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 March 31, 1998
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:
35,301,276 shares of Common Stock, without par value, outstanding
at April 30, 1998.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
1998 1997 1998 1997 1998 1997
(Thousands, except per-share amounts)
OPERATING REVENUES:
<S> <C> <C> <C> <C> <C> <C>
Gas sales $ 379,178 $509,693 $721,607 $853,672 $ 992,766 $1,177,614
Transportation 41,132 54,457 78,706 92,875 119,401 144,737
Other 4,200 3,164 9,347 7,925 16,710 14,637
Total Operating Revenues 424,510 567,314 809,660 954,472 1,128,877 1,336,988
OPERATING EXPENSES:
Gas costs 206,625 319,848 404,648 508,594 511,588 664,565
Operation 53,018 49,116 103,104 103,133 200,766 206,860
Maintenance 9,700 9,937 20,240 21,463 46,405 45,942
Depreciation and amortization 18,769 18,392 37,647 36,844 74,878 72,946
Taxes - Income 29,952 36,589 52,189 59,933 46,851 57,922
- State and local revenue 41,607 56,590 77,129 95,884 107,469 131,412
- Other 8,626 5,362 13,648 10,389 24,555 21,511
Total Operating Expenses 368,297 495,834 708,605 836,240 1,012,512 1,201,158
OPERATING INCOME 56,213 71,480 101,055 118,232 116,365 135,830
OTHER INCOME
AND (DEDUCTIONS):
Interest income 664 2,091 1,348 2,579 4,178 4,813
Allowance for funds used
during construction 357 35 593 62 799 85
Interest on long-term debt
of subsidiaries (8,941) (8,935) (17,875) (17,862) (35,735) (35,733)
Other interest expense (1,032) (859) (2,292) (1,773) (3,271) (3,226)
Income taxes 59 (785) (96) (867) (1,069) (4,970)
Miscellaneous - net (204) 231 (74) 378 (953) 9,257
Total Other Income
and Deductions (9,097) (8,222) (18,396) (17,483) (36,051) (29,774)
NET INCOME $ 47,116 $ 63,258 $ 82,659 $ 100,749 $ 80,314 $ 106,056
Average Shares of Common
Stock Outstanding 35,213 34,981 35,175 34,976 35,100 34,964
Basic and Diluted Earnings
Per Share of Common Stock $ 1.34 1.81 2.35 2.88 2.29 3.03
Dividends Declared Per Share $ 0.48 0.47 0.95 0.93 1.89 1.85
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
March 31, March 31,
1998 September 30, 1997
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
<S> <C> <C> <C>
Property, plant and equipment, at original cost $2,150,729 $ 2,117,509 $2,070,420
Less - Accumulated depreciation 739,934 715,279 691,931
Net property, plant and equipment 1,410,795 1,402,230 1,378,489
Other investments 17,717 16,305 14,091
Total Capital Investments - Net 1,428,512 1,418,535 1,392,580
CURRENT ASSETS:
Cash and cash equivalents 62,903 33,298 49,870
Temporary cash investments 15,900 15,900 15,900
Receivables -
Customers, net of allowance for uncollectible accounts
of $26,154, $29,895, and $33,348, respectively 141,493 72,290 232,099
Other 35,593 39,182 31,081
Accrued unbilled revenues 65,031 22,742 61,847
Materials and supplies, at average cost 21,415 19,385 16,722
Gas in storage, at last-in, first-out cost 34,799 77,843 29,887
Gas costs recoverable through rate adjustments 13,181 5,164 -
Regulatory assets of subsidiaries 6,679 15,460 31,419
Prepayments 56,939 42,902 28,784
Total Current Assets 453,933 344,166 497,609
OTHER ASSETS:
Non-current regulatory assets of subsidiaries 36,352 38,676 40,261
Deferred charges 21,438 19,428 20,030
Total Other Assets 57,790 58,104 60,291
Total Properties and Other Assets $1,940,235 $ 1,820,805 $1,950,480
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
<TABLE>
Peoples Energy Corporation
CONSOLIDATED BALANCE SHEETS
March 31, March 31,
1998 September 30, 1997
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
<S> <C> <C> <C>
Common Stockholders' Equity:
Common stock, without par value -
Authorized 60,000,000 shares
Outstanding 35,234,424, 35,069,517, and
34,981,897 shares, respectively $ 287,528 $ 281,847 $ 278,335
Retained earnings 483,871 434,652 471,521
Total Common Stockholders' Equity 771,399 716,499 749,856
Long-term debt of subsidiaries, exclusive of sinking
fund payments and maturities due within one year 527,004 527,004 527,039
Total Capitalization 1,298,403 1,243,503 1,276,895
CURRENT LIABILITIES:
Interim loans of subsidiaries 855 2,810 700
Accounts payable 128,649 134,870 144,080
Dividends payable on common stock 16,911 16,479 16,441
Customer gas service and credit deposits 27,837 45,386 17,837
Accrued taxes 73,872 20,645 97,439
Gas sales revenue refundable through rate adjustments 227 14,894 11,817
Accrued interest 10,606 10,800 10,599
Temporary LIFO liquidation credit 42,203 - 56,603
Total Current Liabilities 301,160 245,884 355,516
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily accelerated depreciation 259,559 249,178 238,973
Investment tax credits being amortized over
the average lives of related property 33,176 33,942 34,648
Other 47,937 48,298 44,448
Total Deferred Credits and Other Liabilities 340,672 331,418 318,069
Total Capitalization and Liabilities $1,940,235 $ 1,820,805 $1,950,480
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
Peoples Energy Corporation
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Six Months Ended
March 31,
1998 1997
(Thousands of Dollars)
Operating Activities:
Net Income $ 82,659 $ 100,749
Adjustments to reconcile net income to net cash:
Depreciation and amortization 37,647 36,844
Deferred income taxes and investment tax credits - net 8,596 4,657
Change in deferred credits and other liabilities 658 4,518
Change in other assets (2,493) 2,050
Change in current assets and liabilities:
Receivables - net (65,614) (162,106)
Accrued unbilled revenues (42,289) (32,533)
Materials and supplies (2,030) (594)
Gas in storage 43,044 35,615
Gas costs recoverable (8,017) 19,920
Regulatory assets 8,781 10,861
Prepayments (14,037) (16,497)
Accounts payable (6,221) (3,892)
Customer gas service and credit deposits (17,549) (24,553)
Accrued taxes 53,227 64,618
Gas sales revenue refundable (14,667) (2,104)
Accrued interest (193) (197)
Temporary LIFO liquidation credit 42,203 56,603
Net Cash Provided by (Used in) Operating Activities 103,705 93,959
Investing Activities:
Capital expenditures of subsidiaries - construction (38,715) (31,207)
Other assets 127 528
Other capital investments (6,229) (2,511)
Other temporary cash investments - (15,000)
Net Cash Used in Investing Activities (44,817) (48,190)
Financing Activities:
Interim loans of subsidiaries - net (1,955) (1,925)
Retirement of long-term debt of subsidiaries - (25)
Dividends paid on common stock (33,009) (32,173)
Proceeds from issuance of common stock 5,681 454
Net Cash Provided by (Used in) Financing Activities (29,283) (33,669)
Net Increase (Decrease) in Cash and Cash Equivalents 29,605 12,100
Cash and Cash Equivalents at Beginning of Period 33,298 37,770
Cash and Cash Equivalents at End of Period $ 62,903 $ 49,870
The Notes to Consolidated Financial Statements are an integral part of these
statements.
