<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 June 30, 1995.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
-------------- --------------
Commission file number 0-1284-2
UNITED CITIES GAS COMPANY
--------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois and Virginia 36-1801540
--------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5300 Maryland Way, Brentwood, TN 37027
--------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
(615) 373-5310
--------------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
[X] Yes
[ ] No
At July 31, 1995, 12,571,187 shares of the common stock of the Registrant were
outstanding.
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<PAGE> 2
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
QUARTERLY REPORT ON FORM 10-Q
FOR THE QUARTER ENDED JUNE 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, Six
and Twelve Months Ended June 30, 1995 and June 30, 1994. 3
Consolidated Statements of Cash Flows (Unaudited) for the Three,
Six and Twelve Months Ended June 30, 1995 and June 30, 1994 4
Consolidated Balance Sheets at June 30, 1995 (Unaudited) and 5
December 31, 1994.
Consolidated Statements of Capitalization at June 30, 1995
(Unaudited) and December 31, 1994. 6
Notes to Consolidated Financial Statements. 7
2 Management's Discussion and Analysis of Financial Condition
and Results of Operations. 8
PART II -- OTHER INFORMATION
1 Legal Proceedings. 12
4 Submission of Matters to a Vote of Security Holders. 12
6 Exhibits and Reports on Form 8-K. 12
List of Exhibits. 13
Signature 14
</TABLE>
<PAGE> 3
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
JUNE 30, JUNE 30, JUNE 30,
------------------ ---------------- -------------------
(Unaudited, in thousands, except per share amounts) 1995 1994 1995 1994 1995 1994
---- ----- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
UTILITY OPERATING REVENUES.................................... $42,246 $48,352 $148,252 $172,543 $256,693 $294,646
Natural gas cost........................................... 24,023 30,033 85,945 110,035 148,879 186,375
------- ------- -------- -------- -------- --------
UTILITY OPERATING MARGIN...................................... 18,223 18,319 62,307 62,508 107,814 108,271
------- ------- -------- -------- -------- --------
UTILITY OTHER OPERATING EXPENSES:
Operations and maintenance................................. 14,524 14,754 29,764 29,644 57,423 57,522
Depreciation and amortization.............................. 3,708 3,506 7,372 6,934 14,371 13,621
Federal and state income taxes............................. (2,430) (2,333) 4,448 4,907 3,416 3,227
Other taxes................................................ 2,978 2,498 6,397 5,557 11,579 10,448
------- ------- -------- -------- -------- --------
Total other operating expenses........................... 18,780 18,425 47,981 47,042 86,789 84,818
------- ------- -------- -------- -------- --------
UTILITY OPERATING INCOME (LOSS)............................... (557) (106) 14,326 15,466 21,025 23,453
UTILITY OTHER INCOME (LOSS), NET.............................. 215 (49) 173 (125) 37 232
------- ------- -------- -------- -------- --------
(342) (155) 14,499 15,341 21,062 23,685
------- ------- -------- -------- -------- --------
UTILITY INTEREST CHARGES:
Interest on long-term debt................................. 2,980 3,073 6,017 6,217 12,149 12,567
Other interest charges..................................... 490 216 1,191 490 2,438 2,337
------- ------- -------- -------- -------- --------
Total interest charges................................... 3,470 3,289 7,208 6,707 14,587 14,904
------- ------- -------- -------- -------- --------
UTILITY INCOME (LOSS)......................................... (3,812) (3,444) 7,291 8,634 6,475 8,781
------- ------- -------- -------- -------- --------
OTHER INCOME (LOSS):
Operations of UCG Energy Corporation-
Revenues................................................ 4,444 5,984 16,827 19,726 35,485 40,465
Operating expenses...................................... (4,015) (5,100) (12,777) (14,603) (26,834) (30,639)
Interest expense........................................ (283) (201) (521) (386) (909) (996)
Depreciation and amortization........................... (1,007) (865) (1,991) (1,752) (3,819) (3,590)
Other income, net....................................... 372 178 1,313 328 1,659 688
Federal and state income taxes.......................... 185 2 (1,082) (1,257) (2,119) (2,359)
------- ------- -------- -------- -------- --------
(304) (2) 1,769 2,056 3,463 3,569
------- ------- -------- -------- -------- --------
Operations of United Cities Gas Storage Company-
Revenues................................................ 1,145 1,741 3,028 4,757 5,398 8,805
Operating expenses...................................... (527) (1,205) (1,840) (3,715) (3,076) (6,611)
Interest expense........................................ (275) (237) (506) (488) (966) (979)
Depreciation............................................ (92) (92) (184) (183) (368) (364)
Federal and state income taxes.......................... (97) (81) (193) (145) (384) (358)
------- ------- -------- -------- -------- --------
154 126 305 226 604 493
------- ------- -------- -------- -------- --------
COMMON STOCK EARNINGS (LOSS).................................. $(3,962) $(3,320) $ 9,365 $ 10,916 $ 10,542 $ 12,843
======= ======= ======== ======== ======== ========
COMMON STOCK EARNINGS (LOSS) PER SHARE........................ $ (0.35) $ (0.32) $ 0.86 $ 1.05 $ 0.99 $ 1.25
======= ======= ======== ======== ======== ========
AVERAGE NUMBER OF COMMON SHARES OUTSTANDING................... 11,197 10,369 10,937 10,350 10,700 10,309
======= ======= ======== ======== ======== ========
COMMON STOCK DIVIDENDS PER SHARE.............................. $ 0.255 $ 0.25 $ 0.51 $ 0.50 $ 1.015 $ 0.995
======= ======= ======== ======== ======== ========
</TABLE>
3
<PAGE> 4
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
JUNE 30, JUNE 30,
------------------ -----------------
(Unaudited, in thousands) 1995 1994 1995 1994
---- ---- ---- ----
<S> <C> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Common stock earnings (loss).................................... $ (3,962) $ (3,320) $ 9,365 $ 10,916
-------- -------- -------- --------
Adjustments to reconcile common stock earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................................. 4,807 4,463 9,547 8,869
Deferred taxes................................................ 7 (72) 13 (144)
Investment tax credits, net................................... (91) (93) (182) (185)
Investment income from Woodward Marketing, L.L.C.............. (155) - (729) -
Changes in current assets and current liabilities:
Receivables................................................. 20,073 27,121 27,111 30,650
Materials and supplies...................................... (124) (471) (363) (399)
Gas in storage.............................................. (7,293) (10,644) 8,445 5,013
Gas costs to be billed in the future........................ (1,901) (1,997) 2,823 (3,069)
Prepayments and other....................................... (1,391) (845) (326) 117
Accounts payable............................................ (845) (5,622) (8,903) (14,224)
Customer deposits and advance payments...................... 6 575 (3,208) (3,352)
Accrued interest............................................ (2,542) (2,574) (339) (1,187)
Supplier refunds due customers.............................. (1,487) (2,787) 4,135 2,800
Accrued taxes............................................... (4,902) (4,258) 428 3,110
Other, net.................................................. (627) (824) (1,926) 521
-------- -------- -------- --------
Total adjustments......................................... 3,535 1,972 36,526 28,520
-------- -------- -------- --------
Net cash provided by (used in) operating activities..... (427) (1,348) 45,891 39,436
-------- -------- -------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property - utility................................. (8,085) (6,692) (17,798) (14,026)
Additions to property - non-utility............................. (1,219) (851) (2,367) (1,446)
Investment in Woodward Marketing, L.L.C., net................... (1,433) - (1,433) -
-------- -------- -------- --------
Net cash used in investing activities................... (10,737) (7,543) (21,598) (15,472)
-------- -------- -------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings - net..................................... (5,109) 10,620 (33,236) (12,243)
Proceeds from issuance of common stock.......................... 20,400 273 21,710 625
Long-term debt retirements...................................... (835) (1,127) (5,333) (5,678)
Dividends paid.................................................. (2,391) (2,284) (4,758) (4,564)
-------- -------- -------- --------
Net cash provided by (used in) financing activities..... 12,065 7,482 (21,617) (21,860)
-------- -------- -------- --------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS.......... 901 (1,409) 2,676 2,104
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.............. 4,519 4,311 2,744 798
-------- -------- -------- --------
CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.................... $ 5,420 $ 2,902 $ 5,420 $ 2,902
======== ======== ======== ========
CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized............................ $ 6,570 $ 6,301 $ 8,574 $ 8,768
======== ======== ======== ========
Income taxes.................................................... $ 2,901 $ 2,499 $ 5,069 $ 2,862
======== ======== ======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends reinvested............................................ $ 444 $ 308 $ 804 $ 611
======== ======== ======== ========
Debt incurred to acquire assets of Harrell Propane, Inc......... - - $ 1,250 -
======== ======== ======== ========
Common stock issued in investment in Woodward Marketing, L.L.C.. $ 5,000 - $ 5,000 -
======== ======== ======== ========
<CAPTION>
TWELVE MONTHS ENDED
JUNE 30,
-------------------
(Unaudited, in thousands) 1995 1994
---- ----
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Common stock earnings (loss).................................... $ 10,542 $ 12,843
-------- --------
Adjustments to reconcile common stock earnings (loss) to net
cash provided by (used in) operating activities:
Depreciation and amortization................................. 18,558 17,575
Deferred taxes................................................ 1,458 485
Investment tax credits, net................................... (367) (372)
Investment income from Woodward Marketing, L.L.C.............. (729) -
Changes in current assets and current liabilities:
Receivables................................................. 3,493 (411)
Materials and supplies...................................... 229 175
Gas in storage.............................................. 2,964 (10,799)
Gas costs to be billed in the future........................ (2,019) (5,074)
