FORM 10-Q
UNITED STATES
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, 1998
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, 1998.
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PART I. FINANCIAL INFORMATION
Item 1. Financial Statements
<CAPTION>
The Peoples Gas Light and Coke Company
CONSOLIDATED STATEMENTS OF INCOME
(Unaudited)
Three Months Ended Nine Months Ended Twelve Months Ended
June 30, June 30, June 30,
1998 1997 1998 1997 1998 1997
(Thousands, except per-share amounts)
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OPERATING REVENUES:
Gas sales $ 132,175 $ 150,871 $ 707,032 $ 885,068 $ 786,281 $ 981,703
Transportation 21,319 22,254 92,257 105,403 105,630 121,719
Other 3,870 4,183 13,443 12,663 17,170 16,108
Total Operating Revenues 157,364 177,308 812,732 1,003,134 909,081 1,119,530
OPERATING EXPENSES:
Gas costs 53,633 62,419 355,849 495,488 379,696 533,827
Operation 39,171 38,904 125,634 129,006 168,960 169,820
Maintenance 10,816 12,093 29,645 32,083 42,255 44,301
Depreciation and amortization 17,042 16,659 50,543 49,563 67,055 65,615
Taxes - Income 1,308 5,806 45,951 56,713 35,849 50,594
- State and local revenue 13,205 18,596 83,337 106,195 92,572 117,248
- Other 7,091 4,685 19,178 13,975 24,243 18,985
Total Operating Expenses 142,266 159,162 710,137 883,023 810,630 1,000,390
OPERATING INCOME 15,098 18,146 102,595 120,111 98,451 119,140
OTHER INCOME
AND (DEDUCTIONS):
Interest income 579 974 905 2,978 2,080 3,683
Allowance for funds used
during construction 436 82 1,030 144 1,153 157
Interest on long-term debt (7,785) (7,773) (23,347) (23,321) (31,120) (31,099)
Other interest expense (424) (333) (2,184) (1,681) (2,699) (2,195)
Income taxes (62) (389) (131) (1,186) (602) (2,300)
Miscellaneous - net (483) (313) (685) (213) (814) 1,876
Total Other Income
and Deductions (7,739) (7,752) (24,412) (23,279) (32,002) (29,878)
NET INCOME APPLICABLE
TO COMMON STOCK $ 7,359 $ 10,394 $ 78,183 $ 96,832 $ 66,449 $ 89,262
The Notes to Consolidated Financial Statements are an integral part of these statements.
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<TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED BALANCE SHEETS
June 30, June 30,
1998 September 30, 1997
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
<S> <C> <C> <C>
PROPERTIES AND OTHER ASSETS
CAPITAL INVESTMENTS:
Property, plant and equipment, at original cost $ 1,855,982 $ 1,819,567 $ 1,795,178
Less - Accumulated depreciation 645,337 614,224 605,626
Net property, plant and equipment 1,210,645 1,205,343 1,189,552
Other investments 5,229 5,470 5,499
Total Capital Investments - Net 1,215,874 1,210,813 1,195,051
CURRENT ASSETS:
Cash and cash equivalents 19,003 18,509 70,293
Temporary cash investments 25,100 15,500 15,500
Receivables -
Customers, net of allowance for uncollectible accounts
of $23,584, $28,959, and $31,406, respectively 77,090 67,330 117,881
Other 37,549 40,159 32,552
Accrued unbilled revenues 19,021 20,109 18,402
Materials and supplies, at average cost 13,388 13,225 13,313
Gas in storage, at last-in, first-out cost 53,188 67,536 42,269
Gas costs recoverable through rate adjustments 3,054 3,328 -
Regulatory assets 5,887 13,139 20,310
Prepayments 63,449 39,802 34,125
Total Current Assets 316,729 298,637 364,645
OTHER ASSETS:
Non-current regulatory assets 29,338 32,473 32,866
Deferred charges 21,540 15,704 15,508
Total Other Assets 50,878 48,177 48,374
Total Properties and Other Assets $ 1,583,481 $ 1,557,627 $ 1,608,070
The Notes to Consolidated Financial Statements are an integral part of these statements.
