FORM 10-Q
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
(Mark One)
[ X ] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
For the Quarterly Period Ended June 30, 1997
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d)
OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 2-26983
THE PEOPLES GAS LIGHT AND COKE COMPANY
(Exact name of registrant as specified in its charter)
Illinois 36-1613900
(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:
24,817,566 shares of Common Stock, without par value, outstanding
at July 31, 1997.
<TABLE>
PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
The Peoples Gas Light and Coke Company
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
<CAPTION>
Three Nine Twelve
Months Ended Months Ended Months Ended
June 30, June 30, June 30,
------------------ -------------------- ----------------------
1997 1996 1997 1996 1997 1996
-------- -------- ---------- -------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C> <C> <C> <C>
OPERATING REVENUES:
Gas sales $150,871 $187,395 $ 884,563 $810,894 $ 981,868 $ 891,506
Transportation 22,254 25,313 105,908 99,019 121,554 115,713
Other 4,183 3,730 12,663 10,267 16,108 13,352
-------- -------- ---------- -------- ---------- ----------
Total Operating Revenues 177,308 216,438 1,003,134 920,180 1,119,530 1,020,571
-------- -------- ---------- -------- ---------- -----------
OPERATING EXPENSES:
Gas costs 62,419 93,886 495,488 407,386 533,827 434,072
Operation 38,904 47,275 129,006 149,136 169,820 193,154
Maintenance 12,093 10,568 32,083 30,189 44,301 40,384
Depreciation and amortization 16,659 16,134 49,563 46,953 65,615 62,002
Taxes - Income 5,806 4,910 56,713 55,564 50,594 46,190
- State & local revenue 18,596 21,508 106,195 99,368 117,248 110,144
- Other 4,685 4,960 13,975 14,793 18,985 19,572
-------- -------- ---------- -------- ---------- ----------
Total Operating Expenses 159,162 199,241 883,023 803,389 1,000,390 905,518
-------- -------- ---------- -------- ---------- ----------
OPERATING INCOME 18,146 17,197 120,111 116,791 119,140 115,053
-------- -------- ---------- -------- ---------- ----------
OTHER INCOME
AND (DEDUCTIONS):
Interest income 974 795 2,978 3,325 3,683 6,201
Allowance for funds used
during construction 82 10 144 10 157 10
Interest on long-term debt (7,773) (7,777) (23,321) (25,111) (31,099) (35,191)
Other interest expense (333) (669) (1,681) (3,649) (2,195) (5,146)
Income taxes (389) (1,907) (1,186) (2,975) (2,300) (4,108)
Miscellaneous - net (313) 4,256 (213) 7,931 1,876 8,133
-------- -------- ---------- -------- ---------- ----------
Total Other Income
and Deductions (7,752) (5,292) (23,279) (20,469) (29,878) (30,101)
-------- -------- ---------- -------- ---------- ----------
NET INCOME APPLICABLE
TO COMMON STOCK $ 10,394 $ 11,905 $ 96,832 $ 96,322 $ 89,262 $ 84,952
======== ======== ========== ======== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of these
statements.
</TABLE>
<TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
Property, plant and equipment,
at original cost $1,795,178 $1,761,007 $1,743,502
Less - Accumulated depreciation 605,626 571,255 564,485
---------- ---------- ----------
Net property, plant and equipment 1,189,552 1,189,752 1,179,017
Other investments 5,499 6,607 4,181
---------- ---------- -----------
TOTAL CAPITAL INVESTMENTS - NET 1,195,051 1,196,359 1,183,198
---------- ---------- ----------
CURRENT ASSETS:
Cash 4,510 3,826 3,483
Cash equivalents 65,783 13,711 49,147
Temporary cash investments 15,500 500 500
Receivables -
Customers, net of allowance for
uncollectible accounts of $31,406,
$25,279, and $25,564, respectively 117,881 63,152 107,943
Other 32,552 32,045 36,291
Accrued unbilled revenues 18,402 25,534 18,374
Materials and supplies, at average cost 13,313 14,017 14,724
Gas in storage, at last-in, first-out cost 42,269 55,876 40,894
Gas costs recoverable through rate adjustments -- 17,420 22,460
Prepayments 34,125 11,897 4,591
---------- ---------- ----------
TOTAL CURRENT ASSETS 344,335 237,978 298,407
---------- ---------- ----------
OTHER ASSETS:
Regulatory assets 53,176 76,176 61,969
Deferred charges 15,508 12,249 11,338
---------- ---------- ----------
TOTAL OTHER ASSETS 68,684 88,425 73,307
---------- ---------- ----------
TOTAL PROPERTIES AND OTHER ASSETS $1,608,070 $1,522,762 $1,554,912
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1997 September 30, 1996
(Unaudited) 1996 (Unaudited)
---------- ---------- ----------
(Thousands of Dollars)
<S> <C> <C> <C>
CAPITALIZATION AND LIABILITIES
CAPITALIZATION:
Common Stockholder's Equity:
Common stock, without par value
Authorized - 40,000,000 shares
Outstanding - 24,817,566 shares $ 165,307 $ 165,307 $ 165,307
Retained earnings 455,007 398,875 420,360
---------- ---------- ----------
Total Common Stockholder's Equity 620,314 564,182 585,667
Long-term debt, exclusive of sinking fund
payments and maturities due within one year 462,400 462,400 462,400