Prepayments and other....................................... 564 527
Accounts payable............................................ (3,116) 7,384
Customer deposits and advance payments...................... 2,334 1,365
Accrued interest............................................ (264) (399)
Supplier refunds due customers.............................. 2,562 (4,035)
Accrued taxes............................................... (193) 63
Other, net.................................................. (2,038) (2,899)
-------- --------
Total adjustments......................................... 23,436 3,585
-------- --------
Net cash provided by (used in) operating activities..... 33,978 16,428
-------- --------
CASH FLOWS FROM INVESTING ACTIVITIES:
Additions to property - utility................................. (34,660) (28,227)
Additions to property - non-utility............................. (5,149) (2,892)
Investment in Woodward Marketing, L.L.C., net................... (1,433) -
-------- --------
Net cash used in investing activities................... (41,242) (31,119)
-------- --------
CASH FLOWS FROM FINANCING ACTIVITIES:
Short-term borrowings - net..................................... 2,332 10,620
Proceeds from issuance of common stock.......................... 24,347 1,496
Long-term debt retirements...................................... (7,488) (6,770)
Dividends paid.................................................. (9,409) (9,067)
-------- --------
Net cash provided by (used in) financing activities..... 9,782 (3,721)
-------- --------
NET INCREASE (DECREASE) IN CASH AND TEMPORARY INVESTMENTS.......... 2,518 (18,412)
CASH AND TEMPORARY INVESTMENTS AT BEGINNING OF PERIOD.............. 2,902 21,314
-------- --------
CASH AND TEMPORARY INVESTMENTS AT END OF PERIOD.................... $ 5,420 $ 2,902
======== ========
CASH PAID DURING THE PERIOD FOR:
Interest, net of amounts capitalized............................ $ 16,726 $ 17,278
======== ========
Income taxes.................................................... $ 5,927 $ 7,779
======== ========
NONCASH INVESTING AND FINANCING ACTIVITIES:
Dividends reinvested............................................ $ 1,447 $ 1,190
======== ========
Debt incurred to acquire assets of Harrell Propane, Inc......... $ 1,250 -
======== ========
Common stock issued in investment in Woodward Marketing, L.L.C.. $ 5,000 -
======== ========
</TABLE>
4
<PAGE> 5
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
JUNE 30, DECEMBER 31,
(In thousands) 1995 1994
---- ----
ASSETS (UNAUDITED)
<S> <C> <C>
UTILITY PLANT:
Plant in service, at cost................................ $420,220 $403,121
Less-accumulated depreciation.......................... 146,262 139,715
-------- --------
273,958 263,406
-------- --------
NON-UTILITY PROPERTY:
Property, plant, and equipment........................... 74,384 71,222
Less-accumulated depreciation.......................... 23,894 22,272
-------- --------
50,490 48,950
-------- --------
CURRENT ASSETS:
Cash and temporary investments........................... 5,420 2,744
Receivables, less allowance for uncollectible accounts
of $1,070 in 1995 and $1,017 in 1994................... 16,219 43,330
Materials and supplies................................... 5,543 5,180
Gas in storage........................................... 18,006 26,451
Gas costs to be billed in the future..................... 13,134 15,957
Prepayments and other.................................... 2,372 2,046
-------- --------
60,694 95,708
-------- --------
DEFERRED CHARGES:
Unamortized debt discount and expense, net............... 2,649 2,694
Investment in Woodward Marketing, L.L.C. ................ 7,162 -
Non-compete agreements, net.............................. 3,703 3,697
Deferred system improvement costs, net................... 1,119 1,425
Other deferred charges................................... 7,430 5,320
-------- --------
22,063 13,136
-------- --------
$407,205 $421,200
======== ========
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common stock equity...................................... $149,345 $118,028
Long-term debt........................................... 137,637 144,344
-------- --------
286,982 262,372
-------- --------
CURRENT LIABILITIES:
Current portion of long-term obligations................. 8,692 6,068
Notes payable............................................ 12,952 46,188
Accounts payable for gas costs........................... 17,210 26,185
Other accounts payable................................... 3,060 2,988
Accrued taxes............................................ 6,803 6,375
Customer deposits and advance payments................... 10,965 14,173
Accrued interest......................................... 3,006 3,345
Supplier refunds due customers........................... 9,576 5,441
Other.................................................... 8,658 8,993
-------- --------
80,922 119,756
-------- --------
DEFERRED CREDITS:
Accumulated deferred income tax.......................... 24,715 24,572
Deferred investment tax credits.......................... 4,463 4,645
Income taxes due customers............................... 6,185 6,329
Other.................................................... 3,938 3,526
-------- --------
39,301 39,072
-------- --------
$407,205 $421,200
======== ========
</TABLE>
5
<PAGE> 6
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
JUNE 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 12,548,476 in
1995 and 10,613,441 in 1994..................................... $ 99,136 $ 71,622
Capital surplus................................................... 22,462 22,462
Retained earnings................................................. 27,747 23,944
-------- --------
Total common stock equity....................................... 149,345 52.0% 118,028 45.0%
-------- ----- -------- -----
LONG-TERM DEBT:
First mortgage bonds ............................................. 125,000 129,000
Senior secured storage term notes, 8.67%, due in
installments through 2007...................................... 10,191 10,436
Rental property adjustable rate term notes due in
installments through 1999...................................... 6,267 6,839
Other long-term obligations due in installments through 2013...... 4,871 4,137
-------- --------
146,329 150,412
Less-current requirements..................................... 8,692 6,068
-------- --------
Total long-term debt, excluding amounts due within one year... 137,637 48.0% 144,344 55.0%
-------- ----- -------- -----
TOTAL CAPITALIZATION.................................................. $286,982 100.0% $262,372 100.0%
======== ===== ======== =====
</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
month and six month periods ended June 30, 1995 are not necessarily indicative
of the results to be expected for the full year.
In June, 1995, the Company entered into a $1,787,000 agreement with
Union Electric Company (Union Electric) whereby Union Electric agreed to assume
responsibility for the Company's continuing investigation and environmental
response action obligations as outlined in the feasibility study related to a
former manufactured gas plant site in Keokuk, Iowa. At June 30, 1995, the
Company had $1,430,000 accrued for its remaining liability related to the
agreement. This amount is to be paid annually over a four year period
beginning July 1, 1996. The Company has deferred the accrued amount and
expects approval for recovery in its next rate proceeding in Iowa.
The Company owns former manufactured gas plant sites in Johnson City
and Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any
information which suggests that these sites give rise to a present health or
environmental risk as a result of the manufactured gas process or that any
response action will be necessary. However, the Company has accrued and
deferred for recovery $750,000 associated with the preliminary survey and
invasive study of these sites.
Management expects that expenditures related to response action at any
environmental site will be recovered through rates or insurance, or shared
among other potentially responsible parties. Therefore, the costs of
responding to these sites are not expected to materially affect the results of
operations, financial condition or cash flows of the Company.
During the first quarter of 1995, UCG Energy purchased a 45% interest
in certain contracts related to the gas marketing business of Woodward
Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired
interest, the shareholders of WMI received $5,000,000 in the Company's common
stock and $750,000 in cash in May, 1995, and may, if certain earnings targets
are met, receive an additional payment of $1,000,000 to be paid over a five
year period. In exchange for its own gas marketing contracts and the acquired
45% interest in the WMI gas marketing contracts, UCG Energy received a 45%
interest in a newly formed limited liability company, Woodward Marketing,
L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its
remaining 55% interest in the WMI gas marketing contracts. In addition, in
May, 1995, the Company paid a net $683,000 for the Company's share of certain
assets and paid-in-capital of WMLLC. WMLLC will provide gas marketing services
to industrial customers, municipalities and local distribution companies. UCG
Energy utilized equity accounting, effective January 1, 1995, for the
acquisition.
On April 6, 1995, the Company signed a letter of intent to acquire all
the outstanding common stock of Monarch Gas Company (Monarch). The acquisition
will be accounted for as a pooling of interests whereby the number of shares of
the Company's common stock issued will be calculated based on the book value of
Monarch versus the book value of the Company at December 31, 1994. In
addition, the Company will enter into a $250,000, five year non-compete
agreement with the owners of Monarch. Monarch serves approximately 3,000
customers in small communities adjacent to the Company's Vandalia, Illinois
operation. The Company will not restate prior years' consolidated financial
statements due to immateriality.
In March, 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria
for regulatory assets by requiring that such assets be probable of future
recovery at each balance sheet date. The Company anticipates adopting this
standard on January 1, 1996, and does not expect that adoption will have a
material impact on the results of operations, financial condition or cash flows
of the Company based on the current regulatory structure in which the Company
operates. This conclusion may change in the future as a result of a change in
regulation.
Effective May 22, 1995, United Cities Propane Gas of Tennessee, Inc.,
a subsidiary of UCG Energy, purchased all of the propane transportation assets
of Transpro South, Inc., a common carrier corporation, for approximately
$218,000. In addition, the subsidiary entered into a ten year non-compete
agreement with the prior owner for $6,000.