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.,
Peoples Energy Ventures Corporation, and Peoples NGV Corp., and
comprise the assets, liabilities, revenues, expenses, and
underlying common stockholders' 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, 1997. Certain items
previously reported for the prior periods have been reclassified
to conform with the presentation in the current periods.
The business of the Company'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
Peoples Gas' and North Shore Gas' utility operations are
subject to regulation by the Illinois Commerce Commission
(Commission). Regulated operations are accounted for in
accordance with Statement of Financial Accounting Standards
(SFAS) No. 71, "Accounting for the Effects of Certain Types of
Regulation." This standard controls the application of generally
accepted accounting principles for companies whose rates are
determined by an independent regulator such as the Commission.
Regulatory assets represent certain costs that are expected to be
recovered from customers through the ratemaking process. When
incurred, such costs are deferred as assets in the balance sheet
and subsequently recorded as expenses when those same amounts are
reflected in rates.
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred
income taxes have been recorded using currently enacted tax rates
for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on 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.
Income taxes and interest paid (excluding capitalized
interest) were as follows:
For the six months
ended March 31, 1998 1997
(Thousands)
Income taxes paid $16,104 $28,903
Interest paid 19,052 19,195
2F Recovery of Gas 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).
For each gas utility, the Commission conducts annual
proceedings regarding the reconciliation of revenues from the Gas
Charge and related costs incurred for gas. In such proceedings,
costs recovered by a utility through the Gas Charge are subject
to challenge. Such proceedings regarding Peoples Gas and North
Shore Gas for fiscal year 1997 are currently pending before the
Commission.
2G Accounting Standard
In February 1997, the Financial Accounting Standards Board
(FASB) issued SFAS No. 128, "Earnings Per Share". This statement
simplifies the calculation of earnings per share (EPS) and
increases conformity to international standards. Under SFAS No.
128, primary EPS is replaced by "basic" EPS, which excludes the
effects of any dilution. It is calculated by dividing net income
available to common shareholders by the weighted-average number
of common shares outstanding for the period. "Diluted" EPS,
which is computed similarly to fully diluted EPS, reflects the
potential dilution that could occur if securities or other
contracts to issue common stock were exercised or converted into
common stock. This standard was adopted October 1, 1997.
Previous periods have been restated to reflect this standard.
(See Note 6.)
3. ENVIRONMENTAL MATTERS
3A 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. 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 March 31, 1998,
the total of the costs deferred by the subsidiaries, net of
recoveries and amounts billed to other entities, was $17.2
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 contribution 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
March 31, 1998 have not been reduced to reflect recoveries from
insurance carriers.
The Company believes that the costs incurred by Peoples Gas
and by 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 the
financial position or results of operations of the utilities.
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 March 31, 1998, the subsidiaries had recovered
$13.2 million of such costs through rates.
3B 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 alleges that
North Shore Gas is a successor-in-interest to certain companies
that were allegedly responsible during the period 1934-1941 for
the disposal of mineral processing wastes containing radium and
other hazardous substances at the site. The cost of the remedy
at the site has been estimated by Shattuck to be approximately
$31 million. Salomon has provided financial assurance for the
performance of the remediation at the site.
North Shore Gas filed a declaratory judgment action against
Salomon in the District Court for the Northern District of
Illinois. The suit asks 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.
3C 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.
4. 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 March 31, 1998, such restrictions amounted to
$11.6 million out of North Shore Gas' total retained earnings of
$74.2 million.
5. LONG-TERM DEBT
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, 1997 have been remarketed. The interest rate
on such bonds is 3.875 percent for the period October 1, 1997
through September 30, 1998.
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, 1997, have been remarketed.
The interest rate on such bonds is 3.90 percent for the period
December 1, 1997, through November 30, 1998.
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, 2000.
6. EARNINGS PER SHARE
In fiscal 1998, the Company adopted FASB Statement No. 128,
Earnings Per Share. The statement simplifies the methodology for
computing both basic and diluted earnings per share. The only
difference in the two methods for computing the Company's per
share amounts is attributable to stock options outstanding under
the Long-Term Incentive Compensation Plan. The effect of the
stock options was determined using the treasury stock method.
Consolidated net income as reported was not affected. Shares
used to compute diluted earnings per share are as follows:
Average Common Stock Shares (in thousands)
Three months Six months 12-months
Ended Ended Ended
March 31, 1998 1997 1998 1997 1998 1997
As reported shares 35,213 34,981 35,175 34,976 35,100 34,964
Effects of options 24 20 22 24 25 27
Diluted shares 35,237 35,001 35,197 35,000 35,125 34,991
Options for which the average stock price is lower than the
grant price are considered antidilutive and, therefore, are not
included in the calculation of diluted earnings per share. (See
Note 2G.)
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income decreased $16.1 million, to $47.1 million, for the
current three-month period ended March 31, 1998, as a result of
weather that was 19 percent warmer than in the comparable period
last year. Also, negatively affecting comparative results were
adjustments to accrued income taxes and pension expense in the
prior period. Partially offsetting these effects was a decrease in
the provision for uncollectible accounts.
Net income decreased $18.1 million, to $82.7 million, and $25.7
million, to $80.3 million, for the current six and 12-month
periods, reflecting weather that was 14 and 12 percent warmer,
respectively, than the year-ago periods. Also contributing to the
decline in the 12-month comparative earnings was the previous
period's one-time gain associated with the expiration of gas
storage contracts. For both periods, the decline in earnings was
partially offset by decreased operation and maintenance expense.
<TABLE>
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
Three Months Ended Six Months Ended 12 Months Ended
March 31, 1998 March 31, 1998 March 31, 1998
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) $(14,598) (7.6) $(22,111) (6.3) $(31,191) (5.8)
Operation and maintenance expenses 3,665 6.2 (1,252) (1.0) (5,631) (2.2)
Depreciation and amortization expense 377 2.0 803 2.2 1,932 2.6
Income taxes (6,637) (18.1) (7,744) (12.9) (11,071) (19.1)
Other income and deductions 875 10.6 913 5.2 6,277 21.1
Net income (16,142) (25.5) (18,090) (18.0) (25,742) (24.3)
(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 utility 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 declined $14.6 million, to $176.3
million, for the current three-month period, due primarily to El
Nino which caused weather to be 19 percent warmer than the same
period a year ago.
Net operating revenues declined $22.1 million, to $327.9
million, and $31.2 million, to $509.8 million, for the current
six- and 12-month periods, respectively, due primarily to weather
that was 14 and 12 percent warmer, respectively, than comparable
periods a year ago.
