<PAGE> 1
================================================================================
UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1996.
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from to .
-------------- --------------
Commission file number 0-1284-3
UNITED CITIES GAS COMPANY
- --------------------------------------------------------------------------------
(Exact name of registrant as specified in its charter)
Illinois and Virginia 36-1801540
- --------------------------------------------------------------------------------
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification Number)
5300 Maryland Way, Brentwood, TN 37027
- --------------------------------------------------------------------------------
(Address of principal (Zip Code)
executive offices)
(615) 373-5310
- --------------------------------------------------------------------------------
Registrant's telephone number, including area code
Indicate by check mark whether the Registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceeding 12 months (or for such shorter period that the
Registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
X Yes
- ----
No
- ----
At October 31, 1996, 13,183,312 shares of the common stock of the Registrant
were outstanding.
================================================================================
<PAGE> 2
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
Quarterly Report on Form 10-Q
For the Quarter Ended September 30, 1996
Table of Contents
<TABLE>
<CAPTION>
Item Page
Number PART I -- FINANCIAL INFORMATION Number
------ ------
<S> <C> <C>
1 Financial Statements:
Consolidated Statements of Income (Unaudited) for the Three, Nine 3
and Twelve Months Ended September 30, 1996 and September 30, 1995.
Consolidated Statements of Cash Flows (Unaudited) for the Three, Nine 4
and Twelve Months Ended September 30, 1996 and September 30, 1995.
Consolidated Balance Sheets at September 30, 1996 (Unaudited) and 5
December 31, 1995.
Consolidated Statements of Capitalization at September 30, 1996 6
(Unaudited) and December 31, 1995.
Notes to Consolidated Financial Statements. 7
2 Management's Discussion and Analysis of Financial Condition 9
and Results of Operations.
PART II -- OTHER INFORMATION
1 Legal Proceedings. 14
4 Submission of Matters to a Vote of Security Holders. Not Applicable
6 Exhibits and Reports on Form 8-K. 14
List of Exhibits. 15
Signature 16
</TABLE>
2
<PAGE> 3
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF INCOME
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------ -------------------- --------------------
(Unaudited, in thousands, except per share amounts) 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Utility Operating Revenues............................ $39,953 $32,248 $245,360 $180,500 $336,720 $254,798
Natural gas cost................................... 24,651 18,066 158,326 104,011 213,491 146,777
------- ------- -------- -------- -------- --------
Utility Operating Margin.............................. 15,302 14,182 87,034 76,489 123,229 108,021
------- ------- -------- -------- -------- --------
Other Utility Operating Expenses:
Operations and maintenance......................... 15,578 16,139 46,925 45,903 62,848 59,773
Depreciation and amortization...................... 4,202 3,765 12,370 11,137 16,352 14,569
Federal and state income taxes..................... (4,190) (4,369) 2,612 79 6,583 2,790
Other taxes........................................ 2,767 2,731 9,385 9,128 12,557 11,807
------- ------- -------- -------- -------- --------
Total other utility operating expenses........... 18,357 18,266 71,292 66,247 98,340 88,939
------- ------- -------- -------- -------- --------
Utility Operating Income (Loss)....................... (3,055) (4,084) 15,742 10,242 24,889 19,082
Other Utility Income, net of tax...................... 155 298 389 471 574 385
------- ------- -------- -------- -------- --------
(2,900) (3,786) 16,131 10,713 25,463 19,467
------- ------- -------- -------- -------- --------
Utility Interest Expense:
Interest on long-term debt......................... 3,118 2,980 9,655 8,997 12,691 12,063
Other interest expense............................. 516 227 1,187 1,418 2,035 2,187
------- ------- -------- -------- -------- --------
Total utility interest expense................... 3,634 3,207 10,842 10,415 14,726 14,250
------- ------- -------- -------- -------- --------
Utility Income (Loss)................................. (6,534) (6,993) 5,289 298 10,737 5,217
------- ------- -------- -------- -------- --------
Other Income (Loss):
Operations of UCG Energy Corporation-
Revenues........................................ 19,447 6,135 58,009 22,962 69,480 33,335
Operating expenses.............................. (18,817) (4,926) (53,225) (17,703) (61,147) (25,028)
Interest expense................................ (328) (380) (1,031) (901) (1,322) (1,103)
Depreciation and amortization................... (966) (1,269) (2,873) (3,260) (3,992) (4,195)
Other income, net............................... 391 259 2,381 1,572 3,139 1,751
Federal and state income taxes.................. 105 68 (1,237) (1,014) (2,341) (1,808)
------- ------- -------- -------- -------- --------
(168) (113) 2,024 1,656 3,817 2,952
------- ------- -------- -------- -------- --------
Operations of United Cities Gas Storage Company-
Revenues........................................ 882 1,800 4,753 4,828 7,368 6,125
Operating expenses.............................. (207) (1,170) (2,823) (3,010) (4,718) (3,702)
Interest expense................................ (202) (228) (615) (734) (846) (966)
Depreciation.................................... (98) (92) (294) (276) (386) (368)
Federal and state income taxes.................. (145) (120) (395) (313) (547) (422)
------- ------- -------- -------- -------- --------
230 190 626 495 871 667
------- ------- -------- -------- -------- --------
Common Stock Earnings (Loss).......................... ($6,472) ($6,916) $ 7,939 $ 2,449 $ 15,425 $ 8,836
======= ======= ======== ======== ======== ========
Common Stock Earnings (Loss) Per Share................ ($ 0.49) ($ 0.55) $ 0.61 $ 0.21 $ 1.19 $ 0.79
======= ======= ======== ======== ======== ========
Average Number of Common Shares Outstanding........... 13,138 12,585 13,051 11,492 12,958 11,249
======= ======= ======== ======== ======== ========
Common Stock Dividends Per Share...................... $ 0.255 $ 0.255 $ 0.765 $ 0.765 $ 1.02 $ 1.02
======= ======= ======== ======== ======== ========
</TABLE>
3
<PAGE> 4
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
September 30, September 30, September 30,
------------------- ----------------- -------------------
(Unaudited, in thousands) 1996 1995 1996 1995 1996 1995
<S> <C> <C> <C> <C> <C> <C>
Cash Flows from Operating Activities:
Common stock earnings (loss).............................. ($6,472) ($6,916) $ 7,939 $ 2,449 $15,425 $ 8,836
------- ------- ------- ------- ------- -------
Adjustments to reconcile common stock earnings (loss) to
net cash provided by (used in) operating activities:
Depreciation and amortization.......................... 5,266 5,126 15,537 14,673 20,730 19,132
Deferred taxes......................................... (45) 6 (137) 19 1,624 1,536
Investment tax credits, net............................ (90) (91) (270) (273) (344) (366)
Investment income from Woodward Marketing, L.L.C....... (181) (53) (1,564) (802) (2,116) (802)
Changes in current assets and current liabilities:
Receivables......................................... 8,616 2,204 32,995 28,733 (6,925) 2,519
Materials and supplies.............................. (208) 86 (425) (277) 118 7
Gas in storage...................................... (12,501) (7,107) (15,352) 1,338 (6,882) 4,888
Gas costs to be billed in the future................ (1,166) (4,792) 6,710 (1,969) 8,923 (4,352)
Prepayments and other............................... (2,603) (226) (3,005) (552) (2,435) 350
Accounts payable.................................... (3,545) (1,021) (7,781) (9,924) 2,287 577
Customer deposits and advance payments.............. 3,330 2,048 (1,221) (1,160) (2,156) 318
Accrued interest.................................... 3,064 2,669 2,723 2,330 660 (133)
Supplier refunds due customers...................... (5,260) (685) (4,866) 3,450 (7,303) 3,561
Accrued taxes....................................... (4,407) (6,132) 3,774 (5,704) 7,523 (3,539)
Other, net.......................................... (2,044) (1,344) 302 (3,269) 2,458 (2,430)
------- ------- ------- ------- ------- -------
Total adjustments.............................. (11,774) (9,312) 27,420 26,613 16,162 21,266
------- ------- ------- ------- ------- -------
Net cash provided by (used in) operating
activities................................. (18,246) (16,228) 35,359 29,062 31,587 30,102
------- ------- ------- ------- ------- -------
Cash Flows from Investing Activities:
Additions to property - utility........................... (8,526) (8,553) (22,886) (26,351) (31,695) (34,623)
Additions to property - non-utility....................... (2,469) (305) (5,444) (2,672) (7,698) (4,261)
Investment in Woodward Marketing, L.L.C., net............. 153 - 795 (832) 795 (832)
------- ------- ------- ------- ------- -------
Net cash used in investing activities........ (10,842) (8,858) (27,535) (29,855) (38,598) (39,716)
------- ------- ------- ------- ------- -------
Cash Flows from Financing Activities:
Short-term borrowings - net............................... 31,496 23,596 8,587 (9,640) 4,352 1,719