Certain reclassifications were made conforming prior year's financial
statements with 1995 financial statement presentation.
7
<PAGE> 8
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
Item 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview
The Company's 1995 second quarter common stock loss was $3,962,000
compared to the second quarter 1994 loss of $3,320,000. The loss per common
share was $.35 on an additional 828,000 average number of shares outstanding,
compared to the loss of $.32 for the comparable period in 1994. The common stock
earnings for the first six months of 1995 were $9,365,000 compared to
$10,916,000 in 1994. Common stock earnings per share decreased from $1.05 in
1994 to $.86 in 1995 on an additional 587,000 average number of shares
outstanding. Common stock earnings for the twelve month period ended June 30,
1995 were $10,542,000 compared to $12,843,000 for the twelve month period ended
June 30, 1994. Common stock earnings per share decreased from $1.25 in the
twelve month period in 1994 to $.99 in the twelve month period in 1995. Average
shares outstanding increased by 391,000 for the twelve month period ended June
30, 1995.
The following table summarizes certain information regarding the
operation of each segment of the Company's business for the periods ended June
30:
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
------------------ ---------------- -------------------
(UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Utility................................ $42,246 $48,352 $148,252 $172,543 $256,693 $294,646
------- ------- -------- -------- -------- --------
Subsidiaries:
UCG Energy Corporation-
Propane Division................... 1,825 1,651 10,843 11,082 20,548 20,368
Rental Division.................... 1,586 1,614 3,117 3,258 6,309 6,577
Utility Services Division.......... 1,033 2,719 2,867 5,386 8,628 13,520
------- ------- -------- -------- -------- --------
Total UCG Energy Corporation..... 4,444 5,984 16,827 19,726 35,485 40,465
United Cities Gas Storage Company.... 1,145 1,741 3,028 4,757 5,398 8,805
------- ------- -------- -------- -------- --------
Total Subsidiaries............... 5,589 7,725 19,855 24,483 40,883 49,270
------- ------- -------- -------- -------- --------
Total Revenues......................... $47,835 $56,077 $168,107 $197,026 $297,576 $343,916
======= ======= ======== ======== ======== ========
COMMON STOCK EARNINGS:
Utility................................ $(3,812) $(3,444) $ 7,291 $ 8,634 $ 6,475 $ 8,781
------- ------- -------- -------- -------- --------
Subsidiaries:
UCG Energy Corporation-
Propane Division................... (791) (695) 395 698 819 1,083
Rental Division.................... 425 506 859 1,021 1,863 1,810
Utility Services Division.......... 62 187 515 337 781 676
------- ------- -------- -------- -------- --------
Total UCG Energy Corporation..... (304) (2) 1,769 2,056 3,463 3,569
United Cities Gas Storage Company.... 154 126 305 226 604 493
------- ------- -------- -------- -------- --------
Total Subsidiaries............... (150) 124 2,074 2,282 4,067 4,062
------- ------- -------- -------- -------- --------
Total Common Stock Earnings............ $(3,962) $(3,320) $ 9,365 $ 10,916 $ 10,542 $ 12,843
======= ======= ======== ======== ======== ========
</TABLE>
OPERATING RESULTS-UTILITY
The utility loss increased by $368,000 for the second quarter and
utility earnings decreased $1,343,000 and $2,306,000, respectively, for the six
and twelve month periods in 1995 from the comparable 1994 periods due
predominantly to the factors mentioned below:
The operating margin decreased from $18,319,000 in the second quarter of
1994 to $18,223,000 in 1995. The operating margin for the six month period
ended June 30, 1995 was $62,307,000 compared to $62,508,000 for the same period
in 1994, and the margin decreased $457,000 to $107,814,000 for the twelve months
ended June 30, 1995. The decrease in margin in the six and twelve month periods
can primarily be attributed to the warmer weather in the periods ended June 30,
1995 as compared to the previous year periods. However, the negative impact of
the warmer weather was lessened by the weather normalization adjustments (WNAs)
in Tennessee and Georgia, an increased number of natural gas customers, the
Palmyra, Missouri acquisition in March, 1994 and the rate increase effective
February, 1995 in South Carolina. In the six and twelve month periods ended
June 30, 1995, $2,328,000 and $3,852,000, respectively, in additional revenues
were generated by the WNAs. In comparison, the WNAs generated additional
revenues of $526,000 and $313,000 for the six and twelve month periods ended
June 30, 1994.
8
<PAGE> 9
ITEM 2. CONTINUED
Operations and maintenance expenses other than natural gas cost for the
current year periods varied only slightly from the previous year periods.
Increases in payroll related expenses during the periods were primarily offset
by a reduction in medical expenses. Depreciation and amortization expense and
other taxes, which includes property taxes, increased in all periods primarily
due to additional plant in service.
Interest expense increased $181,000 and $501,000 in the three and six
month periods ended June 30, 1995 as compared to the same periods in 1994
primarily due to interest on increased short-term debt outstanding, offset
slightly by the retirement of long-term debt. Interest expense decreased
$317,000 in the twelve month period primarily due to the retirement of long-term
debt and because of the 1993 assessment of interest related to the settlement of
the Internal Revenue Service Audit for the years 1986 through 1990, partially
offset by interest on increased short-term debt outstanding during the period.
The table below reflects operating revenues, gas sales volumes and
weather data for the periods ended June 30:
<TABLE>
<CAPTION>
OPERATING STATISTICS-UTILITY
THREE MONTHS ENDED SIX MONTHS ENDED TWELVE MONTHS ENDED
------------------ ---------------- -------------------
(UNAUDITED, IN THOUSANDS) 1995 1994 1995 1994 1995 1994
---- ---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Residential.......................... $16,424 $18,048 $ 71,090 $ 82,732 $117,877 $138,268
Commercial........................... 9,786 11,473 39,023 46,528 65,871 77,272
Industrial........................... 12,832 16,761 30,358 38,466 60,961 70,093
Transportation....................... 2,625 1,684 6,224 3,336 10,095 6,612
Other Revenues....................... 579 386 1,557 1,481 1,889 2,401
------- ------- -------- -------- -------- --------
Total Operating Revenues.......... $42,246 $48,352 $148,252 $172,543 $256,693 $294,646
======= ======= ======== ======== ======== ========
GAS SALES (MCF):
Residential.......................... 2,645 2,585 13,011 13,553 20,810 22,828
Commercial........................... 2,144 2,120 8,389 8,560 13,944 14,634
Industrial-
Firm............................... 1,691 1,861 4,122 4,536 7,720 8,010
Interruptible...................... 2,430 2,569 5,354 5,426 10,930 11,104
------- ------- -------- -------- -------- --------
8,910 9,135 30,876 32,075 53,404 56,576
======= ======= ======== ======== ======== ========
Transported Volumes (Mcf).............. 4,092 3,244 8,806 5,911 15,470 11,628
======= ======= ======== ======== ======== ========
WEATHER DATA-COLDER (WARMER)
THAN NORMAL*......................... (3.7%) (7.4%) (10.7%) (3.8%) (14.4%) -
======= ======= ======== ======== ======== ========
</TABLE>
*Based on system weighted average. Data for 1995 is preliminary.
OPERATING RESULTS-NON-UTILITY
Revenues of UCG Energy Corporation (UCG Energy) decreased $1,540,000,
$2,899,000 and $4,980,000 from the second quarter, six and twelve month periods
ended June 30, 1994, respectively. The propane division's revenues increased
moderately from the second quarter in 1994 due to increased jobbing and service
revenues as a result of increased appliance sales. The propane division's
revenues decreased in the six month period due to decreased propane volumes sold
as a result of warmer than normal weather, but increased in the twelve month
period as a result of a change in the billing date of the facility fee from
June, 1994 to October, 1994, partially offset by decreased propane volumes sold
due to warmer than normal weather. The utility services division's revenues
decreased in the second quarter, six and twelve month periods from 1994
primarily due to decreased gas brokerage sales to certain industrial customers
and others, and secondarily, the discontinuance of the distribution of
energy-related products. The rental division had a moderate decrease in
revenues in all periods due to lower rental rates on certain rental units in
service.
Expenses of UCG Energy, including cost of sales, decreased $1,085,000,
$1,826,000 and $3,805,000 from the second quarter, six and twelve month periods
ended June 30, 1994. Expenses increased in all periods in the propane division
due to added general and administrative expenses associated with the
acquisitions of Transpro South, Inc., Harrell Propane, Inc., and Hurley's
Propane Gas. Expenses of the utility services division decreased in all periods
as a result of decreased gas brokerage sales to certain industrial customers and
others as well as the discontinuance of the distribution of energy-related
products. Expenses of the rental division varied only slightly in all periods
from the previous year.
9
<PAGE> 10
ITEM 2. CONTINUED
Other income, net of UCG Energy increased $194,000, $985,000 and
$971,000 from the second quarter, six and twelve month periods ended June 30,
1994, respectively, primarily as a result of investment income from Woodward
Marketing, L.L.C. in the utility services division of $155,000 in the second
quarter and $729,000 in the six and twelve month periods.