See Other Matters - Operating Statistics for details of
selected financial and operating information by gas service
classification.
Operation and Maintenance Expenses
Operation and maintenance expenses increased $3.7 million, to
$62.7 million, for the current three-month period, due mainly to
a $4.0 million increase in pension expense caused by a prior
period adjustment to reflect changes in settlement accounting.
Also contributing were increases in costs of outside professional
services ($1.9 million) and a prior period adjustment to costs
associated with claim settlements ($842,000). Partially
offsetting these effects was a $3.6 million decrease in the
provision for uncollectible accounts, reflecting decreased
revenues due to warmer weather.
Operation and maintenance expenses decreased $1.3 million, to
$123.3 million, for the current six-month period, due primarily
to decreases in the provision for uncollectible accounts ($4.4
million), environmental costs recovered through rates ($2.3
million) and group insurance expense ($879,000). These decreases
were offset, in part, by increases in outside professional
services ($2.7 million) and a prior period adjustment to costs
associated with claim settlements ($1.1 million).
Operation and maintenance expenses decreased $5.6 million, to
$247.2 million, for the current 12-month period, due principally
to an $8.0 million decrease in pension expense caused by a change
in settlement accounting attributed to employees choosing early
retirement, and a $6.6 million decrease in the provision for
uncollectible accounts. Partially offsetting these reductions
were increases in outside professional services ($6.0 million)
and higher administrative and general expenses.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $377,000, to
$18.8 million, $803,000, to $37.6 million, and $1.9 million, to
$74.9 million, for the current three-, six- and 12-month periods,
respectively, due mainly to depreciable property additions.
Income Taxes
Income taxes, exclusive of taxes in other income and
deductions, decreased $6.6 million, to $30.0 million, $7.7
million, to $52.2 million, and $11.1 million, to $46.9 million,
for the current three-, six-, and 12-month periods, respectively,
due primarily to lower pre-tax income. Partially offsetting the
effect of lower pre-tax income in each of the comparative periods
was a prior year adjustment to reduce income tax accruals.
Other Income and Deductions
Other income and deductions increased $875,000 and $913,000
for the current three- and six-month periods, respectively, due
chiefly to decreases in miscellaneous interest revenues.
Partially offsetting these effects were increases in the
allowance for funds used during construction.
Other income and deductions increased $6.3 million, for the
current 12-month period, due principally to the prior period's
gain of $5.1 million, net of income taxes, associated with the
expiration of natural gas storage contracts. This increase was
offset, in part, by an increase in the allowance for funds used
during construction and a decrease in interest expense on amounts
refundable to customers.
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 October 1997, the Company adopted SFAS
No. 128, "Earnings Per Share". (See Note 2G and 6 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 impact on the net income of Peoples Gas and North Shore Gas
as a result of these contracts is not material.
Small-Volume Transportation Service. On June 25, 1997, the
Commission allowed Riders SVT and AGG to go into effect for
Peoples Gas, thus initiating a two year pilot program designed to
provide transportation service to certain small-volume industrial
and commercial customers of the utility as well as to some of its
large residential customers. The Commission also ordered a
concurrent investigation of the program to ascertain if program
adjustments or revisions are required.
Investment in Non-utility Energy Business.. The Company has a
financial goal to earn 25% of its earnings from non-utility
investments by the end of 2002. In accordance with this goal,
during April, the Company entered into two commitments, totaling
$35 million, to acquire oil and gas production properties.
<TABLE>
Operating Statistics. The following table represents margin components:
<CAPTION>
Three Months Ended Six Months Ended Twelve Months Ended
March 31, March 31, March 31,
1998 1997 1998 1997 1998 1997
Operating Revenues (Thousands):
<S> <C> <C> <C> <C> <C> <C>
Gas sales
Residential $ 301,597 $ 425,150 $ 570,318 $ 716,640 $ 795,242 $ 993,210
Commercial 47,593 68,720 85,602 112,746 119,719 153,083
Industrial 9,180 14,953 16,552 23,248 22,272 30,256
Non-utility 20,808 870 49,135 1,038 55,533 1,065
379,178 509,693 721,607 853,672 992,766 1,177,614
Transportation
Residential 13,411 13,967 24,258 25,414 35,650 39,658
Commercial 16,760 18,123 31,574 32,913 46,317 49,741
Industrial 8,377 9,610 16,373 18,946 28,394 35,301
Contract Pooling 2,483 12,757 5,968 15,203 8,507 19,637
Other 101 - 533 399 533 400
41,132 54,457 78,706 92,875 119,401 144,737
Other 4,200 3,164 9,347 7,925 16,710 14,637
Total Operating Revenues 424,510 567,314 809,660 954,472 1,128,877 1,336,988
Less- Gas Costs 206,625 319,848 404,648 508,594 511,588 664,565
- Revenues Taxes 41,607 56,590 77,129 95,884 107,469 131,412
Net Operating Revenues $ 176,278 $ 190,876 $ 327,883 $ 349,994 $ 509,820 $ 541,011
Deliveries (MDth):
Gas Sales
Residential 52,421 64,427 94,278 111,093 126,022 145,725
Commercial 9,046 10,979 15,488 18,648 21,833 24,755
Industrial 1,929 2,584 3,283 4,159 4,492 5,422
63,396 77,990 113,049 133,900 152,347 175,902
Transportation (a)
Residential 10,383 11,701 18,539 20,514 25,934 28,537
Commercial 14,819 16,079 27,460 28,792 39,149 41,013
Industrial 12,128 11,497 22,696 22,979 38,624 40,858
Other - 224 - 234 - 234
37,330 39,501 68,695 72,519 103,707 110,642
Total Gas Sales
and Transportation 100,726 117,491 181,744 206,419 256,054 286,544
Margin per Dth delivered $ 1.75 $ 1.62 $ 1.80 $ 1.70 $ 1.99 $ 1.89
(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 March 31, 1998, such
restrictions amounted to $11.6 million out of North Shore Gas'
total retained earnings of $74.2 million.
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 3A 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 3B of the Notes to
Consolidated Financial Statements.)
On November 14, 1995, the Illinois Attorney General filed a
complaint in the Circuit Court of Cook County naming 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 3C of the
Notes to Consolidated Financial Statements.)
Credit Lines. The Company has lines of credit totaling $170.0
million. At March 31, 1998, the Company had unused credit
available of $169.1 million.
The utility subsidiaries have lines of credit totaling
$129.4 million. At March 31, 1998, the utility subsidiaries had
unused credit available from banks of $91.2 million.
Interest Coverage. The fixed charges coverage ratios for Peoples
Gas for the 12 months ended March 31, 1998, and for fiscal 1997
and 1996 were 4.29, 5.01, and 4.84, respectively.
The corresponding coverage ratios for North Shore Gas for the
same periods were 5.00, 5.74, and 5.62, respectively.
