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 June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 1-5540
PEOPLES ENERGY CORPORATION
(Exact name of registrant as specified in its charter)
Illinois 36-2642766
(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:
35,061,580 shares of Common Stock, without par value, outstanding
at July 31, 1997.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Nine Twelve
Months Ended Months Ended Months Ended
June 30, June 30, June 30,
------------------ ---------------------- ----------------------
1997 1996 1997 1996 1997 1996
-------- -------- ---------- ---------- ---------- ----------
(Thousands, except per-share amounts)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales $173,380 $216,654 $1,025,505 $ 944,118 $1,138,156 $1,036,893
Transportation 25,104 28,330 118,496 110,735 136,636 129,649
Other 3,950 3,516 13,566 9,809 16,769 12,826
-------- -------- ---------- ---------- ---------- ----------
Total Operating Revenues 202,434 248,500 1,157,567 1,064,662 1,291,561 1,179,368
-------- -------- ---------- ---------- ---------- ----------
OPERATING EXPENSES:
Gas costs 72,651 110,346 581,313 484,249 626,938 515,882
Operation 45,940 54,659 149,667 171,251 198,714 222,735
Maintenance 12,748 11,381 34,210 32,543 47,309 43,563
Depreciation & amortization 18,649 18,095 55,492 52,627 73,500 69,556
Taxes - Income 6,515 5,557 66,448 64,188 58,880 53,102
- State & local revenue 20,282 23,479 116,166 109,124 128,214 120,856
- Other 5,220 5,509 15,609 16,389 21,221 21,844
-------- -------- ---------- ---------- ---------- ----------
Total Operating Expenses 182,005 229,026 1,018,905 930,371 1,154,776 1,047,538
-------- -------- ---------- ---------- ---------- ----------
OPERATING INCOME 20,429 19,474 138,662 134,291 136,785 131,830
-------- -------- ---------- ---------- ---------- ----------
OTHER INCOME
AND (DEDUCTIONS):
Interest income 1,311 1,156 3,889 4,318 4,968 7,742
Allowance for funds used
during construction 82 10 144 10 157 10
Interest on long-term debt
of subsidiaries (8,930) (8,936) (26,792) (28,891) (35,728) (40,437)
Other interest expense (387) (830) (2,160) (4,492) (2,782) (6,310)
Income taxes (442) (2,614) (1,309) (4,349) (2,798) (5,557)
Miscellaneous - net (328) 5,987 50 11,491 2,942 11,745
-------- -------- ---------- ---------- ---------- ----------
Total Other Income
and Deductions (8,694) (5,227) (26,178) (21,913) (33,241) (32,807)
-------- -------- ---------- ---------- ---------- ----------
NET INCOME $ 11,735 $ 14,247 $ 112,484 $ 112,378 $ 103,544 $ 99,023
======== ======== ========== ========== ========== ==========
Average Shares of Common Stock
Outstanding 34,988 34,946 34,980 34,938 34,975 34,932
Earnings Per Share
of Common Stock $ .34 $ .41 $ 3.22 $ 3.22 $ 2.96 $ 2.83
======== ======== ========== ========== ========== ==========
Dividends Declared Per Share $ .47 $ .46 $ 1.40 $ 1.37 $ 1.86 $ 1.82
======== ======== ========== ========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
Property, plant and equipment,
at original cost $2,088,570 $2,046,156 $2,024,574
Less - Accumulated depreciation 705,020 665,077 656,589
---------- ---------- ----------
Net property, plant and equipment 1,383,550 1,381,079 1,367,985
Other investments 13,671 12,348 9,904
---------- ---------- ----------
TOTAL CAPITAL INVESTMENTS - NET 1,397,221 1,393,427 1,377,889
---------- ---------- ----------
CURRENT ASSETS:
Cash 6,388 4,684 4,328
Cash equivalents 93,653 33,086 77,655
Temporary cash investments 15,900 900 900
Receivables -
Customers, net of allowance for
uncollectible accounts of $32,425,
$26,211, and $26,581, respectively 127,212 68,675 120,718
Other 30,939 32,399 42,539
Accrued unbilled revenues 20,547 29,314 20,586
Materials and supplies, at average cost 17,361 16,128 16,377
Gas in storage, at last-in, first-out cost 46,865 65,502 45,494
Gas costs recoverable through rate adjustments 353 19,920 24,650
Prepayments 36,829 12,287 5,132
Other 425 -- --
---------- ---------- ----------
TOTAL CURRENT ASSETS 396,472 282,895 358,379
---------- ---------- ----------
OTHER ASSETS:
Regulatory assets of subsidiaries 62,736 91,498 73,653
Deferred charges 20,015 15,930 14,582
---------- ---------- ----------
TOTAL OTHER ASSETS 82,751 107,428 88,235
---------- ---------- ----------
TOTAL PROPERTIES AND OTHER ASSETS $1,876,444 $1,783,750 $1,824,503
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stockholders' Equity:
Common stock, without par value
Authorized - 60,000,000 shares
Outstanding - 34,996,835, 34,960,399,
and 34,951,938 shares, respectively $ 278,926 $ 277,881 $ 277,959
Retained earnings 466,810 403,304 429,087
---------- ---------- ----------
Total Common Stockholders' Equity 745,736 681,185 707,046
Long-term debt of subsidiaries,
exclusive of sinking fund payments
and maturities due within one year 527,039 527,064 527,104
---------- ---------- ----------
TOTAL CAPITALIZATION 1,272,775 1,208,249 1,234,150
---------- ---------- ----------
CURRENT LIABILITIES:
Interim loans of subsidiaries -- 2,625 4,000
Accounts payable 129,282 147,972 120,481
Dividends payable on common stock 16,446 16,082 16,078
Customer gas service and credit deposits 20,211 42,390 18,803
Accrued taxes 62,575 32,821 87,066
Gas sales revenue refundable through
rate adjustments 15,247 13,921 9,407
Accrued interest 7,408 10,796 7,444
Temporary LIFO liquidation credit 29,777 -- 40,209
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 280,946 266,607 303,488
---------- ---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily
accelerated depreciation 244,374 230,948 213,053
Investment tax credits being amortized
over the average lives of related property 34,264 35,439 35,858
Other 44,085 42,507 37,954
---------- ---------- ----------
TOTAL DEFERRED CREDITS AND
OTHER LIABILITIES 322,723 308,894 286,865
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,876,444 $1,783,750 $1,824,503
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
June 30,
-------------------
1997 1996
-------- --------
(Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $112,484 $112,378
Adjustments to reconcile net income to net cash:
Depreciation and amortization 55,492 52,627
Deferred income taxes and investment tax credits - net 9,259 10
Change in deferred credits and other liabilities 4,570 11,955
Change in other assets 20,467 (36,256)
Other -- 63
Change in current assets and liabilities:
Receivables - net (57,077) (103,950)
Accrued unbilled revenues 8,767 581
Materials and supplies (1,233) 89
Gas in storage 18,637 55,052
Gas costs recoverable 19,567 (18,445)
Accounts payable (18,690) 18,104
Customer gas service and credit deposits (22,179) (21,774)
Accrued taxes 29,754 58,906
Gas sales revenue refundable 1,326 (70,095)
Accrued interest (3,388) (5,353)
Temporary LIFO liquidation credit 29,777 40,209
Prepayments (24,542) (2,831)
Other (425) --
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 182,566 91,270
-------- --------
INVESTING ACTIVITIES:
Capital expenditures of subsidiaries - construction (53,102) (56,204)
Other assets 128 12,170
Other capital investments (2,102) 600
Other temporary cash investments (15,000) --
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (70,076) (43,434)
-------- --------
FINANCING ACTIVITIES:
Interim loans of subsidiaries - net (2,625) 3,100
Trust fund, bond redemption -- 237
Retirement of long-term debt of subsidiaries (25) (98,770)
Dividends paid on common stock (48,614) (47,505)
Proceeds from issuance of common stock 1,045 846
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (50,219) (142,092)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 62,271 (94,256)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 37,770 176,239
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $100,041 $ 81,983
======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
Peoples Energy Corporation
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements include the
accounts of Peoples Energy Corporation (Company) and its wholly
owned subsidiaries, The Peoples Gas Light and Coke Company
(Peoples Gas), North Shore Gas Company (North Shore Gas), Peoples
District Energy Corporation (Peoples District Energy), Peoples
Energy Services Corporation, Peoples Energy Resources Corp., and
Peoples NGV Corp., and comprise the assets, liabilities, revenues,
expenses, and underlying common stockholder's equity of these
companies. Income is principally derived from the Company's
utility subsidiaries, Peoples Gas and North Shore Gas. The
statements have been prepared by the 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, 1996. 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's utility subsidiaries is
influenced by seasonal weather conditions because a large element
of the utilities' 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 utility operations of Peoples Gas and North Shore Gas 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 revenues.
