Nicor Inc.
Form 10-K/A
Exhibit 99.03
Report of Independent Public Accountants
To the Nicor Gas Thrift
Plan Committee:
We have audited the accompanying statements of net assets available for benefits
of the Nicor Gas Thrift Plan (the Plan) as of December 31, 1999 and 1998, and
the related statements of changes in net assets available for benefits for the
years then ended. These financial statements are the responsibility of the
Plan's management. Our responsibility is to express an opinion on these
financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted
in the United States. Those standards require that we plan and perform the audit
to obtain reasonable assurance about whether the financial statements are free
of material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant estimates
made by management, as well as evaluating the overall financial statement
presentation. We believe that our audits provide a reasonable basis for our
opinion.
In our opinion, the financial statements referred to above present fairly, in
all material respects, the net assets available for benefits of the Plan as of
December 31, 1999 and 1998, and the changes in net assets available for benefits
for the years then ended in conformity with accounting principles generally
accepted in the United States.
ARTHUR ANDERSEN LLP
Arthur Andersen LLP
Chicago, Illinois
June 23, 2000
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Nicor Gas Thrift Plan
Statements of Net Assets Available for Benefits
December 31
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1999 1998
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Assets:
Investment in Trust $ 119,950,120 $ 117,555,309
Receivables:
Participant contributions 142,174 140,289
Employer contributions 56,163 55,717
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198,337 196,006
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Net assets available for benefits $ 120,148,457 $ 117,751,315
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Statements of Changes in Net Assets Available for Benefits
Year ended December 31
--------------------------------
1999 1998
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Net increase in Plan assets from
investment activities of the Trust $ 8,745,708 $ 10,585,678
Contributions:
Participant 3,692,076 3,720,600
Employer 1,440,083 1,453,707
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5,132,159 5,174,307
Distributions to participants (10,603,894) (9,402,160)
Transfers, net and other (876,831) (631)
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Net increase 2,397,142 6,357,194
Net assets available for benefits at
beginning of year 117,751,315 111,394,121
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Net assets available for benefits at
end of year $ 120,148,457 $ 117,751,315
============= =============
The accompanying notes are an integral part of these statements.
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Nicor Gas Thrift Plan
Notes to the Financial Statements
PLAN INFORMATION
The following description of the Nicor Gas Thrift Plan (the Plan) provides only
general information. Participants should refer to the Plan agreement for more
detailed information.
The Plan. The Plan is a defined contribution plan which was established on July
1, 1973, to provide supplemental retirement security to substantially all
employees of Nicor Gas Company (the Company), represented by a collective
bargaining agreement. The funds of the Plan are commingled with the funds of the
Nicor Gas Savings Investment Plan and held for safekeeping and investment by the
Nicor Gas Savings Investment and Thrift Trust (the Trust). The Plan is subject
to the provisions of the Employee Retirement Income Security Act of 1974
(ERISA).
Plan administration. Authority to control and manage the operation and
administration of the Plan is vested in a committee appointed by the Board of
Directors of the Company. Under the terms of a trust agreement, the Northern
Trust Company acts as trustee for the Trust and holds the investments of the
Plan. The Northern Trust Company also acts as investment manager for certain
investments of the Plan. Administrative expenses associated with operation of
the Plan are paid from Plan assets.
Contributions. The participant may elect to make either tax-deferred or
after-tax contributions, or any combination thereof, by payroll deduction, that
are partially matched by the Company. For employees hired on and after January
1, 1998, the Company makes an additional annual contribution. Participants
direct the investment of their contributions into various investment options
offered by the Plan.
Participant loans. Beginning in 1998, participants may borrow a minimum of
$1,000 up to a maximum equal to the lesser of $50,000 or 50 percent of their
vested account balance. Loans are repayable through payroll deductions over
periods ranging from six months to five years, and are secured by the balance in
the participant's account. The interest rate is based on the Northern Trust
prime rate plus 1 percent and is fixed over the life of the loan. The interest
rate at December 31, 1999 and 1998 was 9.5 percent.
Vesting and forfeitures. The participant's contributions and earnings thereon
are immediately vested. The Company's contributions and earnings thereon are
vested after the participant's completion of five years of service, the
participant's death while employed by the Company or retirement.
If the participant's interest in the Company's contributions and earnings
thereon is not vested, such interest will be forfeited if the participant's
employment with the Company or an affiliate is terminated and the participant is
not reemployed within five years by the Company or an affiliate. Any amounts
forfeited by a participant are applied to reduce the amount of the Company's
contributions under the Plan. Forfeitures for 1999 and 1998 totaled $12,880 and
$5,625, respectively.