Dividends. On February 4, 1998, the Directors of the Company
voted to increase the regular quarterly dividend on the Company's
common stock to 48 cents per share from the 47 cents per share
previously in effect. The annualized dividend rate now amounts
to $1.92 per share.
Year 2000. The Company is modifying all of its computer programs
to be year 2000 compliant. The Company does not believe that the
amount of expenditures it will incur in connection with its year
2000 modifications will have a material adverse effect on the
financial position or results of operations of the Company. The
Company's year 2000 modification program has achieved substantial
progress and the Company expects that the modifications will be
completed and fully tested prior to the year 2000. The Company
is also requiring that other parties, particularly vendors with
whom the Company electronically interacts, have year 2000
compatible computer systems. The Company, however, cannot
control the success of other parties' year 2000 modification
efforts.
Forward-Looking Information. Management's Discussion and
Analysis of Results of Operations and Financial Condition
("MD&A") contains statements that may be considered forward-
looking, such as the statement of the Company's financial goal
regarding non-utility earnings, the effect of weather on net
income, cash position and coverage ratios, the insignificant
effect on income arising from changes in revenue from customers'
gas purchases from entities other than the utility subsidiaries,
environmental matters, and the discussion concerning year 2000
compliant information systems. These statements speak of the
Company's plans, goals, beliefs, or expectations, refer to
estimates or use similar terms. Actual results could differ
materially, because the realization of those results is subject
to many uncertainties including:
" The future health of the U.S. and Illinois economies.
" The timing and extent of changes in energy commodity
prices and interest rates.
" Regulatory developments in the U.S., Illinois and other
states where the Company has investments.
" Changes in the nature of the Company's competition resulting
from industry consolidation, legislative change, regulatory
change and other factors, as well as action taken by particular
competitors.
" The Company's success in identifying non-utility investments
on financially acceptable terms and generating earnings from
those investments in a reasonable time.
" The ability of various vendors and others with whom the
Company electronically interacts to complete year 2000 systems
modification efforts on a timely basis and in a manner that
allows them to continue normal business transactions with the
Company without disruption.
Some of these uncertainties that may affect future results are
discussed in more detail in the sections of "Item 1 - Business"
of the Annual Report on Form 10-K captioned "Competition", "Sales
and Rates", "State Legislation and Regulation", "Federal
Legislation and Regulation", "Environmental Matters", and
"Current Gas Supply". All forward-looking statements included in
this MD&A are based upon information presently available, and the
Company assumes no obligation to update any forward-looking
statements.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 3 of the Notes to Consolidated Financial Statements
for a discussion pertaining to environmental matters.
Item 4. Submission of Matters to a Vote of Security Holders
a. The Company held its Annual Meeting of Shareholders
on February 27, 1998.
b. The following matters were voted upon at the Annual
Meeting of Shareholders.
There were no broker non-votes with respect to any
matters voted upon.
1. The election of nominees for directors who will
serve for a one-year term or until their respective
successors shall be duly elected. The nominees, all of
whom were elected, were as follows: William J. Brodsky,
Pastora San Juan Cafferty, J. Bruce Hasch,
Homer J. Livingston, Jr., William G. Mitchell, Earl L.
Neal, Richard E. Terry, Richard P. Toft, and Arthur R.
Velasquez. The Inspectors of Election certified the
following vote tabulations:
FOR WITHHELD
William J. Brodsky . . . . 28,939,235 308,503
Pastora San Juan Cafferty . 28,884,892 308,503
J. Bruce Hasch . . . . . . 28,956,626 308,503
Homer J. Livingston, Jr. . .28,958,691 308,503
William G. Mitchell . . .. .28,934,174 308,503
Earl L. Neal . . . . 28,901,099 308,503
Richard E. Terry . . . . 28,931,452 308,503
Richard P. Toft . . . . . .28,946,107 308,503
Arthur R. Velasquez . . .. .28,948,883 308,503
2. A proposal to amend the Long-Term Incentive
Compensation Plan:
FOR AGAINST ABSTAIN
26,661,189 1,922,104 733,271
3. A proposal to ratify the recommendation of the
Audit Committee and the appointment by the Board of
Directors of Arthur Andersen LLP as the independent
public accountants for the Company and its subsidiaries
for the fiscal year ending September 30, 1998. The
Inspectors of Election certified the following vote
tabulations:
FOR AGAINST ABSTAIN
28,750,257 347,487 218,027
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 February 27, 1998
3(b) By-Laws of the Registrant as amended, dated
February 27, 1998
10(a) Amendment to the Long-Term Incentive
Compensation Plan dated February 27, 1998
10(b) Long-Term Incentive Compensation Plan
as amended, dated February 27, 1998
27 Financial Data Schedule
b. Reports on Form 8-K filed during the quarter ended
March 31, 1998
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)
May 13, 1998 By: /s/ K. S. BALASKOVITS
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
Principal Accounting
Officer
December 3, 1997
Exhibit 3(a)
The directors then discussed the need for and the
benefits which would be derived from reducing the number of
directors to nine members.
After discussion, on motion duly made and
seconded, the following resolution was unanimously adopted:
RESOLVED, That, effective as
of the close of business on February
27, 1998, 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,
nine (9) 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.
RESOLVED FURTHER, That the
Secretary of the Company be, and he
hereby is, directed to initial a copy
of the amended By-Laws presented at
this meeting and place it with the
important papers of this meeting.
Exhibit (b)
BY-LAWS
OF
PEOPLES ENERGY CORPORATION
AMENDED FEBRUARY 27, 1998
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
PEOPLES ENERGY CORPORATION
PAGE
Q
Quorum
Board 7
Shareholders 4
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, nine (9) 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.
Exhibit 10(a)
December 3, 1997
Peoples Energy Corporation
After discussion, on motion duly made and seconded, the
following resolutions were unanimously adopted:
RESOLVED, That, subject to the
approval by the holders of a majority of the
outstanding shares of common stock of the
Company at its Annual Meeting of
Shareholders to be held February 27, 1998,
the Long-Term Incentive Compensation Plan
be, and hereby is amended to provide that
the number of stock options granted under
the LTIC Plan to any individual during any
one fiscal year may not exceed 60,000 and
that the number of stock appreciation rights
granted under the LTIC Plan to any
individual during any one fiscal year may
not exceed 60,000; and
RESOLVED FURTHER, That the
amendment to the LTIC Plan described in the
preceding resolution be submitted to the
shareholders of the Company at the Annual
Meeting of Shareholders to be held on
February 27, 1998, with the recommendation
of the Board of Directors that it be
approved; and
RESOLVED FURTHER, That the
Secretary of the Company be, and he hereby
is, directed to initial a copy of the
amended LTIC Plan presented to the Board and
file it with the important papers of this
meeting.