Proceeds from issuance of long-term debt.................. - - - - 27,000 -
Proceeds from issuance of common stock.................... 766 758 2,322 22,468 3,168 24,720
Long-term debt retirements................................ (695) (484) (12,356) (5,817) (12,886) (6,496)
Dividends paid............................................ (2,838) (2,716) (8,347) (7,474) (11,079) (9,836)
------- ------- ------- ------- ------- -------
Net cash provided by (used in) financing
activities................................. 28,729 21,154 (9,794) (463) 10,555 10,107
------- ------- ------- ------- ------- -------
Net Increase (Decrease) in Cash and Temporary Investments.... (359) (3,932) (1,970) (1,256) 3,544 493
Cash and Temporary Investments at Beginning of Period........ 5,391 5,420 7,002 2,744 1,488 995
------- ------- ------- ------- ------- -------
Cash and Temporary Investments at End of Period.............. $ 5,032 $ 1,488 $ 5,032 $ 1,488 $ 5,032 $ 1,488
======= ======= ======= ======= ======= =======
Cash Paid During the Period for:
Interest, net of amounts capitalized...................... $ 1,059 $ 1,147 $ 9,688 $ 9,721 $16,131 $16,481
======= ======= ======= ======= ======= =======
Income taxes.............................................. $ 1,499 $ 2,452 $ 4,736 $ 7,521 $ 5,838 $ 8,225
======= ======= ======= ======= ======= =======
Noncash Investing and Financing Activities:
Dividends reinvested...................................... $ 513 $ 493 $ 1,534 $ 1,297 $ 2,036 $ 1,628
======= ======= ======= ======= ======= =======
Debt incurred to acquire assets of Harrell Propane, Inc... - - - $ 1,250 - $ 1,250
======= ======= ======= ======= ======= =======
Debt incurred to acquire assets of Duncan Gas Service..... - - $ 2,957 - $ 2,957 -
======= ======= ======= ======= ======= =======
Common stock issued in investment in Woodward Marketing,
L.L.C................................................... - - - $ 5,000 - $ 5,000
======= ======= ======= ======= ======= =======
Increase in common stock equity due to acquisition of
Monarch Gas Co.......................................... - - $ 2,434 - $ 2,434 -
======= ======= ======= ======= ======= =======
</TABLE>
4
<PAGE> 5
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
<TABLE>
<CAPTION>
September 30, December 31,
(In thousands) 1996 1995
------------- ------------
ASSETS (Unaudited)
<S> <C> <C>
Utility Plant:
Plant in service, at cost................................. $469,420 $445,058
Less-accumulated depreciation........................... 171,488 157,968
-------- --------
297,932 287,090
-------- --------
Non-Utility Property:
Property, plant and equipment............................. 75,852 67,423
Less-accumulated depreciation........................... 21,040 19,501
-------- --------
54,812 47,922
-------- --------
Current Assets:
Cash and temporary investments............................ 5,032 7,002
Receivables, less allowance for uncollectible accounts
of $1,344 in 1996 and $1,352 in 1995.................... 21,522 54,517
Materials and supplies.................................... 5,339 4,914
Gas in storage............................................ 31,995 16,643
Gas costs to be billed in the future...................... 9,003 15,713
Prepayments and other..................................... 5,033 2,028
-------- --------
77,924 100,817
-------- --------
Deferred Charges:
Unamortized debt discount and expense, net................ 2,759 2,896
Investment in Woodward Marketing, L.L.C., net............. 7,493 7,012
Non-compete agreements, net............................... 3,361 3,259
Other deferred charges.................................... 13,417 11,381
-------- --------
27,030 24,548
-------- --------
$457,698 $460,377
======== ========
CAPITALIZATION AND LIABILITIES
Capitalization:
Common stock equity....................................... $150,419 $146,071
Long-term debt............................................ 157,492 163,160
-------- --------
307,911 309,231
-------- --------
Current Liabilities:
Current portion of long-term obligations.................. 5,424 9,155
Notes payable............................................. 40,900 32,313
Accounts payable for gas costs............................ 16,851 24,433
Other accounts payable.................................... 4,685 4,884
Accrued taxes............................................. 8,194 4,420
Customer deposits and advance payments.................... 10,857 12,078
Accrued interest.......................................... 6,335 3,612
Supplier refunds due customers............................ 1,588 6,454
Other..................................................... 10,481 8,580
-------- --------
105,315 105,929
-------- --------
Deferred Credits:
Accumulated deferred income tax........................... 31,035 31,599
Deferred investment tax credits........................... 4,028 4,281
Income taxes due customers................................ 5,005 5,190
Other..................................................... 4,404 4,147
-------- --------
44,472 45,217
-------- --------
$457,698 $460,377
======== ========
</TABLE>
5
<PAGE> 6
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CAPITALIZATION
<TABLE>
<CAPTION>
September 30, December 31,
1996 1995
(In thousands, except share amounts) ------------------- ------------------
Common Stock Equity: (Unaudited)
<S> <C> <C> <C> <C>
Common stock without par value, authorized
40,000,000 shares, outstanding 13,174,794 in 1996
and 12,727,280 in 1995........................................... $107,091 $101,735
Capital surplus.................................................... 22,462 22,462
Retained earnings.................................................. 20,866 21,874
-------- --------
Total common stock equity........................................ 150,419 48.9% 146,071 47.2%
-------- ------ -------- ------
Long-Term Debt:
First mortgage bonds .............................................. 115,000 125,000
Medium term notes, 6.20% through 6.67%, due 2000
through 2025.................................................... 22,000 22,000
Senior secured storage term notes, 7.45%, due in
installments through 2007....................................... 9,501 9,926
Rental property adjustable rate term notes due in
installments through 1999....................................... 4,978 5,691
Rental property fixed rate term note, 7.90%, due in
installments through 2013....................................... 2,226 2,292
Propane term note, 6.99%, due in installments
through 2002.................................................... 4,750 5,000
Other long-term obligations due in installments through 2004....... 4,461 2,406
-------- --------
162,916 172,315
Less-current requirements...................................... 5,424 9,155
-------- --------
Total long-term debt, excluding amounts due within one year.... 157,492 51.1% 163,160 52.8%
-------- ------ -------- ------
Total Capitalization................................................... $307,911 100.0% $309,231 100.0%
======== ====== ======== ======
</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, 1995.
The Company's business is seasonal in nature resulting in greater earnings
during the winter months. The results of operations for the three and
nine-month periods ended September 30, 1996, are not necessarily indicative of
the results to be expected for the full year.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 121 (SFAS 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. Because of the
regulatory structure in which the Company operates, the adoption of SFAS 121
did not have a material effect on the results of operations, financial
condition or cash flows of the Company.
Effective January 1, 1996, the Company adopted Statement of Financial
Accounting Standards No. 123, "Accounting for Stock-Based Compensation." For
fiscal years beginning after December 15, 1995, this statement requires new
disclosures in the notes to the financial statements about stock-based
compensation plans based on the fair value of equity instruments granted.
Companies also may base the recognition of compensation cost for instruments
issued under stock-based compensation plans on these fair values. The Company
did not change the method of accounting for these plans.
Effective January 1, 1996, United Cities Propane Gas of Tennessee, Inc.
(UCPT), a subsidiary of UCG Energy Corporation, purchased substantially all of
the propane assets of Duncan Gas Service for approximately $4,310,000. In
addition, UCPT entered into a ten-year non-compete agreement with the prior
owners for $250,000, to be paid over a ten-year period. This acquisition added
approximately 2,000 customers in the Johnson City, Tennessee area.
Effective May 17, 1996, the Company received an annual rate increase of
$410,000 in the state of Iowa. Included in the rate increase was the recovery
of $1,787,000 over a ten-year period related to the Company's 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 pertaining to
a manufactured gas plant site in Keokuk, Iowa.
On June 28, 1996, Monarch Gas Company (Monarch) was merged into the
Company. The merger was accounted for as a pooling of interests in which the
Company issued 207,366 shares of the Company's common stock in exchange for the
common stock of Monarch. In addition, the Company entered into five-year
non-compete agreements with the prior owners of Monarch totaling $400,000. The
merger added approximately 2,900 customers in the Vandalia, Illinois area.