---------- ---------- ----------
TOTAL CAPITALIZATION 1,082,714 1,026,582 1,048,067
---------- ---------- ----------
CURRENT LIABILITIES:
Interim loans -- 700 --
Accounts payable 107,799 121,653 101,172
Dividends payable on common stock 13,650 13,153 12,905
Customer gas service and credit deposits 17,663 37,121 16,456
Accrued taxes 57,526 31,242 79,521
Gas sales revenue refundable through
rate adjustments 14,310 10,734 9,407
Accrued interest 6,505 8,758 6,488
Temporary LIFO liquidation credit 21,659 -- 29,418
---------- ---------- ----------
TOTAL CURRENT LIABILITIES 239,112 223,361 255,367
---------- ---------- ----------
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily
accelerated depreciation 224,155 211,623 193,869
Investment tax credits being amortized
over the average lives of related property 30,632 31,696 32,072
Other 31,457 29,500 25,537
---------- ---------- ----------
TOTAL DEFERRED CREDITS AND
OTHER LIABILITIES 286,244 272,819 251,478
---------- ---------- ----------
TOTAL CAPITALIZATION AND LIABILITIES $1,608,070 $1,522,762 $1,554,912
========== ========== ==========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
<TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
<CAPTION>
Nine Months Ended
June 30,
1997 1996
-------- --------
(Thousands of Dollars)
<S> <C> <C>
OPERATING ACTIVITIES:
Net Income $ 96,832 $ 96,322
Adjustments to reconcile net income to net cash:
Depreciation and amortization 49,563 46,953
Deferred income taxes and investment tax credits - net 8,724 (274)
Change in other deferred credits and other liabilities 4,701 12,025
Change in other assets 15,531 (33,874)
Other -- 55
Change in current assets and liabilities:
Receivables - net (55,236) (89,427)
Accrued unbilled revenues 7,132 77
Materials and supplies 704 (881)
Gas in storage 13,607 41,257
Gas costs recoverable 17,420 (20,328)
Accounts payable (13,853) 13,480
Customer gas service and credit deposits (19,458) (18,556)
Accrued taxes 26,284 52,559
Gas sales revenue refundable 3,576 (59,151)
Accrued interest (2,253) (4,537)
Temporary LIFO liquidation credit 21,659 29,418
Prepayments (22,228) (2,664)
-------- --------
NET CASH PROVIDED BY OPERATING ACTIVITIES 152,705 62,454
-------- --------
INVESTING ACTIVITIES:
Capital expenditures - construction (44,174) (47,183)
Other assets (319) 11,870
Other capital investments 448 791
Other temporary cash investments (15,000) 100
-------- --------
NET CASH USED IN INVESTING ACTIVITIES (59,045) (34,422)
-------- --------
FINANCING ACTIVITIES:
Retirement of long-term debt -- (86,750)
Interim loans - net (700) (900)
Trust fund - bond redemption -- 237
Dividends paid on common stock (40,204) (40,204)
-------- --------
NET CASH USED IN FINANCING ACTIVITIES (40,904) (127,617)
-------- --------
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 52,756 (99,585)
CASH AND CASH EQUIVALENTS AT BEGINNING OF PERIOD 17,537 152,215
-------- --------
CASH AND CASH EQUIVALENTS AT END OF PERIOD $ 70,293 $ 52,630
======== ========
<FN>
The Notes to Consolidated Financial Statements are an integral part of
these statements.
</TABLE>
The Peoples Gas Light and Coke Company
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. BASIS OF PRESENTATION
The accompanying consolidated financial statements have been
prepared by The Peoples Gas Light and Coke Company (Company) in
conformity with the rules and regulations of the Securities and
Exchange Commission (SEC) and reflect all adjustments that are, in
the opinion of management, necessary to present fairly the results
for the interim periods herein and to prevent the information from
being misleading.
Certain footnote disclosures and other information, normally
included in financial statements prepared in accordance with
generally accepted accounting principles, have been condensed or
omitted from these interim financial statements, pursuant to SEC
rules and regulations. Therefore, the statements should be read in
conjunction with the consolidated financial statements and related
notes contained in the Company's Annual Report on Form 10-K for the
fiscal year ended September 30, 1996. Certain items previously
reported for the prior periods have been reclassified to conform
with the presentation in the current periods.
The business of the Company is influenced by seasonal weather
conditions because a large element of the Company's customer load
consists of gas used for space heating. Weather-related deliveries
can, therefore, have a significant positive or negative impact on
net income. Accordingly, the results of operations for the interim
periods presented are not indicative of the results to be expected
for all or any part of the balance of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2A Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2B Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all gas
delivered during the month, including an estimate for gas
delivered but unbilled at the end of each month.
