FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended December 31, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-35965
NORTH SHORE GAS COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-1558720
(State or other jurisdiction of (IRS Employer
incorporation or organization) Identification No.)
24th Floor, 130 East Randolph Drive, Chicago,Illinois 60601-6207
(Address of principal executive offices) (Zip Code)
(312) 240-4000
(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 preceding 12 months
(or for 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. Yes [x] No [ ]
Indicate the number of shares outstanding of each of the issuer's
classes of common stock, as of the latest practicable date:
3,625,887 shares of Common Stock, without par value, outstanding
at January 31, 1998.
Part I. FINANCIAL INFORMATION
Item 1. Financial Statements
<TABLE>
North Shore Gas Company
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Months Ended Twelve Months Ended
December 31, December 31,
1997 1996 1997 1996
(Thousands of Dollars)
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OPERATING REVENUES:
Gas sales $ 45,870 $ 46,598 $ 152,352 $ 154,390
Transportation 4,011 4,222 14,588 16,242
Other 218 229 985 1,068
Total Operating Revenues 50,099 51,049 167,925 171,700
OPERATING EXPENSES:
Gas costs 28,356 27,948 92,715 92,494
Operation 5,447 5,739 23,840 26,245
Maintenance 647 740 2,840 3,212
Depreciation 2,032 2,043 7,852 7,881
Taxes- Income 3,295 3,623 8,717 8,823
- State and local revenue 3,201 3,395 10,601 11,164
- Other 502 515 2,120 2,171
Total Operating Expenses 43,480 44,003 148,685 151,990
OPERATING INCOME 6,619 7,046 19,240 19,710
OTHER INCOME AND (DEDUCTIONS):
Interest income 21 18 450 317
Interest on long-term debt (1,156) (1,157) (4,627) (4,700)
Other interest expense (268) (189) (520) (670)
Income taxes (13) (9) (186) (1,699)
Miscellaneous - net 8 (10) (32) 3,907
Total Other Income and Deductions (1,408) (1,347) (4,915) (2,845)
NET INCOME APPLICABLE
TO COMMON STOCK $ 5,211 $ 5,699 $ 14,325 $ 16,865
The Notes to Consolidated Financial Statements are an integral part of these
statements.
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North Shore Gas Company
CONSOLIDATED BALANCE SHEETS
December 31, December 31,
1997 September 30, 1996
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
Property, plant and equipment, at original cost $298,383 $295,631 $286,525
Less - Accumulated depreciation 102,218 100,957 95,692
Net property, plant and equipment 196,165 194,674 190,833
Other investments 21 21 20
Total Capital Investments - Net 196,186 194,695 190,853
CURRENT ASSETS:
Cash and cash equivalents 1,086 344 936
Receivables -
Customers, net of allowance for uncollectible
accounts of $729, $898, and $826, respective 14,306 4,960 15,936
Other 1,035 1,707 1,315
Accrued unbilled revenues 11,216 2,633 10,775
Materials and supplies, at average cost 2,922 2,976 2,360
Gas in storage, at last-in, first-out cost 8,163 10,003 8,659
Gas costs recoverable through rate adjustments 1,084 1,836 7,996
Regulatory assets 1,420 2,322 6,537
Prepayments 143 246 184
Total Current Assets 41,375 27,027 54,698
OTHER ASSETS:
Regulatory assets 5,339 6,202 6,306
Deferred charges 3,237 2,770 2,644
Total Other Assets 8,576 8,972 8,950
Total Properties and Other Assets $246,137 $230,694 $254,501
The Notes to Consolidated Financial Statements are an integral part of these
statements.
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North Shore Gas Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
December 31, December 31,
1997 September 30, 1996
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
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CAPITALIZATION:
Common Stockholder's Equity:
Common stock, without par value -
Authorized 5,000,000 shares
Outstanding 3,625,887 shares $ 24,757 $ 24,757 $ 24,757
Retained earnings 70,005 67,912 69,603
Total Common Stockholder's Equity 94,762 92,669 94,360
Long-term debt, exclusive of sinking fund
payments and maturities due within one year 64,604 64,604 64,639
Total Capitalization 159,366 157,273 158,999
CURRENT LIABILITIES:
Interim loans 15,095 2,110 11,735
Accounts payable 17,383 18,884 26,732
Dividends payable on common stock 3,118 5,511 2,720
Customer gas service and credit deposits 5,483 5,634 5,176
Accrued taxes 5,867 1,952 6,598
Gas sales revenue refundable through rate adjustments - 411 3,434
Accrued interest 885 2,037 886
Temporary LIFO liquidation credit 1,856 - 1,603
Total Current Liabilities 49,687 36,539 58,884
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily accelerated depreciation 20,832 20,416 19,800
Investment tax credits being amortized over
the average lives of related property 3,557 3,592 3,704
Other 12,695 12,874 13,114
Total Deferred Credits and Other Liabilities 37,084 36,882 36,618
Total Capitalization and Liabilities $246,137 $230,694 $254,501
The Notes to Consolidated Financial Statements are an integral part of these
statements.