UCG Energy's net loss increased $302,000 and net income decreased
$287,000 and $106,000 from the second quarter, six and twelve month periods
ended June 30, 1994. The increased loss in the second quarter is principally
due to decreased sales in the utility services division as mentioned above and
secondarily, to increased expenses in the propane division, partially offset by
increased jobbing and service revenues. The decrease in the six and twelve
month periods is the result of decreased sales in the propane division partially
offset by the investment income from Woodward Marketing, L.L.C. in both periods
and the change in the billing date of the facility fee reflected in the twelve
month periods.
Effective May 22, 1995, United Cities Propane Gas of Tennessee, Inc., a
subsidiary of UCG Energy, purchased all of the propane transportation assets of
Transpro South, Inc., a common carrier corporation, for approximately $218,000.
In addition, the subsidiary entered into a ten year non-compete agreement with
the prior owner for $6,000.
FINANCIAL CONDITION, LIQUIDITY AND CAPITAL RESOURCES
Total cash used in operations for the three month period ended June 30,
1995 was $427,000. Total cash provided by operations for the six and twelve
month periods ended June 30, 1995 was $45,891,000 and $33,978,000,
respectively. Changes in accounts receivable, gas in storage and accounts
payable are primarily a result of the seasonal nature of the Company's
business. There were no other changes in significant balance sheet accounts
which had a material effect on the cash flows of the Company. The financing
activities during the periods include the June, 1995 issuance of 1,380,000
shares of commom stock in a public stock offering with net proceeds from the
sale amounting to approximately $19,000,000 as of June 30, 1995. The net
proceeds were used to repay short-term debt and fund the Company's construction
program. The financing activities also reflect the retirement of long-term
debt, dividend payments, the issuance of stock through the Company's various
stock purchase plans and the net activity of short-term borrowings.
The Company has authorized as of June 30, 1995, specific purchases and
construction projects amounting to $19,718,000 of its 1995 utility capital
budget of $36,868,000 and $3,713,000 of its non-utility capital budget of
$4,855,000. Total capital expenditures for 1996, 1997 and 1998 are anticipated
to be approximately $28,400,000, $30,400,000 and $31,000,000, respectively. In
addition to its ongoing construction program, the Company is constructing a
twenty-eight mile main which will connect two of its fastest growing
distribution systems located in Middle Tennessee and is designed to provide the
Company's current customers with the lowest possible priced gas through
increased gas supply flexibility. Included in the 1995 utility capital budget
stated above is $5,000,000 related to this project.
In June, 1995, the Company entered into a $1,787,000 agreement with
Union Electric Company (Union Electric) whereby Union Electric agreed to assume
responsibility for the Company's continuing investigation and environmental
response action obligations as outlined in the feasibility study related to a
former manufactured gas plant site in Keokuk, Iowa. At June 30, 1995, the
Company had $1,430,000 accrued for its remaining liability related to the
agreement. This amount is to be paid annually over a four year period beginning
July 1, 1996. The Company has deferred the accrued amount and expects approval
for recovery in its next rate proceeding in Iowa.
The Company owns former manufactured gas plant sites in Johnson City and
Bristol, Tennessee and Hannibal, Missouri. The Company is unaware of any
information which suggests that these sites give rise to a present health or
environmental risk as a result of the manufactured gas process or that any
response action will be necessary. However, the Company has accrued and
deferred for recovery $750,000 associated with the preliminary survey and
invasive study of these sites.
Management expects that expenditures related to response action at any
environmental site will be recovered through rates or insurance, or shared among
other potentially responsible parties. Therefore, the costs of responding to
these sites are not expected to materially affect the results of operations,
financial condition or cash flows of the Company.
10
<PAGE> 11
ITEM 2. CONTINUED
During the first quarter of 1995, UCG Energy purchased a 45% interest
in certain contracts related to the gas marketing business of Woodward
Marketing, Inc. (WMI), a Texas corporation. In exchange for the acquired
interest, the shareholders of WMI received $5,000,000 in the Company's common
stock and $750,000 in cash in May, 1995, and may, if certain earnings targets
are met, receive an additional payment of $1,000,000 to be paid over a five
year period. In exchange for its own gas marketing contracts and the acquired
45% interest in the WMI gas marketing contracts, UCG Energy received a 45%
interest in a newly formed limited liability company, Woodward Marketing,
L.L.C. (WMLLC). WMI received a 55% interest in WMLLC in exchange for its
remaining 55% interest in the WMI gas marketing contracts. In addition, in
May, 1995, the Company paid a net $683,000 for the Company's share of certain
assets and paid-in-capital of WMLLC. WMLLC will provide gas marketing services
to industrial customers, municipalities and local distribution companies. UCG
Energy utilized equity accounting, effective January 1, 1995, for the
acquisition.
On April 6, 1995, the Company signed a letter of intent to acquire all
the outstanding common stock of Monarch Gas Company (Monarch). The acquisition
will be accounted for as a pooling of interests whereby the number of shares of
the Company's common stock issued will be calculated based on the book value of
Monarch versus the book value of the Company at December 31, 1994. In
addition, the Company will enter into a $250,000, five-year non-compete
agreement with the owners of Monarch. Monarch serves approximately 3,000
customers in small communities adjacent to the Company's Vandalia, Illinois
operation. The Company will not restate prior years' consolidated financial
statements due to immateriality.
In March, 1995, the Financial Accounting Standards Board issued
Statement No. 121, "Accounting for the Impairment of Long-Lived Assets and
Long-Lived Assets to be Disposed Of." This Statement imposes stricter criteria
for regulatory assets by requiring that such assets be probable of future
recovery at each balance sheet date. The Company anticipates adopting this
standard on January 1, 1996, and does not expect that adoption will have a
material impact on the results of operations, financial condition or cash flows
of the Company based on the current regulatory structure in which the Company
operates. This conclusion may change in the future as a result of a change in
regulation.
On April 28, 1995, the Company filed to increase rates on an annual
basis by $810,000 in the state of Virginia. The proposed rate increase will
become effective in late September, 1995. The increase will be subject to
refund pending the final order which is expected in the second quarter of 1996.
On May 15, 1995, the Company filed to increase rates on an annual basis
by $3,950,000 in the state of Tennessee. The Company expects that any increase
granted will be effective by mid-November 1995.
In an election held on April 7, 1995, 96 employees in Columbus, Georgia
voted not to be represented by a union.
The Company believes its short-term lines of credit are sufficient to
meet anticipated short-term requirements. At June 30, 1995, the Company had
$84,000,000 in short-term lines of credit, including master and banker's
acceptance notes, bearing interest primarily at the lesser of prime or a
negotiated rate during the term of each borrowing. At June 30, 1995,
$12,952,000 was outstanding under these arrangements.
11
<PAGE> 12
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
PART II. OTHER INFORMATION
FOR THE SIX MONTHS ENDED JUNE 30, 1995
ITEM 1. LEGAL PROCEEDINGS.
See December 31, 1994 Form 10-K and Part I of this filing.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.
The annual meeting of Shareholders was held April 28, 1995. The
meeting involved the election of directors. The matters voted
upon were as follows:
Proposal 1. The shareholders approved the nomination of Dwight C.
Baum, Dennis L. Newberry, and Timothy W. Triplett to
serve the Company as directors for a three-year term.
Dale A. Keasling was elected to serve as a director
for a one-year term. Directors of the Company who are
continuing their term are Vincent J. Lewis, Stirton
Oman, Jr., Thomas J. Garland, Gene C. Koonce and
George C. Woodruff, Jr.
Proposal 2. The shareholders approved a Non-Employee Director
Stock Plan. (See copy of plan filed with this report
as Exhibit 10.01.)
Proposal 3. The shareholders approved an amendment to the
Company's Articles of Incorporation to (i) delete the
provisions for Cumulative Preferred Stock and 11-1/2%
Cumulative Convertible Preference Stock and (ii)
create a class of Preferred Stock. (See Amended
Articles of Incorporation of the Company filed with
this report as Exhibit 3.01.)
The results of the voting for each proposal were as follows:
<TABLE>
<CAPTION>
FOR AGAINST WITHHELD NON-VOTE
--- ------- -------- --------
<S> <C> <C> <C> <C>
Proposal 1. Baum 8,745,990 - 332,975 1
Keasling 8,754,255 - 324,710 1
Newberry 8,761,121 - 317,845 -
Triplett 8,757,383 321,582 1
Proposal 2. 8,147,233 597,368 334,364 1
Proposal 3. 6,036,062 670,459 2,372,443 2
</TABLE>
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K.
(a) Exhibits-See list of Exhibits on page 13 hereof.
(b) Reports on Form 8-K.
None
12
<PAGE> 13
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
LIST OF EXHIBITS
3.01 Amended Articles of Incorporation of Company as Amended April 28,
1995
10.01 Non-Employee Director Stock Plan
27 Financial Data Schedule (SEC use only)
13
<PAGE> 14
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED CITIES GAS COMPANY
/s/ ADRIENNE H. BRANDON
------------------------------------
ADRIENNE H. BRANDON
Vice President and Controller
On behalf of the Registrant
Date: August 11, 1995
14
<PAGE> 1
EXHIBIT 3.01
As Amended Through
April 28, 1995
UNITED CITIES GAS COMPANY
AMENDED ARTICLES OF INCORPORATION
(A Public Service Company Incorporated
under the Laws of Illinois and Virginia)
ARTICLE ONE
The name of the corporation is: United Cities Gas Company.