Exhibit 10(b)
LONG-TERM INCENTIVE COMPENSATION PLAN
Effective February 22, 1990
(Amended December 2, 1992, December 7, 1994, February 24, 1995,
November 1, 1996, as of December 4, 1996 and as of February 27,
1998)
1. Purpose
The purpose of the Long-Term Incentive Compensation Plan
("the Plan") is to attract, retain and motivate strong management
employees by providing additional incentive to key employees of
Peoples Energy Corporation (the "Company") and its Subsidiaries
(as defined by paragraph 13) to acquire a proprietary interest in
the business of the Company and its Subsidiaries and by
encouraging the interest of such persons in the financial success
and growth of the Company. The Plan contemplates the granting of
non-qualified stock options (i.e. options which are not
"statutory" within the meaning of Section 1.421-7(b) of the
regulations under the Internal Revenue Code of 1986, as amended)
("Options"), Stock Appreciation Rights ("SARs") or restricted
stock awards, or combinations thereof. A key employee may be
granted and may hold one or more Options, SARs, restricted stock
awards or any combination thereof under this Plan.
2. Administration
(a) Generally
Except to the extent that this Plan applies to the Chief
Executive Officer, this Plan shall be administered solely by the
Compensation-Nominating Committee of the Board of Directors of
the Company (the "Committee"). The Committee shall be composed
of not less than three persons who shall be appointed by the
Board of Directors of the Company (the "Board") from the
membership of the Board. No person who is an officer or employee
of the Company or a Subsidiary shall be a member of the Committee
nor
shall any person be a member of the Committee whose membership
would disqualify any transactions made under the Plan from
complying with the requirements of Rule 16b-3 under the
Securities Exchange Act of 1934 (the "1934 Act") or any successor
rule thereunder. Except to the extent that this Plan applies to
the Chief Executive Officer, the Committee is solely authorized
to prescribe the form and content of Options, SARs and restricted
stock awards to be granted under the Plan, to interpret the Plan,
to prescribe, amend or rescind rules and regulations relating to
it, and to make all other determinations necessary or advisable
for its administration.
(b) Chief Executive Officer
With respect to the Chief Executive Officer, this Plan
shall be administered by the Committee subject to the approval of
the majority of all members of the Board (including members of
the Committee) who are not officers or employees of the Company
or a Subsidiary and who are Non-Employee Directors as defined
under Rule 16b-3 under the 1934 Act (the "Outside Directors").
The Outside Directors shall not include any person whose
inclusion would disqualify any transactions made under the Plan
from complying with the requirements of Rule 16b-3 under the 1934
Act or any successor rule thereunder. With respect to the Chief
Executive Officer, the Committee is authorized to prescribe the
form and content of Options, SARs and restricted stock awards to
be granted under the Plan to interpret the Plan, to prescribe,
amend, or rescind rules and regulations relating to it, and to
make all other determinations necessary or advisable for its
administration, subject to the approval of the majority of the
Outside Directors. All references to the "Committee" contained
in any provision of paragraphs 3 through 13 of this Plan shall,
to the extent that such provision applies to the Chief Executive
Officer, be deemed and construed to mean the Committee, the
decisions of which shall be subject to the approval of the
majority of the Outside Directors.
3. Incentive Awards
Under the Plan participants may be granted any one or
more of the following:
(a) Options: non-qualified stock options to
purchase stock of the Company at a purchase price
of 100 percent of the fair market value of such
Common Stock on the date that the Option is
granted. The stock under Options granted under
the Plan shall be shares of the Company's
authorized but unissued common stock, without par
value ("Common Stock").
(b) SARs: a right to receive, for each SAR
granted, cash in an amount equal to the excess of
the fair market value of one share of the Common
Stock of the Company on the date the SAR is
exercised over the fair market value of such
Common Stock on the date the SAR is granted.
(c) Restricted Stock Awards: shares of Common
Stock which are restricted as provided in
paragraph 8.
Up to 1,800,000 shares of Common Stock (500,000
originally authorized under the Plan plus an additional 500,000
authorized for grant by the stockholders on February 28, 1986
plus an additional 400,000 authorized for grant by the
stockholders on February 23, 1990 plus an additional 400,000
authorized for grant by the stockholders on February 24, 1995)
may be sold under Options granted pursuant to the Plan or awarded
pursuant to restricted stock awards granted under the Plan,
provided that the number of shares available for sale or award
hereunder shall be subject to adjustment as provided in paragraph
9. Up to 1,800,000 SARs (1,000,000 originally authorized under
the Plan plus an additional 400,000 authorized for grant by the
shareholders on February 23, 1990 plus an additional 400,000
authorized for grant by the stockholders on February 24, 1995)
may be granted pursuant to the Plan, provided that the number of
SARs available for granting hereunder shall be subject to
adjustment as provided in paragraph 9.
If an Option or SAR ceases to be exercisable in whole
or in part by reason of the expiration of the term of the Option
or SAR, the termination of the employment of the recipient or the
waiver by a recipient of the right to exercise an Option or SAR,
the shares or SAR which were subject to such exercise but as to
which the recipient has not exercised, shall again become
available for further grants under the Plan. If a restricted
stock award is forfeited in whole or in part by reason of the
termination of the employment of the recipient before such award
has become fully vested, the shares which were subject to such
restricted stock award but which were not vested shall again
become available for further grants under the Plan.
4. Designation of Recipients and Allotment of Shares and SARs
The Committee shall determine and designate from time
to time those key employees of the Company and its Subsidiaries
(including officers and directors employed in capacities other
than as directors only) to whom Options, SARs and restricted
stock awards, or any combination thereof, shall be granted and
who shall thereby become recipients. The Committee shall also
determine the number of shares of Common Stock to be optioned,
the number of SARs to be granted and the number of shares of
restricted stock to be granted from time to time to each
recipient.
In selecting the key employees to whom Options, SARs or
restricted stock awards, or any combination thereof, shall be
granted, as well as in determining the number of SARs, shares
under Option, or shares of restricted stock to be granted to key
employees, the Committee shall weigh the positions and
responsibilities of the individuals being considered, the nature
of their services to the Company, their past, present and
potential contributions to the success of the Company or its
Subsidiaries, and such other factors as the Committee shall deem
relevant to accomplish the purposes of the Plan; provided,
however, that a restricted stock award shall be granted only in
recognition of and as consideration for the performance of
services by the recipient or other consideration received by the
Company prior to the time of grant. Directors of the Company or
its Subsidiaries who are not officers or employees of the Company
or its Subsidiaries shall not be eligible to become recipients
under the Plan. No Option, SAR or restricted stock award shall
be granted to any individual possessing more than 5 percent of
the total combined voting power or value of all classes of stock
of the Company or of any of its Subsidiaries. In no event may
any individual be granted in excess of 60,000 Options or in
excess of 60,000 SARs during any one fiscal year of the Company,
provided that such maximum number of Options and SARs that may be
granted to any individual in one fiscal year shall be subject to
adjustment as provided in paragraph 9. Each recipient shall
agree to continue such recipient's employee status for such
period (not less than one year) as shall be provided in the
Option, SAR or restricted stock award, subject to the right of
the recipient's employer to terminate the recipient's employment
at any time. Options, SARs and restricted stock awards shall
contain such conditions and restrictions as to exercise, the
purchase and delivery of shares, and the forfeiture of shares,
and such provisions as to the rights of the Company or its
Subsidiaries, as may be deemed advisable by the Committee.