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 Peoples Gas and North Shore
Gas, 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.
<TABLE>
Income taxes and interest paid (excluding capitalized
interest) were as follows:
<CAPTION>
For the nine months
ended June 30, 1997 1996
----------------------------------------------
(Thousands)
<S> <C> <C>
Income taxes paid $37,708 $27,168
Interest paid 31,311 35,604
</TABLE>
2F Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of Peoples Gas and North Shore Gas, 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).
The Commission conducts annual proceedings regarding, for each
gas utility, 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 proceedings regarding Peoples Gas and North Shore
Gas for fiscal years 1995 through 1997 are currently pending
before the Commission.
Pursuant to Federal Energy Regulatory Commission (FERC) Order
636 and successor orders, pipelines are allowed to recover from
their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by
the 636 Orders. The utilities are currently recovering pipeline
charges for transition costs through the Gas Charge. (See Notes
3A and 3B.)
2G Recovery of Costs of Environmental Activities Relating to
Former Manufactured Gas Operations
Peoples Gas and North Shore Gas are recovering the costs of
environmental activities relating to the utilities' former
manufactured gas operations, including carrying charges on the
unrecovered balances, under rate mechanisms approved by the
Commission. The Commission conducts annual proceedings regarding,
for each utility with such a rate mechanism, the reconciliation of
revenues from the rate mechanism and related costs. In such
proceedings, costs recovered by a utility through the rate
mechanism are subject to challenge. Such proceedings regarding
Peoples Gas and North Shore Gas for fiscal years 1994, 1995 and
1996 are currently pending before the Commission. (See Note 4A.)
3. RATES AND REGULATION
3A Utility Rate Proceedings
Peoples Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of Peoples Gas that were
designed to increase annual revenues by approximately $30.8
million, exclusive of additional charges for revenue taxes.
Peoples Gas was allowed a rate of return on original-cost rate base
of 9.19 per cent, which reflected an 11.10 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers appealed the
Commission's order to the Illinois Appellate Court, but on June 27,
1997, the Appellate Court affirmed the Commission's order. All
proceedings regarding this case have concluded.
North Shore Gas' Rate Order. On November 8, 1995, the Commission
issued an order approving changes in rates of North Shore Gas that
were designed to increase annual revenues by approximately $5.6
million, exclusive of additional charges for revenue taxes. North
Shore Gas was allowed a rate of return on original-cost rate base
of 9.75 per cent, which reflected an 11.30 per cent cost of common
equity. The new rates were implemented on November 14, 1995. A
group of industrial transportation customers appealed the
Commission's order to the Illinois Appellate Court, but on June
27, 1997, the Appellate Court affirmed the Commission's order. All
proceedings regarding this case have concluded.
FERC Order 636 Cost Recovery. In 1994, the Commission issued
orders providing for the full recovery of pipeline charges for FERC
Order 636 transition costs from gas service customers of Peoples
Gas and North Shore Gas. The Commission directed that gas supply
realignment (GSR) costs (one of the four categories of transition
costs) be recovered on a uniform volumetric basis from all
transportation and sales customers. A group of industrial
transportation customers has filed a petition with the Illinois
Supreme Court appealing the Commission's orders. If the Illinois
Supreme Court accepts the appeal, any changes made by it to the
Commission's orders would have a prospective effect only. (See
Notes 2F and 3B.)
3B FERC Orders 636, 636-A, and 636-B
FERC Order 636 and successor orders require pipelines to make
separate rate filings to recover transition costs. The utilities
are subject to charges for transition cost recovery by Natural Gas
Pipeline Company of America (Natural). Under a Stipulation and
Agreement filed by Natural and approved by FERC, Natural's charges
to the utilities for GSR transition costs (the largest category of
such costs for Peoples Gas and North Shore Gas) are subject to a
cap of approximately $103 million for Peoples Gas and $25 million
for North Shore Gas. Peoples Gas and North Shore Gas are currently
recovering transition costs through the Gas Charge. At June 30,
1997, Peoples Gas and North Shore Gas had made payments of $89.6
million and $22.0 million and had accrued an additional $13.4
million and $3.0 million, respectively, toward the caps.
The 636 Orders are not expected to have a material effect on
financial position or results of operations of the Company or its
subsidiaries. (See Notes 2F and 3A.)
4. ENVIRONMENTAL MATTERS
4A Former Manufactured Gas Plant Operations
The Company's utility subsidiaries, their 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 subsidiaries might be
required to undertake remedial action with respect to some of these
materials. Three of the Manufactured Gas Sites are discussed in
more detail below. Peoples Gas and North Shore Gas, under the
supervision of the Illinois Environmental Protection Agency (IEPA),
are conducting investigations of an additional 29 Manufactured Gas
Sites. These investigations may require the utility subsidiaries
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, North Shore Gas 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. North Shore Gas
entered into the AOC after being notified by the EPA that North
Shore Gas, General Motors Corporation (GMC) and Outboard Marine
Corporation were each a potentially responsible party (PRP) under
the 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, North Shore Gas is responsible for
the cost of the RI/FS. North Shore Gas 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 North Shore
Gas in funding of the RI/FS cost, without prejudice to GMC's or
North Shore Gas' right to seek a lesser cost responsibility at a
later date.
Peoples Gas has observed what appear to be gas purification
wastes on a Manufactured Gas Site in Chicago, formerly called the
110th Street Station, and property contiguous thereto (110th Street
Station Site). Peoples Gas has fenced the 110th Street Station
Site and is conducting a study under the supervision of the IEPA to
determine the feasibility of a limited removal action.
The current owner of a site in Chicago, formerly called Pitney
Court Station, filed suit against Peoples Gas in federal district
court under CERCLA. The suit seeks recovery of the past and future
costs of investigating and remediating the site and an order
directing Peoples Gas to remediate the site. Peoples Gas is
contesting this suit.
The utility subsidiaries are accruing and deferring the costs
they incur 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 June 30, 1997, the
total of the costs deferred by the subsidiaries, net
of recoveries and amounts billed to other entities, was $16.8
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 and at the 110th
Street Station Site in Chicago, 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 each
subsidiary intends to seek contributions from other entities for
the costs incurred at the sites, the full extent of such
contributions cannot be determined at this time.
Peoples Gas and North Shore Gas have filed suit against a number
of insurance carriers for the recovery of environmental costs
relating to the utilities' 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 utilities in connection with five of their
Manufactured Gas Sites in Chicago and Waukegan. The utilities are
also asking the court to award damages stemming from the insurers'
breach of their contractual obligation to defend and indemnify the
utilities against these costs. At this time, management cannot
determine the timing and extent of the subsidiaries' recovery of
costs from their insurance carriers. Accordingly, the costs
deferred at June 30, 1997, have not been reduced to reflect
recoveries from insurance carriers.
The Company believes that the costs incurred by Peoples Gas and
North Shore Gas for environmental activities relating to former
manufactured gas operations are recoverable from insurance carriers
or other entities or through rates for utility service.
Accordingly, management believes that the costs incurred by the
subsidiaries in connection with former manufactured gas operations
will not have a material adverse effect on financial position or
results of operations of the subsidiaries. Peoples Gas and North
Shore Gas are recovering the costs of environmental activities
relating to the utilities' former manufactured gas operations,
including carrying charges on the unrecovered balances, under rate
mechanisms approved by the Commission. At June 30, 1997, the
subsidiaries had recovered $11.9 million of such costs through
rates. (See Note 2G.)
4B Former Mineral Processing Site in Denver, Colorado
In 1994, North Shore Gas 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 alleged that North Shore Gas
was 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.