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North Shore Gas Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Three Months Ended
December 31,
1997 1996
(Thousands of Dollars)
Operating Activities:
Net Income $ 5,211 $ 5,699
Adjustments to reconcile net income to net cash:
Depreciation 2,032 2,043
Deferred income taxes and investment tax credits - net 317 (14)
Change in deferred credits and other liabilities (115) 195
Change in other assets 396 2,243
Change in current assets and liabilities:
Receivables - net (8,674) (8,306)
Accrued unbilled revenues (8,583) (6,995)
Materials and supplies 54 (252)
Gas in storage 1,840 967
Gas costs recoverable 752 (5,496)
Regulatory assets 902 862
Prepayments 103 187
Accounts payable (1,501) (197)
Customer gas service and credit deposits (151) (92)
Accrued taxes 3,915 4,300
Gas sales revenue refundable (411) 246
Accrued interest (1,152) (1,151)
Temporary LIFO liquidation credit 1,856 1,603
Net Cash Provided by (Used in) Operating Activities (3,209) (4,158)
Investing Activities:
Capital expenditures - construction (3,620) (1,862)
Other assets 97 154
Net Cash Used in Investing Activities (3,523) (1,708)
Financing Activities:
Interim loans - net 12,985 9,810
Retirement of long-term debt - (25)
Dividends paid on common stock (5,511) (3,372)
Net Cash Provided by (Used in) Financing Activities 7,474 6,413
Net Increase (Decrease) in Cash and Cash Equivalents 742 547
Cash and Cash Equivalents at Beginning of Period 344 389
Cash and Cash Equivalents at End of Period $ 1,086 $ 936
The Notes to Consolidated Financial Statements are an integral part of these
statements.
North Shore Gas Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared by North Shore Gas Company (Company) in conformity with
the rules and regulations of the Securities and Exchange
Commission (SEC) and reflect all adjustments that are, in the
opinion of management, necessary to present fairly the results
for the interim periods herein and to prevent the information
from being misleading.
Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to SEC
rules and regulations. Therefore, the statements should be read
in conjunction with the consolidated financial statements and
related notes contained in the Company's Annual Report on Form 10-
K for the fiscal year ended September 30, 1997. Certain items
previously reported for the prior periods have been reclassified
to conform with the presentation in the current periods.
The business of the Company is influenced by seasonal weather
conditions because a large element of the Company's customer load
consists of gas used for space heating. Weather-related
deliveries can, therefore, have a significant positive or
negative impact on net income. Accordingly, the results of
operations for the interim periods presented are not indicative
of the results to be expected for all or any part of the balance
of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2A Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent
liabilities at the date of the financial statements and the
reported amounts of revenues and expenses during the reporting
period. Actual results could differ from those estimates.
2B Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all
gas delivered during the month, including an estimate for gas
delivered but unbilled at the end of each month.
2C Regulated Operations
The Company's utility operations are subject to regulation by
the Illinois Commerce Commission (Commission). Regulated
operations are accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation." This standard controls
the application of generally accepted accounting principles for
companies whose rates are determined by an independent regulator
such as the Commission. Regulatory assets represent certain
costs that are expected to be recovered from customers through
the ratemaking process. When incurred, such costs are deferred
as assets in the balance sheet and subsequently recorded as
expenses when those same amounts are reflected in rates.
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred
income taxes have been recorded using currently enacted tax rates
for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on the Company, certain
adjustments made to deferred income taxes are, in turn, debited
or credited to regulatory assets or liabilities.
2E Statement of Cash Flows
For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments
with maturities of three months or less to be cash equivalents.