2C Regulated Operations
The Company's utility operations are subject to regulation by
the Illinois Commerce Commission (Commission). Regulated
operations are accounted for in accordance with Statement of
Financial Accounting Standards (SFAS) No. 71, "Accounting for the
Effects of Certain Types of Regulation." This standard controls
the application of generally accepted accounting principles for
companies whose rates are determined by an independent regulator
such as the Commission. Regulatory assets represent certain costs
that are expected to be recovered from customers through the
ratemaking process. When incurred, such costs are deferred as
assets in the balance sheet and subsequently recorded as expenses
when those same amounts are reflected in revenues.
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred
income taxes have been recorded using currently enacted tax rates
for the differences between the tax basis of assets and
liabilities and the basis reported in the financial statements.
Due to the effects of regulation on the Company, certain
adjustments made to deferred income taxes are, in turn, debited or
credited to regulatory assets or liabilities.
2E Statement of Cash Flows
For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments
with maturities of three months or less to be cash equivalents.
<TABLE>
Income taxes and interest paid (excluding capitalized
interest) were as follows:
<CAPTION>
For the nine months
ended June 30, 1997 1996
------------------------------------------------
(Thousands)
<S> <C> <C>
Income taxes paid $31,078 $22,051
Interest paid 26,452 30,590
</TABLE>
2F Recovery of Gas Costs, Including Charges for Transition Costs
Under the tariffs of the Company, the difference for any month
between costs recoverable through the Gas Charge and revenues
billed to customers under the Gas Charge is refunded to or
recovered from customers. Consistent with these tariff
provisions, such difference for any month is recorded either as a
current liability or as a current asset (with a contra entry to
Gas Costs).
The Commission conducts annual proceedings regarding, for each
gas utility, the reconciliation of revenues from the Gas Charge
and related costs incurred for gas. In such proceedings, costs
recovered by a utility through the Gas Charge are subject to
challenge. Such proceedings regarding the Company for fiscal
years 1995 through 1997 are currently pending before the
Commission.
Pursuant to Federal Energy Regulatory Commission (FERC) Order
636 and successor orders, pipelines are allowed to recover from
their customers so-called transition costs. These costs arise
from the restructuring of pipeline service obligations required by
the 636 Orders. The Company is currently recovering pipeline
charges for transition costs through the Gas Charge. (See Notes
3A and 3B.)
2G Recovery of Costs of Environmental Activities Relating to
Former Manufactured Gas Operations
The Company is recovering the costs of environmental activities
relating to its former manufactured gas operations, including
carrying charges on the unrecovered balances, under rate
mechanisms approved by the Commission. The Commission conducts
annual proceedings regarding, for each utility with such a rate
mechanism, the reconciliation of revenues from the rate mechanism
and related costs. In such proceedings, costs recovered by a
utility through the rate mechanism are subject to challenge. Such
proceedings regarding the Company for fiscal years 1994, 1995 and
1996 are currently pending before the Commission. (See Note 4.)
3. RATES AND REGULATION
3A Utility Rate Proceedings
Rate Order. On November 8, 1995, the Commission issued an order
approving changes in rates of the Company that were designed to
increase annual revenues by approximately $30.8 million, exclusive
of additional charges for revenue taxes. The Company was allowed a
rate of return on original-cost rate base of 9.19 per cent, which
reflected an 11.10 per cent cost of common equity. The new rates
were implemented on November 14, 1995. A group of industrial
transportation customers appealed the Commission's order to the
Illinois Appellate Court, but on June 27, 1997, the Appellate Court
affirmed the Commission's order. All proceedings regarding this
case have concluded.
FERC Order 636 Cost Recovery. In 1994, the Commission issued
orders providing for the full recovery of pipeline charges for FERC
Order 636 transition costs from the Company's gas service
customers. The Commission directed that gas supply realignment
(GSR) costs (one of the four categories of transition costs) be
recovered on a uniform volumetric basis from all transportation and
sales customers. A group of industrial transportation customers
has filed a petition with the Illinois Supreme Court appealing the
Commission's orders. If the Illinois Supreme Court accepts the
appeal, any changes made by it to the Commission's orders would
have a prospective effect only. (See Notes 2F and 3B.)
3B FERC Orders 636, 636-A, and 636-B
FERC Order 636 and successor orders require pipelines to make
separate rate filings to recover transition costs. The Company is
subject to charges for transition cost recovery by Natural Gas
Pipeline Company of America (Natural). Under a Stipulation and
Agreement filed by Natural and approved by FERC, Natural's charges
to the Company for GSR transition costs (the largest category of
such costs for the Company) are subject to a cap of approximately
$103 million. The Company is currently recovering transition costs
through the Gas Charge. At June 30, 1997, the Company had made
payments of $89.6 million and had accrued an additional $13.4
million toward the cap.
The 636 Orders are not expected to have a material effect on
financial position or results of operations of the Company. (See
Notes 2F and 3A.)