ARTICLE TWO
The address of its present registered office in the State of
Illinois is 33 North LaSalle Street, in the City of Chicago 60602, County of
Cook, and the name of its Registered Agent at said address is: United States
Corporation Company. The address of its present registered office in the
Commonwealth of Virginia is 707 E. Main Street, Richmond, Virginia 23212, and
the name of its Registered Agent is Richard D. Gary, who is a resident of
Virginia, whose business address is the same as the address of the registered
office, and who is a member of the Virginia State Bar.
ARTICLE THREE
The duration of the corporation is perpetual.
ARTICLE FOUR
The purpose or purposes for which the corporation is organized
are, as a public service company, to manufacture, buy, distribute and sell
natural and/or artificial gas for light, heat, power, refrigeration and other
purposes for which the same may now or at any time hereafter be used, and also
to sell the by-products and residual products therefrom, and to construct or in
any manner acquire and to maintain, operate, mortgage, sell and in any manner
dispose of works, equipment, appliances and facilities therefor or for use in
connection therewith; to construct, lay, purchase or in any manner acquire and
to maintain and operate, and to sell, encumber or in any manner dispose of pipe
lines and gas mains for the sale, distribution and transportation of natural
and/or artificial gas for the purposes
<PAGE> 2
aforesaid in, over, through or under any streets, alleys, roads, highways, or
other public places, and in, over, through or under any private or public
property.
ARTICLE FIVE
Paragraph 1: The aggregate number of shares which the
corporation is authorized to issue is 40,200,000, divided into two classes
consisting of 200,000 shares designated as Preferred Stock, without par value,
issuable in series as hereinafter provided, (hereinafter referred to as the
"Preferred Stock"), and 40,000,000 shares designated as Common Stock, without
par value (hereinafter referred to as the "Common Stock").
Paragraph 2: The preferences, qualifications, limitations,
restrictions, and the special or relative rights in respect of the shares of
each class hereinabove designated shall be as follows:
SECTION 1. Issuance of Preferred in Series. The Preferred
Stock may be divided into and issued from time to time as shares of one or more
series, each series to be appropriately designated by a distinguishing number,
letter, or title prior to the issue of any shares thereof. The Preferred Stock
of all series shall be of the same class and of equal rank and shall be
identical except as to the terms that may be fixed by the Board of Directors as
hereinafter in this Section 1 provided. All shares of each series shall be
alike in every particular. Before any shares of Preferred Stock of any series
shall be issued, the Board of Directors shall fix and is hereby expressly
empowered to fix, in the manner provided by law, the following relative rights
and preferences, in respect of any or all of which there may be variations
between different series:
(i) The designation of such series and the number of shares
which shall constitute such series, which number may, unless the
authorized number of shares of such series shall be limited, be
increased or decreased (but not below the number of shares thereof, if
any, then outstanding) from time to time by like action of the Board
of Directors;
(ii) The rate of dividend;
(iii) The price at and the terms and conditions on which shares
may be redeemed;
(iv) The amount payable on shares of such series in the event
of any voluntary liquidation, dissolution or winding up of the
affairs of the corporation;
(v) The amount payable on shares of such series in the event
of any involuntary liquidation, dissolution or winding up of the
affairs of the corporation;
(vi) Any sinking fund provisions for the redemption or
purchase of shares;
2
<PAGE> 3
(vii) The terms and conditions on which shares may be converted,
if the shares of any series are issued with the privilege of
conversion;
(viii) Any special voting rights providing for the required
approval of a specified proportion of the shares of any series for any
specified corporate action;
so far as not inconsistent with the provisions of this Article Five applicable
to all series of Preferred Stock. Shares of Preferred Stock shall be issued
only as full-paid and nonassessable shares.
All or any shares of any series of Preferred Stock at any time
redeemed, purchased or acquired by the corporation shall be canceled in
accordance with law and shall not be reissued as shares of the same series, but
shall become authorized and unissued shares of Preferred stock undesignated as
to series.
SECTION 2. Dividends. Out of any source lawfully available
for the payment of dividends, as and when declared by the Board of Directors,
the holders of Preferred Stock of each series shall be entitled to receive
dividends at, but not exceeding, the maximum dividend rate fixed for such
series and expressed in the certificates therefore, payable at the times fixed
for such series and expressed in the certificates therefore, and accruing from
the date of original issue of each share of such stock, before any dividends
shall be declared or paid or set apart for payment on Common Stock and before
any sum shall be paid or set apart for the purchase or redemption of any
Preferred Stock.
After full dividends on Preferred Stock for all past dividend
periods and for the then current dividend period shall have been declared and
paid, or set apart for payment, then, and not otherwise, dividends may be
declared and paid out of any remaining source lawfully available for the
payment thereof upon the Common Stock, share and share alike, to the exclusion
of the holders of Preferred Stock.
SECTION 3. Liquidation, Dissolution or Winding Up. In the
event of any voluntary liquidation, dissolution or winding up of the affairs of
the corporation, the holders of the Preferred Stock of each series shall be
entitled to receive in cash for each share thereof the amount fixed for the
respective series as herein provided, with an amount equal to any accrued and
unpaid dividends thereon to the date fixed for such payment, before any
distribution of the assets shall be made to the holders of Common Stock. After
such payment shall have been made in full to the
3
<PAGE> 4
holders of the outstanding Preferred Stock or funds necessary for such payment
shall have been set aside by the corporation in trust for the account of the
holders of the outstanding Preferred Stock so as to be and continue available
therefor, the remaining assets of the corporation shall be divided and
distributed among the holders of the Common Stock ratably, share and share
alike. If, upon such liquidation, dissolution or winding-up, the assets of the
corporation distributable aforesaid among the holders of the Preferred Stock
shall be insufficient to permit the payment to them of said amount, the entire
assets shall be distributed ratably according to their respective interest
among the holders of the Preferred Stock. A consolidation or merger of the
corporation or any purchase or redemption of the stock of the corporation or
any purchase or redemption of stock of the corporation of any class shall not
be regarded as a liquidation, dissolution or winding up of the affairs of the
corporation within the meaning of this Section 3.
SECTION 4. Common Stock. Subject to the foregoing provisions of this
Article Five, such dividends (payable in cash, stock or otherwise) as may be
determined by the Board of Directors may be declared and paid out of funds
legally available therefore upon the Common Stock of the corporation from time
to time.
In the event of any voluntary or involuntary liquidation,
dissolution or winding up of the affairs of the corporation, after payment to
the holders of Preferred Stock of the amounts to which they are entitled as
hereinbefore provided, the holders of the Common Stock shall be entitled to
share ratably in all assets then remaining subject to distribution to the
shareholders.
SECTION 5. No Pre-Emptive Rights. No holder of any shares of
the capital stock of the corporation shall be entitled as of right to purchase
or subscribe for any unissued stock of any class or any additional shares of
any class to be issued by reason of any increase of the authorized capital
stock of this corporation of any class, or bonds, certificates of indebtedness,
debentures or other securities convertible into stock of this corporation of
any class, or bonds, certificates of indebtedness debentures or other
securities convertible into stock of this corporation or carrying any right to
purchase stock of any class, but any such unissued stock or such additional
authorized issue of any stock or of other securities convertible into stock, or
carrying any right to purchase stock, may be issued and disposed of pursuant to
resolution of the Board of Directors to such persons, firms, corporations or
associations and upon such terms as may be deemed advisable by the Board of
Directors in the exercise of its discretion.
4
<PAGE> 5
SECTION 6. Voting Rights. Each outstanding share, regardless
of class, shall be entitled to one vote on each matter submitted to a vote at a
meeting of shareholders.
In all elections for directors every stockholder shall have
the right to vote, in person or by proxy, for the number of shares owned by
him, for as many persons as there are directors to be elected or to cumulate
said shares, and give one candidate as many votes as the number of directors
multiplied by the number of his shares shall equal, or to distribute them on
the same principle among as many candidates as he shall think fit.
ARTICLE SIX
The total number of Directors which constitutes the Board of
Directors shall be fixed by the by-laws. The Board of Directors shall be
divided into three classes: Class I, Class II and Class III, which shall be as
nearly equal in number as possible. Each Director shall serve for a term
ending on the date of the third annual meeting of shareholders following the
annual meeting at which such Director was elected; provided, however, that each
initial Director in Class I shall hold office until the annual meeting of
shareholders in 1986; each initial Director in Class II shall hold office until
the annual meeting of shareholders in 1987; and each initial Director in Class
III shall hold office until the annual meeting of shareholders in 1988. At
least three Directors shall be elected in each year. In the event of any
increase or decrease in the authorized number of Directors, (1) each Director
then serving as such shall nevertheless continue as a Director of the class of
which he is a member until the expiration of his current term, or his earlier
resignation, removal from office or death, and (2) the newly created or
eliminated directorships resulting from such increase or decrease shall be
apportioned by the Board of Directors among the three classes of Directors so
as to maintain such classes as nearly equal as possible. At all meetings of
the Board of Directors a majority of Directors shall be necessary and
sufficient to constitute a quorum for the transaction of business, and the act
of a majority of the Directors present at any meeting at which there is a
quorum shall be the act of the Board of Directors, except as may be otherwise
specifically provided by statute or by these Articles of Incorporation and
except that any sale, lease, exchange, transfer or other disposition (in one
transaction or a series of transactions occurring within a twelve-month period)
of any assets of the corporation or any subsidiary of the corporation having an
aggregate book value greater than ten percent (10%) of the book value of all
the assets of the corporation shall require the affirmative vote of at least
66-2/3% of the number of the entire Board of Directors as designated in the
by-laws.