The Committee may grant Options, SARs or restricted
stock awards to any key employee at any time or from time to time
during the period of such employee's employment under the Plan,
in accordance with such determinations as the Committee shall
make from time to time. Options, SARs and restricted stock
awards need not contain similar provisions.
5. Term of Plan
No Option, SAR or restricted stock award may be granted
under this Plan after October 31, 2000.
6. Option and SAR Price
Shares of the Common Stock of the Company shall be
optioned and SARs shall be granted from time to time at 100
percent of the fair market value of the Common Stock on the date
the Option or SAR is granted (rounded, in the case of a fraction
of a cent, to the nearest full cent above). The day on which the
Committee approves the granting of an Option or SAR shall be
considered the date on which such Option or SAR is granted. The
fair market value of the Common Stock on the date the Option or
SAR is granted shall be the mean between the highest and lowest
quoted selling price in the New York Stock Exchange Composite
Transactions on such date or, if such stock was not traded on
such date, on the last preceding date on which such stock was
traded.
7. Terms of Options and SARs
Each Option or SAR granted under the Plan shall be
evidenced by a written agreement which shall comply with and be
subject to the following terms and conditions:
(a) Full payment for shares purchased shall be
made in cash and/or Common Stock of the Company at
the time or times the Option is exercised in whole
or in part. Payment in Common Stock may be made
at the recipient's election by the Company's
deducting from the number of shares otherwise
deliverable upon the exercise of the Option such
number of shares of Common Stock as shall have a
value equal to the amount of the Option exercise
price. Any such Common Stock submitted in payment
for an Option shall be valued at the mean between
the highest and lowest quoted selling price of
such Common Stock of the Company in the New York
Stock Exchange Composite Transactions on the date
of exercise or, if such stock was not traded on
such date, on the last preceding date on which
such stock was traded. No shares shall be issued
pursuant to the exercise of an Option until full
payment thereof has been made and no person shall
have any of the rights of a stockholder with
respect to Options held, except to the extent such
Options have been exercised and the shares issued
to such person.
(b) A recipient's rights to exercise an Option or
SAR shall terminate when the recipient is no
longer an employee of the Company or any of its
Subsidiaries unless such recipient's employment is
terminated by reason of such recipient's death,
disability or retirement.
(c) If a recipient dies prior to termination of
such recipient's Option or SAR without having
fully exercised such Option or SAR, the
beneficiary or beneficiaries designated by such
recipient pursuant to paragraph 7(f) hereof, or,
if no such beneficiary or beneficiaries have been
designated by such recipient or if no such
beneficiary or beneficiaries have survived the
recipient, then the recipient's surviving spouse,
or, if the recipient has no surviving spouse, then
the estate of the recipient or any person who
acquires the right to exercise such Option or SAR
by bequest or inheritance or by reason of the
death of the recipient, shall have the right to
exercise the Option or SAR during its term within
the eighteen month period after the recipient's
death, but only to the extent such Option or SAR
was exercisable by such recipient immediately
prior to such recipient's death.
(d) If a recipient's employment is terminated by
reason of such recipient's disability (as
determined in the sole discretion of the
Committee) prior to termination of such
recipient's Option or SAR without the recipient's
having fully exercised such Option or SAR, such
recipient shall have the right to exercise the
Option or SAR during its term within such period
as may be provided at the time of the grant, not
to exceed three years after termination of
employment, but only to the extent such Option or
SAR was exercisable by such recipient immediately
prior to such recipient's termination of
employment.
(e) If a recipient retires prior to termination
of such recipient's Option or SAR without having
fully exercised such Option or SAR, such recipient
shall have the right to exercise the Option or SAR
during its term within such period as may be
provided at the time of the grant, not to exceed
three years after retirement, but only to the
extent such Option or SAR was exercisable by the
recipient immediately prior to such recipient's
retirement.
(f) Except as otherwise expressly provided in
this paragraph 7(f), Options and SARs shall not
be transferable other than by will or by the laws
of descent and distribution and during a
recipient's lifetime shall be exercisable only by
the recipient or the recipient's guardian or legal
representative. Notwithstanding the preceding
sentence, a recipient may, by giving notice to the
Company during the recipient's lifetime, designate
(i) a beneficiary or beneficiaries to whom Options
or SARs shall be transferred in the event of the
recipient's death, and (ii) the specific number or
proportions of the recipient's Options or SARs to
be transferred to each such designated beneficiary
if more than one beneficiary is properly
designated. Any such designation may be revoked
or changed by the recipient at any time and from
time to time by similar notice. If there is no
such designated beneficiary living upon the death
of the recipient or if all such designated
beneficiaries die prior to exercise of all of the
recipient's Options and SARs under this Plan, any
remaining Options and SARs shall be transferred to
the recipient's surviving spouse or, if none, then
the remaining Options and SARs will be transferred
to the estate or personal representative of the
recipient. If the Company, after reasonable
inquiry, is unable to determine within twelve
months after the recipient's death whether any
designated beneficiary of such recipient did in
fact survive the recipient, such beneficiary shall
be conclusively presumed to have died prior to the
recipient's death. Any designated beneficiary,
surviving spouse or other person acquiring any
Options or SARs pursuant to this paragraph 7(f)
shall have the right to exercise such Options and
SARs as set forth in paragraph 7(c), above.
(g) Subject to paragraph 7(k) below, no Option or
SAR granted under this Plan shall be exercisable
before the expiration of one year from the date of
grant of such Option or SAR.
(h) Options and SARs granted under this Plan
shall contain such provisions as may be deemed
advisable by the Committee.
(i) Subject to paragraph 7(k) below, until a
recipient has completed five years of service, the
total number of Options and SARs that may be
exercised by such recipient during the first four
years after such Options and SARs are granted
thereto shall not exceed the following percentages
of the number of Options and SARs so granted:
Years Since Option Percentage of
Options
Or SAR Is Granted Or SARs Exercisable
less than 1 None
1 but less than 2 25%
2 but less than 3 50%
3 but less than 4 75%
4 or more 100%
Notwithstanding the above, the Committee may,
in its sole discretion, accelerate the
exercisability under this paragraph 7(i) of any or
all Options and/or SARs granted under the Plan.
(j) In no event shall any Option or SAR granted
under the Plan be exercisable after the expiration
of ten years from the date such Option or SAR is
granted.
(k) All outstanding Options and SARs granted
under the Plan shall immediately become
exercisable upon the occurrence of a Change in
Control (as defined by paragraph 13).
8. Terms of Restricted Stock Awards
Each restricted stock award granted under the Plan
shall be evidenced by a written agreement which shall comply with
and be subject to the following terms and conditions:
(a) Shares of Common Stock covered by a
restricted stock award may not be sold, assigned,
transferred or otherwise disposed of, or
mortgaged, pledged or otherwise encumbered until
such shares have become fully vested pursuant to
paragraph 8(d) or 8(f).
