
exercise of outstanding stock options, (ii) any employee benefit, shareholder or
customer plan existing on the date hereof, or (iii) certain acquisitions by the
Company.
In connection with the offering, certain Underwriters and selling group
members (if any) or their respective affiliates who are qualifying registered
market makers on Nasdaq, may engage in passive market making transactions in the
Common Stock on Nasdaq in accordance with Rule 10b-6A under the Securities
Exchange Act of 1934 as amended (the "Exchange Act") during the two business day
period before commencement of offers or sales of the Common Stock. The passive
market making transaction must comply with applicable volume and price limits
and be identified as such. In general, a passive market maker may display its
bid at a price not in excess of the highest independent bid for the security; if
all independent bids are lowered below the passive market maker's bid, however,
such bid must then be lowered when certain purchase limits are exceeded.
S-6
<PAGE> 7
Dwight C. Baum, Chairman of the Board of Directors of the Company, was a
Senior Vice President of PaineWebber Incorporated, one of the Representatives,
until his retirement.
Vincent J. Lewis, a member of the Board of Directors of the Company, is a
Senior Vice President of Legg Mason Wood Walker, Incorporated, one of the
Representatives.
S-7
<PAGE> 8
- ------------------------------------------------------
- ------------------------------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY
REPRESENTATIONS IN CONNECTION WITH THIS OFFERING OTHER THAN THOSE CONTAINED IN
THIS PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS AND, IF GIVEN OR MADE,
SUCH OTHER INFORMATION AND REPRESENTATIONS MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED BY THE COMPANY OR THE UNDERWRITERS. NEITHER THE DELIVERY OF THIS
PROSPECTUS SUPPLEMENT OR THE ACCOMPANYING PROSPECTUS NOR ANY SALE MADE HEREUNDER
SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO
CHANGE IN THE AFFAIRS OF THE COMPANY SINCE THE DATE HEREOF OR THAT THE
INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO ITS DATE.
THIS PROSPECTUS SUPPLEMENT AND THE ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN
OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THE
REGISTERED SECURITIES TO WHICH THEY RELATE. THIS PROSPECTUS SUPPLEMENT AND THE
ACCOMPANYING PROSPECTUS DO NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF
AN OFFER TO BUY SUCH SECURITIES IN ANY CIRCUMSTANCES IN WHICH SUCH OFFER OR
SOLICITATION IS UNLAWFUL.
------------------------
TABLE OF CONTENTS
PROSPECTUS SUPPLEMENT
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Prospectus Summary.................... S-3
The Company........................... S-4
Use of Proceeds....................... S-4
Common Stock Dividends and Price
Ranges.............................. S-5
Selected Consolidated Financial and
Other Data.......................... S-5
Underwriting.......................... S-6
PROSPECTUS
Available Information................. 2
Incorporation of Certain Documents by
Reference........................... 2
The Company........................... 3
Use of Proceeds....................... 4
Ratio of Earnings to Fixed Charges.... 4
Description of Debt Securities........ 4
Description of Capital Stock.......... 16
Legal Opinions........................ 18
Experts............................... 18
Plan of Distribution.................. 18
</TABLE>
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
- ------------------------------------------------------
1,200,000 SHARES
(LOGO)
COMMON STOCK
------------------------
PROSPECTUS SUPPLEMENT
------------------------
PAINEWEBBER INCORPORATED
EDWARD D. JONES & CO.
LEGG MASON WOOD WALKER
INCORPORATED
------------------------
, 1995
- ------------------------------------------------------
- ------------------------------------------------------