Income taxes and interest paid (excluding capitalized
interest) were as follows:
For the three months
ended December 31, 1997 1996
(Thousands)
Income taxes paid $ 2 $ 1,053
Interest paid 2,557 2,459
2F Recovery of Gas Costs
Under the tariffs of the Company, the difference for any month
between costs recoverable through the Gas Charge and revenues
billed to customers under the Gas Charge is refunded to or
recovered from customers. Consistent with these tariff
provisions, such difference for any month is recorded either as a
current liability or as a current asset (with a contra entry to
Gas Costs).
For each gas utility, the Commission conducts annual
proceedings regarding the reconciliation of revenues from the Gas
Charge and related costs incurred for gas. In such proceedings
costs recovered by a utility through the Gas Charge are subject
to challenge. Such a proceeding regarding the Company for fiscal
year 1997 is currently pending before the Commission.
3. ENVIRONMENTAL MATTERS
3A Former Manufactured Gas Plant Sites
The Company, its predecessors, and certain former affiliates
operated facilities in the past at multiple sites for the purpose
of manufacturing gas and storing manufactured gas (Manufactured
Gas Sites). In connection with manufacturing and storing gas,
various by-products and waste materials were produced, some of
which might have been disposed of rather than sold. Under
certain laws and regulations relating to the protection of the
environment, the Company might be required to undertake remedial
action with respect to some of these materials. One of the
Manufactured Gas Sites is discussed in more detail below. The
Company, under the supervision of the Illinois Environmental
Protection Agency (IEPA), is conducting investigations of two
additional Manufactured Gas Sites. These investigations may
require the Company to perform additional investigation and
remediation. The investigations are in a preliminary stage and
are expected to occur over an extended period of time.
In 1990, the Company entered into an Administrative Order on
Consent (AOC) with the United States Environmental Protection
Agency (EPA) and the IEPA to implement and conduct a remedial
investigation/feasibility study (RI/FS) of a Manufactured Gas
Site located in Waukegan, Illinois, where manufactured gas and
coking operations were formerly conducted (Waukegan Site). The
RI/FS is comprised of an investigation to determine the nature
and extent of contamination at the Waukegan Site and a
feasibility study to develop and evaluate possible remedial
actions. The Company entered into the AOC after being notified
by the EPA that the Company, General Motors Corporation (GMC) and
Outboard Marine Corporation were each a potentially responsible
party (PRP) under Comprehensive Environmental Response,
Compensation and Liability Act of 1980, as amended (CERCLA), with
respect to the Waukegan Site. A PRP is potentially liable for
the cost of any investigative and/or remedial
work that the EPA determines is necessary. Other parties
identified as PRPs did not enter into the AOC. Under the terms
of the AOC, the Company is responsible for the cost of the RI/FS.
The Company believes, however, that it will recover a significant
portion of the costs of the RI/FS from other entities. GMC has
agreed to share equally with the Company in funding of the RI/FS
cost, without prejudice to GMC's or the Company's right to seek a
lesser cost responsibility at a later date.
The Company is accruing and deferring the costs it incurs in
connection with all of the Manufactured Gas Sites, including
related legal expenses, pending recovery through rates or from
insurance carriers or other entities. At December 31, 1997, the
total of the costs deferred by the Company, net of recoveries and
amounts billed to other entities, was $6.6 million. This amount
includes an estimate of the costs of completing the studies
required by the EPA at the Waukegan Site and the investigations
being conducted under the supervision of the IEPA referred to
above. The amount also includes an estimate of the costs of
remediation at the Waukegan Site at the minimum amount of the
current estimated range of such costs. The costs of remediation
at the other sites cannot be determined at this time. While the
Company intends to seek contribution from other entities for the
costs incurred at the sites, the full extent of such
contributions cannot be determined at this time.
The Company has filed suit against a number of insurance
carriers for the recovery of environmental costs relating to its
former manufactured gas operations. The suit asks the court to
declare that the insurers are liable under policies in effect
between 1937 and 1986 for costs incurred or to be incurred by the
Company in connection with its Manufactured Gas Sites in
Waukegan. The Company is also asking the court to award damages
stemming from the insurers' breach of their contractual
obligation to defend and indemnify the Company against these
costs. At this time, management cannot determine the timing and
extent of the Company's recovery of costs from its insurance
carriers. Accordingly, the costs deferred at December 31, 1997
have not been reduced to reflect recoveries from insurance
carriers.