4. ENVIRONMENTAL MATTERS
The Company, its predecessors, and certain former affiliates
operated facilities in the past at multiple sites for the purpose
of manufacturing gas and storing manufactured gas (Manufactured Gas
Sites). In connection with manufacturing and storing gas, various
by-products and waste materials were produced, some of which might
have been disposed of rather than sold. Under certain laws and
regulations relating to the protection of the environment, the
Company might be required to undertake remedial action with respect
to some of these materials. Two of the Manufactured Gas Sites are
discussed in more detail below. The Company, under the supervision
of the Illinois Environmental Protection Agency (IEPA), is
conducting investigations of an additional 27 Manufactured Gas
sites. These investigations may require the Company to perform
additional investigation and remediation. The investigations are
in a preliminary stage and are expected to occur over an extended
period of time.
The Company 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). The Company 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 the Company in federal district
court under the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended. The suit seeks recovery of
the past and future costs of investigating and remediating the site
and an order directing the Company to remediate the site. The
Company is contesting this suit.
The Company is accruing and deferring the costs it incurs in
connection with all of the Manufactured Gas Sites, including
related legal expenses, pending recovery through rates or from
insurance carriers or other entities. At June 30, 1997, the total
of the costs deferred by the Company, net of recoveries and amounts
billed to other entities, was $10.5 million. This amount includes
an estimate of the costs of 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 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 the
Company intends to seek contributions from other entities for the
costs incurred at the sites, the full extent of such contributions
cannot be determined at this time.
The Company has filed suit against a number of insurance
carriers for the recovery of environmental costs relating to its
former manufactured gas operations. The suit asks the court to
declare that the insurers are liable under policies in effect
between 1937 and 1986 for costs incurred or to be incurred by the
Company in connection with three of its Manufactured Gas sites in
Chicago. The Company is also asking the court to award damages
stemming from the insurers' breach of their contractual obligation
to defend and indemnify the Company against these costs. At this
time, management cannot determine the timing and extent of the
Company's recovery of costs from its insurance carriers.
Accordingly, the costs deferred at June 30, 1997 have not been
reduced to reflect recoveries from insurance carriers.
The Company believes that costs incurred by it 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 Company in connection with former
manufactured gas operations will not have a material adverse effect
on the financial position or results of operations of the Company.
The Company is recovering the costs of environmental activities
relating to its former manufactured gas operations, including
carrying charges on the unrecovered balances, under a rate
mechanism approved by the Commission. At June 30, 1997, it had
recovered $5.3 million of such costs through rates. (See Note 2G.)
5. EXPIRATION OF GAS STORAGE CONTRACTS
The Company had certain natural gas storage contracts with
Natural that expired on or before December 1, 1995. Associated
with the expiration of the contracts, the Company realized a gain,
after income taxes, of approximately $1.3 million for the 12-months
ended June 30, 1997.
6. TAX MATTERS
On September 30, 1993, the Company received notification from
the Internal Revenue Service (IRS) that settlement of past income
tax returns had been reached for fiscal years 1978 through 1990.
The IRS settlement resulted in payments of principal and interest
to the Company in 1994 of approximately $25 million, or $19.4
million after income taxes. The Company received regulatory
authorization to defer the recognition of the settlement amount in
income for fiscal year 1993, and to recognize the settlement amount
in income for fiscal years 1994 and 1995. The Company represented
to the Commission that, having received this accounting
authorization, it would not file a request for an increase in base
rates before December 1994.
As a result of the Commission's accounting authorization, the
Company amortized to operation expense approximately $1.1 million,
or $847,000 after income taxes, for the 12-months ended June 30,
1996. The effect was to offset increases in costs that the Company
incurred during the period.
7. LONG-TERM DEBT
7A Interest-Rate Adjustments
The rate of interest on the City of Joliet 1984 Series C Bonds,
which are secured by the Company's 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. The Company is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series C Bonds that were tendered prior to October
1, 1996, have been remarketed. The interest rate on such bonds is
3.95 per cent for the period October 1, 1996, through September 30,
1997.
The rate of interest on the City of Chicago 1993 Series B Bonds,
which are secured by the Company's 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. The Company is
obligated to purchase any such bonds tendered if they cannot be
remarketed. All Series B Bonds that were tendered prior to
December 1, 1996, have been remarketed. The interest rate on such
bonds is 3.70 per cent for the period December 1, 1996, through
November 30, 1997.
The Company 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, the Company established a $37.4 million
three year line of credit with The Northern Trust Company, which
has since been extended to January 31, 1999.
7B Bonds Redeemed
On December 29, 1995, the Company redeemed, from general
corporate funds, approximately $87 million aggregate principal
amount of the City of Joliet's 1984 Gas Supply Revenue Bonds,
Series A and B, which were secured by the Company's Series U and V
First and Refunding Mortgage Bonds.
8. PENSION EXPENSE
Pension expense for the Company decreased $7.7 million, $18.6
million, and $26.5 million for the three-, nine-, and 12-month
periods, respectively. The decrease in pension expense was caused
by settlement accounting attributed to an increase in the number
of employees choosing early retirement and changes in actuarial
assumptions.