The Company has not restated prior years' financial statements due to
immateriality.
Effective September 1, 1996, UCPT purchased substantially all of the
propane assets of Arrow Propane, Inc. for approximately $610,000. In addition,
the subsidiary entered into a ten-year non-compete agreement with the prior
owners for $50,000. This acquisition added approximately 700 customers in the
Woodbury, Tennessee area.
7
<PAGE> 8
On July 19, 1996, the Company and Atmos Energy Corporation (Atmos) entered
into a definitive agreement whereby the Company will be merged with and into
Atmos, with Atmos as the surviving corporation. Under the definitive
agreement, one share of Atmos stock will be exchanged for each share of the
Company's stock. The transaction is expected to be accounted for as a pooling
of interests. Subject to approval by the shareholders of both companies and
the appropriate regulatory bodies, the transaction is expected to be completed
by March 31, 1997. Atmos is based in Dallas, Texas, and currently provides
natural gas service to approximately 673,000 customers in Texas, Colorado,
Kansas, Missouri, Louisiana and Kentucky. Initial proxy solicitation materials
were sent by the Company to its shareholders on or about October 7, 1996, with
respect to the special shareholders' meeting to be held on November 12, 1996.
In connection with the merger with Atmos, certain litigation was initiated
by Southern Union Company (Southern), the Company and Atmos. On November 4,
1996, the Company and Atmos announced that they had entered into an agreement
with Southern under which Southern agreed not to exercise their dissenter's
rights with respect to the merger of the Company with and into Atmos. Southern
also agreed not to solicit proxies against the proposed merger.
Certain reclassifications were made conforming prior year's financial
statements with 1996 financial statement presentation.
8
<PAGE> 9
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
Item 2 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS.
Overview
The Company's 1996 third quarter common stock loss was $6,472,000
compared to the third quarter 1995 loss of $6,916,000. The loss
per common share in the third quarter of 1996 was $.49 on an additional
553,000 average number of shares outstanding compared to the loss of
$.55 for the comparable period in 1995. Common stock earnings for the
nine-month period ended September 30, 1996, were $7,939,000 compared to
$2,449,000 for the nine-month period ended September 30, 1995. Common
stock earnings per share increased from $.21 in the nine-month period in
1995 to $.61 in the nine-month period in 1996. Average shares
outstanding increased by 1,559,000 for the nine-month period ended
September 30, 1996. Common stock earnings for the twelve-month period
ended September 30, 1996, were $15,425,000 compared to $8,836,000 for
the twelve-month period ended September 30, 1995. Common stock earnings
per share increased from $.79 in the twelve-month period in 1995 to
$1.19 in the twelve-month period in 1996. Average shares outstanding
increased by 1,709,000 for the twelve-month period ended September 30,
1996.
The following table summarizes certain information regarding the
operation of each segment of the Company's business for the periods
ended September 30:
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
(Unaudited, in thousands) ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues:
Utility................................. $39,953 $32,248 $245,360 $180,500 $336,720 $254,798
------- ------- -------- -------- -------- --------
Subsidiaries:
UCG Energy Corporation-
Propane Division.................... 5,565 3,997 25,557 14,840 35,368 20,769
Rental Division..................... 1,013 1,554 3,181 4,671 4,469 6,294
Utility Services Division........... 12,869 584 29,271 3,451 29,643 6,272
------- ------- -------- -------- -------- --------
Total UCG Energy Corporation...... 19,447 6,135 58,009 22,962 69,480 33,335
United Cities Gas Storage Company..... 882 1,800 4,753 4,828 7,368 6,125
------- ------- -------- -------- -------- --------
Total Subsidiaries................ 20,329 7,935 62,762 27,790 76,848 39,460
------- ------- -------- -------- -------- --------
Total Operating Revenues................ $60,282 $40,183 $308,122 $208,290 $413,568 $294,258
======= ======= ======== ======== ======== ========
Common Stock Earnings (Loss):
Utility................................. ($6,534) ($6,993) $ 5,289 $ 298 $ 10,737 $ 5,217
------- ------- -------- -------- -------- --------
Subsidiaries:
UCG Energy Corporation-
Propane Division.................... (511) (476) 259 (81) 1,463 593
Rental Division..................... 293 376 947 1,235 1,404 1,739
Utility Services Division........... 50 (13) 818 502 950 620
------- ------- -------- -------- -------- --------
Total UCG Energy Corporation...... (168) (113) 2,024 1,656 3,817 2,952
United Cities Gas Storage Company..... 230 190 626 495 871 667
------- ------- -------- -------- -------- --------
Total Subsidiaries................ 62 77 2,650 2,151 4,688 3,619
------- ------- -------- -------- -------- --------
Total Common Stock Earnings (Loss)...... ($6,472) ($6,916) $ 7,939 $ 2,449 $ 15,425 $ 8,836
======= ======= ======== ======== ======== ========
</TABLE>
Operating Results-Utility
The utility loss decreased by $459,000 in the third quarter and
utility earnings increased $4,991,000 and $5,520,000, respectively, in
the nine and twelve-month periods in 1996 from the comparable 1995
periods due predominantly to the factors mentioned below.
The operating margin in the third quarter increased from
$14,182,000 in 1995 to $15,302,000 in 1996. The operating
margin for the nine-month period ended September 30, 1996, was
$87,034,000 compared to $76,489,000 for the same period in 1995, and the
margin increased $15,208,000 to $123,229,000 for the twelve months ended
September 30, 1996. The increase in all periods is a result of rate
increases in Kansas, Virginia, Missouri, Tennessee and Iowa; the
acquisition of Monarch Gas Company; and volumes sold to new residential
and commercial natural gas customers. The increase in the nine and
twelve-month periods was also a result of the colder weather in 1996 as
compared to 1995 and the additional revenues derived from penalties
incurred by certain interruptible customers who elected not to go off
the Company's system when curtailed during the first quarter of 1996.
9
<PAGE> 10
Item 2. Continued
Operations and maintenance expenses decreased $561,000 in the third
quarter and increased $1,022,000 and $3,075,000, respectively, in the
nine and twelve-month periods ended September 30, 1996, from the
comparable 1995 periods. The expenses of the third quarter of 1995
include those related to the consolidation of the Company's Virginia/East
Tennessee division of approximately $900,000. However, the effect of
this decrease in operations and maintenance expenses from 1995 to 1996
was somewhat offset by increased payroll and outside services expense.
The increase in operations and maintenance expenses in the nine and
twelve-month periods was primarily a result of increased payroll and
related benefits, expenses related to the consolidation of various
division and corporate functions, and the additional operations and
maintenance expenses of Monarch Gas Company. The 1995 expenses for the
nine and twelve-month periods also include $900,000 of expenses related
to the Virginia/East Tennessee division consolidation.
Depreciation and amortization expense and other taxes, which
includes property taxes, increased in the third quarter, nine and
twelve-month periods ended September 30, 1996, as compared to the same
periods in 1995, primarily due to additional plant in service. Federal
and state income taxes varied in all periods in relation to changes in
income.
Interest expense increased in the three, nine and twelve-month
periods ended September 30, 1996, as compared to the same periods in
1995. In all periods there was additional interest on increased
long-term debt outstanding. In the three-month period other interest
expense increased primarily as a result of a $349,000 credit in 1995 for
the debt portion of the allowance for funds used during construction
(AFUDC) of a twenty-eight mile main in Middle Tennessee. In the nine and
twelve-month periods other interest expense decreased as a result of less
interest on short-term debt outstanding, somewhat offset by the 1995
AFUDC credit.