Costs incurred by the Company for environmental activities
relating to former manufactured gas operations will be recovered
from insurance carriers or other entities or through rates for
utility service. Accordingly, management believes that the costs
incurred by the Company in connection with former manufactured
gas operations will not have a material adverse effect on the
financial position or results of operations of the Company. The
Company is recovering the costs of environmental activities
relating to its former manufactured gas operations, including
carrying charges on the unrecovered balances, under a rate
mechanism approved by the Commission. At December 31, 1997, it
had recovered $6.7 million of such costs through rates.
3B Former Mineral Processing Site in Denver, Colorado
In February 1994, the Company received a demand from the S.W.
Shattuck Chemical Company, Inc. (Shattuck), a responsible party
under CERCLA, for reimbursement, indemnification, and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. Shattuck is a wholly owned
subsidiary of Salomon, Inc. (Salomon). The demand alleges that
the Company is a successor-in-interest to certain companies that
were allegedly responsible during the period 1934-1941 for the
disposal of mineral processing wastes containing radium and other
hazardous substances at the site. The cost of the remedy at the
site has been estimated by Shattuck to be approximately $31
million. Salomon has provided financial assurance for the
performance of the remediation at the site.
The Company filed a declaratory judgment action against
Salomon in the District Court for the Northern District of
Illinois. The suit asked the court to declare that the Company
is not liable for response costs incurred or to be incurred at
the Denver site. Salomon filed a counterclaim for costs to be
incurred by Salomon and Shattuck with respect to the site. On
March 7, 1997, the District Court granted the Company's motion
for summary judgment, declaring that the Company is not liable
for any response costs in connection with the Denver site.
Salomon has appealed the ruling of the District Court to the
United States Court of Appeals, Seventh Circuit.
The Company does not believe that it has liability for the
response costs, but cannot determine the matter with certainty.
At this time, the Company cannot reasonably estimate what range
of loss, if any, may occur. In the event that the Company
incurred liability, it would pursue reimbursement from insurance
carriers, other responsible parties, if any, and through its
rates for utility service.
3C Gasoline Release in Wheeling, Illinois
In June 1995, the Company received a letter from the IEPA
informing the Company that it was not in compliance with certain
provisions of the Illinois Environmental Protection Act which
prohibit water pollution within the State of Illinois. On
November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming the Company
and four other parties as defendants. The complaint alleges that
the violations are the result of a gasoline release that occurred
in Wheeling, Illinois in June 1992, when a contractor who was
installing a pipeline for the Company accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. The
Company is contesting this suit. Management does not believe the
outcome of this suit will have a material adverse effect on
financial position or results of operations of the Company.
4. COVENANTS REGARDING RETAINED EARNINGS
The Company's indenture relating to its first mortgage bonds
contains provisions and covenants restricting the payment of cash
dividends and the purchase or redemption of capital stock. At
December 31, 1997, such restrictions amounted to $11.6 million
out of the Company's total retained earnings of $70.0 million.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income applicable to common stock decreased $488,000, to
$5.2 million, for the three-months ended December 31,
1997, due primarily to weather that was eight percent warmer. Lower
operation and maintenance expenses in the current period
partially offset the effect of the warmer weather.
Net income applicable to common stock decreased $2.5 million,
to $14.3 million, for the 12-months ended December 31, 1997,
primarily due to the prior period's gain associated with the
expiration of certain gas storage contracts and weather that was
six and one-half percent warmer than the previous 12-month period.
Partially offsetting these effects were reductions
in operation and maintenance expenses.
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
Three Months Ended 12 Months Ended
December 31, 1997 December 31, 1997
Increase/(Decrease) Increase/(Decrease)
from Prior Period from Prior Period
(Thousands of dollars)
Amount Per Cent Amount Per Cent
Net operating revenues (a) (1,164) (5.9) (3,433) (5.0)
Operation and maintenance expenses (385) (5.9) (2,777) (9.4)
Depreciation expense (11) (0.5) (29) (0.4)
Income taxes (328) (9.1) (106) (1.2)
Other income and deductions (61) 4.5 (2,070) 72.8
Net income applicable to common stock (488) (8.6) (2,540) (15.1)
(a) Operating revenues, net of gas costs and revenue taxes.