(b) The recipient of a restricted stock award
shall have the right to vote the shares of Common
Stock covered by such award and to receive
dividends thereon, unless and until such shares
are forfeited pursuant to paragraph 8(e).
(c) Shares of Common Stock covered by a
restricted stock award will be held by the Company
until such shares have become vested pursuant to
paragraph 8(d) or 8(f), and will thereupon,
subject to the satisfaction of the withholding
obligations described in paragraph 11, be
delivered to the recipient.
(d) Shares of Common Stock covered by a
restricted stock award granted to a recipient
shall vest in accordance with the terms of the
grant; provided, however, that shares of Common
Stock covered by a restricted stock award granted
to a recipient shall vest with respect to 100% of
the shares covered by the restricted stock award
upon the termination of the recipient's employment
by reason of death, disability (as determined in
the sole discretion of the Committee) or
retirement after attaining age 65 (or such earlier
date as determined by the Committee). In
addition, the Committee may, in its sole
discretion, accelerate the vesting of any or all
restricted stock awards granted under the Plan. A
recipient may, by giving notice to the Company
during the recipient's lifetime, designate (i) a
beneficiary or beneficiaries to whom shares of
restricted stock covered by a restricted stock
award shall be transferred in the event of the
recipient's death, and (ii) the specific number or
proportions of such shares of Common Stock to be
transferred to each such designated beneficiary if
more than one beneficiary is properly designated.
Any such designation may be revoked or changed by
the recipient at any time and from time to time by
similar notice. If there is no such designated
beneficiary living upon the death of the recipient
or if all such designated beneficiaries die prior
to vesting of all shares of Common Stock covered
by a restricted stock award of the recipient, any
remaining shares of Common Stock vesting upon the
recipient's death shall be transferred to the
recipient's surviving spouse or, if none, then the
remaining shares so vesting will be transferred to
the estate or personal representative of the
recipient. If the Company, after reasonable
inquiry, is unable to determine within twelve
months after the recipient's death whether any
designated beneficiary of such recipient did in
fact survive the recipient, such beneficiary shall
be conclusively presumed to have died prior to the
recipient's death.
(e) In the event of the termination of employment
of the recipient of a restricted stock award other
than by reason of death, disability (as determined
in the sole discretion of the Committee) or
retirement after attaining age 65 (or such earlier
date as determined by the Committee) the recipient
will forfeit the shares of Common Stock covered by
the restricted stock award which are not vested.
(f) All outstanding restricted stock awards
granted under the Plan shall immediately become
fully vested upon the occurrence of a Change in
Control (as defined by paragraph 13).
(g) Restricted stock awards granted under this
Plan shall contain such provisions as may be
deemed advisable by the Committee.
9. Adjustment Upon Changes in Capitalization, Etc.
In the event there is any change in the Common Stock of
the Company through the declaration of stock dividends, or
through recapitalization resulting in stock split-ups, or
combinations or exchanges of shares, or otherwise, then the
number of SARs and shares remaining available for future grants
of Options and restricted stock awards under the Plan and
exercisable under existing grants of SARs and Options shall be
appropriately adjusted by the Committee. Appropriate adjustment
shall also be made in the SAR price and the Option price per
share.
10. Amendment
The Board may, by resolution, at any time and from time
to time, amend, revise or terminate this Plan, except that,
without stockholder approval, no amendment shall increase the
maximum number of SARs or shares which may be sold pursuant to
Options or covered by restricted stock awards granted under the
Plan or reduce the Option price of any Option or the SAR price of
any SAR (except as provided by paragraph 9), change the class of
employees eligible to receive SARs, Options or restricted stock
awards under the Plan, or extend the term of the Plan. Except as
otherwise provided in the Plan, no SAR, Option or restricted
stock award previously granted under the Plan may be altered or
impaired without the consent of the holder of the SAR, Option or
restricted stock award.
11. Taxes
The Company may make such provisions and take such
steps as it may deem necessary or appropriate for the withholding
of all federal, state and local taxes required by law to be
withheld with respect to Options, SARs and restricted stock
awards granted pursuant to the Plan including, but not limited to
(a) deducting the amount required to be withheld from any other
amount then or thereafter payable to a recipient or legal
representative, and (b) requiring a recipient or legal
representative to pay to the Company the amount required to be
withheld as a condition of releasing shares of Common Stock. In
addition, subject to the Committee's sole discretion and to such
rules and regulations as the Committee shall from time to time
establish, a recipient shall be permitted to satisfy federal,
state and local taxes, if any, imposed upon the exercise of an
Option or the vesting of a restricted stock award at a rate up to
such recipient's maximum marginal tax rate with respect to each
such tax by (i) electing to have the Company deduct from the
number of shares of Common Stock otherwise deliverable upon the
exercise of an Option or the vesting of a restricted stock award
such number of shares of Common Stock as shall have a value equal
to the amount of tax to be withheld, or (ii) delivering to the
Company such number of shares of Common Stock or combination of
shares of Common Stock and cash as shall have a value equal to
the amount of tax to be withheld.
12. Effective Date
Any amendment to this Plan requiring shareholder
approval shall become effective upon approval thereof by the
holders of a majority of the Company's outstanding shares of
Common Stock, provided such approval occurs within twelve months
of the date such amendment is adopted by the Board. No SARs or
shares of Common Stock shall be issued pursuant to this Plan
prior to compliance with requirements under applicable laws and
regulations.
13. Definitions and Miscellaneous
(a) For purposes of this Plan, a Subsidiary is any
corporation more than 50 percent of the total combined voting
power of which is owned by the Company or by another corporation
qualifying as a Subsidiary within this definition, or by a
combination of any of them.
(b) For purposes of this Plan, a Change in Control
means,
(i) with respect to Options, SARs and restricted stock
awards granted prior to December 4, 1996, that any of the
following events described in this paragraph (i) or in paragraph
(ii) below has occurred:
(A) twenty percent (20%) or more of the Company's
outstanding shares of Common Stock have been
acquired by any person (as defined by Section
3(a)(9) of the 1934 Act) other than directly from
the Company;
(B) there has been a merger or equivalent
combination after which forty-nine percent (49%)
or more of the voting stock of the surviving
corporation is held by persons other than former
stockholders of the Company; or
(C) twenty percent (20%) or more of the directors
elected by stockholders to the Board of Directors
of the Company are persons who were not nominated
by management in the most recent proxy statement
of the Company.