The table below reflects operating revenues, natural gas through-put
and weather data for the periods ended September 30:
<TABLE>
<CAPTION>
Operating Statistics-Utility
Three Months Ended Nine Months Ended Twelve Months Ended
------------------- -------------------- --------------------
1996 1995 1996 1995 1996 1995
(Unaudited, in thousands) ------- ------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Utility Operating Revenues:
Residential........................... $11,599 $10,219 $110,163 $ 81,309 $156,457 $117,522
Commercial............................ 9,690 7,524 65,900 46,547 90,320 65,495
Industrial............................ 14,103 12,018 53,506 44,683 69,599 61,022
Transportation........................ 2,475 1,958 7,706 5,875 9,933 8,357
Other Revenues........................ 2,086 529 8,085 2,086 10,411 2,402
------- ------- -------- -------- -------- --------
Total............................ $39,953 $32,248 $245,360 $180,500 $336,720 $254,798
======= ======= ======== ======== ======== ========
Natural Gas Through-Put (Mcf):
Residential........................... 1,321 1,274 17,008 14,285 25,624 20,766
Commercial............................ 1,746 1,633 11,524 10,021 16,668 14,030
Industrial-
Firm................................ 1,165 1,214 5,020 5,336 7,008 7,327
Interruptible....................... 2,590 2,556 8,267 8,570 11,617 11,543
------- ------- -------- -------- -------- --------
6,822 6,677 41,819 38,212 60,917 53,666
Transportation........................ 4,181 4,170 12,922 12,317 17,789 16,079
------- ------- -------- -------- -------- --------
Total............................ 11,003 10,847 54,741 50,529 78,706 69,745
======= ======= ======== ======== ======== ========
Weather Data-colder (warmer)
than normal*.......................... ** ** 8.1% (9.6%) 8.7% (14.0%)
======= ======= ======== ======== ======== ========
</TABLE>
*Based on system weighted average. Data for 1996 is preliminary.
**Not meaningful for third quarter.
Operating Results-Non-Utility
Revenues of UCG Energy Corporation (UCG Energy) increased
$13,312,000, $35,047,000 and $36,145,000, respectively, in the third
quarter, nine and twelve-month periods ended September 30, 1996, as
compared to the previous year periods. Revenues in the utility services
division increased in all periods as a result of increased gas brokerage
sales to Woodward Marketing, L.L.C. (WMLLC). The propane division's
revenues increased in all periods due to increased retail and wholesale
volumes sold and increased transport revenues, both due to colder than
normal weather and additionally, the acquisitions of Duncan Gas Service
in January 1996 and Arrow Propane, Inc.
10
<PAGE> 11
Item 2. Continued
in September 1996. In addition, the propane division's revenues
increased in the nine and twelve-month periods as a result of the
acquisition of Transpro South, Inc. in May 1995, and increased in the
twelve-month period as a result of the acquisition of Harrell Propane,
Inc. in January 1995. The rental division's revenues decreased in all
periods due to the elimination of rental revenues as a result of the
transfer of certain rental units to the parent company.
Operating expenses of UCG Energy, including cost of sales, increased
$13,891,000, $35,522,000 and $36,119,000, respectively, in the third
quarter, nine and twelve-month periods ended September 30, 1996, as
compared to the previous year periods. Expenses of the utility services
division increased in all periods as a result of increased cost of sales
from increased gas brokerage activities. Expenses increased in all
periods in the propane division primarily as a result of the cost of
increased propane volumes sold, the increased wholesale cost to the
division of those propane volumes and increased administrative and
general expenses. These increases were the result of colder than normal
weather and the propane acquisitions during 1995 and 1996. Expenses
increased only slightly in all periods from the previous year in the
rental division.
UCG Energy's other income, net increased $132,000, $809,000 and
$1,388,000, respectively, in the third quarter, nine and twelve-month
periods ended September 30, 1996, as compared to the previous year
periods. The increase in all periods was primarily the result of
increased income from WMLLC. Investment income from WMLLC, before income
taxes, was $181,000, $1,564,000 and $2,116,000, respectively, for the
third quarter, nine and twelve-month periods ended September 30, 1996.
UCG Energy's net loss increased $55,000 in the third quarter while
net income increased $368,000 and $865,000 in the nine and twelve-month
periods ended September 30, 1996, as compared to the previous year
periods. The increase in net loss for the third quarter can be
attributed to the transfer of certain rental units from the rental
division to the parent company at the end of 1995 and the associated loss
of rental income, partially offset by decreased depreciation expense
related to those rental units. The increase in net income in the
nine-month period is due to a combination of increased investment income
from WMLLC and increased sales in the propane division. Net income
increased in the twelve-month period because of increased sales in the
propane division, partially offset by decreased rental income in the
rental division. In the utility services division, the increase in
investment income from WMLLC for the same twelve-month period was
partially offset by increased amortization and interest expense related
to that investment.
Effective January 1, 1996, United Cities Propane Gas of Tennessee,
Inc. (UCPT), a subsidiary of UCG Energy, purchased substantially all of
the propane assets of Duncan Gas Service for approximately $4,310,000.
In addition, the subsidiary entered into a ten-year non-compete agreement
with the prior owners for $250,000, to be paid over a ten-year period.
This acquisition added approximately 2,000 customers in the Johnson City,
Tennessee area.
Effective September 1, 1996, UCPT purchased substantially all of the
propane assets of Arrow Propane, Inc. for approximately $610,000. In
addition, the subsidiary entered into a ten-year non-compete agreement
with the prior owners for $50,000. This acquisition added approximately
700 customers in the Woodbury, Tennessee area.
United Cities Gas Storage Company had net income for the three, nine
and twelve-month periods ended September 30, 1996, of $230,000, $626,000
and $871,000, respectively, as compared to $190,000, $495,000 and
$667,000 for the same periods in 1995. The revenues of the subsidiary
were primarily derived from natural gas storage services and natural gas
provided to United Cities Gas Company.
Financial Condition, Liquidity and Capital Resources
Total cash used in operations for the three-month period ended
September 30, 1996, was $18,246,000. Total cash provided by operations
for the nine and twelve-month periods ended September 30, 1996, was
$35,359,000 and $31,587,000, respectively. Changes in accounts
receivable, gas in storage and accounts payable were primarily a result
of the weather sensitive nature of the Company's business. Changes in
gas costs to be billed in the future and supplier refunds due customers
were primarily a result of the timing of the recoveries from, or refunds
to, customers of these costs through the Purchased Gas Adjustment
mechanism.
The financing activities for the three, nine and twelve-month
periods ended September 30, 1996, 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. In addition, the financing activities of the twelve-month
period
11
<PAGE> 12
Item 2. Continued
reflect $22,000,000 of medium-term notes and a $5,000,000 term note in
UCPT that were issued in the last quarter of 1995. The proceeds of these
activities were used to repay short-term borrowings, retire long-term
debt, finance the Company's construction program and for other corporate
purposes.
The Company had authorized as of September 30, 1996, specific
purchases and construction projects amounting to $22,958,000 of its 1996
utility capital budget of $29,000,000 and $6,980,000 of its non-utility
capital budget of $7,800,000.
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 121 (SFAS 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. Because of the regulatory structure in which the Company
operates, the adoption of SFAS 121 did not have a material effect on the
results of operations, financial condition or cash flows of the Company.
Effective January 1, 1996, the Company adopted Statement of
Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation." For fiscal years beginning after December 15, 1995, this
statement requires new disclosures in the notes to the financial
statements about stock-based compensation plans based on the fair value
of equity instruments granted. Companies also may base the recognition
of compensation cost for instruments issued under stock-based
compensation plans on these fair values. The Company did not change the
method of accounting for these plans.
As a result of an election held on March 29, 1996, 20 employees in
Hannibal, Missouri will be represented by a union. On April 19, 1996, an
election was held in Columbus, Georgia for 97 employees to determine
whether they would be represented by a union. The Company received final
election results on or about September 6, 1996. The results indicated
that the majority of employees who voted in the election voted against
union representation in Columbus, Georgia.
Effective May 17, 1996, the Company received an annual rate increase
of $410,000 in the state of Iowa. The Company had filed to increase
rates by $750,000 on an annual basis. Included in the rate increase was
the recovery of $1,787,000 over a ten-year period related to the
Company's 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 pertaining to a manufactured gas plant
site in Keokuk, Iowa.
On May 31, 1996, the Company filed to increase rates on an annual
basis by $5,000,000 in the state of Georgia. The Company expects that
any increase granted will be effective by the end of 1996.
On June 28, 1996, Monarch Gas Company (Monarch) was merged into the
Company. The merger was accounted for as a pooling of interests in which
the Company issued 207,366 shares of the Company's common stock in
exchange for the common stock of Monarch. In addition, the Company
entered into five-year non-compete agreements with the prior owners of
Monarch totaling $400,000. The merger added approximately 2,900
customers in the Vandalia, Illinois area. The Company has not restated
prior years' financial statements due to immateriality.