Item 2. Management's Discussion and Analysis of Results of
Operations and Financial Condition
RESULTS OF OPERATIONS
Net Income
Net income applicable to common stock decreased $1.5 million, to
$10.4 million, for the three-months ended June 30, 1997, resulting
mainly from lower gas deliveries due to conservation and the prior
period's gain associated with the expiration of gas storage
contracts. (See Note 5 of the Notes to Consolidated Financial
Statements.) These effects were partially offset by decreased
pension expense caused by settlement accounting attributed to an
increase in the number of employees choosing early retirement and
changes in actuarial assumptions. (See Note 8 of the Notes to
Consolidated Financial Statements.)
Net income applicable to common stock increased $510,000, to
$96.8 million, and $4.3 million, to $89.3 million, for the current
nine- and 12-month periods ended June 30, 1997, respectively. Net
income benefited from the aforementioned decrease in pension costs,
the full nine- and 12-month effects of the Company's rate increase
that went into effect on November 14, 1995 (see Note 3A of the
Notes to Consolidated Financial Statements), a tax accrual
adjustment, and reduced interest expense. These positive impacts
were partially offset by reduced gas deliveries due to conservation
and warmer weather, last year's gain associated with the expiration
of certain natural gas storage contracts (see Note 5 of the Notes
to Consolidated Financial Statements), and lower other income.
<TABLE>
A summary of variations affecting income between periods is
presented below, with explanations of significant differences
following:
<CAPTION>
Three Months Ended Nine Months Ended 12 Months Ended
June 30, 1997 June 30,1997 June 30, 1997
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
from Prior Period from Prior Period from Prior Period
------------------ ------------------ -------------------
(Thousands of dollars) Amount % Amount % Amount %
- -----------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C> <C>
Net operating revenues (a) $(4,751) (4.7) $(11,975) (2.9) $(7,900) (1.7)
Operation and
maintenance expenses (6,846) (11.8) (18,236) (10.2) (19,417) (8.3)
Depreciation and
amortization expense 525 3.3 2,610 5.6 3,613 5.8
Income taxes 896 18.2 1,149 2.1 4,404 9.5
Other income and deductions (2,460) (46.5) (2,810) (13.7) 223 0.7
Net Income Applicable
to Common Stock (1,511) (12.7) 510 0.5 4,310 5.1
<FN>
(a) Operating revenues, net of gas costs and revenue taxes.
</TABLE>
Net Operating Revenues
Gross revenues of the Company are affected by changes in the
unit cost of the Company's gas purchases and do not include the
cost of gas supplies for customers who purchase gas directly from
producers and marketers rather than from the Company. The direct
customer purchases have no effect on net income because the Company
provides transportation service for such gas volumes and recovers
margins similar to those applicable to conventional gas sales.
Changes in the unit cost of gas do not significantly affect net
income because the Company's tariffs provide for dollar-for-dollar
recovery of gas costs. (See Note 2F of the Notes to Consolidated
Financial Statements.) The Company's tariffs also provide for
dollar-for-dollar recovery of the cost of revenue taxes imposed by
the State and City.
Since income is not significantly affected by changes in revenue
from customers' gas purchases from producers or marketers rather
than from the Company, changes in gas costs, or changes in revenue
taxes, the discussion below pertains to "net operating revenues"
(operating revenues, net of gas costs and revenue taxes). The
Company considers net operating revenues to be a more pertinent
measure of operating results than gross revenues.
Net operating revenues decreased $4.8 million, to $96.3 million,
$12.0 million, to $401.5 million, and $7.9 million, to $468.5
million, for the current three-, nine-, and 12-month periods,
respectively, due to a decline in gas deliveries attributable to
conservation and warmer weather. However, the effects of these
factors on the nine- and 12-month periods were partially offset by
the full effect of the Company's rate increase.
See Other Matters - Operating Statistics for details of selected
financial and operating information by customer classification.
Operation and Maintenance Expenses
Operation and maintenance expenses decreased $6.8 million, to
$51 million, for the current three-month period, due chiefly to a
$7.7 million decrease in pension expense caused by settlement
accounting attributed to an increase in the number of employees
choosing early retirement and by changes in actuarial assumptions.
(See Note 8 of the Notes to Consolidated Financial Statements.) In
addition, the provision for uncollectible accounts decreased $1.8
million. These decreases were partially offset by increases in the
cost of operating and maintaining the Company's distribution system
($761,000) and to an increase in the cost of outside services
($558,000).
Operation and maintenance expenses decreased $18.2 million, to
$161.1 million, in the current nine-month period, due principally
to an $18.6 million decrease in the aforementioned pension expense,
and reductions in costs associated with injuries and damages
($1.4 million) and labor ($1.2 million). Partially
offsetting these decreases were increased expenses for outside
services ($900,000), environmental costs recovered through rates
($825,000), and costs associated with operating and maintaining the
Company's distribution system ($476,000).