North Shore Gas 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 North Shore Gas
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 North Shore Gas' motion for
summary judgment, declaring that North Shore Gas 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.
North Shore Gas does not believe that it has liability for the
response costs, but cannot determine the matter with certainty. At
this time, North Shore Gas cannot reasonably estimate what range of
loss, if any, may occur. In the event that North Shore Gas
incurred liability, it would pursue reimbursement from insurance
carriers, other responsible parties, if any, and through its rates
for utility service.
4C Gasoline Release in Wheeling, Illinois
In June 1995, North Shore Gas received a letter from the IEPA
informing North Shore Gas 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 North Shore Gas 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 North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. North
Shore Gas 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 or North
Shore Gas.
5. COVENANTS REGARDING RETAINED EARNINGS
North Shore Gas' 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 June
30, 1997, such restrictions amounted to $11.6 million out of North
Shore Gas' total retained earnings of $75.4 million.
6. EXPIRATION OF GAS STORAGE CONTRACTS
Peoples Gas and North Shore Gas had certain natural gas storage
contracts with Natural that expired on or before December 1, 1995.
Associated with the expiration of the contracts, the utilities
realized a gain, after income taxes, of approximately $1.8 million
for the 12-months ended June 30, 1997.
7. TAX MATTERS
On September 30, 1993, the Company received notification from
the Internal Revenue Service (IRS) that settlement of past income
tax returns had been reached for fiscal years 1978 through 1990.
The IRS settlement resulted in payments of principal and interest
to the Company in 1994 in total amount of approximately $28
million, or $21.6 million after income taxes. Both Peoples Gas and
North Shore Gas received regulatory authorization to defer the
recognition of the settlement amount in income for fiscal year
1993, and to recognize their respective portions of the settlement
amount in income for fiscal years 1994 and 1995. Each utility
represented to the Commission that, having received this accounting
authorization, it would not file a request for an increase in base
rates before December 1994.
As a result of the Commission's accounting authorization,
Peoples Gas and North Shore Gas amortized to operation expense
approximately $1.3 million, or $952,000 after income taxes, for the
12-months ended June 30, 1996. The effect was to offset increases
in costs that the utilities incurred during the period.
8. LONG-TERM DEBT
8A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds,
which are secured by Peoples Gas' Adjustable-Rate First Mortgage
Bonds, Series W, is subject to adjustment annually on October 1.
Owners of the Series C Bonds have the right to tender such bonds at
par during a limited period prior to that date. Peoples Gas is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series C Bonds that were tendered prior to October
1, 1996, have been remarketed. The interest rate on such bonds is
3.95 per cent for the period October 1, 1996, through September 30,
1997.
The rate of interest on the City of Chicago 1993 Series B Bonds,
which are secured by Peoples Gas' Adjustable-Rate First Mortgage
Bonds, Series EE, is subject to adjustment annually on December 1.
Owners of the Series B Bonds have the right to tender such bonds at
par during a limited period prior to that date. Peoples Gas is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series B Bonds that were tendered prior to
December 1, 1996, have been remarketed. The interest rate on such
bonds is 3.70 per cent for the period December 1, 1996, through
November 30, 1997.
Peoples Gas classifies these adjustable-rate bonds as long-term
liabilities, since it would refinance them on a long-term basis if
they could not be remarketed. In order to ensure its ability to do
so, on February 1, 1994, Peoples Gas established a $37.4 million
three year line of credit with The Northern Trust Company, which
has since been extended to January 31, 1999.
8B Bonds Redeemed
On December 29, 1995, Peoples Gas redeemed, from general
corporate funds, approximately $87 million aggregate principal
amount of the City of Joliet's 1984 Gas Supply Revenue Bonds,
Series A and B, which were secured by Peoples Gas' Series U and V
First and Refunding Mortgage Bonds.
On February 1, 1996, North Shore Gas redeemed $8 million
aggregate principal amount of its Series I First Mortgage Bonds
using the proceeds of a short-term bank loan as well as other
monies of North Shore Gas. The final payment on the short-term
bank loan was made by North Shore Gas on August 1, 1996.
9. PENSION EXPENSE
Pension expense for the Company decreased $7.8 million, $19
million, and $26.4 million for the three-, nine-, and 12-month
periods, respectively. The decrease in pension expense was caused
by settlement accounting attributed to an increase in the number of
employees choosing early retirement and changes in actuarial
assumptions.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income decreased $2.5 million, to $11.7 million, for the
three-months ended June 30, 1997, resulting from decreased gas
deliveries due to conservation and the prior period's gain
associated with the expiration of gas storage contracts. (See Note
6 of the Notes to Consolidated Financial Statements.) These
effects were partially offset by decreased pension expense caused
by settlement accounting attributed to an increase in the number of
employees choosing early retirement and changes in actuarial
assumptions. (See Note 9 of the Notes to Consolidated Financial
Statements.)
Net income increased $106,000, to $112.5 million, and $4.5
million, to $103.5 million for the current nine- and 12-months
ended June 30, 1997, respectively, due to the aforementioned
decrease in pension costs, and a tax accrual adjustment. In
addition, net income in the nine- and 12-month periods benefited
from the full effect of the utilities' rate increases that went
into effect on November 14, 1995 (see Note 3A of the Notes to
Consolidated Financial Statements). These positive impacts were
partially offset by reduced gas deliveries due to conservation and
warmer weather and last year's gain associated with the expiration
of certain natural gas storage contracts. (See Note 6 of the Notes
to Consolidated Financial Statements.)
<TABLE>
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
Three Months Ended Nine Months Ended 12 Months Ended
June 30, 1997 June 30,1997 June 30, 1997
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
from Prior Period from Prior Period from Prior Period
(Thousands of dollars) Amount % Amount % Amount %
- -------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues (a) $(5,174) (4.5) $(11,201) (2.4) $(6,221) (1.1)
Operation and
maintenance expenses (7,352) (11.1) (19,917) (9.8) (20,275) (7.6)
Depreciation and
amortization expense 554 3.1 2,865 5.4 3,944 5.7
Income taxes 958 17.2 2,260 3.5 5,778 10.9
Other income and deductions (3,467) (66.3) (4,265) (19.5) (434) (1.3)
Net Income (2,512) (17.6) 106 0.1 4,521 4.6
<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>
Net Operating Revenues
Gross revenues of Peoples Gas and North Shore Gas are affected
by changes in the unit cost of the subsidiaries' 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
subsidiaries. The direct customer purchases have no effect on net
income because the utilities provide transportation service for
such gas volumes and recover margins similar to those applicable to
conventional gas sales. Changes in the unit cost of gas do not
significantly affect net income because the utilities' tariffs
provide for dollar-for-dollar recovery of gas costs. (See Note 2F
of the Notes to Consolidated Financial Statements.) The utilities'
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 subsidiaries, 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 $5.2 million, to $109.5
million, $11.2 million, to $460.1 million, and $6.2 million, to
$536.4 million, for the current three-, nine-, and 12-month
periods, respectively, reflecting decreased gas deliveries, mainly
caused by conservation and warmer weather. However, the effects of
these factors on the nine- and 12-month periods were partially
offset by the full effect of the utilities' rate increases.
See Other Matters - Operating Statistics for details of selected
financial and operating information by customer classification.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased $7.4 million, to
$58.7 million, for the current three-month period, due mainly to a
$7.8 million decrease in pension expense caused by settlement
accounting attributed to an increase in the number of employees
choosing early retirement and by changes in actuarial assumptions.
(See Note 9 of the Notes to Consolidated Financial Statements.)
Also, the provision for uncollectible accounts decreased $1.8
million. These decreases in costs were partially offset by an
increase in payments for outside services and higher administrative
and general expenses.
Operation and maintenance expenses decreased $19.9 million, to
$183.9 million, for the current nine-month period, due primarily to
a $19.0 million decrease in the aforementioned pension expense, and
a reduction in the costs associated with injuries and damages ($1.9
million). These items were partially offset by an increase in
amounts paid for outside services of $1.0 million.
Operation and maintenance expenses decreased $20.3 million, to
$246.0 million, for the current 12-month period, due largely to a
$26.4 million decrease in pension expense. The decrease in pension
expense was partially offset by increases in payments for outside
services ($1.9 million), an increase in the cost of operating and
maintaining the utilities' distribution systems ($1.5 million), the
prior period's recognition of an IRS settlement (see Note 7 of the
Notes to Consolidated Financial Statements), which reduced expenses
by $1.3 million and an increase in environmental costs recovered
through rates ($1.1 million).