5
<PAGE> 6
ARTICLE SEVEN
Section 1. Vote Required for Certain Business Combinations.
A. Higher Vote for Certain Business Combinations. In
addition to any affirmative vote required by law or these Articles of
Incorporation, and except as otherwise expressly provided in Section 2
of this Article Seven:
(i) any merger or consolidation of the corporation
or any Subsidiary (as hereinafter defined) with (a) any
Interested Shareholder (as hereinafter defined) or (b) any
other corporation (whether or not itself an Interested
Shareholder) which is, or after such merger or consolidation
would be, an Affiliate (as hereinafter defined) of an
Interested Shareholder; or
(ii) any sale, lease, exchange, mortgage, pledge,
transfer or other disposition (in one transaction or a series
of transactions) to or with any Interested Shareholder or any
Affiliate of any Interested Shareholder of a major part of the
assets of the corporation or any Subsidiary; or
(iii) the issuance or transfer by the corporation or
any Subsidiary of any securities of the corporation or any
Subsidiary to any Interested Shareholder or any Affiliate of
any Interested Shareholder in exchange for cash, securities or
other property; or
(iv) the adoption of any plan or proposal for the
liquidation or dissolution of the corporation proposed by or
on behalf of an Interested Shareholder or any Affiliate of any
Interested Shareholder; or
(v) any reclassification of securities (including
any reverse stock split), or recapitalization of the
corporation, or any merger or consolidation of the corporation
with any of its Subsidiaries or any other transaction (whether
or not with or into or otherwise involving an Interested
Shareholder) which has the effect, directly or indirectly, of
increasing the proportionate share of the outstanding shares
of any class of equity or convertible securities of the
corporation or any Subsidiary which is directly or indirectly
owned by any Interested Shareholder or any Affiliate of any
Interested Shareholder;
shall require the affirmative vote of the holders of at least 80% of
the voting power of the then outstanding shares of capital stock of
the corporation entitled to vote generally in the election of
directors (the "Voting Stock"), voting together as a single class.
Such affirmative vote
6
<PAGE> 7
shall be required notwithstanding the fact that no vote may be
required, or that a lesser percentage may be specified, by law or in
any agreement with any national securities exchange or otherwise.
B. Definition of "Business Combination." The term "Business
Combination" as used in this Article Seven shall mean any transaction
which is referred to in any one or more of clauses (i) through (v) of
paragraph A of this Section 1.
Section 2. When Higher Vote is Not Required. The provisions
of Section 1 of this Article Seven shall not be applicable to any particular
Business Combination, and such Business Combination shall require only such
affirmative vote as is required by law and any other provision of these
Articles of Incorporation, if all of the conditions specified in either of the
following paragraphs A and B are met:
A. Approval by Disinterested Directors. The Business
Combination shall have been approved by all of the Disinterested
Directors (as hereinafter defined).
B. Price and Procedure Requirements. All of the following
conditions shall have been met:
(i) The aggregate amount of the cash and the Fair
Market Value (as hereinafter defined) as of the date of the
consummation of the Business Combination of consideration
other than cash to be received per share by holders of common
stock in such Business Combination shall be at least equal to
the higher of the following:
(a) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder
for any shares of common stock acquired by it (1) within the
two-year period immediately prior to the first public
announcement of the proposal of the Business Combination (the
"Announcement Date") or (2) in the transaction in which it
became an Interested Shareholder, whichever is higher;
(b) the Fair Market Value per share of
common stock on the Announcement Date or on the date on which
the Interested Shareholder became an Interested Shareholder
(such latter date is referred to in this Article Seven as the
"Determination Date"), whichever is higher; and
(c) (if applicable) the price per share
equal to the Fair Market Value per share of common stock
determined pursuant to the immediately preceding clause (b),
multiplied by the ratio of (x) the highest
7
<PAGE> 8
per share price (including any brokerage commissions, transfer
taxes and soliciting dealers' fees) paid by or on behalf of
the Interested Shareholder for any shares acquired by it
within the two-year period immediately prior to the
Announcement Date to (y) the Fair Market Value per share of
common stock on the first day in such two-year period on which
the Interested Shareholder acquired beneficial ownership of
any share of common stock.
(ii) The aggregate amount of the cash and the Fair Market
Value as of the date of the consummation of the Business
Combination of consideration other than cash to be received
per share by holders of shares of any other class of
outstanding Voting Stock shall be at least equal to the
highest of the following (it being intended that the
requirements of this paragraph B(ii) shall be required to be
met with respect to every class of outstanding Voting Stock,
whether or not the Interested Shareholder has previously
acquired any shares of a particular class of Voting Stock):
(a) (if applicable) the highest per share
price (including any brokerage commissions, transfer taxes and
soliciting dealers' fees) paid by the Interested Shareholder
for any shares of such class of Voting Stock acquired by it
(1) within the two-year period immediately prior to the
Announcement Date or (2) in the transaction in which it became
an Interested Shareholder, whichever is higher;
(b) (if applicable) the highest preferential
amount per share to which the holders of shares of such class
of Voting Stock are entitled in the event of any voluntary or
involuntary liquidation, dissolution or winding up of the
corporation; and
(c) the Fair Market Value per share of such
class of Voting Stock on the Announcement Date or on the
Determination Date, whichever is higher.
(iii) The consideration to be received by holders of a
particular class of outstanding Voting Stock (including Common
Stock) shall be in cash or in the same form as the Interested
Shareholder has previously paid for shares of such class of
Voting Stock. If the Interested Shareholder has paid for
shares of any class of Voting Stock with varying forms of
consideration, the form of consideration for such class of
Voting Stock shall be either cash or the form used to acquire
the largest number of shares of such class of Voting Stock
previously acquired by it. The price determined in accordance
with paragraphs B(i) and B(ii) of this
8
<PAGE> 9
Section 2 shall be subject to appropriate adjustment in the
event of any stock dividend, stock split, combination of
shares or similar event.
(iv) After such Interested Shareholder has become an
Interested Shareholder and prior to the consummation of such
Business Combination: (a) except as approved by all of the
Disinterested Directors, there shall have been no failure to
declare and pay at the regular date therefor any full
quarterly dividends (whether or not cumulative) on the
outstanding preferred stock; (b) there shall have been (1) no
reduction in the annual rate of dividends paid on the common
stock (except as necessary to reflect any subdivision of the
common stock), except as approved by all of the Disinterested
Directors, and (2) an increase in such annual rate of
dividends as necessary to reflect any reclassification
(including any reverse stock split), recapitalization,
reorganization or any similar transaction which has the effect
of reducing the number of outstanding shares of the common
stock, unless the failure so to increase such annual rate is
approved by all of the Disinterested Directors; and (c) such
Interested Shareholder shall have not become the beneficial
owner of any additional shares of Voting Stock except as part
of the transaction which results in such Interested
Shareholder becoming an Interested Shareholder.
(v) After such Interested Shareholder has become an
Interested Shareholder, such Interested Shareholder shall not
have received the benefit, directly or indirectly (except
proportionately as a shareholder), of any loans, advances,
guarantees, pledges or other financial assistance or any tax
credits or other tax advantages provided by the corporation,
whether in anticipation of or in connection with such Business
Combination or otherwise.
(vi) A proxy or information statement describing the
proposed Business Combination and complying with the
requirements of the Securities Exchange Act of 1934 and the
rules and regulations thereunder (or any subsequent provisions
replacing such Act, rules or regulations) shall be mailed to
shareholders of the corporation at least 30 days prior to the
consummation of such Business Combination (whether or not such
proxy or information statement is required to be mailed
pursuant to such Act or subsequent provisions).
Section 3. Certain Definitions. For the purposes of this
Article Seven:
A. A "person" shall mean any individual, firm,
corporation or other entity.
9
<PAGE> 10
B. "Interested Shareholder" shall mean any person
(other than the corporation or any Subsidiary) who or which:
(i) is the beneficial owner, directly or indirectly, of
more than 10% of the voting power of the outstanding Voting Stock; or
(ii) is an Affiliate of the corporation and at any time
within the two-year period immediately prior to the date in question
was the beneficial owner, directly or indirectly, of 10% or more of
the voting power of the then outstanding Voting Stock; or
(iii) is an assignee of or has otherwise succeeded to any
shares of Voting Stock which were at any time within the two-year
period immediately prior to the date in question beneficially owned by
any Interested Shareholder, if such assignment or succession shall
have occurred in the course of a transaction or series of transactions
not involving a public offering within the meaning of the Securities
Act of 1933.
C. A person shall be a "beneficial owner" of any Voting Stock:
(i) which such person or any of its Affiliates or
Associates (as hereinafter defined) beneficially owns,
directly or indirectly; or
(ii) which such person or any of its Affiliates or
Associates has (a) the right to acquire (whether such right is
exercisable immediately or only after the passage of time),
pursuant to any agreement, arrangement or understanding or
upon the exercise of conversion rights, exchange rights,
warrants or options, or otherwise, or (b) the right to vote
pursuant to any agreement, arrangement or understanding; or
(iii) which are beneficially owned, directly or
indirectly, by any other person with which such person or any
of its Affiliates or Associates has any agreement, arrangement
or understanding for the purpose of acquiring, holding, voting
or disposing of any shares of Voting Stock.