Net Operating Revenues
Gross revenues of the Company are affected by changes in the
unit cost of the Company's gas purchases and do not include the
cost of gas supplies for customers who purchase gas directly from
producers and marketers rather than from the Company. The direct
customer purchases have no effect on net income because the
Company provides transportation service for such gas volumes and
recovers margins similar to those applicable to conventional gas
sales. Changes in the unit cost of gas do not significantly
affect net income because the Company's tariffs provide for
dollar-for-dollar recovery of gas costs. (See Note 2F of the
Notes to Consolidated Financial Statements.) The Company's
tariffs also provide for dollar-for-dollar recovery of the cost
of revenue taxes imposed by the State and various municipalities.
Since income is not significantly affected by changes in
revenue from customers' gas purchases from producers or marketers
rather than from the Company, changes in gas costs, or changes in
revenue taxes, the discussion below pertains to "net operating
revenues" (operating revenues, net of gas costs and revenue
taxes). The Company considers net operating revenues to be a
more pertinent measure of operating results than gross revenues.
Net operating revenues decreased $1.2 million, to $18.5
million, and $3.4 million, to $64.6 million, for the three- and
12-month periods, respectively, due chiefly to warmer weather.
See Other Matters - Operating Statistics for details of
selected financial and operating information by gas service
classification.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased $385,000, to $6.1
million for the current three-month period, due primarily to a
reduction in environmental costs recovered through rates
($650,000) and a decrease in pension costs ($145,000). Partially
offsetting these effects were increases in other operation and
maintenance expenses.
Operation and maintenance expenses decreased $2.8 million, to
$26.7 million, for the current 12-month period due principally to
a reduction in environmental costs recovered through rates ($1.7
million), pension costs ($952,000), and reductions in costs
associated with liability premiums and claim settlements
($681,000). Increases in other operation and maintenance
expenses partially offset the reductions mentioned above.
Depreciation Expense
Depreciation expense decreased $11,000, to $2.0 million, and
$29,000, to $7.9 million, for the current three- and 12-month
periods, respectively, due to a decrease in net dismantling
charges.
Income Taxes
Income taxes, exclusive of income taxes in other income and
deductions, declined $328,000, to $3.3 million and $106,000, to
$8.7 million, for the current three- and 12-month periods,
respectively, due principally to lower pre-tax income.
Other Income and Deductions
Other income and deductions increased $61,000, for the current
three-month period, due chiefly to an increase in interest on
notes payable.
Other income and deductions increased $2.1 million, for the
current 12-month period, due to the prior period's gain of $2.2
million, net of income taxes, from the expiration of certain
natural gas storage contracts.
Other Matters
Effect of Weather. Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a
significant positive or negative impact on net income, cash
position, and coverage ratios.
Large-Volume Gas Service Agreements. The Company has entered
into a gas service contract with a large-volume customer under a
specific rate schedule approved by the Commission. This contract
was negotiated to overcome the potential threat of bypassing the
utility's distribution system. The contract will not have a
material adverse effect on the financial position or the results
of operations of the Company.
Operating Statistics. The following table represents gas
distribution margin components:
Three Months Ended Twelve Months Ended
December 31, December 31,
1997 1996 1997 1996
Operating Revenues (thousands):
Gas sales
Residential $ 39,067 $ 39,702 $ 128,700 $ 131,518
Commercial 5,579 5,588 19,376 18,676
Industrial 1,224 1,308 4,276 4,196
45,870 46,598 152,352 154,390
Transportation
Residential 334 670 2,446 2,567
Commercial 2,021 1,592 5,444 6,846
Industrial 1,402 1,568 4,962 6,066
Contract Pooling 254 392 1,736 763
4,011 4,222 14,588 16,242
Other 218 229 985 1,068
Total Operating Revenues 50,099 51,049 167,925 171,700
Le- Gas Costs 28,356 27,948 92,715 92,494
- Revenues Taxes 3,201 3,395 10,601 11,164
Net Operating Revenues $ 18,542 $ 19,706 $ 64,609 $ 68,042
Deliveries (MDth):
Gas Sales
Residential 6,441 7,022 20,997 22,679
Commercial 982 1,059 3,454 3,499
Industrial 230 268 808 868
7,653 8,349 25,259 27,046
Transportation (a)
Residential 147 568 2,335 1,874
Commercial 1,958 1,264 4,630 4,712
Industrial 1,727 1,766 6,358 6,349
3,832 3,598 13,323 12,935
Total Gas Sales and Transportation 11,485 11,947 38,582 39,981
Margin per Dth delivered $ 1.61 $ 1.65 $ 1.67 $ 1.70
(a) Volumes associated with contract pooling revenues are
included in their respective customer classes.