Depreciation and Amortization Expense
Depreciation and amortization expense increased $554,000, to
$18.6 million, for the current three-month period, due primarily to
net property additions.
Depreciation and amortization expense increased $2.9 million, to
$55.5 million, and $3.9 million to $73.5 million, for the current
nine- and 12-month periods, due primarily to depreciable property
additions and the amortization of costs associated with the closing
of Peoples Gas' synthetic natural gas-making plant.
Income Taxes
Income taxes, exclusive of income taxes included in other income
and deductions, increased $958,000, to $6.5 million for the
three-month period due to increased pre-tax income.
Income taxes, exclusive of income taxes included in other income
and deductions, increased $2.3 million, to $66.4 million and $5.8
million to $58.9 million for the current nine- and 12-month
periods, due primarily to increased pre-tax income. These
increases were partially offset by a reduction to taxes accrued.
Other Income and Deductions
Other income and deductions increased $3.5 million for the
current three-month period, due chiefly to the prior year's gain of
$3.3 million, after income taxes, associated with the expiration of
certain natural gas storage contracts. (See Note 6 of the Notes to
the Consolidated Financial Statements.) This impact was partially
offset by lower interest expense.
Other income and deductions increased $4.3 million for the
current nine-month period, due primarily to the prior year's gain
of $7.2 million, after income taxes, associated with the expiration
of certain natural gas storage contracts (see Note 6 of the Notes
to the Consolidated Financial Statements) and to lower other
income. These effects were partially offset by lower interest
expense.
Other income and deductions increased $434,000 for the current
12-month period, due primarily to the prior period's gain
associated with the expiration of certain natural gas storage
contracts and to lower interest income in the current period.
These negative factors were partially offset by lower interest
costs.
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.
Accounting Standards. In March 1995, the Financial Accounting
Standards Board (FASB) issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ". This statement requires recognition of impairment
losses on long-lived assets when an asset's book value may not be
recoverable. For regulated companies, the statement requires that
regulatory assets be probable of recovery at every balance sheet
date. This statement requires adoption no later than the Company's
1997 fiscal year. The Company does not expect the adoption of SFAS
No. 121 to have a material adverse effect on its financial position
or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement requires companies to
either recognize compensation costs measured at fair value
attributable to employee stock options or similar equity
instruments at the grant date in net income, or, in the
alternative, provide pro forma footnote disclosure on net income
and earnings per share. This statement requires adoption no later
than the Company's 1997 fiscal year. The Company anticipates
electing the pro forma footnote disclosure provisions of this
statement in 1997.
FERC Order 636 Costs. In 1992, the FERC issued Order 636 and
successor orders that required substantial restructuring of the
service obligations of interstate pipelines. (See Notes 2F, 3A,
and 3B of the Notes to Consolidated Financial Statements.)
In 1994, the Commission entered orders providing for full
recovery by Peoples Gas and North Shore Gas of FERC Order 636
transition costs from the utilities' respective gas service
customers. The Commission's orders have been appealed to the
Illinois Supreme Court. (See Notes 2F, 3A, and 3B of the Notes to
Consolidated Financial Statements.)
Large Volume Gas Service Agreements. Peoples Gas and North Shore
Gas have entered into gas service contracts with certain large
volume customers under specific rate schedules approved by the
Commission. These contracts were negotiated to overcome the
potential threat of bypassing the utilities' distribution systems.
The contracts will not have a material adverse effect on the
financial position or results of operations of Peoples Gas or North
Shore Gas.
Small Volume Transportation Service. On June 25, 1997, the
Illinois Commerce Commission approved Riders SVT and AGG for
Peoples Gas which will initiate a two year pilot program designed
to provide transportation service to certain small volume customers
of the utility. The Commission also ordered a concurrent
investigation of the program to ascertain if program adjustments or
revisions are required.
<TABLE>
Operating Statistics. The following table represents gas
distribution margin components:
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------ ----------------- -------------------
1997 1996 1997 1996 1997 1996
----- ----- ----- ----- ----- ----
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands):
Gas sales
Residential $146,519 $182,717 $ 863,153 $787,405 $ 958,848 $868,005
Commercial 22,437 26,780 134,730 126,883 149,442 137,229
Industrial 4,424 7,157 27,622 29,830 29,866 31,659
-------- -------- --------- -------- --------- ---------
173,380 216,654 1,025,505 944,118 1,138,156 1,036,893
Transportation
Residential 7,219 7,661 32,640 32,392 37,381 37,309
Commercial 8,888 9,758 42,253 45,335 48,168 52,252
Industrial 6,525 9,001 25,522 31,098 30,483 38,178
Contract Pooling 2,472 1,910 17,675 1,910 20,198 1,910
Other -- -- 406 -- 406 --
-------- -------- --------- --------- --------- ---------
25,104 28,330 118,496 110,735 136,636 129,649
-------- -------- --------- --------- --------- ---------
Other Revenues 3,950 3,516 13,566 9,809 16,769 12,826
-------- -------- --------- --------- --------- ---------
Total Operating Revenues 202,434 248,500 1,157,567 1,064,662 1,291,561 1,179,368
Less - Gas Costs 72,651 110,346 581,313 484,249 626,938 515,882
- Revenues Taxes 20,282 23,479 116,166 109,124 128,214 120,856
--------- -------- --------- --------- --------- ---------
Net Operating Revenues $109,501 $114,675 $ 460,088 $471,289 $ 536,409 $ 542,630
========= ======== ========= ========= ========= =========
Deliveries (MDth):
Gas Sales
Residential 23,313 25,011 134,405 144,192 144,341 154,543
Commercial 4,359 4,185 22,923 25,251 25,063 27,114
Industrial 966 1,252 5,118 6,366 5,554 6,780
--------- -------- --------- --------- --------- ---------
28,638 30,448 162,446 175,809 174,958 188,437
--------- -------- --------- --------- --------- ---------
Transportation (a)
Residential 5,181 5,261 25,696 24,075 28,144 26,361
Commercial 7,238 7,708 36,114 38,165 40,409 43,340
Industrial 8,537 10,650 31,522 36,563 38,324 45,453
Other -- -- 234 -- 234 --
--------- -------- --------- --------- --------- ----------
20,956 23,619 93,566 98,803 107,111 115,154
--------- -------- --------- --------- --------- ----------
Total Gas Sales
and Transportation 49,594 54,067 256,012 274,612 282,069 303,591
========= ======== ========= ========= ========= ==========
Margin per Dth
delivered $2.21 $2.12 $1.80 $1.72 $1.90 $1.79
<FN>
(a)Volumes associated with contract pooling revenues are
included in their respective customer classes.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Indenture Restrictions. North Shore Gas' 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 June 30, 1997, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$75.4 million. (See Note 5 of the Notes to Consolidated Financial
Statements.)
Rate Order. On November 8, 1995, the Commission issued orders
approving changes in rates of Peoples Gas and North Shore Gas.
(See Note 3A of the Notes to Consolidated Financial Statements.)
Environmental Matters. The Company's utility subsidiaries are
conducting environmental investigations and work at certain sites
that were the location of former manufactured gas operations. (See
Note 4A of the Notes to Consolidated Financial Statements.)
In 1994, North Shore Gas 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. North Shore Gas filed a
declaratory judgment action asking the court to declare that North
Shore Gas 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 North Shore Gas' motion for summary
judgment, declaring that North Shore Gas 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 4B 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 North Shore
Gas 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 North Shore Gas accidentally struck a
gasoline pipeline owned by West Shore Pipeline Company. North
Shore Gas is currently contesting this suit. (See Note 4C of the
Notes to Consolidated Financial Statements.)
District Energy. Peoples District Energy is a 50 per cent
participant in a partnership, Trigen-Peoples District Energy
Company, that provides district energy services to the McCormick
Place Exposition and Convention Center, in Chicago, Illinois. In
May, 1998 the partnership will begin providing district energy
services to the adjacent Hyatt Regency McCormick Place Hotel.