(ii) with respect to Options, SARs and restricted
stock awards granted on or after December 4, 1996, any of the
following events has occurred:
(A) either (1) receipt by the Company of a report on
Schedule 13D, or an amendment to such a report, filed with the
Securities and Exchange Commission ("SEC") pursuant to Section
13(d) of the 1934 Act disclosing that any person (as such term is
used in Section 13(d) of the 1934 Act) ("Person"), is the
beneficial owner, directly or indirectly, of twenty (20) percent
or more of the outstanding stock of the Company, or (2) actual
knowledge by the Company of facts, on the basis of which any
Person is required to file such a report on Schedule 13D, or to
make an amendment to such a report, with the SEC (or would be
required to file such a report or amendment upon the lapse of the
applicable period of time specified in Section 13 (d) of the 1934
Act) disclosing that such Person is the beneficial owner,
directly or indirectly, of twenty (20) percent or more of the
outstanding stock of the Company;
(B) purchase by any Person, other than the Company or
a wholly-owned subsidiary of the Company, of
shares pursuant to a tender or exchange offer to
acquire any stock of the Company (or securities
convertible into stock) for cash, securities or
any other consideration provided that, after
consummation of the offer, such Person is the
beneficial owner (as defined in Rule 13d-3 under
the 1934 Act), directly or indirectly, of twenty
(20) percent or more of the outstanding stock of
the Company (calculated as provided in paragraph
(d) of Rule 13d-3 under the 1934 Act in the case
of rights to acquire stock);
(C) approval by the shareholders of the Company of (1)
any consolidation or merger of the Company in
which the Company is not the continuing or
surviving corporation or pursuant to which shares
of stock of the Company would be converted into
cash, securities or other property, other than a
consolidation or merger of the Company in which
holders of its stock immediately prior to the
consolidation or merger have substantially the
same proportionate ownership of common stock of
the surviving corporation immediately after the
consolidation or merger as immediately before, or
(2) any consolidation or merger in which the
Company is the continuing or surviving
corporation, but in which the common shareholders
of the Company immediately prior to the
consolidation or merger do not hold at least
ninety (90) percent of the outstanding common
stock of the continuing or surviving corporation
(except where such holders of common stock hold at
least ninety (90) percent of the common stock of
the corporation which owns all of the common stock
of the Company), or (3) any sale, lease, exchange
or other transfer (in one transaction or a series
of related transactions) of all or substantially
all the assets of the Company (Transfer
Transaction), (except where (x) the Company owns
all of the outstanding stock of the transferee
entity or (y) the holders of the Company's common
stock immediately prior to the Transfer
Transaction own at least ninety (90) percent of
the outstanding stock of the transferee entity,
immediately after the Transfer Transaction), or
(4) any consolidation or merger of the Company
where, after the consolidation or merger, one
Person owns one hundred (100) percent of the
shares of stock of the Company (except where the
holders of the Company's common stock immediately
prior to such merger or consolidation own at least
ninety (90) percent of the outstanding stock of
such Person immediately after such consolidation
or merger); or
(D) a change in the majority of the members of the
Board within a twenty-four (24) month period,
unless the election or nomination for election by
the Company's shareholders of each new director
was approved by the vote of at least two-thirds of
the directors then still in office who were in
office at the beginning of the twenty-four (24)
month period.
(c) The transfer of an employee from the Company to a
Subsidiary or from a Subsidiary to the Company or another
Subsidiary shall not be a termination of employment or an
interruption of continuous employment for the purposes of this
Plan.
(d) No SAR, Option, restricted stock award,
shares of Common Stock issuable upon the exercise of an Option or
cash payable incident to the exercise of an SAR granted under
this Plan shall be transferable or assignable by anticipation
either by the voluntary or involuntary act of the recipient or by
operation of law, or be liable for any debts or liabilities of
the recipient, except as provided herein.
(e) Nothing herein shall entitle any employee to
remain in the employ of the Company or any of its Subsidiaries or
affect the right of such employer to discharge such employee with
or without cause.
(f) The right of recipients to designate one or
more beneficiaries pursuant to paragraph 7(f) or paragraph 8(d)
shall apply to any and all Options, SARs or restricted shares
granted under the Plan, notwithstanding anything contained in any
written agreement evidencing such grant of Options, SARs or
restricted stock to the contrary.
(g) Notwithstanding anything contained in any
written agreement evidencing a grant of Options or restricted
stock made under the Plan prior to November 1, 1996, recipients
of Options or restricted stock may make, on or after November 1,
1996 at any time at the recipient's discretion, but subject to
such rules and regulations as the Committee may from time to time
establish, one or more elections for the Company to withhold from
the number of shares of Common Stock otherwise deliverable
pursuant to the exercise of an Option or vesting of restricted
stock in full or partial satisfaction of taxes imposed upon such
exercise or vesting as described in paragraph 11 above; provided,
however, that any such election is made in accordance with the
requirements of Rule 16b-3 under the 1934 Act or any successor
rule or regulation so as to exempt such election and the
resulting transaction from Section 16(b) of the 1934 Act.
(h) This Plan shall be construed according to the
laws of the State of Illinois.
<TABLE> <S> <C>
<ARTICLE> UT
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED
STATEMENTS OF CASH FLOWS, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> SEP-30-1998
<PERIOD-START> OCT-01-1997
<PERIOD-END> MAR-31-1998
<BOOK-VALUE> PER-BOOK
<TOTAL-NET-UTILITY-PLANT> 1,410,795
<OTHER-PROPERTY-AND-INVEST> 17,717
<TOTAL-CURRENT-ASSETS> 453,933
<TOTAL-DEFERRED-CHARGES> 21,438
<OTHER-ASSETS> 36,352
<TOTAL-ASSETS> 1,940,235
<COMMON> 287,528
<CAPITAL-SURPLUS-PAID-IN> 0
<RETAINED-EARNINGS> 483,871
<TOTAL-COMMON-STOCKHOLDERS-EQ> 771,399
0
0
<LONG-TERM-DEBT-NET> 527,004
<SHORT-TERM-NOTES> 855
<LONG-TERM-NOTES-PAYABLE> 0
<COMMERCIAL-PAPER-OBLIGATIONS> 0
<LONG-TERM-DEBT-CURRENT-PORT> 0
0
<CAPITAL-LEASE-OBLIGATIONS> 0
<LEASES-CURRENT> 0
<OTHER-ITEMS-CAPITAL-AND-LIAB> 640,977
<TOT-CAPITALIZATION-AND-LIAB> 1,940,235
<GROSS-OPERATING-REVENUE> 809,660
<INCOME-TAX-EXPENSE> 52,189
<OTHER-OPERATING-EXPENSES> 656,416
<TOTAL-OPERATING-EXPENSES> 708,605
<OPERATING-INCOME-LOSS> 101,055
<OTHER-INCOME-NET> 1,771
<INCOME-BEFORE-INTEREST-EXPEN> 102,826
<TOTAL-INTEREST-EXPENSE> 20,167
<NET-INCOME> 82,659
0
<EARNINGS-AVAILABLE-FOR-COMM> 82,659
<COMMON-STOCK-DIVIDENDS> 33,009
<TOTAL-INTEREST-ON-BONDS> 17,875
<CASH-FLOW-OPERATIONS> 103,705
<EPS-PRIMARY> 2.35
<EPS-DILUTED> 2.35
</TABLE>