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<TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED BALANCE SHEETS
<CAPTION>
June 30, June 30,
1998 September 30, 1997
(Unaudited) 1997 (Unaudited)
(Thousands of Dollars)
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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 439,947 409,662 455,007
Total Common Stockholder's Equity 605,254 574,969 620,314
Long-term debt, exclusive of sinking fund
payments and maturities due within one year 462,400 462,400 462,400
Total Capitalization 1,067,654 1,037,369 1,082,714
CURRENT LIABILITIES:
Interim loans 700 700 -
Accounts payable 109,235 113,502 107,799
Dividends payable on common stock 15,635 32,015 13,650
Customer gas service and credit deposits 24,487 39,753 17,663
Accrued taxes 42,347 19,056 57,526
Gas sales revenue refundable through rate adjustments 5,888 14,484 14,310
Accrued interest 6,523 8,763 6,505
Temporary LIFO liquidation credit 2,624 - 21,659
Total Current Liabilities 207,439 228,273 239,112
DEFERRED CREDITS AND OTHER LIABILITIES:
Deferred income taxes - primarily accelerated depreciation 245,173 229,225 224,155
Investment tax credits being amortized over
the average lives of related property 29,307 30,350 30,632
Other 33,908 32,410 31,457
Total Deferred Credits and Other Liabilities 308,388 291,985 286,244
Total Capitalization and Liabilities $ 1,583,481 $ 1,557,627 $ 1,608,070
The Notes to Consolidated Financial Statements are an integral part of these statements.
</TABLE>
The Peoples Gas Light and Coke Company
CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
Nine Months Ended
June 30,
1998 1997
(Thousands of Dollars)
Operating Activities:
Net Income $ 78,183 $ 96,832
Adjustments to reconcile net income to net cash:
Depreciation and amortization 50,543 49,563
Deferred income taxes and investment tax credits - net 13,570 8,713
Change in other deferred credits and other liabilities 2,833 4,712
Change in deferred charges (6,911) 1,098
Change in current assets and liabilities:
Receivables - net (7,150) (55,236)
Accrued unbilled revenues 1,088 7,132
Materials and supplies (163) 704
Gas in storage 14,348 13,607
Gas costs recoverable 274 17,421
Regulatory assets 7,252 14,433
Prepayments (23,647) (22,228)
Accounts payable (4,267) (13,853)
Customer gas service and credit deposits (15,266) (19,458)
Accrued taxes 23,291 26,283
Gas sales revenue refundable (8,596) 3,576
Accrued interest (2,240) (2,253)
Temporary LIFO liquidation credit 2,624 21,659
Net Cash Provided by Operating Activities 125,766 152,705
Investing Activities:
Capital expenditures - construction (51,858) (44,174)
Other assets 223 (319)
Other capital investments 241 448
Other temporary cash investments (9,600) (15,000)
Net Cash Used in Investing Activities (60,994) (59,045)
Financing Activities:
Dividends paid on common stock (64,278) (40,204)
Interim Loans - (700)
Net Cash Used in Financing Activities (64,278) (40,904)
Net Increase in Cash and Cash Equivalents 494 52,756
Cash and Cash Equivalents at Beginning of Period 18,509 17,537
Cash and Cash Equivalents at End of Period $ 19,003 $ 70,293
The Notes to Consolidated Financial Statements are an integral part of
these statements.
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, 1997. Certain items previously
reported for the prior periods have been reclassified to conform
with the presentation in the current periods.
The business of the Company is influenced by seasonal weather
conditions because a large element of the Company's customer load
consists of gas used for space heating. Weather-related deliveries
can, therefore, have a significant positive or negative impact on
net income. Accordingly, the results of operations for the interim
periods presented are not indicative of the results to be expected
for all or any part of the balance of the current fiscal year.
2. SIGNIFICANT ACCOUNTING POLICIES
2A Use of Estimates
The preparation of financial statements in conformity with
generally accepted accounting principles requires management to
make estimates and assumptions that affect the reported amounts of
assets and liabilities and disclosure of contingent liabilities at
the date of the financial statements and the reported amounts of
revenues and expenses during the reporting period. Actual results
could differ from those estimates.
2B Revenue Recognition
Gas sales revenues are recorded on the accrual basis for all gas
delivered during the month, including an estimate for gas delivered
but unbilled at the end of each month.
2C Regulated Operations
The Company's utility operations are subject to regulation by the
Illinois Commerce Commission (Commission). Regulated operations
are accounted for in accordance with Statement of Financial
Accounting Standards (SFAS) No. 71, "Accounting for the Effects of
Certain Types of Regulation." This standard controls the
application of generally accepted accounting principles for
companies whose rates are determined by an independent regulator
such as the Commission. Regulatory assets represent certain costs
that are expected to be recovered from customers through the
ratemaking process. When incurred, such costs are deferred as
assets in the balance sheet and subsequently recorded as expenses
when those same amounts are reflected in rates.