Neither the partnership nor its partners are regulated as a public
utility. The Company and Trigen Energy Corporation have provided a
joint and several limited guarantee to the owner and operator of
McCormick Place and also have certain limited obligations to the
partnership's lender under a Sponsors Support and Equity
Contribution Agreement.
Bonds Redeemed. On December 29, 1995, Peoples Gas redeemed, from
general corporate funds, approximately $87 million aggregate
principal amount of the City of Joliet's 1984 Gas Supply Revenue
Bonds, Series A and B, which were secured by Peoples Gas' Series U
and V First and Refunding Mortgage Bonds. (See Note 8B of the
Notes to Consolidated Financial Statements.)
On February 1, 1996, North Shore Gas redeemed $8 million
aggregate principal amount of its Series I First Mortgage Bonds
using the proceeds of a short-term bank loan as well as other
monies of North Shore Gas. (See Note 8B of the Notes to
Consolidated Financial Statements.)
Credit Lines. The utility subsidiaries have lines of credit of
$114.4 million. At June 30, 1997, the utility subsidiaries had
unused credit available of $114.4 million.
Interest Coverage. The fixed charges coverage ratios for Peoples
Gas for the 12-months ended June 30, 1997, and for fiscal 1996 and
1995 were 5.27, 4.84, and 2.76, respectively.
The corresponding coverage ratios for North Shore Gas for the
same periods were 6.06, 5.62, and 2.93, respectively.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 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
------------------------------------------------------
3(a) Amendment to the By-Laws of the Registrant
dated July 1, 1997.
3(b) By-Laws of the Registrant, as amended,
dated July 1, 1997.
27 Financial Data Schedule.
b. Reports on Form 8-K filed during the quarter ended June
30, 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.
Peoples Energy Corporation
--------------------------
(Registrant)
August 12 , 1997 By: /s/ K. S. BALASKOVITS
--------------------- --------------------------------
(Date) K. S.Balaskovits
Vice President and Controller
(Same as above)
------------------------------
Principal Accounting Officer
EXHIBIT 3(A)
PEOPLES ENERGY CORPORATION
ACTION OF THE BOARD OF DIRECTORS
BY WRITTEN CONSENT IN LIEU OF MEETING
The Board of Directors of the Company has taken the
following action by unanimous written consent:
RESOLVED, That Section 3.1 of Article
III of the By-Laws of the Company be, and it
hereby is, amended by deleting said Section in
its entirety and substituting the following in
lieu thereof:
ARTICLE III
Directors and Committees
SECTION 3.1. Number and Election.
The business and affairs of the Company shall
be managed and controlled by a Board of
Directors, eleven (11) in number, none of whom
need to be a shareholder, which number may be
altered from time to time by amendment of these
by-laws, but shall never be less than three
(3). Except as provided in the Articles of
Incorporation, the directors shall be elected
by the shareholders entitled to vote at the
annual meeting of such shareholders and each
director shall be elected to serve for a term
of one (1) year and thereafter until a
successor shall be elected and shall qualify.
Only persons who are nominated in accordance
with the procedures set forth in this section
shall be eligible to be nominated as directors
at any meeting of the shareholders of the
Company. At any meeting of the shareholders of
the Company, nominations of persons for
election to the Board of Directors may be made
(1) by or at the direction of the Board of
Directors or (2) by any shareholder of the
Company who is a holder of record at the time
of giving the notice provided for in this
section, who shall be entitled to vote at the
meeting, and who complies with the notice
procedures set forth in this section. For a
nomination to be properly brought before a
shareholders' meeting by a shareholder, timely
written notice shall be made to the Secretary
of the Company. The shareholder's notice shall
be delivered to, or mailed and received at, the
principal office of the Company no less than 60
days nor more than 90 days prior to the
meeting; provided, however, in theevent that less
than 70 days notice or prior public disclosure of
the date of the meeting is given or made to
shareholders, notice by the shareholder to be
timely must be received not later than the
close of business on the tenth day following
the day on which the notice of the date of the
meeting was mailed or the public disclosure was
made; provided further, however, notice by the
shareholder to be timely must be received in
any event not later than the close of business
on the seventh day preceding the day on which
the meeting is to be held. The shareholder's
notice shall set forth (1) as to each person
whom the shareholder proposes to nominate for
election or reelection as a director, all
information relating to such person that is
required to be disclosed in solicitations of
proxies for election of directors, or is
otherwise required by applicable law (including
the person's written consent to being named as
a nominee and to serving as a director if
elected), and (2) (a) the name and address, as
they appear on the Company's books, of the
shareholder, (b) the class and number of shares
of capital stock of the Company owned by the
shareholder, and (c) a description of all
arrangements or understandings between the
shareholder and each nominee and any other
person or persons (naming such person or
persons) pursuant to which the nomination or
nominations are to be made by the shareholder.
The shareholder shall also comply with all
applicable requirements of the 1934 Act and the
rules and regulations thereunder with respect
to the matters set forth in this section. If
the chairman of the meeting shall determine and
declare at the meeting that a nomination was
not made in accordance with the procedures
prescribed by this section, the nomination
shall not be accepted.
and
RESOLVED FURTHER, That William J.
Brodsky be, and he hereby is, elected a
director of the Company, to serve until the
next annual election of directors of this
Company or until his successor is duly elected
and qualified.
IN WITNESS WHEREOF, the Board of Directors PEOPLES
ENERGY CORPORATION has caused this Written Consent to be executed
as of July 1, 1997.
/s/ Pastora San Juan Cafferty /s/ J. Bruce Hasch
- ------------------------------------- ------------------------------
/s/ Frederick C. Langenberg /s/ Homer J. Livingston, Jr.
- --------------------------------------- ---------------------------------
/s/ William G. Mitchell /s/ Earl L.Neal
- ---------------------------------------- --------------------------------
/s/ Michael S. Reeves /s/ Richard E. Terry
- ----------------------------------------- --------------------------------
/s/ Richard P. Toft /s/ Arthur R. Velasquez
- ------------------------------------------ -------------------------------
Exhibit 3(b)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED JULY 1, 1997
PEOPLES ENERGY CORPORATION
BY-LAWS
ARTICLE I - OFFICES
ARTICLE II - MEETINGS OF SHAREHOLDERS
ARTICLE III - DIRECTORS AND COMMITTEES
ARTICLE IV - OFFICERS
ARTICLE V - INDEMNIFICATION OF DIRECTORS,
OFFICERS, EMPLOYEES AND AGENTS
ARTICLE VI - CERTIFICATES OF STOCK AND THEIR
TRANSFER
ARTICLE VII - MISCELLANEOUS (CONTRACTS)
ARTICLE VIII - AMENDMENT OR REPEAL OF BY-LAWS
PEOPLES ENERGY CORPORATION
INDEX
PAGE
A
Amendment of By-Laws 18
Appointment of Officers 10
Assistant Controller, Duties of 13
Assistant General Counsel, Duties of 13
Assistant Secretary, Duties of 13
Assistant Treasurer, Duties of 13
Assistant Vice President, Duties of 12
B
Board of Directors 5
C
Certificates of Stock and Their Transfer 15
Chairman of the Board, Duties of 11
Chairman of the Executive Committee 8
Committees
Executive 8
Other 9
Controller, Duties of 13
Contracts, Execution of 17
D
Directors and Committees 5
E
Election of Directors 5
Election of Officers 10
Executive Committee 8
F
Fees and Compensation 9
PEOPLES ENERGY CORPORATION
PAGE
G
General Counsel, Duties of 13
I
Indemnification of Directors, Officers, Employees
and Agents 14
M
Meetings
Directors 7
Action Without Meeting 9
Shareholders 1
N
Notice of Meetings
Directors 7
Shareholders 2
O
Officers
Appointed 10
Elected 10
Offices, Two or More Held By One Person 10
P
President, Duties of 11
Presiding Officer
Board Meetings 8
Shareholders Meetings 5
Proxies 4
Q
Quorum
Board 7
Shareholders 4
PEOPLES ENERGY CORPORATION
PAGE
S
Secretary, Duties of 12
Signatures to Checks, Drafts, etc. 17
Stock, Certificates of and their Transfer 15
T
Treasurer, Duties 12
V
Vice President, Duties of 12
Voting
Shareholders 4
Stock Owned by Company 18
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
ARTICLE I
Offices
SECTION 1.1.