Suspensions and withdrawals. The participant may suspend contributions and will
not cease to be a participant during the suspension period.
The participant may elect, under certain conditions, to withdraw participant
contributions and earnings thereon prior to termination of employment. The
Company's matching contributions and earnings thereon will not be distributed
until the vested participant's attainment of age 59-1/2 or employment has been
terminated.
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Nicor Gas Thrift Plan
Notes to the Financial Statements (Continued)
Plan termination. The Company expects to continue the Plan indefinitely, but
reserves the right to amend or discontinue it at any time in a manner consistent
with any collective bargaining agreement and subject to the provisions of ERISA.
In the event of plan termination, participants will become fully vested in their
account balances.
ACCOUNTING POLICIES
Investment valuation. The Plan states its investment in the Trust at the
underlying value of the investments of the Trust as follows:
Group annuity contracts are recorded at contract value. Contract value
represents contributions made plus interest at the various contract rates, less
Plan withdrawals and administrative expenses. The aggregate market value of the
group annuity contracts at December 31, 1999 and 1998, approximated contract
value. Estimated market value is based on a variety of factors, such as contract
terms, interest rate, maturity date and credit worthiness of the issue. For the
years ended December 31, 1999 and 1998, the average return was approximately 6.8
percent.
The market value for Nicor Inc. common stock is based on the closing price on
the New York Stock Exchange Composite Tape.
The market value of the units of the common/collective trusts and registered
investment companies are determined based on the underlying market value of the
investments of the funds.
Allocation provisions. The Trust's net investment gain (loss) is allocated daily
to the Plan based on the beginning ratio of the Plan's investment balance to
total Trust investments.
Use of estimates. The preparation of financial statements requires management to
make estimates that affect the reported amounts. Actual results could differ
from those estimates.
Reclassifications. Certain reclassifications were made to conform the prior
year's financial statements to the current year's presentation.
INCOME TAXES
The Internal Revenue Service has determined and informed the Company by a letter
dated January 16, 1997, that the Plan is qualified and the Trust established
under the Plan is tax exempt under Section 401(a) of the Internal Revenue Code
(the Code). The Plan's management believes that the Plan and related Trust
continue to be designed and operated in compliance with the requirements of the
Code.
NET TRANSFER TO NICOR GAS SAVINGS INVESTMENT PLAN
If an employee transfers between the Plans, their account balance is transferred
into a new account in their current plan. During 1999 and 1998, a net transfer
of $822,994 and $165,468, respectively, was made from the Nicor Gas Thrift Plan
to the Nicor Gas Savings Investment Plan.
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Nicor Gas Thrift Plan
Notes to the Financial Statements (Continued)
TRUST FINANCIAL INFORMATION
The following schedules present the Trust's net assets as of December 31, 1999
and 1998, the increase in the Trust's net assets derived from investment
activities for the years then ended and the Plan's share of each:
Net Assets in Trust
December 31
---------------------------------
1999 1998
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Assets:
General Investments:
Group annuity contracts $ 112,587,125 $ 118,233,043
Common/collective trusts* 21,990,550 21,115,362
Nicor Inc. common stock* 23,080,168 23,011,419
Registered investment
companies* 104,432,679 87,804,603
Loans to participants* 3,797,948 3,051,418
Other assets 349,741 425,832
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266,238,211 253,641,677
Liabilities:
Operating payables 94,739 240,545
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Net assets in Trust $ 266,143,472 $ 253,401,132
============= =============
Plan's interest in Trust net
assets $ 119,950,120 $ 117,555,309
============= =============
* Includes Party-in-Interest Investments.
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Nicor Gas Thrift Plan
Notes to the Financial Statements (Concluded)
Trust Investment Activities
Year Ended December 31
-------------------------------
1999 1998
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Investment income:
Interest $ 8,388,351 $ 8,400,725
Dividends 967,266 844,741
Net change in market value
of Nicor Inc. common stock (5,779,130) (65,239)
Net investment gain from
common/collective trusts 193,751 996,540
Net investment gain from
registered investment companies 19,329,540 14,475,016
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23,099,778 24,651,783
Administrative expenses (308,720) (223,153)
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Increase in Trust net assets
derived from investment
activities $ 22,791,058 $ 24,428,630
============ ============
Plan's interest in Trust
investment activities $ 8,745,708 $ 10,585,678
============ ============
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