On July 19, 1996, the Company and Atmos Energy Corporation (Atmos)
entered into a definitive agreement whereby the Company will be merged
with and into Atmos, with Atmos as the surviving corporation. Under the
definitive agreement, one share of Atmos stock will be exchanged for each
share of the Company's stock. The transaction is expected to be
accounted for as a pooling of interests. Subject to approval by the
shareholders of both companies and the appropriate regulatory bodies, the
transaction is expected to be completed by March 31, 1997. Atmos is
based in Dallas, Texas, and currently provides natural gas service to
approximately 673,000 customers in Texas, Colorado, Kansas, Missouri,
Louisiana and Kentucky. Initial proxy solicitation materials were sent
by the Company to its shareholders on or about October 7, 1996, with
respect to the special shareholders' meeting to be held on November 12,
1996.
12
<PAGE> 13
Item 2. Continued
In connection with the merger with Atmos, certain litigation was
initiated by Southern Union Company (Southern), the Company and Atmos.
On November 4, 1996, the Company and Atmos announced that they had
entered into an agreement with Southern under which Southern agreed not
to exercise their dissenter's rights with respect to the merger of the
Company with and into Atmos. Southern also agreed not to solicit proxies
against the proposed merger.
The Company believes its short-term lines of credit are sufficient
to meet anticipated short-term requirements. At September 30, 1996, the
Company had $91,000,000 in short-term lines of credit, including master
and banker's acceptance notes, bearing interest primarily at the lesser
of the prime rate or a negotiated rate during the term of each borrowing.
Under these arrangements, $40,900,000 in short-term debt was outstanding
at September 30, 1996.
13
<PAGE> 14
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
Part II. Other Information
For The Nine Months Ended September 30, 1996
Item 1. Legal Proceedings.
See December 31, 1995 Form 10-K and Part I of this filing.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits-See list of Exhibits on page 15 hereof.
(b) The following Form 8-Ks were filed during the quarter ended
September 30, 1996:
1. Form 8-K, Item 5 dated July 2, 1996.
2. Form 8-K, Item 5 dated July 23, 1996.
3. Form 8-K, Item 5 dated August 6, 1996.
14
<PAGE> 15
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
LIST OF EXHIBITS
3.01 Amended By-Laws of Company as Amended August 22, 1996.
12.01 Computation of Ratio of Consolidated Earnings to Fixed Charges.
27 Financial Data Schedule (for SEC use only)
15
<PAGE> 16
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this Report to be signed on its behalf by the
undersigned thereunto duly authorized.
UNITED CITIES GAS COMPANY
/S/ ADRIENNE H. BRANDON
-----------------------------
ADRIENNE H. BRANDON
Vice President and Controller
On behalf of the Registrant
Date: November 11, 1996
16
<PAGE> 1
AS RESTATED
AUGUST 22, 1996
BY-LAWS OF
UNITED CITIES GAS COMPANY
OFFICES
1. The principal office shall be in the City of Brentwood, County
of Williamson, State of Tennessee.
2. The corporation may also have offices at such other places as
the board of directors may from time to time appoint or the business of the
corporation may require.
SEAL
3. The corporation seal shall have inscribed thereon the name of
the corporation, the year of its organization and the words "Corporate Seal,
Illinois." Said seal may be used by causing it or a facsimile thereof to be
impressed or affixed or in any other manner reproduced.
4. Except as otherwise provided herein, meetings of the shareholders
may be held at such place, either within or without the State of Illinois, as
may be designated by the board of directors and stated in the notice of the
meeting.
5. The Annual Meeting of Shareholders shall be held as near as
possible to the last Friday of April in each year, if not a legal holiday, and,
if a legal holiday, then on the next secular day following, at ten-thirty
o'clock a.m., when the shareholders shall elect, by a plurality vote, by
ballot, a board of directors, and transact such other business as may properly
be brought before the meeting.
6. The holders of a majority of the shares issued and outstanding,
and entitled to vote thereat, present in person, or represented by proxy, shall
be requisite and shall constitute a quorum at all meetings of the shareholders
for the transaction of business except as otherwise provided by law, by the
Articles of Incorporation by these by-laws. If, however, such majority shall
not be present or represented at any meeting of the shareholders, a majority of
the
<PAGE> 2
shareholders entitled to vote thereat, present in person or by proxy, shall
have the power to adjourn the meeting from time to time, without notice other
than announcement at the meeting, until the requisite amount of voting shares
shall be present. At such adjourned meeting at which the requisite amount of
voting shares shall be represented any business may be transacted which might
have been transacted at the meeting as originally notified.
7. At each meeting of the shareholders every shareholder having
the right to vote shall be entitled to vote in person or by proxy appointed by
an instrument in writing subscribed by such shareholder. No proxy shall be
valid after eleven months from the date of its execution unless otherwise
provided in the proxy. Each outstanding share, regardless of class, shall be
entitled to one vote on each matter submitted to a vote at a meeting of
shareholders. In all elections for directors every shareholder shall have the
right to vote in person or by proxy for the number of shares owned by him for
as many persons as there are directors to be elected, or to cumulate said
shares and give one candidate as many votes as the number of directors
multiplied by the number of his shares shall equal, or to distribute them on
the same principle among as many candidates as he shall think fit. Except
where the books maintained by the Transfer Agent for the transfer of shares of
the corporation shall have been closed or a date shall have been fixed as a
record date for the determination of its shareholders entitled to vote, no
shares shall be voted at any election for directors which shall have been
transferred on the books maintained by said Transfer Agent within twenty days
next preceding such election of directors.
8. Written notice of the annual meeting shall be mailed at least ten,
or in case a merger or consolidation is to be acted upon at least twenty, but
not more than forty days prior to the date thereof to each shareholder entitled
to vote thereat at such address as appears on the books maintained by the
Transfer Agent for the transfer of shares of the corporation.
9. The Transfer Agent of the corporation shall make, at least ten
days before each meeting of shareholders, a complete list of the shareholders
entitled to vote at such meeting, arranged in alphabetical order, with the
address of and the number of shares held by each, which list, for a period of
ten days prior to such meeting, shall be kept on file at the registered office
of
2
<PAGE> 3
the corporation and shall be subject to inspection by any shareholder at any
time during usual business hours. Such list shall also be produced and kept
open at the time and place of the meeting and shall be subject to the
inspection of any shareholder during the whole time of the meeting.
10. Special meetings of the shareholders may be called only by the
chairman, by the president, by the secretary, by the board of directors, or in
the manner hereafter prescribed by the holders of not less than one-fifth of
all the outstanding shares entitled to vote on the matter for which the meeting
is called. At any time, upon written request of shareholders holding in the
aggregate one-fifth of all the outstanding shares entitled to vote on the
matter for which a meeting is called, it shall be the duty of the secretary to
call a special meeting of shareholders to be held at the registered office at
such time as the secretary may fix, not less than ten nor more than forty days
after the receipt of said request, and if the secretary shall neglect or refuse
to issue such call, shareholders making the request may do so upon no less than
forty days' written notice. Such request shall state the purpose or purposes
of the proposed meeting.
11. Persons authorized to call shareholders' meetings shall cause
written notice of the time, place and purpose of the meeting to be given all
shareholders entitled to vote at such meeting, at least ten, or in case a
merger or consolidation is to be acted upon at the meeting, at least twenty but
not more than forty days prior to the day named for the meeting, provided that
written notice given by shareholders calling a meeting in accordance with
paragraph 10 above shall be given forty days prior to the date named for the
meeting. If such written notice is placed in the United States mail, postage
prepaid, and addressed to a shareholder at his last known post office address,
notice shall be deemed to have been given him. Notice of any shareholders'
meeting may be waived by any shareholder at any time.
12. Business transacted at all special meetings shall be confined to
the object stated in the call.
3
<PAGE> 4
DIRECTORS
13. The property and business of the corporation shall be managed by
its board of directors, which shall be eleven (11) in number and divided into
three classes, which shall be as nearly equal in number as possible, as
provided in the Articles of Incorporation. The number of directors may be
increased or decreased by amendment to these by-laws, provided the number of
directors shall not be less than three. In case of any increase in the number
of directors, the additional directors may be elected by the shareholders at
any meeting, annual or special, duly called for that purpose, or by the board
of directors. Except as otherwise herein provided, the directors shall be
elected at the annual meeting of shareholders. Each director shall be elected
to serve until his successors shall be elected and shall qualify; provided,
however, that in no event shall any director who is first elected on or after
February 16, 1976, be permitted to serve on or after his date of retirement,
which retirement date shall be deemed to be the date of the Annual Meeting of
Shareholders of the Company next following the date on which a director has
attained age 70.
Nominations for the election of directors may be made by the board of
directors or by any shareholder entitled to vote for the election of directors.