2D Income Taxes
The Company follows the liability method of accounting for
deferred income taxes. Under the liability method, deferred income
taxes have been recorded using currently enacted tax rates for the
differences between the tax basis of assets and liabilities and the
basis reported in the financial statements. Due to the effects of
regulation on the Company, certain adjustments made to deferred
income taxes are, in turn, debited or credited to regulatory assets
or liabilities.
2E Statement of Cash Flows
For purposes of the balance sheet and the statement of cash
flows, the Company considers all short-term liquid investments with
maturities of three months or less to be cash equivalents.
Income taxes and interest paid (excluding capitalized
interest) were as follows:
For the nine months
ended June 30, 1998 1997
(Thousands)
Income taxes paid $11,935 $31,078
Interest paid 25,961 26,452
2F Recovery of Gas Costs
Under the tariffs of the Company, the difference for any month
between costs recoverable through the Gas Charge and revenues
billed to customers under the Gas Charge is refunded to or
recovered from customers. Consistent with these tariff provisions,
such difference for any month is recorded either as a current
liability or as a current asset (with a contra entry to Gas Costs).
For each gas utility, the Commission conducts annual proceedings
regarding the reconciliation of revenues from the Gas Charge and
related costs incurred for gas. In such proceedings, costs
recovered by a utility through the Gas Charge are subject to
challenge. Such a proceeding regarding the Company for fiscal year
1997 is currently pending before the Commission.
2G Accounting Standard
The Company adopted Statement of Position (SOP) 96-1,
"Environmental Remediation Liabilities" in the first quarter of
fiscal 1998. The application of the statement did not have a
material effect on the Company's financial condition or results of
operations.
3. 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, 1998, the total
of the costs deferred by the Company, net of recoveries and amounts
billed to other entities, was $10.7 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, at the minimum amount of the current estimated
range of such costs. The costs of remediation at the other sites
cannot be determined at this time. While the Company intends to
seek contribution from other entities for the costs incurred at the
sites, the full extent of such contributions cannot be determined
at this time.
The Company has filed suit against a number of insurance
carriers for the recovery of environmental costs relating to its
former manufactured gas operations. The suit asks the court to
declare that the insurers are liable under policies in effect
between 1937 and 1986 for costs incurred or to be incurred by the
Company in connection with three 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, 1998 have not been reduced to reflect
recoveries from insurance carriers.
Costs incurred by the Company for environmental activities
relating to former manufactured gas operations will be recovered
from insurance carriers or other entities or through rates for
utility service. Accordingly, management believes that the costs
incurred by the Company in connection with former manufactured gas
operations will not have a material adverse effect on the financial
position or results of operations of the Company. The Company is
recovering the costs of environmental activities relating to its
former manufactured gas operations, including carrying charges on
the unrecovered balances, under a rate mechanism approved by the
Commission. At June 30, 1998, it had recovered $6.5 million of
such costs through rates.
4. LONG-TERM DEBT
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, 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 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, 1997, have been remarketed. The interest rate on such
bonds is 3.90 percent for the period December 1, 1997, through
November 30, 1998.
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, 2000.
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 $3.0 million, to
$7.4 million, for the three-month period ended June 30, 1998, due
primarily to weather that was 39 percent warmer than in the
comparable quarter last year. Increases in outside professional
services and depreciation and amortization expenses also
contributed to the decline. Partially offsetting these effects
were decreases in the provision for uncollectible accounts and an
adjustment to taxes accrued.
Net income applicable to common stock decreased $18.6
million, to $78.2 million, and $22.8 million, to $66.4 million, for
the nine- and 12-month periods ended June 30, 1998, respectively,
reflecting weather that was 18 percent warmer in both comparable
periods. Also contributing to the declines were increases in
outside professional services. A one-time gain associated with the
expiration of natural gas storage contracts in the prior period
also affected the 12-month comparison. For both periods, the
decline in earnings was partially offset by decreased operation and
maintenance expenses.