Operation and maintenance expenses decreased $19.4 million, to
$214.1 million, in the current 12-month period due largely to a
reduction of $26.5 million in pension expense and a decline in the
costs associated with injuries and damages ($1.1 million). The
above mentioned decreases were offset, in part, by increases
associated with the following items: the costs of outside services
($1.7 million), the costs of operating and maintaining the
Company's distribution system ($1.7 million), the prior period's
recognition of an IRS settlement ($1.1 million) (see Note 6 of the
Notes to Consolidated Financial Statements), and environmental
costs recovered through rates ($1.1 million).
Depreciation and Amortization Expense
Depreciation and amortization expense increased $525,000, to
$16.7 million, for the current three-month period, due primarily to
net property additions.
Depreciation and amortization expense increased $2.6 million, to
$49.6 million, and $3.6 million to $65.6 million, for the current
nine- and 12-month periods, due primarily to depreciable property
additions and the amortization of costs associated with the closing
of the Company's synthetic natural gas-making (SNG) Plant.
Income Taxes
Income taxes, exclusive of income taxes included in other income
and deductions, increased $896,000, to $5.8 million for the
three-month period due to higher pre-tax income.
Income taxes, exclusive of income taxes included in other income
and deductions, increased $1.1 million to $56.7 million, and $4.4
million, to $50.6 million, for the current nine- and 12-month
periods, due primarily to increased pre-tax income. These
increases were partially offset by a reduction to taxes accrued.
Other Income and Deductions
Other income and deductions increased $2.5 million for the
current three-month period, due chiefly to the prior year's gain of
$2.4 million, after income taxes, associated with the expiration of
certain natural gas storage contracts (see Note 5 of the Notes to
the Consolidated Financial Statements) and to lower interest
income. These effects were partially offset by lower interest
expense.
Other income and deductions increased $2.8 million for the
current nine-month period, due primarily to the prior year's gain
of $5.4 million, after income taxes, associated with the expiration
of certain natural gas storage contracts (see Note 5 of the Notes
to the Consolidated Financial Statements) and to lower other
income. These negative effects were partially offset by lower
interest expense.
Other income and deductions decreased $223,000 for the current
12-month period, due primarily to lower interest expense. Partially
offsetting this benefit was the prior period's gain associated with
the expiration of certain natural gas storage contracts. (See Note
5 of the Notes to the Consolidated Financial Statements.)
Other Matters
Effect of Weather. Weather variations affect the volumes of gas
delivered for heating purposes and, therefore, can have a
significant positive or negative impact on net income, cash
position, and coverage ratios.
Accounting Standards. In March 1995, the Financial Accounting
Standards Board (FASB) issued SFAS No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be
Disposed Of ". This statement requires recognition of impairment
losses on long-lived assets when an asset's book value may not be
recoverable. For regulated companies, the statement requires that
regulatory assets be probable of recovery at every balance sheet
date. This statement requires adoption no later than the Company's
1997 fiscal year. The Company does not expect the adoption of SFAS
No. 121 to have a material adverse effect on its financial position
or results of operations.
In October 1995, the FASB issued SFAS No. 123, "Accounting for
Stock-Based Compensation". This statement requires companies to
either recognize compensation costs measured at fair value
attributable to employee stock options or similar equity
instruments at the grant date in net income, or, in the
alternative, provide pro forma footnote disclosure on net income
and earnings per share. This statement requires adoption no later
than the Company's 1997 fiscal year. The Company anticipates
electing the pro forma footnote disclosure provisions of this
statement in 1997.
FERC Order 636 Costs. In 1992, the FERC issued Order No. 636 and
successor orders that required substantial restructuring of the
service obligations of interstate pipelines. (See Notes 2F, 3A,
and 3B of the Notes to Consolidated Financial Statements.)
In 1994, the Commission entered orders providing for full
recovery by the Company of FERC Order 636 transition costs from the
Company's gas service customers. The Commission's orders have been
appealed to the Illinois Supreme Court. (See Notes 2F, 3A, and 3B
of the Notes to Consolidated Financial Statements.)
Large Volume Gas Service Agreements. The Company has entered into
gas service contracts with certain large volume customers under a
specific rate schedule approved by the Commission. The contracts
were negotiated to overcome the potential threat of bypassing the
utility's distribution system. The contracts will not have a
material adverse effect on the financial position or results of
operations of the Company.
Small Volume Transportation Service. On June 25, 1997, the
Illinois Commerce Commission approved the Company's Riders SVT and
AGG which will initiate a two year pilot program designed to
provide transportation service to certain small volume customers.
The Commission also ordered a concurrent investigation of the
program to ascertain if program adjustments or revisions are
required.