Nominations by the board of directors may be made at any time. Nominations by
shareholders shall be made by notice in writing, delivered or mailed by first
class United States mail, postage prepaid, to the secretary of the corporation
not less than 30 days nor more than 40 days prior to any meeting of the
shareholders called for the election of directors; provided, however, that if
less than 30 days' notice of the meeting is given to shareholders, such written
notice shall be delivered or mailed, as prescribed, to the secretary of the
corporation not later than the close of the seventh day following the day on
which notice of the meeting was mailed to shareholders. Each notice of
nomination by a shareholder shall set forth (i) the name, age, business address
and, if known, residence address of each nominee proposed in such notice, (ii)
the principal occupation or employment of each such nominee and (iii) the
number of share of stock of the corporation which are beneficially owned by
each nominee. The chairman of the meeting may, if the facts warrant, determine
and declare to
4
<PAGE> 5
the meeting that a nomination was not made in accordance with the foregoing
procedure, and if he should so determine, he shall so declare to the meeting
and the defective nomination shall be disregarded.
14. The directors may hold their meetings and have one or more
offices, and keep the books of the corporation in the City of Brentwood,
Tennessee, or at such other places as they may from time to time determine.
15. The entire board of directors or any individual director may, at
any special meeting of the shareholders called for that purpose in the manner
provided by Paragraph 10 and 11 hereof, be removed from office by a vote of
shareholders holding a majority of the outstanding shares entitled to a vote at
an election of directors. In case the board or any one or more directors be so
removed, new directors may be elected at the same meeting. Unless the entire
board be removed, no individual director shall be removed in case the votes of
a sufficient number of shares are cast against the resolution for his removal,
which, if cumulatively voted at an election of the whole board, would be
sufficient to elect one or more directors.
16. If the office of a any director or directors becomes vacant by
reason of death, resignation, retirement, disqualification, removal from
office, or otherwise, such vacancy or vacancies may be filled by the
affirmative vote of a majority of the remaining directors. A director thus
elected to fill any vacancy shall hold office until the next annual election
and until a successor or successors have been duly elected, unless sooner
displaced.
17. In addition to the powers and authorities by these by-laws
expressly conferred upon it, the board of directors may exercise all such
powers of the corporation and do all such lawful acts and things as are not by
statute or by the Articles of Incorporation or by these by-laws directed or
required to be exercised or done by the shareholders.
5
<PAGE> 6
EXECUTIVE COMMITTEE
18. The board of directors shall by resolution or upon recommendation
of the Chairman and approval of the majority of the entire Board, establish an
Audit Committee and a Compensation Committee and may by resolution or
resolutions, passed by a majority of the whole Board, designate one or more
additional committees, each committee to consist of two or more directors, who
shall serve at the pleasure of the Board. Such committees shall have any may
exercise such powers permitted by law as may be directed or delegated by the
board of directors from time to time. Vacancies in the membership of the
committees shall be filed by the board of directors at a regular or a special
meeting called for that purpose.
COMPENSATION OF DIRECTORS
19. Directors who are not employees of the Company shall be paid a
stated salary for their service plus a fixed sum and expenses of attendance at
each regular and special meeting of the board; PROVIDED, that nothing herein
contained shall be construed to preclude any director from serving the
Corporation in any other capacity and receiving compensation therefor or
preclude the Chairman of the Board from receiving any stated salary for his
services as such. Members of special or standing committees will be allowed
like compensation for attending committee meetings. The board of directors
shall have the authority to fix the compensation of directors unless otherwise
provided by the Articles of Incorporation.
MEETINGS OF THE BOARD
20. Each newly elected board shall hold its annual meeting
immediately following the annual meeting of shareholders at the place where
such annual meeting of shareholders was held, and no notice of such annual
meeting to the new elected directors shall be necessary in order legally to
constitute the annual meeting, provided a quorum shall be present.
6
<PAGE> 7
21. Regular meetings of the board of directors may be held at such
place as a majority of the directors may from time to time appoint. Notice of
such regular meeting shall be given at least five days before the meeting by
mail or telegram by the chairman of the board or in his absence, by the
president. Such notice need not specify the business to be transacted at such
regular meeting, but shall state that the meeting to be held is a regular
meeting of the board.
22. Special meetings of the board may be called by the chairman of
the board, or in his absence, by the president on five (5) days' notice to each
director, by mail or telegram, or notice may be waived by the directors.
Special meetings shall be called by the chairman of the board or by the
president or the secretary in like manner and on like notice on the written
request of two directors.
23. At all meetings of the board a majority of directors shall be
necessary and sufficient to constitute a quorum for the transaction of
business, and the act of a majority of the directors present at any meeting at
which there is a quorum shall be the act of the board of directors, except as
may be otherwise specifically provided by statute or by the Articles of
Incorporation or by these By-laws.
24. No business shall be transacted at any special meeting of the
board which shall not have been stated in the notice thereof, except upon
written approval of all the directors of the corporation.
OFFICERS
25. The officers of the corporation shall be elected by the directors
and shall be a chairman of the board, a president, one or more vice presidents,
a secretary and a treasurer. The board of directors may also appoint one or
more assistant secretaries and assistant treasurers. Any two of the offices of
the corporation may be held by one person except the offices of president and
secretary. The board of directors may appoint one or more assistant
secretaries and assistant treasurers to perform their respective duties and to
have such powers of the secretary and treasurer as shall from time to time be
assigned to them by the board of directors.
7
<PAGE> 8
26. The chairman of the board and the president shall be a member of
the board of directors. No other officers of the corporation need be a member
of the board. No vice president who is not a director may succeed to or fill
the office of the president.
27. The board may appoint such other officers and agents as it shall
deem necessary, who shall hold their offices for such terms and shall exercise
such powers and perform such duties as shall be determined from time to time by
the board.
28. The salaries of all elected officers of the corporation shall be
fixed by the board of directors.
29. The officers of the corporation shall hold office until their
successors are chosen and qualify in their stead. Any officer, manager or
agent elected or appointed by the board of directors may be removed at any time
by the affirmative vote of a majority of the whole board of directors, whenever
in their judgment the best interest of the corporation will be served thereby,
such removal, however, to be without prejudice to the contract rights of the
person so removed.
If the office of any officer or officers becomes vacant for any
reason, the vacancy shall be filled by the affirmative vote of a majority of
the whole board of directors.
30. The chairman of the board shall preside at all meetings of the
shareholders and the board of directors.
PRESIDENT
31. The president shall be the chief executive officer of the
corporation and shall have active supervision and general charge of the
property, business and employees of the corporation, subject, however, to the
control of the board of directors; he shall see that all resolutions and orders
of the board of directors are carried into effect; he shall exercise such other
powers and perform such other duties as shall be incident to the office of
president or as may be required by the board of directors. In the absence or
inability to act of the chairman of the board of directors, the president shall
preside at all meetings of the shareholders and the board of directors and
shall during such absence exercise all the powers of the chairman of the board.
8
<PAGE> 9
32. He shall execute bonds, mortgages, and other contracts requiring
the seal, under the seal of the corporation, but the authority to execute such
instruments may also be vested in others as provided in Paragraph 41 of these
by-laws.
33. He shall be EX OFFICIO a member of all standing committees, and
shall have the general powers and duties of supervision and management usually
vested in the office of president of a corporation.
VICE PRESIDENTS
34. Each vice president shall have such powers and perform such
duties as the board of directors may from time to time prescribe or as the
chairman of the board or the president may from time to time delegate to him.
At the request of the president, any vice president may, in the case of the
absence or inability to act of the president, temporarily act in his place. In
the case of the death of the president or in the case of his absence or
inability to act where no vice president has been designated to act temporarily
in his place, the board of directors shall designate one or more vice
presidents to perform the duties of the president.
THE SECRETARY AND ASSISTANT SECRETARIES
35. The secretary shall attend all sessions of the board and all
meetings of the shareholders and record all votes and the minutes of all
proceedings in a book to be kept for that purpose. He shall give, or cause to
be given, notice of all meetings of the shareholders and special meetings of
the board of directors, and shall perform such other duties as may be
prescribed by the board of directors or president, under whose supervision he
shall be. He shall keep in safe custody the seal of the corporation, and when
authorized by the board, affix the same to any instrument requiring it, and
when so affixed, it shall be attested by his signature or by the signature of
the assistant secretary or an assistant secretary.
9
<PAGE> 10
36. The assistant secretary, or assistant secretaries in the order of
their seniority, shall, in the absence or disability of the secretary, perform
the duties and exercise the powers of the secretary, and shall perform such
other duties as the board of directors shall prescribe.