Principal Office. The principal office of the Company shall be
in the City of Chicago, County of Cook and State of Illinois.
SECTION 1.2.
Other Offices. The Company may also have offices at such other
places both within and without the State of Illinois as the Board
of Directors may from time to time determine or the business of
the Company may require.
ARTICLE II
Meetings of Shareholders
SECTION 2.1.
Annual Meeting. The annual meeting of the shareholders shall be
held on the fourth Friday of the month of February in each year,
if not a legal holiday, or, if a legal holiday, then on the next
succeeding business day, for the purpose of electing directors
and for the transaction of such other business as may come before
the meeting. If the election of directors shall not be held on
the day herein designated for the annual meeting, or at any
adjournment thereof, the Board of Directors shall cause such
election to be held at a special meeting of the shareholders as
soon thereafter as convenient.
SECTION 2.2.
Special Meetings. Except as otherwise prescribed by statute,
special meetings of the shareholders for any purpose or purposes,
may be
called by the Chairman of the Board, the Vice Chairman of the
Executive Committee, the Executive Committee or the President.
Such request shall state the purpose or purposes of the proposed
meeting.
SECTION 2.3.
Place of Meetings. Each meeting of the shareholders for the
election of the directors shall be held at the principal office
of the Company in the City of Chicago, Illinois, unless the Board
of Directors shall by resolution designate another place as the
place of such meeting. Meetings of shareholders for any other
purpose may be held at such place, and at such time as shall be
determined by the Chairman of the Board, or the President, or in
their absence, by the Secretary, and stated in the notice of the
meeting or in a duly executed waiver of notice thereof.
SECTION 2.4.
Notice of Meetings. Written or printed notice stating the place,
date and hour of each annual or special meeting of the
shareholders, and, in the case of a special meeting, the purpose
or purposes for which the meeting is called, shall be given not
less than 10 nor more than 60 days before the date of the
meeting, except as otherwise provided in this section or by
statute. Notice of any meeting of the shareholders may be waived
by any shareholder. At any meeting of the shareholders of the
Company, only such business shall be conducted as shall have been
brought before the meeting (1) by or at the direction of the
Board of Directors or (2) by any shareholder of the Company who
is a holder of record at the time of giving the notice provided
for in this section, who shall be entitled to vote at the
meeting, and who complies with the notice procedures set forth in
this section. For business to be properly brought before a
shareholders' meeting by a shareholder, timely written notice
shall be made to the Secretary of the Company. The shareholder's
notice shall be delivered to, or mailed and received at, the
principal office of the Company not less than 60 days nor more
than 90 days prior to the meeting; provided, however, in the
event that less than 70 days notice or prior public disclosure of
the date of the meeting is given or made to shareholders, notice
by the shareholder to be timely must be received not later than
the close of business on the tenth day following the day on which
the notice of the date of the meeting was mailed or the public
disclosure was made; provided further however, notice by the
shareholder to be timely must be received in any event not later
than the close of business on the seventh day preceding the day
on which the meeting is to be held. The shareholder's notice
shall set forth (1) a brief description of the business desired
to be brought before the meeting and the reasons for considering
the business, and (2) (a) the name and address, as they appear on
the Company's books, of the shareholder, (b) the class and number
of shares of capital stock of the Company owned by the
shareholder, and (c) any material interest of the shareholder in
the proposed business. The shareholder shall also comply with
all applicable requirements of the Securities Exchange Act of
1934 (the "1934 Act") and the rules and regulations thereunder
with respect to the matters set forth in this section. If the
chairman of the meeting shall determine and declare at the
meeting that the proposed business was not brought before the
meeting in accordance with the procedures prescribed by this
section, the business shall not be considered. The notice
procedures set forth in this section 2.4 do not change or limit
any procedures the Company may require in accordance with
applicable law with respect to the inclusion of matters in the
Company's proxy statement.
SECTION 2.5.
Quorum. 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 for, and shall
constitute, a quorum at all meetings of the shareholders of the
Company for the transaction of business, except as otherwise
provided by statute or these by-laws. If a quorum shall not be
present or represented at any meeting of the shareholders, the
shareholders entitled to vote thereat, present in person or
represented by proxy, shall have power to adjourn the meeting
from time to time, without notice other than announcement at the
meeting if the adjournment is for thirty days or less or unless
after that adjournment a new record date is fixed, until a quorum
shall be present or represented. At such adjourned meeting at
which a quorum shall be present or represented, any business may
be transacted which might have been transacted at the meeting as
originally noticed.
SECTION 2.6.
Proxies. At every meeting of the shareholders, each shareholder
having the right to vote thereat shall be entitled to vote in
person or by proxy. Such proxy shall be appointed by an
instrument in writing subscribed by such shareholder and bearing
a date not more than eleven months prior to such meeting, unless
such proxy provides for a longer period, and shall be filed with
the Secretary of the Company before, or at the time of, the
meeting.
SECTION 2.7.
Voting. At each meeting of the shareholders, each shareholder
shall be entitled to one vote for each share of stock entitled to
vote thereat which is registered in the name of such shareholder
on the books of the Company. At all elections of directors of
the Company, the holders of shares of stock of the Company shall
be entitled to cumulative voting. When a quorum is present at
any meeting of the shareholders, the vote of the holders of a
majority of the shares present in person or represented by proxy
and entitled to vote at the meeting shall be sufficient for the
transaction of any business, unless otherwise provided by
statute, the Articles of Incorporation or these by-laws.
SECTION 2.8.
Presiding Officer. The presiding officer of any meeting of the
shareholders shall be the Chairman of the Board or, in the case
of the absence of the Chairman of the Board, the President.
ARTICLE III
Directors and Committees
SECTION 3.1. Number and Election. The business and
affairs of the Company shall be managed and controlled by a Board
of Directors, eleven (11) in number, none of whom need to be a
shareholder, which number may be altered from time to time by
amendment of these by-laws, but shall never be less than three
(3). Except as provided in the Articles of Incorporation, the
directors shall be elected by the shareholders entitled to vote
at the annual meeting of such shareholders and each director
shall be elected to serve for a term of one (1) year and
thereafter until a successor shall be elected and shall qualify.
Only persons who are nominated in accordance with the procedures
set forth in this section shall be eligible to be nominated as
directors at any meeting of the shareholders of the Company. At
any meeting of the shareholders of the Company, nominations of
persons for election to the Board of Directors may be made (1) by
or at the direction of the Board of Directors or (2) by any
shareholder of the Company who is a holder of record at the time
of giving the notice provided for in this section, who shall be
entitled to vote at the meeting, and who complies with the notice
procedures set forth in this section. For a nomination to be
properly brought before a shareholders' meeting by a shareholder,
timely written notice shall be made to the Secretary of the
Company. The shareholder's notice shall be delivered to, or
mailed and received at, the principal office of the Company no
less than 60 days nor more than 90 days prior to the meeting;
provided, however, in the event that less than 70 days notice or
prior public disclosure of the date of the meeting is given or
made to shareholders, notice by the shareholder to be timely must
be received not later than the close of business on the tenth day
following the day on which the notice of the date of the meeting
was mailed or the public disclosure was made; provided further,
however, notice by the shareholder to be timely must be received
in any event not later than the close of business on the seventh
day preceding the day on which the meeting is to be held. The
shareholder's notice shall set forth (1) as to each person whom
the shareholder proposes to nominate for election or reelection
as a director, all information relating to such person that is
required to be disclosed in solicitations of proxies for election
of directors, or is otherwise required by applicable law
(including the person's written consent to being named as a
nominee and to serving as a director if elected), and (2) (a) the
name and address, as they appear on the Company's books, of the
shareholder, (b) the class and number of shares of capital stock
of the Company owned by the shareholder, and (c) a description of
all arrangements or understandings between the shareholder and
each nominee and any other person or persons (naming such person
or persons) pursuant to which the nomination or nominations are
to be made by the shareholder. The shareholder shall also comply
with all applicable requirements of the 1934 Act and the rules
and regulations thereunder with respect to the matters set forth
in this section. If the chairman of the meeting shall determine
and declare at the meeting that a nomination was not made in
accordance with the procedures prescribed by this section, the
nomination shall not be accepted.