<TABLE>
Operating Statistics. The following table represents gas
distribution margin components:
<CAPTION>
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
------------------- ----------------- -------------------
1997 1996 1997 1996 1997 1996
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (thousands):
Gas sales
Residential $127,380 $157,641 $ 744,362 $675,148 $ 826,812 $744,997
Commercial 19,639 23,369 116,830 109,930 129,725 119,090
Industrial 3,852 6,385 23,371 25,816 25,331 27,419
-------- --------- --------- -------- --------- --------
150,871 187,395 884,563 810,894 981,868 891,506
-------- --------- --------- -------- --------- --------
Transportation
Residential 6,652 7,054 30,235 30,894 34,622 35,627
Commercial 7,916 8,702 37,871 39,683 43,133 45,618
Industrial 5,486 7,709 21,432 26,594 25,214 32,620
Contract Pooling 2,200 1,848 15,964 1,848 18,179 1,848
Other -- -- 406 -- 406 --
-------- -------- --------- -------- --------- --------
22,254 25,313 105,908 99,019 121,554 115,713
-------- -------- --------- -------- --------- --------
Other Revenues 4,183 3,730 12,663 10,267 16,108 13,352
-------- --------- --------- -------- --------- --------
Total Operating Revenues 177,308 216,438 1,003,134 920,180 1,119,530 1,020,571
Less - Gas Costs 62,419 93,886 495,488 407,386 533,827 434,072
- Revenues Taxes 18,596 21,508 106,195 99,368 117,248 110,144
--------- --------- --------- -------- --------- ---------
Net Operating Revenues $ 96,293 $101,044 $ 401,451 $413,426 $ 468,455 $ 476,355
========= ========= ========= ======== ========= =========
Deliveries (MDth):
Gas Sales
Residential 19,767 21,301 114,196 122,984 122,552 131,763
Commercial 3,763 3,627 19,634 21,813 21,513 23,467
Industrial 833 1,115 4,285 5,484 4,674 5,848
--------- --------- --------- -------- --------- ---------
24,363 26,043 138,115 150,281 148,739 161,078
--------- --------- --------- -------- --------- ---------
Transportation (a)
Residential 4,613 4,734 23,269 22,908 25,468 25,140
Commercial 6,545 6,969 32,525 33,348 36,492 37,965
Industrial 7,155 9,269 26,551 31,593 32,052 39,146
Other -- -- 234 -- 234 --
--------- -------- --------- -------- --------- ---------
18,313 20,972 82,579 87,849 94,246 102,251
--------- -------- --------- -------- --------- ---------
Total Gas Sales
and Transportation 42,676 47,015 220,694 238,130 242,985 263,329
========= ======== ========= ======== ======== =========
Margin per Mcf
delivered $2.26 $2.15 $1.82 $1.74 $1.93 $1.81
<FN>
(a)Volumes associated with contract pooling revenues are
included in their respective customer classes.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Rate Order. On November 8, 1995, the Commission issued an order
approving changes in rates of the Company. (See Note 3A of the
Notes to Consolidated Financial Statements.)
Environmental Matters. The Company is conducting environmental
investigations and work at certain sites that were the location of
former manufactured gas operations. (See Note 4 of the Notes to
Consolidated Financial Statements.)
Bonds Redeemed. On December 29, 1995, the Company redeemed, from
general corporate funds, approximately $87 million aggregate
principal amount of the City of Joliet's 1984 Gas Supply Revenue
Bonds, Series A and B, which were secured by the Company's Series U
and V First and Refunding Mortgage Bonds. (See Note 7B of the
Notes to Consolidated Financial Statements.)
Credit Lines. The Company has lines of credit of $114.4 million of
which North Shore Gas Company may borrow up to $25 million. At
June 30, 1997, the Company had unused credit available of $114.4
million.
Interest Coverage. The fixed charges coverage ratios for the
Company for the 12-months ended June 30, 1997, and for fiscal 1996
and 1995 were 5.27, 4.84, and 2.76, respectively.
PART II. OTHER INFORMATION
Item 1. Legal Proceedings
See Note 4 of the Notes to Consolidated Financial Statements for
a discussion pertaining to environmental matters.
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description of Document
-------------------------------------------------------------
3(a) Amendment to the By-Laws of the Registrant
dated March 26, 1997.
3(b) By-Laws of the Registrant, as amended,
dated March 26, 1997.
27 Financial Data Schedule
b. Reports on Form 8-K filed during the quarter ended June 30, 1997
None.
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of
1934, as amended, the registrant has duly caused this report to be
signed on its behalf by the undersigned thereunto duly authorized.
The Peoples Gas Light and Coke Company
---------------------------------------
(Registrant)
August 12 , 1997 By: /s/ K. S. BALASKOVITS
------------------ ----------------------------------
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
------------------------------
Principal Accounting Officer
EXHIBIT 3(A)
THE PEOPLES GAS LIGHT AND COKE COMPANY
ACTION OF THE BOARD OF DIRECTORS
BY WRITTEN CONSENT IN LIEU OF MEETING
The Board of Directors of the Company has taken the
following action by unanimous written consent:
RESOLVED, That, effective as of the
close of business on March 26, 1997, the
By-Laws of the Company be, and they hereby are,
amended by replacing Section 3.1 of Article III
of the By-Laws in its entirety with the
following:
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, six (6) in number,
each of which shall be a shareholder. 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 his successor shall be elected
and shall qualify. The Board of Directors may
fill one or more vacancies arising between
meetings of shareholders by reason of an
increase in the number of directors or
otherwise.