D. For the purposes of determining whether a person is an
Interested Shareholder pursuant to paragraph B of this Section 3, the
number of shares of Voting Stock deemed to be outstanding shall
include shares deemed owned through application of paragraph B of this
Section 3 but shall not include any other shares of Voting Stock which
may be
10
<PAGE> 11
issuable pursuant to any agreement, arrangement or understanding, or
upon exercise of conversion rights, warrants or options, or otherwise.
E. "Affiliate" or "Associate" shall have the respective
meanings ascribed to such terms in Rule 12b-2 of the General Rules and
Regulations under the Securities Exchange Act of 1934, as in effect on
January 1, 1985.
F. "Subsidiary" means any corporation of which a majority of
any class of equity security is owned, directly or indirectly, by the
corporation; provided, however, that for the purposes of the
definition of Interested Shareholder set forth in paragraph B of this
Section 3, the term "Subsidiary" shall mean only a corporation of
which a majority of each class of equity security is owned, directly
or indirectly, by the corporation.
G. "Disinterested Director" means any member of the Board of
Directors who is unaffiliated with the Interested Shareholder and was
a member of the Board of Directors prior to the time that the
Interested Shareholder became an Interested Shareholder, and any
successor of a Disinterested Director who is unaffiliated with the
Interested Shareholder and is recommended to succeed a Disinterested
Director by all of the Disinterested Directors then on the Board of
Directors.
H. "Fair Market Value" means: (i) in the case of stock, the
highest closing sale price during the 30-day period immediately
preceding the date in question of a share of such stock on the
Composite Tape for New York Stock Exchange-Listed Stocks, or, if such
stock is not quoted on the Composite Tape, on the New York Stock
Exchange, or, if such stock is not listed on such Exchange, on the
principal United States securities exchange registered under the
Securities Exchange Act of 1934 on which such stock is listed, or, if
such stock is not listed on any such exchange, the highest closing bid
quotation with respect to a share of such stock during the 30-day
period preceding the date in question on the National Association of
Securities Dealers, Inc. Automated Quotations System or any system
then in use, or if no such quotations are available, the fair market
value on the date in question of a share of such stock as determined
by the Board of Directors in good faith; and (ii) in the case of
property other than cash or stock, the fair market value of such
property on the date in question as determined by the Board of
Directors in good faith.
I. In the event of any Business Combination in which the
corporation survives, the phrase "other consideration to be received"
as used in paragraphs B(i) and (ii) of Section
11
<PAGE> 12
2 of this Article Seven shall include the shares of common stock
and/or the shares of any other class of outstanding Voting Stock
retained by the holders of such shares.
Section 4. Powers of the Board of Directors, No Effect on
Board of Directors Discretion, Etc. A majority of the Directors shall have the
power and duty to determine for the purposes of this Article Seven, on the
basis of information known to them after reasonable inquiry, (A) whether a
person is an Interested Shareholder, (B) the number of shares of Voting Stock
beneficially owned by any person, (C) whether a person is an Affiliate or
Associate of another, (D) whether the assets which are the subject of any
Business Combination constitute a major part of the assets of the corporation
or any Subsidiary. A majority of the Directors shall have the further power to
interpret all of the terms and provisions of this Article Seven. The fact that
any Business Combination complies with the provisions of paragraph B of Section
2 of this Article Seven shall not be construed to impose any fiduciary duty,
obligation or responsibility on the Board of Directors, or any member thereof,
to approve such Business Combination or recommend its adoption or approval to
the shareholders of the corporation, nor shall such compliance limit, prohibit
or otherwise restrict in any manner the Board of Directors, or any member
thereof, with respect to evaluations of or actions and responses taken with
respect to such Business Combination.
Section 5. No Effect on Fiduciary Obligations of Interested
Shareholders. Nothing contained in this Article Seven shall be construed to
relieve any Interested Shareholder from any fiduciary obligation imposed by
law.
Section 6. Amendment, Repeal, Etc. Notwithstanding any other
provisions of these Articles of Incorporation or the by-laws (and
notwithstanding the fact that a lesser percentage may be specified by law,
these Articles of Incorporation or the by-laws) the affirmative vote of the
holders of 80% or more of the outstanding Voting Stock, voting together as a
single class, shall be required to amend or repeal, or adopt any provisions
inconsistent with this Article Seven.
ARTICLE EIGHT
The by-laws of the corporation may be made, altered, amended
or repealed only by the affirmative vote of the holders of at least 66-2/3% of
the voting power of the then outstanding capital stock of the corporation
entitled to vote generally in the election of directors voting together as a
single class or by the affirmative vote of 66-2/3% of the number of the entire
Board of Directors as designated in the by-laws of the corporation in effect at
that time.
12
<PAGE> 13
Special meetings of the shareholders may be called only by the
chairman, by the president, by the secretary, by the board of directors, in the
manner prescribed in the by-laws by the holders of not less than 20% of all the
outstanding shares entitled to vote on the matter for which the meeting is
called or by such other officers or persons as may be provided in the by-laws.
The holders of at least 70% of the voting power of the then
outstanding shares of capital stock of the corporation entitled to vote
generally in the election of directors shall be required to constitute a quorum
for any meeting of the shareholders at which a vote upon the removal of one or
more directors is to occur.
Any action required by law to be taken at any annual of
special meeting of the shareholders, or any other action which may be taken at
a meeting of the shareholders, may be taken without a meeting and without a
vote, only if a consent in writing, setting forth the action so taken, shall be
signed by all of the shareholders entitled to vote with respect to the subject
matter thereof.
ARTICLE NINE
Except where a higher approval and vote is expressly required
in Article Five, Seven or Eight of these Articles of Incorporation, and except
where a higher approval and vote is expressly required by any provision of
applicable law which may not be superseded by a provision of the articles of
incorporation, any provision of applicable law which (a) unless otherwise
provided in the articles of incorporation requires the approval and affirmative
vote of the holders of two-thirds or more of the outstanding shares entitled to
vote on a corporate action or two-thirds or more of the outstanding shares of
any class or series of shares entitled to vote as a class on a corporate
action, including, but not limited to, the following corporate actions: (i)
amendment to the articles of incorporation, (ii) adoption of a plan of merger,
consolidation or share exchange, (iii) sale, lease, exchange or other
disposition of all, or substantially all, of the corporation's properties and
assets other than in the usual and regular course of the corporation's
business, and (iv) dissolution of the corporation, and (b) permits the articles
of incorporation to provide for a lesser approval and affirmative vote, shall
only require the approval and affirmative vote of the holders of a majority of
the outstanding shares entitled to vote on the corporate action, and a majority
of the outstanding shares of each class or series of shares entitled to vote as
a class on the corporate action.
13
<PAGE> 1
EXHIBIT 10.01
UNITED CITIES GAS COMPANY
NON-EMPLOYEE DIRECTOR STOCK PLAN
1. PURPOSE OF THE PLAN
The purpose of the United Cities Gas Company Non-Employee Director
Stock Plan (The "Plan") is to promote the ownership by non-employee directors
of United Cities Gas Company, an Illinois and Virginia corporation (the
"Company"), of shares of common stock, without par value, of the Company
("Company Common Stock"), by allowing non-employee directors of the Company to
elect to receive shares of Company Common Stock in lieu of their receiving some
or all of the annual cash retainer compensation which they would otherwise be
entitled to receive as payment for their services rendered as directors of the
Company. The Company believes that ownership of Company Common Stock by its
non-employee directors aligns the interests of such non-employee directors more
closely with the interests of the shareholders of the Company and that the Plan
will also assist the Company in attracting and retaining highly qualified
persons to serve as non-employee directors of the Company.
2. ELIGIBILITY AND SHARES ISSUED UNDER THE PLAN
Any person who is serving as a director of the Company and who is not
an employee of the Company or any of its subsidiaries shall be eligible to
participate under the Plan (hereinafter referred to individually as an
"Eligible Director" and collectively as the "Eligible Directors").
The total number of shares of Company Common Stock which may be issued
under the Plan (the "Stock") shall not exceed 100,000. The shares may be
authorized and unissued or issued and reacquired shares, as the Board of
Directors from time to time may determine. In the event of a recapitalization,
stock split, stock dividend, combination or exchange of shares, merger,
consolidation, reorganization, or any other change in the capital structure or
shares of the Company, the Board of Directors may make such equitable
adjustments, as they may deem appropriate, in the number and class of shares
authorized to be issued hereunder.
3. PAYMENT PERIODS
The three-month periods, January 1 to March 31, April 1 to June 30,
July 1 to September 30, and October 1 to December 31, are "Payment Periods"
during which Compensation (as hereinafter defined) may be deferred and deemed
to have accumulated under the Plan for the acquisition of Stock.