THE TREASURER AND ASSISTANT TREASURERS
37. The treasurer shall have the custody of the corporate funds and
securities and shall keep full and accurate accounts or receipts and
disbursements in books belonging to the corporation and shall deposit all
moneys, and other valuable effects in the name and to the credit of the
corporation in such depositaries as may be designated by the board of
directors.
38. He shall disburse the funds of the corporation as may be ordered
by the board, taking proper vouchers for such disbursements, and shall render
to the president and directors, at the regular meetings of the board, or
whenever they may require it, an account of all his transactions as treasurer
and of the financial condition of the corporation.
39. If required by the board of directors, he shall give the
corporation a bond in such sum, and with such surety or sureties as shall be
satisfactory to the board, for the faithful performance of the duties of his
office, and for the restoration to the corporation, in case of his death,
resignation, retirement or removal from office, of all books, papers, vouchers,
money and other property of whatever kind in his possession or under his
control belonging to the corporation.
40. The assistant treasurer, or assistant treasurers in the order of
their seniority, shall, in the absence or disability of the treasurer, perform
the duties and exercise the powers of the treasurer, and shall perform such
other duties as the board of directors shall prescribe.
DUTIES OF OFFICERS MAY BE DELEGATED
41. The board of directors, except as otherwise provided in these
by-laws, may authorize any officer or officers, or agent or agents, to enter
into any bond, mortgage or contract or execute and deliver any instrument in
the name and on behalf of the corporation, and such authority may be general or
confined to specific instances; and, unless so authorized by the board of
directors or
10
<PAGE> 11
by the provisions of these by-laws, no officer, agent or employee other than
the chairman of the board of directors and the president shall have any power
or authority to bind the corporation by any contract or engagement or to pledge
its credit or to render it liable pecuniarily for any purpose or to any
allowance.
42. In case of the absence of any officer of the corporation or for
any other reason that the board may deem sufficient, the board may delegate,
for the time being, the powers or duties or any of them, of such officer to any
other officer, or to any director.
CONSIDERATION FOR SHARES
43. Without the consent of any holder of any share of the capital
stock of this corporation, the shares of stock of this corporation may be
issued by it from time to time in such number or amount of shares of said
stock, and for such consideration, not less than the par value thereof, in
labor or services actually performed, money or property, as from time to time
may be fixed and determined by the board of directors of this corporation at
any annual meeting or any special meeting called for said purpose, and the
right, power and authority of said board of directors from time to time so to
authorize and order the issuance by this corporation of the said shares of said
stock, in such number or amount of share, and for such consideration in labor,
services actually performed, money or property, as from time to time said board
may fix and determine, is hereby absolutely reserved to said board of
directors.
Payment or delivery to, or receipt by this corporation of such
consideration as may be so fixed and determined by its board of directors for
the issuance of any share or shares of its said stock, as hereinbefore in this
Paragraph 43 provided, shall operate and be construed, deemed and held: (i) to
discharge, release and satisfy fully and absolutely, all liability to this
corporation and/or to its creditors now or at any time hereafter existing, of
any subscriber for, and/or holder or any such share or shares so authorized to
be issued in any way on account of, founded upon, or
11
<PAGE> 12
arising out of any subscription for, and/or purchase of, and/or issuance of a
certificate or certificates representing such share or shares, and (ii) to
constitute such share or shares as full paid and non-assessable.
CERTIFICATES REPRESENTING SHARES
44. Certificates evidencing the ownership of shares of the
corporation shall bear such serial designation (which may be a combination of
letters and numbers) as shall be prescribed by the board of directors and the
ownership thereof shall be recorded in books maintained by the Transfer Agent
for recording the transfer of shares of the corporation as they are issued.
They shall state that the corporation is organized under the laws of the State
of Illinois, the name of the person of whom issued, the number and class of
shares, and the designation of the series, if any, which such certificate
represents, the par value of each share represented by such certificate, and
such authorization number as may be prescribed by an Order or Orders of the
Illinois Commerce Commission. They shall be signed by the president or a vice
president, and the secretary or an assistant secretary, and sealed with the
seal or a facsimile seal of the corporation. In case the seal of the
corporation is changed after the certificate is sealed with the seal or a
facsimile of the seal of the corporation, but before it is issued, the
certificate may be issued by the corporation with the same effect as if the
seal had not been changed. Where such certificate is countersigned by a
transfer agent other than the corporation itself or an employee of the
corporation, or by a transfer clerk and registered by a registrar, the
signatures of the president or vice president and the secretary or assistant
secretary upon such certificate may be facsimiles, engraved or printed. In
case any officer who has signed or whose facsimile signature has been placed
upon such certificate shall have ceased to be such officer before such
certificate is issued, it may be issued by the corporation with the same effect
as if such officer had not ceased to be such at the date of its issue.
12
<PAGE> 13
Every certificate representing shares issued by the corporation shall
set forth upon the face or back of the certificate a full or summary statement
of all the designations, preferences, qualifications, limitations,
restrictions, and special or relative rights of the shares of each class
authorized to be issued, and if the corporation is authorized to issue any
preferred or special class in series, the variations in the relative rights and
preferences between the shares of each such series so far as the same have been
fixed and determined and the authority of the board of directors to fix and
determine the relative rights and preferences of subsequent series; provided
that such statement may be omitted from the certificate if it shall be set
forth upon the face or back of the certificate that such statement, in full,
will be furnished by the corporation to any shareholder upon request without
charge.
TRANSFER OF SHARES
45. Transfers of shares shall be made on the books maintained by the
Transfer Agent for the transfer of shares of the corporation only upon
surrender of the certificate therefor, endorsed by the person named in the
certificate or by attorney lawfully constituted in writing.
CLOSING OF TRANSFER BOOKS
46. The board of directors shall have power to close the stock
transfer books of the corporation for a period not exceeding sixty days
preceding the date of any meeting of shareholders or the date for payment of
any dividend or distribution, or the date for the allotment of rights, or,
subject to contract rights with respect thereto, the date when any change or
conversion or exchange of shares will be made or go into effect; provided,
however, if the share transfer books shall be closed for the purpose of
determining shareholders entitled to notice of or to vote at a meeting of
shareholders, such books shall be closed for at least 10 days, or in the case
of a merger or consolidation at least 20 days, immediately preceding such
meeting; and provided, further, that in lieu of closing the stock transfer
books as aforesaid, the board of directors may fix in advance a date at least
10, or in the case of a merger or consolidation at least 20, but not more
13
<PAGE> 14
than 60 days preceding the date of any meeting of shareholders or the date for
payment of any dividend or distribution, or the date for the allotment of
rights, or, subject to contract rights with respect thereto, the date when any
change or conversion of exchange of shares will be made or go into effect, as a
record date for the determination of the shareholders entitled to notice of,
and to vote at, any such meeting, or entitled to receive payment of any
dividend, or to any such allotment of rights, or to exercise the rights in
respect of any such change, conversion or exchange of shares of capital stock,
and in such case only such shareholders as shall be shareholders of record on
the date so fixed shall be entitled to such notice of, and to vote at, such
meeting, or to receive payment of such dividend, or to receive such allotment
or rights, or to exercise such rights, as the case may be, notwithstanding any
transfer of any stock on the books of the corporation after any such record
date fixed as aforesaid.
REGISTERED SHAREHOLDERS
47. The corporation shall be entitled to treat the holder of record
of any share or shares of the corporation as the holder in fact thereof and,
accordingly, shall not be bound to recognize any equitable or other claim to or
interest in such share on the part of any other person, whether or not it shall
have express or other notice thereof, save as expressly provided by the laws of
Illinois.
LOST CERTIFICATES
48. Any person claiming a certificate of stock to be lost or
destroyed, shall make an affidavit or affirmation of that fact and advertise
the same in such manner as the board of directors may require. The owner of a
lost or destroyed certificate(s), or his legal representative will give the
corporation a bond, sufficient to indemnify the corporation against any claim
that may be made against it on account of the alleged loss of any such
certificate. A new certificate of the same tenor and for the same number of
shares as the one alleged to be lost or destroyed, may be issued without
requiring any bond, when, in the judgment of the directors it is proper so to
do.
14
<PAGE> 15
INSPECTION OF BOOKS
49. The directors shall determine from time to time whether and, if
allowed, when and under what conditions and regulations the accounts and books
for the corporation (except as may by statute be specifically open to
inspection) or any of them shall be open to the inspection of the shareholders,
and the shareholders' rights in this respect are and shall be restricted and
limited accordingly.