<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, 1998 June 30, 1998 June 30, 1998
Increase/(Decrease) Increase/(Decrease) Increase/(Decrease)
From Prior Period From Prior Period From Prior Period
(Thousands of dollars) Amount % Amount % Amount %
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Net operating revenues (a) $(5,767) (6.0) $(27,905) (7.0) $(31,642) (6.8)
Operation and maintenance expenses (1,010) (2.0) (5,810) (3.6) (2,906) (1.4)
Depreciation and amortization expense 383 2.3 980 2.0 1,440 2.2
Other taxes 2,406 51.4 5,203 37.2 5,258 27.7
Income taxes (4,498) (77.5) (10,782) (19.0) (14,745) (29.1)
Other income and deductions (13) (0.2) 1,133 4.9 2,124 7.1
Net income applicable to common stock (3,035) (29.2) (18,649) (19.3) (22,813) (25.6)
(a) Operating revenues, net of gas costs and revenue taxes.
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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 declined $5.8 million, to $90.5
million, for the current three-month period due primarily to the
effect of El Nino which caused weather to be 39 percent warmer
than during the same period a year-ago.
Net operating revenues declined $27.9 million, to $373.5
million, and $31.6 million, to $436.8 million, for the current
nine- and 12-month periods, respectively, due primarily to
weather that was 18 percent warmer, in both periods, than during
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 decreased $1.0 million, to
$50.0 million, for the current three-month period, due primarily
to a $494,000 decrease in the provision for uncollectible
accounts, caused by reduced revenues, and to reduced group
insurance expenses ($417,000). In addition, costs associated
with operating and maintaining the Company's distribution system
decreased by $383,000, along with reductions in pension expense
($341,000), reengineering costs ($242,000), and other non-labor
operation and maintenance expenses. These reductions were
offset, in part, by higher labor costs of $675,000, and by an
increase in the cost of outside professional services of $2.1
million. The cost of outside professional services has
increased primarily due to the use of contract programmers to
maintain existing systems while the Company's staff is involved
in the development and implementation of a new customer
information system.
Operation and maintenance expenses decreased $5.8 million, to
$155.3 million, and $2.9 million, to $211.2 million, for the
current nine- and 12-month periods, respectively, due mainly to
$4.8 million and $5.3 million decreases in the provision for
uncollectible accounts and to $1.6 million and $1.8 million
decreases in environmental costs recovered through rates,
respectively. Also contributing to the positive variations were
reduced group insurance expenses of $1.4 million and $2.2
million, and decreased costs associated with operating and
maintaining the Company's distribution systems of $969,000 and
$990,000, respectively. These effects were offset, in part, by
increases in costs of outside professional services ($3.5 million
and $5.8 million, respectively), a prior period adjustment to
costs associated with claim settlements of $1.3 million and $1.0
million, respectively, and increases in labor costs of $367,000
and $1.9 million, respectively.
Depreciation and Amortization Expense
Depreciation and amortization expense increased $383,000, to
$17.0 million, $980,000, to $50.5 million, and $1.4 million, to
$67.1 million, for the current three-, nine- and 12-month
periods, respectively, due mainly to net property additions.
Other Taxes
Other taxes increased $2.4 million, to $7.1 million, $5.2
million, to $19.2 million, and $5.3 million, to $24.2 million,
for the current three-, nine- and 12-month periods, respectively,
due primarily to the new Supplemental Low Income Energy Assistance
Charge. Since this charge was collected from customers, it had
no impact on net income.
Income Taxes
Income taxes, exclusive of taxes in other income and
deductions, decreased $4.5 million, to $1.3 million, $10.8
million, to $46.0 million, and $14.7 million, to $35.8 million,
for the current three-, nine- and 12-month periods, respectively,
due primarily to lower pre-tax income and a current period
adjustment to reduce taxes accrued. Partially offsetting these
effects in the nine- and 12-month comparative periods was a prior
period adjustment to reduce income tax accruals.
Other Income and Deductions
Other income and deductions increased $1.1 million for the
current nine-month period due chiefly to a decrease in
miscellaneous interest revenues, higher interest expense and a
loss on disposition of property. Partially offsetting these
effects was an increase in the allowance for funds used during
construction.
Other income and deductions increased $2.1 million for the
current 12-month period due primarily to the prior period's gain
of $1.3 million, net of income taxes, associated with the
expiration of natural gas storage contracts. Also contributing
to the variation between periods was a decrease in miscellaneous
interest revenues, higher interest expense and a loss on
disposition of property. These effects were offset, in part, by
an increase in the allowance for funds used during construction.