SECTION 3.2.
Regular Meetings. A regular meeting of the Board of Directors
shall be held immediately, or as soon as practicable, after the
annual meeting of the shareholders in each year for the purpose
of electing officers and for the transaction of such other
business as may be deemed necessary, and regular meetings of the
Board shall be held at such date and time and at such place as
the Board of Directors may from time to time determine. Not less
than two days' notice of all regular meetings of the Board,
except the meeting to be held after the annual meeting of
shareholders which shall be held without other notice than this
by-law, shall be given to each director personally or by mail or
telegram.
SECTION 3.3.
Special Meetings. Special meetings of the Board may be called at
any time by the Chairman of the Board, the President, or by any
two directors, by causing the Secretary to mail to each director,
not less than three days before the time of such meeting, a
written notice stating the time and place of such meeting.
Notice of any meeting of the Board may be waived by any director.
SECTION 3.4.
Quorum. At each meeting of the Board of Directors, the presence
of not less than a majority of the total number of directors
specified in Section 3.1 hereof 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. If a quorum shall not be present at any meeting of
directors, the directors present thereat may adjourn the meeting
from time to time, without notice other than announcement at the
meeting, until a quorum shall be present. In determining the
presence of a quorum at a meeting of the directors or a committee
thereof for the purpose of authorizing a contract or transaction
between the Company and one or more of its directors, or between
the Company and any other corporation, partnership, association,
or other organization in which one or more of the directors of
this Company are directors or officers, or have a financial
interest in such other organization, such interested director or
directors may be counted in determining a quorum.
SECTION 3.5.
Presiding Officer. The presiding officer of any meeting of the
Board of Directors shall be the Chairman of the Board. In the
case of the absence of the Chairman of the Board, for reasons
other than provided in Section 4.3, the President shall act in
his place and stead. In the case of the temporary absence of
both the Chairman of the Board and the President, the Vice
Chairman of the Executive Committee or, in his absence, any other
director elected by vote of a majority of the directors present
at the meeting, shall act as chairman of the meeting.
SECTION 3.6.
Executive Committee. The Executive Committee of the Board of
Directors shall consist of the Chairman of the Board who shall be
the Chairman of the Executive Committee, and each of the
nonmanagement directors. The Chairman of the Board shall select
a Vice Chairman of the Executive Committee subject to the
approval of the Board of Directors of the Company. The Executive
Committee shall, in the recess of the Board, have all the powers
of the Board except those powers which, under the law of the
State of Illinois, may not be exercised by such Committee and
shall keep a record of its proceedings and report the same to the
Board. The Executive Committee may meet at any place whenever
required by a member of the Committee and may act by the consent
of a majority of its members, although not formally convened.
SECTION 3.7.
Other Committees. The Board may appoint other committees,
standing or special, from time to time from among its own members
or otherwise, and may confer such powers on such committees as
the Board may determine and may revoke such powers and terminate
the existence of such committees at its pleasure.
SECTION 3.8.
Action Without Meeting. Any action required or permitted to be
taken at any meeting of the Board of Directors, or any committee
thereof, may be taken without a meeting if all members of the
Board or of such committee, as the case may be, consent thereto
in writing and such writing or writings are filed with the
minutes of the proceedings of the Board or such committee.
SECTION 3.9.
Fees and Compensation of Directors. Directors shall not receive
any stated salary for their services as such; but, by resolution
of the Board of Directors, reasonable fees, with or without
expenses of attendance, may be allowed. Members of the Board
shall be allowed their reasonable traveling expenses when
actually engaged in the business of the Company, to be audited
and allowed as in other cases of demands against the Company.
Members of standing or special committees may be allowed fees and
expenses for attending committee meetings. Nothing herein
contained shall be construed to preclude any director from
serving the Company in any other capacity and receiving
compensation therefor.
ARTICLE IV
Officers
SECTION 4.1.
Election of Officers. There shall be elected by the Board of
Directors in each year the following officers: a Chairman of the
Board; a President; such number of Senior Vice Presidents, such
number of Executive Vice Presidents, such number of Vice
Presidents and such number of Assistant Vice Presidents as the
Board at the time may decide upon; a Secretary; such number of
Assistant Secretaries as the Board at the time may decide upon; a
Treasurer; such number of Assistant Treasurers as the Board at
the time may decide upon; a Controller; and such number of
Assistant Controllers as the Board at the time may decide upon; a
General Counsel; and such number of Assistant General Counsel as
the Board at the time may decide upon. Any two or more offices
may be held by one person, except that the offices of President
and Secretary may not be held by the same person. All officers
shall hold their respective offices during the pleasure of the
Board.
SECTION 4.2.
Appointment of Officers. The Board of Directors, the Executive
Committee, the Chairman of the Board, or the President may from
time to time appoint such other officers as may be deemed
necessary, including one or more Vice Presidents, one or more
Assistant Vice Presidents, one or more Assistant Secretaries, one
or more Assistant Treasurers, one or more Assistant Controllers
and one or more Assistant General Counsel, and such other agents
and employees of the Company as may be deemed proper. Such
officers, agents and employees shall have such authority, perform
such duties and receive such compensation as the Board of Directors,
the Executive Committee or, in the case of appointments made by
the Chairman of the Board or the President, as the Chairman of the
Board or the President, may from time to time prescribe and determine.
The Board of Directors or the Executive Committee may from time to time
authorize any officer to appoint and remove agents and employees,
to prescribe their powers and duties and to fix their
compensation therefor.
SECTION 4.3.
Duties of Chairman of the Board. The Chairman of the Board shall
be the chief executive officer of the Company and shall have
control and direction of the management and affairs of the
Company and may execute all contracts, deeds, assignments,
certificates, bonds or other obligations for and on behalf of the
Company, and sign certificates of stock and records of
certificates required by law to be signed by the Chairman of the
Board. When present, the Chairman of the Board shall preside at
all meetings of the Board and of the shareholders. In the
absence of the Chairman of the Board, due to his permanent
disability, death, resignation or removal from office, the Vice
Chairman of the Executive Committee shall promptly convene the
Executive Committee to select a nominee for that office and
submit said nominee's name to the Board of Directors for their
consideration.
SECTION 4.4.
Duties of President. Subject to the Control and direction of the
Chairman of the Board, and to the control of the Board, the
President shall have general management of all the business of
the Company, and he shall have such other powers and perform such
other duties as may be prescribed for him by the Board or be
delegated to him by the Chairman of the Board. He shall possess
the same power as the Chairman of the Board to sign all
certificates, contracts and other instruments of the Company. In
case of the absence or disability of the President, or in case of
his death, resignation or removal from office, the powers and
duties of the President shall devolve upon the Chairman of the
Board during absence or disability, or until the vacancy in the
office of President shall be filled.
SECTION 4.5.
Duties of Vice President. Each of the Senior Vice Presidents,
Executive Vice Presidents, Vice Presidents and Assistant Vice
Presidents shall have such powers and duties as may be prescribed
for him by the Board, or be delegated to him by the Chairman of
the Board or by the President. Each of such officers shall
possess the same power as the President to sign all certificates,
contracts and other instruments of the Company.
SECTION 4.6.
Duties of Secretary. The Secretary shall have the custody and
care of the corporate seal, records and minute books of the
Company. He shall attend the meetings of the Board, of the
Executive Committee, and of the shareholders, and duly record and
keep the minutes of the proceedings, and file and take charge of
all papers and documents belonging to the general files of the
Company, and shall have such other powers and duties as are
commonly incident to the office of Secretary or as may be
prescribed for him by the Board, or be delegated to him by the
Chairman of the Board or by the President.
SECTION 4.7.
Duties of Treasurer. The Treasurer shall have charge of, and be
responsible for, the collection, receipt, custody and
disbursement of the funds of the Company, and shall deposit its
funds in the name of the Company in such banks, trust companies
or safety deposit vaults as the Board may direct. He shall have
the custody of the stock record books and such other books and
papers as in the practical business operations of the Company
shall naturally belong in the office or custody of the Treasurer,
or as shall be placed in his custody by the Board, the Chairman
of the Board, the President, or any Vice President, and shall
have such other powers and duties as are commonly incident to the
office of Treasurer, or as may be prescribed for him by the
Board, or be delegated to him by the Chairman of the Board or by
the President.