CHECKS
50. All checks or demands for money and notes of the corporation
shall be signed by such officer or officers as the board of directors may from
time to time designate.
FISCAL YEAR
51. The fiscal year shall begin the first day of January in each
year.
DIVIDENDS
52. Dividends upon shares of the corporation, subject to the
provisions of the Articles of Incorporation, may be declared by the board of
directors at any regular or special meeting, pursuant to law. Dividends may be
paid in cash, in property, or in shares of the corporation, and shall be paid
only out of the surplus of the aggregate of the assets of the corporation over
the aggregate of its liabilities, including in the latter the amount of its
capital shares.
Before payment of any dividend, there may be set aside out of any
funds of the corporation available for dividends such sum or sums as the
directors from time to time, in their absolute discretion, think proper as a
reserve fund to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the corporation, or for such other
purpose as the directors shall think conductive to the interests of the
corporation.
15
<PAGE> 16
DIRECTORS' ANNUAL STATEMENT
53. The board of directors shall present at each annual meeting and
when called for by vote of the shareholders at any special meeting of the
shareholders, a full and clear statement of the business and condition of the
corporation.
NOTICES
54. Whenever under the provisions of these by-laws notice is required
to be given to any director, officer or shareholder, it shall not be construed
to mean any requirement for personal notice, but such notice may be given in
writing, by mail, by depositing the same in the post office or letter box, in a
postpaid, sealed wrapper, addressed to such shareholder, officer or director at
such address as appears on the books of the corporation, or, in default of
other address, to such director, officer or shareholder at the General Post
Office in the City of Chicago, Illinois, and such notice shall be deemed to be
given at the time when same shall be thus mailed.
55. The notice provided for in these by-laws of any general or
special meeting of the shareholders, or general or special meeting of the
directors, may be waived in writing by the shareholders or directors,
respectively.
INDEMNIFICATION OF DIRECTORS AND OFFICERS
56. Each director or officer of the corporation, each former director
or officer, and any person who serves or has served at the request of the
corporation as a director or officer of another corporation in which the
corporation owned shares of the capital stock or of which it was a creditor,
shall be indemnified by the corporation against any costs and expenses which
may be imposed upon or actually and necessarily incurred by him (and for which
he is not otherwise reimbursed), including the amount of any judgments or
fines, in connection with the defense of any action, suit or proceeding,
whether criminal or civil, in which he may be named as a party by reason of his
being or having been such director or officer, or by reason of any action
alleged to have been taken or omitted by him in either such capacity; provided,
however, that the
16
<PAGE> 17
corporation shall not indemnify any such person against any costs or expenses
imposed upon or incurred by him in relation to matters as to which he shall be
finally adjudged to be liable for negligence or misconduct in the performance
of duty. In the event of a settlement of any such action, suit or proceeding
prior to final adjudication, or in the event of a settlement or any claim made
against any such person by reason of his being or having been such director or
officer, such person shall be indemnified against any costs and expenses
actually incurred by him, including any amount paid to effect such settlement,
if the corporation is advised by independent counsel selected or approved by
its board of directors that he acted without negligence or misconduct in the
performance of duty and that such costs and expenses are not unreasonable. In
the event of a criminal action, suit or proceeding, a conviction or judgment
(whether based on a plea of guilty or nolo contendere or its equivalent, or
after trial) shall not be deemed an adjudication that such person is liable for
negligence or misconduct in the performance of duty if he acted in good faith
in what he considered to be the best interests of the corporation or such other
corporation or such other corporation and with no reasonable cause to believe
that the action was illegal.
The right of indemnification in this Paragraph 56 provided shall
insure to each person referred to in the first paragraph of this Paragraph 56
whether or not he is such director or officer at the time such costs or
expenses are imposed or incurred, and whether or not the claim asserted against
him is based on matters which antedate the adoption of these by-laws; and in
the event of his death or incapacity shall extend to his legal representatives.
Each person who shall act as a director or officer of the corporation, or if
any such other corporation at the request of the corporation, shall be deemed
to be doing so in reliance upon such right of indemnification; and such right
shall not be exclusive of any other right which he may have.
None of the provisions of this Paragraph 56 shall be construed as a
limitation upon the right of the corporation to exercise its general power to
enter into a contract or undertaking of indemnity with a director or officer in
any proper case not provided for herein. The provisions of Paragraph 56 shall
be subject to any limitations contained in applicable statutory laws.
17
<PAGE> 18
VOTING SHARE IN OTHER CORPORATIONS
57. Unless otherwise ordered by the shareholders, the chairman of the
board, the president or a vice president shall have full power and authority in
behalf of the corporation to attend, and to act and to vote, at any meeting of
shareholders of any corporation in which this corporation may hold shares, and
in connection with such meeting shall possess and may exercise in behalf of the
corporation any and all rights and powers incident to the ownership of such
shares, including the power to appoint proxies therefor and to execute any and
all instruments for that purpose. The directors may, from time to time by
resolution, direct the manner in which shares may be voted or confer these
powers upon any other person or persons.
AMENDMENTS
58. These by-laws may be altered or amended only in the manner
prescribed by the Articles of Incorporation.
* * * * * * * * * * * * * * * * * *
18
<PAGE> 1
Exhibit 12.01
UNITED CITIES GAS COMPANY AND SUBSIDIARIES
COMPUTATION OF RATIO OF CONSOLIDATED EARNINGS TO FIXED CHARGES
FOR THE TWELVE MONTHS ENDED
<TABLE>
<CAPTION>
(Unaudited, in thousands, except ratio amounts)
9-30-96 12-31-95 12-31-94 12-31-93 12-31-92 12-31-91
------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
Fixed Charges, as defined:
Interest on long-term debt........................ $14,530 $13,697 $14,026 $14,553 $12,965 $11,111
Amortization of debt discount..................... 283 227 227 220 181 233
------- ------- ------- ------- ------- -------
Total.......................................... $14,813 $13,924 $14,253 $14,773 $13,146 $11,344
======= ======= ======= ======= ======= =======
Earnings, as defined:
Net income........................................ $15,425 $9,935 $12,093 $12,150 $10,218 $7,875
Taxes on income................................... 9,795 6,970 6,503 5,681 5,171 2,564
Fixed charges, as above........................... 14,813 13,924 14,253 14,773 13,146 11,344
------- ------- ------- ------- ------- -------
Total.......................................... $40,033 $30,829 $32,849 $32,604 $28,535 $21,783
======= ======= ======= ======= ======= =======
Ratio of Consolidated Earnings to Fixed Charges...... 2.70 2.21 2.30 2.21 2.17 1.92
======= ======= ======= ======= ======= =======
</TABLE>
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND THE CONSOLIDATED STATEMENTS OF INCOME, CASH
FLOWS AND CAPITALIZATION AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH
FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> SEP-30-1996
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 297,932
<OTHER-PROPERTY-AND-INVEST> 54,812
<TOTAL-CURRENT-ASSETS> 77,924
<TOTAL-DEFERRED-CHARGES> 27,030
<OTHER-ASSETS> 0
<TOTAL-ASSETS> 457,698
<COMMON> 107,091
<CAPITAL-SURPLUS-PAID-IN> 22,462
<RETAINED-EARNINGS> 20,866
<TOTAL-COMMON-STOCKHOLDERS-EQ> 150,419
0
0
<LONG-TERM-DEBT-NET> 157,492
<SHORT-TERM-NOTES> 40,900
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 5,424
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 103,463
<TOT-CAPITALIZATION-AND-LIAB> 457,698
<GROSS-OPERATING-REVENUE> 245,360
<INCOME-TAX-EXPENSE> 2,612
<OTHER-OPERATING-EXPENSES> 227,006
<TOTAL-OPERATING-EXPENSES> 229,618
<OPERATING-INCOME-LOSS> 15,742
<OTHER-INCOME-NET> 3,039
<INCOME-BEFORE-INTEREST-EXPEN> 18,781
<TOTAL-INTEREST-EXPENSE> 10,842
<NET-INCOME> 7,939
0
<EARNINGS-AVAILABLE-FOR-COMM> 7,939
<COMMON-STOCK-DIVIDENDS> 9,881
<TOTAL-INTEREST-ON-BONDS> 8,587
<CASH-FLOW-OPERATIONS> 35,359
<EPS-PRIMARY> .61
<EPS-DILUTED> .61
</TABLE>