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 Standard. In fiscal 1998, the Company adopted SOP 96-
1, "Environmental Remediation Liabilities". (See Note 2G 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. These
contracts were negotiated to overcome the potential threat of
bypassing the utility's distribution system. The impact on the
net income of the Company 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 the
Company, 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.
<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,
1998 1997 1998 1997 1998 1997
<S> <C> <C> <C> <C> <C> <C>
Operating Revenues (Thousands):
Gas sales
Residential $ 115,636 $ 127,380 $ 603,487 $ 744,366 $ 671,350 $ 826,819
Commercial 13,966 19,639 87,325 117,280 97,524 129,753
Industrial 2,573 3,852 16,220 23,422 17,407 25,131
132,175 150,871 707,032 885,068 786,281 981,703
Transportation
Residential 6,491 6,652 29,955 30,230 33,749 34,616
Commercial 8,231 7,916 35,819 37,422 41,036 43,105
Industrial 5,123 5,486 18,943 21,432 23,401 25,464
Contract Pooling 1,364 2,200 6,896 15,913 6,800 18,128
Other 110 - 644 406 644 406
21,319 22,254 92,257 105,403 105,630 121,719
Other 3,870 4,183 13,443 12,663 17,170 16,108
Total Operating Revenues 157,364 177,308 812,732 1,003,134 909,081 1,119,530
Less - Gas Costs 53,633 62,419 355,849 495,488 379,696 533,827
- Revenue Taxes 13,205 18,596 83,337 106,195 92,572 117,248
Net Operating Revenues $ 90,526 $ 96,293 $ 373,546 $ 401,451 $ 436,813 $ 468,455
Deliveries (MDth):
Gas Sales
Residential 14,594 19,767 94,258 114,197 101,320 122,553
Commercial 2,078 3,763 15,248 19,719 16,992 21,518
Industrial 486 833 3,173 4,291 3,403 4,608
17,158 24,363 112,679 138,207 121,715 148,679
Transportation (a)
Residential 4,092 4,613 22,189 23,268 24,074 25,466
Commercial 6,626 6,545 30,030 32,440 34,133 36,488
Industrial 8,289 7,155 27,503 26,545 33,468 32,118
Other - - - 234 - 234
19,007 18,313 79,722 82,487 91,675 94,306
Total Gas Sales
and Transportation 36,165 42,676 192,401 220,694 213,390 242,985
Margin per Dth delivered $ 2.50 $ 2.26 $ 1.94 $ 1.82 $ 2.05 $ 1.93
(a)Volumes associated with contract pooling revenues are included in
their respective customer classes.
</TABLE>
LIQUIDITY AND CAPITAL RESOURCES
Environmental Matters. The Company is conducting environmental
investigations and work at certain sites that were the location
of former manufactured gas operations. (See Note 3 of the Notes
to Consolidated Financial Statements.)
Credit Lines. The Company has lines of credit totaling $129.4
million of which North Shore Gas may borrow up to $30 million.
At June 30, 1998, the Company and North Shore Gas had unused
credit available from banks of $91.2 million of which $30 million
was available to North Shore Gas.
Interest Coverage. The fixed charges coverage ratios for the
Company for the 12 months ended June 30, 1998, and for fiscal
1997 and 1996 were 4.04, 5.01, and 4.84, respectively.
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 discussion of 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 Company, 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 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 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit
Number Description of Document
27 Financial Data Schedule
b. Reports on Form 8-K filed during the quarter ended June
30, 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.
The Peoples Gas Light and
Coke Company
(Registrant)
August 11, 1998 By: /s/ K. S. BALASKOVITS
(Date) K. S. Balaskovits
Vice President and Controller
(Same as above)
Principal Accounting
Officer
Exhibit 27
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THE SCHEDULE CONTAINS SUMMARY INFORMATION EXTRACTED FROM CONSOLIDATED
STATEMENTS OF INCOME, CONSOLIDATED BALANCE SHEETS, AND CONSOLIDATED
STATEMENTS OF CASH FLOWS, AND QUALIFIED IN ITS ENTIRETY BY REFERENCE TO
SUCH FINANCIAL STATEMENTS.
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<MULTIPLIER> 1,000
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<OTHER-ASSETS> 29,338
<TOTAL-ASSETS> 1,583,481
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<LONG-TERM-DEBT-NET> 462,400
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