SECTION 4.8.
Duties of Controller. The Controller shall have control over all
accounting records pertaining to moneys, properties, materials
and supplies of the Company. He shall have Charge of the
bookkeeping and accounting records and functions, the related
accounting information systems and reports and executive
supervision of the system of internal accounting controls, and
such other powers and duties as are commonly incident to the
office of Controller or as may be prescribed by the Board, or be
delegated to him by the Chairman of the Board or by the
President.
SECTION 4.9.
Duties of General Counsel. The General Counsel shall have full
responsibility for all legal advice, counsel and services for the
Company and its subsidiaries including employment and retaining
of attorneys and law firms as shall in his discretion be
necessary or desirable and shall have such other powers and shall
perform such other duties as from time to time may be assigned to
him by the Board, the Chairman of the Board or the President.
SECTION 4.10.
Duties of Assistant Secretary, Assistant Treasurer, Assistant
Controller and Assistant General Counsel. The Assistant
Secretary, Assistant Treasurer, Assistant Controller and
Assistant General Counsel shall assist the Secretary, Treasurer,
Controller, and General Counsel, respectively, in the performance
of the duties assigned to each and shall for such purpose have
the same powers as his principal. He shall also have such other
powers and duties as may be prescribed for him by the Board, or
be delegated to him by the Chairman of the Board or by the
President.
ARTICLE V
Indemnification of Directors, Officers, Employees and Agents
SECTION 5.1. Indemnification of Directors, Officers and
Employees. The Company shall indemnify, to the fullest extent
permitted under the laws of the State of Illinois and any other
applicable laws, as they now exist or as they may be amended in
the future, any person who was or is a party, or is threatened to
be made a party, to any threatened, pending or completed action,
suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, an action by or in
the right of the Company), by reason of the fact that he or she
is or was a director, officer or employee of the Company, or is
or was serving at the request of the Company as a director,
officer, employee or agent of another corporation, partnership,
joint venture, trust, employee benefit plan or other enterprise
against expenses (including attorneys' fees), judgments, fines
and amounts paid in settlement actually and reasonably incurred
by such person in connection with such action, suit or
proceeding.
SECTION 5.2. Advancement of Expenses to Directors,
Officers and Employees. Expenses incurred by such a director,
officer or employee in defending a civil or criminal action, suit
or proceeding shall be paid by the Company in advance of the
final disposition of such action, suit or proceeding to the
fullest extent permitted under the laws of the State of Illinois
and any other applicable laws, as they now exist or as they may
be amended in the future.
SECTION 5.3. Indemnification and Advancement of
Expenses to Agents. The board of directors may, by resolution,
extend the provisions of this Article V regarding indemnification
and the advancement of expenses to any person who was or is a
party or is threatened to be made a party to any threatened,
pending or completed action, suit or proceeding by reason of the
fact he or she is or was an agent of the Company or is or was
serving at the request of the Company as a director, officer,
employee or agent of another corporation, partnership, joint
venture, trust, employee benefit plan or other enterprise.
SECTION 5.4. Rights Not Exclusive. The rights provided
by or granted under this Article V are not exclusive of any other
rights to which those seeking indemnification or advancement of
expenses may be entitled.
SECTION 5.5. Continuing Rights. The indemnification
and advancement of expenses provided by or granted under this
Article V shall continue as to a person who has ceased to be a
director, officer, employee or agent and shall inure to the
benefit of the heirs, executors and administrators of that
person.
ARTICLE VI
Certificates of Stock and Their Transfer
SECTION 6.1.
Certificates of Stock. The certificates of stock of the Company
shall be in such form as may be determined by the Board of
Directors, shall be numbered and shall be entered in the books of
the Company as they are issued. They shall exhibit the holder's
name and number of shares and shall be signed by the Chairman of
the Board, the President or a Vice President and also by the
Treasurer or an Assistant Treasurer or the Secretary or an
Assistant Secretary and shall bear the corporate seal or a
facsimile thereof. If a certificate is countersigned by a
transfer agent or registrar, other than the Company itself or its
employee, any other signature or countersignature on the
certificate may be facsimiles. In case any officer of the
Company, or any officer or employee of the transfer agent or
registrar, who has signed or whose facsimile signature has been
placed upon such certificate ceases to be an officer of the
Company, or an officer or employee of the transfer agent or
registrar, before such certificate is issued, said certificate
may be issued with the same effect as if the officer of the
Company, or the officer or employee of the transfer agent or
registrar, had not ceased to be such at the date of issue.
SECTION 6.2.
Transfer of Stock. Upon surrender to the Company of a
certificate for shares duly endorsed or accompanied by proper
evidence of succession, assignment or authority to transfer, and
upon payment of applicable taxes with respect to such transfer,
it shall be the duty of the Company, subject to such rules and
regulations as the Board of Directors may from time to time deem
advisable concerning the transfer and registration of
certificates for shares of stock of the Company, to issue a new
certificate to the person entitled thereto, cancel the old
certificate and record the transaction upon its books.
SECTION 6.3.
Shareholders of Record. The Company shall be entitled to treat
the holder of record of any share or shares of stock 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 or shares on the part or any other person, whether or not
it shall have express or other notice thereof, except as
otherwise provided by statute.
SECTION 6.4.
Lost, Destroyed or Stolen Certificates. The Board of Directors,
in individual cases or by general resolution, may direct a new
certificate or certificates to be issued by the Company as a
replacement for a certificate or certificates for a like number
of shares alleged to have been lost, destroyed or stolen, upon
the making of an affidavit of that fact by the person claiming
the certificate or certificates of stock to be lost, destroyed or
stolen. When authorizing such issue of a new certificate or
certificates, the Board of Directors may, in its discretion and
as a condition precedent to the issuance thereof, require the
owner of such lost, destroyed or stolen certificate or
certificates, or his legal representative, to give the Company a
bond in such form and amount as it may direct as indemnity
against any claim that may be made against the Company with
respect to the certificate or certificates alleged to have been
lost, destroyed or stolen.
ARTICLE VII
Miscellaneous
SECTION 7.1.
Contracts and Other Instruments. All contracts or obligations of
the Company shall be in writing and shall be signed either by the
Chairman of the Board, the President, or any Vice President and,
unless the Board shall otherwise determine and direct, the seal
of the Company shall be attached thereto, duly attested by the
Secretary or an Assistant Secretary, except contracts entered
into in the ordinary course of business where the amount involved
is less than Five Hundred Thousand Dollars ($500,000), and except
contracts for the employment of servants or agents, which
contracts so excepted may be entered into by the Chairman of the
Board, the President, any Vice President, or by such officers or
agents as the Chairman of the Board or the President may
designate and authorize. Unless the Board shall otherwise
determine and direct, all checks or drafts and all promissory
notes shall be signed by two officers of the Company. When
prescribed by the Board, bonds, promissory notes, and other
obligations of the Company may bear the facsimile signature of
the officer who is authorized to sign such instruments and,
likewise, may bear the facsimile signature of the Secretary or an
Assistant Secretary.
SECTION 7.2.
Voting Stock Owned by Company. Any or all shares owned by the
Company in any other corporation, and any or all voting trust
certificates owned by the Company calling for or representing
shares of stock of any other corporation, may be voted by the
Chairman of the Board, the President, any Vice President, the
Secretary or the Treasurer, either in person or by written proxy
given to any person in the name of the Company at any meeting of
the shareholders of such corporation, or at any meeting of voting
trust certificate holders, upon any question that may be
presented at any such meeting. Any such officer, or anyone so
representing him by written proxy, may on behalf of the Company
waive any notice of any such meeting required by any statute or
by-law and consent to the holding of such meeting without notice.
ARTICLE VIII
Amendment or Repeal of By-Laws
These by-laws may be added to, amended or repealed at
any regular or special meeting of the Board by a vote of a
majority of the membership of the Board.
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THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CONSOLIDATED STATEMENTS
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<FISCAL-YEAR-END> SEP-30-1997
<PERIOD-START> OCT-01-1996
<PERIOD-END> JUN-30-1997
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0
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<TOTAL-OPERATING-EXPENSES> 1,018,905
<OPERATING-INCOME-LOSS> 138,662
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