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.
IN WITNESS WHEREOF, the Board of Directors of THE
PEOPLES GAS LIGHT AND COKE COMPANY has executed this Written
Consent as of March 26, 1997.
/s/ R. E. Terry /s/ J. Hinchliff
- ---------------------------- ----------------------------
/s/ J. B. Hasch /s/ K. S. Balaskovits
- ---------------------------- -----------------------------
/s/ M. S. Reeves
- -----------------------------
Exhibit 3(b)
BY-LAWS
OF
THE PEOPLES GAS LIGHT AND COKE COMPANY
AMENDED MARCH 26, 1997
THE PEOPLES GAS LIGHT AND COKE COMPANY
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
THE PEOPLES GAS LIGHT AND COKE COMPANY
INDEX
PAGE
A
Amendment of By-Laws 16
Appointment of Officers 7
Assistant Controller, Duties of 10
Assistant General Counsel, Duties of 10
Assistant Secretary, Duties of 10
Assistant Treasurer, Duties of 10
Assistant Vice President, Duties of 9
B
Board of Directors 4
C
Certificates of Stock and Their Transfer 12
Chairman of the Board, Duties of 8
Committees 6
Controller, Duties of 10
Contracts, Execution of 14
D
Directors and Committees 4
E
Election of Directors 4
Election of Officers 7
F
Fees and Compensation of Directors 6
G
General Counsel, Duties of 10
THE PEOPLES GAS LIGHT AND COKE COMPANY
PAGE
I
Indemnification of Directors, Officers, Employees
and Agents 11
M
Meetings
Directors 4
Action Without Meeting 6
Shareholders 1
N
Notice of Meetings
Directors 4
Shareholders 2
O
Officers
Appointed 7
Elected 7
Offices, Two or More Held By One Person 7
P
President, Duties of 8
Presiding Officer
Board Meetings 5
Shareholder Meetings 4
Proxies 3
Q
Quorum
Board 5
Shareholders 2
THE PEOPLES GAS LIGHT AND COKE COMPANY
PAGE
S
Secretary, Duties of 9
Signatures to Checks, Drafts, etc. 15
Stock, Certificates of and their Transfer 12
T
Treasurer, Duties of 9
V
Vice President, Duties of 9
Voting
Shareholders 3
Stock Owned by Company 15
BY-LAWS
OF
THE PEOPLES GAS LIGHT AND COKE COMPANY
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 last Thursday of the month of March in each year, if
not a legal holiday, or, if a legal holiday, then on the next
preceding 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 President, a
majority of the Board of Directors or shareholders owning capital
stock of the Company having not less than 20% of the total voting
power. 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 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 or more than 60 days before the date of the meeting,
except as otherwise provided by statute. Notice of any meeting
of the shareholders may be waived by any shareholder.
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 the 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
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, six (6)
in number, each of which shall be a shareholder. 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
his successor shall be elected and shall qualify. The Board of
Directors may fill one or more vacancies arising between meetings
of shareholders by reason of an increase in the number of
directors or otherwise.
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 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 or, in his
absence, the President or, in his absence, any other director
elected chairman of the meeting by vote of a majority of the
directors present at the meeting.
SECTION 3.6.
Committees. The Board may appoint 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 3.7.
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 3.8.
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;
and, if the Board may decide, a General Counsel; and such number
of Deputy 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 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, one or more Assistant General
Counsel, and such other agents, employees and attorneys-in-fact
of the Company as may be deemed proper. Such officers, agents,
employees and attorneys-in-fact shall have such authority, (which
may include the authority to execute and deliver on behalf of the
Company contracts and other instruments in writing of any
nature), perform such duties and receive such compensation as the
Board of Directors 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 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.
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, 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 of 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, any Executive Vice
President, any Vice President, the Treasurer, or any other
officer of the Company, agent, employee or attorney-in-fact as
may be designated by the Board, the Chairman of the Board or the
President pursuant to specific authorizations and, the seal of
the Company may 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 Executive Vice President, any Vice
President, the Treasurer, or by such officers, agents, employees
or attorneys-in-fact 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 of stock owned
by the Company in any other corporation, and any or all voting
trust certificates owned by the Company calling for or
representing shares of stock of any other corporation, may be
voted by the Chairman of the Board, the President, any Vice
President, the Secretary or the Treasurer, either in person or by
written proxy given to any person in the name of the Company at
any meeting of the shareholders of such corporation, or at any
meeting of voting trust certificate holders, upon any question
that may be presented at any such meeting. Any such officer, or
anyone so representing him by written proxy, may on behalf of the
Company waive any notice of any such meeting required by any
statute or by-law and consent to the holding of such meeting
without notice.
ARTICLE VIII
Amendment or Repeal of By-Laws
These by-laws may be added to, amended or repealed at
any regular or special meeting of the Board by a vote of a
majority of the membership of the Board.
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