4. COMPENSATION ELECTIONS
Stock may be acquired only on the final business day in each Payment
Period (a "Price Date"); provided, however, that no Stock may be acquired by an
Eligible Director until a Price Date occurring on or after the second business
day after the 185th day following the date the Eligible Director delivers a
written election to receive Stock. Not later than May 1, 1995, an Eligible
Director may, by filing a written election with the Investor
Relations/Corporate
<PAGE> 2
Communications Department of the Company (the "Department"), direct the Company
to pay his or her Compensation for all Payment Periods ending on or after the
date of the election in such amounts of Stock as specified by such Eligible
Director. In such election an Eligible Director must elect to receive Stock
equal to 25, 50, 75 or 100 percent of his or her Compensation. An Eligible
Director shall be deemed to have earned one-fourth of his or her Compensation
on each Price Date. As used herein, the term "Compensation" shall mean only
the annual retainer fee payable to an Eligible Director, as the same may be
adjusted from time to time, and shall not include any other fees or retainers
payable to an Eligible Director by the Company for his or her services as a
director or any portion of an Eligible Director's annual retainer fee which is
treated as Deferred Compensation under the Company Directors' Deferred
Compensation Plan.
After May 1, 1995, any new election, which may be an initial election
or an amendment to any prior election, may be made by an Eligible Director
effective as of the next January 1 thereafter for Payment Periods ending after
such January 1, by filing such written election with the Department prior to
such January 1; provided, however, that upon any such new election, no Stock
may be acquired by an Eligible Director with respect to Payment Periods
following the effective date thereof until a Price Date occurring on or after
the second business day after the 185th day following the date the Eligible
Director delivers his new written election to receive Stock. Only full shares
of Stock may be acquired. Any balance of the Compensation remaining after the
Stock acquisition will be carried forward to the next Payment Period. Upon
termination of a Director's participation in the Plan, any remaining balance of
such Director's Compensation retained under the Plan shall be paid to the
Director in cash.
Once an election by an Eligible Director to receive some or all of his
or her Compensation in Stock becomes effective pursuant to this Section 4, such
election shall remain in effect until the earlier of (i) the termination of the
Plan, (ii) a new election is effective as provided herein, or (iii) a written
notice of withdrawal from the Plan is given to the Department prior to January
1 of any year to be effective for Payment Periods ending after such January 1.
5. STOCK PURCHASE PRICE
The price of each share of Stock acquired pursuant to the Plan will be
the lesser of (i) the average closing prices for the Company Common Stock in
the NASDAQ Over-the-Counter National Market Issues report of the Midwest
Edition of the Wall Street Journal, during the 30-day period prior to the Price
Date applicable to the issuance of the Stock or (ii) the price so quoted on the
Price Date applicable to the issuance of the Stock, or on the last preceding
day quotations are available. The price for each share of Stock to be acquired
with respect to a Payment Period which ends prior to the date the Eligible
Director is entitled to acquire Stock as provided in Section 4 shall be the
first Price Date to occur on or after the date the Eligible Director is
entitled to acquire Stock as provided in Section 4. (i.e. The Price Date for
all Stock to be acquired for all Payment Periods ending in 1995 for an election
filed in April of 1995 would be Friday, December 29, 1995).
<PAGE> 3
6. ISSUANCE OF STOCK
Certificates for Stock acquired pursuant to the Plan will be issued
and delivered as soon as practicable after such acquisition. Stock acquired
under the Plan will be issued only in the name of the Eligible Director. Upon
issuance, Stock will be deemed fully paid and non-assessable.
7. TERM OF THE PLAN
The Board of Directors of the Company reserves the right to amend or
terminate the Plan at any time provided, however, that without the approval of
the Company's shareholders, no alteration or amendment may be made which would
(i) increase the aggregate number of shares of Stock which may be issued under
the Plan (except by operation of Section 2), (ii) change the category of
Directors eligible to acquire Stock under the Plan, or (iii) materially
increase the benefits to Eligible Directors under the Plan. Notwithstanding
the foregoing, the Plan may not be amended more than once every six months,
other than to comply with changes in the Internal Revenue Code of 1986, as
amended, or the Employee Retirement Income Security Act, as amended, or the
rules thereunder, if such amendment would cause the Plan not to be in
compliance with Rule 16b-3 under the Securities Exchange Act of 1934. In any
event, the Plan shall terminate on the earlier of (i) 10 years after the
effective date of the Plan, or (ii) when all or substantially all of the Stock
has been issued pursuant to the Plan. If, at any time, Stock remains available
for issue but not in sufficient numbers to satisfy all then unfilled
acquisition requirements such shares shall be apportioned equally among the
Eligible Directors with then unfilled acquisition requirements.
8. ASSIGNMENT
No right or interest of any Eligible Director or his or her
beneficiary (or any person claiming through or under such Eligible Director or
his or her beneficiary) in any benefit or payment under the Plan shall be
assignable or transferable in any manner or be subject to alienation,
anticipation, sale, pledge, encumbrance or other legal process or in any manner
be liable for or subject to the debts or liabilities of such Eligible Director.
9. TERMINATION OF ELIGIBILITY
When an Eligible Director ceases to be a director of the Company
because of retirement, resignation, discharge, death, or for any other reason,
or becomes ineligible to participate in the Plan, written notice of withdrawal
will be considered as having been received from him or her prior to the close
of business on the day his or her service as a director of the Company ceases,
or on which he or she becomes ineligible to participate in the Plan, and any
elections made for the Payment Period during which his or her service ceases or
for future Payment Periods shall be deemed canceled. If an Eligible Director's
Compensation is interrupted by any legal process, written notice of withdrawal
from the Plan will be considered as having been received from him or her before
the close of business on the day the interruption occurs.
<PAGE> 4
10. COMPLIANCE WITH RULE 16b-3
It is the intent of the Company that the Plan comply in all respects
with applicable provisions of Rule 16b-3 under the Securities Exchange Act of
1934. Accordingly, if any provision of the Plan does not comply with the
requirements of said Rule 16b-3 as then applicable to any such Eligible
Director, or would cause any Eligible Director to no longer be deemed a
"disinterested person" within the meaning of Rule 16b-3, such provision shall
be construed or deemed amended to the extent necessary to conform to such
requirements with respect to such Eligible Director. In addition, the Board of
Directors of the Company shall have no authority to make any amendment,
alteration, suspension, discontinuation or termination of the Plan or take
other action if and to the extent such authority would cause an Eligible
Director's transactions under the Plan not to be exempt or any Eligible
Director no longer to be deemed a "disinterested person," under Rule 16b-3
under the Securities Exchange Act of 1934.
11. ADMINISTRATION OF THE PLAN
The Treasurer of the Company, James B. Ford, 5300 Maryland Way,
Brentwood, TN 37027 or an alternate named by him, will administer the Plan
until its termination and make such interpretations and rulings as are
necessary in connection with its operations. Such administrator will not
receive any compensation from the assets of the Plan.
12. GOVERNING LAW
This plan shall be governed by and construed in accordance with the
laws of the State of Illinois.
13. SUCCESSORS
The provisions of this Plan shall bind and inure to the benefit of the
Company and its successors and assigns.
14. EFFECTIVE DATE OF PLAN
The Plan shall be effective as of February 28, 1995, subject to
approval by the shareholders of the Company. Any elections made prior to such
shareholder approval shall be contingent on such approval, and if such approval
is not obtained prior to April 30, 1995, all elections made pursuant to the
Plan shall be canceled.
15. REGULATORY COMPLIANCE AND LISTING
The issuance or delivery of any shares of Stock may be postponed by
the Company for such period as may be required to comply with any applicable
requirements under the federal securities laws, any applicable listing
requirements of any national securities exchange or any requirements under any
other law or regulation applicable to the issuance or delivery of such shares
including, without limitation, approval by all applicable regulatory
commissions and the
<PAGE> 5
Company shall not be obligated to issue or deliver any such shares if the
issuance or delivery thereof shall constitute a violation of any provision of
any law or any regulation of any governmental authority or any national
securities exchange.
16. NO RIGHT TO CONTINUED SERVICE
Nothing contained herein shall be construed to confer upon any
Eligible Director the right to continue to serve as a director of the Company
or in any other capacity.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF UNITED CITIES GAS COMPANY FOR THE SIX MONTHS ENDED JUNE
30, 1995, AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL
STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> JAN-01-1995
<PERIOD-END> JUN-30-1995
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 273,958
<OTHER-PROPERTY-AND-INVEST> 50,490
<TOTAL-CURRENT-ASSETS> 60,694
<TOTAL-DEFERRED-CHARGES> 22,063
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 407,205
<COMMON> 99,136
<CAPITAL-SURPLUS-PAID-IN> 22,462
<RETAINED-EARNINGS> 27,747
<TOTAL-COMMON-STOCKHOLDERS-EQ> 149,345
0
0
<LONG-TERM-DEBT-NET> 137,637
<SHORT-TERM-NOTES> 12,952
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 8,692
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 98,579
<TOT-CAPITALIZATION-AND-LIAB> 407,205
<GROSS-OPERATING-REVENUE> 148,252
<INCOME-TAX-EXPENSE> 4,448
<OTHER-OPERATING-EXPENSES> 129,478
<TOTAL-OPERATING-EXPENSES> 133,926
<OPERATING-INCOME-LOSS> 14,326
<OTHER-INCOME-NET> 2,247
<INCOME-BEFORE-INTEREST-EXPEN> 16,573
<TOTAL-INTEREST-EXPENSE> 7,208
<NET-INCOME> 9,365
0
<EARNINGS-AVAILABLE-FOR-COMM> 9,365
<COMMON-STOCK-DIVIDENDS> 5,562
<TOTAL-INTEREST-ON-BONDS> 6,017
<CASH-FLOW-OPERATIONS> 45,891
<EPS-PRIMARY> .86
<EPS-DILUTED> .86
</TABLE>