LIQUIDITY AND CAPITAL RESOURCES
Indenture Restrictions. The Company's indenture relating to its
first mortgage bonds contains provisions and covenants
restricting the payment of cash dividends and the purchase or
redemption of capital stock. At December 31, 1997, such
restrictions amounted to $11.6 million out of North Shore Gas'
total retained earnings of $70.0 million. (See Note 4 of the
Notes to Consolidated Financial Statements.)
Environmental Matters. The Company is conducting environmental
investigations and work at certain sites that were the location
of former manufactured gas operations. (See Note 3A of the Notes
to Consolidated Financial Statements.)
In 1994, the Company received a demand from a responsible
party under CERCLA for reimbursement, indemnification and
contribution for response costs incurred at a former mineral
processing site in Denver, Colorado. The Company filed a
declaratory judgment action asking the court to declare that the
Company is not liable for response costs relating to the site.
Salomon filed a counterclaim for costs to be incurred by Salomon
and Shattuck with respect to the site. On March 7, 1997, the
District Court granted the Company's motion for summary judgment,
declaring that the Company is not liable for any response costs
in connection with the Denver site. Salomon has appealed the
ruling of the District Court to the United States Court of
Appeals, Seventh Circuit. (See Note 3B of the Notes to
Consolidated Financial Statements.)
On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming the Company
and four other parties as defendants. The complaint alleges
violations arising out of a gasoline release that occurred in
Wheeling, Illinois in June 1992 when a contractor who was
installing a pipeline for the Company accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. The
Company is currently contesting this suit. (See Note 3C of the
Notes to Consolidated Financial Statements.)
Credit Lines. Peoples Gas has lines of credit of totaling
$129.4 million of which the Company may borrow up to $30 million
to cover its projected short-term needs. At December 31, 1997,
Peoples Gas and the Company had unused credit available from
banks of $68.8 million.
Interest Coverage. The fixed charges coverage ratios for the
Company for the 12 months ended December 31, 1997, and for fiscal
1997 and 1996 were 5.51, 5.74, and 5.62, respectively.
Year 2000. The Company is modifying all of its computer programs
to be year 2000 compatible. The Company does not believe that
the amount of expenditures it will incur in connection with its
year 2000 modification will have a material adverse effect on the
financial position or results of operations of the Company.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description of Document
27 Financial Data Schedule
b. Reports on Form 8-K filed during the quarter ended
December 31, 1997.
None
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to
be signed on its behalf by the undersigned thereunto duly
authorized.
North Shore Gas Company
(Registrant)
February 11, 1998 By: /s/ K. S. BALASKOVITS
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
Principal Accounting Officer
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THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS
OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED STATEMENTS OF CASH
FLOWS, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> DEC-31-1997
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 196165
<OTHER-PROPERTY-AND-INVEST> 21
<TOTAL-CURRENT-ASSETS> 41375
<TOTAL-DEFERRED-CHARGES> 3237
<OTHER-ASSETS> 5339
<TOTAL-ASSETS> 246137
<COMMON> 24757
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 70005
<TOTAL-COMMON-STOCKHOLDERS-EQ> 94762
0
0
<LONG-TERM-DEBT-NET> 64604
<SHORT-TERM-NOTES> 0
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 15095
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 71676
<TOT-CAPITALIZATION-AND-LIAB> 246137
<GROSS-OPERATING-REVENUE> 50099
<INCOME-TAX-EXPENSE> 3295
<OTHER-OPERATING-EXPENSES> 40185
<TOTAL-OPERATING-EXPENSES> 43480
<OPERATING-INCOME-LOSS> 6619
<OTHER-INCOME-NET> 16
<INCOME-BEFORE-INTEREST-EXPEN> 6635
<TOTAL-INTEREST-EXPENSE> 1424
<NET-INCOME> 5211
0
<EARNINGS-AVAILABLE-FOR-COMM> 5211
<COMMON-STOCK-DIVIDENDS> 5511
<TOTAL-INTEREST-ON-BONDS> 1156
<CASH-FLOW-OPERATIONS> 3209
<EPS-PRIMARY> 0
<EPS-DILUTED> 0
</TABLE>
